Inter-personal and inter-organizational networks in internationalization of SMEs: A bibliometric analysis and review

Bužavaitė, Monika; Korsakienė, Renata Article Inter-personal and inter-organizational networks in internationalization of SMEs: A bibliometric analysis and review Open Economics Provided in Cooperation with: De Gruyter Brill Suggested Citation: Bužavaitė, Monika; Korsakienė, Renata (2018) : Inter-personal and interorganizational networks in internationalization of SMEs: A bibliometric analysis and review, Open Economics, ISSN 2451-3458, De Gruyter, Warsaw, Vol. 1, Iss. 1, pp. 94-104, https://doi.org/10.1515/openec-2018-0003 This Version is available at: https://hdl.handle.net/10419/236583 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by-nc-nd/4.0/ Open Economics 2018; 1: 94–104 Monika Bužavaitė*, Renata Korsakienė Inter-Personal and Inter-Organizational Networks In Internationalization of SMEs: ABibliometric Analysis and Review https://doi.org/10.1515/openec-2018-0003 Received June 4, 2018; accepted July 7, 2018 Abstract: Small firms contribute to the economy by creating new vacancies and are the most common business form in the EU. However, small firms are not tended to expand internationally and only a limited number of small firms export to the countries outside the EU. The study aims to investigate inter-personal and inter-organizational networks in the international expansion of small firms. The investigation is grounded in analysis and synthesis of scientific literature. In addition, the bibliometric analysis was integrated into the scientific research. Bibliometric analysis of the papers published in 2000-2017 and obtained from Clari-vate Analytics database revealed that the significance of networking in international activities of small firms are not explored sufficiently while networking and internationalization of SMEs separately are a much more popular topic among researchers. The research results let us present insights for future investigations and implications for managers and policymakers. Keywords: internationalization, networking, inter-personal networks, inter-organizational networks, entrepreneurs, SMEs. JEL Classification: M10, M13, M16, M19. 1 Introduction Small and medium-sized enterprises (SMEs) appear to be a backbone of the EU economy. Small firms contribute to the economy by creating new vacancies and are the most common business form in the EU. Therefore, institutional support for small companies aims to ensure economic growth, innovations, lower unemployment rate and social integration in the region. However, small firms are not tended to expand internationally and only a limited number of small firms export to the countries outside the EU. Thus, the European Commission set up the policy to develop a business-friendly environment with more accessible finance and new markets, facilitating international expansion of SMEs (European Commission). New ventures experience tough competition in domestic markets with well-established multinational companies. Thus, the initiation of SMEs international expansion is triggered by limitations of national markets and new opportunities abroad. However, a small firm is not ought to start international activities in order to start competing with other companies for various resources. A well defined competitive advantage is essential for successful competition in order to attract enough customers. If competition is based on Research Article Article note: This article is a part of Topical Issue "Business and Management" edited by Viktorija Skvarciany. *Corresponding author: Monika Bužavaitė, Department of Management, Business Management Faculty, Vilnius Gediminas Technical University, Saulėtekio al. 11, LT-10223, Vilnius, Lithuania, Email: [email protected] Renata Korsakienė, Department of Management, Business Management Faculty, Vilnius Gediminas Technical University, Saulėtekio al. 11, LT-10223, Vilnius, Lithuania, Email: renata.korsak[email protected] Open Access. © 2018 Monika Bužavaitė, Renata Korsakienė, published by De Gruyter. This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivs 4.0 License. Inter-Personal and Inter-Organizational Networks In Internationalization of SMEs 95 resources as the source of competitive advantage, a firm must have very specific resources, which are not so easily accessible by the competitors. Nowadays, competitive advantages are more based on specific knowledge and technologies, which are not so easily achievable and require better understanding of the market, constant analysis of the relationships among other firms and customers. In this context arises the necessity of networks, because being a member of any local network is more important than the competitive advantage (Odlin & Bensonrea 2017). International contacts, as the main part of social networks, provide significant knowledge about foreign markets and facilitate the initiation of international expansion (Musteen et al. 2014). The scholars noticed that majority of studies were focused more on large firms, which have enough resources and important institutional support and identified inappropriate attention to smaller firms, which potentially have limited resources (Ginevičius et al. 2007; Korsakienė et al. 2015; Narooz & Child 2017). In addition, poor institutional support of SMEs internationalization disclosed that the participation in the networks appears to be even more accessible way, facilitating the internationalization process. Small firms face the following challenges during the early stages of international expansion: selection of the right form of entry mode, coping with available resources and proactive search of customers (Yener & Ergun 2014). Hence, the networks, which contribute to the profit, provide beneficial contacts and supportive suppliers help SMEs overcome the obvious weaknesses and influence the growth of the firms. The study aims to investigate inter-personal and inter-organizational networks in the international expansion of small firms. The investigation is grounded in analysis and synthesis of scientific literature. In addition, the bibliometric analysis was integrated into the research. The following chapters present literature analysis, which reveals the following concepts: networks, networking, internationalization and international entrepreneurship. The clarification of these concepts let us disclose the interrelationships between networking and international expansion. The results of bibliographic analysis, based on combinations of main keywords, were discussed. Finally, the conclusions and insights for future investigations are presented. 