We integrate internationalization process theory with industrial network theory to explain SME entry in emerging markets. We show that entry modes are complemented by entry nodes and entry processes. We develop a Five/Five Stages Model to consider the dynamic interaction between these factors. We undertook a survey of 116 SMEs in Southern Sweden trading with the Baltic States, Poland and Russia, as complemented by a case study of ten SMEs trading with Poland and an analysis of trade statistics of SMEs in Southern Sweden.

We find that relationships are critical for entry as most firms rely on direct relationships with customers or dyads. The involvement of subsidiaries is uncommon, suggesting a low degree of FDI. Meanwhile, triads or indirect relationships through distributors or agents are more important. This low cost entry node creates a paradox in that the insufficient learning it provides about local markets obstructs further internationalization. By relating entries to the global internationalization process, we find that most SMEs trade with few countries in the region, indicating a low degree of regional internationalization.