How international new ventures acquire knowledge and subsequently learn from their inter-firm relations : a qualitative study on learning by international new ventures in the context of their inter-firm relations

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knowledge and subsequently learn from their

inter-firm relations

A qualitative study on learning by international new ventures in the

context of their inter-firm relations

University of Amsterdam

Faculty Economics and Business

MSc. Business Administration – International Management Track

Date: 6/24/2016 Jacey Homan

Student ID: 10291482

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Statement of originality

This document is written by student Jacey Homan who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document are original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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Abstract

Internationalization patterns of firms have been frequently discussed over the years since the existence of multi-national enterprises (MNEs). Fairly new additions to this field of expertise are so called international new ventures (INVs) which differ significantly regarding their process and pace of internationalization. While current international business (IB) literature argues that the actual dynamics behind this phenomenon are not completely clear yet, knowledge acquisition and learning seem to play an important role. This study aims to build on existing theories about INVs by analyzing the knowledge transfer and subsequent learning from their inter-firm

relations. An empirical research was conducted on the basis of a pre-defined set of characteristics including several dynamics of the inter-firm relation alongside certain characteristics of INVs. Both the degree of knowledge acquisition and the degree of learning were assessed to offer a complete overview on the impact of inter-firm relations on INVs. Semi-structured interviews were conducted at five separate INVs which were all located in Amsterdam, The Netherlands. The findings suggest that INVs rely significantly on inter-firm relations to learn and possibly overcome obstacles resulting from early internationalization. Inter-firm relations were found to both increase the number of cognitive developments of the INVs as well as change the behavior of the INV as a whole. Furthermore, INVs were found to be characterized by a high motivation to learn and to actively seek knowledge from their inter-firm relations. This study reassures the importance of inter-firm relations and provides a new approach into understanding the deviating internationalization patterns of INVs.

Keywords: International new ventures, INV, international business, inter-firm relations, IFR,

knowledge acquisition, knowledge transfer, knowledge sharing, learning, internationalization, motivation to learn.

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1. Introduction

With the entire world becoming more connected through globalization, the ease of doing business abroad drastically increased. Small, domestic firms have grown to become major enterprises that have proven that their influence reached far beyond business only. However, firms must continuously alter their strategies to capture the benefits that are surrounding the megatrend that is globalization. This resulted in firms operating outside of their country borders, becoming what is now called the multi-national enterprise (MNE). Prior research analyzed these new embodiments of firms, which were found to differ crucially from traditional, domestic firms. Several theories explaining the existence of MNEs arose with the theory of internalization as the most widely-accepted one (Rugman, 1980; Rugman & Verbeke, 2003). This theory states that when market imperfections across borders arise and subsequently transaction costs increase, firms will internalize the cross-border transaction which in turn results in a multi-national firm. Frequent internalization of such transactions has led to the creation of large global enterprises that are active in a high number of different countries.

The evolution of multi-national firms has not stopped there. Currently the international business world welcomes a new sort of MNE called the international new venture (INV). The rising level of connectedness in the world makes it possible for firms to interact with an international market in a very early stage of the firm’s lifecycle. The main point of difference with MNEs is their pace of international orientation, INVs are ‘’born globals’’ and therefore differ significantly from traditional theories of internationalization, such as the Uppsala model presented by Johanson & Vahlne (1977) in which they describe the theory of internationalization as a stage model where firms first go through a domestic stage before internationalizing carefully into culturally close countries. This contradiction made these born-global firms an interesting topic in international management studies ever since.

The current body of literature regarding INVs remains small, yet some important acknowledgements have been made. One of these acknowledgements is the importance of

knowledge and learning of INVs during the process of rapid internationalization (Prashantham & Young, 2011; Zhou et al., 2010). INVs seem to differ in their extent of learning, but the actual dynamics behind this remain unclear (Zhara, 2004). How do INVs learn, and when do INVs learn? An important source of knowledge for firms in general is inter-firm relations (Easterby-Smith et al., 2008; Gupta & Polonski, 2014).

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5 To possibly explain the process of internationalization by INVs in a better way, this thesis is devoted to increasing our understanding on how INVs acquire knowledge and

subsequently learn from their inter-firm relations (IFRs). To do so, interviews on the degree of knowledge acquisition and learning from their respective IFRs were conducted at five different INVs located in Amsterdam, the Netherlands. The next section will offer an elaborated literature review which ends in a conceptual framework. Then, the methodology of this study will be outlined, following by the results achieved from the interviews. Finally, the results are discussed and evaluated and a connection to existing literature is made.

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2. Literature review

2.1 International new ventures (INVs)

A more thorough definition of an international new venture (INV) is offered by Oviatt & McDougall (2005), who studied this phenomenon and define an INV as an organization that is both internationally oriented and active from inception and behaves differently from traditional MNEs. Furthermore, INVs are characterized by the fact that they derive a significant competitive advantage from the use of resources and the output of sales in multiple countries. They argue that in prior research INVs were largely discarded as exceptional cases and therefore current research on INVs remains slim.

Oviatt and McDougall (2005) argue that INVs are sustainable when they possess four elements. The first element is the internationalization of some transactions. Internationalization is necessary for every MNE to bypass market imperfections and internalize certain transactions that would not have taken place otherwise (Williamson, 1991). This is the very basis of one of the most widely accepted theories on MNEs, stating that internationalization is simply a result of cost efficiency (Rugman & Verbeke, 2003). When cross-border transactions cannot take place due to several costs, for example costs associated with knowledge dissemination, the transaction will be internalized which results in firms operating cross-border (Williamson 1991; Rugman & Verbeke, 2003). According to Oviatt and McDougall (2005) INVs have to follow this trend to some extent by stating that some cross-border transactions should be internalized.

The second element is the use of alternative governance structures. New ventures commonly lack sufficient resources to control assets through ownership resulting in ventures internalizing or owning a smaller percentage of resources essential to their survival in

comparison with mature ventures (Oviatt & McDougall, 2005). The third element that

characterizes INVs is the use of foreign location advantages. In essence, firms are multinational because this imposes several benefits that operating domestically does not offer. International markets are becoming increasingly more efficient and accessible and this is a crucial element in explaining the existence of INVs. The fourth and last element is the possession of unique

resources. To generate a sustainable competitive advantage firms must possess resources that are superior in several ways to their competitors (Barney, 1991). In the case of INVs this is no different, unique resources such as knowledge are crucial for a venture to survive when it is

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7 internationally active from the moment of its birth (Oviatt & McDougall, 2005)..

