An investigation into the learning needs of managers in internationalising small and medium-sized enterprises
Valerie Anderson, Grahame Boocock and Stuart Graham
Westminster Business School, University of Westminster, 35 Marylebone Road, London NW1 5LS, UK
Tel: +44 (0)20 7911 5000 ext. 3016; Fax: +44 (0)20 7911 5839; E-mail: [email protected]
Submitted: 5th October, 1999; Amended: 10th November, 2000; Accepted: 25th January, 2001
ABSTRACT
This paper is concerned with the learning needs of managers in SMEs that seek to become progressivelyinternational. A particular focus of attentionis the informal learning practices that occur withinthe 留學(xué)生MBA thesis economic and social networks utilised by managersin this sector. Using both qualitative andquantitative approaches to data collection, thepaper investigates the challenges perceived by managersengaged (or seeking to engage) in internationalactivity. The results suggest three main areasof challenge: first, the early ‘pre-internationalisation’stage, when decisions about ‘whether’,‘where’ or ‘how’ to internationalise are taken; secondly,the development of longer-term planningprocesses and business systems to cope with the consequencesof the initial internationalisation decision;thirdly, the challenge of regulatory issues and theneed to secure payment and manage foreign intermediaries.
Further areas of learning need, whichdepend on the significance of international businessfor the firm, are also indicated. Existing structures,cultures and approaches to management can bemaintained for many SMEs that undertake somelimited international activity. Where internationalbusiness is a more important factor, however, managersneed to develop cultural appreciation andempathy to underpin their expertise and consolidatetheir market position. Indeed, sustained internationaldevelopment may require a significant reorientingof the business, underpinned by managementand organisational learning to develop anappropriate international ‘mind-set’ that supportsthe effective development of relationships with stakeholdersin different countries.
MANAGERIAL AND POLICY IMPLICATIONS
. Management learning in SMEs frequentlyoccurs in an informal and often unplanned waythrough a process of interaction within socialand business networks.
. Decision makers are not fully aware of the differentmethods of internationalisation that theymight consider when evaluating ‘whether’,‘when’ and ‘how’ to internationalise.. State-provided services of advice and supportfor internationalising SMEs in the UK focusprimarily on regulatory, technical and proceduralissues. Although these issues are of crucialimportance, managers learn how to managethem through their informal business networks.
. The transition from limited internationalengagement to a position whereby internationalbusiness is a significant component of an SME’sactivity requires a process of management and#p#分頁標(biāo)題#e#
organisational learning to manage cross-culturalsituations and to establish an international‘mind-set’ within the company as a whole. Thiselement of learning is unlikely to be anticipatedduring the initial stages of internationalisationand is not covered in the official support networksfor SMEs.
. State-provided sources of advice and supportare, therefore, of partial relevance for SMEsthat wish to maintain only a limited level ofinternational activity.
. Advice and guidance services would be bettertargeted on those SMEs that intend to achieve
# 2001 MCB University Press, ISSN 1462–6004, 215–232Journal of Small Business and Enterprise Development, Volume 8, Number 3significant growth through internationalisation.Rather than the provision of technical skills andknowledge, the service offered should promotea process of re-evaluation of existing businessassumptions and the development of a new‘dominant logic’ throughout the organisation insupport of sustained international involvement.
KEY WORDS
Internationalisation, small and medium-sized enterprises (SMEs), learning, networks
INTRODUCTION
The challenge of creating an internationally competitiveeconomy provides the UK policy contextfor support to assist the internationalisation processin small and medium-sized enterprises (SMEs).Given the wider environmental trend towardsglobal convergence, as well as the adoption of outsourcingoptions by firms of all sizes, internationalactivity is increasingly recognised as a growthoption for SMEs (Schmidt, 1996; Coviello andMcAuley, 1999).SMEs form a significant feature of the Europeaneconomy, representing 95 per cent of commercialwithin the European Union andaccounting for over 70 per cent of employmentand 80 per cent of turnover (European Networkfor SME Research, 1994). Most small firms, in theUK as well as in Europe, aspire for survival andindependence, rather than substantial businessgrowth (Curran, 1999). The opportunities ofinternationalactivity, however, are increasingly likelyto form part of the survival tactics or the growthstrategies for those that do wish to expand (Tongeet al., 1998). SMEs are important to the Europeaneconomy and, as markets arebecoming increasinglymulticultural and transnational, the EuropeanParliament and governments of memberstates have emphasised the role of national andlocal enterprise support agencies in facilitating thesuccessful expansion of international business activityamong smaller firms (Organisation for EconomicCo-operation and Development, 1997;Eyre and Smallman, 1998).
The transition from domestic firm to establishedinternational player is an uncertain and dynamic
one for firms of all sizes. For smaller enterprises,however, operating internationally is particularly
challenging. Owner-managers, for example,develop personalised objectives based on their personallives outside the firm as well as plans fortheir business. These may mitigate against themanagement of the rigours of growth and change(Storey, 1994). Limited financial resources andtime pressures may also constrain the ability of#p#分頁標(biāo)題#e#
managers in the SME to think beyond tactical andoperationally urgent issues (Marlow, 1998). Informal,and often intuitive, planning and control systemsthat characterise the sector further inhibit thesystematic development of international activity(Baird et al., 1994). As a consequence, internationalactivity may well result in negative outcomes forSMEs (Barber et al., 1989; Storey, 1994).Against this background, this paper seeks toaddress three questions relating to the developmentof international activity in SMEs.
— What are the challenges faced by managers astheir organisations become progressively international?
— What do managers need to learn to meet thesechallenges?
— How are these learning needs met in practice?
