How to characterize internationalization speed A qualitative study of Born digitals’ internationalization processes.

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How to characterize internationalization speed

A qualitative study of Born digitals’ internationalization processes.

Master’s Thesis 15 credits

Department of Business Studies Uppsala University

Spring Semester of 2021

Date of Submission: 2021-06-01

Hanna Börjesson Katarina Tiberg

Supervisor: Philip Kappen

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Acknowledgements

The master’s thesis “How to characterize internationalization speed” has been written during the spring semester 2021 by two students from the Master’s programme in Entrepreneurship by Uppsala University.

Firstly, we would like to thank the companies who participated in the interviews and contributed with valuable thoughts and input regarding their internationalization journeys. Secondly, we would like to thank our supervisor Philip Kappen who has been very helpful and guided us throughout the development of the thesis.

_______________________ _______________________

Katarina Tiberg Hanna Börjesson

Uppsala, 1 June 2021. Uppsala, 1 June 2021.

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Abstract

During the last few years, there has been a shift from a physical to a digital focus within companies. In line with the digital transformation, the number of born digitals has increased in the market. Born digitals often exclude stages in the traditional internationalization theories and use different strategies to reach new markets rapidly. The aim of this thesis is to widen the understanding of born digital internationalization and identify characteristics of the speed. To investigate characteristics we conducted semi-structured interviews with managers of born digital firms. The Gioia method was used to analyze the empirical data and three aggregated dimensions were characterized; an aligned growth strategy, level of digital presence and network capacity, and the ability to change.

The internationalization strategy and speed varied between the companies depending on different barriers in terms of e.g. culture or legal circumstances. The digital transformation has also entailed companies to have a digital presence in all countries worldwide and tailor their business models digitally. Some companies can leverage their business model to foreign countries to accelerate the internationalization without having a local office in that particular country, while other firms are in greater need of establishing a local presence to manage e.g. their network with authorities in order to internationalize to particular countries. The ability to perform changes in the business model of a born digital company might be another characteristic, to meet customer demands in different foreign countries. In conclusion, digital business models could result in new opportunities which could affect the speed of internationalization in different ways.

Keywords: Born digitals, Internationalization speed, the Uppsala model, Digital presence, Network.

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1. Introduction

Since the world is getting more connected and digitalized, the internationalization process for many digitalized firms is getting more complex (Mitić & Rakita, 2020; Proksch et al., 2020;

Schepis, 2020). For instance, digital companies are implied to internationalize early and fast to identify new market opportunities in global markets more efficiently. With this approach, digitalized firms may also save resources while developing the most attractive markets (Neubert, 2018). During the last few years, even more firms offer digital solutions directly or early in the lifecycle of the firm. Those firms are defined as born digitals and have shifted the view from the physical context to the digitalized (Mingione & Abratt, 2020). It implies that born digital internationalization may differ compared to traditional internationalization processes. Born digitals often exclude many stages in the traditional models which, in many cases, has increased the pace of the process (Vadana et al., 2019). The high speed of internationalization could be explained by the usage of digital technologies since the technology could help to collect market information and develop local networks (McKinsey Global Institute, 2016).

Digitalization may open up new internationalization opportunities. The fast-changing environment, with a large amount of existing data and a steady stream of new data, continuously changes the internationalization processes (Neubert, 2018). However, research on the speed of internationalization in regard to born digitals is currently limited and opens up for further research to fill the gap of the research shortage in this topic we are addressing. Overall, Knight

& Liesch (2016) indicate that born digitals have in terms of establishing a global presence an advantage over traditional businesses, but underline that research of born digitals’

internationalization process remains limited. More specifically, Lin & Si (2019) have indicated that research has mostly been focused on born digitals' early internationalization behavior and have not captured their internationalization process over a longer period and therefore limited findings regarding the internationalization speed have been discovered. Furthermore, Johanson

& Johanson (2021) argues that network relationships are commonly discussed in terms of internationalization speed by supporting the recognition of new opportunities and facilitating the understanding of market movements. However, limited research has been performed on the born digitals’ speed of network-building.

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2 Additionally, Huang et al., (2017) highlight that little is currently known about the mechanisms to accomplish scaling through digitalization. In other words, there is a gap in research about the scaling of born digitals’ when growing internationally (Westerlund, 2020), and whether the business models of single-country firms differ from those that have internationalized (Hsieh et al., 2019). This is problematic because research around business internationalization has previously been based on assumptions of tangible goods and services with limited access to open resources, monetized investments when moving across domestic borders, and competition among businesses in an environment of physical barriers (Nambisan et al., 2019). In the traditional internationalization theory, for instance, in the Uppsala model, businesses internationalize in an incremental process in which businesses act in a risk-averse manner, and engage in expansion to markets abroad when they have enough knowledge about the foreign market and are properly established in the domestic market first (Johanson & Vahlne, 1977).

However, the revised Uppsala model explains that the firm’s entry into a foreign market’s network is dependent on its capabilities to act and react in their network relationships, and on its capability to integrate the knowledge it has gained (Johanson & Vahlne, 2009).

A shift in research occurred when born digitals began to internationalize faster at an earlier stage, and skipped traditional steps in the internationalization process, compared to traditional theories (Johanson & Johanson, 2021). Common in the existing research is that they have neglected the factors that are influencing the comparative speed of internationalization in different aspects and why some born digitals internationalize faster than others. Questions remain regarding the conceptualization of born digital companies, their internationalization processes, and speed when expanding. Therefore, this thesis aims to provide a more holistic set of factors by including the characteristics of the early and rapid internationalization of born digital firms, by developing a framework consisting of combined observations from collected empirical data. To fill the gap and advance the state of knowledge in the field of internationalizing born digitals, this thesis investigates how the speed of born digital internationalization can be characterized.

According to the results, there are mainly three ways to characterize the born digital internationalization speed; an aligned growth strategy, digital presence, and network capacity, and the ability to change. These characteristics may influence the companies in different ways.

For instance, companies could use different expansion strategies, internationalize in different paces and might handle different barriers in terms of e.g. culture or legal circumstances. In turn, some born digitals can expand globally from start, while others initially focus on nearby markets.

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3 Additionally, some companies can fully operate in the digital sphere and establish a network there, whilst others might need to establish a local presence in order to understand the foreign market and establish a network with important partners for their internationalization process.

