Small Businesses and International Entrepreneurship in the Economic Hard Time: A Global Strategic Perspective (2012)

ABSTRACT This study takes a strategic approach to international entrepreneurs hip with special attention to small and medium-sized enterprises (SMEs), including small family firms, as these organizations strive to survive in the increasingly intertwined and often volatile global marketplace. Key factors examined include some unique characteristics of small and family businesses (e.g., entrepreneurial vision, entry niche, resources and capabilities, major challenges, and strategic options to go international) and social institutional variables (e.g., culture, economic system, government regulations, and institutional reforms both at home and abroad), which may assist or hamper an entrepreneur's capability to create, build, and expand a new venture within the national context or across borders. The primary focus of the study is to explore how small and family businesses triumph over barriers in the time of economic downturns. It expands prior research on entrepreneurs hip by developing a contextual global strategic framework for entrepreneurial firms. Country-firm specific examples are incorporated to illustrate ways to assess and exploit market opportunities, including firm registration procedures and costs, capital formation, and fund raising. Through this endeavor, the study provides practical implications for small business owners and managers as they attempt for resource acquisition and capability development, particularly in the rapidly globalizing industries. Practical implications are discussed and suggestions for future research provided. Keywords: entrepreneurship, national context, institutional reforms, SME global strategies INTRODUCTION Small businesses play a vital role in many societies. Where data are available, such as in Europe, North America, and Asia (e.g. IFERA, 2002; OECD, 2002; USSBA, 2006), over 95% of all businesses are small, including many family businesses, which contribute to over 50% of the GNPs and generate 60%-90% of the new jobs annually depending on the country. While some of these businesses may be content to operate in a domestic market, more are expanding across borders. In South Korea, for example, small businesses account for approximately 40% of Korean exports and 65% of Korean manufacturing FDI (foreign direct investment). Small businesses in the United States employ over 50% of the workforce, produce more than 30% of export value, and represent as many as 97% of identified exporters. With trade liberalization and regional economic integration in many parts of the world, from manufacturing to services and ecommerce, a new global business paradigm awaits more market-driven small and medium-sized enterprises (SMEs) to enter. To exploit opportunities in an increasingly globalized market, it is imperative that small and family business managers, whether domestically based or doing business across borders, learn about their strategic options and adapt on a country-by-county basis. There are different definitions of what makes a small business. This study follows the conventional idea that small businesses are by and large entrepreneurial organizations, which are relatively young and have fewer than 500 employees (OECD, 2002). An entrepreneurial organization deals with risks and uncertainty of new and untested business opportunities. The term entrepreneurship refers to the discovery, evaluation, and exploitation of market opportunities (Baker, Gedajlovic & Lubatkin, 2005). When applied to the international level, small businesses create new ventures that seek profits and growth beyond national boundaries, just as their larger counterparts do. Small businesses also face similar strategic options as larger multinational enterprises (MNEs), such as exporting, franchising, licensing, joint ventures, strategic alliances, and FDI. In contrast, however, being small often means limited financial and personnel resources, lack of prior international experiences, and lack of sufficient scale to produce goods or services as efficiently as do the larger firms. …