resource diﬀerences between born global and born regional ... · resource diﬀerences between...

57International Business : Research, Teaching and Practice | 7.1

RESEARCH

Resource di!erences between Born Global and Born Regional firms:Evidence from Canadian Small and Medium-Sized Manufacturers 1997-2004

Sui Sui Assistant Professor, Global Management Studies Department, Ted Rogers School of Management, Ryerson University

Zhihao Yu Professor of Economics, Department of Economics, Carleton University

Matthias Baum Chair for Entrepreneurship, Department of Entrepreneurship, University of Kaiserslautern

CORRESPONDING AUTHOR Sui SuiRyerson University575 Bay Street Toronto, ON, M5G 2C5��H[W��[email protected]

ABSTRACT While international business research has intensively observed the GHWHUPLQDQWV� DQG� RXWFRPHV� RI� ,QWHUQDWLRQDO� 1HZ� 9HQWXUHV� �,19�� ZH�only have a limited understanding on why some INVs pursue regional IRFXVHG�LQWHUQDWLRQDOL]DWLRQ��VR�FDOOHG�%RUQ�5HJLRQDO�)LUPV��ZKLOH�RWKHUV�GHFLGH� IRU�D�JOREDOO\�GLVSHUVHG�DSSURDFK��VR�FDOOHG�%RUQ�*OREDO�ÀUPV��This study draws on resource-based theory and applies logistic regression on a longitudinal sample of 604 Canadian small and medium-sized exporting manufactures to investigate how initial internal resources differ EHWZHHQ�%RUQ�*OREDO�DQG�%RUQ�5HJLRQDO�ÀUPV��:H�ÀQG�WKDW��FRPSDUHG�WR� %RUQ� 5HJLRQDOV�� %RUQ� *OREDOV� KDYH� VLJQLÀFDQWO\� JUHDWHU� IRUHLJQ�PDUNHW� NQRZOHGJH�� DQG� KDYH� VLJQLÀFDQWO\� KLJKHU� LQLWLDO� SHUIRUPDQFH��We advance research about the internationalization-performance link by means of a reverse causality regarding this relation in which initial SHUIRUPDQFH�LQÁXHQFHV�WKH� LQWHUQDWLRQDOL]DWLRQ�DSSURDFK�RI� ,19V��7KLV�provides additional support for the regionalization hypothesis and the assumption that a global expansion does not necessarily lead to higher performance, but demands a greater amount of resource input.

INTRODUCTION 7KH� LQWHUQDWLRQDOL]DWLRQ� SURFHVV� RI� HQWUHSUHQHXULDO� ÀUPV�KDV� LQWULJXHG� LQWHUQDWLRQDO� EXVLQHVV� �,%�� VFKRODUV� IRU� PRUH�than two decades. During this time span, numerous valuable contributions regarding the prevalence (e.g. McDougall & 2YLDWW��DQG�GHYHORSPHQW��H�J��0XGDPEL��=DKUD��RI�VR�FDOOHG�,QWHUQDWLRQDO�1HZ�9HQWXUHV��,19V�� L�H��ÀUPV�WKDW�VWDUW�LQWHUQDWLRQDO�DFWLYLWLHV�LQ�D�YHU\�HDUO\�OLIH�VWDJH��KDYH�EHHQ�

KEYWORDS | Born Globals; Born Regionals; International new ventures; International entrepreneurship

58 International Business: Research, Teaching and Practice | 7.1

RESEARCH

SXEOLVKHG��VHH�-RQHV��&RYLHOOR��7DQJ��RU�.HXSS��*DVVPDQQ��IRU�D�UHYLHZ��'HVSLWH� DQ� LPSUHVVLYH� YROXPH� RI� UHVHDUFK� RQ� ,19V�� WZR� LPSRUWDQW� TXHVWLRQV� KDYH�received only limited attention: determinants of internationalization strategy choice and the exogenous role of performance.

Relatively little is known why some INVs restrain their international forays to their KRPH� UHJLRQ� �%RUQ�5HJLRQDO� ÀUPV��ZKLOH� RWKHUV� SXUVXH� D� JHRJUDSKLFDOO\�GLVSHUVHG�VWUDWHJ\��%RUQ�*OREDO�ÀUPV��VLQFH�RQO\�IHZ�UHVHDUFKHUV�KDYH�SDLG�DWWHQWLRQ�WR�GLIIHUHQFHV�among INV strategies (e.g. Baum, Schwens & Kabst, 2011; Gabrielsson, Kirpalani, 'LPLWUDWRV��6ROEHUJ��=XFKHOOD��.XLYDODLQHQ��6XQGTYLVW��6HUYDLV��0RVW�studies on INVs confound different INV strategies under one label, although empirical �H�J�� 3XONNLQHQ� � /DULPR�� DV� ZHOO� DV� WKHRUHWLFDO� �2YLDWW� �0F'RXJDOO�� arguments exists “that INVs are a heterogeneous rather than homogenous group of ÀUPVµ��%DXP�HW�DO��

&RQQHFWHG� ZLWK� WKDW�� SUHYLRXV� VWXGLHV� PDNH� FRQÁLFWLQJ� DVVXPSWLRQV� DQG� VKRZ�PL[HG� UHVXOWV� UHJDUGLQJ� WKH� UHODWLRQ� EHWZHHQ� ÀUP� SHUIRUPDQFH� DQG� LQWHUQDWLRQDO�new venturing. Most INV studies assume that performance is an outcome of LQWHUQDWLRQDOL]DWLRQ�VWUDWHJ\��+DJHQ��=XFFKHOOD��&HUFKLHOOR��-RQHV�HW�DO��DQG�WKDW�WKH�GHJUHH�RI�LQWHUQDWLRQDOL]DWLRQ�SRVLWLYHO\�LPSDFWV�ÀUP�SHUIRUPDQFH��$FFRUGLQJ�WR�WKLV�VWUHDP�RI�UHVHDUFK��2YLDWW��0F'RXJDOO��JHRJUDSKLF�VDOHV�GLYHUVLÀFDWLRQ�LQFUHDVHV�DFFHVV�WR�ÀQDQFLDO�UHVRXUFHV��*DEULHOVVRQ��6DVL��'DUOLQJ��6KDYHU��DQG�LV�PHDQW�WR�OHDG�WR�KLJKHU�H[SRUW�SHUIRUPDQFH��.XLYDODLQHQ�HW�DO��+RZHYHU��empirical proof for these assumptions is largely based on cross-sectional data.

0RUHRYHU�� WKHVH� WKRXJKWV� DUH�� DW� OHDVW� SDUWLDOO\�� LQ� FRQÁLFW�ZLWK� RWKHU� SURPLQHQW�and largely proven internationalization frameworks: the regionalization hypothesis �5XJPDQ� � 9HUEHNH�� DQG� VWDJH� PRGHOV� RI� LQWHUQDWLRQDOL]DWLRQ� �-RKDQVRQ� �9DKOQH��$FFRUGLQJ�WR�WKH�UHJLRQDOL]DWLRQ�K\SRWKHVLV��5XJPDQ��9HUEHNH��5XJPDQ��9HUEHNH��DV�ZHOO�DV�VWDJH�PRGHOV�RI�LQWHUQDWLRQDOL]DWLRQ��-RKDQVRQ��9DKOQH��D�%RUQ�*OREDO�VWUDWHJ\�KROGV�FRPSDUDWLYHO\�KLJK�ULVNV�RI� IDLOXUH�DQG�UHTXLUHV�D�KLJK�LQLWLDO�UHVRXUFH�FRPPLWPHQW��%URXWKHUV��%URXWKHUV��:HUQHU��Following this rationale, a Born Global approach fostering a broad international scope GRHV�QRW�GHWHUPLQH�KLJKHU�ÀUP�SHUIRUPDQFH�EXW�UHTXLUHV�D�KLJKHU�LQLWLDO�UHVRXUFH�EDVH��H�J��KLJKHU�SHUIRUPDQFH�DV�UHVRXUFH�LQSXW��WR�EH�SXUVXHG�

