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GAN STATE

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This is to certify that the

dissertation entitled

Emerging Paradigm for
Internationa] Marketing: The Born Global Firm

presented by

Gary A. Knight

has been accepted towards fulﬁllment
of the requirements for

Ph.D. Marketing

degree in

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Major professor

Date June 25, 1997

 

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TO AVOID FINES return on or More dete due.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MSU Ie An Afﬂrmetlve Action/Equal Opportunity lnetltuton

GIG-9.1

 

EMERGING PARADIGM FOR
INTERNATIONAL MARKETING: THE BORN GLOBAL FIRM

by

Gary A. Knight

A DISSERTATION

Submitted to
Michigan State University
in partial fulﬁllment of the requirements
for the degree of

DOCTOR OF PHILOSOPHY

Department of Marketing and Supply Chain Management

1997

ABSTRACT

EMERGING PARADIGM FOR
INTERNATIONAL MARKETING: THE BORN GLOBAL FIRM

By

Gary A. Knight

This dissertation investigates the emergence in recent years of a relatively new type of
fum: the "Born Global." Born globals (808) are companies that operate in international
markets from or near their founding. A key distinguishing feature of BGs is that
management tends to see the world, instead of just the domestic economy, as the ﬁrm’s
marketplace. The emergence of 865 parallels recent advances in information technology
and the ongoing globalization of markets worldwide. Recent research has identiﬁed
these ﬁrms in Australia, Japan, Western Europe, and North America.

The goals of the dissertation are to ( 1) describe BG ﬁrms and examine how they
arose and how they differ from traditional exporting ﬁrms; (2) develop and test a
theoretical model which describes key orientations and strategies antecedent to export
market performance in such ﬁrms; (3) develop and reﬁne “global orientation,” a
construct composed of several sub-constructs which appear useful to describing 8G8 and
understanding how they operate; and (4) offer a contemporary explanation of ﬁrm
internationalization.

Following case studies with selected BG ﬁrms, a mail questionnaire was sent to

the CEOs of several hundred BG and Non-Bom-Global (NEG) ﬁrms located throughout

the United States. Nearly 300 responses were received and analyzed. The dependent

variable was the firm’s export market performance.

Results suggest that 86s are distinct from NBGs in several aspects which help to

reveal how young companies can operate abroad with a signiﬁcant degree of success.

Additional ﬁndings revealed that the following are important features of the BG ﬁrm and

signiﬁcant antecedents of export market performance:

commitment to international markets;

certain aspects of international venturesomeness, a construct associated with
entrepreneurial orientation in the international context;

speciﬁc elements of international market orientation;

international marketing competence;

emphasis on product and product-service quality; and

product-based differentiation.

Copyright by
Gary Alan Knight
1997

Dedicated to my wife Mari and my mother Audrey,
in appreciation of their love, encouragement, and
financial support over these past six years of graduate study;

and to my father William, in appreciation of the example he set

ACKNOWLEDGMENTS

The writing of this dissertation was a challenging task. The research and writing was
completed over the space of about three years, during which time my knowledge of the
topic and the methods for investigating it continually grew. I would like to extend my
sincere thanks to the members of my doctoral committee, who were extremely
instrumental in their educational and other support throughout the creation of this
document. Additionally, these same individuals were critical to the great strides I made
over four years in my doctoral education (in matters both practical and academic) and in
the maturation process that naturally accompanies the completion of a Ph.D. These
individuals are:

S. Tamer Cavusgil, professor and chair of the committee;

Robert W. Nason, professor and department chair;

Stanley C. Hollander, professor emeritus;

Roger J. Calantone, professor and head of the Ph.D. program; and

Preet Aulakh, assistant professor;

I extend a special note of gratitude to Dr. Cavusgil, one of the great visionaries of
contemporary business education and research. It was he who originally suggested the
idea for this dissertation and whose guiding light was crucial to its completion. I shall
always be indebted for the inﬂuence this man has had on me, as principled mentor,
scholar, farsighted leader, and skilled statesman to the academic community. I am also

particularly grateﬁrl to Dr. Calantone who, having mastered every art and skill of

vi

academic life, has proven a continuous fountain of knowledge, in matters both practical
and scholarly.

I would also like to thank the Center for International Business Education and
Research at Michigan State University for its generous support that enabled the research
for this dissertation and numerous other collateral projects. For the future, I will do my
best to provide value for the taxpayers’ money.

Finally, I would like to thank professors Cornelia Droge, Richard Spreng, and
also Attila Yaprak (at Wayne State University), who contributed substantially to my

education and ultimately to my completing the Ph.D. at Michigan State University.

vii

TABLE OF CONTENTS

LIST OF TABLES ................................................................................................... xi
LIST OF FIGURES ................................................................................................ xii
CHAPTER 1

OVERVIEW ............................................................................................................. 1
Introduction and Motivation for the Study ............................................................... 1
Conditions Giving Rise to the Emergence of Born Globals ..................................... 5
Facilitating Factors ................................................................................................... 5
Triggers of Internationalization in the Born Global F irm ........................................ 10
CHAPTER 2

THEORETICAL FOUNDATION ............................................................................ 13
Conventional Internationalization Models and Re-Assessment ............................... 13
Theoretical Bases: Explaining the Born Global Phenomenon ................................. 15
CHAPTER 3

THEORETICAL MODEL AND HYPOTHESES ................................................... 23
A Model of the Born Global Firm ............................................................................... 23
Global Orientation .................................................................................................... 23
Distinctive Marketing Strategies .............................................................................. 27
Export Market Performance ..................................................................................... 32
Research Hypotheses ................................................................................................ 33
CHAPTER 4

RESEARCH DESIGN / METHOD .......................................................................... 34
Overall Design and Sampling Frame ........................................................................ 34
Questionnaire, Measures, and Mailing ..................................................................... 36
CHAPTER 5

ANALYSES AND FINDINGS ................................................................................ 44
Analytical Approach ................................................................................................. 44
Response Rate and Nonresponse Bias ...................................................................... 44
Data Quality / Construct Reliability and Validity .................................................... 46
Findings: Description of BG Firms .......................................................................... 56
Findings: Main Model .............................................................................................. 63

viii

CHAPTER 6

DISCUSSION AND CONCLUSION ...................................................................... 75
Explanation of Results .............................................................................................. 75
Managerial Implications ........................................................................................... 84
Conclusion and Directions for Future Research ...................................................... 85
APPENDIX 1 ............................................................................................................ 89
Summary of Born-Global F inns in Case Studies ..................................................... 89
APPENDIX 2 ........................................................................................................... 93
Sampling of Companies Meeting the Born-Global Criteria .................................... 93
APPENDIX 3 ............................................................................................................ 95
Descriptive Statistics on Responding Born-Global Firms (N = 122) ....................... 95

ix

LIST OF TABLES

TABLE 1: Sub-constructs that Comprise

Global Orientation in the Born Global Firm .......................................... 24
TABLE 2: Sub-constructs that Comprise

Distinctive Marketing Strategies in the Born Global Firm .................... 28
TABLE 3: Pilot Study Results of Conﬁrmatory Factor Analysis

and Reliability Analysis on Study Factors / Measures .......................... 41
TABLE 4: Non-Response Bias Assessment Using Wave Analysis ......................... 45

TABLE 5: Number of Scale Items and Reliability Estimates for Full
Scale Items Prior to Reﬁnement using Conﬁrmatory Factor Analysis .. 47
TABLE 6: Main Study Results of Measurement Models in

Conﬁrmatory Factor Analysis and Scale Reliability Estimates ................ 51
TABLE 7: Comparison of Characteristics of

Born-Global and Non-Bom-Global Firms .............................................. 57
TABLE 8: Motivations for Starting Exporting ......................................................... 58
TABLE 9: Additional (Non-Metric) Characteristics

of Born-Global and Non-Born-Global Firms ......................................... 60
TABLE 10: Additional Signiﬁcant Differences

between Born-Global and Non-Bom-Global Firms ............................. 62

TABLE 1 1: Antecedents to Export Market Performance in the Born-Global Firm 64
TABLE 12: Antecedents to Export Market
Performance in the Non-Born-Global Firm .......................................... 68
TABLE 13: Antecedents to Export Market Performance: Side-by-Side
T-value Comparison of Born-Global and Non-Born-Global Firms ..... 70
TABLE 14: T-test Comparison of Global Orientation and Distinctive Marketing
Strategies Constructs between the Top One-Third Performing Bom-
Global Firms (n = 40) and the Full Sample Non-Bom-Global Firms .. 73
TABLE 15: Summary of Major Research Findings ................................................ 74

LIST OF FIGURES

FIGURE 1: Conditions Giving Rise to

and Common Features of the Born Global Firm .................................. 6
FIGURE 2: Proposed Conceptual Model:
Key Performance Antecedents in the Born Global Firm ...................... 16

xi

CHAPTER 1

OVERVIEW

INTRODUCTION AND MOTIVATION FOR THE STUDY

This dissertation concerns the recent emergence and characteristics of a new and
important type of commercial enterprise: the "Born Global" ﬁrm (McKinsey & Co. 1993;
Rennie 1993). The Born Global (BG) is deﬁned as a company which, from or near its
founding, seeks to derive a substantial proportion of its revenue from the sale of its
products in international markets. In contrast to the vast majority of companies presently
involved in international marketing, the key distinguishing feature of the BG is that its
origins and fundamental orientation are strongly international. Management at these
ﬁrms — as demonstrated by early commitment of ﬁnancial, human, and other resources
to generating foreign sales — typically views the world as a single, borderless
marketplace. Conventional explanations have long asserted that international business is
the domain of large, resource-rich companies and that internationalization is gradual,
occurring largely as an afterthought and only after the fum has thoroughly established
itself in the domestic market, a process usually spanning several decades (Anderson
1993; Johanson and Vahlne 1990). The phenomenon of the BG ﬁrm presents a
substantial new challenge to this conventional thinking and affords an opportunity to
extend and enrich numerous theoretical perspectives.

In the following pages an explanation is provided of characteristics of 3G5 and
key antecedents giving rise to their emergence and performance. These explanations are
based on interviews conducted with managers at twelve separate BG ﬁrms as well as on
case studies presented elsewhere (e. g., McDougall, Shane and Oviatt 1994; McDougall
and Oviatt 1996; Oviatt and McDougall 1995), and descriptions provided in the

academic and popular business press. Summaries of selected case studies that were

conducted as part of this research are provided in Appendix 1. As additional support for
the emergence of BGs, this researcher has identiﬁed over 1,000 young American
companies from a variety of sources meeting the BG criteria. A sampling of these ﬁrms
is presented in Appendix 2.

Recent preliminary research from the United States, Japan, Australia, and Europe
(Business Week 1992; Business Week 1993; Business Week 1995; Chuushoo Kigyoo Cho
1995; Economist 1993; Gupta 1989; McKinsey & Co. 1993; Nakarnura 1992; Nikkei
Sangyoo Shimbun 1995; Rennie 1993; Rose and Quintanilla 1996; Tokyo Business
Today 1995) indicates that BGs began to appear in large numbers in the late 19805.
Brush (1992) found that 13 percent of her nationwide sample of young U.S.
manufacturers had expanded overseas within their ﬁrst year of operations. In some
industrialized economies such as Australia and the United States (Business Week 1992;
McKinsey & Co. 1993), 30s are estimated to account for a substantial portion of export
growth. Typically, such businesses emerge as a result of signiﬁcant breakthroughs in
product or process technologies and tend to be formed by active entrepreneurs possessing
a strong market orientation and emphasizing customer relationships. Initial international
involvement is usually via exporting, frequently sustained through network relationships,
with emphasis on products possessing substantial added-value, high quality, and
differentiated design. While BGs tend to be small in size (given their relative youth),
aggressive pursuit of markets worldwide often leads to rapid growth, implying that many
can evolve into large, technology-infused ﬁrms (Chuushoo Kigyoo Cho 1995; Economist
1993; Gupta 1989; Jolly, Alahuhta and Jeannet 1992; McKinsey & Co. 1993; Nikkei
Sangyoo Shimbun 1995; Oviatt and McDougall 1994).

Increases in efﬁciency resulting from advances in information, production, and
communications technologies have decreased the cost of international business for all
ﬁrms. Compared to smaller newcomers, large multinational ﬁrms (MNEs) hold fewer

advantages than they once did. Competitive advantage in foreign markets has tended, in

recent years, to shift away from companies with large size and long experience to smaller
ﬁrms possessing unique knowledge and better able to service distinct global market
niches (Oviatt and McDougall 1995). Because they typically possess fewer ﬁnancial and
other resources than larger, traditional multinational enterprises (MN Es), BGs rely
heavily on communications technology — e-mail, the Internet, fax, voice mail,
electronic data interchange, and other computer-supported systems — to achieve their
international goals. Such technologies facilitate low-cost, global communications and
the acquisition of substantial amounts of high-quality market data, often previously
inaccessible to smaller ﬁrms, but now allowing them to achieve equal footing in many
respects with larger MNEs (Chuushoo Kigyoo Cho 1995; Economist 1993; Gupta 1989;
Jolly, Alahuhta and Jeannet 1992; McKinsey & Co. 1993; Nikkei Sangyoo Shimbun
1995; Oviatt and McDougall 1994). In light of this development and the ongoing decline
in international transportation and communication costs (e.g., the Economist recently
predicted that the cost of international telephone calls will soon fall to levels approaching
that of local calls [1995]), small size, want of massive resources, and the inability to
access costly information are no longer barriers to signiﬁcant participation in
international markets. Rather than being the exception that they have been in the past,
smaller, BG-type ﬁrms are likely, in due course, to become the norm among
internationally active ﬁrms.

In many respects, the BG phenomenon is an artifact of the new global
marketplace. These young and entrepreneurial ﬁrms are responding, on the one hand, to
worldwide marketing opportunities afforded by the rapid globalization of markets. Their
products and services — often featuring advanced technology, unique customer beneﬁts,
and high added-value — appear to enjoy universal appeal. On the other hand, the
aggressive posture of 803 in cultivating international consumers is greatly facilitated by
the contemporary environment of marketing: homogenous worldwide demand, modern

information technology, easier access to the means of internationalization, favorable cost

economies of communication and transportation, and widening multi-country networks
of suppliers and customers. Also instrumental to their rise are recent advances in
manufacturing technology which allow efﬁcient and economical production of goods on
a modest scale. These circumstances, coupled with high entrepreneurial drive and the
appearance of niche markets worldwide, are likely to have fueled the rapid emergence
and growth of BG ﬁrms.

To the extent that small ﬁrms can be engines of growth for product-market
innovations and the broader economic development of nations, the advent of BGs holds
import for scholars and practitioners alike. With a view to shedding light on the BG
phenomenon, this dissertation has several objectives:

(1) To describe BG ﬁrms and compare them to traditional exporting ﬁrms;

(2) To develop and test a theoretical model which describes key orientations and
strategies antecedent to export market performance in such ﬁrms;

(3) To develop and reﬁne “global orientation,” a construct critical to understanding the
BG ﬁrm;

(4) To begin to offer a contemporary explanation of the internationalization of the ﬁrm.

This dissertation proceeds as follows. First, an overview of conditions giving rise
to the occurrence of BG ﬁrms is presented. Chapter 2 lays out several theories which
help to explain the BGphenomenon. In Chapter 3, key constructs, the theoretical model
and hypotheses are presented. Chapter 4 outlines the research design and method
followed in the empirical portion of the dissertation. Chapter 5 describes analyses
performed and overall results of the study. Finally, in Chapter 6, conclusions and

relevant discussion are provided, along with implications for future research.

CONDITIONS GIVING RISE TO THE EMERGENCE OF BORN GLOBALS
With a view to better understanding the BG phenomenon, developing hypotheses, and
setting the stage for future research, managers were interviewed at twelve separate BG
ﬁrms. Summaries of eight of these case studies are provided in Appendix 1. Data
obtained from the interviews and ﬁ'om other sources serve as the basis for much of the
explanations that follow. There are a number of phenomena that have precipitated the
appearance of HG ﬁrms over the last several years. These phenomena are summarized in
Figure l and can be divided into two types: facilitating factors and internationalization

triggers.

FACILITATING FACTORS
Facilitating factors are emergent conditions in the business environment that are
favorable to emergence of BGs. Key facilitating factors are listed and explained below.
Globalization of markets for goods and services. Over the past twenty years,
world trade has grown far more rapidly than world production. The result is a more
integrated global economy in which ﬁrms and consumers everywhere are increasingly
touched by the activities of international marketing (Dunning 1993; Levitt 1983; Porter
1986; Sheth 1992). The trend has given rise to globalization -— the marketing of
products and brands in numerous countries, simultaneously, by thousands of
multinational ﬁrms. Globalization is associated with reduction of trade and investment
barriers, manufacturing by large MN Es in multiple countries, sourcing by local ﬁrms of
raw materials or parts from cost-effective suppliers worldwide, and increased
competition in domestic markets ﬁ’om foreign ﬁrms. Most recently the trend has been
accelerated by the development of free trade areas such as the ASEAN, NAFTA, APEC,
and the European Union. Increasing internal competition is putting greater pressure on

smaller ﬁrms to intemationalize. This, combined with increasing opportunities to

 

 

FACILITATING FACTORS
Globalization of markets for goods and services
Advances in communications technologies
Inherent advantages of young ﬁrms
Advances in production technologies
Growing role of global networks
Increasing salience of global niche markets

 

 

 
    

    
 

 

COMMON FEATURES OF BORN GLOBAL FIRMS
Young (less than 20 years since founding);
Small/medium-sized ﬁrms having fewer ﬁnancial and other resources than traditional MNEs;
Derive at least 25% of total sales from international markets;
Management has strong technological orientation;
Management has strong international orientation;
Management has strong international entrepreneurial orientation;
Management has strong market orientation;
Frequently enjoy internationally recognized technical eminence in given product/service category
Emergence correlated with signiﬁcant product or process innovations;
Products have substantial added-value, universal appeal, higher quality, and differentiated design;
Initial international involvement is via exporting;
lntemational involvement initiated and/or sustained through signiﬁcant network relationships;
Rely heavily on advanced communications technologies to achieve international goals;
LB_egan to appear in large numbers in the late 19805 in the USA, Japan, Eugpe, and Australia.

 

    

INTERNATIONALIZATION TRIGGERS

Export pull

Export push

Worldwide monopoly or near-monopoly position

Product-market conditions necessitating international
involvement

Signiﬁcant global network relationships

      

 

 

 

 

FIGURE 1

CONDITIONS GIVING RISE TO AND
COMMON FEATURES OF THE BORN GLOBAL FIRM

 

capture foreign markets and the ability to proﬁt from expanded scale and scope in their
operations, has created many incentives today for smaller companies to intemationalize
(Oviatt and McDougall 1995; Reich 1991).

Advances in information and communications technologies. Widespread
diffusion of fax, e-mail, the Internet, and other such communications technologies are
making early internationalization a more viable and cost-effective option for small
marketers than was the case just 10 years ago (Business Week 1994; Oviatt and
McDougall 1995). Gone are the days when global market data were nearly monopolized
by vertically-integrated mega-ﬁrms in which information ﬂows were expensive and took
considerable time to be shared. International telephoning costs 'continue to decline,
bringing the price of global communications down to levels within reach of even the
smallest ﬁrms (Economist 1995). A wide range of products — from ﬂowers to auto parts
—— are already being marketed through Internet servers worldwide (Quelch and Klein
1996). E-mail is facilitating mobile computing, permitting small and medium size
enterprises (SMEs) to compete anywhere without setting up expensive branch offices
(Business Week 1994). Such systems are providing important competitive advantages to
smaller ﬁrms, allowing them to efficiently transact business with upstream and
downstream channel members throughout the world (Economist 1995; Oviatt and
McDougall 1994).

In the near-term, developments in information and communications technologies
are likely to continue through increased collaborations among telecoms, software giants,
and TV cable ﬁrms, among other trends. As businesses are increasingly ﬁtted with ﬁber-
optic telephony, digital networks and the Internet are permitting SMEs to replace costly
foreign business trips with video conferencing, facilitating immediate access to foreign
customers, and providing information on foreign markets, local distributors, potential
joint venture partners, and other data ﬂows critical to cost-effective international

marketing operations. The rapid, widespread dissemination of information is also

facilitating the rise of global niche markets, critical to the success of the BG ﬁrm
(Business Week 1994; Dalgic and Leeuw 1994; Kotler 1991; Quelch and Klein 1996).

