ISSN 1392–0758 SOCIAL SCIENCES. 2014. Nr.

4 (86)

IMPACT OF GLOBALIZATION ON CONTEMPORARY BUSINESS

Preconditions for Born Global Internationalization: Network Approach

Rimante Morkertaite and Jurgita Sekliuckiene

Kaunas University of Technology

K. Donelaicio str. 73, LT-44029 Kaunas, Lithuania

http://dx.doi.org/10.5755/j01.ss.86.4.9260

Abstract constantly looking for new internationalization methods.

Born global companies are mainly managed by
A rapidly changing environment creates new entrepreneurial leaders. Entrepreneurial orientation
challenges for companies seeking to expand their emphasizes the importance of the initiative and innovation
activities outside the country. On the other hand, the of organization; for such companies it is easier to establish
changes can be accelerators for new activities, new themselves in international markets (Knight and Cavusgil,
breakthroughs of ideas. Internationalization solutions 2004). The leaders of born global companies see the
of born global enterprises are often in response of international business as their fundamental vision of the
changes in the environment and have a quick solution organization, so that all the processes, decisions and
for engaging in the foreign markets, ambition and activities are concentrated in order to accelerate
entrepreneurial activity. Rapid internationalization of internationalization process (Roudini and Osman, 2012).
small and medium-sized companies is often associated Rapid internationalization of small and medium-sized
with strong partners and the need for the operation of a enterprises is an interesting object of both practitioners and
network. Therefore, networking is becoming a necessity theoreticians.
for successful internationalization of born global There is quite a lot of research on particular aspects of
companies. born global internationalization and its performance.
Building on the extant literature and drawing on However, the importance of networking for the company’s
the network theory, this paper presents a conceptual internationalization is a relatively new research sphere.
model of born global firm internationalization and The need for further explorations on the impact of
benefits from the networking in internationalization networking to rapid internationalization among born global
process. The theoretical research has shown that companies has been recognized by Andersson and Wictor
formal and informal networking is crucial for (2004), Sharma and Blomstermo (2003), Autio (2005),
internationalization of born global enterprises, however Coviello and Cox (2006). Therefore, further analysis of
there are positive and negative outcomes, which are born global firms, highlighting the importance of
discussed. The investigation contributes to born global networking to companies’ internationalization becomes the
literature, presenting networking-based rapid object of this study. The aim of the paper is to reveal
internationalization. preconditions of born global internationalization through
Keywords: born global, internationalization, networks and highlight the benefits from networking. This
networks, benefits from networking. study is contributing to the international business sciences
by providing a better understanding of the importance of
Introduction networking to performance of born global companies.
The study was carried drawing on literature analysis,
Globalization has caused increasing integration of the revealing born global enterprise specifics and networking
markets and the economies. Therefore, companies factor. In the study a conceptual framework of born global
operating in relatively small markets are seeking to grow internationalization through networks is proposed.
outside the country, and the internationalization is
becoming a mainstream of business growth. The intensive
competition has determined researches for new forms of Factors influencing born global companies and
activities outside the country not only to large companies networks
but also small and medium enterprises (SMEs). In order to Small and medium-sized enterprises, which
compete in the international market and to make a more internationalize rapid from the first day of their
efficient use of the limited financial, time and other establishment, are referred to as born global companies
resources, small and medium-sized enterprises are (Knigh and Cavusgil, 1996, Knight and Cavusgil, 2004;

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Social Sciences / R. Morkertaite, J. Sekliuckiene. Preconditions for Born Global
Socialiniai mokslai. 2014. Nr. 4 (86) Internationalization: Network Approach

