International Business Review 13 (2004) 555–571

www.elsevier.com/locate/ibusrev

Born globals: how to reach new business space

rapidly
Mika Gabrielsson a,, V.H. Manek Kirpalani a,b,c
a
Department of International Business, Helsinki School of Economics, P.O. Box 1210,
00101 Helsinki, Finland
b
Director center for International Business Education and Research, Bloomsburg University,
Bloomsburg, PA, USA
c
Department of Marketing and International Business, Concordia University, Montreal, Quebec, Canada
Received 16 September 2003; received in revised form 3 February 2004; accepted 26 March 2004

Abstract

The born global start-up lacks resources compared to the requirement of reaching world
markets. Further, the extant internationalization theories may not be adequate to indicate
viable channel alternatives for born globals. The conventional way of pledging personal
assets, raising resources, and expanding internationally is definitely slow and this adds to the
usual business risks. Thus, the major imperative emerges that the born global must utilize
large channels provided by MNCs, networks, and/or the Internet to receive substantial rev-
enues and cash flow rapidly. These channels also provide learning, technology, and evol-
utionary growth. Examples of the performance of born globals, with relatively similar
products, originating from Israel and Finland are used to elaborate. Also, the managerial
implications for born globals, and future research areas are brought out.
# 2004 Elsevier Ltd. All rights reserved.

Keywords: Born globals; MNCs; Channels

1. Introduction

Born global companies have recently raised interest among researchers (see
Knight & Cavusgil, 1996; Madsen & Servais, 1997; Oviatt & McDougall, 1994;
Rennie, 1993). Although the international and global marketing literature has con-
tributed much to our understanding of the marketing strategies of large global


Corresponding author. Tel.: +358-9-431-386-70; fax: +358-9-431-3888.
E-mail address: gabriels@hkkk.fi (M. Gabrielsson).

0969-5931/$ - see front matter # 2004 Elsevier Ltd. All rights reserved.
doi:10.1016/j.ibusrev.2004.03.005
556 M. Gabrielsson, V.H. Manek Kirpalani / International Business Review 13 (2004) 555–571

firms (see e.g. Levitt, 1983; Yip, 1992), little has been written specifically on born
globals’ marketing strategies (see e.g. Gabrielsson & Gabrielsson, 2003; Knight,
1997) and few of these studies are related to the challenges facing born globals in
their strategic marketing channel selection. It therefore seems justifiable to study
the channel strategies of born globals.
Born globals from small and open economies (SMOPEC), such as Finland, Swe-
den, Denmark, Israel and Taiwan, are facing a tremendous challenge given their
origin, resource constraints, and vision. They originate from SMOPEC, are new
business ventures, and aim to conquer the global market rapidly (Luostarinen &
Gabrielsson, 2004). Given these circumstances, selection of the international
marketing channels is among one of the most difficult managerial challenges. It has
usually taken years for global companies to expand and penetrate into foreign
markets. Enormous amounts have been spent in setting up subsidiaries and build-
ing marketing channels in place. Born globals lack such resources, and therefore it
has been suggested that they utilize ‘‘alternative governance structures’’ (Oviatt &
McDougall, 1994) and to more often rely on hybrid structures in their distribution
channels (close relationships, network partners, etc.) (Madsen & Servais, 1997).
However, little has been said about, what channel strategies they should follow and
which members they should turn to.
Hence, the main objective of this article is to help address this gap and indicate
the viable channel alternatives for born globals, given their resource constraints.
From this analysis, one major imperative emerges. That the channels by which
born global company products/services are carried must have global reach and
deliver large enough revenues and cash flow rapidly, for the born global firm to
flourish and grow. To address the main objective systematically, this article pro-
gresses through following steps: first, the ‘‘born global’’ is defined. The definition
sketches its strengths and weaknesses. From this, it becomes clear that a lack of
resources, compared to the requirements for the company vision of doing business
globally, is the crucial gap for the ‘‘born global’’ start-up, which tries to reach
world markets. Then, briefly, the different paths along which internationalization
theories have developed and their relation to channel structures are outlined. After
which entrepreneurship influence on channel selections and the born global firm
are analyzed and posited within the theory spectrums. From this, it becomes obvi-
ous that little research has been presented to guide the born global in the strategic
selection of the international marketing channel. Later, business examples are
described and ways are induced by which the born global can acquire ‘‘new busi-
ness space’’ for it selves. Furthermore, new research directions are suggested arising
from such charting.

