The impact of transport costs on new venture internationalisation

This paper investigates the importance of transport costs in new venture internationalisation, i.e. of firms that start exporting before they are 3 years of age. It does so by merging two large international datasets, on the firm level (covering 49,584 firms) as well as on the country level (covering 154 countries). It is found that transport costs matter significantly for new venture internationalisation, for older firms’ decision to export, as well as the extent of the latter’s subsequent exports. Export costs, the quality of transport infrastructure and domestic logistics costs affect new venture internationalisation even when controlling for a range of standard determinants. New international ventures behave differently from older firms in two important ways: (1) Transport costs affect the probability that they will export but not the extent of their subsequent exports and (2) their probability of exporting is affected negatively by their networking, domestic success and ISO status, whilst in the case of older firms, these factors have a positive impact. Various recommendations for policy and further research are made.     

Internationalisation choices of Polish firms during the post-socialism transition period: The role of institutional conditions at firm’s foundation

The purpose of this paper is to investigate how the home country radical change of institutional conditions influences the firm-level internationalisation process understood as exporting. In particular, we aim to broaden our understanding of how changing institutional conditions affect the internationalisation process of Polish firms founded in different institutional conditions; i.e. under the communist regime (before 1990), in the transition period (1990–2003), and in the post-transition period (2004 and later). We compare and contrast in each period three crucial aspects describing the internationalisation process: time to internationalisation, direction and degree of internationalisation. We find support for the assertion that the institutional conditions at a firm’s birth influence the internationalisation paths of emerging market firms in terms of speed, direction and degree of internationalisation. Firms founded either in the transition (1990–2003), or in the post-transition phase (2004 and later) are more likely to: (1) make the decision about internationalisation earlier in their life cycle, (2) enter developed markets, and (3) achieve a higher degree of internationalisation than firms founded under the communist regime (before 1990).     

Spillovers through backward linkages and the export performance of business services. Evidence from a sample of Italian firms

We provide evidence on the role of spillovers through vertical linkages in service firms’ internationalisation process. We combine input–output coefficients with region-level information on downstream manufacturing sector exports to build a measure of spillovers through backward linkages, which we assess as a systematic determinant of Italian BS firms’ export status. Once considered firm and sector specificities, export spillovers especially matter for exporting to high-income economies outside Europe. This finding originates from higher sunk costs stemming from greater distance to the destination market and tougher competition within the destination market. Furthermore, the spillovers’ geographical scope is mainly local. We thus contribute to international business theory by generalising existing evidence from case studies on the importance of buyer–supplier relationships for service firms’ internationalisation across several BS sectors. Our research carries important implications for international business practices as well, as joining networks with internationalised customers may play an important role in enhancing BS firms’ exports, regardless of the BS supplied.     

Resources,home institutional context and SMEs’ exporting: Direct relationships and contingency effects

Research highlights the role of resources in SMEs’ exporting but is less forthcoming with respect to entrepreneurial perceptions of home institutional quality. Drawing on institution-based lenses, we distinguish among formal, informal, and regulatory institutions, which in concert with firm resources are expected to influence SMEs’ export behavior. Our predictions are tested on a sample of 150 firms located in Greece. The analysis of direct relationships shows that formal and informal institutional dimensions affect significantly, but differently, SMEs’ export activity. The analysis of interaction effects demonstrates that resource decisions for exporting are contingent upon entrepreneurial perceptions of the home institutional context, such that SMEs respond to formal and informal domestic institutional weaknesses by intensifying resource allocations to fuel export sales. In an opposite direction, export regulatory complexity reverses the positive resources-exporting link. These findings suggest the importance of home institutions in the exporting field.     

