Does relationship psychic distance matter for the learning processes of internationalizing SMEs?

This study builds on two theoretical assumptions: (1) Because SMEs tend to internationalize fast on a wide global scale, their market selections do not seem to be dictated by distance measures. (2) Business relationships seem to be vital for these firms when acquiring knowledge and developing their ongoing businesses in foreign markets. Based on these assumptions, this study applies Linear Structural Relations (LISREL) analysis to investigate the relationships of 314 Swedish SMEs and their most important foreign customers. In specific, we investigate what potential effects relationship psychic distance has on SMEs’ knowledge transfer in ongoing foreign customer relationships. The results demonstrate, rather counter-intuitively, that relationship psychic distance actually enhances knowledge transfer in the investigated customer relationships.     

Post-entry internationalization speed of SMEs: The role of relational mechanisms and foreign market knowledge

Prior research shows that small and medium-sized enterprises (SMEs) can utilize domestic networks with internationally experienced partners to accelerate their internationalization process. Yet, there is a lack of clarity and limited empirical evidence regarding the role of relational mechanisms within these networks in driving post-entry internationalization speed (PIS) of SMEs. To address this gap, this study examines the relational mechanisms-PIS relationship by drawing insights from the relational view to argue that foreign market knowledge mediates the relationship between relational mechanisms and PIS. The hypothesized study model is tested using a structural equation modelling (SEM) technique on a sample of 394 UK based manufacturing SMEs. Our results show that foreign market knowledge acquisition from domestic networks fully mediates the relationship between relational mechanisms and PIS. Additionally, the linkage between foreign market knowledge acquisition and PIS is moderated by domestic environmental hostility, such that the relationship is strengthened when domestic environmental hostility increases. We discuss the contributions and implications of our results and suggest opportunities for future research.     

The international market selection of Chinese SMEs: How institutional influence overrides psychic distance

The purpose of this research is to contribute to the ongoing debate about whether psychic distance still plays a vital role in the internationalisation of SMEs from emerging markets. Drawing on the prior research which suggests the salient impact of institutional factors on internationalisation, we investigate the role of home country institutions in international market selection. Adopting a multi-case methodology, we collected semi-structured interview data from six small and medium-sized manufacturing firms in China. Our findings suggest that while psychic distance is still important in some circumstances, both formal institutions, such as government support, and informal institutions, such as business and political guanxi, enable Chinese SMEs to choose psychically distant markets. Our findings also indicate that informal institutions interact with formal institutions to further influence SMEs’ international market selection. This research contributes to SME internationalisation studies by revealing how formal and informal institutional factors override psychic distance in influencing international market selection.     

The evolution of inter-organisational social capital with foreign customers: Its direct and interactive effects on SMEs’ foreign performance

Taking a longitudinal approach, we analyze how the evolution of different dimensions of social capital between an SME (Small and Medium enterprise) and its key foreign customers directly influences the firm’s foreign performance growth. Moreover, we utilize a contingency approach by introducing two dyad-specific characteristics into the analysis: psychic and geographic interorganizational distances. Our findings contribute to the international business literature on social capital and suggest that while an investment in social capital with distant foreign customers always reinforces SMEs’ foreign performance development, relational and cognitive social capital have the same positive effects only for low levels of interorganizational psychic distance.     

Foreign market entry knowledge and international performance: The mediating role of international market selection and network capability

While the literature emphasizes the importance of knowledge and foreign market knowledge for international performance, it is unclear about the intervening/mediating relationships. From a knowledge-based view and network approach, we posit that previous foreign market entry (FME) knowledge can be used in the selection of international markets and to enhance network capabilities and international performance. We test the relationships between these constructs in a sample of 140 Australian SMEs. We contribute to the international SME literature by explaining important mechanisms through which FME knowledge affects SMEs’ international performance. International market selection and network capability mediate its relationship with international performance.     

The Psychic Distance Postulate Revised: From Market Selection to Speed of Market Penetration

In this paper we revise the psychic distance postulate of the Uppsala Model (Johanson and Vahlne, 1977, 1990) by injecting more recent findings (i.e., distinguishing between selection of foreign markets and time needed to achieve sufficient penetration in foreign markets and the role of social capital). The model we propose posits that a higher psychic distance decreases the speed of market penetration. On distant markets, internationalizing technology-based ventures need more time to establish a position in the foreign network and to obtaining positive cash flow. Our model presents social capital as a mean to overcome the psychic distance and to increase the speed of market penetration. We build our model on four case studies on technology-based new ventures internationalizing at very early ages.     

