Generic strategies and firm performance in SMEs: a longitudinal study of Austrian SMEs

This paper studies the impact of generic strategies on firm performance using a longitudinal study of small and medium-sized enterprises (SMEs) in Austria. In two surveys, data on the strategic behavior and performance of the same group of firms were gathered for the period from 1992 to 2002. The study expands existing literature, which provides little evidence whether the persistent commitment to a generic strategy over a longer period pays off or whether strategic change is the rule in SMEs, reflecting their flexibility as a potential competitive advantage. We consider the traditional generic strategies of cost-efficiency and differentiation, but also examine the group of firms that have no clear strategy or are “stuck in the middle.” Within this group, we distinguish between those companies that deliberately combine traditional low cost production and differentiation, i.e., follow a combination strategy, firms that change their strategy and those that have no strategy. We argue that a combination strategy is a viable strategic choice for SMEs in the long run. We found that the majority of firms pursued a persistent strategy over a 10-year period, but that companies that changed their generic strategy did not produce inferior results to those that adhered to a single strategy over the entire period. Our results reveal that firms that follow a combination strategy outperform companies with no generic strategy in terms of profitability and growth and achieve higher profitability than companies that follow a differentiation strategy.     

Early and Rapid Internationalization of Firms from Emerging Economies: Understanding the Heterogeneity of Chinese Exporters

By synthesizing several theoretical perspectives, we explore the determinants of early and rapid internationalization of firms from China as an example of an emerging economy. Specifically, we examine the symbiosis of foreign knowledge, networks, and government support and their impact on the emergence of born globals (BGs). We use the dataset covering 368 Chinese exporting SMEs. The results provide new insights regarding the nature of their strategic behavior and shed light on the reasons for heterogeneity among exporters.     

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.     

Effect of market orientation,network capability and entrepreneurial orientation on international performance of small and medium enterprises (SMEs)

This study contributes to literature on the internationalization of SMEs by analysing the influence of International Market Orientation, Network Capability, and International Entrepreneurial Orientation on the International Performance of this kind of businesses. Particularly, both the direct effects of explanatory variables of International Performance and interdependence relations between them are analysed. Results obtained from a sample of 161 Mexican SMEs using SEM-PLS analysis show that the International Performance of this kind of businesses is favourably influenced by their Network Capability and International Entrepreneurial Orientation, but not by their International Market Orientation. Similarly, it is verified that interdependence relations exist among the explanatory variables of International Performance of SMEs, where positive impact of International Entrepreneurial Orientation is observed on Network Capability and the International Market Orientation of SMEs.     

How Campanian Small and Medium Enterprises (SMEs) Can Compete in the Global Agro-Food Industry

Importance of the agro-food industry in Italy and in Campania led us to investigate industry structure and small and medium enterprises' (SMEs) strategies for competing in the global scenario. We first analyzed the relevance of the Campanian agro-food system. Then we presented the results of face-to-face interviews to some SMEs. Through the interviews, we highlighted the SME value chain structures and their strategies to face global challenges. Most of the Campanian SMEs internationalize their activity by exporting their products abroad. Firms export in markets oriented to a high level of product quality—the main factor of Campanian agro-food SMEs' competitive advantage.     

Constraints,internationalization and growth: A cross-country analysis of European SMEs

Small and medium sized enterprises (SMEs) are known to face barriers which limit their ability to grow. We build on resource dependency theory and the resource-based view to investigate how SMEs are able to achieve venture growth in the face of these constraints by adopting internationalization and inter-firm collaboration strategies. Based on a large sample of European SMEs, our research demonstrates the importance of distinguishing between specific dimensions of internationalization and inter-firm collaborations, in particular between exporting and importing, and between formal and informal collaborations – as well as context-specificity of these strategies with respect to the types of constraints SMEs face.     

