A Global Mindset - A Prerequisite for

Successful Internationalization?
Niina Nummela
Turku School of Economics and Business Administration, Finland
Sami Saarenketo
Kaisu Puumalainen
hppeenranta University of Technology, Finland
Abstmct
This study offers a contribution to our understanding of
the role of a global mindset in the successful interna-
tionalization of small and medium-sized companies. The
particular focus is on the drivers of the global mindset
and the connection with performance. We created a
framework and tested it, empirically, with a representa-
tive sample of small Finnish companies in the field of
information and communications technology (ICT). The
jndings indicate that managerial experience and market
characteristics are important drivers of the global mind-
set, which, in turn, is one of the key parameters of inter-
national performance. The paper includes our conclu-
sions, a discussion of the litnitations of the study and the
managerial implications, and suggestions for future
research.
Rbsumb
La prisente itude se propose de faire comprendre le rdle
que joue la mentaliti globale dans 1 internationalisation
heureuse des petites et moyennes entreprises. Nous nous
appesantissons surtout sur les facteurs motivants de la
mentaliti et sur ses rapports avec la performance. Nous
crions un cadre que nous testons. de facon empirique. a
partir d un ichantilloti representatif de petites entrepris-
esfinnoises opirant dans le secteur des Technologies de
linformation et de la communication (ICT). Les risul-
tats indiquent que lexpirience en mati2re de gestion et
les caractiristiques du march6 sont des catalyseurs
importants de la mentaliti globale qui. a son touc est
Sun des parani2tres cl i de la performance intema-
tionale. Litude digage igalement nos conclusions, ses
implications en mati2re de gestion. ses liniites et propose
des pistes de recherche futures.
The pace of change in the economy has been accel-
erating, and the time span of operations in all fields of
business has generally shortened. For example, accord-
ing to Julien (1996). the increasing competition on con-
sumer markets means that products reach the end of their
life cycle very quickly, which in turn enhances product
volatility. Additionally, firms must constantly seek new
markets in order to extend the life cycle of their prod-
ucts. Current developments are reflected in the opera-
tions of small and medium-sized enterprises (SMEs),
which often lack the resources, experience, skills, and
knowledge needed on international markets (Bell, Mur-
ray, & Madden, 1992). It is evident that the combination
of insufficient resources and inadequate management
skills puts SMEs at a disadvantage compared with larger
firms in the globalizing world (Etemad, 1999).
Address correspondence to Niina Nummela Department of Marketing,
Turku School of Economics and Business Administration, Turku, Fin-
land. E-mail: niinanummela@tukkk.fi
It has been argued that the driving forces of global-
ization have, at least partly, influenced the international-
ization of SMEs. For one thing, they have diminished the
barriers (Fletcher, 2000, Knight, 2001). The increasing
speed of business operations has also had an effect. as
SMEs start operating internationally much more quickly
than previously. Finally, increasing competition has
reduced the ability of SMEs to control their own devel-
opmental paths (Etemad, Wright, & Dana, 2001).
Researchers and practitioners have recently turned
their attention to what has become a topical phenome-
non: the increasing number of companies that are inter-
national from inception. Earlier, these born globals
were exceptions to the rule (Welch & Luostarinen,
1988). but now their numbers are increasing. The
progress of born globals is mostly attributed to three
interrelated factors: new market conditions, technologi-
cal developments in various areas, and the capabilities of
people (Madsen & Servais, 1997). Thus, the emergence
of these organizations could be seen partly as a response
0 ASAC 2004 51
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GLOBAL MINDSET A PREREQUISITE FOR SUCCESSFUL INTERNATIONALIZATION? NUMMELA ET AL.
to the changing environment, although the relationship
between the two is somewhat contradictory.
Active research has produced a considerable num-
ber of studies related to managerial characteristics and
internationaliiation. These studies suggest that the posi-
tive attitude of the manager is a significant factor in dis-
tinguishing exporters from non-exporters (for example,
(Harveston. Osborne, & Kedia, 2002). However. because
interest in rapid internationalization is a fairly recent
phenomenon, the number of empirical studies connect-
ing managerial characteristics and the speed of interna-
tionalization is still rather limited. I n the few that do
exist, the global mindset of the manager is emphasized.
and i t has even been argued that it is a prerequisite for
early internationalization (Fletcher, 2000. Harveston,
Kedia. & Davis, 2000b; Harveston et al., 2002; Knight,
2001; Townsend & Cairns. 2003). This assumption has
prompted most empirical studies to include, at least
implicitly, the global mindset of the manager in the def-
inition of a rapidly internationalizing firm (Hurmerinta-
PeltomPki. in press).
This study sheds some light on this topical issue by
describing and analyzing the global mindset of small
Finnish information and communications technology
(ICT) companies. The ICT industry was selected as the
focus of the study because of its global nature. Our
framework. with its four propositions, scrutinizes both
the drivers of the global mindset and its relationship to
the firm's export performance.
The article provides a brief review of the drivers of
rapid internationalization i n the ICT industry and of the
concept of the global mindset, and a literature review of
the measurement of export performance. The subsequent
section describes the framework of the study and the
research design and proposition testing. Wethen present
findings, and the article ends with a discussion of the
conclusions. the limitations of the study. the managerial
implications, and suggestions for future research.
