Complementary Roles of Domestic and International Networks in Sustaining Internationalization of SMEs: a Modeling Approach

Ahmed Ibrahim Karage,Mohani Abdul,Raja Nerina Raja Yusof,Devika Nadarajah

doi:10.6007/ijarbss/v9-i8/6235

Abstract

The importance of networks in internationalization has been acknowledged in literature with much emphasis on international networks. What remains unclear is the complimentary role being played by domestic and international networks in entry and sustaining international market. This paper provides an empirical understanding of the joint influence of firm’s domestic network and international network in sustaining internationalization of SMEs in Sub Sahara African countries. The study also examined the role of international entrepreneurial orientation (IEO) in mediating the relationships between domestic network, international network and internationalization of SMEs. The objectives of the study were achieved by developing hypotheses relating to the network resources in domestic and international markets and internationalization of SMEs. Using partial least square (PLS), the study analyzed data from a sample of 266 exporting SMEs in Nigeria and shows that establishing and maintaining domestic and international networks are crucial in sustaining internationalization of SMEs. Furthermore, mediation effect of IEO was significant in the relationships. The study proposes that enhancing the capacity of exporting SMEs in IEO can further increase their capacity develop and sustain their network resources both at home and in international market.

Highlights

Small and medium enterprises depend on several types of resources than larger companies in achieving strategic goals like internationalization
International network and international entrepreneurial orientation (IEO) account for 51 % variance (R2) in internationalization of SMEs
The results show that SMEs that establish and maintain cluster networks as well as international network have better chances of sustaining presence in the international market

Summary

Introduction

Small and medium enterprises depend on several types of resources than larger companies in achieving strategic goals like internationalization. SMEs can create domestic relationships engaging as brokers between firms and partners in international markets, commencing relationships on the basis of social ties (O'Gorman & Evers, 2011), family associates (Coviello, 2006), institutional and technological connections (Evers & Knight, 2008), and even relations with physically nearby firms (Fletcher, 2008). This means that SMEs can attain central status by progressively linking with firms that are trying to attain a central position. The extent of a firm internationalization is determined by the degree to which it occupies in national and foreign networks positions and the level of relevance and integration of the positions (Ratajczak-mrozek, 2014)

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