The precise definition of what constitutes an SMEis problematic, depending as much on industry
sector and national location as on categories ofemployment size or annual turnover (Storey,1994). Current European Union classifications suggestthat a small firm is one that employs 1–49staff, and an http://www.ttc-switch.com/dissertation_writing/MBA/SME employs fewer than 250 people.Business Links networks, established in the UK tooffer a service to smaller firms, offer a service tothose employing fewer than 100 people. Thispaper is based on data related to organisations of
this size, accepting that the SME sector as a wholecomprises a heterogeneous mixture of organisations,and firms of different sizes within it mayface very different challenges. Following Covielloand McAuley (1999: 225), internationalisation isdefined as ‘the process by which firms bothincrease their awareness of the direct and indirectinfluence of international transactions on theirfuture, and establish and conduct transactions in
other countries’. As such, international activity istaken to include: exporting; licensing/distributorarrangements; franchising; establishing a greenfieldsite abroad; having a manufacturing facility inanother country; owning a sales or service centreabroad; undertaking a cross-border merger oracquisition; or the establishment of a cross-borderjoint venture or strategic alliance.SMES AND INTERNATIONALISATIONThe process of initial internationalisation, for firmsof all sizes, may be considered as an incrementallyInternationalising SMEs
216 Journal of Small Business and Enterprise Developmentstaged process (Johannson and Vahlne, 1990), theconsequence of ‘strategic opportunism’ (Melin,1992) or a more rational outcome of strategic
market development (Buckley and Casson, 1999).Management learning underpins the process,
whether internationalisation is explained as an economicallydriven process of rational choices interms of foreign investments, the outcome of strategicor opportunistic management behaviour, or
the product of a network of inter-firm relationshipsenabling organisations to grow and develop(Coviello and McAuley, 1999).From within the ‘staged perspective’, Dudleyand Martens (1993) characterise the process of#p#分頁標(biāo)題#e#
internationalisation as moving from: an introductoryphase of exporting or initiating a licensing
agreement; ‘colonisation’ through distributors,branch offices or subsidiary companies; ‘unification’,with the tightening of central control andthe establishment of global objectives; ‘rationalisation’,
where the business is restructured into manageablegroups of business units; culminating in aposition of ‘strategy maintenance’. Empiricalinvestigations of the internationalisation processindicate, however, that these linear, staged explanationsinadequately reflect the different experiencesof firms in some sectors (Preece et al., 1998).Other studies focus on the organisational developmentfeatures of international activity and suggestthat organisations need to develop from a preinvolvement,or aspirational, stage of internationalisation
to one where they are fully engagedthrough an ‘international mind-set’ in creating and
maintaining effective relationships with stakeholdersin cross-border operations (Edvardsson et
al., 1993; Leblanc, 1994; Barkema et al., 1996;Anderson et al., 1998).For smaller enterprises, of course, managementlearning is particularly important, as the scale andsignificance of the development from domestic to
international operations is proportionately greaterthan for a large and functionally diverse organisation.The process of ‘going international’ beginswell before the first international activity is undertaken,as managers begin to consider ‘whether’‘where’ and ‘how’ to operate overseas (Reid, 1981).
If the transition from pre-internationalisation tocommitted international player is to be achieved,key issues are the ability to build an internationalvision, formulate consistent strategic goals, and
knowledge (Buckley, 1989; Chetty and
Hamilton, 1996; Tonge et al., 1998).
LEARNING, TRAINING AND DEVELOPMENT
IN SMES
The significance of management learning processes
in internationalisation, particularly the provision
of support, advice and interaction through personal
and business networks was noted above (Coviello
and McAuley, 1999). In the UK, as well as in
other countries, however, the use made of the official
agencies charged with fostering international
activity is disappointing (Reid, 1984; Julien et al.,
1998). Skill deficiencies in areas such as strategy
and planning, marketing and sales, and leadership
have been identified (Welch, 1996), but SMEs do
not have a culture linked to the provision of
formal training programmes (Scott et al., 1996;
Storey and Westhead, 1997). Research focusing on
formal ‘vocational’ training activity (see, for
example, Curran, 1988; Westhead, 1996) suggests
a low level of activity in SMEs. By contrast, studies
that adopt a broader focus, incorporating
informal as well as formal training, indicate that#p#分頁標(biāo)題#e#
levels of activity are significantly higher (see, for
example, Vickerstaff, 1992; Curran et al., 1997).
For this reason, learning is defined in this paper as
the acquisition of new knowledge and insights
leading to changed behaviour. It is considered,
therefore, to be a broader and less formal process
than a ‘task-centred’ approach to training, embracing
skills, knowledge and understanding as well
as the attitudinal or ‘affective’ domain (Marquardt,
1996; Bloom, 1964).
The significance of informal learning is critical
because SME managers have to deal with a wider
task structure than their large business counterparts
(Hendry et al., 1991; Gibb, 1998). The learning
processes are as important as the ‘content’ of what
is learned. In this sense, learning is seen as something
that is ‘acquired’ rather than something that
must be ‘delivered’ in a formal sense, and abstract
knowledge (knowing what) is strongly linked to
tacit knowledge (knowing how). The dominant
mode of learning in small firms (learning by
doing) thus involves: learning through feedback
from customers and suppliers; learning by copying;
learning by problem solving and opportunity
taking; and learning by making mistakes (Gibb,
1998).
