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The Internationalisation Process of the Smaller Firm: An Examination of the Craft Microenterprise

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This work involves an examination of the internationalisation process of the smaller firm, focusing on the craft enterprise in the United Kingdom and the Republic of Ireland. Craft sector analysis was carried out in order to determine historical precedents as well as to assist in the identification of industry and firm level factors impinging upon domestic and export market behaviour. A range of internationalisation theories are discussed, with the conclusion that the majority of these frameworks fail to readily explain smaller firm exporting behaviour. More recent developments such as the born global firm, the instant international and networking for internationalisation are deemed more appropriate fits for smaller firm internationalisation research. Quantitative results identify the majority of craft firms as microenterprises with almost one half operating as a single person business. Qualitative analysis enabled profiling of craft firm types to be carried out. Four orientations are uncovered: the entrepreneur, the idealist, the lifestyler and the latecomer. A composite framework of the factors uncovered in the analysis is constructed in order to better explain the process of smaller firm internationalisation.
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THE INTERNATIONALISATION PROCESS OF THE SMALLER FIRM:
AN EXAMINATION OF THE CRAFT MICROENTERPRISE
Dr. Ian Fillis
Senior Lecturer
Department of Marketing
Faculty of Management
University of Stirling
Stirling
FK9 4LA
Tel: 01786 467392
Fax: 01786 464745
Email:i.r.fillis@stir.ac.uk
Abstract:
This work involves an examination of the internationalisation process of the smaller firm,
focusing on the craft enterprise in the United Kingdom and the Republic of Ireland. Craft
sector analysis was carried out in order to determine historical precedents as well as to
assist in the identification of industry and firm level factors impinging upon domestic and
export market behaviour. A range of internationalisation theories are discussed, with the
conclusion that the majority of these frameworks fail to readily explain smaller firm
exporting behaviour. More recent developments such as the born global firm, the instant
international and networking for internationalisation are deemed more appropriate fits for
smaller firm internationalisation research. Quantitative results identify the majority of
craft firms as microenterprises with almost one half operating as a single person business.
Qualitative analysis enabled profiling of craft firm types to be carried out. Four
orientations are uncovered: the entrepreneur, the idealist, the lifestyler and the latecomer.
A composite framework of the factors uncovered in the analysis is constructed in order to
better explain the process of smaller firm internationalisation.
1
THE INTERNATIONALISATION PROCESS OF THE SMALLER FIRM:
AN EXAMINATION OF THE CRAFT MICROENTERPRISE
Abstract:
This work involves an examination of the internationalisation process of the smaller firm,
focusing on the craft enterprise in the United Kingdom and the Republic of Ireland. Craft
sector analysis was carried out in order to determine historical precedents as well as to
assist in the identification of industry and firm level factors impinging upon domestic and
export market behaviour. A range of internationalisation theories are discussed, with the
conclusion that the majority of these frameworks fail to readily explain smaller firm
exporting behaviour. More recent developments such as the born global firm, the instant
international and networking for internationalisation are deemed more appropriate fits for
smaller firm internationalisation research. Quantitative results identify the majority of
craft firms as microenterprises with almost one half operating as a single person business.
Qualitative analysis enabled profiling of craft firm types to be carried out. Four
orientations are uncovered: the entrepreneur, the idealist, the lifestyler and the latecomer.
A composite framework of the factors uncovered in the analysis is constructed in order to
better explain the process of smaller firm internationalisation.
Key words: internationalisation, smaller firm, exporting, entrepreneurship, craft,
creativity.
Biography:
Dr. Ian Fillis is Senior Lecturer in Marketing in the Department of Marketing, Faculty of
Management at the University of Stirling, Scotland. He holds a BSc in Civil Engineering
from the University of Glasgow, an MA in Marketing from the University of Ulster and a
PhD on the internationalisation process of the smaller firm from the University of
Stirling. His main research interests focus on issues at the marketing and entrepreneurship
interface such as creativity and innovation, in addition to exploring international
marketing and export related phenomena.
2
1. Introduction: A Review of Internationalisation Research
Internationalisation has been used to describe the outward movement or increasing
involvement in a firm’s or larger grouping’s international operations [1] [2]. With more
and more smaller firms now internationalising, Yakhlef and Maubourguet [3] focus on
the reasons for this, such as gaining access to increasing amounts of tangible and
intangible resources in order to establish firm-specific global advantages. The stages
theory of internationalisation postulates that, in order to develop their international
operations, firms use a stepwise approach along an organisational continuum [4]. The
Uppsalla School views internationalisation as having four stages [5] while it has also
been modelled with five and six [6] [7]. Although the number of incremental steps may
differ, there is general agreement that with each subsequent step comes increasing
involvement in international operations [8]. However, due to increasing globalisation,
chaotic market conditions and technology effects, it is believed that such stepwise
advancement is not generally exhibited in SMEs and that alternative modelling of
microenterprise behaviour is needed in order to account for emerging modes of behaviour
[9]. Long standing conceptualisations such as transaction cost analysis and the eclectic
paradigm [10] fail to satisfactorily explain smaller firm internationalisation behaviour.
Recent conceptualisations have, for example, centred on the network approach which
more accurately portrays SME behaviour [11] [12] [13].
Analysis of the literature shows that internationalisation research originally focused on
the activities of the multinational enterprise before shifting attention to a certain extent to
3
the behaviour of the small and medium sized enterprise due to its increasing influence on
international markets through globalisation and technology effects [14] [15] [16] [17]
[18] [19] [20] [21]. Research has also shown that there are sectoral differences in
internationalisation behaviour [22].
