Foreign Markets Entry Mode Decision

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Foreign markets entry mode decision for
SMEs. Key factors and role of industrial
districts.
Musso, Fabio and Francioni, Barbara
Urbino University (Italy)

2009

Online at http://mpra.ub.uni-muenchen.de/32153/
MPRA Paper No. 32153, posted 11. July 2011 / 16:36

35th EIBA Annual Conference - Valencia, 13-15 December 2009

Foreign markets entry mode decision for SMEs. Key
factors and role of industrial districts*
Fabio Mussoa** , Barbara Francionib
a
Dipartimento di Studi Aziendali e Giuridici, Facoltà di Economia, Università degli Studi di Urbino “Carlo Bo” Via Saffi, 42, 61029 Urbino, Italy
b
Dipartimento di Studi Aziendali e Giuridici, Facoltà di Economia, Università degli Studi di Urbino “Carlo Bo” Via Saffi, 42, 61029 Urbino, Italy

Abstract

The principal aim of this paper was to examine the internationalization of small and medium-sized enterprises (SMEs) in regard to the entry mode selection process. To successfully accomplish this, a resource-based view model was used to investigate the primary factors influencing a SMEs’ international entry mode. Data was obtained during direct interviews with owners/managers of SMEs in Italy. The results revealed that entry mode decisions were primarily influenced by firm specific factors, above all organizational culture. The study also illustrated that SMEs were not influenced by their belonging to an industrial district.

Keywords: Small and medium sized enterprises; Resource based view; Entry modes; Industrial Districts

*

This article is the result of a common research activity between the authors. Nevertheless, single sections can be attributed as follows: Sections 1 and 3 are attributed to Fabio Musso, Sections 2,4 and 5 to Barbara Francioni. **

Corresponding author. Tel. +39.0722.305.509 Fax +39.0722.305.541 E-mail addresses: fabio.musso@uniurb.it (F. Musso), francioni.barbara@gmail.com (B. Francioni).

1

1. Introduction
The number of small firms operating in international markets, in response to lowering the barriers to international trade, has been increasing (Nummela, Loane, & Bell, 2006). Currently, small and medium-sized enterprises (SMEs) represent the majority of firms in most countries, and therefore, play an important role in the economic growth of their representative countries. For instance, in Italy, 99.9 percent of all firms have less than 250 employees (Istat, 2005). As a result, the internationalization process of SMEs has become a subject of academic, political and governmental attention and research (Crick & Jones, 2000; McDougall & Oviatt, 1996; Nakos & Brouthers, 2002).

One of the most important decisions regarding the internationalization process of firms is the choice of entry mode (Quer, Claver, & Andreu, 2007). The selection of an appropriate entry mode into a foreign market can have significant and far-reaching consequences on a firm’s performance and survival (Davidson, 1982; Ekeledo & Sivakumar, 2004; Gatignon & Anderson, 1988; Root, 1998; Terpstra & Sarathy, 1994). Entry mode is one of the most critical strategic choices, because it affects the firm’s future decisions and operations in the selected countries market (Brouthers & Hennart, 2007; Kumar, 2000).

Several theories have been developed to explain entry mode choice, such as the Transaction Cost Analysis (TCA) (Erramilli & Rao, 1993), the institutional theory, Dunning’s eclectic paradigm (Brouthers, Brouthers, & Werner, 1996; Hill, Hwang, & Kim, 1990) and the resource-based view theory (Brouthers & Hennart, 2007). Most of them have been tailored to large firms. But can such theories be used to interpret an SMEs behaviour? This is currently uncertain (Nakos & Brouthers, 2002). 2

Several researchers (Burgel & Murray, 2000; Jones, 1999) suggested that SME entry mode selection (EMS) is one of the most important new research fields, especially because until now SME entry mode selection has been object of few...
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