CHAPTER 1. INTERNATIONALISATION AND EXPORTS OF SMALL AND MEDIUM

SIZED ENTERPRISES: TOWARDS A CONCEPTUAL FRAMEWORK

1.1.

What do we mean by Business Internationalisation?

The internationalisation of businesses and firms is defined as the process by which firms increase their

involvement in international operations (Welch and Luostarinen, 1988). The idea of

internationalisation as a process is also confirmed by the OECD (1998) which states that

internationalisation occurs when a firm is "… seeking to compete beyond its national borders"

(OECD, 1998, p. 7). Others have explained internationalisation from a procedural and organisational

point of view as "the process of adapting a firm's operations (strategy, structure, resources, etc.) to

international environments” (Calof and Beamish (1995). It has been argued that the

internationalisation process is more dependent on creating and exploiting opportunities than on

reducing uncertainties such as the new culture in the foreign country (Johanson and Vahlne, 2009). In

order to be successful in entering a new market the firm needs to become an insider, which means

being a part of the foreign market’s business network (Johanson and Vahlne, 2009).

The general proposition made by many writers on the subject is that internationalisation is not a single

event, but rather an on-going flow of events over time (Jones and Coviello, 2005). It is also noted that

the context of internationalisation concerns the situation, the surroundings, the environment, the

location and the conditions where internationalisation processes and content are observed. Over the

years research on internationalization has covered issues of international trade, market entry, the

specific role of SMEs in international markets, the prospects of new business creation in foreign

countries, and involvement in global supply chains, production networks.

Exports constitute a major component of business internationalisation. Not all businesses, and

especially smaller firms, find it easy to consider foreign direct investment, strategic alliances, direct

technology transfer, joint venturing or co-production.

International trade has expanded rapidly within the past five decades (World Trade Organisation,

2009). It is estimated that the value of worldwide export activity has grown in excess of US$5 trillion

annually (World Bank, 2009), accounting for more than 10% of global economic activity (e.g.

International Monetary Fund, 2009). Between 2000 and 2011 world export figures (see Table 1.1)

indicate buoyant growth which then fell between the global recession periods of 2008-9, and picked up

again in 2010-11. Exports to and from three key categories of countries (developed economies, Asia

Pacific and Commonwealth of Independent States (CIS)) increased between 2000 and 2011. The total

of exports from developed economies to the rest of the world and to the Asia Pacific region doubled

between these years. However, when we compare overall world exports to developed economies with

intra-developed economy exports, the figures for the latter are significantly lower than the former.

This flow of exports would be in line with received wisdom about the opening up of the global market

for exports and the faster pace of growth of exports from Asia Pacific countries.