458443ISB

32710.1177/0266242612458443International Small Business JournalHilmersson

2012

is
bj
Small Firms

Article

Experiential knowledge types and

profiles of internationalising small
and medium-sized enterprises

International Small Business Journal

2014, Vol. 32(7) 802817
The Author(s) 2012
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DOI: 10.1177/0266242612458443
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Mikael Hilmersson
Linnaeus University, Sweden

Abstract
Although experiential knowledge is a well-documented construct in the internationalisation
literature, research on the multidimensionality of the construct remains limited and we do not
know how different knowledge combinations among internationalising SMEs are composed.
This article answers the research questions: is experiential knowledge in the internationalisation
process a multidimensional construct, and is there a pattern to be found among the experiential
knowledge profiles of internationalising SMEs? In the article, the multidimensionality of the
concept is established and four experience-based knowledge profiles of internationalising firms
are identified. First, four types of experiential knowledge are extracted: internationalisation,
institutional, business network and social network knowledge. Second, four experiential
knowledge profiles are identified: masters, institutional experts, social networkers and learners.
The article concludes that experiential knowledge is a multidimensional construct and that
internationalising SMEs develop heterogeneous experiential knowledge profiles.
Keywords
business network knowledge, experience profile, experiential knowledge, institutional knowledge, internationalisation knowledge, social network knowledge

INTRODUCTION
This article discriminates between different types of experiential knowledge and identifies experiential knowledge profiles amongst internationalising small and medium-sized enterprises (SMEs).
Experience-based knowledge occupies a central position in internationalisation research. In order to
understand the dynamics of the internationalisation process (Morgan-Thomas and Jones, 2009),
researchers have turned to the ideas of Penrose (1959), arguing that the growth of the firm is driven
by its generation of experiential knowledge. As such, it has been demonstrated that experiencebased knowledge is of great importance, ensuring that perceptions of opportunities for international

Corresponding author:
Mikael Hilmersson, School of Business and Economics, Linnaeus University, Grndalsvgen 19, Kalmar SE-39182, Sweden.
Email: mikael.hilmersson@lnu.se

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expansion are more accurate and realistic (Barkema and Vermeulen, 1998; Delios and Beamish,
1999). Experienced-based knowledge has been proposed to be positively related to a firms abilities
to recognise opportunities for international expansion (Hohenthal et al., 2003). In the market entry
process, experiential knowledge has been found to have an uncertainty-reducing effect with regard
to commitments to international operations (Johanson and Vahlne, 1977, 2009). Furthermore, international experiences have a cost-reducing effect when firms undertake additional international
assignments (Dikova and Witteloostuijn, 2007; Eriksson et al., 1997), as it has been suggested to be
positively associated with a firms absorptive capacity in foreign markets (Chetty and Eriksson,
2004; Coeurderoy et al., 2012). The latter also holds true for research on the link between organisational learning of SMEs and their strategic behaviour (e.g. Spicer and Sadler-Smith, 2006; Zhang et
al., 2006), which has been shown as an important ingredient in explaining SMEs international
behaviour (Bell et al., 2004).
Although experiential knowledge is a well-documented construct in the internationalisation
literature, research on the multidimensionality of the construct remains limited. Relatively little
research has been conducted on how experiences discriminate into different types of experiential
knowledge, and how different knowledge combinations among internationalising firms are composed. An important exception to the former gap was provided by Eriksson et al. (1997), who
introduced three types of knowledge in the internationalisation process. Inspired by their research,
this article empirically discriminates and verifies the fact that experiential knowledge is a multidimensional construct, and establishes experiential knowledge profiles of internationalising SMEs.
Thus, the following research questions are addressed:
RQ1: Is experiential knowledge in the internationalisation process a multidimensional construct?
RQ2: Is there a pattern to be found among the experiential knowledge profiles of internationalising SMEs?

In the next section of this article, the theoretical framework is presented. Thereafter the method,
data collection and analysis and results are presented. This is followed by discussion and the conclusions of the research. The article concludes with some reflections on how future research could
compensate for the limitations of this study.