Tie the Ties: The Significance of the Binding Networks in SMEs’ Internationalization Process

This research examines the obstacles for small and medium sized enterprises’ (SMEs) internationalization and the roles of networks in SMEs’ internationalization process. It finds that the key obstacles for SMEs internationalization are lack of market insights, lack of knowledge and skills necessary for internationalization, and lack of skilled labor. In Thailand, personal networking has played the most prominent role in the early stage of SMEs’ internationalization. Trust is reported to be the critical component for a long lasting relationship in the network. “Friendship” is viewed as the ultimate level of relationship in the trusted network.     

Analysis of SMEs partner proximity preferences for process innovation

This paper explores small and medium enterprises’ (SMEs) proximity preferences when selecting partners for collaborative process innovation. Drawing on a survey of 362 Danish SMEs, we address four partner proximity characteristics: geographic, cognitive, organizational, and social. The results show that SMEs prioritize geographic openness over regional clustering. Furthermore, to simultaneously facilitate collaboration and ensure innovation, firms tend to collaborate with partners that are characterized by cognitive similarity at a technological level and knowledge distance at a market level. Technological proximity is also found to be more relevant than social proximity when it comes to bridging the potential geographic and market distance between the collaborative partners. Finally, the results indicate that the tendency of organizational proximity to facilitate informal interactions with partners enhances process innovation only at two of four process innovation levels. Thus, the results highlight the fact that the value of partner proximity characteristics change with the level of process innovation considered.     

The logic behind foreign market selection: Objective distance dimensions vs. strategic objectives and psychic distance

The aim of this paper is to highlight the importance of the firm’s strategic objectives regarding the choice of countries for foreign expansion, complementing the existing literature on the internationalisation process. Through a multiple case study methodology, we conduct a comparative analysis of three Brazilian ventures that have internationalised in Italy, and three Italian firms that have internationalised in Brazil, seeking to investigate the firms’ decisions on the selection of foreign markets. We consider jointly the objective aspects of distance, the overall perceptions of the decision-makers in relation to the differences between the domestic and (potential) host countries, and the firm’s strategic objectives. This research contributes to International Business studies by revealing the role of firm-specific strategic objectives as determinants of foreign market selection, in addition to, or even on top of, the dimensions of objective distance and psychic distance.     

Social capital in relation to the foreign market entry and post-entry operations of family SMEs

Scholars in the discipline of international entrepreneurship have mainly studied rapidly internationalizing firms. However, the majority of entrepreneurial firms are family-owned businesses (85% of all firms in the EU and the USA). Research on family business has focused on the importance of bonding social capital whereas, despite its importance, bridging social capital has not so far attracted much attention. It has been argued that bridging social capital plays an important role in firms’ internationalization processes. The purpose of this article is to examine the role of bridging social capital in the initial entry and post-entry operations of eight family SMEs with regard to the French market. We found that in foreign market entry social capital generally had a serendipity role, based on weak and intermediary relationships. In the post-entry situation, the role of strong and formal ties emerged strongly, and social capital most commonly took on efficacy or liability roles. Thus, it seems that the social capital of family entrepreneurs is limited to their strong bonding social capital, and perhaps to their strong national social capital. However, when such firms start to internationalize, they have to find new networks to gain the bridging social capital that will enable foreign operations. It seems that having a limited number of international ties drives family SMEs to search for relevant contacts at international trade exhibitions and trade fairs.     

Linking Processes and Dynamic Capabilities of International SMEs: The Mediating Effect of International Entrepreneurial Orientation

Previous research on the internationalization of small and medium‐sized enterprises (SMEs) has highlighted the role of knowledge and learning about foreign markets. However, empirical results on the performance implications of foreign market scanning and planning have been mixed. Following the dynamic capability perspective, we argue that SMEs can capitalize on scanning and planning processes because of their international entrepreneurial orientation. We test our hypotheses with a sample of 604 established SMEs and find that entrepreneurial orientation completely mediates the relationship between scanning and planning and international performance. Moreover, the results implicate a bidirectional relationship between processes and international entrepreneurial orientation.     

心理距离对跨国公司进入模式的影响

基于65 670家外商直接投资企业数据,本文使用群组Logit模型,分析了心理距离对跨国公司进入中国市场模式选择的影响。研究发现语言差异和工业发展水平差异与跨国公司采取独资模式进入的机会比率呈显著负相关关系,宗教差异与跨国公司采取独资模式进入的机会比率呈显著正相关关系,而教育水平差异和民主差异对跨国公司进入模式选择的影响并不显著。     

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.     

Understanding the formation of psychic distance perceptions: Are country-level or individual-level factors more important?

