The internationalization of small firms: The relationship between the global mindset and firms’ internationalization behavior

Some firms in internationally oriented industries are internationalized while other comparable firms in the same sector or industry do not. Observing this difference in strategic behavior among small firms led us to consider how differences in CEOs’ attitudes, international orientation, and mindset might explain it. Therefore, this study adopts a cognitive perspective on management to explore the formation of the global mindset and the relationship between the global mindset of small-firm decision makers and their firms’ internationalization behavior. A theory-based conceptual model and measurement instrument are developed and—using structural equation modeling—the model is estimated based on empirical data from cross-sectional samples of small Norwegian and Portuguese firms. The study finds: (1) a strong causal relationship between the global mindset and firms’ internationalization behavior; (2) the combination of the findings and substantive theory indicates that the main driver of firms’ internationalization operates through the global mindset. This study also covers the factors that strongly influence the formation of a global mindset, especially the decision makers’ work experience and personal characteristics in terms of propensity to interdisciplinary collaboration, cognitive flexibility, and networking capability. Based on these findings, suggestions are made for policies that can foster the internationalization of small firms.     

The effect of internationalization on firm capital structure: A meta-analysis and exploration of institutional contingencies

Despite extensive research on the relationship between internationalization and firm capital structure, findings in this research area remain inconclusive. In this paper, we review the literature on the internationalization–capital structure relationship and investigate its direction, effect size, and multiple contingencies through a meta-analysis of 31 studies with a grand total of 223,658 firm observations and at least two separate samples each. Our cumulative evidence indicates lower debt ratios of multinational corporations compared to domestic corporations, in line with arguments of increased risk and agency costs in international operations. We extend our analysis to institutional characteristics in firms’ home countries and find that much of the existing variation in study findings can be explained using theory arguments on firm risk in internationalization. We contribute to an integration of international business and finance literature and point to directions for future research on determinants of the internationalization–capital structure relationship and its multiple contingencies.     

Process and intensity of internationalization of IT firms – Evidence from India

This paper provides insights and evidence related to the process and intensity of internationalization of firms in the Information Technology (IT) sector, which is the driving force of high economic growth in the Indian sub-continent during the last two decades. Research objectives were set as (i) to examine the existence of born global firms in the IT sector, (ii) to identify the process of internationalization adopted by firms in the IT industry, (iii) to measure the intensity of internationalization of IT firms. The paper is based on data collected from annual financial reports of firms listed in the CNX IT Index of National Stock Exchange of India. Two clusters were extracted using hierarchical clustering method followed by k-means clustering to analyze the characteristics of the variables. We find that the firms in both clusters are true global firms with 66 and 85% of their income from foreign markets with a very high level of international intensity. Though the findings provide some evidence for the gradual internationalization of Indian IT firms; the empirical results indicate that firm age has no impact on internationalization. The results from our study also show that firms, especially in certain industries such as IT, do have access to information that reduces the risk aversion.     

Upstream internationalization process: Roles of social capital in creating exploratory capability and market performance

This paper investigates to what extent resource governance of international ventures affects dynamic capability and market performance in the high-tech firms’ internationalization process. We examine the non-equity-based international network collaborations of high-tech firms as forms of strategic resource seeking within the internationalization process. Within the context of upstream technology collaborations by international software and hardware firms, this paper proposes and empirically examines the impact of resource governance mechanisms (i.e. trust-building and behavioral monitoring) on the exploratory capabilities of firms. The findings indicate that building trust in the internationalization process of network ventures contributes to the firm-level exploratory capabilities and, in turn, market performance. Furthermore, this paper tests the moderating effects of structural capital on the capability–performance relationship. The relationship is stronger when network relationships existed before the inception of the international technology alliance. We also find a negative moderating effect from the existence of an actual alliance and from network duration on the relationship between exploratory capability and market performance. To this end, the longevity of the alliance may not always be something firms should aim for. The paper highlights the criticality of relational and structural capital in the internationalization process and the importance of exploratory capability for creating radical innovation in high-tech industries.     