Theoretical framework
Experiential knowledge in internationalisation research
Firm growth is driven by the knowledge generated by the firm and its management (Penrose,
1959). Whereas knowledge is classified as objective or tacit (Penrose, 1959; Polanyi, 1969), most
research has indicated that tacit or experiential knowledge is the main catalyst for a firms growth.
As opposed to objective knowledge, which can be taught, experiential knowledge needs to be generated by experience. By generating such knowledge, firms can reduce their uncertainty about
committing resources directed to the firms growth. These ideas have been substantiated in research
on international growth strategies among firms, and experiential knowledge has come to occupy a
central role in most internationalisation models (Madsen, 2005). In internationalisation process
theory, learning is assumed to take place as the firm transforms experience into useful knowledge
(Eriksson et al., 1997; Petersen et al., 2008). Since knowledge is obtained by experience, it takes
time to develop foreign business skills; therefore, the international growth of the firm takes time
and is an incremental process. Once experiences are generated, a theory in use is developed
(Argyris and Schn, 1978; Jansson, 2007) guiding the perceptions, interpretations and actions of

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the firm. In research on the strategic decision-making of smaller firms, it has been claimed that
previous experiences are important assets for the firm, assisting future information processing
(Jansen et al., 2011). These experiences lay a platform for encoding of cognitive schemas and
scripts with regard to particular situations or contexts. Various researchers have shown how these
experiences affect international behaviour among firms: for example, Baum et al. (2011) show that
previous experience affects the likelihood that firms will start up as international new ventures. In
their study, Zahra et al. (2000) showed that it influences the pace of internationalisation, whereas
Kundu and Katz (2003) showed that experiences affect the export performance of the firm.
Moreover, the duration of prior experience has been investigated in relation to the likelihood of
further international investment (Mudambi, 1998), country selection, entry modes (Krishna
Erramilli, 1991) and the longevity of international joint ventures (Barkema et al., 1996).
Thus from the reviewed literature, it is evident that experience and experiential knowledge
occupies a central position in research on the international activities of firms. However, an interesting observation is that treatment of the concept has been relatively rudimentary up to this point.
Apart from the study by Eriksson et al. (1997), few internationalisation studies have examined the
role of different types of experiential knowledge, but from their research it is understood that firms
generate experiential knowledge that is market-specific and/or general. Market-specific knowledge concerns the characteristics of a certain host country, while general knowledge concerns
knowledge about international methods and procedures.

Types of experiential knowledge in internationalisation research

In the internationalisation literature, the most general type of knowledge is labelled internationalisation knowledge. It represents the aggregate of a firms experience in managing international
business activities and is not market-specific (e.g. Eriksson et al., 2000; Johanson and Vahlne,
1977). It can be seen as the foundation of firms ability to engage in foreign markets; since it is
embedded in routines and structures, it is procedural. Previous research has argued that firms with
such knowledge are better equipped to recognise and enact international business opportunities
than firms with limited international experiential knowledge (Hohenthal et al., 2003). It has been
shown that the more the firm knows about international operations, the less tacit knowledge the
firm needs to generate in each new foreign market (Meyer and Estrin, 1997). Therefore, international experiences can reduce perceived risks when entering new foreign markets (Dikova and
Witteloostuijn, 2007). Related findings were made by Eriksson et al. (1997), who found that the
extent to which international experiential knowledge is perceived as useful has cost-reducing
effects when undertaking additional foreign assignments. The reason seems to be that generated
international experiences are useful in new market environments (Blomstermo et al., 2004). In fact,
Eriksson et al. stated that internationalisation experience is not related to specific country markets.
It is a firm-specific experience relevant for all markets (1997: 352). These findings reflect arguments by Barkema et al. (1996), Delios and Beamish (1999) and Zahra et al. (2000), who all concluded that internationalisation knowledge generated from experience is a general and procedural
type of knowledge that can be transferred between, and used in, different markets.
From specific markets, the firm also generates experiential knowledge that is market-specific.
The first type of market-specific knowledge occupying a central position in internationalisation
research concerns the host countrys macro-environment, and has been labelled institutional
knowledge (Eriksson et al., 1997). This knowledge type is operational and country-specific, and
is generated incrementally when the firm is active in the host country (e.g. Blomstermo et al., 2004;
Eriksson et al., 1997, 2000). According to Johanson and Vahlne (1977), institutional knowledge

