UNCORRECTEDPROOF

J Int Entrepr (2006) 3: 263–277DOI 10.1007/s10843-006-7855-y

The role of the internet in the internationalisationof small and medium sized companies

1

2

Sharon Loane3

C© Springer Science + Business Media, Inc. 20064

Abstract It is now recognised that many firms are “born global’ and initiate international5

business from inception or shortly thereafter. They have been influenced by both globalisation6

and the impact of new ICT technologies. This paper examines the role of the Internet in the7

internationalisation of a cross national sample of small entrepreneurial firms from Canada,8

Ireland, Australia and New Zealand. The findings are presented, including the role of the9

Internet in marketing, distribution, business processes and market intelligence and competitor10

analysis. The role of the Internet as a knowledge building tool is discussed, and areas for11

future research are presented.12

Keywords Small firms . Internationalisation . Internet-enabled13

Introduction14

It is now widely recognised that many firms are “born global” and initiate international busi-15

ness from inception or shortly thereafter (McKinsey and Co., 1993; Oviatt and McDougall,16

1994). Such entrepreneurial firms ignore national boundaries and are often configured as17

new organisational types, transcending both time and geography. According to Knight and18

Cavusgil, 1996, their emergence has been influenced by trends towards the globalisation19

of business and the impact of new communication and process technologies (Knight and20

Cavusgil, 1996). In addition, ‘born global’ firms often possess knowledge-based competitive21

advantages that enable them to offer value-added products and services (McKinsey and Co.,22

1993).23

Clearly, new Information Communication Technologies (ICT) and the Internet, in par-24

ticular are providing entrepreneurial small firms with new ways to conduct business and to25

exchange and communicate ideas and information (Freed and Derfler, 1999; Gilmore and26

Pine, 2000; Slater, 2000; OECD, 2001, Weill and Vitale, 2001) These technologies enable27

S. Loane (�)University of Ulster, Northland Road, Derry, N. Ireland, BT48 7JLe-mail: sp.loane@ulster.ac.uk

Springer

UNCORRECTEDPROOF

264 J Int Entrepr (2006) 3: 263–277

such firms to improve their efficiency and develop new ways to co-ordinate their activities 28

often in an international context (Katz and Murray, 2002; Fletcher et al., 2004). Many authors 29

contend that the Internet offers small firms an invaluable resource for use in internationali- 30

sation activities, as at a stroke they may have global reach via a website (Poon and Jevons, 31

1997; Samiee, 1998; Hamill, 1999). 32

As Kobrin (2001: 688) comments, “cyberspace and e-commerce are intrinsically inter- 33

national”. Web access is available to all firms regardless of size, offering benefits which 34

include: the reduced importance of economies of scale, lower marketing communication 35

costs, greater price standardisation, reduced information float time, temporal asynchronicity, 36

increased contact between buyers and sellers, and changes in intermediary relationships. The 37

Internet offers a new means of maintaining and developing relationships with clients, channel 38

partners, suppliers and network partners, as posited by Cuneo (1995), Herbig and Hale (1997) 39

and Coltman et al. (2001). Huber (1990) and Migliarese and Paolucci (1995) posit that the 40

Internet provides firms with the means to co-ordinate and maintain communications across 41

many sites easily and effectively, also allowing for new forms of organisation (Borman, 1994; 42

Baskerville and Smithson, 1995; Narendran et al., 1995; Volery, 1995; Poon and Swatman, 43

1996). 44

The argument that smaller firms can particularly benefit from the Internet to gather com- 45

petitor or market intelligence, to promote them and service customers in new markets for 46

relatively little expense is very persuasive (Quelch and Klein, 1996; Chattell, 1998; Franson, 47

1998). Knowledge of foreign markets has always been integral to internationalisation theories, 48

including the work of the early seminal Uppsala theorists (Johanson and Wiedersheim-Paul, 49

1975; Johanson and Vahlne, 1977) who argued that a firm’s market knowledge determines 50

its internationalisation trajectory. It is now generally recognised that the internationalisation 51

of firms is contingent upon specific foreign market knowledge in terms of knowledge of 52

local business counterparts and their relations, as well as an understanding of social values 53

and business cultures (Johanson and Vahlne, 1990; Eriksson et al., 1997; Forsgren, 2000; 54

Petersen et al., 2001). 55

In smaller firms in particular, the owner/managers or entrepreneurial founder(s) are likely 56

to be working at the frontline and are likely to possess or acquire such knowledge. Grant 2002 57

posits that the emerging knowledge based view of the firm offers a set of ideas regarding 58

the existence and nature of firms, which highlight the role of knowledge. Knowledge as 59

embedded in the entrepreneur(s) from their previous experience (Reuber and Fischer, 1997; 60

Yli-Renko et al., 2002) plays a role in the garnering of and the allocation of firms resources 61

for internationalisation, for example, in obtaining the necessary finance, and in obtaining 62

network partners. However, the technical knowledge base or intensity of the firm is also 63

important, and there is support from some authors for the notion that knowledge based and 64

knowledge intensive firms internationalise earlier in their histories than more traditional firms 65

(Autio et al., 2000; Zahra and Garvis, 2000; Bell et al., 2003). Such technologies enhance the 66

entrepreneur’s opportunities for retrieving and transmitting “objective knowledge” (Petersen 67

et al., 2001). 68

Basically such knowledge may be viewed as an enabling factor in the firm’s internationali- 69

sation and will therefore influence their trajectories. This may occur through Internet enabled 70

collaborative activity such as virtual Communities of Practice (CoPs) for example, which 71

are essentially knowledge exchange mechanisms (Ardichvilli and Wentling, 2003; Martin 72

and Matlay, 2003; Sanchez and Perez, 2003). New product development and R&D activities 73

may also be vastly enhanced in some firms through the knowledge pool created via formal 74

and informal Internet enabled collaborations (Swahney et al., 2003). The argument is that 75

the Internet may influence knowledge acquisition, transfer, dissemination and collaboration 76

Springer

UNCORRECTEDPROOF

J Int Entrepr (2006) 3: 263–277 265

activities of knowledge based and knowledge intensive small firms in their international77

activities.78

Rapidly internationalising firms have tantalised academics and new theories and constructs79

have emerged in an effort to explain such internationalisation by small firms. Bell et al. (2001)80

incorporate knowledge intensity as a source of competitive advantage in their integrative81

model of internationalisation and in the case of Internet enabled firms the Internet is of82

course a source of knowledge and has been incorporated into this model. In essence, these83

authors posit that greater knowledge can catapult the small firm forward on the international84

stage, as the knowledge base of the firm is itself a source of competitive advantage (Bell et al.,85

