Social Networking and Opportunity Recognition: A Focus on Internationalised Firms in South Africa

Abstract

Social networks serve as an important source for new business opportunities in foreign markets and are considered as one of the most significant resources for the internationalising firm in emerging markets. This article empirically examines how internationalised firms in under-researched African context access and use social networks to increase their recognition of opportunities. Hypotheses are formulated based on several social networking principles and are tested statistically. The findings highlight that interacting with international contacts more fre-quently is associated with higher levels of opportunity recognition when compared to firms with fewer interactions. Additionally, internationalised firms tend to spend more time developing and maintaining contacts which are associated with higher levels of opportunity recognition. The article makes a contribution to the international entrepreneurship literature by demonstrating that multiple social networking factors will raise the level of opportunity recognition for internationalised firms in South Africa.

Keywords

Opportunity recognition social networks international relationships South Africa

Introduction

The international entrepreneurship (IE) literature as an area of study has emerged over the past decade where IE is conceptualised as the ‘discovery, enactment, evaluation, and exploitation of opportunities across national borders to create future goods and services’ (Oviatt & McDougall, 2005, p. 538). Prior research shows that IE is the outcome of a combination of different resources and competencies that are controlled by entrepreneurs and managers of firms engaged in internationalisation (Javalgi & Todd, 2010; Yamakawa, Peng, & Deeds, 2008). One of the most significant resources for any internationalising firm is the ability to access and use social networks, which serve as an important source of information for new business opportunities in foreign markets (Adler & Kwon, 2002). The value of social capital and entrepreneurial networks for internationalising firms is evident through the growth of theoretical knowledge on networking in the IE literature (De Haaff & Urban, 2013; Shree & Urban, 2012). Several studies emphasise that coordinating network management activity enables entrepreneurs to establish more new network relationships, maintain a larger social exchange network and build their social capital base (Kebede, 2018; Uslaner, 2001).

While traditional views of internationalisation propose incremental growth patterns for internationalised firms; from the IE perspective internationalisation is seen as swift and opportunity-driven (Ellis, 2011; Jones & Coviello, 2005; McDougall & Oviatt, 2000). There is limited research that has been conducted on internationalisation, where most issues, such as uncertainty associated with entering foreign markets are considered (Ellis, 2011), while opportunity recognition is often neglected (Oviatt & McDougall, 2005; Singh, 2012). Moreover, studies based on traditional theories of internationalisation rarely concentrate on factors that explain how opportunities are recognised during internationalising, and to what extent opportunity recognition is dependent on social networks (Ellis, 2011; Shree & Urban, 2012). Thus, it still remains unclear to what extent firms which are internationalising use social networking to recognise more opportunities.

Motivated by this question, the present article conducts an empirical investigation in South Africa to better understand how international firms access and use social networks to recognise opportunities. Research in emerging economies tends to be overshadowed by studies primarily conducted in Eastern Europe and Asia, with regions, such as Africa, relatively neglected (Bruton, Ahlstrom, & Obloj, 2008). Subsequently, cross-national differences and the validation of perspectives on IE and opportunity recognition, often developed in more mature markets are poorly understood and under-explored in emerging markets such as South Africa (Kiss, Danis, & Cavusgil, 2012; Urban & Muzamhindo, 2017).

Despite South Africa’s fairly long history of private enterprise and export orientation, high levels of corruption and government red tape pose serious challenges to internationalisation (Urban & Hwindingwi, 2016). Research in emerging markets, such as South Africa, reveals that firms tend to learn incrementally about how and when to internationalise by entering markets perceived to be ‘less risky and markets that have geographic proximity and cultural closeness to their home market’ (De Haaff & Urban, 2013, p. 168). Following these studies, it is argued that the setting for firms in Africa is different from other Western and emerging economies. In many African countries, the collectivist culture which predominates society together with strong family ties renders social capital to be viewed as an important resource for firms, particularly as it often substitutes the restricted formal institutional support available to these firms (Kebede, 2018). Based on these observations, it is clear that not enough attention has been paid to how internationalising firms in South Africa can best make use of the opportunities available to them (De Haaff & Urban, 2013).