Rialp et al., 2005). According Falize and Coeurderoy alliances, universities, scientific research centers, non-
(2012), a born global company from the outset seeks governmental organizations (NGOs), government agencies
international markets and in a short period of time jumps and others) and with others - vertical relationships
over some traditional internationalization stages. Born (customer, customer partners, suppliers and partners).
global companies quickly achieve a high level of sales of There are various horizontal and vertical forms of
goods or services of the foreign markets. Born global collaboration, such as partnerships, business associations,
companies are driven by the emergence of both external technology platform, integrated science, studies and
and internal factors. External factors include the remote business centers, clusters. According to Johansson (2005),
environment and industry effects: company’s connections, their characteristics are closely
 Technological development (production, linked to the needs of the company, i.e. with the
communication, transportation systems, etc.) (Rialp et company’s requirements from the network.
al., 2005); Companies have formal and informal network of
 Globalization of markets, such as globalization of contacts. Formal relationship is considered to be related to
knowledge perspective, which has solved many of the the business relationship between two or more participants
international trade barriers (Knight and Cavusgil, (Coviello and Martin, 1999; Ojala, 2009). Formal
2009; Halldin, 2012); communication includes goods or economic exchanges and
 The industry in which acts a firm characteristics certain resolution of specialized economic (mostly one-off)
(Baronchelli and Cassia, 2011); issues (Hite and Hesterly, 2001). In addition, formal
 Growing competition, which has created an relationships include relations, which are institutionalized
increasing amount of niche markets (Knight and for example, through contractual agreements, licensing,
Cavusgil, 2009; Halldin, 2012). etc. Meanwhile, informal contacts can be identified as the
 Internal factors are divided into the following: social and economic exchange. These networks are closely
 Global entrepreneurial vision of the firm (Rialp, Rialp related to the individual existing links, for example,
and Knight, 2005); contacts with former colleagues, volunteer relations and
certain family or community relationships. Whereas
 Organization competence, such as the company's
official relations can ensure stability, access to resources,
ability to develop innovative products (Baronchelli
as well as the legitimacy of the contract, informal
and Cassia, 2011);
communication networks are promoting factors to formal
 Company’s innovativeness, flexibility and
relations. Informal communication is considered to be
adaptability, which are derived from the company’s
stronger and providing diverse information, creating trust
small size (Knight and Cavusgil, 2009; Halldin,
and that is what is needed for the creation of formal links.
2012);
Moreover, informal communication is often more
 Entrepreneurs’ international experience, explained by
important because of a lower demand for investment and
the fact that modern businesses need more
its flexibility, and these qualities are necessary in the
international experience and knowledge about foreign
context of changing entrepreneurs business.
markets (Baronchelli and Cassia, 2011).
In both formal and informal relations, the strength of
Both internal and external factors create an
the relationship is essential; it depends on the participants’
environment in which born global company has been
communication frequency, intensity and reciprocity. The
formed. The smallness of firm leads to partnership needs,
weak link is the case when participants of network spend
seeking synergies in the development of existing
little time and is inactively involved in the development of
partnerships by engaging in networks. Gilchrist (2009)
the relations. Weak ties are not suitable for complex
explains that networking is a process of information,
knowledge transferring, but these relationships are much
knowledge, practice and experience (and sometimes
more flexible, requiring fewer resources and are used to
resources) movement, sharing and exchange among the
obtain a broad range of straightforward information
participants with a common interest - to create added value
(Blomstermo and Sharma, 2003). Stronger links are
in a given field. The relationships between the participants
created with higher confidence, freedom of communication
in the network are due to reach the exchange of valuable
between the participants in the network, which has an
resources and this interaction continues until both sides of
impact on the transmitted or received information content
this is helpful. In the established network companies split
and easier transfer of complex knowledge.
their activities, which means that they become dependent
on each other (Sasi and Areni, 2008). Networks created by
entrepreneurs are interpreted as an egocentric concept. Reasons encouraging to form networks
These networks consist of direct bilateral communication Reasons to form networks can be divided into several
with the center of the entrepreneur (Hite and Hesterly, categories: 1) to reduce costs; 2) to increase revenue. It
2001). Based on these networks, entrepreneurs, developing should be noted that both categories correlated with each
born global enterprises, receive the necessary information other, so it is worthwhile to elaborate them.
relating to the environment in which they operate or intend Mostly networking companies are encouraging by a
to operate. desire to reduce their costs (Glaister and Buckley, 1996;
Möller and Halinen (1999) and Johansson (2005) Ebers, 1997). Necessary amount of expenditure is too high
argue that a company with some of the participants share a for small and medium-sized born global enterprises and
horizontal relationships (with the competitors and their this amount is also increasing because of certain barriers