Working from this basis, and drawing on
Kolb’s (1984) model of experiential learning, Gibb
(1998) highlights the importance in small organisations
of learning through experience to cope and
survive in a dynamic environment. The work of
Argyris and Schon (1978) can also be applied in
Anderson, Boocock and Graham
Journal of Small Business and Enterprise Development 217
this context. They distinguish between single loop
learning, where behaviour is adapted to achieve
existing goals and values, and double loop learning
whereby individuals and organisations question
those same values and attitudes, to reach a state of
‘break through’ learning. Senge (1990) builds on
this approach and distinguishes between adaptive
and generative learning; the latter involves creativity
and enhancing the capability to rethink the
‘world view’ of the organisation and the continual
development of the knowledge base. Prahalad and
Bettis (1996) argue, from within this premise, that
the ‘conventional wisdom’ and internalised cognitive
processes of managers in an organisation comprise
its ‘dominant logic’. This dominant logic
provides SME managers with a mental map by
which to make sense of the world. Such mental
models are not static, however, and will be modified
through the joint construction of meaning as
generated by sharing and dialogue (Hayes and
Allison, 1998). In this way, informal groups,#p#分頁標(biāo)題#e#
whose members share ways of behaving and interpreting
events as ‘communities of practice’, enable
learning to take place within social interactions
between individuals and organisations on a daily
basis (Gerhardi et al., 1998). There is a body of
evidence, therefore, suggesting that learning
within small firms involves a ‘complex network of
economic relationships, dependencies and mutual
obligations’ (Gibb, 1998: 17). Such informal learning
is not without its problems, however, and it
may be negatively influenced by problems of
communication, lack of opportunity and lack of
trust between the different parties involved in the
interaction (Hayes and Allison, 1998; Coopey,
1998).
METHODOLOGY
Studies of both internationalisation and training in
SMEs tend to take a quantitative or qualitative
approach (Coviello and McAuley, 1999). A
number of cross-functional quantitative studies
attempt to analyse the degree, and different forms,
of internationalisation (see, for example, Korhonen
et al., 1996; O’Farrell et al., 1998). Similarly, a
number of quantitative studies have been undertaken
of the volume and types of formal training
undertaken in small businesses (see, for example,
Curran et al., 1996; Welch, 1996).
The qualitative approach, utilising either semistructured
interviews or a case study approach, has
also been used to good effect in studying both
internationalisation and learning in small businesses
(see, for example: Hendry et al., 1991, Julien et al.,
1998). These studies highlight the dynamic, complex
and specific issues associated with the development
of new forms of business and the learning
process where ‘the management team will be constantly
developing, and the skills needed will
change as both cause and effect of the development
of the firm itself’ (Wong et al., 1997: 45;
Gunther-McGrath et al., 1995). However, the
complex and dynamic issues involved in both
internationalisation and learning mean that single
method studies may not fully explore or analyse
the process under investigation (Coviello and
McAuley, 1999).
The research design underpinning this paper
incorporates both a qualitative and a quantitative
approach to data collection, and three distinct
phases were conducted. Initially, a qualitative
study was undertaken, incorporating semi-structured
interviews with decision makers in 50 organisations,
across a range of business sectors and
organisational sizes. This sample was derived from
alumni databases of two universities. The criterion
for inclusion was that international activity had
commenced in the recent past. Initial contact was
by telephone and interviews took place over a#p#分頁標(biāo)題#e#
period of 15 months. Data were collected through
semi-structured interviews with key decision
makers who had been instrumental in deciding to
adopt or implement a strategy of internationalisation.
A framework of questions incorporating contextual
and strategic issues was used to achieve
consistency between interviews, while leaving
flexibility to gather data specific to each organisation.
Broad themes and issues were then derived
from the predominately text-based, qualitative
data and a process of pattern matching was undertaken
(Miles and Huberman, 1984). This phase
identified some important factors in the internationalisation
process and established a context from
which more detailed investigations could be
undertaken.
The issues relating to management learning in
smaller businesses were explored through a case
study approach. This phase of the research aimed
to identify the different variables, factors and issues
faced by managers as they learn to adapt and interact
in an increasingly international environment
(Romano, 1989; Salama, 1992). In collaboration
with the Export Development Counsellor of Business
Link, Northamptonshire, 1,000 firms employing
fewer than 100 staff were invited to a seminar
entitled ‘Successful Business Overseas’. Managers
Internationalising SMEs
218 Journal of Small Business and Enterprise Development
from 17 firms attended this seminar, and six companies
agreed to participate in the case study phase
of the research. These six organisations have been
trading for between seven and 45 years and
employ between 15 and 47 staff. They represent a
range of different business sectors and their annual
turnover ranges from £600,000 to £4m. Some of
the organisations are involved in a limited amount
of international activity while others secure 40–60
per cent of turnover from overseas involvement,
principally subsidiaries, distribution agents or
export. A summary of the key organisational features
of the companies is shown in Table 1.
The procedure for obtaining case study data was
as follows. First, semi-structured interviews, focusing
on the management challenges, the learning
needs of managers, and the ways in which these
needs were met, were undertaken with the owner
manager of the firm. (See Appendix 1) Secondly,
company documents relating to the implementation
of international activity and the strategic and
marketing activities of the firm were collected.
Thirdly, company tours were undertaken to facilitate
observation of less tangible aspects of the
organisation, notably the culture and values of the
organisation and its approaches to management.
Fourthly, in order to capture routine aspects of the#p#分頁標(biāo)題#e#
international experience of the firm, another
member of the company was asked to complete a
series of diary sheets to record their reflections on
critical incidents during the previous few weeks
(Coffee and Atkinson, 1996). The provision of a
summary report to each company was used to
check the factual accuracy of the data collected.
Data analysis from this stage of the project
involved a comparing and matching process that
built on, and sought to amplify, the themes that
had been identified in the initial phase (Yin, 1994).
In the third phase of the research programme, a
postal questionnaire was devised, which incorpo-
Table 1: Case study organisations
Case study % Turnover Characterisation Regional market Types of
comp. from overseas involvement international activity
F 5 Company is considering,
but not committed to, a
strategy of entry to
overseas markets.
Western Europe, Africa Export, distribution agents
C 5 Company is considering,
but not committed to, a
strategy of entry to
overseas markets.
Africa Export, distribution agents
B 10 Company is more
systematic in organising
activities in new areas but
is still searching for the
best way to proceed.
Western Europe Export, distribution agents
D 10 Company is more
systematic in organising
activities in new areas but
is still searching for the
best way to proceed.
Western Europe Export, distribution
agents, subsidiary
E 40 Consolidation of new
market position.
