Ownership and the internationalization of agricultural firms in a sub-regional agglomeration

(1)

Master Business Administration, International Management, Faculty of Economics and Business (FEB), University of Amsterdam

Ownership and the Internationalization of

Agricultural Firms in a Sub-Regional

Agglomeration

First Supervisor: Dr. Johan Lindeque

Second Supervisor: Dr. Francesca Ciulli

Date: 23-06-2017

Student Name: Margarida Saturnino Marques Calqueiro

Student Number: 11376201

(2)

Statement of Originality

This document is written by Student Margarida Saturnino Marques Calqueiro who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

(3)

Abstract

This research investigates the impact of ownership type in the internationalization of agricultural SMEs in a sub-regional agglomeration. The main goal of the study is to determine how different types of ownership can affect the way firms perceive and strategize on internationalization; and to understand how agglomeration can play a role in this process. To achieve these goals, an in-depth qualitative multiple case study was conducted on six Portuguese wine producing SMEs operating indifferent regions. A total of eleven interviews were conducted. this study found that for wine producing SMEs clustering is highly valuable for both its products’ perceived value and international demand, of as well as the influence of the type of ownership on the trigger and motivation for internationalization and on some patterns of internationalization such as pace and number of markets.

(4)

Acknowledgments

I would like to thank my supervisor Dr. Johan Lindeque. His trust, involvement, suggestions, patience and feedback were tremendously valuable and provided me with insights that helped me construct this thesis. Furthermore, I would like to thank all the interviewees for their time, experience and availability to answer all my questions and for providing me with detailed and relevant contributions on understanding this phenomenon. Also, I would like to thank my family and friends for all their support during this year and especially during the period I was writing this thesis, and for all the contacts made available to me in order to conduct this research.

(5)

Index of Tables

Table 1. Overview of Case Study Design ... 30

Table 2. Overview of Interviews ... 31

Table 3. Links between the Interview Questions and Working Propositions ... 34

Table 4. Code Book Matrix ... 36

Table 5. NF1, within case analysis ... 39

Table 6. NF2, within case analysis ... 42

Table 7. FC1, within case analysis ... 45

Table 10. FI1, within case analysis ... 57

Table 11. Cross-case Analysis... 62

(7)

1 INTRODUCTION

Reduced costs, rapid market entry; improvements in products and services; access to a greater variety of suppliers, and quick and easy sharing of knowledge are some of the benefits firms have due to the recent changes in the international business environment (Vivas and de Sousa, 2011). As a consequence, firms realized that they cannot limit their business to their domestic market and that internationalization has become essential to their growth and, to some, even their survival (Mitter et al., 2014).

The internationalization process raises uncertainties regarding the choice of different types and levels of risk it incorporates, creating the need for a robust international strategy to be designed by the firm. Different degrees of risk acceptance (or aversion) experienced by owners and managers lead to different international strategies, becoming clear that ownership has a strong influence on the strategies of the firm, including internationalization (Fernández and Nieto, 2006). However, the size and industry of a firm also influence its decisions on whether to and how to internationalize (Harzing and Sorge, 2003).

SMEs are a very relevant part of the global economy and have a strong weight as source of employment and communities’ wellbeing (Pacheco, 2016). In Europe, “nine out of every 10 enterprises are SME, and SMEs generate two out of every three jobs”. The majority of SMEs in the western world are family firms – firms where the family controls the business through significant involvement in ownership and management positions – which represent 85% of small and medium enterprises in the EU and the USA (European Commission, 2016b).

Although previous studies show contradictory results regarding the different influences of ownership on internationalization when analyzing family firms vs. non-family firms, others have proved that “the ownership structures of SMEs influence their proclivity to take risks and expand the scale and scope of their internationalization efforts” (George, Wiklund and Zahra, 2005, p.210) also highlighting the need for further research focused on specific industries and countries.

(8)

Therefore, apart from size, industry and country are also to be taken into account when studying the internationalization of a firm. Furthermore, it is also related to ownership in the sense that some ownership structures are more commonly seen in specific industries, sectors and countries (Harzing and Sorge, 2003).

This thesis focuses on Portuguese wine SMEs; agriculture is a large industry in the EU and is mainly composed by SMEs with a heterogeneous ownership structure (Pordata, 2016b). Over time agricultural production has become more concentrated and a division between small family and large farms has emerged and small farms have been a keystone for the European Union agricultural activity (Eurostat, 2016b). Furthermore, in Portugal the number of SMEs in this industry has been increasing (Pordata, 2016b).

More specifically, “The EU is the world's leading producer of wine, with almost half of the global vine-growing area and approximately 65% of production by volume”, and contrary to what happens in other areas of the agricultural industry, ownership of most wine companies remains in families or as co-operatives (Eurostat, 2016b). Moreover, the global wine industry has been adapting and reacting to the opportunities and threats brought by globalization, namely by focusing more on its internationalization (Kontinen and Ojala 2010).

Globalization and its consequent trade liberalization brought changes to countries’ production and trade patterns, including the agglomeration of related firms which is presented as a clustering of economic activities (Grazi, van den Bergh & Rietveld, 2007). Clusters can act as enablers for the internationalization of similar firms belonging to the same cluster due to the opportunity they offer to share networks and know-how, while increasing their rivalry and forcing them to improve their strategies to become more competitive (Borwn and Bell, 2001).

As mentioned above, studies already exist regarding the role of ownership in the internationalization of SMEs especially regarding family business. But the existing studies lack focus on some specific industries such as the agricultural sector where SMEs and family firms represent a large share in the industry as well as on the influence that agglomeration and clusters increasingly present to SMEs and agricultural firms’ context. Thus, the purpose of this research is to study the role of ownership in the internationalization of private owned SMEs, making a

(9)

distinction between non-family SMEs, controlled family SMEs and influenced family SMEs, in the agricultural industry in sub-regional agglomerations.

Research Question: How does ownership affect the internationalization of agricultural firms in a home-country sub-regional agglomeration?

In order to answer to this question, literature regarding internationalization, the role of ownership, small and medium enterprises, the agricultural industry, wine production and the phenomenon of agglomeration. Analyzing the literature was analyzed brought us the understanding that all these topics are related and interdependent; their characteristics affect how firms might perceive internationalization and therefore how they derive their internationalization strategy.