Some business models might also have the ability to easily perform changes regarding the local customer demand when internationalizing, others might be hesitant to perform changes to focus on a scalable business model.

The remaining thesis consists of a literature review including relevant theories related to traditional internationalization theories as well as updated theories regarding born digitals and internationalization speed. Followed by this chapter we present the method and explain how the semi-structured interviews were performed and analyzed using the Gioia method. In the result, we present a summary of the answers from the semi-structured interviews. The discussion consists of coded and analyzed data aligned with the Gioia method in regard to the internationalization theories such as the Uppsala model. In the implication and contribution chapter, we argue that this thesis has contributed to internationalization speed research, based on previous theory and on empirical findings the developed conceptual model has contributed to deeper theoretical understanding of the speed of internationalization of born digitals. Thus, provided with insights of characteristics that have an influence on the speed, which consist of an aligned growth strategy, digital presence and network capacity, and the ability to change. This study furthermore contributes with insights that are applicable for founders and managers of born digitals. Influential characteristics and the impact they might have on the speed are recognized, which is of importance for founders and managers in the decision-making process when expanding to foreign markets.

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2. Literature review

2.1 Internationalization theory

Internationalization theory has developed during the last hundred years. In 1959 Penrose developed the knowledge-based view that considers knowledge as the most significant resource of a company. Since knowledge-based resources are usually difficult to imitate and socially complex, the theory suggests that different knowledge bases and capabilities could be the determinants of sustained competitive advantage and superior corporate performance (Penrose, 1959). Moreover, Vernon (1966) developed the Product Life Cycle Theory to explain the life cycle that products go through when exposed to an international market. The life cycle describes how a product matures and declines as a result of internationalization. Hymer (1976) studied the operations of national firms and argued that advantages that trigger companies in investing abroad might be a product of excess resources that derive from a lack of competition in the domestic market. Those companies do not necessarily have to be innovative or cost-efficient, but their advantage derives from having market power. Williamson (1979, 1986) developed the Transaction Cost Theory, which posits that the optimum organizational structure achieves economic efficiency by minimizing the exchange costs. According to the theory, each type of transaction produces coordination costs of monitoring, controlling, and managing transactions.

However, the most observed theory in the internationalization of firms is the Uppsala model, developed by Johanson & Vahlne (1977, 1990). The Uppsala model is constructed by Penrose’s (1959) theory consisting of the growth of the firm and Cyert and March's (1963) behavioral theory of the firm. The incremental characteristics of internationalization in the Uppsala model are based on a dynamic model where one cycle of events affects the next steps in the process.

According to the Uppsala model, State and Change aspects of internationalization are presented.

Market knowledge and market commitment represent the state aspects, in turn, they affect commitment decisions and current activities, that represent the change aspects (Johanson &

Vahlne, 1977; 1990). The Uppsala model shows that firms incrementally increase their international involvement by using knowledge about foreign markets which in turn result in increased commitment to foreign markets (Johanson and Vahlne, 1977). The central argument of the model is that firms lack market knowledge in the internationalization process and activities, and Johanson and Vahlne (1977) argue that particular knowledge grows out of experience in international activities which in turn is crucial to the learning process. Learning by engaging in

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5 international activities results in a more differentiated perspective of foreign markets. (Johanson

& Vahlne, 1977).

In existing research on internationalization theory, the knowledge-based perspective is broadly used (Johanson & Vahlne, 2003; Oviatt & McDougall, 2005). Moreover, previous literature on internationalization frameworks, experiential learning, and market knowledge are factors that are influencing internationalization speed (Autio et al., 2000; Oviatt & McDougall, 2005).

Knowledge has an important role in internationalization theory and is critical when seeking opportunities in international markets (Autio et al., 2000). When a firm possesses knowledge about a foreign market, uncertainty and risk can be reduced in the internationalization process (Johanson & Vahlne, 1977, 2009). Additionally, Johanson and Vahlne (1977) defined the

“psychic distance” as a sum of factors preventing the firm's flow of information from and to the foreign market such as distinctions in business practices, language, culture, education, and industrial development. In other words, the concept implies that firms enter new foreign markets associated with greater psychic distance successively.

In the revisited Uppsala model change variables are dependent on the knowledge development process, since that is where the “action takes place" (Johanson & Vahlne, 2017). In the knowledge development process creating, learning and trust-building occur, which triggers change. For example, if the learning influences the resource commitment process, it can imply that an extant capability can be improved upon, which in turn means that the firm’s set of capabilities is being enhanced. Resources do not only influence capabilities, but also the existing resource positions of the born-digital and the partners in the network. This, in turn, may influence the performance. Hence, a new resource position can also be a result of decreased commitment, which could include reduced diversification, terminating a relationship, or leaving a market. In turn, changed capability and resource position will affect additional knowledge development (ibid). Furthermore, Coviello et al. (2017) argue that the outlined knowledge development process is somewhat paradoxical since it occurs at the level of the individual. Yet, in the Johanson

& Vahlne (2017) theory they do not include the individual, which leads to a lack of understanding of the process of change. Haynie et al. (2010) have performed cognitive research and concluded that entrepreneurial success is partly an outcome of an individual's capacity to adapt in a dynamic and uncertain context. The concept of cognitive adaptability is critical to consider since it goes above and beyond owning prior knowledge.

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6 Johanson and Vahlne (1990) continued the research of the internationalization process by introducing the network approach as one of the most influential perspectives. This perspective contributed to a framework to understand firms as embedded actors in their business networks (Johanson & Mattsson, 1988). Moreover, Johanson & Mattsson (1988) defined internationalization as network and business relationships developed through extension, integration, and penetration in foreign countries. Research has argued that born digitals rely on network relationships when expanding to international markets, by shaping foreign market business opportunities and compensating for born digitals' resources shortage (Prashantham et al., 2019). The main focus of the network consists of the quality of the relationships between born digitals and how this affects the internationalization process. Uncertainty and risk is a critical topic when firms look for opportunities when entering foreign markets. During the internationalization process, the firm makes relationship-specific decisions and commitments linked to other firms. When trust grows towards other partners, decisions are perceived as less risky, which makes the firm less resistant to commit knowledge and resources (Johanson &

Vahlne, 1977).

