How Do You Account for the Rise of the Born Global Essay

Since 1980s, along with the development of economic globalization, there is a new form of enterprise internationalization in the global range which called Born Global enterprises. This type of firm normally engages in significant international activity and promptly starts penetration to the international market from its establishment. But more remarkably, those Born Global firms get involved in international market and participate in international competition without any previous experience. The first purpose of this paper will focus upon the explanation of the reasons for the rise of Born Global based on relevant theoretical studies and characteristics. The second section of this paper provides a selective example of Chinese Born Global firms which focus on explain and analyse the reasons for emergence of Born Global phenomenon and assess the influence and benefits to the development of internationalization on Chinese small and medium-sized enterprise( SMEs). An Explanation of Born Global Characteristics based on Typical Examples The Born Global firm is defined as â€Å"a business organization that, from inception, seeks to derive significant competitive advantages from the use of resources and the sale of outputs in multiple countries† (Oviatt and McDougall, 1994, P. 49). While Knight and Cavusigil (1996) think Born Global refers to those small technology oriented business that engage in operating international markets since it has been in early stage of being established. Therefore, from the stated definitions above, we can get basic characteristics of Born Global. Furthermore, there is a variety of reliable samples for Born Global which reveal that the typical characteristics of Born Global. For instance, History and Heraldry is an England company that specializes in gifts for history buffs and those with English ancestry. History and Heraldry was selling in 60 countries, with exports generating about 70% of total production. The biggest markets the firm target in are France, Germany, Italy, Spain, and the United States (Cavusgil and Knight, 2009). Another example, Cosmos Corporation Inc. s a young company in US that produces telescopes and various optical devices. Cosmos has begun selling its products in Japan and Europe since it has been founded for a few years. Moreover, the firm had expanded its scales to 28 countries around the world soon after that (Knight and Cavusigil, 2009). Thus, from previous examples, we can see that companies conduct international business at or near their founding and have engaged in international business throughout history and gain competitive advantages by seeking a wide range of resources located around the world. Furthermore, Born Global firms are characterized by limited financial and tangible resource. The Reasons for the Rise of Born Global Since the early 1980s, international business rapidly developed which is initially facilitated by the globalization of markets. Historically, the most internationalization business appeared in advanced-economy countries such as North America and Europe, Japan. However firms today increasingly target emerging market, such as Brazil, China, India, Mexico (Wall, Minocha and Rees, 2010). As there are substantial market opportunities even in developing countries, meanwhile companies seek growth via market diversification and gain economies of scale in production and marketing, basically most Born Global firms achieved considerable success in international business early in their development. In the last decades, internationalization was in the field of large multinational enterprises (MNEs), however, globalization trends and high technology have facilitated the emergence of born global firms in recent years. The appearance of plenty of Born Globals helps to reshape the global economy; these firms tend to be formed by entrepreneurs with a strong international outlook and managers regard the world as their marketplace, normally emphasize international market skills. Integration and growing interdependence of national economies have both facilitated. In addition, the national governments tend to reduce trade and investment barriers also facilitated the internationalization of more firms. Therefore, the emergence of Born Global firms becomes an important trend. Secondly, the modern information technology is essentially making company internationalization cost-effective. The internet provides databases, references, and private system which rapidly increased the ability to internationalize and target numerous countries simultaneously (Zou and Cavusgil, 2002). Thirdly, enterprise founders have strong entrepreneurship; this is an important reason for the rise of Born Global enterprises. As the enterprise will face more risks and uncertainty than the omestic market when it enters into international market, therefore, only those with strong entrepreneurship will take risks of internationalized operation and seek various resources to create competitive advantages, and realize international strategy. Again, Enterprise management team with sufficient international management experience and knowledge lay the foundation for the rise of Born Global. Moreover, this would relatively reduce the risks and uncertainty for entering the international market which improve the success probability of