International activity is
conducted separately from
other markets. Issues
between different markets
and the main office.
Western Europe, Eastern
Europe, Asia
Export, subsidiary
A 60 Actively seeking new
opportunities. International
business issues begin to be
integrated into thinking
and action within the
organisation.
North America, Western
Europe, Middle East,
Australasia, Asia
Subsidiary, distribution
agents, export
Anderson, Boocock and Graham
Journal of Small Business and Enterprise Development 219
rated issues arising from the two previous stages,
as well as factors identified within the broader literature
on internationalisation. The questionnaire
asked respondents to consider factors influencing
decisions to become involved with international
activity, the implementation of those decisions and
the outcome of the process.
The questionnaire was mailed to a random
sample of 3,000 businesses in three geographical
areas of the UK: North London, East Midlands
and Manchester. The database comprised firms of
all sizes with the proviso that they were involved
in international activity. Responses were received#p#分頁標(biāo)題#e#
from 252 companies of which 187 (75 per cent)
employed fewer than 100 staff; 64 per cent of
these organisations were principally involved in
manufacturing industrial and consumer products,
the remaining 36 per cent being primarily service-
oriented organisations. This paper focuses on
the responses of those companies employing
fewer than 100 staff. Of this group 6 per cent,
although sourced from a database targeted at
known exporters, reported that they had not
commenced international activities. Of those who
were operating internationally, only 14 per cent
had commenced their international activity in the
previous five years, the remaining 86 per cent
reported experience in this field for six or more
years.
LEARNING TO INTERNATIONALISE: THE
CHALLENGES
The decision-making process in SMEs has been
characterised as one where emergent developments
and chance opportunities may be more significant
than formally rational strategic thinking (see, for
example, Newbould et al., 1978; Olson and
Bokor, 1995). Analysis of the postal survey data is
not conclusive on this point. While many of the
companies claimed to be motivated by ‘potential’
in overseas markets, other features, such as an
appraisal of the domestic competitive situation,
cultural features and geographical proximity, were
less significant. When asked to indicate factors that
might have become more important over time,
respondents highlighted factors associated with
formal planning, such as the domestic market size,
organisational capability and issues of spreading
risk (see Tables 2 and 3). In both cases, personal
motives, ad hoc orders or approaches from agents
were recalled as less significant.
The postal survey also sought to identify parti-
Table 2: Key factors influencing the decision to internationalise (n=168)
Unimportant Fairly imp. Very imp./ No response
critically
imp.
(%) (%) (%) (%)
Potential size of overseas market(s) 4.8 22.6 72.6 0.0
Profit potential from sales overseas 5.4 30.9 60.7 3.0
Thought to be within the capabilities of the organisation 11.3 26.2 59.5 3.0
Approaches from overseas customers, ie known demand 14.3 28.6 57.2 0.0
Similar customer needs in overseas markets 13.1 27.3 55.4 4.2
Spread risk across more markets 20.8 30.9 45.8 2.4
Approaches from existing contacts 25.6 28.0 41.7 4.8
Limited size of domestic market putting constraint on
growth
24.4 33.9 38.1 3.6
Unique or patented product to market overseas 46.4 11.3 34.5 7.7
Personal motives within the company 41.1 22.6 32.7 3.6
Approaches from overseas agents 33.9 30.9 31.5 3.6
Opportunity to utilise excess capacity/reduce production
costs
43.4 28.6 22.6 5.4
Limited competition in overseas markets 35.7 37.5 18.5 8.3#p#分頁標(biāo)題#e#
Similar culture in overseas markets 45.2 32.1 17.3 5.4
Geographical proximity of markets/ease of access 45.8 30.9 16.7 6.5
Strong competition in domestic market 40.5 37.5 16.1 5.9
Ad hoc order or one-off project 57.7 17.8 16.1 8.3
Availability of foreign government help/inducement 84.5 6.5 1.8 7.1
Internationalising SMEs
220 Journal of Small Business and Enterprise Development
cular problems that had been experienced during
the early phase of internationalisation. Again the
data are inconclusive, particularly as some respondents
would not have recent memory of the early
period of internationalisation. Although payment
issues and the management of foreign agents were
cited by more than 40 per cent of respondents, the
higher rates of response indicate issues that were
not perceived as a problem, particularly: entry
routes/methods, transport or logistical difficulties,
awareness of tariffs/trading barriers and language
problems (see Table 4).
