Journal of World Business 58 (2023) 101418

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Journal of World Business

journal homepage: www.elsevier.com/locate/jwb

Business model adaptation for realized international scaling of born-digitals

Irina Mihailova
Associate Professor of International Business, University of Eastern Finland, Microkatu 1, Kuopio 70211, Finland

A R T I C L E I N F O A B S T R A C T

Keywords: This study examines the process and mechanisms of realized international scaling of born-digital firms through
Born-digital firms the business model lens. In an explorative multiple-case study of Finnish firms in cultural industries, it finds that
Scaling born-digital firms adapt their business models through an iterative process to achieve practically scaled opera­
Business model
tions. The research unpacks the mechanisms guiding the process of business model adaptation and highlights the
Dynamic capabilities
Cultural industries
role of dynamic capabilities in their employment. The findings extend existing theorizing on scaling by offering a
conceptualization of realized international digital scaling and the role of the business model in its
implementation.

1. Introduction some studies highlight that digitalization does not automatically guar­
antee occurrence of scaling and there is a variation amongst digital firms
Scaling is increasingly considered a key strategic objective of digital in achieving wide international presences (Stallkamp et al., 2022). There
firms across the globe (Financial Times, 2021; Sullivan, 2016). The are also indications of organizational challenges associated with inter­
importance of this real-word phenomenon has attracted the interest of national scaling. While young firms often struggle with managing the
scholars in international business (IB) and entrepreneurship (IE) fields, organizational design during the scaling process (DeSantola et al.,
leading to increased efforts to develop its theoretical foundations 2022), MNEs experience pressures of conflicting strategic demands in
(Giustiziero et al., 2021; Reuber et al., 2021; Shepherd & Patzelt, 2022). implementation of replicable innovation scaling strategy (Tippmann
International scaling is related to topics that have already been et al., 2022b). The extensive evidence also indicates that many digital
studied in extant literature, such as the expansion of high growth ven­ firms fail to scale (Gulati & DeSantola, 2016; Kutcher et al., 2014;
tures (Duruflé, Hellmann & Wilson, 2017; Rasmussen et al., 2018), Scale-Up Europe, 2016).
internationalization of lean entrepreneurial firms (Autio & Zander, This discussion highlights that scalability enabled by digital tech­
2016), and the speedy expansion of born-global firms (Hennart, 2014). nological affordances in itself does not allow firms to succeed in
Yet only recently have works initiated a dialogue on international digital achieving scale in their international operations. I argue that there is a
scaling as a phenomenon that has unique mechanisms, challenges, and need to introduce a concept of ‘realized scaling’ (achieved scaling) and
organizational context condition (Piaskowska et al., 2021; Tippmann clarify how it is distinct from related and broadly used scalability
et al., 2022b). Digital technologies have triggered unprecedented pos­ concept (potential scaling) in a digital setting. I aim to develop a theo­
sibilities for international scalable expansion by decreasing trans­ retical explanation of the realized scaling through the lenses of a busi­
portation and production costs and developing platforms enabling ness model and dynamic approaches (Teece, 2010, 2018). The business
instant global expansion and connectivity (Adner et al., 2019; Autio model concept is shown to be relevant for understanding of scaling
et al., 2018). Born-digital firms, or firms that are fully digital from their (Tippmann, Ambos, Del Giudice, Monaghan and Ringov, 2022a) as well
inception (Monaghan et al., 2020) are assumed to be readily scalable as for rapid international expansion of born-global firms (Hennart,
due to their ability to achieve economies of scale in core business pro­ 2014, 2021) and global strategy (Tallman et al., 2018). Thus, in this
cesses. In other words, digital firms are believed to have scalability that study I aim to (1) delineate the concept of realized international digital
depicts “how the value derived from a firm’s resource bundle in a focal scaling, and (2) elaborate how born digital firms with scalable business
activity changes as the size of the bundle increases” (Giustiziero et al., model (potential scalability) achieve realized international scaling.
2022: 2). Yet, despite the enabling power of digital affordances, and To shed light on these questions, I conduct a multiple-case study of
global “by default” mindset of born digital firms (Birkinshaw, 2022), six Finnish born-digital firms from two sectors in cultural industries -

E-mail address: irina.mihailova@uef.fi.

https://doi.org/10.1016/j.jwb.2022.101418
Received 14 June 2021; Received in revised form 15 July 2022; Accepted 27 October 2022
Available online 5 December 2022
1090-9516/© 2022 The Author(s). Published by Elsevier Inc. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).
I. Mihailova Journal of World Business 58 (2023) 101418

namely, digital education and mobile games - and employ a processual (Demir et al., 2017), scale-ups (Coviello, 2020; DeSantola & Gulati,
approach that incorporates time, dynamism, and longitudinal observa­ 2017) and accelerated internationalization (Autio & Zander, 2016).
tions (Welch & Paavilainen-Mäntymäki, 2014). The choice of firms was Economies of scale were recognized as one of the key reasons for in­
made based on a theoretical sampling technique to select cases with ternational expansion (Dunning, 1980). Yet only recently have IB
common antecedents, such as national and industry background scholars begun to develop conceptual foundations of the international
(Eisenhardt, 2021). However, differences across case firms also allowed digital scaling phenomenon per se (Giustiziero et al., 2022; Tippmaan
strengthening theory building (Eisenhardt, 2021). Following a longitu­ et al., 2022a). In their editorials, Reuber et al. (2021) initiate a con­
dinal research design, I collected empirical evidence at different points versation on scaling in the multinational enterprise context, while
in time through personal interviews, observations, offerings’ testing Shepherd and Patzelt (2022) propose a scaling research framework in
sessions, and secondary sources. The cultural industries represent an apt the IE field. Empirical studies highlight that digital international scaling
research context because they have recently undergone significant has unique goals, mechanisms, and challenges (Huang et al., 2017;
transformation triggered by digital technologies and their global reve­ Piaskowska et al., 2021). It appears to be timely to extend this discussion
nues have been rapidly growing during the past decade (Wang et al., to those digital firms that rely on digital tools from inception to create
2020). In addition, while IB research in this field is mostly based on and distribute their offerings labelled as ‘born digitals’ (Monaghan et al.,
sectors such as music and movies (Wang et al., 2020), other contexts 2020). Birkinshaw (2022) highlights that distinctive feature of these
such as education and mobile games are significantly less explored. firms is “global by default” mindset. Indeed, since born-digital firms
This research makes several important contributions to scaling and have digital elements built into their business models creating vast op­
business model literature. First, it develops a conceptualization of born- portunities for rapid and cost-efficient global expansion, they are
digital firms’ realized scaling as an achievement of exponential growth of believed to be readily scalable (Autio & Zander, 2016; Monaghan et al.,
revenue with an incremental increase in costs. This highlights the impor­ 2020). These firms can instantaneously expand via digital platforms and
tance of dedicating attention to succeeding in an actual value capture markets and do so with a low cost per additional user (Shaheer, 2020).
manifested in the revenue generation (Stallkamp et al., 2022) in addi­ Digital market owners, such as Apple and Google, can perform many
tion to a successful value creation enabled by firms’ digital resource functions on behalf of born-digital firms, such as billing, marketing, and
bundle (e.g. Giustiziero et al., 2021). This definition further enhances technological integration with platform partners, that allow for their
conceptual clarity in scaling research, - in particularly in setting of lean operations (Mihailova, Liesch, & Rose, 2016). The digital business
digital international scaling, joining in effort with other works in this model enables born-digital firms to benefit from high degrees of con­
special issue (Tippmann et al., 2022a). Second, this research shows how nectivity and flexibility that foster their international expansion (Adner
born-digital firms achieve realized international scaling through an et al., 2019; Nambisan, 2017). Digital firms can rapidly increase their
iterative process of business model adaptation during the scaling phase. user base by relying on data-driven operations, possibilities for instant
This process is dynamic in nature and steered by mechanisms such as release of their offerings, and swift transformation of the offering value
data-driven decision-making, marketing, direct user interactions, (Huang et al., 2017).
localization, investment, and entrepreneurial persistence. These find­ This discussion indicates the concept of scalability of digital firms is
ings reflect the prominent role of dynamic capabilities in achieving widely used in the current literature understood as “how the value
realized digital scaling and resonates with argument that scaling in­ derived from a firm’s resource bundle in a focal activity changes as the
volves the navigation of tensions (Tippmann et al., 2022a). Third, this size of the bundle increases” (Guistiziero et al., 2022:2) and implies
research extends business model literature by developing an empirically potential digital scaling. Yet, some studies discuss that although digital
based framework of business model execution to achieve international technologies allow for rapid making digital offerings availability fast
scaling. The framework fleshes out how firms apply the highest order of worldwide, it does not automatically result in their adoption by users
dynamic adaptation capabilities, or the ability to transform and refine (Shaheer & Li, 2020). Tippamann et al. (2022b) describe global scaling
the business model, in business model execution during international of MNEs as a paradox requiring navigating conflicting demands. They
scaling. They enrich knowledge about the process and implications of suggest that digital firms must mobilize a number of mechanisms to
business model implementation, shedding light on the implications of satisfy these demands that are (1) top-down replication; (2) bottom-up
dynamic capabilities in business model research (Teece, 2018). These entrepreneurial orientation; and (3) replicable innovation generation.
insights also contribute to dialogue about the explanatory power of the Stallkamp et al. (2022) draws attention to persistent challenges that
business model versus entrepreneurial approach of the speed of inter­ impede the internationalization of digital ventures and highlight that
national expansion (Hennart, 2014; Hennart et al., 2021). Born-digital despite the ‘scale free nature’ of digital resources, there is a significant
firms’ transformation capabilities are vital in adapting their initial variation in firms’ speed and scope of international expansion. There is
business model that is scalable because of its digital features. A scalable also extensive evidence showing failure of many born-digital firms to
business model in the start-up phase is necessary but not sufficient for practically scale (Coutu, 2014; Kutcher et al., 2014).
achieving realized international scaling by born-digital firms. This leads I argue that conceptual clarity on what constitutes actual scaling of
to the conclusion that the business model and entrepreneurship expla­ born digital firms needs to be developed further. This paper attempts to
nations are complementary rather than competing in explaining digital do so by introducing a concept of ‘realized scaling’ (achieved scaling)
international scaling. and show how it is distinct from related and broadly used scalability
concept (potential scaling) in a digital setting. Moreover, understanding
2. Theoretical background of mechanisms of international scaling is still incomplete in the setting of
born digital firms. Huang et al. (2017) stress a need to zoom in on the
2.1. International digital scaling and born-digital firms mechanisms underpinning digital scaling and to examine how managers
can navigate them in practice. The international dimension of scaling is
International scaling has increasingly become an important strategic another aspect that deserves further attention (Tippmann et al., 2022a).
objective of digital ventures across the globe, and it has also begun While research often studies scaling in a global context (Huang et al.,
gaining the attention of the academic community (Piaskowska et al., 2017; Piaskowska et al., 2021; Tippmann et al., 2022b), the discussion
2021; Reuber et al., 2021). Working in a phenomenological field (Liesch about assumptions underlying the outcomes of international digital
et al., 2011), IB scholars are interested in both describing and explaining scaling requires further attention (Stallkamp et al., 2022; Tippmann
new phenomena as they emerge. Understanding scaling is theoretically et al., 2022a). The current study aims to enrich scaling literature by (1)
intriguing. The key attributes of scaling - namely, growth and speed - are delineating the concept of realized international digital scaling, and (2)
not new in IB literature. Scaling is closely associated with high growth theorizing how born digital firms with scalable business model

