Learning about foreign markets: A study of Czech SMEs

Drawing on the organizational learning literature, our study examines the role of foreign market knowledge and firm emphasis on technological innovation in the internationalization of small, entrepreneurial firms in the Czech Republic. It is based on a sample of 168 SMEs representing a broad range of manufacturing industries that were founded after the fall of communism and as the Czech economy was transitioning to a more market-based economy. Findings indicate that emphasis on technological innovation is associated with greater acquisition of foreign market knowledge. In addition, our results indicate that emphasis on technological innovation directly and indirectly influences the performance of such SMEs in international markets. Our findings also suggest that foreign market knowledge partially mediates the relationship between firm emphasis on technological innovation and international performance. Implications of our findings from the perspective of theory and practice are discussed.     

Linking Processes and Dynamic Capabilities of International SMEs: The Mediating Effect of International Entrepreneurial Orientation

Previous research on the internationalization of small and medium‐sized enterprises (SMEs) has highlighted the role of knowledge and learning about foreign markets. However, empirical results on the performance implications of foreign market scanning and planning have been mixed. Following the dynamic capability perspective, we argue that SMEs can capitalize on scanning and planning processes because of their international entrepreneurial orientation. We test our hypotheses with a sample of 604 established SMEs and find that entrepreneurial orientation completely mediates the relationship between scanning and planning and international performance. Moreover, the results implicate a bidirectional relationship between processes and international entrepreneurial orientation.     

Tie the Ties: The Significance of the Binding Networks in SMEs’ Internationalization Process

This research examines the obstacles for small and medium sized enterprises’ (SMEs) internationalization and the roles of networks in SMEs’ internationalization process. It finds that the key obstacles for SMEs internationalization are lack of market insights, lack of knowledge and skills necessary for internationalization, and lack of skilled labor. In Thailand, personal networking has played the most prominent role in the early stage of SMEs’ internationalization. Trust is reported to be the critical component for a long lasting relationship in the network. “Friendship” is viewed as the ultimate level of relationship in the trusted network.     

International network management for the purpose of host market expansion: The mediating effect of co-innovation in the networks of SMEs

Research shows that innovation facilitates internationalization and that the customer network is an important source of technical and market knowledge. Yet, little is known about how co-innovation within a business relationship with a key international customer relates to international network management and international growth beyond the focal business relationship. The paper contributes to international entrepreneurship research by investigating (1) international business relationship learning mechanisms that reinforce co-innovation within a dyadic business relationship with a key customer (2) and the link between co-innovation outcome in the business relationship and international network management for purposes of foreign market expansion beyond the dyadic business relationship. Three hypotheses were developed and tested on a sample of 188 internationalizing small- and medium-sized enterprises (SMEs) using linear structural relations (LISREL) structural equation modeling. The analysis shows that an SME’s (i) awareness of a customer’s complementary knowledge and (ii) innovation-oriented customer relationships leads to increased co-innovation within a dyadic business relationship with a key customer. Moreover, successful co-innovation with a key customer increases the likelihood that the focal SME will attempt at international network management by drawing on the key customer as a bridge to new customers and suppliers on the foreign host market. The findings provide a link between innovation within a dyadic business relationship and international network management for the purpose of foreign market expansion into the wider network on the host market. The findings hence contribute to our understanding of the mediating role of co-innovation in the internationalization process of SMEs.     

Market Orientation and Internationalization in Small and Medium‐Sized Enterprises

This article builds on studies from the literature on market orientation (MO) and internationalization to develop a model and a set of hypotheses regarding the relationships among MO, knowledge acquisition (KA), and market commitment (MC), and the direct and indirect effects of these variables on the performance of small and medium‐sized enterprises (SMEs) in foreign markets. The model and its hypotheses are tested by means of an empirical study of a multi‐industry sample of Spanish SMEs operating in foreign markets. The results, obtained by structural equation modeling, indicate that a direct positive relationship exists between MO and a strategy of internationalization, and that the effect of MO on performance in foreign markets is moderated by KA and MC.     

