A Theoretical Examination of SMEs Internationalisation in a Globalised Business Environment: An Eye on the Future

A Theoretical Examination of SMEs Internationalisation in a Globalised Business Environment: An Eye on the Future

Adyzakrie Mohamad Zaki (Birmingham City University, Birmingham, UK), David J. Edwards (Birmingham City Business School, Birmingham City University, Birmingham, UK) and Hatem El-Gohary (Birmingham City University, Birmingham, UK & Cairo University Business School, Cairo University, Egypt)
DOI: 10.4018/IJCRMM.2015100101
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Abstract

In the new global economy, internationalisation has become increasingly important to the competitiveness of enterprises of all sizes (Evers 2010). SMEs with a clear global strategy can take advantage of cross-border activities, which provide opportunities not only for revenue and growth, but also knowledge exchange and the enhancement of capabilities, thereby strengthening the firm's longer-term competitiveness. Muller et al. (2014) report that export-oriented SMEs show higher growth of turnover and employment than SMEs serving the domestic market only. Despite universal acceptance that internationalisation is vital, a myriad of internal and external barriers persist to impede SMEs' ability to internationalise their operations. Moreover, there is a dearth of data on the actual export performance of SMEs and the challenges and issues they face (Muller et al., 2014, p. 60). The purpose of this paper is to critically review and theoretically examine published research on SMEs internationalisation not only to identify knowledge gaps in the field, but also to provide a theoretical examination of SMEs internationalisation in a globalised business environment with an eye on the future. The paper commences with an introduction and explanation of the importance of an internationalisation strategy to modern businesses, then defining what is meant by internationalisation vis-à-vis globalisation. A similar differentiation between large and SMEs internationalisation is then given prior to critically synthesising pertinent theories that have been developed and/or implemented by previous researchers. Based upon this synthesis, theoretical models are evaluated and assessed critically to provide good grounds for future research in the field. Finally, the paper review the extant using under the lens of SMEs internationalisation from both developed and developing countries perspectives.
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1. Introduction

Internationalisation and globalisation are terminologies that are frequently and erroneously used inter-changeably to mean the same thing (Ruzzier et al., 2006). However, the true definitions of these terms is significantly different and hence each will be discussed in some detail. Within this regard, the word ‘internationalisation’ is a synonym for ‘exporting’ and was used by earlier researchers between 1980 and 1990. For example, Turnbull (2013) describes internationalisation as: the outward movement in international operations. Some researchers also define it as a process through which a firm moves from solely operating in its domestic market place to international market (Andersen 1992; Buckley and Casson 1998; Farrell et al. 1998). More recently, eminent scholars such as: Lumpkin and Dess (1996); Zahra et al. (2000) proffer that internationalisation is a process of discovering opportunities that lie outside a firm’s domestic market in the pursuit of competitive advantage. They defined internationalisation from the perspective of international entrepreneurship. However, the above-mentioned definitions are inextricably linked to one-way outward activities of internationalisation.

In contrast, some scholars argue that internationalisation should be described in a broader context rather than focusing only upon outward movement of the firm’s domestic market (e.g. Welch and Luostarinen (1988); and Calof and Beamisht (1995)). As intimated above, Welch and Luostarinen (1988) depict internationalisation as a process of increasing involvement in international operations including inward and outward cross border activities. While the example of outward international activities includes exports, foreign direct investment (FDI), and joint ventures, the example of inward international business activity includes import of goods and services (Naidu et al., 1997). In a similar vein, Calof and Beamisht (1995) extended the definition of Welch and Luostarinen (1988) to consider a more holistically view since firms' respond to various factors, including: divest a division; sell a foreign production plant; lay of people involved in their international operation; and to the extent of de-internationalisation situation. Hence, they defined it as: “the process of adapting firms’ operations (strategy, structure, resource, etc.) to international environments.”

However, the definition by Calof and Beamisht (1995) does not sufficiently explain changes of the internationalisation processes from the early stage until firms become fully established in international markets. Therefore, the definition of Johanson and Vahlne (1990) is more appropriate to explain internationalisation as an evolutionary and ongoing process. According to them, it is a process gradually increases a firm international operation.

Based on the above discussion and illustration, it is recommended to adopted the definition given by (Calof and Beamisht 1995; and, Johanson and Vahlne 1990) as they offer the most comprehensive possibilities since most future research studies looks at inward and outward activities of SMEs internationalisation including import; export; joint venture; FDI and international sales representatives.

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