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Article Type: Guest editorial From: International Marketing Review, Volume 30, Issue 2.
The guest editorial team for the special issue on internationalization patterns of small- and medium-sized enterprises (SMEs) is pleased to announce the publication of the second part of the issue, containing four papers, each of which addresses an important aspect of international marketing. The first part, consisting of four papers and the introductory guest editorial, was published in issue 29:5 of the International Marketing Review. The double issue comprises nine papers including the main guest editorial (in Part 1), and eight competitive papers that were accepted for publication after the double-blind review process, from 65 papers submitted. We believe that the papers in the special issue make a substantial contribution to the theory of SME internationalization and provide innovative suggestions to direct future research on this important topic.
This editorial introduces the four papers that make up the second part of this double special issue (30:2). The key themes are the importance of context and structure in the internationalization of SMEs. If we are interested in “what happens after the initial internationalization” (cf. Zahra and George, 2002 and our introduction to the special issue's first part), these issues are important, and in our opinion, deserve study that is more extensive. The papers in this issue illustrate the influence of target and host market on internationalization paths, and how structure, particularly in terms of entry and operation modes change as firms begin and then intensify their internationalization.
Host and home market context
Although the term “born global” suggests that such firms engage in worldwide operations, early research on the phenomenon did not focus on the number of regions, countries or markets in which internationalizing new ventures operated. It is widely suggested that knowledge-intensive or high-tech born globals target lead markets (e.g. Madsen and Servais, 1997; Bell et al., 2003) but less is known about the number of such markets or regions and the consequences of addressing such spatially (and potentially culturally and economically) diverse markets. Location decisions in the internationalization process of SMEs are often even taken for granted and the role of location is considered by only a few of the early studies on born globals (e.g. Reuber and Fischer, 1997; Zahra et al., 2000). This is surprising as multinationality or global diversity of firms’ operations is a core issue in international management research (Kuivalainen et al., 2007). The recent emphasis on regional strategies among rapidly internationalizing firms is consequently important and we are of the opinion that the country/regional patterns and their similarities and differences between, e.g. traditionally internationalizing SMEs should be analyzed in detail. This is important from the consequence perspective as multinationality – performance relationship, which is widely researched among larger firms, should be of interest among SMEs as well. This would also have heuristic value even for SME managers when they are planning their international growth strategies.
Regarding the home country locations the recent debate has been much about the emphasis being in developed countries (Europe, USA). In their recent review on international entrepreneurship (IE) research in emerging economies, Kiss et al. (2012) point out that in this context IE is highly skewed in its geographic coverage, and also somewhat fragmented. Consequently, there is a lack of understanding on the role of institutional and cultural aspects in the likelihood of SMEs choosing different internationalization patterns. Interestingly all the eight empirical papers in this special issue have data from different home countries (USA, Canada, Germany and Finland in the first part and Italy, Sweden, UK and Australia in the second part) and this provides readers a possibility to compare internationalization strategies and patterns in different context. One paper focusses especially on emerging markets either as a host country/destination (Sandberg's paper focusses on Swedish SMEs entering Baltic States, Poland, Russia or China).
Entry and operation modes
To increase our understanding of internationalization patterns of SMEs, it is important to further discuss the role of entry and operation modes. Research suggests that exporting is the dominating entry mode among the internationalizing smaller firms. However, studies also confirm that many firms change their operation modes subsequently and fewer carry on exporting to the international markets (see, e.g. Hashai and Almor, 2004). Therefore, we believe additional focus should be directed towards looking at what happens after the initial entry because these post-entry decisions are often critical in terms of “outcomes,” e.g. performance and survival of the company.
In our attempt to look beyond exporting we need to highlight the role of the “hybrid” modes of entry that relate especially to partnerships and networks. The role of networks in internationalization of SMEs has been studied rather extensively during the last couple of decades, Coviello and Munro (1995, 1997) being some of the most influential studies. Findings advocate that very often the internationalization pattern in general and entry mode and market choices in particular are a manifestation of relationships and network ties of a firm. A firm is seen to enter a network rather than a country, for example, and consequently, the national borders become superfluous. According to this view (adapted by Susanne Sandberg in paper 2 of this issue) the “entry node,” i.e. “the establishment point into foreign market networks” (cf. Jansson and Sandberg, 2008, p. 67) becomes at least as significant as the pure structural form, i.e. the mode that the firm adopts.
Advancement of the internet offers SMEs completely new ways to enter and to operate in the international markets. The current global giants such as Google, Amazon and Facebook all started out as small new ventures and grew rapidly from obscurity to the top of global rankings with market valuations in billions, thus redefining what IE or the “born global” firm actually stands for (Morgan-Thomas, 2012). As the authors in the third paper of this issue note, the internet enables the SMEs with limited resources to receive customer orders and handle inquiries on a global basis, thus making early internationalization a feasible and cost-effective opportunity for the firms.
Finally, internationalization patterns of SMEs may take in different types of “strategic re-structuring” in the forms of outward and inward-oriented operations and the processes of de-internationalization and re-internationalization (paper 4 in this issue). To capture the internationalization of a firm holistically it is of importance to enhance our understanding of these potentially co-evolutionary re-structuring processes.
The papers in this issue
The papers that made their way through the review process into this second part of the special issue are now briefly introduced and discussed.
