1. Internationalization of small and medium-sized enterprises (SMEs): A new assessment
- Author
-
Santos-Paulino, Amelia U., Trentini, Claudia, and Bakhtiarizadeh, Hamidreza
- Subjects
Foreign investments -- International trade ,Small and medium sized companies ,Brand equity ,International business enterprises ,Globalization ,Business, international ,International relations ,Transportation industry ,United Nations - Abstract
The contributions of small and medium-sized enterprises (SMEs) to domestic economies are sizeable. The most productive and dynamic ones venture abroad and internationalize by exporting or by investing overseas. For smaller Arms, foreign direct investment (FDI) implies the commitment of a high level of resources, potentially increasing the risk of failure. This study empirically assesses the question of whether outward investment is a valuable growth strategy or whether engaging in FDI might hurt performance. The results show that while displaying higher revenue growth rates than their larger counterparts, SMEs experience a bigger shock after their foreign investment: the sales growth of SMEs decreases by about 6 per cent during the first three years after a cross-border greenfield project; it starts recovering only after the fourth year. Larger MNEs show no significant change in growth rate after an investment. The decrease in revenues in SMEs occurs mostly in manufacturing enterprises, and less so in services companies. This is primarily because for services companies a foreign affiliate, which almost by definition is market-seeking, tends to make an immediate contribution to sales and sales growth, whereas many manufacturing affiliates require a start-up period and may engage in activities that contribute less to sales growth, such as supply chain activities. Keywords: foreign direct investment (FDI), internationalization, multinational enterprises (MNEs), small and medium-sized enterprises (SMEs) JEL classification codes: C4, F23, L11, L25, G32, 1. Introduction In 2017, the United Nations designated 27 June as Micro, Small and Medium-sized Enterprises (MSMEs) Day to raise awareness of MSMEs' critical role in economic growth, job creation [...] more...
- Published
- 2023