Measuring the Performance of Born-global Firms throughout their Development Process: The Roles of Initial Market Selection and Internationalisation Speed

Ryan Trudgen Monash UniversityDepartment of Management, Faculty of Business and EconomicsCaulfield Campus, 21 Sir John Monash Drive, Caulfield East, 3145, Victoria, AustraliaTel: +61 3 9903 2807 and Fax: +61 3 9903 2718e-mail: ryan.trudgen@gmail.com

Associate Professor Susan Freeman, PhD The University of Adelaide Adelaide Business School, International Business DisciplineNexus 10, North Terrace, Adelaide, South Australia, 5005, AustraliaTel: +61 8 8303 3255 and Fax: +61 8 8303 4368e-mail: susan.freeman@adelaide.edu.au

Abstract:

Purpose: Recent efforts have been made to operationalise the performance of born-global (BG) firms in ways

that acknowledge their unique characteristics and strategies. This paper explores the BG development process

and assesses the relevance of various types of performance measures. Two questions are addressed: First, which

types of performance measures are most relevant to BGs in the various phases of their development? Second,

how do initial market selection and internationalisation speed influence BG development, and therefore the

relevance of performance measures?

Method: Drawing on international entrepreneurship theory, this study undertook a progressive focussing, theory

development/refinement (abduction) approach. Utilising a multiple case study design, data were collected

primarily through in-depth, face-to-face interviews with senior managers from Australian BGs and with industry

experts and analysed using open, axial and selective coding. Data were collected from BGs across each of the

three phases of BG development: pre-start-up/venture creation; early international entry/development; and

international growth/consolidation.

Results: Building on recent conceptualisations of the BG development process, we found that the relevance of

performance measures is dependent, in part, on the BG’s phase of development. Further, the rapidity of

internationalisation and the psychic distance of initial markets influence the duration of each phase.

Conclusion: The unique characteristics and strategies of BGs should be reflected in the measures used to

evaluate their performance in each of the three phases. This study represents the first empirical examination into

the measurement of BG performance across the phases of development, providing a foundation for future scale

development.

Keywords: Born-global, Performance measurement, Pre-founding, Initial internationalisation, Maturity,

International entrepreneurship.

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1 Introduction

Changes in the global business environment have substantially reduced barriers to international trade, making

global markets accessible to even the youngest and smallest of firms (Efrat and Shoham 2012). This has created

conditions conducive to the emergence and proliferation of born-globals (BGs) (Knight and Cavusgil 2005;

Freeman and Cavusgil 2007). Frequently defined as firms that enter multiple foreign markets at, or soon after,

inception (Knight and Cavusgil 1996), BGs have become increasingly important to both emerging and

developed economies (Almor 2013; Varma 2011). However, many variables are used to distinguish venture

types with key variants defined by differences in innovation and technology, operational and competitive

strategies, international entrepreneurial orientation, finance and performance (Knight and Cavusgil 2005;

Gabrielsson et al. 2008; Kuivalainen et al. 2012). Consequently, greater understanding of BGs, and the factors

that facilitate their success within the global market place, is required (Griffith et al. 2008).

Recent and extensive reviews reveal substantial theoretical and empirical gaps in our understanding of venture

types, such as the BG, despite their prevalence in the international entrepreneurship (IE) literature since the

1980s (Jones et al. 2011). Considerable effort has been devoted to differentiating BGs from the broader

categorisation of international new ventures (INVs) (Madsen 2013), and also traditional (gradual)

internationalizers (Johanson and Vahlne 1977) in terms of their entrepreneurial mindset and risk tolerant

behaviour, international experience, networks and international entrepreneurial capability. Recent

conceptualisations reveal that BG strategic behaviour and performance objectives are influenced, at least in part,

by the phase of development in which they find themselves (Efrat and Shoham, 2012; Rialp-Criado et al. 2010;

Gabrielsson et al. 2008; Sleuwaegen and Onkelinxn 2013). While the performance outcomes of BG strategies

have emerged as a prominent topic of interest (Efrat and Shoham 2012; Zhang et al. 2013), progress in this area

has been slowed by the myriad of approaches undertaken to select measures of BG performance. With BG

performance defined ‘as the extent to which financial and other goals are achieved as a function of business

strategies’ (Knight and Cavusgil 2004, p. 129), the selection of performance measures should take into account

not only the unique characteristics of BGs, but also their level of development (Gabrielsson et al. 2008). To our

knowledge, this approach has not yet been systematically addressed. Responding to a lack of empirical evidence

in this area, the first research question of this study is: Which types of performance measures are most relevant

to BGs in the various phases of their development?

To address this first research question, this study explored not only the relevance of specific performance

measures during the BG’s early international entry/development phase, but also the often neglected Pre-start-

up/new venture creation and international growth/consolidation phases of BG development (Rialp-Criado et al.

2010). However, these phases are not easily operationalised (Gabrielsson et al. 2008). Identifying a point of

incorporation can be problematic, with BG inception recently conceptualised as a process, rather than a single

event (Hewerdine and Welch 2013). Similar challenges arise in identifying the point at which a BG has

progressed from early international entry/development, to international growth and consolidation. The pace of

progression through these phases is likely to be unique to each individual BG, and to be dependent on the

strategic decisions made by entrepreneurial management (Gabrielsson et al. 2008). Consequently, this study

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explored the influence that BG strategies have on the pace of BG development. The second research question of

this study is: How do initial market selection and internationalisation speed influence BG development, and

therefore the relevance of performance measures?

Responding to recent calls for performance to be assessed through ‘theoretically stronger discipline-specific

measures’ (Richard et al. 2009, p. 744), we adopt international entrepreneurship (IE) as our primary theoretical

lens. There are other perspectives in international business (IB) research, namely the economic (e.g eclectic

paradigm) (Dunning and Lundan 2008) and the process view (e.g. Uppsala internationalisation process (IP)

model, (Johanson and Vahlne 1977), which provide valuable knowledge on the behaviour of internationalising

firms, and we realise that these should not be ignored. As internationalisation is a complex process, many

different perspectives need to be understood, especially if we accept that entrepreneurs are individuals and that

research suggests ‘these individuals influence…firms’ international processes in various ways’ (Andersson

2000, p. 64). Given this ‘reality’, the purpose of our study is to provide a perspective that acknowledges

entrepreneurs and ‘the importance of individuals’ actions’ (p. 66) in our analysis, to enhance our understanding

of the complex phenomenon of firms’ international performance throughout their various development phases

(pre-start-up, initial internationalisation and maturity). Operating at the owner/manager level of analysis, the

development of IE literature has followed the emergence and continued growth of BGs in the global

marketplace (Andersson and Florén 2011). Originally defined as ‘a combination of innovative, proactive and

risk-seeking behaviour that crosses national borders and is intended to create value in organisations’

(McDougall and Oviatt 2000, p.903), IE theory continues to develop and is commonly adopted to explain the

internationalisation and performance of BGs (Peiris et al. 2012). This perspective is valuable as it provides

insights into both the unique strategies pursued by BGs, and the heterogeneity of firms that fall under the BG

label.

The BG literature has recently progressed from qualitative explorations of BG internationalisation strategies

(Knight and Cavusgil 1996), to quantitative tests of their performance outcomes (Efrat and Shoham 2012;

Zhang et al. 2013). However, this emerging stream of research has been comprised largely of BG performance

studies that ‘have ignored BGs’ unique characteristics’ (Efrat and Shoham 2012, p. 676) and ‘the context of

BGs varies greatly’ (Gabrielsson et al. 2008, p. 400). This current study is unique and makes valuable

contributions to this emerging field of literature; specifically, by applying an IE lens, this study will provide

insights into how researchers can identify performance measures that reflect more accurately the changing goals

and objectives of BGs at various phases of their development process. Furthermore, this study will highlight

how the strategic internationalisation decisions made by BG mangers affect their BG’s progression through the

three phases of their development process and, therefore, the relevance of performance measures.

