۱- Introduction

۲- Theoretical underpinnings

۳- Hypotheses development

۴- Methodology

۵- Results

۶- Discussion

۷- Conclusion

References

Abstract

This study examines the accumulation of financial and intellectual resources of U.S.-based biopharmaceutical SMEs. We find that internationalized SMEs experience better financial resource growth than domestic market-focused SMEs only in the long run. While international expansion per se does not enable SMEs to accumulate more intellectual resources than via domestic expansion, it exerts a positive impact over time for SMEs with strong alliance capabilities. Moreover, we show that alliance capabilities are more important than in-house technological capabilities for key resource accumulation of internationalized SMEs over time. Our results infer that SMEs gain the benefits of resource exploration via international expansion.

Introduction

International expansion has become an increasingly common strategic option for small and medium-sized enterprises (SMEs), even those based in large domestic markets, despite the conventional belief that they are particularly vulnerable in foreign markets due to their inherent resource constraints (Knight & Cavusgil, 2004; Love & Roper, 2015). Extant literature indicates that SMEs could exploit their limited resources and capabilities such as marketing skills, technological competencies, and partnering capabilities to perform successfully in the international arena (Dhanaraj & Beamish, 2003; Hessels & Parker, 2013; Lu & Beamish, 2001; Sui & Baum, 2014). SMEs could also explore new resources and capabilities such as foreign market-specific knowledge and innovative product development routines to strive for longterm growth (Eriksson, Fjeldstad, & Jonsson, 2017; Zhou & Wu, 2014; Zhou, Barnes, & Lu, 2010). In light of Penrose’s (1959) theory of the growth of the firm (TGF), however, both international business and strategy scholars tend to agree that SMEs’ growth options are constrained in large part due to their small size (Cavusgil & Knight, 2015; Knight & Cavusgil, 2004; Verwaal & Donkers, 2002; Zollo & Winter, 2002). Ideally, SMEs would expand their operations both at home and abroad; in reality, however, SMEs—especially those operating in sizable home markets—tend to be wary of the latter approach due to the anticipated joint liabilities of smallness and foreignness (Kirca et al., 2011) or the potential disruption to internal consistency of their domestic organization resulting from the need to adapt to foreign environments (Lampel & Bhalla, 2011).1 Further, SMEs may try to exploit and explore their resources and capabilities to survive and grow over time. In practice, however, SMEs typically have to focus either on exploitation or exploration within a particular period of time given their limited managerial resources (Zollo & Winter, 2002). The argument above raises two important questions: first, if some SMEs still choose to go international despite the anticipated liabilities of operating in the international arena, what do they gain through international expansion (as opposed to domestic expansion) over time? Second, how do internationalized SMEs gain considering that they are small and tend to face the trade-off between resource exploitation and exploration?