2. Definition and profile of a born global

Born global firms, which often rapidly globalize their business by methods that
circumvent many of the existing international business research paradigms, have
recently received increased interest from researchers in many countries. A number
 M. Gabrielsson, V.H. Manek Kirpalani / International Business Review 13 (2004) 555–571 557

of studies on such firms have been made in Australia (Rennie, 1993), Ireland
(Knight, Bell, & McNaughton, 2001), Israel (Almor, 2000), New Zealand (Dana,
2001), Scandinavian countries (Kirpalani & Luostarinen, 1999; Luostarinen &
Gabrielsson, in press) and the USA (Knight & Cavusgil, 1996; Oviatt & McDou-
gall, 1994). These studies clearly highlight the increase in the number and impor-
tance of this relatively new breed of companies in many parts of the world.
We must also mention that depending on the school of thought and character-
istics of the investigated companies, scholars have used the following criteria when
defining born globals: (1) vision and strategy to become global/international (e.g.
Knight & Cavusgil, 1996; Oviatt & McDougall, 1994), (2) small technology-orien-
ted companies (e.g. Bell, 1995; Knight & Cavusgil, 1996), (3) time to become glo-
bal/international, varying from immediate to three years (e.g. Knight et al., 2001;
Knight & Cavusgil, 1996), (4) geographical expansion in terms of a minimum of
25% of foreign sales (e.g. Knight & Cavusgil, 1996) or a minimum number of
countries served outside the home country (e.g. Oviatt & McDougall, 1994), and
(5) geographical expansion outside the home continent with a minimum of 50%
external sales (Luostarinen & Gabrielsson, 2004). The variety of definitions used
in earlier studies is naturally a problem in regard to the comparability of the results
with each other.
In line with Oviatt and McDougall (1994: p. 49), we define that born globals
‘‘from inception, seeks to derive significant competitive advantage from the use of
resources and the sales of outputs in multiple countries’’. For the purpose of this
article, it is enough to conclude that born globals from their inception pursue a
vision of becoming global and often globalize rapidly without any preceding long
term domestic or internationalization period (Luostarinen & Gabrielsson, in press).
Furthermore, for a born global company to be investigated by the present authors,
some specific requirements have been set. Thus, to qualify for inclusion in the
study group, the born globals should have either unique technology and/or
superior design or innovative product/service, or know-how, systems or other
highly specialized competence.
The born global usually would lack the managerial and financial resources
required for globalization and global marketing (Luostarinen & Gabrielsson,
2004). Such latter resources are difficult to gain from conventional sources because
the born global has yet to prove its credibility as a profitable entity. The risk of
gaining profitability is even higher and the challenge even bigger when
the new entrepreneurial firm is going global. At this stage, it is useful to outline
the development vectors of internationalization theory and then where the born
global fits.

3. Internationalization theory background

Traditionally, internationalization and global research approaches have evolved

around two schools of thought: the process school and the economic school. The
former assumes the firm follows a behavioural approach (Cyert & March, 1963);
558 M. Gabrielsson, V.H. Manek Kirpalani / International Business Review 13 (2004) 555–571

the latter relies on the rational economics dominated firm utilizing transaction
costs (Williamson, 1975). Research emanating from the process approach focuses
on the question of how internationalization happens. The rationale for a stage-wise
development is very reasonable: via the export mode, the firm can test market
acceptance with minimal risk. If demand proves promising, the firm increases mar-
ket power by establishing a sales unit abroad. Then through non-investment
foreign production operations, manufacturing conditions can be tested before
establishing a production unit abroad. In Finland, this was substantiated by evi-
dence gained, since the late 1960s, through periodically collecting and analyzing
longitudinal, almost population-wide, databanks generated by Finland’s Inter-
national Business Operations Research Program at the Helsinki School of Eco-
nomics. Similarly, Swedish researchers identified the stages pattern of
internationalization at the target country level through multiple-case study research
(Johanson and Vahlne, 1977, Luostarinen, 1970, 1979). The stages pattern is the
mainstream process internationalization path of companies, especially for those
from SMOPEC. Globalization is achieved by the firm focusing on its product, ser-
vice, systems and know-how lines that can have global reach.
We now turn to a specific look at the international sales channel strategy
development by the firm. Empirical studies have found that the sales channel
strategy does not necessarily change from a lower degree of vertical integration
to a higher degree of vertical integration along the internationalization process
as could be expected due to resource accumulation and learning. Rather, other
factors such as cooperation and relationship factors can be decisive (see e.g.
Gabrielsson, Kirpalani, & Luostarinen, 2002). In particular, evidence from
born global software companies seems to indicate that networks may develop
through an initial contact with a larger firm, which rapidly develop into
a network of formal and informal contacts that provides market knowledge
and entry to markets around the world (Coviello & Munro, 1997; Sharma &
Blomstermo, 2003).
The economic based internationalization model assumes the firm policy maker is
‘‘homo economicus’’. S(he) has access to perfect information and will select the
rational solution. This leads to approaches such as transaction cost (Anderson &
Gatignon, 1986; Williamson, 1975) and/or an eclectic paradigm (Dunning, 1988).
These are micro-economic approaches, which imply that the firm and the market
are two alternative modes that can be used to accomplish an economic function.
When the market becomes imperfect, the cost of transactions becomes high, and a
firm would be better of by performing the function by itself, such as distribution
by establishing a sales subsidiary (see e.g. Anderson & Gatignon, 1986). This how-
ever may be beyond the resources of the born global or against its strategic inter-
ests. In fact, there is evidence claiming that these theories fail in providing an
appropriate explanation for the decision-making of born globals since cost reduc-
tions is not the key for their localization or internalization decisions (McDougall,
Shane, & Oviatt, 1994). A macro-level framework was provided by Porter’s
National Competitiveness model. From that stemmed the micro-model of the glo-
balizing firm, which gains from industry globalization drivers and its own globaliz-
 M. Gabrielsson, V.H. Manek Kirpalani / International Business Review 13 (2004) 555–571 559

