Abstract
The internationalization of firms has reached levels never seen before. As a consequence and in order to face the new competitive challenges of globalized markets, industrial small and medium-sized enterprises must be able to adapt to new organizational approaches, to innovate and to further develop their networks. Based on a case study, this chapter reviews the literature on internationalization and networks and addresses a less researched topic of supplier-clients relationships in the value chain referring to the importance of the networks, resources and collaborative new product development on the internationalization process of firms. The case reports a successful ex-small technical textile company that leveraged its competitive strategy based on technology-based paths and is thriving in both domestic and international markets.
TopIntroduction
Given the increasing globalization process, the internationalization of firms has reached levels never achieved before. This is mainly due to the increased instability of the contextual environment where firms operate and to the increasing firm specialization around core competencies. As a consequence, firms have never witnessed so many competitive challenges as in today’s global business world.
One consequence of the growing importance of internationalization of firms is their need to adapt to new organizational approaches in the relationship with their customers, especially with regard to industrial firms, given the importance of a proper relationship throughout the value chain.
Internationalization refers to the process of increasing involvement in international activities (Welch & Loustarinen, 1988). At firm level it is related to the export intensity of the firm and how it explores international markets. There are several theories that relate the export behavior with the internationalization process. However, two main strands stand out: one that advocates an evolutionary, sequential and linear model with growing international involvement (Johanson & Wierdersheim-Paul, 1975; Bilkey & Tesar, 1977; Welch & Loustarinen, 1988) and a second strand that understands the internationalization process in terms of resource allocation, i.e., dependent on the strategic decision of allocation of company resources and their interaction with the environment (Reid, 1981, 1982; Aharoni, 1966).
Although the internationalization process has been one of the most studied areas in the field of international business (Aharoni, 1966; Johanson & Wierdersheim-Paul, 1975; Bilkey & Tesar, 1977; Reid, 1982; Coviello & McAuley, 1999; Fillis, 2001), there are few studies (Holmlund & Kock, 1998; Moreira 2007) dedicated to the internationalization of suppliers throughout the supply chain considering the supplier-client relationship. In this way, set in a context of supplier-client relationship, the role of the client is represented by a multinational company and the supplier by a Portuguese company with strong research and development (R&D) competences, in which the relationship is analyzed from a relational perspective based on the new product development capabilities of the Portuguese supplier firm. Accordingly, the aim of this chapter is to examine to what extent the internationalization of suppliers is conditioned by this inter-organizational relationship.
The contribution of this study stems from the analysis of the internationalization of a firm (supplier) taking into account the conditions and opportunities that their multinational client in the automotive industry represents. So, not only Holmlund and Kock (1996, 1998) studies are complemented, as new empirical perspectives that analyze the entry into international markets through industrial relations in the country of origin of the supplier firm are provided, which has not been explored previously.
Key Terms in this Chapter
Collaborative New Product Development: A process where two or more companies engage in a collaborative strategy to bring new products to the market. Normally, only firms that engage in trust-based relationships are able and willing to get involved in collaborative new product development.
Supplier-Client Relationships: Business relationship in which one company is involved in a business relationship in the supply chain with other firm, involving the provision of raw materials, components, spare parts, products or services. Normally this type of relationship is celebrated between two firms to abandon adversarial, transaction-based involvements and to embrace on a partnership-like involvement.
Industrial Networks: A cluster of relationships between two or more companies. Normally, they require actors, to perform activities in which resources might be collaboratively used.
B2B: Commercial transactions between two or more companies.
Technical Textiles: Textiles whose purpose is mainly functional rather than aesthetic.
Trust: The belief that in an existing relationship an actor will act and behave in the benefit of both parties.
Supply Chain: The supply chain involves all the companies or organizations, people and resources involving management of upstream and downstream value-added flows of materials, final goods, and related information among suppliers, company, resellers, and final consumers.
Internationalization: A strategy in which a company performs business activities outside its domestic market. Following a networked perspective, the internationalization process occurs in interactive environments where a well-established network of companies includes local and external actors searching win-win relationships.
Commitment: Investment and effort spent in order to continue on a relationship.