IN FASHION WE TRUST: Exploring the role of internationalization as an entrepreneurial process in the fashion industry

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MASTER THESIS FALL 2016

IN FASHION WE TRUST

Exploring the role of internationalization as an entrepreneurial process in the fashion industry

Charlotte Grip

DEPARTMENT OF BUSINESS STUDIES

Master Program in Business and Administration; Strategic Marketing Supervisor: Ivo Zander

Submission Date: 09.08.2016

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Abstract

Fashion companies struggle with internationalization, as do many retailers, but nevertheless they need to take action and cross borders in order to increase their revenue. A strong focus on the entrepreneurial capabilities of a company is suggested to enhance the process and the model of internationalization as the entrepreneurial process is addressed as an established tool for internationalization. The aim of this paper is to investigate what role internationalization as an entrepreneurial process model plays in the fashion industry context. To do this, a qualitative study with five fashion companies and four trade organizations is conducted. A theoretical framework on the network internationalization process model guides the data collection consisting of several interviews with owners, CEOs and managers. The findings indicate that entrepreneurial capabilities, networks and being able to exploit contingencies play an important role for internationalization in the fashion industry. I conclude that internationalization as an entrepreneurial process can be applied in the fashion industry context.

Key words: Internationalization, Entrepreneurial process, Networks, Business Opportunity Identification and development, Effectuation

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Acknowledgments

First of all, I would like to express gratitude to my adviser, Ivo Zander, for his feedback, supervision and ideas throughout this research work. Also, I would like to thank professor James Sallis for stepping in and helping me finish the thesis. His suggestions made this thesis lighter, straight to the point and more thoughtful.

Secondly, I want to thank the following individuals and companies for their insights, knowledge, experience and help with my research by allowing me the time to interview with them; they are as follows: Reneé Lundholm at The Swedish American Chamber of Commerce, Niklas Arengren at The Consulate General of Sweden, Fiorella Piedra at Business Sweden, Stockholm and Vivianne Gillman at Business Sweden, New York, Erik Wilkinson at Eton, Per Magnusson at D.brand, Maja Svensson at ELSA AND ME, Emy Blixt at Swedish Hasbeens, and Erik Ulin at J.Lindeberg.

Finally, I want to thank my mother, Marie Ellinge, for her endless support and praise during the process of writing this thesis. Her encouragement was crucial during the writing process.

This thesis has provided new insights that I hope and believe will be further explored in the future.

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Charlotte Grip, Uppsala University 2016-08-09

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1. INTRODUCTION

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“Internationalization is all about networking and relations” says The President of the Swedish American Chamber of Commerce (SACC) in New York. I followed the discussion in the lunch room and everyone was very engaged and wanted to make their point. One of the coworkers argued that he had seen that most of the entrepreneurs he met were good at sales. This was my first day and I was curious to know more. Her words kept going through my head during the whole internship in fall 2013. As an economic student at the Uppsala University I had read a lot about international theories during my years and especially the Uppsala Model by Vahlne and Johnson (2009) had crossed me many times. I knew through theory that networking and relationships are important but I faced a reality with more complexity. My interest for this area increased. Networking is essential in every internationalization process but how they are doing it and the entrepreneur’s role in the process is an interesting discussion. I was networking a lot that semester. I met many talented fashion entrepreneurs and with that an unexplored field, the fashion industry.

Research indicates that many fashion companies struggle with issues on how to internationalize (Alexander and Myers, 2000). Both Sundberg (2006) and Hines and Bruce (2007) address the need of further research in internationalization of fashion companies in order to achieve a better understanding of the process. Fashion is our chosen skin and we communicate who we are through our clothes. The Fashion Industry is a 3 trillion-dollar industry and has dramatically changed during recent years. We buy 80 billion clothes each year, 400 percent more than 20 years ago.

Today the fashion industry has a significant big impact and has a daily effect on millions of people worldwide (The True Cost).

When firms cross boarders, it is, by definition, internationalization. In this paper I follow Schweider, Vahlne and Johansons (2010) beliefs that internationalization should be seen as either a by-product of firm’s efforts to improve its position within its network or networks, or as a result of an entrepreneurial action.

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1.1 Problem formulation

I identify the problem as being, fashion companies struggle with the internationalization process.

In this research I have tried to find relevant research but as many others before me have pointed out, relatively little is known about the internationalization process for the Fashion Industry (Swoboda, Zentes, and Elsner, 2009., Burt et al., 2008; Wigley and Moore, 2004; Dawson, 1994).

According to Doherty (2000) and Fernie et al (1997), fashion companies have evolved to be the most successful category of international retailers in the last twenty years. One example is Zara, the fastest growing international fashion retail group in Europe, with 54 percent of their sales done outside the home market (Inditex, 2004). Considering that an increasing number of fashion companies pursue a greater percentage of their revenues from global operations, and it is growing every year, it is essential to understand how the fashion industry could best internationalize.

As early as in 1969, Blumer (p.290) asked to “take fashion more seriously and give it the attention and study which it deserves.”

1.2 Purpose and research question

The purpose of this thesis is to investigate how fashion companies internationalize. I aim to explore how the model internationalization as an entrepreneurial process can be used as a tool in the fashion industry context. The following research question is stated:

What role does the internationalization as an entrepreneurial process have in the fashion industry?

1.3 Contribution

Based on literature in internationalization and the context of the fashion industry, this paper will add to existing research by exploring how the internationalization as an entrepreneurial process can be used within the fashion industry. I further believe this study performed in a Swedish fashion context will fill a gap in existing internationalization literature, as empirical studies on the internationalization in Swedish fashion academic research are still relatively few.

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1.4 Structure of the Thesis

This thesis is divided into eight chapters. The first chapter is the introduction. The second chapter is a review of the literature regarding the Uppsala Model followed by an indepth review of the business network internationalization process model and ends up in the extended model internationalization as an entrepreneurial process. The third chapter involves the methodology.

