THE SIGNIFICANCE OF BUSINESS NETWORK

IN SMALL BUSINESS INTERNATIONALISATION

Niina NUMMELA

Turku School of Economics and Business Administration

FINLAND

ABSTRACT

The number of small firms operating on international markets has been growing, and

simultaneously the process of internationalisation has been accelerating. As a result, small

firms have to acquire the necessary skills and resources more rapidly than earlier. It has

been suggested that the business network of a small firm could be the source for these

resources. This paper discusses how the business network can assist small firms to

overcome the difficulties in their internationalisation. The paper includes a description of

two empirical cases.

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INTRODUCTION

During the 1990s small and medium-sized enterprises 1 (SMEs) have been the object of

increasing interest. Politicians, governmental bodies and academics have re-evaluated the

significance this group of firms, and currently regard them as the key sources of wealth and

employment. However, due to improved communication systems and deregulation of tariff

barriers, "the world is getting smaller". SMEs are also pushed and pulled to the

international markets.

The number of small firms operating in international markets has been growing, slowly but

steadily. Some researchers have also discovered that the time lag for SMEs'

intemationalisation2 (i.e. the time from the establishment of a firm to the first export

delivery) has become shorter (e.g. Christensen 1991, Hurmerinta-Peltomaki 1995). The

acceleration of intemationalisation requires that small firms also acquire the resources and

skills needed for international operations faster than earlier.

However, it is also said that in their intemationalisation small and medium-sized firms suffer

from disadvantages compared with their larger counterparts (Bonaccorsi 1992, Miesenbock

1988). Operating on international markets demands resources, experience, skills and

knowledge, which the small businesses often lack (Bell et al. 1992, Burton & Schlegemilch

1987). Between the need and existing skills and resources seems to exist a significant gap,

which has to be overcome.

1 Definition of small and medium-sized enterprises has proved to be very complicated. In this article we define them as does the European Union: SMEs employ less than 250 persons, their annual sales do not exceed 20 Mill. ECU and the company is independent (i.e. other companies' share of ownership does not exceed 25 per cent). The terms SME, small firm and small business as well as small business manager and entrepreneur are used interchangeably.2 Although intemationalisation includes both the inward and outward operations of a firm (Welch & Luostarinen 1988), this article focuses on the outward operations of SMEs, particularly on direct exporting, as it is the most common form of international operations among small firms.

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Some researchers have suggested that the lack of skills and resources could be at least

partly solved with the help of the business network3 in which the small firm belongs

(Malecki & Tootle 1996, Christensen & Lindmark 1991, Christensen 1991). However,

although access to external resources through business network seems to be significant

factor related to intemationalisation, in previous research the evaluation of the significance

and use of this potential has been neglected (Bonaccorsi 1992, Christensen & Lindmark

1991, Christensen 1991).

The purpose of this article is to demonstrate both theoretically and practically how the

network can assist SMEs to overcome some difficulties in their intemationalisation. First,

previous research on small business intemationalisation and networks is reviewed. Second,

the significance of the business network is evaluated in two case firms, which are in

different phases of their intemationalisation process.

SMALL BUSINESS INTERNATIONALISATION

What makes SMEs different ?

In small business intemationalisation the role of small business manager is often decisive,

because the decision-making is centralised, i.e. dominated by the entrepreneur (Carson et al.

1995, Marchesnay & Mien 1990, Miesenbock 1988). On the one hand, this makes small

firms very flexible and allows rapid changes and adaptation to the changing environment.

On the other hand, however, the central role of entrepreneur may also have its

disadvantages, such as vulnerability in crises, single-minded decision-making and limited

managerial capabilities.

3 In this study business network is defined as the relationships a firm has with the business units and organisations in its environment. In this network the firm exchanges resources with the other actors, with whom the ties can be either weak or strong.

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The activities of many small firms are often based on the skills and knowledge of the

entrepreneur. Particularly in the industrial sector many entrepreneurs are skilled craftsmen

with technological background and orientation (Carson 1985). For this reason their way of

thinking and business perspective is mainly technology or production oriented (cf. Fuller

1994).

