Small and medium-size enterprise

Introduction

Despite a growing interest in small and medium-size enterprise (SME) internationalisation, there is a scarcity of well developed pool of knowledge on SME internationalisation (O'cass and Weerawardena, 2009).Contemporary knowledge about the internationalisation of SME's is largely informed by the integration of the various theoretical perspectives on internationalisation (Wright et al., 2007). Conventional internationalisation theories mainly focus on the enterprise as the unit of analysis, whether in the acquisition of knowledge by the enterprise (Wright et al., 2007) or development of unique competencies for internationalisation (Etemad, 2004). However, McDougall et al. (1994) and Madsen and Servais (1997) have emphasized the role of entrepreneurs in international new ventures and recent researches on SME internationalisation process have led to a growing consensus that SME internationalisation is an entrepreneurial activity (Gagnon et al., 2000; O'cass and Weerawardena, 2009). This indicates a need to incorporate broader perspectives which take in to account the role of entrepreneurs in facilitating the internationalisation of SME's (Jone and Coviello, 2005, 1). The aim of this essay is to provide a comprehensive critical literature review on the role of entrepreneurs in internationalising SME's.

Background

SME's cannot be simply considered a smaller version of their larger counterparts as they have different managerial styles, scale of operations, levels of independence and decision making characteristics. However these differences do not eliminate the opportunities of SME's to internationalize. On the contrary, SME's come up with unique strategies to overcome their size-related and resource related constraints for internationalization (O'cass and Weerawardena, 2009)).

According to Welch and Luostarinen (1988) internationalisation is a process of extending involvement in international operations. However as an activity, internationalisation is not totally separate from other activities of the enterprise; rather it is a part or outcome of the enterprise's strategy (Andersson, 2000). However strategy and internationalisation processes are in turn dependant on acting entrepreneurs. While entrepreneurs may be the key decision makers in firms, all key decision makers are not entrepreneurs (Andersson, 2000). According to Schumpeter's (1934) definition, which is still widely accepted (Andersson, 2000), apart from taking major decisions, an entrepreneur, who may be the establisher, owner or manager of the firm, also undertakes the introduction of new products or services, new production methods and opening up of new markets. The basic fact emphasized by Schumpeter (1934) was that entrepreneurs not just make decisions but also act. However, it should also be noted that while an entrepreneur may also be the administrator of the firm, administrators and entrepreneurs behave differently (Mintzberg and Waters, 1982), and each actor may occasionally display the other's characteristic behaviour (Gagnon et al., 2000).

Role of Entrepreneurs in Internationalising SME's

While according to the Uppsala models (Johanson and Vahlne, 1993), the ability of the top management to affect the internationalisation process is limited, the Stage models (Czinkota, 1982) consider individual learning and top managers as considerable aspects in understanding a firm's international behaviour (Andersson, 2000). However, although some researchers have highlighted the importance of entrepreneurs in guiding a firm's international venture (Preece et al., 1999), the impact of individuals' action on firm's internationalisation process has been largely neglected. Andersson (2000) emphasized the importance of the entrepreneur in guiding a firm's international strategies and behaviour (Antoncic et al., 2007) and O'cass and Julian (2003) support this view of entrepreneur being the central factor in the start-up, growth, sustainment and success of the firm's internationalisation (4). Ruzzier et al.(2006) go to the extent of saying that the internationalisation process frequently centres around one key person in the firm, usually the entrepreneur, and his knowledge, experience and network; and according to Miesenbock (1988) the decision maker in an SME is the most important variable in the internationalisation of the firm. Since in an SME a single or few persons are responsible for making decisions, and usually it is the entrepreneur; hence an entrepreneur has a decisive role in the enterprise (Bloodgood et al., 1996) especially in pursuing information and environmental opportunities, and business positioning ; thereby shaping business specific and location specific decisions (Zucchella et al., 2007).

However this also means that in an SME, an entrepreneur may also have to play the roles of owner and manager; hence an SME entrepreneur may be required to take the responsibility of organising human resources (man and Lau, 2000), preserving the firm's culture and values and bringing about changes if required (Omerzel and Antoncic, 2008). Previous theoretical approaches have largely overlooked the role of entrepreneurs in the internationalisation of the SME's who support the whole process by mobilizing the firm's resources and capabilities (Westhead et al., 2001). According to Bloodgood et al (1996) a firm's ability to internationalise is influenced by its tangible and intangible resource stocks and entrepreneurs provide the firm with such resources (Westhead et al., 2001), having accumulated them through education, knowledge and experience. While a firm's resources, depending on their value and inimitability, may provide it a sustained competitive advantage in the international market, they are susceptible to modifications depending on the customers' needs, technologies, and the knowledge of international markets . An Entrepreneur is one such resource which may acquire significant influence in the firm, as he gains new knowledge and utilizes his human capital to promote the interests of the firm (ruzzier et al., 2007). It is argued that SME's can overcome their resource constraints by greater entrepreneurship which would facilitate their internationalisation (O'cass and Weerawardena, 2009).

