Description
With this detailed description about international corporate entrepreneurship with born global spin along ventures.
INTERNATIONAL CORPORATE
ENTREPRENEURSHIP WITH BORN GLOBAL
SPIN-ALONG VENTURES — A CROSS-CASE ANALYSIS
OF TELEKOM INNOVATION LABORATORIES’
VENTURE PORTFOLIO
SARAH MAHDJOUR
*
and SEBASTIAN FISCHER
†
Telekom Innovation Laboratories
Ernst-Reuter-Platz 7, 10587 Berlin, Germany
and
Technische Universit € at Berlin
Straße des 17. Juni 135, 10623 Berlin, Germany
*
[email protected]
†
[email protected]
Published 28 April 2014
This study investigates a special kind of corporate ventures, so called spin-along ventures,
and their motivations to internationalise early. Insights are built from a multiple case study
approach, investigating the spin-along program of Telekom Innovation Laboratories
(T-Labs). Our results show that early internationalisation can avoid or reduce challenges
that spin-alongs face when entering the domestic market. Four major motivations for early
internationalisation could be identi?ed: (1) avoid termination based on the parent’s per-
ceived threat of cannibalisation of existing products, (2) enable a venture’s collaboration
with competitors, (3) overcome restrictions of parental assets in the domestic market, and
(4) address markets that offer greater chances for success than the domestic market does.
Based on our ?ndings we derive concrete implications for practitioners and academics in
the ?eld of innovation management.
Keywords: Born globals; corporate venturing; spin-along; case study; spin-out; interna-
tional entrepreneurship; Telekom Innovation Laboratories.
Introduction
In order to secure their long-term competitiveness, established companies are
challenged to continuously stay innovative. Literature on the incumbent’s curse
International Journal of Innovation Management
Vol. 18, No. 3 (June 2014) 1440007 (18 pages)
© Imperial College Press
DOI: 10.1142/S1363919614400076
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has revealed that incumbency can lead ?rms to assume a lower level of market
pressure which decreases innovation incentives. With this in mind, large compa-
nies apply corporate venturing to commercialise inventions by establishing new
internal or external units (Burgelman, 1983; Keil, 2004; Sharma and Chrisman,
1999). If the transfer of R&D results into the parental organisation is accompanied
by high internal barriers (Riege, 2007), then the creation of independent organi-
sational units can become an attractive alternative path. Companies can decide
whether to create own ventures from the inside out or to acquire external start-ups
from the outside in. In recent years, practitioners as well as scholars have identi?ed
organisations that consolidate both internal and external venturing activities and
called this phenomenon the “spin-along approach” (Rohrbeck et al., 2007).
Companies that follow a spin-along approach build on ideas or R&D results to
spin out new ventures as “innovation speedboats” to reduce barriers within the
internal innovation process. At the core of the spin-along approach is the main-
tenance of a relevant stake in the new ventures (e.g., via ownership of shares or
key assets) to ?exibly decide whether to spin them in or off in the future.
Ventures that internationalise early after inception are called “born globals”
(Knight and Cavusgil, 1996) or “international new ventures” (Oviatt and
McDougall, 1994). Callaway (2008) linked born global research with the concept
of internal corporate venturing (ICV) and presented “global corporate ventures” as
measures to quickly internationalise internal corporate ventures.
In this paper, we will highlight early internationalisation as a strategy of spin-
alongs to avoid internal and external barriers of domestic commercialisation. We
build our insights on an explorative multiple case study of ?ve ventures from the
spin-along program of Telekom Innovation Laboratories (T-Labs) that aimed for a
launch in non-domestic markets early after their inception and present potential to
become born globals. We will thereby link the spin-along approach with the
concept of international entrepreneurship. Our results suggest that if corporates do
not accept that their new ventures cannibalise own business models, engage in
business with competitors or may require key parental assets, early inter-
nationalisation can be an attractive new direction when spinning-out new ventures
successfully.
Related Literature
The spin-along approach
In 2007, Rohrbeck et al. ?rst introduced the spin-along approach as a novel
concept of corporate venturing. Previously, literature on corporate venturing
emphasised two major foci. While ICV deals with the creation of new business
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within an established company, external corporate venturing focusses on sourcing
ideas and concepts that are already in the market (Burgelman, 1983; Keil, 2004;
Sharma and Chrisman, 1999). Corporate venturing allows companies to create
new business, achieve growth, and diversify their product portfolio. Indirect
bene?ts can include the development of new competencies and technologies, the
promotion of an innovative corporate culture and the opportunity to learn through
exploration (Backholm, 1999).
Companies applying the spin-along approach source promising ideas or gen-
erate new technology via internal R&D and commercialise them as spin-outs in
separate new business organisations. A novel aspect of the concept is a close
linkage and monitoring of these spin-alongs after their market launch, followed by
a regular evaluation and decision to either reintegrate them, keep them at a dis-
tance or to reduce ownership of shares completely (Rohrbeck et al., 2009). In this
context it is important to differentiate the terms spin-off, spin-in and spin-out: Spin-
offs are completely separated from the corporate parent, although the parent might
be a partner or customer of the new company. Spin-ins are external ventures that
are acquired and integrated into an organisational structure. Spin-along ventures
are spun out (not “off ”) by their corporate parent in order to keep them at a
distance over a longer period of time (Rohrbeck et al., 2009).
While several case study-based publications have presented the relevance of the
spin-along approach in management practice (Mahdjour and Fischer, forthcoming;
Klarner et al., 2013; Michl et al., 2012; Rohrbeck et al., 2007, 2009), the number
of publications exploring and sharpening the concept to date is scarce (Michl et al.,
2012). Especially the detailed characteristics that distinguish the approach from
other existing theoretical concepts in the area of corporate venturing need to be
further investigated.
Born globals
Born globals or international new ventures are young companies that interna-
tionalise early after their inception (Knight and Cavusgil, 1996; Oviatt and
McDougall, 1994). They challenge the widely established notion that inter-
nationalisation measures are only relevant for large established ?rms that seek to
enhance their existing business with opportunities in international markets (Chang,
1995; Johanson and Vahlne, 1977; Vernon, 1966). Different de?nitions of the term
born global have been proposed in management literature (e.g., Knight and
Cavusgil, 1996; Knight, 1997; McDougall and Oviatt, 2000; Wright and Ricks,
1994; Wurster, 2011). By taking previous de?nitions into account, Wurster (2011)
proposed that “Born globals are companies that operate in international markets
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from the earliest days of their establishment and derive a substantial proportion of
their revenues from sales in these markets.” (Wurster, 2011:41). To identify born
globals, Holtbrügge and Enßlinger (2005) and Holtbrügge and Wessely (2007)
proposed the following criteria: First, a born global makes a ?rst attempt towards
internationalisation within the ?rst three years of its lifecycle and a second attempt
within the following three years, and second, the internationalisation activities take
place in ?ve or more countries, two different cultural clusters or two different
geographic regions. In order to enter new markets, born globals exploit various
opportunities to access networks, partners and build strategic alliances, e.g., via
licensing, joint ventures or franchising. Key success factors of born globals are an
entrepreneurial orientation, the ability to enter international markets early, to
protect intangible assets and to penetrate market niches (Wurster, 2011).
Global corporate ventures
The interest in linking international business research with entrepreneurship is
growing (McDougall and Oviatt, 2000; Young et al., 2003). Moreover inter-
nationalisation plays an increasingly important role in corporate entrepreneurship
(Hoskisson et al., 2011). Callaway (2008) linked the concept of born globals with
ICV. By presenting examples of ING Direct and HSBC Direct he showed how two
large ?nancial service companies were able to create international ventures via
internal corporate venturing. He introduced the concept of global corporate ven-
tures as vehicles to quickly bring new products to the international market place.