ing levers. The firm gains competitive advantage from value adding in its supply
chain (Porter, 1980).

4. Entrepreneurship, the born global and emerging concepts

Both the organizational theory behavioural man paradigm (Cyert & March,
1963) and the ‘‘homo economicus’’ approach overlook the possibility of entrepre-
neurial-minded executives making strategic choices (Child, 1998; Turnbull, 1987).
Once the entrepreneur paradigm is introduced, new concepts emerge (Andersson,
2000). Thus, one can have a technical entrepreneur who focuses on a path that can
create an international pull strategy where a network links with the firm. There is
the other possibility of a marketing entrepreneur who implements an international
push strategy. Further, one can have an entrepreneur who drives towards an inter-
national restructuring of an industry. Moreover, some researchers maintain that
networks are used at a personal level. Entrepreneurs can choose and manage the
network to which they belong (Oviatt & McDougall, 1994).
Schumpeter, arguably the most famous economist in the field of entrepreneur-
ship, focuses on the entrepreneurial function and not on the attributes of the per-
son. His concepts include the introduction of new products, new production
methods, the opening of new markets, new sources of supply and raw materials,
and the reorganization of an industry (Schumpeter & Clemence, 1989). The litera-
ture has brought out four main attributes of an entrepreneur. These are innovation
capability, internal locus of control, risk taking propensity, and energy level. Inno-
vation refers to creative thinking and acting in all sectors. Internal locus indicates
the ability of a person to be self-reliant. The other two attributes are self-explana-
tory. Innovation is acknowledged the world over as an entrepreneurial quality.
Research indicates that the other three attributes decrease in importance with
increasing cultural distance from the Protestant model of independent achievement
to collectivist group cultures.
Almost certainly, all entrepreneurs can be found in the Schumpeterian spectrum.
Also, all entrepreneurs must possess innovative capability. Born global leaders fit
into this set. But for born globals to act and be successful, resources that are more
extensive than possessed by them are usually necessary. Our interest is to show that
these resources can be generated from actors in the new business space, which can
be exploited by born globals.
The recognition of entrepreneurship as a significant force in the formulation of
strategy has grown in the 1990s (Oviatt & McDougall, 1994). Controlled vision
must be allowed to dominate rational calculations. The forerunners were the con-
cepts of strategic stretch and leverage. Companies, with this new thinking, can rap-
idly grow internationally; jumping over stages outlined in the process
internationalization theory current. They can even extend beyond the tight
accounting straightjacket of their own transaction costs by joining networks
abroad. The conventional wisdom started changing away from strategic fit and
resource allocation towards strategic misfit; a strategic stretch approach based on a
560 M. Gabrielsson, V.H. Manek Kirpalani / International Business Review 13 (2004) 555–571

gap between the resources available and the aspirations of the firm. The allied con-
cept of leverage suggested a means of reaching these aspirations without changing
the level of internal resources. According to Madsen and Servais (1997), born glo-
bals can be expected to rely more often on ‘‘supplementary competences sourced
from other firms; in their distribution channels they more often rely on hybrid
structures (close relationships, network partners, etc.)’’. Various methods can be
used to save costs and make the firm more efficient and effective. Those born glo-
bals targeting broader strategic scope in terms of range of products, broadness of
markets, number of segments, customers and channels can be expected to place
greater emphasis on developing new channels of distribution, such as e-business
(McDougall, Covin, & Robinson, 1994). A most significant sector of competence
at present and in the future is going to be the leveraging of resources and the abil-
ity to create higher order value with fewer resources. This has led to the idea of
creating profitable ‘‘new business space’’ for born globals, short of resources,
where competition has not yet penetrated. Born globals must activate new inter-
national marketing/business channels in order to penetrate this ‘‘new business
space’’, and access learning and resources from the global market.

