International Business Review 12 (2003) 739–753 www.elsevier.com/locate/ibusrev

The internationalization process of Born Globals: a network view D. Deo Sharma , Anders Blomstermo Department of Marketing, Distribution and Industry Dynamics, Stockholm School of Economics, P.O. Box 6501, S-113 83 Stockholm, Sweden Received 3 September 2002; received in revised form 1 January 2003; accepted 1 May 2003

Abstract This paper attempts to make a contribution to the theory of development of the internationalization process of Born Globals. We propose that models emphasizing knowledge and networks are suitable for this purpose. The findings show that Born Globals possess international market knowledge before their first foreign market entry. The selection of foreign market entry mode is based on their existing knowledge and the knowledge supplied by their network ties. # 2003 Elsevier Ltd. All rights reserved. Keywords: Reactive process; Referral; Co-evolution

1. Introduction An increasing number of firms—Born Globals1—are engaging in international operations from the first day of their establishment (Jones, 1999; Knight & Cavusgil, 1996; McDougall et al., 1994; Knight, 1997, 2000; Burgel & Murray, 2000; Yip, Biscarri, & Monti, 2000; Bell, 1995; Brush, 1992; McKinsey & Co., 1993). The internationalization process of Born Globals deviates from that of firms commonly observed in the past. One such common observation is that internationalization is the process of increasing the accumulation of knowledge in markets and institu

Corresponding author. Tel.: +46-8-736-9545; fax: +46-8-33-4322. E-mail address: [email protected] (D.D. Sharma). 1 The other terms used in the literature are: International New Ventures (McDougall, Shane, & Oviatt, 1994), Born Global (Rennie, 1993; Knight & Cavusgil, 1996), High Technology Start-ups (Jolly, Alahutha, & Jeannet, 1992), and Global Start-ups (Oviatt & McDougall, 1994). 0969-5931/$ - see front matter # 2003 Elsevier Ltd. All rights reserved. doi:10.1016/j.ibusrev.2003.05.002

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tions abroad (Bilkey & Tesar, 1977; Cavusgil, 1980; Johanson & Vahlne, 1977; Chang, 1995). It has been observed that firms start the internationalization process by exporting products to culturally similar countries. However, other researchers argue that the longer a firm waits to initiate international activities, the more difficult it will be to grow internationally. The current research on Born Globals is primarily empirical and ‘‘purely descriptive without a well developed theoretical frame of reference... As of now a ‘missing link’ in the research about Born Globals is the answer to the following question. Which theoretical framework should be applied in order to understand and explain the phenomena?’’ (Madsen & Servais, 1997: p. 565). Born Globals need more theory driven research. The purpose of this paper is to contribute to the development of theory by explaining the internationalization process of Born Globals. We propose that models emphasizing knowledge and (network) ties are suitable for this purpose. This is appropriate because the ties that firms have may help them to go international by supplying information about clients and markets. Firms that operate in an international network may enjoy a ‘‘learning advantage’’ and find it ‘‘easier’’ to go abroad than firms whose exchange partners are domestic firms (Majkga˚rd & Sharma, 1998; Bell, 1995). We also argue that the internationalization process of Born Globals is a reactive process. We will not investigate the performance consequences of learning on Born Globals. This paper begins with an illustrative case example. Thereafter, the internationalization process of Born Globals, network ties and knowledge development is discussed. Finally, some implications are presented. 2. Knowledge and the internationalization process of firms The U-model states that the firms’ internalization process is driven by their knowledge base (Johanson & Vahlne, 1977). Of particular interest is the experiential knowledge2 of firms (Penrose, 1959). Firms initially accumulate knowledge and develop network ties in the domestic market. These pieces of knowledge are noncodifiable and stored in (i) routines, processes, and structures, and (ii) individuals, that is, the ‘‘congenial’’ knowledge (Hubert, 1991). Knowledge accumulation in firms is path dependent, dependent on the intensity of exposure to foreign markets and the diversity of the exposure (Eriksson, Majkga˚rd, & Sharma, 2000). Based on the behavioral theory of firms (Cyert & March, 1963), decisions are made as problems or opportunities arise: when faced with a decision in the international market, firms apply the solutions that have been successful in the past. The internationalization process of firms could be viewed as a series of ‘‘option windows’’ that allow firms to learn (Peng & Wang, 2000). Through exposure to international markets, firms accumulate institutional knowledge, business knowledge and internationalization knowledge (Eriksson, 2

In the rest of the paper, knowledge and experience are used inter-changeably.

