Internationalization of small and medium sized enterprises and longevity: A study of SMEs from software publishing services industry

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Internationalization of small and medium sized enterprises (SMEs) is an increasingly important area in international business research. One of the important discussions in internationalization of SMEs is relationship between internationalization and performance. A considerable amount of literature has been published on this relationship. Performance measures in these studies often include profitability, organization growth and competitiveness. So far, however, there has been little discussion about link between internationalization and longevity or survival of SMEs. Longevity as a measure of performance of internationalization of SMEs combined with other performance measures would give added understanding of internationalization of SMEs. The main purpose of this study, therefore, is to discover relationship between SMEs’ internationalization and their longevity. Despite their inherent vulnerabilities and heightened risks they face during their internationalization, SMEs continue internationalizing. Resource based view theories, location advantage theories and liabilities of foreignness theories can justify this counterintuitive behavior. SMEs’ ability to reap benefits of internationalization using their resources and location advantages improve longevity. Internationalization risks SMEs face are for short period and after these short-term hurdles, liabilities of foreignness decrease, benefits of internationalization overweigh risks and chances of longer survival improve. This study proposes that, all else being equal, internationalization has positive impact on longevity. This study focuses on SMEs from software publishing service industry. The study sample includes 67 USA based active and inactive small and medium sized software firms (SMSFs) existed between 1984 and 2013. Mean, Variation and Trend of degree of internationalization are related to number of years of firms’ existence using multivariate linear regression methodology. This study finds that size of internationalization alone does not have significant impact on longevity of SMSFs. Variation in level of internationalization has significant positive impact on longevity. Considering variations in level of internationalization as result of firms’ pro-active strategic actions, this study suggests that strategic variation rather than the level of internationalization help to improve longevity of SMSFs. This research also finds evidence that short-lived SMSFs spent more on R&D and acquired more assets when compared with long-lived SMSFs and SMSFs improved longevity through mergers and acquisitions. (Author abstract)