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1.2.1.Why Do SMEs Need to Internationalise?
Globalization increases the exposure of SMEs to the risk of failure if they choose to concentrate
exclusively on their domestic market. A firm’s growth outside its own country is more crucial than
growth inside the domestic location only (Sikorski and Menkhoff, 2000; Manolova et al., 2002).
Domestic business environments have become increasingly affected by international economic factors,
and the capability for small firms to isolate themselves from foreign competition has diminished,
especially for firms that operate in global industries (Anderson et al., 2004).
1.2.2.The Importance of Exports for SMEs
Exporting is considered to be the most used strategy for SMEs because of the lack of resources (Dalli,
1995) and certain degree of market knowledge and experience (Root, 1994). At the micro level the
benefits that exporting organisations accrue are numerous. Export activity boosts corporate growth and
ensures company survival in the long term (Sousa, Martínez-López and Coelho, 2008; Samiee and
Walters, 1990, and it is an important route that firms use to increase their revenue (Morgan, Vorhies
and Schlegelmilch, 2006).
At the macro level, export activity among SMEs has shown the capacity to drive economic
development (OECD, 2009). Export business integrates countries into the world economy and
mitigates them from external shocks from other countries. In addition to this, export business serves as
a source of foreign exchange for countries and reduces the potential balance of payment problems.
Firms’ exports create employment in the domestic economy, which in turn increases consumption and
private spending. Furthermore, openness to trade improves international negotiations concerning trade
and tariff issues, and countries can use this platform for their own benefit and build their respective
welfare positions concerning trade barriers (Maneschiöld, 2008).
Despite the importance of export activities to the success of many firms, Leonidou (1995) observes
that exporting is not without its challenges. The plethora of challenges can be enormous, including
regulatory, attitudinal, structural, procedural and operational difficulties.
1.2.3.International Entrepreneurship: Creating New Businesses through Internationalisation
How SMEs can best function in a highly volatile environment is dependent on their entrepreneurial
orientation which is characterised by innovativeness, proactiveness and the capacity or willingness of
the firm to take risks (Patel and D’Souza, 2009; Balabanis and Katsikeas, 2003; Lumpkin and Dess,
1996; Miller, 1983). International entrepreneurship deals with innovative, proactive and risk-seeking
behaviour that traverses national borders (McDougall and Oviatt, 2000). Since the late 1980s it has
been observed that an increasing number of new ventures in different countries around the world
perceived their operating domain to be international at or near inception (McDougall, 2000).
1.3. SMEs Entrepreneurial Orientation and Exporting Capability
The entrepreneurial orientation of firms has attracted considerable amount of attention in recent times
not least because of the ability of these firms to innovate, be pro-active and take risks. These
competencies are not often available in larger businesses. Research evidence suggests that there is a
positive relationship between these three dimensions of entrepreneurial orientation and firm
performance (e.g. Covin and Slevin, 1991; Dess, Lumpkin and Covin, 1997; Becherer and Maurer,
1997; Zahra and Covin, 1995; Atuahene-Gima and Ko, 2001).