International opportunity networks
Introduction
Opportunity seeking has emerged over the last decades as the dominant key assumption in internationalization theories. For instance, both Johanson and Vahlne (2009) and Oviatt and McDougall, 1994, Oviatt and McDougall, 2005 highlight identification of opportunities as driving factors in firm internationalization. Meanwhile, these seminal papers share the same conceptual idea, namely that a firm's network determines the acquisition of knowledge and capabilities, which, in turn, is assumed to influence how firms develop international opportunities. Over the last 20 years, network theory has emerged to explain internationalization (cf. Johanson & Vahlne, 2009), but despite the growing body of empirical studies on either networks or opportunities in firm internationalization, we contend that three research gaps remain.
First, with few exceptions (e.g. Coviello, 2006), there is a lack of studies on network structures and their impact on internationalization (see the literature review in Hohenthal, Johanson, & Johanson, 2014). The majority of studies either take the network as given, without analyzing its configuration and structure, and study how trust and knowledge are developed, or try to understand processes unfolding in the network but are missing discussions of the network's structure. There are some studies on network position and outsidership (e.g. Almodovar & Rugman, 2015), which are also rare. It becomes apparent that the literature has been silent on how the firm's specific network structure influences development of networking capabilities and opportunities. This is a critical gap, as these are concepts that have attracted extensive attention from business and management scholars over the last decade (see seminal articles by Burt, 1992a, Shane and Venkataraman, 2000, Teece et al., 1997) but have not yet been combined in a study on internationalization.
Second, studies on opportunities and internationalization have mostly been in the form of anecdotal evidence and case studies. Although the concept of opportunity is well-represented in contemporary international entrepreneurship literature (Mainela, Puhakka, & Servais, 2014), most extant knowledge comes from conceptual (Hohenthal, Johanson, & Johanson, 2003) or qualitative research (Chandra et al., 2012, Muzychenko and Liesch, 2015). The few existing studies on international opportunity have produced rich stories, new insights, and a platform from which to conceptualize, but the literature says little about causalities and does not generalize about how opportunities are identified.
Third, several studies (e.g., Sarasvathy, Kumar, York, & Bhagavatula, 2014) argue that identifying opportunities is a driving force in internationalization, and some studies observe and conceptualize the role of networks in identifying opportunity in firm internationalization (Blankenburg Holm et al., 2015, Galkina and Chetty, 2015, Kontinen and Ojala, 2011, Vasilchenko and Morrish, 2011, Zaefarian et al., 2016). But we lack systematic quantitative research combining the study of networks and opportunities. This lack is especially felt in the study of how firms develop capabilities and knowledge, which traditionally has been treated as the main driver in the internationalization process (Johanson and Vahlne, 2009, Sarasvathy et al., 2014).
Accordingly, we address these gaps by developing a structural model, containing three hypotheses, where the network structure is proposed to influence the firm's capabilities to act in international networks, which, in turn, exposes the firm to opportunities mediated by the network. We test the model on a sample of 200 Chinese firms. Network-mediated opportunity is a critical concept, as it captures the reception of knowledge about new business and technological opportunities from the network. It does not reflect the extent to which the firm cooperates and interacts with other firms, nor what strategy it pursues, but it does reflect the knowledge and information a firm receives either from its interactions with other firms or from its exposure to the network more generally. In addition, we argue that by having networking capabilities, which are based on experience from acting in international networks, the firm is likely to be more exposed to opportunities mediated by the network. Finally, we contend that networking capability is influenced by the firm's international network structure. The network structure is divided into two concepts, where relational embeddedness captures the quality of the firm's direct relationships, while network closure reflects the configuration of the network beyond the direct relationships. Based on this conceptual reasoning and the examined model, this study makes the following contributions to the network literature on internationalization.
