Internationalization of Small and Mediumsized Enterprises: A Grounded Theoretical Framework and An Overview

Internationalization of Small and Mediumsized Enterprises: A Grounded Theoretical Framework and an Overview
Hamid Etemad*
McCill University
Prior to the globalization of markets and industries, national markets were segmented: large companies competed mostly in international markets, while smaller businesses remained local or regional. But the global Competitive environment has gradually changed. Globalization has removed the barriers (Levitt, 1983)that segmented the national and international markets and separated small and large firms competitive space in the recent past (Fraser & Oppenheim, 1997).It is becoming increasingly difficult, if not practically impossible. for independent small firms to thrive by taking refuge in their traditionally protected markets (Etemad, 1999; Fraser & Oppenheim; Levitt. 1983).Consider, for example, the European Unions (EU) Single European Act that removed market boundaries (and national boundaries) among the 15 members on December 31. 1992. and 1 more Eastern European countries will be joining 0 the single market on May 1.2004.The EUs transformation resonates with Ohmaes (1985, 1990, 1995) concepts of a borderless world, inter-linked economies. and triads, where regional blocs are becoming more powerful than the nation-states. Unlike the EU, the other regional free trade (and investment) agreements have not removed national or market boundaries. However, they have removed many of the crippling entry and exit barriers to intra-bloc movements for firms within their jurisdictions. Regardless of size. firms are forced to compete side-by-side and must now become at least regionally, if not globally, competitive to survive in the exceed*Faculty of Management, McGill University, 1001 Sherbrooke Street West. Montreal, QC. Canada H3A lG5. E-mail: Hamid.Etemad@McGill.ca I would like to thank the co-editors of this journal. Drs. Brooks and Fooladi. for their thorough review and constructive suggestions on this article. I am grateful to Professor Jim Bell for his insightful review and valuable recommendationsand to Abhijit Ghosh and Isabelle Dagenais for their suggestions on an earlier version. Funhermore. I acknowledge Mr. John Dobson and John Dobson Foundation for their genuine interest. suppon, and financial contributions to the McGill International Entrepreneurshipinitiative. On behalf of the MIE scholarly community, I am delighted to thank them for their support of our collective effort...
ingly competitive interlinked markets. Even if firms decide to refrain from entering international markets and compete in other blocs that are home markets to their respective national firms, globally competitive firms may enter their home market. Forced to compete with multinational enterprises (MNEs) and globally competitive and regionally dominant national firms, at home and abroad, smaller firms face even larger challenges than their larger counterpart.. They must develop both the necessary and sufficient conditions for attaining the requisite competitiveness (Fahy, 2002;Grant, 1991;Mathew. 2003). while handicapped by constrained resources (Bell, Murray, & Madden, 1991; Bonaccorsi, 1992; Etemad. 1999; McNaughton & Bell. 2000; Miesenbock. 1988) and deprived of the potential guidance provided by foundation theories that have helped to pave the road for international growth of larger firms such as MNEs. Consider, for example, that the extant theoretical developments in international business, including major theoretical contributions by Bartlett and Ghoshal(1986, 1989).Buckley and Casson (1976).Dunning (1977,1980, 1981. 1988). Dunning and Rugman (1985). Hymer (1976). Rugman ( 1982).Vernon ( 1 6 ) and many others have focused on 96. internationalization of larger firms, especially MNEs, nearly to the exclusion of smaller or entrepreneurial firms (Kirzner, 1979). With the notable exception of a very few scholars, including Buckley (1989) those in and the Uppsala School of Internationalization (e.g.. Cavusgil, 1980, 1982;Johanson & Vahlne. 1977. 1 9 , 1992; 90 Johanson & Weidersheim-Paul, 1975). sometimes referred to as the Stage Theory of Internationalization, the other extant theories have offered little, if any, theoretical guidance to smaller firms aspiring to internationalize. The Uppsala Theory of Internationalization envisioned that firms would gain experiential knowledge in sruges by first entering foreign markets with close psychic distance (Stottinger & Schlegelmilch, 1998), which helped them to control the elevated risks of foreignness (Hymer, 1976) and accumulate experiential knowledge as a basis for entering other markets.
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The importance of theoretical guidance to smaller firms is further amplified because of these firms relatively low capacity to absorb the risk of conducting experimentation in inherently riskier and hypercompetitive international markets (DAveni, 1994). and equally low tolerance for temporal crisis (Castrogiovanni, 1996). due to their constrained resources (Bonaccorsi. 1992; Miesenbock, 1988). Smaller firms are truly challenged, especially when facing intense competition in international markets where they have yet to establish strongholds. In spite of such pronounced needs, the other extant theories of internationalization have not acknowledged the basic characteristics of small and mediumsized enterprises (SMEs) and the potential impact of unbridled global competition on them. Knickerbocker ( 1973) observed that U.S.-based MNEs have emulated one anothers leading strategies when entering international markets to avoid the risk of excessive costs and falling behind, or becoming dominated by the lead movers. Knickerbockers observation is a direct result of the theory of oligopolistic competition with implication for SMEs. The disadvantage of the emulation strategy may amount to disaster for SMEs whenever the emulated variant of the strategy faces the strategys original architect or its affiliates (e.g., the sister-subsidiaries of MNEs). Game Theory dictates that the emulated strategy should be attacked at its weak and exposed point(s), which might not have been apparent or uncovered by the emulator due to inexperience or constrained resources. By a logical extension, theories of internationalization, from which most MNEs strategies emanate. may be equally ineffective. if not risky and impotent, to SMEs in trying to compete. especially with MNEs. Therefore, the minimum added danger to the SMEs, when emulating the strategy(ies) of the leading MNEs is exposure to a double jeopardy:
I. The SMEs relatively smaller resources greatly disadvantage them in the case of direct conflict with the larger firms (which may, for example. engage in resource-intensive competition for faster and more decisive results); and 2. SMEs may also find themselves defenceless against the larger firms. whose integrated strategies were emulated. in whole or in part, especially when competing in market territories favourable to the competitive positions of the larger firms.
needs of SMEs and have, for the most part, left them to their own devices. There is a pronounced need for new theories shedding light on SMEs internationalization strategies and process. Formation of Internationalization Strategies in SMEs
A Basis for SMEs Internationalization Strategy
The above arguments suggest that SMEs seeking internationalization, especially when facing larger and better endowed MNEs, need to develop their own distinctive, if not unique and dynamic, competencies (Eisenhardt & Martin, 2000; Hamel & Prahalad, 1985. 1990; Mathew, 2003; Teece, Pisano, & Shuen. 1997) to empower equally distinctive competitive strategies (Fahy, 2002; Grant, 1991. 1996) that can lead to potent competitiveness enabling them to compete against other companies, regardless of size. If competitive strategies can, for example, be based mainly on SMEs respective competitive advantages, they would hold the potential for changing the prevailing basis of competition (Christensen & Bower, 1996). from those in which their competitors possess a competitive advantage to those in which the focal SME holds competitive superiority. and against which competitors may find themselves defenceless. This is not a practical impossibility. Many small knowledge-intensive firms, from small domestic markets, have successfully deployed narrow but welldefined market segments worldwide (McDougall & Oviatt, 1991; Oviatt & McDougall, 1995, 1997) and have served their markets well sometimes in symbiotic collaboration with many local partners to deliver higher value (e.g., higher quality at lower prices) than competition to their prospective customers and stakeholdersZ (Dana, Etemad, & Wright, 2000, Etemad, Wright, & Dana, 2001). These firms have become globally competitive in the process and have experienced much higher rates of rapid internationalization (McDougall & Oviatt, 1991; Oviatt & McDougall, 1994, 1995, 1997) without facing serious competitive deterrence from others. This discussion points to a two-pronged proposition:
1. That emulation of MNEs strategies is not generally defensible, and should not be automatically emulated by SMEs as they are likely to be based on the strengths and competencies of their architects. but their weaknesses are easily exposed; and 2. SMEs internationalization strategies must have their own engines and drivers, relatively immune to competition or at least inimitable in the short term by competitors, regardless of their size and resources. which puts a much heavier emphasis on devising potent strategies well-constructed for SMEs that r y p
Naturally, the original architects know the potential strengths and weaknesses of their own strategies better than others and can easily develop counter-strategiesfor attacking those weaknesses (Etemad, 2002, 2004a). especially in a prolonged competition and regardless of the resources of their smaller counterparts. Therefore, and especially from a theoretical perspective, the extant theories have not responded to the internationalization
ical large firms cannot attack routinely.

