Network theory

In the Innovation Model internationalization consists of five stages: (1) domestic marketing referring to being preoccupied with the home market, (2) pre-export which implies to intentionally searching for information and doing initial evaluation of the feasibility of engaging in international marketing activities, (3) experimental involvement which involves the initiation of limited international marketing activities, (4) active involvement including systematically exploring expanding possibilities in international marketing activities, and finally (5) committed involvement, during which resource allocation is done based on existing international opportunities (Cavusgil 1980). The I- and U-model are often regarded as being very similar, though Welch and Paavilainen-Mäntymäki (2014) argue that the early I-model was a variance-based approach, and the U-model provided a process-based explanation to internationalization. However, due to their nature the U-Model and the I-Model have often been mentioned as ‘stage approaches’ or ‘stage models’ (See e.g., Lin 2010; Welch & Paavilainen- Mäntymäki 2014; Wadeson 2020) and studies have also referred to them as process theories of internationalization (See e.g., Amdam 2009; Lindstrand & Hånell 2017; Freixanet & Renart 2020).

Non-sequential model can be seen as a counterpart to models in which internationalization happens over time in stages (Roque et al. 2019). It suggests that the capability to internationalize is dependent on two types of fundamental knowledge: knowledge related to a specific market and general knowledge of how to operate in international markets (Clark et al. 1997). Companies can aim to cultivate the latter by developing three kinds of know-how at their home country that are useful for overcoming difficulties regarding foreign expansion: (1) knowledge to manage complexity by having several operations at home, (2) knowledge to manage differences in competitive conditions by operating in B2B-industries and (3) knowledge to manage differences in institutional environments by cooperating with a foreign firm at home (Cuervo-Cazurra 2011). If ventures can accumulate such know-how either from previous internationalization experiences or from home markets it is not necessary to internationalize next time according to a linear stage model or to a target country resembling the country of origin (Clark et al 1997).

Network theory is one of the few approaches that aims at explaining the behavior of rapidly internationalizing SMEs and it is relatively acknowledged and useful in the study of rapidly globalizing firms (Raatikainen 2013). Therefore, it also suits the context of high technology commercialization which is associated to rapid internationalization or born globals and emphasizes the significance of external resources (e.g., networks) as discussed in Chapter 2.2.3.

According to network theory internationalization is about the global relationships and networks that a company has. Ventures establish and develop positions related to their counterparts in foreign networks and internationalization means an increase in the number and strength of the relationships between different parts of the firms’ global production network (Johanson & Mattsson 1988). The networks facilitate the acquisition of resources and competences concerning funding, team formation and partnership opportunities (Lin 2010).

The network theory divides internationalizing firms into four categories. Firstly, The Early Starter has only a few relationships with foreign companies and a little information regarding internationalization. Competitors however are in the same position. The Early Starters often use local agents or distributors to facilitate their entry to the market and to reduce risk. The initiative to internationalize originates often from counterparts such as distributors (Johanson & Mattsson 1988;

Lin 2010; Raatikainen 2013).

The Late Starter already has an internal network with e.g., suppliers or customers which create traction for the international development of the company. The ventures domestic experiences can facilitate its internationalization and enable entry to more psychically remote markets. However, competitors often have an advantage while they are already in the business network and the market is already internationalized. Thus, operations require more coordination than for The Early Starter (Johanson &

Mattsson 1988; Lin 2010; Raatikainen 2013).

In the case of The Lonely International the venture already has structured networks, supply chains and a market position in the foreign market, but its competitors have not internationalized and the market

in general has still a domestic focus. These firms already have experience and knowledge in foreign markets and a position in the business network compared to domestic competitors which improves their possibilities to succeed (Johanson & Mattsson 1988; Lin 2010; Raatikainen 2013).

Finally, The International Among Others already belongs to a competitive and developed international network whose members operate mostly on a global level. The venture needs to control its activities in several market areas and respond rapidly to changing environments. Such firms use multiple business networks in acquiring external resources (Johanson & Mattsson 1988; Lin 2010; Raatikainen 2013).

Raatikainen (2013) notes that the categories have several characteristics that resemble idiosyncrasies of born globals. Firstly, ventures often have limited number of international relationships and therefore use 3^rd parties to facilitate their internationalization. Secondly, born globals face similar challenges that they must compete in a highly internationalized environment against large firms.

Thirdly, also born globals must control several business networks simultaneously to obtain financial resources and knowledge that they are lacking.

The most relevant remark of the network theory regarding the thesis research follows. The network theory assumes that strategies for internationalization are influenced by the position that the companies have in their network. Therefore, the relations within the networks can facilitate, drive, or accelerate the internationalization process of ventures (Lin 2010). Consequently, the firms position in the networks can have crucial effect on the availability of further connections, information, and progression possibilities. Also, according to opportunity recognition and development theory discussed in Chapter 2.2.2. the quality and availability of relevant information is crucial regarding further development (De Bruin & Ferrante 2011). The benefits of the available knowledge can be observed and integrated to own structures and behaviors, and the network can also produce unexpected random information (Groen et al. 2015). Therefore, firms must systematically aim at improving their position within networks to gain and pertain access to important information and

resources. One way to secure the position in the network is to have a congruent IPR-strategy that gives leverage in cooperation negotiations, as briefly covered in Chapter 2.2.1.