Fan & Phan (2007) continued on building theory on INVs by examining the drivers behind the choice to internationalize at birth or at an early stage. The decision to internationalize at inception is influenced mainly by the size of the home market that the INV is in. The

characteristics of the home market could be a driver for firms to internationalize at inception; matured, small or incapable domestic markets may push a firm to internationalize at an early stage. A firm’s production capacity is indefinitely tied to this phenomenon since it may be profitable to internationalize early when a firm is capable to meet demands that exceed the domestic demand (Fan & Phan, 2007). Finally, several cultural drivers might also push the firm towards early internationalization. For example, the product or service generated by the firm may be more suitable for a culture in foreign countries.

2.2 The role of knowledge

Alongside these elements and definitions that characterize an INV, more recent research has developed a focus on the way INVs deal with the liability of foreignness and liability of newness (Zhou et al., 2010). These liabilities always have to be dealt with when a firm starts to operate abroad, but INVs deal with these in a different manner in contrast to traditional MNEs (Zhou et al., 2010). Firstly, the entrepreneurial spirit that supports international venturing is crucial when establishing a profitable INV. Entrepreneurial spirit, which is largely characterized by pro-activeness and insightfulness, is found to positively influence INV performance. Risk-taking and innovativeness amongst international entrepreneurs is also found to positively influence INV performance (Zhou et al., 2010). The relationship between these constructs is mediated by knowledge capability upgrading which can be defined as increasing one’s knowledge on international venturing. Zhou et al. (2010) found that mainly due to knowledge capability upgrading, INVs can afford to internationalize rapidly because this offsets the liability of doing business abroad.

Research on the role of learning and attaining knowledge by INVs has been extended further by Prashantham & Young (2011), who incorporated the role of country scope speed and international commitment speed. They argue that the pace of internationalization varies

according to INVs’ relative capabilities in accumulating and utilizing knowledge through

exploitative learning. To elaborate, it is found that the speed of learning by INVs is influenced by their absorptive capacity and social capital, where social capital embodies the leading role in this

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8 process. Absorptive capacity, social capital and knowledge accumulation are all found to

positively influence the pace of internationalization by INVs in a positive manner (Prashantham & Young, 2011), concluding that knowledge possessed by INVs enables them to expand at rapid pace.

A final knowledge-related determinant of the pace and scope of internationlization by INVs is found by Manolova et al. (2010), who incorporated the effect of domestic INV’s networks. They found that extensive personal domestic networks positively affect

internationalization by INVs. Moreover, they distinguished that the earlier the new venture engages in inter-firm collaboration, the higher the degree of its internationalization will be. This depicts domestic inter-firm networks as an important determinant in describing how INVs internationalize, especially in transition economies since this study was conducted in Bulgaria.

2.3 Knowledge acquisition and inter-firm relationships

To summarize, INVs are partly able to internationalize in a quicker and more successful fashion than traditional MNEs because of their unique combination between entrepreneurial spirit and knowledge capability upgrading (Zhou et al., 2010). Furthermore, higher levels of knowledge accumulation and absorptive capacity (Prashantham & Young, 2011) and the use of extensive personal networks (Manolova et al., 2010) also positively influence the pace and performance of the internationalization carried out by INVs. All of these imply that the dynamics revolving the way that INVs acquire knowledge are essential to rapidly internationalize and become active in multiple domestic markets at an early stage in the firm’s life cycle.

According to Easterby‐Smith et al. (2008) knowledge acquired through inter-firm relations is essential in this process. They elaborated further on knowledge transfers between firms, stating that several characteristics of both the donor –and recipient firm define the nature of the knowledge transfer. For instance, the donor firm must be motivated to teach and

subsequently the recipient firm must be motivated to learn. A key factor in both cases is the absorptive capacity, which is the ability to recognize the value of new knowledge and to acquire and use that knowledge (Easterby-Smith et al., 2008; Cohen & Levinthal, 1990). Cohen & Levinthal (1990) found in their seminal paper on absorptive capacity that it is one of the major determinants when assessing an organizations’ ability to acquire and use new knowledge.

Furthermore, the level of a firms absorptive capacity is directly associated with a firm’s ability to innovate. In the case of internationalization, superior absorptive capacity enables firms to

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9 internationalize faster and more successfully than others (Prashantham & Young, 2011; Zahra & Hayton, 2008). As INVs are characterized by fast and successful internationalization, absorptive capacity can be assumed to play an important role.

Easterby-Smith et al. (2008) furthermore identified that in any knowledge transfer, the characteristics of the knowledge itself also come into play. Knowledge can be explicit or tacit, with the latter one being the most difficult to transfer as this includes knowledge that is hard to formulate (Smith, 2001). Alongside tacitness, the complexity and ambiguity of knowledge also create barriers in the knowledge transferring process between firms (Easterby-Smith et al. (2008). The final factors that influence the knowledge transfer are the relations between the donor and recipient firm. Different kinds of structures and mechanisms can both improve or impair the inter-firm knowledge transfer and the same goes for the distribution of power and the amount of trust and risk between the firms in question (Easterby-Smith et al. 2008).

Especially the distribution of power and the perceived trust and risk between firms can restrain the knowledge sharing a great deal. Prior research on strategic alliances and inter-firm relations suggests that firms behave opportunistically and avoid both lock-in and long-term commitment (Das, 2006; Parkhe, 1993; Grant & Baden-Fuller, 2004). Thus, it can be assumed that in these types of inter-firm relationships the knowledge transfer may be limited. Therefore, knowledge acquisition in inter-firm relations that do not involve some kind of equity or

investment is perceived to be higher. An inter-firm relation that is more transactional or arm’s length, for example supplier relations, licensing or export partners are found to play an important role in the knowledge acquisition of firms (Albino et al., 1998; He et al., 2013; Gupta &

Polonski, 2014). Albino et al. (1998) researched the knowledge transfer in terms of the customer-supplier relationship and its antecedents. When assessing the industrial district they found that the leading firm in the relationship can increase the effectiveness of the knowledge transfer in by modifying the nature of the knowledge. Albino et al. (1998) suggest that when the knowledge transfer needs to be fast and reliable between customer and supplier, knowledge should be codified. However, increasing levels of knowledge codification may lead to an increased adoption of codes by competitors within the same district. This in turn could be countered by reducing the number of suppliers that the leading firm has. Furthermore, Albino et al. (1998) confirm that the knowledge transfer between firms is of great value when it is shaped in the most efficient way.

