The Speed and the Degree of SME Internationalisation in Bangalore: An Analysis of its Determining Factors

Abstract

This article presents an empirical inquiry on the drivers that have influenced the speed and the degree of SME internationalisation in Bangalore. The article is based on primary data gathered from 70 internationalised small and medium enterprises (SMEs) belonging to the machinery industry in Bangalore urban district. Our analysis ascertained that the size of the firm and CEOs’ foreign language proficiency are the significant determinants of the speed of SME internationalisation. CEOs’ international experience, motivation, international network and speed of entry positively influenced the degree of SME internationalisation. Thus, the present study lays emphasis on ‘entrepreneurial competence’ and ‘strategic entry’ that determine the speed and degree of internationalisation of SMEs, for appropriate policy attention for promoting SME internationalisation.

Keywords

Internationalisation speed degree of internationalisation determining factors and SMEs

Small and medium enterprises (hereafter SMEs) are of strategic importance in most of the developed and emerging economies. This is primarily because they contribute significantly to employment, GDP and exports, among others (Edinburgh Group, 2014). Also, they stimulate innovative ideas, entrepreneurial skills and are adaptable to the changing conditions of the business environment (Yannopoulos, 2010). SMEs, especially in developing countries, have to confront intense competition in the era of globalisation, due to (1) enhanced global opportunities, (3) reduction in trade barriers and (3) new technological developments (Wolf & Pett, 2000). These changes not only have reduced the importance of ‘home-market size’ and ‘geographical distances’ but have also facilitated SMEs to internationalise at the global level (Ruzzier, Hisrich, & Antocic, 2006).

In the last couple of decades, firms are increasingly internationalising from the very inception and such SMEs are defined as ‘born-globals’ or ‘international new ventures’ (INVs) (Oviatt & McDougall, 1994). Prior evidence suggests that firms that are small-sized and possess limited resources (in terms of human and physical resources) have rapidly internationalised at an early age (GEM, 2017; Knight & Cavusgil 2004) and have achieved higher degrees of internationalisation (Autio, Sapiienza & Almeide, 2000; Kuivalainen, Sundqvist & Servais, 2007; Zhou & Wu, 2014). Furthermore, internationalising at an early age enables firms to improve their learning curves as well as to gain more profit advantages than their counterparts (Zucchella, Palamara, & Denicolai, 2007). But early or rapid internationalisation is affected by entrepreneurial characteristics and contributes to their overall performance (Acedo & Jones, 2007; McDougall & Oviatt, 2000).

Although the importance of determinants, speed and degree of internationalisation has attracted the attention of empirical researchers, they are mainly focused on advanced economies (McDougall & Oviatt, 2000) and their findings may not hold good in the context of emerging economies (Naude & Rossouw, 2010; Zhou, 2007). Further, understanding the impact of determinants on the speed and the degree of internationalisation would facilitate the policymakers and researchers to focus on specific areas to stimulate the international operations of SMEs. Specifically in this study, we focus on driving factors as the determinants of speed and performance.

Therefore, it is against this backdrop that an attempt is made to explore and examine two research questions regarding machinery industry SMEs of Bangalore, which are as follows:

What are the different determinants (internal and external drivers) which influence the speed at which SMEs enter the international market?

To what extent does the speed of internationalisation along with the determining factors that determine the degree of internationalisation achieved by SMEs?

This paper comprises seven sections. The second section analyses the definitions of concepts used in this study. The third section reviews relevant literature that forms the conceptual basis for the subsequent analysis. The fourth section describes the sample, data and statistical methods used for the analysis. The data analysis and results are presented and discussed in the fifth section. Finally, the sixth section contains inferences.

Definitions of Concepts

At the outset, we would like to define the two important concepts used in this paper, namely, SMEs and internationalisation.

