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Introduction

How can small firms leverage the Internet when seeking to expand their business abroad? This question has been at the centre of academic inquiry ever since the introduction of the Internet. Yet, there has recently been a number of calls for more research to explore how the Internet as a global techno-social system can add value as a driver of internationalization in small and medium-sized firms (SMEs) (Plakoyiannaki et al. 2014; Reuber and Fischer 2011; Sinkovics et al. 2013). With this study, we aim to address this call for research. Drawing on the Uppsala internationalization process model (Johanson and Vahlne 1977, 1993; Johanson and Wiedersheim-Paul 1975) we explore how SMEs can leverage the Internet to create value when seeking to expand their business abroad by reducing the amount of risk associated with doing business in foreign markets. The Uppsala internationalization process model is one of the most extensively used theories within academic inquiry on SME internationalization (Coviello and McAuley 1999; Ruzzier et al. 2006) and highlights important factors which impact on the internationalization process (Fillis 2001).

Risk is a central concept in the literature on firm internationalization, including the Uppsala internationalization process model (Figueira-de-Lemos et al. 2011), where it is generally acknowledged that risk must be considered sufficiently low to allow international involvement to proceed (Liesch et al. 2011). The importance of risk as an explanatory variable of firm internationalization has been emphasized in a number of empirical studies. For example, previous research has found risk to influence internationalization propensity (Cavusgil and Naor 1987; Simpson and Kujawa 1974), degree of internationalization (Acedo and Florin 2006), speed of internationalization (Acedo and Jones 2007; Oviatt and McDougall 2005), and the number of countries in which the firm is engaged (Kiss et al. 2013). Risk is therefore often highlighted as a critical barrier hindering SMEs ability to initiate, develop, and sustain business operations in foreign markets.

While our knowledge and understanding of SME internationalization has increased in recent years, the true impact of the Internet on this phenomenon has yet to be fully examined (Bianchi and Mathews 2016; Plakoyiannaki et al. 2014; Sinkovics et al. 2013). The Internet arguably holds great potential for creating value and growth in organizations, by enabling them to increase their involvement in foreign markets (Morgan-Thomas 2009; Zucchella and Hagen 2012). The world has witnessed an increase in the number of SMEs doing business in foreign markets and one reason why we see more and more SMEs seeking business in foreign markets is presumably because of the introduction of the Internet (Acs and Preston 1997; Oviatt and McDougall 2005). The value of the Internet in supporting international growth arguably lies in its ability to reduce the cost of internationalization, causing resource-constrained SMEs to disregard their size-related constraints (Cavusgil and Knight 2015). However, the role and impact of the Internet on foreign market expansion is complex and by no means evident (Karavdic and Gregory 2005; Petersen et al. 2002). Some even argue that the Internet may have a negative effect on firm internationalization, by causing firms to mistakenly believe there is no need for learning about the target markets through non-virtual means and causing rash foreign market expansion (Reuber and Fischer 2011; Yamin and Sinkovics 2006). Thus, there are conflicting viewpoints to be found in the literature, as to the role of the Internet in SME internationalization.

Furthermore, previous research has been criticised on several grounds for being subject to a number of limitations. First, on the grounds that it fails to draw upon a solid theoretical framework to explore and explain the role of the Internet in the internationalization process (Moen et al. 2008; Sinkovics et al. 2013). Second, empirical studies that focus on the role of the Internet in the internationalization process of SMEs are relatively scarce and most previous studies are conceptual in nature and often deal more with the potential than the reality of Internet use in practice (Eid 2005; Pezderka and Sinkovics 2011). Thus, much work still remains to explore the role of the Internet in the internationalization process.

We organize this chapter as follows. First, we define risk and conceptualize how the Internet influences risk by reducing market commitment and uncertainties in the internationalization process. Specifically, we conceptualize how firms can leverage the Internet to reduce the amount of risk associated with internationalization, by acting as a resource conserving strategy and reducing knowledge gaps. Second, we present and justify the methodological approach used, including the procedures and techniques used for collecting and analysing the empirical data. Third, we present our findings, followed by a discussion of the results in relation to earlier findings. Finally, the contributions and the implications of the study are discussed and a number of topics perceived as promising avenues for future research are presented.

Theoretical Background

Risk, Uncertainty and Market Commitment

Risk is central to internationalization (Liesch et al. 2011), where it refers to ‘the dangers firms faced in terms of limitations, restrictions, or even losses when engaging in international business’ (Ahmed et al. 2002: 805). For instance, risk is a cornerstone of the Uppsala internationalization process model, according to which the perception of risk influences firms’ commitment to foreign markets (Johanson and Vahlne 1977). It is now well established in the literature that firms operating across national borders are confronted with a number of risks, some of which are unique to firms operating across national borders (Ghoshal 1987; Shrader et al. 2000). For instance, internationalization is accompanied by a number of risks, including, among others, foreign exchange risks (Batten et al. 1993; Jacque 1981), political risks (Bekaert et al. 2014; Jiménez and Delgado-García 2012; Kobrin 1979), country risks (Brown et al. 2015; Di Gregorio 2005; Luo 2009), and cultural risks (Hain 2011). SMEs therefore face a dilemma: one the one hand, internationalization provides them with an opportunity for growth, while on the other hand, internationalization exposes them to heightened risks, which may negatively influence their performance and well-being (Brouthers 1995; Prashantham and Floyd 2012).