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Johanson, Majkga˚rd, & Sharma, 1997). Institutional knowledge concerns knowledge on foreign institutions, and the current rules and regulations. Business knowledge concerns knowledge on clients, their needs and their decision making process. Finally, internationalization knowledge concerns the internal resources of the internationalizing firms (Yu, 1990). The internationalization of firms involves having knowledge of the external resources and capabilities of the firm in question, as well as its internal ones. The internationalization knowledge forms the ‘‘absorption capability’’ of the internationalizing firm, and determines the knowledge that the firm will be able to absorb in the future (Cohen & Levinthal, 1990). The absorption capability of firms changes only gradually. Firms first develop ties in domestic markets. They develop products and services for domestic markets. Expansion abroad implies transmission of knowledge and domestic based practices. Solutions that have been applied successfully in the past are used (Stopford & Wells, 1972). Firms opt for the strategy of exploitation (March, 1991). The internationalization process of such firms has two characteristics. Firstly, such firms start their internationalization in countries that are culturally similar to the domestic market, and secondly, the commitment of resources in foreign markets is gradual (Johanson & Vahlne, 1977). Vernon (1966), Kogut and Singh (1988), Johanson and Wiedersheim-Paul (1975), Weinstein (1974, 1977), Erramilli and Rao (1993) found that firms start their foreign market ventures in countries that are culturally similar. Barkema, Bell, and Pennings (1996) and Chang (1995) showed that cultural barriers punctuate the learning process in international markets. The performance impact of the above knowledge need not be positive however. Occasionally, however, through domestic operations, firms establish strong ties with internationally active firms. Such firms are client followers and may start their internationalization process despite a substantial cultural distance (Majkga˚rd & Sharma, 1998). Also, Maclayton, Smith, and Hair (1980), Davidson and McFetridge (1985) and Newbould, Buckley, and Thurwell (1978) detected no significant correlation between a firm’s experience in a market and its evaluation of individual markets. In the initial years, foreign market entry is a gradual commitment of resources. Initially, firms export, followed by the establishment of a marketing subsidiary, and subsequently, foreign production (Johanson & Wiedersheim-Paul, 1975). Through export, international firms establish ties with foreign institutions and business actors. As ties deepen, more resources are invested abroad. Davidson (1982), Franko (1989), and Gatignon and Anderson (1988) observed an increasing propensity to select wholly owned subsidiaries with increasing knowledge. Daniels, Ogram, and Radebaugh (1976) detected a propensity to move to contract based entry modes with increasing knowledge abroad. Stopford and Wells (1972) reported that US firms frequently preferred US-owned subsidiaries, whilst Shetty (1979) observed that, as they are more experienced abroad, European firms more frequently opt for JVs than US firms do. Finally, recent research has shows that the internationalization process of firms is driven by their network ties (Majkga˚rd & Sharma, 1998; Sharma & Johanson, 1987).