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Socialiniai mokslai. 2014. Nr. 4 (86) Internationalization: Network Approach

and risks. In particular, small and medium-sized companies Expected benefit from networks is recognition of a
have limited resources which are required for new market. Belonging to the network organization has an
internationalization. Enterprise expansion liabilities are all opportunity to increase their visibility in the market,
costs associated with the spatial distance incurred in order enhance their reputation, image, prestige, and this, in turn,
to internationalize (Falize and Coeurderoy, 2012). Thus has a direct impact on company revenues increase.
SMEs aim to create networks in order to save the An economy of scale ambition is not only a mean of
organization’s management and coordination costs (Ebers, overcoming the threats, but also an obvious benefit for the
1997). Rapid internationalization creates additional company. Often, small and medium-sized enterprises are
transportation, communication, co-ordination at a distance unable to make proper use of their existing production
and other costs. The management costs are usually much technology capabilities, due to small orders degrade
more complicated than acting only in their own context conditions to acquire the necessary resources (Glaister and
(Falize and Coeurderoy, 2012). Buckley, 1996). Access to resources (financial, human,
The time required for the learning and assimilating the etc.), skills and competencies is another aspiration of born
basic knowledge about foreign markets, also becomes a global companies. Companies cooperating in networks
barrier. SMEs in particular have a lack of knowledge about hope for easier access to the information. Cooperating
business organization in other countries. organizations have a potentially better access to the
Internationalization of the company often occurs with new multiplicity of information that would otherwise be
operations, with which the company must be able to cope difficult to achieve. This reduces the time and financial
(Falize and Coeurderoy, 2012). Enterprise collaboration is costs of the company (Wilkinson and Young, 2005).
one of the fastest and most effective ways to absorb and Specialization benefits also promote born global
assimilate knowledge, the maximum shortening the companies for networking. Mostly company does not
learning curve. develop full value chain of specific product. It specializes
Another reason to encourage companies to look for in a certain stage of the process, and the rest (e.g., details,
cost-saving alternatives in networks is liability of newness. resources, processes, etc.) purchases from other
Born global companies are entrepreneurial start-ups with a organizations with which it has a certain relationship.
lack of knowledge about the specifics things in Specialization in one area gives the company a more
international business, that’s why they often faced with the favorable competitive position in relation to non-
newness of the enterprise threats (Sharma and specialized firms.
Blomstermo, 2003). Companies penetration in foreign
markets speed directly dependents on its ability to find Stages of internationalization
clients, the right partners and establish a solid deals.
Penetration into new market for inexperienced company is There are plenty of disagreements between schoolars
exposed to significant unnecessary costs such as: search about internationalization process, as the organizations
engines costs for finding a reliable local agent; negotiating uses networking to ensure a place into foreign markets.
costs incurred in negotiating the terms of the contract; The internationalization stages of born global companies
costs incurred for regular meetings and terms of the are: 1) Identifying opportunity; 2) Acting upon the
contract execution monitoring, etc. (Falize and opportunity; 3) Realyzing an opportunity.
Coeurderoy, 2012). First of all born global company must identify the
Another reason is associated with overcoming of opportunities for itself, find the ways to use them
foreignness liability. Small and medium-sized businesses effectively and finaly realizing them (Johansson, 2005).
often lack the additional resources that may be required in The main focus will be on technological and market
order to establish themselves in unfamiliar institutional opportunities. Technological and knowledge growth
environments. Trading in the international market can be absorption progress are the most important aspects of
risky due to the different political, economic, social and technological capabilities. It is the technological
legal environments between the company’s home country opportunities that are most vital for born global companys
and the country in which the company has decided to start-ups. However these opportunities by itself cannot
internationalize their activities (Falize and Coeurderoy, give best results so far, so then market opportunities
2012). In case of not dealing with other entities and not (opportunities that already exist and newly designed) also
prevailing their rules of behavior and values, the company become important. Market opportunities can have a
risks closing all ways to a successful business expansion significant impact on network connections. The network in
(Barkema and Drogendijk, 2007). this case become not only required for additional campany
Another group of factors encouraging companies to source, but also the possibility of continuous development
network is the aim to increase operating incomes (Ebers, and transformation tool (Sarasvathy, 2001). In order to
1997). Inter-organizational networks can be useful for this identify opportunities for technological development, it is
purpose, as the company strengthens position against useful for born global companys to have relations with
competitors or part of competitors become partners vertical connection people, researchers or patent
belonging to the same network. Cooperation organizations representatives. When the posibility of development are
gain greater overall competitive power, which gives a more carried out it does not mean that the company will
favorable competitive position against opponents (Glaister automatically establish market opportunities. In order to
and Buckley, 1996; Ebers, 1997). create economic value, identified opportunities should be
compared on the market itself.