Table 3: Factors becoming less or more important over time (n=139)
More important Less important No response
(%) (%) (%)
Potential size of overseas market(s) 84.9 15.1 0.0
Limited size of domestic market, putting constraint on growth 82.6 17.3 0.07
Thought to be within the capabilities of the organisation 70.5 18.7 10.8
Spread risk across more markets 68.3 20.1 11.5
Profit potential from sales overseas 63.3 29.4 7.2
Similar customer needs in overseas markets 61.9 32.4 5.7
Strong competition in domestic market 59.0 25.1 15.8
Approaches from existing contacts 57.5 29.5 12.9
Approaches from overseas customers, ie known demand 56.8 32.3 10.8
Personal motives within the company 48.2 34.5 17.3
Opportunity to utilise excess capacity/reduce production costs 43.2 36.7 20.1
Approaches from overseas agents 40.3 43.1 16.5
Unique or patented product to market overseas 34.5 46.0 19.4
Geographical proximity of markets/ease of access 32.4 48.2 19.4
Similar culture in overseas markets 30.9 47.5 21.6
Ad hoc order or one-off project 23.7 50.3 25.9
Limited competition in overseas markets 23.0 56.8 20.1
Availability of foreign government help/inducement 6.5 65.5 28.1
Table 4: Problems in the early phases of internationalisation (n=157)
Strongly Not sure Agree/ No response
disagree/ strongly
disagree (%) (%) agree (%) (%)
We experienced payment problems 50.3 2.5 45.8 1.3
Management of agents/intermediaries was problematic 39.5 12.1 42.7 5.7
There was a lack of coordinated assistance from
government agencies
25.5 24.2 36.9 13.4
Products were less competitive than anticipated 51.6 11.5 34.4 2.5
We were unprepared for levels of bureaucracy 54.1 14.6 28.0 3.2
Competitor reaction in foreign markets was a problem 63.1 8.3 24.2 4.5
Language barriers were a problem 70.0 6.3 23.6 0.0#p#分頁標(biāo)題#e#
We failed to appreciate market characteristics 56.7 18.5 21.0 3.8
We were unaware of the existence of trading barriers/
tariffs
70.7 8.3 12.7 8.3
We inadequately prepared our overseas staff 50.3 13.4 18.5 17.8
We experienced transportational/logistical difficulties 71.3 8.9 14.6 5.1
Coordination between home and overseas organisations
was a problem
66.2 14.6 10.2 8.9
We selected an inappropriate entry method 72.0 12.7 5.7 9.5
Anderson, Boocock and Graham
Journal of Small Business and Enterprise Development 221
The issue of prior knowledge of target markets
was investigated to some extent through a question
relating to knowledge of different regions of
the world prior to entry. Knowledge of Western
Europe was perceived to be average or good in
around 70 per cent of firms, whereas between 40
and 46 per cent of respondents entering Eastern
Europe, Asia and the Middle East believed their
level of prior knowledge to be poor. Only 6.8
per cent believed their knowledge of Eastern
Europe to be good or very good prior to entry,
with this figure rising to 16.3 and 17.8 per cent
for those entering the Middle East and Asia (see
Table 5).
The survey also provided respondents with an
opportunity to reflect on some of the outcomes of
their international activities. Data from the questionnaire,
shown in Table 6, indicate that the main
changes recorded relate to product specification,
marketing issues and financial controls. There is
less evidence of changes in management style,
organisation structure or approach to HRM issues.
When asked about other, less tangible, benefits of
involvement with international markets, most
firms cited enhanced market awareness and company
reputation rather than organisational or management
learning (see Table 7).
The survey data suggest, therefore, that having
made the decision to undertake international activity,
immediate challenges of securing payment and
the management of foreign intermediaries are
important, and prior knowledge of the target
region is recalled as a less significant issue for those
embarking on international activity. Management
learning is not perceived as a concern at the beginning
of the process or as an outcome.
The survey data provide some useful indications
of challenges for managers but do not indicate
the process by which these issues are
addressed. Data from the case study organisations,
however, are useful for further investigation of
these challenges.
Table 5: Prior knowledge when first entering different regions (number of responses shown for each different
region)
n Poor Average Good Very good N/a
(%) (%) (%) (%) (%)
Eastern Europe 102 46.0 19.6 3.9 2.9 27.4
Asia 112 41.1 20.5 12.5 5.3 20.5#p#分頁標(biāo)題#e#
Middle East 110 40.9 19.1 12.7 3.6 23.6
Africa 101 37.6 18.8 6.9 4.9 31.7
South America 81 28.4 17.3 7.4 1.2 45.7
Western Europe 165 21.2 44.8 24.8 6.7 2.4
North America 121 19.8 24.8 25.6 8.2 21.5
Australasia 108 19.4 27.8 19.4 3.7 29.6
Table 6: Organisational changes as a result of international activities (n=171)
No change Some change Imp./crit. change No response
(%) (%) (%) (%)
Product specifications 21.6 47.4 31.0 0.0
Marketing/sales procedures and policies 19.9 47.9 30.4 1.7
Management style 36.2 34.5 27.5 1.7
R&D activity 39.2 29.2 26.8 4.7
Financial controls 31.6 40.9 25.1 2.3
Organisation structure 38.6 38.0 21.0 2.3
Human resource/personnel procedures and policies 47.4 35.1 13.4 4.1
Language training 58.5 31.6 8.1 1.7
Internationalising SMEs
222 Journal of Small Business and Enterprise Development
LEARNING TO INTERNATIONALISE: THE
PROCESS
Experiential learning
Much of the literature on internationalisation, particularly
that based on the ‘staged approach’, suggests
that firms are likely to enter markets with
low ‘psychic distance’ in their initial forays abroad
(see, for example, Barkema et al., 1996). The questionnaire
data do not support the view that culture
or location, both of which might be components
of ‘psychic distance’, are significant features of
internationalisation decisions. For the case study
organisations, experience of the entry method used
to access previous markets was also more important
than issues of culture or geography.
In Company A, for example, international
activities have been undertaken and developed in
an ad hoc way with such success that, in spite of a
lack of any coherent strategy or plan, business
abroad now accounts for 60 per cent of the company
turnover. Products reach North America,
Western Europe, Middle East, Asia and Australasia.
The overseas business is undertaken almost
entirely through a network of distribution agents,
although there is one subsidiary company in New
Zealand that began as a distributor and was
acquired to save it from insolvency.
The current MD of Company B initiated trade
overseas through chance contacts gained from an
existing domestic customer. Further activities in
foreign markets have been undertaken through
contacts with large customers based abroad. On
this basis Company B has been able, on an incremental
basis, to use its contacts as a base for expansion
into new geographical markets and leverage
its existing expertise and product range.
Exports, for Company C, account for less than
5 per cent of annual turnover. The orders stem
from small advertisements in UK business directories
being accessed by customers overseas looking#p#分頁標(biāo)題#e#
for a supplier based in the UK, and from the
unsolicited approach of a distributor. The MD
indicates that future expansion of overseas business
will occur through the establishment of a network
of distributors, and he plans to attend some trade
missions in the Middle East, Africa or Asia in
future.
Company D began international activity as a
result of receiving a small number of orders for
their products from customers living in Europe.