This article makes a contribution to advancing the entrepreneurship literature in two ways. First, it is anticipated that the study will add to IE theory and practice by providing empirical evidence on how internationalising firms access and use social networks in order to increase their levels of opportunity recognition. Rather than merely testing the internationalising, firm performance link, a more refined approach is implemented to show how different dimensions of social networking may influence increases in opportunity recognition. By recognising that empirical findings from different studies across different contexts are largely inconclusive regarding the consequences of IE (Kiss et al., 2012), the present study builds on earlier work on IE which allows for further levels of modification for analysing differences in internationalisation, networking and opportunity recognition. Secondly, the study takes place in South Africa where researchers observe that ‘despite its potential, entrepreneurial behaviour remains understudied in African countries often resulting in inappropriate policy actions’ (Urban & Hwindingwi, 2016, p. 499). Furthermore, scholars’ note that international business theory needs to adapt the changes in the global economy and IE researchers must account for the effect of several contingent variables in emerging markets (Singh, 2012). One notable feature of African markets is that there are less market saturation and more room for firm growth through expansion, especially through internationalisation (De Haaff & Urban, 2013). Consequently, the present study is relevant when considering that in many African countries, such as South Africa, Kenya and Botswana, governments have introduced policies to increase and create more knowledge so that growth, internationalisation and entrepreneurship can flourish (Urban & Muzamhindo, 2017).

The article first provides a theoretical overview to provide a basis for the formulation of the hypotheses. Next, the research methodology is explained in terms of sampling and measures used, which is followed by statistical analyses and a discussion of the findings.

International Entrepreneurship (IE) and Opportunity Recognition

A critical review of the internationalisation literature reveals ‘absence of a unifying paradigm, despite that international new ventures (INVs), global start-ups and born-global firms are all by definition international at inception’ (Jones & Coviello, 2005, p. 285). Nonetheless, researchers argue that the core characteristics of internationalisation, such as speed, degree and scope of internationalisation are context-sensitive and must be studied in a way that permits evaluations across different contexts (Zahra, 2005). Furthermore, researchers in internationalisation increasingly recognise that other configurations of international businesses exist outside the ‘monolithic multinational firm’ (Buckley & Casson, 2009; Oviatt & McDougall, 2005; Zahra, 2005).

There are multiple theoretical perspectives in explaining IE, which include the resource-based view (RBV), a focus on organisational learning and the product life cycle, as well as invoking the transaction cost theory (Zahra & George, 2002). Additionally, different models of IE have been formulated and shown organisational factors as the main antecedents of IE, with strategic and environmental factors moderating the relationship between organisational factors and the different dimensions of IE (Zahra & George, 2002). Organisational factors such as unique assets, research and development (R&D), networks and firm reputation have all been identified as important resources in the internationalisation process (Kiss et al., 2012; Zahra & George, 2002). Numerous efforts have also been made to identify internationalisation by studying the processes of opportunity recognition and/or exploitation (George, Parida, & Lahti, 2016). According to researchers, a strong element of planning and recognising and/or exploiting opportunities in relation to internationalisation is evident (Kiss et al., 2012), which supports the main purpose of this article in terms of creating closer conceptual and empirical links between opportunity recognition, networking and internationalisation.

The ‘how, why and when, some entrepreneurial firms, and not others, recognise opportunities’ (Davidsson, 2015; Kirzner, 1979; Zahra & George, 2002) is argued to be a crucial element of the entrepreneurial process (Shane & Venkataraman, 2000). Additionally, researchers have developed conceptual models to help clarify and delineate the opportunity recognition process (e.g., Ardichvili, Cardozo, & Ray, 2003; Gaglio & Katz, 2001; Hansen, Monllor, & Shrader, 2016; Young, Dimitratos, & Dana, 2003), where three distinct phases have been identified. These include (a) sensing or perceiving a market need and/or underemployed resources, (b) recognising or discovering a fit between market need and resources and (c) creating a new fit in the form of a business venture (Ardichvili et al., 2003, p. 110). Following these phases means that opportunities are evaluated at each stage of the development process and the commitment of resources and use of social networks results in the formalisation of the opportunity (Ardichvili et al., 2003; Davidsson, 2015). By navigating these different phases of the opportunity recognition process, firms in emerging markets can pursue international opportunities and respond rapidly when they do arise (Vaghely & Julien, 2010).

