Promoting internationalisation – the role of knowledge and innovation

The literature on internationalisation focuses on two broad forms of knowledge: experimental and objective knowledge (Eriksson et al, 1997, 2015; Johanson and Vahlne, 1977, 2009; Mejri and Umemoto, 2010). These are, arguably, similar to the tacit and coded knowledge discussed in relation to theories on spatial organisation. Objective knowledge consists of all forms of knowledge acquired through documentary sources such as written documents, reports and explicit materials, while experiential knowledge is acquired only through experience. These forms of knowledge drive innovation for firms within the internationalisation process. Their absence, therefore, creates barriers to internationalisation as businesses are unable to appreciate the conditions in the external markets. The barriers, among others, include: understanding foreign business practices, different product standards and consumer standards in foreign countries, and difficulty in obtaining adequate representation in foreign markets (Reid, 1981; Bilkey and Tesar, 1977; Hashai and Almor, 2004).

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Mejri and Umemoto (2010, p. 168) explain that market knowledge is a form of objective and experiential knowledge which includes, “network knowledge (social and business network; knowledge as the network itself), cultural knowledge (knowledge of language, habits, norms, laws, behaviour...), and the entrepreneurial knowledge (knowledge of the existence of opportunities and exploiting them)”. This knowledge is perceived by the Traditional Internationalisation School (TIS) as an important obstacle to the development of international operations (Johanson and Vahlne, 1977, 2009; Kalinic and Forza, 2012). On market knowledge, Johanson and Vahlne (2009) distinguish between institutional market knowledge and business market knowledge. They explain that knowledge that consists of factors related to psychic distance and to the liability of foreignness, such as language, laws, and rules, is institutional market knowledge. Business market knowledge, on the other hand, is related to a firm’s business environment and consists of the firms with which it is doing or trying to do business.

The International Entrepreneurial School (IES) views knowledge as a means to drive competitive advantage to permeate multiple countries (Oviatt and McDougall, 1994; Coviello, 2006; Bell et al, 2003; Freeman, et al, 2013). IES argues that, due to globalisation, the growth of information and communications technology and reduced transportation cost, firms are able to innovate, and acquire knowledge and capabilities to achieve considerable foreign market success early in their evolution (Cavusgil and Knight, 2009; Dib et al, 2010; Efrat and Shoham, 2012; Krishna et al, 2012; Knight and Cavusgil, 2004; Freeman, et al, 2013). According to proponents of the ‘born global’ firms phenomenon, firms pursue global niches from the onset with more committed and proactive management. These firms seek to gain first-mover advantage and rapid market penetration by exploiting and protecting proprietary knowledge. Based on the characteristics of the ‘born global’ firms, Bell et al (2003) argue that production and processing involve higher added value of scientific knowledge, and as a result classify them as knowledge-intensive or knowledge-based firms. These scholars explain that knowledge-based firms exist due to the emergence of new technology, which may be as a result of proprietary or acquired knowledge such as that of software and internet developers. On the other hand, knowledge-intensive firms may require knowledge to improve productivity and modify production methods. These may include computer-aided designs and manufacturing (Bell et al 2003).

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It is worth noting that the nature of knowledge influences the internationalisation process (Freeman et al, 2013; Eriksson et al, 2015). Knowledge-based firms internationalise rapidly but the pace of knowledge-intensive firms depends on whether they are innovators or adopters of the knowledge acquired (Bell el at, 2003). There seems to be a strong case for acquired knowledge in the internationalisation process. Cuervo-Cazurra (2011) explains that managers with internationalisation knowledge have acquired it by working for firms involved in foreign activities and have a perceived interest in internationalisation from the onset of the business. Coviello (2006) argues that a firm’s acquired knowledge and its competiveness in internationalisation depends on the network relations established. It appears that some born global firms acquire some forms of knowledge through learning. It is not surprising that there are inconsistencies in the foundation period before firms proceed to internationalise. For instance, in relation to the duration before business inception in internationalisation, Knight et al (2004) estimate the period of business formation and eventual internationalisation at four years, but McDougall et al (1994) estimate the period to be eight years. Against this backdrop, there is variation in a firm’s learning ability in the internationalisation process (Bilkey and Tesar, 1977; Johanson and Vahlne, 2009). Could it be that this period, however short, forms the learning period required for the born global firms to internationalisation? If this is the case, then there may be some similarities in the traditional stages model and the born global model, as observed by Autio (2005). He argues that, whereas the TIS emphasises knowledge as the constraint to a firm’s internationalisation, the IES views it as the enabler, and therefore the IES’s views are complementary to the internationalisation process (Autio, 2005).

While there seems to be consensus on the relevance of learning and knowledge in the internationalisation process, there are differences in the pace of acquisition of this knowledge and its usage. For instance, while the stages theory assumes the acquisition of knowledge on an incremental basis, international entrepreneurs seem to adopt knowledge for strategic positioning in the international market (Bell et al 2003; Johanson and Vahlne, 2009). Resource constraints and the competitive nature of the knowledge economy influence acquisition of knowledge by businesses. In this case, knowledge is seen as a commodity and positively relates to firms’ resource availability (Mejri and Umemoto, 2010). This goes to support OECD data (2013) on the dominance of large firms and their performance in the internationalisation process. However, if large TNCs have more resources to acquire

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knowledge and increase performance in internationalisation, how do we explain the evidence of small firms’ rapid internationalisation?

It suffices to note that internationalisation literature seems to agree that exposing firms to the international market may enhance knowledge and innovation, competence and performance (Eriksson et al, 1997; Bell et al, 2003; Freeman et al, 2013). Casillas et al (2010) examine knowledge and learning from the pre-export phase of firms and conclude that knowledge, (supra-organisational, organisational, and individual sources) is positively related to the favourable attitude to initiate a process of internationalisation through exports. In accordance with Bell et al (2003), Casillas et al (2010) further observe that new knowledge positively influences firms in the internationalisation process and leads firms to unlearn the old knowledge while adopting new knowledge. This is confirmed by the salmon and mango clusters in Chile and Peru. These clusters have, through the acquisition and adoption of new knowledge, reorganised their production structure to sustain internationalisation. The internationalisation literature appears to agree that sustained internationalisation requires maintaining and modifying knowledge flow. However, Cesinger and Kraus (2012) note that internationalisation exposure could also induce rigidity and biases which sustain ethnocentric views and stereotypes. They propose that entrepreneurs must be willing and curious in understanding and learning about the geographic mosaic of business opportunities worldwide. The question that arises from the literature is: can the objective and experiential knowledge be easily adopted by business entrepreneurs in developing economies like Ghana? The literature on internationalisation appears to agree that networking and innovation may co-exist. The importance of knowledge diffusion through the interactions of firms and the networks in which they reside provides analytical support to the role of clusters in the internationalisation process. The interplay of weak and strong network ties, and experiential and objective knowledge, appears to rest within economy specific policies and institutions. However, these policies and the institutional environment for the internationalisation of business clustering have been examined to a minimal degree only (Richardson et al, 2012) and, in the case of Ghana, are completely absent. A holistic study of a firm’s internationalisation requires an understanding of the macro, meso and micro institutional environment and policies that drive them. The next section examines the institutional and policy environment in the internationalisation process.

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