1 Introduction and definition of a Born-Global Firm

The “born global” label originated with Michael Rennie in 1993, who studied firms established with the capability to compete internationally and coordinate resources across countries (Jones et al., 2011). Since

the emergence of born-global firms, various definitions of ‘born-global firms’ have been proposed. Many claim that only firms that adopt a global outlook from conception with planned internationalization, devoting resources to expansion into markets worldwide, qualify as ‘born-global firms’ while others accept the

definition which encompasses firms that simply grow to be global only after 1 to 3 years of domestic operations, following a more systematic internationalisation process.

For the purpose of this report, a true born-global firm is a venture that acts to satisfy a global niche (Tanev, 2012) from inception, excluding all alternative definitions. This definition focuses on the creation of new ventures that are international by design and purpose, instead of growth. A born-global firm is thus defined to

have a global focus, from their beginnings, and pledge their resources to international ventures (Law, 2012), ultimately achieving significant competitive advantages, and reaping economies of scale and scope by capturing large market shares in foreign markets all over the world, transcending national boundaries.

These firms include the likes of Google, Logitech, Uber and Intel - brands that are recognised worldwide. These organisations adopt a global strategy and a geocentric organisational vision, having a centralised

group of integrated operations present in all the world key markets.

This introduction segment provides a clear definition of ‘born-global firms’ that will guide the delivery of

content in this report. The report is organized into 3 remaining sections. The following segments will, firstly, elaborate on 3 distinctive characteristics of born-global firms; secondly, identify conditions in the business environment which supports the growth of new global ventures, where the importance of business

ecosystems to the growth of born-global firms is highlighted; lastly, an assessment of Airbnb, justifying its qualification as a ‘born-global’ start up.

2 Distinctive Characteristics of Born-Global Firms

In order for born-global firms to thrive and succeed in the international arena, they are likely to possess 3

main distinctive characteristics as follows:

2.1 Rapid Internationalisation Process

Firstly, born-global firms adopt and plan a rapid internationalisation process, operating in knowledge-intensive environments and giving little or no attention to their home market (Bell, McNaughton, Young &

Crick, 2003). The firms’ founding vision play a key role in early internationalisation patterns (Gabrielsson & Pelkonen, 2008).

The conception of born-global firms stems from having a borderless world view, committed to developing strategies for worldwide expansion since day one and serving small, dispersed niche markets. Hence, building a sizable home market advantage is not a part of the firm’s strategy and the development of more

and more dispersed niche markets is expected to grow. All resources are devoted to the international

marketplace. Born-global firms often begin exporting their products or services within a time span of 1 to 3

years after founding - a pervasive phenomenon of expeditious increasing level of activity in international markets. Export volumes add up to a quarter or more of the firm’s total production. Most of them advance through subsequent stages of internationalization, collaboration with foreign partners, or undertaking of direct

foreign investment (Tanev, 2012).

A fitting example to illustrate this characteristic would be Uber. Uber is a U.S.-based technology start up. The

company started out by offering limousine ride services, and has now broadened its offering with a variety of services, like UberPop, which enable non-professional drivers the opportunity to earn money by giving customers a ride, or UberPool, which offers shared rides for customers (Uber, 2015).

The Uber application was officially launched in 2010, where limousine services were offered in several big cities in United States of America. By May 2011, the service was launched in Paris, the first city beyond U.S.

borders; followed by Toronto, Canada a year later and subsequently, London, in the run up to the 2012 London Olympic Games. Further growth sustained throughout 2013 as Uber expanded into Berlin and Asian markets, such as Singapore, Taiwan, Taipei, Seoul and South Korea. As of 2015, Uber serves 57 around the

globe. Within a span of 5 years, Uber has successfully penetrated global markets as the world’s leader in its industry.

2.2 High Leverage on Global Information and Communications Technology

Secondly, for most born-global firms, internationalisation is enabled by advances in technology and

globalisation. Born-global firms leverage on the high availability of advanced information and communications technology. With limitless access to the Internet, these firms are able to collect relevant data, which enables them to tactfully segment consumers into global-market niche segments and skilfully

serve highly-specialised needs (Tanev, 2012). With well-established technology infrastructure present in most developing countries and metropolitan cities, technology also allows firms to communicate with partners and customers worldwide at practically zero cost (Cavusgil and Knight, 2009). Born-global firms

often attribute their success to technological innovativeness, leveraging on the transferability and sustainability of existing information systems - by creating navigation systems, mobile and desktop applications, as well as telematics, to process information more efficiently.