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3. Born Globals: example of the radiotherapy firm, helax Helax was started in 1989. Helax is a leading supplier of systems for the integration of radiation oncology departments. The company’s product is an advanced computer system for radiotherapy. Helax product enables patients to receive radiation doses tailored to their individual requirements. Helax has about 100 employees, 50 of whom work for Helax in Uppsala, Sweden. Uppsala is the seat of Scandinavia’s most renowned university and a leading center for R&D in medicine and computing. The company sells its products to 40 different countries and 95% of its sales are abroad. It has wholly owned subsidiaries in Germany, France, the UK, USA and Norway. More than 90% of the Helax staff hold academic qualifications in computing or radiation physics. The core of the Helax personnel is the same research group that started the company over 10 years ago, ensuring a stable base of knowledge and experience. Helax start-up was preceded by many activities at the University Hospital, Uppsala. The company’s founder studied physics at the university at the end of the 1960s. During the final term of his studies, he came in contact with a research group involved in computer physics. The founder of Helax was involved in the work done by the research group early on, and the task of evaluating the different types of research projects fell to him. One of these projects focused on new radiation techniques and involved an attempt to visualize and simulate what happens in the human body with the aid of computers. The project developed well and an agreement of collaboration was signed in 1973 between the Uppsala University and Siemens in Germany. The founder of Helax became responsible for the project. The university hospital provided the premises and the equipment for clinical tests. Throughout the 1970s, chemotherapy was developed. This treatment competed with radiotherapy, but, almost without exception, the world’s well-known authorities concentrated mainly on chemotherapy. The majority of the researchers and medical companies were of the opinion that chemotherapy would beat radiotherapy as a treatment for cancer. In contrast, Helax thought that radiotherapy would be useful in cancer therapy in the future. In the company’s first year, the first systems were sold to the reputed university hospitals in Uppsala, Stockholm and Malmo¨ in Sweden. A strong research tie between Helax and researchers at the above-mentioned university hospitals in Sweden already existed. Helax founded a scientific council chaired by Professor Jerzy Einhorn of Karolinska Hospital in Stockholm. Professor Einhorn was a pioneering researcher, has much research experience and is one of the most recognized researchers in the field. He has many important personal contacts with the leading researchers of the world. These ties benefited Helax. Through the ties of the members of this scientific council, knowledge of Helax’s products grew internationally by word-of-mouth. Many internationally renowned researchers visited Uppsala. Helax rapidly became an international identity.

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3.1. Foreign market entry In 1989, the company managed to sell a system to a major hospital in Oslo, Norway. A strong research collaboration had long been in existence between the university hospitals in Uppsala and Oslo. There were frequent exchanges and visits by researchers. The ties between the hospitals in Uppsala and Oslo were helpful in marketing Helax. Through this, a referral was established and subsequently, Helax sold their product to several other Norwegian hospitals. The university hospital in ˚ rhus, Denmark also bought a system. In 1993, Helax bought a Norwegian patent A from a subcontractor enabling it to integrate new solutions. The same year, a subsidiary was established in Norway with staff being recruited for the new subtracting company. In 1989, the managing director investigated the nature of purchasing in British hospitals. Using his social ties, Helax identified a clinic in Glasgow that had received £ 250,000 from a benefactor. This money was to be used for the purchase of a radiotherapy system. The clinic was free to determine which system it would purchase. The clinic’s radiotherapy specialists decided to purchase a system from Helax. Everything was almost signed and sealed, but at the last minute General Electric put in a counter bid dropping their price to half of Helax’ offer. The product specialists from Helax went to Glasgow and returned with the order without dropping their original price. GE did not give up there, though, but went to the mayor of Glasgow and claimed that the hospital management had made an erroneous decision. In their turn, the professor of the clinic and the chief physicist went to see the Mayor and said that if they were not allowed to purchase the system, they would resign. It had taken Helax about two years to get the order from Glasgow. Helax had acquired experience of the Scottish market and, during this time, it had also developed a contact with Siemens’ managing director (MD) in the UK. In 1990, Helax decided to establish its own subsidiary in the UK and employed Siemens’ personnel. The former MD of Siemens became the MD director of the new firm. He had a number of strong as well as weak ties in the UK. Utilizing these ties, Helax sold systems to several hospitals there. Siemens’ managing directors in the UK and France were in close contact with each other. They helped Helax to develop contacts with people in France and, as a result, Helax decided to enter into the French market. In 1989, one of Siemens’ clients in France—a well-known university hospital—contacted Helax about the installation of two systems. It was positive word-of-mouth from the English client that helped Helax to sell the systems to the French hospital. In 1992, Helax acquired its own subsidiary in France, a former subcontractor. The head of the radiology unit at the university hospital in Uppsala was a close friend of the professor of radiology in Freiburg, Germany. They had done a considerable amount of research together over a long period of time. In 1989, specialists from Freiburg visited Uppsala and saw Helax’ system demonstrated in its working environment. The German clinic considered the Helax product to be superior to those of the competitors, and the system was thus purchased by the hospitals in Freiburg and Essen in Germany. In 1991, Helax established a