SMEs

In India, the official SME definition is given by the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 (Ministry of MSMEs, 2014). According to the Act, a micro-enterprise in manufacturing sector is defined as an enterprise having investment in plant and machinery not exceeding ₹2.5 million, a small enterprise as having investment in plant and machinery more than ₹2.5 million and not exceeding ₹50 million, and a medium enterprise as having investment in plant and machinery more than ₹50 million and not exceeding ₹100 million. In this study, the definition of SMEs as given by the MSMED Act, 2006, is adopted and SMEs are defined as firms having original investment in plant and machinery not exceeding ₹100 million.

Internationalisation

Internationalisation can be carried out in different ways that include ‘inward, outward, and cooperative operations’ (Ruzzier et al., 2006). Further, firms adopt a particular channel based on several issues such as cost, availability of resources, nature of the external environment and domestic government support. However, exports have been historically regarded as the primary step to enter international markets (Leonidou & Katsikeas, 1996), and it is a commonly observed mode of entry for international expansion since it involves lesser resources, minimum risk and offers a high flexibility in terms of movement (Leonidou & Katsikeas, 1996) compared to other channels of internationalisation. Given the various channels of internationalisation, this study primarily focuses on exports by SMEs to represent the mode of entry into the international market. Therefore, in this study, we define internationalisation as the expansion of a firm’s products or activities into foreign markets through exports.

Driving Factors, Speed and Degree of Internationalisation: A Review of Literature

The drivers or motives are considered the most dynamic element in analysing the process of SME internationalisation because it critically examines the pattern of a firm’s internationalisation process (Johanson & Valhne, 1990). Subsequently, it explains why certain firms internationalise and others abstain from internationalisation activity (Yannopoulos, 2010; Zhang, Ma, Wang, Li, & Huo, 2016). Besides, drivers facilitate SMEs to employ an appropriate strategy to overcome the obstacles in the path of internationalisation. In recent times, the literature on international entrepreneurship emphasised the fact that internationalisation is an entrepreneurial act, strongly driven by the characteristics of the individuals involved (Acedo & Jones, 2007).

At the outset, it should be emphasised that the role of the owner/manager is significant in the process of SME internationalisation (Crick & Chaudhry, 1997). Many empirical researchers have considered entrepreneurs’ age as an important element of human capital. Often, scholars have noted that younger managers seem to be more export-oriented than their senior counterparts (GEM, 2017). Oviatt, McDougall, and Dinterman (1993) argue that younger managers are more open to extending their company’s activities abroad. Suarez-Ortega and Alamo-Vera (2005) contend that entrepreneurs can be a resource for the firm, which can be in the form of experience or education. Better educated entrepreneurs are considered more open-minded and fascinated in international affairs, and therefore, are more able to evaluate the strength and weaknesses of export activities (Suarez-Ortega & Alamo-Vera, 2005). Moreover, McDougall, Shane, and Oviatt (1994) state that better-educated entrepreneurs can manage the complexity associated with the international market and positively influences the international orientation (Alon & Lerner, 2008). However, Zucchella et al. (2007) in their study did not find a significant relationship between an entrepreneur’s educational background and early internationalisation.

Apart from the educational background, previous international experience of entrepreneurs can lead to faster and better international involvement (Oviatt & McDougall, 1997). Scholars in the area of international entrepreneurship have documented the importance of an entrepreneur’s experience as a major influencing factor on the degree of internationalisation (McDougall & Oviatt, 2000). Entrepreneurs with more international experience can expand abroad through their contacts and accelerate the internationalisation process faster than their competitors without experience (Ciravegna, Majano, & Zhan, 2014; Naude & Rossouw, 2010) as well as their export performance (Stoian, Rialp, & Rialp, 2011).

Similarly, entrepreneurs’ experience in an export department and particularly in an MNC or a local enterprise also determines the firm’s internationalisation strategy (Zucchella et al., 2007). Zucchella et al. (2007) found that entrepreneurs’ experience in an MNC determined the early entry into the international market. Another factor that would determine the speed and degree of internationalisation is the entrepreneur’s foreign language proficiency. Entrepreneur’s foreign language proficiency assists firms to communicate with foreign customers, develop social networks, and facilitates in understanding the business practices of foreign markets (Acedo & Jones, 2007; Suarez-Ortega & Alamo-Vera, 2005).