Because of their smaller size the resources of small firms are limited (Carson et al 1995,

Carson 1985, Van Hoorn 1979). The financial resources are usually bound to the normal

day-to-day activities, and SMEs can not afford the long-lasting and insecure return on their

investment, which internationalisation often requires. The investment required for

internationalisation involves not only money, but also time, which is often a scarce resource

for entrepreneurs.

In addition to financial resources, other, more immaterial resources are also important. Do

the entrepreneur and other personnel have the skills and knowledge required in international

markets ? It is argued that some small firms lack not only expertise but also market and

marketing knowledge (Hogarth-Scott et al. 1996, Fuller 1994, Cromie 1991). Many

researchers also claim that small firm managers often lack long term perspective (Sashittal

& Wilemon 1996, Garland et al. 1989). However, in addition to the concrete skills and

knowledge, more subjective managerial characteristics, such as the e.g. attitude towards

export, willingness to change, cognitive style, are also of importance in small business

internationalisation (for international orientation of the manager, see more Holzmiiller &

Kasper 1990, Dichtl et al. 1984, Reid 1981).

Small firms often operate on local or regional markets and with a few key customers

(Carson 1985). This increases the vulnerability of small firms, as they are often very

dependent on these large customers, and therefore all structural changes in the industry have

a significant impact on small firms (Marchesnay & Julien 1990). Because of their weak

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position in the market, their possibilities to affect the development in the market are very

limited.

To sum up, small firms tend to have common characteristics which distinguish them from

larger firms. However, we should not regard SMEs as a homogenous group, but keep in

mind that, e.g., in marketing there is considerable variation between small firms, ranging

from those with no marketing at all to those with quite sophisticated marketing strategies

(Hogarth-Scott et al. 1996) and it seems that in some areas of marketing such as in

customer knowledge and contacts small firms can be quite skilled marketers (Ylikortes

& Moller 1996).

The Intel-nationalisation process

Since the 1960s researchers have been interested in the process by which firms become

involved in international operations. Already in the 1970s several researchers described

internationalisation as a gradual sequential process consisting of stages (e.g. Johanson &

Wiedersheim-Paul 1975, Bilkey & Tesar 1977, Johanson & Vahlne 1977, Luostarinen

1979). In these models internationalisation has been analysed as a step-by-step process of

learning from experience. This processual perspective has also been often applied when

analysing small business internationalisation (Miesenbock 1988).

However, despite its popularity, the processual perspective on internationalisation has been

later strongly criticised (e.g. Turnbull 1987, Strandskov 1986). The criticism has brought

up, e.g., the following two important issues: the doubt of the existence of sequential,

identifiable stages and the ignorance of use of external resources in this process. For

example, Tumbull (1987) claims that firms do not necessarily follow any consistent pattern

in their internationalisation and Stranskov (1986) argues that the description of

internationalisation is a scientific "ideal case", which originates from the desire of

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researchers to explain and predict. This criticism can, nevertheless, be partly countered with

the notion that although the outlook of stages in internationalisation may have changed, the

driving forces behind the process remain the same (Benito & Welch 1993).

On the other hand, Christensen and Lindmark (1991) found previous studies on

internationalisation to be too focused on the internal commitment of the firm. In their

opinion the use of external resources is as important as the use of internal resources,

particularly in small business internationalisation. Also Bonaccorsi (1992) and Christensen

(1991) emphasise the significance of external resources in small business

internationalisation.

In this article we do not focus on the process on internationalisation, but for analytical

purposes distinguish two phases in small business internationalisation: (1) the early, pre-

export phase, during which the firm is seeking information and evaluating operations in

international markets, and (2) the later, mature phase of export involvement, during which

the firm is already operating on the international markets.

Barriers in SME internationalisation

In studies of small business internationalisation researchers have found several internal and

external factors barriers that inhibit small businesses from initiating, developing and

sustaining export operations (for reviews, see Luostarinen et al. 1994, Miesenbock 1988).