After an in-depth analysis of the literature, theoretical conclusions were derived, working propositions that this study aims to understand and support or rephrase after collecting and analyzing data. Given the exploratory nature of the research question a multiple case-study qualitative method was chosen to study the phenomenon of how ownership affects the internationalization of agricultural SMEs in sub-regional agglomerations, and how this influence of ownership is identified when dealing with family and non-family SMEs. To collect the necessary data, a number of twelve (12) semi-structured interviews, in six (6) different firms with different types of ownership, were conducted with directors and senior managers of wine firms belonging to a cluster, in Portugal.

This study results show that for wine producing SMEs clustering is highly valuable for their products perceived value and international demand, and that the type of ownership influences both the trigger and motivation for internationalization and some patterns of internationalization such as pace and number of markets. The study also found, that some other patterns of internationalization such as entry modes and domestic presence do not seem to be determined by the type of ownership. Moreover, a new insight was obtained through the collected data that showed the importance of external mangers on the success of the internationalization of family SMEs and consequently their degree of internationalization.

(10)

2 THEORETICAL BACKGROUND

Internationalization raises uncertainties regarding different types and levels of risk so a clear strategy should be drawn by the firm and therefore by its owners and managers. However, owners and managers might have different degrees of risk aversion, which influences the strategy of the firm, including internationalization (Fernández and Nieto, 2006). Thus, ownership is one of the dimensions that must be considered when trying to understand the internationalization of a firm. Considering that 85% of American and European SMEs are family owned (European Commission, 2016b) this study will compare firms with family and non-family types of ownership.

Separately Harzing and Sorge (2003) highlight the importance of size and industry of a firm as dimensions to be studied when an understanding on how firms internationalize. Since nine out of ten firms in Europe are SME and family firms are most of the time SMEs, and considering to their contribution to the economy, employment and communities being very high (Pacheco, 2016), this study focuses on SMEs. The industry studied is the agricultural industry more specifically wine producing firms, due to its large importance Europe – EU is the world’s leading producer of wine (Eurostat, 2016b) – as well as the lack of focus of previous studies in this industry where family firms are in its majority.

Finally, another dimension to be studied when referring to the internationalization of these firms is their agglomeration, originated by the changes globalization and trade liberalization brought, which represent a clustering of economic activities that allow for the dynamics between firms within the same cluster and their strategy to change (Grazi, van den Bergh & Rietveld, 2007). These dimensions and their influence are presented and explained more in-depth throughout this chapter.

(11)

2.1 Internationalization and the Role of Ownership

In recent years, the international business environment has witnessed changes like the globalization of markets (Bartlett & Ghoshal, 1988); the development of transport of goods and people, the development of telecommunications as well as production processes, the spread of internet usage and the growing weight of services which leads to a pattern for international trade (Axinn & Matthyssens, 2002). These changes created some benefits for firms: reduced costs, rapid market entry and processing; improvements in products and services; access to a greater variety of suppliers, and a quick and easy sharing of knowledge within and between firms (Vivas and de Sousa, 2011). Globalization drives firms to evaluate and create a strategy to expand its business outside the home market, to internationalize, in order to maintain their competitiveness.

Although not clearly defined, internationalization tends to be used only to describe the outward movement of a firm’s international operations and it could be further broadened to the process of increasing involvement in international operations, which includes both the inward and outward processes, that link more with the dynamics of, for example, international trade brought by globalization (Welch and Luostarinen, 1988). This process of internationalization raises some issues and uncertainties which underline the need for an effective establishing of the firm’s boundaries. This issue is dealt by the research regarding the international entry mode by exploring the way the firm will operate when entering a foreign market. Firms can enter these markets through contracts with distributors or resource suppliers or even through licensees and franchisees. Firms can also choose to extent their operations to a foreign country through manufacturing or sales subsidiaries. The decision of expanding abroad brings further options like a joint venture which means that ownership is shared with other firms or wholly owned subsidiaries which allow the firm to keep full ownership (Brouthers, & Werner, 2007).

Previous studies regarding the reasons behind internationalization focus mainly on the advantages for the firms which are included in an assumed rational decision. Dunning’s (1973) OLI-Paradigm identifies rational explanations for the market entry choice and some common theoretical arguments for internationalization are the Hymer (1976) utilization of monopolistic advantages, the Rugman (1979) diversification of investment portfolios and the Buckley & Casson

(12)

(1976) internalization of imperfect markets. Oesterle, Richta and Fisch (2013), on the other hand, do not agree that the firm’s decision to internationalize is a rational decision. They argue that “if firms are conceptualized as political coalitions in which their goals are bargained between their participants (March 1962) the mere rational view seems to be insufficient to explain why and to what extent firms internationalize” (Oesterle, Richta and Fisch, 2013, p.187).

An alternative explanation lies in a principal-agent theoretical approach that focuses on ownership-stake motivations and bargaining power as well as the actions managers are allowed to perform in different ownership structures. “Their bargaining power within the firm as a political coalition and as a result of this, their ability to enforce actions in favor of their own interests depends largely on the structure of ownership” (Oesterle, Richta and Fisch, 2013, pp.187). Ownership can influence the firm’s corporate strategy and performance since they are related to different degrees of risk aversion (Thomsen and Pedersen, 2000) and this factor is crucial when designing corporate international strategies because different owners may have different degrees of risk aversion (Fernández and Nieto, 2006) and managers can have different views regarding further steps for the firm.

The main interests of managers, supposedly, are safeguarding and maximizing their own income as well as their prestige and reputation, interests which can be attained by product or services scope (industry diversification) or internationalization (geographical diversification), determining that managers favor a high degree of internationalization. On the other hand, owners are supposedly in favor of lower level of diversification (i.e. products, internationalization, etc.) due to the possibility of efficiently using the capital market to diversify their portfolio, concluding that “there is a clear agency theoretical link between a firm’s ownership structure and its international diversification” (Oesterle, Richta and Fisch, 2013, p.198).

As we concluded from Fernández and Nieto (2006) and Oesterle, Richta and Fisch (2013) structures of ownership influence the way those firms internationalize. However, according to Harzing and Sorge (2003, p.206) “internationalization strategy is visibly related to universally conceived variables, especially industry and size”, which means that those two “variables” also have to be integrated in the study. Moreover, a study by George, Wiklund and Zahra (2005, p.210)

(13)

analyzed the effects of SME ownership on the scale and scope of SMEs’ internationalization proving that “the ownership structures of SMEs influence their proclivity to take risks and expand the scale and scope of their internationalization efforts”, making it clear that the type of ownership influences the firms’ internationalization strategy. In the same study the authors highlight the need for “future studies across countries and industries to enrich the understanding (…) on the various dimensions and outcomes of SME internationalization” (p.230).