2001, 2003), which influences the both the patterns and pace of internationalisation. However,86

the degree of usefulness of the knowledge and information available via the Internet depends87

on the ability of the entrepreneur(s) to use it effectively, a process termed “Internet infusion”88

by Nguyen (2001), whereby, firms are able to garner knowledge and information with regard89

to their own specific internationalisation needs, thus reducing traditional information barriers90

to internationalisation.91

Research focus and methods92

The objective of this study was to investigate and understand the behaviour and strategies93

adopted by rapidly internationalising Internet enabled firms. For the purposes of the en-94

quiry, Internet-enabled firms were defined as firstly having a web address and using ICT95

technologies in their day-to-day activities. Secondly, rapid internationalisers were those new96

ventures that exhibited an innate propensity to engage in a meaningful level of international97

business activity at or near inception, to achieve strategic competitive advantage (Oviatt and98

McDougall, 1994).99

The study focuses on four locations, Ireland, Canada, New Zealand and Australia, which100

are relatively small open advanced economies; with the technical infrastructure to sup-101

port Internet enabled firms. Additionally, these locations have been classified as having102

broadly similar Anglo business cultures using Ronen and Shenkar’s (1985) schema. Pro-103

cedures involved a preliminary screening of over 800 firms in the four locations, from104

which 218 “shallow” cases were constructed from secondary sources, such as the World105

Wide Web (WWW), databases/sites, firm websites, government and industry reports, the106

trade press and the popular media. Specific information gaps, typically financial perfor-107

mance measures and exact employee numbers, were obtained from 143 firms via an e-108

mail or telephone follow-up with a founding member of the firm, usually the CEO and109

incorporated in an SPSS database. Due care and diligence was observed in order to ade-110

quately establish cross-cultural equivalence following principles recommended by Cavusgil111

and Das (1997). These “shallow” cases were analysed using Thematic Content Analysis112

techniques.113

Analysis of the shallow cases yielded a representative sub-set of firms suitable for follow-114

up interviews with key decision-makers, which in most cases was a member of the founding115

team. These firms were tightly clustered in each location, to make maximum use of the116

researcher’s resources. In total 53 in-depth interviews were conducted and analysed, using117

thematic content analysis, in order to explore firm’s internationalisation patterns and path-118

ways, behaviour and motivation, processes, strategies, and the role the Internet played in119

the internationalisation process. Findings pertaining to the role of the Internet are presented120

hereafter, following a brief profiling of case firms.121

Springer

UNCORRECTEDPROOF

266 J Int Entrepr (2006) 3: 263–277

Table 1 Firm profiles by location

Canada Ireland Australia New Zealand OverallN = 44 N = 39 N = 30 N = 30 N = 143

% of all firms

Firm age

0–2 years 9.1% 10.3% 10.0% 10.0% 9.8%

3–5 years 22.7% 46.2% 23.3% 30.0% 30.8%

6–10 years 36.4% 33.3% 40.0% 40.0% 37.0%

10+ years 31.8% 10.3% 26.7% 20.0% 22.4%

Size of firm

(No. employees)

<20 34.0% 23.1% 33.3% 56.6% 35.6%

20–49 27.3% 28.2% 33.3% 20.0% 27.2%

50–99 25.0% 38.5% 16.7% 16.7% 25.3%

100 or > 13.7% 10.2% 16.7% 6.7% 11.9%

Export ratio

1–10% – 5.1% 6.7% – 2.8%

11–50% 20.4% 23.1% 36.6% 20.0% 24.5%

51–90% 52.3% 53.8% 43.4% 66.7% 53.8%

91–100% 27.3% 18.0% 13.3% 13.3% 18.9%

Speed to first export market

<2 years 77.4% 76.9% 63.4% 63.4% 71.3%

3–5 years 13.6% 12.7% 26.7% 26.7% 18.8%

6–10 years 4.5% 5.2% 3.3% 3.3% 4.3%

10+ years 4.5% 5.2% 6.6% 6.6% 5.6%

Export markets

Less than 5 61.4% 51.3% 66.7% 70.0% 61.5%

6–25 markets 20.4% 28.2% 20.0% 23.3% 23.2%

More than 26 18.2% 20.5% 13.3% 6.7% 15.3%

Findings 122

Profile of case firms 123

As may be seen from Table 1, the majority of case firms are young, with a mean age of 124

approximately 9 years old and the bulk of firms (37%) across all locations fell into the 125

6–10 year old band. Second, utilising employee numbers as a measure of firm size, the 126

majority of firms could be classified as small and typically, employed less than 50 employees. 127

Interestingly, there was a higher preponderance of larger SMEs in Australia and Canada. 128

With respect to the export intensity of firms, measured by export ratio, this ranged from 129

10 to 100%, with over half the firms in all locations in 51–90% range. Significantly, 19% of 130

all firms had an export ratio approaching 100%, signalling that they had little or no domestic 131

Springer

UNCORRECTEDPROOF

J Int Entrepr (2006) 3: 263–277 267

Table 2 Types of internet usage

Internet usage Canada Ireland Australia New Zealand TotalN = 16 N = 13 N = 13 N = 11 N = 53

Marketing communication 16 (100%) 13 (100%) 13 (100%) 11 (100%) 53 (100%)

E-mail communication 16 (100%) 13 (100%) 13 (100%) 11 (100%) 53 (100%)

Product development 5 (31%) 7 (54%) 6 (46%) 4 (36%) 22 (42%)

Market intelligence 5 (31%) 4 (31%) 6 (46%) 1 (9%) 16 (30%)

Competitor analysis 9 (56%) 7 (54%) 4 (31%) 2 (18%) 22 (42%)

Sourcing suppliers 2 (13%) – 1 (8%) 1 (9%) 4 (8%)

Distributor area 3 (19%) 4 (31%) 2 (16%) 3 (27%) 11 (21%)

Distribution 4 (25%) 3 (23%) 4 (31%) 2 (18%) 13 (24%)

Business processes 5 (31%) 8 (62%) 5 (38%) 4 (36%) 22 (42%)

Online sales – – – 2 (18%) 2 (4%)