Internationalisation and Firm Size:
One of the key themes in internationalisation research has been the effect of firm size on
internationalisation behaviour. Perceptions vary as to what constitutes a small, medium or
large firm. The majority of the literature is derived from USA studies where definitions of
size differ from the United Kingdom, Europe and elsewhere [23] [24]. The transferability
of findings and replicability of studies is therefore difficult to achieve, given these
differences. In addition, much of the existing theory today is still dominated by early
conceptualisations, with many textbooks continuing to promote the use of these
frameworks as an aid to understanding internationalisation of the firm several decades
after the initial work was carried out [25] [26], although Hollensen [27] provides a useful
comparison of several more contemporary approaches.
In order to move theory forward, both testing of existing conceptualisations and forming
of new frameworks based on industry specific studies and emerging behavioural patterns
are needed. Much of the theory developed so far has examined industries where firms can
progress to carrying out mass production and mass specialisation. An analysis of the craft
sector offers the opportunity to examine what happens when the product is produced on a
one-off or small batch basis and where owner/manager philosophy dominates over many
4
external motivating influences. Most of the frameworks developed so far have tended to
focus on the firm passing through a number of stages as it develops from the small
domestic based firm to the multinational enterprise. Results will show that for industry
sectors dominated by the smaller firm, together with the impact of product and lifestyle
issues, this progression is not necessarily observed. Attempts to apply existing theory to
such firm behaviour therefore tends to break down. In addition to adaptation of existing
internationalisation frameworks, alternative visualisations are needed in order to portray
behaviour more accurately.
Internationalisation Theory:
The various theories of internationalisation seek to illustrate the configurations which
companies adopt, while also prescribing a normative approach to internationalisation
decision making. Tookey [28] and Wind et al. [29] were some of the earliest proponents
of the stages approach, while Johanson and Wiedersheim-Paul [5], Johanson and Vahlne
[1] and Bilkey and Tesar [6] produced works which still form the basis for much research
today. However, there have been various criticisms made regarding the theoretical
validity of the concept while empirical evidence from other studies has also tended to
contradict these findings [30]. Hurmerinta-Peltomaki [31] senses that the days of stages
theory are numbered and that there is a moving away from its linear time based approach
to a more primitive concept of cyclical time with no fixed direction. Bell et al. [32] also
review the criticisms of the stages approach while Moen et al. [33] provide a useful
critique of the process models of internationalisation in a study of internationalising small
computer software firms. Westhead et al. [34] examine the internationalisation strategies
5
of SMEs in rural and urban areas. This has particular relevance to the craft sector
discussed later in this paper where many internationalising firms are rurally based.
Difficulties arise when endeavouring to derive a general definition of internationalisation
and also when trying to classify the various stages of the process [35]. A number of
studies focus on internationalisation through export activity and export orientation and,
although they are related, they are not identical. Turnbull’s research of British companies
show that the internationalisation stage is determined by the operating environment, the
industry structure and the marketing strategy of the company. The stages concept should
therefore only be used as a classification framework and not as a means of learning how
firms internationalise. Bilkey [14] undertook a review of the literature concerning export
behaviour of the firm, covering areas such as export initiation, motivations for exporting,
firm size effect and export models. He concluded that exporting is a developmental
process and that export profiles should be used together with export behaviour models to
achieve meaningful results. This procedure is adopted in the investigation of smaller craft
firm internationalisation detailed later in this paper.
Exporting as a path to Internationalisation
Key research themes relating to the exporting SME include the investigation of the
process itself [36] [[37], market entry and the role of the decision maker [38], SMEs and
globalisation [39], exporting stimuli [40], export problems and barriers [41] [42], the link
between firm/managerial characteristics and exporting competencies [43] and export
stimulation measures [44]. Other issues investigated include comparisons of non-
6
exporters versus exporters [45], networking and the entrepreneurial exporter [15] [46],
the impact of the internet on SME domestic and export behaviour [47], export market
information gathering [48] and the use of creativity to overcome resource constraints
[49]. A growing related field is that of international entrepreneurship which
acknowledges changing patterns in internationalisation behaviour and connects with born
global and instant international phenomena [50].
2. Progress in SME Internationalisation and Exporting Studies
The smaller international firm can exist in tandem with the larger player through its
ability to offer a flexible, customised product and service, enhanced by intuitive
networking and other entrepreneurially-based competencies linked to creativity,
innovation and relationship building [51] [52] [53] [22]. Researchers are now examining
the phenomenon of ‘instant’ or ‘born global’ internationalising firms in a number of
sectors, from hi-tech industries [54] [55] [32] to the entrepreneurial arts and craft firm.
Jolly et al. [56] focus on the ability of entrepreneurially inclined start-up companies to
pursue global strategies ‘by leapfrogging some of the traditional intermediate stages of
internationalisation (to become) significant global players…in a relatively short time.’
They identify sets of entrepreneurial competencies as drivers of competitive advantage,
such as having a global vision, a focused approach to doing business, the ability to
recognise technological opportunities and to capitalise on them, facilitated by the insight
of the founder of the organisation.
By operating in niche markets and utilising their distinct sets of competencies, the smaller
firm can compete with larger organisations, despite resource limitations. Madsen and
7
Servais [57] examine the usefulness of the network approach and evolutionary economics
in order to provide an improved explanation of ‘born global’ behaviour. In addition, they
draw on the work of Oviatt and McDougall [58] who identify the International New
Venture as an organisation which may initially have one or a few employees (the
microenterprise) but has a proactive international strategy from inception of the business
[59]. Madsen and Servais also promote the need to understand the background
characteristics of the founder of the organisation in shaping internationalisation
behaviour. They also call for an integration of the literatures on internationalisation and
entrepreneurship in order to improve understanding of the ‘born global’ firm while also
understanding the particular behaviour of firms by size.
There is a growing interest in smaller internationalising entrepreneurial firms [60] [61].
