An Empirical Study on Export Orientation of Indian Small and Medium Enterprises

Abstract

Small and Medium size Enterprises (SMEs) despite having enormous potential and significance in the economy have not been able to harness the advantages of internationalisation and at the same time have fallen short in facing the challenges of globalised competition. Furthermore, evidence suggests that SMEs have been observed to face challenges in maintaining impactful internationalisation strategies and responding to market changes over time. One approach which has been actively pursued by internationally oriented players to address these challenges over the past few decades and is extensively highlighted in the literature is exporting. While this strategy as an initial step toward internationalisation may offer much potential, it also comes with certain issues. This study investigates the influential drivers of export-orientation in such internationally oriented small firms. Blending the findings from the literature on internationalisation with insights from the work on exportation illuminates the problem. While the research on internationalisation directly discusses entry strategies and drivers of performance in such ventures, extrapolating the work on exportation further informs these aspects, and complements the same by bringing to light additional factors to consider. To shed further light upon these aspects, a two-phased, in-depth empirical investigation of the internationalisation strategies and the factors that influence the export-orientation of SMEs was conducted in the five most prominent and export driven clusters in the textile industry in India. Qualitative analysis was used to inductively generate theory, while quantitative analyses subsequently tested the resulting hypotheses. Results of both analyses indicate that the management and firm characteristics influence the export-orientation of a firm. Furthermore, analyses show that the management of a firm with the presence of global networks, previous internationalisation experience and international knowledge transfer have been able to recognise and manage complexities associated with internationalisation and positively influence the export-orientation of the focal firm. R&D intensity does play a significant role in influencing the internationalisation of a firm, and has an impact on export-orientation. Export-orientation meanwhile is also positively influenced by both firm age and firm size. Moreover, the interpretive structural model (ISM) and the directed graph provide a hierarchal relationship among the perceived barriers to exporting and further strengthen the argument that a firm’s management orientation toward internationalisation is a significant catalyst in firm’s internationalisation decision. Overall, the findings enhance our understanding of internationalisation and export orientation in SMEs in the changing environments. A case was subsequently developed to highlight; how the management and firm characteristics help SMEs to survive in the volatile environments.