International Entrepreneurship and International New Ventures Arild Aspelund, PhD

Senter for entreprenørskap – Truls Erikson Outline A presentation of a traditional internationalization models –The Uppsala Model –The Innovation-Related Model Characteristics of International New Ventures –Or also frequently called Born Globals

Senter for entreprenørskap – Truls Erikson Traditional models of incremental internationalization Traditional models of internationalization view the internationalization process as a slow, incremental process where the firms spreads it activities like ‘rings in the water’ Increased international commitment can be observed through three dimensions –Resource commitment –Market spread –Product sophistication Internationalization is initiated after domestic establishment

Senter for entreprenørskap – Truls Erikson The Uppsala Internationalization Model (1) The core of the Uppsala Internationalization Model is the ‘Experiential learning – Commitment’ interplay Experiential learning refers to the process of accumulating experiential market knowledge in foreign markets State AspectsChange Aspects Market Commitment Market Knowledge Commitment Decisions Current Activities

Senter for entreprenørskap – Truls Erikson The Uppsala Internationalization Model (2) Other distinguishing features of the Uppsala Model comprise –The establishment chain –Psychic distance –Path dependency All in all these features results in a slow, incremental internationalization process of the firm The process is slow and incremental primarily due to the need of internalizing new knowledge from foreign markets before committing more resources for further expansion

Senter for entreprenørskap – Truls Erikson The Innovation-Related Internationalization Model (1) Looks upon the internationalization process as an innovation to the firm The reason for this rationale is that turning an established domestic organization into an international actor represents a challenging change process External network ties, organizational routines, capabilities and skills needs to be changed in order to meet the new demands of international customers

Senter for entreprenørskap – Truls Erikson The Innovation-Related Internationalization Model (2) The resulting internationalization process becomes a slow and gradual process due to the organization’s need to change routines, build new capabilities and internalize new resources The process is most often initiated by unsolicited orders from abroad and internationalization is seldom initiated from strategic intent The process is often directed by a ‘firm champion’; an internal entrepreneur that guides the firms towards its internationalization

Senter for entreprenørskap – Truls Erikson Some critique of the ‘stage models’ Both models assume domestic maturation Both models also assumes internationalization as a strategic option The models might be criticized for being tautological They fail to explain the rapid and extensive internationalization of firms that has become the rule among Norwegian international firms

Senter for entreprenørskap – Truls Erikson Do these models seem to be good explanations of Norwegian international firms? Share of Foreign Sales Time to Internationalization 100% Born Global 40%* Early International 45%* Late International 12%* Late Global 2%*

Senter for entreprenørskap – Truls Erikson Differences in the Typology Demographics –Age –Size –Turn over Competitive profile International activities –Number of foreign markets –Market selection International Strategy –Niche orientation –Differentiation –Quality T % Born Global Early International Late International Late Global

Senter for entreprenørskap – Truls Erikson Similarities in the Typology Demographics –Business sector –Location Entry modes –Export sales –Agents/distributors Performance! T % Born Global Early International Late International Late Global

Senter for entreprenørskap – Truls Erikson Why Do They Internationalize? Born Globals – Need! –Pushed by need for growth –Also tempted by high demand Early Internationals and Late Internationals – Domestic factors –Reduce dependency –Excess capacity Extremely low score on governmental encouragement! T % Born Global Early International Late International Late Global

Senter for entreprenørskap – Truls Erikson What Inhibits Further International Growth? Late Globals – Internal factors predominantly related to organizational inertia Late Internationals – Incremental internationalization, process slowed down by lack of experiential market knowledge Born Globals and Early Internationals – Rapid internationalization inhibited by various resource constraints. Especially in terms of human and financial capital T % Born Global Early International Late International Late Global

Senter for entreprenørskap – Truls Erikson Theoretical Implications The distribution suggests that we need to take a step away from the slow, incremental models of internationalization It also suggests that different models might apply for firms in different clusters It also underlines the heterogeneity of internationalizing firms, which in turns suggests holistic models with idiosyncratic internationalization patterns Effects of newness also underlines problems related to resource gaps and strategic management in order to fill these

Senter for entreprenørskap – Truls Erikson Managerial Implications Early and rapid internationalization might not be an economic gold mine, but it might be necessary! Early internationalization is often advantageous in order to avoid painful internationalization processes at later stages In case of internationalization of established organizations, international spin-offs might be a good option Strategic planning and partnering through hybrid structures might be necessary in early stages, but do not give up your independence!

Senter for entreprenørskap – Truls Erikson Summary and Conclusions We have presented the traditional view of firm internationalization and it’s counterpart the INVs These firms differentiate themselves from traditional exporter in many ways and represents a challenge to existing internationalization theories Early internationalization have become the rule rather than the exception in many small and open economies It follows from this fact that the theoretical focus has shifted from models of “knowledge accumulation” to entrepreneurial models of “resource acquisition”