A Neighbor We Never Talk To : Internationalization barriers in the Baltic region: a knowledge based approach

Abstract: Today’s globalized economy puts considerable pressure on Small and Medium Enterprises (SMEs) as they are forced to compete in a world where business is often conducted over nations’ borders. This globalization has also led to the creation of free trade areas such as the European Union, where most traditional barriers to trade have been removed. Despite this there still seems to be several, more invisible, barriers that hampers business between member states. We therefore intend to examine how companies in two member states – Lithuania and Sweden – have been affected by such invisible barriers and how they are trying to cope with them. This research has been conducted using following theoretical foundation; Invisible barriers, knowledge, the Uppsala model, psychic distance and networks. Our empirical data have been gathered by holding semi structured interviews with 7 SMEs, this data have then been analyzed with the help of our theoretical foundation. We have found substantial evidence pointing towards the importance of psychic distance and lack of knowledge when explaining the barriers still in existence. Furthermore we have also discovered the duality of knowledge and networks which can be both barriers in themselves as well as ways for companies to work their way around previously mentioned barriers.