International Opportunity Discovery and Creation by Internationalising SMEs: Implications for Firm Performance

Abstract

According to the International Entrepreneurship (IE) perspective, internationalisation is considered as exploration and exploitation of international opportunities, in which networking and learning from experiences play a vital role. By internationalising Small and Medium-sized Enterprises (SMEs) they learn how to convert discovered and created opportunities into exploited opportunities through learning by doing, within their networks. SMEs take different paths to internationalisation. While some SMEs rely on prediction and market analysis (causation) to discover already existing opportunities to enter foreign markets, others rely on their existing resources and relationships to create (effectuation) internationalisation opportunities. When modelled separately, research supports the association of both paths with international opportunities and firm performance. Investigating the direct effects of effectual versus causal logic of decision making on firms’ international opportunity development and international performance presents an incomplete picture. Relatively little knowledge has been obtained to date on the indirect impacts of the juxtaposition of these paths toward internationalisation. This thesis applies effectuation theory, combined with some insights from the Uppsala model. Both effectual and causal paths to international opportunity discovery and creation are modelled simultaneously. This research captures the indirect relationships between the logic of decision-making and international opportunity development, and subsequent international performance. This thesis is a quantitative study based on survey data collected from 164 SMEs in New Zealand. Structural equation modelling is used to analyse the data and answer the research questions. The findings show that, when modelled simultaneously, both effectual and causal paths result in successful internationalisation. Discovered and created opportunities improve international performance through the mechanism of experiential learning and networking capabilities. In the causal path, Systematic International Market Selection does not provide a mediation effect in the association between causal decision making and firm international performance.