Received: 2 April 2021
Revised: 14 January 2022
Accepted: 28 February 2022
DOI: 10.1002/gsj.1435
RESEARCH ARTICLE
Navigating the paradox of global scaling
Esther Tippmann1
| Sinéad Monaghan2
| Rebecca A. Reuber3
1
J. E. Cairnes School of Business and
Economics, National University of
Ireland Galway, Galway, Ireland
2
Trinity Business School, Trinity College
Dublin, Dublin, Ireland
3
Rotman School of Management,
University of Toronto, Toronto, Ontario,
Canada
Correspondence
Esther Tippmann, J. E. Cairnes School of
Business and Economics, National
University of Ireland Galway, Upper
Newcastle, Galway, Ireland.
Email: esther.tippmann@nuigalway.ie
Abstract
Research summary: Much global strategy research
explores the management of competing strategic
demands. Although these demands vary by a firm's
context, the focus has been largely on established longlived multinational enterprises (MNEs) that are not
based on digital technologies. There is thus a need to
extend theory to take into account the co-existence of
rapid growth and digitization, a condition which is
increasingly prominent. This study of globally scaling
digital firms shows that they navigate the paradoxical
demands of replication, to achieve frictionless rapid
growth, and entrepreneurship, to innovate and remain
competitive. We provide a theoretical model, which
shows how MNEs navigate this global scaling paradox
through a virtuous cycle of identifying innovations that
can be replicated. Surprisingly, given the ease of modifying digital products and services, navigating the
global scaling paradox involves minimizing local
responsiveness, which is regarded as antithetical to replication. This research also builds insights on the global
strategies of digital firms.
Managerial summary: Many digital firms strive to
scale globally to achieve market dominance in competitive, fast-paced industries, but only a few succeed.
Studying software-as-a-service firms that have successfully scaled globally, we illustrate that the core
demands of global scaling are replication and
This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and
reproduction in any medium, provided the original work is properly cited.
© 2022 The Authors. Global Strategy Journal published by John Wiley & Sons Ltd on behalf of Strategic Management Society.
Global Strategy Journal. 2023;13:735–773.
wileyonlinelibrary.com/journal/gsj
735
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entrepreneurship.
Although
contradictory,
both
demands need to be satisfied in tandem. Leaders of
globally scaling firms can achieve this through a strategy that sustains three interrelated mechanisms: topdown replication, bottom-up entrepreneurial orientation, and replicable innovation generation to engender
and screen replicable ideas. These mechanisms represent a virtuous cycle through which globally scaling
digital firms can revise their global business model in a
replicable way in order to sustain competitiveness.
KEYWORDS
business model, digital, entrepreneurship, replication, scale-up,
scaling
1 | INTRODUCTION
Much attention in global strategy research has been paid to how multinational enterprises
(MNEs) are able to operate successfully in competitive and dynamic landscapes. A “remarkably
resilient” issue in this body of research is the need to navigate1 conflicting strategic demands
and the tensions among them (Tallman & Cuervo-Cazurra, 2021; Westney, 2021, p. 304). The
demands which are most pressing differ across contexts, and so there is variability in how they
are addressed by the global strategies of MNEs (e.g., Bartlett & Ghoshal, 1987; Devinney,
Midgley, & Venaik, 2000; Harzing, 2000). Indeed, Prahalad and Doz recognize that there is even
likely to be variability in global strategies within a diversified MNE that has multiple lines of
business. For example, when discussing the global strategies of Corning Glass, they state: “Each
of its businesses is subject to a different combination of pressures toward global coordination
and integration and toward local responsiveness: pressures that elude a simple ‘either-or’ classification” (Prahalad & Doz, 1987, p. 22).
This context-dependency of global strategy suggests a need for research on diverse and new
conditions under which MNEs operate (Tallman & Cuervo-Cazurra, 2021). However, past literature on managing conflicting strategic demands is largely based on contexts which have two
salient characteristics in common. The first is that the focal MNEs are large and long-lived with
established subsidiaries in place. The emphasis is on adjusting organizational structures and/or
activities to retain or regain competitiveness. There has been little consideration of how firms
that are expanding internationally—and need to do so quickly in order to achieve early mover
advantages (e.g., Chang & Rhee, 2011; Monaghan & Tippmann, 2018)—are navigating tensions
among strategic demands while also growing rapidly. The second characteristic is that, while
some long-lived MNEs studied in-depth, such as Corning Glass, are technology-intensive, there
has been little consideration of how digitization affects the ways in which MNEs manage conflicting strategic demands. This is unfortunate because digitization has been identified as consequential to international strategies (Autio, Mudambi, & Yoo, 2021; Monaghan, Tippmann, &
Coviello, 2020; Tallman & Cuervo-Cazurra, 2021). For example, digital technologies have an
“ambivalent ontology” because they are inherently modifiable (Kallinikos, Aaltonen, &
TIPPMANN ET AL.
737
Marton, 2013), and so digital products and processes can be easily altered. Moreover, digitization can enable rapid growth through efficiency, speed, and flexibility in communication, information processing, customization and transactions. However, rapidly growing digital MNEs are
only able to reap these benefits if they can sustain competitiveness while adding large numbers
of new customers and employees to the organization (e.g., DeSantola & Gulati, 2017;
Hambrick & Crozier, 1985; Penrose, 1959/95). Since the co-existence of rapid growth and digitization is increasingly prominent among MNEs in the global economy, there is a need to extend
existing theory to take them into account simultaneously. That is the purpose of this article.
To understand better the tensions among the demands on MNEs in the context of rapid
growth and digitization, we studied globally scaling digital MNEs. These are defined as digital
MNEs that seek rapid growth through the replication of a global business model across foreign
markets (Reuber, Tippmann, & Monaghan, 2021). Such firms are growing rapidly to quickly
attain economies of scale and establish early mover advantages in global markets, while at the
same time remaining innovative in fast-moving industries. Specifically, we ask the research
question: How do globally scaling digital MNEs navigate competing strategic demands? Not
only does this question address an area in need of theory development, it also responds to a crucial practitioner concern. Successful global scaling is important not only for the MNEs themselves and their investors, but also from a public perspective because “scale-ups” provide most
of the job creation and wealth creation benefits associated with entrepreneurship (e.g., Duruflé,
Hellmann, & Wilson, 2018; Isenberg, 2012). At the same time, global scaling is known to be a
challenging endeavor, with private and public sector observers reporting that most attempts are
not successful (e.g., Coutu, 2014; Glasner, 2018; Innovate UK, 2017; Kutcher, Nottebohm, &
Sprague, 2014; Scale Up Europe, 2016; Scale Up Institute, 2019). We address the research question through a qualitative study of globally scaling software-as-a-service (SaaS) firms.
This article contributes to the global strategy literature in three ways. First, we extend past
studies of how MNEs navigate conflicting demands (e.g., Bartlett & Ghoshal, 1987; Devinney
et al., 2000; Harzing, 2000; Prahalad & Doz, 1987), by focusing on an increasingly important
context where rapid growth and digitization co-exist. We show that globally scaling digital
MNEs struggle with a persistent contradiction between the need for entrepreneurship to identify, evaluate, and exploit new opportunities to fuel growth in competitive and dynamic markets, and insisting on replication to enable rapid and efficient international expansion. We label
this persistent contradiction the paradox of global scaling. Consistent with Prahalad and
Doz (1987), these firms deliberately elude an “either-or” solution and navigate the paradox by
prioritizing both demands simultaneously.
Second, we show that globally scaling digital MNEs follow a new-to-the-literature strategy,
which we label replicable innovation, to navigate these competing demands and sustain competitiveness. The replicable innovation strategy is based on a virtuous cycle that sustains competitiveness through three mechanisms: a top-down replication mechanism, a bottom-up entrepreneurial
mechanism, and a replicable innovation generation mechanism. Surprisingly, given the ease of
modifying digital products and services, navigating the global scaling paradox involves minimizing
local responsiveness, which informants regarded as antithetical to replication. Instead, the mechanisms together prioritize innovations to the global business model that can be replicated throughout
the MNE. We show how this strategy is distinct from Bartlett and Ghoshal's (1989) transnational
solution and Jonsson and Foss' (2011) flexible replication strategy.
Third, by focusing on business-to-business firms, which have been under-studied in
prior research on the international strategies of digital firms, we provide evidence that digitization is not necessarily associated with localization, as has been argued. In doing so, our
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study addresses calls for greater theory-building on the variability of global strategies in the
context of digitization (e.g., Alcacer, Cantwell, & Piscitello, 2016; Autio, 2017; Autio
et al., 2021; Monaghan et al., 2020; Nambisan, Zahra, & Luo, 2019; Tallman & CuervoCazurra, 2021).
In the next section, we describe the theoretical background to the study's design, in terms of
the extant literatures on global scaling, tensions in global strategy, and paradox theory. Following this, we describe our research methods and present our findings. Finally, we explain how
our findings contribute to global strategy scholarship and discuss the boundary conditions, limitations, and managerial implications.
2 | THEORE T I CAL BACK G ROU ND
2.1 | Global scaling as a logic of multinationalization
The theoretical background for this study is the conceptualization of global scaling, defined as a
“logic of multinationalization that seeks rapid growth through the replication of a global business model across foreign markets” (Reuber et al., 2021, p. 1031). Core to this definition are
three elements which are summarized below.
The first element is persistent high growth. This is normally operationalized as growth
exceeding 20% per year over 3 years (e.g., Duruflé et al., 2018). However, it is not unusual for
global scaling firms to exhibit hypergrowth with a compound annual growth rate exceeding
40% (World Economic Forum, 2016).
The second element is a global business model. A “business model” refers to the system of interdependent organizational activities centered on a focal firm that creates and
delivers value to its customers. It involves the focal firm's value proposition to customers,
the activity system of actors and resources that create and deliver this value, and its revenue and cost structures (McDonald & Eisenhardt, 2020; Teece, 2010; Zott, Amit, &
Massa, 2011). A global business model is “the means by which the multinational enterprise (MNE) creates customer value and builds its own profits distinctively and sustainably in the global marketplace” (Tallman, Luo, & Buckley, 2018, p. 518). The global
business model of a globally scaling firm is, by definition, based on uniformity across
country markets (Tallman et al., 2018, p. 528) and embodies the non-location-bound
firm-specific advantages that reduce costs and friction of entering foreign markets
(Reuber et al., 2021, p. 1033).
The third element of the global scaling definition is a replication strategy, whereby firm
growth is based on large-scale replication of an established business model across new locations
(e.g., Winter & Szulanski, 2001). Replication strategies have previously been linked to rapid
international expansion (Jonsson & Foss, 2011; Szulanski & Jensen, 2006, 2008; Winter,
Szulanski, Ringov, & Jensen, 2012).
It is important to note that global scaling may not occur soon after start-up, because it can take
time for a viable global business model to be developed. For example, Qualtrics and Netflix were
12 and 13 years old, respectively, before they started to scale globally (Brennan, 2018; Tippmann &
Monaghan, 2018). Moreover, global scaling is resource-intensive, and firms usually tap into external
“patient” capital to achieve such rapid growth (Aernoudt, 2017; Duruflé et al., 2018). These insights
about global scaling helped us to develop sampling criteria for the study.
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2.2 | Tensions in global strategy
While global scaling is a distinct logic of multinationalization that has been under-explored, the
global strategy literature nevertheless provided several important theoretical insights for our
study. First, Bartlett and Ghoshal (1989) argue that when an established MNE operates in a
global industry, as do the SaaS firms in our study, efficiency is the dominant demand, due to
the need to build cost advantages. These MNEs therefore seek “global scale, relatively unimpeded by national differences” (Bartlett & Ghoshal, 1989, p. 23), centralizing and globally
integrating operations, knowledge development, innovation activities, and strategic decisionmaking.
