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DOI: 10.1177/0266242613497744
2014 32: 386 originally published online 11 September 2013 International Small Business Journal
Mikael Hilmersson
in times of market turbulence
Small and medium-sized enterprise internationalisation strategy and performance

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International Small Business Journal
2014, Vol. 32(4) 386 400
The Author(s) 2013
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DOI: 10.1177/0266242613497744
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Small Firms
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497744ISB32410.1177/0266242613497744International Small Business JournalHilmersson
2013
Corresponding author:
Mikael Hilmersson, School of Business and Economics, Linnaeus University, Kalmar SE-39182, Sweden.
Email: mikael.hilmersson@lnu.se
Small and medium-sized enterprise
internationalisation strategy and
performance in times of market
turbulence
Mikael Hilmersson
Linnaeus University, Sweden
Abstract
This article examines the relationship between the strategies utilised by small and medium-sized
enterprise (SMEs) for international expansion, and their performance during market turbulence.
Analysing the strategy process of firm internationalisation, three main dimensions of this unfolding
process are condensed: the scale, scope and speed of firm internationalisation. The influence of
these three dimensions on performance during market turbulence is explored using a hypothesised
model tested through an integrated dataset combining data pertaining to firm strategy, and
performance. The analysis demonstrates that the scope and speed of internationalisation render
a positive performance effect, whereas the scale of internationalisation does not. The article
contributes to knowledge regarding sustainable and successful internationalisation strategies
during times of market turbulence.
Keywords
internationalisation, market turbulence, performance, SMEs
Introduction
The 2007 economic crisis within the globalised economy spread rapidly across country borders
and caused a severe recession affecting businesses on a global scale; however, evidence indicates
that small and medium-sized enterprises (SMEs) in general, and those with international opera-
tions in particular (Eurofound, 2011; Wymenga et al., 2011), were most affected. This reflects the
fact that SMEs, in general, possess fewer resources and have limited international experience and
managerial competencies, compared to large multinational corporations (Coviello and
McAuley, 1999; Coviello and Munro, 1995; McAuley, 2010). Research on the consequences
of the contemporary recession has shown that SMEs have adopted business behaviour (Smallbone
et al., 2012) and political behaviour (Barron et al., 2010) to withstand related effects.
Article
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Hilmersson 387
This article looks at the performance of SMEs and examines whether their internationalisation
strategies can contribute to performance during times of market turbulence caused by recession.
Following the reasoning of Melin (1992), we propose that internationalisation is a strategy pro-
cess which concerns the sequential and orderly outward movement of the firms international
operations (Bilkey and Tesar, 1977; Cavusgil, 1980; Johanson and Vahlne, 1977). From the strat-
egy process of firm internationalisation, three main dimensions of this unfolding process can be
identified (Taylor and Jack, 2012): the scale, scope and speed of firm internationalisation. Whereas
the scale (share of sales abroad) and the scope (number of foreign markets served) of firm inter-
nationalisation concerns the degree to which the firm involves itself in international operations,
the speed of internationalisation relates to the speed at which the firms activities are spread
internationally.
In international business and strategy research, a generally held assumption suggests there is a
positive relationship between international involvement and firm performance. This view also
holds true for studies of export performance (e.g. Katsikeas et al., 2000; Leonidou et al., 2002).
However, empirical research has reported mixed results (Pangarkar, 2008; Sullivan, 1994). Some
researchers have found that the degree of internationalisation has a positive performance effect
(Daniels and Bracker, 1989; Vernon, 1971), while others have found no effect (Buckley et al.,
1984; Morck and Yeung, 1991) or negative effects (Kumar, 1984). Whereas the scale and scope of
firm internationalisation represent the firms degree of internationalisation, speed of internationali-
sation refers to the dynamic aspect of the internationalisation process: that is, the time it takes to
reach a certain degree of international operations. Speed of firm internationalisation has been sub-
ject to increased interest, given the focus on international new ventures (McDougall et al., 1994),
high technology start-ups (Jolly et al., 1992) and born globals (Rennie, 1993), but less is known
about the consequences of the speed at which firms spread their operations internationally. Thus,
research has focused mainly on the antecedents rather than the outcomes of firm internationalisa-
tion strategy (Carr et al., 2010). From the extant literature, only one article empirically examining
the consequences of speed of internationalisation was identified (Khavul et al., 2010); thus, judg-
ing from this lack of evidence, Judging from this discussion, our knowledge regarding the interna-
tionalisation strategy of firms and its performance consequences is far from conclusive.