2.2 Small and Medium-sized Enterprises

Regarding its size, firms can be divided in different categories and the focus of this study will be on small and medium enterprises, best known as SMEs. The European Commission (2017) defines Small and Medium-sized Enterprises (SMEs), as firms whose staff is less than 250 people and whose turnover or total balance sheet is lower or equal to 50€ M or 43€ M, correspondingly.

In Europe, “nine out of every 10 enterprises are SME, and SMEs generate two out of every three jobs”; SMEs are the heart of the economy driving economic growth and job creation. In 2015, around 23 million SMEs generated €3,9 trillion and employed 90 million people representing two thirds of EU28 employment. The President of the European Commission Jean-Claude Juncker describes SMEs as the backbone of their economy (European Commission, 2016b). Franco and Matos (2015) identify a specific country, Portugal, where SMEs exert a strong influence on the economy in terms of employment and contributions to national wealth. According to the Portuguese National Statistics Office (INE, 2016a), SMEs are the main drivers of employment creation and are recognized as a pillar of the national economy. In 2014, and according to INE, 99,1% of the firms were SMEs and although large firms are still responsible for the majority of the turnover, SMEs account for about 80,5% of employment.

The international business environment changes witnessed in recent years have been particularly important on SMEs forcing them to rethink their responsibilities and the way to perform and impact society (Franco and Matos, 2015). Their small size allows them a greater organizational flexibility compared to large firms (Rogers, 2004) – this level of flexibility is also

(14)

positively related to the level of intangible assets possessed by the SME – as well as a greater possibility of firm growth (de Carvalho et al., 2013).

SMEs are a very relevant part of the global economy and have a strong weight as source of employment and communities’ wellbeing. Their role depends on the ability to promote innovation and embrace entrepreneurial strategies (Pacheco, 2016). So, the role of the leadership in this type of firm becomes a pertinent issue to be studied since leadership has an increasingly fundamental role in SME management. Leadership is a managers and owners’ responsibility which includes “encouraging and supporting the initiatives of individual employees and in improving work procedures for the benefit of the organization” (Moriano et al., 2011, p.103).

2.3 Agricultural Industry

According to Harzing and Sorge (2003) in addition to size, industry should also be taken into account when studying the internationalization of a firm which, as well as ownership as some ownership structures are more commonly seen in specific industries and sectors. In order to have a better understanding of how ownership affects internationalization this study will be based on a specific industry, the agricultural. Agriculture represents a large industry in the EU and is mainly composed by SMEs which have a heterogeneous ownership structure.

Almost half of the land area of the EU is used for agriculture and many communities depend on it (Eurostat, 2016b). Portugal, a Member State of the EU, depended on agriculture many years ago, albeit mainly as subsistence, until a big exodus from the countryside to the city occurred in the 20th_{century and the country started to have to import more to satisfy all its demand. With EU}

membership, the Portuguese agricultural industry contracted further but, in recent years, there has been a renewed interest and investment on agriculture and more and more young people started studying and returning to the countryside to produce goods like fruit, vegetables, olive oil and wine, for many of which Portugal has unique climate conditions, and which are now being exported in sizeable quantities. From 2010 to 2014, the number of SMEs in the agricultural industry continued its increasing pace from previous years and in 2014 there were 128,757 SMEs

(15)

from a total of 128,765 firms in the industry (Pordata, 2016a, 2016b) which reflects the importance of SMEs in the value and performance of the industry.

Over time agricultural production has become more concentrated and a division between “small family-run, labor-intensive diversified farms and larger corporate farms which tend to be relatively specialized” (Eurostat, 2016b) has emerged and small farms have been a keystone for the European Union agricultural activity. However, there’s no unique definition for small or large farms. These definitions depend on “geology, topography, climate and natural resources, as well as the diversity that is found in terms of (former) political and economic systems, regional infrastructure and social customs” and the differences between Member States regarding the average size of their farms are thus linked to ownership patterns. This means that “small farms are characterized by semi subsistence, family holdings, whereas larger farms are more likely to be corporately-owned, joint stock and limited liability farms, or cooperatives” (Eurostat, 2016b). The majority of the EU’s farms are relatively small, family-run holdings.

2.4 Wine Production

Contrary to what happens in other areas of the agricultural industry, most wine companies do not have any shares listed in the stock exchange and their ownership remains in families and co-operatives (Coelho and Rastoin, 2004) which is why the focus of this study will be on wine producing firms.

“The EU is the world's leading producer of wine, with almost half of the global vine-growing area and approximately 65% of production by volume” (Eurostat, 2016b) and the introduction of the Common Market Organization (CMO) developed the wine market considerably. Data from Eurostat (2016a) shows that in 2015, Italy (29.4 %), France (26.3 %), and Spain (23.6 %) were the leading EU countries in grape production for wine use, representing 79.3 % of total production. These countries were followed by Germany (5.1 %), Portugal (3.9 %), Romania (3.2 %), Greece (2.3 %), Hungary (2 %), and Austria (1.3 %). These 2015 values represented an increase in the production of grapes for wine use by around 3.5 % compared to 2014.

(16)

Vivas and de Sousa (2013) identify European countries as traditionally producers (PTP – países tradicionalmente productores). These are countries whose concerns about production are focused on associating product quality with territory and culture (Denominations of Origin) and on which regulations establish potential production as well as the market intervention mechanisms. Consumption in PTP countries decreased and the demand in other countries increased significantly which represented a market opportunity for countries in South America and especially Oceania – NPP countries (nuevos países productores, e.g., new producer countries)– due to the European focus on domestic market and contradictory regulations on its operations. In the later 90s, globalization had already spread its effects around the world which allowed for a huge growth in the production of these NPP allowing them to gain a strong international presence.

Also, the fact that industry was heavily regulated by the European Union through the Common Market Organization (CMO) and lightly regulated in the NPP created differences in the competitiveness at international level (Rastoin et al, 2006). The PTP lost their strategic position but learned that their success also depended on foreign markets, which forced them to re-evaluate how globalization reshaped the wine production and the international market and to identify which threats and opportunities they faced (Campbell & Guiber, 2006).