Trading activities,productivity and markups: Evidence for Spanish manufacturing

This work analyses the firms' internationalisation strategies of importing intermediates and exporting output, and the potential rewards of these activities in terms of total factor productivity (TFP), as a proxy for marginal costs, and markups. It further deepens into the study of the relationship between internationalisation strategies and markups by disentangling whether it operates through affecting firms' marginal costs and/or firms' prices. The panel database employed in this paper is the Spanish Survey on Business Strategies (ESEE) for the period 2006–14. Results in the paper distinguish between SMEs and large firms and indicate that there is high persistence in the performance of these activities and in firms' TFP and markups. For SMEs, we obtain rewards from importing inputs as well as exporting output in terms of TFP and markups. For large firms, we obtain rewards in TFP from the importing activity and rewards in markups from the exporting activity. Finally, we find evidence that the effects of internationalisation strategies on markups are due to both a price channel and a marginal cost channel.     

Policy-driven clusters,interfirm interactions and firm internationalisation: Some insights from Malaysia's Multimedia Super Corridor

This paper investigates the impact of social and business interactions on firm internationalisation within the context of an industrial cluster created from scratch by policymakers. Based on in-depth interviews with firms in Malaysia's Multimedia Super Corridor cluster, our findings suggest that a permanent cluster of this nature may not be able to stimulate the development of frequent, spontaneous, informal interaction and rich social networks often seen in ‘organic’ clusters, thus limiting the cluster's effect on firm internationalisation. However, the paper also shows that ‘temporary clusters’, such as trade shows and conferences, organised by policymakers on a regular basis within the broader context of the permanent cluster, can help firms to quickly acquire relevant knowledge.     

Internationalisation Processes,Networking and Local Embeddedness in Technology-Intensive Small Firms

The paper argues that technology-intensive small firms often need to internationalise their activities, and especially sales, at a very early stage of their development because of the limited and global nature of the technological market niche which they have been set up to exploit. From a survey of 100 such firms in the Cambridge and Oxford regions, it demonstrates that many technology-based smaller firms are engaged in a range of international networks and internationalisation processes, including internationalisation of markets, research collaboration, labour recruitment, ownership and facilities location. Technology-intensive firms reporting high levels of internationalisation also differ significantly from those which are more nationally-oriented, for example in terms of size, age, research intensity, university links, and innovativeness. There are also differences with respect to recent growth rates. Finally, the paper demonstrates that far from substituting international for local networks, technology-intensive firms which have achieved high levels of internationalisation in fact also exhibit above-average levels of local networking with respect to research collaboration and intra-industry links. Internationalisation therefore appears to be grounded or embedded in successful local networking and research and technology collaboration.     

Venture capital as an innovation ecosystem engineer in an emerging market

How can venture capital (VC) firms transform a weak innovation ecosystem into a productive and robust one? While the literature has found VC firms’ catalyst role in innovation in developed markets, we know little about whether and how they affect innovation in an emerging market, where formal institutions (e.g., regulations and markets) and informal institutions (e.g., professional networks) to enable VC firms’ catalyst role are relatively lacking. First, we argue that VC firms play a different and more proactive role in these markets as an “ecosystem engineer” through governing the resource flow and selecting deviation, which drive regional innovation performance. Second, such effects are further positively moderated by the presence of multinational enterprises (MNEs) in a region. Lastly, over time, while the direct effects of VC firms persist and increase, the moderating effects of MNE presence decline. Empirically, we examined a Chinese provincial-level panel data of VC activities (1999–2009) and patent applications (2000–2010) and found supportive evidence. Implications are discussed.     

Innovation capacity,international experience and export performance of SMEs in Brazil

Innovation capacity and international experience are factors often related to the internationalisation process of firms, with export activities as the first stage of the process. However, firms from emerging countries seem to show advantages and follow patterns of international expansion that may differ from firms based in developed countries, where the internationalisation models were created. Specifically, exporting firms from emerging countries tend to have limited resources, especially small firms (e.g., for investing in R&D). Despite these facts, the literature on export performance seems biased towards recommending firms to enhance, above all, their innovation capacity in order to achieve better export performance, while little attention is paid to international experience as a factor that is as important as innovation. In this context, the objective of this study is to investigate the impact of innovation capacity and international experience on the export performance of small and medium-sized enterprises (SMEs) located in an emerging country and to identify which factor is more significant. The Resource-Based View and Dynamic Capabilities approach were used as theoretical frameworks. A research model was developed and tested on a significant sample of Brazilian industrial SMEs. The data were analysed through partial least squares structural equation modelling. The results indicate that international experience has a greater impact on export performance than innovation capacity, showing that there is possibility of overemphasising the role of innovation in the export performance of SMEs, at least, in the Brazilian context.     

