SME Internationalisation: The Relationship Between Social Capital and Entry Mode

Abstract

The literature has assessed the social capital of internationalised SMEs, but not how SME social capital affects entry mode and the mechanisms involved in the effect. Case data from 35 SMEs which have internationalised to China were analysed to identify how SME social capital affected entry mode. Weak relational and structural social capital were found to provide network resources, information and entry mode opportunity identification which affected entry mode, but later became path dependent on the entry mode due to its effect on the context for the social capital. This internal and external context resulted from specialised organisational resources, institutional forces and market conditions and influenced the types of social capital. Political social capital was found to be weaker in its effect on entry mode than business social capital. Expectations of future social capital were influenced by initial social capital and some SMEs selected their entry mode to create a context that supported social capital. Several mechanisms of affect were identified, including using trust to support social capital development, a reduction in the resources required to maintain social capital over time due to intentional manipulation of context and a reduction in the focus on developing weak ties as part of social capital over time.