Second, when firms internationalize with a replication strategy, as do globally scaling firms,
the emphasis is on exploiting the current business model across new locations and avoiding
deviations from it. Winter et al. (2012) show that precise replication of the established business
model, compared with localization, is associated with lower failure of a new location. Local
modifications to the business model can lead to cascading modifications, which can unravel the
logic of the business model and result in ineffective local operations. For that reason, a negative
relationship has been found between localization of the business model and growth in a country (Szulanski & Jensen, 2006, 2008). These findings imply that internationalizing with a replication strategy may favor standardization over localization, even if there are pressures for local
responsiveness. However, in a study of the replication strategy of IKEA, Jonsson and Foss (2011)
found that IKEA permitted certain aspects of their retail operations to be locally determined,
including product ranges, pricing, store formats, store design, standard operating procedures,
and human resource management (Jonsson & Foss, 2011, p. 1090). As a variant of a replication
strategy labeled “flexible replication,” this strategy was effective for IKEA.
Third, a common underlying pressure of MNE strategies is to develop and diffuse new
knowledge across the organization for worldwide learning (Bartlett & Ghoshal, 1989; Doz,
Santos, & Williamson, 2001). In fast-moving global markets, an initial global business model
will not enable a firm to remain competitive indefinitely, and even MNEs following a replication strategy are likely to experience pressure for innovation to remain competitive. While most
prior studies on international replication strategies do not explicitly consider evolutionary modifications to standardized practices, Jonsson and Foss (2011) show that IKEA's success involves
slow modifications to company-wide practices when experiential learnings from local stores are
shared across the corporation.
Fourth, the limited literature on the strategies of digital MNEs tends to highlight localization. Autio et al. (2021) argue that in specialized high-knowledge areas, digitization results in
centrifugal forces that disperse MNE activities more widely and enable MNEs to leverage dispersed knowledge better. Marano, Tallman, and Teegen (2020) highlight the multidomestic
nature of digital firms with disruptive business models, which need to address legitimacy issues
in host countries where there is pushback against them. And Stallkamp and Schotter (2021)
argue that digital platform firms are more likely to adopt global strategies when network externalities are predominantly cross-country, and multidomestic strategies when network externalities are predominantly within-country. This latter group of digital platforms adopting
multidomestic strategies include the business-to-consumer platforms studied by Brouthers,
Geisser, and Rothlauf (2016) and the business-to-consumer mobile gaming apps studied by
Shaheer, Li, and Priem (2020).
Overall, these insights from past research sensitized us to pay attention to efficiency, innovation, and localization priorities and the existence of multidomestic strategies, when collecting
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and analyzing the data, in addition to replication. As well, the case of IKEA (Jonsson &
Foss, 2011) emphasized the importance of contextualization in designing global strategy studies
and suggested that designing our study on a single industry would be beneficial.
2.3 | Paradox theory
Doz and colleagues identify the persistent conflicting demands faced by MNEs as organizational
paradoxes (Evans & Doz, 1990; Prahalad & Doz, 1987). Similarly, Pant and Ramachandran (2017)
and Ambos, Fuchs, and Zimmermann (2020) label the tension between localization-standardization
and global integration-local responsiveness, respectively, as paradoxes. Given that conflicting
demands related to international strategies have been identified as paradoxes in prior literature, we
were alert to the possibility of encountering paradox when analyzing the data.
A paradox is defined as a “persistent contradiction between interdependent elements”
(Schad, Lewis, Raisch, & Smith, 2016, p. 10). Paradoxes cannot be resolved but need to be navigated on an ongoing basis (e.g., Andriopoulos & Lewis, 2009; Evans & Doz, 1990). Rather than
making “either/or” trade-offs, this involves the challenge of meeting “both/and” demands
simultaneously (Prahalad & Doz, 1987; Smith, 2014; Smith & Lewis, 2011). Paradox theory drew
our attention to the types of mechanisms used to navigate contradictory demands. Managers
may navigate paradox by attending to the unique demands of each dimension of the paradox
separately, through differentiating mechanisms; or they may seek to unleash synergies between
the contradictory demands by treating them as inseparable through integrating mechanisms
(Andriopoulos & Lewis, 2009; Jarzabkowski, Lê, & Van de Ven, 2013; Smith, 2014; Smith &
Tushman, 2005). Further, this literature points out that the navigation of organizational paradoxes may involve cycles, either vicious or virtuous (Lewis, 2000; Smith & Lewis, 2011), and so
we were attuned to this possibility when analyzing the data.
3 | METHODS
3.1 | Research design and setting
Like much qualitative research, our theory-building approach was both inductive and abductive
(e.g., Grodal, Anteby, & Holm, 2021; Harley & Cornelissen, 2020; Van Maanen, Sørensen, &
Mitchell, 2007). Our analytical stance was inductive in that it involved making theoretical
claims based on empirical data (Harley & Cornelissen, 2020, p. 5), and it was abductive in that
it involved searching for explanations for surprising discrepancies in the data that prior research
could not explain (Van Maanen et al., 2007, p. 1149). Within this hybrid approach, we designed
the project using prescribed techniques to ensure, as far as possible, the trustworthiness of our
findings (Cuervo-Cazurra, Andersson, Brannen, Nielsen, & Reuber, 2016; Pratt, Kaplan, &
Whittington, 2020).
Specifically, we adopted a multiple case study research design. A multiple case study
research design has previously been used to illuminate issues associated with rapid international growth (e.g., Marano et al., 2020; Monaghan & Tippman, 2018), navigating organizational paradox (e.g., Smith, 2014), and managing tensions in MNEs (Bartlett & Ghoshal, 1989;
Tippmann, Sharkey Scott, Reilly, & O'Brien, 2018). A multiple case study research design permits a “replication logic,” where individual cases serve as replications, contrasts, or extensions
TIPPMANN ET AL.
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to the emerging theory, analogously to multiple experiments (Yin, 2014). In adopting a multiple
case study design, we avoided the use of specific methodological templates in favor of customizing practices and techniques for different aspects of the project (e.g., Corley, Bansal, & Yu,
2021; Pratt, Sonenshein, & Feldman 2020; Reuber & Fischer, 2022). Our practices are described
in the following sections.
Given the contextual nature of global strategy (Prahalad & Doz, 1987), and different ways
for digital firms to grow internationally (Stallkamp & Schotter, 2021), we focused on one type of
firm—the Software-as-a-Service (SaaS) firm—in order to be able to contextualize our research
findings. Specifically, we focused on SaaS firms selling to enterprise markets that did not have
Platform-as-a-Service (PaaS) capabilities to enable user innovation.
SaaS firms differ from traditional software vendors. Traditional software vendors offer onetime perpetual licenses or purchases, with customers paying for software updates. Customers
are then responsible for providing the hardware to run the software, as well as for installation
and maintenance. In contrast, SaaS firms provide software and service. They run and maintain
the software on their own servers, with customers paying a subscription fee for cloud-based
access. The flexibility and lower investment costs associated with SaaS products have proven to
be attractive to customers. Total worldwide revenue for cloud-based software was estimated to
be roughly $46 billion in 2017, growing at almost 20% a year (Gartner, 2017). Well-known
examples of SaaS firms include Dropbox and HubSpot.
We focused on SaaS firms for two reasons. First, the digital nature of their processes and
products facilitates global scaling. Second, they face pressures to scale globally. SaaS firms are
knowledge-intensive, with a high degree of proprietary technological knowledge (Guo &
Ma, 2018). They operate in a global competitive landscape with low entry barriers (Ojala, 2016)
and early mover advantages (Kutcher et al., 2014). They are, therefore, motivated to capture a
large global market quickly in order to recoup high software development costs (Fan, Kumar, &
Whinston, 2009; Katzmarzik, 2011) and establish early market dominance. The recurrent revenue model of SaaS firms provides a steady cash flow to appease banks, and it is common for
investors to finance global scaling once a SaaS firm has a global business model in place. External funding reinforces pressures to grow rapidly, making SaaS firms an ideal setting to observe
any tensions during global scaling.
It might be expected that SaaS firms grow internationally primarily by exporting, because
the digital nature of their products and distribution channels enable engagement with end users
from a distance. However, even when they use multiple foreign operation modes (Benito,
Petersen, & Welch, 2009), they are motivated to establish subsidiaries, for two reasons. First,
their high knowledge intensity drives a need for control through internalization in order to
maintain competitiveness (e.g., Kogut & Zander, 1993). Indeed, SaaS firms are motivated to
establish subsidiaries close to their customers to be able to identify needed innovation more
quickly. Traditional software vendors offer upgrades periodically, in a stepwise manner, and
customers can pay for them (or not). In contrast, SaaS firms continuously improve software
quality, and customers do not pay for it. Given low entry barriers (Ojala, 2016), a SaaS firm's
competitiveness depends on how quickly it can offer improvements in quality and functionality
(Campbell-Kelly, 2009; Guo & Ma, 2018). This favors internalization and a presence close to
customers. A second reason for establishing subsidiaries is that sales and service transactions
are complex. Customers buy only the functionality they require, rather than a single uniform
product version (Katzmarzik, 2011), and this implementation tailoring needs to be supported by
a sales force (Ma & Seidmann, 2015). Given that service excellence is expensive to deliver, operational efficiency is critical (Fan et al., 2009), and so a local presence is desirable. Similarly, the
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preference of SaaS firms for longer-term contracts with clients to recoup their large R&D costs
(Luoma, Laatikainen, & Mazhelis, 2018) suggests that a local presence is chosen to build meaningful client relationships.
While the economics of the SaaS context are conducive to global scaling, it is important to
note that only a subset of SaaS firms is successful at global scaling (McIntyre, 2021). We can
find no evidence to suggest that SaaS firms differ from firms in other industries, in that most
new firms fail and only a few are able to grow significantly (Aldrich & Ruef, 2006, p. 26). A
McKinsey study of 3,000 software and online firms indicates that success occurs infrequently:
only 28% of the firms studied reached $100 million annual revenue, 3% reached $1 billion, and
0.6% grew beyond $4 billion (Kutcher et al., 2014). Moreover, the same McKinsey report emphasizes the difficulty of sustaining rapid international growth (Kutcher et al., 2014). We can therefore assume that global scaling is not an easy endeavor in the software industry.
3.2 | Sample
Our sample consists of eight firms, which we refer to as Alder, Birch, Elm, Hazel, Maple, Oak,
Pine, and Willow to protect their anonymity. They are described in Table 1, and the criteria
used to select them are outlined below.
Following past research on early and rapid international growth (e.g., Oviatt &
McDougall, 1994) and organizational paradox (e.g., Andriopoulos & Lewis, 2009), we intentionally studied successful firms. Our objective was not to understand variance in performance, but
rather to understand how firms navigate competing demands during global scaling. Therefore,
we selected cases as multiple instances of firms known to be theoretically relevant: they are all
success stories with a known outcome, which is a “literal” replication strategy (Yin, 2014). We
operationalized success at global scaling through three selection criteria that were consistent
with the definition of global scaling (Reuber et al., 2021).
The first criterion was that the firms were replicating a global business model across foreign
markets in multiple regions. We selected firms that had established at least two foreign subsidiaries in different regions, and that had received venture capital funding explicitly for international expansion, indicating they had a global business model in place.