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Social Sciences / R. Morkertaite, J. Sekliuckiene. Preconditions for Born Global
Socialiniai mokslai. 2014. Nr. 4 (86) Internationalization: Network Approach

Figure 1. Conceptual framework of born global internationalization through networks

The company must realize which development opportunity business system that enables its members to work and be
may solve the problems that occur. All of this is a market more productive and efficient.
opportunity through its relationship with the environment
development. In this case connection relations play an Conceptual framework
important role, because it its through them that companies
are provided with useful information. According to the presented theoretical insights
Second entrepreneurial internationalization stage is (Johansson, 2005; Sasi and Areni, 2008; Falize and
very dependent on the company’s business model. Coeurderoy, 2012; etc.), the authors of the paper propose a
Business model development is quite a long process, which conceptual framework of born global internationalization
is influenced by the environment contacts. Close ties with through networks (see Figure 1).
the partner can block the searching for alternative solutions Proposed framework combines complex factors which
because of exposing only by cooperation, on which determining networks of born global companies,
company depends, business model (Chesbrough and entrepreneurial internationalization stages of the process,
Rosenbloom, 2002). In this case, the entrepreneurial synergy effect resulted through networking and possible
company could suffer painful consequences because impact on company operating in networks. Synergy effect
consumer segmentation, value proposition development, is achieved due to the following reasons:
cost structure, and other processes are formed not  Membership of the network enables enterprises to get
according to the company's technological capability, but specific information about markets, technologies,
taken over by the partner’s business model to whom the resources, and other important aspects of a business
company has a strong relationship. in an easier, faster and cheaper way (Chetty and
In the third stage of entrepreneurial internationalization Wilson, 2003). Participants of network exchange
SMEs has to realizing an opportunity. This whole process available experience, share advices with each other,
is an integral part of networking (Lechner and Dowling, seek for experiential learning, acquire important skills
2003). The networks creates synergy effect (Sasi and for internationalization. On the same time grows
Areni, 2008), necessary for realizing technological and confidence in each other and there is unity among the
market opportunities. This occurs because of the links forming a network. Companies use networks to
networking companies find themselves in an effective acquire the techniques, how to avoid the institutional

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Social Sciences / R. Morkertaite, J. Sekliuckiene. Preconditions for Born Global
Socialiniai mokslai. 2014. Nr. 4 (86) Internationalization: Network Approach