2.3 High Value Creation through Differentiation

Lastly, born-global firms achieve high value creation through product or service differentiation strategies. These firms tend to develop highly distinctive designs and products that target niche markets. The focus is on stimulating customer loyalty by catering to particular needs (Tanev, 2012). Most successful firms are also

often first-movers, creating a market which previously did not exist.

For example, Uber’s initial service offering was an idea born by identifying a niche market for limousine

services, which matured into a large-scale tech-based private hire transport service, outgrowing its competitors with lower regulations and more competitive pricing structures than traditional taxis. Uber has also clearly demonstrated that effective differentiation can disrupt industries in domestic markets, which have

existed for decades and traditionally dominated by big players. In major cities like Singapore, Uber’s lower

price structure have threatened the taxi industry, giving large taxi operators a run for their money.

Starting out in Chicago, Groupon is another example of a born-global firm which begin identified a niche

market for a third-party online service which acts as a promotional channel for business to reach out to consumers by offering massive discount campaigns. Within two years, despite market saturation of new competitors, Groupon had a market share of 80% in the U.S (Weiss, 2010). Groupon has since been

established as the main to-go website for consumers worldwide seek good deals.

3 Is AirBnB a Born-Global Firm?

3.1 Company Profile

Founded in 2008, AirBnB was launched as a website which allows people, who have free spaces in their apartment or houses, to list their home as ‘hosts’ and rent it out to potential ‘guests’. ‘Guest’ are people who are looking for a temporary place to stay. These ‘guests’ will then proceed to book a suitable and available

place listed directly on site. Airbnb charges both the ‘guest’ and the ‘host’ a small fee when the booking is successfully confirmed.

The company started out in San Francisco, catering to the U.S. market. To date, it has recorded 25 million successful bookings. AirBnB has since evolved into a global online community marketplace, offering short term rentals- ranging from shared apartments to entire houses in 190 countries and 34,000 cities worldwide

(Airbnb, 2015).

To examine Airbnb’s qualification as a Born-Global Firm, the following segment will show how Airbnb has

specifically displayed all 3 characteristics in its growth, as discussed in section 2.0. The arguments presented aim to cement the justification that Airbnb is, in fact, a born-global firm.

3.2 Assessment

3.2.1 Rapid Internationalisation Process

Airbnb began their internationalization process from psychically proximate countries before expansion into more geographically distanct markets at an accelerated rate, which is a shared belief-driven practice of most

born-global firms. Since 2008, the company has internationalised to over 190 countries (Airbnb, 2015).

Airbnb’s international expansion started in 2011, with the acquisition of Accoleo, a German company

providing a similar service to that of Airbnb’s (Bradshaw, 2011). As such, Airbnb was able to establish a presence in two German cities: Hamburg and Berlin (The Next Web, 2011). Simultaneously, Airbnb expanded its service offering to London by establishing a local offer there. Britain and Germany were

physically relatively close market which marked the start of the internationalisation process.

Airbnb enters each new market as a fully-owned subsidiary- a high commitment entry mode independent of

partnership. In 2012, Airbnb expanded into single cities in France, Italy, Spain, Denmark, Russia and Brazil

(TechCrunch, 2012), gradually setting up wholly owned local offices and customer service centers all over

the world, even in parts of Asia and Australia. It now has international headquarters in 16 major cities.

It is important to note that the internationalisation process of Airbnb as a born-global firm was not only rapidly

phenomenal, but extremely well planned. The company employs a scalable business model, based on an customer-centric online platform, to gain knowledge on foreign markets from several countries and to scale the business significantly. The firm’s expansion patterns and pace of expansion are both rapid and

multidirectional, penetrating multiple markets simultaneously (Persinger, Civi & Vostina, 2007).

Furthermore, when determining which country or city was next to expand into, the main determinant of

location included high population density and reasonable affluence. Airbnb’s business model cannot grow if there are not enough paying guests to support the hosts, and vice versa. Therefore, Airbnb goes to wherever presents itself as a desired destination for its users, with no end in mind. This determines why Airbnb was

quick to target areas such as Singapore and Hong Kong in the Asian region.

As such, Airbnb has exemplified the first characteristic of a born-global firm, by seeking international

expansion from early on and with accelerated speed, sustaining high activity in foreign markets. To further supplement this statement, the company receives a majority of its revenue abroad, according to Fortune magazine (Kokalitcheva, 2015). This readily distinguishes Airbnb from conventionally internationalizing firms.

3.2.2 High Leverage on Global Information and Communications Technology

Airbnb continuously leverages on advances in technology to introduce new features on its desktop and mobile site, as well as mobile application. Both platforms have since undergone multiple redesigning of interface to continuously improve the functionality for a optimal user mobile experience. Airbnb has

established itself as a responsive and interactive online platform to secure fast and easy booking of safe accommodation. How does Airbnb do so using technology?