In addition to entrepreneurial characteristics, many research studies have highlighted that the attitude and preferences of entrepreneurs determine the decision to internationalise (Nummela, Saarenketo, & Puumalainen, 2004). Likewise, entrepreneurs who have the motivation to internationalise, anticipation for growth in sales/profits, desire for expansion and envisioning of international opportunities influence a firm’s decision to internationalise (Acedo & Jones, 2007; GEM, 2017; Yannopoulos, 2010). Therefore, these issues highlight the cognitive process or a proactive attitude of an entrepreneur towards international business (Acedo & Jones, 2007; Ciravegna et al., 2014; Nummela et al., 2004).

Subsequently, studies have highlighted the importance of external determinants that influence the entrepreneurs to initiate internationalisation activity (Katsikeas & Piercy, 1993; Westhead, Wright, & Ucbasaran, 2002). One of the distinct motives for internationalisation is influenced as a result of unsolicited orders from a foreign customer or unanticipated events that have been identified as a major export stimulation (Ciravegna et al., 2014; Knight & Cavusgil, 2004). Westhead et al. (2002) acknowledged that these orders from foreign customers acted as a catalyst for export promotion. Further, SMEs in their early export stages are likely to be determined by unanticipated events than in their later stages (Ciravegna et al., 2014; Leonidou et al., 2007).

The expanding global networks have also played a significant role in the internationalisation of the firms (Chetty & Holm, 2000). McDougall and Oviatt (2003) pointed out that network analysis demonstrates a powerful model for research on international entrepreneurship. The international network facilitates entrepreneurs in identifying business opportunities, to access resources and provides a roadmap to the internationalisation process of SMEs (Amal & Rocha, 2010; GEM, 2017; Zhang et al., 2016). Zain and Ng (2006) recognise that business or social ties develop a firm’s process towards internationalisation. Studies by Musteen, Francis, and Datta (2010) and Amal and Rocha (2010) reveal that firms with extensive network relationships had achieved superior performance in the international market.

Firm size has been a major determinant factor that influences international behaviour. It is argued that a firm with a larger size will have the advantage to incorporate more human and financial resources, and production capacity (Stoian et al., 2011). Several studies have established a positive relationship between firm size and export intensity (Suarez-Ortega & Alamo-Vera, 2005; Zhou, 2007).

Speed and Performance of Internationalised SMEs

Technically, those SMEs that enter the international market at a faster pace (speed) would able to perform better in terms of international sales (Autio et al., 2000). This is a desirable outcome as it enables one to gain an advantage over one’s competitors. Therefore, firms that reach international markets at a faster pace are likely to succeed in terms of higher export intensity, due to their international commitment and capacity according to Johanson and Valhne (1990) and Cieslik, Kaciak, and Welsh (2010). As a result, SMEs that enter early into the international market might achieve higher degrees of internationalisation.

According to Zucchella et al. (2007), early internationalisation facilitates the improvement of the firms learning activities and the ability to gain higher profit advantages in relation to the firms that exhibit a gradual process. A study by Mc Dougall & Oviatt (1996) found that new ventures that had an intensive international activity exhibited superior performance. Kuivalainen et al. (2007) found rapidly internationalised smaller Finnish firms exhibited better export performance. Similarly, Autio et al. (2000), Cieslik et al. (2010) and Zhou and Wu (2014) explored the impact of early internationalisation on international sales. The studies confirm that early internationalisation had strongly influenced the export sales.

The above discussion implies that certain driving factors can positively influence the speed and degree of internationalisation and the speed, in turn, can influence the degree. Given this, it is pertinent to investigate which of the driving factors influenced the speed of internationalisation and the degree of internationalisation of SMEs and what kind of relationship exists between the speed and the degree of internationalisation in an emerging economy like India. It is appropriate to explore what driving factors determine the speed at which SMEs entered the international market and whether the speed of entry into the international market along with the driving factors facilitates SMEs to achieve more internationalisation? The main concepts and the relationships between them, which need to be explored, are proposed in Figure 1.

