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Int. J. Knowledge Management Studies, Vol. 1, Nos. 3/4, 2007 497
Copyright © 2007 Inderscience Enterprises Ltd.
Knowledge and networks in the global startup
process
P. Danskin Englis*
Campbell School of Business,
Berry College and
Dutch Institute for Study of Knowledge Intensive
Entrepreneurship (Nikos),
The University of Twente,
Netherlands
Fax: (706)238-5843
E-mail: penglis@berry.edu
*Corresponding author
Ingrid Wakkee
Department of Public Administration and Organisation Science,
Faculty of Social Sciences,
Vrije Universiteit,
1081 HV Amsterdam,
The Netherlands
Fax: (31)20-5986820
E-mail: iam.wakkee@fsw.vu.nl
Peter van der Sijde
Dutch Institute for Study of Knowledge Intensive
Entrepreneurship (Nikos),
The University of Twente,
Netherlands
E-mail: P.C.vanderSijde@bbt.utwente.nl
Abstract: This paper focuses knowledge and networks in the global startup
process of science-based ventures. A global startup process is a process of
organisational emergence in which ventures engage in the exchange of
knowledge, information and other resources with international contacts, to
recognise opportunities for business, and prepare for the exploitation of these
activities on the global market. We examine how knowledge-related needs
change during the global startup process in terms of classification, function,
network composition and interaction patterns. We formulate propositions to
guide founders in their global startup process in building on theoretical insights
and examples.
Keywords: entrepreneurship; global startups; internationalisation; knowledge;
knowledge-intensive entrepreneurship; social networking; spin-off.
498 P.D. Englis, I. Wakkee and P. van der Sijde
Reference to this paper should be made as follows: Englis, P.D., Wakkee, I.
and van der Sijde, P. (2007) ‘Knowledge and networks in the global startup
process’, Int. J. Knowledge Management Studies, Vol. 1, Nos. 3/4, pp.497–514.
Biographical notes: Paula Danskin Englis is an Associate Professor of
Management at the Campbell School of Business, Berry College, and is an
Associate Professor at the Dutch Institute for Study of Knowledge Intensive
Entrepreneurship at the University of Twente, The Netherlands. Dr Englis’
research focuses on strategic management with an international emphasis
including application in entrepreneurship and family businesses, technology
and knowledge management. Papers based on her research have been published
in a number of leading journals including Academy of Management Review,
Entrepreneurship Theory and Practice, Entrepreneurial Executive, Family
Business Review, Journal of Knowledge Management, Journal of Small
Business Management and Journal of World Business.
Ingrid Wakkee is working as an Assistant Professor at the Vrije Universiteit in
Amsterdam. She received her PhD from the Dutch Institute of Knowledge
Intensive Entrepreneurship at the Twente University in the fall of 2004. Her
current research interests include entrepreneurship in networks, international
entrepreneurship and social innovation.
Peter van der Sijde is the Senior Project Manager/Researcher/Teacher at the
Dutch Institute for Knowledge Intensive Entrepreneurship at the School of
Businesses, Public Administration and Management of the University of
Twente, and is an Associate Professor for Knowledge Innovative
entrepreneurship at the Saxion Universities for Professional Education, both
located in Enschede, the Netherlands. His research interests are in student
entrepreneurship, high-tech and international entrepreneurship, as well as the
interaction between knowledge institutes.
1 Introduction
Global startups are ventures that pursue opportunities around the globe from the moment
the business idea is first discovered (Oviatt and McDougall, 1995; Dominguinhos, 2002;
Wakkee, 2004). Global startups are found in both high tech and low tech industries
(Simões and Dominguinhos, 2001; Wickramasekera and Bamberry, 2001; Moen, 2002).
In our view, it is important to make clear distinctions between these ventures and low-
tech (and no tech) global startups, because they are subject to very different influences
and pressures from the global market arena.
Previous studies have already explained why ventures active in high tech industries
need to start global (Grant, 1996; Roberts and Senturia, 1996; Andersson and Wictor,
2003). Yet, few studies have focused on how startups, with limited experience and
available resources are able to accumulate the required knowledge and other resources
from around the world. Following authors such as Coviello and Munro (1985), we argue
the use of networks offers an important part of the explanation. After all, internationally
active network contacts are the link between (geographically dispersed) knowledge and
the venture (e.g. Birley, 1985; Johannisson, 1986; Nooteboom and Gilsling, 2004).
