Externalizing, internalizing and fostering commitment: the case of born-global firms in emerging economies.
| Verfasser | Glaister, Alison J. |
| Posten | RESEARCH ARTICLE |
Abstract This paper examines the HR practices of mature born-global firms from 29 emerging economies. Through an examination of large scale survey data the paper questions the extent to which firm size impacts the employment of temporary workers, the employment of skilled workers and the extent of employee training. Findings suggest that as firm size increases the use of temporary workers decreases, the number of skilled workers increases and the number of employees receiving training also increases. The paper highlights how born-global firms are able to shift away from externalized, market-based approaches towards more internalized, commitment-based approaches in order to survive, adapt and grow.
Keywords Mature-born * Global firms * Skilled labour * Temporary workers * Training levels * Emerging economies * Human resource management * Networks
1 Introduction
The last two decades have witnessed an unparalleled growth in the number of SMEs that internationalize from an early stage of their operations. These firms have been referred to as 'born global' (BG) because of their early and rapid internationalization and are commonly characterized as young, knowledge-intensive organizations that sell mainly innovative, self-developed technology-based products (Almor 2011, 2013; Aspelund and Moen 2012; Knight and Cavusgil 2004; Li et al. 2012). BGs are therefore defined as firms that almost from inception seek superior international business performance from the application of (knowledge-based) resources to the sale of outputs in multiple countries (Knight and Cavusgil 2004; Gabrielsson et al. 2008).
The rapid growth of these firms has been accompanied by a corresponding increase in research, with scholars examining the characteristics of BGs and their entrepreneurs (Evangelista 2005; Kalinic and Forza 2012; Odorici and Presutti 2013; Rasmussen et al. 2012; Spence et al. 2011), the challenges they face in their channel selection(Gabrielsson and Gabrielsson 2011; Gabrielsson and Kirpalani 2004), the role of knowledge in the internationalisation process (Gassmann and Keupp 2007; Nordman and Melen 2008; Presutti et al. 2007), the reasons why BGs are able to internationalize so quickly and from an early stage (Rialp et al. 2005; Taylor and Jack 2013; Zou and Ghauri 2010), the relationship between entry mode patterns and competitive advantage (Zhang and Dai 2013; Gassmann and Keupp 2007), the impact of financial management on BGs (Gabrielsson et al. 2004), the role of trust and contracts (Blomqvist et al. 2008) and the important roles played by marketing and IT functions (Zhang et al. 2013; Evers et al. 2012). As this body of knowledge consolidates it is impoitant to understand how mature BGs succeed and the practices that underpin their long-term growth. In this context the human resource management practices employed by mature BG firms remain under-researched.
The study seeks to fill this important gap and considers key HR practices including the use of contingent labour, the recruitment of skilled labour, and the extent of employee training. While these selected practices do not embody a comprehensive set of HRM practices, they have been examined in several prior studies to evaluate HRM in MNEs (Edwards et al. 2010; Tregaskis and Brewster 2006; Sahadev and Demirbag 2011).
This paper is innovative in several ways: it is the first to focus on mature BGs operating in an emerging market context. Our particular interest in mature BGs is novel and is justified by the fact that the prior literature on the topic provides insights only into the international behaviour and characteristics of traditionally known born global firms. Second, the paper is unique in its examination of HRM practices utilised by mature BGs and in particular makes a strong case for the need for incumbent BG managers to design and implement an effective training policy in line with their growth needs.
The paper is structured as follows: first, the theoretical background underpinning this study is discussed and hypotheses are developed. This is followed by an examination of the research methods and data analysis techniques employed. The results of the study are then presented and the main findings discussed. The concluding section discusses the theoretical and managerial implications of the study and proposes avenues for further research.