According to the Uppsala internationalization process model, the amount of risk associated with initiating, developing, and sustaining business operations in foreign markets is dependent on market commitment and market uncertainty (Figueira-de-Lemos et al. 2011; Johanson and Vahlne 1977). The underlying logic is that the risk associated with foreign business operations increases as the market commitment and uncertainty increases. Large market commitments imply greater risk, as large market commitments create potential exit barriers and increase the significance of potential losses when engaging in international business (Figueira-de-Lemos et al. 2011). In addition, when uncertainty increases, the predictability of the outcome of an action is reduced and therefore risk increases (Miller 1992).

Market commitments refer to all those assets that a firm accumulates in a particular foreign market which can constrain its freedom of actions (Forsgren and Hagström 2007; Lamb and Liesch 2002). Market commitment is concerned with the size of resources committed in foreign markets as well as their transferability, i.e. country-specificity (Pedersen and Petersen 1998). Thus, commitment is best described as the ‘the product size of the investments times its degree of inflexibility’ (Johanson and Vahlne 2009: 1412). Market commitment increases concurrently with the amount of resources committed in marketing, organization, personnel etc. (Johanson and Vahlne 1977). In addition, market commitment increases as the degree of commitment increases because the country-specificity of resources increases, which makes them more difficult to transfer to alternative use (Andersen 1993; Pedersen and Petersen 1998).

It is possible to distinguish between tangible and intangible market commitments (Hadjikhani 1997). Tangible market commitments are ‘those for which it is possible to plan or calculate both the input costs and output outcomes, such as the given examples of production plants, subsidiaries’ offices, transportation vehicles or even other less obvious like suppliers’ subcontracts’, while intangible market commitments ‘are those for which the input costs are quantifiable, but the outcomes difficult to estimate’ (Figueira-de-Lemos and Hadjikhani 2014: 335). Examples of intangible market commitments include personnel education, advertisement actions, managers’ meetings, or relationships inside and outside the firm. Thus, a firm’s market commitments can be made in tangible or intangible assets for specific foreign markets.

Market uncertainty, on the other hand, is concerned with ‘the decision-makers ’ perceived lack of ability to estimate and predict the present and future, market and market-influencing factors’ (Hilmersson et al. 2015: 236). Uncertainty therefore has to do with decision-makers’ difficulty in predicting the future and comes from incomplete knowledge (Beckman et al. 2004; McKelvie et al. 2011). While risk and uncertainty are often used as synonyms (Liesch et al. 2011), this suggests it is perhaps more correct to conceptualize risk and uncertainty as two conceptually different concepts (which are closely related). According to Yates and Stone (1992: 11), ‘Every conception of risk requires that there must be uncertainty about the outcomes of prospective actions; if the outcomes are guaranteed, there is no risk’. Thus, risk is best defined as a situation where the outcome is uncertain (i.e. uncertainty as an antecedent of risk) (Aven and Renn 2009; Sitkin and Pablo 1992).

It is generally acknowledged that internationalization involves a high degree of uncertainty, as firms are venturing into ‘strange new lands’ (Maitland and Sammartino 2014; Oviatt et al. 2004; Schweizer et al. 2010). Different sources of uncertainty have been discussed and investigated in the existing literature. As illustrated in Table 12.1, Miller (1992) distinguishes between three types of uncertainty when engaged in international business: (1) general environmental uncertainties, (2) industry-specific uncertainties, and (3) firm-specific uncertainties, which all act as sources of risk in the internationalization process.

Table 12.1 Sources of uncertainty when doing business in foreign markets
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Uncertainty may either be pure or contingent (Figueira-de-Lemos et al. 2011). While it is impossible to reduce or eliminate pure uncertainty, contingent uncertainty can be reduced with knowledge and skills as well as risk-controlling strategies (Knight 1921; March and Shapira 1987). According to the Uppsala internationalization process model, uncertainty is correlated with international knowledge (Johanson and Vahlne 1977), which has been shown to be a key resource leading to internationalization (Fernhaber et al. 2009; Reuber and Fischer 1997). Uncertainty has been used to refer to ‘the lack of confidence about one’s knowledge’ (Jauch and Kraft 1986: 782) and is arguably the result of a disparity between the international knowledge needed and the international knowledge possessed by the firm for successfully increasing involvement in foreign markets (Hilmersson and Jansson 2012; Petersen et al. 2008). Viewing uncertainty as the result of knowledge gaps implies that uncertainty is reduced by increasing the amount of information available to the decision-maker (Lipshitz and Strauss 1997). Hence, risk is inversely related to market knowledge (Casillas et al. 2015).

SMEs seeking to expand their business abroad may lack institutional knowledge, which consists of knowledge of the institutional framework, rules, norms, and values, business knowledge, which refers to knowledge of foreign markets and opportunities as well as knowledge about local cultures, or internationalization knowledge, which concerns how to develop and execute an internationalization strategy and internationalize in different countries (Eriksson et al. 1997; Fletcher and Harris 2012).

It is well-established that firms are able to reduce uncertainty by acquiring tacit knowledge through experiential learning (Forsgren 2002; Johanson and Vahlne 1977). However, while a firm’s experience is an important source of knowledge for internationalization, it is not the only one. While tacit knowledge acquired through experiential learning was previously considered to determine international involvement, recent research suggests that firms can rely on different sources of market knowledge and still reach similar levels of market knowledge (Åkerman 2015). Firms may also acquire the necessary knowledge by other means, including grafting (i.e. hiring people or acquiring business units), vicarious learning (i.e. from the experience of others), and external search (i.e. scanning the environment and conducting a focused search for new information) (Fletcher and Harris 2012; Huber 1991).

