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

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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

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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

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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:

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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).

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2 Logitech 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

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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

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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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