2 Theoretical Background and Hypotheses Development
2.1 Knowledge-based View and Born Global Firms
The knowledge-based view regards firms as knowledge generators and integrators (Grant 1996; Kogut and Zander 1992). A firm's ability to create value hinges largely on sets of intangible, knowledge-based resources (Leonard 1998; Nonaka 1994). Firms can generate higher than average performance if they possess value-creating organizational knowledge which is relatively rare or idiosyncratic and difficult to substitute. The knowledge-based view has been used to examine the internationalization of smaller born-global firms (Autio 2005; Johanson and Vahlne 2006; Park and Rhee 2012). Essentially, the resources of a small and medium-sized enterprise (SME) can be reduced to knowledge as the single intangible resource (Chetty and Wilson 2003; Gassmann and Keupp 2007). Nordman and Melen (2008) distinguished two types of knowledge pertinent to a firm's internationalization, namely international knowledge and technological knowledge. BGs rely greatly on technological knowledge to develop their internationalization activities (Efrat and Shoham 2011; Kim et al. 2011; Li et al. 2012). Building upon this argument, one recent study found that BGs tend to internationalize rapidly into markets which are ready to adopt their technology (Freeman et al. 2012). Consequently, they usually seek culturally proximate markets to exploit economies of scale and to establish a revenue stream as quickly as possible. BG managers can use both pre-existing and newly formed relationships to quickly and proactively develop new knowledge for rapid commercialization of their products (Freeman et al. 2010).
One distinctive feature of BGs is their rapid internationalization process (Hashai and Almor 2004; Hewerdine and Welch 2013; Wickramasekera and Oczkowski 2006). The knowledge-based view can play a crucial role in explaining this important feature. Almor and Hashai (2004) demonstrate that BGs still exhibit sequential internationalization, but at a faster pace than the Uppsala model predicts (Johanson and Vahlne 2006). BGs use more complex foreign market servicing modes, internationalize different activities, and enter psychically distant markets (Almor and Hashai 2004). The accumulated knowledge base associated with foreign experience helps to explain the internationalization route of BGs. Hashai (2011) argues that BG firms stick to one dominant internationalization path, either expanding geographic scope or intensifying the extent of their foreign operations. We argue that knowledge accrual has an important bearing on the chosen internationalization path.
Knowledge is considered central to the internationalization of BGs. Upon entering foreign markets BGs may recognize that the knowledge they possess does not meet the knowledge needed for successfully operating the foreign business venture. BGs perceive more procedural barriers during their ventures and struggle to communicate with their foreign customers and require financial, technological and marketing support from partners that often fails to transpire (Hewerdine and Welch 2013, Uner et al. 2013). Evers et al. (2012) suggest that BGs develop regenerative capabilities by leveraging competencies both inside and outside the organization, and that these capabilities are developed through employee engagement. Thus, we argue that it is through leveraging HRM practices that BGs are able to develop the knowledge needed for successful market penetration. The next section discusses the importance of the organization's HR architecture.
2.2 Selecting the HR Architecture
Born globals rely extensively on a range of networks which provide the skills and expertise to help build and sustain legitimacy within the competitive environment (Evers et al. 2012; Ojala and Heikkila 2011; Sepulveda and Gabrielsson 2013; Smith et al. 2012). Vasilchenko and Morrish (2011) suggest that BGs utilise social and business network forms. The former influences market selection while the latter is central in gaining credibility in new markets. During the early stages of development, BGs adopt a more utilitarian approach to their networks and use them to secure funding, product knowledge, expertise and support for their international expansion (Sepulveda and Gabrielsson 2013, p. 7). However, over time, BGs focus on reducing their external resource dependence and develop new internal competencies and enhanced branding and reputation. It is this new internal knowledge development that enables BGs to use their networks in more strategic ways. According to Sepulveda and Gabrielsson (2013), BGs reach a point where these network relationships hinder further development and expansion, and the more a BG develops its internal resources, the more choice it has over how it balances externalization and internalization decisions. At this latter point, BGs' skill requirements become more specialist in nature (Ojala and Heikkila 2011), thus prompting the internal development of resources to establish a reputation and accumulate operational knowledge in order to engage in areas that were previously beyond their internal resource capacity (Coviello and Cox 2006; Hite and Hesterly 2001; Gabrielsson et al. 2008). The emphasis is placed on human capital: talent attraction, retention and employee flexibility (Karra et al. 2008).
The initial dependence on networks and the gradual shift to more internalization suggests a need for BGs to focus on developing an appropriate HR architecture. Lepak and Snell (1999) identify four key HR approaches according...
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