Internet based product/service 3 (19%) 3 (23%) 9 (69%) 3 (27%) 18 (34%)

market. Over 70% of firms had internationalised within two years, in the manner of born132

globals. Finally, in regard to market spreading, the majority (61.5%) of all firms were active133

in 5 or less international markets. The remaining firms were serving between 6 and in some134

instances 40 or more markets. The sample is cross sectoral in nature and while the bulk of135

the responding firms are drawn from within the software industry (62%), other sectors are136

also represented. However, all firms were highly specialist “niche” providers in their chosen137

arena of operations.138

Internet adoption139

There is compelling evidence that firms were making significant use of the Internet and atten-140

dant technologies to underpin domestic and international activities. The fact that relatively141

small firms employed such technologies points to a sophisticated level of Internet usage.142

Table 2 presents an outline of the usage of these technologies by the case firms and key areas143

of Internet usage are further explored in subsequent sections.144

The majority of firms were Internet enabled from inception (some from the 1980’s, when145

they used the Internet in its infant form) and were using the Internet in a sophisticated146

and integrated manner. In fact they could in the main be described as High-end ICT users,147

unsurprising given that the bulk of the responding firms are drawn from various activities148

within the software industry (62%), although other sectors are also represented,—displaying149

leading edge and innovative IT use, such as ICT integration into business processes, a full150

digital information and communication system and in larger firms ICT as a formal respon-151

sibility with a dedicated manager. Thus, there was little or no evidence to support the e-152

adoption or ladder models, where firms progress up an incremental model of e-commerce,153

finally reaching the position where they undertake online sales transactions. Unequivocal154

evidence emerged from the study that Internet adoption was not an incremental process.155

Instead the majority of firms adopted ICT technology that suited their business model,156

and only changed ICT provision when new technologies that were useful to them became157

available.158

Springer

UNCORRECTEDPROOF

268 J Int Entrepr (2006) 3: 263–277

E-mail as a communications medium 159

As can be seen from Table 2, without exception and across all locations, firms were actively 160

using e-mail as a communications medium. In the vast majority, all managers had access to 161

the Internet and e-mail. Firms with an international office often used an intranet to support 162

e-mail communications; indeed, firms who had followed clients abroad often also had access 163

to the client intranet. High-speed Internet or broadband technologies proved important, and 164

relatively few firms were relying solely on dial-up Internet access. Nevertheless, the lack 165

of a high speed Internet access is as a constraint on the ability of small firms to participate 166

in e-commerce. As observed by the CEO of an Irish firm that followed its’ only client into 167

international markets: 168

“We have broadband for communications, we need speed. E-mail and the Internet just run underneath 169

everything we do. We upload and download huge files quickly. Without the Internet and e-mail, we 170

could still develop software, but not for the locations we service (Australia and the US). Also as we 171

are a client software partner, we are able to work much closer with them than if we were just a contract 172

firm, as we can access their intranet”. CEO, Oil and Gas software firm, Ireland. (Ire 19) 173

Similarly, an Australian CEO commented 174

“We have an Intranet. We use this for sales conferences. These rotate around the locations regularly, 175

and information is shared in this forum. Without the Internet we wouldn’t have the communications 176

systems with each other.” CEO, Wireless tracking firm, Australia (Aus 2) 177

All firms viewed the Internet and e-mail in particular as essential for business in the 178

21st century, as it provides the service platform, which enables them to enter new mar- 179

kets, whilst reducing the investment and resources required in order to work internation- 180

ally. E-mail served as a major communications channel with their customers, distribu- 181

tors, agents or suppliers and also to communicate with employees and sales offices or 182

subsidiaries located elsewhere. In addition, many used e-mail to contact and pose prob- 183

lems to other specialists in the CoP’s that they belonged to. In other instances, such 184

CoP’s had discussion areas, specifically set up to share software code, and exchange 185

ideas. 186

All firms offered the facility to contact them by e-mail, and increasingly initial en- 187

quiries were by e-mail. However, levels of sophistication varied, some offered this fa- 188

cility simply as, info@. . ., whilst others had nominated people and dedicated e-mail 189

addresses for various points of contact within the firm. Some companies, in partic- 190

ular those sited in New Zealand and Australia, cited the combination of e-mail and 191

time zone differences as a positive advantage for them as e-mail sent from North 192

America or Europe was answered by the start of business for the senders, giv- 193

ing the impression of an instant response. The following observations by CEOs are 194

illustrative: 195

“Time zones work to our advantage here, because we can proof overnight and have work back first 196

thing their morning for example. When coupled with industry software (for advertising, media etc.) 197

we can get high quality work back really quickly–so technology and the fact that we are perched on 198

the edge of the world actually works for us!” CEO, Media branding and Identity firm, New Zealand. 199

(NZ 23) 200

“The beauty is that we have a virtual product, so we can sit here and e-mail very large files around the 201

world. The ability to do business remotely from Belfast is greatly enhanced by Internet technologies. 202

Ok your sales people and engineering people have to do some travelling to meet customers still. But 203

in concept the Internet has removed all the logistical problems for us. We have easy contact with the 204

US sales people via e-mail and the video link.” CEO, Semi conductor firm, Ireland, (Ire 35) 205

Springer

UNCORRECTEDPROOF

J Int Entrepr (2006) 3: 263–277 269

The internet as a marketing medium206

Almost without exception, firms were actively using the Internet as a marketing medium.207

Setting e-mail communications aside, the use of the Internet for marketing related purposes208

is the most popular use of this medium. Basically firms were using the Internet for three main209

purpose in this area: Marketing communications, Customer relationship management (CRM)210

and as a Marketing Channel (sales transaction and fulfilment), although the latter was less211

prevalent. The majority of firms utilised the Internet primarily as a marketing communications212

medium or tool. These firms were interested in getting more exposure for their proprietary213

products, services, and business opportunities. There was a broad consensus that the Internet214

offers a very cost-effective way for them to reach a large potential customer base compared215

to traditional communications methods:216

“We use it (the Internet) for all the marketing type things, advertising, promotion, contact, communi-217

cations, demos of work, like a virtual catalogue. It’s our window on the world. You found us there! It218

powers the international element really-otherwise we would need offices in each country we work in,219

instead of just the US.” CEO, Media promotion firm, New Zealand. (NZ 22)220

“The website gives us a great marketing tool; we prepare a package of special events and put this on221

the website. So as people are becoming more aware of us, they can go to the website, see the APEC222

package and they don’t have to call our sales person any more. And eventually, what we want is for223

the broadcaster to say, “APEC, go see if XXX have a package” CEO, Satellite news provider, Canada.224