The relevance of knowledge and networks for international market development has
already received considerable attention (i.e. Coviello and Munro, 1995; Rasmussen,
Knowledge and networks in the global startup process 499
Madsen and Evangelista, 2001; Ripolles, Menguzzato and Iborra, 2002; Andersson and
Wictor, 2003; Sharma and Blomstermo, 2003) but typically it has been investigated in the
context of young but nevertheless established ventures and on networking-for-sales-
activities, rather than taking a broader startup perspective. In this contribution, we adopt a
longitudinal perspective and use social network theory to examine how knowledge-needs
change during the actual global startup process in terms of classification and function,
and how network composition and interaction patterns develop to meet these changing
needs. We focus particularly on the period leading up to official company foundation and
sales. This pre-venture phase further seems crucial because international production or
sales activities set up later in the venture’s existence, originate in this phase. As a result,
these more traditional types of cross-border activities cannot be understood completely
without incorporating this pre-venture phase in the investigation (Wakkee, Kirwan and
van der Sijde, 2004). Focusing on this pre-venture phase implies that our investigation of
knowledge acquisition and social networks takes place at the level of the entrepreneur or
the entrepreneurial team.
Building on insights from entrepreneurship and social network theory and evidence
found in case studies produced by various authors (e.g. Jolly, Alahuhta and Jeannet,
1992; McDougall et al., 1994; Oviatt et al., 1994; Bell, 1995; Dominguinhos, 2002;
Wakkee, Kirwan and van der Sijde, 2004; Kirwan, van der Sijde and Groen, 2005; van
der Sijde and Groen, 2005), we develop a framework to analyse the startup process,
formulate a number of propositions, and suggest future research paths to explore the role
of knowledge and networks in the global startup process.
2 Conceptual framework
2.1 Global startups and the entrepreneurial process
Over the past two decades, firms that are internationally active from an early stage in
their existence have received considerable attention from researchers in the field of
(export) marketing, strategic management and entrepreneurship (e.g. Oviatt and
McDougall, 1995; Knight and Cavusgil, 1996; Harveston, 2000; Saarenketo, 2002;
Wakkee, 2004). In this paper, we focus on what is possibly the most radical type of new
ventures with international activities: the global startup (McDougall, Shane and Oviatt,
1994; Wakkee, 2004; Wakkee, Kirwan and van der Sijde, 2004).
A global startup is a venture that pursues opportunities from the moment it is
discovered. They do so because resources, partners and markets are scarce and globally
dispersed (McDougall, Shane and Oviatt, 1994; Oviatt and McDougall, 1995;
Dominguinhos, 2002; Wakkee, 2004).
The opportunities pursued by these ventures have two related characteristics: they are
global in nature and they are knowledge-intensive. Opportunities are knowledge-
intensive when knowledge (whether it is related to technology, (international) markets or
(international) venturing) is the most important ingredient in the offering, or in the
development of the offering (Hymer, 1976; Grant, 1996; Nielsen, 2005). The
technological knowledge needed to create a high tech venture is typically highly
specialised. An opportunity is global when it is recognised in interaction with
international actors; it can only be exploited when combining resources and or with
partnership from around the world; and or creates sufficient value to sustain the venture
500 P.D. Englis, I. Wakkee and P. van der Sijde
over longer periods of time, when outputs are sold around the world (Wakkee, Kirwan
and van der Sijde, 2004). Due to the knowledge-intensity, the level of specialisation in
science-based sectors is high both on the supply and demand side of the industry (Roberts
and Senturia, 1996; Eriksson et al., 1997). Only a limited number of organisations
(research institutes, venture capitalists, commercial companies) will be active in the
industry. The scarcity and global dispersion of the industry players have a strong
influence on what knowledge entrepreneurs need about the market and about venturing
on this market and on how they can obtain this knowledge.
The founders of global startups often begin their internationalisation process before
they have officially founded their venture. After the official foundation the international
activities expand rapidly both in scope (range of activities) and in geographic diversity
(Wakkee, 2004) Usually global startups are involved in a wide variety of cross-border
activities such as international sourcing and resource building, international cooperation
in product development early in the development process (Korhonen, 1997; Karagazoglu
and Lindell, 1998; Fletcher, 2001).