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10 More recent studies on the knowledge transfer between firms also incorporate the role of the leading firm, or in other words, the firm with the most power in line with Easterby-Smith et al. (2008). He et al. (2013) found that the flow of knowledge increased when supply chain actors had limited alternatives and when the dominant firm exercised restraint in the use of their power, proving that the study of Albino et al. (1998) still holds. Moreover, He et al. (2013) found a positive relationship between knowledge acquisition and supply chain performance, reaffirming the important role of knowledge in inter-firm relations.

Knowledge sharing in international inter-firm relations is also essential in sustaining a profitable multinational network according to Gupta & Polonski (2014). Amongst other things, they found that multinational firms operate more effectively by sharing knowledge with

outsourced firms that reflect the customers’ structure. The process of knowledge-sharing is furthermore found to be the strongest at the product development stage. These insights from recent studies prove that knowledge flows between firms are a valuable aspect of inter-firm relations and are therefore relevant to analyze.

2.4 INVs and inter-firm relations

Despite the increased academic attention surrounding INVs, research around knowledge acquisition of INVs remains slim, especially in the context of inter-firm relations. Most recent research is focused on examining the birth of INVs, the drivers of INVs and their pace and performance. The acknowledgement of the essential role of knowledge acquisition by INVs is made, yet it is not fully understood how this knowledge assimilation takes place (Albino et al., 2013; He et al., 2013). It is argued that INVs learn differently than traditional MNEs and process knowledge in a more effective way (Zahra & Hayton, 2008; Zhou et al., 2010; Prashantham & Young, 2011). This might imply superior absorptive capacity regarding knowledge (Zhou et al., 2010; Prasantham & Young), however Cohen & Levinthal (1990) argue that firms with superior absorptive capacity derive this from R&D investments which INVs in their initial stage are not likely to have. One might argue that in the case of INVs, the actual dynamics of their knowledge acquisition remain a black-box. This gap in the literature was also highlighted by Zhara (2005) who stated that ‘’INVs appear to differ in the extent of their learning, but the sources of these variations are not well defined. To fill this gap in the literature, future studies need to examine how and when these ventures learn’’.

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11 with the liability of foreignness and the liability of newness, which both play a crucial role in the evolution of a domestic firm into a multi-national firm. Traditionally, dealing with these

liabilities was done in a step by step fashion in line with the Uppsala model by Johanson & Vahle (1977). INVs however disregard this step by step method and take on these liabilities of both foreignness and newness through a persisting entrepreneurial spirit and their developed knowledge capability upgrading (Zhou et al., 2010). The distinctiveness of INVs therefore is recognized, yet the learning process of INVs in the context of inter-firm relations is mentioned rarely in current literature.

This is noteworthy because inter-firm relations are considered crucial vehicles when transferring knowledge (Easterby-Smith et al., 2008; Manolova et al., 2010; Albino et al., 1998) and therefore might aid INVs in overcoming their liability of foreignness and liability of

newness. Specifically, an inter-firm relation that is more transactional or arm’s length, for example supplier relations, licensing or export partners is found to play an important role in the knowledge acquisition of firms (Albino et al., 1998; He et al., 2013; Gupta & Polonski, 2014). It is already known that INVs learn and acquire knowledge differently than traditional MNEs (Zhou et al., 2010; Fan & Phan, 2007; Prasantham & Young, 2011) and it is also proven that inter-firm relations actively shape the knowledge possessed by firms (Easterby-Smith et al., 2008; Manolova et al., 2010; Albino et al., 1998). By combining these two insights, this thesis hopes to increase our understanding on the essence of INVs. To guide this thesis more

specifically, the following research question was created: How do international new ventures

(INVs) acquire knowledge and subsequently learn from their inter-firm relations (IFRs)?

2.5 Conceptual framework

This section will explain each of the measurements used to study the knowledge acquisition and subsequently learning by INVs. Each measurement or dimension was carefully derived from widely accepted literature to ensure validity of the results. The eventual framework showing how each element relates to one another is visualized at the end of this section (figure 1).

2.5.1 Characteristics of the knowledge

In terms of knowledge acquisition, the acquisition process is dependent on the nature of the knowledge that is acquired. Easterby-Smith et al. (2008) defined knowledge alongside three measures: tacitness, complexity and ambiguity. These three dimensions of the knowledge

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12 transfer will be measured to accurately categorize the different knowledge flows from inter-firm relation and subsequently the acquisition carried out by INVs. Tacit knowledge or uncodified knowledge is harder to transfer because it entails knowledge that is hard to write down or quantify (Easterby-Smith et. al, 2008). Therefore, most of this knowledge is acquired from individuals who already own this piece of knowledge. To measure tacitness, participants will be asked to what the degree the piece of knowledge is quantifiable, and whether or not this

knowledge is exclusively possessed by people in the firm. To measure complexity, participants were asked to what degree they perceive the knowledge given by inter-firm relation is complex and why. The same holds for ambiguity, focusing on the interpretation on knowledge and the degree of possible speculation. All in all, tacitness, complexity and ambiguity will make up for the nature of the knowledge.

Next to the nature of the knowledge, also the content of the knowledge will be analyzed. What knowledge is exactly being shared? Is it operational knowledge, such as proposing changes in standard routines and procedures or is it economic knowledge regarding price points or

marketing activities? Another example might be organizational knowledge, regarding governing structures of firms and overall firm effectiveness. Finally, knowledge from inter-firm relations can also address individual issues, such as information on employee productivity. An inductive approach is used, because the content of knowledge is almost impossible to categorize

beforehand. Therefore the content of the knowledge will be analyzed after gathering the data. This way, bias before the interviews will be minimized and it will leave room to any form of knowledge to be interpreted. By linking the content of the knowledge and defining its

characteristics, I expect to form a clear picture of the knowledge that is being acquired by INVs through IFRs.

2.5.2 Characteristics of the INV

Following the research of Easterby-Smith et al. (2008), the first INV characteristic that needs to be taken into account is their motivation to learn. According to Easterby-Smith et al. (2008), motivation to learn is essential in the knowledge transferring process because it both incorporates a firm’s willingness and attitude towards learning. These affect a firm’s absorptive capacity and therefore are considered the first important characteristic of the INV when analyzing their knowledge acquisition process.

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13 widely accepted paper on motivation introducing two major determinants of motivation to learn: conscientiousness and goal orientation. Both these constructs are found to have a positive effect on one’s motivation to learn (Colquitt & Simmering, 1998). Conscientiousness stands for a trait that reflects qualities such as being reliable, hardworking, self-disciplined, and persevering. Goal orientation consists of two components which are learning orientation and performance

orientation. Increasing competence by developing new skills is the focus of learning orientation and a performance orientation demonstrates competence by meeting normative-based standards. Participants will be asked about each of these dimensions to assess their motivation to learn.