Integrating the internationalisation literature with opportunity recognition underscores that the capacity to recognise and exploit opportunities is related to various human and social capital variables, which includes networking, knowledge (experiential and existing knowledge) and entrepreneurial experience (Davidsson, 2015; George et al., 2016; Shree & Urban, 2012). Internationalising firms need a various form of knowledge to recognise and take advantage of opportunities (Urban, 2010; Yamakawa et al., 2008). One major factor that influences the core process of opportunity recognition is social networking, which is often utilised to gain access to rare resources and to position the firm more strategically in the international marketplace (Adler & Kwon, 2002). IE researchers emphasise that firms typically rely on international networks such as suppliers, distributors and strategic alliances to successfully navigate the internationalisation process (Jones & Coviello, 2005). The significance of social networks and their relationship to opportunity recognition is important as networks provide access to resources, which serve as sources of novel information, and may reduce a firm’s perceived risks when entering international markets (Chandra, Styles, & Wilkinson, 2009; Ellis, 2011).

Social Networks

Social capital has been conceived in terms of the value of social networks and with reference to the norms of reciprocity, bonding and bridging (Granovetter, 1973; Uslaner, 2001). Social capital provides networking capabilities used by firms to interact with their international associates. Networking allows firms to acquire information about foreign markets and opportunities (Jones & Coviello, 2005), where research on entrepreneurial networking finds that firms those form relationships with their foreign partners and contacts, as opposed to only domestic partnerships, is vital for success in internationalisation (Zahra, 2005).

An analytical review of pertinent literature reveals that networking in the context of internationalisation process involves growing the firm’s knowledge and experience of foreign markets as networks enable the attainment of experiential knowledge about foreign markets and opportunities (Jones & Coviello, 2005; Uslaner, 2001). Researchers such as Street and Cameron (2007) show that ‘relationship strength, network size, network structure, relationship type, goal compatibility, and existing trust, represent the largest area of research regarding network relationships’ (p. 251). Network tie-based exchanges are advantageous in the internationalisation process as they are trust-based and result in more favourable exchanges than non-network methods (Ellis, 2011). Network ties may be examined as being either direct or indirect, as well as in terms of their intensity (strong vs. weak), and in terms of their outcomes (bonding or bridging social capital). Weak ties are loose based relationships between individuals, as opposed to the close ties that would be found in a nuclear family (Chandra et al., 2009; Granovetter, 1973; Urban, 2010).

The seminal work of Granovetter (1973) highlights the importance of maintaining an extended network of weak ties in obtaining resources, as weak ties are valuable in attaining information that would otherwise be inaccessible or costly to find. Network ties can link organisations together and provide an interface for exchanges to take place. Firms can rely upon weak ties, such as membership in an international trade organisation, to gain knowledge about the marketplace innovations and opportunities. In contrast, strong ties, such as those derived from family relationships, deliver secure and dependable access to resources. According to researchers, the most reliable relationships in a personal network are strong ties, which are usually of long duration, and in these two-way relationships, not dominated by short-term calculations of self-interest, the principle of reciprocal obligations is understood (Ellis, 2011; Granovetter, 1973; Greve & Salaff, 2003).

Studies on networking in the African context shows that firms make very effective use of international business networks; wherein the South African context, differences in strength of network ties between necessity-driven entrepreneurs and opportunity-driven entrepreneurs have been reported (Urban, 2010). In the light of prior empirical findings and recognising the importance of social networks to opportunity recognition, particularly as network tie-based exchanges are valuable and in that they are rooted in a setting of trust between international partners, the first hypothesis predicts:

Hypothesis 1 (H1). Internationalised firms in South Africa which have established tie-based network exchanges are associated with higher levels of opportunity recognition when compared to firms operating with less established tie-based network exchanges.