Defining international entrepreneurship is still in a state of evolution. McDougall [62]
saw it as focusing on the international activities of new ventures, rather than including
already established firms but then this has largely been the case in entrepreneurial
research generally. Wright and Ricks [63] viewed international entrepreneurship as a
firm-level business activity which crossed national borders and which involved inter-
relationships between the business and the international environment. McDougall and
Oviatt [60] define the concept as a combination of innovative, proactive, and risk-seeking
behaviour that crosses national borders and is intended to create value in organisations
The field of international entrepreneurship is growing markedly and this has been
recognised by the launch of the Journal of International Entrepreneurship in 2003. Recent
8
issues have covered topics such as international entrepreneurship and the internet [60]
[64], branding strategies of born globals [65] and micro multinationals [66].
Summarising the key influencing factors on smaller firm internationalisation, it can be
seen that exporting issues dominate such behaviour. The literature concentrates on issues
such as firm size effect on internationalisation, motivation for exporting, export barriers
and characteristics of the export decision maker and the decision to export. Further
contributing factors which also impinge upon the process to varying degrees include the
behaviour of the entrepreneurial firm in comparison with other firm types, the effect of
culture on the internationalisation process, the use of export marketing research and the
impact of export marketing assistance programmes. These factors are found to
subsequently impact upon exporting strategy and performance and on owner/manager
evaluation of export profitability and success. Figure 1 indicates how these factors
interact in forming smaller firm exporting behaviour:
Insert Figure 1 here
3. The Internationalisation Process of the Smaller Craft Firm:
Previous theories of internationalisation have failed to provide a reasonable explanation
for the behaviour of the smaller exporting craft firm. Given that the craft sector has
particular peculiarities in that the majority of craft firms appear not to follow a pattern of
growth as described in much existing internationalisation theory, there are merits for the
application of other paradigms of understanding linked to entrepreneurship and creativity.
By examining the historical development of the craft firm, evidence of creative
9
entrepreneurial practice can be found spanning several centuries. This should also prove
valuable to the owner/manager of any smaller firm involved in domestic and international
markets.
Historically, the craft firm can be traced at least to the Medieval period [67], through to
the Italian Renaissance [68] and the Arts and Crafts period of the late nineteenth and
early twentieth centuries [69]. The nature and meaning of craft has altered during these
times, from the early vernacular status to the more recent aesthetic appreciation of the
craft product [70]. A major problem related to tracing the development of the crafts as a
recognised industry is that when examining historical documents there does not appear to
be a consensus of opinion regarding its definition [71]. Its present connotation
encapsulates a number of ideas drawn from philosophy, aesthetics and technology [72].
Metcalf [73] makes the distinction between craft as skilful labour and craft as a class of
objects. Concentrating on the latter category, he sees this as embracing the idea that the
object must have a high degree of hand-made input, either by using the hand itself,
handtools and even hand-held power tools. Further more, the craft object does not
necessarily have to be produced using traditional materials, only that
traditional/conventional methods should have been used as part of the production process.
Now, in the post industrialisation era, the craftsperson has to compete with both domestic
and foreign competition where many products appear hand-crafted even though they are
mass produced via advanced technological processes. The crafts sector is now viewed as
part of the greater cultural and creative industries [74] [75]. The craft product itself must
10
exhibit aesthetic appeal, be of individual design and contain a large degree of manual
skill in its production. In surveying craft firms in the United Kingdom and the Republic
of Ireland, the author has attempted to identify those crafts which involve a high degree
of manual input, either manufactured as one-off items, or in small batches. As such, this
will then have implications for issues such as the time available for export decision
making and acquiring entrepreneurial and marketing skills.
4. Research Propositions:
Several propositions contributing to smaller firm internationalisation can be derived from
this literature review. The propositions centre around the notion that despite sometimes
severe resource constraints, microenterprises can and do internationalise but their
behaviour and progression is sometimes at odds with existing frameworks of
internationalisation.
Proposition 1: The majority of existing internationalisation frameworks fail to explain
contemporary smaller firm internationalisation behaviour.
Proposition 2: Alternative conceptualisations focusing on entrepreneurial thinking and
creativity are needed in order to secure a better fit.
Proposition 3: Analysis of craft firm internationalisation will provide a range of
contrasting findings compared to previous internationalisation studies.
Proposition 4: Given the dominance of the microenterprise in the craft sector,
owner/manager influences will dominate internationalisation behaviour of such firms.
Proposition 5: Competencies such as creativity, opportunity recognition and networking
ability will result in competitive advantage for the internationalising microenterprise.
11
5. Methodology
The methodology adopted was pluralistic in nature, incorporating both qualitative and
quantitative approaches. Due to the specific problems of defining the craft industry and
the difficulties in sampling from a single recognised source, the decision was made to
carry out a quantitative survey of 500 craft business in England, Scotland, Wales,
Northern Ireland and the Republic of Ireland in order to firstly identify exporting and
non-exporting craft firms. The number of usable responses was 25%, comparing
favourably to similar exporting behaviour studies [48]. The second stage involved follow
up interviews with thirty exporting and non-exporting craft business owner/managers in
order to test the initial findings and also to explore additional themes such as the choice
of export market of the Celtic craft firm, and to facilitate the building of craft firm
typologies. Statistical analysis was carried out on the questionnaire data [76]. This was
then followed by qualitative analysis and interpretation of the in-depth interviews [77]
where recurring themes were identified and the findings were compared and contrasted
with the initial quantitative study in order to enhance understanding.
6. Quantitative Results
Approaching one half of all respondents (47.5%) operate on an individual basis (Table 1).
Over one third of craft business owner/managers employ between two and five people.
