Olha Fedoronchuk  

 

INTERNATIONALIZATION OF ONLINE SERVICE 

PROVIDERS: 

 NETWORK PERSPECTIVE 

 

 

 

 

 

 

School of Management  

             Master’s Thesis in International Business  

 

 

 

 

 

 

VAASA 2020 



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CONTENTS  

 

 

1 INTRODUCTION                             5 

   1.1 Background of the study                                       5 

   1.2 Research questions and objectives                            8 

   1.3 Terminology and key concepts                10 

   1.4 Structure of the study               11 

2 INTERNATIONLIZATION THEORY                         13 

    2.1 Drivers of internationalization                           13 

    2.2 OSPs and internationalization theory                             18                        

    2.3 Internationalization in terms of networks                           24 

3 NETWORK THEORY                                         28                     

     3.1 Networks in international entrepreneurship                                    28 

     3.2 Types of networks                            30 

     3.3 Forms of network relationships                                                         32 

4 ONLINE SERVICE PROVIDERS                             34 

     4.1 Service sector growth                34 

     4.2 Online service providers             35 

5 RESEARCH METHODOLOGY                                                          39 

    5.1 Research approach                  39 

    5.2 Data collection and analysis             41 

    5.3 Reliability and validity                              44 

          5.3.1 Reliability                 45 

          5.3.2 Validity                                        46    

5.4 Ethics of the research                          47 

6 FINDINGS                                        49 

   6.1 Pre-internationalization stage                         50 

   6.2 Internationalization process in terms of networks                                      51 

         6.2.1. Speed and geography                              51 

         6.2.2. Mode of entry                           54 



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7 DISCUSSION                      56 

    7.1 The main characteristics of OSPs internationalization process                       56 

    7.2 Network development in OSPs                                            60 

           7.2.1 Ties-strength of networks                                        62 

           7.2.2 The impact of online social network                                      63 

8 CONCLUSIONS                                                         65 

    8.1 Theoretical contributions                             65 

    8.2 Managerial implications                67 

    8.3 Limitations                68 

    8.4 Future research suggestions                            69 

LIST OF FIGURES                           71 

LIST OF TABLES                71 

REFERENCES                 72 

APPENDIX 1                     81 

APPENDIX 2                83

      

 

 

 

 

 

 

 

 

 

 

 

 

 

 



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UNIVERSITY OF VAASA  

Faculty of Business Studies  

Author:    Olha Fedoronchuk 

Topic of the Thesis:    Internationalization of online service providers:         

     network perspective 

Name of the Supervisor:                Minnie Kontkanen 

Degree:                Master of Science in Economics and Business        

                 Administration 

Department:        Department of Management  

Major Subject:   International Business 

Line:      International Business 

Year of Entering the University:  2019 

Year of Completing the Thesis:  2020             Pages: 83 

_____________________________________________________________________  

ABSTRACT 

The study examines the internationalization process of online service providers in terms 

of network. Online service providers (OSPs) depend on digital delivery over the internet, 

thus, undertaking internationalization faster than traditional firms. The literature 

describes such phenomenon as ‘born global’ also means that OSPs can overcome 
geographical borders easily. Network theory emphasized the importance of pre-existing 

knowledge and network relationships of the entrepreneur both business and social. 

That drives OSPs to the new markets in more efficient, less risky and faster way. This 

study also reveals the trust building aspect of networks as well as the role of strong and 

weak ties in internationalization process. The technologically complex nature of online 

services and the importance of building local network relationships could explain why 

the case company used controlled mode of entry. World wide web provides the new 

ways and tools to build relationships, thus giving the chance for individuals to have a 

larger number of network relationships. Social media such as LinkedIn or Facebook 

create a base with useful and easily reachable contacts, which could facilitate 

internationalization of OSPs. All in all, this study contributes to the existed researches 

and demonstrates the internationalization process of recently launched international 

startups providing services through online channels.  

______________________________________________________________________  

KEYWORDS: internationalization, networks, online service providers, international 

new ventures, born global 

 

 

 



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1. INTRODUCTION  

 

1.1. Background of the study 

 

In October 2019 approximately 4,48 billion people were registered as the internet users, 

accounting for 58% of the world population. The heading countries with the most active 

internet users are United States, India and China. Nowadays, we can’t imagine our life 

without internet. Internet links billions of people all over the world and became a central 

component of the modern information society. World’s internet penetration rate is 

57%, while both US and Northern Europe rank first, with the internet penetration rate 

95%. The countries with the world’s highest internet penetration rate also are Iceland, 

the UAE, Norway, Bermuda, Qatar, Andorra and Aruba with a 99% internet usage rate 

(Statista, 2019).  

 

The online service providers (OSPs) have already made online services as an important 

part of the IT industry.  Moreover, online services tend to form an independent industry 

nowadays. There were approximately 10 000 OSPs in the world by 1990s, among them 

more than half were located in US. By now, some of these companies merged into the 

larger providers or they have been acquired by the bigger OSPs. Furthermore, a lot of 

newly established OSPs enter the business in the large national markets, for example, in 

China or India (Computer Business Research, 2019). 

 

The online world totally changed modern society’s lifestyle as well as business operation 

style. Online service providers became an essential link between the users and the 

internet. Only through online service providers, people are able to enter the internet 

world. It might be stated that the internet has no sense without OSPs (Computer 

Business Research, 2019).  

 

 



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As the intermediary, the OSPs offer online services for the customers (usually paying 

subscribers), such as e-mail, discussion forums, websites, news articles, download files 

or the chat rooms. The online services provide an internet access to the specialized 

database or just online access for general purposes. Additionally, together with the 

internet access, OSPs can provide  e-mail accounts, software packages and personal web 

pages. Overall, they make people’s lives more convenient and comfortable then it was 

in the past (Computer Business Research, 2019). Through the OSPs, individuals are able: 

- communicate easily with the others at every corner in the world; 

- work at home by online services like video and chats; 

- shop at home by online shopping services. 

OSPs also made the revolutionary changes in the business operation. Almost every 

company, organization or government office needs their own website. Most of these 

websites are hosted by OSPs. Especially for those companies that cannot afford to 

purchase own servers and hire computer experts to maintain their websites, OSPs are 

the best choice to solve the problem. For example, Yahoo and Google can build and 

maintain websites for their customers. They put these websites on their own servers. 

They also build a database for the customers. At the same time, OSPs can be connected 

to each other through networks to support more extensive online services. Through the 

OSPs, one company can (Computer Business Research, 2019): 

- “save the money used for network build-up and maintenance; 

- build their database, collect and store large amount of information;  

- achieve online sale like Ebusiness, Eshop; 

- share and exchange their data with the partners and customers (electronic data 

interchange); 

- reduce the labor and overhead”. 

The number of internet-based ventures is systematically increasing as the internet has 

become a significant field. In addition, the new business models were created in order 

to challenge offline sector. Online markets are rapidly increasing and the traditional 



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companies are having troubles in overcoming the competition as internet connection 

and digital technologies are covered whole the world (Themner & Hedborg, 2014).  

 

Online services and software development are phenomenal and these new ventures are 

referred to as super-fast growers in McKinsey & Company (2014) report. One year old 

companies dare to reduce billions in buyouts, optimistically receiving a multibillion-

dollar offer in a few months. For these new actors the growth is the most important. 

This gives profitability and long-term success, and also turned out to be more important 

than margin and cost structure (Kutcher, 2014).  

 

The internationalization of companies is a deeply researched field in the literature and 

articles. There are several well-established hypotheses of how a company might act 

during foreign market’s entry. Yet, recently the rules have been changed and the 

company should not be present physically on a market when there is a need to enter it 

(Themner & Hedborg, 2014).   

 

Research problem and research gap  

 

Digital technologies have become an everyday phenomenon transforming physical 

products and services into online forms ( Evers et al., 2018). One of the most interesting 

types of firms that emerged recently is internet-based international new ventures (INVs) 

with rapidly internationalization processes shortly after inception (Oviatt & McDougall, 

1994). Besides, referring to the entrepreneur’s behavior in the internationalization 

process, such firms make use of the founders’ social and business network in order to 

develop a unique competitive advantage across borders (Sasi & Arenuis, 2006). The 

researchers also state that networks facilitate resource development and provide a pool 

of key contacts for learning and internationalizing (Coviello, 2006; Coviello & Cox, 2006). 

Research especially in strategic management has resolved the questions of why firms 

form networks and has explored the relational concepts, such as mutual dependence, 

commitment and trust (Johanson & Vahlne, 2009; Dyer & Chu, 2000;). However, there 



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is still a critical need for academic research in order to continuously examine the effect 

of networks on company’s performance (Gulati et al., 2000).    

 

Because there are several types of internet-based INVs, this study focuses on a new 

increasingly important in the global economy group of firms, namely online service 

providers. These firms are undertaking internationalization at an extraordinary speed 

and depend on online delivery through the internet. Furthermore, network relationships 

have been defined as important through the different stages of a new venture’s 

internationalization processes and seen as a source of new knowledge required in 

foreign market entry (Evers et al. 2018; Johanson & Vahnle, 2009). This creates a great 

interest for further research. 

 

Rapidly growing online service providers have little time for market analysis, however, 

there is a need of understanding what key factors are important in the process of market 

entry. Since there are extensive studies about the benefits of internationalization, 

particularly when using network advantages according to the Uppsala model or Born 

global phenomenon (Johanson & Vahnle, 2009; Knight & Cavusgil, 1996), we still have 

to go deeply in such specific topic as online service providers.  

