Sylvie Chetty and Henrik Agndal
Executive Summary
A difficult task that an international decision maker faces is to choose the right mode for the firm’s international operations. This decision has often been described as a trade-off between the desired levels of control and the resources that can be committed for a particular mode. A factor that influences this decision is the social context in which business takes place and how this influences business activities, such as internationalization mode selection. Chetty and Agndal explore how social capital, which they define as the relationships and resources embedded within a firm’s network, triggers and enables changes between different internationalization modes.
The study finds that firms use social capital to enable mode changes because it has an efficacy role. The more firms interact, the more committed they become, and therefore they develop more useful social capital. This social capital can be used to acquire knowledge and create new partnerships, which enable the firm to make mode changes. Social capital also triggers changes. It can serendipitously lead firms into new modes—for example, when a firm is contacted by someone with whom the firm has had no prior contact. This also highlights the importance of the brokering role of relationships—for example, when a business partner’s associate provides an opportunity to use a new mode to enter a new market. There are also negative aspects to social capital, which Chetty and Agndal refer to as its liability role. Opportunistic behavior and poor partner firm commitment compel managers to undertake mode changes that they would not otherwise consider. In addition, the findings indicate that social capital can play a single role or multiple roles in a mode change. An example of multiple roles is that the liability role of social capital can trigger a mode change when the costs of maintaining a mode are too high. The serendipity role of social capital may then provide information about a third party that is willing to become a distributor for the firm, thus enabling the firm to make a mode change.
This research involves an in-depth study of social capital and mode change in ten New Zealand and ten Swedish highly internationalized small and medium-sized enterprises. Chetty and Agndal analyze these firms’ internationalization histories and identify mode changes. They find 36 such mode changes in which social capital played a prominent role. The liability role of social capital is the most frequently observed role in this study.
Chetty and Agndal’s study emphasizes the importance of developing and maintaining networks to reduce the liabilities of social capital and to increase its usefulness. In addition, social capital generates unexpected opportunities.
Biography
Sylvie Chetty is Professor of Marketing in the Department of Commerce at Massey University. She has a BSc (honors) in Sociology from Salford University, an MSc in Business Studies from Edinburgh University, and a PhD in Business Studies from Canterbury University. Her areas of interest are internationalization, business networks, learning in internationalization, and export performance. In addition to Journal of International Marketing, she has recently published in Journal of International Business Studies, International Business Review, and European Journal of Marketing. She is currently exploring knowledge acquisition and collaboration, innovation through business networks, and industrial districts and clusters.
Henrik Agndal is an assistant research professor at Stockholm School of Economics (Sweden). He has an MSc from the School of Business, Economics, and Commercial Law at Gothenburg University (Sweden) and Ph D from Jönköping International Business School (Sweden). His areas of teaching expertise include business-to-business marketing and international marketing, with a focus on networks and business relationships. He is currently involved in research projects on inward internationalization, purchasing of services, and interorganizational cost management.
Journal of International Marketing, Vol. 15, No. 1, March 2007
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