The second characteristic is an INV’s age. An INV will be classified as active as soon as it engaged in actual business and/or served customers. More accurately, the date of establishment will be retrieved from the Kamer van Koophandel (KvK) to pinpoint the exact date. From there on, I will compare different age groups across INVs to determine differences in knowledge acquisition and learning patterns. This distinction in age is important, because older INVs

naturally possess a greater absorptive capacity and therefore might acquire and use knowledge in a different, possibly more effective way.

The third and final characteristic is the current size of the INV, which was measured in number of employees, in line with major researches on firm size from both Hart & Oulton (1996) and Axtell (2001). The size of a firm might influence its organizational learning abilities (Zhou et al., 2010; Easterby-Smith et al., 2008) and therefore size is considered the final INV

characteristic in determining the dynamics of the knowledge acquisition and learning process. Firm size and age are intertwined and follow similar growth patterns (Angelini & Generale, 2008), and therefore the emphasis will be on firm size which will be measured according to the number of employees a firm has.

To summarize, motivation to teach and both firm size and age are proposed to have a moderating effect on the relation between the knowledge acquisition by INVs and subsequent learning by INVs.

2.5.3 Motivation and dynamics of the IFR

Several dynamics of the inter-firm relation between INVs and consecutive firms are also assumed to shape the knowledge transferring process. The first dimension that is considered to be of influence is the motivation to teach by the donor-firm, in this case the firm from which the INV acquires knowledge (Easterby-Smith et al. 2008). According to Easterby-Smith et al. (2008)

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14 this motivation can greatly influence the amount of knowledge that is being transferred between the donor and recipient firm. In current literature, measurable components of one’s motivation to teach were not found. Therefore, I decided to evaluate the potential benefits that teaching a different firm has. These benefits translate to economic efficiencies (such as cost decreases or profit optimization) and to the degree of protection by the teaching firm (such as patents and degree of secrecy). Both economic benefits and degree of information protection together indicate the motivation to teach.

Following the model of Easterby-Smith et al. (2008) regarding inter-organizational knowledge transferring processes, certain dynamics of the relationship itself between firms are also of importance. Different kinds of structures and mechanisms can both improve or impair the inter-firm knowledge transfer and the same goes for the distribution of power and the amount of trust and risk between the firms in question (Easterby-Smith et al. 2008). To measure the power distance, participants will be asked about the dominant firm in the relation in terms of authority and autonomy. A firm that has leverage on the other firm and exhibits authority indicates a high power distance, while inter-firms relations of a more collaborative nature with no real

autonomous figure indicate low power distance.

As degree of trust and subsequently risk will be hard to measure, mutual dependence will be used as an indicator for trust. According to Park & Lee (2014) high levels of dependence indicate high levels of trust and vice versa. Participants were therefore asked how they evaluate their dependence on the opposing firm in the inter-firm relation. Following trust, participants will also be asked to rate the potential risk that comes into play with having the inter-firm relation in question as well.

To conclude, the motivation to teach by the donor firm, the power relationship between the INVs and the respective firm, and the amount of trust and/or risk make up for all

characteristics of the IFR (inter-firm relation) that potentially moderate the relation between knowledge acquisition by INVs and subsequent learning by INVs.

2.5.4 Learning by INV

The final and most crucial stage in the knowledge transferring process is the learning stage by the INVs. To categorize and define learning I follow the seminal paper by Fiol & Lyles (1985) on organizational learning, stating that learning can be divided into the concept of learning and the content of learning. Regarding the content of learning, knowledge must first be assimilated

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15 by a firm so that it has cognitive associations with the knowledge gathered. This can be

translated to the degree an employee thinks that the knowledge is valuable as opposed to disregarding it.

After a cognitive association is established, a change in behavior by the firm must be observed translating to the fact that actual learning demands a change in behavior. Fiol & Lyles (1985) therefore argue that the higher the level of cognitive development, the higher the

observational change in behavior. A change in behavior is a very broad statement, it can mean a small change in behavior such as a change in a single employee’s way of working or it can concern a more broad change such as changing a process that is fundamental to the firm as a whole. In the case of INVs, both cognitive development and change in behavior will therefore be assessed during the interviews.

When all of these measurements and proposed effects are put together, it results in the following overview (figure 1, page 15)

Characteristics of the knowledge:

 Tacitness, complexity and ambiguity  Content of knowledge Learning by INV:  Cognitive development  Change in behavior Characteristics of the INV:  Motivation to learn

 Firm size/firm age

Dynamics of the IFR:  Motivation to teach  Power distribution  Level of trust  Degree of risk

Figure 1: Overview of proposed learning process by INV

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3. Methodology

3.1 Definitions

INVs are defined as a firm that operates in at least one country other than their home country from the moment of inception, or shortly thereafter. To confirm whether or not an INV was established, Kamer van Koophandel (KvK) records were consulted. To confirm whether or not an INV operated in at least two countries from the moment of inception I spoke to each founder of the firm in question. To further confirm the activity in two or more countries, websites of INVs were consulted.

Inter-firm relations refer to all relations that an INV has with other firms, such as supplier relations, exporting partners, service bureaus, developers and so on. An inter-firm relation must be continuously active and does not include one-time only transactions made with other firms. Furthermore, to be considered as an inter-firm relation, the nature of the relation must be to aid the INV in doing their business.

3.2 Design

The data was collected by conducting semi-structured interviews at five separate INVs.

Interviews were used as a manner of data collection because knowledge sharing is a phenomenon that is hard to quantify and involves many variables (Riege, 2005; Lin, 2007; Ipe, 2003). To justify my research design in a more thorough manner, Corley (2012) states that qualitative research is a sound choice when one wants to measure the deeper layers of a process, in this case a knowledge transfer. Semi-structured interviews were used because they are conducted on a basis of a predefined set of questions that enable the interviewer to have a good sense of what topics need to be covered. Furthermore, as opposed to fully structured interviews, semi-structured interviews leave room to discuss deviant topics if necessary (Fylan, 2005). Semi-structured interviews therefore ensure flexibility (Saunders, 2011). Lastly, semi-Semi-structured interviews create the potential for unexpected insights that could contribute to relevant findings of a study (Fylan, 2005).

At each INV, the employee that was handling either one or multiple inter-firm relations on behalf of the firm was interviewed. In two cases the INV contained more than five employees and as a result two interviews were conducted with two separate people handling inter-firm relations to increase the reliability of the data. In total, seven interviews were conducted, two

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17 interviews at two INVs with more than five employees and three interviews with three start-up INVs. During the interviews respondents were asked questions on four topics: the characteristics of the knowledge, the characteristics of the INV, the dynamics of the inter-firm relation and the extent of learning within the INV as a result of engaging in a inter-firm relation. The full interview template can be found in the appendix.