(Can 25)225

However, whilst almost without exception firms obviously used the Internet and their226

web sites as promotional tools, there were a few rare exceptions. One was an Irish firm who227

provide design services for large-scale chemical plants. It has a sophisticated suite of tools228

to facilitate remote working and transfer of large amounts of technical data and drawings to229

sites as far a field as Russia. At face value their website was extremely simple, with to the230

uninitiated eye, very little information to be found. During interview the CEO observed that:231

“The website plays little or no role (in promoting the firm)—it’s a poster. We get people who try to sell232

us stuff via the website, but not any business. The website is for people in the industry, in the know,233

they will look and notice that we present case studies in 3 dimensions. So they know that’s saying234

something. So industry players will get the message. To the un-initiated, it is unlikely that they would235

know what it took to get that “nice” picture there, or what its value is.” CEO, Design services firm,236

Ireland. (Ire 18)237

In many ways this is an extremely interesting comment on the firm’s web site content, as238

it conflicts with research carried out to date on web site content analysis, and goes contrary239

to the received wisdom of what the zenith of web enablement actually is all about. Firms240

like this have, to the untrained eye, a very “low key” web presence with seemingly limited241

information available on the website. However the opposite appears to be the case.242

Clear evidence emerged that the firms attached much more importance to supporting243

offline sales and CRM, than transacting or fulfilling orders online. Findings indicate that244

firms were using the Internet as a means to further develop and maintain relationships with245

customers and channel partners. At the most basic, the majority of in all locations offered246

online materials to support sales made via more traditional means. In general, but particularly247

prevalent among software firms, there was an online support facility, often combined with248

help facilities, suggestions and feedback opportunities, which are all elements of customer249

service. Those with more sophisticated CRM arrangements were providing vast amounts of250

shared information to customers in real time, and had Internet enabled specific interactions251

with both customers and suppliers, for example when a product was outsourced, as illustrated252

below:253

Springer

UNCORRECTEDPROOF

270 J Int Entrepr (2006) 3: 263–277

This Irish firm currently exports 25% output to the US. They have been Internet enabled from inception 254

and consider the Internet as absolutely vital to their operations. Because the actual manufacturing is 255

outsourced, one of the biggest concerns is to retain control, especially in an industry where FDA 256

demands traceability right down to batch numbers. The Internet allows it to drill right down into the 257

suppliers manufacturing processes, and the electronic records are available for the FDA. As the CEO 258

commented, “It (the Internet) helps us manage the supply chain effectively.” (Ire 27) 259

As one Australian CEO observed 260

“It’s everything (the Internet)—our business is about measuring it. Without the Internet we wouldn’t 261

have the communications systems with each other (employees in other international offices). We 262

couldn’t get the feedback from our clients that we do. We wouldn’t be able to deploy our new features 263

so quickly without it. It’s so central to everything that we do even to the point of phone systems and 264

management systems.” CEO, Wireless tracking firm, Australia (Aus 2) 265

However, for some firms there is a pressing need for face-to-face interaction with clients, 266

especially at the concept or product/service development stage. This is especially so in 267

service situations, when significant financial sums are involved and when a high degree of 268

customisation of offering is necessary. Nevertheless, there was consensus that the Internet is 269

invaluable in terms of maintaining and developing relationships with clients, channel partners, 270

suppliers and network (Cuneo, 1995; Herbig and Hale, 1997; and Coltman et al., 2001). 271

The investigated firms were not classic dot.com companies and few could be classified as 272

pure Internet companies. Thus, they did not tend to view the Internet as a primary transactional 273

and order fulfilment channel. In fact only two New Zealand firms were utilising the Internet 274

as a transactional medium. For example: 275

This New Zealand-based firm was founded in 1999 by two brothers, who were from a 4th generation 276

forestry background, who set up an e-marketplace for lumber trading, giving them global reach from 277

birth. Its first transaction was in 2000 to Australia, and since then it routinely trades with Chile, Korea, 278

India, Canada, USA, Japan, China and Malaysia. The website is multi-lingual, offering seven language 279

choices, and will accept trade in any currency. Although there is public access to the web site, trading 280

is private and sophisticated security systems are in place. The founders state that they wish to “. . .set 281

the pace in the global wood industry, and become the top brand e-exchange. (NZ 8) 282

Undoubtedly the Internet may present many transactional opportunities for small firms 283

in an international context, but these are particularly situation specific. Some case firms that 284

offer customised software for example, have so many lines of code that it would not be 285

viable to use the Internet download method of delivery. Additionally, many firm’s offerings 286

require significant training and installation, therefore rendering them unsuitable for Internet 287

distribution: 288

“Although the Internet has many benefits, I do not think that online selling will really ever be an option 289

for us, as big customers need a lot of personal attention.” CEO, Sports analysis software firm, New 290

Zealand. (NZ 20) 291

“What you put on the website is tied to the sales cycle; we have a 6 months average sales cycle, so the 292

website is not ever going to make a sale for us” CEO, Wireless communications technology, Ireland. 293

(Ire 16) 294

“It plays a fairly important part of our business, although we do not distribute software on line. Ours 295

is out of the box, but to big to download really. Also there is a training element needed. But we do use 296

the web for demo, product information, contact, news items, and you can order online—an increasing 297

part of the order book comes this way.” CEO, Analytical Mathematical software, Canada. (Can 26) 298

Market intelligence and competitor analysis 299

The Internet also increased awareness of distant opportunities and provided firms with access 300

to information and knowledge that was previously unavailable or not affordable. International 301

Springer

UNCORRECTEDPROOF

J Int Entrepr (2006) 3: 263–277 271

entrepreneurs were able to access knowledge on new markets, industry trends, and supplier302

details easily and quickly, partially level the playing field with larger competitors and many303

respondents cited this as one of the main benefits of Internet adoption. In fact, as can be seen304

in Table 2, many firms were making significant use of the Internet for market intelligence305

gathering (30%) and competitor analysis (42%). As several CEOs commented:306

“People enquire; they’ve found us on the web. The amount of competitor intelligence there is unbe-307

lievable. It has revolutionized, in particular the way in which the software business is run. There is308

huge transparency there also.” CEO, software for mobile applications firm, Ireland. (Ire 7)309