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Both of these propositions follow closely game theoretic principles (Shubik, 1952, 1953, 1955; Von Neumann, 1954; Von Neumann & Morgenstern, 1947) and resonate with the formulation of competitive strategy based on the resource-based view of the firm (Barney, 1991, 1997; Grant, 1991, 1996; Nelson & Winter, 1977, 1982; Wernerfelt, 1984). and with SMEs distinctive core competencies and dynamic capabilities (Hamel & Rahalad, 1985& 1990). This implies that the distinct and possibly unique resources on which the internationalizing strategies of SMEs are based should be more eotent than those of well-endowed competitors. An Exaniple of Potent Internationalization Strategy: A Network of Locally-Based Capabilities The survival of SMEs in the exceedingly globalized and competitive environment suggests that not only do they possess distinctive competencies, but also that they use them effectively. One such distinct competency is smaller firms ability to establish and manage special relations with other partners at home and abroad (Etemad, 1999, 2003, 2004b). Managing relations, for the most part, is not dependent on physical resources, but relies on entrepreneurial traits, social relations, social capital and even family networks (Baron & Markman, 2000, Bygrave. 1989; Jones & Conway. 2004, Kapasuwan & Rose, 2004). At home, for example, where SMEs have their own strong local knowledge base, socio-political capital, social networks, as well as functional supply-chains, which we will refer to collectively as locally-based capabilities and competencies (LBCs), they can easily base their strategies on such LBCs. The distinct advantage of doing so is that others cannot easily develop or imitate them and therefore their exposure and vulnerabilities are substantively reduced. Such SMEs can even leverage the strengths of their Aveni. 1994) LBCs to provide strategic strong-holds ( D to offer refuge and competitive safety to partners against other competitors at home or in markets in which they possess similar competitive strengths. Likewise, they can rely on reciprocal arrangements based on the partners locally-based strengths (e.g.. locally-specificadvantages or capabilities). Such arrangements can form the strategic pillars of a network architecture for building strong worldwide networks of SMEs, with each local member being strong in its own home market and capable of defending its own as well as the networks interest in that market by virtue of its own locally-based strengths, including LBCs and locally-specific advantages (LSAs). In fact, MNEs have exploited their local subsidiaries LSAs and LBCs to advance their overall positions for a long time (Birkinshaw. 1996, 1997; Birkinshaw. Hood, & Jonsson, 1998; Crookell, 1986; Dunning, 1980, 1988;
Etemad, 1982; Etemad & Seguin-Dulude. 1986a. b; Rugman & Douglas, 1986). Not only have such LSAs and LBCs assisted the local subsidiary to compete locally, but they also have been systematically internalized by MNEs (Buckley & Casson, 1976; Coase, 1937; Dunning, 1980, 1988; Rugman. 1982)to increase their international competitiveness as a whole elsewhere. Therefore, there is no logical reason for SMEs not to utilize and adapt such well-established principles in deploying LSAs and LBCs to defend their own and network partners collective interests at home and beyond. They may even further leverage them to increase the networks competitiveness worldwide. It is important to note that the above is not emulating MNEs. It is. however, an example of a well-established and size-neutral theoretical principle that may be used by firms of all sizes. Naturally, what distinguishesone firms strategy from others and makes it effective against competitorsis not the principle but the distinctiveness and the competitive potency of that firms (or its networks) LBCs relative to those of others. The distinct resources of family networks and family enterprises, or those of socio-culturally-based firms (e.g., relations in coalition of family or ethnically-based firms), can form the initial basis for LBCs, while gradual accumulation of technologically- or strategically-based advantages could further enhance them later on. When combined, these enhanced LBCs can be further leveraged, as discussed earlier, to benefit all network members. In fact, Jones and Conway (2004). Kapasuwan and Rose (2004). Dana et al. (2000). and Etemad et al. (2001) have found that most of such collaborative relations turn synergistic (i.e.. complementary and mutually enhancing) and may even gravitate towards high reliance on partners strengths (Kanter, 1984). Etemad (2003, 2004b) found that some partnerships, regardless of the size of partners, have become distinctly synergistic and symbiotic over time, which translates consequently into distinct competitiveness for the partners and the network as a whole. In some cases, the strength of their mutual ties has eliminated the strategic necessity of second sourcing relations (i.e., redundant strategic partnering to minimize opportunistic behaviours) and led to uniquely symbiotic relations with partners operations attaining optimal combinations of scale and scope economies to permit high-value offerings to their customers and stakeholders (e.g., in terms of both high value and choice) for increased competitiveness.
This Papers Structure