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(potential scalability) achieve realized international scaling. their design, features, and digital form of delivery, their actual value can
only be revealed after users have time to experience the digital offering.
2.2. Business model and dynamic capabilities Digital firms lack sufficient ex ante knowledge about which offering
characteristics will appeal to users and lead to adoption (Kriz & Welch,
The business model approach has recently gained the attention of IB 2018). For these reasons, digital firms often develop offerings without
scholars. Hennart (2014) highlights its explanatory power and suggests having full knowledge about the ‘best’ version during their start-up
that it affects the speed of internationalization of born-digital ventures. phase (Huang et al., 2017). Instead, they rely on insights from user in­
Tallman et al. (2018) demonstrates the relevance of the business model teractions on the release of new versions, upgrades, and added func­
for understanding global competition in MNE setting. Scaling research tionalities to better address user needs during their operational phase.
refers to the business model as an analytical instrument for under­ Shaheer et al., (2020) provide an example of digital game developers
standing the facets of scaling and its underlying logic for different types that release ‘good enough versions’, with the aim to continuously update
of firms (Monaghan et al., 2020; Reuber et al., 2021; Tippmann et al., them by monitoring user feedback. In cultural industries, intrinsic at­
2022a). One of the most broadly used definitions of the business model tributes of cultural content, such as the capacity to entertain, are diffi­
comes from Teece (2010, p. 172), who describes it as “the design or cult to parameterize because they are experiential and subjective
architecture of the value creation, delivery, and capture mechanisms [a (Vendrell-Herrero et al., 2018). The creative nature of digital offering
firm] employs. The essence of a business model is in defining the manner and perception bias make it even more difficult to predict the actual
by which the enterprise delivers value to customers, entices customers to value for target users than in other digital segments (Vendrell-Herrero
pay for value, and converts those payments to profit”. Teece’s concep­ et al., 2018).
tualization of the business model is relevant for understanding realized This discussion suggests that digital firms must continuously adapt
scaling, as it shows how value creation, delivery, and capture elements their operations by refining elements of their offerings’ value proposi­
of born-digital firms’ business model are executed during the imple­ tion, delivery, and capture to address users’ needs and expectations.
mentation of international scaling. Therefore, examination of the process and mechanisms of business
Use of the business model lens for understanding the process of model execution and adaptation during realized international scaling of
realized international scaling, - focus of this study, can offer valuable born-digital firms represents a theoretically promising and practically
insights to business model literature. While this literature has exten­ important research avenue.
sively studied designs, typologies, and the performance implications of
business models (Zott et al., 2011), it has been less concerned with 3. Method
causal explanations and specific details of these models’ development
and execution process, both empirically and theoretically (Dunford 3.1. Research design and empirical setting
et al., 2010). Teece (2018) emphasizes that the design and operation of
the business model depend on firms’ dynamic capabilities, which are This research uses an exploratory multiple-case study design with the
essential for the crafting, refinement, implementation, and trans­ objective to build theory about a novel and significant phenomenon of
formation of the business model. Dynamic capabilities refer to realized digital international scaling and its process (Eisenhardt, 1989;
higher-order capabilities, including sensing, seizing, and transforming Monaghan et al., 2020). It follows a longitudinal approach, which im­
competences (Teece, 2018). They are associated with firms’ ability to plies reliance on data collected at more than one point in time (Welch &
design the original model and replace and recombine elements of the Paavilainen-Mäntymäki, 2014) to be able to fully conceptualize the
existing model over time (Teece, 2018). However, most of the work on realized scaling process (Eisenhardt, 2021). That is, the reliance on
dynamic capabilities and business models has been conceptual. Teece methodologies that capture multiple time points allows developing
(2018) stresses the need for empirical studies to explore how dynamic process-related theorizing (Blazejewski, 2011).
capabilities shape the process of business model development and The empirical setting of the study is Finnish born-digital firms from
adaptation during the execution phase. Recent studies have begun to cultural industries. Cultural industries are defined as “organizations that
address this call by examining the dynamic process of business model produce and distribute cultural goods with substantive symbolic,
development during the start-up phase (McDonald & Eisenhardt, 2020; aesthetic, or artistic value” (Wang et al., 2020, p. 665). The reason for
Snihur & Zott, 2020), and development of replicable innovation strategy choosing this context is that cultural industries are amongst the
of scaling digital MNEs that requires ongoing revisions to the global fastest-growing sectors in terms of revenue, employment, and global
business model to be replicated globally to be able to sustain MNEs’ trade (UNESCO, 2016) and have undergone rapid digital trans­
competitiveness (Tippmann et al., 2022b). formation. They have not appeared extensively as a research setting and
Yet, largely research on business model adaptation, defined as al­ thus can shed more light on basic demographics of born-digital firms.
terations to the architecture of the business model elements, has mostly The study focuses on two sectors of cultural industries: digital education
been static, analysing antecedents and outcomes of business model and mobile games. Finland represents an appropriate geographic setting
adaptation (Foss & Saebi, 2018). By examining the process and mech­ for exploring firms from these sectors for several reasons. It is a world
anisms of business model execution during the actual scaling phase, the leader in information technology development and children’s education
current study aims to enrich the knowledge on the business model and and has witnessed the notable growth of entrepreneurial digital firms in
dynamic capabilities. mobile gaming and digital education (Niipola, 2014; Staff, 2020). In the
mobile game sector, Finnish firms are over-represented amongst the
2.3. Business model execution and adaptation in digital setting firms that have gained dominance in the global mobile gaming industry.
The firms Supercell and Rovio have become well-recognized across the
Examination of the business model execution process is particularly globe, and their business performance represents remarkable success
relevant in a digital setting. Attributes of digital technologies, such as (Guardian, 2014; Rovio Press Release, 2014). Similarly, the education
generativity, reprogrammability, connectivity, and aggregation, allow technology sector has attracted many entrepreneurs given Finland’s
digital firms to modify the value proposition, delivery, and capturing of reputation for providing the best world education (ExEdu, 2021).
their offerings on the basis of interactions with users (Adner et al., 2019;
Moreau et al., 2018). Machine learning algorithms offer digital firms 3.2. Case firms and research process
unprecedented opportunities to get insights about user preferences and
quickly develop ideas for offerings’ improvements (Chalmers et al., The choice of the case firms was guided by the objective to investi­
2021). As all digital offerings have some degree of novelty rooted in gate the process of realized international scaling of born-digital firms.

