Preliminary contribution of the study

Knowledge acquisition and exploitation as a key resource for sustained interna-tional competitiveness is a well- established fact in internainterna-tional business litera-ture (Rodriguez and Rodriguez 2005; Yli-Renko, Autio and Sapienza 2001; Tsai and Ghoshal 1998; Barney 1991). Cavusgil and Li (2000) explicitly mention that market knowledge competence is one of the most importantly assumed constructs in international business literature. However, its effects on exports are not empiri-cally tested due to an insufficient understanding of its dimensionality. This notion plainly calls for added theory development as well as for more empirical evidence regarding market knowledge for export expansion purposes.

Some theoretical gaps can be identified based on the insufficient understanding of the foreign market knowledge competence dimensionality at the firm and market levels, and lack of empirical evidence of its implications with the speed and suc-cess of export expansion in the existing literature. The first theoretical gap that can be identified from the existing literature suggests that previous studies either focus on the firm or on market levels separately to analyze the market knowledge of the firms. Therefore a holistic view of the intangible firm assets from organiza-tional and market sources and how they constitute the market knowledge compe-tence of a firm, when utilized in the form of export expansion capabilities is lack-ing in the literature. There is a need to integrate the holistic view of the sources of the knowledge needed for export expansion. Second, despite its stated importance (Burpitt and Rondinelli 2000; Seringhaus 1993; Toften and Olsen 2003), the phe-nomenon of market knowledge competence appears to be the focus in only a few empirical studies. Third, empirical findings concerning relations between market knowledge competence and export expansion in terms of success and speed are scarce, even though there seems to be agreement that such relationships exist

(Hart and Tzokas 1999; Seringhaus 1993; Souchon and Diamantopoulos 1999;

Toften and Olsen 2003).

A comparison of the focus in present and previous studies is shown in Figure 4.

Further, the joint arrow from organizational and market levels towards the export expansion indicates that this study will analyze the export expansion by employ-ing a holistic view of the sources of the intangible knowledge needed for export expansion.

Figure 4. Comparison of the focus in present and previous studies.

A number of previous studies linking firm-specific factors to the international growth and expansion of SMEs relate organizational learning as one of the main factors influencing market knowledge and view exporting activity as a process driven by internal factors (cf. Ling-Yee 2004; Ogbuehi and Longfellow 1994;

Autio, Sapienza and Almeida 2000; Burpitt and Rondinelli 2000; Inkpen 1996).

Organizational learning in these studies is considered as a firm-level construct explained from the perspective of organizational change, adaptation, routines, past history, target orientation and expectations of firms. Alternatively, another research tradition concerning firm- specific factors, views export expansion as a knowledge development process (Johanson and Valhne 1977). This knowledge is the knowledge of the foreign market that firms develop while operating in it. A large number of follow up studies (Johanson and Valhne 1990; Young, Wheeler and Davis 1989; Engwall and Wallenstål 1988; Nordstrom 1991; Linqvist 1991;

Johanson and Sharma 1987; Benito and Gripsrud 1992; Luostarinen 1979; Peter-sen and PederPeter-sen 1999; Björkman and Eklund 1996) confirm this assumption.

Dependent variable Focus of the present study

Organizational level

Market level

Export expansion

Organizational level

Market level Focus of previous

studies

The internationalization process model (Johanson and Valhne 1977) relates learn-ing with an increaslearn-ing degree of resource commitment in foreign markets. The model assumes that market knowledge in turn affects the current activities and commitment of resources at the firm level. Morgan and Katsikeas (1998) also relate a lack of export market knowledge as one of the major exporting problems and impediments to export development. These studies however, do not consider the acquisition and internalization of knowledge acquired from the market-level either through experience or via partnership sources and focus solely on the or-ganizational knowledge.

From the mentioned studies it becomes clear that a positive relationship in knowl-edge development and increased export intensity exists. It is however surprising that given the commonly expressed significance of knowledge as a source of sus-tainable competitive advantage, conceptual limitations as to what different com-bination of intangible resources such as knowledge and capabilities constitute market knowledge competence of firms and how market knowledge development can be used as a source of specific export expansion capabilities still remain un-derexplored. This demands more research on the subject. For this reason, Morgan and Katsikeas (1998) call for additional empirical research to identify the firm-specific factors on market knowledge development (Cavusgil and Li 2000; Ling-Yee 2004).

The implications of the contribution of the study can be interpreted at the practi-cal level as well. Problems faced by firms in identifying and creating knowledge related to export expansion may imply two issues; first, firms have an ambiguous idea of the necessarily required knowledge and, second, firms lack key mecha-nisms or processes used in the acquisition and development of market knowledge.

Both practical issues are interdependent and may significantly affect developemnt of exports. This is, however, expected to be profound if export expansion for SMEs from the software development sector is taken into consideration. This is explained next.

Internationalisation for such SMEs is mostly an export agreement for the sale and services of the software via resellers in foreign countries. Thus, many of these firms have no establishments in foreign countries. For these firms market knowl-edge development is a process through partners. Firm-level practices and proc-esses to manage these partners in order to absorb the knowledge of the foreign market become vital elements for successful export operations. This study aims to provide practical insights into these issues. As the knowledge-based economies of many industrialized countries have an enormous number of SMEs in the software development sector, the study seems beneficial for real business situations. For

such SMEs that are in the early phases of developing market knowledge, this study may provide some information about the right capabilities to nurture in or-der to expand internationally.