International Business Review: Heini Vanninen, Olli Kuivalainen, Luciano Ciravegna

G Model
IBR 1343 No. of Pages 15
International Business Review xxx (2016) xxx–xxx
Contents lists available at ScienceDirect
International Business Review

journal homepage: www.elsevier.com/locate/ibusrev
Rapid multinationalization: Propositions for studying born

micromultinationals
Heini Vanninena,* ,1, Olli Kuivalainena,c,1, Luciano Ciravegnab,1
a
School of Business and Management, Lappeenranta University of Technology, PL 20, 53850 Lappeenranta, Finland
b
King’s College, University of London, Strand, London, WCC2R 2LS, United Kingdom
c
The University of Manchester, Alliance Manchester Business School, Booth St W, Manchester M15 6PB, United Kingdom
A R T I C L E I N F O A B S T R A C T
Article history:
Received 27 October 2014 This study examines how so-called born micromultinationals multinationalize. Existing theoretical
Received in revised form 29 August 2016 frameworks do not capture the multinationalization of young and small firms because of the literature
Accepted 28 September 2016 gap separating studies on born globals and international new ventures from the research on
Available online xxx multinational enterprises. However, firms go beyond accelerated internationalization and engage in
accelerated multinationalization. Born micromultinationals invest and operate in multiple countries
Keywords: from, or soon after, their foundation. We argue that it is necessary to examine their smallness, newness
Micromultinationals and entrepreneurial nature, as suggested in the BG/INV literature, as well as to investigate why and how
Born micromultinationals
they invest abroad through the lenses of MNE theories. We discuss existing theories and examine them in
Internationalization
the light of four case studies of Finnish born micromultinationals. Our results show that the
Multinationalization
International new ventures organizational, locational and internalization approach and transaction costs economics for example,
Born globals have explanatory power for the FDIs conducted by born micromultinationals. We suggest that the
Networks multinationalization process of born mMNEs consists of commitment decisions; reconfigurations of the
International strategy value chain; and learning from, and creating and building trust with internal sources.
ã 2016 Elsevier Ltd. All rights reserved.
1. Introduction market, such as being able to benefit from global variations in

knowledge, skills and labour costs (Varian, 2011). They can conduct
Multinational companies of the 21st century are not necessarily their business around the world and around the clock across
large. At little or no cost, even the smallest business has access to multiple time zones (Varian, 2011). Many of them operate in
communications and computing innovations that were beyond industries in which the products are intangible and thus easily
their reach just a decade ago (Subramaniam, 2015). SMEs that transferable, such as the software domain.
operate like multinational enterprises in using high-commitment In our study we focus on born mMNEs, i.e. mMNEs that started
modes of entering foreign markets are called micromultinationals international operations soon after their foundation. We have
(mMNEs) (Coviello, 2015; Dimitratos, Johnson, Slow, & Young, formulated the following research question to guide this study:
2003), which, by combining virtual and physical networks, have How do born mMNEs multinationalize? A multinational enterprise
the potential to disrupt industries (Subramaniam, 2015). An (MNE) is, by definition, an enterprise that owns and controls value-
example of an mMNE is the Australian cloud-based business- adding activities in two or more countries (Dunning, 1989).
management software provider WORK [etc.] (www.worketc.com). Accordingly, multinationalization in this study is viewed as the
This young firm has 22 employees in five countries and eight process of becoming and further developing as a multinational
locations. company. In our opinion, a company becomes multinational (from
Why are these companies important? For one thing, mMNEs an international, export-based company) at the moment of its first
enjoy advantages that are unavailable to SMEs operating in a single foreign direct investment (FDI). However, this is not the end of the
process but marks the beginning of real multinationalization.
Studies that concentrate on born globals (BGs) and international
new ventures (INVs) tend to refer to this process as a ‘pattern’ or
* Corresponding author.
‘pathway’ of internationalization. Kuivalainen, Sundqvist, and
E-mail addresses: heini.vanninen@lut.fi (H. Vanninen), olli.kuivalainen@lut.fi
(O. Kuivalainen), [email protected] (L. Ciravegna).
Servais (2007), for instance, describe the key dimensions of this
1
The authors contributed equally to this study. process as scale (export intensity, i.e. the share of turnover from
http://dx.doi.org/10.1016/j.ibusrev.2016.09.005
0969-5931/ã 2016 Elsevier Ltd. All rights reserved.
Please cite this article in press as: H. Vanninen, et al., Rapid multinationalization: Propositions for studying born micromultinationals,
International Business Review (2016), http://dx.doi.org/10.1016/j.ibusrev.2016.09.005
G Model
2 H. Vanninen et al. / International Business Review xxx (2016) xxx–xxx
foreign markets), scope (the number of markets in which the mMNEs face that SMEs focusing on exports do not (Contractor,
company sells) and time (the speed of internationalization) and Kumar, Kundu, & Pedersen, 2010), and it would therefore be
ignore multinational properties such as establishing FDIs. Thus, we beneficial to enhance understanding of them. We argue that
believe it is justified to differentiate accelerated multinationaliza- making sense of this phenomenon could help in guiding managers
tion from accelerated internationalization (Weerawardena, Sulli- and better framing policy debates. This is important as SMEs’
van, Liesch, & Knight, 2007) given our focus on how the process of multinationalization has an effect on the global economy and
establishing FDIs proceeds, rather than merely focussing on the culture (Varian, 2011). Given mMNEs increasing importance on a
scale, scope and time aspects that characterize studies of the global scale, this is an avenue that merits further investigation
internationalization process. Firms establishing FDIs, and thus (Dimitratos et al., 2014).
engaging in multinationalization, face different challenges from In our empirical study we scrutinize the suitability of the
those confronting exporting firms because they need to think existing literature in the light of findings derived from four case
about aspects – such as HR strategy and knowledge transfer – from studies of Finnish born mMNEs. Our contribution to the literature
different perspectives. Internationalization may merely entail is twofold. First, we provide empirical explanations related to the
exporting without any of the challenges of a multinational process of multinationalization in firms of this type, which are
company. Multinational firms need to optimize their business in even more extreme in their internationalization than BGs. Second,
terms of its configuration, the design and redesign of the value iterating the theory and case studies, we develop a set of
chain and its coordination, creating a system for adjusting the roles propositions to characterize born mMNEs. We conclude that the
and functions of interdependent units (Vahlne, Ivarsson, & multinationalization process of born mMNEs consists of commit-
Johanson, 2011). ment decisions; reconfigurations of the value chain; and learning
As a starting point we examine the multinationalization process from, and creating and building trust with internal sources.
of born mMNEs, as depicted in the literature on international
business, and derive our ex-ante explanatory factors from both the 2. Theoretical background
BG/INV literature and traditional IB theories, such as the resource-
based view (RBV) and transaction cost economics (TCE). Multi- 2.1. Born mMNEs
nationalization has been studied extensively on the MNE level (e.g.
Andersson & Forsgren, 1996; Andersson, Forsgren, & Holm, 2001; SMEs that own or control value-adding activities in two or more
Birkinshaw & Hood, 1998), but it remains unclear how the process countries are mMNEs (Dimitratos et al., 2003). We note that this is
evolves in smaller companies (Dimitratos, Amorós, Etchebarne, & a simplistic measure but after the first FDI a mMNE needs to start to
Felzensztein, 2014). These firms have not been examined through learn how to do local HRM in the host country for example: in
the theoretical lenses of MNE theories that extend beyond the general, many aspects related to the common tasks and duties
speed and scope of rapid internationalization. prevalent among MNEs come to the fore and it can be said that
Born mMNEs are not similar to the exporting BGs and INVs these firms operate like multinationals.
discussed in the earlier literature (McDougall & Oviatt, 2000; Although the term multinational was used earlier to describe
Oviatt, McDougall, & Loper, 1995; Shrader, Oviatt, & McDougall, the international activities of large firms (Dunning, 1989), cases of
2000) and rapidly transform into MNEs, opening different types of SMEs using more advanced entry modes have been reported
subsidiaries in multiple locations at a very early stage (Dimitratos regularly (Dimitratos et al., 2003). As Mathews and Zander note in
et al., 2003). Although firms that internationalize early and rapidly their JIBS article (2007) (Mathews & Zander, 2007), mMNEs
after their foundation, such as BGs and INVs (Oviatt et al., 1995; constitute a new MNE species in the global economy. Although not
Shrader et al., 2000), have been a strong focus of academic study in all mMNEs are INVs, and vice versa, some do establish their foreign
recent decades, it is assumed in most of the research that such operations soon after their foundation, thereby qualifying as INVs
firms serve international markets through lower-commitment (McDougall & Oviatt, 1996; Zahra, Ireland, & Hitt, 2000) and in
modes of investment (e.g. Brouthers & Hennart, 2007; Brouthers & some cases as BGs (Knight, Madsen, & Servais, 2004) regarding
Nakos, 2004; Jones, 1999; Ripollés, Blesa, & Monferrer, 2012): the their time to internationalization if they have established these
idea that SMEs can also internationalize (several) parts of their operations in less than three years from their inception. We use the
value chain has been largely neglected since Oviatt and McDou- term born mMNEs (Dimitratos et al., 2003) to describe firms that,
gall’s (1994) seminal INV study was published (Kuivalainen et al., despite being small and resource-constrained SMEs, own or
2007). However, as the economy has shifted away from physical control value-adding activities (they have established FDIs) in
goods towards the production of information, SMEs have more two or more countries in less than three years after their
options for organizing their operations (Child & McGrath, 2001). As foundation. In Oviatt and McDougall’s (1994) seminal paper, they
Cavusgil and Knight (2015: 13) point out in the Journal of presented four types of INV based on two dimensions, value-chain
International Business Studies retrospective, ‘in the longer term, as activities (few–many) and the number of countries (few–many). In
technology facilitates global, virtual small firms that configure and fact their global start-ups, which would score high values on both
coordinate their value chains with the aid of iPads, iPhones, and dimensions, could be considered similar to born mMNEs. However,
similar devices, we may reach a point where the born global even though a global start-up is the most committed manifestation
concept becomes outmoded. —Research must keep pace with the of an INV, it merely has close network alliances in multiple
evolving patterns of start-up firms.’ There have also been calls for countries (Oviatt & McDougall, 1994) and is thus different from
more research focusing on younger SMEs and their choice of born mMNEs that go beyond this networked approach and
foreign-market entry mode (Laufs & Schwens, 2014). The entry establish their own FDIs at an early stage (see Fig. 1 for the
modes that young SMEs adopt to penetrate foreign markets affect positioning of born mMNEs).
their future success (Burgel & Murray, 2000; Dhanaraj & Beamish, There is scant empirical evidence on mMNEs’ activities but
2003). In connection to this, mMNEs may exert more control over some evidence exists that the utilization of a high-commitment
international activities and thereby realize superior performance operation mode often coincides with strong co-operation, even
(Dimitratos et al., 2014; Prashantham, 2011) and thus deserve more with competitors (Dimitratos, Johnson, Plakoyiannaki, & Young,
research attention. Furthermore, the assumption that SMEs only 2016). Early and rapid internationalization is often based on
use low-commitment modes may limit the types of support that networking and social capital (Dimitratos et al., 2014; Prashan-
governments give them. There are costs and challenges that tham, 2011) and hence born mMNEs indeed often combine
G Model
H. Vanninen et al. / International Business Review xxx (2016) xxx–xxx 3
explores how salient literature streams in international business