Inherent advantages of small ﬁrms. Compared to MNES, smaller companies are
unfettered by bureaucracy and expensive existing information systems (Business Week
1994; Covin and Slevin 1989; Douglas, Craig and Keegan 1982; Mascarenhas 1986;
Pelham and Wilson 1995). They are often more innovative, more customer-oriented,
more adaptable, and have quicker response times when it comes to implementing new
technologies and meeting speciﬁc needs and tastes (Business Week 1994; Carroll 1984;
Mascarenhas 1996; Oviatt and McDougall 1994). Such smaller, market-oriented ﬁrms
are often formed by entrepreneurs who break off from large companies, taking their
visionary knowledge and ﬂexible capabilities with them, factors that ultimately allow
them to target products to market niches that may be too small to interest their larger,
former employers. With the growing role of direct marketing, globe-spanning
transportation specialists such as Federal Express, and local distributors who search the
world to ﬁnd products meeting exacting speciﬁcations, it is increasing possible for
smaller businesses to serve customized market segments in regions scattered around the
world (International Business 1996; McDougall, Shane and Oviatt 1994; McKenna 1995;
Oviatt and McDougall 1995).

Advances in production technology. Thanks to revolutionary progress in
microprocessor-based controls, low-scale, batch-type production has become economical
for SMEs in many industries. The deﬁning attribute of the microprocessor is
prograrnmability which, on the factory ﬂoor, transforms the production process and
permits the cost-effective creation of a broad range of models and products (McKenna
1991; Wheelwright and Hayes 1985). Inexpensive computer-aided design and
manufacturing soﬁware allow small ﬁrms to produce multiple prototypes quickly and
cheaply without large product development labs (Business Week 1994). These

technologies enable marketers to segment consumers into ever narrower, global market

niches, efﬁciently serving highly customized needs of increasingly demanding buyers
both at home and abroad. In this way, smaller ﬁrms are achieving, in many respects,
equal footing with large multinationals in the production of sophisticated products for
sale everywhere (Goldhar and Lei 1995; Jolly, Alahuhta and Jeannet 1992; Kirpalani and
MacIntosh 1980; McKenna 1991; Oviatt and McDougall 1994).

Growing role of global networks. Successful international business today is
increasingly facilitated through link-ups with foreign distributors, trading companies,
strategic alliance partners, as well as more traditional buyers and sellers (Hakansson
1982; Thorelli 1990; Webster 1992). Networks and other strategic partnerships are
replacing simple market-based transactions and traditional bureaucratic hierarchical
organizations (Achrol 1991; Alchian 1984; Webster 1992). The new networks
relationships are allowing BG ﬁrms to obtain advantages abroad that are relatively
unattainable in the absence of such linkages. For example, network connections allowed
OmniComm, Inc., a young manufacturer of two-way satellite-based messaging systems,
to expand rapidly into Europe in the late 19808. Without such connections, the company
would not have been able to go global as efﬁciently as it did.

Increasing salience of global niche markets. With the globalization of markets,
intemational demand for customized products appears to be growing (Dalgic and Leeuw
1994; Dunning 1993; Oviatt and McDougall 1995). Technology is facilitating greater
specialization and the appearance of increased numbers of small ﬁrms supplying
products occupying narrow, cross-national niches (Dunning 1993; Kotler 1991). Indeed,
with heightened competition in many industries and advances in production technologies,
small entrepreneurs are leveraging highly specialized knowledge bases to deﬁne and
serve market segments small enough to go unnoticed by larger rivals . As McKenna
(1991) notes, such knowledge can be applied to generating “niche thinking” in the

identiﬁcation of global niche markets that the small player can own.

10

TRIGGERS OF INTERNATIONALIZATION IN THE BORN GLOBAL FIRM
Internationalization triggers are orientations or circumstances in the ﬁrm's internal
environment that induce management to intemationalize. Key internationalization triggers
affecting BGs are listed and explained below.

Export pull. In most industries, there exists substantial demand in numerous
countries for a broad mix of products. In the absence of competent local suppliers,
Export Pull describes the case of local buyers who satisfy their product needs by
sourcing from abroad. In response to this demand, BG ﬁrms supply products worldwide
that occupy narrow, cross-national market niches. Moreover, the globalization of
markets has standardized many product needs, occasioning ﬁrrther demand for goods
produced by individual ﬁrms (Levitt 1983). The pull effect may be initiated by local
intermediaries who perceive a speciﬁc product-market opportunity or by end users
themselves who become aware of a given foreign supplier. For example, GeoQuest
company invented a technology that can safely and cheaply locate unexploded land
mines. Because it is the leader in this relatively new industry, the ﬁrm is starting to do a
big business in the Middle East and Southeast Asia.

Export Push. Many 363 are managed by internationally-oriented entrepreneurs
who possess a powerful drive for selling their products abroad. Indeed, as demonstrated
by early commitment of ﬁnancial, human, and other resources to generating foreign
sales, such managers may view much of the world as their marketplace. They apply a
push strategy of actively promoting their offerings to foreign intermediaries, who in turn
promote the products to ﬁnal consumers (Oviatt and McDougall 1995). Alternatively,
the manufacturer may engage in extensive foreign advertising and deve10p its own sales
force to promote the product directly to foreign buyers. For example, much of the
foreign success of AntiTox Corporation, a manufacturer of products that kill toxins in
stored grains and other crops, derives from the energetic pursuit of markets in Latin

America by top management. Within the ﬁrst ﬁve years of operations, the ﬁnn’s

ll

founders perceived a strong need in those countries that was not being adequately
addressed by existing products.

Worldwide Monopoly or Near-Monopoly Position in the Exported Product.
Some companies possess a monopoly or near-monopoly position in a given product and
this advantage, even in the face of small size, translates into early internationalization as
interested foreign buyers demand product from the monopolist ﬁrm (Penrose 1959;
Porter 1991). Monopoly power can derive from tacitly owned knowledge, proprietary
products or processes, or other assets that are relatively inseparable from the controlling
ﬁrm. Moreover, some degree of monopoly power accrues, in the short-term at least, to
marketers whose products are substantially differentiated from and/or superior to those of
competitors (Penrose 1959; Porter 1980). Finally, companies can maintain a pseudo
monopoly position to the extent they can convince buyers, through marketing and other
means, that theirs is the only product of its kind (Porter 1980).

Under product-market conditions necessitating international involvement, young
ﬁrms may produce products, components, or parts so specialized that domestic demand
proves insufﬁcient, necessitating multi-national selling (Dunning 1988; Nikkei Sangyoo
Shimbun 1995; Oviatt and McDougall 1995). This phenomenon may also occur in
businesses that locate in foreign settings to obtain resources in short supply or of
inappropriate quality at home (Teramoto et al. 1990) or in ﬁrms selling goods in which
primary demand has shifted abroad (N akamura 1992). S[MMMi]ome SME expand ,
offshore to obtain resources that are not readily available to them at home (Czinkota and
Ronkainen 1995; Nikkei Sangyoo Shimbun 1995; Teramoto et al. 1990). For example, in
Japan, capital markets for young companies are not as well developed as they are in other
countries and consequently, BG ﬁrms are establishing a presence in the United States in
part to access funding from such sources as the NASDAQ (the stock market for capital
formation by smaller, entrepreneurial ﬁrms) (Nikkei Sangyoo Shimbun 1995). Other

companies have moved offshore to access cheaper factors of production such as labor

12

(Nakamura 1992; Teramoto et a1. 1990). In addition, new ﬁrms selling products for
which demand may be insufﬁcient in the home market, are heading offshore to enter
lucrative markets of affluent consumers (Nikkei Sangyoo Shimbun 1995). In the United
States, OmniComm, Inc. can generate adequate sales for some of its specialized
products only by targeting markets in multiple countries.

The ﬁnal early internationalization trigger is the existence of significant global
network relationships. Early foreign expansion may be facilitated through network
linkages with entities located abroad. Networks develop through foreign business
activities, government intervention, or personal contacts of management, and comprise
inward (e.g., sourcing) as well as outward (e.g., foreign licensing) interactions. Such
relations are often an invaluable source of knowledge regarding international business
methods and opportunities (Hakansson 1982;‘Thorelli 1990; Welch and Luostarinen

1993).

CHAPTER 2

THEORETICAL FOUNDATION

CONVENTIONAL INTERNATIONALIZATION MODELS AND RE-ASSESSMENT

The BG phenomenon presents an important challenge to conventional theories of ﬁrm
internationalization. Historically, the internationalization process has been identiﬁed
with two major schools depicted as the Uppsala model and the Innovation model. The
Uppsala model was developed by Johanson and Wiedersheim-Paul (1975) and Johanson
and Vahlne (1977; 1990), and has received considerable attention over the last two
decades. The model implies four distinctive stages of gradually increasing foreign
involvement which ﬁrms follow on their way to becoming fully internationalized: ( 1)
No regular export activities; (2) Export via independent representatives; (3)
Establishment of an overseas sales subsidiary; and, ultimately, (4) Foreign processing
and production.

The Uppsala model emphasizes incremental internationalization through
acquisition, integration, and use of experiential knowledge about and gradually
increasing commitment to markets located abroad. Internationalization hinges on two
state aspects: knowledge possessed by the ﬁrm about speciﬁc foreign markets and
commitment of ﬁrm resources to those markets. The model assumes that management
will not commit higher levels of resources to a market until it has acquired increasing
levels of experiential knowledge. Because such learning is time-consuming,
internationalization is said to occur slowly (Anderson 1993; Johanson and Vahlne 1977;
Johanson and Vahlne 1990). Weight is given in the model to internationalization as a
stepwise, almost plodding process — the "establishment chain" — in which the ﬁrm
evolves systematically from a situation of no foreign involvement to eventual

establishment of production abroad. Throughout the process, the Uppsala model

13

14

emphasizes a continuously growing commitment of resources to the market that can
occur even in the absence of speciﬁc strategic intent. The model assumes that, initially,
ﬁrms target culturally similar markets, and then advance to newer targets possessing
increasing “psychic distance” (Anderson 1993; Johanson and Vahlne 1977; Johanson and
Vahlne 1990).

The second major model describing ﬁrm internationalization — the Innovation
model — derives mainly from the work of Bilkey and Tesar (1977), Cavusgil (1980), and
Reid (1981). It is similar to the Uppsala model in portraying internationalization as an
incremental sequence of market-targeting innovations within the ﬁrm, evolving slowly as
the ﬁrm gradually acquires relevant knowledge and experience. Cavusgil's (1980)
review suggested that companies tend to intemationalize without much rational analysis
or deliberate planning, that internationalization is a gradual process advancing in
incremental stages over a relatively long period of time, and that each stage entails
increasing commitments of resources and managerial talent. The slowness of the process
may be a reﬂection of management's aversion to risk-taking and its inability to rapidly
acquire relevant knowledge and market information (Cavusgil 1980).

Since the Uppsala and Innovation models were developed, numerous scholars
have advanced various criticisms about their assumptions and validity. First, the initial
step in internationalization may not be simple exporting as predicted by the models, but
may be one of several other international expansion modes (Anderson, Hakansson and
Johanson 1994; Garnier 1982; Nikkei Sangyoo Shimbun 1995; Nordstrom 1991; Root
1994; Rosson and Reid 1987; Roux 1979; Welch and Luostarinen 1993). Second,
foreign expansion may proceed more quickly in countries where there is already
widespread internationalization of industry and business activities or where markets are
substantially globalized (Johanson and Vahlne 1990; Levitt 1983; Nordstrom 1991).
Third, the traditional views emphasize deterministic processes (e.g., the “establishment

chain”) in which internationalization proceeds almost ceaselessly, seemingly without

15

much deliberate planning. However, foreign expansion tends to be, in reality, a major
undertaking, fraught with contingencies and risk. To confront these challenges, many
companies rely on careful strategic planning which accounts for a potentially wide array
of product-market conditions and strategic options. In the ﬁnal analysis, ﬁrms tend to
choose entry modes best suited to their individual circumstances (Douglas and Wind
1987; Root 1994; Rosson and Reid 1987). Finally, the phenomenon of the BG ﬁrm itself
poses important new challenges to traditional internationalization models. Inherently,
and owing largely to the advent of facilitating technologies and other factors, BGs go

international early, often from the incipient days of their existence.

THEORETICAL BASES: EXPLAINING THE BORN GLOBAL PHENOMENON
Figure 2 proposes a conceptual model in which the export-market performance of BG
ﬁrms is inﬂuenced both by the ﬁnn's Global Orientation and its Distinctive Marketing
Strategies. A relationship is also acknowledged between that orientation and those
strategies, although the linkage is not explored here. In Figure 2, export-marketing is
emphasized since it is the primary mode of foreign market entry for the majority of these
ﬁrms. The conceptualization of antecedents to export-market performance in Figure 2 is
generally consistent with that of Cavusgil and Zou (1994). In the speciﬁc instance of
explaining BG performance, however, the two constructs play a central role and,
therefore, are highlighted in the model. Export-market performance is deﬁned as the
extent to which BG objectives are achieved as a function of Global Orientation and
Distinctive Marketing Strategies. Performance comprises expectations about the
achievement of strategic objectives in addition to more traditional economic goals. such

as proﬁtability, market share, and return on investment.

l6

 

 

J/

(r

GLOBAL ORIENTATION \
' Commitment to International Markets
- International Venturesomeness

- International Market Orientation

- International Marketing Competence
- Use of Advanced Communication
Technologies

k 19

 

 

 

 

 

 
     
 

EXPORT MARKET
PERFORMANCE

 

F/ ‘1
DISTINCTIVE MARKETING STRATEGIES
~ Global Niche Focus Strategy
' Product and Product-Service Quality
° Product/Marketing Differentiation
- Promotion Emphasizing Personal Selling
- Use of Conventional Distribution Channels
or Partnerships J

\L - Foreign Distributor Effectiveness
\

 

 

 

 

 

FIGURE 2

PROPOSED CONCEPTUAL MODEL:
KEY PERFORMANCE ANTECEDENTS IN THE BORN GLOBAL FIRM

17

Before delving into the rationale behind the constructs and relationships portrayed
in Figure 2, several key theories from marketing, management, and economics that help
explain the BG phenomenon are reviewed. At the outset, in addition to posing a
substantial challenge to traditional internationalization models, Oviatt and McDougall
(1994) and McDougall, Shane, and Oviatt (1994) note that the BG ﬁrm (which they term
"International New Venture") is not well explained by existing, conventional theories of
international business. There are at least two explanations for this. First, the BG
phenomenon is relatively new and most potentially applicable international business
theories were developed prior to its recognition. Preliminary research indicates that BGs
began to be described in the popular press beginning in the late 19803 (e.g., Gupta 1989;
Nakarnura 1992; Teramoto et a1. 1990). Thus, it was perhaps only in the last ten to
ﬁfteen years that technology and other factors had evolved to a point facilitating the
emergence of 803 in large numbers. Second, traditional international business theories
have been developed primarily to describe the foreign involvement of large MNEs,
traditional ﬁrms distinct in most respects from BGs.

Theories which may provide important insights, chieﬂy through extension, in
explaining the rise and functioning of BG ﬁrms are examined below.

Monopolistic Advantage Theory suggests that the ﬁrm can enter international
markets because it possesses unique sources of superiority over foreign businesses in
their own markets (Barney 1991; Hymer 1976; Root 1984). Indeed, intemationalizing
ﬁrms may need to have substantial advantages since local companies usually possess
more knowledge and business know-how about their home turf than invading ﬁrms. It is
assumed that monopolistic advantages belong to the foreign ﬁrm and cannot be readily
acquired by local companies. Consequently, despite their advantage in local knowledge,
local entrepreneurs cannot successfully compete with the invading ﬁrm without incurring
substantial costs in developing the specialized knowledge that the foreigner owns. It is

for this reason that the foreign ﬁrm is able to operate successfully abroad. Monopolistic

l8

advantage theory helps explain the internationalization trigger of companies, as noted
above, that possess international monopoly or near-monopoly positions in exported
products.

Closely related to monopolistic advantage theory is the Resource-Based Theory
of the ﬁrm which implies that differential endowment of organizational resources is an
important determinant of strategy and performance. Resources include all assets,
capabilities, organizational processes, information, knowledge, technologies, and so
forth, controlled by the company and enabling it to conceive and implement strategies
that improve its effectiveness and efﬁciency and, in the case of BGs, allow it to obtain
differential advantage in foreign markets (Collis 1991; Porter 1991; Wemerfelt 1984).
The most critical resources are those that are superior in use and hard to imitate or
supplant (Porter 1991). The resource-based view rests on two key assumptions: (1) ﬁrms
within any given industry are heterogeneous with regard to the resources they control;
and (2) resources are not perfectly mobile across ﬁrms and hence, heterogeneity tends to
be long-lasting. The theory helps to explain how possession of superior communications
technologies, effective distribution channels, superior marketing competence,
personalized customer attention, and other such factors can serve as important
advantages in the internationalization efforts of BG ﬁrms.

Network Theory holds that a company may be a member of a network, consisting
of direct and indirect linkages with supportive businesses such as trading companies,
alliance partners, large-scale buyers, distributors, consultants, and even banks (Anderson,
Hakansson and Johanson 1994; Hakansson 1982; Thorelli 1990; Webster 1992). Network
theory emphasizes cooperative and committed relationships that one company may
establish with others to facilitate the achievement of goals in an efﬁcient manner. Over
time, a ﬁrm seeking to expand overseas may establish numerous such linkages with local
entities to facilitate what might otherwise be unattainable foreign transactions. Thus,

network relationships permit smaller ﬁrms to access foreign markets efﬁciently and

l9

acquire the know-how necessary for successful local navigation, as well as providing
other competitive advantages for operating abroad.

Resource-Seeking Theory holds that companies may venture abroad in search of
natural, human, and market resources critical to achieving cost efﬁciencies or sustainable
operational and ﬁnancial performance (Behrman 1981; Czinkota and Ronkainen 1995;
Vanek 1963). Natural resources typically relate to needs based on mineral or
agricultural advantages and result in businesses locating to areas where these resources
are available. Firms seeking human resources usually desire low-cost labor which
matches their requirements in terms of output quality. On the other hand, some
companies locate in an area because of the availability of highly skilled labor or
knowledge workers (Czinkota and Ronkainen 1995). Numerous BGs, particularly in
Japan, have had to locate some or all of their. operations offshore in order to overcome
resource shortcomings that hindered the ﬁrm’s establishment at home.

Strategic Behavior Theory posits that ﬁrms transact business by whichever mode
maximizes proﬁts through improving their competitive position vis a vis rivals (Hofer
and Schendel 1978; Porter 1991)[MMM1]. Strategic behavior theory can be used to predict
the international efforts of small and medium size BG-type ﬁrms. Accordingly,
companies utilize strategies in order to maximize their effectiveness, their efﬁciency, or
both. Effectiveness is deﬁned as the degree to which strategy-deﬁned outputs
correspond to desired outputs, while efﬁciency is the ratio of actual outputs to actual
inputs (Hofer and Schendel 1978). The goal of strategy is the attainment of superior,
sustainable organizational performance (Hofer and Schendel 1978). Strategic behavior
theory helps to explain why BGs might pursue markets in their product niche worldwide,
develop global networks as a means of securing efﬁcient distribution channels and other
assets, seek resources and markets abroad, and so forth. In each case, the theory implies
that the ﬁrm undertakes such actions in order to avoid competing directly with rivals or

to otherwise gain some sort of long-tenn competitive advantage.

20

Industrial Organization Theory examines the "ﬁt" between strategy and the
external environment of the ﬁrm (Aldrich 1979; Hofer 1975; Porter 1980; Venkatraman
and Prescott 1990). Accordingly, companies manage their relationship with the
environment by developing and activating strategies (Bourgeois 1980; Hofer and
Schendel 1978; Scherer and Ross 1990). Superior performance hinges on the ability of
management to align the strategy variables within its control with those environmental
factors outside its control (Galbraith and Schendel 1983). Thus, as shifts in the ﬁrm's
external environment, such as the trend to globalization and advances in communications
and other technologies, render internationalization a more viable alternative for young
ﬁrms, it is expected that some will modify their strategies to proﬁt from potential cross-
border opportunities or to safeguard competitiveness by expanding their activities abroad
(Cavusgil, Zou and Naidu 1993). As noted earlier, shifts in the external environment of
business have been instrumental to the rise of the BG ﬁrm.