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collaborative teamwork with a German company in the field of radiotherapy. In 1994, Helax established their own new company and absorbed personnel from the German partner into the new company. With the help of Professor Jerzy Einhorn, Helax developed contacts at US hospitals. In 1990, these ties helped Helax to sell its first system in US. Initially, Helax worked with Siemens. In 1994, Helax started its own subsidiary and took over the responsibility for the US market. Helax recruited personnel from Siemens and got access to their contact ties in the market. The case shows that that the internationalization process of Born Globals is influenced by their network of ties. 4. Firm in a network Network research emphasizes the importance of inter-firm ties in accumulating and utilizing knowledge (Burt, 1982; Gulati, 1995). By knowledge is implied ‘‘...information whose validity has been established through tests of proof. . . . . .what we can use without further experimentation’’ (Leibeskind, 1996: p. 94). Researchers have emphasized the impact of network ties on learning and the internationalization behavior of firms (Sharma & Johanson, 1987; Majkga˚rd & Sharma, 1998). Networks are important, as ‘‘economic actions and outcomes, like all social actions and outcomes, are affected by actor’s dyadic (pair-wise) relations and by the structure of the overall network of relations’’ (Granovetter, 1992: p. 33). Firms’ ties provide channels for sharing knowledge as well as the motivation to do so. Network ties of firms are firm specific and difficult to imitate and have consequences along three dimensions, namely (1) the information that is available to the firm, (2) its timing, and (3) referrals (Burt, 1997). Firstly, networks are a source of information to firms about what goes on in the market. The same information is not available to all the firms in the market. Secondly, ties influence the timing of when a particular piece of information will reach a particular firm. Finally, referrals imply that firms’ interests are represented in a positive light, at the right time, and in the right place. Firms placed centrally in a network receive more, better, and early knowledge compared to their competitors. This may influence the internationalization process of firms. Network may also produce unexpected random information for firms. The ties may be strong or weak. The strength of ties is defined as ‘. . .a (probably linear) combination of the amount of time, the emotional intensity, the intimacy (mutual confiding), and the reciprocal services which characterize the ties’3 (Granovetter, 1973/LINK: p. 1361). Ties are weak when the amount of time, emotional intensity, intimacy, and reciprocity is low. Weak ties connect distant and otherwise disconnected firms. Firms with a large number of weak ties enjoy an advantage over those that are engaged in strong ties. Firstly, for cost reasons, firms are in a 3

This definition is based on inter-personal ties. Over the years, however, this definition has also been applied at an organizational level.

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better position to maintain a large number of weak ties than a large number of strong ties (Boorman, 1975; Hansen, 1999). Strong ties imply a tight interaction between firms and they are costly to maintain. Secondly, weak ties supply more novel knowledge than strong ties (Rogers, 1980). The knowledge of firms involved in weak ties is dissimilar to that of strong ties. Firms engaged in strong ties adapt to each other and develop a similarity of knowledge base. Thirdly, weak ties imply a de-coupling between firms, and this is less of a restraint on the adaptive behavior of firms (Weick, 1976). Firms engaged in weak ties are in a better position to search for new knowledge, enjoy greater autonomy, and to adapt. Firms may go outside their existing channels in search for knowledge. Strong ties may restrain the knowledge-based adaptive response of firms. Thus, firms with a large number of weak ties may develop products and services that are less customized to the needs of a few customers. Less client specific knowledge is required as products and services become standardized, thus minimizing the need for after sales service. Similarly, actors in a network could be connected to each other either directly or indirectly. As stated earlier, (indirect) ties are a pervasive channel for knowledge transfer. Intermediaries help otherwise disconnected units to communicate and forge relationship.

5. The nature of Born Golbals The case of Helax shows that Born Globals are knowledge intensive firms with a high degree of knowledge content and employ individuals who possess high scientific knowledge. They sell products and services that are either ‘totally new’ or ‘radically’ different from existing products. This is made feasible as Born Globals (re)combine scientific principles and discoveries to develop a new concept. The competitive advantage of Born Globals is embedded in their knowledge intensity. This ability to recombine current knowledge to develop new products makes the knowledge base of Born Globals contingent on their network of relationships, codified and difficult to imitate. Born Globals are new firms, they possess limited foreign business and institutional knowledge and suffer from ‘‘liability of newness’’ (Hannan & Freeman, 1984). These firms lack domestic operations, and referral. They are exposed to high levels of uncertainty concerning potential clients and their needs and demands. But, as the case of Helax shows, Born Globals have strong ties that are overwhelmingly internal. A similarity in educational background and years of working together allows and encourages development of strong ties and sharing of knowledge and ideas. Knowledge sharing is made easy for (1) a similarity in past and a similarity in technical knowledge of the employees, and (2) a small and limited size of Born Globals. The knowledge in Born Globals is codified, experiential, and stored with qualified researchers with a high degree of similarity in knowledge base. This eases communications among employees in Born Globals on complicated issues involving codified knowledge. The small size is important as this allows employees in Born Globals in evolving routines and heuristics to communicate

