Research Handbook on Innovation in International Business 1800882939, 9781800882935

Citation preview

RESEARCH HANDBOOK ON INNOVATION IN INTERNATIONAL BUSINESS

Research Handbook on Innovation in International Business Edited by

Desislava Dikova Professor in International Business, Institute for International Business, Department of Global Business and Trade, Vienna University of Economics and Business, Austria

Edith Ipsmiller Assistant Professor, Institute for International Business, Department of Global Business and Trade, Vienna University of Economics and Business, Austria

Cheltenham, UK • Northampton, MA, USA

© Desislava Dikova and Edith Ipsmiller 2022

Cover image: Chuttersnap on Unsplash All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical or photocopying, recording, or otherwise without the prior permission of the publisher. Published by Edward Elgar Publishing Limited The Lypiatts 15 Lansdown Road Cheltenham Glos GL50 2JA UK Edward Elgar Publishing, Inc. William Pratt House 9 Dewey Court Northampton Massachusetts 01060 USA A catalogue record for this book is available from the British Library Library of Congress Control Number: 2022934679 This book is available electronically in the Business subject collection http://dx.doi.org/10.4337/9781800882942

ISBN 978 1 80088 293 5 (cased) ISBN 978 1 80088 294 2 (eBook)

EEP BoX

Contents

List of figuresvii List of tablesviii List of contributorsx 1

Introduction to Research Handbook on Innovation in International Business1 Desislava Dikova and Edith Ipsmiller

2

The relationship between innovation and internationalization of SMEs: a review of theoretical perspectives Yusaf Akbar, Marco Balzano and Guido Bortoluzzi

3

The role of institutions in the context of innovation in international entrepreneurship: transforming uncertainty from being a threat to becoming an asset Igor Kalinic

6

34

4

The internet and internationalization: a review and future research agenda Edith Ipsmiller and Desislava Dikova

5

Innovation in international mid-sized corporations: understanding their R&D offshoring characteristics Josephine Igoe, Chad Trevithick and Esther Tippmann

6

Innovation performance in collectivist societies: a network perspective 114 Susanne Scherer, Jonas Puck, Mario Glowik, Gregor Binder and Thomas Lindner

7

Contextual ambidexterity in the subsidiary: how exploration and exploitation interact to drive subsidiary strategic initiatives and innovation Marty Reilly, Shaen Corbet, Pamela Sharkey Scott and Ulf Andersson

8

Talent circulation for innovation activities: the agenda for states and firms Marina Latukha and Nikita Kuleshov

9

Digital outsidership: the practical and affective effects of digitalization in international business relationships between Kenyan and German firms Sonja Mattfeld, Dorota Piaskowska and Tilo Halaszovich

177

10

A bricolage perspective on construction innovation in a BOP market: evidence from a Finnish family-owned micro-enterprise Samppa Kamara, Ahmad Arslan, Minnie Kontkanen and Shlomo Y. Tarba

206

11

Innovation and internationalization in the Indian pharmaceutical sector: the moderating role of ownership structures Saptarshi Purkayastha, Tatiana S. Manolova and Linda F. Edelman

219

v

52

99

135 157

vi  Research handbook on innovation in international business 12

Innovation in the global pharmaceutical industry: the role of regulations in the EU Ernest Jędrzejewski and Desislava Dikova

239

13

International cooperation on technology innovation development: a case study from the maritime industry Marina Z. Solesvik

264

14

Cities and regions with special economic zones as innovation hubs within the Belt and Road Initiative Andrei Panibratov and Liana Rysakova

275

Index288

Figures

3.1

R&D investment (in € billion) 2018–19 by region/country

34

3.2

Prediction versus control

44

4.1

The use of the internet in internationalization: antecedents, phenomena and consequences

54

7.1

Cluster matrix for all 258 subsidiaries in sample

143

7.2

SEM analysis for the entire sample

143

7.3

SEM analysis of high exploitation and high exploration grouping

147

8.1

Ecosystem of talent circulation within MTM

168

9.1

Conceptualization of empirical findings

191

10.1

Proposed social bricolage conceptual framework in the BOP context

214

12.1

Top 10 blockbuster medicinal products by global revenue (USD billion)

244

12.2

Healthcare expenditure as % of GDP, 2018

256

14.1

BRI and Chinese and Russian SEZs

276

vii

Tables

3.1

R&D investment in 2019 by region/country and sector group

35

3.2

Number of SMEs and large enterprises in the EU-28 NFBS in 2018 and their value added and employment

38

3.3

Contribution of EU-28 SMEs on different industry groupings to (a) industry group value added employment and (b) total SME value added and employment in the EU-28 NFBS in 2019

39

3.4

Differences between prediction, risk and uncertainty

42

4A.1

Overview of reviewed literature

68

5.1

Comparison of R&D offshoring of large multinational corporations and SMEs 101

5.2

Comparison of R&D offshoring: hybrid characteristics of mid-sized corporations108

6.1

fGLS regression analysis

126

7.1

Summary statistics for the entire sample

144

7.2

Results of SEM analysis with controlled variables and defined sub-groupings

145

7A.1

Survey measurements and questions

155

9.1

Overview of sampled firms and informants 

184

9.2

Matrix of first-order codes, second-order categories, and conceptual dimensions185

9.3

Illustrative data evidence for each category

187

11.1

Descriptive statistics and correlation matrix

228

11.2

2SLS IV Regression: fixed effects estimation with R&D as the dependent variable

229

11.3

2SLS IV Regression: random effects estimation with degree of internationalization as the dependent variable

230

12.1

The 2020 EU R&D scoreboard published by the European Commission

241

12.2

Summary of number of new medicinal products approved by the FDA and proportion of products indicated for rare diseases

242

viii

Tables  ix 12.3

R&D intensity (%) based on the 2020 financial statements of the companies concerned

243

13.1

Interfirm collaboration in functional areas

268

14.1

SEZ sustainable development: profit and loss statement

278

14.2

Descriptions of Chinese SEZs

279

14.3

Performance of initial five SEZs in China, 2015

280

Contributors

Yusaf Akbar is an Associate Professor at the Department of Economics and Business, Central European University in Vienna, Austria. His current research interests focus on (a) non-market strategy and corporate political activity, (b) internationalization of SMEs and (c) strategic impacts of new business models such as sharing platforms. He has published widely in peer-reviewed journals including the Journal of World Business, Journal of International Management, International Business Review, Cross-Cultural Management and Harvard Business Review. Ulf Andersson is Professor at Mälardalen University, Sweden and Adjunct Professor at BI Norwegian Business School. Earlier he was a Professor of International Business at Uppsala University, where he also earned his doctorate and Professor of Strategy and International Management at Copenhagen Business School. Ulf is Fellow of the Academy of International Business and the European International Business Academy. His research focuses on subsidiary strategy and evolution, knowledge governance and transfer, network theory, and strategy and management of the MNE. Dr Ahmad Arslan is currently working as an Associate Professor in the Department of Marketing, Management and International Business, at Oulu Business School, University of Oulu, Finland. He also holds the position of Honorary Chair in Business Management at the University of Aberdeen, Scotland, UK. Previously, he has worked in academia in different universities in the UK and Finland. His earlier research has been published in prestigious academic journals such as British Journal of Management, Human Resource Management (US), IEEE Transactions on Engineering Management, International Business Review, International Marketing Review, Journal of Business Research, Journal of International Management, Scandinavian Journal of Management, Journal of Knowledge Management, Production Planning & Control, and Technological Forecasting and Social Change. He has also contributed book chapters to several edited handbooks addressing different management-related topics. Finally, he holds several editorial board memberships and is currently a Senior Editor of International Journal of Emerging Markets (Emerald). Marco Balzano is a PhD student in Management at the Ca’Foscari University of Venice (Italy). He received an International PhD scholarship to attend the Double PhD degree with the SKEMA Business School (France). He gained an MSc cum laude in Strategic Management at the University of Trieste. Marco has published in international journals and presented the results of his research activity at several international conferences. His research interests deal with strategy, imitation, competitive dynamics, business model innovation and strategic agility. Gregor Binder is an advisor at Deloitte. He has also worked as a research assistant and lecturer at WU Vienna’s Institute for International Business. Guido Bortoluzzi is an Associate Professor in Innovation Management and Entrepreneurship at the University of Trieste (Italy) and Core Faculty Member at MIB Trieste School of x

Contributors  xi Management. His research interests deal with innovation strategies, microfoundations of creativity and the internationalization processes of SMEs. He has published the results of his research activity in several international journals, including International Marketing Review, European Management Journal and European Journal of Innovation Management. Shaen Corbet is Professor of Finance at Dublin City University and visiting Professor of Finance at the University of Waikato. Shaen’s main research interests are in financial economics, financial econometrics and the study of financial crises. His recent works have been at the forefront of FinTech research. Shaen has published over 80 refereed journal articles and books in Economics and Finance, winning several prestigious young researcher, best researcher, and best paper awards. Desislava Dikova is Professor in International Business CEE focus at the Vienna University of Economics & Business. She previously held positions at the University of Groningen, the Netherlands and King’s College London, UK. Dikova’s research focuses on the international behavior of multinational companies of large and smaller organizational size; she examines their foreign market entry mode choices in emerging and developing economies and the subsequent performance of their foreign subsidiaries often under a great deal of uncertainty. In addition, Dikova studies the competitive behavior of firms with respect to the types of innovation investments and their cross-border merger and acquisition activity. Dikova is Editor in Chief of the Journal of East-West Business, and associate editor of the Journal of International Management and European Management Review. Her work is published in Journal of International Business Studies, Journal of World Business, Journal of Management Studies, Journal of International Management, International Business Review, Management International Review, Management and Organization Review, European Management Review, Journal of International Marketing, and others. Linda F. Edelman (DBA Boston University) is the Rhodes Professor of Management at Bentley University, and the chair of the Management Department. Her research examines small firm finance, internationalization, and women and nascent entrepreneurs. Linda is the author of four books and over 75 scholarly articles and book chapters. She serves on four editorial boards, co-edited four special issues on women in entrepreneurship, and received a Kauffman Foundation research grant for her work on women entrepreneurs. Mario Glowik is a professor of international strategic management at the Berlin School of Economics and Law. He holds a Doctorate in Business Administration from the Free University of Berlin and gained his habilitation (post-doctoral qualification) at the WU Vienna University of Economics and Business, Austria. Prior to academia, Mario served more than eight years as a marketing and sales manager in the high-technology electronics industry at several locations around the globe. Tilo Halaszovich is Professor of Global Markets and Firms at the Jacobs University Bremen, Germany, and Chair of the entrepreneurship support program J-CUB. He is also a faculty member of the Bremen International Graduate School of Social Science. His research focuses on competitiveness of firms in developing countries, institutional distance, and the role of technology and entrepreneurship in international business. He has published in leading journals, including Journal of Business Research, International Business Review and European Journal of International Management.

xii  Research handbook on innovation in international business Josephine Igoe is a Lecturer in International Business at the National University of Ireland Galway. Josephine teaches and researches in the field of strategy and international business, examining the challenges pertaining to multinationals and small to medium enterprises. She has recently published work on both multinationals and small enterprises and continues to investigate challenges for both contexts. Josephine currently serves as National Representative for Ireland for the European International Business Academy and has acted as a reviewer for many journals and conferences. Edith Ipsmiller is Assistant Professor at the Institute for International Business at WU Vienna. Her research interests lie in the fields of decision-making under uncertainty, internationalization and market entry in particular. She received the Adam Smith Best Doctoral Dissertation Award as well as the Buckley and Ghauri Prize for the Best Early Career Researcher Paper from the Academy of International Business UK and Ireland. Her work has been published in the Journal of World Business, Journal of International Management and European Management Review. Ernest Jędrzejewski, MA, LL.M. received his Master of Arts in Law from the University of Warsaw and Master of Laws from Columbia Law School as well as a diploma in European Law from the University of Cambridge. He is a practicing attorney-at-law with almost 20 years of experience advising international clients on health care, pharmaceuticals and biotechnology. Ernest is also a guest lecturer at the Vienna University of Business and Economics. His academic research in the field of economics focuses on new technologies in health care and in the field of public health he examines cancer prevention strategies. Igor Kalinic works for the European Commission. He is also affiliated with Turku School of Economics as visiting senior fellow. He has more than 20 years of practical experience, academic knowledge, and policy-making with a focus on international entrepreneurship, business strategy and sustainable economy. His research interests are primarily focused on international business, decision-making under uncertainty, and social entrepreneurship. Samppa Kamara is a Junior Researcher at the Department of International Business, Oulu Business School, Finland. He holds an MSc degree in International Business Management at the University of Oulu. Samppa currently serves as a teacher (assistant) for undergraduate and open university levels. He is the responsible teacher from the University of Oulu for the LITO course (a Basic Business Studies module that offers eight 5-credit courses entirely online) targeted at non-business students in the eleven participating universities. His areas of interest include entrepreneurship, international business, and BOP markets. Minnie Kontkanen is a Programme Manager of the master’s degree Programme in International Business at the University of Vaasa. She has long-term teaching experience in the areas of international marketing, entry strategies and internationalization behaviour. Her research areas of interest include international marketing strategies, uncertainty and risk in internationalization strategies, and sustainability. Her studies have been published in edited books and in journals like Technological Forecasting & Social Change, Journal of Transnational Management and Journal of Strategic Marketing. Nikita Kuleshov is a PhD student at Graduate School of Management, Saint Petersburg State University. His research interests are focused on the impact of state policies and political insti-

Contributors  xiii tutions on the implementation of talent management processes and innovation at firm and state levels. Nikita is interested in discussing governmental and firms’ initiatives to accumulate talent to perform innovation activities and ensure long-term competitiveness. Marina Latukha is a Doctor of Economics and Professor of Organizational Behaviour and Human Resources Management at the Graduate School of Management, Saint Petersburg State University, Russia. She has graduated from postdoctoral programs at Harvard Business School, the Haas School of Business, and the London Business School. Her research interests focus on global talent management, international and strategic human resource management, talent diversity and emerging multinationals. She is the author of a number of academic articles published in top-ranked academic journals, such as Human Resource Management, The International Journal of Human Resource Management, Journal of Business Research, Thunderbird International Business Review, Advances in Human Resource Development, European Management Journal, Journal of Global Mobility, European Journal of International Management. Marina is the author of Talent Management in Emerging Market Firms: Global Strategy and Local Challenges (2015), and has edited Talent Management in Global Organizations: A Cross-Country Perspective (2018). Thomas Lindner is a professor of international management at the University of Innsbruck. He is also a visiting professor at the Vienna University of Economics and Business (WU Vienna) as well as a guest lecturer at the Copenhagen Business School and the Nantes Business School. Thomas studies international finance and strategy with a special interest in the valuation of cross-border bond issues, and project finance. His research has been published in several journals including Academy of Management Journal, International Business Review, Journal of International Business Policy, Journal of International Business Studies, Journal of International Management and Journal of World Business. Tatiana S. Manolova (DBA, Boston University) is a Professor of Management at Bentley University, USA. Research interests include strategic management, international entrepreneurship, and management in emerging economies. Tatiana is the author of over 70 scholarly articles and book chapters, and has co-authored or edited four books. She is a Senior Editor for the International Journal of Emerging Markets, a Consulting Editor for the International Small Business Journal and the International Journal of Management Reviews, and serves on three editorial boards. Sonja Mattfeld is a Research Associate at the Jacobs University Bremen, Germany. Her research focuses on international business relationships with(in) sub-Saharan Africa, particularly Kenya, and the internationalization of European companies. Having worked in senior management positions for more than a decade, she investigates practical phenomena through the lens of IB research, and thus contributes to both theory and practice. Andrei Panibratov is Professor of Strategic and International Management in the Graduate School of Management and Director of the Center of Russian Multinationals and Global Business at St Petersburg State University, Russia. His research focuses on the internationalization, legitimacy and liability of foreignness of emerging market firms, state ownership and political capital, economic sanctions, and competitive advantages of Russian MNEs, among others. His work has appeared in the British Journal of Management, International Business Review, Management and Organization Review, Multinational Business Review

xiv  Research handbook on innovation in international business and Thunderbird International Business Review, among others. He is the author of Russian Multinationals (2012) and International Strategy of Emerging Market Firms (2017), both with Routledge. Andrei is the National Representative of Russia and Board Member of the European International Business Academy. He serves as an expert of the Russian Academy of Sciences and the Ministry of Education and Sciences, and on editorial and review boards of Russian and international journals. Dorota Piaskowska is an Associate Professor in Strategy and International Business at University College Dublin, Ireland. Her research focuses on the antecedents and outcomes of corporate development activities, including internationalization, mergers and acquisitions, alliances, and scaling. She has a particular interest in strategies for the digital era and in the role of experience and learning in firms. She has published in leading journals and sits on the editorial review boards of the Journal of World Business and Management International Review. Jonas Puck is Full Professor of International Business at Vienna University of Economics and Business (WU Vienna). His current research interests lie in the overlaps of global strategy, finance and political science. Jonas serves on the Editorial Boards of the Journal of International Business Studies, Long Range Planning, European Management Journal, Journal of World Business and the Multinational Business Review. His research has been published in journals such as the Journal of International Business Studies, Journal of Management Studies, Global Strategy Journal and Journal of World Business. Saptarshi Purkayastha (PhD, ICFAI University) is an Associate Professor of Strategy at the Indian Institute of Management, Calcutta. His primary research interest is in investigating the effectiveness of emerging market firms with a focus on internationalization and the role of governance in the management of these firms. His research has been published in the International Journal of Management Reviews, Journal of World Business, Journal of Business Research and Asia Pacific Journal of Management. Marty Reilly is Assistant Professor of International Business and Strategy at Dublin City University and an International Partnership of Business Schools (IPBS) Research Scholar. Marty’s research focuses on ambidexterity, subsidiary driven innovation, capability development within MNCs, and internationalization. He has published work in the Journal of World Business and Technovation. Liana Rysakova is a Research Fellow at the Graduate School of Management, St Petersburg State University, Russia. She is also a Researcher of the Center of Russian Multinational Enterprises and Global Business. Her research interests concentrate on the internationalization of firms from emerging economies, China–Russia economic and business relationships, and the role of foreign diasporas for legitimacy and capabilities of emerging market firms. Liana is a member of several professional academic organizations including Academy of International Business and European International Business Academy. She holds her PhD degree from the St Petersburg State University. Susanne Scherer is a project manager at AUDI AG, Germany. Her research focuses on the overlap of innovation, international strategy, and control. She holds a PhD in International Business from WU Vienna.

Contributors  xv Pamela Sharkey Scott is Professor of Strategy and International Business at Dublin City University. Pamela’s research, teaching and advisory services centre on how organizational leaders develop and implement strategy across multinational corporations. Nominated for several international awards, Pamela’s work is published in the Journal of International Business Studies, Journal of World Business, Journal of Management Studies, Organization Studies, and Global Strategy Journal. Marina Z. Solesvik is a professor of Innovation and Management at the Western Norway University of Applied Sciences. Marina holds a PhD in Management from the Nord University Business School (Norway) and PhD in Entrepreneurship from the Institute of Agrarian Economy in Kiev (Ukraine). She has also served as a board member at different Norwegian firms and organizations. Her research interests include regional innovation, open innovation, maritime business, entrepreneurial intentions, female entrepreneurship, strategic alliances and green business models. Shlomo Y. Tarba is Chair (Full Professor) in Strategy and International Business at the University of Birmingham, UK. He is a Fellow of the Academy of Social Sciences. He is a member of the editorial boards of Journal of International Business Studies, Journal of Management Studies, Journal of Product Innovation Management and Journal of World Business. His papers are published in Journal of Management (SAGE), Journal of Organizational Behavior, Human Resource Management (US), Human Relations and Academy of Management Perspectives. Esther Tippmann is Professor of Strategy, Leadership and Change at the National University of Ireland Galway. Esther’s research and teaching interests revolve around the strategic challenges of internationally operating organizations. She has published in the Journal of International Business Studies, Organization Studies, Journal of World Business, Journal of Management Studies, Global Strategy Journal, Harvard Business Review and Sloan Management Review, among others. Esther currently serves as Senior Editor for the Journal of World Business. Chad Trevithick is the Chief Executive Officer of the Neutrik Group. A recent graduate of Grenoble Ecole de Management, Chad’s doctoral thesis explored how mid-sized firms successfully offshore R&D. A passionate practitioner, he has spent the past decade offshoring R&D for mid-sized firms. In addition to helping other practitioners improve their R&D offshoring effectiveness, Chad’s current research identifies a potential firm size advantage that mid-sized firms may have over large and small firms.

1. Introduction to Research Handbook on Innovation in International Business Desislava Dikova and Edith Ipsmiller

OBJECTIVES OF THIS HANDBOOK In a 2017 paper titled “Innovation and international business”, John Cantwell groups International Business (IB) research on innovation into four categories. The first group of studies examines technological innovation (change), either organized across borders or dependent on international knowledge connectivity. This stream of research focuses on international knowledge flows and various aspects of international knowledge sourcing. The second group of studies discusses the role of IB networks, the evolution of these networks towards more open international innovation systems mostly within and across the global networks of multinational enterprises (MNEs). The third group of studies focuses on the geography of innovation, examining the location of innovation activities. The fourth group of studies examines the topic of innovations in the age of accelerated technological development or the so-called information age, which enables firms to better manage innovation across national boundaries and business areas. In this Handbook, we aim to continue the conversation and provide a slightly different outlook on the variety of innovations taking place in the realm of international business. The Handbook naturally covers these four main research areas, featuring authored chapters on the organization of innovative activities across borders, the location of innovation, the role of alliances and networks on innovation, and the impact of the Internet on managing global innovations. There is a vast range of research questions to examine and these are only a few illustrative examples. How do interactions within global knowledge networks influence learning and innovation outcomes for individual firms? How do competing tensions across MNE networks, host-country context, and knowledge networks in terms of knowledge diversity and dominance, organizational bias and knowledge relevance influence innovation outcomes? In the context of innovation, who benefits to a greater extent – national (local) or foreign enterprises? Some of the contributions to this Handbook focus indeed on large multinational firms, investigating issues such as subsidiary innovation initiatives, or the role of corporate governance as a boundary condition to the relationship between innovativeness and internationalization, among others. However, there are several aspects of international innovation not discussed in Cantwell (2017) which deserve scholarly attention and are therefore included in the Handbook. 1. Despite the predominance of small and medium enterprises (SMEs) in most developed economies, there has been insufficient attention on SMEs managing both innovation and internationalization capabilities. SMEs often suffer from inherent constraints to international growth due to the scarce availability of financial and managerial resources, but ownership of technological capabilities propelling innovation likely strengthens their 1

2  Research handbook on innovation in international business competitive/ownership advantages and can favour internationalization. How these capabilities are related to advanced global positioning and whether an environment conducive to innovation and learning is a critical factor is one of the new directions propelled by some of the featured chapters. Specifically, we introduce a critical take on the institutional support offered within the EU to internationalizing SMEs and suggest ways to improve the current status quo. We also reveal interesting insights into decisions to offshore innovation activities by medium-sized enterprises and tackle a relatively new phenomenon, namely, digital outsidership, which is particularly relevant in a post-Covid-19 world and can be disadvantageous for European internationalized SMEs unable to transform and implement digitalized business models. 2. Azar and Ciabuschi (2017: 324) point out that “[d]espite ample research on the innovation– performance relationship, previous studies have mainly focused on technological innovations, leaving the effects of organizational innovations relatively unexplored” (emphasis added). There is a clear need for more focus on various types of innovation in the context of IB. This can be in the range of joint or individual effect on organizational performance of both MNEs and SMEs, and more narrowly organizational and technological innovation effects on export performance. We add to the debate by offering some insights into organizational innovations propelled by European micro-enterprises operating in markets described as base of pyramid (BOP). We also focus on the importance of designing and investing in multilevel talent circulation frameworks, which can further boost innovation within organizations. 3. The role of national institutions, regulations, and laws in the context of innovations deserves special attention. At a more supranational (macro) level, we offer a focus on EU regulation as a facilitator (or an inhibitor) of innovation. The EU vows to create an innovation-friendly environment under its Europe 2020 strategy programme but it is unclear who will be the beneficiary in this process. For the purpose of specific illustration of some of the challenges, we offer an industry-level approach to investigating the role of regulations on the innovation and global success of industry participants in the global pharmaceutical industry. Furthermore, solutions-driven innovations within an emerging market context can be utilized as a strategy by multinational enterprises to address institutional voids in these markets. Yet, to be successful in BOP markets, it takes innovative solutions addressing institutional voids, which in turn affects the value proposition in such markets.

STRUCTURE OF THIS HANDBOOK We have organized the chapters in a logical and sequential manner. Chapter 2, “The relationship between innovation and internationalization of SMEs: a review of theoretical perspectives” by Akbar, Balzano and Bortoluzzi reviews the literature on SMEs’ innovation and internationalization by providing a road map of the theoretical perspectives employed. This review discusses the evolution of the literature both over time and across disciplines and aims at further enriching research areas and questions that are theoretically grounded and can potentially advance the current state of knowledge in this field. Chapter 3, “The role of institutions in the context of innovation in international entrepreneurship: transforming uncertainty from being a threat to becoming an asset” by Kalinic provides a different focus on the topic of SMEs’ innovation and internationalization. The point

Introduction  3 of departure is the fact that many SMEs need to be internationally competitive to succeed in their home market, and to achieve that they need to be innovative and proactive. However, many SMEs face substantial obstacles when getting to the global market with innovative products and solutions. The reasons for this vary, but difficulties in obtaining financial and other support from public and private institutions is a crucial factor behind the failure of many SMEs to engage in innovative (and) international activities. The author suggests that one major reason for this is the high level of uncertainty, which hinders the ability of institutions to assess risk. The solution for this is the development of new specific instruments to help institutions evaluate projects where risk cannot be calculated or estimated. The contribution of the chapter extends beyond the field of innovation, touching on entrepreneurship, international business, political economics, and new economic policy for the twenty-first century. Chapter 4, “The internet and internationalization: a review and future research agenda” by Ipsmiller and Dikova systematically reviews research on the use of the Internet in firms’ internationalization, highlighting its relevance for different types of firms in diverse contexts. The chapter covers academic literature published in top journals between 1991 and 2021. Three distinct categories that capture research on the use of the Internet in internationalization are suggested: antecedents, phenomena and consequences, providing an overview of what has or has not been researched and providing guidance to researchers about potentially fruitful, yet undiscovered fields whose exploration may help us to better understand the role of the Internet for internationalizing firms. Chapter 5, “Innovation in international mid-sized corporations: understanding their R&D offshoring characteristics” by Igoe, Trevithick and Tippmann focuses on the topic of R&D offshoring in the context of mid-sized corporations – firms that have 500–4,999 employees and generate an annual turnover of less than $4 billion. The main contribution of this study is to the literature on R&D offshoring in international firms by detailing the unique characteristics of R&D offshoring in the context of mid-sized corporations. Using the case study of Alpha Group, a European multinational corporation that is active in over 100 countries and offshoring R&D activities, the authors examine typical characteristics of R&D offshoring; namely, mode of entry and activities relating to financial risk management, access to talent, as well as innovation and adoption of new technologies. As some of these activities are typical for MNEs and others typical for SMEs, the authors find that R&D offshoring in Alpha Group involves a unique ability to leverage outsourcing characteristics of both large corporations and SMEs in a hybrid manner. Chapter 6, “Innovation performance in collective societies: a network perspective” by Scherer, Puck, Glowik, Binder and Lindner examines the role of structural holes and closed networks on innovation performance and suggests that a lower number of structural holes augments the innovation performance of networking firms in a sample of R&D alliances in collectivist societies, in the consumer electronics industry. The results of the analysis show that closed networks increase innovation performance in R&D networks, but this is mostly due to the specific cultural contexts and environments of the collaborating firms. Chapter 7, “Contextual ambidexterity in the subsidiary: how exploration and exploitation interact to drive subsidiary strategic initiatives and innovation” by Reilly, Corbet, Sharkey Scott and Andersson examines the capacity of multinational subsidiaries to engage in innovation and to generate strategic initiatives. The chapter provides new insights on nested innovation within MNEs, intra-organizational networks and on harnessing the potential for subsidiary-driven innovation. The authors examine how the interaction of exploitation

4  Research handbook on innovation in international business and exploration strategies explains why some subsidiaries are better at generating strategic initiatives than others. Using survey data from a sample of 258 subsidiary managers within MNE subsidiaries located in Ireland, the authors group subsidiaries into subgroups based on both high and low estimates of both exploitation and exploration/entrepreneurial orientation observed. Findings reveal that high-performing subsidiaries in the sample were significantly more likely to generate strategic initiatives when compared with the average subsidiary within the model. Chapter 8, “Talent circulation for innovation activities: the agenda for states and firms” by Latukha and Kuleshov discusses how talent inflows and outflows influence the innovation and digitalization capabilities of countries and firms. Specifically, the authors highlight how a multilevel talent circulation framework may shape an ecosystem for talents to stimulate innovation activities via talent accumulation. The authors direct their insights into particular areas for the benefit of governments and firms who can gain from talent circulation rather than lose speed and scope of innovation and digitalization. Chapter 9, “Digital outsidership: the practical and affective effects of digitalization in international business relationships between Kenyan and German firms” by Mattfeld, Piaskowska and Halaszovich considers the effects of a specific type of organizational innovation on firms’ relationships in their international business networks. The Covid-19 pandemic caused a wave of rapid adoption of digitally mediated communication in international business exchanges. The analysis of data obtained from ten Kenyan and German firms and four business intermediaries shows that practical and affective (in)efficiencies of digitally mediated communication impact firms’ abilities not only to develop new relationships but also to maintain existing relationships. New and weak relationships are particularly negatively influenced by the affective inefficiencies, and this results in digital outsidership, which in turn hinders further internationalization. Chapter 10, “A bricolage perspective on construction innovation in a BOP market: evidence from a Finnish family-owned micro-enterprise” by Kamara, Arslan, Kontkanen and Tarba focuses on a specific type of innovation in the construction industry in BOP African markets. The focus of examination is an innovative Finnish family-owned micro-enterprise that offers affordable housing and construction solutions in Zambia. The authors found that co-creation, co-ownership and social bricolage are the critical ingredients to this micro-enterprise strategy, which aspires to offer locally customized innovative solutions in this particular African BOP market. The authors reveal that technology and skills transfer are key to a mutual value creation and innovation. Chapter 11, “Innovation and internationalization in the Indian pharmaceutical sector: the moderating role of ownership structures” by Purkayastha, Manolova and Edelman combines insights from the strategic management, international business and corporate governance literature in this exploration of the link between research intensity and degree of internationalization under different ownership structures in the context of the Indian pharmaceutical sector. The authors test their hypotheses on a sample of 88 research-active Indian pharmaceutical firms over a seven-year period (2006–12) in a balanced panel of 616 firm-year observations. Results show that research intensity is positively associated with the degree of internationalization, and the strength of this relationship is affected by the concentration of ownership of the pharmaceutical company. Family ownership enhances the effect of R&D expenditure on the degree of internationalization, whereas ownership by domestic financial institutions diminishes the effect of R&D expenditure on the degree of internationalization.

Introduction  5 Chapter 12, “Innovation in the global pharmaceutical industry: the role of regulations in the EU” by Jedrzejewski and Dikova examines whether the EU and its regulatory peculiarities is a driving or inhibiting force to global innovation. The focus of the chapter is on the pharmaceutical industry and the goal is to assess whether the existing laws impair or enable factors that drive innovation in the industry. The authors examine the EU institutional framework in the discovery phase of a new drug, focusing on the speed and regulatory complexity of clinical trials in the EU and the process of obtaining marketing authorization in Europe. The conclusions of the investigation are that neither the regulatory status quo nor the planned regulatory changes stimulate healthcare innovation in the EU. Chapter 13, “International cooperation on technology innovation development: a case study from the maritime industry” by Solesvik presents new insights into inter-firm collaboration related to technology innovation development between maritime firms in Norway and firms located abroad. Empirical data relating to national and international inter-firm collaboration during the development of a new type of a ship that uses hydrogen as a power source is discussed. Fresh case study insights are presented relating to the motives for inter-firm collaboration and strategic alliance creation and issues relating to partner selection during the international inter-firm collaboration process. Chapter 14, “Cities and regions with special economic zones as innovation hubs within the Belt and Road Initiative” by Panibratov and Rysakova assesses the current economic policy of special economic zones (SEZs) in Russia and China within the Belt and Road Initiative (BRI) as they present an arena for innovative solutions and infrastructure development. Based on the analysis of the main Russian and Chinese SEZs and spillover effects, the authors discuss the role of cities and regions with SEZs as innovation hubs. They argue that the direct and spillover effects of SEZs can significantly improve local innovation and bring further benefits to the development of specific locations within the BRI.

REFERENCES Azar, G. & Ciabuschi, F. (2017). Organizational innovation, technological innovation, and export performance: the effects of innovation radicalness and extensiveness. International Business Review, 26(2), 324–36. Cantwell, J. (2017). Innovation and international business. Industry and Innovation, 24(1), 41–60.

