How Do Rapidly Internationalizing SMEs Learn? Exploring the Link Between Network Relationships, Learning Approaches and Post-entry Growth of Rapidly Internationalizing SMEs from Emerging Markets.

Date01 Agosto 2020
AuthorPuthusserry, Pushyarag

1 Introduction

Rapidly internationalizing small and medium-sized enterprises (SMEs) play a significant role in driving economic growth (Trudgen and Freeman 2014; Gerschewski et al. 2018). Accordingly, the strategies used by rapidly internationalizing SMEs continue to attract considerable interest (Oviatt and McDougall 1994; Knight and Cavusgil 2004; Gerschewski et al. 2018). SMEs that internationalize rapidly are called International New Ventures (INVs) (Oviatt and McDougall 1994) and Born Global firms (Knight and Cavusgil 2004; Knight and Liesch 2016). Contrary to the internationalization process model (Johanson and Vahlne 1977), prior research has found that the risk-prone and entrepreneurial nature typical of the founders of INVs and Born Globals tends to support relatively aggressive international expansion (Autio 2005).

It is widely known that SMEs suffer from liabilities of smallness, lack of resources, limited international experience and limited market knowledge (cf. Galkina and Chetty 2015; Johanson and Vahlne 2009), yet paradoxically, many SMEs internationalize rapidly and compete with well-established MNEs. This suggests that SMEs have unique capabilities and value offerings, however, research to date has failed to fully understand the factors of their success (Knight and Cavusgil 2004; Coviello 2015). Studies on internationalizing SMEs have provided important insights about why, when and how they rapidly expand in international markets. In particular, research has stressed the importance of developing capabilities and network relationships to facilitate expansion of SMEs in international markets (Oviatt and McDougall 1994; Fletcher and Harris 2012; Sullivan-Mort and Weerawardena 2006; Khan and Lew 2018). However, little is known on the type of networks SMEs utilize and their role in success-based learning at the post-entry stage (Evers and O'Gorman 2011; Eberhard and Craig 2013; Hanell and Ghauri 2016; Madsen and Desai 2010; Khan and Lew 2018).

Khan et al. (2018) suggest that global networks are important for SMEs based in emerging markets to develop exploratory innovation. Furthermore, knowledge exchanges and learning from peer and international networks enhance the growth and performance of such firms (Kuivalainen et al. 2007; Coviello 2006, 2015; Khan and Lew 2018; Khan et al. 2018); however, to date, there is a lack of empirical research confirming this. Consequently, there is a need for fine-grained analysis of SMEs' post-entry behavior, and how they grow and survive in international markets (cf. Ibeh et al. 2018; Coviello 2015; Khan and Lew 2018). We contribute to this gap by exploring the following research questions: (1) what learning approaches do rapidly internationalizing SMEs' utilize at the post-entry stage? (2) How do learning approaches from various networks affect the postentry growth of rapidly internationalizing SMEs?

To achieve this, we utilize a multiple case study approach to explore rapidly internationalizing SMEs within a knowledge-intensive emerging market context, namely the Indian information and communication technology (ICT) sector, where knowledge and learning are essential to international performance. We examine the acquisition and strategic application of knowledge through learning, from both within and outside the enterprise among rapidly internationalizing SMEs, in the context of emerging markets. Such processes represent internal and external learning activities that result in different, yet complementary types of knowledge (Arora and Gambardella 1990; Cohen and Levinthal 1990; Powell et al. 1996). Knowledge developed in this way exerts a differential and synergistic effect that is recognized as an antecedent to innovation (Hartman et al. 1994), firm performance (Bierly and Chakrabarti 1996) and internationalization (Oviatt and McDougall 2005). Prior research calls for the need to extend knowledge on international entrepreneurship in emerging markets (Kiss et al. 2012; Khan and Lew 2018). India is one of the largest emerging markets, in both economic and population terms (Das and Das 2014; Economist 2017). As such, it provides an important context to explore the preceding gaps and research questions.

