The influence of network relationships on the foreign market entry
decisions of SMEs
‘A multiple case-study analysis on two Dutch SMEs in the bicycle industry’
By
MARNIX DREISE
MSc Thesis for International Business and Management
Supervisor: dr. Florian Becker-Ritterspach Co-assessor: mr. drs. Henk Ritsema
decisions of SMEs
‘A multiple case-study analysis on two Dutch SMEs in the bicycle industry’
By
MARNIX DREISE
University of Groningen
Faculty of Economics and Business
MSc Thesis for IB&M
MSc International Business and Management
Supervisor: dr. Florian Becker-Ritterspach Co-assessor: mr. drs. Henk Ritsema
ACKNOWLEDGEMENTS
Haarlem, May, 2010.
After several years of studying International Business and Management, it was my province to finish my study by writing a Master thesis. The topic of this thesis beholds the influence of network relationships on the foreign market entry decisions of SMEs.
I gained interest for this topic during my six months stay in Bangalore, India, where I worked as a project manager for a Dutch-Indian consultancy company that primarily assisted Dutch SMEs willing to expand their business horizon. I was and still am interested by the question how these SMEs made their foreign market entry decisions. As my study has its emphasis on the international activities of MNEs, I found it interesting to put the emphasis on the international activities of SMEs and thereby broaden my international horizon.
During the writing process of my thesis, there were the occasional “ups and downs” in my motivation and I would like to thank a special few their support.
First off, I would like to thank Yalçin Cihangir and Dave Deutsch of De Fietsfabriek and Angelique van Rijn and Ad Tummers of Urban Bike Concepts for their availability, time, interest and valuable answers during my interviews in order to conduct a multiple case-study analysis and thereby to answer my research question.
Second, I would like to thank my friends for their interest in the topic, their support and the conducted social activities in order to unwind. A special thanks goes out to Tobias Braam who proved out to be an important sparring partner with valuable insights.
Finally, I would like to thank my supervisor Florian Becker-Ritterspach for his enthusiasm, analytical insights and valuable tips to enhance the quality of my work.
Without all these persons, I couldn’t have written my Master thesis with so much zeal and interest.
Thanks again!
ABSTRACT
Title: The influence of network relationships on the foreign market entry decisions of SMEs
Author: Dreise, M.G.J.
Date: May, 2010
Keywords: internationalisation, network relationships, foreign market entry decisions, SMEs, decision-making unit, experience, multiple case-study, bicycle industry
TABLE OF CONTENTS
1. INTRODUCTION_________________________________________________________ 5 1.1 Background ___________________________________________________________ 5 1.2 Problem discussion _____________________________________________________ 6 1.3 Research question and approach ___________________________________________ 7 1.4 Disposition____________________________________________________________ 7
4. RESULTS ______________________________________________________________ 39 4.1 De Fietsfabriek _______________________________________________________ 39 4.1.1 Basic company and founders information _______________________________ 39 4.1.2 International activities_______________________________________________ 39 4.1.3 The experience of the decision-making unit ______________________________ 40 4.1.4 How did network relationships influence the market entry decisions in time? ___ 41 4.2 Urban Bike Concepts___________________________________________________ 45 4.2.1 Basic company and founders information _______________________________ 45 4.2.2 International activities_______________________________________________ 45 4.2.3 The experience of the decision-making unit ______________________________ 46 4.2.4 How did network relationships influence the market entry decisions in time? ___ 47
1. INTRODUCTION
1.1 BACKGROUND
A large proportion of firms starts to internationalise their business as the world has become globalised (Zain & Ng, 2006). Internationalisation does no longer merely involve large firm enterprises, known as MNEs, but also incorporates many small and medium-sized enterprises, known as SMEs (Kundu & Katz, 2003; Zain & Ng, 2006). Consequently, SMEs more often experience international issues. These SMEs need to consider the opportunities and risks from the competition on a global level, including the challenges on a managerial level.
Finally, in the internationalisation of SMEs it has been investigated that SMEs actively network (Gilmore et al, 2006) and that they are encouraged and motivated by their network relations to internationalise (Coviello & Martin, 1999; Gilmore et al, 2006; Harris & Wheeler, 2005). On top, network relationships have influenced SMEs in their foreign market entry choices being market selection and entry mode (Chetty & Holm, 2000; Coviello & Martin, 1999; Coviello & Munro, 1997; Ojala, 2009; Zain & Ng, 2006).
1.2 PROBLEM DISCUSSION
In the last few years, the internationalisation of SMEs from a network perspective has been researched more often (Zain & Ng, 2006). Still, scholars opt for more research on the internationalisation of SMEs regarding the influence of network relationships (e.g. Coviello & Martin, 1999; Gilmore et al, 2006; Harris & Wheeler, 2005; 1999, Ojala, 2009).
First, the influence of different types of network relations has not been researched before (Ojala, 2009). Relations are in fact the building blocks of a network where actors exchange certain resources (Beije et al, 1993). These relations might differ in their executed role and can be considered as an important step in internationalisation (Hohenthal, 2001).
Second, in the literature on the influence of network relationships on internationalisation, most researchers do not take the role of the decision-making unit into account when interacting with network relations.
Finally, according to the author, no study has been conducted on the influence of network relationships on the foreign market entry decisions of Dutch SMEs.
1.3 RESEARCH QUESTION AND APPROACH
Based on the problem discussion, the following research question is of particular interest in this study:
How do network relations influence the foreign market entry decisions taken by the decision-making unit of a SME, and is there a connection with different network relations and with how a decision-making unit networks?
The research question is interesting for small and medium-sized enterprises, as they play an important role in the Dutch economy (Bijmolt and Zwart, 1994; Hoevenagel and Wolters, 2001).
The open research question of this thesis tries to find an answer based on explanation rather than incidence questions (Yin, 1981). It wants to explain how “network relations” affect “the strategic decision-making on internationalisation” and to explore which relations are important and how a decision-making unit networks.
Based on Whetten (1989) and in order to answer my research question, the building blocks (i.e. concepts) of my conceptual model are explored and explained during my research, why the depicted relationships exist, and how they are related. Consequently, a more valid model emerges at the end of my research.
Considering the explanatory and exploratory element in comprehending and describing the influence of different types of network relationships on the foreign market entry decisions taken by a decision-making unit, a multiple case-study research is relevant.
1.4 DISPOSITION
2. THEORETICAL FRAMEWORK
The theoretical framework introduces the reader to the research fields of internationalisation and to the development of a network perspective which is deemed the most suitable to explain the internationalisation activities of small and medium-sized enterprises (SMEs). Further, a review of the findings from previous studies that link the network perspective and SME internationalisation are given and gaps are formulated. The theoretical framework will be the input for the conceptual framework as described and explored in the final part of this chapter.
