Theory Of Internationalization

2. Theory

The theory section is focused on the internationalization process of SMEs and the network model of internationalization. Thereafter, the second part reviews the literature related to business networks including the key terms related to networking.

2.1 Internationalization in networks

Internationalization

Internationalization is broadly defined as the process of geographical expansion in international economic operations across national country’s borders (Manolova et al., 2010; Ruzzier et al., 2006; Amal and Rocha Freitag Filho, 2010). According to Ruzzier et al. (2006), a firm operates in international business when a firm sells or buys its products in foreign countries, or cooperates with a foreign counterpart in a certain industry.

The economical perspective which relates to multinational enterprises and their international operations and the behavioral perspective that is emphasized on the process of internationalization. This study is focused on the behavioral perspective of the internationalization of SMEs (Amal and Rocha Freitag Filho, 2010; Ruzzier et al., 2006). Additionally, Ruzzier et al., (2006) suggests that the models concerning the internationalization of SMEs can be divided into the market, firm or entrepreneur perspective. This study is focussed on the firm perspective since it emphasizes on the “stage” model of internationalization. The two general stage models of internationalization are the Uppsala internationalization model (U-model) and the innovation-related model (I-model), which describes the development of internationalization and the international operations. Both models are driving the incremental nature of the internationalization process in which the activities and resources are seen as the main components of the behavior of the firm (Ruzzier et al., 2006; Amal and Rocha Freitag Filho,

Ruzzier et al., (2006) suggests, that these business relationships in international networks can be further developed through international extension, penetration, and international integration. Despite the entry node, the development of the international relationships process goes through five business relationship stages: the experimental export stage, the pre-relationship stage, the early stage, the development stage and the final stage. Across the stages the relationship factors experience, commitment and adaptations of the parties grow and the factors distance and uncertainty decreases. Furthermore, the stage of internationalization is related with the way in which firms establish their relationships. For instance the higher the level of internationalization, the more likely that the SME is dedicated to the business networks (Jansson and Sandberg, 2008; Hilmersson and Jansson,