could explain how born mMNEs multinationalize.
2.3. Multinationalization in the literature
The multinationalization of SMEs is best understood through

the integration of several literature streams and theoretical
perspectives (Coviello & McAuley, 1999). We believe that
integrating different perspectives potentially enriches the analysis,
especially given our focus on a yet under-examined type of
internationalization, i.e. the multinationalization of born mMNEs.
However, in line with Van de Ven and Poole (1995), we find it
important to preserve the distinctiveness of the perspectives and
literature streams we integrate, which is possible because they
provide alternative interpretations that complement but do not
nullify each other (Van de Ven & Poole, 1995). Thus, in this study
we examine the process of multinationalization in born mMNEs
through the alternative lenses of common theories and literature
streams that are used to explain the speed, intensity and scope of
internationalization – which in our context can be seen as
dimensions that create an entity that we could call the degree
Fig. 1. The positioning of the born mMNE. of multinationalization (see Table 1). In other words, we consider
the explanatory factors with regard to when, how and where born
elements from INVs and traditional MNEs, supporting our mMNEs multinationalize. By internationalization speed we mean
definition. the time lag between inception and the first entry into a foreign
market, which is a common criterion to distinguish INVs and BGs
2.2. The multinationalization process from the companies following a more conservative and traditional
internationalization pathway (cf. e.g. Acedo & Jones, 2007;
We refer to the multinationalization process as the progression Prashantham & Young, 2011). With the scope of internationaliza-
of events in an organizational entity’s existence over time as it tion, common measures relate to the choice of the location of firms’
follows its pathway to becoming and developing as a multinational value chain activities. For the purposes of this study we focus on
company. Multinationalization, in the context of born mMNEs, can entry (or operation) mode as an intensity measure. In the BG
also be seen as a process, in this case a very rapid one, that could be literature entry mode has not been a key variable. Instead, export
examined through the lenses of process models. Given our aim to intensity or foreign-sales-to-total-sales ratios have been used (for
investigate how born mMNEs multinationalize, we decided to examples, see e.g. Knight et al., 2004; Kuivalainen et al., 2007). This
focus on one of the classic models of the internationalization type of operationalization often stems from the fact that most INVs
process, the Uppsala model (e.g. Johanson & Vahlne, 1977), as a and BGs are exporters. However, several firms internationalize
starting point for our analysis. We use it here a priori as an early through higher-commitment entry modes rather than
internationalization process model, not as a contradictory view on exports.
rapid internationalization as it is commonly seen in other studies: Different streams of international business literature have
in this we follow Hashai and Almor (2004), for example, who have emphasized numerous explanatory factors for entry or operation
already pointed out that BG firms may follow an accelerated mode. In Table 1 and in the following paragraphs we highlight the
internationalization process, but it is still a process. explanations that we consider important on the basis of our
A key concept in a process is change. Change, which is one type literature review. These factors are not exclusive, and we believe
of event, is described as the empirical observation of difference in that all these viewpoints are needed to explain the whole process
form, quality or state over time in an organizational entity (Van de of rapid expansion to international markets among SMEs and
Ven & Poole, 1995). This is depicted in the Uppsala internationali- eventually their multinationalization. Although the usual explan-
zation process model for example. The original Uppsala model ations tend to rely on the BG/INV and network literature we have
describes the internationalization process of a firm that suffers also considered classic theories and frameworks to explain FDI, i.e.
from the liability of foreignness: through commitments, decisions transaction cost economics (TCE), the organizational, locational
and knowledge development it slowly overcomes this liability and internalization (OLI) model, RBVs and knowledge-based views.
(Johanson & Vahlne, 1977). Companies may also suffer from the There is limited knowledge on e.g. the OLI approach and
liability of outsidership, lacking not only market knowledge but transaction cost–based explanations and their fit within the
also knowledge about business opportunities (Johanson & Vahlne, mMNE literature and even among SMEs in general.
2009). Knowledge may be acquired externally with or from Scholars focusing on the RBV of the firm use it to explain the
partners, or internally with or from subsidiaries. Learning about choices of international growth strategy (see e.g. Andersen &
the activities of the subsidiary and its local network, and building Kheam, 1998; Peng, 2001). It has been argued that the speed,
trust require interacting with key people in the subsidiary (Vahlne, intensity and scope of internationalization are linked to the firm’s
Schweizer, & Johanson, 2012). The Uppsala model has also been resource endowments, which may include the international
applied to the globalization process (Vahlne et al., 2011) in which experience and skills of its managers, such as their ability to
decisions focus on reconfiguring the value chain and redesigning conduct market research or establish foreign operations (Buckley &
the coordination mechanisms. Following this lead we suggest that Casson, 2009). A lack of resources, such as limited knowledge of
in the born mMNE context a key change variable in the the foreign market, may slow down the process of internationali-
multinationalization process is the commitment decision related zation (cf. the implicit link between the RBV and Johanson and
to the reconfiguration of the value chain. The following section Vahlne’s (1977) Uppsala model of internationalization). The entry
mode could also be seen as a consequence of the resources a firm is
G Model
Table 1
Theories and literature explaining the multinationalization of born mMNEs.
Literature The focal dimensions of The findings main explanatory factors