Innovations introduced by global corporate ventures are often niche products or
platform technologies which require a global reach to be successful. Internal
ventures may internationalise early, regardless of the degree of internationalisation
of the corporate parent and can therefore, become a vehicle to internationalise the
parent itself (Callaway, 2008). Furthermore, global corporate ventures face a trade-
off between independence and access to parental resources. The more indepen-
dently a venture acts, the lower is the likelihood of receiving proper access to
corporate resources and vice versa. However, more access to resources is linked
with stronger parental monitoring which hinders entrepreneurial freedom of the
venture (Callaway, 2008). This notion is in line with Burgelman’s (1984) as-
sessment that ICV top management “should learn to assess better the strategic
importance of ICV projects to corporate development and their degree of relat-
edness to core corporate capabilities” (p. 44). Additionally high-technology
ventures in the ICT industry can speci?cally bene?t from network effects. Global
corporate ventures that are able to scoop network effects and achieve technological
lock-ins have the chance to increase internationalisation speed (Callaway, 2008)
and thereby set de-facto standards (Wurster, 2011).
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Research questions
We follow Callaway’s (2008) suggestion to enhance research on global corporate
ventures and to extend it to sectors outside of the ?nancial services industry.
Moreover, we agree with the need to identify motivations for corporations to
internationalise their ventures. Additionally, Callaway underlines the need for
richer case studies to test his propositions and develop new ones.
As opposed to Callaway’s research in which he focusses on chances of early
internationalisation for internal corporate ventures, we aim to reveal challenges of
spin-alongs that trigger early internationalisation. By analysing motivations and
bene?ts of ?ve early internationalising spin-alongs in the ICT industry, the fol-
lowing research questions will be addressed:
(1) What were the motives of the T-Labs’ spin-along ventures to aim for early
internationalisation?
(2) How did early internationalisation help the spin-along ventures of T-Labs to
overcome internal barriers?
Methodology
Case studies are a suitable method to answer complex “how” and “why” questions
and can serve to explore “holistic and meaningful characteristics of real-life
events” (Yin, 2009:4). Furthermore, multiple case studies analyse and compare a
set of cases and can therefore set a suitable level of abstraction with greater
generalisability (Eisenhardt and Graebner, 2007). To answer our research ques-
tions we conducted a multiple case study with ?ve of T-Labs’ spin-along ventures.
Data collection
The sample for our analysis consists of ?ve ventures from T-Labs’ spin-along
program, which were under development in 2013, and aimed for early inter-
nationalisation.
Semi-structured qualitative expert interviews were conducted in 2013, with
eight members of the management staff of these spin-alongs (240 transcribed
pages) and with four T-Labs managers (115 transcribed pages). Being members of
the parental organisation ourselves, we had the chance to bene?t from practitioner
research (Jupp, 2006), and could include our observations of the spin-alongs’
activities over a 12-month period into our research project. To ensure objectivity
of this study, internal documents (e.g., guidance documents of the spin-along
program, target pictures, success metrics, and plan versus reality comparisons), as
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well as public documents (e.g., press releases and websites of the ventures) were
also collected and analysed.
Sample
The following paragraphs will provide a short overview of the ?ve spin-along
ventures. For the purpose of this publication the ventures’ names have been
changed to maintain con?dentiality and to provide a descriptive title.
IPcall offers an internet protocol-based communication solution. As IPcall pro-
vides a technology that has the potential to cannibalise the parental core business it
had to deal with low levels of trust internally.
SECphone delivers a security solution for mobile phones. A highly complex
architecture of the product requires close collaboration of several highly-specia-
lised individuals at the parent company. Since, thematically, SECphone was close
to the parental core business, a business unit of the parent became its ?rst customer.
Traf?cNET offers a technology that enhances transparency of network utilisation.
The underlying idea arose from the parent’s own needs which it could address with
the technology. Traf?cNET commercialises this technology and builds on highly
sensitive parental assets making a close collaboration with the parent necessary.
JinglePhone offers a mobile entertainment application which enables users to
enrich phone calls with speci?c sounds. The idea resulted from a prior ideation
project. Although it appeared trivial at ?rst, it soon became apparent that the
technological realisation is highly complex and requires access to sensitive pa-
rental assets.
InfoSense offers an analytics service based on complex data sources. Data is the
core parental asset which InfoSense requires to run its business. InfoSense is
challenged to ful?l strict legal requirements in the domestic market which limits its
business potential.
Data analysis
Literature recommends the construction of category systems to analyse and in-
terpret qualitative data. These categories can be built either deductively, based on
existing theory, or inductively, constructed from the collected data (Saunders
et al., 2007). To analyse our data, the following steps based on Eisenhardt (1989)
were taken:
(1) Following an inductive approach the transcribed interview data was reduced
by coding all instances that reveal contexts and motivations for early
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internationalisation. In order to manage the large data volume Atlas.ti was
used as coding software. In an iterative manner, the resulting categories were
regrouped to receive a comprehensive set of codes to categorise the identi?ed
motivations.
(2) From this ?rst analysis step we shaped hypotheses about our research object.
These were reviewed and validated in interviews with representatives of T-
Labs’ spin-along program.
(3) The resulting set of categories was reviewed with reference to similar and
diverging ?ndings in existing literature, until theoretical saturation was
achieved.
Early Internationalisation Motives of T-Labs’
Spin-Along Ventures
Spin-along executives are regularly confronted with challenges related to the fact
that they need to manage their venture’s positioning in the external market
(moving from being an internal corporate venture to becoming a spin-along
venture) and at the same time facing pressure to satisfy the goals and expectations
of the parent ?rm. The continuous endorsement of the parent can be crucial to
ensure the availability of suf?cient support and ?nancing. If a venture fails to
manage this balancing act well, con?icting goals and activities can cause an un-
timely termination of ventures, regardless of their chances for success. Addi-
tionally, parent organisations are not always able to provide all of their ventures
with the resources they need to run their business successfully, and detrimental
domestic market conditions can hinder the pro?table commercialisation of a
venture’s offer.
Many of T-Labs’ spin-alongs faced these challenges when developing their
business strategy. Our study focusses on the subset of spin-alongs that chose early
internationalisation as a proper balancing mode (Table 1).
Avoidance of cannibalisation
IPcall developed a technical solution that had the potential to cannibalise the
parental core business of traditional mobile telephony. When applying for internal
funding the spin-along faced much internal resistance. From the parent’s point of
view the offering was too close to the current business and therefore, too risky.
With this in mind, great chances were seen in commercialising IPcall’s technology
in markets in which the parent had only a weak footprint. This allowed building on
already established resources, e.g., sales channels, as well as partner and customer
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networks in the target market, without threatening existing core revenue sources.
At the point in time when our study was conducted, IPcall had not brought its
offering to the market yet. The consideration of an early internationalisation ap-
proach, however, offered the team a promising chance to avoid complete termi-
nation based on fears of cannibalisation, and allowed them to develop their
product further.
The case of IPcall shows that spin-alongs, which commercialise technology
from their parent’s own R&D portfolio, may develop products that are rather
strongly related to current parental products. This strong relatedness can raise
corporate fears of disrupting currently stable revenue sources. Early inter-
nationalisation can offer chances for launching spin-alongs successfully, without
cannibalising current parental business and can thereby, enable the parent to invest
in promising initiatives while securing current business.
Business with competitors
Traf?cNET initially started as an internal development project. It was based on
the parent’s own need of receiving high-quality information on its network utili-
sation. The team realised that the technology would also meet a strong demand in
the external market. However, other companies that had a demand for this solution
would be current competitors of the parent in the domestic market. In order to
avoid critical con?icts at the management level, which risk termination of the
venture, the team approached international customers who operated in markets
where the parent had no footprint with the affected product. Thereby, Traf?cNET
could offer its service to foreign competitors of the parent while avoiding internal
con?icts. If internationalisation would not have been identi?ed as a suitable
strategy, the venture might have never been started.