5. Channels necessary for born globals to reach and flourish in new business
space

As shown in Fig. 1, the channels necessary for born globals to flourish in new
business space are:

. MNCs acting as systems integrators

. MNCs distributing born global products/services
. Networks
. Internet
. Some combination of two or more of the above channels.

The channels above are discussed below separately. The ‘‘combination’’ channel
is included in the discussion, wherever relevant. Moreover, it is examined much
more through the selected examples of actual born globals, later in the next part.
5.1. MNCs: acting as systems integrators and/or distributing born global’s
products/services

MNCs have to make strategic relationships with other firms in industries where
technology is changing rapidly and markets are uncertain. Falling interaction costs,
and improved information technologies and communication are giving manu-
facturers unprecedented choices in structuring business. Outsourcing manufactur-
ing or services can deliver great changes in value. In 2001, the North American
automobile industry outsourced two-thirds of its manufacture. The average electro-
nics original equipment manufacturer (OEM) was hoping to outsource 73% of its
manufacture. Furthermore, 40% of all OEMs were hoping to outsource 90% or
 M. Gabrielsson, V.H. Manek Kirpalani / International Business Review 13 (2004) 555–571 561

Fig. 1. Channels for born globals.

more of their final product (Stearns, 2001). In general, the outsourcing of opera-
tions and facilities across industries rose by 18% in the period from 1999 to 2000
(Corbett et al., 2000).
These situations demand a collaborative relationship. Computer firms rely to a
great extent on outsourced manufacturers such as Flextronics and Solectron to
design and manufacture their products (Sawhney & Zabin, 2002). The MNC must
believe in partner retention and must show this by funding the born global’s busi-
ness development funding, training its people, giving long-term supply contracts
and other collaborative activities. The MNC can help the born global by lever-
aging its expertise in design, operations, production and research. Of particular rel-
evance to born globals is that it has been stated that for an MNC the balance
begins to swing toward ‘‘buy’’ when, amongst other factors, the supply base offers
a location, process technology, or a skill set that would be hard to acquire or
reproduce (Doig, Ritter, Speckhals, & Woolson, 2001). Moreover, there are
MNCs, which search for SMEs whose products/services can complement or sup-
plement the width and depth of their own lines. 3M is one such firm, which mar-
kets a huge number of products and is continuously searching for new products,
for example, they found ‘‘Breathe Right’’.
562 M. Gabrielsson, V.H. Manek Kirpalani / International Business Review 13 (2004) 555–571

Large institutional buyers sometimes purchase directly from born globals with
specialized products/services. But in such circumstances, these institutions usually
seek volume discounts. The large sales are naturally beneficial for born globals.
However, in this market dyad situation, the price discount often does not leave the
born global with the surplus to reinvest and develop their core competencies and
capabilities. Thus, it tends to slow down their future growth rate.
The formation of marketing alliances is not uncommon for born globals. Many
of the Finnish born globals cooperate with well established large MNC marketing
partners like Artemis Management systems, Cutler-Hammer, Johnson and John-
son, and 20th Century Fox. The born globals concerned have realized that when
their resources are not enough for adequate brand development, they must cooper-
ate in large partner marketing channels. Some of the above partners act as distri-
bution channels. Others provide marketing resources for the born global due to
shared interests in co-marketing, which we examine next.
5.2. Networks as partnerships for born globals

