Startups internationalizing in quest of a business model: The global prospecting of process niche firms

Abstract

This paper examines technology startups whose initial offering is not a tangible product or service, but rather a technology used in the production process of goods and services of other firms. These “process niche firms,” as we call them, represent an emerging and increasingly common feature of the digitized economy. As part of their search for a suitable business model – be it products, services, and/or outright licensing of intellectual property – process niche firms engage in early internationalization in order to gain relevant market knowledge and identify possible business partners. A framework is derived to examine the internationalization pattern of such firms. The paper draws on four illustrative case studies providing insight into how such process niche firms “prospect” in foreign markets prior to deciding on the business model that suits them best. Early in their life cycle, process niche firms may decide to locate their headquarters in a different country in closer proximity to relevant markets and partners, as their high knowledge intensity and dearth of tangible assets makes them highly movable. Later in their development, process niche firms will likely evolve into other types of firms, depending on the business model they ultimately choose and the process that they follow.