Table 1. Motives for early internationalisation.
Motives Effects Reference cases
Avoidance of cannibalisation . Reduction or avoidance of competition
with parental offerings in currently served
market
. IPcall
Business with competitors . Provision of offer to competitors in other
markets
. Traf?cNET
. SECphone
Access to assets . Faster utilisation of assets from
subsidiaries in other markets
. JinglePhone
Market selection . Selection of markets that provide bene?-
cial conditions for successful launch
. InfoSense
. Traf?cNET
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Furthermore, an early internationalisation can help to avoid parental lock-in
effects that are not favoured from a venture’s perspective. SECphone was one of
the ?rst ventures to be created as part of T-Labs’ spin-along program. It bene?tted
from the chance to work closely with a parental business unit that provided it with
its valuable distribution channels. The utilisation of these channels allowed
attracting large business customers, however, the close collaboration with the
internal partner also created barriers for SECphone. Since, the business unit as-
sumed an important role in the venture’s business activity and organisational
structure, it was able to block aspirations of approaching other external customers
in the domestic or international markets in which the business unit had an
established footprint. Due to the exclusive focus on the parent as an internal
customer, SECphone was not able to realise its whole business potential at the time
when our study was conducted. While the early af?liation with the parental
business unit helped to leverage SECphone’s business, an early internationalisation
could have taken place in parallel to avoid the creation of barriers and retain SEC-
phone’s independence. We believe that an expansion to other markets in which the
business unit currently has no footprint may still be a feasible approach at this point.
Spin-along ventures that originate from internal development projects may
solve problems with which the corporate parent is itself concerned. In this case, a
pilot implementation at the parent can help ventures to deliver a proof-of-concept
which may be a prerequisite for attracting prospective external customers. The
early integration with the parent can also create organisational linkages which
restrict the venture’s approach of other target customers. This can especially hold
true in cases where other potential customers to the solution could be current
competitors of the parent. An early internationalisation can circumvent perceived
threats of collaboration with competitors by serving these customers in markets
where the parent currently has no footprint.
To reach a relevant market size, it is not advisable for spin-alongs to exclusively
focus on internal customers but to also address external customers which in some
cases may be competitors of the parent. Early internationalisation in markets where
the parent organisation is not active is a valid approach to overcome resulting con-
?icts. However, in today’s globalised world, distances between separated markets
decrease constantly, which should be monitored and managed to avoid future con-
?icts. The European telecommunications industry is a rather speci?c example as it is
shaped by a rather constant number of network operators in each country.
Access to assets
JinglePhone commercialised a technology that required utilisation of one of the
parental core assets: the mobile telephony network. It soon became apparent to the
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team that the venture was too small to be granted the needed resources from the
parent. The team looked for other countries in which the parent was active, to
explore possibilities for partnerships with national network providers of the parent.
By intensifying contacts to an international subsidiary of the parent, JinglePhone
could gain access to the needed resources more easily. An adjustment of the
business model to the speci?cations of the target market (e.g., pricing) was needed
to create an offer that accounted for the local conditions.
In comparison to independent start-ups, corporate ventures can build on the
assets of a large company. Needed assets may be tangible and intangible prop-
erties, such as IT infrastructure, sales channels, partner and customer networks and
data, intellectual property rights, and also brand and market power. In a broader
sense parental assets are resources that are needed to ful?l current business ac-
tivity. Many of the T-Labs spin-alongs were built on parental assets, but in order to
ensure continuous operation, the parent needed to carefully weigh its decisions of
which ventures to grant its resources to and which not to. Despite their strategic
importance, spin-alongs were not always considered high-priority candidates for
receiving access to corporate assets. They needed to compete for resources with
internal units and projects that already had established revenue streams and were
therefore, often prioritised. In our research we found that international of?ces of
the corporate parent were in some cases more willing to share their assets with new
spin-along ventures. Due to the smaller size and stronger market orientation, these
subsidiaries have a stronger resemblance to the structures of new ventures, making
collaboration easier. Furthermore, spin-alongs can build on experiences of inter-
national of?ces and may in many cases be prioritised higher there.
To conclude, an early internationalisation can enable ventures to pro?t from
access to resources of parental subsidiaries in other markets. Even if the corporate
parent has no internationalisation experiences, building on other key partners’
assets can serve as a competitive strategy of born global spin-alongs.
Market selection
Technology-push oriented ventures may trade highly specialised solutions. In
many cases such specialised solutions are offered to narrow niche markets which
can have a very small volume on a national scale, but may be large internationally.
Traf?cNET delivered a solution to a problem which only participants of a very
narrow niche market had. In order to reach a relevant market size, the venture
considered an international market launch and engaged in an early exchange with
other market participants in international markets. An international market launch
could, therefore, extend the size of the addressed market and create a promising
outlook for future ?nancial returns. Early internationalisation was a rational
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decision for Traf?cNET, because it was the only way to commercialise the very
speci?c invention in a rather narrow but international niche market.
InfoSense offered a service that was dif?cult to deliver in the domestic market due
to strictly regulated legal conditions. The spin-along therefore, decided to launch a
limited version of its offer in the domestic market with the intention to soon
expand to an international market with less restrictive legal conditions. Inter-
nationalisation, thereby, provided a plan B for launching the product even though
it was not in line with domestic legal restrictions.
In the two above-mentioned cases, an early internationalisation strategy was
pursued because of the bene?cial conditions or higher level of opportunities in
foreign markets. Most of T-Labs’ spin-alongs originated from a technology-push
orientation, therefore, only fewwere based on a strong identi?ed market demand. In
fact, the ?t of developed technologies with domestic market conditions was ex-
plored at a rather late stage. The capability to identify and select the right market can
be vital for spin-along ventures. Foreign markets can serve as trial environments,
where a spin-along can learn and sharpen its product offering. Markets generally
differ from one another and products always need to be adapted to speci?c market
conditions, however, early internationalisation can improve chances for success and
enable a staged roll-out into different attractive markets. After all, the effort it takes
to alter their own business model to local needs may be much lower than the effort it
takes to overcome barriers which are in place in the domestic market.
Discussion
Positioning of T-Labs’ born global spin-along ventures
In this section we will analyse how the envisaged internationalisation strategies of
the ?ve aspiring born global spin-alongs differ from one another. Recalling the
de?nition of Wurster (2011), we identify born globals as ?rms that operate in-
ternationally from their earliest days on and generate a large share of their rev-
enues from these international markets.
In Fig. 1 we adapted the 4-?eld matrix of types of international new ventures by
Oviatt and McDougall (1994). It was modi?ed to re?ect the context of corporate
venturing and we positioned the ?ve ventures along the dimensions “number of
activities across countries” and “number of countries involved.” Since the ana-
lysed T-Labs ventures were only started in 2012, it is still open how they will
evolve and if they are really going to become born globals by executing the
internationalisation strategies that have been de?ned during their development.
Their positioning within the matrix is therefore, based on the strategies that their
leaders envisioned at the time when our research was conducted.
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Traf?cNET’s sophisticated product can be used by all kinds of telecommuni-
cation companies over the world. If the venture launches internationally, not only
sales activities take place on an international level but also customer speci?c
software implementation at the local telecommunication service provider’s infra-
structure. In our matrix, this places Traf?cNET in the category Global Venture.
According to Oviatt and McDougall (1994), ventures in this category have the
potential to derive “signi?cant competitive advantage from extensive coordination
among multiple organizational activities, the locations of which are geographi-
cally unlimited” (p. 59).