Networking is an effective way of overcoming the paucity of resources and sim-

ultaneously learning from each other. A born global’s growth worldwide stems
from its ability to build and leverage relationships with its main customer in the
network, which is the partner who buys its products/services. What is important is
the commonality of vision and objectives, and the potential width and depth of the
relationship across the business. Most networks emerge from links between special-
ist firms. The Internet allows technology-enabled relationship management. The
firm’s outward facing processes can be customer facing, supplier facing, and part-
ner facing. Fig. 2 depicts three networks with three different value systems, one in
each respectively. The three are on a continuum from a stable well-defined value
system to an emerging value system. The latter aims at developing new technolo-
gies, products or business concepts, with concomitant radical changes (Möller &
Svahn, 2003). This is the landscape that has been described as ‘‘high velocity mar-
kets’’ (Eisenhardt & Martin, 2000). However, networks creating emerging value
systems pursue technology and business solutions that are markedly more effective
than the existing ones. It should be noted that networks may be interrelated
through actors having roles in several; most large MNCs do have such multiple
roles (Möller & Svahn, 2003). Companies such as Cisco, Dell, Nike and Nokia are
currently expanding their value nets into ‘‘end-to-end demand–supply nets’’ cover-
ing all the value activities needed to produce value for the end customer (Hoover,
Eloranta, Holmström, & Huttunen, 2001). These arrangements generally involve a
strong hub company, a set of first-tier suppliers responsible for specific major com-
ponents of the end product or system; different types of channel members such as
e-channels, value adding resellers, and franchising chains; and major corporations
as end customers (Möller & Svahn, 2003). Selected born globals with specialized
skills can fit very well into such networks.
An organization consists of three interrelated parts: a corporate core, a func-
tional back-end, and a relational front-end. The relational front end is what the
 M. Gabrielsson, V.H. Manek Kirpalani / International Business Review 13 (2004) 555–571 563

Fig. 2. Value-system continuum. Source: Möller and Svahn (2003).

firm presents to its key external entities. In the case of the born global, this is the
partner facing organization. But relational management initiatives are difficult to
measure. There can be four possible outcomes: revenue expansion, cost reduction,
time reduction, or relationship enhancement (Sawhney & Zabin, 2001). These out-
comes require different units for measuring results. Revenue and cost are measured
in dollars. Time reduction is measured in days/hours. Relationship enhancement
has to be measured in soft terms such as satisfaction, loyalty and trust which assess
the quality, breadth, and strategic importance of the relationship. Furthermore, a
very real case of a born global which started off as contract supplier, progressed
into becoming a network partner, and now is a player in its own right in the indus-
try is Acer, the Taiwanese computer MNC. More detail on that case is provided in
the paragraph below.
Taiwan is a small country, as are Finland and Israel, with limited domestic mar-
ket opportunities, yet it is a known fact that about 50% of all PCs sold in world
markets in the last decade or so have been produced by Taiwanese manufacturers.
The development is relatively recent. It has taken place since the later 1980s and
early 1990s when leading PC vendors like Dell, HP-Compaq, IBM, Fujitsu-ICL
started to outsource and contract manufacture their PCs in the Far East. Acer
started by producing components for most of these leading PC companies and
other OEM products. Acer became an important producer and designer of note-
books and desktop computers that were sold under large PC vendor brands all
over the world in the early 1990s. Thus, on the one hand, the MNCs got their low
564 M. Gabrielsson, V.H. Manek Kirpalani / International Business Review 13 (2004) 555–571

and middle range offerings produced, and partly designed, inexpensively. Acer, on
the other hand, was able to enjoy large-scale advantages from its combined PC
supply volume and learn from the networking with R&D and marketing personnel
from the MNCs. Acer and other Taiwanese producers, however, faced a major
problem. Their negotiation power was very weak against those large MNCs.
Therefore, they received low prices, which led to rather moderate financial per-
formance. Acer took the offensive from the mid 1990s, and started to develop its
own brand. This gave it bargaining power towards the MNCs over pricing. Fur-
thermore, it began to generate increasing sales revenues under its own brand.
5.3. Internet as a channel for born globals

Many born globals have found forming networks and then marketing through
the Internet a good means to overcome their paucity of resources (see e.g. Moen,
2002a,b). Amazon started off as a born global and has used the Internet to grow
very fast. It is now even leveraging its customer base by ‘‘renting’’ its customers to
affiliates and partners, such as Circuit City and Toys ‘‘R’’ Us (Sawhney and Zabin,
2002: p. 319).

