Determinants of successful internationalisation by SMEs in Flanders
Export companies are more resistant to crisis according to a study by Flanders DC
Small and medium sized firms (SMEs) internationalize not only to grow their business, but also to survive. Spreading activities across different countries make SMEs more resistant to the impact of an economic downturn.
Many SMEs in Flanders still use an internationalization strategy fitting the traditional stage models in which firms start internationalizing after years of purely domestic operations. For the average SME, international activities start with import after 2 years, followed by export after 9 years and export outside the EU after 13 years. Other forms of internationalization follow later in the firm’s life. Firms that start selling abroad often first enter neighboring countries, in many cases the Netherlands. After a successful first export experience, a number of firms enter other nearby markets. These markets are often larger (e.g. Germany or France) than the first export market.
Nevertheless, a number of firms use a different approach to internationalization. These firms start internationalizing rapidly after inception, in many cases even within the first year of operations. These firms often operate in niche markets and use their distinct competences to target narrow market segments in multiple markets across the globe. The product or service they sell often has a relatively short life cycle, resulting in a more rapid internationalization than typically found in firms producing more traditional mass products with longer life cycles. This implies these firms are more likely to opt for a sprinkler strategy, in which multiple markets are entered, rather than a waterfall strategy, in which markets are entered sequentially. As a result, firms in niche markets have a presence in multiple markets across the globe.
These SMEs are also more optimistic about the further growth of their international turnover. This increase in foreign sales is mainly driven by new and improved products and by entering new markets, whereas SMEs in mass markets aim to increase sales in markets in which they already have a presence.
SMEs in niche markets use a more proactive approach to internationalization and are more involved in international networks. They are more likely to source their inputs from foreign countries, often outside Europe and use multiple modes of internationalization, including foreign sales subsidiaries, production plants, joint ventures and licenses.
About Flanders DC
Flanders District of Creativity is the Flemish organisation for business creativity. It was founded by the Flemish Government as a non-profit organization and enjoys broad support. Flemish businesses, academics, and public institutions use Flanders DC as a platform for cooperation and for building a more creative region. Creativity is the key ingredient in making companies more successful and in helping regional governments fuel a healthy economy with more jobs.