In addition, risk is related to the amount of resources committed and the transferability of those resources (Johanson and Vahlne 1977). Thus, firms can reduce the level of risk associated with internationalization by reducing the amount of resources committed or the level of vulnerability associated with adverse outcomes (Cho and Lee 2006). SMEs may actively reduce the risk associated with internationalization by selecting suitable resource strategies, for example by relying on entry modes that require low resource commitments, such as exporting, licensing or joint ventures (Oviatt et al. 2004; Sasi and Arenius 2012).

In sum, the relevant literature suggests that the risks associated with internationalization are correlated with uncertainty and commitment, which is why the risks associated with internationalization can be mitigated by reducing uncertainty through learning and information search, or reducing vulnerability by lowering the amount of resources commitment to foreign markets in terms of quantity and irreversibility.

Internationalization of SMEs and the Internet

The importance of the Internet as both a market and a medium when seeking to increase involvement in foreign markets has been discussed ever since it first saw the light of day (e.g. Bennett 1997; Hamill 1997; Poon and Jevons 1997). The Internet is defined as a dynamic ‘global techno-social system, based on a global, decentralized technological structure consisting of networked computer networks that store objectified human knowledge’ (Fuchs 2008: 122). Previous research suggests that SMEs have much to gain from effectively using the Internet when seeking to expand their business abroad (Cho and Tansuhaj 2013; Sandulli et al. 2012; Zucchella and Hagen 2012) and the introduction and advancement of the Internet has been referred to as ‘the most important innovation in recent years for SME exporters’ (Mostafa et al. 2005: 292). Some even go as far as describing the Internet and the firm’s ability to take advantage of the opportunities afforded by the Internet, as a necessary precondition for internationalization (Etemad et al. 2010).

A number of studies highlight how the Internet diminishes distance and enable SMEs to circumvent size-related barriers that have previously been hindering their ability to initiate, develop or sustain business operations in foreign markets (Clarke 2008; Mathews et al. 2012; Nieto and Fernández 2005; Tseng and Johnsen 2011). For example, previous studies have demonstrated how effective use of the Internet can reduce the constraining effects of liability of foreignness and resource scarcity (Arenius et al. 2006; Sasi and Arenius 2012) and be a major determinant of rapid internationalization (Loane 2006). Establishing an online presence may allow firms to reach customers that were otherwise inaccessible due to the temporal and spatial limitations of existing distribution channels (Sheth and Sharma 2005). This, in turn, may lead to an increased number of unsolicited orders from abroad, due to an expansion of the firm’s opportunity horizon (Berry and Brock 2004). As a consequence, firms are pulled into foreign markets, because of their greater visibility to international customers, who are using the Internet to search for products and services (Petersen and Welch 2003). Using the Internet as a platform for marketing may therefore directly result in international growth (Morgan-Thomas and Bridgewater 2004).

However, not everyone seems to share this optimistic perspective on the opportunities afforded by the Internet. Others have criticised existing research for being too positive and questioned the Internet’s effectiveness in facilitating SME internationalization (Sinkovics et al. 2013). Instead, it has been argued that relying too much on the Internet as a means to support or conduct international business activities can have negative consequences for the firm (Reuber and Fischer 2011), by having firms diversify their international activities too much (Petersen et al. 2002) or creating a ‘virtuality trap’ (Sinkovics et al. 2013; Yamin and Sinkovics 2006). Thus, it is important to acknowledge that the Internet can both be performance enhancing as well as performance destroying (Geyskens et al. 2002), and why a more balanced perspective on the role of the Internet is needed that acknowledges both the positive as well as the negative consequences of the Internet (Reuber and Fischer 2011).

The Internet has very diverse applications and can be used across the entire value chain (Yamin and Sinkovics 2006). Broadly speaking, it provides SMEs with an information-intensive environment and may be used for disseminating, acquiring, and sharing information (Prashantham 2005). SMEs can use the Internet to conduct and support internationalization-related activities in three ways: (1) as a global marketing tool that can be used to disseminate and acquire information, (2) as a cost-effective transaction medium, and (3) as a tool to support customer service (Servais et al. 2006). In relation to firm internationalization, Moen et al. (2008) distinguish between using the Internet for information search, sales activities, and relationship development.

First, the Internet can be used to explore international markets. The Internet presents decision-makers with access to vast amounts of information and can be used to assist firms in acquiring information in order to evaluate foreign markets, access information about competitors, and search for partners and customers (Moen et al. 2008; Nguyen et al. 2006). The Internet has provided new ways of accessing secondary data and collecting primary data, which makes it possible to reduce the resources required to conduct international marketing research (Samuel Craig and Douglas 2001). Thus, the Internet potentially enhances firms’ marketing research capacity (Bianchi and Mathews 2016), by providing them with a means to collect a considerable amount of information about foreign markets (Kollmann and Christofor 2014) at relatively low costs (Loane 2006). Consequently, the Internet has the potential to drive international growth, as limited information about foreign markets is a major barrier hindering SMEs’ ability to increase their involvement in foreign markets and is an important source of uncertainty in the internationalization process (Hilmersson and Jansson 2012; Leonidou 2004; Petersen et al. 2008; Petersen et al. 2003). However, the ability of the Internet to reduce uncertainty and increase knowledge about foreign markets is dependent on the ability of the firm to internalize and apply the information, by absorbing it and translating it into knowledge (Liesch and Knight 1999; Nguyen and Barrett 2006).

