Academic journal article Journal of Management Research

Quantitative Analysis of Managerial Capabilities and Internationalization of Manufacturing SMEs - Empirical Evidence from Developing Countries

Academic journal article Journal of Management Research

Quantitative Analysis of Managerial Capabilities and Internationalization of Manufacturing SMEs - Empirical Evidence from Developing Countries

Article excerpt

Abstract

In this study, managerial capabilities: management capacity or size; management expertise; and management process were quantitatively analyzed through longitudinal methodology to ascertain their importance as one of the key driving forces or factors of firm's international operations. The objective is to examine whether there is a significant relationship between these factors and the firm's degree of internationalization. The study is based on a sample of 500 low, medium and highly-internationalized non-SMEs and SMEs from five developing countries. The results indicate that there is a significant difference in the managerial capabilities of SMEs and non-SMEs at all levels of internationalization. For example, management capacity (size) of SMEs was significantly less than their non-SMEs counterparts at the moderate and high levels of internationalization. SMEs were significantly less likely to employ a qualified managers (expertise) or uses professional training at the low, moderate and high levels of internationalization when compared to non-SMEs. SMEs were also found to be significantly less likely to develop management process, (international expansion, export and strategic plans, TQM, JIT, QA) when compared to non-SMEs. Overall, the study results suggest that compared to non-SMEs, SMEs grow internationally with less managerial capability.

Keywords: Internationalization, SMEs, Manufacturing, Developing countries, Managerial Capabilities

It has traditionally been argued that if you want to get on in business across the globe, (internationalization) 'who you are' is more important than 'where you come from.' Recent research have revealed that the successful operations of businesses across diverse markets has much more to do with personal attributes of the managers responsible for these cross border transactions. Hence the main objective of this paper is to investigate what roles do the SMEs managerial capabilities play in their internationalization process? Internationalization (cross-border operations) among small and medium-sized enterprises (SMEs) has remained a topic of considerable contemporary relevance, principally owing to the observed growth effects of cross-border venturing, and the demonstrated capacity of SMEs to drive economic development at national, regional, and global levels (European Commission, 2013). However, several obstacles constrain SMEs' international activities. The literature reports extensive analysis of export barriers (Fernandez-Ortiz & Lombardo, 2009). SMEs in particular suffer from a number of major internal barriers to international development relating to their limited endowment of resources and capabilities to meet the challenges of the global environment. Cerrato and Piva (2010) argued that the debate on barriers or factors affecting the international development of small and medium-sized enterprises (SMEs) is very lively, and research in this field is attracting growing interest (Fernandez-Ortiz and Lombardo, 2009; Sommer, 2010). To ensure a greater understanding of SME internationalization barriers, Osei-Bonsu (2010) identified five barriers as being the most serious impediments to SME international activities. These are: 1) lack of managerial capabilities; 2) shortage of working capital to finance exports; 3) inability to identifying foreign business opportunities; 4) limited information to locate/analyze markets; and 5) inability to contact potential overseas customers. Additionally, management characteristics, endowment of human resources and ownership structure have been identified by scholars as areas of interest for a deeper understanding of the determinants of SME success in international activities.

Hence, as stated above, the primary focus of this paper is to investigate to which extent does the managerial capabilities are essential in the context of SME internationalization process. Managerial capabilities in this paper are defined as: management capacity (size), management expertise (formal Business or Management education or professional Training) and management process (strategic or international expansion plan & management improvement techniques). …

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