International network management for the purpose of host market expansion: The mediating effect of co-innovation in the networks of SMEs

Research shows that innovation facilitates internationalization and that the customer network is an important source of technical and market knowledge. Yet, little is known about how co-innovation within a business relationship with a key international customer relates to international network management and international growth beyond the focal business relationship. The paper contributes to international entrepreneurship research by investigating (1) international business relationship learning mechanisms that reinforce co-innovation within a dyadic business relationship with a key customer (2) and the link between co-innovation outcome in the business relationship and international network management for purposes of foreign market expansion beyond the dyadic business relationship. Three hypotheses were developed and tested on a sample of 188 internationalizing small- and medium-sized enterprises (SMEs) using linear structural relations (LISREL) structural equation modeling. The analysis shows that an SME’s (i) awareness of a customer’s complementary knowledge and (ii) innovation-oriented customer relationships leads to increased co-innovation within a dyadic business relationship with a key customer. Moreover, successful co-innovation with a key customer increases the likelihood that the focal SME will attempt at international network management by drawing on the key customer as a bridge to new customers and suppliers on the foreign host market. The findings provide a link between innovation within a dyadic business relationship and international network management for the purpose of foreign market expansion into the wider network on the host market. The findings hence contribute to our understanding of the mediating role of co-innovation in the internationalization process of SMEs.     

The network model of internationalisation and experiential knowledge

This study operationalised the network model of internationalisation [Johanson, J., & Mattsson, L.-G. (1988). Internationalization in industrial systems—a network approach. In N. Hood, & J.-E. Vahlne (Eds.), Strategies In Global Competition (pp. 303–321). New York: Croom Helm] to test the association between experiential knowledge, firm degree of internationalisation and market degree of internationalisation. Adaptations of Eriksson et al.’s three knowledge constructs [J. Int. Bus. Stud. 28 (2) (1997) 337] were employed in regression and ANOVA tests. The regression results indicate that internationalisation knowledge is re lated to firm internationalisation, foreign institutional knowledge is associated with both firm and market internationalisation, and foreign business knowledge is strongly related to internationalisation knowledge. The ANOVA results confirm that foreign institutional knowledge levels differ for the Early Starter, Late Starter, Lonely International and International among Others firms. Implications are drawn relating to the effect of different international strategies on the generation of internationalisation knowledge, the vicarious acquisition of foreign institutional knowledge, especially in relation to parent companies and government organisations, and the need to more effectively measure the outcomes of the ac cumulation of foreign business knowledge.     

Network knowledge and business-relationship value in the foreign market

Based on the key assumptions that firms are opportunity seeking and that they gain critical knowledge operating in a network of relationships, this paper focuses on early expansion in foreign market networks. In particular, the paper examines the relation between experience and business-relationship value in a foreign market. While experience and experiential knowledge are central concepts in international business, little has been written about their effects on the value of business relationships. The paper formulates a set of interrelated hypotheses on the effects of international experience, experiential network knowledge and importance of customer and competitor knowledge on the value of business relationships in a foreign market. They are combined in a structural model, which is tested on a sample through LISREL. The main conclusion drawn from the study is that experiential network knowledge and knowledge about the importance of customers and competitors in the network influence the value of business relationships in a foreign market in different ways.     

The character of bridgehead relationships

A supplier's development of a foreign market can be better understood when examined in the context of bridgehead business relationships between a supplier and a foreign customer. In addition to intrarelationship factors, the network of business relationships connected with a supplier and its foreign customer is also important in understanding the supplier's bridgehead relationships. The results from a LISREL analysis of 142 international business relationships show that the supplier's bridgehead relationships are conditioned by the personal relations with the foreign customer. The supplier's bridgehead relationships are also dependent on mutual commercial dependence between the supplier and the foreign customer. The results show that the supplier views the foreign customer as a conduit for foreign market development and will commit itself to the business relationship for this reason. A further finding is that the network of business relations connected with a supplier and its foreign customer constitutes an important setting for the supplier's bridgehead relationships.     

Absorptive capacity from foreign direct investment in Spanish manufacturing firms

This paper deals with the determinants of absorptive capacity from foreign direct investment (FDI) spillovers. We study how firm behavior, capabilities, and structure drive absorptive capacity such as research and development (R&D) activities and expenditures, R&D results, internal organization of innovation, external relationships of innovation, human-capital quality, family management, business complexity, and market concentration. Our results enhance and complement previous evidence of the determinants of absorptive capacity, particularly with different approaches to innovative activities as mediators of the capability.     

