This article explores how social capital influences a firm to change its internationalization mode. The authors use an in-depth qualitative study to identify 36 internationalization mode changes in ten New Zealand and ten Swedish small and medium-sized enterprises. This article contributes to the internationalization mode literature by focusing on relationships and mode change. Using the network approach, the authors develop three categories of social capital and discuss their role in influencing mode change. The roles include the efficacy role, the serendipity role, and the liability role of social capital. These three roles incorporate both the positive and the negative aspects of social capital. The liability role is the most frequently observed form of social capital to influence mode change. The most frequent type of mode change is toward a high-control internationalization mode.
Get full access to this article
View all access options for this article.
References
1.
AchrolRavi S. (1997), “Changes in the Theory of Interorganizational Relations in Marketing: Toward a Network Paradigm,”Journal of the Academy of Marketing Science, 25 (1), 56–71.
2.
AndersonErin, and GatignonHubert (1986), “Modes of Foreign Entry: A Transaction Cost Analysis and Propositions,”Journal of International Business Studies, 17 (3), 1–26.
3.
AndersonErin, and WeitzBarton (1992), “The Use of Pledges to Build and Sustain Commitment in Distribution Channels,”Journal of Marketing Research, 29 (February), 18–34.
4.
AxelssonBjorn, and JohansonJan (1992), “Foreign Market Entry: The Textbook Vs. the Network View,” in Industrial Networks: A New View of Reality, AxelssonBjorn, and EastonGeoff, eds. London: Routledge, 218–34.
5.
Blankenburg HolmDesiree, ErikssonKent, and JohansonJan (1999), “Creating Value Through Mutual Commitment to Business Relationships,”Strategic Management Journal, 20 (5), 467–86.
6.
BourdieuPierre (1986), “The Forms of Capital,” in Handbook of Theory and Research for the Sociology of Education, RichardsonJ.G., ed. New York: Greenwood, 241–58.
7.
BourdieuPierre, and WacquantLoic (1992), An Invitation to Reflexive Sociology.Chicago: University of Chicago Press.
8.
BuckleyPeter J., and MartinJ. Carter (2004), “A Formal Analysis of Knowledge in Multinational Enterprises,”Journal of International Business Studies, 35 (5), 371–84.
9.
BurtRonald S. (1997), “A Note on Social Capital and Network Content,”Social Networks, 19 (4), 355–73.
10.
CalofJonathan, and BeamishPaul (1995), “Adapting to Foreign Markets: Explaining Internationalization,”International Business Review, 4 (2), 115–31.
11.
ChettySylvie, and Campbell-HuntColin (2003), “Explosive International Growth and Problems of Success Amongst Small to Medium-Sized Firms,”International Small Business Journal, 21 (1), 5–27.
12.
ChettySylvie, and Campbell-HuntColin (2004), “A Strategic Approach to Internationalization: A Traditional Versus a ‘Born-Global’ Approach,”Journal of International Marketing, 12 (1), 57–81.
13.
DuttaShantanu, and GeorgeJohn (1995), “Combining Lab Experiments and Industry Data in Transaction Cost Analysis: The Case of Competition as a Safeguard,”Journal of Law, Economics and Organization, 11 (1), 87–111.
14.
EisenhardtKathleen (1989), “Building Theories from Case Study Research,”Academy of Management Review, 14 (4), 532–50.
15.
EllisPaul (2000), “Social Ties and Foreign Market Entry,”Journal of International Business Studies, 31, (3), 443–69.
16.
ErramilliM. Krishna, and RaoC.P. (1993), “Service Firms’ International Entry-Mode Choice: A Modified Transaction-Cost Analysis Approach,”Journal of Marketing, 57 (July), 19–38.
17.
European Commission (1996), “Commission Recommendation of 3 April 1996 Concerning the Definition of Small and Medium-Sized Enterprises,”Official Journal, No. L 107.
18.
GhoshalSumantra, and MoranPeter (1996), “Bad for Practice: A Critique of the Transaction Cost Theory,”Academy of Management Review, 21 (1), 13–47.
19.
GrabherGernot (1993), “Rediscovering the Social in the Economics of Interfirm Relationships,” in The Embedded Firm: On the Socioeconomics of Industrial Networks, GrabherGernot, ed. London: Routledge, 1–31.
20.
GranovetterMark (1973), “The Strength of Weak Ties,”American Journal of Sociology, 78 (6), 1360–80.
21.
HakanssonHakan, ed. (1982), International Marketing and Purchasing of Industrial Goods: An Interaction Approach.Chichester, UK: John Wiley & Sons.
22.
HakanssonHakan, and SnehotaIvan Eds (1995), Developing Relationships in Business Networks.London: Routledge.
23.
HiteJulie M., and WilliamS. Hesterly (2001), “The Evolution of Firm Networks: From Emergence to Early Growth of the Firm,”Strategic Management Journal, 22 (3), 275–86.
24.
HuberGeorge P., and DanielJ. Power (1985), “Retrospective Reports of Strategy-Level Managers: Guidelines for Increasing Their Accuracy,”Strategic Management Journal, 6 (2), 171–80.
25.
JohansonJan, and MattssonLars-Gunnar (1987), “Interorganizational Relations in Industrial Systems: A Network Approach Compared with the Transaction-Cost Approach,”International Studies of Management and Organization, 17 (1), 34–48.
26.
JohansonJan, and VahlneJan-Erik (1977), “The Internationalization Process of the Firm,”Journal of International Business Studies, 8 (Spring-Summer), 23–32.
27.
