The Internationalisation Process Of Small And Medium Sized Enterprises

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This essay critically compares and contrasts the works of Knight (2001) against O'Cass and Weerawardena (2009) who researched the internationalisation process of small and medium sized enterprises. The discussion weighs the arguments and evidence presented against each other, seeking to identify their strengths and weaknesses (Hart, 1998). Although both papers emphasize the importance of entrepreneurship as core driver of SMEs' international performance, the former stands out as the dominant voice as it is more convincing in its comparatively complex approach.

Knight shows that SMEs play an important role in international trade accounting for a great proportion of exports from most industrialized nations. However, his investigation is triggered by the lack of knowledge on "the effect of having an international entrepreneurial orientation, or the role of specific strategies associated with this construct, on the foreign performance of such firms". Thus, he employed a two-stage research approach, which comprised case studies to uncover expert interpretations and a survey-based analysis of international manufacturing SMEs in USA, in order to elaborate a structural model to reveal the connections between these concepts. This model hereunder aims to show the importance of and strong relation between an international entrepreneurial orientation, strategic competence, inter-nationalization preparation, technology acquisition and international performance.

Fig. 1 Proposed conceptual model with entrepreneurial orientation as a key performance antecedent in the international SME; Source: Knight (2001)

Likewise, the study of O'Cass and Weerawardena examines the role of entrepreneurship and innovation in SMEs' internationalisation, also touching on the firm size as a proxy of access to resources. Following the theoretical framework depicted here, the research tests the strength of the variables' interconnections with each hypothesis adding to the global image. Three hundred managers running manufacturing SMEs in an Australian state were interviewed. The results showed that to succeed in the global market any firm should adopt an entrepreneurial posture by displaying innovativeness, a high tolerance for risk-taking, and pro-activeness. Through its endeavour, this paper adds value to the literature on international entrepreneurship and competitive strategy founded on innovation.

Fig. 2 Theoretical framework with International Entrepreneurship key driver of Marketplace Performance;

Source: O'Cass, A., Weerawardena, J. (2009)

As the two articles are built around the same focus - whether entrepreneurial orientation leads to international performance - they share some core arguments. Premises similarly state that smaller firms may "lack the resources, capabilities, and market power of traditional multinational enterprises". Operations scale determines leverage on the competitive market and influences the ability to attract superior inputs compared to stronger players. SMEs are not miniature reflections of MNEs but deal with specific size-related issues addressing them distinctly from their big counterparts. To overcome such challenges they strive to manipulate R&D, innovation, quality, local adaptation, and distribution networks. Furthermore, they benefit from less bureaucracy which creates an ease in reacting to change.

An additional common feature is their choice of the manufacturing industry as practical application of the models. Various industries were selected in cross-sectional surveys with a preference for those predisposed to globalization i.e. electronic equipment, textile, apparel, and related fields. In this respect, Knight's method appears more persuasive for a number of reasons. First, the concepts and associated relationships were tested during interviews with 23 experts on SME internationalization to provide grounded evidence and help derive an appropriate, realistic framework. Secondly, his questionnaire was pretested and refined before the actual research comprising 800 randomly chosen CEOs versus only 302 in the other research. Finally, not only is there a discrepancy in numbers and thoroughness of approach, but there is also an advantage concerning location since common awareness would perceive US to be more prone to innovation and globalization than Australia.

Even more, the two papers are strongly correlated through the frequent references O'Cass and Weerawardena make to previous research belonging to Knight. Despite not concerning the work in question here, they add confidence to the reliability and field renown of this particular researcher.

A further divergence stemming from a common theme is the treatment of innovation in relation to entrepreneurship. Knight perceives the latter as an enduring "basic firm orientation" dwelling within managerial beliefs and values, which encompasses innovation, risk-taking, a proactive approach in foreign markets, and managerial vision. On the other hand, O'Cass and Weerawardena treat it separately and hypothesize that "international entrepreneurship has a significant positive effect on organisational innovation intensity". Nonetheless, they all agree that innovation involves value-adding technological or non-technological implementations of new ideas in the pursuit of solutions to challenges confronting the company. Consequently, consensus is also found in respect to the precedence innovation takes over international performance.

Findings of the diamond model imply that international entrepreneurial orientation supports not only the development of strategic competence, but also encourages internationalization preparation and technology acquisition. These constructs are likely to be crucial strategic mediators of SMEs' international success based on empirical evidence from both the interviews and survey-based studies (Knight, 2001). It has also been shown that international entrepreneurial orientation indirectly enhances the firm's overall performance in foreign markets. These results are credible especially due to their predictability. A company deeply committed to its strategy, which is always seeking improvement, updated knowledge, and technology is quite likely to succeed.

In a similar manner, the latter arrow-shaped theoretical framework achieved resembling conclusions. The target was again marketplace performance although the constructs were different and only innovation and entrepreneurship were tested for congruence with the main variable. Firm size was found to be influential of propensity to export and innovation intensity. Moreover, the authors are keen on emphasizing the contrast in attitude between exporters and non-exporters: the former were more prone to deliver superior products and "explore innovative ways of performing the value-creating activities". Overall, the results of this study, too, confirm that entrepreneurial SMEs entering foreign markets actively employ innovation throughout their value-chain.

Finally, these papers, taken together, manage to diminish a substantial research gap within the international marketing literature. Their central argument is that entrepreneurial SMEs intending to enter the global market are bound to undertake organisational innovation as a central enabler of positional advantages. Empirical evidence has been found to support this general hypothesis contributing to both theory and business practice. In conclusion, they validate the emerging entrepreneurship concept of innovation-driven, organisational performance in international markets.