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Table 1
Case firms’ description.
Case Sector and product Founding Number of Interviewee Scaling scope
year countries

A B2C 2018 0 CEO, co- None

Language leaning application for children founders
B B2B/B2G 2010 2 CEO Domestic scaling and pilot projects in international scaling
E-platform for acquisition and use of digital
materials in educational sector
C B2C 2010 150 Head of Talent Operations in 150 countries. International scaling from the
Language learning application, English inception.
mastering application for adults
D B2B/B2G 2019 25 CEO Operations in about 20 countries. Initially domestic scaling,
University developed digital learning app for followed by international scaling via partners’ network.
Mathematics
E B2C 2012 Worldwide CEO First offering was globally scaled (100,000 downloads within a first
Online shooter games for mobile phones day of launched).
F B2C 2017 Worldwide CEO Global scaling shortly after inception (after few failed attempts).
Online tycoon games for mobile

The selection was based on the theoretical sampling approach to choose In addition to the interviews, I attended internal team meetings and
cases whose similarities and differences could strengthen theory build­ discussions with investors held over Zoom to verify and deepen under­
ing. Case design followed the logic of including born-digital firms with standing of matters related to the interview topics. The notes from the
common antecedents (Eisenhardt, 2021). These antecedents were the meetings’ observations were documented. In addition, I tested a demo
national origin and industry of operations (Finnish digital cultural in­ version of the firm’s offering to gain a better understanding of the appeal
dustries) and the clear intention to achieve international scale. This of the offering, the interface usability, and the effectiveness of imple­
allowed ‘controlling’ for alternative explanations associated with cul­ mented updates in the offering features. Thus, the research process
tural and industry differences (Eisenhardt, 2021). Yet the goal of the relied on data triangulation to ensure the validity and reliability of the
case selection was to achieve reasonable variation amongst cases by study (Miles et al., 2013).
including firms from both (1) digital education and mobile gaming in­ The second phase of the research began in late 2020 after the end of
dustry sectors and (2) business-to-consumer (B2C) and the first longitudinal case research. Extensive secondary data were
business-to-business (B2B) business segments. Effort was made to ensure collected on five other case firms from available public sources, such as
that there was variance in the scope and speed of realized international company websites, industry forums, and news releases. This was fol­
scaling and the types of business models of case firms, thus enabling a lowed by in-depth, semi-structured interviews in each of the five case
better assessment for cross-case differences. firms in January-March 2021 (see Table 2). The respondents were
The research process was implemented in two phases. During the selected on the basis of their knowledgeability of and accessibility to
first phase, the operations of a selected case firm in the B2C digital ed­ their past and current international operations. The interviews were
ucation sector were followed over a two-year period. Access was granted conducted in English and transcribed shortly after the interviews, the
to this newly established firm with clear objectives to scale interna­ duration of which spanned 55–90 min. The objective of the interviews
tionally. However, after initiating the scaling process, this case firm was to collect the process data over multiple rather than a single point in
failed to achieve realized scaling and was shuttered shortly after the time (Welch & Paavilainen-Mäntymäki, 2014).
market launch of its offering. The second phase focused on identifying The interview guide was developed before the interviews and
additional cases with a common national and sectoral background that included three sections with open-ended questions to navigate the dis­
had achieved a realized scale in their operations. Five born-digital case cussion. The first section focused on questions related to the entrepre­
firms were selected according to the theoretical sampling criteria. As an neurs and why they had established their firms. These questions were
outcome of this process, six case firms were studied overall. Table 1 followed by a discussion about the features of the offering, its value, and
provides a description of the case firms. target segment. The second and most extensive section covered ques­
tions about the firms’ past and current operations, focusing on the de­
3.2.1. Data collection tails of the process of international scaling and its scope. The third
The first phase of the research began in 2018. Data were collected section included questions related to the capabilities of the founders and
over the two-year period from 2018 to 2020, which accounted for the employees and their role in the firms’ international scaling. All the in­
initiation, development, and termination stages of the case firm. The terviews were conducted in English, recorded, and then transcribed.
most important data came from personal interviews with the founder Secondary data sources were systematically collected during the
and co-founders of the firm who were its full-time employees. The main second phase of the study. The data included material from firms’ offi­
source of interview data was based on reflections of the founder who had cial websites, marketing material, press releases, press interviews, re­
a vision for the firm’s offering and was leading the firm’s operations. ports of public talks and speeches made by the heads of the companies,
Insights from other co-founders complemented and enriched the data and internal reports. In addition, industry and daily media was carefully
collected from the founder. Table 2 shows details of the conducted examined to better understand the concepts and relationships described
interviews. by the interviewees (e.g. App Annie, 2021; AppsFlyer, 2020). This sec­
In total, 21 interviews were conducted during the longitudinal study. ondary data shed light on the various aspects of firms’ operations before
The average duration of the interviews was approximately 40–45 min. and during their international scaling. Altogether, the empirical data
The interviews focused on the operational and strategic matters related comprised 26 interviews, notes from the meetings’ observations, and
to the offering’s development, preparation and implementation of secondary material about the companies and respective industry sectors.
launch, scaling strategy, relationships with partners and investors, and
team dynamics over time. Examples of these topics are available in
Table 2.

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Table 2
Interview data from longitudinal case.
Timing of Time Examples of topics discussed
interviews

Firm A
Founder, CEO Jan, 2018 0:45 Offering idea, firms’ objectives, global customer segment
May 2018 0:43 Key milestones in offering development
Aug,2018 0:30 Key milestones in offering development
Dec, 2018 0:35 Talent search and acquisition, offering features, seed grant acquisition
March 2019 0:38 Process of offering development, market prospects, and platform partners’ relationships
June 2019 0:41 Target customer segments, offering discoverability
Oct, 2019 0:31 Investor relations, preliminary launch plans
Jan, 2020 0:45 The development of plans, the pitch structure and appeal to investors
May 2020 0:42 Implementation of testing, user feedback, strategies for the soft launch
July 2020 0.37 Feedback from customer test group, process of soft launch, securing feedback from platform owners, investors relations
Sep, 2020 0:48 The outcomes of soft launch and key KPI, negotiations with investors, market launch strategy, fundraising activities.
Nov, 2020 0:55 Reflection on failure to secure investments and poor KPIs during the market launch. Plans for venture terminations
Co-founder, front-end June 2020 0:46 Offering features, important competences for offering development, offering testing requirements
developer Oct, 2020 0:44 Feedback on KPIs during market launch, issues with offering features
Co-founder back-end Aug, 2020 0:47 Offering features, important competences for offering development, relationships with platforms’ owners
developer Oct, 2020 0:35 Feedback on KPIs during market launch, issues with offering features
Co-founder, Product June 2020 0:57 Offering features and the target customer segment, testing and initial expansion, role of investments for offering
development officer development
Nov, 2020 1:20 Feedback from market launch, features updates, localization
Jan, 2021 0:43 Offering performance failure, decision-making challenges, and potential road map ahead if venture were not terminated
Designer May 2020 0:51 Offering features and attractiveness, the vision for the main launch, and additional updates to be made and added after the
launch
Board Member Oct, 2020 0:55 Offering appeal and target segment, scale of expansion, capabilities of founder and co-founding team, investments
opportunities
Firm B Feb, 2021 1:30
CEO Offering appeal, target customer segments, initiation of international expansion and its objectives, current scope and logic
Firm C Feb, 2021 1:05 of operations, operational challenges, decision-making practices, future expansion strategies
head of talent
Firm D Feb, 2021 0:55
CEO
Firm E March 2021 0:50
CEO
Firm F March 2021 1:05
CEO