This study begins with a review of extant literature on defining BGs, their development phases, and the

measures typically selected to measure their performance. We then outline the methodology and analysis

utilised to address the first and second research questions stated above. The paper concludes with a discussion of

the findings, development of propositions and conceptual framework and implications for future research.

2 Theoretical perspectives on BGs

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BGs are a distinct subset of INVs, which are characterised by early, rapid, and extensive involvement in

multiple geographically dispersed foreign markets (Madsen 2013). The emergence of BGs has been driven by

factors at the environmental, industry, and managerial levels. At the environmental level, substantial advances in

communication, transportation, and information technology, combined with the removal of many tariff and non-

tariff barriers to international trade (Efrat and Shoham 2012; Varma 2011) have made it faster, easier, and more

affordable for resource deficient firms to compete on an international scale. At the industry level, operating in

global industrial sectors and frequently with little or no domestic market, BGs are often forced to

internationalise in order to generate sufficient demand for their offerings (Freeman et al. 2010). Finally, at the

managerial level, the ability of international entrepreneurial owner/managers to maintain personal networks,

identify foreign opportunities, and acquire resources plays a critical role in the early and rapid

internationalisation of BGs (Andersson and Florén 2011; Freeman et al. 2012; Gabrielsson et al. 2008; Hashai

and Almor 2004).

While environmental (Efrat and Shoham 2012; Varma 2011) and industry level (Freeman et al. 2010) factors

provide insights into why BGs choose to internationalise rapidly soon after inception and how they are able to

do so, it is the entrepreneurial owner/manager level of analysis that is commonly adopted when examining BG

behaviour (Andersson 2011; Andersson and Floren 2011). This is because BGs are often founded by

entrepreneurs (Knight and Cavusgil 2004) who drive the firms’ internationalisation through the identification

and pursuit of opportunities in foreign markets (Loane and Bell 2006). While the IP (Johanson and Vahlne

1977) and other stage models (Bilkey and Tesar 1977) provide an organisational level perspective, the models

do not position individuals as making individual choices and emphasise standard patterns of behaviour, which

are less helpful for understanding strategic change, where managers play a fundamental role (Andersson 2000).

For these reasons, IE theory is consistently used as a lens for discussing the behaviour and performance

objectives of BGs (Peiris et al. 2012).

Firm performance has emerged as a central issue within the IE field (Keupp and Gassman 2009).

Comprehensive reviews of IE literature reveal the extensive application of this theory in examinations of both

the antecedents and outcomes of firm performance (see Jones et al. 2011). However, IE theory has yet to be

extended to the selection of performance measures for BGs in the early phases of development compared to

their more mature counterparts. This study seeks to address this gap.

2.1 Extant Measures of BG Performance

Operationalising firm performance within an IB context is a challenging and uncompleted task. Focussing on

export performance, Shoham (1998) provided a detailed discussion of the complexities of measuring the

performance of international firms. Hult et al. (2008) offered a categorisation of the plethora of performance

measures into three distinct categories: financial performance, operational performance, and overall

effectiveness. It is this classification that is adopted for this current study. Financial performance refers to

achievement of economic goals, which can be either accounting-based or market-based. Operational

performance refers to achievement of operational objectives, including product-market outcomes and internal

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process outcomes, which may facilitate future financial performance. Finally, overall effectiveness ‘reflects a

wider conceptualization of performance’ which captures those measures that are neither financial nor

operational (Hult et al. 2008, p. 1066).

Further complexity is added to the task of selecting performance measures when an international business is also

a new venture (McDougall and Oviatt 1996). Thus it can be seen that selecting appropriate measures to evaluate

BG performance is an especially challenging task, and one that requires the unique characteristics of BGs to be

taken into account. However, this is rare within existing BG literature (Efrat and Shoham, 2012; Gabrielsson et

al. 2008). Despite some studies in which the authors attempt to adapt their performance measures to suit BGs

(Crick 2009; Mort and Weerawardena 2006; Mort et al. 2012), empirical examination into the appropriateness

of specific measures remains rare (Crick 2009).

Recent efforts to capture BG performance have involved the application of a plethora of inconsistent measures,

including survival, global market share, improvements in strategic position and global competitiveness, sales

growth, export growth, and profitability (Efrat and Shoham 2012; Zhang et al. 2013; Zhou et al. 2007) (see

Table 1 below). Extant studies have not achieved an understanding of how to define and operationalise BG

performance. In this sense, the BG literature is reflective of the broader management/strategy literature which

also lacks methodological consistency in the ways that performance is measured (Richard et al. 2009). It can be

argued that the BG literature has applied an arbitrary mix of financial performance, operational performance,

and overall effectiveness measures as performance measures (Hult et al. 2008). This haphazard approach to

performance measurement makes ‘effective positive scientific comparisons between these papers difficult and

normative recommendations hard to justify as having any degree of prescriptive validity’ (Richard et al. 2009,

p.720). If the BG performance field is to progress, this issue needs to be resolved.

(Please insert Table 1 here)

2.2 Measuring BGs’ Performance throughout their Development Processes

The issue of BG age is well acknowledged within the literature, yet it is treated at only a general level. Although

liabilities of newness do influence BG strategy and performance (Sleuwaegen and Onkelinxn 2013), assigning

them the generic label of young firms does not truly reflect the heterogeneity in the age of BGs. Rather, BG

firms advance through numerous phases of development from initial idea generation through to growth and

consolidation (Rialp-Criado et al. 2010). Other studies provide a similar categorisation: introductory, growth

and resource accumulation and break out, when the BG evolves into a ‘normal’ MNE (Gabrielsson et al. 2008).

More recently, Gabrielsson and Gabrielsson (2013) introduced an empirically derived model of the phases of

INV development: INV creation, commercialization and foreign entries, rapid growth and foreign expansion,

and rationalisation and foreign maturity. Each of these models outlines a process by which the firm moves from

initial idea generation and creation, through to maturity. That being said, BGs may also undertake non-linear

internationalisation and move back and forth between stages as they de- and re-internationalise in order to adapt

their strategies to changes in the firm and in the external environment (Freeman et al. 2013; Vissak and

Francioni 2013; Welch and Welch 2009).

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While recent BG literature has explored the implications of the various phases of the BG development process

with respect to strategy formation and the decision making-logic adopted by managers (Gabrielsson and

Gabrielsson 2013; Pettersen and Tobiassen 2012; Rialp-Criado et al. 2010), examination into the selection of

performance measures appropriate to these phases is lagging behind. For instance, Crick (2009) provided a rare

empirical examination of the performance measures valued and utilised by BG managers. The study, however,

did not take the phase of development of each individual BG into account. Given that the challenges faced,

strategy formation process undertaken, and decision making logic applied by BGs is unique to their phase of

development (Rialp-Criado et al. 2010; Gabrielsson and Gabrielsson 2013; Pettersen and Tobiassen 2012), it

makes sense that the performance goals and objectives of BG managers would also be dependent on the firm’s

phase of development. Performance is best measured as the extent to which a firm meets its desired outcomes

(Shoham 1998) and the relevance of performance measures to BGs is expected to be determined, at least in part,

by their phase of development. This study primarily adopts the phases of development outlined by Rialp-Criado

et al. (2010) because they were developed specifically for BGs, rather than NVs (Kazanjian 1988) or INVs

(Gabrielsson and Gabrielsson 2013).