JinglePhone’s and InfoSense’s business models are also designed to conduct
most of their business activities across different countries, nevertheless, both
ventures’ geographical reach is focused on countries in which their corporate
parent has an already established footprint. This is based on the fact that both
ventures build strongly on parental assets which need to be in place continuously
in each country that they want to operate in. In the long run they may have the
opportunity to decouple their business from parental assets and open up for other
enabling assets. However, JinglePhone and InfoSense differ from each other in the
amount of cross country operating business activities.
JinglePhone is based on a technology that is not expected to need to adapt
extensively to speci?c local conditions in foreign markets (e.g., domestic legal
regulations or enabling technical infrastructures) and may therefore be classi?ed as
an Export/ Import Venture with only few activities dispersed across countries. A
long-term competitive advantage of international new ventures in this category
Fig. 1. Types of born global spin-along ventures (adapted from Oviatt and McDougall, 1994).
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depends on “(1) unusual abilities to spot and act on (. . .) emerging opportunities
(. . .), (2) knowledge of markets and suppliers, and (3) the ability to attract and
maintain a loyal network of business associates” (Oviatt and McDougall, 1994, :58).
Due to the different national regulations for procession and commerce with data
(the core business of InfoSense), we expect that InfoSense will need to adapt more
strongly to local conditions in foreign markets than JinglePhone does and may
therefore, need to conduct more activities in its target markets, classifying it as a
Geographically Focussed Venture. This type of international new ventures may
secure its advantages by “a close and exclusive network of alliances in the geo-
graphical area served” (Oviatt and McDougall, 1994:59).
IPcall and SECphone can operate in many different countries as they are not
restricted to countries in which their parent already has a footprint. As they are also
not expected to be required to adapt their activities strongly to local contexts in the
target markets, their activities in foreign markets may be limited (e.g., to sales
activities). IPcall and SECphone can be categorised as Multinational Traders,
who operate mostly from their domestic market and reach into many different
markets.
Re?ection on theory
Callaway (2008) proposes that if a corporate parent has strong international
experiences and a widely established footprint in global markets, global corporate
ventures may exploit this and internationalise faster than more independent and
decoupled ventures. Our analysis underlined that this does not always hold true.
Especially for spin-along ventures, a more nuanced viewpoint should be taken.
Spin-along ventures that commercialise parental assets and have the ability to
cannibalise the parental business should, under speci?c circumstances, avoid
commercialisation in parental markets. Although, a willingness to cannibalise has
been named in management literature as a key success factor for remaining in-
novative (Nijssen et al., 2005), its realisation in management practice is dif?cult
when the ful?lment of ongoing contracts and target agreements is at risk. This also
holds true when a venture’s business with parental competitors is necessary to
generate suf?cient revenue. Spin-along ventures need to ?nd the right (niche)
market to develop their products and to scale the business up from there. Com-
pared to Callaway’s ?ndings, our research does not primarily focus on faster
internationalisation, but gives antecedents for how a venture can be spun-out
despite internal barriers.
Furthermore, we agree with Callaway that the degree of a venture’s indepen-
dence is directly related to the support given by the parent, and that a high level of
support (e.g., granting access to resources) is coupled with more monitoring and
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guidance. When it comes to business with competitors it seems that only less
integrated ventures are likely to attract customers that are competitors of the
corporate parent. This is not only the case because customers may want more
independent spin-alongs, but also because the parental unit may prohibit business
with competitors if the level of integration, and by that, in?uencing power is high.
Nevertheless, we suggest that the importance of parental assets may decrease over
time. At the beginning, parental assets build a competitive advantage compared to
independent start-ups, however a born global spin-along should aim for building
own distinct assets and capabilities to increase independence from the corporate
parent in the long run. In this regard, the selection of the right market plays a key
role. Our ?ndings are in line with Jolly et al. (1992) by saying that for a few new
ventures internationalisation is the only way to start a business based on high
initial investments in R&D. Furthermore, we agree with scholars that new ven-
tures, which satisfy a need of a niche market need to internationalise early after
inception, because the domestic market is too small to gain signi?cant revenues
(Hordes et al., 1995). From the perspective of the spin-along approach, inter-
nationalisation measures do not primarily aim for returning R&D investments, but
rather for expanding into global niche markets to make commercialisation gen-
erally possible.
Teece (1986) claims that “in almost all cases, the successful commercialization
of an innovation requires that the know-how in question be utilized in conjunction
with other capabilities or assets” (p. 288). This means that the single invention is
not enough to successfully turn it into an innovation. For T-Labs’ spin-along
ventures complementary assets like the parental brand reputation, sales channels,
funding capacities, network embeddedness, and also knowledgeable and experi-
enced staff and shared services from the corporate parent may leverage their
success. But in general, how can a corporate judge the suitability of an invention to
be commercialised by a corporate venture? One explanation can be the above-
mentioned degree of dependence on complementary assets. One can assume (and
our study showed evidence for that), that if an innovation needs complementary
assets which (only) the corporate parent can offer, then a new venture has a
signi?cant competitive advantage in the market, in case it is granted exclusive
access to these assets.
Conclusion
With our research questions we sought to identify what motivations T-Labs’ spin-
alongs had to aim for early internationalisation and how this approach helped to
overcome internal barriers. By analysing the experiences of ?ve new ventures of
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T-Labs ventures, we could narrow down the core motivations for inter-
nationalisation and could identify early internationalisation as a strategy that can
circumvent speci?c challenges.
Four major motivations for early internationalisation could be identi?ed: (1) to
avoid termination based on the parent’s perceived threat of cannibalisation of
existing products, (2) to enable a venture’s collaboration with competitors, (3) to
overcome restrictions of parental assets in the domestic market, and (4) to address
markets that offer greater chances for success than the domestic market does. We
thereby identify that internationalisation can serve as
(1) a measure taken to avoid or reduce con?icts with the corporate parent,
(2) an approach to increase likelihood of access to parental assets by sourcing
from international subsidiaries, and
(3) a measure to select and address those markets in which the offer had the
greatest chances to succeed.
Our research aims to enhance literature on the spin-along approach and pro-
vides the research community with cases that serve to further analyse the concept
and its challenges. Moreover, it highlights the legacy of the spin-along approach as
a distinctive approach of corporate venturing. By linking the spin-along approach
with born global theory, potentials could be identi?ed that current literature has not
yet focussed on.
Limitations and future research
Our study focussed on the bene?ts that early internationalisation offers to corpo-
rate spin-alongs of T-Labs, re?ecting cases in the ICT industry. The ICT industry,
and especially the telecommunication service provider market, is exceptional.
Additionally, telecommunication providers, have a rather constant footprint in
several markets. To build or buy a telecommunication network infrastructure or to
acquire a whole operator, requires high investments and takes place only occa-
sionally. Other industries might face much more dynamic international activities
and case studies in those ?elds may show other characteristics.
Moreover, our study is limited in a sense that it incorporates the ?ndings of only
a small number of cases, however we aimed to show deep insights from multiple
cases and did not aim for generalisable ?ndings. Last, it should be noted that the
T-Labs spin-along program was still at an early stage of its implementation at the
time when this study was conducted. Therefore, it is still too early to draw
conclusions from the effects of the early internationalisation aspirations and the
realisation of respective strategies in the long run. Future research should there-
fore, include long-term effects of early internationalisation on spin-alongs.
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Our study aimed to broaden the scope of the spin-along approach by linking it
with another theoretical concept — born globals. Future studies may aim at
deepening the spin-along approach by explaining its foundation with the help of
theories like resource-based view or transaction cost economics. Mahdjour and
Fischer (forthcoming) took a ?rst step in that direction.
Acknowledgement
We would like to thank all of our interviewees who took the time and effort to
provide us with the information that the ?ndings in this paper are based on. Also
we would like to thank our reviewers for the very helpful feedback that was
incorporated to improve this publication.
