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SMEs non-listed companies identified through industry directories may confirm ... Keywords: internationalization, TMTs, networks, social media and innovation ... internationalization process, the network of the Top Management Teams (TMT).
TMT characteristics, TMT networks, innovation and internationalization: an indepth overview of dynamism between them Paula Martínez Sanchis University of Valencia Abstract We argue that internationalization is influenced by the dynamic roles played by the Top Management Team (TMT) and its network, being innovation of major importance, acting it as the driving and unifying force. An experience-sampling study with 1217 SMEs non-listed companies identified through industry directories may confirm our intuition and allow us to have a better and deeper understanding of the internationalization process. Using widely known scales, we discuss hypothetical practical implications that will ease the internationalization process for businesses. Keywords: internationalization, TMTs, networks, social media and innovation 1. Introduction In a constantly changing world, internationalization is crucial for the survival of most of the companies. It’s been defined as a process in which businesses progressively increase their international involvement (Johanson & Vahlne, 1977). Firms’ survival and development are highly dependent on an in-depth understanding of the

factors

that

influence

their

internationalization

performance.

In

the

internationalization process, the network of the Top Management Teams (TMT) becomes of major importance due to the need of companies of being formed by teams rather than by individuals (Loane et al., 2007). The key issue is how to carry out a successful internationalization process. In response to this question, an influential stream of research has explored the determinants of partnerships, time and network on the initiation of foreign trade by new businesses (Yu et al., 2011). On the one hand, internationalization concept blazed a trail since its very beginning due to its newness and novelty; having been frequently studied and related with the International Entrepreneurship (IE) literature, being remarkable the domain ontology 1

carried out by Jones et al. (2011). On the other hand, networks and their importance in job-seeking (Liu et al., 1972) as well as work field made in how TMTs create their structures and the importance of structural holes (Burt, 1992) affecting both, innovation and internationalization (Fernández-Mesa et al., 2015). However, there are still unsolved questions when we correlate these concepts: what is truly underlying behind these four terms? What are the relations that reach to unify all of them creating an inseparable unit? Should we include TMT characteristics and TMT networks in our list of must-to with regards to a successful innovation and internationalization process? These are just some of the questions we have tried to answer during our research. The paper is structured as follows. The next section sets out both a conceptual framework together with a theoretical review by taking into account the role of innovation in the relationship between internationalization against TMTs characteristics and networks. Following this theoretical review, we state four differentiated hypothesis in the context of the internationalization process. In the subsequent section, we deploy our methods detailing measures and analyses used during the study. Finally, expected results and conclusions are presented in the last two sections of the paper. 2. Conceptual background and hypothesis This work field research attempts to clarify how TMT characteristics related with TMT Networks, can both lead to an increase of innovation performance and in doing so enhance the company’s propensity to internationalise. CEO’s network and its working team dynamism have been classified as essential for innovation (Mihalache et al. 2014) especially when a company is about to start an internationalization process (Loane et al., 2007). To support and advance theorizing in internationalization, we find out that in the latest years, the availability of existing literature relating innovation performance with internationalization may be missing the incremental importance of TMT and networks characteristics. In doing so, alternative perspectives on the scope of innovation have shown the importance of analysing the differences in the production of new knowledge across companies (R. Pittiglio et al., 2009). Particularly interesting is the research carried out by Cassiman et al., 2011 which enlighten the internationalization process by validating that exports and product/process innovation are positively correlated. Further still, strong associations between both foreign employees and foreign students 2

highlighted the importance of cross-country mobility of skilled human resources in order to acquire not only knowledge abilities, but also innovation capabilities (Filippetti et al., 2011). In fact, following Fernández-Mesa et al., (2012) model which emphasizes the role of the Organizational Learning Capacity (OLC) in affecting positively to the Entrepreneurship Orientation (EO), we are able to measure till which extent EO becomes of major importance when considering innovation performance, since it highly increases the organization’s performance. On the one hand, innovation has been frequently related with TMT characteristics due to the businesses’ necessity of constantly being updated in a globalized world. In fact, we find support to argue that the number of innovators on TMTs is directly proportional to the degree of teams’ innovation (M.A. West et al., 1996). A deeper look into the relationship between TMTs characteristics and innovation performance reveals that team diversity is positively correlated with innovation. Not surprisingly, these heterogeneous groups achieve a higher turnover, though this feature may obstacle companies, since they may encounter some difficulties in keeping together these profitable teams (K. A. Bantel et al., 1989). On the other hand, the entrance on the scene of digital networks has importantly shaped the approach in which the innovation concept had been examined. Following Venkataramani et al., (2014), we consider employees creative efforts and networks as essential in order to be innovative. This clearly assumes that TMTs connections could be not enough, and encourages employees to be aware of this fact, attempting to counteract it. Despite work carried out by Scholars on this line of research, we still find a narrow pathway that could be broaden thanks to the introduction and usage of new concepts such as the role of social media in creating cross-borders networks, showing this a niche with a wide variety of possibilities to be explored.

