International Entrepreneurship and Enterprise Development

Abstract

International entrepreneurship is an important vehicle for firms to reap benefits from their high productivity levels and from economies of scale by reaching new customers. International enterprises tend to be larger and more innovative, but a key question of causality remains disputed in the international trade and international business studies literature. That is, does innovation and productivity drive firms towards international markets or does internationalization influence firm innovation and productivity? In this thesis, six papers fill two gaps in the literature. First, small businesses are increasingly active in international trade relationships. Some small firms even become internationally active from their inception; a spectacle referred to as the “born global” firm. Often these SMEs concentrate their business activities in nearby markets and specialize to particular niches. What stands out is that these firms use international markets to gain access to the latest technologies, learn from interaction with foreign partners and obtain experimental knowledge to become more innovative. Thus, such learning by SMEs poses some difficulties for the standard models’ hypothesis that only large, productive firms venture abroad. Moreover, the standard model predicts that immediately after productivity levels are revealed, firms make the internationalization decision. However, the majority of the SMES cannot be labeled born global but becomes active in foreign markets sequentially.Second, just as small enterprises may not have direct access to recent innovations, many firms from developing countries want to internationalize in order to obtain foreign inputs and close the knowledge gap with large Western multinationals. For firms from transition economies and emerging markets that have a high learning potential, joint ventures and foreign direct investment facilitate the access to strategic assets. Moreover, international activities allow for economies of scale, induce learning-by-doing effects and give rise to new competitive pressures to enhance firm-level productivity. Taking stock, this suggests that relatively unproductive non- Western firms and SMEs purposely attempt to influence their innovative capacity and productivity by the internationalization of their enterprises. Therefore, if we consider the internationalization process as a strategy to increase productivity, the assumption of exogeneity is no longer valid as it are SMEs and firms from developing countries that are expected to experience most efficiency gains from international activities as their learning potential is the highest. These firms also have sufficient absorptive capacities. The six papers make an important contribution to understanding the mechanisms and consequences of the internationalization of the firm. Based on micro-econometric evidence the thesis provides insights in a vibrant literature in international economics and business studies on international entrepreneurship and enterprise development. In summary, the papers suggest that entrepreneurship, internationalization and innovation play an important role for economic development. The papers stipulate that there is a fruitful interplay between economics and business studies as a multidisciplinary field of research to explain both the conditions for and the impact of internationalization strategies at the firm-level. The main thesis that internationalization has a positive effect on firm performance is confirmed for small businesses from advanced economies and for firms from less developed markets.