However, in the most recent study Johanson & Johanson (2021) argue that network relationships are not assumed to be stable, since when changes occur and processes are developed through the relationships in the network, each specific born digital starts to influence both its customers and suppliers but also other partners in the network. Business networks are dynamic and constantly changing, and as a result, they are never stable. When a firm enters a network in a foreign market it is not to gain a position in a stable network, instead, it is a question of synchronizing the born- digital to the dynamics of a new network that is constantly changing.

2.2 Digitalization and Born digitals

Literature suggests that digitalization is a changing context in which new technologies emerge and new capabilities are required (Nambisan, 2017; Reuber & Fischer, 2011; Wentrup, 2016).

While digitalization has enabled these transformations, software and hardware technologies have become the real drivers in the market. Digitalization might, in other words, give rise to digital entrepreneurship, which has opened up new research approaches and explanations (Nambisan, 2017). Digital entrepreneurship has e.g. been shown in so-called born digitals. Born digitals could be described as records or activities without any physical footprint. In other words, companies that have a digital business model from the start rather than analog artifacts converted into digital

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7 form in a later stage (Kirschenbaum, 2013). However, born digitals initiatives could also refer to projects that break the link with the analog world. Born digitals may not only reproduce the organizing principles of analog technologies, instead, they could refigure and subvert them (Muhanna, 2018). According to Vadana et al. (2019), born digitals are companies usually digitalized from start or early after the inception. The business model of those companies could be categorized by a higher degree of digitalization, which may increase the process of new market entries (ibid).

Today, the digitalized market reaches the whole world, and digitalized companies have access to different business opportunities immediately, independently of space and resources (Mort &

Weerawardena, 2006; Gerschewski et al., 2015). Many born digitals also rely on the internet in order to run their companies (Monaghan, 2020). As born digitals can conduct the whole business online, they do not need to physically establish themselves. Furthermore, they might not have the same restrictions when internationalizing due to export, delivery, logistics, timing, inventory management, and strategic location as e.g. physical production companies have (Mahnke &

Venzin, 2003). Instead, there might be other reasons that could characterize the internationalization speed of born digitals.

Monaghan et al. (2020) have identified characteristics of born digitals. Firstly, born digitals could build and leverage digital infrastructure, which means that a firm has an identifiable online occurrence (Nambisan, 2017; van Alstyne et al., 2016). Secondly, born digitals may rely on digital infrastructure to accrue communication, collaboration, and/or computing capabilities.

Those capabilities allow the firm to create and sell its offering online through a digital business model (Laudon & Laudon, 2015; Nambisan, 2017). In line with previously mentioned research, this means that firms with a physical market offer, independently of the degree of digitalization, are not born digitals. Born digitals are also digital from inception and differ from e.g. firms that are still in the process of “going digital” by engaging in digital transformation or supplementing their digital capabilities (Eden, 2018).

Born digital entrepreneurs with previous international experience are more likely to entail a greater understanding of the potential and emerging international opportunities, moreover they tend to be more proactive to develop the emerging opportunities. Compared with entrepreneurs without international experience, it leads the entrepreneurs to internationalize the born global earlier and accomplish rapid post-entry internationalization (De Clercq et al., 2012). However, Acedo & Galán (2011) argue that the entrepreneurs of born digitals have a positive outlook on

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8 internationalization and perceive opportunities in foreign markets to be more interesting than domestic opportunities and are more willing to commit resources to foreign opportunities and internationalize earlier (Moen, 2002).

2.3 Internationalization of Born digitals

The internationalization process of a digital firm differs from traditional internationalization theories (Brouthers et al., 2016). One of the main differences is that digital firms can either have an internationalization process that is active or passive. The passive approach entails that a digital firm is not adjusting its domestic value proposition or actively targeting customers in foreign markets, instead the digital firm has an international business model that serves customers in foreign countries. This approach does not require initial investments or adjustments. On the other hand, when a digital firm uses an active internationalization approach, they establish a presence in a new market and instantly target customers, by adjusting their offerings to match the demands in the foreign country (Hazarbassanova, 2016).

Research has been performed on the active internationalization process of such firms and several researchers have observed general patterns in this field (Mahnke & Venzin, 2003; Ojala et al., 2018; Wentrup, 2016; Brouthers et al., 2016). Digital firms appear to enter foreign markets rapidly with low resource commitment through entry modes that require advertising and fast market penetration to lock in customers. Additionally, digital firms tend to be willing to take high risks to enter a new market, since the risk of being a late entrant and missing out on market shares is perceived as higher (Mahnke and Venzin, 2003). Furthermore, digital firms also seem to enter countries far from the domestic market at an earlier stage than traditional firms in order to obtain important resources (Ojala et al., 2018).

A firm or organization that provides online services is referred to as an Online Service Provider (OSP), and the internationalization theory of an OSP explains the terms of an online entry, offline entry and the gap between these two called the online-to-offline interval. The behavior of firms that enter a new market with an online entry approach enters by only introducing the product online. On the other hand, the offline entry approach refers to when a firm enters a market starting with domestic operations, and later firms seek an offline presence in the foreign countries to ensure that they e.g. manage local customer and legal requirements. However, Wentrup (2016) explained that successful firms have centralized operations in the domestic market. He furthermore explains that these firms initially entered with an online entrance and with time

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9 increased their offline presence. The offline presence is distinguished by OSPs establishing subsidiaries in foreign countries with staff from the domestic operations, to be in control of the value chain. The interval in time between the online and offline entry mode is referred to as the online-to-offline lag and the length of the interval is dependent on what business model and sales channels the firm is using (Wentrup, 2016).

2.4 Speed of internationalization

Research on internationalization has divided speed into two categories. The first category focuses on how early the firm starts to internationalize (Khavul et al., 2010; Luo et al., 2005; Pla-Barber

& Escriba ́ -Esteve, 2006). The second category focuses on sustainable speed, which covers the process once internationalization has started (Jiang et al., 2014; Vermeulen & Barkema, 2002).

Internationalization speed is often used to explain the causes of an early start, such as why some firms start to internationalize early after the inception. In other words, the speed to internationalization research covers a period characterized by outsiders, while the speed of internationalization research covers a period from outsiders and moving towards insiders (Johanson & Johanson, 2021).

