Cross-Border Cooperations

Transcription

1 Cross-Border Cooperations Strategies for European SMEs Bearbeitet von Prof. Dietmar Sternad, Eithne Knappitsch, Christina Mundschütz 1. Auflage Buch. 294 S. Hardcover ISBN Format (B x L): 15,5 x 23,5 cm Wirtschaft > Management > Internationales Management Zu Inhaltsverzeichnis schnell und portofrei erhältlich bei Die Online-Fachbuchhandlung beck-shop.de ist spezialisiert auf Fachbücher, insbesondere Recht, Steuern und Wirtschaft. Im Sortiment finden Sie alle Medien (Bücher, Zeitschriften, CDs, ebooks, etc.) aller Verlage. Ergänzt wird das Programm durch Services wie Neuerscheinungsdienst oder Zusammenstellungen von Büchern zu Sonderpreisen. Der Shop führt mehr als 8 Millionen Produkte.

2 1 Cooperation and the internationalisation of SMEs As a consequence of the globalisation of markets and in light of the constantly intensifying international competition, the number of small and mediumsized enterprises (SMEs) operating in foreign markets has been growing steadily (Nummela 2002). Specifically the removal of trade barriers within the European Union has led to an increased internationalisation of SMEs within the common European market. Besides that the time span between the formation of a firm and its first steps towards internationalisation is decreasing (Nummela 2002). However, SMEs make, in proportion, a much smaller contribution to value added in global markets than large firms and are generally less active on international markets. The reason for this imbalance can be attributed to their inherent size and resource constraints. Due to these characteristics, SMEs traditionally face more and different challenges in their internationalisation endeavours than larger firms. The aforementioned increase in the number of SMEs active in global markets has been linked to their ability to create and join networks, a concept rapidly gaining importance in internationalisation process research (Holmlund and Kock 1998). According to Johanson and Vahlne (1990), firms develop and distribute products in foreign markets through business networks that, through providing local market knowledge, lower uncertainty and allow for faster internationalisation. Contemporary research on the relationship between SMEs has long focused on these networks while the research on the co-operation between one enterprise and its partners is far less rich and homogenous (European Commission 2003c, p. 13). This is noteworthy, as SMEs could overcome their individual resource constraints especially by entering long-term strategic alliances. Strategic alliances among enterprises, which can be seen more as intense cooperation rather than loose network ties can play a key role for the successful internationalisation of SMEs (Brouthers 2002; Robson et al. 2006). By bundling resources, strategic cooperation can enable SMEs to achieve a critical mass for internationalisation (Welge and Borghoff 2005). This argument is supported by Fink et al. (2008), who confirm that cooperation can foster the internationalisation of SMEs, as combining complementary resources allows them to engage in internationalisation activities from which they would otherwise be excluded. 9

3 1 Cooperation and the internationalisation of SMEs 1.1 SME characteristics Before exploring the role of cooperation in the internationalisation of SMEs, we need to identify (a) the main characteristics of SMEs and (b) the specifics of their internationalisation process. As there is no universally accepted definition of an SME, we use the term as defined by the European Commission, which is widely used in European literature. As defined by the European Commission (2003a), an SME is a private company with fewer than 250 employees, a turnover not exceeding 50 million, and/or a balance sheet size less than 43 million. Table 1.1 summarises the details of the EU definition of micro, small, and medium-sized enterprises, all subsumed under the term SME. Table 1.1 European Union SME definition and/or Category Staff headcount (annual work units) Annual turnover Annual balance sheet total Medium-sized enterprise < million 43 million Small enterprise < million 10 million Micro enterprise < 10 2 million 2 million Source: European Commission (2003a) Table 1.2 illustrates the key role that SMEs in all three categories play in the European economy. Table 1.2 Key indicators by enterprise size Micro Small Medium SME total Large Number of enterprises (in 1000), 2010 (estimates) Employment (in 1000), 2010 (estimates) Persons employed by the enterprise (average), 2010 (estimates) 19, ,