Drivers of Rapid Internationalization
The Push of the Dynamic Environment - The I C T
lndustty in Focus
The ICT industry could bedescribed as a dynamic
field i n which the impact of globalization has been
noticeable, and rapid internationalization has become
more the rule than the exception. Preece, Miles, and
Baetz ( 1999) distinguish three main drivers of rapid
internationalization. First, SMEs in the high-tech sec-
tors frequently operate within a narrowly defined mar-
ket niche. Specialization necessitates international
expansion if the firm aims to achieve sales growth. Sec-
ond, firms are facing high R&D costs, which often come
"front-end", that is, before any sales have been made. If
they are to survive, they must latch onto the growth
track quickly i n order to support these initial expenses.
Third, the competition is intense and products become
obsolete quickly. If the company is to take full advan-
tage of the market potential, it has to penetrate all mar-
kets simultaneously.
In addition to the drivers mentioned above, there are
other trends in the ICT industry that should be men-
tioned. First, a waveof deregulation and liberalization
was evident during the 1990s. I n many countries, the
model of the classic monopoly-baed public telecommu-
nications operator (PTO) has become obsolete. Compa-
nies are being privatized and the markets have been
opened up to keen competition (Sarkar, Cavusgil. &
Aulakh, 1999). Consequently, new international market
opportunities have also emerged for smaller firms. The
ICT industry is now global in its very nature. The quest
for global standards i n telecommunications is making
many of the products and services rather similar world-
wide. Therefore, there is pressure for firms to interna-
tionalize their operations early on i n order to keep up
with the competition.
Second. the industry is multi-dimensional and
diverse, and its boundaries are far from clear-cut. This
complicates any analysis of developments. There are
many different types of services and products: the soft-
ware business. for example. can be divided into pack-
aged software, enterprise solutions, and related profes-
sional services (Hoch, Roeding, Purkert. Lindner. &
Muller, 2000). The ambiguity arises due to the constant
dynamics in the industry, and there is good reason to
describe current ICT markets as high-velocity markets
(cf. Blomqvist, 2002; Eisenhardt & Martin, 2000).
It could also beargued that the ICT sector is of great
economic significance: it has been one of the Fdstest
growing sectors i n the world in recent years (OECD,
2001). However, the future prospects of the industry are
not all positive. It has to beadmitted that, while the inter-
national growth of information-technology-based ser-
vices continues, several segments have been in a down-
turn. This has forced more and more SMEs into rapid
entry into a shrinking market. In sum, the context is a
strong international push factor in the ICT industry.
The Pull of the Global Mindset
As stated above, various dimensions of human cap-
ital also affect the internationalization of the firm, and
particularly the speed of entering international markets.
Earlier research has particularly highlighted the role of
the top manager (e.g., Gregersen. Morrison, & Black,
1998; Harveston et al., 2000b; Knight, 2001; Manolova.
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GLOBAL MINDSET A PREREQUISITE FOR SUCCESSFUL INTERNATIONALIZATION? NUMMELA ET AL.
Figure 1
Global mindset and related concepts
GLOBAL ORIENTATION
raponsi vmeu
INTUCAUCICU
IUTERNAI'IONAL
ENTREPRENEURIAL
OR1 EN1 Al'ION
f
Brush, Edelman. & Greene, 2002). Given the importance
of managerial characteristics. researchers have attempt-
ed to analyze themi n order to distinguish factors that
could separate successful and less successful companies.
Researchers studying established phenomena i n
novel contexts, such as the managerial characteristics of
rapidly internationalizing firms. tend to create diverse
theoretical and analytical constructs. An overview of the
literature shows that the managerial characteristics of
internationalizing firms have also been analysed in terms
of several partly overlapping concepts. This study
applies the concept of the global mindset, and Figure 1
illustrates this in relation to other similar concepts.
As Figure I indicates, the broadest concept in useis
apparently global orientation. This refers to a manager's
positive attitude towards international affairs, and also to
his or her ability to adjust to different environments and
cultures (van Bulck, 1979). Global orientation is also
demonstrated through the manager's commitment to
international markets, international vision and proactive-
ness. and also more generally to customer orientation,
responsiveness, marketing competence, and the use of
advanced communications technologies (Knight, 1997;
Moen, 2002; Moen & Servais, 2002). Like van Bulck,
wecould conclude that it is a fairly multidimensional
concept. According to Knight, rapidly internationalizing
companies seem to be more globally oriented than oth-
ers, but studies with contradictory findings exist (Moen;
Moen & Servais).
A more narrow, but clearly overlapping concept in
the analysis of managerial characteristics is the inrerna-
rional enrrepreneurial orientation of the manager (see
Figure I ) . This concept focuses on the behavioural ele-
ments of global orientation, and apparently includes sev-
eral basic dimensions of entrepreneurship* i n general:
risk taking, innovativeness, and proactiveness (Harve-
ston, Kedia, & Davis, 2000a; Knight, 2001). The strong
emphasis on general entrepreneurial characteristics is
probably due to the researchers' background in entrepre-
neurship. One central concept in this research tradition is
entrepreneurial orientation as a determinant explaining
new-venture creation. Some researchers have applied
this i n the international context, and argue that the man-
agers of rapidly internationalizing firms have higher
international entrepreneurial orientation than those of
gradually internationalizing firms (e.g., Harveston et al.,
2000a).