Once a firm enters a specific market, it could establish a position in the market’s network and go from being an outsider to an insider position (Johanson & Vahlne, 2009). Through the network and insiders, the company learns about new opportunities and could thereby expand the network (Blankenburg Holm & Eriksson, 2000; Hohenthal et al., 2014). Insiders could, therefore, be seen as a result of having developed several relationships categorized by mutual commitment.

However, insiders are also a position from where the firm sees both direct and indirect relationships, as well as where the indirect relationships can affect the firm. An insider's position could, therefore, be categorized by the firm being embedded and locked into the network (Johanson & Johanson, 2021).

Digitalization may increase the importance of business networking when internationalizing into new markets (Johanson & Vahlne, 2009). The digital environment has provided new firms to learn fast and make early and rapid internationalization achievable. However, the output of digitalization could also be seen as critical, especially for new firms’ internationalization, since digitalization is the basis for rapid internationalization (ibid). Further, digitalization may stimulate and facilitate the internationalization speed in born digitals (Oviatt & McDougall, 1994, 1999). The born digitals phenomenon is triggered by the facilitated way to internationalize

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10 due to digitalization, as well as the advances in communication and reduced transaction costs (Knight & Cavusgil, 2004).

According to Pagani and Pardo (2017), digitalization has made it easier for new firms to assess resources and leverage their capabilities for early and rapid internationalization. Therefore, digitalization could be viewed as an opportunity for a new firm to internationalize into new markets (ibid). According to international business competencies, there are sets of international knowledge and skills to manage an international business. Performed research has examined the necessary resources and capabilities that led to rapid internationalization (Falahat et al., 2013;

Weerawardena et al., 2007), however, the impact of digitalization on these resources have not been further developed (Johanson & Johanson, 2021).

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3. Method

3.1 Research approach

Research commonly distinguishes between two research approaches, deductive and inductive approaches. The deductive approach is used when examining hypothesis testing and experimental research, where the researchers form the basis of the study by having preconceptions of the data collection (Thomas, 2006). On the other hand, the inductive approach follows an opposite strategy, where findings of the research appear from common patterns and themes in the raw data (Thomas, 2006). This thesis is outlined by an inductive research approach that aims to create a grounded theory based on interviewees' experiences. Additionally, this thesis aims to take into account each interviewed individual expression, which requisite an inductive approach (Saunders et al., 2016). According to Jackobsen (2017) it is crucial to have an objective attitude and an open mind when following an inductive approach, to minimize the risk of influencing collected data. To achieve an objective and inductive approach, to the fullest extent possible, we will aim for our preconceptions to not affect the interview conditions or control the interviewees in any direction.

According to Gioia et al. (2012), a systematic inductive approach can ensure that new concepts can be developed based on qualitative data collection. Through this methodology, Gioia et al.

(2012) have developed an opportunity to develop a new grounded theory with an inductive approach. Since this thesis follows an inductive approach, the Gioia Methodology is used in order to analyze the empirical data and generate a new grounded theory. In this way, an initial frame of reference could create an understanding of the speed in the internationalization process of born digitals. Specifically, the authors’ approach to summarizing the derivation of their emergent grounded conceptual framework in the form of a data structured diagram has become increasingly common. The Gioia methodology has given rise to numerous empirical studies that have contributed to organizational theory as well as a methodological exemplar for authors (Pratt, 2009; Rindova, Dalpiaz, & Ravasi, 2011; Maguire & Phillips, 2008).

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3.2 Data collection

3.2.1 Selection criteria

The selection criteria for the chosen companies are in line with Monaghan et al. (2019) main characteristics of a born digital (see section 2.2 Born Digitals). As previously mentioned, Monaghan et al. (2019) has set the following criteria to define a born digital: companies who are digital from the inception and not about to “go digital” in a later stage, leverage digital infrastructure, and rely on infrastructure to accrue communication. To ensure that the companies had international experience, the companies also were required to expand to three countries minimum. It was also required that the interviewees possessed a comprehensive knowledge of the firm's internationalization process. Those criteria were believed necessary to reduce the bias of the study. Potential interview persons without internationalization knowledge were, therefore, sorted out since it may have affected the outcome of the study.

To find relevant companies, we used Google and searched for “international born digitals” and sorted out the companies that did not meet the mentioned criteria. Once we had found several relevant companies we searched for relevant roles within the company on LinkedIn. It could for instance be “head of acquisition”, “market expansion manager” or “country manager”. The interviews were held with those types of roles since they are inserted in the internationalization process for respective companies and possessed relevant knowledge for the study. The requirement of those roles and knowledge was made to increase the internal validity of the study, since interviewing people with relevant competencies may increase the credibility and believability (Bryman et al., 2017). The relevant contracts were either contacted directly on LinkedIn or by email if it was available. We also used our private network to get in touch with relevant contacts in the firm. Additionally, we contacted info- and support emails and called customer service, however, it turned out that the response rate was the highest on LinkedIn.

When contacting the relevant companies, we made sure the contacts were informed about the aim of the study and that it was voluntary to participate. According to Bryman & Nilsson (2018), informing the interviewee about the purpose and voluntary participation is of importance in order to make the interviewee feel comfortable, which may reduce the ethical abuse of the person investigated.

The interviewed companies were grounded in different European countries and varied in terms of size and industry; however, the majority of the companies had initially expanded in the

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13 northern market. Table 1 illustrates the “names” of the interviewees, which is not their real names since they are anonymous, and some background information about the interviewees and the companies:

Table 1: Interviewed companies.

“Name” Work role Industry Company origin Grounded Turnover ‘000 Astrid Nordic marketing

manager

IT Security Norway 2001 200 000’ SEK

Peter Expansion project lead

Digital Publishing

Sweden 2006 2 000 000’

SEK Carl Product manager-

global expansion

Music Sweden 2009 350 000’ SEK

Steven Head of acquisition

Gaming Content

Spain 2011 700 000’ SEK

David Account Executive- International Markets

Digital Textbooks

Sweden 2012 70 000’ SEK

Martin Country manager Fintech Denmark 2015 30 000’ SEK

3.2.2 Interview structure

As illustrated in Table 1, we conducted six interviews combined. The number of interviews were limited because of the limited time frame, and the fact that enough data was considered to be collected once the interviews were conducted. We continued to collect empirical data until we reached theoretical saturation, which is the point when new properties, dimensions of relationships emerge during the analysis (see the 3.3 Data analysis and coding) (Strauss &

Corbin, 1998). All interviews were also conducted in the interview person’s native language.