The second criterion was that the firms had achieved a persistent period of rapid international growth. With three exceptions, we selected firms that had achieved the standard operational measure of rapid growth: a sales or employee growth of at least 20% per annum over the
3 years preceding data collection (Acs & Mueller, 2008; Aernoudt, 2017). We chose three firms
(Birch, Hazel, and Willow) which had not yet been globally scaling for 3 years in order to be
able to collect data from firms that were newer at global scaling. Although they had been growing at the “scaling” rate for 3 years prior to data collection, they had been globally scaling for
1.5 years, 2.5 years, and 2.5 years respectively at the time of data collection. Three years after
the initial data collection, we collected follow-up data from informants, IPOs/annual reports,
and documentary data as evidence that all the firms in our sample had sustained rapid growth.
Five of the sampled firms (Birch, Elm, Oak, Pine, and Willow) continued to grow by at least
20% annually for the additional 3 years, while the remaining three firms (Alder, Hazel, and
Maple) were successfully acquired at a high multiple of their firm value (between 2.5 and
16 times). Thus, we concluded that all firms were in a period of successful global scaling during
data collection. Moreover, the increase in the number of international employees in the firms
was extreme and persistent (see Table 1): they had increased between 100% and 2,000% during
3.5
2
Length of global scaling
(years)
Number of foreign
subsidiaries
6
Co-founder and CFO x2
Chief Scientist
x2
7
1 sub
2 subs
VC
1 HQ; 2 subs
Abbreviations: HQ, headquarters; sub, subsidiary; VC, venture capitalist.
a
“x2” means two interviews with a person.
Observations (# of office
visits)
Board member informants VC; Adviser
5
80
120
>200%
2
2.5
4
Hazel
7
210
70
>400%
6
3
11
Maple
1 HQ
VC; Adviser x2
CFO; VP
Operations
4
230
110
>100%
4
5
11
Oak
Director
Strategy x2
6
60
370
>150%
11
5.5
4
Pine
7 subs
2 subs
2 subs
VC
Regional Dir;
VP Global
Regional
Sub Mgr; Sub
Operations x2 Director; 2
Mgr x2
Sub Mgrs
CEO; Global Ops VP Global Sales; CEO; CoMgr x2; Dir
Lawyer
founder; VP
global facilities
Global Sales
6
120
380
>200%
10
4
4
Elm
Subsidiary/regional
Co-founder and Sub Mgr x2; Regional VP;
headquarters informants CTO x2
Sub Mgr
Global Sales
(HR)
Director
Headquarters informants
Number of interviews
110
70
Online videos (min)
a
210
>2000%
2
1.5
4
Birch
Print and online text (pages) 560
Overview of data collection
Compound annual growth
>150%
rate in international
employees during global
scaling period (the 3 years
before data collection)
2
Age when firm commenced
global scaling (years)
Overview of sampled firms
Alder
T A B L E 1 Overview of sampled firms and data collection
1 HQ; 2 subs
Regional VP;
EMEA
Mkting
Director x2
COO x2
5
320
280
>400%
4
2.5
8
Willow
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the global scaling period at the time of data collection, which is substantially above the 20% per
annum standard measure of rapid growth.
The third criterion was that the firms were globally scaling. International strategy scholars
have suggested thresholds to assess whether a firm is truly global rather than regional
(e.g., Osegowitsch & Sammartino, 2008; Rugman & Verbeke, 2004, 2008; Verbeke,
Coeurderoy, & Matt, 2018). Since we intended to study firms successfully engaged in global
scaling (vs. being categorized as “global”), and following Reuber et al. (2021), we considered this
criterion to be an ambition (Verbeke et al., 2018, p. 1102), but not necessarily a current attainment. That said, we assessed the firms on Verbeke et al.'s (2018) “globalness” criteria, which
were adopted by Reuber et al. (2021) in the conceptualization of global scaling. Table 2 shows
the globalness metrics of the firms in our sample.
We collected data on five globalness criteria. The first is that a firm commands non-location-bound firm-specific advantages. All eight firms meet this criterion since their global business model was based on intentionally global processes and products. The second and third
criteria are that a firm has both (a) significant geographic breadth (i.e., a presence in many
countries) and (b) depth of international involvement (e.g., a significant percentage of overall
assets and sales in various countries). In terms of breadth, as can be seen in Table 2, six of the
firms were assessed as global and two as bi-regional on the basis of the number of countries in
which they generated revenue. We measured depth in terms of human assets (employees). We
considered three firms (Alder, Birch, and Hazel) to be strongly global by extrapolating the
Rugman and Verbeke (2004) 50% threshold to the number of employees working outside the
home market, and four firms (Elm, Maple, Pine, and Willow) to be weakly global with the same
extrapolation to the Osegowitsch and Sammartino (2008) 20% threshold. Oak is a “home-region
oriented” firm on this criterion. The fourth criterion is the scope of value chain activities
involved in a firm's international operations, which has been identified as a factor affected by
digitization (Autio et al., 2021). The key value chain activities for SaaS firms are sales, R&D,
and support. Table 2 shows the distribution of these activities across the three regions in which
the firms were predominantly operating. Three of the firms were considered global, in terms of
having all three activities in three regions; two of the firms were clearly bi-regional; and two of
the firms were assessed as being in-between, with client-facing value chain activities in three
regions and R&D in two regions. Finally, with respect to the fifth criterion, informants in all
sampled firms expressed strong global ambitions, as shown by the illustrative quotations in
Table 2. This analysis indicates that, although there are differences in how strongly a criterion
was met, it seems fair to say that at the time of data collection, four of the firms (Alder, Birch,
Elm, and Maple) met four of the five criteria and four of the firms (Hazel, Oak, Pine, and
Willow) met three criteria. Thus, becoming a global firm was not just an ambition; the firms we
studied were on a trajectory to achieve it.
Within the literal replication strategy, we followed theoretical sampling (Yin, 2014) to
ensure there were other similarities among firms to enable comparison and replication and
improve our ability to delineate the transferability of our findings (Eisenhardt, 1989). In
selecting firms for the sample, we not only sought homogeneity in terms of industry and success
at global scaling, as discussed above, we also constrained extraneous variation in four other
ways. First, the firms were all headquartered in the United States, to ensure a common host
country context. This is consistent with prior research which indicates that home country characteristics are associated with outcomes of rapid internationalization (e.g., Fan & Phan, 2007),
specifically for firms selling digital products (e.g., Brouthers et al., 2016; Stallkamp &
Schotter, 2021). Second, the firms were privately owned and venture capital funded, to avoid
Non-locationbound firmspecific
advantages
Global
Global
Global
Global
Global
Global
Global
Global
Firm
Alder
Birch
Elm
Hazel
Maple
Oak
Pine
Willow
>200
Global
>20
Bi-regional
>100
Global
>50
Global
>20
Bi-regional
>50
Global
>100
Global
>100
Global
Breadth of sales
(number of
countries revenue
is generated in)
T A B L E 2 “Globalness” of the sampled firms
30%; 200
Weakly global
35%; 650
Weakly global
15%; 500
Home-region oriented
20%; 700
Weakly global
85%; 35
Strongly global
20%; 450
Weakly global
50%; 200
Strongly global
55%; 65
Strongly global
Depth of human assets
(employees) in foreign
subsidiaries (%; total)
Sales (3); R&D (2); Support (3)
Global (client-facing)
Sales (3); R&D (3); Support (3)
Global
Sales (3); R&D (2);
Support (3)
Global (client-facing)
Sales (3); R&D (3); Support (3)
Global
Sales (2); R&D (2); Support (2)
Bi-regional
Sales (3); R&D (3); Support (3)
Global
Sales (2); R&D (2); Support (2)
Bi-regional
Sales (2); R&D (2); Support (2)
Bi-regional
Value chain activities
(number of regions from:
Americas; Europe and Middle
East; Asia Pacific)
“We want to build a global technology
company.” (COO)
“We have a grand vision for the future, and
being a truly global company is one of the
main pillars.” (Director Strategy)
“This is something that we've been working
on with the top leadership; making sure
that the global piece is on the radar of
everyone.” (VP Global Operations)
“Bringing in our co-founder meant being
able to think at a global level … we are
going to be global.” (Founder/CEO,
archival)
“Starting the company from day one, we
were very much focused on being a global
company.” (Founder, archival)
“There were global ambitions from the
start.” (Global Sales Director)
“It is a global vision. We are not focused on
mass localization.” (Subsidiary Manager)
“There is a strong chance of [being] a global
company … They have to monitor against
the main competitors on the global scene.”
(Venture Capitalist)
Illustrative quotation regarding the
ambition of the firms' leaders to become
a global firm
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the complexities of public firms. Third, all firms were business-to-business to ensure they
shared a general approach to sales. Fourth, all firms had a subsidiary in Ireland, which served
as the regional headquarters leading the expansion into Europe, the Middle East, and Africa
(EMEA) and, for two of the firms (Elm, Oak), also into the Asia Pacific (APAC) region. Ireland
offered access to talent, cost-efficiencies, and proximity to EMEA markets to support an accelerated geographic expansion.
While constraining variation in these ways, we also sought variation to explore four firmlevel characteristics that past research suggests may be relevant to global scaling: the age when
the firm started to scale globally, firm size, the number of subsidiaries, and length of global scaling period. First, we varied firm age because younger firms tend to have fewer organizational
rigidities, allowing them greater nimbleness and flexibility, while older firms have more
established organizational routines that can be inertial (Aldrich & Auster, 1986). The age at
which a firm started global scaling was operationalized as the age after start-up at which they
had either received funding explicitly for international expansion or set up a foreign subsidiary.
The sampled firms started to scale globally between 2 and 11 years after start-up. Second, we
varied the firms by size (number of employees), because smaller firms exhibit faster competitive
reactions than larger firms (e.g., Chen & Hambrick, 1995). The sampled firms had between
35 and 700 employees in total. Third, we varied the firms by the number of subsidiaries they
had established: firms get better over time at establishing subsidiaries (Delios &
Beamish, 1999), and this may enhance their ability to replicate. The number of foreign subsidiaries of the sampled firms at the time of data collection varied from two to 11. Fourth, as mentioned previously, we varied the time period over which the firms had been globally scaling, in
the expectation that firms which had been scaling longer had better-developed mechanisms to
manage any tensions associated with replication. This time period varied from 1.5 to 5.5 years.
After successively collecting and analyzing data from these eight cases, we were detecting
repetition and similar insights from informants. All data categories had well-developed properties and dimensions, and so we concluded that the addition of a new case would not offer new
conceptual insights (Strauss & Corbin, 2008). Our sample size is consistent with the tenets of
our sampling approach (Yin, 2014, p. 59).
3.3 | Data collection
Our data sources for each firm are summarized in Table 1. We collected three types of data to
add richness to each case, as described below. We used a documented protocol to ensure that
the collection and analysis of data was handled in a uniform way across cases (Yin, 2014,
pp. 84–86). Moreover, data were triangulated within and across data sources to strengthen its
validity (Cuervo-Cazurra et al., 2016; Yin, 2014).
3.3.1
| Archival data
We collected archival data on the firms from their founding. Data sources included: articles in
newspapers and magazines (found through searching the LexisNexis database by firm name);
online postings in firm blogs and press releases (found from company websites); and online
postings of personal blogs, interviews, videos, and talks by founders, CEOs, and executives
involved in internationalization (found through company websites and online searches of the
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name of the firm and names of key executives). This archival data, totaling more than 2,100
pages of text and 20 hours of video recordings, was invaluable in providing insights on the history of the firms and offering real-time managerial accounts of the entire period of global scaling covered in our study.
