SMEs and international entrepreneurship: An institutional network ...

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IBR-1203; No. of Pages 13 International Business Review xxx (2015) xxx–xxx

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SMEs and international entrepreneurship: An institutional network perspective Gospel Onyema Oparaocha * University of Turku, Turku School of Economics, Department of Management and Entrepreneurship, Rehtorinpellonkatu 3, 20500 Turku, Finland

A R T I C L E I N F O

A B S T R A C T

Article history: Received 15 January 2014 Received in revised form 26 December 2014 Accepted 23 March 2015 Available online xxx

This study examines the influence of the use of institutional networks by SMEs in the context of international entrepreneurship (IE). It provides insights into SMEs’ awareness of, access to, and actual use of the resources available through institutional networks and whether these are inducements or deterrents for entrepreneurial activities in foreign markets. A qualitative research design employing a multiple case study approach was used to investigate five internationalized SMEs from Sweden and Finland. The findings suggest that institutional network relationships have a positive effect on the internationalization process of SMEs. However, the significance of this influence is continuous and intertwined in the different stages of the internationalization process. A novel contribution of this study is the use of institutional theory combined with the network perspective to explain how SMEs’ awareness of, and access to, institutional network resources affects their international entrepreneurial activities. ß 2015 Elsevier Ltd. All rights reserved.

Keywords: External resources Internationalization International entrepreneurship Institutional networks SMEs

1. Introduction International entrepreneurship (IE) research has made significant progress over the past two decades (Autio, George, & Alexy, 2011; Dimitratos, Voudouris, Plakoyiannaki, & Nakos, 2012; Gabrielsson & Gabrielsson, 2013). However, there is a lack of consensus among scholars regarding the focus of IE research (Jones, Coviello, & Tang, 2011; Nummela & Welch, 2007). Jones and colleagues described the existing criticisms on the IE domain. Even though scholars have argued that the domain is fragmented and lacking consistency however, Jones and colleagues are of the opinion that IE is ‘a young field. . .’ which should not be regarded as amorphous (Jones et al., 2011, p. 633). Moreover, Keupp and Gassmann (2009) emphasized the lack of any unifying paradigms in IE research, so they proposed that the fragmented theoretical and contextual standpoints are challenges to the further development of the domain (See also Szyliowicz & Galvin, 2010). Meanwhile, Covin and Miller (2014) suggested that IE research can be contextualized into two broad streams: a) firstly, there is the new venture/new entry viewpoint, which considers IE primarily in the context of the identification and exploitation of opportunities for new entry (e.g. Mainela, Puhakka, & Servais, 2014) by new small firms (e.g. Dimitratos et al., 2012). These are often

* Tel.: +358 442801780. E-mail address: gospel.o.oparaocha@utu.fi

classified as new international ventures, global start-ups, or born global firms (Sepulveda & Gabrielsson, 2013; Crick, 2009). (b) The second viewpoint of IE mainly concerns itself with the entrepreneurial activities and behavioral orientation of established firms in foreign markets (e.g. Mainela et al., 2014; Neill and York, 2012; Peltola, 2012). Arguably, both perspectives involve elements of innovation, strategic exploitation of opportunities, and renewal strategies in the competitive international business arena (Gabrielsson & Gabrielsson, 2013). This conceptualization echoes Oviatt and McDougall’s (2005, p. 537 and 538) assertion that although the field of IE research began by studying the internationalization of new ventures, its scope has broadened beyond that, because competitiveness, innovation, and renewal strategies have become paramount for the survival of both new and established firms. This study is structured on the conceptualization of the internationalization of firms, both as new entry and firm renewal in the context of IE. In this study, IE is understood according to McDougall and Oviatt (2000, p. 903) definition of IE as entrepreneurship that crosses borders and manifests itself in the proactive, risk-seeking and innovative behavior of the firm that bring value. Equally, the term ‘‘internationalization’’ refer to entrepreneurial internationalization as described by Jones et al. (2011). Scholars agree that the area of how public institutional support networks influence the business outcomes of SMEs is underexplored (Bateman, 2000; Ceglie & Dini, 1999; Ramsden & Bennett, 2005; Se´ror, 1998). Therefore, a study focused on how institutional

http://dx.doi.org/10.1016/j.ibusrev.2015.03.007 0969-5931/ß 2015 Elsevier Ltd. All rights reserved.

Please cite this article in press as: Oparaocha, G. O. SMEs and international entrepreneurship: An institutional network perspective. International Business Review (2015), http://dx.doi.org/10.1016/j.ibusrev.2015.03.007

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IBR-1203; No. of Pages 13 G.O. Oparaocha / International Business Review xxx (2015) xxx–xxx

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networks interplay with the IE activities of SMEs is of interest.1 The European Union’s standard definition refers to an SME as any enterprise with an overall headcount of less than 250 employees combined with a turnover of 2–50 million Euros or a balance sheet total of 2–43 million Euros (European Commission, 2005). A key objective of this study is to shed light on how SMEs’ access to, and actual use of, institutional network resources interact with their internationalization process. Moreover, our contribution is aimed at understanding how small businesses derive value from network relationships with institutional actors. In addition, a novel contribution of this study concerns our use of institutional theory combined with the perspective of internationalization networks. This contributes to the growing body of literature on how institutional contexts influence IE. This study delves beyond export-assistance mechanisms and the export mode of SME internationalization. We examine the role of institutional networks in the entrepreneurial internationalization (Jones et al., 2011) activities of SMEs in general. We use the institutional network perspective in this context, because it provides a better explanation of how the various institutional support and network resources used by SMEs in the context of IE influence their international business outcomes. The remainder of this paper is organized as follows. The next section presents a literature review that discusses the internationalization of SMEs in the context of IE and the tendency of SMEs to rely on external networks to mitigate various resource constraints. Next, the institutional network perspective is elaborated on. The research’s design and methodology are discussed in the third section, while the empirical analysis is presented and discussed in the fourth section. This paper concludes by discussing the key findings. The implications, limitations, and recommendations for research are also presented.

