Knowledge Acquisition and Learning by Entrepreneurial Internationalising Firms ISBE Workshop, 16 April 2013 Dr Margaret Fletcher

Internationalisation is a learning intensive process, through which SMEs acquire and accumulate knowledge, a source of competitive advantage. But there are gaps in our knowledge of how firms learn. This research examines What new knowledge firms need as they internationalise, and how they source it And The role of different kinds of internationalisation knowledge acquired by firms Why is knowledge important?

The findings are drawn from a longitudinal research study based on case studies of firms which participate in a Scottish Enterprise internationalisation programme The study is part of a wider research and evaluation project in collaboration with SE Interviews were carried with CEOs over three years as they implemented an internationalisation strategy, there was access to company records and reports, SE advisors and data, and follow up focus groups were held Methodology

The case firms

What knowledge is needed? Technological knowledge was acquired by high and medium technology firms to adapt or develop new products to new markets “ In each of the major geographies we learned that you have to do something different and understand and develop the different (technical) solutions that were needed in each country. This was then put into our sales message ” Three manufacturing firms with well understood technologies and well-defined product ranges had no new technology development needs. The focus was to develop international markets Technological Knowledge

Market knowledge was needed when firms expanded in existing and into new markets and to adapt products to overseas markets. This involved knowledge of business, networks and institutions “We have worked in the USA since day one, we know the way the market is, (to expand) we are developing business relations …. Every state has different legislation, requirements and business controls” Three firms that had already established a presence overseas did not need to acquire new market knowledge Market Knowledge

The big story! As they internationalised, all firms needed to acquire new general internationalisation related know-how and capabilities Such as market entry methods, managing overseas partners, legal issues, licensing, overseas project management, overseas franchising, sales and marketing processes, manage overseas subsidiaries It is specific to the resources and capability needs of the individual firm Internationalisation Knowledge

This internationalisation knowledge (IK) was often knowledge that could be transferred worldwide “We weren’t performing as well in sales as we should and identified that sales and marketing were our weakness in the business. We brought in an outside consultant to develop the people but also to develop processes internally to monitor and plan properly … we needed to develop people and processes and learn how to monitor and plan properly ” Internationalisation Knowledge

Some IK was connected to technological and/or market knowledge acquisition, for example how to –Select and build partnerships –Combine marketing and technology information for new product development Other IK was about to how to enable both UK and overseas operations to be effectively managed, for example Involve managers in decision-making, improved head office and international management structures, new management delegation procedures, information and reporting systems IK is about entering new markets, operating and competing internationally Internationalisation Knowledge

 Market Entry - to achieve market entry; access partners, construct agreements and build relationships  Localisation – to compete in international markets; develop business models, organise supply chains to meet the needs of particular markets  International Enterprise – know-how to support and implement the international strategy; new management structures, information and analytical systems, HR procedures and project management processes Internationalisation Knowledge

Internationalisation knowledge acquisition

Direct experience/internal experts were important to acquire all knowledge (but IK did not come from networks) External search from published sources was used by two firms for knowledge acquisition (objective knowledge) Sources of Knowledge

Experience of External Advisors and Consultants were used for all knowledge Senior external recruitment was used to acquire all knowledge but difficult to hire people with the relevant experience and firm specific knowledge for the acquisition of IK  Learning vicariously from experts by recruiting or using close advisors is vital to acquire IK (The one company that relied on its own prior experience only, suffered delays in its internationalisation) Sources of Knowledge

Internal information systems were created for market and technological knowledge acquisition  There needs to be the recognition that this knowledge source is required and that relevant international enterprise knowledge is needed to acquire it Sources of Knowledge

Firms may not have or be able to acquire the necessary internationalisation knowledge from their own experience Senior level skills and knowledge (e.g. IK) that enables firms to develop strategies and to break with old ways of doing things internationally, may not have been acquired Managers need to recognise this knowledge need, and develop learning processes and culture to acquiring the knowledge externally from advisors/consultants or by recruiting Lessons for Management

The firms in the study benefited from external advisors and consultants who helped them recognise their knowledge needs and implementation. But there are cost implications as diagnosis of these needs and aftercare requires “close” advisors, who have knowledge of the firm Managers and advisors should appreciate the importance of the different kinds of internationalisation knowledge and seek to acquire it before the firm reaches the stage that it becomes critical This requires involvement of advisors over time e.g. mentoring Lessons for Policy

Thank you! Also thanks to The case firms involvement Scottish Enterprise: Jonathan Slow, Barclay Low, Ros Forrest, Kenny Richmond Academics: Simon Harris, Glenn Richey, Shameen Prashantham (Co-authors) and Stephen Young and Marian Jones

Fletcher, M. and Harris, S. (2012) “Knowledge Acquisition for the Internationalization of the Smaller Firm: Content and Sources”, International Business Review, 21, (4) pp Fletcher, M., Harris, S. and Richey, G. “Internationalization Knowledge: What, Why, Were and When?”, Journal of International Marketing (forthcoming, 2013) Fletcher, M. and Prashantham, S. (2011) “Knowledge Assimilation Processes of Rapidly Internationalising Firms: Longitudinal case studies of Scottish SMEs” Journal of Small Business and Enterprise Development, Vol 18 (3) References