Figure 1.

Source: Authors’ own.

The potentially important driving factors that might exert influence on SMEs have been classified as (i) entrepreneurial characteristics, (ii) entrepreneurial orientation and (iii) external stimuli. Among these driving factors, some might accelerate the internationalisation process of SMEs to enter the international market, whereas some others might decelerate the process. Further, internationalisation speed along with the determinants would determine the degree of internationalisation achieved by the SMEs.

Methodology and Data Analysis

The present study is confined to SMEs that are part of the engineering industry in Bangalore. A description of the method adopted for choosing this industry for our primary survey is in order. The research is based on primary data gathered from Bangalore urban district based machinery SMEs, identified from the secondary data procured from Visvesvaraya Industrial Trade Centre (VITC), Bangalore. VITC is a state government organisation that maintains a database of exporters for the entire state of Karnataka. The final database comprised 1271 exporting SMEs for 2011–2012. Later, we prepared a district-wise list of SME exporters. Since Bangalore urban district accounted for 958 SMEs (75.3 per cent) of the total 1271 SME exporters in Karnataka, we decided to confine our study to Bangalore urban district. We prepared an industry-wise list of SME exporters (as per National Industrial Classification (NIC) 2008) and found that machinery parts and equipment manufacturing industry accounted for a maximum share (182 out of 958) of the total SME exporters in Bangalore. Therefore, we decided to confine our study to the machinery parts and equipment manufacturing industry SMEs.

Since the present study focuses on SMEs of machinery equipment industry located in and around Bangalore, it is appropriate to give a brief account of the city which has been fast emerging as a global city attracting a considerable amount of Foreign Direct Investment in a wide variety of industries (Directorate of Industries and Commerce, 2015). Bangalore has become one of the most attractive cities for global investments and has been recognised as the ‘IT capital of India’. Further, Bangalore city gained a reputation as the modern industrial city of the country as early as in the 1960s because many prominent Central Public Sector Enterprises (CPSEs) in the engineering sector was set up here, after India’s independence in 1947.

To name the important ones, Hindustan Aeronautics Limited (HAL), Indian Telephone Industries (ITI), Hindustan Machine Tools (HMT), Bharat Earth Movers Limited (BEML), Bharat Heavy Electricals Limited (BHEL), Bharat Electronics Limited (BEL) and Indian Space Research Organization (ISRO) were established in the 1950s, 1960s and 1970s (Rao & Bala Subrahmanya, 2017). This was followed by the setting up of industrial estates in different parts of the city in the 1970s and 1980s to encourage the growth of modern small-scale industries. This has facilitated the widespread growth of SMEs in the form of ancillary units in the engineering industry, over a period of time. Today, Bangalore has a vibrant and growing SME sector in the machinery industry (Directorate of Industries and Commerce, 2015).

This study is based on the primary data collected from 70 internationalised SMEs in Bangalore during the period from November 2013 to July 2014. We used a semi-structured questionnaire followed by face-to-face interviews as the primary tools for primary data collection.

The two dependent variables used for the analysis are as follows:

Speed of Internationalisation has been operationalised as the number of years from firm inception to the beginning of the international sales. Following Madsen and Servis (1997), an early entry has been defined as firms that started exporting in the first three years. As a dependent variable, we code a dummy variable equal to 1 if a firm internationalised within the first 3 years after establishment, otherwise 0. Further, internationalisation speed has also been used as an independent variable along with the driving factors to analyse its influence on the degree of internationalisation.

To measure the degree of internationalisation, we have used Foreign Sales as a percentage of Total Sales (FSTS/DOI) in the first year of exports.

The various independent variables used for the analyses are as follows.

Internal drivers

Firm size (FZ): Measured by the number of employees.

