Informal Social Networks as Intermediaries in Foreign Markets

Abstract

We investigate how informal social networks can assist multinational firms in their internationalization strategy. We propose a refinement of the Uppsala internalization model (Johanson & Vahne, 2009) grounded in network theory, by developing an intermediate position between an ‘insider’ and an ‘outsider’ for conditions when the transformation of an outsider into an insider is limited by institutional constraints. An intermediary position represents one of the sides of ‘patron-client’ informal networks (Denoeux, 1993) whereby the other side is represented by the ‘insider’. We argue that this setup would help mitigate the Liability of Outsidership (Johanson & Vahne, 2009), a replacement of the Liability of Foreignness (Hymer, 1976; Zaheer, 1995), in the modern networked business world. We contextualize our proposition for the case of Iran, a large rising West-Asian economy with known institutional limitations, and suggest that the informal network of local merchants (bazaaries) could play an important intermediary role in Multinational Enterprises (MNEs) internationalization process. We review the history of bazaaries and make a series of propositions exemplifying possible ways informal networks could influence the internationalization process. In addition to re-affirming the importance of the MNE country of origin (emerging markets, and low psychic distance with Iran), we propose that an intermediary of the Iranian bazaaries will have a positive impact on performance and survival of the MNE's subsidiary in Iran, especially in the case of incongruence of MNE's leadership with Shi'a Islam. Additionally, we suggest that employing the Iranian diaspora may also improve subsidiary performance and survival.

Smes Internationalization: Between Strategic Collaborators and Intermediaries

“…The same applies to the correlation between strategic collaborators and SMEs development on the foreign markets (Păduraru et al, 2016;Vătămănescu et al, 2019a, b). The findings do not support prior research (Li et al, 2019;Efrata & Øynab, 2020;Apaydin, 2020) which have underscored the role of intermediaries in the internationalization process of SMEs and in their venture into foreign markets.…”

“…The intermediaries can offer the firms worthy resources like information about the market with the aim of acknowledging and reducing foreign operations costs, and they are representatives for the activities for the newcomer which can be very important for the firm's achievements in the context when overcoming that status can be troublesome because of institutional constraints. There are situations where local business systems have firm and entangled engagement, it may be a difficult task for a total 'foreigner' to acquire insidership without referring to an intermediary (Apaydin, Thornberry & Sidani, 2020). Using Italian customs data between 2015 and 2020, we can take into account companies with wholesaling as their main activity as intermediaries.…”

“…If we look into the literature dedicated to the significance of intermediaries for SMEs, a study carried out on 165 international venture managers (of SMEs) showed that a good relationship between the respective SMEs and their intermediaries can increase SMEs performance, expansion and profit (Efrata & Øynab, 2020). Another study carried out by Apaydin (2020) used the case analysis approach to underline the importance of bazaars (informal networks of local merchants) in Iran and their positive impact on performance and survival of an international subsidiary opened in Iran (Apaydin et al, 2020). In some countries, intermediaries can be wide and dense and cover all strands of society, including powerful politicians.…”

Connecting the Dots: Exploring the Knowledge-based Antecedents of SMEs’ Profitability and Development via International Ventures

“…The intermediaries, in general, act as supportive forces to the expansion of the SME to external markets and facilitate the increase of profits through a multitude of means: they may provide information about the market and insight regarding the business ecosystem, they may act as door-openers to SMEs that are otherwise considered newcomers, and offer invaluable insidership supply to foreign SMEs (Apaydin, Thornberry and Sidani, 2020), they may connect buyers with sellers, they may identify buyers, and they may negotiate terms of trade and importing/ exporting activities (Dekel-Sachs et al, 2021). For SMEs that are working towards international expansion through exports/ imports, intermediaries play a significant role in fostering international trade.…”

The interaction between gender and informal social networks: An East Asian perspective

“…First, we offer an East Asian perspective on gender diversity management, taking into account the crucial role of informal social networks which shape and mediate the effect of institutional mechanisms on organisational approaches to managing gender diversity. We use the term 'informal social networks' to refer to the networks of relationships that individuals form across diverse functions and domains to accomplish personal or/and organisational goals, as opposed to formal networks which are traditionally self-evident religious and state institutions (Apaydin et al, 2020). We recognise that informal networks are important for the success of women in every cultural context, not just the East Asian context, considering how gender inequality is a global issue rather than a culture-specific issue.…”