Getting Embedded in Industry Networks Abroad: The Case of LINAK A/S

Publication: Research - peer-reviewConference abstract for conference

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Expanding to markets abroad is a vital opportunity to stabilize and/or expand a company’s revenues. Companies who suffer from small domestic markets try to overcome competitive pressures by entering new markets (Korsakine and Tvaronaviciene, 2012). In particular, the attention for SMEs to increase their activities abroad has turned to the potential of accessing emerging markets with faster growth like the BRIC countries (Brazil, Russia, India and China) in response to the saturation of domestic and European markets (Neupert, et al. 2006, Ulrich, et al., 2014).
However, the challenges associated with entering such foreign markets remain significant, especially for inexperienced SMEs. These challenges can include inadequate knowledge about a host country’s culture, norms, values and business environment, and a lack of embeddedness in the industry networks abroad. Such barriers can often hinder successful foreign market entry. Identifying and overcoming such export challenges, especially in emergent markets has become a focus for academics and policy makers in recent years (Keegan and Green, 2017).
One concept to bridge SMEs who lack experiental knowledge is the incubator in international business to facilitate a firm’s entry into a foreign market. It is best described as a shared office-space facility, including a local person (the ‘incubator’) who has access to potential buyers and can help the SME set up the first sales of its products in the local market, and then to establish a successful foothold in the foreign market (Rask and Bøllingtoft, 2012).
The “incubator” enables the company to acquire market knowledge, at a reasonable cost, and without making a large up-front investment. The “incubator” can also help firms compensate lacking experiental knowledge and lower the risk at least in the entry phase (Hollensen, 2017).
This research project aims to explain how the “incubator” can support the acquisition of lacking experiental knowledge and facilitate the process of getting embedded in markets or industrial networks abroad.
Theoretical foundation
This paper adopts an industrial network approach in line with Mats, et al. (2015) and Johannson/Vahlne (2015). On the one hand it is assumed that resources, actors, exchange- and coordination-mechanism are vital determinants influencing the degree of embeddedness of companies in industry networks abroad (Mats, Holm, Johansson 2015, Johanson and Vahlne, 2015, Raskovic, 2015, Granovetter, 1985, Zukin and DiMaggio, 1990). On the other hand experiental knowledge related to the specific exchange- and coordination-mechanism, which vary from one cultural sphere to another, matters as a requirement to process the exchange and to establish and foster relationships (Johanson/Vahlne, 1977, 2015).
These assumptions indicate that network value accrues to SMEs venturing abroad in result of accessing resources like e. g. distribution-channels and/or networks and of tying up with key actors like brokers, facilitators of networks and/or with key customers and that learning and acquisition of network specific knowlede is a vital precondition.
Acquiring knowledge of how resources are exchanged and of how value is (co-)created among actors is a necessity to effectively process the entry (Johanson and Weding, 2000). In this context markets are defined as overlapping industry networks in which actors exchange resources and co-create value based on specific codes of conduct (Cook and Emerson, 1978, Johanson and Mattsson, 1992, Mattsson 1997).
Johanson and Vahle (1977/1990) highlight that beyond offering demanded resources the aspects of learning and experience influence a company´s embeddedness in industry-networks abroad because these elements build the firm’s knowledge of a market, what, again, influences the decisions about the level of commitment and the activities that grow out of them. Finally this leads to the next level of commitment which triggers more market knowledge, and consequently more experiential learning (Johanson and Vahle, 1977, 1990, 2013). Depending on the level of experiental knowledge and the access to experienced facilitators the process of understanding and entering new markets is more or less difficult and effective.
This leads to the following propositions:
Proposition 1:
The higher the level of the companies’ accumulated experiential knowledge, the faster integration into the foreign market.

Proposition 2:
The use of incubator facilitates a faster integration into a specific foreign market.

Research Design and Data Collection
The aim of the study is to learn how the incubator and experiental knowledge can support the company with a faster integration into the foreign industry networks/markets. To thoroughly demonstrate the phenomenon we have chosen a case with four sub-cases a) two using the incubator and b) two not using the incubator.
An in depth single case study design is applied to illustrate the phenomenon in its real-life context. The illustration of how the incubator was used is expected to show the process of how the incubator supports to get embedded into the industial business networks abroad. By comparing the different cases we hope to better understand how the incubator can substitute in the short run and/or improve the experiental knowledge of the company (Yin, 2002, Eisenhardt, 1989, Stake, 1995).
The data will be conducted based on personal interviews with managers and external experts involved into incuabator initiatives. The experts are people who are appointed to companies who work as incubator/export-facilitator. As we took an industrial network approach (Granovetter, 1985, Erikson, et al. 2015) we will explore the phenomena related to the role/impact of the incubator and the impact of experiental knowledge in the process of getting embedded into industry networks abroad. We have developed an interview guide relating the objects to the key-actors.

First Findings
Until now we have conducted data based on one interview with an expert of the company Linak A/S who have used and not used the incubator when entering new markets to get a first understanding of the involved actors, resources and functions of the incubator. The second round of data collection as described above has just started and findings based on the case study will be presented on the workshop.

Original languageEnglish
Publication date1 Jun 2017
Number of pages12
StatePublished - 1 Jun 2017
Event22nd Center for Business & Industrial Marketing Academic Workshop - Stockholm, Sweden

Workshop

Workshop22nd Center for Business & Industrial Marketing Academic Workshop
Number22
CountrySweden
CityStockholm
Period19/06/201721/06/2017
Internet address

    Keywords

  • Industrial Networks , Embeddedness, Experiental Learning, Incubator