Although some recent studies have adopted a rather
broad perspective on the concept of international entre-
preneurial orientation (e.g., Aspelund & Moen, 2002;
Knight, 2002). the majority of empirical studies have
focused on the behavioural dimensions. Some
researchers have also pointed out the importance of the
attitudinal characteristics of managers. According to
Dichtl, Leibold. Koglmayr, and Muller (1984). several
terms, such as international orientation, foreign market
orientation, and motivation toward foreign involvement,
have been used synonymously in this respect. They sug-
gest that the measurement of international orientation
should include diverse psychosocial and demographical
components (this attitudinal aspect of the concept is
illustrated in Figure 1 ). Accordingly. empirical findings
indicate that internationally oriented managers (a) have
low psychic distance3 from foreign markets; (b) are well
educated, master foreign languages and have experience
of foreign countries; (c) are less risk-averse and resistant
to change; and (d) have a positive attitude towards
exporting and stays abroad4 (Dichtl et al., 1984, Dichtl,
Koglmayr, & Muller, 1990; Holzmuller & Kasper,
1990). Additionally. according to a study among Finnish
entrepreneurs. the personality of internationally oriented
entrepreneurs seems to differ slightly fromthat of other
entrepreneurs: they are often more extraverted and intu-
itive (Routamaa, Vesalainen, & Pihlajaniemi, 1997).
International orientation as a concept seems to
include another. more narrow construct (see Figure I ).
Some researchers have used the term international out-
look when referring to the difference between the for-
eign and the home markets as perceived by the manag-
er (Reid, I98 1 ; Wiedersheim-Paul. Olson, & Welch,
1978). This concept strongly resembles the concept of
psychic distance, which is one component of interna-
tional orientation.
As depicted in Figure I , the concept of global mind-
set used in this study includes both attitudinal and behav-
ioural elements. The attitudinal aspect is quite natural, as
the term mindset is known in cognitive psychology and
organization theory to refer to the way people make
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GLOBAL MINDSET A PREREQUISITE FOR SUCCESSFUL INTERNATIONALIZATION? NUMMELA ET AL.
Figure 2
The determinants of export performance (adapted
from Leonidou et al., 2002)
1
sense of the world (Gupta & Govindarajan, 2002). A
global mindset is said to describe a manager's openness
to and awareness of cultural diversity and the ability to
handle it (Fletcher, 2000, Gupta & Govindarajan; Kedia
& Mukherji, 1999). In this context, the global mindset is
quite similar to global orientation. This attitude is
reflected in the proactive and visionary behaviour of the
manager in the preparedness to take risks in building
cross-border relationships, for example (Fletcher; Har-
veston et al., 2000b). Consequently, the concept seems to
include elements that are close to an international entre-
preneurial orientation.
It is often assumed that rapid internationalization
requires a global mindset among managers. Previous
research indicates that this determines the extent to
which a firm engages i n international activities (Harve-
ston et al., 2000b). However, a global mindset alone is
not enough, and managers also need the knowledge and
skills to sustain it (Kedia & Mukherji. 1999). It is a
dynamic concept that interacts continuously with the
environment and is constantly revised as a result of
learning and collected experience (Fletcher, 2000).
Wecould conclude that the theoretical discussion
around managerial characteristics is diverse, and the
concepts used are ambiguous. I n spite of the differences
in content, some researchers use these concepts as syn-
onyms. Their varying content is also reflected in their
operationalization, which in turn produces contradictory
and confusing results in empirical studies. Therefore, it
is actually quite surprising that discussion on the content
is almost non-existent. In order to avoid confusion, it
would beworthwhile clarifying the difference between,
54
for example, global and international orientation, if there
is any (e.g., Moen, 2002. seems to use themas syn-
onyms).
In spite of the conceptual differences, researchers
seem to agree on some issues. For example, it has been
suggested that there is a relationship between the speed
of internationalization and the manager's global mindset
or orientation (e.g., Harveston et al.; 2000b; Knight,
1997). It can be assumed that managers with a global
mindset should beable to combine resources from dif-
ferent markets. However, not all SME managers have the
ability to enter into global operations, and therefore in
the future one criterion for distinguishing successful
companies from less successful ones will be in-house
human-resource capital.
Research on this issue in general. and on its rela-
tionship with performance in particular, is quite limited
(Harveston et al., 2000b). A few studies indicate that the
global mindset or orientation might be related to the
international performance of the firm (Harveston et al..
Knight, 1997. 2001). In line with earlier research, it is
assumed here that the link exists specifically between the
company's export-related performance and the manag-
er's global mindset. Although this association might also
beseen in SME performance in general, it is probably
affected by other factors that make its identification
more difficult. Consequently, the following section gives
a broad overview of export performance and suggests
how it should bemeasured i n this kind of study.
What Constitutes Export Performance?
Our knowledge of export performance has a rather
solid basis because of the extensive research that has
been going on for decades (for comprehensive reviews,
see, e.g., Aaby & Slater, 1989; Chetty & Hamilton,
1993; Katsikeas, Leonidou, & Morgan, 2000; Leoni-
dou, Katsikea, & Samiee, 2002; Zou & Stan, 1998). I n
their meta-analysis of earlier studies, Leonidou et al.
summarized the key findings i n the form of a figure
(see Figure 2).
The focus of our study is on managerial characteris-
tics and their relationship to export performance. How-
ever, the managerial and organizational characteristics
often overlap in SMEs and thus we do not totally exclude
the latter from our analysis. Moreover, although our
emphasis is on internal factors, the impact of the envi-
ronment is not o~erlooked.~ Market characteristics are
assumed to bea significant driver of the global mindset,
and the relationship between these concepts is examined
in this study.
