Geographic Diversification and the Survival of Born-Globals

The staged internationalization model posits that firms internationalize incrementally over time. However, born-globals are less likely to follow a more gradual model of staged internationalization, and they must decide on the scope of internationalization at their founding to exploit entrepreneuria...

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Bibliographic Details
Published inJournal of management Vol. 44; no. 5; pp. 2008 - 2036
Main Authors Patel, Pankaj C., Criaco, Giuseppe, Naldi, Lucia
Format Journal Article
LanguageEnglish
Published Los Angeles, CA SAGE Publications 01.05.2018
Sage Publications Ltd
Subjects
Diversification
Equity
Founding
Globalization
interregional geographic diversification
survival
industry munificence
intraregional geographic diversification
industry dynamism
international entrepreneurship
geographic diversification
born-globals
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Summary:The staged internationalization model posits that firms internationalize incrementally over time. However, born-globals are less likely to follow a more gradual model of staged internationalization, and they must decide on the scope of internationalization at their founding to exploit entrepreneurial opportunities on a global scale. Because returns from international expansion must be considered along with the risk of failure, we propose that born-globals’ local industry conditions moderate the relationship between the scope of intraregional diversification (geographic diversification within a region) or interregional diversification (geographic diversification across different regions) and survival. Using a sample of 680 Swedish born-globals founded in 2002, 2003, or 2004 and followed until 2010; data from Swedish Customs; and archival performance data, we find that interregional geographic diversification increases—and that intraregional diversification decreases—the likelihood of failure, which declines further when born-globals undertake intraregional geographic diversification under higher environmental dynamism in the home country industry. Conversely, undertaking interregional geographic diversification even when the home country industry is munificent increases the likelihood of failure (marginally significant). The findings are robust to several alternative specifications.
ISSN:0149-2063
1557-1211
1557-1211
DOI:10.1177/0149206316635251