Where business networks and institutions meet: Internationalization decision-making under uncertainty

Both business networks and institutional forces are relevant to firm internationalization but they have seldom been studied together. We investigate under what circumstances firms are more likely to adopt non-predictive strategy in light of the influence of the business networks, the institutional forces, and the home market background affecting their internationalization. Based on survey data from 758 small and medium-sized enterprises (SMEs) from Brazil, China, Poland, Italy, and Sweden, our results support the effects of formal institutional distance and cultural differences on the use of non-predictive strategies by SMEs in internationalization decisions, as well as the contingency effects of business network stability and of having an emerging market background. We integrate research on the liability of foreignness and the liability of outsidership and find that business network stability is critical. It does not moderate the relation between cultural difference and NPS adoption but attenuates the negative relation between institutional distance and NPS adoption, indicating that the liabilities of foreignness and outsidership play different roles in internationalization.     

Internationalization of Emerging Economy SMEs: A Tripod Approach

Research suggests that internationalizing SMEs in the West enjoy far greater institutional support. There is, however, little understanding of the internationalization processes of emerging economies' SMEs (EESMEs) and yet they are notable contenders in international trade. Accordingly, this research draws from an integrated strategy tripod framework to develop new perspectives accounting for how Iranian-based EESMEs internationalize and compete in international markets. A comprehensive analysis of Iranian EESMEs' survey data revealed that, other than their owner's managerial perceptions of their industry, firm, and institutional constraints, international market knowledge (IMK) significantly moderated their internationalization strategies. Such understanding advances research on firm internationalization by pinpointing the central role of IMK in forming internationalization strategies by EESMEs in hard-to-reach contexts, which has implications for academic research and policy-making, leading to needed reform based on theory and practice.     

Entrepreneurship,globalization, and public policy

This paper examines the impact of governmental policies in influencing the path of internationalization of small- and medium-sized enterprises (SMEs). It focuses on the role of institutions mandated to assist internationalization, as exemplified by Canada's Export Development Corporation (EDC). We illustrate and examine critically the role that governments typically play in assisting and influencing the international expansion of domestic firms. We argue that the activities of agencies such as EDC — mainly in financing and in insuring against the risks inherent in export activities — may actually be counterproductive to the long-term interests of many SMEs by skewing managers' decisions toward direct exporting, rather than toward indirect exporting by entering the value chain of already-established multinational enterprises (MNEs). A consequence may be to divert the constrained resources of entrepreneurial firms away from their greatest comparative advantage — innovation — toward managing direct entry into international markets in which they are at a comparative disadvantage relative to larger established MNEs. Highly innovative SMEs might be better off by leaving the internationalization of their innovations to MNEs and sharing some of the international direct exporting profits with them instead. The implications are relevant for governmental policies toward internationalizing SMEs not just in Canada but in open, market-oriented economies everywhere.     

Entry and Exit in OTC Derivatives Markets

We develop a parsimonious model to study the equilibrium and socially optimal decisions of banks to enter, trade in, and possibly exit, an OTC market. Although we endow all banks with the same trading technology, banks' optimal entry and trading decisions endogenously lead to a realistic market structure composed of dealers and customers with distinct trading patterns. We decompose banks' entry incentives into incentives to hedge risk and incentives to make intermediation profits. We show that dealer banks enter more than is socially optimal. In the face of large negative shocks, they may also exit more than is socially optimal when markets are not perfectly resilient.     

Social Capital and Indian Micromultinationals

‘Micromultinationals’ are small to medium‐sized enterprises (SMEs) that use higher‐commitment entry modes beyond exporting. The study extends the micromultinational notion by addressing the question: what enables some internationalizing SMEs to become micromultinationals rather than pure exporters? Adopting a connectionist and bonding perspective, its focus is on cross‐border coethnic ties as a valuable source of social capital. A survey of 102 Indian software SMEs indicates that higher stocks of cross‐border coethnic social capital facilitate the adoption of higher‐commitment entry modes by micromultinationals. Also, micromultinationals have a significantly higher degree of internationalization (the percentage of sales from foreign sources) than pure exporters.     