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doc_745224037.pdf
With this detailed description about international corporate entrepreneurship with born global spin along ventures.
INTERNATIONAL CORPORATE
ENTREPRENEURSHIP WITH BORN GLOBAL
SPIN-ALONG VENTURES — A CROSS-CASE ANALYSIS
OF TELEKOM INNOVATION LABORATORIES’
VENTURE PORTFOLIO
SARAH MAHDJOUR
*
and SEBASTIAN FISCHER
†
Telekom Innovation Laboratories
Ernst-Reuter-Platz 7, 10587 Berlin, Germany
and
Technische Universit € at Berlin
Straße des 17. Juni 135, 10623 Berlin, Germany
*
[email protected]
†
[email protected]
Published 28 April 2014
This study investigates a special kind of corporate ventures, so called spin-along ventures,
and their motivations to internationalise early. Insights are built from a multiple case study
approach, investigating the spin-along program of Telekom Innovation Laboratories
(T-Labs). Our results show that early internationalisation can avoid or reduce challenges
that spin-alongs face when entering the domestic market. Four major motivations for early
internationalisation could be identi?ed: (1) avoid termination based on the parent’s per-
ceived threat of cannibalisation of existing products, (2) enable a venture’s collaboration
with competitors, (3) overcome restrictions of parental assets in the domestic market, and
(4) address markets that offer greater chances for success than the domestic market does.
Based on our ?ndings we derive concrete implications for practitioners and academics in
the ?eld of innovation management.
Keywords: Born globals; corporate venturing; spin-along; case study; spin-out; interna-
tional entrepreneurship; Telekom Innovation Laboratories.
Introduction
In order to secure their long-term competitiveness, established companies are
challenged to continuously stay innovative. Literature on the incumbent’s curse
International Journal of Innovation Management
Vol. 18, No. 3 (June 2014) 1440007 (18 pages)
© Imperial College Press
DOI: 10.1142/S1363919614400076
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has revealed that incumbency can lead ?rms to assume a lower level of market
pressure which decreases innovation incentives. With this in mind, large compa-
nies apply corporate venturing to commercialise inventions by establishing new
internal or external units (Burgelman, 1983; Keil, 2004; Sharma and Chrisman,
1999). If the transfer of R&D results into the parental organisation is accompanied
by high internal barriers (Riege, 2007), then the creation of independent organi-
sational units can become an attractive alternative path. Companies can decide
whether to create own ventures from the inside out or to acquire external start-ups
from the outside in. In recent years, practitioners as well as scholars have identi?ed
organisations that consolidate both internal and external venturing activities and
called this phenomenon the “spin-along approach” (Rohrbeck et al., 2007).
Companies that follow a spin-along approach build on ideas or R&D results to
spin out new ventures as “innovation speedboats” to reduce barriers within the
internal innovation process. At the core of the spin-along approach is the main-
tenance of a relevant stake in the new ventures (e.g., via ownership of shares or
key assets) to ?exibly decide whether to spin them in or off in the future.
Ventures that internationalise early after inception are called “born globals”
(Knight and Cavusgil, 1996) or “international new ventures” (Oviatt and
McDougall, 1994). Callaway (2008) linked born global research with the concept
of internal corporate venturing (ICV) and presented “global corporate ventures” as
measures to quickly internationalise internal corporate ventures.
In this paper, we will highlight early internationalisation as a strategy of spin-
alongs to avoid internal and external barriers of domestic commercialisation. We
build our insights on an explorative multiple case study of ?ve ventures from the
spin-along program of Telekom Innovation Laboratories (T-Labs) that aimed for a
launch in non-domestic markets early after their inception and present potential to
become born globals. We will thereby link the spin-along approach with the
concept of international entrepreneurship. Our results suggest that if corporates do
not accept that their new ventures cannibalise own business models, engage in
business with competitors or may require key parental assets, early inter-
nationalisation can be an attractive new direction when spinning-out new ventures
successfully.
Related Literature
The spin-along approach
In 2007, Rohrbeck et al. ?rst introduced the spin-along approach as a novel
concept of corporate venturing. Previously, literature on corporate venturing
emphasised two major foci. While ICV deals with the creation of new business
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within an established company, external corporate venturing focusses on sourcing
ideas and concepts that are already in the market (Burgelman, 1983; Keil, 2004;
Sharma and Chrisman, 1999). Corporate venturing allows companies to create
new business, achieve growth, and diversify their product portfolio. Indirect
bene?ts can include the development of new competencies and technologies, the
promotion of an innovative corporate culture and the opportunity to learn through
exploration (Backholm, 1999).
Companies applying the spin-along approach source promising ideas or gen-
erate new technology via internal R&D and commercialise them as spin-outs in
separate new business organisations. A novel aspect of the concept is a close
linkage and monitoring of these spin-alongs after their market launch, followed by
a regular evaluation and decision to either reintegrate them, keep them at a dis-
tance or to reduce ownership of shares completely (Rohrbeck et al., 2009). In this
context it is important to differentiate the terms spin-off, spin-in and spin-out: Spin-
offs are completely separated from the corporate parent, although the parent might
be a partner or customer of the new company. Spin-ins are external ventures that
are acquired and integrated into an organisational structure. Spin-along ventures
are spun out (not “off ”) by their corporate parent in order to keep them at a
distance over a longer period of time (Rohrbeck et al., 2009).
While several case study-based publications have presented the relevance of the
spin-along approach in management practice (Mahdjour and Fischer, forthcoming;
Klarner et al., 2013; Michl et al., 2012; Rohrbeck et al., 2007, 2009), the number
of publications exploring and sharpening the concept to date is scarce (Michl et al.,
2012). Especially the detailed characteristics that distinguish the approach from
other existing theoretical concepts in the area of corporate venturing need to be
further investigated.
Born globals
Born globals or international new ventures are young companies that interna-
tionalise early after their inception (Knight and Cavusgil, 1996; Oviatt and
McDougall, 1994). They challenge the widely established notion that inter-
nationalisation measures are only relevant for large established ?rms that seek to
enhance their existing business with opportunities in international markets (Chang,
1995; Johanson and Vahlne, 1977; Vernon, 1966). Different de?nitions of the term
born global have been proposed in management literature (e.g., Knight and
Cavusgil, 1996; Knight, 1997; McDougall and Oviatt, 2000; Wright and Ricks,
1994; Wurster, 2011). By taking previous de?nitions into account, Wurster (2011)
proposed that “Born globals are companies that operate in international markets
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from the earliest days of their establishment and derive a substantial proportion of
their revenues from sales in these markets.” (Wurster, 2011:41). To identify born
globals, Holtbrügge and Enßlinger (2005) and Holtbrügge and Wessely (2007)
proposed the following criteria: First, a born global makes a ?rst attempt towards
internationalisation within the ?rst three years of its lifecycle and a second attempt
within the following three years, and second, the internationalisation activities take
place in ?ve or more countries, two different cultural clusters or two different
geographic regions. In order to enter new markets, born globals exploit various
opportunities to access networks, partners and build strategic alliances, e.g., via
licensing, joint ventures or franchising. Key success factors of born globals are an
entrepreneurial orientation, the ability to enter international markets early, to
protect intangible assets and to penetrate market niches (Wurster, 2011).
Global corporate ventures
The interest in linking international business research with entrepreneurship is
growing (McDougall and Oviatt, 2000; Young et al., 2003). Moreover inter-
nationalisation plays an increasingly important role in corporate entrepreneurship
(Hoskisson et al., 2011). Callaway (2008) linked the concept of born globals with
ICV. By presenting examples of ING Direct and HSBC Direct he showed how two
large ?nancial service companies were able to create international ventures via
internal corporate venturing. He introduced the concept of global corporate ven-
tures as vehicles to quickly bring new products to the international market place.