To describe how high tech global startups can acquire and develop the required
knowledge during the pre-venture phase we build on a model developed by van der Veen
and Wakkee (2004). According to this model, which was based on an extensive literature
review (e.g. Schumpeter, 1934; Stevenson, Roberts and Grousbeck, 1989; Wiklund,
1998; Shane and Venkataraman, 2000), entrepreneurship can be seen, most of all, as the
process of recognising
1 recognising opportunities
2 preparing these for exploitation and
3 exploiting them in order to create value without regard of the resources they
currently control (van der Veen and Wakkee, 2004). This entrepreneurial process is
driven by individuals, either on their own or in a team.
The entrepreneur or the entrepreneurial team is the driving force behind the pursuit of
opportunities (Knight, 1921; van der Veen and Wakkee, 2004). However, entrepreneurs
are embedded in a social context and need to interact with other actors (individuals and
organisations) to exchange information and resources that allow them to exploit the
opportunity and create value (e.g. Granovetter, 1973; Elfring and Hulsink, 2003; Groen,
2005).
A model of the entrepreneurial process is presented in Figure 1.
Although the three stages in the process (opportunity recognition, preparation and
exploitation) are shown as sequentially organised, this is not actually the case. In reality,
the process is highly dynamic and iterative (Bygrave and Hofer, 1991; Ropo and Hunt,
1995) as the three stages may be more or less overlapping and many feedback loops exist
both within the three stages and between them. As the process unfolds, changing
circumstances may require actions to change or decisions to be rethought. The two bold
arrows in Figure 1 represent these characteristics. As Bygrave and Hofer (1991) state, the
entrepreneurial process is holistic because its course is influenced by its environment and
is sensitive to a multitude of antecedent variables: the strength and number of
competitors, the needs of future customers, etc. Further, the role of the entrepreneur is
critical throughout the process. The influence of the entrepreneur and the entrepreneur’s
interaction with the network in the process is represented in Figure 1 by the linked curves
above and below the process.
Knowledge and networks in the global startup process 501
Figure 1 The entrepreneurial process
Source: van der Veen and Wakkee (2004, p.118).
2.2 Starting global and social networking
An entrepreneur’s position in the network has consequences along three dimensions
(Birley, 1985; Aldrich and Zimmer, 1986; Elfring and Hulsink, 2003),
1 availability of information
2 timing and
3 referrals.
First, the social network is a source of information to entrepreneurs about what goes on in
the environment and market and thus helps them in discovering and developing
potentially valuable opportunities (opportunity recognition) and in creating an
organisation that allows them to exploit these opportunities (preparation). This type of
information is not available to other entrepreneurs or firms. Secondly, the position in the
network determines which information will reach a particular firm or entrepreneur at
what moment and thus which opportunities are located and evaluated (Aldrich and
Zimmer, 1986; Ahuja, 2000). Finally, referrals imply that entrepreneur’s interests are
mentioned and represented in a positive light, at the right time, and in the right place
(Burt, 1997). Firms placed centrally in a network receive more, better and earlier
information and knowledge than their competitors. This is a source of advantage and may
exert influence on the internationalisation of firms. The network may also produce
unexpected random information to firms. Firms may observe the benefits of this
knowledge and may integrate it in their own structures and behaviours. Throughout the
startup process, entrepreneurs build up their networks and interact with different
members of their network to accommodate the different needs (Burt, 1997; De Koning,
1999; Groen, 2005).
Following Evangelista (1996), Harris and Wheeler (2005) we distinguish between
two alternatives, perhaps ‘extreme’, approaches to network development in the context of
internationalisation. The first (planned network strategy) emphasises the deliberate
development of relationships, through ‘networking’, to achieve intended
internationalisation (export) outcomes (Yip, Biscarri and Monti, 2000). The second
approach (relationship-evolution strategy) is that entrepreneurs are more likely to
internationalise by developing the relationships that they happen to have, rather than set
502 P.D. Englis, I. Wakkee and P. van der Sijde
objectives and develop plans for the development of relationships (Coviello and
Munro, 1995). However, in our view founders of global startups are not limited to using
only one of these extreme strategies. Rather, we expect that most entrepreneurs employ
both strategies in developing their important relationships. Using existing relationships
saves both time and money and helps the entrepreneurs to overcome their lack of
legitimacy and their liability of newness, while the existing network of a starting
entrepreneur is most likely too limited to be sufficient especially in the context of
emerging and globally dispersed industries. Further, new (weak) ties are likely to bring in
new information and thus potentially leads to the recognition of new opportunities
(Granovetter, 1973), while existing and strong ties will be more useful in acquiring
resources and thus in preparing for exploitation (Elfring and Hulsink, 2003). In the
following sections, we will combine insights from network- and knowledge-based views
on entrepreneurship to discuss how entrepreneur interact with their network to meet the
different knowledge needs in each of the three phases of the startup process.
