The paper presents the correlation between different variables and internationalisation, such as: the size of the company, the activity field, the level of innovation. It also emphasizes the barriers the SMEs face in the process. In the end of the paper, one presents some of the solutions proposed in order to sustain the SMEs overcome these barriers.SMEs, internationalisation, innovation, success.

Aurel Gheorghe SETEL

Mihaela-Georgia SIMA

Simona-Clara BARSAN

English

Research Papers in Economics

Review of International Comparative Management                              Special Number 1/2011  77 
 
 
ISSUES SMEs FACE WITHIN  
THE INTERNATIONALISATION PROCESS 
 
Simona-Clara BÂRSAN 
Research Institute for Analytical Instrumentation Bucharest, Technological Transfer Centre 
Mihaela-Georgia SIMA 
Bucharest Chamber of Commerce and Industry, Technological Transfer Centre 
Aurel Gheorghe SETEL 
University of Oradea, Technological Transfer Centre 
 
 
KEYWORDS: SMEs, internationalisation, innovation, success 
 
Internationalization consolidates growth, intensifies competition and long 
term balances companies for long term. At the same time, it generates new jobs and 
potentiates the company competitiveness. Though, for many SMEs, there is a series 
of important barriers in extending their own business, fact that determines them to 
depend, more or less, on the internal market.  
One  should  also  know  the  correlations  that  appear  between  different 
variables of SMEs and internationalization, so as to know which way is the best to 
be approached. 
 
Situation and drivers to internationalization 
 
A considerable number of European SMEs are  engaged  in international 
activities yet only a small percentage is involved in internationalization beyond the 
internal market. 
The two most common modalities of internationalization are exports and 
imports. The first shows that 25% of SMEs within  EU27  export, out of  which 
about 50% go beyond the internal market (13%). The second one shows that 29% 
of SMEs within EU27 import, out of which 50% import from countries outside the 
internal market (14%). 
In  addition:  7%  of  SMEs  within  EU27  are  involved  in  technological 
cooperation with foreign partners; 7% are subcontractors to foreign partners; 7% 
have foreign subcontractors; 2% of SMEs within EU27 are active in foreign direct 
investments. 
ABSTRACT 
The  paper  presents  the  correlation  between  different  variables  and 
internationalisation, such as: the size of the company, the activity field, the level of 
innovation. It also emphasizes the barriers the SMEs face in the process.  In the end of 
the paper, one presents some of the solutions proposed in order to sustain the SMEs 
overcome these barriers 
          Special Number 1/2011                         Review of International Comparative Management  78 
In accordance with the results presented in the EIM report that has been 
carried out regarding internationalization of European SMEs, one describes below 
the issues that have come up.  
  There  is  a  direct  link  between  the  internationalization  level  and 
company size: 
  the larger the company, the more it tends to internationalize. This 
applies to any single mode of internationalization. For exports, 24% 
of micro, 38% of small and 53% of medium-sized SMEs are active, 
as  for  imports  the  respective  percentages  are  28%,  39%  and, 
respectively, 55%. 
  the smaller the country, the more its SMEs are internationalized, but 
the SME’s proximity to a national border does not have much effect 
on its level of internationalization 
There is a negative correlation between the size of the SME's home country 
population and its level of international activity. For example, countries such as 
Estonia, Denmark, Sweden, the Czech Republic and Slovenia have a much higher 
percentage of exporters than the EU average of 25%. Germany, France and UK 
score below average. 
SMEs situated near border show much higher activity rates with their cross 
border regions, but this is  not  followed by being  more internationally active  in 
general. 
  The most internationalized sectors are trade, manufacturing, transport& 
communication and research.  
The highest percentage of internationalized SMEs is found in wholesale 
trade,  mining,  manufacturing  and  sale  of  motor  vehicles.  Within  services,  the 
sector 'research' has a very high score. The activity sectors having the highest share 
of  exporting  SMEs  are:  mining  (58%),  manufacturing  (56%),  wholesale  trade 
(54%),  research  (54%),  sales  of  motor  vehicles  (53%),  renting  (39%)  and 