3.3. Data analysis 3.4. Data validity

Data analysis began by synthetizing evidence from the first case in­ Data validity was addressed in three ways. First, triangulation was
terviews, observation notes, and secondary data. To do this, the the­ ensured by integrating insights from the interview data with observa­
matic analysis procedure (Patton, 2002) was followed, which included tion, offerings’ testing sessions, and secondary sources. Second, in­
three steps. The first step consisted of qualitative content analysis, which terviews were structured using non-directive questions focused on
involves identifying and coding raw data (Corbin & Strauss, 2014). Open events (Huber & Power, 1985). Specifically, informants were asked to
coding was applied while proceeding sentence by sentence or paragraph describe significant elements of the firms’ operations that they had
by paragraph to generate emergent topics (Charmaz, 2006). A case personally experienced in the past or were currently experiencing. To
history of the first case was created by (1) outlining the main phases in improve accuracy, leading questions and speculative questions were
firm development, including inception, product development, market avoided. Third, in the first case, internal and external informants from
launch, and scaling (failure) phase, (2) identifying elements of firm’s different functions and levels (CEO, chief product officer, lead de­
business model, and (3) important business processes and mechanisms velopers, and board members) were interviewed to gain a relatively
mobilized at each of the phases. This approach helped uncover the bias-free understanding of the events.
ontology behind this firm’s operations and meaning of scaling, key
considerations, and emerging challenges at each phase and insights into 4. Findings
the reasons behind its failure to achieve scaled operations and its
termination. 4.1. Case firm A: vignette
In the analysis of the other five case firms added during the second
phase of the research, I followed the thematic analysis that emerged 4.1.1. Firm creation and initial business model
from the first case (Corbin & Strauss, 2014) and distinguished themes Firm A’s establishment was driven by the founder’s vision for the
related to their scaling phase, including firms’ business model elements, offering - a gamified application for children to learn vocabulary. His-
meaning and objectives of scaling, initiation of practical scaling, the experience in digital marketing and management as well as personal
ongoing scaling and its mechanisms, and external pressures inhibiting international background led to the creation of the idea for the offering.
scaling. This was followed by a cross-case comparison and identification He believed that competitive strength came from the novelty of the
of the emerging patterns and relationships. Finally, the findings were business model design of a unique offering delivering value (1) for
compared with the first case to draw conclusions based on the differ­ children (users) via a gamified application to expand language vocab­
ences in scaling processes and mechanisms across case firms. ulary that shows progress in learning by an integrated reward system
and (2) for parents (customers) through the provision of customized
feedback about the progress in their children’s learning and indications

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for rewarding them on the basis of the results. The monetization model 4.2. Born-digital firms’ international realized scaling: cross-case evidence
was a monthly subscription for up to four users and all available lan­
guages. The founder described his idea as follows: The respondents largely perceive scaling as the logic behind their
I thought of it as Netflix for learning languages. Once you have firms’ expansion. They noted that the key characteristic of their firms’
subscribed, you can choose any language for any member of the family. offerings is scalability enabled by the digital elements. As the CEO of
(Founder of firm A) firm D explained:
The founder believed that his business model was novel, but simple We are offering them [users] this scalable digital product that they
and effective. The aspiration was to scale fast from the very beginning by can then provide to any school. (CEO of firm D)
growing a customer base internationally using a subscription model for Similarly, the head of talent from firm C mentioned scalability as
revenue generation. The market opportunity was judged as untapped, strategically important for a viable business:
with other language-learning applications being more complex in use I mean, scalability and expertise especially digital marketing, paid
and lacking monitoring tools (e.g. Duolingo). The preliminary feedback acquisition … that’s a critical competence. (Head of talent of firm C)
on the offering acquired from business and personal network was highly There are two aspects that respondents seemed to associate with
positive: achieving practically scaled operations. The first is an expectation of a
I would definitely get this application for my kids. It will be great to significant increase in revenues from existing and new customers/users.
be able to see what and how they learn and have a good reason to get The mere expansion to the digital market - for example, by making the
them a treat every now and then. (Founder’s business partner) offering available in app stores - does not exemplify practical scaling
The offering development required a home office and a small team of because it does not automatically imply that customers will discover and
experienced developers. The development process took only several pay for the firm’s offering. To achieve scaled operations, firms must
months and was driven primarily by the founder’s vision; this allowed acquire paying users. The objective of user acquisition is to ensure that
for extremely lean operations with low fixed costs. The offering had been the offering will be discovered by users and will satisfy their expecta­
intended for launch in a large number of foreign markets and was tions so they will be willing to pay for its use. As the CEO of firm B
translated into many languages by using a core code for the master explained:
language without localizing content. As the back-end developer of firm We charge by users. So we have fixed price per user. And then we
A explained: have, in addition … we take a commission from the purchases made
Our offering is a language app for kids anywhere in the world with a within our platform. (CEO of firm B)
simple user interface. No matter which language one wants to learn or The firms also highlighted the importance of user retention by
improve, they can use the application. (Back-end developer of firm A) making offerings appealing to a specific target customer segment. As
The test launch was implemented in the home market (Finland) in CEO of firm F noted:
July 2020, and its key performance indicators (KPIs) showed promising The game needs to offer meaningful, deep content or experience for
results. Qualitative user feedback was not collected because the team several months. In addition … if those things happen, then the game can
believed that only hard data were truly reliable. The team had only be super big and keep our players interested. (CEO of firm F)
reached out to platform developers (Apple and Google) for the assess­ Second, it appears that firms intend to manage the scaling process by
ment of the offering. During the test launch, several issues were relying on simple governance mechanisms and maintaining relatively
discovered, and data from a larger user base were required to solve low costs. Two main sources of costs are associated with realized scaling:
them. Therefore, the firm decided to prepare for market launch in both costs of new user acquisition and costs required for organizational op­
Finland and Sweden shortly after the test launch, at which point erations and expansion to manage the growth in the user base. The
securing investments became the main strategic priority. Venture capital predictability of the costs differs across cases. For example, cases A, C, E,
was expected to support operations for the first year, providing the and F, which operate in the B2C sector, have digital tools to assess the
opportunity to finance user acquisition campaigns and work on offering costs of paid user acquisition and can also grow organically at zero extra
optimization. The goal was to quickly launch with more languages such costs. The rule of paid user acquisition is that new users are acquired
as Russian, Italian, German, and French to the markets where they are only when they are expected to generate higher revenue than the costs of
taught or learned. their acquisition. In case firms B and D, which operate in the B2B sector,
the user acquisition costs are less predictable and are associated with
4.1.2. Business model adaptation pressures finding large international customers via partner networks. The CEO of
After the market launch in September 2020, the data analytics firm D elaborated:
revealed that the offering was not good enough for scaling and that the We have no limits to scale fast, our offering is entirely digital. We
business model required further modifications. Further feedback from need only to find good partners, the more the merrier. (CEO of firm D)
Apple and Google also indicated a need for improvements. As the Growth in the number of users results in a relatively low increase in
founder described: organizational expenses to cover and hire a few employees to manage
We did have a good product, but it wasn’t good enough for the user interactions and product development. As the CEO of firm E
market. We saw that there were engagement and retention issues which mentioned:
we hadn’t seen directly in the soft launch. (Founder of firm A) If we scale big, we’ll need a couple more people to run user feedback
User data were required for insights into the direction of the offering and also a few more developers to focus on the next product so we can
features’ modification, adjustments in the target segments, and pricing keep our competitive edge.
model, which in turn required financial capital. Yet investments were (CEO of firm E)
not secured, which prevented paid user acquisition. Although the team The respondents did not appear to perceive significant organiza­
was developing various options for minor and major changes, the tional growth as a concern when scaling operations. On the contrary,
founder was not willing to deviate from the initially envisioned offering reliance on digital means in production, distribution, and adaptations of
and the business model. This resulted in frustration in the team and a the offering in response to customer feedback and market pressures was
lack of a clear future roadmap. Without investments and availability of stressed by the case firms as a reason for maintaining lean operations.
large user data, the founder was rather pessimistic about the outcomes For example, case firm F in the B2C sector reached hundreds of thou­
and was not willing to pursue the adaptation process. In November sands of users across the globe and managed to maintain its small size.
2020, the decision to terminate the firm was made jointly with the team. The CEO mentioned:
We are continuously updating the first game and developing new
ones, but our team has always been 10 to 14 people, including