multinationaliz-ation
The RBV Internationalization Linked to a firm’s resource endowments
Buckley and Casson (2009); Peng (2001); Rugman et al. (2011); cf. speeda
Johanson and Vahlne (1977). Entry mode Linked to the resources a firm can mobilize to enter markets
Location or Gradual; linked to resource accumulation
internationalization
scope
Studies of young international firms, BGs/INVs Internationalization The fast proactive targeting of global markets and also reactive,
Bell et al. (2004); Jones (1999); Kuivalainen et al. (2007); Lopez et al. speed exploiting unexpected opportunities. The skills, experience and
(2008); McDougall and Oviatt (2000); Shrader et al. (2000) global mindset of the entrepreneur explain internationalization
speed.
Entry mode A focus on low-commitment foreign market servicing modes, such
as exporting
Location or Linked to entrepreneurial characteristics and resources, including
internationalization networks, as well as serendipity. The niche markets the firm
scope wishes to target.
Relational (network) perspective Internationalization Networks and client followership influence internationalization
Ciravegna et al. (2013); Coviello (2006); Coviello and Munro (1997); speed speed
Gulati et al. (2000); Nummela et al. (2004); O’Farrell and Wood (1994) Entry mode The entry mode depends on relationships with clients and
suppliers. FDI near clients in order to establish and maintain
relations with foreign clients (client followership).
Location or The location choice depends on networks – firms follow their
internationalization clients, suppliers and partners
scope
TCE Entry mode The entry mode is determined by the best mechanisms to control
Hennart (2009); Hennart and Park (1994); Rugman and Verbeke (2003); opportunism
cf. Dunning (1998). Via exports when contractual rules are sufficient to govern
transactions, via FDI when opportunism may be more likely
Location or The main focus is on the decision whether to produce at home or
internationalization abroad (the location decision); the optimal location depends on
scope aspects such as plant economies of scale, transportation costs
(how to minimize them by being within a spatial cluster), trade
barriers and the presence of long-standing customers
OLI Model Aharoni (1993); Brouthers et al. (1996); Dunning (1993), (1998); Entry mode The entry mode depends on the determinants of
cf. Hennart (2009). internationalization (whether it is market seeking, efficiency
seeking, resource seeking or strategic-asset seeking), the features
of the home base and target markets, and the existence of
organizational and internalization (firm-specific) advantages as
well as locational (country-specific) advantages
Location or Organizational advantages can be exploited in the chosen location,
internationalization locational advantages include adding value to the firm’s offering
scope via the availability and price of skilled and professional labour or
the increased need to be close to users/customers in knowledge-
intensive sectors
Knowledge-based perspective Entry mode The entry mode depends on the knowledge content of the
Kogut and Zander (1993) transaction. FDI is made in order to collaborate with clients and
suppliers and control strategic knowledge.
a
Speed is seen here as an early internationalization measure; it is the time between inception and the first entry into a foreign market (cf. e.g. Kuivalainen, Saarenketo &
Puumalainen, 2012).
able to mobilize, FDI being riskier and harder to finance than and does not necessarily follow a slow, gradual path linked to the
exports, and for that reason exporting is often the mode of choice firm’s resource accumulation (Cavusgil & Knight, 2015). Drawing
among smaller, resource-constrained firms (see e.g. Brouthers & from the entrepreneurship literature, scholars point out that BGs
Nakos, 2004; Buckley, 1989). Following this line of thought, one and INVs tend to be founded and managed by highly skilled
could also explain the geographic scope of a firm’s internationali- entrepreneurs (Nummela, Saarenketo & Puumalainen, 2004;
zation in terms of gradual growth and resource accumulation McDougall & Oviatt, 2000; Oviatt et al., 1995). Their skills,
(Johanson & Vahlne, 1977). For our quest, it is important to consider international experience and ‘global mindset’ can help young
whether the born mMNEs’ early commitment to the establishment and small firms overcome the liabilities of foreignness and
of subsidiaries relates to the availability of slack resources – which smallness in spite of their limited resources (Oviatt et al., 1995;
may have been gained from the use of venture capital for example Zander, McDougall-Covin & Rose, 2015). Discussing mMNEs,
– or to learning. Dimitratos et al. (2003) argue that the vision and expertise of
There is a large body of empirical studies documenting the the founder and top management help to explain the superior
internationalization of firms at an early stage, such as is the case performance of these small, although not necessarily young, MNEs.
among BGs and INVs (Kuivalainen et al., 2007). Such studies Thus, scholars focusing on young exporters and small multina-
illustrate how internationalization may be rapid and disruptive, tionals converge in pointing to the importance of the entrepreneur.
G Model
Based on the existing BG and INV literature our presumption is that advanced market-servicing modes such as FDI by default, they
the mindset, skills and experience of the managers relate more to commit to markets if one or several of the OLI conditions are
the speed and scope of internationalization and they may not fulfilled.
explain the multinationalization, i.e. the establishment of The knowledge-based perspective posits that the way in which
subsidiaries in many cases. a firm internationalizes may also depend on the knowledge
Scholars focusing on the relational perspective (in other words, content of its transactions (Kogut & Zander, 1993). When the
the network perspective) argue that firms invest across interna- completion of the transaction requires the exchange of tacit
tional borders in order to build closer relationships with their knowledge, firms are likely to open subsidiaries and interact
buyers and suppliers (cf. Gulati, Nohria, & Zaheer, 2000 and their directly with their clients (Rugman, Verbeke, & Nguyen, 2011). A
network perspective in general). Some of the early literature on small firm implementing a high-commitment market-servicing
internationalization emphasized customer followership as a major mode, and thus becoming a born mMNE, enjoys the benefits of
reason for internationalization (Bell, 1995; Weinstein, 1977), being able to provide better customer service and collecting
meaning that the relationships the firm has determine the speed, feedback on market conditions (Dimitratos et al., 2003, 2014; Lu &
entry mode and especially the location of its internationalization Beamish, 2006; Prashantham, 2011). Born mMNEs may have access
(Dyer & Singh, 1998). O’Farrell, Wood, and Zheng (1998) argue that to greater stocks of learning processes, routines and systems that
the first big client has a strong impact on market development. In collect, disseminate and use information for their international
some cases, following the customer could be seen as a reactive activities (Dimitratos et al., 2014), and consequently the knowl-
strategy with less emphasis on long-term planning, whereas in edge-based perspective could serve to explain the existence of
other cases it may be part of a broader strategic plan (Ciravegna, born mMNEs among the other streams of literature referred to
Lopez, & Kundu, 2013; Eriksson, Majkgård, & Sharma, 2000). above.
External resources, such as the network of relationships that firms
develop, compensate for their resource constraints, helping them 3. Methodology
in their foreign market entries (Ciravegna et al., 2013; Coviello,
2006). Johanson and Vahlne’s (2009) revised Uppsala model Qualitative research methods are particularly useful when the
emphasizes the role of these external resources, which combined aim is to develop new research agendas, explore new phenomena
with internal resources contribute to explaining internationaliza- and find settings that are not examined in the existing literature
tion. Networks provide opportunities and additional knowledge (Eisenhardt, 1989). As discussed in the previous sections, thus far
about the host market and, as mentioned above, help in defining the literature on multinationals has not focused on young
the internationalization processes of small firms (Bresnahan, internationalizing firms, neither have studies of BGs and INVs
Gambardella & Saxenian, 2001; Coviello & Munro, 1997; McDou- focused on the high-commitment entry-mode elements of rapid
gall & Oviatt, 2000; Moen, Gavlen & Endresen, 2004; Ojala, 2009). internationalizers.
They are thus particularly important in influencing the ‘when’ (the We use a case-based method that utilizes inductive theory
speed), ‘how’ (the entry mode) and ‘where’ of the internationaliza- building (Eisenhardt, 1989; Welch, Piekkari, Plakoyiannaki &
tion of young and small firms such as BGs, INVs and born mMNEs. Paavilainen-Mäntymäki, 2011) and our aim is to develop testable
However, the multinationalization part is often not explicitly propositions. A case study is a potential method to induce new
considered from this perspective as the focus may have been on theory from empirical data (Eisenhardt, 1989; Welch et al., 2011).
other operation modes, such as partnerships. However, our method is not induction in its purest form as we first
TCE provides a theoretical framework explaining internation- studied the literature in order to be able to develop theoretical
alization in terms of the nature of transactions, the bounded ‘building blocks’ for our analysis and then linked our theoretical
rationality of decision makers and the risk of opportunistic discussion to in-depth qualitative evidence collected through
behaviour (Williamson, 1985). Firms choose their entry mode in various methods from four case firms (Eisenhardt & Graebner,
order to protect themselves from the risk of opportunism. They 2007).
internalize transactions and engage in high-control entry modes We used purposeful sampling (Patton, 1990) to study SMEs that
(such as FDI) in circumstances in which the risk of opportunism is had multinationalized in an accelerated manner. We set various
higher, whereas they choose to export when such risks are low eligibility criteria for the case firms. The firm had to have fewer
(Rugman & Verbeke, 2003). TCE also explains, at least to a certain than 250 employees, fulfilling the EU classification of an SME
extent, the location of the FDI: the company may choose a location (OECD, 2008). Even though the term mMNE contains the word
that facilitates the minimization of transaction costs. One example ‘micro’ in relation to the size of the firm, mMNEs are seen as SMEs
of this so-called spatial cluster is the City of London and its (Dimitratos, 2015). The industry of the born mMNE was not a
financial sector (Dunning, 1998). According to our knowledge TCE selection criterion per se and it is more likely that born mMNEs
has not been used to study mMNEs’ entry mode choice in the past; operate in sectors that offer intangible products or services, such as
however, the opportunity and risk aspects that relate to TCE have software, given that it is easier to produce intangible offerings
been studied to a certain extent. Dimitratos et al. (2014) found out across distances with the help of ICT technologies. We opted for
that risk-taking propensity and networking increased the likeli- studying Finnish born mMNEs given that Finland is a small and
hood of firms to become mMNEs. open economy, and the phenomenon of interest may be most
The OLI model (Aharoni, 1993; Dunning, 1993, 1998; Brouthers, prevalent in this kind of setting with its relatively few customers
Brouthers, & Werner, 1996) is based on the premise that firms for example. To qualify as a born mMNE the firm had to have an FDI
invest abroad to exploit firm-specific advantages that their home in another country, and given our interest in rapidly multi-
country does not offer, such as low-cost inputs (efficiency seeking), nationalizing companies, we only chose firms that had established
large markets for their products (market seeking) and co-operation the FDI(s) in less than three years after their foundation (following
partners (strategic-asset seeking). The co-existence of OLI advan- the ‘rapid’ criterion that Knight et al. (2004) used in an earlier
tages could eventually lead to FDI in a chosen foreign market. The study).
OLI model thus explains the entry mode and location with regard We focused our data collection on tracking the multination-
to the characteristics of the host country as well as the specific alization patterns of each case firm, starting from its foundation
business focus (the firm-specific advantages, see also Hennart until the latest data-collection point. These patterns vary slightly.
(2009)) of the firm. Our assumption is that as born mMNEs use We have mapped the key events in the multinationalization
G Model
Table 2
Data-collection points.
Alpha Beta Gamma Delta

