Born Globals – myth or reality?
A company with exports representing at least 25 per cent of its turnover within 2–3 years of its formation – this is a born global company. But how common is the phenomenon – and what societal effects does it yield? New research shows that we should lower the expectations for born global companies.
Together with Pontus Braunerhjelm, researcher Torbjörn Halldin has recently released the Born Globals report – Could rapid internationalisation help in scaling up Swedish companies? Here Torbjörn shares his views on the situation of Swedish born globals.
How common are born globals?
“Born globals are a rare phenomenon. Between 0.6 and 3.3 per cent of all startup companies within the Swedish manufacturing industry fit the bill. These consist mainly of high-tech companies, which exist from the offset in relatively few markets, four on average.”
What is the willingness to export among Swedish startup companies?
“According to previous research, both the growth ambitions and the internationalisation rate are relatively low among young Swedish companies and Swedish startup companies. Compared to other innovation-driven countries, only companies in Greece, Spain and Italy have lower growth ambitions for their businesses.”
Are born global companies more profitable than other startup companies?
“Born global companies are growing faster, both in the number of employees and in sales per employee. But when we look at productivity and profit levels, the differences are non-existent or negative. The rapidly growing size of born globals is down to the companies’ profit levels. Therefore, it is important to have sustainable and strong financiers in order to implement a born globals strategy. A more gradual internationalisation strategy may reduce the vulnerability of young companies.”
Are born global companies good for society?
“Although the share of born globals is low, the impact of one or two companies growing into a new large company could be significant for society. However, research shows that we cannot expect born globals to act as growth engines in society. Many young Swedish companies find it difficult to scale up their business. It then seems as though a more cautious and gradual export strategy is more likely to succeed than an aggressive born global strategy.”
Jan Grigo is a senior underwriter at EKN. We asked him to give his opinion on the phenomenon. What do you consider to be a successful export venture and what happens within organisations that begin to export?
“Successful export ventures are mainly characterised by their profitability! Becoming established in a new market is comparable with an investment. In order for the establishment to succeed, you must do the numbers on the investment and prepare the company as best as possible. For small and medium-sized enterprises, a shortage of resources and liquidity are the major obstacles on the way out into the world. Therefore, a born global strategy can be difficult because it requires considerable resources to implement,” says Jan Grigo.
He continues: “There is a tremendous amount of knowledge and lessons to be learned on the international market. Knowledge that cannot be obtained theoretically, but which comes from practical experience. Companies that succeed in a new market possess a great knowledge advantage when establishing themselves in the next country. Even if the conditions differ, large parts of the process can be copied and repeated. The same goes for failures. Failure within a market provides lessons that may be used next time around. The decisive factor is whether the company is willing to export. Motivation and work that employs a long-term perspective pay off in the long run. This applies to both born globals and companies that have a more cautious and gradually increasing export strategy.”