Journal of Korea Trade

Korea Trade Research Association (한국무역학회)
권호 표지
DOI QR코드

DOI QR Code

Degree of Internationalization and Performance of High-tech Small and Medium-sized Enterprises: Evidence from Korea

  • Received : 2021.04.27
  • Accepted : 2021.11.09
  • Published : 2021.11.30
Download PDF
⟨ Previous Next ⟩

Abstract

Purpose - In this study, we explore the relationship between the degree of internationalization (DOI) and firm performance (DOI-P) of small and medium-sized enterprises (SMEs) in the manufacturing sector. Specifically, we investigate whether the costs and benefits dynamics concerning the internationalization of SMEs differ between high-tech and non-high-tech industries. Design/methodology - We extend the prior literature on this relationship by employing 5-year data on 589 Korean SMEs in the manufacturing sector and examining the moderating impact of the industry characteristics. Our findings reveal a U-shaped relationship between the DOI and SME performance. High-tech SMEs demonstrate an inverted U-shaped relationship, whereas non-hightech SMEs exhibit a U-shaped relationship. Findings - Our findings illustrate the importance of the industry factor in testing the performance impact of the internationalization of Korean SMEs. By incorporating industry dynamics, our results indicate that the DOI-P relationship depends on the context of the industry in which an SME operates. High-tech SMEs also display a higher DOI but are outperformed by non-high-tech SMEs for the entire internationalization path, which implies that high-tech SMEs face more challenges than non-high-tech SMEs while seeking internationalization. Originality/value - The findings strongly validate that significant benefits exist for SMEs undertaking internationalization. We also employ the contextual framework contributing to increasing the understanding of the intrinsic value of internationalization and resolving the mixed results issue on the DOI-P relationship, by illustrating that the industry factor leads to different dynamics of costs and benefits of SME internationalization; it also determines the shape and direction of the relationship.

