Internationalization

Strategy of small and mid cap enterprises

von Felix Hötzinger

Impressum

Buchtitel: Internationalization von Felix Hötzinger

1. Auflage Mai 2014, ISBN: 978-3-944949-10-9

Bild und Text von Felix Hötzinger (Author), Layout und Gestaltung durch VBH Verlagsbuchhandlung Liedtke, Berlin

Covergestaltung in Bild und Text Felix Hötzinger (Author), Layout und Formatierung durch VBH Verlagsbuchhandlung Liedtke

Veröffentlicht durch VBH Verlagsbuchhandlung Liedtke, Berlin 2014

© Copyright 2014. Alle Rechte vorbehalten by Felix Hötzinger.

CONTENTS

Impressum

Abstract

Shortcuts

1 Introduction

2 Objectives

3 Literature Review

3.2 Globalization and Internationalization strategies

3.3 Impediments and risks of SME internationalization

3.4 Preconditions to SME internationalization success

3.5 Assessing SME internationalization success

3.6 Quantitative Overview of results

3.7 Achievements and limitations of previous research

4 Material and Methodology

4.2 Secondary Data

4.3 Methodological approaches

5 Results and discussion

5.2 Exploratory factor analysis of parameter items of internationalization strategy

5.3 Impact of firm characteristics on internationalization modalities

5.4 Impact of preparation to internationalization on firm success

5.5 Impact of internationalization strategy on firm success

5.6 Impact of perceived impediments to internationalization on firm success

5.7 Impact of performance related on growth related success (H10)

6 Conclusions and discussion

6.2 Recommendations

6.3 Theoretical and practical addition of paper

6.4 Outlook: Limitations and further research needs

7 References

8 Appendices

List of figures

List of charts

Abstract

Small and mid cap Enterprises are the most important part of Germany’s economy:

99.3 % of all German companies

3.55 million SME in Germany

Employing more than 24.3 million people

Generating more than 60 % of Germany’s turnovers

Why are Germany’s SMEs reluctant to go abroad? Diverse factual and psychological reasons have been found to interact for SMEs from different nations.
This paper intends to fill gaps in knowledge on German SME internationalization and explore the cause and effect chain of SME characteristics, SME internationalization modalities and internationalization success in more detail.

To what extent do SME characteristics (e.g. firm age, branch, size, leadership) determine internationalization preparation, strategy and possible impediments to internationalization?

To what extent do parameters of internationalization preparation, strategy and possible impediments to internationalization determine the degree of SME internationalization success and performance?

To what extent does the degree of SME internationalization determine SMEs’ competitive performance?

To answer these research questions the paper conducts a systematic review of previous studies on SME internationalization strategies, impediments and success and derives categories to assess the cause and effect relationships of SME internationalization systematically. These considerations result in a causal research model, which will be argued and detailed as to its indicators in the course of the paper. Model hypotheses to be tested by multiple regression modelling are derived from previous empirical research in the course of the paper. To test this model the study relies on an empirical survey among 167 German SMEs. It applies exploratory factor analysis to assign adequate items to the parameters and develops a multiple regression model to test the relevance of the indicators of the model parameters on the assumed causal relationships.

Shortcuts

ANOVA Analysis of variance between groups
CULT cultural integration
COM communication and networking
Corr. correlation
CULT_N normalized cultural integration
COM_N normalized communication & networking
H hypothesis
IS Internationalization strategy
IS_cult_1 country-specific technical requirements
IS_cult_2 multilingual training material
IS_cult_3 international project management
IS_cult_4 knowledge of foreign norms and standards
IS_cult_5 access to international databases
IS_cult_6 multilingual documentation
IS_cult_7 compatibility
IS_cult_8 foreign languages
IS_cult_9 knowledge of country-specific challenges
IS_com_1 analysis of cultural aptitude
IS_com_2 new media
IS_com_3 integrated communication
IS_com_4 local expert advice
IS_com_5 international communication capability
IS_com_6 international order monitoring
IS_com_7 service point in place
IS_com_8 e-commerce
IS_com_9 qualification for languages
IS_strat_1 business strategy, sales plan
IS_strat_2 competition analysis
IS_strat_3 partnerships and daughters
IS_strat_4 certification
IS_strat_5 analysis of potentials
IS_strat_6 international reporting standards
IS_strat_7 international investment decisions
IS_strat_8 key ratio based controlling
IS_strat_9 credit insurance
IS_strat_10 payment terms order for payment
IS_know_1 project responsibility
IS_know_2 supply chain management
IS_know_3 systematic interchange of know how
IS_know_4 global sourcing
IS_know_5 supply chain management
IS_know_6 knowledge of foreign labour law
IS_know_7 knowledge of skilled personnel pool
IS_know_8 financial incentives for stays abroad
IS_know_9 transparent travel cost guidelines
IS_know_10 recruiting abroad
KMO Kaiser-Mayer-Olkin criterion
KNOW staff & knowledge management
KNOW_N normalized staff and knowledge management
MNC multinational corporation
O1 lacking capital
O2 lacking leadership competence
O3a strategic deficits
O3b organizational deficits
O4a deficits of functional departments
O4b operative shortage of staff
O5a lacking international project management
O5b lacking language skill
PRE_1 preparation to internationalization in marketing
PRE_2 preparation to internationalization in R&D
PRE_3 preparation to internationalization in production
PRE_4 preparation to internationalization in sales
PRE_5 preparation to internationalization in acquisitions
PRE_6 preparation to internationalization in staff management
PRE_7 preparation to internationalization in corporate finance
PRE_8 preparation to internationalization in IT support
Sig. significance
SME Small and Medium Sized enterprises
SP_1 share of foreign turnovers
SP_2 share of foreign purchases
STRAT strategic planning skill
STRAT_N normalized strategic planning skill
a, b prameters of regression model
error term
mean
S standard deviation
n sample size
Q question