First, the pre-start-up and new venture creation phase can be quiet extensive (Hewerdine and Welch 2013) and

have considerable implications for the BGs post-founding strategy and behaviour (Pettersen and Tobiassen

2012). In this phase, BGs benefit from proactive entrepreneurs who are internationally experienced and possess

valuable interpersonal relationships (Rialp-Criado et al. 2010). Critical steps and incidents denote each phase

(Gabrielsson et al. 2008). The focus of the entrepreneurial manager in this phase is likely to be on developing

resources, networks, and interest in the product (Pettersen and Tobiassen 2012). To align performance measures

with these objectives, the use of overall effectiveness outcomes would seem appropriate. This is because a

highly entrepreneurial approach to strategy formation is likely to be taken in this phase (Rialp-Criado et al.

2010). Thus, measures that take into account the ambitions of the entrepreneurs are required. Given that the firm

is neither producing nor selling at this point, financial and operational measures are not likely to be relevant.

Second, immediately after founding, BGs enter their early international entry/development phase. It is on this

phase that the preponderance of BG literature has been focussed (Melén and Nordman 2009), with these studies

tending to rely ‘primarily on measures developed for the international operations of [gradual globalisers]’ (Efrat

and Shoham 2012, p. 676). This phase is characterised by rapid expansion into geographically dispersed markets

(Almor 2013; Hashai and Almor 2004; Madsen 2013), which results in BGs being faced simultaneously with

liabilities of newness, foreignness, and outsidership (Johanson and Vahlne 2009; Mudambi and Zahra 2007).

Due to these considerable pressures, BGs are likely to prioritise establishing themselves as a legitimate

competitor within their new markets, focusing on growth and resource accumulation (Gabrielsson et al. 2008)

rather than on short-term financial outcomes (Mudambi and Zahra 2007). Consequently, longer-term strategic

outcomes would take precedence in this phase (Efrat and Shoham 2012). This would promote the adoption of

operational performance and overall effectiveness measures; rather than financial measures.

Third, once the criteria for being considered a BG have been met (i.e. the firm has rapidly internationalised to

geographically dispersed markets, within 3 years of inception), it has been suggested that this legacy of early

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and rapid expansion remains with the firm for 20 years (Knight et al. 2004), suggesting that some BGs move

into a phase of international growth and consolidation (Rialp-Criado et al. 2010).

The so-called ‘break out’ phase, where the BG evolves into a ‘normal’ MNE (Gabrielsson et al. 2008), is

challenged by other studies. Not all BGs achieve this. Rather, the liabilities of newness, foreignness, and

outsidership overwhelm many BGs, resulting in a relatively high failure rate (Mudambi and Zahra 2007;

Sleuwaegen and Onkelinxn 2013). Furthermore, even when a BG has reached the breakout phase, it may de-

and re-internationalise and return to the early international entry/development phase (Freeman et al. 2013;

Vissak and Francioni 2013; Welch and Welch 2009). However, the liabilities of foreignness and newness are

temporary in their nature. They are likely to have subsided by the time BGs achieve growth and consolidation. It

is also in this phase that BGs are able to begin leveraging ‘on the resource accumulation and organisational

learning effort previously deployed’ (Rialp-Criado et al. 2010, p. 118). In some ways, the evolution of BGs may

result in their strategy and performance goals converging with traditional internationalising firms. If this is true,

then tradition financial measures of performance will be appropriate for BGs who have reached international

growth and consolidation. From these arguments, a theoretical model (matrix) has been derived (see Table 2

below).

(Please insert Table 2 here)

2.3 The influence of BGs’ international strategies on their development process

Arguably, the development process, described in Table 2 may be applicable to any form of new venture. The

rate at which a BG is able to progress through the phases of its development process is likely to be unique to

each firm and dependent on a range of factors. For instance, in the case of INVs, Gabrielsson and Gabrielsson

(2013) proposed that advancement through growth phases is positively related to: knowledge of opportunities,

the existence of resources, existence of dynamic networking capabilities, and an entrepreneurial orientation. The

internationalisation processes of BGs can also be expected to influence the pace at which BGs progress through

the various phases of their development. The current study focuses on BG rapid internationalisation and the

selection of multiple geographically dispersed markets as these differentiate BGs from other forms of domestic

new ventures and INVs (Madsen 2013).

2.3.1 BG Rapid Internationalisation

A key objective of many BGs is to establish, very quickly, a foothold in multiple foreign markets (Mort et al.

2012). In recent times, ‘theoretical development in the performance implications of rapid internationalization

has become a central topic of debate’ (Zhou et al. 2007, p. 673). However, it has been argued that ‘there have

been too few studies on rapid-growth firms as a distinct category to provide a basis for a theory refinement and

testing approach’ (Fischer and Reuber 2003, p. 348). The concept of internationalisation speed remains an

important avenue for research (Prashantham and Young 2011). For the current study, we apply Prashantham and

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Young’s (2011) concept of country scope speed (i.e., rate of increase in the number of countries entered) when

discussing rapid internationalisation.

BGs typically enter foreign markets soon or immediately after their founding and must therefore endure

liabilities of foreignness (Zaheer and Mosakowski 1997). It is this early entry into foreign markets that can

extend the early international entry/development phase of the BG’s development. Additional transaction costs

arise from the company’s unfamiliarity with the foreign market conditions, which necessitates rapid

organisational learning, and the adaption of products and processes to align with foreign business practices

(Salomon and Wu 2012). Entering numerous markets, and having repeatedly to overcome liabilities of

foreignness can potentially destabilise BGs and place substantial strain on their configuration, finances,

resources and capabilities (Chetty and Campbell-Hunt 2003). The speed of BG internationalisation means that

these costs are faced repeatedly within a short time-frame.

With speed of entry identified as ‘the essential performance criterion for successful born globals’ (Mort et al.

2012, p. 550), there is a prolonged period in which financial measures of performance are rendered less relevant

as firms invest in establishing a foothold in their target markets (Mort and Weerawardena 2006). Indeed, this

may further extend the early international entry/development period in which it is unrealistic to expect financial

returns, and can delay international growth/development. Therefore, while domestic new ventures often

experience an initial period of establishment where financial returns are unlikely to be achieved, the phase is

likely to be more extended for BGs progressing through rapid internationalisation.

2.3.2 BG Initial Market Selection

The role played by psychic distance in the initial market selection of BGs remains unclear. Some argue that

psychic distance is of little concern to the entrepreneurial owner/managers of BGs, who are primarily network

driven and focussed on opportunity recognition and exploitation behaviour, leading to psychically distant

markets often being selected early in their foray (Freeman et al. 2006; Freeman and Cavusgil 2007). Others have

suggested that many BGs could more accurately be labelled born-regionals as they tend to limit their

international expansion to a single geographic region (Lopez et al. 2008). More recent studies (Freeman et al.

2012) propose that some BGs initially select psychically proximate markets for the purpose of risk reduction,

but are then able to utilize technical expertise, networks and entrepreneurial skill to move very quickly to

psychically distant markets with more opportunities.

In either case, ‘the choice of the first target market can have a crucial impact on their strategic performance’

(Efrat and Shoham 2012, p.677). Traditional views of internationalisation suggest that firms should be able to

maximise their profit if they follow a path of gradually increasing psychic distance, as this reduces uncertainty

and risk (Johanson and Vahlne 1977). Such an incremental strategy is assumed to be beneficial because firms

are able to adjust by only a certain amount per unit of time, before performance outcomes are adversely affected

(Hutzschenreuter and Voll 2008). Expanding into markets with similar cultures and business practices enables

firms to ‘leverage their home country competencies in these locations more easily, translating to superior

profitability’ (Gomes and Ramaswamy 1999, p. 179). However, for BGs that originate from small, saturated

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domestic markets and in industries that operate globally with industrial relevance elsewhere, the domestic

market may hold little relevance (Chetty and Campbell-Hunt 2003). This suggests that BGs may be driven out

of their domestic markets in search of sufficient demand for their products (Freeman et al. 2010). Nonetheless,

while some studies suggest, that BGs may seek out culturally proximate markets, initially, (Chetty and

Campbell-Hunt 2003; Freeman et al. 2006), others demonstrate that if the returns in the initial culturally

proximate market are not realised quickly, they will move to other, culturally distant markets, where greater

opportunities for growth are likely (Freeman et al. 2012). Expansion into culturally and psychically similar

markets will allow BGs to achieve international growth and consolidation more quickly, only if the potential

that the market offers is realised.