2. Literature review 2.1. Background The internationalization domain in IE research (Oviatt & McDougall, 2005) has attracted considerable interest from scholars studying the internationalization process from various theoretical and empirical standpoints (Amal & Filho, 2010, p. 609; Welch & Luostarinen, 1988). Considering the apparent diverse viewpoints, Glaum and Oesterle (2007) assert that a unified definition remains elusive even after 40 years of research into the area of the internationalization of firms (p. 308). For the purpose of this study, we use the definition of internationalization put forward by Lehtinen and Penttinen (1999): Internationalization of a firm concerns the relationships between the firm and its international environment, derives its origin from the development and utilization process of the personnel’s cognitive and attitudinal readiness and is concretely manifested in the development and utilization process of different international activities, primarily inward, outward and cooperative operations (Lehtinen & Penttinen, 1999, p. 13). The above definition is preferred because it emphasizes the use of various relationships and activities that go beyond the export perspective of internationalization. It also captures the exploitation of interactions between different actors—such as the firm’s management and employees, as well as the external 1 In this paper, an institutional network is defined in terms of the firm’s collaboration with publically funded formal institutions, such as the ministry of foreign trade/industry, trade promotion councils, internationalization assistance organizations, research institutions, credit unions, embassies, chambers of commerce and national trade delegations (e.g., Bateman, 2000; Se´ror, 1998; Spencer, Murtha, & Lenway, 2005; Whitley, 2000).

environment that influences the focal firm’s involvement in nondomestic operations. In addition, it also draws attention to the inward, outward, and cooperative perspectives of international engagements, so it is not limited to import/export operations (Ruzzier, Robert, Hisrich, & Antoncic, 2006; Welch & Luostarinen, 1993). 2.2. On the internationalization of SMEs in the context of IE The internationalization of SMEs is a major vehicle for sustaining innovation, employment, and economic and social renewal (Greene & Mole, 2006), yet SMEs face many challenges in the IE process when compared to their resource-rich counterparts, the multinational enterprises (MNEs) (Hessels & Terjesen, 2010; Shaw & Darroch, 2004). Moreover, due to the small size of the home market in small open economies (SMOPECs) such as Finland and Sweden (Hallba¨ck & Gabrielsson, 2013), many SMEs must internationalize and engage actively in IE as a principal means for survival and growth. Therefore, many governments proactively strive to support the engagement of firms in IE as a way to ensure not only the survival of local industries but also to promote economic stability and international competitiveness (Greene & Mole, 2006; Kibler, 2012). Thus, internationalization not only provides a competitive advantage to SMEs; it also enhances the economic robustness of all industry sectors, particularly within manufacturing and knowledge-intensive industries (Chiao, Yang, & Yu, 2006; Lu & Beamish, 2006, 2001). Scholars agree that SMEs face difficulties regarding how to leverage international opportunities and the need to mitigate risks, competition, and other challenges on the international business frontiers (Bretherton & Chaston, 2005). Impediments to the internationalization of SMEs in the context of IE can include internal and external barriers (Leonidou, 2004, p. 279; Shaw & Darroch, 2004). For instance, internal barriers may include, but are not limited to, inadequate human capital; financial constraints; a lack of foreign market exposure; and limited technical expertise. Meanwhile external barriers could include a country’s policies and regulatory environment, its competitive dynamics, a lack of access to network resources, and liabilities of foreignness (Johanson & Vahlne, 2009; Ruzzier et al., 2006; Torkkeli, Puumalainen, Saarenketo, & Kuivalainen, 2012; Zucchella & Servais, 2012). On the other hand, MNEs have greater financial and human resources when compared to SMEs (Hessels & Terjesen, 2010), and they are considerably more proficient in the use of network relationships with both public and private entities. Therefore, MNEs are better able to leverage international opportunities, and they are often capable of influencing the foreign market’s environment at policy and industry levels (Sun, 2009; Augier & Teece, 2007). Therefore, many SMEs often rely on external resources for both new entry and further development in their IE endeavors (Coviello & Cox, 2006; Coviello & Munro, 1997; Ello, 2005; Johanson & Vahlne, 2009; Se´ror, 1998; Street & Cameron, 2007). Because of the significant role of external resources in the international activities of SMEs, the dependency of SMEs on these resources is discussed in depth in the following subsection. 2.3. SME internationalization and resource dependency Growth enterprises are important for the economy. The exploration of international opportunities is a vital aspect of growth entrepreneurship (Bosma & Levie, 2009), but the SMEs’ resource constraints can hinder this. As a result, SMEs that manage to secure the resources required for international growth will have a significant impact on the economy (Ruzzier et al., 2006, p. 180). Arbaugh, Camp, and Cox (2008) suggest that perceptual and experiential factors—such as perceived risks, knowledge and


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cultural differences—are the major factors determining the internationalization propensity of entrepreneurial firms (p. 366– 370). They found that the age and size of the balance sheet or the level of success in the home market might not affect the reasons why firms go abroad. However, SMEs can rely on diverse external sources to gather cultural, technical, and commercial competencies that help them overcome the various international business constraints (Johanson & Vahlne, 2009). Therefore, despite SMEs being disadvantaged by their limited resources, they have the benefit of access to network resources, so their liabilities can be effectively mitigated, especially during the early phase of IE activities2 (Arbaugh et al., 2008, p. 375; Vatne, 1995). However, businesses operate under specific institutional environments and institutional guidance (e.g., legal environment, cultural norms, nature of the financial markets, regulatory and policy frameworks, industry patterns, etc.). Thus, institutional guidance often defines and controls a business’s operating environment (Bruton, Ahlstrom, & Li, 2010). Consequently, institutional guidance interacts with an SME’s internal resource control and the resources it can access through external network relationships (Vatne, 1995, p. 179). The institutional environment therefore has a multilayered influence on the propensity of an SME to engage in IE (Bruton et al., 2010; Szyliowicz & Galvin, 2010; Volchek, Henttonen, & Edelmann, 2013). Institutional resources also have a crucial influence on the entrepreneurial internationalization activities of SMEs (Jones et al., 2011; Bruton et al., 2010, p. 422). The concept of SME internationalization being embedded in the internal and external network relationships is explored further in the following subsection. 2.4. Internationalization networks Iacobucci and Zerrillo (1996) explained how network research focuses on understanding the different interconnections that exist between units. Zain and Ng (2006) described internationalization networks as ‘‘. . . relationships between a firm’s management team and employees with customers, suppliers, competitors, government agencies, distributors, bankers, families, friends, or any other party that enables it to internationalize its business activities’’ (Zain & Ng, 2006, p. 184). Among the actors listed in Zain and Ng’s description of internationalization networks, the term government agency is loosely used to represent various forms of institutional actors. While there is nothing wrong with the use of the term, it is perturbing that it bundles together a vast array of relationships and resources associated with different types of state-related agencies. Moreover, this construct ignores the existence of publicly funded, open-access, yet non-governmental, institutions that provide business support services and resources that play a key role in IE. For example, financial institutions, business incubators and science parks, research institutes, expert and advisory service centers, NGOs and technology/innovation foundations are not government agencies in most countries. The classification of these different stakeholders into business networks or social networks in IE literature provides an incomplete understanding of institutional agencies in IE. Szyliowicz and Galvin (2010, p. 322 and 323) present arguments for more diverse institutional perspectives in IE literature. Because of this, we argue here for a typology of networks that separates the currently overlapping views. This will also further serve as a starting point in understanding the key characteristics of institutional networks, as well as how they

2 A wide range of factors such as personal social networks, prior knowledge of an SME’s owners/managers, and/or international experience of the top management team (TMT) may play a significant role in how SMEs internationalize and which network resources they utilize (e.g., De Clercq, Sapienza, & Crijns, 2005, p. 413; Greve & Salaff, 2003; Nahapiet & Ghoshal, 1998; Sommer, 2009; Sullivan, 1994).

