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Startups find success by going global first: study

A man looks at a stock quotation board outside a brokerage in Tokyo in this Nov. 7, 2012, file photo.

Toru Hanai/REUTERS

The conventional wisdom is that businesses should get established at home before tackling export markets.

But a new European Union study – Born Global: The Potential of Job Creation in New International Businesses – makes a case that even the smallest and newest companies can succeed on the world stage.

Authors Irene Mandl and Funda Celikel-Esser found that startups driven to do more business abroad tend to grow faster, hire more workers, and create better and more sustainable jobs, according to the study. Evidence also suggests these "born global" companies are more profitable and innovative than their stay-at-home peers.

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One example cited in the report is tiny Seaflex AB of Sweden, which developed an environmentally friendly elastic mooring system for boats. Founded in 1999, the company quickly generated 98 per cent of its sales outside the country, and it has has doubled those sales every year.

"During those first years, I tried to find international customers because Sweden is so small and I think if you have a product that everyone else can use, it is a missed opportunity to sell it only on the domestic market," chief executive Lars Brandt told the report's authors. "The whole world is our market."

The report estimates that roughly a fifth of young companies in Europe are "born global," but the share varies widely from one country to another. Nearly half of new companies in small countries such as Belgium, Denmark and Romania are born global. But the share is generally much smaller in larger countries.

The authors said that the experience of these export-oriented startups suggests governments should do more to help small first become exporters. Among other things, they recommend fostering a culture of internationalization, promoting national branding, exposing companies to international markets, supporting international business incubators, mentoring, subsidizing wages and offering financial support.

They also warn that "born globals alone cannot be the silver bullet" that solves Europe's economic and labour woes.

"Not every startup should be pushed to internationalization as the success of born globals is strongly influenced by the suitability of the product or service for the international market as well as the personal characteristics of the entrepreneur," the authors argue.

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