The forth chapter consists with the empirical findings that consist of five qualitative interviews with Swedish Fashion Companies in US and four organizations in Sweden and US. The fifth chapter holds an analysis of the findings from the empirical section together with literature. Lastly, it ends up in a conclusion and then further studies.

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2. THEORETICAL FRAMEWORK

In this chapter the papers theoretical framework is presented. First, I outline the concept of the Uppsala internationalization process model. Second I present the business network internationalization process model. Third, the concept of internationalization as an entrepreneurial process is presented.

2.1 The Uppsala Internationalization Process Model

One of the most renowned models of Internationalization is The Uppsala Internationalization process model (Johanson and Vahlne, 1977; Johanson and Vahlne, 2009, Blomstermo & Sharma, 2003). The original model from 1977 views firm internationalization as a lengthy process that develops in stages, where market knowledge is required primarily from experience in countries similar to the home country. The U-model makes three assumptions: a firm gains experience from the home market; a firm starts a foreign operation close to the home market and grows more gradually; and that a firm uses traditional export as a start. The U-model believes in experiential learning and that a firm gains knowledge through experience, and that the market knowledge will lower the uncertainty and risk involved. Market knowledge and commitment decisions have a strong positive correlation, as well as commitment decisions and current activities, as showed in research by Johanson and Vahlne (1977). The authors make a distinction between general- and specific knowledge, and explain that specific knowledge cannot be achieved without a specific activity in that country, and the specific knowledge cannot be applied in other countries except the ones studied (Johanson and Vahlne, 1977).

Figure 1: Uppsala internationalization process model (Johanson and Vahlne, 2009)

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2.2 Business Network Internationalization Process Model

In 2009 Johanson and Vahlne updated the model and the revised model is called the business network internationalization process. In this model the business environment is viewed as a web of relationships, a network, rather than a neoclassical market with many independent suppliers and customers. The first box in the state variable is knowledge, especially of opportunities, but also of the capabilities and resources of other actors. The more knowledge firms have about each other, the closer their relationship. Consequently, a large part of that knowledge is unavailable to actors who are distant from the firm. This implies that opportunities are visible only to a limited number of actors. The second box in the state variable is network position. A firm with a good network position enjoys a beneficial exchange with its partners. On the other side we have the box of change variables and one is the actions of learning, creating and trust building. The other change variable is the category relationship- commitment decisions, where partners can increase or decrease the level of commitment to a relationship. In this model by Johanson and Vahlne (2009) internationalization can be seen as a result of opportunity-seeking efforts made by the focal firm in order to improve or defend its position in a network or networks.

Figure 2: Business Network Internationalization Process Model (Johanson and Vahlne, 2009)

Johanson and Vahlne (2009) Knowledge

Both the entrepreneur (Oviatt and McDougall 1994) and the organization (Johanson and Vahlne 2009) have knowledge. Individuals learn, and some of what they learn is disseminated through the organization. Knowledge is of the utmost importance, primarily knowledge of opportunities, as

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6 this is what drives the process of entrepreneurial activity (Johanson and Vahlne 2009). Johanson and Vahlne (2009) point out that knowledge is the key to business success in international expansion. “Learning by doing” leads, according to Johanson and Vahlne (2009), to a gradual and differentiated approach to foreign markets. Further they explain the importance of remembering that managing with a lack of institutional and commercial market knowledge takes a lot of time.

Another input from Johanson and Vahlne (2009) is the suggestion that prior knowledge makes it easier for individuals to discover some potential, which means that players who are looking for opportunities should concentrate on what they already know and develop from there.

Relationships

When entering a new market, the focus should be on establishing relationships and engaging in them, which leads to a start of a positioning process in this new market (Johanson and Vahlne, 2009). The authors express that “what happens, happens in a relationship”. International businesses are in a global competition combined with dynamics, and the complexity increases the need for close relationships with suppliers and customers, and close relationships are possible once trust is established. Drawing on a business network view Johanson and Vahlne (2009) argue that the challenges faced by firms involved in internationalization and also the opportunities that they may enjoy are less a matter of country specificity than of relationship specificity.

Challengingly, they write that the difficulties and rewards associated with foreign market entry are very much the same as those associated with domestic market entry. As they see it: “markets are networks of relationships in which firms are linked to each other in various, complex and, to a considerable extent, invisible patterns. Hence insidership in relevant network(s) is necessary for successful internationalization” (Johanson and Vahlne, 2009, p.1411).

Networks

Companies take part in several networks, and they are linked in various ways that differ in the complexity and closeness to other firms. A firm’s relations are created out of the social engagements with other firms, in which the involved firms develop their relationship. As the relationship evolves, the firms accumulate knowledge and build mutual trust. By participating in these networks firms will expand their knowledge of markets, hence they will reduce uncertainty.

To be successful in foreign markets it is necessary to be part of a strong network (Johanson and

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7 Vahlne 2009). Firms no longer compete on an individual level; they compete on a network level, which include domestic and foreign suppliers, and customers.

2.3 Internationalization as an entrepreneurial process

Schweizer, Vahlne and Johanson (2010) suggest adjustments to the business network internationalization process model, which is an update of the Uppsala internationalization process model, to emphasize the entrepreneurial aspects of the process. Internationalization is seen as a by-product of a firm´s effort to improve its position in its network or networks (ibid).

Figure 3: Internationalization as an entrepreneurial process (Schweizer, Johanson, Vahlne, 2010).

