Academic journal article Management International Review

Internationalisation and the Smaller Firm: A Review of Contemporary Empirical Research

Academic journal article Management International Review

Internationalisation and the Smaller Firm: A Review of Contemporary Empirical Research

Article excerpt

Small and medium-sized enterprises (SMEs) are increasingly active in international markets, thus contributing to economic growth and prosperity (Reynolds 1997). As a reflection of this, the SME export literature is substantial, and encompasses general research on the behaviours and strategies associated with exporting (Kaynak et al. 1987, Bonaccorsi 1993, Baird et al. 1994, Dalli 1995, Douglas 1996) as well as more specific research streams.(2) These include for example, studies on the relationship between firm size and export behaviour (Culpan 1989, Samiee/Walters 1990, Bonaccorsi 1992), and the performance characteristics of SME exporters (Beamish et al. 1993, Bijmott/Zwart 1994, Naidu/Prasad 1994, Moini 1995, Katsikeas et al. 1996, 1997).

More recently, there has been a shift from interest in exporting per se, to understanding the processes and patterns that explain how smaller firms increase their international involvement over time. The purpose of this paper is therefore to review and assess contemporary empirical research specifically focused on SME internationalisation in order to consolidate the extant literature and generate meaningful research opportunities.

The paper begins with a discussion of the internationalisation concept and a summary of the major schools of research in the area. Recent empirical work examining SME internationalisation is then reviewed and assessed, leading to a discussion of future research implications.

The Internationalisation Literature

Since Welch and Luostarinen's (1988) analysis of the evolution of the internationalisation concept, a number of useful reviews have been conducted in an effort to synthesise the literature in this area (Aaby/Slater 1989, Johanson/Vahlne 1990, 1992, Melin 1992, Andersen 1993). Nevertheless, a single, universally accepted definition of the term "internationalisation" remains elusive (Young 1987, Welch/Luostarinen 1988, Whitelock/Munday 1993), with a number of interpretations being found in the literature. For example, one view of internationalisation considers it to be a pattern of investment in foreign markets explained by rational economic analysis of internalisation, ownership, and location advantages (Williamson 1975, Dunning 1988). A second view is that internationalisation is an ongoing process of evolution (Melin 1992) whereby the firm increases its international involvement as a function of increased knowledge and market commitment (Johanson/Vahlne 1977).

A third view is also process-based, although it argues that internationalisation does not always involve a "smooth, immutable path of development," and may include both 'outward' and 'inward' patterns of international expansion (Welch/Luostarinen 1988, 1993). Furthermore, while Johanson and Vahlne (1977) imply that international involvement is manifested primarily in the markets entered and mechanisms used for market entry, Welch and Luostarinen (1988) argue that it is also reflected in the firm's market offering, organisational capacity, personnel, and structure.

A fourth view is that offered by Beamish (1990, p. 77), who defines internationalisation as:

"...the process by which firms both increase their awareness of the direct and indirect influence of international transactions on their future, and establish and conduct transactions with other countries."

This definition is perhaps most useful in that it integrates aspects of the first three views into one holistic interpretation of the internationalisation concept. Firstly, Beamish's (1990) definition integrates the internal learning of the organisation with its patterns of investment. As such, it recognises that internationalisation has both behavioural and economic components. Secondly, the definition is process-based. This implies that internationalisation is dynamic and evolutionary. Thirdly, the definition is not restricted to outward patterns of investment and thus allows for the firm to be involved with inward internationalisation activities such as importing or countertrade. …

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