Factors affecting internationalization speed and scope

Due to the phenomenal importance of born global concept and their typical internationalization patterns led researchers to study drivers or influential factors of rapid internationalization especially in terms of their precocity and speed (Nayyar & Bantel, 1994; Ancona et al., 2001).

Although, there are numerous studies have been conducted proving theoretical and practical aspects, this area is still rather fragmented. While different names used in the of born global literature, two important characteristics of born global firms can be identified which distinguish from the traditional Internationalizers, namely speed and the scope of internationalization.

Concerning internationalization speed, it can be defined either as the period between the founded year and first international market entry and the period between first international market entry and the subsequent market entries (Cao & Ma, 2009).

The second criterion is the scope of internationalization which describes as number of export markets entered by the firms (Crick, 2009) or geographical expansion of the firm's operations. This may vary from case to case since it depends on how successful a firm can expand geographically.

On the other hand, the proportion of sales coming from foreign markets are further criteria to identify BGFs. When analysing BG literature, several authors have defined BGs in different manner. The first-ever definition of BGs is defined by McKinsey and Company (1993) and Rennie (1993) as firms commenced exports only after two years of establishment or 76% of total sales coming through foreign markets within 14 years of age. The same idea of starting exports within two years of founded year and quarter of revenue should be from foreign markets is to be fulfilled to classified as BGFs claimed by Knight and Cavusgil (2004).

As discussed earlier, BGs or rapid internationalizes can be identified as a way of speed and scope.

Therefore, plenty of academics tend to investigate and explain the kind of factors affecting rapid internationalization due to the popularity of the BG concept. For example, some authors identified key factors as competitive advantages, innovativeness, networking capabilities, and financially sound of the firm, besides the owner/manager vision and their knowledge (Laanti et al., 2007).

Also, some other factors like business strategy, network, and entrepreneurial orientation or international business mind-set of the founder are main drivers for rapid internationalization (Cao

& Ma, 2009). Moreover, scholars have also focused on how capable of gaining the right resources

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at the right time for rapid internationalization whereby special attention on the social capital of the entrepreneur and the team (Coviello, 2006; Gabrielsson & Sepulveda, 2013).

According to Preece, Miles, and Baetz (1998) industry specific factors may influence the early internationalization. For instance, if a firm belonging to high-tech sector, those firms may start early internationalizing more than traditional firms. However, there are also evidence that can be seen in the previous studies that authors shift their attention from industry-specific factors to entrepreneur specific factors as drivers of early internationalization. Regarding this perspective, firm international expansion is an important function that describes the internal capabilities of firms (McDougall et al., 1994; Zahra, Ireland, & Hitt, 2000; Autio, Sapienza, & Almeida 2000).

Accordingly, internal factors including financial resources, organizational capabilities, knowledge, and other physical assets act as key drivers for rapid internationalization especially for a large and established firm which are also act as barriers for entry for small firms. On the other hand, Oviatt and McDougall (2005) suggest that entrepreneur international knowledge and networks are heavily determining the internationalization speed that authors recognized as the mediating forces.

However, for this study, I use BG and INV literature to analyse which factors mostly affecting internationalization speed and scope especially concerning digital companies because this thesis is based on digital ventures. Out of several factors, the main important factors are described in a detailed manner from the next chapters onwards to get understand the reader which factors influence the rapid internationalization of digital firms. Here, this study focuses to discuss few concepts but is considered as crucial factors including networking, entrepreneurial specific factors, international business competence and digital competence on their internationalization outcomes.

on the other hand, this study was not intended to deal with some other factors such as business/location-specific factors, assets or resources, competitive advantages, etc. since mostly those factors related to non-digital firm's internationalization than digital firms.

18 Networks

No matter firm is traditional or digital, networking capabilities play a crucial role in international development. Even though, this study field relatively important there are not many studies concerning BGs internationalization through networks except few important studies (Rasmussan et al., 2001; Sharma & Blomstermo, 2003; Freeman et al., 2006; Mort & Weerawardena, 2006;

Zhou et al., 2007; Freeman et al., 2010). On the other hand, Coviello and Munro, 1997; Sharma and Blomstermo, 2003; Loane and Bell, 2006 explained as "growth takes place through the extension of the firm's network through investment in network positions and development of network relationships”. Also, previous studies (Crick & Jones, 2000; Yli-Renko et al., 2002) argue founders personal contacts and business networks are pivotal for faster internationalization.