Following this introduction, a brief overview of the extant literature on internationalization pertinent to smaller firms will be presented. This provides the conCanadian Journal of Administrative Sciences Revue canadienne des sciences de Iadministration 2K1,. 1-21
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text for proposing a grounded and integrative framework, which serves to organize the next six articles in this issue. A brief discussion of each of these papers will be followed by conclusions and implications.
The Overview of SMEs' Internationalization Literature as a Context for an Integrative Framework Compelled by an ever faster pace (Becker, 1965; Gifford, 1998; Poutzioris, Soufani, & Michaelas, 2003; West & Meyers, 1997) manifested in shortening product and technological life cycles (Coviello & Munro, 1995; Rasmussen, Madsen, & Evangelista. 2001). increasing costs of R&D (Lindqvist, 1990, 1997; Litvak, 1990). and faster technological obsolescence (Lindqvist). while facing resource limitations (Bell et al., 1991; Bonaccorsi, 1992; Etemad, 1999; McNaughton & Bell, 2000; Miesenbock. 1988) and increased competitiveness, typical small firms must tind it difficult to survive without the necessary requisite to support their competition. As a result, they must develop their own distinct competencies (e.g.. assets, capabilities, competencies, and especially relations) and further leverage them at home and abroad to overcome entry, exit. and competitive barriers, especially when they face adversities such as shortage of financing at home (McDougall & Oviatt. 1991). small home markets (Lindqvist. 1997; Madsen & Servais, 1997). and adversaries such the massive networks of MNEs (i.e., the network of MNE headquarters, sister subsidiaries, and their respective host of supply-chain collaborative arrangements) competing against them even in their own domestic markets. As the traditional theories of internationalization, including theories of MNEs, have failed to offer much needed direction to SMEs for formulating competitive strategies, especially in competition against MNEs, SMEs have been forced to devise and deploy a plethora of diverse strategies of their own, motivated by different competitive needs and enabled by different strategic drivers. Most of these strategies are innovative and are based on a combination of well-established principles. including distinct core competencies (Hamel & Prahalad, 1985, 1990). dynamic capabilities (Eisenhardt & Martin, 2000; Mathew, 2003; Teece et al.. 1997). self-renewing advantages and capabilities, such as knowledge (Nonaka & Takeuchi. 1995) and collaborative advantage (GomesCasseres, 1996; Kanter, 1984; Yoshino & Rangan. 1995) in order to cope with the competition and a continually evolving context. This dynamic context is neither simple nor static. It is continually formed and re-formed by: (a) the action of competitors inspired
by, for example, game theoretic principles (e.g., Shubik. 1952, 1953. 1955; Von Neumann, 1954; Von Neumann & Morgenstern, 1947). networks, alliances, and inter-firm arrangements (e.g., Gulati, 1995; Johanson & Mattson, 1988) and the evolutionary and behavioural theories of the firm (e.g., Barney 1991, 1997; Cohen & Cyert, 1965; Cyert & March, 1963). and (b) the forces and influences emanating from the resource-based view of the firm. especially when knowledge is the primary resource (e.g., Galunic & Roden, 1998; Gupta & Govindarajan. 1991; Kogut & Zander, 1992; West & Meyers, 1997). the international collaborative networks (Coviello & Munro. 1995; Dana et al., 2000; Doz, 1996; Etemad, 2003; Etemad et al., 2001; Huber, 1991; Jones & Conway, 2004; Keeble, Lawson, Smith, Moore, & Wilkison, 1998; Rasmussen et al., 2001; Russel, 1999). effective management of inter-firm LSAs and LBCs (Rugman & D'Cruz, 2000; Russel). This contluence of dynamics will undoubtedly have a confining effect on all competitors. The converging global environment with its exceedingly open and borderless international markets (Fraser & Oppenheim, 1997; Ohmae, 1985, 1990, 1995; Rennie, 1993) is fast becoming the common battleground for application of the strategic arsenals motivated partially by the above theories and schools of thoughts and partially by new approaches. Victorious firms appear to have deployed different strategies and are characterized differently. Consider, for example, "born globals" (Cavusgil, 1994; Knight & Cavusgil, 1996a. b; Knight, Madsen. Servais, & Rasmussen. 2000; Rennie. 1993). "international new ventures" (Oviatt & McDougall, 1994; Zahra, Ireland. & Hitt, 2000). "global start-ups" (Oviatt & McDougall. 1995). globally networked SMEs (Coviello & Munro. 1995; Johanson & Mattson, 1988; Oviatt & McDougall, 1994). and synergistically-based partnerships (Dana et al., 2000; Etemad et al., 2001; Hakansson & Snehota, 1989. 1992, 1995). symbiotic networks (Etemad. 2003, 2004b) among other innovative characterizations, which are mostly based on coalitions and have gained global market share collectively at the cost of others. The defeated firms. on the other hand, have faced bleak prospects: the risk of losing markets even at home, if not eventual demise. Therefore, the following theoretically grounded framework is an attempt to organize the complex dynamics of the above influences in a small number of theoretical constructs in the face of the exceeding complexities of internationalization process in a rapidly evolving environment while not abstracting from the competitive reality facing SMEs. This framework will also serve to provide a broader context for the next six papers in this issue.
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Figure 1
Schematic Depictions of Push, Pull, and Mediating Forces in Internationalization Process
The Internationalizing
The Attractive Pull
lnternationali7ation
Llirection of SMEs Movement towards Internationalization

from Local to International Markets
Towards a Theoretically-Grounded and Integrative Framework