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interact with the IE activities of SMEs (Jones et al., 2011; McDougall & Oviatt, 2000). 2.5. Toward a network typology Because SMEs develop various types of relationships with a variety of actors in the international business environment (Zain & Ng, 2006), different studies have highlighted different aspects of the network associations that can be found, depending on the interactions and exchanges that exist within each specific network collaboration. Often when the impact of a network interaction is in the social aspect of an organization, the relationship is explained as social networking (Arenius, 2005; Kostova & Roth, 2003; Tsai & Ghoshal, 1998). On the other hand, if the focus of the interactions and exchanges emphasizes understanding the inter-connections and dynamics of a dyadic relationship, it can be perceived as business networking or a corporate relationship (see Slotte-Kock & Coviello, 2009, p. 42). Again, as we highlighted earlier, such a network classification is oversimplified. For instance, in the statements above, the notion of an institutional network is often hidden under the term business networks or corporate relationships. The need to separate these overlapping network ideologies is important in developing network studies in the IE domain, particularly to understand the significance of institutional networks to SME internationalization activities. Fig. 1 illustrates the differences and interconnections between the three core network areas that firms utilize in international business (Lehtinen & Penttinen, 1999, p. 13). In this figure, two intersections highlight the overlapping aspects. In Fig. 1, institutional networks represent the network relationships that can exist between a firm and publically funded, openaccess institutions. In our understanding, one of the aims of institutional networks is to provide support functions and create an atmosphere that can foster cross-border investment and improve business success, both locally and internationally (Gibb, 1993). The support services offered by institutional centers are not driven by profit motives (Martin & Scott, 2000), so most of them are funded by government and do not charge for their services. Their benefits are reflected in the overall growth of SMEs, the industry sector, and the regional or national economy (Audet & St-Jean, 2007). Inter-organizational network relationships, meanwhile, are mostly technical and process collaborations aimed at business expansion and increased profitability for the collaborating partners (Huggins, Johnston, & Thompson, 2012; Huggins, 2010). It should be noted that the intersection between business and institutional networks shown in Fig. 1 does not embody the same characteristics as described under institutional networks. This suggests there is a clear distinction between business and institutional networks when viewed more closely (cf. O’Donnell et al., 2001; Slotte-Kock & Coviello, 2009). To further highlight this distinction, we now develop Table 1, and apply a network classification framework (Slotte-Kock & Coviello, 2009) to illustrate the differences between the three main perspectives of network research. Based on Table 1, it is clear that institutional networks focus on a firm’s interaction with public and semi-public agencies to gain resource advantages that cannot be obtained through social exchanges or dyadic relationships (Audet & St-Jean, 2007; Schwens, Eiche, & Kabst, 2011). Following the characteristics of institutional networks described in Table 1, we conceptualize that the benefits of institutional networks can be both ‘hard and soft’ (Ramsden & Bennett, 2005) – that is, tangible resources which a firm may rely upon to be able to internationalize, and intangible resources that may have various degrees of influence on the actual resource control of the firm. Thus, institutional network relationships could have


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Fig. 1. A network typology for understanding general network characteristics and intersections.

significant implications for the entrepreneurial behavior of an SME in foreign market environments. 2.6. Institutional networks: institutional theory perspective The application of institutional theory in entrepreneurship research (Bruton et al., 2010) is of primary importance for understanding cross-border entrepreneurial behaviors (Szyliowicz & Galvin, 2010). At the heart of institutional theory in the context of IE is how firms secure operational positions and legitimacy in

different institutional contexts (Bruton et al., 2010). Because of this, we apply the institutional perspective to discuss the network associations of SMEs with institutional actors (Se´ror, 1998, p. 39). As was defined in Section 1, in the context of this study, institutional networks take into account the mixture of formal institutions, such as unions, governments, agencies for international development, innovation centers, business incubators, professional support associations, financial and research institutions, and so on. These provide a variety of support services aimed at enhancing firms’ knowledge capacities, resource controls, and

Table 1 Comparing the three perspectives of network research. (Developed following O’Donnell, Gilmore, Cummins, & Carson, 2001, p. 752; and, Slotte-Kock & Coviello, 2009, p. 46). Dimension

Social network research

Business network research

Institutional network research

Focus

Studies patterns of whole networks of individuals or organizations, occasionally including dyads

Focuses on the interaction between institutions and organizations in order to support market opportunity recognition and the connection of the organization with other resources

Actors

Individuals, family, friends, colleagues, employees and other acquaintances

Focuses on dyadic interaction (specific inter-organizational relationships within the broader network) but argues it is possible and necessary to understand the mutuality of tie and network development Business partners, suppliers, competitors, customers and/or other stakeholders

Theoretical underpinning

Social exchange theory

Main area of influence on performance

Creating and developing social capital and business know how

Resource-based view (RBV), Resource dependency theory, Agency, Transaction-cost and External relationship theory Business deal, supplement or acquire resource advantage, business know how

Government agencies, business incubators, financial institutions, R&D institutions, NGOs, chambers of commerce, international development centers, etc. Institutional analysis theory, resource dependency, foreign direct investment (FDI) theory Support functions and the institutionalbased business environment


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internationalization activities (Se´ror, 1998, p. 39 and 40). A key objective of this type of network association is to facilitate activities in foreign markets and overcome the sociocultural and resource barriers inhibiting the identification and exploitation of IE opportunities in the international environments (Szyliowicz & Galvin, 2010; Bateman, 2000; Ceglie & Dini, 1999). Scholars have linked the continuing differences in the innovation strategies and expansion approaches of firms to the diverse institutional environments in which the business systems are embedded (Bruton et al., 2010; Baumol, Litan, & Schramm, 2009; Hwang & Powell, 2005; Shane, 1992). Institutional structures (Spencer et al., 2005) shape not only new entry but also the growth and renewal aspects of IE, and they are prerequisites for survival in the turbulent international business environment. According to Bruton et al., ‘‘. . .institutional factors impacting entrepreneurial efforts include the direct action of governments in constructing and maintaining an environment supportive of entrepreneurship as well as societal norms toward entrepreneurship’’ (2010, p. 426). In the context of this study, such actions by governmental and societal forces are manifested in institutional investments and support for various public and semi-public agencies that facilitate innovative, cross-border entrepreneurship (Bruton et al., 2010; McDougall & Oviatt, 2000). Thus, the IE activities of many SMEs in SMOPEC countries (Hallba¨ck & Gabrielsson, 2013) are significantly influenced by their associations with institutional agencies and their access to resources through institutional networks (Bruton et al., 2010).