3.3.2
| Interviews
We interviewed 46 informants associated with the eight firms, seeking multiple perspectives on
the global scaling of each firm. We identified the most appropriate leaders to interview through
preliminary discussions with a founder or executive of the firm. At company headquarters, we
interviewed founders, senior executives, and managers most responsible for overseeing internationalization. At the subsidiaries, we interviewed managers tasked with developing regional or
country operations. For four firms, we also interviewed a venture capitalist and/or another
adviser who served on the board of directors. Collecting data from these three perspectives—
headquarters, subsidiary, and investor/adviser—provided multiple perspectives on how global
scaling was managed in each firm. Gaining multiple perspectives is especially important in
investigating organizational paradox because some informants may be able to perceive only one
side of the conflicting demands (Schad et al., 2016). It also reduces the risk of the data being
biased by impression management and retrospective sense-making (Eisenhardt &
Graebner, 2007). We promised confidentiality to informants to encourage them to provide full
and accurate accounts.
Each informant was directly involved in advising on, making, or implementing global scaling decisions, allowing us to gain informed perspectives and ensuring that the data was internally oriented. At each firm, there was at least one informant who had been at the firm from its
inception, and many informants were founding leaders of subsidiaries. We were therefore able
to garner detailed and knowledgeable insights. For practicality of data collection, subsidiary
data was largely collected from the Irish subsidiary, which was either the EMEA regional headquarters (Alder, Birch, Hazel, Willow, Pine, and Maple) or the international headquarters overseeing EMEA and APAC (Elm and Oak). Because our informants were responsible for regional
or global growth, they could discuss issues faced in the subsidiaries of multiple countries, as
well as issues that spanned subsidiaries.
The interviews were based on conventions for the collection of data from multiple cases. We
developed a standard interview protocol through a thorough understanding of the literature on
related topics such as global strategy, rapid (international) growth, the SaaS industry, and digital firms. The protocol was designed to be as unobtrusive as possible so that informants could
tell their own story. We followed the precepts of McCracken (1988, p. 35) and laid out “grand
tour questions” with a series of prompts that informants could “push off against.” This rendered
the interview protocol both standardized across informants and modifiable with specific respondents. We used semi-structured interviews with three similar interview protocols for founders
and headquarter managers, subsidiary managers, and investors/advisers, respectively. We asked
informants to explain the nature of global scaling, the challenges it posed (if any), and the ways
these challenges were addressed. The open-ended nature of the interviews enabled informants
to elaborate with specific examples and events, and we used probes to increase the detail of
accounts. From the very first interviews, informants talked about the contradictory, simultaneous demands of replication and entrepreneurship, and this was an area we often asked them
to discuss in more detail.
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It is important to note that we sought to examine how leaders navigated the challenges of
global scaling without constraining the data collection to specific demands or tensions. This is
consistent with past research on management activities in MNEs which enables informants to
conceptualize important aspects under their purview (e.g., Tippmann, Sharkey Scott, &
Mangematin, 2012). All the interviews took place when the firms were actively engaged in
global scaling, as previously described, and so challenges, including contradictory demands,
were salient to them.
Initial interviews took place in early 2015 and follow-up interviews were undertaken at the
end of that year. Of the 46 interviews, 25 were face-to-face interviews conducted at a company
office, and 21 interviews were conducted via telephone or video call. The interviews captured
real-time data on global scaling activities, as well as retrospective data about past activities.
Given the danger of informants retrospectively creating “new memories” (Loftus &
Hoffman, 1989), we followed the norms of minimizing retrospective bias when discussing past
events by focusing on actual behaviors of firms instead of on individuals' opinions or beliefs
and by interviewing multiple key informants (Miller, Cardinal, & Glick, 1997).
Each interview lasted about 45 min, with some extending to one-and-a-half hours. We
recorded and transcribed all the interviews, with one exception: for Elm, we took detailed notes
during all six interviews, to comply with directions given by their legal department. We transcribed our notes immediately after each Elm interview.
3.3.3
| Observations
Observations were captured through field notes written up after each visit (Strauss &
Corbin, 2008, p. 123), and the focus was on recording information about the location, physical
layout, and décor of each office. We took field notes when making 21 visits to the firms'
U.S. headquarters and Irish subsidiaries to conduct interviews, which was collected and input
to the dataset separately. (The number of visits is less than the number of face-to-face interviews because in a couple of cases we interviewed multiple people during one visit.) Consistent
with the precepts of observational methods (Bernard, 2002), our field notes separated objective
facts (e.g., the presence of a logo on the wall) from our interpretation of the facts (e.g., a perception that the bar in a subsidiary was designed to look “Irish”) to reduce potential
subjectivity bias.
Initially, we did not recognize the relevance of the field notes to the theoretical model that
emerged. It was when we read about the importance of store layouts in the study of replication
at IKEA (Jonsson & Foss, 2011) that we thought more deeply about the role of physical spaces
in a replication strategy. Accordingly, we went back to our field notes to analyze the observational data more closely.
3.4 | Data analysis
Following the tenets of case-based research, we started analyzing data as it was being collected
in order to probe for emerging themes and unfolding firm-level events in subsequent interviews
(Eisenhardt, 1989). Since we investigated a phenomenon relatively new to the scholarly literature, we performed an iterative analysis that involved constant comparison of our data with
prior literature and emerging theorization (Strauss & Corbin, 2008). We performed three
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analytic steps to support our aim of building theory, although they were performed iteratively
with significant cycling between steps. Treating each firm as a standalone “experiment,” we
started with a detailed within-case analysis before undertaking cross-case comparisons and then
model-building (Eisenhardt, 1989; Yin, 2014). To increase the reliability of our findings, two
authors coded the data independently, questioning and challenging each other's coding to
arrive at consensus (Eisenhardt, 1989). We maintained a systematic record of the data, codes,
discussions, and emergent understandings throughout the data analysis period. Our data analysis is described in more detail below.
3.4.1
| Step 1: Within-case analysis
To start, we wrote a detailed case write-up for each firm, using the archival, interview, and
observation data to triangulate insights within and across data sources. In this within-case analysis, we focused on understanding the relationship between informants' perceptions of global
scaling, the demands, the challenges (if any) it posed to their firm, and the mechanisms used to
deal with them. Since the interviews were conducted while firms were globally scaling, each
case history contained detailed accounts of specific real-time events, decisions, and priorities
from the informants' perspective. Given prior research findings on replication strategy, we paid
particular attention to informants' discussion of competitive pressures and localization pressures and whether these represented hurdles for replicating their firm's global business model.
We used open coding logic (Strauss & Corbin, 2008) for a systematic analysis, by coding themes
we observed in the data. For example, one code indicated the importance of process replication
and another code indicated the demands for individual proactiveness. In assigning codes, we
noticed contradictory statements within the data for each firm, for example, when informants
discussed tensions associated with increased formalization while the firm scaled. While this
analysis was based on triangulated data from the three types of data, we relied heavily on the
interview insights. This emphasis is consistent with evidence that a firm's leaders perceive more
internal complexity and constraints in achieving rapid growth than do more distant observers
(e.g., Reuber & Fischer, 2003), and with prescriptions for researchers to incorporate the perceptions of managers in explaining their internationalization choices (e.g., Bouquet &
Birkinshaw, 2011; Kano & Verbeke, 2019).
Following the axial coding logic (Strauss & Corbin, 2008), we next clustered the empiricallybased themes into more abstract categories, connecting the empirical themes conceptually.
These categories, together with additional supporting empirical evidence, are shown in
Tables 3 and 4.
To build these categories, we compared our emerging themes with established theoretical
constructs. In this regard, we paid particular attention to a contradiction that was clearly visible
in the data. Specifically, informants contextualized the generic contradiction between replicating and changing a global business model as one between replication and entrepreneurship in
global scaling. They articulated the relationship between these two organizational demands
with expressions such as “but” and “more of x makes y more challenging.” This parlance
suggested that the contradictory demands represent a paradox (Smith & Lewis, 2011), which we
labeled the paradox of global scaling.
To analyze this paradox in more detail, we examined all instances in the data relating to the
themes of firm-level replication and entrepreneurship. This confirmed that informants saw the
contradictory demands as persistent and intertwined, aligning with the definition requirements
Demand for entrepreneurship
Definition: The need for continual
identification, evaluation and exploitation of
opportunities
“We obviously want to make sure that our focus is on
continuously improving and innovating. A big part
of that is continuing to improve our product and
continuing to innovate in those areas in the
future.” (Subsidiary Manager, Birch)
“There is a recognition that growing and scaling, and
even becoming a public company, is down to your
ability to innovate.” (VP Global Sales, Hazel)
“They [founders] will constantly be challenging you
to learn new things, to develop new processes to
come up with new skills, to take new risks … and
so with that, we are constantly innovating and
constantly releasing new products.” (VP Global
Sales, Maple)
Demand for replication
Definition: The need for continual restraint on
changes to a firm's business model as it is
exploited across the organization
“The goal is to have a sales representative in the
U.S. … and the sales representative in Ireland to
work in the same way, with the same processes.”
(EMEA regional headquarters, Maple)
“This is one of the things that we really push in
terms of how we grow our business as we scale
internationally. The layers of what we've done so
far is within the U.S. market, we try and replicate
it and take that to the international level … Our
mindset is that we have the recipe for what
worked in our U.S. market. We try to replicate it
in other markets.” (Subsidiary Manager, Birch)
“We do follow a defined structure and defined
model to go to market … we have very defined
business processes across the organization.” (VP
EMEA, Elm)
“I think we're trying to maintain that
[entrepreneurship] as much as we can … But
having everybody doing that also leads to a lot of
chaos and disorganization. We're trying to keep it
at a certain level, but as you continue to get
larger, it gets more and more difficult. We'd love
to be able to continue to do that, but I think that
it is getting a little bit of a challenge as we
continue to grow, especially in an international
organization, which has requirements all around
the world that people aren't always aware of.”
(CFO, Birch)
“But as we continue to grow, it gets more and more
tricky to spread and maintain that initial
entrepreneurial enthusiasm.” (Director Strategy,
Pine)
“As our company grows, like every company of a
larger size in terms of employees, revenue,
eventually we will need a lot of processes that
will keep things running smoothly. It will have
more layers of management, so that will keep it a
bit more difficult to enable and keep this
entrepreneurial spirit.” (Subsidiary Manager,
Maple)
Global scaling paradox
Definition: Firm-level replication and
entrepreneurship pose persistently
contradictory demands
T A B L E 3 Additional illustrative evidence on the demand for replication and entrepreneurship, and the global scaling paradox
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Bottom-up entrepreneurial orientation
Based on: Hiring young, versatile employees;
autonomy at job level; entrepreneurial values
“What we try to give people a lot of responsibility
on their function and not be micromanaging
people. You hold them accountable for the
result, but the way they get those results—give
them the opportunity to express and be
resourceful and entrepreneur-like in going after
their goals.” (VP Global Operations, Oak)
“He [CEO, Co-founder] has tried to make a
company that empowers people to go and solve
their own problems. People are encouraged and
cheered if they come up with ideas and solve
these problems.” (Subsidiary Manager, Pine)
“Our employees operate semi-autonomously
without waiting on someone from HQ, and also
they really feel like they are integral to the
company because we expose all employees to
every function of the business.” (Regional VP,
Willow)
Top-down replication
Based on: Tacit knowledge among seniors;
formalization; organization culture
“As part of that growth, as well, we have hired a senior
management team. We've brought in a professional
CEO in the U.S. market, and we've brought in the
former VP of Services from Salesforce Europe, who
has just joined us now and is our worldwide head of
sales.” (Archival, Hazel)
“So as a company grows, fighting hierarchy is futile—
you will just invite chaos … So embrace the concept
of structure to minimize growing pains.” (Archival,
Elm)
“When you're a small team the culture is just there,
because people are in such close quarters and you
know what people are like. But as your team grows,
you need to make sure that that is maintained across
the teams and that the people have all the same
values and understand what you're about as a
company and trying to accomplish.” (Co-founder
and Chief Scientist, Alder)
T A B L E 4 Additional illustrative evidence on the mechanisms used to navigate the paradox of global scaling
“On Monday at 4 p.m. o'clock we have beer and
pizzas, and we are asking everyone who has
got a frustrating process that they are
currently involved in to come to us, explain
the process, and we work out a solution for
how to fix it.” (Subsidiary Manager, Pine)
“The developers take a day off from the
standard work and do what they call a hack
day, which is to go off and maybe just build
something else, something that's just been in
the back of their heads … We might try a pub
crawl or a happy hour with the customers.
