International Network Searching, Learning, and Explorative Capability: Small and Medium-sized Enterprises from China.

VerfasserXiao, Shufeng Simon

1 Introduction

A key question in international business centers the reasons for firms to expand internationally. Due to this, an extensive body of internationalization literature has explored the factors that drive outward foreign direct investment (FDI) of multinational enterprises (MNEs) (Dunning 1988; Hymer 1960; Rugman 2009). For example, Dunning's eclectic paradigm highlights the central role of possessing firmspecific ownership advantages and exploiting such advantages in driving outward FDI behaviors of MNEs; this paradigm is probably the most influential theory for explaining the reasons MNEs engage in outward FDI (Rugman et al. 2011). These assumptions are applicable to conventional MNEs from advanced economies, which generally develop firm-specific competitive advantages that they will soon exploit and transfer abroad through outward FDI. Thus, foreign investment allows MNEs from developed economies to internalize their ownership advantages.

However, emerging market firms are less likely to possess strong home-based competitive advantages and capabilities than conventional developed economy MNEs when going international (Jormanainen and Koveshnikov 2012; Wang et al. 2014; Yamakawa et al. 2008). Emerging market firms, by definition, commonly experience the liability of emergingness and newness; these firms suffer from latecomer status and thus tend to lack competitive resources and proprietary advantages when expanding internationally (He et al. 2019; Luo and Tung 2007; Mathews 2006). Such disadvantages may hinder these emerging market firms from exploiting home-based, firm-specific competitive advantages abroad through international expansion. In this regard, recent theoretical developments propose that international expansion can enable emerging market firms to explore competitive advantages and overcome their home country-based competitive disadvantages (Bartlett and Ghoshal 2000; Luo and Tung 2007).

Several studies have viewed the international expansion of emerging market firms as a springboard for exploring 'ownership advantages' and strategic assets abroad; these strategic assets are required to overcome their latecomer disadvantages and allow these emerging market firms to compete effectively against their competitors in international markets (e.g., Luo and Tung 2007; Wang et al. 2014). For example, according to Luo and Tung (2007), emerging market firms tend to view outward FDI as a springboard to learn and obtain assets required to overcome their latecomer disadvantages in a new global market landscape. This is especially true for emerging market small and medium-sized enterprises (ESMEs), which as an organizational form typically face additional institutional and resource disadvantages, compared to large-sized emerging market firms (Aulakh et al. 2000; Peng et al. 2004; Uhlenbruck et al. 2003) or conventional SMEs from developed markets (Brouthers et al. 2009; Lu and Beamish 2001). This typical disadvantageous position of ESMEs may impel them to actively seek and obtain required resources from the external networks. As a result, external network linkages may be especially important for smaller emerging market firms to access to information and resources not available internally by developing a strong explorative capability (Filatotchew et al. 2009; Lu et al. 2010; Senik et al. 2011). In the present study, we contend that the homegrown liability of emergingness provides ESMEs with a strong motivation for exploring new international competitive advantages, such as technology, knowledge, and skills, through outward FDI. We define international explorative competency as ESMEs' capacity to develop completely new technology, skills, and capabilities through international learning in the process of international expansion (cf., Liu and Deng 2014). Thus, we ask the following research questions: What drives the development of international explorative capability? To what extent does international explorative capability contribute to ESMEs' international innovation performance?

Although studies exploring international explorative capabilities are in the limelight, it is hard to find extant empirics attempting answer the abovementioned questions. This situation is partially due to, theoretically, the key assumption of existing established theory is that international expansion serves as a mechanism for conventional MNEs to exploit the stock of their existing firm-specific advantages, such as technological resources, knowledge, or management expertise (Dunning 1988). However, this assumption may not hold for the ESMEs whose international expansion is largely motivated by their aim to explore resources and assets that are necessary and valuable for overcoming their liability of emergingness (Madhok and Keyhani 2012) and to overtake their global rivals originating from advanced economies (Mathews 2002). Thus, conventional views on firm growth and international expansion strategy and the antecedents of such a strategy are difficult to apply to emerging market context. In the present study, on the basis of recent emerging market firm perspectives on international expansion (e.g., Luo and Tung 2007; Mathews 2002, 2006) and considering the characteristics of ESMEs, we investigate the effects of two sets of factors, namely, international learning intent and international network search.

The development of international explorative capability for ESMEs requires a strong learning intent on new knowledge through international expansion (Volberda et al. 2010). This reasoning suggests that international explorative capability cannot be developed by internationalizing ESMEs unless they display a high level of international learning intent. As the lack of institutional support and valuable resources represents one of the primarily factors driving ESMEs' learning and international expansion (Khan et al. 2016; Yamakawa et al. 2008), they should have the desire to learn through international expansion and are willing to create learning opportunities by developing network linkages with global partners. As such, we conduct intensive research on international network search and opportunity recognition phase by searching worldwide networks with global partners to consider the influence of different types of international network search strategies on the opportunity and possibility of ESMEs to explore valuable knowledge and skills from such external networks. In particular, we develop the concepts of breadth and depth as two dimensions of international network searching. As such, the present study links the breadth and depth of international network searching to developing international explorative capability, thereby exploring the influence of differences in network search among ESMEs on their explorative capability abroad in their internationalization and innovation outcomes.

Given that ESMEs are international exploration-orientated when expanding abroad, the conceptual model captures antecedents to these firms' international explorative capabilities (i.e., learning intent, breadth of international network, and depth of international network). Furthermore, the model hypothesizes that developing a strong international explorative capability to acquire new knowledge, skills, and expertise through international expansion allows ESMEs to achieve superior international innovation performance. Thus, our validated model demonstrates that the international explorative capability and innovation of ESMEs is facilitated by their learning process and interactions with external knowledge searching and acquisition. In other words, it is critically important internationalizing ESMEs to make an attempt to develop a broad scope of collaborative international network per se. A high degree of international explorative capability has allowed ESMEs to access additional valuable knowledge and skills possessed by their established global players, which are necessary and valuable for a successful innovation when they expand internationally.

2 Conceptual Background and Hypotheses

A knowledge-based view claims that knowledge represents a strategically important firm resource, and thus regards a firm as a stock of knowledge that helps establish the firm's competitive advantage (Arend et al. 2014; Grant 1996). According to the knowledge-based view, the heterogeneous knowledge bases and capabilities among firms explain the performance differences among them (DeCarolis and Deeds 1999). Recent research has suggested that knowledge acquired externally by firms through external learning from their external linkages or networks represent an important source of such opportunities (Laursen and Salter 2006; Lew and Sinkovics 2013; Nambisan and Swahney 2007). In addition, organizational learning literature supports the idea that acquiring external knowledge from an external source through effective external learning process helps firms learn and apply new technology and knowledge that are unavailable to them (e.g., Garriga et al. 2013; Hutzschenreuter et al. 2007; Laursen and Salter 2006). These studies have suggested that firms can acquire diverse information and knowledge resources by networking with their global partners who provide learning opportunities (Inkpen and Tsang 2005; Park and Ghauri 2011). The firm can learn new knowledge and valuable resources, which may not be created through an internal learning process (Cohen and Levinthal 1990; Jimenez and de la Fuente 2016; Liu 2012).

Numerous studies have explored the benefits of international partner networks to the innovation performance of firms; however, these studies have focused primarily on understanding some of pure resource-based explanations that promote networking development (Zhang and Wu 2017). Nevertheless, the differences in such beneficial effects of specific external networks are also limited (Laursen and Salter 2006; Leiponen and Helfat 2010). Our knowledge on the role...

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