Born Globals, Networks, and the Large Multinational Enterprise

Insights from Bangalore and Beyond

Shameen Prashantham

• Publisher: Routledge
• Year: 2015
• Print ISBN:
  9781138787797
• eBook ISBN:
  9781317659495
• Topic: Business
• Subtopic: Business General
• Index: Business

Focusing on international entrepreneurship, this research book explores the accelerated internationalization of young firms. Known variously as international new ventures (INVs) or "born globals," such firms have come to be viewed as legitimate actors on the global stage alongside large multinational enterprises (MNEs). However, the current approach taken by scholars – studying large MNEs and born globals separately – is questionable.

This book explores the crucial MNE/INV interface – a fascinating, yet under-researched relationship in international entrepreneurship. Drawing upon a decade of case-based research, the author argues that the MNE influence on born globals must be considered more carefully and suggests how new ventures can leverage MNE networks in the pursuit of their rapid internationalization. Furthermore, it demonstrates that, as firms enhance their levels of innovation, new pathways emerge via multinational corporation networks, a phenomenon vividly demonstrated in the emerging economy context of the Bangalore software industry.

This innovative research text will be of interest to academics, researchers, and advanced students with an interest in international entrepreneurship and business, strategy, innovation, and new ventures.

PART I Conceptual underpinnings

1 Networks and new venture internationalization

DOI: 10.4324/9781315766126-1

Introduction: the motivation for this book

The central argument of this monograph is this: international entrepreneurship (IE) research is due a shift in the conversation. Specifically, research on international new ventures (INVs) and born globals ought to take cognizance of the role of multinational enterprise (MNE) networks.

As Zahra (2005) pointed out when commenting on Oviatt and McDougall’s (1994) Journal of International Business Studies (JIBS) Decade Award-winning paper, the INV notion resulted in an important shift in the research conversation of the time, away from an exclusive focus on large (elephant-like, in Zahra’s colorful metaphor) MNEs to (gazelle-like) INVs, that is, new ventures that seek to derive “significant competitive advantage from the use of resources and sale of outputs in multiple countries” (Oviatt & McDougall, 1994, p. 49). There is no doubt that this was an important shift in the research conversation.

However now, over two decades on, it appears important to recognize that acknowledging the importance of INVs need not preclude acknowledging the continued existence – and dominance – of large MNEs in the global economy. This monograph seeks to argue for the prospect of INVs and MNEs engaging and thus potentially influencing new ventures’ internationalization trajectory.

During the past two decades IE research on INVs and born globals has attracted much attention (Jones, Coviello, & Tang, 2011; Oviatt & McDougall, 2005; Zahra, 2005). Signals of the domain’s prominence include special issues in leading entrepreneurship journals (Coviello, McDougall, & Oviatt, 2011; McDougall-Covin, Jones, & Serapio, 2014) and the prestigious Decade Award for two seminal papers on INVs and born globals (Knight & Cavusgil, 2004; Oviatt & McDougall, 1994) in the leading international business journal.

Although considerable progress has been made in highlighting and explaining the empirical reality that internationalization is not the preserve of the large MNE (Zahra, 2005), a deficiency in the extant literature is that rather little is known about how new venture internationalization is influenced by large MNEs. Some efforts have been made to identify the effects of INVs’ ties with key overseas customers (Yli-Renko, Autio, & Tontti, 2002), venture capitalists (Fernhaber, McDougall-Covin, & Shepherd, 2009) and domestic companies (Yu, Gilbert, & Oviatt, 2011), but the role of MNE networks in facilitating (or not) new venture internationalization is surprisingly under-researched. This is so despite research surfacing the prospect that new ventures do partner with MNEs. For instance, in Coviello’s (2006) pioneering and insightful inductive qualitative research on INVs’ network dynamics, one of her three INV cases had an enduring tie with a large MNE on which it “piggybacked” into international markets. But the specifics of this particular relationship were outside the scope of that study. Also, Prashantham and McNaughton (2006) described start-ups’ efforts to build ties with large MNE subsidiaries, but stopped short of theorizing the conditions under which those relationships lead to new venture internationalization.