Innovations introduced by global corporate ventures are often niche products or
platform technologies which require a global reach to be successful. Internal
ventures may internationalise early, regardless of the degree of internationalisation
of the corporate parent and can therefore, become a vehicle to internationalise the
parent itself (Callaway, 2008). Furthermore, global corporate ventures face a trade-
off between independence and access to parental resources. The more indepen-
dently a venture acts, the lower is the likelihood of receiving proper access to
corporate resources and vice versa. However, more access to resources is linked
with stronger parental monitoring which hinders entrepreneurial freedom of the
venture (Callaway, 2008). This notion is in line with Burgelman’s (1984) as-
sessment that ICV top management “should learn to assess better the strategic
importance of ICV projects to corporate development and their degree of relat-
edness to core corporate capabilities” (p. 44). Additionally high-technology
ventures in the ICT industry can speci?cally bene?t from network effects. Global
corporate ventures that are able to scoop network effects and achieve technological
lock-ins have the chance to increase internationalisation speed (Callaway, 2008)
and thereby set de-facto standards (Wurster, 2011).
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Research questions
We follow Callaway’s (2008) suggestion to enhance research on global corporate
ventures and to extend it to sectors outside of the ?nancial services industry.
Moreover, we agree with the need to identify motivations for corporations to
internationalise their ventures. Additionally, Callaway underlines the need for
richer case studies to test his propositions and develop new ones.
As opposed to Callaway’s research in which he focusses on chances of early
internationalisation for internal corporate ventures, we aim to reveal challenges of
spin-alongs that trigger early internationalisation. By analysing motivations and
bene?ts of ?ve early internationalising spin-alongs in the ICT industry, the fol-
lowing research questions will be addressed:
(1) What were the motives of the T-Labs’ spin-along ventures to aim for early
internationalisation?
(2) How did early internationalisation help the spin-along ventures of T-Labs to
overcome internal barriers?
Methodology
Case studies are a suitable method to answer complex “how” and “why” questions
and can serve to explore “holistic and meaningful characteristics of real-life
events” (Yin, 2009:4). Furthermore, multiple case studies analyse and compare a
set of cases and can therefore set a suitable level of abstraction with greater
generalisability (Eisenhardt and Graebner, 2007). To answer our research ques-
tions we conducted a multiple case study with ?ve of T-Labs’ spin-along ventures.
Data collection
The sample for our analysis consists of ?ve ventures from T-Labs’ spin-along
program, which were under development in 2013, and aimed for early inter-
nationalisation.
Semi-structured qualitative expert interviews were conducted in 2013, with
eight members of the management staff of these spin-alongs (240 transcribed
pages) and with four T-Labs managers (115 transcribed pages). Being members of
the parental organisation ourselves, we had the chance to bene?t from practitioner
research (Jupp, 2006), and could include our observations of the spin-alongs’
activities over a 12-month period into our research project. To ensure objectivity
of this study, internal documents (e.g., guidance documents of the spin-along
program, target pictures, success metrics, and plan versus reality comparisons), as
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well as public documents (e.g., press releases and websites of the ventures) were
also collected and analysed.
Sample
The following paragraphs will provide a short overview of the ?ve spin-along
ventures. For the purpose of this publication the ventures’ names have been
changed to maintain con?dentiality and to provide a descriptive title.
IPcall offers an internet protocol-based communication solution. As IPcall pro-
vides a technology that has the potential to cannibalise the parental core business it
had to deal with low levels of trust internally.
SECphone delivers a security solution for mobile phones. A highly complex
architecture of the product requires close collaboration of several highly-specia-
lised individuals at the parent company. Since, thematically, SECphone was close
to the parental core business, a business unit of the parent became its ?rst customer.
Traf?cNET offers a technology that enhances transparency of network utilisation.
The underlying idea arose from the parent’s own needs which it could address with
the technology. Traf?cNET commercialises this technology and builds on highly
sensitive parental assets making a close collaboration with the parent necessary.
JinglePhone offers a mobile entertainment application which enables users to
enrich phone calls with speci?c sounds. The idea resulted from a prior ideation
project. Although it appeared trivial at ?rst, it soon became apparent that the
technological realisation is highly complex and requires access to sensitive pa-
rental assets.
InfoSense offers an analytics service based on complex data sources. Data is the
core parental asset which InfoSense requires to run its business. InfoSense is
challenged to ful?l strict legal requirements in the domestic market which limits its
business potential.
Data analysis
Literature recommends the construction of category systems to analyse and in-
terpret qualitative data. These categories can be built either deductively, based on
existing theory, or inductively, constructed from the collected data (Saunders
et al., 2007). To analyse our data, the following steps based on Eisenhardt (1989)
were taken:
(1) Following an inductive approach the transcribed interview data was reduced
by coding all instances that reveal contexts and motivations for early
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internationalisation. In order to manage the large data volume Atlas.ti was
used as coding software. In an iterative manner, the resulting categories were
regrouped to receive a comprehensive set of codes to categorise the identi?ed
motivations.
(2) From this ?rst analysis step we shaped hypotheses about our research object.
These were reviewed and validated in interviews with representatives of T-
Labs’ spin-along program.
(3) The resulting set of categories was reviewed with reference to similar and
diverging ?ndings in existing literature, until theoretical saturation was
achieved.
Early Internationalisation Motives of T-Labs’
Spin-Along Ventures
Spin-along executives are regularly confronted with challenges related to the fact
that they need to manage their venture’s positioning in the external market
(moving from being an internal corporate venture to becoming a spin-along
venture) and at the same time facing pressure to satisfy the goals and expectations
of the parent ?rm. The continuous endorsement of the parent can be crucial to
ensure the availability of suf?cient support and ?nancing. If a venture fails to
manage this balancing act well, con?icting goals and activities can cause an un-
timely termination of ventures, regardless of their chances for success. Addi-
tionally, parent organisations are not always able to provide all of their ventures
with the resources they need to run their business successfully, and detrimental
domestic market conditions can hinder the pro?table commercialisation of a
venture’s offer.
Many of T-Labs’ spin-alongs faced these challenges when developing their
business strategy. Our study focusses on the subset of spin-alongs that chose early
internationalisation as a proper balancing mode (Table 1).
Avoidance of cannibalisation
IPcall developed a technical solution that had the potential to cannibalise the
parental core business of traditional mobile telephony. When applying for internal
funding the spin-along faced much internal resistance. From the parent’s point of
view the offering was too close to the current business and therefore, too risky.
With this in mind, great chances were seen in commercialising IPcall’s technology
in markets in which the parent had only a weak footprint. This allowed building on
already established resources, e.g., sales channels, as well as partner and customer
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networks in the target market, without threatening existing core revenue sources.
At the point in time when our study was conducted, IPcall had not brought its
offering to the market yet. The consideration of an early internationalisation ap-
proach, however, offered the team a promising chance to avoid complete termi-
nation based on fears of cannibalisation, and allowed them to develop their
product further.
The case of IPcall shows that spin-alongs, which commercialise technology
from their parent’s own R&D portfolio, may develop products that are rather
strongly related to current parental products. This strong relatedness can raise
corporate fears of disrupting currently stable revenue sources. Early inter-
nationalisation can offer chances for launching spin-alongs successfully, without
cannibalising current parental business and can thereby, enable the parent to invest
in promising initiatives while securing current business.
Business with competitors
Traf?cNET initially started as an internal development project. It was based on
the parent’s own need of receiving high-quality information on its network utili-
sation. The team realised that the technology would also meet a strong demand in
the external market. However, other companies that had a demand for this solution
would be current competitors of the parent in the domestic market. In order to
avoid critical con?icts at the management level, which risk termination of the
venture, the team approached international customers who operated in markets
where the parent had no footprint with the affected product. Thereby, Traf?cNET
could offer its service to foreign competitors of the parent while avoiding internal
con?icts. If internationalisation would not have been identi?ed as a suitable
strategy, the venture might have never been started.