Top management team characteristics and firm internationalization: The moderating role of the size of middle managers

This paper examines the influence of the top management teams' (TMTs) characteristics, including tenure and international experience, on the degree of firm internationalization. In addition, this study explores the moderating effect of the size of middle managers (MMs) on the relationship between the TMT characteristics and the degree of firm internationalization. This study use the information-process perspective to emphasize that MMs provide information processing capabilities that assist TMTs as they cope with the high information-processing demands of the strategic decision-making process in international markets. We test the hypotheses using a sample of listed manufacturing firms in the electro-optical and textile industries during the 2006–2010 period. The findings indicate that TMT tenure has an inverted U-shaped relationship with firm internationalization and TMT international experience has a positively affect the firm internationalization. Furthermore, we find that large MM size positively enhances the inverted U-shaped relationship between TMT tenure and firm internationalization.     

A Conceptual Model of the Internationalization of Services Firms

Abstract

In the 1990s, the global marketplace is characterized by the speed and ease with which services cross over national boundaries. As a result, service industries in many countries around the world have become extremely important in the development and socioeconomic well-being of these countries. The purpose of this paper is to understand the internationalization process of services firms. It is concluded that international operations of services firms are driven by a similar set of variables used by manufacturing firms, but the intensity and direction of some key relationships require modification and adaptation.     

Internationalization, Strategic Behavior, and the Small Firm: A Comparative Investigation

Previous research on the internationalization of the small firm explored the relationship between the adoption of a global orientation and strategic thinking. However, there was difference in opinion between those arguing that there is a positive relationship between the two variables and others who contended that small firms may internationalize by adopting a passive or reactive approach to the external environment. Within this context, this study sets out to further the discussion by comparing the experience of small enterprises with their medium and large-scale counterparts. In doing so, it draws upon the findings of survey of 1,000 internationalized enterprises located in the main urban conurbations of England. The results suggest that overall there is little disparity in strategy development among internationalized enterprises of different sizes. However, whereas the incidence of strategic behavior among medium and large businesses increases with the complexity of international operations, this is not the case for small firms.     

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.     

How Industry Dynamics Influence the Internationalization–Performance Relationship: Evidence From Technology‐Intensive Firms

The relationship between internationalization and performance has been the topic of a significant number of research studies, which report a mixed pattern of findings. However, the incorporation of global industry characteristics in the testing of this relationship has not been a facet of these studies. This article investigates the impact of intrafirm trade and differential market growth of the industry on the relationship between internationalization and performance. It focuses on technology‐intensive industries using a sample of 795 firms drawn from five countries. Findings indicate that internationalization has a positive relationship (which is quadratic in nature) with performance. Intrafirm trade and differential growth rates were found to interact with the relationship between internationalization and performance, thereby indicating the benefits of internationalization to be contingent on global industry characteristics. © 2012 Wiley Periodicals, Inc.     

The influence of international networks on internationalization speed and performance: A study of Czech SMEs

Drawing on social capital theory and the international entrepreneurship literature, we develop hypotheses relating the structural, cognitive and relational aspects of the international network of SME CEOs to two internationalization outcomes – speed and performance. The study is based on a sample of 155 Czech SMEs covering a broad range of manufacturing industries. Our findings indicate that firms sharing a common language with their international ties are able to internationalize faster than firms that do not share a common language. Moreover, we observe that geographically diverse networks contribute to superior performance. Extensive reliance on personal contacts hinders the performance of the first international venture.     

CEOs’ regulatory focus and firm internationalization: The moderating effects of CEO overconfidence,narcissism and career horizon

While the international business literature has mainly focused on the firm- or industry-level antecedents of internationalization strategies, scholars have recently advocated a greater focus on the microfoundations of firms’ strategic decisions. Building on the regulatory focus theory, this study focuses on how CEO promotion and prevention foci impact firm internationalization. Looking into dispositional and situational attributions, this study also theorizes how these factors moderate the relationship between a CEO’s psychological motivations and firm internationalization. Using data from publicly traded US firms listed in the Fortune 500, the findings of this study show that a CEO’s promotion focus is positively associated with the extent of a firm’s internationalization, whereas a CEO’s strong prevention focus limits the extent of a firm’s internationalization. The findings also reveal that the relationship between a CEO’s regulatory focus and the extent of a firm’s internationalization is moderated by a CEO’s overconfidence, narcissism, and career horizon. These findings have important research and managerial implications for firms engaged in international business.     