2. The relationship between innovation and internationalization of SMEs: a review of theoretical perspectives Yusaf Akbar, Marco Balzano and Guido Bortoluzzi

1. INTRODUCTION The extant literature on the relationship between innovation and internationalization confronts scholars with two challenges. First, its theoretical grounding is somewhat weak – in particular, the extant scholarship treats innovation and internationalization of small and medium enterprises (SMEs) with little reference to the theoretical debates in strategy research around the relative salience of resource-based theory, network perspectives and on the linkages between strategy theory and internationalization theory. Johanson and Vahlne (1977) clarified that the typical internationalization path of an SME is characterized by gradual investments and a stepwise approach to market expansion. While such a widely accepted perspective in the literature exists, it tends to disappear when innovation is integrated into studies of SME internationalization. Outside of the International Business (IB) literature, where scholarship considers SME innovation processes explicitly, scholars frequently base their analyses on theoretically grounded paradigms such as open innovation (De Marco et al., 2020). Yet when SME innovation is related to internationalization, these paradigms are often relegated to the background of the discussion with an absence of theory-building around innovation. Our review attempts to put theory back into the discussion by coupling a systematic review of the extant literature focused on the main themes and topics to a discussion on the role of theory in the field. We also identify theoretical gaps and make a call for future scholarship to address these gaps. Many of the studies surveyed in this chapter develop causal hypotheses between variables without elaborating in sufficient detail on the theoretical grounding of such hypotheses. We argue that research in this area should focus much more explicitly on building theoretical grounding for the relationship between innovation and internationalization of SMEs. Two areas of this theoretical task are especially germane: first, the antecedents of SME innovation and internationalization and second, moving beyond linear causality between innovation and internationalization as well as considering nonlinear processes as a means of understanding SME innovation processes, on the one hand, and SME internationalization, on the other. A second feature of the extant literature is that research is centered on sequential/reciprocal causality between innovation and internationalization (the ‘chicken and egg’ problem). We think this debate is not an entirely productive one and somewhat contributes to the overshadowing of other potentially relevant themes and research questions. As there is considerable debate in the literature on the causal direction between internationalization and innovation as well as contextual factors such as institutions and networks that facilitate innovation and internationalization, our chapter surveys this literature highlighting the most important insights developed from this body of research and ends with a call for further research to refine the 6

The relationship between innovation and internationalization of SMEs  7 state-of-the-art in this area. We begin by addressing the importance of the relationship between SME internationalization and innovation. For several decades, the key focus of the literature has been on establishing a causal direction between innovation and internationalization. Are innovative SMEs more likely to enter international markets because of the superiority of their innovation-driven offerings? Alternatively, do exporters learn from foreign markets more than non-internationalized SMEs and, in turn, develop new products and new solutions out of the needs and the expectations of a greater variety of clients (Cassiman et al., 2010; Lewandowska et al., 2016)? These issues carry considerable salience for scholarship but also for adjacent practice and policymaking. If scholars can uncover theoretical and empirical insights, practitioners and public policymakers can benefit substantially. As has been extensively covered elsewhere, the contribution of SME activity to an economy is vital. An emphasis in public policy or in strategy on developing innovation capabilities in SMEs in order to promote internationalization versus one which encourages SMEs to internationalize in order to become innovative has hugely different implications for resource allocation of government policy as well as strategic decision-making and sequencing of entrepreneurs. While this chapter cannot overlook the existence of the causality theme, we aim to go beyond it and to include further themes and a range of different perspectives. There has been the useful addition of supplementary nuance to the debate such as the impact of different types of innovation in triggering the internationalization of SMEs or the deployment of novel and/ or more robust methodologies, such as big data analysis and longitudinal studies (Love and Roper, 2015). Following an extensive and systematic literature review, we have organized our discussion to address three key objectives. First is to focus on the most original and seminal contributions to the ‘chicken and egg’ debate. Second is to emphasize complementary research themes that could offer research opportunities to future researchers and third is to contribute to theoretical debates on the relationship between innovation and internationalization. In relation to our second aim, our review dedicates special attention to a number of sub-themes. One is the role of innovation and internationalization strategies as common functions and activities within firms that exert considerable impact on performance variables, such as growth, productivity or profitability (i.e., Golovko and Valentini, 2011). The purpose here is to explore synergies between innovation and internationalization activities. For example, how do innovation and internationalization promote SME growth individually or through their interaction within firms? What are the underlying antecedents that promote such growth? A similar, but quite different topic, is to examine innovation and internationalization as common outcomes of firm strategy and activities. Papers dealing with this topic do not necessarily hypothesize the existence of a causal relationship between the two strategies. However, such studies can provide useful information for scholars to better clarify the conditions that push SMEs to pursue both strategies at the same time. We also address doubts that sometimes causal and reciprocal relationships measured by scholars are statistically spurious and that causality may be driven by variables not included in their studies. The rest of our chapter is thus organized as follows. In Section 2, we present the methodology used to review the literature and provide details on how the review process was conducted. In Section 3, we present the results of our review which we organize in three sub-topics: ‘chicken and egg’, innovation and internationalization as SME strategies, and a supporting miscellaneous set of papers. In Section 4, we consider how different innovation strategies and forms influence internationalization propensities of SMEs. Section 5 considers the extant literature’s exploration of innovation and internationalization strategies and how and in what

8  Research handbook on innovation in international business manner they relate to SME performance. There is also a brief discussion in Section 6 of important papers that don’t fall into the previous categories but are noteworthy for the purposes of furthering future research. Finally, in Sections 7 and 8, we discuss the results of our review and recommend further research avenues for scholarship on this topic.

2. METHODOLOGY Our research is based on a systematic literature review approach (Denyer and Neely, 2004; Fink, 1998; Mulrow, 1994; Pittaway et al., 2004; Thorpe et al., 2005; Tranfield et al., 2003). This choice is made for the following reasons. First, in contrast with a conventional review, it allows us to synthesize “research in a systematic, transparent, and reproducible manner” (Tranfield et al., 2003: 207). Second, in systematic reviews, a core goal is to attempt to limit the subjective errors linked to individual biases in the extant literature (Mulrow, 1994; Denyer and Neely, 2004; Jesson et al., 2011). Third, in the light of the large amount of empirical literature on the interplay between innovation and internationalization in the context of SMEs, we elected to adopt a systematic approach with a view to bringing “together as many studies as possible that are relevant to the research being undertaken, irrespective of their published location, or even disciplinary background” (Thorpe et al., 2005: 258). Lastly, adopting the recommendations of Petticrew and Roberts (2008), we develop a protocol specifically focusing on the designs, source of information, tools and primary searched information. We integrated our collection of articles through a backward and forward search process, which has been identified as a key criterion for assessing the quality of a systematic literature review (vom Brocke et al., 2009). Indeed, “the process of backward search refers to reviewing older literature cited in the articles yielded from the keyword search and forward search means reviewing additional sources that have cited the article” (vom Brocke et al., 2009: 14). Thus, we adopted VisualBib1 (Dattolo and Corbatto, 2019), an advanced and real-time visual tool for simplifying the management of bibliographies. This online platform allowed us to deal with visual analytics, in order to construct, explore and evaluate the internal consistency of the linkages among citations, authors and keywords of the articles that have been selected. Consistent with the extant literature, our review process involves three main phases: data collection and refinement, analysis and synthesis. To enhance reliability of the literature review process, a number of crucial classification steps have been independently carried out by each of the authors. 2.1

Data Collection and Refinement

In line with our research question, we identified keywords for the queries using Scopus2 and Web of Science3 databases. In particular, we selected the following keywords and strings: innovati*, R&D*, internationali*ation*, export*, international AND contract*, foreign AND direct AND investment*, SME*. Furthermore, we limited our search to the related disciplines of social sciences, business and management. We cross-checked all obtained entries between

1



2



3

Available at http://​visualbib​.uniud​.it. Available at http://​www​.scopus​.com. Available at http://​webofknowledge​.com.

The relationship between innovation and internationalization of SMEs  9 the two databases to eliminate repeated citations. Our search retrieved a total of 763 articles. We exported all bibliographic data. The Document Information Elements (DIEs) of the 763 articles guided our manual selection. This was guided by an intention to focus only on those articles strictly connected to both innovation and internationalization of SMEs. To decide which citations to include, we implemented the document selection model (Wang and Soergel, 1998), consisting of selecting, reading and citing the articles on the basis of a set of key DIEs, with a clear reference to each of the nine relevance criteria outlined by Zhang et al. (2021), namely: topicality, availability, quality, completeness, authority, currency, convenience, usability and standardization. This process led to the identification of 109 articles. Then, applying the specialized views offered by VisualBib, in line with the backward and forward procedures, 16 further papers were included in the analysis, arriving at a total of 125 selected papers. Considering the systematic approach of our search procedure and the additional integration used through the visual network analysis, we argue that our sample of articles is representative of the major research streams in the literature on the topic. 2.2

Data Analysis

To provide a discussion with a fine-grained and comprehensive picture of the current debate on the interplay between innovation and internationalization in the context of SMEs, we went through a detailed analysis of each of our sample articles. During the analysis, we focused on two dimensions: the identification of current topics in the field, and the theoretical lenses that have been adopted to tackle the various topics in the selected articles. Once the six key topics and seven theoretical perspectives were outlined, we entered into a manual coding phase. We acted as reviewers and independently positioned each article according to its main theoretical approach and the tackled topics. Measures were employed for evaluating inter-rater reliability. At the end of this phase, we compared our results. The choices across the team proved to be closely aligned between us which we argue is a result of the robustness of our classification matrix. In the minority of cases where there was disagreement on classification, we discussed these cases until agreement was reached. We organized the results as follows: Section 3 is concerned with the longstanding debate on the ‘chicken and egg’ problem. Section 4 deals with the topic of innovation and internationalization processes and examines different modes of innovation (open, disruptive, etc.) and internationalization (e.g., exports). Section 5 is concerned with the topic of the symbiosis between innovation and internationalization and the SME performance outcomes. Section 6 collects miscellaneous and previously unclassified contributions.

3.

THE ‘CHICKEN AND EGG’ PHENOMENON: WHICH COMES FIRST, INNOVATION OR INTERNATIONALIZATION?

In this section, we explore the nature of the relationship between SME innovation and internationalization. In the extant literature, there is a vibrant, ongoing debate on the way in which innovation and internationalization interrelate. There is a clear consensus in research on the existence of a correlation between innovation and internationalization. However, the direction of causation remains very much up for debate. In this context, there are three dominant perspectives. First, there is a stream of research that builds on the mutual causation hypothesis

10  Research handbook on innovation in international business (e.g., Bernardini Papalia et al., 2018; Damijan et al., 2010; Freixanet et al., 2020; Lachenmaier and Wößmann, 2006). Second, several studies show that innovation is in fact an antecedent of internationalization (e.g., Bortoluzzi et al., 2018; Hsieh et al., 2019; Prange and Pinho, 2017; Roper and Love, 2002; Yang et al., 2004). Third, while less common, there are a few studies that present evidence that supports the reverse logic, that internationalization is rather an antecedent of innovation (e.g., Golovko and Valentini, 2011). In broad terms, recent studies have confirmed the linkage between innovation and internationalization, but have suggested that the type of relationship that exists could depend on the type and degree of innovation (Fassio, 2018; Lefebvre et al., 1998; Saridakis et al., 2019) and internationalization modes (Ren et al., 2015). The extant literature characterizes the relationship between SME innovation and internationalization as somewhat similar to a ‘chicken and egg’ dilemma, namely which comes first: innovation or internationalization? This point is far from trivial in both theoretical and empirical terms. In order to provide a comprehensive picture of this phenomenon, we structure our coverage of this topic as follows. First, we propose relevant studies which place an emphasis on the co-causality idea. Second, we dedicate one section each for the two unidirectional hypotheses. In each of the three sections, we present the main theoretical lenses that have been adopted, as well as some key insights from empirical analysis and ex-post explanations of the results. 3.1

The Mutual Causation Hypothesis

This hypothesis posits that innovation and internationalization co-influence each other. This might happen because internationalizing SMEs may have a tendency to employ knowledge inputs, such as innovation and, in parallel, access larger flows of ideas coming from the more varied international markets and contexts, as found by Pittiglio et al. (2009) and then confirmed in later work by Esteve-Pérez and Rodríguez (2013), Halilem et al. (2014), Damijan et al. (2010), Ferraris et al. (2019), also across several industries (Lachenmaier and Wößmann, 2006) and in the context of emerging countries (Lee and Hemmert, 2021). Some of the studies we reviewed share a knowledge management and organization theory approach to amplify the co-causality between integration of external and internal knowledge. For example, Damijan et al. (2010) observe a close connection between internationalization decisions and innovation activities. Their study supports the idea that learning effects from exports increase the innovativeness of SMEs which in turn plays a proactive role in the development of the process of internationalization (along similar lines, see also Gkypali et al., 2021). Through a focus on organizational learning, Freixanet et al. (2020) examine reciprocities of the causal relationship between internationalization and innovation. The process of organizational learning is clearly a complex one. Even if a mutual causation hypothesis is supported by their analysis, the authors point out that a complex circular system is sometimes created. Patterns of interaction are widely influenced by the type of innovation, the internationalization modes and the pursuit of adaptive or generative learning. We believe that research efforts of this kind represent a promising approach to consider the causal relationship. Further findings are reached through the adoption of alternative overarching hypotheses. For instance, resource-based view (RBV) and dynamic capabilities approaches are central in the contribution by Oura et al. (2016). This study supports the stronger role played by international experience in determining internationalization, rather than innovation capacity. These

The relationship between innovation and internationalization of SMEs  11 findings suggest that the relationship between innovation and internationalization has been hitherto overemphasized by the extant literature. The study calls for further investigation on an alternative explanation to illustrate the interactive nature between these two variables among different countries, as well as to admit the possibility that alternative (and correlated) variables induce an increase in both innovation and internationalization levels alike. Building on RBV theory, Singh and Kota (2017) observe a positive correlation between the two dimensions, pointing out that there could be other factors to be investigated for a better comprehension of the nature of the interaction (specifically, they focus on the cross-differences among family and non-family businesses). Castaño et al. (2016) offers a convincing argument when they claim that “potential competition positively affects product innovation, and indirectly affects the internationalization of entrepreneurs in the service sector. Furthermore, in the case of innovative entrepreneurs, economic activity stimulates the search for new market niches. Companies with competent personnel and new technologies innovate more and choose to internationalize in their first years of operation” (p. 1695). Other papers worth exploring that support the mutual causation hypothesis are studies by Hessels (2007), Filipescu et al. (2013) and Bernardini Papalia et al. (2018). Finally, both Saridakis et al. (2019) using data from SMEs in the UK and Exposito and Sanchis-Llopis (2019) using Spanish SME data explore the intertwined nature of the relationship between innovation and internationalization and they find it to be dependent on both the type of innovation and its relative degree of novelty. 3.2

Innovation as an Antecedent of Internationalization

The first of two linear sources of causality in the extant literature argues that innovation is an antecedent of SME internationalization. A representative piece of research in this direction is Roper and Love (2002) which focuses on the determinant of the export performance of UK and German manufacturers. In both countries, innovation is found to be positively related to exports. It is also interesting to consider the findings of Cassiman and Golovko (2011). They show that innovation (specifically product innovation) not only plays a direct effect on internationalization, but it also indirectly influences it through a mediating impact on levels of firm productivity. In line with this research, Bell et al. (2004) detect that both product and process innovation are critical stimuli for international expansion of SMEs. These results are also consistent with Arslanagic-Kalajdzic et al. (2017), showing that product innovation capability could enhance exports, if the SME possesses a requisite level of international experience. Adopting an RBV approach, Nguyen et al. (2008) and de Vasconcellos et al. (2019) both show how different types of innovation have a determining role in increasing SME exports. In the same theoretical stream, Nassimbeni (2001) highlights the role of innovative organizational capabilities to enhance the internationalization process (with particular reference to exports). Again from a resource-based perspective, Filatotchev et al. (2009) argue that R&D and technology transfer, as well as the presence of a consolidated network, favor the export orientation of Chinese SMEs. Veglio and Zucchella (2015) analyze the impact of innovation (considering different typologies and sources) in the internationalization performance. In particular, they find a strong and positive effect played by design innovation, with other types of innovation playing a much less remarkable role. It is interesting to compare these findings with those of Kunttu and Torkkeli (2015), which uncovered a significant and positive role for service innovation in the overall improvement of international performance. Thus, much may depend on how internationaliza-

12  Research handbook on innovation in international business tion is measured, and which stage of the internationalization process SMEs are at. However, as Azari et al. (2017) discuss, the strategic posture SMEs assume is determinant in the activation of innovation-based international growth strategy. Falk and de Lemos (2019) introduce labor productivity into the analysis. In an important contribution to our understanding of this debate, their longitudinal study consists of the creation of a panel of 17,168 SMEs in Austria from 1995 to 2011. Both innovation and labor productivity are found to positively predict the likelihood of SMEs engaging in export activities. Another recent longitudinal study worth considering is Eerme and Nummela (2019). It bridges open innovation with internationalization theory to explain how collaboration in knowledge development is one of the main drivers of international expansion. In fact, internationalization expansion is not found to be driven by an increase in market knowledge. Rather, it is determined by R&D efforts, in a cyclical and non-linear process, widely based on co-creation mechanisms. Relatedly, Kriz and Welch (2018) elaborate on the internationalization patterns by emphasizing how new technologies accelerate internationalization dynamics of SMEs. Further empirical work provides support for this idea (see e.g., Aw et al., 2007; Celec et al., 2014; Lefebvre et al., 1998; Monreal-Pérez et al., 2012; Van Beveren and Vandenbussche, 2010; Zucchella and Siano, 2014). As should be clear at this point of the review, SMEs that internationalize engage in a complex set of multifaceted and related processes. Innovation seems to play a critical role, but it is not the only one. For instance, Falahat et al. (2020) emphasize the role played by market intelligence, pricing, and marketing capabilities in the pursuit of enhanced international performance. An interesting moderator is IT endowments possessed by firms. A recent study by Lecerf and Omrani (2020) found that the implementation of enterprise resource planning and electronic customer relationship management systems acted as positive moderators on the relationship between innovation and internationalization. Not all research supports these findings with more studies diverging from this theory. In contrast to the idea that innovation positively affects internationalization, Wakelin (1998) found that non-innovative SMEs are more likely to export than their innovative counterparts. Wakelin argues that these findings are a consequence of the fact that “the cost of entering export markets is higher for smaller firms, which thus prefer to stay in domestic markets”, since “smaller innovative firms with one or two innovations are less likely to export, and more likely to service the domestic market alone than the equivalent non-innovative firms” (p. 839). In a more recent study, Baier-Fuentes et al. (2021) concluded that a lack of knowledge, seen as a key driver of innovation, drives firms to intensify their external collaboration thus accelerating the internationalization process. 3.3

Internationalization as an Antecedent of Innovation

Contrary to Section 3.2, a second sub-stream of the literature provides rich empirical evidence of how internationalization processes force SMEs to innovate. Boso et al. (2013) show that when SMEs engage in a process of internationalization, they face higher levels of environmental dynamism. To cope with such sources of uncertainty, they attempt to enhance their competitiveness through product innovation practices. Similarly, Ren et al. (2015) find that internationalization positively affects innovation performance, and that this relationship is positively moderated by R&D capabilities and marketing skills. In their exploration of the effects of internationalization on innovation performance, Genc et al. (2019) find that interna-

The relationship between innovation and internationalization of SMEs  13 tionalization has great predictive power of innovation performance, and that this relationship is largely mediated by market and entrepreneurial orientation. This internationalization– innovation hypothesis that internationalization exerts a positive influence on innovation is a corollary of a broader learning-by-exporting argument (Bratti and Felice, 2012). Using a firm-level database on Italian manufacturers, Bratti and Felice find that firms constantly engaged with exports have a greater likelihood of introducing product innovations than their non-internationalized counterparts. Last but not least, a study by Fassio (2018) is noteworthy in this regard. Fassio analyzes the relationship between SME exporting activity and innovation performance across several countries (France, Germany, Italy, Spain and the UK). He shows that in addition to technological learning effects, foreign market experiences of SMEs push the introduction of product innovations. Overall, we believe that this third section offers promising and potentially productive avenues for future research. When SMEs expand their market scope, they have to cope with new challenges, partly connected with market specific factors. To grow and prosper, they need to innovate their businesses and adapt their paradigm to the different contextual factors that they face in international markets.

4.

INNOVATION AND INTERNATIONALIZATION PROCESSES

In previous studies reviewed above we have already referred to the impact of different kinds of innovation and internationalization processes. We go into more detail in this section, conscious of the fact that boundaries between clusters are not rigid and several of the papers we have already reviewed could have fallen into multiple clusters. At the outset, it is important to emphasize that given their relative size, SME internationalization typically takes the form of exporting rather than equity-based internationalization such as wholly or partially owned subsidiaries, joint ventures and the like which are more frequently associated with larger international firms. In fact, the empirical literature we surveyed reflects this reality. Broadly speaking, the literature is especially concerned with looking at whether different types of innovation activity (e.g., product vs. process innovation) exert differential impacts on the propensity of SMEs to internationalize. Among the literature surveyed there are a few multi-country studies which offer more comprehensive cross-country comparisons as well as a large number of single country studies. These latter studies are mainly centered on datasets collected in developed economies (such as Germany, Italy, Spain, Sweden and the UK) with a minority of studies examining similar phenomena in developing economies. Irrespective of study design, evidence is provided on how different types (product vs. service innovation), modes (R&D vs. non-R&D related) and speed of innovation activities broadly influence export capacity of SMEs. The empirical message is fairly unequivocal – the more innovative an SME is, the more likely it is to export. Last but not least and albeit much less prevalent, there is also coverage of the reverse causality too (i.e., how export activities foster innovation types which shows that participation in exporting drives innovation as well). To begin with, in a comprehensive study examining German exporting SMEs, Rammer and Schmiele (2008) look at different stages of the innovation process (R&D, design, production and sales of new products, and implementation of new processes) and explore the role of internal resources, home market competition and innovation-related location advantages on an SME’s decision to undertake innovation abroad. Their results indicate that both export

14  Research handbook on innovation in international business experience as well as experience in knowledge protection encourages international innovation activities of SMEs. Strong domestic market competition, however, presents obstacles to innovation. High innovation costs stimulate internationalization of non-R&D innovation activities, and shortages of qualified labor reduce production of new products. R&D activities abroad and exports of new products spur firm growth in their domestic market. Other scholars have developed similar findings in more limited single-country settings. For example, drawing on a sample of 88 Spanish exporting firms belonging to the ceramic tiles industry, Flor and Oltra (2005) consider the influence that a firm’s technological activity exerts on its export performance. Identifying different capabilities that the firms may develop to manage their innovation process, they show that investment in a variety of internal non‐R&D innovation activities (e.g., engineering design and pre‐production) have a positive influence on export performance. Their findings also show that production capabilities have a positive effect linked to both improvement and imitation of products and processes. Caldera (2010) investigates the relationship between innovation and the export behavior of firms using data from a representative panel of Spanish firms between 1991 and 2002. The results uncover heterogeneous effects of different modes of innovations on export propensity. In particular, product upgrading appears to have a larger effect on the firm export participation than cost-saving innovation. In a third Spanish study, Esteve-Pérez and Rodríguez (2013) analyze the joint dynamics of exports and R&D using data from a representative sample of SMEs in Spanish manufacturing over the 1990–2006 period. They find that engaging in export activities leads to increased R&D activities. The results hold for both alternative modes of internationalization (i.e., imports) and innovation modes (product and process innovation). Añón Higón and Driffield (2011) consider the factors explaining export propensity of UK SMEs based on a 2004 Annual Small Business Survey. They distinguish explicitly between product and process innovation in their analysis of the innovation–export performance relationship. UK businesses that export are also characterized by high levels of innovation activity (43 per cent of exporters innovate in products, 27 per cent innovate in process while 21 per cent innovate in both). When they examine product and process innovation independently they both impact positively on the decision to export. However, once they consider the interdependence between both innovation activities, they discover no clear proof that process innovation increases the propensity to export to a greater degree than product innovation. In a second UK-focused study, Gkypali et al. (2021) examine exporting choices of UK micro, small and medium enterprises. They consider how different types or modes of innovation impact on export propensity. They find that product and process innovation have different effects on export capability and exporting, respectively. In particular, the effect of product innovation on productivity is negative at least in the short term. D’Angelo (2012) considers innovation measures on the export intensity of Italian high technology SMEs. Using a sample of Italian firms operating in the high-tech settings, empirical results revealed that R&D employees do positively and significantly impact the export intensity of firms, whereas R&D expenditures do not; links with higher education as external R&D partners has a positive influence on the export intensity of SMEs and product innovation as well as the revenues derived from innovation activities positively and significantly affect the export intensity of firms in our sample. Imbriani et al. (2014) explore whether innovating and targeting the upper-quality segment of markets increased Italian SMEs’ probability to export. The most interesting results came from the introduction of interaction terms where they found evidence of ‘super-additive effects’, which delineate linkages between product innovation

The relationship between innovation and internationalization of SMEs  15 activities and quality strategy. Morone et al. (2013) estimate the effect of innovation on export growth for a sample of Italian small and medium size manufacturing firms. They define two modes of innovation (technological and non-technological) and found that both technological and non-technological innovations increase export propensity, the former being doubly relevant than the latter. Azar and Ciabuschi (2017) examine the relationship between organizational and technological innovations and firm export performance which they test on data drawn from export-intensive Swedish firms. They find that organizational innovation enhances export performance both directly and indirectly by sustaining technological innovation. Moreover, they show how organizational innovation enhances both the radicalness and extensiveness of technological innovation although, notably, only extensiveness is actually beneficial for export performance. This research fills a gap on examining the links between different types of innovation and export performance and in doing so contributes to the international business literature by generating new evidence regarding the mechanisms through which organizational and technological innovations may improve export performance. In a second study on Sweden, using two waves of Swedish data, Tavassoli (2018) estimates the influence of the innovation output of a firm on its export propensity and intensity, respectively. The study uncovers that the innovation output of firms exerts a positive and significant effect on export propensity. The results also show that it is indeed innovation output, rather than innovation input that matters for export behavior of firms. Last but not least, in a study of US manufacturing firms, Lim et al. (2006) emphasize the role (especially the speed) of new product development as a specific innovation mode in facilitating export growth. They show that the ability to develop competitive products faster than competitors is a prerequisite for export expansion. This implies that new product development cycle time measures were significantly related to the perception of a firm’s overall competitive position in global markets. When it comes to empirical studies of developing countries, Lo Turco and Maggioni (2015) model the effect of process and product innovation on Turkish firms’ first time export entry in foreign markets. Product innovation matters in particular for exporting to developing economies, while process innovation reinforces the role of product innovation for exporting to richer markets. Lamotte and Colovic (2013) investigate the relationship between innovation and internationalization in young entrepreneurial firms, based on data from the Global Entrepreneurship Monitor and the World Bank for 64 countries during the 2001–08 period. The main conclusions of the study uncover a greater impact for product innovation than for process innovation. Hwang et al. (2015) use Korean Innovation Survey (KIS) data from 2005, 2008 and 2010 to estimate the relationship between firm size, innovation type and export performance with different time spans. They find that firms could improve their export performance if they carried out both product and process innovations simultaneously. In a similar fashion, Lewandowska et al. (2016) show that combining product and process innovation increases new product export intensity in their extensive survey of Polish firms. Seen through an Uppsala model lens on data collected in Chile, Geldres-Weiss et al. (2016) analyze the role of innovation in exporting by considering the role of export product innovation and export market innovation in experiential knowledge acquisition. The study finds that experiential knowledge resulting from exporting to different and geographically distant markets increases the firm’s export activity. Secondly, such export market innovation takes precedence over export product innovation.

16  Research handbook on innovation in international business Both Hsieh et al. (2019) and Exposito and Sanchis-Llopis (2019) explore a comprehensive impact of different types of innovation on export-oriented SMEs. They consider how innovation introduced by these firms determines the entrepreneurial decision-making process regarding whether to engage in exporting and/or importing. Their results confirm an interrelationship between exporting and importing decisions. Furthermore, these decisions should be jointly estimated when exploring the impact of alternative types of innovation (product, process, and organizational/managerial innovation) on said decisions. Their research highlights a complementarity between different types of innovation to be relevant in explaining export and import decisions made by SMEs. Specifically, cumulative effects as a result of combining product and process innovation, as well as of product, process and organizational innovation, are highly significant in explaining export decisions, while in the case of imports, the combination of product and organizational innovation is shown to be significant.

5.

INNOVATION AND INTERNATIONALIZATION: SYMBIOSIS AND FIRM PERFORMANCE

A second main topic we identify in our chapter is related to innovation and internationalization as determinants of performance. In particular, studies dealing with SME performance are of interest because they presume the existence of symbiosis between innovation strategies and the internationalization process of SMEs, and they discuss the impact that such a symbiosis may have for firm performance – typically focusing on growth and productivity. As regards studies dealing with innovation and internationalization induced by other factors, these studies develop an alternative perspective to the ‘chicken and egg’: namely that strong correlations (and even causation effects) between innovation and internationalization may be somewhat illusory and may, in reality, be caused by variables outside the model that exert a common influence on both the variables. The topic is organized in the following three subsections: the first is dedicated to innovation and internationalization as simultaneous strategies; the second examines innovation and internationalization as being the consequence of other factors in the firm’s activities and strategies. The third is dedicated to papers that synthesize the two previous topics, such as the internationalization of R&D activities, the role of exports in supporting international innovation activities and even more complex relationships between innovation- and internationalization-related aspects that go far beyond the reciprocal causation discussed in the previous topic on ‘chicken and egg’. 5.1

Innovation and Internationalization as Simultaneous Strategies

Is the simultaneous pursuit of innovation and internationalization strategies always beneficial to SMEs? The literature is less optimistic than it could be assumed. Or, at least, it shows that the effect can be positive, but under specific conditions. Di Cintio et al. (2017: 848) use data from 5,445 observations originating in different waves of a survey conducted by the national financial institution Mediocredito on Italian SMEs. They conclude that “changes of the conditional firm growth distribution driven by firms’ R&D activities are slightly more pronounced if firms are not active in international markets” (p. 848). In other words, while pure R&D investors grow significantly more than non-investors, R&D investors that are also

The relationship between innovation and internationalization of SMEs  17 active in export activities paradoxically struggle to grow. How can this effect be accounted for? According to the authors, such an explanation is to be found in the harsher competition that firms face when competing in a broader market context. The theme of the potential contradictions arising from the simultaneous pursuit of innovation and internationalization strategies for the growth process of SMEs is the central theme of an empirical study carried out by Battaglia et al. (2018) involving 221 high and medium technology Italian SMEs. Their empirical results support their assertions that the two objectives can create tensions at an organizational and at the managerial level, which in turn result in poor growth. In particular, when SMEs are highly internationalized (expressed in terms of export sales as a ratio of total sales), the impact of R&D investments on revenue growth is negative. The interesting thing is that this does not hold universally true but only just for the youngest SMEs in the sample in their paper. Indeed, they show that more experienced SMEs (having at least ten years of experience) seem to better manage the conflict contradictions between innovation and internationalization and to exploit the full potential coming from the synergistic symbiotic deployment of the two strategies. Among the studies confirming the positive effects of the two strategies, but only under specific circumstances, the study by Booltink and Saka-Helmhout (2018) examines the role of R&D investment as a driver of performance in high-tech SMEs and finds that such a role cannot be taken for granted. They show that an inverted U-shaped relationship connects R&D intensity to performance among such firms. However, such a relationship is further shaped by the level of internationalization of the SME that acts as a moderating variable. They conclude that a combination of high levels of R&D investment and internationalization represent a booster of SME performance. Drawing on a dynamic capabilities perspective, a recent study by Battaglia and Neirotti (2020) shows that both the scope of innovation and of internationalization activities matter in driving SME profitability. In particular, in the presence of open innovation strategies (in terms of particular, collaborative initiatives with universities and research centers) and wide (many multiple markets) international experience, simultaneous SME involvement in R&D and export activities exerts a positive impact on the profitability of SMEs. Finally, some studies are fully optimistic about the complementarities of the two strategies. Aw et al. (2007) use longitudinal data to analyze the effect of R&D investments and exporting on the productivity of SMEs, focusing in particular on their future productivity. The study highlights that SMEs pursuing both strategies (investing in R&D and exporting) report higher productivity gains in the future than those firms that do one or neither. But the beneficial effects do not stop there. Indeed, firms pursuing such combined ambidextrous strategies are also more likely to continue intensifying investment in R&D and extend export expansion, thus leading to further gains in productivity. In a similar fashion in a Spanish context, Máñez et al. (2015) checked the effect of export and R&D experience on the future productivity of SMEs in the period 1990–2009 and found that both the variables significantly affect future productivity. They also demonstrate that in this case, the effect is self-reinforcing over time. What if the combined effect of innovation and internationalization on SME productivity performance is, in reality, a process of consecutive causation? This is the hypothesis advanced by Henley and Song (2020) and involving a sample of micro-firms (SMEs with fewer than ten employees). The empirical results from their sample support the claim that innovation promotes exporting also in such specific firms and that, in turn, exporting positively reinforces their productivity.