to make the best contribution to the theory (Ghauri & Grønhaug, 2005, p. 155) regarding how institutional networks interact with the internationalization of SMEs in the context of IE (see e.g., Saunders, Lewis, & Thornhill, 2009, p. 235; Gummesson, 2006). First, our inclusion and exclusion criteria were derived from the theoretical constructs of the study. Based on our conceptualization of IE and institutional networks, we sought only SMEs that were fully engaged in IE as described earlier in Section 1. Guided by Jones et al. (2011) and Oviatt & McDougall (2005); an SME’s internationalization that did not clearly indicate key elements of entrepreneurship were excluded. For instance, mere exporting was not considered sufficient for inclusion, because this could entail the use of export assistance only; and also that the entrepreneurial activities ends when export requirements have been fulfilled within the borders of the exporter’s home country. Second, an important decision was made to limit our case selection to Finland and Sweden because:

3. Research design

In order to fulfill our selection criteria, lists of firms that have utilized institutional network support for IE activities were obtained from two institutional centers in both countries. After the initial screening phase, 15 SMEs were contacted, of which six case firms were eventually interviewed. However, one of these case firms was later removed from the analysis. The final choice of cases was influenced by many factors, including being able to interview a key person who has played a key role in the internationalization process. In a few cases, such key people had left the firm or were busy abroad and unable to grant an interview at the time. In addition, two firms from our initial selection did not want to participate in the study. Fig. 2 provides an overview of the selection process.

The qualitative case study approach suggested by Yin (1989, 2009) and Ghauri (2004) was used for data collection to enable us understand how the awareness of, access to, and utilization of institutional networks in SME internationalization impacts the IE activities of SMEs. This requires an exploratory enquiry that takes into account both the content and context of interactions within institutional network settings. Case selection is therefore a very crucial element in this type of research, so it must be based on a careful evaluation that selects the cases that provide the best possible account of the phenomenon being observed (Ghauri, 2004; Tracy, 2010, p. 845). According to Ruokonen, Nummela, Puumalainen, and Saarenketo (2008, p. 1298), ‘‘Random selection is not desirable, and theoretical sampling is recommended’’. 3.1. Inclusion and exclusion criteria for case firms Theoretical sampling was used to select case firms that best fit the study criteria and bring the most valuable information in order

a) Finland and Sweden are excellent SMOPEC examples. b) These two countries have versatile institutional support frameworks that go beyond just export promotion. c) They are welfare states, so the economic burden resulting from firms not actively engaging in IE falls on the state. Therefore, such governments make extra efforts to develop various public and semi-public agencies that provide support for SME internationalization. d) The institutional environments of the two countries are similar.

3.2. Overview of the profiles of the case firms As can be seen from Table 2, all the selected SMEs have IE activities in more than one overseas location. In general, all the case firms were experienced in the use of institutional support networks for entering and developing in foreign markets. They all

•List of client firms obtained from Uminova Contact •List of client firms obtained from Finpro Institutions

SME selection

•Firms were first profiled based on the EU's standard definition of an SME •Secondly, SMEs were selected according to preset criteria for case firm selection •15 SMEs that fit the criteria were contacted at this stage

•Interviewees should have practical knowledge/expertise in internationalization •Actual involvement/key role in the case firm's internationalization process Respondent •7 positive responses received, but only 6 were able to grant interviews at the time selection

Fig. 2. General overview of the case selection process.


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Table 2 A brief overview of the case firms (balance sheet in millions of Euro at the end of year 2012). Interview code

Industry Sector

Head office location

Interviewee’s position

ES-01

Sweden

CEO

ES-02 EF-04

GIS – Geographic information systems Construction Environmental technology

Sweden Finland

EF-05

Waste management

Finland

EF-06

IT/Mobile technology

Finland

Project leader Director – International Operations Vice-president – Customer Process Director – Solution Center

had active relationships with a significant number of institutional agencies in multiple countries. It was observed that the method(s) used by each case firm for maintaining a presence in foreign markets depended on the industry segments to which each firm belonged. For example, ES01 uses retailers and sales partners in most of their foreign markets: ‘‘We are looking for export and . . .sales partners’’ (CEO, ES01). Meanwhile, EF-06 has its own subsidiaries in selected markets: ‘‘We have own personnel. . ., company in Germany, the UK, France, the Netherlands and the USA. And we have our own retailer network that covers about 100 countries’’ (Director Solution Center, EF-06). On the other hand, EF-05 operates in a very niche market, so the preferred mode of entry for them is through distributors. The niche nature of their business also implies that they only use one distributor in each of the 40plus countries they operate in. Also, the distributor is responsible for the local manufacturing and/or the sourcing of some parts: ‘‘. . .we ship the basic module down there and they do the rest. . . [meaning the remainder of the production] because each final product is custom built for the client’’ (Manager, EF-05). ES-02 and EF-04 currently sell directly to the international markets. ES-02 retails piece-by-piece to their foreign markets because their mode of operations is project based. ES-02 has developed an advanced technology for meshed welding in construction work that is especially suitable for pipes carrying extremely high temperature liquids at chemical factories and plants. It does not sell its technology as such, but rather it undertake projects and then deploys external contractors who use ES-02s technology to complete the project under the guidance of ES-02’s technical experts. They reverted to a project-based strategy after their initial licensing method did not work out well. According to the project leader (ES-02), ‘‘Right now, we are a kind of export project 2.0. . .you buy what you need and that puts less risk on the side of the buyer.’’ EF-04, meanwhile, is looking forward to establishing subsidiaries in its overseas markets. The Director of International Operations (EF-04) notes, ‘‘Our international strategy is to use an integrated model which is not only limited to exports. Exporting is not enough, so we have to be there to provide the important after-sale service. . .’’ In terms of the level of internationalization of the SMEs, our primary consideration was that they should be engaged in IE activities beyond mere exporting. Attempting to define the degree of internationalization for each case firm in detail would be a precarious endeavor, because these firms are not identical. For example, see Ramaswamy, Kroeck, and Renforth, (1996), Sommer (2013) and Sullivan (1994, 1996) for a detailed debate on measuring the degree of internationalization. We do not want to become entangled in such a debate for this study, but we do provide a general understanding of the firms’ levels of repeat international experiences in Appendix 1. 4. Findings This section presents the empirical findings from the studied SMEs. In Section 4.1, we seek to understand and describe the case

Head count

Cross-border activities

Year founded/Balance sheet [2012]

4

10 countries

2007 (3.4)

40 4

6 countries 3 countries

2004 (11.0) 2009 (0.42)

23

40 countries

2001 (22.01)