Fire and ice: The incompatible impact of industry-wide domestic patents and international standards on firm internationalization

This study contributes to firm internationalization theory by identifying domestic patents and international standards as industry-level attributes that differently affect the ability of firms to internationalize. Firms operating in industries with extensive patenting enhance internationalization via technology-based competitive advantages that allow overcoming liabilities of foreignness (LOFs). Furthermore, firms operating in industries with extensive standardization enhance internationalization via the reduction of LOFs that manifest in transaction costs and information asymmetries. Yet operating in industries replete with both domestic patents and international standards raises challenges for internationalizing firms due to the incompatibility of these attributes with respect to LOFs, thus domestic patents and international standards yield a negative joint effect on firm internationalization. We test these priors by employing panel data on the internationalization of up to 4248 publicly-traded U.S. firms in the manufacturing sector over the 1997–2019 period.     

New venture internationalization,strategic change,and performance: A follow-up study

Although many scholars, business experts, and government agencies enthusiastically advise all firms, including new and small ventures, to internationalize, such advice does not appear to be based on empirical evidence. Few researchers have empirically examined the link between new venture performance and the internationalization of new ventures. At best, the evidence suggests that there is no significant relationship.We used a sample of 62 U.S. new venture manufacturers in the computer and communications equipment industries during the late 1980s. These industries were purportedly globalizing and may have been leading other industries into increased international operations. We found that higher levels of internationalization (percentage of foreign sales to total venture sales) were associated with higher relative market share two years later. However, there was no significant direct relationship between percentage of international sales and subsequent return on investment (ROI). Perhaps international operations simply cost more than expected. Or perhaps, as MacMillan and Day (1987) found in their study of corporate ventures over a 4-year time period, increases in market share may be a prelude to higher ROI as scale benefits translate into higher profitability. However, the 2-year time period of our study may simply not be long enough for investments in higher market shares to produce improved profits.During the 2-year study period, many of the ventures changed their level of internationalization. Of the 36 ventures who were domestic (no international sales) in the prior study, 10 expanded into international markets over the 2 years. Of the 26 originally international ventures (international sales of at least 5%), half increased their percentage of international sales, nine reduced it, and four stayed the same. Whereas the average change in international sales percentage of the ventures was only 2.9 percentage points, the large standard deviation of 13.0 percentage points, and the leptokurtic distribution (9.2) reflected the dramatic changes made by some of the ventures. Using subgroup analysis we examined these changes in percentage of international sales in conjunction with changes in strategies and performance. Ventures that had increased international sales, relative to those that had not, exhibited more positive associations between the degree of strategic change and performance as measured in terms of both relative market share and ROI. Increased international sales in technology-based new ventures seems to require simultaneous strategic changes in order to positively impact venture performance.This study is a follow-up to McDougall's (1989) finding that technology-based new ventures that had sales in foreign markets had significantly different strategies than similar ventures that sold their products only domestically. The current study enriches the previous findings by adding consideration of (1) changes in degree of internationalization, (2) changes in strategy, and (3) venture performance.Although we found no performance penalty associated with increasing international sales alone, indiscriminant advice for new ventures to sell in foreign markets without other supporting strategic actions is inconsistent with our findings. Internationalization, alone, did not lead to increased profitability.Entrepreneurs of young technology-based firms who are considering internationalization should take heed of our results. Internationalization of sales does not appear to be a simple matter of applying established strategies and procedures developed for a domestic arena. Successful internationalization appears to require changes in the venture's strategy as well.     

Knowledge and internationalization of returnee entrepreneurial firms

This study aims to answer whether and how returnee entrepreneurs’ international experience and returnee entrepreneurial firms’ international market knowledge influence these firms’ internationalization. Anchored in a framework combining an entrepreneurial and knowledge-based view, we develop a model and four hypotheses on the relations between returnee entrepreneurs’ international experience, international market knowledge, international market commitment, and level of internationalization of the returnee entrepreneurial firm. Empirical evidence of the proposed model is derived from a recent sample of Chinese returnee SMEs in knowledge-intensive and high-technology industries. The main finding is that returnee entrepreneurs’ international experience nurtures international market knowledge of returnee entrepreneurial firms, which in turn has a positive effect on these firms’ international market commitment and level of internationalization. In terms of theory, the study extends our understanding of returnee entrepreneurial firms by uncovering the role of returnee entrepreneurs’ international experience and returnee firms’ international market knowledge during their initial and early international expansion.     