Internal barriers are factors which the company can control and they are related to either the

firm or the entrepreneur; and external barriers are outside the company's control and related

to the business environment of the firm.

Firms are exposed to a variety of barriers at all phases of internationalisation, but the

barriers differ from phase to phase (e.g. Kaleka & Katsikeas 1995, Leonidou 1995, Keng &

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Jiuan 1989, Sharkey et al. 1989, Bilkey & Tesar 1977). For example, Leonidou (1995) and

Keng and Jiuan (1989) distinguish between barriers related to export initiation, i.e. the pre-

export phase, and barriers which the firm encounters during exporting, i.e. in the mature

phase of the process.

It seems that the significance of internal barriers decreases during the process as learning

occurs and skills and know-how are developed (cf. Kaleka & Katsikeas 1995, Keng &

Jiuan 1989, Sharkey et al. 1989). On the other hand, the importance of external barriers

seems to increase during the internationalisation process as the firm becomes more active in

the international environment. In the pre-export phase of internationalisation barriers are

often related to attitudes, knowledge and resources (Hurmerinta-Peltomaki & Paasio 1991).

Later, when the firm already is involved in exporting, barriers related to more operational

and market-related issues, such as competition, become topical (Leonidou 1995).

To sum up, in their internationalisation SMEs face barriers that hinder their operations on

international markets. However, the barriers vary during the internationalisation process.

This paper discusses how small firms seek help from the actors in their business network in

order to facilitate overcoming different barriers. This kind of collaborative

internationalisation and its potential benefits are discussed in detail in the following section.

NETWORK AND HOW CAN IT HELP ?

SME and its network

Networks have been studied in many contexts and by researchers in different disciplines

and therefore it is very hard to imagine one, universally accepted network theory (e.g.

Easton 1992, M0nsted 1995). In the field of business-to-business marketing, the network

studies made by the so called IMP (Industrial Marketing and Purchasing) Group have

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played a dominant role. In their studies networks have often been analysed as a combination

of actors, activities and resources (for the basic A-R-A model, see e.g., Hakansson &

Johanson 1992). For analytical purposes this study focuses on actors, who can assist small

firms in their process of intemationalisation (recommended in some cases e.g. by Axelsson

1995, Johanson & Mattsson 1992).

Actors in a network are connected to each other with either strong or weak ties

(Granovetter 1973). The measurement of the strength of ties is usually based on age of

contact, homogeneity of partners, frequency of interaction or emotional involvement

(M0nsted 1995). Malecki and Tootle (1996) look at the relationships in a network from a

different perspective, and argue that relationships in a network can be placed on a

continuum according to their voluntarily. Interaction with some actors, such as suppliers

and customers, is compulsory. On the other hand, small businesses have relationships with

other actors, which are not necessary required for the completion of business operations,

although they might facilitate them. Voluntary relationships exist between the focal firm

and, e.g., trade associations and chamber of commerce.

The classification of compulsory and voluntary relationships is not identical with the

strength of the ties between actors. In other words, a compulsory relationship with an actor

does not mean that a strong tie between actors would necessarily exist. The strength of ties

depends on the nature of relationship. In this article we focus on SME's voluntary

relationships with other network actors. The tie between the actors can be either strong or

weak.

Who are the network actors ?

Researchers have distinguished between different types of networks, such as the

technological network, the regional network, the social network and the business network

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(e.g. Halinen & Tornroos 1997). In many studies the significance of the entrepreneur's

personal, particularly social, network in, e.g., business formation is highlighted (e.g. Greve

1995, Butler & Hansen 1991, Johannisson 1988). Family, friends and acquaintances offer

strong support for the entrepreneur particularly in the early stages of the entrepreneurial

process. However, we assume that the significance of personal network decreases when the

firm grows, and therefore our analysis focuses on the ties within firm's business network

thus excluding the social relationships.