50

105 countries

2000 (18.3)

firms’ level of awareness of the various types of institutional network support available to them for internationalization purposes. Section 4.2 provides some insight into the actual utilization of institutional networks, namely the level of usage and the differences in the case firms’ use of the various types of institutional networks. Finally, Section 4.3 provides an overview of how the access to, and actual use of, institutional networks has affected the IE efforts of the SMEs. 4.1. The association of SMEs with institutional networks Individual interview sessions of 60–90 min were held with each case firm. The SMEs were asked to discuss the various networks they used for internationalization purposes. A key aim was to see how many of their network relationships corresponded with the description of institutional networking in the context of our study. The second aspect concerned the level of awareness of the SMEs about the various types of support available through institutional networks for new entry and further development, especially when considering their resource constraints (Ruzzier et al., 2006). Altogether, the responses in Table 3 indicate a certain level of awareness by the case firms. Ten institutional networks were mentioned in total by interviewees in this category, without the interviewers asking any direct questions about them. The institutional support centers mentioned were: a) Uminova and Finpro: All the case firms immediately recounted the various types of network support, relationships, and further connections they had enjoyed through these types of institutions. However, they seem to have utilized varying support services from each particular institutional network resource center. Uminova and Finpro are institutional agencies for international business development. They provide expert and advisory services, business incubation, technology support, and market intelligence to SMEs. Given that all the case firms have been clients of either Finpro or Uminova, it was unsurprising that all of them were very aware of the support services available through these agencies. However, two aspects were noteworthy: i) It was not disclosed to the SMEs that the researchers already knew about their associations with these institutional actors. Therefore, the SMEs’ vivid accounts of their network relationships with Finpro and Uminova further emphasized the primary role of this type of institutional agency as a key source of institutional network resources for IE. ii) The variation in the types of resources the firms accessed and utilized through Finpro and Uminova can be partly explained by differences either in their industry sectors or in the resources needed for each case firm. Moreover, such variations could also be partly due to varying levels of awareness, because in practice, a firm can only seek access to resources they are aware of.


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Table 3 An extract showing the SMEs’ level of awareness and association with institutional networks. Case

Extract from Interview Response

Count

Awarenessa

ES-01

‘‘We have had help from incubator projects from the beginning, on latest stage we develop cooperation with Vinnova, . . .we also have later through Uminova innovation are part owners . . . business’’ ‘‘[. . .] Rely on the Swedish Trade Council, Swedish pipe and Finnish pipe manufacturer associations, [. . .] Green Tech clusters and work with Uminova for quite a long time’’ ‘‘We had financial help from Tekes and Finpro for a market research, [. . .] contacts of the Finnish embassy in Nigeria has been helpful for connections in that market. . .’’ ‘‘We had use Finpro since 1995 and we have quite good relations with the local authority that belong to the minister of trade and industry, [. . .] we have applied and received funds from . . ., also Tekes’’ ‘‘[. . .] Own networks finding local connections through trade shows or internet. . . .we use Finpro and also some consulting companies. . ., and also in some countries this Enterprise Europe Network and they have their own country organization in each European country’’

3

Medium

4

Medium high

3

Medium

4

Medium high

2

Low

ES-02 EF-04 EF-05

EF-06

a Please note, the level of awareness was rated on a five-point scale: low, medium low, medium, medium high and high. The scores the case firms obtained were calculated as the number of institutional networks resources the firm reported to use compared to the overall support resources mentioned by the institutional agencies. Case no.3 was intentionally removed from the case sample at a later stage.

b) Vinnova and Tekes: The empirical findings highlighted that only one Swedish case firm had utilized the services of Vinnova, while all three Finnish case firms had used support from Tekes. Indeed, Vinnova and Tekes are the respective national funding agencies for technology innovations and scientific research for the two countries. Note that all the case firms operate in technologyintensive sectors, and the two Swedish SMEs in particular have technological innovations at the base of their product/service offerings. Despite this, one Swedish case firm did not use Vinnova’s resources. This could indicate a lack of awareness. In addition to the different needs of each SME, it could be that the requirements (if any) for accessing each type of resource might have played a role in this situation. c) Green-tech clusters and the Swedish and Finnish pipe manufacturers’ associations: These organizations are industry-specific networks. They provide network resources solely for their members (Antonio Belso-Martıńez, 2006, p. 802). Only ES-02 mentioned being associated with these types of institutional networks. The observed low level of awareness is surprising, but it is unclear whether there are similar umbrella organizations for the industry sectors of the other SMEs. It is also important to note that a low access rate, or not being associated with this type of industry-specific network at all, might not imply an unawareness of their potential resource/service offerings in practice. However, SMEs can be unpredictable with regard to the voluntary membership of specialized trade associations. One reason for this unpredictability is that membership often requires compliance with certain operational rules and codes of conduct. Thus, despite the benefits that industry-specific relationships can bring (Wright, Westhead, & Ucbasaran, 2007, p. 1014), SME owners/managers may prefer autonomy in the management of their operations, especially when operating in turbulent foreign-business environments. d) Embassies, Ministries of Trade and Industry, Finnish National Trade Delegation, and the Swedish Trade Council: It was found in the empirical data that ES-02 used the Swedish Trade Council, while EF-04 was associated with the Finnish embassy in Nigeria. EF06, however, was found to be connected with both the Finnish Ministry of Trade and Industry and the National Trade Delegation. This category of institutional networks involves direct governmental participation in the IE process as a means to promote international competitiveness (Hessels & Terjesen, 2010, p. 217; Francis, Zheng, & Mukherji, 2009). The low number of stated associations could be attributed to an equally low level of SME awareness of, and access to, this category of institutional network. Other reasons could be that some SMEs are not eager to associate themselves with governments or that they lack the

exposure and confidence to participate in national trade delegations. e) The Enterprise Europe Network (EEN): This is the Europe-wide network center for connecting enterprises with international partners, EU funds, financing organizations, technology, and market knowledge. The EEN collaborates with business-support organizations from 49 countries.4 This type of institutional network is especially important for SMEs’ internationalization and IE in general because of the versatile network resources they provide (Bosma & Levie, 2009; Ruzzier et al., 2006, p. 180). However, only EF-06 mentioned involvement with this network. Again, this suggests a lack of awareness about these institutional resources that could help SMEs overcome various barriers in their IE endeavors (Lu & Beamish, 2001; Ruzzier et al., 2006; Torkkeli et al., 2012). Concertedly, the findings suggest that each case firm had associations with approximately three different types of institutional network on average. In total, we identified a reasonable level of association with certain types of institutional networks, with Finpro and Uminova being the most mentioned. Tekes was the next most popular institutional network mentioned, and this indication confirms the reality of Finland being one of the most active countries in terms of direct innovation funding. The observed level of awareness and use of institutional networks by the case firms is quite representative of the situation in SMOPEC countries, where most firms enjoy a variety of institutional support aimed at fostering the international competitiveness and growth of SMEs. 4.2. The main benefits of utilizing institutional networks In this section, we looked for insights into the type of resources the firms sought to use from institutional networks. Understanding the actual institutional network resource consumption of SMEs and the main benefits of such resource utilization will help our understanding of their influence in the IE process. The empirical data revealed that the main institutional network resources used by the case firms for their entrepreneurial internationalization activities were: (a) advisory and knowledge-support services, (b) financing information, (c) partner search and foreign business contacts, (d) market information, and (e) innovation subsidies and FDI incentives. A concise overview of the case firms’ accounts of their access to, and use of, these institutional network resources is presented in Table 4.