Multilevel psychic distance and its impact on SME internationalization

We expand the conceptualization of psychic distance and use a multilevel framework by studying it as a founder’s psychic distance in the pre-entry phase of entering a specific foreign market, and the SMEs (firm) psychic distance in the post-entry phase of entering that specific foreign market. Based on qualitative research involving six SMEs’ with 18 internationalization events, we found that psychic distance at country and business levels causes difficulties for SMEs in the post-entry phase because of their lack of knowledge. Bridge-makers possessing knowledge about target markets help SMEs to overcome psychic distance challenges. Trust in the relationship with the bridge-maker is an important ingredient to gain knowledge that alleviates the SMEs’ psychic distance challenges. Finally, we go beyond country-business levels of psychic distance by showing that psychic distance also matters at bridge-maker level. This relates to their lack of knowledge about the target market and SMEs’ routines.     

The effect of network competence and environmental hostility on the internationalization of SMEs

Research findings suggest that networks offer small and medium-sized enterprises (SMEs) opportunities to internationalize successfully. However, the role of internal organizational competence in the process of developing and maintaining such networks in hostile external environments has received little attention. The aim of this study is to shed light on the relationship by examining the positive influence that the network competence of SMEs has on their propensity to internationalize, and on their subsequent international performance. Given that the willingness of firms to enter and perform well in markets appears to also depend on environmental hostilities, this external influence on SME internationalization is incorporated into the study. We also examine whether the level of environmental hostility moderates the relationship between network competence and SME internationalization. The empirical part of the study comprises a web survey of 298 Finnish SMEs representing five different industry sectors: metal, food, furniture, software, and knowledge-intensive business services. Confirmatory factor analysis and regression models are used in the analysis. The results indicate that higher levels of network competence are positively related to the propensity of SMEs to internationalize, as well as to their international performance. Conversely, the level of environmental hostility has a negative effect on the performance measure, but not on the internationalization propensity. Additionally, the influence of network competence is not moderated by environmental hostility. The results indicate that internal network competence and external environmental hostility play a role in SME internationalization, and that the positive influence of network competence exists independently of the hostility in the environment.     

Experiential knowledge antecedents of the SME network node configuration in emerging market business networks

This paper aims to determine experiential knowledge antecedents of the network node configuration (i.e., dyad or triad) of SMEs entering emerging market business networks. Three kinds of knowledge of different degrees of specificity are assessed, namely, general internationalization, market-specific, and customer-specific knowledge. The sample consists of 203 SMEs in southern Sweden with experience of entering the Baltic State, Polish, Russian, or Chinese markets. The theoretical framework integrates network theory and internationalization process theory in order to understand and explain the internationalization of smaller firms. The hypotheses formulated are tested using logistic regression, which indicates that market- and customer-specific types of knowledge favor a dyadic network node configuration into the emerging market business network, while general internationalization knowledge has no significant effect. In addition, interaction effects were seen to moderate relationships between knowledge antecedents and the network node configuration of the sampled SMEs.     

Foreign Entry Mode and Performance: The Moderating Effects of Environment*

As the trend toward economic globalization increases, the internationalization of small and medium‐sized enterprises (SMEs) has become an important topic. Research on the performance outcomes of foreign market entry strategies has been primarily considered from the perspective of the multinational corporations. In this paper hierarchical regression analyses were conducted on archival data of 123 publicly held manufacturing SMEs based in the United States to test a contingency model that hypothesizes more of the performance variance is explained when the foreign market entry mode is aligned strategically with domestic and foreign environmental factors. The results indicate that firms will have a higher rate of international revenue growth using no‐equity‐based (exporting) foreign market entry modes in growing domestic environments. International revenue growth is higher for equity‐based modes when foreign market risks are high. The findings should provide managers of SMEs with contextual evidence for making successful foreign market entry decisions.     

