The International Entry Choices of Italian SMEs in Emerging Markets: a Case-based Analysis

Chiara Cannavale,Elena Laurenza

doi:10.15388/ekon.2017.3.11578

Abstract

The paper addresses the factors influencing the SMEs’ entry choices in international markets and explores two factors: one related to the external environment and one dependent on firms. The first factor is the institutional context as the whole of formal and informal rules of the country target. The second is the market commitment, intended as resources committed in a particular market area: the experience firms get in foreign markets and a general attitude to maintain the international presence for a long period are the main sources of market knowledge.The aim of the study is to understand the effect of company-specific factors and of context-specific factors, namely the market commitment and institutional context, on SMEs’ entry choice mode in foreign markets. The paper develops a multiple case study analysis of four small international Italian firms. Built on the institutional theory and on the market commitment construct, the paper offers a conceptual model that shows that the institutional context strongly influences the amount of resources involved in the internationalization process, while the market commitment affects more the complexity – and intensity – of the process.

Highlights

An internationalized firm has to adopt the appropriate organizational structure to manage operations located in foreign markets
When firms enter international markets, they can choose from several alternatives: they can do it through greenfield investments, exporting, contractual agreements or joint ventures
The entry choice is a key component of internationalization strategies, and different theoretical and empirical studies have focused on this issue

Summary

Introduction

An internationalized firm has to adopt the appropriate organizational structure to manage operations located in foreign markets. Different scholars have interpreted this choice as getting different results, and empirical evidence is not easy to interpret and revise This field of research owes its origins to three main backgrounds: the economic theories, the theories of foreign direct investment and the internalization. Some studies explain that frameworks developed for MNEs are not always able to explain SMEs’ choices, in situations with a high degree of uncertainty and external pressure above all (Erramilli and D’Souza 1995). These studies suggest that the institutional context is suitable to explain SMEs because of their sensitivity to reactions to external challeneges and because of their resource scarcity (Brouthers and Nakos 2004)

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