6. Born globals: selected examples of some which have accessed new channels
and found new business space

In this study, by definition, born globals have product and/or service but are
short of resources. From this viewpoint, examples from small countries with small
markets, open economies, and short of resources are very pertinent. Israel and Fin-
land have been natural source countries, having produced a number of fast grow-
ing born globals. Israel is an international leader in terms of the contribution of
high tech to overall exports; some two-thirds of industrial exports, excluding cut
diamonds, are accounted for by knowledge-intensive industries. Today’s Finland
has the highest percentage of population educated at the tertiary level, of any
industrialized country. Thus, the recent increase in the number of born globals
there is not unexpected.
6.1. Examples from Israel

Some 96 of the Israel firms traded on the Nasdaq are defined as knowledge-
intensive. But the other parameter from our viewpoint had to be that they must be
born globals; with the unique feature of operating in global markets from their
inception or very early on. This narrowed the selection to 41 firms. As the firms
grew in size, they faced increasing competition. Thus, in recent years, they have
had to invest 5% of sales revenue or more in R&D (Almor, 2000). The firms came
primarily from three industries: software (18 firms), electronics (12 firms) and tele-
communications (eight firms). The firms had sales ranging from US$ 3 to 400 mil-
lion in the late 1990s, which is small as compared to other firms traded on that
stock exchange. The customers for their knowledge-intensive products were large
 M. Gabrielsson, V.H. Manek Kirpalani / International Business Review 13 (2004) 555–571 565

buyers, often MNCs. Others were institutional buyers such as banks, insurance
companies, and airports, who need solutions to problems, which are similar on a
global level.
Three useful examples, from our viewpoint, from the sample of 41 listed on Nas-
daq are analyzed below. Tecnomatix, located in Israel, mainly serves the global
automotive industry. Its eMPower Web-based collaboration software is designed to
develop, communicate, and achieve optimal manufacturing processes. Its annual
sales are over US$ 81 million and 70% of this goes to automotive manufacturers
all over the world (Almor, 2000). The rest goes to aerospace companies, contract
manufacturers, consumer electronic companies and telecommunications equipment
makers. The stock has been quoted on the Nasdaq since 1993. Another example is
Nice Systems Ltd., which specializes in institutional customers such as those men-
tioned in the previous paragraph. The company product ‘‘makes sure employees of
its customers say please and thank you!!’’ Financial institutions such as Deutsche
Bank and J.P. Morgan Chase & Co. are customers, as are telecommunication com-
panies like Avaya, and EarthLink. The company’s customer experience manage-
ment systems monitor interaction with customers, besides recording and archiving
telephone conversations, desktop screens, and video. Nice Systems also offers voice
recording and communications intelligence systems to government agencies, and
traffic control logging systems. The company counts Lucent Technologies, Micro-
soft and Siemens among its partners. The company sales are over US$ 150 million
annually. A final example is Checkpoint Systems Inc., with annual sales of US$
723 million and growing at 17% annually. The company makes electronic article
surveillance systems, electronic security devices, closed-circuit TV systems and elec-
tronic access control systems, used by retailers and grocers. If their circuit tags are
not disarmed at checkout, they trigger electronic sensors when the customer tries to
leave. They also manufacture firewalls, which protect computer systems from hack-
ers and other outsiders. Their clients worldwide encounter similar problems and
require similar solutions, which allow the company to market a global product.
The sample data of these 41 Israeli born globals, which were listed on the Nas-
daq, showed that the firms were born globals, reaching worldwide from their incep-
tion. This was possible because of their founders’ core competencies. These
included technological knowledge and market knowledge, neither of which
required much capital and were not dependent on scale economies. Furthermore,
they had limited manufacturing costs. Manufacturing in many cases is not a cen-
tral function in knowledge-intensive companies and often may be easily out-
sourced. For software makers, manufacturing may just consist of ‘‘burning’’
software onto a CD-ROM. Obviously, as these born globals gained greater resour-
ces from customer revenues and financial capital from public offering of their
stocks, they were able to fund R&D, which has grown as a core capability in which
the companies invest large portions of their income. Also, they presently are found
to invest large amounts in marketing. Both these investments are being done in
order to maintain rapid growth as their size expanded.
566 M. Gabrielsson, V.H. Manek Kirpalani / International Business Review 13 (2004) 555–571

