Chapter 5 The Effect of Network Competence and Environmental Hostility on the Propensity of SMEs to Internationalise

Purpose – The role that network competence, environmental hostility and knowledge intensiveness of the industry have on the propensity of small- and medium-sized enterprises (SMEs) to internationalise is examined. Design/methodology/approach – Hypotheses are developed, based on earlier literature on the subject. Subsequently, binary logistic regression modelling using SPSS software is applied to test the hypotheses on a sample of 224 Finnish SMEs representing five industries, two of which are characterised by knowledge intensiveness and three of which are from less knowledge-intensive ones. Findings – The propensity of SMEs to internationalise depends on both their level of network competence and their lack of perceived environmental hostility. Knowledge intensiveness of the industry is found to moderate the effect that network competence has on the internationalisation propensity. Research limitations/implications – The present study indicates that possessing higher levels of network competence helps domestic SMEs in their efforts to turn international, and that its beneficial effect is especially important for small firms in industries characterised by high knowledge intensity. Possible limitations of the study are the small cultural context and inclusion of firms from only five industries. Originality/value – This study is the first linking measurable network competence to internationalisation decisions of SMEs, while also including environmental and industry considerations. It also provides further evidence for the importance of networks in SME internationalisation theory, but indicates that it is not only the business networks themselves but also the competence in developing and maintaining those networks that help SMEs internationalise.