2 Literature review 2.1 Networks and networking in the context of SMEs The roots of the networking approach lie in a broad stream of studies, performed by the researchers at the University of Uppsala in the mid of 1970s. The scholars assumed that business firms are involved in a number of exchange relationships with other organizations and thus, each entity exerts considerable impact on each other (Håkansson & Snehota 2006). Though initial investigations considered industrial firms, other empirical researches confirmed and extended this approach to other firms. Later on, networking approach was adopted by investigators, focused on SMEs, demonstrating liability of newness and smallness and subsequently, limited financial and human resources. Thus, the studies expanded into few streams, investigating inter-personal and inter-organizational relationships of SMEs. The investigations of inter-personal relationships consider the role of owner/manager and his personal contact networks, business networks, industry and marketing networks (Gilmore et al. 2006). Thus, explanation of owner/manager’s network resides in the concept of the egocentric network, including “a set of direct, dyadic ties”, with the owner/manager at the center (Manolova et al. 2010). A stream of studies was grounded in social capital theory, which considers “interpersonal relations and the resources embedded in them” (Bai et al. 2018). The proponents of social capital theory emphasize the significance of social ties for entrepreneurial activities, leading to valuable information (Manolova et al. 2010), financial resources (Milosevic 2018) and thus, the benefits from higher quality networks. For example, the investigation of 623 small Bulgarian firms revealed that personal networks have a positive impact on export intensity (Manolova et al. 2010). Bai et al. (2018) investigated 200 Chinese firms and revealed that international social network leads to the development of international network capability. Meanwhile and Milosevic (2018) reported the significance of higher social networks for raising larger financial funds. On the other hand, some studies 96 M. Bužavaitė, R. Korsakienė disclose distortions from favoritism and especially, in the developing countries context. For instance, Charoensukmongkol (2016) in his investigation of 500 firms from Thailand found that government support strongly associated with the political network of entrepreneurs. Stel and Naude (2016) considered firm-level data from the 2009 and 2013, which let to disclose the close interrelationship of entrepreneurial success and ties to political networks. The studies of inter-organizational networks focus on networks as intangible assets of the firm. The scholars suggest how new ventures could establish the relationships with other organizations and consequently, survive in the market (e.g., Hung 2006). Inter-personal relations play a significant role in the first development stages of the new venture. Later on, inter-personal networks of owner/manager gradually transit to the inter-organizational embeddedness in the inter-organizational networks. It appears that investigations relied on strategic management literature and aimed to explain how embeddedness in the inter-organizational networks may lead to the unique resources and capabilities and finally, influence performance of the firms. For instance, investigations confirm that early engagement of new firms in inter-organizational networks leads to the higher the degree of internationalization (Manolova et al. 200). Notably, the literature on inter-organizational networks distinguishes the relational embeddedness and the structural embeddedness (Schoonjans et al. 2013). The explanation of relational embeddedness lies in the strength of ties based on the trust and closeness. On the other hand, the scholars assert that frequent interactions with same partners may lead to ‘collective inertia’ and consequently, to the lower adaptability of the firm to the external changes (Schoonjans et al. 2013). Meanwhile, structural embeddedness is explained through informational advantages gained by the firm due to the exceptional position in the network structure. In the context of small firms, the investigations revealed that SMEs are “constrained to extend the range of direct dyadic partners and may have more difficulties linking to well-connected lead firms in the network” (Wang et al. 2018). 