The development of network competence in an internationalized SME

Abstract

There is ample evidence suggesting that the business networks of small- and medium-sized enterprises (SMEs) drive the internationalization process. Network competence, in other words the ability of SMEs to develop and manage key business relationships with their suppliers, customers and other key actors, tends to increase the propensity to expand beyond domestic markets. However, thus far there has been no attempt to find out whether network competence is something SMEs develop before entering foreign markets, or if they only have the need and the resources to do so when operating internationally. The aim of this study is to find this out by examining the development of network competence in a rapidly internationalizing Finnish SME during the internationalization process. Methodologically it is thus a longitudinal case study. We investigate the phenomenon processually in the distinct phases of internationalization, separated by critical incidents throughout.

The results indicate that it is only after entering a number of foreign markets that such a firm has the resources and the organizational structure to develop substantial network competence. We also interpret this to imply that different kinds of network competence may be needed during the early phases of the process, as business networks are being developed. We believe this finding makes an additional contribution to the literature, given that the extant measures and research on internationalization and business networking tend to discount these differences, particularly when it comes to early-phase network competence.