The network of a small firm is a complex combination of several embedded nets, within

which the firm belongs (cf. Halinen & Tornroos 1997, Easton 1992). In order to distinguish

the relevant actors for our purposes this complex reality needs to be simplified with the help

of a model or classification. Our model has been inspired by Smilor and Gill (1986), who

have studied networks in the context of business incubators and SMEs. They have identified

six different types of actors in the entrepreneurial network: major (large) and emerging

(small) firms, universities, state & local support (public sector) and professional & other

support (trade and other associations, chambers of commerce etc.). We assume that the

actors assisting SMEs in internationalisation can be classified in similar groups (Figure 1).

Universities

Large firms

Small firms

Public sector organisations

Associations

Professionaladvisers in

the private sector

Figure 1 - Business network of small firm (adapted from Smilor & Gill 1986)

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When analysing the business network we have to bear in mind that it changes over time

(e.g. Easton 1992, Gadde & Hakansson 1992, Christensen & Lindmark 1991). During its

evolution the network can be used for different purposes, as in different phases the firm

needs different resources (Greve 1995). Christensen and Lindmark (1991) describe this as

an iterative process where new actors are gradually involved and the relationships are

deepened.

We may also assume that during its internationalisation process the network of a small firm

also changes. Relationships with new actors are established in order to acquire the

resources needed in the process. In the following section we present two empirical cases of

small business internationalisation, and the use of business network in the two cases.

BUSINESS NETWORK IN SMALL BUSINESS INTERNATIONALISATION

The use of business network in small business internationalisation is described with the help

of two empirical cases. The data used in the case descriptions was collected in interviews

with the marketing manager of the one company (Hiilipeikko) and the managing director of

the other (Hihra). Both were interviewed twice; the first, face-to-face interview lasted

approximately two hours, the second, a telephone interview, lasted app. 30 minutes. The

first case, Hiilipeikko, describes a small firm starting its internationalisation, whereas the

second case firm, Hihra, already has some experience on international markets.

Case Hiilipeikko

Hiilipeikko is a small company selling and manufacturing charcoal for barbecues. The

production unit of the company is located in south-western Finland, but the company also

has a small sales office Helsinki. The company was established in August 1994 and it

employs six people of whom one is mainly responsible for production and management, one

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for marketing and the others for different tasks in the production. During the first accounting

period the turnover of Hiilipeikko was approximately 200.000 USD.

The product Peikkohiili is innovative, but also expensive compared with competitors.

The innovativeness of the product is based on the fact that this charcoal ignites without any

lighter fluid. The product is also "green"; but manufacturing charcoal is relatively labour

intensive and thus the manufacturing costs of the product in Finland are quite high. In

Western Europe the barbecue charcoal market is dominated by the large buyers, mainly

wholesalers. However, Hiilipeikko has not been quite able to convince the large Finnish

wholesalers of the product's advantages. Price seemed to be the only important factor in

their decision-making and competing products can be offered at a significantly lower price.

Consequently, the products are mainly sold through retailing chains as well as through

hardware store chains and petrol stations.

Because of the lack of sufficient interest in domestic markets Hiilipeikko was obliged to put

some effort also into international markets. In the main, it was markets which are close by,

i.e. Scandinavia and Germany, which were of interest. Although the marketing manager of

Hiilipeikko was very active in creating contacts with potential customers, she also sought

for external assistance in intemationalisation. In addition to general information on

exporting, which she acquired from the Finnish Foreign Trade Association (FFTA), more

concrete assistance was needed.

Hiilipeikko was a newly established firm with very limited financial resources. Entry into

international markets required heavy investment and marketing effort, which the firm could

not afford. However, the firm received financial support from the Ministry of Trade and

Industry in form of an export promotion subsidy. With the help of this support, Hiilipeikko

could print its brochures and other marketing material in Swedish and German.

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The manager of the firm was familiar neither with the Swedish, Danish and German markets

nor with the distribution channels there. In order to acquire the market knowledge needed

and to create contacts in Swedish market, they decided to participate in a trade fair in

Stockholm together with other SMEs. The fair was organised by the local small business

association and participation in the fair included also a market research into the Swedish

market for their products. They also received market information on Denmark and Germany

through studies which they had ordered from the Finnish Export Centre in Copenhagen and

from the Finnish Foreign Trade Association (FFTA).

