Examining Sme Internationalization Motives as an Extension of Competitive Strategy

By Pett, Timothy L.; Francis, John D. et al. | Journal of Business and Entrepreneurship, March 2004 | Go to article overview

Examining Sme Internationalization Motives as an Extension of Competitive Strategy


Pett, Timothy L., Francis, John D., Wolff, James A., Journal of Business and Entrepreneurship


ABSTRACT

A number of arguments are presented that propose a theoretical relationship between a SME's environmental perceptions, performance, and competitive approach with their motives for internationalization. Data from 176 firms were used to test these relationships. The findings suggest that firms pursuing internationalization proactively are mainly influenced by favorable perceptions of their environment and their current performance. In addition, SMEs using a differentiation strategy based on unique marketing skills in conjunction with these circumstantial influences were more likely to pursue internationalization proactively. Implications and directions for future research are addressed.

INTRODUCTION

During the last two decades of the 20th century, we have witnessed dramatically improved international communication and information networks, significant technological advances, falling barriers to international trade, and an increased global perspective to business activities. These changes create an environment in which internationalization is more feasible and potentially attractive to small businesses and entrepreneurial start-ups (Brush, 1995). The barriers to international business that historically favored large firms with the requisite resources have been lowered substantially.

Since small- and medium-sized enterprises (SMEs) comprise the vast majority of the population of firms in the US, and barriers to internationalization are falling, increasingly researchers are examining SME internationalization issues (e.g. Calof, 1993; Campbell, 1996; Czinkota, 1982; Leonidou & Katsikeas, 1996) and international entrepreneurship (e.g., Brush, 1995; Oviatt & McDougall, 1994; Reuber & Fisher, 1997). In spite of these efforts, there is much to examine and understand with respect to SME internationalization activity. Strategies on how to compete in markets and the type of resources being utilized to achieve competitive advantage have already been determined and are being utilized in domestic markets. The decision to internationalize adds a layer of complexity to the strategy of SMEs. While there has been research on factors influencing internationalization, there has been little effort to examine internationalization motives as they relate to, as well as are influenced by, their other ongoing strategic decisions and processes.

Therefore, the purpose of this paper is to examine internationalization motives within the context of SME's. Specifically, what impact do contexts, such as perceptions of the macro environment and the firm's recent performance, have on an SME's internationalization motives? In addition, how do different types of competitive strategies influence an SME's motivations as they undertake international trade? Lastly, is the relationship between these strategies and internationalization motivations influenced by the different contexts in which an SME finds itself? The paper first provides theoretical development for internationalization motives and specifies relationships between and among the variables in formally stated hypotheses. The second section of the paper discusses the methodology used to test the hypotheses. Lastly, the results are presented and we conclude with discussion, interpretations, and directions for future research. The intention of this research is to contribute to the understanding of SME internationalization motivations in the context of the macro environment, performance and competitive strategies.

THEORETICAL DEVELOPMENT

A number of scholars have investigated the forces stimulating the firm's decision to initiate, develop, or sustain international operations. For some of them, the motives, incentives, triggering cues, and attention evokers are among the most dynamic and critical elements of the internationalization process in that they provide the real driving force behind the firm's expansion into international business (Wiedersheim-Paul, Olson, & Welch, 1978). …

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