transport&communication (39%). 
  The enterprise age is proportional with the export and import activities.  
Thus, the percentages of SMEs that are exporting gradually increase from 
just over 15% for enterprises up to 4 years of age to nearly 30% for enterprises that 
have existed for 25 years or more. 
  SMEs usually start international activities by importing. 
If SMEs have both import and export activities, then they start with import 
twice as often (39%) as starting with exports (18%). One has noticed that 42% of 
SMEs have started with imports and exports in the same year. 
  Not  many  of  the  internationally  inactive  SMEs  are planning  to  start 
international activities in the foreseeable future. 
Few  non-internationalized  companies  show  any  intention  to  start 
international operations. 
Only about 4% of all SMEs have concrete plans to start such activities. Review of International Comparative Management                              Special Number 1/2011  79 
  Partner  countries  are  mostly  other  EU  countries.  The  relations  with 
BRIC  countries  are  generally  little  developed,  excepting  the  imports 
from China. 
Whereas three quarters of all exporting SMEs are oriented towards markets 
in other EU Member States, emerging markets such as Brazil, Russia, India and 
China (BRIC) are only served by 7-10% of exporting SMEs. The percentage is 
much higher in transport and communication. At the same time, for imports, most 
SMEs, meaning 86% of importers, focus on other EU Member States, but again 
China is quite important (27%). 
  Companies involved in e-commerce are more internationally active. 
The possibility to sell products or services online is positively correlated 
with  being  active  in  export  or  import  markets  (also  when  controlled  for  other 
effects such as company size). The conclusion is that the Internet has made SMEs 
of all sizes to overcome some of the barriers to internationalization. In fact, the 
relationship between certain barriers and the company size has weakened because 
of the Internet. 
  Barriers for internationalization as perceived by SMEs. 
SMEs have reported the following most important barriers: 
  Internal barriers: price of their own product or service and the high 
cost of internationalization. 
  External barriers: lack of capital, lack of adequate information, and 
lack of adequate public support and the costs of or difficulties with 
paperwork associated with transport. 
Lack of capital and adequate public support are even more important, with 
reference to EU-EEA markets, than with reference to third markets. This might be 
related to the fact that generally larger and more experienced SMEs are active in 
third markets. Both barriers become more important the smaller the SME is. 
  Low awareness of public support programs among SMEs. 
SMEs  are  generally  not  well  aware  of  the  existence  of  public  support 
programs  for  internationalization  that  could  be  used  by  their  company.  The 
percentages  range  from  15%  for  micro  enterprises  to  27%  for  medium  sized 
enterprises and from only 10% for enterprises that are not internationally active to 
22% for SMEs with international activities. Judging by sector, one can find the 
following situations: 20% to 25% of SMEs in wholesale and manufacturing are 
aware of support programs, whereas for retail, transport and personal services this 
is only 10% to 13%. 
Step one in adequately supporting SMEs to access international markets 
opportunities is to raise the rather low awareness of business support programs 
among SMEs. 
  Rather low use of public support. 
Only a small number of the SMEs actually use public support measures. In 
2009, the financial support was used more by the larger SMEs, as it follows: micro 
10%, small 13% and medium-sized 16% of enterprises with international activities.          Special Number 1/2011                         Review of International Comparative Management  80 
Non-financial support is used more by the smallest firms: micro 10%, small 8% 
and medium-sized enterprises 6%. 
By  country,  the  differences  are  very  large.  A  very  high  percentage  of 
SMEs  in  Austria  (47%)  and  Turkey  (32%)  reported  using  financial  support 
whereas in countries such as Portugal, Denmark, the Netherlands, FYROM and 
Iceland  this  percentage  is  only  1%  or  less.  One  registered  the  highest  use  in 
Slovenia (23%), Cyprus (19%) and Latvia (16%), but only between 2% and 10% in 
10 countries and below 2% in 15 of the 33 countries. 
 