Table 1. Motives for early internationalisation.
Motives Effects Reference cases
Avoidance of cannibalisation . Reduction or avoidance of competition
with parental offerings in currently served
market
. IPcall
Business with competitors . Provision of offer to competitors in other
markets
. Traf?cNET
. SECphone
Access to assets . Faster utilisation of assets from
subsidiaries in other markets
. JinglePhone
Market selection . Selection of markets that provide bene?-
cial conditions for successful launch
. InfoSense
. Traf?cNET
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Furthermore, an early internationalisation can help to avoid parental lock-in
effects that are not favoured from a venture’s perspective. SECphone was one of
the ?rst ventures to be created as part of T-Labs’ spin-along program. It bene?tted
from the chance to work closely with a parental business unit that provided it with
its valuable distribution channels. The utilisation of these channels allowed
attracting large business customers, however, the close collaboration with the
internal partner also created barriers for SECphone. Since, the business unit as-
sumed an important role in the venture’s business activity and organisational
structure, it was able to block aspirations of approaching other external customers
in the domestic or international markets in which the business unit had an
established footprint. Due to the exclusive focus on the parent as an internal
customer, SECphone was not able to realise its whole business potential at the time
when our study was conducted. While the early af?liation with the parental
business unit helped to leverage SECphone’s business, an early internationalisation
could have taken place in parallel to avoid the creation of barriers and retain SEC-
phone’s independence. We believe that an expansion to other markets in which the
business unit currently has no footprint may still be a feasible approach at this point.
Spin-along ventures that originate from internal development projects may
solve problems with which the corporate parent is itself concerned. In this case, a
pilot implementation at the parent can help ventures to deliver a proof-of-concept
which may be a prerequisite for attracting prospective external customers. The
early integration with the parent can also create organisational linkages which
restrict the venture’s approach of other target customers. This can especially hold
true in cases where other potential customers to the solution could be current
competitors of the parent. An early internationalisation can circumvent perceived
threats of collaboration with competitors by serving these customers in markets
where the parent currently has no footprint.
To reach a relevant market size, it is not advisable for spin-alongs to exclusively
focus on internal customers but to also address external customers which in some
cases may be competitors of the parent. Early internationalisation in markets where
the parent organisation is not active is a valid approach to overcome resulting con-
?icts. However, in today’s globalised world, distances between separated markets
decrease constantly, which should be monitored and managed to avoid future con-
?icts. The European telecommunications industry is a rather speci?c example as it is
shaped by a rather constant number of network operators in each country.
Access to assets
JinglePhone commercialised a technology that required utilisation of one of the
parental core assets: the mobile telephony network. It soon became apparent to the
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team that the venture was too small to be granted the needed resources from the
parent. The team looked for other countries in which the parent was active, to
explore possibilities for partnerships with national network providers of the parent.
By intensifying contacts to an international subsidiary of the parent, JinglePhone
could gain access to the needed resources more easily. An adjustment of the
business model to the speci?cations of the target market (e.g., pricing) was needed
to create an offer that accounted for the local conditions.
In comparison to independent start-ups, corporate ventures can build on the
assets of a large company. Needed assets may be tangible and intangible prop-
erties, such as IT infrastructure, sales channels, partner and customer networks and
data, intellectual property rights, and also brand and market power. In a broader
sense parental assets are resources that are needed to ful?l current business ac-
tivity. Many of the T-Labs spin-alongs were built on parental assets, but in order to
ensure continuous operation, the parent needed to carefully weigh its decisions of
which ventures to grant its resources to and which not to. Despite their strategic
importance, spin-alongs were not always considered high-priority candidates for
receiving access to corporate assets. They needed to compete for resources with
internal units and projects that already had established revenue streams and were
therefore, often prioritised. In our research we found that international of?ces of
the corporate parent were in some cases more willing to share their assets with new
spin-along ventures. Due to the smaller size and stronger market orientation, these
subsidiaries have a stronger resemblance to the structures of new ventures, making
collaboration easier. Furthermore, spin-alongs can build on experiences of inter-
national of?ces and may in many cases be prioritised higher there.
To conclude, an early internationalisation can enable ventures to pro?t from
access to resources of parental subsidiaries in other markets. Even if the corporate
parent has no internationalisation experiences, building on other key partners’
assets can serve as a competitive strategy of born global spin-alongs.
Market selection
Technology-push oriented ventures may trade highly specialised solutions. In
many cases such specialised solutions are offered to narrow niche markets which
can have a very small volume on a national scale, but may be large internationally.
Traf?cNET delivered a solution to a problem which only participants of a very
narrow niche market had. In order to reach a relevant market size, the venture
considered an international market launch and engaged in an early exchange with
other market participants in international markets. An international market launch
could, therefore, extend the size of the addressed market and create a promising
outlook for future ?nancial returns. Early internationalisation was a rational
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decision for Traf?cNET, because it was the only way to commercialise the very
speci?c invention in a rather narrow but international niche market.
InfoSense offered a service that was dif?cult to deliver in the domestic market due
to strictly regulated legal conditions. The spin-along therefore, decided to launch a
limited version of its offer in the domestic market with the intention to soon
expand to an international market with less restrictive legal conditions. Inter-
nationalisation, thereby, provided a plan B for launching the product even though
it was not in line with domestic legal restrictions.
In the two above-mentioned cases, an early internationalisation strategy was
pursued because of the bene?cial conditions or higher level of opportunities in
foreign markets. Most of T-Labs’ spin-alongs originated from a technology-push
orientation, therefore, only fewwere based on a strong identi?ed market demand. In
fact, the ?t of developed technologies with domestic market conditions was ex-
plored at a rather late stage. The capability to identify and select the right market can
be vital for spin-along ventures. Foreign markets can serve as trial environments,
where a spin-along can learn and sharpen its product offering. Markets generally
differ from one another and products always need to be adapted to speci?c market
conditions, however, early internationalisation can improve chances for success and
enable a staged roll-out into different attractive markets. After all, the effort it takes
to alter their own business model to local needs may be much lower than the effort it
takes to overcome barriers which are in place in the domestic market.
Discussion
Positioning of T-Labs’ born global spin-along ventures
In this section we will analyse how the envisaged internationalisation strategies of
the ?ve aspiring born global spin-alongs differ from one another. Recalling the
de?nition of Wurster (2011), we identify born globals as ?rms that operate in-
ternationally from their earliest days on and generate a large share of their rev-
enues from these international markets.
In Fig. 1 we adapted the 4-?eld matrix of types of international new ventures by
Oviatt and McDougall (1994). It was modi?ed to re?ect the context of corporate
venturing and we positioned the ?ve ventures along the dimensions “number of
activities across countries” and “number of countries involved.” Since the ana-
lysed T-Labs ventures were only started in 2012, it is still open how they will
evolve and if they are really going to become born globals by executing the
internationalisation strategies that have been de?ned during their development.
Their positioning within the matrix is therefore, based on the strategies that their
leaders envisioned at the time when our research was conducted.
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Traf?cNET’s sophisticated product can be used by all kinds of telecommuni-
cation companies over the world. If the venture launches internationally, not only
sales activities take place on an international level but also customer speci?c
software implementation at the local telecommunication service provider’s infra-
structure. In our matrix, this places Traf?cNET in the category Global Venture.
According to Oviatt and McDougall (1994), ventures in this category have the
potential to derive “signi?cant competitive advantage from extensive coordination
among multiple organizational activities, the locations of which are geographi-
cally unlimited” (p. 59).