Bryman & Nilsson (2018) argues that interviewees tend to be more comfortable when speaking in their native language. Therefore, we used it to ensure comfortability and not miss out on important information due to limited language skills. The ambition to increase the comfortability among the interviewees was made to increase the reliability of the thesis. The reliability is of importance because it may contribute to the replicability of the study, which means that a research project can get the same result if constructed repeatedly (Saunders et al., 2009; Recker,

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14 2013). To assist in the replicability of the thesis, the interview guide is available in Appendix 1.

The interviews lasted for approximately one hour over Zoom, Teams, or Google meet, due to the Covid- 19 restrictions and the platform preferred by the interviewees. Letting the interviewed person stay in their office environment, independently of digital versus physical interviews, could also increase the comfortability throughout the interview process (Saunders et al., 2009).

The interviews were mostly performed through an open discussion, which is preferable to set the direction for the research and get a general understanding of the interviewees' situation and problem (Onwuegbuzie & Leech, 2007). Additionally, Brinkmann & Kvale (2015) argues that interviews make it possible to express thoughts about a phenomenon. In order to get a broadening of the interviewees’ thoughts about their internationalization process, interviews were therefore an appropriate method to use. Further, semi-structured interviews provide in-depth insights since it enables the interviewer to have a dialogue with the interviewees (Bryman et al., 2017). To operationalize the interview questions in regard to the research question, the questions were formulated in regards to different themes. We were interested in getting a wider understanding of the opportunities and barriers in the born digitals’ internationalization and asked open-ended questions regarding how the interviewees’ internationalization processes for different countries looked like. Thus, we got information about potential opportunities and barriers in the internationalization process which might characterize the speed in different ways. More specifically, one theme we asked questions related to was how the company's digital nature enabled their firms to establish a presence in markets abroad, and how this could affect the speed of the internationalization process. The operationalization of the interview questions may also increase the validity of the thesis since operationalized interview questions imply that the thesis measures what was designed to be measured (Bryman & Nilsson, 2018). Semi-structured interviews made it easier for us to add follow-up questions, such as “how” and “why”, as well as asking the interviewee to develop their response. The possibility to have conversations and add possible questions during the interviews made a semi-structured approach with open-ended questions appropriate for this thesis. However, open-ended questions could, if not correctly structured, also generate too much empirical data (Bryman et al., 2017). Therefore, the interview questions were adapted and reformulated as interviews revealed new insights and while the research progressed. For instance, questions that were trickily formulated were rewritten. Since our interviewees had lots of information and knowledge to share, we ranked the importance of the interview questions, to not miss out on relevant information.

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15 All interviews began with oral information including an introduction of ourselves and the study’s approach, as well as asking for permission to record the interview. We also informed the interviewee that no unauthorized person could access the interview material and that the interviewee was anonymous. Thereafter, the interviewees themselves had to decide on their choice of participation. According to Bryman & Nilsson (2018) participants have the right to assess information about the material and decide on their participation. To make it easier for the interviewees to answer the questions it might also be of extra importance that the interviewee feels comfortable in the setting. Hence, some introduction and ending interview questions were added, which were questions regarding the interviewees' position in the company and the opportunity to add some final thoughts in the end. Since the questions were intended to capture the firm's characteristics of speed-related to internationalization, the questions did not focus on specific markets or countries. Instead, we focused on the speed in the internationalization processes. The semi-structured interviews were recorded and transcribed to not lose valuable information. The total transcripted material resulted in approximately 180 pages including every part of the interview except for the short introduction. Pauses, laughs, sighs, irrelevant words, etc were included in the transcripted material, this was made to not exclude any relevant information (Bryman & Nilsson, 2018).

3.3 Data analysis and coding

This thesis outlines an empirical study using an inductive approach. Thereby, we have chosen to apply the Gioia methodology to present our empirical findings in a structured and logical way, which is grounded on the article “Seeking Qualitative Rigor in Inductive Research: Notes on the Gioia Methodology” (Gioia et al., 2012). The rationale for selecting and applying the Gioia methodology is established upon two main arguments. Firstly, based on the research question we wanted to choose a method that realizes the entirety of the qualitative data analysis and its rigorous requirement. Secondly, we were seeking a method that entailed a well-established process flow, in which the raw data could be refined systematically, without affecting the authenticity and quality of the raw data. Based on the above-mentioned arguments, we are confident that the Gioia Methodology is the appropriate approach to acquire in our empirical data analysis. Accordingly, the Gioia methodology is by other researchers preferably chosen to present clear illustrations of how they go from their empirically-rooted data findings to the aggregate conceptual dimensions they use to build new theory (Pratt, 2008). Langley & Abdallah (2011) furthermore describe that the Gioia Methodology contributions have been designed to

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16 build continuously on a developing outline of conceptualizing organizations in a revelatory logic, and showed how this approach achieves persuasive results by revealing the related rhetorical moves underlying their argumentation and presentation.

The purpose of the Gioia methodology according to Gioia et al. (2012) is to communicate a systematic approach to new grounded theory articulation and concept development that is outlined to drive “qualitative rigor” of inductive research. Moreover, Gioia et al. (2012) are explaining the motives of using the Gioia methodology and introduced two main concerns according to the methodology. The first concern includes how to permeate “qualitative rigor” in a study with an inductive approach while maintaining the revelatory and creative potential for generating new grounded theory, and fulfill such purpose of an inductive study. The second concern includes how researchers that follow an inductive approach can apply analytical discipline and systematic concepts that result in incredible explanations of data that also convince the readers that the generated conclusions are defensible. Thus, Gioia et al.'s (2012) intention in performing inductive research was to ensure “qualitative rigor”. To ensure this, their approach depends upon a well-specified research question and by using several data sources that lead to credible explanations of the raw data and reassure the readers that the generated conclusions are defensible. To achieve qualitative rigor Gioia et al. (2012) encourages presenting the research findings in a manner that illustrate the connections in the raw data, the emerging concepts, and the developed grounded theory. More specifically, the Gioia methodology allows for a systematic presentation of the “1st-order” concept, which entails an analysis using informant-centric codes and terms, and a “2nd order” themes, which entail using researcher-centric themes and dimensions (Maanen, 1979). The reporting of the informant and researcher voices allows for both a qualitatively rigorous demonstration of the connections in the raw data as well as the induction of a new concept (Gioia et al., 2012).