2. 1 INTERNATIONALISATION
Since the area of interest of this thesis has its theoretical base originating from internationalisation research, this section starts from a broad view of internationalisation to introduce the reader briefly in this field. After this, the focal point will turn towards SME internationalisation and to the importance of decisions regarding foreign market and mode of entry.
Internationalisation has become an everyday reality for modern-day firms by creating a business environment that has never been so interconnected, independent and global. On top, internationalisation is a trend that either directly or indirectly affects all kinds of firms regardless of size and orientation (Zain & Ng, 2006). The term internationalisation is vague and used in different ways (Welch & Luostarinen, 1988; in Buckley & Ghauri, 1999). Welch and Luostarinen (1988) coin the term internationalisation as “the process of increasing
There are many studies that examine different aspects of internationalisation, searching for paths, reasons, processes and barriers that are present among internationalisation for firms. However, most of these studies are portrayed towards large firm enterprises, i.e. MNEs (Coviello & Martin, 1999; Coviello & Munro, 1997; Ojala, 2009; Zain & Ng, 2006). Overall, these studies do not suffice to properly explain the internationalisation activities of SMEs.
2.1.1 The internationalisation activities of SMEs
Many theories are prevalent that try to grasp the internationalisation concept. Some well-known theories are the transaction cost theory, the OLI-eclectic paradigm, the process-model of internationalisation, and the network perspective. These theories and their suitability to grasp the internationalisation activities of SMEs are discussed next.
The transaction cost theory and OLI-eclectic paradigm
One main theoretical contribution to explain internationalisation is the transaction cost theory of Coase and Williamson (Brouthers & Brouthers, 2003). This theory argues that firms choose the international location for each activity they perform where the costs of each economic transaction, i.e., the transfer of property rights of goods or services between economic actors, will be minimized (Coviello & Martin, 1999; Hohenthal, 2001; Tsegay, 2003). Conversely, the OLI-eclectic paradigm of Dunning advocates that economic transactions are not the only aspect influencing internationalisation (Coviello & Martin, 1999). This paradigm depicts that a firm should invest in a country where the antecedents of either ownership (i.e. firm-specific assets and skills), internalization (i.e. ability to transfer ownership-advantages across borders which depicts the entry mode), or location (i.e. market potential and low market risk) -advantages are present (Coviello & Martin, 1999; Hohenthal, 2001; Rugman & Verbeke, 2003; Westhead et al, 2001).
Nordic authors heavily influenced the development of a behavioural perspective instead of the traditional economic perspective and focused on the internationalisation process of firms (Coviello & Martin, 1999; Elo, 2005; Hohenthal, 2001; Ojala & Tyrvainen, 2007; Ojala, 2009; Zain & Ng, 2006). One of these theories is the process-model of internationalisation.
The process-model of internationalisation
The process-model of internationalisation of Johanson and Vahlne (1977), also known as the Uppsala-model, is one of the most influencing theories in the behavioural perspective explaining the internationalisation process. According to Johanson and Vahlne’s study, when a firms starts to internationalise, the experience of that firm in conducting business abroad and the knowledge about the (foreign) market will decide the firm’s commitment and amount of resources allocated to the target market (Johanson & Vahlne, 1977). A firm will only acquire experience or experiential knowledge by a direct presence in the foreign market (Hohenthal, 2001; Johanson & Vahlne, 1977). By being present in the foreign market, the market knowledge of the firm increases. As the market knowledge and experiential knowledge increases, the uncertainty to invest in this foreign market decreases, resulting in an increase of market commitment. As such, the process-model depicts an incremental path of internationalisation where each step towards international commitment represents a rational decision based on the gradually acquired knowledge by the firm (Coviello & Martin, 1999; Hohenthal, 2001; Johanson & Vahlne, 2003). Hence, a learning effect transpires where commitment is not solely dependent on economic grounds. Finally, the process-model argues that a firm starts internationalising to psychically close or similar markets as the perceived uncertainty and hence the risk in losing resources in these markets is low (Johansson & Vahlne, 1977).
Criticism has been directed to this model in not explaining when the process begins or how it is triggered, and not being able to give an explanation for firms that start exporting from the outset, known as “born globals” or “international new ventures” (e.g. Hohenthal, 2001; Westhead et al, 2001).
The network perspective
The network perspective focuses on the behaviour of a firm in the context of inter-organisational and interpersonal relationships where it is dependent on resources controlled by other firms (Coviello & Martin, 1999; Tsegay, 2003; Ojala, 2009).
The network perspective draws on the economic theory of resource dependency (Coviello & Martin, 1999; Tsegay, 2003). This theory argues that firms manage their dependence of resources by structuring relationships and establishing formal or semi-formal links with actors who are strategically important where there are relative few alternatives forehand (Tsegay, 2003). By doing so, a firm increases its knowledge. However, the resource dependency theory sees resources as knowledge resided in property rights of goods and services instead of managerial competence of people (Tsegay, 2003). This is primarily explained as the resource dependency theory takes the industry or firm as its unit of analysis (Ibid). Furthermore, the resource dependency theory does not say anything about the internationalisation process of firms (Westhead et al, 2001).
The network model of Johanson and Mattsson (1988) acknowledges the learning effect caused by other actors and gives a explanation how a network is developed and maintained. Except for the network perspective, the above-mentioned theories portray foreign market entry decisions as a rational response to conditions in the market and are seen to be made on the basis of objective information gathered systematically via market research (Albaum et al, 2002; Ellis, 2000; Hotho, 2008). However, information disseminates through society via social interaction and this “subjective” information is especially important when objective information is difficult to acquire (Ellis, 2000, Ellis & Pecotich, 2001; Harris & Wheeler, 2005). Moreover, as stated by Hotho (2008) and Westhead et al (2001), decisions can also be non-rational or even anarchic.
Especially for SMEs, internationalisation is based on non-rational decisions and un-controllable events (Agndal & Elbe, 2007; Ellis, 2000). This is mainly the case as SMEs draw upon fewer resources in terms of financials, management and information as opposed to their larger counterparts (Coviello & Martin, 1999; Coviello & Munro, 1997; Zain & Ng, 2006). If a SME is faced with increasing demand and a volatile competitive market, successful internationalisation may well require the firm to leverage the capabilities and resources of other organisations in order to efficiently survive domestically and globally (Coviello & Munro, 1997; Etemad, 2004; Jansson & Sandberg, 2008). The network model of Johanson and Mattson (1988) acknowledges the importance of other relations and their influence on the internationalisation of firms as foreign market opportunities are seen to be communicated to the firm via its relationships with network partners. Various authors, including recent studies of Ojala (2009), Gilmore et al (2006) and Harris and Wheeler (2005), support the influence of network relations as initiators for internationalisation activities in SMEs.