international business. Meanwhile, those entrepreneurs are more confident for internationalization, therefore it is naturally for such enterprises choose involved into international market after establishment. Finally, the diversification of products and markets create advantages for the formation of Born Global enterprises (Andersson and Wictor, 2003). Along with the development of economic globalization, the consumers’ demand trend to homogeneity in the world region which makes easier to sell the same products in different countries and regions. The Reasons for Emergence of Born Global Firms –Taking China as an Example There is an example of Zhejiang Born Global firms which indicates the motives of Born Global enterprises. Yang (2007) thought that the entrepreneurship, organizational learning and the enterprises network are the initial causes. Zhao (2004) demonstrated the importance of the global economy, niche market, technology improvement, and the implicit sensitivity. Comparing with the Born Global firms oriented high technology abroad, most Zhejiang Born Globals focus on the traditional industry because of their traditional inheritance. Basically, the motives of Zhejiang Born Global firms is attributed to the unique entrepreneurship, the network of business globally, the precise niche market, and technological development. Firstly, Zhejiang is famous for its private economy in its inception and booming stage, and the innovation is key factor of the Zhejiang entrepreneurship. Moreover, the core competency of Zhejiang is being good at seeking market opportunity and starving for change which create advantages for the formation of Born Global. Above all, the entrepreneurs are scattered in government administrative departments, private owned firms who are talents for Zhejiang economic development, so as lead the small and medium-sized born global enterprise. Secondly, the niche market is crucial for the Zhejiang born global enterprise (Robinson, 1986). As limited natural resource and size, it is difficult for Zhejiang small and medium-sized enterprises to compete with the large scale rivals. Therefore, they normally choose niche market at the early stage and concentrate on international market, then expand their market frontier, afterwards build the competitive barrier, and finally, achieve competitive advantage in global market by stages. Most importantly, these firms focus on the specific industry and reply on the persistence to obtain the profitable market gradually. Thirdly, the previous international management background is very helpful for the Born Global enterprise. Once the firm gets involved into international markets and obtain much international experience, they start to employ top foreign talents to conduct research and development in order to extend the global market within expected period. On the other hand, Zhejiang government provided favorable policy to encourage and attract overseas to start their business in Zhejiang during the last decades, which ensure the firms booming in the international market rapidly. Finally, the Zhejiang Born Global enterprise is famous for its extensive enterprise network which refers to interpersonal relationship (Freeman, Edwards and Schroder, 2006). This kind of relationship network promotes their business. For instance, after contacting with Wenzhou businessman who has settled down abroad, Wenzhou lighter will march into international market and get the most shares in light industry soon, which makes the company dominate comparative advantages over the rivals. Furthermore, Zhejiang Born Global enterprises normally set up overseas industries zone led by powerful firms and attract other enterprises to settle down in order to avoid the marketing risk. However, the Zhejiang Born Global enterprise not only makes full use of current network, but also develop new network to make the global network perfect. Therefore, the more extensive network they have, the more resources they share. Conclusion With the further development of opening up and reform policy, more and more Born Global enterprises have been found in China and many other countries and regions. It is of practical significance to study the characteristics and the reasons for the emergence of Born Global phenomenon, which provide eference for small and medium-sized enterprises (SMEs) to march the international markets. Furthermore, along with economic globalization and marketing integration, the Born Global enterprises, emerging as a new kind of enterprise, have become popular and attractive recently. Based on the explanation and analysis of Born Global phenomenon above, the main forming reasons of the Born Global including entrepreneurship, niche market, international management experience, and extensive enterprise network. There are crucial factors for the rise of Born Global. China has joined the WTO, economic globalization, consumption personalized and the development of information communication technology which are indicating the business opportunities for small and medium-sized enterprises internationalization. In addition, Chinese government officials and departments are beginning to make policies for supporting the small and medium-sized enterprises (SMEs) internationalization in order to encourage the SMEs engaging in international competition and improving the international competitiveness.