Internationalization Orientation in SMEs: The Mediating Role of Technological Innovation

This study examines the relationship between internationalization orientation and international performance of small and medium-sized enterprises (SMEs), and the mediating effect of technological innovation. Prior research suggests that internationalization is a prominent strategic choice for SMEs growth and profitability. However, there is still no explicit agreement on how internationalization affects international performance. Similarly, the role of innovation on performance has long been emphasized, but the implications of technological innovation on international performance are still eluding us. Our investigation of 116 SMEs in the United Kingdom reveals that internationalization orientation has a significant effect on their international performance, with SMEs adopting simultaneously an inward and outward international orientation achieving superior results. We further demonstrate that there is an inverted U-shaped relationship between technological innovation and international firm performance among SMEs. Meanwhile, we find that technological innovation positively mediates the effect of internationalization orientation on international firm performance, particularly for the SMEs exhibiting moderate levels of technological innovation activities. The findings of this study suggest that managers can improve international performance by combining inward and outward internationalization orientation with technological innovation activities in their strategic decisions.     

An interaction orientation approach to SME-Intermediaries relationships

Small and medium-sized enterprises (SMEs) engaging in foreign operations have drawn significant research attention in recent years. One of the aspects linked to such operations is SMEs’ expansion to foreign markets, often relying on local intermediaries. These intermediaries provide the firms with valuable resources such as market knowledge and recognition and reduce foreign operations’ costs. Hence, they are often considered as strategic partners. The current study aims to expand the existing knowledge regarding the relationships between business to business SMEs and their intermediaries by exploring interaction orientation as an organizational cultural aspect and its linkage to the trust-conflicts balance. Based on a survey of 165 international venture managers, complemented by in-depth interviews with 16 senior export managers, we found that by incorporating interaction-orientation constructs into the relationship management, SMEs can enhance affective trust while mitigating conflicts. We also reveal that the impact of emotional and task conflicts on SMEs’ performance is mediated through calculative trust, indicating the benefits of balancing between relational and formal governance.     

Liquidity in Asset Markets With Search Frictions

We develop a search‐theoretic model of financial intermediation in an over‐the‐counter market and study how trading frictions affect the distribution of asset holdings and standard measures of liquidity. A distinctive feature of our theory is that it allows for unrestricted asset holdings, so market participants can accommodate trading frictions by adjusting their asset positions. We show that these individual responses of asset demands constitute a fundamental feature of illiquid markets: they are a key determinant of trade volume, bid–ask spreads, and trading delays—the dimensions of market liquidity that search‐based theories seek to explain.     

Innovation and internationalization in an emerging market context: Moderating effects of interpersonal and organizational social networks

This study draws upon the social network theory to understand under what conditions innovation influences firm internationalization in the context of Vietnamese small and medium-sized enterprises (SMEs). We theorize that different types of social networks play varying roles in moderating the relationship between innovation and firm internationalization. Using a panel dataset of more than 15,800 observations of SMEs, we found that high levels of interorganizational social networks positively moderate the relationship between innovation and firm internationalization. However, there is no such relationship for interpersonal social networks for the studied firms. Our findings will allow SME managers to better understand the crucial role that interorganizational social networks can play in their successful internationalization.     

Relational Contracts and the Nature of Market Interactions

We provide evidence that long‐term relationships between trading parties emerge endogenously in the absence of third party enforcement of contracts and are associated with a fundamental change in the nature of market interactions. Without third party enforcement, the vast majority of trades are initiated with private offers and the parties share the gains from trade equally. Low effort or bad quality is penalized by the termination of the relationship, wielding a powerful effect on contract enforcement. Successful long‐term relations exhibit generous rent sharing and high effort (quality) from the very beginning of the relationship. In the absence of third‐party enforcement, markets resemble a collection of bilateral trading islands rather than a competitive market. If contracts are third party enforceable, rent sharing and long‐term relations are absent and the vast majority of trades are initiated with public offers. Most trades take place in one‐shot transactions and the contracting parties are indifferent with regard to the identity of their trading partner.     