2.2 Internationalization and international entrepreneurship The roots of internationalization theories are associated with industrial economics and could be referred to 1930s. Later on, these theories were cultivated in the 1970s and 1980s. During this period multinational companies, located in America, have initiated investments in Europe. Meanwhile, in this period SMEs, located in Europe, begun international expansion, but mainly in the adjacent regions (Axinn & Matthyssens 2002). International expansion is widely investigated in international business theory and suggests the explanations, why firms start their activities internationally and how this process is managed. International business theory highlights the step by step process, which begins with satisfying the demand of the domestic market and later on expands forward by exploring foreign markets and ultimately initiating international activities (Amdam 2009). The scholars, who focused on internationalization, directed their efforts towards the better understanding of the progressive engagement in foreign markets. These investigations were grounded on traditional internationalization theories, such as stage theory, based on factors, affecting international expansion in general (Wright et al. 2007). Meanwhile, some scholars focused on the Uppsala model and the “born global” approach (Dominguez & Mayrhofer 2015). Uppsala model mainly corresponds to the motivation to start international expansion due to the learning effects. In this case, companies deal with resources and specific knowledge gaps, which encourage them to start international activities. “Born global” approach assumes that some firms start their international activities very early, even from the establishment and thus, internationalization does not follow the traditional sequential process. Some scholars criticized the traditional internationalization theories due to inappropriate clarification why some SMEs decide to start their activities internationally. Thus, the investigations have led to the development of international entrepreneurship theory. The concept of international entrepreneurship (IE) was defined as the situation when competitive advantage of the firm is identified and accompanied with the search of new foreign markets in a constructive way. This concept is closely interrelated to international entrepreneurship theory, which considers the main aspects of entrepreneurship, linked to the international Inter-Personal and Inter-Organizational Networks In Internationalization of SMEs 97 expansion, such as selection of strategy, domestic market situation and foreign market choice (Wright et al. 2007). Some researchers described internationalization as entrepreneurial practice (Cass & Weerawardena 2012; Korsakienė et al. 2017). The explanation resides in the fact that the more environment becomes international, the better results small firm can achieve in the international expansion process. On the other hand, the entrance into new markets becomes stimulus for an entrepreneur to demonstrate leadership characteristics by setting the right strategy for further international expansion and taking ownership of this activity. Cass and Weerawardena (2012) assert that the international entrepreneurship qualities, taking into account internationalization as the main activity of entrepreneur, are: ability to enter a new market, innovativeness, risk-taking and proactiveness. The studies were expanded into examination of international entrepreneurship’s impact on the strategic position of the firm, strategic planning capabilities, readiness of international expansion and technological improvement possibilities. Glavas and Mathews (2014) assumed that even if the concepts of internationalization and international entrepreneurship are familiar and related, international entrepreneurship is another field of research, which was developed from traditional internationalization theories. Some researchers confirmed that IE can make a significant contribution to international expansion success. In addition, Zhang et al. (2016) identified IE as one of the driving factors for international expansion of SMEs. The conducted study supported the hypothesis about moderating effect of networks between IE and internationalization. SME has to expand its network, in order to increase IE effect on internationalization. 2.3 The interrelationships between networking and internationalization of SMEs The limitations of some internationalization theories have led the scholars to investigate networking approach. The studies analyzed the networks, developed by the firms and the structures of networks in foreign markets. Thus, networking appears to be interrelated to the firm’s degree of internationalization and market’s degree of internationalization (Manolova et al. 2010). Later on, the investigations tend to address internationalization success which was grounded in the firm’s relational position in the networks. The recent studies highlight the significance of network relationships during the international expansion. For instance, Crick D. and Crick J. (2014) have performed deep interviews with executives from small IT companies, aiming to evaluate the impact of decision making, managers’ experience and networks on internationalization strategies. The study revealed that experience of the executives and network relationships among the companies, which function in the same sector, affects the choice of entry mode and further international acts of small firms. Meanwhile, Haddoud et al. (2017) collected data from a survey, which investigated the firms based in the UK and operating internationally. The aim of the study was to indicate success factors, related to the networking and impacting export intensity. The following factors were selected: distribution of useful information among regional firms, perspective networks with regional firms, evaluation of networks with regional firms, distribution of useful information with international business partners, and perspective networks with international business partners and evaluation of networks with international business partners. The results revealed that networks with international business partners positively affected the export performance of small firms. Networks could be investigated as the factors, affecting the decision of small firms to operate internationally. Nisar et al. (2012) investigated and compared 146 SMEs in Norway in order better understand of what factors determine to initiate international expansion