Current Operational Practices of U.S. Small and Medium-Sized Enterprises in Europe
Edmund Prater, Soumen Ghosh. Journal of Small Business Management. Milwaukee: Apr 2005. Vol. 43, Iss. 2; p. 155 (15 pages)

Abstract (Summary)
This article presents the results of a survey of all U.S.-owned small and medium-sized enterprises (SMEs) with physical facilities in Europe. It is a snapshot of the role of key strategic, tactical, and operational elements of U.S. SME globalization in Europe. It presents descriptive results regarding drivers of expansion, harriers to entry, entry strategies and current operating strategies, growth strategies, operational barriers, and the use of strategic alliances by SMEs in Europe. The findings are also compared with the literature on large firms. This allows the reader to see the distinct differences between small and large U.S. firms operating in Europe.

 
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Introduction

The global market has traditionally been the battlefield of large, multinational corporations (MNCs). However, the past 20 years has witnessed the evolution of a new global manufacturing environment, with firms of all sizes now competing globally in order to obtain new competitive advantages. Unfortunately, most global operational research has focused on the practices of MNCs and neglected the fact that small and medium sized enterprises (SMEs) and MNCs do not operate in similar ways. This paper helps fill that gap by presenting the results of a survey of all U.S.-owned SMEs in Europe and detailing their key strategic, tactical, and operational elements.

The literature's neglect of smaller firms is ironic because, in developing countries, SMEs account for more than 90 percent of all jobs, sales, and value added. In developed countries, SMEs account for over 50 percent of these measures (UN 1992). In fact, firms with fewer than 500 employees employ almost half of the U.S. workforce, and over 88 percent of U.S. firms have fewer than 20 employees (Fiegenbaum and Karnani 1989). In addition, U.S.-based SMEs are increasingly active in global markets. A survey of over 400 winners of the Entrepreneur of the Year (EOY) Award found that 56 percent of the respondents were active in the global arena and that another 39 percent plan to expand into new global markets ( Ernst & Young 1995).

The objective of this paper is to further investigate the salient features related to some of the strategic, tactical, and operational elements of SMEs as they globalize. Although some research has looked at general SME issues and foreign direct investment, most studies have focused on large multinational corporations or small firms that export directly (Czinkota and Johnston 1983). This neglects the operational needs of those firms that have moved beyond exporting to establish a physical presence in markets abroad. For those SMEs that have moved beyond direct exporting and actually placed facilities overseas, research on understanding the strategic and operational aspects of the globalization process is virtually missing in the current literature. This is of concern as there are differences with respect to both general and specific operational issues (Cagliano, Blackmon, and Voss 2001). . . .

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Foreign Entry Mode and Performance: The Moderating Effects of Environment
Howard S Rasheed. Journal of Small Business Management. Milwaukee: Jan 2005. Vol. 43, Iss. 1; p. 41 (14 pages)

Abstract (Summary)
As the trend toward economic globalization increases, the internationalization of small and medium-sized enterprises. (SMEs) has become an important topic. Research on the performance outcomes of foreign market entry strategies has been primarily considered from the perspective of the multinational corporations. In this paper hierarchical regression analyses were conducted on archival data of 123 publicly held manufacturing SMEs based in the United States to test a contingency model that hypothesizes more of the performance variance is explained when the foreign market entry mode is aligned strategically with domestic and foreign environmental factors. The results indicate that firms will have a higher rate of international revenue growth using no-equity-based (exporting) foreign market entry modes in growing domestic environments. International revenue growth is higher for equity-based modes when foreign market risks are high. The findings should provide managers of SMEs with contextual evidence for making successful foreign market entry decisions. [PUBLICATION ABSTRACT]

 
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As the trend toward economic globalization increases, the internationalization of small and medium-sized enterprises. (SMEs) has become an important topic. Research on the performance outcomes of foreign market entry strategies has been primarily considered from the perspective of the multinational corporations. In this paper hierarchical regression analyses were conducted on archival data of 123 publicly held manufacturing SMEs based in the United States to test a contingency model that hypothesizes more of the performance variance is explained when the foreign market entry mode is aligned strategically with domestic and foreign environmental factors. The results indicate that firms will have a higher rate of international revenue growth using no-equity-based (exporting) foreign market entry modes in growing domestic environments. International revenue growth is higher for equity-based modes when foreign market risks are high. The findings should provide managers of SMEs with contextual evidence for making successful foreign market entry decisions.