The BG phenomenon can also be explained in part through theories related to
Knowledge, Organization Learning, and the Information Explosion. Knowledge,
perhaps the most important asset of the ﬁrm, consists of information that is internalized
through the process of leaming, (Mahoney 1995; Nonaka 1994; Penrose 1959; Reich
1991). Penrose (1959) noted that ﬁrm resources and the productive services they yield
are functions of knowledge. Information on technology, markets, and other useful data
comprise the ﬁrm’s ‘stock of knowledge’, inﬂuencing corporate resources and the uses to
which they may be employed (Penrose 1959). Such knowledge may be speciﬁc to
individual managers or embedded within the management team and not, therefore, easily
disseminated to other ﬁrms (N onaka 1994). The conﬂuence of a complex corporate
culture, unique historical conditions, causal ambiguities, and managers possessing
differential talents often leads to the accumulation of inimitable knowledge bases
providing substantial competitive advantage (Barney 1991; Mahoney 1995). Knowledge

is particularly important to BG ﬁrms because such businesses may lack ﬁnancial and

21

other resources that are more common to larger companies. Proprietary knowledge of
new technologies often allows BGs to achieve a sort of monopoly position vis a vis
competitors both at home and abroad. Knowledge of foreign markets and entry strategies
provides an important means for proﬁtable exploitation of existing product lines.

Organization learning is the process whereby managers acquire new knowledge
and insights that lead to product innovations and new behaviors (Nevis, DiBella and
Gould 1995; Senge 1990). It is through learning that managers change the shared mental
models of their organization, their markets, and their competitors. Mahoney (1995)
refers to organizational learning as a “meta-competence”, an overarching process that
facilitates discovery and targeting of new market opportunities, directs the resource
conversion activities of the ﬁrm, and is generally a key source of sustainable competitive
advantage. Effective learning is a function of the acquisition, processing, storage, and
retrieval of knowledge (Mahoney 1995; Senge 1990). One of the key triggers facilitating
the emergence of BG ﬁrms has been recent revolutionary improvements in information
and communications technologies. This shift has made the means of information
acquisition easier for all ﬁrms, thereby enhancing the ability of BGs to acquire
knowledge through the learning process.

Indeed, the quantity of business information has exploded in the last ten years,
owing primarily to advances in information technology. Where much strategic business
information, particularly regarding international markets, was formerly monopolized by
large MNEs, it is now more readily available to all (Business Week 1994; Glazer 1991;
Ieo 1995; McFarlan 1984; Ohmae 1991; Porter and Millar 1985; Reich 1991). As
Business Week (1994) noted, the information revolution has radically transformed
virtually every method for recording and transmitting knowledge. Research by Anderson
Consulting found that the vast majority of American companies are being deeply affected
by emergent digital technologies that permit the rapid internalization of all variety of

business information, from all over the world (Business Week 1994). Moreover, given

22

the wide range of information technologies now available and trends promoting the rapid
emergence of others — e. g., government deregulation facilitating mergers in the
software, telecommunications, computer, and education industries — the trend to the
rapid “infonnationalization” of small business is likely to accelerate.

In conclusion, it would appear that the above theories have much to offer in
explaining the BG phenomenon. This fact underscores the robustness and validity of
extant theories regarding their ability to clarify even emergent phenomena that where
largely unknown at the time of their development. Yet, it must also be noted that the
above theories do not provide an accounting of all the factors perceived as underlying the
emergence and operations of the BG ﬁrm. Consequently, an important challenge will be
to develop new theory having all-inclusive explanatory value. Given the complexity of
the BG phenomenon, such theory may need to be eclectic in nature, drawing explanatory

power from a variety of perspectives.

CHAPTER 3

THEORETICAL MODEL AND HYPOTHESES

A MODEL OF THE BORN GLOBAL FIRM
Figure 2 presents a preliminary, detailed conceptual model explaining export market
performance in the BG ﬁrm. The following discussion presents the rationale underlying

the factors highlighted in this ﬁgure.

Global Orientation

In conducting the case studies, it became clear that the best way to describe the BG ﬁrm
is to devise a superconstruct that describes the special characteristics key to its
international performance. “Global orientation” is the name applied to this fundamental
construct. It was also developed based on secondary sources from the academic and
popular business press. In essence, global orientation comprises a fundamental,
organizationwide bundle of orientations and approaches, the sum of which appears to be
positively associated with export market performance. Global orientation can be thought
of as existing along a continuum, ranging from high global orientation to none at all, with
some ﬁrms being more globally oriented than others. BGs are the best exemplars of
global orientation, possessing it at the extreme. The sub-constructs comprising Global
Orientation (presented earlier in Figure 2) are summarized below in Table l and now
explained in turn.

Commitment to international markets reﬂects the extent of management’s
devotion toward international activities, as demonstrated by substantial allocation of
ﬁnancial and human resources (Aaby and Slater 1989; Cavusgil and Nevin 1981;
Johanson and Vahlne 1977). Degree of commitment governs the aggressiveness and

persistence with which management enters international markets. It also determines the

23

24

speciﬁc international strategies and decisions applied to those markets. Owing to
considerable complexity, foreign ventures usually require more time than domestic ones

to bear fruit. Compared

TABLE 1

Sub-constructs that Comprise Global Orientation in the Born Global Firm

 

0 Commitment to International Markets
9 International Venturesomeness

0 International Market Orientation

6 International Marketing Competence

0 Use of Advanced Communications Technologies

 

to traditional MN Es, BGs are young and tend to possess fewer ﬁnancial and other
resources needed to sustain long-tenn success. Top management commitment, therefore,
is especially important in such ﬁrms and is expected to be a signiﬁcant antecedent of
export market performance.

International venturesomeness is deﬁned as the propensity of ﬁrms to engage in
proactive and visionary behaviors in order to achieve strategic objectives in international
markets (see Khandwalla 1977; Miller and Friesen 1984; Reid 1981). Consistent with
research on entrepreneurship (Cavusgil 1984; Cavusgil and Nevin 1981; Cooper and
Kleinschmidt 1985; Covin and Slevin 1989; Hills and LaForge 1992; Miles and Snow
1978; Miller and Friesen 1984; Yeoh 1994), ﬁrms possessing substantial intemational

venturesomeness will tend to be more market oriented and more aggressive in the

25

creation and execution of strategy. It is anticipated that such ﬁrms will have an
organizational culture which strongly supports active exploration of international
opportunities, with management adopting a bold, aggressive posture to pursue them.
International venturesomeness appears to be instrumental to superior export market
performance in the BG ﬁrm.

International market orientation describes the "organization culture that most
effectively and efficiently creates the necessary behaviors for the creation of superior
value for buyers and, thus, continuous superior performance for the business" with
respect to international markets (Narver and Slater 1990, p. 21). A market orientation
helps management to better satisfy customer needs and minimize rival threats, thereby
engendering superior performance domestically (Jaworski and Kohli 1993; Kohli and
Jaworski 1990; Narver and Slater 1990; Pelham and Wilson 1995; Slater and Narver
1992) and abroad (Czinkota and Ronkainen 1995; Dalgic 1994). Empirical ﬁndings by
Pelham and Wilson (1995) show that market orientation is an important determinant of
success in small ﬁrms because it may provide a framework for objectives, decisions, and
actions. Such a framework may be needed because smaller ﬁrms often lack systematic
decision-making and strategic planning (Pelham and Wilson 1995 ; Robinson and Pearce
1984). In international markets, because the ﬁrm encounters a multiplicity of diverse
consumer needs and tastes as well as multifaceted competitive threats, 3 market
orientation is particularly important in the success of the SME (Dalgic 1994; Pelham and
Wilson 1995). Indeed, foreign competitors are frequently supported by local
governments, allied with ﬁnancial institutions, possessed of unanticipated strategic goals,
and spread across numerous national markets. The primary challenge facing BG ﬁrms is
to satisfy local needs as efﬁciently as possible while evading offensive competitor
moves. In general, market oriented 308 may be better positioned to accomplish this
task. The construct is being adopted in light of case study and other evidence suggesting

that BGs tend to be strongly market-oriented in their international dealings. Indeed,

26

given the diversity of competitors and buyer tastes abroad, market orientation is likely to
be particularly important to BG performance.

International marketing competence denotes the skill with which management
performs the marketing functions — product development, promotion, pricing, and
distribution — that direct the ﬂow of goods and services to consumers located abroad
(Cateora 1996; Czinkota and Ronkainen 1995). The international context imposes
numerous uncontrollable constraints and challenges to the international marketer which
may not be present in the home market. The goal of international marketing and the
intended result of superior international marketing competence is to earn the ﬁrm a proﬁt
through the skillful promotion, pricing, and distribution of products targeted to
international markets. The use of marketing skills to attain superior performance is
grounded in economic theory (McKee et a1. 1992). All ﬁrms operate in environments
fraught with market imperfections arising, in part, from the heterogeneity of competitive
advantages and the imperfect mobility of these advantages among ﬁrms (McKee et a1.
1992; Porter 1991; Yao 1988). The essence of marketing strategy is the creation of
imperfections in markets which result in above-average proﬁts (Porter 1991; Yao 1988).
Market imperfections form the basis for competitive advantage in ﬁrms (McKee et a1.
1992). Numerous scholars have pointed to marketing strategy and tactics as providing
the means to obtain superior performance in general (Burke 1984; Kotler and Armstrong
1996) and in international markets (Cateora 1996; Cavusgil and Zou 1994; Szymanski,
Bharadwaj and Varadarajan 1993; Wind, Douglas and Perlmutter 1973). Because
foreign markets impose numerous uncontrollable challenges which may not be present in
the home market, international marketing competence may be especially salient to BG
success abroad.

Given the youth and limited resource base of the ﬁrm, management at BGs is
constrained in its ability to fund executive travel or establish foreign offices to manage

operations abroad. Consequently, for international ventures, such ﬁrms are likely to be

27

more dependent than traditional MNEs on the use of advanced communications
technologies in daily operations. Fortunately, tools such as fax, e-mail, and the Internet
have recently reduced the need for expensive face-to-face meetings and now enable
resource-poor ﬁrms to develop and manage far-ﬂung operations from home. Combined
with cheaper international telephoning rates (Economist 1995), these technologies
facilitate constant communications at costs far lower than just a few years ago (Business
Week 1994; Glazer 1991; Haeckel 1994; Webster 1992). The use of advanced
communications technologies in the BG ﬁrm is expected to be a signiﬁcant antecedent of

export market performance.

Distinctive Marketing Strategies
Marketing strategy implies a dynamic system of decisions regarding product
development, pricing, promotion, and distribution that are formulated and implemented
over time. It is characterized by a consistent pattern of activities that ﬁrms perform with
a view to prevailing over competitors and maximizing corporate performance (Galbraith
and Schendel 1983; Hofer and Schendel 1978). In this study, marketing strategy is the
means through which the BG responds to the interplay of forces in its external
environment to fulﬁll the objectives of the export venture (Cavusgil and Zou 1994). In
addition to the global orientation factors described above, BGs appear to apply a
particular mix of marketing strategies that distinguish them from other businesses. These
are listed in Table 2 and explained below.

According to Kotler (1991; 1996), SMEs often specialize in serving market
niches that possess the following characteristics: relatively small groups of consumers
having similar characteristics or need; sufﬁcient size and purchasing power to be

potentially proﬁtable; ignored or largely overlooked by larger competitors; signiﬁcant

28

growth potential; providing opportunities for the entering ﬁrm to serve the market via its

special competence(s). They are increasingly common in the wake of

TABLE 2

Sub-constructs that Comprise Distinctive Marketing Strategies in the Born Global Firm

 

0 Global Niche Focus Strategy

0 Product and Product-Service Quality

6 Product / Marketing Differentiation

0 Promotion Emphasizing Personal Selling

e Use of Conventional Distribution Channels or Partnerships

0 Foreign Distributor Effectiveness

 

decreasing trade barriers, homogenization of consumer tastes, market globalization, and
other trends (Dalgic and Leeuw 1994; Dunning 1993; Levitt 1983; McDougall, Shane
and Oviatt 1994).

Use of global niche focus strategy describes the approach of BGs that, by
focusing their resources, serve global markets well (Dalgic and Leeuw 1994; Kotler
1991; Porter 1980). Accordingly, BGs operate as specialists, attempting to serve a
narrow target market more effectively than competitors that compete more broadly
(Carroll 1984; Mascarenhas 1996). Because of their smaller size, niche marketing is
usually the only such strategy available to BGs. Niche marketing can be explained within
the framework of population ecology which implies that small ﬁrms can do well because

they use a limited range of resources, including customers, extremely efﬁciently

29

(Harman and Freeman 1977). In marketing, the nicher can specialize along any of
several market, customer, product, or marketing mix lines. By focusing sharply on a
given niche’s needs, the ﬁrm uses resources more efﬁciently and consumers receive
superior value (Harman and Freeman 1977; Kotler 1991; 1996). Moreover, such a
strategy allows the small player to avoid head-to-head competition with larger, broad-
based competitors that tend to target mass markets (Mascarenhas 1986; Porter 1985).
Ultimately, global niche focus strategy should allow the BG to achieve higher
performance by serving a niche well, by reducing costs, or both (Dess and Davis 1984;
Miller and Friesen 1986; Porter 1980).

Product and product-service quality reﬂects a perceived ﬁrndamental
characteristic of products and accompanying service which meet or exceed customer
expectations regarding features and performance (Kotler and Armstrong 1996). In an
increasingly global economy, consumers can access a greater volume and variety of
product choices. As shoppers compare across different brands, they may be exposed to
newly imported goods possessing superior features and, consequently, their expectations
of product quality are apt to grow. Similarly, ﬁrms in globalizing environments may be
more inclined to benchmark their quality standards against those of more broadly-based
foreign competitors. The new awareness resulting from such intra-regional comparisons
puts pressure on companies to improve (Cvar 1986). Generally, consumers favor
products offering the most quality (Kotler and Armstrong 1996). However, a quality
focus may be at odds with product standardization goals or cost-cutting measures
designed to bring pricing in line with rival brands (Szymanski, Bharadwaj and
Varadarajan 1993). On the other hand, increased attention to quality can be a means to
differentiate goods from those of competitors (Porter 1980). Quality has been linked to
improved competitiveness (Buzzell and Gale 1987; Porter 1990) and improved
performance in international markets (Deming 1982; Szymanski, Bharadwaj and

Varadarajan 1993). To the extent that superior quality reduces rework and service costs

30

and consumers are willing to pay higher prices for it, proﬁt margins can rise and is likely,
therefore, to be antecedent to superior performance in BG ﬁrms (Buzzell and Gale 1987;
Deming 1982; Szymanski, Bharadwaj and Varadarajan 1993).

Product/marketing diﬂerentiation is deﬁned as the offering of products perceived
by consumers as unique (Porter 1980). It involves the creation of customer loyalty by
uniquely meeting a particular need and is typically based on a well-known brand name,
innovative product features, excellent customer service, or a strong dealer network
(Miles and Snow 1978; Miller and Friesen 1984; Porter 1980). It is one of three generic
strategies distinguished by Porter (1980). The other two are focus strategy and cost
leadership. Cost leadership emphasizes economies of scale via massive production and
marketing operations, as well as cost reductions from experience and aggressive control of
spending on overhead, R&D, and service (Porter 1980). An important difference between
BGs and traditional MNEs is that, owing to their smaller size and relative inexperience,
BGs usually cannot apply cost leadership strategy, relying instead on differentiation and/or
focus (Porter 1980). Miller (1988) notes two main types of differentiation strategies:
those based on product innovation and those based on intensive marketing and image
management. The latter usually necessitates substantial advertising or market power,
resources not typically at the disposal of young ﬁrms. Hence, most BGs tend to
differentiate via product innovation, often by leveraging new technologies. It is
anticipated that, among BG ﬁrms, differentiation strategy will be a signiﬁcant antecedent
of export market performance.

Promotion emphasizing personal selling is an approach in which, among major
variables in the promotion mix — advertising, sales promotions, personal selling, and
public relations — personal selling is emphasized most. While ﬁrms selling in
consumer markets tend to stress advertising and sales promotions, most industrial goods
marketers emphasize personal selling (Kotler 1987). Case studies suggest that BGs

usually emphasize personal selling. There are at least three possible explanations for

31

this. First, 303 tend to sell specialized products to dispersed global market niches that
may be hard to target with advertising. Second, BGs usually lack the resources needed to
engage in large-scale advertising. Third, many BGs sell only to industrial markets
where, traditionally, personal selling and direct contact with customers is the usual route
to generating sales. It is expected that personalized-selling approaches to promotion will
be a signiﬁcant performance antecedent in such ﬁrms.

Use of conventional distribution channels or partnerships for distributing
products abroad is another approach common to BGs. Conventional channels usually
consist of traditional wholesalers or retailers, each independent of the BG and seeking to
maximize its own proﬁts, even at the expense of channel performance as a whole.
Partnering refers to the use of wholesalers or retailers with which the BG has entered into
a joint venture, strategic alliance, or other such partnering relationship (Bowersox and
Cooper 1992; Czinkota and Ronkainen 1995; Kotler and Armstrong 1996; Root 1994;
Rosson and Ford 1982). Traditional MNEs often establish their own integrated channels
as a means of maximizing distribution control (Anderson 1985; Anderson and Gatignon
1986; Bucklin 1973; Czinkota and Ronkainen 1995). Two factors in particular lead BGs
to rely substantially on foreign independent intermediaries or distribution partners: the
BG’s (1) dearth of resources, and (2) absence of knowledge about distant markets and
how to navigate them. BGs lack the resources to integrate vertically, but still seek
reliable solutions for sending their products abroad. Thus, they tend to rely on cheaper
solutions such as direct exporting or joint ventures.

A key issue in foreign distribution strategy is striking the right balance between
the extent and quality of functions performed on the BG's behalf and the cost of
performing those ﬁrnctions (Bowersox and Cooper 1992; Czinkota and Ronkainen 1995).
Foreign distributor effectiveness refers to the extent to which such services meetthe
expectations of BG management. At issue is the need to entrust the foreign distributor

with providing most or all market tasks abroad (e. g., inventory maintenance, local

32

advertising, after-sales service) that the BG would normally handle at home.
Additionally, the international business environment entails considerable uncertainty,
much of which can be overcome through the use of local intermediaries (Mascarenhas
1982). Indeed, the distributor may come to represent an important competitive
advantage for the exporting ﬁrm (Czinkota and Ronkainen 1995; Rosson and Ford 1982;
Yeoh and J eong 1995). Improper distributor behavior can damage the BG's reputation
and overall prospects for sales. Hence, foreign distributor effectiveness takes on great

importance and should be a signiﬁcant antecedent of export market performance.

Export market performance

Broadly, export market performance is deﬁned as the extent to which BG objectives are
achieved in its main export market as a function of global orientation and distinctive
marketing strategies. By deﬁnition, a ﬁrrn's‘ basic orientation and the strategies it pursues
are intended to maximize desired performance outcomes. In the literature, the most
frequently used performance measures emphasize economic indicators such as export
sales growth, ratio of export to total sales, and export proﬁtability (Cavusgil and Zou
1994). In addition to these measures, scholars highlight the need to link performance to
the ﬁrm’s strategic and competitive goals (Day and Wensley 1983; Lampkin and Day
1989; Wind and Robertson 1983). Consequently, a good deﬁnition of performance
should also comprise expectations about the achievement of strategic objectives (e.g.,
gaining a foothold in a foreign market and market expansion) in addition to more

traditional economic goals.

33

RESEARCH HYPOTHESES

Based on the above discussion and the theoretical model of the BG ﬁrm, several

hypotheses were developed. These are listed as follows.

H1

H2

H3

H4

H5

H6

H7

H8

H9

H10

H11

Commitment to international markets is an important feature of the BG ﬁrm. It is
a signiﬁcant antecedent of export market performance.

International venturesomeness is an important feature of the BG ﬁrm. It is a
signiﬁcant antecedent of export market performance.

International market orientation is an important feature of the BG ﬁrm. It is a
signiﬁcant antecedent of export market performance.

International marketing competence is an important feature of the BG ﬁrm. It is a
signiﬁcant antecedent of export market performance.

Use of advanced communications technologies in their daily operations is an
important feature of the BG ﬁrm. It is a signiﬁcant antecedent of export market
performance.

Use of global niche focus strategy is an important feature of the BG ﬁrm. It is a
signiﬁcant antecedent of export market performance.

Emphasis on product and product-service quality is an important feature of the
BG ﬁrm. It is a signiﬁcant antecedent of export market performance.

Product/marketing differentiation is an important feature of the BG ﬁrm. It is a
signiﬁcant antecedent of export market performance.

Promotion emphasizing personal selling is an important feature of the Born
Global ﬁrm. It is a signiﬁcant antecedent of export market performance.