Internationalization and performance of Indian pharmaceutical firms

This study explores the nature of the degree of internationalization and performance (DOI‐P) relationship in the context of the Indian pharmaceutical industry. The study relies on the stages model of internationalization to posit for specific relationships between DOI and performance in the distinct stages of international expansion. The findings are different from those of similar studies on emerging markets that have used a broader set of industries in their sample. Researchers should adopt caution when making any generalization of the DOI‐P relationship across contexts. Industry context in certain instances can be more powerful than country context in shaping the DOI‐P for particular firms. © 2008 Wiley Periodicals, Inc.     

The influence of experiential,inherited and external knowledge on the internationalization of venture capital firms

This paper examines the effect of different types of international knowledge accumulation on the internationalization of venture capital firms, as a particular type of professional service firms. We distinguish between experiential knowledge acquired through previous activities, inherited knowledge through the management team and external knowledge through network partners. Hypotheses are developed for both the likelihood and the number of cross-border investments. The hand collected dataset comprises a combination of survey and archival data on a unique sample of 110 venture capital firms from five different European countries. Analyses indicate a positive effect of experiential and inherited knowledge on internationalization, but external knowledge has limited impact. Intense international contacts even decrease international activities. Together, these results highlight the importance of experiential and inherited knowledge to overcome information asymmetries inherent in the internationalization of professional service firms, and of venture capital firms in particular.     

The effect of social networks and dynamic internationalization capabilities on international performance

This article explores the relationship between social networks and dynamic internationalization capabilities (DICs), and their impact on the international performance of small and medium-sized firms (SMEs) in low-tech industries. We distinguish between exploitative DICs (threshold and consolidation capabilities) and explorative DICs (value-adding and disruption capabilities). Our results, which are based on a sample of small and medium-sized Portuguese exporters, indicate that social networks are a relevant antecedent of exploitative and explorative DICs, and that consolidation and disruption capabilities positively affect international performance. Multiple mediation analysis confirms these relationships. The article concludes with a discussion of implications for research and practice.     

The Internationalization of Service Firms in China: A Comparative Analysis with Manufacturing Firms

In this article, we expand upon the springboard perspective of emerging markets in the service sector. We investigate the phenomenon of service firm internationalization in China and the distinct differences between service and manufacturing firms during international expansion. Using dynamic analysis of historical data for 363 service firms and 569 manufacturing firms from 2001 to 2007, we find that the internationalization of service firms in China is different from that of manufacturing firms in terms of resource requirement and experience exploitation. The internationalization of service firms relies more on international experience than corporate resources. Furthermore, we also identify the structural differences between hard and soft service industries. In China, identifiable intangible assets are found to be more important for the international expansion of hard service firms than they are for soft service firms. © 2013 Wiley Periodicals, Inc.     

Family firms and internationalization: An exploratory study on high-tech entrepreneurial ventures

This paper empirically explores a highly relevant, although poorly investigated topic: internationalization of family firms that operate in high-tech industries. Specifically, we compare internationalization of family and nonfamily entrepreneurial ventures in these industries. Relying on prior studies on internationalization of family firms, we speculate on how the specificities of high-tech industries shape the advantages and disadvantages of family entrepreneurial ventures in pursuing internationalization as compared with their nonfamily peers. In the empirical part of the paper, through a rigorous quantitative analysis of unique data from 264 Italian high-tech entrepreneurial ventures, we explore whether in high-tech industries family entrepreneurial ventures are more (or less) likely to pursue internationalization than their nonfamily counterparts. Surprisingly enough, our econometric estimates indicate that, in high-tech industries, family entrepreneurial ventures exhibit a higher internationalization propensity than their nonfamily peers.     

Internationalization stages of traditional SMEs: Increasing,decreasing and re-increasing commitment to foreign markets

SMEs attempt to accelerate and diversify their international expansion strategies. The purpose of this article is to identify the internationalization stages followed by traditional SMEs to seize global market opportunities. The authors analyze the internationalization paths of five French SMEs operating in traditional manufacturing industries. The empirical study is mainly based on 66 interviews. The findings indicate that the internationalization process of SMEs continues to follow several stages, but that their commitment to foreign markets may increase, decrease and re-increase. The identified stages, which can be triggered by internal and external factors, reflect characteristics of different internationalization models proposed in the literature.