The measurement of performance is always com-
plex and context-dependent. Leonidou et al. (2002) point
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GLOBAL MINDSET A PREREQUISITE FOR SUCCESSFUL INTERNATIONALIZATION? NUMMELA ETAL.
out several difficulties in assessing export performance,
and they assume that, because of these difficulties, the
majority of empirical studies have applied subjective or
perceptual measures. They also conclude that non-finan-
cia1 as well as financial measures have been used to
assess export performance. The financial measures
referred to i n earlier research can beclassified as sales-
related, profit-related, and market share-related. The
nonfinancial measures are more diverse, including those
that are market-related and product-related. Crude gen-
eral measures have also been used, such as managers
satisfaction with overall export performance and per-
ceived export success, as well as the fulfilment of export
objectives (Katsikeas et al.. 2000).
Madsen (1998) studied the mental maps of experi-
enced managers (i.e., their subjective perceptions related
to export performance) and found them often to bevery
static, narrow, and short-term. Sales were emphasized
over the enhancement of organizational capabilities and
future profits. However, none of the managers was satis-
fied with hard financial performance measures. Some of
themstressed the importance of more soft criteria that
would allow the assessment of the contribution i n terms
of the future of the firm. Several researchers have dis-
cussed the advantages and disadvantages of subjective
measures (for reviews, see, e.g., Leonidou et al., 2000,
Madsen ).
This study takes a holistic perspective on export-
performance measurement, that is, export performance is
studied as a whole, not by evaluating individual export
ventures one at a time (recommended by Madsen, 1998).
This approach seems particularly appropriate given that,
within the global mindset of a manager, exporting is seen
as one activity: studying performance on the level of
individual ventures might be more suitable if the aim is
to draw conclusions on the product or market level. For
this study. performance is measured both subjectively
and objectively.
Framework of the Study
The global mindset is a multidimensional concept.
and this study attempts to take both the attitudinal and
behavioural aspects into consideration. Measurement is
based on the managers own evaluation (this is recom-
mended by van Bulck, 1979, for example, who argues
that objective definition is not possible). Thus it is taken
to consist of proucriveness on international markets and
the managers commirmenr to internationalization and an
international vision. Proactiveness is understood here as
the anticipation of future problems, needs, and changes
related to international markets, and thus as comprehen-
sion of their significance. It is measured according to
55
statements referring to the need for and importance of
international activities:
It is important for our company to internationalize
rapidly.
Internationalization is the only way to achieve our
growth objectives.
Wewill have to internationalize in order to succeed
in the future.
The growth weare aiming at can beachieved main-
ly through internationalization.
On the other hand, commitment to internationaliza-
tion is measured according to statements referring to the
top managers concrete behaviour related to internation-
al activities:
The founder/owner/manager of the company is
willing to take the company to the international mar-
kets.
The companys management uses a lot of time in
planning international operations.
and the attitudinal aspect of the measure, the man-
agers international vision, according to the statement:
The companys management sees the whole world
as one big marketplace.
Earlier discussion on the concept of the global
mindset also incorporated some psychological and
demographical information about the manager. Subjec-
tive and objective characteristics of the manager have
been deliberately left out of this study, however, because
in the globalizing world, and particularly i n the ICT
industry, exceedingly larger numbers of managers
already share them. This assumption is supported by
Manolova et al. (2002). who found that an international
orientation did not distinguish internationalized from
non-internationalized firms. They suggest that one
explanation for this could be the constant and instant
access to information, as well as the attention given to
this matter in the media. Additionally, managers in the
ICT industry are. on average, rather well educated and
also know foreign languages, and thus an analysis of
these characteristics would not have been very informa-
tive. Because of the nature of the industry, too, aspects
related to the use of advanced technologies have been
left out. even though Knight (1997) claims that this is
one of the dimensions of global orientation.
This study explores the drivers of the global mind-
set and its relationship to the companys international
performance. The research setting is illustrated in
Figure 3.
Managerial experience and learning have been con-
sidered key features in the internationalization process of
SMEs, and thus the importance of individuals who are
willing to learn is highlighted (e.g., Gregersen et al.,
1998; Manolova et al.. 2002; Townsend & Cairns. 2003).
Managerial experience also often seems to lead to rapid
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GLOBAL MINDSET A PREREQUISITE FOR SUCCESSFUL INTERNATIONALIZATION? NUMMELA ET AL.
____
Figure 3
The research setting of the study
International work experience
International education
Globalness of the market
Turbulencc on h e m a k t
Proacti veiiess
Commitment
International virion
P3 JI
P4
Quantiritivr mri surrs Developmcnt of turnover
Qualitative measures Shan of foreign customers
Sllarc of foreign padners
Numbcr of expon markets
internationalization (Reuber & Fischer. 1997). It is not
only general business experience, but also market-
specific experience that encourages companies to inter-
nationalize (Westhead, Wright. & Ucbasaran, 2001 ). As
far back as the late 1970s. Johanson and Vahlne(1977)
pointed out the importance of market-specific experi-
ence i n their seminal article. They argued that the inter-
nationalization of a firm develops as a result of collect-
ing market knowledge. Consequently, our first
proposition is:
PI : Thereis a positiverelationship betwccn theman-
ager's experienceand a global mindset.
As stated earlier, certain market characteristics
(niche market, R&D intensity, competition) may push
firms rapidly into international markets. In other words,
the market conditions create a need for a global mindset
as well (attitudinal aspect). On the other hand, if the mar-
ket is very turbulent, successful managers need to be
sensitive to weak signals and flexible towards changes.