Use of conventional or partner-based distribution channels‘is an important feature
of the BG ﬁrm. It is a signiﬁcant antecedent of export market performance.

Foreign distributor effectiveness is important to the success of the BG ﬁrm. It is
a signiﬁcant antecedent of export market performance.

CHAPTER 4

RESEARCH DESIGN / METHOD

OVERALL DESIGN AND SAMPLING FRAME
The proposed theoretical model incorporates a diverse collection of theoretical
perspectives, constructs, and associated linkages. To test the model empirically, a cross-
industry ﬁeld survey of businesses ﬁtting the BG criteria was conducted to collect the
primary data. Prior to conducting the main study, case studies of twelve BG ﬁrms were
conducted in order to ﬁnalize hypotheses, reﬁne the questionnaire, reﬁne and generally
conﬁrm that the proposed theoretical models accurately reﬂect actual business conditions
(Bonoma 1985; Deshpande 1983; Eisenhardt 1989). The case studies are summarized in
Appendix 1. In the main study, it was considered important to collect data from ﬁrms
across numerous industries in order to minimize the potential for bias arising ﬁom
peculiarities of individual industries. In addition, survey data were collected from a
collection of non-BG exporting ﬁrms to facilitate comparative analyses.
The BC ﬁrm targeted population were a random sample of 1,000 manufacturing

ﬁrms in the United States roughly ﬁtting the BG criteria. To wit:
0 Exporter, exporting at least 25 percent of total production;
0 20 years old or younger (i.e., ﬁrm founded in 1977 or later);
0 USA ﬁrm located in USA only (i.e., names/addresses of the United States branches

of foreign ﬁrms were systematically removed from the targeted database);
0 Manufacturer (i.e., ﬁrms whose primary or sole product is services, trading

companies, and wholesalers were eliminated from consideration);
0 Following SIC codes: 2833, 2834, 2835, 2836, 2873, 2874, 2875, 2879, all industries

under general SIC no. 35, 3612 thru 3639, 3651, 3661 thru 3699, 3714, 3728, all

industries under SIC no. 38;

34

35

The SIC codes indicated were chosen as they represent industries involved in the
manufacture of relatively high value-added and, in most cases, high technology,
products. Such ﬁrms appear to be more representative of emergent BG ﬁrms and, hence,
are the primary focus of inquiry here (Brush 1992; Business Week 1992; Business Week
1993; Business Week 1995; Chuushoo Kigyoo Cho 1995; Economist 1993; Gupta 1989;
McKinsey & Co. 1993; Nakamura 1992; Nikkei Sangyoo Shimbun 1995; Rennie 1993;
Rose and Quintanilla 1996; Tokyo Business Today 1995). Further, it was believed that
ﬁrms involved in agriculture, metals, and other commodity-type products are different in
many respects from other types of traditional manufacturing exporters and that data from
such ﬁrms would tend to skew overall study results. Finally, considerable effort was
made to avoid including ﬁrms in the targeted database having fewer than 30 employees.
Such ﬁrms were avoided because very small companies tend to reﬂect part-time
operations, strong family inﬂuences, unstable objectives, half-hearted proﬁt orientations,
or other factors that can skew study outcomes (Brady 1995; Kirpalani and MacIntosh
1980; Miesenbock 1987).

Firms ﬁtting the BG criteria were found in the following databases, with
databases listed in order of contribution, with the database providing the most BG ﬁrms
listed ﬁrst.

0 CorpTech Directory of Technology Companies, 1996 (Wobum, MA)

0 Directory of United States Exporters, Journal of Commerce, New York, NY.

0 Michigan State Trade Directory

0 Princeton Hightech Group High Technology Market Place Directory 1996

Each database provided a listing of each ﬁrm indicating the name and title of the
corporate CEO and the address of the ﬁrm, as well as other information contained in the
list of criteria noted above. The CEO was targeted in each case since, given the size of
the ﬁrms, it was expected that the CEO would be the most knowledgeable person or

would be best positioned to delegate completion of the study questionnaire to that person

36

most knowledgeable about export operations. In any event, in the cover letter addressed
to each ﬁrm, the CEO was requested to have the questionnaire completed by the
individual most knowledgeable about the ﬁrm’s export operations, if this is not the CEO
him/herself.

In addition to the 1,000 ﬁrms noted above, an additional 1,000 exporting
manufacturers speciﬁcally not meeting the above BG criteria were targeted with the
study questionnaire. These ﬁrms were intended to serve as controls to facilitate
comparative analyses to determine how 363 differ from more traditional exporting
manufacturers. This second group was chosen to ﬁt the same criteria as that for BGs
except that the second group were limited to ﬁrms founded during the years from 1945 to
1976, with emphasis given to companies founded earlier rather than later. 1945 was
chosen as a cutoff year for two important reasons: (1) It is commonly regarded as the ﬁrst
year of the current world trade era, incorporating modern trading institutions such as the
World Trade Organization, following World War 11 (e. g., Czinkota and Ronkainen 1995;
Daniels and Radebaugh 1995; Dunning 1993; Levitt 1983; Porter 1986); (2) Numerous
questionnaire questions require a basic knowledge of company activities at the ﬁrm’s
founding or relatively early in its existence. Thus, given the limits of institutional

memory, no ﬁrms founded before 1945 were targeted.

QUESTIONNAIRE, MEASURES, AND MAILING
The study questionnaire was developed in several stages, following the procedure
suggested by Fowler (1988), and reﬁned according to procedures recommended in the
appropriate literature (Bagozzi, Yi and Phillips 1991; Campbell 1960; Churchill 1979;
Gerbing and Anderson 1988; Nunnally 1978).
In the ﬁrst stage, consistent with study objectives and the constructs outlined
earlier, the literature on exporting, networks, entrepreneurship, market orientation,

marketing, high technology, niche marketing, quality, generic strategies, channels, and

37

general organization characteristics was searched to obtain relevant information on the
model constructs and on measures appropriate for their assessment. In most instances,
scales suitable to the measure of study constructs were available or could be easily
adapted to meet the international nature of the study.

Thus, in the second stage, a bank of items suitable for the present study was
gathered from the relevant literature. To the extent possible, scales were framed as
seven-point Likert-type scales in order to minimize the response time and effort to
executive respondents (Fowler 1988). This is an important consideration in light of the
difﬁculty in obtaining responses from CEOs and other top managers in modern business
research.

In the third stage, case studies (Appendix 1) were conducted, as noted earlier,
with executives at twelve separate BG ﬁrms. The interviews lasted about an hour on
average and were usually conducted with the executive most responsible for the ﬁrm’s
international operations. Some interviews were conducted in person while others were
conducted by telephone with ﬁrms located around the United States. These interviews
were extremely useful in helping to identify key antecedents to performance in BG ﬁrms,
and in formulating the constructs and related measures needed to investigate these ﬁrms
empirically.

Based on the ﬁrst three stages, it was possible to devise a “rough draft” of the
study questionnaire. The scale for Commitment to International Markets was developed
from the exporting literature (Cavusgil and Naor 1987; Cavusgil and Nevin 1981). The
scale for International Venturesomeness was derived largely from the entrepreneurship
literature and is based on an eight-item scale developed by Khandwalla( 1977), Miller and
Friesen (1984), and reﬁned by Covin and Slevin (1989). The scale for International
Market Orientation is based on the one developed by Narver and Slater (1990) and reﬁned
by Pelham and Wilson (1995), and is modiﬁed for exporting. The measure for

International Marketing Competence is based on the marketing competence scale

38

developed by McKee et a1 (1992). The scale for Product and Product-Service Quality is
similar to one used by Buzzell and Gale in the PIMS studies (1987), but is supplemented
with two questions derived from Kotler (1996). The scale for Product/Marketing
Diﬂerentiation beneﬁted partly from the work of Miller (1988) and Roth and Mon'ison
(1992). The scale for Export Market Performance was partially adapted from Cavusgil and
Zou (1994). All other scales were developed speciﬁcally for this study, based on methods
outlined here, following procedures suggested by Churchill (1979) and Gerbing and
Anderson(1988).

Past research on export performance typically has been conducted at the
aggregate level of the ﬁrm. Yet the examination of performance and its antecedents at
the corporate level has several limitations related to the nature of international business.
Many ﬁrms pursue multiple foreign ventures and performance tends to differ widely
from one project to the next. Given the complexity of the international environment,
aggregate measures are frequently inaccurate in assessing performance (Cavusgil and
Zou 1994; Douglas and Wind 1987). Therefore, as assessed through the questionnaire, to
more precisely capture the constructs global orientation, strategy, and performance, the
unit of analysis for most of the questionnaire scales is deﬁned at the level of the ﬁrm’s
primary export venture.

For the fourth stage of questionnaire development, once the pre-ﬁnal questionnaire
was completed, it was circulated to four academicians familiar with exporting,
international marketing, and marketing research. All were asked to evaluate the
questionnaire items for validity and reliability in measuring the intended study
constructs. Based on feedback from these experts, numerous questionnaire items were
dropped; others were substantially modiﬁed; and a few new items were added.

In the ﬁnal stage, a pilot study was conducted among exporting manufacturers
generally meeting the criteria given earlier for BG and NBG ﬁrms. For this part of the

study, a rough version of the questionnaire was sent to about 400 ﬁrms located mostly in

39

the state of Michigan and reﬂecting substantial diversity with respect to industries
represented and other key variables. This procedure resulted in the return of 51 usable
questionnaires. A critical step in the veriﬁcation of theory and, ultimately, in the
transition to empirical research is validation of theoretical constructs (Deshpande 1983;
Hunt 1991; Zaltrnan, LeMasters and Heffring 1982). The psychometric properties of all
the measures were then assessed using several analytical techniques.

Psychometrics concerns the design and evaluation of quantitative scales to assess
attitudes, strategy, behavior, and other such constructs that cannot be directly and
perfectly measured with any one item. In business as well as science, valid measurement
is a prerequisite for the successful study of the constructs and relationships comprising a
conceptual model (Peter 1979). Validity refers to the degree to which a construct is
accurately described by a measuring instrument. Peter (1979) notes that if the scales
used to assess constructs in a given ﬁeld are not valid, then that ﬁeld carmot advance as a
science.

A necessary condition for validity of construct representation is reliability, or
internal consistency. It reﬂects the degree to which instruments are free from error and
thereby yield consistently accurate representations of the construct (Churchill 1979; Peter
1979). Another important indicator is convergent validity, or the extent to which
multiple independent attempts to measure the same construct are in agreement (Bagozzi,
Yi and Phillips 1991; Campbell and F iske 1959; Peter 1981). Finally, robust scales
demonstrate nomological validity, or the extent to which the constructs in a model are
related as predicted by theory (Campbell 1960; Gerbing and Anderson 1988; Peter 1981).
In this regard, the factors underlying Global Orientation and Distinctive Marketing
Strategies (Figure 2) are expected to be positively correlated with export-market
performance. While measures of imprecise concepts are never completely valid or

reliable, researchers strive to maximize these qualities.

40

To test the reliability and convergent and nomological validity of study factors,
each scale in the questionnaire was assessed using data from the 51 pilot study ﬁrms.
These tests were undertaken to validate the factor measures only, without regard to their
potential explanatory power for these speciﬁc ﬁrms. The data were analyzed using
reliability, correlation, and conﬁrmatory factor analysis (CFA). CFA was conducted
using the software EQS (Anderson and Gerbing 1984; Bentler 1992; Hayduk 1987). As
with other structural equations programs such as LISREL, EQS provides a useful
methodology for specifying, estimating, and evaluating hypothesized relationships among a
set of constructs and their associated measurement variables. EQS generates a chi-square
statistic, the Bentler-Bonett Norrned and Non-normed Fit Indices (NF I and NNFI), and the
Comparative Fix Index (CFI) as overall goodness-of-ﬁt indicators of the speciﬁed
measurement models, as well as indicator-to-constructpath coefficients and associated
signiﬁcance tests. Where the indices achieve a score of .90 or above, the associated
measurement model is considered to ﬁt well (Bagozzi and Yi 1988; Bentler 1992). CFA is
regarded as the state-of-the-art method for assessing convergent validity in construct
development (Anderson and Gerbing 1984; Bagozzi, Yi and Phillips 1991; Bollen 1989;
Gerbing and Anderson 1988; Hayduk 1987).

Results of CF A and reliability analyses using Cronbach's alpha relative to Global
Orientation, Distinctive Marketing Strategies, and export-market performance are
presented in Table 3. As shown, each scale achieved satisfactory reliability (Nunnally
1978). To set up the CFA analyses, separate measurement models comprising causal
relations among scale items and theoretical factors were created and tested. As reﬂected in
Table 3, all but one of the models attained satisfactory ﬁt and signiﬁcant path coefﬁcients

(p < .05), generally indicating satisfactory convergent validity.

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41

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42

The one exception was the measurement model for use of advanced communication
technologies. The lack of adequate ﬁt may be due to two questions that referred to use of
the Internet. Responses revealed that, at the time of the survey at least, very few businesses
were using the Internet to communicate with distributors or conduct international research.
The resulting paucity of variance in these two items probably led to a general failure of the
associated measurement model. Thus, the scale for this factor is revised subsequently. In
addition, owing to insufﬁcient degrees of freedom on the two-item scale, no measurement
model could be estimated for "promotion emphasizing personal selling." Finally, no
measurement model was estimated for the use of conventional distribution channels or
partnerships because of the nature of the original scale.

To provide support for the nomological validity of study factors, additional tests
were conducted using correlation analysis. To the extent that the factors comprising
Global Orientation and Distinctive Marketing Strategies are related to other constructs in
ways predicted by theory, the conﬁrmation of those relationships provides evidence of
nomological validity (Campbell 1960; Gerbing and Anderson 1988; Peter 1981). As
noted earlier, measures for the Global Orientation and Distinctive Marketing Strategies
factors should be signiﬁcantly and positively associated with export-market performance.
To test this claim, an aggregate score was calculated for each factor and compared in
correlation analysis (Spearman's correlation coefﬁcient) to the aggregate score for
export-market performance. Results revealed that the Global Orientation factors were
indeed correlated, in the expected direction, with export-market performance at the .01
level. As for the Distinctive Marketing Strategies factors, niche focus strategy and
foreign distributor effectiveness were found to be positively correlated with export-
market performance at the .01 level, product/product-service quality and product/market
differentiation at the .05 level, and personal selling at the .10 level. With little exception,
the factors and measures proposed in this study performed well in terms of internal

consistency, and convergent and nomological validity. This lends strong support to the

43

overall validity of the constructs proposed here. The scales should prove useful to

researchers in future empirical investigations of the BG phenomenon.

Based on the reliability and general analyses, the study questionnaire was further
reﬁned and mailed in two waves to the 2,000 designated executives. The ﬁnal
questionnaire was professionally printed and peach-colored to help it stand out. The
questionnaire included a cover letter from the author and from the Center for
International Business Education and Research at Michigan State University using
ofﬁcial letterhead stationary printed expressly for the study. Additionally, the mailing
included the following incentives intended to elicit subject participation:

0 An offer to evaluate the subject ﬁrm’s international business practices and provide them with
a detailed summary report explaining how they compare, as a benchmarking tool, to the
average of other ﬁrms in their industry; .

0 An offer to provide the subject ﬁrm with up to four key ‘how-to’ articles from the
academic business press that reveal best practices for international success (a list of
articles was provided for the executive to choose from);

o A pre-sharpened pencil embossed with the University’s name.

In the cover letter, respondents were also assured of total anonymity and told that, in

responding to the summary report and business article offers, they could provide their

home or other anonymous address to preserve anonymity. As ﬁrrther inducements, the
mailing also included copies of letters endorsing the study (all reduced to ﬁt on one
sheet) from the Small Business Exporters Association, United States Council for

International Business, the National Business Association, and the International Trade

Council/US. International Chamber of Commerce. Finally, the cover letter was

personally signed by the researcher and Professor Tamer Cavusgil. The questionnaire

was then sent unfolded, in a large-size envelope (Churchill 1991).

CHAPTER 5

ANALYSES AND FINDINGS

ANALYTICAL APPROACH

In analyzing the data generated for this dissertation, an approach consisting of multiple
steps was followed. First, nonresponse bias is assessed by comparing early and late
waves of responses to the main study questionnaire (Armstrong and Overton 197 7).
Second, data quality, and construct reliability and validity are veriﬁed using statistical
methods including exploratory and conﬁrmatory factor analysis, as well as reliability
analysis using Cronbach’s alpha (N unnally 1978). Finally, the main study model is
evaluated and hypotheses tested using structural equations modeling and other methods

(Anderson and Gerbing 1988; Bentler 1992; Bollen 1989; Byme 1994; Hayduk 1987).

Response Rate and Nonresponse Bias

As noted earlier, 2,000 questionnaires were mailed to BG and NBG ﬁrms located
around the United States. This procedure resulted in the return of 122 completed, usable
surveys from ﬁrms meeting the BG criteria and 168 completed, usable surveys from ﬁrms
ﬁtting the NBG ﬁrm criteria. This represents an effective response rate of 12.2 percent for
the BG ﬁrms and 16.8 percent for the NBG ﬁrms. One possible explanation for the
difference in response rates for the two groups is that BGs are younger on average than
NBGs. Additionally, early evidence suggests that BGs tend to be concentrated in high
growth-rate industries (Brush 1992; McDougall, Shane and Oviatt 1994). These factors
suggest that BGs may have fewer human resource hours across the ﬁrm available to
complete questionnaires, resulting in the lower response rate.

To assess non-response bias, responses related to several basic variables were
compared between surveys from the 50 earliest responding ﬁrms and the 50 latest

responding ﬁrms (Armstrong and Overton 1977). The results of this testing are

44

45

summarized in Table 4. Early and late-wave testing as an indicator of non-response bias is

based on the premise that late-wave respondents are more similar to non-respondents

Table 4. Non-Response Bias Assessment Using Wave Analysis

 

 

 

 

 

 

 

 

 

Variable of Comparison Early Late Difference 2-Tail

Wave Wave Significance
Mean Mean Level

Firm identiﬁcation number 8441 8395 46 .71

Number of employees 155 422 -267 .20

International sales as a percentage 40 43 -3 .52

of total sales (percent)

Last 3 years total sales growth 21.5 16 5.5 .13

(percent)

Last 3 years export sales growth 22.6 20.3 2.3 .56

(percent)

Last year total company sales 22 241 -219 .28

(millions of dollars)

Primary export product-market 23.5 22.3 1.2 .78

sales as a percentage of total sales
(percent)

 

 

 

 

 

than early-wave respondents. Therefore, the respondent characteristics of late respondents

are expected to be reasonably representative of non-respondents (Armstrong and Overton

1977). As shown in the table, there was no signiﬁcant difference between early and late

respondents on several major variables (p < .05). Differences between early and late

respondents on number of employees and total company sales appear to be substantial, but

were not signiﬁcantly different owing to large standard deviation values for the respective

means on the late wave group. Hence, non-respondentbias is not expected to be a

signiﬁcant factor affecting study results.

 

46

Data Quality / Construct Reliability and Validity .

Descriptive statistics for each variable represented on the questionnaire were calculated
for the 122 responding BG ﬁrms using the statistical package SPSS (Norusis 1993).
These are presented in Appendix 3. As shown, all variables fall within expected ranges,
indicating that data were entered accurately. While kurtosis was a minor concern with a
few variables, it did not signiﬁcantly affect the ability to achieve model ﬁt in subsequent
conﬁrmatory factor analysis and structural equations modeling.

As a prelude to assessment of construct validity using conﬁrmatory factor
analysis (CFA), reliability was next assessed on the major constructs using Cronbach’s
alpha. It is expected that, in subsequent tests using CF A, some items for most or all of
the study scales will be dropped to achieve parsimony and superior construct validity.
However, before performing such reﬁnements, it is ﬁrst useful to assess and report the
reliability of each of the full scales. This is done to verify that each full scale is robust
and can stand on its own. Therefore, Cronbach’s alphas on each of the full scales are
presented next in Table 5. As shown, all full scales for which reliability was assessed
achieved adequate or superior values in Cronbach’s alpha (N unnally 1978). Reliability
was not assessed for the scale for Use of Conventional Distribution Channels or
Partnerships for the reason that the scale consists of only two items, one of which is
nominal in nature and thus not conducive to reliability testing. The scale was also not
included in CFA testing for similar reasons as well as the difﬁculty of establishing a
variance standard for such a scale.