 

 

1.2. Research questions and objectives  

 

Based on the previous assumptions the important problem is to understand how 

modern companies with the digitization processes and web presence internationalize 

and through which channels they are doing it. Particularly, this master thesis focusing 

on network processes of internet-based platforms, more specifically on service 

providers as an example of the young ventures presenting modern international firms.  

Since the use of networks has been shown to help international new ventures to 

overcome the traditional stages of internationalization and expand fast by connecting 



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themselves to established networks, the research question is the following: How do 

online service providers internationalize in terms of using networks? 

 

The objectives provide an accurate description of the actions that will be taken in order 

to reach the purpose of the research. To clarify for the reader’s meaning and 

understanding of the main problem the research objectives must be set. Thus, the 

objectives of this work are: 

 

- to define the factors that drive OSPs to enter international markets; 

- to identify why network plays an important role in the internationalization 

process of OSPs; 

- to discover the impact of OSPs networking ties on such specific factors of 

internationalization process as speed of entry, entry modes and geography.

  

Delimitations        

 

In order to narrow down the scope of the thesis and make it clear for the reader, the 

following delimitations are described. There are different ways how to organize the 

study research analysis. However, this project is divided into two interrelated aspects, 

which are internationalization strategy and what role networks play in it. It has been  

claimed that the three main elements of the internationalization process are mode of 

entry, geography and speed and they are mutually interconnected. For instance, the 

choice of geographic market will actually affect the speed of the internationalization 

process due to the geographical distance (Wentrup, 2016). Based on that assumption in 

this study these elements are applied. 

 

During an internationalization process of the company, networks are usually created 

and then developed in order to obtain the necessary resources or to gain a better 

position within the foreign market. In addition, establishing contacts with foreign 

partners can be perceived as the company’s actions and reactions in the market, as such, 



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it also leads to mutual commitments. (Johanson & Vahnle, 2009; Coviello & Munro, 

1995). Based on this, the network theory is an important aspect of the thesis work.   

 

There is a number of researches that have been studied international new ventures, also 

named as born globals (Coviello, 2006; O’Gorman & Evers, 2011, McDougall et al., 2011). 

However, much less is known about the emergence and internationalization of more 

specific firms, such as online service providers. This is giving a motivation to focus on 

differences between traditional network models of internationalization and recently 

occurred one (Andersson, Evers & Kuivalainen, 2014; Gabrielsson & Sepulveda 2013; 

Etamad,2017).  

 

 

1.3. Terminology and key concepts  

 

Internationalization  

In the economics context, the internationalization may refer “to a company that takes 

steps to increase its footprint or capture greater market share outside of its country of 

domicile by branching out into international markets”. The corporate movement 

towards internationalization process has helped drive the world economy into a 

globalizing environment, in which economies around  the world are highly connected 

because of cross-border commerce (Kenton, 2019 ).  

 

Internationalisation as a busines idea or a strategy is original and dependents on the 

following synthesis of the factors: administrative decisions, business goals and the other 

factors (Daniels et al., 2015). While some business organizations seriously considered 

the strategic and successful potentials of the internationalization activities, others were 

rejecting the whole idea as not only expensive but also exhausting for the company (Hill 

et al., 2016).     

 

  



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Networks  

Network researches came into view in various disciplines, such as in marketing and in 

entrepreneurship (Granovetter, 1973; Curran et al., 1993). As a consequence, the 

definitions for a ‘business network’ may differ. According to Axelsson & Easton (1992), 

the networks are the “sets of two or more connected exchange relationships”. Following 

this, markets are portrayed as the systems of social and industrial relations among, for 

example, consumers, suppliers, competitors, family and friends. In accordance to the 

network's perspective, the nature of the relationship established between different 

parties influence strategic decisions, and the network involves the exchange of 

resources between its members (Sharma, 1993).  

 

Online service providers  

Mobile technology, socіal apps, and the cloud have been growing significantly over the 

past years. It has created a lot of low-cost opportunities for potential online 

entrepreneurs to enter the technologically advanced internet world. Business 

operations raised from 1,9 trillion dollars in 2016 to an estimated 4,48 trillion dollars by 

2021.  Since technology increased in sophistication, it becomes much easier to access 

the online world of business (Finkle, 2019). Online service providers  are playing a central 

role in the growing internet economy. Google, Twitter and Facebook are bright 

examples of the fast-growing OSPs established in US. In a short time, these companies 

became one of the largest in the world (Wentrup, 2016).  

  

 

1.4. Structure of the study  

 

This research is divided into eight main chapters. The thesis begins with an introduction 

chapter, which explains the main trends in the industry and why the research will 

contribute to further studies of the problem area. Besides, the delimitation of the study 

gives us more understanding of the scope and framework.   

 



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The second and third chapter includes an overview of the existing literature and 

theoretical approaches that are the most important for thesis specific topic. As it has 

been mentioned before the focus is on theory about online service providers, 

internationalization processes and networking ties in order to develop new insights and 

explaining the execution of the study. The fourth chapter gives an overview of the 

specific type of international new ventures – online service providers. 

 

The fifth chapter describes the research methodology of the thesis. The methodological 

approach is chosen as well as a data collection method, sample size and composition. 

Finally, procedures to assure the validity, reliability and ethics of the study are 

highlighted. 

 

The sixth chapter starts with an empirical examination, followed by the analyzes of the 

data collected from the interviews and the next chapter six provides the evaluation of 

the results. Furthermore, actual findings will be compared and connected with the 

existing theory within the research area.   

 

Finally, the last chapter of the thesis presents the conclusion, acknowledges its 

limitations and identifies potential managerial implications of the results as well as 

future research suggestions.  

 

 

 

 

 

 

 

 

 

 



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2 INTERNATIONALIZATION THEORY 

 

 

2.1   Drivers of internationalization  

 

The current international economic environment is described as dynamics and requires 

from the companies a broad vision of their strategies. Nowadays internationalization 

has become one of the main elements of successful functioning as well as future 

perspectives of the company. The company’s interest in acting on the international 

market could be defined by several key factors. Entering foreign markets gives more 

independence from local market business cycles, increases productive capacity, 

enhances market resources and efficiency. Johnson et al. (2008) indicated four drivers 

of the internationalization. These drivers are:  

 

1. Market drivers  

 

Standardization of markets has considered a crucial point that facilitates 

internationalization. There are three main elements on which this driver based on. The 

first one, similar customer needs and tastes that are equal within different foreign 

markets. The second one, the presence of global customers that requires standardize 

products.  Finally, the third element is transferable marketing which helps in market 

globalization processes (Johnson et al., 2008).  

 

2. Cost drivers  

 

Acting internationally benefits in reducing the costs. Smaller local markets, for example, 

in the Nordic countries, lead companies to internationalize with the bigger motivation 

than companies in the United States, where large domestic market creates the huge 

opportunities. Internationalization is proposed where it is possible to take advantage of 



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specific business activities that a company can benefit from using resources outside the 

internal market (Johnson et al., 2008).     

 

3. Government drivers  

 

Government drivers can both facilitate and suppress internationalization. The relevant 

policy elements are diverse, containing the currency and capital flow controls, the tariff 

barriers, ownership restrictions, technical standards, controls over technology transfer, 

local content requirements, intellectual property (patenting) regimes, and subsidies to 

local firms (Johnson et al., 2008).  

 

4. Competitive drivers  

Competitive drivers refer directly to globalization as an integrated global strategy rather 

than simpler international strategy. These drivers have two factors. First, country-

specific dependence calls for the global coordination. The second factor - directly related 

to the competitor's strategy. As it has been mentioned earlier, globalization provides a 

scale of cost-effectiveness, responsiveness, and flexibility that could be difficult to 

achieve (Johnson et al., 2008).  

Internationalization can be a fantastic opportunity for companies, but it’s crucial to have 

well-established operations and networks at the local level in order to be competitive 

on the international level. That requires a thorough analysis of all international strategy 

related aspects.  

Andersson et al. (2014) in their research draw from Jones and Coviello’s (2005) three 

dimensions of time (speed), foreign market selection and entry mode to underpin the 

internationalization process. Furthermore, Figure 1 shows that these dimensions are at 

the core of the new ventures internationalization process. The other research (Ruzzier 

et al., 2007) identifies speed, market entry strategy (or mode) and a foreign market 

choice as important dimensions in company’s internationalization processes. That is 



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why internationalization and network processes are analyzed in terms of the above- 

mentioned dimensions.  

 

 

 

 

Figure 1. The factors influencing international new venture’s internationalization 

process (Andersson et al., 2014). 

 

 

Mode of entry 

 

When the company enters a new market the mode of entry plays an important role 

because such crucial decision automatically limits the production and marketing 

strategies. The entry mode also have an affect how company faces the challenges and 

deploying new skills to successfully market its product (Gillespie et al., 2007). Johnson & 



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Tellis (2005) categorize five key types of entry modes based on Root’s (1994) research 

survey, which are described below: 

 

1. “Export - a firm’s sales of goods/services produced in the home market and sold 

in the host nation through an entity in the host nation.   

 

2. License and Franchise - formal permission or right offered to a firm or agent 

located in a host nation to use a home firm’s proprietary technology or other 

knowledge resources in return for payment.  