2.3 Opportunity recognition: about the role of information and networks
The essence of the opportunity recognition process is that the entrepreneur develops an
initial idea into a viable business opportunity by matching (future) attainable resources
and perceived market needs (Long and McMullan, 1984; Bhave, 1994; De Koning, 1999;
Puhakka, 2002). Then the entrepreneur evaluates the opportunity before deciding whether
or not and how to exploit it. According to De Koning (1999) and Bloodgood et al. (1996),
the initial idea may be found through systematic scanning of the environment and
interacting with multiple weak ties or as the result of a chance discovery. Not
surprisingly, when dealing with high-tech ventures, scientific discoveries (made by the
entrepreneur or by others) often give rise to the initial idea that form the startup point of
the opportunity recognition process. Yet, these discoveries or innovations alone do not
form the opportunity (van der Veen, 2004). Discoveries only become innovations when
they or their applications are introduced at the market. Similarly, innovations are only
innovations when these can result in the creation of profit or wealth (Guth and Ginsberg,
1990) or have an impact on the market (Wiklund, 1998). Thus, the discovery only forms
the starting point of opportunity recognition. An illustration of this is Shane’s (2000)
study that shows that the same discovery (patent) gives rise to different business ideas.
Through interaction with strong ties (family member, trusted friends or close business
associates) the entrepreneur analyses the competitive environment, the initial idea takes
shape and the entrepreneur may begin to recognise the value of the idea and decide it is
worth being pursued (de Koning, 1999; Puhakka, 2002) – see Box 1 for the Heartware
(example). To develop the idea into a full-fledged business opportunity, the entrepreneur
proactively searches for specific information and assesses required resources (and
potential resource providers). According to Puhakka (2002), this process is enhanced by
creativity, intrinsic motivation, management experience, social interaction, and
commitment to relationships. At a given point the entrepreneur decides whether the
opportunity is sufficiently developed and whether or not it will actually be exploited.
When positive, the entrepreneur (or entrepreneurial team) begins to prepare the
exploitation.
In most startups, the entire opportunity recognition process takes place in a local or
domestic context (with internationalisation beginning only well into the exploitation
process). Reviewing previously published case studies in the literature, we conclude that
Knowledge and networks in the global startup process 503
a considerable number of entrepreneurs discover an initial idea while living, travelling,
and or working abroad and in interaction with others (e.g. McDougall et al., 1994,
SciTex: Ray, 1995). Also, we found that many of these entrepreneurs discover their ideas
while working at universities, research institutes or R&D departments (Oviatt et al.,
1994; Oviatt and McDougall, 1995; Wakkee, 2004; Wakkee, Kirwan and van der Sijde,
2004).
Box 1 Idea recognition in the Heartware case
The founder of Heartware International discovered the initial idea for his ventures
when still working as an employee for another U.S. based company. While being
abroad on an assignment he was told about a new medical device developed at the
University of Maasticht in the Netherlands. Seeing the potential value of the device he
first tried to interest his employer to investigate the opportunity further. When the
employer showed no interest he decided to venture himself. In discussions with the
University of Maastricht and some potential lead users, he developed his idea further
and after having obtained an exclusive license he established Heartware Int (From
McDougall et al., 1994; Oviatt et al., 1994).
Although these entrepreneurs are working in their home country, their work environment
is typically highly internationalised. In their research these entrepreneurs usually
cooperate with actors (primarily scientists) from a large number of countries. Further,
these entrepreneurs often travel abroad to exchange their ideas at scientific conferences.
Looking at the cases in the literature, we found that even when the initial idea is
discovered in an entirely domestic context, the entrepreneurs typically engaged in
information exchanges with individuals and organisations located in other countries.