“Because we are in the Intellectual property business, we expect our staff to make good use of the310

Internet and to surf, not frivolously of course. The amount of technical information available to them311

and the amount of competitor information available is just stupendous.” CEO, semiconductor IP firm,312

Ireland. (Ire 35)313

Case firms were actively using the Internet as a knowledge-building tool, as much of the314

knowledge required in now freely available and in the public domain. There is little doubt315

that the Internet presents the opportunity for firms to both broaden and deepen the knowledge316

acquisition process, often in real time, and for relatively low costs. This new knowledge is317

of course added to the existing stock of knowledge embedded in the firms, and disseminated318

amongst employees. The in-depth interviews revealed that those firms that had developed319

effective management information systems and employed them rigorously derived greater320

competitive advantage from such activities. As the majority of case firms were small, knowl-321

edge flows and information and communications were relatively easy to maintain formally322

and informally.323

Distribution issues324

One aspect of Internet enablement that has received much attention in the literature is325

the ability to close the gap between buyer and seller, eliminating layers of middlemen326

or intermediaries (disintermediation) in the distribution channel. In the present study, al-327

most a quarter of all firms used the Internet as a distribution channel to some extent.328

It offered these firms participation in market situations where distribution costs or cost-329

of-sales shrink to zero or near zero, as evidenced for example, by firms engaged in me-330

dia branding and identity work, information services or Intellectual property management.331

However, there were differences by location in the extent to which the Internet was be-332

ing utilised as a distribution channel (see Table 2). What did emerge amongst those who333

used the Internet as a distribution medium was the fact that they were able to dissemi-334

nate information and knowledge back and forth effectively and cheaply amongst channel335

partners.336

Notwithstanding the fact that relatively few firms were distributing product/services on-337

line, for those who do, Internet reliance is high, as one Australian CEO candidly remarked:338

“Look, without the Internet we are nothing, the product is delivered over the Internet.” CEO, Futures339

trading software firm, Australia. (Aus 27)340

However, for firms with tangible physical products or digital products rendered unsuitable341

for Internet distribution, the Internet still held many benefits:342

“The Internet plays a fairly important part of our business, although we do not distribute software343

online. Ours is out of the box, but too big to download. Also there is a training element needed. But344

we do use the web for demo, product information, contact, news items, and you can order online–an345

increasing part of the order book comes this way. It underpins communications with clients and with346

the distributor networks, and fulfils a promotional role”. CEO, Graphical modelling software firm,347

Canada. (Can 14)348

Springer

UNCORRECTEDPROOF

272 J Int Entrepr (2006) 3: 263–277

Almost one quarter of all firms had a dedicated distributor website area. This offered 349

similar benefits to those gained from online distribution, in reduced sales and distributor 350

support costs. The majority of these distributor extranet areas were password protected, 351

and general access was not possible. This was understandable as sensitive materials such 352

as company information, company software downloads and patches, prices and market- 353

ing collateral were held there. However, an interesting finding that emerged from a very 354

small (10%) but significant number of firms was that some had such “protected areas, but 355

that no easily identifiable password entry area was visible. In fact, there was a specific 356

set of “keys” to be used to take the user beyond the web pages available to the casual 357

browser. Others had an entirely different web address, which bore little resemblance to the 358

firm name/domain, which was only available to the “insider” and which was also password 359

protected. 360

Internet collaboration 361

The Internet has often been promoted as an excellent tool for facilitating collaboration be- 362

tween geographically distant parties. Such collaboration occurs in a wide variety of areas 363

including scientific research, software development, conference planning and creative writ- 364

ing. In this study, there emerged clear evidence of online collaboration at many levels by case 365

firms, and many were using Internet technologies for real-time interaction. Users at multiple 366

locations were able to remotely access shared data for viewing, modelling and design activ- 367

ities via a web browser based user interface. In fact the Internet in many instances acts as 368

an efficient tool for knowledge generation and sharing. As the following indicative quotes 369

illustrate: 370

“We have a VPN (Virtual Private Network. The website you see is only the tip of the iceberg, there is a 371

lot more. So the VPN links all the computers on both sides of the Atlantic, so no matter where we are 372

working you just plug in and the system looks the same. The servers at either end synchronize all the 373

time; so if one goes down the other can support the network. This way we can work on joint projects 374

in real time, specialists do not have waste time travelling between the US and N. Ireland.” CEO, Semi 375

conductor Intellectual property firm, Ireland. (Ire 35) 376

“Because we develop software remotely the Internet is critical in our operations. I have never yet met 377

the people in Houston face-to-face. We have Spylab, for software process improvement, this enables 378

quality systems and all the software testing. Basically some one can sit in Perth (Australia) or Houston 379

and assign a test to one of the developers here in Portadown. So we have situations where people in 380

Perth and Aberdeen are all working on the same project. So quality and delivery are taken care of via 381

the web. It also allows people to work together in real time on codes and configurations. CEO, Oil and 382

gas software firm, Ireland. (Ire 19) 383

These scenarios present a picture of cutting edge online collaboration; however, it was 384

also occurring at many levels. For example, some firms were using Internet technologies 385

for internal collaboration across multiple sites, to ensure fast and accurate dissemination of 386

information and company knowledge, via online sales conferences or video conferencing. 387

Consider the quote below from the CEO of a firm with a sales presence in 39 countries 388

worldwide: 389

“We have an Intranet, with everyone’s picture on it! We use this for sales conferences. These rotate 390

around the locations regularly, and information is shared in this forum. We are not quite at the video 391

conferencing stage but we are positioning ourselves to do that shortly.” CEO, Interactive measurement 392

technologies firm, Sydney. (Aus 2) 393

He went on to comment that such a system for sales conferencing allowing for the dis- 394

semination of vast amounts of data relatively from human distortion, resulting in greater 395

Springer

UNCORRECTEDPROOF

J Int Entrepr (2006) 3: 263–277 273

Table 3 Business processes underpinned by the internet

Business process function Aspects used by case firms

Marketing and sales Transaction preparation (ordering, billing and payment, finance, delivery)Transaction completion (ordering, billing and payment, finance, delivery)Transaction support (information capture, information management,

order tracking, market analysis, market development)Link with MIS systems of channel partnersPoint of contact

Manufacturing Process innovation (design integration, logistics, production, administration/production co-ordination, co-ordination of outsourcing)

