Lasse Torkkeli

Network competence in Finnish SMEs: implications for growth

Purpose – The purpose of this paper is to examine how network competence is related to the growth of domestic and international SMEs originating from the Nordic region. Business networks have been found to drive internationalization of SMEs in the Nordic context, but the impact of network-related organizational competencies on them has not been considered. Design/methodology/approach – The authors apply regression analysis on a sample of 298 Finnish SMEs across five industry sectors, gathered via an online survey in 2008, and with the data having been updated for its financial indicators up to 2010. Findings – The authors find that cross-relational network competence is a significant predictor of growth in internationally operating SMEs. This result is robust across measures among the firms. In comparison, the network competence of domestically operating SMEs is not related to their growth, and relationship-specific competence does not influence growth. Research limitations/implications – The study does n...

Service innovation and internationalization in SMEs: Implications for growth and performance

We investigate the relationship between the management of innovations and internationalization among small- and medium-sized enterprises (SMEs). The literature has yielded mixed results on how innovation impacts internationalization and performance of SMEs, while simultaneously neglecting the role of service innovations (SI), in particular. Thus, using a sample of 104 Finnish SMEs, we examine how engaging in SI impacts their growth, international performance and international expansion. We find that engaging in SI has a positive relationship with international performance, but not with the growth or degree of internationalization (DOI) among the companies. We then discuss the implications on innovation management and corporate strategy.

Profitable SME internationalisation: the influence of cross-relational and relationship-specific network competence

Small- and medium-sized enterprises (SMEs) often internationalise to enhance their long-term survival and profitability. Their abilities to develop business network relationships with supply chain and other business partners have also been found to have a beneficial effect on their international success. However, the influence of such network competence on their long-term profitability has received less attention. The aim of this study is to do so, by examining how the network competence of SMEs influences their internationalisation propensity and subsequent profitability. Using a sample of 298 Finnish SMEs across five industries, the results indicate that relationship-specific network competence is associated with increased likelihood of first foreign market entry, whereas cross-relational network competence is positively related to increased profitability among internationalised SMEs. Thus, internationalising SMEs benefit from both types of network competence, but their importance depends on the phase of the internationalisation process and on the strategic goals of the firm.

The development of network competence in an internationalized SME

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.

Chapter 5 The Effect of Network Competence and Environmental Hostility on the Propensity of SMEs to Internationalise

Purpose – The role that network competence, environmental hostility and knowledge intensiveness of the industry have on the propensity of small- and medium-sized enterprises (SMEs) to internationalise is examined. Design/methodology/approach – Hypotheses are developed, based on earlier literature on the subject. Subsequently, binary logistic regression modelling using SPSS software is applied to test the hypotheses on a sample of 224 Finnish SMEs representing five industries, two of which are characterised by knowledge intensiveness and three of which are from less knowledge-intensive ones. Findings – The propensity of SMEs to internationalise depends on both their level of network competence and their lack of perceived environmental hostility. Knowledge intensiveness of the industry is found to moderate the effect that network competence has on the internationalisation propensity. Research limitations/implications – The present study indicates that possessing higher levels of network competence helps domestic SMEs in their efforts to turn international, and that its beneficial effect is especially important for small firms in industries characterised by high knowledge intensity. Possible limitations of the study are the small cultural context and inclusion of firms from only five industries. Originality/value – This study is the first linking measurable network competence to internationalisation decisions of SMEs, while also including environmental and industry considerations. It also provides further evidence for the importance of networks in SME internationalisation theory, but indicates that it is not only the business networks themselves but also the competence in developing and maintaining those networks that help SMEs internationalise.

The Rise and Fall of an International New Venture: The Case of an Online Medical Tourism Platform

Thomas moves to Colombia. He teams up with Daniel to create an Internet platform on which hospitals, clinics, and doctors from Colombia can offer their services to patients from the US. The promotion of medical tourism is a priority for the local government. Thomas decides to outsource the design and programming of Flyclinic’s Internet platform. This proves to be challenging. The initial launch of the website is delayed by eight months, and making hospitals and clinics sign the contract for use of the platform proves to be difficult. This causes Thomas to rethink the business model. Thomas questions whether the health-care providers in Colombia are interested in medical tourism at all. Flyclinic eventually enters into what Thomas calls a “starvation mode.”