CEO 2011, 2014 2006, 2010 2004, 2006, 2010, 2014 2012, 2013, 2014
Subsidiary manager/other key member 2010, 2015 2004 2011, 2014 2015
process of the case companies (with FDIs being the key events) and tables, and this framework enabled us to identify differences and
provide timelines for each of our cases (in the Appendix A). The key similarities between the cases. Finally, we followed an iterative
motives behind these entries are also presented and discussed (for process of moving between the literature and the case data to
the guidance of the process type of research, see Langley (1999)). refine our findings, relate them to existing theories and clarify our
We relied on multiple sources of evidence to allow data contributions.
triangulation, as suggested by Yin (1994), and used primary We took several measures to address the validity of our study.
semi-structured interviews with key informants and secondary Eisenhardt (1989) notes that theory induced from data is likely to
sources. We conducted interviews with the CEOs of the companies, be valid as it mirrors reality. Our longitudinal data collection
half of them being the original founders and the other half having a (Table 2) allowed us to keep track of the case firms for several years,
long history of working for the firm. We also interviewed the reducing the potential disadvantages associated with retrospective
managers responsible for the subsidiaries, or other key employees designs, such as recall problems. In addition to this, we
of the subsidiary, in order to acquire a more holistic understanding triangulated between primary and secondary data sources, and
of the multinationalization process. There was an average of four used multiple informants in each firm to ensure the validity of the
primary data-collection points for each case firm. The interviews findings. The informants (at least one of the company representa-
were recorded and transcribed, and stored in a case database. The tives) were also asked to comment on the brief case summaries in
firms’ websites and search engines were used to find secondary order to validate our understanding of the cases.
data: all press releases, news articles and other material related to
the international expansion of each case firm was stored in the case 4. Findings and discussion
database.
After the data collection we followed the suggestions of 4.1. Case profiles
Eisenhardt (1989) and carried out a within-case analysis, writing
detailed descriptions of each case and combining all the relevant We introduce the case companies in this section (see Table 3 in
information from the multiple sources of evidence. Thus, each case the text and Figs. A1–A4 in the Appendix A) and in the following
was first studied as a stand-alone entity. For example, by section we discuss the ways in which they multinationalized,
triangulating between the primary and secondary sources, we illustrating common patterns and themes (Table 4).
constructed timelines for each case firm’s expansion to interna- Case firm Alpha, founded in 1997, is a software company that
tional markets. This allowed the unique pattern of each to emerge creates benchmarks enabling people to measure, understand and
before we attempted to generalize them. We then conducted a manage the performance of computer hardware. Most of Alpha’s
cross-case search for patterns (Eisenhardt & Graebner, 2007), using revenue comes from its B2B clients in the US and Taiwan, but small
tables and graphs (e.g. Table 1, which contains the theoretical streams also come from B2C customers. The timeline of Alpha’s key
building blocks) to facilitate the analyses (Miles & Huberman, internationalization events are presented in Fig. A1 in the
1994). We used categories that had emerged from the literature to Appendix A. Its internationalization already started with exporting
develop a framework for the cross-case analysis. These figures and in 1997 and its multinatinalization (the opening of its first
Table 3
Four Finnish born mMNEs.

Year of 1997 2000 2000a 2012
foundation
No. of 35 191 120 8
employeesb
Average annual Approx. s3.5 m Approx. s58.2 m Approx. s10.1 m (piloting with both domestic and foreign
salesc customers)d
The nationality of Finnish Finnish Finnish Finnish and Polish
the founders
The type of Benchmarking software Electronic patient diaries and wireless Data-erasure and An app (and solution for B2B customers) for
product (computer hardware data solutions for clinical trials computer-reuse sharing TV clips on social media
performance) solutions
First foreign 1997 2000 2000 2013
market entry
First FDI 2000 2000 2002 2014e
No. of foreign 2 2 15 2f
offices
a
1997–2000; some operations occurred under a different name and business model.
b
In 2014, except for Beta in 2013.
c
In 2013 (last publicly available information).
d
Pilot customers in two countries, operations in three (incl. e.g. HQ, sales and R&D in different locations).
e
Employees in Poland and UK since 2013; the first ‘physical’ FDI came when an office was established in Poland in 2014.
f
There is a physical subsidiary in Poland but there are also employees in the UK using a ‘virtual office’.
G Model
Table 4
Multinationalization in born mMNEs – a cross-case comparison.

Market selection 1st: Canada was selected because of 1st: European markets 1st: Markets were selected Markets were selected reacting to
a personal preference and its market (Sweden, Germany, Czech reacting to unsolicited orders unsolicited orders and pursuing
potential; Taiwan was selected Republic) were selected and following a large client in opportunities generated by the founders’
because a reliable partner was found because of the lower psychic new markets networks
there (that was later replaced with distance 2nd: A focus on European
Alpha’s own employees). Alpha also 2nd: The US was selected markets because of resource
had operations in the UK and China, based on its market potential limitations and to allow for
but these were closed/sold. and the presence of key the further customization of
2nd: The US was selected because of global actors with whom to the service to meet local
H. Vanninen et al. / International Business Review xxx (2016) xxx–xxx

its market potential and a cluster of collaborate needs
key clients with whom the company
wanted to set up development co-
operation
Operation modes 1st: Operating via wholly-owned Operating via wholly-owned Operating using different Operating via a wholly-owned subsidiary
subsidiaries in Canada and the US, subsidiaries in the US and the entry modes over time: 1st in Poland and an employee in a ‘virtual
and a partner company in Taiwan UK using direct sales from HQ; office’ type of setting in the UK
2nd: Operating via wholly-owned 2nd using sales through
subsidiaries partners; 3rd using partners
working under a franchising
model; 4th using wholly-
owned subsidiaries in key
markets and a global partner
network
Foreign sales as a percentage of total sales 100% 100% 98% –