 

3. Alliance - agreement and collaboration between a firm in the home market with 

a firm located in a host nation to share activities in the host nation.  

 

4. Joint Venture - shared ownership of an entity located in a host nation by two 

partners-one located in the home nation and the other located in the host 

nation.    

 

5. Wholly Owned Subsidiary - complete ownership of an entity located in a host 

nation by a firm located in the home nation to manufacture or perform value 

addition or sell goods/services in the host nation” (Keller & Kotler, 2012). 

 

 

 

Global Internet Strategy 

Moreover, except of these five entry modes, world wide web development caused a 

reason for inventing a strategy where none of the above-mentioned modes are fully 

needed for the foreign market entry. This approach involves tailoring the website with 

country-specific content to target existing consumers that are living abroad as well as 

the foreign suppliers and, as such, develop global company awareness. With the help of 

internet, the companies also can effectively implement marketing researches and 



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provides more convenient and safer way of purchasing goods from abroad (Keller & 

Kotler, 2012). 

The international new ventures have different ways to enter the foreign market. They 

can use one of the modes described above or combine them at different stages of 

internationalization. The degree of control is a key aspect that distinguishes different 

entry modes and allows the company to choose the best one according to the needs 

(Anderson & Gatignon, 1986). On the one hand, there is an export of goods with the 

lowest degree of control. While, on the other hand, franchises, licenses and various 

forms of joint ventures provide a high degree of control, which can also lead to the 

formation of divisions, belonging to forms of the ownership, such as a wholly owned 

subsidiary with the highest level of control (Johnson &Tellis, 2005).    

 

Speed of entry 

 

Additionally, to the right entry mode selection, speed of internationalization processes 

is critical for the international new ventures. Just as many companies overestimated 

market advantages abroad and underestimated the required efforts and time in order 

to develop a real market presence, so they justified their foreign expansion on the 

grounds of the rapid need for early market participation (Andersson et al., 2014).  

 

Born global concept assumed that the firms internationalize rapidly due to large foreign 

revenues. According to Kuivalainel (2012) the industry variables can influence the 

decision to internationalize early in a firm’s life cycle and can also speed up its 

international growth from an inception. For instance, existing studies of born global 

firms from the high-tech and low-tech fields argued that the company’s choice to rapidly 

internationalization is determined by the industry factors (Evers et al., 2014; Andersson 

et al., 2014).   

 

 

 



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Geography  

The researches have shown that the development of internet changes the internal 

orientation of the company, as information quickly overcomes the distance and the  

boundaries. Thus, it makes services available anywhere and anytime, as such, globalizing 

the service economy (Wymbs, 2000; Wentrup, 2016). Internet-based companies often 

use international knowledge and personal founder’s networks to identify international 

markets and act with the commitment in order to take advantages from the foreign 

opportunities (Andersson & Wictor, 2003). 

It is argued that service-oriented internet companies can serve a larger number of 

international markets than manufacturers do. Their pace of internationalization is rapid 

but also gradual, telling about the importance of physic distance (Kim, 2003). Laanti 

(2007) found that B2B companies in the wireless technology sector are rapidly entering 

distant markets. In addition, Gabrielsson and Pelkonen (2008) stated that internet-

based companies can enter the distant markets at the beginning of their 

internationalization. If to talk about the geographical pace, the internet-based 

companies typically reach those markets where the online business is growing the 

faster, despite of the physic distance (Wentrup, 2016).  

 

2.2  OSPs and internationalization theory  

 

In order to understand how OSPs adjust with the internationalization theories and what 

aspects play an important role for them different aspects of internationalization theory 

is reviewed in this section. During the 1970s various models of internationalization 

occurred in the literature. Fetcher (2001) separated models of the company's 

internationalization process into four significant approaches. They are: the stages 

approach, the contingency approach, the learning approach, and the network approach. 

The researcher discussed that the stages, the learning and the contingency approaches 

were created on the basis of empirical observations about the past export operations. 



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Thus, there is a high possibility that the older models do not fully address the rising and 

complex nature of modern internationalization process (Hakansson, 1982). 

 

This thesis work is focusing on a such category of internationalization processes as 

network relationships, generally referred to those companies that internationalize from 

their inception, for instance, international new ventures or born globals. The 

internationalization literature claimed about several types of international new 

ventures but this study concentrates on a new and increasingly important types of 

companies - online service providers.  

 

 

The Uppsala model and modern firms  

 

The Uppsala model (Johanson & Vahlne, 1977) is considered as one of the most 

discussed in the internationalization literature. The model “proposes a gradual approach 

with an emphasis on the importance of experiential learning and commitment building 

to overcome the psychic distance and the liability of foreignness and outsidership for 

international markets” (Vahlne & Johanson, 2013). 

 

Johanson & Vahlne (1977) demonstrated in their model that the firm’s primary 

internationalization processes were conducted with the geographically close markets. 

Besides, many of the firms used export mode of entry due to the low level of 

commitment. The researchers justified that during early internationalization phase the 

actors usually learn about the foreign markets and gaining more knowledge over time. 

Only after obtaining enough experience they might increase foreign market 

commitments, as such, gradually enter to more geographically distant markets. This is 

an example how foreign market expansion’s risks are overtaken by achieving tacit 

knowledge about the market as well as showing how steadily the commitment is 

growing. Nonetheless, it must be admitted that traditional cross-border nature lays in 



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the core of the Uppsala model, while modern type of firms internationalize rapidly with 

great entrepreneurial ambitions (Oviatt & McDougall, 2005b). 

 

In 2009 and 2013 the Uppsala model was revised by the researchers (Johanson & Vahlne 

2009; Vahlne & Johanson, 2013). New versions are focused on the networks processes 

and sub-process, such as opportunity determination, trust and knowledge creation as 

well as the process of taking advantages from established networks. Besides, Vahlne & 

Johanson (2017) described modern firm as “process rather than structure oriented, 

business exchange rather than production; network rather than a stand-alone unit; 

proactive and entrepreneurial rather than passive, decentralized rather than 

hierarchical.” This is telling about the importance of using the latest version of Uppsala 

model in order to explain the internationalization motives of modern firms.  

 

In line with Johanson (2009) “the business environment these days has become a web 

of relationships or networks, rather than the classic idea of a market of independent 

suppliers and customers as it was the case in the past”.  That is why “trust-building” and 

“knowledge creation” were seen as crucial aspects to be added in comparison with the 

initial model (Figure 2). The revised model (Johanson & Vahlne, 2009) also emphasized 

that the ‘’internationalization of the business firm will be a consequence of its 

development of relationships with the customer firms that are connected to those, 

which they are already working together with’’.  

 

Moreover, the researchers found out the similarities between the internationalization 

and entrepreneurial processes. The entrepreneurs tend to use learning approach in 

establishing business in the meaning that, firstly, they are gaining knowledge and 

experience necessary for starting business operations on particular field. They 

enhancing useful network relationships over time and only after that can make use of 

them. Similarly, the Uppsala model states about the internationalization processes. 

  

 



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Figure 2. The revised interpretation of the Uppsala model (Johanson & Vahlne, 2009). 

 

 

Johanson & Vahlne (2009) further portrayed the relationship between ‘’uncertainty’’ 

and ‘’commitment’’. They claimed in their model that if uncertainty factor increasing the 

willingness to commitment decreasing. The uncertainty can be reduced if the knowledge 

and experience about the foreign markets is quite strong, means that in such case, the 

risk factor is limited and it creates a stimulus for higher willingness to commitment.  

Moreover, Johanson & Vahlne (2009) stated the networks and relationships developing 

are the central aspects of the internationalization processes.  To summaries, there is a 

need for the foreign market experts in order to avoid risks, as much as it is possible, and 

to share the knowledge and experience about the foreign countries.  

 

 

 

 



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Born global phenomenon  

 

More recently, it has been identified the rising number of companies, which do not go 

along with the traditional pattern of the internationalization stages. Oppositely, such 

companies have an international mindset or even global vision to enter the foreign 

markets right after the inception (Kenny, 2009).  That types of companies are named as 

the global startups (Oviatt & Mc Dougall, 1994); high-technology startups (Jolly et al., 

1992); born globals (Knight & Cavusgil, 1996), and international new ventures 

(McDougall et al., 1994).  

 

The tendency of young companies to initiate early internationalizing processes was 

expected in the countries with the small domestic markets, for instance as in Sweden or 

Finland. Yet, very soon such types of companies began to born in countries with the 

larger home markets. In accordance with the Madsen & Servais’s (1997) research, 

existing internationalization theories partially explain and analyze the born global 

phenomenon within new ventures. Later, they also claimed that using networks in firm’s 

internationalization process give special additional insights and facilitate the process of 

foreign market entry.  

McDougall et al. (1994) and later on Knight & Cavusgil (2015) have been trying to find 

evidence in the empirical studies in order to identify an increasing number of firms that 

tend to skip traditional stages of internationalization. With the same purpose Welch & 

Loustarinen (1988) were concentrating on small Australian, Swedish and English 

companies that omitted different internationalization stages and involved foreign direct 

investments right after launching the business.  

Oviatt & McDougall (1994) also has been focusing more on recently born companies and 

described the international new venture as a “business organisation that, from 

inception, seeks to derive significant competitive advantage from the use of resources 

from and the sale of outputs in multiple countries. In contrast to traditional 

organisations that develop gradually from domestic firms to multinational enterprises, 



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the international new venture starts out with a new proactive international strategy - 

even though it starts with only a few employees/entrepreneurs”.  