The research has a number of contributions. First, we respond to calls for research by Tuomisalo and Leppaaho (2019), Sleuwaegen and Onkelinx (2014) and Deligianni et al. (2015) by providing a fine-grained analysis of the learning strategies of rapidly internationalizing SMEs' post-market entry. Second, we provide new insights into the different types of learning approaches (e.g., vicarious, congenital and experiential) (Huber 1991) needed for geographic expansion, market penetration and product development. We extend theory through identifying the importance of knowledge from peers, trade fairs and trial and error as mechanisms for self-learning for SMEs' internationalization and their post-entry growth (Madsen and Desai 2010). Third, although experiential learning plays a central and vital role in the post-entry phase of rapidly internationalizing SMEs, we identity that vicarious and congenital learning are also needed to enhance the scope and speed of their internationalization. Vicarious and congenital learning are important in the early internationalization phase (cf. Bruneel et al. 2010; De Clercq et al. 2012). Thus, our findings emphasizes the role of diverse and integrated learning approaches (e.g., experiential, vicarious and congenital) for post-entry growth of rapidly internationalizing SMEs. We also shed light on how diverse learning is achieved from a wide range of networks. Fourth, we provide important insights into how peer-to-peer learning can alleviate SMEs limited international experience and resources; and provide valuable knowledge for enhancing post-entry growth (e.g., Tuomisalo and Leppaaho 2019; Madsen and Desai 2010). Finally, this research provides a more fine-grained understanding of the need for SMEs to embed themselves within international networks such as trade fairs and trade missions, alongside learning from clients, suppliers and networks to facilitate diverse learning and enhance post-entry growth.

2 Conceptual Background

2.1 The Role of Different Types of Knowledge for Learning During Post-entry Growth of SMEs

The importance of knowledge and learning in the pre- and post-internationalization phases of firms has been widely acknowledged (Knight and Cavusgil 2004; Knight and Liesch 2016; Tuomisalo and Leppaaho 2019). Knowledge has been found to aid rapidly internationalizing SMEs to recognize opportunities, develop offerings and ways of doing business, adapt efficiently and effectively to foreign environments, and become established in new markets (Autio et al. 2000; Gerschewski et al. 2018).

Extant literature emphasizes the need for technological learning within knowledge-intensive businesses in order to identify commercial potential (Clarysse et al. 2011; Deligianni et al. 2015) and understand technological trends. Technological learning can lead to the development of competencies needed to diversify further into international markets (Zahra et al. 2000). Furthermore, Sullivan and Marvel (2011) highlight the value of market and unique product/service knowledge for firms' growth and survival. Prior research identifies the need to explore the interdependent effects of different knowledge types on post-entry growth of rapidly internationalizing SMEs (Sullivan and Marvel 2011; Sleuwaegen and Onkelinx 2014; Deligianni et al. 2015), especially in an emerging market's context. Each type of knowledge will now be discussed.

Rapidly internationalizing firms' product or technology knowledge can be classified into two categories; explorative and exploitative (March 1991). Deligianni et al. (2015) suggest that firms involved in explorative innovation, which creates new technological knowledge and generates genuinely novel products, tend to experience negative growth. In contrast, they find that firms who are exploitative (relying on existing knowledge and product modification) tend to exhibit slow growth (Deligianni et al. 2015). Gabrielsson and Gabrielsson (2013) identify that opportunity creation and explorative learning are more important in the early phases of internationalization, whereas opportunity discovery and exploitative learning are important in later phases. Hsieh et al. (2019) suggest that the creation of new technological knowledge or product exploration can maximize firms' growth opportunities, yet more research is needed to understand how such knowledge is acquired through various networks.

Market and international knowledge have also been found to be important in rapidly internationalizing firms (Deligianni et al. 2015; Pellegrino and McNaughton 2017). Market knowledge on local business partners, their connections, and local institutional situations have been found to aid survival and growth (Eriksson et al. 1997; Gerschewski et al. 2018). Market knowledge influences both exploitative and explorative innovation through enabling the identification of market demands and helps firm's to capitalize on these opportunities (McKelvie and Wiklund 2010: 266). International knowledge has been found to aid the identification and exploitation of opportunities in diverse geographic and product markets (Deligianni et al. 2015) and facilitate not only firm growth but also improve their competitiveness. Despite its importance, the pursuit of internationalization through exploration and exploitation is mostly overlooked in the extant literature (Child et al. 2017).

2.2 Learning and Post-entry Growth of Rapidly Internationalizing SMEs

Firms create knowledge through the acquisition, dissemination, interpretation and storage of information from their internal and external environments (Hanvanich et al. 2006; Huber 1991). Learning is an individual and organization-level process that cumulatively leads to the development of...

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