How Do Rapidly Internationalizing SMEs Learn? Exploring the Link Between Network Relationships, Learning Approaches and Post-entry Growth of Rapidly Internationalizing SMEs from Emerging Markets

Rapidly internationalizing small and medium-sized enterprises (SMEs) play a significant role in driving economic growth (Trudgen and Freeman 2014; Gerschewski et al. 2018). Accordingly, the strategies used by rapidly internationalizing SMEs continue to attract considerable interest (Oviatt and McDougall 1994; Knight and Cavusgil 2004; Gerschewski et al. 2018). SMEs that internationalize rapidly are called International New Ventures (INVs) (Oviatt and McDougall 1994) and Born Global firms (Knight and Cavusgil 2004; Knight and Liesch 2016). Contrary to the internationalization process model (Johanson and Vahlne 1977), prior research has found that the risk-prone and entrepreneurial nature typical of the founders of INVs and Born Globals tends to support relatively aggressive international expansion (Autio 2005).

It is widely known that SMEs suffer from liabilities of smallness, lack of resources, limited international experience and limited market knowledge (cf. Galkina and Chetty 2015; Johanson and Vahlne 2009), yet paradoxically, many SMEs internationalize rapidly and compete with well-established MNEs. This suggests that SMEs have unique capabilities and value offerings, however, research to date has failed to fully understand the factors of their success (Knight and Cavusgil 2004; Coviello 2015). Studies on internationalizing SMEs have provided important insights about why, when and how they rapidly expand in international markets. In particular, research has stressed the importance of developing capabilities and network relationships to facilitate expansion of SMEs in international markets (Oviatt and McDougall 1994; Fletcher and Harris 2012; Sullivan-Mort and Weerawardena 2006; Khan and Lew 2018). However, little is known on the type of networks SMEs utilize and their role in success-based learning at the post-entry stage (Evers and O’Gorman 2011; Eberhard and Craig 2013; Hånell and Ghauri 2016; Madsen and Desai 2010; Khan and Lew 2018).

Khan et al. (2018) suggest that global networks are important for SMEs based in emerging markets to develop exploratory innovation. Furthermore, knowledge exchanges and learning from peer and international networks enhance the growth and performance of such firms (Kuivalainen et al. 2007; Coviello 2006, 2015; Khan and Lew 2018; Khan et al. 2018); however, to date, there is a lack of empirical research confirming this. Consequently, there is a need for fine-grained analysis of SMEs’ post-entry behavior, and how they grow and survive in international markets (cf. Ibeh et al. 2018; Coviello 2015; Khan and Lew 2018). We contribute to this gap by exploring the following research questions: (1) what learning approaches do rapidly internationalizing SMEs’ utilize at the post-entry stage? (2) How do learning approaches from various networks affect the post-entry growth of rapidly internationalizing SMEs?

To achieve this, we utilize a multiple case study approach to explore rapidly internationalizing SMEs within a knowledge-intensive emerging market context, namely the Indian information and communication technology (ICT) sector, where knowledge and learning are essential to international performance. We examine the acquisition and strategic application of knowledge through learning, from both within and outside the enterprise among rapidly internationalizing SMEs, in the context of emerging markets. Such processes represent internal and external learning activities that result in different, yet complementary types of knowledge (Arora and Gambardella 1990; Cohen and Levinthal 1990; Powell et al. 1996). Knowledge developed in this way exerts a differential and synergistic effect that is recognized as an antecedent to innovation (Hartman et al. 1994), firm performance (Bierly and Chakrabarti 1996) and internationalization (Oviatt and McDougall 2005). Prior research calls for the need to extend knowledge on international entrepreneurship in emerging markets (Kiss et al. 2012; Khan and Lew 2018). India is one of the largest emerging markets, in both economic and population terms (Das and Das 2014; Economist 2017). As such, it provides an important context to explore the preceding gaps and research questions.

