Internationalisation theory and Born Globals
ISSN: 1525-383X
Article publication date: 15 April 2020
Issue publication date: 21 October 2020
Abstract
Purpose
It has been claimed that Born Globals are incompatible with the Uppsala model, which is based on the firm having a maximum tolerable risk level. This assumption was used to explain observed incremental commitments, with further commitments being made as experiential learning reduces the level of risk faced. This study aims to show that adding a consideration of the role of expected value, including the effects of resource constraints, can reconcile the Born Global and internationalisation process literatures.
Design/methodology/approach
The theoretical arguments are supported by mathematical modelling of a firm pursuing expected value based on subjective beliefs.
Findings
While the effects of risk and expected value coincide when firms limit their downside risks by taking an incremental approach to commitments, other factors impacting on expected value can shift the balance of incentives towards earlier and more rapid internationalisation. For instance, some firms are specialised and have high costs of R&D, and so need to achieve early and rapid growth but face small home markets. While resource constraints can lead a firm to expand for some time in its home market before internationalising, the effect can be reversed in the case of the finance constraint for some firms.
Originality/value
The study shows how Born Global and internationalisation process literatures can be reconciled through a consideration of the effects of expected value on internationalisation decisions. It also provides a novel theoretical analysis of Born Globals.
Keywords
Acknowledgements
This paper forms part of special section “Contemporary issues in international business: the 7th reading-UNCTAD international business conference”, guest edited by Davide Castellani.
Citation
Wadeson, N. (2020), "Internationalisation theory and Born Globals", Multinational Business Review, Vol. 28 No. 4, pp. 447-461. https://doi.org/10.1108/MBR-10-2019-0123
Publisher
:Emerald Publishing Limited
Copyright © 2020, Emerald Publishing Limited