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This part contains four papers. Even though this volume of AIM primarily concerns exporter–intermediary relations, the first two contributions deal with channel choice and partner selection. The first chapter by Kent Eriksson, Jukka Hohenthal and Jessica Lindbergh, “SME export channel choice in international markets”, tests some of the fundamental factors proposed by the IP model explaining choice of entry mode (accumulation of knowledge of foreign markets determining foreign operation modes). Later developments of the model claim that experience and knowledge of local business relationships are also essential elements of the IP model. Whereas the IP model has been found to hold well for incremental resource commitments, it has – in contrast to transaction-cost theories – produced mixed results concerning its ability to explain operation modes. The authors present findings from research in 494 firms from Sweden, Denmark and New Zealand: factors included in the initial explanation of the IP model explain choice of channel, but later developments of the model do not. Implications are that the foreign market knowledge is, and that more incremental experiential knowledge accumulation is not relevant for export channel choice as regards integrated or non-integrated channel. The results show that for Small and Medium Sized Businesses (SMEs), expected market growth lead to use of integrated channels. Integrated channels make it possible to reap more of the profits from a growing market and to learn faster about what is going on in the market. They also found that use of integrated channels is correlated with cultural distance, contradicting the findings of Johanson and Vahlne (1977) and Kogut and Singh (1988). The IP model therefore offers a rather weak explanation of choice of integrated channel.

Cities evolved into quite complex urban systems. The rigid management process must reflect the complexity of the current political, social, and economic environment. With the vast city growth, citizens experience new difficulties – traffic congestion, pollution, immigration, overcrowding, and inadequate services.

In our research, we analyze problems and benefits that occur with the growing complexity and offer a new concept considering every city as a live and constantly developing complex adaptive system of many participants and actors that operate in an uncertain environment. These actors (residents, businesses, transport, energy, water supply providers, entertainment, and others) are the main elements of city life.

The new concept of “Smart City 5.0” is based on a previously developed model of Smart City 4.0 (compared with Industry 4.0) and implements the Urban Digital Ecosystem, where every element can be represented by a smart agent operating on its behalf. It is shown that smart services can interact vertically and horizontally in the proposed ecosystem, supporting competition and cooperation behavior based on specialized network protocols for balancing the conflicting interests of different city actors.

The chapter describes the design principles and the general architecture of the Urban Digital Ecosystem, including the basic agent of smart service, protocols of the agent’s negotiation, the architecture, and basic principles Smart City knowledge base.

The developed evolutionary methodology of implementation will ensure a minimum of disruptions to city services during its transformation into an urban ecosystem to harmoniously balance all spheres of life and the contradictory interests of different city actors.

Language commonality and barriers are often taken as exogenous given variable and independent of the context; however in this chapter we investigate the factors determining perception of language barriers. As such we are responding to the question of when do managers perceive language barriers and which business contexts foster the perception of language barriers and which do not? Language serves different purposes and entails different communicative requirements depending on the context in which it is used. In addition, language has multiple dimensions and we argue that the different dimensions of language vary in their importance depending on the specific context, where the contextual variation in this case is related to the operation mode chosen in the foreign market. More specifically, we argue that language distance (relatedness in language) matters when the firms conduct business abroad through their own employees, while language incidence (accuracy in language) is critical when operating through a local agent. The different use of language implies a need for different language skills. The combination of the operation mode and the availability of people with the needed language skills will affect managers’ perception of language barriers. The hypotheses are tested on a large data set encompassing 390 multinational corporations headquartered in Finland, South Korea, New Zealand, and Sweden that have undertaken a business operation in a foreign country.

The study this chapter reports focuses on how network theory contributes to the understanding of the internationalization process of SMEs and measures the effect of network capability on performance in international trade and has three research objectives.

The first objective of the study relates to providing new insights into the international market development activities through the application of a network perspective. The chapter reviews the international business literature to ascertain the development of thought, the research gaps, and the shortcomings. This review shows that the network perspective is a useful and popular theoretical domain that researchers can use to understand international activities, particularly of small, high technology, resource-constrained firms.

The second research objective is to gain a deeper understanding of network capability. This chapter presents a model for the impact of network capability on international performance by building on the emerging literature on the dynamic capabilities view of the firm. The model conceptualizes network capability in terms of network characteristics, network operation, and network resources. Network characteristics comprise strong and weak ties (operationalized as foreign-market entry modes), relational capability, and the level of trust between partners. Network operation focuses on network initiation, network coordination, and network learning capabilities. Network resources comprise network human-capital resources, synergy-sensitive resources (resource combinations within the network), and information sharing within the network.

