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International Business Review 9 (2000) 77–93 Internationalisation of small to medium-sized manufacturing firms: a network approach
Sylvie Chetty a a,*

, Desiree Blankenburg Holm


School of Business and Public Management, Victoria University of Wellington, PO Box 600,
Wellington, New Zealand b Uppsala University, Uppsala, Sweden

How do firms use business networks when they internationalise? To answer this question, a longitudinal case study of four manufacturing firms in a small open economy such as New
Zealand is used. This paper includes a dynamic element in the study of internationalisation by using Johanson and Mattsson’s (1988) model [Internationalization in industrial systems — a network approach. In P. J. Buckley, & P. N. Ghauri, The internationalization of the firm: a reader (pp. 303–321). London: Academic Press]. This model uses social exchange theory to illustrate how firms develop network relationships organically to internationalise. In New
Zealand, however, government export promotion programmes encourage formal structured networks. This paper identifies the theoretical gap in the literature, which is the focus on organically developed networks rather than formal structured ones. The study’s findings illustrate the dynamics of how firms interact with their network partners to extend, penetrate and integrate their international markets. Networks can help firms expose themselves to new opportunities, obtain knowledge, learn from experiences, and benefit from the synergistic effect of pooled resources. Another contribution of this paper is that it identifies weaknesses and various other factors that influence the model, thus advancing the literature. © 2000 Elsevier Science
Ltd. All rights reserved.
Keywords: Business networks; Internationalisation; Manufacturing firms; Small to medium-sized firms

* Corresponding author. Tel.: +64-4-495-5233; fax: +64-4-495-5231.
E-mail address: (S. Chetty)
0969-5931/00/$ - see front matter © 2000 Elsevier Science Ltd. All rights reserved.
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S. Chetty, D. Blankenburg Holm / International Business Review 9 (2000) 77–93

1. Introduction
Collaboration in business is becoming common practice amongst firms, and these collaborations can range from informal relationships to more formal ones such as joint ventures (Gomes-Casseres, 1994). According to Madhok (1996) the firm’s capabilities and competitive forces are the main factors forcing firms to collaborate. Firms with advanced collaborative capabilities tend to acquire trust and reputation by collaborating with other firms continuously (Gulati, 1995). Various terms are used for these collaborations: production nets, networks, clusters, constellations or virtual corporations. Normann and Ramirez (1993) argue that successful firms are moving away from strategic positions in the value chain to a value creating system. These firms add value by collaborating with suppliers, business partners, allies and customers.
This paper is based on a longitudinal case study of four small- to medium-sized manufacturing firms in the electrical industrial machinery and timber processing industries in New Zealand. New Zealand is a small open economy, which is highly dependent on exporting but is geographically distant from major world markets. In recent years, the New Zealand government has been making concerted efforts to improve both the country’s trading performance and its international competitiveness.
To do this, the government made major structural changes to New Zealand’s economy, introducing, in 1984, the most comprehensive economic programme undertaken by any Organisation of Economic Co-operation and Development (OECD) country this half-century. The programme included abolishing import controls (licenses and quotas), substantially reducing tariffs, abandoning export subsidies, and floating