Availability and accessibility of MIS over multiple sites/internalco-ordination

Joint project management with clientsUnderpin collaboration capabilities

Human resources Recruitment advertisingJob applications submission

Administration Budgetary controlAccounting functions

effectiveness of communications across sites and a reduction in time spent and costs, sup-396

porting the assertions of Huber (1990) and Migliarese and Paolucci (1995).397

Business processes and the internet398

The Internet has redefined how businesses operate and has forever changed the way people399

work, with both Internet hardware and software prices’ dropping to such a level that fast400

Web access is not only affordable but essential to business activity. Case firms reported that401

they were using the Internet and associated technologies to varying degrees in order to re-402

shape business processes, including, manufacturing, marketing and sales and human resource403

functions as well as administration (see Table 3).404

The in-depth interviews revealed that the dominant attitude with regard to the integration405

of the Internet and business processes was not whether they should become Internet enabled,406

but rather how could they best leverage Internet enablement to support the firms’ strategic407

international growth objectives. Evidence suggests that the Internet provided at least some408

firms with a medium through which they could co-ordinate and underpin complicated value409

chain activities. Some firms were outsourcing technical medical devices for example, and410

then co-coordinating the export process and customer information using online means. Others411

were using the Internet to streamline the collection of Management Information, which if412

utilized correctly could lead to process improvement and cost reductions.413

However, for the majority of firm’s the total integration of the Internet and business pro-414

cesses was some way away. For example, the Canadian sample and some Irish respondents415

were using the Internet to underpin parts of the recruitment and selection process. Never-416

theless, none were using any electronic means to sift through application forms, although417

this capability exists. In some cases, firms were using the Internet’s capabilities to drive418

changes in administrative procedures, although this was not widespread. For example, close419

integration with channel partners produced benefits in terms of speed of information transfer420

and response to client enquiries. However, many firms, especially the Canadians and the421

Australians were using the Internet to submit data for e-government purposes.422

Springer

UNCORRECTEDPROOF

274 J Int Entrepr (2006) 3: 263–277

SME Internet enabled companies, even within industry sectors, are incredibly diverse, 423

thus to expect a single technological approach to be appropriate for every firm is illogical. 424

Rather, evidence suggests that firm decision-makers evaluate each technology and each online 425

business activity in light of their own business goals, internal knowledge skills, capabilities 426

and resources. Business process re-engineering (BPR) may be the most radical feature of 427

e-commerce, and involves completely redesigning how the company operates. BPR focuses 428

on the processes within and between organisations using e-commerce to create a new type 429

of organisation. The evidence suggests that in common with many other strategic decisions, 430

firms were making decisions with regard to BPR in a holistic manner. 431

Discussion 432

As Internet enablement was a prerequisite for inclusion in the study, unsurprisingly firms 433

were using this technology to underpin business activities in all areas of operations, domesti- 434

cally and internationally. Such business processes included sales and marketing management 435

systems, and to a lesser extent administrative functions and recruitment. Others used the 436

Internet and web based systems in order to act as meta-firms, co-ordinating upstream and 437

downstream activities, thereby “punching above their weight” (Verity and Hof, 1994). 438

Case firms were competing in dynamic, highly competitive international arenas, and 439

operations demanded appropriate levels of Internet enablement. This conflicts with earlier 440

studies conducted by Hamill and Gregory (1997) and Hamill (1999) who found that the 441

greatest impediment to Internet usage by small firms was a lack of knowledge and skill with 442

regard to the technology. Not only were case firms fully cognisant with Internet technologies, 443

they also had understanding of how ICT could augment the firms resource and knowledge 444

base and become incorporated into their strategic thinking. This is unsurprising, given the 445

relatively young age of many responding firms, and the fact that most have routinely used 446

sophisticated ICT since the late 1990’s. Indeed several firms had used the precursor of the 447

Internet as we know from the 80’s. Moreover, this result was anticipated, as the preponderance 448

were from the software sector. This combined with their early Internet adoption, may indicate 449

high levels of Internet usage and capability. 450

Significantly, the vast majority of firms demonstrated that Internet adoption was not in- 451

cremental, and this research finds little support for e-adoption or “stage” models of Internet 452

adoption. There was little evidence of an incremental staged progression towards a fully In- 453

ternet enabled organisation among case firms, and they displayed no wish to move upwards 454

along a ladder in a uni-directional manner. Rather, they were adopting whatever elements 455

of Internet technology underpinned their particular business operations from or close to in- 456

ception, therefore resting on a particular rung of the model. The present study suggests that 457

extant models do not accurately reflect the sophisticated manner in which firms actually used 458

ICT. For example, very few used either e-commerce, or the Internet to fulfil transactions. 459

This was not surprising given the customised and augmented nature of many offerings, and 460

the fact that individual transaction amounts tended to be high. Those firms that did were 461

operating within the Business-to-Consumer (B2C) Marketspace. Indeed, perhaps the extant 462

literature has over emphasized the role of e-commerce and online sales, particularly in the 463

Business-to-Business (B2B) arena. This area in particular merits future research interest, as 464

there is currently only nascent understanding of how small internationalising firms adopt 465

Internet technologies. 466

Evidence emerged that not all web pages or features of a website are open to the ca- 467

sual browser as some are covert in nature, and go beyond mere password protection. 468

Springer

UNCORRECTEDPROOF

J Int Entrepr (2006) 3: 263–277 275

Therefore this study suggests that extant web content analysis research may present an469

incomplete analysis of firm’s web functionality, at least in the B2B arena. Indeed, one470

of the most sophisticated users of Internet technology in the research appeared to only471

use e-mail and posted a website, but the initiated knew they were dealing with a so-472

phisticated CAD operation. Again, this issue warrants further investigation, as web con-473

tent analysis alone, may not be the best form of accurately assessing the efficacy of B2B474

websites.475

All firms were using e-mail as a communications medium. Similarly most were using the476

Internet as a marketing medium, primarily for marketing communications and to a lesser477

degree for CRM and sales transactions/fulfilment activity. The majority sought to use the478

Internet to support offline sales, and around one quarter of the firms were using the Internet479

as a distribution/ or distributor support medium. This finding supports the work of other480

authors who postulate that the Internet allows small firms to market globally at an early stage481

of development (Hamill and Gregory, 1997; Bennett, 1997, 1998; Berry and Prashantham,482

