Business Relationships in the context of De-internationalization : A Case Study of Swedish SMEs

Abstract: Every firm in the world in one way or another is touched by the prevailing globalization trend. In order to survive in the 21st century businesses in every industry are taking steps to expand through trade outside their home markets.  Thus this global expansion evokes stimulus by firms to internationalize. The internationalization process of firms has been studied extensively among various business scholars with the main focus on the growth or positive development of firms. However, an area which has received fairly limited attention is the de-internationalization process. In this field the role of small and medium sized enterprises (SMEs) under non-crisis conditions, where this phenomenon is seen as a strategic decision of firms or subsequence of internationalization process rather than a market failure, has been underestimated. This paper aims to contribute to the theoretical understanding of cross-border activities of small firms by looking into business relationships as a new perspective on analyzing de-internationalization motives. This was studied through a qualitative case study of Swedish SMEs operating globally. Interviews with sales and marketing directors of the companies together with secondary data compose the gathered empirical data for analyzing de-internationalization process. The study sheds light on business relationship constructs - dependence, bond, investment, and atmosphere - and their influence on the key factors for internationalization - trust, knowledge and commitment - which in turn determine the strategic decision by firms to reduce their market involvement in foreign markets. It has been found out that these key factors of internationalization were affected by the relationship constructs mostly negatively: the market knowledge in majority of cases was lacking due to the weak bond, the commitment determined by unbalanced dependence and reduced investment has gradually decreased along the time and the level of trust influenced by a negative atmosphere was not sufficient enough which played a decisive role on the reduced level of market involvement by firms. Thus the results of the study indicate that unfortunate business relationships influenced the decision of three case companies to de-internationalize through the key factors of internationalization.