In light of SMEs impressive and rapid success in international markets (e.g.. see Coviello & Munro, 1995; Keeble et al., 1998; Knight & Cavusgil, 1996a & b; Knight et al., 2000, Madsen, Rasmussen, & Servais. 2000, Madsen & Servais, 1997; McDougall & Oviatt, 199 I ; Oviatt & McDougall, 1994; Oviatt, McDougall. Simon, & Shrader, 1991). the above discussion suggests that internationally-oriented SMEs must have developed at least an implicit, if not an explicit, competitive framework. Alternatively,parts of a logical and internallyconsistent variants of a framework, developed partially by different internationalizing SMEs, may have been already deployed by these internationalizing SMEs. The above discussion, as well as the other literature reviews presented in this issue, confirms that these efforts have remained isolated and the modeling of the forces may have also been partial. These early efforts are reflective
of the prevailing developments in the field. However, an integrative and theoretically grounded framework has not emerged yet. This is the basic point of departure for further developments that follow.
An Integrative Framework
With the above point of departure in mind and for ease of discussions and further developments, we propose an integrative, yet conceptually simple framework to embody a range of influential forces at work and to reflect the early developments of the field. It consists of three theoretical constructs in addition to the institution of the firm, each housing a cluster of forces and influences, with their respective bilateral and multilateral inter-relations. This framework is depicted schematically in Figure I. The three constructs are termed the Pushing Forces of Internationalization (or simply. the push factors), the Attractive Pulling Incentives of Internationalization (or simply, the pull factors). and the
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Note: The evolutionary process of each construct due to, for example, bench marking, experimentation. and learning. among other self-renewal processes, is represented by a feedback arrow within each construct.
Mediating Forces of Internationalization. pushing, pulling, intermediating, and interacting with the SMEs internationalization process. Naturally, the combined impact of these forces is intermediated by the firms assessment of (a) the external environment, (b) its own competitive position, objectives. and aspirations, (c) internal resources and capabilities in relation to the exerted influences and market requirements, (d) the potential impact of exerted forces on a range of strategic options available to the firm, and (e) the ease of formulation and implementation of the consequent strategies. The push forces. This theoretical construct consists of a set of forces (or drivers) that are usually internal to the firm and exert pressure on the firm from the inside to internationalize (i.e., drive/push the firms strategy along the internationalization process). The push factors are entrepreneurial in nature and follow the Schumpeterian quest for creating opportunities especially when the firm has innovative combinations (e.g.. innovative products, services, and processes) and it is set to realize them. In practical terms, the manifestation of push factors may, for example, be pushing, or accelerating, SMEs internationalization process to exploit interna-
tional opportunities, especially when domestic market inertia (Bloodgood, Sapienza. & Almeida, 1996) may have been encumbering SMEs efforts. The extant theory, going back to Cantillon ( 1755). Schumpeter (1947, 191 111934). Say ( l803/1830, 1815). and Ely and Hess (1893). lends direct support to the overall framework in general and also to its push factors in particular. A taxonomical list of the components, organized in logical categories, and their associated citations are highlighted in Table 1. The ultimate potency of formulated strategies against competitors would, however, vary in relation to the firms internal resources and assessment of differing competitive and environmental forces. A cursory examination of the components of this set of forces indicates that all six drivers of rapid internationalization identified originally by McDougall and Oviatt (1991). followed by further elaborations by Oviatt et al. (1991, 1993). are included in the push factors. The puff forces. This theoretical construct consists of a set of forces (or drivers). usually in the environment im and external to the f r ,which enhance the firms competitiveness or provide attractive incentives for it to internationalize. These, for example, attract the firm by
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Table 1 Factors Pushing SMEs Internationalization Process and Associated Citation and References
F
A
Components of Push Factors FounderNanager Characteristics International/Global vision International experience Education and exposure Economics of Operations Achieving economies (E) of scale Achieving E of scope Achieving lower costs and prices Attaining added E of higher quality at lower prices Avoiding dis-economiesof small domestic market
Associated Citations and References Bloodgood et I., 1996: McDougall & Oviatt, 1991; viatt & McDougall. 1994; Oviatt et al., 1991, 1993; Roberts & Senturia, 1996; Madsen & Servais, 1997
R S
U s
H N
I
Jolly, Alahuhta, & Jeannet, 1992; Coviello & Munro, 1995; Coviello & McAuley, 1999; OECD, 1997
S M Characteristicsof Competition and Strategy Rapid response to competitors initiatives worldwide E S Rapid response to customers needs worldwide
T
0
Set standard and preempt competition worldwide Avoid intense domestic competition in certain industries Achieve lower competition in narrowly-defined segments Avoid domestic market inertia Economics of R&D. Innovation. and Technological Change Higher R&D costs require large international markets (IM) Front-end loaded R&D accentuates faster returns Faster technological obsolescence compels presence in large IMs Continuous innovation requires larger IMs and vice versa
OECD, 1997; McDougall & Oviatt. 1991; Oviatt & McDougall, 1994; McDougall et al., 1991. 1993; Coviello & Munro, 1995; Bloodgood et al., 1996; Grant, 1991; Mathew, 2003; Fahy, 2002
Dosi, Pavitt, & Soete. 1990; Lindqvist. 1990, 1997; OECD. 1997; Litvak, 1990, Coviello & McAuley. 1999
N
A
L
I
Z E F
A
Characteristicsof High-Technology Products and Markets Larger fixed costs dictate larger sales volumes of IMS Faster pace of change requires faster and larger returns from 1Ms Shorter product life cycle (PLC) requires larger IMs
Etemad. 2003, 2004a. b, Dosi et al., 1990; Jones-Evans & Westhead, 1996; Litvak, 1990, Jolly et al., 1992; Knight et al., 2000, Podolny, Stuart, & Hannan, 1996; Rasmussen et al., 200 I Etemad, 1999,2002, 2003,2004a. b; Hakansson & Snehota, 1989, 1992. 1995. 2000, Bell et al., 1991: Bonaccorsi, 1992; McNaughton & Bell, 2000, Miesenbock, 1988; Grant, 1991, 1996; Mathew, 2003; Fahy, 2002
S E R
Strategic Logic of International Operations Constrained resources at home forces SMEs to access others resources International partners provide additional resources Interdependent operations leverage networks strengths against others
providing incentives, or pull the firm by signifying the benefits of larger and richer international markets. The pull factors are consistent with Kirznerian (and also with most Austrian) views of entrepreneurs (or entrepreneurial firms) responding to the attraction of international opportunities (Hayek, 1948, 1978; Kirzner, 1973,
1979; von Misses, 1949). i.e.. unfulfilled market demand in an international market or segment. This view is reinforced by the firms perception that it may possess the capability of matching its supplies (or capabilities)to the market demands (or requirements) in light of its enhanced perception of abilities due to favourable conCanadian Journal of Administrative Sciences Revue canadienne des sciences de Iadministration 2L(I,. 1-21
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Table 2 Attractive Factors Pulling SMEs Internationalization Process and Associated Citation and References
~~
C T
F A
Components of Pull Factor Liberalization of International Markets Facilitates exporting and presence in IM Allows for specialization and division of labour Permits easier achievement of scale economies Avoids direct and intense competition Provides much expanded opportunities Borderless and inter-linked economies require IM operations
Associated Citations and References Acs, Morck, Shaver, & Yeung, 1997; Aggarwal, 1999; Bilkey, 1978; Bilkey & Tesar. 1977; Coviello & McAuley, 1999; Fraser & Oppenheim, 1997; Ohmae, 1990, 1995; McDougall & 0 * tt, 1991; Oviatt & McDougall, 1994; Oviatt et a .. 1991; Podolny et al.. 1996; Rennie, 1993
R S
P U L L N G
I
Advances in Information and Communication and Transportation Technologies (ICTTs) S Facilitate IM operations M E Mitigate against limited resources S Override the impact of time and distance for SMEs Facilitate Network operations I N Reduces costs
Aggarwal, 1999; Fraser & Oppenheim, 1997; Keeble et al., 1998; Knight & Cavusgil, 1996a. b; OECD, 1997; Litvak, 1990; Madsen et al., 2000; Madsen & Servais, 1997; Oviatt & McDougall, 1994; Roberts & Senturia, 1996; Bell et al., 1991; Bonaccorsi, 1992; McNaughton & Bell, 2000, Miesenbock, 1988 Etemad, 2002,2003. 2004a; Comes-Casseres, 1996, 1997; Gulati, 1995; Hakansson & Snehota, 1989. 1992. 1995.2000; Roberts & Senturia, 1996; Yoshino & Rangan, 1996; Grant, 1991; Mathew, 2003; Fahy, 2002. Roberts & Senturia, 1996; Etemad, 2004a. b; DAveni. 1994; Hakansson & Snehota. 1989. 1992. 1995
T E R N
A
T N
A
I 0
Attraction and Resources of Partners Mitigate against limitations of size Shorten internationalization process Increase the speed of internationalization Allow for survival in competitive markets Attraction of Serving Current Buyers and Suppliers International Needs Respond to needs of previous domestic customers Save established relations with internationalizing buyers and suppliers Pre-empt competitors From getting previouslydomestic customers and suppliers
I Z A
T N
I 0
tributions from both the push and pull factors. Pull factors may also manifest in terms of providing incentives that entice, if not enable, the firm to internationalize. They may also make the process cheaper, easier and/or faster. Kirzner (1979, 1997) spoke of an entrepreneur observing the opportunity for arbitrage across the street and responding to the opportunity by buying cheaper on one side of the street and selling on the other side. International and domestic markets are analogous to the two sides of the street. Furthermore, international markets may also signal opportunities to the alert (Kirzner, 1979) and entrepreneurial firm (Hayek, 1978; von Misses, 1949). Practically. they alert the internationalizing firm to see through the mountain of ordi-
nary data (e.g.. a range of various market prices) and to extract valuable information about the opportunity (i.e.. the higher price on one side of the street with little to no associated cost differential on the other) and to respond to the opportunity by a simple arbitrage across the street by simply buying on one side (e.g., domestic market) and then selling to the other side (e.g., international market). The extant theory provides numerous examples of such attractions impacting the firms assessment directly or indirectly. The various components of these incentives, documented by a host of scholars are also organized in logical categories and highlighted in Table 2, which lists the citations associated with the component of this construct.
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The mediating forces. As in any real world process. the true manifestation of the above forces impacting firm processes depends on the basic characteristics of the firm. the orientation of its entrepreneur or managers, as well as circumstances under which these forces exert pressure on or interact with the firm. The interactive factors refer to those forces that result from the interaction between active components of the Pull and the Push forces exerting influence on the firm. An interactive impact usually resembles a mathematical product moment (i.e., multiplicative relations), where the presence of one amplifies (or reduces) the direct impact of the other. Such an influence is proportioned by the combined strength of interactions between otherwise noninteracting influences in internal and external factors. These interactions magnify conditions that further stimulate or deter internationalization. When combined, they stimulate (and thereby accelerate), or alternatively discourage (and thereby decelerate), the firm's internationalization process. As a result, the exclusive attribution of impact to one set of forces, as opposed to the other, may be dificult. In general. especially in a cross-sectional analysis, the interaction effects can be detected when the presence of one set of forces magnifies (or reduces) the impact of another set beyond their respective direct effects. Although such heightened (or dampened) impacts signals the interaction effect... a clear distinction between the impact of the pull, push, or the interactive factors may not be that critical as their true impact is eventually mediated by the firm's (or managers') perceived influence of such factors. The influences of the above forces are intermediated by the firm's own internal dynamics, comprising the firm's propensity to internationalize in terms of its entrepreneurial orientation (or management's mindset) and the firm's administrative heritage and routine processes (Lieberman & Montgomery. 1998). These interactions act as a lens through which the firm sees internal and external forces magnified, or as a filter that lessens the true impact of such influences. The dynamics of bilateral and multilateral relations (between these forces) are represented schematically by double-ended arrows in Figure 1. While Figure 2 can be viewed as a simplified version of Figure I , the three sets of influential forces remain the same and are represented similarly. The fundamental additions in Figure 2, not present in Figure 1 to avoid clutter, are provisions for continual learning, natural evolution, and self-initiated renewal, among other dynamic processes, in each component of the influential forces, represented schematically by feedback arrows working within each of the proposed constructs of forces. This evolutionary and self-learning process follows the internal renewal underlying learning organizations (Nonaka, 1995; Nonaka & Takeuchi, 1995) and is
