International new ventures and social networks: Advantage or liability?

Abstract

Summary This research seeks to expand our knowledge of the role of networks, particularly social networks, in the rapid internationalisation process. To deepen our understanding of this process, we review the network approach on internationalisation in light of the social network perspective and recently published empirical findings on the internationalisation of International New Ventures (INVs). We also analyse the internationalisation process of ten Information and Communication Technology (ICT) case companies from Finland. The findings in this study reveal, in line with the network theory of internationalisation that the case firms gained access to and mobilised resources through established long-term relationships [Johanson, J. and Mattsson, L. G. (1987) Interorganizational relations in industrial systems: A network approach compared with the transaction-cost approach. International Studies of Management & Organization, 17(1), 34–48, Johanson, J. and Mattsson, L. G. (1988) Internationalization in industrial systems – A network approach. In Strategies in global competition, (eds) N. Hood, and J. E. Vahlne, Croom Helm, London], but the relationships were those of the founders, not those of the firms. The relationships are characterised by a high level of trust and commitment, and particularly in the early phases of internationalisation, the INVs focus on exploiting the existing ties instead of adding new ties, a path dependent process. We find that it is useful to divide the internationalisation process into two phases: early internationalisation, which is aimed at gaining access to global business; and subsequent international/global growth. The empirical evidence shows that those firms who rely on dyadic relationships are able to complete the first phase successfully. The dyadic relationships, however, become a limitation during the phase of international growth. Only those firms that manage to complete the transition from dyadic relationships to multilateral network relationships achieve significant international growth.