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The purpose of this paper is to show how the inward‐outward dynamics in the internationalisation of Baltic banks have led towards higher incorporation into Nordic banking groups and subsequently towards diminishing autonomy.

The paper presents two case studies, which characterise the evolution of international inward‐outward connections in two major Baltic banking groups – Hansabank Group and Skandinaviska Enskilda Banken (SEB) Group.

Acquisitions by Swedish banks in 1998 had a different impact on the internationalisation of the two leading Baltic banking groups. Inward‐outward connections in the case of the Hansabank Group meant that they obtained strong autonomy in controlling Swedbank's activities in the Baltic. In the case of Eesti Ühispank, Latvijas Unibanka and Vilniaus Bankas inward‐outward linkages meant that they lost autonomy about the further expansion to other Baltic countries and were eventually transformed into Baltic subsidiaries of SEB. These differences in strategies between Swedish banks could be explained by the background of the companies (especially their previous internationalisation experience). However, latest developments point towards growing similarities between two groups via incorporation of Hansabank into Swedbank group.

The case study has inherently limited the capacity to offer generalisations concerning other service companies.

These results indicate the inward‐outward development pattern of international service companies. The managers of similar companies can use this development pattern to project the dynamics of market entry strategies.

The paper introduces original experience allocation framework in the context of inward‐outward internationalisation and outlines the dynamic nature of the strategic relations between the foreign owner and its subsidiary.

The purpose is to show the interconnections between the management style of an internationally expanding company and the pattern of its network connections, while incorporating the company size and corporate traditions as secondary determinants.

The paper uses multiple case study analysis. Included case studies characterise the various management attitudes of Estonian companies in engaging in international inter‐company relationships. To allow for the generalisation of results, the cases analyse the companies from several sectors and size groups.

Research concludes that the decision to participate in an international network could be made either because of socio‐economic circumstances or as the innovative entrepreneurial choice toward more rapid expansion. Thus, the paper views certain decisions of a company about its relationships with other agents, including suppliers and competitors, as entrepreneurial choices made by its general management. This research also categorises these choices as irreversible and temporary and positions company size and traditions as secondary factors, besides management style, which are important in determining the usage of relational support.

The case study analysis might fail to illuminate the most archetypical features that could be generalized to all similar companies. Thus, one should exercise extreme caution when generalizing given results. In the case of qualitative research, the danger of misinterpretation of facts or events is bigger than in the case of quantitative research. The methodological variations make it more difficult to bring in cause and effect patterns.

These results imply the role and authority of an entrepreneur not only in multinational or ownership‐based networks but also in solely relational networks. This issue at present is not the subject of the research focus. The managers should also increasingly account for the impact of entrepreneurial management style in the corporate setting of takeovers and partnerships. Thus, innovative choices might achieve an increasingly important role in the formation of industrial networks.

This paper establishes the position of entrepreneurial management style as a determinant of partnership contacts, while controlling for company size and its management traditions. It offers case evidence about this entrepreneur‐led relationship building in Estonian companies.

The aim of this paper is to study the linkages between inward and outward foreign direct investment (FDI) and the innovation inputs and outputs of domestic and foreign owned companies in Estonia, a small economy in CEE.

The econometric analysis of the data about the linkages between FDI and innovation is made using the model by Crépon et al., which allows estimation of the innovation expenditure equation, the knowledge production function (with various innovation output variables as dependent variables) and the productivity equation (production function), with all the equations including company and industry level FDI variables.

The results show that the higher innovation output of foreign owned companies vanishes after various company characteristics are controlled for, but there were significant differences in innovation inputs such as the higher use of knowledge sourcing and the lower importance of various impeding factors. Outward investment has a positive influence on innovativeness among both domestic and foreign owned companies.

The managers can benefit from this study by tapping into a wider range of knowledge sources via diverse and active involvement in exporting and investing activities. Often they fail to realise that initiation of international activities can also serve as an important learning opportunity in becoming more innovative. The policy implications suggest that government policies as well as triple helix cooperation should be oriented not only towards attracting foreign interest, but also towards building opportunities for more extensive regional and international business networking by exporting and outward FDI.

The originality of the study lies in the usage of the data from a small open economy of Central and Eastern Europe. This region is a good candidate for studying the impacts of FDI; while CEE countries were closed to FDI before the onset of transition, since the beginning of transition they have witnessed massive FDI inflows. The present study seems to be one of the first ones to use three different waves of the Community Innovation Survey (CIS), specifically CIS3 covering 1998‐2000, CIS4 (2002‐2004) and CIS2006 (2004‐2006). Thereby the authors are able to study the impact of the changing economic environment on the link between FDI and innovativeness.

This volume of Progress in International Business Research comprises of a selection of 12 competitive papers from the 34th EIBA (European International Business Academy) annual conference, which was held in Tallinn, Estonia in December 2008 with the theme “International Business and the Catching-up Economies: Challenges and Opportunities”. It addresses two main issues – (1) the internationalization process and (2) the role of knowledge and innovation for internationalization – that are important in the current economic slowdown both for catching-up and for other economies, scholars, and practitioners.