Evidence from Around the World
Edited by Marian V. Jones, Pavlos Dimitratos, Margaret Fletcher and Stephen Young
Chapter 5: Perspectives on the Interrelationships Between Domestic and International Markets for the Smaller Firm
Maria Karafyllia SUMMARY The interrelationships between domestic and international markets emerge as an important and under-researched theme for the smaller firm. Significant interdependencies between domestic and international performance seem to exist for the smaller as compared to the larger firm. Management studies however tend to approach domestic and international markets in isolation, offering a one-sided view of the complex nature of small firm growth. This chapter examines the origins and definitions of this theme, the main issues and debates, the key contributions from four research strands, the theoretical and practical implications and the fruitful areas for future research. Specifically, it synthesizes research on firm growth, economic approaches to internationalization, process internationalization and international entrepreneurship. Emerging research issues encompass growth patterns, business decisions, market strategies, resource allocation, planned strategic growth, knowledge development and learning, and opportunities development. INTRODUCTION The distinction between domestic and international markets is a fundamental one for business development. The domestic environment can influence firm formation and expansion (Wiedersheim-Paul et al., 1978), and international performance (Dimitratos et al., 2004). International markets may be perceived and understood on the basis of psychic distance, that is, perceived differences from the domestic market (Johanson and Vahlne, 1977; Johanson and Wiedersheim-Paul, 1975; Luostarinen; 1979). Those 53 54 Internationalization, entrepreneurship and the smaller firm differences may concern language, culture, and business norms and rules. In turn, differences can influence risk perception in international expansion. Smaller firms may be more resource-restricted and have lower survival probability than larger firms. The latter are more likely...
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