Abstract
This paper focuses on SMEs from the Latin American region and aims to build on existing literature on the emergence of the institution-based view in combination with the resource-based view. We contribute to existing literature by extending the application of the aforementioned theories to firms in three under-researched countries in this region. Specifically, we contribute to the extant literature by providing empirical insights on how home country–specific resources and firm-specific resources can affect the internationalization speed of SMEs in Latin American region. In order to achieve our objectives, we empirically examine the role of economic freedom (EF), prior business/international experience, and firm size on speed of internationalization. We use a dataset of Latin American SMEs, employing Poisson and negative binomial (NB) regression techniques. Our data cover three main Latin American Pacific Rim economies—Chile, Colombia, and Peru—with similar economic specializations, geographical borders, and economic growth dynamics. We find that (1) some parts of Economic Freedom Index (EFI) accelerate the speed of internationalization, whereas other areas slow it down or have no effect. Specifically, the closer to full EF the home country is in terms of regulations and government, the shorter the time to internationalize. (2) More experienced management teams are more likely to translate their knowledge into faster international market entry, but this pays off only for larger sized SMEs in contrast to smaller ones due to complementarities between managerial resources and physical, financial, and organizational resources. (3) Finally, industry, firm location, and country destination can only weakly explain the speed of internationalization. The findings add to the literature on SME internationalization in emerging markets and point towards potential policies to stimulate growth by SMEs in these markets.
Highlights
Acceleration of the globalization process in the world economy (Jormanainen and Koveshnikov 2012; Paul and Gupta 2014) has rekindled the academic and policy interest in international entrepreneurship (IE)
Research questions/purpose: The aim of this paper is to examine how home-country institutions and international entrepreneurial capabilities that is previous international business experience can speed up the internationalization process of small firms operating in under-developed institutional environment
We examine whether the previous business/international experience of the key decision maker of the firm leads to substantial competitive advantage which in turn speeds up the internationalization process, as it has been suggested in the Resource-Based View (RBV)
Summary
Acceleration of the globalization process in the world economy (Jormanainen and Koveshnikov 2012; Paul and Gupta 2014) has rekindled the academic and policy interest in international entrepreneurship (IE). The Resource-Based View theory of the firm—RBV—(Barney 1991) has been considered to be one of the key theories in entrepreneurship research and it has become a widely used approach to understand firm’s internationalization process making a significant contribution to IE field (Bruton et al 2010; Peiris et al 2012). Ethiraj et al (2005) argued that these capabilities can be the results of previous and accumulated experience embedded in routines and learning by doing It can be viewed as a result of a careful investment decision in the firm’s systems and organizational structure with the aim of improving the firm’s practices. In other words, it is the previous experience of the owner-manager of the firm that matters. We examine whether the previous business/international experience of the key decision maker of the firm leads to substantial competitive advantage which in turn speeds up the internationalization process, as it has been suggested in the RBV
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