Second, the Internet may be used to create and mediate dialogue between the firm and customers (Brodie et al. 2007; Hamill 1997). For example, the Internet can be used to provide information about the organization, its products and/or establish a business image (Berry and Brock 2004; Servais et al. 2006). Using the Internet as a marketing channel has a number of advantages, the primary ones being reducing costs and enhancing reach (Harrison-Walker 2002; Loane and Bell 2006; Sheth and Sharma 2005). Using the Internet for sales activities arguably allow SMEs to reach customers that were otherwise inaccessible due to temporal and spatial limitations (Sheth and Sharma 2005). Kotha et al. (2001: 776) even suggests that, ‘in principle, an Internet firm gains immediate access to international customers by virtue of launching a website’. In addition, using the Internet as a marketing medium offers a very cost-effective way for firms to increase their reach (Loane 2006) and can reduce some of the costs associated with the internationalization process (Berry and Brock 2004). Thus, the Internet is considered a low-cost gateway to foreign markets (Loane et al. 2004).

Third, the Internet can be leveraged to develop and harness relationships, also referred to as virtually embedded ties (Reuber and Fischer 2011). The Internet, with its potential for interactivity, provides firms with opportunities for developing and maintaining network ties and can be used to build social capital (Prashantham and Young 2004; Sigfusson and Harris 2012). In addition, these virtually embedded ties can be created ‘more quickly and at a lower cost than is possible through the development of physically based connections’ (Morse et al. 2007: 143). These Internet-assisted network ties are likely to differ qualitatively from socially embedded ties and to be much more functional (Etemad et al. 2010) and some argue that the Internet can be utilized to overcome the ‘liability of outsidership’ (Johanson and Vahlne 2009), by developing and maintaining relations with potential partners on the Internet to become insiders in relevant networks in foreign markets (Sigfusson and Chetty 2013). Researchers have also recognized that the Internet may provide an important tool in developing and maintaining relations between geographically diverse actors. Thus, the Internet may increase the range and diversity of network attachments.

The importance of informal and formal network relationships is increasingly being acknowledged in the literature on SME internationalization, where it has been argued that a lack of network relationships is likely to be an important source of uncertainty (Hilmersson and Jansson 2012; Johanson and Vahlne 2009). Network relationships have long been acknowledged for their ability to provide SMEs with access to critical resources, including knowledge (Yli-Renko et al. 2001). For example, network relationships can be used as conduits for information and knowledge flows to gain access to information about foreign markets through interactions with others (Agndal et al. 2008; Presutti et al. 2007), increase international exposure (Fernhaber and Li 2013), help identify foreign exchange partners (Ellis 2000; Zhou et al. 2007), and provide tacit knowledge about international business practices (Eriksson et al. 1997; Sharma and Blomstermo 2003). Thus, Yli-Renko et al. (2002: 281) concludes that ‘the greater the social capital possessed by the firm, the greater will be its knowledge and therefore, the faster will be its international growth’. SMEs can therefore utilize network relationships to control and reduce uncertainties, by acting as conduits of and access to knowledge (Beckman et al. 2004; De Carolis and Saparito 2006). Thus, SMEs may acquire critical resources, such as knowledge, that are needed to internationalize, through online social capital formation (Sigfusson and Chetty 2013).

Figure 12.1 depicts a conceptual model showing an overview of the Internet’s influence on the amount of risk associated with internationalization.

Fig. 12.1
figure 1

Overview of the Internet’s influence on the amount of risk in the internationalization process

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Methodology

Research Design

The main objective of this study was to explore how SMEs can leverage the Internet to create value when seeking to expand their business abroad by reducing the amount of risk associated with doing business in foreign markets. In addressing this objective, a case study approach was adopted because of its merits when dealing with this specific type of research question (Ghauri 2004). Additionally, given that the academic literature on Internet-enabled internationalization is limited and at a formative stage (Glavas and Mathews 2014; Reuber and Fischer 2011), a case study design was deemed appropriate (Eisenhardt 1989).

The objective when selecting cases were to select ‘information rich’ cases that were relevant to our study (Ghauri and Grønhaug 2010). Thus, criterion sampling was used to identify and select cases that fulfilled predetermined criteria (Sandelowski 1995). To be considered eligible for this study, cases had to meet two predetermined criteria. First, cases had to be classified as SMEs. In line with previous studies, the criterion used for defining SMEs was number of employees, as a proxy for firm size (McAuley 2010). The standard EU classification was followed, where SMEs are defined as firms with fewer than 250 employees. This is also the most frequently definition across OECD countries (OECD 2005) and is widely used in the literature (Agndal et al. 2008; Galkina and Chetty 2015; Hilmersson 2014; Moen et al. 2016; Pinho and Martins 2010). Second, cases had to be involved in international operations, that is, with exports or subsidiaries abroad.

To identify eligible cases, a database containing information on all registered companies in Denmark, including facts regarding ownership, turnover, balance sheets and size, was used. Given that the majority of companies in Denmark are classified as SMEs and given that Denmark is a small open economy, this screening procedure generated a large number of candidates. To select cases from this list of eligible cases, randomly selected companies were contacted by telephone and asked if they were willing to take part in the study. In addition, it was double-checked that the cases fulfilled the predetermined criteria. In total, 10 cases were selected. Background information on each of the case study firms, including details on firm age, size, products, export experience and top export markets, is presented in Table 12.2.

Table 12.2 Overview of case companies
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Data Collection

For the purpose of this study we relied on semi-structured interviewing as the primary method of data collection. While there are various techniques available for gathering data, including surveys, observation and documents, the interview is the most important and common technique for gathering data in case studies (Myers 2009). This is particularly true when studying SMEs, where interviewing is likely to be the only way to obtain information from key decision-makers (Bell et al. 2004; Carson 1995). In addition, interviews provide a unique opportunity for researchers to gain access to key decision-makers and their mind-set (Welch et al. 2002; Yeung 1995).