Regarding the operations structure of activities McDougall (1994) argued that there are 

several important differences between startups and traditionally established firms 

based on the amount and origin of resources. The latter sort of firms would have a few 

resources unconsumed from expensive investments, for instance, the distribution 

channels. Yet, if to compare with established firms, the entrepreneur should count on 

complex structure for managing and controlling international business activities (for 

example, the good approach is joint venture or use of close personal relationships).   

Bell (1995) also argued about born globals and theirs entry mode. In his research the 

small computer software firms were examined. Bell (1995) stated that in such firms the 

Uppsala model do not properly reflects the fundamental drivers of the 

internationalization process. He discovered that the motives for internationalization 

emerged because of the home and foreign client followership as well as the targeting of 

niche markets and specific industry cogitations instead of geographical distance to the 

foreign markets. The researcher also investigated that the firms not necessarily progress 

continuously from export entry mode to the other, more controlled, entry modes. Even 

though, in his research the case companies showed the increasing level of commitment 

to exporting. To conclude, not all companies have established themselves in domestic 

sales before doing the foreign sales. This can be explained by the previous 

entrepreneur’s experience within international arena or due to the case that export was 

often shorted when looking for the suppliers abroad (Kenny, 2009).  

Overall, the born global phenomenon was a response to the Uppsala model and its 

gradual approach (Wentrup, 2016). However, as it has been found by Luostarinen & 

Gabrielsson (2006) and Gabrielsson & Pelkonen (2008), the born global companies can 

also follow the stages approach of internationalization after establishing operations in 

the foreign markets. In the meaning that they go along with more gradual 

internationalization process.  

 



 24 

Interesting insight from the born global literature is difficulty in figuring out what 

characteristics define the belongings to such category of firms as born global. The high-

tech or knowledge-intensive companies are often clustered together with the 

manufacturing firms, which is making hard to examine the typical internationalization 

aspects of born globals. Besides, there is a problem how actually define these firms as 

the different researchers describes born globals differently with no common or distinct 

definition. Oviatt & McDougall (1994) claimed that probably all companies that have in 

mind internationalization could be described as born globals or international new 

ventures. Furthermore, Wentrup (2016) telling in his research about the difference 

between high-tech new ventures and online service providers. As such, that differences 

this thesis work will try to identify.  

 

 

 

2.3   Internationalization in terms of networks  

  

Most of the researches about international entrepreneurship conducted by Coviello & 

Munro (1995) have used network theory to analyze international market growth and 

operational activities related to the international markets. Based on their review of the 

internationalization processes of the software companies from New Zeland, Coviello & 

Munro (1995) concluded that that the understanding of the entrepreneurial firms’ 

internationalization process has been enriched by extending the research beyond the 

behavior of individual firms and addressing the effect of the company’s role and place 

within a network of relationships. From that point of view, foreign market choice and 

entry market activities arise from possibilities developed through business network 

relationships, rather than only from the firm’s management strategic decisions.  

  

It is not unexpectedly that the reported trends of international market growth for high-

tech entrepreneurial companies vary from those of the larger manufacturing companies 

marked in the literature. Their incredibly fast and dispersed participation in the 

international markets creates the perception of being random and fairly irrational while 



 25 

in reality the span of activities may be related to the opportunities gained from a 

network of relationships. To summarize, the networks are helping entrepreneurs to 

define useful chances and opportunities, build credibility and often could drive to 

cooperative strategies such as strategic alliances. 

 

The strong international business networks were defined by Oviatt & McDougall (1994) 

as one of the seven most important indications of successful international startups.  

Their model characterizes the network relationships “as a moderating influence on the 

speed of internationalization. After an entrepreneurial actor discovers or enacts an 

opportunity and perceives the technologies that enable internationalization and the 

competitors that motivate it, the entrepreneur uses established network links that cross 

national borders to explore where and how quickly the opportunity can be exploited in 

foreign locations”. The researchers assumed that there are three major characteristics 

of the networks that moderate the speed of internationalization. That characteristics 

are the size of network, the strength of the network ties, and in general density of the 

network. 

 

Oviatt & McDougall (2005b) found that “the entrepreneurs are most dependent upon 

strong ties at startups, and because strong ties require considerable investment and 

maintenance their number for any individual entrepreneur rarely exceeds 20”. Thus, 

because of their small number it is believed strong ties are not so important in 

internationalization process. On the contrary, week ties are. The business-like friendly 

relationships with the suppliers, customers and others creates weak ties that require 

less investment. They are considered as very important because they are often critical 

sources of know-how and knowledge. Besides, if the cross-border weak ties established 

by the entrepreneurial actor are the more direct or indirect, the bigger is the potential 

country scope for internationalization and the bigger is the speed at which that scope 

can be increased. So, the size of the network of entrepreneurial actors is the second 

major factor to regulate the speed of internationalization.  

 



 26 

Density is the third moderating factor of entrepreneurial networks. Although the sparse 

networks are incredibly good at collecting new information, when trust and reciprocity 

are important, dense networks are useful. The actors are said to have sparse networks 

because, for the most part, the nodes to which they are connected, not connected to 

each other. Density generates trust between network actors tied by weak ties, however, 

the trust is created by the monitoring potential in a dense network in place of the 

emotional connections present in the strong ties. As successful global business 

operations are relied on trustful interaction between the actors within different foreign 

countries, dense networks give quite efficient support for internationalization processes 

(Oviatt & McDougall, 2005b). 

 

Mort & Weerawardena (2006) reviewed network relationships “as offsetting small firm 

resource scarcity”. They summarized that the born global companies tend to use 

network opportunities to identify and exploit market advantages, support international 

implementation and facilitate the development of knowledge‐intensive products. The 

Chinese researchers Zhou Wu & Luo (2007) described the tole of social networks 

between born globals. According to them, social networks have been found to provide 

awareness about market opportunities, global business know-how as well as to increase 

solidarity and trust. The final conclusions of the research suggested that responsible for 

internationalization processes’ managers should use social networks in order to 

internationalize faster and with greater profitability (Knight & Cavusgil, 2015).  

 

The latest research describing more the nature of entrepreneurial processes in born 

global companies. Harms & Schiele (2012) studied the born global phenomenon and 

early internationalization process in terms of effectuation perspective. In accordance 

with their findings the experienced entrepreneurs in their early internationalization 

activities tend to use effectuation rather than causation approach. For example, 

causation-oriented entrepreneurs are engaged in more planning operations and usually 

choose exporting as an entry mode. In contrary, effectuation-based approach says about 

the less emphasis on identifying the most appropriate mode of entry in advance.  



 27 

 

Sigfusson & Chetty (2013)  studied  how software international entrepreneurs use online 

social network websites in order to develop and enlarge their network 

relationships. They found that “online social networks provide opportunities for 

entrepreneurs to enlarge weak ties which are especially important for internationalizing 

firms”. However, they warned that the web should be used wisely by the entrepreneurs 

due to the unnecessary time wasting and inefficiency in some cases.  In general, 

entrepreneurs should think about the strategic networks building in order to access 

different skill sets. In addition, they need to consider how to build strong and trustful 

network identity that will lead to the new bridging relationships. 

 

Andersson, Evers & Kuivalainen (2014) advise to look more precisely over the 

internationalization strategy, especially in defining what is that mean by new ventures 

internationalization, having in mind three important aspects of internationalization: the 

speed, geography and modes of entry. Their study shows that psychical distance holds 

limited importance for born global firms in case of choosing international markets.  That 

firms tend to choose international markets based on the previous knowledge and 

established networks of the founder as well as to use international opportunities with 

the decisive constancy. The researchers claimed that the industry external factors are   

especially important in avoiding the psychic distance because it allows international new 

ventures enter the markets where demand for the particular products is high.  

 

 

 

 

 

 

 

 

 



 28 

3 NETWORK THEORY 

 

 

3.1 Networks and international entrepreneurship 

 

Over the last years, international entrepreneurship has been considered as an 

opportunity-focused operation (Oviatt & McDougall, 2005). Previous entrepreneurship 

literature emphasized the high importance of using networks because entrepreneur’s 

network ties may help new ventures to gain necessary resources, overcome asymmetry 

of information and facilitate implementation of internationalization strategy (Anderson 

& Evers, 2014, Coviello, 2006 ). Due to this reason the networks and entrepreneurship 

are discussed in this chapter. The definition of entrepreneurial network ties says that it 

is a mixture of family, friends and business ties. The researchers highlighted that major 

role in the internationalization plays business ties of the founders (Sharma & 

Blomstermo, 2003). In line with the network perspective, the character of relationships 

developed between different parties will have an impact on strategic decisions, and the 

network relationships involve exchange of the resources among different members.  

Nooteboom (1999) describe networks “as a pattern of more or less lasting linkages 

between firms or divisions within firms (departments, subsidiaries)”. In accordance with 

such definition the networks might exist within a company, between companies or a 

combination of both. The network linkages could be uni- or bidirectional, sharing of 

resources, presenting flows of goods and services, relations of ownership or the other 

types of control or the line of cooperation and communication.  

 

Launching of international new ventures could be seen as a matter of linkages between 

entrepreneurs, networks and international opportunities (Oviatt & McDougall, 2005). 