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concerns knowledge about the characteristics of the specific national market, its business climate
and cultural patterns. Thus, it deals with experience of aspects in the host country beyond the firms
actual business relationships. The greater the institutional knowledge possessed by the firm, the
lower the liability of being a foreign firm in the host country.
An additional form of market-specific knowledge is business network knowledge, which concerns the entering firms knowledge about clients, competitors and other network actors in the host
country business network (Eriksson et al., 2000; Timlon and Hilmersson, 2008). This knowledge
is generated by the firm when interacting with network partners (Eriksson et al., 1997), and is
essential for the development of business in a local market (Bridgewater, 1999; Chen and Chen,
1998). This experiential knowledge is similar to network experiential knowledge (Blomstermo
et al., 2004). Firms that lack business network knowledge are assumed to suffer from a liability of
network outsidership (Johanson and Vahlne, 2009). This is important, as Johanson and Vahlne
(2003, 2006) claim that anything that happens to the firm takes place within its business network.
The greater the business network knowledge, the less the entering firm will suffer from a liability
of network outsidership.
Whereas the business network knowledge introduced above springs from research on the role
of organisational networks in internationalisation (e.g. Johanson and Vahlne, 2009), a parallel
stream of research has shown the importance of social networks in explaining the internationalisation of the firm (e.g. Bjrkman and Kock, 1995; Coviello, 2006; Evers and OGorman, 2011;
Oviatt and McDougal, 1994). These findings reflect work by Hilmersson and Jansson (2012), who
show that organisational networks are socially embedded, requiring a multilevel perspective on
networks in internationalisation research. Empirical research by Manolova et al. (2010) showed
that the social network is a central ingredient in explaining the behaviour of international new
ventures. Similar claims were forwarded by Musteen et al. (2010), who argued that SMEs rely
more on social networks and personal contacts in the internationalisation process compared with
large companies. In addition, social networks have been said to be of particular importance to firms
lacking established business relationships in the market entered (Aldrich and Zimmer, 1986; Greve
and Salaff, 2003). From these studies we have learned that relationships other than pure business
relationships play an important role for the internationalisation of the firm. Thus, we can expect
that firms will not only develop experiential knowledge with regard to the business network, but
also develop experiential knowledge from their social network relationships. This type of knowledge is highly specific and a result of personal interaction, and in this article is referred to as social
network knowledge.

Method
Sample and data collection
In order to examine the multidimensionality of the experiential knowledge construct and to identify experiential knowledge profiles among internationalising firms, data were collected from
SMEs in southern Sweden. The European Union (EU) definition based on a headcount of fewer
than 250 employees was followed. Further, a lower limit of an annual total export of at least
Kr10m, of which at least Kr1m was to emerging markets, was set. Data for sampling were ordered
from Statistics Sweden and covered all firms in southern Sweden matching the criterion above.
Identification of the sample followed two distinct steps. First, the secondary data provided for each
firm were evaluated in relation with the criteria. Second, firms were contacted and evaluated over
the phone, excluding firms not representative of the population. After these two steps, the sample
fulfilling the selection criteria consisted of 277 firms. Of these, 203 firms filled in the

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questionnaire, resulting in a response rate of 73 per cent. This relatively high response rate was
reached because of two main strategies. First, the firms were evaluated carefully in relation to the
definition of the population. Second, all firms were contacted over the phone and then visited onsite: this meant that all the firms which answered the questions also returned the questionnaire.1 In
the sample, for which an overview is provided in Table 1, 91 firms answered for the new EU countries, 61 firms answered for Russia and 50 firms answered for entries in China. It is noteworthy to
add that two firms, according to the EU definition of SMEs, were oversized at the time of interview: the reason was that one of the firms had merged with a competitor and the other had grown
rapidly. Still, it was decided to keep them for the analysis as the questions addressed information
in retrospect from the time when these firms qualified as SMEs.
In order to collect the data, an on-site survey method was undertaken. This method is rather
labour- and cost-intensive, but it offers the advantage of ensuring the respondents commitment,
standardisation of the data collection process and accessible support from the research team. All
firms were visited on-site in autumn 2007 and spring 2008. The visit contained a short semistructured interview and a standardised questionnaire, and lasted between 1 and 1.5 hours. A template was set for the visit and the interview situation was standardised following a semi-structured
interview guide (Merriam, 1998).

Measures
As suggested by Hair et al. (2005), single measures for the constructs were avoided. Instead, multifaceted representations of the underlying constructs were sought, and a seven-point Likert scale
(where 1 = strongly disagree to 7 = totally agree) was used. The questionnaire was developed
after a literature review and tested through a pilot study with six firms of the sample, after which
adjustments were made. In order to assess the firms degree of experiential knowledge, inspiration
was taken from previous research on experience-based knowledge in the internationalisation process (e.g. Blomstermo et al., 2004; Eriksson et al., 1997; Petersen et al., 2008).
The level of internationalisation knowledge was assessed by the firms experiential knowledge
from operating in international markets: the firms experience of supplying international customers, adapting its products and services to the needs and wants of international customers, and marketing the products and services abroad. These measures were taken from studies by Blomstermo
et al. (2004) and Eriksson et al. (1997). Institutional knowledge was assessed by the firms experiential knowledge of the market being entered at the macro-level: the firms knowledge of the
Table 1.Sample.

