Current internationalisation and international business (IB) theories are silent on the intermittent internationalising experiences of small and medium size enterprises (SMEs) from emerging economies (EEs). The aim of this chapter is to examine the role that networks play in facilitating SMEs from EEs subsequent behaviour following intermittent (exit and subsequent re-entry) internationalising experiences, and to build the theory of this process. Internationalisation of SMEs is a complex phenomenon. Utilising qualitative interview-based data from 15 Pakistani and Chinese SME entrepreneurs, industry experts and government representatives, this study concludes the following: SMEs from EEs continuously reconfigure existing products, resources and markets through networks while reducing and reviving levels of commitment with partners in international markets. Additionally, entrepreneurs from these markets proactively choose to dissolve existing relationships, withdraw from foreign markets to seek new partnerships and diversify resources to reduce foreign market uncertainty. However, some SME entrepreneurs seek to re-enter into previous markets utilising prior relationships and networks. Hence, successful management of network relationships over time is a challenge for internationalising SMEs.
INTRODUCTION
The internationalisation of small and medium size enterprises (SMEs) has been researched for almost three decades in the international business (IB) literature. However, internationalisation theories within the field of IB, namely the internationalisation process (IP) model and the Uppsala model and its revised versions (e.g. see Johanson & Vahlne, 1977, 1990, 2006, 2009, 2011; Vahlne, Ivarsson, & Johanson, 2011; Vahlne & Johanson, 2013; Johanson & Vahlne, 2015), have continued to explain internationalisation as a forward moving activity, referring to linear type internationalising activities. Alternative views on internationalisation phenomena, for example, the impact of an inability to develop holistic frameworks in international market exits and re-entries, have been ignored (Bernini, Du, & Love, 2016; Choquette, 2018; Surdu, Mellahi, & Glaister, 2019). Current IB literature argues the importance of exploring foreign market exits (Etemad, 2015; Surdu et al., 2019) and re-entries (Sui & Baum, 2014; Welch & Paavilainen-MĂ€ntymĂ€ki, 2014), as well as exploring the phenomenon of exit and re-entry from the entrepreneurial perspective (Zander, McDougall-Covin, & Rose, 2015). Researchers have also drawn attention to the need to explore exits and re-entries of SMEs internationalising from EEs (Vissak & Zhang, 2015). No single theoretical model fully explains the phenomenon of intermittent internationalisation (Bernini et al., 2016). Hence we draw upon Johanson and Vahlneâs study on the IP model which appeared in the Journal of International Business Studies in 1977 and has been revised a number of times by the IB community (e.g. see Johanson & Vahlne, 1977, 1990, 2006, 2009; Vahlne & Johanson, 2013; Vahlne et al., 2011). Supporters of the IP model (e.g. Zou & Ghauri, 2010) assume that internationalisation is incremental and a forward moving activity for SMEs, both in advanced economies (AEs) and in emerging economies (EEs). However, several studies on SMEs (including born-global and international new venture) criticise some of the assumptions of the IP model (e.g. Vissak & Francioni, 2013).
While scholars argue that the model should continue to dominate the IB field and continue to be used to explain internationalisation patterns in SMEs (Meyer & Thaijongrak, 2013; Santangelo & Meyer, 2011), some researchers acknowledge the partiality of the IP model, in that while it can be applied in some situations, that does not mean that it is valid and applicable in other situations (Hadjikhani, 1997). Various issues have been raised. The model has been criticised for being deterministic (meaning that internationalisation outcomes are pre-determined). The model does not explain leapfrogging, sporadic, episodic, nonlinear and intermittent type internationalisation activities. Additionally, the model considers experiential learning, knowledge development, product development, involvement and organisational structure from the firm-level perspective, while ignoring the role of the individual level entrepreneur (Andersson, 2000). This study highlights the importance of the individualâs voice during the processes of intermittent internationalisation through the network perspective. Intermittent internationalisation is defined as âexit and (possible) re-entry conditional on exitâ (Bernini et al., 2016, p. 1060). Hence, we ask the following research question: How do networks facilitate EE entrepreneurial SMEs throughout their intermittent internationalising experiences? This is consistent with the argument of Bembom and Schwens (2018) that further research is needed on identifying positive and negative effects of network dynamics during the post-internationalisation phase of firms. The structure of this chapter is as follows: following the introduction, the literature review is presented along with a conceptual framework, followed by a discussion of the research methodology and presentation of the analysis and discussion. A conclusion and implications section provides directions for future research.
LITERATURE REVIEW
Network Perspective of the IP Model
From a network perspective, as firms internationalise the strength, commitment and the size of their business network increases (Bembom & Schwens, 2018; Blankenburg, 1995; Chetty & Stangl, 2010; Johanson & Mattsson, 1988; Johanson & Vahlne, 2009). Thus, Coviello and Munro (1997) advocate that firms, over time, increase their visibility and commitment in overseas markets through their experiences and learning from both formal (business) and informal (social) relationships (Coviello & Munro, 1997). The network perspective considers the examination of the IP through business networks (Söderqvist & Chetty, 2013). Business networks are defined as âa set of relationships linking one firm with another firmâ (Ellis, 2011, p. 102). They are also defined as âassets of connected business relationshipsâ (Johanson & Vahlne, 2011, p. 484). Informal networks are considered as a subset of formal business network theory (and are also known as social networks, e.g. see Ellis, 2011). Studies in IB have considered social networks as a part of broader level networks including business-to-business networks (e.g. see Björkman & Kock, 1995). Business networks are likely to have an influence on internationalisation activities such as innovation (Chetty & Stangl, 2010) and foreign market survival (Welch & Welch, 2009).