7KLV� VWXG\� DSSOLHV� UHVRXUFH� EDVHG� UHDVRQLQJ� �%DUQH\�� WR� UHVROYH�FRQÁLFWLQJ�ÀQGLQJV�IURP�SUHYLRXV�UHVHDUFK��,Q�GRLQJ�VR��ZH�REVHUYH�WKH�LPSDFW�RI�ZHOO�HVWDEOLVKHG�GULYHUV�RI� LQWHUQDWLRQDOL]DWLRQ��ÀUP�VL]H�DQG� IRUHLJQ�PDUNHW�NQRZOHGJH��$GGLWLRQDOO\�� ZH� WDNH� WKH� VWDQFH� WKDW� ÀUP� SHUIRUPDQFH� LV� QRW� RQO\� DQ� RXWFRPH� RI�internationalization, but also a resource that drives internationalization strategy choice. Therefore, we further contribute to IB literature by showing that performance can also be an antecedent of internationalization strategy and not only its outcome.

We apply a longitudinal empirical approach in order to observe resource differences among Born Globals and Born Regionals and the exogenous role of performance. :H�XVH� ORQJLWXGLQDO�ÀUP�OHYHO�GDWD� WKDW�ZDV� FRQVWUXFWHG�XSRQ�PXOWLSOH� ODUJH� VFDOH�

Sui, Yu, Baum | Resources di!erences between BGs and BRs


RESEARCH

administrative databases from Statistics Canada. Our data set includes the business activities of all Canadian exporting enterprises that have at least one shipment to a foreign country between 1997 and 2004, which allows us to investigate the internationalization process of a representative sample of Canadian SMEs without having sample selection issues. Prior studies differentiating between different INV VWUDWHJLHV��H�J��%RUQ�5HJLRQDO�YV��%RUQ�*OREDO��ZHUH�TXDOLWDWLYH�LQ�QDWXUH��H�J��/RSH]��.XQGX��&LUDYHJQD��3XONNLQHQ��/DULPR��RU�UHOLHG�RQ�FURVV�VHFWLRQDO�GDWD��.XLYDODLQHQ�HW�DO��2Q�WKH�EDVLV�RI�RXU�ORQJLWXGLQDO�VWXG\�GHVLJQ�ZH�FDQ�PDNH�D�stronger case on the endogeneity of INV strategy choice than prior studies have.

CONCEPTUAL FRAMEWORK AND HYPOTHESES DEVELOPMENTDefining Born Regional and Born Global firms

'HVSLWH�WKH�LQFUHDVH�LQ�,19�VWXGLHV�RYHU�ODVW�\HDUV��D�XQLYHUVDOO\�DFFHSWHG�GHÀQLWLRQ�RI�,19V��RU�PRUH�VSHFLÀFDOO\�GLIIHUHQW�,19�VWUDWHJLHV��KDV�QRW�EHHQ�GHYHORSHG�\HW��,Q�HPSLULFDO�VWXGLHV�WKH�PRVW�FRPPRQ�FULWHULD�WKDW�KDYH�EHHQ�XVHG�WR�GHÀQH�,19V�DUH�WKH�DJH�DW�WKH�ÀUVW�LQWHUQDWLRQDOL]DWLRQ�DQG�WKH�LQWHQVLW\�RI�LQWHUQDWLRQDO�DFWLYLWLHV��IRUHLJQ�VDOHV�WR�WRWDO�VDOHV�UDWLR��,Q�HDUO\�,QWHUQDWLRQDO�(QWUHSUHQHXUVKLS��,(��VWXGLHV�WKHVH�WZR�FULWHULD�KDYH�EHHQ�VLPXOWDQHRXVO\�XVHG�WR�GHÀQH�,19V�LQ�JHQHUDO�DV�ZHOO�DV�%RUQ�*OREDO�ÀUPV��ZLWKRXW�WDNLQJ�GLIIHUHQFHV�EHWZHHQ�,19�VWUDWHJLHV� LQWR�DFFRXQW��2QH�H[DPSOH�FODVVLÀFDWLRQ� VSHFLÀHV� %RUQ�*OREDOV� DV� ÀUPV� WKDW� UHDOL]H� DW� OHDVW� �� RI� WKHLU� VDOHV�DEURDG�ZLWKLQ�WKUHH�\HDUV�RI�WKHLU�LQFHSWLRQ��.QLJKW��&DYXVJLO��

More recently, IE researchers have started to differentiate between INVs that focus on WKHLU�KRPH�UHJLRQ��%RUQ�5HJLRQDO�ÀUPV��DQG�WKRVH�,19V�WKDW�SXUVXH�D�JOREDO�DSSURDFK��%RUQ�*OREDO� ÀUPV�� 7KXV�� WKH� GHVWLQDWLRQ� RI� LQWHUQDWLRQDO� DFWLYLWLHV� LV� HQWHUHG� LQWR�WKH�DQDO\VHV��,Q�WKLV�FRQWH[W�LW�LV�DUJXHG�WKDW�%RUQ�5HJLRQDO�ÀUPV�IDFH�ORZHU�ULVNV�DQG�OLDELOLWLHV�RI� IRUHLJQQHVV�FRPSDUHG� WR�%RUQ�*OREDO�ÀUPV� �5XJPDQ��9HUEHNH��since they operate in a restricted geographical areas with psychic and geographically SUR[LPDWH�FRXQWULHV��-RKDQVRQ��9DKOQH��

)URP�WKH�SHUVSHFWLYH�RI�&DQDGLDQ�ÀUPV��WKHUH�DUH�ORZHU�ULVNV�DQG�FRVWV�DVVRFLDWHG�with entering the U.S. market because of the geographical advantage and the cultural similarity between the two countries. As such, we propose that operating in the U.S. market should be conceded as a regional rather than global activity. Following previous VWXGLHV��*DEULHOVVRQ�HW�DO��.XLYDODLQHQ�HW�DO��/RSH]�HW�DO��D�ÀUP�LV�FODVVLÀHG�DV�%RUQ�*OREDO�LI�LW�VWDUWHG�H[SRUWLQJ�ZLWKLQ�WKUHH�\HDUV�RI�LQFHSWLRQ��KDV�DQ�H[SRUW� LQWHQVLW\�RI� ��RU�KLJKHU� DQG�KDV� H[SRUWHG� WR� WKH�JOREDO� �QRQ�8�6��PDUNHW�GXULQJ�WKH�ÀUVW�WZR�\HDUV�RI�LWV�H[SRUW�DFWLYLW\��D�ÀUP�LV�FODVVLÀHG�DV�%RUQ�5HJLRQDO�LI�it started exporting within three years of inception, has an export intensity of 25% or KLJKHU�DQG�KDV�RQO\�H[SRUWHG�WR�D�UHJLRQDO��WKH�8�6��PDUNHW�GXULQJ�WKH�WZR�\HDUV�RI�LWV�H[SRUW�DFWLYLW\��,W�LV�LPSRUWDQW�WR�QRWH�WKDW�LI�ZH�XVH�WKH�FRQYHQWLRQDO�GHÀQLWLRQ�RI�%RUQ�*OREDO�DV�GHYHORSHG�E\�.QLJKW�DQG�&DYXVJLO��WKH�%RUQ�5HJLRQDO�ÀUPV�LQ�our sample would also be considered as “Born Globals”.