Puhakka & Mainela (2013) suggest the emergence of international new ventures 

through an entrepreneurial process involving four main elements which are highly 

interdependent: 



 29 

 

- “international new venture emergence tends to be identified with the 

entrepreneur while the entrepreneur identifies her/himself with the venture”. 

Such statement tells about interlace of organizational and personal networks in 

the venture idea development.  

 

- “new venture emergence requires resourcing the venture”. It means, the 

network relationships are highlighted as an instrument for information and 

knowledge transfer as well as the ways for access to new resources. 

Furthermore, important here is social contracting, for example, use of close 

friends or acquaintances as the routes of cheaper resources or the bridging 

points for virtual resources because of relation to the entrepreneur’s personal 

involvement to the venturing process.  

 

- “networks are a basis for learning and creation in new venture emergence”. By 

engaging and creating interactions with others, entrepreneurs may intergrade 

their ventures into an innovative environment.  

 

- “to turn the venture idea into an international new venture, an entrepreneur 

needs to be able to communicate the opportunity to others and that way 

legitimize the emerging venture”. Here, the venture should be quite clear to the 

others when presenting an innovative idea combining a strong value proposition 

with a new offering as well as the method for international opportunities 

implementation (Puhakka & Mainela, 2013).  

 

 

All in all, networks are seen as an inherent part of entrepreneurship. Accordingly, the 

entrepreneurship is considered as a network-based method of developing new business 

in which the opportunities are found and converted into a form where it creates value 

by the use of the own resources as well as the resources of others. In the center of 

international new ventures business processes are the importance of relevant skills, 



 30 

knowledge and capabilities in order to exploit new international opportunities (Puhakka 

& Mainela, 2013). In addition, the entrepreneurs are considered to be an important part 

in creation and internationalization of new ventures.  

 

 

3.2  Types of networks  

 

The existing network iterature underline a lot of network types. O’Doherty (1998) in his 

study describes the next main categories of networks:  

“Informal and unorganised Networking: this is the most basic form consisting simply of 

firms helping other firms”. Follow the definition, this does not entail any kind of 

conscious help or broketing. Although, there could be space for sort of the third-party 

awareness rising assistance in order to foster habits of mutual support.  

“Membership-Based Networks: this includes traditional industry associations where 

members pay dues and commit themselves to a certain level of joint problem solving, 

but where their business success does not depend significantly on the actions of other 

members”. Although it is not easy to force the firms for commitment to this level of 

interaction, the relative lack of interdependence makes this type of collaboration easier 

to organize and facilitate than more closely-related networks. 

“Customer-Supplier Networks: this involves a number of supplier firms co-operating with 

each other in meeting the needs of a ‘vertical’ customer, who often sets up and 

facilitates the collaboration”.  

“Independent Networks of Firms: these are small, formal groups of sometimes 

competing firms who carefully select each other and agree to co-operate significantly 

with each other (often at a high level of trust)”. For examples: co-production networks 

in which the companies collaborate in manufacturing components, assemblies or 

finished products; co-marketing networks where the companies mutually market their 

products; learning networks where the companies look for learning jointly about some 



 31 

complex changes important for improving competitiveness; research networks where 

the companies accumulate resources for creating  new products or processes.  

“Development Networks: bilateral, organisational or personal, regular and purposeful 

contacts between SMEs or entrepreneurs”. Here any business relationships exist.  The 

entrepreneur only can openly discuss the activities that have been accomplished as 

important. The distinction between development networks and entrepreneur’s informal 

discussions is that the meetings between counterparts in the development networks are 

regular. Such type of cooperation gives an opportunity to learn from each other and can 

be seen as “mutual mentorship”. 

“Cross-Border Networks: represent a form of emerging international network that is 

supposed to go beyond the traditional modes of markets and in consequence should fit 

with the network theory in general”.   According to Imai & Baba (1991) these kinds of 

structure might take a form not only of, for example, joint ventures but also long-term 

cooperation or coordination (for example, subcontracting, cross-licensing and so on.) 

Finally, Social Networks: In accordance with Holmlund & Kock (1998) the individuals in 

a company will have a significant impact on internationalization due to the close social 

relationships with another people affect the motivation of going abroad. Besides, 

Johanisson (1996) pointed out that social networks are exceptionally important for 

entrepreneurs in making a decision of foreign market entry. Furthermore, Holmlund & 

Kock (1998) stated “the social network is a sub-network within the business network 

thus effecting and being affected by the gained resources and the chosen operation 

mode. In the same way the chosen operational mode can affect and be affected by the 

present business network as well as the social network”  (see Figure 3).  

 



 32 

 

Figure 3. Factors affecting a focal actor’s internationalization (Holmlund & Kock, 1998). 

 

 

3.3   Forms of network relationships  

 

 
 The studies on networks in the pre-establishment stage focuses on identifying 

opportunities.  Specifically, social networks are considered as an important factor for 

recognition of opportunities. Networks make possible creation of startup because they  

Complement the own resources of the entrepreneurs, a diversity of which are needed 

to start and develop a company. Milanov & Fernhaber (2009) highlighted, the new 

ventures during early development stage should look for a partner with a central place 

in large networks. That partner could help them to get access to the network resources 

in the long run (Chetty & Holm, 2000). 

 

The literature emphasized two main forms of network relationships: weak and strong. 

The lack or surplus of network relationships that are firm’s important resources may 

have an impact on the strength of ties, which born globals can create and develop. It 

means, the strength of the relationships is related to the importance and level of 

influence that the firm has on the certain relationships, and vice versa. According to 

Gabrielsson & Sepulveda (2013) “strong ties are socially embedded links formed from 

dense cohesive sets of relationships, whereas weak ties are arm's-length relationships 



 33 

that are not socially embedded and help firms gain access to new and diverse resources 

from their networks”.  

 

Ellis (2011) argued that following foreign opportunities that came from strong network 

ties are easier to develop and lead up to faster market growth and higher revenue 

volumes than business chances came from outside the networks.  The researcher also 

defined that “arm's length deals made with strangers require caution and trust-building 

investment” highlighting the reasons of less use of the weak ties in the initial stages of 

business development.  

 

According to Jack (2005) the strong ties have been proved as important for business 

activity, even though different types of ties deliver different resources.  Strong ties often 

have entrenched history and the degree of trust, whereas weak ties do not. That means 

that the person could use strong ties immediately and it takes less time to active them 

as trust is already integrated, the working scheme already organized and the mutual 

benefits have been already established (Gabrielsson & Sepulveda, 2013). 

 

This research is focusing on the modern international ventures and how theirs networks 

enable to acquire and manage resources for internationalization process. Besides, since 

the  outcome of successful contacts which the entrepreneurs hold (social capital) “is a 

key component of entrepreneurial networks” (Burt, 1992) the importance of it are 

researched as well. The Arenius’s (2002) research claimed that the external social 

network relationships have a positive impact on the ways how new ventures enhancing 

knowledge about the foreign markets.  The more social capital increasing the better 

access is to the needed international resources and opportunities and also it means “to 

overcome the liabilities of newness and foreignness” (Arenius, 2002).  Moreover, trust 

is a very important aspect of social network relationships, in particular when observing 

the international network relationships of entrepreneur. Thus, trustworthiness will be 

taken into consideration as well.    

 



 34 

4 Online service providers  

 

 

4.1   Service sector growth  

One more field of interest in this research is service sector and its growth. According to 

Gronroos (2007) the definition is the next:  

“A service is a process consisting of a series of more or less intangible activities that 

normally, but not necessarily always, take place in interactions between the customer 

and service employees and physical resources or goods and systems of the service 

provider, which are provided as the solutions to customer issues." (Gronroos, 2007)  

An important characteristic for most services is that the interactions are in general 

present and essential. For internet-based companies, the user (who is not always a paid 

customer) may interact primarily with the company’s infrastructure and provided 

systems, where these interactions are just as crucial for the success of such services as 

the interactions with employees (Gronroos, 2007).  

The service sector has been growing over the last years and competition is increasing 

globally as a consequence of the new competitors entering many service markets. In 

addition, the online world has opened the door to more service-driven development 

with focus on the sophisticated technologies and the possibility to operate a business 

without ant geographical borders. Thus, the local market is no more a limiting factor and 

business is able to offer services through online channels engaging larger audience 

(Lazzari, 2019). 

 

Now, the outsourcing services are relevant if the organization undergoes changes or 

shifts its business model with the aim to capitalize within a growing freelance market, 

where the qualified actors work on the contractual agreements.  The technologies are 

contributing to the significant shifts in the services, as well as traditional roles such as 



 35 

taxi services have been replaced by Uber or Bolt and other options connecting a large 

workforce to a specific market. One more bright example is Airbnb, which opened the 

rental market to the owners of personal property, thus, cutting out the intermediary 

management companies and making possible direct connection between a large 

audience and the owners (Lazzari, 2019). 

 

Many service economy sectors are witnessing shifts in the perception of the 

employment ways and labor forces as new technologies broke the old system of 

conducting the business and open more opportunities to the contractors and 

individuals. Lazzari (2019) says: “the benefits that come with traditional employment 

are often lost but the overall service sector is open to more individuals and the 

technology ultimately facilitates growth in what were once perceived as locked 

markets”. 