First, as many studies view opportunity seeking as the key assumption when building internationalization (Johanson and Vahlne, 2009, Oviatt and McDougall, 1994), identifying opportunities is a prerequisite for a firm's continued growth and expansion. A firm unable to identify international opportunities will have difficulty growing. Our study develops a deeper understanding of how firms identify international opportunity in networks, where networking capabilities is a critical variable, leading to network-mediated opportunity in the network (Möller, 2006, Möller and Törrönen, 2003, Ritter and Gemünden, 2003, Ritter and Gemünden, 2004).
Second, we address the impact of network structures on internationalization, which has seldom been done before, and we link two structural characteristics of networks – namely network closure and relational embeddedness – to networking capabilities. As most firms are part of business networks, international growth tends to take place in this context. Several studies demonstrate that the network is a mechanism for the acquisition of knowledge (Evers and Knight, 2008, Loane and Bell, 2006), which is not only important for existing relationships, but also critical for further international expansion (Blomstermo et al., 2004, Ellis, 2000, Hohenthal et al., 2014). This study takes an additional step and provides knowledge about how different networks influence capability development. We anchor the theoretical framework in a combination of the notion of opportunity in the entrepreneurship literature and the network literature, particularly the studies where internationalization has been explained by arguing that relationship and network are key concepts. In line with Johanson and Mattsson (1988), we suggest that networks do not follow the borders of country markets, but are international in nature.
We begin by presenting the theoretical foundation. We review how the literature has approached the international opportunity concept and how opportunities are mediated in the network. The subsequent section presents how the networks have been analyzed in the internationalization literature, and after this we discuss network structure. The following section goes through the building blocks of the structural model, which consists of three hypotheses explaining network-mediated opportunity in international networks. This is followed by a section on methods, and then we present and discuss the findings. Finally, we present implications for theory and practice, identify promising research areas for the future, and discuss the limitations of the study.
Section snippets
International opportunity
Over the last few decades, a shift has taken place in the approach to firm internationalization. The traditional assumption, manifested both in the Uppsala school and internalization theory, is that risk and uncertainty hamper further internationalization, and a firm will only make additional commitments to foreign markets after those risks and uncertainties have been reduced (Johanson & Vahlne, 1977). However, subsequent research instead observed that firms tend to be resistant to uncertainty
Network closure and networking capability
Network closure is a concept that captures the interconnected relationships surrounding the firm, that is, it goes beyond the firm's direct relationships with customers and suppliers. A closed network tends to produce redundant information, as the firm acquires the same information from several relationships, which results in, first, little new information flowing through the network, and second, information overlap, as firms in the network to some extent have the same information (Noordhoff et
Method
To test our hypotheses, we conducted a survey in China from October 2013 to January 2014. China is a suitable empirical context and has been widely used in extant studies of entrepreneurial firms from emerging markets. We focus on an entire economic region that is a composite of multiple cities and business parks. This economic zone, the Pearl River Delta Economic Zone (PRDE), is one of the most developed regions in China (with a population of 56 million and a GDP per capita of USD 17,260 in
Model on network-mediated opportunity in international networks
The main purpose of this study was to test the extent to which international networks expose the firm for new opportunities, and whether this relationship is mediated by the firm's networking capabilities. This study is a complement to the literature combining network and opportunity. Several studies have applied effectuation theory as the conceptual framework, and to a large extent analyze the behavior or activities performed in the network with concepts such as search, improvisation,
Implications for practice
This study highlights several important implications relevant for managers. In the literature, redundant knowledge is often viewed as something undesirable due to its lack of novelty (see Granovetter, 1973). From a practical point of view, network-mediated opportunity reflects the extent to which the firm is exposing itself to the possibility of receiving new ideas and opportunities in the context of the firm's network. In addition, the antecedent of network-mediated opportunity is a trade-off
Limitations
This study has several limitations, which have to be taken into considerations. The sample consists of firms from a specific emerging market, China, and consists only of SMEs. Firms from other markets and of other sizes may act in other ways and the model tested may not be valid for them. For instance, firms with resources and capabilities may be less dependent on the network, as they can mobilize financial resources and use internal capabilities that are not a result of acting in networks. In
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