Rod B. McNaughton

Towards an Integrative Model of Small Firm Internationalisation

Firm internationalisation has long been regarded as an incremental process, wherein firms gravitate towards ‘psychologically close’ markets and increase commitment to international markets in a gradual, step-wise, manner through a series of evolutionary ‘stages’. However, much of the recent literature provides clear evidence of rapid and dedicated internationalisation by ‘born global firms’. Typically, these are smaller entrepreneurial firms that internationalise from inception, or start to shortly thereafter. Their main source of competitive advantage is often related to a more sophisticated knowledge base. In addition, the authors have found evidence of firms supporting this ‘born global’ pattern of behaviour but also evidence of firms that suddenly internationalise after a long period of focusing on the domestic market. These ‘born-again’ globals appear to be influenced by critical events that provide them with additional human or financial resources, such as changes in ownership/management, being taken over by another company with international networks, or themselves acquiring such a firm. Based upon the extant literature and our own research, we propose an integrative model that recognises the existence of different internationalisation ‘pathways’. We then explore differences in behaviour due to the firms internationalisation trajectory and discuss the strategic and public policy implications.

Examining the Link Between Knowledge Management Practices and Types of Innovation

The management of knowledge is frequently identified as an important antecedent of innovation. However, very little empirical research has specifically addressed antecedents and consequences of effective knowledge management. Using data collected from 443 New Zealand firms, a knowledge management instrument, which comprises three components and 16 factors, is regressed against a three‐factor innovation scale that captures incremental innovation, innovation that changes consumers’ behaviour and innovation that destroys existing competencies. The results of this research show that knowledge acquisition and responsiveness to knowledge are more important for innovation than knowledge dissemination.

Beyond market orientation

Knowledge is seen as a critical resource, with both tangible and intangible attributes. Effective knowledge management is emerging as an important concept that enables all the resources of firms, including knowledge, to be used effectively. A knowledge‐management orientation is positioned in this paper as a distinctive capability that supports the creation of sustainable competitive advantages such as innovation. Using an instrument to measure a knowledge‐management orientation, which is grounded in Kohli, Jaworski and Kumars work on a market orientation, this paper identifies four clusters of firms based on knowledge‐management practices that exist within the New Zealand business environment. The clusters are then described according to their innovation and financial performance profiles. The study finds that firms with a knowledge‐management orientation outperformed those classified as market‐oriented. The study also shows a market orientation to be a subset of a knowledge‐management orientation.

The Number of Export Markets that a Firm Serves: Process Models versus the Born-Global Phenomenon

An implicit assumption in process models of internationalization is that firms gradually increase the number of markets to which they export. In contrast, recent research on born-global firms highlights cases where firms enter numerous geographic markets around the time of their inception. This paper draws on both process models and the literature about born-global firms to identify possible influences on the number of export markets served by a firm. The results of a survey of micro-exporters suggest that the number of export markets is positively associated with firm age, proprietary and knowledge-intense products, industries that are internationalized, and small domestic markets. This research provides a description of the market, product and industry conditions where entry into a larger number of export markets should be considered.

The service quality construct on a global stage

The eagerness of global marketers to establish a competitive advantage based upon service quality excellence within emerging markets displays a degree of naivete in respect to the influence of environmental factors upon consumption behaviour. An example of this is the global application of Parasuraman, Zeithamal and Berry’s conceptualisation of service quality (SERVQUAL) in 1988 without consideration of the possible influence of the variety of cultures found in international markets. This paper takes a cautionary stance to such global application, and proposes that cultural values endow consumers with rules that guide their evaluation of service quality. Field research was conducted within Taiwan to ascertain whether the dominant service quality model holds in this “foreign” environment. The results indicate that not only do cultural values influence the hierarchy of service quality dimensions, but also that Parasuraman et al.’s SERVQUAL conceptual model does not capture the breadth of criteria utilised by Taiwanese consumers. Interpersonal relations are highlighted as a dimension of service quality that is not adequately addressed by SERVQUAL.