To ensure that the interviews share a given focus and ensure cross-case comparability, the actual interview was conducted based on an interview guide, which was organized into five parts. The first part captured information regarding the company background, such as when the company was founded, the company’s ownership and current size in terms of employees and turnover. This information was supplemented with information from annual reports, company brochures and corporate websites. The second part specifically aimed at capturing information regarding the internationalization patterns of the company, such as when the company first started to internationalize, how the internationalization process developed over time and the percentage of revenue coming from overseas markets. The fourth part captured information about the company’s decision-making processes with respect to internationalization. The final and fifth, part was focused on capturing information about the role of the Internet in the internationalization of the firm. During the interviews, the decision-makers were asked questions regarding their experiences with using the Internet for supporting or conducting international business activities when increasing their involvement in foreign markets as well as their assessment of the impact of the Internet on SME internationalization.

All interviews were conducted in the period from January 2013 to December 2013and each interview lasted about 90–120 minutes. The informants used for the purpose of this study was corporate elites, including Chief Executive Officers, Owner-managers, Vice Presidents and Directors of Sales (Welch et al. 2002). All interviewees therefore had an in-depth knowledge about their firms’ international operations, including how the firm’s internationalization had developed over time, and they had had a direct impact upon the decisions related to the internationalization strategy.

All interviews were recorded and eventually transcribed verbatim to help overcome natural constraints of memory and allow for a more thorough examination of the content of the interviews.

Data Analysis

The aim of the analysis was to identify how participating decision-makers interpreted the Internet and its role in firm internationalization.

When analysing the data, we used ‘pattern matching’ as an analytic technique to compare our empirically observed patterns with those predicted by our conceptual framework (Gibbert and Ruigrok 2010; Yin 2009). As a first step in data analysis, each transcript was read and statements or actions that reflect the decision-maker’s assumptions, knowledge, or expectations related to the role of the Internet and its implications for firm internationalization were highlighted. The purpose of this process was to increase familiarity with the data, in order to gain a more holistic understanding of it, before starting to condense the data (Braun and Clarke 2006).

The next phase of analysis involved data condensation. In order to condense the data, while preserving the ‘essence’ or meaning of participants’ perceptions or experiences, we relied on coding. This process involved assigning ‘a word or short phrase that symbolically assigns a summative, salient, essence-capturing and/or evocative attribute for a portion of language-based or visual data’ (Saldana 2013: 3) and allowed us to overcome cognitive constraints and discover patterns in the data that were not otherwise visible (Auerbach and Silverstein 2003). The actual coding of the data involved both inductive (i.e. data driven) and deductive (i.e. theory-driven) coding (Fereday and Muir-Cochrane 2006; Kvale and Brinkmann 2009), as this provided the benefit of giving the study focus and making sure that the coding was linked to the specific research questions, while still allowing room for new insights to emerge (Bazeley 2013).

NVivo 10 was used during all phases of coding, which allowed us to address the issue of de-contextualization (i.e. the possible problem of losing the context of what is said), which is one of the most commonly mentioned criticisms of coding (Bryman and Bell 2015). As argued by Gibson and Brown (2009: 189), ‘[t]he contexts in which people speak are fundamental to the meaning which they are creating. By removing that context from the analysis, researchers remove the resources that would enable them to understand why the speakers said what they did or, perhaps more accurately, “why they said it how they did”’. However, by using NVivo, a link between the coded material and the source of the coded material was always retained so that it was always possible to go back to the source in order to understand the context more accurately (Bazeley and Jackson 2013).

Empirical Findings

Impact of the Internet on Knowledge and Uncertainty

As was mentioned earlier, uncertainty results from a disparity between the knowledge needed to successfully increase involvement and operate in foreign markets and the knowledge currently possessed by the firm, also referred to as a knowledge gap. Our findings illustrate how the Internet as a global techno-social system storing objectified human knowledge has enabled many SMEs to reduce the levels of uncertainty associated with international business by providing access to a number of information sources to support decision-making.

During the interviews, all decision-makers seemed to recognize the value of the Internet as a source of information. It was generally acknowledged that the Internet had reduced information barriers by increasing the amount of foreign market information available to firms. For example, the CEO of Case I, a globally oriented company developing and producing advanced wireless solutions, emphasized the importance of the Internet as a source of international knowledge and as a means to close knowledge gaps: ‘We acquire most of our knowledge from the Internet one way or the other. The amount of information available there is incredible. Of course we also receive information by talking to our customers, but typically they give a hint and then you investigate further’. Similarly, when reflecting upon the consequences of the Internet on information availability, the CEO of Case F argued: ‘You have definitely got better opportunities to keep yourself up-to-date, without that big of an effort’. Thus, it was acknowledged that the Internet could assist the firm in acquiring appropriate knowledge and hence allow firms to make more informed decisions.

Most case firms were actively using the Internet as a source of knowledge. However, it was mostly used in a non-systematic way to perform ad-hoc focused web-searches. Firms were mainly using the Internet for seeking and acquiring business knowledge, including knowledge of foreign market conditions and opportunities as well as knowledge about the behaviours, resources, and capabilities of suppliers, competitors, and local clients. There was a broad consensus that the Internet provided quick and easy access to information and knowledge that was previously inaccessible or too expansive to afford. As a CEO commented: ‘It is easier to qualify leads. It is easier to research people on LinkedIn, Google, or Twitter to find out who they are, what their company is about and their references. So desk research is definitely easier’ (Case E). Thus, the Internet was reducing the amount of risk associated with internationalization, by providing firms with a knowledge-building tool and reducing the uncertainties accompanying internationalization.

