Sergey Filippov


The rise of micro-multinationals

Large multinational companies are undeniably the key players in the contemporary global economy, dominating the world trade and investment landscape. Unsurprisingly, they are the prime targets of most investment promotion agencies (IPAs) around the globe who seek to attract their investment projects into respective jurisdictions. However, internationalisation as a business strategy is not reserved exclusively to large enterprises. Today, in an ever globalised and interconnected world, many small and medium-sized enterprises (SMEs), startups and individual entrepreneurs operate globally from day one and consider dynamic international expansion as part of parcel of their businesses strategies.

Academic literature employs the term “born global” to describe SMEs that are export-oriented practically since their establishment and see the world, not a single country, as the home. “Born global” do not follow the traditional incremental internationalisation path – from export to foreign manufacturing, from culturally close and neighbouring countries to more remote locations – the classic “Uppsala Model.” In contrast, they have the ability to address global markets with their products and services right from their birth. “Born global” are present in various sectors, including high-tech. The Internet plays a crucial role in the process, facilitating operations of many “born globals,” allowing them to increase their presence in a number of countries without the need of physical presence.

While SMEs are commonly defined as companies employing less than 250 people, there is no universally accepted definition of startups. However, generally, startups are understood as young, dynamic companies, testing new business models and working to solve a problem where the solution is not obvious and success is not guaranteed. The very nature of startups, as dynamic and agile organisations, makes them appropriate vehicles for testing and commercialising new technologies, products and services. A recent study, drawing on a sample of over 12,000 UK firms demonstrates that in services, being a startup increases the likelihood of product innovation. When examining the returns to innovation, the study finds that startups have a significant advantage both in services and manufacturing.

This innovativeness is often driven not only by the agile nature of startups, but also by internationalisation. In an analysis by the London-based Centre for Economic Policy Research (CEPR), researchers found that companies that are “regionally minded” are four times less likely to innovate than their globally connected counterparts. In terms of product development, the addition of just one new international relationship improved a firm’s odds of successfully introducing new ideas by 26%.

Certain tech startups, fuelled by the power of digital technologies have all the potential to become global leaders. According to a recent research, Europe has produced 30 technology companies worth more than $ 1 billion since the millennium. While these valuable startups are few, and the researchers refer to them as “unicorns,” this is valid evidence that technology and internationalisation enable startups to reach the sky and generate exceptional rewards.

In addition to their innovative potential, young dynamic firms – both SMEs and startups – are responsible for a sizeable share of the modern economy, particularly, for employment. Since the outbreak of the global economic and financial crisis 2008, eight out of 10 jobs generated in the European Union were created in SMEs. Looking at the age, the picture is even more impressive. Between 1980 and 2005, all net job growth in the United States came from young firms (five years old or less). In a paper published by the National Bureau for Economic Research (NBER) in 2010, researchers concluded that startups in the United States grow faster than more mature companies and create a disproportionate share of jobs relative to their size. Likewise, in the Organisation for Economic Co-Operation and Development (OECD) countries, young firms (five years old or less) accounted for only about 20% of non-financial business sector employment over the past decade, but generated nearly half of all new jobs.

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