External advisors were also helpful when the marketing manager of Hiilipeikko found her

skills in international business lacking. The representatives of the Export Centre in

Copenhagen participated in the negotiations with Danish wholesalers, helped to find

answers for all relevant questions and wrote a memo of the negotiations for both parties. On

the other hand, the Finnish-Swedish Chamber of Commerce in Stockholm assisted in

creating credibility and establishing the original contact with a large Swedish wholesaler

and provided the rooms for the initial negotiation.

During the negotiations the Swedish wholesaler mentioned that for them it was very

important that the product would also fulfil the European quality standards and other

technical norms. For this reason the marketing manager of Hiilipeikko contacted the

Technical Research Centre of Finland (VTT), and let them test their product. In addition to

technical qualification some other technical advice was obtained.

To sum up, if we analyse the internationalisation of Hiilipeikko so far, we can conclude that

it has sought external assistance from several actors in its business network. The actors

involved in Hiilipeikko's internationalisation as well as the resources they offered are

summarised in Figure 2.

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' Ministry of \ Trade and '

, Industry '

Local SME \ _ association / ,'~ ~v

~-----' ' Finnish | Export

market \ Centre knowledge s -

Figure 2 - Actors involved in Hiilipeikko's internationalisation

It seems that the use of network in Hiilipeikko's case was quite haphazard and that the

resources acquired through the network were independent of each other, i.e. each resource

had a value by itself. Interaction with the other actors was based on short term transactions,

and it was quite one-sided. The actors, which all were either public or semi-public in nature,

received no benefits - at least direct ones - from the relationship.

It was assumed that later, when the small firm is more involved in international markets, it

also gradually collects the necessary skills and resources required for successful

international operations. The external factors which affect a small firm's internationalisation

become more relevant, and the business network is used for other purposes than earlier.

Therefore also bonds with different actors become more important. As an example, a case

of a small business in a later stage of intemationalisation is described.

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Case Hihra

Hihra is a small manufacturer of tailor-made metal products, such as components to the

automotive, furniture and electronics industry as well as shipyards. The most important

customer group - the automotive industry - covers about 40 per cent of the annual sales,

which are approximately 6 Mill. USD. Exports account for a third of the firm's annual

sales. The turnover has grown constantly in recent years, and although there has been some

reduction in personnel, the amount has been modest and mainly due to the recession. The

firm is family-owned and managed by the owner.

At the end of 1980's the European automotive manufacturers decided to decrease the

number of their suppliers in order to improve their effectiveness. They wanted to focus on

their core competencies i.e. efficient assembly and delivery of cars, and to buy the

required components from relatively few suppliers. From suppliers this required the ability

to offer larger system solutions to the customer and the capability to be responsible for the

product development. For smaller suppliers this meant a significant change. Relationships

with important customers became indirect as the goods were delivered to the system

suppliers instead of the automobile manufacturers.

Also Hihra was in the position that it would lose the direct contact with large customers and

be able to supply to them only through system suppliers. However, Hihra was not familiar

with most of the system suppliers, some of them even being large foreign companies with

already existing networks. It would not be easy to access these networks, and therefore

Hihra was faced with the possibility that the sales to this significant customer group could

decrease rapidly in the following years.

The manager of Hihra decided to react to this potential threat and started looking for

potential partners with whom to co-operate. In this search he used both his personal and the

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firm's network. After a few months' search he found three potential partners for co­

operation. The manager knew the companies because they were all suppliers to the

automotive industry, and he also knew the managers of each company personally. One of

the firms manufactures springs, one is a supplier of optical and technical plastics and the

third makes technical rubber products. A characteristic which is common to all four firms is

that they all are serial producers, who aim at economies of scale in production. Finnish

markets are too limited for this kind of production and therefore all of them consider their

future markets to be abroad. Two of the firms fit in the traditional definition of small firm:

their annual turnover varies from 5 to 10 Million USD and the number of personnel does

not exceed 100 employees. One of the partners is significantly larger than others: its annual

turnover exceeds 30 Million USD and it employs more than 200 employees (it is also a

subsidiary of a German conglomerate). All the partners are relatively old firms with

traditions; they have been established either in the 1940s or 1950s.

