How are knowledge acquisition and SME's internationalization related? Empirical evidence from Gruppo Germani

INTRODUCTION Internationalization literature emphasizes the role of knowledge from different points of view. Studies focused on the internationalization process, starting from the firm’s awareness of its lack of knowledge concerning foreign markets, and the related uncertainty; highlight the importance of the gradual acquisition, integration, and use of experiential knowledge (especially foreign market knowledge). This explains as to why such firms internationalize by operating first in geographically close countries, and subsequently in more distant countries. Literature on the internationalization process focuses especially on the compatibility between domestic knowledge and new knowledge of foreign markets, and emphasizes the role of experiential market knowledge (Johanson and Vahlne, 1977, 1990). International Entrepreneurship (IE) models, starting from the works of McDougall, Shane and Oviatt (1994) and Oviatt and McDougall (1994) on International New Ventures (INV) and their subsequent developments (Knight et al., 2004; Zucchella et al. 2007), consider knowledge as a key factor to identify and exploit opportunities in foreign markets (Zahra, 2005). These models point out that firms can be born “global” and highlight the importance of technological knowledge (McDougall and Oviatt, 1994; Oviatt and McDougall 1994). Eriksson et al. (1997) notice the critical role of international knowledge, besides market and technological knowledge. As Fletcher and Harris (2012) point out, while market knowledge is market-specific and technological knowledge is industry-specific, international knowledge is firm-specific; and therefore, it can represent a fundamental source of competitive advantage. The literature based on the network model of internationalization (Johanson and Mattsonn 1988) points to the importance of knowledge acquired through indirect experience besides knowledge acquired through direct experience. More recently, the stress has been on the opportunity to create new knowledge (Johanson and Valhne, 2009). Studies based on the resource-based view (RBV) of the firm (Barney 1991) and on the knowledge-based view of the firm (Grant 1996) are intertwined with those that emphasize the role of dynamic capabilities (Teece 1997), and emphasize the importance of Knowledge Management and Organizational Learning (e.g., Casillas et al., 2009; Chiva et al. 2013; Gray and McNaughton, 2010; Knight and Cavusgil, 2004). As Gabrielsson et al. (2008: 388) point out, traditional sequential models rely on the exploitation of knowledge “developed in the domestic market,” while studies on Born Global firms, emphasize the exploration and creation of new knowledge. From the contingency theory and the RBV perspectives (Bell et al. 2003: 352), integrative perspectives, such as Born-Again Global proposed by Bell et al. (2001) integrate aspects concerning stage theories and the network perspectives. According to these authors, internationalization can arise from “critical” events (e.g., changes of ownership, acquisitions, and client follower-ship) that favor access to resources and competencies not possessed by typical SMEs (in traditional industries) operating in the domestic market. These events trigger internationalization, which takes place very quickly and is not “a linear, incremental, and uni-directional path” (Bell et al. 2001: 186; Bell et al., 2003). This chapter, following on the Born-Again Global pathway, represents an attempt to redefine the spectrum of “critical” events from which internationalization arises, considering how crucial they are with reference to access to/acquisition of new knowledge. Moreover, it examines the issue of knowledge acquisition, relating it to the use of specific learning mechanisms, by means of which the knowledge base is enhanced. Knowledge acquisition, starting with the model of Huber (1991), has been treated in the literature on internationalization. Important contributions are represented by the works of Fletcher and Harris (2012), and Fletcher et al. (2013), who explore the modes of knowledge acquisition and intercept the challenges that SMEs usually face to acquire knowledge. However, some issues related to knowledge acquisition in SMEs have not been investigated adequately. In contrast, the inadequacy is particularly evident regarding learning mechanisms enabling organizational learning. In sum, the role of knowledge in internationalization is generally recognized and the acquisition of knowledge is attracting attention. In particular, the questions of how knowledge acquisition and organizational knowledge are related to the internationalization of SMEs merit investigation. Based on the born-again global (Bell et al. 2001) pathway and the knowledge acquisition perspective (Grant and Baden-Fuller 2004), this chapter aims to analyze the internationalization of an Italian SME operating in the fashion industry, the Gruppo Germani S.r.l. The case seems particularly significant for exploring the phenomenon, since the success of Germani’s internationalization appears to be related to knowledge acquisition and organizational knowledge. More specifically, this research attempts to address the following questions: What sources of knowledge are particularly critical for the internationalization of SMEs; and, how does knowledge acquisition enhance the firm’s knowledge base? The results of this research highlight the fact that the knowledge base of the firm can constitute both a stimulus to, and also a driver of the firm’s international growth, if it is continuously augmented through external knowledge acquisition. The main effect is the improvement of performance over time. Therefore, organizations should not only leverage their knowledge base to internationalize and extend its scope (Autio et al. 2000; Casillas et al. 2009; Oviatt and McDougall 2005), but also to identify and then acquire useful external knowledge (e.g., Argote, 1999; Fletcher et al. 2013; Grant and Baden-Fuller, 2004), in order to enhance their knowledge base. This chapter is organized as follows. The next section provides a brief theoretical background on the role of knowledge acquisition during the internationalization of SMEs. The third section describes the methodology, while the fourth section presents empirical analysis and discusses the main findings. Finally, section five presents the conclusions, limitations, and recommendations for further research.