Entrepreneurial characteristics:

CEOs’ age (CAG): Measured by years at the time of entering the international market.

CEOs’ education background (CEE): We have ranked the educational qualifications of CEOs from 1 to 6 (1. Up to X standard, 2. 12thstandard, 3. Graduates in engineering and 4. Post-graduates in engineering, 5. Diploma holders in engineering, 6. Nontechnical graduates).

CEOs’ international experience (CIE): Number of years in international business.

CEOs’ foreign language proficiency (EFK): Number of foreign languages spoken.

CEOs’ experience in MNC/LE (ML): A dummy variable was created for the entrepreneurs’ experience, taking the value 1 if the entrepreneur had previously worked for an MNC, and zero otherwise.

Entrepreneurial orientation: (i) CEOs’ motivation (EM): a dummy variable is used (1 for yes and 0 otherwise). (ii) Opportunities for expansion (EPO): a dummy variable is used (1 for yes and 0 otherwise). External drivers: We have used dummy variables to measure the external determinants (Unsolicited orders (USO), Yes=1, No=0 and International network (IN), Yes=1, No=0).

The research analysis done to study the two research objectives is confined to binary logistic regression analysis and multiple regression analysis.

Result of Analysis

The descriptive statistics of the dependent and independent variables are presented in Table 1 and the correlation coefficients between the variables are given in Table 2. At the outset, it is appropriate to describe the features of internationalised SMEs in Bangalore. About 25 per cent of SMEs have taken less than three years to enter the international market. The degree of internationalisation varied from a minimum of 1 per cent to a maximum of 100 per cent, the average being about 29 per cent. The age of CEOs (CAG) varied from 31 years to 78 years, the average being about 54 years at the time of entering the international market. The educational qualifications of CEOs (CEE) varied from a mere X standard to M.E. On an average, these CEOs have a higher educational qualification, with majority accounting for engineering graduates. The international experience of CEOs (CIE) varied from 1 year to 39 years at the time of entering the international market. The foreign languages known (EFK) varied from 0 to 7, the average being about two international languages. Around 2 per cent of the CEOs of SMEs had previous work experience in a multinational company. Further, about 47 per cent of the entrepreneurs have indicated motivation, 14 per cent indicated opportunities for expansion, 12 per cent unsolicited orders and 2 per cent of an international network. The firm size (FZ) varied from 2 employees to 100 employees, the average being about 29 employees.

Table 1.

Descriptive Statistics of Variables

Variables	N	Min	Max	Mean	SD
Internationalisation speed (IS)*		0.00	1.00	.25	0.440
Degree of internationalisation (DOI)		1.00	100.00	29.1	26.12
CEOs’ age (CAG)		31.00	78.00	54.2	12.40
CEOs’ education qualification (CEE)	70	1.00	6.00	4.50	1.17
CEOs’ international experience (CIE)		1.00	39.00	9.05	7.02
Foreign language known (EFK)		0.00	7.00	2.24	1.38
MNC or local enterprises(ML)*		0.00	1.00	2.41	1.06
Motivation (EM)*		0.00	1.00	0.47	0.502
Opportunities for expansion (EPO)*		0.00	1.00	0.14	0.352
Unsolicited orders (USO)*		0.00	1.00	0.12	0.337
International network (IN)*		0.00	1.00	0.28	0.167
Firm size (FZ)		2.00	100.00	29.00	29.31

Source: Authors’ own.

Note:*Dummy variables

Table 2 presents the correlation coefficients between the variables. All those which are statistically significant at 0.05 and 0.01 level are marked in bold. DOI has a statistically significant moderately positive correlation with IS. IS has a positive relationship with EFK. CAG has a positive relationship with CIE. EM has a negative relationship with OIM and USO. USO has a positive relationship with FZ. The remaining coefficients are not statistically significant.

Table 2.