Turnover (000)
Employees
Export markets
Export/turnover %
International employees %
International assets
Firm age
Years since entrya
aIn

Min

Max

Mean

S.D.

842
3
3
10
0
0
2
1

166200
510
160
100
90
90
131
57

27578
107.7
32.5
70
16
9
43.62
11.15

26744037
94.46
27.61
.23
.25
.18
23.66
9.23

the market answered for (Baltic states, Poland, Russia or China).

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government, culture, political system, legal environment and world view in the host country. These
measures were inspired by Eriksson et al. (1997), and Blomstermo et al. (2004). Business network
knowledge was assessed by the firms experience-based knowledge about the needs and wants of
the customers, competitors and potential customers in the host country. These measures were taken
mainly from Blomstermo et al. (2004). Social network knowledge was assessed with three indicators capturing the extent to which the entering firm had developed a strong social relationship with
customers, as well as the firms knowledge about the social network. The indicators capture
whether customers are met in private situations, if private meetings are held and whether customers
are considered as friends. These measures were developed as the researchers iterated between data
from the semi-structured interviews (see Hilmersson, 2011; Hilmersson and Jansson, 2012) and a
review of the literature.

Data analysis
In the first stage, an exploratory factor analysis was performed based on the matrix of variable correlations (Table 2). Thereafter, the extracted factors were interpreted and the indicators summed
into a factor scale, which was used as input in a cluster analysis. This analysis was designed to
group the firms into internally homogenous and externally heterogeneous clusters. At the end of
this section, the interpretation is complemented by practical illustration from four of the sample
firms, which is based on the qualitative interviews performed during on-site data collection.
Descriptive statistics in terms of means, standard deviations and Pearson correlations are provided
in Table 2.
Factor extraction. As the correlation matrix revealed promising grounds for factor analysis, the
next step aimed to reduce the variables into a more manageable dataset. In the first stage, the principle component analysis (Hair et al., 2005; Harman, 1967) was used based on an eigenvalue>1
criterion. This extraction was subjected to a Varimax rotation to prevent inter-correlations among
the dimensions. The factor purification process served as preparation for an acceptable construct
validity. Two main criteria were followed to ensure convergent validity: item-to-total correlations
and factor loadings. Reliability tests were based on Cronbachs alpha values, and the discriminant
validity test was based on each indicator loading on factors to which it did not belong. In addition,
a careful theoretical appraisal of each indicator assisted the assurance of acceptable translation
validity. All these principles were used iteratively. Through the factor analysis, four latent constructs were extracted explaining 68.2 percent of the variance. The reliability test revealed acceptable values. The Kaiser-Meyer-Olkin (KMO) value was >.850 and all communalities were >.6.
The factors extracted, their statistical values and indicators are presented in Table 3.
As the factor analysis demonstrated sufficient reliability of the four factors, the subsequent
analysis was performed at factor level. To enable analyses on the factor level, the indicators of each
factor were summed to create a factor scale. In the subsequent section, these values are used as
input variables in a cluster analysis with the purpose of identifying and classifying classes or
groups of the cases.
Cluster identification and interpretation. As the theory did not specify the number of clusters in
advance, a two-step clustering procedure was followed. First, a hierarchical cluster analysis was
performed to identify the most stable and suitable number of clusters. To minimise the internal differences within the clusters, Wards method was used (Hair et al., 2005). In this analysis, the numbers of clusters are decided upon based on the agglomeration coefficient change when stepwise
changing the number of clusters. Each case starts out as its own cluster, stepwise the closest cases are
combined into a new cluster, which incrementally reduces the number of clusters. The agglomeration

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.40*

.07
.05
.14
.08
.01
.12
.08
.22*
.02
.04
.03

1.11 5.85

4.51
3.85
4.89
4.42
3.45
5.68
4.76
5.51
3.17
2.61

1.43
1.58
1.41
1.54
1.67
1.01
1.36
1.20
1.91
1.87
2.02 3.26

.18*

.06
.11
.09
.05
.08
.17
.12
.19*
.09
.12

.54* 1

1
.34* 1

.75 6.56
1.08 5.80

S.D. Mean 1

*Significant at p< 0.01. X represents the market answered for.