Business opportunity identification and development

Ardichvili et al (2003) stress that while earlier literature on entrepreneurship indirectly assumes that the recognition of an opportunity is led by a systematic search, others highlight that individuals do not search for opportunities but can recognize the value of new ideas and information as they come upon them by chance. This accidental discovery is something Ardichvili et al (2003) refer to as entrepreneurial alertness. The definition of entrepreneurial alertness is “a propensity to notice and be sensitive to information about objects, incidents, and patterns of behavior in the environment, with special sensitivity to maker and user problems, unmet needs and interests, and novel combinations of resource” Ardichvili et al. (2003, p.113). The authors argue

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8 that opportunities are identified by some individuals and not by others because of personality differences related to optimism, self-efficacy, and creativity. Additionally, because of differences in background and experience, and the amount and type of information they possess about a particular opportunity. Each person’s idiosyncratic prior creates a knowledge corridor that allows her or him to recognize certain opportunities. According to Ardichvili et al (2003) entrepreneurial knowledge can be divided into two domains: knowledge related to special interests, passions, and sense of joy; and knowledge gathered from work experience. They also put light on the importance of social networks arguing that entrepreneurs who have extended networks identify significantly more opportunities than solo entrepreneurs.

Effectuation

Effectuation lies in exercising control over what can be done with available resources, rather than optimizing decisions about what ought to be done given a set of predictions about what will happen next. Dew and Sarasvathy (2002) argue that the focus is on affordable loss, relatively expected return. In short, uncertainty becomes an advantage rather than an obstacle when creating or developing business ventures. Both Ardichvili et al. (2003) and Sarasvathy advance the special role of the manager in solving problems. “Characteristics of decision makers, such as who they are, what they know, and whom they know, form the primary set of means that combine with contingencies to create an effect that is not preselected but that gets constructed as an integral part of the effectuation process” (2001, p. 249). Dew and Sarasvathy (2002) highlight that these characteristics are the individual agent’s identity, including value systems, beliefs, intentions, and aspirations, knowledge base, and social network. Therefore, the effectuation process is dependent on the individual as it is the individual who negotiates with partners.

Dynamic capabilities

Eisenhardt and Martin (2000) define dynamic capabilities as firm strategic and organizational processes that create value within dynamic markets by manipulating resources into new value- creating strategies. Dynamic capabilities reveal how the constraints that entrepreneurs face and the possibilities that they perceive for possible effects result in dramatic changes in their attempts to exploit an opportunity. Furthermore, the dynamic capability perspective enriches the internationalization literature with its focus on the internal processes of the organization and its

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9 consideration of the interplay between organizational processes and the resources created by a firm’s network and the entrepreneur or entrepreneurial manager. Organizational advantages, such as dynamic capabilities, are part of these available resources that can potentially create an advantage on which to base expansion into foreign markets (Dunning 1980; Hymer 1960/1976).

Industrialization as an entrepreneurial process

Industrialization as an entrepreneurial process (Schweizer et al 2010) is an adjustment of Johanson and Vahlnes model the business network internationalization process (2009). In this model internationalization is seen to be an entrepreneurial process. Entrepreneurial capabilities are added as a state variable and exploiting contingencies is added as a change variable (See figure 3). The company’s surroundings are still viewed as a set of dynamic networks. The model is also dynamic because the state variables are influencing the change variable that is influencing the state variable back. The box in the upper left corner shows the entrepreneurs characteristics. One of the most important capability of an entrepreneur is to be able to build, networking and catch the opportunities that arise in front of them. These are affecting the change variable in the upper right corner which reflects the decision to raise or lower the engagement and commitment in a relationship.

In the box in the right corner the second change variable consists of learning, creating, trust building and exploiting contingencies. These variables are depended upon the state variables in the left corner, knowledge, opportunities and entrepreneurial capabilities. And those state variables are affecting the change variables relationship and commitment in decisions, which affect the network position and the degree of internationalization.

Entrepreneurial capabilities

The entrepreneur with the ability to live with the uncertainty and ambiguity that experiential learning entails has an advantage (Sarasvathy 2001). “Entrepreneurs begin with three categories of ´means´: they know who they are, what they know—their own traits, tastes and abilities; the knowledge corridors they are in; and the social networks they are part of” (Sarasvathy 2001, p.

250). Consequently, Schweizer et al (2010) add entrepreneurial capability as a state variable, to supplement knowledge and opportunities. In Figure 3 you can see the upper left box with

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10 characteristics of the entrepreneur and the firm, this includes attitudes and tangible and intangible resources, as state variables.

Exploiting contingencies

Exploiting contingencies are to be able to see an opportunity when it comes. It also emphasizes entrepreneurial alertness, which is to have enough experience and knowledge to be able to take action in a given situation. With exploiting contingencies the entrepreneur or manager ids able to create new value strategies.

In summary: “Learning by doing” leads, according to Johanson and Vahlne (2009) to an increase in knowledge. They also highlight that prior knowledge makes it easier to gain more knowledge.

According to Ardichvili et al 2003, entrepreneurial knowledge can be divided into two domains:

knowledge related to special interests, passions and sense of joy; and knowledge from work experience.

One quote used is “what happens, happens in a relationship” (Schweizer et al 2010).

Internationalization is seen as less a matter of country specificity than of relationship specificity, and the authors also stress that internationalization is seen as a by-product of a firms effort to improve its position in its network or networks (Johanson and Vahlne, 2009).

Ardichvili et al (2003) stress that individuals do not search for opportunities but can recognize the value of new ideas and chances when they come by and refer to this as being entrepreneurial alertness. Opportunities are identified by some individuals and not by others because of personality differences related to optimism, self-efficacy and creativity. They also put light on the importance of social networks arguing that entrepreneurs who have extended networks identify significantly more opportunities than solo entrepreneurs.

Effectuation lies in exercising control over what can be done with available resources. Both Ardichvili et al (2003) and Sarasvathy (2001) advance the special role of the manager in solving problem. They both stress that the characteristics of the decision makers form the primary set of means in the effectuation process. These characteristics are the individual’s identity, value system, beliefs, intentions, aspirations, knowledge base and social network. Therefore, the individual has a central role.

