SMEs’ growth in international markets: export intensity, export diversification and distribution strategies

Abstract

Depending on the firm’s resources and capabilities, international distribution strategies may lead to either high market control (commercial subsidiaries) or flexibility and speed (collaborative or independent forms) in entering foreign markets. This strategic choice is particularly crucial for SMEs’ internationalisation strategies. This paper investigates the relationship between SMEs’ distribution strategies adopted abroad and their export performance, defined in terms of export intensity and diversification. The research hypotheses are proposed distinguishing between small- and medium-sized firms, as well as differentiating between regional and global markets. The empirical analysis refers to a sample of about 2600 Italian SMEs observed over the period 2004–2006, and considers different destination markets: the 25-country European Union area (regional market) and the rest of the world (global market). The empirical results suggest that commercial distribution based on agreements has a higher impact on SMEs’ export intensity than the other two distribution modes in the regional market, with the FDI-mode having a higher effect than the use of local traders. On the contrary, SMEs’ export intensity in the global market seems to benefit more from the use of local traders, while non-equity agreements present the lowest effect. Agreements-based distribution modes have the highest impact on SMEs’ export diversification, followed by FDIs and then by the distribution through local traders.