The research has a number of contributions. First, we respond to calls for research by Tuomisalo and Leppäaho (2019), Sleuwaegen and Onkelinx (2014) and Deligianni et al. (2015) by providing a fine-grained analysis of the learning strategies of rapidly internationalizing SMEs’ post-market entry. Second, we provide new insights into the different types of learning approaches (e.g., vicarious, congenital and experiential) (Huber 1991) needed for geographic expansion, market penetration and product development. We extend theory through identifying the importance of knowledge from peers, trade fairs and trial and error as mechanisms for self-learning for SMEs’ internationalization and their post-entry growth (Madsen and Desai 2010). Third, although experiential learning plays a central and vital role in the post-entry phase of rapidly internationalizing SMEs, we identity that vicarious and congenital learning are also needed to enhance the scope and speed of their internationalization. Vicarious and congenital learning are important in the early internationalization phase (cf. Bruneel et al. 2010; De Clercq et al. 2012). Thus, our findings emphasizes the role of diverse and integrated learning approaches (e.g., experiential, vicarious and congenital) for post-entry growth of rapidly internationalizing SMEs. We also shed light on how diverse learning is achieved from a wide range of networks. Fourth, we provide important insights into how peer-to-peer learning can alleviate SMEs limited international experience and resources; and provide valuable knowledge for enhancing post-entry growth (e.g., Tuomisalo and Leppäaho 2019; Madsen and Desai 2010). Finally, this research provides a more fine-grained understanding of the need for SMEs to embed themselves within international networks such as trade fairs and trade missions, alongside learning from clients, suppliers and networks to facilitate diverse learning and enhance post-entry growth.

For this study, we adopted a qualitative, interpretivist multiple case study approach. Qualitative research is appropriate for contexts where the goal is to interpret meaning from actions and experiences (Mason 2017). We conducted our research in the emerging market of India due to it being a high-growth, high-potential economy where it is one of the largest emerging markets (Das and Das 2014; Economist 2017). We chose the software industry due to it being knowledge-intensive, where knowledge is the core competency, suggesting a need for learning (Davis and Eisenhardt 2011). Moreover, India is the world’s largest IT and ITES (information technology-enabled services) sourcing destination with a global share of 55% (NASSCOM 2017).

A multiple case study approach was adopted to explore the existence of multiple realities that are strongly associated with participants’ actual experiences (Lincoln and Guba 1985). This approach also responds to calls by Birkinshaw et al. (2011) and Doz (2011) for more qualitative research in international business which promotes theory development in order to develop the field.

A purposeful sampling method was used to identify information rich cases based on a number of characteristics. First, SMEs had to have initiated their international activities instantly or within the first 2 years of their inception in order to be classified as rapidly internationalising. Second, the SMEs had to have entered more than two countries in order to explore the learning processes involved in the post-entry phase of rapidly internationalizing SMEs. Third, we sought for variation in terms of the degrees of their success and entrepreneurs’ prior experience. Fourth, we only chose cases where it was possible to conduct in-depth interviews with the founder managers who were directly involved in internationalization and foreign market entry. Table 1 provides an overview of the cases.

Overall, 12 face-to-face semi-structured interviews were conducted across the ten firms (Table 2). In the majority of our cases, only one person had key responsibility for the firm’s international business activities. Two of the cases also had a chief marketing officer (CMO) involved in their international expansions, thus it was deemed relevant to include them in the study. Marshall et al. (2013) suggest aligning sample size with comparable studies. Prior comparable qualitative research in this topic have used small sample sizes due to a focus on information richness and fine-grained analysis (for example, Evers and O’Gorman 2011 used 3, Deliganni et al. 2015 used 5 and Khan and Lew 2018 used 8 cases). Therefore, ten cases was deemed relevant to allow for information depth but also sufficient breadth to aid theory development.