RESEARCH

Firm Resources as Drivers of Internationalization Strategy Choice

7KH� UHVRXUFH�EDVHG� WKHRU\� �5%7��QRW�RQO\�PDNHV�DVVXPSWLRQV�DERXW� WKH� UHODWLRQ�between resources and performance, but also on the link between resources and SXUVXHG� VWUDWHJLHV�� $FFRUGLQJ� WR� 5%7�� D� ÀUP·V� UHVRXUFH� HQGRZPHQW� GHWHUPLQHV�LWV� DELOLWLHV� WR� SXUVXH� VSHFLÀF� VWUDWHJLHV� �VXFK� DV� LQWHUQDWLRQDOL]DWLRQ� VWUDWHJLHV��:HUQHUIHOW��7KLV�UDWLRQDOH�LV�PRVWO\�DGDSWHG�WR�WKH�H[SODQDWLRQ�RI�GHWHUPLQDQWV�DQG�RXWFRPHV�RI�SURGXFW�GLYHUVLÀFDWLRQ��+LWW��+RVNLVVRQ��,UHODQG��EXW�LV�DOVR�DSSOLFDEOH�WR�LQWHUQDWLRQDO�GLYHUVLÀFDWLRQ��+LWW��+RVNLVVRQ��.LP��7KRXJK�WKLV�OHQV��SRWHQWLDO�JURZWK�DQG�VWUDWHJLF�FKRLFHV�DUH�PRVWO\� OLPLWHG�E\�D�ÀUP·V�UHVRXUFHV�UDWKHU�WKDQ�PDUNHW�FRQGLWLRQV��3HQURVH��

,I�D�ÀUP�KDV�YDOXDEOH��UDUH��LQLPLWDEOH�DQG�LQVXEVWLWXWDEOH��%DUQH\��UHVRXUFHV��LW� LV�DEOH� WR�SXVK�VWUDWHJLHV� IRUZDUG��ZKLFK�DUH�GLIÀFXOW� WR�FRS\�E\�FRPSHWLWRUV�DQG�ZKLFK� HYHQ� WKH� JURXQG� IRU� FRPSHWLWLYH� DGYDQWDJHV�� $FFRUGLQJ� WR� WKH� 5%7�� ÀUPV�ZLWK�D�VWURQJ�UHVRXUFH�EDVH�DUH�PRUH�OLNHO\�WR�ÀQG�FXVWRPHUV�LQ�QHZ��IRUHLJQ�PDUNHWV�and can better alleviate market entry barriers by foreign competitors (Bloodgood, 6DSLHQ]D��$OPHLGD��,I�D�ÀUP�KDV�YDOXDEOH��UDUH�DQG�QRW�HDVLO\�VXEVWLWXWHG�RU�imitated resources, it is more likely to have competitive advantages in multiple foreign HQYLURQPHQWV��2YLDWW��0F'RXJDOO��DQG�HYHQ�LQ�HQYLURQPHQWV�WKDW�KROG�VHYHUH�ULVNV�IRU� OLDELOLWLHV�RI�IRUHLJQQHVV��+\PHU��$�%RUQ�*OREDO�VWUDWHJ\�VHHPV�WR�EH�such a “hard to apply strategy” because it greatly increases transaction costs and resource demand (Brouthers, Mukhopadhyay, Wilkinson & Brouthers, 2009; Ripollés, %OHVD��0RQIHUUHU�� )LUPV�ZLWK� D� VWURQJ� UHVRXUFH� VWRFN�ZLOO� WKHUHIRUH� KDYH� D�higher proclivity towards increasing their international operations already in early VWDJHV�RI�WKHLU�H[LVWHQFH��%DXP��6FKZHQV��.DEVW��%ORRGJRRG�HW�DO��DQG�pursue a Born Global Strategy.

Firms with a strong resource base have higher capacities for fostering forays abroad. Internationalizing into plural environments, particularly for those with differing cultural or institutional backgrounds, is more resource demanding than a concentrated LQWHUQDWLRQDOL]DWLRQ��KXPDQ�UHVRXUFHV��ÀQDQFLDO�UHVRXUFHV�HWF��0RUHRYHU��WKH�IXUWKHU�D�ÀUP�VSUHDGV�LWV�LQLWLDO�LQWHUQDWLRQDOL]DWLRQ�DFWLYLWLHV��WKH�KDUGHU�LW�EHFRPHV�WR�PDQDJH�HDFK� IRUHLJQ�PDUNHW� DFWLYLW\�� VLQFH� ´GHDOLQJ�ZLWK� IRUHLJQ�JRYHUQPHQW� RIÀFLDOV�� ODZV�and agencies, suppliers, and customers increases the complexity of managing such DQ�HQWHUSULVH��WD[LQJ�PDQDJHULDO�UHVRXUFHV�DQG�H[SHUWLVHµ��%URXWKHUV�HW�DO��+HQFH�� WKH� DELOLW\� WR� GHFLGH� IRU� DQ� LQWHUQDWLRQDOL]DWLRQ� VWUDWHJ\� LV� LQÁXHQFHG� E\� D�ÀUP·V�LQWDQJLEOH�DQG�WDQJLEOH�UHVRXUFHV��7DQ��3ORZPDQ��+DQFRFN��,QWDQJLEOH�resources cover aspects like foreign market knowledge of managerial skills (Axinn, ��7DQJLEOH�UHVRXUFHV�FRQVLVW�RI�IHDWXUHV�OLNH�ÀQDQFLDO�UHVRXUFHV�RU�ÀUP�VL]H��%LONH\��&KDQJ��5KHH��

Summing up, we argue that a Born Global strategy is connected with higher initial liabilities of foreignness and that overcoming liabilities of foreignness is resource-



RESEARCH

GHPDQGLQJ�� 7KXV�� ÀUPV�ZLWK� D� KLJKHU� LQLWLDO� UHVRXUFH� EDVH�PD\� EH�PRUH� OLNHO\� WR�pursue a born global rather than a born regional approach.

Hypotheses Previous performance as antecedent of internationalization strategy

While performance is mostly observed as an outcome of internationalization �*DEULHOVVRQ�HW�DO��5XDQH��6XWKHUODQG��LQLWLDO�SHUIRUPDQFH�PLJKW�EH�RQH�of the most important predictors of strategic options and, as such, of the possibility WR�FKRRVH�D�ERUQ�JOREDO�VWUDWHJ\��3HUIRUPDQFH�LQFUHDVHV�WKH�DFFHVV�WR�IXUWKHU�ÀQDQFLDO�resources since it acts as a positive signal to investors. Financial performance also serves DV�DQ� LQGLFDWRU� IRU� WKH�TXDOLW\�RI� WKH�SURGXFWV�DQG�VHUYLFHV�RIIHUHG�E\� WKH�ÀUP�DQG�WKH�TXDOLW\�RI�SDVW�VWUDWHJLF�GHFLVLRQV��,I�D�ÀUP�VKRZV�D�VWURQJ�ÀQDQFLDO�SHUIRUPDQFH��H[WHUQDO�LQYHVWRUV�ZLOO�EH�PRUH�OLNHO\�WR�SURYLGH�DGGLWLRQDO�ÀQDQFLDO�VXSSRUW�IRU�IXWXUH�ÀUP�GHYHORSPHQW��VXFK�DV�LQWHUQDWLRQDO�H[SDQVLRQ��

,Q� DGGLWLRQ�� SHUIRUPDQFH� �H�J�� LQ� WHUPV� RI� UHYHQXHV�� LV� D� YHUVDWLOH� EXQGOH� RI�resources that can be easily transferred between different business units and allows FURVV�ÀQDQFLQJ�RI�GLIIHUHQW�LQWHUQDWLRQDO�DFWLYLWLHV��3UHYLRXV�SHUIRUPDQFH�WKXV�UHÁHFWV�WKH�DPRXQW�RI�VODFN�UHVRXUFHV�D�ÀUP�FDQ�DGPLQLVWHU��2UJDQL]DWLRQDO�VODFN�DOORZV�ÀUPV�WR�PRUH�ÁH[LEO\�UHDFW�WR�IRUHVHHQ�RU�XQIRUHVHHQ�FKDQJHV�LQ�WKH�HQYLURQPHQW�DQG�WKXV�allows coping with more dynamic, hostile and complex situations (Chang & Rhee, ��3DUWLFXODUO\�JHRJUDSKLFDOO\�GLVSHUVHG�ÀUPV��VXFK�DV�%RUQ�*OREDOV��DFW�LQ�G\QDPLF�HQYLURQPHQWV��ZKLFK�DUH�PRUH�OLNHO\�WR�LQGXFH�OLDELOLWLHV�RI�IRUHLJQQHVV��+\PHU��6ODFN�UHVRXUFHV�DOORZ�ÀUPV�WR�RYHUFRPH�WKH�LQFUHDVHG�OLDELOLWLHV�RI�IRUHLJQQHVV�WKDW�DUH�connected with a geographically dispersed internationalization (Rugman & Verbeke, ��:H� SURSRVH� WKDW� H[SRUWLQJ� JOREDOO\�ZLOO� H[SRVH� ÀUPV� WR� JUHDWHU� FRPSHWLWLYH�SUHVVXUHV��DQG�UHTXLUH�KLJKHU�HQWU\�FRVWV�DV�ZHOO�DV�EHWWHU�SHUIRUPDQFH��7KHUHIRUH�ÀUPV�with a higher initial performance have more strategic options and have the capacity WR� RSHUDWH� LQ� PRUH� IRUHLJQ� FRXQWULHV� WKDQ� ÀUPV� ZLWK� D� ORZHU� SHUIRUPDQFH�� 7KLV�DUJXPHQWDWLRQ�LV�DOVR�LQ�OLQH�ZLWK�D�VWXG\�E\�(DWRQ��.RUWXP�DQG�.UDPDU]��RQ�&ROXPELDQ�H[SRUWHUV�VXJJHVWLQJ�WKDW�ÀUPV�ZLWK�EHWWHU�SHUIRUPDQFH�DUH�DEOH�WR�H[SRUW�to more distant markets. These arguments lead to the following hypothesis:

Hypothesis 1: Firms that have a better initial performance are more likely to choose the Born Global relative to Born Regional approach.

Firm size as antecedent of internationalization strategy%HVLGHV�LWV�SUH�LQWHUQDWLRQDOL]DWLRQ�SHUIRUPDQFH��WKH�ÀUP·V�VL]H�LV�DQRWKHU�LQGLFDWRU�

RI� PDQDJHULDO� DQG� ÀQDQFLDO� UHVRXUFHV� DYDLODEOH� WR� WKH� ÀUP� �&]LQNRWD�� 5RQNDLQHQ��0RIIHWW��0DULQRYD��0DULQRYD��/DUJHU�ÀUPV�DUH�OLNHO\�WR�KDYH�D�JUHDWHU�DUUD\�RI�resources which allows them to cope with the challenges of global operations and to reduce the liabilities of foreignness (Chang & Rhee, 2011; Miller & Friesen, 1984;



RESEARCH

2K��5XJPDQ��5HVHDUFK�RQ�HQWU\�PRGH�VXJJHVWV�WKDW�ÀUP�VL]H�LV�SRVLWLYHO\�FRUUHODWHG�ZLWK� IRUHLJQ�PDUNHW� FRPPLWPHQW� DQG� WKH� OLNHOLKRRG� RI� FKRRVLQJ� HTXLW\�based entry modes (Agarwal & Ramaswami, 1992; Brouthers, Brouthers, & Werner, ��)RU�H[DPSOH��3UHHFH��0LOHV��%DHW]·V� ��VWXG\�RI��&DQDGLDQ�HDUO\�VWDJH�WHFKQRORJ\�EDVHG�ÀUPV�VXJJHVW�WKDW�ÀUP�VL]H�LV�SRVLWLYHO\�UHODWHG�WR�JOREDO�GLYHUVLW\�LQ�WHUPV�RI�QXPEHU�RI�IRUHLJQ�PDUNHWV��0RUHRYHU��WKH�PRUH�UHVRXUFHV�WKDW�D�ÀUP�SXWV�into founding an organization, the more likely for it to become a Born Global. Size is an LQGLFDWRU�IRU�WKH�LQWHUQDOO\�DYDLODEOH�UHVRXUFH�EDVH�RI�D�ÀUP��H�J��PDQDJHULDO�UHVRXUFHV��While Born Globals are meant to intensively capitalize on external resources stemming IURP�WKHLU�QHWZRUNV��&RYLHOOR��LQWHUQDO�UHVRXUFHV�VWLOO�SOD\�D�SLYRWDO�UROH�IRU�WKHLU�FDSDELOLW\�EDVH� �/X��=KRX��%UXWRQ��/L�� DQG� WKHLU� VWUDWHJLF�RSWLRQV��7KH�PRUH�internal resources there are, the lower the need to rely on external resources, which are KDUGHU�WR�FRQWURO��7KXV��ÀUP�VL]H�DOORZV�IRU�PRUH�UHVRXUFH�GHPDQGLQJ�VWUDWHJLF�PRYHV��Based on these arguments, we propose the following hypothesis:

Hypothesis 2: Firm size increases a firm’s likelihood to choose a Born Global relative to a Born Regional approach.

Foreign market knowledge as antecedent of internationalization strategyAFFRUGLQJ�WR� WKH�VWDJH�PRGHOV�RI� LQWHUQDWLRQDOL]DWLRQ��-RKDQVRQ��9DKOQH��

ÀUPV�EHFRPH�LQYROYHG�JUDGXDOO\� LQ�IRUHLJQ�EXVLQHVV�DFWLYLWLHV�EHFDXVH�WKH\�QHHG�WR�accumulate necessary knowledge about foreign markets. Eriksson, Johanson, Majkgård DQG� 6KDUPD� �� UHIHU� WR� WKH� ODFN� RI� IRUHLJQ� LQVWLWXWLRQDO� NQRZOHGJH� �ODQJXDJH��FXOWXUH�� LQVWLWXWLRQV�� UXOHV� DQG� UHJXODWLRQV�� DV� WKH� ´OLDELOLW\�RI� IRUHLJQQHVVµ�� DQG� WKH�ODFN� RI� PDUNHW�VSHFLÀF� EXVLQHVV� NQRZOHGJH� �SHUWDLQLQJ� WR� FXVWRPHUV�� FRPSHWLWRUV�DQG�PDUNHW�FRQGLWLRQV��DV� WKH�´OLDELOLW\�RI�RXWVLGHUVKLSµ��&RYLHOOR��VKRZV�WKDW�´LQVLGHUVKLSµ� LQ� IRUHLJQ� PDUNHWV� LV� LQÁXHQWLDO� WR� WKH� VSHFLÀF� LQWHUQDWLRQDOL]DWLRQ�DSSURDFK�WKH�ÀUP�ZLOO�FKRRVH��

3ULRU�VWXGLHV� �H�J��)UHHPDQ��+XWFKLQJV��/D]DULV��=\QJLHU��/HRQLGRX��further argued that intangible assets would be important for small and medium-sized HQWHUSULVHV� �60(V�� WR� FRPSHQVDWH� IRU� ODFNLQJ� ÀQDQFLDO� DQG� KXPDQ� UHVRXUFHV�� ´$Q�important example of such an intangible resource used by SMEs, and in particular, Born *OREDO�ÀUPV��LV�WDFLW�NQRZOHGJH��ZKLFK�PD\�EH�OHYHUDJHG�WR�GHYHORS�QHZ�NQRZOHGJH�µ��)UHHPDQ�HW�DO��

,I� ÀUPV� SRVVHV� IRUHLJQ� PDUNHW� NQRZOHGJH�� WKH\� DUH� PRUH� OLNHO\� WR� VSUHDG� WKHLU�international activities to the regions in which this knowledge is targeted. Accordingly, LI�&DQDGLDQ�ÀUPV�KDYH�NQRZOHGJH�DERXW�PDUNHWV�RWKHU�WKDQ�WKH�86�PDUNHW��WKH\�DUH�able to overcome liabilities of foreignness in these countries more easily (Rugman & 9HUEHNH��DQG�ZLOO�WKHUHIRUH�EH�PRUH�OLNHO\�WR�RSHUDWH�EXVLQHVV�WKHUH��LQFUHDVLQJ�WKH�FKDQFH�RI�EHFRPLQJ�D�%RUQ�*OREDO�UDWKHU�WKDQ�D�%RUQ�5HJLRQDO�ÀUP��$ERYH�DUJXPHQWV�lead to the following hypothesis:

Hypothesis 3: Firms that have foreign market knowledge stemming from other regions than the home region are more likely to choose a Born Global relative to a Born Regional approach.



RESEARCH

METHODOLOGYData

,Q�WKLV�VWXG\��ZH�LQYHVWLJDWH�WKH�IRXQGLQJ�FKDUDFWHULVWLFV�RI�ÀUPV�LQ�UHODWLRQ�WR�WKHLU�choice between the Born Global and Born Regional strategy. Our data are merged IURP�GLIIHUHQW�VRXUFHV�FRYHULQJ�WKH�([SRUWHU�5HJLVWHU��(5��WKH�%XVLQHVV�5HJLVWHU��%5��DQG�WKH�/RQJLWXGLQDO�(PSOR\PHQW�$QDO\VLV�3URJUDP��/($3��$OO�WKHVH�GDWDEDVHV�DUH�produced and maintained by Statistics Canada. Our main data source, the Exporter 5HJLVWHU� �(5�� LV� D� ODUJH�VFDOH� DGPLQLVWUDWLYH� GDWDEDVH� RI� DOO� PHUFKDQGLVH� WUDGH�WUDQVDFWLRQV�E\�&DQDGLDQ�ÀUPV�IURP��WR��7KH�GDWD�ZDV�REWDLQHG�IURP�WZR�VRXUFHV��WKH�8�6��&XVWRPV�GRFXPHQWV�DQG�&DQDGD�5HYHQXH�$JHQF\��&5$��GRFXPHQWV��7KLV�GDWD�VHW�DOORZV�XV�WR�WUDFN�WKH�ÀUVW�\HDU�LQ�ZKLFK�D�ÀUP�VWDUWV�WR�H[SRUW��LWV�YDOXH�of exports, the destinations and the products it exports in each year between 1993 and ��7KH�VHFRQG�GDWD�VRXUFH��WKH�%XVLQHVV�5HJLVWHU��%5��LV�D�PDLQ�IUDPH�WKDW�LQFOXGHV�all businesses operating within Canada as well as foreign businesses that have links with Canadian companies from 1987 to 2006. We use the BR database as a supplement IRU� WKH�(5�GDWDEDVH�WR�REWDLQ� LQIRUPDWLRQ�RQ�ÀUPV·�DQQXDO�UHYHQXH�DQG�RZQHUVKLS��7KH� WKLUG� GDWD� VRXUFH�� WKH� /RQJLWXGLQDO� (PSOR\PHQW� $QDO\VLV� 3URJUDP� �/($3��contains employment information for each employer business between 1997 and 2004 in Canada.

,Q�RUGHU�WR�DGKHUH�WR�FRPPRQ�60(�GHÀQLWLRQV��ZH�VHOHFWHG�PDQXIDFWXULQJ�ÀUPV�established between 1997 and 2004 that hire 500 or fewer employees (e.g. Lu et al., �� 7R� HQVXUH� H[SRUW� LV� DQ� LPSRUWDQW� SDUW� RI� HDFK� ÀUP·V� EXVLQHVV� DFWLYLW\�� ZH�HOLPLQDWHG�ÀUPV�ZLWK� DQQXDO� YDOXHV� RI� H[SRUWV� RI� ��&DQDGLDQ�GROODUV� RU� OHVV� ��7KHQ��ZH�HOLPLQDWHG�ÀUPV�ZLWK�H[FHSWLRQDOO\�KLJK�RU�ORZ�UHYHQXH�SHU�HPSOR\HH��WKH�KLJKHVW��DQG�WKH�ORZHVW��)LQDOO\��ZH�GLVFDUGHG�DOO�ÀUPV�WKDW�GLG�QRW�PDWFK�RXU�GHÀQLWLRQ�RI�%RUQ�5HJLRQDO�RU�%RUQ�*OREDO��VXFK�DV�ÀUPV�WKDW�GLG�QRW�VWDUW�WR�H[SRUW�within three years of operation and exported more than 25% of their revenue during WKH�ÀUVW�WZR�\HDUV�RI�WKHLU�H[SRUW�DFWLYLW\��7KLV�JLYHV�XV�WKH�DQDO\VLV�VDPSOH�RI��ÀUPV��%RUQ�5HJLRQDOV�DQG��%RUQ�*OREDOV��


Variables Mean Std. Dev. Min Max Sources

Performance 1.00 0.08 0.66 1.50 BR, LEAP Size 18.40 28.08 1 331.32 LEAP

Non-US foreign market knowledge 21.64% 41.19% 0 1 ER

Foreign-owned 1.07% 10.30% 0 1 BR

Table 1

Descriptive statistics (N-604) Note: The variable ‘Performance’ is ratio of a firm’s revenue per employee relative to the average in its industry. The variable ‘Size’ is measured by the number of employees a firm hired at its inception.


RESEARCH

Dependent Variable

2XU�GHSHQGHQW�YDULDEOH��WKH�GLIIHUHQW�,19�VWUDWHJ\�LV�D�GXPP\�YDULDEOH�WKDW�HTXDOV�WR�RQH�LI�D�ÀUP�LV�FODVVLÀHG�DV�D�%RUQ�*OREDO�DQG�]HUR�LI�D�ÀUP�LV�FODVVLÀHG�DV�D�%RUQ�Regional. Three variables were used as criteria to classify the internationalization VWUDWHJ\� RI� WKH� REVHUYHG� 60(V�� 7KH� ÀUVW� YDULDEOH�� H[SRUW� VWDUW�XS� DJH� �WKH� DJH� RI� D�ÀUP�ZKHQ�LW�VWDUWHG�WR�H[SRUW��LV�D�PHDVXUH�RI�LQWHUQDWLRQDOL]DWLRQ�VSHHG��7KH�VHFRQG�variable, foreign sales to total sales (the percentage of revenue that comes from H[SRUWLQJ�� LV�D�PHDVXUH�RI� LQWHUQDWLRQDOL]DWLRQ�VFDOH�WKDW�WDNHV�LQWR�DFFRXQW�D�ÀUP·V�LQWHQVLW\�RI�FRPPLWPHQW�WR�IRUHLJQ�VDOHV��7KH�ÀUVW�WZR�FULWHULD�KDYH�EHHQ�FRPPRQO\�XVHG� WR�GHÀQH�%RUQ�*OREDOV� LQ� WKH� OLWHUDWXUH� �H�J��.QLJKW��&DYXVJLO�� 5HQQLH��$� WKLUG� YDULDEOH�� JOREDO� VDOHV� WR� IRUHLJQ� VDOHV� �WKH� SHUFHQWDJH� RI� H[SRUWV� WKDW�FRPHV�IURP�WKH�JOREDO�QRQ�86�PDUNHW��LV�D�PHDVXUH�RI�LQWHUQDWLRQDOL]DWLRQ�VFRSH�WKDW�WDNHV�LQWR�DFFRXQW�WKH�JHRJUDSKLF�UDQJH�RI�D�ÀUP·V�IRUHLJQ�VDOHV��3UHHFH�HW�DO��

Measurement

Performance&RQVLVWHQW�ZLWK� 5XDQH� DQG� 6XWKHUODQG� ��ZH� XVH� UHYHQXH� SHU� HPSOR\HH� WR�

PHDVXUH�WKH�SHUIRUPDQFH�RI�ÀUPV��)RU�ÀUPV�WKDW�VWDUWHG�LQ�WKH�VDPH�\HDU��EHORQJ�WR�the same industry, are located in the same province, and hire the same number of HPSOR\HHV��D�ÀUP�WKDW�SURGXFHV�D�KLJKHU�OHYHO�RI�UHYHQXH�SHU�HPSOR\HH�LV�FRQVLGHUHG�to have a better performance. To take into account the different level of performance LQ�GLIIHUHQW�LQGXVWULHV��WKH�YDULDEOH�¶3HUIRUPDQFH·�LV�WKH�UDWLR�RI�D�ÀUP·V�UHYHQXH�SHU�employee relative to the average in its industry.

SizeFirm size is calculated by the natural logarithm of the number of employees. By

calculating the natural logarithm we avoid estimation biases due to distribution-VNHZQHVV�RI�ÀUP�VL]H��

Non-US Foreign market knowledgeNon-US Foreign market knowledge is measured with a dummy variable that is

HTXDO�WR��LI�D�ÀUP�LV�ORFDWHG�LQ�4XHEHF��:H�SURSRVH�WKDW��FRPSDUHG�ZLWK�ÀUPV�ORFDWHG�LQ�RWKHU�SURYLQFHV��ÀUPV�WKDW�DUH�ORFDWHG�LQ�4XHEHF��WKH�RQO\�&DQDGLDQ�SURYLQFH�ZKRVH�VROH�RIÀFLDO� ODQJXDJH� LV�)UHQFK��KDYH�EHWWHU� IRUHLJQ� LQVWLWXWLRQDO�NQRZOHGJH�EHFDXVH�WKH\�KDYH�D�JUHDWHU�DIÀQLW\�ZLWK�(XURSHDQ�FRXQWULHV�WKDQ�WKH�8�6��LQ�WHUPV�RI�ODQJXDJH�DQG�FXOWXUH��&RQVHTXHQWO\��WKH\�DUH�PRUH�OLNHO\�WR�FKRRVH�WKH�%RUQ�*OREDO�UHODWLYH�WR�the Born Regional approach.

As control variables we entered industry, province and time dummies into our DQDO\VHV��0RUHRYHU�ZH� FRQWUROOHG� IRU�ZKHWKHU� WKH�ÀUP�RZQHU� LV� �SDUWLDOO\�� IRUHLJQ��)RUHLJQ�RZQHG�LV�D�GXPP\�YDULDEOH�ZKLFK�HTXDOV�WR�RQH�LI�D�WKH�KRPH�FRXQWU\�RI�WKH�ÀUP·V�RZQHU�LV�QRW�&DQDGD�



RESEARCH

Table 2: Born Regionals vs. Born Globals: Results Logistic Regression (Dependent Variable: Internationalization Approach equals to1 if Born Regional and equals to 0 if Born Global)

Relative Performance

Size

Non-US foreign market knowledge

Variables

Foreign-owned

Year start business (reference: 1997)

1998

1999

2000

2001

2002

2003

2004

Industry (reference: Computer)

Textile

Wood

Paper

Printing

Petroleum

Plastic

Mineral

Metal

Machinery

Transportation Equipment

Furniture

Miscellaneous

Born Regional vs. Born Global

H1

H2

H3

Controls

Coe!cient

-2.3002***

-0.0851

0.5210***

0.0734

-0.4143

-0.5023*

-0.3244

0.4355

0.0411

-0.4355

-0.1571

1.0132***

0.2680

-0.3507

1.7574*

0.4269

-0.6505

-0.8986

1.030***

-0.4030

-0.3574

2.1688***

-0.3604

(s.d.)

(0.0433)

(0.0626)

(0.0025)

(0.0510)

(0.2825)

(0.2808)

(0.3043)

(0.2842)

(0.2864)

(0.2842)

(0.2104)

(0.3713)

(0.3268)

(0.5781)

(1.0646)

(0.3644)

(0.3636)

(0.5897)

(0.3461)

(0.2981)

(0.4006)

(0.5582)

(0.2986)

Note: Number of observations=604; Log likelihood = -1396.44. Standard deviations are reported in parentheses. *, ** and *** indicates statistical significant at the 1 percent, 5 percent, and 10 percent level, respectively.



RESEARCH

RESULTSWe use logistic regression analysis in order to observe the impact of the independent YDULDEOHV�RQ�ÀUPV·�FKRLFHV�RI� LQWHUQDWLRQDOL]DWLRQ�VWUDWHJLHV� �%RUQ�5HJLRQDO�YV��%RUQ�*OREDO� DSSURDFK�� 7KH� LQGHSHQGHQW� YDULDEOHV� XVHG� LQ� RXU� UHJUHVVLRQ� LQFOXGH� ÀUP�performance, size and non-US foreign market knowledge. We include ownership as well as time and industry dummies as control variables to prevent spurious results.

7DEOH� �� SURYLGHV� WKH� HIIHFW� VL]HV� RI� HDFK� H[SODQDWRU\� YDULDEOH� RQ� D� ÀUP·V� FKRLFH�of Born Global and Born Regional strategy from the logistic regression analysis. The likelihood-ratio test has been applied to check the robustness of each independent YDULDEOH��7KH�FRHIÀFLHQWV�LQ�WKH�ÀUVW�FROXPQ�RI�7DEOH��IRU�H[DPSOH��VKRZ�WKH�HIIHFW�RI�the explanatory variables on the marginal utility of choosing the Born Global relative WR�WKH�%RUQ�5HJLRQDO�VWUDWHJ\��7KH�VWDWLVWLFDO�VLJQLÀFDQFH�RI�D�FRHIÀFLHQW�LQGLFDWHV�WKH�extent to which the corresponding explanatory variable affects the marginal utility of choosing different internationalization approaches.

:H� XVH� D� ÀUP·V� ÀUVW� \HDU·V� UHYHQXH� SHU� HPSOR\HH� UHODWLYH� WR� WKH� DYHUDJH� LQ�LWV� LQGXVWU\� WR� DVVHVV� LWV� SHUIRUPDQFH�� :H� ÀQG� WKDW� QHZ� ÀUPV� WKDW� DUH� DVVRFLDWHG�ZLWK� UHODWLYH� KLJKHU� UHYHQXH� SHU� HPSOR\HH� KDYH� VLJQLÀFDQWO\� ORZHU� SUREDELOLW\� RI�choosing the Born Regional relative to the Born Global approach. Hence, Hypothesis ��ÀUPV�WKDW�KDYH�EHWWHU�SHUIRUPDQFH�LQ�WKH�HDUO\�VWDJH�RI�WKH�FRPSDQ\�KDYH�FHWHULV�paribus higher probability of choosing the Born Global relative to the Born Regional LQWHUQDWLRQDO�DSSURDFK��LV�VXSSRUWHG��,W�DSSHDUV�IURP�7DEOH��WKDW�ÀUP�VL]H�GRHV�QRW�VLJQLÀFDQWO\�LPSDFW�WKH�RGGV�RI�FKRRVLQJ�D�%RUQ�*OREDO�YV��D�%RUQ�5HJLRQDO�DSSURDFK��7KXV�+\SRWKHVLV��LV�UHMHFWHG��)LQDOO\��7DEOH��VXJJHVWV�WKDW�ÀUPV�ZLWK�QRQ�86�IRUHLJQ�market knowledge are more likely to choose the Born Global relative to both Born Regional approach. Thus, Hypothesis 3 receives support.