3 Refer to http://www.enterprise-europe-network.ec.europa.eu/index_en.htm for more information.


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Table 4 An overview of SMEs’ access to, and utilization of, specific institutional network resource(s). Resources accessed & utilized

Extracts/description by firms using the specific resource(s)

Spread of utilization

Advisory and knowledge-support services

‘‘[. . .] it’s all about information. . . .and all the time you learn more about the right organization that provide you the right support’’ (EF-04) ‘‘the Swedish trade council had helped us to understand the culture of the different countries we go to do business, . . .’’ (ES-02). ‘‘[. . .] and also in terms of financing and how to find the right ways and then possibilities to financing’’ (ES-01) ‘‘. . .we got financial support and market knowledge’’ (EF-04). ‘‘[. . .] finding the right partners and things like that’’ (EF-05); ‘‘[. . .] some focused work as they can find individual companies or retailers and then clients and arrange meetings with them’’ (EF-06). . . .market statistics [and/or] . . .feasibility study (ES-02; EF-04; EF-05 & EF06), competitor analysis (EF-06). ‘‘[. . .] we got money from Tekes. . .’’ (EF-04; EF-05; EF-06) ‘‘[. . .] development co-operation with Vinnova’’ (ES-02).

2 firms

Information about various grants and funding opportunities Partner search and foreign business contacts Market information Innovation funds and FDI incentives

In general, the extracts in Table 4 reveal that market information and funding support/FDI incentives have been the most-used resources from the institutional networks. All three Finnish SMEs stated that it had been important for them to obtain funding from Tekes. The institutions confirmed the general opinion expressed by the SMEs about their actual and preferred network resource utilization: ‘‘They look for help in the knowledge of markets, laws and entry modes and to find contacts in other countries to find distributors, suppliers or potential partners.’’ (IS-01) ‘‘It’s hard to say, but the services they seek more is the partner search, as some companies are really small, and if they try to conquer a new market only by themselves, it will not work. . .’’(IF-02) The extracts above suggest that the case firms highlight these areas of the internationalization process as the ones where an SME most needs vital input from institutional networks in order to overcome the hindrances presented by its internal constraints (Torkkeli et al., 2012). Thus far, the findings concur with the network and resource dependency theories (Arbaugh et al., 2008). It is also in accordance with the institutional theory perspective, which argues that SMEs may rely on the external institutional environment to gather the various cultural and technical capabilities necessary to exploit international opportunities and mitigate resource inadequacies (Bruton et al., 2010; Street & Cameron, 2007; Szyliowicz & Galvin, 2010; Vatne, 1995; Zain & Ng, 2006). The institutional agencies mentioned a much wider variety of services that they offer to SMEs. For instance, credit and background checks, legal help, and drafting international trade contracts and business plans were just some of the network resources they said they provided. However, none of the case firms mentioned having used, or even being aware of, such support. There could be several possible explanations for why the SMEs did not indicate any awareness of these types of resources. It could be because the interviewers did not specifically name any of these during the interview sessions, but directly asking if they had used credit checks, legal consultancy, or other similar services would mean asking ‘‘leading questions.’’ Therefore, we avoided these because of the nature of the qualitative enquiry approach used in this study (Ghauri & Grønhaug, 2005, p.137). Another possible explanation could be the need for confidentiality in relation to credit and background checks and certain legal services. In general, it could also be that none of the case firms had used these aspects of the institutional network resources, or maybe they just deemed

2 firms

2 firms

4 firms 4 firms

them so trivial that they decided not to mention it. In any case, it could not be established as to whether these unmentioned aspects of the institutional network resources are important or not to the internationalization process and the IE activities of the SMEs. According to the constructionist ideology, an organizational narrative is a process of sensemaking whereby the narrator’s choice of words reflects a continuous and careful order aimed at constructing and reproducing certain forms of meaning to a particular audience. Thus, researchers have no analytical justification for anything that was not said (Buchanan & Dawson, 2007). Regarding the main benefits of institutional networking, the two Swedish case firms said that ‘‘knowledge competence’’ had been most valuable for them (ES-01 & ES-02). Therefore, institutional resources and relationships that helped ES-01 and ES-02 improve their IE knowledge competence had the most profound impact on their IE activities. Two Finnish case firms (EF-04 & EF-06) noted that ‘‘expanding their own business networks’’ was the most beneficial aspect for them. In other words, they acquired valuable business contacts through the institutional networks, and these contacts have been instrumental in their success in their respective international markets (e.g., ‘‘they open doors’’–EF-06). However, one Finnish case firm (EF-05) also stated that ‘‘professional knowhow’’ was the most important benefit of the institutional relationships. Most case firms credited institutional network resources related to different forms of knowledge as being crucial to successful entrepreneurial internationalization. Interestingly, it is important to note that the three Finnish case firms all stated that they had obtained funding from Tekes, yet none of them considered financial help to be the most crucial aspect of institutional networking for their IE endeavors. This particular finding seems somewhat counterintuitive, because some analysts suggests that due to SMEs’ resource constraints; therefore, providing financial support to the SME sector would seem to be the ultimate solution to their problems. However, our findings lend support to some existing research that emphasizes that a firm’s knowledge resources are the key predictors for its internationalization (Yli-Renko, Autio, & Tontti, 2002). SMEs have relatively lower resource capabilities, and this makes their access to knowledge vital for their survival and growth, especially in the unfamiliar frontiers of IE (Mejri & Umemoto, 2010). 4.3. The outcomes and significances of relationships This part of the inquiry sought to gain insight into what the SMEs considered to be the importance of institutional network associations to their entrepreneurial activities in foreign markets.