18  Research handbook on innovation in international business At the same time, and in partial contrast to studies focusing on larger SMEs, no significant relationship was found between innovation and productivity. Similarly, Bolívar-Ramos et al. (2020) check whether the combination of export and innovation has a significant effect on growth capabilities of Spanish SMEs. Through an analysis of panel data they conclude that firms simultaneously engaging in exporting and technological collaborations are able to achieve higher growth rates than those firms that engage only in export, only in technological collaboration, or in neither of the two. 5.2

Innovation and Internationalization Induced by Other Factors

In contrast to the research surveyed in Section 5.1 which looks to explain SME performance by examining the simultaneity of innovation and internationalization or to a more limited degree the sequential interdependence of innovation and internationalization as explaining SME performance, this section covers research that looks for other factors that explain innovation and internationalization propensities, such as entrepreneurial orientation, firm size, governance structure and networking capabilities. Some of the literature focuses only on how other factors explain these propensities while others go further and draw specific inferences for SME performance. This batch of the literature provides compelling evidence of a wider range of forces at play in the SME internationalization and innovation debate. A study by Denicolai et al. (2015) succinctly summarizes the central topic of this section. The authors develop a sample composed of 88 Italian SMEs which are clustered into three groups: (a) family firms, (b) team-founded firms and (c) businesses led by solitary self-made entrepreneurs. What they discover is that innovation and internationalization strategies of such SMEs reflect differences in their governance structure and, given the small size of the firms involved, the characteristics of the entrepreneurs or funding teams. While family-firm SMEs (group a) are less internationalized and more focused on product innovation, team-founded SMEs (b) do the opposite and combine intensive internationalization with extensive innovation strategies. The third group (c) is more peculiar. Such businesses show good levels of both product and process innovation combined with moderate levels and scope of internationalization. Chetty and Stangl (2010) carry out a similar study but focus on the networking ability of SMEs as antecedents of their innovation and internationalization results. In this case, four types are identified out of ten firms involved in the study. Their results show that the type of network relationships managed by SMEs impacts on the type of innovation and internationalization strategies that it pursues. SMEs with a narrow limited network of relationships mainly pursue incremental internationalization paths and incremental innovation strategies, while SMEs managing diverse and more extensive network relationships are capable of pursuing both radical internationalization and innovation paths. Employing a similar research design, but making use of a quantitative methodology, Nyuur et al. (2018) compare the domestic network structural attributes (centrality, density) of a sample of Croatian SMEs and the impact of such attributes on the internationalization of strategic innovation and adaptiveness in the host country. Their results support the existence of a moderating role exerted by domestic network informality on the relationship between specific network attributes and the levels of international innovation. The moderating role is key, since no direct impact of network density and network centrality on SME international innovation and strategic adaptiveness was found. A study by Pla-Barber and Alegre (2007) focusing on the biotech industry involved a sample composed of 121 biotechnology firms. The authors

The relationship between innovation and internationalization of SMEs  19 wanted to understand whether a resource endowment of a firm (proxied by firm size, as is commonly adopted in the literature) could explain its innovation levels and its export intensity. Their results rejected this hypothesis: size does not matter in biotechnology. However, in the context of our review, a positive association between innovation and internationalization was found for this sample of firms. Fernández-Mesa and Alegre (2015) look at the role of entrepreneurial orientation (EO) in driving the export performance of the SME. What they found is that EO, per se, is not sufficient to drive smaller firms to internationalize. However, when coupled with innovation, EO encourages a higher influence on export performance thus suggesting the idea that a mutual reinforcement exists between EO, on the one hand, and innovation and internationalization, on the other. Using a more comprehensive framework, Vuorio et al. (2020) use a ‘sandwich approach’ to understand on the one hand (a) what causes higher internationalization and (service) innovation in SMEs and, on the other hand (b) to what extent both strategies impact on the same firms’ profitability levels. In relation to the antecedents (a), the authors focus their attention on EO and human capital. The results of their study provide support to the hypothesis that EO matters for service innovation and internationalization, while human capital does so only for innovation. As regards the outcome of the two strategies, the scholars were able to support the hypothesis that service innovation is related to higher profitability, while internationalization is not. On the contrary, internationalization appears to have a negative impact on profitability. Differently from the mainstream literature focusing just on the export strategies of SMEs, the study by Villar et al. (2020) offers empirical support for the existence of a double relationship between the adoption of a complex entry mode (like foreign direct investment, joint venture and strategic alliances), organizational innovation and, in turn, firm performance. Their supporting argument is that a ‘heavy’ internationalization mode often entails deep organizational changes in an SME business model, in the distribution channels and in the system of partnerships. Such innovation, in turn, provides support for the firm’s sources of competitive advantage and ultimately, to its performance. Interestingly, similar arguments do not hold for ‘light’ entry modes (like direct and indirect export) that do not show significant relationships with innovation (technological) and performance. A study by Freixanet et al. (2020) uses panel data to compare family vs. non-family firms and to check whether the family governance and technological capabilities may influence the firms’ ability to turn the knowledge coming from the learning by exporting into process or product innovation. The authors find that “family firms that are more technologically endowed are better suited to identify this new knowledge, assimilate it and use it to boost their innovation output in terms of their product-process choice” (p. 20). Hätönen (2010) looks at the role of outsourcing strategies in influencing and facilitating SME innovation, internationalization and growth processes in the software industry and finds that outsourcing allows SMEs to capitalize external production-related resources that may provide several benefits (both direct and indirect) for the reach of the previous goals. Finally, a study by Bagheri et al. (2019) addresses the joint themes of innovation and internationalization by examining the impact of internationalization orientation (both inward and outward) on the international performance of SMEs as mediated by the technological innovation ability of the same firms. The empirical investigation involved 116 SMEs based in the UK and found support for the hypothesis that technological innovation mediates the impact of internationalization orientation on the international firm performance. The mediating effect is higher when SMEs exhibit a moderate level of technological innovation.

20  Research handbook on innovation in international business 5.3

Complex Syntheses of Innovation and Internationalization, and Performance Implications

The third category of research would appear to be a prima facie reprise of the ‘chicken and egg’ stream in the literature earlier in this chapter. That would, however, be a mis-characterization of this sub-stream. In fact, this last set of papers seeks to explore more complex interdependencies between innovation and internationalization rather than the simpler arguments around which induces which. A study by Kyläheiko et al. (2011) checked the role of a firm’s technological capabilities and its appropriability regime, proxied by the available intellectual property rights (IPRs), in driving internationalization and innovation as two ‘growth-seeking strategies’ with a view to examining the impact of such strategies on realized growth and profitability as performance indicators. All hypotheses in the model held with the exception of the role of IPRs in driving the international growth of SMEs. Thus, ownership of patents, licenses and/or trademarks was not associated with significant export performance of firms. On the other hand, results revealed that innovators focusing on their domestic market only experienced higher growth than international innovators, in line with the results of the later study by Di Cintio et al. (2017) examined above. Similarly, after surveying a sample of 335 French firms, Lecerf (2012) found technological resources to act as a common driver of both innovation and internationalization strategies of SMEs and, in turn, found them both to be responsible for fueling business growth. Cassiman et al. (2010) analyzed a panel of Spanish manufacturers and found empirical evidence of the fact that product innovation positively affects SMEs’ productivity and, in turn, increased productivity may encourage non-exporting firms to enter foreign markets. Complex interdependencies between innovation and internationalization are also at the core of the study carried out by García-Cabrera et al. (2017). The authors look at the probability (or ‘propensity’ in the original study) that an SME will end up in being an exporter and whether to choose between (a) becoming a born global or (b) following a traditional, and stepwise, process of internationalization. Their results indicate that an SME’s technology-related capabilities encourage firms to export and also to do that early and fast (thus, acting as a born global). However, such a result depended also on the export levels of the region where the SME is located (a proxy for export spillovers used by the authors). On the contrary, import spillovers (proxied by levels of imports in a region) do not exert the same effect, thus suggesting that the inbound and outbound international activity of firms in a region do not exert similar knowledge spillover effects in other companies: while high exports levels (combined with technological capabilities) encourage individual SMEs to export, import levels do not. A theme at the crossroads between innovation, internationalization and performance is the one of the international success of SMEs’ innovation and R&D activities. In a qualitative study involving five SMEs, Davcik et al. (2021) discuss the impact of SMEs’ technological and marketing capabilities on R&D international diffusion and performance. Results show that medium-sized firms can be highly organized and effective in making their R&D activities successful internationally. Similarly, the study by Rammer and Schmiele (2008) shows that SMEs’ experience in export and in knowledge protection has a key relevance to SME support and ensures the success of international innovation activities. Notwithstanding all the caveats deriving from the limited sample used for a qualitative study carried out by Galina et al. (2016), the authors found deep differences in the innovation management practices of

The relationship between innovation and internationalization of SMEs  21 internationalized firms located in developed markets from the ones used by firms located in developing markets. 5.4

Miscellaneous Contributions

Having covered the main vectors of internationalization and innovation in our paper selection, we now turn to two papers that were outliers in our review. One examines the broader, country-level institutional impact on innovation and internationalization (Martínez-Román et al., 2019) and the other tackles the issue of long-run survival of the sui generis category of small firms: born globals (Sui and Baum, 2014). We turn first to Martínez-Román et al. (2019) who analyzed a very broad dataset comprising 123,395 surveys of firms in 13 European countries. While the results in the study replicate findings in other papers we surveyed on the role of firm-specific variables in the innovation–internationalization context, the comparative analysis also shows important variance in technology levels in industries (high versus low), and, on a larger, aggregate level, differences between developed West European firms and their counterparts from transition economies in Central and East Europe. The study reveals a disconnect between firms and the institutional context in the set of countries where they operate. The implication of their work is that broader institutional contexts impact both innovation and internationalization capabilities where poorer, less institutionally developed countries create greater challenges for SMEs in these countries compared to their counterparts based in more developed economies. The study also showed that, in a broad sense, business risk in geographic market extension is not an important consideration when firms are more innovative. However, they found significant differences between countries insofar as the impact of innovation and its relative utility in market extension strategies. Sui and Baum (2014) considered whether ‘born global’ internationalization modes strengthen or undermine an SME’s possibilities of organizational longevity in export markets, arguing for a gap that needs to be filled in the extant literature about what drives their survival in export markets. They posit that different theories generate contradictory predictions as to whether ‘born global’ international expansion is superior to ‘born regional’ internationalization or stepwise internationalization. Drawing on a longitudinal Canadian data set of almost 2,000 newly founded SMEs (from 1997 to 2005), they revealed that no single strategy by itself is better. In fact, they found that internationalization strategy moderates the relative importance of resources to SMEs’ longevity internationally. While resources are important for the longevity of all SMEs in the data sample, the relative salience of spare resources and innovation were most associated with born global firms followed by born regional firms and were the least important for stepwise internationalizing SMEs.

6.

DISCUSSION AND FURTHER RESEARCH AVENUES

After reviewing the literature on SME internationalization and innovation, we are left with an overwhelming sense that while several empirical studies have provided support for the causation between innovation and internationalization (the ‘chicken and egg’ problem notwithstanding) as well as developing causal linkages between innovation and internationalization (in isolation or in concert) on SME performance both of which have generated valuable

22  Research handbook on innovation in international business empirical insights, a great part of work surveyed doesn’t seem to be grounded in clear and rigorous theoretical foundations. Much of the extant literature is built on somewhat loose, intuitive hypothesis testing, and data mining efforts. In the following section we now discuss the results of our review through an explicit theoretical lens highlighting the conceptual gap in the extant literature. We start with RBV followed by dynamic capabilities, network factors and institutional issues. 6.1

The Resource-based View (RBV) of Strategy

Our survey of the literature demonstrates that implicitly, the RBV of strategy is the dominant theoretical lens in the field, yet treats resources and capabilities as somewhat of a black box phenomenon. In particular, while the resources and the capabilities that trigger and support innovation and internationalization efforts of SMEs are varied (e.g., Castaño et al., 2016; Zucchella and Siano, 2014), this research rarely refers to the role played by specific and idiosyncratic resources and capabilities as factors in the sequential (or contextual) activation of either. Exceptions to this general observation include the introduction of new technologies to the SME that might trigger both market expansion and the realization of new products and services (Castaño et al., 2016) and the managerial prowess of executives to promote both (Bernardini Papalia et al., 2018). Furthermore, evidence is missing on effects that some resources may impose in the hindrance of both innovation and internationalization. We know that absorptive capacity enhances the ability of SMEs to integrate new knowledge with existing knowledge from newly entered markets and to translate such knowledge into newly developed products and services (i.e., Ali et al., 2020). Yet inadequate leadership styles, poor information sharing mechanisms or the absence of organizational routines may undermine the role played by absorptive capacity in translating internationalization achievements into innovation-related ones. We thus need more evidence on the ‘dark side’ of how resources and capabilities weaken internationalization and innovation strategies of SMEs. Similarly, papers using RBV to explain the relationship between innovation and internationalization as simultaneous strategies start from the assumption that common resources and capabilities can support the two and also that the two strategies may reinforce each other. This is potentially problematic in the case of SMEs that suffer from resource constraints and consequently face substantial investment trade-offs over resource allocation between internationalization and innovation initiatives. For example, investments in R&D and innovation-related resources may conflict with expansion plans in foreign markets as discussed by Di Cintio et al. (2017) since SMEs would find it hard to do both. In such situations, SMEs, especially younger and smaller ones, could be forced to reject a simultaneous deployment of innovation and internationalization-related investments giving precedence to one over the other (Battaglia et al., 2018). Further research, especially of a qualitative nature, could be developed in order to understand whether the process of acquisition and development of resources represents a strategic burden for SMEs forcing them to prioritize one of the two strategies. As observed by Wakelin (1998: 838), “it is possible that many innovative firms with high average salaries and thus high skills and low unit labour costs are choosing not to enter export markets” thus delaying their process of internationalization. Another critical aspect concerns innovation and internationalization modes. In particular, many studies focus on needed resources and capabilities

The relationship between innovation and internationalization of SMEs  23 to execute these strategies. Rammer and Schmiele (2008) investigate how internal resources affect the modalities in which SMEs opt for a broad innovation. Conversely, few studies focus on larger SMEs, and how these resources activate internal processes for innovation and internationalization at a micro-foundational level, and how this micro-foundational wave is then manifested at a broader organizational level. 6.2

Dynamic Capabilities, Innovation and Internationalization

By their very nature, dynamic capabilities exert profound impacts on innovation and internationalization. For example, SMEs adopting dynamic knowledge management strategies become more sensitive to market opportunities, as well as more able to exploit them (Ferraris et al., 2019). If seen through the lenses of dynamic capability theory, namely ambidexterity, the simultaneous pursuit of innovation and internationalization strategies reveals additional nuances. The ability to sense new opportunities, seize them and reconfigure the firm to be able to put them in value seems to be higher when SMEs innovate and internationalize in a broader way, for example through open innovation strategies and by serving multiple markets (and market regions) through a variety of ways (Battaglia and Neirotti, 2020). The mechanisms through which a higher variety (more ideas, more markets) translates into enhanced strategic and operational agility remains at the moment an under-researched topic which could offer additional opportunities for scholarship. In this regard, a micro-foundational perspective could represent an interesting approach to use here since it allows for the connection of the attitudes and mindsets of individuals (micro level), with activities and routines taking place at the meso level (teams, functions) with broad strategic decisions taken at a firm level in order to understand how SMEs translate external stimuli into a higher level of strategic agility and dynamism. Lastly, a dynamic capabilities perspective could represent a suitable framework for analyzing whether and how SMEs dynamically modify their entry strategies, their modes of presence and their product and distribution strategies in foreign markets, for example through the escalation (or de-escalation) of resource commitment (see also Akbar et al., 2018; Mashahadi et al., 2016). 6.3

Network Theory Perspectives

Both innovation and internationalization strategies require the development of a certain amount of knowledge; knowledge about markets, technologies, products, distribution channels, and so on. Given the resource constraints characterizing SMEs, the process of accumulation of knowledge frequently requires external collaboration, which in turn provides SMEs with the opportunity to ramp up internationalization processes (Baier-Fuentes et al., 2021). Network relationships improve the intensity of exports, as well as the innovative capabilities of smaller firms, supporting the sequential deployment of both strategies (D’Angelo, 2012). A limited set of connections with external partners and a lack of network centrality affect an SME’s ability to simultaneously innovate and internationalize (Tomiura, 2007). So, what remains to be explored? First, additional empirical investigation is needed to understand how different network configurations could affect the ability to achieve both innovation and internationalization. To the best of our knowledge there is no quantitative follow-up study of the work carried out by Chetty and Stangl (2010) in which the authors classified

24  Research handbook on innovation in international business ten firms in different clusters, discovering with different internationalization and innovation achievements, different types of network relationships are needed. Second, it would be interesting to know whether and how SMEs are able to combine and to leverage local ties (with suppliers and subcontractors, local branches of MNEs, local universities, trade associations, etc.) to take part in innovative networks on an international scale, with international clients, innovation intermediaries, dispersed users and so on. For example, in business-to-business (B2B) contexts, the phenomenon of piggy-backed internationalization of smaller subcontractors (the subcontractor is pushed into international markets by a client already operating on an international scale) has been widely documented (Balboni et al., 2013). It would be revealing to know if piggy-back works also for innovation and for the international innovation strategies of smaller firms. 6.4

Institutional Perspectives

Dynamics and differences at industry, country and cultural levels may impact significantly on the ability of SMEs to innovate and also to grow in foreign markets (Martínez-Román et al., 2019). Despite the call made by Peng et al. (2009) for an institutional perspective as a third theoretical pillar in strategy theory, alongside the industry-based and RBV, an institutional perspective on SME innovation and internationalization strategies remains very underdeveloped. This theme is especially interesting in market contexts characterized by weak or under-studied institutional dynamics common to developing economies. Despite notable attempts (see e.g., Meyer et al., 2009) the theme would appear to have currently run out of steam. Our opinion is that such a perspective could be still a useful one for studying the strategic dynamics of SMEs operating in developing countries in sub-Saharan Africa or Asia which are characterized by disruptive innovation dynamics (e.g., to the widespread use of mobile payment systems in African countries and the enabling effect that such use might have on related businesses) or by a lack of institutional conditions (normative, logistic development, etc.) that drives the development of ad hoc alternatives (such as the use of drones for deliveries in remote areas of Africa). A very different topic but one which is in line with the institutional perspective is that of family firms (Greenwood and Hinings, 1996). In general, non-family SMEs exhibit more courage in pursuing both innovation and internationalization strategies (Denicolai et al., 2015). The result is not unexpected, since family firms tend to be more risk-averse and conservative than non-family ones (Gallo et al., 2004). However, a recent study by Alayo et al. (2021) suggests that family-specific characteristics, and the managing generation of the family businesses among those with younger family members being less conservative, can influence the effective pursuit of simultaneous strategies. The result is interesting also from a theoretical point of view and more evidence would be needed to understand whether the phenomenon could be generalized to different contexts. 6.5

Other Theoretical Perspectives

Open innovation and, in particular, the relationship between open innovation strategies and internationalization deserve more attention. By involving foreign clients in their innovation processes, SMEs can kill two birds with one stone: to learn more about the specific needs and wants of clients based in foreign markets (innovation) as well as to establish business

The relationship between innovation and internationalization of SMEs  25 relationships with potential foreign distribution partners (internationalization). Second, by collaborating with foreign users through digital platforms, SMEs could expand their knowledge about foreign markets and develop better targeted offerings for foreign markets without the need for substantial investments in foreign markets. Related to this is the relationship between innovation appropriability and internationalization (Kyläheiko et al., 2011) when companies apply ecosystem strategies, user-driven innovation strategies or platform strategies, where the problem of the appropriability is addressed from a different point of view with respect to the traditional innovation literature that focuses on IPRs as the preferred means to protect knowledge and innovation (Minin and Faems, 2013). In relation to the influence exerted by industry structure, extant studies frequently compare innovation and internationalization performance of SMEs as belonging to low-tech and to high-tech industries (Martínez-Román et al., 2019). However, the pervasiveness of digital technologies may render such a distinction frankly obsolete; even sectors like agriculture can no longer be defined as purely low-tech (Porter and Heppelman, 2014). Thus, a shift of perspective from industry to firm (and their technology and digital internal strategies) may be advisable. In this regard, additional research is needed on the interplay between digitalization, innovation and internationalization of SMEs, with particular reference to the role played by digital technologies as an enabler or enhancer of both strategies (Bortoluzzi et al., 2020). Research at a country level has examined how some more internationalized countries have more innovative firms (Filippetti et al., 2011) because a country’s resources, products and institutions are exposed to alternative innovation contexts, which allows firms and people to learn from different environments and competition forces the firms to innovate. Studies could demonstrate this theoretical relationship at an SME-level by examining how the more internationalized an SME becomes, the more it is likely to innovate based on theoretically grounded arguments used at a country level. Theoretical lenses that explore how cognitive-psychological aspects of entrepreneurial behavior (e.g., expectations of growth in international markets) may encourage innovation would also be valuable additions to our understanding of the relationship between innovation and internationalization. A final thought goes to the role of internationalization theory. In the studies we analyzed for this chapter, SME internationalization is almost exclusively focused on export modes. And while exports are a predominant form of internationalization of SMEs, a number of these firms internationalize through the setting up of business assets in a foreign market such as distribution and sales capabilities. Moreover it is important to recognize that exporting isn’t as straightforward an internationalization mode as is characterized in the extant literature: Akbar et al. (2018) show that export-oriented, international expansion processes of SMEs can be characterized by different levels of resource commitment over time. Such a fine-grained perspective is missing from the debate, especially in the literature looking at the impact that internationalization may have on innovation through learning-by-exporting. It is likely that SMEs managing strategic agreements with foreign distributors and visiting them regularly, will be more exposed to the local needs and wants of consumers, and will be more effective in designing products able to meet the needs of specific markets.

26  Research handbook on innovation in international business

7.

CLOSING REFLECTIONS

Since the contribution of Wakelin (1998), the role of innovation in the internationalization process has increasingly gained attention in the scientific community. Yet, despite an extensive literature on the relationship between innovation and internationalization in the context of SMEs, there remains a lack of clear scholarly consensus on the issue. More recent studies (e.g., Ferraris et al., 2019; Freixanet et al., 2020; Gkypali et al., 2021) devote considerable attention to the ongoing ambiguity of the causal relationship. Patterns of interaction are affected by multiple factors such as the type of innovation, the internationalization modes and organizational learning. On the one hand, the absence of a consensus on the key relationship demonstrated by the empirical dissonance of the findings from this branch of research calls out for further studies that will set the ground for further clarification on such a complex phenomenon, establishing boundary conditions as well as exposing contextual factors under which one side prevails over the other. On the other hand, to what extent does it matter to establish which comes first? Wouldn’t it be better to deepen the synergies among and barriers between the two, given the key importance that both the strategies have for SMEs? In the prior literature, innovation as an activity has been characterized using somewhat broad notions or categories (e.g., product vs. process innovation or radical vs. incremental innovation) (Exposito and Sanchis-Llopis, 2020; Saridakis et al., 2019). While such categories are useful to simplify the analysis in the case of studies that rely on large data samples and leverage econometric methods, such oversimplifications of the innovation concept and of innovation strategies should no longer be used in empirical studies involving smaller samples of firms or in qualitative studies. It is clear that a more fine-grained, nuanced operationalization of innovation is expected and needed. Through the process of compiling this chapter, we are left encouraged by the fact that there remains much exciting theoretical and empirical work to be done that cuts across firms, industries and country contexts. Based on our detailed analysis of the prior literature, we call for established and emerging scholars alike to further develop a meaningful research agenda around SME internationalization and innovation.

REFERENCES Akbar, Y., Balboni, B., Bortoluzzi, G., Dikova, D., & Tracogna, A. (2018). Disentangling resource and mode escalation in the context of emerging markets: evidence from a sample of manufacturing SMEs. Journal of International Management, 24(3), 257–70. https://​doi​.org/​10​.1016/​J​.INTMAN​.2018​.01​ .003. Alayo, M., Iturralde, T., & Maseda, A. (2021). Innovation and internationalization in family SMEs: analyzing the role of family involvement, European Journal of Innovation Management, https://​doi​ .org/​10​.1108/​EJIM​-07​-2020​-0302. Ali, I., Ali, M., Salam, M.A., Bhatti, Z.A., Arain, G.A., & Burhan, M. (2020). How international SMEs’ vicarious learning may improve their performance? The role of absorptive capacity, strength of ties with local SMEs, and their prior success experiences. Industrial Marketing Management, 88, 87–100. https://​doi​.org/​10​.1016/​j​.indmarman​.2020​.04​.013. Añón Higón, D., & Driffield, N. (2011). Exporting and innovation performance: analysis of the annual Small Business Survey in the UK. International Small Business Journal, 29(1), 4–24. https://​doi​.org/​ 10​.1177/​0266242610369742. Arslanagic-Kalajdzic, M., Balboni, B., Kadic-Maglajlic, S., & Bortoluzzi, G. (2017). Product innovation capability, export scope and export experience. European Business Review. https://​doi​.org/​10​.1108/​ EBR​-12​-2015​-0180.

The relationship between innovation and internationalization of SMEs  27 Aw, B. Y., Roberts, M. J., & Winston, T. (2007). Export market participation, investments in R&D and worker training, and the evolution of firm productivity. The World Economy, 30(1), 83–104. https://​ doi​.org/​10​.1111/​j​.1467​-9701​.2007​.00873​.x. Azar, G., & Ciabuschi, F. (2017). Organizational innovation, technological innovation, and export performance: the effects of innovation radicalness and extensiveness. International Business Review, 26(2), 324–36. https://​doi​.org/​10​.1016/​J​.IBUSREV​.2016​.09​.002. Azari, M. J., Madsen, T. K., & Moen, Ø. (2017). Antecedent and outcomes of innovation-based growth strategies for exporting SMEs. Journal of Small Business and Enterprise Development, 24(4), 733–52. https://​doi​.org/​10​.1108/​JSBED​-08​-2016​-0125. Bagheri, M., Mitchelmore, S., Bamiatzi, V., & Nikolopoulos, K. (2019). Internationalization orientation in SMEs: the mediating role of technological innovation. Journal of International Management, 25(1), 121–39. https://​doi​.org/​10​.1016/​J​.INTMAN​.2018​.08​.002. Baier-Fuentes, H., Guerrero, M., & Amorós, J. E. (2021). Does triple helix collaboration matter for the early internationalisation of technology-based firms in emerging economies? Technological Forecasting and Social Change, 163, 120439. https://​doi​.org/​10​.1016/​j​.techfore​.2020​.120439. Balboni, B., Bortoluzzi, G., & Grandinetti, R. (2013). On the relationship between size, capabilities and internationalisation: an explorative analysis of Italian subcontracting SMEs. International Journal of Globalisation and Small Business, 5(1–2), 114–32. https://​doi​.org/​10​.1504/​IJGSB​.2013​.050489. Battaglia, D., & Neirotti, P. (2020). Dealing with the tensions between innovation and internationalization in SMEs: a dynamic capability view. Journal of Small Business Management, 1–41. https://​doi​ .org/​10​.1080/​00472778​.2020​.1711635. Battaglia, D., Neirotti, P., & Paolucci, E. (2018). The role of R&D investments and export on SMEs’ growth: a domain ambidexterity perspective. Management Decision. https://​doi​.org/​10​.1108/​MD​-02​-2017​-0136. Bell, J., Crick, D., & Young, S. (2004). Small firm internationalization and business strategy: an exploratory study of ‘knowledge-intensive’ and ‘traditional’ manufacturing firms in the UK. International Small Business Journal: Researching Entrepreneurship, 22(1), 23–56. https://​doi​.org/​10​.1177/​ 0266242604039479. Bernardini Papalia, R., Bertarelli, S., & Mancinelli, S. (2018). Innovation, complementarity, and exporting: evidence from German manufacturing firms. International Review of Applied Economics, 32(1), 3–38. https://​doi​.org/​10​.1080/​02692171​.2017​.1332576. Bolívar-Ramos, M. T., Capelleras, J.-L., Rialp-Criado, A., & Rialp-Criado, J. (2020). The interplay between exports and technological collaborations: effects on SME growth. International Journal of Technology Management, 84(1–2), 110–36. https://​doi​.org/​10​.1504/​ijtm​.2020​.112156. Booltink, L. W., & Saka-Helmhout, A. (2018). The effects of R&D intensity and internationalization on the performance of non-high-tech SMEs. International Small Business Journal, 36(1), 81–103. https://​doi​.org/​10​.1177/​0266242617707566. Bortoluzzi, G., Chiarvesio, M., Romanello, R., Tabacco, R., & Veglio, V. (2020). Industry 4.0 technologies and the servitization strategy: a good match? Sinergie Italian Journal of Management, 38(1), 55–72. https://​doi​.org/​10​.7433/​S111​.2020​.05. Bortoluzzi, G., Kadic-Maglajlic, S., Arslanagic-Kalajdzic, M., & Balboni, B. (2018). Innovativeness as a driver of the international expansion of developing markets’ firms: evidence of curvilinear effects. International Marketing Review, 35(2), 215–35. https://​doi​.org/​10​.1108/​IMR​-11​-2015​-0258. Boso, N., Cadogan, J. W., & Story, V. M. (2013). Entrepreneurial orientation and market orientation as drivers of product innovation success: a study of exporters from a developing economy. International Small Business Journal: Researching Entrepreneurship, 31(1), 57–81. https://​doi​.org/​10​.1177/​ 0266242611400469. Bratti, M., & Felice, G. (2012). Are exporters more likely to introduce product innovations? The World Economy, 35(11), 1559–98. https://​doi​.org/​10​.1111/​j​.1467​-9701​.2012​.01453​.x. Caldera, A. (2010). Innovation and exporting: evidence from Spanish manufacturing firms. Review of World Economics, 146(4), 657–89. https://​doi​.org/​10​.1007/​S10290​-010​-0065​-7. Cassiman, B., & Golovko, E.N. (2011). Innovation and internationalization through exports. Journal of International Business Studies, 42(1), 56–75. https://​doi​.org/​10​.1057/​JIBS​.2010​.36.

28  Research handbook on innovation in international business Cassiman, B., Golovko, E., & Martínez-Ros, E. (2010). Innovation, exports and productivity. International Journal of Industrial Organization, 28(4), 372–6. https://​doi​.org/​10​.1016/​J​.IJINDORG​.2010​.03​.005. Castaño, M.-S., Méndez, M.-T., & Galindo, M.-Á. (2016). Innovation, internationalization and business-growth expectations among entrepreneurs in the services sector. Journal of Business Research, 69(5), 1690–95. https://​doi​.org/​10​.1016/​J​.JBUSRES​.2015​.10​.039. Celec, R., Globocnik, D., & Kruse, P. (2014). Resources, capabilities, export performance and the moderating role of entrepreneurial orientation in the context of SMEs. European Journal of International Management, 8(4), 440. https://​doi​.org/​10​.1504/​EJIM​.2014​.062971. Chetty, S. K., & Stangl, L. M. (2010). Internationalization and innovation in a network relationship context. European Journal of Marketing. https://​doi​.org/​10​.1108/​03090561011079855. Damijan, J. P., Kostevc, Č., & Polanec, S. (2010). From innovation to exporting or vice versa? World Economy, 33(3), 374–98. https://​doi​.org/​10​.1111/​j​.1467​-9701​.2010​.01260​.x. D’Angelo, A. (2012). Innovation and export performance: a study of Italian high-tech SMEs. Journal of Management & Governance, 16(3), 393–423. https://​doi​.org/​10​.1007/​S10997​-010​-9157​-Y. Dattolo, A., & Corbatto, M. (2019). VisualBib: A novel Web app for supporting researchers in the creation, visualization and sharing of bibliographies. Knowledge-Based Systems, 182, 104860. https://​doi​ .org/​10​.1016/​J​.KNOSYS​.2019​.07​.031. Davcik, N. S., Cardinali, S., Sharma, P., & Cedrola, E. (2021). Exploring the role of international R&D activities in the impact of technological and marketing capabilities on SMEs’ performance. Journal of Business Research, 128, 650–60. https://​doi​.org/​10​.1016/​j​.jbusres​.2020​.04​.042. De Marco, C. D., Martelli, I., & Minin, A. (2020). European SMEs’ engagement in open innovation: when the important thing is to win and not just to participate, what should innovation policy do? Technological Forecasting and Social Change, 152, 119843. https://​doi​.org/​10​.1016/​j​.techfore​.2019​.119843. Denicolai, S., Hagen, B., & Pisoni, A. (2015). Be international or be innovative? Be both? The role of the entrepreneurial profile. Journal of International Entrepreneurship, 13(4), 390–417. https://​doi​.org/​10​ .1007/​S10843​-015​-0143​-Y. Denyer, D., & Neely, A. (2004). Introduction to special issue: innovation and productivity performance in the UK. International Journal of Management Reviews, 5(3–4), 131–5. https://​doi​.org/​10​.1111/​J​ .1460​-8545​.2004​.00100​.X. de Vasconcellos, S. L., Garrido, I. L., & Parente, R. C. (2019). Organizational creativity as a crucial resource for building international business competence. International Business Review, 28(3), 438–49. https://​doi​.org/​10​.1016/​J​.IBUSREV​.2018​.11​.003. Di Cintio, M., Ghosh, S., & Grassi, E. (2017). Firm growth, R&D expenditures and exports: an empirical analysis of Italian SMEs. Research Policy, 46(4), 836–52. https://​doi​.org/​10​.1016/​J​.RESPOL​.2017​ .02​.006. Eerme, T., & Nummela, N. (2019). Capitalising on knowledge from big-science centres for internationalisation. International Marketing Review, 36(1), 108–30. https://​doi​.org/​10​.1108/​IMR​-03​-2017​-0059. Esteve-Pérez, S., & Rodríguez, D. (2013). The dynamics of exports and R&D in SMEs. Small Business Economics, 41(1), 219–40. https://​doi​.org/​10​.1007/​s11187​-012​-9421​-4. Exposito, A., & Sanchis-Llopis, J. A. (2019). The effects of innovation on the decisions of exporting and/or importing in SMEs: empirical evidence in the case of Spain. Small Business Economics, 1–17. https://​doi​.org/​10​.1007/​S11187​-019​-00184​-3. Falahat, M., Ramayah, T., Soto-Acosta, P., & Lee, Y.-Y. (2020). SMEs internationalization: the role of product innovation, market intelligence, pricing and marketing communication capabilities as drivers of SMEs’ international performance. Technological Forecasting and Social Change, 152, 119908. https://​doi​.org/​10​.1016/​j​.techfore​.2020​.119908. Falk, M., & de Lemos, F. F. (2019). Complementarity of R&D and productivity in SME export behavior. Journal of Business Research, 96, 157–68. https://​doi​.org/​10​.1016/​J​.JBUSRES​.2018​.11​.018. Fassio, C. (2018). Export-led innovation: the role of export destinations. Industrial and Corporate Change, 27(1), 149–71. https://​doi​.org/​10​.1093/​ICC/​DTX028. Fernández-Mesa, A., & Alegre, J. (2015). Entrepreneurial orientation and export intensity: examining the interplay of organizational learning and innovation. International Business Review, 24(1), 148–56. https://​doi​.org/​10​.1016/​J​.IBUSREV​.2014​.07​.004.