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with each other. Thus, the knowledge base driving the internationalization process of Born Globals—the internationalization knowledge—is experienced based and procedural, e.g. knowledge on how to create new knowledge produces very different product or services by recombining existing knowledge. Born Globals are engaged in numerous weak ties. They are primarily weak, as the intensity as well as the duration of interaction with each individual market and actor abroad is limited. A number of these ties are indirect and involve intermediaries. Intermediaries help otherwise disconnected units to communicate and forge relationship. As stated earlier, weak ties are less cumbersome and less expensive to maintain. Through them, Born Globals develop internationalization knowledge and an absorptive capability consisting of a large variety of cues in foreign markets.

6. Born Globals: selecting foreign markets and foreign clients The stock of knowledge held by Born Globals influences their choice of foreign markets as well as the selection of foreign market entry mode. First, we discuss country market selection. The strategies pursued by Born Globals in entering foreign markets may manifest differently. Helax, for example, internationalized in a traditional manner. In the selection of foreign markets, Helax showed a preference for culturally similar markets: it started in Norway and Denmark, then commenced its activities in the UK and Germany. As stated earlier, from the outset, the founder of Helax operated within an international network. With the help of its strong ties in the domestic market, Helax established a number of weak ties abroad. These weak ties were a source of institutional knowledge abroad. But, this is not necessary, as the case of IAR systems shows. IAR systems develops and markets a development tool used in the production of microchips. Examples of products containing microprocessors are mobile telephones, airbags and GPS systems. Well-educated, experienced and specialized engineers work in teams with the customers to develop, adapt, translate and implement the software according to the specific requirements of the customer. IAR had strong ties with a limited number of R&D and other educational institutions in Sweden. These allowed IAR to test its product before releasing it onto the market. IAR has 110 employees, 70 of them work in new product development. The company sells its products in 45 countries, and 95% of its sales are abroad. 6.1. Foreign market entry of IAR systems IAR was started by a researcher at the Uppsala University’s Center of Technology in 1982. The company’s founder worked at the university for eight years, and he worked closely with IBM. The founder built and tested an assembler (translating one computer language to another) on an IBM platform. He was a pioneer in the field. In 1986, IAR’s founder released the first compiler in the world.

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The first customers were research engineers at several well-known US universities. They had already met the IAR staff at international research conferences, developed joint research projects with them and published scientific articles together. The founders had strong social ties, primarily with universities and a few R&D labs in Sweden. Later IAR advertised in countries with large markets, such as US, France and Germany. In 1986, a Swedish friend of the founder moved to the USA and started to sell IAR’s products there. The products were sold under a different name than in Sweden. The agent worked strictly as a sales office without any technical expertise or product development. IAR started its own company and sold its products under the same name as in rest of the world. In the same year, IAR contacted an agent in France. The French firm had bought products from IAR since 1982 and was interested in distributing its products. The agent was independent and worked closely with IAR. In 1987, IAR started a subsidiary in London. IAR had no previous experience with the English market. After three months, the subsidiary developed relationships with local customers. The subsidiary started to act first and foremost as a sales and support office for the local market. In 1988, a Japanese distributor interested in IAR’s products made contact and became its agent in Japan. The Japanese agent translates the product and makes the manuals and product adaptations himself. Japan is an important market, because most of the chip manufacturers are located in Japan. After a few years, the agent signed contracts with 14 different Japanese distributors. The Japanese agent selected the appropriate information and specific products for the distributors. In 1996, IAR started a subsidiary in Germany. For two years, they had had a distributor. The German subsidiary established ties with three major distributors. IAR, thus, started its internationalization from a culturally distant market. We believe that in both the cases the information supplied by weak ties paved the way for learning, search and evaluation processes. As Born Globals lack fixed routines to select and enter foreign markets, they evaluate each proposition individually and enter into alliances and cooperative ventures to serve foreign markets. Entry into a large number of foreign markets using a variety of different entry modes may open up an array of ‘‘option windows’’ for future internationalization in these firms. The internationalization process of Globals is driven by the knowledge supplied by their network ties. Moreover, knowledge on clients, their existence, and their needs may reach Born Globals in a random manner. The initiative is taken by network actors and it is based on improvisation. In addition, as the case of Helax shows, Born Global do not necessarily first commercialize their products in leading markets (Jolly et al., 1992). Helax did not enter a leading market first. But IAR systems did. However, Born Globals seem not to collect information on institutional factors and government rules and regulations. Neither Helax nor IAR systems looked into whether domestic competitors were expanding abroad or whether the Swedish market was being invaded by foreign competitors. A rather similar argument holds for entry mode selection. In selecting clients abroad, Born Globals improvise, adapt, and show a willingness to learn on the needs of the individual buyers and the local distribution channels. They adapt