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developers and business people. (CEO of firm F) 4.4. Adaptation of initial business model during the international scaling
The B2B firms indicated that managing the extension of a network of phase
partners becomes more complex when scaling operations. Yet they
perceive it to be manageable because many elements can be governed As the empirical findings indicate, having a business model design
efficiently through digital tools. Overall, respondents indicated that the that supports the intended scaling is essential but not sufficient by itself
meaning and purpose of achieve scaled operations is to fulfil the ‘big for the actual achievement of scaled operations. The discussion of case
dreams’ of founders and expectations of investors: firm A illustrates this well. While its initial digital business model was
We do both, so we want to increase the percentage of spending users, intended to reach international scale and the prospects of anticipated
but we also want to grow the audience 20 times bigger than what it is scaling were supported by internal and external parties before market
now. (CEO of firm D) launch, the realized scale was not achieved. Next, I discuss the (1) ra­
All the case firms perceived scaled operations as a raison d’être tionales for adaptation of an initial business model and its implications
aimed to generate a strong cash flow to support and develop firms’ for achieving realized scaling, and (2) mechanisms mobilized during the
operations further. As the CEO of firm B indicated: adaptation process.
Every company that is dependant on the scalable growth, such as
ours, aims to expand payable user base … because we only have that 4.4.1. Adaptation outcomes of business model at the international scaling
yearly fee, per user, which means that the more users we have, the more phase
income we will have, and the stronger cash flow. After offerings are launched in the market, firms can obtain user data
(CEO of firm B) that signal performance indicators, such as download rates, retention
The head of talent of firm C also explained: rates, lifetime value, number of organic installs, conversion rate, and
If we are to survive, we need to succeed in scaling. (Head of talent of qualitative user feedback. While the range of KPIs might vary across B2C
firm C) and B2B firms, their objective is to reveal the offering’s actual perfor­
As this quote indicates, realized scaling is essential for survival mance after its market launch. KPIs also pinpoint issues with different
because revenue is required for born-digital firms’ continuous innova­ elements of an offering’s business model and indicate directions for their
tive activities, which are vital for maintaining their competitiveness. adaptation. Table 3 offers insights into adaptations that the case firms
The fast pace of technological change, customer preferences, and rivalry have undertaken in their business model during international scaling
landscape in the global digital market space push born-digital firms to phase.
continuously update their offerings and adjust to market signals, as the One reason for adaptation is the uncertainty associated with the
CEO of firm B explained: actual appeal of a digital offering to users. For example, the superior
features of the digital offerings of case firms C, E, and F proved chal­
There is always some kind of new innovation, there are some new lenging for the firms to estimate users’ perceptions of the offering be­
companies coming to the market, there are a lot of new e-learning forehand as well as the optimal target segment for the offering. As such,
materials entering the market. So we kind of, like, need to know user data analytics was the main source for informed decision-making
everything. Since the market is so complex, or our platform is so tied for improvements. As two respondents explained:
up to these different kinds of innovations and new things. And we We just launched it globally, then started to see where the game
have to keep up, otherwise we fall. (CEO of firm B) appeals. (CEO of firm E)
Post-launch data analysis is at the heart of what we required to scale.
An ability to practically scale to generate high revenues is also a key It showed us that our offering has a misfit with the segment which were
indicator guiding venture capitalists’ decision to invest. For example, aiming at. All follow up decisions were made based on the user data.
founder of case firm A mentioned a lack of convincing evidence for (CEO of firm F)
prospective realized scaling as one of the reasons for the failure to ac­ These reflections show that data analytics provides indicators about
quire venture capital that led to its termination. the offering’s appeal to a particular customer segment. Similarly, firm A
In summary, achieving scaled operations, or the exponential growth envisioned its offering to be novel and attractive to users (children) and
of revenue while maintaining a significantly lower increase in organi­ customers (parents); yet the market launch data revealed that its value
zational costs, is the main goal of born-digital firms. The reliance on was not perceived in the expected way. As the founder mentioned:
digital elements in all aspects of operations is the main enabler of such We have had downloads, but extremely low retention for our
scaling in both B2B and B2C segments. application. It became obvious that it was not as appealing as we
thought it would be. (Founder of firm A)
4.3. Initial business model in the pre-scaling phase Similarly, firm C faced a need to reconfigure its value-capturing el­
ements. As its head of talent explained:
The scaling intent as a raison d’être of born-digital firms is reflected We realized we need different sales models, different pricing models,
in their initial business model. All business model elements, value cre­ different subscription and discount models. (Head of talent of firm C)
ation, delivery, and capturing are designed to allow for achieving in­ The CEO of firm B in the B2B segment mentioned issues with its
ternational scale. Notably, born-digital firms view the concept of the monetization model discovered in the initial phase of scaling. Address­
business model at the offering level rather than at the firm level. Digital ing the localization pressures also appeared to be challenging for firms in
firms might have several offerings (e.g. case firm C) when they have both segments. As the CEO reflected:
their own business model in terms of how value is created, delivered, When entering first foreign markets, I learned was that you never go
and captured. As Table 1 shows, the business models of the case firms there alone. (CEO of firm B)
vary in terms of the type of business segment (e.g. B2B, B2C), value The speed of adaptation appears to differ across B2C (cases A, C, E,
creation model (e.g. subscription, premium, free-to-play), and delivery and F) and B2B (cases B and D) business models. The reason for this is
model (e.g. app stores, partner network, websites). These business that B2C firms can reach users directly via digital channels whereas B2B
models fully support the pursuit of an international scale of operations. firms must negotiate first with business partners and customers about
The digital nature of the business model elements is a crucial enabler of the purchase of their offerings and only then establish a digital presence.
perceived scaling prospects. As the CEO of firm D noted: Therefore, B2B firms have a longer period of user acquisition due to the
All of this would be completely impossible unless it was completely existence of the ‘offline to online’ period. For example, firm D relies on
digital…. The platform itself, the digital learning tool, has zero physical its network partners to deal with schools, and firm B negotiates case by
components. So everything is done to a network device. (CEO of firm D) case with municipalities, schools, and the government for the sale of its

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Table 3
Business model adaptation outcomes.
Seg- Firm/ Factors driving Business model adaptations Illustrative quotes
ment sector reconfiguration

B2C A/ -Low level of KPIs -Value proposition* (offering We had some downloads, but extremely low retention rate. It became obvious that
EdTech (low number of downloads & features and interface) it was not as appealing as we thought it would be. (CEO of firm A)
retention rate) -Value capturing* (pricing model)
- Misfit of monetization model (*would have been required if firm
-Low degree of localization had succeeded)
C/ Low level of KPIs (number of new -Value capturing (sales and pricing We realized we need different sales models, different pricing models, tdifferent
EdTech users, retention rate) models) subscription and discount models. (Head of talent, firm C)

E/ Limited understanding about offering -Value proposition: target markets We just launched it globally, and then started to see where the game appeals.
Game performance on some of the markets -Value proposition: offering (CEO of firm E)
features
F/ -Low level of some KPI (low number -Value proposition (misfit with the Since our game has a hybrid monetization model, it was beneficial to learn that in
Game of downloads & conversion rate) target segment) such markets as India ad focused in-game monetization model can be the key for
-Value capturing: monetization revenue generation as Indian players are inclined to watch rewarded ads. In
model at the different foreign contrast, players from the United States have a lower inclination to watch ads in
markets games, which means that focus would need to be on in-app purchase monetization
-Value delivery: change from the for these users. (CEO of firm F)
publisher to own distribution
B2B B/ Misfit in expectations about -Value delivery: partners and direct When entering first foreign markets, I learned was that you never go there alone.
EdTech operating model in foreign markets contacts (CEO of firm B)
-Value capturing: pricing model
(context-specific)
D/ Need for further customization -Value creation: customization of Another important task for us is about learning analytics after the launch, meaning
EdTech user experience that when we are observing everything that the kids are doing. Then we can
improve customization of learning experience of each student.
(CEO of firm D)

