The effect of network competence and environmental hostility on the internationalization of SMEs |
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Authors: | Lasse Torkkeli Kaisu Puumalainen Sami Saarenketo Olli Kuivalainen |
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Institution: | (1) Lappeenranta University of Technology, School Of Business, Skinnarilankatu 34, P.O.BOX 20, FI-53851 Lappeenranta, Finland |
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Abstract: | Research findings suggest that networks offer small and medium-sized enterprises (SMEs) opportunities to internationalize
successfully. However, the role of internal organizational competence in the process of developing and maintaining such networks
in hostile external environments has received little attention. The aim of this study is to shed light on the relationship
by examining the positive influence that the network competence of SMEs has on their propensity to internationalize, and on
their subsequent international performance. Given that the willingness of firms to enter and perform well in markets appears
to also depend on environmental hostilities, this external influence on SME internationalization is incorporated into the
study. We also examine whether the level of environmental hostility moderates the relationship between network competence
and SME internationalization. The empirical part of the study comprises a web survey of 298 Finnish SMEs representing five
different industry sectors: metal, food, furniture, software, and knowledge-intensive business services. Confirmatory factor
analysis and regression models are used in the analysis. The results indicate that higher levels of network competence are
positively related to the propensity of SMEs to internationalize, as well as to their international performance. Conversely,
the level of environmental hostility has a negative effect on the performance measure, but not on the internationalization
propensity. Additionally, the influence of network competence is not moderated by environmental hostility. The results indicate
that internal network competence and external environmental hostility play a role in SME internationalization, and that the
positive influence of network competence exists independently of the hostility in the environment. |
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