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foreign entry mode to the needs of the individual markets and clients. Helax, thus, first entered foreign markets by exporting, followed by green-field investments and acquisitions, and setting up wholly owned subsidiaries abroad. The process of selecting foreign market entry mode was incremental. During the early years, knowledge of potential foreign clients and purchasing routines was important for Helax. Moreover, as the product was hi-tech and new, Helax needed to ‘‘educate’’ the buyer. A two-way flow of firm specific information was important. The buyer needed to know on the product, its uses, and its reliability. This was achieved through direct contact with the buyers. Therefore, Helax started to export. Gradually, JVs and wholly owned subsidiaries were established. IAR too started by exporting, followed by setting up agencies and green-field investments. However, within Born Globals, there is no predetermined blue-print to be followed to select foreign clients. The process is one of improvisation and trial and error. The goal is to commercialize the product abroad, to help firms economize with their own limited resources and to achieve an ‘‘optimal’’ resource mix of the resources supplied by the local counterparts. Moreover, this strategy is made feasible as for Born Globals exploiting global synergy is less important as they operate in a limited number of countries (Jones, 1999). Firms interested in exploiting global synergy frequently opt for high control (wholly owned subsidiary) foreign market entry modes (Bartlett & Ghoshal, 1989; Porter & Fuller, 1986).

7. Weak ties and Born Globals Based on the preceding discussion, we argue that weak ties supply Born Globals knowledge that is heterogeneous and allow for a knowledge search and evaluation process that is based on improvisation. Opportunities are evaluated on their own merits, and the firms’ current knowledge base represents far less of a restraint for future operations. This allows the questioning of present practices, and adapting to the needs of clients and institutions (Weick, 1976; Slater & Narver, 1995). Adaptation is made possible, as Born Globals are not bound by specific knowledge and successful decision experiences of the past. As argued earlier, this has consequences for the country market selection as well as the entry mode selection. But, it is the current network ties that supply Born Globals knowledge on markets and clients abroad. Thereby, risk involved in going abroad is reduced. They search for business opportunities and experiment. Because Born Globals lack previous successes and fixed routines in entering foreign markets, Born Globals are innovative in combining their own resources with the resources of others through JVs and partnerships (or low control market entry modes). Partnerships may partially compensate for the resource disadvantage of Born Globals. In other words, the internationalization process of Born Globals is characterized by the strategy of exploration (March, 1991). Entry into a large number of foreign markets and the use of a variety of different entry modes allow these firms to establish ties in the market. These supply knowledge. A majority of these ties are indirect and weak. They are primarily weak, as