CSR-Driven Entrepreneurial Internationalization: Evidence of Firm-Specific Advantages in International Performance of SMEs

This study examines an emerging yet somewhat neglected theme in international and global marketing literature, namely, the role of corporate social responsibility (CSR) and market-sensing capability in international enterprises. Specifically, we illustrate how CSR and market-sensing capability impact international performance in the context of small- and medium-sized enterprises (SMEs). The results from a sample of 85 internationalized Finnish SMEs indicate that social responsibility serves as a mediator of market-sensing capability on international performance. Moreover, market-sensing capability along with social responsibility also has a positive direct effect on an SME’s international performance. Thus, the study links global marketing, strategic management, and sustainability literatures to explain the emerging paradigm of sustainable international entrepreneurship.

Chapter 1: A Global Mindset – Still a Prerequisite for Successful SME Internationalisation?

Abstract The concept of global mindset was introduced more than a decade ago as a prerequisite for successful internationalisation of small- and medium-sized enterprises (SMEs). However, the pace of global integration and globalisation has accelerated, and complexity has increased. Therefore, the authors ask: To what extent is global mindset still a critical driver for successful international expansion of SMEs? We are particularly interested in learning how global mindset is reflected in the decision making of internationalising SMEs in Finland. To answer this question, we test four propositions which concern the relationship between global mindset, decision-making logic and SME performance. Our empirical study is based on a cross-sectional sample of Finnish SMEs, and the authors find that global mindset seems to be linked to both effectual decision-making logic and improved international performance. On the other hand, in our data set effectual decision making and SME performance were not linked; thus, global mindset predicts international rather than overall performance of the Finnish SMEs. Overall, this study confirms the continued relevance of the global mindset concept. Furthermore, it indicates the connection between global mindset and entrepreneurial decision making and that their joint effect is relevant when explaining entrepreneurial internationalisation.

The entrepreneurial ecosystem and born globals: the Estonian context

The purpose of this study is to develop a framework of the elements of the entrepreneurial ecosystem in the context of born global start-ups. The study also applies this framework to uncover the ecosystem elements that impact start-ups during their initial phases of discovery and validation.,The authors used an online survey questionnaire sent out to several Estonian start-ups. Based on the responses, a dataset was developed and analysed using STATA and t-test methodology.,The analysis resulted in the identification of seven systemic ecosystem elements as the main factors impacting the launch and ten elements impacting the growth of born global start-ups. The systemic elements that comprise the ecosystem’s strengths and weaknesses were also identified.,The cross-sectional nature of the survey method and the single-country context are noted as limitations of the study and offer future research potential for longitudinal settings, for mixed method studies and for comparative country data.,The study suggests that start-ups should function in a more collective manner to create platforms, promote one another’s products and services where possible and launch collective initiatives to enhance their visibility in the global context. Born globals should engage with their local entrepreneurial ecosystem, while remaining aware of its relative strengths and weaknesses for supporting internationalisation.,Although the local ecosystem involves many stakeholders, this study helps identify key stakeholders that should be focused on by the government. Doing so will help create an increasingly comprehensive ecosystem at the national level – one that functions efficiently in supporting growth-seeking enterprises such as born globals.,This study combines the two research streams of the entrepreneurial ecosystem and born globals by directly connecting them with systemic elements. This study is, to our knowledge, the first to combine the two, thus making an added contribution by highlighting macro- and micro-viewpoints, with the former lacking in research on born globals and the latter in research on ecosystems. Thus, the present study helps in bringing venture creation and local ecosystem development research closer to each other.

Subsidiary’s Network Competence: Finnish Multinational Companies in Russia

Abstract Multinational companies tend to have resources and be capable of establishing subsidiaries across national borders, yet successful foreign operations also require that the established subsidiaries are able to become locally embedded in host-country networks. This study contributes to the international business research by investigating how and when the subsidiary’s ability to develop and manage their local network relationships developed as subsidiaries are established abroad. The empirical part is based on interviews from two Finnish companies operating internationally and in Russia. The findings provide insight into the network competence’s development process in the Russian business environment and in international business.