The relationship between innovation and internationalization of SMEs  29 Ferraris, A., Giachino, C., Ciampi, F., & Couturier, J. (2019). R&D internationalization in medium-sized firms: the moderating role of knowledge management in enhancing innovation performances. Journal of Business Research. https://​doi​.org/​10​.1016/​j​.jbusres​.2019​.11​.003. Filatotchev, I., Liu, X., Buck, T., & Wright, M. (2009). The export orientation and export performance of high-technology SMEs in emerging markets: the effects of knowledge transfer by returnee entrepreneurs. Journal of International Business Studies, 40(6), 1005–21. https://​doi​.org/​10​.1057/​jibs​.2008​ .105. Filipescu, D. A., Prashantham, S., Rialp, A., & Rialp, J. (2013). Technological innovation and exports: unpacking their reciprocal causality. Journal of International Marketing, 21(1), 23–38. https://​doi​ .org/​10​.1509/​jim​.12​.0099. Filippetti, A., Frenz, M., & Ietto-Gillies, G. (2011). Are innovation and internationalization related? An analysis of European countries. Industry and Innovation, 18(5), 437–59. https://​doi​.org/​10​.1080/​ 13662716​.2011​.583461. Fink, A. (1998). Conducting Research Literature Reviews: From the Internet to Paper. Thousand Oaks, CA: Sage. Flor, M., & Oltra, M. J. (2005). The influence of firms’ technological capabilities on export performance in supplier-dominated industries: the case of ceramic tiles firms. R&D Management, 35(3), 333–47. https://​doi​.org/​10​.1111/​J​.1467​-9310​.2005​.00393​.X. Freixanet, J., Rialp, A., & Churakova, I. (2020). How do innovation, internationalization, and organizational learning interact and co-evolve in small firms? A complex systems approach. Journal of Small Business Management, 58(5), 1030–63. https://​doi​.org/​10​.1111/​jsbm​.12510. Galina, S., Carvalho, L., & Costa, T. (2016). Innovation management of internationalised IT companies in Brazil and Portugal. International Journal of Knowledge-Based Development, 7(4), 317–35. https://​ doi​.org/​10​.1504/​IJKBD​.2016​.10001781. Gallo, M., Tápies, J., & Cappuyns, K. (2004). Comparison of family and nonfamily business: financial logic and personal preferences. Family Business Review, 17, 303–18. https://​doi​.org/​10​.1111/​j​.1741​ -6248​.2004​.00020​.x. García-Cabrera, A. M., García-Soto, M. G., & Suárez-Ortega, S. M. (2017). Macro-level spillovers and micro-level capabilities as antecedents of young SMEs’ propensity to export and to become a born global. International Entrepreneurship and Management Journal, 13(4), 1199–220. https://​doi​.org/​10​ .1007/​S11365​-017​-0451​-X. Geldres-Weiss, V. V., Uribe-Bórquez, C. T., Coudounaris, D. N., & Monreal-Pérez, J. (2016). Innovation and experiential knowledge in firm exports: applying the initial U-model. Journal of Business Research, 69(11), 5076–81. https://​doi​.org/​10​.1016/​J​.JBUSRES​.2016​.04​.083. Genc, E., Dayan, M., & Genc, O. F. (2019). The impact of SME internationalization on innovation: the mediating role of market and entrepreneurial orientation. Industrial Marketing Management, 82, 253–64. https://​doi​.org/​10​.1016/​j​.indmarman​.2019​.01​.008. Gkypali, A., Love, J. H., & Roper, S. (2021). Export status and SME productivity: learning-to-export versus learning-by-exporting. Journal of Business Research, 128, 486–98. https://​doi​.org/​10​.1016/​J​ .JBUSRES​.2021​.02​.026. Golovko, E., & Valentini, G. (2011). Exploring the complementarity between innovation and export for SMEs’ growth. Journal of International Business Studies, 42(3), 362–80. https://​doi​.org/​10​.1057/​jibs​ .2011​.2. Greenwood, R., & Hinings, C. (1996). Understanding radical organizational change: bringing together the old and the new institutionalism. Academy of Management Review, 21, 1022–54. https://​doi​.org/​ 10​.5465/​AMR​.1996​.9704071862. Halilem, N., Amara, N., & Landry, R. (2014). Exploring the relationships between innovation and internationalization of small and medium-sized enterprises: a nonrecursive structural equation model. Canadian Journal of Administrative Sciences/Revue Canadienne des Sciences de l’Administration, 31(1), 18–34. https://​doi​.org/​10​.1002/​CJAS​.1272. Hätönen, J. (2010). Outsourcing and licensing strategies in small software firms: evolution of strategies and implications for firm growth, internationalisation and innovation. Technology Analysis & Strategic Management, 22(5), 609–30. https://​doi​.org/​10​.1080/​09537325​.2010​.488066.

30  Research handbook on innovation in international business Henley, A., & Song, M. (2020). Innovation, internationalisation and the performance of microbusinesses. International Small Business Journal: Researching Entrepreneurship, 38, 337–64. https://​doi​.org/​10​ .1177/​0266242619893938. Hessels, S. J. A. (2007). Innovation and international involvement of Dutch SMEs. International Journal of Entrepreneurship and Small Business, 4(3), 234–55. https://​doi​.org/​10​.1504/​ijesb​.2007​.013250. Hsieh, L., Child, J., Narooz, R., Elbanna, S., Karmowska, J., Marinova, S., Puthusserry, P., Tsai, T., & Zhang, Y. (2019). A multidimensional perspective of SME internationalization speed: the influence of entrepreneurial characteristics. International Business Review, 28(2), 268–83. https://​doi​.org/​10​.1016/​ J​.IBUSREV​.2018​.09​.004. Hwang, Y.-S., Hwang, M.-H., & Dong, X. (2015). The relationships among firm size, innovation type, and export performance with regard to time spans. Emerging Markets Finance and Trade, 51(5), 947–62. https://​doi​.org/​10​.1080/​1540496X​.2015​.1061386. Imbriani, C., Morone, P., & Testa, G. (2014). Innovation, quality and exports: the case of Italian SMEs. The Journal of International Trade & Economic Development, 23(8), 1089–111. https://​doi​.org/​10​ .1080/​09638199​.2013​.831944. Jesson, J., Matheson, L., & Lacey, F. M. (2011). Doing your literature review: traditional and systematic techniques. Evaluation and Research in Education, 24(3), 219–21. https://​doi​.org/​10​.1080/​09500790​ .2011​.581509. Johanson, J., & Vahlne, J. (1977). The internationalization process of the firm—a model of knowledge development and increasing foreign market commitments. Journal of International Business Studies, 8, 23–32. https://​doi​.org/​10​.1057/​PALGRAVE​.JIBS​.8490676. Kriz, A., & Welch, C. (2018). Innovation and internationalisation processes of firms with new-to-the-world technologies. Journal of International Business Studies, 49(4), 496–522. https://​doi​.org/​10​.1057/​ s41267​-018​-0147​-7. Kunttu, A., & Torkkeli, L. (2015). Service innovation and internationalization in SMEs: implications for growth and performance. Management Review, 26(2), 83–100. https://​doi​.org/​10​.5771/​0935​-9915​ -2015​-2​-83. Kyläheiko, K., Jantunen, A., Puumalainen, K., Saarenketo, S., & Tuppura, A. (2011). Innovation and internationalization as growth strategies: the role of technological capabilities and appropriability. International Business Review, 20(5), 508–20. https://​doi​.org/​10​.1016/​J​.IBUSREV​.2010​.09​.004. Lachenmaier, S., & Wößmann, L. (2006). Does innovation cause exports? Evidence from exogenous innovation impulses and obstacles using German micro data. Oxford Economic Papers, 58(2), 317–50. https://​doi​.org/​10​.1093/​OEP/​GPI043. Lamotte, O., & Colovic, A. (2013). Innovation and internationalization of young entrepreneurial firms. Management International/International Management/Gestión Internacional, 18(1), 87–103. https://​ doi​.org/​10​.7202/​1022222AR. Lecerf, M. (2012). Internationalization and innovation: the effects of a strategy mix on the economic performance of French SMEs. International Business Research, 5(6), 2. https://​doi​.org/​10​.5539/​IBR​ .V5N6P2. Lecerf, M., & Omrani, N. (2020). SME internationalization: the impact of information technology and innovation. Journal of the Knowledge Economy, 11(2), 805–24. https://​doi​.org/​10​.1007/​S13132​-018​ -0576​-3. Lee, Y., & Hemmert, M. (2021). Performance implications of combining innovation and internationalization for Korean small- and medium-sized manufacturing firms: an exploration–exploitation perspective. Asian Business & Management, 1–25. https://​doi​.org/​10​.1057/​s41291​-020​-00144​-w. Lefebvre, É., Lefebvre, L. A., & Bourgault, M. (1998). R&D-related capabilities as determinants of export performance. Small Business Economics, 10(4), 365–77. https://​doi​.org/​10​.1023/​A:​1007960431147. Lewandowska, M. S., Szymura-Tyc, M., & Gołębiowski, T. (2016). Innovation complementarity, cooperation partners, and new product export: evidence from Poland. Journal of Business Research, 69(9), 3673–81. https://​doi​.org/​10​.1016/​J​.JBUSRES​.2016​.03​.028. Lim, J.-S., Sharkey, T. W., & Heinrichs, J. H. (2006). Strategic impact of new product development on export involvement. European Journal of Marketing. https://​doi​.org/​10​.1108/​03090560610637301. Lo Turco, A., & Maggioni, D. (2015). Dissecting the impact of innovation on exporting in Turkey. Economics of Innovation and New Technology, 24(4), 309–38. https://​doi​.org/​10​.1080/​10438599​ .2014​.946311.

The relationship between innovation and internationalization of SMEs  31 Love, J. H., & Roper, S. (2015). SME innovation, exporting and growth: a review of existing evidence. International Small Business Journal: Researching Entrepreneurship, 33(1), 28–48. https://​doi​.org/​ 10​.1177/​0266242614550190. Máñez, J. A., Rochina-Barrachina, M. E., & Sanchis-Llopis, J. A. (2015). The dynamic linkages among exports, R&D and productivity. The World Economy, 38(4), 583–612. https://​doi​.org/​10​.1111/​twec​ .12160. Martínez-Román, J. A., Gamero, J., de Loreto Delgado-González, M., & Tamayo, J. A. (2019). Innovativeness and internationalization in SMEs: an empirical analysis in European countries. Technological Forecasting and Social Change, 148, 119716. https://​doi​.org/​10​.1016/​J​.TECHFORE​ .2019​.119716. Mashahadi, F., Ahmad, N. H., Mohamad, O., & Ahmed, A. (2016). Strategic innovation ambidexterity and the internationalization performance of small and medium enterprises: an insight into herbal-based small and medium enterprises (HbSMEs). World Journal of Entrepreneurship, Management and Sustainable Development. https://​doi​.org/​10​.1108/​WJEMSD​-09​-2015​-0036. Meyer, K., Wright, M., & Pruthi, S. (2009). Managing knowledge in foreign entry strategies: a resource-based analysis. Strategic Management Journal, 30(5), 557–74. https://​doi​.org/​10​.1002/​ SMJ​.756. Minin, A. D., & Faems, D. (2013). Building appropriation advantage: an introduction to the special issue on intellectual property management. California Management Review, 55, 14–17. https://​doi​.org/​10​ .1525/​cmr​.2013​.55​.4​.7. Monreal-Pérez, J., Aragón-Sánchez, A., & Sánchez-Marín, G. (2012). A longitudinal study of the relationship between export activity and innovation in the Spanish firm: the moderating role of productivity. International Business Review, 21(5), 862–77. https://​doi​.org/​10​.1016/​J​.IBUSREV​.2011​.09​.010. Morone, P., Renna, F., & Testa, G. (2013). Innovation activities and Italian SMEs’ exports decisions: a multi-treatment analysis. International Journal of Globalisation and Small Business, 5(4), 256–72. https://​doi​.org/​10​.1504/​IJGSB​.2013​.056810. Mulrow, C. D. (1994). Systematic reviews: rationale for systematic reviews. British Medical Journal, 309(6954), 597–9. https://​doi​.org/​10​.1136/​bmj​.309​.6954​.597. Nassimbeni, G. (2001). Technology, innovation capacity, and the export attitude of small manufacturing firms: a logit/tobit model. Research Policy, 30(2), 245–62. https://​doi​.org/​10​.1016/​S0048​ -7333(99)00114​-6. Nguyen, A. N., Pham, N. Q., Nguyen, C. D., & Nguyen, N. D. (2008). Innovation and exports in Vietnam’s SME sector. The European Journal of Development Research, 20(2), 262–80. https://​doi​ .org/​10​.1080/​09578810802060801. Nyuur, R. B., Brecic, R., & Debrah, Y. A. (2018). SME international innovation and strategic adaptiveness. International Marketing Review. https://​doi​.org/​10​.1108/​IMR​-11​-2015​-0239. Oura, M. M., Zilber, S. N., & Lopes, E. L. (2016). Innovation capacity, international experience and export performance of SMEs in Brazil. International Business Review, 25(4), 921–32. https://​doi​.org/​ 10​.1016/​J​.IBUSREV​.2015​.12​.002. Peng, M.W., Sun, S.L., Pinkham, B.C., & Chen, H. (2009). The institution-based view as a third leg for a strategy tripod. Academy of Management Perspectives, 23(3), 63–81. https://​doi​.org/​10​.5465/​AMP​ .2009​.43479264. Petticrew, M., & Roberts, H. (2008). Systematic Reviews in the Social Sciences: A Practical Guide. Oxford: Blackwell. Pittaway, L., Robertson, M., Munir, K., Denyer, D., & Neely, A. (2004). Networking and innovation: a systematic review of the evidence. International Journal of Management Reviews, 5(3–4), 137–68. https://​doi​.org/​10​.1111/​J​.1460​-8545​.2004​.00101​.X. Pittiglio, R., Sica, E., & Villa, S. (2009). Innovation and internationalization: the case of Italy. The Journal of Technology Transfer, 34(6), 588–602. https://​doi​.org/​10​.1007/​s10961​-009​-9107​-5. Pla-Barber, J., & Alegre, J. (2007). Analysing the link between export intensity, innovation and firm size in a science-based industry. International Business Review, 16(3), 275–93. https://​doi​.org/​10​.1016/​J​ .IBUSREV​.2007​.02​.005. Porter, M. E., & Heppelmann, J. E. (2014). How smart, connected products are transforming competition. Harvard Business Review, 92(11), 64–88.

32  Research handbook on innovation in international business Prange, C., & Pinho, J. C. (2017). How personal and organizational drivers impact on SME international performance: the mediating role of organizational innovation. International Business Review, 26(6), 1114–23. https://​doi​.org/​10​.1016/​j​.ibusrev​.2017​.04​.004. Rammer, C., & Schmiele, A. (2008). Drivers and effects of internationalising innovation by SMEs. ZEW-Centre for European Economic Research Discussion Paper, 08–035. https://​doi​.org/​10​.2139/​ ssrn​.1207262. Ren, S., Eisingerich, A. B., & Tsai, H.-T. (2015). How do marketing, research and development capabilities, and degree of internationalization synergistically affect the innovation performance of small and medium-sized enterprises (SMEs)? A panel data study of Chinese SMEs. International Business Review, 24(4), 642–51. https://​doi​.org/​10​.1016/​j​.ibusrev​.2014​.11​.006. Roper, S., & Love, J. H. (2002). Innovation and export performance: evidence from the UK and German manufacturing plants. Research Policy, 31(7), 1087–102. https://​doi​.org/​10​.1016/​S0048​ -7333(01)00175​-5. Saridakis, G., Idris, B., Hansen, J. M., & Dana, L. P. (2019). SMEs’ internationalisation: when does innovation matter? Journal of Business Research, 96, 250–63. https://​doi​.org/​10​.1016/​j​.jbusres​.2018​ .11​.001. Singh, R., & Kota, H. B. (2017). A resource dependency framework for innovation and internationalization of family businesses: evidence from India. Journal of Entrepreneurship in Emerging Economies. https://​doi​.org/​10​.1108/​JEEE​-04​-2016​-0013. Sui, S., & Baum, M. (2014). Internationalization strategy, firm resources and the survival of SMEs in the export market. Journal of International Business Studies, 45(7), 821–41. https://​doi​.org/​10​.1057/​ JIBS​.2014​.11. Tavassoli, S. (2018). The role of product innovation on export behavior of firms: is it innovation input or innovation output that matters? European Journal of Innovation Management. https://​doi​.org/​10​ .1108/​EJIM​-12​-2016​-0124. Thorpe, R., Holt, R., Macpherson, A., & Pittaway, L. (2005). Using knowledge within small and medium-sized firms: a systematic review of the evidence. International Journal of Management Reviews, 7(4), 257–81. https://​doi​.org/​10​.1111/​j​.1468​-2370​.2005​.00116​.x. Tomiura, E. (2007). Effects of R&D and networking on the export decision of Japanese firms. Research Policy, 36, 758–67. https://​doi​.org/​10​.1016/​J​.RESPOL​.2007​.02​.020. Tranfield, D., Denyer, D., & Smart, P. (2003). Towards a methodology for developing evidence-informed management knowledge by means of systematic review. British Journal of Management, 14(3), 207–22. https://​doi​.org/​10​.1111/​1467​-8551​.00375. Van Beveren, I., & Vandenbussche, H. (2010). Product and process innovation and firms’ decision to export. Journal of Economic Policy Reform, 13(1), 3–24. https://​doi​.org/​10​.1080/​17487870903546267. Veglio, V., & Zucchella, A. (2015). Entrepreneurial firms in traditional industries: does innovation matter for international growth? Journal of International Entrepreneurship, 13(2), 138–52. https://​doi​ .org/​10​.1007/​s10843​-015​-0142​-z. Villar, C., Pla-Barber, J., & Ghauri, P. (2020). Learning from foreign operation modes: the virtuous path for innovation. BRQ Business Research Quarterly, 23(2), 159–71. https://​doi​.org/​10​.1177/​ 2340944420916341. vom Brocke, J., Simons, A., Niehaves, B., Reimer, K., Plattfaut, R., & Cleven, A. (2009). Reconstructing the giant: on the importance of rigour in documenting the literature search process. 17th European Conference on Information Systems (ECIS), Verona, Italy. Vuorio, A., Torkkeli, L., & Sainio, L.-M. (2020). Service innovation and internationalization in SMEs: antecedents and profitability outcomes. Journal of International Entrepreneurship, 18(1), 92–123. https://​doi​.org/​10​.1007/​s10843​-019​-00266​-z. Wakelin, K. (1998). Innovation and export behaviour at the firm level. Research Policy, 26(7–8), 829–41. https://​doi​.org/​10​.1016/​S0048​-7333(97)00051​-6. Wang, P., & Soergel, D. (1998). A cognitive model of document use during a research project. Study I. Document selection. Journal of the American Society for Information Science, 49(2), 115–33. https://​doi​.org/​10​.1002/​(SICI)1097​-4571(1998)49:​23.0.CO;2-1. Yang, C.-H., Chen, J.-R., & Chuang, W.-B. (2004). Technology and export decision. Small Business Economics, 22(5), 349–64. https://​doi​.org/​10​.1023/​B:​SBEJ​.0000022213​.61143​.37.

The relationship between innovation and internationalization of SMEs  33 Zhang, G., Wang, J., Liu, J., & Pan, Y. (2021). Relationship between the metadata and relevance criteria of scientific data. Data Science Journal, 20(1). https://​doi​.org/​10​.5334/​dsj​-2021​-005. Zucchella, A., & Siano, A. (2014). Internationalization and innovation as resources for SME growth in foreign markets: a focus on textile and clothing firms in the Campania region. International Studies of Management & Organization, 44(1), 21–41. https://​doi​.org/​10​.2753/​IMO0020​-8825440102.

3. The role of institutions in the context of innovation in international entrepreneurship: transforming uncertainty from being a threat to becoming an asset Igor Kalinic1

INNOVATION WORLDWIDE AND TRENDS It is widely acknowledged that innovation is a key determinant of productivity and long-term growth and it can substantially contribute to solving social challenges and assisting in a more inclusive development (OECD, 2010; OECD/Eurostat, 2018). Worldwide, the investment in R&D has continued to increase significantly for the ten years leading up to 2019 until the Covid-19 pandemic (numbers for 2020 are still forthcoming) (European Commission, 2020a). According to the EU 2020 Industrial R&D Investment Scoreboard that covers approximately 90 per cent of the world’s business-funded R&D, all major economies followed a similar pattern – in 2019, investments in R&D increased by 5.6 per cent in the EU compared to 2018, by 10.8 per cent in the USA and by an impressive 21 per cent in China. In absolute numbers, the largest investor in R&D is by far the USA (almost 350 billion euros in 2019) (Figure 3.1), followed by the EU (roughly half the investment of the USA), ahead of China, Japan and the rest of the world (European Commission, 2020a).

Source: Adapted from European Commission (2020a: 2).

Figure 3.1

R&D investment (in € billion) 2018–19 by region/country 34

Transforming uncertainty from being a threat to becoming an asset  35 Table 3.1

R&D investment in 2019 by region/country and sector group

 

EU

USA

Japan

China

(188.9 bn €)

(347.7 bn €)

(114.9 bn €)

(118.8 bn €)

Chemicals

2.9

1.2

6.9

1.4

Aerospace and defence

4.3

2.4

0.0

0.4

Industrials

6.4

2.8

9.1

9.5

ICT services

7.0

30.2

4.8

17.5

ICT producers

14.2

24.5

18.8

30.0

Health industries

19.2

26.4

12.5

5.5

Automobiles and other transport

34.8

6.4

31.3

10.0

Others

11.1

6.0

16.7

25.7

Total*

100%

100%

100%

100%

Notes: Figures shown are a percentage of the total. * Total sum rounded up to 100 due to approximation errors. Source: Adapted from European Commission (2020a: 3).

It is interesting to note how countries/regions have focused on different sectors (Table 3.1). More than one third (35 per cent) of investment in R&D in Europe is in the automotive sector (European Commission, 2020a). This is similar to the situation in Japan. It is, however, absolutely not the case in the USA and China. Information and communication technology (ICT) producers and services account for more than 50 per cent of R&D investment in the USA, and 47 per cent in China. The USA has also been investing heavily in R&D in health industries. Following the analysis done by the EU R&D Scoreboard, areas of investment in R&D have shifted heavily between regions in the last decade. Europe went approximately from investing 30 to 65 billion euros in the automotive sector, whereas the USA increase in R&D investment in the automotive sector has been negligible. On the other hand, the increase in R&D investment in ICT and Health in the USA has been considerable. This increase has been much greater than the one visible in Europe. Similarly, in China from 2010 to 2019 investment in R&D in the ICT sector has been much larger than in Europe. For the same period, investment in R&D in the automotive and health sectors in China stalled. A key point for policymakers is to distinguish between innovation and invention. According to Freeman (1982: 7), “An invention is an idea, a sketch or model for a new or improved device, product, process or system … an innovation in the economic sense is accomplished only with the first commercial transaction involving the new product, process, system or device.” The OECD builds on this and in their studies they consider an innovation as “a new or improved product or business process (or combination thereof) that differs significantly from the firm’s previous products or business processes and that has been introduced on the market or brought into use by the firm” (OECD/Eurostat, 2018: 68). It is the successful development and marketing of new or improved products or services (Neely et al., 2001). The crucial point is to bring invention, through development, to the market, in order to be able to profit from it. The market element is fundamental. According to neoclassical growth models, investment in innovation with its spillover effects is a key factor for scientific and technological expansion. This continued improvement generates competition and leads to lasting economic growth and welfare (Romer, 1990; Grossman and Helpman, 1991; Aghion and Howitt, 1992). The importance of investment in innovation has gained even more importance in recent years. A number of policymakers (e.g. European Commission, 2020b, A New Industrial Strategy for Europe; OECD/Eurostat, 2018) have underlined that innovation is crucial in green transformation and, thus, for sustainable growth.

36  Research handbook on innovation in international business However, the cost of innovation cannot always be sustained by the private sector. The public sector has played an important role in the past and will play an even more crucial role in the future. There are at least two reasons. First, because of the spillover effects companies might be afraid to make the first move because final profits will be shared also with companies that have invested less. The first movers might end up relatively disadvantaged or even with a net loss. Second, the recent developments of open source knowledge and shared economy have both positive and negative implications for innovation. On the positive side, access to knowledge and the possibility to co-create is offered to a higher number of players; however, that might induce the big players to be less proactive and to wait for innovation to emerge and then take it over and make profit with relatively little investment. But, often the overall social benefits may well exceed private profits – from a social perspective, not investing is not optimal (Hall et al. 2010). Therefore, governments from around the globe have developed and implemented a number of policy instruments (for more on the topic, see Hall and Van Reenen, 2000; Radicic and Pugh, 2017; Petrin, 2018). The need for government support is even more important for resource-limited companies; according to the Study on the effectiveness of public innovation support for SMEs in Europe, 85 per cent of the surveyed SMEs declared that public support was essential for them to undertake their innovation (European Commission, 2021b).

(SHIFTS IN THE WORLD ECONOMY AND THE) INCREASINGLY IMPORTANT ROLE OF SMEs IN INNOVATION However, according to the OECD (2019, 2010), most government policies aiming at enhancing investment in innovation have somehow neglected the shifts that have occurred in the global economy in recent decades. This is due to the passage from a ‘managed economy’ to an ‘entrepreneurial economy’ where economies of scale have lost some of their importance and knowledge has been elevated as a crucial production factor (Audretsch and Thurik, 2004; OECD, 2010). In this new setting, the relative role played by small and medium enterprises (SMEs) and their collaborative approach to innovation has increased compared to big companies and innovation produced in closed labs. In fact, economic growth is often associated with a higher presence of SMEs and start-ups (Audretsch and Thurik, 2001; Audretsch and Keilbach, 2005) and SMEs are crucial for job creation (OECD, 2019). However, some of the most common government innovation policies are not well suited for SMEs. For example, R&D tax credits tend to be too complex from the administrative point of view, thus favouring big companies with more capacity; other policies do not take into account the collaborative approach typical of SMEs and the clusters in which they operate (OECD, 2019). There are a number of concurrent reasons explaining the shift (i.e. why economies of scale and scope are no longer barriers for SMEs to take part in the innovation process) (see OECD, 2010; European Commission, 2019b). First, customers’ preferences have evolved bringing an increased taste for variety that also changes quickly. This has created a number of (sometimes time limited) niches that are not covered by big companies because they are too small (negligible contribution to the overall profit) or because they are overlooked. That space can be covered by more dynamic and flexible smaller companies. Also, in recent years there has been an increased demand for local products produced by local (small/entrepreneurial) companies. Second, society is more service- than product-oriented; the purchase of services has considerably increased. Often the development of new services is linked to a non-technological

Transforming uncertainty from being a threat to becoming an asset  37 innovation and this reduces the relative importance of economies of scale. A smaller company can provide the same (or even better) service as a big company. Third, the emergence of new ICT (combined with globalisation) facilitates a geographically distributed creation of knowledge with the involvement of many actors. Further, it has also pushed towards a culture of open innovation (Chesbrough, 2006) that has made it easier for knowledge to be created and innovation to be produced outside the labs of big companies. This enhances the involvement of specialized SMEs and the spillover effects within networks on which SMEs rely (Rogers, 2004). Fourth, the combination of more efficient technologies and mass customization techniques (Forza and Salvador, 2006) also makes production in smaller batches economically efficient. As a consequence, the contribution of SMEs to innovation has increased in recent years. For governments, enhancing innovation in SMEs and young companies makes them more competitive and this can lead to a more inclusive growth because they will be able to spread the innovation, create jobs and close wage gaps with big companies (OECD, 2015). Moreover, their crucial role derives also from being the backbone of many economies worldwide, including the European Union. SMEs comprise some 90 per cent of firms in most economies; they contribute to technological innovation, industrial upgrading, and are largely responsible for opening up the frontiers of new industries (World Bank, 2011). The true extent of SMEs’ contribution to individual national performance and welfare is considerable; among OECD countries they represent 70 per cent of total employment and contribute between 50 per cent and 60 per cent of total value added (OECD, 2017). In the EU, according to the Annual Report on European SMEs (European Commission, 2019a), there were more than 25 million SMEs in 2018 accounting for 99.8 per cent of all enterprises,1 66.6 per cent of employment, and generating 56.4 per cent of added value (Table 3.2). Despite the global Covid-19 crisis, the provisional findings indicate that those numbers have been maintained – this could be due to a number of factors including many government interventions (European Commission, 2021a). Consequently, many economies have pinned their hopes of growth upon the SME segment of domestic industry (OECD, 2019), expecting them to perform the central role in the transition to a more sustainable and innovation-based economic growth, as exemplified within A New Industrial Strategy for Europe (European Commission, 2020b). According to the 2019 SBA Fact Sheet and Scoreboard (European Commission, 2019c), more than 3,750 policy measures to support SMEs have been adopted/implemented in 2011–19 across different member states of the European Union mainly in the area of (a) access to finance, (b) entrepreneurship, (c) skills and innovation, and (d) responsive administration (European Commission, 2019c: 4).2 The logic is that SMEs can be presumed to be more firmly rooted in the home economy than might be the case with established, but more footloose, multinational enterprises. Further, a strong SME sector tends to provide a more balanced wealth distribution and a more dynamic social mobility. But, at the same time, governments recognize that SMEs have to be internationally competitive in order not to be outcompeted within their domestic market (see e.g. European Commission, 2008, 2020c). To gain this competitive ability, SMEs need to innovate, to propose new solutions at affordable prices. In the non-financial business sector (NFBS). The measures are organized around ten principles identified in the Small Business Act for Europe (SBA). They are: think small first, entrepreneurship, second chance, responsive administration, state aid & procurement, access to finance, single market, skills & innovation, environment, internationalisation. The SBA fact sheets are published annually. The objective is to provide an overview of recent trends and national policies affecting SMEs. 1 2

38  Research handbook on innovation in international business Table 3.2

Number of SMEs and large enterprises in the EU-28 NFBS in 2018 and their value added and employment Enterprises

Value added

Number (million) Percentage

Value (bn €)

Percentage

Micro SMEs

23.324

93.0

1610

20.8

43.5

29.7

Small SMEs

1.472

5.9

1358

17.6

29.5

20.1

Medium SMEs

0.236

0.9

1388

18.0

24.7

16.8

TOTAL

25.032

99.8

4357

56.4

97.7

66.6

Large enterprises 0.047

0.2

3367

43.6

49.0

33.4

TOTAL

100%

7724

100

146.8

100

 

25.079

Employment Number (million)

Percentage

Source: Adapted from European Commission (2019a: 17).

LINKS BETWEEN INTERNATIONALIZATION OF SMEs AND INNOVATION In a global and interconnected economy based increasingly on distributed and open innovation and on knowledge (OECD, 2019) the internationalization aspect assumes a crucial role to the innovation of the SME sector, and to income, employment and growth in the home economy. The extensive decline in barriers to trade and investment linked with the globalization of markets, together with technological advances in ICT, are now enabling SMEs – rapidly following their establishment – to anticipate becoming direct participants in international business (Oviatt and McDougall, 2005; Zander et al., 2015; Cavusgil and Knight, 2015; Coviello, 2015) thereby increasing the number of international SMEs. A number of works have explored the relationship between internationalization and innovation (e.g. Alarcón Osuna, 2014; Love and Roper, 2015). Some argue that internationalization influences the level of innovation (Kafouros et al., 2008; Peng, 2001); others that innovation settles the internationalization level (Singh and Gaur, 2013; Wakelin, 1998). In any case, the evidence suggests that there is a strong and positive relationship between internationalization and innovation. For example, 26 per cent of international SMEs (versus only 8 per cent of domestic SMEs) introduced products or services new to their domestic sector (European Commission, 2010); SMEs that had exported at the beginning of the 2012–14 reference period were more likely to innovate than SMEs which did not (European Commission, 2019a); SMEs with export experience are more likely to conduct R&D on a consistent basis than SMEs that did not export (European Commission, 2019a). Moreover, innovation itself has globalised (Archibugi and Iammarino, 1997). Being connected to the global knowledge flows both to obtain inputs and to exploit outputs (e.g. cross-border alliances, knowledge transfer from foreign direct investments, attraction of a foreign skilled workforce) is crucial for SMEs to innovate (OECD, 2010). International expansion is even more critical for high-growth enterprises (e.g. gazelles and unicorns), start-ups and scale-ups. According to the Annual report on European SMEs (European Commission, 2019a), only 11 per cent of surveyed start-ups did not intend to expand internationally in the following 12 months. Further, going international has several positive impacts on SMEs in existence. For example, international activity by an SME correlates strongly with higher turnover; internationalized SMEs report employment growth of 7 per cent versus the 1 per cent reported by those without any international activities (European Commission, 2010).

Transforming uncertainty from being a threat to becoming an asset  39 Table 3.3

Contribution of EU-28 SMEs on different industry groupings to (a) industry group value added employment and (b) total SME value added and employment in the EU-28 NFBS in 2019

 

Share of SMEs in industry group

Industry grouping

Value added %

Employment %

Share of industry SMEs in total SMEs in NFBS Value added %

Employment %

  Low tech

53.0

69.5

7.5

9.2

  Medium tech

55.9

52.8

7.8

7.3

  High tech

25.8

36.5

6.7

4.6

Less knowledge-intensive

64.7

69.2

51.7

57.4

Knowledge-intensive

57.0

62.5

26.3

21.4

Source: Adapted from European Commission (2019a: 33).

SMEs STRUGGLE WITH BOTH INNOVATION AND INTERNATIONALIZATION Notwithstanding the above, SMEs struggle both to be innovative and to internationalize. In OECD countries, SMEs innovate less than large companies with median share of business R&D at 35 per cent (OECD, 2019). In the EU, the value generated by SMEs in the high-tech industry group is 26 per cent versus 53 per cent (low-tech industry) to 65 per cent (less knowledge-intensive) in all other technology or knowledge industry groups (European Commission, 2019a). This is also reflected in employment rates; in the high-tech industry groups, only 37 per cent work for an SME versus 53–70 per cent in other industry groupings (Table 3.3). There are multiple reasons for this, but public financial support, access to networks and ecosystems, and access to skills are the most commonly reported issues (European Commission, 2019a). Regarding internationalization, only a small proportion of SMEs are doing business at the international level (OECD, 2019). For example, less than one in four European SMEs – which are among the most active worldwide – have exported to another country, less than 10 per cent of them have partnered with a foreign-based enterprise on R&D and only 4 per cent have invested directly in a foreign-based firm (European Commission, 2014). Further, almost 74 per cent of the SMEs that do not currently export report that they will probably never do so (European Commission, 2015). The reasons for this vary, but difficulty in getting financial and other support from public and private institutions plays a crucial role (European Commission, 2015).