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11 Eisenhardt and Martin (2000) define dynamic capabilities as firm strategic and organizational processes that create value within dynamic markets by manipulating resources into new value- creating strategies. Dynamic capabilities reveal how the constraints that entrepreneurs face and the possibilities that they perceive for possible effects result in dramatic changes in their attempts to exploit an opportunity.

Industrialization as an entrepreneurial process (2010) is an updated version of the business network industrialization process (2009) with two variables added, the entrepreneurial capabilities and the exploiting contingencies. Entrepreneurial capabilities are the characteristics of the entrepreneur and the firm in form of attitudes and tangible and intangible resources. Exploiting contingencies is being able to see opportunity when it comes, taking action and to having enough experience and knowledge to make something valuable of it.

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3. METHODOLOGY

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In this part, a description of the method used to address the research question will be provided.

This includes the research approach and design, an explanation of the data collection process and the data analysis as well as the use of the theoretical framework.

3.1 Research approach and design

The aim of this study is to explore how fashion companies internationalize and what role the entrepreneur plays in that process. The research question of the thesis is therefore: What role does the internationalization as an entrepreneurial process have in the fashion industry?

Since there is a gap in existing research on the internationalization in the fashion industry context, a qualitative study was chosen to get more descriptive information. Qualitative research emphasizes words rather than quantification in the collection and analysis of data (Bryman and Bell, 2007). In-depth interviews are in this thesis used to try to grasp the differences and similarities in the internationalization process. Interviews are preferable because the respondents provide more and deeper information about the subject (Dalen, 2008; Trost, 2005). Another argument for conducting a qualitative study is the lack of qualitative research done within the international business field (Bryman, 2012).

To use a qualitative approach, it gave me the possibility to investigate in depth the internationalization of fashion companies in four selected trade organizations and five fashion companies as compared to a quantitative study. According to Jones (2012) the deductive and inductive processes are the opposite of each other and decide what direction the study will take.

Deduction is based on theory, and the findings are compared to the theory. The inductive method is based on empirical findings, and then compared to theories that match the findings. The thesis’s ability to answer the research questions thus suggested a combination of an inductive and deductive approach.

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3.2 Case selection

In order to create a good sampling frame (Bryman, 2012) I had some criteria; First of all they had to be based in US with several years of experience. Second, I wanted to interview the CEO or owner to secure relevant insights in the areas of internationalization and fashion industry. Third, the sample was only comprised of small and medium sized fashion companies, because 90 percent of fashion companies are small and medium sized. Forth, they had to have brands that I believed to be relatively known. I see myself having average knowledge about the Swedish fashion industry and do not perceive the risk of biased selections of fashion companies to be too high. The sample frame consisted of 20 Swedish fashion companies that I phone called and e-mailed and 5 of them responded to my interview request. Of the 4 trade organizations I contacted, everyone responded positivly to be interviewed. After 9 interviews no new findings were drawn from the data.

3.3 Case description

The companies and respondents interviewed were:

Table 1: Company and Organization Profile

Name Position Company /Organization

Emy Blixt Founder and Owner Swedish Hasbeens

Erik Magnusson Founder and Owner D.brand US

Erik Ulin Managing Director J.Lindeberg US

Erik Wilkinson Global Sales Director Eton Fiorella Piedra Business Developer of

Creative Industries

Business Sweden Stockholm

Maja Svensson Founder and Owner ELSA AND ME

Niklas Arnegren Director of Cultural Affairs and Public Programs

The Consulate General of Sweden in New York

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Renée Lundholm The President The Swedish-American

Chamber of Commerce in New York

Vivianne Gillman Managing Director Business Sweden New York

For a more detailed explanation about the interviewees background and previous experience see Appendix 7.1.

3.4 Data collection and process

In the fall of 2013 I had an internship with The Swedish-American Chamber of Commerce; during this period important contacts were established with several of the companies which I aimed to interview in spring 2014. I scheduled the nine interviews. Six of the interviews were conducted via Skype and three via phone. Via Skype, the video camera was not used, because I wanted the person to speak freely, and not be distracted by my facial expressions (Esaisson, 2005). After the companies were interviewed I interviewed managers at Business Sweden, The Swedish-American Chamber of Commerce, and The Consulate General of Sweden. All of the interviews were held through April and May of 2014. I used an iPhone recorder and backed it up with writing bullet points during the interview to safeguard against any technical issues, as is suggested by Svenning (2003). The interviews were carried out in English to make the transcription as correct as possible, and to ensure there would not be any information lost in translation. The interviews lasted between 45-60 minutes.

One of the most shared methods when it comes to gathering information is to ask and talk to people. Personal interviews can give unexpected answers, and open up for follow up questions (Esaisson, 2005). The representatives from the sample were contacted first through email, and thereafter with a follow-up phone call. The interviews were semi-structured with a combination of both specific and open questions. There was room for follow-up questions and changes to the order of the questions depending on the respondent (Bryman, 2012; Bryman and Bell, 2007). After the introduction to the subject and personal questions, I began to ask the thematic questions. These questions were open in order to give the interviewee a chance to speak freely (Allwood et al.

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15 2004). If I felt that the questions were not answered, direct questions were utilized to gain a better understanding. In the end of the interview I asked if there was anything the interviewee wanted to add or clarify. This offered the interviewee a chance to add valuable information (Alvesson and Sköldberg, 2008). After the interviews I was required to contact a few of the representatives again for clarification. The questions were sent out to the representatives before the interview so the representatives could prepare themselves. It was important that there was no misunderstanding of the questions, so I aimed to make the questions as simple as possible (Kvale and Brinkmann, 2009). There is a risk that the questions constructed by the interviewer could give a biased result (Eriksson and Kovalainen, 2008). To decrease that risk the questions were both open and neutral.