In the context of entrepreneurial networks, social capital also refers to ‘interactions and repetitive group activity, such as the frequency of meetings and other formal interactions, as well as informal gatherings and other social activities’ (Chandra et al., 2009, p. 31). The strength of social network relationships can be measured in terms of interaction, intimacy and activity (Burt, 1997). Entrepreneurs interact through networks to obtain access to various resources and opportunities which may be considered as highly important when internationalising (Shree & Urban, 2012; Uslaner, 2001). Research stresses that firms which interact with teams are more likely to have a wider network of contacts and partners, as well as a more diverse set of skills to master internationalisation, all leading to greater opportunity recognition (Uslaner, 2001). In line with these research findings and based on the social networking principle, interactions are related to more opportunity recognition, it is hypothesised that:

Hypothesis 2 (H2): Internationalised firms in South Africa which interact with their international contacts more frequently are associated with higher levels of opportunity recognition when compared to firms with fewer interactions.

Another key feature of networking relationships is the considerable time that is invested in ‘both developing and maintaining social networks’, so as to obtain information and resources (Greve & Salaff, 2003, p. 2) when internationalising new contacts are developed, while existing or disused ones are maintained or re-established (De Haaff & Urban, 2013). During this process, time is invested to develop and maintain contacts that are beneficial for internationalisation and thereby building reliable and useful networks (Greve & Salaff, 2003). Indeed, developing and maintaining social networks between organisations of any size are between people, and the first contact is therefore unsurprisingly informal (Urban, 2010). Entrepreneurial networking is characterised by a ‘sense of urgency and intensity’, and the importance of developing and maintaining social networks is important for internationalising (Shree & Urban, 2012). Building on the theory in this regard, two hypotheses are formulated to capture the networking principle that time is invested in ‘both developing and maintaining social networks’, which ultimately should lead to greater opportunity recognition.

Hypothesis 3 (H3): Internationalised firms in South Africa which spend more time developing network contacts are associated with higher levels of opportunity recognition when compared to firms which spend less time developing such contacts.

Hypothesis 4 (H4): Internationalised firms in South Africa which spend more time maintaining network contacts are associated with higher levels of opportunity recognition when compared to firms which spend less time maintaining such contacts.

Finally, social networks afforded by community-based and extended family relationships have been shown to supplement the lack of human, social and financial capital which internationalising firms in emerging markets may face (Greve & Salaff, 2003). Adler and Kwon (2002, p. 20) argue that the ‘breadth of the social capital concept reflects a primordial feature of social life—namely, that social ties of one kind (e.g., friendship) often can be used for different purposes (e.g., moral and material support, work and social advice)’. Furthermore studies indicate that new international firms are more likely to be successful in foreign markets when they develop networks of trust, based on long-term relationships, since these networks support them in establishing acceptability in the new marketplace (De Haaff & Urban, 2013). Consequently, these considerations lead to the following hypothesis:

Hypothesis 5 (H5): Internationalised firms in South Africa who have established long-term relationships with their contacts are associated with higher levels of opportunity recognition when compared to firms who have short-term relationships with their contacts.

Research Design

The study was an empirical analysis employing a cross-sectional design and was built on primary survey data. In line with the study objectives, the focus of the study was based on firms operating internationally from South Africa. Following previous research studies (see, Javalgi & Todd, 2010; Zahra, 2005), a firm was considered to be ‘internationalized when their foreign sales represented a minimum of 10 per cent of total sales or was engaged in exports to more than five countries’ (De Haaff & Urban, 2013, p.170). Additionally, internationalised firm parameters included that the firm was ‘operating abroad, with either a global presence in exporting, or had opened subsidiaries overseas or had expansions globally’ (Buckley & Casson, 2009, p. 1565). A firm-level approach, consistent with prior IE studies (De Haaff & Urban, 2013; Javalgi & Todd, 2010) was adopted where the individual serves as a proxy for the firm. The rationale is that at the firm level ‘a manager’s’ self-perception of a firm’s strategic orientation represent firm behaviour’ (Covin & Miller, 2014, p. 20).