Firstly, Airbnb recognised that travellers often face trouble sourcing for accommodation in their desired locations, hence, it introduced mapping technology to the site. Once users search for the location, they will be provided listing options from a Google Map view. Listings are clearly displayed as location placements on

the map of the city or country they have chosen. The mapping technology incorporated enhances the user experience for a potential guest as he or she may have specific location preferences. For example, if a user wishes to find a ‘host’ in Melbourne, he or she will have a birds’ eye view of all the listings across Sydney,

and proceed to decide which listing is most catered to his or needs and preferences. (Refer to Appendix A)

Secondly, Airbnb also recognised that safety is a traveller’s priority concern. Hence, it implemented on-site

ID verification to ensure the safety of its growing community. Uploading an identification image is as simple and secure in 5 easy steps and can be completed in the comfort of a user’s own home. A user need not head down to a physical office to verify himself or herself, which makes the process much more convenient for the

users. (Refer to Appendix B)

Residing in a strangers’ home can be dangerous and this function reassures users that their safety is

Airbnb’s utmost concern. Guests and hosts benefit as this process help provide more information when the

parties are deciding who to host or stay with. Upon verification, users will earn a badge on their respective

Airbnb profiles. While it does not represent Airbnb’s endorsement or guarantee of someone's identity, this verification enhances the credibility and trustworthiness of a user as a host or a guest.

The two features mentioned above shows how Airbnb exemplifies the second characteristic of a born-global firm- generating greater usability of its website by tapping on the power of modern day technology.

3.2.3 High Value Creation through Differentiation

The growth of Airbnb has threatened the profitability of hotel industries worldwide. Prior to the launch of

Airbnb, hotels have been the first choice of accommodation of travellers worldwide, operating with major threats for decades. Hence, the question is: How did Airbnb differentiate itself?

Firstly, apart from the fact that Airbnb is challenging the hotel industries at large as many of the properties listed on Airbnb offer lower prices than hotels charge and are distinctly more unique, the personal touch that Airbnb provides is truly what sets it apart. Most hosts on Airbnb provide hotel-like amenities, such as

hangers, clothing irons and shampoo, to ensure their guests feel right at home. Certain listings allow access to kitchen and laundry amenities, with meals even personally prepared by the ‘hosts’. Guests from all walks of life freely mingle with their hosts, building new friendships and making true connections with the locals,

enhancing the travel experience. Airbnb successfully caters to the growing demand for experiences that are not like the typical tourists’ and actually reflects what its like to live in a foreign country.

Secondly, with the introduction of ‘Business Travel’ in 2014, Airbnb specifically targets the niche market of business travellers by creating a separate portal for business’ needs, specifically designed to show lodgings that have the necessary amenities for business travelers, as well as those offering flexible extended stays.

Businesses can even choose from a large home, a villa, or a multi-story condominium for the whole team to stay comfortably under one roof when they travel for work or retreats (Airbnb, 2016). In order to ensure that listings match a company’s expense policies, Airbnb has partnered with business travel and expense

management company Concur, enabling Airbnb users to take advantage of Concur’s TripLink, which is a plugin for third-party sites that allows business travelers to book travel and have it automatically added to their expense reports (TechCrunch, 2014), streamlining expense reporting.

Airbnb has since partnered with companies such as Google to encourage employees to utilise Airbnb in booking accommodation for their business trips. When Google employees book an Airbnb listing, the website

will charge Google directly for expenses, making the billing process simple and convenient.

Thirdly, before the launch of Airbnb, there has been an existing business for vacation home rentals. Airbnb

thus created a common platform where vacation home owners could post their listings and reach a mass audience. On top of that, Airbnb continues to empower its ‘hosts’. With the introduction of Host Home, ‘hosts’ can now review messages on both the desktop site and mobile application. Host Home also makes

recommendations for how to make a guest’s stay more special. It recommends amenities and activities that users can do to prepare for their guests. It then sends a push notification for when guests are checking in (Lawler, 2013). These functions exclusively offered by Airbnb differentiates itself from any other

accommodation sites. Furthurmore, with an established user base, it is clearly the preferred site to increase

the chances of being booked.

4 Environmental Factors that Foster Rise of Born-Global Firms

There are specific external conditions, or factors, of a business environment which fosters the rise of ‘born global firms’. The following segment proposes and elaborates on 3 of them.

4.1 Nurturing Ecosystem

Firstly, the ecosystem in which the firm is born and bred. Ecosystems play a huge role in promoting international growth to enhance the performance of ‘born global’ firms.