The interview guide was constructed with respect to the chosen theory (Internationalization) and purpose of the study (fashion industry). When conducting the interview, the questions were separated into three sub-categories (knowledge, networks, and relationships) to guarantee that the questions covered the theoretical framework. But as pointed out before this thesis has an abductive approach so after the empirical findings I added theories especially for the fashion industry context.

With semi-structured interviews follows the risk of biased researcher who has too much personal influence on the data collection and analysis of the empirical material due to the researchers own subjectivity, frame of references and values (Yin, 2003). Nevertheless, this method was still believed to best answer the research questions.

3.4.1 Operationalization of the theoretical framework

The theoretical framework, with focus on internationalization as an entrepreneurial process in the fashion industry was operationalized into 4 variables (see Table 2). In order to investigate how fashion companies internationalize, I found it appropriate to dedicate a vast amount of the questions on the network internationalization process theme and especially knowledge and networks. So the focus on my questions from start was more about the internationalization process and how they internationalized. During the interviews the respondents brought up a lot of information about the entrepreneur so this brought me back to the theory section and I added the theories behind the internationalization as an entrepreneurial process.

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16 The last question during the interviews regarded the respondent’s challenges and what they recommended to other fashion companies before starting the internationalization process. This question was added as a “secret” question and not represented to the respondents prior to the interviews.

Themes Variables Theoretical Origin

Network internationalization process

Networks

Knowledge

Vahlne and Johansson (2009)

Qviatt and McDougall (1994) Internationalization as an

entrepreneurial process

Entrepreneurial capabilities

Exploiting contingencies

Schweizer, Johanson Vahlne (2010); Sarasvathy (2001);

Ardichvili et al (2003); Dew and Sarasvathy (2002);

Eisenhardt and Martin (2000);

Dunning (1960); Hymer (1976);

Table 2: Variables derived from the theoretical framework on the network

internationalization process and internationalization as an entrepreneurial process.

3.5 Data Analysis

The analyses of the data started immediately after the data collection began. Firstly I separated the data in to two themes, network and knowledge, entrepreneurial capabilities and opportunity. Then I separated it into four variables; knowledge, networks, entrepreneurial capabilities and opportunity. As pointed out by Yin (2003) I tried as much as possible to categorize the responses within the categories and variables that were related to the questions in order to not draw any pre- conclusions before all data was gathered. I summarized the transcriptions and sent them back to the respondents for clarifications to ensure I had understood them correct (Svenning, 2003).

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4. EMPIRICAL FINDINGS

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Here I will present the empirical findings of the data collection from each fashion company and trade organization. First, the empirical findings from the network internationalization process model, with focus on knowledge and networks, are presented as they set the foundation of internationalization theory. Second, the findings from the two added building components;

entrepreneurial capabilities and opportunity are explained.

4.1 The building blocks; knowledge and networks

Knowledge

While the entrepreneurs believe that everything is built on relationships in business, they maintain that relationships and a good network is not enough. According to The Business Developer of Creative Industries at Business Sweden Stockholm, some of the knowledge problems are the legal aspects. She brings up the example of all the information that is needed on a label. There are many more things to consider and she states:

“It is important to have a legal partner who knows the local market. The US is a good market for the more mature companies. I think that many Swedish fashion companies take the US market to fast and Business Sweden has seen it many times.”

For example, Tiger of Sweden had difficulties to enter the US and they tried several times without success. Thereafter, they tried with Canada and it was a huge success, and now they are penetrating the US market from Canada. One of the biggest problems The President at The Swedish-American Chamber of Commerce has seen is:

“When Swedish fashion companies have agreements with department stores, the company gets stuck with the agreement and ends up getting no advertisement or help in promoting the products. The Americans are very good at selling and can promise a lot of things to get a signature on an agreement that will make them the distributor for the US. It is too costly to break the agreement, so for example the Swedish company

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18 Svenskt Tenn had to wait out the time on the agreement until they could continue with sales in the US.”

Therefore, The President at The Swedish-American Chamber of Commerce states, be careful when signing with a department store and be sure they will market and promote your products in the best possible way. The knowledge requirements needed are as follows, first attend Market Week and Fashion Week. It is also about timing the visit and attending trade shows that are the best fit for your brand. Also, to do the research and get to know the stores, agents, and the big retailers. The concerns when starting up a business in the US have mostly been about the risk factor. Furthermore, the US Manager of D.brand stresses the uncertainty he faced:

“The concerns have also been about knowing when to outsource service and to which extent. For this reason, it can be a painful dance to run a business.”

The Manager at Business Sweden New York states that it is vital to get to know the competitive landscape around you, that kind of knowledge is very valuable; it is a lot of hard work but it is worthwhile doing it before you travel.

The President of The Swedish-American Chamber of Commerce gave the following advice:

“Do your homework, talk to as many people as you can, contact the Chamber, and do not think you know it all because you do not.”

The main challenge The Manager at Business Sweden New York can see among the Swedish fashion companies:

“Swedish companies underestimate the need of time, resources, effort, and investment that they need to put in when entering the market. The US is a huge market with huge potential, but it is also very competitive. It is crucial to have a person who dedicates themselves with a substantial amount of time to the business and the US market.”

“Another setback is the lack of understating of the business culture, and that what is important is to work with someone locally that you can trust, like some kind of partner” (The Manager at Business Sweden New York).

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19 The Consulate General of Sweden has seen which failures Swedish fashion companies are experiencing; the US market is too tough for Swedish fashion companies, and they do not see the sales or reaction they had hoped for.

“The importance of realizing that the US has 350 million people and Sweden only has 9 million people is of great challenge for the organization of the supply chain” (The Global Sales Director at Eton).

The Founder of Swedish Hasbeens emphasizes the importance of being aware of cultural differences in international business as such differences can lead to mistrust.

“It is important to not break the rules or procedures in the US. Moreover, the delivery time is essential, you will get charged, and the US companies will stop working with you if you do not deliver on time and keep your promises.”