The remaining 15% are dispersed over several other categories. However, no craft
business in the survey was identified as employing between 50 and 99, and more than
200 people. Well over half of respondents (58.8%) recorded total annual sales of less than
£30,000. More than 10% experience sales of between £30,001 and £50,000, while over
13% have sales of between £50,001 and £100,000. At the other end of the scale, 6.7% of
12
respondents have experienced sales of over £500,000. Respondents were asked to
indicate the level of annual sales generated through exporting. Well over half of exporters
achieved export sales of less than £10,000, with over one fifth achieving sales of between
£10,001 and £25,000. However, at the other end of the range, five exporters achieved
sales of over £100,001, with three reaching in excess of £250,000. Exports, on average,
accounted for just over 38% of total sales.
Insert Table 1 about here
Motivation for Exporting:
Respondents were asked to indicate on a 5-point Likert scale, with 5 being very important
to 1 being not at all important, the main positive and negative influences on the decision
to export (Table 2) The most important factors inhibiting export activity were that the
owner/managers did not believe they had enough production capacity (mean = 3.67); the
business was too small in general (mean = 3.54); the owner/manager did not have enough
time to research new markets (3.16) and that they lacked sufficient marketing knowledge
(mean = 3.05). The least influential factor related to the owner/manager not having
travelled overseas before. Having sufficient business in the domestic market is a major
factor in the decision not to export. Other reasons of above average importance are lack
of export inquiries, relating to the reactive approach to business; complicated exporting
procedures; poor levels of exporting assistance and limited government incentives. Issues
which caused least difficulty related to lack of appropriate marketing information and
distribution channel structure. The small size of the craft firm in the survey reflects the
13
findings of previous work in the sector. It also relates to the observations by Storey
(1994) with respect to the dominance of the microenterprise in Europe.
Take in Table 2 about here
Export Markets and Exporting Success:
The main export markets were European Union countries (35.7%), followed by North
America (30.2%). There were differences in export market choice by firms from
Northern Ireland, the Republic of Ireland, England, Scotland and Wales, although the
only statistical significant destination was the Far East (phi = 0.440; sig. = .029).
Differences were found in owner/manager perception of the role of geographical distance
upon the choice of export market (p = .013). Attitudinal differences were found among
exporter groups in terms of the influencing effect of unsolicited orders and the wish to
rely less on domestic market sales (p = .039). There appears to be a relationship between
previous exporting activity by those no longer exporting, total annual sales achieved and
the age of the owner/manager (p = .027; p = .017). This suggests that, despite gaining
exporting experience, a number of firms have reverted to domestic-based activities,
reflecting the impact of factors such as lifestyle and motivation on craft firm
internationalisation behaviour which are detailed in the qualitative results. One-way
analysis of variance tests were also carried out on exporter and non-exporter groups, and
support the findings of the chi-square tests.
14
Export market access was obtained primarily through international trade shows and
exhibitions (32.5%), direct sales (15.4%) and the use of networking and personal contacts
(11.4% of exporters). However, when questioned specifically about the use of networks,
over one quarter of respondents confirmed that they utilised networks in order to achieve
exports. The most important relationships for exporting success were shown to be with
customers (mean = 4.87), retailers (mean = 4.54), suppliers (mean = 4.07), other business
contacts (mean = 3.87) and distributors (mean = 3.16). Only 7.3% of current exporters
believed that exporting had not resulted in increased business for the firm. The
quantitative results demonstrate that the typical exporting smaller craft firm tends to
develop low cost internationalisation methods centred around exploitation of personal
and business networks, while utilising the company/customer relationship in order to
secure business at trade fairs and exhibitions.
Problems Experienced by Exporters:
Over one third of exporting craft firms (36.4%) indicated that they encountered problems
once they entered export markets. The most common problem encountered was with the
choice of a reliable distributor, followed by difficulties in promoting the product and
matching competitors’ prices. The least problematic areas were in identifying and
choosing distribution channels for the products and the lack of marketing information.
There appears to be a certain degree of conflict between the choice of actual distributor
and in how the owner/manager understands the operating mechanism of the distribution
channel. Exporting status (whether or not the firm is currently exporting) was found to
vary, depending on employment and sales levels (p = .000; p = .002). The length of time
spent operating in international markets appears to affect the degree of usage of overseas
15
contacts and professional institutions as export information sources (p = .019; p = .042).
Results also indicated that the degree of use of contacts in the domestic market to assist
international activities varied with exporting experience (p = .023).
7. Qualitative Results
Qualitative analysis has enabled the generation of a profile of craft business
owner/managers. There are those who have chosen to work in the industry because of the
type of lifestyle involved and are unwilling to sacrifice this in order to expand the
business (the lifestyler). Another type of craft owner/manager is the business-oriented
entrepreneur who is willing to take risks and recognises the importance of developing a
customer base (the entrepreneur). Networking and relationship building are deemed very
important for business success. The third type can be described as an artist/designer who
is unwilling to view the craft as a product but as a creative entity (the idealist). Their
stance is uncompromising when producing the work; they do not tend to take note of
customer demand but instead make art/craft which they feel has artistic integrity. In other
words, they embrace an ‘Art for Art’s sake’, rather than ‘Art for Business sake’
philosophy. There is a fourth type who may enter the industry much later than the other
groups; they tend to have gained previous work experience in unrelated areas and have
decided to make a career change (the late developer). Depending on their background, a
number of key skills can be brought into the new venture but the importance of lifestyle
quality appears to be significant here too. Table 3 summarises the key characteristics
found in the four craft business types:
Insert Table 3 here
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Although qualitative analysis has identified these groups of owner/manager
characteristics it should be noted that they are not always mutually exclusive. Several
characteristics can be found in more than one group: for instance, both the entrepreneur
and the idealist are prepared to take risks. However, it is the nature of the risk that is
inherently different. The former is prepared to indulge in risk taking at the business and
product level, while the latter is really only concerned with artistic risk. These factors
must then be taken into account when considering the internationalisation behaviour of
the craft firm and are presented as reasons as to why such firms appear not to conform to
the various stages of export progression identified in studies from other industry sectors.