Correlation between Variables

DOI

CAG

CEE

CIE

EFK

EPO

USO

DOI

0.358**

CAG

−0.146

−0.191

CEE

0.074

0.112

0.094

CIE

0.182

0.014

0.447**

0.007

EFK

0.115

0.323**

−0.135

−0.004

−0.028

0.090

–0.137

0.044

−0.121

0.045

−0.235

0.189

0.034

0.008

−0.012

0.009

−0.104

0.144

EPO

0.025

0.040

−0.140

−0.035

−0.191

0.047

−0.044

−0.386**

USO

−0.156

−0.128

0.138

0.018

−0.132

–0.006

−0.029

−0.277*

−0.157

0.039

−0.101

−0.024

−0.073

−0.051

−0.217

–0.148

−0.162

−0.070

−0.066

0.071

0.036

0.051

−0.024

−0.012

−0.155

−0.048

−0.013

−0.109

0.313**

−0.102

Source: Authors’ own.

Notes: **Correlation is significant at the 0.01 level (2-tailed). *Correlation is significant at the 0.05 level (2-tailed).

Table 3 presents the results of binary logistic regression analysis for determining the influence of various drivers on the speed of internationalisation in terms of early and late entry. The model has shown better predictive accuracy as the model was 77 per cent correctly classified indicating that explanatory variables are the good predictors of internationalisation speed. Overall, the results are moderately better in terms of Cox and Snell R-Square, Nagelkerke R-Square and the Hosmer and Lemeshow statistic.

Further, the binary logistic regression model is statistically significant and effectively explains the difference in choosing the path of internationalisation, i.e. early and late internationalised. Among the entrepreneurial characteristics CEOs age (CAG), Education background (CEE), international experience (CIE) and experience in MNC/LE (ML) did not make a difference in choosing a particular path of internationalisation. However, a foreign language known (EFK) had a strong positive influence on the speed of internationalisation. Further, entrepreneurial orientation in terms of motivation and opportunities for expansion and external drivers did not make any significant difference in explaining the internationalisation speed. In addition, firm size is statistically significant and influenced positively on the speed of internationalisation.

The above results bring out the importance of entrepreneurial skills (which is reflected in no foreign languages known to entrepreneur) if an SME has to enter the international market rapidly or at an early age. Firm size is also a major driver on early internationalisation indicating that larger firm sizes are more successful to reach the international market sooner than smaller firms. It appears that medium-sized firms would have entered the international market rapidly than smaller firms in the Bangalore city region. Therefore, one could argue that firms with ‘larger size’ and driven by ‘entrepreneurial skills’ are able to internationalise rapidly.

Table 3.

The Influence of Driving Factors on Internationalisation Speed: Binary Logistic Regression

Chi-square		17.916	0.05
-2 Log likelihood		61.891
Cox and Snell R-Square		0.226
Nagelkerke R-Square		0.332
Hosmer and Lemeshow test		9.937	0.270
% of case correctly classified		77%
Variables	B	S.E.	Sig.
CAG	–0.039	0.031	210
CEE	0.153	0.305	0.615
CIE	0.023	0.056	0.677
EFK	0.439	0.243	0.071**
ML	–0.036	0.318	0.910
EM	0.510	0.814	0.531
OIM	0.351	1.052	0.739
USO	–1.429	1.721	0.406
IN	–1.670	1.099	0.999
FZ	0.026	0.012	0.036*
Constant	–1.918	2.532	449

Source: Authors’ own.

Notes: *Significant 0.05% level, **significant at 0.10% level.

With an understanding of drivers and their influence on the internationalisation speed, it is important to examine how internationalisation speed along with drivers (internal and external) influenced the degree of internationalisation. Therefore, we carried out a multiple regression analysis to ascertain the influence of driving factors and internationalisation speed on the degree of internationalisation. The results of the multiple regression analysis along with VIF values of independent variables are given in Table 4.

The model is statistically significant as indicated by the F-value and it explained about 31 per cent of the total variation in the degree of internationalisation as reflected in the R-squared value. Further, there is no problem of multicollinearity between the independent variables as indicated by their VIF values.