Therefore, networks seem to be vital for born global firms but few have been studied on how these networks influence especially for digital firms. In the study of Cao and Ma (2009) argue that the role of networks strongly correlated with the rapid internationalization of a firm. Several authors have pointed out even niche firms can be a leader among their market segment as a result of strong networking capabilities (Simon, 1986; Calof, 1994; Kohn, 1997; Gomes-Casseres, 1997) and those firms expand their operations into broad geographic scope with precocity. The main reason can be identified as these firms use social and business networks in expansion. Hence, Johanson and Vahalne (1990) highlights the importance of establishing entrepreneurs and management social networks especially in the early and intense international expansion of a firm.

Concerning the previous literature on networking and globalization, it has a long history of Johanson and Mattsson (1998), "Network theory", Coviello and Munro (1995), "Networking for international market development" through to the latest studies of Koch and Windsperger (2017),

"Seeing through the network". These studies almost explain how those network capabilities utilize to rapid internationalization. For instance, Koch and Windsperger (2017) argues that firms can use the network as value creation in the digital economy. Even though number of studies limited in the BG literature in respect to networking, the recent studies have been indicated that networking is a pivotal factor for knowledge acquisition (Loane & Bell, 2006; Gabrielsson et al., 2008) especially for digital platforms (ex: Uber, LinkedIn, Airbnb) to leverage network effects for viral growth (Choudar et al., 2016). Few other studies also discuss the numerous benefits of using networks of born global companies. For instances, the firm may use networks when entering in to

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and developing foreign markets (Bell, 1995; Coviello & Munro, 1995; Evangelista, 2005). In addition, acquire the financial resources for new markets and products development (Coviello &

Munro, 1997), for gain access to lack of resources for a firm. Hence, it is assumed that networks pivotal for creating competitive advantages for a firm (Coviello & Cox, 2006).

Accordingly, Madsen and Servais (1997) discussed in their study how a firm achieves internationalization through networks as how to establish relationships in new countries. Here, the authors argue that networks can be established in two ways. First firm can develop relationships through those networks already known to the firm and the second way is that develop new networks through integrating existing relationships. These types of relationships are supposed to be individual level, business level or government level, or a combination of them. Therefore, different kind of relationships serves in different ways. In this respect, we can identify different types of networks including local and foreign networks (business networks) which is known as formal networks, then personal networks (non-business networks), or in other words informal networks and intermediary networks through intermediates (or agents) and social network relationships through professional ties. For example, those social networks are more professional (LinkedIn) than personal ties (Facebook).

Types of networks and internationalization

The previous literature identified that international networks largely determine the internationalization, but on the other hand, local networks are also playing a pivotal role as a forcing factor for small firms' internationalization (Maccarini, Scabini, & Zucchella, 2003).

According to well known "Network Approach" of Johanson and Mattsson (1988) argue that if firms already establish a strong position in foreign networks those relationships can act as a bridge to new market areas. Moreover, they pointed out business networks are more flexible than other types which can be uses to respond quickly and proactively with the rapid changes in the local and foreign market environment. As well as several other studies have supported the opinion that these international networks drive start-up firms to enter into foreign target markets easily rather than those who don't have enough network capabilities. Furthermore, Freeman et al. (2010) and Rialp-Criado et al. (2010) suggest the increasing relevance of global networks and alliances are pushing forces for small firms for seeking rapid international expansion.

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Another category is family and friend relationships which are generally known as personal (non-business) or informal networks. Many scholars stated those personal networks play a crucial factor in international market expansion among the entrepreneurs. For instance, those networking capabilities of the entrepreneur can replace with limited internal and external resources of SMEs (Havnes, 2003). Nevertheless, Toften and Hammervoll (2011) argue that developing networks and relationships are vital for SMEs. Therefore, the degree of internationalization of the firms is mostly defined by the firm's ability to develop and establishing networks. Moreover, few studies explained that SMEs utilize their personal or informal networks to grow opportunities and face the risks and challenges of internationalization. (Batjargal, 2003; Johanson & Vahlne, 2003; Chetty &

Campbell-Hunt, 2004).

