The globalization of new ventures, be they from advanced or emerging economies, may sound like an oxymoron: how can a young firm with limited resources go global? Research by various academics, including my own for over a decade in India, UK, US and latterly China, shows that in many cases the answer is: by leveraging network relationships. Entering international markets typically entails building and leveraging network relationships because new ventures rarely have the wherewithal to internationalize exclusively on the basis of their own resources.
Internationalization activity in new ventures is often opportunistic and serendipitous. This is integral to the nature of entrepreneurial activity. New ventures can, and should, flexibly take advantage of unexpected opportunity. That said, the argument here is that new ventures are more likely to be effective at internationalizing entrepreneurially when they are also strategic. In particular, it pays to be strategic in relation to cultivating, nurturing and leveraging network relationships.
Being strategic entails three key partnering capabilities:
Leveraging relationships proactively. Relationships are widely recognized as being key to new ventures’ growth and success both in general and specifically in relation to internationalization. However a passive approach to relationships will result in suboptimal network benefits. All things being equal, firms that are proactive in cultivating and leveraging their network relationships are more likely to succeed on the global stage. Furthermore, they not only leverage their networks proactively, but they also broaden their original network portfolios.
Leveraging relationships reflectively. It is important for entrepreneurs to recognize that while generating revenues through network relationships is important, a more sustainable benefit is gaining learning outcomes – learning new knowledge and capabilities through network relationships. This calls for deliberately devoting attention to knowledge transfer and acquisition, which can require even greater effort whilst dealing with dissimilar partners. Picking good “teachers” is important. Having the intent and patience to gain non-monetary benefits such as knowledge – which can in turn be monetized by applying it to enhance international business revenue – is crucial and may go against the natural tendency of new ventures to focus exclusively on business revenue outcomes via networks.
Leveraging relationships discerningly. Entrepreneurs must recognize that different types of networks are good for different things. This is important because certain relationships are easier to access than others, but their benefits may be limited to early stages of the internationalization process. For longer term success, new ventures will have to go beyond their comfort zone to build new types of relationships. Typically, forging relationships with other similar entities is easier to do, but it is necessary to build a portfolio that includes links with dissimilar actors too. That is, it is important to build a holistic portfolio of network relationships over time. To do so new ventures will need to, over time, go beyond easy-to-access network relationships both at the interpersonal level and the interorganizational level.
In sum, of all the special capabilities that new ventures to globalize arguably the most important is that of building and leveraging network relationships. This applies to both interpersonal relationships of the entrepreneur and interorganizational relationships of the venture as a whole. How well networks are managed can have a considerable influence of the pace and trajectory of new ventures’ internationalization.