Sample

In South Africa, there is no official or comprehensive database of internationalised firms (De Haaff & Urban, 2013). Instead, sampling lists and contacts were accessed from the Industrial Development Corporation (IDC, 2016) as well as the South African Chamber of Commerce and Industry (SACCI, 2014) offices and served as the sampling frame. To develop the study sample, support from regional managers from these offices was sought in multiple locations across the Gauteng, KwaZulu-Natal and the Western Cape, which represents the top three economic provinces of South Africa (SAinfo, 2012). By drawing samples from a diverse geographical base, bias was minimised which can be caused by respondents specific to a particular area. The respondents were provided a list with a total of more than 250 internationalised firms.

Firms which met the aforementioned sampling selection criteria were sent an electronic survey which, after two reminders, yielded a total of 66 valid responses and served as the final study sample (26.4% response rate). The response rate was regarded as reasonable (Cooper & Schindler, 2011) and is in line with prior studies of a similar nature (Urban, 2010). To check for non-response bias, t-tests comparing non-responding firms with the current study sampling mean scores on frequencies of international network interactions showed no significant differences, p > 0.10, signifying that the sample seems to be fairly representative of the population from which it is drawn.

The characteristics of the sample revealed that 67 per cent of the respondents indicated that the firm’s age was more than 15 years old and in terms of firm size 59 per cent indicated that the firm employed 100+ employees. In line with the sampling parameters, it was noted that 22 per cent of the firms surveyed followed the internationalisation route within a 3 year period since their date of inception, while 38 per cent of the responding firms were internationalised by the time they reached 6 years of age and close to the majority (96%) had internationalised by the time they were 10+ years old.

Measures

The study instrument was based on previous studies, and existing scales were used which were replicated and modified.

For the dependent variable—opportunity recognition, for the purpose of this study, was operationalised as the number of opportunities recognised and exploited have resulted in international exchange agreements (Chandra et al., 2009; Ellis, 2011). This operationalisation is in line with formulations of opportunity recognition which highlight the importance of measuring the frequency of opportunities recognised and exploited (Ardichvili et al., 2003). To capture this quantification and in an attempt to aid statistical analysis and interpretation, the opportunity recognition (OPRE) measure was simply calculated as the net result of recognition versus exploitation. This allowed for responses to be categorised as either ‘low OPRE (0–4), medium OPRE (5–10) and high OPRE (>10)’.

For the section on social networking, data was collected on the social networking principles as identified in the literature and in line with the study hypotheses. In accordance with each of the hypothesis, these independent variables were operationalised as follows: network-based ties which focused on both tie-based vs. non tie-based relationships (Ellis, 2011); in terms of network interactions, respondents were asked to select the frequency of interaction with international contacts (Burt, 1997); for establishing network development and maintenance, the number of hours in a week spent for developing international contacts and then the hours in a week spent for maintaining international contacts were asked to respondents (Greve & Salaff, 2003); the length of time that respondents had known their international contacts were also sourced (Burt, 1997).

Two control variables were also surveyed as their importance is evident through prior theory and research—these were firm age and firm size (Covin & Miller, 2014; Javalgi & Todd, 2010).

Data Analysis

Following the prior methods used to detect significant differences in the entrepreneurship literature (Urban, 2010), and based on data type collected, the hypothesised differences across variables were tested using chi-square methods. All the responses were collapsed and recoded into separate categories in an attempt to meet the assumption of expected frequencies for the Pearson chi-square test, as well as to aid interpretation (Cooper & Schindler, 2011).

Since the study was susceptible to common-method bias, a number of practical and statistical steps were required to reduce this potential bias. The instrument was based on a proven and consistent Likert-type scale format with questions that has both negative and positive statements.

Moreover, the survey instrument required respondents to be honest in their replies while assuring complete anonymity of responses and results. Furthermore, in statistical terms, the various scale items were subjected to a single ‘principal component analysis (PCA) using Harman’s one-factor test’ (Podsakoff, MacKenzie, Lee, & Podsakoff, 2003, p. 883). PCA results revealed that four distinct factors were extracted, with the first factor explaining the variance of 27.46 per cent indicating that common method bias was not a significant problem.