3.3 Sample

This study focused on INVs located in the Netherlands, which have one or multiple inter-firm relations, both of domestic or of international nature. A total of five INVs were incorporated in this study, based on several characteristics. First of all, the sample contained both smaller and larger INVs to compare the differences in knowledge acquisition and learning between these two groups. Smaller INVs tend to acquire and process knowledge differently than larger INVs because of the degree of experience. To adequately make conclusions on the knowledge

acquisition and learning by INVs, both sizes of workforce were taken into account when creating this sample. An INV was considered larger when it housed five or more employees. More

precisely, two out of five INVs had five or more employees while the remaining three INVs had less than five employees.

INVs were also selected on the nature of their inter-firm relations. Inter-firm relations were classified into two groups based on the coordination that typifies the relation, in line with the research of Sobrero & Schrader (1998) on inter-firm structures. Sobrero & Schrader argue that there are two main systems of coordinating an inter-firm relation which are contractual coordination and procedural coordination. Contractual coordination refers to the mutual exchange of rights between the parties involved in a relationship towards the production of results. The nature and characteristics of these rights vary along the notion of contractual

elements that are present. These rights are predominantly used to set up operating procedures and to resolve possible disputes among the partners. Contractual coordination is mostly used in relations that benefit the most from clear contractual agreements such as suppliers (Sobrero & Schrader, 1998). Procedural coordination is the second typology which relates to the mutual exchange of information towards the production of results. In this form of coordination organizational learning seems to be a distinctive component of the inter-firm relation whereas contractual coordination deemphasizes organizational learning (Sobrero & Schrader, 1998).

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inter-18 firm relations, both types of coordination were included in this sample. In total, two INVs with contractual coordination in their IFRs were interviewed, while the remaining three INVs used procedural coordination mechanism in their IFRs.

3.4 Procedure

I visited each of the INVs in their own offices or other workplaces within a timeframe of approximately 20 days. Participants were taken into an empty, silent room where they could speak freely and the interviews were conducted during office hours. Participants were informed of the main goal of my paper, anonymity was assured and then the interviews started and lasted between 20 and 25 minutes, according to the recordings. In most cases the template of the interview was fully used and I had enough room for follow-up questions diverging from my interview template. The interviews were conducted English, regardless of the fact that English was not the native language of every participant. Afterwards the participants had the option to provide feedback on the interview and other general comments.

3.5 Analysis

Each interview was recorded and transcribed to fully enable the coding-process and to visually display the data. Each transcript was then carefully analyzed using a combination of inductive and deductive coding. Inductive coding means that data was analyzed without prior identification of the dimensions I am testing during the knowledge transfer ((Miles & Huberman, 1984). This greatly reduces the bias as codes are constructed on the basis of the collected data instead of beforehand (Miles & Huberman, 1984). Alongside inductive coding, I also used deductive coding based on the conceptual framework (figure 1) that is shown above (page 12). Each dimension was operationalized and these operationalizations were transformed into codes that accommodated relevant parts of the interview data.

To code the data I used QSR NVivo 10, which is a software tool designed specifically to code and analyze qualitative data. The codes of each interview were then grouped together and compared to indicate the direction of relationships proposed in this research and to identify reoccurring themes. The results will be discussed in the next section of this paper. Please note that the names of participants are not displayed during the presentation of the results because many participants requested full anonymity during the data collection. Also when you guarantee anonymity, people will speak more freely and less restrained (Corley, 2012). In the results

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19 section, INVs will be referred to as INV-1, INV-2 and so on. Certain informative characteristics of INVs will be displayed, such as size, type of inter-firm relation and sector of operation (table 1).

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4.0 Results

This chapter provides an overview of the findings that were retrieved from the interview data. The chapter consists of four parts. First, the findings on the characteristics of the knowledge alongside the content of the knowledge will be discussed. Secondly, the findings on the characteristics of the INV will be shown. The third section will cover the motivation and dynamics of the inter-firm relations (IFRs). The fourth and last section will discuss the findings on learning by INVs. To effectively discuss each INV while maintaining complete anonymity the following table shows the characteristics of each respondent (table 1). When the number of employees exceeded five, two interviews were conducted at that respective firm instead of one.

# Sector Number of

employees

Interviews Job role respondents

Coordination of IFR (Sobrero & Schrader, 1998)

INV-1

E-commerce

Eleven Two Online project

managers (2) Procedural coordination (Web developing) INV-2 E-commerce

Nineteen Two Marketing manager

& Business developer Procedural coordination (B2B Marketing) INV-3 Hygiene products

Three One Founder Contractual

coordination (Supplier) INV-4 Leisure

products

Four One Founder Contractual

coordination (Supplier) INV-5

E-Commerce

Four One Founder Procedural

coordination (Web developing)

Table 1: Overview of characteristics per respondent

4.1 Findings on the characteristics and content of the knowledge

The content of the knowledge varied greatly between IFRs with a contractual coordination as opposed to a procedural coordination. Knowledge that was shared in a contractual coordination solely contained product related information and operational knowledge. In a contractual

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21 coordination type of IFR, it seemed that the knowledge flows were less rich as opposed to IFRs embedding a procedural coordination. A typical description of this was offered by INV-3.

‘’We have a specific image in our head as to how we want our packaging to be done, but because they are producing it, they have the knowledge for it. Sometimes they tell us that something is not possible but I would not consider this to be actual knowledge.’’ – INV-3

The content of the knowledge that was shared in IFRs with procedural coordination mechanisms seemed more comprehensive and covered a wider range of topics such as organizational

knowledge and market knowledge. In this type of inter-firm relation the content of knowledge ranged from market analysis information to feedback on website structuring as exemplified by INV-2.

‘’A lot of knowledge we get for example is feedback. Mostly it is feedback on our product but also on the structure of our website, where the foundation of our company is hosted. For example, we receive tips on how information of certain partners is displayed.’’ – INV-2, respondent 1

The complexity of the knowledge followed the same trend; in contractually coordinated IFRs, the knowledge was deemed complex by every INV while in procedurally coordinated IFRs the knowledge was regarded as mostly straight-forward. The nature of the IFR is decisive in this case; IFRs that are of a more comprehensive nature naturally lead to higher levels of complexity in the knowledge that is being acquired by INVs. The complexity however does not necessarily lead lower levels of knowledge acquisition according to multiple INVs, including INV-2.