6.2. Examples from Finland

The Finnish examples were selected from a survey data of 90 born global com-
panies, which fitted our definition. Selected cases were chosen for more in-depth
investigation from the Finnish born globals data so that they matched the Israeli
data from the same kind of software small entrepreneur background. This enabled
us to further comparatively analyze the channel selections of born globals with
relatively similar products. It should be noted that the growth of the selected Fin-
nish companies has been rapid but slower than that of the selected Israeli compa-
nies because the latter raised funding from their Nasdaq debut and successfully
used these larger resources for increased growth.
F-Secure, a Finnish born global security software company, has become global
rapidly. The founder was a young student with limited financial and managerial
resources. F-Secure spread rapidly since its establishment in Helsinki in 1988. The
firm has a global product and has reached a worldwide clientele. Their success
stems from cooperation with large MNCs that already have a global presence.
Today, F-Secure is supported by a network of value added resellers and dis-
tributors in over 90 countries. In addition, the company has a North American
regional headquarters in San Jose, California, besides a number of branch offices in
the USA. Further, it has offices in Germany, Japan, Sweden, and the UK. F-
Secure and Deutsche Telecom, Europe’s largest telecom operator, recently
announced a partnership to offer antivirus and firewall software services to 350,000
business customers in Germany. F-Secure provides the security applications as well
as the back-end technology to manage subscriptions, and hosts the service on
behalf of Deutsche Telecom. The latter markets, sells and provides technical sup-
port for the services. Furthermore, F-Secure security software solutions are pro-
vided in other parts of Europe by Wanadoo in France, Telia AB and Telenordia in
Sweden and Sonera in Finland, and worldwide by Compaq. In a very similar fash-
ion, some other Finnish security software companies use global MNCs as their dis-
tribution channel; for example, SSH Communications, which piggybacks sales
through the Sun Microsystems distribution system.
Solid Information Technology, another Finnish software company, has rapidly
developed worldwide sales. It was established in 1992 by four newly graduated
engineers. They produced data management and synchronization software, which
was utilized by large IT companies like Nokia, HP and Siemens in their products.
Solid Information Technology sold their product technology, often via the Inter-
net, to the above-mentioned MNCs, who then adapted the technology to their own
products and distributed those products to their end customers. Therefore, Solid
Information Technology only had to render delivery and support services to selec-
ted IT and telecom companies.
Stonesoft is a Finnish specialized know-how born global company founded in
1990, which provides software for network security solutions. By 2001, its annual
sales revenue had grown to 4 58 million, generated from 60 countries worldwide. It
is currently listed on the Helsinki Stock Exchange. Since 1994, it became the Nor-
dic distributor of firewalls for Checkpoint Technologies Ltd., an Israeli born global
 M. Gabrielsson, V.H. Manek Kirpalani / International Business Review 13 (2004) 555–571 567

Internet security company. Stonesoft soon developed its own network security pro-
duct named Stonebeat, which was distributed through Check Point’s global chan-
nels. In 1997, Stonebeat began to sell in the USA and soon sales started up in
Europe and Asia. By 2001, some 63% of total sales were generated from Europe,
the Middle East and Africa; 27% from the Americas; with the remaining 10% com-
ing from Asia and the Pacific Rim. Stonesoft strategy was to lessen its dependence
on Check Point, and widen its channel vehicles. Thus, it expanded sales through
appointing a few selected European and US distributors, such as US GE Access,
and value added resellers. Stonesoft products are now sold by over 2000 resellers.
Twelve sales subsidiaries have been established in its major markets in Europe, the
Americas and Asia. These subsidiaries support the activities of its distributors and
resellers. In addition, Stonesoft has cooperated with several MNCs, which are act-
ing as hardware and software product systems integrators, such as HP-Compaq,
Fujitsu-Siemens, and IBM. However, its major distributor remains Check Point.
Interestingly enough, a channel conflict emerged when Stonesoft introduced its new
Stonegate product, which Check Point found competing with its own product
range. So the latter informed its own resellers not to sell Stonegate, for otherwise it
would stop supplying them Check Point products. This restriction has now been
withdrawn because the EU authorities found the marketing control behaviour
unacceptable. The above-mentioned companies belong to the so-called Finnish ICT
cluster ranging from application software, component/contract manufacturers,
content and consulting companies, to infrastructure and terminal producers, and
telecom operators. This ICT cluster generates a total revenue of some 4 20 billion
annually (Ali-Yrkkö, 2001).
Based on the analysis of both Israeli and Finnish knowledge-intensive born glo-
bals, we were able to verify that our earlier postulation of viable channel alter-
natives was correct. These channels are: MNCs acting as systems integrators,
MNCs distributing born global products/services, networks, Internet, and some
combinations of the above. The born global companies utilizing MNCs as their
channel are to a large extent dependent on their partner MNCs to distribute their
products and have little to say as to how their products are marketed to end-custo-
mers. From all of the above, what managerial implications and future research
areas can be derived?

7. Managerial implications and areas of future research

On analysis, it was found that a number of the managerial implications sug-

gested areas where future research would be useful. Therefore, with each mana-
gerial implication, if there is a consequent area of future research it is mentioned
immediately.