One important function for which the Internet was being used was for identifying and evaluating international opportunities. The Internet was generally considered to increase firms’ alertness to new possibilities on international markets and increase their awareness about new opportunities. The Internet was seen as offering new opportunities to conduct exchange with new customers and partners in foreign markets either through deliberate search or accidental discovery (i.e. serendipity). Deliberate search refers to identifying international opportunities through a purposeful, rational, and systematic search, while accidental discovery refers to the process of identifying international opportunities without any systematic search and may result from heightened entrepreneurial alertness (Ardichvili et al. 2003; Zaefarian et al. 2016).

First, our findings provide evidence of deliberate search for international opportunities through the Internet. As part of their deliberate search for business knowledge and to identify international opportunities, firms engaged in different activities. For example, the Internet was leveraged to develop and harness relationships and to build social capital. A good example of this is Case B, a small company developing business intelligence solutions. In order to expand into new foreign markets or to grow existing foreign markets, they use the Internet proactively to increase the range and diversity of their network ties, by identifying and connecting with potential customers and partners online. They used the Internet actively to tap into their existing network and identify opportunities to bridge relationships, establish bonds with foreign networks and seek further opportunities abroad. As the Owner-manager of Case B explained: ‘we use the Internet proactively as a vehicle for identifying potential customers. When you have a limited customer segment, you know that they will have specific job titles and work in a specific category of companies. Then LinkedIn is very effective, as it allows you to quickly identify potential customers by filtering by job title and geography … LinkedIn is also a good tool for developing and expanding your network. When I sell something to someone, there is a good chance that this person is connected to similar people in different companies and different countries. So this gives me an opportunity to discover new potential customers’. In addition, the Internet was used to do research on foreign markets. For example, Case J obtained a lot of valuable market-related information from the Internet when first expanding into the French market. The company has used the Internet to learn more about the French market, including the size of the market, potential competitors and the most promising potential customers and partners.

In addition, there was also evidence of accidental discovery of international opportunities through the Internet. Such accidental discovery of international opportunities was driven by the increased exposure made possible through the Internet, which triggered serendipitous internationalization. All firms utilized the Internet to promote their products, with the main purpose of making the company more visible in international markets. This, in turn, made the companies become aware about potential international opportunities, as the number of unsolicited orders from foreign markets increased. For example, accidental discovery was the main driver of internationalization in the early stages of its foreign market expansion process for Case B. As explained by the Owner-manager in Case B, the company was being pulled into foreign markets early after being established, through its online presence: ‘Actually, in the beginning, we did not have a plan to internationalize. In the beginning our internationalization was based on our website. We created a corporate website and soon after we started receiving unsolicited inquiries from abroad’.

Firms were also found to be using the Internet as a means to reduce competitive uncertainties, which are related to the unpredictability of the actions of existing and potential competitors (Sutcliffe and Zaheer 1998). Our findings suggest that the introduction and diffusion of the Internet has greatly improved the SMEs’ competitive scanning capacity, as the ability of firms to gain information about competitors has been increased because of the advancement of the Internet. A good example is Case A, a company producing and selling ventilation units. The CEO noted: ‘The Internet allows us to get a quick overview of the competitive situation … our capacity to quickly identify the competition that we face has been significantly strengthened with the introduction and diffusion of the Internet’. In addition, the Owner-manager in Case G also noted the potential of the Internet as a resource for reducing competitive uncertainties: ‘Our sales team is increasingly using the Internet to find competitors’ information … They can find everything on the Internet … The Internet is a very good source for findings information about customers, competitors and so forth’. Hence, these findings indicate that the Internet has greatly improved SMEs’ ability to understand the competitive arena.

Others specifically used the Internet as a means to cope with uncertainties related to collectibles. Several informants commented on how they have used the Internet for credit assessments, in order to reduce the risks of doing business in other countries. For example, the Owner-manager of Case C, a small company designing women’s accessories, noted how the Internet was used for coping with credit uncertainties: ‘We also use the Internet to quickly check existing and potential customer’s payment history and financial information. I use this homepage, where I can see business credit reports to get an overview of the company and its wellbeing’. Similarly, the CEO of Case D, a food manufacturer selling to the industrial market, also used online channels to safeguard against the risks associated with credit uncertainties: ‘We have a subscription to Dun and Bradstreet, where we can check a company’s financial scores and payment history before we decide on the credit terms’.

While it was generally acknowledged that the Internet presents the opportunity for SMEs to acquire appropriate knowledge, which is fundamental to successful internationalization, a number of interviewees emphasized that it required significant resources to acquire and absorb information via the Internet and translate this information into knowledge. Thus, while the value of the Internet as a source of knowledge was recognized, many SMEs were not leveraging this opportunity to its full potential, as they were lacking the resources necessary to internalize the information available on the Internet and translate it into knowledge. As a CEO commented: ‘We would use the Internet more systematically to generate insights about market trends if we had the resources. All the information you desire is available on the Internet, but it requires a lot of resources to find, given the amount of information available online’ (Case A). Thus, while the Internet has increased information availability, SMEs still need resources and infrastructure in order to leverage and capitalize on the increased information availability.