Co-operation was initiated after six months of negotiations. Now the alliance (as they call

it) is a co-operative arrangement of four suppliers, who look for competitive advantage by

offering joint deliveries to the Finnish and Scandinavian automotive industry. The objective

of this co-operative arrangement is to be able to offer system solutions to their customers by

using their unique skill and know-how in jointly developing, manufacturing and delivering

complete ready-for assembly units. A joint product could be, for example, the rear light

system of a car. Customers are attracted by increased cost efficiency and the smoothness of

design and production cycle as well as by the decrease in the number of problems in

procurement and material management. The objectives are achieved with joint research and

development, integration in production and co-operation in marketing activities.

We can conclude that Hihra's decision to seek assistance from its business network was

related to changing customer requirements and competition, i.e. a result of strong external

pressure. The network actors with whom it co-operated were other firms, who had

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complementary resources which the firms could combine with co-operation. This could be

described as strategic action4 to keep the international customers. With the help of its

business network and the resources it could offer, the firm was able to create a novel

strategy for international markets (see Figure 3).

skills and knowledge in manufacturing technical plastics

Firm B

skills and x * ~ ~ ~" " knowledge in« Firm A ) manufacturing^ ^ _ _ - springs

skills and knowledge in manufacturing rubber products

skills and knowledge in manufacturing metal components

Figure 3 - Actors involved in Hihra's internationalisation

The resources which Hihra has acquired through its network are complementary, but their

utility is also quite mutually dependent, i.e. alone the resources of each actor would be

worthless. Additionally, the interaction has resulted in long term, interrelated relationships

between the actors, and each actor has received some benefits as an outcome of the

exchange. The process started with personal, social bonds between the key persons in the

three companies, but resulted in technical and economic bonds between the companies.

4 Johanson and Mattsson (1992, 214) define strategic action as efforts by actors to influence (change or preserve) their position in the network.

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DISCUSSION AND CONCLUSIONS

In the process of small firm internationalisation the barriers to internationalisation and

external assistance from the network are strongly intertwined. In the pre-export phase of

internationalisation when the firm is still searching for information and considering the

possibility of entering international markets the barriers are mainly related to lack of

different resources. Consequently, the small firm seeks assistance from network actors

which can offer the resources needed. Very often these actors are public or semi-public in

nature.

In the case of Hiilipeikko Oy the firm also contacted the actors of its business network in

order to acquire the resources needed for internationalisation. The firm co-operated with

several network actors, but the relationships with the actors remained short term and quite

weak. In conclusion, it seems that in the pre-export phase of internationalisation the

network is used broadly, but there is no attempt to create a long-lasting relationship with the

other network actors, as both parties are aware that in course of time the firm is able to

develop the skills and resources within its organisation. In other words, in this phase weak

bonds between actors exist, but because of the lacking mutuality and need for long term

resource ties, the bonds never get stronger.

When a small firm is already involved in international operations i.e. when its

internationalisation has already advanced to a more mature phase it faces competition

and environmental turbulence in the market. These new circumstances create novel needs of

external assistance and the firm's interests also turn to different network actors. Other firms

both small and large may seem to be suitable partners in this phase, when new

strategy alternatives are sought.

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The alliance in which Hihra belongs is an example of the use of business network in

acquiring resources in a later phase of internationalisation. In this case the objective of

Hihra was to preserve its position as a supplier through co-operative relationships with the

other actors in the business network. The actors then formed an alliance a net inside the

network in order to co-operate even more closely with each other. Thus, strategic action

requires a more focused use of network and long term co-operation. The outcome of this

kind of co-operation are quite strong resource ties between the partners.