A redefinition of actors and strategies took place in a mature market characterized by an increasing sophistication of products (high consumer demand in terms of supply targeting and quality of service) through the intensification of competition and the concentration of supply, a "global battle" (Royo et al, 2007). It focused on decreasing the gap between production and domestic consumption, which in most companies meant increased attention to the export market (Campbell & Guiber, 2006).

In Portugal, as well as in other PTPs (traditional producing countries), wine producers now face a highly competitive domestic and international market. Wine production has a heavy relevance in the Portuguese economy representing a significant share in agricultural production, contributing positively to external trade balance, and generating employment and income in other sectors that depend on it, namely cork production, the preferred material to seal wine bottles (Portugal is the worlds’ leading cork producer). Since 1986, the year Portugal joined the European

(17)

Community, the wine sector has been changing in aspects like the renewal of vineyards and the modernization of processing and marketing facilities, and also increasing its wine production quality and competition, and with broad availability of brands and types of wines, both in the domestic and international market (Duarte, Madeira & Barreira, 2010).

Concerning trade, wine is the Portuguese main agri-food export with 20.5 % in 2006 (MADRP - GPP, 2007). According to the Portuguese National Statistics Office (INE, 2016b, 2016c, 2017) in 2015, 178,957 hectares all over the country were covered in vineyards and the total production of wine reached the value of 7,044,677 hl. The popularity of wine is proved by the values of 2015 and 2016’s domestic consumption reaching an average of 4.8 million hl, i.e. 45.2L per capita.

2.5 Agglomeration

Globalization and its consequent trade liberalization brought changes to country’s production and trade. It also brought two apparently contradictory patterns observed individually in some industries: the international fragmentation of production chains; and the agglomeration of (vertically) related firms (Amiti, 2005).

In Grazi, van den Bergh & Rietveld (2007) agglomeration is presented as a clustering of economic activities, and an effect that can represent a positive externality arising from the sharing of certain inputs like labor and communication networks (Eberts and McMillen, 1999) which occurs when production facilities are geographically close. This geographical closeness allows firms to benefit from access to an increasing number of potential customer, suppliers and greater local market (Holl, 2004) and by clustering firms can enjoy the benefits of agglomeration economies: labor market pooling, labor sharing and knowledge spillovers; which according to Marshall (1920) facilitates an efficient organization of production.

Agglomeration effects allow for companies to expand their competitiveness, and regions and countries to enhance their growth potential the same way clusters of firms use the increase of return generated by locational proximity. As pointed out by Guimarães, Figueiredo & Woodward

(18)

(2000), “agglomeration economies result from industry-specific localization, obtained when firms in the same industry draw on a shared pool of skilled labor and specialized input suppliers” (p.122). Porter’s (1990) initial definition of cluster was a group of competitive industries within a nation. Later Porter (1998) recognized the importance of the sub-national agglomeration aspect of clusters, and updated the definition from simply enterprises to enterprises and various institutions of the public and private sector. At that point, a cluster was then a “geographically close group of interconnected companies and associated institution, in a particular field, linked by commonalities and complementarities” (Aničić, Zakić, et al. 2016, p. 507). Ten years later studies were being based on a new definition: a cluster comprises a group of different organizations and institutions defined by their geographic locations that interact formally and informally, through inter-organizational and interpersonal relations and networks (Hamdouch, 2008). The cluster allows firms to have access to information regarding the characteristics of the products or services of their competitors and their production costs and, due to the geographically proximity, firms can effectively compare their performance with their competitors.

Richardson (1972) characterized clusters by horizontal and vertical dimensions. The vertical dimension integrates companies with different but complementary capabilities that carry out complementary activities between them. On the other hand, the horizontal dimension integrates companies with similar capabilities that perform similar activities. This last dimension can play an important and decisive role in the beginning phase of the cluster’s formation and specialization (Bathlet et al., 2004). The horizontal dimension creates an incentive for variation and differentiation of products due to the rivalry that exists between the firms.

Firms and clusters mutually influence each other, which affects their growth and performance (Hendry et al., 2000). One of the factors that influences the growth and performance of both firms and clusters is the existence of networks and links between firms. In conceptual terms, clusters and networks differ in the way that they occur in specific geographical and institutional settings.

Clusters are developed with the purpose to achieve a perfect balance between the knowledge effect of clusters and networks (Visser, 2004). And, when finally developed, clusters

(19)

use all the advantages of the geographical proximity and at the same time develop networks (local and international). Which means that as the cluster progresses, networks will be developed local and internationally and those better-established networks can help the firm in their internationalization process.

As highlighted by Porter (2000) local rivalry, the existence of demanding home customers and specialized suppliers, improves competitiveness, and strong developed clusters provide a powerful aid for productivity and capacity for innovation. Mariotti and Piscitell (2001) point out that the absence of local competition influences negatively the local companies making them structurally unable to compete and succeed in the international environment. By being successful in the domestic market, firms in the cluster bring in capabilities they need for the international market. Clusters can act as enablersfor the internationalization due to the opportunity they present to firms belonging to them to reinforce their competitiveness (Borwn and Bell, 2001). A higher predisposition for internationalization can be found in firms located within strong clusters (Grogaard et al., 2013).

According to De Arcangelis et al. (2003), clusters have an impact on export and its growth and dynamics. The clustering strengthens the specialization domestic model, strongly influencing the sectors that already experience higher export growth. As pointed out by Yanhong (2012), clusters that maintained an active specialization model and that were able to innovate and readjust their businesses achieved export growth. Supporting this are the findings of Singh and Chugan (2013) that identify clustering as a significant determinant in explaining the firm-level export performance.

A study by Aničić, Zakić, et al. (2016) the opportunities, created by clusters, for internationalization of Serbian SMEs, highlighted that clusters of SMEs in developed economies have a higher level of competitiveness than large firms and as a result of modern technology, communications and investments brought by globalization, clusters have an active role in the growth of regional economy and its integration. For SMEs, the positive effects of clustering are numerous: “introduction of quality management system, new technologies and innovation, access to new markets and increase in exports, reduction of operating costs, cooperation with scientific

(20)

research institutions, and attracting more attention of policy makers” (Aničić, Zakić, et al., 2016, pp. 506). The study also mentions that if firms are already present in the international market, selling outside their region and country, the association and cooperation between them increases.

The increase in exports brought by clustering proves that agglomeration is substantially relevant to the wine industry because “the predominant form of internationalization of SMEs in the wine sector is direct and indirect export[ing]” (Kubíčková & Peprný, 2011, p.337), which means that by clustering wine firms can improve their international presence due to the above mentioned positive effect of clustering for SMEs of giving access to new markets and increase their exports (Aničić, Zakić, et al., 2016).

