New product development in foreign customer relationships: a study of international SMEs

Sara Melén Hånell,Emilia Rovira Nordman,Daniel Tolstoy

doi:10.1080/08985626.2017.1336257

Abstract

This study identifies a gap in research concerning how small and medium-sized enterprises (SMEs) can benefit from pursuing locally (rather than globally) oriented internationalization strategies. Becoming overly dependent on one single foreign market could potentially reduce the inflow and diversity of new knowledge that can serve as input for new product development. This study discusses how this risk can be minimized. In this endeavour we create a theoretical model that investigates how the local sales concentration and relationship-specific commitment of SMEs relates to new product development. To do this we draw on the behavioural internationalization process framework. The theoretical model is tested on an effective sample of 188 Swedish SMEs. The results show that relationship-specific commitment mediates the effect of local sales concentration on new product development. The implication is that investments which enable collaboration in important business relationships are crucial requisites for keeping firms innovative and in pace with market fluctuations. The findings thus contribute to international business literature by showing that a local market scope of operations combined with a relationship orientation are beneficial for new product development in international SMEs.

Highlights

In international business research, there is a lack of consensus regarding whether firms should follow local market strategies (Buckley and Casson 1976; Hennart 1982; Rugman 2005) or develop their businesses on a global scope, sometimes already from the start (Knight and Cavusgil 1996, 2004)
Becoming overly dependent on one single foreign market could potentially reduce the inflow and diversity of new knowledge that can serve as input for new product development
We can discern a negative effect of time in international markets on new product development, which suggests that firms that have spent a relatively longer time abroad are likely to stagnate in this respect eventually

Summary

Introduction

There is a lack of consensus regarding whether firms should follow local market strategies (Buckley and Casson 1976; Hennart 1982; Rugman 2005) or develop their businesses on a global scope, sometimes already from the start (Knight and Cavusgil 1996, 2004). Whereas previous studies about the benefits of locally oriented internationalization strategies have predominantly focused on large firms – namely multinational enterprises (MNEs) (e.g. De Martino, McHardy Reid, and Zygliodopoulos 2006; Gellynck, Vermeire, and Viaene 2007; Semlinger 2008) – internationalization orientations with more global scopes have been reported among small and medium-sized enterprises (SMEs) in the international entrepreneurship literature (Knight and Cavusgil 2004; Loane and Bell 2006). A ‘local market’ is in this study regarded as a foreign country market in a specific region of the world, in which the investigated sellers and locally situated key customers can interact and exchange products and/or services with each other

Objectives

Results

Conclusion