Still, the network model of Johanson and Mattsson (1988) has it shortcomings. As indicated by Chetty and Holm (2000), and Westhead et al (2001), the network model does not include the aspirations of the entrepreneur and the subsequent decisions he or she makes. In addition, the network model has a focus on the business network of a firm, but not on the social network (Ellis, 2000; Chetty & Holm, 2000; Elo, 2005). Moreover, the model is unable to explain how a firm moves from one situation (e.g. “early starter”) to another (Elo, 2005). Although the network model of Johanson & Mattsson (1988) has it shortcomings, its network perspective has been widely researched and developed in order to grasp the complexity of SME internationalisation (Johanson and Vahlne, 2003; Ojala, 2009; Zain & Ng, 2006). Especially the incorporation of experiential knowledge is interesting. To gain experiential knowledge, one interacts with its environment (Hohenthal, 2001; Johanson & Vahlne, 2003). Making decisions on foreign investments determines a process where different people carry out many small acts (Hohenthal, 2001). It can be described as a bargaining process among a multitude of relations (Chetty & Holm, 2000; Coviello & Martin, 1999; Hohenthal, 2001; Ojala, 2009). As such, the network perspective is a multilateral model that links experiential knowledge and decision-making (Coviello & Martin, 1999).
Based on the above discussion, and not disregarding other theories, a network perspective is deemed the most functional to explain the internationalisation activities of SMEs (e.g. Etemad, 2004; Jansson & Sandberg, 2008; Ojala, 2009; Zain & Ng, 2006).
All these theories try to capture and explain certain issues related to decisions on internationalisation activities. The next section will explain the antecedents of these decisions that are deemed important in this thesis.
2.1.2 Foreign market entry decisions
organisational structures related to the international activities are commonly referred to as “modes” (Agndal & Elbe, 2007; Albaum et al, 2002).
The foreign “market selection” and the mode of entry are interrelated (Agndal & Elbe, 2007; Ojala, 2009) as the market the firms choose to select, affects the mode considered suitable. Ellis (2000) outlines the importance of market entry decisions: “Of all the decisions involved
in the incremental internationalisation of the firm, perhaps none is more important than the decision to enter a new foreign market” (p. 443). Hence, market selection and mode of entry are among the most critical in foreign market entry decisions and in formulating an international strategy for their international activities (Agndal & Elbe, 2007; Albaum et al, 2002; Ellis, 2000).
Market selection and entry mode
Market selection is “the process of opportunity evaluation leading to the selection of foreign
markets in which to compete” (Albaum et al, 2002: 154). Selecting the right foreign markets is an important managerial decision and has major impact on the success or failure in international operations (Ojala & Tyrvainen, 2007). Preferably, a fit between the firm and the prospective market is important as the foreign market might function as a catalyst for the firm to enter other foreign markets. Moreover, to a certain degree, the firm ties resources and operations to this foreign market (Albaum et al, 2002). Consequently, the market the firm selects affects the entry mode considered suitable.
The entry mode is the mode that is used to penetrate the target market (Albaum et al, 2002). The entry mode is important as it determines the degree of a firm’s control and to an extent the degree of its commitment in the target market (Ibid). According to Albaum et al (2002):
an outline of the most common export modes (direct and indirect) and non-exporting modes (p. 249)1.
Foreign market entry decisions are often influenced by psychic distance as it portrays the perceived difficulty and uncertainty about the foreign market (Albaum et al, 2002; Dikova, 2009; Fletcher & Bohn, 1998; Ojala & Tyrvainen, 2007).
Psychic distance
Johanson and Vahlne (1977) coin psychic distance as: “The sum of factors preventing the
flow of information from and to the market” (p. 24). Examples are differences in business practices, education, language, culture and industrial development. Conducting business in a psychically distant market leads to environmental unfamiliarity (Albaum et al, 2002; Dikova, 2009; Johanson & Vahlne, 1977; 2003). This unfamiliarity creates high levels of uncertainty that will hamper effective decision making. Uncertainty about the foreign market reduces when market knowledge on the differences in e.g. business practices are obtained (Johanson & Vahlne, 1977; 2003). This market knowledge is primarily obtained through experience in the foreign market, known as experiential learning (Dikova, 2009; Johanson & Vahlne, 1997; 2003). Hence, in general, firms will internationalise to psychically close markets as the uncertainty these firms face will be lower.
However, it is possible that a network might provide this crucial market information on the foreign market which will reduce uncertainty. As such, a network might play an important role in the pattern of internationalisation. Although the network perspective is deemed most suitable to explain the internationalisation activities of the SME, it is yet unclear what the antecedents of the network behold. Hence, the next section describes the antecedents of the network.
1
2.2 THE NETWORK CONCEPT
A network is a vague and ambiguous concept, described and measured in numerous ways (Carson et al, 2004; Godfroij, 1993; Oerlemans et al, 1993). Three examples illuminate the ambiguity.
Meeus and Oerlemans (1993) describe an abstract network view. They define networks derived from a geographical perspective. According to them, networks are present on three geographical levels, being global, national and local. At a global level, network relationships involve actors located at an international level, while a national level involves actors within a country. A local level involves network relationships with actors located inside “indentified
geographical boundaries” (Ibid, p. 59).
Oerlemans et al (1993) distinguish networks anchored in macro, meso, and micro-economic networks. Macro-economic networks focus on aggregate relations between firms and the environment, while micro-economic networks focus on the behaviour of individual actors. Meso-economic networks result in a remaining focus between the environment and the actors. Finally, Perry (1999) distinguishes a more tangible network classification consisting of “family and ethnic”, “place”, “organisational”, and “buyer-supplier” networks. A family and ethnic network is built on ties between family and personal contacts, embedded in close-knit communities such as family business. A place network constitutes of a network based on geographic proximity taken the form of “Silicon Valley”. Organisational networks have ties based on ownership or membership such as joint ventures or industry bodies. At last, a buyer-supplier network is founded on the interaction between buyer-suppliers and buyers.
These three examples mark the ambiguity of the network concept. According to Godfroij (1993) the conceptual confusion about networks arises from the different disciplines that use contrasting definitions of network, as well as from the researchers’ different knowledge perspectives.
