The Review on the Theory of Internationalization of Multinational Firms and SMEs
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- 동아시아경상학회지
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- 제6권2호
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- pp.49-57
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- 2018
Purpose - to examine the theories related to the internationalization of multinational corporations as well as theories related to internationalization of small and medium-sized enterprises. Research design, data, and methodology - traditional theories, e.g. eclectic paradigm and behavioral theory and product life cycle etc. were examined and recent advances theories - network theory, entrepreneurship - were also examined to outline the theory of internationalization of firm. Results - the main schools of international researches are divided into two; one is the economics school, the other is the behavioral school. The economics school has considered internationalization as a pattern of investment in foreign markets explained by rational economic analysis of internalization, ownership, and location advantages. Apart from the economics approach, a theory relevant to smaller firms highlights slow and incremental overseas market commitment. Recent research on the network perspective is fast emerging and it can be applied and well explained on the internationalization of smaller firms, focusing on firm behavior in the context of a network of interorganizational and inter-personal relationships Conclusions - Small medium-sized enterprises have been recently rising, however, there has still been little consolidation of literature in internationalization and most of the relevant theories have been still focusing on explaining the globalization of multinational corporations. Little studied on the internationalization in the context of smaller firms which are distinctly differentiated from larger firms including international new ventures, which the motivation to study strongly calls for more information and studied on small medium-sized enterprises.
Purpose - This study investigates whether the internationalization process of traditional industry firms can be categorized as born global, early internationalization, or gradual internationalization, and examines what factors promote internationalization in traditional industries using a case study of two firms, one each in China and Korea. Design/methodology - This study elects to use case study methodology to determine the "how" and "why" of internationalization process of traditional industry firms. Taking into consideration that factors that impact the internationalization process of firms are diverse and unclear in terms of causality, this study utilizes exploratory case study methodology. This research performs a comparative two-case study of two firms in traditional industries, one each in China and Korea, to examine similarities and differences of study subjects in order to improve the validity and suitability of research results. Findings - The findings of this research are as follows: First, traditional industries are more likely go through early and rapid internationalization rather than being born global; born globals are far more likely to appear in high tech industries. Second, the internationalization process of companies that go through early and rapid internationalization differs from what is indicated by traditional internationalization theories, and are not limited by factors like psychological distance and lack of experiential knowledge. Third, international entrepreneurship, international market orientation, and imitation and learning are important internal driving factors for early and rapid internationalization. Fourth, conditions within the domestic market, policy support from the government, and pilot effect from industry leaders are external driving factors for early and rapid internationalization. Originality/value - This study shows that the internationalization process of traditional industry firms is more likely to be early and rapid internationalization rather than being born global and suggests answers to why this may be the case. In addition, through an examination of case studies, it reveals that the internationalization process of traditional industry firms that undergo early and rapid internationalization is different from traditional internationalization theory, in that they are not limited by the lack of psychological proximity and empirical knowledge, and are driven by international entrepreneurship, international market orientation, imitation and learning, competitive pressure within the domestic market, government's policy support, and the pilot effect of industry leaders. Therefore, this study contributes to literature by expanding the scope of application of born global theory to traditional industries, making born global theory more generalizable and identifying driving factors to internationalization of traditional industry firms.
Franchising is one of the fastest growing types of business. It is already popular and well-known in the U.S., and has been growing in many other countries including Korea. Furthermore, many Korean franchising companies have expanded their business overseas actively. According to the data by the Ministry of Industry and Resource, 82 companies out of a sample of 500 franchising companies are already operating in many foreign countries and 48% of them have started their foreign business since 2006. This clearly indicates the fast growing current trend of foreign operation by Korean franchising companies. In spite of the fast growing trend of foreign expansion in the industry, academic research on internationalization of franchising companies is extremely difficult to find. Accordingly, academic research on the issue is necessary and urgent in Korea. Among the various research questions on internationalization of franchising business, this study intends to investigate the difference in organizational factors between the franchising companies doing foreign operation and those doing business only domestically. More specifically, this research has the following purposes. First, considering the lack of theoretical basis of previous studies, resource-based theory and agency theory are employed as the theoretical bases. Second, this study explains the difference in internationalization based on organizational factors such as company size, history and growth rate. Third, the five hypotheses regarding the difference in organizational factors are presented and tested empirically, which is the first attempt in the area of this topic. Finally, the study attempts to clarify the conflicting implications among theories regarding some organizational factos such as growth rate. As the theoretical background, resource-based theory and agency theory are discussed. According to resource-based theory, a firm can grow continuously when it has competence and resource, and also the ability to develop them. The competence and resource can include capital, human resource, management skill, market information, ability to manage risk, etc. Meanwhile, agency theory views the relationship between franchisor and franchisee as an agency relationship. In agency theory, bonding capability and monitoring capability are the two key factors which promote internationalization of franchising companies. Based on the two theories, a conceptual model is designed. The model consists of two groups of variables. One is organizational factors including size, history, growth rate, price bonding and geographic dispersion. The other is whether a franchising company is operating overseas or not. We developed the following five research hypotheses basically describing the relationship between organizational factors and internationalization of franchising companies. H1: The size of franchising companies operating overseas is larger than that of franchising companies operating domestically. H2: The history of franchising companies operating overseas is longer than that of franchising companies operating domestically. H3: The growth rate of franchising companies operating overseas is higher than that of franchising companies operating domestically. H4: The price bonding of franchising companies operating overseas is higher than that of franchising companies operating domestically. H5: The geographic dispersion of franchising companies operating overseas is wider than that of franchising companies operating domestically. Data for the analyses are obtained from 2005 Korea Franchise Survey data co-generated by Ministry of Industry and Resource, GS1 Korea, and Korea Franchise Association. Out of 2,804 population companies, 2,489 companies are excluded for various reasons and 315 companies are selected as the final sample. Prior to hypotheses tests, validity and reliability of the measures of size, history, growth rate and price bonding are examined for further analyses. Geographic dispersion is not validated since it is measured using nominal data. A series of independent sample T-tests is used to find out whether there exists any significant difference between the companies internationalized and those operating only domestically for each organizational factor. Among the five factors, size and geographic dispersion show significant difference, growth rate and price bonding do not reveal any difference and, finally, history factor shows conflicting results in the difference depending on how to measure it.