Keywords

References

  1. Agarwal, S. and S. N. Ramaswami (1992), "Choice of Foreign Market Entry Mode: Impact of Ownership, Location and Internalization Factors", Journal of International Business Studies, 23(1), 1-27. https://doi.org/10.1057/palgrave.jibs.8490257
  2. Almodovar, P. and A. M. Rugman (2014), "The M curve and the Performance of Spanish International New Ventures", British Journal of Management, 25(S1), S6-S23. https://doi.org/10.1111/1467-8551.12022
  3. Anderson, R. C. and D. M. Reeb (2003), "Founding-Family Ownership and Firm Performance: Evidence from the S&P 500", The Journal of Finance, 58(3), 1301-1328. https://doi.org/10.1111/1540-6261.00567
  4. Baptista, R. and M. Karaoz (2011), "Turbulence in Growing and Declining Industries", Small Business Economics, 36(3), 249-270. https://doi.org/10.1007/s11187-009-9226-2
  5. Barney, J. B. (2000), "Firm Resources and Sustained Competitive Advantage", In Economics Meets Sociology in Strategic Management (pp. 203-227): Emerald Group Publishing Limited.
  6. Bausch, A. and M. Krist (2007), "The Effect of Context-Related Moderators on the Internationalization-Performance Relationship: Evidence from Meta-Analysis", Management International Review, 47(3), 319-347. https://doi.org/10.1007/s11575-007-0019-z
  7. Beise-Zee, R. and C. Rammer (2006), "Local User-Producer Interaction in Innovation and Export Performance of Firms", Small Business Economics, 27(2-3), 207-222. https://doi.org/10.1007/s11187-006-0013-z
  8. Benito-Osorio, D., A. Colino, L. A. Guerras-Martin and J. A. Zuniga-Vicente (2015), "The International Diversification-Performance Link in Spain: Does Firm Size Really Matter?", International Business Review, 25(2), 548-558. https://doi.org/10.1016/j.ibusrev.2015.09.004
  9. Booltink, L. W. and A. Saka-Helmhout (2018), "The Effects of R&D Intensity and Internationalization on the Performance of Non-High-Tech SMEs", International Small Business Journal, 36(1), 81-103. https://doi.org/10.1177/0266242617707566
  10. Bowen, H. P. (2007), "The Empirics of Multinationality and Performance", Regional Aspects of Multinationality and Performance, 13, 113-142. https://doi.org/10.1016/S1064-4857(07)13006-0
  11. Buckley, P. J. and X. Tian (2017), "Transnationality and Financial Performance in the Era of the Global Factory", Management International Review, 57(4), 501-528. https://doi.org/10.1007/s11575-016-0306-7
  12. Calantone, R. J., D. Kim, J. B. Schmidt and S. T. Cavusgil (2006), "The Influence of Internal and External Firm Factors on International Product Adaptation Strategy and Export Performance: a Three-Country Comparison", Journal of Business Research, 59(2), 176-185. https://doi.org/10.1016/j.jbusres.2005.05.001
  13. Capar, N. and M. Kotabe (2003), "The Relationship Between International Diversification and Performance in Service Firms", Journal of International Business Studies, 34(4), 345-355. https://doi.org/10.1057/palgrave.jibs.8400036
  14. Cho, J. and J. Lee (2018), "Internationalization and Performance of Korean SMEs: The Moderating Role of Competitive Strategy", Asian Business and Management, 17(2), 140-166. https://doi.org/10.1057/s41291-018-0036-8
  15. Contractor, Kumar and Kundu (2007), "Nature of the Relationship Between International Expansion and Performance: The Case of Emerging Market Firms", Journal of World Business, 42(4), 401-417. https://doi.org/10.1016/j.jwb.2007.06.003
  16. Contractor, S. K. Kundu and C. C. Hsu (2003), "A Three-Stage Theory of International Expansion: The Link Between Multinationality and Performance in the Service Sector", Journal of International Business Studies, 34(1), 5-18. https://doi.org/10.1057/palgrave.jibs.8400003
  17. Davcik, N. S., S. Cardinali, P. Sharma, and E. Cedrola (2021), "Exploring the Role of International R&D Activities in the Impact of Technological and Marketing Capabilities on SMEs' Performance", Journal of Business Research, 128, 650-660. https://doi.org/10.1016/j.jbusres.2020.04.042
  18. De Monte, A. and E. Papagni (2003), "R&D and the Growth of Firms: Empirical Analysis of a Panel of Italian Firms", Research Policy, 32(6), 1003-1014. https://doi.org/10.1016/S0048-7333(02)00107-5
  19. Demsetz, H. and K. Lehn (1985), "The Structure of Corporate Ownership: Causes and Consequences", Journal of Political Economy, 93(6), 1155-1177. https://doi.org/10.1086/261354
  20. Dhanaraj, C. and P. W. Beamish (2003), "A Resource-Based Approach to the Study of Export Performance", Journal of Small Business Management, 41(3), 242-261. https://doi.org/10.1111/1540-627X.00080
  21. Eisingerich, A. B., G. Rubera and M. Seifert (2009), "Managing Service Innovation and Interorganizational Relationships for Firm Performance: To Commit or Diversify?", Journal of Service Research, 11(4), 344-356. https://doi.org/10.1177/1094670508329223