When analyzing networks in a business environment, networks are often described as being present somewhere between the market (environment) and the hierarchy of the firm (Albaum
The market – hierarchy network is an economic view where the firm interacts with the market to coordinate economic activities in order to enhance the firm’s value system (Beije et al, 1993; Morsink, 1997). The firm interacts on a continuum between hierarchy and the market where it decides if the value system of the firm enhances whether it acts more as a hierarchy or more as a market player. The hierarchy consists of a strong coordination along the marketing channel of the firm. If vital parts of the marketing channel (e.g. transactions of production or R&D) are tightly coordinated or internalized by the focal firm, the network is considered as a strong vertical network, i.e. a hierarchy (Beije et al, 1993). If parts of the marketing channel are loosely coordinated and where (market) actors might fulfil transactions of production or R&D, the network is considered as a strong horizontal network, i.e. a market (Ibid).
The structure of a network in international business builds upon the market – hierarchy network (Tsegay, 2003), as explained in the following paragraph.
2.2.1 Network structure in international business
In international business, a company is engaged in a business network of domestic and international parties (Albaum et al, 2002). In this network, there are ongoing inter-organisational interactions among the focal firm and its network (Ellis, 2000; Tsegay, 2003). According to Tsegay (2003), a business network composes of horizontal and vertical networks. Horizontal networks include organisations in the same industry whose primary goal is to co-ordinate their skills, resources and functions among each other in order to enhance the specific industry. These horizontal networks can be seen as partially co-operative and partially competitive network relationships as they want to solve a common problem or exploit a common market opportunity (Ibid). Vertical networks include organisations at different levels of the marketing channel where they coordinate their channel-activities in order to be more productive (Beije et al, 1993; Tsegay, 2003).
Based on Albaum et al (2002) and Tsegay (2003), the following figure portrays the interaction between a focal firm and its network.
Figure 1: Horizontal and vertical business networks, author (2009)
In this depicted network structure, network relationships are portrayed as business relationships between a focal firm and its network (Albaum et al, 2002; Tsegay, 2003; Beije
et al, 1993). However, Godfroij (1993) and Oerlemans et al (1993), argue that it is important to include the network on an individual level as the interplay between actors is manifested in a relationship (Coviello & Munro, 1997). On top, useful insights into the relationship may also be sourced from the social network theory which considers the transmission of information by means of interpersonal networks (Ellis, 2000; Ellis & Pecotich, 2001).
Especially in the analysis of the SME network, where the manager2 predominantly carries out networking, it is important to include his/her personal relations (e.g. Carson et al, 2004; Coviello, 2006; Ellis, 2000; Ellis & Pecotich, 2001; Gilmore et al, 2006; Hadley & Wilson, 2003; Harris & Wheeler, 2005). For this reason, the social network of this decision-making unit is portrayed.
2
Figure 2: Social network of decision-making unit, author (2009)
Building on the business and social network, in this thesis the network definition of Zain and Ng (2006) is opt for as it incorporates business and social relationships:
“A network can be defined as the relationship between a firm’s management team and employees with customers, suppliers, competitors, government, distributors, bankers, families, friends, or any other party that enables it to internationalize its business activities.”
(p. 184).
Network approach
In the development of relationships with other actors, one can make a distinction between active and reactive networking (Gilmore et al, 2006; Ojala, 2009). Active networking refers to the situation “where initiation for networking is taken by the seller” (Ojala, 2009: 52). In active networking, network linkages are actively used by the seller when carrying out activities in different fields, e.g. marketing and internationalisation (Gilmore et al, 2006; Moini et al, 2008). In reactive networking “the initiation for networking comes from outside
the firm” (Ojala, 2009: 52) such as an intermediary, customer or supplier in the foreign market (Ellis, 2000; Johanson & Vahlne, 2003). In reactive networking, network linkages are meagrely used in carrying out activities (Gilmore et al, 2006; Johanson & Vahlne, 2003).
Network formality
A recurring theme in network literature is the use of network formality (Carson et al, 2004, Ojala, 2009). Network formality is defined as “the extent to which formal business network
Martin, 1999; Harris & Wheeler, 2005; Ojala, 2009). There is a general conformity that formal relationships are associated with business activities between two or more actors in the network, while informal relationships are related to personal relationships with family members and friends (e.g. Coviello & Martin, 1999; Coviello, 2006; Ellis, 2000; Ellis & Pecotich, 2001; Ojala, 2009).
On top of formal and informal relationships, several authors (e.g. Chetty & Holm, 2000; Ellis, 2000, Ojala, 2009) signify the importance of intermediary relationships. In intermediary relationships, there is no direct contact between the buyer and the seller, but a third party comes in, such as a government agency, bank or consultancy who initiates international business activities between the buyer and the seller (Ellis, 2000; Ojala, 2009).
Consequently, a business network will primarily be associated with formal and intermediary relationships; while a social network will primarily be associated with informal relationships. A network is dependent on its actors and the relationships they have. The development and mutual benefit these relationships generate are affected by the position of the focal firm in the network but are also determined by the strength of the relationship (Beije et al, 1993; Carson
et al, 2004; Hohenthal, 2001).
According to Carson et al (2004), the network literature should include relational components to determine the strength of the relationships.
Strength of the relationship
According to Oerlemans et al (1993), the strength of a relation is “determined by the amount
that share common views and have an understanding (Ellis, 2000; Hohenthal, 2001). As such, trust may be seen as a pre-requisite for international activities.
Although literature has emphasized the importance of trust in the strength of relationships, Carson et al (2004) opt for two more dimensions, being commitment and co-operation. Commitment is defined as “the time and effort in maintaining network linkages” (Ibid, p. 374) and can be measured in terms of frequency of communication between a focal party and its relationships. On top, Carson et al (2004) found that strong relationships were especially apparent in a stable environment. Consequently, the stability of the network is influenced by the commitment of relationships. According to Coviello (2006), one should include the interaction dimension “durability” to understand the stability of the network. Durability is measured in terms of the length of the relationship, being “short term”, “medium term” or “long term” (Ibid). As such, commitment can be measured as frequency of communication between and durability of the relationships.
The final dimension is co-operation. Co-operation is defined as the level of interdependence between “the firm” and its network members (Carson et al, 2004). According to Carson et al (2004) it is measured in terms of the level of “co-ordinated market activities and the level of
reciprocity and mutual compatibility regarding goals of the firm and the linkage partners” (p. 374). In other words, it depends on who is in charge of the transactions (i.e. reciprocity) and if the goals of the focal party (i.e. firm or manager) are in line with other network members. Hence, the co-operation definition shares similarities with the market-hierarchy perspective where antecedents such as power and conflict play a role. According to Beije et al (1993), who describe the market-hierarchy perspective, the strength of a relation depends on the amount of power (i.e. reciprocity) and conflict (i.e. different goals) that are associated with the transaction.
