itap – sardinia, july 2015 ib, ims & int'n © 2015 n. papadopoulos factors affecting the...

ITAP – Sardinia, July 2015ib, ims& int'n

© 2015 N. Papadopoulos

Factors Affecting the International Behaviour of SMEs

Nicolas Papadopoulos, Chancellor's Professor Daniel Gulanowski, Ph.D. Student

Llynne Plante, Ph.D. Student

Sprott School of BusinessCarleton University

Ottawa, Canada

July 25, 2015

3rd Annual Meet at Sardinia, Akarnania:The Role of SMEs in Akarnania Development Prospects



Main premise

1984 (OT, January): "Internationalize or die"2015 (ITAP, July): "Global mindset or ..."

(or if not, at the least accept: - greater risk exposure and/or

- potential need to eventually struggle harder)



Purpose and Method

Purpose

• Study of internationalization process and international behaviour of firms

• Comparison of Uppsala model (1977, 1990, 2003, 2006, 2009, 2013) & Born Global conceptualization (selected papers 1989-2014)

• Focus on role/treatment of knowledge

Method (this work)

• Multi-stage iterative lit review process: Standard online databases; review of their references; detailed review of each paper

• Terms in title, abstract, text: Internationalization, intl'n process, Uppsala, born global, global firm, INV, intl start-ups, intl entrepreneurship, globalization, rapid intl'n, speed of intl'n

• First cut: 136 main papers from 31 journals

• Selection criteria (Rialp et al. 2005): Published 1977–2014; in English; theoretical and/or empirical; closely related to the topic; top B/IB journals

• Final cut: 69 papers; 10 in each of JIBS, IBR, JWB, 6 in JBV, 1-3 in 24 other j's



Uppsala 1977 (Johanson & Vahlne)

The basic mechanism of internationalization:State and change aspects



INVs and BGs: Selected key points

Varying terminology: International new ventures (INVs), born globals (BGs), born internationals, global start-ups

Internationalize early (< 2 to 3 years) with minimum exports of 10% to 25% of revenues

Perform better than domestic-only

younger, smaller, more flexible, agile, adaptable

entrepreneurial orientation

strongly innovative

often defined as knowledge-intensive

international and export intensive strategic orientation

knowledge a critical resource, drives organizational capability



INVs & Born Globals: ^ literature

McDougall (1989): INVs v Domestic

Oviatt & McDougall (1994): INVs challenge to traditional (Uppsala) models

Oviatt & McDougall (1999): Knowledge framework

Hadley & Wilson (2003): Network model

Knight & Gavusgil (2004): Innovation & capabilities of BG firm



Oviatt & McDougall (1994)

Four necessary conditions:1 org formation through internalization of some transaction2 typically too small to control resources through

ownership; alliances & networks (and so trust and reputation) extremely important

3 cannot rely on scale, need establish foreign location advantages

4 control over unique resources, and hard to imitate/reproduce tacit knowledge, important

A typology of INVs



Saarenketo et al. (2004)

Evolutionary knowledge management model for internationalization



Casillas et al., 2009

A model of influence of knowledge on the internationalization process



Knowledge in Internationalization

Explicit knowledge

Tacit knowledge

Acquisition Easy Very difficult

Transfer Easy Very difficult

Storage Digital, "paper" Embedded in individuals

Management cost Relatively low Very high



Newer Research

Bruneel et al. 2010 (sources of knowledge)• prior knowledge• inter-firm exchange of knowledge• observation & imitation• reliance on experiential knowledge (real-time)

Fletcher and Harris 2012 (sources & main types of knowledge)• technological, market & internationalization • internal & external sources of explicit and tacit knowledge

Sleuwaegen and Onkelinx 2014 (integrating knowledge & strategy) • longitudinal study of 5800 INVs in Belgium• integrate concepts from entrepreneurship, learning/knowledge and strategy • “waterfall” strategy: geographically-focused INVs (low growth/low

competition industry)• “sprinkler” strategy: global start-ups (high growth/high competition, short

product life cycles, knowledge-based industries)



Uppsala 1990

Adds networks of business relationships



Uppsala 2003, 2006

2003Expands on network relationships• overcome country market barriers• knowledge about market and opportunities• build new network relationships• interact and coordinate relationships

2006From uncertainty reduction to opportunity development• Prior experience of owners• New knowledge through network interactions



Uppsala 2009

The business network internationalization process model; integrates prior experience and trust



Integrating Uppsala & and BG

As the debate continued (and continues), research shifted (shifting)

to rationalizing and increasingly to a knowledge-based view of

internationalization.