JohansonJan, and VahlneJan-Erik (2003), “Business Relationship Learning and Commitment in the Internationalization Process,”Journal of International Entrepreneurship, 1 (1), 83–101.
28.
JohansonJan, and VahlneJan-Erik (2006), “Commitment and Opportunity Development in the Internationalization Process: A Note on the Uppsala Internationalisation Process Model,”Management International Review, 46 (2), 165–78.
29.
JohansonJan, and Wiedersheim-PaulFinn (1975), “The Internationalization of the Firm-Four Swedish Cases,”Journal of Management Studies, 12 (3), 305–322.
30.
LechnerChristian, and DowlingMichael (2003), “Firm Networks: External Relationships as Sources for the Growth and Competitiveness of Entrepreneurial Firms,”Entrepreneurship and Regional Development, 15 (1), 1–26.
31.
McDougallPatricia P., ShaneScott, and BenjaminM. Oviatt (1994), “Explaining the Formation of International New Ventures: The Limits of Theories from International Business Research,”Journal of Business Venturing, 9 (6), 469–87.
32.
McEvilyBill, and ZaheerAkbar (1999), “Bridging Ties: A Source of Firm Heterogeneity in Competitive Capabilities,”Strategic Management Journal, 20 (12), 1133–56.
33.
NahapietJanine, and GhoshalSumantra (1998), “Social Capital, Intellectual Capital, and the Organizational Advantage,”Academy of Management Review, 23 (2), 242–66.
34.
PedersenTorben, and PetersenBent (1998), “Explaining Gradually Increasing Resource Commitment to a Foreign Market,”International Business Review, 7 (7), 483–501.
35.
PedersenTorben, and PetersenBent, and BenitoGabriel (2002), “Change of Foreign Operation Method: Impetus and Switching Costs,”International Business Review, 11 (3), 325–45.
36.
PenroseEdith (1959), The Theory of the Growth of the Firm.Oxford: Blackwell.
37.
PetersenBent, BenitoGabriel, and PedersenTorben (2000), “Replacing the Foreign Intermediary: Motivators and Deterrents,”International Studies of Management and Organization, 30 (1), 45–62.
38.
PetersenBent, and WelchLawrence (2002), “Foreign Operation Mode Combinations and Internationalization,”Journal of Business Research, 55 (2), 157–62.
39.
PettigrewAndrew M. (1990), “Longitudinal Field Research on Change: Theory and Practice,”Organization Science, 1 (3), 265–92.
40.
PortesAlejandro, and SensenbrennerJulia (1993), “Embeddedness and Immigration: Notes on the Social Determinants of Economic Action,”American Journal of Sociology, 98 (6), 1320–50.
41.
RanganV., KasturiE., CoreyRaymond, and CespedesFrank (1993), “Transaction Cost Theory: Inferences from Clinical Field Research on Downstream Vertical Integration,”Organizational Science, 4 (August), 454–77.
42.
RindfleischAric, and JanB. Heide (1997), “Transaction Cost Analysis: Past, Present, and Future Applications,”Journal of Marketing, 61 (October), 30–54.
43.
SimonHerbert (1996), Hidden Champions.Boston: Harvard Business School Press.
44.
StraussAnselm, and CorbinJuliet (1990), Basics of Qualitative Research: Grounded Theory Procedures and Techniques.Beverley Hills, CA: Sage Publications.
45.
TsaiWenpin, and GhoshalSumantra (1998), “Social Capital and Value Creation: The Role of Intrafirm Networks,”Academy of Management Journal, 41 (4), 464–76.
46.
UzziBrian (1997), “Social Structure and Competition in Inter-Firm Networks: The Paradox of Embeddedness,”Administrative Science Quarterly, 42 (2), 35–67.
47.
VaramakiElina, and VesalainenJukka (2003), “Modelling Different Types of Multilateral Co-Operation Between SMEs,”Entrepreneurship and Regional Development, 15 (1), 27–47.
48.
VernonRaymond (1966), “International Investment and International Trade in the Product Cycle,”Quarterly Journal of Economics, 80 (2), 190–207.
49.
WalkerGordon, KogutBruce, and ShanWeijian (1997), “Social Capital, Structural Holes and the Formation of an Industry Network,”Organization Science, 8 (2), 109–25.
50.
WilliamsonOliver E. (1975), Markets and Hierarchies: Analysis and Antitrust Implications.New York: The Free Press.
51.
WilliamsonOliver E. (1985), Economic Institutions of Capitalism.New York: The Free Press.
52.
WongPeter Leung-Kwong, and EllisPaul (2002), “Social Ties and Partner Identification in Sino-Hong Kong International Joint Ventures,”Journal of International Business Studies, 33 (2), 267–89.
53.
WoolcockMichael (1998), “Social Capital and Economic Development: Toward a Theoretical Synthesis and Policy Framework,”Theory and Society, 27 (2), 151–208.
54.
WoolcockMichael, and NarayanDeepa (2000), “Social Capital: Implications for Development Theory, Research, and Policy,”The World Bank Observer, 15 (2), 225–49.
55.
YinRobert (1989), Case Study Research: Design and Methods.Beverley Hills, CA: Sage Publications.
56.
Yli-RenkoHelena, AutioErkko, and SapienzaHarry (2001), “Social Capital, Knowledge Acquisition, and Knowledge Exploitation in Young Technology-Based Firms,”Strategic Management Journal, 22 (6-7), 587–613.
57.
Yli-RenkoHelena, AutioErkko, and TonttiV. (2002), “Social Capital, Knowledge, and the International Growth of Technology-Based New Firms,”International Business Review, 11 (3), 279–304.