2001; Mostafa and Wheeler, 2001; Kuemmerle, 2002; Etemad and El Trash, 2003). Moreover,483

for all firms, Internet-enablement was not an option, but a necessity, and was regarded as a key484

driver in both building and maintaining international competitive advantage (Eid et al., 2002).485

Undoubtedly the Internet was altering and reconfiguring the structure and operations of486

these firms, including their ability to collaborate online. This occurred at many levels, and487

significant numbers of firms were using the Internet to underpin relationships with strate-488

gic alliance partners, suppliers, clients, agents and distributors, research and development489

partners, and other software coding developers, both nationally and internationally. Thus the490

Internet was acting as an enabler of new collaborative forms of organisation, in line with491

Borman (1994), Baskerville and Smithson (1995), Narendran et al. (1995), Volery (1995)492

and Poon and Swatman (1996).493

Informal intra-firm knowledge sharing was occurring via virtual CoP, where members494

were connected due to a shared interest or problem. As the firm’s competitive advantage495

is embedded in the intangible, tacit knowledge of its human capital, these proved to be496

good mechanisms for knowledge exchange, supporting Ardichvilli and Wentling (2003),497

Martin and Matlay (2003) and Sanchez and Perez (2003). New product development and498

R&D activities were vastly enhanced in some firms through the knowledge pool created via499

formal and informal Internet enabled collaborations. Indeed for many firms in the present500

study, the Internet proved to be “. . . a powerful platform for collaborating with customers on501

innovation” (Swahney et al., 2003: 77).502

Importantly, firms were using the Internet as a knowledge and resource building tool,503

supporting Maloff (1995) who asserts that the Internet can generate a wealth of exter-504

nal information. In fact, the firm’s key decision makers were internalising the knowledge505

gained with regard to both market intelligence and competitors, which then became part506

of the collective wisdom of the firm. Knowledge has always been viewed as crucial to507

internationalisation and is now well recognised as central to the internationalisation pro-508

cess (Forsgren, 2000; Petersen et al., 2001; Kuivalainen, 2003). The input and modera-509

tion of the entrepreneurial founder(s) leveraged Internet usage and enablement to best “fit”510

with the strategic objectives and internationalisation strategies of the firm. It is this In-511

ternet infusion that enables them to develop the knowledge rich environments in which512

they operate, reducing the barriers to internationalisation and increasing international op-513

portunities and competitiveness. As such, Internet leverage by rapidly internationalising514

firms in general, and knowledge acquisition activities in particular, merit much further515

research enquiry.516

Springer

UNCORRECTEDPROOF

276 J Int Entrepr (2006) 3: 263–277

References 517

Ardichvilli A, Page V, Wentling T (2003) Motivation and barriers to participation in virtual knowledge-sharing 518

communities of practice. J Knowl Manag 7(1):64–77 519

Autio E, Sapienza H, Almeida J (2000). Effects of age at entry, knowledge-intensity, and imitability on 520

international growth. Acad Manag J 43 (3):909–924 521

Axelsson B, Johanson J (1992) Foreign market entry—the textbook vs network view’. In: Axelsson B, Easton 522

G (eds) Industrial networks: A new view of reality. Routledge, London, pp 218–234 523

Baskerville R, Smithson S (1995) Information technology and new organizational forms: Choosing chaos over 524

panaceas. Eur J Infor Syst 4:66–73 525

Bell JD, McNaughton R, Young S (2001) Born again global firms: an extension to the born global phenomenon. 526

J Int Manage 7(3):1–17 527

Bell JD, McNaughton R, Young S, Crick D (2003) Towards an integrative model of small firm internationali- 528

sation. J Intern Entrepr 1:339–362 529

Bennett R (1997) Export marketing and the internet: experiences of web site use and perceptions of export 530

barriers among UK businesses. Intern Market Rev 14(5):324–344 531

Bennett R (1998) Using the World Wide Web for international marketing: Use and perceptions of export 532

barriers among German and British businesses. J Market Comm 4(1):27–43 533

Benito GR, Welch LS (1994) Foreign market servicing: Beyond choice of entry mode. J Intern Market 2(2):7– 534

27 535

Berry M, Prashantham S (2001) The internet and the internationalisation of small knowledge intensive firms. 536

In: Jones M, Dimitratos P (eds) Researching new frontiers. Proceedings of the 4th McGill Conference on 537

international entrepreneurship, pp 294–303 538

Borman M (1994) Common knowledge, interorganizational networks and the future for the organization of 539

production. J Inf Technol 9:203–212 540

Cavusgil T, Das A (1997) Methodological issues in empirical cross-cultural research: a survey of the manage- 541

ment literature and a framework. Manage Intern Rev 37(1):71–97 542

Chattell A (1998) Creating value in the digital era: Achieving success through insight, imagination and 543

innovation. New York University Press, New York 544

Coltman T, Devinney T, Latukefu A, Midgely D (2001) E-business: Revolution, evolution, or hype? Cal 545

Manage Rev 44(1):57–86 546

Cuneo AZ (1995) Internet world show spurs online commerce debate. Adverti Age, April 17, pp 16 547

Eid R, Trueman I, Ahmed AI (2002) A cross industry review of B2B critical success factors. Internet Res: 548

Electronic Network Appl Pol 12(2):110–123 549

Eriksson K, Johanson J, Majkgard A, Sharma D (1997) Experiential knowledge and cost in the international- 550

isation process. J Intern Bus Stud 28(2):337–360 551

Etemad H, El Trash SE (2003) E-commerce as a mechanism of SMEs internationalization? A preliminary study 552

of four sectors. Proceedings of the Sixth McGill International Entrepreneurship Conferemce, Londonderry, 553

Northern Ireland 554

Fletcher R, Bell JD, McNaughton R (2004) International e-business marketing Thomson Learning, London 555

Forsgren M (2000) Some critical notes on learning in the Uppsala internationalisation pro- 556

cess model. Working Paper, Foretagsekonomiska Institutionen, Uppsala Universitet, Accessed at 557

http://www.bibl.liu.se/kvartersbibl/KA/eki/kurser/scanpersp/literature.htm (March 22nd 2003) 558

Franson P (1998) High tech, high hope: Turning your vision of technology into business success. John Wiley, 559

New York 560

Freed L, Derfler FJ (1999) Fast connections. PC Magazine Online 18, April 20 561

Gilmore JH, Pine BJ (2000) Markets of one: Creating customer unique value through mass customisation. 562