Let's see if someone turns up. Let's try it as a
workshop where we can get some of our
customers and prospects together. So you're
always trying little things, just to see if they
catch on.” (VP Global Sales, Hazel)
“Technology has really enables the
collaboration between the units and with HQ.
We use a lot of video-conferencing. These
tools integrate ideas and solutions across
different locations and facilitates coordination
and leadership across the globe.” (VP EMEA,
Elm)
Replicable innovation
Based on: Informal feedback forums;
formal idea generation forums; screening
for scalable ideas
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of organizational paradox (Schad et al., 2016). In addition, we went back to the literature on
organizational ambidexterity to check whether prior studies had examined the manifestation of
the tension between exploration and exploitation in the context of (global) scaling, but we could
not locate any such study. We also revisited the literature on tensions within MNEs to ensure
that the contradictory demand between replication and entrepreneurship was different from
ones previously identified; in particular, tensions between standardization and localization
(Bartlett & Ghoshal, 1989) and between integration and responsiveness (Prahalad & Doz, 1987).
This search led us to conclude that we had identified a novel paradox that reflected the
demands of global scaling. To analyze how firms manage the paradox of global scaling, prior
research on organizational paradoxes sensitized us to pay attention to the types of mechanisms
shown to navigate contradictory demands in past research as discussed above
(e.g., Andriopoulos & Lewis, 2009; Smith, 2014; Smith & Lewis, 2011). Additionally, we
remained alert to new types of mechanisms the data revealed.
In the within-case analyses, we also examined whether the perspectives of headquarters and
subsidiary informants aligned. In contrast to prior research, which finds that headquarters and
subsidiary managers can have different views (e.g., Bouquet, Birkinshaw, & Barsoux, 2016;
Stendahl, Schriber, & Tippmann, 2021), we observed similarities rather than differences. We
recognize that perceptions may be more similar in younger and smaller MNEs rather than in
long-established MNEs with many subsidiaries. But the similarities may also be due to the exigencies of focused managerial attention due to the fast pace of international growth. In either
case, the similarity of perspectives across informants strengthens our findings.
3.4.2
| Step 2: Cross-case analysis
The second step of data analysis was to look for cross-case patterns in the data, systematically
looking for cross-case differences and similarities (Eisenhardt, 1989; Yin, 2014). We commenced
cross-case comparison as we developed empirical codes. It is important to note that there was
similarity across all firms in that all empirical codes were manifest in each firm. We also looked
for cross-case differences by successively separating the firms in the sample into groups based
on the characteristics on which we had sought cross-case heterogeneity in the sample, and by
looking for within-group differences. Although we designed the study to allow for variation in
findings based on these four factors, and there was some cross-case variation with respect to the
manner in which the empirical codes were manifested in the data, we did not detect any crosscase variation in the codes assigned that was material to the research question. For example,
older firms (Maple, Oak, and Willow) used formalized mechanisms for idea generation to a
greater degree than did younger firms (Alder and Birch), which is consistent with the greater
formalization of older firms (Aldrich & Auster, 1986). However, there was no evidence that this
difference was material to their capacity to generate usable ideas. The reasons for the overall
lack of variance may be that (1) age-related rigidities and size-related constraints on speed are
slow to set in for firms in the fast-paced SaaS context; and (2) there are fewer learning advantages when firms are expanding through replication of a global business model.
Abduction was used in this phase of analysis to search for explanations for surprising
discrepancies in the data that prior research could not explain (Van Maanen et al., 2007,
p. 1149). One surprise that emerged in the cross-case analysis was the universal reluctance
of informants to pursue localization, while they emphasized the need for innovation, given
prior literature highlighting the ease of modifying digital technologies (e.g., Kallinikos
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et al., 2013). Related, we were surprised that informants emphasized entrepreneurial
behavior throughout the organization at the individual level, in contrast to the existing
MNE literature that focuses on entrepreneurial units or subsidiary initiative processes
(e.g., Ambos, Andersson, & Birkinshaw, 2010; Birkinshaw, Hood, & Jonsson, 1998). These
discrepancies led us to think through the puzzle of what a model of global scaling would
look like if the need for localization was not seen as a critical demand and individual
employees played a role in maintaining firm competitiveness. Our findings also revealed
that global scaling based on a replicable business model for SaaS firms is fundamentally
different than the flexible replication of a bricks-and-mortar retailer, such as IKEA
(Jonsson & Foss, 2011), because of the contextual differences between the two types of
firms.
3.4.3 | Step 3: Developing a theoretical model of how firms navigated the
global scaling paradox
As we iteratively analyzed our data in conjunction with the extant literatures on rapid international growth, replication strategy, and organizational paradoxes, we developed a theoretical
model which explains how firms are able to navigate the contradictory demands of replication
and entrepreneurship that informants saw as inherent in global scaling. Once the model was
formulated, we returned to the data to ensure it reflected the data from each of the firms we
studied.
We then shared our interpretations with key informants from the sampled firms, as well
as knowledgeable practitioners leading or advising globally scaling firms, to gain confidence
that our findings made sense to “those living the phenomena of interest” (Nag, Corley, &
Gioia, 2007, p. 829). We also sought opportunities through workshops and presentations for
our findings and emergent interpretations to be scrutinized by fellow researchers interested
in, and knowledgeable about, this topic. This practice increases the trustworthiness of the
study (Lincoln & Guba, 1985) and is also consistent with past paradox research
(e.g., Smith & Besharov, 2019). This feedback did not result in changes to the model
developed.
4 | F IN D I N G S : TH E G L O B A L S C A L I N G P A R A D O X A N D IT S
NAVIGATION
In this section, we present findings which answer our research question: How do globally scaling digital MNEs navigate competing strategic demands? We first introduce the competing strategic demands that informants highlighted—replication and entrepreneurship—and explain
why they represent a paradox. We label this new construct the paradox of global scaling. We
then discuss how the firms we studied navigate the global scaling paradox to satisfy these two
conflicting demands simultaneously, by presenting three mechanisms described by informants.
At the end of the Findings section, we present a theoretical model of how firms navigate the
paradox of global scaling through a virtuous cycle involving these three inter-related mechanisms. The model is depicted in Figure 1.
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F I G U R E 1 Theoretical model: Navigating the paradox of global scaling through replicable innovation
4.1 | The need for replication and entrepreneurship
Informants identified two fundamental demands of global scaling. As is pointed out below, they
both align with exigencies of the SaaS industry. The first demand is the need for firm-level replication. Informants articulated this demand in a manner consistent with the description of replication in the replication strategy literature: the continual restraint on changes to a firm's
business model as it is exploited across locations (e.g., Winter & Szulanski, 2001). The second
demand is for firm-level entrepreneurship. Informants articulated this demand in a manner
consistent with the definition of entrepreneurship in the entrepreneurship literature
(Shane, 2012; Shane & Venkataraman, 2000): the continual identification, evaluation, and
exploitation of opportunities.
4.1.1
| Need for replication
Consistent with the ambition of being a global firm and the existence of a global business model
to provide homogeneous customer value across different country markets, informants emphasized the importance of replicating the products and processes encapsulated in the global business model across geographies to achieve rapid growth. For example, a subsidiary manager at
Birch stated that they took what worked in the U.S. market and aimed “to replicate it in other
different markets.” This enabled the exploitation of a non-location bound firm-specific advantage across international markets.
Process replication was viewed as being essential to the speed of growth as illustrated in the
following quotation about process replication: “There have to be clear processes in place to
ensure that we can scale so rapidly”—with “clear” meaning that “everybody approaches sales,
or any other business function, in the same or similar manner” (EMEA & APAC Global Sales
Director, Elm). Similarly, a venture capitalist at Hazel stated: “You need to have a repeatable
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sales process that works so you can predict the future of your company before you can even
consider launching an international office.” Moreover, customers were viewed as not having
localized product requirements: “You don't have product managers that are focused on
Australian customers or U.K. customers” (VP Global Operations, Oak). The following quotation
from Maple, a company that offers software to help customers collect and analyze big data,
directly links product replicability to global scaling, in stating that their technology “is built in a
way that fits different markets, and I think this is the basis of why we can scale it into different
markets globally” (Subsidiary Manager, Maple). Further, informants viewed product replication
as enabling process replication. While it may be technically simple to modify digital products
extensively, it is not simple to support modified products on a worldwide basis. The German
subsidiary manager at Pine, for example, explained that there were technical adjustments to the
product that would increase German sales, but these adjustments would hamper Pine's ability
to replicate sales and support processes across markets. This consideration of the implications
of modifications for sales and support activities is consistent with the importance of service
excellence and operational efficiency for SaaS firms (Fan et al., 2009).
Overall, there was consensus across informants on the need to minimize local adaptation to
maintain the replicability of the global business model. This aligns with classic replication strategy, where there is a desire to avoid adaptation because it leads to cascading effects which
unravel the coherence of the business model (Szulanski & Jensen, 2006, 2008). Some minor
localization for cross-country differences was viewed as permissible if it did not affect the business model. For example, the firms localized language and nomenclature, such as accommodating American and European ways to display numbers (e.g., Maple, Oak, Pine). Informants also
discussed accommodations to conform to local data privacy laws and employment laws
(e.g., Birch, Elm) and the greater emphasis on personal relationships in sales processes when
pursuing opportunities with large corporate clients in the EMEA and APAC regions
(e.g., Maple, Pine, Willow). As is underscored in the Discussion section, the emphasis on replication across locations and the concomitant avoidance of local adaptation is an important feature differentiating the global strategy of the SaaS firms we studied from those examined in
prior literature.
4.1.2
| Need for entrepreneurship
Informants also emphasized the need for entrepreneurship to sustain competitiveness in their
fast-moving industry. Indeed, many informants explained that the greatest risk to their companies was not capturing new opportunities that would fuel rapid international growth. For example, the manager of the Irish subsidiary of Pine stated: “Google is one example of a company
that has just grown, grown and grown … because it continues to innovate and innovate, and
iterate and iterate. And that's what we are doing here.” Across the firms we studied, non-location-bound product innovations were consistent with the continual improvement type of innovation required to compete as a SaaS firm (Campbell-Kelly, 2009; Guo & Ma, 2018), such as
providing new product extensions like mobile applications for more operating systems and the
ever-improving analyses of big data. Non-location-bound process innovations usually
improved sales and supported efficiencies, which is also consistent with the competitive
demands of SaaS firms (e.g., Ma & Seidmann, 2015). For example, informants at Oak
discussed launching a new customer engagement process across all its geographic markets
to speed up the work required when dealing with large business clients. Based on the
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extant global strategy literature, we expected informants to talk about location-bound adaptations of products and processes as innovations, but, instead, they discussed only nonlocation-bound innovations. In other words, informants encouraged the pursuit of new
non-location-bound opportunities temporally and avoided the pursuit of new opportunities
across geographic space if requiring localization.2
4.1.3
| The paradox of global scaling
The informants not only highlighted demands for replication and entrepreneurship separately,
they also recognized that they were persistently contradictory. Replication drives maintenance
of the global business model, while entrepreneurship drives adjustments to it to capture new
opportunities. We label this persistent contradiction the paradox of global scaling.