Generally speaking, as most firms use networks to facilitate their internationalisation activities (e.g. Chetty & Holm, 2000; Johanson & Mattsson, 1988; Ojala, 2009), strong relationships facilitate a bigger impact on the strategic decisions concerning internationalisation (e.g. Coviello & Munro, 1995; Coviello & Munro, 1997; Coviello & Martin, 1999; Ellis, 2000; Ellis & Pecotich, 2001; Ojala, 2009; Zain & Ng, 2006).
2.3 A REVIEW IN THE FINDINGS OF PREVIOUS STUDIES
In the line of this thesis, it is interesting to find out how the network perspective is incorporated in the internationalisation literature on SMEs. The most relevant findings from previous research for this thesis has been found in Agndal and Elbe (2007), Bell (1995), Coviello and Munro (1997), Coviello and Martin (1999), Lin and Chaney (2007), Ojala (2009), and Zain and Ng (2006). In particular, it is of this thesis interest to find out how different types of network relations (i.e. formality and type of network) influence the foreign market entry decisions, i.e. market selection and its ensuing entry mode, in their interaction with SMEs. In this section, the findings of these scholars are discussed in order to formulate interesting research gaps and a subsequent conceptual model.
2.3.1 Market selection & entry mode
decisions. Likewise, Bell (1995) and Coviello and Martin (1999) find that interfirm relationships have an impact on mode of entry as they offer an “easy solution” for SMEs to link to a dealer’s network, adopt existing distribution channels and offer a “total solution”. These findings are in line with Zain & Ng (2006), who state that the entry mode choice is influenced by network relationships by adapting to the requirements of the business partner. However, both these studies investigated software SMEs and the offer of a total solution was more applicable as the “major network partner” was a hardware producer.
According to Ojala (2009), the mode of entry is more determined by industry specifics. This is in line with Agndal & Elbe (2007). In their research of ten Swedish SMEs in the tourist industry the entry mode was chosen that deemed most suitable to survive and to tap in to resources from their network partners abroad. This argument is clearly stated by Lin and Chaney (2007) in their study on the influence of domestic networks on the internationalisation process of eleven Taiwanese SMEs (2007: 579) “The firms’ dependence on the interfirm
networks in information sourcing and production could be also an important factor in the firms tending to follow partners’ entry modes.”
Generally speaking, in their initial phase of internationalisation, SMEs follow their “major” client(s) to a foreign market and are thus influenced by their clients in their market selection and mode of entry. Besides, when SMEs entered a psychically distant market, their network relationships and experience reduced the “barrier” of psychic distance. However, it remains theoretically unclear in what way different types of network relations influence the market selection and mode of entry as these authors do not provide a theoretical categorization of the different network relationships.
2.3.2 The different types of network relationships
Coviello and Munro (1997) are one of the first authors who make a categorical distinction on the influence of network relationships in the internationalisation of SMEs. They found that in the initial phase of internationalisation, SMEs follow their major partner, but in time, the SME develops an internal network of informal and formal relationships that influence the market selection and entry mode. This is in line with the study of Coviello and Martin (1999).
managers must be willing to establish business relations with various types of people including their ex-employers, relatives, friends, ex-colleagues, and other types of contacts.”
(Ibid: 203), but fail to categorize these network types as personal or social relationships. In their study on the internationalisation of ten Swedish SMTFs, Agndal and Elbe (2007) describe the importance of “intermediaries”. These intermediary parties are outbound business tour-operators and agents who facilitate and connect the Swedish firms with the local customer. Apparently, these intermediaries are used to overcome uncertainty of the foreign market and a lack of (financial) resources (Agndal & Elbe, 2007). Besides these intermediaries, personal relations, government and trade-agencies influence the internationalisation of SMEs. However, Agndal and Elbe (2007) fail to explicitly categorize these “network relationships” and their role.
Ojala (2009) is the first author who properly incorporates network literature in the internationalisation of SMEs. According to Ojala (2009), the selection of Japan was primarily a strategic choice, but formal, informal and mediated (i.e. intermediary) relationships facilitated the market development. Mediated relationships were important for firms that did not have any existing formal or informal relationship that they could use for their market entry. These firms developed networks with non-profit consultancy organisations in the home and/or the host country which enabled networking with potential distributors for market entry. In addition, Ojala (2009) is the only author who makes a clear distinction between an active and reactive network approach. Ojala (2009) finds that reactive networking is evident among informal relationships, while active networking is evident among formal and intermediary relationships. On top, Ojala (2009) states that network relationships primarily have effect in the market selection when reactive networking is conducted.
From the previous findings, it is apparent that different types of network relationships influence the internationalisation of SMEs on market selection and entry mode. However, several antecedents of the network literature are in deficient in these seven articles as shown in the following table.
Table 1: incorporation of network literature in the internationalisation of SMEs
Authors Relations influence foreign market entry decisions?
Relative importance (strength) of different network types? Distinction in network approach? Incorporation of decision-making unit? Agndal & Elbe (2007)
Yes, but entry mode is influenced by industry specifics
No, but do categorise between formal, informal and intermediary
Yes, but do not link to network relations
No
Bell (1995) Yes, follow major client in combination with less experience and adopt mode of entry
No, only mentions “network relations”
No No
Coviello & Munro (1997)
Yes, follow major client and adopt mode of entry
No, but do categorise between formal and informal
No No
Coviello & Martin (1999)
Yes, follow major client in combination with less experience and adopt mode of entry
No, but do categorise between formal and informal
No No
Lin & Chaney (2007)
Yes, follow major client but entry mode is more base d on industry specifics
No, and don’t categorise properly (only business)
No No
Ojala (2009) No, existing relations are used to connect to other parties and entry mode is based on industry specifics
No, but do categorise between formal, informal and intermediary
Yes and related to type of network relations No Zain & Ng (2006)
Yes, follow major client in combination with less experience and adopt mode of entry
No, and don’t categorise properly
Yes, but do not link to type of network relations
No
2.3.3 GAPs
Michailova & Wilson, 2008; Wright et al, 2007). These theories are (in this context) the network model of Johansson and Mattsson (1988) and the process-model of Johanson and Vahlne (1977). Portraying the network on an individual level is especially useful in SMEs as it is the manager, i.e., decision-making unit, who predominantly carries out networking (Carson et al, 2004; Chetty & Holm, 2000; Coviello, 2006; Ellis, 2000; Gilmore et al, 2006; Hadley & Wilson, 2003; Harris & Wheeler, 2005). On top, Coviello (2006) acknowledges the importance of incorporating the individual in the network perspective as stated in her future research: “how their [manager’s] network dynamics are influenced by their previous
knowledge, work experience, propensity to network, or motivations and learning” (p. 728).
