Born Global Startups

What are born global startups?


Born global startups are ventures that start thinking and acting globally in their early stages of development, which utilize international markets and resources to scale their growth. Attention to born global startups comes from a stream of theory and research that examines how startups rapidly internationalize their new ventures (Knight and Cavusgil, 2004). Traditionally, entrepreneurs would focus on domestic markets first and then pursue internationalization gradually as they develop the requisite skills through trial and error.


Modern advances in internet technologies, global talent flows, and international supply chains have substantially lowered the cost for entrepreneurs to internationalize (McCormick & Somaya, 2020). They have also made it possible for startups to address global markets from the very beginning of their existence. Entrepreneurs can now bypass many of their home-country constraints such as government inefficiencies and physical location (McCormick & Somaya, 2020). For example, a tax software startup might decide to address the Australian market rather than the over-saturated U.S. market, even if it is based in the U.S., or in Europe. Since all of the interactions are mediated by the internet, there is less need for physical proximity of production and sales.


We would expect born global startups to be more prevalent in smaller countries as entrepreneurs look for larger markets or production capabilities. Bilingualism and biculturalism of the population might also be important, thus, we might expect to see more of this type of entrepreneurship among individuals from diverse backgrounds or with access to diversity through their networks. For instance, 1/3 of people living in Toronto were born outside Canada. International experiences (including travel, education, and living abroad experiences) increase the cognitive complexity required to thrive in international businesses (Leung & Chiu, 2008; Pidduck, 2019) and provides increased understanding of foreign cultures which can be useful in generating business ideas. In addition, entrepreneurs and teams with prior international experience will have knowledge and established networks that they can leverage in their global ventures.


One of the best examples of born global startups are dropshipping businesses. Dropshipping is a method of e-commerce retail sales where the store does not hold the products it sells. The business purchases items from a third party supplier and facilitates its shipment directly to the consumer. This model eliminates the need for warehousing, B2B shipping, storefront costs (rent, utilities etc.), and enables the company to have a substantially wider reach from the start.


One area that seems ripe for future research is to look at the moderators of the tendency to start global. For example, how do factors like income inequality, strength of intellectual property rights, or quality of institutions in general strengthen or weaken the effect of diversity of experience on the likelihood of being born global rather than following the traditional incremental internationalization path.


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Comments

Unknown said…
Not sure I'd agree that this is a theory but BGs have certainly received a lot of research attention. Early use of the term was popularized by Knight and Cavusgil (1996) also Madsen and Servais (1997). However, the strongest arguments (albeit not theory) came from Oviatt and McDougall (1994 in JIBS and 1994 in JBV). They distinguish four types of international new venture, one of which is the 'global start-up'. Of note, Knight and Cavusgil typically look at exports to categorize firms while Oviatt and McDougall consider two dimensions: coordination of value chain activities; number of countries served. Other work (e.g. Coviello 2015) suggests that many of us use the term born global too casually (because it sounds good) when in fact we typically study early internationalizers, born regionals, or born internationalizers (all these are different). This is consistent with various arguments from Alan Rugman that born globals are very rare. My personal view is that it is only now (2019) that we have digital technologies are firms technically able to be born globals. I have tried very hard to NOT use the term BG through my career unless it was specifically appropriate (e.g. in a critique).