It is appropriate to describe the role of each of the four explanatory variables which influence the degree of internationalisation. First is the CEO’s international experience. Those firms with more internationally experienced CEOs could achieve more export sales compared to the lesser experienced ones. Second, those firms with CEOs who are motivated (EM) to internationalise are able to achieve a higher degree of internationalisation compared to those who do not have the motivation to internationalise. Third, those firms that depend on an international network (IN) to enter the international market are able to achieve a higher degree relatively. Finally, internationalisation speed (IS) positively influenced the degree of internationalisation indicating that those SMEs that have entered the international market at an early age are able to achieve a higher degree of internationalisation. This indicates that internationally entrepreneurial firms (early internationalised) are better performers compared to late internationalised. However, entrepreneurs’ age, educational background and foreign languages are known and experience in multinational company/local enterprise is not significant in influencing the degree of internationalisation. Further, opportunities for expansion, unsolicited orders and firm size did not significantly influence the degree of internationalisation.

Table 4.

The Influence of Driving Factors and Internationalisation Speed on Degree of Internationalisation: Multiple Regression Analysis

F				2.389	0.016
R-Square				0.312
Adjusted R-Square				0.181
Variables		T	Sig.	Collinearity Statistics
Variables	Beta	T	Sig.	Tolerance	VIF
Constant		−0.182	0.856
CAG	−0.215	−01.667	0.101	0.711	1.406
CEE	0.112	0.994	0.324	0.938	1.066
CIE	0.323	2.476	0.016*	0.698	1.433
EFK	0.139	1.099	0.276	0.744	1.345
ML	0.180	1.533	0.131	0.860	1.163
EM	0.294	2.158	0.035*	0.640	1.563
OIM	0.202.	1.535	0.130	0.682	1.466
USO	033	0.252	0.802	0.674	1.483
IN	0.226	1.845	0.070**	0.793	1.261
FZ	0.167	1.410	0.164	0.843	1.186
IS	0.294	2.461	0.017*	0.829	1.206

Source: Authors’ own.

Notes: *Significant 0.05% level, **significant at 0.10% level.

Discussion

Given the fact that there are limited studies from emerging economies that have examined the impact of determinants on speed of internationalisation and performance, this study examined the different drivers (internal and external) and their influence on the speed at which SMEs entered the international market and to what extent does the speed of internationalisation along with the determinants facilitate SMEs to achieve a higher degree of internationalisation. The study argued that entrepreneurial orientation towards the international market facilitates SMEs to early internationalise and to achieve higher performance. The study also finds support for the idea that in an emerging economy, entrepreneurial orientation plays a major role in determining international activity.

Our results, for the first research question, revealed that the size of the firm and entrepreneur’s foreign language proficiency influenced the speed of internationalisation. It is important to elaborate on why firm size and foreign language proficiency facilitate early internationalisation. To begin with, the international market is a difficult terrain, whose entry would call for ‘larger resources’ on the part of SMEs. Accordingly, a firm with a larger size will have the advantage to incorporate more human and financial resources, and production capacity (Stoian et al., 2011). Moreover, firm size facilitates to withstand the risk associated with internationalisation and in overcoming the initial cost and likely to impact the pace of internationalisation. However, smaller firms may least likely to absorb these initial costs and may not be able to look for more export opportunities. Therefore, early internationalisation may not be feasible for firms that are smaller in size. Another internal factor that would determine the speed of internationalization is the entrepreneur’s foreign language proficiency. Generally, foreign language proficiency makes entrepreneurs more open towards extending their company’s activities abroad, communicate with foreign customers and develops an international mind-set. This is a prerequisite for early internationalisation. Therefore, an SME which is larger in size, led by a CEO who is more fluent in multiple foreign languages, would have been better off in terms of resources and competence, which would have facilitated the early internationalisation of SMEs.