In light of this, we address three shortcomings in the existing literature on the relationship
between a firms internationalisation strategy and its performance. First, the main body of research
has focused on multinational corporations thus, our knowledge remains limited regarding SMEs.
This is an intriguing shortcoming as, compared to their larger counterparts, SMEs have to be more
conscious, careful and selective when making decisions concerning international activities. This
relates to SMEs generally being constrained by a constrained resource base and hampered by a
limited pool of international experience. Second, most studies have examined the effects of a
firms degree of internationalisation; in contrast, the present study seeks to separate the scope and
scale of internationalisation, while at the same time including the dynamic speed dimension
(Casillas and Acedo, 2012; Casillas et al., 2012). Third, existing research has been largely under-
taken during market stability; little is known about the validity of these findings under market
turbulence. The current study addresses these shortcomings through the research question:
In times of market turbulence, what are the performance effects of a SMEs scale, scope and speed of
internationalisation?
In order to address this question, a model is theoretically derived from the international
business and strategy literature and explored through data collected from an on-site survey
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388 International Small Business Journal 32(4)
covering internationalisation strategies until 2007 and publicly available performance data
for the period 2007 to 2011. This allowed the study to test whether the internationalisation
strategies in place prior to recession had an effect on firm performance during times of mar-
ket turbulence.
The subsequent sections of this article are structured as follows. First, the conceptual foun-
dations are discussed; thereafter, the hypothesised model is presented. The second is followed
by a description of the sample and data collection and analysis processes; third, there is a
discussion of the findings. Fourth, the main conclusion and how future research can compen-
sate for some of the limitations of this article are discussed and, finally, managerial implica-
tions explored.
Strategy of SME internationalisation
Even though internationalisation has been seen as an uncertain undertaking in the face of an
unknown environment (Figueira-de-Lemos et al., 2011), it is suggested that in a globalising
economy, it might be even more risky not to internationalise (George et al., 2005). Firms that
do not internationalise may lose competitiveness; over-dependence on a single and/or home
market might increase income stream uncertainty, given that dependence on market stability
generates vulnerability to sales fluctuations. In general, internationalisation is seen as the out-
ward movement of the firms activities; more specifically, internationalisation has been
described as a sequential and orderly process of increased international involvement and asso-
ciated changes in organisational forms (Bilkey and Tesar, 1977; Cavusgil, 1980; Johanson and
Vahlne, 1977). This is a process of the increased involvement of both inward and outward
operations (Welch and Luostarinen, 1988), by which awareness of the influence of international
activities is acknowledged, such that the firm conducts transactions across national borders
(Beamish and Morrison, 1997).
These descriptions all concern changes of position or perspectives and therefore, fall under
Melins (1992) argument that internationalisation is a strategy process. This reflects the general
definition of strategy by Nag et al. (2007), concerning the major intended and emergent initia-
tives taken by general managers on behalf of owners, involving the utilisation of resources to
enhance firm performance in their external environments. In the internationalisation literature,
the external environment concerns the foreign geographical areas where the firm seeks to
enhance its performance (Wiersema and Bowen, 2011). This is consistent with more recent
research, that firm internationalisation can be regarded as a growth strategy undertaken to
improve performance (Khavul et al., 2010; Yip et al., 2000). Three main dimensions of this
process can be identified. First, the degree to which the firm is involved in international activi-
ties. This dimension is referred to as the degree of internationalisation, which consists of two
main components: the scale and scope of international activities. The scale of firm internation-
alisation refers to reliance on foreign sales thus, suggesting a decreasing dependency on the
home market in favour of international markets. The scope of internationalisation refers to the
number of markets within which the firm operates; this denotes the international geographic
reach of the business. Second, speed of internationalisation refers to the rate at which firms
spread their international activities between different markets. Whereas the scale and scope of
firm internationalisation are fairly established constructs in the literature, the speed concept has
only emerged recently. From a strategic perspective, this study identifies three main dimensions
of the internationalisation process, all relating to how the firm seeks to enhance its performance
in the international environment.
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Hilmersson 389
Scale of internationalisation and small and medium-sized enterprise
performance in times of market turbulence
As outlined previously, the scale of firm internationalisation embodies the degree to which the
firms activities depend on foreign markets; large-scalecompared to small-scale internationali-
sation means that the firm is less dependent on the home market. Therefore, it is reasonable to
assume that scale has an influence on managerial attitudes within the firm; those operating on a
larger scale are expected to have a more international outlook than those with a limited scale. The
scale of internationalisation is related to the extent of internationalisation (Hashai, 2011): the dif-
ference being that scale relates to share of sales whereas, internationalised extent relates to the
share of internationalised value chain activities. A firm with large scale internationalisation has
expanded its outlet market so that it has an opportunity to serve and exploit similar market niches
in new countries (Luostarinen, 1980), contributing both to growth and potential for economies of
scale. The significance of the economic effects of an increased scale of international operations is
expected to be greater for SMEs compared to large firms (Loth and Parks, 2002), as increased
scales of international operations proportionally have a greater profitability effect for such firms.