This requires proactive behaviour, which is one compo-
nent of a global mindset. Consequently, wepropose the
following:
P2: Thereis a positiverelationship between market
characteristics and a global mindset.
It has also been argued that the global mindset of
management enables the company to respond accurately
and rapidly to the changing needs of the market (Gupta
& Govindarajan. 2002). This kind of active behaviour
should also bereflected in the international performance
56
of the firm (supported by Knight, 1997). Therefore our
third and fourth propositions are:
P3: Therei s a positiverelationship between a global
mindset and themanager's perception of theintcma-
tional performanceof the firm (subjectiveperfor-
mance).
P4: Thereis a positiverclationship between a global
mindset and thefinancial indicators of thc intema-
tional performanceof the firm (objective pcrtbr-
mancc).
Research Design
Data Collectioti
The population of interest was defined as small and
medium-sized Finnish companies providing value-added
services i n the ICT sector. These include providers of
content and software for service platform and manage-
ment systems. Hardware manufacturers and companies
providing mainly educational or consultancy services
were excluded from the study. Due to the rapid develop-
ment of the ICT sector and the unsuitability of standard
industry classification codes, there was no single up-to-
date sampling frame available for our purposes. There-
fore. the names and contact information of the compa-
nies were sought frommultiple sources, including the
Scandinavian Kompass on Disc database (SKOD, 1998).
the Statistical Bureau of Finland database of Finnish
companies (TOL, 1995). IT magazines, and the Internet
sites of the companies themselves, universities, cities,
science parks, incubators, venture capitalists, and indus-
try organizations. The data were collected by means of a
structured questionnaire. Since the companies of interest
were operating in the ICT sector, an Internet-based ques-
tionnaire was considered an appropriate tool for the data
collection.
A total of 493 companies were identified and con-
tacted by telephone during November and December
2001. I n this phase, 34 companies were found ineligible
and 74 refused to participate in the study. The 385 com-
panies that agreed to participate received, on the follow-
ing day, an e-mail message containing instructions for
answering the Web-based questionnaire. A reminder
message was sent to those who had not sent their
responses within two weeks. Of this sample, 123 com-
panies responded, resulting in an effective response rate
of 26.8% ( 123/459) of the eligible target population.
This rate could beconsidered adequate as the question-
naire was extensive and the respondents were mainly
chief executive officers or managing directors with busy
schedules. Unfortunately, due to the length of the ques-
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GLOBAL MINDSET A PREREQUISITE FOR SUCCESSFUL INTERNATIONALIZATION? NUMMELA ET AL.
tionnaire. there were some incomplete responses, and the
propositions could betested only on the 72 companies
that provided data on their global mindset and the pro-
posed independent variables.
The validity and reliability of the results were
secured by several means. For example, the question-
naire was carefully pre-tested i n a number of firms. Fur-
thermore, it was targeted at CEOs and managing direc-
tors, who are considered the most knowledgeable
informants regarding internationalization issues i n
SMEs. A comparison of the early and late respondents
(with the late respondents being assumed to besimilar to
non-respondents) was conducted i n order to assess non-
response bias (cf. Armstrong & Overton, 1977). No sig-
nificant differences were found between these two
groups, and non-response bias was therefore not expect-
ed to have an effect on the results of our study.
the items, yielding two factors (subjective quantitative
and subjective qualitative performance), together
explaining 58.5% of the variance (for more details of the
factor structure see Appendix 3). Taking an average of all
the highest loading items produced the final scales for
subjective quantitative and subjective qualitative perfor-
mance. The internal consistencies of the scales were
god (the Cronbach as were 0.91 for subjective quanti-
tative and 0.69 for subjective qualitative performance.
respectively).
Objective performance was measured on six items
that were combined in a single measure. This measure
was obtained by principal-component analysis, i n which
all the items had a high loading on a single factor,
accounting for 64.3% of the variance in the six original
items (for more details of the factor structure see Appen-
dix 4).
Operationalization of the Key Concepts
Findings
Global mindset was measured on seven Liken-scale
items ( I = disagree totally, 5 =agree totally), which were
combined into a single measure. This measure was
obtained by principal component analysis. i n which all
the items had a high loading on a single factor account-
ing for 7 I .3% of the variance i n the seven original items
(for more details of the factor structure see Appendix I).
The final scale for the global mindset was arrived at by
taking an average of all of the items. The internal con-
sistency of the scale was very good (Cronbach (Y =0.93.
see recommendations by Nunnally. 1978).
It was assumed that two main drivers of a global
mindset exist: management experience and market char-
acteristics. Mailagemetit experience was measured by
two items: "percentage of managers with international
work experience" and "percentage of managers with an
international education." A factor analysis was conduct-
ed in order to assess market characteristics (for more
details. see Appendix 2): two drivers (globalness and tur-
bulence) seemed to be of importance, but a third factor,
"lack of competition on the market," also emerged.
These three factors explained 57.8% of the variance.
This study concentrates on the two first factors, as their
impact on the global mindset seems to be more relevant.
It may also beassumed that the level and nature of com-
petition are, dl least partly, outcomes of globalness and
turbulence. An average of all the highest loading items
formed the final scales for these two drivers. The inter-
nal consistencies of both scales were acceptable (the
Cronbach as bere 0.78 for globalness and 0.67 for tur-
bulence, respectively).