DISCUSSION AND IMPLICATIONSThe purpose of this paper was to conceptually and empirically contribute to our understanding of the impact of SMEs’ resource bases on their internationalization strategies. Therefore, we observed differences among Born Global and Born Regional ÀUPV�LQ�WKH�&DQDGLDQ�FRQWH[W��2XU�UHVXOWV�XQGHUSLQ�WKH�5HVRXUFH�%DVHG�7KHRU\�DQG�show its applicability in the IB context.

Our paper contributes to current IB knowledge by emphasizing the role RI� SHUIRUPDQFH� WR� LQWHUQDWLRQDOL]DWLRQ� VWUDWHJ\�� 0RVW� ,%� VWXGLHV� IRFXV� RQ� ÀUP�performance as an outcome of internationalization, while only few studies observe KRZ�SHUIRUPDQFH�DIIHFWV�LQWHUQDWLRQDOL]DWLRQ�VWUDWHJ\��-RQHV�HW�DO��2Q�WKH�EDVLV�of our longitudinal study design, we can make a stronger case for the endogeneity of INV strategy choice than prior studies did. Prior studies mostly argued that the GHJUHH� RI� LQWHUQDWLRQDOL]DWLRQ� ZRXOG� SRVLWLYHO\� LQÁXHQFH� ÀUP� SHUIRUPDQFH�� 2XU�ÀQGLQJV� VXJJHVW� WKDW� D� UHYHUVH� FDXVDOLW\� DOVR� H[LVWV� UHJDUGLQJ� WKLV� UHODWLRQ� DQG� WKDW�LQLWLDO�SHUIRUPDQFH�LQÁXHQFHV�WKH�LQWHUQDWLRQDOL]DWLRQ�DSSURDFK�RI�,19V��

This is an important contribution to the IB as well as to the International



RESEARCH

Entrepreneurship literature. Previous studies which contradicted the incremental internationalization approach as proposed by stage-models to internationalization EDVHG� WKHLU� FULWLTXH� PDLQO\� RQ� HPSLULFDO� ÀQGLQJV� WKDW� VKRZHG� SRVLWLYH� UHODWLRQV�EHWZHHQ�ÀUP�SHUIRUPDQFH�DQG�HDUO\�LQWHUQDWLRQDO�H[SDQVLRQ��+RZHYHU��WKH�FRQFOXVLRQ�WKDW�JOREDO�H[SDQVLRQ�QHDU�ÀUP�LQFHSWLRQ�OHDGV�WR�KLJKHU�SHUIRUPDQFH�LV�ODUJHO\�EDVHG�on cross-sectional data. Such data is limited in its ability to underpin causal relations since dependent and independent variables are measured at the same point in time. %\�DSSO\LQJ�ORQJLWXGLQDO�GDWD��ZH�ÀQG�SURYH�IRU�D�UHYHUVH�FDXVDOLW\��ÀUP�SHUIRUPDQFH�LQÁXHQFLQJ�D�%RUQ�*OREDO�VWUDWHJ\��:H�WKXV�SURYLGH�VXSSRUW�IRU�RUJDQL]DWLRQDO�VODFN�SHUVSHFWLYH��&KDQJ��5KHH��DQG�WKDW�WDQJLEOH�UHVRXUFHV�DUH�LPSRUWDQW�IRU�ÀUPV·�internationalization strategies. We still think that internationalization (even at a young DJH��PD\� SURYLGH� EHQHÀWV� IRU� ÀUPV�� VXFK� DV� OHDUQLQJ� DGYDQWDJHV�� H[SORUDWLRQ� DQG�H[SORLWDWLRQ�RI�ÀUP�DGYDQWDJHV� DQG� DQ� LPSULQWLQJ� HIIHFW� VKDSLQJ�ÀUP� VWUXFWXUHV� WR�international environments from the beginning. However, our study suggests that a regional focus of internationalization is less resource demanding than a true Born *OREDO� DSSURDFK�� D� ÀQGLQJ� JLYLQJ� DW� OHDVW� D� SDUWLDO� VXSSRUW� WR� WKH� UHJLRQDOL]DWLRQ�K\SRWKHVLV��5XJPDQ��9HUEHNH��

:H�VKRZHG�WKDW�ÀUP�VL]H�GRHV�QRW�GLIIHU�EHWZHHQ�%RUQ�5HJLRQDOV�DQG�%RUQ�*OREDOV��(YHQ�WKRXJK�ÀUP�VL]H�PD\�EH�DVVRFLDWHG�ZLWK�DQ�HQKDQFHG�UHVRXUFH�EDVH��LW�GRHV�QRW�LPSDFW�,19�VWUDWHJ\��)LUP�VL]H�DORQH�PD\�QRW�VXIÀFH�WR�SURYLGH�DGYDQWDJHV�LQ�WDFNOLQJ�OLDELOLWLHV�RI�IRUHLJQQHVV��7KLV�UDWKHU�LQFRQFOXVLYH�ÀQGLQJ�UHÁHFWV�SULRU�UHVHDUFK�RQ�ÀUP�VL]H��)RU�LQVWDQFH��D�VWXG\�E\�0F$XOH\��VXJJHVWV�WKDW�ÀUP�VL]H�LV� LUUHOHYDQW�WR�JOREDO�SUHVHQFH��&DYXVJLO��.QLJKW�DQG�5LHVHQEHUJHU��VXJJHVW��FRPSDUHG�WR�ODUJHU�ÀUPV��VPDOOHU�ÀUPV�DUH�PRUH�DGDSWDEOH�DQG�KDYH�TXLFNHU�UHVSRQVH�WLPHV�WR�QHZ�LGHDV�DQG� WHFKQRORJLHV��&RQVHTXHQWO\�� VPDOOHU� ÀUPV� DUH�PRUH� OLNHO\� WR� H[SRUW� LQWHQVLYHO\�at the founding of the company. Considering this, it seems that initial performance and intangible resources are better predictors of INV strategy choice. This implies that IXWXUH�VWXGLHV�VKRXOG�LQFOXGH�LQLWLDO�RU�SUHYLRXV�ÀUP�SHUIRUPDQFH�LQWR�WKHLU�UHVHDUFK�models if observing INV strategy.

Our results furthermore suggest that, compared Born Regionals, Born Globals are PRUH� OLNHO\� WR� KDYH� EHWWHU� IRUHLJQ� NQRZOHGJH� �ODQJXDJH� DQG� FXOWXUH�� ,I� ÀUPV� KROG�foreign market knowledge, they are more likely to operate in the regions for which this knowledge is targeted, thus overcoming liabilities of foreignness.