In Portugal, the wine industry is divided into fourteen regions according to their geographical location and each region is divided in sub-regions. For example, Alentejo, the region that has led Portugal in its wine revolution, is divided in eight sub-regions: Portalegre, Borba, Évora, Redondo, Reguengos, Granja/Amareleja, Vidigueira and Moura (winefromportugal.com, 2017a). Each of these sub-regions aggregates different firms, brands, producers and farms all with different sizes, types of ownership and strategies for the domestic and international markets. Although, in Portugal, these clusters were not created voluntarily; firms were appointed by Wine and Vineyards Institute (Instituto da Vinha e do Vinho) to this region.

A DOC certification is a recognition that the oldest Portuguese producing regions have (Infovini, 2017) and the existence of these clusters allowed for firms to obtain this quality recognition (winesofportugal.info, 2017). In addition to certifying the wine origin, the DOC’s certificate goal is to ensure the quality of the wines in each region establishing the recommended varieties, the methods of vinification, the minimum alcoholic strength, the yield per hectare and the periods of aging in bottle or in hulls, as recognition of good quality (Winesofportugal.com 2017b). Belonging to this region, and cluster, allows firms to sell their wines with this recognition which may increase its perceived value and consequently its international demand.

WP1: Clustering positively affects the perceived value and international demand for products of

(21)

2.6 Family Owned SMEs

As seen before, agriculture and especially the wine industry businesses are mostly SMEs. D’Angelo, Majocchi and Buck (2016) highlight that “SMEs are important to world business”, accounting for two-thirds of all businesses globally (Family Firm Institute, 2014) and the majority of SMEs are family firms, representing 85% of small and medium enterprises in the EU and the USA (Kontinen & Ojala, 2011) and is estimated that 70%-90% of global GDP annually is created by family businesses (Family Firm Institute, 2014). The definition of family firms has been highly discussed but for the purposes of this study the definition used is that a family firm is a firm where the family controls the business through significant involvement in ownership and management positions (Sciascia & Mazzola, 2008).

There are different views regarding entrepreneurial behavior of family firms: whereas some see these firms as particularly supportive of corporate entrepreneurship and innovation (Craig and Moores, 2006; Zahra, 2005) and depict them as more dynamic, striving for international opportunities (Eddleston, Kellermanns, & Zellweger, 2012), the majority of studies state that family firms are averse to risk (Fernández and Nieto, 2005; Naldi et al., 2007) and resistant to change (Kellermanns and Eddleston, 2006). It is the result of increasing globalization that makes firms not limit their business to their domestic market (Mitter et al., 2014) in order to grow or even survive (Kontinen and Ojala 2010). This risk aversion and the desire for control is argued to result from the concentration of family wealth in a single organization (Gallo, Tàpies, & Cappuyns, 2004).

WP2: Family Firms derive their risk aversion from the high concentration of family wealth in a

single organization

Moreover, Graves & Thomas (2008) highlight that due to their risk-averse nature and their resistance to change it can be argued that family SMEs are more likely to take a traditional pathway to internationalization when comparing to other firms, like non-family SMEs, who are more likely to adopt a non-traditional pathway. Adapted from (Bell, McNaughton, Young, and Crick, 2003), one of the characteristics of this traditional pathway is its reactive trigger when comparing to the

(22)

identified opportunity in global niches for competitive advantage followed in the non-traditional pathway.

WP3a: The internationalization drive of Family SMEs is determined by a reactive trigger

WP3b: The internationalization drive of Non-Family SMEs is determined by an identified

opportunity

A second characteristic of this traditional pathway is its firm survival motivation (presented in family firms) that is believed to lead them to a protectionist behavior of internationalization after having a solid domestic presence. Whereas the non-traditional pathway relies more on gaining competitive advantage leading those firms to focus simultaneously on both foreign and domestic markets (Bell et al. 2003).

WP4a: The internationalization motivation for Family SMEs it is its survival

WP4b: The internationalization motivation for Non-Family SMEs is the search for competitive

advantages

WP5a: Family SMEs internationalize after they have established a strong home country

competitive position

WP5b: Non-Family SMEs internationalize to (or while) establish(ing) a strong home competitive

position

A third characteristic of this traditional pathway is its incremental expansion and the focus, at first, on psychically closer markets and an incremental expansion on this distance after acquiring more knowledge and experience, portrait by the Uppsala Model (Johnson and Vahlne, 1977), believed to be adopted by family SMEs. The model “focuses on the gradual acquisition, integration and use of knowledge about foreign markets and operations, and on the incrementally increasing commitments to foreign markets” (Johanson and Vahlne 1977, p.23).

This model also highlights that the choice of markets occurs in stages, as firms start exporting to countries with a close psychic distance and later they start spreading into more distant countries. And this distance refers to differences between home and host country (perceived by managers) – like language, culture, political system, etc – which avoids the flow of information from and to the market (Hutzschenreuter, Kleindienst & Lange, 2015). On the contrary, a focus on

(23)

lead foreign markets, independently of the psychical distance, is believed to be adopted by firms that follow the non-traditional pathway (Bell et al. 2003). This is relevant to the understanding of a firm’s internationalization because, as highlighted by (Hutzschenreuter, Kleindienst & Lange, 2015, p.167), “Four main types of outcomes are affected by distance: market selection; entry mode; performance; and knowledge transfer”.

WP6a: Family SMEs internationalize first to psychically closer markets

WP6b: Non-Family SMEs internationalize to niche markets regardless of psychical distance

A fourth characteristic of the traditional pathway is on one hand its slow pace and on the other its reduced number of countries of internationalization of more traditional firms whereas the non-traditional ones tend to have both a rapid pace, which according to Taylor & Jack (2013, p.703) refers to the “time taken between the inception of the firm and its entry into international markets” and an expansion to a large number of key markets (Bell et al. 2003).

WP7a: Family SMEs internationalize with a low pace WP7b: Non-Family SMEs internationalize with a high pace WP8a: Family SMEs internationalize to a low number of markets WP8b: Non-Family SMEs internationalize to a high number of markets

And finally, another characteristic of the traditional pathway is its conventional entry mode on foreign markets (i.e. exports, directly to customers) when comparing to non-traditional firms, that follow a not so traditional pathway that has more flexible and diverse entry modes (Bell et al. 2003; Kubíčková & Peprný, 2011).

