Global Start-Ups

 Oviatt, B. M., & McDougall, P. P. (1995). Global start-ups: Entrepreneurs on a

With globalization and technological advances, competitive advantage has "tended to shift away from firms with large size and long experience toward firms with unique knowledge and swift response capabilities" - how global start-up companies are successful.

This article looks at global start-ups and examines how they are successful when they are international at inception.  Although it may seem like such companies need to take time in developing in order to create a well developed product or service that is time tested in its processes as well as experienced and knowledgeable in foreign markets, trade, cultures and laws, the authors claim that such competitive conditions are being disproved.  With globalization and technological advances, competitive advantage has "tended to shift away from firms with large size and long experience toward firms with unique knowledge and swift response capabilities".  In fact, the amount of start-ups that are global is increasing.  These firms achieve their aggressive growth objectives by "rapidly exploiting technological advantages, acquiring foreign technologies, and following clients into foreign lands".

In deciding whether a start-up should be global, the authors offer six questions based on the driving technological and competitive forces that those who are exploring such a venture should consider.  These six questions are also answered with the author's explanations and credible examples of global start-up firms that illustrate each.
The first question is:  Are the best human resources dispersed among various countries?  It is pointed out that certain countries and locations around the world are known for being superior for unique skills, such as the Japanese in their attention for detail in manufacturing and the US for their design of software.  This illustrates that firms must look globally in order to gain the best resources offered at the lowest prices.

Q2:  Would foreign financing be easier or more suitable?  What was found was raising financing domestically can be quite a challenge, especially within the US.  For instance, many firms believed the US to be less patient with shorter investment horizons.  European investors were cited as being more likely to take risks with start-up forms.  International financing overall could be a valued force in that it encourages the internationalization of new ventures because founders will easily consider moving their product/service into a foreign market that has invested it and in turn, this motivates foreigners to invest in ventures that they want in their home market.

Q3:  Do the target customers require a venture to be international?  Entrepreneurs who were interviewed about this were in agreement.  They believe that global start-ups are formed with much encouragement from the current and growing global demands of several markets.

Q4:  Will rapid worldwide communications lead to quick responses from competitors?  These days, information about almost any market is easily accessible due to swift and global communication and transportation.  

Q5:  Are worldwide sales required to support the venture?  Because global start-ups can gain more customers than a domestic firm, "worldwide sales may be needed to justify large R&D expenses and to effectively address the target market".

Q6:  Will domestic inertia be crippling if internationalization is postponed?  This is definitely a possibility because it will take great amounts of effort and time for large organizations to accomplish even without the possible resistance to change in adapting to be able to operate in foreign markets.  This is why the authors recommend that global start-ups be international from inception.

While success is not guaranteed in creating global start-ups, there are seven characteristics that are "most commonly associated with their survival and growth".  These include: 

A global vision exists from inception
Managers are internationally experienced
Global entrepreneurs have strong international business networks
Preemptive technology or marketing is exploited
A unique intangible asset is present
Product or service extensions are closely linked
The organization is closely coordinated worldwide

Since there are still only a small number of global start-ups, we have yet to gain a full understanding about them.  However, there is evidence to suggest that the number will be growing in the future and they will encompass a range of industries. Finally, the authors predict the next millennium to be "the first time when large numbers of new corporations are forced to be global from inception".

This article provides an interesting and insightful view into the future about global start-ups.  It suggests helpful tips for determining what types of firms should consider being a global start-up and characteristics for their success.

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