4 Cooperation and the internationalisation of SMEs 1 Micro Small Medium SME total Large Persons employed (%), 2010 (estimates) Value added (%), 2010 (estimates) Labour productivity (EUR 1 000/person), ,8 20,4 16,8 66,9 33,1 21,6 18,9 17,9 58,4 41,6 34,3 41,2 47,9 45,5 56,6 Source: European Commission (2011) and Eurostat European Commission (2011) The annual report on EU small and medium-sized enterprises published by the European Commission (2011) shows that SMEs represent more than 99% of businesses in the European Union (EU) and form the backbone of the European economy. In 2010, there were nearly 20.8 million SMEs in the EU; most of them (19.2 million or 92.1% of all EU businesses) were microfirms. In the private sector, SMEs account for more than two-thirds of all employment opportunities and contribute around 58.4% of the total gross value added. However, owing to their limited resource base and little support from governments, SMEs are facing various challenges, especially in this uncertain economic period. The financial crisis and subsequent debt crisis had a considerable impact on the performance of European SMEs. Globalisation and increasing international competition have forced SMEs to search for innovative and flexible survival strategies in a negative economic environment. Increasing globalisation has affected SMEs in two important ways (OECD 2004): On the positive side, SMEs that (a) have high growth rates, (b) are niche exporters, or (c) are able to tie in with global supply chains, can benefit from the opportunities created by globalisation. On the other hand, globalisation also poses a threat to SMEs that are not able (or do not try) to compete in the international market. A study published by the European Commission (2007) shows that most European SMEs believe that the competition in their markets has increased over the past two years. In response to this competition, SMEs have taken different approaches to overcome these hurdles. According to the study, SMEs have tried to improve the quality of their products and services, widen their product differentiation, look for market niches, extend their marketing activities, reduce costs, or form strategic partnerships. Given their resource constraints and risk awareness, looking for new foreign markets is seen as a strategy of last resort (European Commission 2007). 11

5 1 Cooperation and the internationalisation of SMEs 1.2 SME internationalisation Owing to their particular characteristics, SMEs face specific challenges in the process of internationalisation and their smaller firm size is often regarded as a disadvantage. Westhead et al. (2002) argue that internationalisation usually involves high risks and SMEs are less able to manage risks and uncertainties than larger firms, as they do not have the same financial background and international experience. Moreover, SMEs often lack other resources necessary to enter foreign markets (Meyer and Skak 2002), such as human resources, time resources, and knowledge. This lack of resources constitutes a substantial obstacle to their ability to perform in an international environment. However, SMEs also possess advantages, which can be used in the process of internationalisation, such as their flexibility, their closeness to the market, and their ability to quickly adapt to changes within the environment (Chen and Hambrick 1995; Peters 1992). Technological and structural changes have made it less difficult for SMEs to participate in the international economy, as these changes facilitate information flows and support the expansion of the market potential of small enterprises (OECD 2004). Further, SMEs are often more innovative, as they have a more informal and flexible behaviour (Alvarez and Barney 2001). Theoretical work on the internationalisation process of SMEs was dominated, for a long time, by incremental models originating from the Uppsala School ( Johanson and Vahlne 1977; Johanson and Wiedersheim-Paul 1975). These models were characterised as tempting because of their simplicity and logic (Nummela 2002, p. 6). The focus of the Uppsala approach is to explain the increasing internationalisation of a firm through the interplay between knowledge development through experiential learning and international commitment building. According to this theory, enterprises gradually intensify their involvement in international markets over time, as a firm will usually first enter a market with the lowest possible commitment, expanding its activities only after having gained experience and trust in the market ( Johanson and Vahlne 1977). Consequently, the model suggests that firms will start the internationalisation process by choosing culturally similar markets, strengthening their commitment over time with increasing experience by gradually entering physically and culturally distant markets. This model of internationalisation, however, has received ample criticism. Andersen (1993), for example, argues that the Uppsala approach does not explain the start of the internationalisation processes nor provides clear information about the working of the mechanism linking knowledge with com- 12