JinglePhone’s and InfoSense’s business models are also designed to conduct
most of their business activities across different countries, nevertheless, both
ventures’ geographical reach is focused on countries in which their corporate
parent has an already established footprint. This is based on the fact that both
ventures build strongly on parental assets which need to be in place continuously
in each country that they want to operate in. In the long run they may have the
opportunity to decouple their business from parental assets and open up for other
enabling assets. However, JinglePhone and InfoSense differ from each other in the
amount of cross country operating business activities.
JinglePhone is based on a technology that is not expected to need to adapt
extensively to speci?c local conditions in foreign markets (e.g., domestic legal
regulations or enabling technical infrastructures) and may therefore be classi?ed as
an Export/ Import Venture with only few activities dispersed across countries. A
long-term competitive advantage of international new ventures in this category
Fig. 1. Types of born global spin-along ventures (adapted from Oviatt and McDougall, 1994).
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depends on “(1) unusual abilities to spot and act on (. . .) emerging opportunities
(. . .), (2) knowledge of markets and suppliers, and (3) the ability to attract and
maintain a loyal network of business associates” (Oviatt and McDougall, 1994, :58).
Due to the different national regulations for procession and commerce with data
(the core business of InfoSense), we expect that InfoSense will need to adapt more
strongly to local conditions in foreign markets than JinglePhone does and may
therefore, need to conduct more activities in its target markets, classifying it as a
Geographically Focussed Venture. This type of international new ventures may
secure its advantages by “a close and exclusive network of alliances in the geo-
graphical area served” (Oviatt and McDougall, 1994:59).
IPcall and SECphone can operate in many different countries as they are not
restricted to countries in which their parent already has a footprint. As they are also
not expected to be required to adapt their activities strongly to local contexts in the
target markets, their activities in foreign markets may be limited (e.g., to sales
activities). IPcall and SECphone can be categorised as Multinational Traders,
who operate mostly from their domestic market and reach into many different
markets.
Re?ection on theory
Callaway (2008) proposes that if a corporate parent has strong international
experiences and a widely established footprint in global markets, global corporate
ventures may exploit this and internationalise faster than more independent and
decoupled ventures. Our analysis underlined that this does not always hold true.
Especially for spin-along ventures, a more nuanced viewpoint should be taken.
Spin-along ventures that commercialise parental assets and have the ability to
cannibalise the parental business should, under speci?c circumstances, avoid
commercialisation in parental markets. Although, a willingness to cannibalise has
been named in management literature as a key success factor for remaining in-
novative (Nijssen et al., 2005), its realisation in management practice is dif?cult
when the ful?lment of ongoing contracts and target agreements is at risk. This also
holds true when a venture’s business with parental competitors is necessary to
generate suf?cient revenue. Spin-along ventures need to ?nd the right (niche)
market to develop their products and to scale the business up from there. Com-
pared to Callaway’s ?ndings, our research does not primarily focus on faster
internationalisation, but gives antecedents for how a venture can be spun-out
despite internal barriers.
Furthermore, we agree with Callaway that the degree of a venture’s indepen-
dence is directly related to the support given by the parent, and that a high level of
support (e.g., granting access to resources) is coupled with more monitoring and
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guidance. When it comes to business with competitors it seems that only less
integrated ventures are likely to attract customers that are competitors of the
corporate parent. This is not only the case because customers may want more
independent spin-alongs, but also because the parental unit may prohibit business
with competitors if the level of integration, and by that, in?uencing power is high.
Nevertheless, we suggest that the importance of parental assets may decrease over
time. At the beginning, parental assets build a competitive advantage compared to
independent start-ups, however a born global spin-along should aim for building
own distinct assets and capabilities to increase independence from the corporate
parent in the long run. In this regard, the selection of the right market plays a key
role. Our ?ndings are in line with Jolly et al. (1992) by saying that for a few new
ventures internationalisation is the only way to start a business based on high
initial investments in R&D. Furthermore, we agree with scholars that new ven-
tures, which satisfy a need of a niche market need to internationalise early after
inception, because the domestic market is too small to gain signi?cant revenues
(Hordes et al., 1995). From the perspective of the spin-along approach, inter-
nationalisation measures do not primarily aim for returning R&D investments, but
rather for expanding into global niche markets to make commercialisation gen-
erally possible.
Teece (1986) claims that “in almost all cases, the successful commercialization
of an innovation requires that the know-how in question be utilized in conjunction
with other capabilities or assets” (p. 288). This means that the single invention is
not enough to successfully turn it into an innovation. For T-Labs’ spin-along
ventures complementary assets like the parental brand reputation, sales channels,
funding capacities, network embeddedness, and also knowledgeable and experi-
enced staff and shared services from the corporate parent may leverage their
success. But in general, how can a corporate judge the suitability of an invention to
be commercialised by a corporate venture? One explanation can be the above-
mentioned degree of dependence on complementary assets. One can assume (and
our study showed evidence for that), that if an innovation needs complementary
assets which (only) the corporate parent can offer, then a new venture has a
signi?cant competitive advantage in the market, in case it is granted exclusive
access to these assets.
Conclusion
With our research questions we sought to identify what motivations T-Labs’ spin-
alongs had to aim for early internationalisation and how this approach helped to
overcome internal barriers. By analysing the experiences of ?ve new ventures of
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T-Labs ventures, we could narrow down the core motivations for inter-
nationalisation and could identify early internationalisation as a strategy that can
circumvent speci?c challenges.
Four major motivations for early internationalisation could be identi?ed: (1) to
avoid termination based on the parent’s perceived threat of cannibalisation of
existing products, (2) to enable a venture’s collaboration with competitors, (3) to
overcome restrictions of parental assets in the domestic market, and (4) to address
markets that offer greater chances for success than the domestic market does. We
thereby identify that internationalisation can serve as
(1) a measure taken to avoid or reduce con?icts with the corporate parent,
(2) an approach to increase likelihood of access to parental assets by sourcing
from international subsidiaries, and
(3) a measure to select and address those markets in which the offer had the
greatest chances to succeed.
Our research aims to enhance literature on the spin-along approach and pro-
vides the research community with cases that serve to further analyse the concept
and its challenges. Moreover, it highlights the legacy of the spin-along approach as
a distinctive approach of corporate venturing. By linking the spin-along approach
with born global theory, potentials could be identi?ed that current literature has not
yet focussed on.
Limitations and future research
Our study focussed on the bene?ts that early internationalisation offers to corpo-
rate spin-alongs of T-Labs, re?ecting cases in the ICT industry. The ICT industry,
and especially the telecommunication service provider market, is exceptional.
Additionally, telecommunication providers, have a rather constant footprint in
several markets. To build or buy a telecommunication network infrastructure or to
acquire a whole operator, requires high investments and takes place only occa-
sionally. Other industries might face much more dynamic international activities
and case studies in those ?elds may show other characteristics.
Moreover, our study is limited in a sense that it incorporates the ?ndings of only
a small number of cases, however we aimed to show deep insights from multiple
cases and did not aim for generalisable ?ndings. Last, it should be noted that the
T-Labs spin-along program was still at an early stage of its implementation at the
time when this study was conducted. Therefore, it is still too early to draw
conclusions from the effects of the early internationalisation aspirations and the
realisation of respective strategies in the long run. Future research should there-
fore, include long-term effects of early internationalisation on spin-alongs.
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Our study aimed to broaden the scope of the spin-along approach by linking it
with another theoretical concept — born globals. Future studies may aim at
deepening the spin-along approach by explaining its foundation with the help of
theories like resource-based view or transaction cost economics. Mahdjour and
Fischer (forthcoming) took a ?rst step in that direction.
Acknowledgement
We would like to thank all of our interviewees who took the time and effort to
provide us with the information that the ?ndings in this paper are based on. Also
we would like to thank our reviewers for the very helpful feedback that was
incorporated to improve this publication.
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