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Internationalization and competition in small manufacturing firms

By Timo Mikael Lautanen


This study focuses on three topics in the behaviour of small manufacturing firms using theories from industrial economics as theoretical benchmarks. The study takes as its starting point the perspective of the individual enterprise rather than that of an industry or a market. For the study a considerable amount of new data was collected by interviewing about 80 small business managers in Finland up to three times by the end of 1997. The first of the three parts of the study considers the adoption of an export strategy. The non-linear econometric model adopted suggests that the adoption of an export strategy in small firms is in particularly influenced by the language skills of entrepreneurs, and has become faster over time. The second chapter provides insights into the differentiation behaviour of industrial small firms. At the individual firm's level, vertical differentiation seems to have a special weight since horizontal differentiation is often limited by the requirement of technical compatibility, and because improving quality is perceived to incorporate lower risk than differentiation based on taste differences between customers.\ud \ud The third chapter studies exiting from export markets using the case-study method of research. There is no strong case for, or against, the export hysteresis in the data, and thus one can argue that the behaviour of the firms has been largely in accordance with the standard theory of a competitive industry. The lack of an explicitly export strategy and concentration on exports to one country seem to contribute to exit where the nature of exporting can be described as opportunistic. Overall, the firm-level study presented here suggests the relevance of further studies using models of diffusion of innovations to theorize small business exporting and to taking better into consideration of an individual firm's perspective in studies on product differentiation. Moreover, demand side influences on export hysteresis should be studied further

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