From examination of the existing literature, there is a general consensus that an increased scale
of international operations will contribute positively to the performance of the firm. In a situation
of market turbulence, it can be assumed that there will be a relationship between the scale of SME
international operations and performance. First, as the scale of international operations increases,
the international outlook of the firm will expand. This outlook, in turn, is likely to place the firm in
a situation where it can interpret developments in the international business environment more eas-
ily. Moreover, it has been argued that a firms international experience will contribute positively to
its ability to recognise international growth opportunities (Hohenthal et al., 2003). With this knowl-
edge at hand, it is reasonable to assume that such experience also will contribute positively to the
firms ability to recognise and interpret warning signals in the international business environment.
Further, an increased scale of internationalisation ensures that the firm reduces its dependency on
the home market. The scale of international operations enables the firm to exploit economies of
scale as well as to balance sales fluctuations between home and host markets. Thus, it can be
hypothesised that a large scale of international operations will positively influence SME perfor-
mance in times of market turbulence:
H1.The greater the scale of SME internationalisation, the stronger the SME performance in times of
market turbulence.
Scope of internationalisation and small and medium-sized enterprise
performance in times of market turbulence
Scope of internationalisation refers to geographical spread, or the number of markets entered
(Hashai, 2011; Lu and Beamish, 2004). When a firm undertakes internationalisation as a strategy
for growth, it is exposed to a number of market and institutional environments. This exposure con-
tributes to the firms general experience base (Johanson and Vahlne, 1977) which, in turn, can be
absorbed and transformed into experiential knowledge. Previous research on the internationalisa-
tion process has shown that the greater the diversity of a firms operations, the greater the experi-
ential knowledge base (Eriksson et al., 1997). Moreover, Hilmersson (2012) showed that, dependent
on the internationalisation strategy, different experiential knowledge profiles are developed which
have an effect on performance when entering new markets. These findings reflect arguments from
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390 International Small Business Journal 32(4)
the resource-based view of strategy which underlines that growth and performance is associated
with its experiential knowledge base. Further, it has been claimed that such knowledge is an inimi-
table resource which contributes to the competitive advantages of globalising firms (Autio et al.,
2000; Oviatt and McDougall, 2005). Thus, we know that the experiential knowledge base of the
firm will reduce uncertainty regarding international operations, reduce perceived costs and contrib-
ute to international competitiveness. During the internationalisation process, learning arises from
different circumstances and market environments; if this knowledge is leveraged, competences
emerge which can enhance performance. Firms with a broad scope of international activities will
have opportunities to learn from diverse circumstances and environments: this includes customers
as well as competitors with different strategies for competition. These learning opportunities can
be leveraged thereby, enhancing the performance of the internationally active SME (Preece et al.,
1999).
The literature also presents economic arguments regarding the scope of firm internationalisation
to influence performance, as it offers higher returns from intangible resources whilst diversifying
risks (Tallman and Li, 1996). During times of market turbulence, the internationally active SME
can balance sales fluctuations between different markets thus, if sales cycles are uncorrelated, a
firm with a wide market range may have smoother and more stable sales as well as greater
profitability.
From this review, the evidence indicates that an increased scope of international operations
will contribute positively to firm performance. At a time of market turbulence, it can be assumed
that there will be a relationship between the scope of international operations and performance.
First, as the turbulence occurs, it can be assumed that a firm with a broad scope of international
activities will be better equipped to diagnose market developments and recognise warning signals
in countries where symptoms of the recession are revealed at an early stage. Second, during mar-
ket turbulence, a firm with a broad scope of international operations will be able to diversify risks
between different countries. Thus, the firm with a broad scope of international operations has the
flexibility to adapt its activities between different market environments in order to handle sales
fluctuations and decreases in demand, among other things. It can be assumed, then, that a broad
scope of international operations will positively influence SME performance in times of market
turbulence informing the second hypothesis:
H2. The broader the scope of SME internationalisation, the stronger the SME performance in times of
market turbulence.