International staff as a percentage of total staff 27% 92% 71% 88%
The number of foreign-market entries 5 5 62 3
De-/re-internationalizations during the process Withdrew from three markets (one Withdrew from three Withdrew from 16 markets in Withdrew from one market (but never had
office closed) markets (closing the offices in which it operated with an office there)
all of them) partners but later re-entered
them with its own offices/
other partners
Offices & functions Finland: HQ and R&D Finland: HQ and R&D Finland: HQ and R&D Finland: HQ & customer support
US: Sales, marketing, customer US, UK: Sales, marketing, UK, US, Australia, Japan, Poland: R&D & customer support
support customer support Canada, Italy, Sweden, UK: sales, business development
Germany, France, Spain,
Mexico, Netherlands, Russia,
Malaysia, New Zealand: Sales,
marketing, customer support
7
G Model
subsidiaries in the US and Canada) took place in 2000. There were employees located in two continents and possessing customers all
several motives behind the entries. Alpha decided to settle in the over the world.
US to develop its solution together with its key customers, all of Case firm Gamma, founded in 2000, provides data-erasure and
whom resided close by in Silicon Valley. Market potential and computer-reuse solutions that ensure the complete and secure
personal reasons can also be noticed as reasons behind entries. For cleaning of hard disks. Gamma has changed its international
example, the VP for marketing recalls ‘One of our VPs travelled a operational mode several times (see Fig. A3 in the Appendix A).
huge amount to China and then we decided to open an office there in First it served international markets via direct sales from
2008 to handle what we thought would be a good place for both sales headquarters. Second, it started to build a global network of
and extra engineering’. The company set up its subsidiaries as partners. Often the trigger for entry to a new market was an
greenfield investments but also used a partner in Taiwan before unsolicited export order. However, it also opened its first
replacing the partner company with its own workforce in 2012. The subsidiaries in 2002 in order to be able to have more control of
contract with the Taiwanese partner was terminated upon finding its international operations. There were multiple reasons behind
some accounting irregularities. This made the company decide to FDIs and, in the case of the Australian subsidiary, the CEO and co-
change the operation mode and hire a full-time sales person in founder also pointed out personal motivations to visit the country.
Taiwan. Their VP for marketing stated: Third, the company wanted to improve the efficiency of its partners
I could write a full PhD thesis just on how to hire and maintain the and introduced a franchising model. Fourth, from approximately
right people in Far Eastern subsidiaries . . . but it can be summed 2009 onwards Gamma started acquiring the shares of its partner
up as “Find good people who are already known by a personal companies and also made new greenfield investments by
friend. Give them full responsibility to handle the business on their establishing new subsidiaries; it revised its operations in the UK
own. Provide them with the right resources to get their job done. and the US. A key motivation for the new operation model, which
Visit only when they ask, not when you feel like a trip to eat was more controlled and centralized, was to serve customers
dumplings” By the way . . . that formula works around the world’. better with a more integrated value chain as low-end competition
had started to appear and the company wanted to make its value
The company has stayed rather small over the years. A key
proposition clearer for its current and potential customers.
reason for this is that they have – over the years – sold some of their
Interestingly, for a number of years Gamma was using multiple
operations that were not seen as core for their business. For
operation modes in parallel. This type of behaviour is typical for
example, gaming operations were sold to another Finnish company
many MNEs (Benito, Petersen, & Welch, 2009) but has been less
and a Chinese subsidiary was sold to the mobile benchmarking arm
studied in an INV/BG setting in the past.
that spun off from Alpha.
Case firm Delta, founded in 2012, provides an application that
Case firm Beta, founded in 2000, is a provider of electronic
allows smartphone and tablet users to access a replay of an
patient diaries and wireless data-collection solutions that are used
interesting moment they saw on a TV show and share that on social
for data capture in clinical trials. The rapid international expansion
media. The company’s revenue comes from corporate customers,
was seen as a key target from day one and the founders wanted to
such as TV channels, and the end users can use the application
create a global firm. Beta has subsidiaries that were set up as
without charge. It has been able to pilot its service with four TV
greenfield investments (see Fig. A2 in the Appendix A). The first
channels (in Finland, Poland and Spain) and has developed the
sales subsidiary in the US was established within the very same
service based on the lessons learned from end users and TV
year the company was founded. The key reason behind the market
channels. The founding team of Delta knew each other from their
entries was the idea to be near clients. Their client targets were the
previous work experience in a large multinational company but
top 10 pharmaceutical companies, all of which operate globally. As
had different cultural backgrounds and experience. Hence,
Beta was providing disruptive technology for the value chain of the
operations first spread around Europe in order to benefit from
pharmaceutical industry, two key reasons for the greenfield FDIs
operating in multiple locations and for personal reasons (see
can be found. First, the management felt that they needed to
Fig. A4 in Appendix A). An example of a personal reason is that the
educate potential customers and this would be easier when in their
partner of one of the founders received a good job offer from the UK
close vicinity, and second, there were no possible middlemen
– this provided an additional incentive to locate activities in the
easily available as they were more or less establishing the industry
UK. Delta currently operates in the UK and Poland, in addition to
and destroying the business of old, non-digital clinical trial
Finland, enabling it to work closely with potential clients in the UK,
companies. Eventually, after learning how the market worked, they
as the UK is seen as a hub for all European TV business, and to
closed some of the offices (e.g. in Germany and the Czech Republic)
utilize an affordable workforce for its R&D and product develop-
– the management of Beta had come to the conclusion that even
ment (in Poland). The company has migrated from home offices to
though many pharmaceutical companies have operations in many
‘proper’ offices as the number of workers has increased. Other
countries, their decision-making is rather centralized and it would
motives for establishing an office in Poland relate to the aim to be
be more beneficial for Beta to concentrate its resources in the
able to work more efficiently, facilitate communication and create
locations where the headquarters of the customers are. In this the
and build organizational culture for example.
subsidiary in the US was found to be seminal as it was near a cluster
of the headquarters of its key clients and eventually the company
4.2. Cross-case analysis
moved its headquarters to the US in 2004. Recruitment policy for
the US office meant that most of top management team members
In this section we outline a cross-case analysis that is based on
were US-based only five years after the foundation of the company.
the findings of our study and includes the key aspects of
This enabled the company to learn rapidly about the markets and
multinationalization in born mMNEs (Table 4). We then present
become embedded in local networks. The UK office’s role was
five propositions in which we incorporate our findings into the
defined as that of a hub for sales and distribution in Europe, and
various theoretical frameworks on internationalization, and
R&D was kept mostly in Finland. Currently the only Finnish top
contrast our multinationalization cases with traditional models
management team member is the Chief Technology Officer. For a
of internationalization.
number of years Beta’s organizational structure has been very
similar and the company seems to operate as an mMNE with core
G Model
4.3. Dimensions explaining the progress of the multinationalization P1. Born mMNEs mainly multinationalize from inception for
process market-seeking reasons; to be near their key clients and co-
operation partners, and to acquire visibility and a good reputation
The beginning of the multinationalization process is related to among them.
the global mindset of the born mMNE’s management (Buckley &
The continuing process of multinationalization of our born
Casson, 2009; Nummela et al., 2004; Oviatt et al., 1995), the OLI
mMNEs could be characterized as the entrepreneurial seizing of
model (Aharoni, 1993; Brouthers et al., 1996; Dunning, 1993, 1998)
opportunities (Ciravegna et al., 2013). Alpha first selected its
and relational IB theory (Gulati et al., 2000). These views explain
markets on the basis of personal preferences and market potential,
why the firm becomes a born mMNE instead an exporting
and Beta because of the lower psychic distance, but both soon
company for example. The importance of having a global mindset
opted for a location near their key clients and co-operation
is highlighted in several studies as a variable affecting the speed,
partners. Gamma reacted to unsolicited orders and followed its
intensity and scope of internationalization, including the extent to
clients but later on realized that it needed to focus more on market
which the firms are prepared to invest abroad and thus become
selection because of resource constraints. Delta reacted to
multinationals (Buckley & Casson, 2009; Nummela et al., 2004;
unsolicited orders and opportunities that arose from the founders’
Oviatt et al., 1995). Our cases opted for FDI because one or more OLI
networks. This is in line with the BG/INV literature that highlights
conditions (Aharoni, 1993; Brouthers et al., 1996; Dunning, 1993,
reactions to unsolicited orders and the opportunities provided by
1998) were fulfilled. All the cases were market-seeking organiza-
networks (Bell, Crick, & Young 2004; Coviello, 2006; Jones, 1999;
tions at first because of the small size of their home markets, and
Kuivalainen et al., 2007; Lopez, Kundu, & Ciravegna, 2008;
one also sought strategic assets and efficiency. Our cases went to
McDougall & Oviatt, 2000; Shrader et al., 2000). In many cases
markets in which their key customers and co-operation partners
certain markets are only selected in order to follow a large client
resided and where they could leverage low-cost labour. It is
and certain markets are selected because there is customer
particularly useful for technology providers to be inside technolo-
potential (Bell, 1995; Weinstein, 1977). However, it seems that even
gy hubs. All in all, international markets were perceived as sources
though the case companies followed this route in their initial
of multiple opportunities that were not available at home:
market selection, they adopted a more strategically planned
strategic clients, potential co-operation partners and specialized
approach later on, and some of them closed their offices and
skills. Relational IB theory (Gulati et al., 2000) and the knowledge
withdrew from markets they had selected because of opportu-
perspective (Kogut & Zander, 1993) also explain the FDIs of born
nities rather than because of a strategic plan.
mMNEs. Having a physical presence in their key markets was
Having all the software development in Poland halves our
important for marketing and customer-relationship reasons in all
development expenses compared to having the same work done
the case firms. Alpha and Beta opened subsidiaries to acquire
in Finland. Also, in Poland we have better access to local talent, and
credibility and to co-operate more closely with their key clients.
it would be difficult to hire experienced coders here [in Finland],
Gamma also needed credibility and input for product develop-
while in Poland it’s easy for two reasons: our co-founders know
ment, in addition to local market information. Delta wanted to
people from there and in Poland the salaries we can pay are
exploit the founders’ international networks and low-cost labour.
competitive. (Founder and CEO, Delta)
All the case companies obtained the majority of their revenue from
business-to-business sales, meaning that their customers were In some situations it may be that reactive, opportunistic
fewer in number and more geographically focused. Equally reasoning coexists with strategic proactive decision making, but
consistent with the relational perspective was that another major when the role and responsibilities of the international operations
reason for investing abroad (as opposed to only exporting to increase, the more systematic approach becomes more dominant.
multiple markets) was to provide customer support and maintain For example, after the first, market-seeking and reputation-
relationships with key clients (Gulati et al., 2000): ‘Our customers seeking phases the subsidiaries in all the cases took on a different
expect us to operate in many markets because they do too. They expect function – working closely with strategic clients and partners to
to get customer support in Japanese from a local office in Japan.’ exchange tacit knowledge and to customize the offering (Kogut &
(Founder and CEO, Gamma). Zander, 1993).
Relational capital is important in ensuring client satisfaction With our pioneer customers, we do things together. For example, in
and repeated purchases (Hitt, Bierman, Uhlenbruck & Shimizu, Japan we have developed totally new technologies; in the US we
2006; Lovelock, 1999): have tried different delivery channels; and in Scandinavia, some
If it [maintaining the customer relationship] is done via email, it new business models. (Founder and CEO, Gamma)
very easily leads to misunderstandings; the customer thinking that
Knowledge content thus explains the need to be physically close
we don’t understand them. ( . . . ) In conflict situations it is very
to key clients, and many born mMNEs multinationalize by
important that we express that we understand the customer’s
establishing a presence in so-called strategic markets in order to
distress. It is so much easier to express that when you are present.
provide their customers with a superior customer service and to
(CEO, Alpha)
work on and develop new products in close co-operation with
Developing relationships with strategic clients is another key them. We therefore propose the following:
factor explaining when, how and where such firms internationalize P2. Both opportunities and strategic factors affect born mMNEs’
and it is consistent with the relational perspective of internation- multinationalization – they follow opportunities but establishing a
alization. Finally, there is a more conventional reason for going presence in strategic markets is more important for them and they
multinational and opening subsidiaries – visibility and reputation. move towards this strategic approach as they proceed in their
We noted that both the BG/INV literature and MNE theories explain multinationalization.
the beginning of the multinationalization process of our born
The process of multinationalization has also meant using a
mMNEs. All of our cases support the market-seeking approach of
hybrid combination of entry modes. Born mMNEs invest, disinvest
the OLI model, and some of them multinationalized to exploit
and change governance in their subsidiaries much more rapidly
strategic assets and location advantages. However, given the
than other firms. Alpha had wholly-owned subsidiaries from the
predominance of market-seeking reasons, we propose the
beginning and complemented this approach with one partner
following:
G Model
company, which was later replaced by their own workforce. Beta focusing on BGs/INVs (Bell et al., 2004; Jones, 1999; Kuivalainen
only had wholly-owned subsidiaries from the very beginning. et al., 2007; Lopez et al., 2008; McDougall & Oviatt, 2000; Shrader
Gamma proceeded from selling directly from headquarters to et al., 2000) because, as rapid internationalizers they are more
conducting sales through partners, then selling to partners likely to export and to rely mostly on unsolicited orders and
working under a franchising model and finally to having networks in their choice of location. However, their customer
wholly-owned subsidiaries in key markets and a global partner relationships strongly affect their choice of entry mode and
network to service less important markets. Delta’s employees location. Born mMNEs with B2B offerings have fewer and larger
outside their home country used their homes as offices and the customers and the main reason for making FDIs is to co-create
company operated almost like a virtual office despite having value and cultivate customer relationships, thus exporting is not an
physical headquarters in the home country. The company option that fulfils these requirements. Born mMNEs specifically
established its first physical subsidiary in Poland in 2014, which target the locations in which their customers operate and thereby
was a significant commitment for the start-up. All of these firms take more of a strategic, rather than opportunistic, approach in
opted for opening their own offices less than three years after their their international expansion.
inception. Their proceeding to higher-commitment market-ser- P4. Born mMNEs are able to overcome resource constraints and
vicing modes was faster than predicted, even by the literature on establish FDI while young and small because of changes in working
BGs (Hashai & Almor, 2004). The key reason behind FDI decisions culture and technological developments.
was the ability to serve clients better. Working closely with clients
Delta, the youngest of the four case firms, has multinationalized
is often a means to fully developing the offering and customizing it
most rapidly. This may be explained by the changes that
to the market, and although this could be achieved through virtual
technology has brought to day-to-day work. It has been easier
meetings, such as Skype calls, a physical presence and face-to-face
to operate as a multinational company in 2012 than in 1997, during
interactions play a crucial role. The local presence was in many
which time the oldest case firm (Alpha) was established.
cases seen as fundamental for success. For example, in Alpha the
Developments in technology may make the process of multi-
cannibalization of the existing value chain would have been
nationalization even faster in the future. This means that we argue
difficult without their presence in the key market (the USA). One of
that it is necessary to go beyond the BG/INV and network literature
the founders noted that the ‘industry was not ready for partnerships
and combine it with MNE theories to explain the rapid multi-
as service providers were afraid of losing their margins to new
nationalization of small firms, which manifests a combination of
technologies.’ In addition to the ‘softer’ reasons for wanting to be
the aggressive and entrepreneurial behaviour of BGs/INVs. BG/INV
near their clients, born mMNEs also want to have control, in line
and network literature can explain the speed, but MNE theories,
with TCE (Rugman & Verbeke, 2003), and thus opted for their own
such as the OLI model, explain the choice of a high-commitment
subsidiaries instead of joint ventures and resellers. Interestingly,
operational mode and the knowledge perspective explains the
personal motives also came through in the interviews in case of
locations in which they are more likely to access strategic
Alpha, Gamma and Delta. In the case of Delta, for example, family
resources. However, MNE theories alone lack the power to explain
reasons affected the decision to establish an office in London.
entrepreneurial and agile behaviour in accelerated multination-
Therefore we propose the following:
alization and both viewpoints are needed. We therefore propose
P3. The operation mode of born mMNEs reflects the need to serve
the following:
clients and the level of control they wish to exercise on operations
P5. Born mMNEs combine the internationalization speed, scale and
established in new markets. They also change governance
scope of BGs/INVs with MNEs’ high commitment to the chosen
structures as necessary in their search for the optimal solution.
international markets while remaining small in size.
However, personal reasons may also affect the choice of higher-
commitment market-servicing modes.
5. Conclusions
4.4. Born mMNEs: multinationalization, not just internationalization
5.1. The multinationalization process of born mMNEs
Born mMNEs are rapidly multinationalizing (as opposed to
We focused in the previous sections on the dimensions of
merely rapidly internationalizing) firms. Our cases spread their
multinationalization we found to be the most important and tried
value-adding functions among multiple locations and also gener-
to build explanations as to why the various events in the process of
ate a significant amount of their revenue from international
multinationalizing in born mMNEs happened over time. In
markets. They soon began to target international markets, often
conclusion, we suggest that a modified version of the Uppsala
from their inception. However, unlike the BGs currently depicted in
model of the internationalization process would best serve to
most empirical studies, they also rapidly transformed into
illustrate this process. The right-hand boxes of our framework in
multinational enterprises, investing in multiple countries for
Fig. 2 (which is modified from Vahlne et al. (2012)) identify the
different reasons. Born mMNEs challenge the RBV (Buckley &
sub-processes that constitute the multinationalization process of
Casson, 2009; Peng, 2001; Rugman et al., 2011) in that as young
born mMNEs. These are the factors that mark the changes in the
and small firms they should not have the resources to commit to
company during the process. The upper box represents commit-
FDI. However, they may still be able to establish FDI rapidly given
ment decisions such as the opening of new offices and extending
the global mindset and often also given the previous experience of
the value-adding activities to them: the commitment decision may
their founders, and they can compensate for their lack of
also be reversed or negative, such as closing an office in a certain
experience by hiring local employees who have knowledge of
market area. The box also covers the reconfiguration of the value
certain market areas and connections with local networks. They
chain, such as locating various company functions at the
can also afford FDI in that they produce intangible offerings and
subsidiaries instead of the domestic headquarters. As soon as
benefit from how working culture (hot desking, virtual offices) and
born mMNEs establish the FDI location, they give it a significant
technology have developed, allowing practically cost-free work
role in the value chain. This may stem from the locational
coordination and communication (e.g. Loane, McNaughton, & Bell,
advantage. For example, in Alpha and Beta and Gamma it was
2004): all this facilitates the establishment of a born mMNE. On the
possible to recruit experienced and talented people into the foreign
other hand, born mMNEs diverge from the stream of literature
G Model
reconfigurations of the value chain; and learning from, and