One of the most common problems is that some Swedish fashion companies have put the largest departments stores as their target, but do not understand the requirements the department stores have. The Business Developer of Creative Industries at Business Sweden Stockholm states:

“It is important to deliver on time and having all the administration for shipping sorted out because if the Swedish fashion company does not follow the requirements it can damage the relationship.”

The smaller retailers are often able to take more risks than the bigger ones, sometimes because they have to, sometimes because they want to, and sometimes because that is their business model.

Smaller brands generally fit better with smaller retailers. The Director of Cultural Affairs and Public Programs at The Consulate General of Sweden does not have a straight recommendation regarding expansion strategies, but according to him:

“Wiser to grow step-by-step because there are a lot of costs and risks involved and you want to keep them down.”

“You will have a better shot if you approach the smaller retailers because the larger retailers usually pick-up trends from the smaller retailers” (The Director of Cultural Affairs and Public Programs at Consulate General of Sweden).

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20 Networks

In general, the Manager at Business Sweden New York believes in the value of networks in finding business opportunities and in conducting business. She stresses that it is important to build a network in some way; however it is not crucial to have your own social network.

“In the beginning when you are new it is more time efficient to buy the network which is to partner up with a stakeholder who already has that network and sales channels because it takes a while to build it up” (The Manager at Business Sweden New York).

The Consulate General of Sweden highlights the importance to reach out to as many people as you possibly can outside of the trade shows. He also strongly believes that it takes time to build a successful and long-term business relationship and that for a business deal to work, everyone interests must be satisfied.

The Business Developer of Creative Industries at Business Sweden declares that when the Swedish fashion companies also have their own network, everything gets easier. She continues and states that she has seen different references where the network is everything. For example to get to the front page in vogue you have to have personal contacts to reach that space. Business Sweden has offices in different cities in U.S to be able to build networks. This makes it easier to build contact with the embassy, different department stores and trying to pitch Sweden for local actors. The founder of D.brand US started off with no experience in the fashion industry and asked his way up. Additionally, D.brand attended the trade shows each season and still does that every year during the market week. Moreover, he has been participating in many events and highlighted that networking is everything and plays a big role in your success. D.brand US had no investors when they started in the US and no big advertisement or marketing campaigns. From the start, D.brand US has worked with people they knew, sport stars, social media personalities, models, and successful bloggers. This is something The US Manager of D.brand highlights to be both cost- effective, and one of the best ways to increase brand awareness.

The Global Director of Sales at Eton says his personal network in the fashion industry has been central for the growth and the success of Eton. He argues that networks are essential, and without a personal network in U.S it will be hard to succeed, it will be to slow. Thus, it has to be a balance and he highlights that Eton is also using trade shows and market research. That being the case, he

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21 states the importance of having a local person with local contacts in the establishment of a business in the U.S. Networking is about calling and travelling, there are no magic wand argues The Global Director of Sales at Eton.

Pre-establishments are very hard for the US Director of J.Lindeberg to talk about because it was before his time, but he argues that today they work a lot with their networks but mostly with trade- shows and PR because it works very well in the U.S. Back in 2000 Johan Lindeberg himself worked with the company and the US Director of J.Lindeberg highlights that Johan Lindeberg used his own network and personal contacts to a great extent in the beginning to establish the brand in the U.S. The founder of Swedish Hasbeens highlights that they did not have any contacts from the beginning. They gained contacts during fashion and trade shows. They had no PR or their own fashion show, instead they attended the biggest shoe fashion fair in LA. It was expensive but it paid off directly when they got the big customer Amazon.

For the fact that the Chamber is a 108 year old organization their network is strong and unique explains The President of Swedish-American Chamber of Commerce. In fact, SACC actively works at creating networks and they have their own platform to make new contacts. At the same time she declares that it is very important that the Swedish Fashion companies have their own networks because that facilitates the whole process in starting up a business in U.S. Moreover, The Director of Cultural Affairs and Public Programs at The Consulate General of Sweden declares that:

“Companies coming to the US, and especially New York, need to know more about the social drive and the importance of talking about other things than business when doing business.”

The US Manager at D.brand has a philosophy that:

“To know your business and industry you must start from scratch before you can work with the big-account department stores in the industry. I didn´t want to burn any bridges and played with the small actors in the beginning, to minimize potential losses due to shipping, customs, production, delays, and how to handle product defects.”

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4.2 The added components; entrepreneurial capabilities and opportunity

Entrepreneurial capabilities

According to the Global Sales Director at Eton they are very lucky to have an extraordinary team- attitude, and it is a world-wide attitude. He stresses that:

“It is of great value to have a strong positive attitude and supporting each other. As a result, it all comes down to the people, and the people at Eton have a “can do” spirit, positive attitude, share the same vision and understand the plan and run after it.”

The Founder of ELSA AND ME highlights the differences between people in US and Sweden:

“The main difference is that the US has an extrovert culture with a lot of energy and excitement among the sales representatives. In the US people expect more and Americans are better at selling.”

“In previous years, Eton had been hiring the wrong people because of the hurry in hiring since we were expanding so fast. Sometimes we forced people into positions that were not suitable for them” (The Global Sales Director at Eton).

The Global Sales Director at Eton refers to the book Good to Great and the importance of not only getting the right people on-board the bus, but also in the right seat. That being the case, Eton learned from their previous mistakes and today they are a really good team with different cultures and backgrounds that makes Eton a dynamic workplace.

The Director of Cultural Affairs and Public Programs, at The Consulate General of Sweden, continues that the reasons behind the failures are that Swedish companies are not carrying the products Americans are looking for, or they are not trying hard enough; you have to do it with a hundred percent. Moreover, you must have the money to be able to be in the US.

“Persist longer than anybody else and to have the right people representing the brand is crucial for success” (The Director of Cultural Affairs and Public Programs at The Consulate General of Sweden).