Mutual commitment and experiential knowledge in mature international business relationship

This paper examines how market knowledge and market commitment are developed in mature supplier/customer relationships in international markets. It reports the empirical testing of a model of increasing commitment and experiential knowledge development in international business relationships. The assumption is that the connected relationships in a business network are the basis for forming a relationship and it will influence how the focal relationship develops. The model shows the process when a supplier increases his or her knowledge of the business network that a foreign customer is embedded in and what happens as their relationship with the customer becomes mature, stable and profitable. In this situation the firm does not invest as much as it did early on in the relationship but diverts its attention to firms that are more embedded in the local business network context. The model thus explicates a process of transition as a firm moves from one mature relationship to create new relationships as it increases its foreign market involvement.     

Outcome quality of small- to medium- sized enterprise–based alliances: The role of perceived partner behaviors

Proponents of transaction cost theory have assumed that alliance formation is motivated by environmental uncertainty, with the structure and outcomes of alliance relationships being determined by the costs versus benefits of opportunism on the part of alliance participants (Williamson 1985; Zaheer and Venkatraman 1995). Williamson argued that cooperative relationships driven by perceived efficiency are inherently prone to opportunism or “self-interest seeking with guile” (1975, p. 6). In alliance relationships, opportunism generally takes the form of negative departures from the behavioral norms established for the alliance and is usually motivated by the firm leader’s desire to improve the firm’s position, regardless of the cost to the alliance (Parkhe 1993a). The traditional focus of transaction cost theory has been on the norms established by the formal alliance relationship. These contractual mandates encompass both goal-based and relationship-based expectations. Failure to meet these types of expectations significantly, but not completely, explains the quality of outcomes for alliance relationships.A growing body of research on social control theory suggests that the social embeddedness of the alliance relationship may also establish behavioral norms against which opportunistic departures may be judged (Ouchi and Parkhe). Such norms are extracontractual or taken-for-granted expectations established by both the prior experience of the firms’ leaders and the placement of the firms’ alliance relationships within the network of interpersonal relationships maintained by the firms’ leaders. This study explores the relative impact of negative departures from both contractual and extracontractual behavioral norms on the quality of alliance outcomes, while controlling for a wide range of environmental and firm-specific factors suggested to have an impact on alliance outcome quality.Norwegian manufacturing firms that met the study’s size criteria and belonged to any one of 10 industry types were surveyed. From a list of over 7,000 small- to medium-sized enterprises (SMEs), we randomly selected and mailed surveys to the key decision leaders of over 2,500 firms, ultimately identifying, of the 433 (17.6%) owners and general managers responding, 252 (58%) that maintained alliance relationships.The results of this study challenge several assumptions regarding the determinants of alliance outcomes. A number of resource- and environment-based factors, including the firm’s industry, size, and financial strength, are not found to significantly influence alliance outcomes. The financial return provided by the SME’s alliance relationships, as an indicator of goal-based determinants, was found to be the most important factor related to outcome quality, but the results also suggested that contract noncompliance and the perceived behaviors of the SME’s alliance partners are significant as well. Additionally, the notion that SME-based alliance relationships are generally marked by assumptions of trust rather than opportunism was supported. When partner behaviors are seen or perceived to be inconsistent with either contractually mandated or socially obligated expectations, the outcomes of those relationships are negatively effected, even when the financial goals have been met. An additional finding of this study was that firm leaders make judgments regarding the quality of alliance outcomes in light of their cumulative experience with alliance relationships.     

Absorptive capacity in foreign subsidiaries: The effects of language-sensitive recruitment,language training,and interunit knowledge transfer

Are multinational corporations able to enhance the development of absorptive capacity in foreign subsidiaries through language-oriented human resource management (HRM) practices? Taking into account that a shared language enhances absorptive capacity and that many multinational corporations are multilingual entities, this question is relevant but given little focused attention in international business research. In this paper, we hypothesize that two language-oriented HRM practices – language-sensitive recruitment and language training – enhance absorptive capacity in foreign subsidiaries. In addition, we hypothesize that interunit knowledge transfer partially mediates the positive relationship between these language-oriented HRM practices and absorptive capacity. Analyses of survey data derived at three points in time from 574 foreign subsidiary units in Japan provide support for these hypotheses.     

Customer portfolio planning in a business network context

In an increasingly globalised business environment, it is no longer adequate to analyse and develop supplier-customer relationship portfolios without consideration of a firm's network relationships. While research in business relationships has examined resource allocation and strategy development in the context of a dyadic relationship, portfolios and network relationships, little is known about the network effects of a focal firm's relationships on its performance particularly from both supplier and customer evaluations. The present study attempts to fill this gap by developing a customer portfolio framework that includes four levels of business relationships, and integrates a resource-based view and industry determinants of competitive advantage. The proposed framework is applied and analysed using data of UK-based food service companies. The main results show that a focal relationship performance is influenced by both industry and resource-based advantages in a business network context. The results also suggest that a focal firm can better enhance its competitive position with the knowledge of network effects and interdependence of strategic actions in a business network context.     