8. Conceptualisation of Craft Firm Internationalisation:
Survey results have revealed that the typical craft practitioner follows manual methods of
production, either works alone or employs only very small numbers of personnel and
experiences limited total annual sales and export sales. This then means that testing of
existing theories of internationalisation and export stage development based on the
‘traditional firm’ is inherently problematic. Other crucial factors have been identified
from profiling of both exporting and non-exporting craft enterprises. The particular
philosophy followed by the key decision maker affects future business growth. There
appears to be a problematic dichotomy of ‘art for art’s sake’ versus ‘art for business sake’
beliefs. Those following the former approach have no particular wish to embrace
marketing in case their artistic standpoint is compromised. Conversely, a number of
entrepreneurial marketers have been identified where they have used their creative
17
strength to achieve both domestic and export market sales. Creative use of cultural
background has resulted in the production and marketing of culture-related products, as
well as in the identification and development of culture-related export markets such as
North America. It should also be noted that a number of owner/managers have refused to
exploit their cultural background as an aid to business growth but have instead focused on
their individual creative design strengths in order to achieve sales. Examination of the
craft industry has shown that creative use of limited resources can break down barriers to
growth. It should also be noted that creativity can also be a limiting factor in that those
owner/managers refusing to embrace business and marketing philosophy will not always
be successful; not every producer can rely on reputation as an aid to sales.
Investigation of the smaller craft firm has shown that companies employing less than ten
personnel (the microenterprise) can have meaningful international impact. This research
has demonstrated that internationalisation of the microenterprise involves a range of
factors relating to resource limitation and owner/manager orientation not generally
incorporated in studies of larger sized firms. Internationalisation has previously been
described as the process of increasing involvement in international operations [2], or
involving the scaling of a strategy-ladder [78]. Examination of smaller craft firm
behaviour has shown that many existing methods such as the stages approach and the
eclectic paradigm offer limited scope for visualising the internationalisation behaviour of
the microenterprise. Conceptualisations such as the born global and instant international
are now offered as contemporary evaluations of entrepreneurial smaller internationalising
firms. As can be seen from the profiling of the craft firm, increasing involvement of the
microenterprise will depend on owner/manager orientation. Investigation of craft firm
18
behaviour has shown that a large proportion of these smaller firms will always remain
small, due to the wishes of the owner/manager who drives the firm. Therefore,
international progression will only reach a certain point beyond which only those firms
with creative and entrepreneurial orientation will tend to pass.
Investigation of smaller craft firm exporting behaviour has reinforced the usefulness of
the network paradigm [11] [79] as an aid to understanding smaller firm
internationalisation. Due to limitation of resources, the microenterprise must seek low
cost methods such as networking and word of mouth communication to facilitate growth.
In many cases, export market entry can be gained much more quickly using these
approaches than through the adoption of other methods. A range of exporting barriers can
be bypassed as the microenterprise forms and exploits links with network members in
domestic and overseas markets. Interpretation of exporting success varies, depending on
the particular orientation of the owner/manager of the craft enterprise. Although
exporting acts as a business expansion factor, results indicate that this rate decreases as
the value of export sales increases. This supports the belief that many owner/managers of
smaller craft firms are motivated to expand only to a certain point beyond which the
increased effort is not deemed to be worthwhile. The dominance of the lifestyle factor
exhibited by many owner/managers explains this lack of progression. A fuller
comprehension of the internationalisation process of the smaller craft firm can be
obtained by combining the various factors influencing exporting behaviour,
owner/manager characteristics and smaller craft firm exporting performance and success
issues (Figure 2):
19
Insert Figure 2 here
9. Conclusions:
Analysis of the results has shown that owner/manager perception of terminologies such
as exporting strategy, business and products vary due to the particular philosophical
stance held. Instead of incorporating the exporting strategy dimension into the model
following an evaluation of the impact of various internal and external factors on
internationalisation, it is perhaps more valuable to include both strategic and cultural
dimensions as part of initial owner/manager orientation. Export marketing research
attitudes and usage will vary depending on this orientation, but will also be affected by a
range of craft sector specific and general smaller firm factors such as predisposition by
local support agencies towards providing appropriate exporting assistance geared towards
the smaller craft firm. Owner/manager orientation impacts directly upon craft product
issues; for example, the idealist will not adapt the product to suit market demand, while
many entrepreneurial exporters will tend to exploit the Celtic connection regardless of
whether or not they themselves are Celtic in origin. These preceding factors then impact
upon export decision making, with a variety of possible outcomes.
Instead of the commonly modelled dichotomous behaviour of export decision making
such as the reactive/proactive, aggressive/passive approaches, this research has identified
four possible orientations with varying attitudes towards exporting. The idealist and the
entrepreneur have the best possibility of developing exports, although different
motivational reasons are found in each firm type. Reputation acts to drive the idealist
20
producer through international markets while increasing profits serve to motivate the
entrepreneurial craft firm. The latecomer and the lifestyler are the least likely to engage in
exporting activity, with both types tending to be more risk averse than the other firm
types. Finally, evaluation of exporting performance and success will vary, due to
differences in owner/manager philosophy and the outcomes generated over time. The
lifestyler and latecomer may be satisfied with a continuing small level of craft exports, as
long as they experience no additional stress and inconvenience. However, the idealist and
entrepreneur appear strongly motivated to continue exporting, although their individual
reasons for doing so will vary.
