Internationalization and Performance: findings from a set of Italian SMEs

Abstract

The relationship between Internationalization and performance is a challenging topic for the agenda of researchers across the world, due to the complexity of the variables involved, to the difficulties in construct building and, last but not least, to the controversial results arising from the different studies that have been conducted on the matter in recent decades. This is particularly true in the case of SMEs, which represent a field still to be explored from this point view. The fundamental hypothesis that has driven the present work is that the growing level of market integration has generated a framework of international competition for economic actors which has to be considered as the actual natural environment both for international and for domestic firms. As a consequence, being international is no more than a natural status for the enterprise, in the sense that firms which have not engaged yet in international markets are also part of a competitive international environment that influences strategic decisions and contributes to shaping business models and performances accordingly. This concept applies immediately to those regions where the integration process has gone further and deeper, for example the European Union area, where the domestic market for economic actors has gradually evolved from the former national base to a European one. The empirical study, based on 220 Italian firms, performance - measured by profitability ratios - is not determined by the degree of internationalization in terms of classical export intensity and number of international agreements, but depends mainly on the ability of firms to gain access to specific markets such as the American one. Moreover, SMEs which have grown in foreign markets through FDI show a lower profitability, showing the existence of a "liability of foreignness" effect at the beginning of their international growth. Howeverthis negative effect can be reduced when SMEs have already developed international competences and knowledge through an intense export activity.SMEs, internationalization, exporting, foreign direct investment