This study investigates individual managers’ formation of psychic distance perceptions to foreign countries. Adopting a social psychological perspective, we propose that three social-cognitive mechanisms—social comparison, mere exposure, and social learning—help explain why and how country- and individual-level characteristics affect the formation of these perceptions. Based on an international survey of 1591 managers located in 25 countries undertaken between 2003 and 2008, we find that country-specific international experience, formal education, and the use of common language reduce psychic distance perceptions. Surprisingly, and in contrast to conventional wisdom, managers’ international experience and overall work experience do not seem to affect their distance perceptions. Moreover, individual-level antecedents seem to have limited explanatory power relative to country-level factors as predictors of overall psychic distance perceptions, which lends support to the widely-employed practice of operationalizing psychic distances through country-level indicators. In addition to these empirical findings, the study provides a theoretical social psychological framework useful for understanding how psychic distance perceptions are formed.     

Post-entry survival of developing economy international new ventures: A dynamic capability perspective

Recent research suggests that the capabilities needed for the survival of international new ventures (INVs) may be at odds with the original aims that had brought them into the international markets. INV mortality is exacerbated by uncertainty and lack of familiarity with the host market environment, which elevates the liabilities of newness, smallness, and foreignness in the initiating companies. We investigate the key factors that determine the post-entry survival of developing economy INVs by analyzing in-depth seven software INVs originating in the developing economy of Pakistan. These INVs survived the 2000 dotcom crisis and the 2008 global financial crisis, and continue to grow. Based on a dynamic capability view on the INVs’ internationalization and survival from sensing-seizing-reconfiguration angles, we find the founders’ entrepreneurial orientations and network development capabilities (sensing), specialized product focus and niche market development (seizing), and transformation and renewal capabilities (reconfiguration) are the key capabilities that enhance the post-entry survival of these INVs. Importantly, we find that a stable leadership and the post-entry international experience of the leadership team continuously feed into facilitating the creation and maintenance of dynamic capabilities. This paper identifies key strategic aspects that determine the post-entry survival of the developing economy INVs.     

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.     

It’s personal: The emotional dimension of psychic distance perception in intercultural knowledge transfer

Psychic distance (PD) is a perceived obstacle to information flows in knowledge transfer between individuals in different national markets. However, the impact of individuals’ subjective perceptions of macro-level distance factors disrupting these flows has been undertheorized. Prior research has conceptualized PD as a geospatial concept – symmetric, continuous and stable over time. Using appraisal theory and a qualitative study of a Chinese multinational, we analyse individual-level psychic distance stimuli. We examine how perceived psychic distance is impacted in the appraisal of personal concerns, triggering salient emotions in the process of individual’s cross-border interactions. Our key contribution is to trace and explain how individual-level psychic distance is created in intercultural knowledge transfer. We theorize that it is created by a psychological mechanism involving emotionally charged processes of individuals coping with concerns arising from emotional encounter. We find that conventional macro-level psychic distance is moderated by the emotions of individuals.     

International network extension processes to institutionally different markets: Entry nodes and processes of exporting SMEs

This article is about how SMEs reduce their liability of network outsidership in the process of establishing a network insider position in foreign business networks. By examining how SMEs establish insidership positions in institutionally different business networks, the authors contributes to the network approach to firm internationalization. From a detailed longitudinal and retrospective case study of four SMEs from mature market entering emerging country markets and four SMEs from such immature markets entering mature markets, the authors develop propositions based on intra-group and inter-group analysis. The propositions concern the parties to which the exporter initiates and develops relationships when plugging into the foreign network (the entry node), and how the firm reaches an insider position in this network (the entry process). Three distinct network types are identified along this entry process: the exposure network, the formation network and the sustenance network.     

Liability of Foreignness and the Constitutive Legitimation of Foreign Firms in a Host Country

We examine population density effects on foreign firms’ likelihood to exit from a host country. The lack of constitutive legitimacy is an important aspect of the liability of foreignness experienced by foreign firms. Both foreign firms from a focal firm’s home country and foreign firms from other countries can provide constitutive legitimation for the focal firm. These intrapopulation and interpopulation legitimation effects strengthen with a greater psychic distance between the home and host countries; they also interact with and strengthen each other. Results based on a dataset containing 68,723 firm-year observations on 29,843 foreign firms in China support our predictions.     

The Role of Systematic International Market Selection on Small Firms' Export Performance

This article hypothesizes that, on average, small and medium-sized enterprises (SMEs) that use a systematic methodology in selecting foreign target markets (what we call systematic market selection) perform better than SMEs using an ad hoc international market selection methodology. Using a sample of Greek exporting firms, we found that systematic international market selection is a significant determinant of export performance, even when controlling for decision-maker and firm-specific characteristics previous studies found to be related to export success. Implications for managers, trade promotion agencies, and future research are discussed.