Globalization and Entrepreneurship

Globalization and Entrepreneurship

Policy and Strategy Perspectives

The McGill International Entrepreneurship series

Edited by Hamid Etemad and Richard Wright

The contributors to this collection provide a wealth of new analyses of both traditional and emerging aspects of entrepreneurship, from a variety of national perspectives and from a variety of disciplines. Globalization has begun to dismantle the barriers that traditionally segregated local business opportunities and local firms from their international counterparts. Local markets are becoming integral parts of broader, global markets. As globalization proceeds apace, entrepreneurs and small businesses will play a more prominent role on the global business arena. The volume is divided into three sections. The first looks at the internationalization process itself while the second focuses on factors facilitating this process in small and medium-sized firms. The last section examines emerging dimensions in management policy.

Chapter 4: Small Multinationals in Global Competition: An Industry Perspective

Tatiana S. Manalova

Subjects: business and management, entrepreneurship, international business


Tatiana S. Manalova* INTRODUCTION Small and medium-sized enterprises (SMEs) have become increasingly dynamic international participants. In Europe, they account for up to a third of France and Sweden’s exports and for over 50 per cent of Italy and Ireland’s exports (OECD, 1997). Even in the USA, where small businesses have traditionally been oriented towards the domestic market, 97 per cent of all 1999 exporters were small businesses, and the number of small business exporters tripled between 1987 and 1997 (SBA, 2000). Not only are SMEs active exporters, but they also undertake direct investment in foreign countries (Fujita, 1995a, 1995b). Small foreign investors establish production, sales, service, R&D or other affiliates abroad, joining global competition as small multinationals. There are more than 235,000 small multinational corporations in the OECD countries alone and this number is expected to grow continually (OECD, 1997; Fujita, 1998). Of particular interest to this study is the observation that foreign direct investment by SMEs tends to be clustered in several industries, such as computers and associated peripherals, software, industrial electronics, and medical technology (Oviatt and McDougall, 1997; Knight and Cavusgil, 1997). Since SMEs enter global competition in increasing numbers, yet are not uniformly distributed across industries, it follows that some inherent industry structural and competitive characteristics favor the emergence of small multinationals. Hence the research question guiding this study is: What industry structural and competitive forces determine foreign direct investment by small and medium-sized enterprises? Globalization has been touted as the order of the...

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