Then another type of network is intermediary networks can be connecting buyers and sellers so that relationship works through the third party (Oviatt & McDougall, 2005). These relationships considered as indirect ties where a third person (agent) acts as an intermediate between the firm and the buyer. This type of relationship is useful when small firms lacking with networking capabilities in foreign markets. The study of Oviatt and McDougall (2005) states that these intermediate as "broker" who provide the link between buyer and the seller. In respect to intermediary relationships, local government also plays an important role where providing networking and internationalizing support for local companies with potential foreign markets. For instance, Business Finland act as a public actor that provides financing and foreign market area expertise for Finnish firms in various stages of internationalization. Also, FiBAN, a non-profit organization who provides support for Finnish firm’s internationalization. This is one of the effective ways of networking for born globals who have limited or zero networking capabilities in unknown markets.

On the other hand, social networks are more useful for early internationalization for SMEs, since personal networks might not provide reliable information all time when compared to professional ties (Goerzen, 2007). However, different authors have many views of social networks and internationalization speed as some argue that internationalization speed depends on how capable firms connected themselves with global communities (Gassmann & Keupp, 2007) whereas some others stated that sometimes it may negatively affect internationalization speed with having larger and extended social networks (Zhou et al., 2007). Nevertheless, those networks considered as quite

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trusted and allow owner to acquire knowledge on international markets (Peng & Heath, 1996).

Accordingly, Zhou et al. (2007) those social networks are positively benefited to accelerate the internationalization and lead to obtaining better performance in foreign markets. The authors highlighted three benefits of having social networks. For instance, those networks help firm to gain information about international market opportunities, get assistance and experiential learning, and also obtain trust and solidarity referrals.

However, in this digital era network effects are most visible in platform business than entrepreneur's social and business networks. Can you ever imagine Uber start operation without owning a single car and Airbnb start the business without even a single room? But, those businesses are valued in trillions today. The reason is the power of the platform and its network effects. Positive network effects are the main driver for value creation and competitive advantage of the platform business (Choudar et al., 2016). Therefore, it is understandable that digital platforms leverage network effects (Monaghan et al., 2020) to grow in foreign markets. This idea is not new or only for digital firms, because networks are relatively important to both traditional and non-traditional firms. The reason is that platform is consisting of a both domestic market, and foreign markets portfolio of users. Therefore, network effects are considered as key factor in the rapid internationalization of digital firms.

Moreover, there are numerous studies in this area explored how networks influences internationalization speed and intensity (Zhou, Wu, & Lou, 2007; Dimitratos, Plakoyiannaki, &

Pitsoulaki, 2010). However, the relationship between networks and internationalization scope received less attention on how firms enter into multiple foreign markets through networks.

However, Felzensztein et al. (2015) highlighted that firms are mainly focus on multiple foreign markets as they utilize both formal and informal networks. Those studies show that networks can help firms expand to more foreign markets as part of their internationalization strategy (Coviello, 2006; Jack, 2008; Dimitratos et al., 2010). Moreover, the studies of Zahra (2005) and Dimitratos et al (2010) explain that building a large range of networks helps the rapid internationalization of SMEs and at the same time enter into multiple markets.

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Nevertheless, Oviatt and McDougall (2005) propose three factors that influence the speed of internationalization. First, they argue that the strength of network ties is important as strong network ties are more durable, trust and need emotional investments whereas weak ties require fewer investments but yet friendly. Second, the size of the network which has both positive and negative impact on internationalization. The third factor is overall density of the network also important for rapid internationalization.

Furthermore, Oviatt and McDougall (2005) also propose three outcomes of having the direct or indirect cross-border ties influence the speed of venture internationalization positively. First, the authors argue that a firm can initially enter into foreign markets with high speed if the owner/manager has established both formal and informal networks once they discover an opportunity. Vice versa, internationalization speed might be slower if those ties are not established yet. Secondly, if the entrepreneur has a large network that leads to faster internationalization with the possibility to enter into more international markets. The third point here the author's highlight that is, strong cross- border networks provide support for internationalization since successful business operations mostly depend on the reliable interaction between the different actors in multiple foreign countries. Therefore, it is clear that established networks helps entrepreneurs to internationalize rapidly rather than those with no or low networking capabilities (Oviatt &

McDougall, 2005).