Further, we probed whether the speed along with the driving factors had any influence on the degree of internationalisation. Our results revealed that CEOs’ international experience, CEOs’ network, CEOs’ motivation and early internationalisation influenced the degree of internationalisation. This is answerable, due to the fact that to succeed globally, SMEs need entrepreneurs who have international experience. Basically, international experience facilitates identifying business opportunities, implementing export strategies and monitoring the overseas business than entrepreneurs who have a lack of international experience. Thus, international experience assists the entrepreneurs to familiarise themselves with export business and in search of international business opportunities, which positively affect the performance of SMEs. Further, the increasing global networks have prompted many firms to become internationalised (Chetty & Holm, 2000; Coviello & Munro, 1995; Zain & Ng, 2006) as it facilitates to overcome the obstacles associated while entering an international market (Musteen et al., 2010). Primarily to develop relationships with suppliers, clients, competitors, and investors need more time. The entrepreneurs who have worked for a longer period of time in international markets (international experience) would have developed a relationship with different networks to facilitate their internationalisation activities and performance. Subsequently, we found that along with international experience and network relationships, CEOs’ motivation was statistically significant and positively influenced the degree of internationalisation. One could argue that firms with CEOs who are highly motivated would have had international experience and developed a network relationship with various sources, eventually leading to international success. Therefore, CEOs’ cognitive ability by itself depends on previous experience and different sources of the network to achieve a higher degree of internationalisation. This reflects the unique character of an international entrepreneurial firm (Mc Dougall & Oviatt, 2000).

Finally, the speed of internationalisation has positively contributed to a higher degree of internationalisation indicating that those SMEs that have entered the international market at an early age (less than 3years) have achieved higher performance than those who have entered the later stage. In the sense, entering and operating in the international market at an early age is a learning experience (Zhou & Wu, 2014). Many SMEs would learn the value of quality, price and adhere to strict delivery schedule once they enter into the international market. Those who learn the basic requirements in a hard way would be able to penetrate the global market further gradually and steadily. That is why those who have entered the international market at a faster pace are able to achieve a higher degree of internationalisation. The overall analysis highlight that internationally oriented CEOs are vital for early entry into a new international market, and related to international performance.

Conclusions and Implications

SMEs play a vital role in the development of many emerging economies like India and often exporting has been a strategic objective of such firms. This study contributes to the international entrepreneurship literature by analysing the influence of speed of internationalisation along with the determining factors on the degree of internationalisation achieved by SMEs. Likewise, the study was carried out using the empirical data from Indian SMEs, where internationalisation topics have not been thoroughly carried out.

Several implications can be derived based on our research findings. More importantly, entrepreneurs of SMEs, especially those who have the aspirations of rapid internationalisation will benefit from identifying the key factors. A major outcome of the research finding is that entrepreneurs should focus on improving their overall organisational capabilities. As organisational capabilities (proxy to firm size) comprise non-imitable managerial abilities that transform the physical and financial resources into competency. Further, our study conveys to decision-makers the importance of fostering the skills of the CEOs of SMEs to enable them early entry into the international market. Therefore, improving the overall organisational capabilities and CEO skills are pertinent for the early internationalisation of SMEs. Subsequently, Young entrepreneurial firms should take advantage of internationally experienced CEOs or international networks to overcome the initial barriers to achieving higher export sales.

Finally, policymakers need to consider diverse ways of facilitating SME export activities. Given the importance of human capital, the policy should promote on improving the skills and capabilities of entrepreneurs through appropriate training, which will have positive implications on developing international orientation and facilitating the internationalisation of SMEs only its speed but more importantly, its degree, for the benefit of the economy at large.

Limitations and Suggestions for Future Research

Given the results, this study has some limitations. This study is specific to the manufacturers of the machinery industry in Bangalore and its results may not be fully applicable to other sectors and regions. Further, there is a need to develop specific scales relating to proactiveness and its influence on the speed of internationalisation. Finally, this study is cross-sectional in nature and not a longitudinal one. However, longitudinal analysis can be employed to understand the changing dynamics of exporting over a period of time.

Footnotes

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

ORCID iD

Channappa Santhosh

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