The Effects of Top Management Team Pay and Firm Internationalization on MNC Performance

We examine relationships among top management team (TMT) compensation, a firm’s degree of internationalization (DOI), and its subsequent levels of market and accounting performance. Consistent with our contingency view of information-processing theory, we find that non-CEO total pay and the use of long-term incentive pay are positively associated with subsequent performance, whereas the CEO-TMT total pay gap has negative effects on firm performance. CEO pay has no relationship with performance and TMT pay effects are much stronger in MNCs with high DOI.     

The internationalization of small and medium-sized enterprises: the effect of family management, human capital and foreign ownership

Research on factors affecting the internationalization of SMEs is attracting growing interest. However, only a limited number of empirical analyses have explored the question of if and to what extent the family character of the firm has an effect on internationalization decisions. Relying on data from a sample of 1,324 Italian manufacturing SMEs, this paper shows that involvement of the owning family in management negatively influences export propensity but, once the choice to go international has been made, both the degree of internationalization and geographical scope in family-managed firms are not significantly different from nonfamily-managed firms. Empirical results also show that the level of human capital and the presence of foreign shareholders in the SMEs positively influence internationalization. Innovation propensity, size, and age of the firm as well as industry characteristics are included in the analysis as control variables.     

中国进出口贸易市场的混沌特性分析

对于经济管理系统混沌的检验,主要体现在证券、期货和外汇市场,由于其他经济领域序列数据的匮乏,传统混沌分析方法的应用受到了限制。本文采用最新的基于小数据样本的临近返回检验,研究中国进出口贸易1989年1月到2003年5月的月度数据序列,发现了混沌的拓扑特征;进一步应用小数据量方法计算最大Lyapunov指数,数值结果同样证实中国进出口贸易市场存在低维混沌,从而佐证了国际贸易市场混沌的存在;实证结果为国际贸易系统模型的建立和预测提供了新的理论依据。     

Leadership and business model innovation in late internationalizing SMEs

Drawing on the distinction between small-scale and large-scale business model innovation, and between directive and empowering leadership, we examine how CEOs in SMEs lead business model innovation during the process of internationalization. Building on eight cases of Japanese manufacturing SMEs, we develop a theoretical framework pointing to two different patterns in the articulation between CEO leadership style and business model innovation. We show that small-scale business model innovation led by directive leadership results in a timelier foreign market entry. However, in order to increase international sales, large-scale business model innovation is required. This is facilitated by an empowering leadership style of the CEO.     

Foreign market knowledge,entry mode choice and SME international performance in an emerging market

This paper examines the mediating role of equity entry mode choice in the relationship between foreign market knowledge (FMK) and international performance of small and medium-sized enterprises (SMEs) originating from emerging markets. In addition, this paper investigates when FMK enhances firms' equity mode choice by considering financial slack as a moderating variable. Using data obtained from 205 SMEs engaged in cross-border activities in Ghana, the results reveal that FMK and international performance relationship is mediated by foreign market equity entry mode choice. The results also suggest that FMK positively relates to SMEs' preference for equity mode for foreign market entry and this relationship is amplified when slack resource is greater. These findings offer theoretical as well as practical implications for SME managers in developing and emerging markets in terms of entry mode decisions.     