  22. Elango, B. (2011), "Does Market Context Impact Payoffs to Internationalization?", European Business Review, 23(5), 434-453. https://doi.org/10.1108/09555341111158100
  23. Elango, B. and C. Pattnaik (2011), "Learning Before Making the Big Leap", Management International Review, 51(4), 461-481. https://doi.org/10.1007/s11575-011-0085-0
  24. Evangelista, F. (2005), "Qualitative Insights into the International New Venture Creation Process", Journal of International Entrepreneurship, 3(3), 179-198. https://doi.org/10.1007/s10843-005-4204-5
  25. Fabrizio, K. R. and L. Thomas (2012), "The Impact of Local Demand on Innovation in a Global Industry", Strategic Management Journal, 33(1), 42-64. https://doi.org/10.1002/smj.942
  26. Fleming, F. C. and J. E. de Oliveira Cabral (2016), "The influence of contextual factors on the multinationality-Performance relationship: A conceptual model", International Journal of Business Administration, 7(3), 15-26.
  27. Freel, M. S. (2000), "Strategy and Structure in Innovative Manufacturing SMEs: The Case of an English Region", Small Business Economics, 15(1), 27-45. https://doi.org/10.1023/A:1012087912632
  28. Goerzen, A. and P. W. Beamish (2003), "Geographic Scope and Multinational Enterprise Performance", Strategic Management Journal, 24(13), 1289-1306. https://doi.org/10.1002/smj.357
  29. Gomes, L. and K. Ramaswamy (1999), "An Empirical Examination of the Form of the Relationship Between Multinationality and Performance", Journal of International Business Studies, 30(1), 173-187. https://doi.org/10.1057/palgrave.jibs.8490065
  30. Grant, R. M. (1987), "Multinationality and Performance among British Manufacturing Companies", Journal of International Business Studies, 18(3), 79-89. https://doi.org/10.1057/palgrave.jibs.8490413
  31. Greenaway, D. and R. Kneller (2007), "Firm Heterogeneity, Exporting and Foreign Direct Investment", The Economic Journal, 117(517), F134-F161. https://doi.org/10.1111/j.1468-0297.2007.02018.x
  32. Greene, W. H. (2003), Econometric Analysis: Pearson Education India.
  33. Guisinger, S. (2001), "From OLI to OLMA: Incorporating Higher Levels of Environmental and Structural Complexity into the Eclectic Paradigm", International Journal of the Economics of Business, 8(2), 257-272. https://doi.org/10.1080/13571510110051487
  34. Hair, J. F. (2010), Multivariate Data Analysis: Pearson College Division.
  35. Hirsch-Kreinsen, H. (2008), "Low-Technology: A Forgotten Sector in Innovation Policy", Journal of Technology Management and Innovation, 3(3), 11-20. https://doi.org/10.4067/S0718-27242008000100002
  36. Hitt, M. A., R. E. Hoskisson and H. Kim (1997), "International Diversification: Effects on Innovation and Firm Performance in Product-Diversified Firms", Academy of Management Journal, 40(4), 767-798. https://doi.org/10.2307/256948
  37. Hsu, C., Y. Lien and H. Chen (2015), "R&D Internationalization and Innovation Performance", International Business Review, 24(2), 187-195. https://doi.org/10.1016/j.ibusrev.2014.07.007
  38. Jensen, M. C. and W. H. Meckling (1976), "Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure", Journal of Financial Economics, 3(4), 305-360. https://doi.org/10.1016/0304-405X(76)90026-X
  39. Johanson, J. and J. E. Vahlne (2009), "The Uppsala Internationalization Process Model Revisited: From Liability of Foreignness to Liability of Outsidership", Journal of International Business Studies, 40(9), 1411-1431. https://doi.org/10.1057/jibs.2009.24
  40. Karadeniz, E. and K. Gocer (2007), "Internationalization of Small Firms: A Case Study of Turkish Small-and Medium-Sized Enterprises", European Business Review, 19(5), 387-403. https://doi.org/10.1108/09555340710818978
  41. Karlsson, C. and O. Olsson (1998), "Product Innovation in Small and Large Enterprises", Small Business Economics, 10(1), 31-46. https://doi.org/10.1023/A:1007970416484
  42. Kim, P. Hwang, and W. P. Burgers (1989), "Global Diversification Strategy and Corporate Profit Performance", Strategic Management Journal, 10(1), 45-57. https://doi.org/10.1002/smj.4250100105
  43. Kim, Y., Y. Kim and K. Oh (2020), "Small-and Medium-Sized Firms' Internationalization and Performance during a Recession", The Journal of Asian Finance, Economics, and Business, 7(9), 341-350. https://doi.org/10.13106/JAFEB.2020.VOL7.NO9.341
  44. Kirca, A. H., W. D. Fernandez and S. K. Kundu (2016), "An Empirical Analysis and Extension of Internalization Theory in Emerging Markets: The Role of Firm-Specific Assets and Asset Dispersion in the Multinationality-Performance Relationship", Journal of World Business, 51(4), 628-640. https://doi.org/10.1016/j.jwb.2016.03.003