Informants described the global scaling paradox as being manifested in multiple ways. For
example, with respect to organizational structures and control, the VP Global Operations at Oak
stated: “As you grow, you need more structure, you need more control, and that will hamper entrepreneurship.” Likewise, informants across the firms told us how the formalization of organizational
processes and structures enabled replication while threatening entrepreneurship if decision-making
autonomy was compromised. For example, the Regional VP EMEA of Willow stated: “Once you
start opening up a European operation like ours—where you have all functions of the business—
and you scale it to nearly 50 people, then you don't have that sense of I can just walk across over to
somebody and get that approved without a rubber stamp.”
Informants also described the global scaling paradox as escalating as their firm grew. Their
perceptions in this regard are consistent with organization theory showing that firm size and
standardization inhibit the pursuit of new opportunities (Hannan & Freeman, 1984). For example, the Director of Strategy of Pine stated: “As we continue to grow, it gets more and more
tricky to spread and maintain that initial entrepreneurial enthusiasm.” Despite becoming more
challenging, meeting both demands were considered essential in accomplishing firm objectives,
such as attaining global scale and global market leadership. The Managing Director of the
EMEA region at Maple explained this relationship as:
One of the hardest challenges that you can have as a company is scaling. Every company hopes to become the giant eventually … You get to a certain size and the challenge then is how do you build for scale? You start putting in management processes,
you put management in place, you put processes in place in order to allow the organization to scale out … But you never want to lose that entrepreneurial scrappiness that
you need to grow fast. As soon as you lose that, the growth is going to peter off.
In the next section we describe how the firms we studied navigated the paradox of global
scaling.
4.2 | Navigating the global scaling paradox
Informants talked about navigating, rather than resolving, the tension between replication and
entrepreneurship. Recognizing that the tension was persistent, they talked openly about the need to
satisfy both demands to scale globally in the present and into the future. Analysis of the data
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revealed three mechanisms used by the firms to do this: a top-down replication mechanism, a
bottom-up entrepreneurial mechanism, and a mechanism for generating replicable innovation. In
the parlance of paradox theory, the first two mechanisms are differentiating mechanisms, because
they split the paradox by honoring each distinct demand separately (Andriopoulos & Lewis, 2009;
Smith, 2014). The third mechanism—replicable innovation generation—is an integrating mechanism, because it provides an interdependency between the contradictory demands, thereby treating
them as inseparable (Andriopoulos & Lewis, 2009; Smith, 2014).
Somewhat surprisingly, our data did not indicate an internal division of these mechanisms
between headquarters and subsidiaries, as might be expected from prior literature on MNEs
(e.g., Nohria & Ghoshal, 1997). Instead, these mechanisms are based on a horizontal slicing of
the company across units, with senior individuals across the organization enforcing uniformity
and maintaining the replicability of the company's digital products and processes, and junior
individuals across the organization pushing against this uniformity and generating new ideas to
sustain the firm's competitiveness. We discuss each mechanism below.
4.2.1
| Top-down replication mechanism
Informants emphasized the importance of having a generalized replication mechanism
throughout the organization which enforces the global business model. We label this a “topdown” replication mechanism because it is delivered by the firms' senior executives. Informants
described this mechanism as being sustained in four ways, as outlined below.
First, most directly, the firms hired senior executives who had previous experience in global
scaling, with the assumption that they could literally replicate their success. This is illustrated
by the following quotation:
One of the first things I did when we got set up over here, when we closed our
funding round, was to hire other experienced people who have done this before,
because I was brand new to this—“green,” if you will—trying to learn as much as I
could. We brought in our CEO, who had been through this a number of times
before, and we brought in a sales leader and a marketing leader … And together, as
a management team, we've grown out the process around sales, the process around
marketing (Co-Founder and Chief Scientist, Alder).
Such practical experience is pivotal to the development of explicit knowledge and also tacit knowledge (Polanyi, 1966). Previous research shows the importance of managers' tacit knowledge to the
internationalization of micro-multinationals (Stoian, Dimitratos, & Plakoyiannaki, 2018), small
firms (Reuber & Fischer, 1997), and large American MNEs (Athanassiou & Nigh, 2000). In the fastpaced context of global scaling, experientially-acquired knowledge enables firms to act and make
decisions quickly based on lessons learned in other globally scaling firms. For example, when discussing a recent senior hire, the VP Global Sales at Hazel stated:
He worked at a company called [Company X], and they were a real high-growth
start-up 3 or 4 years ago. We constantly grill him on what they were doing in marketing at that stage, how they sold the product, how they built the product. Just
finding people who've been through the experience already and trying to shortcut
some of the learning.
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Rather than locating this global scaling expertise solely in the U.S., which would centralize the
development of replicable processes, the firms distributed it geographically. For example, informants in Elm, Maple, Oak, Pine, and Willow talked about hiring executives with global scaling
experience for their regional headquarters and local offices.
Second, and reflecting the theoretical relationship between formalization and standardization (e.g., Hannan & Freeman, 1984), informants talked about sustaining replication
through formal, standardized processes. The importance of formal systems is reflected in
quotations from the previous section which highlight growing out “the process around
sales” and learning “how they sold the product.” SaaS is an established business model, and
informants recognized that they could use formal processes that were effective elsewhere.
As the Director of Strategy at Pine emphasized, there are “global best practices that you
want to leverage.”
Third, even though they avoided local adaptation, informants did have knowledge of local
host markets and viewed it as important in sustaining the replicability of the global business
model. As the venture capitalist of Hazel explained, local knowledge is essential for a replication strategy in order to be able to identify the requirements that are generic across markets
and therefore might offer promising non-location-bound opportunities for the firm to pursue.
Fourth, replication was sustained in a top-down fashion through a uniform organization
culture, as is illustrated by the following quote:
For sure the entrepreneurial spirit, the culture, is very much coming from the top
and feeds itself down. And every leader within, whether it's me or head of sales or
whoever it might be, it doesn't matter what region they have to represent, the
values and culture of the senior execs feeds down. (VP EMEA, Willow).
Moreover, informants explained that a uniform organization culture facilitated the alignment
across different parts of the firm that is needed for a replication strategy, which is consistent
with arguments that organization culture provides tacit rules in an economically efficient manner (e.g., Camerer & Vepsalainen, 1988). For example, the VP of Global Operations at Oak
stated:
I think culture plays a big part in being able to scale. If the company has a strong
culture and can keep that culture in every [international] location so that every
member of the firm knows what it is to be an employee of Oak and what is
expected, it's a very good way to scale. Otherwise, if you don't have that strong culture, very quickly you will have teams that will not be aligned with what the company is or what the company is trying to accomplish, and it can become a serious
problem very quickly (VP Global Operations, Oak).
A uniform organization culture was reinforced in the physical spaces of the companies, which
are an important way for entrepreneurial firms to signal symbolic values (e.g., Zott &
Huy, 2007). Uniformity in office design and décor was common across the participant firms. An
informant at Elm, who was responsible for office and décor, explicitly ties design to the culture
of the company: “All our international offices would have exactly the same interior design and
layout. This is an attempt to retain and instil the culture” (Director Global Facilities, Elm).
Seeking to prioritize uniformity across offices, company executives at Willow asked for the ceiling to be exposed after the construction of a new subsidiary, so it resembled other offices more.
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Further, we observed that Willow explicitly used office décor to reinforce its core values with
respect to the achievement of global scaling:
There are many whiteboards hung along the walls. They are all in use, with notes
written on them. The sales targets, with the current sales figures next to the targets,
are on one board. At the main door, there's a large board where the core values of
Willow are listed (Observation, Willow).
While firms were diligent in adhering to a common office décor, there were often prescribed
minor ways to tailor space to the locale; for example, an Irish office might share a common
company template for office colors and layouts but have meeting rooms with Irish names. In
this way, the localization of office décor was prescribed in a replicable manner.
4.2.2
| Bottom-up entrepreneurial orientation mechanism
In addition to elaborating a top-down replication mechanism, informants also articulated a
bottom-up entrepreneurial orientation mechanism. They highlighted a need for entrepreneurial
behavior on the part of lower-level employees throughout the firm to deliver on the demand for
entrepreneurship. As we analyzed our data, it became clear that innovativeness and
proactiveness were the two desired entrepreneurial characteristics. We recognized that these
characteristics are also the behavioral dimensions of the individual entrepreneurial orientation
construct in the entrepreneurship literature3 (Covin et al., 2020; Mustafa et al., 2018), and so we
use that term here. From a Penrosean perspective of firm growth (Penrose, 1959/95), sustaining
individual entrepreneurial orientation among lower-level employees frees up managerial
resources to steer the firm's expansion, thereby reducing constraints on growth. Our data shows
that it was sustained through two practices: hiring young employees and providing autonomy
at the job level.
First, hiring young employees with ambition, current skills, and versatility was seen as
an effective way to ensure a high level of individual entrepreneurial orientation. This finding is consistent with labor economics research showing that entrepreneurial firms with
young workers tend to be more innovative and have higher growth rates (e.g., Ouimet &
Zarutskie, 2014). For example, one informant explained: “We are built on young employees
and churning out technological wizards who thrive within an environment like this—with
flexibility, autonomy, and equality” (Director of Global Facilities, Elm). As the Director of
Global Facilities, this informant emphasized that the location of offices made a difference
when trying to recruit desirable individuals in a competitive market for talent. Similarly,
the COO of Willow pointed out that the location of a subsidiary in a central and vibrant
downtown district of a capital European city was attractive to the young, entrepreneurial
employees they wanted to hire.
Second, companies provided job-level autonomy for junior employees so that they could be
proactive in finding solutions to problems they encountered. This practice aligns with the theoretical understanding that job-level autonomy is important to sustain performance when the
organizational context is characterized by uncertainty due to industry dynamics (Griffin, Neal, &
Parker, 2007), as is the case for SaaS firms. This relationship is illustrated by the following quotation, in which an informant tied job-level proactiveness to Maple's ability to scale:
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If I can hire people who, when they run into a problem, can figure it out themselves, rather than having to run to someone every time there is a problem … that
is not going to scale. So, the trick is, first of all, to hire really, really smart people
who can go figure stuff out (Managing Director EMEA, Maple).
Similarly, a Subsidiary Manager explicitly tied employees' proactiveness to Pine's ability to
scale: “There is a person that started here [in a subsidiary] about a year ago, and within six
months he had won the Toolbox Award, which is for the person who has come up with a brand
new initiative. He created a new system to speed up working on all the advertising operations'
creative work.”
However, informants also viewed individual entrepreneurial orientation as relatively
bounded in scope—to their job—because of the replication demands of scaling. While a subsidiary manager at Maple encouraged proactive new hires, he clarified that they were also looking
for people who “fit into the structure and the culture.” An informant from Oak described this
boundedness on individual entrepreneurial orientation as follows: “We push to get people to
focus on innovating within the things they control. And how to make your job different because
you're doing it smarter or you're having more of an impact, but within the scope that aligns
with why the company hired you and what they're paying you to do” (VP Operations, Oak).
Thus, new hires at Oak were encouraged to innovate and be proactive within the confines of
their job.