The prospect that MNEs may proffer a conduit for new venture internationalization has been noted in the past (Acs, Morck, Shaver, & Yeung, 1997) but not developed in a meaningful way. Perhaps part of the reason that for this lacuna is that the INV literature was rather more preoccupied initially with differentiating between the internationalization of new ventures and that of established MNEs (Zahra, 2005). Yet, while useful progress has been made in INV research concerning the role of capabilities and networks, with the exception of scholars like Gabrielsson and Kirpalani (2004, p. 555) who advocate that “the born global must utilize large channels provided by multinational corporations,” the INV literature appears to “wish away” the role of the MNE. That is, little is known about the interface between INVs and MNEs. Given that the large MNE remains the most dominant actor in the global economy, it appears naïve to fail to consider the potential for MNEs to act as a conduit for INVs’ international growth, and, more importantly, to examine the determinants of this occurring.

This is a theoretically relevant lacuna in the literature because the innovation strategies and business model choices of large MNEs shape the institutional environment in which new ventures operate and, in turn, pose opportunities and constraints that new ventures must navigate in order to successfully internationalize. The time now seems ripe for a more concerted effort to incorporate the role of the MNE in our understanding of the INV phenomenon. In my earlier monograph I had called for IE research to consider “the potential role of MNEs as a source of social capital” for INVs (Prashantham, 2008, p. 126). I have reiterated this call more recently by pointing to “the global entrepreneurial ecosystems that are emerging, with multinationals at the nodes not only feeding the growth of a large number of new ventures, but also being nourished and served by the very firms that they help to grow” (Prashantham & Dhanaraj, 2015) and, furthermore, by arguing that: This slim monograph represents a preliminary step to address this call. It is structured in three parts:

Contemporary developments in firms’ strategy and technological prowess have meant that the phenomenon of new venture internationalization can no longer fail to explicitly take into account the influence of large multinational enterprises (MNEs) and the interfirm ecosystems that they orchestrate.

(Fernhaber & Prashantham, 2015, p. 2)

• Part I (Chapters 1 to 3) delves into and synthesizes relevant prior relevant literatures; Chapter 2 is particularly significant in that it draws on IB literature that IE scholars generally do not take into cognizance, at least explicitly.
• Part II (Chapters 4 to 7) provide some exploratory insights drawing upon case-study research in Bangalore and survey data on Indian software ventures, supplemented by brief case-studies from Cambridge, UK, and Zhongguancun, a high-tech district in Beijing, China.
• Part III (Chapters 8 to 10) discuss implications for research, policy, and practice and contain further case-illustrations from India, China, the UK, and the US.
• Finally, for academics keen to bring research-led insights into the classroom, a teaching case on INV–MNE collaboration is included in an Appendix.

International entrepreneurship: an overview

In a sense, IE research emerged from an en masse recognition of accelerated internationalization in certain firms, virtually from inception, and therefore by implication, a refutation of the gradual internationalization process depicted by Uppsala research in the 1970s (Johanson & Vahlne, 1977; Johanson & Wiedersheim-Paul, 1975). Many entrepreneurship scholars were pioneers of IE research (see in particular the contributions to the 2000 IE special issue in Academy of Management Journal: Autio, Sapienza, & Almeida, 2000; McDougall & Oviatt, 2000; Zahra, Ireland, & Hitt, 2000), and they have lent the domain solidity in examining the role of knowledge and networks, drawing upon research at the intersection between strategic management and entrepreneurship.