Experiential knowledge antecedents of the SME network node configuration in emerging market business networks

This paper aims to determine experiential knowledge antecedents of the network node configuration (i.e., dyad or triad) of SMEs entering emerging market business networks. Three kinds of knowledge of different degrees of specificity are assessed, namely, general internationalization, market-specific, and customer-specific knowledge. The sample consists of 203 SMEs in southern Sweden with experience of entering the Baltic State, Polish, Russian, or Chinese markets. The theoretical framework integrates network theory and internationalization process theory in order to understand and explain the internationalization of smaller firms. The hypotheses formulated are tested using logistic regression, which indicates that market- and customer-specific types of knowledge favor a dyadic network node configuration into the emerging market business network, while general internationalization knowledge has no significant effect. In addition, interaction effects were seen to moderate relationships between knowledge antecedents and the network node configuration of the sampled SMEs.     

Critical success factors determining performance of cross‐border acquisition: Evidence from the African telecom market

This study investigates the factors affecting Bharti Airtel's cross‐border postacquisition performance in an African market. This study describes the relationships among various factors such as technical capability, affiliated firm's absorptive capacity, and organizational learning capabilities, which determine the successful operations of the Zain acquisition deal in South Africa. This paper adopts a qualitative approach to identify factors that influence the postacquisition performance. Seven factors are identified based on the literature. Consequently, it has become a necessity to encapsulate these factors in suitable proportions. In this study, we have developed a total interpretive structural modeling (TISM) to analyze the postacquisition performance of Bharti Airtel in South Africa. Our research has highlighted six dynamic factors (organizational learning capability, knowledge management, technology capability, technology relatedness, acquirer's absorptive capacity, and national culture difference) that affect the firm's postacquisition performance. The interpretive structural model (ISM) and total interpretive structural model for postacquisition performance are built‐up. The developed TISM will support academics and practitioners to develop their understanding of acquisition performance of parent companies in the context of telecom business in the South African market.     

Financial determinants of systematic risk in real estate investment trusts

Financial theory and empirical evidence suggest that a firm's systematic, or market related, risk is related to its financial conditions. This study empirically investigates the financial determinants of systematic risk for Real Estate Investment Trusts (REITs). The study is an examination of sample of 32 REITs for the period 1976–1978. The results indicate that systematic risk varies directly with financial leverage, business risk, and advisor fee. The explanatory power of the relationship between systematic risk and financial variables exceeds that of previous studies wherein firms were pooled across industry groups. The higher explanatory power observed even with limited data suggests that better estimates of coefficients of financial determinants of systematic risk may be obtained through analysis conducted on an industry by industry basis. Furthermore, such industry-specific analysis provides useful results to practicing financial managers in their financial policy considerations. With the knowledge of how the financial decisions affect the firm's systematic risk, a manager may be able to manipulate those variables so as to reduce the systematic risk for his or her firm and thus increase the market value of the firm's securities.     

Small Italian wine producers’ internationalization: The role of network relationships in the emergence of late starters

This paper aims to examine how network relationships influenced the internationalization of small Italian wine producers characterized as late starters. It is based on four cases. It shows that foreign tourists helped these firms to expand internationally: they identified business opportunities, suggested firms to contact importers, contacted importers themselves to get access to the same wine in their home country or provided foreign market knowledge. Thus, small wine producers should pay more attention to attracting tourists and creating network relationship with them. Several other network relationships ? for instance, with friends and relatives, Italian expatriates and other business partners ? also advanced the case firms’ internationalization. Moreover, they were affected by lack of time and resources, language barriers and other factors. Thus, all these aspects also need managers’ attention. Furthermore, they should take a more strategic approach towards internationalization and understand that not all internationalization attempts succeed or result in continuous orders.     

Realised absorptive capacity,technology acquisition and performance in international collaborative formations: an empirical examination in the Korean context

The research objectives of this paper are twofold. First, it attempts to identify the critical factors facilitating the acquisition of technology from foreign partner firms and performance enhancement in international collaborative formations. Second, it compares these factors across Western and Japanese sub-samples. A new concept, realised absorptive capacity, is employed to achieve these objectives. Using a sample collected through a questionnaire-based survey, our results show that trust and communication are critical components in transforming new knowledge, while active managerial involvement of the foreign firm and the participation of foreign expatriates are the keys to applying it for business operations. In particular, components consisting of the ability to exploit new knowledge (i.e. active managerial involvement of foreign firm, participation of foreign expatriates and provision of training) are closely associated with performance enhancement. In addition, our results confirm that there clearly exist different patterns of learning mechanisms and incompatible behaviours in improving performance between the two sub-samples. Based on the results, the authors suggest implications and future research avenues.     