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23 “Eton has been a success because they finally built a top-to-bottom plan, with a good business plan and also invested in the organization to support the plan. That plan also included the growth of the businesses and support of the team as we grew, which is another important thing” (The Global Sales Director at Eton).

Americans are very good at talking and promising things. Americans have an expectation of being social and at trade shows and fairs it is fundamental to greet people and be proactive.

“Swedes tend to be shyer and want the products to speak for itself, but sometimes in the US it helps to have a social drive, it is a cultural thing but it has implications for business as well” (The Director of Cultural Affairs and Public Programs at Consulate General of Sweden).

Swedish Hasbeens has been working with sales from the start and had their first fashion show last year, 2013. The Founder the company emphasizes:

“It is very important to sell because the people in the fashion industry are more creators and forget about selling and therefore do not survive. Instead of having fashion shows and ads we went to trade shows and made selling most important in the business, therefore our success.”

The Founder of ELSA AND ME highlights that:

“It is not always good to have capital, it is better to sell to survive because it will be a deeper driving force.”

Exploiting contingencies

The Director of Cultural Affairs and Public Programs at The Consulate General of Sweden explains:

“It is important to be physically present in the US during the expansion process and being connected to the city like, Acne and Rodebjer, to develop the brand. Besides this, it is about persistence, never giving up and coming back again and again.”

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24 Common for all the five entrepreneurs they had a tendency to see opportunities and catch them. The founder of Swedish Hasbeens saw the opportunity when she found fifty cloths in her stockroom to make cloth popular again. A similar story goes on for the founder of Elsa and me, she saw a demand for work clothes for business women and she visualized the idea of her own brand and took action.

In summary: The knowledge requirements before internationalization to the US is according to the entrepreneurs and organizations to have a legal partner who know the market, always have agreements and make sure it is a good one. In internationalization there are a lot of uncertainly to handle and one of the entrepreneurs explains it to be a painful dance to run an international business. So, do your homework is the common view and do not underestimate the time, resources and investment the internationalization process will take and cost. Hence, realize it is a continent and not a country. Accordingly, do not break any rules, deliver on time and have the administration and logistics ready. Four of the five entrepreneurs didn’t have any external capital and used a step-by-step method to grow.

Only one entrepreneur said networks where not critical. Others expressed that “a network was everything” and “the most important aspect” and “networking is about start calling and travelling, there are no magic wonder”. However, everyone agreed that having your own network made it easier. Additionally, most of the entrepreneurs expressed that their own personal network was a big part of their company’s success. The organizations also highlighted the fact that they live on helping entrepreneurs with contacts and also stressed that you can buy your network in the beginning.

Entrepreneurial capabilities are the personality of the entrepreneur and include attitudes, beliefs, values and prior experience. A common view of the entrepreneurs was that they strongly believed in the importance of having a strong positive attitude, a can “do spirit” as one expressed. In general, the US is an extrovert culture with energy and excitement, which demands a personality that can fit in that environment. Eventually, one entrepreneur expressed that you cannot force people in positions, you have to have the right people on board and they have to sit in the right place. In fact, only two of nine interviews did not have any prior experience in their field and all of them had a higher education.

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5. ANALYSIS

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In this part I discuss the findings related to my theoretical framework from Johanson and Vahlne (2009). Whereas some reflections are in line with the thought of the business network internationalization process, others focus on the entrepreneurial aspects such as entrepreneurial capabilities and exploiting contingencies. The latter two are the building blocks for the internationalization as an entrepreneurial process. The conclusions drawn from the analysis will be presented in the following chapter, where I present the internationalization as an entrepreneurial process in the fashion industry.

5.1 Knowledge

It is obvious that the fashion industry operates in a world characterized by knowledge. Still it is clear that knowledge can be divided as Ardichvili et al (2003) stress, related to passion or work experience. All the founders to fashion companies had knowledge related to their special interests and passions in the fashion industry. Furthermore, all of the entrepreneurs and organizations had knowledge from work experience. The fashion industry is described as a small world, where people know each other and know what is going on. Still, it is clear that though within the industry some information is more or less public knowledge, some of it is held in close relationships.

According to Johanson and Vahlne (2009), learning by doing leads to a gradual and differentiated approach to foreign markets. A similar experience is shared by the respondents in this thesis. They all emphasized the importance of research and knowledge of the US market before entering.

However, most of them learned by their mistakes and grew step by step. Strengthened by J.Lindeberg, Eton and D.brand US who has a philosophy and that is to know your business and industry you must start from the bottom before you can work with the big accounts in the industry.

Highlighted by Cohen and Levinthal (1990), “The premise of the notion of absorptive capacity is that the organization needs prior related knowledge to assimilate and use new knowledge.” In sum, this explains that the more knowledge you have the more new knowledge you can absorb and create. This is contrary to the Swedish Hasbeens’s experience, which went in to the US without

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26 any knowledge, but with a great passion for their product and for sales. Still, in internationalization there is a lot of uncertainties and risk involved.

5.2 Networks

Clearly, all participating respondents agreed on Ardichvili et al (2003) statement that entrepreneurs who have extended networks identify more opportunities than solo entrepreneurs who must find new business opportunities by themselves. Most of the respondents also put light on the fact that their own personal network had an importance in their success. Arguably, fashion entrepreneurs are believers in networks. Some of the respondents expressed how much they enjoyed building relationships and attending events. Also, for some of the organizations that was their core business which emphasize the value they attach to networks.

Network position reflects the firm’s trustworthiness and degree of commitment in its formal and informal relationships (Johanson and Vahlne 2009). A strong network position as a basis for the successful development of the firm’s business has, for example, been shown to lead to successful internationalization, affecting both the choice of country market and the mode of operation in that market (Coviello and Munro 1995, 1997; Johanson and Vahlne 2009).

