Understanding the Internationalization Process of Small-to Medium-Sized Manufacturing Enterprises (SMEs): Evidence from Developing Countries

Abstract

This study explores how firm specific and key personnel factors (resources) influence the internationalization process of small-to-medium-sized enterprises (SMEs) in manufacturing sector in developing countries. SME internationalization has been widely researched but little is known of how and why internationalization takes place in the developing countries, and such lack of evidence in the literature provides strong grounds for this study. The findings indicate that, compared to non-SMEs, developing countries SMEs are less likely to venture into international markets, and those that do, do so to a lesser degree; they are also less likely to engage in networking with other business, but are more likely to exhibit growth intention. Various paces and myriad of entry modes determine the pattern of internationalization undertaken. A traditional internationalization pattern is strongly evident, although some SMEs exhibited born-again global internationalization pattern as a result of occurrence of some critical events within the firm. These include the appointment of managers with the requisite expertise; knowledge and access to international business information. The main drivers of internationalization centered on key personnel managerial capabilities and firm specific factors such as organizational process and networking abilities. The study also found that the production capabilities, domestic market conditions, outcomes (financial and non-financial), are all critical to the international expansion of SMEs in developing countries. Compared to solely focus on the domestic marketplace, there were some financial benefits to be gained by developing countries SMEs in venturing overseas. However, the extent to which they did so had no observable effect on financial performance. Internationalization was found to place a substantial stress and conflicts among the managers and their dependent families. This study provides new knowledge and important insights that will benefit the manufacturing and other sectors in the developing countries.

Keywords: Internationalization, SMEs, Manufacturing, Developing countries