Entering psychically distant markets in the early international entry/development phase of their development

requires BGs to undertake a process of learning and adaptation that may inhibit immediate financial returns

(Barkema and Drogendijk 2007). However, because ‘psychic distance is comprised of a combination of

differences and uncertainty’ (Freeman et al. 2012, p. 352), this effect is temporary. While the differences

between nations may endure, the entrepreneur’s uncertainty will subside as they gain familiarity with the new

environment. BGs can then reap the benefits of their initial foray into these markets, as it ‘serves to create the

knowledge base and accumulation of experience which helps in enhancing performance in sequential markets’

(Efrat and Shoham 2012, pp. 676-677). In this sense, an initial foray into psychically distant markets may reflect

a longer-term orientation, in which BGs spend many years in the early international entry/development phase of

their development.

From this discussion, we conclude that the level of BG development may affect the relevance of BG

performance measures, while the speed of internationalisation and initial market selection may influence the

duration of the phases of BG development.

3 Methodology

To maximise the value of the insights achieved through qualitative research, a progressive focussing approach

was utilised. This entailed ‘a systematic narrowing and refinement of the research focus during fieldwork in

order to accommodate highly unique and specific issues (emic) of socio-cultural behaviour’ (Sinkovics and

Alfoldi 2012, p.818). Emic approaches investigate how those existing in a culture think, while etic approaches

deal in generalisations about behaviour considered universally true (Kottak 2006). This involved a non-linear

research approach in which each phase of the research design was continually revisited as the project evolved.

While this study initially sought to identify appropriate measures of BG performance, the iterative and cyclical

approach of research design and analysis revealed the interaction between the BG development process and the

measurement of their performance. Accordingly, the research focus of the study was narrowed and shifted in

this direction. This focussing approach was then reflected across all components of the research design and

analysis. We selected a case study design due to the exploratory, contemporary, and complex (Yin 2011) nature

of the research questions. With the ability to generate ‘extremely rich, detailed, and in-depth’ information (Berg

1998, p. 212), case studies are particularly appropriate for ‘acquiring intimate knowledge of a small business in

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its natural context’ (Romano 1989, p. 41). This is especially true given the complexity of the IB context

(Piekkari et al. 2009).

3.1 Context

Australia was selected as the country context of this study. While some BGs have originated from larger

countries, they more frequently emerge from small, open, and advanced economies (Almor 2013; Chetty and

Campbell-Hunt 2003; Freeman et al. 2012; Mort et al. 2012). With a relatively small domestic market,

Australian firms commonly seek growth through internationalisation. Over 40 per cent of Australian exporting

firms are small or medium sized businesses, and this percentage continues to grow (DIISC 2011). As Australia

increasingly becomes a knowledge-based economy (DFAT 2009) and with government bodies such as Austrade

set up to facilitate growth in exports and international trade (Australian Trade Commission 2011), the BG

phenomenon is expected to become increasingly prevalent and economically important within the Australian

economy.

3.2 Sampling

To be classified BG in this study, firms needed have internationalised within 3 years of inception and derived at

least 25% of total sales from foreign markets (Knight and Cavusgil 2004). Borrowing from Eisenhardt (1989,

p.537), a theoretical sampling approach was undertaken, in which cases are ‘chosen to fill theoretical categories

and provide examples of polar types’. This form of sampling was considered ideal for the progressive focussing

approach undertaken by this study as it allowed the selection of additional cases to be driven by the findings

derived from the previous cases (Sinkovics and Alfoldi 2012). Because this study adopted IE theory as its

theoretical lens, initial sampling was focussed on Australian BGs that met the abovementioned criteria. To

ensure that polar examples of BGs were represented, the cases were selected so that they ranged with respect to

their age, size, type of offering (manufacturing vs service), and initial market selection (psychically close vs

distant) (see Table 3 below). As a result of our progressive focussing approach (Sinkovics and Alfoldi 2012),

the sampling criteria evolved throughout the fieldwork and, due to the initial findings, the phases of BG

development emerged as more central to the study. As a result, the phases of BG development outlined by

Rialp-Criado et al. (2010) became important in our final sampling criteria. This allowed for a spectrum of

entrepreneurial decision-making logics (Gabrielsson and Gabrielsson 2013), and strategy formation processes

(Rialp-Criado et al. 2010) to be captured. The cases were similar and comparable in that they were Australian

based BGs seeking to establish a global presence. However, we sought variety across the cases with respect to

their position in the BG development process, which emerged as the primary theoretical categories of interest. In

sum, we selected seven cases (firms) that captured the pre-start-up/venture creation (TravelWear), early

international entry/development (WebSource and GlobalHome), and international growth/consolidation

(DeviceDesign, InDesign, SysTrain, and GamePlay) phases of BG development. The need to access a sufficient

range of data sources and analyse each case in sufficient depth dictated the number of cases included in this

study (Piekkari et al. 2009). We opted for a multiple case study design so that each case could be used to

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corroborate the data gathered from the others, while also providing insights into ‘complementary aspects of the

phenomenon under investigation’ (Eisenhardt 1991, p.621).

(Please place Table 3 here)

We utilised personal contacts within the Australian Exporters Club to locate firms fitting our criteria of 'BG' that

were willing to be interviewed and provide appropriate documentation to assist with our study. We limited our

sample to respondents within Victoria, one of the two largest states in Australia. Recent statistics show that

approximately 40% of Australian new ventures cease to operate within four years of their inception (DIISRTE,

2012). Early and rapid internationalisation places additional pressures on BGs, further heightening the risk of

failure (Mudambi and Zahra 2007). This makes survival a fundamental desire of BGs (Efrat and Shoham 2012).

In a sense, the BGs sampled in this current study could be considered exceptional as they have all survived.

Arguably, then, these exceptional BGs provide insights into the most appropriate performance measures, as they

have resulted in BG success/survival. To gain further insights, the cases were supplemented by in-depth

interviews with 5 industry informants, with selection based on their knowledge of, and involvement with,

Australian BGs. These informants were sourced from the Australian Exporters Club, academia, MNEs, and both

state and federal level government departments. This provided a holistic and comprehensive understanding of

the phenomenon from both within and outside the cases for triangulation purposes (Yin 2011).

3.3 Data Collection

In order to maximise the benefits of a case study design, we utilised multiple data collection techniques. Our

primary method of data collection was semi-structure in-depth interviews (Kumar 2005) and, for every

interview, we used the same protocol, which included a list of open-ended questions. This ensured that general

information relating to the research area was addressed while also allowing us to pursue any topics that emerged

during the interview. Interviewees were asked about the BG’s current performance objectives, as well as those

that were pursued in early phases of the firm’s development, and those that were anticipated to gain prominence

as the BG developed further. Within each case, senior managers were selected for face-to-face interviews based

on their direct knowledge of their firm’s international activities and performance objectives and measures (e.g.

owners, marketing directors, CEOs and senior managers). Interviews lasted 1-2 hours, providing in-depth

understanding of the challenges faced by BGs, and how these influenced the measurement of performance. The

data collected from interviews was supplemented by secondary data gathered through publicly available

documentation, to build multiple individual case databases (Yin 2011). Interviews using the same semi-

structured approach were conducted with all industry informants.