Rigidity in SME export commencement decisions

In an increasingly globalised world, firms generally have become more internationalised utilising a range of different modes of operation. In the case of small-medium sized enterprises (SMEs), exporting is the favoured mode of international market entry, at least in the early stages of internationalisation, and many governments have supported SME exports through export promotion policies because of the importance of SMEs in employment creation. However, in spite of this policy focus, in most countries, the proportional involvement of SMEs in exporting remains low, which raises an important question as to what factors are inhibiting firms that are successful domestically from exporting. In addressing this question, much scholarly research has focused on the broad concept of ‘export barriers’. These barriers, for example, tariffs, quotas and administrative obstacles, are seen as a primary source of export reluctance. This paper takes a different approach to previous studies and proposes that a firm's resistance to exporting can be better understood through an analysis of the behavioural decision process of firms in line with the Uppsala internationalisation model. We propose ‘lateral rigidity’, first introduced in the literature in the 1970s, as an important concept in export commencement. By applying factor analysis to a survey of Australian SMEs, we provide a measurement model for lateral rigidity, revealing its important factors and thus strengthening understanding of firms' export commencement decisions. We conclude by drawing implications for internationalisation theory, practice and public policy and suggesting ways to extend this work through future research.     

Experience,age and exporting performance in UK SMEs

We consider the determinants of SME exporting performance using a survey of internationally engaged UK SMEs. We first develop a model incorporating organisational and prior managerial learning effects. Our empirical analysis then allows us to identify separately the positive effects on exporting from the international experience of the firm and the negative effects of firm age. Positive exporting effects also result from grafted knowledge – acquired by the recruitment of management with prior international experience. Innovation also has positive exporting effects with more radical new-to-the-industry innovation most strongly linked to inter-regional exports; new-to-the-firm innovation is more strongly linked to intra-regional trade. Early internationalisation is also linked positively to the number of countries to which firms export and the intensity of their export activity. We find no evidence, however, relating early internationalisation to extra-regional exporting, suggesting that early-exporting SMEs tend be ‘born regional’ rather than ‘born global’.     

Changing Paradigms of International Entrepreneurship Strategy

This article identifies sweeping transformations taking place in the contemporary international business environment, and discusses their impact on international entrepreneurship. We focus on two overarching trends: (1) the demise of the nation-state as the relevant unit around which international business activity is organised and conducted; and (2) the demise of the stand-alone firm, with a hierarchic distribution of power and control, as the principal unit of business competition. We then discuss an alternate approach to internationalisation: one that involves a multi-polar distribution of power and control. Traditional approaches to internationalisation focus on the hierarchic centralised firm, with a uni-polar distribution of power and control. We suggest that the world is moving towards multi-polar networks of firms, involved in what we term symbiotic management: each entity benefits from working together within a multi-polar network. This includes large corporations as well as small and medium-sized enterprises (SMEs). As corporations out-source to specialised firms–increasingly SMEs–power and control are dispersed among independently owned firms that are cooperating voluntarily for increased efficiency and profit. The new paradigm moves from a focus on the firm, towards a focus on relationships within multi-polar networks. We conclude by illustrating how this emerging competitive paradigm may impact on the strategic management of small firms, with examples from a real-world company.     

The contingent value of social resources: Entrepreneurs' use of debt-financing sources in Western China

This study shows that entrepreneurs' use of debt-financing sources is conditioned by the resources embedded in their social networks. More business or political contacts increase entrepreneurs' probability of using formal financial sources, and more urban ties increases their probability of using informal sources. However, the effects of business and bureaucratic ties are contingent on community-level institutional trust and on firms' age. Business ties have greater positive impact on the probability of using formal financial sources for older firms and for those in regions with a higher level of institutional trust, while the impact of bureaucratic ties on these firms is weaker.     