We have well-developed experience of:

1 Supplying foreign customers.
2 Adapting our organisation to meet the
needs and wants of foreign customers.
3 Sales and marketing of our products
abroad.
We have well-developed knowledge about:
4 The world view in X.
5 The government in X.
6 The culture in X.
7 The political system in X.
8 The legal environment in X.
9 Our customers needs and wants in X.
10 Potential customers in X.
11 Our competitors in X.
12 Our customers private situation in X.
13 We often have private meetings with
customers in X.
14 We consider our customers in X as close
friends.

Indicators

Table 2. Means, standard deviations and Pearson correlation coefficients.

5

10

11

12

.18*

.23*

.28*

.30*

.26*

.25*

.28*

.20*

.04

.70*

14

.69* 1

13

.12 1
.16
.54* 1
.23
.64* .57* 1
.17
.61* .68* .63* 1
.12
.49* .75* .51* .63* 1
.19
.25* .25* .26* .22* .21* 1
.11
.33* .38* .32* .33* .35* .30* 1
.22* .28* .23* .21* .30* .22* .30* .41* 1
.11
.31* .29* .34* .27* .23* .18
.13
.01 1
.16
.27* .18
.32* .21* .20* .18* .17
.02 .66* 1

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We have well-developed knowledge of the personal situation of our

customers in X: for example, their families.
We often have private meetings with our customers in X.
We consider our customers in X as close friends.

We have well-developed knowledge of the needs and wants of our

customers in X.
We have well-developed knowledge about potential customers in X.
We have well-developed knowledge about our competitors in X.

We have well-developed knowledge about the world view in X.

We have well-developed knowledge about the government in X.
We have well-developed knowledge about the culture in X.
We have well-developed knowledge about the political system in X.
We have well-developed knowledge about the legal environment in X.

We have well-developed experience of supplying foreign customers.

We have well-developed experience of adapting our organisation to
meet the needs and wants of foreign customers.
We have well-developed experience of sales and marketing of our
products abroad.

Indicator

Note: The % of variance explained by the four factors was 68.2%. Communalities >.6.

Social network knowledge

Institutional knowledge

Business network knowledge

Internationalisation knowledge

Factor

Table 3. Factors extracted.

Items

.869

.605

.885

.689

Cronbachs alpha

.862
.871

.743
.682

.854

.746
.840
.767
.856
.810

.663

.798

.799
.732

Factor loading

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change revealed that the smallest change in agglomeration coefficients occurs in the four-cluster
solution. Thus, this solution is seen as the most stable and suitable one.
In the second stage, a K-means cluster analysis was performed, where a four-cluster solution
was ordered. The K-means analysis maximises the differences among cases in different clusters.
As the change in distance from the cluster centre was small, convergence was achieved after seven
iterations using the squared Euclidian distance (Hair et al., 2005). To test the reliability of the cluster solution, Anova F statistics revealed significant differences among the groups in the clustering
variables. To advance this further, Sheffe tests of paired comparisons confirmed that most of the
cluster differences in the variables were statistically significant. These somewhat weaker statistics
for the group differences in internationalisation knowledge were expected, as most of the firms
which have entered these emerging markets are very experienced internationally.
Cluster 1 institutional experts consists of firms with relatively prominent internationalisation
knowledge and business network knowledge. Although cluster 1 has a high rank on the vertical
axis, the more profiling characteristics of this cluster are found in the horizontal axis. From the

Table 4. Cluster data.

Factor

Institutional
experts

Masters

Learners

Social
networkers

Anova F

Scheffe test

Internationalisation knowledge
Institutional knowledge
Business network knowledge
Social network knowledge

6.1
4.8
5.7
2

6.4
5.4
5.9
5.1

5.9
2.9
4.6
1.4

6
3.5
4.9
4.2

3.52*
12.19***
32.61***
225.58***

1.2<3
1.2>3.4
1.2>3.4
2.4>1.2

*significant at p<0.1; ***significant at p<0.001. Sheffe tests show differences across clusters significant at p<0.05.

Figure 1. Cluster solution, final cluster centres.

