Academic journal article Multinational Business Review

Internationalization, Internalization and the Performance of US Biopharmaceutical SMEs

Academic journal article Multinational Business Review

Internationalization, Internalization and the Performance of US Biopharmaceutical SMEs

Article excerpt

Introduction

Despite the immense amount of international business (IB) literature on the multinationality-performance (M-P) relationship ([14] Contractor et al. , 2003; [43] Kudina et al. , 2009; [49] Lu and Beamish, 2004; [53] Musteen et al. , 2010; [77] Thomas and Eden, 2004), little research has been undertaken on small- and medium-sized enterprises (SMEs) in specific industry contexts. We contend that industry-specific studies on the M-P relationship of SMEs have the potential to make unique contributions to the literature for three major reasons.

First, IB scholars have developed a three-stage internationalization perspective ([14] Contractor et al. , 2003; [46] Li, 2003; [49] Lu and Beamish, 2004) - an initial international expansion stage with negative effects on performance, a second stage of further internationalization with positive effects, and finally a third stage where excessive internationalization negatively impacts performance. If researchers are to test this so-called S-curve in a finer-grained manner, an important step is to study carefully the early stage of internationalization in which multinational SMEs are prevalent.

Second, the research on the M-P relationship typically focused on a single dimension of multinationality, be it the ratio of foreign to total sales or number of foreign subsidiaries or countries or some kinds of weighted indices ([47] Li, 2007). In particular, the extant studies on the M-P relationship of SMEs tended to address export sales activities ([16] Coviello and Jones, 2004). Considering the ubiquity of worldwide strategic alliances (especially in high-technology industries) and the essential need for resource-constrained SMEs to collaborate with foreign partners ([73] Shrader, 2001), it is important to investigate SME internationalization to reveal the likely distinctive performance impact of alliance-based international expansion as opposed to subsidiary-based (or go-it-alone) international strategy.

Third, the extant studies on the M-P relationship of SMEs focused on firms from relatively small open economies (e.g. Australia, New Zealand, Denmark, Sweden, The Netherlands), and more recently, those from newly industrialized economies, such as Korea, Taiwan, Singapore, Hong Kong ([15] Coviello and McAuley, 1999). These studies drew sample firms across many industries, and thus were not industry specific. [31] Hennart (2007, p. 446) remarked, "[t]he multiplicity of motives for international expansion [...] means that studies examining the [M-P] relationships should be performed [...] at a detailed industry level." Consistent with Hennart's suggestion is [2] Andersson's (2004) finding that internationalization varies considerably in different industrial contexts. Therefore, an investigation of the M-P relationship within a specific industry demonstrates more precisely the consequences of internationalization.

In line with the above, this study examines the M-P relationship of SMEs from a single home country and in a specific industry, i.e. the US biopharmaceutical industry. We first seek to reveal how performance varies with geographic dispersion of foreign subsidiaries and alliances. To the best of our knowledge, virtually no studies on the M-P relationship attempt to distinguish between subsidiary- and alliance-based internationalization. Second, we draw upon internalization theory ([10] Buckley and Casson, 1976; [32] Hennart, 1982; [64] Rugman, 1981), which seems to be reconcilable with [17], [18] Dunning's (1980, 1988) eclectic paradigm ([65] Rugman, 2010), to investigate how performance is affected by firm-specific advantages (FSAs), country-specific advantages (CSAs), and the degree of internalization systematically[1] . Thus, this study contributes to the IB research by further elucidating the M-P relationship ([78] Verbeke et al. , 2009) and advancing our understanding of the performance impact of FSAs, CSAs, and internalization advantages ([65] Rugman, 2010) in an industry-specific SME internationalization context. …

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