Subjective performance was measured on six Lik-
en-scale items ( I =disagree totally, 5 =agree totally). A
principal-component factor analysis was conducted on
57
PmjZe of the Respondents
On average, the turnover of the companies was 2.03
million euros, but the median turnover value was as low
as 0.44 million euros. There were even some companies
that were so young that they had no sales at the time of
the data collection. Their smallness is also reflected i n
the number of employees: 50% of thememployed 10or
fewer full-time workers. The median value of the year of
establishment was 1996. indicating that the companies
participating in the present study were quite young. I n
spite of their youth, the majority of them(58%) had
some international operations. The basic information on
the companies is summarized in Table I .
All major sectors of the software industry were rep-
resented i n the study: 67% of the companies were selling
software products, while 49% customized their software
for each client and 12% produced software embedded in
different devices. Additionally, 43% included training
and consulting as part of their offering.
The descriptive information on the key concepts of
our model is presented i n Table 2. The mean value for a
global mindset was 3.2. indicating that, in general, the
companies were more globally than domestically orient-
ed. About one-third of the managers had international
work experience, whereas only one in six had had some
education abroad. The respondents generally saw their
market environment as both global and turbulent, and
were more satisfied with their international performance
in terms of qualitative (e.g.. image and learning) out-
comes than quantitative measures (e.g., market share and
turnover). The companies with international operations
currently derived, on average, one-third of their sales
Canadian Journal of Administrative Sciences
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GLOBAL MINDSET A PREREQUISITE FOR SUCCESSFUL INTERNATIONALIZATION? NUMMELA ETAL.
Table 1
Profile of the respondents
Mean Median Std Deviation Minimum Maximum
Turnover in 2001 (f million) 2.03 0.44 3.57 0 2 I ,70
Establishment year 1994.4 I996 6.69 I954 2001
Full-time employees i n 2001 24.00 10 4 I .07 0 360
Start year of international operations 1997.5 1999 3.3 I I984 2001
R&D 9% of turnover 26.86 20 26.49 I I50
~~~~
Table 2
Descriptive statistics of the key concepts
Mean Median Std Deviation Minimum Maximum
Global mindset
Management experience
Intnl work experience
Intnl education
Market characteristics
Global ness
Turbulence
Subjective performance
Subj. quantitative
Subj. qualitative
Objective performance
Share of foreign turnover 200 I
Share of foreign turnover 2002
Share of foreign turnover 2003
Share of foreign customers
Share of foreign partners
Number of countries
3.24
32.07
17.41
3.39
3.23
2.53
3.82
32.65
26.15
36.35
28.27
25.36
8.19
3.50
25.00
0.00
3.50
3.25
2.50
4.00
15.00
10.00
20.00
11.00
15.23
5.00
1.19
33.34
27.22
0.93
0.77
0.98
0.82
33.65
31.32
33.79
29.04
30.26
10.20
1
0
0
I
I .25
I
I
0
0
0
0
0
0
5
I00
100
5
5
5
5
100
100
100
100
100
50
from international markets. but expected a slight
increase i n the future.
Testing Pmpositiort
Westudied the drivers of the global mindset and its
relationship with export performance according to the
model i n Figure 3. First, the four propositions were test-
ed by regression analysis. Three basic control variables
were used: the year of the establishment of the firm,
turnover, and the proportion of turnover that the firm
invested in R&D. As illustrated in Table 3, each Model I
examined the effect of these control variables. Our pro-
posed independent variables were then added in Model 2
in order to test whether the explanatory power increased.
Proposition I (PI ) stated that there is a positive rela-
tionship between the manager's experience and the glob-
al mindset. Our results provided partial support for this,
since international work experience had a significant
relationship with a global mindset, but education did not.
Proposition 2 (P2) was that there is a positive rela-
tionship between market characteristics and a global
mindset. This proposition was supported as well. There
was a significant relationship with the globalness of the
market in which the firm operates, while the turbulence
of the market was of less importance.
Proposition 3 (P3) suggested that there is a positive
relationship between a global mindset and the manager's
perception of the international performance of the firm.
In our study wefound no support for P3. Although the
Canadian Journal of Administrative Sciences
Revue canadienne des sciences de I'administration
58 21(1). 51-64
GLOBAL MINDSET A PREREQUISITE FOR SUCCESSFUL INTERNATIONALIZATION? NUMMELA ETAL.
Table 3
Proposition testing using regression analysis
Dependent variable
(proposition) Model Summary
Independent Model I Model 2
variables Beta coefficients Beta coefficients
Mindset (PI &P2) Model I Year
R-Square .I 4 F=3.5, d.f.=3.68, Turnover
sig.=.O I9 R&D share
Model 2 Globalness
R-Square S O F=9.0, d.f.=7,64. Turbulence
sig.=.OOO Work experience
Education
Subjective Model L Year
performance R-Square . I 5 F=2. I , Turnover
(P3, quantitative) d.f.=3, 37. sig.=. I I5 R&D share
Model 2 Mi ndset
R-Square .I 9 F=2. I ,
d.f.=4. 36. sig.=. 102
Subjective Model I Year
performance R-Square .03 F=.39. Turnover
(P3, qualitative) d.f.=3, 36. sig.=.762 R&D share
Model 2 Mindset
R-Square . I7 F=I .7.
d.f.=4, 35. sig.=. I64
Objective
performance
(P4)
Model I Year
R-Square .I7 F=I .8.
d.f.=3. 28, sig.=. 162
Model 2 Mindset
R-Square .52 F=7.3. d.f .4 27.
sig.=.OOO
Turnover
R&D share
-.I2
.23*
.30**
n.a.
n.a.
n.a.
n.a.
