THE INTERNATIONALIZATION AND GROWTH OF SMEs

We examine the individual and joint effects of two internationalization strategies, exporting and foreign direct investment (FDI), on the growth of small and medium-sized enterprises (SMEs). Using a sample of 164 Japanese SMEs, we find that FDI activity is a more effective growth strategy for SMEs than exporting. However, exporting activity has a positive moderating effect on the relationship between an SME's FDI activity and firm growth. A strategy of high exporting concurrent with high FDI leads to higher rates of firm growth. Finally, we find that an SME’s age when it starts to internationalize has a negative moderating impact on the relationship between internationalization and firm growth. Early internationalizers achieve higher rates of firm growth from internationalization activities than late internationalizers.

[1]  James A. Wolff,et al.  Internationalization of Small Firms: An Examination of Export Competitive Patterns, Firm Size, and Export Performance [*] , 2000 .

[2]  Jaeyong Song,et al.  Foreign Direct Investment and the Sourcing of Technological Advantage: Evidence from the Biotechnology Industry , 1997 .

[3]  L. Zucker.  The role of institutionalization in cultural persistence. , 1977 .

[4]  J. Johanson,et al.  The Mechanism of Internationalisation , 1990 .

[5]  Aviv Shoham,et al.  Export Performance: A Conceptualization and Empirical Assessment , 1998 .

[6]  E. Autio,et al.  Effects of Age at Entry, Knowledge Intensity, and Imitability on International Growth , 2000 .

[7]  H. Barkema,et al.  International Expansion Through Start-Up or Acquisition: A Learning Perspective , 1998 .

[8]  M. Hannan,et al.  Structural Inertia and Organizational Change , 1984 .

[9]  Andrew McAuley,et al.  Internationalisation and the Smaller Firm: A Review of Contemporary Empirical Research1 , 1999 .

[10]  P. P. McDougall,et al.  New venture internationalization, strategic change, and performance: A follow-up study , 1996 .

[11]  John A. Seeger,et al.  The Theory and Practice of Strategic Management in Smaller Rapid Growth Firms , 1986 .

[12]  Shaker A. Zahra,et al.  The Effect of the Environment on Export Performance among Telecommunications New Ventures , 1997 .

[13]  A. Rugman,et al.  New Theories of the Multinational Enterprise , 1983 .

[14]  Paul W. Beamish,et al.  The role of alliances in international entrepreneurship , 1999 .

[15]  Camille Carrier,et al.  Intrapreneurship in Large Firms and SMEs: A Comparative Study , 1994 .

[16]  Daniel P. Sullivan.  Measuring the Degree of Internationalization of a Firm , 1994 .

[17]  Terence R. Mitchell,et al.  Decision making behavior in smaller entrepreneurial and larger professionally managed firms , 1988 .

[18]  M. Porter.  The Competitive Advantage Of Nations , 1990 .

[19]  J. Hennart,et al.  A Theory of the Multinational Enterprise , 1982 .

[20]  Paul W. Beamish,et al.  The internationalization and performance of SMEs , 2001 .

[21]  Bruce R. Barringer,et al.  Small business growth through geographic expansion , 1998 .

[22]  A. Stinchcombe.  Social Structure and Organizations , 2000, Political Organizations.

[23]  Paul W. Beamish,et al.  Survival and Profitability: The Roles of Experience and Intangible Assets in Foreign Subsidiary Performance , 2002 .