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Fig. 1. Research model

Internationalization literature has generally taken exports performance as the main reason for which a company crosses its national frontiers in order to expand its economic possibilities, irrespectively of its resources (S. Reid, 1983). In particular, between the range of most frequent reasoning applied when a company decide to go a step forward, we find as leitmotivs market potential and the relationship between cost/benefits influencing TMTs efforts to overcome potential difficulties (J.L. Calof et al., 1995). Additionally, the gusher phenomenon has proved to influence firms’ behaviour with unexpected directions when they are in the internationalization process; phenomenon that can be offset thanks to the undertaking of active learning approaches (S. Chetty et al., 2004). Remarkably in the field is to take into account the proposed redeveloped theoretical integrative conceptual model in international entrepreneurship (M. Ruzzier at al., 2006), which highlighted the need of continuingly assessing capabilities, skills and the entrepreneur management of know-how if a firm aims to succeed in its internationalization process. In the same sense, the relevance of experience should not be forgotten, since due its significance the firm can gain a better understanding of foreign investment behaviour (J. Johanson et al., 1977). After these findings, we encounter many studies that still propose multiple factors that could affect indirectly to the internationalization process. In fact, some Scholars find support to argue that firms’ strategic changes are likely to be pursued when members’ of the TMT possess some particular demographic variables, such as, low age, high level of studies or specialization in sciences (M. F. Wiersema et al., 1992). In fact, TMTs decision’s quality seem to be highly correlated with the cognitive dimension of conflict,

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since decision’s rightness is clearly enhanced when the cognitive part of conflict plays an important role in the development of an strategically managed change (A.C. Amason, 1996). Further, based on previous research on the field, we argue that debate between TMTs can significantly raise its heterogeneity trend, therefore bettering the performance of the team (T. Simons et al., 1999). In the same line of research, we now consider the entrance into play of the network concept. The word ‘network’ (though its newness in our times) was first derived in the 16th century, and stands originally from ‘net’ (to catch things) and ‘work’ (to be employed). For most companies, this concept has raised its relevance during the last years thanks to the introduction of the digital era, which has allowed TMTs from no matter which type of enterprise, to create and build up cross-border relationships by just sending an email. In this sense, we shall remark the main sources from which companies can not only obtain and empower their networks, but also use them to ease the internationalization task: ‘institutions’, ‘business partners’ and ‘personal relations’ (Z. C. Senik et al., 2011). In doing so, both businesses and researchers will gain a deeper insight in the capitalization process carried out by TMTs when developing crossborders operations through the usage of social networks (N. Athanassiou et al., 2005). Particularly interesting in this aspect is to emphasize the empowerment of social media, especially Twitter, which seems to be one of the main pillars in managing a successful social media strategy by companies. As proved by researchers, NodeXL can effectively help your business to analyse the different metrics you can obtained from Twitter (V. Barash et al., 2010). In line with Clemmer (2003) our core proposition is illustrated by the analogy of the stained-glass window: a company shines and is proactive to invest when the sun is out (when the economic context is stable), whilst when night is out (financial and economic crises arrive), their strengths and essence is reflected as long as there is a true light coming from within. Like a stained-glass window will only reflect its true beauty when night is out, a company will only prove itself for a successful innovation that helps to internationalize if it is able to empower its networks together with having a multi-cultural adapted TMT, possessing characteristics such as ambidexterity, team strategic management or an active innovation approach. 5

Even though relationship between different concepts related with TMT that help to internationalise a company have been broadly studied, unfortunately, we can’t count many

researches

that

link

CEO’s

networking

with

the

innovation

and

internationalization process. It is hardly surprising that this specific aspect of innovation and internationalization had not been studied in-depth previously, since the role played by networks nowadays is increasingly showing its importance. In this line of research it is curious how social media networks’ penetration in our lives has strongly changed the way in which we can manage work relationships. Facebook will no longer be just a way of sharing your likes or dislikes; it has become one of the main informal sources from which TMTs relate with each other. Likewise, LinkedIn has become the very first way in which an employer will recruit a potential candidate, and this can be, in the same way, applied to the TMT relations. We will also focus our attention on Twitter or Google +, since we certainly see hypothetical interconnections between TMT networks and a successful innovation and internationalization process. This article responds to the lack of research conducted by Scholars relating not only internationalization with TMT, but taking into account the force of innovation and internationalization as dependent variables when related with both social networks and TMT. Considering the above, we put forward the following hypothesis: H1. TMT’s characteristics positively affect internationalization. On the one hand, it is generally accepted that the composition of the TMT and its level of heterogeneity will clearly have an effect on the actions undertaken by the company to go overseas. H2. TMT’s network positively affects internationalization. On the other hand, the importance of TMT’s network has gradually risen its significance to the field. Considering that, we aim to explain the positive effect that TMT’s network has on the ongoing process of a firm’s internationalization. H3. The relationship between TMT characteristics and internationalization is positively mediated by innovation. 6