In conclusion, this research has examined a sector of industry which has not been
previously rigorously investigated from entrepreneurship, marketing and international
business perspectives. The smaller craft firm shares many common characteristics with
other microenterprises and, therefore, these factors should be addressed in future studies
of smaller firm internationalisation in other sectors as well as in the wider creative and
cultural industries. In addition, this work has also uncovered a range of situation specific
issues found to occur within the craft sector. Future internationalisation research on the
smaller firm should attempt to incorporate a pluralistic approach based on marketing and
entrepreneurship issues, in order to identify a range of shared and situation specific
factors which can then be incorporated in the construction of improved theory generation,
as well as in advice for industry practitioners.
21
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Figure 1. Total Sales Generated
Total Annual Sales
0 102030405060
less than £30,000
£30,001 - £50,000
£50,001 - £100,000
£100,001 - £250,000
£250,001 - £500,000
£500,000 +
Category
Percentage
28
Figure 2: Interaction of Contributing factors in Smaller Firm Exporting Behaviour
Industry
Specific
Factors
Firm level
Factors:
Exporter
typologies
Owner/Manager
Characteristics:
perceptions of barriers to
exporting
levels of motivation
use of export marketing
research and assistance
Export Decisions and
Behaviour:
traditional and non-
traditional paths
levels of export
involvement
Export
Performance and
Success
(source: the author)
29
Table 1. Craft Firm Employment Levels
Category Frequency Percentage
single person 58 47.5
2 - 5 46 37.7
6 - 10 7 5.7
11 - 25 7 5.7
26 - 49 2 1.6
50 - 99 0 0
100 - 199 2 1.6
200 + 0 0
Total 122 100
30
Table 2. Firm and Managerial Factors Impinging Upon the Decision Not to Export.
Reasons Mean score Rank
not enough production
capacity 3.67 1
business too small to
handle exporting 3.54 2
no time to research new
markets 3.16 3
lack of marketing
knowledge 3.05 4
lack of financial resources 3.02 5
no motivation to export 2.95 6
lack of personnel 2.65 7
lack of business
experience 2.59 8
exporting is too risky 2.58 9
no time to research
cultural differences 2.46 10=
no time to research
language differences 2.46 10=
unwilling to investigate
new markets 2.19 12
have not travelled abroad 1.59 13
31
Table 3: Craft Business Owner/Manager Characteristics
THE LIFESTYLER
expansion of business not
important
unwilling to take many risks
importance of quality of life
may or may not export;
generally reactive
unwilling to follow business and
marketing philosophy/skills
THE ENTREPRENEUR
risk taker (in terms of carrying out
business and with the craft
product itself)
may or may not export - proactive
willing to accept business and
marketing philosophy (to varying
degrees)
realisation of importance of
customer relationships/networking
THE IDEALIST
risk taker (with the craft
product)
unwilling to accept business and
marketing philosophy
dominance of ‘Art for Art’s
sake’ beliefs
may or may not export
realisation of importance of
establishing and building
relationships and generating
reputation
views self as artist rather than
craftsperson
THE LATE DEVELOPER
tends to come from non-creative
background
less motivated to expand business;
less likely to export
unlikely to accept ‘new’ ideas;
believe in valuing own experience
of business and life
able to bring ‘outside skills’ to the
business
lifestyle also important
(source: the author)
32
Figure 2. The Process of Smaller Craft Firm Internationalisation (source: the author)
External environment:
cross-industry factors
craft sector specific
issues
Craft Firm Owner/Manager
Orientation:
-viewed as 'strategy'
-viewed as 'culture'
Impact of Support Bodies:
-specific to the craft
sector
-general SME support
mechanisms
Export Marketing
Research Issues and
Attitudes
Craft Product Issues:
impact of culture on
design and market choice
Export Decision Making and Craft Firm
Internationalisation via Exporting
Idealist:
-may or may not export
-reputation as driving
mechanism
-takes risks with product
Latecomer and Lifestyler:
-least possibility of
exporting
-risk averse
Entrepreneur:
-best possibility of
exporting
-takes risks with product
and business
Variation in Exporting
Performance and Evaluation of
Success
33
... SME internationalisation has seen a wealth of research since the emergence of the Stage Approach in the 1970s, with a vast range of studies conducted across multiple industries and research contexts. However, there is a need for more industry-specific research (Fillis, 2008), particularly in the food and drink industry (Bowen et al., 2016), which has particular characteristics due to the close connections between food and its place of origin (Tregear, 2001). ...
... SME internationalisation is not a new phenomenon, with a wealth of literature exploring internationalisation from a range of perspectives since the development of the Stage Approach in the late 1970s (such as Johanson & Wiedersheim-Paul, 1975;Johanson & Vahlne, 1977). Since the majority of these studies have been conducted across multiple industries and research contexts, there is a need for more industry-specific research (Fillis, 2008). Studies specifically on the food and drink industry remain limited (see Ibeh et al., 2006;Testa, 2011;Serrano et al., 2015;Caiazza, 2016), but the close connections that exist between food and its place of origin (Tregear, 2001) underline the particularities of the industry, therefore meriting greater investigation in underlying the specificities of internationalisation for food and drink SMEs. ...
... This is evident from the literature review on the determinants of export performance within SMEs conducted by Sousa et al. (2008), which indicates that several studies have been conducted across multiple industries with a focus on a variety of different individual countries. Fillis (2008) points to problems in attempts to generalise findings across industry sectors and advocates industryspecific research. Indeed, Bowen et al. (2016) point to the need for specific research into SME internationalisation in the food and drink industry due to the unique characteristics of food products. ...
