Interorganizational perspective

Question 1

Describe the interorganizational perspective.

Answer 1

Companies are assumed to be part of internal and external alliances, which have arisen as consequences of social exchange.
- Social exchanges in turn occur as an element in exercising influence and controlling behavior.
- the network perspective suggests that a firm’s strategy emerges as a pattern of behavior influenced by a variety of network relationships.
o the managerial implications emphasize the use of the firm’s relationship on the established domestic network as a bridge to networks in other countries.
- Members of the network value relationships rather than discrete transactions, thus opportunistic behavior is expected to be controlled and minimized.

Question 2

What is the basic assumption of the interorganizational perspective?

Answer 2

1) The firm can minimize risk by building trust with partners.
2) partners with foreign experience/knowledge of opportunities.
3) A trustworthy relationship with a partner is essential to know about opportunities.

Question 3

What is a network?

Answer 3

a network involves “sets of two or more connected exchange relationships”.

Question 4

what is the contradiction in Coviello’s paper about the network perspective?

Answer 4

it is stated that a working relationship is a result of considerable investment to build trust which is both time consuming and costly. However, the paper suggest that small software companies rapidly expand through their networks – how have they been able to build trust in that short amount of time?

Question 5

What are the arguments that the Uppsala model has changed?

Answer 5

core argument is based on business network research and has two sides.

1. markets are networks of relationships in which firms are linked to each other.
   o there is a liability of outsidership therefore insidership in relevant network(s) is necessary.
2. relationships offer potential for learning and for building trust and commitment, which are preconditions for internationalization.

Question 6

What determines the liability of foreignness?

Answer 6

The larger the psychic distance the larger is the liability of foreignness.

Question 7

What is the effect of the liability of foreignness?

Answer 7

The larger the psychic distance, other things being equal, the more difficult it is to build new relationships

Question 8

According to the network perspective how does firms generate new knowledge?

Answer 8

The firm may create new knowledge through exchanges in its network.

Question 9

What is an insider?

Answer 9

a firm that is well established in a relevant network is an ‘‘insider.’’

Question 10

What does insidership lead to?

Answer 10

it is to a large extent via being an insider in relationships that firms learn, build trust, and build commitment.

Question 11

What is an “outsider”?

Answer 11

A firm that does not have a position in a relevant network is an ‘‘outsider.’’
- This company will suffer from the liability of outsidership and foreignness.

Question 12

What is the liability of outsidership

Answer 12

The lack of market-specific business knowledge constitutes the liability of outsidership. Firm’s uncertainty about problems and opportunities in international business are becoming less a matter of country-specificity and more of a relationship-specificity
- If a firm attempts to enter a foreign market where it has no relevant network position, it will suffer from the liability of outsidership and foreignness, and foreignness complicates the process of becoming an insider

Question 13

What is country-specificity?

Answer 13

country-specificity: A lack of institutional market knowledge (language, laws, and rules) relates to psychic distance.

Question 14

What is relationship-specificity?

Answer 14

relationship-specificity: Lack of business market knowledge is related to the position in the foreign network (knowledge, trust and commitment possible to develop and utilize in the network)
- relationship-specific knowledge, which is developed through interaction between the two partners. This also contributes to more general knowledge.

Question 15

What can trust substitute for?

Answer 15

Trust can substitute for knowledge, i.e., when a firm lacks the necessary market knowledge and so lets a trusted middleman run its foreign business.

Question 16

Describe the re-vised Uppsala model

Answer 16

State aspects are:
o Knowledge opportunities consider opportunities to be the most important element of the body of knowledge that drives the process.
 It is a matter of interrelated processes of knowledge development and commitment to an opportunity.
 Other important components of knowledge include needs, capabilities, strategies, and networks of directly or indirectly related firms in their institutional contexts.
o Network position: the internationalization process is pursued within a network.
 The more an insider the better to reduce the liability of outsidership
- Change aspects are:
o Relationship commitment decisions: the focal firm decides either to increase or decrease the level of commitment to one or several relationships in its network.
o Learning, creating, trust building: The speed, intensity, and efficiency of the processes of learning, creating knowledge, and building trust depend on the existing body of knowledge, trust, and commitment, and particularly on the extent to which the partners find given opportunities appealing.

Question 17

What are the charateristcs of the network mode (revised Uppsala model)?

Answer 17

Location: depends on partners
Timing: gradual as it takes time to build trust with partners
Entry mode: nothing specific, though, a hybrid mode is common