Speed of internationalisation and small and medium-sized enterprise
performance in times of market turbulence
Whereas the scale and scope of internationalisation refers to aspects of the firms internationalisa-
tion process, speed of internationalisation addresses the dynamic aspect of this strategy. Speed of
internationalisation has become a more popular focus of research; however, most studies explore
the time taken from firm inception to the start of internationalisation, so a short time is deemed
concomitant with high speed (Casillas and Acedo, 2012; Taylor and Jack, 2012). Further, as these
studies analyse only the starting phase, they study mainly the time taken to commence activity in
the first foreign market (Khavul et al., 2010; Taylor and Jack, 2012) . How quickly the firm enters
more than one market, and how quickly it spreads international operations are questions that
remain unanswered. If internationalisation is considered as a process through which the firm
spreads its activities, there is a distance aspect involved: namely, the number of markets covered
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Hilmersson 391
by the internationalising firm. In order to capture the speed of this process, it is necessary to divide
the distance covered (number of markets entered) by the time taken to cover this distance. This
provides us with a measure of speed of firm internationalisation which accounts for the average
number of markets entered (distance covered) for each time unit. Whereas developed measures are
valid for capturing speed to internationalisation, speed of internationalisation should be defined as
the international distance covered over time. This concept, then, would capture the speed at which
the firm has internationalised its activities rather than the time taken for the firm to reach the point
where it could begin this process.
When a firm undertakes an international growth strategy at a high speed, it is likely to gain a
first-mover advantage if it is the first significant occupant of a market segment (Grant, 2010). As
such, the entrant firm can gain access to, and control of, resources. Thus, it can be assumed that
firms that internationalise at high speed have a greater opportunity to gain advantage over rivals.
By such pioneering behaviour, firms also are likely to earn positive economic profits and have
stronger performance. Further, when internationalisation is undertaken as a growth strategy, new
customers and outlet markets will be exploited. Thus, the customer base and size of the outlet mar-
kets will be increased which in turn enables the firm to capture economies of scale: the cost per unit
can be reduced, as overhead costs are distributed over a larger quantity of units. If a firm interna-
tionalises at high speed, it can be assumed that economies of scale are reached more quickly and
therefore, internationalises at a faster pace has cost-based advantages contributing to competitive-
ness. So, it can be assumed that the higher the speed at which these cost-based advantages are
generated, the stronger the firms performance.
From this overview, it is evident that our knowledge regarding the relationship between the
speed at which a firm spreads its international operations, and performance, is rudimentary. Still,
in times of market turbulence it can be expected that an alert and flexible firm will be better
equipped to deal with sales fluctuations and changes in the market environment. Alertness and
flexibility often are considered to be main features of born-globals or rapidly internationalising
firms (McDougall et al., 1994). Similar arguments suggest (Casillas and Acedo, 2012; Casillas
et al., 2012; Khavul et al., 2010) that speed of firm internationalisation should be considered an
important determinant of firm performance. Thus, it can be hypothesised that a high speed of inter-
nationalisation will positively influence SME performance in times of market turbulence so, our
third hypothesis is:
H3. The higher the speed of SME internationalisation, the stronger the SME performance in times of
market turbulence.
Method
Sample and data collection
In order to test the performance effect of different internationalisation strategies during market
turbulence, this study draws on data collected on two separate occasions from two different sources.
This strategy enables potential common method biases to be minimised, as suggested by Podsakoff
et al. (2003). The data on the internationalisation strategies of SMEs were collected in an on-site
survey of 203 SMEs in 2007. The performance data in turn were collected in spring 2012 from
official databases, and cover the period 20072011.
The sample consists of the most internationally experienced SMEs in southern Sweden. This
geographical delimitation was made in order to enable on-site data collection, and is suitable for
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392 International Small Business Journal 32(4)
studying SMEs since it is well known for its high share of entrepreneurial and manufacturing
SMEs. Concerning firm size, the European Union (EU) definition based on a headcount of fewer
than 250 employees was followed.
1
The focus was on firms with international experience, and a
lower limit of an annual total export of at least Kr10m was set. Data for the sampling procedure
were ordered from Statistics Sweden, and covered all firms in southern Sweden that matched the
criteria presented above. The sample identification followed two distinct steps. First, the secondary
data provided for each firm were evaluated in relation to the criteria. Second, firms were contacted
by telephone to exclude those not representative of the population, such as firms with no current
exports, firms distributing to Swedish customers foreign facilities or to sister firms within their
own corporations, or those in which no individuals had related experience. After these two steps,
the sample in southern Sweden fulfilling the selection criteria consisted of 277 firms. Of these, 203
firms completed the questionnaire, resulting in a response rate of 73 percent, which exceeds the
general response rate achieved in mail or email surveys of internationalising firms. Of the 277
firms identified, 74 did not participate in the survey: some were unreachable after four attempts;
others declined to respond to the questionnaire due to policies of not participating in surveys, lack
of interest in this research or lack of time to participate. This first phase of the data collection pro-
cedure ended in spring 2007.