and evaluate the effect of financial, operational and managerial synergy on the choice of market entry mode. The senior managers were questioned. The results of the research confirmed that networks related to the way how small firms decide to start its international activities. Network relationships of the firms sometimes are assumed to be as a strategy for small firms, initiating international expansion. In addition, business network plays a significant role on internationalization patterns. It is possible to increase competitiveness and effectiveness of decisionmaking in the internationalization process through networks, which help small firms to cope with 98 M. Bužavaitė, R. Korsakienė limited capacities. For instance, a study carried out by Brida et al. (2015) investigated small firms, which belong to Spanish hotel chains, and confirmed that SMEs rely on networks, which help to overcome the hardships that appear when small firms initiate international activities. Meanwhile, Chetty and Stangl (2010) emphasized the benefits from networking such as risk dividing, access to new markets and technologies, commercialization speed, accumulation of complementary assets, protection of property rights, and the role networks play as avenues to external knowledge (see Fig. 1). The scholars also indicated that a variety of firms’ networks is related to its level of international activities and innovativeness. Fig. 1. Advantages of networking (Source: created by the author according to Chetty, Stangl 2010) Presutti et al. (2016) identified social capital as an important factor for receiving useful information, power and partnerships. Social capital or in other words relationships among small firms and its key customers from various countries, affect international activities development process. Hypothesis testing approved that the increased international trade is a result of improved networks that involves distant international partners. Thus, the improvement of social relationships with foreign customers could lead to better foreign business opportunities. The networks with financial institutions are also beneficial for small firms. In addition, the scholars identified that recent studies are lacking information in elucidation on how financial institutions participate in international expansion trial of small companies (Linstrad et al. 2011). The following study considered 318 small international firms based in Sweden. The scholars focused on financial institutions as necessary assistants during initiation of international activities. The partnership with financial institutions could be the important source of resources for international expansion for small firms. The findings indicated that network relationships had a significant impact on small firms’ international expansion trial, especially by providing the knowledge and other resources for the small firms’ internationalization. On the other hand, the research revealed that financial institutions were unwilling to take part in the network of small firms when international activities were initiated. Small firms rely on financial institutions only aiming to trade and broaden the networks. The studies discussed above confirmed that network relationships are beneficial for small firms during international expansion trial in many ways. Firstly, it was noticed that the quality of networks and the gained position in networks is related to international expansion success, which can be measured as export intensity. In addition, networks are useful and helpful for small companies during international expansion by increasing competitiveness and effectiveness of decision-making, overcoming various difficulties. Networks also let small firms to obtain useful information, gain more power and a wider range of partners. The partnerships with financial institutions were also indicated as beneficial by passing the knowledge and providing other resources for small firms. Inter-Personal and Inter-Organizational Networks In Internationalization of SMEs 99 3 Method The bibliometric analysis was selected to systematically review the current literature on networking and internationalization in the context of small firms. Clarivate Analytics database was used for the purpose to prepare data file with authors, titles, keywords and abstracts of the articles for the further investigation and bibexcel software was used for the actual bibliometric analysis. Clarivate Analytics database was selected due to increasing popularity and significance. The literature analysis, presented above, let us select the main keywords. Firstly, the keywords “network*” and “social capital” were indicated as similar concepts, which sum up inter-personal and inter-organizational relationships. Secondly, the keyword “skills or competences” was chosen due to the reference to international entrepreneurship theory, according to which skills of entrepreneur are especially significant in developing new networks and internationalizing new ventures. Therefore, the keyword “skills and competences” was combined with other keywords - “network*” and “internationalization” for the compound search. The main keywords were identified and the final keywords set consisted of four main keywords: “network*”, “internationalization”, “social capital”, “skills or competences”, “SMEs”. It was taken into account that “network” could also be expressed as “networks” or “networking”. Therefore star symbol was used at the end of the keyword “network” in order to expand search results. Skills and competences are interrelated definitions and thus, in the papers could appear one instead of another. Accordingly, in the search field of the database these two keywords were used with the operator “OR”, in order to increase the amount of search results. Previous keywords testing suggested that it is essential to apply the constant keyword “SMEs” in order to exclude articles, focused on multinational companies (MNC) and perform more accurate research. Afterwards, other search criteria were determined. It was considered to use only papers for the research (proceedings papers, reviews, meeting abstracts, editorial materials were excluded) and the search was performed by topic because titles can be created without indicated keywords. In addition, the time span of the papers was established from 2000 to the most recent 2017 (the papers published in 2018 were excluded because there is no data for the whole year and it is impossible to compare with previous years). After transferring collected data from Clarivate Analytics database to the software bibexcel, the duplicates of the papers were eliminated. 