However, while the Gioia method does generate process models with a qualitatively rigorous demonstration, the models occasionally seem to describe a high level of aggregation in the phenomena, which in turn might lead to an incomplete interpretation of how and why things occur. To some extent, this may be a consequence of the grounded theory methodology in which the coding and categorizing activity may generate certain isolation of a concept from its normal or expected context (Langley & Abdallah, 2011). Overall, to achieve generality, the interplay and chaining of particular situations may at times become lost in this process. Furthermore, despite Gioia's methods’ interpretive roots, this research usually assembles narratives where

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17 differences in perspectives are classified as “tensions”, but these tensions are not investigated in depth (Buchanan & Dawson, 2007). However, based on our research question to identify characteristics in the internationalization process of born digitals we feel confident using the Gioia methodology, to generate knowledge and more easily show how we progressed from empirical data to emergent theory in a manner that is credible and defensible (Gioia et al., 2012).

The data analysis was conducted parallelly with the data collection and was continuously compared with previous literature. To organize the data analysis appropriate for an inductive and qualitative research approach, the Gioia Methodology (Gioia et al., 2012) was chosen to secure qualitative rigor and organize the data analysis. Moreover, this thesis's purpose is to attain new knowledge in a comparatively unexplored research field, the Gioia Methodology is used to generate codes, sub-themes, and themes without being purely dependent on existing theories (Gioia, et al., 2012). The open coding and Gioia method refer to separating data into smaller objects to produce meaningful concepts out of the combined codes (Miles et al., 2014).

The process of the empirically-rooted 1st-order concepts was grounded on three waves of interviews that created a data structure to generate the findings. Each interview followed every stage of the research process. The first wave of interviews was examining the atmosphere and was performed through an open discussion. This wave of interviews validated the formulation of the research purpose and the problem discussion (Ghauri & Grønhaug, 2005). The second wave of interviews, fully described in section 3.2.2 Interview structure, was conducted based on predetermined questions that resulted in a semi-structured outline (Ghauri & Grønhaug, 2005), see Appendix 1. These interviews were recorded and notes were taken during the sessions.

Confirmation interviews were performed in the third wave of interviews, to confirm and clarify statements as well as to fill information gaps from the prior interviews (Leech & Onwuegbuzie, 2008). They conducted semi-structured interviews represent the main data, meanwhile the first and third waves of interviews primarily contributed with direction and validation of the produced themes. To identify the first-order concepts we used sentences or paragraphs from the transcribed interview material as coding and marked each textual expression with either descriptive phrases or the language used in the interviews. We performed this open-coding process separately and produced the 1st-order codes, occasional differences were resolved through discussion throughout the coding process. The 1st-order codes were organized in an Excel file to code the data manually systematically and consistently using different colors. We confirmed links among the 1st-order codes based on axial coding (see Golden-Biddle & Locke, 2006). Based on our

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18 semi-structured interview outline we could organize the 1st-order codes into clusters consisting of the interviewees' responses to the questions asked. We estimated patterns, similarities, and differences in the identified 1st-order codes and proposed theoretical labels in connection to the revelations contained in the interviews. In the 2nd-order themes, we identified common concepts which may characterize the internationalization speed in different ways. To identify the aggregated dimensions, we concluded dynamic relationships in the 2nd-order themes and converted the static data design into the dynamic grounded theory model (see Table 2). In the result we have summarized the answers from the interviews in order to get an overview of the themes discussed. To cover all themes in quotes would not be possible due to the limited scope of the study, and might also exclude the holistic perspective in the answers. However, in the discussion it was necessary to include quotes in order to illustrate and discuss concrete findings that are closely connected to the aggregated dimensions which facilitated the answer to the research question.

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19

4. Results

Table 2: Gioia conceptual framework (results)

The identified aggregated dimensions are illustrated as characteristics and could relate to the speed of internationalization in different ways, since both barriers and opportunities are included.

This means that the characteristics could both increase and decrease the speed depending on different factors. For instance, some born digitals need local teams with language skills in order to expand to new markets which is illustrated in the “Align growth strategy” dimension. Those companies usually have personal customer contact and might need an in-depth understanding of different cultures, which often means that they incrementally expand to markets close to the domestic market. The process of hiring a new team and understanding a new culture may therefore decrease the internationalization speed. On the other hand, some born digitals are not in need of personal communication and could expand worldwide without incrementally expanding to new markets. Therefore, the identified characteristics do not affect the speed of all

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20 born digitals’ internationalization processes similarly, but might differ depending on e.g.

industries, legal circumstances, and business models.

4.1 Aligned growth strategy

Grounded in the empirical data, the dimension of an align growth strategy is of relevance among born digitals. By expanding to markets nearby the domestic market, some interviewees explained that they could take advantage of their previous knowledge and experience when expanding to new markets. Martin explained that the Fintech company will start to focus on the Nordic market before expanding globally. Although the four Nordic countries differ from each other, Martin argued that they are still more similar than other countries in Europe. For example, Martin explained that the competitor situation looks different in Germany. According to him, Germany differs from Nordic countries in terms of laws and culture, since they have a different view on how to use cards, etc. The Nordic market is also the most profitable market for the Fintech industry which is one reason they saw the highest opportunities in the Nordics at the moment.

