Abstract
This chapter explores the internationalization path of ALPHA, a family-owned, medium-sized Portuguese company. The analysis reveals a two-stage process. Initially, ALPHA's gradual market entry aligns with the Uppsala model, prioritizing geographically close markets and leveraging accumulated experience. However, later stages demonstrate network-based theory influences. While lacking formal networks, ALPHA prioritizes strong B2B relationships with large international clients, mirroring network bridges for market access. The case highlights the importance of trust-based B2B relationships for success. ALPHA leverages these partnerships to gain market knowledge and access new opportunities. Exporting plays a vital role, keeping ALPHA updated on technological trends and fostering innovation through diverse client projects. The company prioritizes a pragmatic approach focused on strong client relationships and win-win partnerships, emphasizing trust as a key resource. While the RBV perspective highlights investment in internal resources, reliance on intermediaries introduces limitations.
TopIntroduction
Small and medium-sized enterprises (SMEs) have extensively employed internationalization strategies to expand their operations overseas. This approach enables them to participate more actively in international markets (Ribau et al., 2015, 2018).
Several theoretical frameworks and models elucidate the internationalization process and the modes of entry typically adopted by firms. Amongst the most prominent are the Uppsala model and the network-based view of the firm (Bell, McNaughton, & Young, 2001; Ribau et al., 2015). The Uppsala model posits a gradual and sequential progression of international involvement (Ribau et al., 2015), while the network-based view emphasizes the role of relationships between market actors in firm internationalization (Hakansson & Snehota, 2006).
Despite the evolving nature of globalization and its impact on the economy, many firms, particularly those operating in a business-to-business (B2B) environment, continue to adhere to traditional internationalization approaches. Moreover, although the literature review on SMEs internationalization is abundant (Maciejewski & Wach, 2019; Luostarinen & Gabrielsson, 2006; Ribau et al., 2018), there are opportunities, especially in relation to resource-constrained SMEs. This chapter aims to examine the historical context of the internationalization process and critically discuss the nuances of the two main internationalization theories, namely the Uppsala model and the network-based view of the firm. The purpose is to compare and contrast these theories in light of the specific characteristics of a Portuguese technology-based firm, codenamed ALPHA for confidentiality reasons, which achieves nearly 50% of its sales volume through international channels. The analysis focuses specifically on the firm’s dependence on the B2B channel, which contributes to its seemingly passive internationalization approach. As such, based on a case study of a technology-based SME, this chapter aims to address the following research question: Can a resource-constrained SME with strong technology mastery and international experience brake away of dependent relationships with downstream intermediaries? While case studies are subject to criticism due to limitations in generalizability, they undeniably contribute to knowledge acquisition and development (Ghauri, 2004; Vissak & Francioni, 2013). This case study, therefore, seeks to explore, understand, and analyze ALPHA’s strategic formulation and internationalization process, offering a framework for classroom discussions.
The chapter is structured into six sections. Following this introductory section, the second section presents a concise literature review to establish the key concepts and theories necessary for a comprehensive interpretation of the case study analysis. Subsequently, the third section details the research methodology, specifically the qualitative component employing an interview conducted with the company’s Finance Director. The fourth section presents the key findings gleaned from the interview. The fifth section provides a discussion that integrates these findings with the established literature. Finally, the concluding section summarizes the study’s key takeaways and acknowledges its limitations.
Key Terms in this Chapter
Internationalization Process: The internationalization process describes a company's trajectory as it transitions from a domestic market to engage in foreign markets. This process typically involves various entry modes, such as exporting, foreign direct investment (FDI), or franchising. The chosen entry mode plays a critical role in shaping the company's subsequent internationalization path and associated costs. Two prominent theories that illuminate the internationalization process include the Uppsala model and the network-based approach, which will be discussed further (see below).
Globalization: Globalization refers to the multifaceted process of increasing interconnectedness across the globe, encompassing economic, financial, trade, and communication spheres. This phenomenon often manifests as a reduction in trade barriers between nations, facilitated by free trade agreements. Globalization entails a shift from local and nationalistic perspectives to a broader understanding of an interdependent world. This interconnectedness fosters the free flow of capital, goods, and services across national borders, potentially leading to increased investment opportunities.
Case Study: A case study is a qualitative research methodology commonly employed in the social sciences. It aims to interpret a specific phenomenon or situation through a chosen lens. This approach is particularly suited for addressing questions focused on “how” and “why” phenomena unfold. Case studies are often used within a constructivist research framework, which emphasizes the subjective nature of knowledge and the importance of understanding lived experiences.
Uppsala Model: The Uppsala model is a dynamic theory that has garnered significant attention within the field of International Business Studies, particularly within the Nordic School of thought. It seeks to explain the gradual process by which firms internationalize. This theory posits that companies learn and adapt as they navigate international expansion. The Uppsala model emphasizes the staged nature of this process, suggesting that firms progress from limited international exposure, such as non-regular exports, to establishing a more robust foreign presence through subsidiaries.