creating and building trust with internal sources.
5.2. Limitations and further research directions
This study possesses some limitations that may guide further

research. First, as in any qualitative study, there are limitations
related to narrow sampling. Although we selected our longitudinal
cases carefully we need to be cautious about analytical generali-
zation. For Lincoln and Cuba (1985) generalizability is more about
analyzing the ‘transferability’ of research findings and this very
much makes the context transparent to a reader. Our cases may be
context-sensitive; it may be that internationalization is quite
different in 2012 than it was in 2000 for example. We believe,
however, that our findings can be generalized, at least among firms
Fig. 2. The multinationalization process of born mMNEs (modified from Vahlne
et al., 2012).
such as those in software and digital services that provide products
or services that are fast and easy to transfer across borders
(meaning that fixed costs and barriers to entry are low). These
types of firm may multinationalize rapidly because of the
subsidiaries (cf. P4) and often (some) global responsibility and top intangibility of their offering, which allows multinationalization
management tasks were actually moved from Finnish headquar- without high investments in facilities and machinery. Our study
ters to foreign subsidiaries. These kinds of recruits would have also concentrated on firms selling mostly to B2B customers, which
been difficult to make if the new personnel had needed to move to may affect the generalizability.
Finland. Furthermore, the focus on key markets and customers Second, we have refined the definition of born mMNEs in this
drives the commitment decisions (cf. P1). The lower box refers to paper and have formulated propositions regarding their multi-
the process for developing new knowledge by learning and nationalization. Our approach has been holistic and we have tried
creating, in this case mostly from internal sources such as the focal to study the phenomenon from various perspectives. Here we have
subsidiary or subsidiaries working closely with clients on both tried to consider the ‘added value’ of different streams of literature,
improving their offering and customizing it. Of special interest in following the approach taken by Coviello and McAuley (1999). We
this context is knowledge about subsidiary activities and resources. have to acknowledge, however, that this type of multiperspective
The subsidiary of the born mMNE should be able to provide more approach means that the depth of analysis is thinner than in
information and develop more competences when it is locally studies that are based on a single theoretical framework. Hence, we
embedded (e.g. Andersson et al., 2001), and this should eventually would encourage other researchers to test our propositions and
speed up the multinationalization process. In a number of our case born mMNEs’ international behaviour in different contextual
companies global marketing responsibility was actually moved to settings and also in different theoretical settings. For example,
the subsidiary close to key customers. This required trust between regarding the former idea, how does being based in a large
the old and new members of the management, residing in offices in economy such as the US affect internationalization? Do born
different countries. Trust building is a prerequisite for efficient mMNEs operating in the manufacturing industry multinationalize
learning and creation, as well as for any commitment decisions. In for similar reasons and follow similar processes as do those
some of our case companies trust was built through rather operating in digital services and software? How does being a
traditional methods, e.g. in Gamma the managing director of the provider of a B2C offering affect first the internationalization and
French subsidiary had learnt to know the company as a trainee then the multinationalization of born mMNEs? For the latter, one
during his exchange studies abroad, and in the case of the UK could for example test our propositions only by using the OLI
subsidiary a new managing director was recruited from a business model as a theoretical framework. Furthermore, the possible use of
partner. However, we have to note that in many companies the hybrid operation modes or mode bundles (see e.g. Benito et al.,
companies had made unsuccessful recruitments in the first place. 2009) among born mMNEs should be studied. Even if FDIs
Fortunately for them they were able to make fast changes, for dominated within our four cases, Gamma, for example, had used
example in Beta the whole US sales team were changed within a multiple modes in parallel and we need more studies focusing on
year, and new recruits were brought in (cf. P5 and ‘aggressive this type of behaviour. There seem to be several sub-patterns in
behaviour’). Beta was able to develop the ‘first class team’ in the US multinationalization, even though the general model could be the
eventually, and the organizational culture was transferred by one same for all. It would be interesting to study (and distinguish) all
of the founders moving to the US one year with the other founder the patterns of multinationalization with a larger number of cases.
spending half of his time in the US for a year and half. With this It would also be interesting to compare the findings with the
activity the company was able to develop both the internal and broader literature of entrepreneurship. Moreover, the disaggre-
external network position of the US subsidiary. The left-hand boxes gated operations of born mMNEs require more investigation as
in Fig. 2 are snapshots from any moment in time: born mMNEs organizing work in this type of company differs from BGs and INVs
possess a stock of knowledge about the markets and their that have all their core activities and key executives in one location.
international offices and have a certain position in relation to How these companies operate is an interesting topic for future
external and internal operators in the specific market area. Global studies. In terms of methodology, future research could take
opportunities and an entrepreneurial mindset make born mMNEs several directions. In quantitative studies, event history studies
begin internationalization (cf. P1). Also the internal position of would be interesting as these are rare in the field, as Welch and
units in mMNEs may evolve rapidly over time – in the case of Beta Paavilainen-Mäntymäki (2014) note. In the qualitative field, more
the US subsidiary eventually became the headquarters of the studies utilizing process data and analysis is called for (Welch &
whole company within four years (cf. P3). Paavilainen-Mäntymäki, 2014). All in all, this global phenomenon,
As a conclusion we suggest that the multinationalization which is growing in importance, provides numerous avenues for
process of born mMNEs consists of commitment decisions; future research.
G Model
Appendix A.
Fig. A1. Alpha’s timeline.
Fig. A2. Beta’s timeline.
G Model
Fig. A3. Gamma’s timeline.
Fig. A4. Delta’s timeline.
Birkinshaw, J., & Hood, N. (1998). Multinational subsidiary evolution: Capability and
References charter change in foreign-owned subsidiary companies. Academy of
Management Review, 23(4), 773–795.
Bresnahan, T., Gambardella, A., & Saxenian, A. (2001). ‘Old economy’ inputs for ‘new
Acedo, F., & Jones, M. (2007). Speed of institutionalization and entrepreneurial economy’outcomes: Cluster formation in the new Silicon Valleys. Industrial and
cognition: Insights and a comparison between international new ventures, Corporate Change, 10(4), 835–860.
exporters and domestic firms. Journal of World Business, 42(3), 236–252. Brouthers, K., & Hennart, J. M. A. (2007). Boundaries of the firm: Insights from
Aharoni, Yair (1993). Ownerships, networks and coalitions. In Y. Aharoni (Ed.), international entry mode research. Journal of Management, 33(3), 395–425.
Coalitions and competition: The globalization of professional business services (pp. Brouthers, K. D., & Nakos, G. (2004). SME entry mode choice and performance: A
121–142).New York: Routledge. transaction cost perspective’. Entrepreneurship Theory and Practice, 28(3), 229–
Andersen, O., & Kheam, L. S. (1998). Resource-based theory and international 247.
growth strategies: An exploratory study. International Business Review, 7, 163– Brouthers, K. D., Brouthers, L. E., & Werner, S. (1996). Dunning’s eclectic theory and
184. the smaller firm: The impact of ownership and locational advantages on the
Andersson, U., & Forsgren, M. (1996). Control and embeddedness in multinational choice of entry-modes in the computer software industry. International Business
corporations. International Business Review, 5(5), 487–508. Review, 5(4), 377–394.
Andersson, U., Forsgren, M., & Holm, U. (2001). Subsidiary embeddedness and Buckley, P. J., & Casson, M. C. (2009). The internalisation theory of the multinational
competence development in mncs – a multi-level analysis. Organization Studies, enterprise: A review of the progress of a research agenda after 30 years. Journal
22(6), 1013–1035. of International Business Studies, 40(9), 1563–1580.
Bell, J., Crick, D., & Young, S. (2004). Small firm internationalisation and business Buckley, P. (1989). Foreign direct investment by small and medium sized
strategy: An exploratory study of ‘knowledge-intensive’ and ‘traditional’ enterprises: The theoretical background. Small Business Economics, 1, 89–100.
manufacturing firms in the UK. International Small Business Journal, 22(1), 23– Burgel, O., & Murray, G. C. (2000). The international market entry choices of start-up
56. companies in high technology industries. Journal of International Marketing, 8
Bell, J. (1995). The internationalization of small computer software firms – a further (2), 33–62.
challenge to stage theories. European Journal of Marketing, 29(8), 60–75. Cavusgil, S. T., & Knight, G. (2015). The born global firm: An entrepreneurial and
Benito, G. R., Petersen, B., & Welch, L. S. (2009). Towards more realistic capabilities perspective on early and rapid internationalization. Journal of
conceptualisations of foreign operation modes. Journal of International Business International Business Studies, 46(1), 3–16.
Studies, 40(9), 1455–1470.
G Model
Child, C., & McGrath, R. G. (2001). Organizations unfettered: Organizational form in Laufs, K., & Schwens, C. (2014). Foreign market entry mode choice of small and
an information intensive economy. Academy of Management Journal, 44(6), medium-sized enterprises: A systematic review and future research agenda.
1135–1148. International Business Review, 23, 1109–1126.
Ciravegna, L., Lopez, L., & Kundu, S. (2013). Country of origin and network effects on Lincoln, Y. S., & Cuba, E. G. (1985). Naturalistic inquiry. Newbury Park, CA: Sage.
internationalization: A comparative study of SMEs from an emerging and Loane, S., McNaughton, R., & Bell, J. (2004). The internationalization of internet-
developed economy. Journal of Business Research. enabled entrepreneurial firms: Evidence from Europe and North America.
Contractor, F. J., Kumar, V., Kundu, S. K., & Pedersen, T. (2010). Reconceptualizing the Canadian Journal of Administrative Sciences, 21(1), 79–96.