‘’I would see it as complex yes; it seems easy on the one hand because it is often small stuff. But you cannot change small stuff without having the bigger picture. Complexity is necessary to transfer certain pieces of information.’’ – INV-2, respondent 1

This indicates that in both complex and less complex knowledge transfers, INVs acquire the knowledge either way. Tacitness however seems to have a different effect on the knowledge acquisition of INVs. INVs that faced high levels of tacit knowledge argued that they would rather acquire explicit knowledge because it is easier to process and comprehend.

‘’A lot of the knowledge we get is based on experience by our partner, which makes it harder to understand for us. In these cases we have to trust on their expertise, but it is easier to use more explicit pieces of knowledge.’’ – INV-5

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22 Again, IFRs that governed a procedural coordination showed that the level of tacitness was perceived to be higher by the INVs. This indicates that in IFRs governing contractual

coordination, knowledge is easier acquired because of its explicit nature. In each interview the respondents claimed that explicit knowledge would make the acquisition process easier. Finally, the level of ambiguity in the acquired knowledge was found to be low in this sample, especially in contractually coordinated IFRs. Almost every INV stated that the knowledge they receive from their IFRs is straight-forward and leaves little room for speculation, as can be seen below. INV-3 however stated that the knowledge is ambiguous in some cases.

‘’No, it is kind of straight-forward. Especially the technical stuff is like really specific. You do not need skills, but you need some background knowledge though.’’ – INV-1, respondent 1

‘’The knowledge is pretty clear so there is no room for speculation. I think they make sure that there is no room for speculation because it would only make things harder.’’ – INV-5

‘’Interesting question, I think there is a lot of space for your own interpretation. At this stage in our relation the knowledge is not always really specific. We hope it will get there sooner or later’’ – INV-3

From the interview data it can be suggested that complexity, tacitness and ambiguity of the knowledge influence the knowledge acquisition by INVs in a negative way when they arise. Although the INVs are still acquiring knowledge, most of them argue that it would be easier if knowledge was less complex and specific rather than complex and ambiguous. The full overview of the findings can be found below (table 2).

Dimension Evaluation Exemplary quotes

Content Content of the knowledge in contractually coordinated IFRs ranged from market information to website structuring, while content of the knowledge in procedurally coordinated IFRs was mainly on product information and operational knowledge.

- ‘’We talk about the difference between the UK market and the Dutch market. That is the most important thing at the moment.’’ – INV-2, respondent 2

- ‘’We have a specific image in our head as to how we want our packaging to be done, but because they are producing it, they have the knowledge for it.’’ – INV-3

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Tacitness Some knowledge shared through IFRs was deemed tacit because it is unique to individuals and hard to quantify. Respondents argued that they would prefer explicit

knowledge as it is easier to comprehend. Tacitness seems to be higher in procedurally coordinated IFRs. Higher levels of ambiguity might restrain the inter-firm knowledge transfer (Easterby-Smith et al., 2008).

‘’A lot of the knowledge we get is based on experience by our partner, which makes it harder to understand for us. In these cases we have to trust on their expertise, but it is easier to use more explicit pieces of knowledge.’’ – INV-5 - ‘’I guess tacit, yes. It is unique to individuals. At the

moment we share some metrics but most is more unique yes. The next step is making it more explicit I guess.’’ – INV-2, respondent 2

Complexity Complexity was higher in procedurally coordinated IFRs as opposed to contractually coordinated IFRs. Respondents indicated that complex knowledge was not necessarily harder to acquire and is a requisite in certain situations. Higher levels of complexity might restrain the inter-firm knowledge transfer (Easterby-Smith et al., 2008).

- ‘’Complexity is necessary to transfer certain pieces of information.’’ – INV-2, respondent 1

- ‘’I guess it is some kind of complex, for example metrics containing feedback on our website. But it does not have to be very complex.’’ – INV-5

Ambiguity Only in rare cases was knowledge acquired through IFR labelled as abstract, most of it was characterized as very specific and this was seen as a benefit by the INVs. Higher levels of ambiguity might restrain the inter-firm knowledge transfer (Easterby-Smith et al., 2008).

- ‘’No, it is kind of straight-forward. Especially the technical stuff is like really specific. You do not need skills, but you need some background knowledge though.’’ – INV-1, respondent 1

- ‘’The knowledge is pretty clear so there is no room for speculation. I think they make sure that there is no room for speculation because it would only make things harder.’’ – INV-5

4.2 Findings on conscientiousness, goal orientation and performance orientation by INVs

During the interviews INVs were asked to comment on their own conscientiousness and goal orientation which both make up for their motivation to learn (Colquitt & Simmering, 1998). Each INV responded similar to conscientiousness by stating that their INV possesses qualities such as perseverance, reliability and discipline. Especially the smaller INVs claimed that these three qualities are essential in surviving the start-up phase of their firm, in line with findings of Zhou et al. (2010) who claim that entrepreneurial spirit is essential. By internationalizing at an early stage in the firm’s life cycle, perseverance, reliability and discipline, in short conscientiousness, are crucial drivers for success.

‘’If you consider our situation, we started this company with three people and our own money. In the beginning everything is kind of vague and discipline is the only thing that gets you past that. Discipline and relying on the people around you.’’ – INV-3

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‘’Because when you start a company it is always hard, you have to work and you have to deal with a lot of disappointments too. Traits like perseverance are needed in those times.’’ – INV-4

The learning orientation of the INVs in this sample was also found to be of a strong nature. Respondents argued that they value the learning of new skills from their inter-firm relations a great deal and state that it is important to rapidly internationalize. Both small and large INVs argue that they put learning new skills amongst their top priorities. Start-up INV-5 characterizes learning new skills as essential in their online environment.

‘’We are an online company and the online environment changes quickly. We want to keep everyone up to date so we can keep the platform running. And by just doing things we learn a lot, I believe.’’ – INV-5

Performance orientation on the other hand was less high amongst the interviewees. Especially smaller INVs argue that they try to meet normative-based standards in their industries but speak of a ‘’gray area’’ regarding performance standards, while the larger INVs stated that they meet all standards and benchmarks for their industries.

‘’There is no real gray area; it is strictly to the point. We monitor the development of standards, especially in Germany. In the Netherlands things are a bit less on point, but it is important anyhow.’’ – INV-2, respondent 1

‘’We are working with, a lot of certifications; it is building the product and moving on sometimes. It’s pretty low key. It is not like the food industry for example where standards are way more important’’ – INV-4

All in all, conscientiousness and goal orientation where found to be high in almost every INV while performance orientation differs between small and large INVs. Based on these findings it can be concluded that INVs naturally possess a high motivation to learn, which positively affects the knowledge acquisition process (Easterby-Smith et al., 2008). A full overview of the

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Conscientiousness Conscientiousness was operationalized into degree of perseverance, reliability and discipline (Colquitt & Simmering, 1998). All respondents indicated that they possess these traits and that they place a high value on each of them. Respondents argue that these traits are necessary to start a company, especially an international company. Smaller INVs specifically argued that

conscientiousness is essential in the start-up phase of the firm.