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final cluster centres it is seen that this cluster scores high on institutional knowledge but low on
social network knowledge. This indicates that this group of firms has a more profound experience
of the society surrounding the business network than personal aspects of their customers. Based on
the profile revealed, this cluster is labelled institutional experts.
A practical example of the role of institutional experts is provided by the ventilation company
(VC), which was founded in 1982. VC produces environmentally-friendly air conditioning units
and began its international expansion in the mid-1980s. The Norwegian market was the first entered,
followed by the USA, Denmark, Finland, Germany, Iceland and France. After a few export projects
in Estonia, VC entered the Polish market in 1997. From its international expansion, VC has generated
relatively high degrees of international experience and is familiar with international procedures. To
learn about business opportunities and the local Polish culture, representatives from VC participated
in seminars and meetings with the Swedish trade council. Considering that VC supplies both private
and public customers, it is important to develop deep knowledge about developments in host countries societies, as well as learning about public procurement, public procurement agencies and identifying new construction projects by both public and private investors. Common customers are
hospitals, schools or manufacturing plants. As VCs ventilation systems are only a marginal part of
customers total investment, it does not develop very deep relationships with its customers. The relationship with the customer is often left to contractors: for example the Swedish construction firms
NCC or Skanska. However, it is important for VC to develop knowledge about the local business
network to evaluate local competitors and potential customers preferences.
Cluster 2 masters consists of firms with prominent internationalisation knowledge and business network knowledge. Except for these high scores on the vertical axis, cluster 2 reveals high
scores on the horizontal axis; from this axis, cluster 2 can be interpreted more properly. The final
cluster centres indicate that these firms score high on both institutional knowledge and social network knowledge. This cluster profile indicates that these firms possess a prominent experiential
knowledge base. They have the highest score in all dimensions, and compared to cluster 1 they
seem to be oriented towards developing knowledge about the host countrys society, as well as
developing profound knowledge about the social network in the host country. Based on the profile
revealed, this cluster is labelled masters.
A practical example of masters is provided by the energy efficiency company (EC), which was
founded in 1974. EC has expanded internationally for the last 20 years, beginning at a trade fair in
Finland and followed by other fairs in Denmark, Norway, Germany, France, Italy, the USA and
Mexico, indicating its vast international experience. Through different trade fairs, the company has
met its customers and the distributors of its products. International demand has increased dramatically as presumptive customers have become more environmentally concerned. EC believes that
knowledge about international markets and operations is a key resource to succeed. In fact, the
export manager is a regular participant at seminars provided by the Swedish trade council, which are
seen as important complements to personal experiences of international operations. As the products
are developed mainly for advanced economies where there is a high environmental concern, EC did
not believe in a strong growth potential in Eastern Europe before the standard of living had increased.
This belief was wrong and in 1995 EC received an unsolicited order from Estonia. Since then the
Baltic States have become a second home market for EC, currently accounting for almost 20 percent
of total sales. This situation was reached by EC actively trying to establish a leading position in this
growth region. However, in order to succeed, local experience and knowledge have been very
important in this strategy, as EC had to become attuned to the culture and concerns of the local population. This included understanding the environmental concerns of the host the society, the subsidies
available for environmentally-friendly investments and regulations in the energy sector. Moreover,

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EC seeks to develop trustful and long-term relationships with existing customers and distributors of
its products in the local market in order to further develop its products and services and identify new
sales opportunities.
Cluster 3 learners consists of firms with limited experiential knowledge of the host country.
This group of firms has the lowest mean value on the final cluster centres in all four axes, although
internationalisation knowledge and business network knowledge are not remarkably lower for the
other clusters. Conversely, experience scarcity is more apparent in the horizontal dimension. The
social network knowledge of this type of firm is highly limited, which indicates that this group of
firms has a very limited social relationships with customers in the host country. Judging from the
mean values, this group also has a very limited understanding of the institutional setting in the host
country, as indicated by the low scores on institutional knowledge. Based on the profile revealed,
this cluster is labelled learners.
A practical example of host market learners is provided by the optic visioning (OV) company,
which for a relatively long period of time has been exporting to Estonia. Founded in 1978, its first
export experiences were generated in the early 1980s. OV followed a traditional international
expansion pattern that started in the Scandinavian countries, which were followed by the
Netherlands, Germany, Belgium, and France. Today, the firm has experience in 17 countries and is
knowledgeable when it comes to international procedures. In 1995, OV received an unsolicited
order from Estonia. Prior to that time, there were no plans to enter East European markets; however, the order was seen as a bonus and led to annual sales of approximately 12 percent of total
turnover in Estonia. OV has not been very active in the Estonian market as it has only participated
in a few local fairs. OV has only met the five customers that it supplies a few times to discuss the
technicalities of products, so it does not have a deeply rooted relationship with customers and has
very limited knowledge of the local business network. Furthermore, as very few visits have been
made to Estonia, its knowledge about local regulations, culture and politics is very limited. Instead,
the highly competitive and unique products requested by local customers have mainly driven OVs
international growth in the country; in fact, most of its sales in Estonia are the result of unsolicited
orders.
Cluster 4 social networkers consists of firms with relatively prominent internationalisation
knowledge and business network knowledge. These scores indicate that this is a group of firms
with prominent international experience and rather developed experience of interacting in the
host country business network. However, the horizontal dimension reveals a more interesting pattern compared with clusters 1, 2 and 3. Here, it is evident that cluster 4 consists of firms with
well-developed knowledge about social networks in the host country, which is indicated by high
scores on the social network knowledge axis. In turn, the final cluster centre on the institutional
knowledge dimension indicates that this group of firms has limited knowledge about the host
country society. This leads to the interpretation of cluster 4 as a group emphasising social networks rather than institutions in the host country. Based on the profile revealed, this cluster is
labelled social networkers.
The industrial tool company (TC) provides an example of social networkers. Founded in
1967, TCs international growth began in the late 1990s. Prior to this, TC was highly home
market-oriented, a situation that changed when a new export manager was recruited. Today, its
exports have reached 27 percent of the firms total turnover. Fifty per cent of its exports are sent
to the Baltic States, where Lithuania is the most important market with 20 customers currently
supplied. The remaining exports are mainly sent to markets with developed woodworking industries, for example the USA, Thailand, Vietnam and South Africa. From these markets, TC has
generated advanced experience in international operations. The Lithuanian market was entered