Modelling the effects of institutional support and international knowledge on competitive capabilities and international performance: Evidence from an emerging economy

This paper explores the process through which institutional support initiatives contribute to the international performance of firms from the small open economy of Malaysia. We examine both direct and indirect causal effects of institutional support (informational, training, trade mobility and financial aid-related support) on internationalization. We develop a model to address how institutional support initiatives affect the performance of export-oriented or so-called born global firms. From a survey of 250 firms from Malaysia, an emerging Southeast Asian market, we find that government support initiatives do not have significant impacts on firm performance unless examined based on processes of government support initiatives, international knowledge, commitment, competitive capabilities, and international performance. Government support initiatives play a critical role in export-oriented firms from small open economies (SMOPECs) in emerging markets by contributing to a number of contextual deficits that determine the international performance of a firm. This study provides guidelines for policy makers and business owners on how institutional support can facilitate the accumulation of knowledge about international markets, enhance commitment to exports and help firms gain competitive capabilities in the export market for greater success in international markets.     

Digital Internationalization of Traditional Firms: Virtual Presence and Entrepreneurial Orientation

While digital technologies like the internet offer new and less cost-intensive ways to seize international opportunities, when it comes to traditional firms selling tangible products, little is known about their use of online channels for servicing foreign markets. This is especially the case for their choice between customized (active) or general (default) forms of corporate internationalization websites (viz. virtual presence modes). Building on the entrepreneurial orientation literature, we propose that firms that are more entrepreneurially orientated are more likely to capture internationalization opportunities with active internationalization websites. We further suggest that the threat of competitive pre-emption will moderate this relationship. Using a sample of Austrian SME exporters, we find support for the positive effect of entrepreneurial orientation on the use of active internationalization websites, but do not find a significant moderating effect of competitive pre-emption. In this way, we add to the growing research on digital internationalization by explaining the circumstances in which traditional firms choose between different internationalization website formats.     

Organizational learning in SMEs’ internationalization: A moderated mediating effect of absorptive capacity

We examine both mediation and moderation effects on the direct relationship between internationalization speed and firm performance in the context of small and medium-sized enterprises (SMEs). Building on prior studies that focus either on the direct speed–performance linkage or the moderating role played by knowledge, we suggest that an important source of performance variations is organizational learning. Grounded in the organizational learning perspective, we argue that firm strategies regarding speed and earliness of internationalization provide the SMEs with opportunities to develop their absorptive capacity, and thus enhance their performance. Using survey data from 343 SMEs in Australia and New Zealand, our empirical results suggest that absorptive capacity is associated with internationalization speed in a reversed U-shape relationship and that in turn absorptive capacity mediates the direct speed–performance relationship. Moreover, this mediating effect is moderated by earliness of internationalization. By demonstrating the moderated mediating effect of absorptive capacity as a novel mechanism to achieving superior performance, we enhance the understanding of how firms succeed internationally.     

Drivers of internationalization success: a conjoint choice experiment on German SME managers

Internationalization is a common growth strategy for small and medium-sized enterprises (SMEs). However, SMEs face several challenges within the internationalization process. As SMEs are characterized by limited resources, managers are constantly involved in a decision-making process concerning the allocation of the SMEs’ resources. Therefore, internationalization can be understood as a complex, multidimensional decision process. Based on a set of 2244 internationalization decisions made by German SME managers, the present study examines how eight strategic and structural factors drive the perceived international success of SMEs. When applying conjoint choice analysis, the results suggest that especially equity financing in the internationalization process, an appropriate market selection as well as proactive motives, and a long-term scope can drive SMEs’ international success. Moreover, it becomes evident that strategic factors are more relevant for successful internationalization than structural factors.     

Internet and SMEs' internationalization: The role of platform and website

Despite the growing trend among small and medium enterprises (SMEs) of utilizing the Internet for internationalization, academic research in this area remains sparse. This paper presents and empirically evaluates a theoretical framework of the effect of Internet capabilities, comprising platform and web capabilities, on export marketing capabilities and export performance for SMEs in emerging markets. Furthermore, we examine the contingencies in this relationship. Based on a sample of Chinese SMEs, our empirical findings indicate that platform and web capabilities are positively related to export marketing capabilities and export performance. Moreover, product complexity and competitive intensity moderate the effects of platform and web capabilities on export marketing capabilities. Additionally, we discuss the theoretical and managerial implications.