Academic journal article Journal of Small Business Management

Internationalization of Small and Medium-Sized Technology-Based Firms: An Exploratory Study

Academic journal article Journal of Small Business Management

Internationalization of Small and Medium-Sized Technology-Based Firms: An Exploratory Study

Article excerpt

In recent years technology-based industries have increasingly globalized, with this change driven primarily by multinational technology-based firms. These large mature firms, which are extensively involved in global markets, provide the main conduit through which important technologies are integrated across nations (Korbin 1991). As global competition has intensified, many small and medium-sized technology-based firms have also had to adopt international perspectives (Litvak 1990). Even the SMTFs whose primary orientation is domestic must be internationally competitive in order to secure long-term success (Wright and Ricks 1994). Small and medium-sized firms usually face unique challenges in the arena of international competition due to their limited resources and capabilities, insufficiently developed administrative procedures and methods, less formal centralized planning and control systems (van Hoorn 1979; Roth 1992), and the lack of manufacturing know-how and access to distribution channels (Hull and Slowinski 1990). SMTFs, in particular, face additional challenges due to their accelerated time-to-market and product differentiation imperatives (Price and Chen 1993).

The importance of the internationalization of SMTFs, as well as the unique challenges and prospects they face in this regard, call for systematic research. Accordingly, the overall purpose of this study is to explore some of the key questions pertaining to the internationalization of SMTFs. These relate to the motives that drive SMTFs to internationalize, the barriers that SMTFs must overcome to achieve successful internationalization, and the adaptive measures that they implement in order to compete successfully in the international arena. It is hoped that shedding light on these questions at a broader level of inquiry will help stimulate and guide further research which would preferably be more atomistic but at the same time provide deeper understanding of the various aspects of the internationalization process.

Conceptual Background

Technology-based industries have become increasingly global in recent years, as technological innovation has been a significant driver of international competition (Porter 1985). Higher technological opportunities and the economic benefits of exploiting them have created a faster rate of technological change. Accelerated technological changes have in turn increased the speed of global technological diffusion (Bettis and Hitt 1995). Another contributing factor to the globalization trend has been that the volume generated in domestic markets is no longer sufficient to support competitive levels of R & D spending (Kobrin 1991). The globalization trend has, in turn, escalated competitive rivalry in technology-based industries (Brahm 1995).

Although large multinational firms initially dominated the international competitive landscape, smaller firms have also entered the race owing to the evolving conditions in international communication and trade (The Economist 1993). Oviatt and McDougall (1994) have argued that the gap in competitive advantage between large and small firms in international markets has narrowed and that internationally sustainable competitive advantage has increasingly depended upon a firm's unique assets (see also Barney 1991; Hamel and Prahalad 1990). These changes, coupled with the excessive international rivalry in technology-based industries (Brahm 1995), have made it indispensable for SMTFs to adopt international perspectives and strategies. International competitive forces and advantages in knowledge-intensive sectors have been so strong that some of the new ventures market internationally from their inception (Oviatt and McDougall 1994).

SMTFs have certain advantages over larger firms, including greater flexibility, speed, and advantage-seeking behavior (Fiegenbaum and Karnani 1991; Katz 1970; Hitt, Hoskisson, and Harrison 1991). These advantages work particularly well for them in new product development and entrepreneurship, driven as they tend to be by their motivation to constantly seek new opportunities and to aggressively challenge the status quo (Aldrich and Auster 1986; Chen and Hanbrick 1995). …

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