The second step of the data collection procedure was undertaken in spring 2012. In order to
make it possible to test the effect of different internationalisation strategies on performance in
times of market turbulence, performance data were collected on all 203 SMEs visited in 2007; this
data was collected from official registers in Sweden. Via a search in official Swedish register data,
it was possible to follow up and see how well the original 203 SMEs had performed during the
recession. Performance data were collected for the period 20072011, as data indicate that it was
during these years that SMEs most suffered from the global recession. When following up on the
original 203 firms, the study was able to access performance data on 183 firms; accordingly, it
managed to cover 89 percent of the original database, which corresponds to a response rate of 65
percent of the original sample. The final sample consisted of firms with an average age of 34 years
(minimum two; maximum 73), an average size of 103 employees (minimum four; maximum 253)
similar to the original sample.
The study followed up all 20 firms that were not included in the final dataset and compared their
descriptive statistics. It was revealed that the mean values of the independent measures were: scale
of internationalisation, .80; scope of internationalisation, 28.9 and speed of internationalisation,
.83. These values were not significantly different from those within the original sample; in addi-
tion, no significant differences were identified regarding the number of employees or turnover
(these values can be compared to the values for the remaining 180 firms in Table 1). Thus, no major
Table 1. Descriptive statistics and correlations.
Min Max Mean S.D. 1 2 3 4 5 6
1. Employees 4.00 270.00 108.65 91.49
2. Turnover (ln) 16.12 20.62 18.87 0.92 .701**
3. Scope of internationalisation 3.00 160.00 33.08 28.63 .309** .310**
4. Scale of internationalisation 0.10 1.00 0.70 0.23 0.14 .160* .503**
5. Speed of internationalisation 0.05 9.00 1.05 1.21 .173* .187* .524** .310**
6. Performance 33.52 104.32 10.87 13.61 0.03 0.08 .160* 0.04 .270**
**Correlation is significant at the 0.01 level. *Correlation is significant at the 0.05 level.
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Hilmersson 393
factors contravening continued analysis were found. Pursuing these firms also enabled the exami-
nation of why performance data could not be collected in the second step of the data analysis. It
emerged that six of the firms had filed for bankruptcy, five had been acquired and four had merged;
unfortunately, it was not possible to find information on the remaining five. After this assessment,
we were confident that their absence would not impact on the subsequent analysis, as no notewor-
thy differences in relation to the responding firms could be identified.
Measures
The independent variables for firm internationalisation strategies consist of measures of a firms
scale, scope and speed of internationalisation. Scale of internationalisation was measured as the
share of the firms total turnover outside of Sweden. Scope of internationalisation was measured
as the number of country markets to which the firm sells its products. These two measures follow
the established approaches in the literature (Vermeulen and Barkema, 2002). As noted previ-
ously, few studies (Khavul et al., 2010) have measured speed of firm international expansion, so
the validity of existing measures can be questioned. Instead of measuring speed of internationali-
sation, they are more valid measures of a firms speed to internationalisation. Established mea-
sures have captured mainly how long it takes to reach the point where a firm begins
internationalising its activities. In response to these weaknesses, this article introduces a new
measure of a firms speed of international expansion. In order to develop this measure, the author
claims that a proper definition of the concept of speed is the time required to travel a specific
distance. Thus, the speed concept includes two main dimensions: time and space. Consequently,
for this study, international expansion represents the space or distance aspect, whereas the period
of time is represented by the age of the firm. By dividing the degree of a firms globalness by the
age of the firm, a more valid measure of speed is established. Speed is measured, then, as the
average number of countries entered by the firm each year from its inception. Thus, a firm that
exports to 20 countries 10 years after its inception would have an average annual international
expansion rate, or speed, of 2, whereas a firm that exports to 10 countries 20 years from incep-
tion would have a speed value of 5. The dependent variable, firm performance in times of market
turbulence, is measured objectively using the firms return on total assets (ROTA). Moreover, it
was important to avoid biases related to annual fluctuations; therefore, the study compensated
for annual fluctuations, bookkeeping strategies and, depending on the firms position in the
value chain, integrating the average performance of the firm over this period of time into the
original dataset. Consequently, the ROTA measure represents the average ROTA of the SMEs
from 2007 to 2011.