In addition, our findings suggest that the usefulness of the Internet as a source of information and knowledge in the internationalization process is perhaps associated negatively with perceived uncertainty. During one of the interviews it was noted that the value of the Internet as a tool for marketing intelligence and competitor analysis was related to psychic distance. Psychic distance refers to ‘the perceived differences between the characteristics of a firm’s domestic environment and those of a foreign country [that] generate uncertainties among business decision-makers’ (Child et al. 2009: 200). As noted by the Owner-manager of CASE G: ‘If we were going to expand into China I would not rely that much on the Internet as a source of information. It would of course be one source of information, but it would require deeper market research. I would not be worried about using information sourced via the Internet if we are expanding into European markets, as we are used to travel to these countries, have a lot of people inside the company who has a lot of knowledge about these countries and the culture is not that different from us. It is a completely different culture in China. It will be a bigger move for us to start doing business in China’. Thus, the Internet was deemed useful when seeking information about markets that are psychically close to the domestic market of the company, while other sources of knowledge were considered more useful, when the perceived differences between the host market and domestic market was high. This suggests that as uncertainty increases due to higher psychic distance, the efforts required for market research increases. This is interesting, as it suggests that the Internet is perhaps only useful for reducing uncertainties, if the uncertainties are not perceived as high in the first place.

Impact of the Internet on Market Commitment

As was mentioned earlier, the amount of resources committed in foreign markets and their transferability has a significant impact on the amount of risk accompanying internationalization, as it determines the size of loss that a decision entails, if things go wrong. Based on this study’s findings, it appears that the Internet holds the potential to reduce the amount of risk associated with doing business in foreign markets through reducing the costs incurred by SMEs seeking to expand abroad.

Our findings demonstrate how the firms were able to leverage the Internet as a means to reduce internationalization costs, by providing them with a cost-effective way to enhance reach and build awareness compared to traditional communication methods. Almost without exception, the case SMEs were actively using the Internet for building awareness about the company and its products. There was a broad consensus among the decision-makers that the Internet afforded companies a cost-effective way to do this. The Internet was believed to reduce firms’ global marketing costs, as building awareness about the company and its products through online marketing made it possible to reach foreign customers more cheaply. Hence, the Internet was found to be useful for removing or reducing some of the traditional internationalization barriers, including communications costs. For instance, the CEO of Case C described how using the Internet as a marketing channel has reduced resource-related barriers by providing the firm with a cost-effective marketing channel: ‘Indeed the Internet has provided us with a number of opportunities for increasing our involvement in foreign markets. Today, our marketing budget is close to zero, because we do not have any advertisements in magazines. Instead we use our website and social media such as Facebook and Instagram … If we did not have these new opportunities for marketing our products, we would be ruined’. Similarly, the Owner-manager of Case H, a family-owned international brand selling menswear and womenswear, explained: ‘you can easily use a large amount of resources when expanding into foreign markets … but in relation to resources, the Internet has changed a lot. Now we are launching a new platform in Italy and the Middle East, which we can do for a small amount of money … There are a lot of things you can do, which are costing us nothing’.

In addition to allowing firms to promote themselves globally at minimal costs, the cost of launching every additional international website was also reduced when using the Internet actively as a vehicle for conducting online business in foreign markets. For instance, the Owner-manager of Case H noted how it only required minimal localization efforts, such as translating the content to create an online presence in foreign markets, once the firm had already invested in a corporate website or e-commerce platform: ‘Today, we have our own e-commerce platform, which we can duplicate very easily. We only have one guy working on this. It is costing us nothing compared to what we can actually do, so it is a very important area for our company’. Hence, the Internet was proactively used by the majority of companies to reduce the costs associated with marketing activities; online marketing allowed firms to promote themselves globally at minimal costs.

In addition, the Internet was found to increase transaction efficiency, by reducing the search costs associated with obtaining information on potential foreign customers and partners. A decision-maker at Case E noted how the Internet had improved the opportunities for identifying as well as evaluating potential foreign customers and partners: ‘Well you can, it is easier to qualify, it is easier to research people on the LinkedIn, Google, Twitter, find out who they are and what is their company all about, what are their references’. Hence, through the Internet, companies’ experienced better opportunities for identifying and evaluating potential foreign customers and partners, such as export intermediaries and suppliers. In addition to reducing search costs, the Internet also reduced the costs of adverse selection.

The Internet both reduced the costs associated with identifying international opportunities and helped SMEs reduce the costs directly associated with spatial distance. For instance, Case F utilized the Internet as a distribution channel, meaning that actual product fulfilment took place online. The CEO of Case F explained how the ability to use the Internet as a distribution channel had allowed the company to reduce its distribution costs: ‘It has become less expensive to distribute our products compared to previously, where we had to send our products physically by mail. In addition, when you have customers in foreign markets, this can easily become expensive. We also needed to send every software update physically. It also took a lot of time to pack all the packages. So from that perspective, it is much easier and cheaper today, where you just have to push a button’.

Therefore, to conclude, SMEs were able to reduce international operating costs, thus reducing the amount of resources committed to foreign markets and the risk accompanying internationalization. The Internet was used as a resource-conserving strategy, providing a low-cost gateway into foreign markets; it consequently had a significant impact on amount of risk associated with doing business in foreign markets.

Discussion and Conclusions

According to the results of this study, SMEs seeking to expand their business abroad have much to gain from leveraging the Internet. The analysis of the ten case companies shows that the Internet can add value as a driver of internationalization in SMEs, by reducing the amount of risk associated with doing business in foreign markets. Overall, the value of the Internet as a driver of internationalization is to a large extent related to reducing uncertainties accompanying internationalization by increasing the exposure of decision-makers to foreign market knowledge through accidental discovery or deliberate search. In addition, the Internet was also found to reduce competitive uncertainties related to the unpredictability of the actions of existing and potential competitors by improving SMEs’ competitive scanning capacity.

