Adaptation of Business Practices in Swedish Software-Exporting SMEs: An Institution-Based View of Internationalization

Abstract

Previous research has acknowledged the importance of software SMEs by emphasizing their ability to compete in the international arena despite their smaller size. Further, the internationalization of software SMEs have been emphasized as an interesting phenomenon as they have not followed classic incremental internationalization paths, meaning the establishing a subsidiary in a foreign country of operations, but instead software SMEs favor direct exports. Prior studies attribute this to the increasing availability of facilitating technological means, as well as to a lack of financial and human resources. However, despite the increasing trend towards exports, no studies that have researched how institutional factors of foreign markets may affect Software-Exporting SMEs business practices and therefore what adaptations may be necessary in their internationalization process were identified. In order to fill the existing gap in theory, the authors have conducted a single case study of SoftWeb AB, an SME in the software industry. The study included eight interviews with the company representatives in possessing adequate knowledge of SoftWeb AB´s international operations and resulted in the following main findings: Firstly, software SMEs such as SoftWeb adapt their business practices to institutional environments of foreign markets through a process of efficiency-seeking. Secondly, the foreign institutional aspect that majorly affects Software-Exporting SMEs international operations is of an informal normative nature. Lastly, the thesis affirms that the extent to which Software-Exporting SMEs must adapt their practices is positively related to the degree of institutional distance between the SME and export-receiving customer.