In order to control for unobserved heterogeneity, two variables related to the size of the firm
were used as controls in the analysis. First, the number of employees of the firm, and second, the
total turnover of the firm; these two variables are important indicators of resilience to turbulence
caused by recession (Eurofound, 2011; Wymenga et al., 2011).
Data analysis
In order to test the theoretically derived model, the data was processed in the Statistical Package
for the Social Sciences (SPSS) 20. The descriptive statistics are described in Table 1. Here, we can
see that the mean ROTA in times of market turbulence exceeds 10 percent; in addition, this figure
is heterogeneous among the sample firms. Regarding the independent variables on different inter-
nationalisation strategies of the sample firms, the mean value on scope of internationalisation
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394 International Small Business Journal 32(4)
reaches 33 countries. The mean value for the scale of internationalisation reaches 70 percent, and
the mean value for speed of internationalisation is 1.05. The latter means that, on average, the mean
firm has entered 1.05 new countries.
As the descriptive data revealed a promising variation as well as correlation among the variables
included in the model, the study had reason to believe that it would find support for the hypotheses.
Before testing the hypotheses, multicollinearity in the dataset were controlled for. For this purpose,
the variance inflation factor (VIF) for the independent variables was calculated. If multicollinearity
exists, there is a harmful correlation among the independent variables that can lead to a misinter-
pretation of the relationships in the model, and an overestimation of the R
2
value. In this analysis,
the VIF values were all below 1.7, which is a relatively low and acceptable level (Hair et al., 1998).
Consequently, there is no reason to believe that there is any major multicollinearity in the regres-
sion that could lead to misinterpreting or overestimating the final model and its predictive ability.
The next step in the analysis involved the test of the hypotheses; this was undertaken through a
regression analysis where the control and independent variables were regressed stepwise on the
performance of the firm. The result of the regression analysis is provided in Table 2.
Findings
In Model, 1 the two control variables on performance in times of market turbulence were regressed.
The model returned no significant results, which indicates that the size of the firm has no effect on
performance in times of turbulence.
Model 2 includes these two control variables and tests the first hypothesis. For H1 it was postu-
lated that the greater the scale of SME internationalisation, the stronger would be firm performance
in times of market turbulence. This analysis returned no significant results. Thus, in contrast to the
hypothesis, it seems that the scale of international operation has no performance effect in times of
market turbulence. Therefore, H1 is rejected.
Model 3 in the regression tests H2, which relates to the broader the scope of SME internationali-
sation and firm performance in times of market turbulence. This time, the analysis returned a
Table 2. Regression results.
Regressor Model 1 Model 2 Model 3 Model 4
S.E. S.E. S.E. S.E.
Employees 0.059 0.019 .061 0.019 144 0.019 155 0.019
Turnover (ln) .025 1.755 0.118 1.763 0.121 1.729 0.123 1.696
Scale of
internationalisation
0.019 5.098 .099 5.719 112 5.619
Scope of
internationalisation
.261** 0.051 0.148* 0.055
Speed of
internationalisation
.239* 1.066
N 180 180 180 180
R
2
0.008 0.009 0.056 0.112
Adj. R
2
.011 .017 0.021 0.062
Fstatistics 0.434 0.336 1.668* 2.595**
Note: Standardised parameter estimates reported. **Correlation is significant at the 0.01 level. *Correlation is significant
at the 0.05 level.
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Hilmersson 395
positive and significant result. Thus, as the scope of internationalisation positively affects perfor-
mance in times of market turbulence, support for H2 is found.
Model 4 includes all variables and tests H3, which suggested that the higher the speed of SME
internationalisation, the greater the firm performance in times of market turbulence. This time the
analysis returned a significant and positive result. Consequently, based on the result revealing the
positive and significant performance effect by the speed of internationalisation, support is found
for H3.
Discussion
This article has been developed from the assumption that, compared to large multinational corpora-
tions, SMEs possess limited experience and resources when internationalising their business activ-
ities. As indicated by previous empirical reports, they are in a more vulnerable and risky position
when facing distant or, as in this case, turbulent market environments. Based on the literature, three
hypotheses were developed to address this issue. All three posited that SMEs following a strategy
of international growth would be less affected in times of market turbulence. Thus, this article has
reflected existing international business research (see Pangarkar, 2008): namely, that the greater
the degree of international activities of the firm, the stronger its performance. In order to examine
this relationship, three strategic dimensions of the internationalisation process were condensed
along the lines suggested in recent research by Taylor and Jack (2012) and Casillas and Acedo
(2012). In so doing, the study addressed three shortcomings in the received literature: limited
knowledge regarding the internationalisationperformance relationship of SMEs; the dynamic
aspect of the internationalisation process; and the fact that previous research has been undertaken
during times of market stability. Thus, a unique opportunity was captured, as the study set out to
test the effects of internationalisation strategies in times of market turbulence.