firm in a world of outsourcing and offshoring: The organizational and Lopez, L. E., Kundu, S. K., & Ciravegna, L. (2008). Born global or born regional?
geographical relocation of high-value company functions. Journal of Evidence from an exploratory study in the Costa Rican software industry.
Management Studies, 47, 8. Journal of International Business Studies, 40(7), 1228–1238.
Coviello, N., & McAuley, A. (1999). Internationalisation and the smaller firm: A Lovelock, C. H. (1999). Developing marketing strategies for transnational service
review of contemporary empirical research. Management International Review, operations. Journal of Services Marketing, 13(4/5), 278–295.
39(3), 223–256. Lu, J. W., & Beamish, P. W. (2006). SME internationalization and performance:
Coviello, N. E., & Munro, H. J. (1997). Network relationships and the Growth vs. profitability. Journal of International Entrepreneurship, 4, 27–48.
internationalisation process of small software firms. International Business Mathews, J. A., & Zander, I. (2007). The international entrepreneurial dynamics of
Review, 6(4), 361–386. accelerated internationalization. Journal of International Business Studies, 38,
Coviello, N. E. (2006). The network dynamics of international new ventures. Journal 387–403.
of International Business Studies, 37(5), 713–731. McDougall, P. P., & Oviatt, B. M. (1996). New venture internationalization, strategic
Coviello, N. (2015). Re-thinking research on born globals. Journal of International change, and performance: A follow-up study. Journal of Business Venturing, 11(1),
Business Studies, 46(1), 17–26. 23–40.
Dhanaraj, C., & Beamish, P. W. (2003). A resource-based approach to the study of McDougall, P. P., & Oviatt, B. M. (2000). International entrepreneurship: The
export performance. Journal of Small Business Management, 41, 242–261. intersection of two research paths. Academy of Management Journal, 43(5), 902–
Dimitratos, P., Johnson, J., Slow, J., & Young, S. (2003). Micromultinationals: New 906.
types of firms for the global competitive landscape. European Management Miles, M. B., & Huberman, A. M. (1994). Qualitative data analysis: An expanded
Journal, 21(2), 164–174. sourcebook, 2nd ed. Thousand Oaks, CA: Sage Publishing.
Dimitratos, P., Amorós, J. E., Etchebarne, M. S., & Felzensztein, C. (2014). Micro- Moen, O., Gavlen, M., & Endresen, I. (2004). Internationalization of small, computer
multinational or not? International entrepreneurship, networking and learning software firms: Entry forms and market selection. European Journal of
effects. Journal of Business Research, 67, 908–915. Marketing, 38(9–10), 1236–1251.
Dimitratos, P., Johnson, J., Plakoyiannaki, E., & Young, S. (2016). SME Nummela, N., Saarenketo, S., & Puumalainen, K. (2004). A global mindset – A
internationalization: How does the opportunity-based international prerequisite for successful internationalization? Canadian Journal of
entrepreneurial culture matter? International Business Review forthcoming. Administrative Sciences, 21(1), 51–64.
Dimitratos, P. (2015). Micromultinationals. Keynote presentation at McGill O’Farrell, P. N., & Wood, P. A. (1994). International market selection by business
international entrepreneurship conference. service firms: Key conceptual and methodological issues. International Business
Dunning, J. H. ([104_TD$DIFF]1989). Multinational enterprises and the growth of Review, 3(3), 243–261.
services: Some conceptual and theoretical issues. The Service Industries Journal, O’Farrell, P. N., Wood, P. A., & Zheng, J. (1998). Regional influences on foreign market
9(1), 5. development by business service companies: elements of a strategic context
Dunning, J. H. (1993). The internationalization of the production of services: Some explanation. Regional Studies, 32, 31–48.
general and specific explanations. In Y. Aharoni (Ed.), Coalitions and competition: OECD (2008). Definition of small and medium sized enterprises (SMEs). Available:
The globalization of professional business services (pp. 79–101).New York: http://stats.oecd.org/glossary/detail.asp?ID03123 Accessed 10.10.10.
Routledge. Ojala, A. (2009). Internationalization of knowledge-intensive SMEs: The role of
Dunning, J. H. (1998). Location and the multinational enterprise: A neglected factor? network relationships in the entry to a psychically distant market. International
Journal of International Business Studies, 29(1), 45–66. Business Review, 18, 50–59.
Dyer, J. H., & Singh, H. (1998). The relational view: Cooperative strategy and sources Oviatt, B. M., & McDougall, P. P. (1994). Toward a theory of international new
of interorganizational competitive advantage. Academy of Management Review, ventures. Journal of International Business Studies, 25(1), 45–64.
23(4), 660–679. Oviatt, B. M., McDougall, P. P., & Loper, M. (1995). Global start-ups: Entrepreneurs on
Eisenhardt, K. M., & Graebner, M. E. (2007). Theory building from cases: a worldwide stage [and executive commentary]. The Academy of Management
Opportunities and challenges. Academy of Management Journal, 50(1), 25–32. Executive (1993–2005)30–44.
Eisenhardt, K. M. (1989). Building theories from case study research. The Academy of Patton, M. (1990). Qualitative evaluation and research methods. Beverly Hills, CA:
Management Review, 14(4), 532. Sage169–186.
Eriksson, K., Majkgård, A., & Sharma, D. D. (2000). Path dependence and knowledge Peng, M. (2001). The resource-based view and international business’. Journal of
development in the internationalization process. Management International Management, 27, 803–829.
Review, 40, 307–328. Prashantham, S., & Young, S. (2011). Post-entry speed of international new ventures.
Gulati, R., Nohria, N., & Zaheer, A. (2000). Strategic networks. Strategic Management Entrepreneurship Theory and Practice, 35(2), 275–292.
Journal, 21(3), 203–215. Prashantham, S. (2011). Social capital and indian micromultinationals. British
Hashai, N., & Almor, T. (2004). Gradually internationalizing ‘born global’ firms: An Journal of Management, 22(1), 4–20.
oxymoron? International Business Review, 13, 465–483. Ripollés, M., Blesa, A., & Monferrer, D. (2012). Factors enhancing the choice of higher
Hennart, J.-F., & Park, Y.-R. (1994). Location, governance, and strategic determinants resource commitment entry modes in international new ventures. International
of Japanese manufacturing investment in the United States. Strategic Business Review, 21, 648–666.
Management Journal, 15(6), 419–436. Rugman, A. M., & Verbeke, A. (2003). Extending the theory of the multinational
Hennart, J.-F. (2009). Down with MNE-centric theories! Market entry and expansion enterprises: Internalization theory and strategic management perspectives.
as the bundling of MNE and local assets. Journal of International Business Studies, Journal of International Business Studies, 34(2), 125–137.
40(9), 1432–1454. Rugman, A. M., Verbeke, A., & Nguyen, P. C. Q. T. (2011). Fifty years of international
Hitt, M. A., Bierman, L., Uhlenbruck, K., & Shimizu, K. (2006). The importance of business theory and beyond. Management International Review, 51(6), 755–786.
resources in the internationalization of professional service firms: The good, the Shrader, R. C., Oviatt, B. M., & McDougall, P. P. (2000). How new ventures exploit
bad, and the ugly. Academy of Management Journal, 49(6), 1137–1157. trade-offs among international risk factors: Lessons for the accelerated
Johanson, J., & Vahlne, J.-E. (1977). The internationalization process of the firm: A internationization of the 21 st century. Academy of Management Journal, 43(6),
model of knowledge development and increasing foreign market commitment. 1227–1247.
Journal of International Business Studies, 8(1), 23–32. Subramaniam, R. (2015). Micro-Multinationals, and how they will define our era.
Johanson, J., & Vahlne, J.-E. (2009). The Uppsala internationalization process model Youngupstarts. Available: http://www.youngupstarts.com/2015/07/31/micro-
revisited: From liability of foreignness to liability of outsidership. Journal of multinationals-and-how-they-will-define-our-era/ Accessed 4.08.15.
International Business Studies, 40, 1411–1431. Vahlne, J.-E., Ivarsson, I., & Johanson, J. (2011). The tortuous road to globalization for
Jones, M. (1999). The internationalization of small high-technology firms. Journal of volvo’s heavy truck business: Extending the scope of the Uppsala model.
International Marketing, 7(4), 15–41. International Business Review, 20, 1–14.
Knight, G. G., Madsen, T. T., & Servais, P. P. (2004). An inquiry into born-global firms Vahlne, J.-E., Schweizer, R., & Johanson, J. (2012). Overcoming the liability of
in europe and the USA. International Marketing Review, 21(6), 645. outsidership—The challenge of HQ of the global firm. Journal of International
Kogut, B., & Zander, U. (1993). Knowledge of the firm and the evolutionary theory of Management, 18, 224–232.
the multinational corporation. Journal of International Business Studies fourth Van de Ven, A., & Poole, S. (1995). Explaining development and change in
quarter. organizations. Academy of Management Review, 20(3), 510–540.
Kuivalainen, O., Sundqvist, S., & Servais, P. (2007). Firms’ degree of born-globalness, Varian, H. (2011). Micromultinationals will run the world. Foreign Policy. Available:
international entrepreneurial orientation and export performance. Journal of http://foreignpolicy.com/2011/08/15/micromultinationals-will-run-the-world/
World Business, 42(3), 253–267. Accessed 4.08.15.
Kuivalainen, O., Saarenketo, S., & Puumalainen, K. (2012). Start-up patterns of Weerawardena, J., Sullivan, G., Liesch, P. W., & Knight, G. (2007). Conceptualizing
internationalization: A framework and its application in the context of accelerated internationalization in the born global firm: A dynamic capabilities
knowledge-intensive SMEs. European Management Journal, 30(4), 372–385. perspective. Journal of World Business, 42, 294–306.
Langley, A. (1999). Strategies for theorizing from process data. Academy of
Management Review, 24(4), 691–710.
G Model
Weinstein, A. K. (1977). Foreign investments by service firms: The case of Williamson, Oliver (1985). The economic institutions of capitalism. New York, NY: Free
multinational advertising agencies. Journal of International Business Studies83– Press.
91. Yin, R. (1994). Case study research: Design and methods, 2nd ed. Thousand Oaks, CA:
Welch, C., & Paavilainen-Mäntymäki, E. (2014). Putting process (back) in: Research Sage Publishing.
on the internationalization process of the firm. International Journal of Zahra, S. A., Ireland, R. D., & Hitt, M. A. (2000). International expansion by new
Management Reviews, 16(1), 2–23. venture firms: International diversity, mode of market entry, technological
Welch, C., Piekkari, R., Plakoyiannaki, E., & Paavilainen-Mäntymäki, E. (2011). learning, and performance. Academy of Management Journal, 43(5), 925–950.
Theorising from case studies: Towards a pluralist future for international Zander, I., McDougall-Covin, P., & Rose, E. L. (2015). Born globals and international
business research. Journal of International Business Studies, 42, business: Evolution of a field of research. Journal of International Business Studies,
740–762. 46(1), 27–35.

