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International Family Enterprise

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"Enabling Internationalization Excellence for Family Enterprises"

IFE, 2017

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WHAT IS DIGITALIZATION AND HOW IS DIGITALIZATION INFLUENCING ON (INTERNATIONAL) ENTREPRENEURSHIP?

All the family firms of the IFE project are operating in the international marketplace. Many of them have started implementing digital solutions for sales and communication, but also production. (Please see the previous blog for this discussion.)

Digital platforms such as eBay, Amazon, Facebook, and Alibaba provide with internationalization opportunities for small firms – especially if they are seeking early internationalization. But digital tools are an essential part of today’s business also outside of the above-mentioned platforms.

What is digitalization actually about according to academic research? Let’s look at some definitions to dig into the theme. Digitalization is about

  • The usage of algorithms and digital data structures for the performance of control, communication, and execution of tasks (Autio, Mudambi & Yoo, 2021)-
  • The usage of digital technologies to change existing business processes (Verhoef et al., 2021)
  • Process of digitizing a firm’s activities and integrating phone, Internet, mobile technologies to transform the communication interface with customers, suppliers, and channel partners (Wang, 2021)
  • Process of transforming an organization’s outputs and processes into internet-compatible data packages for marketing, sales, and distribution (Banalieva & Dhanaraj, 2019)
  • Use of digital technologies to innovate a business model and provide new revenue streams… (Parida et al., 2019)
  • Exploitation of digital opportunities. For instance, using different technologies to develop new products, services, and business models (Rachinger et al., 2019)
  • Use of digital technology, and digitized information, to create and commercialize value (Gobble, 2018)

The definitions above altogether bring us to see what a holistic process digitalization is. Digitalization is related to data structures / information and technologies applicable for many different functions creating value within the firms: marketing, sales, communication, distribution, production, but also the innovation of business model to generate new revenue streams. Altogether, digitalization is a source of significant transformations, which is increasing the pace of change overall (Warner and Wäger, 2019).

The study of Manyika et al. (2016) in McKinsey Global Institute shows that already more than five years ago:

  • 50 percent of the services trade in the world was digitized
  • About 12 percent of the global goods trade was conducted via international e-commerce
  • International Skype calls corresponded to 46 percent of the total number of traditional international calls.

We can imagine that after the global coronavirus disease pandemic, the shift to digital solutions has been even faster. In many industries, a shift to digital tools is a necessity to keep up with the global competition. To be tackled rather sooner than later.

References

Autio, E., Mudambi, R. and Yoo, Y. (2021). Digitalization & globalization in a turbulent world: Centrifugal and centripetal forces. Global Strategy Journal, 1-14.

Banalieva, E. R. and Dhanaraj, C. (2019). Internalization theory for the digital economy. Journal of International Business Studies, 50(8), 1372–1387.

Gobble, M. M. (2018). Digitalization, Digitization, and Innovation. Research- Technology Management, 61(4), 56-59.

Manyika, J., Lund, S., & Bughin, J. (2016). Digital Globalization: The New Era Global Flows. McKinsey Global Institute.

Parida, V., Sjödin, D. and Reim, W. (2019). Reviewing Literature on Digitalization, Business Model Innovation, and Sustainable Industry: Past Achievements and Future Promises. Sustainability, 11(2), 1-18.

Rachinger, M., Rauter, R., Müller, C., Vorraber, W. and Schirgi, E. (2019). Digitalization and its influence on business model innovation. Journal of Manufacturing Technology Management, 30(8), 1143-1160.

Verhoef, P. C., Broekhuizen, T., Bart, Y., Bhattacharya, A., Qi Dong, J., Fabian, N. and Haenlein, M. (2021). Digital Transformation: A multidisciplinary reflection and research agenda. Journal of Business Research, 122, 889–901.

Wang, P. (2021). Connecting the Parts with the Whole: Toward an Information Ecology Theory of Digital Innovation Ecosystems,” MIS Quarterly, 45(1), 397- 422.

Warner, K. S. R. and Wäger, M. (2019). Building dynamic capabilities for digital transformation: An ongoing process of strategic renewal. Long Range Planning, 52, 326–349.