Forking Paths: Resource Development Processes of Incubated, Internationalising High-Technology SMEs

Abstract

Given the simultaneous demands of innovation and international expansion, how do young, internationalising, high-technology, small to medium enterprises (HTSMEs) develop their resource base? In recent years, this question has attracted increased interest in the field of international business (IB), with such firms seemingly contradicting established internationalisation theories. Existing research largely addresses this question through the use of a born global framework (Rennie 1993), grounded in the resource based view (RBV) (Barney, 1991), and/or the dynamic capabilities view (DCV) (Teece, 2007). However, born global literature fails to account for the firm's prior history, suffers from a success bias, and lacks an understanding of the nature of these firms. it has also been noted that the RBV and DCV are better suited to explaining the resource development of larger and typically older firms with generally well-established resource bases that have evolved over time (Connor, 2002; Teece, 2009). As an alternative theoretical lens, I build upon Elizabeth Garnsey's (1998) Theory of the Early Growth of the Firm (TEGF) - a theory too often neglected in the IB literature - which analyses growth in small, high-technology firms. While Edith Penrose in her Theory of the Growth of the Firm (TGF) was concerned with the growth of established firms (Penrose, 2009), Garnsey draws on a genuinely Penrosean lens to explore the development of the resource base in new firms. The TEGF is Penrosean in that it embeds open systems thinking, explains processes and mechanisms underlying development, and moves beyond simplified stage models of growth. Garnsey focuses on a general explanation of early firm growth and I extend her theory to incubated firms in the internationalising HTSME context. Given that the defining feature of internationalising HTSMEs is their technology base, it is surprising that the IB literature has offered little consideration of technology. The born global literature does not focus on the role of technology or provide a theoretical explanation of how a firm develops its technology base over time. Technology is typically treated as accepted, as fixed and pre-determined as a result. The TEGF examines early growth in firms generally, rather than high-technology firms and technology development specifically. Garnsey's emphasis on organisational and managerial aspects in the TEGF can be enriched by incorporating the evolution of the firm's technology base. To do this, I apply a social shaping of technology (SST) lens (Williams and Edge, 1996), which conceptualises technological development as a social rather than narrowly technical process. By providing an explanation for technology development from a SST perspective, I highlight the social dimensions associated with the development of the resource base over time. A SST perspective is, I argue, complementary to the TEGF and its open systems perspective. It allows me to account for the development of the technology base, something which has been missing from existing IB literature. The technology base of the eight case firms selected for this research was similar in that all were incubated within and spun off from a parent, a common parent in the case of seven of the firms, and were seeking to commercialise science-based, new-to-market innovations. I enhance the TEGF by problematising success and failure and focusing more deeply on how this journey unfolds in the high-technology context. In doing so, I make the point that success (rather than failure) is an outlier. A SST lens enabled me to recognise the complexity of the process of technology and resource base development which could result in multiple outcomes depending on contextual conditions. This offered deeper insights than simply focusing on an outcome in isolation (e.g. whether a firm survived or failed) (Wilson and Howcroft, 2000). From a social shaping perspective, I also realised how perceptions of what was considered as a technology success or failure were not predetermined but rather, subject to 'interpretive flexibility' (Rosen, 1993) among relevant social groups (RSGs) (Wilson and Howcroft, 2000). Understanding who decides and why they had the authority to decide required historical analysis that accounted for key stakeholders involved in shaping the success or failure of the technology. These RSGs also provided varying accounts of why case firms developed in the way they did, pinpointing the absence or presence of particular attributes or decisions of the firm. I explain the resource development processes of the case firms as the result of a complex array of 'forking paths' (Williams and Edge, 1996).