Focus on the internationalization of Small and Medium Enterprises (SMEs) has increased, in
as much as the companies today are characterized by a high degree of globalization and
internationalization independent of their size. Therefore, the growth of SMEs, including the
successful development of the international markets, is recognized as crucial for the economic
development and the future wellbeing of the nations.
The decision to internationalize SMEs includes: determination of the countries and
foreign markets in which they wish to operate, and the structural nature of their activities in
those markets (Carazo and Lumiste, 2010).
When a company decides to expand internationally, it has to carefully select the foreign
market in which it wants to operate. The choice of market involves analyzing strategic needs
and orientation of the firm beforehand. After choosing the foreign market, the company’s
operations in the foreign market have to be determined (Goodnow, 1985; Papadopoulos,
1988; and Kumar et al., 1994).
The firm’s operations in the market depend on its choice of foreign entry mode. An entry
mode can be defined as an institutional arrangement chosen by the parent company in the
foreign market. Foreign entry mode strategy is the most critical decision as it influences all
the future decisions (Kumar and Subramaniam, 1997).
Consequently, international entry mode research is important because the chosen
entry mode has significant implications on performance (Canabal and White, 2008).
It determines whether a company has full control over the foreign unit or has to share
control with a partner (Arregle et al., 2006). In addition, once the mode of entry is
established, it is difficult to change because it has long-term consequences for the company
(Brouthers and Hennart, 2007).
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