Our paper further contributes to the discussion on differences among INV types or ,19�VWUDWHJLHV��,Q�WKLV�FRQWH[W�ZH�DOVR�ÀQG�JHQHUDO�VXSSRUW�IRU�WKH�UHJLRQDOL]DWLRQ�PRGHO�E\�5XJPDQ�DQG�9HUEHNH��)LUPV�WKDW�KDYH�UHVRXUFHV�RU�DUH�DEOH�WR�GUDZ�RQ�ÀUP�VSHFLÀF�DGYDQWDJHV�DUH�EHWWHU�DEOH�WR�UHQGHU�OLDELOLWLHV�RI�IRUHLJQQHVV�DQG�PD\�SURÀW�PRUH� IURP�HDUO\� LQWHUQDWLRQDOL]DWLRQ�ZLWK�DQ� LQFUHDVHG�VFRSH��0RUHRYHU�� LQLWLDO�ÀUP�SHUIRUPDQFH�DQG�LQWDQJLEOH�UHVRXUFHV�VHHP�WR�EH�PRUH�YDOLG�DV�ÀUP�VSHFLÀF�DGYDQWDJHV�WKDQ�ÀUP�VL]H��IRU�LQVWDQFH��)LUP�SHUIRUPDQFH�VSDQV�DGYDQWDJHRXV�VWUXFWXUHV�DQG�LV�D� IXQFWLRQ� RI� D� ÀUP·V� FRPSHWLWLYH� DGYDQWDJHV� �&KDQ��*X�� 7DQJ�� :HUQHUIHOW��$GGLWLRQDOO\��SHUIRUPDQFH�LQFUHDVHV�WKH�ÀQDQFLDO�UHVRXUFHV�EDVH�LQWHUQDOO\�EXW�



RESEARCH

also externally by serving as positive signal to potential external shareholders. Thus, LQLWLDO�SHUIRUPDQFH�LQFUHDVHV�WKH�UHVRXUFH�EDVH�DQG�SURYLGHV�ÀUP�VSHFLÀF�DGYDQWDJHV�allowing for more risky and resource-demanding internationalization strategies.

Our results also hold policy implications, as trade promotion constitutes an LQÁXHQWLDO�HOHPHQW�LQ�WKH�JRYHUQPHQW·V�HIIRUW�WR�ERRVW�WKH�&DQDGLDQ�HFRQRP\��$V�ZH�VKRZ��ÀUPV�ZLWK�EHWWHU�SHUIRUPDQFH�DUH�PRUH�OLNHO\�WR�FKRRVH�WKH�%RUQ�*OREDO�UHODWLYH�WR�Born Regional approach; thus, it would seem wise for programs supporting exporting WR�QRQ�8�6�PDUNHWV�WR�WDUJHW�ÀUPV�ZLWK�EHWWHU�SHUIRUPDQFH��$V�VXFK��WKH�UHVXOWV�RI�WKLV�UHVHDUFK�PD\�HQKDQFH�JUHDWHU�HIÀFLHQF\�LQ�WKH�GHOLYHU\�RI�WUDGH�SURPRWLRQ�SURJUDPV�through better tailoring and targeting of the program.

LIMITATIONS AND FUTURE RESEARCHThe limitations of this study are partially inherent to the use of secondary data. We draw on a large longitudinal database in order to overcome shortfalls of prior studies on the occurrence or development of INVs. Yet, even though this data provides a strong base for our analyses, we face limitations with regards to the inclusion of individually EDVHG�YDULDEOHV��3ULRU�UHVHDUFK�RQ�,19V�KDV�VKRZQ�WKH�VWURQJ�LQÁXHQFH�RI�LQGLYLGXDOO\�based factors such as prior international experience, entrepreneurial orientation or networking capabilities. Unfortunately our data does not cover these factors and thus ZH�DUH�QRW�DEOH�WR�GUDZ�FRQFOXVLRQV�DERXW�WKHLU�LQÁXHQFH�RQ�WKH�SUREDELOLW\�RI�SXUVXLQJ�D�VSHFLÀF�LQWHUQDWLRQDOL]DWLRQ�DSSURDFK�DQG�WKH�GHYHORSPHQW�RI�DQ�,19��7KLV�VKRXOG�EH�fostered in future studies by combining individual survey-based and secondary data.

We argued that organizational slack, indicated by previous performance and ÀUP� VL]H�� KHOSV� ÀUPV� WR� UHQGHU� OLDELOLWLHV� RI� IRUHLJQQHVV� DQG� WR� IRVWHU� LQWHUQDWLRQDO�competitive advantages which coin into a higher likelihood to pursue a Born Global Strategy. While this perspective has received support from other scholars as well (e.g. &KDQJ��5KHH��LW�ZRXOG�EH�LQWHUHVWLQJ�WR�IXUWKHU�GHGXFH�ZKLFK�GLIIHUHQW�W\SHV�RI�VODFN�DFFUXH�WR�EHWWHU�FKDQJHV�LQ�WKH�LQWHUQDWLRQDO�DUHQD��:H�ÀQG�WKDW�ÀUP�VL]H�GLG�QRW�VHSDUDWH�VLJQLÀFDQWO\�EHWZHHQ�%RUQ�*OREDOV�DQG�%RUQ�5HJLRQDOV��7KLV�VXJJHVWV�DQ�interesting future research avenue differentiating between absorbed, unabsorbed and ÀQDQFLDO�VODFN�UHVRXUFHV�DQG�WKHLU�UHODWLYH�LPSRUWDQFH�IRU�60(V�LQWHUQDWLRQDOL]DWLRQ�

Our measurement of foreign market knowledge is not without limitations, but JHQHUDOO\� DSSOLFDEOH� IRU� RXU� UHVHDUFK��:KLOH� QRW� DOO� ÀUPV� IURP� WKH� VSHFLÀF� ORFDWLRQ�will have more knowledge about foreign markets than others, they are more likely to have access to this knowledge since some trade barriers such as language and cultural understanding are partially leveled out. The liabilities of foreignness arguments VXJJHVW�WKDW�ÀUPV�ZLWK�VLPLODU�ODQJXDJHV�DQG�FXOWXUHV�DV�WKH�H[SRUW�PDUNHW�DUH�PRUH�likely to succeed and have lower costs of entry. Moreover, using proxies for knowledge RU�H[SHULHQFH�� VXFK�DV� UHVLGHQFH�GXUDWLRQ� LQ�D�PDUNHW�RU�EHLQJ�SUHVHQW� LQ�D� VSHFLÀF�ORFDWLRQ� �+XW]VFKHQUHXWKHU��*URHQH�� LV� D� FRPPRQ� SUDFWLFH� LQ� LQWHUQDWLRQDO�business research. Yet, future studies should address the inherent limitations of such proxies and measure foreign market knowledge more directly.



RESEARCH

Moreover, we face some limitations with regards to the timeframe of our data and the time intervals. The data used in our study is annual data. Therefore, it is beyond the scope of this paper to identify the immediate effect of macroeconomic changes. such DV�SRVW��WUDGH�UHJXODWLRQV��RQ�WKH�SUREDELOLW\�RI�&DQDGLDQ�ÀUPV�WR�FKRRVH�WKH�%RUQ�Regional strategy. Additionally, we are only able to observe the timeline between 1997 and 2004. It would be interesting for future studies to investigate a longer timeframe in RUGHU�WR�XQGHUOLQH�RU�DGMXVW�WKH�ÀQGLQJV�LQ�WKLV�VWXG\�



RESEARCH

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ACKNOWLEDGEMENTSAcknowledgments: The authors would like to thank the Academy of International Business Southeast USA Chapter Conference 2012 for helpful comments on an early version of this paper. We thank four anonymous reviewers for their helpful suggestions and comments. This research has been supported by the Social Sciences and Humanities 5HVHDUFK�&RXQFLO� �66+5&��RI�&DQDGD�DQG�5\HUVRQ�8QLYHUVLW\��7KH�DXWKRUV�DUH�DOVR�grateful to the International Trade Division of Statistics Canada for the help and support in working with the Exporter Register Database. This paper represents the YLHZV�RI�WKH�DXWKRUV�DQG�GRHV�QRW�QHFHVVDULO\�UHÁHFW�WKH�RSLQLRQ�RI�6WDWLVWLFV�&DQDGD�

resource diﬀerences between born global and born regional ... · resource diﬀerences between...

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