Internationalization: A study of small firms from emerging markets

Abstract

Internationalization of firms is happening at an ever-increasing pace, and more and more small firms from emerging economies are shifting their approach from domestic to global orientation. Small firms are considered a crucial factor for the development of emerging countries. They contribute to the development of countries by generating employment, supporting innovation and sustaining economic development (Mukole, 2010). They also help in achieving wider socioeconomic goals of emerging countries. They do so by quickly adding jobs, giving competition to big firms and fostering entrepreneurial spirit (Javalgi & Todd, 2011). Small firms from emerging markets are increasingly looking at internationalization as one of the important strategic options to grow. These firms, lacking in propriety resources, do not approach internationalization as a way to exploit existing resources; instead, they view internationalization to acquire resources and capabilities. Moreover, these small firms from emerging markets face different kinds of liabilities- liability of newness, liability of foreignness and liability of third-world multinationals, mainly due to poor branding, lack of resources, lack of cutting-edge technology, and lack of scale. Firms from emerging markets view internationalization as one of the strategic options to grow large and acquire resources and capabilities (Guillen & Garcia-Canal, 2009). They use strategic alliance as one of the essential tools to enter international markets. This paper argues that small firms from emerging market lack resources, consequently they go for internationalization. Building on the linkage, leverage and learning framework proposed by Mathews (2006), we argue that smaller firms from emerging markets get into an alliance to form a linkage with a wider network of globally connected firms to get access to requisite resources and capabilities. Further, we posit that piggybacking on strategic alliance help such firms offset the liability of foreignness and poor branding, small firms from emerging markets sponge upon the strategic alliances for internationalization.