Internationalization Behavior of Small- and Medium-Sized South African Enterprises

Article excerpt

Since Johanson and Vahlnes' pioneering internationalization study (1977), much research has gone on to assess what differentiates exporters from non-exporters and why some firms aggressively export while others are less involved. To understand this phenomenon, a plethora of studies has been conducted, mainly in developed countries (Canada, United States, United Kingdom, Sweden, Italy, Norway, Australia, and New Zealand to name but a few -- see Chetty and Hamilton (1991) and Eshghi (1992) for a comprehensive review of the literature). As a result, much is known about the export behaviors of firms in these developed countries. However, only a handful of studies have been conducted in lesser developed countries such as El Salvador, Brazil, and Korea (Eshghi 1992).

South Africa is an interesting country to study because it is at the same time a developing and a developed country. Yet little research has focused on South African business behavior. There has been only one study of export behavior which included South African firms (Dichtl, Koeglmayr, and Mueller 1990). Since current theories of internationalization have been tested primarily in developed countries, we cannot be certain whether these theories apply within the South African context.

Given that South Africa is embarking on a new economic strategy which includes rapid growth in the number of export companies, it is important to understand that country's underlying export dynamics. In particular, understanding the export behaviors of South African SMEs will be important if the government is to devise policies which will result in export growth. The objective of this study is to examine, in a manner similar to past studies, what factors differentiate among South African small- and medium-sized firms with respect to varying levels of involvement in exporting. The value of this study is its examination of the extent to which the stages model of exporting can be extended to an economy unlike any other examined in past research. Further, there are several unique factors in the South African economy and culture (to be discussed later) which have never been examined in past internationalization studies.

Literature Review

While there has been a diversity of approaches used to understand export behavior, the "stages" model has dominated. This model proposes that firms move sequentially through different stages as they develop their international activities (Cavusgil 1984; Burton and Schlegelmilch 1987; Johanson and Vahlne 1977). Each stage involves an increased commitment to international activities. Commitment increases as firms learn more and therefore become less uncertain about foreign markets (Bilkey and Tesar 1977; Johanson and Vahlne 1977; Kedia and Chokar 1986). In particular, firms change modes, countries, or structure as they gain experiential knowledge in a particular foreign market or international business and as decision makers' perceptions of the costs and benefits of involvement in that market change. For example, firms in the early stages of internationalization view export costs as higher and revenues as lower than firms farther along in the internationalization process (Kedia and Chokar 1985; Brooks and Rosson 1982; Bradley 1984). This process of gradual acquisition, integration, and use of knowledge about foreign markets and operations is associated with incremental increases in commitment to foreign markets (Johanson and Vahlne 1977). Thus, stages research predicts that a firm's international involvement will change incrementally over time in response to its executives' attitudes towards the risks, costs, and benefits of international business. As such, stages is a learning theory of internationalization.

The principle application of stages research has been to characterizing the export profile of the exporting firm. In their research on Wisconsin manufacturing firms, Bilkey and Tesar (1977) identified six export stage profiles: (1) management is not interested in exporting; (2) firm fills unsolicited orders but does not actively pursue export markets; (3) management actively explores exporting (passive exporter); (4) the firm begins to experiment with exporting; (5) the firm becomes an active exporter; and (6) the firm becomes a committed exporter. …