The Importance of Locally Embedded Personal Relationships for SME Internationalisation Processes – from Opportunity Recognition to Company Growth

Milena Ratajczak-Mrozek

doi:10.7341/20141034

Abstract

The purpose of the paper is to present the importance of locally embedded personal relationships and individuals’ networks for the rise of small and medium enterprises (SMEs)’ opportunities in the internationalisation process (especially the market entry phase) as well as their international operations and growth. Above all, the aim of the article is to answer the question what is influencing the actual impact of these resulting opportunities on internationalisation and growth. This paper adopts both a conceptual and empirical approach to the problem based upon a critical review of pertinent literature. Two case studies of companies from industries representing different levels of technological advancement, that is the furniture industry and IT industry, are presented. The theoretical and empirical analysis presented in the article points to the fact that relationships simultaneously facilitate opportunity recognition and themselves constitute such an opportunity. The analysis carried out as part of the case study proves that main factors determining the rise of the opportunity based on locally embedded personal relationships are trust and mutual understanding, in this way emphasising the importance of relational embeddedness. At the same time the realisation of these opportunities and therefore their impact on the internationalisation process and a company’s growth requires additional social factors (an entrepreneurial attitude) as well as economic factors (such as quality and competitive prices).

Highlights

Companies’ continuing search of new growth possibilities means, in many cases, the necessity to internationalise their activities
The locally embedded relationships with other entities appear to be important. In this way we may say that the internationalisation process can be explained by the recognition of opportunities that in turn are facilitated by locally embedded personal relationships and the individual’s network
The two case studies, they apply to different industries point to many similarities in terms of embarking on an internationalisation process through small and medium enterprises (SMEs)’ as well as their growth

Summary

Introduction

Companies’ continuing search of new growth possibilities means, in many cases, the necessity to internationalise their activities. For small and medium companies, an important factor contributing to internationalisation and accompanying growth as well as a solution for the above mentioned hindrances may be the willingness and openness of these SMEs, (their owners and/or managers), to make the most of an opportunity which presents itself This is related to a more ad hoc internationalisation (ad hoc compared to the outlined strategic approach associated with planning of the steps of the process). The creation of such international opportunities may be facilitated by personal relationships, analysed in the literature as individuals’ networks or social networks. In this way we may say that the internationalisation process can be explained by the recognition of opportunities that in turn are facilitated by locally embedded personal relationships and the individual’s network

Objectives

Findings

Discussion

Conclusion