The third research objective is to determine the impact of networking capability on the international performance of SMEs. The study analyzes 11 hypotheses through structural equations modeling using LISREL. The hypotheses relate to strong and weak ties, the relative strength of strong ties over weak ties, and each of the eight remaining constructs of networking capability in the study. The research conducts a cross-sectional study by using a sample of SMEs drawn from the telecommunications industry in Ireland.

The study supports the hypothesis that strong ties are more influential on international performance than weak ties. Similarly, network coordination and human-capital resources have a positive and significant association with international performance. Strong ties, weak ties, trust, network initiation, synergy-sensitive resources, relational capability, network learning, and information sharing do not have a significant association with international performance. The results of this study are strong (R2=0.63 for performance as the outcome) and provide a number of interesting insights into the relations between collaboration or networking capability and performance.

This study provides managers and policy makers with an improved understanding of the contingent effects of networks to highlight situations where networks might have limited, zero, or even negative effects on business outcomes. The study cautions against the tendency to interpret networks as universally beneficial to business development and performance outcomes.

In recent years, foreign banks have significantly expanded their presence in many emerging countries. In our study, we use panel data to examine the economic determinants of foreign banks’ entry modes into emerging European countries during the period from 1994 to 2008. Our results suggest that a parent bank's choice of an organizational structure is a function of its strategic plans in the region and the countries’ characteristics. After further consideration of the financial crisis of 2007–2010, we find that as a result, parent banks tend to behave differently toward their foreign affiliates depending on its organizational structure. Our findings suggest that these differences are especially observable during periods of economic expansion and home financial distress.

We build on the resource-based view and extend entry mode research by focusing on firms’ intention to transfer different resources from the parent firm to its overseas subsidiary. In line with our hypotheses, we find that parent firms that plan to transfer high levels of intangible resources to their foreign subsidiaries tend to choose wholly owned subsidiaries, while firms that intend to transfer high levels of tangible resources tend to choose international joint ventures. Moreover, we find that these relationships are moderated by institutional distance. We test our hypotheses using unique primary data from a sample of 128 foreign subsidiaries in the People’s Republic of China. Our results have important theoretical implications for international business strategy research as they develop further existing entry-mode theories.

This chapter reviews the literature on servitization to understand whether and how mergers and acquisitions (M&As) have been dealt with and what the portrayed consequences are of servitization through M&As. Servitization refers to how manufacturing firms extend and remodel their offerings to focus on value in use rather than product transfer. The rationale of the chapter follows from how business model innovation or business modeling has been predicted as the next M&A wave, while the focus on servitization has been pronounced in research and practice as a means for manufacturing firms to refocus operations during the past decade. The chapter concludes that while the servitization literature is vibrant, the mode of reaching service competence and renewing business is not well explored in the literature. In line with the predicted next M&A wave, servitization through M&As would thereby create an interesting path for future research.

The purpose of this chapter is to explore, analyze, and compare the different solutions that Luhmann has provided throughout his work to the problem of the psychic element. We depart from the construction of a corpus of texts that includes most of the Luhmann's published production. They are chronologically analyzed to observe the evolution and changes. The categories of this analysis are divided according to the two distinct periods of Luhmann's production. For the preautopoietic writings, we looked at system/environment as inside/outside the system, and selectivity as the difference between process and system. In the autopoietic writings, we analyzed operation and selection, medium and form, operation and observation, structural coupling and operational closure, and differentiation. The chapter shows how, from an initial superposition of concepts, Luhmann distinguished the personal aspect (a structural trait) from the operation of the system. Then, the problem becomes how to unify all the capacities of consciousness under a single operation. We individualize the two main hypotheses and their shortcomings. This also includes the discussion of the possibility of differentiation of consciousness. The chapter avoids discussing single texts or temporally limited concepts. Instead, it discusses the problem throughout the complete work of Luhmann. As a result, it identifies the distinct hypotheses, their changes, and their weaknesses, offering a systematic study of the theme.

This paper examines the role of firm capabilities, psychic distance and choice of country risk variables in the entry mode decision between developed and emerging countries. The conceptual model extends previous studies built on gravity models by considering the potential effect of colonial ties on the entry mode. The empirical test applies an ordered logit model on a survey sample of 462 Portuguese firms. A subsample of 143 firms with internationalisation in the former Portuguese colonies was rerun to be compared with the total sample results. The findings suggest that firm capabilities maintain their importance in the presence of colonial ties, whereas psychic distance and perceived risk seem to be distorted or absent from the decision process of the market entry.