WP9a: Family SMEs internationalize through conventional entry modes, mainly exports WP9b: Non-Family SMEs internationalize through diversified entry modes

There is evidence in the literature that governance structures of family firms are heterogeneous (Siebels & Knyphausen-Aufseß, 2012), levels of ownership and management can vary (Chrisman et al., 2012) and create different types of firm (Nordqvist, Sharma, & Chirico, 2014) and that can make them decide differently regarding internationalization (Graves & Thomas, 2006). However, results regarding the impact of ownership on internationalization have been contradictory. Some studies have concluded that family ownership and control creates a positive

(24)

impact on the internationalization of a business (Zahra, 2003), others have argued that negative effect on a firm’s international activities is created by these family-related factors (Fernández & Nieto, 2006; Graves & Thomas, 2006).

Studies regarding the reason for these contradictions present the simple division of family vs. non-family categorization of SMEs as the main cause and underline the need to overcome this dichotomy “in order to increase our understanding of the separate and combined impact of ownership and management on family SME internationalization” in order to fully understand the impact of family ownership and control (D’Angelo, Majocchi and Buck, 2016, p.535).

This way, the authors provide a new division of SMEs dividing family ownership in influenced (< 50%) or controlled (> 50%) and depending on the management: family only or family and external managers. This new division puts family influenced SMEs in an internationalization pathway somewhere between the traditional and the born-global due to its less strong family control but still with the existence of a family business core characteristics.

Although having the possibility of being family only or family + external (or in the case of non-family SMEs, fully external) management may only be evaluated according to the ratio of external to total managers employed by the firm, since being a part of the family makes the managers behave in a more owner-like fashion. Considering Oesterle, Richta and Fisch (2013) statement that managers favor a high degree of internationalization, the definition being the ratio of export of a firm (the higher the ration the higher the degree of internationalization) as stated by Kubíčková, & Peprný (2011), together with D’Angelo, Majocchi and Buck’s (2016, p.538) argument that “[t]he effect of the involvement of external managers on internationalization depends on the level of family ownership and it will be more positive for family-influenced (low level of family ownership) than for family-controlled SMEs”, we can say that Family Influenced Firms will be less traditional than Family Controlled Firms and so support a higher degree of Internationalization.

(25)

WP10a: Non-Family SMEs favor a higher degree of Internationalization than any type of Family

Firm

WP10b: Family Influenced SMEs favor a higher degree of Internationalization than Family

Controlled SMEs

To empirically study these working propositions, an in-depth multiple case study was conducted. The following chapter will lay out the methodology, where the methods and approaches are chosen and defined for the purpose of this research. This chapter is followed by a results section which presents an analysis of the data collected, which is then followed by a discussion section where conclusions are conferred.

(26)

3 METHODOLOGY

This section presents the adopted research methodology. I will present how the purpose and objective of the study are intended to be reached, justifying the choices of methods in light of those objectives. The section starts by providing an overview of conceptual issues considered when selecting the methodology. It then describes methodological choices, and the research design that defines the structure of the study, the cases and the execution of the research. A discussion and explanation of the data collecting methods follows, for which semi-structured interviews and additional documentation provided by the studied firms were used in order to have multiple case-study analysis. Finally, the adopted data analysis method is discussed using a thematic coding approach.

3.1 Philosophy of research

Several methodologies can be used when conducting a scientific research. For a given research undertaking, the phenomenon being studied along with the nature of the research question should dictate which particular methodology is the correct one to be used due to their different approaches of information gathering (Gill & Johnson, 2010).

Methodology choices imply philosophical commitments that researchers have to embrace and be aware of, because those commitments will have an impact on the work that is being developed as well as on the understanding of the investigation (Gill & Johnson, 2010). The adopted philosophy shapes the way in which the researcher views the world and implies the use of a specific research strategy. There are two major elements of a research philosophy: ontology and epistemology.

Ontology explains the nature of reality which raises questions for the researcher regarding the way the world operates and the commitment needed to particular views (Saunders et al., 2007). Ontology is based on how reality is constructed which might be either an objective or subjectively perspective. In this study, a more subjective ontology is adopted which implies that “entities are created from the perceptions and consequent actions of those social actors responsible for their creation” (Saunders et al., 2007, p.601). This means that our thinking and speaking regarding

(27)

reality shapes it due to the way we interpret and the language we use to explain reality (Krijnen & Kee, 2007).

Epistemology explains what is the acceptable knowledge in a field of study. It is the element of research philosophy that studies the origin, nature, validity and limits of the human knowledge (Krijnen & Kee, 2007). In this study, a more interpretivist approach is used. It is an epistemology that implies the necessity for the understanding of the differences between humans as social actors and their roles by the researcher (Saunders et al., 2007). Due to the adoption of this interpretivist approach a semi-structured approach to the interviews was embraced, which enables for the coverage of the themes of interest found through the literature, but nevertheless allows the interviewees to give insights that may not have been understood or highlighted given the social constructive nature of reality, then by allowing for a more flexible approach on data collection.

3.2 Choices in research methods

3.2.1 A deductive qualitative research

According to Saunders et al. (2007, p.600), a research is a “systematic collection and interpretation of information with a clear purpose, to find things out”. And when conducting a research there are two approaches that can be chosen: inductive or deductive approach. A deductive approach implies a testing of literature driven propositions that will be supported or refuted after the analysis of the collected data (Saunders et al., 2007), and is the one used in this study, as working propositions regarding the internationalization of family and non-family agricultural SMEs and the role of clusters in this internationalization were drawn from academic literature.

Regarding data collection and data analysis, the literature divides this choice in two categories: quantitative and qualitative research methods. Qualitative research is used when motivations, beliefs and perceptions of a specific phenomenon are the object of the study (Eisenhardt, 1989). And as Miles and Huberman (1984, p.15) highlight a higher number of researchers in fields traditionally studied through quantitative methods “have shifted to a more qualitative paradigm”, because this type of data is “a source of well-grounded, rich descriptions and explanations of processes occurring in local contexts”. Qualitative data preserves chronological

(28)

progress, assesses local causality and derives rich explanations which leads to a more in-depth knowledge that help researchers to go over and above initial frameworks. According to Smith (1978) qualitative studies’ findings have a quality of “undeniability” due to their “concrete, vivid, meaningful flavor that often proves far more convincing to a reader (…) than pages of numbers” when words are organized in stories or situations (Miles and Huberman, 1984, p.15).