First, it was hypothesised that the scale of SME internationalisation would positively affect
performance in times of market turbulence. Based on previous research (Hilmersson and Jansson,
2012; Johanson and Vahlne, 1977, 2009), it was argued that an increased scale of internationalisa-
tion would lead to the firm having a greater international outlook and experience. This, in turn,
would enable the firm to identify and recognise international warning signals in times of market
turbulence at an early stage of a recession. In addition, it was argued that an increased scale of
internationalisation would positively affect firm performance in times of market turbulence, as it
would be less dependent on the home market. However, the analysis provided no support for H1,
and so it seems that the scale of internationalisation is not a predictor of SME performance in times
of market turbulence. One reason for this might be that the scale (measured as a percentage of total
sales abroad) says very little about the international activities of the firm. It is an important indica-
tor of the home markets importance, but still it only accounts for the share of the turnover sold
abroad. However, this share might very well be addressed by exporting to very few countries. If
this were the case, then the firm most probably would not be exposed to a variety of experiences
enabling the identification and recognition of warning signals. This reasoning is further developed
when the results from the test of H2 are discussd.
Second, it was hypothesised that the scope of SME internationalisation would positively affect
the performance of the SME in times of market turbulence. Supporting this hypothesis, the data
analysis returned a positive and significant result. Thus, the present study confirms previous
research (Eriksson et al., 1997; Hilmersson, 2012; Hilmersson and Jansson, 2012; Johanson and
Vahlne, 1977) in claiming that a broad scope of international operations exposes the firm to a mul-
titude of institutional environments, customers as well as competitors. Firms that are able to
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396 International Small Business Journal 32(4)
transform such experiences into experiential knowledge achieve stronger performance (Eriksson
et al., 1997; Johanson and Vahlne, 1977). Thus, it creates an inimitable competitive advantage that
enhances the performance of the firm, reflecting Autio et al. (2000). A broad scope of internation-
alisation also enables the firm to spread risks and balance sales fluctuations between different
markets, as argued by (Tallman and Li, 1996). This article has shown that this idea is also of par-
ticular importance to SMEs in times of market turbulence.
Third, support was found for the hypothesis suggesting that the speed at which the firm interna-
tionalises would positively influence performance in times of turbulence. As such, this study suggests
that firms are able to achieve advantages over competitors and establish first-mover benefits by inter-
nationalising at a high speed, and experience positive performance effects from international opera-
tions in times of market turbulence. Previous research (Casillas and Acedo, 2012) has shown that
internationalisation at high speed is driven by the alertness and flexibility of the firm and its manag-
ers. In the present study this argument has been confirmed, demonstrating that these are important
determinants of performance during market turbulence. Thus, this article supports the ideas of
McDougall et al. (1994) and Oviatt and McDougall (2005), claiming that firms experience positive
performance effects if they internationalise quickly or aggressively. Whereas the born-global litera-
ture (Khavul et al., 2010) has argued that firms should start internationalisation quickly, this article
has underlined the importance of continued internationalisation at a high speed. As such, the article
has contributed to the existing literature by developing a new measure of speed of internationalisation
that is different to previous measures on speed to internationalisation. Furthermore, it has examined
the performance effects of the speed at which firms are internationalising, revealing that high-speed
internationalisation positively contributes to firm performance during times of market turbulence.
These findings suggest that even though SMEs are constrained by their limited experiences,
limited resources and a liability of smallness, they should internationalise their activities in order
to be sustainable during market turbulence. The analysis has shown that the speed at which the firm
internationalises has a performance effect. Thus, it has demonstrated that the greater the speed of
internationalisation, the stronger the performance of the firm. This article shows that in todays
globalised economy, where economic drawbacks and problems are spread quickly between inter-
national markets, it is important for internationalising firms to spread their risks among different
country markets. In addition, this research has shown that the issue of the speed at which the inter-
nationalising firm spreads its risks has not been previously identified. So, in order to manage risk,
the firm needs to spread its activities across country markets quickly. In contrast with what was
hypothesised in this article, the scale of internationalisation did not reveal any positive perfor-
mance effect during times of market turbulence. This study suggests that, in some cases, it might
be more risky not to internationalise than to do so.