The first paper of this special issue written by D’Angelo, Majocchi, Zucchella and Buck focusses on exploring geographical pathways of SME internationalization by utilizing data from Italian SMEs (2.657 manufacturing firms). The authors focus especially on the role of resources, namely product innovations, networks and human resources, in determining the geographic internationalization pathways. The important contribution of the paper arises from the empirical findings suggesting that some of the resource-based export drivers differ between global and regional markets.
In the second paper Sandberg conceptualizes entry node, and provides insights into the SME node patterns in emerging markets using survey data from Swedish exporters (197). The difference between entry mode and entry node is highlighted, and Sandberg emphasizes that mode and node represent two aspects of foreign market entry, which are interrelated. Node is seen here as the establishment point into foreign market networks. In the empirical part of the paper, Sandberg provides interesting observations concerning the changes of the initial export nodes. Furthermore, she examines the association between the different node types and three kinds of experiential knowledge.
The third study focusses on export marketing, and the impact of the internet on firm internationalization. In the paper, Sinkovics, Pezderka and Jean perform an exploratory study on the viability of the internet as a path in internationalization (namely exporting) among 115 UK-based SMEs using survey and secondary data. The three essential dimensions of internationalization patterns, time (internationalized within three years), scale (export sales at least 25 percent of the total sales) and scope (at least three continents) are used in defining the firms’ born globalness. Although the main focus of the paper is examining the main motivations in using internet-based export channels (i.e. the antecedents of internationalization), the authors contribute to the outcomes of internationalization patterns discussion by showing the relationships with export performance. Antecedents studied cover managerial perceptions, firm behavior and environmental factors.
Finally, the fourth paper authored by Freeman, Deligonul and Cavusgil examines strategic re-structuring by born globals tackling two particular questions: how do managers move forward through the de-internationalization (exit) to the re-internationalization (re-entry) process? and how do they choose their patterns of internationalization? These authors use data on 26 in-depth interviews with senior managers in nine Australian born globals. Interestingly, their findings advocate that shifting between outward and inward-oriented operations in the course of de-internationalization and re-internationalization is used as proactive strategic re-structuring by the managers for survival, in periods of global economic decline or changing competitive conditions.
The guest editors want to thank all the reviewers and always-helpful Jeryl Whitelock who helped us with the second part of the issue. The reviewers’ names have been published in the previous volume. We would also like to acknowledge our intellectual debt to late Professor of International Business Entrepreneurship at the University of Ulster, Jim Bell, a long-time supporter of IMR, who passed away in November 2009. The idea for this special issue originally came when thinking about commemorating Jim's work. We were first thinking of a special session to be held at the McGill International Entrepreneurship Conference but eventually this idea led to the development of this special issue. With this two-part special issue we hope we have managed to put his influential ideas on internationalization paths into use and also take them forward.
Bell, J., McNaughton, R., Young, S. and Crick, D. (2003), “Towards an integrative model of small firm internationalisation”, Journal of International Entrepreneurship, Vol. 1 No. 4, pp. 339-362
Coviello, N.E. and Munro, H.J. (1995), “Growing the entrepreneurial firm: networking for international market development”, European Journal of Marketing, Vol. 29 No. 7, pp. 49-61
Coviello, N.E. and Munro, H.J. (1997), “Network relationships and the internationalization process of small software firms”, International Business Review, Vol. 6 No. 4, pp. 361-386
Hashai, N. and Almor, T. (2004), “Gradually internationalizing ‘born global’ firms: an oxymoron?”, International Business Review, Vol. 13 No. 4, pp. 465-483
Jansson, H. and Sandberg, S. (2008), “Internationalization of small and medium-sized enterprises in the Baltic Sea Region”, Journal of International Management, Vol. 14 No. 1, pp. 65-77
Kiss, A.N., Danis, W.M. and Cavusgil, S.T. (2012), “International entrepreneurship in emerging economics: a critical review”, Journal of Business Venturing, Vol. 27 No. 2, pp. 266-290
Kuivalainen, O., Sundqvist, S. and Servais, P. (2007), “Geographical dimension: a missing link in the internationalisation of born global firms?”, in Sinkovics, R.R. and Yamin, M. (Eds), Anxieties and Management Responses in International Business, Palgrave MacMillan, Houndmills, Basingstoke, pp. 225-242
Madsen, T.K. and Servais, P. (1997), “The internationalization of born globals: an evolutionary process?”, International Business Review, Vol. 6 No. 6, pp. 561-583
Morgan-Thomas, A. (2012), “Global online entrepreneurship after fifteen years of research: a review of the empirical literature”, paper presented at the 38th Annual Conference of the European International Business Academy (EIBA), University of Sussex, Sussex, December 7-9
Reuber, A.R. and Fischer, E. (1997), “The influence of the management team's international experience on the internationalization behavior of SMEs”, Journal of International Business Studies, Vol. 28 No. 4, pp. 807-825
Zahra, S.A. and George, G. (2002), “International entrepreneurship: the current status of the field and future research agenda”, in Hitt, M.A., Ireland, R.D., Camp, S.M. and Sexton, D.L. (Eds), Entrepreneurship: Creating an Integrated Mindset, Blackwell Publishers, Oxford, pp. 255-288
Zahra, S.A., Ireland, D.R. and Hitt, M.A. (2000), “International expansion by new venture firms: international diversity, mode of market entry, technological learning and performance”, Academy of Management Journal, Vol. 43 No. 5, pp. 925-950