International Business Review: Heini Vanninen, Olli Kuivalainen, Luciano Ciravegna

Uploaded by

Copyright:

Available Formats

International Business Review: Heini Vanninen, Olli Kuivalainen, Luciano Ciravegna

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

International Business Review: Heini Vanninen, Olli Kuivalainen, Luciano Ciravegna

Uploaded by

Copyright:

Available Formats

G Model

IBR 1343 No. of Pages 15

International Business Review xxx (2016) xxx–xxx

Contents lists available at ScienceDirect

International Business Review

Rapid multinationalization: Propositions for studying born

1. Introduction market, such as being able to beneﬁt from global variations in

2 H. Vanninen et al. / International Business Review xxx (2016) xxx–xxx

H. Vanninen et al. / International Business Review xxx (2016) xxx–xxx 3

explores how salient literature streams in international business

2.3. Multinationalization in the literature

The multinationalization of SMEs is best understood through

4 H. Vanninen et al. / International Business Review xxx (2016) xxx–xxx

Literature The focal dimensions of The ﬁndings main explanatory factors

H. Vanninen et al. / International Business Review xxx (2016) xxx–xxx 5

6 H. Vanninen et al. / International Business Review xxx (2016) xxx–xxx

Alpha Beta Gamma Delta

Alpha Beta Gamma Delta

Alpha Beta Gamma Delta

H. Vanninen et al. / International Business Review xxx (2016) xxx–xxx

Foreign sales as a percentage of total sales 100% 100% 98% –

8 H. Vanninen et al. / International Business Review xxx (2016) xxx–xxx

H. Vanninen et al. / International Business Review xxx (2016) xxx–xxx 9

10 H. Vanninen et al. / International Business Review xxx (2016) xxx–xxx

H. Vanninen et al. / International Business Review xxx (2016) xxx–xxx 11

reconﬁgurations of the value chain; and learning from, and

5.2. Limitations and further research directions

This study possesses some limitations that may guide further

12 H. Vanninen et al. / International Business Review xxx (2016) xxx–xxx

Fig. A1. Alpha’s timeline.

Fig. A2. Beta’s timeline.

H. Vanninen et al. / International Business Review xxx (2016) xxx–xxx 13

Fig. A3. Gamma’s timeline.

Fig. A4. Delta’s timeline.

14 H. Vanninen et al. / International Business Review xxx (2016) xxx–xxx

H. Vanninen et al. / International Business Review xxx (2016) xxx–xxx 15

You might also like