INTERNATIONALIZATION PROCESS OF SMEs: THE CRITICAL ROLE OF UNCERTAINTY Research on the internationalization process of the firm took off in the early 1970s in the Nordic countries (Cavusgil, 1980; Johanson and Vahlne, 1977). The leading outcome of this body of work is the Uppsala model (Johanson and Vahlne, 1977; subsequently updated by (among others) Johanson and Vahlne, 2009; Schweizer et al., 2010; Johanson and Johanson, 2021). This model describes the internationalization process as a gradual acquisition and integration of knowledge about foreign markets accompanied by an increasing commitment in those markets. In this dynamic model, the internationalization of the firm is seen as the

40  Research handbook on innovation in international business process of a company’s international involvement increasing as a result of different types of learning. The model suggests that the internationalization process is prompted according to the level of knowledge of the foreign market. Usually, it starts with infrequent overseas sales and continues with gradually larger commitments in the foreign markets. The more firms learn, the greater the commitment and, in turn, the higher the commitment, the more firms learn. Another characteristic of the internationalization process is that it is usually initiated in markets that are perceived as close to the domestic market not simply in spatial terms but also close in terms of cognition where the uncertainty is low. This might be a perception based on accumulated knowledge but also on intuition, perhaps arising from cultural or institutional similarity. This idea of the importance of knowledge and the perception of foreign markets was originally encapsulated in the concept of the ‘liability of foreignness’ (Hymer, 1976) and later, based on the works that pointed out the importance of networks (e.g. Coviello, 2006; Zaheer, 1995) upgraded into the ‘liability of outsidership’ (Johanson and Vahlne, 2009) as a barrier to internationalization in foreign markets. According to this approach, a firm starts internationalization in countries that are perceived culturally, economically, geographically (etc.) close before gradually entering other markets (Johanson and Vahlne, 2009). At the beginning of the 1990s, “researchers at the intersection of entrepreneurship and internationalisation” (Autio et al., 2000: 909) challenged the dominant wisdom. They found that some SMEs are able to internationalize more rapidly than the previous models had predicted (Oviatt and McDougall, 1994, 2005). These new observations suggested that some firms, especially knowledge-intensive and knowledge-based SMEs, are more likely to exhibit accelerated internationalization that skips over some of the strictly sequential, and predictable, phases of increasing foreign market commitment previously identified in the literature. In particular, research focused on international new ventures (INV), ‘born global’ and ‘born-again global’ firms. INVs and born globals are firms that are internationally oriented since their inception, or from soon after, that succeed in reaching a convincing degree of internationalization within relatively few years (e.g. typically between three and six years) (Bell et al., 2003). On the other hand, born-again global firms will have operated for a number of years only on a national basis until, owing to some critical event, they change their strategy and start to internationalize rapidly. Whatever the ‘critical incident’ is (e.g. adaption of product and/or market innovation, adaption of new information technology (Bell et al., 2003: 351)), its effect is to increase the knowledge intensity of the firm. Oviatt and McDougall (2005: 541) developed “a model of forces influencing the speed of internationalisation” arguing that market knowledge, international network of the entrepreneur, and intensity of the knowledge embedded in the product are the moderating forces of the internationalization speed. Researchers and practitioners agree that international business is a potentially expensive undertaking and requires the firm to deal with uncertainties in foreign languages, cultures, and unusual ways of doing business. Compared with doing business in the familiar home market, international business is complex, uncertain and challenging (Kalinic et al., 2014; Johanson and Vahlne, 2009) and adds a disproportionately heavy burden upon SMEs’ entrepreneurs. Compared with leading larger firms, SMEs are characteristically not only small in size, but exhibit youth and with this, inexperience, while also lacking substantial financial and human resources (Nakos et al., 2014). For entrepreneurs there is a fine balance between (international) growth and performance (Sapienza et al., 2006). In particular, management may be either short-handed or deficient in superior business skills, or both. Small size and lower levels of resourcing make SMEs vulnerable per se: they often operate on slim profit margins, and across

Transforming uncertainty from being a threat to becoming an asset  41 a narrower base of revenue streams (Westhead et al., 2001). However, when internationalizing, empirical evidence points to the possibility of an unexpectedly high level of international commitment (e.g. establishment of a production unit abroad) and performance by these firms, despite the considerable uncertainty they face due to the lack of knowledge and international network (Kalinic and Forza, 2012). In addition to these uncertainties, and linked to the lack of resources, there are also uncertainties which are intrinsically embedded in the environment owing to the innovative nature of the endeavour. Alvarez (2007) explains that these uncertainties make it difficult for the entrepreneur to calculate or estimate the risk and, thus, to make decisions about how to organize the emerging venture and which resources to acquire; yet, solving those difficulties under conditions of uncertainty is the primary characteristic of entrepreneurial firms (Alvarez and Barney, 2005). In sum, high levels of uncertainty often characterize SMEs’ internationalization and innovation processes, making it problematic for institutions to assess risk. This uncertainty hinders investment and growth. Yet entrepreneurial firms’ raison d’être is to innovate under such conditions by identifying or creating new opportunities where others cannot see them. Thus, new specific instruments are needed to help institutions evaluate projects that are embedded in uncertain environments (i.e. where risk can be neither calculated nor estimated).

ENTREPRENEURIAL DECISION-MAKING UNDER UNCERTAINTY The literature on economics (e.g. Knight, 1921) and entrepreneurship (e.g. Knight, 1921; Alvarez and Barney, 2005; Sarasvathy, 2008) suggests that the level of unpredictability under which business decisions are made ranges from risky, through uncertain (i.e. ambiguous), to highly uncertain. In the case of risk, the distribution of future events is known and the risk associated with each outcome can be calculated using analytical techniques. In cases where distribution is ambiguous, the risk associated with future scenarios can still, to some extent, be estimated through statistical estimation techniques (Table 3.4). In these two cases, decision makers use approaches based on causal logic (causation) that emphasize planning, control and the pre-determination of objectives (e.g. Brinckmann et al., 2010; Delmar and Shane, 2003; Miller and Cardinal, 1994). The assumption of these causal approaches is that the opportunities (e.g. market niches) already exist and wait to be discovered. Once discovered, it remains for the entrepreneur to create, or acquire, the necessary resources to exploit them. The return on different business projects is assessed by calculating, or estimating, the present value of new investment or net cash flow that an investment is expected to generate. The emphasis of causal logic is on data and information gathering, and on the prediction of future scenarios. Under such conditions, Alvarez and Barney (2005) and Reymen et al. (2015) suggest that decision-making is consistent with transaction cost economics, as information is available to assign residual rights and make residual claims choices. However, the literature suggests that causation-based protocols for estimating risk have limited applicability under conditions of true/high uncertainty because, in such contexts, predictions calculated or estimated on past experience typically cannot correctly reflect the future development of events (Chwolka and Raith, 2012; Brinckmann et al., 2010; Alvarez and Parker, 2009; Dencker et al., 2009). The distribution of future events is not only unknown but it is also unknowable in principle, as there is no information on which to conduct estimation

42  Research handbook on innovation in international business Table 3.4

Differences between prediction, risk and uncertainty

 

What matters

Planning ahead

Prediction

Data

Quality/schedule

(known)

(the past)

checking

Risk (unknown) Uncertainty (unknowable)

Foresight (the present, near future) Vision (based on experience) (the future)

If something is wrong … … adjust to the prior business plan

Success Planned vs. actual – execution, procedures

Alternative scenarios

… adjust the business plan to the

Actual vs. planned –

development

alternative scenarios

flexibility, improvements

Unforeseen possibilities exploration

… co-creation and affordable loss

Does it make sense?!, unforeseeable

Source: Adapted from Read et al. (2010: 27).

(Sarasvathy, 2001). In contrast, approaches based on adaptation, emerging strategies, and flexible objectives – such as bricolage (Baker and Nelson, 2005), improvisation (e.g. Baker et al., 2003), and effectuation (Sarasvathy, 2001) – appear to be more suitable for the creation of ventures because, under high uncertainty, decision makers need to be responsive to the changing and unpredictable external environment and open to engage with unforeseen stakeholders as and when information transpires (Reymen et al., 2015; Alvarez and Barney, 2005). In contrast to casual logic, such opportunities tend to be created rather than discovered. There is growing agreement that making decisions under conditions of high uncertainty is one of the key characteristics of entrepreneurial firms (Reymen et al., 2015; Alvarez and Barney, 2005; Loasby, 2002; Alvarez and Busenitz, 2001). Because entrepreneurs often exploit new, untried market opportunities (Shane and Venkataraman, 2000; Schumpeter, 1934) they must coordinate stakeholders, allocate resources, and make decisions before the economic value associated with exploiting a market opportunity is known, even probabilistically (Alvarez, 2007; Alvarez and Barney, 2005). Such conditions are typical of early venture stages and technology-based ventures (Reymen et al., 2015; Atuahene-Gima and Haiyang, 2004).

EVIDENCE FROM INTERNATIONAL ENTREPRENEURSHIP LITERATURE The international entrepreneurship literature provides evidence of entrepreneurial decision-making using non-casual logics (Aharoni et al., 2011; Jones et al., 2011). Often when going international, entrepreneurs apply ‘unexpected’ lines of reasoning (Aharoni et al., 2011). They make satisficing decisions (March and Simon, 1958; Cyert and March, 1963) preferring to invest as much as they are willing to lose instead of making decisions based on the risk-adjusted return on investment and the logic of cost-minimization. Entrepreneurs often adapt to uncertain international environments by combining resource-based analysis, networking, and flexibility of goals which can result in ‘unplanned’ internationalization (Chandra et al., 2009; Crick and Spence, 2005). The term ‘unplanned’ refers to the fact that international expansion does not follow a precise plan containing pre-fixed goals; it might nevertheless successfully develop international activities. Using elements of effectuation theory (Sarasvathy, 2001) scholars have recently reasoned that entrepreneurs are more means-driven rather than goal-oriented, particularly under condi-

Transforming uncertainty from being a threat to becoming an asset  43 tions of high uncertainty. Such conditions are typical during the internationalization process, especially for resource-constrained SMEs, and tend to favour incremental exploitation of the means at their disposal, rather than the adoption of completely new means to reach prefixed goals (Kalinic et al., 2014). Under such conditions, entrepreneurs at the SME stage frequently use the resources available in their companies, turn to their networks to overcome the liability of outsidership (Schweizer et al., 2010), and base their investment project decisions on the affordable loss principle rather than on any estimation of return on investments (Kalinic et al., 2014). The specific type and configuration of (international) activity is not predetermined; it is rather the outcome of a process that depends on constant interaction with external stakeholders and the resources developed during the process itself (Sarasvathy et al., 2014). From this perspective, classical business plans based on calculation of risks and development of possible scenarios have limited efficacy (Kalinic et al., 2014). Kalinic et al. (2014) argue that entrepreneurs’ decision-making oscillates between effectual logic and causal logic. It depends on the level of foreign market uncertainty and on the entrepreneurs’ predisposition to base the decisions on the affordable loss principle rather than on the return on investment calculation. Further, switching front and back from causal to effectual logic allows companies with limited resources to overcome the uncertainties linked to the liabilities of outsidership and to rapidly increase the level of commitment in the foreign market.

TRANSFORMING UNCERTAINTY FROM BEING A THREAT TO BECOMING AN ASSET There is substantial evidence that entrepreneurs successfully follow alternative (non-causal) logics of decision-making during the process characterized by high uncertainty (Mainela et al., 2014; Sarasvathy et al., 2014; Crick and Spence, 2005). Although investigators have achieved a good level of understanding of the dynamics of decision-making under such conditions, so far innovation support programmes have largely neglected how to assess accurately the potential of truly innovative projects based on these logics. Usually, the programmes either ignore the external environment and the level of uncertainty or provide instruments aimed at reducing the uncertainty. An example of the first case is investments in the overall innovation environment (e.g. basic research in the research centres or universities). The aim/hope of governments is the creation of spin-offs and of spill-over effects to already existing companies. Another example is the establishment of tax benefits for companies that undertake some kind of innovation or that acquire some innovative services/tools. These actions are general in aim, sometimes known as helicopter policies. Other initiatives aim at reducing the environmental uncertainty in order to equip companies with enough knowledge to be able to estimate risks, analyse different scenarios, and prepare a robust business plan. Examples of those initiatives are info desks, networking events, and business missions. Although a number of those initiatives have proven their potential and have been appreciated by the SMEs (European Commission, 2019b), they need to be complemented with the programmes that aim at investing in uncertainty. But, in order to be able to provide the most effective support, governments and financial institutions need specific ground-breaking instruments tailor-made for entrepreneurial projects (e.g. start-ups, scale-ups) embedded in true environmental uncertainty, that are capable of assessing the potential of projects with uncertain outcomes, yet capable of delivering high

44  Research handbook on innovation in international business innovation and returns and, thus, economic growth. If entrepreneurial decision-making in conditions of high uncertainty is based on elements such as means at disposal, affordable loss investment, networking, and flexibility of goals (Sarasvathy, 2008) then we need to understand what makes means at disposal sufficient to start the venture, an investment affordable to be lost, a network useful for developing the venture, and flexible goals efficient in creating value. The ‘toolkit’ with which to evaluate the potential of true entrepreneurial projects (we call it ‘entrepreneurial plan’ as opposed to the classic ‘business plan’) – that is, those within genuinely uncertain environments versus those taking place under conditions where risk can be calculated or estimated (Figure 3.2) (Alvarez and Barney, 2005) – is overlooked. And this undermines the possibility of policymakers and financial institutions selecting the most effective mechanisms of promotion – issues to do with the availability and terms of access to (alternative forms of) finance, equity and (self‑)selection of stakeholders, awareness-raising measures, knowledge acquisition measures, capacity-building measures – with which to support those projects with the highest innovativeness and profitability. It follows that this shortcoming must hamper economic growth.

Source: Read et al. (2010: 27).

Figure 3.2

Prediction versus control

Business planning for any business is important, but it is not the most suitable tool for the truly innovative projects operating under conditions of high uncertainty. Business plans are focused on how to reach pre-fixed objectives by optimizing the resources to put in (Figure 3.2). A business plan is based on prediction and efficiency: once the goal/opportunity (e.g. market segment and market price) is identified based on market surveys and other estimation techniques, the company needs to optimize the resources to produce at the lowest cost possible in order to maximize profit. Whereas, an entrepreneurial plan is based on control and effectiveness: once the means at disposal have been identified, the goal is to re-combine the means, interact with emerging stakeholders and create new unforeseen opportunities. In a sense, the risk is controlled by investing what is affordable to be lost and the profit is produced by creating additional value. In this sense, uncertainty can be transformed into opportunity by

Transforming uncertainty from being a threat to becoming an asset  45 controlling the environment and effectuation principles can provide unique sets of heuristics which are related to control. Effectuation indicates how to act based on knowledge and capabilities at disposal in conditions when it is not possible to obtain additional resources or reduce the level of uncertainty (Sarasvathy, 2008). Evaluating projects based on the entrepreneurial plan has the potential to significantly change the way that projects facing highly uncertain conditions (typical of the internationalization process, especially for the resource-constrained SMEs), conventionally assessed as too risky, will be evaluated, so enabling them to be supported in greater numbers. They will not be turned down on the grounds of high environmental uncertainty alone, or on the grounds of incapacity to produce/predict a detailed business plan based on the estimation of the net cashflow an investment is expected to generate. Instead, a greater number will be helped to proceed, and thus deliver innovation, employment and growth to society. They will be supported based on the capacity to control the resources at their disposal, on the ability to re-configure the goals based on the emerging stakeholders and changes in the external environment. An important outcome will be a tangible increase in the rate of successful international entrepreneurial projects supported by public (and private) entities. In other terms, this approach opens new horizons for public and private entities to explore new ecosystems where uncertainty is not considered a threat but an asset. It is important to note that business and entrepreneurial plans are not in competition. It depends on the level of external uncertainty. Both efficiency (prediction) and effectiveness (control) can help to beat the competition, but only by combining the two can a company ensure that a sustainable and lasting competitive advantage is achieved. In fact, once the most uncertain point of the innovation/internationalization process is passed, the companies will need to produce a business plan in order to be able to capitalize on their innovation. This will allow the start-ups and SMEs in general to expand efficiently and effectively in a sustainable way. Therefore, the secret for young, small companies to obtain high and sustainable growth is to range between prediction and control, between business and entrepreneurial plan. Some public institutions have recognized the importance of innovation in SMEs for economic growth and sustainability and have established initiatives at the national and also European level (e.g. European Innovation Council;3 for more examples of initiatives at the national level, see the background study of the Annual Report on European SMEs 2018/2019: Research & Development and Innovation by SMEs (European Commission, 2019b)). One of the major challenges that such initiatives face consists of differentiating the support from what is already provided from other actors on the market. Therefore, they should seek to support (usually through grants, loans or equity) those private innovation initiatives that are truly operating in a domain of uncertainty with unexpected positive (and negative) outcomes. These initiatives should have an entrepreneurial plan that convincingly explains issues such as: how they intend to expand their network and use yet unknown potential stakeholders; what they can afford to lose in order to be able to re-start; what are the alternative market niches; and how

3 The European Innovation Council is Europe’s flagship innovation programme to identify, develop and scale up breakthrough technologies and disruptive innovations in Europe. It is a unique programme in the world – it combines (visionary) research on future technologies with an accelerator to scale up innovative start-ups and SMEs. Further, it aims at creating pioneering communities of researchers and innovators that will jointly shape the future and enhance the development of European innovation ecosystems.

46  Research handbook on innovation in international business flexible they are in changing a company’s objectives. In case the support programmes are too focused on evaluating the initiatives according to the classical business plan, they risk ending up supporting those initiatives that can estimate the risk; but, this is already covered (at least in advanced countries) by traditional financial institutions (i.e. those investing in risk). From this perspective, the support programmes should act more as venture capitalists or business angles. However, differently from them, the support programmes have additional challenges. First, they should not consider only the potential return on investment as the main performance indicator but also all the knowledge spill-over effects and social benefits that derive from investing in such entrepreneurial projects. Further, support initiatives should also take into consideration smaller projects with limited potential for growth in economic terms (and, therefore, not interesting to venture capitalists) but with important social impacts such as employment for local communities, creation of innovative model-companies that would guide the transition to a more green and sustainable economy, or creation of the critical mass of start-ups for the innovation ecosystems. Finally, the support programmes should provide integrated support. Next to financial aid it is also crucial to provide to (often) resource-constrained SMEs support in terms of expert advice, access to (international) markets, access to (international) knowledge flows, networking opportunities, technical training, and intellectual property support. This is important not only for the success of a specific company but also because it aids creation of a critical mass of experienced and skilled staff that can contribute to the development of further innovations contributing to the aforementioned local innovation ecosystem. However, often those benefits are not easy to quantify and are evident only in the long term, making it more difficult to estimate and, consequently, to prove the efficacy of the programmes to the investors (in this case governments and, therefore, citizens).

CONCLUSIONS AND IMPLICATIONS FOR FUTURE RESEARCH In this chapter, we deliver a radical change to the conventional approach of private and public entities towards uncertainty in supporting innovation projects, especially for resource-constrained SMEs. We suggest that the change of approach is needed to assess and support the potential of entrepreneurially driven innovation projects. This assessment will be in terms of short-, medium-, and long-term impact and performance. Rather than focusing on lowering the level of uncertainty in order to be able to better predict the future, a new approach is suggested to deal with uncertainty and transform it into an asset. If authentic entrepreneurship operates under conditions of uncertainty (Alvarez and Barney, 2005) and entrepreneurial decision-making is based on non-causal logics then it cannot be supported efficiently through incentives that assign benefits to the best projects evaluated using conventional analytical and statistical techniques (Sarasvathy, 2008). We need specific instruments designed for entrepreneurial projects – embedded in true environmental uncertainty – that are capable of assessing the potential of projects with uncertain outcomes, yet capable of delivering innovation, social benefits and/or high returns and, thus, economic growth. Further, given globalization trends, the interconnectedness of knowledge flows and the growing importance of open innovation, an effective innovation support programme (especially for young fast-growing companies) cannot ignore internationalization strategy. Companies must have both innovation and internationalization strategies well developed and integrated in order to succeed.

Transforming uncertainty from being a threat to becoming an asset  47 Although our work provides interesting new insights, it has some limitations which may provide opportunities for future research. First, it is based on previous theoretical works and on secondary data evidence that has not specifically focused on problems of investing in innovative companies under conditions of true uncertainty. This provides the opportunity to suggest and develop new and alternative programmes that invest in uncertainty that will be used by private and public entities – issues to do with the availability and terms of availability of and access to (alternative ways of) finance, equity and (self‑)selection of stakeholders, awareness-raising measures, knowledge acquisition measures, and capacity-building measures. Second, most data are retrospective. Future research should develop ad hoc longitudinal studies that will evaluate the effectiveness of new innovation support programmes. Third, our secondary data come mostly from the most advanced countries (OECD and European Union). Future research might wish to explore the generalizability and impact in other geographical locations, especially in emerging countries where the rapid growth of young companies might bring social benefits and contribute to the United Nations’ 2030 Agenda and the Sustainable Development Goals. The lessons learnt will be able to be applied beyond the field of innovation, impacting entrepreneurship, international business, political economics, and new economic policy for the twenty-first century.

NOTE 1.

The information and views set out in this article are those of the author and do not necessarily reflect the official opinion of the European Commission

REFERENCES Aghion, P., & Howitt, P. 1992. A Model of Growth through Creative Destruction. Econometrica, 60 (2), 323–51. Aharoni, Y., Tihanyi, L., & Connelly, B. L. 2011. Managerial decision-making in international business: a forty-five-year retrospective. Journal of World Business, 46(2), 135–42. Alarcón Osuna, M. A. 2014. Innovation and internationalization as a single strategy of the firm: a unification of theories. International Journal of Management and Marketing Research, 7(1), 73–84. Alvarez, S. A. 2007. Entrepreneurial rents and the theory of the firm. Journal of Business Venturing, 22(3), 427–42. Alvarez, S. A., & Barney J. B. 2005. How do entrepreneurs organize firms under conditions of uncertainty? Journal of Management, 31(5), 776–93. Alvarez, S. A., & Busenitz, L. W. 2001. The entrepreneurship of resource-based theory. Journal of Management, 27(6), 755–75. Alvarez, S. A., & Parker, S. 2009. Emerging firms and the allocation of control rights: a Bayesian approach. Academy of Management Review, 34(2), 209–27. Archibugi, D., & Iammarino, S. 1997. The policy implications of the globalisation of innovation, University of Cambridge ESRC Centre for Business Research, Working Paper 75, ESRC Centre for Business Research, Cambridge. Atuahene-Gima, K., & Haiyang, L. 2004. Strategic decision comprehensiveness and new product development outcomes in new technology ventures. Academy of Management Journal, 47(4), 583–97.

48  Research handbook on innovation in international business Audretsch, D., & Keilbach, M. 2005. Entrepreneurship capital and regional growth, The Annals of Regional Science, 39, 457–69. Audretsch D., & Thurik, R. 2001. Linking entrepreneurship to growth, OECD Science, Technology and Industry Working Papers, 2001/2, OECD, Paris. Audretsch, D., & Thurik, A. R. 2004. A model of the entrepreneurial economy. International Journal of Entrepreneurship Education, 2(2), 143–66. Autio, E., Sapienza, H. J., & Almeida, J. G. 2000. Effects of age at entry, knowledge intensity, and imitability on international growth. Academy of Management Journal, 43(5), 909–24. Baker, T., Miner, A. S., & Eesley, D. T. 2003. Improvising firms: bricolage, account giving, and improvisational competencies in the founding process. Research Policy, 32(2), 255–76. Baker, T., & Nelson, R. E. 2005. Creating something from nothing: resource construction through entrepreneurial bricolage. Administrative Science Quarterly, 50(3), 329–66. Bell, J., McNaughton, R., Young, S., & Crick, D. 2003. Towards an integrative model of small firm internationalisation. Journal of International Entrepreneurship, 1(4), 339–62. Brinckmann, J., Grichnik, D., & Kapsa, D. 2010. Should entrepreneurs plan or just storm the castle? A meta-analysis on contextual factors impacting the business planning performance relationship in small firms. Journal of Business Venturing, 25(1), 24–40. Cavusgil, S. T. 1980. On the internationalization process of firms. European Research, 8(6), 273–81. Cavusgil, S. T., & Knight, G. 2015. The born global firm: an entrepreneurial and capabilities perspective on early and rapid internationalization. Journal of International Business Studies, 46(1), 3–16. Chandra, Y., Styles, C., & Wilkinson, I. 2009. The recognition of first time international entrepreneurial opportunities: evidence from firms in knowledge-based industries. International Marketing Review, 26(1), 30–61. Chesbrough, H. 2006. Open Innovation: The New Imperative for Creating and Profiting from Technology. Boston, MA: Harvard Business School Press. Chwolka, A., & Raith, M. G. 2012. The value of business planning before start-up: a decision-theoretical perspective. Journal of Business Venturing, 27(3), 385–99. Coviello, N. 2006. The network dynamics of international new ventures. Journal of International Business Studies, 37(5), 713–31. Coviello, N. 2015. Re-thinking research on born globals. Journal of International Business Studies, 46(1), 17–26. Crick, D., & Spence, M. 2005. The internationalisation of ‘high performing’ UK high-tech SMEs: a study of planned and unplanned strategies. International Business Review, 14, 167–85. Cyert, R. & March, J. 1963. A Behavioral Theory of the Firm. Englewood Cliffs: NJ: Prentice-Hall. Delmar, F., & Shane, S. 2003. Does business planning facilitate the development of new ventures? Strategic Management Journal, 24(12), 1165–85. Dencker, J. C., Gruber, M., & Shah, S. K. 2009. Pre-entry knowledge, learning, and the survival of new firms. Organization Science, 20(3), 516–37. European Commission. 2008. “Think Small First” – A “Small Business Act” for Europe. Communication from the Commission. Publications Office of the European Union. European Commission. 2010. Internationalisation of European SMEs. Entrepreneurship Unit, Directorate-General for Enterprise and Industry. European Commission. European Commission. 2014. Annual Report on European SMEs 2013/2014: A Partial and Fragile Recovery. Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs. European Commission. European Commission. 2015. Internationalisation of Small and Medium-Sized Enterprises. Flash Eurobarometer 421. Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs. European Commission.

Transforming uncertainty from being a threat to becoming an asset  49 European Commission. 2019a. Annual Report on European SMEs 2018/2019: Research & Development and Innovation by SMEs. European Commission. 2019b. Annual Report on European SMEs 2018/2019: Research & Development and Innovation by SMEs. Background Document. European Commission. 2019c. 2019 SBA Fact Sheet & Scoreboard. European Commission. 2020a. The 2020 EU Industrial R&D Investment Scoreboard. European Commission. 2020b. A New Industrial Strategy for Europe. European Commission. 2020c. An SME Strategy for Sustainable and Digital Europe. European Commission. 2021a. Annual Report on European SMEs 2018/2019: Digitalisation of SMEs. European Commission. 2021b. Study on the Effectiveness of Public Innovation Support for SMEs in Europe. Publication Office of the European Union. Forza, C., & Salvador, F. 2006. Product Information Management for Mass Customization: Connecting Customer, Front-Office and Back-Office for Fast and Efficient Customization. Basingstoke: Palgrave Macmillan. Freeman, C. 1982. The Economics of Industrial Innovation. London: Frances Pinter. Grossman, G., & Helpman, E. 1991. Endogenous product cycles. Economic Journal, 101(408), 1214–29. Hall, B., & van Reenen, J. 2000. How effective are fiscal incentives for R&D? A review of the evidence. Research Policy, 29(4–5), 449–69. Hall, J. K., Daneke, G. A. & Lenox, M. J. 2010. Sustainable development and entrepreneurship: past contributions and future directions. Journal of Business Venturing, 25(5), 439–48. Hymer, S. 1976. International Operations of National Firms: A Study of Foreign Direct Investment. Boston, MA: MIT Press. Johanson, J., & Johanson, M. 2021. Speed and synchronization in foreign market network entry: a note on the revisited Uppsala model. Journal of International Business Studies, 1–18. https://​doi​.org/​10​ .1057/​s41267–021–00407–4. Johanson, J., & Vahlne, J. E. 1977. The internationalization process of the firm—a model of knowledge development and increasing foreign market commitments. Journal of International Business Studies, 8(1), 23–32. Johanson, J., & Vahlne, J. E. 2009. The Uppsala internationalization process model revisited: from liability of foreignness to liability of outsidership. Journal of International Business Studies, 40(9), 1411–31. Jones, M. V., Coviello N. E., & Tang, Y. K. 2011. International entrepreneurship research (1989–2009): a domain ontology and thematic analysis. Journal of Business Venturing, 26(6), 632–59. Kafouros, M., Buckley, P., Sharp, J., & Wang, C. 2008. The role of internationalization in explaining innovation performance. Technovation, 28, 63–74. Kalinic, I., & Forza, C. 2012. Rapid internationalization of traditional SMEs: between gradualist models and born globals. International Business Review, 21(4), 694–707. Kalinic, I., Sarasvathy, S. D., & Forza, C. 2014. ‘Expect the unexpected’: implications of effectual logic on the internationalization process. International Business Review, 23(3), 635–47. Knight, F. H. 1921. Risk, Uncertainty and Profit. New York: Houghton Mifflin. Loasby, B. J. 2002. The evolution of knowledge: beyond the biological model. Research Policy, 31(8), 1227–39. Love, J., & Roper, S. 2015. SME innovation, exporting and growth: a review of existing evidence. International Small Business Journal, 33, 28–48. Mainela, T., Puhakka, V., & Servais, P. 2014. The concept of international opportunity in international entrepreneurship: a review and a research agenda. International Journal of Management Review, 16(1), 105–29. March, J. G. & Simon, H. A. 1958. Organizations [2nd edition 1993]. Oxford: Blackwell.

50  Research handbook on innovation in international business Miller, C. C., & Cardinal, L. B. 1994. Strategic planning and firm performance: a synthesis of more than two decades of research. Academy of Management Journal, 37(6), 1649–65. Nakos, G., Brouthers, K. D., & Dimitratos, P. 2014. International alliances with competitors and non‐ competitors: the disparate impact on SME international performance. Strategic Entrepreneurship Journal, 8(2), 167–82. Neely, A., Filippini, R., Forza, C., Vinelli, A., & Hii, J. 2001. A framework for analysing business performance, firm innovation and related contextual factors: perceptions of managers and policy makers in two European regions. Integrated Manufacturing Systems, 12(2), 114–24. OECD. 2010. SMEs, Entrepreneurship and Innovation, OECD Studies on SMEs and Entrepreneurship. OECD Publishing, Paris.  https://​doi​.org/​10​.1787/​9789264080355​-en. OECD. 2015. Implementation of the WTO Trade Facilitation Agreement: the potential impact on trade costs, OECD Trade and Agriculture Directorate. http://​ www​ .oecd​ .org/​ tad/​ tradedev/​ WTO​ -TFImplementation​-Policy​-Brief​_EN​_2015​_06​.pdf. OECD. 2017. Entrepreneurship at a glance. OECD Publishing, Paris. http://​ dx​ .doi​ .org/​ 10​ .1787/​ entrepreneur​_aag​-2017​-en. OECD. 2019. Strengthening SMEs and Entrepreneurship for Productivity and Inclusive Growth: OECD 2018 Ministerial Conference on SMEs, OECD Studies on SMEs and Entrepreneurship. OECD Publishing, Paris. https://​doi​.org/​10​.1787/​c19b6f97​-en. OECD/Eurostat. 2018. Oslo Manual 2018: Guidelines for Collecting, Reporting and Using Data on Innovation, 4th edition, The Measurement of Scientific, Technological and Innovation Activities. OECD Publishing, Paris/Eurostat, Luxembourg. https://​doi​.org/​10​.1787/​9789264304604​-en. Oviatt, B. M., & McDougall, P. P. 1994. Toward a theory of international new ventures. Journal of International Business Studies, 25(1), 45–64. Oviatt, B. M., & McDougall, P. P. 2005. Defining international entrepreneurship and modelling the speed of internationalization. Entrepreneurship Theory and Practice, 29(5), 537–54. Peng, M. W. 2001. The resource-based view and international business. Journal of Management, 27(6), 803–29. Petrin, T. 2018. A literature review on the impact and effectiveness of government support for R&D and innovation. ISIGrowth. http://​www​.isigrowth​.eu/​2018/​02/​14/​a​-literature​-review​-on​-the​-impact​-and​ -effectiveness​-of​-government​-support​-for​-rd​-and​-innovation/​. Radicic, D., & Pugh, G. 2017. Performance effects of external search strategies in European small and medium-sized enterprises. Journal of Small Business Management, 55(S1), 76–114. Read, S., Sarasvathy, S., Dew, N., Wiltbank, R., & Ohlsson, A. V. 2010. Effectual Entrepreneurship. London: Taylor & Francis. Reymen, I. M., Andries, P., Berends, H., Mauer, R., Stephan, U., & Burg, E. 2015. Understanding dynamics of strategic decision making in venture creation: a process study of effectuation and causation. Strategic Entrepreneurship Journal, 9(4), 351–79. Rogers, M. 2004. Networks, firm size and innovation. Small Business Economics, 22(2), 141–53. Romer, P. 1990. Endogenous technological change. Journal of Political Economy, 98(5), S71–S102. Sapienza, H. J., Autio, E., George, G., & Zahra, S. A. 2006. A capabilities perspective on the effects of early internationalization on firm survival and growth. Academy of Management Review, 31(4), 914–33. Sarasvathy, S. D. 2001. Causation and effectuation: toward a theoretical shift from economic inevitability to entrepreneurial contingency. Academy of Management Review, 26(2), 243–88. Sarasvathy, S. D. 2008. Effectuation: Elements of Entrepreneurial Expertise. Cheltenham, UK and Northampton, MA, USA: Edward Elgar Publishing. Sarasvathy, S., Kumar, K., York, J. G., & Bhagavatula, S. 2014. An effectual approach to international entrepreneurship: overlaps, challenges, and provocative possibilities. Entrepreneurship Theory and Practice, 38(1), 71–93.

Transforming uncertainty from being a threat to becoming an asset  51 Schumpeter, J. 1934. The Theory of Economic Development, 1st edition. Cambridge, MA: Harvard University Press. Schweizer, R., Vahlne, J. E., & Johanson, J. 2010. Internationalization as an entrepreneurial process. Journal of International Entrepreneurship, 8(4), 343–70. Shane, S., & Venkataraman, S. 2000. The promise of entrepreneurship as a field of research. Academy of Management Review, 25(1), 217–26. Singh, D. A., & Gaur, A. S. 2013. Governance structure, innovation and internationalization: evidence from India. Journal of International Management, 19(3), 300–309. Wakelin, K. 1998. Innovation and export behaviour at the firm level. Research Policy, 26(7–8), 829–41. Westhead, P., Wright, M., & Ucbasaran, D. 2001. The internationalization of new and small firms: a resource-based view. Journal of Business Venturing, 16(4), 333–58. World Bank. 2011. Telling Our Story: Volume 5 Small and Medium Enterprises (SMEs). Washington, DC: World Bank Group. Zaheer, S. 1995. Overcoming the liability of foreignness. Academy of Management Journal, 38(2), 341–63. Zander, I., McDougall-Covin, P., & Rose, E.L. 2015. Born globals and international business: evolution of a field of research. Journal of International Business Studies, 46(1), 27–35.