3.4 Data Analysis

An iterative and cyclical approach to data collection and analysis was undertaken. Consistent with the

progressive focussing approach, insights gained from the initial data were used to inform subsequent case

selection and refine the conceptual foundations of the study (Sinkovics and Alfoldi 2012). As a result, the

11

research questions guided the interview process. Research themes where continually refined in the analysis, in a

manner that evolved constantly throughout the process of data analysis. A number of techniques (Yin 2011)

were used in the analysis of data, consistent with other cases studies on BGs (Freeman et al. 2012), including the

use of open, axial and selective coding to extract key themes and give meaning to the data. Open coding refers

to ‘the analytical process through which the components are identified and their properties and dimensions

discovered in the data’ (Strauss and Corbin 1998, p. 101). Axial coding entailed ‘relating categories to their

subcategories’ and selective coding involved the integration and refinement of theory (p.123). After data was

coded, similarities and differences between cases were analysed (pattern matching) with the findings

subsequently discussed in relation to relevant theories (explanation building) (Yin 2011).

During the analysis of the data we drew upon Eisenhardt and Graebner (2007) for insights and Miles and

Huberman (1984) for methods to analyse qualitative data. The transcripts and case study databases were then

analysed in detail to identify themes and to construct descriptive codes. The researchers worked independently

to construct themes, then compared them and adjusted discrepancies. Peer debriefing was used, with regular

meetings with the researchers who discussed the method, analysis of data and interpretation of findings. This

ensured that the data collection and analysis were accurate and effective. This detailed approach allowed us to

look for patterns by looking across the rows of transcripts and databases for cross case analysis and within the

rows for within case analysis. We regularly moved backwards and forwards between the theme summaries, case

study databases and transcripts to confirm conclusions and interpretations for triangulation. This abductive

process (Dubois and Gadde 2002) of moving between the theme summaries, case study databases and

transcripts enabled us to deepen our understanding of the causal links and the complex interplay of a variety of

factors as well as to ascertain why certain events took place. During the analysis we moved back and forth

constantly between the data and theory to refine and extend theory.

Because we sought insights regarding the past, present, and anticipated future performance objectives of each

firm, it was necessary to corroborate the findings obtained from each individual case. While measures of

performance may be more accurately obtained within close temporal proximity to the event of interest (Richard

et al. 2009), the emergent themes were found to be consistent across the cases in this study. This replication

suggests that the findings derived from this retrospective method were not unduly influenced by respondent

memory bias. Finally, we triangulated the data gathered from semi-structured interviews with managers and

industry experts and the documentation, enhancing the validity of the research results.

4 Findings

Analysis revealed not only that different performance measures are relevant within each of the phases of BG

development, but also that the unique internationalisation strategies (early and rapid) pursued by BGs influence

the duration of each phase. The speed of internationalisation and psychic distance of initial markets were also

explored in the analysis for each firm.

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4.1 BG Firm Development and the Selection of Performance Measures

Our findings reinforce prior criticism of BG literature which focussed almost exclusively on the initial

internationalisation of BGs, to the exclusion of other phases of their development (Melén and Nordman 2009).

The youngest BG in this study was established less than a year prior to data collection, while the oldest was 17

years old. It was found that the relevance of BG performance objectives was strongly influenced by the BGs

phase of development.

We have predominantly built upon Rialp-Criado et al.’s (2010) conceptualisation of the BG development

process by exploring its implications for the measurement of BG performance. BGs in the pre-start-up/venture

creation phase of development (TravelWear), were found to face challenges notably different (Gabrielsson et al.

2008) from those in both the early international entry-development (WebSource, GlobalHome) and

international growth/consolidation (DeviceDesign, GamePlay, SysTrain, InDesign) phases, resulting in the

pursuit of different performance outcomes. Refining Hult et al.'s (2008) call for performance constructs to

include a combination of financial measure of performance, operational measures of performance and overall

effectiveness measures, we reveal that in the context of BGs, the relevance of each of these categories varies

substantially depending upon the firm’s phase of development.

Hewerdine and Welch (2013) emphasised that INVs often have a lengthy gestation period before their official

date of incorporation. Pettersen and Tobiassen (2012) noted the importance of this phase of entrepreneurial idea

generation, opportunity assessment, and resource seeking. Our findings extend this and reveal that BGs take

advantage of this pre-start-up phase to varying degrees, by exploring ideas, assessing opportunities and locating

resources, and that this has important implications for their post-founding performance objectives. For example,

the entrepreneurs responsible for the creation of DeviceDesign had previously worked at a leading global

software company. Following the initial idea generation, the entrepreneurs identified a company developing a

similar concept and sought funding to purchase the pre-existing company. Having undertaken this process, the

BG was able to utilise a pre-existing foundation at the time of inception. This allowed for the relatively quick

realisation of profits. Similarly, although TravelWear was yet to begin production, the entrepreneurs had

invested considerable resources into concept testing and product design. Crowd sourced funding was obtained

via the ‘Kickstarter’ website, meaning the future BG had been able to obtain finances and pre-orders for the

product. The entrepreneurs anticipated that these efforts would translate into faster realisation of profits once

their operations had commenced. By contrast, the pre-founding phase was not used to generate resources in the

case of GlobalHome. Consequently, at the point of foundation, GlobalHome was faced with severe financial and

human resource deficiencies which slowed the achievement of financial returns. Measures of overall

effectiveness are useful and relevant during all there phases of BG development. Particularly useful measures

within this category include perceived overall performance and the achievement of goals. Because these

measures are fully subjective, they are highly flexible and able to account for the varied aspirations of the BGs

(Richard et al. 2009). In the pre-start-up/venture creation phase, operational and financial measures of

performance are irrelevant, because the BG has yet to commence operations or trading.

The early international entry-development phase, was suggested to last for between 2 years (Industry Informant

1) and 5 years (Industry Informant 3) following a BG’s inception. In our analysis, it should be noted that these

13

timelines were not regarded as a literal representation. Rather, they were interpreted as a reflection of the

duration of this phase for each BG. The findings of the study reveal that BGs progress through this phase at

different speeds depending, in part, on the strategic decisions made by their owner/managers (discussed in depth

below). BG age may, therefore, not be a reliable indicator of their phase of development. Rialp-Criado et al.

(2010) suggested that BGs undertake different strategy formation processes depending on their phase of

development. Similarly, Gabrielsson and Gabrielsson (2013) found that decision making logic of INVs evolved

from effectuation logic (i.e. it centres on the entrepreneurs’ aspiration and their ability to remain flexible in their

search for opportunities and in creating value) in the early phases of development, towards a causation type of

logic (i.e. goal-driven and deliberately pursuing opportunities) as they reached more advanced phases. Adding

to this, the findings of the current study reveal that BGs pursue different performance objectives during the

various phases of their development. Integrating the findings of these three studies will provide better criteria for

ascertaining which phase of development BGs are in, so that they can adapt their measures accordingly.

Measures of overall effectiveness are relevant in the early international entry-development phase, as BGs invest

heavily in new processes, employees, products and markets. The primary objective for BGs in this phase is to

establish themselves within the marketplace. For instance, the entrepreneur from TravelWear was expecting to

enter the global market in coming months, and highlighted that product quality, service quality, distribution,

customer satisfaction, and reputation would initially take precedence over financial outcomes. Similarly, while

yet to achieve financial returns, GlobalHome, an accommodation agent for international students, invested in

numerous events and activities to enhance their reputation within the international student community. The

owner of WebSource also highlighted the importance of overall effectiveness measures when assessing the

performance of a BG in the initial phase of their development: ‘Reputation, survival, perceived overall

performance, achievement of goals and perceived overall [performance] relative to competitors; All good ones’

(WebSource, Owner). The relevance of financial measures is low in this phase as BGs are focussed primarily on

establishing their operations and reaching new markets (Industry informants 1 and 4). Instead, the operational

measures and overall effectiveness which gave an indication of likely future financial performance were found

to take precedence during early international entry/development. Specifically, in this phase, operational

performance measures such as product quality, service quality (InDesign and SysTrain), efficiency, and

customer satisfaction (TravelWear) should be adopted in conjunction with overall effectiveness measures of

brand awareness (TravelWear) and reputation (GlobalHome).