and cultural barriers in order to establish their (Sasi and Arenius, 2008; Falize and Coeurderoy,
business in those markets. 2012).
 Manolova et al. (2010) note that with useful  Another positive result achieved by the company
information and relevant resources company takes the through networks is innovation. Ahuja (2000) and
internationalization actions much more confidently, Burt (2004) in their studies have demonstrated that
which allows the company to avoid opportunistic the number of connections and the structure of
behavior. network can improve the innovative performance of
 Networks of born global company serves for the company. The aim to improve innovation and
implementing a number of activities (Andersson and results obtained through actively managed networks
Wictor, 2004). The network partners can co-operate can directly improve achievement results of the
in many areas: sales and logistics; production; company (Kastelle and Steen, 2010).
administration; research and development and etc.  Born global companies through established
Cooperation among the organizations can take entrepreneurial networks become known in the
advantage of economies of scale through shared market and gain a reliable market participant
resources, orders preparation, joint marketing reputation (Hite and Hesterly, 2001; Partanen et al.,
formation, production capacity sharing and others. 2008).
Thus, networks enable co-creation of products or  Company’s contacts provide a competitive advantage,
services. resulting reduced costs and increase operating
 Participation in networks enables the SMEs to efficiency and differentiation. Cost reduction is
develop their competence in a particular field. It achieved through economies of scale. It can be said
provides opportunities for the company in the entire that born global enterprises through networks manage
value chain of activities to choose to carry only one with their naturally emerging development, newness
activity - it may be the product design development, and foreignness liabilities and other risks.
logistics, negotiations with manufacturers or other  However, it is necessary to emphasize the negative
activities (Westhead, Uchbasaran and Binks, 2004; consequences of internationalization through
Belso-Martinez, 2006). networks. It is possible to distinguish two clear
 Networks are enablers of innovation processes networking negative impacts on business
(Gronum, Verreynne and Kastelli, 2012), through consequences: 1) the need for increased costs because
which process and product or service innovations are of the establishment of a strong relationship with
developed. network partners requires time, effort and other costs;
 The synergy effect is increased also by easier access 2) established strong relationships can cause
to specialized labor sources. Network (e.g., a cluster) excessive dependency, companies risk to loss their
becomes the center of attraction of professional autonomy (Johansson, 2005; Falize and Coeurderoy,
excellence. The latter becomes not only experts in a 2012). Then the company loses a large part of the
narrow specialization, but due to constant decision making right and does not act in accordance
communication with theirs partners acquires a with their capabilities, but according to its’ important
systematic problem-solving competence. partner ‘dictated’ business model.
 Existing network provides a shared identity of a new
market. According Falize and Coeurderoy (2012), Conclusions
belonging to the network company extends not only
knowledge about the market, but also provides In the circumstances of intense competition,
information to the market about the new venture. networking is becoming an important factor for successful
 These conditions of synergies elements result a internationalization. Network performance is supported by
positive economic and social impact to born global the relationship. A network can consist of horizontal and
companies. Born global enterprises through vertical relationships, these relationships can be divided
networking become more resources provided into formal and informal, and accordingly to the effort and
international firms, containing valuable insights for time to network formation – into the strong and weak ties;
further development of the company and are able to the basic networking forms that enable to co-operate are
spread properly their business idea on the relevant partnership, alliances, associations, clusters, technology
markets, directly fulfilling consumer expectations. parks, integrated science, studies and business centers.
The company successfully internationalized its Born global companies are promoted to networking by the
activity in one market opens an opportunity to enter main group of reasons, correlating with each other: the aim
into another. By using networks, born global of reducing costs and efforts to increase revenues. Rapid
company reaches effective scope of business and internationalization of born global enterprises includes
gaining more capacity (Chettty and Wilson, 2003). In these stages: 1) opportunity identification; 2) searching
addition, networks help to improve efficiency of the ways to take advantage of opportunities (acting upon the
supply chain. All this is implemented much more opportunity); 3) opportunity realization. In networking
quickly and with lower costs than in the case of companies seek synergies which results the potential
internalization only by the efforts of a small company positive and negative consequences for the company.
Based on the theoretical insights the authors of the paper

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Socialiniai mokslai. 2014. Nr. 4 (86) Internationalization: Network Approach

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Straipsnyje pateikta teorinė analizė atskleidė, kad gimusių