also consistent with the evolutionar and the behavioural theories of the firm (Barney, 19 , 1997; Cohen & Cyert. 1965; Cyert & March. 1963; Nelson & Winter, 1977, 1982). The entrepreneur's (or founder's and manager's) continual upgrading of his knowledge, competencies, and orientation are examples of such dynamic internal feedback processes (sometimes in reaction to change in external forces and sometimes in response to internal forces) ongoing within the firm. It is this mediated impact that influences the true course of a firm's internationalization. Coviello and Munro ( 1995) describe how the mediated impact of.New Zealand's small market size (i.e., pushing the firm out) combined with the attraction of the larger liberalized international markets (i.e.. attracting firms to the richer incentives of international markets rather than confined to the limited New Zealand market) may have interacted with managers open to the process, thus accelerating the pace of internationalization of these firms. One can argue that, for example, the availability of internal or external funds for financing internationalization efforts may contribute to the lowering of perceived barriers or transaction costs facing the firm (as opposed to true ones) and as a result expedite the pace of internationalization. Similarly, the presence of active links with potential partners abroad may also result in lowering the perception of transaction cost, or accrual of higher benefits. associated with internationalization through networks. The mediated influence can, therefore, have a different impact on the SME's pace of internationalization. Other researchers, including Rennie ( 1993). Hakansson and Snehota ( 1989, Gulati (1995). and Huber (1991) have acknowledged the possibility of such interactions and mediations. A brief list of components of this theoretical construct, organized in logical categories, and their associated citations are summarized in Table 3. The finti's own characteristics. The firm is at the centre of internationalization activity and the entity to which all the above pressures are applied. The firm's own internal decision-making, strategy formulation, and implementation dynamics influence the ultimate results. These dynamics are also conditioned by the state of many internal, and possibly external, forces and drivers. In favour of simplicity and clarity, we identify only two categories of such distinct internal mechanisms and drivers:
ih
1. The enubfers. which may include internal resources. such as firm's human resources. capabilities, competencies, orientations, stock of knowledge and technology. knowledge management procedures, and human capital. among others: and 2. The deterrents (or disablers), which may include limited or lack of financial resources, inadequate knowledge of international markets and crossCanadian Journal of Administrative Sciences Revue canadienne des sciences de I'administnuion 2 U l h 1-21
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Table 3 Interactive Push-Pull Factors influencing SMEs Internationalization Process and Assuciated Citation and References L
N T E R
A
Components of Interactive Pull-Push Factors Industry Characteristics and Drivers Competition in internationalized industries requiring international presence Internationalizationof supplyhalue chains Presence of oligopolistic reaction in the industry Industry idiosyncrasies SMEs Need For Financial Resources Limited market at home Availability of richer financing internationally Integration of international financial markets
Associated Citations and References Coviello & Munro, 1995; Dosi et at.. 1990; Fraser & Oppenheim, 1997; Jolly et at.. 1992; Litvak. 1990; Oakley, 1996; Ohmae, 1990, 1995; McDougall & Oviatt, 1991; Oviatt & McDougall, 1994; Oviatt et al., 1991; Rennie. 1993; Knickerbocker, 1973; Rasmussen et al., 2001 Coviello & McAuley, 1999; McDougall & Oviatt, 1991; Oviatt & McDougall, 1994; Oviatt et al.. 1991. 1993; Bilkey, 1978; Bilkey & Tesar, 1977
C T
I
E
P U L L
P U S H
The Dynamics of Learning Organizations Nonaka, 1995; Nonaka & Takeuchi, 1995; Allows for learning from partners and competitors in Intl Etemad. 2004a. b; Huber, I 9 9 I ;Doz, 1996; West Markets (IMs) & Meyers, 1997; Zahra et at., 2000 Allows for transferring and leveraging the learning at home and other IMs Permits isolated experiments for broader learning worldwide Leveraging Capabilities, Products, and Resources Enter IMs in favour of avoiding small domestic markets Capitalize on unique firm resources Access to local national resources InternationalizedNeeds of Customers and Suppliers Responding to internationalization of customers Taking advantage of international supply chains Taking advantage of partners collaborative networks Hakansson & Snehota, 1989, 1992, 1995; Lindqvist, 1990, 1997; Madsen & Servais, 1997; Bloodgood et al., 1996; Zahra et at., 2000 Coviello & McAuley, 1999; Coviello & Munro. 1995; Jones-Evans & Westhead, 1996; GomesCasseres. 1996, 1997; Kanter, 1984
F
A
C T
0
R S
cultural consumer behaviour. high fear of failure if faced with stiff local competition, lack of international networks, among others.
In turn, these sets of drivers exert influences that condition the firms response, regardless of the nature and the source, and they intermediate the final outcome. It is because of such intermediation that different firms respond differently to the same stimuli in the same environment. We refer to this conditioning as intermediation effect and attribute a mediating characteristic to the firm and its management. The dynamic conditioning of other forces and influences (through interactions and intermediation), both internal and external, determines the actual direction and pace of movement and also the ultimate
outcome of the internationalization process over time. Therefore, a modified and operationally oriented version of the framework is presented in Figure 3, depicting all influential forces, which may better portray the actual dynamics of the SMEsinternationalization.The prevailing conditions under which the firm, industry, and product-markets operate influence the final configuration of forces that impact a firms internationalization.The continual evolution within each construct is represented by feedback loops similar to Figure 2. In summary, the above framework has drawn upon a diverse literature, including the Austrian tradition of the Entrepreneurial Economics (e.g.. Hayek, 1948, 1978; Koppl & Minniti. 2003; von Misses, 1949)in order to (a) form a context for entrepreneurial actions and processes
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Figure 3 The Inter-dynamic of Forces and Their Influence on SMEs Internationalization Process
Note: The self-renewal processes of each entity are represented by a feedback arrow.
(Bygrave, 1989). (b) build on the neo-classical concept of entrepreneur as the principal actor within the entrepreneurial firms, and (c) integrate pertinent aspects of the recent developments from the evolutionary and behavioural theories of the firm. organizational learning, game theory and transaction costs theory (Williamson, 1975, 1981). among others. A typical firm at the centre of this theoretically grounded framework is further enabled by the powers of progressive management, which may be viewed as a collective ponrayal of the contemporary entrepreneurial firms. However, the distinct focus of framework is on internationalization of smaller, as opposed to larger, firms.
Highlights of Papers in this Special Issue The first paper, entitled International activities in small firms - Examining factors influencing internationalization and export growth of small firms by Svante Andersson, Jonas Gabrielsson, and Ingemar Wictor. has two research objectives. The first and primary one is to explore the explanatory power of the Stage Theory of Internationalization,proposed by the Uppsala School of Internationalization. As discussed earlier, the basic tenet of this theory is that firms gain increasing levels of experiential knowledge with time as they expand internationally in incremental stages. This step-wise expansion
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would be instrumental to the operation of the theory. It would allow for a better assessment and management of risks associated with entering and operating in foreign markets (presumably due to the accumulated knowledge resulting in application of increasingly advanced processes in progressive stages). The direct implication of the theory is that size, age, and prior experience of the firm (or in its management) must have a direct and positive relationship with the extent of internationalization? With this starting point, the paper examines the effects of contingency factors that characterize the stage theory of internationalization on the growth of international activities in small firms. The authors seek to test a set of hypotheses pertaining to the impact of an array of variables on international activities and export growth of the firm in the sample. However, their examination finds evidence to support the contrary. Furthermore, what appears to explain internationalization partially is the degree of perceived environmental dynamism (especially at home) that influences these firms decisions to internationalize. also contrary to the stage theory. Based on the findings of this paper, either the validity of the theory or its applicability to knowledge-intensivefirms must be questioned. The paper also seeks to explain whether the contingent factors intluencing firms decision to internationalize differ from factors that influence it to expand and grow further in international markets. The papers findings not only point to the inapplicability, and possibly the impotency, of the stage theory.5 but also suggest that there is the possibility of phase change beyond the initial entry threshold6(i.e., qualitative internal change and adjustments due to the initial internationalization experience), for knowledge-intensive small firms represented in the sample of this paper. Again, the results call the received theory into question, pointing to the need for fresh theoretical development. The next three papers take novel theoretical and empirical steps to provide further guidance to SMEs aspiring to internationalize. Specifically. the second paper picks up where the first one left off and takes up the challenge of questions proposed by Andersson et al. In a paper entitled The effect of environmental turbulence and leader characteristicson international performance: Are knowledge-based firms different? Olli Kuivalainen, Sanna Sundqvist, Kaisu Puumalainen, and John W. Cadogan explore the contentious area of environmental turbulence and leaders characteristics in knowledge-based (or knowledge-intensive) small firms in a cross-sectional sample containing knowledge-intensive SMEs.The authors set out to examine the impact of contingency factors pertaining to environmental turbulence (i.e.. a factor that Andersson et al. had also examined), leaders mindset and other leader
characteristics on firms performance in international markets. By comparing two sub-samples of knowledge-intensive and other firms, they find that knowledge-intensive firms are nor similar to non-knowledge-intensivefirms in many respects, but do not differ greatly from their counterparts on all parameters examined.The authors observe that knowledge-intensive firms may have passed the rhreshold under which variations in the leaders global mindset would impact international performance.R Finally, the question of whether knowledge-intensive firms have better trained and more skilful leaders than nonknowledge-intensivefirms shows significant differences between the two sub-populations of managers. Overall, the knowledge-intensive firms based in Finland appear to have a higher propensity to internationalize in spite of perceived technological turbulence. While this paper provides a better understanding of issues raised by Andersson et al. it also confirms that it is a confluence of internal and external forces that motivates SMEs internationalization (as proposed in the grounded framework). Furthermore, the paper points to a clear direction for further research on the subject. It forces us to raise questions about a firms collective international orientation or global mindset: namely and specifically, are there structurally grounded constructs underlying firms internationalization beyond managers self-assessment? And, if there are such structures present, what is a typical pattern and structure of a firms (or its managers) mindset? In the next paper. entitled A global mindset - A prerequisite for successful internationalization, Niina Nummela, Sami Saarenketo, and Kaisu Puumalainen elaborate on the above questions and concerns raised by Kuivalainen et al. The authors set out to explore the structure and the potential role of global mindset in the internationalization of SMEs.The proposed model of this paper is that global mindset has two drivers (or antecedents)that serve to influence performance, factors that the authors termed globalness of market and market turbulence. The findings of this paper indicate that there are (a) factoral structures underlying the internationalization, (b) inter-relations among the sub-structures of global mindset (which is a part of the internal/push factors in the proposed framework characterized by at least a single factor, among possibly others not examined in this paper) and market structure (which is a part of the external/pull factors in the proposed framework with a structure characterized by two orthogonal factors), and (c) inter-relations among these factors capable of accounting for international performance (as proposed in the grounded framework). This article strongly supports the theoretically-grounded framework proposed in this paper, and is also a promising developCanadian Journal of Administrative Sciences Revue canadienne des sciences de Iadrninistration ZlCl). 1-21