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in 1994. Neither prior to nor after entry has TC tried to develop any knowledge about Lithuanian
society, culture or regulations. Instead, the company is very focused on developing strong, trustful and long-term relationships with its existing customers. Most of the information necessary
for TC to succeed in Lithuania is received through everyday conversations with local customers,
or over an informal dinner after a visit to customers production facilities. It is at these types of
occasions that TC can teach its customers to use its products more efficiently, and it is in such
discussions that TC learns about how to adapt its products to the local customers in order to stay
competitive.

Discussion and conclusion

Experiential knowledge: a multidimensional construct of four basic types
This study has confirmed empirically that experiential knowledge is a multidimensional construct,
as suggested by Eriksson et al. (1997). The analysis has underlined that in the internationalisation
process, firms generate different types of experiences that are transformed into knowledge of different degrees of specificity. The factor analysis discriminated between four types of knowledge
ranging from low to high degrees of specificity: internationalisation knowledge, institutional
knowledge, business network knowledge and social network knowledge.
The first three knowledge types confirm findings from previous internationalisation research
(e.g. Blomstermo et al., 2004; Eriksson et al., 1997; Petersen et al., 2008). Internationalisation
knowledge is the aggregate of the firms international experiences generated by a multitude of
customers located in different host countries. Thus, the more customers that the firm is supplying
and the greater variety of its geographical location, the more developed the internationalisation
knowledge. In order to examine this relationship further, a post hoc analysis of the correlation
between the number of export markets and the firms internationalisation knowledge revealed a
positive, strong and significant relationship, which verifies that internationalisation knowledge
can be seen as an important indicator of a firms spread in different countries.
The market-specific knowledge types identified in this study follow three distinct specificity
stages. The least specific knowledge type concerns knowledge about the host countrys institutions. This knowledge type was labelled institutional knowledge, and concerns the institutions in
the host countrys business environment. This knowledge type is proposed to be an important
indicator of a firms liability of foreignness in the focal market. In the analysis, it was revealed that
this knowledge can be separated from more specific business network knowledge, which concerns
firm knowledge about the business network in the foreign market. Therefore, it is proposed that
business network knowledge is an important indicator of a firms degree of insidership in the foreign business network. Hence, firms with low degrees of this experiential knowledge are expected
to suffer from a liability of network outsidership.
Whereas these three types of experiential knowledge verify findings from previous research in
internationalisation theory, a central contribution of this study is the introduction of a new type of
experiential knowledge in internationalisation research: the concept of social network knowledge.
This type of knowledge concerns the social network in the host country in contrast with the business network. This is a central contribution to internationalisation research, where recent findings
have shown the importance of social relationships and networks in explaining international behaviour and success among SMEs (e.g. Bjrkman and Kock, 1995; Coviello, 2006; Evers and
OGorman, 2011; Oviatt and McDougal, 1994). So for SMEs, apart from knowledge about business networks, we can expect it to be of great importance to develop our knowledge of social networks in the host country too.