Results

Hypotheses Testing

H1 test results revealed no significant association between tie-based vs. non tie-based relationships and OPRE, see Table 1 (chi-square value (χ²) = 1.86, df = 2, p = 0.395). In terms of OPRE categories, 83 per cent, 94 per cent and 78 per cent of all firms were recorded in the low (0–4), medium (5–10) and high (>10) categories respectively. Of those with tie-based networks, 38 per cent recognised a high number of OPRE, followed by 35 per cent with a low number and 27 per cent with a medium number. Of the firms with non-tie-based networks, 59 per cent were in the high OPRE category. Subsequently, H1 was not supported.

Table 1.

Chi-square Test Results for H1

	Value	df	Asymp Sig. (2-sided)	Exact Sig. (2-sided)	Exact Sig. (1-sided)	Point Probability
Pearson chi-square	1.859^a	2	0.395	0.413
Likelihood ratio	2.135	2	0.344	0.378
Fisher’s exact test	1.744			0.452
Linear-by-linear association	0.253^b	1	0.615	0.709	0.379	0.132
No. of valid cases	66

Source: The author.

Notes: ^a 3 cells (50.0%) have expected count less than 5. The minimum expected count is 2.67.

^b The standardised statistic is 0.503.

H2 test results indicate a significant association between the frequency of interaction with contacts and OPRE, see Table 2 (χ² = 13.91, df = 4, p = 0.008). Of the firms with high OPRE, 85 per cent interacted with their international contacts on a weekly basis, followed by 11 per cent on a monthly basis and 4 per cent on a less than monthly basis. Similarly, for firms with medium OPRE, nearly half (42%) interacted with their contacts on a weekly basis followed by equal proportions (29% each) on monthly and less than monthly interaction. Firms with low OPRE tended to interact with their contacts on a monthly basis (41%) only. Firms that interacted with their international contacts on a frequent, weekly basis recognised a high number of OPRE (61%). This frequency of interaction reduced with lower OPRE, with such interaction taking place more on a monthly and less than monthly basis. Subsequently, H2 was supported.

Table 2.

Chi-square Test Results for H2

	Value	df	Asymp Sig. (2-sided)	Exact Sig. (2-sided)	Exact Sig. (1-sided)	Point Probability
Pearson chi-square	13.905^a	4	0.008	0.006
Likelihood ratio	14.851	4	0.005	0.008
Fisher’s exact test	14.048			0.005
Linear-by-linear association	9.699^b	1	0.002	0.002	0.001	0.001
No. of valid cases	66

Source: The author.

Notes: ^a 4 cells (44.4%) have expected count less than 5. The minimum expected count is 2.26.

^b The standardised statistic is –3.114.

H3 test results showed that the number of hours spent on developing contacts was significantly associated with OPRE, see Table 3 (χ² = 18.67, df = 4, p = 0.001). Firms with high OPRE spend more time in a week in developing international contacts than firms with a lower OPRE. High OPRE firms (52%) spend 7 to >9 hours a week in developing contacts. Conversely, firms (68%) with low OPRE commit less time (<1 to 2 hours) in developing their international contacts. Subsequently, H3 was supported.

Table 3.

Chi-square Test Results for H3

	Value	df	Asymp. Sig. (2-sided)	Exact Sig. (2-sided)	Exact Sig. (1-sided)	Point Probability
Pearson chi-square	18.668^a	4	0.001	0.001
Likelihood ratio	20.785	4	0.000	0.001
Fisher’s exact test	19.377			0.000
Linear-by-linear association	12.277^b	1	0.000	0.000	0.000	0.000
No. of valid cases	66

Source: The author.

Notes: ^a 1 cell (11.1%) have expected count less than 5. The minimum expected count is 3.44.

^b The standardised statistic is 3.504.

H4 test results revealed that the number of hours spent in maintaining contacts has a significant effect on the number of OPRE, see Table 4 (χ² = 27.42, df = 4, p < 0.001). Similar to the development of international contacts, firms with high OPRE spend more time per week in maintaining their contacts. 81 per cent of these firms spend 7 to >9 hours a week in maintaining contacts. This frequency decreases with lower OPRE, where 67 per cent of firms spend <1 to 2 hours a week in maintaining these relationships. Subsequently, H4 was supported.

