Title: The influence of network relationships in the internationalization of SMEs

Authors: Andersson, Arvid & Helander, Anna

Tutor: Karlsson, Tomas

Date: June, 2009

Background: The world has become globalized, resulting in a rapid increase in international trade. Also many SMEs actively internationalize. At the same time, networks are increasingly replacing traditional markets. In the internationalization process of SMEs it has through research been confirmed that firms are influenced by network relationships in their internationalization process.

Problem: Choice of foreign market and market entry mode are crucial decisions SMEs make in their internationalization process. It has been found that network relationships affect SMEs in these decisions. However, the research within this area has been focusing heavily on knowledge-intensive SMEs. Scholars call for further research in relation to other industries, as well as a more specific investigation of what kind of different network relationships that affect choice of foreign market and of market entry mode.

Purpose: The purpose of this thesis is to investigate how SMEs’ choice of foreign market and market entry mode is influenced by different types of network relationships.

Method: A multiple case study strategy was applied and four SMEs were included in the sample. Data was collected through semi-structured interviews, (three personal and one telephone interview), and complemented with secondary data. The respondents were the CEOs of the case firms. The collected data was categorized and each case firm was analyzed, followed by cross-case comparisons.

Conclusion: The findings in this thesis show that all case firms had been affected by network relationships in the choice of foreign market and/or choice of market entry mode. Generally the findings conformed to a certain degree to previous findings concerning SMEs in knowledge intensive industries. Further, it was found that network relationship influence was more frequent in the choice of foreign market. In this decision, firms which had taken a proactive approach were mainly infuenced by strong and formal relationships. Firms taking a reactive approach were mainly influenced by weak and informal relationships. Concerning entry mode, it was only weak, informal relationships which had influenced the decision.