  45. Kirca, A. H., K. Roth, G. T. M. Hult and S. T. Cavusgil (2012), "The Role of Context in the Multinationality-Performance Relationship: A Meta-Analytic Review", Global Strategy Journal, 2(2), 108-121. https://doi.org/10.1002/gsj.1032
  46. Kirner, E., S. Kinkel and A. Jaeger (2009), "Innovation Paths and the Innovation Performance of Low-Technology Firms-An Empirical Analysis of German Industry", Research Policy, 38(3), 447-458. https://doi.org/10.1016/j.respol.2008.10.011
  47. Kotabe, M., S. S. Srinivasan and P. S. Aulakh (2002), "Multinationality and Firm Performance: The Moderating Role of R&D and Marketing Capabilities", Journal of International Business Studies, 33(1), 79-97. https://doi.org/10.1057/palgrave.jibs.8491006
  48. Lee, H., D. Kelley, J. Lee and S. Lee (2012), "SME Survival: The Impact of Internationalization, Technology Resources, and Alliances", Journal of Small Business Management, 50(1), 1-19. https://doi.org/10.1111/j.1540-627X.2011.00341.x
  49. Li, L. (2005), "Is Regional Strategy more Effective than Global Strategy in the US Service Industries?", MIR: Management International Review, 37-57.
  50. Lin, W. (2014), "How Do Managers Decide on Internationalization Processes? The Role of Organizational Slack and Performance Feedback", Journal of World Business, 49(3), 396-408. https://doi.org/10.1016/j.jwb.2013.08.001
  51. Loderer, C. and U. Waelchli (2010), "Protecting Minority Shareholders: Listed Versus Unlisted Firms", Financial Management, 39(1), 33-57. https://doi.org/10.1111/j.1755-053X.2009.01065.x
  52. Love, J. H. and S. Roper (2015), "SME Innovation, Exporting and Growth: A Review of Existing Evidence", International Small Business Journal, 33(1), 28-48. https://doi.org/10.1177/0266242614550190
  53. Lu, J. W. and P. W. Beamish (2001), "The Internationalization and Performance of SMEs", Strategic Management Journal, 22(6-7), 565-586. https://doi.org/10.1002/smj.184
  54. Lu, J. W. and P. W. Beamish (2004), "International Diversification and Firm Performance: The S-curve Hypothesis", Academy of Management Journal, 47(4), 598-609. https://doi.org/10.2307/20159604
  55. Lu, J. W. and P. W. Beamish (2006), "SME Internationalization and Performance: Growth vs. Profitability", Journal of International Entrepreneurship, 4(1), 27-48. https://doi.org/10.1007/s10843-006-8000-7
  56. McDougall, P. P., B. M. Oviatt and R. C. Shrader (2003), "A Comparison of International and Domestic New Ventures", Journal of International Entrepreneurship, 1(1), 59-82. https://doi.org/10.1023/A:1023246622972
  57. Meyer, M. H. and L. Lopez (1995), "Technology Strategy in a Software Products Company", Journal of Product Innovation Management, An International Publication of the Product Development and Management Association, 12(4), 294-306. https://doi.org/10.1111/1540-5885.1240294
  58. Michael Geringer, J., P. W. Beamish and R. C. DaCosta (1989), "Diversification Strategy and Internationalization: Implications for MNE Performance", Strategic Management Journal, 10(2), 109-119. https://doi.org/10.1002/smj.4250100202
  59. Moore, D. S., G. P. McCabe and B. A. Craig (2012), Exploring the Practice of Statistics, Macmillan Higher Education.
  60. Mortensen, P. S. and C. W. Bloch (2005), Oslo Manual-guidelines for Collecting and Interpreting Innovation Data: Proposed Guidelines for Collecting and Interpreting Innovation Data, Organisation for Economic Cooperation and Development.
  61. Muller, E. and V. Zimmermann (2009), "The Importance of Equity Finance for R&D Activity", Small Business Economics, 33(3), 303-318. https://doi.org/10.1007/s11187-008-9098-x
  62. Mudambi, R. and S. A. Zahra (2007), "The Survival of International New Ventures", Journal of International Business Studies, 38(2), 333-352. https://doi.org/10.1057/palgrave.jibs.8400264
  63. Nunes, P. M., Z. Serrasqueiro and J. Leitao (2012), "Is There a Linear Relationship Between R&D Intensity and Growth? Empirical Evidence of Non-High-Tech vs. High-Tech SMEs", Research Policy, 41(1), 36-53. https://doi.org/10.1016/j.respol.2011.08.011
  64. Nunes, P. M., Z. Serrasqueiro, L. Mendes and T. N. Sequeira (2010), "Relationship Between Growth and R&D Intensity in Low-Tech and High-Tech Portuguese Service SMEs", Journal of Service Management, 21(3), 291-320. https://doi.org/10.1108/09564231011050779
  65. OECD (2001), Research and Development Expenditure in Industry 1987-1999. Retrieved from Paris.
  66. Oviatt, B. M. and P. P. McDougall (1995), "Global Start-Ups: Entrepreneurs on a Worldwide Stage", Academy of Management Perspectives, 9(2), 30-43. https://doi.org/10.5465/AME.1995.9506273269
