Academic journal article Journal of Small Business Strategy

Critical Success Factors of Sme Internationalization

Academic journal article Journal of Small Business Strategy

Critical Success Factors of Sme Internationalization

Article excerpt

INTRODUCTION

Internationalization has been defined as the process of going beyond domestic operation and operating internationally. SME internationalization is one of the highly discussed issues in the modern literature of international business. Internationalization of SME operation is certainly not a new phenomenon and it is a quite common practice among Western business organizations. The firms in third world countries are striving to put their name on that list. Few firms from developing countries like China, Malaysia and Thailand have been successful with internationalization. As everything is becoming globalized, the traditional idea of international operation solely applicable for larger corporations is no longer valid. Smaller firms particularly from the West are obtaining remarkable success beyond the conventional domestic territory. Modern communication and transportation tools have further enhanced internationalization. With globalization, greater opportunities are provided internationally as the domestic market is continuing to shrink. With this trend, almost every country view domestic market as insufficient for ensuring business growth and sustainability. This scenario has opened diversified fields of research areas for exploring and thus presents numerous scopes to develop theories for the best possible method of SME internationalization. This study has tried to uncover the most important success factors for SME internationalization. To accomplish this, it has adopted the literature review method and also builds a conceptual model for describing the multidimensional relationship among different variables which plays important and determining roles for successful internationalization of small and medium sized enterprises.

REVIEW OF RELEVANT RECENT LITERATURES

Theories and Approaches of SME Internationalization

Internationalization of different types of business organizations including SMEs is a popular subject of research in international business (Buckley & Casson, 1976; Buehner, 1987; Geringer, Beamish, & da Costa, 1989; Bloodgood, Sapienza, & Almeida, 1996; Coviello & McAuley; 1999, Zahra, Ireland & Hitt, 2000; Geringer, Tallman & Olsen, 2000; Denis, Denis, & Yost, 2002; Bae & Jain, 2003; Suarez-Ortega & Alamo-Vera, 2005; Ruzzier, Hisrich, & Antonic, 2006, and Salahuddin, Kahn, & Akram, 2008). Different approaches have been developed over the years to explain the pattern of internationalization including the stage approach, network approach, international entrepreneurship approach, and integrated approach (Suarez-Ortega & Alamo-Vera, 2005).

The Stage Based Approach

The Stage Based approach of internationalization has been defined as a linear and sequential process which constitutes a group of unique stages. There are mainly two approaches under this theory which are Uppsala model (Johanson & Vahlne, 1977) and Innovation related model (Bilkey & Tesar, 1977, Cavusgil, 1980). The Uppsala model has described internationalization as a process of gradual learning through experiences gained from foreign markets (Ruzzier et al., 2006). It is comprised of two basic concepts- the learning process and psychic distance (Collinson & Houlden, 2005). According to the theory developed by Uppsala model, the internationalization is the process of acquisition, integration, and utilization of both knowledge and expertise in international operations with incremental participation in international markets. By integrating the knowledge gained from international experiences it becomes easier for the enterprises to make decisions (Pett, Francis, & Wolff, 2004). In this way, internationalization can be regarded as the result of a series of incremental decisions. This model is also constructed on two essential elements: the amount of resources committed and the degree of commitment. The interaction between those essential elements also results in two effects known as the static effect and the dynamic effect. …

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