The original IP model also assumes that firms are continuously operating in a business environment that is changing, and this causes uncertainty, as the future is unknowable. The way to cope with high uncertainty is through managerial actions, either transforming or adjusting to the environment. Actions allow managers to use their learning from their environment to improve their management of complexity and ambiguity. Therefore, managerial actions lead to the development of market knowledge as a result of the interaction between the network partners (Johanson & Vahlne, 2009; Vahlne & Johanson, 2013). One important action concerns commitment which is considered to be an emotionally grounded action that allows network partners to create a stock of knowledge, thus strengthening their network positions. This leads to interactive trust-building and commitment activities between network partners to create new knowledge. Over time, building network positions also involves learning from IB partners about internationalisation strategies, capabilities and plans (Vahlne & Johanson, 2013). It allows partners to adjust to each otherâs plans and capabilities to improve efficiency and performance in a foreign market. However, unsatisfactory performance of a network partner is likely to lead to a decrease in commitment and the end of a relationship (Vahlne & Johanson, 2013). Trusting relationships between network partners are essential for firms (Johanson & Vahlne, 2009) operating in a climate of uncertainty, complexity and ambiguity (Vahlne & Johanson, 2013).
Role of Commitment in Internationalisation
The IP model has taken into account the role of commitment in the IB activities of firms (Johanson & Vahlne, 1977, 2015). The driving force of internationalisation is experiential knowledge, which generates IB opportunities; and this also reduces uncertainty. Therefore, firms are expected to accomplish âresource commitmentâ incrementally as they gain knowledge from their current business activities (Johanson & Vahlne, 1990, p. 12). The model also highlights the role of market commitment and suggests that firms make âadditional market commitmentâ in âsmall stepsâ (p. 12) except when they have large resources and the consequences of commitments are small. Thus, large firms with surplus resources can be expected to take larger internationalisation steps. When market conditions are stable and homogenous, relevant market knowledge can be gained in ways other than through experience. In this way, firms have considerable experience from markets with similar conditions and it may be possible to generalise this experience to the specific market targeted (Johanson & Vahlne, 1990). The early IP model limits the role of commitment to resource commitment in foreign markets (Johanson & Vahlne, 1977). However, when the model shifted towards accepting the role of networks in 2009, the relational side of resource commitment was added into the model. Therefore, affective commitment was considered as a part of the IP (Johanson & Vahlne, 2009). Additionally, the element of trust within commitment remains relevant; for example, through recognition of âdecrease and increase [in the] level of trustâ. However, the model still does not explain how changes in trust levels between network partners may influence networks and may result in changing commitments towards internationalisation.
Influence of Networks on Exit and Subsequent Re-entry Experiences
IB researchers have continued to highlight the importance of different types of networks (e.g. international entrepreneurial networks) in the internationalisation activities of SMEs (Hakansson, 1982; Halinen, Tornroos, & Elo, 2013; Ellis, 2011; Wong & Ellis, 2002; Zhou, Wu, & Luo, 2007). The current state of the literature on business and social networks addresses the paucity of network research in the fields of IB and International Entrepreneurship (e.g. see Halinen et al., 2013; Westerlund & Svahn, 2008). However, explanations of the evolution of networks over time still present a challenge for academic researchers due to the complexities and dynamic nature of these types of relationships (Bizzi & Langley, 2012). This study seeks to explore the role of networks in exit and re-entry experiences, particularly in the context of EEs (Dib, Da Rocha, & Da Silva, 2010). The majority of the explanations on relational and structural factors in business relationships are explored in the context of AEs (e.g. Finnish, Swedish, Australian and New Zealand SMEs). Since EEs are contextually unique from AEs, there is value in exploring the role of networks in EEs due to political, institutional (including network structures emerging through institutional transitions and voids) and cultural factors (Kiss & Danis, 2010; Kiss, Danis, & Cavusgil, 2012; Meschi & Wassmer, 2013). Moreover, institutional uncertainties and external environments in EEs push entrepreneurs to develop and maintain the âdensely tiedâ business networks that result in providing trusted information to foreign partners (Meschi & Wassmer, 2013, p. 713). These findings also need to be applied to SMEs from EEs when exploring the role of network relationships (Kiss et al., 2012). However, the relationship between social and business networks and performance outcomes remains underexplored in internationalising firms from EEs (Bembom & Schwens, 2018).
Relying on these types of networks is one of the characteristics of SMEs internationalising from EEs (Sasi & Arenius, 2008). Once these networks are established with strong ties, firms collude to increase âmarket powerâ by disallowing competitors to enter into markets (Rauch, 2001). Hence, they create international trade...