Market‐oriented value creation in service firms

A fundamental proposition in marketing strategy is that a market orientation is positively related to firm performance. However, the mechanisms of this relationship have yet to be explored in detail, especially in service industries where intangible assets are relatively more important. This paper addresses this issue by proposing a model that identifies important intermediate variables between a market orientation and increased firm value. The model posits that a market orientation guides investment in market‐based assets and other asset types, that these assets may be levered to create a competitive advantage and value for customers, and that this results in loyalty and easier customer attraction. Quicker and more extensive market penetration, shorter sales cycles, and decreased marketing and sales costs enhance the cash flow of a market‐oriented firm. This may be recognised in higher valuations, which ultimately translate into higher share prices and wealth creation for the owners of the firm.

Internationalization patterns of small and medium‐sized enterprises

Purpose – The purpose of this paper is to present an overview of the conceptual frameworks and concepts with which the research on internationalization patterns of small and medium‐sized enterprises (SMEs) should be conducted.Design/methodology/approach – A comprehensive overview of concepts and a conceptual framework to study internationalization patterns of SMEs is offered.Findings – The complexities of existing definitions and methodologies for researching internationalization patterns are highlighted, and a synthesis of the issues is provided. An integrative model of internationalization pathways, and their antecedents and outcomes is presented.Research limitations/implications – It is recommended that future research focuses especially on the time dimension of internationalization patterns. Future research can contribute to the literature by adopting a longitudinal approach with larger samples and more detailed cases to capture the dynamics of internationalization.Practical implications – Practitione...

Market orientation and firm value

Several studies in the market orientation literature demonstrate a positive relationship between a market orientation and firm performance. However, the mechanisms of this relationship have yet to be explored in detail. This article addresses such a gap by proposing a conceptual model that links market orientation to wealth creation in firms. The model posits that a market orientation guides investment in market-based assets that may be deployed to create customer value. The realisation of customer value helps to both capture and retain customers. Quicker and more extensive market penetration, shorter sales cycles, and decreased marketing and sales costs enhance the cash flow of a market-oriented firm. This may be recognised in higher valuations, which ultimately translate into higher share prices and wealth creation for the owners of the firm. This model is used to describe the creation of value in the Major Business Division of BT, a large information technology service company. Recent success in this Division of BT is attributed to the creation of a market orientation and customer value-based strategy and processes. The experience of BT provides a clear illustration of how a market oriented firm creates value for both customers and shareholders.

Foreign market channel integration decisions of Canadian computer software firms

Firms that enter foreign markets must decide on the extent to which they will internalize their distribution channels. There is a continuum of choice, ranging from one extreme where the firm performs all marketing and distribution functions itself, to the other where intermediaries take title to goods for resale to foreign wholesalers or customers. The integration decision is a strategic one as the right balance between hierarchy and market can make the difference between success or failure in a foreign market. This paper reports the results of an empirical test of a transaction cost model of channel integration decisions among Canadian computer software exporters. The software industry provides a variety of experiences with respect to product customization and distribution channels within the same aggregate product category. Data on channel choice, channel volume, asset specificity, and external uncertainty were collected from Canadian computer software exporters via a mail survey. The results suggest that channel volume, asset specificity, volatility, and product customization have a significant effect on channel choice.

The use of multiple export channels by small knowledge‐intensive firms

A transaction cost analysis model of the situations in which small knowledge‐intensive firms use multiple distribution channels to serve a foreign market is developed. The central argument is that integrated modes are generally preferred, as they facilitate protection of knowledge‐based assets and the provision of high levels of customer service and support. However, it is hypothesised that either plural or hybrid selling may be used, if assets can be protected in other ways, as a response to environmental diversity, when sales volumes are sufficient to support multiple channels, and in relatively mature markets, where sales growth has started to plateau. Data gathered from Canadian software developers generally support these propositions. The results help the managers of knowledge‐intensive firms to identify some of the circumstances in which multiple export channels might be deployed to enhance sales performance in a foreign market.