Overcoming liabilities in a psychic distant market. The case of Swedish SMEs in Singapore.

Abstract

More and more SMEs are taking the step to become global- However, their internationalisation processes are said to be more challenging than MNE. Not only do they suffer from liability of foreignness but also from liability of smallness and newness when entering a foreign market. Early research tried to explain smaller firms’ expansion through the traditional MNE theory due to the belief that SMEs behaved similar to MNEs. It was not a successful approach as it was later showed that SMEs do not follow a traditional international process. Although, SMEs internationalise and succeed in a foreign market without large resources and a well-known brand. How do they handle the challenges? The purpose of this study was to examine how SMEs perceive the liability of newness, foreignness and smallness in a psychic distant market and what factors support the firm to overcome these liabilities. By conducting a multiple-case study including four case companies the question could be studied through a real-life context. The result showed that SMEs use their network for overcome the constrains. Nevertheless, the network support is nothing if not the entrepreneur act. It is the entrepreneur who manages the requirement, maintain relationships with partners and clients and develop the company for future challenges. Finally, through understand the foreign market and the company’s competitive advantages in the specific country the firm will create a sustainable establishment in the new country.