Since Born Global firms often face the lack of expertise and resources in certain areas which hinder the implementation of internationalization, it is very important for these firms to be in networks or business clusters, and to immerse in an environment endowed with supporting

industries relevant to the firm’s domain of expertise. Doing so often increases the productivity of the participating firm and stimulates innovations, create favourable factor conditions for the emergence of ‘Born Global’ companies. Such environments support the transfer and flow of technical knowledge, allowing

access to capital unparalleled elsewhere. It also fosters competitiveness (Haar, 2012).

The most fitting way to illustrate this point is to discuss the increasingly prominent growth of ‘born global’

tech-based firms emerging from Silicon Valley, attributing success to the effective use of the ecosystem. Silicon Valley is an ecosystem anchored around supporting or competing firms and clusters operating in the tech industry, being recognised as a hub for technological innovation. The knowledge and expertise

developed within the ecosystems create a talent pool of engineers, skilled developers and entrepreneurs, filled with venture capitalists and investors hungry to fund the next big idea. As such, the Valley culture has incubated and nurtured massive amounts of tech start-ups, some of which have grown into thriving global

organisations, which includes the likes of Uber, Airbnb and Facebook. Today, the valley’s tech industry has gained a prestigious status in the Bay area. (Refer to Appendix C for Infographic on Silicon Valley Tech Innovation Ecosystem)

This explains why cities are striving towards being recognised as hubs of innovation and entrepreneurial activity, to create an environment that is conducive for the rise and growth of global start-ups. The 2015

Global Startup Ecosystem Report provides a ranking of the world’s leading start-up cities (Ballantine, 2016). The report is based on data from 11,000 global start-up companies, and gauges the world’s leading start-up ecosystems. Although there were no surprises at the very top–Silicon Valley ahead of New York and Los

Angeles– the ranking does highlight the rise of significant start-up activities in cities around the world such as Tel Aviv (5th), Berlin (9th), Moscow (13th) and Bangalore (15th). Global firms flock to these cities because the ecosystems bolster innovation and a significant degree of knowledge sharing.

4.2 Technology-based Business Industry

Secondly, the type of business sector or industry. Born global firms are more likely to be found in industries characterized by rapid growth, high knowledge intensity, and global interconnectedness (Fernhaber,

McDougall, & Oviatt, 2007).

Therefore, when a newly-created firm’s industry is highly based on technology and serves a niche-based

market, it often creates and drives the need for it to ‘go global’. What truly drives this factor condition is the access to and affordability of technology in the 21st century. Telecommunication infrastructure are almost present worldwide. Firms are now able to leverage upon the Internet to reach the mass audience and gain

market knowledge, better targeting the needs of new customers, creating value through differentiation. As a consequence, the density of technology-based ‘born global’ firms can be expected to be extremely high, as the barriers to entry are lowered by the ease of access to information of the new market.

4.3 Gaining First Mover Advantages

Lastly, having a first-mover advantage, also known as technological leadership. The rapid pace of internationalisation is said to be built on high knowledge intensity of various niche markets, allowing these firms to exploit business opportunities and gain first-mover advantages. A firm is incentivised to

internationalise where its product or service offering is a greenfield investment in the country or city’s domestic market with optimal demand conditions. Selection of markets are highly dependant on the composition of the market’s demand and growth rate, in order to cement the firm’s market positioning as a

initial significant occupant of the niche market segment it serves.

Like all other businesses, the emergence of ‘born global’ firms require demand. However, operating in small

niche markets, what manifests the distinctiveness of ‘born global’ firms is the initial potential absence of demand, before the firm penetrates the market and saturates it. When this occurs, ‘born global’ firms arise from the demand of small niche consumers-innovators, a pool of informed and sophisticated consumers

responsible for driving growth in the demand as the product or service offering begins to gain traction within the niche market and mature. These consumers facilitate the introduction of brand-new or modified products and services into the market and also enable the firm to foresee the new needs that will be shared among

many consumers (Porter, 1990). Subsequently, ’born global’ firms reap the advantages of being the first entrant to cater to specific needs of niche markets by building an early base of customers who would find it inconvenient or costly to switch to the offerings of later entrants (Suarez & Lanzolla, 2005).

5 Conclusion

Overall, this report has achieved its objective to introduce and enhance the understanding about the concept of Born-Global, through thorough research on the distinctive characteristics and evaluation on the conditions that triggered the need for newly created firms to consider early and rapid globalisation.

End of Report

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Appendix A

On-site Mapping Technology

Appendix B

On-site ID Verification System

Appendix C

Silicon Valley Tech Innovation Ecosystem