Next, the construct validity of study scales was assessed via CFA using the
statistical software EQS (Bentler 1992). Construct validity is the most salient indicator
of measure validity and is commonly regarded as consisting of two aspects: convergent

and discriminant validity (Bagozzi, Yi and Phillips 1991; Campbell and Fiske 1959;

47

Peter 1981). Convergent validity is the degree to which multiple independent attempts to
measure the same construct are in agreement. Discriminant validity is the extent to
which measures of two or more different constructs are distinct (Bagozzi, Yi and Phillips

1991; Campbell and Fiske 1959; Peter 1981).

Table 5. Number of Scale Items and Reliability Estimates for Full Scale Items
Prior to Refinement using Confirmatory Factor Analysis

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Factor Number of Items Reliability using
in Full Scale based Cronbach’s Alpha
on Initial
Reliability Tests

GLOBAL ORIENTATION
Commitment to International Markets 5 .70
International Venturesomeness 9 .84
International Market Orientation ll .91
International Marketing Competence 13 .87
Use of Advanced Communication Technologies 6 .68
DISTINCTIVE MARKETING STRATEGIES
Niche FO£US StrategL 5 .57
Product and Product-Service Quality 3 .68
Product/Marketing Differentiation 9 .86
Promotion Emphasizing Personal Sellinj 2 .53
Use of Conventional Distribution Channels or 2 not calculated due to
partnerships nature of the scale
Foreign Distributor Effectiveness 13 .93
Export Market Performance 8 .88

 

Before performing the CF As, the factor structure of the various measures for each
of Global Orientation and Distinctive Marketing Strategies were estimated using
exploratory factor analysis (Anderson and Gerbing 1988; Bentler 1992; Bollen 1989; Byme
1994). Accordingly, all of the construct measures for each of Global Orientation and
Distinctive Marketing Strategies were estimated simultaneously, along with Export Market
Performance, in factor analysis using SPSS (Norusis 1993). Using varimax rotation with

an eigenvalue cutoff of l .00, several iterations of factor analyses were performed.

 

48

Following each iteration, questionnaire items that loaded on more than one factor or which
achieved a loading of less than 0.45 were systematically eliminated from their respective
scales (Dillon and Goldstein 1984; Hair et a1. 1992).

Exploratory factor analysis suggested that the constructs International
Venturesomeness, International Market Orientation, and Product/Marketing
Diﬂerentiation may be best modeled as two sub-constructs each. To assess this possibility,
each of these constructs were modeled individually in CFA, ﬁrst as single constructs and
then as two separate sub-constructs, according to the exploratory factor analysis results.
These analyses revealed that model ﬁt was substantially superior for the two sub-construct
model in each case. Speciﬁcally, for the two sub—construct model, NFI = .92, .86, and .91;
NNFI = .99, .94, and .96; and CF I = .99, .96, and .97 for each of International
Venturesomeness, International Market Orientation, and Product/Marketing
Diﬂerentiation respectively. For the single construct model, the ﬁt indices were NFI = .52,
.47, and .45; NNFI = .38, .39, and .25; and CF I = .56, .53, and .47 for each of International
Venturesomeness, International Market Orientation, and Product/Marketing
Diﬂerentiation respectively.

Inspection of the items measuring each of the subconstructs suggested that the two-
subconstruct model was appropriate in each case based in relevant theory and face validity
(Covin and Slevin 1989; Jaworski and Kohli 1993; Khandwalla 1977; Kohli, Jaworski and
Kumar 1993; Kotler and Armstrong 1996; Miller 1988; Narver and Slater 1990; Porter
1980; Slater and Narver 1992). Consequently, the CFA measurement models were re-
conﬁgured and the sub-constructs re-named accordingly. Speciﬁcally, International
Venturesomeness was re-modeled as International Vision and International Proactiveness.
This approach is consistent with the literature on entrepreneurship,from which several of
the items measuring the higher order construct were originally borrowed (Covin and Slevin
1989; Khandwalla 1977). International Market Orientation was re-modeled as

International Customer Orientation and International Responsiveness. Both of these new

49

constructs are similar to sub-constructs highlighted in the market orientation literature such
as “customer orientation” and “interfunctional coordination” (N arver and Slater 1990;
Slater and Narver 1992) and “intelligence generation” and “responsiveness” (J aworski and
Kohli 1993; Kohli, J aworski and Kumar 1993). The higher order construct
Product/MarketingDiﬂerentiation was re-modeled as Marketing-basedDiﬂ’erentiation and
Product-basedDijferentiation. As above, these new constructs are also consistent with the
literature on differentiation strategy (Kotler and Armstrong 1996; Miller 1988; Porter
1980). Indeed, Miller (1988) notes that differentiation strategy is typically based on
either product innovation, marketing strategy, or both.

Subsequently, separate measurement models, comprising causal relations among
the observed variables and theoretical constructs for each of Global Orientation and
Distinctive Marketing Strategies for the sample of BG ﬁrms were created and tested along
with Export Market Performance in CF A. Results of these models as well as reliability
tests using Cronbach’s alpha on the ﬁnal construct measures are presented in Table 6. In
reﬁning the scales to achieve satisfactory construct validity in CFA, several items from the
original construct scales were eliminated. Eliminated items proved problematic because
they loaded too weakly on constructs that they were intended to measure (reﬂecting poor
convergent validity), cross loaded on constructs that they were not intended to measure
(reﬂecting poor discriminant validity), or were otherwise implicated in poor model ﬁt. As
shown in Table 6, Measurement Model 1 for the Global Orientation constructs and Export
Marketing Performance achieved superior ﬁt (x2 = 444, 342 degrees of freedom, p = .001,
NFI = .77, NNFI = .92, CFI = .93). Results for measurement model 2 (Distinctive
Marketing Strategies constructs and Export Market Performance) were similarly robust
(x2 = 374, 320 degrees of freedom, p = .020, NFI = .82, NNFI = .96, CFI = .97).

It should be noted here that the probability for the signiﬁcance of chi-squared tests
for both measurement models is quite signiﬁcant (.001 and .020 respectively). Moreover,

the NFI index for both measurement models is substantiallyless than .90 (.77 and ..82

50

respectively). However, both the chi-squared tests and the NFI index are known to be
unreliable when the sample size is small relative to the number of parameters tested
(Bagozzi and Yi 1988; Bentler 1992; Bollen 1989; Byme 1994). This condition is
undoubtedly relevant to the present case, given the sample size of 122 BG ﬁrms and the
large number of parameters estimated. In such cases, it is best to use the NNFI and CFI
indices to assess model ﬁt, as they are relatively insensitive to sample size (Bagozzi and Yi
1988; Bentler 1992; Bollen 1989; Byme 1994). Accordingly, the table shows that both

measurement models achieved superior ﬁt.

51

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55

As shown, for both Measurement Models 1 and 2 (Global Orientation and Export
Market Performance; and Distinctive Marketing Strategies and Export Market Performance
respectively), all of the path coefﬁcients are signiﬁcant (p < .01 except for V31; p < .05 for
V3 1), indicating satisfactory convergent validity. Next, to establish discriminant validity,
Lagrangian multiplier (LM) tests were conducted. In the ﬁnal analysis, for each
measurement model, a few items remained as cross-loaders on factor constructs that they
were not intended to measure. However, these cross-loadings were considered trivial for
the following reasons: (1) The cross-loadings made little or no sense with regard to
established theory or practical substance; (2) LM tests revealed that the remaining
parameters represented error covariances which, if freed, would improve model ﬁt only
trivially while simultaneously rendering the models less parsimonious; (3) As indicated by
the CPI indices, because approximately 93 percent of data covariance reﬂected in
Measurement Model 1 and 97 percent of the covariance reﬂected in Measurement Model 2
is already been explained, further post-hoe model ﬁtting would likely result in
overparameterizationof the respective models; (4) Further model ﬁtting would likely
reduce one or more scales to two items, a situation conducive to “Heywood cases” and
other improper solutions in the ﬁnal latent construct model (Bollen 1989; Hayduk 1987).

In this regard, Byme (1994) warns against the temptation to incorporate too many
parameters into a CFA measurement model in a zealous attempt to attain the best ﬁtting
model in statistical terms. Measurement models must be estimated based on a thorough
knowledge of substantive theory, assessments of statistical criteria based on information
pooled from the various indicators of model ﬁt, and close attention to parsimony (Bagozzi
and Yi 1988; Bentler 1980; Bentler 1992; Bollen 1989; Byme 1994; Hayduk 1987; Hayduk
1990). Given these considerations and the above ﬁndings, the present measurement
models are regarded are providing the best overall representation of measurement scales
used in the study. Overall, results of CFA and reliability analyses suggest that study scales

attained satisfactory internal consistency and construct validity (Bagozzi and Yi 1988;

56

Bentler 1980; Bentler 1992; Bollen 1989; Byme 1994; Hayduk 1987; Hayduk 1990;
Nunnally 197 8).

Findings: Description of BC Firms

Before considering the relationship between antecedent variables and ﬁrm performance,
it is useful to provide an overview of the characteristics of the BG ﬁrms examined in this
study, particularly as they compare to characteristics of NBG ﬁrms. Table 7 presents
means of key descriptive variables for each targeted group. The table reveals that BG
ﬁrms differ signiﬁcantly (p < .05) from NBG ﬁrms in terms of year company founded,
year ﬁrm ﬁrst got involved in international business, and the annual grth rate that
ﬁrms expect to attain in both total sales and export sales over the coming three years.
Speciﬁcally, the average BG in the sample was founded in 1982, whereas the average
NBG was founded in 1961. Additionally, the average BG went international in 1986,
whereas the average NBG went international in 1973. The magnitude of these
differences is consistent with the sampling procedure applied in the study. Additionally,
respondents at BG ﬁrms tend to be slightly more optimistic than NBGs regarding their
annualized growth rates over the coming three years in terms of total sales (26 % versus
20 % respectively) and export sales (also 26 % versus 20 % respectively).

With regard to other descriptors depicted in Table 7, B03 did not signiﬁcantly
differ from NBGs. In the case of both types of ﬁrms, the top three executives are said to
spend a substantial portion of their time (27 %) on export operations, with international
sales accounting for more than a third of total company sales. Both groups of ﬁrms have
been growing at more than 20 percent per year in terms of both total and export sales
over the past three years. Additionally, on average, about half of the top ﬁve executives
at each type of ﬁrm have a primarily technical (as opposed to managerial) orientation. In
only a few cases were top executives born outside of the USA, suggesting that foreign

origin contributes relatively little to the international orientation of these ﬁrms. Finally,

57

the vast majority of BG and NBG ﬁrms (85 % and 89 % respectively) sell an industrial

rather than consumer good as the ﬁrm’s primary exported product. Other ﬁndings are

summarized in the table.

Table 7. Comparison of Characteristics of Born-Global and Non-Born-Global Firms

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non
BG Firms BG Firms
Characteristics (n = 122) (n = 168)
mean value mean value
(except as noted) (except as noted)

Number of full—time employees 190 338
Year company founded * 1982 1961
Year ﬁrm ﬁrst got involved in international business * 1986 1973
Number of foreign countries in which sales are being made 26 28
Average proportion of total time that top 3 executives spent last year on 27 % 27 %
export operations '
Total number of foreign business trips made by top 3 executives last year 7 7
International sales as a percentage of total company sales 38 36
Average annual growth rate in total sales over past 3 years 23 % 23 %
Average annual growth rate in export sales over past 3 years 24 % 22 %
Average annual growth rate in total sales expected over next 3 years * 26 % 20 %
Average annual growth rate in export sales expected over next 3 years * 26 % 20 %
Of top 5 executives, number who are primarily technical people (e. g., 2-5 2-5
engineers, computer specialists, inventors, etc.)
Out of top 3 executives. number who were born outside of the USA 0.6 0.4
Percentage of ﬁrms indicating that their primary export product is an 85 °/0 39 %

industrial product (as opposed to a consumer product)

 

 

Frequency with which ﬁrm's home ofﬁce management has face-to-face
contact with this distributor per year

 

3 times per yr

 

3 times per yr

 

* Difference between the two groups is signiﬁcant at p < .05
" Signiﬁcance of difference t-test not calculated

 

58

Table 8 presents the motivations that the various respondents gave for their initial

decision to become involved in exporting. Here too, there were no signiﬁcant

differences between 8G3 and NBGs on the variables shown. Apparently, BGs tend to

intemationalize for much the same reasons as other ﬁrms. For both sets of ﬁrms,

substantial demand in main export market, the desire to seek new markets, and

vision/drive of top management appear to be the most salient factors that motivated these

ﬁrms to start exporting. Conversely, saturated or insufﬁcient demand in the United

States market is by far the least important motivator.

Table 8. Motivations for Starting Exporting

 

 

 

 

 

 

 

 

 

 

 

Motivation Type BG Firms BGNgigms
(n = 122) (n = 168)
rated on the following scale: mean value mean value
no importance 1 2 3 4 5 6 7 very important

Vision / drive of top management 5.2 5.1
Substantial demand in main export market 5.4 5.7
Initiative of foreign distributor (came to us wanting to hand our product) 4.4 4.2
Facilitating influence of network relations (personal contacts, suppliers, etc.) 4.2 4.3
Saturated or insufﬁcient demand in the United States market 2.6 2.9
Universal appeal of the product 5.0 5.0
To seek new markets 5.3 5.3
We make no particular distinction between the USA and export markets 4-3 4-1
4.5 4.3

Facilitating factors (e. g., fax machines, globalization of markets) have
made going international fairly easy

 

 

 

No values are signiﬁcantly different between the two groups

 

59

Next, Table 9 presents additional, nominal characteristics of BG and NBG ﬁrms
that could not be compared statistically. The table reveals that Europe and Japan are by
far the most popular markets targeted, accounting for nearly two-thirds of those areas
cited as primary export markets. Europe and Japan account for just 47 percent of
primary export markets among NBG ﬁrms. While BGs seem to target Japan
substantially more than NBGs (27 % versus 14 % respectively), NBGs appear to favor
markets in “other Asia” or Australia slightly more than BGs (l9 % versus 11 %
respectively). Africa and Russia ranked last as primary markets targeted by both types of
ﬁrms.

Earlier it was hypothesized (H13) that use of conventional or partner-based
distribution channels would be an important feature of the BG ﬁrm, contributing to
export market performance. In this regard, Table 9 reveals that a total of 87 percent of
B65 rely on independent distributors or joint venture partners to distribute their products,
or they sell directly to end users. Only seven percent of these ﬁrms distribute their.
products through their own company-held channels. Similarly, the table indicates that a
total of 82 percent of NBG ﬁrms use independent distributors or joint venture partners to
distribute their products, or sell directly to end users. Only eight percent of these
companies claim to distribute their products through their own channels. Additionally,
frequency statistics reveal that about 76 percent of BG ﬁrms maintain no degree of
ownership in the distribution channel used in their main export market. On the other
hand, about 21 percent of such ﬁrms have at least 50 percent ownership in their foreign
distribution channel, with 19 percent owning their channel outright. In the case of NBG
ﬁrms, 74 percent have no ownership at all in their main export market channel. Twenty
percent of these ﬁrms have at least 50 percent ownership in this channel, with 15 percent
owning it outright. Finally, a t-test conducted on the difference between 865 and NBGs
in the use of conventional or partner-based channels versus company-owned channels

revealed no signiﬁcantly difference. These statistics cast doubt on the veracity of the use

Table 9. Additional (Non-Metric) Characteristics of Born-Global and N on-Born-

Global Firms

Firms’ Main Export Market

60

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BG Firms NBG Firms
Percent of ﬁrms citing Percent of ﬁrms citing
Region as primary export market as primary export market
Europe 34 33
Japan 27 14
Asia / Australia (except Japan 1 l 19
and China)
(Peoples’ Republic of) China 5 6
Mexico 5 6
Latin America (except Mexico) 4 8
Middle East 3 2
Africa 1 0
Russia 0 0
No country given (missing data) 12 12
Note: Percentages do not add up to 100 due to rounding
Distribution Channel Type in Main Export Market
36 Firms NBG Firms
Percentage of ﬁrms citing as Percentage of ﬁrms citing as
best characterizing the best characterizing the
Distribution Channel Type type of distribution channel type of distribution channel
used in main export market used in main export market
Direct sales to end user 22 26
Independent distributor 62 52
Joint venture partner 3 4
Branch ofﬁce owned by ﬁrm 7 8
Other 7 l l

 

 

 

Note: Percentages do not add up to 100 due to rounding

 

 

61

of conventional or partner-based distribution channels being a distinguishing feature of
the BG ﬁrm.

To test the role of the use of such channels on BG export market performance, the
aggregate performance score determined in earlier CFA analyses was examined in
correlation analysis for all BG ﬁrms indicating that they used independent distributors or
partnering-relationships. No signiﬁcant relationship (p < .05) was found with
performance in such ﬁrms. Thus, hypothesis H13 is not supported.

In an attempt to discover any other possible differences between BG and NBG
ﬁrms, additional items from the study questionnaire were compared through t—tests.
Results of these tests are presented in Table 10 in which only signiﬁcant ﬁndings are
reported. Note that, except as noted, these items were scored by respondents on
incremental scales, ranging from 1 (“Not at all”) to 7 (“To an extreme extent”). As
revealed in the table, there are numerous signiﬁcant descriptive differences between the
two groups of ﬁrms. First, BG respondents tend to consider themselves a little more at
“the leading technological edge” of their industry than NBGs (p < .05). Additionally,
Table 10 reveals that, compared to NBGs, a higher proportion of BC managers have
lived overseas for a substantial period of time (more than six months) (p < .05). Results
also show that BG managers tend to have a higher proclivity than NBG managers for
risky projects overseas (p < .05). The next three ﬁndings relate to the importance of
speciﬁc tools in the ﬁrm’s promotional mix (Kotler and Armstrong 1996) to marketing
efforts abroad. As revealed in Table 10, BGs tend to attach more importance than NBGs
to sales promotions, the Internet, and participation in trade shows for generating sales

abroad (p < .05).

62

Table 10. Additional Signiﬁcant Differences between Born-Global and Non-Bom-

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Firms
Non
BG Firms BG Firms
Questionnaire Item (n = 122) (n = 168)
mean value mean value
(except as noted) (except a_s noted)

Our ﬁrm is at the leading technological edge of our industry " 5.49 5.17
One or more of our top 3 executives has 3-71 3-03
lived outside the USA and Canada for at least 6 months *
In international markets, our top managers have 3-34 2.90
a proclivity for high-risk projects (with chances for high returns) *
Importance of sales promotions (short-term discounts, incentives, 3-39 7-90
etc.) in the promotion of primary export product in main export market ‘
(Scale: 1 to 7; l = no importance, 7 = very important)
Importance of the Internet in the promotion 3-12 2-73
of primary export product in main export market *

Scale: 1 to 7; 1 = no importance, 7 = very important)
Importance of participation in trade shows in 5-16 4.76
the promotion of primary export product in main export market *
(Scale: 1 to 7L1 = no importance, 7 = very importantL
Importance to ﬁrm strategy of targeting markets with little or no 4-34 3-32
competition regarding primary export product in main export market ”
(Scale: I to 7; l = no importance, 7 = very important)
Importance to ﬁrm strategy of developing strong customer 6-1 1 5-82
relationships regarding primary export product in main export market *
(Scale: 1 to 7; l = no importance, 7 = very important)
Our primary export product caters to some 4-85 4-38
specialized need that is difﬁcult for our competitors to match *
We use e-mail to communicate 3-61 105

with our distributor(s) in our main export market *

 

 

 

"‘ Difference between the two groups is signiﬁcant at p < .05
** Difference between the two groups is signiﬁcant at p < .01

 

63

The next two ﬁndings in Table 10 relate to the importance of particular
approaches to the ﬁrrn’s international strategy. Speciﬁcally, BGs tend more than NBGs
to target foreign markets where there is little or no competition (p < .01). Additionally,
compared to NBGs, BGs appear to attach greater importance to developing strong
customer relationships in their main export market (p < .05). The next ﬁnding suggests
that BG products tend to address foreign needs which are relatively specialized (p < .05).
This ﬁnding underscores the contention that BGs tend to pursue niche markets. Finally,
while neither type of ﬁrm appears yet to rely extensively on e-mail for interacting with

foreign distributors, 865 do tend to use the technology in this manner more than NBGs

(p < .05).

Findings: Main Model

Findings for the main study model are presented for BG ﬁrms in Table 11. The main
model was estimated, for both BG and NBG ﬁrms by using the “phi matrix” generated
by CFA analyses as the input data. The phi matrix is essentially a zero-order covariance
matrix generated in CFA which reﬂects relationships among all the variables and all the
constructs that the variables measure, as represented in the associated CFA. Such an
approach to generation of a structural equations model is well accepted in the literature
and was applied here primarily in light of relatively small samples (Anderson and
Gerbing 1988; Bollen 1989; Hayduk 1987).

