Tapping the potential of born-global enterprises
Start-up and young enterprises are widely seen as a rich vein of job creation. Not all have a plan or the potential for growth, however. So for governments and policymakers seeking to boost start-ups in their efforts to stimulate job growth, it makes sense to identify those that intend to expand.
One type in particular that tends create jobs at a faster pace than others are the ‘born globals’ – enterprises that internationalise rapidly from inception, deviating from the traditional approach of first building up a home market and then possibly going global.
Eurofound presented results of its ongoing research on born globals at the recent International Council for Small Business (ICSB) World Conference on Entrepreneurship in Dublin, with the theme of ‘Entrepreneurship and sustainability’.
More and better jobs
This orientation towards targeting multiple international markets, alongside the process of establishing a business and intensive product development, not only at the same time but also rapidly (as the speed of the process is one of the main success factors), means that these enterprises are likely to need more resources than a conventional start-up.
Almost one-fifth of born-global start-ups employ 10 or more workers, compared to 12% of start-ups focused on the home market. They also tend to offer better jobs – jobs that require high skills, promote teamwork, value creativity and pay well.
And they’re not a minor phenomenon: Eurofound’s research suggests that around one-fifth of young European companies are in this category.
Dynamic and innovative
Innovation is at the core of the born global. Their products are usually specialised or differentiated by design, are targeted at niche international markets and are produced using cutting-edge technology.
International networks, supported by internet-based communication technologies, play a crucial role in the design and implementation of their business model and create social capital. They also help to foster the development of other firms in the networks.
Alongside their distinctive profile, they have distinctive challenges, which not infrequently sink them before they ever reach their potential. Their funding needs are much higher, but they have less access to finance because they lack a track record and have the image of being a riskier investment.
Human capital costs are high because of their need for staff with knowledge of foreign markets and international business strategies, and technical staff with highly specialised product development skills. Globalisation is something of a double-edged sword as it exposes them to harsh global competition that can threaten to their emergence and sustainability.
Eurofound has found that across Europe born globals don’t figure much for policymakers, partly due to the lack of a common understanding of what a born global is. Hence specific support is rare. This, in general, is not too problematic as a wide range of public start-up, internationalisation and innovation support is available to born globals, if not explicitly targeted at them.
At the same time, however, the research found examples of public support that implicitly disqualify born globals from eligibility, so room for improvement exists.
Eurofound's report Born globals: The potential of job creation in new international businesses underlines the need for more visibility of born globals among European policymakers as a sound business model that can contribute to solving stagnant growth and unemployment in the aftermath of the economic downturn. Pinning down a concrete European definition of this business model would be a good place to start.