Managerial implications

It seems that the external assistance which is available in business network could facilitate

small business internationalisation considerably. However, there are still a few problems on

the way. For example, SMEs are not aware of all potential partners in their network and, on

the other hand, they do not know how to exploit their network (Bell et al. 1992, Rothwell &

Dodgson 1991). We may assume that because of this limited knowledge very few small

firms exploit their network effectively.

During the past decade the role of SMEs as a significant booster of economic development

has been emphasised. Governments have attempted to support SMEs in many ways and in

different fields of operations. Internationalisation of SMEs has been particularly of interest.

For example, in many countries governments have initiated programs, which attempt to

bring small firms together and join forces (Welch 1992). In general, we can say that

governments attempt to manage the network development among small firms (cf. Welch et

al., forthcoming).

However, it seems that this network management has not been very successful. The use of

governmental export services is still quite low among small firms (Holstius & Seringhaus

1994) and the entrepreneurs claim that the assistance is fragmented and uncoordinated. A

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small business manager seeking for external assistance has to seek it from a wide range of

organisations and institutions (Holstius & Seringhaus 1994, Boedeker et al. 1995). The

usefulness of governmental assistance has also been questioned: for example, Rabino

(1980) found that the SMEs would have started exporting regardless of government

assistance.

From the perspective of the entrepreneur we can ask what the government can offer to the

internationalising SME ? It seems that so far the public sector has offered support related to

skills and resources in the pre-export phases of internationalisation. In other words, they

have helped SMEs to overcome internal barriers, and for example Sharkey et al. (1989)

recommend that the government export programs should continue to do so.

Another question is, then, what is going to happen to these SMEs when they advance in

their internationalisation process and start exporting? The support of governmental agencies

has "carried" them to international markets, but there they have to manage themselves. In

the turbulent environment they face international competition and other barriers which

hitherti they have not encountered. Do the SMEs have the capabilities to find the suitable

partners in the competitive environment and to form and manage successful alliances in

order to overcome the barriers ? In many cases this is questionable.

Consequently, at the moment the governmental support is already focused on the pre-export

phase and it has very little to offer to companies already active in international markets.

Exceptions to this rule are situations where the firm tries to enter new, demanding far-away

markets i.e. is in a similar situation as in initiating exports. In order to reach the SMEs

already exporting, the future activities of government could also include the role of

"matchmaker", i.e. to help SMEs to find potential partners though novel technical channels,

such as databases and the Internet.

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However, we agree with Welch et al. (forthcoming) who state that there is a limit to the

network engineering role of government. After all, the success of a company depends

mostly on internal issues, such as on the skills and know-how of the key personnel and

competitive advantage over competitors.

Suggestions for further research

In our opinion this article has contributed to the existing research on small business

internationalisation in a number of ways. First, in the literature review we have combined

the views from two separate research fields internationalisation and networks which

is not very common, although some exceptions do exist. Second, this article considers an

important aspect that has been ignored in previous research on small business

internationalisation. The use of external resources in internationalisation through the

business network is described and analysed with the help of two empirical examples. Third,

in the evaluation the barriers of internationalisation and different network actors are

connected with each other in the phases of internationalisation process. As a result, the

article offers an overview of the significance of business network in small business

internationalisation.

This article provides a basis for further studies of small business internationalisation from a

network perspective. For example, export co-operation has not been analysed in network

terms, although the underlying logic is clearly network-related. (Welch et al. forthcoming).

As our example of Hihra verifies, joining forces with other small firms might be a suitable

strategy for SME to overcome some problems in international markets.

In the end, however, success in internationalisation depends on the investment of the small

firm and particularly the small business manager. They have to be committed to the

operations on international markets. When co-operating with other firms in order to enter

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international markets, commitment is even more crucial. However, then it is not only a

question of commitment to internationalisation, but also of commitment to co-operation, i.e.

the way in which the objectives of internationalisation are achieved.

Unfortunately many co-operative arrangements among small firms end without achieving

their objectives. It is argued that the primary reason for this is the lack of commitment

among partners (Murto-Koivisto & Vesalainen 1995, Yrittajien yhteistyoasenteet... 1995).

This suggests that commitment in export co-operation would deserve more attention in our

further research efforts.

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