We adopted a general interview guide approach (Patton 1990) for each interviewee, which provided a core structure to alleviate validity concerns of collecting data across cases (Miles and Huberman 1994). This approach also allowed an element of freedom and storytelling where the founding managers could reflect on their internationalization journey to date. The interview collected data on the firm and its entrepreneurial characteristics and explored post-entry strategies. In particular, we focused on the various learning strategies adopted for further growth and survival in the international markets, including the role of various networks. On average, interviews lasted between 45–60 min and were conducted in English, audio-recorded and transcribed verbatim.

The data analysis process consisted of a number of stages (Yin 2009) which involved an iterative approach with constant referral back to literature. This allowed for theory elaboration (Lee 1999) and theory generation (Eisenhardt 1989) in our analysis. First, secondary sources were combined with the interview transcripts in order to develop descriptive narratives of each case facilitating within-case analysis (Eisenhardt 1989). Second, the post-internationalization phase and types of knowledge the cases utilized were identified. Following Deligianni et al (2015), the knowledge types were categorised as being technological, market or international knowledge. Third, emerging patterns related to learning across the post-entry growth and survival stages of the rapidly internationalizing SMEs were then open coded, grouped into 1st order themes and then categorized according to whether the learning approaches were facilitated by internal or external networks. Next, we conducted a cross-case analysis (Miles and Huberman 1994) by comparing the first-order themes across cases to identify aggregate dimensions and constructs across the cases. Table 3 provides an overview of the data structure.

The findings revealed that all case firms were highly international in nature, with the majority of their revenue coming from foreign sales. The founders of all cases identified that their companies were developed with the intention of targeting international markets from their inception. Consequently, their primary focus was on rapidly entering foreign markets. The primary motivation for this was to capitalize on the opportunities provided by efficient workforces in Indian IT and ITES sectors.

The data revealed the various internal and external learning approaches which were adopted by the rapidly internationalizing Indian SMEs during their post internationalization growth stages. The rapidly internationalizing SMEs growth stages included both geographic and product diversification. The knowledge utilized and the learning processes within each of these stages will now be discussed.

This article set out to explore the learning approaches rapidly internationalizing SMEs’ utilize during post-entry and how these learning approaches impact their post-entry growth. Our findings provide much needed rich insights into a nascent emerging market context which to date has been underexplored. The findings provide new insights into the post-internationalization learning processes of rapidly internationalizing SMEs. Our findings reveal that rapidly internationalizing SMEs can overcome liabilities of smallness and foreignness and grow post-market entry through effectively developing and leveraging internal and external learning capabilities. Indeed, all cases propensity to learn, post-market entry, aided knowledge acquisition to not only survive in the market but to grow through geographical diversification and product innovation; which were both found to be key drivers of post-market entry success. Hence our first proposition is:

Proposition 1: Among rapidly internationalizing SMEs, managers leverage knowledge acquired from internal and external sources in order to undertake early Internationalization, optimize internationalization performance and product innovation.

While prior research has emphasized the role of networks, the scholarly enquiry has focused on social capital residing solely within the SME, with a lack of research into different types of knowledge gained through external networks (Tuomisalo and Leppäaho 2019). Our findings extend SME internationalization literature by showing the processes through which rapidly internationalizing SMEs acquire knowledge from various internal and external sources of knowledge. Consequently, we extend emergent literature on the internationalization processes of rapidly internationalizing SMEs (Pellegrino and McNaughton 2015) by providing empirical evidence justifying the need for different types of learning approaches and corresponding knowledge for different types of post-entry growth trajectories.

We found that growth through geographic expansion and market penetration requires different types of learning approaches and knowledge. The case firms highlighted the importance of different combinations of knowledge for post-entry growth. For example, international and market-specific knowledge was found to help complement their technological knowledge in order to be able to grow through geographical diversification. This extends existing knowledge through identifying the need for combinative knowledge configurations for different patterns of post-market entry growth (Deligianni et al. 2015; Sullivan and Marvel 2011). The case firms reported that they primarily seek market and product knowledge for market penetration strategies as it allows them to understand customers’ demands and requirements. Our cases also revealed the added importance of international knowledge such as market conditions, institutions and resource adaptation which leads to product development through research and development. Extending research by Deligianni et al. (2015) and Pillegrino and McNaughton (2017), international knowledge, particularly knowledge of the target market, was found to enhance alertness towards opportunities in the marketplace which was associated with geographical and product diversification. Therefore, we present our next three propositions:

Proposition 2: Market knowledge—knowledge on potential customers, distribution channels and how to market offerings in the target market—is a key driver of enterprise performance in foreign market entry, geographic expansion and product innovation for rapidly internationalising SMEs.