Therefore, Martin argued that it is important to estimate the similarities and differences in different countries before making rapid decisions. Another reason why they initially focus on the Nordic market is because of their limited resources. By investing in their product and increasing their attractiveness in the Nordic market, they allocate their resources carefully which might be important in regard to the Fintech company’s early lifecycle stage. Additionally, Martin stated the importance of hiring local teams in an early stage to get a more in-depth understanding of the culture, language, and the customers' needs. The IT Security company has a similar internationalization strategy and focuses on being a leading player in the Nordics before expanding in the rest of Europe. According to Astrid, the Nordic countries have similarities in terms of e.g. people and needs. Therefore, the company could make usage of their knowledge and experiences from e.g. the Norwegian market when expanding to Sweden. Since the IT Security company has mostly expanded through acquisitions, they have also got access to language skilled employees, as well as a customer base in the new countries. On the other hand, Astrid also mentioned some challenges with acquisitions. For instance, she explained that it could take time to build up a new brand in different countries since the customer trust sometimes could be deficient. However, since the IT Security company brought both employees and customers in the new market, Astrid explained that their acquisitions went relatively smoothly and might have streamlined their expansion since they have performed several acquisitions and have developed

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21 a well-established and aligned growth formula. She mentioned that it would probably take longer to merely grow and expand organically for their firm.

Peter also stated the importance of initially focusing on nearby markets. According to him, the Nordic market was mature for digital publishing services, since a leading competitor had increased the interest for similar digital services in that market. Therefore, they initially expanded in the Nordic market before some countries globally. In addition, the Nordics consisted of small markets and when the company felt that they had penetrated that market, it was time to reach markets ahead of the domestic market. Peter explained that the digital publishing industry is controlled by content, which makes the first-mover advantage important. First mover advantage means that the company can take ownership of the titles and build a catalog before the competitors do. In a later stage, when the markets abroad get more mature, it could be beneficial to have ownership of the titles and take usage of the first-mover advantages by acquiring the potential customers more easily. Peter compared countries in the Nordic market with e.g.

Germany, the largest provider of digital publishing in the world with more than 15 000 titles, which makes it hard to compete for titles in that market. If the company would like to enter the German market and build a brand from the start, more capital is required compared to if they should enter a market where the digital publishing industry is not developed to the same extent.

In Germany, the company would have to produce its content with unique bestsellers, premium titles, and the right niche to build the brand. Compared to Thailand, where the digital publishing industry was not developed, the company could offer exclusive content from the start. Steven also explained that the Gaming Content firm had a strategic advantage when exporting their service to the Nordic market since it tends to get easier to contact people in your native language.

Thus, Steven explained that it initially was easier to contact e.g. Swedish customers. On the other hand, the market expansion strategy in the Gaming Content company differed from the companies that incrementally reached new markets similar to the domestic market. The expansion strategy of the Gaming Content company was mostly dependent on the customers’

demand, and since the company found an increased demand for the service in England and Germany they decided to expand to those countries relatively quickly by recusing material, knowledge, and experiences from other markets. According to Steven, business language is in English and they do not need local teams anymore, since translating sites have been developed during the last few years. English websites do also work as marketing in many different countries.

In other words, a link from an Austrian site could therefore build a German website which might

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22 streamline the expansion process and simplify the expansion to companies distant from the domestic market.

The internationalization strategy looked different for the Music and Digital Textbook companies.

The business model of the Music company is to offer royalty-free music, which means they are the owners of all licenses. Carl mentioned that being a digital customer company makes it possible that things “just happen”. Since the Music company has ownership of the music licenses, they can have customers in every country worldwide, although they did not focus on reaching specific markets from the beginning. However, Carl explained that if a company has to manage licenses or other requirements when entering a foreign country, they are probably more aware of which country to focus on. A leading competitor does, for instance, need licenses in other countries to reach new markets. The licenses entail barriers for the leading competitor since they can start to reach a new market but then have to close it since they are not allowed to leverage their music in that country. The internationalization process for the leading competitor does look different compared to the Music company since the competitor starts to make marketing campaigns and launch their product once they have got the licenses. Except for the digital business model, Carl mentioned their team is a key resource for the company’s rapid internationalization process. According to him, it is therefore of importance to set up strategies and goals for the employees about what is expected from them and how they will generate value for the organization. The internationalization strategy for the Digital Textbook company is similar to what Carl described. Instead of initially focusing on the nearby market, the Digital Textbook company expanded directly to the U.S. When expanding to a new market, the Digital Textbook company primarily looked at the number of schools and the economic situation in different markets. In the U.S there are plenty of private schools that have a budget for textbook services, compared to e.g. South Africa, and the market is also accustomed to digital solutions.

Before entering a new market, the company performed market research to select information about the size of the schools, their policies, and how their intentions for digital products are. The company talks to potential customers in each country to learn as much about the school as possible.

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4.2 Digital presence and network capacity

Based on the collected empirically-rooted data the dimension of digital presence and network capacity is of relevance among born digitals. From the collected data, the importance of being digitally present involves customizing the communication in a certain language for the market the firm is entering. According to Peter, their service can be digitally present in a particular country by leveraging the content from another country with the same language. Further, Peter illuminated that one benefit of being digitally present is a quick market entry to make the product viable. On the other hand, he mentioned that a negative aspect of leveraging content to a country with the same language could be the difference in dialects provided in the online store. Peter argued that this might be seen as a simplification of the internationalization process. Similarly, according to Martin, when the Fintech company started in Denmark they expanded to both Sweden and Norway within three years, the expansion entailed being digitally present in these countries by having their service available on for instance App-store as a digital front end, while the software is based and operated in another country. Similarly, Steven explained that the Gaming Content company started in Spain, but the company targeted the marketing towards Sweden and the other Nordic countries from the beginning due to the founders and other employees' native Nordic languages, since it was easier to establish a contact and approach the Nordic countries digitally. Steven argued that the first step to establishing a digital presence was in terms of PR, and used the first customers to do so. As the customer base in the Nordic countries grew, the created content and digital publication reached intentionally and customers outside of the Nordics requested their service. In this way, the Gaming Content firm builds an online network, by essentially getting large customers to use their service, and smaller firms that mimic the large companies tend to follow. In other words, their business model establishes a digital presence in countries along with customers using their service. Steven argued that they only have a temporary network with clients, which means that the company operates digitally without the need of collaborating with external partners to reach new markets. David also explained that the Digital Textbook firm operates digitally. Furthermore, he described that their product consists of two curriculums, the International General Certificate of Secondary Education (“IGCSE”) and International Education Diploma Program (“IBDP”), and has reached 107 countries digitally.

Since international schools operate their organizations in the English language, the platform is scalable, consisting of curriculums that are based on the English language.