1977:originalmodel

1990:extension

2003:extension

2006:extension

& re-focusing

2009:major

revision

2013latest

revisionstate aspects(market knowledge & commitment) change asp. (commitment decisions & current activities)

knowledge:experience

adds:network rel'ships

knowledge:+ networks

expands:role of networks identifies 3types of business network learning

knowledge:networks^ critical

adds: trust, AC,founders' exper., opps from new knowledge & netsfocus: from less uncertaintyto more opp dev't

knowledge:+ founders' experience+ integration innetworks

main revision:intl'n = dynamic &cumulative process of learning and trust & comm't buildingadds: net position, knowledge opps, rel'ship comm't, learning + trust + rel'ship building

knowledge:+ new knowledgethrough netlearning

state (dynamic & op capabilities, net position)change (comm't decisions & inter-orgprocesses)highlights: imp. of knowledge heterogeneity & insidership

knowledge:some for insiders only; trust = nb learning prereq;knowledge ^ impacts new knowledge ^

Uppsala 1977 - 2013



Key Findings

• Diffusion of technology and knowledge are key drivers of acceleration of internationalization.

• Increased focus on role of knowledge and learning in internationalization process.

• Shift in definition of “commitment”: From mode-based to export intensity based.

• Perception of risk linked to founders' prior experience: How to accelerate experiential learning.

• Need for dynamic model: Uppsala model still best positioned – many models but no new theory…?

The theory of knowledge and learning of the firm can help to bridge the debate on rapid v staged models of expansion ...

... and thus enhance our understanding of internationalization and the international behaviour of firms.



Key Findings

Factors Internationalization speed

Extent of experiential knowledge +++

Networks of relationships +++

Trust +++

Founders' prior experience ++

Dynamic capabilities ++

Absorptive capacity ++

Learning culture ++

Perceived opportunity ++

Market uncertainty -

Cultural differences -

Psychic distance -



Dynamic capabilities (DC)

Dynamic capability: "Ability to create, deploy, and upgrade organizationally-embedded and return-generating resources in pursuit of sustained competitive advantages in the global marketplace" (Luo 2000, JWB); three ingredients:• capability possession (distinctive resources)• capability deployment (resource allocation)• capability upgrading (dynamic learning)

& absorptive capacity (AC)

Absorptive capacity: "A set of organizational routines and processes by which firms [manage knowledge] to produce a dynamic organizational capability" (Zahra

& George 2002, AMR, drawing on Cohen & Levinthal 1990, ASQ); four dimensions: acquiring, assimilating,transforming, andexploiting

knowledge.



Role of knowledge, then and now

Born Global model

Traditional stage model

KNOWLEDGE

barrier

driver

redrawn from Brennan & Garvey (2009)

then

now



BGs' approaches to learning

Rapid internationalization = rapid learning

Four main modes: • searching• imitation• grafting• networks

Saarenketo et al. (2004)



significant prior experience (language, education, travel, prior work)

leverage social networks to access market knowledge, technology, capital

superior alertness to opportunities

global mindset, attitude, learning orientation

mindset & prior experience lead to perception of lower psychic distance

Characteristics & role of BG founders



Nicolas Papadopoulos

Thank you!

3rd Annual Meet at Sardinia, Akarnania:

The Role of SMEs in Akarnania Development Prospects



Internationalization

“Internationalization ... is a process

in which firms gradually increase

their international involvement”

(Johanson and Vahlne, 1977)

“Internationalization ... is a process

in which firms gradually increase

their international involvement

over time”



Two Competing Models ?

Uppsala Born Globals

Size at initial internationalization Medium to large Small

Internationalization process

Incremental

One market at the time

Rapid

Multiple markets simultaneously

Knowledge Barrier Driver

Primary sources of knowledge

Experiential learning

Few networks of relationships

Prior experience of founders

Many small networks of relationships

Intent to learn Low to High Very High



Future Research

Examine new constructs critically, integrate into extant theory:

• Tacit knowledge management• Trust• Network relationships• Development of new knowledge• Dynamic capabilities• Absorptive capacity• Performance

itap – sardinia, july 2015 ib, ims & int'n © 2015 n. papadopoulos factors affecting the...

Documents

itap sardinia

ims intn

papadopoulos invs

papadopoulos uppsala

papadopoulos oviatt

papadopoulos purpose

typology of invs slide

papadopoulos factors