Born Global firms - a growing feature of Australia’s internationally active business community
19 Dec 2017
This year we investigated the profile of AIBS respondents with regards to when they were established, and when they started earning international revenue. Combining these two pieces of information allowed us to identify so-called ‘born global’ firms.
In the literature, there are varying definitions of 'born global', ranging from newly established firms that have emerged within 2-3 years to earn international revenue (in some cases a defined minimum share of international revenue), to those specifically created to go international by design.
In this post, we use a simple definition of 'born global' - firms that have earned international revenue within two years of starting operations – that captures elements of both the ‘emerging’ and ‘by design’ definitions.
For the following analysis I've screened survey responses to identify firms that provided us with both relevant dates – the year the company started operating and the year it started earning international revenue. The analysis also only focuses on those firms that started earning international revenue after 1980.
Over 700 firms met the above criteria, and of these around half were established in the past two decades.
We found that AIBS respondents are mostly recent earners of international revenue, with most survey respondents commencing international revenue generation after 2000 (that is, after the shift to the widespread use of 'digital' technologies in advanced economies).
Of this group, three hundred and twenty-one firms, or forty-five percent of the 706 firms that started earning international revenue after 1980, meet our definition of 'born global'.
Figure 3 shows that the number of these 'born globals' in our overall sample has increased over time.
After 2000, although there are discernible dips in the count of ‘born global’ firms – something that might be attributed to wider economic impacts on business including the dot.com crash and the global financial crisis - the upward trend in born globals for our sample is still quite clear.
This is also the case if, instead of looking at individual years, we look at decade averages. Figure 4 shows a greater proportion of companies between 2010 and 2017 are considered born global companies, compared with the previous three decades.
Economic research points to a number of reasons for the development of born-global firms, and these reasons might also help explain why internationally-active firms are earning international revenue earlier in their life-cycle, than in previous decades.
These reasons include:
- technological advances that better enable delivery of products and services into global markets;
- a relatively small domestic market for a company's products or services – a feature particularly relevant to technology firms whose services or products have scalability/applicability across a wide range of markets;
- born global founders may have established international networks, an international market background and/or an international vision enabling them to exploit market opportunities;
- born global firms have dynamic capability - the ability to learn along a number of dimensions (market learning, network learning, internal learning and entrepreneurial marketing);
- opportunities to service/follow global or multinational customers and leverage customer networks; and
- greater need to open up offices overseas (supports tailored customer servicing for services firms that benefit from closer proximity to customers).
As well as looking at trends in the relative importance of ‘born global’ firms, we can also explore characteristics of these firms. The following charts look at the characteristics of surveyed 'born global' firms.
First, the industry spread of surveyed born global firms is more diverse than the industry spread of the full sample of AIBS respondents.
Next, over three-quarters of born global firms in our sample have less than 20 employees (ie. these companies are considered 'small' by the Australian Bureau of Statistics definition).
Third, Figure 7 shows that most of the AIBS born global companies are small and medium sized exporters, earning between $250,000 and $50 million in international revenue.
AIBS 2017 also found that ninety per cent of our born globals expect the outlook for their international operations over the next two years to be better or the same as the last two years, compared to 87 percent for the full sample of 941 internationally-active firms.
Overall then, AIBS 2017 highlights that among our sample of internationally-active firms, those established this century are more likely to have a global vision earlier in their life-cycle than those established prior to 2000.
The extent to which this trend is due to ‘design’ or ‘emergence’ is not clear. Internationally-active firms are perhaps more likely than domestic firms to have founders with international vision that are better at taking advantage of opportunities to go global. There are selected examples of this, but more broadly ongoing technology disruption does potentially require more local firms to consider international activity earlier in their development.
This describes firms designed
to earn international revenue (ie at establishment it was intended the company would sell internationally within a short time period) in contrast to firms generating international revenue by emergence
ie a more traditional approach to growth where the firm establishes itself in the domestic market before international market opportunities become available to it.
I’ve therefore excluded respondents that did not provide either the date they started operations or the date they started earning international revenue.
See, for example, Australian summaries of born-global research
and firm characteristics