When developing the opportunity applications based on the scientific findings, they will
have to be developed in such a way that they are both feasible and desirable. To this end,
entrepreneurs must begin to discuss their ideas and opportunities-in-progress with
potential resource providers and prospective customers. As already suggested, these will
be located internationally because of the high level of industry internationalisation and
small domestic resource and sales markets.
Previous research into high tech industries shows that due to both the rapid
development of knowledge and due to the relatively small number of highly specialised
players co-operation is the norm. Due to the high level of specialisation and because it is
often unclear where new developments will lead to and because both the speed of
knowledge development, and the costs and duration of formal means of knowledge
protection (e.g. patent application) often the cooperation is governed by trust
mechanisms, rather than the by formal contracts (Aldrich and Fiol, 1994; Swaminathan
and Wade, 2001; Wakkee, Groen and De Weerd Nederhof, forthcoming). The
argumentation presented about leads to a set of connected propositions emphasising the
role of the network for gathering information to explore the potential of the initial idea. In
general we propose that
Proposition 1. For global startups, opportunity recognition requires interaction with
international network ties.
This general proposition can specified in the following more detailed propositions:
504 P.D. Englis, I. Wakkee and P. van der Sijde
Proposition 1A. Previous employment is an important source of opportunities for high
tech global startups.
Proposition 1B. Research institutes, R&D departments and universities are amongst the
most important ties in the entrepreneur’s network during opportunity recognition.
Proposition 1C. Technological knowledge is most important during the discovery of the
initial idea, for opportunity development both technological and market knowledge are
required.
Proposition 1D.Both the technological and the market knowledge required during
opportunity recognition must be obtained through international networking because of
the small number of players in the industry.
Proposition 1E. Exchange of technological and industry knowledge during opportunity
recognition is usually informal and governed by trust relationships.
2.4 Preparation of opportunities: about the role of intellectual property and
networks
During the preparation phase, the business opportunity is translated in a concrete business
concept leading to exchange with the market. The business concept incorporates all
ingredients that are necessary to enable this exchange. One of the most important steps in
this process is the development of the necessary resource base (i.e. Brush et al., 2001)
and of knowledge-related capabilities. Knowledge-related capabilities are produced
through internal (and external) learning processes and they determine how the initial idea
is eventually transformed into the offering that will be introduced in the market as such it
determines the direction of the opportunity that the firm’s entrepreneurs’ see and can take
advantage of (Penrose, 1959). Whereas during the opportunity recognition process, the
idea was developed into a full-fledged opportunity through mental processing of the
desirability and feasibility, in the preparation stage the entrepreneur starts collecting the
venture’s resources in a much more systematic matter.
Clearly, this process requires knowledge related to the technology, to the market and
to venturing (perhaps in this context the concept organisation (of the venture) is more
appropriate). Technological knowledge relates to the feasibility of the offering in terms of
functionality and application. It includes Codified knowledge;Knowledge embedded in
research facilities and (‘tacit’) knowledge embedded in human resources (Nonaka and
Takeuchi, 1995).
Market knowledge relates to the desirability of the offering (van der Veen and
Wakkee, 2004) and concerns both legislative and cultural issues and the socio-economic
and technological landscape of the market (Rip, 2001). Knowledge about venturing is
required to ensure that an organisation can be created that allows for sustainable creation
of value through the exploitation of the opportunity (van der Veen and Wakkee, 2004).
In the preparation phase, the network clearly has two functions:
1 accumulating and combining the necessary and required knowledge (intellectual
property portfolio) and information to build up the resource base for the venture and
2 collecting information about alternative resource-providers and potential referrals
(see Box 2 on the Logitech case).
Knowledge and networks in the global startup process 505
2Logitech and alternative resource providers
The Italian and Swiss founders of Logitech understtod that the best place to establish
their company would be Silicon Valley. The reason for this was that here an extremely
high concentration of potential suppliers and customers was located. Although they
already envisioned global operations, the entrepreneurs realised that being present in
Silicon Valley would potentially kick-start their company and give them a competitive
edge (from Jolly et al., 1992).
