Entrepreneurship,globalization, and public policy |
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| Institution: | 1. Merrick School of Business, University of Baltimore, 1420 North Charles Street, Baltimore, MD 21201, USA;2. Faculty of Business, University of Alberta, Edmonton, Alberta, Canada;3. Stern School of Business, New York University, New York, NY 10012, USA;1. Department of Microbiology and Immunology, College of Medicine and Health Sciences, Sultan Qaboos University, P.O. Box 35, Muscat, Oman;2. Department of Community Health, Faculty of Applied Medical Sciences, Al-Baha University, Saudi Arabia;1. School of Economics and Management, Tongji University, Shanghai 200092, China;2. College of Economics, Shenzhen University, Shenzhen 518060, China;1. Enterprise Research Centre, Imperial College Business School, Tanaka Building, South Kensington Campus, London, United Kingdom;2. Department of Human and Community Development, University of California, Davis, Davis, CA 95616, United States;3. Berkeley Roundtable on the International Economy, University of California, Berkeley, United States;4. Mines ParisTech, 60 Boulevard Saint-Michel, 70006 Paris, France;5. School of Business, University at Albany, SUNY, 1400 Washington Avenue, Albany, NY 12222, United States;6. Ghent University, Faculty of Economics and Business Administration, Hoveniersberg 4, Gent, Belgium;1. Faculty of International Social Sciences, Gakushuin University, Tokyo, Japan;2. Okayama University, Japan;3. Aomori Chuo Gakuin University, Japan |
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| Abstract: | 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. |
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