Does international experience help firms to be green? A knowledge-based view of how international experience and organisational learning influence proactive environmental strategies

Early research on environmental strategy in international firms focused predominantly on direct investment as an expansion strategy for multinationals. However, we know relatively little from a strategic management perspective about exporting, which is the most prevalent form of international expansion. For this reason, we examine whether the knowledge that export firms acquire abroad influences their environmental strategies. Using a sample of export firms from the food industry, we show that the number of years spent in developing export activities does not contribute to developing a proactive environmental strategy; however, a more complex experience of environmental international diversification is positively related to a firm's proactive environmental strategy. Finally, organisational learning capability moderates the positive relationship between environmental international diversification and environmental proactivity.     

Corporate Social Responsibility That “Pays”: A Strategic Approach to CSR for SMEs

This study adopts a strategic approach to corporate social responsibility (CSR), puts forward a model of CSR activities that enhance small and medium enterprises (SMEs) growth, and argues that by aligning CSR activities with the competitive strategy of the firm, SMEs enhance firm growth. We test this model using multinomial logistic analysis and data from a survey with 211 U.K.‐based SMEs. We find that CSR activities related to the community enhance firm growth for all SMEs, but especially for firms adopting a cost leadership strategy, and that CSR activities related to the workforce are crucial to avoid sales decline, especially for SMEs adopting a differentiation or a quality‐driven strategy. We also find that environment‐related CSR activities are not beneficial for SMEs' growth and that human rights–related CSR activities slow growth for firms adopting a differentiation or a quality‐driven strategy. Finally, we put forward managerial and policy recommendations.     

Financial Constraints and Small and Medium-Sized Firms’ Export Propensity: Evidence from Portuguese Manufacturing Firms

The internationalization of firms through exports is often crucial to their survival and growth in this era of globalization. This is particularly the case for small and medium-sized enterprises (SMEs) operating in small and saturated markets, as is the case in Portugal. However, firms face several barriers to exporting, and this study aims to verify whether financial constraints influence a firm’s export propensity. The empirical analysis is based on a sample of 12,732 Portuguese manufacturing SMEs during the period 2008–2012, and tests two different proxies of financial constraints: the liquidity and leverage ratios. The results indicate that the SMEs in less healthy financial positions are less likely to export than the others are, although the impact of financial constraints on these Portuguese firms appears to be relatively small.     

Dealing with Resource Disadvantage: Generic Strategies for SMEs

This paper identifies three generic strategies for SMEs taking into account explicitly their resource disadvantage. In addition to the much advocated niching strategy, we show that SMEs can free-ride on the bigger firm's market development efforts and/or they can form strategic alliances to force accommodation by the bigger rivals. Contrary to conventional arguments, we show that success in niching is not conditional upon the continued ignorance of the niche by the bigger firms. It is also not true that the SMEs must have a cost advantage vis-à-vis the bigger firms in order to niche or to free-ride successfully. The bigger firms faced with entry into their markets by SMEs encounter the classical chain-store paradox. The three generic strategies proposed here are designed to force accommodation by the bigger firms.     

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.     

Modelling Small Firms' Decisions to Export – Evidence from Manufacturing Firms in Finland, 1995

In this paper, I model small firms' decisions to export by applying an existing model of the theory of diffusion of innovations and test the predictions of the model with data on Finnish SMEs. The model, incorporating so-called epidemic learning and rank effects, describes nicely the different phases of this decision-making process. The data used in the empirical analysis has been collected by interviewing directors of small industrial firms especially for this study. The results suggest, among other things, that the development of exporting in a small firm is particularly influenced by the language skills of the entrepreneurs, and that the smaller the firm, the faster is the adoption of the export strategy. In addition, the development of exporting has been faster in firms that have started exporting in the 1990s than in firms that began exporting before the '90s.     

Environmental strategy and exports in medium,small and micro-enterprises

Growing corporate internationalization and the emergence of environmental concerns are two of the main trends in the business world. This paper analyzes whether strategies for environmental protection can help small and medium enterprises (SMEs) as they internationalize their activities through exports. Personal interviews were conducted with 123 general managers of exporting SMEs from the Spanish food industry. The results show a relationship between advanced environmental strategies and export intensity for the sampled firms. However, the size of firm plays a role in this relationship, as the relationship between advanced environmental strategies and exports is stronger with an increase in the size of the SMEs. Authors discuss implications of these results for practitioners and future research.     