Basically the same networking mechanisms apply for the three different types of
knowledge. It has often been suggested that strong ties are particularly important in
obtaining access to knowledge-based resources. The reason for this is two fold: first
strong ties are more motivated to help the entrepreneur than weak ties and provide
entrepreneurs with (access to) resources at a below market price as a result of a stronger
emotional and multiplex bonds. Second, the exchange of particularly complex and/ or
tacit knowledge requires a frequent communication to build a shared understanding and
the development of unspoken language. Thus, to obtain access to knowledge related
resources, global startups need to interact with strong ties. When current (strong) ties
cannot or will not provide access to the required knowledge, alternative resource
providers have to be identified before relationships can develop. Granovetter (1973) and
many others suggested that in particular weak ties are important in this process, as they
provide access to new information and thus to new contacts. Thus a balanced network of
strong and weak ties is required during preparation stage.
In the context of high tech global startups the question would be where the relevant
network ties are located. In general, from a review of the different cases presented in the
literature we observed that the more general the required knowledge is, the more likely it
will be that relevant knowledge providers can be found domestically. This suggests that
knowledge about venturing and knowledge about markets will more likely be attainable
domestically than technological knowledge. At any case we found no examples of
entrepreneurs with previous entrepreneurial experience. As these ‘novice’ entrepreneurs
do not possess venture knowledge from experience, they need to obtain knowledge about
venturing from others. Although in the context of global startups venture knowledge also
involves knowledge about venturing internationally, such knowledge can best be
obtained from local network ties. The reason for this is that first, the venture process
itself is independent of the context, so there is no specific need to go abroad to find this
knowledge and finding it locally most likely saves both time and money. Second, even
though the venture will operate internationally, it is nevertheless dependent on the
customs and legislation of the country where it is founded officially. Therefore,
entrepreneurs also need knowledge from actors that have knowledge and experience
about venturing in their home country.
Proposition 2A. During opportunities preparation obtaining knowledge about venturing
can best be obtained from domestic network ties.
When it comes to market knowledge entrepreneurs involved in starting a high tech global
venture have to obtain knowledge about what future suppliers and customers want
(desirability) and how this can be achieved. The entrepreneur must have knowledge of
the market-environment in general (including issues like culture, socio-economic and
technological landscapes) to obtain this knowledge and of the presence of relevant actors
506 P.D. Englis, I. Wakkee and P. van der Sijde
(customers, suppliers, intermediaries). Based on previous studies (i.e. Coviello and
Munro, 1995), it seems that such knowledge will both be available in internationally
active domestic ties and in international ties (including both multinational working in
third countries and ties native to the country in question). Therefore we offer the
following proposition.
Proposition 2B. During opportunities preparation obtaining knowledge about the market
requires a mix of both domestic and international network ties.
During opportunity preparation the entrepreneur needs to build up its Intellectual
Property portfolio. The source of technological knowledge is important. If the ownership
of the knowledge lies with the institute or the entrepreneur originates from (university or
research laboratory, the intellectual property is most likely owned by this institute and
rights (IPR) to use it must be obtained (Polanyi, 1958; Nonaka and Takeuchi, 1995).
Many global startups are spin-offs from universities and use the university to access
research facilities (at or below market price during a certain period or in return for
equity). These facilities are most commonly found in the institute from which the
entrepreneur used to work (Groen and van der Sijde, 2002).
Proposition 2C. During opportunities preparation, obtaining technological knowledge
can best be obtained from a mixed of domestic and international network. Codified
knowledge and tacit knowledge embedded in human resources are generally sourced
abroad and tacit knowledge embedded in research facilities is likely to be sourced
domestically.
2.5 Opportunity exploitation, knowledge, networks and resources
As shown in Figure 1, the third stage of the process is opportunity exploitation. At this
point in the preparation process, the firm has created marketable products or services and
exchange processes between the firm and its customers begin to take place. Once the
exploitation process is reached however, the entrepreneur may realise that an appropriate
resource base to exploit the opportunity is not viable. Likewise, the demand for the
product or service turns out to be insufficient for profitable exploitation. In these cases,
the business concept may be revised or even abandoned (Herron and Sapienza, 1992).
For firms that move forward in the opportunity exploitation process, the exchange
with the market will increase to a higher level. The entrepreneur will continues to update
the opportunity by adding new or improved goods and services to the market and/or by
improving its internal operations. This leads to the creation of value in terms of financial
gain, innovation, choice for customers, knowledge, etc (Autio, Sapienza and Almedia,
2000). During the value-creation process, the venture becomes more and more
established and more day-to-day management activities become important.
Proposition 3A. During the exploitation process, the interaction with the network of the
company will become more formal and it will develop and maintain a variety of new
(weak) links in order to access information and knowledge.
