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The purpose of this paper is to address the issues of how business people perceive the business environment, how government policies impact the environment and how the environment impacts the establishment processes and position development of new firms in the Eritrean market. The process is discussed by keeping a strict focus on the main actors and the activities they carried out, as well as how the available resources are utilized and exchanged in the market.

Drawing on the establishment process model developed from the network approach, case studies based on interviews and focus group discussions have been used to shed light on the extent to how government policies and the environment impacts the establishment processes and position development in the Eritrean market.

An important conclusion of this paper is that the main obstacle for business establishment is the hostile attitude of the government to the private sector. Another significant obstacle for building a successful position in the market is the state‐owned command economy network of relationships. An additional crucial hindrance is the non‐existence of a market economy network of relationships that can provide firms in the private sector with the resources they need to perform their operations.

All firms in this paper have demonstrated that the main obstacle for establishment is the hostile attitude of the government to the private sector. Another obstacle is the state‐owned command economy network of relationships, which hinders firms from building a successful position in the market. An additional crucial hindrance is the non‐existence of a market economy network of relationships that can provide firms in the private sector with the resources they need to perform their operations. Since the paper is based on case studies and focus group discussions, conducting a similar study on a representative sample of firms selected from a larger population will be very useful.

This paper makes a unique contribution by focusing on the establishment process in a market, which is regulated, controlled and owned by the one party government. The other unique contribution is that a firm has to identify the secrets of business success and to follow the same strategy.

The purpose of this study is to provide deeper insights into the extent to which an independent actor(s) actively collaborates with the internationalizing firm so as to jointly determine the choice of market, the mode of entry and the level of investment committed in the market to be entered and even after the entry (i.e. the ongoing activities).

Against the previous purpose section, a qualitative research approach is selected to guide the exploratory nature of this study. Thus qualitative data are used to build the two case studies because case studies are generally a more appropriate approach when “how” and “why” questions are being posed and when the investigator has little control over events.

Based on two multiple case studies, one major finding of the study shows that independent actors, with their interconnected networks, have played and are still playing a major role in influencing the internationalization processes of each of the two firms in this study.

This is an original paper developed based on two case studies which have not been published in any journal before. The paper highlights the role of external independent actors in internationalization, which is not mentioned at all or stressed in the extant literature.

In the extant literature a firm's development of its competitive advantage is seen to be the task of the firm alone. The purpose of this paper is to introduce a new and a broader approach of how competitive advantage can be developed and maintained in today's highly competitive and dynamic markets. To this end, how a firm handles its relationships with significant actors in its network becomes very decisive for the development of its competitive advantage.

Drawing on a network approach, case studies have been used to shed lights on the extent to which the development of competitive advantage of firms affect and are affected by their interaction with some actors in a network of exchange relationships.

An important conclusion of this study is that a firm's highly valued performance, an indication of its strong position or competitive strength, has its roots in its regular and intensive interaction with some significant actors in its network.

All firms in this study have demonstrated that competitive advantage can be achieved by building up a strong position through interaction, learning and adaptation with some significant actors in the marketplace. Since the study is based on one setting, extending a similar study to several settings will be very useful.

The paper provides insights into how a firm, in the effort to build its competitive advantage, draws on its own capabilities and complementary capabilities of its partners in a network.