1. From the Acer case, it became evident that the born global management must
strategize from the start of a tie-up with an MNC as to when they will try to
become independent. If a born global sells solely to an MNC, there is the risk of
568 M. Gabrielsson, V.H. Manek Kirpalani / International Business Review 13 (2004) 555–571

a prolonged ‘‘dependency’’ relationship. How long should ‘‘dependency’’ last?

Further, what does independence mean in terms of developing one’s own brand?
Two obvious ensuing areas of future research suggest themselves. One is to
study the factors that are crucial to the decision as to when to become inde-
pendent; here, the Acer case might be useful to study in depth. The other is to
investigate how born global management should decide on the ‘‘best’’ brand for
the company.
2. As illustrated by Tecnomatix, Nice Systems and Checkpoint Systems cases, born
globals ought to add product/service width and length to develop more market
power versus distributors and resellers. A large area of future research in this
connection is to what extent a born global should try to develop these products/
services internally, and to what extent should they acquire them, distribute those
of others, or be agents for others. Furthermore, how much resources should
they allocate to developing their own brands and thus strengthen their negotiat-
ing position?
3. The Stonesoft case analyzed earlier was a relatively rare instance of direct cross
distribution cooperation by two born globals, united by product familiarity. But
it gives food for thought. It led to conflict. Born globals must join MNCs or
networks where the possibility of marketing conflict in the future is minimized.
The research area would be to study why conflicts have arisen. Another conse-
quent area is how to lessen conflict if it does arise?

8. Conclusions

In today’s world, the phenomena of entrepreneurship commands growing inter-

est amongst business leaders and policy makers. It has its historical roots in the
significant impact of Schumpeter’s work on the entrepreneurial function, and the
study by scholars on the attributes of entrepreneurs. Born globals are a subset of
entrepreneurs. Born globals do not possess sufficient resources at start-up time to
stand up to a serious business mistake. They have often borrowed monetarily by
pledging their personal assets. Any serious business mistake heavily damages their
personal asset base. Therefore, born global companies trying to reach new business
space in international markets rapidly must use the channels outlined earlier of
MNCs as system integrators/distributors, networks, and the Internet, either separ-
ately or in combination. In this way, the born global’s risk is lessened. This is our
major message and contribution.
There does not seem to have been much focus on this aspect in the international
business literature on how born globals can be more effective and lower their risk
by using the large channels proposed. In earlier research, born globals have been
found to utilize ‘‘alternative governance structures’’ and more often in their distri-
bution channels to rely on hybrid structures (close relationships, network partners)
(Madsen & Servais, 1997). However, little has been said about what channel strate-
gies should be used and which members they should turn to. Coviello and Munro
(1997) touched upon the topic but did not explore it in-depth when examining
 M. Gabrielsson, V.H. Manek Kirpalani / International Business Review 13 (2004) 555–571 569

small New Zealand-based software developers and found network relationships to

facilitate the internationalization process. Neither has the subject been approached
from this viewpoint in the international marketing channels literature. Moreover,
even in the strategy literature, emphasis has not been placed on this matter. Thus,
the emphasis placed here on this important area should be of significant interest to
academicians and practitioners, especially to the owners of born global companies.
The three major managerial implications depicted in respect to the problem area of
becoming overly dependent on the large MNCs are believed to offer some major
possibilities to go in-depth in future born globals research: when to become inde-
pendent, how to build market power and how to avoid or lessen potential
conflicts?
For a born global company, the MNC global partners’ role was usually even
more important than the Internet as a channel. A probable good reason for this is
that in electronic commerce customer trust can seldom be achieved without the
well-recognized brand offered by successful MNCs. Earlier research has often
investigated either the role of the Internet (see e.g. Moen, 2002a, b) or then the role
of the network relationships (Coviello & Munro, 1997) for born globals but has
neglected their interplay. In this study, Internet was found to be useful when the
born globals were in a network combination with large MNCs.
For a born global to adopt the strategy at the start-up of borrowing and build-
ing resources places them on a slower growth path. Given the market variability in
the increasingly competitive environment of this century, where production capa-
bility is in excess of demand, this is a high risk option. Furthermore, the time for
which a company can through its R&D remain a technological leader has nar-
rowed. Many MNC competitors in every technological field have extensive R&D
establishments and catch up quickly. Thus, in the advancing knowledge world of
the 21st century, the total risk of a slow growth path for a born global can easily
become excessive.

Acknowledgements

This article has benefited from the born globals research project led by Professor
Reijo Luostarinen of the Helsinki School of Economics. The project is part of the
LIIKE-research program, financed by TEKES, the National Technology Agency,
and the Academy of Finland.

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