Internationalization of Chinese SMEs: The Perception of Disadvantages of Foreignness

Abstract

The paper aims at extending previous research on the specific barriers experienced by emerging markets-based small- and medium-size enterprises (SMEs) expanding internationally and the necessary corporate resources and capabilities to support the first stages of their expansion. Framed within resource-based theory (RBV) and liability of foreignness perspectives, the study focuses on four main areas: limited knowledge of external markets, socio-cultural differences, unfamiliarity with foreign contexts and business practices, and limited local business contacts, reliable representatives, and control systems. The data were collected from more than 500 Chinese SMEs and then analyzed using multivariate and stepwise regressions. The research results show that external factors, both at the domestic level and in host markets, ranging from local regulations and distribution facilities to cultural differences and exchange rates, are perceived to be critical for the performance of business expansion. The research provides deep insights on the barriers faced by SMEs from emerging economies when doing business abroad and especially to discriminate among its different sources of liabilities. The results also suggest that the RBV approach is insufficient to analyze the barriers associated with liabilities of foreignness, newness, and outsidership.

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