The MD was also approached by potential agents
from France, Switzerland and Austria, who had
seen the product while in the UK and felt there
would be a market for it in their countries. Company
D owns a small subsidiary company in
France which had previously been a distributor of
their products, but had been ‘bought-out’ because
the MD believed the French market could be
developed more proactively if he had more control
over the activities of this particular distributor.
The experiences of these companies suggests
that experiential learning is important for subsequent
activities that may be undertaken to achieve
an expansion of international activity. While all
but one of the case study companies had planned
to expand their business overseas, none of them
had conducted formal research into the different
ways of achieving this, preferring to build on their
previous approaches.
Technical and procedural learning
The case study data also suggest that ‘technical’
and ‘procedural’ challenges are very significant,
particularly in the early period of international
activity. All of the case study organisations emphasised
the critical importance of learning and mastering
the documentary and regulatory
mechanisms necessary for the conduct of overseas
trade generally, as well as the regulations specific
to their business sector.
The owner manager of Company C, for example,
assumed that, when the first overseas orders
arrived, the process would be like a ‘straight sale, as
with UK business’. In fact, there were more com-
Table 7: Benefits of involvement with international markets (n=171)
No/little change Some change Imp./crit. change No response
(%) (%) (%) (%)
Greater market awareness 9.9 32.7 57.3 0.0
Enhanced company reputation 12.9 40.9 45.6 0.06
Professionalism increased 12.8 40.9 45.6 0.06
Organisational/management learning 29.8 43.8 24.6 1.70
Increased language proficiency 55.5 31.6 11.6 1.20
Anderson, Boocock and Graham
Journal of Small Business and Enterprise Development 223
plications than were expected, and the company
needed to learn a considerable amount about the
documentation required to ship materials overseas.
Company D also found the learning requirements#p#分頁標(biāo)題#e#
of initial export into France particularly difficult
and admitted being entirely unprepared for the
levels of bureaucracy required. The MD reported
that he had previously wasted entire business visits
to France because he was unaware of the ‘little
rules’, extra taxes and requirements for the completion
of forms. These essential prerequisites are not
written down in a format that is accessible for
exporters, especially a small business from the UK.
Company A, which exports to a wide range of
countries, also reported the ongoing need to learn
about the correct shipping procedures for any new
order, conscious that the wrong documentation
will inevitably result in the non-delivery of the
product and a delay of a number of weeks in correcting
the error and moving the process forward.
This type of learning was not perceived as difficult
to undertake. Company B, for example, had
sent the sales office manager on an export documentation
course and the same company also found it
relatively easy to seek advice on regulations or even
to outsource many parts of these ‘technical’ processes.
Similarly, the warehouse manager in Company
C had attended a course about exporting and
the company had obtained useful advice on the
technicalities of exporting from a major supplier.
Company F does not engage in any marketing
specific to its export activities and there is no pattern
to the countries from which they may attract
an export order, the most recent contracts being
for equipment in Austria and Ghana. Indeed, one
of the two partners in the business is concerned
that rapid development of international activity
might threaten the stability and character of the
firm. As such, there is little enthusiasm for export
orders and they are treated in the same way as any
UK order would be. Where procedural and technical
advice is needed, it is usually obtained from
haulage companies and from Customs and Excise.
Overall, therefore, the use of books and manuals,
the occasional off-the-job course for one or
two people in the organisation, and the advice of
contacts within their network of business relationships
generally, enables firms to meet the ‘technical’
problems associated with international activity.
Learning about markets and customers
Some, but not all, of the case study companies also
cited the importance of gaining local market
knowledge. Company E, for example, invests considerable
effort in sustaining business contacts with
bigger customers. Likewise, the MD and the
Technical Director within Company A spend considerable
time out of the country visiting agents,
and establishing and developing lasting working
relationships. Within this organisation, the company#p#分頁標(biāo)題#e#
is explicit about the need for two-way trust
with their distributor network, feeling that business
will be sustained only if there is a mutual
acceptance of capability on both sides of the sales
relationship. In Company B, the approach is very
similar. The MD confirms the importance of effective
relationships for sustained international business.
Only a few people in his organisation have
experience of international customers and know
the sorts of behaviour and sensitivities that are
important. Company D places great importance
on the development of appropriate behaviour and
relationships through the linguistic ability of key
players within the organisation on the overseas
side of the business. Company E was formed from
a management buy-out of a large, multinational
chemical company. Having worked within the
larger organisation prior to the buy-out, the MD
has previous experience of working internationally.
In order to develop the business overseas
further, the MD appointed a new person to run
the UK operation in the late 1990s and redeployed
himself and his family to Hong Kong for two
years, to increase sales in the Far East.
The type of cultural learning described above is
less tangible, and it is difficult to differentiate and
articulate. Such knowledge seems to be acquired
through the activities of a few key players. A
course-based or instructional form of learning
would be inappropriate for such people. A slow
process of dealing with problems and achieving
what Gibb (1998) identifies as an ‘adaptive’ understanding
of ‘the way to do things’ takes place. Successful
adaptive learning seems to depend on the
personal experience of a few key personnel, who,
in turn, rely on colleagues, customers and wider
business contacts to help them learn.
Generative learning
One of the case study companies, Company A,
also indicated learning needs that are similar to the
‘generative’ learning highlighted by Gibb (1998).
The organisation is currently undertaking a thorough
review of the way it meets the needs and
expectations of overseas customers. An extensive
customer survey has been carried out and a confer-
Internationalising SMEs
224 Journal of Small Business and Enterprise Development
ence organised to consider the attitudes, judgments
and values of the main overseas distributors and to
re-align the business in the light of this. The organisational
structure is under review, and it is likely
that a new appointment will be made to act as a
catalyst to develop the business as an internationally
orientated company. As part of this review,
Company A is trying to identify and correct its
weaknesses, and enhance its strengths in international#p#分頁標(biāo)題#e#
business so its operations abroad can be integrated
and managed as part of the ‘mainstream’
business. To achieve this end a radical reconsideration
of the assumptions, beliefs and values of the
organisation is required.