Growth through foreign market expansion has become an increasingly popular strategy, as previously closed foreign markets open and as economies around the world globalize. Spurred by technological advances in transportation and communications, smaller firms now are finding it easier to expand internationally (Oviatt and McDougall 1994). Research on international expansion and foreign market entry is well established within the international market diversification literature but has focused primarily on multinational corporations (Stopford and Wells 1972; Daniels, Pitts, and Tretter 1984; Galbraith and Kazanjian 1986; Ghosal 1987; Kim, Hwang, and Burgers 1989; Habib and Victor 1991). The internationalization trend for small and medium-sized enterprises (SMEs) has prompted increased research interest in explaining the factors that contribute to success, but sufficient theoretical framework is lacking (Lu and Beamish 2001).

Many strategists have used contingency theory to explain how an organization maximizes its alignment of strategy with its environment to achieve performance outcomes within a domestic strategy context (Burns and Stalker 1961; Christensen and Montgomery 1981; Galbraith and Kazanjian 1986; Keats and Hitt 1988; McArthur and Nystrom 1991; Goll and Rasheed 1997; Simerly and Li 2000). The issue of strategic fit in an international context takes on additional complexities due to the problems of control and coordination, confounded by the actions of foreign market agents and the policies of foreign governments, particularly for SMEs (Lu and Beamish 2001). The theoretical precepts for a contingency model for SME international expansion therefore must consider the unique issues associated with resource commitment, as well as the relevant external factors associated with foreign markets. . . .

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Internationalization Process of Small and Medium-sized Enterprises: Toward a Hybrid Model of Experiential Learning and Planning
Lei Li, Dan Li, Tevfik Dalgic. Management International Review. Wiesbaden: First Quarter 2004. Vol. 44, Iss. 1; p. 93 (24 pages)

Abstract (Summary)
This study develops a coherent internationalization process model, which is particularly needed for examining the internationalization of small and medium sized enterprises (SME). Based on a review of existing literature and an empirical illustration, this paper proposes a hybrid model that integrates the experiential learning and systematic planning models, and incorporates the contingency perspective. The managerial and scholarly implications of the model are discussed. By replicating and extending the empirical analyses in a published article, this study illustrates that US SMEs do not seem to follow a systematic planning process at the early stage of internationalization. This study develops a hybrid model of internationalization process which is comprised of 3 major phases: antecedents, planning, and execution.

 
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Introduction

The literature shows that there are three broad theoretical perspectives regarding the internationalization process of firms: (1) Experiential learning (Johanson/ Vahlne 1977, Lam/White 1999, Cavusgil 1980, Cavusgil/Zou 1994), (2) Systematic planning (Root 1987, 1994, Miller 1993, Yip/Biscarri/Monti 2000), and (3) Contingency perspective (Welch/Welch 1995, Boter/Holmquist 1996, Coviello/ Munro 1997, etc.) Despite their important contributions, these perspectives have not led to a coherent framework that may help both scholars and practitioners to gain a convergent understanding of the internationalization process of firms.' This paper seeks to develop a hybrid model of internationalization process which reconciles different theoretical perspectives, and bears normative implications for managers.

In our opinion, the establishment of such a model would be particularly helpful for examining the internationalization process of small and medium-sized enterprises (SMEs) which have played an increasingly important role in the international arena (Fujita 1995, liesch/Knight 1999, Manolova 2001).2 There are three major reasons. First, SMEs usually have limited resources to allocate for information and knowledge acquisition pertaining to foreign markets. They cannot afford to undertake a thorough systematic planning process as big firms. second, SMEs are internationally inexperienced compared to large multinational enterprises (MNEs). They face the problem of "unknown unknowns" (Yip/Biscarri/Monti 2000). Third, today's SMEs initiate their international expansion in a global environment which is substantially different than the one faced by traditional MNEs two or three decades ago. They often have to respond to international market opportunities in a very timely manner.

The rest of the paper is organized as follows. We first briefly review and classify the literature on firms' internationalization processes. Next, we conduct an empirical replication and extension of the article of Yip, Biscarri, and Monti (2000). Then, we conceptualize a hybrid model by integrating the experiential learning and systematic planning models, and incorporating the contingency perspective. Subsequently, we discuss the managerial and scholarly implications of our model. Finally, we draw our conclusions. . . .

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