  67. Ren, S., A. B. Eisingerich and H. Tsai (2015), "How Do Marketing, Research and Development Capabilities, and Degree of Internationalization Synergistically Affect the Innovation Performance of Small and Medium-Sized Enterprises (SMEs)? A Panel Data Study of Chinese SMEs", International Business Review, 24(4), 642-651. https://doi.org/10.1016/j.ibusrev.2014.11.006
  68. Ruigrok, W. and H. Wagner (2003), "Internationalization and Performance: An Organizational Learning Perspective", MIR: Management International Review, 63-83.
  69. Ruzzier, M., R. D. Hisrich and B. Antoncic (2006), "SME Internationalization Research: Past, Present, and Future", Journal of Small Business and Enterprise Development, 13(4), 476-497. https://doi.org/10.1108/14626000610705705
  70. Schwens, C., F. B. Zapkau, K. D. Brouthers and L. Hollender (2018), "Limits to International Entry Mode Learning in SMEs", Journal of International Business Studies, 49(7), 809-831. https://doi.org/10.1057/s41267-018-0161-9
  71. Shin, J. and J. Gwon (2019), "The Role of the Related Party in the Internationalization of SMEs: Evidence from Korea", Korean Academy of International Business, 30(4), 101-133.
  72. Shin, J., X. Mendoza and C. Choi (2021), "Do Internationalizing Business Group Affiliates Perform Better after Promarket Reforms? Evidence from Korean SMEs", Asia Pacific Journal of Management, 1-37.
  73. Siddharthan, N. S. and S. Lall (1982), "The Recent Growth of the Largest US Multinationals", Oxford Bulletin of Economics and Statistics, 44(1), 1-13. https://doi.org/10.1111/j.1468-0084.1982.mp44001001.x
  74. Stam, E. and K. Wennberg (2009), "The Roles of R&D in New Firm Growth", Small Business Economics, 33(1), 77-89. https://doi.org/10.1007/s11187-009-9183-9
  75. Stinchcombe, A. L. and J. G. March (1965), "Social Structure and Organizations", Advances in Strategic Management, 17, 229-259. https://doi.org/10.1016/S0742-3322(00)17019-6
  76. Suh, Y. and M. Kim (2014), "Internationally Leading SMEs vs. Internationalized SMEs: Evidence of Success Factors from South Korea", International Business Review, 23(1), 115-129. https://doi.org/10.1016/j.ibusrev.2013.03.002
  77. Sullivan, D. (1994), "The Threshold of Internationalization: Replication, Extension, and Reinterpretation", MIR: Management International Review, 34(2), 165-186.
  78. Sorensen, J. B. and T. E. Stuart (2000), "Aging, Obsolescence, and Organizational Innovation", Administrative Science Quarterly, 45(1), 81-112. https://doi.org/10.2307/2666980
  79. Tallman, S. and J. Li (1996), "Effects of International Diversity and Product Diversity on the Performance of Multinational Firms", Academy of Management Journal, 39(1), 179-196. https://doi.org/10.2307/256635
  80. Thomas, D. E. and L. Eden (2004), "What is the Shape of the Multinationality-Performance Relationship?", Multinational Business Review, 12(1), 89-110. https://doi.org/10.1108/1525383X200400005
  81. Voss, G. B. and Z. G. Voss (2013), "Strategic Ambidexterity in Small and Medium-Sized Enterprises: Implementing Exploration and Exploitation in Product and Market Domains", Organization Science, 24(5), 1459-1477. https://doi.org/10.1287/orsc.1120.0790
  82. Wright, M., P. Westhead and D. Ucbasaran (2007), "Internationalization of Small and Medium-Sized Enterprises (SMEs) and International Entrepreneurship: A Critique and Policy Implications", Regional Studies, 41(7), 1013-1030. https://doi.org/10.1080/00343400601120288
  83. Yeoh, P. L. (2014), "Internationalization and Performance Outcomes of Entrepreneurial Family SMEs: The Role of Outside CEOs, Technology Sourcing, and Innovation", Thunderbird International Business Review, 56(1), 77-96. https://doi.org/10.1002/tie.21597
  84. Zhang, X., X. Ma, Y. Wang and Y. Wang (2014), "How Can Emerging Market Small and Medium-Sized Enterprises Maximise Internationalisation Benefits? The Moderating Effect of Organisational Flexibility", International Small Business Journal, 32(6), 667-692. https://doi.org/10.1177/0266242613503356
  85. Zhu, H., S. Zhao and A. Abbas (2020), "Relationship Between R&D Grants, R&D Investment, and Innovation Performance: The Moderating Effect of Absorptive Capacity", Journal of Public Affairs, 20(1), 1-10.
  86. Zhu, J., Y. Wang and C. Wang (2019), "A Comparative Study of the Effects of Different Factors on Firm Technological Innovation Performance in Different High-Tech Industries", Chinese Management Studies, 13(1), 2-25. https://doi.org/10.1108/cms-10-2017-0287
  87. Zou, H. and P. N. Ghauri (2010), "Internationalizing by Learning: The Case of Chinese High-Tech New Ventures. International Marketing Review, 27(2), 223-244. https://doi.org/10.1108/02651331011037539