Scholars whose pioneering efforts seek to foster a research agenda at the strategy/entrepreneurship interface suggest that the internationalization of smaller firms is a topic that can be fruitfully examined from a strategic entrepreneurship perspective. Hitt, Ireland, Camp, and Sexton (2001) identify internationalization – along with external networks, resources/organizational learning, and innovation – as a naturally occurring domain in strategic entrepreneurship. Smaller firms lack the resources of their large counterparts. Yet many are able to successfully leverage limited resources in an enterprising yet sensible manner. It is therefore appropriate that research on the internationalization of small and new firms be approached from both strategic and entrepreneurial perspectives.

Hitt et al. (2001, p. 480) note, “Entrepreneurship is about creation; strategic management is about how advantage is established and maintained from what is created. … Wealth creation is at the heart of both entrepreneurship and strategic management.” Scholars have pointed out the need for an entrepreneurial mindset as they engage with risks and dangers presented by international expansion (Oviatt & McDougall, 1994). Equally, attention has been drawn to the importance of a strategic orientation (Welch & Welch, 1996) in the key choices to be made in terms of market selection, entry mode choice, and timing of entry. A strategic entrepreneurship perspective is consistent with internationalizing new ventures’ need to “punch above their weight,” as it were, and resourcefully use their limited means to internationalize (Zahra, 2005).

Other scholars echo the call for integrating strategic and entrepreneurial perspectives. Venkataraman and Sarasvathy (2001) colorfully argue that strategic management and entrepreneurship are incomplete without the other – much as Romeo would be incomplete without a balcony, and vice versa! Shane (2003) discusses the need for entrepreneurial strategies that synthesize opportunity recognition and strategic choice. McGrath and MacMillan (2000) call for strategists to adopt an entrepreneurial mindset. These two fields are therefore seen as offering mutually beneficial perspectives (Zahra & Dess, 2001).

The three other domains of strategic entrepreneurship identified by Hitt et al. (2001) can all be related to resourceful internationalization. There are certain resources that firms need to possess themselves. The influence of Penrose (1959), whose work inspired the resource-based view of the firm (e.g., Barney, 1991), is evident in the new venture internationalization literature. In particular, knowledge is seen as a vital resource (Wiklund & Shepherd, 2003). As Yli-Renko et al. (2002, p. 280) observe, Reflecting the wider literature that emphasizes the role of market and technological knowledge with respect to smaller firms (Wiklund & Shepherd, 2003), the internationalization literature documents the role of market knowledge as a regulator of resources (Johanson & Vahlne, 1977) and of technological knowledge as an enabling resource (Oviatt & McDougall, 1994). An important complementary perspective to the resource/knowledge-based view is that of organizational learning. As Hitt et al. (2001, p. 483) assert, “Knowledge is generated through organizational learning.” Both traditional (e.g., Johanson & Vahlne, 1977) and more recent (e.g., Sapienza, Autio, George, & Zahra, 2006) perspectives of internationalization highlight the importance of learning (Cyert & March, 1963). Linking this notion with that of external networks, a significant potential outcome for internationalizing firms is that “social capital facilitates learning” (Hitt et al., 2001, p. 482); in other words, “external networks can be valuable because they provide the opportunity to learn new capabilities” (Hitt et al., 2001, p. 481).

Given the importance of knowledge as a central value-adding resource of firms, it is not surprising that the current dominant theories on the internationalization process of new and small firms treat knowledge as a central enabling and driving resource.

A key manifestation of knowledge and learning, including via social capital, is in terms of innovation. The literature is replete with exhortations for firms to succeed at innovation. The significance of innovation is evident from Hitt et al.’s (2001, p. 481) suggestion that innovation “is considered by many scholars and managers to be cri...

Table of contents

• Cover
• Prashantham’s monograph
• Halftitle Page
• Routledge studies in international business and the world economy
• Title Page
• Copyright Page
• Dedication
• Contents
• List of figures
• List of tables
• List of boxes
• Foreword
• Preface
• Acknowledgments
• List of abbreviations
• PART I Conceptual underpinnings
• PART II Exploratory insights
• PART III Implications and directions
• Appendix: Teaching case
• References
• Index