Strategic decision-making of a born global: a comparative study from three small open economies.
| Verfasser | Nummela, Niina |
| Posten | RESEARCH ARTICLE |
Abstract This paper extends current understanding on international growth process of born global firms from the perspective of strategic decision-making. The data were collected from three software companies in Finland, Ireland and Israel both in real-time and retrospectively, and data triangulation was employed to increase the validity of the findings. With a longitudinal approach, we captured the dynamics of the post-entry international growth process and the critical events that act as decision-making triggers. The decision-making of born global firms seems to be characterised by alternating periods of causation- and effectuation-based logics. Triggers for amending the logic include, for example, change of key persons and the search for external funding. Co-existence of the two decision-making logics is possible, due to different degrees of uncertainty in market and technology or multiple decision-makers involved. The contribution of the study is threefold: first, it addresses gaps in international entrepreneurship research by describing how born global firms make strategic decisions and who are involved in the decision-making. Second, it identifies critical incidents which trigger a change in the decision-making process of a born global firm. Third, it provides alternative insights to why decision-making logic may change or why two decision-making logics may co-exist.
Keywords Born global * Decision-making * Effectuation * Causation * Software * Longitudinal study
1 Introduction
The rapid international growth of a born global firm can be considered a challenge for decision-making. As stated by Chetty and Campbell-Hunt (2004, p. 63), "the born-global approach emphasizes the role of strategy in internationalization, because both the focus and the pace of internationalization are dictated by competitive imperatives to seize a leading position in niche or emerging markets". Furthermore, entrepreneurs and managers in these types of firms are confronted with high levels of unpredictability and ambiguity combined with a considerable time pressure--a really challenging environment for decisions. In this context the findings of earlier studies on decision-making in internationalisation--earliest dating back already to the 1980s--are hardly applicable. Unfortunately, there are only a few previous studies on born-global firms' decision-making and their exploitation of international niches, and their findings are fragmented (Gabrielsson and Gabrielsson 2013; Dimitratos et al. 2011; Rialp-Criado et al. 2010; Jantunen et al. 2008).
In fact, the great majority of international entrepreneurship studies have focused on the foreign entry strategies and patterns of internationalization, i.e. outcomes of decision-making (Keupp and Gassmann 2009). However, interest in decision-making has been increasing and a number of studies have been published, often focusing on the drivers of decision-making; particularly the entrepreneurial orientation of these companies has been studied extensively (Jones et al. 2011). Thus, we can conclude that less research has been devoted to the decision-making process or the managerial decision-making, although it has been called for (Rialp et al. 2005). To address this gap, this study examines the strategic decision-making of born global firms and answers the following research questions:
* How does the decision-making process evolve and who are involved?
* How are the decisions made; that is, what kind of decision-making logic is applied?
* What are the critical events which trigger a change in the decision-making process?
The born global firms studied here are international new ventures that recognised and exploited international opportunities at or soon after inception. Previous research tends to regard this growth either as a rationally planned process steered by key actors or as a process of unexpected discovery in which opportunities are co-created with other actors (Andersson 2011). Independent of the chosen perspective, critical events emerge over the process that require strategic decisions, which cut across organisational functions and have a substantial long-term impact on company performance (Eisenhardt and Zbaracki 1992). However, the decision-making process, which lies at the core of this study, and resultant decision outcomes can follow different logics due to the fact that decision-makers differ in terms of how they perceive the future, take action, evaluate risks and resources and address uncertainty (cf., Sarasvathy 2001).
Admittedly, strategic decisions are always context-specific and therefore, to enable stronger conclusions to be drawn, it is wise to limit our investigation. Entrepreneurship in general has been characterised with uncertainty, goal ambiguity and enactment (Sarasvathy 2004) and these characteristics are particularly evident in high-tech industries, which have also been the home of a number of international new ventures (Autio et al. 2011). Consequently, the software industry was considered an appropriate context for this study. High industry growth rates in this setting provide new entrants with opportunities to position themselves favourably in global niche markets. However, the highly volatile markets that often advance rapidly and in unexpected ways also contain a number of challenges such as discontinuous changes in the competitive landscape and customer needs (cf., Bourgeois and Eisenhardt 1988) that require strategic decisions.
Given the inconclusive and contradictory nature of earlier findings, an exploratory approach was chosen and the international growth of three software companies from Finland, Ireland and Israel was examined. The context of a small open economy was chosen due to the significance of knowledge-intensive born global firms for these economies. Data were collected both in real-time and retrospectively, and data triangulation was employed to increase the validity of the findings. With a longitudinal approach, we were able both to capture the dynamics of the post-entry international growth process and critical events that act as triggers for strategic changes and even turnarounds.
The findings of this study broaden our understanding of the born global firm's international growth and strategic decision-making. Based on a rich, longitudinal data set it provides an in-depth description of how born global firms make strategic decisions and who are involved in the decision-making. Focus on the decisionmakers is an extension to existing knowledge as earlier studies on internationalization have often concentrated on analysing decision-making on the firm level and disregarded the individual (Schweizer et al. 2010). We found that besides the CEO, also founders, board members and the middle management may have a decisive role in the decision-making. Additionally, the study examines how the decision-making of these companies evolve over time and identifies the critical incidents which trigger a change in the decision-making logic. By applying effectuation theory (Sarasvathy 2001), we find support that born global firms' decision-making is characterised by alternating periods of causation- and effectuation-based logics. This reinforces the findings of some earlier studies (Kalinic et al. 2014; Gabrielsson and Gabrielsson 2013) but also provides additional insights on the co-existence of the two logics. For example, our findings suggest that the parallel use of causation and effectuation logic may be due to different degrees of uncertainty in market and technology or the role of different decision-makers. Furthermore, the study identifies a number of critical events which may trigger a change in the decision-making logic, including, for example, change of key persons and the search for external funding. However, whether causation or effectuation logic is applied in decision-making in these situations is affected by contingency factors, such as international business experience of the decision-maker and environmental conditions.
In sum, this study extends our understanding on born global firms' strategic decision-making and thus contributes to the field of international entrepreneurship. It also responds to the call for investigation of entrepreneurial internationalisation across countries (Jones et al. 2011) and thus adds to the small but growing number of studies on comparative entrepreneurial internationalisation (Terjesen et al. 2013). Applying a longitudinal research design is also a welcome deviation, as research on born global firms is dominated by cross-sectional studies (e.g., Rialp et al. 2005). In the following, we first lay out and justify our conceptual approach to the decision-making in born global firms. We then discuss our research design and the findings from the three case companies in Finland, Ireland and Israel. Finally, the discussion and conclusions will conclude the paper.
2 Decision-Making in Born Global Firms
Born global firms are not a "random group of firms" but are expected to build on more strategic thinking and decision-making, determined by a particular set of resources and capabilities and, therefore, having more endogenous than exogenous vision (Mudambi and Zahra 2007). Simultaneously, their decision-making is often expected to be based on intuition and limited information as the competitive landscape and windows of opportunity evolve very rapidly and "wait and see" (Bourgeois and Eisenhardt 1988) type of thinking is rarely an option. Combining these two expectations is not easy and, unfortunately, previous research offers very little information on how it is achieved in practice.
We know from earlier research on born global firms that the rapid international growth of these companies is orchestrated by managers responding with actions to changes in the company's internal and external context (Liesch et al. 2011). In a way, decision-makers act as an anchor between the environment and its effects within the...
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