Proposition 3: Possession of international knowledge, especially specific knowledge of target markets, is a key driver of rapidly internationalizing SMEs’ performance in foreign market entry, geographic expansion and product development.

Proposition 4: Possession of product/technological knowledge—knowledge associated with product, technology and/or process—is a key driver of rapidly internationalizing SMEs’ performance in foreign market entry, geographic expansion and market penetration.

It also emerged that external sources of knowledge such as peer networks, associations in the same industry, international clients/partners, and international connections developed through trade fairs and trade missions are imperative for geographical expansion within international markets (e.g. Li 2014). Our findings did not identify trade fairs or industry associations as being a key source of learning for product diversification. Learning approaches for market penetration of diversified products largely arose from international clients, peer firms and personal relationships (external knowledge). Clients or external partners were primary knowledge sources for product modification and other forms of innovation (e.g., Child et al. 2017). Such approaches helped the rapidly internationalizing SMEs obtain market and product/technological knowledge for market penetration strategies. Indeed, the SMEs relied upon market and technological knowledge to grow through being reactive to customer trends. Being responsiveness to customers needs is important within an emerging and developed market in order to gain a competitive advantage (Luo 2001). This leads to our fifth and sixth propositions:

Proposition 5: External learning related to geographic expansion consists primarily of learning from peers, industry associations, trade fairs, and trade missions; and is mainly achieved vicariously which then enabled the post-entry growth of rapidly internationalizing SMEs.

Proposition 6: External network sources of learning, especially of international clients, peers and partners, is a key driver of continuous product innovation, needed to sustain post-market entry performance of rapidly internationalizing SMEs.

Within the case firms, the overall network relationships influenced their post-market entry strategies and facilitated learning related to internationalization capabilities and strategies. Indeed, network learning emerged as an externally-focused learning capability (Tuomisalo and Leppäaho 2019), which contributed to the development of knowledge that facilitates internationalization and key international activities. Network relationships supported the acquisition of knowledge on internationalization and appeared to help managers reduce uncertainty about operating in foreign markets, which is especially vital to resource-constrained internationalizing SMEs. In particular, our findings emphasized learning that occurs via the organizations' network connections of firms and other organizations within the same industry, known as ‘peer learning’ (Zahra et al. 2018).

Learning through the firm’s networks was found to be dynamic and gave rise to new competencies, and/or renewed existing competencies which are beneficial in turbulent conditions characteristic of rapidly evolving industries and markets, such as the emerging Indian market. Here, ‘dynamic’ evokes work on dynamic capabilities where capabilities that facilitate renewing competencies to achieve congruence with evolving environmental conditions are especially important (e.g., Teece et al. 1997). Based on the above discussion, we suggest the following propositions:

Proposition 7: Among rapidly internationalizing SMEs, external learning is a key driver in the development of knowledge to manage risk, uncertainty, and challenges in the target market.

Proposition 8: Among rapidly internationalizing SMEs, external learning is a key driver in the development of knowledge to support post-market entry learning and performance in the target market.