The impact of home business network attributes on Chinese outward foreign direct investment

Researchers who take a network perspective argue that insidership in foreign market networks is a necessary condition for internationalization. In this study, we argue that insidership in home market networks also matters. The effect of home network insidership on outward foreign direct investment (OFDI) depends on both individual and joint effects of structural and relational network attributes. Our study based on a survey of 194 Chinese firms shows that firms in a central network position are more likely to engage in OFDI than those in a brokerage position. Furthermore, we find the interaction between firms’ centrality and their connections to foreign-invested enterprises to be significantly and positively associated with OFDI, whereas a significantly negative effect is evidenced when a firm is connected more to domestic firms.     

Foreign market entry knowledge and international performance: The mediating role of international market selection and network capability

While the literature emphasizes the importance of knowledge and foreign market knowledge for international performance, it is unclear about the intervening/mediating relationships. From a knowledge-based view and network approach, we posit that previous foreign market entry (FME) knowledge can be used in the selection of international markets and to enhance network capabilities and international performance. We test the relationships between these constructs in a sample of 140 Australian SMEs. We contribute to the international SME literature by explaining important mechanisms through which FME knowledge affects SMEs’ international performance. International market selection and network capability mediate its relationship with international performance.     

Rapid internationalization of traditional SMEs: Between gradualist models and born globals

Within the last 20 years, a number of traditional small-medium enterprises (SMEs) have accelerated their international commitment by investing in distant countries despite limited market knowledge, limited use of networks, and limited international experience of the entrepreneurs. The purpose of this paper is to draw research attention to this phenomenon and to compliment the existing literature on internationalization process of SMEs.We argue that traditional SMEs are able to speed up their internationalization process by, thus, rapidly catching up with the increasing global competition. The peculiar path followed by SMEs is described by analyzing five case firms and explained by contrasting to the leading literature. The empirical evidence suggests that specific strategic focus (as opposed to knowledge-intensity, international network, and international experience) is the determinant success aspect of the change in the internationalization process.     

Managerial characteristics and entrepreneurial internationalization: A study of Tunisian SMEs

Growing internationalization has sparked increasing interest in any factor which could strengthen a firm’s ability to develop a long-term competitive edge. One of the main factors which determine a firm’s international behavior is the characteristics of its management team. The aim of this paper is to shed light on the relationship between the management team’s characteristics and factors which favor a company’s development by examining the causal effects of managerial characteristics on innovative behavior of small- and medium-sized enterprises (SMEs) seeking international market expansion. The conceptual model and its hypotheses are tested through an empirical study of a multi-industry sample of Tunisian SMEs. To our knowledge, this present study is the first to include Islamic ethics as a determining factor on managers’ behaviors as their companies enter the international market. Obtained by structural equation modeling technique, the key findings of this research show that personality traits, mental ability, and social networks of managers have a direct impact on a firm’s behavior as it enters the international context. Results also show that Islamic ethics seem to favor a creative context for innovative ideas in both local and foreign markets. Given the importance of the results analyzed, it could be suggested that Islamic ethics in organizations be implemented as a part of the education system in all Islamic societies.     

A socioemotional wealth perspective on how collaboration intensity,trust, and international market knowledge affect family firms’ multinationality

Internationalization theory does not account for the priority family firms place on socioemotional wealth (SEW). This can reshape how critical theoretical dimensions of collaboration intensity, network trust, and international market knowledge exert their effects. Bringing together the internationalization model of Johanson and Vahlne (2009) with SEW theory, our study of 334 German-speaking family firms reveals international market knowledge mediates the relationship between collaboration intensity and family firms’ multinationality. High network trust positively moderates the relationship between collaboration intensity and the acquisition of international market knowledge. Our work expands the predictive ability of Johanson and Vahlne’s (2009) important model.     

An analysis of U.S. small and medium‐sized manufacturers' international business relationships

Notwithstanding the dominant role of the United States in world trade, little is known about the relationships between smaller indigenous manufacturers and their foreign customers and how these differ from domestic market relationships. Using data from a recent study among 201 U.S. small and medium‐sized enterprises (SMEs), the article reveals that (a) these firms tend to put much more emphasis on the domestic side of their business, while the foreign market receives secondary treatment; (b) the atmosphere governing their relational exchanges differs in the two types of markets, being relatively healthier in domestic business; and (c) their domestic business performance levels, although moderate, are significantly higher than those found in foreign markets. © 2004 Wiley Periodicals, Inc.     