 

Since the consumers are getting more used to do different things by themselves through 

the internet, the self-service is a rapidly increasing aspect in the service industry. As 

such, for instance, the customers don’t need the travel agents for online booking the 

flights or hotels and even they are able to compare different prices or propositions in an 

efficient manner (Karmarkar, 2004). That is why the information mentioned above is 

giving an impute for further research in this area and understanding new trends for the 

future.  

 

 

4.2   Online service providers 

 

The final area of interest in this research work is an online business, that has many 

different shapes. Hedborg & Themner (2014) define three main segments of internet-

based business models. The first segment is community and market makers, “which 

enables product and information exchange, or includes a financial flow amongst the 

users”. Facebook and eBay are the examples of such types of companies. The networks 



 36 

developed by these companies are supported with the security agreements for personal 

information of users as well as confidentiality in the exchange of it. The second one is 

the service and product providers of retail services to the internet users. All the products 

and services could be order through digital channels. For example, iTunes provides the 

possibility to download official music or video through its digital platform or Amazon is 

an online platform that is working in the same segment selling digital and physical items.  

Finally, the third segment is search engines and portals where users can find the most 

famous actors such as Google and Yahoo!. These service providers channel traffic to the 

other websites through the web. That three segments have to engage new users and 

make them as repeated visitors (Hedborg & Themner, 2014).  

 

Above mentioned online service segments are interdepended across each other and 

usually benefit one from another. Here the example could be the product and service 

providers that want to engage higher number of visitors, thus, have to cooperate with 

search engines to enlarge web traffic. Besides, many companies are going outside the 

particular business segment when they are in search for new opportunities because of 

need to widen the offer. Since the competition has been growing over the last years, the 

companies developed different level of functional integration and innovation (Hedborg 

& Themner, 2014). Figure 4 is showing how various of online platforms operate (Laseter 

& Rabinovich, 2011). 

 

Till today there were different terms describing internet-based companies, which were 

developed by different researchers. That fact could create an ambiguity in conducting 

research with these types of companies. Wentrup (2016) collected common terms, 

which are presented in Table 1. Moreover, he argued that the narrowest and descriptive 

is the term online service providers.  

 



 37 

 

 

Figure 4. Innovation and functional integration of different online business models 

(Laseter & Rabinovich, 2011).  

 

 

It has been stated that many of the largest online service providers nowadays are from 

USA. However, such types of companies are spread worldwide, for instance, Alibaba, 

Baidu, Tencent, AliExpress, Weibo coming from China and becoming more and more 

popular everywhere (The Economist, 2013). It is also worth mentioning the importance 

of speed and firs-mover advantages in the online industry. For example, Facebook and 

Google pursue aggressive acquisition strategies primarily in relation with Canadian and 

European companies (Facebook, 2014). This reflects the geographical regionalization 

and the online business focusing on the global north, mostly the US (Zook, 2002b).  

 

 

 

 

 



 38 

Table 1. Terminology of internet-based companies (Wentrup, 2016). 

 

 

Terminology Definition 

E-commerce corporation “Organizations that from inception are engaged in 

electronic commerce and derive significant 

competitive advantage from the use of network 

resources resident in virtual networks of commercial 

collaborative alliances.” 

 

Internet intermediaries 

 

“Internet intermediaries provide the internet’s basic 
infrastructure and platforms by enabling 

communication and transactions between third 

parties. Internet intermediaries can be commercial 

or non-commercial in nature and include internet 

service providers (ISPs), hosting providers, search 

engines, e-commerce intermediaries, payment 

intermediaries, and participative networked 

platforms.”  

 

Internet firms  “Firms that derive most of their income from one or 

more internet-related activities. These can be 

divided into a number of layers, of which the key 

activities include search engines, internet service 

providers (ISPs), hardware, software, information 

services, and internet retail.”  

 

Online service provider  “Abbreviated as OSP, an online service provider is a 

generic term that describes any company, 

organization, or group that provides an online 

service. These types of services may include web 

sites, discussion forums, chat rooms, or web mail.” 

 

 

 

 

 

 

 

 

 

 

 



 39 

5 RESEARCH METHODOLOGY  

 

This chapter provides a description of chosen research approach. The data collection 

method and the structure of the interviews are explained. In order to assess the quality 

of research, the validity and reliability subchapters are also included. Finally, such 

important factor as research ethics is included in the end of the chapter.   

 

 

 

5.1   Research approach  

 

The aim of this work is to gain a rich understanding of the internationalization processes 

of OSPs in terms of networks. As such, the methodological approach is presented as a 

case study. The choice of a case study approach provides an opportunity to study a 

phenomenon thoroughly in a specific context. A case study in brief is described by Yin 

(2003) as a “method that allows investigators to retain the holistic and meaningful 

characteristics of real-life events - such as individual life cycles, organizational and 

managerial processes, neighborhood change, international relations, and the 

maturation of industries”. Thus, the case study is an appropriate approach as the 

phenomenon that has been studied in this research is internationalization process and 

the units of the analysis is a case company that fits the requirements.  

 

The case study can be presented as quantitative or qualitative approaches or also the 

combination of both because of the limitation of the sample that has been studied. 

However, the literature emphasized on the qualitative methodology when conducting 

the research as a case study (Osuala, 2005). Case study is mainly used in order to get in-

depth understanding of the problem and studied subject. As such, it is focusing on the 

process and discovery the new insights rather than just getting an outcome and 

confirmation (Osuala, 2005).  

 



 40 

Yin (2003) distinguishes between two main case study strategies which are single case 

or multiple case. A single case is often used where it represents a critical case or, 

alternatively, anextreme or unique case. Case study approach may also involve several 

cases, in other words more than one single example. The reason for implementing 

multiple case approach focuses on the need to assess if the first case’s results appears 

in the other cases and, in summary, the need to generalize these findings (Saunders et 

al., 2009). Since this research is focusing on such specific firms as online service 

providers and gives an opportunity to observe the phenomenon that not many 

researchers have considered before, a single case study approach is selected.  

 

Because of the complex topic of a case study research, it may be quite problematic and, 

in some point, inconvenient to use a probability sampling for the collection of the main 

informants. In contrary, a non-probability sampling that is based on subjective 

researcher’s judgement might be more appropriate (Saunders et al.,2009). Due to this 

reason a non-probability sampling method, specifically convenience sampling was used.  

Convenience sampling “means that the sample was not selected randomly, rather based 

on the accessibility and the researcher`s personal judgment.” (Saunders et al., 2009). 

 

Additionally, there was a need for defining criteria in order to find the proper case 

company. Thus, the next criteria were developed:  

- it should be an online present company that provides services; 

- the company should have international operations; 

- it should be a recently established company to accurately track its development 

on the international arena. 

 

After the criteria were selected, the process of finding company was started. There was 

a recent statistic about the Finnish startups that have been growing fast within an 

international arena (EU-Startups, 2020). According to the developed criteria five 

companies were appropriate for the research. As a result, these companies have been 



 41 

contacted by the email. Three companies rejected the request, one company didn’t 

answer anything and one company agreed to participate.  

 

5.2  Data collection and analysis  

 

Considering the behavioral emphasis on internationalization and the lack of 

comprehensive statistics for particular group of companies, a qualitative approach is 

appropriate. The qualitative technique is “an interpretative approach, which attempts 

to gain insight into the specific meanings and behaviours experienced in a certain social 

phenomenon through the subjective experiences of the participants”. Due to this the 

researchers tend to build different concepts, abstracts, hypotheses or even theories by 

answering the questions “how”, “why” and “in what way”.  

 

In general, a highly objective and systematic approach are used in the quantitative 

approach. Besides, qualitative method works more with the numerical data. In contrast,  

qualitative methods  “use  descriptions  and  categories  (words)  to  study  human 

experiences and realities from the subject’s perspective” (Yin, 2011). It is also an 

iterative mechanism by which the theory or the hypotheses arise from the collected 

data, as such, making the researcher central in the process of data collection and 

analysis (Palmer & Bolderstone, 2006). Besides, the case study approach has been 

defined as the most efficient qualitative approach to illustrate and theorize real world 

phenomena (Yin, 2011).  

 

When it comes to the data collection for this particular topic will be wise to use 

combined approaches in order to create an optimal method. Interviews and archive 

analysis are two common techniques to combine for data collection in the case study 

(Themner & Hedborg, 2014). Archive data includes the useful information about the 

case company in media (Medium.com, 2019; Eu-startups.com, 2020) and the company’s 

own website.  

 



 42 

For this thesis work, interviews were important in order to gain insights as to what the 

real process of market entry looks like, and what was the purpose behind it. It is worth 

mentioning that the preparations for the interview should be done in a proper manner 

in order to get as much valuable data as possible. The interview can be open or 

unstructured, structure and semi-structured (Host et al., 2006). The semi-structured 

interview has a pre-determined set of questions to ask, but the interviewee is allowed 

to speak not only about the defined topic, and the interviewer might ask follow-up 

questions that are not included in the pre-determined questionnaire, at the same time 

still following the direction of the interview (Host et al., 2006).  

 

Semi-structured interview method was considered the most appropriate in this research 

as it allows to answer the research questions more descriptive but still draw a frame in 

order to avoid discussions unrelated to the topic of the study. Due to the unstructured 

model, this method is categorized by the flexibility and the ability to drive the discussion 

into non-expected areas. Thus, semi-structured interview method can give rich insights 

about the topic, as a result, creates more detail data (Saunders, Lewis & Thornhill, 2012). 