Conference Paper
The aim of this paper is to investigate the internationalisation of food and drink SMEs, to identify and analyse the motivations towards a company's internationalisation, the conditions in which it can occur and the challenges that impact on this activity. Representing 99% of businesses in the European Union (European Commission, 2018), small and medium-sized enterprises (SMEs) play a significant role in many national economies and therefore merit closer investigation. Globalisation has brought opportunities in recent decades for SMEs to develop international growth, however this development has brought a greater need to understand how SMEs operate in international markets. SME internationalisation has seen a wealth of research since the emergence of the Stage Approach in the 1970s, with a vast range of studies conducted across multiple industries and research contexts. However, there is a need for more industry-specific research (Fillis, 2008), particularly in the food and drink industry (Bowen et al., 2016), which has particular characteristics due to the close connections between food and its place of origin (Tregear, 2001). Informed by the conceptual framework of food and drink SME internationalisation (Bowen et al., 2016), this study uses a sequential convergent mixed methods design involving 169 questionnaire responses and 37 interviews with exporters and non-exporters in the food and drink industry in Wales and Brittany. Results from a logistic regression analysis identify 22 statistically significant variables, mostly pointing to an increased likelihood of internationalisation through greater company experience, awareness of growth opportunities and support, attending trade fairs and proactivity in seeking international growth. Interview findings identified 4 themes and 10 sub-themes following thematic analysis (Braun & Clarke, 2006) of both exporters and non-exporters with differences observed between the motivation of companies to internationalise. The triangulation of data led to the development of 4 company types through a cluster analysis, distinguishing between non-exporters with no desire to internationalise or a focus on the domestic market, and exporters who are either reactive or proactive in seeking international growth. It is apparent that SMEs of all characteristics have the ability to internationalise, however this is largely dependent on the conditions in which the company operates and access to support. As such, future research should seek to provide a more detailed analysis of the conditions in which internationalisation could occur, as well as investigate different support policies designed to help SMEs.
... SME internationalisation is an established field of research, with studies covering a wide range of issues on the subject across various research settings. This study responds to the call for industry-specific research by Fillis (2008), focussing on food and drink SMEs, as the focus on specific industries is significant in understanding the particularities of internationalisation within the industry. The close associations that exist between food and their place of origin (Tregear, 2001) underline the unique characteristics of food products derived from local environmental conditions and cultural influences. ...
... As a study of the motives to internationalisation, an investigation of environmental factors is inevitable in understanding the influences and barriers to internationalisation. The complexities of internationalisation merit a more pluralistic methodological approach (Fillis, 2008), indeed, previous studies on the internationalisation of food and drink SMEs acknowledge limitations of a limited sample and narrow focus on one methodology (such as Ibeh et al., 2006;Testa, 2011;Ismail and Kuivalainen, 2015). The use of mixed methods in this study allows distinctions to be made between SMEs currently involved in internationalisation and those that are not. ...
... Hollensen (2014) categorises the key obstacles as general market risks (market distance, competition and cultural differences), commercial risks (exchange rates, financing and export delays) and political risks (foreign government restrictions, tax regulations, tariffs and a lack of government assistance in overcoming barriers). Different industries present different challenges to internationalisation (Fillis, 2008), therefore it is necessary to examine barriers according to their context (Crick et al., 1998). Existing theories are not reflective of the barriers to internationalisation for SMEs, who face many challenges against larger more established firms (Etemad, 2004). ...
Article
Full-text available
Purpose This study offers a comparative analysis of attitudes to small and medium-sized enterprise (SME) internationalisation in two different cultural settings, Wales and Brittany. The purpose of this paper is to conduct an in-depth investigation of attitudes to internationalisation among food and drink SMEs using mixed methods and focussing on both SMEs that internationalise and those that do not. This leads to a more comprehensive understanding of the issues influencing attitudes to SME internationalisation, which could facilitate policy development for such companies. Design/methodology/approach Mixed methods are used in this study to provide a richness of data in investigating this complex issue. The majority of research in this field has focussed on quantitative research, however, this study heeds calls for more plurality in research on SME internationalisation to achieve a more detailed understanding of the issues affecting SME internationalisation. This is achieved through an online questionnaire of 169 food producing SMEs in Wales and Brittany, informed by International Entrepreneurship theory. A second phase of semi-structured interviews provides more context to the questionnaire findings, with 37 interviews conducted with respondents from the questionnaire. Each phase was conducted independently, with findings triangulated for further investigation. Findings Companies of all characteristics have the ability to internationalise; however, cultural differences were observed between Wales and Brittany in both attitudes and the conditions for internationalisation. Breton SMEs displayed more proactivity to internationalisation, stemming from more favourable conditions, a greater reputation for food and more confidence. Conversely, Welsh SMEs were more reactive, relying on government support in encouraging internationalisation. Breton SMEs also benefitted from the strong cultural identity of food products, especially through the Produit en Bretagne brand and its network of producers. Originality/value The study makes both a theoretical and methodological contribution to research on SME internationalisation. The comparative study of Wales and Brittany is significant in understanding cultural influences to internationalisation in two regions where the food and drink industry represents an important part of the economy. The focus on a single industry is significant in understanding the particularities of internationalisation within an industrial context, as findings from studies across multiple industries are considered less generalisable. A methodological contribution is sought through using mixed methods to provide a more comprehensive study.
... This is evident from the literature review on the determinants of export performance within SMEs conducted by Sousa et al. (2008), which indicates that several studies have been conducted across multiple industries with a focus on a variety of different individual countries. Fillis (2008) points to problems in attempts to generalise findings across industry sectors and advocates industry-specific research. Additionally, he leads calls for a pluralistic approach to research in the field, incorporating marketing and entrepreneurial issues. ...
... The aim of this study was to contribute to knowledge on SME internationalisation, following calls from previous studies by focussing on location effects (Freeman et al. 2012) in the food and drink industry in Wales and Brittany (Bowen et al. 2016). Additional motives were evident from the need to investigate issues specific to certain industries (Fillis 2008) and countries (Sousa et al. 2008). Results of the study identified significant variables in both location relating to the constructs derived from the conceptual framework. ...
