Inward–outward connections and their impact on firm growth

Abstract

Firms can internationalize via two types of operations: inward (related to international supply operations) and outward (related to serving or selling in foreign markets). This paper analyzes variations in growth for firms that adopt different international strategies: those that perform only one type of international operation, and those that undertake both types simultaneously. The study starts from the premise that connections exist between inward and outward operations, connections that give access to related and diverse knowledge. Based on a sample of European SMEs from different sectors, the empirical findings indicate that undertaking inward and outward operations simultaneously exerts a greater positive effect on turnover growth than performing just one type of international operation. This simultaneous effect is significantly higher when these operations take place in the same foreign country. The findings provide support for the idea that the acquisition of country-specific knowledge allows firms to boost sales growth.