Academic journal article Management International Review

Exploring the Internationalisation Process of Small Businesses: A Study of Dutch Old and New Economy Firms (1)

Academic journal article Management International Review

Exploring the Internationalisation Process of Small Businesses: A Study of Dutch Old and New Economy Firms (1)

Article excerpt

Abstract

* The focus of this paper is on the internationalisation process of small businesses. We investigate if, how and why small firms use a cooperative or autonomous strategy to internationalise their activities and the possible changes in this use of strategy over time. We assume that, because of unique resource constraints, small firms opt for a cooperative internationalisation strategy. We examine not only the impact of firm- but also of industry characteristics.

* The empirical investigation uses a sample of Dutch firms from two different sectors: one that can be labelled as typically 'old economy' (i.e. mechanical engineering) and one that can be described as 'new economy' (i.e. computer software).

Key Results

* Results show that small firms follow an evolutionary internationalisation path (with incidental set-backs), while a majority prefer a cooperative internationalisation strategy. In contrast with expectations, type of industry does not matter.

Introduction

The phenomenon of globalisation puts pressure on small- and medium-sized firms (SMEs) to develop strategies for internationalisation. Currently, SMEs are not yet represented in the international economy as much as large firms are (Fujita 1998), even though their internationalisation activities are increasing (Lamb/ Liesch 2002). In particular limited resources (financial, managerial, information, etc.) seem to frustrate the efforts of SMEs to internationalise (Baird et al. 1994, Buckley 1989, Burpitt/Rondinelli 2000, Fujita 1998). By means of inter-firm cooperation, SMEs may, however, gain access to additional resources and enter markets or enhance revenues in a manner not possible for each firm alone (Contractor/Lorange 1988, Burgel/Murray 2000, Fujita 1998, Hoffmann/Schaper-Rinkel 2001). With some notable exceptions (e.g., Bell 1995, Coviello/Munro 1997, Holmlund/Kock 1988, Korhonen et al. 1996), empirical research on the internationalisation process of SMEs has, however, tended to ignore inter-firm cooperation.

In this paper we argue that an SME may either choose for the strategic option of 'go-it-alone' (by direct exporting and/or creating fully owned foreign subsidiaries) or for a cooperative strategy, allying with partners up, down, or at the same level of the value chain. We thus conceptualise entry modes choices as 'binary' (for a similar approach see e.g. Burgel/Murrey 2000, Erramilli/Rao 1993). In our study, we will not only describe and explain the use of a cooperative or autonomous internationalisation strategy, but also examine changes over time.

Recent empirical research has indicated that the internationalisation process of small high-technology firms differs from the process of firms operating in more traditional, mature industries (e.g. Burgel/Murray 2000, Bell 1995, Coviello/Munro 1997, Crick/Jones 2000), among other things, with regard to the time frame in which the internationalisation process occurs. Based on these findings, we posit that the choice between go-it-alone vs. collaboration (or autonomy vs. cooperation) is not only a function of structural characteristics of the firm (see e.g. Burgel/Murray 2000, Erramilli/Rao 1993), but also of industry-specific characteristics. More specific, we will examine whether there are differences in the extent to which firms operating in the 'New Economy' and those in the 'Old Economy' make use of the cooperative or the autonomous strategy.

To examine the issues raised above, our qualitative study focuses on the internationalisation trajectories of Dutch SMEs from two different sectors: one which can be labelled as typically 'Old Economy', namely the mature mechanical engineering sector, and one 'New Economy' sector, that is the more recently emerged computer software sector. By including firms from the service-intensive computer software sector in our sample and contrasting their way of internationalising with that of firms from a manufacturing-intensive industry, we contribute to the relatively under-developed stream of research on the internationalisation process of service firms (Coviello/McAuley 1999, Domke-Damonte 2000). …

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