The experience of the case study businesses suggests
that, as indicated by the staged theories of
the internationalisation process, a mixture of strategic
thinking, strategic action, emergent developments,
chance and necessity is evident (Johannson
and Vahlne, 1990). Staged approaches, however,
tend to underemphasise the pre-internationalisation
phase that is an important feature of the experience
of the case study organisations. This study
does not support those models (for example,
Dudley and Martens, 1993) where ‘types’ of international
activity are depicted as unfolding in
something of a linear fashion.
The data also indicate that, where international
activity is not a significant part of the business,
organisations are likely to maintain the cultures,
structures and approaches traditionally adopted in
their domestic markets. The experience of internationalisation,
therefore, is not of itself a ‘trigger’
of organisational change in small firms.
Nevertheless, the analysis does suggest that sustained
international activity may require organisational
development such that delegation,
coordination and flexibility within the organisation
is developed through some form of generative
learning. This is necessary to facilitate more
effective working with customers or agents in
other countries.
LEARNING TO INTERNATIONALISE: MEETING
LEARNING NEEDS IN PRACTICE
As noted already, sources of advice, guidance and
support are provided for SMEs by local and
national agencies tasked with assisting small business
growth, but empirical studies have suggested
that their impact is limited. Sources of advice most
often used by those in smaller firms tend to be
provided by business friends and suppliers rather
than Trade Associations, Training and Enterprise
Councils (TECs), Industry Training Organisations
or Professional Bodies (North et al., 1996). The
perceptions of questionnaire respondents from this
study about the quality of advice provided by a
range of external sources confirms this view. The
data shown in Table 8 suggest that contacts in
similar businesses are more frequently used sources
of advice than Business Links/TECs or Trade
http://www.ttc-switch.com/dissertation_writing/MBA/Associations. The quality of advice about international
activities provided by contacts in similar
businesses is rated as good or very good by over
40 per cent of respondents compared to 12 and 9#p#分頁標(biāo)題#e#
per cent for Business Links/TECs and Trade Associations,
respectively.
The experience of the case study organisations
also lends support to network-based explanations of
small business development. Personal networks of
business contacts and friends were viewed as the
most useful, and commonly sought, sources of
advice and support related to the internationalisation
process. Organisations B and C also reported
Table 8: Quality of advice and support relating to international activities (n=145)
Not used Poor Average Good/very No response
good
(%) (%) (%) (%) (%)
Contacts in similar businesses 26.9 3.4 17.9 42.8 9.0
Informal contacts 30.3 4.8 24.8 26.9 13.1
Dept of Trade and Industry 29.6 13.8 29.6 25.5 1.4
Chamber of Commerce 35.9 17.2 30.3 16.6 0.0
Contacts in unrelated businesses 44.8 5.5 13.8 15.2 20.7
Parent company 45.5 3.4 4.8 13.8 32.4
Banks 31.7 24.1 29.6 12.4 2.1
Business Links/TECs 42.7 13.8 25.5 12.4 5.5
Trade associations 39.3 13.1 30.3 9.6 7.6
Anderson, Boocock and Graham
Journal of Small Business and Enterprise Development 225
receiving valuable advice from suppliers. Official
bodies, such as the TECs, the CBI and other training
providers, were rarely found to be of great value.
For Company B, they were a reasonable, but rarely
sought, source of ad hoc advice. Likewise, Company
C had very little contact with such bodies although
the MD felt that the company might initiate contact
with the local TEC and a Trade Association at some
stage. Company F failed to read many of the frequent
‘mail shots’ which arrived from trade bodies,
the Chamber of Commerce, TECs and the Department
of Trade and Industry (DTI). Company D
contrasted the helpfulness of the Chamber of Commerce
in France with its local equivalent in the UK,
feeling that the support in the UK was ‘rarely relevant
or convenient’. For Company D, the Trade
Association was the most helpful institution in the
UK although the primary source of advice and support
was through the MD’s network of friends and
business contacts.
Analysis of the case study data also reveals the
significant influence of internal factors on the learning
process. It suggests that a major influence on
the passage of a smaller business through the internationalisation
and learning process is the ‘dominant
logic’ of key decision makers within the
organisation. In Companies A, B and E the MD
had previous experience of working on an international
basis. In Companies A, B and D the MD had
also led a comprehensive business refocusing exercise
during the previous few years. While it is possible
to commence internationalisation with a culture
and dominant logic that reflects the existing UK#p#分頁標(biāo)題#e#
small business experience, to be fully established as
an international business on a sustained basis
requires a period of reorientation which presupposes
reconceptualisation and learning by senior
figures in the firm and also by the company as a
whole. The process of internationalisation itself
may not prompt this change and it may be that
external ‘triggers’, perhaps through the appointment
of a significant figure with experience from
outside the business, as with Company B, or
through a change of ownership of the company as
a whole, as with Company A, may lead to a reappraisal
of current business processes.
CONCLUSIONS
The evidence from this study suggests three main
areas of challenge faced by managers in internationalising
SMEs. The first occurs in the initial preinternationalisation
phase when managers must
decide ‘whether’, ‘when’ and ‘how’ to internationalise.
This study suggests that decision makers are
not fully aware of the different methods of internationalisation
that they might consider, or of the
potential longer-term implications of their decision
to undertake international activity.
The second challenge, which follows from this,
is the requirement to develop planning and management
systems to enable the organisation to sustain,
and possibly expand, its initial international
activity on a longer-term basis.
The third area of challenge, which is common
to all internationalising SMEs, is the requirement
to cope with technical and procedural issues specific
to the financial and legal regulation of trade
between countries. The evidence of this study suggests
that learning to meet this ‘procedural’ challenge
is not difficult for most managers.
