Internationalisation theory and Born Globals

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.