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10-1108 - 03090569510095008 NM
10-1108 - 03090569510095008 NM
10-1108 - 03090569510095008 NM
Introduction
Growth of small and medium-sized enterprises is recognized as crucial to a
nation's economic development and future wellbeing. As part of growth, the
need for successful international market development is particularly acute for
smaller firms pursuing niche strategies from a limited domestic market.
The literature on the international market development initiatives of entre-
preneurial firms is quite limited and rather inconsistent in its findings (see
Miesenbock’s extensive review[1]). Much of the research focuses on issues
relating to the export performance of small firms[2-4], with literature on
entrepreneurial firm internationalization limited to the exploratory work of
Lindqvist[5] and Coviello and Munro[6]. In the latter study, entrepreneurial
high-technology firms were found to develop multiple relationships for
internationalization, and to use them in parallel across numerous markets. Also,
the internationalization process for these firms was compressed over a short
period of time (e.g. two to three years). Finally, it was found that the traditional
“stepwise” approaches to internationalization as discussed in the literature,
generally in the context of larger, traditional manufacturing firms (e.g. [7]), were
not followed by small, entrepreneurial high-technology firms.
The current research expands on Coviello and Munro’s[6] findings, and
examines the entrepreneurial high-technology firm’s approach to international
market development. In particular, the research focuses on their use of network
relationships to pursue foreign market opportunities and conduct international
marketing activities. The article proceeds with a brief literature review and an
outline of the research questions, followed by a summary of the research
method and discussion of research results. Finally, conclusions and
implications are presented.
Literature review
Increasingly, networks have come under examination as a clearly emerging
organizational design[8,9] appropriate to the global high-technology industry European Journal of Marketing,
Vol. 29 No. 7, 1995, pp. 49-61.
which is characterized by high-growth, entrepreneurial ventures[10,11]. © MCB University Press, 0309-0566
European In recent literature it has been suggested that network theory can offer a fresh
Journal perspective on the internationalization processes of firms, particularly for
of Marketing smaller organizations whose development tends to be dependent on
relationships with others[12,13]. In network theory, markets are depicted as a
29,7 system of relationships among a number of players including customers,
suppliers, competitors and private and public support agencies. Thus, strategic
50 action is rarely limited to a single firm, and the nature of relationships
established with others in the market influences and often dictates future
strategic options (see Axelsson and Easton[12] for a more in-depth review of
network theory).
In terms of internationalization, Johanson and Mattsson[14] suggest that a
firm's success in entering new international markets is more dependent on its
relationships within current markets, both domestic and international, than it is
on the chosen market and its cultural characteristics. For example, firms can
expand from domestic to international markets through existing relationships
which offer contacts and help to develop new partners and positions in new
markets. At the same time, network relationships may restrict the nature of a
firm’s growth initiatives[15].
In the context of the entrepreneur seeking to develop international markets,
network theory leads one to examine a variety of internationalization issues.
These include, for example, the impact of network relationships on foreign
market selection and the relative influence of other firms (in both direct and
indirect relationships) on new market entry strategies.
Other issues relate to the evolution of power and control in domestic and
foreign network relationships, the interconnectedness of network relationships
and the effect of network relationships on the rate and success of international
growth. While some of these issues are beginning to be addressed in the
literature[16,17], much of the literature to date examines issues related to
organization design and the general influence of formal and informal networks
on the entrepreneurial venture[9,18, 19]. There is a limited amount of discussion
or examination of the role of networks in growth and international market
development, except from the viewpoint of the focal firm[20,21]. The focal or
“hub” position however, is typically not that held by a small entrepreneurial
organization. Further, given the inherently weak role played by the marketing
function in entrepreneurial high-technology firms[22-24], there has been little
examination of the use of networks to outsource some or all of the marketing
activities for the resource-constrained high-technology venture, as it seeks to
expand internationally. This is particularly important given that effective in-
house marketing and management capabilities are believed to be vital to
successful international expansion[7,25].
Thus, there is much to be learned from further research examining network
theory in the context of the entrepreneurial firm. This research article
endeavours to offer new insights into the international market development
activities and growth of entrepreneurial ventures, through application of a
network theory perspective. More specifically, the objective of this article is to Growing the
examine the impact of network relationships on: entrepreneurial
(1) international market development, and firm
(2) marketing-related activities within international markets.
Method 51
Two sources of data provide the empirical basis for this investigation. The first
consists of four in-depth case studies of the internationalization processes of
entrepreneurial firms in the New Zealand software industry. This industry is
dominated by entrepreneurial firms competing with leading-edge technology in
international markets.
Given the early stage of international network theory development, this
research was exploratory and descriptive in nature. Therefore, case
methodology allowed for the rich detail necessary for theory building[26]. The
selected case companies were at a relatively mature stage of internationalization
(ranging from between ten and 15 years old, with 25-150 employees and 1991
sales of $NZ 2.4-16 million), and reflected rich histories of both successful and
unsuccessful international market development experience. The four
companies had different product characteristics and served different off-shore
markets, using a variety of international linkages (see Table I for details).
Multiple in-depth interviews with the key decision makers in each of the firms,
combined with secondary data, generated the information on which to build the
case histories.
CBA d2
UK (NZ)
g Singapore
f j
h
UK Malaysia
i
Dealer
Key:
Original network Indirect/communication
Figure 1. relationships relationship
CBA New direct CBA a–j Order of occurrence
internationalization relationship
process and network
Note: Figure includes only key players in the network. Related network players
development (e.g. CBA dealers or other MNCs they distribute the product for) are excluded
are important to accelerating access and entry into new markets. The case
study insights do, however, suggest a tendency for more established high-
technology firms eventually to develop in-house marketing/sales expertise in
order to avoid total marketing control by other network players.
Managerial implications
Managers of entrepreneurial firms can benefit from a better understanding of
the impact of networks on international market development. Given that their
future opportunities emanate largely from network relationships, more
attention should be paid to how and with whom these relationships are
established. In addition, managers of entrepreneurial firms tend to sacrifice
marketing control for market access in their third-party relationships. This
tends to weaken their firm's position within a network, particularly when
managers lose touch with market dynamics. Efforts to keep on top of market
European activity, either through sales/support offices or through ongoing market
Journal research, can enhance leverage in relationships as well as facilitate performance
of Marketing evaluation of linkage partners. Finally, it is important that managers
successfully position their firms so that they have a wide array of relationship
29,7 options open to them. Their existing networks, as well as their ability to
establish new network relationships, should be managed as a key competitive
60 capability.
Network theory, while still in need of some refinement, offers a rich
perspective on how and why the international development patterns of
entrepreneurial firms occur. The interrelationships among a set of firms can
alter not only the range of strategic options available, but also the resource base
available for their pursuit.
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