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Small and medium size enterprises (SMEs) that have gained experience in a supplier-customer relationship with multinational companies in the domestic market may be able to leverage that relationship to recruit new customers abroad. Is it possible to internationalize such supplier-customer relationships is the research question addressed in this paper. We tested five hypotheses, derived from the internationalization and interorganizational literature, using non-parametric tests and regression analysis with data provided by customers and suppliers in the computer industry. We discover that while customers initiate the first supplier-customer relationship, additional relationships, formed with the objective of internationalizing the firm are often initiated by SME itself, a new finding.

Is there an opportunity for smaller firms to skip stages in the organic internationalization process by piggybacking on their relationships with stronger more established local multinational firms? Many small and medium size enterprises (SMEs), especially high technology firms, are forced to internationalize early in their development due to a focus on niche markets, shorter product cycles and, frequently, the small size of their domestic markets relative to the potential that exists abroad. SMEs attempting to internationalize face a basic marketing dilemma—do they attempt to internationalize unaided or do they form a partnership with stronger firms in their business system that can help them. One such way is to internationalize as part of a supplier-customer network in partnership with established multinational firms. Many firms have experimented with supplier-customer collaborative networks, linking numerous parties in the business system, to respond to customer product and service preferences in myriad international markets. For example, firms that wish to sell to original equipment manufacturers (OEMs), especially in the automotive and electronics industries, must be willing and have the capability to fulfill their customers' request for close supplier-customer relationships. Indeed, the long-term relationships that suppliers have with their customers is acknowledged as a key to their performance and has become a major source of competitive advantage for both parties (Flint, Woodruff, & Gardial, 1997). This paper examines the degree to which supplier-customer relationships between SMEs and large scale OEMs may be internationalized to avail of such competitive advantages. The broad research issue addressed is: are SMEs, with a favorable attitude toward collaboration and participation in supplier-customer relationships, more likely to win additional new customers abroad? To understand this research issue it is decomposed into the following four questions: 1. Who initiates the first supplier-customer relationship between industrial SMEs and multinational partners? 2. Is it possible to internationalize supplier-customer relationships i.e. is it possible to acquire customers abroad using existing domestic supplier-customer relationships established with multinational firms? 3. Are industrial SMEs more likely to initiate additional supplier-customer relationships after the first one has been implemented? 4. Does an SME's attitude toward a supplier-customer relationship have an influence on the survival of that relationship? In this exploratory research we use these questions to develop a number of hypotheses, which are tested using data drawn from the computer sub-supply industry. We discover that, in general, customers initiate the first supplier-customer relationship, which confirms findings in the literature. Suppliers however, often initiate subsequent relationships. In many cases, suppliers actively seek to establish additional supplier-customer relationships with the objective of internationalizing their business. Suppliers with a more favorable attitude toward supplier-customer relationships may be more likely to win customers abroad.

In a general sense customers and suppliers in the present study proceed through a series of steps that appear to correspond to the Dwyer et al. (1987) relationship formation process. As the parties concerned explore and expand their relationship (Comer & Zirger, 1997) through deeper bonding and the formation of additional supplier-customer relationships, they establish sequentially more structured and formal relationships some of which are likely to deepen the firm's commitment to supplier-customer relationships and international markets. Specifically, we arrive at three major conclusions. First, the supplier's attitude to supplier-customer relationships depends on the length of experience-longer experience leads to a more positive attitude. Second, while customers initiate the first supplier-customer relationships, suppliers with a more favorable attitude toward such relationships, after the first one has been established, are more likely to enter additional supplier-customer relationships than are suppliers with less favorable attitudes. Lastly, suppliers who form favorable attitudes toward supplier-customer relationships in the domestic market are more likely to establish relationships with large multinational customers leading them to acquire new customers abroad.