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Another aim was to learn whether their relationships have or have not been maintained after their use in a particular phase, or for a particular purpose, in the internationalization process. Similar to the discussion presented in Section 4.2, the responses from the case firms suggest that the significance of institutional network resources were mostly felt in the areas of knowhow, funding, and policy and regulatory environments. Primarily, the SMEs described their current relationships with the institutional agencies as friendly. EF-04 stated that they maintain contact because they need it, while EF-05 and EF-06 stated that there was often no further contact after a particular assignment was fulfilled. Furthermore, ES-01 and EF-06 said they kept continuous relationships with certain institutional actors because they have ongoing collaborations with them. All the case firms indicated that it was very important for institutional networks to support them during the initial entry phase into foreign markets, because these institutional actors provided help in different knowledge areas, opened doors to international partnerships, and sped up the overall process of internationalization. Another motivation for maintaining relationships is that it makes it easier to receive further help, especially when an SME is entering into a new market or launching a new project in an already established market. This concurs with the institutional networks theoretical conceptualization of this study, suggesting that the effect of institutional networks on SMEs’ IE activities is multidimensional (Bruton et al.,

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2010; Suddaby, 2010; Szyliowicz & Galvin, 2010; Siu, 2005; Se´ror, 1998). Both the SMEs and the institutional agents were asked about in which internationalization phase SMEs most need the help. The institutional agencies answered that they prefer to be involved with projects as early as possible. The SMEs, meanwhile, replied that they needed institutional support most at the new entry stage, specifically when the new market, products, services, or technological innovations are in the development phase. The SMEs therefore need help at this stage to ensure realization of the IE effort. However, the Swedish SMEs highlighted that they also used institutional network support for idea generation before the development phase. Based on what the interviewees conveyed in the discussions, it was clear that even though the use of institutional network resources might be more obvious at particular phases of the entrepreneurial internationalization process, the impact is felt most in the success or failure of the entire IE endeavor. Thus, the influence of institutional networks cannot be separated from the projects and entrepreneurial activities that constitute the overall IE endeavor. An illustration of the influence of institutional network resources on the internationalization of SMEs in the context of IE is presented in Fig. 3. Fig. 3 reflects the information from both the SMEs and the institutional agencies. It suggests that the relationships between

Fig. 3. A conceptual framework of the influence of institutional network resources on an SME’s internationalization process. Key: SME – Institutions network connection Home country’s institutional-based resource influence Host country’s institutional influence


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SMEs and institutional networks begin with an awareness of the resources and types of support available through the institutional agencies. Such awareness is driven by the resource constraints of SMEs, and it is the push-and-pull factors motivating SMEs to establish connections that will allow them access the resources obtainable through institutional networks. Moreover, as the SMEs’ awareness of, and access to, different institutional resources increases, the SMEs begin to develop both formal and informal network relationships with various actors within the network of institutional agencies, both in the home and host countries. For instance, when the term ‘‘friendly’’ is used by SMEs to describe the nature of their relationships with institutional agencies, it may represent mutual trust and/or the interpersonal micro-building blocks of a long-term relationship (Fink, Harms, & Kraus, 2008). This therefore has a dual effect on both a firm’s propensity to internationalize and its resource capabilities (Vatne, 1995, p. 179). In hindsight, the impact of institutional network resource utilization is reflected in the holistic outcome of the IE activities. In brief, Fig. 3 suggests two primary, intertwined blocks regarding the influence of institutional network relationships on the SMEs’ internationalization process. These can be labeled as the enabling and fostering influences. For our case firms, the darkshaded block in Fig. 3 represents the various sources of knowledge resources that have been instrumental in enabling the SMEs to commence their internationalization activities. The light-shaded block represents the tangible resources that foster the progress or success of the IE endeavor. In addition, FDI incentives, support services, and tariff conditions of a host country’s institutional environment has a significant impact on the IE process. 5. Conclusions and recommendation The current study set out to examine how institutional networks interact with the internationalization activities of SMEs in the context of IE. In order to fulfill this study’s objective, a qualitative case study was used to investigate five SMEs engaged in IE. The findings suggest that institutional networking has a positive influence on the internationalization process of SMEs. The major areas where institutional networks influence an SME’s entrepreneurial internationalization process were found to be market information, financial support, business contacts and partner searches. Hence, the key influences of an SME’s association with, and utilization of, institutional network resources are in the aspects of knowledge, speed, and the reduction of risks in foreign environments. These findings agree with existing research on SME resource dependency and external alliances (Street & Cameron, 2007). Furthermore, proponents of resource dependency theories have consistently emphasized the need for small businesses and governments to cooperate within the institutional environment in order to identify the challenges and opportunities that affect SMEs’ success in IE (Bruton et al., 2010; Spencer et al., 2005; Whitley, 2000). The networks school of internationalization emphasizes a firm’s interactions and exchanges in a web of network relationships in order to overcome various obstacles in international business (Johanson & Vahlne, 2009). Our findings suggest that the case firms have utilized institutional network resources in order to mitigate various resource constraints that could otherwise hinder or jeopardize their IE efforts. Institutional network resources continuously influence an SME’s IE activities, and this influence is intertwined in the different stages of internationalization. Therefore, despite the fact that case firms sought institutional network resources mostly for new entry, the importance of these resources cannot be pinpointed to any particular phase of the internationalization process. Although, the influence of institutional networks on IE may vary in the different phases of the

internationalization process, however, our findings suggests that it had significant impact on the speed of new entry, reduced risks and uncertainty associated with foreign market environments and thus lead to positive attitude toward IE. Institutional theory is of great interest when understanding SMEs’ network relationships with various institutional actors. It also provides a solid base for examining and explaining how different resource interactions between specific institutional environments and a firm influences the firm’s international entrepreneurial outcomes beyond the insights offered so far by classical export literature. 5.1. Theoretical contributions The current study suggests a network typology for separating the overlap between business and institutional networks. The proposed network typology follows the methods of O’Donnell et al. (2001, p. 752) and Slotte-Kock & Coviello (2009, p. 46). It therefore provides a basis for understanding the characteristics of institutional networks, as well as how institutional agencies can influence the IE efforts of SMEs. In light of the limited literature focused on this area (Bruton et al., 2010; Szyliowicz & Galvin, 2010), it is a novel step to use institutional theory combined with the network perspective to study the role of institutional networks in the internationalization and IE processes of SMEs. Although most of the findings are in agreement with the existing literature regarding SMEs’ external alliances, our findings seem to contradict the previous assumptions suggesting that resources external to the firm are separate to its internal resources from a network perspective (Vatne, 1995). In our findings, institutional network resources do not only help develop the internationalization process; they also guide the acquisition of other key capabilities that are important for an SME’s success in IE. Therefore, when internationalizing SMEs are connected to institutional networks, most of their resource capabilities are embedded in the support and resource flow from their institutional network relationships. This resource embedding aspect combined with the possibility of institutional networks to enhance the core capabilities of the firm will therefore enable the SMEs to be in a better position to explore and exploit entrepreneurial opportunities across national boundaries. Since institutional network reduces risks and uncertainty in foreign markets, it therefore, encourages border-crossing entrepreneurial behaviors such as opportunity seeking, proactive risk taking and innovativeness which add value to the organization. 5.2. Policy implications Institutional network support is vital for the entrepreneurial internationalization of SMEs, so it should therefore be in the interest of governments, policy makers and public institutions to promote viable institutional support networks for the SME sector in order to ensure the international competitiveness of their national economies (Bosma & Levie, 2009; Greene & Mole, 2006; Lu & Beamish, 2001). This is supported by the existing view that SMEs who manage to secure the resources required for international growth have a significant impact on the larger economy, because they generate the bulk of the innovation flow and economic renewal. However, increasing financial support for the SME sector is not the ‘‘magic bullet’’ (as suggested by some analysts) that will solve all the problems associated with SMEs’ resource constraints. Instead, the results suggest policymakers should collaborate with SMEs in planning various types of institutional support programs in order to ensure improved awareness of, and access to, the key institutional resources that enable and foster SMEs’ engagement in IE.