As reﬂected in the table, the following factors were found to be signiﬁcant
antecedents of Export Market Performance in the BG ﬁrm: Commitment to International
Markets (p < .05); International Proactiveness (a sub-construct of International
Venturesomeness) (p < .05); International Responsiveness (a sub-construct of
International Market Orientation) (p < .05); International Marketing Competence (p <
.001 ); Product and Product-Service Quality (p < .001); and Product-based

Differentiation (a sub-construct of Product/Marketing Drﬂerentiation) (p < .01).

64

Table 11. Antecedents to Export Market Performance in the Born-Global Firm

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Factor Coefﬁcient Standard T-value
Error
GLOBAL ORIENTATION
Commitment to International Markets .192 .087 2216*
International Vision (sub-construct of International .097 .091 1.064
Venturesomeness)
International Proactiveness (sub-construct of .162 .075 2147*
International Venturesomeness)
International Customer Orientation (sub-construct .138 .108 1.276
of International Market Orientation)
International Responsiveness (sub-construct of .233 .101 2.302“
lntemational Market Orientation)
lntemational Marketing Competence .654 .085 7 668‘"
Use of Advanced Communication Technologies .100 .059 1.711
DISTINCTIVE MARKETING STRATEGIES
Niche Focus Strategy .034 .100 0.345
Product and Product-Service Quality .684 .082 8382*"
Marketing-based Differentiation (sub-construct of .080 .071 1.125
Product/Marketing Differentiation)
Product-based Differentiation (sub-construct of .268 .095 2.812"
Product/Marketing Differentiation)
Promotion Emphasizing Personal Selling .065 .062 1.050
Use of Conventional Distribution Channels or
Partnerships '
Foreign Distributor Effectiveness .038 .069 0.553

 

 

 

 

* Signiﬁcant at .05 level
** Signiﬁcant at .01 level
*** Signiﬁcant at .001 level

' Structural equation model not estimated because of the nature of the scale

 

65

For comparison purposes, ﬁndings for the main model for NBG ﬁrms are
reported in Table 12. Before delving into these results, it is important to explain the
procedure followed for assessing the construct validity and reliability of scales used to
assess study constructs for these ﬁrms. For the sake of perfect comparability of
performance antecedents across BG and NBG ﬁrms, measures identical to those used for
BG ﬁrms (Table 6 above) were applied to the assessment of the antecedent-performance
relationship in NBG ﬁrms. For the sake of ensuring valid measurement, these same
measures were re-assessed in CFA and reliability analysis using the data from the second
group, NBG ﬁrms. Because these measures wereioriginally reﬁned for use with BG
ﬁrms, some deterioration in the quality of validity and reliability occurred in the
application of these measures to the second group.

Results of the CFA for NBG ﬁrms are now explained in turn. The measurement
model incorporating the Global Orientation constructs and Export Market Performance
attained adequate ﬁt, with resulting ﬁt indices being very similar to those of BG ﬁrms
(speciﬁcally: 12 = 493, 342 degrees of freedom, p = .001, NFI = .79, NNFI = .91, CFI =
.92). All questionnaire items loaded for the NBG on the constructs they were intended to
measure at the .01 level, indicating robust convergent validity. In the LM test, numerous
items attempted to load on construct perimeters that they were not intended to measure,
indicating less than satisfactory discriminant validity. However, because it would be
inappropriate to re-conﬁgure measurement relationships in light of the necessity for
perfectly comparable measurement across the two study groups, no adjustments were
made to the NBG measurement model. In spite of the imperfection of measurement
relationships in assessing NBG ﬁrms, the following points are noteworthy. First, nearly
all of the cross-loadings detected in the NBG LM test made little or no sense with regard to
established theory or practical substance. Second, LM tests revealed that the remaining
parameters, if freed, would improve model ﬁt only trivially. Third, the CFI index revealed

that approximately 92 percent of data covariance reﬂected in the measurement model is

66

already explained. This outcome is almost identical to the Global Orientation/Performance
measurement model for BGs ﬁrms. Fourth, further model ﬁtting would likely reduce one
or more scales to two items, a situation conducive to “Heywood cases” and other improper
solutions in the ﬁnal structural equations model (Bollen 1989; Hayduk 1987). Finally, in
no case did any of the cross-loading items load on the dependent variable, Export Market
Performance. Hence, lack of perfect discriminant validity is not expected to compromise
the validity of main study results in any signiﬁcant way. The measurement model for the
Global Orientation - Performance relationship is therefore generally considered robust.

As with the above model, the measurement model incorporating the Distinctive
Marketing Strategy constructs and Export Market Performance attained adequate ﬁt, with
ﬁt indices being very similar to those of BG ﬁrms (speciﬁcally: x2 = 464, 320 degrees of
freedom, p = .001, NFI = .82, NNFI = .92, CH = .93). All questionnaire items loaded for
the NBG on the constructs they were intended to measure at the .01 level, indicating
robust convergent validity. In the LM test, several items attempted to load on construct
perimeters that they were not intended to measure. However, in light of the explanation
provided above, this situation was not regarded as serious. In general, the measurement
model for the Distinctive Marketing Strategies - Performance was found to be robust.

Results of reliability analyses for the NBG ﬁrms are reported next.

The construct measures are listed in the order in which they appear in the main model,
with reliability coefﬁcients (Cronbach’s alpha) provided in parentheses following each.
To wit: Commitment to International Markets (.71); International Vision (sub-construct
of lntemational Venturesomeness) (.84); International Proactiveness (sub-construct of
International Venturesomeness) (.69); International Customer Orientation (sub-construct
of International Market Orientation) (.74); International Responsiveness (sub-construct
of International Market Orientation) (.85); International Marketing Competence (.76);
Use of Advanced Communication Technologies (.80); Niche Focus Strategy (.55);
Product and Product-Service Quality ( .67); Marketing-based Diﬂerentiation (sub-

67

construct of Product/Marketing Differentiation) (.78); Product-based Diﬂrerentiation
(sub-construct of Product/Marketing Diﬁ’erentiation) ( .80); Promotion Emphasizing
Personal Selling (.41); Foreign Distributor Effectiveness (.92); Export Market
Performance (.82). Except in the case of Promotion Emphasizing Personal Selling, these
results indicate satisfactory reliability of measurement in the scales used to assess NBG
ﬁrms (Nunnally 1978). It is unclear why the reliability for Personal Selling is poor.
Nonetheless, the face validity of this scale is quite high and its reliability among BG ﬁrms
is satisfactory (i.e., alpha = .53) (Nunnally 1978).

Having veriﬁed the validity and reliability of construct measures for NBG ﬁrms,
results of main model testing for these ﬁrms is reported next. As reﬂected in Table 12,
the following factors were found to be signiﬁcant antecedents of Export Market
Performance among NBG ﬁrms: Commitment to International Markets (p < .001);
International Marketing Competence (p < .001); Global Niche Focus Strategy (p < .05);
Product and Product-Service Quality (p < .001); Product-based Diﬂerentiation (a sub-
construct of Product/Marketing Diﬂerentiation) (p < .001); and Foreign Distributor

Eﬂectiveness (p < .001).

68

Table 12. Antecedents to Export Market Performance in the Non-Born-Global Firm

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Factor Coefﬁcient Standard T-value
Error
GLOBAL ORIENTATION
Commitment to International Markets .207 .057 3606*"
International Vision (sub-construct of lntemational .104 .067 1.552
Venturesomeness)
International Proactiveness (sub-construct of .094 .055 1.725
lntemational Venturesomeness)
International Customer Orientation (sub-construct .019 .068 0.276
of lntemational Market Orientation)
International Responsiveness (sub-construct of .021 .069 0.303
lntemational Market Orientation)
International Marketing Competence .674 .064 10.445***
Use of Advanced Communication Technologies .018 .053 0.337
DISTINCTIVE MARKETING STRATEGIES
Global Niche Focus Strategy .206 .084 2444*
Product and Product-Service Quality .485 .076 6379*"
Marketing-based Differentiation (sub-construct of .099 .074 1.329
Product/Marketing Differentiation)
Product-based Differentiation (sub-construct of .295 .084 3532*“
Product/Marketing Differentiation)
Promotion Emphasizing Personal Selling .066 .068 0.967
Use of Conventional Distribution Channels or
Partnerships '
Foreign Distributor Effectiveness .309 .064 4802*“

 

 

 

 

* Signiﬁcant at .05 level
** Signiﬁcant at .01 level
*** Signiﬁcant at .001 level

' Structural equation model not estimated because of the nature of the scale

 

69

For ease of comparison between BG and NBG ﬁrms, main model t-value results
for these two groups are presented, side-by-side, in Table 13. As shown in the table,
Commitment to International Markets, lntemational Marketing Competence, Product
and Product-Service Quality, and Product-based Diﬂerentiation are all signiﬁcant
antecedents of Export Market Performance in both BG and NBG ﬁrms. However, it is
noteworthy that International Proactiveness and International Responsiveness (sub-
constructs of International Venturesomeness and lntemational Market Orientation
respectively) are signiﬁcant antecedents of performance in BGs but not in NBGs (p <
.05). While it should be noted that lntemational Proactiveness is a signiﬁcant
performance antecedent of NBGs at the .10 level, lntemational Responsiveness appears
to be an important performance antecedent unique to BG ﬁrms. This ﬁnding appears to
underscore the notion that possession to a fairly substantial degree of the responsiveness
aspect of market orientation would appear to be an important, discriminating
characteristic of BG ﬁrms operating successfully in international markets.

On the other hand, results suggest that Niche Focus Strategy and Foreign
Distributor Eﬂectiveness are signiﬁcant performance antecedents for NBG ﬁrms but not
for BGs. The ﬁnding is fairly robust for both constructs and is interesting in light of the
original conceptualization of these constructs are being particularly important to the

international success of resource-poor BG ﬁrms.

70

Table 13. Antecedents to Export Market Performance: Side-by-Side T-value

Comparison of Born-Global and Non-Born-Global Firms

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Main Model Main Model
Factor T-values for T-values for
BG Firms NBG Firms
GLOBAL ORIENTATION
Commitment to International Markets 2216* 3606*"
International Vision (sub-construct of lntemational 1.064 1.552
Venturesomeness)
International Proactiveness (sub-construct of 2.147* 1.725
lntemational Venturesomeness)
International Customer Orientation (sub-construct 1.27 6 0.276
of lntemational Market Orientation)
International Responsiveness (sub-construct of 2.302“ 0.303
lntemational Market Orientation)
International Marketing Competence 7668*" 10.445***
Use of Advanced Communication Technologies 1.711 0.337
DISTINCTIVE MARKETING STRATEGIES
Niche Focus Strategy 0.345 2444*
Product and Product-Service Quality 8382*" 6379*"
Marketing-based Differentiation (sub-construct of 1.125 1.329
Product/Marketing Differentiation)
Product-based Differentiation (sub-construct of 2.812" 3532*"
Product/Marketing Differentiation)
Promotion Emphasizing Personal Selling 1.050 0.967
Use of Conventional Distribution Channels or
Partnerships '
Foreign Distributor Effectiveness 0.553 4802*"

 

 

 

* Signiﬁcant at .05 level
** Signiﬁcant at .01 level
*** Signiﬁcant at .001 level

' Structural equation model not estimated because of the nature of the scale

 

71

Finally, with the intent of corroborating earlier ﬁndings or revealing new possible
ﬁndings, an additional test was conducted on the constructs represented by Global
Orientation and Distinctive Marketing Strategies as antecedents to Export Market
Performance. In this test, a subsarnple of the top one-third (n = 40) of BG ﬁrms based on
the aggregate Export Market Performance score, as deﬁned above in CFA, was separated
from the main BG sample. All of the Global Orientation and Distinctive Marketing
Strategies constructs were then compared in t-tests between this top performing BG
group and the full sample of NBG ﬁrms (n = 168). Results of this analysis are presented
in Table 14.

When interpreting this table, some caveats should be noted. First, the results are
based on a relatively small sample of BG ﬁrms. Hence, these results cannot be
considered as robust as those presented earlier using the full sample in structural
equations modeling. Second, because the revised sample of BG ﬁrms in this analysis
represents an elite group, it is not necessarily appropriate to compare them across-the-
board to the full sample of NBG ﬁrms. The primary utility of this analysis is that it
reveals the magnitude with which top-performing BG ﬁrms emphasize speciﬁc
orientations and strategies, as compared to the average of traditional exporting ﬁrms, the
NBGs. In essence, the analysis reveals what the top-performing BG ﬁrms are doing that
“run-of-the-mill” NBG ﬁrms are not doing, or not doing as well.

In examining Table 14, it is noteworthy that, regarding mean scores on each
construct, the top-performing BGs consistently outperform the full sample of NBGs. In
only three instances is this difference statistically insigniﬁcant at the .05 level or better.
(It should be noted that the difference between BGs and NBGs on International
Proactiveness is signiﬁcant at the 10 percent level.) Table 14 is summarized as follows:
the top-performing BG ﬁrms score higher than the full sample of NBGs in terms of
International Vision (p < .001); International Customer Orientation (p < .001);

International Responsiveness (p < .05); International Marketing Competence (p < .01);

72

Use of Advanced Communications Technologies (p < .001); Global Niche Focus Strategy
(p < .05); Product and Product-Service Quality (p < .001); Marketing-based
Diﬂerentiation (p < .001); Product-based Diﬂerentiation (p < .01); and Promotion
Emphasizing Personal Selling (p < .05). There is no signiﬁcant difference (p < .05)
between the two groups of ﬁrms on Commitment to lntemational Markets, International
Proactiveness, or Foreign Distributor Effectiveness. The values on Export Market
Performance are listed simply. to give the reader a sense of the magnitude of difference
on this variable when the groups are dichotomized as explained above.

A summary of major research ﬁndings with regard to earlier advanced hypotheses
is presented in Table 15. Note that a few of these hypotheses have been modiﬁed from
the original to reﬂect a posteriori reﬁnement of study constructs as a result of CF A
analyses. The relevant signiﬁcance level is .05. Note that, where some conditional
support was found for a hypothesis based on results presented in Table 14, the wording

“Tentative support” is used.

73

Table 14. T-test Comparison of Global Orientation and Distinctive Marketing
Strategies Constructs between the Top One-Third Performing Born-Global Firms
(n = 40) and the Full Sample Non-Born-Global Firms

 

 

 

 

Born- Non-Born
Factor Global Firms Global Firms
Mean Value Mean Value
GLOBAL ORIENTATION
Commitment to International Markets 4.96 4.60
International Vision *"'* 5.59 4.92

(sub-construct of lntemational Venturesomeness)

 

International Proactiveness 4.93 4.56

(sub-construct of lntemational Venturesomeness)

 

International Customer Orientation **"‘ 5.88 5.29

(sub-construct of lntemational Market Orientation)

 

International Responsiveness * 5.33 4.91

(sub-construct of lntemational Market Orientation)

 

International Marketing Competence ** 5.11 4.66

 

Use of Advanced Communication Technologies ** 3.89 3.02

 

DISTINCTIVE MARKETING STRATEGIES

 

 

 

 

Niche Focus Strategy * 5.56 5.19
Product and Product-Service Quality *** 7.04 6.46
Marketing-based Differentiation *** 4.52 3.72
(sub-construct of Product/Marketing Differentiation)

Product-based Differentiation ** 5.43 4.70

(sub-construct of Product/Marketing Differentiation)

 

 

 

 

Promotion Emphasizing Personal Selling * 6.25 5.78
Foreign Distributor Effectiveness 5.09 4.95
Export Market Performance *** 6.21 4.97

 

 

 

 

* Difference signiﬁcant at .05 level
** Difference signiﬁcant at .01 level
*** Difference signiﬁcant at .001 level

74

Table 15. Summary of Major Research Findings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

"YW‘hﬁis Description Finding
H1 Commitment to international markets is an important feature of the BG ﬁrm. It
is a signiﬁcant antecedent of export market performance. Supported
H2 lntemational vision as a component of international venturesomeness is an
important feature of the BG ﬁrm. It is a signiﬁcant antecedent of export Tentative
market performance. support *
H3 lntemational proactiveness as a component of international venturesomeness is
an important feature of the BG ﬁrm. It is a signiﬁcant antecedent of export Supported
market performance.
H4 lntemational customer orientation as a component of international market
orientation is an important feature of the BG ﬁrm. It is a signiﬁcant antecedent Tentative
of export market performance. support *
H5 lntemational responsiveness as a component of international market orientation
is an important feature of the BG ﬁrm. It is a signiﬁcant antecedent of export Supported
market performance. -
H6 lntemational marketing competence is an important feature of the BG ﬁrm. It is
a signiﬁcant antecedent of export market performance. Strongly
supported
H7 Use of advanced communications technologies in their daily operations is an
important feature of the BG ﬁrm. It is a signiﬁcant antecedent of export market Tentative
performance. support *
H8 Use of global niche focus strategy is an important feature of the BG ﬁrm. It is a
. . Tentative
Signiﬁcant antecedent of export market performance. *
support
H9 Emphasis on product and product-service quality is an important feature of the
. . . Strongly
BG ﬁrm. It rs a Signiﬁcant antecedent of export market performance.
supported
H10 Marketing-based differentiation as a component of product/marketing
differentiation is an important feature of the BG ﬁrm. It is a signiﬁcant Tentative
antecedent of export market performance. support *
H11 Product—based differentiation as a component of product/marketing
differentiation is an important feature of the BG ﬁrm. It is a signiﬁcant Strongly
antecedent of export market performance. supported
H12 Promotion emphasizing personal selling is an important feature of the BG ﬁrm.
. . . Tentative
It IS a srgniﬁcant antecedent of export market performance. *
support
H13 Use of conventional or partner-based distribution channels is an important
feature of the BG ﬁrm. It is a signiﬁcant antecedent of export market Not
performance. supported
H14 Foreign distributor effectiveness is important to the success of the BG ﬁrm. It Not
is a signiﬁcant antecedent of export market performance. supported

 

 

 

" Support based only on ﬁndings of analyses represented in Table 14.

 

CHAPTER 6

DISCUSSION AND CONCLUSION
Explanation of Results
Findings from this study offer a number of insights into an emerging area that holds
important practical as well as theoretical implications. Initially, the study has offered
numerous possible shortcomings in existing theories of ﬁrm internationalization and has
offered a more contemporary explanation of how many companies today are expanding
their selling activities abroad. Study ﬁndings have described numerous key aspects of
BG ﬁrms. They have also provided support for speciﬁc aspects of a conceptual model
designed to explain export market performance in these ﬁrms. The study has been able
to highlight several factors which appear to distinguish BGs from traditional exporting
ﬁrms and contribute to their performance abroad. Finally, the study has developed and
reﬁned the super-construct Global Orientation, most of whose factors appear to be key
descriptors and antecedents to BC performance abroad. Global Orientation also appears
to hold much relevance in explaining the foreign success of traditional, NBG ﬁrms.

The study has revealed that, in some respects, BGs do not differ signiﬁcantly
from traditional exporters, the so-called NBG ﬁrms. This ﬁnding tends to support the
notion that certain characteristics and approaches of ﬁrms active in international markets
are relatively fundamental. Additionally, it should be noted that nearly all the companies
which responded to the study are, according to the US. govemment’s deﬁnition (N arniki
1988), small or medium size (that is, having fewer than 500 employees). Several
scholars have pointed to numerous characteristics shared by small business exporters
(Brady 1995; Czinkota 1982; Malekzadeh and Nahavandi 1985; Miesenbock 1987;
Ortiz-Buonaﬁna 1990).

Nevertheless, numerous characteristics were signiﬁcantly different between BG

and NBG ﬁrms. First, BG managers tend to consider themselves more at “the leading

75

76

technological edge” of their industry than managers at NBGs. This may be a function of
the fact that BGs tend to be smaller than NBGs, suggesting that BGs may be operating as
niche marketers or in more narrowly deﬁned industries. Hence, if, for example, the BG
were a niche operator at the extreme, it would tend to have very few competitors and
could therefore be regarded as functioning at the leading technology edge in its industry.
It may also be the case that numerous BGs have actually created new, narrowly-deﬁned
industries in which they are at the lead. Evidence in support of this explanation was
strong among several of the ﬁrms interviewed in an earlier stage of the study.