The next step is selection of the interviewees. This research is in need of specific 

company’s information only accessible through particular people. They should have a 

certain valuable position and should be involved in the internationalization activities of 

the case company. Besides, important is the fact of using networks in international 

expansion processes and the interviewees should be aware of it. Thus, the next 

managerial positions are considered as suitable for the research: founder/co-founder, 

CEO, marketing manager, expansion manager, regional manager etc.  

The first interviewee was reached by contacting through LinkedIn and the other one 

through direct email message suggested by the first key informant.  Table 2 shows the 

main characteristics of the interviewees chosen for this research.  

 

 



 43 

Table 2. Overview of the chosen interviewees.  

Occupied position Years in the 

company 

The role 

1. Head of Marketing 

Department  

(further at the 

analysis – Manager 1) 

3 years  From the beginning the manager was involved in 

the international market expansion activities; 

worked closely with the founders and knew how 

networks were used in the expansion. The country 

of origin is Poland, with the master degree in 

Management there. Poland is one of the markets 

where the company established its operations. It 

means that having a local person on board could 

facilitate business processes there. 

2.Market Expansion 

Manager  

(further at the analysis 

– Manager 2) 

2 years  Before the manager had his own business startup, 

which connected him with the Finish 

entrepreneurial society. That is how the founder 

of the case company met him. Originally, the 

manager is from Spain, which also gave an 

opportunity for the case company to use his 

networks, even though he did his master degree in 

Helsinki. 

 

Altogether two semi-structured qualitative interviews were conducted. These 

interviews were done with Helsinki office representatives, more specifically with the 

head of marketing department and with the market expansion manager. The interviews 

were conducted during March 2020 via telephone and email. The length of the interview 

varied from 30 till 40 minutes, with the mean length of 30 minutes. The interviews were 

not recorded due to the technical problems. Instead, during the interview process notes 

have been taken in order to gather the main ideas of the respondents.  

 

Every interview started with an introduction about the purpose and main ideas of the 

research topic. The interviewees were sent preliminary questions in order to feel more 

confident and relax answering it during the interview process. They also were asked to 

indicate in case some of the questions asked were not clear enough. Besides, it was 



 44 

emphasized and confirmed that the data will be handled confidentially. At the 

beginning, the interviewees were let to tell about themselves, their position and field of 

interest in the company. Later, they were asked more specific questions related to the 

research topic. There was different set of questions for both managers, because they 

are responsible for different parts of business development in the company. For 

example, the head of marketing department knew more about home market expansions 

whereas the expansion market manager was able to tell about initial motivation to 

which foreign market enter. After the interview, the transcript of the conversations was 

written by the researcher and sent back to the interviewees in order check the 

trustworthiness. Finally, when the transcript was confirmed the analysis of findings 

started. The analysis was done in accordance with the research objectives: 

 

1. It was identified the driving factors for internationalization; 

2. Analyzed the evidence how networks influenced speed, mode of entry and 

geography; 

3. Analyzed the network types and forms in internationalization process;  

The interviews were conducted in English, which is not a native language neither for 

interviewees nor the interviewer. That’s mean that all the participants were in the equal 

position and didn’t feel embarrassed or nervous. Since English is not-native language it 

could have been seen as a disadvantage because of some misunderstanding with the 

questions and the validity of the research could be reduced.  

 

5.3  Reliability and validity 

The studies marked the reliability and validity as important characteristics of conducting 

and assessing the quality of quantitative research. Yet, there was a discussion among 

qualitative researchers regarding their propriety for qualitative research. In addition, 

even those who agree that the reliability and validity criteria are relevant have thought 

about the possibility that term’s meaning need to be changed.  Nevertheless, this study 



 45 

uses the traditional evaluation criteria based such decision on the assumption of Morse 

et al. (2002) that, for example, most of European academics proved the importance of 

reliability and validity despite the type of the study.   

5.3.1  Reliability  

Since good research design is important in order to avoid credibility issue of research 

findings the attention has to be paid to two particular emphases: reliability and validity 

(Saunders et al. 2012). 

Reliability refers to the degree to which reliable conclusions can come from the data 

collection method or analytical procedures. This may be tested be placing the following 

three questions (Easterby-Smith et al., 2008):  

 

1. “Will the measures yield the same results on other occasions?  

2.  Will similar observations be reached by other observers?  

3.  Is there transparency in how sense was made from the raw data?” 

 

In order to increase reliability of this qualitative study, the research process has been 

described in details and the most appropriate approach was chosen as well as data 

collection method.  

With the intention of enhancing reliability, initially the interview questions were sent to 

the people in order to check if the questions are understandable and well formulated. 

While performing the interviews the questions were explained in more detail when it 

was necessary with the aim to minimize risk of misunderstanding. Besides, the attention 

was paid on confidentiality of the information in order to reduce the risk of bias of the 

interviews, for instance when employee is afraid to lose a job when telling something 

wrong. Due to this reason, the interviewees’ names were not mentioned in the research 

as well as the name of the case company. Care should also be taken when analysing the 

data to ensure that your data are telling you what you think they are telling you 

(Saunders et al., 2009). To ensure accuracy, all aspects of the study were scrutinized by 



 46 

the company representatives. As it has been mentioned before, the transcript of the 

conversations was checked and approved by the interviewees. Reliability was also 

achieved in the meaning of holding several interviews on the same topic.  

5.3.2  Validity  

 

Validity is concerned with whether the findings are really about what they appear to be 

about (Saunders et al., 2009). According to LeCompte and Goetz (1982) there are two 

types of validity: “internal validity means whether there is a good match between 

researchers’ observations and the theoretical ideas they develop; whereas “external 

validity refers to the degree to which findings can be generalized across social settings”.  

 

In order to maximize internal validity, the questions for this research were drawn from 

the previous interview studies (Wentrup, 2016; Hedborg & Themner, 2014) and then 

the most relevant for the research topic quotations have been used. Moreover, a small 

number of respondents allowed the interviewer to communicate profoundly with the 

interviewees, thus the most complete and in-depth information could have been 

deducted.  Additionally, the reliability and validity of the study may have been 

influenced by the lack of necessary skills when performing the interviews. As the 

researcher of this study didn’t have previous experience, there is a possibility of 

mistakes such as wrong type of questions or missing the important questions as well as 

inability to go deeper to the topic with some persons.  

 

LeCompte & Goetz (1982) discuss that, external validity, unlike internal one, poses a 

problem for qualitative researchers due to their propensity to use case studies and 

limited non-representative samples. Thus, this case study approach may not give a 

proper picture of the entire business field and the comparison can be problematic. 

That’s why the generalization should be carefully interpreted also taking into 

consideration the lack of resources and time constrains. However, the purpose of the 

research is to broader exiting studies and to develop new theoretical conclusions based 

on the analysis of this case study. 



 47 

5.4  Ethics of the research  

In the research context, “ethics refers to the appropriateness of researcher behaviour 

in relation to the rights of those who become the subject of the research work, or are 

affected by it” (Saunders et al., 2009). Therefore, research ethics represents the ways 

how researcher formulate the research subject, how the research is designed and 

conducted, how the data is collected, processed and analyzed as well as how the 

researcher summarize findings in terms of moral and ethical characteristics.  Thus, the 

researcher should approve that the way of designing research is both “methodologically 

sound and morally defensible” to the people who are participants of the research. 

(Saunders et al., 2009).  

 

In this study the privacy and confidentiality of the participants were gained by ensuring 

them that the answers remain anonymous. With the intention to avoid harmful effect 

on those who undertake research and provide relaxing atmosphere of the interview, it 

has been deeply justified the aim of current study and the arguments why the obtained 

information will not affect negatively the well-being of the company were given. At the 

begging of the interviews, the participants have been told about the possibility to 

withdraw at any stage of the interview if they feel uncomfortable with the questions or 

with anything else related to the interview process. Besides, they received the interview 

questions in advance so the key informants could be more confident during whole 

process but the main aspects of the study were explained once again at the begging of 

each interview.   

 

Since some of the interviews were done by email and some through online calls, it was 

also important to assure the participants that the relatively greater level of control 

related to interview-based techniques was exercised. Although the use of the internet 

can allow the researcher to communicate with the participant remotely overcoming 

physic distant barrier, such approach can be seen as demanding and challenging for the 

participants. In contrast, using this data collection approach can adversely affect the 

reliability of data when participants are unable to devote the time needed to provide 



 48 

broad written responses through their computer (Saunders et al., 2009). However, in 

order to minimize the ethical problems, it was essential to gain trust between the 

researcher and the key informants.  Thus, it was emphasized that the case company and 

the interviewees have the right to ask for anonymity before, during or after the 

interview.   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 49 

6 FINDINGS  

 

This chapter represents the data collected from the interviews and the analysis of 

findings is described in detail. The sections of this chapter are in line with the thesis 

objectives when, the first internationalization process is described with concentration 

on three important aspects such as geography, speed and mode of entry. The second 

aspect is to describe network development with an intention to find how networks 

influence on the internationalization process.  