-. 10
.35**
. I 0
n.a.
-.03
.I6
- .03
n.a.
-. I3
.32*
.24
n.a.
-.08
, I I
.09
.55***
-.os
.25***
-. 10
-.07
.30*
.03
.22
.02
.07
-.I5
.40**
-.05
.I8
.05
M***
sig. <.lo. ** sig.<.O5. *** sig.<.Ol
regression models were not statistically significant, the
mindset variable in the model for qualitative perfor-
mance had a substantially large coefficient with a posi-
tive sign, as qight have been expected.
The lack of support for P3 suggests that there may
besome other effects that were not included and there-
fore could not betested with our sample. The subjective
measures of performance were constructed from percep-
tions of how well the companies had met their objectives
in terms of market share, turnover. and image, for exam-
ple. It is possible that there is a positive relationship
between the mindset and the level of objectives set by the
company, that is, companies with a positive mindset set
their internationalization objectives at a more ambitious
level than those with a less global mindset.
Proposition 4 (P4) stated that there is a positive rela-
tionship between a global mindset and the financial indi-
cators of the international performance of the firm. Our
results provided support for P4, since the globally-mind-
ed firms had significantly more foreign partners and cus-
tomers, and they derived a significantly larger portion of
their revenue fromforeign markets.
Our measure for objective performance (P4) evalu-
ated the absolute intensity and scale of the firms inter-
national operations rather than how it meets its objec-
tives. Hence, the global mindset clearly has an effect on
59
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GLOBAL MINDSET A PREREQUISITE FOR SUCCESSFUL INTERNATIONALIZATION? NUMMELA ET AL.
the internationalization of the firm per se. It affects the
decision to commit more resources to foreign markets
and probably also to set the internationalization objec-
tives ona higher level. For example, a firmwith a mod-
erate mindset may derive only 5% of its revenue from
just one foreign country. and operate there very prof-
itably. In this kind of case. our objective performance
measure would be low. but the subjective performance
measure could be high. These results highlight the
importance of using a variety of pertormance measures.
The links between the mindset. objectives, and pertor-
mance i n the sense of meeting the objectives could be an
interesting issue for future research.
Discussion and Conclusions
The importance of managerial characteristics in the
internationalization of SMEs has been stressed and the
review of previous literature verified that this interesting
phenomenon has been examined i n the context of
diverse, often partly overlapping concepts. I n order to
unravel the conceptual confusion. this study introduced a
novel operationalization of the concept of the global
mindset, which combined a signiticant amount of earlier
work. The results of the empirical study suggest that the
measure created is a viable tool for this type of research
and it could beapplied in other studies as well.
The focus on a single industry, however. may have
imposed some limitations. It is possible that the selec-
tion of the ICT industry as the focus of the study may
have affected the findings. For example. the push of the
industry-specific factors might have overemphasized
the degree of global mindset among the respondents.
This effect might even have been strengthened by the
selection of a small open economy, such as Finland, as
the context. Additionally, most of the firms were young
and formed a rather homogeneous sample with little
variation i n some of the variables. Consequently, if
used with a sample from another industry or another
country, the findings might not be as straightforward
and robust as they are i n this study. More investigation
would beneeded i n order to draw stronger conclusions,
and therefore the study of the phenomenon in cross-
industrial and cross-national settings in the future is
highly recommended.
Although one of the propositions in our framework
(P3) was not supported, wewould argue that one of our
key findings is related to the association between the
global mindset of the manager and company perfor-
mance. The findings of our study clearly support the
prior assumptions regarding the importance of a global
mindset i n assessing the international performance of
SMEs (e.g.. Harveston et at., 2000b). Despite the fact
60
that there must beseveral other drivers of performance,
the global mindset of the management seems to beone
of the key parameters in terms of the international per-
formance of the firm.
I n our opinion. the failure to find a significant link
between a global mindset and goal achievement related
to internationalization has some interesting implications
for future research. On the one hand. researchers should
be very specific as to what constitutes good internation-
al performance. If wetake international performance as
the ability to gain and maintain a reasonable volunie of
profitable sales in foreign countries, it seems that a glob-
al mindset is a significant antecedent. On the other hand.
if performance is conceptualized as the fulfilment of
goals, such a mindset might be more relevant to the level
of goals set by the company than to the ability to achieve
them. Thus, future researchers might consider an alter-
native model i n which intemationali7ation objectives set
by the firm act as an intervening variable between a
global mindset and international performance.
The reader should also keep i n mind that this study
is cross-sectional i n nature and provides only a snapshot
view of the firms' activities. Therefore. wecannot draw
very strong conclusions about the (causal) relationships
between the constructs i n our model. For example. it
might also be possible that the intensive international-
ization (measured i n terms of objective performance
here) would increase the experience and awareness of
the firm's management and, furthermore. would make
the firm more positive towards globalization. A more rig-
orous testing of the measure should be conducted by
using several samples and a longitudinal research design.
Managerially, the findings of our study point to the
potential characteristics of future managers: proactive-
ness. commitment, and international vision. Proactive-
ness here is based on the understanding of the market
and its requirements. and also on the ability to take risks.
These may also be the key characteristics required of
managers in international business i n the future, and thus
young companies with an international growth orienta-
tion should pay particular attention to developing these
skills in the company.