Conclusion
Managerial implications
Prior to this study, empirical evidence suggested (Eurofound, 2011; Wymenga et al., 2011) that
SMEs were affected heavily by the global recession and have adapted their behaviour (Barron
et al., 2010; Cowling et al., 2012; Smallbone et al., 2012). We have contributed to this field by
examining the performance effects of SME internationalisation strategies during turbulent
times. In doing so, it has addressed two unresolved issues in the literature. First, received
research has reported mixed results on the relationship between degree of internationalisation
(scale and scope) and firm performance (e.g. Pangarkar, 2008). Second, incomplete evidence
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Hilmersson 397
remained on the performance consequences of speed of internationalisation (Khavul et al.,
2010). Reflecting work by Taylor and Jack (2012), this study condensed three strategic dimen-
sions of the internationalisation process of SMEs, responding to the call for further studies of
the outcome of a firms internationalisation strategy, as noted by Carr et al. (2010). From this
studys analysis and discussion, it is concluded that the strategy of firm internationalisation is
a relevant predictor of performance during market turbulence. This research has shown that the
scope, as well as the speed, of firm internationalisation positively influences performance in
times of market turbulence. These findings support the arguments of Pangarkar (2008) and
Khavul et al. (2010). So, firms that are able to balance their sales between different markets as
well as establish first-mover advantages internationally will experience stronger performance
during market turbulence. However, contrary to the hypothesised model, the analysis revealed
that scale of internationalisation did not significantly affect SME performance in times of mar-
ket turbulence. Thereby, the share of the sales exported would seem to be less important than
the number of markets when seeking resilience against market turbulence.
These conclusions are of interest to managers of SMEs. The findings suggest that managers of
internationalising SMEs should diversify risk between different countries in order to reduce sales
fluctuations and gain flexibility of market activities during market turbulence. This research shows
that the geographical scope of the firms international activities is a more important predictor of
SME performance at times of turbulence than the scale of internationalisation. Furthermore, this
study has shown that managers in firms beginning to internationalise their activities should seek to
exploit potential first-mover advantages in different countries by realising a strategy of internation-
alisation at high speed.
This study has shown that SMEs should not put all their eggs into one basket. When market
turbulence arises, as witnessed in the last five years, firms that diversify risks experience stronger
performance. The analysis here shows that it is not the share of the eggs put into the home market
basket, in relation to the international one, that is the main predictor of performance during turbu-
lence. Instead, what matters is the number of baskets used for the eggs, and the speed at which they
are spread between the baskets. Based on this research, we argue that the assumption that interna-
tionalisation is a risky strategy should be challenged. We argue that it might be more risky for firms
not to internationalise activities than it is for them to do so; during times of market turbulence,
internationalisation should be seen as a risk-reduction strategy so, we are confident in suggesting
that SME managers spread their eggs, and do so quickly.
Limitations of the study
It is acknowledged that this study has some limitations. First, there is a risk that the use of ROTA
as an indicator of firm performance may lead to misinterpretations. In their early stage of evolu-
tion, many SMEs might emphasise growth over profitability: this might understate their actual
performance, thus distorting the relationship between the internationalisation strategy of these
firms and their actual performance. In order to minimise misinterpretation, the study controlled for
this by regressing the strategies on the average performance of the SMEs from 2007 to 2011. In this
analysis the three strategic dimensions were treated independently, thus the study has not examined
their potential interrelatedness, or the sequences between different investments as studied by
Hashai (2011). Second, the sample consists of relatively internationalised SMEs, thus the findings
do not really speak to the situation faced by SMEs in their very first steps of the internationalisation
process. Future research would benefit from developing more sophisticated measures of the three
dimensions of the internationalisation strategy, where a very interesting aspect would be the devel-
opment of speed measures capturing acceleration and deceleration of the speed.
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398 International Small Business Journal 32(4)
Acknowledgements
The author would like to express his gratitude to Susanne Sandberg and Hans Jansson for collaboration in the
data collection project. He is also grateful for comments on an earlier draft of the article from Anders Pehrsson
and Richard Owusu at Linnaeus University. The final version has been significantly improved thanks to
insightful comments from the anonymous reviewers, as well as the Editor, Susan Marlow.
Funding
The author would like to thank Handelsbankens Forskningsfonder who funded the data collection project.
Note
1. In this article, headcount was used in the sampling process due to data availability in the sampling source. A
post hoc analysis revealed no noteworthy outliers in relation to the EU definitions view on the balance sheet.
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Author biography
Mikael Hilmersson is Assistant Professor of Marketing in the School of Business and Economics, Linnaeus
University. His main research interests revolve around various aspects of the internationalisation process of
SMEs. His research has been published in the International Small Business Journal, International Business
Review, Journal of International Marketing, Baltic Journal of Management, International Journal of
Business Environment and International Journal of Trade and Global Markets.
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