- ‘’If you consider our situation, we started this company with three people and our own money. In the beginning everything is kind of vague and discipline is the only thing that gets you past that. Discipline and relying on the people around you.’’ – INV-3

- ‘’Because when you start a company it is always hard,

you have to work and you have to deal with a lot of disappointments too. Traits like perseverance are needed in those times.’’– INV-4

Learning orientation

Learning orientation was operationalized into giving value to learning new skills to increase competence (Colquitt & Simmering, 1998). Every respondent argued this to be needed in establishing and growing as a firm. Increasing competence through developing new skills is deemed crucial by both small and large INVs.

- ‘’We want to keep everyone up to date so we can keep the platform running. And by just doing things we learn a lot, I believe.’’ – INV-5

- ‘’I think it’s a lot of self-learning. So you have to develop your own skills to eventually increase your competence. But learning matters.’’– INV-1, respondent 2

Performance orientation

Performance orientation was operationalized into meeting normative-based standards that are set in your industry (Colquitt & Simmering, 1998). The findings from the interviews provide two distinctive attitudes towards these standards. One attitude is operating in a ‘’gray area’’, meaning that only a part of the standards are met. This happens more frequently at smaller INVs. The second attitude is meeting all normative-based standards, which was characterizing for larger INVs.

- ‘’We try to be a kind of sustainable, we don’t want to pollute in our daily work and there are many standards and certifications for this. It is impossible to meet all of them, and also because we are smaller no one really cares, I believe.’’ – INV-3

- ‘’There is no real gray area; it is strictly to the point. We monitor the development of standards, especially in Germany. In the Netherlands things are a bit less on point, but it is important anyhow.’’ – INV-2, respondent 1

4.3 Findings on IFR motivation and IFR dynamics

The first IFR characteristic that was analyzed is the motivation to teach by the firms that are in an inter-firm relation with the INVs. The main reason for inter-firm relations to share knowledge with the INV was economic benefit. Sharing potential useful knowledge created a pay-off

according to most of the respondents. When knowledge is acquired through an IFR, reciprocity is created which is the basis for a long lasting relation according to start-up INV-3 and INV-5.

‘’First of all, they are seeking a long-term relation. We are a small company now, but they know that and when we get bigger they will have bigger profits because of us. If they share more information with us and we evaluate them as quality partners and that we can rely on them, it means future profits for them.’’ – INV-3

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‘’Well, they benefit from sharing because it creates reciprocity; they tell us how the German side works and how we can use this for the Dutch platform as well. So the better we run, the better they will run. And then of course it’s because we pay them.’’ – INV-5

The remaining respondents argued that in their IFRs sharing knowledge is the foundation of the relation itself. The INVs are in this relation because they rely on them to share knowledge so that the INV can increase its profits in the end. Other than this, no other real benefits were observed.

‘’Well not benefits, but more that they get paid to explain things. It is not necessarily true that they benefit from the knowledge that is shared with us.’’ – INV-1, respondent 1

‘’They benefit from sharing knowledge because it is essential in our partnership. If they would not share knowledge, we would look for a different educator.’’ – INV-2, respondent 2

Motivation to teach was also measured through the degree of protected information and patents on knowledge possessed by IFRs. In this sample, neither of these topics influenced the

motivation to teach. According to the INVs in this sample no real sensitive information could be discussed and more importantly no patented knowledge was possessed by IFRs.

‘’There is no real protected knowledge, I believe they can share everything freely without putting themselves at risk or breaking patents of whatsoever.’’ – INV-1, respondent 1

In one case however the INV was asked to sign a non-disclosure agreement (NDA) before engaging in the inter-firm relation. The NDA was created to make sure that no knowledge spills occur outside of the IFR. Therefore, the NDA serves as a tool to increase the motivation to teach by an IFR.

‘’They diminish the risk of sharing knowledge by setting up a NDA’s I guess. We signed and now it is okay, but it is a very different approach. We would never do that.’’ – INV-2, respondent 2

Several dynamics of the IFRs were also found to influence knowledge acquisition by INVs. Firstly power distance, in other words the distribution of authority within the IFR. The small INVs in this sample argued that they do not consider themselves to possess the authority. They experienced that due to their size and age they cannot afford themselves to exhibit authority.

‘’Because we are small they dictate the terms most of the times. For example in a normal situation we would give them 30% but we now we have to yield 40%. In these cases they definitely have the authority.’’ – INV-3

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‘’I would say they have a little more authority, because we are not as big and not very powerful compared to them.’’ – INV-4

The larger INVs (INV-1 and INV-2) both argued that in their IFRs that no real power distance was observed. They characterized the power distance as 50/50, meaning that both firms possess an equal amount of authority or autonomy. An interesting observation was made in regards to power distance and mutual dependence. More than half of the respondents measured authority through the level of dependability they have on one another. Authority was only perceived as legitimate when there are high levels of dependability involved. This suggests that power distance and mutual dependence are interwoven which is in contrast with Easterby-Smith et al. (2008) who classified power distance and trust, operationalized in this study as mutual

dependence, as separate dimensions. The level of authority was usually measured according to the dependability of the INV on the IFR. Both power distance and mutual dependence were found to be higher in IFRs of small INVs as opposed to larger INVs.

‘’I can go to a different supplier but it is far away and a hassle.’’ – INV-4

‘’That is why we have a lot of trust in them, because they are our only partner in Germany that is helping us enter the market. So we really want to make it work, if the relationship ends it would have a lot of negative impact on us.’’ – INV-5

‘’The authority is kind of equal, if we would fire them they would have to find another job, but if they say that they are no longer working for us then we would have to find new developers too. I do know that it is kind of difficult for us to get new developers, so they might own some authority over us.’’ – INV-1, respondent 1

The final dynamic of IFRs that was taken into account is the degree of risk. Risk involved in IFRs naturally impedes the knowledge transfer between firms (Easterby-Smith et al., 2008). Respondents however reported that generally, no real risk was taken while engaging in their IFRs. If anything, risk regarding lock-in with several IFRs was the only possible risk mentioned.