In their international growth/consolidation phase, we observed BGs seek to recoup their investment through

sustained financial success. Just as the BG strategy formation processes begin to converge with those of gradual

globalising firms (Rialp-Criado et al. 2010), so too do their performance measures. During this period,

traditional financial measures of performance gain prevalence: ‘Well I guess there’s typical sort of accounting

measures where you’re looking at your profit and loss on a regular basis just to see how you’re tracking’

(InDesign, Owner). Our findings suggest that during the international growth/consolidation phase, BG

performance objectives align more closely to the profit-maximising goals of traditional MNEs (Dunning and

Lundan 2008; Gabrielsson et al. 2008). For instance, in the case of SysTrain, ROI is their central objective:

‘Definitely ROI, everything that we do, whether it is a marketing event, investment in a course, venues we use,

everything is based on ROI’ (SysTrain, Marketing Director). GamePlay, also relied on financial performance

14

measures that were reflective of those utilised by larger, established multinationals: ‘I would say that we

probably account for our performance in a similar way as larger companies’ (GamePlay, Senior Manager). That

being said, in this phase, operational performance and overall effectiveness maintain their importance, as the

firms remain conscious of their longer-term survival (DeviceDesign, CEO). Efrat and Shoham (2012) criticised

measurement of BG performance using measures that were developed for gradual globalising firms. Our

findings refine this by revealing that these measures are appropriate for BGs that ‘break out’ of the early

international entry-development phase (Gabrielsson et al. 2008) and operating in the international

growth/consolidation phase. Specifically, profitability (InDesign, GamePlay), and ROI (SysTrain) were

suggested to be of increased relevance in this final phase of BG development.

4.2 Rapid Internationalisation Slows BG Progression Through The Early International Entry-Development

Phase

Noting the importance of internationalisation speed to performance, survival and continued growth,

Prashantham and Young (2011) conceptualised a learning-based model to explain the differential

internationalisation speeds amongst INVs. Building on this, the current study examined the role of

internationalisation speed in determining the rate at which BGs are able to progress through the phases of their

development. The initial period where financial outcomes are unlikely to be achieved also exists for domestic

new ventures, labelled the 'conception and development' phase by Kazanjian (1988). For some BGs, however,

this phase was extensive and made increasingly critical due to their strategies of early and rapid

internationalisation into a large number of foreign markets (DeviceDesign). This can be particularly challenging

for BGs introducing unique and highly innovative products to the market (WebSource). Compared to those BGs

who restrict their initial expansion to a narrow range of foreign markets (SysTrain, GamePlay, GlobalHome),

BGs who enter a large number of markets can experience greater financial strain as the challenges of building

reputation and establishing market position are repeated for each new market (DeviceDesign, WebSource). This

was reiterated by Industry Informant 3 below:

‘Once they get to be stronger, their revenue is higher, their profit margin is higher, and then multiple overseas markets becomes a strength because that buffers against any particular downturn. But when they have just started… then they are probably draining cash at a very fast pace’ (Industry Informant 3).

Furthermore, BGs often operate in niche (specialised) markets, and in highly technical industries, where they

introduce unique and innovative products. As a result, financial returns to BGs can be further delayed as they

need to invest time and resources into educating the market about the value of their products. In the case of

WebSource, constant product innovations led to a situation in which they were 'ahead' of their customers. This

meant that the launching of products was delayed until customers were able to comprehend the value of the

offering. This is further highlighted in the case of DeviceDesign. When they initially launched their computer

peripheral device, there was no pre-existing market and the potential customers were neither knowledgeable nor

able to recognise the value exchange, and thus not ready to adopt the product. The consequence for BGs with

such unique and innovative products is the extension of the period in which it is naive to expect financial results,

as time is required to explain, and create a demand for, the product in the marketplace.

15

‘With our product, our product is very unique and it was the first of its kind. So it requires more of an explanation and it's harder to sell upfront because of the nature of the product’ (DeviceDesign, CEO).

‘We have created things that we haven’t given to our clients yet because they are still trying to come to terms with implementing step one. If we give them step 5 they’re just going to cave in and go back to what they were doing before!’ (WebSource, Owner).

While our findings support extant literature, which suggests that there is a limit to how rapidly firms can move

across cultures before organisational and financial outcomes are compromised (Chetty and Campbell-Hunt

2003), we show for the first time what are the consequences, which is illustrated by DeviceDesign. As suggested

by Mort et al. (2012), this BG was initially focussed primarily on rapid expansion into multiple markets. As a

result, the set-up costs associated with entry into each market overlapped and delayed the financial returns. This

was a cost that management willingly accepted. This is highlighted below:

‘We went for getting the product worldwide very, very quickly, very slim margins, volume and when entering a new product into the marketplace, you probably have to look or anticipate for some losses at the outset... Then get to break even and then after that be profitable. So if you’re looking for profitability right from the outset, you’re probably going to be disappointed’ (DeviceDesign, CEO).

Thus through the early international entry-development phase, BGs endure the considerable strains of

rapidly entering multiple foreign markets, and the need to repeatedly educate potential customers about the

product.

4.3 High Psychic Distance of Initial Markets Slows BG Progression Through Early International

Entry/Development

This study provides insights into conflicting perspectives on the influence that psychic distance has on BG

initial market selection. While some BGs were found to internationalise into culturally similar markets to ease

challenges associated with differing languages and business systems (TravelWear, WebSource, SysTrain, and

GamePlay), others followed their networks into markets with unfamiliar business cultures (DeviceDesign,

GlobalHome, and InDesign). The findings also reveal that BGs are aware of, but not daunted by, the challenges

of psychic distance. Entering psychically distant markets was found to reflect a longer-term perspective, which

prolonged the amount of time BGs spent in the early international entry/development phase.

As prescribed by the IP model (Johanson and Vahlne 1977), the challenges associated with difference and

uncertainty do, in some cases, encourage BGs to expand initially into psychically close markets. For instance, as

a systems engineering training firm, SysTrain relied heavily on effective communication with customers when

providing its services. Consequently, cultural and language differences formed substantial deterrents for

SysTrain, and were a central consideration for the initial market selection process. By comparison, the initial

international markets of other BGs were found to be psychically distant. DeviceDesign was indifferent to the

pressures of psychic distance, and was committed to following the distribution channels of their key business

partner.

16

‘It grew very, very quickly due to the logistics of our partner that once you get it into their system, it's like a distributor. Basically where they are, they tried to get it into different channels and you're there’ (DeviceDesign, CEO).

Similarly, GlobalHome expanded initially into China, and this market selection was the result of pre-existing

personal networks and the size of the Chinese market. China remains the largest single nation contributor to the

international student population in Australia (ABS 2011). Our findings also reveal an additional strategy

whereby the BG (InDesign) would initially enter simultaneously a combination of psychically distant and

psychically close markets in order to balance short- and long- term objectives.

We confirm that initial selection of psychically distant markets indicates a long-term perspective, whereby BGs

pursue the operational performance and overall effectiveness outcomes that will eventually result in financial

performance. The Marketing Director of SysTrain revealed that their entry into psychically close markets was

motivated by the desire to experience quick financial returns. While there were opportunities for the BG to enter

psychically distant markets, this approach was not taken due to the delay it would cause on financial returns.