Harvard Business School Press, Boston 563

Grant RM (2002) The knowledge based view of the firm. In: Choo CW, Bontis N (eds) The strategic manage- 564

ment of intellectual capital and organisational knowledge. Oxford University Press, Oxford, pp 133–148 565

Hamill J (1999) Internet editorial: Export guides on the net. Intern Market Rev 15(5):434–436 566

Hamill J, Gregory K (1997) Internet marketing and the internationalisation of UK SMEs. J Market Manage 567

13(1–3):9–28 568

Herbig P, Hale B (1997) Internet: The marketing challenge of the twentieth century. Internet Res: Electro 569

Network Appl Pol 7(2):95–100 570

Huber GP (1990) A theory of the effects of advanced information technologies on organizational design, 571

intelligence, and decision making. Acad Manage Rev 15(1):47–71 572

Johanson J, Vahlne J (1977) The internationalization process of the firm—a model of knowledge development 573

and increasing foreign market commitment. J Intern Bus Stud (Spring/Summer) 8:23–32 574

Johanson J, Vahlne J (1990) The mechanism of internationalisation. Intern Market Rev 7(4):11–24 575

Springer

UNCORRECTEDPROOF

J Int Entrepr (2006) 3: 263–277 277

Johanson J, Vahlne JE (1992) Management of foreign market entry. Scand Intern Bus Rev 1(3):9–27576

Johanson J, Wiedersheim-Paul F (1975) The internationalization of the firm—Four Swedish cases. J Manage577

Stud 12(3):305–322578

Katz J, Murray ML (2002) Automatically global: The challenges of virtual instant global entrepreneurship579

for research and policy. In: International entrepreneurship: Researching new frontiers. Proceedings of the580

5th McGill Conference, Montreal581

Knight G, Cavusgil ST (1996) The born global firm: A challenge to traditional internationalization theory.582

Adv Intern Market 8:11–26583

Kobrin SJ (2001) Territoriality and the governance of Cyberspace. J Intern Bus Stud 32(4):687–704584

Kotha S, Rindova VP, Rothaermel FT (2001) Assets and actions: Firm-specific factors in the internationaliza-585

tion of US internet firms. J Intern Bus Stud 32(4):769–791586

Kuemmerle W (2002) Home base and knowledge management in international ventures. J Bus Vent 17:99–122587

Kuvalainen O (2003) Knowledge based view of internationalisation—Studies on small and medium sized in-588

formation and communication technology firms. Doctoral thesis, Lappeenranta University of Technology,589

Finland. ISBN 951-764-782-4590

McKinsey and Co. (1993) Emerging exporters, Australia’s high value-added manufacturing exporters. Aus-591

tralian Manufacturing Council, Melbourne592

Maloff J (1995) The virtual corporation. Internet World 5:46–50593

Martin LM, Matlay H (2003) Innovative use of the internet in established small firms: The impact of knowledge594

management and organisational learning in accessing new opportunities. Qual Market Res 6(1):18–26595

Migliarese P, Paolucci E (1995) Improved communications and collaborations among tasks induced by group-596

ware. Dec Sup Syst 14:237–250597

Mostafa R, Wheeler C, Jones MV (2001) Internet-enabled international entrepreneurship. In: Jones M, Dim-598

itratos P (eds) Researching new frontiers. Proceedings of the 4th McGill Conference on International599

Entrepreneurship, pp. 294–303600

Narendran P, Strom J, Whiteley D (1995) An analysis of electronic markets in the context of SMEs. 3rd601

European Conference on Information Systems, Athens/Greece, 1–3 June, pp 917–929602

Nguyen TD (2001) A study of the internet and the internationalization of firms in transitional markets.603

Unpublished PhD Thesis, University of Technology, Sydney604

OECD, Science, technology and industry scoreboard 2001—Towards a knowledge-based economy, Accessed605

at http://www1.oecd.org/publications/e-book/92-2001-04-1-2987/gA-7-a.htm (December 10th)606

Oviatt BM, McDougall PP (1994) Toward a theory of international new ventures. J Intern Bus Stud 25(1):45–64607

Petersen B, Petersen T, Sharma D (2001) The role of knowledge in firms internationalisation608

process: Wherefrom and whereto. No. 17-2001 in working papers from Copenhagen609

Business School, Department of International Economics and Management. Accessed at:610

http://www.cbs.dk/departments/int/publications/wp 2001/WP17intproces2001.pdf (April 2nd, 2002)611

Poon S, Jevons C (1997) Internet-enabled international marketing: A small business network perspective. J612

Market Manage 13(1–3):29–42613

Poon S, Swatman P (1996) An empirical study on Australian small business use and the internet. Working614

Paper 96-4, Centre of Information Systems Research, Swinburne University: Australia SPSS Inc. Base615

7.0 Application Guide. SPSS Inc, USA616

Quelch JA, Klein L (1996) The internet and international marketing. Sloan Manage Rev, Spring 37(3):60–75617

Reuber AR, Fischer E (1997) The influence of the management team’s international experience on the inter-618

nationalization behaviours of SMEs. J Intern Bus Stud 28(4):807–825619

Samiee S (1998) Exporting and the internet: A conceptual perspective. Intern Market Rev 15(5):413–426620

Sawhney M, Prandelli E, Verona G (2003) The power of infomediation. MIT Sloan Manage Rev 44(2):77–82621

Slater D (2000) The integrated enterprise: The whole. . .is more than its parts. CIO 18:116–122622

Vatne W (1995) Local resource mobilisation and internationalisation strategies in small and medium sized623

enterprises. Environ Plan 27(1):63–80624

Verity JW, Hof RD (1994) The internet: How it will change the way you do business. Business Week, Nov625

14, pp 80–88626

Volery T (1995) Cooperative strategies for small and medium enterprises, working paper 95.05, School of627

management, Curtin University of Technology, Perth, July628

Weill P, Vitale M (2001) From place to space: Migrating to ebusiness models. Harvard Business School Press,629

Cambridge, MA630

Yli-Renko H, Autio E, Sapienza H (2001) Social capital, knowledge acquisition, and knowledge exploitation631

in young technology based firms. Strat Manage J 22(6-7):587–613632

Zahra SA, Garvis DM (2000) International corporate entrepreneurship and firm performance: The moderating633

effect of international environment hostility. J Bus Vent 15:469–492634

Springer