Dynamics of Small Business Internationalisation. A European Panel study

Abstract

Internationalisation has become part of the daily life of most small and medium sized enterprises (SMEs) in Europe. Internationalisation is a dynamic phenomenon and is in this thesis studied as one specific example of change processes in the development of SMEs. Previous research on internationalisation has largely been explorative, most often without any modelling of causal relationships, and with insufficient definitions of concepts. The dominating dynamic models have been based on the assumption of uni-directional changes in small steps, and only cross-sectional data have been used. This research is among the first where longitudinal data is available for studying the process of internationalisation. The data comes from a panel consisting of 1700 SMEs from seven countries in Europe where each firm is observed four or five times in the period 1991-95. Around 47% of the enterprises in the panel exhibit development of their export quotas which can be explained by an incremental change model. Importantly, an almost equally large proportion, 45% of the enterprises, exhibit fluctuations in their export quotas which cannot be explained by the incremental change models. Although variations have been found, the non-incremental change patterns are significantly represented in all countries, all size classes of enterprises and in all industry sectors; and can therefore be considered to be general features -- not patterns associated with specific sub-groups of enterprises. The causal analyses of factors influencing export orientation were not able to identify a temporally stable regression model for export quotas. The endogenous variable market extension has been found to be influenced by four composite measures: external interaction (+), available capacity (-), employment (+), and manager capabilities (+). Measured by growth in total sales, there is clear evidence that the non-regular change patterns of export quotas cannot be regarded as indicators of failure. On the contrary, the results suggest that the non-regular change patterns identify enterprises which successfully use adaptation and flexibility to their competitive advantage. An initial model was build on previous research where conceptualisation and relationships have mainly been tested with cross-sectional data. However, this model did not stand up to a test with longitudinal data. The discrepancy between cross-sectional and longitudinal modelling indicates that there is a qualitative difference in what can be deduced from research based on one observation and multiple observations. The same conclusion can be derived from the fact that factor analyses as well as path analyses produced different results when the yearly data sets were analysed separately or concurrently.