SMEs’ Internationalization Strategy: To Cooperate or Not to Cooperate?
When small- and medium-sized enterprises (SMEs) choose their internationalization strategy, do they tend to cooperate with other businesses, or do they prefer to remain autonomous? It has been a common assumption among researchers that upon attempting international ventures, SMEs tend to cooperate with other enterprises due to a lack of resources. A 2012 study conducted by Brand, Gemser, and Sorge set out to find out the answer to this fascinating question.
The researchers examined the internationalization strategies used by 54 SMEs in the technology-driven sector. The researchers discovered the smaller SMEs and the bigger SMEs tend to avoid cooperating with other companies, while the medium-sized SMEs prefer to cooperate with other companies as part of their internationalization strategy.
The incentive for preferring an autonomous internationalization strategy varies between the smaller and larger SMEs. For the smaller SMEs the reason tends to be risk control. The internationalization venture is very risky for the smaller SMEs, and they tend to prefer to refrain from international cooperation and keep a low-resource (but also low-risk) autonomous internationalization strategy. For the bigger SMEs the reason tends to be simply control. Any sort of cooperation demands a certain loss of control by entrusting certain aspects of the business to the partner. Bigger SMEs generally don’t lack resources, and therefore they chose to adopt an autonomous internationalization strategy in order to maintain control over their foreign operations.
The researchers concluded that SMEs who chose an autonomous internationalization strategy didn’t perform any better or any worse than SMEs who chose a cooperation internationalization strategy. Overall, the researchers were unable to identify one of the two possible strategies as being significantly better than the other.
A very important discovery made by the researchers was that SMEs tend to get “locked” in the chosen strategy. According to their findings, once the SME chooses the internationalization strategy, either autonomous or cooperation, the SMB very rarely changes its strategy. The strategy is not affected by environmental characteristics like regional prosperity or industry setting. And this resistance to changing strategy can prove to be a mistake.
The researchers concluded that SMEs don’t have a clear tendency towards an internationalization strategy that requires cooperation. The SMEs examined in the technology-driven sector were not necessarily persuaded by a lack of resources to adopt a cooperation internationalization strategy; on the contrary, the smallest SMEs tended to choose an autonomous strategy in order to avoid big risks.
SMEs must carefully weigh the pros and the cons of each of the alternatives before choosing an internationalization strategy. Although the researchers did not find one of the strategies to be significantly better than the other, the SMEs will benefit from examining their surroundings and allowing themselves to change their strategy if changes in the environmental characteristics require such alterations.
Source: Gemser, Gerda, Maryse J Brand, and Arndt Sorge. “Exploring the Internationalisation Process of Small Businesses: A Study of Dutch Old and New Economy Firms.” Management International Review. 44.2 (2004): n. page. Print.
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