‘’Now we are doing fine, but what if we invest too much into them to help us with entering the German market, and it turns out it is not working, that would be risky.’’ – INV-5

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Motivation to teach

Motivation to teach was measured through the economic benefits of teaching and the degree of protected

knowledge and patents. Economic benefits were found to be present in every IFR and served as the main reason the share knowledge. Some respondents argued that besides economic benefits, knowledge sharing lead to a reciprocal IFR. Respondents furthermore stated that instances of protected knowledge were not present in their IFRs. In a unique case a non-disclosure agreement (NDA) was signed, to ensure save knowledge

transferring.

- ‘’If they share useful knowledge, I will evaluate him positively and he can stay longer. If they share nothing we will probably replace him after a while. So they benefit that they get to stay.’’ – INV-1, respondent 1 - ‘’Well, they benefit from sharing because it creates

reciprocity; they tell us how the German side works and how we can use this for the Dutch platform as well. So the better we run, the better they will run. And then of course it’s because we pay them.’’ – INV-5 Power distance Power distance was found to be low for the IFRs that

larger INVs where in, while it was significantly higher for smaller INVs, due to their size which makes them less powerful. Furthermore, power distance was considered interwoven with mutual dependence. Respondents argued that authority between firms is influenced by the level of dependability on one another. This stands in contrast with the classifications of Easterby-Smith et al. (2008).

- ‘’The authority is kind of equal, if we would fire them they would have to find another job, but if they say that they are no longer working for us then we would have to find new developers too. I do know that it is kind of difficult for us to get new developers, so they might own some authority over us.’’ – INV-1, respondent 1 - ‘’I would say they have a little more authority, because

we are not as big and not very powerful compared to them.’’ – INV-4

Trust Trust was operationalized into mutual dependence based on the research of Park & Lee (2014). Respondents stated that while mutual dependence is hard to assess, most of them experience high levels of dependability, especially in IFRs of smaller INVs. Finally, mutual dependence was assessed when respondents were questioned on power distance, indicating that the two might be interwoven.

- ‘’I can go to a different supplier but it is far away and a hassle.’’ – INV-4

- ‘’That is why we have a lot of trust in them, because they are our only partner in Germany that is helping us enter the market. So we really want to make it work, if the relationship ends it would have a lot of negative impact on us.’’ – INV-5

Risk Risk was found to be low in every consecutive INV and

IFR, resulting in no impediment of the knowledge acquisition process. If anything, risks associated with lock-in were mentioned the most frequently. The low levels of risk stimulate inter-firm knowledge transfers (Easterby-Smith et al., 2008).

- ‘’Now we are doing fine, but what if we invest too much into them to help us with entering the German market, and it turns out it is not working, that would be risky.’’ – INV-5

- ‘’Well yeah, if we lose them there would be problems, because they know a lot about us.’’ – INV-1,

respondent 1

4.4 Findings on learning by INV

Learning is divided into two parts according to Fiol & Lyles (1985), which are the concept or learning and the content of learning. The concept of learning refers to the degree in which knowledge is deemed as valuable or relevant and subsequently stored while the content of Table 4: Analytical table for characteristics of the inter-firm relation (IFR)

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29 learning refers to observing an actual change in behavior because of the stored knowledge. The data retrieved from the interviews show that every INV in this sample both stored knowledge originating from their IFRs and subsequently changed their behavior because of it. Respondents argued that apart from the fact that not all knowledge was directly useful, it certainly sparked their cognitive associations. All five INVs, both small and large, claimed that knowledge acquired from their IFR was evaluated and stored, as can be seen in the quotations below.

‘’They offer us a lot of information on how to improve our product. Not everything is as useful but most of it is stored indeed, either in my mind or I write it down.’’ – INV-4

‘’Well we store the information, for sure. We are very data-driven so we have everything on paper or online. Even less relevant pieces of information are stored, because you never know when you might need it.’’ – INV-2, respondent 1

The two larger INVs in the sample proven to be more advanced in storing valuable knowledge than the smaller INVs. Both large INVs stated that they have separate systems accessible by both the INV itself and their IFRs to fully optimize the knowledge acquiring process.

‘’Like I mentioned, the project managers write everything in cards and also my instructions for them are in these cards. All cards are stored in Trelo and they answer and reply in the same cards. And those cards are stored on a board that each developers has. So Trelo really helps us with storing valuable knowledge, yes.’’ – INV-1, respondent 1

‘Initially, the knowledge is stored in my mind, but the first thing I do is to get it written down in the systems. We have multiple CRM systems to help us with that and anyone can access them.’’ – INV-2, respondent 2

From the findings we can derive that INVs in this sample actively store valuable knowledge that is acquired from inter-firm relations. Besides storing the knowledge, all five INVs also

confirmed that the knowledge that is acquired from IFRs actually lead up to a change in both their working behavior and typical working processes. Knowledge gained from IFRs both immediately and over time changes the working behavior of INVs. These changes in working behavior cover a wide range of topics; respondents stated that changes due to acquired

knowledge from IFRs include changes in product characteristics, redirecting marketing efforts, production knowledge, operational knowledge and technical knowledge.

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‘’They have a conversion expert for their website for example, and sometimes we get knowledge from him on what to change our own website, for example. This is knowledge that is directly affecting the way we work.’’ – INV-1, respondent 1

‘’For example, sometimes the packaging producer for example tells us what is possible and what is not. We created a lot of prototypes and he offered feedback on them. This directly affected the way we package our products.’’ – INV-3

Amongst the smaller INVs, which were in the start-up phase of their firms, knowledge was found to be sought actively from their IFRs. Internationalizing at an early phase in the firms life cycle requires a lot of knowledge to offset the lack of experience according to INV-5.

‘’When we started in the Netherlands and Belgium for example, we bit of more than we could chew. Our foreign partners that helped us running the student platform provided us knowledge on other aspects as well, also because we consulted a lot with them.’’ – INV-5

The respondents claimed that IFRs are considered to be very helpful in the start-up phase of a firm. They can provide knowledge on several topics that small INVs do not yet possess and are possibly struggling with. Actively seeking knowledge from IFRs can help the INV to increase its competence and to improve their product or service. When knowledge is sought actively it is also implemented more immediately according to INV-4.

‘’We asked them a lot about the quality of our product and what they think about it. They probably have seen many firms like us and therefore we believe them to possess valuable information. When this information is shared it mostly immediately leads up to changes in our working behavior.’’

In short, INVs create cognitive associations due to knowledge acquired from IFR and

subsequently use this knowledge to change their behavior. The results indicate that IFRs are an important source of information for INVs and the acquired knowledge possibly aid them in their prematurely process of internationalization. A full overview is found below (table 5).