Table 4.

Chi-square Test Results for H4

	Value	df	Asymp. Sig. (2-sided)	Exact Sig. (2-sided)	Exact Sig. (1-sided)	Point Probability
Pearson chi-square	27.424^a	4	0.000	0.000
Likelihood ratio	34.685	4	0.000	0.000
Fisher’s exact test	30.967			0.000
Linear-by-linear association	22.576^b	1	0.000	0.000	0.000	0.000
No. of valid cases	66

Source: The author.

Notes: ^a 3 cells (33.3%) have expected count less than 5. The minimum expected count is 2.66.

^b The standardised statistic is 4.751.

H5 test results revealed that the length of time which the firms have known their international contacts was non-significant in terms of the number of OPRE, see Table 5 (χ² = 8.84, df = 4, p = 0.065). Firms with high OPRE had known their international contacts for longer time periods, with over half (59%) of these firms knowing such contacts for more than 9 years. Of those firms that have known such contacts for a shorter time period (<1 to 3 years), 57 per cent are characterised by low OPRE. Subsequently, H5 was not supported.

Table 5.

Chi-square Test Results for H5

	Value	df	Asymp. Sig. (2-sided)	Exact Sig. (2-sided)	Exact Sig. (1-sided)	Point Probability
Pearson chi-square	8.838^a	4	0.065	0.065
Likelihood ratio	9.383	4	0.052	0.068
Fisher’s exact test	8.917			0.058
Linear-by-linear association	7.659^b	1	0.006	0.005	0.003	0.002
No. of valid cases	66

Source: The author.

Notes: ^a 2 cells (22.2%) have expected count less than 5. The minimum expected count is 3.11.

^b The standardised statistic is 2.767.

Discussions

This article set out to determine the extent to which international firms in South Africa access and use social networks to recognise opportunities. Several positive findings were observed which are discussed in terms of each of the hypotheses tests and in relation to prior findings.

H1 predicted that internationalised firms in South Africa which have established tie-based network exchanges are associated with higher levels of opportunity recognition when compared to firms operating with less established tie-based network exchanges. Based on the Pearson chi-square test, H1 cannot be supported. This is somewhat surprising given that some prior studies, albeit in a Western context, report that opportunity recognition increases when tie-based networks are abundant (Ellis, 2011). A plausible reason for this may be that entrepreneurs in developed and emerging economies rely less directly on their social ties than those in developed economies, as these firms in emerging economies may have limited direct exposure to contacts in foreign markets (De Haaff & Urban, 2013). Additionally, as prior research demonstrates, the strength of tie-based network exchanges is perhaps not as important in emerging economies when ties may be disconnected through ‘structural holes’ (Burt, 1997; Chandra et al., 2009). While every economy should provide a range of institutions to enable the functioning of markets, many developing countries have structural holes in terms of failed institutions which create inefficiencies in the marketplace. Such ‘institutional voids’ often lead to higher business costs and pose problems for internationalised firms in these markets (Khanna & Palepu, 2010). Given the context of the study—South Africa, where institutional structural holes have been noted, particularly in terms of crime and corruption (Urban & Muzamhindo, 2017), this line of argument seems valid in explaining the limited benefits of network ties in recognising opportunities, as detected in the present study.

H2 predicted that internationalised firms that interact with their international contacts more frequently are associated with higher levels of opportunity recognition when compared to firms with fewer interactions. Significant Pearson chi-square test results support H2, which resonates with prior literature insofar frequent interaction between individuals in the international arena could facilitate the building of trust, which enables the sharing of information (Ellis, 2011). Others have similarly reported that firms in emerging markets tend to learn incrementally about the viability of entering international markets and they consider the risk of entering foreign markets in terms of the information shared between trading partners (De Haaff & Urban, 2013). Consequently, the present study findings add to IE theory where an important driver for increasing international engagement is the development of knowledge relevant to foreign markets, and by way of interacting with international contacts more frequently. Such findings support a growing research stream for which frequent interactions, which tend to be more valuable if diverse, are crucial for internationalising firms as these interactions provide access to sources of potential new opportunities (Chandra et al., 2009).

