Who should a new venture ally with in order to enhance its internationalization capabilities? While peer relationships come easily and naturally for most new ventures, interactions with foreign multinational subsidiaries operating in their local environment are complex to build and to sustain. We contribute to the relational perspective of new venture internationalization by specifically contrasting the role of new venture ties with multinational enterprises (MNEs), from those with other peer firms. We draw on a multi-method study, integrating a quantitative study based on a survey of 102 software firms in India and a longitudinal case analysis of the relationship between an international new venture (INV) and an MNE (Microsoft). We find a positive relationship between local MNE ties and internationalization capability, and a negative relationship between ties with other small firms and internationalization capability. Our post-hoc analysis of the case study serves to shed further light on this, highlighting an important caveat to the relational capital story: building ties with MNEs is necessary but not sufficient for new ventures to internationalize; they require managerial action to exploit the knowledge acquired.
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Relational capital, or “joint benefits embedded in a relationship between two or more parties,” (Hitt, Bierman, Uhlenbruck, & Shimizu, 2006: 1138), has also been referred to as social capital in the economic sociology literature (Granovetter, 1985, 1995) and sometimes as relational embeddedness (Dhanaraj, Lyles, Steensma, & Tihanyi, 2004; Uzzi, 1997).
We clarify that our focus here is on subsidiary-level knowledge rather than that of individual MNE subsidiary managers because we have only firm-level data. But we acknowledge that, as insightfully pointed out by an anonymous reviewer, a more fine-grained picture can be obtained in future research by considering multi-level models that take into account manager-level knowledge within MNE partners. Furthermore, our focus is on foreign MNE subsidiary ties, not ties with Indian MNEs, which our field interviews suggested were relatively rare.
The 12-year threshold represents relative youth in an Asian context. This higher age limit compared to US-based studies is justified by the lower availability of early-stage equity funding and the typically longer maturation process for ventures (Kumar et al., 2009). This study’s results remained stable at lower age cut-offs (less than 10 and 8 years).
As Keupp and Gassmann (2009: 601) noted, the most common employee cut-offs in international entrepreneurship research are 250 and 500 employees. In this study the former was chosen because of the nascent empirical setting.
Ideally every questionnaire would have been completed by multiple respondents but often this is not feasible in smaller Asian firms for business and cultural reasons; hence the follow-up to confirm survey data against interviews.
In terms of R&D activity, foreign MNEs tend not to engage with indigenous Indian firms (Krishnan, 2010).
As evident from these examples, the general thinking here relates to leading MNE subsidiaries. Cantwell and Mudambi (2011) insightfully observed that some MNE subsidiaries are laggards. This is a distinction that is conceptually and empirically beyond the scope of our study. But we do recognize that this represents a fascinating way forward for future research on the role of MNE ties in international entrepreneurship.
We thank the anonymous reviewers for suggesting the latter lines of inquiry.
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An earlier version of the paper won the Best Paper Runner-up Award at the Strategic Management Society Special India conference in Hyderabad. We appreciate helpful comments on previous drafts from Julian Birkinshaw, Simon Collinson (at an AIM-sponsored paper development workshop), Rod McNaughton, guest editor Anil Nair, and two anonymous reviewers. The first author gratefully acknowledges financial support from the Carnegie Trust for the Universities of Scotland and an ESRC India Visiting Scholar Grant (RES-072-27-0005).
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Prashantham, S., Dhanaraj, C. MNE ties and new venture internationalization: Exploratory insights from India. Asia Pac J Manag 32, 901–924 (2015). https://doi.org/10.1007/s10490-014-9391-y
- International entrepreneurship
- New venture internationalization
- International new venture
- INV-MNE interactions
- Relational capital
- Social capital