6 Cooperation and the internationalisation of SMEs 1 mitment. Further criticism addresses the model s limited applicability for entrepreneurial SMEs. In the 1990s, several studies identified a significant number of firms that did not follow the steps of the traditional stage model of internationalisation. Such companies, often referred to as born globals (Oviatt and McDougall 1994), were able to leapfrog some stages of the internationalisation process. This phenomenon has been attributed to (1) advances in technology, production, transportation, and communication, (2) increased competition in a firm s domestic market, and (3) entrepreneurs acquisition of an increasing amount of international experience and foreign market knowledge (Madsen and Servais 1997; Oviatt and McDougall 1994). Acknowledging the rapid internationalisation of born globals, the incremental models were combined with the network theory ( Johanson and Mattson 1988; Johanson and Vahlne 1990; Meyer and Skak 2002). According to this theoretical approach, firms use both domestic and international business networks to develop and distribute products for foreign markets. These networks aid in lowering uncertainty by providing local market knowledge, thus enabling faster internationalisation. In addition to networks, firm-specific resources, such as a firm s assets, capabilities, information, knowledge, and technologies, may constitute a source of differential advantage in foreign markets (Collis 1991; Porter 1991), thus fostering accelerated internationalisation. The resource-based view (RBV) has gained considerable influence in recent internationalisation research (Peng 2001). Following RBV thinking, the main reason that firms are able to internationalise lies in their firm-specific resource advantages, which are transformed into competitive advantage in the international market place. It is essential for SMEs planning to go international to consider the resource needs for this process, as a lack of adequate resources was found to be the main barrier to SME internationalisation (Wright et al. 2007). 1.3 The role of cooperation in the internationalisation of SMEs We identified the possession of relevant resources and capabilities and being a part of relevant networks as key factors for rapid internationalisation. One of the main characteristics of SMEs, however, is their resource limitation. Most SMEs have less financial capital, human resources, and managerial capabilities than large corporations. Owing to these inherent constraints, smaller firms often seek cooperation, bundling resources with partners in order to secure their 13

7 1 Cooperation and the internationalisation of SMEs survival and development (Simons and Royer 2006). Strategic alliances may in fact serve as a strategy to neutralize the disadvantages of small-scaled organizations [...] achieving a competitive advantage while maintaining a higher degree of organizational flexibility ( Johansson and Ylinenpää 2006, p. 3). The formation and management of external relationships is therefore an important strategy in the development of small businesses (Street and Cameron 2007) and can help SMEs exploit new market opportunities across borders. SMEs face specific challenges when it comes to cooperation. In addition to controlling more resources, larger corporations usually have more relationships and are able to obtain more information about their operating environments (Yasai-Ardekani and Nystrom 1996). Both these factors can be seen as considerable advantages in building cooperation. The resource constraints of SMEs limit their ability to contribute specific resources to an alliance and lower their potential of attracting partners and establishing alliances (Dickson and Weaver 2011). This might also be one of the reasons of why SMEs are less likely to engage in cooperation than large-scale corporations (Frank 1994). Nevertheless, cooperating across borders is still a strategic option for SMEs to strengthen their competitive position in the international marketplace (Kotha et al. 2001) as they can also exploit their size-specific advantages, such as their higher degree of flexibility, lower level of rigidity (Greve 2011), and reduced bureaucratic inertia (Haveman 1993), for cooperative ventures. The definition of SME cooperation In accordance with the definition in the 2003 Observatory of European SMEs report by the European Commission, we refer to the term SME cooperation in this book as the interaction between independent SMEs for a specific purpose that extends beyond a single task (European Commission 2003c, p. 7). Specifically, SME cooperation is characterised by: (1) the objective of improving the potential of each partner enterprise to attain a specific purpose; (2) long-term commitments rather than a limitation to a certain milestone or event (although we see joint project work also as a viable form of cooperation); (3) different degrees of formalisation of the cooperation agreement, and (4) collaboration between SMEs rather than between an SME and large enterprises (European Commission 2003c). 14