Absorptive dynamic capability relates to processes developed in the company to seek new knowledge, internalize it, and integrate it into the firm’s existing knowledge base. Developing this capability is vital to the survival of born globals, as business opportunities have not yet been consolidated. Also, given the competition in a global market segment, the nature of the factors affecting the conditions of business comes from a wide variety of sources. This diversity of resources has the effect of increasing the complexity associated with the mechanisms that born globals need to generate to manage and integrate information from their foreign markets internally. Therefore, before developing new information seeking and integrative mechanisms, firms should encourage the use of processes that allow the efficient management of original information from different sources.
Born globals are recently formed companies and therefore assume limited resource availability. In these conditions, networks facilitate the development of absorption capability. Nahapiet and Ghoshal state that in order to access different information sources from their foreign markets, companies should establish communication processes to ensure the capture and integration of real and potential talents and resources. Similarly, Cohen and Levinthal argue that absorption capability is built on communication structures that transcend firm boundaries.
Therefore, belonging to a market-oriented network provides some related advantages to born globals, first by developing their capacity to develop an agreed perception of their market based on multiple agents and sources of information. And second, it combines coordination processes to interpret, understand and integrate this information into the internal firm’s knowledge base. In summary, a market-oriented network facilitates the development of the absorption ability of born globals.
Absorption Capability and Competitive Advantages in Born Globals
According to Porter, competitive advantages based on product differentiation and cost are that the different meanings used to refer to competitive advantages can be concentrated on two general meanings that encompass the rest. In addition, depending on reliability and services, companies have qualities such as old-fashioned quality, design, competitors’ values and reliability. The cost-based advantages lie in the area of production, management and commercialization costs. They value the manufacturer as lower costs and offer the lowest price to the consumer.
Regarding the impact of absorption ability on these advantages, Cohen and Levinthal report that the establishment of practices that encourage the absorption of external knowledge positively encourages investment in R&D. He claims that thereby improving the firm’s probability of gaining superior competitive advantages. According to Ref, he suggests some strategies to improve the diverse nature of a new company and these are as follows:
• Internal application of certain valuable knowledge-based resources and capabilities,
• Ability to associate them with other external ones,
• The capacity to integrate the information obtained from this union internally
• Ability to apply this knowledge to potentially successful business goals.
However, the fact that firms are open to their external environment may reflect an organizational myopia that shows that managers can overemphasize internal resources and adequately emphasize external resources. Therefore, an excessive internal vision can adversely affect the competitiveness of the firm. To foster firm competitiveness, there should ideally be a balance between the concentration of internal talent and openness. In this context, Vinding discloses the role of the firm’s internal capability and its ability to absorb as it enables external cooperation to complement each other. On the basis of this capability, companies make it easier to obtain competitive advantages by capturing, absorbing and using external information.
Born globals tend to gradually define the characteristics of their products or services, taking into account the characteristics of their customers and the conditions that characterize their competitive environment. Therefore, internal short-sightedness should be avoided when stating market trends in different and low-cost products or services. Knowledge and knowledge generated on the basis of their absorption capabilities are used to introduce valuable features required in their products or services to guarantee the feasibility of their business projects.
Competitive Advantages and International Performance in Born Globals
Reviewing the conceptualizations of the concept of competitive advantage shows that, by definition, a firm has a competitive advantage over another firm when it achieves superior performance. Therefore, competitive advantage can be seen as a direct precursor of a born global’s international performance. Because the superiority arising from the attempt to provide value determines the purchasing performance of the target market and thus its performance. When a firm gains competitive advantages based on differentiation or cost, its capacity to generate value for its customers is higher.
Correspondingly, there are higher levels of customer satisfaction, business volume, market share and lower customer service costs. Snoj and his team point out that maintaining competitive advantages is the foundation for achieving superior business performance, survival and development. Therefore, some hypotheses are proposed and they are as follows:
• Reaching the competitive advantages of Born globals based on differentiation contributes to higher levels of international performance,
• Accessing the cost-based competitive advantage of Born globals contributes to higher levels of international performance.
Limitations and Future Research
Interpretation of the results from the study should take into account some limitations that lead to suggest certain future lines of research. Regarding theoretical limitations, studies suggest a specific model of influence to which other new relationships can be added, taking into account additional variables to complement the description of achieving competitive advantages and international performance by born globals. In addition, born globals are considered to complement the results from previous studies showing the impact of market orientation on competitiveness from an individual perspective. And future research may explore the relationship between network market orientation and a specific market orientation.
Moreover, it should be noted that the main internationalization decisions are related to the speed and mode with which they enter new foreign markets. Thus, future studies could analyze the impact of network market orientation on different speed levels and entry modes. Methodological limitations include the use of a single nation sample because the findings may not be generalized to other national contexts. Future research may copy and compare hypotheses presented in studies in other countries. Given that networks may differ in their behavior, structure, and performance, future research could explore industries and facilitate a greater homogeneity of businesses and networks. Another methodological limitation concerns the use of a single interviewer response per network and firm. Buddha raises two questions:
• Can a manager of a single firm answer questions about how a network of companies works as a whole?
Similarly, can a single interviewed person represent the entire company in their responses?
Keeping in mind that it is distributed online, more doubts may arise about the question of who actually responded to the survey. Finally, making causal inferences using cross-sectional data can limit the value of the results. New research can usefully analyze the proposed impact model with longitudinal data.
Author: Ozlem Guvenc Agaoglu