In many SMEs, the owner(s) or decision-making unit determines, recognizes and pursues opportunities in the target markets (e.g. Gilmore et al, 2006; Wright et al, 2007). They accumulate human and social capital, financial and physical capital leading to industry and management experience and the knowledge to grasp the opportunities in domestic and foreign markets (Hadley & Wilson, 2003; Wright et al, 2007). Besides, the international new venture or born global literature argues that it is the knowledge of the entrepreneur(s) that determines, recognizes and pursues the opportunities in the target markets (Jones, 1999; Michailova & Wilson, 2008; Wright et al, 2007). Therefore, it is valid to also analyze experience and network approach on an individual level as firm-level analyses might ignore important dimensions that impact the internationalisation activities of SMEs.
The second gap is portrayed to the elusiveness on the relative importance of the different types of network relations in their influence on the foreign market entry decisions. Although some articles mention different types of network relations, they do not categorise them properly into a business -and/or social network and their related formality. Bell (1995), and Lin and Chaney (2007) only describe formal types, whereas Zain and Ng (2006) also indicate the importance of informal types in their study. In addition, none of the reviewed articles mentions the relative strength (i.e. commitment, co-operation and trust) of these types of relationships.
2.4 CONCEPTUAL FRAMEWORK
To recapitulate the most important concepts from the theoretical framework, a conceptual model is depicted with its related linkages. Additionally, the conceptual model paves the way to answer this thesis’ research question.
2.4.1 Conceptual model
As previously mentioned, there seems to be a difference in the executed role of different types of network relations that interact with the network of the SME its respective decision-making unit when they make strategic decisions on their selected market and the subsequent mode of entry, i.e. the foreign market entry decisions.
Based on the analysed theory, three broad concepts are distilled that interact with each other in a particular way being “network relationships”, “decision-making unit”, and “market entry decisions”.
Generally speaking, it is the decision-making unit of a SME who decides whether the firm will pursue internationalisation and therefore makes the foreign market entry decisions (Chetty & Holm, 2000; Gilmore et al, 2006; Wright et al, 2007). On top, it is the decision-making unit who predominantly carries out networking (e.g. Carson et al, 2004; Chetty & Holm, 2000; Coviello, 2006; Ellis, 2000; Gilmore et al, 2006; Hadley & Wilson, 2003; Harris & Wheeler, 2005). As such, network relationships indirectly affect the selection of the market and the ensuing mode of entry.
The following conceptual model depicts these linkages.
In short, the presence of network relationships indirectly influences the market entry decisions taken by the decision-making unit on market selection and ensuing entry mode.
In all reviewed articles, no scholar mentions how different types of network relations affect the foreign market entry decisions. On the other hand, some scholars state that in the selection of the market and the subsequent mode of entry, managers are sometimes influenced by market uncertainty. Several authors (e.g. Agndal & Elbe, 2007; Bell, 1995; Zain & Ng, 2006) mention network contacts and experience as important antecedents in going international (i.e. market entry decisions) and in reducing market uncertainty. The experience in this conceptual model is portrayed to the individual experience of the decision-making unit, i.e. a management characteristic.
Consequently, network relationships interplay with the experience of the decision-making unit when selecting a foreign market. Subsequently, the mode of entry is influenced as well. In the network literature, authors do not state that a certain influence of the network relationships will result in a specific entry mode (i.e. non-export mode vs. export mode). Therefore, in this thesis, it will only be stated if network relationships influence the entry mode and if so, what entry mode was chosen.
Based on the preceding discussion, several propositions are developed and several explorations can be carried out as explained in the next section.
2.4.2 Propositions
All propositions are related to the “Y-variable”, being the market entry decisions of market selection and entry-mode.
Market entry decisions and network relationships
Decision-making unit and network relationships
Besides network relationships, experience of the decision-making unit is an important factor in the international activities of a SME and in reducing foreign market uncertainty (e.g. Hadley & Wilson, 2003; Michailova & Wilson, 2008). It is the knowledge of the decision-making unit(s) that determines, recognizes and pursues opportunities in the foreign markets (Jones, 1999; Michailova & Wilson, 2008; Wright et al, 2007). This knowledge is affected by certain management characteristics such as international and general experience that play an important role in explaining the internationalisation activities of SMEs (e.g. Ellis, 2000; Fletcher & Bohn, 1998; Michailova & Wilson, 2008; Moini et al, 2008; Westhead et al, 2001). International experience is perceived when a decision-making unit has a high international exposure (i.e. experiential market knowledge) due antecedents as “been born abroad”, “worked abroad”, “sold abroad”, “studied abroad”, and the “amount of spoken foreign languages” (Michailova & Wilson, 2008; Reuber & Fisher, 1997). If a manager possesses a high amount of international experience, there will be a higher intent to internationalise (De Clerq et al, 2005; Michailova & Wilson, 2008; Reuber & Fisher, 1997; Wright et al, 2007). In several articles (e.g. Andersson et al, 2004; Etemad, 2004; Moini et al, 2008; Westhead et al, 2001), general experience is coined and measured as the management know-how and educational background of a manager. Someone with a university degree has higher problem-solving skills and is likely to be more aware of (foreign) business opportunities due to a wider social and business network (Andersson et al, 2004; Westhead et
al, 2001). Other management characteristics that influence general experience are “industry experience” and “age” (Ibid). Age is related to the amount of years a manager is present in the firm and its own age. It is often hypothesized that senior managers possess more experience than junior managers (Andersson et al, 2004; Etemad, 2004; Westhead et al, 2001). If a manager possesses a lot of general experience such as experience in industry, experience in the firm and educational background, there might be a higher likelihood to exploit his or her knowledge through international activity and he or she might be more eager to internationalise and surpass market uncertainty. This effect might be even greater if the manager has a lot of international experience (i.e. experiential market knowledge by experience in doing business abroad, duration abroad or context experience).
than when the overall experience of the decision-making unit is low. The following propositions might explain this phenomenon.
Proposition 1a: When general experience and international experience of the DMU is high, network relationships will function as a complement to internationalise.