Additionally, study ﬁndings revealed that, compared to NBGs, a higher
proportion of BG managers have lived overseas for a substantial period of time (more
than six months). Such experiences provide managers with more international
experience and may contribute to greater corporate sensitivity to and afﬁnity for
consumers located abroad (Ali and Camp 1993; Johanson and Vahlne 1990; Katsikeas
and Morgan 1994; Ursic and Czinkota 1984). Results also show that BG managers tend
to have a higher proclivity than NBG managers for risky foreign projects. This ﬁnding
suggests that BG ﬁrms may be more entrepreneurial in foreign ventures and may reﬂect
the fact that, as noted above, BG top managers tend to have more experience living
abroad than NBG managers. That is, a manager’s deﬁnition of foreign risk is likely to
moderate the more international experience he or she has (Ali and Camp 1993; Katsikeas
and Morgan 1994; Ursic and Czinkota 1984).

Three additional ﬁndings relate to the importance of speciﬁc tools in the ﬁrrn’s
promotional mix (Kotler and Armstrong 1996) for marketing efforts abroad. First, it was
found that BGs tend to attach more importance than NBGs to the use of sales promotions
and the Internet, as well as participation in trade shows for generating international sales.
Because of their cost effectiveness, application of the latter two approaches in particular
would tend to be greater in smaller or resource-poor companies, characteristic of BG

ﬁrms (Business Week 1994; Czinkota and Ronkainen 1995; Quelch and Klein 1996;

77

Root 1994). In any event, the ﬁnding tends to underscore the importance of the Internet
and trade fairs to small and medium size companies venturing abroad. It is difficult to
interpret why BGs would have a greater tendency than NBGs to employ sales promotions
in foreign markets. One possible explanation is that executives at NBGs may eschew
extending domestically used promotions to foreigners because of the complexities
involved. For example, this researcher worked for a time as the export manager of a
medium-sized company that frequently used promotions to generate sales in the United
States. However, top management was consistently reluctant to extend such promotions
to foreign consumers because of the expense and problems with translating ﬂyers into
foreign languages and of converting discounts to local currencies. However, BG
managers, as revealed earlier, are signiﬁcantly more sensitive and responsive to
international consumers. This sensitivity can account for a greater willingness to extend
promotions abroad.

Additional ﬁndings relate to the importance of particular approaches to the ﬁrm’s
international strategy. Speciﬁcally, BGs tend more than NBGs to target foreign markets
where there is little or no competition. Given the asymmetry of resources between the
two groups of ﬁrms, such a strategy is eminently logical and could, for BGs in some
markets, result in substantial sales in exchange for relatively little effort (Porter 1986).
The ﬁnding is consistent with monopolistic advantage theory described earlier (Barney
1991; Hymer 1976; Root 1984). By targeting markets in which the ﬁrm has little or no
competition, the BG can obtain a monopoly of sorts, which should allow it to charge
higher prices and reap other beneﬁts, at least in the short run. The strategy is conducive
to obtaining an important competitive advantage; quite a feat for the resource-poor ﬁrm.
BGs would also tend to enjoy pioneer advantages in those markets that they enter ﬁrst
(Kerin, Varadarajan and Peterson 1992; Lampkin 1988; Lieberman and Montgomery
1988). For example, as a ﬁrst-mover, the BG might use its position to gain higher

proﬁts, amass market position, and obtain economies associated with early progression

78

on the local learning curve (Kerin, Varadarajan and Peterson 1992; Lieberman and
Montgomery 1988). However, scholars have also recently warned of substantial risks
faced by pioneering ﬁrms (Kerin, Varadarajan and Peterson 1992; Tellis and Golder
1996).

Finally, while ﬁndings suggest that neither BGs nor NBGs rely extensively on e-
mail for interacting with foreign distributors, BGs do tend to use the technology for this
purpose more than NBGs. This outcome may imply a stronger proclivity for using
information technology on the part of BGs or it may reﬂect the efforts of relatively
resource-poor companies to minimize the cost of conducting international business.
However, it should be noted that analyses also revealed no signiﬁcant difference between
BGs and NBGs in the importance of the fax machine to their foreign operations or use of
the Internet to conduct international research. This ﬁnding tends to suggest that BGs use
e-mail more to minimize international expenses than due to some strong technological
bent. Quelch and Klein (1996) have already pointed to the Internet as an important cost-
saving device for international communications in the foreign marketing efforts of the
SME. Apparently, numerous BG-type ﬁrms have seized on the tool for this purpose.

Findings regarding speciﬁc hypotheses highlighted at the end of the previous
chapter are now discussed in detail. H1 stated that Commitment to lntemational Markets
is an important feature of the BG ﬁrm and a signiﬁcant antecedent of export market
performance. This hypothesis was supported for both BG and NBG ﬁrms. The outcome
is consistent with ﬁndings of several other scholars (Aaby and Slater 1989; Cavusgil and
Nevin 1981; Dichtl, Koeglmayr and Mueller 1990; Douglas and Craig 1989; Johanson
and Vahlne 1977). In the present context, commitment to international markets was
assessed as the extent of ﬁnancial investments and human resources allocated to the
undertaking of the foreign venture. Given that BGs often suffer from a shortage of such

resources, being committed may require an extraordinary effort for many such ﬁrms.

79

H2 and H3 stated that lntemational Vision and International Proactiveness are
important features of the BG ﬁrm and signiﬁcantly antecedent to export market
performance. No support was found for the former construct in either type of ﬁrm.
However, International Proactiveness was found to be a signiﬁcant performance
antecedent for BG ﬁrms. In conjunction with this ﬁnding, BG managers were also
revealed to have, on average, a higher proclivity for risky foreign projects. Furthermore,
early descriptive results showed that BG managers tend to be more optimistic than NBG
managers regarding future annual growth rates of export sales. Finally, although not
mentioned previously, NBG ﬁrms did cite that “saturated or insufﬁcient demand in the
United States market” is a factor more important to them than for the sample of BG ﬁrms
for getting started in international business (p < .10). This ﬁnding tends to suggest that
BGs may have a greater tendency to expand abroad because they want to, not because
they must in order to shore up sagging domestic sales.

The aggregate of all these results implies that BG ﬁrms are, on average, more
internationally aware, more visionary, and more aggressive in their pursuit of
international opportunities, with management willing to take greater risks to achieve
international goals. With regard to International Proactiveness, studies have found a
positive correlation between entrepreneurial orientations of this sort and the earnestness
with which ﬁrms activate strategic plans (Davis, Morris and Allen 1991; Miller and
Friesen 1984). Many traditional types of ﬁrms, giving precedence to domestic priorities,
are reactive when dealing with export markets and slow to respond to evolving
challenges (Knight 1997; Root 1994). Given the complexities of international markets,
proactiveness may be a key to success because management at proactive ﬁrms is more
inclined to create and activate strategies that are needed to overcome the numerous and
constant challenges (Miller and F riesen 1984). Conversely, ﬁrms lacking proactiveness
may withdraw early or fail to take needed action, obviating possibilities for future

international success. Evidently, a proactive orientation is a key element in the

80

international success of BG ﬁrms. But it is also ironic since, given their relative paucity
of resources, BGs may be less able to withstand the ﬁnancial and other consequences of
risky foreign failures. Thus, BGs are to be applauded; many boldly pursue foreign
challenges even in the face of potential costly failure.

H4 and H5 stated that lntemational Customer Orientation and International
Responsiveness are important BG features, contributing signiﬁcantly to export market
performance. While no support was found for the former construct, H5 was supported
with a considerable degree of signiﬁcance in BGs relative to NBGs. The implication is
that BG managers have a strong afﬁnity for foreign consumer needs and experiences, and
attempt to respond to these by creating value. The ﬁnding also implies that BG
managers have a greater awareness of export market competitors. This may stem from
the smaller average size of these ﬁrms: when you’re small, you tend to be more aware of
larger rivals. The results also imply that BGmanagers have a distinct ability to instill
customer responsiveness in employees throughout the ﬁrm. This quality may derive
ﬁom both size and youth: it’s easier to implant a speciﬁc corporate culture in a small,
fresh organization than in a large, established one. On the other hand, it may be that BG
managers are simply, on average, more visionary and sophisticated in their dealings with
foreign consumers. Indeed, other evidence revealed that BGs attach greater importance
than NBGs to the development of strong customer relationships. Whatever the case, it
appears that emphasis on developing and maintaining customer relationships through
responsiveness is a distinguishing BG feature, contributing to their success abroad.

H6 stated that another important feature in BG export market performance is
International Marketing Competence. The hypothesis was strongly supported. The
ﬁnding is very important and conﬁrms a well-established idea (Cateora 1996; Cavusgil
and Zou 1994; Szymanski, Bharadwaj and Varadarajan 1993; Wind, Douglas and
Perlmutter 1973). Here, competence consists of effective performance of pricing,

advertising, distribution, and product development, as well as superior knowledge of the

81

market and an ability to use marketing tools well. Unfortunately, many ﬁrms have
neglected the marketing task abroad, only to endure the consequences (Hartley 1986;
Knight 1995; Ricks 1983). Because foreign markets impose a variety of uncontrollable
challenges often not present in the domestic market, marketing competence may be
especially salient to BG international success. It is hoped the ﬁnding will inspire more
ﬁrms to improve the marketing activities abroad.

While no support emerged for H7 on the use of advanced communications
technologies to support BG performance at the .05 level, support was fairly strong at 10
percent. It is possible that, given a larger sample size, the hypothesis might have found
signiﬁcant, reportable support. This point is particularly relevant in light of the
computed t-value for NBG ﬁrms, which is close to zero, and the fact, revealed earlier,
that BGs do use e-mail signiﬁcantly more than NBGs to interface with overseas
distributors. In all probability, advanced communication technologies are a signiﬁcant
factor in the international success of BG ﬁrms. The question clearly warrants additional
research.

There was no support as well for H8 — use of global niche focus strategy as an
important feature of the BG ﬁrm and signiﬁcant antecedent of export market
performance. However, global niche strategy does appear to be a signiﬁcant,
performance-enhancing feature of NBG ﬁrms. Because one expects smaller BG ﬁrms to
be nichers, and because other evidence revealed that BG managers tend more than NBG
managers to perceive their products as addressing a specialized need (p < .05), the result
is perplexing indeed. It may be that the construct measure is misspeciﬁed and fails to
represent the construct well. Clearly, the niche strategy-performance linkage requires
additional study.

H9 tested product quality as an important BG feature and antecedent to
performance. The hypothesis was strongly supported, underscoring the importance to

international success of meeting the expectations of consumers with regard to product

82

performance and service. With the globalization of markets and expanding opportunities
for international purchasing (e. g., via the Internet), end-users will be able increasingly to
compare across a larger volume and variety of brands from suppliers located worldwide.
As they do so, their expectations of quality are apt to grow. Similarly, ﬁrms may be
more inclined to benchmark their quality standards against those of foreign competitors,
leading to pressure on companies to improve (Cvar 1986). With heightened competition
in world markets, makers of parts, components, and ﬁnished goods may invest in quality
to retain or recapture customers, or to attract new ones (Dobyns and Crawford-Mason
1991; Porter 1986; Szymanski, Bharadwaj and Varadarajan 1993). Thus, the importance
of quality is likely to become even more salient in the future.

H10 and H11 proposed that Marketing-based Diﬂerentiation and Product-based
Diﬂerentiation are important features of the BG ﬁrm, expected to be a signiﬁcant
antecedents of performance. Marketing-based differentiation was not found to be a
signiﬁcant antecedent for BGs. However, as indicated in Table 14, marketing-based
differentiation does appear to be an important strategy of high-performing BGs. In
structural equations modeling analyses, product-based differentiation was found to be a
signiﬁcant performance antecedent in both BG and NBG ﬁrms. This probably reﬂects
the fact that the great majority of ﬁrms in both samples are selling industrial products in
their main export markets (Table 7). Given the needs and knowledge-level of industrial
buyers, it is logical that product-based and not marketing-based differentiation would
play a greater role in these sales (Kotler and Armstrong 1996; Miller 1988; Mosakowski
1993). As measured in the study, product-based differentiation reﬂects the creation and
sale of products that are unique with respect to technology and design, and which
represent an innovative approach to solving the customer’s need. The ﬁnding is
consistent with research suggesting that smaller ﬁrms that have few scale advantages

should apply differentiation rather than cost-based strategies because larger rivals enjoy

83

scale-based cost advantages that permit them to market products massively at lower
prices (Eden 1994; Knight 1997; Porter 1980; Porter 1986; Rugman and Verbeke 1989).

H12 and H13 stated that Promotion Emphasizing Personal Selling and Use of
Conventional Distribution Channels or Partnerships are important features of the BG
ﬁrm, contributing signiﬁcantly to export market performance. Neither hypothesis was
supported. In the case of personal selling, lack of support may stem from the fact that 85
percent of responding BGs are selling industrial products, a situation that implies
considerable emphasis on personal selling as opposed to other forms of promotion.
Consequently, there may not have been sufﬁcient variation in promotion methods
throughout the sample to render a conclusive ﬁnding as to the superiority of personal
selling over other methods. To test this conjecture, mean scores were calculated for each
of eight speciﬁc international promotion methods assessed via the study questionnaire
(advertising, direct mail, personal selling, sales promotions, the Internet, trade shows,
public presentations, and distributor support). Personal selling was found to be by far the
most popular method of promotion used by BG ﬁrms (mean score = 6.16 out of 7 ). A
paired sample t-test revealed that it was regarded as signiﬁcantly more important (p <
.001) to the ﬁrrn’s international promotion strategy than the next most popular
promotional method, trade shows (mean score = 5.16).

H14 was the ﬁnal hypothesis assessed in the study. It posited that Foreign
Distributor Eﬂectiveness would be an important factor in BG success, and a signiﬁcant
antecedent to export market performance. While distributor effectiveness was found to
be play a very considerable role in NBG performance (p < .001), the hypothesis failed to
gain any support among BG ﬁrms. This is perhaps the most perplexing ﬁnding of the
study, given that one expects resource-poor BGs to be more dependent on their foreign
distributors than other, more established ﬁrms. One possible explanation for this
outcome was related to this researcher in a discussion with Toshikata Amino, former

vice-president of Honda America. He pointed out that smaller exporters, when compared

84

to big ﬁrms, tend to produce a relatively small volume of goods and consequently sell in
only limited quantities overseas. Therefore, because their foreign distribution needs are
relatively simple, many such ﬁrms can be quite satisﬁed with minimal distributor
effectiveness. For example, if production constraints prevent a medical technology ﬁrm
from offering more than 200 heart valves in its main export market per year, it would
tend to be satisﬁed with a distributor that sells the entire quota even though the market
might actually support annual sales of 2,000. It is only when the manufacturer begins
exporting 2,000 valves that it comes to expect more from a distributor that historically
sold smaller amounts. Therefore, the foreign distribution needs of many BGs may be so
simple that, as long as the basic job is fulﬁlled, management is oblivious to improving

distributor performance and to the larger potential of the market.

Managerial Implications

The study has suggested numerous orientations and strategies that appear to promote

export market performance in Born Global ﬁrms. Of greatest likely interest to practitioners

are ﬁndings that indicate speciﬁc orientations and strategies for export market success. As
revealed in earlier causal analyses, key performance-enhancingfactors are now reviewed.

0 Commitment to international markets as demonstrated by sufﬁcing investment of
ﬁnancial and human resources toward achievement of international goals. This factor
was relevant to BGs and NBGs alike.

0 Emphasis on international marketing competence, including effective performance of
product development or adaptation, pricing, promotion (especially sales), and
distribution, as well as keen knowledge of the foreign environment and skillful use of
marketing tools. This factor was consistently of greatest signiﬁcance in the
international success of BG as well as NBG ﬁrms. Its importance cannot be

highlighted enough.

85

0 Emphasis on product and product-servicequality in the delivery of goods overseas.
This factor appears to be just as important as marketing competence to international
success.

0 Application of product-based differentiation strategy as a means to highlighting the
product’s unique features and avoiding head-to-head challenges from rivals.
Differentiation incorporates the use of innovative approaches to solving basic consumer
problems, particularly with regard to technology and design of the product.

Of special importance to BG ﬁrms are strategies that appear to work well for them,
but not so well for NBGs. These are given as follows.

0 Development and application of behaviors consistent with international proactiveness
including encouragement of a corporate culture that is conducive to ﬁnding
opportunities abroad and boldness in their pursuit.

o Emphasis on international responsiveness as it relates to creating value for foreign
consumers and being sensitive to competitor moves.

Additional factors that appear to be particularly characteristic of high-performing

BG ﬁrms (Table 14) include possession of an international vision (e.g., seeing the world as

your marketplace), use of advanced communications technologies for interacting with

buyers and sellers abroad, emphasis on niche focus strategy (instead of going head-to-head

with potential rivals), and using marketing-baseddijferentiation strategies.

Conclusion and Directions for Future Research

Thirty years ago, the vast majority of international trade was conducted by large,
“Fortune 500”-type multinationals that had followed traditional paths to
internationalization (Czinkota 1982; Johanson and Vahlne 1977; Root 1994). This
dissertation has suggested how fundamental changes in the external environment of the
ﬁrm, such as the globalization of markets and the emergence of advanced international

business-facilitating technologies, have engendered the rise of large numbers of a

86

relatively new breed of international ﬁrm. Several of the changes noted here appear to
be occurring quickly. For example, when this research was begun some three years ago,
a telephone call from the United States to Japan cost, on average, over $1.00 per minute.
Since that time, numerous shifts have impacted the international telecommunications
industry (Economist 1995; Quelch and Klein 1996; Sarkar 1995; Sarkar, Butler and
Steinfeld 1995). Today, just three years later, that same phone call to Japan can now be
accomplished for as little as 26 cents per minute. During the same three-year period, the
U.S. government has made signiﬁcant strides in creating a ﬁee trade zone that stretches
from Canada to Chile and a second such zone among nations of the Paciﬁc Rim (Daniels
and Radebaugh 1995; lntemational Business Asia 1995; Knight 1997). Additionally, the
Internet has emerged as an important tool of business making it possible for any ﬁrm —
even a one-man software consultancy —— to “go global” by simply launching a homepage
(Ieo 1995; Poon and Swatman 1995; Quelch and Klein 1996). Such “instant
internationalization” was unattainable for the vast majority of ﬁrms just ﬁve years ago.
These developments are indicative of rapid changes that are ever lowering the
cost of international business for the small- and medium-size ﬁrm. The emergence of
BGs as a new organizational form is an exciting development. Evidence points to the
rapid increase of these young, internationally aggressive ﬁrms not only in small
industrialized countries but also in the United States. Their pattern of
internationalization does not follow the conventional model of gradual and slow foreign
expansion. Indeed, their rapid and early internationalization represents a sharp departure.
Similarly, exploratory interviews suggest that, in addition to a distinctive set of
marketing strategies, the export-market performance of BGs is best explained by a new
construct referred to here as “global orientation.” It incorporates a set of organizational
dispositions and competencies that seem to account for the extraordinary performance of
BGs in international markets. The present study advances our knowledge by providing

empirical evidence for the validity of this construct and of its role and that of Distinctive

87

Marketing Strategies as antecedents of export market performance in young

intemationalizing ﬁrms.

The issues addressed above reveal a broad agenda for future research. Given the
virtual absence of empirical work, attempts should be made to ﬁrrther test and reﬁne the
conceptual model presented here. Two complementary procedures are suggested: (1)
case studies to guide and reﬁne theory development, and (2) survey research of key
informants in ﬁrms that meet basic criteria in a cross-section of industries. Numerous
case studies have been reported here, but more are necessary to better understand BGs
and to better prepare other large-scale surveys (Bonoma 1985; Deshpande 1983;
Eisenhardt 1989).

In conducting future research, it will be important to address the following
research questions:

0 What are the salient characteristics of BG ﬁrms, in addition to the features noted
above.

0 What is the proﬁle of the entrepreneurs who found them?

0 What form do the international business activities of such ﬁrms take? (E. g., what
governance structures do they use?)

0 What key factors, in addition to those noted above, promote operational and ﬁnancial
success in the international ventures of such ﬁrms?

0 What are the practical implications of the BG phenomenon for management at
smaller, intemationalizing ﬁrms? That is, what can be learned from successful BGs
that will permit other ﬁrms to expand and function effectively overseas?

o What are the implications of successful BGs for the national economy? (E. g., are
they an important conduit for importing foreign technology? Are they capable of
creating new industries?)

Once the nature and success factors of the BG are reasonably well understood,

research which explores appropriate public policy should be pursued. The objective

88

should be to suggest public policy initiatives which can facilitate and promote
development and progress of the BG ﬁrm. For it is predicted that, instead of being the
exception they are today, BG-type ﬁrms will soon become the norm in international
trade. When that day arrives, it will represent a fundamental shift in the existing
paradigm of international marketing. Such a momentous development underscores the
importance of understanding the operations and international success factors of such
ﬁrms. It is therefore hoped that the present dissertation has shed some useful light on

these vibrant new engines of world trade.

