Global Start-ups and Born-Global Firms

More and more firms—even very small ones—have operations that bridge national borders soon after their founding. Thanks to the Internet and related information technologies (IT) that enable many of them, this new breed of firms began emerging in the 1990s and is dubbed “born-global” because their operations often span the globe early in their existence. A born-global firm, also commonly called a global start-up, is “a business organization that, from inception, seeks to derive significant competitive advantage from the use of resources and the sale of outputs in multiple countries.”^[1] A common characteristic of such firms is that their offerings complement the products or capabilities of other global players, take advantage of global IT infrastructure, or otherwise tap into a demand for a product or service that at its core is somewhat uniform across national geographic markets. While many firms may fall into this category by virtue of their products, the operations and customers of born-global firms do actually span the globe—exploiting a combination of exporting and foreign direct investment.

Logitech, the computer peripherals company, is perhaps one of the best early examples of a successful born-global firm.^[3] Focusing first on the PC mouse, the company was founded by two Italians and a Swiss. The company’s operations and research and development were initially split between California and Switzerland, and then it expanded rapidly with production in Ireland and Taiwan. With its stylish and ergonomic products, Logitech captured 30 percent of the global computer mouse business by 1989, garnering the start-up a healthy $140 million in revenues.

Courtesy of Logitech Inc.

Its innovative and stylish products have made Logitech a global leader in computer peripheral devices.

Today, Logitech is an industry leader in the design and manufacture of computer peripheral devices; has manufacturing facilities in Asia and offices in major cities in North America, Europe, and the Asia-Pacific region; and directly employs more than 6,000 people worldwide.^[4]

Skype Limited is a more recent born-global firm. You may already have its software on your laptop or desktop computer to take advantage of this free Internet phone technology, called voice-over Internet protocol, or VoIP.^[5] At any point in time, there are millions of users logged in on Skype; the program and service has made such a strong impression that the term “Skype me” has replaced “call me” in some circles. Niklas Zennstrom and Janus Friis, the same two entrepreneurs who invented KaZaA (one of the most popular Internet file-sharing software programs in the world) also developed Skype. Initially founded in Sweden as Tele2, Skype is now headquartered in Luxembourg and has offices in Europe, the United States, and Asia. Skype and has received significant funding from some of the largest venture-capital firms in the world.^[6] Both Logitech and Skype share certain characteristics—ripe conditions for global start-ups, what it takes to build them, and what it takes to make them succeed. Skype’s video calling capabilities have enabled businesses to connect with team members around the world economically and efficiently.

Courtesy of Skype Limited 2011.

Two Phases of Global Start-up Assessment

Global start-ups need to pass through two phases. If you can answer yes to all or most of the questions from Phase 1, then you need to be sure that you can quickly build the resources and capabilities identified in Phase 2. Research has shown that firms unable to connect the dots in Phase 2 are forced to cease operations after a short, but lively, period of time.^[7]

• Phase 1: Should my firm be a global start-up?
  1. Do I want to build the brand around the world right from the start?
  2. Do I need human resources from other countries for my company to succeed?
  3. Do I need financial capital from other countries for my company to succeed?
  4. Will my target customers prefer the services of my company to the services of my competitors if I am global?
  5. Can I put an international system in place more quickly than domestic competitors?
  6. Do I need global scale and scope to justify the financial and human capital investment in the venture?
  7. Will a purely domestic focus now make it harder for me to go global in the future?
• Phase 2: Now that you have committed to going global, here is what you need:
  1. A strong management team with international experience
  2. A broad and deep international network among suppliers, customers, and complements
  3. Preemptive marketing or technology that provides you with a first-mover advantage with customers and can lock out competitors from key suppliers and complements
  4. Strong intangible assets (e.g., both Logitech and Skype have style, hipness, and mindshare via their brands)
  5. The ability to keep customers locked in by linking new products and services to the core business while constantly innovating in the core product or service itself
  6. Close worldwide coordination and communication among business units, suppliers, complements, and customers

So why is the introduction of global start-ups important at this point in your international business education? One reason is the increasing prevalence of global start-ups, driven in part by globalizing consumer preferences, mobile consumers, large global firms, and the pervasiveness of the Internet and its effects. The other is that global start-ups are very relevant to the subject of intrapreneurship, which you will learn about in Section 11.5 “From Entrepreneurship to Intrapreneurship”.