The effect of internationalization on business performance 
 
  Being internationally active strongly relates to higher turnover growth. 
There  is  a  positive  correlation  between  being  internationally  active  and 
reporting high turnover growth. Accordingly, more than 50% of SMEs that invest 
abroad  and  SMEs  that  are  involved  in  international  subcontracting  report  a 
turnover increase related to 2007- 2008, whereas for all SMEs this is about 35%. 
  SMEs that are internationally active report higher employment growth. 
SMEs that are internationally active generally report higher employment 
growth from 2007 to 2008 than non-active SMEs, for example: 
  Exporters’ employment growth 7%; non exporters 3%. 
  Importers employment growth 8%; non importers 2%. 
  SMEs  both  importing  and  exporting  10%  employment  growth; 
others 3%. 
  SMEs with FDI employment growth in 2007-2008: 16%; others 4%. 
  Strong relationship between internationalization and innovation. 
26%  of  the  internationally  active  SMEs  have  introduced  products  or 
services that have been new for their sector in their country; for other SMEs, this 
percentage is only 8%. These internationally active SMEs are also more active with 
process innovations that are new for their sector in their country (11% versus 3% 
for the SMEs without international activities). 
 
What should be done? 
 
  More  aggressive  promotion  of  awareness  and  use  of  public  support 
programs. 
For SMEs that use the support provided, the effect of public support is 
relatively important. But SMEs are generally not well aware of the existence of 
public  support  programs  for  internationalization  and  the  level  of  use  of  these 
instruments is very limited: less than 10% of the internationally active SMEs use 
them. 
  Easier access to support measures for micro companies. 
The smallest (micro) SMEs are the ones that need and would benefit most 
from support programs. Yet, paradoxically, they are the ones that are least aware 
and  are  the  lowest  users.  This  is  particularly  relevant  in  the  case  of  financial Review of International Comparative Management                              Special Number 1/2011  81 
support, especially considering that lack of capital figures prominently among the 
barriers reported in the survey. Therefore, one should make efforts to improve the 
access  of  especially  micro and small SMEs to existing public  financial support 
mechanisms. Support programs, financial and otherwise, must be more specific in 
their targets and objectives and include monitoring tools. 
  Support innovation to spur internationalization. 
Nevertheless, the study results confirm that there is a strong link between 
activities on international markets and different innovation forms. These findings 
regarding the link between innovation and internationalization, that it is useful to 
design and present policy support measures, aimed at stimulating innovation and 
internationalization  in  conjunction.  It  might  also  be  considered  to  merge  the 
agencies that are implementing these two types of policies. 
  Focus on export, but also on import. 
The survey shows that import is an important activity for SMEs, not only 
in its own right (sourcing inputs to remain competitive), but also as a good start to 
internationalization.  However,  most  public  support  programs  still  focus  on 
exporting. 
  Foster e-commerce. 
E-commerce activity is positively correlated with being active in export or 
import markets. The Internet has already made it easier for SMEs of all sizes to 
overcome some of the barriers to internationalization. The actions carried out by 
policy  makers  for  facilitating  a  continuing  growth  of  e-commerce  may  further 
strengthen this effect such as acceptance of electronic signatures. 
  Cooperation between MS in collecting market information. 
Lack of information is a crucial barrier for doing international business and 
might  be  due  to  a  market  failure.  The  costs  for  overcoming  this  gap  could  be 
considerably reduced by ensuring that the amount of 'double work' within the EU is 
further reduced.  
Efficiency  gains  could  be  obtained  by  organizing,  at  EU  level,  the 
collection and analysis of information on market developments and the legal and 
institutional  environment  in  foreign  markets.  This  will  allow  local  agencies  to 
focus on being an efficient interface with their national business community. 
 
Conclusions 
 
The main advantage of an analysis, as the one presented before, is that 
several characteristics of the company are taken into consideration simultaneously.  
The emphasized issues have shown a strong correlation among the factors 
that make an SME being internationally active to become better than the average 
business performance scores ranged at the other ones.  
Although part of this  effect  is  due to the  'self-selection' process, in the 
sense  that  SMEs  having  better  performance  are  more  likely  to  be  active 
internationally, the facts lead to the conclusion that there is also a direct, positive 
effect on the performance of enterprises that become internationally active.           Special Number 1/2011                         Review of International Comparative Management  82 
Nevertheless, this will also have a direct effect on the performance of the 
national  and  European  economy.  In  addition,  there  will  be  indirect  effects,  for 
example, on learning and innovation.  
Overall economic welfare gains from internationalization make the letter 
one  worthwhile  to  see  to  what  extent  policy  makers  could  and  should  further 
support SMEs internationalization. 
 
 
References 
 
1.  European  Commission,  First  Section  of  the  Annual  Report  on  EU  Small 
andMedium-sized  Enterprises,  Zoetermeer,  2009.  available  at: 
http://ec.europa.eu/enterprise/ 
policies/sme/files/craft/sme_perf_review/doc_08/spr08_annual_reporten.pdf  
2.  EUROSTAT,  Eurostat  Newsrelease,  euroindicators,  119/2009,  2009.  See: 
http://www.eurostat.eu/. 
3.  Hauser C., Werner, A., Fostering International Entrepreneurship: Are SMEs 
targeted  adequately  by  official  foreign  trade  promotion  schemes?  2008, 
Working paper posted 15/4/2008 at: http://papers.ssrn.com/sol3/ papers.cfm? 
abstract_id=1120824 
4.  IKEI/EIM,  EU  SMEs  and  Subcontracting,  report  by  IKEI  Spain  and  EIM 
commissioned  by  European  Commission,  DG  Enterprise  and  Industry, 
forthcoming, 2009 
5.  World  Trade  organization,  World  Trade  report  2009,  Trade  Policy 
Commitments and Contingency Measures, Geneva, 2009 
6.  ***http://europa.eu/abc/european_countries/index_en.htm 
 

First Section of the Annual Report on EU Small andMedium-sized Enterprises,

Fostering International Entrepreneurship: Are SMEs targeted adequately by official foreign trade promotion schemes? 2008, Working paper posted 15/4/2008 at: http://papers.ssrn.com/sol3/ papers.cfm?

SMEs and Subcontracting, report by IKEI Spain and EIM commissioned by

World Trade organization, World Trade report 2009, Trade Policy Commitments and Contingency Measures,

Issues SMEs Face Within the Internationalisation Process

http://rmci.ase.ro/no12vol1s/Vol-12_No-1S_Article-12.pdf

Issues SMEs Face Within the Internationalisation Process

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