Factors affecting SMEs' strategic decisions to approach international markets

Abstract

The internationalisation challenges that face all companies are no longer the exclusive concern of multinationals. Participation in the international marketplace has become a reality for large firms and small and medium-sized enterprises (SME) alike. This kind of participation can be rewarding for both companies and employees. The markets that SMEs enter and the success of this entry depend on several factors such as cultural differences, company tradition, venture capital, products and competitors. The goal of this study is therefore to understand whether the characteristics of the external market, the characteristics of the company itself and the barriers to internationalisation influence the strategic approach that SMEs adopt in their internationalisation processes. Using data on 320 Portuguese SMEs, we apply multivariate analyses to test the dimensions of internationalisation. We find that the decision of SMEs to internationalise involves an institutional change in response to external pressures in the home country. SMEs under greater institutional pressure not only tend to expand further but also engage in their initial international activities more radically.