4.2.3
| Replicable innovation generation mechanism
The previous two mechanisms revealed by this study are differentiating mechanisms in the
parlance of paradox theory, because they each navigate the paradox of global scaling by
attending to one demand of the paradox (replication or entrepreneurship) separately on an
ongoing basis (Smith, 2014). The third mechanism revealed through our data analysis—the
replicable innovation generation mechanism—is an integrating mechanism that sustains
interdependence between the contradictory demands. The objective of this mechanism is to
harness the individual entrepreneurial orientation of employees to deliver new products or
processes that are replicable. In other words, it enables the persistent generation of replicable innovations that can be incorporated into the firms' global business model. This
harnessing, or coordination, of innovation was seen as important for global scaling as illustrated by this quote: “As you scale as an organization, you realize that everybody might be
figuring 50 different ways to do the same thing. Then that becomes less scalable” (Managing
Director EMEA, Maple). Our data showed that this mechanism was sustained in three ways:
through fast feedback, formalized idea generation, and an assessment of replicability. The
emphasis on replicable innovation was paramount.
Fast feedback on the ideas of innovative and proactive employees was encouraged, as is
illustrated by the following quote: “If there is a developer in the Irish subsidiary who's got a
new product feature, we encourage them to just reach out directly to some of our sales team, or
some of our marketing team, so that they can get some feedback or hear some stories from the
front line” (VP Global Sales, Hazel). This informant went on to say that they try to encourage
“small chunks of trial and error” to see what might “catch on,” insofar as “there's no real playbook for what to do, so you always have to have a little bit of controlled experimentation
around how you continue to find new customers and build yourself out.” Similarly, Birch had
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an informal mechanism to vet ideas and, for those with scaling potential, to encourage the collaboration needed to find and implement workable solutions that could be more widely
considered:
We have a process internally that you can submit to, which is basically anyone with
an interesting idea or an idea that no one's currently working on or something
that's not on our product roadmap, but you think is interesting, you can send that
out to the whole company in an email and then usually people respond like, “Hey,
that's a great idea; hey, actually, I'm working on something like this; hey, I think
we should do this.” And it generates interest through this. If it gets picked up, usually someone in product or engineering or one of the technical teams that works on
it will say, “Hey, this is great, let's talk about this more offline and build that way”
(Subsidiary Manager, Birch).
Informants also discussed more formal forums specifically intended to elicit scalable ideas. One
such forum is a hackathon, which, despite their short duration, scholars have found to be associated with viable innovations (Lifshitz-Assaf, Lebovitz, & Zalmanson, 2021). For example, the
Director of Strategy at Pine described their internal version of a hackathon, which was open to
all employees across the firm (not just engineers, programmers, or developers) and which
emphasized the value of cross-functional collaboration. Pine signaled the importance of this
hackathon by offering financial prizes and flying the winners from different subsidiaries to
headquarters for the final judging competition. While hackathons often elicit a wide scope of
ideas, firms also used formal forums to elicit ideas to solve specific problems. For example, in
the early days of establishing Maple's EMEA operations, managers recognized that their sales
processes were a competitive weakness, and this led to initiatives to generate new ideas for sales
processes that could be replicated globally.
Such formal forums promoted idea generation beyond the remit of junior employees' job
roles. However, there is a difference between an idea and a viable opportunity (Shane, 2012),
and informants stressed the importance of narrowing the possibility set to the ideas that represented truly viable opportunities in that they could be replicated internationally across the
entire firm and not just in certain subsidiaries or geographies. Therefore, the third way in which
a replicable innovation generation mechanism was sustained was to assess ideas for their replication potential before they were adopted. The importance of this assessment is illustrated by
the following quote from the VP, Operations at Oak:
If you work on the French market, you can see the things that would make a difference for French customers or the opportunity to acquire French customers. But
you need to understand that French customers are a small percentage of our total.
If you look for commonality across multiple markets and languages, if you can
coordinate with your colleagues and come up with insights that cross boundaries
and are more global or at least regional across the larger set of users, you're going
to drive more investments and a better perspective on the trade-offs (VP, Operations, Oak).
As this quote illustrates, our informants believed that while it was important for employees to
continually look for ways to improve the firm's competitiveness, employees were encouraged to
focus on the commonalities across multiple markets to find innovations that could be
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replicated. The overall objective was to identify where the firm's competitiveness could be
enhanced through replicable revisions to the global business model.
4.3 | Navigating the global scaling paradox through replicable
innovation
Our data analysis shows that the firms we studied navigated the global scaling paradox and
sustained rapid growth through three inter-related mechanisms, which together constitute a
strategy of replicable innovation. As shown in Figure 1, the three mechanisms operated in tandem in a virtuous cycle which delivered on the strategic demands for replication and entrepreneurship simultaneously. From a top-down vantage point, industry experience, formalized
standard processes, knowledge of generic needs across locations, and a common culture
enforced the uniformity needed for replication. From a bottom-up vantage point, bounded individual entrepreneurial orientation, supported by hiring young people and giving them autonomy in their job roles, pushed against this uniformity provided a continual source of new ideas
for products and processes. On an ongoing basis, new ideas were elicited and assessed in order
to determine which had the replication potential to enhance the firm's global business model,
thereby enhancing the firm's competitiveness. Notably absent in this model is the adoption of
innovations or adaptations for local requirements.
5 | DISCUSSION
This research was prompted by the observation that although the global strategies of MNEs are
known to be contextually dependent (Bartlett & Ghoshal, 1987; Devinney et al., 2000;
Harzing, 2000; Prahalad & Doz, 1987), collectively we know little about the strategy followed by the
globally scaling digital MNEs that are becoming increasingly prominent in the world economy.
Accordingly, we designed a research project to investigate the strategic demands on globally scaling
digital MNEs and how they are navigated. Below we discuss three theoretical contributions of this
research to global strategy scholarship and outline avenues for future research. We also present the
study's boundary conditions, limitations, and managerial implications.
5.1 | Theoretical contributions
5.1.1
| The contextual situatedness of the global scaling paradox
Our study was designed on the assumption, based on prior global strategy research, that the
context within which an MNE operates imposes strategic demands. Our findings support the
general assertion that context matters. More importantly, we identify the strategic
demands—replication and entrepreneurship—that loom large for globally scaling digital MNEs.
Replication enables persistent rapid growth and entrepreneurship enables persistent competitiveness, and both are needed in order to sustain global scaling. Because replication requires
maintenance of the global business model, and entrepreneurship requires adjustments to the
global business model, these demands are contradictory and addressing them simultaneously
constitutes a paradox that firms need to navigate.
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How do these two demands correspond to the demands reported in prior global strategy
research? These demands are normally described as efficiency, local responsiveness, and
worldwide learning (e.g., Bartlett & Ghoshal, 1989; Prahalad & Doz, 1987; Tallman & CuervoCazurra, 2021; Westney, 2021). In considering the correspondence between them, it is
important to keep in mind that prior literature has focused primarily on large, long-lived, and
diversified MNEs, while this study focuses on globally scaling firms, which tend to be smaller,
newer, and mostly organized around a single line of digital business.
Replication in this study corresponds to efficiency in classic MNE studies, as it facilitates
rapid international growth. We use the more specific term here because when informants discussed efficiencies, they discussed product and process replications rather than other types of
efficiencies. For example, given the digital nature of their business, moving to low-cost locations
might inhibit their ability to acquire the needed skills. Entrepreneurship corresponds to worldwide learning, as both denote the generation of new opportunities. Here we use the broader
term of entrepreneurship to reflect the data. When informants discussed the generation of new
opportunities, it was on a worldwide basis, but it did not necessarily involve a learning process.
Indeed, forums were set up intentionally to elicit new ideas and circumvent organizational
learning. The lack of reliance on learning through the firm's own experience may reflect the relatively short lives of the globally scaling firms we studied. It is interesting to note in this respect
that when experience is emphasized by informants, it is the experience of senior hires to help
reinforce the replication imperative, rather than boosting entrepreneurship.
A surprise of the study was the absence of local responsiveness as a strategic demand, and
indeed the avoidance of localization in order to heighten the firm's ability to replicate. This was particularly surprising given that digital products and processes can be easily and quickly altered. This
finding can be explained by the reliance of globally scaling firms on an efficient global business
model that embodies the non-location-bound firm-specific advantages that reduce the costs and frictions of entering foreign markets (Reuber et al., 2021, p. 2). As discussed in Section 5.3, we recognize that there may be a temporal limitation as to how long a firm is able to scale globally, and
when this is reached, firms may have to localize in order to remain competitive. At this point,
though, the firm can be thought of as operating in a different competitive context, and the strategic
demands of this context would be expected to be different.
The lack of salience of localization is consistent with an international replication strategy
(Szulanski & Jensen, 2006, 2008), which prioritizes consistency in how firms create and capture
value because it allows the global business model to be quickly rolled out internationally. However,
this literature is largely silent on how firms sustain competitiveness while replicating; in other
words, how they manage the “replication dilemma”—the trade-off between precise replication and
the need for adaptation over time (Winter & Szulanski, 2001, p. 373). Our findings show that globally scaling firms identify replicable innovations on an ongoing basis through an integrating mechanism. Our findings can also be compared with IKEA's replication strategy, which allows for a few,
slow-paced adaptations over time (Jonsson & Foss, 2011). In contrast, the ongoing generation and
elicitation of replicable innovations by the globally scaling firm we studied underscores the importance of contextual differences in understanding strategic demands, with SaaS firms needing to
innovative more quickly and more continuously in order to remain competitive.
5.1.2
| Replicable innovation as a novel global strategy
In uncovering the virtuous cycle used to navigate the global scaling paradox, this research
reports a novel global strategy which we label replicable innovation. Inherent to the strategy of
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replicable innovation are ongoing revisions to the global business model that can be replicated
throughout the organization. In other words, a firm's rapid growth can be based on replication,
but the firm can also innovate its global business model. This is required to sustain competitiveness (Tallman et al., 2018).
The replicable innovation strategy can be contrasted with the transnational solution
(Bartlett & Ghoshal, 1989). In both, (a) subsidiaries play a strategic role in contributing to global
business model modifications; (b) headquarters and subsidiaries share strategic decision-making; and (c) worldwide learning processes develop and share knowledge across the MNE
(Bartlett & Ghoshal, 1989). However, there are also notable differences, which make replicable
innovation a unique strategy. Globally scaling SaaS firms emphasized global innovation and
avoided local innovation. Moreover, global scaling highlights the importance of entrepreneurial
employees. It suggests that global strategy scholars should take into account not only the
decision-making of managers when considering the firm-level pursuit of international opportunities (e.g., Coviello, Kano, & Liesch, 2017; O'Brien, Sharkey Scott, Andersson, Ambos, &
Fu, 2019; Verbeke & Ciravegna, 2018), but also the entrepreneurial behaviors of employees at
more junior levels of the organization. This is consistent with Meyer, Li, and Schotter's (2020)
contention that individuals throughout the MNE are relevant to its global strategy.
We did not detect a headquarters-subsidiary divide in terms of roles in generating, adopting,
and diffusing new ways of doing things, which has often been observed in past literature on
MNEs (e.g., Bouquet et al., 2016; Nohria & Ghoshal, 1997). Prior research has emphasized subsidiary specialization for competence creation (Cantwell & Mudambi, 2005; Rugman &
Verbeke, 2001), which contrasts with our findings where innovative proposals were encouraged
from across the MNE. We go beyond our data to speculate that the constant change and frenzied pace of global scaling (e.g., DeSantola & Gulati, 2017; Piaskowska, Tippmann, &
Monaghan, 2021) renders firm-wide alignment particularly important and precludes the development of subsidiary-based concentrations of influence or capabilities.