APPENDICES

APPENDIX 1

SUMMARY OF BORN-GLOBAL FIRMS IN CASE STUDIES
(Company names are disguised to protect privacy)

OmniComm, Inc.

Diversiﬁed company founded in 1981 with about 2,700 employees, $300 million in
annual sales, growing very quickly in international markets, and handling a variety of
product lines. Product is "Omnitracs", a two-way satellite message and position
reporting system targeted to the trucking and ﬁshing industries and the military. Europe
was ﬁrst major foreign market; has been serving 16 different European countries since
1989. Also active in Japan, Malaysia, and Brazil. Company founders are highly
technically-oriented entrepreneurs who, from the beginning, made little distinction
between domestic and international markets. The product succeeds around the world
largely in light of the following factors: (1) OmniComm invented the technology; (2)
products tend to be better designed, more cost effective, and of higher quality than those
of competitors; (3) ﬁrm specializes in and is highly dedicated to only a few products; (4)
ﬂexibility of being a smaller company; (5) competitive pricing. In addition, all of
Omnitracs overseas marketing is handled via joint ventures with local entities. Firm
faces a trade-off between the minimal control of arms-length JV type channels and the
large expense of setting up channels in which they exercise greater control. Key
internationalization triggers and facilitating factors were (1) export pull, (2) monopoly
position in product, (3) pioneer advantage, and (4) heavy reliance on advanced
communications technologies.

AntiTox Corporation

Founded in 1983, company is a dominant player in the manufacture and marketing of
products to control toxins and improve quality for the food, agriculture, pharmacological,
and the environmental industries. Growth in international sales has been strong since
1988, increasing an estimated 10 to 50 percent per year. Company founding coincided
with substantial grth in demand owing to (1) increasing need to comply with
government regulations regarding food and feed safety and (2) increasing threat of
litigation regarding foods tainted with toxins. Firm possesses strong technological and
market orientations, and greatly emphasized product quality (e. g., products are
customized to individual customer needs and all are currently manufactured by hand).
Customers buy the product primarily because it possesses proven effectiveness in
detecting harmful toxins, and tests can be conducted quickly and cheaply. Distribution is
handled through strong, local distributors which typically handle complementary
products. In general, AntiTox's international success is largely attributable to: (1)high-
tech, quality, price-competitive products; (2) strong export pull; (3) export push
(management has a strong international orientation); (4) signiﬁcant international network
relationships; (5) product-market conditions requiring international presence; (6)
ﬂexibility of being a small ﬁrm; (7) pioneer advantage (in some markets); (8) strong
market orientation.

89

90

Instrument Specialists, Inc.

Founded in 1978, this ﬁrm specializes in surgical devices for knee and shoulder repair
related to arthroscopic surgery, including hand instruments, leg and arm holders, staples,
screws, and other products for the operating room. The founder's invention of numerous
superior tools and techniques for arthroscopic surgery led to the company's start. IS
currently generates about 35 percent of its sales from international sources. It is
exporting primarily to Europe, with some sales in South America (Brazil) and Africa.

F irrn has a very strong technological orientation (15 patents) and is world-famous,
among orthopedic surgeons at least, for the innovativeness and quality of its products.
Success derives largely ﬁom "relationship marketing" — that is, the development and
maintenance of an extensive network of physicians, hospitals, and distributing agents
throughout much of the developed world. Became "international by default" owing to
the founder's extensive contacts among orthopedic physicians in Europe. IS now
distributes its products through 22 distributors in most of the major countries of Europe,
Argentina, Brazil, Canada, Israel, Turkey, and Zaire. Most of its distributors are in the
industry and tend to be small (except for Italy), distributing other orthopedic products to
doctors and hospitals. The ﬁrm's international success derives primarily from (1) the
ﬁrm's high quality, highly regarded tools and techniques; (2) substantial export pull; (3)
signiﬁcant international network; (4) the company's reputation as the forerunner in the
latest instrumentation for orthopedic surgery; and (5) competitive pricing; and (6)
ﬂexibility of being a small ﬁrm.

Heartsafe Corporation

Founded in 1979, Heartsafe has around 300 employees and sells some 25 percent of its
products in foreign markets. The ﬁrm is a leading manufacturer of disposable medical
products used in open heart surgery and ventured overseas in its ﬁrst year of business.
Company founders are a medical technology engineer and a marketing specialist. Main
export markets are France, Japan, and Germany. Early success with the company’s
products abroad inspired management to emphasize exporting. One of the founders
spent much of the 19808 traveling to Europe and Asia doggedly developing markets.
Says he “We were always open to getting sales, anywhere.” Much of the companies
international success hinges on the fact that heart disease is a fairly universal problem.
The ﬁrm can generally sell a standardized product worldwide, but does make some
adjustments to suit, for example, the smaller physique of most Japanese customers.
Heartsafe has built up a reputation for making high quality products and, when to comes
to life-saving devices, people everywhere usually insist on top quality. While a small
ﬁrm, Heartsafe enjoys some protection against competitors through the holding of nearly
25 patents. Other strengths include pioneer advantage, strong market/customer
orientation (“we treat our international customers as well as our domestic ones”), and
advanced position on the industry experience and learning curve. In addition to these
advantages, Heartsafe’s international success derives primarily from: (1) strong export
pull and (2) export push.

91

GeoQuest Inc.

With annual sales of around $6 million and only 30 employees, GeoQuest has
nonetheless gained considerable popularity with foreign consumers. The company
developed and operates the world’s ﬁrst sinkhole and structural detection system for use
in roadway design and maintenance. The system has already won several major awards
for product design and innovation. The company, founded in 1989 by a young engineer, .
is already generating international sales and, in 1992, was enlisted by the United Nations
and the Swedish government to apply its technology in the detection of land mines.
Currently, estimates indicate that some 100 million land mines are buried in numerous
countries around the world. Current approaches are dangerous and rely primarily on
soldiers methodically poking the ground beneath their feet with sticks. GeoQuest’s safe,
high-tech approach enjoys substantial demand. Key target markets for the ﬁrm include
Kuwait, Cambodia, and Afghanistan which have experienced much warfare in recent
years. Key reasons for GeoQuest’s international success include: (1) monopoly
possession of a product providing a high-tech, vastly superior solution to an important,
worldwide problem; (2) export pull; (3) strong entrepreneurial orientation and export
push; (4) strong technological orientation; (5) emphasis on products having substantial
added value; and (6) signiﬁcant global network relationships.

NETSALES, Inc.

This ﬁrrn’s main business is the conducting of national auctions of second-hand cars by
linking buyers and sellers through its patented satellite-based communications network.
Since its founding in 1984, NETSALES, Inc. has grown rapidly, auctioning a record
170,000 vehicles in 1994 and generating roughly $50 million in sales. The ﬁrm employs
a large team of inspectors who evaluate each car, generating a complete written and
photographic description. Auctions are then held each week via closed circuit television,
with the majority of buyers being used car salespeople. The ﬁrm employs the latest in
leading edge digital technology to abreast of competitors in the satellite-based auction
industry. NETSALES has been generating substantial foreign sales since 1994 when it
was approached by several global auto manufacturers, including Mercedes Benz,
Mitsubishi, and Volvo, searching for innovative ways to boost sales. Much of the
company’s success comes from its patented satellite auction system which gives the ﬁrm
a near-monopoly in its brand of high-tech auto auctions. Factors key to NETSALES’
international success include (1) Worldwide near-monopoly position in its unique service
line; (2) Export pull; (3) Export push (management has become aggressive recently in
pursuing international markets); (4) heavy reliance on advanced communications
technology; and (5) Signiﬁcant global network relationships (in the auto industry).

Netcomm, Inc.

Founded in 1987, Netcomm’s main business is creation and sales of products, hardware
and software, for use with computer network communications and data transfer systems.
The company is at the leading edge of numerous ﬁrms attempting to exploit the
multifarious possibilities for efﬁcient, global communications stimulated in part by the
rise of Internet. Netcomm has total revenues of around $35 million and is expanding
rapidly, with annual growth rates frequently in the triple digits. The ﬁrm now generates
more than 25 percent of its sales from overseas, from sales bases as widely dispersed as
Asia, Australia, Europe, and the Middle East. Much of the company’s international

92

success derives from a solid focus on product development and R&D. To beat the high
cost of new product development, Netcomm established a large research facility in
Eastern Europe where wages for the ﬁnn’s development team are much lower than they
would be in the United States. Other ways in which the ﬁrm has secured international
success include the following: (1) strong export push; (2) emphasis on the creation and
marketing of high-tech products for a rapidly evolving international market; (3) export
pull; (4) global network relationships (facilitating both new product development and
worldwide product distribution); (5) strong market orientation emphasizing high quality
customer service; (6) heavy reliance on advanced communications technologies for
worldwide operations.

93

APPENDIX 2

SAMPLING OF COMPANIES MEETING THE BORN-GLOBAL CRITERIA

 

 

Year Aprox. Sales Approx. %
Companv Locm Founded (USS Millions) lntemational
Comverse Technology Woodbury, NY 1984 99 82
Qualcomm San Diego, CA 1981 271 27
Computer Network Technology Maple Grove, MN 1979 80 3O
Stratacomm San Jose, CA 1986 154 30
FTP Software North Andover, MA 1986 93 40
Trident Microsystems Mountain View, CA 1987 106 90
Platinum Technology Oakbrook Terrace, IL 1987 96 21
[MRS Stamford, CN 1981 81 28
Biogen Cambridge, MA 1978 149 61
Vicor Andover, MA 1981 115 28
Xyplex Boxborugh, MA 1981 77 28
Artisoft Tucson, AZ 1982 107 29
Marcam Newton, MA 1980 172 30
NetFrame Systems Milpitas, CA 1985 89 31
Lattice Semiconductor Hillsboro, OR 1983 144 43
Progress Software Bedford, MA 1981 139 57
Network Computing Devices Mountain View, CA 1988 160 28
Medisense Waltharn, MA 1981 140 63
Cheyenne Software Roslyn Heights, NY 1983 98 48
Avid Technology Tewksbury, MA 1987 113 42
DOVatron lntemational Boulder, CO 1987 132 30
Shaw Group Baton Rouge, LA 1987 113 31
United States Filter Palm Desert, CA 1986 148 25
Wall Data Kirkland, WA 1981 101 29
Corrpro Medina, OH 1993 126 29
Integrated Circuit Systems Valley Forge, PA 1991 94 44
Tricord Systems Plymouth, MN 1987 81 27
Cyrix Richardson, TX 1988 125 48
Asanté Technologies San Jose, CA 1988 80 25
Xircom Calabasas, CA 1988 131 43
Signal Technology Sunnyvale, CA 1980 93 25
Dialogic Parsippany, NJ 1983 127 85
IDEXX Laboratories Westbrook, ME 1983 126 25
Chipcom Southborough, MA 1983 161 40
Quicktum Design Systems Mountainview, CA 1987 55 26
Bell Sports Scottsdale, AZ 1989 116 29
Auspex Systems Santa Clara, CA 1987 83 25
Amtech Dallas, TX 1983 61 25
Microdyne Alexandria, VA 1991 101 35

 

94

Gupta Menlo Park, CA 1984 64 51
Nature’s Sunshine Products Provo, UT 1976 127 27
Frame Technology San Jose, CA 1986 72 26

DESCRIPTIVE STATISTICS ON RESPONDING BORN-GLOBAL FIRMS (n = 122)

Variable

\Il

'V2

'V3

'V4

V5

'V6

‘V7

V8

‘V9

'V10
\Ill
‘V12
‘V13
'V14
‘V15
V16
V17
V18
V19
V20
V21
‘V22
V23
V24
V25
V26
‘V27
V28
V29
V30
V31
V32
V33
V34
V35
V36
V37
V38
V39
V40
V41
V42
V43
V44

Mean

7583

mmppmmmew»ppwmbhmmmwhwmmm

.80
.00
190.

82.

25.

86.

26.
.19
.39
38.
22.
23.
26.
25.
31.
.33
.48
.56
.49
.16
.33
.75
.98
.71
.67
.21
.53
.68
.45
.41
.34
.32
.14
.18
.71
.15
.98
.59
.19
.43
.39
.17
.60
.03

21
91
55
11
61

09
80
98
43
98
35

29

31

m H H N H H

S.E.Mean

.29
.00
.75
.40
.13
.36
.81
.54
.77
.72
.86
.01
.92
.67
.53
.04
.12
.07
.10
.14
.15
.17
.12
.24
.13
.14
.13
.13
.12
.14
.13
.13
.13
.20
.14
.03
.12
.00
.13
.12
.18
.16
.15
.14

APPENDIX 3

Kurtosis
—1.

13.
.36
.17
.94
.30
.96
.60
.22
.44
.88
.31
.34
.87
.47
.50
.34
.43
.72
.63
.20
.43
.82
.86
.23
.60
.22
.13
.55
.64
.66
.66
.87
.84
.08
.83
.96
.43
.66
.17
.90
.38
.64

m h H

.h
H w_¢ m H p

H

95

05

83

S.E. Kurt
.43
.44
.43
.44
.43
.44
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.46
.44
.43
.43
.45
.43
.43
.43
.43
.43
.43

Range

1166.

00

.00

2197.
18
97.
23
98
38.
52.
89.

105.
105.

(h
O‘kaO
IblOO)

mmmmmmmmHmmmmmmmmmmmmmmmmhwmiﬂ

00

.00

00

.00
.00

00
00
00
00
00

.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00

122
122
121
122
117
122
121
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
108
117
122
122
115
122
122
122
122
122
122

 

Variable

V45
V46
V47
V48
V49
V50
V51
V52
V53
V54
V55
V56
V57
V58
V59
V60
V61
V62
V63
V64
V65
V66
V67
V68
V69
V70
V71
V72
V73
V74
V75
V76
V77
V78
V79
V80
V81
V82
V83
V84
V85
V86
V87
V88
V89
V90
V91
V92

.bwpmpmhwmwwmwhmbmppbbbhmmmpmpmmp.tsmmmabthHtt-‘sowmmppm

Mean

.30
.30
.52
.23
.44
.15
.93
.93
.89
.55
.85
.48
.43
.18
.34
.15
.70
.20
.78
.59
.02
.96
.32
.49
.04
.93
.70
.73
.57
.74
.52
.02
.45
.04
.00
.64
.16
.39
.12
.16
.93
.88
.02
.28
.07
.84
.80
.16

S.E.Mean

.13
.16
.15
.38
.11
.10
.61
.16
.12
.16
.22
.20
.18
.19
.17
.16
.18
.17
.16
.17
.19
.13
.12
.13
.14
.13
.13
.13
.13
.14
.13
.12
.13
.14
.15
.16
.10
.16
.15
.14
.16
.16
.11
.10
.11
.11
.12
.13

Kurtosis

hibdtn l

96

.04
.71
.41
.95
.05
.67
.17
.16
.09
.24
.22
.13
.34
.29
.32
.63
.76
.26
.55
.71
.73
.53
.87
.83
.46
.44
.50
.37
.21
.36
.27
.28
.28
.52

66

.09
.92
.87
.80
.65
.00
.13
.32
.29
.14
.03
.12
.04

8.3. Kurt

.43
.43
.43

.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43

Range

Otth U1lﬁ Ultﬁ O‘th O‘th O‘lﬁ O\¢h O\¢h O‘th O‘th Otth O‘th O\¢h O‘th O\(h O‘th O‘th O\¢h O\¢h Otth \ICDIF Ottﬁ Otth Ct

.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00

122
122
122

13
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122

Variable

V93

V94

V95

V96

V97

V98

V99

V100
V101
V102
V103
V104
V105
V106
V107
V108
V109
V110
V111
V112
V113
V114
V115
V116
V117
V118
V119
V120
V121
V122
V123
V124
V125
V126
V127
V128
V129
V130
V131
V132
V133
V134
V135
V136
V137
V138

Mean

h-th
¢>nb Ln e-tb Ln U11” Ultﬂ h) F‘kO 0‘1» ‘5 brCD ﬁbtb J5 ﬁrth Ottb U1tb J> Club 01.5 J> O‘iﬁ ‘5 Ulob Ulth J> Ullﬂ Ln #hok

.08
.64
.34
.25
.19
.67
.68
.43
.89
.86
.43
.57
.07
.31
.36
.72
.87
.02
.55
.86
.35
.34
.11
.39
.45
.47
.61
.49
.78
.49
.84
.54
.90
.51
.84
.37
.66
.25
.62
.11
.45
.82
.39
.23
.46
.60

S.E.Mean

.11
.11
.12
.12
.11
.11
.12
.13
.12
.09
.14
.14
.10
.13
.15
.10
.15
.09
.17
.14
.13
.14
.09
.12
.15
.14
.14
.12
.39
.13
.13
.15
.19
.60
.92
.13
.08
.10
.10
.13
.11
.15
.15
.13
.14
.15

97

Kurtosis

.16
.33
.49
2.11
.36
.22
-.26
.96
-.49
-.03
-.75
-.19
1.31
-.40
-.87
1.17
-.32
-.09
-1.02
-.40
.99
-.68
2.15
.59
-.59
-.46
-.O7
.00
.95
-.26
-.32
-.91
-.07
-.34
-1.08
-.39
1.81
-.30
2.69
.04
1.25
-.16
-.74
.04
-.O6
-.63

8.2. Kurt

.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.44
.43
.43
.43
.43
.45
.47
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43
.43

Range

(h O‘th O\<h Ulth O‘th 0‘15 O\<h O‘th Ulth 0\th Ulth O\¢h O\<h OSIh O)

\O h)
O\\O 0\(h Oth

(h O\Iﬂ O\(h Ulth 0\lﬂ Ullﬂ

.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
98.
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00
.00

00

122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
122
119
122
122
122
122
113
106
122
122
122
122
122
122
122
122
122
122
122

98

Variable Mean S.E.Mean Kurtosis S.E. Kurt Range N

V139 3.76 .17 -1.23 .43 6.00 122
V140 3.92 .16 -l.07 .43 6.00 122
V141 5.17 .14 .32 .43 6.00 122
V142 5.26 .12 1.84 .43 6.00 122
V143 5.61 .11 2.10 .43 6.00 122
V144 4.07 .16 -.98 .43 6.00 122
V145 4.59 .15 -.80 .43 6.00 122
V146 4.38 .15 -.50 .43 6.00 122
V147 4.57 .14 -.36 .43 6.00 122
V148 4.62 .14 -.23 .43 6.00 122
V149 5.36 .12 1.05 .43 6.00 122
V150 4.39 .15 -.60 .43 6.00 122
V151 4.87 .16 -.30 .43 6.00 122
V152 4.85 .16 -.29 .43 6.00 122
V153 4.93 .14 -.33 .43 6.00 122
V154 4.91 .15 -.45 .43 6.00 122
V155 5.38 .17 .26 .43 6.00 122
V156 4.92 .13 .24 .43 6.00 122
V157 3.59 .14 -.82 .43 6.00 122
V158 4.91 .14 .01 .43 6.00 122
V159 4.58 .14 -.02 .43 6.00 122
V160 5.42 .14 1.43 .43 6.00 122
V161 5.39 .14 2.03 .43 6.00 122
V162 4.48 .16 -.53 .43 6.00 122
V163 5.39 .16 .40 .43 6.00 122
V164 3.61 .20 —1.42 .43 6.00 122
V165 5.66 .13 2.30 .43 6.00 122
V166 2.64 .17 -.33 .43 6.00 122
V167 5.93 .12 1.27 .43 5.00 122
V168 3.86 .19 -1.47 .43 6.00 122
V169 5.25 .14 .27 .43 6.00 122
V170 5.19 .14 .27 .43 6.00 122
V171 3.89 .14 -.53 .43 6.00 122
V172 5.47 .11 1.67 .43 6.00 122
V173 5.48 .11 1.65 .43 6.00 122
V174 2.44 .14 .02 .43 6.00 122
V175 5.08 .15 .00 .43 6.00 122
V176 3.11 .17 -1.09 .43 6.00 122
V177 3.41 .16 -1.33 .43 6.00 122
V178 1.75 .13 1.51 .43 5.00 122
V179 2.55 .17 -.62 .43 6.00 122
V180 4.42 .20 -1.29 .43 6.00 122
V181 4.07 .17 -1.02 .43 6.00 122
V182 4.63 .58 -1.42 1.01 6.00 19

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