Internationalization and innovation in a network relationship context

Purpose – The aim of this paper is to study how network relationships are used in the internationalization and innovation of small and medium‐sized enterprises (SMEs) in the software industry. The paper seeks to use the extant literature to develop a matrix consisting of incremental internationalization and innovation and radical internationalization and innovation. Design/methodology/approach – The paper is based on an in‐depth qualitative study of ten software firms in New Zealand. The unit of analysis is the firm. Multiple sources of data collection are used, but the main method of data collection is semi‐structured interviews. Findings – The ten firms in the study fall into four distinct groups, depending on the type of internationalization and the type of innovation, and each group has particular types of network relationships. Firms with limited network relationships have incremental internationalization and innovation, but those with diverse network relationships have radical internationalization and innovation. The findings indicate that network relationships are influential in shaping the firm's future as well as sustaining the firm. Practical implications – The matrix developed could assist managers to identify where they appear and what relationships they need to form in order to internationalize their innovation. Managers need to be aware of the changing dynamics of network relationships, and the impact this will have on the firm. Originality/value – The paper identifies a gap in current SME research that combines the following three research streams: internationalization, innovation, and networks. The original contribution of the paper is to address this gap so that researchers and practitioners have some understanding of innovation and internationalization of SMEs in the context of networks.