As well, prior research also notes that entrepreneurial initiatives are not typical in the early
years of subsidiaries (Birkinshaw & Hood, 1998), and this contrasts with our finding that entrepreneurship was encouraged and highly prevalent in very young subsidiaries of the firms we
studied. However, we recognize that the firms we studied may change as subsidiaries become
more established and differentiated in terms of power, and as the company gains more experience of international strategy. This suggests that future research based on longitudinal studies
of globally scaling firms is likely to be beneficial in detecting experienced-based patterns in how
firms respond to contradictory demands.
The replicable innovation strategy we observed can also be contrasted with the flexible replication strategy of IKEA (Jonsson & Foss, 2011). One key difference is that IKEA's flexible replication involves both company-wide innovation as well as localization in host markets, while
replicable innovation involves only company-wide innovation. Another difference is that flexible replication slices the organizational roles vertically (headquarters vs. local stores) while replicable innovation slices organizational roles horizontally (senior level managers vs. lower-level
employees). These fundamental differences make sense if one considers the very different contexts the firms operate in. IKEA is a bricks-and-mortar retailer which competes with local furniture stores, has over 9,000 tangible products, and needs to have products, product mixes, prices,
and store layouts compatible with local consumer preferences. For example, Jonsson and
Foss (2011) discuss the desirability of high prices to convey quality in Japan and low prices to
attract customers in Russia (p. 1099), as well as variation in the size of beds, kitchen cabinets,
and sofas across markets (pp. 1088–1092). Thus, at the local level, there is a need for flexibility
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in replication to match local preferences. In contrast, the SaaS firms we studied have at most a
handful of major digital products that are developed for, and compete in, global markets. It is
logical that they would favor replicable innovation, and avoid local flexibility, in order to sustain competitiveness in these markets.
5.1.3
| Variability in international strategies among digital firms
The third theoretical contribution of this article is to the emerging literature on digitization and
international strategies. Digitization enables cross-border transactions and interactions. However, prior research has established that many digital firms operate multidomestic strategies
due to the need for local responsiveness, for example to create within-country end user networks (e.g., Brouthers et al., 2016; Shaheer et al., 2020) or to overcome local legitimacy challenges (Marano et al., 2020). These findings are in direct contrast to our findings where
informants spoke of the need to minimize, and even avoid, localization.
We believe the reason for this difference is that prior research is based predominantly on
firms where user network growth and business-to-consumer interactions are critical to firm success, or firms enter markets with a disruptive global business model. In contrast, we studied
business-to-business firms which did not rely on establishing end user networks and were based
on a well-established SaaS business model. Thus, in contrast, our study provides empirical evidence of variability in the internationalization strategies among digital firms. Specifically, it
supports the contention that when interaction effects among end users are low, as for the
business-to-business SaaS firms in our study, non-location-bound firm-specific advantages are
consequential to the internationalization strategies of digital firms (Hennart, 2019; Monaghan
et al., 2020; Stallkamp & Schotter, 2021). Again, understanding the contextual differences
among studies is crucial in providing explanations for differences in findings. We believe that
future research on digitization and global strategy should build on these differences by continuing to explore the variability among digital firms.
5.2 | Boundary conditions
The boundary conditions of this research are formed by the characteristics of our sample, given
that case study theory-building is based on the phenomena studied (Eisenhardt, 1989, p. 547).
First, the globally scaling firms we studied had digital products and processes and a SaaS delivery model. While contextualizing the research findings was beneficial is providing fuller explanations and enabling comparisons with prior research on digital firms, as discussed above, it
also begs the question of the extent to which results can be transferred to other types of firms.
We know that global scaling is not limited to digital firms (Reuber et al., 2021). As well, the digitization of the SaaS firms' products and services seemed relatively inconsequential to how they
responded to the demands for replication and entrepreneurship. For example, the ease of altering digital objects (Kallinikos et al., 2013) was not associated with widespread, unfettered
change of digital products and processes. This suggests that non-digital globally scaling firms
may face a similar global scaling paradox as the one identified in this study. Further research is
needed to establish the extent to which the global scaling paradox exists for other types of globally scaling firms, and, if it does, the extent to which a replicable innovation strategy is
followed.
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Second, although none of the SaaS firms we studied had a platform to enable innovation by
end users (e.g., von Hippel & Katz, 2002), we recognize that some global SaaS firms enable user
innovation through provision of a platform-based mechanism. Such a platform may allow localization requirements to be offloaded to customers and autonomous producers in host markets,
with a corresponding lessening of localization demands on the focal MNE.4 Future research
extending theory on global scaling can gain a better understanding of the demand and supply
of localization by studying digital firms that provide platforms for user innovation.
Third, we studied firms with a global business model in place and external financing to fund
global scaling. These firms had more resources for internationalization than the new firms that
tend to be studied by international entrepreneurship scholars (e.g., Mudambi & Zahra, 2007;
Sapienza, Autio, George, & Zahra, 2006). While acquiring “patient” outside capital is a
facilitator of global scaling (Aernoudt, 2017; Duruflé et al., 2018), a recent study in the
social sector shows how bricolage can be used to support scaling in low-resource contexts
(Busch & Barkema, 2020). Investigating the extent to which the replicable innovation strategy
can be transferred to firms with greater resource constraints offers another opportunity for
future research.
Finally, all our informants worked in national cultural contexts with low power distance
(Ronen & Shenkar, 2013), and so the entrepreneurial ideas of junior employees were solicited,
forthcoming, and respected. Future research can investigate the extent to which individual
entrepreneurial orientation among employees and a capacity for replicable innovation can be
developed in contexts of high power distance, where junior employees might be more reticent
about proposing new ideas, and senior employees might be more reticent to pay attention
to them.
5.3 | Limitations
As is the case with all research investigations, there are limitations to our study. First, our study
is cross-sectional, and so we do not have data on the beginning or the end of the period of global
scaling for the firms we studied. We recognize that there are likely to be false starts to global
scaling when a business model that is thought to be global turns out to require major adjustments in order to fit demands across disparate geographies. We also recognize that there may be
temporal limitations as to how long a firm can successfully navigate the contradictory demands
between replication and entrepreneurship to accommodate ever-distant markets, pressures for
product line diversification, and a fast-changing competitive environment. Future process
research based on a longitudinal design can investigate triggers and brakes in global scaling over
time and identify events that result in fissures in the virtuous cycle of replicable innovation. As
well, it is likely that other tensions in the MNE, such as those identified in past research on
established MNEs (e.g., Ambos et al., 2010; Tippmann et al., 2018), become heightened as subsidiaries age and the organization becomes more complex, and this could affect both the key
contradictory demands and the possibility of navigating it with the mechanisms identified here.
Second, while our informants emphasized the importance of minimizing localization to preserve replicability, we acknowledge that this may have been facilitated by having global business customers. We believe that it would be worthwhile for future research on global scaling to
collect data on target markets in order to be able to delve more deeply into localization
demands on digital firms. In doing so, future research can build on Rogers (2003) to explore the
role of customer interactions in the diffusion of large, enterprise business-to-business products
TIPPMANN ET AL.
767
digital products, as Chen, Shaheer, Yi, and Li (2019) did for interactive consumer-oriented digital platforms.
Third, our informants viewed localization as slowing down the speed of growth, but we have
no objective evidence of this. Because there are likely to be many factors that impact the speed
of growth in international markets (e.g., Casillas & Acedo, 2013) and global scaling outcomes
(Reuber et al., 2021), large-scale, theory-testing studies with appropriate samples, models, and
measures are needed to assess the impact of localization on growth rates.
Fourth, we only studied successful firms, so we cannot analyze whether there are firms that
conform to our model and are unsuccessful. Again, we believe that such differences in performance outcomes are well-served by quantitative methods with proper controls and variation
among contingent factors that may affect outcomes. Moreover, it is very difficult to find informants who are willing to discuss the failure of their business in the depth required for a qualitative study, which also renders quantitative research more suitable for future research on
variation in performance outcomes.
5.4 | Managerial implications
Our study suggests three points of guidance for leaders with ambitions to scale their firm globally.
First, it is important to be able to replicate processes and products across markets that have the
potential to yield extremely high levels of growth. This means that a firm's managers need to understand variations in user demands in their product niche across markets, so that they understand
whether and how they can develop a global business model based on homogeneous requirements.
Second, comparing our results with those of other studies of digital firms brings home the
point that digital firms differ considerably in their internationalization priorities. Thus, we
expect considerable variability among digital firms as to whether they benefit from non-location-bound firm-specific assets, such as technological prowess, or from location-bound firmspecific assets, such as local networks of users. Given that international entrepreneurs engage
in vicarious learning (DeClercq, Sapienza, Yavuz, & Zhou, 2012; Fernhaber & Li, 2010), our
study suggests that they should pay most attention to peer firms that are based on a similar
business model, rather than assume broad similarities among digital firms.
Third, the frenzied pace of global scaling may generate a sense of chaos or turmoil within
the firm (Hambrick & Crozier, 1985). Our findings indicate that entrepreneurial behavior at
low levels of the organization should not be curtailed, but rather that it be encouraged and
explicitly harnessed and assessed. Our findings also emphasize the importance of establishing
and reinforcing a uniform organization culture conducive to global scaling in multiple ways,
ranging from human resources to office décor.
6 | C ON C L U S I ON
Achieving global scale is a challenge for leaders of digital MNEs. We show that globally scaling
digital MNEs face simultanous competitive pressures to replicate and be entrepreneurial, and
this constitutes the paradox of global scaling. We show that such firms use a global strategy
which has not yet been reported in the research literature—replicable innovation—that enables
rapid growth and sustained competitiveness through replication. Overall, our findings illustrate
the importance of investigating global strategy in new contexts.
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ACK NO WLE DGE MEN TS
We are grateful for the insights and feedback provided by Anupama Phene and three anonymous reviewers. We thank Tina Ambos, Keith Brouthers, Peter Buckley, Luciano Ciravegna,
Nicole Coviello, Dimo Ringov, and Alain Verbeke, as well as seminar participants at the University of Calgary, University of Leeds, University of Sheffield, and King's College London for
their valuable suggestions on earlier drafts. Open access funding provided by IReL. [Correction
added on 17 May 2022, after first online publication: IReL funding statement has been added.]
E N D N O T ES
1
“Navigate” is emerging as the word used to describe managerial action in the face of conflicting demands
because it conveys that the contradictory and simultaneous pressures are not necessarily solved or resolved
(as the word “manage” tends to convey). Instead, organizational leaders must “find approaches to move forward even while accepting the ongoing tensions” (Smith & Besharov, 2019, p. 25).
2
We are indebted to an anonymous reviewer for pointing out this distinction.
3
Entrepreneurial orientation is a firm-level construct to measure the capacity of a firm for corporate entrepreneurship, and demonstrated entrepreneurial orientation is based on the actions of top managers (Lumpkin &
Dess, 1996). With emerging interest in the microfoundations of firm behavior, entrepreneurship scholars are
paying greater attention to the entrepreneurial orientation of individual employees in corporations and referring to it as individual entrepreneurial orientation (e.g., Covin et al., 2020; Mustafa, Gavin, & Hughes, 2018).
We use this latter term here because it is consistent with our informants' assertions that globally scaling firms
need individual employees to be innovative and proactive (the behavioral dimensions of individual entrepreneurial orientation) in their job roles.
4
We are grateful for an anonymous reviewer for making this suggestion.
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How to cite this article: Tippmann, E., Monaghan, S., & Reuber, R. A. (2023).
Navigating the paradox of global scaling. Global Strategy Journal, 13(4), 735–773. https://
doi.org/10.1002/gsj.1435
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