Antecedents of sequencing strategies in Dutch and German SMEs : the role of network competence

This multi-method study aims to explore how Network Competence affects an SME’s choice for implementing a sequencing strategy. In addition, other potential antecedents including Cultural Intelligence and having a Global Mindset are taken into account. The relationship between the choice of strategy, either sequenced or not, and firm performance is also analysed. The research question of this thesis is stated as follows: Does the level of Network Competence, Cultural Intelligence and having a Global Mindset influence the selection of a sequencing strategy? Previous studies with regards to sequencing have only considered the strategy itself and possible outcomes for firms without discussing the determinants of choosing a sequencing strategy in the first place. Antecedent factors were derived from the revised Uppsala Model in which Network Competence, Cultural Intelligence and Global Mindset are included, either directly or implicitly, to be relevant to the internationalisation process of a firm (Johanson and Vahlne, 2009). Elevating the relevance of this study further, specific calls have been made to shed more light on Network Competence of the firm in relation to internationalisation (Ritter and Gemunden 2003; Ritter et al. 2002). In this thesis, it is proposed that a high level of Network Competence, Cultural Intelligence and Global Mindset will positively contribute to firms implementing a sequencing strategy. Additionally, it is proposed that firms using a sequencing strategy perform better than those who do not. This study takes on a predominantly qualitative approach. While it is argued why the selected antecedents could contribute to firms implementing a sequencing strategy, the selection of antecedents is not deemed complete. Insights from interviewees could, therefore, help in steering future research directions and contribute to more extensive implications. To explore the propositions, first, qualitative interviews with the CEO, founder or entrepreneur of 15 technology-focused SMEs headquartered in The Netherlands and Germany were conducted and analysed. These firms all have a high proportion of R&D spending relative to their revenue and are active in at least three different international markets. As this was a joint project between three students, the coding process of the interviews was done collaboratively and results were peer-reviewed when necessary. Results were reported in a similar way compared to Bingham (2009) in which tables are presented with different quotes supporting the level of each construct of every participating firm. The second part of the methodology included the distribution of a survey among the interviewees containing established scales for each antecedent construct as derived from the literature. This paper includes the mode score from the survey of every construct to strengthen results. The link between sequencing and firm performance was also reported in a similar way to Bingham (2009), with a graph showing firm performance for each international market making graphical distinctions between the firms that used a sequencing strategy and those that did not. Ultimately, there was no sufficient evidence found for any of the propositions to be supported. This may be largely due to the limited amount of interviewees indicating to have used a sequencing strategy as well as the level of heterogeneity in the developmental stages of the selected firms. Although a number of cues were found pointing to the importance of the selected antecedents when internationalising in general, additional research is required for exploring these relationships in greater detail. As for managerial implications, a number of findings stand out. First of all, when in the market position of relying primarily on the firm networking capabilities when going abroad it is important to note a large amount of resources may be spend initially on the setting up of a network from scratch. In this case, being able to initiate new networking relations as well as maintaining existing ones will likely become part of daily activities. This may, in the early stages of internationalisation, become very resource intensive while at the same time being difficult to measure in terms of return on investment. Secondly, data suggests a sufficient level of Cultural Intelligence is desirable for foreign success, especially in the language department. When a firm is doubtful of competences in this regard it might be effective to make use of external parties like agents, distributors or account managers to compensate for the lack of firm Cultural Intelligence. Another recurring theme in the results was the relevance of adapting products according to local demand. Some firms even indicated to not enter a market at all before they had any unique product to offer. The legislative systems seem to play a large role in estimating the profitability of a market before entering as well, which can differ radically even in local regions. This study links to previous research in the following ways. First of all, it examines the level of Network Competence among recently internationalised technologyfocused firms situated in the Netherlands and Germany. Tokkeli et al. (2012) has pointed out wanting to examine specific industries more thoroughly in the context of areas outside of Finland. This study addresses this call partially, since it does offer a selection of firms that are all technology driven. The selection of firms presented in this study however does diverge in terms of industry type. Secondly, it contributes to internationalisation strategies by concretely isolating sequencing strategies and for the first time considering antecedent factors that could be of influence for firms to implement such a strategy in the first place. Previous studies have instead opted to focus on the internationalisation process itself by examining different firm characteristics (Lindell and Karagozoglu, 1997; Lindqvist, 1991), characteristics of the founders (Boter and Holmquist, 1996; McDougall, Shane, and Oviatt 1994; Murray, 1996; Roberts and Senturia, 1996) and internationalisation theories (McDougall, Shane, and Oviatt, 1994). Other studies have taken antecedent factors like networks into account when firms are in fact internationalising and measure their success but do not address these antecedents by linking them to the choice of strategy (Johanson and Vahlne, 2009)