1 Introduction

SMEs are an integral part of Germany’s economy. 99.3 % of German companies are SMEs. These 3.55 million German SMEs employ more than 24.3 million people and account for more than 60 % of Germany’s turnovers. According to a EU definition SMEs comprise three firm size categories:

Micro-enterprises have got less than 10 employees and an annual turnover or balance sum below two million Euros.

Small enterprises employee less than 50 persons and their annual turnovers or balance sum is below 10 million Euros.

Medium sized enterprises have got less than 250 employees and turnovers below 50 million Euros or a balance sum of no more than 43 million Euro (KfW, 2012). These firms are in the focus of this research paper.

Mugler (2005, 31-32) additionally suggests qualitative characteristics to differentiate SMEs from large corporations: Usually they are coined by the personality of the firm owner, dispose of a dense network of personal contacts to suppliers and customers. SMEs are specialized in individual products and services on customer demand. Relationships between employees and management frequently are informal and personal, which results in a low degree of formalism and bureaucracy and enables SMEs to react to environmental changes rapidly.

In spite of these virtues on a local level only a quarter of Germany’s SMEs operate internationally (Geyer & Uriep, 2012, 1). Only 16 % of SME turnover is from exports. In total German industry though earns more than 30 % from export goods (Yalcin & Zacher, 2011, 17). Concerning international engagement German SMEs hence dispose of further growth and turnover potential.
Why are Germany’s SMEs reluctant to go abroad? Diverse factual and psychological reasons have been found to interact for SMEs from different nations:
Due to high personal involvement with the business Finnish SMEs frequently find it hard to delegate tasks and accept cultural diversity (Kotinen & Ojala, 2010).
Acs et al. (1996) assert that SMEs are disadvantaged concerning property rights protection and face larger entry barriers than big corporations. Evaluating SMEs expansion to China Goxe (2010) finds that SMEs frequently fail due to cultural barriers and lacking intercultural relationship management. Inadequate internal and external resources as well as entrepreneurial vision are further reasons why UK retail SMEs usually are more reluctant to expand internationally (Hutchinson et al., 2009).

On the other hand empirical studies have repeatedly proven that SMEs basically dispose of valuable abilities concerning international expansion: New Zealand SMEs are prone to innovation and flexible to cope in new setting. They usually dispose of highly personalized contacts in the target country, which reduces the risk of going abroad (Chetty & Stangl, 2009). Personal relationships are particularly valuable in the process of knowledge transfer between foreign and local units as well as firm integration (Forsman et al., 2002).

The form of the venture as well as the characteristics of the firm apparently have got additional impact on internationalization propensity and success: Li et al. (2011) point out that US biopharmaceutical SME Internationalization success depends on the experience with similar projects, the design of the alliance and the degree of geographical and cultural dispersion. The degree of entrepreneurship and leadership properties as well as external conditions like market, product and timeframe of the project are further crucial points (Ruzzier et al., 2006)

Lesen Sie weiter in der vollständigen Ausgabe!

Lesen Sie weiter in der vollständigen Ausgabe!

Lesen Sie weiter in der vollständigen Ausgabe!

Lesen Sie weiter in der vollständigen Ausgabe!

Lesen Sie weiter in der vollständigen Ausgabe!

Lesen Sie weiter in der vollständigen Ausgabe!

Lesen Sie weiter in der vollständigen Ausgabe!

Lesen Sie weiter in der vollständigen Ausgabe!

Lesen Sie weiter in der vollständigen Ausgabe!

Lesen Sie weiter in der vollständigen Ausgabe!

Lesen Sie weiter in der vollständigen Ausgabe!

Lesen Sie weiter in der vollständigen Ausgabe!

Lesen Sie weiter in der vollständigen Ausgabe!

Lesen Sie weiter in der vollständigen Ausgabe!

Lesen Sie weiter in der vollständigen Ausgabe!

Lesen Sie weiter in der vollständigen Ausgabe!

Lesen Sie weiter in der vollständigen Ausgabe!

Lesen Sie weiter in der vollständigen Ausgabe!

Lesen Sie weiter in der vollständigen Ausgabe!

Lesen Sie weiter in der vollständigen Ausgabe!

Lesen Sie weiter in der vollständigen Ausgabe!

Lesen Sie weiter in der vollständigen Ausgabe!

Lesen Sie weiter in der vollständigen Ausgabe!

Lesen Sie weiter in der vollständigen Ausgabe!

Lesen Sie weiter in der vollständigen Ausgabe!

Lesen Sie weiter in der vollständigen Ausgabe!