Conference Paper
Objectives: The aim of this paper is to investigate the effect of company location on the propensity of Small and Medium-sized Enterprises (SMEs) in the food and drink industry to internationalise. Specific focus is given to the case studies of two predominantly rural regions, Wales and Brittany, with comparisons drawn between the two. SMEs are recognised as the backbone of many economies, given that 99% of all companies in the European Union are SMEs (European Commission 2017), with many jobs dependent on them. Differences between rural and urban-located companies are evident in many industries, however, given the close associations that exist between food and the land (Tregear 2001), further investigation is required to consider how company location can affect the international growth of food companies. Globalisation has brought increasing opportunities for smaller companies to internationalise, therefore there is a requirement to analyse the challenges and opportunities that exist between rural and urban areas in the pursuit of understanding the internationalisation strategies for food SMEs. Prior Work: As a field of study, SME internationalisation has seen considerable research since the seminal works of the Uppsala Scholars in the late 1970s (such as Johanson & Wiedersheim-Paul 1975; Johanson & Vahlne 1977). Despite this wealth of research, much of the focus is on studies conducted across several industries and several countries. Research specific to the food and drink industry is particularly limited (see Bowen et al. 2016), equally few studies have been conducted on location-specific factors (see Freeman et al. 2012; Freeman & Styles 2014). Based on the conceptual framework for food and drink internationalisation by Bowen et al. (2016) and a study of location advantages by Freeman and Styles (2014), this study seeks to address the issue of location-specific effects on food and drink SME internationalisation. Approach: A quantitative research methodology is undertaken, with results derived from an online questionnaire issued to food and drink producers in Wales and Brittany between September 2015 and March 2016. A total of 169 usable responses were obtained from 810 questionnaires issued between both regions, equating to a 21% response rate. A total of 107 usable responses were obtained from 451 Welsh food producers (24% response rate), with 62 responses from 359 Breton producers (17% response rate). In addition to descriptive statistics, a correlation analysis was used to analyse the data, comparing rural and urban-located companies and both regions. Results: Results show that the majority of companies in both regions were located in rural areas, however differences were observed between each region in relation to internationalisation. In Brittany, 44.7% of exporting companies were located in rural areas, whereas in Wales this number was 57.1%. A correlation analysis highlighted interesting differences in the relationship between company location and internationalisation, with favourable results observed for rural-located companies, particularly in relation to resources and motivation to internationalise. That said, challenges to internationalisation through risk and a lack of production capacity were more evident in rural locations. Implications: It is evident from the results of this study that differences exist between food and drink SMEs located in rural and urban areas and their propensity to internationalise. Challenges are observed in both locations. Due to limited resources, however, challenges to internationalisation are more evident in rural areas despite many successfully engaging in international activities. There is evidence that support is necessary in both urban and rural locations in facilitating the process of internationalisation. Differences observed between Wales and Brittany underline location-specific constraints faced by SMEs in each region, supporting the need for country-specific research and policy. Value: This paper takes up the call from Freeman et al. (2012) for more research to be conducted into the nature and role of location on the internationalisation of food and drink SMEs, as well as heeding calls for market and country-specific research (Sousa et al. 2008). The contribution of this paper to SME internationalisation is particularly valuable to food and drink companies, as this industry is significant to the economies of Wales and Brittany, and has seen relatively little research within the field. Given the close ties between food and its place-of-origin, the study of location-specific factors that impact on internationalisation is extremely significant. Conclusions drawn from the study point to the need for tailored support towards food and drink SMEs in pursuing internationalisation strategies.
... cultural and aesthetic experience. In addition, UNESCO has considered crafts as part of our intangible heritage, establishing the objective of safeguarding and respecting intangible cultural heritage (UNESCO 2003), while for Fillis (2008), crafts are a creative industry. Thus, Hartley (2005) and Hesmondhalgh (2007) indicate that the recent literature on crafts suggests that the craft sector should be considered as part of the cultural and creative industries. ...
Article
Full-text available
Sustainability has been progressively incorporated into all dimensions of society as a response to the negative externalities of the traditional production model, and the craft sector has been no stranger to this. Thus, the present work constitutes a bibliometric analysis of 894 research articles from the Scopus database on sustainable crafts in the 21st century, identifying the growth trends, published articles, and the most productive journals, authors, institutions, and countries. Additionally, we have identified the main research topics that have emerged in sustainable crafts in three time periods: before the international financial crisis, the post-crisis period, and, finally, within the 2030 Agenda and the Sustainable Development Goals set out by the United Nations (UN). Based on the bibliometric indicators analysed, we conclude that this research area has grown exponentially, particularly in response to the Sustainable Development Goals, increasing the abundance and diversity of the issues investigated.
... Moreover, some studies still go further and report that the creation of subsidiaries is the last step in the internationalization process. Albeit all these studies were conducted in different contexts and with different companies, what they can all agree on is their growing participation in international operations, as well as the increase of resources and commitment to foreign markets as more experience in international business is gained (Johanson and Wiedersheim-Paul, 1975;Fillis, 2008). Leonidou and Katsikeas (1996) made a comparison of different studies and divided the process into two phases: (1) companies that have never carried out any export activity and (2) companies that sporadically export. ...
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... In his study of very small craft businesses in the UK and Ireland, Fillis (2008, p. 18) found that "creative use of limited resources can break down barriers to growth." He found that a range of exporting barriers can be bypassed through forming and exploiting links with network members in domestic and overseas markets (Fillis, 2008). Though this finding came from a single industry comprised of microenterprises, it shows how firms globally can leverage external networks to overcome the barriers faced by them with very limited resources. ...
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