The role of networks in the entrepreneurial process

The extent to which the entrepreneur interacts with the networks in his local environment during the process of starting a new firm was studied. This study was based on the premise that, during this process, he is seeking not only the resources of equipment, space, and money, but also advice, information, and reassurance. Consequently the help and guidance received from both the formal networks (banks, accountants, lawyers, SBA) and the informal networks (family, friends, business contacts) will influence the nature of the firm substantially.The study was conducted in St. Joseph County, Indiana, a county that has experienced the same economic problems as many other towns in the midwest smoke-stack belt during the 1970s. In 1982, in response to this general decline in the business climate, a fund was raised to create and manage a new industrial strategy. Before this, there was no collective strategy for nurturing either the small firm or the new firm. Therefore, in order to determine the extent to which an interventionist strategy was appropriate, a research project was designed that posed three basic questions: what does the environment look like; does it need changing; and, if so, in what ways? This article reports part of that study—a survey of firms that had started in the county in the previous five years (1977–1982). It was concerned with two issues: the characteristics of the St.Joseph County entrepreneur and the usage of the formal and informal networks.The results of the survey show that the aggregate characteristics of the St. Joseph County entrepreneur are similar to those found in other studies. The new firms were founded by local people from small firms who started their small firms in similar industries that were local in nature. Moreover, the majority (90%) not only started small, but also grew very little subsequently—firms that have been classified elsewhere as life-style ventures. It is to be expected that such people would have a strong local network, both formal and informal, particularly in a county with a population of only 220,000. However, the results of the second part of the study showed that the main sources of help in assembling the resources of raw materials, supplies, equipment, space, employees, and orders were the informal contacts of family, friends, and colleagues. The only institution that was mentioned with any regularity was the bank, which was approached towards the end of the process when many of the resources were assembled and the elements of the business set in the entrepreneur's mind. This was not because the formal sources were unwilling to offer guidance, but rather that the entrepreneur and his social network appeared to be unaware of what was available. Moreover, in using only business contacts, family, and friends, the entrepreneur was likely to re-create the elements of previous employment, even when he was starting business in an entirely new market. Further, there was no significant difference between growth and no-growth firms. It would appear that in this county, the formal network was uniformally inefficient.This research shows that a major aim of the new strategy should be to increase the awareness of the community to the formal sources and types of help that are available. However, whilst most of the institutions are prepared to solve specific problems, they are not in the business of diagnosis or counseling. The network needs a hub or an enterprise office.The data on the start-up process and the role of networks in relation to new firms are very sparse and often anecdotal. This study was conducted in one environment, a small midwest county with a jaded entrepreneurial tradition. Further studies are necessary. Research questions include the extent to which networking is crucial in the start-up process, the length of time it took for the sophisticated networks of Boston's Route 128 and California's Silicon Valley to develop, and the effect of different geographic, cultural, and economic conditions. Only in this way is it possible to determine the extent to which regional, regeneration strategies for new firm creation should be county specific rather than state or country wide.     

The international market selection of Chinese SMEs: How institutional influence overrides psychic distance

The purpose of this research is to contribute to the ongoing debate about whether psychic distance still plays a vital role in the internationalisation of SMEs from emerging markets. Drawing on the prior research which suggests the salient impact of institutional factors on internationalisation, we investigate the role of home country institutions in international market selection. Adopting a multi-case methodology, we collected semi-structured interview data from six small and medium-sized manufacturing firms in China. Our findings suggest that while psychic distance is still important in some circumstances, both formal institutions, such as government support, and informal institutions, such as business and political guanxi, enable Chinese SMEs to choose psychically distant markets. Our findings also indicate that informal institutions interact with formal institutions to further influence SMEs’ international market selection. This research contributes to SME internationalisation studies by revealing how formal and informal institutional factors override psychic distance in influencing international market selection.     

