International entrepreneurial opportunities: roles of networks, knowledge and serendipity

Abstract

Business relationship networks are of critical importance to firms (Forsgren & Johanson, 1992; Johanson & Vahlne, 2009). Competitive advantages of individual firms and their ability to internationalise may be dependent upon whether they are an 'insiders' or 'outsiders' in networks which can provide accumulated experience, resources and knowledge (Johanson & Vahlne, 2009). The characters of network relationships arise as a consequence of the interaction strategies of the parties (Cunningham & Homse, 1982) and can be conditioned by relationships with third parties. Thus, structural holes (Burt, 1992) and strong and weak ties (Granovetter, 1973) have also been shown to contribute to the competitive advantage of firms.

This research explores the importance of direct, indirect and serendipitous roles that third parties - including government bodies, trade associations, government advisors, and immigrant networks - played within the knowledge-based natural health products (NHP) - i.e., dietary supplements - sector in Canada. The thesis utilises three representative cases selected from ten revelatory longitudinal case studies that were developed. One case was selected from each firm type, including regulatory service consultancies, service-based combination firms that act as both ingredient suppliers and contract manufacturers, and five manufacturers with their own brands, which had internationalised in this industrial sector. The cases were developed using semistructured interviews with small and medium-sized international new venture NHP firms, secondary interview data and secondary documents. The firms were first drawn from the membership directory of the Canadian Health Food Association, the largest trade association representing the interests of this sector and then selected based on their ability to meet the Canadian SME definition and whether they were Canadian owned and operated, located in one of two large NHP industry clusters (in the Toronto or Vancouver greater metropolitan areas), and had already internationalised. A firm founder, or member of each firm's senior management team, was interviewed and recorded either in person in Toronto, or using Skype internet telephone service for firms in Vancouver. The data were then transcribed verbatim and coded using NVivo International Entrepreneurial Opportunities: Roles of Networks, Knowledge and Serendipity software and the Gioia method of analysis to identify scripts, and then developed into themes and aggregated dimensions prior to theorising.

The research makes a number of unique contributions. First, it brings together literature from international business, entrepreneurship, migration, information science, and sociology and a unique institutional environment and a sector about which little literature exists, to build a range of new theories which are then empirically supported. Canada's unique institutional environment for trade, immigration, multiculturalism, post-secondary education and NHPs was found to uniquely allow these NHP SME firms to internationalise to many more markets and regions than comparable SMEs in other countries. The Canadian NHP SMEs networked extensively prior to and during internationalisation using third parties, including government bodies, trade associations, government advisors, consultants and immigrant networks. During their internationalisation process, the firms gained significant institutional, technical, market and internationalisation knowledge which enabled them to enter many more markets than other SMEs previously noted in the literature. These geographically-located ties helped firms to: identify previously unrecognized internationalisation opportunities; select foreign markets to enter; locate resources; overcome psychic distance, risk, and constrained resource obstacles; reduce the time required to accumulate knowledge and experience (e.g., internationalisation, market, and technical knowledge) and access and deepen market penetration; acquire privileged knowledge about partners, resources, needs, and capabilities which allowed them to become successful internationalisers; leap-frog internationalisation stages and co-create and co-produce new knowledge and new firms.

The use of geographically-located ties and structural holes involving these third parties allowed the NHP firms to develop the competitive advantage necessary for them to overcome the liability of outsidership and the liability of foreignness in entering new international markets. This is in contrast to the Johanson & Vahlne (2012) theory that firms must be insiders in networks in order to internationalise. Canadian immigrant networks and immigrant transnational firms involved in this process co-created new International Entrepreneurial Opportunities: Roles of Networks, Knowledge and Serendipity firms in their home or regional markets and co-produced knowledge in the process. The type of technical, market and internationalisation knowledge, its content, and the sources of knowledge gained from third parties were all shown to have contributed significantly to the internationalisation process of these firms. The immigrant and transnational immigrant networks shared market and internationalisation knowledge and experience to attract the NHP firms to experiment with internationalisation and Canadian NHP firms shared knowledge of their products and the industry to assist these groups in the co-creation, development and growth of new businesses in foreign markets. Learning mitigated the risk of entering new markets for both sets of entrepreneurs. The research also provided empirical evidence for Mohr & Shoobridge's (2011) theory of how diversity contributes to SME internationalisation. The thesis also found that all the NHP firms had utilised only serendipitous internationalisation methods during all stages of their internationalisation processes. A new typology of serendipity in internationalisation, and theoretical processes of serendipity in internationalisation and in entrepreneurship were also created for the first time.

The research has a wide range of implications for other SMEs as well as for policy and management. First, it illustrates how a unique institutional environment and a range of specific government policies allowed firms to rapidly and successfully internationalise to between 20 and over 50 different markets, unlike other SMEs in other countries and sectors in the literature. Other governments may, therefore, be interested in adopting these policies for their own countries. The research also has implications for SMEs which have not yet undertaken exports or which are new and new to the industry by enhancing their understanding of the pros and cons of different networking approaches when engaging in international activities and providing evidence as to how third parties may be ofvalue during the internationalisation process, based on the experience of what have grown to become the NHP sector's largest knowledge-based firms.