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The confirmation of experiential knowledge as a multidimensional construct is of importance

for future research, as it allows for advancing the importance of experiential knowledge in the
internationalisation process. This article has enabled future studies to examine in more detail
the types of experience-based knowledge that are strongest in relation to a firms ability to recognise
international growth opportunities, make accurate and realistic predictions and reduce uncertainty
related to further international commitment.

Experiential knowledge profiles among internationalising SMEs

This article has shown that in the internationalisation process, firms are developing heterogeneous
experiential knowledge profiles. In this study, four such profiles were identified, interpreted and
exemplified.
First, institutional experts were identified. This group consists of firms with relatively welldeveloped experiences of the host country institutions, but with relatively shallow relationships
with the host country customers. They are internationally experienced and have fairly developed
knowledge about the local business network.
Second, masters were identified. The master is a type of firm with great internationalisation
knowledge as well as business network knowledge: it reveals impressive experiential knowledge
concerning business network knowledge and well-developed social network knowledge. So, with
great experiential knowledge about both institutions and the business network in the host country,
this is a firm that is unlikely to suffer from a liability of foreignness or network outsidership.
Third, learners were identified. This type of firm has generated relatively low degrees of experience-based knowledge concerning the host countrys society; it also has limited experience of the
customers supplied in the host country, which indicates that its relationship with the customer is
shallow. This indicates that this type of firm is likely to suffer from both liabilities of foreignness
and network outsidership.
Fourth, social networkers were identified. This type of firm has relatively well-developed
international experience as well as business network experience, but relatively scarce knowledge
about institutions in the host country. Instead, it seems to develop profound knowledge about social
networks in the host country. As such, this type of firm might be suffering from a liability of foreignness, even though it has reached a relatively high degree of insidership in the local business
network and social network.
The identification of these clusters underlines the importance of understanding the heterogeneity of experiential knowledge development among internationalising firms. The findings have
shown that when studying entry into emerging market environments, firms with ongoing business
expose different knowledge profiles. Primarily, this heterogeneity is revealed when studying the
degree of social network knowledge and institutional knowledge developed by the entering firm.
An analysis of the degree of internationalisation knowledge and business network knowledge
revealed only modest differences.

Limitations of the study and implications for managers

The study has reported from an on-site survey of 203 SMEs in southern Sweden. In the research
project, this data collection procedure was chosen to ensure the quality and response rate in the
dataset; however, it has its limitations. First, this research was performed on Swedish SMEs with
experience of entry into newly-opened or emerging economies. Therefore, future studies would
benefit from comparing the results with samples where alternative home and host countries are

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Hilmersson

involved. Second, the limitation in the dataset relates to this particular sample. As the study population was defined as firms from mature EU 15 with experience of entries in emerging economies,
the cluster analysis revealed only a modest variation in cluster centres on the internationalisation
knowledge dimension.
Except for the sample-related limitations of the present study, an additional limitation of the
study relates to measurement of knowledge constructs. Measuring knowledge is a complex task,
and the measures utilised in this research were taken from previous research on experience-based
knowledge in the internationalisation process. These measures are in the form of self-evaluation,
which means that there is a risk for method biases. However, a main benefit to this study was that
potential overestimations could be controlled for while interviewing the respondents. Future studies would contribute to our increased understanding of the importance of experiential knowledge
by developing the measures of such constructs. For this purpose, this article has laid solid groundwork by discriminating the different types of knowledge, ranging from low to high degrees of
specificity generated in the internationalisation process.
For managers and entrepreneurs seeking international growth, this study has shown that in the
internationalisation process, firms are generating different types of experiential knowledge.
Depending on the type of experiential knowledge generated, diverse experiential knowledge profiles will be exposed. These findings are important, as they reveal the potential main sources of a
firms liability of foreignness and network outsidership. This study has pinpointed and shown the
types of experiential knowledge that need to be generated to overcome these two main obstacles in
the internationalisation process. In addition, this article has shown that managers of internationalising firms generate social network knowledge. This knowledge type is importance for firms seeking
to identify international growth opportunities.
Funding
This research received no specific grant from any funding agency in the public, commercial or not-for-profit
sectors.

Note
1.

A more detailed description of the data collection is found in Hilmersson (2011).

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Author biography
Mikael Hilmersson is Assistant Professor of Marketing at the School of Business and Economics, Linnaeus
University. He is the head of the masters programme in international business strategy at the university. His
main research interests revolve around various aspects of the internationalisation process of SMEs. His
research has been published in the International Business Review, Journal of International Marketing,
International Journal of Business Environment and International Journal of Trade and Global Markets.

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