The creation of value might be regarded as the outcome of the entrepreneurial process
(Zahra and Dess, 2001). The process of value creation ends when the opportunity is
abandoned or does not add value to the entrepreneurial team or the market any longer.
For instance, innovations can make the product or service obsolete, or the entrepreneurial
Knowledge and networks in the global startup process 507
team can no longer enjoy working on the opportunity and therefore, decide to focus on
other (business or personal) opportunities (van der Veen and Wakkee, 2004).
As argued due to the high level of specialisation, the number of potential customers
might be limited and the exploitation will have to take place at a global scale in order to
create sufficient value. In some cases, domestic customers may simply not exist or may
not provide the level of demand that is needed to earn back the extensive investment in
R&D and/or extensive development time (see Box 3 on the Decuma case). The global
spread of the customers might call for specific type of marketing activities such as
visiting international conferences and trade-fairs or the development of specific sales
channels including local distributor networks or online sales. At the same time, the
entrepreneurial team should try to recognise new opportunities that either expand on the
current opportunity by adding to the product line or expand into new markets that are
new to the firm (Churchill and Muzyka, 1994). Through these network enlarging and
reinforcing activities, the firm will strengthen relationships in the network and become a
hub of network connections. This notion is in line with previous network studies. For
instance, according to Freeman (1979) it is essential for firms to be critical to the network
structure and functioning in order to become more powerful within a collaborative
network. In the literature, this has been called a firm’s degree of centrality, that is, the
number of organisations to which a firm is tied (Freeman, 1979). Following this
argument and considering that global startups are able to build a global position rapidly it
seems likely that these firms are able to move to a more central position in the network
during the opportunity exploitation process (Kirwan, van der Sijde and Groen, 2006).
Box 3 Decuma – Expanding beyond the national borders
Decuma is a small technology based firm established in November 1999 and based in
Ideon Science Park in Lund, Sweden. It is a software firm developing and marketing
software for handwriting recognition on mobile devices like laptops, pocket and
handheld personal computers and mobile phones. After trying to establish a customer-
base in the Nordic countries unsuccessfully, the venture directed its attention to the
Japanese market. This move was inspired and facilitated by their venture capitalist.
This VC had considerable experience and an extensive network in this Asian country
and helped Decuma gain foothold (from Bengtsson, 2004).
Proposition 3B. During the opportunity exploitation process the global start-up moves to
a more central position in the (global) network.
Research shows that both the domestic and international networks play an important role
(Coviello and Munro, 1995; Zucchella, 2000). Established domestic ties (including
investors, customers and suppliers) may provide the new venture with access to new
markets by acting as brokers.
Also, entrepreneurs might try to establish an international network by offering
products at a discount and asking international lead customers and users to ‘spread the
word.’ (See Box 4: Sound Inc case). When operating in emerging sectors, scientists may
continue to play an important role in the global introduction of the products, as is shown
in the example from Sound, Inc. Thus, the network diversity is very important for
exploiting the product and finding new customers.
508 P.D. Englis, I. Wakkee and P. van der Sijde
Box 4 Sound Inc – About the role of scientists in entering markets
The founders of a Dutch startup called Sound Inc. were anxious to increase the
awareness and acceptance of their highly innovative sensors for measuring sound
intensity. In order to deal with this issue, they offered their sensors to researchers from
around the world at a huge discount or for free. In exchange for a sensor, these
researchers were asked to conduct research and produce a scientific publication or
presentation at a conference. In this way the venture did not only increase the number
of users directly, it also virtually expanded the company’s research capacity, and
increased the credibility of the products. This approach proved to be very successful as
it resulted in the creation of new applications and an extension of the product range as
well as an increase in the awareness and acceptance of their technology (from
Wakkee, 2004).
Proposition 3C. During the exploitation process, the network of the global startup will
be highly heterogeneous (including research institutes, high tech companies, medium
tech technology users, suppliers, and distributors).
Proposition 3D. During the opportunity exploitation process, the knowledge (IP)
position is continuously strengthened by enlarging the information and knowledge base
for (new) product development to improve the (product) offering to (meet the
requirements of) lead users and (major) customers.
Table 1 presents a summation of the knowledge and networks in the entrepreneurship
process.