H3 and H4 predicted that internationalised firms that spend more time in developing (H3) and maintaining (H4) contacts are associated with higher levels of opportunity recognition when compared to firms which spend less time in developing contacts. Both H3 and H4 were supported by the Pearson chi-square test results, and these positive findings are in line with the research that confirms firms in the internationalising planning phase talk to more people, and that they invest more time in building and maintaining networks during this crucial stage (Greve & Salaff, 2003).

Finally, H5 was not supported by insofar internationalised firms who have established long-term relationships with their contacts are associated with higher levels of opportunity recognition when compared to firms who have short-term relationships with their contacts. Similarly, others have noted that social networks take time to develop, with benefits accruing with experience (Adler & Kwon, 2002) and knowing social contacts for long periods is not a requisite, as younger, smaller firms, for example, can access the established networks of other firms (Chandra et al., 2009).

Overall, the findings emanating from the statistical analyses resonate with past studies and a growing literature which highlights that social networks are pivotal to internationalising firms as they facilitate opportunity recognition (Davidsson, 2015; Urban, 2010).

Implications and Recommendations

The article findings are insightful for researchers, policymakers and firm managers.

For researchers, this article is relevant as scholars mention that the intensification of emerging economies is important for international business scholars in general and more specifically for IE researchers (Singh, 2012). In this vein, conducting a study in the South African context is useful, as it allows researchers to compare and contrast similar networking principles and their relation to opportunity recognition in similar contexts. While research on emerging markets has increased over the past decade, there is still limited research in the African context (Urban & Muzamhindo, 2017). However, the implications of the findings from studies such as the present one highlights the significance of recognising the importance of social networking and opportunity recognition in internationalised firms. Considering that the economic development and growth in emerging economies is often attributed to the level of innovation and international competitiveness of firms in the marketplace (GEM, 2018), it is recommended that more empirical studies are conducted in the African context.

The study results also hold policy relevance when considering that internationalisation is highly dependent on social contexts, specifically in terms of the networking principles identified in this and prior studies (Urban, 2010). Policymakers should acknowledge the empirical evidence that shows in emerging markets, where firms which are able to access and utilise their networks effectively within local and international settings will recognise more opportunities. It is recommended that policymakers consider developing international, national and regional support infrastructure systems and enabling environments so that firms can connect themselves with others involved in international supply chains and related businesses.

The practical implications of the study findings point to several areas of interest to firm managers. Managers should be aware that not only can a firm’s social network be influenced by a variety of social network relations, but the more time internationalised firms spend interacting, developing and maintaining contacts also have a greater recognition of opportunities. Managers at all levels would greatly benefit from a better understanding of which networking practices are associated with higher levels of opportunity recognition. Furthermore, training managers and employees to be aware of the complex networks in internationalisation and how these are increasingly shaped by the development of new technologies could prove to be valuable as firms must deal with and act in these dynamic networks.

Limitations and Future Research

This study is not without limitations, which include limited availability of an official or comprehensive database on the internationalised firm in South Africa. This makes any generalisability of the results risky as no comprehensive population and sampling frame was available. The sample size was also restricted, and the nature of the hypotheses only allowed for data analysis using chi-square methods. While it is recognised that a smaller sampling size reduces the statistical power of the study (Cooper & Schindler, 2011), prior studies (see, Urban, 2010) have demonstrated significant results in similar studies. Related to this issue of sampling, more complicated analyses would have been ideal but requires a higher sample size if greater statistical power is to be achieved. While this was one of the first empirical studies in the IE field in the South African context, future studies could engage in more robust analytical techniques, such as structural equation modelling. Another limitation of this article is the cross-sectional nature of the study and in future investigating the dynamics of networking practices on opportunity recognition using a longitudinal design could show how networking changes and grows over time. Future research could also focus on different levels in human capital in developed vs. developing countries that are compatible with social networking, opportunity recognition and internationalisation.

Footnotes

Declaration of Conflicting Interests

The author declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.

Funding

The author received no financial support for the research, authorship and/or publication of this article.

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