A temporal bracketing perspective on the internationalisation propensity of SMEs from post-communist transition economies

Abstract

We develop a temporal bracketing perspective on the internationalisation propensity of incumbent and start-up small-and-medium-sized enterprises (SMEs) from post-communist transition economies. Prior research has yielded mixed findings on whether SMEs from transition economies are more likely to internationalise with age. We reconcile these mixed results by decomposing the SMEs' age into two adjacent institutional brackets: communist legacy and reform legacy. We propose and find that while a longer communist legacy unlocks entrepreneurial mechanisms of self-help that increase the incumbent SMEs' current competitive aspirations to internationalise, a longer reform legacy raises the costs of financing, monitoring, and information search for both incumbent and start-up SMEs, reducing their current competitive aspirations to internationalise. Using the probit methodology, we find support for our framework on a sample of 388 SMEs from nine post-communist transition economies during 2008-2009. Our findings caution managers to carefully adjust their temporal expectations of competitive aspirations for internationalisation based on their length of communist and reform legacies.