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Born Global Or Forced Global? The Internationalisation Of Sme Firms

2896 words - 12 pages

Common sense suggests that a firm will only enter an international market when there is an incentive or benefit to do so. The timing and mode to how this takes place has been of increasing focus in modern literature- can firms be born global? This is a confronting thought when taken in the context of established theories such as Johanson and Vahlne's Internationalisation theory of the 1970s. However, when contrasted against more modern theories such Oviatt and McDougall's International New Ventures theory and other similar concepts, incentives which entice a firm to become global, start to emerge.This paper looks at the theoretical incentives for an SME to go global quickly. I do this by comparing and contrasting the born global theories to the more familiar internationalisation theory against 4 key statements. The reason for this approach is that internalisation theory, having been the leading theory for some 20 years, stands as a benchmarking and context point, for which more modern theories can be interpreted and studied. It also allows the reader to understand why some of the following points may be considered an incentive as opposed to just an existing factor of circumstance. By identifying contrasting factors, we can extrapolate if such factors are incentives or rather, taking a forceful effect on SMEs in the technology sector.The structure of my discussion will be as follows; A summary of fundamental differences of born global theories to internationalisation theory, followed by an analysis of factors which act as an incentive to become a global firm against 4 key statements. I conclude by addressing the statement if SMEs are forced into the global market and suggest further areas for research.Johanson and Vahlne's Internationalisation theory explains the international development of the firm. This theory suggests that the internationalisation of the firm occurs in small incremental steps to allow learning and adaption as the process continues and builds. It is suggested, once the firm has assured success in its own home market, it will go through a process of gradual acquisition, integration and use of knowledge about foreign markets and operations which results in a gradual commitment to exporting and eventually manufacturing in those foreign markets (Johanson and Vahlne, 1977).Internationalisation is seen as an action taken by the firm with reluctance and great risk adversity to change or new environments. Entry mode is typically initiated with exports to a new market via an agent or subsidiary, when eventually the production or manufacturing is moved into the foreign market to supply that countries demand of the firms' output (Johanson and Vahlne, 1977).One assumption which is core to the theory is that a firms' original intent is to supply the domestic market. For example, if the firm was set up in India, it must initially supply the Indian market, with an aim to meet the demand which exists in that market. However, the environment...

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