Many of the fashion entrepreneurs and trade organizations emphasized the importance of building trust and commitment in business relationships and the importance of consider both parties interests in a partnership. Some of the respondents admitted they would not be where they are today without their network. Another respondent said his that there are no magic wands, just start calling and meeting people. However, as this study has illustrated, a good network is not enough.

International success also demands the entrepreneur or manager be alert to opportunities and that they have an imaginative and visionary side to be able to create and see what can be in the future when opportunities come.

5.3 Entrepreneurial capabilities

Entrepreneurial capabilities are the characteristics of the entrepreneur and the firm in form of attitudes and tangible and intangible resources. Also, entrepreneurial capabilities are the

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27 personality of the entrepreneur and also include beliefs, prior knowledge and values. A common view of the entrepreneurs was that they strongly believed in the importance of having a strong positive attitude, as can “do spirit” as one expressed. In general, US are an extrovert culture with energy and excitement, which demand a personality that can fit in that environment. Arguably, many of the respondents highlighted how important it is to have the right people on board and if not, how it can drain the company and slow down the internationalization process.

Reflections of the respondents are that they all have good business skills. After nine in-depth interviews I am impressed by the educational and long experience the respondents have in the field. Many of them are well-informed, open-minded and optimistic. One could say that the entrepreneurs had more of an energy approach compared to the respondents from the trade organizations. Some of the stories shared reflected the opportunity development process described by Ardichvili et al (2003), perception, discovery and creation.

In addition, another common view was the respondent’s ability to build and sustain work and personal relationships. Most of the entrepreneurs and managers were curios, had a drive and a self- confidence; they knew what they were talking about and they trusted themselves. Most interestingly, most of them came to US with a goal to make it and had an attitude of learning-by- doing. This attitude is strengthening the theory of effectuation. Effectuation lies in exercising control over what can be done with available resources. Both Ardichvili et al (2003) and Sarasvathy (2001) advance the special role of the manager in solving problems. They both stress that the characteristics of the decision makers form the primary set of means in the effectuation process. These characteristics are the individual’s, aspirations, knowledge base and social network. Therefore, the individual has a central role. Putting light on the fashion industry, this is of great importance as people in the fashion industry are more creative and believe the products will “speak for themselves”.

Eisenhardt and Martin (2000) define dynamic capabilities as firm strategic and organizational processes that create value within dynamic markets by manipulating resources into new value- creating strategies. Dynamic capabilities reveal how the constraints that entrepreneurs face and the possibilities that they perceive for possible effects result in dramatic changes in their attempts to exploit an opportunity.

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5.4 Exploiting contingencies

Exploiting contingencies is to be able to see opportunity when it comes, take action and to have enough experience and knowledge to make something valuable of it.

Sarasvathy (2001, p. 252) stresses the importance of “excellence in exploiting contingencies”, for example, in networks. Ardichvili et al (2003) stress that individuals do not search for opportunities but can recognize the value of new ideas and chance when they come by and refer this to be entrepreneurial alertness. Opportunities are identified by some individuals and not by others because of personality differences related to optimism, self-efficacy and creativity.

One interesting reflection is that both Acne and Rodebjer, who today are two of the most successful Swedish fashion companies in the US, both were physically present in the US during the expansion process and still are today. All of the entrepreneurs in this study can be seen as optimistic and self-efficient because there are a lot of risks and uncertainty in the internationalization process. But, this is also what makes them unique. The “lets do it” approach, being able to catch the opportunities and recognizing when something is of value, is their biggest strength in the internationalization process. The stories shared show clearly how the entrepreneur used, perhaps felt forced to use, contingent knowledge rather than existing information.

The similarity between all five entrepreneurs was that they had a tendency to see opportunities and catch them. The founder of Swedish Hasbeens saw the opportunity when she found fifty cloths in her basement and came up with the creative idea to make cloth shoes popular again. A similar story goes on for the founder of Elsa and me, she saw a demand for work clothes for business woman and she visualized the idea of her own brand and took action.

The commonality between all the respondents was that they attempted to exercise control over what could be done with the resources available. When standing in front of a problem, they use their competences and networks and trying to convert uncertainty into opportunity.

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6. CONCLUSION

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I started this study with one question: What role does the internationalization as an entrepreneurial process have in the fashion industry? In this section I will summarize the findings and draw some conclusions.

This study leads to several conclusions with implications for the internationalization as a process in the fashion industry. First of all, entrepreneurial capabilities play an important role in the internationalization process. The characteristics of the entrepreneur and attitudes are essential for the fashion company. Most of the entrepreneurs in the study were open-mined, optimistic, had drive and self-confidence. All of the managers and entrepreneurs were highly educated and had lengthy experience in their field.

Second, effectuation is important as it is the ability in exercising control over what can be done with available resources. The special role of the manager according to Sarasvathy (2001) and Ardichvili et al (2003) is solving problems. In doing so, they both stress that the characteristics of the decision makers to be highlighted. This has been proven to hold true in this thesis, similar for all the respondents are that they attempted to exercise control over what could be done with the resources available.

Moreover, dynamic capabilities are a firm’s strategic and organizational processes that create value within dynamic markets by manipulating resources into new value creating strategies.

Dynamic capabilities are the internal value creation strategies within a firm. This was true to most of the entrepreneurs in the thesis, for example Eton and their top-bottom plan.

Exploiting contingencies is to be able to see opportunity when it comes, take action and to have enough experience and knowledge to make something valuable of it. Similar for all the five entrepreneurs was that they had a tendency to see opportunities and catch them. Opportunities are identified by some individuals and not by others because of personality differences related to optimism, self-efficacy and creativity.

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30 Clearly, the accepted view from this study shows that many tend to underestimate the work experience that is needed. Building networks takes time and effort. But, with focus on the entrepreneur’s capabilities and exploiting contingencies, internationalization as an entrepreneurial process can be seen as a great tool in that process.

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IN FASHION WE TRUST: Exploring the role of internationalization as an entrepreneurial process in the fashion industry