Foreign market involvement, entry-mode learning potential and SME internationalization outcomes

Abstract

Purpose: Drawing on an organizational learning perspective, this paper examines the effect of levels of foreign market involvement (intensity and geographic spread) on internationalization outcomes recognizing that the moderating influence of entry-mode learning potential is not well documented in the literature on small- and medium-sized enterprises (SMEs). Design/methodology/approach: The sample includes 180 SMEs evenly selected from three industries: biotechnology, software and clothing (60 firms in each industry). The sampled firms employ less than 250 employees and are equally distributed between three developed economies and three emerging economies. All were engaged in foreign business. Findings: The authors find that there is a direct relationship between levels of foreign market involvement and internationalization outcomes. Entry-mode learning potential moderates the relationship between intensity of foreign market involvement and internationalization outcomes but not the relationship between geographic spread and internationalization outcomes. Practical implications: This study reveals several new insights that help explain the pathway through which foreign market involvement activities are translated into internationalization outcomes. Originality/value: The authors conclude that the positive relationship between intensity of foreign market involvement and internationalization outcomes is strengthened when SMEs also use an entry mode with a higher learning potential than exporting only.