‘It can be poor performance in the market, initially short-term but in terms of like, long term, it takes a long time to get within a culture of another country as well as getting that same reputation we have in the western countries. I guess our biggest barrier is language’ (SysTrain, Marketing Director).

The Owner of InDesign provided additional insights into varying motives that underpin BG initial market

selection. By simultaneously entering a combination of psychically close and psychically distance markets, the

BG sought to balance short- and long- term objectives. Entrance into psychically distant South East Asian

markets such as China was driven by longer-term prospects including access to valuable resources and a large

customer base. By contrast, entry into psychically close markets was motivated by the opportunity to achieve

more immediate financial outcomes.

‘The markets where we do quite well is very simple. Obviously, it’s Canada, US, South Africa, Ireland, England and the only other place which is quite interesting is Holland. ….. English is obviously of a high standard but also culturally, there’s quite a lot of similarities with perhaps even Australians and Dutch people. So basically at the early stages, we started in Melbourne but as soon as we started, we were travelling to Asia and identifying where there were growth markets at that time from a customer point of view but also from a resource point of view’ (InDesign, Owner).

Our findings show that the motivations underlying BG initial market selection vary. Entering psychically close

markets can lead to quicker financial returns because of greater business familiarity and less need for adaptation.

This hastens BG progression towards international growth/consolidation. By comparison, when BGs are

attracted initially into psychically distant markets by their networks and opportunity identification, they tend to

spend a longer period of time in their early international entry-development phase.

In summary, we derive a conceptual model (Figure 1) with supporting propositions and make two significant

contributions to the BG and IE literature. First, our data confirm that BGs in different phases of development

prioritise different performance objectives. Interestingly, the majority of BG and IE literature has focussed on

the initial internationalisation phase of BG development (Nordman and Melen 2008), relying heavily on

financial measures to evaluate their performance (Li et al. 2012). However, our findings suggest that in this

early international entry/development phase, it is overall effectiveness and operational performance measures

that are most relevant. It is in the international growth/consolidation phase that financial performance measures

17

are most appropriate. Second, our findings reveal that the extent to which BGs internationalise rapidly and do

not follow patterns of gradually increasing psychic distance influences the duration of the early international

entry/development phase, and delays the achievement of financial outcomes.

(Please insert Figure 1 here)

Finally, we use the above analysis of the findings to suggest the following propositions to compare and contrast

early international entry/development phase of BGs that initially enter psychically distant markets with those

that initially enter psychically close markets.

Proposition 1: Financial measures of performance are not appropriate in the early phases (pre-start-up/venture creation and early international entry/development) of BG development, but will become increasingly valid as the firm matures (international growth and consolidation).

Proposition 2: Rapid internationalisation of BGs slows their progression through the early international entry-development phase as they repeatedly invest time and finances to establish their position within each new market.

Proposition 3: Due to the learning and adaptation processes necessitated by increased psychic distance, BGs that initially enter psychically distant markets are slower to progress through their early international entry/development phase than those BGs that initially enter psychically close markets.

5 Conclusion and Discussion

Researchers have called for empirical examination of ‘[w]hat makes young, entrepreneurial start-ups successful

in IB?’ (Griffith et al. 2008, p. 1227). This study has drawn upon IE to contribute to this goal by providing

theoretical and empirical insights into what constitutes 'success' for BGs. We have built on recent efforts to

operationalise BG performance in a way that acknowledges their unique characteristics and strategies (Efrat and

Shoham 2012; Mort et al. 2012). To our knowledge, this paper represents the first empirical exploration into the

suitability of specific measures for evaluating the performance of BGs across the various phases of

development. Furthermore, the unique internationalisation strategies of BGs (early and rapid) were also taken

into consideration so as to more accurately identify relevant performance measures (Efrat and Shoham 2012)

through the varying phases of BG development.

As with domestic firms (Kazanjian 1988), the relevance of BG performance measures is dependent on which

phase of development they are in. That being said, the fundamental differences between BGs and domestic new

ventures are also reflected in the process. In the pre-start-up / venture creation phase, overall effectiveness

measures took precedence. As the firm is not producing or selling at this point, operational and financial

measures were found to be irrelevant. In the period immediately following their founding (early international

entry / development), operational measures we found to be become important as the firm seeks to establish itself

and develops its operations. However, the strains of customer education and early and rapid internationalisation

delay the realisation of financial outcomes. It is not until the BG has reached international growth /

consolidation that financial measures can be considered a suitable gauge of their performance. In this phase,

18

overall effectiveness and operational performance retain their importance as the mature BG continues to pursue

longer-term success (see Figure 1).

This study commenced with the objective of identifying performance measures that are appropriate for BG

research. It was not until data collection and analysis had been initiated that the focus of this study was refined

and directed towards the interaction between BG phase of development and the appropriate measurement of

their performance. This cyclical approach proved invaluable when responding to the true complexity of BG

performance measurement. Rather than suggest that a linear research design was undertaken, we acknowledge

the use of a non-linear progressive focussing approach, advocated by Sinkovics and Alfoldi (2012). This

represents a step towards greater research transparency, which they suggest has been lacking in the IB literature.

Future research would be encouraged to extend this effort further by taking advantage of recent developments to

further increase the transparency of their research, addressed especially well in Sinkovics and Alfoldi (2012).

We invite future research to build upon this study. For instance, within each phase BGs were found to pursue

similar performance objectives and these were distinct from those pursued by BGs in other phases of their

development. This was interpreted as preliminary evidence of a process through which the appropriateness of

specific BG performance measures evolves over time. Supporting Welch and Paavilainen-Mantymaki’s (2013)

call for more IB process theorising to be accompanied by process data, we would encourage future research to

explore our propositions further through the use of longitudinal research designs. Identifying entrepreneurs at

the point of idea generation and following the evolution of their performance objectives through their

development process will provide better understanding of the critical time dimension of BG development

(Welch and Paavilainen-Mantymaki 2013).

Greater understanding could also be obtained by delving further into the impact of market selection and

internationalisation speed on BG progression through their phases of development. For instance, it would be

interesting to build on the findings of this study by exploring the role of different forms of internationalisation

speed (country scope speed versus international commitment speed) (Prashantham and Young 2011). Rapidly

increasing commitment to only a small number of foreign markets could be expected to have a considerably

different influence on the rate at which BGs progress through the early international entry / development phase,

from rapidly entering a large number of markets. In addition, the current study treated initial market selection

and internationalisation speed as two separate factors influencing BG progression through their development

process. In reality, however, it is likely that these factors interact with one another. Investigations into this

interaction would be valuable. For instance, research is encouraged to explore whether the role of rapidly

entering a large number markets is reduced, or reversed, when the markets entered are culturally similar to that

of the home country. We argue that this also depends on the nature of their products/businesses. Such an

internationalisation path could then be compared to those BGs who enter only a small number of psychically

distant markets. The extent to which these two internationalisation decisions may align with or compensate for

each other provides an interesting avenue for future research.