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mental path as it points to a potent structural architecture not proposed previously. The next paper examines internationalization process from a different perspective to achieve its stated objectives. In Efficiency and personalization as value creation in internationalizing high-technology SMEs, Martine Spence acknowledges the dramatic change in SMEs environment and the innovative ways in which these enterprises, especially high-technology SMEs, have responded to the challenges facing them. Most of these firms have used coalition- and network-based approaches, international new ventures (Oviatt & McDougall, 1994; Zahra et al., 2000). and synergistically- and symbiotically-based partnerships (Dana et al., 2000, Etemad, 2003; Etemad et al., 2001; Hakansson & Snehota, 1989, 1992, 1995). among other inter-firm innovations. Such mutually beneficial arrangements share at least one common principle: exchange for the purpose of creating value for all concerned parties, which leads the author to ask the pivotal research question: How do SMEs create value? It is this question that sets the research on a path of new discovery. Accordingly, this paper proposes two sources of value creation: efficiency and personalization. The interactions between these two sources, contingent on prevailing conditions, create incremental value and consequent competitive advantage for small high-technology firms. Based on semi-structured interviews with high-technology SMEs. the author suggests that the tangible elements of value equation are among the necessary conditions for enhancing efficiency and performance for clients but they may not be sufficient for creating incremental value in and of themselves in order to sustain the firms relations with its stakeholders in the long term. The combined efforts of the focal firm and its dedicated partners appear to reinforce their previously established relations in response to their mutual needs for improving performance over time. The findings of this paper point to an important feature of the proposed grounded framework: that a set of interactive factors (e.g., interactive inter-firm relations) are at least as important as the firms internal (push) factors or external incentives energizing the firms internationalization process and ultimate success. While the interaction of the high-technology environment and the characteristics of high-technology smaller firmsrrequire a fresh approach to understanding the international behaviour of these firms, as discussed in Spences paper, the next paper continues on to examine a family of Internet-based technologies (IBTs) to explore new Avenues and strategies for internationalization. In a paper entitled The internationalization of Internet-enabled entrepreneurial firms: Evidence from Europe and North America, Sharon Loane, Rod B. McNaughton, and Jim Bell examine the impact of IBTs
on internationalization activities of start-ups and already-established SMEs. Loane et al. report on the success of start-ups and small firms in internationalizing very rapidly by capitalizing on the enabling aspects of IBTs. Based on case studies of a sample of firms in Europe and North America, this paper examines the internationalization pace, patterns, and drivers of the Internet-enabled firms and start-ups. The authors found that all firms had a global focus at the outset (i.e., consistent with internallpush factors in the proposed grounded framework), undergoing rapid and intensive internationalization, resulting in most firms internationalizing from inception. They also found that the Internet has become an integral part of their business model (and thereby intermediating between the past and the emerging) patterns of internationalization strategy in some of these firms. In some cases, these firms followed either a major client or a lead market (i.e., a pull factor in the proposed framework) for internationalizing and establishing wide market presence and thus operating in two to three continents within a few years of their initial entry. The direct implications of Loane et al.s paper are supportive of the proposed framework. The paper portrays the newly emerging business scenarios, if not models. It seems that IBTs, including those in the expanding fields of information systems and technologies, empower internationally-oriented entrepreneurs to reach remote markets of the world much easier and faster than their traditional counterparts, in spite of time and resource constraints. Furthermore, internationalizing small firms need not develop their own ITBs internally as they can outsource them. Although the enabling prospects of IBTs. which must be viewed as theory-neutral, may have propelled internationally oriented entrepreneurs to exploit promising market conditions in record times, the developmental path of international entrepreneurship, either as a field of scholarly inquiry or theory development, may still face more difficult and troubling challenges. In the last paper of this issue, entitled Quel paradigme pour Ientrepreneuriat international?, Claude Marcotte asks the most pertinent question: which paradigm should be adopted for International Entrepreneurship at the outset? His epistemological approach, with a view to both entrepreneurship and international business, uncovers some of the true challenges facing theory development scholars and practitioners, of which the above discussion was a small sample. His theoretical review and examples of technology transfer leads him to raise the age-old questions of paradigm specialization versus paradigm generalizationapplied in this case to international entrepreneurship. In international business, for example, a similar question translated into standardization versus
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customization of products, programs, and services and preoccupied scholars and practitioners for a long time. However, technological advances are providing the possibility of mass-customizations, which can offer both the economies of scale associated with standardized (or mass-produced)products and the richness of customized (or tailor-made) products for meeting customers true choice, thereby delivering the highest possible value to customers in terms of lower cost combined with increased choice and quality. Although technology has provided a practical solution, the theoretical debate is still ongoing. The parallel question facing scholars of international entrepreneurship is whether to keep the flame of theoretical debate alive with the hope of theory development or try to keep up with the galloping pace of practice by the true entrepreneurs. These entrepreneurs may not have read Joseph Schumpeter or have knowledge of Thomas Kuhns (1962) structure of systematic and scientific discovery. They appear to leave in their wake both the received theory and prevailing paradigms of the time. In the final analysis, and true to the spirit of entrepreneurship, they have undertaken (from entreprendre in French) to do the necessary for succeeding. as the forefathers of entrepreneurship, including Ely and Hess (1893). Richard Cantillon (1755). Jean Baptiste Say (1803, 1815). and Joseph Schumpeter (1911/1934), had done. We are indeed witnessing the embryonic stages of an emerging field facing exciting challenges, including troubling choices of appropriate theoretical paradigms. The contribution of this special issue should serve as a testimony to the dedicated efforts of scholarly entrepreneurs pushing the frontiers forward in this newly emerging field. Conclusions From its inception, McGill International Entrepreneurship (MIE) Initiative encouraged a holistic approach. if not an integrated paradigm for internationalization, to reflect the reality of international entrepreneurship and integrated internationalization processes irrespective of enterprise characteristics. Fortunately, a family of slowlyemerging paradigms appears to capture both the bilateral relations and multilateral interactions among the actors, action, and factors influencing international entrepreneurship, including (a) internationally-orientedentrepreneurs, (b) growth-orientedenterprises, and (c) a continuously evolving competition and environment. A simplified example of such a paradigm is schematically represented in Figure 2 and the empirical papers in this issue provide confirmatory support for such, and similar, broad-based models of international entrepreneurship. A summary of this support is presented in Table 4.
Despite the nascence of international entrepreneurship as a field of scholarly inquiry, Etemad and Lees (2003) research uncovered that international entrepreneurship has been functioning for a long time. Formal documentation of internationally oriented entrepreneurs dates back at least to Cantillon (1755). Although CantilIons writing about French wine merchants, who took the highly localized French wines to international markets takes us to the 18th Century, international entrepreneurship goes much farther back? The traders of the ancient caravans that trekked the trading routes of antiquity must be viewed as the forefathers of modem international entrepreneurs who are increasingly travelling the information highway and functioning in both real and cyber space at record speeds and far ahead of cutting edge theory. The troubling fact is that the travelling traders of the past era did not have the benefits of theory nor would they have changed their time-tested practices because of. or despite, the prevailing theory then (even if they could have accessed one). They relied on their entrepreneurial intuitions. The prospect that contemporary international entrepreneurs may be following in the footsteps of their forefathers is equally troubling. However, the burden of shedding theoretical and paradigmatic lights on discovery of practical frontiers still remains on scholarly shoulders. Fortunately, scholars in the emerging field (or subfield) of international entrepreneurship have begun to combine concepts from international entrepreneurships constituent fields for studying the complex inner dynamics of the young and fast-growing entrepreneurial firms entering international markets or competing in internationally-oriented regional industrial clusters. Individual entrepreneurs, similar to the international traders of the past, are traveling the obstacle-riddenroads of industrial and corporate structures in the international markets or, alternatively, they compete in the globally competitive regional clusters and play critical roles in the global competitiveness of firms in such complex groupings. When small firms grow in industrial regional clusters much faster than their counterparts elsewhere and participate in international markets indirectly through others, it is mainly because of their entrepreneurial efforts and international orientation within highly progressive enterprises and conducive environments. It is the nexus of entrepreneurial efforts, enterprise capabilities, and enabling environment that have led small and young entrepreneurs, their enterprise, and the regional industrial clusters by extension, to excel in global markets. Similarly, we should not find it surprising if the modem cyber-based entrepreneurs following their forefathers travel the un-chartered information highways of the 21st Century with cyber-speeds. However the challenge of understanding the prevailing phenomena, theoCanadian Journal of Administrative Sciences Revue canadienne des sciences de Iadministration 2l(l), 1-21
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Table 4 Highlights of Confimatoty Suppori Provided by the Papers in this Issue for the Components of the Proposed Theoretically Grounded Framework
The Substance of Components
~~~ ~
Papers Supporting the SubstancdComponent
I. Support for the Specific Components of the Model

I . The Direct Impact of the Entrepreneur on Firm's Action Age Experience and exposure International/global orientation
Andersson et al.; Kuivalainen et al.; Nummela et at. Andersson et al.; Kuivalainen et al.; Nummela et al.; Loane et al.
2. The Internal Factors Pushing the Firm's Internationalization Process (i.e., push factors) Economics of operations Characteristicsof competition and strategy Economics of R&D, innovation. and change Characteristicsof high-technology Strategic logic of SME's international operations
3. The External Factors AttractingPulling the Firm's Internationalization Process (i.e., pull factors) Liberalization of international markets Advances in information and communication technologies Attraction and resources of partners Attraction of sewing current buyer and suppliers
4. The Impact of International Environment on Firm's Action
Loane et al.; Spence
Ease of exporting and presence in IM allows for specialization and division of labour Easier achievement of scale economies providing opportunities for much expanded IMs Borderless and inter-linked economies requiring IM operations Overriding the impact of time and distance through network operations reduces costs Increased speed of internationalization necessitating shortened internationalization process Responding to needs of previous domestic customers Preserving previous position in competitive markets Saving and building on established relations with internationalizingbuyers and suppliers Re-empting competitors from getting previously-domestic customers
5. The Impact of Combination of Pull and Push Factors on the Firm's Internationalization
Andersson et al.; Kuivalainen et al.; Loane et al.; Spence
Processes Attraction of serving current buyer and suppliers SMEs need for financial resources The dynamics of learning organizations Leveraging capabilities, products, and resources Internationalized needs of customers and suppliers
I
Andersson et al.; Kuivalainen et al.; Nummela et al.; Loane et al.; Spence
(Conrinued ... )
15
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Table 4 Continued Highlights of Confitmatory Support Provided 6y the Papers in this Issue for the Components of the Proposed Theoretically Grounded Framework
~~~ ~
The Substance of Components 11. Support for interaction Between the Specific Components of the Model
I. interaction between the pull factors and the environment
Papers Supporting the SubstanceKomponent
Andersson et al.; Kuivalainen et al.; Nummela et al.; Loane et al. Nurnmela et al.; Kuivalainen et al. Andersson et al.; Kuivalainen et al.; Nummela et al.; Loane et al. Andersson et al.; Kuivalainen et al.; Loane et al.; Spence Andersson et at.; Kuivalainen et al.; Nummela et al.; Loane et al.; Spence
2. Interaction between the push factors and the environment