Table 1 Knowledge and networks in the entrepreneurship process
Global opportunity
recognition process
Preparation of
global opportunity
Global Exploitation of
opportunity
Knowledge needs Inventions and
innovations;
information to
establish feasibility
and desirability of
application/
opportunity
Location of relevant
resources,
Mobilisation of relevant
suppliers, customers,
and partners,
New ideas to up-date
opportunity and add to
product range
Knowledge usages Combination of
scientific findings
with market needs
Combination of
resources to develop
innovative offering
Using knowledge to
produce the products
Network composition Universities and
research institutes,
front-end players in
sector
Universities and
research institutes,
front-end players in
sector, investors,
potential lead
customers
Diversity/Composition
of Network increases.
Formalise Global
Knowledge Networks
through trade
associations, etc.
Network
internationalisation
Low to Medium Medium to high High
Network interaction no low high
Relationship between
networks and knowledge
Use of the network to
explore the novelty
creation
Explore the feasibility
to create the business
elements (product)
Global
exploitation/leveraging
of knowledge
Knowledge and networks in the global startup process 509
3 Conclusion
In this paper we examined how the founders of global startups use their network to
develop a knowledge base during the pre-venture phase to accommodate the changing
knowledge needs during the different phases of the startup process. There is a paucity of
research that explores the entrepreneurial process of globalisation for high-tech startups.
To address this gap in the literature, this study focused on how startups with limited
experience and available resources are able to ‘go global’ by accumulating the required
knowledge and other resources from networks around the world. Our research focused on
the use of networks and their role as a link between (geographically dispersed)
knowledge and the venture (e.g. Nooteboom and Gisling, 2004) across the startup
process. In particular, we examined how knowledge-needs change during the global
startup process in terms of classification, function and how the network composition and
interaction change to accommodate these different needs. The main contribution of our
study concerns our focus on the period leading up to the official foundation. Previous
studies have usually examined young but nevertheless established firms. However, the
foundations of the venture’s future developments are made prior to official foundation
and we can only truly understand the venture’s development when we understand where
ideas, resources, and network contacts come from, or in other words when we know the
history of the venture.
Many global startups operate in industries that are characterised by high levels of
knowledge intensity. These firms both require and generate highly specialised knowledge
that is scarcely available and often scattered around the world. They are able to transform
knowledge through different interactions with their network ties and leverage this
knowledge within the firm to recognise opportunities, create desirable offerings, and
expand externally into the market place to gain a competitive advantage worldwide. This
affects the activities in relation to opportunity recognition, preparation, exploitation and
globalisation a great deal (Deo Sharma and Blomstermo, 2000). We formulated a series
propositions that form a framework that helps us understand the global startup process.
Our research on the entrepreneurial startup process of has several implications.
Global startups, like other new ventures, have limited time and resources. Therefore, they
need to develop strategies that enable them to create, obtain and leverage knowledge
efficiently and effectively. The use of networks is critical in these strategies.
Entrepreneurs must be aware that during each of the three phases of the global startup
process, different knowledge needs exist and, as a consequence, network interaction must
be changed to fulfill these needs.
As argued in the introduction, most studies on global startups have focused on
ventures that are still young, but nevertheless, are already established. In this
contribution, we have shown that the pre-venture stages (opportunity recognition and part
of the preparation process) are critical in understanding how global startups develop.
After all, it is in these stages that the venture builds its knowledge base and develops its
network. Thus, including these early stages offers additional insight into the process and
is necessary to gain a full understanding of the global startup phenomenon.
Empirical research is needed to examine the extent to which the propositions
formulated above accurately describe the role of knowledge and networks in the global
startup process. Preferably, such empirical investigation should include ventures from
different science-based industries and, if possible, from multiple countries. As Rialph
510 P.D. Englis, I. Wakkee and P. van der Sijde
et al. (2005) has shown, most studies on global startups so far consisted of single-country
samples. As a result, the cross-cultural generalisation of their findings has been limited.
Other research could be conducted to extend this contribution outside the science-
based (high tech) sectors of industry. In the introduction, we argued that science-based
and low-tech ventures experience very different pushes and pulls from the market place
(both on the supply and demand side). Nevertheless, it would be relevant to examine how
the role of knowledge and networks in low-tech global startups deviates from the patterns
we have identified here.
Acknowledgements
The authors would like to thank the Dutch Institute for Study of Knowledge Intensive
Entrepreneurship (Nikos) for Research Support and Dr Aard Groen for comments.
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