Internationalization Strategies,Networking and Functional Discretion

Abstract

International networking seems to be a very useful concept especially for internationalization of small and medium-sized companies (SMEs) in (small) catching-up economies, since it is possible to overcome some of the problems of knowledge and technology as well as capital accumulation. However, an important set of questions pertains to the position of a partner within a network of relationships. I will argue that a functional discretion or a “freedom of business functions” and their development, especially the marketing and R&D functions, should be a strategic goal for a company striving to be well positioned in a network.

For introductory purposes three models describing internationalization strategies of firms are distinguished: the theory of internalization, the model of the internationalization process, and the network approach to internationalization.¹ The latter describes industrial markets as networks of relationships between companies. Then I describe the nature of cooperation and competition in networks, discuss problems and management of networks and introduce the concept of the positioning of companies in networks. Based on internationalization and networking concepts I develop a “3-Phase Internationalization” model, which helps to develop a pattern of thinking about the functional discretion of a company in various stages of the internationalization process. In effect, this model may be seen as a means of integrating the main theories of internationalization. In the last part of the article we present two Slovenian cases of networks in internationalization as illustrations of the theoretical discussion. I conclude that functional discretion may well be a development issue for states or regional economies as well as a critical strategic issue for companies.