globaliomis įmonių formavimąsi lemia išoriniai ir vidiniai veiksniai.
R. Morkertaitė, J. Sekliuckienė
Tinklaveika tampa svarbiu veiksniu gimusioms globalioms įmonėms,
Gimusių globaliomis įmonių internacionalizacijos prielaidos: siekiant efektyviai konkuruoti. Pagrindinės tinklo charakteristikos yra
tinklaveikos požiūris šios: tinklas gali susidaryti iš horizontalių bei vertikalių ryšių, šie ryšiai
gali būti skirstomi į formalius ir neformalius, bei atitinkamai nuo įmonės
Santrauka įdėtų pastangų ir laiko tinklo formavimui – į stiprius bei silpnus ryšius;
pagrindinės tinklaveikos formos: partnerystės, aljansai, asociacijos,
Greitai besikeičianti aplinka kuria naujus iššūkius įmonėms, klasteriai, technologijų parkai, integruoti mokslo, studijų ir verslo centrai.
siekiančioms plėsti veiklą už šalies konkrečios ribų. Kita vertus, pokyčiai Gimusias globaliomis įmones jungtis į tinklus skatina pagrindinės motyvų
gali paskatinti naujas veiklas, naujus idėjų proveržius. Gimusių grupės, koreliuojančios tarpusavyje: siekis sumažinti sąnaudas ir siekis
globaliomis įmonių internacionalizacijos sprendimai dažnai yra atsakas į padidinti pajamas. Gimusių globaliomis įmonių greitos
aplinkos pokyčius ir pasižymi greitais sprendimais įsitraukiant į užsienio internacionalizacijos etapai apima: 1) galimybių identifikavimą; 2) būdų
rinkas, ambicija ir antrepreneriška veikla. Smulkioms ir vidutinėms (SMĮ) pasinaudoti galimybėmis paiešką; 3) galimybių įgyvendinimą.
įmonėms greita internacionalizacija dažnai siejasi ir su stiprių partnerių Tinklaveikos metu įmonės siekia sinergijos, dėl kurios galimos tiek
poreikiu, ir veikimu tinkle. Todėl tinklaveika tampa viena svarbiausių teigiamos, tiek neigiamos pasekmės įmonei. Remiantis teorinėmis
gimusių globaliomis įmonių sėkmingos internacionalizacijos prielaida. įžvalgomis, straipsnyje pateikiamas tinklaveika grįstas gimusių
Globalizacija sąlygojo vis didesnę rinkų ir ekonomikų integraciją. globaliomis įmonių internacionalizacijos modelis.
Todėl įmonės, veikiančios sąlyginai nedidelėse rinkose, siekia plėstis už Tolimesnės tyrimų kryptys turėtų apimti siūlomo modelio validaciją
šalies ribų, o internacionalizacija tampa pagrindine įmonių augimo konkrečiuose ūkio sektoriuose veikiančiose gimusiose globaliomis
strategija. Intensyvi konkurencija sąlygoja ne tik stambių įmonių, bet ir kompanijose. Empiriniai tyrimai leistų identifikuoti modelio taikymo
smulkių ir vidutinių įmonių naujų veiklos formų už šalies ribų paiešką. privalumus ir ribotumus. Kita kryptis galėtų būti teorinių ir praktinių
Siekdamos konkuruoti tarptautinėje rinkoje bei kaip galima efektyviau sprendinių paieška, siekiant atskleisti gimusių globaliomis įmonių
išnaudoti turimus ribotus finansinius, laiko ir kitus išteklius, smulkios ir tinklaveikos poveikį įmonės veiklos rezultatams ir produktyvumui.
vidutinės įmonės nuolat ieško naujų greitų ėjimo į užsienio rinkas Reikšminiai žodžiai: gimusi globalia įmonė, internacionalizacija,
metodų. Staigus tokių įmonių veiklos internacionalizavimas domina tinklaveika, tinklaveikos naudos.
praktikus ir teoretikus.
Nors gimusių globaliomis įmonių tinklaveika nėra visiškai nauja
tema, tačiau tinklaveikos įtaka internacionalizacijai yra vis dar neištirtas First received: October, 2014
žinių laukas. Poreikį tyrinėti gimusių globaliomis įmonių tinklaveikos Accepted for publication: December, 2014
įtaką sparčiai internacionalizacijai savo darbuose iškėlė Sharma ir
Blomstermo (2003), Andersson ir Wictor (2004), Autio (2005), Coviello
ir Cox (2006). Todėl platesnė gimusių globaliomis įmonių fenomeno
analizė, išskiriant tinklaveikos svarbą tokių įmonių internacionalizacijai,
yra straipsnyje pristatomo tyrimo objektas. Straipsnio tikslas – atskleisti
gimusių globaliomis įmonių internacionalizacijos per tinklaveiką
prielaidas bei teigiamus ir neigiamus poveikius įmonei. Straipsniu
siekiama prisidėti prie naujų žinių apie tinklaveikos reikšmę gimusių
globaliomis įmonių internacionalizacijos rezultatams.
Straipsnyje pasitelkiama mokslinės literatūros analizė ir sintezė,
atskleidžiant gimusių globaliomis įmonių specifiką bei tinklaveiklos
veiksnį, išskiriant tinklaveikos pasekmes gimusioms globaliomis
įmonėms ir formuojant siūlomą gimusių globaliomis įmonių
internacionalizacijos, vertinant tinklaveiką, modelį.

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