Internationalization of Internet-Enabled Entrepreneurial Firms: Evidence from Europe and North America, The

Canadian Journal of Administrative Sciences, Mar 2004 by Loane, Sharon, McNaughton, Rod B, Bell, Jim

Case A's product/service offering is Web based and dependent on Internet technology; indeed it has recently received the Irish Software Association Award for the Best Mobile Internet Technology, 2003. According to judges, case A provided a "real example of a working mobile Internet technology" (Public Relations Manager, Irish Software Association, 2003). case A offers secure wireless management of aircraft technical and operations data using XML technology and portable computing devices and can achieve substantial cost savings and improved operational efficiencies for airlines, resulting in savings averaging US$100,000 per aircraft annually. Central to its success has been an astute partnering strategy; partners include Fujitsu, EDS, and IBM. case A became a member of the IBM Net Generation group, set up by IBM to nurture and support start-up companies. Membership gave it access to IBM technology, market knowledge, and server hardware. IBM will also provide a total server solution to case A to include hardware, software, and services.

The more "digitized" firms, such as case F, have global reach through the Internet and its related technologies. It delivers encrypted files via the Internet in real time direct to the desktop, across the world from Japan to Scotland. It has targeted industries requiring extreme security measures, such as the automotive and financial services sectors, irrespective of location.

Mode of Internationalization

Internationalization activities, and the consequent drain on already scarce resources in the small firm, increase both risk levels and uncertainty. Therefore the choice of the correct or appropriate mode of internationalization or market entry is strategically important. As Table 2 shows, the interviews highlighted that the case firms employed various modes of internationalization.

Without exception the case firms were using direct exporting, a low-cost market entry mode. It would appear that firms whose products required a high level of installation expertise and costs (Case D), or those which were highly customized (Cases A, C, D, E), particularly suited the direct exporting mode. The high levels of innovative technology involved led to a reluctance to involve third parties in any transactions. For example, Case firm D had high installation costs and requirements for the laser sorting machines and high levels of innovative technologies embedded in the machines. Its CEO commented:

We do not involve other parties in selling our machines, we are the experts at installation, training and service support, the message may get diluted or changed if we involved others such as agents or distributors. Also, there is less danger of piracy of the technology if we do everything with our own people. (CEO, Firm D, Belgium, 2002)

However, as North America is a lead market for this firm, it has opened a sales, marketing, and service centre in the United States staffed by expatriate Belgian managers from the parent firm. Machines are still shipped directly to the United States and the team installs, trains, and supports the customers. For the other three firms (Cases A, C, E), that are using a direct sales approach to international markets, it is the heavily customized nature of their products that have influenced the mode of internationalization. The aviation software supplier (Firm A) has secure Web site areas and supports the customers via partnerships with hardware. Each software sale is unique and has a significant service component included, making it difficult to sell via indirect means such as agents or distributors. In addition, the sensitive nature of military sales and sales impacting aircraft safety procedures precludes involving outside parties for this firm. Therefore, the entry mode decisions, as Bell and Young (1998) posited, are conditioned by product, industry, and other external factors, as well as firm-specific factors.