Social capital in the international operations of family SMEs

Abstract

Purpose – The aim of this study is to discuss how social capital is developed in the internationalization process of small and medium-sized family enterprises (family SMEs). Design/methodology/approach – This paper reports findings from an in-depth multiple case study with four Finnish manufacturing family SMEs. The data were analyzed through the perspectives of (i) structural holes, (ii) network closure, and (iii) the interplay between these two mechanisms. Findings – Our material demonstrated that family entrepreneurs had a large number of structural holes when launching international operations, but also after several years of running international operations. Instead of trying to span structural holes, they concentrated merely on developing the network closure with agents and subsidiary staff. The case firms spent a lot of resources on finding suitable network ties and on developing good network closure with the selected social capital ties. Research limitations/implications – There are some aspects that might differ depending on the home and target country of firms. For instance, firms in some Asian countries are able to utilize emigrant relationships that help them with networking, which was not the case here with Finnish family SMEs. Practical implications – Family entrepreneurs seem to have a tendency to concentrate on a limited number of foreign partners, and to neglect the building of new relationships that could help them in future challenges. Originality/value – In this study, we (i) respond to calls for more research on network development in the entrepreneurial process, especially in the context of internationalization, (ii) we introduce the notions of network closure and structural holes to the internationalization context, and (iii) we reveal how social capital restricts and facilitates family SMEs’ international operations.