Academic journal article Journal of Competitiveness Studies

The Effects of Firm Size and International Business Experience on Export Attitudes

Academic journal article Journal of Competitiveness Studies

The Effects of Firm Size and International Business Experience on Export Attitudes

Article excerpt

INTRODUCTION

Smaller firms, especially in their early phase of internationalization, suffer from a lack of experience operating in the foreign market (Nadkarni and Perez, 2007). In turn this limits their opportunities to learn from the internationalization process and exposes them to higher uncertainty levels compared to established multinational companies. Therefore, it is common to see small and medium enterprises (SMEs) move towards internationalizing their operation by beginning with an entry mode of a lower commitment or smaller scale and progress to entry modes of a higher commitment or greater scale; this is known as an incremental approach to internationalization (Johanson and Vahlne, 1977). The traditional route provides the SMEs with the time to learn and acquire enough information regarding their foreign market before moving into a greater scale of entry or higher commitment mode of entry. However, increased access to foreign markets and the availability of information about foreign markets, enabled partly by technological advancements, has raised the question of whether the traditional route for an enterprise to enter international markets is still relevant. While certain enterprises are capable of going abroad from inception, many of these firms are not at par with their more resource-rich counterparts. One of the often-highlighted reasons is the resource capability of the firms required in the process of going international.

Firm size is often linked to a firm's resource capabilities, and it has been argued that firm size is an important factor in determining firms' competitiveness (Ali and Camp, 1996). The theory of firm size suggests that bigger firms are better off compared to their smaller counterparts because of their greater resource availability in such areas as management, finance, research and development, and marketing (Caloff, 1994). It is argued that smaller firms are not able to compete effectively with larger and more resourceful firms. In fact, the theories of internationalization propose that direct international involvement requires a firm to fulfill basic considerations, one of which is resource availability (Johanson and Vahlne, 1977; Welsch and Lousrrarinen, 1988).

Thus, a study on firm size provides important insights into firms' internationalization process by addressing two important issues: whether firms size has any bearing on international business experience, and to what extent firm size influences management attitudes towards exporting activities. This study attempts to investigate the relationship between firm size and 1) international business experience and 2) management attitudes toward exporting activities. Empirical research by Bonaccorsi (1992) on management attitude as a determinant factor in export success is limited. Managers that have a more positive attitude will tend to make a stronger commitment towards exporting activities. Firms that are already exporting perhaps will commit more resources to export-related research and development activities, increasing effort in exploring more potential markets and gathering export specific market activities (Souchon and Diamantopoulos, 1999). While it seems that international experience is arguably an important determinant to exporting behavior, it nonetheless has received less attention in research (Gripsrud, 1990; Reuber and Fischer, 1997).

The objectives of this study are twofold: (a) to find out whether size of a firm relates to management attitude toward exporting behavior, and (b) to examine the association between international involvement of a firm and the attitude of management toward exporting. The knowledge gained from this research will assist us in understanding whether firms of different sizes in Malaysia have similar patterns and experiences to those in other countries. Furthermore, the insight will also provide inputs to the Malaysian government in formulating policies to assist exporters in their exporting activities. …

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