offering. The international context in which cultural and institutional data. And already in the data, there are millions of possibilities, which
differences affect localization requirements is particularly challenging. we look at, then we can ask for fellow game developers to take a look at
B2B firms have fewer direct customers, whereas B2C firms’ user base can the problem and give their opinion. (CEO of firm E)
be increased more effortlessly through digital markets. For example, The assessment of fit between the offering and target user segment is
firm E’s offering has been downloaded 90 million times, whereas firm B, another area in which decisions are made largely based on data
though founded in 2010, currently has only 200,000 users. As the CEO of analytics:
firm B explained: Post-launch data analysis is at the heart of what we required to scale.
So we are actually working through a network of partners that help It showed us that our offering has a misfit with the segment which were
us find this local understanding, the business cultural language, of aiming at. All follow up decisions were made based on the user data.
course, and working through our partners; then we have been able to see (CEO of firm F)
that the product is actually very relevant in any country. (CEO of firm B) Marketing activities are often discussed in close connection with user
data analytics because they lead to data acquisition. In digital market­
4.4.2. Mechanisms of the business model adaptation during international ing, users are acquired through non-organic installs. ‘App install ad
scaling phase spend’ is a sub-category of mobile marketing related to the money
The assessment of the issues inhibiting actual scaling and imple­ invested to drive users to app stores to download an app (AppsFlyer,
mentation of business model adaptation takes place through several 2020). The quality of data analytics is directly related to the size of the
interrelated mechanisms. These are summarized in Table 4 and sup­ data, with a larger amount enabling more reliable conclusions to be
ported with illustrative quotes. drawn. The front-end developer from case A explained that a lack of
Data-driven decision-making based on data analytics appears to be the hard data led to the failure of the venture:
main mechanism that guides reconfigurations of business model ele­ And when you can’t have hard data to illustrate where the problem
ments during the active scaling phase. Case firms engage in multiple is, it is very much, like, going on manual of data, a small amount of it.
rounds of user data analyses to be able to make decisions about the When you have a large dataset, and know where the problem is, then
optimization of offerings’ market performance. User data provide sig­ you can find anecdotal evidence for what could be that specific problem.
nals about the most valuable (as well as problematic) features of the But reverse engineering starting from the anecdotal evidence and seeing
offerings, the effectiveness of the monetization model, and delivery what the problem in my experience tends not to work very well. (Front-
channels. As the respondents explained: end developer of firm A)
So, we are using these digital tools to kind of make it transparent for The head of talent of firm C also noted:
everybody in the team about what are the most important things that we I think it’s mostly hard data that we look at. We are not, like, so
should be focusing on right now. (CEO of firm B) active in organic social media. We do advertise a lot and rely on paid
I think we are working in a more agile way and in a more data-driven user acquisition. (Head of Talent of firm C)
way. So that’s how we currently updating the product, like based on As Table 4 shows, the case firms in both B2C and B2 sectors have the
continuous AB testing and iteration and, customer feedback and same objective of their marketing operations - user acquisition - but they
customer behaviour. So, we follow the data and make decisions based on differ in the means by which they carry out those operations. The former
that. (Head of Talent of firm C) rely solely on digital marketing, while the latter use mostly traditional
Furthermore, firms use data analytics to identify the bottlenecks B2B marketing approaches. In digital marketing, the success of user
experienced by users and the directions on how to address them. As the acquisition largely depends on the availability of a sufficient budget that
CEO of firm E explained: can be used for acquiring new users, paying for mobile attribution,
There are so many ways to approach the problem, we can look at the optimizing the app store, and advertising on social media.

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Table 4
Mechanisms of scaling.
Mechanisms of scaling Case-specific examples Case Illustrative quotes
firms

Data-driven decision-making based on data Focus of analytics: B2C I think what we look most is the data. So like what gets people? What gets the users to purchase? What gets them
analytics - Learning about user behaviour B2B to continue? Where? And why do they drop out or quit using the service? I think it’s mostly the hard data that we
Means of data acquisitions - Bottlenecks A look at when we try to scale big.
- Monitoring changes B (Head of talent, firm C)
- Guidance for offering updates C We have some inbuilt measures that we follow as well. How many users there are, how many active users we have.
- Target market decisions D Then we can also check on the sales, and how much would there be per student purchases per student and things
E like this, that we follow when making decisions about next steps.
F (CEO of firm B)
Digital marketing: B2C
- User acquisition A I think it’s mostly hard data that we look at. We are not, like, so active in organic social media. We do advertise
- Mobile attribution C a lot and rely on paid user acquisition.
- App store optimization E (Head of talent, firm C)
F
Non-digital marketing and sales: B2B Our team was attending bet one, which is one of the biggest education exhibitions in, in Britain. And they were
- Sales (B2B) B there. And when they were meeting different kinds of companies and people all over the world.
- Partner network & word of mouth D (CEO of firm B)
- Weconduct distribution via local partners who are responsible for overlooking all operational matters. Unfortunately,
it takes time to find good partners, but once we have at least one in the new country, then we move faster.
(CEO of firm D)
Direct interaction with user and platform owners: We are working in a more agile way and in a more data-driven way. This is how we currently updating the products, like
- User feedback and behaviour B2C based on continuous AB testing and iteration and, customer feedback and customer behaviour. So, we follow the data
- Communities of users B2B and make decisions based on that.
9

-Platform owners A (Head of talent, firm C)

B We do keep very close touch with our customers, and eager to know their feedback, suggestions for improvements.
C They often have very good ideas as they are the ones who use our product.
D (CEO of firm B)
E We have ongoing interaction with our user community because it is extremely important to address their concerns and
F questions as they come. They have also good comments about game mechanics and other things, for example live ops.
B2C So they like show us what works, what doesn’t and we try to fix it quickly.
E (CEO of firm E)
F We continuously seek feedback from Apple and Google. Some of it is helpful, some not so much, but it is important to show
B2C that we take it seriously if we want them to feature our offering.
A (CEO of firm A)
E
F

Localization Moderate localization: Localization of input language helps us to scale fast. For example, the Spanish app is spreading faster in Latin American
- Translation of interface B2C countries and now we are willing to translate into more languages in the future.
- Live ops C (Head of talent, firm C)

Journal of World Business 58 (2023) 101418

- Gradual increase in degree of localization E As [the] scale grows with adding more countries, we keep localizing in that order . . . So we have translation [into the]
- Reliance on partners F most important languages . . . English, of course, and then Russian and Portuguese for Brazilian players.
(CEO of firm E)
We do digital content, or blog posts, and all kinds of things … we tried to do those together with partners, so that they are
maximally relevant to different countries.
(CEO of firm F)
Extensive localization B2B We find a partner in the new country, we localize the content jointly. The local guidance is important to make it right.
- Translation of interface and adaptation of content B (CEO of firm B).
D
(continued on next page)
I. Mihailova Journal of World Business 58 (2023) 101418

User interaction is another mechanism assisting in actual scaling. It

different from my initial idea. But the problem is that without strong user data we can’t know for sure, and without investments
Our KPI reflected that we need to change a lot of elements in our application. In our team, we now have different visions that are

They [founders] have this passion and the will to make it big, I mean, they could probably find an easier job somewhere else, but
helps improve the offerings’ value based on direct user feedback and
address users’ concerns in a timely manner. As the head of talent of firm
C reflected:
We have collected customer feedback and develop the platform or
the service based on that. But I think what we look for most is the data.
So, like, what gets the people? What gets the users to purchase? What
gets them to continue? Where? And why do they drop out or quit using
the service? (Head of Talent of firm C)
Similarly, firms in the B2B sector continuously analyse user feedback
for further improvement. As the CEO of firm B explained:

We do keep very close touch with our customers, and eager to know
their feedback, suggestions for improvements. They often have very
good ideas as they are the ones who use our product.(CEO of firm B)
salaries and external investments to fuel the development and the growth

Only case firms E and F have used communities of users, which

appear to be common in the mobile gaming sector.
Partnerships with other companies are important for achieving scaled
operations. While B2B firms extensively rely on external partners for
international sales and localization of their offerings, B2C firms have
they want to try this, you know, until the end.

used partnerships with eco-system partners and platform owners largely

for attaining a better market position in the digital market. The CEO of
firm D mentioned:
We do digital content, or blog posts, and all kinds of things … we
tried to do those together with partners, so that they are maximally
we have no money to do it.
(Head of Talent, firm C).

relevant to different countries. (CEO of firm D)

In B2C, cooperation with platform partners such as Apple and Google
Illustrative quotes

can be important, though not always useful in terms of value of feed­

(CEO of firm A)

(CEO of firm B)

back. As the founder of firm A mentioned:

We continuously seek feedback from Apple and Google. Some of it is
helpful, some not so much, but it is important to show that we take it
seriously if we want them to feature our offering. (Founder of firm A)
In terms of localization, many respondents stressed that the skilful
firms
Case

adaptation of the digital offering to language and cultural aspects while

B2B

B2B
B2C

B2C

EF
D

D
A

C
B

B
E
F

expanding to different locations allowed their firms to scale faster. For

example, the head of talent of firm C explained:
Own capital/venture capital

- Continuouseffort of owners towards firms’ development

Localization of input language helps us to scale fast. For example, the

Spanish app is spreading faster in Latin American countries and now we
are willing to translate into more languages in the future. (Head of
Talent of firm C)
Yet several firms view their offering as standard with minimal re­
quirements for localization. This shows that the requirements for the
extent of localization are offering-specific and that estimating them in
order to scale is important. Some offerings require a mere translation of
the interface, while others necessitate a full range of cultural adaptations
Case-specific examples

of their content and interface. An example of the former is an offering of

case firm E, whose localization included only the translation of the game
language and running the live ops, which was mentioned by the CEO:
We translate the game, but we don’t have any country-specific fea­
tures because shooter games are something so similar. But we run
country-specific live ops, for example for Chinese New Year, they trigger
-

downloads for a few days. (CEO of firm E)

By contrast, in firm D, localization took place at three levels, as the
CEO explained:
So, first is the user interface language. I mean, that’s really the next
couple of days, the language. But then our content library is a
completely different thing. It’s more than 200,000 tasks that cover the
entire weekly programmes from grades one to nine … the amount of
exercises in this content library means that it’s not trivial to translate …
Mechanisms of scaling
Table 4 (continued )

teachers are adopting it much faster when a natural language version is

Entrepreneurial

available … the third level is curriculum adaptation … Estonian trans­

persistence
Investments

lators are looking at the lesson plans, and they are at that point looking
at ‘Okay, this exercise should be on that grade’.(CEO of firm D)
While localization adaptations are implemented more easily for
digital than physical offerings, they differ in the amount of time and

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I. Mihailova Journal of World Business 58 (2023) 101418

Fig. 1. Empirically based framework.

resources employed. The failure to accurately evaluate the extent of explained:

required localization can be detrimental to the success of a firm, as in When your firm doesn’t have the funding to pay talent, and when
case firm A. In that particular case, the firm’s chief product officer had a there is no budget for user acquisition, then there is not much one can
strong belief in the need for profound localization and expressed that the do. (CEO of firm F)
mistake in this respect had a serious impact on the success of scaling. Thus, both the ability to secure financial support and the persistence
With regards to entrepreneurial persistence and financial resources, the in offering a business model reconfiguration are important driving
case firms strongly agreed that the reconfiguration process is highly mechanisms of scaled operations.
intense and demanding. Its implementation requires persistence and
high competence from an entrepreneurial team, and it takes place under 5. Discussion
fierce competitive pressures of a rapidly changing global digital market,
as the CEO of firm B mentioned: 5.1. Contribution to scaling literature
They [founders] have this passion and the will to make it big, I mean,
they could probably find an easier job somewhere else, but they want to Research on international scaling has attracted the attention of IB
try this, you know, until the end. (CEO of firm B) scholars, emphasizing the need for theoretical advancement of the field
The respondents indicated that they had to work incredibly hard and (Reuber et al., 2021; Tippamann, 2022a). This study undertakes the next
fast in undertaking continuous iterations to optimize offerings’ features steps in this direction. First, it introduces the concept of ‘realized in­
and ensuring the effectiveness of the overall business model. In contrast ternational scaling’ and explicates its distinction from that ‘scalability’
with the attitude of the owner of firm B mentioned previously, the and ‘scalable expansion’ concepts broadly used in the literature to date
founder of firm A expressed a lack of willingness to undergo a process of (Giustiziero et al., 2020; Monaghan et al., 2020). This research suggests
improvements after receiving poor KPI during market launch: that realized international scaling is achieved when a born-digital firm
Our KPI reflected that we need to change a lot of elements in our (1) generates exponential revenue by expanding its customer base by
application. In our team, we now have different visions that are different retaining existing and acquiring new users in large number of foreign
from my initial idea. But the problem is that without strong user data we markets; while (2) maintaining a lower increase of costs associated with
can’t know for sure, and without investments we have no money to do it. customer retention and acquisition as well as those arising from orga­
So, the excitement is no longer there and it is better just to end things. nizational expansion.
(Founder of firm A) This conceptualization highlights that realized international scaling
This quote also illustrates that the other reason for the firm’s is closely associated with revenue generation. It occurs when born dig­
termination was the unavailability of investment funds. Indeed, all case ital firms succeed in their value capturing activities (Stallkamp et al.,
firms indicated that financial resources are essential for undertaking the 2022), in addition to the value creating ones which merely manifest a
scaling process. The firms whose founders have largely relied only on potential for achieving scaled operations, referred as to ‘scalability’ of
their own funds have indicated that it slowed down the speed of scaling. digital resource bundle (Giustiziero et al., 2021). Indeed, even though
For example, the user acquisition budget is directly related to available digital nature of firms’ offerings allows to make them easily available in
financial capital, which in turn affects the number of acquired users. In global market space (value creation) (Shaheer, 2020), to practically
addition, hiring top talent in the field is costly. As the CEO of firm F scale, born-digital firms’ offerings need to be made discoverable and

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I. Mihailova Journal of World Business 58 (2023) 101418

