Much of the existing literature on internationalisation within the field of International Business focuses on internationalisation from the perspective of larger Multinational Corporations (MNCs) that have more resources and capabilities than smaller firms. However, smaller firms are not just scaled-down versions of larger firms, as eloquently put by Shuman and Seeger:
Although both sizes of companies deal with many of the same issues, smaller businesses also deal with unique size related issues as well, and they behave differently in their analysis of, and interaction with, their environments.
Given that many theories of internationalisation have been conceptualised using large MNCs as the unit of analysis, this could have important implications for our understanding of SME internationalisation. While there is a plethora of literature that studies firm internationalisation, it often studies the external pressures and ‘push’ or ‘pull’ factors that lead to internationalisation and is heavily based upon research of larger firms or macro trends. For example, FDI and Neoclassical economic theory seek to explain the existence of Multinational firms through economic calculation and incentives.
However, they do little to explain the process of internationalisation and are perhaps less important in explaining the internationalisation of smaller firms. Developments from the behavioural theory of the firm have placed greater emphasis on the process of internationalisation and how organisations' behaviour in response to external incentives and disincentives can vary, including impacting the internationalisation process itself.
This has led to the development of Stage Models of internationalisation, such as the Uppsala Model which places even greater emphasis on the process and specifically on smaller companies. The Uppsala Model explains internationalisation as an ongoing organisational learning process that operates in a cyclical manner, gradually leading to greater commitment to internationalisation and more diverse approaches to internationalisation. Within the Uppsala model, the importance of people and human cognition is implicitly acknowledged through the concept of psychic distance (i.e. perceived cultural, economic, geographic, institutional distance between nations) and through the learning that occurs incrementally at an individual and organisational level.
Further theories built upon on the Stages Models, such as the Network approach, seek to understand firm internationalisation by analysing both the business networks of companies and the social networks of managers. The network approach explains firm internationalisation as a result of interactions within and between networks, with domestic networks joining across borders facilitating the internationalisation of firms. This may help to explain why some industries have greater internationalisation rates than others: firms in the same industry share a domestic network which is linked to a foreign network because of company internationalisation, making internationalisation opportunities more plentiful and easily identifiable even for the companies not involved in the original internationalisation. For SMEs in particular, single individuals can be of great importance in the network approach as knowledge within the social and business relationships that drive internationalisation is usually concentrated within one individual, giving that individual great influence over the firm’s internationalisation.
Among these theories of internationalisation, there is no single ‘correct’ theory, in fact, meta-analyses have shown that all the theories have been accurate at times and even mutually compatible at times, despite expectations of the contrary. However, the role that upper management, specifically founders or CEOs of small firms, may play in the internationalisation process is often acknowledged yet overlooked given how important upper management are in other decision-making processes. Studies within Upper Echelons theory have shown that top management team (TMT) characteristics can and do have an impact on strategic decision-making and company outcomes. Most studies in the Upper Echelons field of research tend to focus on demographics or previous experience, with fewer insights into how the personality traits of strategic decision makers impact firm outcomes. Moreover, much of the research is again focused on large corporations, with fewer insights into SMEs, despite the fact strategic decision makers often enjoy greater individual power given the size of the firm.
Hence, this dissertation aims to expand the existing knowledge in internationalisation with a focus on Strategic Decision-makers in SMEs. Firstly, by focusing on specifically the process of SME internationalisation this dissertation aims to expand our knowledge of how SMEs internationalise and what supports each stage in the process. Secondly, this dissertation will contribute to the Upper Echelons research field by focusing on upper strategic management (CEOs/Founders/Strategic Decision-makers). Thirdly, by extending Upper Echelons beyond solely demographics and incorporating the field of psychology, this dissertation aims to fill a gap in existing research and provide a basis for future research.
Therefore, this dissertation seeks to address the following research question:
How do the personality traits of the main strategic decision-maker impact SMEs’ internationalisation?
This will be achieved by conducting a quantitative study that analyses each stage of the internationalisation process, as set out by Beugelsdijk et al., and personality traits, measured with the five factor model of personality, from data collected through an online questionnaire. To the author's knowledge, only one similar study has been conducted which employs a slightly different methodology and focuses on manufacturing SMEs in Pakistan. To expand our knowledge on this topic further, this dissertation will be focused on the technology sector(s) and be embedded in the context of the UK, providing comparable results in both a different industry and national context.
The aim of this dissertation was to investigate the impact of Strategic Decision-makers’ personality traits on the SME internationalisation process in the UK, identified as a research gap in the literature review. To achieve this, an Upper Echelons approach was taken, assuming the characteristics of top management at least partially influence organisational outcomes. Personality traits were measured based on Goldberg’s five-factor model of personality that has become commonplace in social science research related to personality traits. From the literature, 25 sub-hypotheses were developed to address the research gap, with the overarching proposition that Strategic Decision-makers’ personality traits impact the SME internationalisation process.
Overall, the findings suggested that this was not the case, but there were some caveats to this. All personality traits impacted specific stages of the internationalisation process once (Openness to Experience and Neuroticism impacted Entry Mode, Conscientiousness and Agreeableness impacted Commitment, and Extraversion impacted Success). Additional data from the findings suggested this may be due to changes in the decision-making process between the first case and subsequent cases of internationalisation that ultimately diminish the potential for the personality traits of an individual decision maker to have an effect. Support for the stages model of internationalisation and the network perspective of internationalisation was also found, suggesting these may have more explanatory power than personality traits.
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08 November 2022