Internationalization of Small Firms: An Examination of Export Competitive Patterns, Firm Size, and Export Performance [*]

Abstract

Analysis of data taken from 157 small firms actively exporting to markets outside the U.S. revealed that small firms differ among themselves with respect to the competitive pattern used in their export activities. Larger (small) firms exhibited competitive patterns consistent with their size-related resource base. However, smaller (small) firms did not exhibit competitive patterns that could be viewed as consistent with their size-related resource base. In addition, no significant difference in export intensity across three size categories was found. The implications of these findings with respect to the explanatory power of the stage theory of international development and the resource-based theory of the firm are discussed. The why and how of internationalization in small businesses are subjects of significant and ongoing research. An export strategy is the primary foreign-market entry mode used by small businesses in their internationalization efforts (Leonidou and Katsikeas 1996). Exporting fits the capabilities of small business by offering a greater degree of flexibility and minimal resource commitment yet limits the firm's risk exposure (Young et al. 1989). Exporting can be an engine for individual firm growth and profitability, and for the nation's economic growth as well. In the U.S., small manufacturing firms (those with fewer than 500 employees) make up 98.7 percent of manufacturers (U.S. Bureau of the Census 1993) and play a major role in the economy. With increased internationalization, the economic growth potential afforded by small-business exporting may be quite significant (Dichtl et al. 1984; Hardy 1986). However, only a minority of all small U.S. manufacturing firms are currently engaged in any type of export a ctivity. Since Johanson and Vahlne's (1977) pioneering study on the internationalization process of small firms, much research has addressed how small firms pursue internationalization. This research stream proposes that small firms internationalize their activities through a series of progressive stages (Anderson 1993; Barkema, Bell, and Pennings 1996; Bilkey and Tesar 1977). Recently however, Oviatt and McDougall (1994) proposed that at least some small firms are international (that is, involved in significant cross-border business activities) at their inception. Obviously, such firms do not follow the successive stages that some research suggests. Based on this new insight, the literature now suggests two discreet ways that small firms internationalize -- international-at-founding (Oviatt and McDougall 1994) and international-by-stage (Johanson and Vahlne 1977). However, it is still an open question whether there are only two means by which small firms internationalize. The two methods may actually represent the end points of a continuum for internationalization. The question, Might there be firms that are not 'international-at-founding' but that are able to circumvent or skip stages in their efforts to has received increased attention (for example, Oviatt and McDougall 1994; Reuber and Fisher 1997). Stated more generally, does the stage theory of small-business internationalization apply to all domestic-at-founding firms, or is it a special-case explanation for how (some) small businesses internationalize? With increasing global competition, falling barriers to international trade, and improved international communication and information networks, many small firms are pressed to compete in international markets. Exporting may offer an effective means for firms to achieve an international position (Ohmae 1990; Porter 1990) without overextending their capabilities or resources (Young et al. 1989). The potential ability to skip stages in the export-development process could create a relative advantage vis-a-vis those firms that follow a stepwise path. There is an extensive and well-developed body of literature that examines many issues in small-firm internationalization. …

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