Proposition 1b: When general experience and international experience of the DMU is low, network relationships will function as a substitute to internationalise.
Exploring relative importance of types of network relationships and network approach
As connoted in proposition 1a and 1b, there seems to be an interaction between the experience of the decision-making unit and the influence of the network relationships and how these interact to influence the foreign market entry decisions. However, the influence of different types of network relationships in terms of formality and structure is ambiguous. For instance, Bell (1995), and Lin and Chaney (2007) only describe formal types, whereas Zain & Ng (2006) also indicate the importance of informal types. On top, Ellis (2000), Ellis and Pecotich (2001) and Harris & Wheeler (2005) state that informal and intermediary relationships are important when firms internationalise. This is contrary to Coviello (2006) who describes the importance of economic (i.e. formal) ties. Nevertheless, there seems to be some agreement on the importance of intermediary relations (e.g. Agndal & Elbe, 2007; Ellis, 2000; Ellis & Pecotich, 2001; Ojala, 2009). According to Agndal and Elbe (2007), intermediary relationships were important in entering a psychically distant market, while Ojala (2009) indicated that intermediary relations were used when a SME did not have many formal and informal relations that could assist them. All in all, the literature is quite mixed on the effect in the formality, the structure (i.e. type of business and social network) and the utilisation of network relationships.
In addition, it remains elusive how strong different types of network relationships are. If the relationships between a focal party (i.e. decision-making unit) and its network relationships are strong, the impact on market entry decisions is deemed stronger (e.g. Coviello & Munro, 1995; Coviello & Martin, 1999; Ellis, 2000; Ellis & Pecotich, 2001). However, the antecedents of strength (trust, co-operation, commitment) have not been researched in this context before.
2006; Gilmore et al, 2006; Moini et al, 2008; Ojala & Tyrvainen, 2007; Ojala, 2009). Management characteristics are especially important as it supplies the individual focus that is essential to understand experiential knowledge (Michailove & Wilson, 2008). When a DMU uses an active approach of networking, he or she actively searches for network partners (Ojala, 2009). An active approach results in the identification of potential network partners and a growth in the decision-making unit(s) its network. When a decision-making unit has such an active approach, he or she will be more inclined to tap into the resources of their network partners and consequently is more likely to internationalise (De Clerq et al, 2005). The ambiguity in the relative importance (utilisation) of network relationships and the utilisation of a certain network approach might be explained by the effect of the experience of the decision-making unit.
As such, the answers to propositions 1a and 1b and the exploration of the relative importance of different types of network relations and the network approach will illustrate how network relationships affect the foreign market entry decisions while interplaying with individual experience of the decision-making unit.
During the explanation and exploration of the conceptual model, a theory building process begins which might result in a revised conceptual model and different propositions.
3. METHODOLOGY
The methodology part describes the research approach, data sampling, data collection and data analysis respectively.
3.1 RESEARCH APPROACH
The research question of this thesis is:
How do network relations influence the foreign market entry decisions taken by the decision-making unit of a SME, and is there a connection with different network relations and with how a decision-making unit networks?
Taking the “topics of interesting” of Thomas (2004) into account, the problem identification and formulation of the research question are in line with two distinct phenomena that makes this an interesting topic to research.
First, the single phenomenon “organisation” is applicable. According to Hotho (2008), decision-making is often based on irrational than rational movements. As such, the influence of network relationships on making decisions might be different per context and decision-making unit. Hence, the phenomenon is not structured but anarchic.
Second, the multiple phenomenon “co-relation” is applicable as for instance the different types of network relationships might differ in their influence towards certain elements in the strategic decision-making on internationalisation (i.e. market selection and entry mode). For instance, there is an active involvement of third party organisations (i.e. intermediaries) that are trusted by SMEs in the Netherlands (Hoevenagel and Wolters, 2001).
Exploring and finding an explanation for this phenomenon is a feature of an open research question (Yin, 1981).
As stated by Jonker and Pennink (2010), “The “product” of research with an open question,
is quite often a conceptual model”. The concepts, propositions and exploratory questions as explained in the conceptual framework, are built upon and influenced by earlier studies which are part of the extensive theoretical framework. Several authors (e.g. Eisenhardt, 1989; Jonker & Pennink, 2010; Whetten, 1989) highlight the reliance on concepts from relevant theory in the research design and data collection processes.
A qualitative, in-depth inquiry is deemed most suitable for the investigation of this thesis topic as one wants to understand rather than to measure the influence of network relationships. Exploring this phenomenon by means of a qualitative, in-depth inquiry is a characteristic of an inductive approach (Thomas, 2004). An inductive approach is called for as existing research does not include and explore the influence of different types of relationships and their relative importance. On top, when studying SMEs, a qualitative study is often conducted to grasp the unique characteristics of this type of firm (Gilmore et al, 2006).
3.2 RESEARCH STRATEGY
The open research question of this thesis suggests conducting a case-study. A case-study is likely to be used in early stages of novel research topics or to provide new insights to an already investigated topic (Eisenhardt, 1989). As indicated by Thomas (2004), a case-study
“aims for the intensive examination of one or a small number of instances of the units of interest” (p. 127).
Furthermore, a case-study is relevant as this thesis builds upon recent literature where the same research method was conducted. This will prove extremely valuable when one wants to achieve triangulation (Eisenhardt, 2005; Harris & Wheeler, 2005; Jonker & Pennink, 2010; Kirk & Miller, 1988; Patton, 2002).
In general, a priori specification of concepts (i.e., making use of propositions) is not common in case-study research. However, it is valuable as it permits to measure concepts more accurately. If these concepts prove more important when the study progresses, there is a firmer empirical grounding for the emergent theory (Eisenhardt, 1989).
3.3 DATA SAMPLING
The sample is chosen on the basis of theoretical sampling (Glaser & Strauss, 1967) as the goal is to build theory. In other words, the sample was chosen because the cases could be used for literal and theoretical replication, rather than being representative for the population. Moreover, the selected cases are useful for illuminating and extending relationships and logic among constructs, which is an elaboration of the emergent theory (Eisenhardt & Graebner, 2007).
When one conducts a multiple case-study research, there are no hard facts about how many cases are required in order to explore a phenomenon (Thomas, 2004). Yet, between 4 and 10 cases is ideal when one conducts a multiple case-study research (Eisenhardt, 1989). However, given the constraints in time, financials and availability in this research, it makes sense to choose cases where one has been exposed to a certain “condition” while the other, near-identical case has not (Thomas, 2004). This is known as polar types. This theoretical sampling approach makes it simpler to observe patterns in contrasting data of the focal phenomenon (Eisenhardt & Graebner, 2007). In this thesis, propositions 1a and 1b propose a difference in the amount of individual experience. Therefore, the polar dimension “experience” is warranted as this study is conducted on the interplay between experience of the DMU and the influence by network relationships on the foreign market entry decisions. As such, a dimensional range is present where the emphasis for one case will be on low experience and another on a higher level of experience.
