Determinants of Goan SME firms going global: Theoretical and empirical approach

Abstract

Choice of entry mode has been widely recognized as one of the critical decisions in a firm's internationalization. However, most of the research primarily focuses upon Western multinational enterprises rather than Indian state small-medium sized enterprises (SMEs). In the past, several major theories have been proposed but none of them is able to explain the choice from the complete set of entry modes. The purpose of this research is to understand the various entry modes, improve the selection decision, and explain the entry mode strategies of Goan SME firms in the international markets. A firm can deploy a variety of arrangements (entry modes) like wholly-owned subsidiaries, joint ventures, contracts, and export modes to implement its product market strategies in foreign countries. Each of these arrangements entails decisions about the location of production facilities and/or marketing operations, and the type of ownership of these operations. This study examines the internationalization behaviour of 200 randomly selected Goan SME firms. It examines the factors associated with each theory and seeks to integrate them to gain a better understanding of how SME businesses succeed in the international marketplace. The determinants under examination are also substantiated with the identification of several international SME entry mode models. The nine groups of determinants are: International planning experience, firm size, R&D intensity, competitive advantage, degree of standardization, demand intensity, economic development, regulation, and political risk. The proposed framework is an effort to fill the gap between theory and practice of entry mode choice. The framework is broader in scope than the extant theories because it transcends across industries and nationalities of firms. The primary objectives of the study are: (a) to identify the descriptive determinants that have been strongly associated with SME internationalization entry behaviour; and (b) to determine if the propensity of Goan SME firms will be significantly predicted using specific empirical analysis.