Strategic and Functional Orientation of Small and Medium Sized Enterprises in Professional Services: An Analysis of Public Accountancy

This study examines how SMEs in public accountancy remain competitive, promote and deliver their services. The association among strategic planning, functional diversification (services and markets), methods of promotion and delivery is also examined. These SMEs face considerable difficulty in overcoming both in-house and external barriers in accessing clients requiring non-traditional services (e.g. management consulting), and clients involved in international business (broadly defined). The results show that the proactive, functionally diversified, and/or internationally oriented firms outperform the reactive, functionally concentrated, and local market oriented firms. The competitive advantage for the former categories is based on flexible specialisation such as customisation of services for specific groups of clients, speed of delivery collaboration with other producer service firms, and specialised skills. These firms utilise informal networks to promote their services with minimal investments in sponsorships or media selling. Face-to-face interaction with clients continues to be the preferred mode of service delivery despite the increased adaptation of local area networks and other modes of internationally technology by the proactive, functionally diversified or internationally oriented firms.     

The Location Choices of Multinational Firms: The Role of Internationalisation Experience and Group Affiliation

This paper investigates whether location choices of multinational firms depend on their past export, import or Foreign Direct Investment (FDI) experience on foreign markets or the experience of other affiliated firms. Regardless of locations' characteristics, we find that exporting in a given country, and to a smaller extent importing from it, significantly increases the probability of investing in that particular country the following year. This preliminary exporting phase appears more important for firsttime investors. Moreover, location choices not only depend on the investor's own international experience, but also on the international experience of other affiliated firms: firms tend to invest in countries where the group already exports or owns a local affiliate. These last findings suggest the existence of coordinated strategies and/or information sharing between affiliated firms.     

Internationalisation and Economic Performance of Enterprises: Evidence from Polish Firm‐level Data

This article provides evidence on the relative performance of internationalised firms using Polish firm‐level data, spanning the period 1996–2005 and covering all medium and large enterprises. We distinguish between three modes of internationalisation: foreign direct investment, exporting and importing of capital goods. Our results point strongly at the superior performance of foreign affiliates vs domestic firms, exporters vs non‐exporters, and importers vs non‐importers: internationalised firms are larger, more capital intensive, pay higher wages and are more productive than purely domestic firms. Foreign ownership is the strongest factor accounting for gains from internationalisation. The premia from exporting are substantially lower, though also significantly positive. The performance of capital goods importers is also higher compared to non‐importers and is to some extent related to their involvement in other types of international activity. The results are robust to the choice of specification and productivity estimator. The analysed enterprises recorded a sizeable and broad‐based productivity improvement over the period under consideration. Not only the initial levels of productivity of exporters, importers and foreign affiliates were on average significantly higher that those of their non‐internationalised counterparts, but they also recorded faster productivity gains (manifested in increasing productivity premia), so that the discrepancies grew even larger. We also perform the analysis of productivity spillovers from internationalised firms onto own, downstream and upstream sectors. We find evidence of significant horizontal and backward spillovers from all three types of international activity. Our results suggest that trade externalities are rather of a horizontal nature, while those related to foreign direct investment operate mainly via backward linkages.     

Early international entrepreneurship in China: Extent and determinants

We use data on 3,948 Chinese firms obtained from the World Bank’s Investment Climate Private Enterprise Survey to investigate early international entrepreneurship (international new ventures) in China. The extent of early international entrepreneurship in China is significant: 62% of the exporting firms start export operations within 3 years. Foreign shareholders within the firm and an entrepreneur with previous exporting experience are noted to significantly increase the probability that a firm internationalizes early. We find marked differences in the behaviour of indigenous and foreign-invested firms, and between direct and indirect exporters. For example, for an indigenous firm the more foreign experience its entrepreneur has, the less likely it is to start exporting early. As far as indirect exporting is concerned, business networks are significant determinants of the extent of such exporting, but delays the internationalization process of indigenous firms. The more firms in China export, the more time their managers need to spend on government regulations, although perhaps counter-intuitively, this was not found to discourage exporting. Overall, the findings suggest that exporting by indigenous Chinese firms is often due to challenging or adverse domestic conditions.