“Born global” SMEs are defined as small businesses that internationalise very early in their development without first building a domestic client base. The term was coined at McKinsey way back when the primary means of international business communication was the fax machine. Since then, the “born global ” concept has become a particularly hot topic in small industrialised countries, such as New Zealand, where small, innovative niche companies are seen as real drivers of economic diversification and export-led GDP growth.
Now the democratisation and virtualisation of knowledge delivers direct access to overseas clients, and the Internet enables firms to realise global aspirations across a wide range of industries. One area of study around “born globals” that remains somewhat sparse in the literature however is the phenomenon of cooperative partnerships and alliances between SMEs and much larger multinational companies. By nature of their imbalance in terms of resources and power, these assymetric alliances would seem to pose particular challenges and risks for the managers of SMEs.
For the SME, large multinationals offer rapid access to technology platforms, overseas market knowledge, distribution networks and brand recognition. Conversely, multinationals increasingly view SMEs as important sources of innovation and new product development, and may see cooperation with the SME as preferable to full buyout and absorption.
In one suggested model, “born global” SMEs use partnerships with much larger companies to accelerate their internationalisation. This helps to address their lack of financial resources, limited market knowledge, an aversion to risk-taking and a lack of economies of scale. However alliance/cooperative behaviour is only one of the strategies to overcome the constraints of small size. Partnerships sit alongside technical innovation, client-centred product development, leverage of personal networks and multiple entry modes.
A friend of mine, Richard Cotman, is pursuing an MBA research project exploring the role that alliances and partnerships play in SME internationalisation strategies and how the partnerships are formed and managed. If you are managing a New Zealand technology company that has forged international alliances and is doing a substantial amount of business globally, please consider letting Richard interview you.