appealing to target customers to generate actual revenue (value cap­ international scaling. This study shows that born-digital firms find it
ture). For example, the free-to-play business model in mobile gaming important to adapt their offering to local conditions that is in line with
allows users to download the game from the app store and play it for free existing research (Lovelock & Yip, 1996; Prahalad & Doz, 1987). They
and has zero additional costs per user (Seufert, 2014), but it is game often prefer to rely on local and international partners for undertaking
attractiveness and skilful application of in-game monetization tech­ the localization tasks to maintain the lean style of operations. The extent
niques that lead to revenue generation and demonstrate realized scaling. of localization varies across different offerings depending on their type
Realized scaling also implies that born-digital firms succeed in and business segments. With regards to the type, the offerings that
maintaining lean principals of operations (Autio & Zander, 2016) that address global needs and have a high degree of independence of setting
are largely enabled by their entirely digital business model. Born-digital or genre do not require extensive localization, while those addressing
firms rely on small professional teams, the use of digital tools to perform specific local demands require more extensive localization. For example,
most of the business process, and the opportunity to outsource some of in the mobile game sector, hyper-casual games (e.g. Candy Crush Saga)
the functions to eco-system partners that allow to sustain low gover­ or casual games (e.g., those of case firms’ E and F) require moderate
nance costs and its complexity. This put a pressure to organize the in­ localization related to interface translation, though games that are
ternal processes efficiently and effectively during the realized scaling specific to a local cultural setting also need content localization. Simi­
which, however, have found to be challenging (DeSantola et al., 2022). larly, in the digital education segment, the more generic an offering,
The definition of born-digital firms’ international realized scaling such as music learning or language learning app (e.g. that of case firm
delineates features that differentiate it from the concept of growth that A), the less localization is required. However, this research suggests that
implies expansion in costs but not necessarily in revenue (Reuber et al., offerings in B2B segments tend to require more extensive localization
2021). Furthermore, this conceptualization highlights the argument and customization, as they target large business customers.
that, theoretically, distinctive element of scaling is concerned with un­ The implementation of data acquisition and localization is costly.
derstanding of how the scaling is achieved and its outcomes (Tippmann Born-digital firms must have sufficient investment capital, from either
et al., 2022a). However, it is important to stress that as the definition venture capitalists or owners, to cover data acquisition and localization
was derived inductively from the analysis of born-digital firms, the costs. The importance of venture capital has been emphasized elsewhere
dominating digital features of the business model represent its boundary in IE research (Aernoudt, 2017; Duruflé et al., 2018), and this study il­
conditions. lustrates how it also fuels the scaling phase of born-digital firms.
Second, this explorative research contributes to the theoretical Digital international scaling appears to be an achievement context
development of born-digital firms’ international realized scaling by (Deshpandé et al., 2013), in which born-digital firms must overcome
unveiling its dynamic process and mechanisms. It offers a framework unforeseen obstacles if they are to succeed. The full design and appeal of
suggesting that international realized scaling is achieved through an the digital offering is unknown before the use by customers (Huang
iterative process of initial business model adaptation, which is illus­ et al., 2017), which makes the scaling phase highly unpredictable. This
trated in Fig. 1. research suggests that the persistence of the entrepreneurial team in
The actual scaling process starts after market launch, when born- driving the process of realized international scaling forward represents
digital firms attempt to expand their user base and generate revenues another underlying mechanism of scaled operations. This finding is in
through several interconnected mechanisms. The key objective in the line with previous research highlighting the importance of entrepre­
beginning of the scaling phase is to acquire understanding about user neurial perseverance (Cardon & Kirk, 2015). It also enriches the un­
perceptions of the offering and their purchasing behaviour to get an derstanding of the entrepreneurial role in the digital context, in which
indication of offering appeal and actual revenue. These learnings enable data-driven analytics offers unambiguous indications about the offer­
firm to undertake the required adaptation in elements of the business ing performance. In this context, the ability and willingness of the
model such as value creation, delivery, and capturing. This adaptation entrepreneurial team to quickly address revealed issues and opportu­
process requires continuous implementation and orchestration of nities and to adapt business model elements are crucial. This requires the
various mechanisms (see Fig 1) and ability to sense and seize the op­ existence of a learning orientation of founders (Domurath et al., 2020),
portunities and bottlenecks to make offering appealing and able to which appears to be essential for the scaling of born-digital firms.
generate revenue (Teece, 2018). This comprehensive account of mechanisms mobilized by born dig­
One of the key mechanisms driving the process of business model ital firms in the process of realized international scaling addresses lim­
adaption is data-driven decision-making based on analysis of user data itations of Huang et al. (2017), who examine only a few of them. While
acquired through marketing tools and direct user interactions. Data their study elaborates on such mechanisms as data-driven operations,
analytics is focused on understanding user behaviour, identifying bot­ instant release, and swift transformation, it recognizes the need to
tlenecks, monitoring user feedback, and spotting potential new expan­ further investigate the role of marketing and venture capital in stimu­
sion avenues (e.g. in terms of target segment). Its results provide signals lating and scaling efforts. This research examines the interactions
about perceptions and performance of offerings and enable identifica­ amongst data-driven operation, marketing efforts, and venture capital,
tion of the directions of necessary modifications. Data analytics guides as well as the role of managers and entrepreneurs, in driving the itera­
decisions about the optimization of offerings’ business model elements tive process resulting in business model adaptation.
throughout the scaling phase via rounds of iterations. To sum up, the process of business model adaptation is iterative in
Marketing and direct interactions with users are key mechanisms for nature and requires firms to orchestrate various mechanisms to succeed
acquiring user data. Similar to the results reported by Huang et al. in its implementation leading to realized scaling. This observation
(2017), this study’s findings indicate that a greater amount of user data highlights the fact that realized scaling of born digital firms is not solely
leads to better-quality decisions. Marketing mechanisms vary in B2B and a feature of their scalable bundle of digital resources (revenue creation),
B2C firms. While B2C firms primarily rely on digital marketing, B2B but the presence of dynamic capabilities to steer the execution of busi­
firms extensively use non-digital channels to distribute their offering (e. ness model to achieve value capturing that exabits realized scaling. The
g. network of business partners). However, in both sectors direct in­ need for dynamic capabilities were also implied elsewhere in scaling
teractions with users via digital means represent an important source of research. Tippmann et al. (2022b) show that digital MNEs have to
data. The crucial role of digital data acquisition and analytics-based continuously navigate with conflicting demands to navigate through the
decision-making in achieving internationally scaled business model scaling paradox. Therefore, one of the important contributions of this
highlights the importance of digital competences for international studies is to extend existing understanding about the important role of
expansion (Cahen & Boirini, 2020). dynamic capabilities in the process of realized international scaling. This
Localization is another important mechanism that assists firms in study unpacks the iterative process and mechanisms of realized scaling

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enabled by features of digital technologies such as connectivity, flexi­ 5.4. Implications for practitioners
bility, replicability, and aggregation in implementation of business
processes (Adner et al., 2019; Monaghan et al., 2020). It emphasizes the The growth of digital firms has exploded in recent years, and thus
value of a large amount of digital data for learning about user behaviour this research resonates with the recent call for IB research to produce a
that assist international scaling (Chalmers et al., 2021). This research greater “impact, relevance, and a connection to the real world” (Buckley
also shows that firms in the B2B segment differ from B2C firms in the et al., 2017, p. 1053). By unveiling the process and mechanisms of
extent of their reliance on the discussed mechanisms of realized scaling practically scaled born-digital firms, this research informs managers
due to the presence of non-digital elements in business model. Yet they about the strategic and operational matters that are important to
follow similar heuristics in the scaling process (see Tables 3 and 4). consider when working to achieve realized international scaling. The
These nuances contribute to a better understanding of the implications findings of this study clearly illustrate that scaling is not simply a feature
of digital affordances and data analytics, particularly with regards to of the born-digital firm but the raison d’être for survival that warrants
international scaling of digital firms from different business segments. proper strategic efforts from management teams. As the CEO of firm E
well explained, ‘many people think of [scaling] as the wheels of a car,
while it is the engine’, which highlights the importance of implementing
5.2. Contribution to business model literature actual scaling if digital firms are to succeed in the IB arena.

First, this research contributes to the business model literature by

developing an empirically based view of the dynamic process of business 5.5. Limitations and future research
model adaptation during international digital scaling. It addresses the
call for the need to better understand business model implementation This study has several limitations that could be addressed in future
and highlights the importance of dynamic capabilities in the imple­ research. First, it takes first steps to uncover the nature of the realized
mentation process (Teece, 2018). While most research on the business international scaling of born-digital firms but does not claim to offer the
model is static and focuses on the business model design, typologies, and all-embracing conceptual development of the scaling phenomenon.
performance implications (Dunford et al., 2010; Foss & Saebi, 2018), Additional studies should further explore scaling in a non-digital
this study explains the mechanisms of business model adaptation that context.
help achieve realized international scale. A few notable exceptions have Second, there is likely greater diversity in the mechanisms of scaling.
examined the process of effective business model development (McDo­ Although this study includes different types of firms and business
nald & Eisenhardt, 2020) and entrepreneurial business model innova­ models, these belong to a single industry context, which has its specific
tion (Snihur & Zott, 2020) during the start-up phase, revealing nuances features. The investigation of scaling in other digital sectors would
associated with these processes. The findings of this research are novel, complement the findings from this research. In addition to different
as they show how business model adaptation takes place in the post industry contexts, research on the scaling of born-digitals from other
start-up phase to achieve realized scaling. The reason for the adaptation national contexts could be insightful. For example, firms from emerging
of the business model after market launch is associated with the novel markets might have different objectives and mechanisms of scaling. In
nature of digital offerings and the challenges in predictability of how addition, the institutional environment might exert an important impact
users will perceive them (Shaheer et al., 2020). on operational aspects of the realized scaling of emerging market firms.
Second, the insights of this study shed light on the discussion about Finally, there is an opportunity to undertake a larger quantitative
the explanatory power of the business model versus entrepreneurial study to test some of the assumptions proposed herein. Doing so would
approaches for understanding the speed of international expansions strengthen the conceptual foundations of scaling and enhance the
(Hennart, 2014; Hennart et al., 2021). They highlight that these expla­ generalization of the research assumptions.
nations are complementary, rather than competing, by unveiling how
entrepreneurial factors matter for the execution of the business model 6. Conclusion
during the scaling phase. While potential scaling is based on estimations
about an offering’s appeal and the effectiveness of the digital business This research enriches knowledge in the scaling and business model
model before market launch, the realized scaling is an outcome of skilful fields by offering empirical insights into the concept, process and
business model adaptation implemented by entrepreneurial team during mechanisms of realized international scaling of born-digital firms
the scaling phase. through the lenses of the business model and dynamic capabilities. The
research framework shows how the dynamic process of business model
adaptation takes place after market launch and leads to scaled opera­
5.3. Contribution to literature on cultural industries tions of born-digital firms. While scholars often define born-digital firms
as being readily scalable (Monaghan et al., 2020), this research uncovers
This explorative study offers implications for research on cultural the ‘work’ behind practically scaled born-digital firms and offers an
industries. Cultural industries deeply rooted in values, customs, and empirically based definition of realized digital scaling.
traditions are rapidly undergoing digital transformation. The increasing
reliance on digital technologies was even further trigged by the COVID- Acknowledgments
19 pandemic. This context lies at the heart of the IB discipline, and better
understanding it allows drawing implications about the applicability of The author was a silent co-founder of one of the case companies. This
the assumptions associated with culture, such as the role of localization research was funded by the Foundation for Economic Education and
and location choice for digital international expansion (Wang et al., HSE Support Foundation, Finland.
2020). The discussion on born-digital firms’ scaling sheds light on how
the diffusion of digital cultural products and services occurs in global
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