3. Interaction between the pull and the push factors
4. Interaction between the interactive factors and the environment
5. Interaction between the entrepreneurial characteristics and the other components
of the model
111. Support for Macro Features of the Model

I. Questioning the lessons and implicationsof the Stage Theory
All above papers as well as Marcotte
All above papers as well as Marcotte
2. Identifying shortcomings, voids, and absence of necessary concepts, themes and theory essentials necessitating the proposed model
rizing for their developmental path and charting the developmental routes on which international entrepreneurs will travel is still before us. The theoretically grounded framework proposed earlier in this paper provided an opportune privilege to suggest promising milestones on yet-to-be charted landscape in international entrepreneurship. From that vantage point, the theorizing and findings of the next six articles in this special issue are exemplary efforts in further charting the landscape and advancing our knowledge in this emerging field. In the final analysis, the above discussion points to at least two emerging truisms. First, that the word
international in the field of international entrepreneurship no longer refers exclusively to the physical attributes such as movement of goods and services (or even information) across national boundaries. Emerging internationalization strategies may even permit globally competitive small firms to refrain voluntarily from a physical presence and competition in international markets, and instead compete in highly competitive markets at home, which have already become integral parts of the global markets. The entrepreneurs championing the international cause of such firms must be viewed as equally entrepreneurial as those who
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extend the reach of their enterprise to the remote corners of the world. Second, the ever-advanci ng computational capabilities characterized by Moore's law, as a proxy for expanding entrepreneurial capacities, especially those enhanced by IBTs. may in fact expose us to exceeding larger scholarly challenges far beyond the reach of our theoretical foundations. Although the papers in this issue provide strong confirmatory support (as highlighted in Table 4) and paint a coherent picture embodied in the proposed theoretically-grounded framework (as discussed earlier and depicted in Figures I . 2, 3). much larger scholarly challenges are undoubtedly still ahead of us.
suggests that the threshold is about or below 25% of sales emanating from international markets. 9 The highlights of the research into the scholarly roots of International Entrepreneurship as a field of scholarly enquiry. which we have termed 'The Knowledge Network of International Entreprencurship." is presented in Etemad and Lee (2000, 2003). For a brief historical highlight of international entrepreneurship in Europe going as far back as the 1600s see Etemad (2004b). For a bricf review of bazaars and caravans of ancient Assyria. Persia, and China. see Dana and Etemad (2000).
References End Notes There are a relativcly large number of activc regional free trade agrcements. including the North American Free Tradc Agreement. gradually evolving into the proposed Frec Trade Area of the Americas, the Mercosur countries in the southern cone of South America. thc ASEAN countries of South-East Asia. and a host of relatively inactive ones in Africa. among others. The next live papers in this issue present examples of SMEs from small markets that have followed similar internationalization strategies. The notcworthy point about the Eclectic Theory of MNEs (Dunning. 1980. 1988) is that it is based on three such principles: Ownership-specific advantages (OSAs). Locally-specific advantages (LSAs). and Internalization (sometimes called the OLI model of MNEs). While these principles remain the same across MNEs. their distinct competitive advantages, their specificity, and their respective dynamics are not. This is an implication of thc thcory of learning organizations. Bccause the theory builds on and assumes that prior experience results in a better operating knowledge of the environment combined with much more realistic and finetuned evaluation methods and management systems than previously. Ironically. the Stage Theory i s perceived to be the most relevant and theory-friendly to SMEs among all internationalization theories. W are borrowing the term "phase change" from physical e sciences whereby a physical entity undergoes internal phase change due to a change in its external conditions. For example, water changes phase from liquid to solid when ambient temperature falls below zero degrees Centigrade (32 degrees Fahrenheit). This paper uses the terms "knowledge-intensive firms" and "knowledge-based firms" interchangeably. Earlier in this paper, we proposed a phase change beyond ) a threshold (also see Note 6 . Kuivalinen et al.'s paper
. Acs. Z.J., Morck. R. Shaver. M.. & Yeung. B. (1997). The internationalisation of small and medium-sized enterprises: A policy perspective. Small Business Economics. 9 ( 1 ). 7-20. Aggarwal. R. (1999). Tcchnology and globalization as mutual reinforcers in business: Reorienting strategic thinking for the new millennium. Management International Review, 2 (Special Issue), 83- 104. Barney. J. (1991). Firm resources and competitive advantage. Journal o Management. 17 (Special Issue). 99- 120. f Barncy. J. ( 1997). Is the resource-based view a useful perspective for strategic management research'? Yes. Academy o f Manugement Review. 26 ( I ), 41-56. Baron. R. & Markman. G. (2000). Beyond social capital: How social skills can enhance entrepreneurs' success. Academy of Management Executive. 14 ( I), 106-1 16. Bartlett. C.A. & Ghoshal. S. (1986). Tap your subsidiaries for global reach. Harvard Business Review. 64 ( ) 87-94. 6. Bartlett. C.A. & Ghoshal. S. (1989). Managing acmss borders: The transnarional solution. Boston: Harvard Business School Press. Becker. G.S. (1965). A theory of allocation of time. Ecnnomica Journul. 75,493-517. Bell, J.. Murray. M.. & Madden, K. (1991). Developing exportise: An Irish perspcctive. Journal o Small Business Manf agement, I0 (2). 37-53. Bilkey. W.J. (1978). An attempted integration of the literature on the export behavior of firms. Journal o International f Business Studies. 9 (I), 33-46. Bilkey. W.J. & Tesar. G. (1977). The export behavior of smallf er sized Wisconsin manufacturing firms. Journal o International Business Studies. 8 (I). 93-98. Birkinshaw, J.M. (1996). How subsidiary mandates are gained and lost. Journal of International Business Studies. 27. 567-496. Birkinshaw. J.M. (1997). Entrepreneurship in multinational corporations: The characteristicsof subsidiary initiatives. Srrategic Management Journal. 18.207-229. Birkinshaw, J.M.. Hood. N.. & Jonsson. S. (1998). Building firm-specific advantages in multinational corporations: The role of subsidiary initiative. Strategic Management Journal. 19 (3). 221 -241.
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Internationalization of Small and Mediumsized Enterprises: A Grounded Theoretical Framework and An Overview