Our findings also demonstrate how the Internet was central to reducing the costs of doing business in foreign markets. For instance, the Internet was found to reduce search costs significantly, by providing companies with better opportunities for identifying and evaluating potential foreign customers and partners, such as export intermediaries and suppliers. Hence, the Internet was considered an important tool for identifying and evaluating international opportunities. In addition, the Internet was found to reduce the costs related to marketing activities, as online marketing allowed firms to promote themselves globally at minimal costs. The results of this exploratory study therefore highlight the potential of the Internet as a coping mechanism for reducing the risks accompanying internationalization, enabling SMEs to commit to internationalization and increase involvement in foreign markets.

In general, the results of this study seem to support and verify the growing number of empirical studies highlighting the value of the Internet as a driver of internationalization in SMEs. For instance, the results of this study appears to support recent empirical research documenting how different export barriers may be lessened by the use of the Internet, making accelerated internationalization feasible for even small firms (Loane and Bell 2006; Plakoyiannaki et al. 2014; Sinkovics et al. 2013).

In line with this study, previous studies have also found the Internet to be an important tool for decision-makers to seek information on countries, markets, competitors, institutions, and customers, in the face of perceived knowledge gaps (Bianchi and Mathews 2016; Mathews et al. 2012). The results of this study also revealed how SMEs took advantage of the information rich environment provided by the Internet to reduce a number of uncertainties accompanying internationalization. Thus, the findings also support growing empirical evidence demonstrating how SMEs use a mixture of means to acquire knowledge, including external search (Casillas et al. 2015; Fernhaber et al. 2009; Fletcher and Harris 2012).

However, our findings also contribute to existing literature by highlighting contextual factors, which may help explain under what conditions the Internet can add value as a medium for SMEs to obtain information about internationalization and foreign markets. For example, our findings suggest that resource-scarcity is an important barrier for SMEs to take advantage of the knowledge-creating potential of the Internet, as internalizing the information available on the Internet requires significant resources. In addition, our findings also suggest that the Internet is most useful as a medium for knowledge acquisition in situations of low to moderate uncertainty. Thus, as uncertainty increases, the knowledge-creating potential of the Internet decreases. This finding is supported by previous research showing that higher levels of uncertainty generally elicit more intensive efforts to acquire information on relevant events occurring outside the company in order to guide the company’s future course of action (Boyd and Fulk 1996; Daft et al. 1988; May et al. 2000; Sawyerr 1993). In addition, previous research shows that decision-makers rely more on personal sources of information (e.g. friends, family members, and close business associates), when the perceived uncertainty is high (Elenkov 1997; McGee and Sawyerr 2003).

Our findings also contribute to existing literature by demonstrating how the Internet was mainly used as an information source in the internationalization process to acquire business knowledge, while it was less frequently used to acquire other types of knowledge, including institutional knowledge and internationalization knowledge. This suggests that the Internet cannot replace other knowledge sources, but should rather be used in combination with these.

Furthermore, the results of this study also demonstrate the potential of the Internet as a means to mitigate the risks associated with internationalization by reducing the costs of doing business in foreign markets. This result is consistent with previous studies showing that the Internet can be used as a resource-conserving strategy (Arenius et al. 2006; Sasi and Arenius 2012), allowing even firms with limited resources to become international ventures at an early stage of their development (Luo et al. 2005). This finding supports the argument that the Internet can provide a low-cost gateway into foreign markets (Gregory et al. 2007; Moen et al. 2004; Sigfusson and Chetty 2013) and strengthen the firm’s internal resource base, by freeing up resources for their international business (Berry and Brock 2004).

While a number of precautions have been taken during the different phases of this study to increase the trustworthiness of the findings, the results are not without limitations. While these limitations potentially affect the quality of the findings and their ability to answer the research question, they also represent opportunities for future research.

First, due to the qualitative and exploratory nature of the study and the fact that only a limited number of SMEs were included in the study, the statistical generalizability of the findings is limited, as this requires a large, random sample (Tsang 2014). Consequently, further research is necessary to test the results of this study with a larger sample. In addition, it may be necessary to replicate this study in various national contexts and industry sectors. In addition, this approach may also contribute by highlighting contextual factors, which may help explain under what conditions the Internet can be used as a means to reduce risk.

The results of this study also open the door to other promising and interesting research avenues. The results point to the need for further studies that explore the relationships between using the Internet as a means to conduct international business activities and uncertainty, market commitment and the amount of risk accompanying internationalization. First, while the findings show how the Internet has the potential to reduce the uncertainty associated with doing business in foreign markets, increased information availability may potentially also lead to overconfidence (Petersen et al. 2003). Overconfidence is a cognitive bias which involves the failure to recognize the limits of one’s knowledge and may result in inaccurate perceptions of personal abilities and lower quality decisions (Busenitz and Barney 1997; Shepherd et al. 2015). Studies within the field of psychology are now starting to show how the Internet and attendant increased information availability, influence cognition, and produce a sense of false confidence (Fisher et al. 2015; Ward 2013). Thus, one promising avenue for future research is to examine how using the Internet for closing knowledge gaps influences managerial cognition, including overconfidence.

Second, while this study’s findings show that the Internet is considered an effective tool for identifying and evaluating international opportunities, future research may look specifically at how the Internet has provided new and enhanced ways to create and capture international opportunities.

Third, future studies should examine the outcomes of using the Internet as a means to deal with risks when doing business in foreign markets. For instance, future studies could examine its impact on performance, as reliance on the Internet arguably may result in overconfidence and rash internationalization (Petersen et al. 2002; Reuber and Fischer 2011). Hence, a positive impact on firm performance cannot be taken for granted. In addition, future studies may examine the impact on internationalization patterns (i.e. scope, speed, and extent), since risk has been considered to be a major barrier to foreign market expansion (Liesch et al. 2011).