4. The internet and internationalization: a review and future research agenda Edith Ipsmiller and Desislava Dikova

INTRODUCTION The internet is one of the most impactful innovations of the twentieth century. Since it became publicly available in 1991, numerous international strategy and international marketing scholars have pondered about how it will affect firms’ internationalization, with some suggesting it to have only a marginal effect and others proposing drastic changes, such as, for instance, a complete replacement of traditional channels by digital channels or the elimination of intermediaries in international business (De la Torre & Moxon, 2001; Hamill, 1997; Petersen et al., 2002; Petersen & Welch, 2003; Samiee, 1998). Thirty years later, numerous conceptual and empirical papers provide pieces to this puzzle. There are also several literature reviews on the topic. Some of them focus on selected areas only, e.g. the internet and entrepreneurship (Reuber & Fischer, 2011; Vadana et al., 2019) or the internet and international market entry (Watson IV et al., 2018). Others are not systematic but expert (integrative) reviews like the one by Samiee (2020) on the internet and international marketing. However, to the best of our knowledge, there is no available work offering a comprehensive overview on this topic. Consequently, this chapter systematically reviews the theoretical and empirical evidence on the use of the internet in firms’ internationalization, highlighting its relevance for different types of firms in diverse contexts. The main research question we seek to answer is: “How has academic literature discussed internationalization via the internet and what are the main takeaways?” To answer this research question, we systematically review theoretical and empirical academic literature (ranked 3-star or higher according to the Association of Business Schools (ABS) ranking) addressing the role of the internet in internationalization published within the last 30 years (between 1991 and 2021). Through systematically reviewing the existing body of knowledge, this chapter provides a contribution by highlighting what has or has not been researched, and by providing guidance to researchers about potentially fruitful, yet undiscovered fields whose exploration may help us to better understand the role of the internet in internationalization.

METHODOLOGY We use a systematic literature review methodology (Tranfield et al., 2003) to provide an overview of existing literature on the topic. While first introduced in the medical science field, this method has also become popular in management and international business (for examples see Ipsmiller et al., 2019; Ipsmiller & Dikova, 2021; Rosado-Serrano et al., 2018; Surdu & Mellahi, 2016). Tranfield et al. (2003) describe the systematic literature review methodology 52

The internet and internationalization  53 as a three-stage process, involving a planning stage, followed by the actual literature review stage and, finally, the reporting and dissemination stage. After we had established the relevance and content of our review, we searched for literature to be included in our review. To find literature on the topic, we used the EBSCO and ProQuest databases. We searched for the following keyword combinations in the title, abstract and keywords: Virtual/internet/digital/ online + market entry/internationali*ation (cross-border e-commerce; export). Furthermore, we inspected the respective articles’ reference list to identify additional literature on the topic (Wohlin, 2014). To ensure high quality of our review, we limited our search to journals ranked 3-star or higher according to the ABS ranking. We eliminated all articles that only tangentially treated the topic. In total, we identified 104 papers published in journals ranked 3-star or higher whose prime focus is on the role of the internet in firm internationalization.

TAKING STOCK Descriptive Results Of the 104 papers identified, 37 are theoretical (conceptual papers, literature reviews and editorials) and 67 are empirical. Within the empirical category, 40 papers are quantitative, 25 are qualitative, and in two articles, both qualitative and quantitative methods are used. The large number of articles with a qualitative approach – which is often applied for discovering new phenomena or when causal relationships are yet to be determined (Birkinshaw et al., 2011) – supports the idea that the phenomenon under investigation is a complex issue with many aspects yet to be explored (for more details, see Table 4A.1 in the Appendix). Thematic Results Upon closer inspection of the identified literature, several topical fields emerged. Based on the empirical literature identified and following Schmeisser (2013), we grouped contributions according to the “antecedents–phenomena–consequences” logic. This scheme serves as a basis for our topical discussion of the literature, presented in Figure 4.1. Antecedents Several papers covered in this review talk about the antecedents to firms’ use of the internet in internationalization. These antecedents comprise factors that drive or dampen firms’ use of the internet in their internationalization. Broadly speaking, these factors can be grouped into firm-specific/internal factors and environmental/external factors. Internal factors Starting with internal factors, several papers focus on the capabilities needed for (successful) internet-based internationalization. These include IT or digital competences (e.g., Ashurst et al., 2012; Bennett, 1997; Cahen & Borini, 2020; Hagsten & Kotnik, 2017; Jean & Kim, 2020; Morgan-Thomas & Bridgewater, 2004; Reuber & Fischer, 2011; Tiessen et al., 2001) as well as internet marketing capabilities (e.g., Bianchi & Mathews, 2016; Gregory et al., 2019; Liu et al., 2020; Mathews et al., 2016).

54  Research handbook on innovation in international business

Figure 4.1

The use of the internet in internationalization: antecedents, phenomena and consequences

Furthermore, a number of papers discuss the importance of firms’ orientations for the (successful) use of internet-based internationalization, including their (foreign) market (e.g., Colton et al., 2010; Nguyen & Barrett, 2006; Sinkovics et al., 2013), learning (Nguyen & Barrett, 2006), and entrepreneurial orientation (e.g., Colton et al., 2010; Glavas & Mathews, 2014; Sinkovics et al., 2013). For instance, Glavas and Mathews (2014), using a small and medium enterprise (SME) case study, find that while innovativeness and proactiveness lead to a greater integration of the internet in internationalization processes, international risk-taking propensity has the opposite effect. Literature also suggests that resources such as firms’ international experience as well as existing network relationships in foreign markets matter. Glavas & Mathews (2014) find that firms with greater international experience and larger international networks rely more on traditional (instead of internet-based) ways of internationalization. This is also supported by Bennett (1997), who finds that web site users employ significantly fewer foreign representatives in international markets than non-users. According to the case study by Gabrielsson & Gabrielsson (2011), firms’ use of internet-based sales channels increases during globalization. Moreover, existing relationships with foreign intermediaries encourage firms to favor partner-based internet sales channels over non-partner-based (direct) sales channels. Other resource-related factors that have been suggested to impact firms’ use of the internet in internationalization include firm size (Pezderka & Sinkovics, 2011; Tiessen et al., 2001), access to information and communication technology (ICT)/e-commerce (Gregory et al., 2007; Hagsten & Kotnik, 2017; Pezderka & Sinkovics, 2011) and investments in export development (Kaynak et al., 2005). Business models are also examined as an internal factor determining firms’ use of the internet in internationalization (Brouthers et al., 2016; Hennart, 2014, 2019). Unsurprisingly, both domestic and international firms with digital business models show a higher dependence on the internet than traditional firms (Monaghan et al., 2020). Other strategy-related

The internet and internationalization  55 antecedents to companies’ use of the internet in their internationalization include the type of customer (business-to-business (B2B) vs. business-to-consumer (B2C)) (e.g., Gabrielsson & Gabrielsson, 2011; Tiessen et al., 2001), type of product/product characteristics (e.g., Gregory et al., 2007; Moen et al., 2003; Morgan-Thomas & Bridgewater, 2004) and firms’ international intensity (Nguyen & Barrett, 2006). Furthermore, researchers have also found that favorable beliefs about the effectiveness of using the internet to reach foreign customers can boost its usage in international business (Sinkovics et al., 2013), whereas negative perceptions can act as deterrents (Bennett, 1997). External factors Environmental (external) factors that have been suggested and/or found to boost firms’ use (and success) of the internet in internationalization include the demand for e-commerce by value-chain members (e.g. suppliers, customers) (Gregory et al., 2007; Tiessen et al., 2001), a country’s e-readiness (i.e., internet access/penetration/e-commerce/telecommunication infrastructure) (Berthon et al., 2008; Fernandes et al., 2019; Gregory et al., 2007; Luo et al., 2005; Mahnke & Venzin, 2003; Morgan-Thomas & Bridgewater, 2004), online market potential (Pezderka & Sinkovics, 2011) as well as regulatory transparency and legal protection of intellectual property rights (IPR) (Luo et al., 2005). In contrast, e-risk has been suggested to deter web-based internationalization (Pezderka & Sinkovics, 2011). As for foreign market risk, while Sinkovics et al. (2013) suggested that environmental turbulence leads to a decreased use of the internet as an alternative to physical presence, they in fact find the opposite effect. Phenomena The phenomenon investigated in this review is – broadly speaking – the role of the internet in internationalization. Given that the internet can serve different purposes, i.e., virtual information space, virtual communication space, virtual distribution space and virtual transaction space (Angehrn, 1997), papers covered here focus on a variety of issues. Because of the different purposes it can serve and its international reach, the internet is a prominent phenomenon in both (international) marketing as well as international business research, with some scholars stressing its importance as a marketing tool (e.g., Katsikeas et al., 2019; Quelch & Klein, 1996) and others suggesting that it can be used as an internationalization channel (e.g., Morgan-Thomas & Bridgewater, 2004; Pezderka & Sinkovics, 2011; Sinkovics et al., 2013). Moreover, while firms possessing a website can reach customers globally (since anyone who has access to the internet can access a website), they may not do so intentionally. Hence, having a website may constitute an internationalization move or may just serve the purpose of reaching out to domestic customers. What further complicates the analysis of this phenomenon is that the role of the internet in internationalization also varies depending on the type of firm or business model under investigation, some of which only became possible through the introduction of the internet. More specifically, the types of firms that use the internet in internationalization can range from companies with exclusively physical products to firms whose offerings are entirely digital; put differently, internationalizing firms can range from what is typically referred to as a “traditional” firm on the one end of the spectrum to modern, “digital” companies on the other. In addition, many traditional firms have already existed (and started the internationalization

56  Research handbook on innovation in international business process) before the internet was introduced, making digital transformation an important factor which, in turn, affects their internationalization strategies. Taking all this together, the internet has contributed to an increase in complexity of the internationalization process. Below, we summarize the various phenomena or decisions that have been investigated in the literature. We will first give an overview of how papers covered in our review have investigated firms’ use of the internet in the context of internationalization and will then focus on specific internationalization decisions explored in the respective papers. Internet use by firms Firms can use the internet for internationalization in different ways, for example, searching for information about foreign markets, using e-mail to communicate with foreign clients or creating a website that enables them to reach, interact or transact with global customers. Papers covered in our review have focused on internet use by firms in different ways. These include papers that study whether, or to which extent, firms use the internet in general or specifically for international business (e.g., Davis & Harveston, 2000; McCormick & Somaya, 2020; Pergelova et al., 2019). A number of papers differentiate between firms’ use of different internet functions, tools or technologies (e.g., use of search engines, e-mail, website, social media) or the different purposes the internet is used for (e.g., information, communication, transaction) (e.g., Alarcón-del-Amo et al., 2018; Ashurst et al., 2012; Glavas & Mathews, 2014; Glavas et al., 2019; Hagsten & Kotnik, 2017; Lal, 2004; Lituchy & Rail, 2000; Moen et al., 2004, 2008; Nguyen & Barrett, 2006; Sigfusson & Chetty, 2013). Some of the studies focus explicitly on how the use of the internet may assist firms’ internationalization and others establish a link between performance and internationalization, which will be discussed in more detail in the next section (consequences). Use of corporate websites/online internationalization A group of papers focus specifically on the use of corporate websites (e.g., Bennett, 1997; Eid et al., 2006; Houghton & Winklhofer, 2004; Morgan-Thomas & Bridgewater, 2004), which may provide different functions, such as information, communication/relationship, transaction and distribution (Angehrn, 1997; Morgan-Thomas & Bridgewater, 2004). While traditional firms may use the information, communication/relationship and transaction function of websites, firms with purely digital products also engage in a digital distribution. Several authors have suggested that firms can use corporate websites to enter or service foreign markets (e.g., Bennett, 1997; Eid et al., 2006; Moen et al., 2004; Morgan-Thomas & Bridgewater, 2004; Rothaermel et al., 2006; Schu & Morschett, 2017; Sinkovics et al., 2013; Yamin & Sinkovics, 2006). Morgan-Thomas & Bridgewater (2004), for instance, refer to these channels as “virtual export channels”, whereas Yamin and Sinkovics (2006) use the term “online internationalization”. Yamin & Sinkovics (2006) highlight that while firms having a website are, by default, international, a line must be drawn between what they call “active online internationalization” and “default online internationalization”. Whereas the former is associated with a significant investment in local adaptation of websites in terms of language or design, thus showing a firm’s intention to internationalize, the latter does not indicate a clear intention to internationalize and thus may serve no internationalization purpose. Sinkovics et al. (2013) suggest that online channels (e.g., corporate websites) may be used in two different ways in foreign markets, as substitutes for other (traditional or offline) foreign market channels or as complements to these channels. An entrepreneurial disposition is

The internet and internationalization  57 found to be positively linked to using online channels as sales channels complementing other channels, and so is a firm’s market responsiveness as well as the perception that the internet is a useful tool for reaching foreign customers, while market turbulence is negatively related with the use of the internet as an alternative to a physical market presence (Sinkovics et al., 2013). Use of online sales channels/e-commerce adoption Several papers focus on the internet as an (international) sales channel/(cross-border) e-commerce adoption (e.g., Gabrielsson & Gabrielsson, 2011; Gregory et al., 2007; Houghton & Winklhofer, 2004; Kaynak et al., 2005; Tiessen et al., 2001; Tolstoy et al., 2016). In general, (cross-border) online sales or e-commerce can take place via corporate websites (these are websites exhibiting transactional features available for international customers) (Houghton & Winklhofer, 2004) or third-party websites, such as online sales platforms (e.g., Amazon, Alibaba) (Deng & Wang, 2016; Gao et al., 2016; Zeng & Glaister, 2016). Research on born global, small and medium-sized firms from Finland suggests they quickly adopt online sales channels and use them with other traditional channels to create a multiple channel structure of serving foreign markets (Gabrielsson & Gabrielsson, 2011). E-commerce is studied by Tiessen et al. (2001) and Kaynak et al. (2005), both focusing on the role of different types of capabilities (resources) for e-commerce adoption. In addition, several papers focus specifically on retail firms’ use of e-commerce (i.e., e-tailing) (e.g., Colton et al., 2010; Hånell et al., 2019; Wood et al., 2019). Website design and content A number of papers center on the topic of website design and content, more specifically the degree of standardization/local adaptation of corporate websites (Okazaki, 2005; Robbins & Stylianou, 2003; Singh & Matsuo, 2004; Singh et al., 2005a; Singh et al., 2005b). Okazaki (2005) finds that the extent of website standardization is significantly and positively related to the presence of indirect sales functions, image reinforcement and choice availability, but not with the presence of direct sales functions, online promotions, or a feedback mechanism. Singh and colleagues (Singh & Matsuo, 2004; Singh et al., 2005a; Singh et al., 2005b), comparing local websites of international firms, find evidence for their adaptation to national cultural values. Robbins and Stylianou (2003), comparing websites of Fortune 500 firms, identify greater adaptation to national cultures regarding website content than to website design. Online foreign market entry/foreign market penetration Another group of papers focus on online foreign market entry, including traditional and digital/internet-based firms, both via corporate websites (e.g., Moen et al., 2004; Rothaermel et al., 2006; Schu & Morschett, 2017) and third-party websites (e.g., Gao et al., 2016; Qi et al., 2020). For example, Schu and Morschett (2017) find that virtual foreign market entry is positively related with foreign market size, foreign e-commerce market size and presence of other sales channels, as well as better legal and regulative conditions in the market, and negatively related with cultural distance as well as geographic distance between home and host markets. Rothaermel et al. (2006) report that foreign market entry (online or offline) by internet firms is negatively related with host country risk as well as cultural distance between home and host country, with market size moderating these relationships. Several studies investigate the speed of foreign market entry/foreign market penetration. Luo et al. (2005) find that the speed of market entry of e-commerce companies is higher at

58  Research handbook on innovation in international business higher international experience of the top-management team, higher innovative and marketing capability, higher foreign nation’s internet ability, technology supportiveness, legal protection of IPR as well as regulatory transparency. Schu et al. (2016) report that the speed of foreign market entry is affected by the imitability of an online shop, geographic distance, the added distance of a new market to the existing country portfolio, the geographic scope of the country portfolio and the level of diversity within the country portfolio. Shaheer and Li (2020) find that with an increase in cultural, administrative, geographic and economic (CAGE) distances, speed of market penetration is slower, but that pursuing a social sharing strategy mitigates the distance effect on the speed of foreign market penetration. Shaheer et al. (2020) report that penetration in lead markets with high demand heterogeneity as well as high overlapping preferences accelerate penetration of digital technologies in other target markets and that user types (paying/light) and capabilities (technological/marketing) moderate these relationships. Internationalization of new, internet-based firms Finally, a number of papers study the internationalization of new, internet-based/internet-enabled types of firms. In the literature, these firms are subsumed under different terms. The term electronic business (e-business) company refers to “any firm operating online that provides its products/services to customers using the Internet and other CBIS (computer-based information system) technologies” (Brouthers et al., 2016: 513). All firms having a website or whose offerings are presented online (e.g., also via third-party websites) would fall into this category. The term “e-commerce company” refers to a firm engaging in electronic commerce, defined as “the trading of goods or services over computer networks such as the internet by methods specifically designed for the purpose of receiving or placing orders” (Eurostat, 2021). Hence, this definition comprises all firms making transactions via the internet, thus also including, for instance, traditional firms with transactional websites or those that present their offerings on transactional third-party websites. Because the internet has also enabled the existence of new types of firms with new business models, narrower definitions of or terms for internet-based/e-business firms have been introduced to better differentiate these firms from traditional firms. These include “digital companies” (Cahen & Borini, 2020; Shaheer et al., 2020), “digital information good providers” (Mahnke & Venzin, 2003), “digital(ized) service multinationals” (Banalieva & Dhanaraj, 2019; Hennart, 2019), “virtual service firms” (Dillon et al., 2020), “digital service firms” (Ekeledo & Sivakumar, 2004), “born digitals” (Monaghan et al., 2020), “(pure) internet firms” (Kotha et al., 2001; Rothaermel et al., 2006), “ibusinesses” (Brouthers et al., 2016; Chen et al., 2019) and other types of “platform companies” (Nambisan et al., 2019; Ojala et al., 2018; Parente et al., 2018; Stallkamp & Schotter, 2021; Tran et al., 2016; Zeng & Glaister, 2016; Zeng et al., 2019). To pick a few exemplary definitions, according to Cahen and Borini (2020), digital companies are “companies with exclusively digital products” (Cahen & Borini); Brouthers et al. (2016: 514) define ibusinesses as “a special type of E-business companies that use the Internet and other CBIS technologies to provide an Internet-based platform, which allows users to interact with each other”; and, according to Monaghan et al. (2020), a “born digital” denotes a firm that, from inception, “builds and leverages digital infrastructure” (p. 12) and “relies on digital infrastructure to accrue communication, collaboration and/or computing capabilities that allow the firm to both create and sell its offerings online through a digital business model” (p. 13). Because such firms differ significantly from traditional firms in various aspects (including, e.g., their value proposition), many of the papers that discuss

The internet and internationalization  59 digital firms’ internationalization focus on the necessary modifications or combinations of existing theories to accommodate these firms’ idiosyncrasies (e.g., Banalieva & Dhanaraj, 2019; Brouthers et al., 2016; Coviello et al., 2017). Consequences The focus of the final group of papers covered in this review lies on the consequences of the use of the internet in internationalization. These consequences include effects on knowledge creation, learning and psychic distance perceptions, effects on relationships with (foreign) intermediaries and performance effects (including firm performance, international/export performance, reputational performance, productivity and innovation). Knowledge creation, learning and psychic distance perceptions Several papers study the knowledge-creating role of the internet (e.g., Glavas et al., 2019; Moen et al., 2008; Nguyen & Barrett, 2006). Nguyen and Barrett (2006), for instance, find that greater internet utilization leads to higher perceived information relevance, which increases knowledge internalization. Moen et al. (2008) investigate how the use of ICT for different business processes affects new market knowledge creation. While they find that the use of ICT for information search, customer interaction and long-term development of relationships is positively linked with the creation of new market knowledge, contrary to assumptions, the use of ICT to support sale and service activities is negatively related with new market knowledge acquisition. Finally, Glavas et al. (2019) study knowledge acquisition via internet-enabled platforms. Based on case study evidence, they suggest that there are four types of internet-enabled experiences that firms can collect via using the internet (i.e., technical, operational, functional and immersive), and that these experiences allow for knowledge creation (both explicit and tacit forms), which is valuable for internationalization. Linked to the topic of knowledge creation, a consequence of online internationalization, as discussed in an exploratory case study by Yamin and Sinkovics (2006), is a reduction in psychic distance perceptions, where psychic distance is understood as the “degree of uncertainty about a foreign market resulting from […] barriers to learning about a market” (p. 345). This may lead to the so-called “virtuality trap”, which is defined as the “perception by the internationalising firm that the learning generated through virtual interactions obviates the need for learning about the target markets through non-virtual means”, and represents the online equivalent to the “psychic distance paradox” (Yamin & Sinkovics, 2006: 340). Intermediary relationships Based on the idea that increased use of the internet in (international) business may lead to disintermediation (Benjamin & Wigand, 1995), several papers investigate the effect of the internet on relationships with foreign channel partners (e.g., Andersen, 2005; Houghton & Winklhofer, 2004, Wynne et al., 2001). Andersen (2005) theorizes about how the internet will change the role and position of export intermediaries in foreign markets and proposes some new hybrid forms of intermediation. Houghton and Winklhofer (2004) also investigate the effect of the internet on export intermediaries, more specifically the consequences of website or e-commerce instalment. Based on case study evidence, they suggest that online internationalization can lead to conflict with export intermediaries, but that commitment and trust exert a mediating effect on this relationship. Finally, Wynne et al. (2001) examine the effect

60  Research handbook on innovation in international business of the internet on service intermediaries, suggesting ways for intermediaries to refocus their strategies to remain successful. Performance The final group of papers focuses on the performance consequences of internet use or possession of internet capabilities in firms (including firm performance, international/export performance, reputational performance, productivity and innovation). There is ample evidence in the literature that the use of the internet in internationalization boosts firms’ overall and international/export performance. Studies, for instance, have found that overall firm performance (e.g., measured as total sales growth, perceived performance) is linked with the use of internet technology in firms (Davis & Harveston, 2000), the use of digital technology tools (Pergelova et al., 2019) or managerial involvement in social media (Alarcón-del-Amo et al., 2018). Furthermore, firms’ international/export performance (e.g., in terms of international sales, export ratio, export propensity) has been found to be related to the use of internet technology in firms (Davis & Harveston, 2000; Hagsten & Kotnik, 2017; McCormick & Somaya, 2020; Morgan-Thomas & Bridgewater, 2004), the adoption of online sales channels (Tolstoy et al., 2016) or the use of advanced e-business tools (Lal, 2004). In addition, a number of studies have shown a positive link between firms’ internet (marketing) capabilities and international performance (e.g., Bianchi & Mathews, 2016; Gregory et al., 2019; Jean & Kim, 2020; Liu et al., 2020; Mathews et al., 2016; Zhang et al., 2013). However, some studies also found no significant performance effects or mixed effects regarding international performance. Moen et al. (2008), for instance, suggest that the use of ICT for (a) information search, (b) support of sale and service activities and (c) customer interaction and long-term development of relationships is positively associated with satisfaction with performance in international markets, but do not find support. Sinkovics et al. (2013) investigate the effectiveness of the internet as an internationalization channel. They find that SMEs’ use of online channels as an addition to other channels is significantly positively related to export performance, whereas SMEs’ use of online channels as an alternative to physical market presence is not. Sinkovics et al. (2013) suggest that this may be due to the “virtuality trap”, as described above. One paper (Reuber & Fischer, 2009) investigates the determinants of reputational performance in international online markets. The authors find that advertising, umbrella branding and the valence of online user ratings are significantly positively related with reputational performance and that umbrella branding intensifies the relationship between the valence of online user ratings and reputational performance. Finally, several papers discuss the performance consequences in terms of productivity or innovation (e.g., Ashurst, 2012; Dillon et al., 2020; Luo & Bu, 2016). Concerning the effects on productivity, Luo and Bu (2016) find that in emerging market firms, the higher their internationalization level, the stronger is the positive relationship between firms’ ICT level and productivity. With respect to innovation, Dillon et al. (2020), studying digital international experiences in a sample of 16 virtual service firms, find that they are associated with the recognition and exploitation of new business ideas. In another case study, Sigfusson and Chetty (2013) investigate entrepreneurs’ use of online social network sites and find that this is linked with the development of network relationships, which, in turn, boost the exploration and exploitation of international opportunities.

The internet and internationalization  61

DISCUSSION AND FUTURE RESEARCH DIRECTIONS We have reviewed and classified over one hundred papers focused on different aspects of virtual (internet-facilitated) internationalization. What complicated our analysis of the use of the internet in the process of internationalization is how authors view the internet as an internationalization channel. For example, one such channel is a company website; however, websites can be used for domestic as well as international operations. Under such circumstances, can we really consider websites as a means of internationalization? In fact, many of the studies we reviewed do not focus on the use of the internet primarily for serving foreign clients. This can be problematic with respect to the conclusions we draw regarding the internet as innovation that creates value in the context of internationalization. In comparison to other, more traditional entry modes, internet channels can be used for different functions other than foreign market penetration (e.g., as mere marketing and communication tools). Although this is certainly innovative and often ground-breaking, it is not international activity that requires understanding and integrating cultural and institutional differences. Furthermore, websites are by default international, but this does not necessarily mean that firms want to address or appeal to foreign clients. We argue that unless there is an intent in using internet for internationalization purposes, we should be cautious treating it as an innovative internationalization channel. An intentional use of the internet for the purpose of internationalization would require some extent of content adaptation, where a website translation into several languages can be considered the simplest and easiest form of such adaptation. One distinction between digital and traditional firms is worth mentioning here, as digital firms may use the internet for more activities than traditional firms. We made several interesting observations while analyzing the literature. First, most papers published in top-ranked journals are either theoretical or focus on digital firms. This is a curious discovery as it may mean that data availability limits the proliferation of high-end empirical research, on the one hand, and the behavior of digital firms is far more research-enticing than the behavior of traditional firms adopting innovative forms of internationalization, on the other. Perhaps this is not surprising, but we believe that innovative technological solutions are not reserved for specific types of firms. Perhaps by focusing exclusively on the internet as a means of internationalization of digital firms we are overlooking creative and disruptive solutions adopted by traditional firms. Second, the literature we found and investigated focused mostly on marketing & sales, but the internet may also influence the internationalization of other value chain activities. ICT allows firms to capitalize on productivity and efficiency gains made possible by the automation and digitalization of various processes along their value chains. What is especially interesting to study is how formerly human interactions, replaced by either computer-to-computer or computer-to-user interactions (Legner et al., 2017), have reduced the effect of space and transaction costs associated with conducting global business. Internet-facilitated internationalization should not be primarily about marketing but about optimizing spatially dispersed value chains and the interaction with diverse groups of cross-border stakeholders. Internationalization should not be seen only as a way to reach more customers and grow market share, but as a means to tap into valuable resources and knowledge around the world. The role of the internet in this endeavor is invaluable. Third, regarding the methods used in the reviewed papers, it came to our attention that many have used structural equation modeling (SEM) or case studies. The use of SEM is probably

62  Research handbook on innovation in international business due to the fact that this is an area of research that is at the intersection of international business and international marketing, where the use of SEM is rather common. The case study approach is chosen probably because of the manifold effects of the internet in firms, their functions, transactions, etc. What we also observe is the small number of theory-testing papers, especially when it comes to papers exploring the use of the internet by traditional firms. There is a preference for a more inductive approach; however this does not lead to new theory development but merely to observing and describing a phenomenon. Among the few papers using a theoretical approach, there is a clear preference for the OLI paradigm, transaction cost theory and resource-based view. Whether it is the focus on ownership advantages, asset specificity or idiosyncratic resources, the centrality of the digital infrastructure in most firms, and the importance of managing intangible flow of knowledge, data and information confirm this as adequate choices of theory. ICT is mostly seen as transformational innovation giving rise to a new set of advantages for internationalizing firms that can still be perfectly explained with existing theories. We are not impelling new theory development, but we encourage an inter-disciplinary approach to studying the technological affordance of ICT in the context of internationalization. We arrived at several potential (future) research directions. As a start, we should continue to examine ICT-based innovative solutions introduced by traditional firms. In the realm of internationalization activities, it is likely these firms manage diverse channels, both online and offline? How do they manage these new internet-based channels and what are the effects on channel partners? We do not know enough about how traditional firms manage trust in their networks, when they digitally substitute existing relationships. What are the types of international interactions traditional firms cannot afford to substitute by internet-supported technology? Moreover, we would like to see more research on how effective online internationalization channels really are, in comparison to traditional and more established channels (not only related to marketing). It is also interesting “to determine whether the online sales channel is more effective as a substitute or a complement to a physical presence in foreign markets and how synergies between such sales channels can be developed” (Tolstoy et al., 2016: 312). Another possible avenue to pursue is to compare service and manufacturing firms and determine to what extent they differ in their utilization of ICT in the context of internationalization. Many studies analyze the adoption of internet technologies in firms. However, especially when we consider digital firms, there is a whole range of topics that remain under-researched. For instance, what are the different roles played by various stakeholders during internationalization? Are there any risks of stakeholders’ disengagement and how is trust cultivated in the process of digital direct engagement with international stakeholders? Typically, when analyzing online internationalization, network effects are a part of the discussion. However, there is a lot to learn about these effects that goes beyond the link between network and internationalization speed or the consideration of data protection and political interference. For example, is there a negative network effect we are currently ignoring? Monaghan, Tippmann and Coviello (2020) talk about “liability of insidership” where digital firms may experience negative lock-in effects in platforms such as iOS and Android and this is certainly an interesting research topic to consider. In early 2021, the European Commission presented a vision for Europe’s digital transformation by 2030, which revolves around four main points: skills, infrastructures, business and government. With respect to skills, the goal is to achieve basic digital skills in 80 per cent

The internet and internationalization  63 of the European population. This will be accompanied by developing secure and sustainable digital infrastructure to support the digital transformation of business. Research should document and analyze progress in this ambitious undertaking, which aims at converting most of the EU business to using cloud, artificial intelligence (AI) and big data, financially supporting EU unicorns and stimulating SMEs to reach at least a basic level of digital intensity. Will this lead to digitalization-enabled, firm-specific advantages and new internationalization opportunities for European firms? Or will this create additional burden on internationalizing firms due to more regulations protecting EU citizens’ digital rights and upholding EU digital principles? The answers to any of the questions we raise here are not easy, but they deserve our attention and investigation.

REFERENCES Alarcón-del-Amo, M., Rialp-Criado, A., & Rialp-Criado, J. (2018). Examining the impact of managerial involvement with social media on exporting firm performance. International Business Review, 27(2), 355–66. Andersen, P. H. (2005). Export intermediation and the internet: an activity‐unbundling approach. International Marketing Review, 22(2), 147–64. Angehrn, A. (1997). Designing mature internet business strategies: the ICDT model. European Management Journal, 15(4), 361–9. Ashurst, C., Cragg, P., & Herring, P. (2012). The role of IT competences in gaining value from e-business: an SME case study. International Small Business Journal, 30(6), 640–58. Banalieva, E. R., & Dhanaraj, C. (2019). Internalization theory for the digital economy. Journal of International Business Studies, 50(8), 1372–87. Benjamin, R., & Wigand, R. (1995). Electronic markets and virtual value chains on the information superhighway. Sloan Management Review, 36(2), 62–72. Bennett, R. (1997). Export marketing and the internet: experiences of web site use and perceptions of export barriers among UK businesses. International Marketing Review, 14(5), 324–44. Berthon, P., Pitt, L., Berthon, J. P., Campbell, C., & Thwaites, D. (2008). E-relationships for e-readiness: culture and corruption in international e-B2B. Industrial Marketing Management, 37(1), 83–91. Bianchi, C., & Mathews, S. (2016). Internet marketing and export market growth in Chile. Journal of Business Research, 69(2), 426–34. Birkinshaw, J., Brannen, M. Y., & Tung, R. L. (2011). From a distance and generalizable to up close and grounded: reclaiming a place for qualitative methods in international business research. Journal of International Business Studies, 42(5), 573–81. Brouthers, K. D., Geisser, K. D., & Rothlauf, F. (2016). Explaining the internationalization of ibusiness firms. Journal of International Business Studies, 47(5), 513–34. Cahen, F., & Borini, F. M. (2020). International digital competence. Journal of International Management, 26(1), 100691. Chen, L., Shaheer, N., Yi, J., & Li, S. (2019). The international penetration of ibusiness firms: network effects, liabilities of outsidership and country clout. Journal of International Business Studies, 50(2), 172–92. Colton, D. A., Roth, M. S., & Bearden, W. O. (2010). Drivers of international e-tail performance: the complexities of orientations and resources. Journal of International Marketing, 18(1), 1–22. Coviello, N., Kano, L., & Liesch, P. W. (2017). Adapting the Uppsala model to a modern world: macro-context and microfoundations. Journal of International Business Studies, 48(9), 1151–64. Davis, P. S., & Harveston, P. D. (2000). Internationalization and organizational growth: the impact of internet usage and technology involvement among entrepreneur-led family businesses. Family Business Review, 13(2), 107–20. De la Torre, J., & Moxon, R. W. (2001). Introduction to the symposium: e-commerce and global business: the impact of the information and communication technology revolution on the conduct of international business. Journal of International Business Studies, 32(4), 617–39.