Qualitative research

Since the purpose of this study is strongly associated with behavioral science, a qualitative research method was chosen in order to overcome the problems that a quantitative approach imposes on this type of study and to obtain better results.

Qualitative research embraces the complexity of social phenomena by recognizing the multiple realities and developing an interpretive and naturalistic approach to the subjects in study. In this research, most data will be collected face-to-face from participants; this way there will be an examination of the full context when interacting with the participants (Taylor, 2005). According to Taylor (2005, p.101), “this means that qualitative researchers study things in their natural settings, attempting to make sense of, or interpret, phenomena in terms of the meanings people bring to them” allowing a more in-depth understanding of a phenomenon. This more in-depth understanding is also possible due to a gathering of data among a relatively small number of people or cases (Taylor, 2005).

To assess qualitative studies, there are two criteria proposed by the literature: authenticity and trustworthiness. Authenticity is related to the suitability of the results, if the findings contribute to our understanding of the social phenomenon being studied as well as the reaction to the findings by the related parties (Bryman 2003). This concern has been addressed in this study by conducting a large-scale literature survey in advance of the research. Trustworthiness is related to the quality of the findings in the sense of whether they are worth paying attention to or not (Lincoln & Guba, 1985). This second criterion is achieved in this research by conducting multiple interviews with both directors and senior managers of agricultural SMEs in sub-regional agglomerations to get data that reflects perspectives from multiple types of stakeholders.

(29)

3.3 Research design

Research design explains the structure of the research giving an overall view of the methods chosen and the reasoning behind them, including also an explanation on how the researcher intends to carry out the study (Saunders et al., 2007).

3.3.1 Multiple case study

In this study, a multiple case-based approach (Eisenhardt 1989; Yin 2012) is adopted. A case study research starts with the desire to reach an in-depth understanding of a single or small number of cases that are set in their real-world contexts (Bromley, 1986). This in-depth focus and the desire to comprise more contextual and complex conditions allows for a coverage of a wider range of topics which highlights that case study research goes over and above the study of isolated variables, a method associated with quantitative study methods (Yin, 2012).

However, the nature of the research question is essential when determining the appropriate research method (Jill & Johnson, 2010). Since this study is focused on explaining how the ownership of agricultural SMEs in sub-regional agglomerations influences their internationalization, the research question has an explanatory nature; a case study, according to Yin (2012), is a pertinent method for this study. Nevertheless, the case study method also brings some disadvantages: since a phenomenon is investigated with a low number of unit of analysis it can be pointed out its inability to generalize the findings of the study to a broader level. Nonetheless and according to Yin (2012), this disadvantage can be counterbalanced through analytic generalization.

3.3.2 Research Development

In order to find out how ownership affects the internationalization of agricultural firms in a sub-regional agglomeration and to facilitate data selection as well as theoretical replication, this study examines three different types of ownership as research units of analysis: a) Non-Family SMEs, b) Family Controlled SMEs and c) Family Influenced SMEs. The data for this study was collected mainly through semi-structured interviews with directors and senior managers as well as family members working in the firm. This was complemented by documentation made available by the

(30)

firm on the topic. To increase the quality and the suitability of the interview, a matrix linking the questions to the working propositions was developed, see Table 3.

In order to investigate how ownership affects the internationalization of agricultural firms in a sub-regional agglomeration, six Portuguese wine producing SMEs belonging to a cluster (region) were to be selected in order to aim for two firms per ownership category as well as two interviews per firm, allowing the data triangulation (Patton, 2002). The design has literal replication between firms within the same category, while theoretical replication is expected between the categories, thereby contributing to the external validity of the study (Eisenhardt 1989; Yin, 2009). However, this design was not possible due to lack of availability of firms and managers contacted for the study. Consequently, the final case study design was the following:

Table 1. Overview of Case Study Design

A total of eleven participants were inquired for this study during May 2017. Family members were included in the research to obtain possible differentiation in the responses because as family members they can have a different perception of the firm, the business and the internationalization itself, since they have a stock share in the business unit. The semi-structured interviews were designed in English for a better link between the concepts on the working propositions to be studied and the questions and topics to be covered on the interview. However, the interviews were conducted in Portuguese since both interviewer and interviewees were native speakers. According to Cortazzi, Pilcher & Jin (2011, p.510-511), “interviewing in participants’ first language is often held to be advantageous: it is said to lead to more open, easier, more expressive communication and to elicit more or more accurate information” and the interviews that are not conducted in the interviewee’ first language “could imply that those studies which do not do so are probably leaving their participants at a disadvantage, with possible effects on data quality”.

FI2 Interview 10 Interview 11 Interview 6 Interview 7 Interview 8 Interview 9 FC1 FC2 FC3

Non-Family SMEs Family Controlled SMEs Family Influenced

SMEs NF1 Interview 1 Interview 2 Interview 4 Interview 3 NF2 Interview 5

(31)

A translation of the semi-structured interview in Portuguese was made available to a third party, bilingual in English and Portuguese, to be translated back to English in order to access the quality of the translation and design the final interview question. The interviews were recorded in mp3 format for analysis purposes. Interviews had an average duration of 35.28 minutes.

Table 2. 1_{Overview of Interviews}

3.4 Data collection; Semi-structured interviews

The collection of qualitative data for the purpose of this research was done, as a primary source of data, through semi-structured interviews of two directors and/or senior managers of six wine producing SMEs belonging to a cluster from Portugal.

3.4.1 Semi-structured interview

The most common method in qualitative research continues to be the interview (Gill, Stewart, Treasure & Chadwick, 2008), because it helps gather valid and reliable data that is relevant to the study’s research questions and objectives. This method is especially useful to provide an insight on thoughts, feelings, knowledge and intentions of the interviewee. Interviews probe to identify perceptions and views of the interviewees on the working propositions and research questions (Patton, 2002). To see the research topic from interviewee’s perspective and understand how and why they have come to this perspective and view is then the goal of any interview conducted under a qualitative research (Cassel & Symon, 2004).