 

 

About the company 

  

The case company was founded in 2017 and started from 8 employees has grown to 40 

employees of 12 different nationalities. The company has been in the market for less 

than three years but is already the leading iBuyer in Europe with more than 300 

customers. The case company works across the offices in six cities in Finland, Tallinn 

(Estonia), Madrid and Barcelona (Spain), Warsaw (Poland). Later this year, the startup 

expects to expand to Paris (France). In August 2018  the case company announced €12M 

funding from Speedinvest, Schibsted Media Group, and Icebreaker.vc for expansion 

within Europe (Medium.com, 2019).  

 

The company uses machine learning to give homeowners wishing to sell their properties 

a cash offer within 24 hours. That means you can quickly and easily sell your home 

without the hassle of enlisting a real estate agent and preparing the home for viewings, 

and without the inconvenience of matching moving out dates with others (case 

company website, 2020). Shortly, the case company undermine time-consuming 

process of selling and buying residential real estate and gives much needed 

transparency and liquidity of housing markets (Medium.com, 2019).  

 

 



 50 

6.1  Pre-internationalization stage  

The case company ambition, from the very begging was to become an international 

company as Finnish market size is limited. Thus, forced the founders to build something 

that works everywhere.  

“We are Finnish startup, but form the initial stage of conducting business we focused on 

involving international talents with diverse background and multinational experience. 

Having that global mindset from the very beginning is important when you build a 

company in Finland as you have to deal with the limited market size here.”  [Manager 1] 

“In some countries, the local market is so big, so basically you don’t need to think about 

expansion abroad. You can be a huge company and focus only on local market, especially 

if it is real estate business. However, in Finland you don’t have such an opportunity, so 

we knew that we needed to create a better technology and bring it to the other regions.” 

[Manager 2] 

According to born global theory and the international new venture theory, the global 

mindset and international expansion has been seen from the inception. The service was 

launched in 2017 and one year later was available in Estonia, then until 2019 in Poland 

and Spain.   

The founders of the company are experienced entrepreneurs with the degree in real 

estate and AI technology. It gave them motivation to think about the new idea for 

startup as they had a good business network. Additionally, they met the third co-founder 

with the excellent technical knowledge, thus they had a pretty good background to start 

building the company. It means that in pre-internationalization stage different ties of 

social and business network existed. Yet the expansion of the ties is also an important 

aspect in particular case.  

 

“At the beginning, we focused on building the tech team because, obviously, we wanted 

to come up with minimum variable product, an early version of the final website. After 



 51 

that, we were in process of expanding the operational team. So, we had 8 people as a 

starting team and from that point we were scaling up. Right now, we have 40+ people 

and again we are paying attention in localization of technology in order to accelerate 

the product. The new markets like Poland, Spain and now we are thinking about France 

are big, so improving technology is priority for us. Strong long-term relationship there 

allows us to go deeper in building local presence.” [Manager 2] 

According to the Manager 1, the case company commenced with an online presence but 

their model has a huge offline component that forced them to build strong local 

presence and expertise.  

“Real estate business is operationally one of the most challenging model. That situation 

required from us significant local presence and physical offices in foreign countries.”  

[Manager 1] 

 

6.2 Internationalization process in terms of networks  

6.2.1 Speed and geography   

After successful implementation in home market the next step was launching operations 

abroad. It was important for the company to have dedicated people that was leading 

the expansion, not necessarily the founders. For that kind of business, it was all about 

having a strong offline presence from the first day, even though the company’s online 

service did not really require it. They also had been in contact with the recruitment 

agencies trying to find the best local employees.   

“It helps to have recruitment agencies. But when you have needed talents you don’t 

leave them on their own, even if they are fully qualified. Actually, you should have people 

who can bring the company culture to the foreign units. It is kind of a link between the 

local team and the management. We were really lucky to have that team, which gain 



 52 

experience in one region and implement it through the improvement at the next region”. 

[Manager 2] 

First market that the company decided to enter was Estonia. According to founder 

words Estonia was considered as a good test market because of cultural similarity and 

trust to Finnish entrepreneurs. This choice also could be explained by the Upsala model, 

since the market with small geographical and physics distances as well as similar market 

maturity was entered first. After one year from inception and the success with Estonian 

market the company gradually entered to Spain and to Poland.   

Since the begging the case company has been supported by Spanish investor and 

successful international entrepreneur, who also is famous for the brilliant career in 

consulting and insurance. Besides, he was keen on technology, that is why this fresh real 

estate startup impressed him a lot. According to the Manager 2 “this Spanish 

entrepreneur, who has been working in US was inspired by our idea so much and even 

came back to Spain in order to give the best service to local consumers.” During 8 moths 

Spanish team was formed and now has 27 professionals with different backgrounds, 

which is allowing the company to be the leading iBuyer with more than 300 clients.   

 

“With his arrival to Spain, the company wanted to provide the best user experience with 

total transparency also allowing the consumer to close the transaction in a fast way and 

save waiting time. Spanish guy (investor) was warmly welcomed in Madrid and gave us 

a huge trust in relationships with local actors.” [Manager 2] 

 

Similarly, was the entering process to Poland. The primary investor base contributed to 

the case company with an experience in international expansion as well as collaboration 

with the local investors. Together with analytical analysis of European markets form 

technical side and the size, the case company successfully implemented 

internationalization strategy.  

 



 53 

These countries were chosen mainly because the founders had in mind well qualified 

persons that can speak local languages and can share the company’s knowledge with 

the local team. In this case the personal networks of the entrepreneur played a major 

part in making the choice. As Andersson, Evers & Kuivalainen (2014) noticed in their 

research that pre-existing entrepreneurial networks is an important determinant for 

geographical choice. Right now, the dedicated expansion team whose job is to observe 

what is going on in foreign units, is preparing to go to France as it is the next strategic 

market.  

 

“The next goal within our international strategy is to expand to more cities in Spain and 

Poland. Besides, we are analyzing the Spain’s neighbor market – France as it is 

geographically close and with our experience should take less time for establishing office 

there. ” [Manager 2] 

 

In terms of speed, the case company reports that the decision to become fully 

operational in a new foreign country takes approximately nine months. Yet, this period 

can vary due to different circumstances. For example, for the entry into Spain market it 

took longer time because of recruitment process and time spent on creating a quite 

large network of clients.   

 

“Our idea is super fresh even in Finland. Of course, we want to grow as fast as it is 

possible. However, we also realized that building new markets can be time-consuming.  

First of all, we had in mind to get a strong presence and position in one market before 

we can think about entering another one.” [Manager 1] 

 

As Johanson & Vahlne (2009) emphasized that it takes time and resources to build 

relationship with important actors of the firm but it also decreasing uncertainty when 

the firm want to internationalize. 

In addition, at the beginning there was a question how to create trust in new markets 

as real estate generally requires responsibility and trust between counterparts.   



 54 

“We’ve been supported by the great investors such as Speedinvest, Icebreaker and 

Schibsted Media Group. They are well known so it’s increased our credibility. Besides, 

we’ve been transparent and all of this together helped us a lot in establishing 

partnerships with local actors. In addition, our technology is based on data, there is 

science behind it and we can explain everything to the clients. Yes, we had the question 

like: we don’t consider real estate agents trustworthy how we can be sure about your 

unknown technology? And we were able to explain it clearly and transparent.” [Manager 

2] 

Having European investor Speedinvest and Schibsted Media group that provides leading 

online marketplace connecting millions of buyers and sellers every day the case 

company got an access to theirs network and brand names. These partnerships may be 

explained through the lens of born global theory as a way of reaching geographically 

distant market through a partner.  

 

 

6.2.2 Mode of entry 

 

The case company preferers to establish their own subsidiaries and employ its own staff, 

thus adopted controlled mode of entry. Overall, the objective was to have a few 

employees in each foreign office and to control the activity from headquarter in Helsinki. 

One major point was to find the local data scientists in order to know the local data 

sources. As the technology was able to identify opportunities fully automatically from 

the system or from the public market, the case company could make a very competitive 

offer. The physical office was needed not only for practical reason but also to build 

market commitment and trustful relationships with local clients. The commitment is 

mentioned in the Uppsala model, however, controlled mode of entry at the stage of 

early internationalization does not correspond to the staged approach of gradual 

commitment. The reason for such entry strategy could be explained as the 

technologically complexity of the service and real estate business specificity. 

 



 55 

 “Many companies today have to invest heavily in increasing brand awareness. However, 

we don’t need such a big marketing effort instead we invest in localizing the technology 

and build relationships with local actors.”   [Manager 1]  

 

It is also telling about the need for a more robust team of employees in geographically 

distant markets to address cultural and language obstacles. In addition, the business 

should be gradually built up to sustain and adapt to the local market environment.    

 

Trust in network relationships  

 

It has been mentioned a lot that business ties should be based on trust, because 

networks are one of the most important aspect for successful growth of the company.  

Comparing with the rivals, the companies placed centrally in a network may achieve 

better and earlier useful for internationalization process knowledge. This can affect 

company’s internationalization process as network may generate unexpected random 

information. 

 

“We are really happy to have the best talents in our company because finding the right 

talent is a key in real estate area. Mainly we reached the candidates through the online 

platforms like LinkedIn. We are using all resources to find the best experts in the world. 

If you want the best company in your field you have to have the best people.” [ Manager 

1] 

 

Johanisson (1996) pointed out that social networks is extremely important for 

entrepreneurs. According to him “the social network is a sub-network within the 

business network thus effecting and being affected by the gained resources and the 

chosen operation mode”.  

 

 

 



 56 

7 DISCUSSION 

 

The purpose of this study was to identify how online servi