The study also indicates two areas of learning
need that are important for the sustained development
of international business but are not necessarily
recognised as such by those involved in the process.
The first is the need for adaptive learning to enable
those involved in small firms to consolidate market
position and customer relationships through the
development of cultural appreciation and empathy.
The second learning need, which may be
required if the organisation is to establish itself as an
international organisation rather than a ‘domestic
firm that also exports’, is for generative learning
whereby the underlying ‘dominant logic’ or ‘paradigm’,
through which the firm operates, is reconceptualised
through a process of management and
organisational learning. This level of learning,
which is developed in theoretical approaches to
learning and is evident in only one of the case study
organisations, is unlikely to be undertaken, or to be#p#分頁標(biāo)題#e#
perceived as relevant, by managers whose motivations
for their business relate more to survival than
to sustained international growth and development.
IMPLICATIONS FOR POLICY
The study confirms the importance of a variety of
stakeholders in the learning process. Business
friends, suppliers and customers, business associations,
together with specialist professionals such as
accountants, solicitors and financiers (North et al.,
1996; Bennett and Robson, 1999) are key sources
of support and information for the small firm.
There are a range of implications for this networking
for the operation of official support services for
SMEs.
Support in the UK is available at local and
national levels. At a local level, such services are
Internationalising SMEs
226 Journal of Small Business and Enterprise Development
primarily provided through the DTI and the support
system is currently being radically overhauled
in the wake of the introduction of the Small Business
Service (SBS). It is envisaged that a national
network of Learning and Skill Councils (LSCs)
will manage the funding of different forms of support
currently available through a network of
Business Links and TECs. In addition to Business
Links, LSCs will also collaborate with other agencies
such as Chambers of Commerce and Regional
Development Agencies. DTI objectives for 2000–
2001 indicate the importance of increasing the productivity
and profitability of SMEs, as well as the
improvement of support for exporters (DTI Strategic
Framework 2000–2001). On a national level,
the DTI provides centralised services of advice and
information relating to all aspects of international
trade and European issues.
Support and advice services specifically related
to international business will continue to be provided,
within this overall framework, by Export
Development Counsellors accessed through the
Business Link network. Advice, grants and seminars
will be made available to support small firms
in activities such as: the design and support of
business strategies (domestic or international);
training in skill areas such as marketing and
export; the provision of market intelligence and
information; and visits to trade shows and potential
markets.
Empirical studies have shown that small firms
utilise the state-provided sources of advice infrequently,
preferring ‘business friends’ as a source of
advice and support (Bennett and Robson, 1999).
Medium-sized firms tend to make more use of
official sources of advice, guidance and support,
and there is also some evidence that uptake may
be greater among the slower growth firms. DTI
evaluation studies of the services provided through#p#分頁標(biāo)題#e#
the TEC network suggest that they are well
received by those SMEs that use them, although
they also indicate that the services remain underutilised
by most firms within the sector. Where
the services are used, the most frequently cited
benefits are in relation to changing ‘motivation
and attitudes’, and improvements in ‘financial control
and business planning’. The ‘development of
new markets (including export markets)’ is cited
less often (DTI, 1995).
The evidence of this programme of research
goes some way to explaining why the goal of new
market development might not be attained. First,
many of the services available through Export
Development Counsellors are informational, technical
and procedural, and they tend to focus on
market intelligence and training and advice about
export skills. This type of ‘programmed learning’
does not seem to be an area of difficulty for most
small firms. Support might be better targeted,
therefore, to the earlier pre-internationalisation
phase. The quality of initial decisions about internationalisation
is critical and the implications of
different options for the continued management of
the business have to be evaluated at this stage.
Proactive ‘outreach’, in partnership with networks
already familiar with the particular industry
sector, may be required to identify organisations
that may be involved in the pre-internationalisation
decision-making process.
Opportunities to meet learning needs for small
firms seeking to consolidate and further develop
their international activity are also lacking. These
needs might best be met through provision of
opportunities for learning through networks and
tapping into the experience of others in fostering
effective social, business and cross-cultural relationships.
The re-evaluation of business orientations,
underpinning generative learning processes, may
also be required if organisations are to be encouraged
to develop sustained international involvement.
Managers of many internationalising SMEs,
however, are not motivated to achieve significant
growth and organisational change. Support and
advice services that aim to facilitate generative
learning and organisational change must, therefore,
be appropriately identified such that those
organisations that are likely to achieve such development
can benefit from the services.
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http://www.ttc-switch.com/dissertation_writing/MBA/Methods, Sage, London.
Valerie Anderson is a Senior Lecturer in Human
Resource Management at Westminster Business
School, University of Westminster. She has academic
and practical business and management
expertise, focusing particularly on HRM and HRD
issues facing organisations of all sizes as they
seek to operate in a global economy. Her current
research interests include organisational and
management learning and internationalisation
processes
Grahame Boocock worked for a major UK clearing
bank for eight years before moving into academic
life. He teaches on a viariety of
undergratuate and postgraduate/post-experience
programmes. His research interests focus on the
financing of SMEs, SME policy and the internationalisation
of SMEs. Having spent a year in Malaysia
as British Aerospace Associate Professor at
the University of Northern Malaysia, he has
ongoing involvement with a number of research
projects examining the financing and official support
available to SMEs in Malaysia.#p#分頁標(biāo)題#e#
Stuart Graham is a Principal Lecturer and Head of
the Division of Marketing at Newcastle Business
School, University of Northumbria. His teaching
and research interests centre upon international
marketing and the deveopment of strategic marketing
practice and management learning.
Anderson, Boocock and Graham
Journal of Small Business and Enterprise Development 229
APPENDIX
Internationalising SMEs
230 Journal of Small Business and Enterprise Development
Anderson, Boocock and Graham
Journal of Small Business and Enterprise Development 231
Internationalising SMEs
232 Journal of Small Business and Enterprise Development