About AMA

Executive Summary
How much internationalization is beneficial for small firms? If a small firm decides to export, how many countries should it target? Although questions such as these have been examined extensively for other types of firms, such as multinational enterprises (MNEs) and small and medium-sized enterprises, there is scant research addressing these same questions for small firms exclusively. Despite their size, many small firms still attempt to expand abroad as a means of exploiting the unique knowledge they possess, potentially reducing costs by developing scale economies and/or leveraging resources, following customers abroad, alleviating competitive pressures at home, and/or acquiring new products or market knowledge.

The propensity to expand internationally is counterbalanced by the many risks involved in internationalizing, such as little market power and the lack of financial and managerial capabilities, information about foreign market opportunities, foreign market expertise, and other resources compared with the traditional MNE. Thus, for a smaller firm, given its comparatively limited resources and expertise, internationalization may be much riskier than it is for an MNE.

Brouthers, Nakos, Hadjimarcou, and Brouthers employ the internationalization process (IP) theory and the organizational learning (OL) theory to answer the following question: Given the comparative limited resources and greater risks involved for small firms, after a small firm decides to export, how international (multinational) should it become? Previous research has shown that learning through stage internationalization is an essential element of successful marketing strategies. Consequently, the authors draw on the IP model and hypothesize that small firms may be better off following the classic IP model, expanding slowly and incrementally and severely restricting the number of foreign markets they enter. Furthermore, focusing on a few export markets enables a small firm to develop expertise in those markets, build a strong distribution network, and manage its export activities effectively, resulting in superior export performance.

Organizational learning theory leads to the second hypothesis: Small firms that export a larger portion of their output tend to perform better; they have accumulated knowledge in international markets, and as a result, they have developed a competitive advantage, which in turn leads to better performance. Finally, drawing from both OL theory and the IP model, the study suggests that small firms that (1) export to fewer markets but (2) concentrate their sales activities in export markets have even better performance than firms that pursue either strategy in isolation. Unlike previous research, which has focused on larger, publicly held companies, the authors test the hypotheses on a sample of Greek and Caribbean privately held firms with 100 or fewer employees.

The findings show that (1) emphasizing international sales while (2) restricting exports to a few foreign markets results in superior perceived export performance for the sample of small firms from Greece and several Caribbean countries. Notably, post hoc analysis shows that the greater a small firm’s concentration of export sales in a single foreign market, the greater is its export performance.

Biography
Lance Eliot Brouthers currently serves as Professor of Management in the Michael J. Coles College of Business at Kennesaw State University. He has published over 90 refereed articles, proceedings and book chapters on international business, strategy and/or public policy. He currently serves on the editorial boards of the Journal of International Business Studies, the Journal of Management Studies, and Management and Organization Review, generally considered to be the top journal focusing on Chinese management practices.

George Nakos currently serves as Professor of Marketing at Clayton State University.  His most recent publications have appeared in Journal of International Management, Entrepreneurship Theory & Practice, International Business Review, and Journal of Small Business Management.

John Hadjimarcou is Associate Professor of Marketing at The University of Texas at El Paso. He currently serves on the editorial board of Psychology & Marketing and has published in various journals, including the Journal of International Marketing, Psychology & Marketing, and Journal of Management Studies.

Keith D. Brouthers recently joined the North Carolina State University faculty as Professor of Strategy. He serves on the editorial boards of of the Journal of International Business Studies, the Journal of Management Studies, and Journal of Management. His publications appear in many leading journals including the Journal of Management, Strategic Management Journal, and the Journal of International Business Studies.