When Facebook is not enough

It does not help with friendships in social media if you want to sell to Russian industry. Friendship has got to go deeper.

The Russian oil and gas sector is strategically moving towards offshore development of oil and gas resources, but lacks the appropriate technology, and expertise as well as sufficient capital. This in turn creates optimism and opportunities for the Norwegian supply industry, who can provide world-class technology and complex solutions for offshore development to Russia by trading or investing in the market.

However, challenges arises as the Russian business environment is characterized as highly volatile and uncertain with regard to institutional frameworks, with a high political risk, and a  business culture that differ from traditional Western culture.

Two research questions

My PhD-study has investigated how the process of internationalization evolves when actors from the Norwegian supply industry proceed with foreign market entrance and market expansion in the Russian oil and gas sector. Two research questions have been addressed using a qualitative framework, in which both a mapping and a multiple case study have been conducted.

The first part of the study aims to create new knowledge about what entry modes are applied and post-entry changes made, as well as what factors explains actors’ preferences in their entry mode selection. The second part of the study aims to enhance knowledge about the process of organizational learning during foreign market entrance and market expansion.

"Just sufficient enough"

The findings show that actors prefer to apply entry modes requiring little resource commitment and local knowledge. By trading products through a local intermediary, or a representative office, products are exported from the domestic to the Russian market.

The study argues that these actors prefer entry modes that are just sufficient enough in terms of use of resources and possession of local knowledge to trade products in the foreign market.

Furthermore, actors’ rationale and sensemaking behind entry mode selection are found to be an attempt either strategically to avoid or to adapt to market uncertainties that are perceived as constraining market entrance and expansion, and associated with risks during internationalization. Market uncertainties are further found to be grounded on perceptions about physical distance, as dissonance and ambiguity in interpreting and understanding cultural and institutional settings in the foreign market because of embedded differences between Western and the Russian market.

Strategic planning useless

Organizational learning during internationalization is demonstrated to stem from both actors’ interaction with current experiences and through interaction and exchange of information with network-nodes in the Russian market. At first, it is found that actors learn from their current experiences either by exploiting old certainties by replicating routines from their existing knowledge base, or by exploring new certainties by expanding their base of knowledge. From these evidence, it is argued that learning from experiences becomes a crucial factor due to the dynamic environment of the Russian market.

Strategic planning and future forecasting become difficult and less useful, as strategies rather emerge and change from actors’ cognition about challenges and opportunities arising from a chain of unplanned and unexpected situations and events encountered in the market.

Tightly coupled relationships

Secondly, the findings show that actors learn from being insiders in trust-based relationships with few network-nodes in the Russian market. It is argued that learning occurs from tightly coupled relationships founded on collectivism that are associated with the notion of traditional friendship.

This contrasts with assumption about learning from Western structures of loosely coupled networks founded on individualism, which are rather associated with the modern notion of "Facebook-friends".

As foreign actors are not admitted into larger business networks in the Russian market, these network-nodes become significantly important as the main source of knowledge and the main link for providing opportunities in the Russian market.