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INTERNATIONALIZATION OF SMALL AND MEDIUM-SIZED ENTERPRISES

ical large firms cannot attack routinely.

INTERNATIONALIZATION OF SMALL AND MEDIUM-SIZEDENTERPRISES

This Papers Structure

OF SMALL AND MEDIUM-SIZED ENTERPRISES

INTERNATIONALIZATION OF SMALL A N D MEDIUM-SIZED ENTERPRISES

The Attractive Pull

Llirection of SMEs Movement towards Internationalization

Towards a Theoretically-Grounded and Integrative Framework

INTERNATIONALIZATION OF SMALL AND MEDIUM-SIZED ENTERPRISES

lNTERNATlONALl7XTlON OF SMALL A N D MEDIUM-SIZED ENTERPRISES

INTERNATIONALIZATIONOF SMALL AND MEDIUM-SIZEDENTERPRISES

INTERNATIONALIZATION OF SMALL AND MEDIUM-SIZED ENTERPRISES

INTERNATIONALIZATIONOF SMALL AND MEDIUM-SIZEDENTERPRISES

INTERNATIONALIZATION OF SMALL AND MEDIUM-SIZEDENTERPRISES

INTERNATIONALIZATION OF SMALL AND MEDIUM-SIZED ENTERPRISES

INTERNATIONALIZATION OF SMALL A N D MEDIUM-SIZED ENTERPRISES

INTERNATIONALIZATION OF SMALL A N D MEDIUM-SIZED ENTERPRISES

INTERNATIONALIZATION OF SMALL AND MEDIUM-SIZED ENTERPRISES

Papers Supporting the SubstancdComponent

I. Support for the Specific Components of the Model

Loane et al.; Spence

Andersson et al.; Kuivalainen et al.; Loane et al.; Spence

Andersson et al.; Kuivalainen et al.; Nummela et al.; Loane et al.; Spence

INTERNATIONALIZATION OF SMALL AND MEDIUM-SIZEDENTERPRISES

Papers Supporting the SubstanceKomponent

2. Interaction between the push factors and the environment

4. Interaction between the interactive factors and the environment

5. Interaction between the entrepreneurial characteristics and the other components

111. Support for Macro Features of the Model

INTERNATIONALIZATION OF SMALL AND MEDIUM-SIZEDENTERPRISES

INTERNATlONALlZATlONOF SMALL AND MEDIUM-SIZED ENTERPRISES

INTERNATIONALIZATION OF SMALL AND MEDIUM-SIZED ENTERPRISES

INTERNATIONALIZATIONOF SMALL AND MEDIUM-SIZEDENTERPRISES

INTERNATIONALIZATION OF SMALL AND MEDIUM-SIZED ENTERPRISES

Shubik. M. (1955). The use of game theory in management.

Canadian Journal of Administrative Sciences Revue canadiennedes sciences de I'administration

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