This line of thinking also leads to implications for
public-policy makers and venture capitalists. They
attempt to support the internationalization of small firms.
but sometimes it is not easy to pick out potential compa-
nies. Fromtheir perspective, the identification of man-
agers with a global mindset might prove to be essential
i n directing scarce resources to this potential group of
successful exporters.
To sum up, it Seems that, in spite of the growing inter-
est in the phenomenon. the concept of the global mindset
is still under development. As with other emerging con-
cepts, various interpretations, depending on the content,
Canadian Journal of Administrative Sciences
Revue canadienne des sciences de I'administration
2 L( I ) . 51-64
GLOBAL MINDSET A PREREQUISITE FOR SUCCESSFUL INTERNATIONALIZATION? NUMMELA ET AL.
exist and contradictory definitions or explanations are pre-
sented. Although the discussion is still ongoing, our study
is an attempt to make a contribution to this debate, but we
also recommend future studies on this topical issue.
Notes
Several indcpcndcnt researchers in diffcrcnt countries
have studied these companies. They have been callcd born
globals (Knight. 1997: Madsen & Scrvais. 1997). Intcrna-
tional New Ventures (Jones. 1999: McDougall & Oviatt.
1994: Oviatt & McDougall, 1994, 1997). and Global
Start-ups (Oviatt. McDougall. Simon. & Shrader. I991 ).
Thc tcrmborn globals is used in this article. and it is
defined hcrc as a firm that, fromits inccption. derives
competitive advantage fromthc use of resources and the
sale outputs in multiple countries (Oviatt & McDougall.
Entrepreneurial orientation includes five dimensions:
autonomy. risk taking. innovativeness. proactiveness. and
competitivc aggressiveness (e.g.. Lumpkin & Dess. 1996).
Psychic distance can be defined as manager's unccrtainty
about foreign markcts and perceived ditficultics in acquir-
ing information from them(Johanson & Vahlne. 1977).
The second charactcristic can be classified as objective,
thc othcrs as subjective managerial characteristics.
Our decision is supported by Madsen and Sewais (1997)
and Holzmiillcr and Kasper (1991). for cxample. who
argue that the charactcristics of the foundcr and organiza-
tion. as well as of the environment, have a positive impact
on a rapidly internationalizing company's propensity for
further dcvclopment.
1994. p. 49).
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GLOBAL MINDSET A PREREQUISITE FOR SUCCESSFUL INTERNATIONALIZATION? NUMMELA ET AL.
Appendix 1
Factor structure of the g/oba/ mindset
Item Loading on global mindset
Internationalization is the only way to achieve our growth objectives.
Wewill have to internationalize i n order to succeed i n the future.
It is important for our company to internationalize rapidly.
The companys management uses a lot of time for planning international operations.
The growth weare aiming at can be achieved mainly through internationalization.
The founder/owner/management of the company is willing to take the company into
The companys management sees the whole world as one big marketplace.
Eigenvalue
% of variance
Cronbach alpha for mean scale
international markets.
.91 I
.902
.875
.864
363
.842
.616
4.99
71.3
3 3 (7 items)
Appendix 2
Factor structure of market characteristics
Item
Global ness Market Lack of competition
of market turbulence on the market
The market i n which weoperate is global in nature.
Our Competitors operate internationally.
There are potential customers for our products all over the
Our foreign competitors react rapidly to our actions.
I n our field, a company cannot succeed unless it is able to
constantly bring something new to the market.
The needs of our clients change rapidly.
The competition will toughen fiercely i n the coming years.
New, substitute products will probably enter the market within
At the moment, there is not much competition.
It is difficult for our competitors to copy our products.
New companies are constantly entering our field.
Eigenval ue
% of variance
Cronbach alpha for mean scale
world.
a year.
.844
.827
.777
.605
.349
.2 I4
.I85
2.83
25.7
.78 (4 items)
.I67
.832
.764
.577
.56 I
.213
2.2 I
20. I
.67 (4 items)
.109
-. I69
-.430
.730
.708
- .703
I .32
12.0
63
Canadian Journal of Administrative Sciences
Revue canadienne des sciences de Iadministration
2Ul h 51-64
GLOBAL MINDSET A PHEKEQUISITE FOR SUCCESSFUL INTERNATIONALIZATION? NUMMELA ET AL.
Appendix 3
Factor structure of subjective performance
Loading on Loading on
Item Quantitative factor Qualitative factor
Wehave met our international market-share objectives.
Wehave achieved the turnover objectives we set for internationalization.
I n general, we are satisfied with our success in the international markets.
Internationalization has had a positive effect on our company's profitability.
Internationalization has had a positive effect on our company's image.
Internationalization has had a positive etTect on the development of our
Eigenvalue
% of variance
Cronbach alpha for mean scale
company's expertise.
.94 I
.922
.900
.703
.I59
. I69
3.5 1
58.5
.91 (4 items)
.i25
.i45
. I50
3 1 I
.863
348
1.21
20. I
.69 (2 items)
Appendix 4
Factor structure of objective performance
Item Objective performance
Estimated share of turnover from international markets i n 2002
Estimated share of turnover from international markets in 2003
Percentage of foreign customers
Percentage of turnover from foreign markets
Number of countries, in addition to Finland. in which the company operateslhas clients
Share of foreign panners
Eigenvalue
% of variance
.945
.88 I
.830
.808
.676
.622
3.86
64.3 (6 items)
64
Canadian Journal of Administrative Sciences
Revue canadienne des sciences de I'administration
U(I,. 51-64