Young businesses succeed in international markets through trial and error – success does not always have to be based on careful planning, goal setting or large resources
The project "International New Ventures: growth and decision-making", a collaboration between the University of Vaasa, the University of Eastern Finland and three partner organisations, explored how young health start-ups could successfully grow internationally despite their scarce resources. This knowledge is also valuable for companies that are slower to internationalise.
The health sector in Finland is one of the sectors with high growth potential and tends to source its growth from international markets. The health sector has become one of the most potential high-tech sectors benefiting from a rapidly growing global market.
– We wanted to answer the question of what role entrepreneurial decision-making plays in achieving international growth among young Finnish health firms compared to other sectors, says Peter Gabrielsson, Professor of International Marketing at the University of Vaasa.
– We also looked in more detail at the potential of the right decision-making logic and international entrepreneurial marketing, including branding, to promote the growth of internationalising healthcare companies. Small companies need to market differently from large companies and emphasise factors such as innovation, proactivity, customer focus, and the need to leverage the resources of other companies.
Creating new markets, cooperation and appealing to emotions are particularly important
The study consisted of two phases. In the first phase, data was collected through a questionnaire, to which 382 companies responded. Of these, 63 were in the health sector. The companies were selected from growth sectors and the responses were used to supplement existing data. In the second phase, a multi-case study methodology was used to delve into interesting health case studies. In the second phase, 46 interviews were conducted in 24 companies.
The study found that young companies that are rapidly internationalising use more entrepreneurial marketing in the global market than those that are traditionally internationalising. Similarly, health companies use entrepreneurial marketing more than non-health companies, indicating that entrepreneurial marketing is particularly important for these types of companies.
– Effectual decision-making logic is vital in uncertain foreign environments because it encourages entrepreneurial marketing, while traditional causal decision-making logic can be applied in more stable foreign environments, explains Gabrielsson.
– Business leaders should carefully examine the principles of international entrepreneurial marketing presented in our study, especially since entrepreneurial marketing was found to improve both marketing performance and economic productivity. Creating new markets, collaborative marketing programmes with partners and building an emotional connection with customers in international markets proved to be particularly important, he continues.
The study also highlighted the growing importance of digitalisation. Business leaders should therefore focus on so-called digital entrepreneurial marketing. According to Gabrielsson, international brand orientation was also found to be essential for companies in the health sector, which tended to have a stronger brand orientation than companies outside the sector. Other companies could therefore learn from health companies. Here, competitiveness is created by putting international brand values, standards, external visibility, and staff behaviour at the heart of the company.
– There seems to be still room for improvement in young companies that are rapidly internationalising, as the brand orientation of these companies was somewhat lower than that of traditionally internationalising companies.
Both effectual and causal decision-making logic can be used to build stronger brand orientation, but success depends on the skills of entrepreneurs.
– Experienced entrepreneurs would be better off sticking to the effectual logic, while those with more marketing experience may consider using the causal logic.
Proceed with caution or creative experimentation in an uncertain environment
According to Gabrielsson, understanding the logic of decision-making can show how young companies can face the challenges of global growth and survival crises, despite their newness, size, or unfamiliarity with international markets.
– The effectual decision-making logic, with its emphasis on improvisation, taking advantage of unforeseen situations and creating markets through partnerships, offers great promise as it can reduce resource requirements by tapping into the resources of other, often larger, firms.
Entrepreneurial-based effectual decision-making logic can be understood as a process in which the entrepreneur takes inventory of his existing contacts and resources and focuses on exploiting them through trial and error. Over time, he discovers how to advance in international markets and what goals he can achieve. This contrasts with the traditional causal decision-making logic based on planning, which starts by analysing the international market and setting a goal, and then acquiring the necessary resources to achieve that goal.
– So, we challenge the prevailing assumptions in international business that take it largely for granted that business decision-making is based on careful planning and goal setting.
Gabrielsson argues that the use of effectual decision-making logic depends on the context in which entrepreneurs operate and changes over time.
– Whether they operate in risky environments or whether the environment is so uncertain that traditional risk-based decision-making tools cannot be used.
It is generally assumed that business decisions are made based on various plans and analyses. However, in an uncertain environment, entrepreneurs must make decisions based on factors such as their heuristics or creative experimentation. As the business grows or the environment changes, the way decisions are made may also change.
The project (2017–2020), funded by Business Finland, involved the University of Eastern Finland, the University of Vaasa, and three partner organisations: Crown CRO, Ergorest, and World Vision Finland.
Project publications:
Yang, Man; Gabrielsson, Peter; Andersson, Svante (2023). "Entrepreneurs' Social Ties and International Digital Entrepreneurial Marketing in SME Internationalization", Journal of International Marketing, 31(4),1-22, DOI: https://doi.org/10.1177/1069031X231178220
Kusi, Samuel Yaw; Gabrielsson, Peter; Baumgarth, Carsten (2022). "How classical and entrepreneurial brand management increases the performance of internationalising SMEs?" Journal of World Business, 57(5), 1-19. https://doi.org/10.1016/j.jwb.2022.101311
Fürst, Andreas; Gabrielsson, Mika; Gabrielsson, Peter; Prigge, Jana-Kristin (2023). "The Role of Marketing in New Ventures: How Marketing Activities Should be Organized in Firms' ", Journal of the Academy of Marketing Science, https://doi.org/10.1007/s11747-022-00920-4
Kusi, Samuel Yaw. (2021). Digital infrastructure adoption and brand development of internationalizing SMEs: decision-making logic and desire for change. International Journal of Export Marketing, 4(1), 19-38. https://doi.org/10.1504/IJEXPORTM.2021.113953