In general, internal learning is critical to successful SME internationalization. The CEO/entrepreneurs’ prior experience, networks and self-learning appear to be the key learning component that supports internationalization and post-entry performance among rapidly internationalizing SMEs. Our sampled firms reported that they were able to leverage their learned capabilities which influenced their internationalization and product development. In other words, international entrepreneurial orientation (Covin and Miller 2014) influenced product development amongst the internationalizing SMEs. Our findings suggest that congenital knowledge supports the acquisition and assimilation of new knowledge and its transformation into firms’ existing knowledge base. Internal learning, e.g., through trial-and-error and self-learning approaches, typically feature an experiential quality. Throughout the cases, it emerged that self-learning or trial and error approaches not only provide product and market knowledge but can aid internationalization knowledge. Consequently, self-learning and trial and error approaches are important for product development, geographic expansion, and superior performance in foreign markets (Romanello and Chiarvesio 2017; Tuomisalo and Leppäaho 2019). This suggests that:

Proposition 9: Among rapidly internationalizing SMEs, internal learning consists primarily of knowledge acquired through prior internationalization experience, personal networks, self-learning, and trial-and-error approaches.

However, the findings did stress the importance of external learning from peers and the internal trial and error approach in order to acquire knowledge of all types for both geographic expansion and market penetration. We found that self-learning, through trial and error, allowed rapidly internationalizing SMEs to maintain their growth trajectories through the development of learning capabilities where they developed market, technology and international knowledge (i.e., Ciszewska-Mlinarič et al. 2019) which was internalized and cumulatively led to new capabilities and knowledge which they could apply in the future (Knight and Cavusgil 2004). Internal learning, e.g., through trial-and-error and self-learning approaches, typically feature an experiential quality and are important for market and international learning, geographic expansion, and superior performance in foreign markets (Madsen and Desai 2010). Hence our next proposition is:

Proposition 10: Self-learning supports the development of product, market and international knowledge, and is a key driver of rapidly internationalizing SMEs’ performance in foreign market, product innovation and geographic expansion.

The findings revealed that during post-entry growth and survival phases, firms used mixed integrated vicarious and experiential learning approaches (Sardana and Scott-Kemmis 2010), where knowledge is acquired through second-hand experience by observing network associates alongside existing experiential knowledge (cf. Huber 1991). Various interactions with external associates appeared to strengthen knowledge connections and facilitate vicarious learning. Firms engaging in vicarious learning, learn from each other. The end result was that knowledge from both the focal firm and its network was blended and augmented, resulting in distinctive new knowledge capabilities that provided competitive advantages. Concurring with Ciszewska-Mlinarič et al. (2019), vicarious learning led to the acquisition of second-hand experiential knowledge through observing or imitating external stakeholders who have undergone similar experiences. This finding sheds new light on the value of vicarious learning and demonstrates the importance of learning for post-entry internationalization of rapidly internationalizing SMEs.

Furthermore, congenital knowledge (cf. Huber 1991), i.e., knowledge available at the organization’s birth—through entrepreneurs’ prior experience, was important for both geographic diversification and product development. Prior international experience was found to be a key learning component that supported internationalization and performance among internationalizing SMEs (Child et al. 2017). The findings suggest that such congenital knowledge supports the acquisition and assimilation of new knowledge and its transformation into firms’ existing knowledge base. This highlights the importance of the CEOs' or entrepreneurs' prior experiences and knowledge in rapidly internationalizing SMEs, i.e., international entrepreneurial orientation. Therefore, we suggest the following final proposition,

Proposition 11: Among rapidly internationalizing SMEs, experiential and congenital learning was found to be mainly facilitated by firms’ internal network sources, whereas vicarious learning was enabled by their external sources.

Entrepreneurial experience and the firm’s relationships with partners, professional agencies, research institutes and own R&D initiatives influenced the acquisition of proprietary knowledge which contributed to their product development strategies. As already identified, SMEs can utilize and gain valuable learning through knowledge transfer from their peers operating within the same industry. Similar to Huber’s (1991) grafting, case firms acquired knowledge from their external networks which was not formerly obtainable within the case organization. Such knowledge was said to be critical in helping SMEs internationalize through being an important source of bonding and bridging social capital (Prashantham and Young 2011). Overall, our findings provide important insights into the learning approaches rapidly internationalizing SMEs’ utilize during post-entry and how these learning approaches impact post-entry growth.