Ability of a firm to internationalize is not exclusively related to its size or its business age. An entrepreneur's human capital may also affect the competitive strategies and performance of the firm (Westhead et al., 2001). An entrepreneur's resource profile, choices and decisions may have a major effect on the firm's ability to internationalise (Wright et al. 2007). While internationalisation of SME's may be facilitated by an entrepreneur's ability of building up the human, social, physical, financial and organizational capitals required by an SME to venture into international markets (Brush et al., 2002, 1); according to Andersson (2000), sometimes the required resources for a firm's internationalisation may be more extensive than possessed by one entrepreneur; hence personal networks are also needed. Early expansion of SME's may be supported by the pre-existing social or inter-organizational networks set up by the entrepreneur (Zucchella et al., 2007). Since inter-personal relationships form the base of new networks an entrepreneur's ability to build inter-personal and contractual relationships may play a critical role in the internationalisation of an SME (Harris and Wheeler, 2005). However, some differences do seem to exist between these abilities of the entrepreneurs based on their sex and ethnicity (Westhead et al., 2001). As argued by carter and Rosa (1998) women entrepreneurs tend to have fewer opportunities in gaining experience and building up contacts or networks, while ethnic entrepreneurs generally prefer to operate within their own cultural niche markets (Westhead et al., 2001).

Although business, location and network specific factors also have an important role in the internationalisation process, they are influenced by entrepreneurship factors which guide key strategic decisions (Zucchella et al., 2007). However some entrepreneurs may be more proficient in identifying and exploiting such opportunities, than others and may successfully internationalise such products which may be considered non tradable by others (Wright et al., 2007). According to Alvarez and Busenitz (2001) entrepreneurs have individual characteristics which aid in recognizing opportunities and subsequently in internationalisation related tasks like setting objectives, collecting market information, assembling resources and implementing internationalisation strategies. Based on his research Andersson (2000) identified three types of entrepreneurs: Technical entrepreneurs, Marketing entrepreneurs and Structure entrepreneurs . While the technical entrepreneur is mainly interested in product and production development, internationalisation occurs spontaneously and rather passively, due to awareness about the product through his international network which paves way for exports or licensing agreements. On the contrary a marketing entrepreneur is more proactive and focussed on seeking market needs and ways to fulfil their demands while choosing markets more actively. A Structure entrepreneur is more concerned with restructuring company and industries and works in mature industries, which are frequently international . These different entrepreneurial behaviours guide the different market entry modes, considered to have major impact on the success of a firm (Delios and Beamish, 1999), in an international market. While a Market entrepreneur may opt for resource intensive entry modes such as subsidiaries, for quick market penetration, a Technical entrepreneur may choose an entry mode like exports, which require fewer resources, and a Structure may opt for mergers or acquisitions. Hence not only do entrepreneurs influence a firm's international behaviour, they influence it different directions (Andersson, 2000).

Entrepreneurship is considered the driving force of innovation, which in turn is highly valuable for gaining differentiation advantages in the highly competitive local or foreign markets (O'cass and Weerawardena, 2009). While Collis (1991) asserted that the decisions associated with international business activities are path dependent, McDougall et al (1994) maintained that entrepreneurs consciously try to evade domestic path dependence by establishing businesses which target many geographic locations simultaneously. An entrepreneur's expertise in identifying, creating, evaluating and capitalizing on international opportunities, along with his previous experiences, skills and competencies (Bloodgood et al., 1996) are major determinants in an SME's internationalisation (Wright et al., 2007). According to Manolova et al (2002), entrepreneurs with pervious experience in foreign markets may be inclined towards internationalization (1) and this experience complements an entrepreneur's specific human capital by adding beneficial episodic knowledge which in turn affects their subsequent activities (Minniti and Bygrave, 2001) and encourages them to identify and benefit from international opportunities (Wright et al., 2007). Additionally, knowledge gained from previous experiences in international markets may help an entrepreneur in dealing with barriers related to differences in culture, language, legislation, and business practices (Morosini and Shane, 1998, 3) and also helps in building contacts in foreign markets. According to Reid (1983) this may later facilitate internationalisation of the firm (Ruzzier et al., 2007) by increasing chances of export engagement and expansion.

Apart from this, entrepreneurial actions need to be conducted in suitable environments to be fruitful (Dahmen, 1995), which may be changeable, unpredictable and not in control of an entrepreneur. Additionally, Weidersheim et al (1978) have also linked the entrepreneur's ability of risk tolerance with the firm's ability to internationalise (Ruzzier et al., 2007). However an entrepreneur does influence his environment through the processes he creates and based on his interpretation of the macro environment may develop or select his international strategies (Andersson, 2000) or change them if required.

Conclusion

Although the internationalising literature has been conventionally and largely focussed on large multinational enterprises (Coviello and McAuley, 1999), internationalisation of small and medium-sized enterprises (SME) requires separate research owing to their basic differences from the large enterprises, rather than just being their smaller counterparts. Based on the available literature on SME's it can be assumed that entrepreneurs have a pivotal role in internationalising SME's. Entrepreneurs not only play a unique and decisive role in making strategic decisions for positioning an SME in a foreign market but also assume a primary importance in the establishment, sustainment and success of the firm in the international market, by providing and mobilising the firm's resources and capabilities. An entrepreneur's human capital influences the competitive strategies and performance of the firm and at the same time the social and inter-organizational networks developed by the entrepreneur facilitates the firm's foreign ventures. However entrepreneurs may be categorised into different types based on their specific domains of activity. Nevertheless the basic role of entrepreneurs remains the same which is to introduce new products or services, new production methods and open up new markets which in turn facilitate the internationalisation of SME's.

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