Entrepreneur specific factors

As described in the previous section, an entrepreneur's networking capability may lead to rapid internationalization. Hence, the entrepreneur plays a key role in business in an internationalization context as well as in terms of creating ideas to set up a business. In this respect the importance of an entrepreneur has been dealt in many studies that entrepreneur's international mind set, networks, capabilities, and experiences have a positive relationship with the international development of a company (Cao & Ma, 2009). The study of Morris and Lewis (1995) focuses on develop personal characteristics that leads to internationalization since there is a strong relationship with those characteristics with internationalization of SMEs. In this respect, authors refer that entrepreneur needs to develop such personal characteristics as having education and working in foreign countries, rich travelling history in multiple countries, foreign birth, multilingual (Simmonds &

Smith, 1968; Ditch, Kondo, Koglmayr, & Muller, 1984). For instance, people who lived abroad

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have a more export-orientated mind than others who don't live. Reuber and Fischer (1993) argue that although small firm in size move forward towards rapid internationalization if the top-managers have relevant international experience and those firms quickly adopt the multiple markets than their competitive firms. These capabilities can be considered as one of their main competitive advantages when approaching international markets.

But on the other hand, although the entrepreneur has all kinds of capabilities, it is important to identify their resource constraints (Laanti et al., 2007) especially in the initial stages of BGs (Gabrielsson et al., 2008). Yet, if entrepreneur has prepared with relevant qualities such as past experience, foreign education, foreign languages knowledge, and sufficient competencies may influence the internationalization speed and scope of the firms. Here the main idea is that prior experience about international markets supports entrepreneur to acquire experiential knowledge about international markets (Johanson & Vahlne, 1977).

In the study of Cao and Ma (2009) among plenty of factors affecting to fast internationalization of BGFs, entrepreneurs international experience is more significant when entering into foreign markets. These experiences include establishment of personal and business contacts abroad to get reliable information about foreign markets opportunities specially in the start-up stage. Moreover, network-specific factors as discussed in earlier section, is crucial for speed, precocity and niche positioning. In this respect, some entrepreneurs who found interesting companies like Airbnb, Uber, and Spotify continued to work through their capabilities which led succeeded in internationally and achieve rapid growth.

Entrepreneur and networking

Another aspect of entrepreneur-specific factors about internationalization is the networking capabilities of the entrepreneur/owner which is already discussed in the earlier section. However, it is important to discuss this area specifically with internationalization speed and scope.

International entrepreneurship has gathered special attention in the international business field as some authors highlighted the importance of size of the network towards internationalization. For instance, when entrepreneur has larger network leads to diverse internationalization (Coviello, 2006). The interesting finding is a firm with smaller teams (less than 3 people) do not have diverse networks hence few opportunities to expand their operations to outside the cluster but on the other

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hand, a firm with larger teams (more than three people) have more diverse networks whereby expand globally instead of serving domestic market (Felzensztein et al., 2015). The underline meaning of this finding is firms with larger teams use their networking abilities and led the owner to use those networks and information in foreign markets that hamper to expand to many regions.

On the other hand, Coviello (2006) argues that new firms do not necessity to follow gradual internationalization process if they can utilize their networks to grow as age doesn’t define the performance in international markets.

Furthermore, previous studies highlighted how entrepreneurial factors drive internationalization speed. For instance, innovative firms are expanding internationally quickly because technology play vital role in their internationalization process (Nassimbeni, 2001; Weerawardena et al., 2007;

Golovko & Valentini, 2011). The same idea is proved by Ramos et al. (2011) that technology supports in internationalization speed where by attracting external resources. On the hand, entrepreneurial behaviour in respect to opportunity-seeking accelerating the internationalization.

For instance, entrepreneur capabilities for identify opportunities in international markets, quick adaptation and establishment of relationship seen as influential factors for faster internationalization (Mort & Weerawardena, 2006; Karra et al., 2008).

The entrepreneur more likely to utilize their previous business experience to seeking new foreign markets. The ability of identification of risks in foreign markets, owner's international orientation, having international vision from the inception, and there by building connections (Ruzzier et al., 2006; Perks & Hughes, 2008) also act as enables for internationalization speed since the entrepreneur is central role for building and sustaining networks.

International business competence

Apart from networking and entrepreneur's international orientation in respect to rapid

Apart from networking and entrepreneur's international orientation in respect to rapid