Understanding Absorptive Capacity from a Network Perspective

The term absorptive capacity refers to the notion that firms may have differing capabilities to innovate and to recognise the value of new knowledge, assimilate it, and apply it to creating business value. Developing such capabilities often requires firms to become part of a value network. We therefore apply the notion of absorptive capacity to the level of both the firm, and the wider value network in that it is embedded. The purpose of this research is to understand how absorptive capacity process may be moderated by contingent factors so that a more complete picture of absorptive capacity development emerges from our research. We identify from the literature on learning, innovation, and networks several theoretical perspectives that may help researchers to understand how contingent factors may facilitate and/or inhibit the development of absorptive capacity capabilities. We offer a set of propositions that may guide research into learning and innovation in business networks, and we discuss the managerial implications of these propositions.     

The Impact of Corporate Social Performance on a Firm’s Multinationality

Using panel data of 4,244 company years, we examine whether and how corporate social performance (CSP) affects a firm’s capacity to achieve profitable sales in foreign markets. Based on our extension of instrumental stakeholder theory into the international arena, we hypothesized a U-shaped relationship between CSP and multinationality. Results supported our contention that multinational enterprises (MNEs) need to be substantially committed to social performance objectives if they are to recoup the cost of their CSP investments, and improve their capacity to compete in foreign markets. MNEs engaged in intermediate levels of CSP achieve lower levels of multinationality than firms operating at either anchor of the social performance continuum. In addition, this study demonstrates that CSP moderates a well-established relationship in international business literature – the relationship between R&D investment and a firm’s multinationality. Implications for research and practice are discussed.     

Foreign direct investment motivations and knowledge acquisition from MNEs in overseas subsidiaries

Despite studies exploring factors affecting knowledge acquisition from multinational enterprises in subsidiaries, what accounts for a successful acquisition is unresolved. We argue that such disparity may stem from inattention to investment motivations of multinational enterprises (MNEs) in foreign markets and to the fact that learning patterns of subsidiaries can be influenced by foreign firms' market‐seeking or efficiency‐seeking behaviors. We find that absorptive capacity in learning organizations and daily interactions with knowledge possessors are essential to learning from parent firms. In addition, active support from parent firms is particularly crucial for subsidiaries seeking to improve operational efficiency of MNEs. We also suggest that potential absorptive capacity plays a catalyst role in initiating knowledge acquisition, particularly in cases where MNEs have market‐seeking motivations. Copyright © 2014 ASAC. Published by John Wiley & Sons, Ltd.     

The effect of early international commitment on international positional advantages in Spanish and Belgian international new ventures

Past research into internationalisation processes assumes that prior experience influences both a firm’s capability to absorb foreign market knowledge and its international competitiveness. However, recent international entrepreneurship research seems to suggest that an early international commitment can also contribute to develop competitive advantages. Further study of this relationship will provide a better understanding of the competitive behaviour of international new ventures. This paper focuses on how international new ventures acquire market knowledge from foreign markets and develop sustainable positional advantages there. The hypotheses derived from our model were tested using extended data gathered from samples of Spanish and Belgian new ventures. To support the validity of the scale content used, all the items were taken from a review of related literature. We attempted to ensure that they meet the conceptual definition and reflect all the relevant dimensions. We used confirmatory analysis to evaluate convergent validity. A structural equation model was used to test the research hypotheses. The results of the data analysis allow us to confirm that an early international commitment influences the positional advantages of international new ventures, since it facilitates the development of market orientation.     

The embedded sales force: Connecting buying and selling organizations

Business-to-business firms are increasingly focusing on building long-term partnering relationships with key customers. Salespeople are often responsible for managing these relationships. To be effective as relationship managers, salespeople need to be embedded in both their firm’s and customers’ organizations. They need to have extensive knowledge of their customers’ business and also know and be able to leverage their firm’s resources to develop offerings tailored to their customers’ needs. Their companies and sales managers need to use different approaches to manage and support salespeople in this new role. In this paper, we examine some issues affecting the interfaces between elements of the embedded sales force and suggest some directions for future research and methods for examining these issues.     

Risk Management,Real Options,Corporate Social Responsibility

The relationship of corporate social responsibility to risk management has been treated sporadically in the business society literature. Using real options theory, I develop the notion of corporate social responsibility as a real option its implications for risk management. Real options theory allows for a strategic view of corporate social responsibility. Specifically, real options theory suggests that corporate social responsibility should be negatively related to the firm’s ex ante downside business risk.