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5.3. Managerial implication The findings have shown a rather average level of SME awareness about the variety of internationalization support available through the institutional networks. Thus, this could be an indication that the institutional actors should more actively engage in awareness campaigns. The study has also highlighted that the institutions have a much wider variety of service offerings than the SMEs actually utilized. Therefore, the findings serve as a wake-up call for SMEs to start seeking and benefiting from the full variety of institutional support functions. An SME can hardly benefit from any service/resource which the firm is not aware of. Thus, proactive efforts from the SMEs and better awareness programs from the institutional agencies would perhaps result in a higher degree of awareness, access, and optimal utilization of institutional network resources. 6. Limitations and suggestions for further study Qualitative research has by nature several advantages but also some limitations. This study focused on understanding SME-toinstitutional network relationships. Therefore, we did not take into account other relationships and knowledge capabilities that might play roles in the internationalization process. On the other hand, scholars have also argued that examining the entire relationship portfolio of firms in a single study is perhaps a futile endeavor (Bruneel, Yli-Renko, & Clarysse, 2010, p. 177). Another perceived limitation, but perhaps also a strength, in qualitative case studies concerns the blurred role of generalization. Hence, it is recommended to place emphasis on ‘‘trustworthiness’’ rather than ‘‘generalizability’’ in qualitative case studies (Ghauri, 2004; Sinkovics & Ghauri, 2008). The case firms in this study were not chosen from a single industry, and the SMEs are based in two SMOPEC countries. Therefore, the findings might (a) not be entirely representative of the institutional network relationship behavior of a specific industry sector, and (b) the results might not be applicable to non-SMOPEC countries where firms might tend to associate less with institutional agencies. There are also differences among the case firms in terms of their numbers of overseas locations and their modes of internationalization. However, all the studied SMEs have the unifying characteristics of being from technology/knowledge-intensive industries, being internationalized beyond mere exporting, and being experienced users of institutional network resources. In addition, all the firms were based in two institutionally comparable SMOPEC countries. Therefore, as described in section 3, this qualitative case study was designed following the quality guidelines for the optimal understanding of a specific phenomenon rather than for drawing generalizable conclusions (Ghauri, 2004; Yin, 2009). In other words, the key phenomenon of paramount interest to this study is understanding how awareness of, access to, and utilization of institutional networks interacts with the entrepreneurial internationalization of SMEs. Finally, all the case firms had been clients of one of the two ‘‘seminal institutional support providers.’’ However, this did not influence the findings at all, because the SMEs were unaware that the researchers had prior knowledge of their associations with these institutional actors. Moreover, the case firms’ associations with these institutional agencies is representative of the situation in the studied SMOPEC countries, where most SMEs utilize institutional support (e.g., according to the Finnish Ministry of Employment and Economy (TEM), over 60% of Finnish enterprises received institutional support between 2008 and 2011, which on average amounted to about s154,000 per firm). Therefore, despite these minor limitations, there is no reason why the findings will not apply to similar

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SMEs from a single industry sector or to SMEs that are not clients of the two mentioned ‘‘seminal institutional support providers.’’ More studies in this area will be of interest. First, it would be interesting to repeat the current study with a quantitative research design that incorporates a larger sample of SMEs. This would enable scholars to establish if the findings are consistent or if they depend on the chosen methodology and sample. Second, another study of this nature could focus on non-users of institutional networks. One of the objectives here could be to discover what their success rates are, as well as the speed and choice of new entry and further expansion in IE, when compared to firms that actively utilize institutional network resources for their IE efforts. Acknowledgements Many thanks to the anonymous reviewers for their valuable comments. This paper benefited from the guidance of Assistant Professor Eriikka Paavilainen-Ma¨ntyma¨ki, and from an earlier collaboration with Luis Javier Ricardo Pedraza on a separate study project. Thank you to Dr. Mikko Rajala and Professor Jarna Heinonen who commented on the earlier versions of the manuscript.

Appendix 1

Case firm

Operative background and/or business activities

Phase of internationalization and explanation for presumed degree of internationalization

ES01

Design, development and distribution of technologies for aerial surveying and capturing of geospatial data. Also develops software for managing and processing environmental information for the agricultural sector. Specialized nature of GIS business allows them to concentrate product design and development into the hands of few highly skilled engineers. Manufacturing is outsourced, and marketing is done through distributors. Operates in the pipe-welding sector of the construction industry. Their mode of operation is ‘‘project based.’’ They developed an advanced technological method for meshedwelding, particularly for pipes that convey high-temperature liquids. They undertake projects and deploy external contractors to use ES-02’s technology to complete the project. Provides solutions and system integration for environmental technologies. The firm is a subcomponent supplier for parts used in green energy plants (e.g., wind farms), solar convertors, and biowaste to bio-energy conversion. They also provide environmental consultancy services. Manufactures and supplies wastemanagement machinery, such as compact shredders for landfills and wood chipping.

Medium (intermediate phase) The firm has IE activities in 10 different institutional environments. Firms having such double-digit numbers of cross-border entrepreneurial activities are considered to be beyond the experimental internationalization phase.

ES02

EF04

EF05

Medium-low (beginner phase) Based on our chosen parameter, we considered ES02 as being in the early internationalization phase when compared to the three other case firms with activities in 10–100+ different institutional environments. Low (entry phase) International clients from inception. During data collection, EF04 was in the process of staffing and lunching three overseas units of its own.

Medium high (advanced phase) With presence in over 40 overseas locations, this SME could be considered advanced in its internationalization compared to the average international SME.


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Appendix 1 (Continued ) Case firm

Operative background and/or business activities

Phase of internationalization and explanation for presumed degree of internationalization

EF06

Provides ICT consultancy and web portal services.

High (advanced phase) EF06 could be described as a born global or born international. The company has its own (small) units in a number of selected countries. Also, they use service export, partnerships, and project outsourcing to serve clients in over 100 countries.

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