64  Research handbook on innovation in international business Deng, Z., & Wang, Z. (2016). Early-mover advantages at cross-border business-to-business e-commerce portals. Journal of Business Research, 69(12), 6002–11. Dillon, S. M., Glavas, C., & Mathews, S. (2020). Digitally immersive, international entrepreneurial experiences. International Business Review, 29(6), 101739. Eid, R., Elbeltagi, I., & Zairi, M. (2006). Making business-to-business international internet marketing effective: a study of critical factors using a case-study approach. Journal of International Marketing, 14(4), 87–109. Ekeledo, I., & Sivakumar, K. (2004). The impact of e-commerce on entry-mode strategies of service firms: a conceptual framework and research propositions. Journal of International Marketing, 12(4), 46–70. Eurostat (2021). E-commerce statistics. Available at: https://​ec​.europa​.eu/​eurostat/​statistics​-explained/​ index​.php​?title​=​E​-commerce​_statistics (accessed 11.05.2021). Fernandes, A. M., Mattoo, A., Nguyen, H., & Schiffbauer, M. (2019). The internet and Chinese exports in the pre-Ali Baba era. Journal of Development Economics, 138, 57–76. Gabrielsson, M., & Gabrielsson, P. (2011). Internet-based sales channel strategies of born global firms. International Business Review, 20(1), 88–99. Gao, H., Ren, M., Zhang, J., & Sun, R. (2016). Network gatekeeping in SME exporters’ market entry in China. International Marketing Review, 33(2), 276–97. Glavas, C., & Mathews, S. (2014). How international entrepreneurship characteristics influence internet capabilities for the international business processes of the firm. International Business Review, 23(1), 228–45. Glavas, C., Mathews, S., & Russell-Bennett, R. (2019). Knowledge acquisition via internet-enabled platforms. International Marketing Review, 36(1), 74–107. Gregory, G., Karavdic, M., & Zou, S. (2007). The effects of e-commerce drivers on export marketing strategy. Journal of International Marketing, 15(2), 30–57. Gregory, G. D., Ngo, L. V., & Karavdic, M. (2019). Developing e-commerce marketing capabilities and efficiencies for enhanced performance in business-to-business export ventures. Industrial Marketing Management, 78, 146–57. Hagsten, E., & Kotnik, P. (2017). ICT as facilitator of internationalisation in small- and medium-sized firms. Small Business Economics, 48(2), 431–46. Hamill, J. (1997). The internet and international marketing. International Marketing Review, 14(5), 300–323. Hånell, S. M., Nordman, E. R., Tolstoy, D., & Özbek, N. (2019). “It’s a new game out there”: e-commerce in internationalising retail SMEs. International Marketing Review, 37(3), 515–31. Hennart, J. F. (2014). The accidental internationalists: a theory of born globals. Entrepreneurship Theory and Practice, 38(1), 117–35. Hennart, J. F. (2019). Digitalized service multinationals and international business theory. Journal of International Business Studies, 50(8), 1388–400. Houghton, K. A., & Winklhofer, H. (2004). The effect of website and e-commerce adoption on the relationship between SMEs and their export intermediaries. International Small Business Journal, 22(4), 369–88. Ipsmiller, E., Brouthers, K. D., & Dikova, D. (2019). 25 years of real option empirical research in management. European Management Review, 16(1), 55–68. Ipsmiller, E., & Dikova, D. (2021). Internationalization from Central and Eastern Europe: a systematic literature review. Journal of International Management, 27(4), 100862. Jean, Ruey-Jer, & Kim, D. (2020). Internet and SMEs’ internationalization: the role of platform and website. Journal of International Management, 26(1), 100690. Katsikeas, C., Leonidou, L., & Zeriti, A. (2019). Revisiting international marketing strategy in a digital era: opportunities, challenges, and research directions. International Marketing Review, 37(3), 405–24. Kaynak, E., Tatoglu, E., & Kula, V. (2005). An analysis of the factors affecting the adoption of electronic commerce by SMEs: evidence from an emerging market. International Marketing Review, 22(6), 623–40. Kotha, S., Rindova, V. P., & Rothaermel, F. T. (2001). Assets and actions: firm-specific factors in the internationalization of US internet firms. Journal of International Business Studies, 32(4), 769–91.

The internet and internationalization  65 Lal, K. (2004). E-business and export behavior: evidence from Indian firms. World Development, 32(3), 505–17. Legner, C., Eymann, T., Hess, T., Matt, C., Böhmann, T., Drews, P., Mädche, A., Urbach, N., & Ahlemann, F. (2017). Digitalization: opportunity and challenge for the business and information systems engineering community. Business & Information Systems Engineering, 59(4), 301–8. Lituchy, T. R., & Rail, A. (2000). Bed and breakfasts, small inns, and the internet: the impact of technology on the globalization of small businesses. Journal of International Marketing, 8(2), 86–97. Liu, C. L. E., Zhang-Zhang, Y., & Ghauri, P. N. (2020). The influence of internet marketing capabilities on international market performance. International Marketing Review, 37(3), 447–69. Luo, Y., & Bu, J. (2016). How valuable is information and communication technology? A study of emerging economy enterprises. Journal of World Business, 51(2), 200–211. Luo, Y., Zhao, J. H., & Du, J. (2005). The internationalization speed of e‐commerce companies: an empirical analysis. International Marketing Review, 22(6), 693–709. Mahnke, V., & Venzin, M. (2003). The internationalization process of digital information good providers. Management International Review, 43(1), 115–42. Mathews, S., Bianchi, C., Perks, K. J., Healy, M., & Wickramasekera, R. (2016). Internet marketing capabilities and international market growth. International Business Review, 25(4), 820–30. McCormick, M., & Somaya, D. (2020). Born globals from emerging economies: Reconciling early exporting with theories of internationalization. Global Strategy Journal, 10(2), 251–81. Moen, Ø., Endresen, I., & Gavlen, M. (2003). Executive insights: use of the internet in international marketing: a case study of small computer software firms. Journal of International Marketing, 11(4), 129–49. Moen, Ø., Gavlen, M., & Endresen, I. (2004). Internationalization of small, computer software firms: entry forms and market selection. European Journal of Marketing, 38(9–10), 1236–51. Moen, Ø., Madsen, T. K., & Aspelund, A. (2008). The importance of the internet in international business‐to‐business markets. International Marketing Review, 25(5), 487–503. Monaghan, S., Tippmann, E., & Coviello, N. (2020). Born digitals: thoughts on their internationalization and a research agenda. Journal of International Business Studies, 51(1), 11–22. Morgan‐Thomas, A., & Bridgewater, S. (2004). Internet and exporting: determinants of success in virtual export channels. International Marketing Review, 21(4–5), 393–408. Nambisan, S., Zahra, S. A., & Luo, Y. (2019). Global platforms and ecosystems: implications for international business theories. Journal of International Business Studies, 50(9), 1464–86. Nguyen, T. D., & Barrett, N. J. (2006). The knowledge-creating role of the internet in international business: evidence from Vietnam. Journal of International Marketing, 14(2), 116–47. Ojala, A., Evers, N., & Rialp, A. (2018). Extending the international new venture phenomenon to digital platform providers: a longitudinal case study. Journal of World Business, 53(5), 725–39. Okazaki, S. (2005). Searching the web for global brands: how American brands standardise their web sites in Europe. European Journal of Marketing, 39(1–2), 87–109. Parente, R. C., Geleilate, J. M. G., & Rong, K. (2018). The sharing economy globalization phenomenon: a research agenda. Journal of International Management, 24(1), 52–64. Pergelova, A., Manolova, T., Simeonova‐Ganeva, R., & Yordanova, D. (2019). Democratizing entrepreneurship? Digital technologies and the internationalization of female‐led SMEs. Journal of Small Business Management, 57(1), 14–39. Petersen, B., & Welch, L. S. (2003). International business development and the internet, post-hype. Management International Review, 43(1), 7–30. Petersen, B., Welch, L. S., & Liesch, P. W. (2002). The internet and foreign market expansion by firms. Management International Review, 42(2), 207–21. Pezderka, N., & Sinkovics, R. R. (2011). A conceptualization of e-risk perceptions and implications for small firm active online internationalization. International Business Review, 20(4), 409–22. Qi, X., Chan, J. H., Hu, J., & Li, Y. (2020). Motivations for selecting cross-border e-commerce as a foreign market entry mode. Industrial Marketing Management, 89, 50–60. Quelch, J. A., & Klein, L. R. (1996). The internet and international marketing. Sloan Management Review, 37(3), 60–75. Reuber, A. R., & Fischer, E. (2009). Signalling reputation in international online markets. Strategic Entrepreneurship Journal, 3(4), 369–86.

66  Research handbook on innovation in international business Reuber, A. R., & Fischer, E. (2011). International entrepreneurship in internet-enabled markets. Journal of Business Venturing, 26(6), 660–79. Robbins, S. S., & Stylianou, A. C. (2003). Global corporate web sites: an empirical investigation of content and design. Information & Management, 40(3), 205–12. Rosado-Serrano, A., Paul, J., & Dikova, D. (2018). International franchising: a literature review and research agenda. Journal of Business Research, 85, 238–57. Rothaermel, F. T., Kotha, S., & Steensma, H. K. (2006). International market entry by US internet firms: an empirical analysis of country risk, national culture, and market size. Journal of Management, 32(1), 56–82. Samiee, S. (1998). Exporting and the internet: a conceptual perspective. International Marketing Review, 15(5), 413–26. Samiee, S. (2020). International marketing and the internet: a research overview and the path forward. International Marketing Review, 37(3), 425–36. Schmeisser, B. (2013). A systematic review of literature on offshoring of value chain activities. Journal of International Management, 19(4), 390–406. Schu, M., & Morschett, D. (2017). Foreign market selection of online retailers—a path-dependent perspective on influence factors. International Business Review, 26(4), 710–23. Schu, M., Morschett, D., & Swoboda, B. (2016). Internationalization speed of online retailers: a resource-based perspective on the influence factors. Management International Review, 56(5), 733–57. Shaheer, N. A., & Li, S. (2020). The CAGE around cyberspace? How digital innovations internationalize in a virtual world. Journal of Business Venturing, 35(1), 105892. Shaheer, N., Li, S., & Priem, R. (2020). Revisiting location in a digital age: how can lead markets accelerate the internationalization of mobile apps? Journal of International Marketing, 28(4), 21–40. Sigfusson, T., & Chetty, S. (2013). Building international entrepreneurial virtual networks in cyberspace. Journal of World Business, 48(2), 260–70. Singh, N., Kumar, V., & Baack, D. (2005a). Adaptation of cultural content: evidence from B2C e‐ commerce firms. European Journal of Marketing, 39(1–2), 71–86. Singh, N., & Matsuo, H. (2004). Measuring cultural adaptation on the web: a content analytic study of US and Japanese web sites. Journal of Business Research, 57(8), 864–72. Singh, N., Zhao, H., & Hu, X. (2005b). Analyzing the cultural content of web sites: a cross‐national comparison of China, India, Japan, and US. International Marketing Review, 22(2), 129–46. Sinkovics, N., Sinkovics, R. R., & Jean, R.-J. (2013). The internet as an alternative path to internationalization? International Marketing Review, 30(2), 130–55. Stallkamp, M., & Schotter, A. P. (2021). Platforms without borders? The international strategies of digital platform firms. Global Strategy Journal, 11(1), 58–80. Surdu, I., & Mellahi, K. (2016). Theoretical foundations of equity based foreign market entry decisions: a review of the literature and recommendations for future research. International Business Review, 25(5), 1169–84. Tiessen, J. H., Wright, R. W., & Turner, I. (2001). A model of e-commerce use by internationalizing SMEs. Journal of International Management, 7(3), 211–33. Tolstoy, D., Jonsson, A., & Sharma, D. D. (2016). The influence of a retail firm’s geographic scope of operations on its international online sales. International Journal of Electronic Commerce, 20(3), 293–318. Tran, Y., Yonatany, M., & Mahnke, V. (2016). Crowdsourced translation for rapid internationalization in cyberspace: a learning perspective. International Business Review, 25(2), 484–94. Tranfield, D., Denyer, D., & Smart, P. (2003). Towards a methodology for developing evidence‐ informed management knowledge by means of systematic review. British Journal of Management, 14(3), 207–22. Vadana, I. I., Torkkeli, L., Kuivalainen, O., & Saarenketo, S. (2019). Digitalization of companies in international entrepreneurship and marketing. International Marketing Review, 37(3), 471–92. Watson IV, G. F., Weaven, S., Perkins, H., Sardana, D., & Palmatier, R. W. (2018). International market entry strategies: relational, digital, and hybrid approaches. Journal of International Marketing, 26(1), 30–60.

The internet and internationalization  67 Wohlin, C. (2014). Guidelines for snowballing in systematic literature studies and a replication in software engineering. In Proceedings of the 18th International Conference on Evaluation and Assessment in Software Engineering, 1–10. Wood, S., Coe, N. M., Watson, I., & Teller, C. (2019). Dynamic processes of territorial embeddedness in international online fashion retailing. Economic Geography, 95(5), 467–93. Wynne, C., Berthon, P., Pitt, L., Ewing, M., & Napoli, J. (2001). The impact of the internet on the distribution value chain. International Marketing Review, 18(4), 420–31. Yamin, M., & Sinkovics, R. R. (2006). Online internationalisation, psychic distance reduction and the virtuality trap. International Business Review, 15(4), 339–60. Zeng, J., & Glaister, K. W. (2016). Competitive dynamics between multinational enterprises and local internet platform companies in the virtual market in China. British Journal of Management, 27(3), 479–96. Zeng, J., Khan, Z., & De Silva, M. (2019). The emergence of multi-sided platform MNEs: internalization theory and networks. International Business Review, 28(6), 101598. Zhang, M., Sarker, S., & Sarker, S. (2013). Drivers and export performance impacts of IT capability in ‘born‐global’ firms: a cross‐national study. Information Systems Journal, 23(5), 419–43.

OLI

Theoretical, Editorial

performance Internationalization in

the information age:

positions of export market intermediaries compared with other

systems, TCE Not specified

anecdotal evidence) Empirical

activity‐unbundling

2012

Ashurst, C., Cragg,

Thwaites, D.

Management

Campbell, C., &

Industrial

Marketing

2008

Survey data from

e-business. Speculating on the role that corruption in a particular

international e-B2B

society may play in hindering trans-national e-business relationships.

The role that social values play in the development of trans-national Intelligence Unit

E-relationships for

and corruption in

No hypotheses Research questions:

UK exporting firms Data on e-readiness

Not specified

Not specified

from Economist

Empirical

Empirical

 

single case study

No hypotheses

e-readiness: culture

the internet

L., Berthon, J. P.,

Berthon, P., Pitt,

Export marketing and

the digital economy

Marketing Review

Internalization theory

Internalization theory for Theoretical

an SME case study

value from e-business:

competences in gaining

International

Business Studies

International

Dhanaraj, C.

1997

Journal of

Banalieva, E. R., & 2019

Bennett, R.

Business Journal

P., & Herring, P.

approach International Small The role of IT

market entry modes?

How will the growth of electronic commerce affect the roles and

on marketing

(with

and the internet: an

Marketing Review

business networks?

Longitudinal data,

Research question:

Functionalist theory  

Theoretical

Export intermediation

International

2005

Andersen, P. H.

firms, and international

A new era for places,

Business Studies

Piscitello, L.

 

International

Journal of

Cantwell, J., &

Alcácer, J.,

 

theory

on exporting firm

J.

2016

H2: The more proactive exporters are regarding managerial social

different industries

expectancy-value

media usage, the higher the company's performance.

managerial involvement in relation to social media.

exporting firms in

reasoned action;

Business Review

with social media

M., Rialp-Criado,

managerial involvement

Hypotheses H1: Exporting firms differ with regard to their higher or lower

Data 152 Spanish

Type of article Theory Theory of

Title

Examining the impact of Empirical

A., & Rialp-Criado,

Journal

International

Year

2018

Author

Overview of reviewed literature

Alarcón-del-Amo,

Table 4A.1

APPENDIX

68  Research handbook on innovation in international business

International

F. M.

Coviello, N.

2010

Journal of

Cahen, F., & Borini, 2020

Chandra, Y., &

Business Studies

Business

Journal of World

Management

International

Journal of

Rothlauf, F.

2016

Research

Geisser, K. D., &

Brouthers, K. D.,

Mathews, S.

2016

Journal of Business Internet marketing and

H2: Export information availability positively influences export market growth. H3: Internet marketing capabilities positively influence export

data collected via an online survey in 2011

ibusiness firms based

entrepreneurs

international

consumers as

entrepreneurship:

concept of international

Broadening the

Theoretical

Not specified

RBV

 

Brazil

companies based in

with eight digital

in Germany

theory

 

No hypotheses

network relationships. Internationalization Multi-case study of 9 No hypotheses

H6: Export information availability positively influences business

network relationships.

H5: Internet marketing capabilities positively influence business

market growth.

H4: Business network relationships positively influence export

information availability.

growth.

firms from Chile;

H1: Internet marketing capabilities positively influence export market

Data: 204 export

RBV, capabilities

In-depth interviews

competence

Hypotheses  

approach

International digital

Empirical

Empirical

Data  

ibusiness firms

internationalization of

Explaining the

in Chile

export market growth

the marketspace Empirical

evidence)

International services in

Bianchi, C., &

(plus anecdotal

go international:

Marketing

Virtual services

International

Not specified

Type of article Theory Theoretical

Title

Executive insights:

Berthon, J. P.

Journal

Katsikeas, C. S., &

Year

Journal of

Author

Berthon, P., Pitt, L., 1999

The internet and internationalization  69

Journal

codifiability of the production process of the MNE’s industry, the more likely it is to experience increased outsourcing following ICT adoption. H1: The stronger the market orientation, the greater is the effect on

Longitudinal Business Database) Online survey of

174 US and non-US (a) brand strength and (b) supplier relations.

Resourceadvantage theory, RBV

on multinational firm

boundary decisions

e-tail performance:

the complexities

model to a modern

world: macro-context

Journal of

International

Business Studies

Coviello, N., Kano, 2017

L., & Liesch, P. W.

and microfoundations

Adapting the Uppsala

Theoretical

Uppsala model

 

H3: The stronger the foreign market orientation, the greater is the

 

performance relative to objectives and (b) revenue growth.

H5: The stronger the supplier relations, the greater is the effect on (a)

performance relative to objectives and (b) revenue growth.

H4: The stronger the brand strength, the greater is the effect on (a)

effect on (a) brand strength and (b) supplier relations.

effect on (a) brand strength and (b) supplier relations.

resources

Marketing

of orientations and

International

W. O.

Drivers of international

H2: The stronger the entrepreneurial orientation, the greater is the

H2: All else being equal, the higher the degree of electronic

LFTTD,

technology adoption

online retailers

internal firm units.

of Manufacturers;

communication

Empirical

the more likely it is to facilitate increased integration between

(CNUS, Census

information and

M. S., & Bearden,

Business Studies

Journal of

International

F.

The impact of

installed base and its penetration in target countries. H1: All else being equal, the more complex the type of ICT adopted,

moderates the relationship between an ibusiness platform’s global

H3: The clout of the recently penetrated countries positively

US Census Bureau

TCE

and Fitness category H2b: The size of the global installed base will not have a significant

and country clout

Empirical

on an ibusiness platform’s penetration in target countries.

apps in the Health

of Apple’s App Store effect on an ibusiness platform’s penetration in target countries.

H2a: The size of the global installed base will have a positive effect

top-ranked mobile

liabilities of outsidership

Colton, D. A., Roth, 2010

Journal of

model

penetration of 4,583 more likely to penetrate target countries.

theory, Uppsala

firms: network effects,

Social network

penetration of ibusiness

Hypotheses H1: iBusiness platforms exhibiting higher user-defined quality are

Data International

Type of article Theory Empirical

Business Studies

Title

The international

International

Journal of

Chen, W., & Kamal, 2016

N., Yi, J., & Li, S.

Year

2019

Author

Chen, L., Shaheer,

70  Research handbook on innovation in international business

Title

E-commerce and Global

international business

on the conduct of

technology revolution

and communication

of the information

Business: the impact

the Symposium:

Business Studies

 

businesses.

Introduction to

the extensiveness of internationalization will be among family

businesses

businesses.  

higher the growth rate will be among entrepreneur-led family

H4b: The greater the emphasis on investments in technology, the

family businesses.

more extensive internationalization will be among entrepreneur-led

H4a: The greater the emphasis on investments in technology, the

growth rate will be among entrepreneur-led family businesses.

H3b: The greater the usage of internet technology, the higher the

businesses.

extensive internationalization will be among entrepreneur-led family

H3a: The greater the usage of internet technology, the more

growth rate will be among family businesses.

H2b: The more educated the entrepreneur-founder, the higher the

H2a: The more educated the entrepreneur-founder, the greater

H1b: The older the entrepreneur-founder, the lower the growth rate

family firms

entrepreneur-led family

internationalization will be among family businesses.

entrepreneur-led will be among family businesses.

 

Hypotheses

involvement among

Theoretical

theory

Data

Survey data of 1,078 H1a: The older the entrepreneur-founder, the less extensive

usage and technology

the impact of internet

organizational growth:

Upper echelon

Type of article Theory

Internationalization and Empirical

International

Journal of

De la Torre, J., &

Moxon, R. W.

Review

2001

Journal

Family Business

Harveston, P. D.

Year

2000

Author

Davis, P. S., &

The internet and internationalization  71

Title

EMA. In other words, low-price firms will enjoy a faster emergence

portals (DHgate)

Sivakumar, K.

on entry-mode

Marketing

propositions

framework and research

firms: a conceptual

strategies of service

e-commerce

The impact of

approach

using a case-study

International

Journal of

Theoretical

RBV

 

marketing

marketing effective:

2004

using B2B internet

international internet

Ekeledo, I., &

in 3 UK-based firms

business-to-business

a study of critical factors

emergence of EMA but experience a faster decline of EMA.

of EMA. In other words, multi-product firms will enjoy a faster

H3: Product diversity will amplify the inverted U-shape effect

virtual service firms In-depth interviews  

Marketing

Not specified

International

Empirical

from 16 small

experiences

Making

entrepreneurs

entrepreneurial Australian-based

with international

international

Digitally immersive,

In-depth interviews

H2: Price leadership will amplify the inverted U-shape effect of

through online

Not specified

and performance.

firms in 2007–14

e-commerce portals

Empirical

that an inverted U-shape relationship emerges between firm tenure

conducted by 3,969

of EMA but experience a faster decline of EMA.

initial post-entry stages but diminish after a certain critical time, so

export transactions

advantage logic

Hypotheses H1: Early-mover advantages at cross-border B2B portals exist at the

business-to-business

at cross-border

& Zairi, M.

Business Review

International

Research

Data 297,846 B2B

Early-mover

Type of article Theory

Journal of

2020

Journal

Journal of Business Early-mover advantages Empirical

Eid, R., Elbeltagi, I., 2006

Mathews, S.

Glavas, C., &

Dillon, S. M.,

Z.

Year

2016

Author

Deng, Z., & Wang,

72  Research handbook on innovation in international business

Management

Karavdic, M.

Industrial

Marketing

2019

Ngo, L. V., &

Gregory, G. D.,

Business Studies

Standifird, S.

Journal of

Marketing Review

International

International

2001

2019

Business Review

Roehl, T. W., &

Globerman, S.,

Russell-Bennett, R.

Mathews, S., &

Glavas, C.,

Mathews, S.

International

Glavas, C., &

2014

Marketing Review

Zhang, J., & Sun, R.

International

Gao, H., Ren, M.,

2016

Business Review

International

Gabrielsson, P.

Gabrielsson, M., &

2011

Economics

H., & Schiffbauer,

M.

Development

Mattoo, A., Nguyen,

Journal

Journal of

Year

2019

Author

Fernandes, A. M.,

Title

Data

gatekeeping theories

medium-sized travel

network theory

characteristics influence

Hypotheses

e-commerce export venture performance. H2: Export marketing communication efficiency mediates the relationship between e-commerce marketing capabilities and e-commerce export venture performance.

exporters, survey of 340 Australian B2B exporters

enhanced performance

in business-to-business

export ventures

export venture performance (sales).

H3: Export venture e-commerce performance is positively related to

relationship between e-commerce marketing capabilities and Australian B2B

and efficiencies for

H1: Export marketing distribution efficiency mediates the

 

 

No hypotheses

interviews with

15 in-depth

Resource-based view

 

marketing capabilities

 

brokering Developing e-commerce Empirical

inferences from retail

electronic commerce:

Theoretical

service SMEs)

Globalization and

(manufacturing and

nationalization

platforms theory

13 Australian SMEs

Organizational learning, inter-

via internet-enabled

the firm Knowledge acquisition

business processes of

for the international

internet capabilities

Empirical

Australian small and and tourism firms

Interviews in eight

entrepreneurship,

entrepreneurship

How international

International

Empirical

structural hole and

entry in China

Business network,

Network gatekeeping in Empirical

SME exporters’ market

in Finland

relationships

born global firms Single case study

global firms (SMEs)

TCE, long-term

channel strategies of

in 2007 35 cases of born

Uppsala model,

Empirical

1999 and 312,365

Internet-based sales

of firms; 147,109 in

Baba era

Unbalanced panel

exports in the pre-Ali

Not specified

Type of article Theory

The internet and Chinese Empirical

The internet and internationalization  73

2019

Hånell, S. M.,

internationalizing retail

SMEs

Özbek, N.

there”: e-commerce in

Tolstoy, D., &

Marketing Review

“It’s a new game out

international marketing

Marketing Review

International

The internet and Empirical

Theoretical

2001–10  

strategy tripod

Peng et al.’s (2009) Single case study

 

and services firms

International

manufacturing

1997

stronger when demand for e-commerce is high than when demand for

H8: The effects of traditional drivers on export marketing strategy are

marketing strategy.

H7: Demand for e-commerce has a positive, direct effect on export

poorly developed.

developed than when export market e-commerce infrastructure is

are stronger when export market e-commerce infrastructure is highly

H6: The effects of traditional drivers on export marketing strategy

effect on export marketing strategy.

H5: Export market e-commerce infrastructure has a positive, direct

assets are low.

stronger when e-commerce assets are high than when e-commerce

H4: The effects of traditional drivers on export marketing strategy are

marketing strategy.

 

e-commerce is low. 500,000 observations No hypotheses

firms

Hamill, J.

Nordman, E. R.,

product online transferability is low.

exporting

of twelve European

Not specified

are stronger when product online transferability is high than when

e-commerce in

H3: E-commerce assets have a positive, direct effect on export

H2: The effects of traditional drivers on export marketing strategy

currently using

small- and medium-sized

Empirical

RBV

organization theory, Australian exporters export marketing strategy.

internationalization in

ICT as facilitator of

Economics

Small Business

Hagsten, E., &

strategy

on export marketing

e-commerce drivers

Hypotheses H1: Product online transferability has a positive, direct effect on

Data Survey of 340

Industrial

Type of article Theory Empirical

Title

The effects of

Kotnik, P.

Marketing

Zou, S.

2017

International

Karavdic, M., &

Journal

Journal of

Year

2007

Author

Gregory, G.,

74  Research handbook on innovation in international business

2014

Hennart, J. F.

relationship marketing paradigm

adoption on the

relationship between

capabilities. H2: Web capability is positively related to SMEs’ export marketing capabilities. H3a: Product complexity has a positive moderating effect on the effect of platform capability on SMEs’ export marketing capabilities. H3b: Product complexity has a negative moderating effect on the effect of web capability on SMEs’ export marketing capabilities. H4a: Competitive intensity negatively moderates the effect of

via two surveys of Chinese SMEs (1st survey: 250 usable responses, 2nd survey for performance effect: 230 usable responses)

the role of platform and

website

Management

performance.

H5: SMEs’ export market capabilities are positively related to export

capability on SMEs’ export market capabilities.

H4b: Competitive intensity negatively moderates the effect of web

platform capability on SMEs’ export marketing capabilities.

H1: Platform capability is positively related to SMEs’ export market

Data: collected

internationalization:

International

intermediaries RBV

Internet and SMEs’

 

Journal of

SMEs and their export Empirical

with 25 exporters

 

Jean, B. & Kim, D.

2020

In-depth interviews

Empirical

Hypotheses  

Business Journal

International Small The effect of website

Authoritative

a theory of born globals

Practice

Accidental internationalists

control and

internationalists:

Theory and

and e-commerce

The accidental

Entrepreneurship

 

international business

Business Studies Theoretical

multinationals and

International

theory

Data  

OLI, TCE

Type of article Theory Theoretical

Title

Digitalized service

Journal

Journal of

Winklhofer, H.

Houghton, K. A., & 2004

Year

2019

Author

Hennart, J. F.

The internet and internationalization  75

Marketing Review

E., & Kula, V.

commerce by SMEs

adoption of electronic

factors affecting the

a digital era

An analysis of the

International

Zeriti, A.

marketing strategy in

Revisiting international

A contingency model

marketing theories:

into existing export

Empirical

Theoretical

Not specified

manufacturing SMEs

237 Turkish

 

platform risk for INVs.

Not specified

H3: Domestic institution voids are positively related to digital

internationalization

Integrating e-commerce Theoretical

platform risk for INVs.

new ventures’

No hypotheses

risk on the internationalization scope of INVs.

H6: EO positively moderates the negative effect of digital platform

internationalization scope of INVs.

H5: Digital platform risk is negatively related to the

platform risk for INVs.

H4: Foreign market uncertainty is positively related to digital

H2: Foreign market competition is positively related to digital

for international

Kaynak, E., Tatoglu, 2005

International

for INVs.

China

Hypotheses H1: Product specificity is positively related to digital platform risk

Data 273 INVs from

TCE

Type of article Theory Empirical

platform risk

outcomes of digital

Marketing Review

2020

Title

Antecedents and

Leonidou, L., &

Katsikeas, C.,

Gregory, G.

Marketing Theory

Karavdic, M., &

2005

Business

Journal

Cavusgil, E.

Year

Journal of World

Author

Jean, B., Kim, D., & 2020

76  Research handbook on innovation in international business

Data 86 publicly-traded

commerce

businesses

globalization of small

of technology on the

USA and Canada

114 SMEs (bed and

internet: the impact

Not specified

 

Marketing

Empirical

Internalization theory

firms

Survey data of 51

breakfasts) in the

Bed and breakfasts,

Theoretical

Not specified

small inns, and the

Journal of

Lituchy, T. R., &

international digital

advantages in

Ecosystem-specific

Empirical

International

Business Studies

Liao, J.

Rail, A.

International

2000

2019b

Li, J., Chen, L.,

Journal of

behavior: evidence from

Development

Indian firms

E-business and export

World

2004

H3: The greater the level of cooperative activity of an internet firm,

the B2C segment)

Lal, K.

the greater will be its propensity to internationalize.

(predominantly in

of US internet firms

 

 

No hypotheses

propensity to internationalize.

presence of high levels of intangible assets, the greater will be its

H5: The greater number of cooperative actions a firm takes in the

propensity to internationalize.

presence of high levels of intangible assets, the greater will be its

H4: The greater number of competitive actions a firm takes in the

the greater will be its propensity to internationalize.

H2: The greater the level of competitive activity of an internet firm,

companies

be its propensity to internationalize.

strategic perspective US internet

Business Studies

the internationalization

International

Rothaermel, F. T.

Yi, J., Mao, J., &

Hypotheses H1: The more intangible assets an internet firm has, the greater will

firm-specific factors in

RBV, dynamic

Type of article Theory Empirical

Title

Assets and actions:

Rindova, V. P., &

Journal

Journal of

Year

2001

Author

Kotha, S.,

The internet and internationalization  77

2021

2016

Luo, Y.

Luo, Y., & Bu, J.

digital globalization

Business Review

associated with internet marketing capabilities.

emerging economies level, the higher the firm productivity, ceteris paribus.

perspective

information and

communication

firm’s ICT on its productivity, ceteris paribus. H3: In the context of emerging economies, the higher the firm’s

of emerging economy

enterprises

firm’s ICT on its productivity, ceteris paribus.

internationalization level, the stronger the positive impact of the

H4: In the context of emerging economies, the higher the firm’s

on its productivity, ceteris paribus.

quality assurance is, the stronger the positive impact of the firm's ICT

developed the country is, the stronger the positive impact of the

technology? A study

H2. In the context of emerging economies, the less economically

6,236 firms from 27 H1: In the context of emerging economies, the higher the firm’s ICT

Knowledgemanagement

How valuable is

 

market performance.

Business

 

 

H6: Knowledge internalization positively influences international

knowledge internalization.

H5: Entrepreneurial-oriented behavior positively influences

internalization.

H4: Market-oriented behavior positively influences knowledge

entrepreneurial-oriented behavior.

H3: Internet marketing capabilities are positively associated with

market-oriented behavior.

international markets H2: Internet marketing capabilities are positively associated with

Journal of World

Empirical

New OLI advantages in Theoretical

International

evidence)

empirical OLI

cultural congruity

Marketing Science site navigation

M. D.

preliminary

cognitive aspects of web (plus some

Academy of

L. A., & de Juan,

Cross-cultural and

Cultural distance,

orientation

Theoretical

performance

on international market

and entrepreneurial firms with sales in

Hypotheses H1: Use of the internet for customer management is positively

Data 132 Taiwanese

marketing capabilities

Journal of the

Marketing Review

Type of article Theory Market orientation

Title

The influence of internet Empirical

Luna, D., Peracchio, 2002

Ghauri, P. N.

Zhang-Zhang, Y., &

Journal

International

Year

2020

Author

Liu, C. L. E.,

78  Research handbook on innovation in international business

Venzin, M.

Title the speed of its internationalization.

Internalization theory, international new venture research

process of digital

information good

providers

International

Review

Single case study

of its internationalization.

associated with the speed of ECC internationalization.

H8: A foreign nation’s regulatory transparency is positively

with the speed of ECC internationalization.

H7: A foreign nation’s legal protection of IPR is positively associated

associated with the speed of ECC internationalization.

H6: A foreign nation’s technology supportiveness is positively

the speed of ECC internationalization.

population in a country that uses internet) contributes positively to

H5: A foreign nation’s internetability (the percentage of the

speed of its internationalization.

H4: An ECC’s location agglomeration is positively related to the

of its internationalization.

H3. An ECC’s marketing capability is positively related to the speed

H2: An ECC’s innovative capability is positively related to the speed

analysis

ECCs

theory, TCE, RBV

companies: an empirical

speed of e‐commerce

Hypotheses H1: TOM international experience of an ECC is positively related to

Data

Internationalization 93 US-American

Type of article Theory

The internationalization Empirical

The internationalization Empirical

Management

Mahnke, V., &

2003

Marketing Review

Journal

& Du, J.

Year

International

Author

Luo, Y., Zhao, J. H., 2005

The internet and internationalization  79

perspective

Hypotheses

use of the internet in

international marketing:

Journal

Journal of

International

Marketing

Somaya, D.