4 Results and discussion The previously indicated keywords were grouped into combinations and used for the search in Clarivate Analytics database. Table 1 provides the search results. It appears that combinations of keywords „Social capital AND Internationalization AND SMEs“ have led to the lowest number of articles and other scientific papers. Meanwhile, the combination „Social capital AND Internationalization AND SMEs“ is slightly different. The other two combinations resulted in a high number of scientific works. In conclusion, networks and internationalization separately are widely investigated by scholars. However, the interrelationships between social capital or networks and internationalization are not explored sufficiently and could be identified as a research gap. Table 1. The search results of keywords combinations in period 2000-2017 (Source: created by authors) Keywords for the search Constant keyword All Only articles Social capital AND internationalization AND SMEs 35 24 Network* AND Internationalization AND SMEs 212 160 Network* AND Skills OR Competences AND SMEs 90987 68224 Internationalization AND Skills OR Competences AND SMEs 91013 68166 Total 182247 136574 100 M. Bužavaitė, R. Korsakienė The following figures (see Fig. 2-5) illustrate the number of articles published in 2000-2017. The keywords’ combination “Social capital AND internationalization AND SMEs“ did not reveal a consistent trend during the considered period and the number of papers remains low (see Fig. 2). Also, this combination of keywords was the most ineffective compared to other combinations used. The reason behind it could be the higher interest of scholars in networks than in social capital as the factor of international expansion success because it is the more compatible concept in terms of international expansion’s investigation. Fig. 2. The number of articles resulted by Social capital AND internationalization AND SMEs keywords in 2000-2017 (Source: created by authors) Notably, the keywords combination “Network* AND Internationalization AND SMEs“ also do not demonstrate sustainable trend during the investigated period and the number of articles even decreased in the last year (see Fig. 3). Nevertheless, the growth in the number of articles is observed from 2013 and reaches its pick in 2016. The increased interest of researchers in the networks, as an important factor in the international expansion of small firms, could be associated with situation in the institutional business environment. In addition, a constant attitude of the European Commission to SMEs as the main contributors to economic growth, job places creation and social integration, played an important role. Several instruments, facilitating internationalization and assisting the development of network relationships of small firms, were introduced. Consequently, more small firms became more engaged in international activities and thus, attracted the attention of scholars. The other reason, why the scholars got more interested in the topic of networking and international expansion of small firms, can be explained by limitations of stage models, presented in internationalization literature. Fig. 3. The number of articles resulted by Network* AND Internationalization AND SMEs keywords in 2000-2017 (Source: created by authors) Inter-Personal and Inter-Organizational Networks In Internationalization of SMEs 101 The trends of keywords combination “Network*AND Skills OR Competences AND SMEs“ and „Internationalization AND Skills OR Competences AND SMEs“ are similar. In the Fig. 4 and Fig. 5 can be seen, that the number of articles is used to grow every year, only in 2014 is noticeable stagnation, when the number of articles was similar to the previous year and the growth rate was not high. The increase in number of articles, considering networking and skills or competences in the international expansion of small firms could be related to international entrepreneurship theory, which emphasizes the proactive position of executive during international expansion. Therefore, skills and competences of entrepreneur that include abilities to form interpersonal and inter-organizational network relationships, international experience and mindset obtained higher importance. Fig. 4. The amount of articles resulted by Network*AND Skills OR Competences AND SMEs keywords during 2000-2017 (Source: created by authors) Fig. 5. The amount of articles resulted by Internationalization AND Skills OR Competences AND SMEs keywords during 20002017 (Source: created by authors) The graphical analysis based on number of papers’ dynamics in 2000-2017, considering different combination of keywords, used for the articles’ search showed increasing interest of researchers in networking and internationalization of small firms, however, the importance of social capital and networks in international expansion trial of small firms is still not enough investigated topic. During the investigated period, the scholars were more focused on networks and internationalization of small firms as two separate fields for researches.