Similarly, Carl described that their product is digitally present in almost all countries since anyone can sign up as long as they have a credit card. The online music provider has a “one size

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24 fits all '' business model and provides all information in English, this restrains the number of users to individuals that speak English. In recent years the Music company closed down an office in Spain, after realizing that they should focus on hiring marketing and sales representatives since their users appear in the digital sphere. Carl furthermore shared information about how their users utilize their product at their work with Youtube, and since the users operate online in their natural user behavior, the strategy to reach more users is by being digitally present.

However, Martin argued that after some time of being digitally present and to grow their Fintech the need to deal with the local language emerges which might be a driving force to hire people to communicate with the customers. This does not necessarily mean establishing an office in a particular country, rather having representatives in that particular country to gain trust and support their customers. After receiving the banking license in 2018, the company developed its product from being a service warehouse of products provided by other banks and credit institutions, to having the mandate to scale the product. To scale the product, Martin argued that it required the company to get comfortable with the local infrastructures and networks in the different Nordic countries, which in banking language is called a filial. This means that the Fintech company does not only have a digital presence with representatives in that particular country. Instead, this requires the Fintech company to be locally established with an office and a legal department that represents the Fintech company towards financial supervisory authority and other regulatory authorities to ensure e.g. capital adequacy. Martin mentioned that this type of network is hard to establish without local employees and if the Fintech company is only available digitally. Further, Martin described that to establish closer relationships, the demand to have a present market department and collaborative administrative resources increases.

Therefore, he explained, that they need to go beyond digital presence to understand the consumption behavior of individuals in the particular country and how the local infrastructure is built to establish the networks needed to achieve a full establishment in the new foreign market.

Astrid explained that the IT Security firm grew by acquiring firms in the Nordics, immediately they got access to the acquired firms’ network, knowledge from employees in the Nordic countries, and their client base. By acquiring the firms’ network, it has been an important factor for the firm to grow and the importance comes from the fact that it is within the networks that business is done, and where the continued performance and profitability of the firm is shaped.

Further, Astrid mentioned that they have not been digitally present in other countries due to the reason that the client base is dependent on good service. To give the clients quality service, they

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25 need to have dedicated employees and partners in the specific market. Additionally, Peter argued that when they acquire publishing firms to get rights to create content in a particular country, they at the same time get access to a new network that enables them to build local contacts and teams in the foreign country. He explained that it is a clear advantage to have local connections in a foreign country since they get a better understanding of what content the local users demand and how to reach their targeted users. In countries where they do not have local connections to publishers, it might take several years for publishers to open their minds to audiobooks since publishers in some countries are passive due to not wanting to lose income for sold books.

Carl also shared information about why they opened offices in foreign countries, which is because that one part of their business model is to find and connect with talented artists and help them create music. To find and collaborate with artists, a local presence is needed in those countries. This is why they have several offices in the U.S., and where they today mainly source talent from. Having offices in foreign countries where they have a large customer base is also related to sales, since it makes it easier to e.g. negotiate with large enterprises, however, since this can be done digitally, it is mainly to attract the right talents. Carl also mentioned that it might be important to be locally present and still have offices in countries like the U.S. since they need to work closely with the talents when e.g. recording songs in the studio, coaching, etc.

Additionally, Carl explained that they create campaigns together with the artists, where they take photos themselves instead of hiring other photographers. Furthermore, Carl mentioned that they are closely involved with the artists to ensure the quality of the creations, but also in order to establish a local presence and connect with the artists to build a closer relationship. However, Carl argued that he could see even these aspects becoming more digitally operated in the future, but as of now a physical contact is needed in this specific field for their brand and image to shine through in the production and create value for all parties involved. Comparably, David explained that as the Digital Textbook firm internationalized they established one office in the Philippines, several offices in the UK, and some employees working in Thailand to have customer support available constantly for all countries using their platform. As all customers are comfortable with English due to the platform's international nature, the language might not be a barrier. However, cultural differences exist and to find the right way to communicate with the clients, it might be an important factor to have employees working in client-facing roles from several different cultural backgrounds.

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26 Additionally, David explained that the U.S. was one of the first countries that the platform expanded to, and together with the so-called “paying partners” in the U.S. they further developed and advanced the platform. They entered a community that added valuable knowledge in how the product improved, and that has contact with schools around the U.S that are using the two curriculums, IGCSE and IBDP. Furthermore, David described that as they acquired a school as their client in a specific state in the U.S., it became easy to get in contact with several other schools in the same state, since the schools have a close relationship and collaborate. In the same way, through word of mouth, they have acquired several international schools in other countries as well. The Digital Textbook firm has contact with almost all potential international schools in the world using the curriculums. Regarding the schools that have not decided to use the platform jet, they book two or three meetings per year to go through the benefits of using the platform.

Before Covid-19 it was common for employees at the Digital Textbook firm to travel to these countries to create a deeper relationship, understand the schools' needs, and negotiate and tailor a deal with the schools. Furthermore, it is appreciated from the potential customers' perspective that employees commit time to meet in person and create a closer relationship. Due to Covid-19, meetings occur over Zoom or Skype, and organizations all over the world have gotten more used to communicating digitally. David argues that in the future they predict less travels with a similar outcome, which is both time and cost-efficient.

4.3 Ability to change

Based on the gathered empirically-rooted data the dimension of the ability to change is also of importance among born digitals. From the collected data, digitalization and technical networks enable the Fintech company to make small adjustments in regard to the customers' expectations and local infrastructure. Further, Martin explained that if a company has a scalable platform, which they can adapt to the local market with technical architecture, there is no reason not to expand in new countries, given the scale of profit identified. Similarly, Peter shared information about the importance of having the ability to make adjustments to meet different audiences in different countries. The adjustments they assemble connect to the changes in the business model due to country-specific macro-economic factors. For instance, Peter explained that they have made adjustments in the free trial periods of their product and made changes in the unlimited subscription model. Since publishers in some countries do not allow unlimited subscription models. Following, to meet the customers' demands that are aligned with the country-specific circumstances, Peter explained that they perform research of the country they want to enter and analyze the country-specific factors in a matrix they have developed internally. In the matrix,

How to characterize internationalization speed A qualitative study of Born digitals’ internationalization processes.