1_Ownership:

NF – Non-family SMEs FC – Family controlled SME FI – Family influenced SME

Ownership Name Identification Date Lenght (min)

NF1 [Anonymous] Operations Manager 23/05/2017 34,12

NF1 [Anonymous] Sales Representative 23/05/2017 30,20

NF2 Mrs. MG Partner 29/05/2017 41,36

NF2 Mr. PS Financial Manager 25/05/2017 33,24

FC1 Mr. FM Family Member 17/05/2017 33,31

FC1 Mr. JV Marketing Manager 30/05/2017 35,54

FC2 Mr. JG Family Member/ Sole Owner 02/06/2017 40,56

FC3 [Anonymous] Financial Manager 19/05/2017 35,55

FC3 Mr. FA Operations Manager 18/05/2017 43,31

FI1 [Anonymous] [Anonymous] 05/06/2017 30,54

FI1 [Anonymous] [Anonymous] 05/06/2017 30,30

(32)

This data collecting method has many relevant advantages. First, it can be considered a very flexible method due to its adaptability to different types of research questions. Second, it can be used both to examine broader issues and to address more focused questions (Cassel & Symon, 2004). Moreover, and according to Cassel & Symon (2004, p.21), an “area where qualitative interviews may be of great use is in studying organizational and group identities (…), where a complex pattern of organizational, work-group, professional and interpersonal loyalties exists”. This way using interviews as the data collection method is in line with the purpose of this study.

However, there are also some disadvantages regarding this method. First, it is very time consuming for both parties; second, it can create the feeling of data overload due to the great volume of data produced, which, therefore, makes analyzing harder. Furthermore, it can create a concern regarding the reliability of the results due to the uncertainty on whether the participants have enough knowledge to provide the answers needed for the research as well as on whether the participants manipulate their answers to be more in line with the desirable answers within the organization (Cassel & Symon, 2004).

This method has different types of interviews which are used depending on the nature of the research question and objectives of the study (Saunders et al., 2007). Interviews can be highly structured and formalized with the use of standardized questions for each interviewee, or they can be unstructured and informal. There are also some intermediate positions (Saunders et al., 2007). For this study, the most appropriate type of research interview is an intermediate form of research interview, a semi-structured interview. In this type of interview the researcher designs a list of themes, topics and questions to be covered due to their role in collecting data for the study of the working propositions (an overview of links between the interview questions and the working propositions is provided in Table 3). This list is created with a specific order that is decided by the interviewer; however, when interviewing, this order might not be maintained since a semi-structured interview is considered to be more of a conversation where certain topics and questions have to be covered but its order depends on its flow (Saunders et al., 2007).

(33)

Another advantage of this type of interview is the fact that to explore the research question and the objective of the study in more depth, additional questions may be asked (Saunders et al., 2007). This type of research interview is especially useful for the explanatory purpose of this study, since it allows to both understand the relationship between ownership and internationalization and, to some extent, to cover the exploratory goals of the research on how sub-regional agglomerations - clusters, might affect this relationship and seek new insights on both matters (Saunders et al., 2007).

(34)

Questions WP1 WP2 WP3 WP4 WP5 WP6 WP7 WP8 WP9 WP10

Owner/Firm’s only business?

Percentage of group/family business? X

When did the firm internationalize?

How was local presence at the time? X X X X

In how many countries is the firm present?

Which countries? In which years? X X X X X

Number of employees abroad?

X In which ways has the firm internationalized?

X X

Actual percentage of revenue from internationalization?

X When did the firm start to see the importance of internationalization?

What were the opportunities and concerns at that point? Location played a role? X X X X X What do you consider to be the firm’s first step of internationalization?

History of the first international presence. Chosen country. X X X X X

What were the observed opportunities?

What was the strategy? Was the cluster (location) influential? X X X X X X

How did it develop?

Other types of internationalization? Other countries? X X X X X

What were the biggest concerns?

Cluster (location) relations seemed to help in dealing with these concerns? X X X

What made internationalization successful? What was the winning strategy?

Special characteristics of the firm? DOC recognition allowed due to the presence of the firm in the cluster helped?

X X X X X X

Who are your biggest competitors? More concern about firms in the region or outside?

Belonging to a cluster (region) made internationalization “easier/harder?” X X X

How was your strategy different from competitors?

X X X X

How location helps in your strategy?

X X X

What are the future steps for internationalization?

X X X X

(35)

3.4.2 Analyzing data

After the collection of all the required data, an analysis is needed to facilitate its examination, in order to derive answers on the drawn working propositions and to the thesis research question.

3.4.2.1 Analyzing the interview

As explained previously every interview was recorded. The mp3 recording was transcribed for an easier analysis of all the information collected. Since the interviews were conducted in Portuguese, the transcriptions were also made in Portuguese and analyzed in that form due to the problem stressed by Cortazzi et al. (2011, p. 520) that “methodologically, ‘expansion’ usually occurs, so a translation ‘tends to be longer than the original’ (Berman, 2004: 282). Furthermore, the key influence of the translator on meaning is stressed (Venuti, 2004): the translator ‘becomes a producer of research data who shapes the analysis through their identity and experiences’ (Squires, 2009: 279)”. Quotes were used in the results section when a translation into English is provided.

Miles and Huberman (1984, p.56) state that “The real danger is that, at the end of data collection, the analyst will be overloaded with more data than can be processed” and that coding is a common solution for this danger. This approach comprises the creation of codes, abbreviations or symbols that relate normally to a transcribed sentence in order to classify the words collected in the data. These codes become categories derived from the research question, the working propositions as well as key concepts (Miles and Huberman, 1984). The purpose of this code is to help the researcher to rapidly identify segments that relate to concepts, themes or questions. At the same time this approach controls for internal validity.

In this research, a set of descriptive codes were drawn, codes that “entail no interpretation, but simply the attribution of a class of phenomena to a segment of text” (Miles and Huberman, 1984, p.56) and further on were revised as more data was collected and analyzed. The following codes were identified and defined as a final version:

(36)

Code Abbreviation Definition

Type of ownership TO Category of the group of owners of the firm

Family Concern FC Weight of the firm in the family wealth

Risk Aversion RA Dislike for risk, preferring “safer” investments normally associated with lower returns Domestic Presence when Internationalizing DPI Firm’s established domestic presence when initiating internationalization

Internationalization Trigger IT Act or event that serves as stimulus and initiates internationalization Internationalization Motivation IM Strong reason to embark upon an internationalization process

Role of the Cluster RC Influence of agglomeration

Psychich Distance PD Perceived differences between home and host country

International Expansion Patterns IEP Pace, Number of Markets and Entry Modes

External Manager EM Hiring of external manager to help internationalization

Degree of Internationalization DI Share of revenues from non-domestic markets

Ownership and the internationalization of agricultural firms in a sub-regional agglomeration