Computation of the Reggeon Self-Energy

The decision in which market a firm should enter is one major part in the internationalization process. In the case of a high technology based start-up internationalization is necessary for business survival, hence the question in which market to enter as well.

Nordström (1991, p. 30f) argues that the global market increasingly becomes more homogenous referring to national requirements, technical standards and developments in communication, transport and information. Hence markets in general become global characterized by standardized conditions. It is obvious that this change has an impact on the market location approach of a firm.

So which market should a high-tech start-up enter? Is it better to join several countries at once, or is the stepwise process the wiser decision? This chapter treats several questions regarding evaluating the most adequate market location decision for high-tech start-ups. First, more general approaches are discussed, as the “Born Global”

phenomena and if this fits high technology based start-up firms. Afterwards concrete advice for entering the right location successfully is given.

4.3.1. “Born Global” phenomena

In chapter 3.1. the Born Global approach is touched upon, here this model is discussed more exactly in matters of high-tech start-up companies. The term Born Global cannot be constrained precisely, neither theoretically nor empirically, Rasmussen and Madsen (2002) describe it as an “umbrella” concept. Therefore all new established firms that are rapidly internationalizing are under this umbrella.

The term Born Global (McKinsey and Co., 1993) is a synonym for International New Ventures (Oviatt & Mc Dougall, 1994), Infant Multinationals (Rasmussen and Madsen, 2002) and also for High Technology Start-ups (Jolly et. al, 1992). Historically

considered this concept is not new, firms simply “leapfrog” (Hedlund and Kverneland, 1985) steps in the conventional stage approach. McKinsey coined the term “Born Global” and describes those companies as “firms that view the world as their marketplace from the outset and see the domestic market as a support for their international business.” (McKinsey and Co., 1993, p. 9) Some authors state that they are convinced that gradual internationalization is dead. (Cavusgil, 1994, p.18)

Now the question remains if it is a realistic and wise approach for a high-tech start-up starting international activities from their birth, by entering several countries at once?

The fact that the term Born Global stands for high-tech start-up is not sufficient for an informed decision.

Baronchelli and Cassia (2008) define seven factors that influence a firm in choosing the global approach. These at the same time illustrate why especially high-tech start-ups increasingly become Born Globals.

1. Drive and unstableness of company’s environment: many authors state that the changing environment drives firms to become a Born Global. Examples like falling trade barriers, improved information flows, faster communication, global sourcing, shortened life cycles of products, globalizing competitors and competition can be mentioned. (Rasmussen & Madsen, 2002).

Internationalization is seen as a strategy for decreasing risk, due to the fact that even international economic factors have an increased effect on the home market. (Andersson et al., 2004) The changed and more open environment makes it easier for firms entering international markets. (Madsen and Servais, 1997)

2. Domestic market: especially in the high technology industry the home market’s size is too small for achieving profits or paying off the investments made for the start-up’s product. Financial survival in this industry isn’t feasible without rapid internationalization. (Freeman et al., 2006)

3. Industry: companies that are active in high technology based industries are described as having available innovative skills, unique capabilities and resources

that are important in a global approach. (Knight and Cavusgil, 2004) The high-technology industry itself has a high level of globalization, which can be seen as a criterion for a global approach. Hence firms are not able to insulate themselves from foreign competition. (e.g. Andersson et al., 2004)

4. Knowledge existence: In the classic stage approach knowledge and experience are evaluated as decisive factors for internationalization. (Johanson and Vahlne, 1977) It is obvious that Born Globals are not able to improve these two factors before going global, as they internationalize from their birth. (Rasmussen &

Madsen, 2002). These decisive criteria can be achieved in other ways, through the founder’s personal knowledge and experience that this person has developed before the start-ups existence. (Laanti et al., 2007) Further knowledge sharing through cooperation with local and international networks makes it possible for a start-up gaining tacit knowledge that is necessary for internationalization.

(Freeman and Cavusgil, 2007)

5. Entrepreneur and management previous experience: Often Born Globals are founded by businessmen who have gathered international know-how before. In addition these persons have a wider business network and relationships available. Born Globals have to be observed differently, they “exist” longer than their founding day. Due to the entrepreneur’s relationships, experience and knowledge start-ups are able to internationalize from their birth onwards because internationalization qualification is developed before the formation day.

(Madsen and Servais, 1997)

6. Business’ innovativeness and innovative skills: Changing environment (for example global competition) leads to shortened product life cycles and increased innovation intenseness. (Karlsen, 2007) All these raise R&D costs but time for earning returns on investment is shortened too. Hence innovativeness is seen as a decisive factor in internationalization. Unique and qualitative high products and the competence of the high-tech start-up developing these are necessary criteria in a global approach. (Knight and Cavusgil, 2004)

7. Network links: Internationalization in isolation is not possible. (Madsen and Servais, 1997) Considering the different international market entry modes it is obvious that internationalization requires a network. For instance strategic

alliances with competitors or exporting with agents develop such a network.

This overcomes the lack of resources the high-tech start-up faces and makes a global approach possible.

These seven factors summarized by Baronchelli and Cassia (2008) clearly explain why high-tech start-ups are in the position to internationalize from the beginning. As a consequence the question, which foreign markets a high technology based start-up should enter is answered as well. Their market is a global one.

Beside all the positive aspects of the Born Global approach, it has to be analyzed from a critical perspective as well. Being a Born Global involves many risks for the high-tech start-up; hence this step has to be evaluated accurately, even though the competitors in high technology industry are global.

The next step in the internationalization strategy is determining how to enter these markets and afterwards the corresponding market entry timing has to be defined.