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the intensity as well as the duration of interaction with each individual market and actor abroad is limited. As stated earlier, weak ties are less cumbersome and less expensive to maintain. Through them, Born Globals develop internationalization knowledge and an absorptive capability that are more versatile and diversified and that consist of a large variety of cues in foreign markets. This, in turn, defines what Born Globals may learn in the future. The same also allow Born Globals to be innovative and continuously evaluate new business opportunities. This knowledge is intangible and soft. Based on this knowledge base, Born Globals interpret information in a unique manner and that is different from the interpretation supplied by the competitors. Information on clients and institutions abroad supplied by formal market research is less useful as Born Globals lack routines to collect and interpret properly information related to foreign market and foreign clients. As the case of Helax shows, Born Globals do not conduct any formal market research. Moreover, networks may supply random information to Born Global firms. Indeed, potential clients from abroad contacted Helax repeatedly, and expressed interest in purchasing its product. In this process, Born Globals devote little effort to collecting country specific institutional knowledge. This knowledge was supplied to Born Globals by their network ties (distributors and agents). Because of a lack of experience of foreign markets, institutional knowledge is not perceived important. Born Globals take time to realize the important of institutional knowledge in going abroad. It seems that to understand the importance of institutional knowledge in the internationalization process of firms, firms need experience in doing business abroad. The situation with respect to selecting foreign clients may be different. Through their weak ties, Born Globals collect knowledge on clients. In the case of Helax, the firm learnt that (1) product quality and (2) product reliability are important factors for the purchasing decision. In selecting foreign markets and foreign clients, Born Globals accumulate knowledge through establishing an optimal number of (weak) ties abroad as they are a source of referral. As stated earlier, Born Globals frequently sell products and services based on scientific principles that are not standard within the industry. The ‘‘product’’ lacks referral in order to increase its use. Proliferation of a particular product is a source of legitimacy (Conner, 1995). Network ties with external partners are a source of referral. In Helax’ case, for example, strong ties in Uppsala and with Siemens were useful for this reason. This assured buyer that they were purchasing a high quality product. Trust was established. In the process mentioned in the preceding sections, Born Globals increase their ability as well as willingness to uncover business opportunity abroad and to manage business exchange abroad. The process is (i) reactive, and (ii) co-evolutionary based on a feedback process. The process is reactive as the history of network ties shapes their future evolution and constrains pro-active actions by Born Globals. This happens for three reasons. First, as stated by Baum and Singh (1994), serving pre-existing network ties is difficult. Pre-existing ties limit availability of options in future (Uzzi, 1997). Second, serving pre-existing ties may hurt the legitimacy of Born Globals. Finally, as Born Globals lack referrals, actors in international markets may lack willingness to exchange resources with these firms.

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The process is co-evolutionary, gradual, and based on feedback. The pre-existing ties allow Born Globals to acquire resources to serve international markets. Each foreign client is a source of new ties and new knowledge. New ties, through a feedback process, increase the current stock of business and institutional knowledge in Born Globals. This increased stock of resources and knowledge in Born Globals allows them to engage in further internationalization. The international operations of Born Globals and their network ties thus co-evolve. 8. Final remarks and implications Research on Born Globals is increasing. But much of this research is empirical. The purpose of this paper is to contribute to the development of theory based research on Born Global firms. In this paper, we have argued that the knowledge based behavioral internationalization process models are suitable for explaining the internationalization process of Born Global firms. We have argued that the internationalization process of Born Globals is a matter of learning through networks. Our findings point out the importance of weak ties in the internationalization process of firms. Our findings also show that Born Globals are more willing to adapt their internationalization strategy to the needs of the market. Consequently, it is important that relationships with international firms in the domestic market and/or abroad are built early (Majkga˚rd & Sharma, 1998). It is much harder for domestic firms with no international relationships and long domestic experience to change their mental models and processes than it is for Born Globals. Firms with long domestic experience may have a more cemented knowledge platform. More research in this area is suggested. Quantitative studies can provide us with more detailed knowledge concerning the effects of domestic operations on the internationalization process of Born Globals. Moreover, the performance implications of knowledge accumulation on Born Globals need more research. Similarly, in the process of going abroad, some indirect ties of Born Globals are transformed into direct ties and vice-versa. We observe that the process by which weak ties change into strong ties and indirect ties into direct ties is gradual. The process was neither planned nor linear. Each (direct) tie abroad ‘automatically’ gave these firms access to a number of other (indirect) ties. Gradually, as the commitment of resources by the firms in individual foreign markets increased, some of the indirect ties were transformed into direct ties. More research on the processes by which direct ties change into indirect ties and vice-versa is suggested. Also, the consequences of these changes for Born Globals and their performance need more research. References Barkema, H. G., Bell, J. H. J., & Pennings, J. M. (1996). Foreign entry, cultural barriers and learning. Strategic Management Journal, 17(2), 151–166. Bartlett, C. A., & Ghoshal, S. (1989). Managing across borders. The transnational solution. Boston: Harvard Business School Press.

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