Despite the theoretical and practical importance of the respective phases of BG development, establishing a

precise operationalisation is a complex task. Recent work by Hewerdine and Welch (2013) provides valuable

insights into this challenge. Indeed, a BG’s transition from one phase of their development to another may

19

represent a process rather than a single event (Hewerdine and Welch 2013). That being said, this study

represents an important step forward in this endeavour. By combining the findings of this current study with the

theoretical propositions presented by Rialp-Criado et al. (2010) and others (Gabrielsson et al. 2008), we can see

that at each phase of the BG development process, BGs undertake unique strategy formation processes in the

pursuit of evolving performance objectives. These characteristics can be adopted to help operationalise the

phases of BG development. For example, BGs applying an entrepreneurial/visionary approach to strategy

formation in the sole pursuit of overall effectiveness outcomes could be identified as being in their pre-start-

up/venture creation phase. At the other end of the spectrum, a BG that adopts a formalised planning-analytical

approach to strategy formation in the pursuit of financial outcomes would be located in the international

growth/consolidation phase. The precision of this operationalization could be enhanced further by empirical

examinations into the implications of the BG development process for BG structure. This would provide an

additional dimension on which BGs could be assessed to determine how far they have progressed through their

development process.

While we have detailed the triangulation approach used to minimise respondent memory bias in the

methodology section, we make additional suggestions. We recommend in future studies, including more than

one key-informant per firm would better assure reliable retrospective recall, especially for older firms.

Finally, this study has revealed that researchers should not attempt to apply a universal set of performance

measures to all BGs. Rather, for each phase of development, separate measures are required which recognise

that strategic choices made by individuals vary. As the BG field continues to move towards quantitative tests of

their performance outcomes (Efrat and Shoham 2012), we provide a foundation for future scale development. In

summary, BGs are a unique and diverse category of firms and, in order to properly evaluate their performance,

equally unique and diverse measures are required. By taking account of the BG’s level of development,

performance measures can be selected which more accurately reflect their goals and objectives.

20

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Table 1 Summary of BG performance measures utilised in the extant literature

Authors and Year Nature of Study Context Topic of interest Performance Measures

Efrat and Shoham (2012) Quant Israel high-technology industry

Differences in short- and long-term performance drivers

Short-term (global competitiveness, strategic position, global market share)Long-term (survival)

Li, Qian and Qian (2012) Quant US technology intensive industries

Relationship between early internationalisation and performance Return on sales

Park and Rhee (2012) Quant South Korea early internationalising SMES

Antecedents of knowledge competency and performance

Share of sales from international activities

Zhang and Tansuhaj (2007) Qual US early internationalising SMES

Organizational culture, information technology capability, and performance

International performance (not specified)

Gleason, Madura and Wiggenhorn (2006) Quant US early internationalising

SMESOperating characteristics, risk,and performance

Average holding period abnormal returns, return on equity, and growth in sales

Zhang, Sarker and Sarker (2013) Quant Chinese and US born-global firms

Drivers and export performance impacts of IT capability

Financial performance (profitability, sales volume, rapid growth)Strategic performance (global competitiveness, strategic position, global market share)

Zhou, Wu and Luo (2007) QuantChina’s economically developed Eastern Province of Zhejiang

Internationalization and the performance of born-global SMEs: The role of social networks

Export growth, profitability growth, and total sales growth

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Authors and Year Nature of Study Context Topic of interest Performance Measures

Kocak and Abimbola (2009) Qual Turkish BGs The effects of entrepreneurialmarketing on performance

International performance (not specified)

Liu and Fu (2011) Conceptual Review n/a

Relationship between strategic orientation and organizationalperformance

Emphasises that BG performance measures should be adapted to the specific context

Mort and Weeawarenda (1994) Qual Australian BGs How networks function in Australian born global firms

Entry into multiple markets and rapid international market entry

Mort, Weerawardena and Liesch (2012) Qual Australian BGs Entrepreneurial marketing strategies and performance Rapid international market entry

Knight and Cavusgil (2004) Quant US early internationalising SMES

Organisational culture, business strategies, and performance

Market share, sales growth, and pre-tax profitability compared to prior expectation. Product success in export market, and return on investment compared to main competitor(s)

Knight, Madsen and Servais (2004) Quant BGs from Denmark and the US

Customer focus, product quality, marketing competence, product differentiation, and international performance

Market share, sales growth, and pre-tax profitability compared to prior expectation. Product success in export market, and return on investment compared to main competitor(s)

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Table 2 A matrix of the relevance of performance measures for BGs in the three phases of their development

Performance Measures

Phase of Development

Pre-start-up /venture creation

(Preceding BG inception)

Early international entry/ development

(Immediately following BG inception, where rapid internationalisation is pursued)

International growth /consolidation

(Following initially internationalisation, where the BG becomes established)

Financial Low - The BG is yet to establish operations and therefore unable to generate income.

Low - The development of BG operations, foreign market entry, and the need to educate potential customers delay the achievement of financial outcomes. Early and rapid internationalisation of BGs inhibits short-term financial performance

High - Once BGs have established global presence and achieved sustained growth, financial measures gain prevalence

OperationalLow - The BG is yet to establish operations rendering operational performance inappropriate.

High - In order to secure longer-term financial outcomes, firms focus on product quality and innovation, employee retention, and efficiency

High - Due to their niche product strategies, constant improvements in product, processes, and market outcomes remain vital

Overall Effectiveness

High – Entrepreneurial attention is concentrated on idea generation, resource acquisition, network development, and obtaining finance.

High - Survival, development and maintenance of reputation and achievement of BG goals provides a foundation for future financial success.

High - Strong reputation, survival, and performance relative to competition, remains vital for the firm; regardless of whether their intention is continued development or sale of the BG.

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Table 3 Case and industry informant descriptions

Case / Informant

Organisation Interviewee Product/ Service/Department

Firm Characteristics Internationalisation PatternSize

(Number of staff)Age

(years)Phase of

development Initial Market(s) Psychic distance

Case 1 TravelWear Entrepreneur Travel based clothing product 2 entrepreneurs - Pre-start-up and new

venture creation United States Low

Case 2 WebSource Owner Web-based sourcing applications 3 full-time staff 2 Early international

entry / developmentUnited States, United Kingdom Low

Case 3 GlobalHome Owner Housing for international students

1 full time staff, 2 assistants <1 Early international

entry / developmentKorea, China, Hong Kong High

Case 4 DeviceDesign CEO Computer peripheral devise 25 full time staff 6 International growth /

consolidation Europe Medium

Case 5 InDesign Owner Industrial and graphic design 20 full-time staff 6 International growth /

consolidation South-East Asia High

Case 6 SysTrain Marketing Director

Systems engineering training 5-10 full time staff 17 International growth /

consolidation Western cultures Low

Case 7 GamePlay Senior Manager

Video game design and developer 90 full time staff 14 International growth /

consolidationUnited States, United Kingdom Low

Industry Informant 1

Austrade(Federal)

Senior Advisor

Automotive and Advanced Manufacturing n/a n/a n/a n/a n/a

Industry Informant 2

Austrade(Federal)

Senior Advisor

High-technology Industries n/a n/a n/a n/a n/a

Industry Informant 3

State Government

Director Department of Innovation, Industry and Regional Development

n/a n/a n/a n/a n/a

Industry Informant 4

Australian Exporters Club

Chair Knowledge Intensive n/a n/a n/a n/a n/a

Industry Informant 5 Foreign MNE Board

Member Agribusiness n/a n/a n/a n/a n/a

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Figure 1 A framework of BG development

30

International growth / consolidation

(Any time after early internationalisation / development)

Entrepreneurs conceive an idea, develop a business model, obtain finances and

prepare to commence operations.

The BG begins operations and seeks to enter multiple foreign markets rapidly.

The BG becomes increasingly established and begins to recoup initial investments.

Process of BG inception

BG progression to international growth/consolidation can be slowed by:- Rapid entry into multiple foreign markets;- The need to educate potential customers; and- Entry into psychically distant markets.

BG progression to international growth/consolidation can be hastened by: - The extent to which the Pre-start-up/Venture creation phase is used to obtain resources and attract potential customers.

Pre-start-up / Venture creation

(Any time preceding inception)

Early international entry / development

(Initial phase in which the BG invests heavily in product development and market establishment)