Moen, Ø., Endresen, 2003

I., & Gavlen, M.

greater exporting if they use internet-enabled technologies.

computer software firms

a case study of small

Executive insights:

Not specified

Multiple case study

experience.

greater exporting if they are located in a capital city.  

H4: Compared to established firms, young firms will engage in

services.

greater exporting if they derive more efficient basic government

H3: Compared to established firms, young firms will engage in

greater exporting if they are founded by cross-national entrepreneurs.

H2b: Compared to established firms, young firms will engage in

greater exporting if they have top managers with international

of internationalization

emerging economies H2a: Compared to established firms, young firms will engage in

theory, Institutional developing and theory

with international market growth. H1: Compared to established firms, young firms will engage in

Internationalization Data from 15

H7: International network capabilities have a positive relationship

with developing international network capabilities.

H6: An international strategic orientation has a positive relationship

developing international network capabilities.

H5: Internet marketing capabilities have a positive relationship with

with international market growth.

H4: An international strategic orientation has a positive relationship

an international strategic orientation of the firm.

exporting with theories

reconciling early

Empirical

Born globals from

Global Strategy

McCormick, M., & 2020

emerging economies:

with the international strategic orientation of the firm. H3: Internet marketing capabilities have a positive relationship with

H2: Increased information availability has a positive relationship

information availability.

H1: Internet marketing capabilities have a positive effect on

growth

Empirical

exporting firms

RBV, capabilities

Wickramasekera, R.

capabilities and

Data 224 Australian

Type of article Theory Empirical

international market

Business Review

Title

Internet marketing

K. J., Healy, M., &

Bianchi, C., Perks,

Journal

International

Year

2016

Author

Mathews, S.,

80  Research handbook on innovation in international business

International

Business Studies

Journal of

Marketing Review

International

of Marketing

Coviello, N.

2020

2008

Journal

European Journal

Tippmann, E., &

Monaghan, S.,

A.

T. K., & Aspelund,

Moen, Ø., Madsen,

M., & Endresen, I.

Year

2004

Author

Moen, Ø., Gavlen,

Title

Hypotheses

H2a: Using ICT to support sale and service activities is positively

a research agenda

internationalization and

thoughts on their

Born digitals:

 

performance in international markets.

marketing activities

Uppsala model

H1b: Using ICT for information search is positively associated with

with international

markets

Theoretical

new market knowledge.

Norwegian SMEs

business‐to‐business

international markets.  

of relationships is positively associated with performance in

H3b: Using ICT for customer interaction and long-term development

of relationships is positively associated with new market knowledge.

H3a: Using ICT for customer interaction and long-term development

associated with performance in international markets.

H2b: Using ICT to support sale and service activities is positively

associated with new market knowledge.

H1a: Using ICT for information search is positively associated with

Survey data from

The importance of the 635 Danish and

 

internet in international

selection Not specified

theory

Empirical

theory, network

software firms: entry

forms and market

Data

Internationalization Multiple case study

Type of article Theory Empirical

of small, computer

Internationalization

The internet and internationalization  81

International

Business Studies

Journal of

Luo, Y.

2019

Marketing Review

Zahra, S. A., &

Nambisan, S.,

S.

A., & Bridgewater,

Journal

International

Year

2004

Author

Morgan‐Thomas,

business theories

for international

ecosystems: implications

Global platforms and

channels

in virtual export

determinants of success

Theoretical

 

Hypotheses H1: Exporters using more advanced relationship and

 

firms

negatively related to the firm having existing agents and distributors.  

related to the firm having existing direct market channels; and (b)

H9: The effectiveness of a virtual export channel is: (a) positively

services.

more from VECs than do firms with less specialized products or

H8: Firms with more specialized products or services will benefit

of VECs than do firms with high levels of export experience.

H7b: Firms with little export experience gain more benefits from use

intensity.

from the use of VECs than do firms with low levels of export

H7a: Firms with high levels of export intensity gain more benefit

technology.

successful VECs than firms making less sophisticated use of

H6: Firms making sophisticated use of technology have more

experience.

successful VECs than do firms with lower levels of internet

H5: Firms with higher levels of internet experience have more

capability.

more successfully than those with low levels of technological

H4: Firms with higher levels of technological capability use VECs

investment.

implementation have more successful VECs than do firms with lower

H3: Firms with higher investment in internet development and

market, the greater benefits to the exporter from the use of a VEC.

H2: The higher the level of internet usage by other stakeholders in its

than those with information-based applications.

survey of 705 British transaction-based internet applications use VECs more successfully

Data Cross-sectional

Not specified

Type of article Theory Empirical

Title

Internet and exporting:

82  Research handbook on innovation in international business

a firm, the greater is the degree of its knowledge internalization. H3: The greater the degree of a firm’s knowledge internalization, the greater is the degree of its foreign sales. H4. The greater the degree of a firm’s foreign sales, the greater is the

internationalization theory, organizational learning

evidence from Vietnam

Journal of World

Business

& Rialp, A.

Longitudinal case study

approach, resource dependency theory, INV theory

international new

venture phenomenon

to digital platform

case study

providers: a longitudinal

Extending the

Network

Empirical

H2: The greater the degree of information relevance perceived by

nationalization,

international business:

greater is the degree of its knowledge internalization.  

H9: The greater the degree of a firm’s learning orientation, the

is the degree of its knowledge internalization.

H8: The greater the degree of a firm’s market orientation, the greater

greater is the degree of its market orientation.

H7: The greater the degree of a firm’s learning orientation, the

greater is the degree of its internet utilization.

H6: The greater the degree of a firm’s learning orientation, the

is the degree of its internet utilization.

H5: The greater the degree of a firm’s market orientation, the greater

degree of its internet utilization.

is the degree of perceived information relevance.

knowledge in inter- firms

role of the internet in

Marketing

Hypotheses H1: The greater the degree of a firm’s internet utilization, the greater

Data 306 Vietnamese

International

Type of article Theory Theory of

Title

The knowledge-creating Empirical

Journal

Journal of

Ojala, A., Evers, N., 2018

Barrett, N. J.

Year

2006

Author

Nguyen, T. D., &

The internet and internationalization  83

approach RBV

phenomenon: a research

agenda Democratizing

 

between digital technology use and internationalization. H2: The effect of digital technology on international market

of female‐led SMEs

D.

male-led SMEs.

intelligence will be stronger for female-led SMEs compared to

H1b: International market intelligence mediates the relationship

the internationalization

internationalization.

300 Bulgarian SMEs H1a: Use of digital technology tools positively impacts

 

a feedback mechanism.

entrepreneurship?

Empirical

ecosystems

globalization

 

significantly and negatively associated with the presence of

H6: The extent of web site standardization in host markets is

availability.

significantly and positively associated with the presence of choice

H5: The extent of web site standardization in host markets is

promotions.

significantly and positively associated with the presence of online

H4: The extent of web site standardization in host markets is

reinforcement.

significantly and positively associated with the presence of image

R., & Yordanova,

Management

Simeonova‐Ganeva,

TCE Business

internet environment The sharing economy Theoretical

Uppsala model,

chain management in an

Network theory,

sales functions.

Theoretical

significantly and positively associated with the presence of indirect

Spain (43))

International supply

H2: The extent of web site standardization in host markets is

Germany (57), and

sites in Europe

Digital technologies and

Small Business

Journal of

Manolova, T.,

2019

Management

& Rong, K.

Pergelova, A.,

International

Journal of

Marketing Review

International

sales functions.

(57), France (49),

standardize their web

H3: The extent of web site standardization in host markets is

significantly and negatively associated with the presence of direct

standardization

Hypotheses H1: The extent of web site standardization in host markets is

created for the UK

Adaptation vs. sites (206 web sites

Data US brands’ web

Type of article Theory Empirical

how American brands

for global brands:

of Marketing

Title

Searching the web

Journal

European Journal

Geleilate, J. M. G.,

Parente, R. C.,

2018

2001

Overby, J. W., &

Min, S.

Year

2005

Author

Okazaki, S.

84  Research handbook on innovation in international business

Journal

Review

Harvard Business

Porter, M. E.

2001

Business Review

Sinkovics, R. R.

Strategy and the internet Theoretical

internationalization

small firm active online

and implications for

of e-risk perceptions

Theoretical

 

framework

Dunning’s OLI

firms

A conceptualization

Review

International

P. W.

Pezderka, N., &

2011

Uppsala model, agency theory

market expansion by

International

L. S., & Liesch,

internet, post-hype

The internet and foreign Theoretical

Management

development and the

Review

 

 

 

Data  

 

Type of article Theory Theoretical

Title

International business

International

Management

Petersen, B., Welch, 2002

Welch, L. S.

Year

2003

Author

Petersen, B., &

Hypotheses

 

 

The internet and internationalization  85

Klein, L. R.

Quelch, J. A., &

1996

e-commerce as a foreign

Review

international marketing

Sloan Management The internet and

market entry mode

selecting cross-border

Management

Motivations for

Theoretical

Empirical

 

TCE

 

Case study

H2: Greater integration of the internet into marketing strengthens

the USA

competencies and export

 

 

export performance.

influence on the relationship between marketing competencies and

H6: Firms’ degree of export dependence has a significant moderating

performance.

relationship between marketing competencies and export

H5: Firm size has a significant moderating influence on the

performance.

H4: Marketing competencies have a positive relationship with export

competencies of exporting firms.

exporting firms, and (c) the interfunctional orientation and marketing

firms, (b) the competitor orientation and marketing competencies of

the customer orientation and marketing competencies of exporting

H3: Competitive intensity strengthens the relationship between (a)

orientation and marketing competencies of exporting firms.

marketing competencies of exporting firms, and (c) interfunctional

competencies of exporting firms, (b) competitor orientation and

the relationships between (a) customer orientation and marketing

possess superior marketing competencies than their competitors.

exporters located in

integration on marketing

performance

competitor orientation, and (c) interfunctional orientation will

381 manufacturing

internet–marketing

Hypotheses H1: Exporting firms with greater (a) customer orientation, (b)

Data Mail survey data on

Not specified

Type of article Theory Empirical

Title

The influence of

Marketing

Industrial

Qi, X., Chan, J. H.,

Hu, J., & Li, Y.

Marketing

Naidu, G. M.

2020

International

Ramamurthy, K., &

Journal

Journal of

Year

2001

Author

Prasad, V. K.,

86  Research handbook on innovation in international business

2003

Management

Information and

Stylianou, A. C.

Robbins, S. S., &

content and design commonalities

and design

90 websites

investigation of content

Cultural distance

reviewed for

Empirical

(and review)

 

sites: an empirical

Global corporate web

internet-enabled markets

entrepreneurship in

 

H4: The valence of online user ratings is positively related to

website

Theoretical

performance.

the download.com

Journal of Business International

H3: Umbrella branding is positively related to reputational

of products from

markets

No hypotheses

valence of online user ratings and reputational performance.

H7: Umbrella branding strengthens the relationship between the

online user ratings and reputational performance.

H6: Advertising strengthens the relationship between the valence of

user ratings and reputational performance.

H5: Price strengthens the relationship between the valence of online

reputational performance.

H2: Advertising is positively related to reputational performance.

three categories

in international online

Journal

Hypotheses H1: Price is positively related to reputational performance.

Data Data collected from

Signaling theory

Type of article Theory Empirical

Title

Signaling reputation

Entrepreneurship

Venturing

2011

Journal

Strategic

Fischer, E.

Reuber, A. R., &

Fischer, E.

Year

2009

Author

Reuber, A. R., &

The internet and internationalization  87

Steensma, H. K.

T., Kotha, S., &

Management

Journal

Journal of

Year

2006

Author

Rothaermel, F.

Hypotheses

entry by US internet firms. H3a: The greater the uncertainty avoidance in the international target

market size

larger markets.

a fashion that this relationship is stronger for smaller markets than for

country and probability of market entry by internet firms in such

relationship between uncertainty avoidance in the international target

H6a: The size of the international market moderates the negative

stronger for smaller markets than for larger markets.

entry by US internet firms in such a fashion that this relationship is

relationship between cultural distance and probability of market

H5: The size of the international market moderates the negative

smaller markets than for larger markets.

internet firms in such a fashion that this relationship is stronger for

relationship between country risk and probability of market entry by

H4: The size of the international market moderates the negative

country, the lower the probability of market entry by internet firms.

H3d: The greater the power distance in the international target

the greater the probability of market entry by internet firms.

H3c: The greater the masculinity in the international target country,

the greater the probability of market entry by internet firms.

H3b: The greater the individualism in the international target country,

country, the lower the probability of market entry by internet firms.

the international target country, the lower the probability of market

H2: The greater the cultural distance between the United States and

national culture, and

internet firms

decisions by 179 US the lower the probability of market entry by internet firms.

H1: The higher the country risk in the international target country,

analysis of country risk,

firms: an empirical

entry by US internet

Data 7,000 country entry

Not specified

Type of article Theory Empirical

Title

International market

88  Research handbook on innovation in international business

Year

1998

2020

2008

1998b

Author

Samiee, S.

Samiee, S.

Samiee, S.

Samiee, S.

internet: a conceptual

Marketing Review

via alliances and

Management

The internet and

international marketing:

is there a fit?

Journal of

Interactive

Marketing

markets

in business-to-business

electronic commerce

effectiveness

Marketing

the path forward

Global marketing

Industrial

Theoretical

Theoretical

review

and the internet:

Marketing Review

a research overview and

Literature

International marketing

Theoretical

 

 

 

 

Type of article Theory

International

perspective

Exporting and the

Title

International

Journal

 

 

 

 

Data

 

 

 

 

larger markets.

a fashion that this relationship is stronger for smaller markets than for

country and probability of market entry by internet firms in such

relationship between power distance in the international target

H6d: The size of the international market moderates the negative

markets.

that this relationship is stronger for larger markets than for smaller

and probability of market entry by internet firms in such a fashion

relationship between masculinity in the international target country

H6c: The size of the international market moderates the positive

markets.

that this relationship is stronger for larger markets than for smaller

and probability of market entry by internet firms in such a fashion

relationship between individualism in the international target country

H6b: The size of the international market moderates the positive

Hypotheses

The internet and internationalization  89

Morschett, D.

Year

2017

Author

Schu, M., &

Journal

Business Review

International

Title

target country has a negative effect on an online shop’s propensity to select a specific country market.

Turkey

country market.

a positive effect on an online shop’s propensity to select a specific

H4: Better legal and regulative conditions in a target country have

a specific country market.

country has a positive effect on an online shop’s propensity to select

H3: The presence of other sales channels of the company in a target

on an online shop’s propensity to select a specific country market.

country market portfolio and the target country has a negative effect

H2d: Higher added geographic distance between a retailer’s existing

select a new country market.

target country has a negative effect on an online shop’s propensity to

H2c: Higher geographic distance between the home country and the

on an online shop’s propensity to select a specific country market.

country market portfolio and the target country has a negative effect

H2b: Higher added cultural distance between a retailer’s existing

H2a: Higher cultural distance between the home country and the

Switzerland and

country has a positive effect on an online shop’s propensity to select

all EU countries plus a specific country market.

on influence factors Norway, Russia,

H1b: A larger market size of the e-commerce market of the target

over 15 years) from

dependent perspective

on an online shop’s propensity to select a specific country market.

institutional theory

(825 market entries

140 online retailers

capabilities,

retailers—a path-

Hypotheses

Data

Longitudinal data on H1a: A larger market size in the target country has a positive effect

Dynamic

Type of article Theory Empirical

selection of online

Foreign market

90  Research handbook on innovation in international business

Li, S.

Venturing

Journal of Business The CAGE around

2020

portfolio has a negative influence on internationalization speed. H3c: The geographic scope of the country portfolio has a curvilinear

Central Europe and North America

CAGE

H3b: The added distance of a new market to the existing country

companies from

Empirical

country has a negative influence on internationalization speed.

years: 1995–2014),

influence factors

U-shape). H1: An increase in the CAGE distances slows the penetration speed of a digital innovation in a focal country. H2: Pursuing a social sharing strategy will mitigate the effect of the CAGE distances on the penetration speed of a digital innovation. H3: Pursuing a virtual community strategy will mitigate the effect of the CAGE distances on the penetration speed of a digital innovation.

Data on the internationalization of iOS mobile apps in the health & fitness category of Apple’s app store

cyberspace? How

digital innovations

internationalize in

a virtual world

a curvilinear influence on internationalization speed (inverted

H3d: The level of diversity within the country portfolio has

influence on internationalization speed (inverted U-shape).

H3a: The distance between the newly entered market and the home

markets over 19

based perspective on the

a resource-

Shaheer, N. A., &

H2: The participation of a venture capitalist in an online shop has

(1,110 market

capabilities

entries in 47 country a positive influence on internationalization speed.

internationalization speed (inverted U-shape).

150 online retailers

view; dynamic

of online retailers:

Review

nationalization speed

International

Swoboda, B.

Resource-based

Hypotheses

Data

Longitudinal data on H1: The imitability of an online shop has a curvilinear influence on

Type of article Theory Empirical

Title

Inter-

Morschett, D., &

Journal

Management

Year

2016

Author

Schu, M.,

The internet and internationalization  91

is less likely to accelerate the penetration of digital technologies in other target countries if digital technologies (a) rely more on paying users for revenues and (b) acquire a higher proportion of light users. H4: Penetration in lead markets with high preference overlaps is less likely to accelerate the penetration of digital technologies in other target countries if digital technologies (a) rely more on paying users

apps launched since January 2016, tracked on a daily basis across 57 countries through December 2017

Chetty, S.

Business

Journal of World

independent startups in software development with

entrepreneurship theories

networks in cyberspace

export sales >90%

12 Icelandic

RBV, networks,

Empirical

and international

Building international

entrepreneurial virtual

and issues

marketing: opportunities

 

H3: Penetration in lead markets with high demand heterogeneity

sample of 1,910

Not specified

countries.

Store; unbalanced

Theoretical

accelerates the penetration of digital technologies in other target

Apple’s App

of mobile apps?

International e‐

H2: Penetration in lead markets with high preference overlaps

gaming apps in

the internationalization

International

countries.

database of mobile

lead markets accelerate

 

high market capabilities are deployed to support them.

other target countries if (a) high technological capabilities and (b)

more likely to accelerate the penetration of digital technologies in

H6: Penetration in lead markets with high preference overlaps is

high marketing capabilities are deployed to support them.

other target countries if (a) high technological capabilities and (b)

more likely to accelerate the penetration of digital technologies in

H5: Penetration in lead markets with high demand heterogeneity is

for revenues and (b) acquire a higher proportion of light users.

accelerates the penetration of digital technologies in other target

cross-country

a digital age: how can

Marketing

Sigfusson, T., &

2013

Hypotheses H1: Penetration in lead markets with high demand heterogeneity

Data

Location advantages Longitudinal,

Type of article Theory Empirical

Title

Revisiting location in

International

Marketing Review

2005

Journal

Journal of

Sharma, A.

Sheth, J. N., &

& Priem, R.

Year

2020

Author

Shaheer, N., Li, S.,

92  Research handbook on innovation in international business

Matsuo, H.

Singh, N., &

Kundu, S.

2004

Year

2002

Author

Singh, N., &

Journal

Title

approach, International PLC approach,

an extension and

application of the

eclectic paradigm

Research

H2: The Japanese web sites from the Forbes 500 list of companies will show higher levels of uncertainty avoidance compared to the US web sites. H3: The Japanese web sites from the Forbes 500 list of companies will depict higher levels of power distance compared to the US web sites.

company web sites found for Japan and 48 company web sites found for the US)

web sites

US counterparts.

will depict higher levels of high-context communication than their

H5: The Japanese web sites from the Forbes 500 list of companies

counterparts.

will depict higher levels of masculinity compared to their US

H4: The Japanese web sites from the Forbes 500 list of companies

sites.

electronic and retail

of US and Japanese

H1: The Japanese web sites from the Forbes 500 list of companies will show a higher frequency of collectivist features than the US web

framework (45 automotive,

adaptation on the web:

a content analytic study

Data on Fortune

Cultural value

approach

Network Theory

perspective,

Resource-based

approach,

Internalization

approach,

Hypotheses

500 companies

Empirical

Organization

corporations (ECCs):

Behavioral

Paradigm, Industrial

of e-commerce

Journal of Business Measuring cultural

Data

Dunning’s Eclectic  

Type of article Theory Theoretical

Business Studies

Explaining the growth

International

Journal of

The internet and internationalization  93

Journal

of Marketing

International

Marketing Review

Singh, N., Zhao, H., 2005b

& Hu, X.

European Journal

V., & Baack, D.

Year

2005a

Author

Singh, N., Kumar,

Title

(country-specific) web sites targeting French and German consumers will be similar to the cultural value depiction in local French and German web sites.

German local web sites; 15 American web sites targeting

H3b: Local French web sites will show higher levels of collectivist

Germany)

and Chinese web sites. H2: Local Chinese web sites will depict highest levels of collectivism-oriented features, followed by local Japanese, Indian and US web sites. H3: Local Japanese web sites will depict highest levels of

local companies selected from the Yahoo local Indian and Chinese web directory

website analysis, cultural distance

a cross‐national

comparison of China,

India, Japan, and USA

web sites.

power-distance oriented features, followed by local Japanese and US

H4: Local Chinese and Indian web sites will depict highest levels of

US and India.

uncertainty-reducing features, followed by local web sites of China,

individualism-oriented features, followed by local Indian, Japanese

and Chinese (21)

framework for

content of web sites:

Analyzing the cultural

of low-context features than local French web sites. H1: Local US web sites will depict highest levels of

H7b: Local American and German web sites will show higher levels

features than local American and German web sites.

H7a: Local French web sites will show higher levels of high-context

features than local American and German web sites.

H6: Local French web sites will show lower levels of masculinity

features than local American and German web sites.

H5: Local French web sites will show higher levels of power distance

avoidance features than local German and American web sites.

H4: Local French web sites will show higher levels of uncertainty

features than local American and German web sites.

individualist features than local French and German web sites.

web sites targeting

France; 19 American H3a: Local American web sites will show higher levels of

H2: Cultural value depiction in American international

24 French and 22

Data on Indian (21)

Empirical

distance

adaptation, cultural sites (18 American,

depiction of cultural values.

Hypotheses H1: Local French, German and US web sites will differ in their

Data 98 company web

Standardization vs.

Type of article Theory Empirical

Cultural value

B2C e‐commerce firms

content: evidence from

Adaptation of cultural

94  Research handbook on innovation in international business

Jean, R.-J. B.

Marketing Review

International

2013

Sinkovics, N.,

Sinkovics, R. R. and

Journal

Year

Author

internationalization?

alternative path to

The internet as an

Title

web sites. A mail survey of 115 H1a: If the perceived psychic distance of a country is low, there

RBV, TCE

Empirical SMEs

as an alternative to a physical presence.

internet can help to reduce export barriers and the use of the internet

H2: There is a positive relationship between the perception that the

reduce export barriers.

culture to that of the home country and the use of the internet to

a positive relationship between the perceived similarity of its national

H1d: If the perceived psychic distance of a country is high, there is

to reduce export barriers.

national culture to that of the home country and the use of the internet

a negative relationship between the perceived dissimilarity of its

H1c: If the perceived psychic distance of a country is low, there is

reduce export barriers.

practices to those in the home country and the use of the internet to

a positive relationship between the perceived similarity of business

H1b: If the perceived psychic distance of a country is high, there is

internet to reduce export barriers.

business practices to those in the home country and the use of the

UK-based exporting is a negative relationship between the perceived dissimilarity of

of high-context oriented features, followed by local Indian and US

H7: Local Japanese and Chinese web sites will show highest levels

web sites.

oriented features, followed by local Indian, Japanese and Chinese

H6: Local US web sites will show highest levels of low-context

masculinity-oriented features, followed by US, India and China.

H5: Local Japanese web sites will show the highest levels of

Hypotheses

Data

Type of article Theory

The internet and internationalization  95

Management

Turner, I.

Journal of

International

2001

Journal

Wright, R. W., &

Tiessen, J. H.,

Schotter, A. P.

Global Strategy

Stallkamp, M., &

2021

Marketing Review

Sinkovics, N.

Journal

International

Year

Sinkovics, R. R., & 2020

Author

in the hospitality/ tourism and high-tech sectors

firm-specific advantages Economic perspectives (industrial organization,

A model of e-commerce Empirical

use by internationalizing

SMEs

RBV

on innovation),

Schumpeter’s work exporting to Japan

12 Canadian SMEs

externalities,

of digital platform firms

 

 

international strategies

Internalization

 

Data

theory, network

Theoretical

Theoretical

Type of article Theory

borders? The

Platforms without

markets

to platforms and new

from trigger technology

international marketing –

The internet and

Title

 

orientation and its use of the internet as a sales channel.

H8: There is a positive relationship between a firm's entrepreneurial

channel and export performance.

H7: There is a positive relationship between internet use as a sales

alternative to a physical presence and export performance.

H6: There is a positive relationship between internet use as an

an alternative to a physical market presence.

internet is a useful tool for reaching foreign customers and its use as

H5: There is a positive relationship between the perception that the

internet use as an alternative to a physical presence.

H4: There is a positive relationship between market turbulence and

a physical presence.

responsiveness and its use of the internet as an alternative to

H3: There is a positive relationship between a company's market

Hypotheses

96  Research handbook on innovation in international business

Title

Data

Hypotheses

Business Review

M., & Mahnke, V. learning

internationalization in

Marketing Review

P., Pitt, L., Ewing,

M., & Napoli, J.

International

Geography

Economic

Wynne, C., Berthon, 2001

Teller, C.

M., Watson, I., &

Wood, S., Coe, N.

2019

Marketing

H., Sardana, D., &

Palmatier, R. W.

International

Journal of

Weaven, S., Perkins,

Watson IV, G. F.,

distribution value chain

internet on the

The impact of the

Empirical

embeddedness,

fashion retailing

Not specified

embeddedness

societal

network

in international online

Territorial embeddedness,

territorial embeddedness

Dynamic processes of

hybrid approaches Empirical

review)

relational, digital, and

Theoretical (+  

entry strategies:

entrepreneurship and

Saarenketo, S.

marketing International market

review)

in international

Kuivalainen, O., &

2018

(literature

Marketing Review

International

Theoretical

Torkkeli, L.,

Vadana, I. I.,

of companies

perspective

cyberspace: a learning

Case study

Multiple case study

 

study of Facebook

organizational

translation for rapid

 

Longitudinal case

Empirical

Uppsala model,

Crowdsourced

Digitalization

2019

International

international sales is stronger in cases where they have a greater

operations

international online sales

Commerce

Tran, Y., Yonatany, 2016

H2: The effect of retail firms’ online sales channel adoption on

international sales

of operations on its

 

 

 

geographical exportation scope.

international sales is stronger in cases where they have a greater

H3: The effect of retail firms’ online sales channel adoption on

geographical import.

to international sales.

retail firms with

firm’s geographic scope review)

Electronic

H1: Retail firms’ online sales channel adoption is positively related

Journal of

562 Swedish

Sharma, D. D.

Not specified

Type of article Theory

The influence of a retail Empirical (+

Jonsson, A., &

Journal

International

Year

2016

Author

Tolstoy, D.,

The internet and internationalization  97

Journal

British Journal of

Management

International

Zeng, J., & Glaister, 2016

K. W.

Zeng, J., Khan, Z.,

S., & Sarker, S.

Systems Journal

Information

Zhang, M., Sarker,

2013

Business Review

& De Silva, M.

2019

Business Review

International

Sinkovics, R. R.

Year

2006

Author

Yamin, M., &

Title

uncertainty and IT capability in born global firms. H2: There is a positive relationship between information intensity and IT capability in born global firms.

China (136) and the US (66)

IT capability in ‘born

global’ firms: a cross‐

national study

the USA.

performance of born global firms will be different in China and in

H7: Drivers of IT capability and the effect of IT capability on the

performance of born global firms.

H6: There is a positive relationship between IT capability and the

orientation and IT capability.

H5: There is a positive relationship between organizational learning

entrepreneurial orientation and IT capability in born global firms.

H4: There is a positive relationship between international

orientation and IT capability.

H3: There is a positive relationship between international marketing

H1: There is a positive relationship between environmental

global firms from

Drivers and export

performance impacts of

 

Hypotheses

Survey data of born

theory and networks

Expedia and Uber

Groupon, Amazon,

effects

MNEs: internalization RBV

MMPCs: eBay,

Empirical

Case study on five

Internalization theory, network

The emergence of

multi-sided platform

market in China

companies in the virtual Empirical

institutional view

internet platform

enterprises and local

Dynamic capability Multiple case study perspective,

Empirical

Data Case study

Psychic distance

Type of article Theory Empirical

between multinational

Competitive dynamics

virtuality trap

reduction and the

psychic distance

internationalization,

Online

98  Research handbook on innovation in international business

5. Innovation in international mid-sized corporations: understanding their R&D offshoring characteristics Josephine Igoe, Chad Trevithick and Esther Tippmann

INTRODUCTION Research and development (R&D) encompasses the key activities that lead to innovation in the firm, and R&D offshoring is a central issue within this context. More than $250bn is invested into offshored R&D activities worldwide, which equates to about one-third of the global R&D spend, and the year-on-year growth has been double-digit since 2014 (OECD, 2019). Prior literature has examined the drivers and outcomes of R&D offshoring; it has also identified the important role that international location selection and the management of disaggregated R&D have on the sustainability of R&D offshoring, including innovation and performance outcomes (Vrontis & Christofi, 2021; Papanastassiou et al., 2020; Dunning & Lundan, 2009). In terms of firm size, prior literature on R&D offshoring has focused mostly on large multinational enterprises (MNEs) and small and medium-sized enterprises (SMEs). However, little is known about R&D offshoring in the context of mid-sized corporations; i.e. firms that have 500–4,999 employees and generate an annual turnover of less than $4bn. Some of the world’s most successful companies, such as Molex (an industry leading provider of electrical and optical interconnect solutions) and Delo (whose adhesives can be found on 80 per cent of all chip cards) are mid-sized corporations (Simon, 2009). Mid-sized corporations fall into a firm-size cluster between SMEs and large corporations, and these mid-sized corporations have unique firm characteristics. Often, these characteristics include being market leaders in their respective industries (with global market shares of over 50 per cent), regularly outperforming large corporations and having low levels of corporate debt (Simon, 2009; Collins, 2001). Given their prevalence and market competitiveness, as well as the observation that R&D offshoring practices differ across organisations of different sizes (Rodríguez & Nieto, 2016; Nunes et al., 2012; Roza et al., 2011; Di Gregorio et al., 2009), it is surprising that mid-sized corporations have to date received scant attention in terms of their R&D offshoring strategies. To address this shortcoming, this study explores the firm size impact on R&D offshoring by specifically focusing on mid-sized corporations. The question which this chapter addresses is: What are the characteristics of R&D offshoring in mid-sized corporations? The primary contribution of this chapter is to the literature on R&D offshoring in international firms by detailing the unique characteristics of R&D offshoring in the context of mid-sized corporations. By so doing, our second contribution is to the firm size literature, particularly to the literature focused on smaller firms, because we develop insights on the mid-sized corporations firm size cluster.

99

100  Research handbook on innovation in international business

THEORETICAL FOUNDATIONS The theoretical background of this chapter highlights studies that illuminate the R&D offshoring characteristics by firm size, focusing in the main on SMEs and large corporations or MNEs. The inception of the analysis of overseas R&D in MNEs were the reports of the US Tariff Commission (1973) that investigated the extent of overseas R&D of firms, and a study by Creamer (1976), which found that in 1966, 86 per cent of Fortune 500 US companies had foreign R&D expenditure. In addition to noting the extent of international R&D, these studies found diversity in the way that R&D occurred overseas. More recent studies on R&D offshoring often focus on MNEs or large corporations, as their substantial R&D budget means they represent a large proportion of international R&D (Dachs, 2017; Dachs et al., 2014; OECD, 2007; UNCTAD, 2005). Recent literature reviews of international R&D for example, demonstrate the expansive nature of studies on large corporations over the years (Vrontis & Christofi, 2021; Papanastassiou et al., 2020). By comparison, academic literature focused on R&D in SMEs is relatively new (e.g. Rodríguez & Nieto, 2016; Mohiuddin & Su, 2013; Nunes et al., 2012; Roza et al., 2011; Nieto & Rodríguez, 2011; Golovko & Valentini, 2011; Di Gregorio et al., 2009). The focus of this literature on R&D in SMEs has been on firm growth and the benefits of offshoring R&D at various stages of growth, examining options for increased access to markets, and often directly compared to large corporations. Next, we elaborate more on R&D offshoring in SMEs and large corporations. R&D Offshoring in SMEs and Large Corporations The main role of R&D is to grow business by providing organisations with competitive advantages. To this end, understanding R&D offshoring within the firm size context is important, as there are systematic differences across firms of different sizes in their resource endowments, firm behaviour and competitive advantages. Examples include large firms having a relative financial and resource advantage over SMEs, whereas SMEs are able to utilise their relative speed and willingness to adopt new technologies as competitive advantages over large corporations. In addition to these generic differences among SMEs and large corporations, prior literature pinpoints some important differences related to R&D offshoring approaches. Our review of prior literature identifies some firm size-specific characteristics relating to R&D offshoring: the typical mode of entry and activities relating to financial risk management, access to talent, as well as the innovation and adoption of new technologies. These characteristics are widely referenced in the extant literature relating to R&D offshoring within the SME context. For example, in their research that centred on the relationship between R&D offshoring and SME growth, Rodríguez & Nieto (2016) utilised all R&D offshoring characteristics listed in Table 5.1. Rodríguez & Nieto (2016) focused on sales growth as a success factor for R&D offshoring, whereas Mohiuddin & Su (2013) explored offshoring strategies that were focused on enhancing the competitiveness of Canadian manufacturing SMEs. Whilst these two studies are different in their scope, aims and outputs, they are unanimous in identifying the specific characteristics to analyse R&D offshoring for a specific firm size cluster. Building on this, in Table 5.1, we summarise a comparison of R&D offshoring of SMEs and large corporations, and we elaborate the main points next.

Innovation in international mid-sized corporations  101 Table 5.1

Comparison of R&D offshoring of large multinational corporations and SMEs

 

Large multinational corporations

SMEs

Definition

>$1bn turnover p.a. and >500 employees