Productivity and Learning‐by‐exporting: A Firm‐level Analysis of Indian Manufacturing

In this paper, we examine whether firms become productive by learning through exporting. To this end, we estimate the production function using microdata of Indian manufacturing firms operating in the period 1991–2001. In contrast to studies on developed countries, our results provide evidence that Indian manufacturing firms are experiencing a rise in productivity through entering export markets and thus experience the learning effect. We also find that there is a productivity rise prior to exporting. Therefore, our results also support the self‐selection mechanism for exporting.     

Learning by exporting: Lessons from high-technology SMEs

We investigate the learning by exporting hypothesis by examining the effect of exporting on the subsequent innovation performance of a sample of high-technology SMEs based in the UK. We find evidence of learning by exporting, but the pattern of this effect is complex. Exporting helps high-tech SMEs innovate subsequently, but does not make them more innovation intensive. There is evidence that consistent exposure to export markets helps firms overcome the innovation hurdle, but that there is a positive scale effect of exposure to export markets which allows innovative firms to sell more of their new-to-market products on entering export markets. Service sector firms are able to reap the benefits of exposure to export markets at an earlier (entry) stage of the internationalization process than are manufacturing firms. Innovation-intensive firms exhibit a different pattern of entry to and exit from export markets from low-intensity innovators, and this is reflected in different effects of exporting.     

Small & Medium Gold & Fashion Enterprises (SMEs) in Arezzo,Italy: Competitive Challenges and Strategic Implications

ABSTRACT

This paper provides some empirical evidence on organizational characteristics and strategies of firms in the Italian gold and fashion industries. The analysis is based on a data set of three SME clusters in Arezzo (a city and province in Tuscany, Italy, southeast of Florence) which led us to the identification of two main alternative strategies which can be implemented when facing the new global competition: a firm-centered brand strategy and an outsourcing strategy (a supply alliance with co-branding possibilities with one or more large Italian firms). We analyzed the resources and competencies of firms that adopted different export marketing strategies and further explored the relationship between strategic choices and performance of participating firms (measured in terms of growth, innovation, and export capabilities). The results show that the choice of a strategy is strongly influenced by the ability of SMEs to respond to changes in consumer behavior and competition, and that some variables significantly affect performance. Both strategies can be effective, and in some cases it is suggested to follow the middle of the road competitive approach: combining the two strategies, exporting own brand directly to the end markets and collaborating with a large firm in order to achieve a sustainable and significant competitive advantage.     

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.     

Co-alignment in the resource–performance relationship: strategy as mediator

Small firms face unique challenges in crafting strategies that best utilize their resource bases. Research shows strategies that combine with resources lead to performance. The entrepreneurship literature finds the contingent effects, or moderating roles, of strategy and external factors, but the relationship between firm strategy and internal factors, such as resources, is less well studied. Based on the contention that the quality of a firm's strategy cannot be judged independently of the resources upon which it is based, we examine the relationship between firm resources, strategies, and performance in a cross-section of 192 small firms. Using a structural equation analysis, we examine the mediating role of firm strategies as they lead to firm performance in small firms operating in traditional industries. Our findings demonstrate that neither resources nor strategies alone explain firm performance, but instead, small firms fit their strategies to their resource profiles. Human and organizational resources in combination with a strategy of quality/customer service enhance firm performance.     

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.     

The productivity payoff of information technology in multimarket SMEs

This paper examines the effects of information technology (IT) adoption on the productivity of multimarket small and medium-sized enterprises (SMEs). The main hypothesis is that IT usage increases efficiency to a higher degree in diversified and internationalized firms compared with single-market SMEs. This hypothesis is tested using a large sample of more than 2,000 Spanish SMEs. Overall, intensive use of IT in operations processes is found to be associated with substantial increases in productivity of firms following both related and unrelated diversification. Also, exporting firms with more intensive use of IT have higher productivity. These results are consistent with previous theoretical arguments on the relationship between IT and efficiency of firms and open future research directions related to the role played by IT in the management control systems of both diversified and exporting firms.