This paper criticizes conventional internationalization theory of the firm and argues for a relational perspective in the analysis of international expansion. Using in-depth empirical research from three European metropolitan case studies, the paper demonstrates that social networks (i) are the most frequent cause of international market entry and (ii) they systematically affect the organizational form of entry. A combination of qualitative exploration and logistic regression analysis of fieldwork and survey data suggests that the internationalization of business services cannot be fully understood from firm-specific resources alone, but it also has to take the context of external relationships into systematic consideration. The impact of social networks on entry form changes over time. With increasing international experience firms face fewer constraints on entering a foreign market through brownfield FDI. For economic geography, future analysis should focus more on the context of inter-firm relationships in order to overcome some of the too mechanical arguments about the process of firm internationalization.
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