We find support to argue that TMT characteristics affect the internationalization process due to the fact that these will first affect innovation, helping this effect to the internationalization as a whole. H4. The relationship between TMT’s network and internationalization is positively mediated by innovation. A deeper look into the relationship between TMT’s networks and internationalization let us find the mediator role played by innovation, which indirectly helps and affect the internationalization process. 3. Method 3.1. Sample and data collection Our empirical study focuses on high-tech firms in biotechnology, middle-tech firms in the ceramics industry, and low-tech firms in the toy and footwear industries. Fieldwork is being carried out at the moment. We performed a pre-test with four experts to ensure that the questionnaire items were fully understandable in the context of the four industries. A total of 1217 firms were identified through industry directories. It is remarkable to say that most of the companies were SMEs; none of them was a listed company. In order to obtain a representative sample we made initial contact by mail and telephone and then arranged appointments with respondents so that the questionnaire could be answered during a personal interview. We recruited trained interviewers to conduct on-site interviews in order to generate valid information and high-quality data. The interviewers are presenting the questionnaires to two managers separately. We are offering a feedback report on the survey results to the participating firms in order to encourage a higher response rate. The expected date for finalizing the interviews is at the end of February 2016. 3.2. Measures 3.2.1. TMT characteristics TMT characteristics were measured with widely used scales, asking managers to respond questions with respect to their team and themselves, considering 1 (strongly

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disagree) and 7 (strongly agree). Items considered go from demographic data, strategic positioning, and apprenticeship in teams, till ambidexterity and business performance. 3.2.2. TMT network Information from the network of the TMTs will be gathered thanks to the usage of social media assets such as Facebook, Twitter, LinkedIn or Google +. We will use professional methods and techniques already proved in order to take non-biased data. 3.2.3. Innovation We measured innovation focusing on three main points: opened innovation, innovation applied to the business model and innovation performance. In doing so, we asked managers about how specific sources of information and cooperation (e.g. universities, public research institutions, fairs, technique data basis…etc.) had positively influenced their innovation activities. We did also focused on questions such as how often new business model were experienced in their markets or how frequently they changed their costs’ structure. Finally, we conceived innovation performance as a frame based in three different aspects: product effectiveness and success, product development effectiveness in comparison with competitors and the process of innovation. 3.2.4. Internationalization Internationalization was taken as the dependent variable, being exportation performance the concept we used to measure it. We considered not only exports’ profitability and whether the sales’ level was generated by an exporting activity or not, but also if these exporting activities had experienced a fast increase in the last years. 4. Expected results In a complex environment situation internationalization becomes crucial for those SMSs studied. Taking that into consideration, we expect to validate our hypothesis, which means that a direct correlation between TMT characteristics, TMT networks and innovation against internationalization will be found out. Moreover, expected findings regarding TMT characteristics and TMT networks acting as moderators or mediators, with respect to internationalization might open future lines of research on the field.

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5. Summary and future Research Our study aims to contribute to the on-going research stream linking the internationalization process with TMTs characteristics, TMT networks and innovation acting as the mediator variable. During this article, we have attempted to summarize, synthesize and interpret research made by Scholars in the field over the last years. Our intent is to clarify the different approaches made to internationalization, in order to better see the different correlations underlying this concept. References Amason, A. C. (1996). Distinguishing the effects of functional and dysfunctional conflict on strategic decision making: Resolving a paradox for top management teams. Academy of management journal, 39(1), 123-148. Athanassiou, N., & Nigh, D. (2005). The impact of US company internationalization on top management team advice networks: A tacit knowledge perspective. Knowledge Management: Critical Perspectives on Business and Management, 3, 79. Bantel, K. A., & Jackson, S. E. (1989). Top management and innovations in banking: Does the composition of the top team make a difference?. Strategic Management Journal, 10(S1), 107-124. Barash, V., & Golder, S. (2010). Twitter: Conversation, entertainment, and information, all in one network. Analyzing social media networks with NodeXL: Insights from a connected world, 143-164. Burt, R. S. (1992). Structural hole. Harvard Business School Press, Cambridge, MA. Calof, J. L., & Beamish, P. W. (1995). Adapting to foreign markets: Explaining internationalization. International business review, 4(2), 115-131. Cassiman, B., & Golovko, E. (2011). Innovation and internationalization through exports. Journal of International Business Studies, 42(1), 56-75.

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