3.3.1 Sample
Most recent studies on the role of networking and internationalisation focus on SMEs in the software industry (e.g. Coviello, 2006; Ojala, 2009; Zain & Ng, 2006). However, as indicated by several authors such as Coviello (2006), Ojala (2009), and Zain and Ng (2006), more research should focus on the manufacturing industry as well.
This study is conducted on the bicycle industry in the Netherlands. The bicycle industry is rapidly growing and this trend is expected to continue. In 2006, the total turnover for bicycles was EUR 454 million, followed by EUR 472 million in 2007, and 577 in 2008 (CBS Statline, 2009). The latter figure shows an increase of more than 22%. On top, the export-value of Dutch bicycles increased by almost 100% between 2001 and 2007, and more than 1 million Dutch bicycles were sold abroad in 2008 (Glas, 2009). Moreover, a great part of companies in the industry offers new and niche products (e.g. “box-cycles”, accessories, insurances). In addition, since the beginning of this millennium, several Dutch SMEs began a bicycle company with international ambitions (Glas, 2009).
In this study, the Netherlands was chosen as the country of origin due to its small and open economy where small and medium-sized enterprises play an important role (Bijmolt & Zwart, 1994; Hoevenagel & Wolters, 2001). Moreover, the topic of networking is quite industrious in the Netherlands as there is an active involvement of third party organisations (i.e. intermediaries) that are trusted by SMEs in the Netherlands (Hoevenagel & Wolters, 2001). Based on the discussion above, SMEs in the bicycle industry are an interesting and worthwhile study topic in the context of international expansion and the possible influence of network relationships.
Yin (1994) has outlined five components for proper case selection: (1) research question, (2) propositions, (3) unit(s) of analysis, (4) logic linking data to the propositions, and (5) the criteria for interpreting the findings.
this is used as the “polar dimension” in the two cases. Other differences between the cases should be minimized in order to increase the validity of the “polar dimension” and the reliability of the case results. Each case was carefully selected in order to predict results that differ compared to the expected difference in experience.
The following table portrays the selection logic of Yin on the selected cases. Table 2: selection of cases based on Yin’s (1994) criteria
Firms Country of
origin
Industry Firm size DMU Experience from the outset
De Fietsfabriek Netherlands Bicycles 15 FTE (including workshop)
2 FTE
Focal point near low DMU experience
Urban Bike Concepts
Netherlands Bicycles 3 FTE 2
FTE
Focal point near high DMU experience
Hence, two cases were selected via theoretical sampling and availability. Both cases share certain similarities but differ on one major condition, being their difference in experience of the decision-making unit. Of course, “experience” differs in time. As such, in this thesis “time” is taken as a proxy for experience. Therefore, the selection of cases had its focal point at the time the two different SMEs started their company.
3.4 DATA COLLECTION
In each firm, a person well acquainted with international activities was interviewed in order to mitigate “knee-jerk reactions” (Eisenhardt & Graebner, 2007). In both cases, these consisted of the decision-making unit of the SME.
The interview took place by making use of an interview-guide3. The questions asked were related to the several concepts being “decision-making unit(s) of the SME”, “market entry decisions” and how “network relationships” affected the foreign market entry decisions. The questions are influenced by and build upon the literature relating to these concepts and their related propositions, as postulated in the theoretical framework.
The structure of business network relationships (i.e. vertical vs. horizontal network) is constructed on Albaum et al (2002) and Tsegay (2003). The social network is primarily build on insights of Ellis (2000) and Ellis and Pecotich (2001). The formality of relationships is mainly based on Ojala (2009) who makes a distinction between informal, formal and intermediary relationships. In this thesis, formal relationships are business relationships that have industry experience. Strength of the relationships is measured in the elements trust (nature of information shared and confidence in advice received), commitment (frequency of communication and durability), and co-operation (seriousness of conflicts). These antecedents are build upon Carson et al (2004) and Coviello (2006). Besides, the overall influence of strength is build upon Ellis and Pecotich (2001) who provide a framework in where they observe relative strength as “weak, moderate and strong”. Network approach is constructed on the measurement of Moini et al (2008) and Ojala (2009) who both consider active approach as an initiation from the firm and reactive approach as initiation outside the firm.
International experience is primarily build upon the measurements of Hohenthal (2001), and Michailova and Wilson (2008) who distinguish context experience and amount of foreign languages. General experience is mainly constructed upon theory of Andersson et al (2004) and Westhead et al (2001) who distinguish the management characteristics “age”, “educational background”, ‘industry experience, “management experience” and “firm experience”.
As the process of interviewing and the questions asked were similar in both cases, consistency and neutrality were enhanced (Pennink & Van Veen, 2009).
3
3.5 DATA ANALYSIS
These 60-90 min long interviews were recorded and transcribed as in line with collecting case-evidence (Gromm et al, 2000; Strauss & Corbin, 1990; Thomas, 2004). A second listening was conducted to ensure correspondence between the recorded and transcribed data. Only records that were relevant to the subject were transcribed and later on translated in case histories. These case-histories were sent back to the persons interviewed to ensure validity and reliability of the data. If there were inaccuracies, revision took place based on their comments. Although the main source of information beholds these interviews, also information stated in company documents, marketing material, e-mails, websites, and telephone calls were gathered to create triangulation and saturation of the concepts (Eisenhardt, 1989; Eisenhardt & Graebner, 2007).
The case-histories portrayed the several concepts and underlying questions as stated in the conceptual model and the interview guide. As such, the data was organised in order to fulfil the exploratory and explanatory purpose of this thesis. The data was arranged in several construct tables to make within-case and cross-case analysis simpler. Using this approach, each case is looked upon as a separate entity, enabling unique patterns that can be generalised across cases. This gains familiarity and generates preliminary theory (Eisenhardt, 1989). The point of using construct tables that summarises case-evidence, is that they indicate how the focal construct is measured and to what extent the data matches with the literature examined.
Finally, triangulation efforts are undertaken based on similar and conflicting literature (Eisenhardt, 1989; Harris & Wheeler, 2005) until the point of theoretical saturation (Jonker & Pennink, 2010; Strauss & Corbin, 1990).