The Influence of Domestic Interfirm Networks on the Internationalization Process of Taiwanese SMEs

This study investigated how domestic interfirm networks contribute to a better understanding of the internationalization process of Taiwanese small and medium enterprises (SMEs) in the automobile and textiles sectors. The rapid growth of business networks in Taiwan's newly internationalizing firms provides an appropriate context in which to study the emergence and evolution of such networks. Findings from the in-depth case studies indicate that domestic interfirm networks are a major factor in the decision to internationalize. Furthermore, the benefits of assured orders in an unknown international market coupled with the availability of market information from other network partners can be a potential source of competitive advantage for the internationalized SME.     

SME Networks and International Performance: Unveiling the Significance of Foreign Market Entry Mode

This study investigates the relevance of interorganizational networks for the international performance of small and medium‐sized enterprises (SMEs) in relation to the foreign market entry mode (FMEM) selected. We distinguish two groups of internationalized SMEs: exporting firms and micromultinational enterprises (mMNEs). Drawing on insights from the network theory, our study accounts for the role of intermediate outcomes (innovative behavior and foreign market knowledge). Structural equation modeling is conducted in a sample of U.K.‐based internationalized SMEs. Our findings suggest that interorganizational networks have an indirect influence on international performance but differences are found among the two groups of internationalized SMEs.     

Impact of domestic and foreign knowledge mechanisms on the innovation performance of Indian firms

Research on emerging market firms (EMFs) has acknowledged the role of innovation in catching-up with advanced economies. Although we know that EMFs’ innovation increasingly depends on collaborations and cross-border knowledge flows, less has been said about the effectiveness of foreign and domestic knowledge mechanisms adopted to improve EMFs’ innovation performance. We hypothesize that foreign mechanisms rely on diverse knowledge and foster explorative innovation (i.e. innovation that extends the existing local competencies), while domestic mechanisms are more likely to be associated with the exploitation of the local existing competencies. Additionally, we claim that the breadth of EMFs’ absorptive capacity strengthens the impact of foreign knowledge mechanisms on explorative innovation, while depth increases the impact of domestic knowledge mechanisms on EMFs’ exploitative innovation, thus highlighting that the interplay of knowledge resources internal and external to the firm involve different levels of recombination. Our empirical analyses conducted on a sample of 161 Indian bio-pharmaceutical firms observed from 1997 to 2018 confirm our hypotheses, thus contributing to the literature on EMFs’ catching up via internationalization and innovation.     

International network extension processes to institutionally different markets: Entry nodes and processes of exporting SMEs

This article is about how SMEs reduce their liability of network outsidership in the process of establishing a network insider position in foreign business networks. By examining how SMEs establish insidership positions in institutionally different business networks, the authors contributes to the network approach to firm internationalization. From a detailed longitudinal and retrospective case study of four SMEs from mature market entering emerging country markets and four SMEs from such immature markets entering mature markets, the authors develop propositions based on intra-group and inter-group analysis. The propositions concern the parties to which the exporter initiates and develops relationships when plugging into the foreign network (the entry node), and how the firm reaches an insider position in this network (the entry process). Three distinct network types are identified along this entry process: the exposure network, the formation network and the sustenance network.     

Foreign Direct Investments and Domestic Employment of German SMEs: The Moderating Effect of Owner Management

Despite considerable research, the relationship between foreign direct investment (FDI) and domestic employment is still inconclusive. The present paper contributes to extant research by providing differentiated findings on the FDI and domestic employment relationship. We examine how horizontal and vertical FDI impact domestic employment and how the effects are contingent on the ownership structure of the firm. Testing hypotheses on a dataset of 1,079 German small and medium‐sized enterprises (SMEs) shows that horizontal FDI has a positive influence, whereas vertical FDI has a negative influence on domestic employment. Furthermore, domestic downsizing due to the establishment of foreign production subsidiaries is less severe in owner‐managed SMEs.