SME internationalization : the influence of managerial characteristics on foreign entry mode decisions of Dutch SME’s

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SME internationalization; the influence of

managerial characteristics on foreign entry

mode decisions of Dutch SME’s

Rianne Beguin

Student number: 10617418

MSc Business Administration – International Management University of Amsterdam

First supervisor: Drs. E. Dirksen Second supervisor: Dr. A. E. Kourula Final version

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Abstract

This research investigates the foreign entry mode decision-making of Small- to Medium sized enterprises in the Netherlands. The main goal is to examine how and to what extent foreign entry mode decisions are influenced by human capital characteristics of entrepreneurs. Thus to find out whether the individual has impact on strategic decisions, besides firm and

environmental influences. Previous literature on SME internationalization indicates that four human capital characteristics, including international experience, risk perception, network accessibility and industry-specific experience, are expected to influence decisions on equity- and non-equity entry modes. A qualitative multiple case study design was used, whereby extensive information on fourteen Dutch SME’s operating internationally was acquired through semi-structured interviews with the founders or managing directors. To complement the perceptions of the managers, an international business advisor was interviewed. From the results can be concluded that managerial human capital characteristics have impact on foreign entry mode decisions. However, solely the entrepreneur’s risk perception was found to

determine whether an equity or non-equity entry mode is chosen. Both international

experience and network accessibility have a certain degree of influence on the type of entry mode chosen, but mixed results indicate that entrepreneurs consider and implement all kinds of entry modes when international experience and network is present, instead of choosing either equity or non-equity entry modes. Industry-specific experience influences other decisions regarding internationalization, e.g. the decision to start the internationalization. Beside these managerial characteristics, other product, industry and firm factors are observed to be influential for entry mode decisions.

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Acknowledgements

I would sincerely like to thank my supervisor Mr. Drs. Erik Dirksen. His input and advice have been valuable for the progress of my thesis. Especially within the first phases of the thesis project I had some difficulties in executing my research topic and design. After an extensive search on Dutch Small- to Medium sized Enterprises, it was found that most founders of SME’s have a Dutch nationality. Therefore no research could be done on the original topic of this thesis, namely the influence of cultural diversity on foreign entry mode decisions. These findings resulted in an adjustment of the research topic and data collection method. Support from Mr. Dirksen in deciding on these adjustments has been very helpful. Furthermore, I would really like to thank all of the respondents who I have interviewed. Their enthusiasm and openness about themselves and their companies have been of great

motivation. Besides, their contributions have been of utmost importance for the completion of this research.

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8. References ... 52 8.1 Books ... 52 8.2 Articles ... 52 9. Appendices ... 57 Appendix A ... 57 Appendix B ... 59 Appendix C ... 61 Appendix D ... 72 Appendix E ... 80 Appendix F ... 88 Appendix G ... 95 Appendix H ... 102 Appendix I ... 109 Appendix J ... 122 Appendix K ... 132 Appendix L ... 143 Appendix M ... 151 Appendix N ... 159 Appendix O ... 167 Appendix P ... 178 Appendix Q ... 188

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Index of Tables and Figures

Table 1a. General information on selected cases A-G...22

Table 1b. General information on selected cases H-N...23

Table 2a. Linking interview questions to propositions...25

Table 2b. Linking interview questions to propositions Chamber of Commerce...26

Table 3. Within case analysis on the influence of human capital characteristics...34

Table 4. Cross-case analysis on the influence of international experience………..39

Table 5. Cross-case analysis on the influence of risk perception………...41

Table 6. Cross-case analysis on the influence of network accessibility………...42

Table 7. Cross-case analysis on the influence of industry-specific experience…………....44

Table 8. An external perspective on the influencing factors on foreign entry modes……..45

Figure 1. An integrative conceptual model of International Entrepreneurship………3

Figure 2. An hierarchical model of choice of entry modes...6

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1. Introduction

For many years globalization and its effects on society has been a popular topic of discussion. It is a continuing process of economical, political and cultural integration. Due to a rapid increase in technological innovations and an improving infrastructure, countries are driven towards a global economy. Not only governments have to deal with a shift from national to international and eventually to global, especially firms have to anticipate on these global developments. These recent developments have decreased the barriers for firms to expand abroad. Besides firms have little choice whether or not to internationalize, if they want to keep their competitive position they should engage in international activities. The global developments and the effects on firms have attracted attention from many researchers, resulting in the extensive research field of International Business (IB). Nowadays the firm’s internationalization is a commonly used and well known research subject, which is still expanding. Research on International Business started with a focus on the internationalization of Multi-National Enterprises (MNE’s). Throughout the years several definitions and

perspectives on internationalization have been created, Ruzzier et. al. (2006) define internationalization as “the geographical expansion of a firms economic activities over a

national’s country border”, which provides a clear explanation of the term. Extensive

research on MNE internationalization has resulted in some important and commonly used theories, which include the transactional approach, the eclectic paradigm, the resource based approach, the network approach and the stage model (Ruzzier et. al, 2006).

Due to the globalizing market environment not only MNE’s, but also Small- to Medium sized Enterprises (SME) are forced to expand their business abroad to ensure firm profitability. When making strategic decisions SME’s cannot merely look at their home market, because they have to compete with foreign competitors entering their home market and with more efficient competitors that have transferred business to low cost locations (Mohr and Shoobridge, 2011). Therefore both risks and opportunities associated with international competition in the home- and international market should be considered. As a result SME’s are gaining a strong international market position and have a crucial role in the global

business environment. The growing importance of SME internationalization has resulted in a new research area, wherein many research gaps need to be filled (Ruzzier et. al, 2006).

The most recently presented theory on SME internationalization bridges the gap between entrepreneurial research and IB. It is only since the beginning of the 21st century that

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2 researchers have tried to find how entrepreneurial behaviour and the international strategy of SME’s intersect and from this point in time the term International Entrepreneurship (IE) emerged (Ruzzier et, al, 2006). McDougall and Oviatt (2000) were the first who tried to combine the research paths of Entrepreneurship and IB. International Entrepreneurship was defined as “a combination of innovative, proactive, and risk-seeking behaviour that crosses

national borders and is intended to create value in organization”. Recently the definition of

IE was adjusted to “the discovery, enactment, evaluation, and exploitation of opportunities—

across national borders—to create future goods and services” (McDougall and Oviatt, 2005).

Until the beginning of the 21st century an unifying conceptual model on IE did not exist, therefore the results within the research field were viewed as inconclusive and fragmented. Antoncic and Hisrich (2000) were the first who integrated the two research streams of IE, namely SME internationalization and international start-ups, into one model. The model was created around the main properties of internationalization, including time and mode of internationalization and international performance. Environmental and organizational characteristics were found to be key determinants for these internationalization properties (Antoncic and Hisrich, 2000) . For example less international experience of SME managers, as an organizational characteristic, is expected to lead to low involvement entry modes of international expansion (Agarwal and Ramswami, 1992). In addition the model entails the expected relationship between firm internationalization and firm growth and profitability. The conceptual model of IE was later slightly adjusted, as can be seen in Figure 1 (Ruzzier et.al. 2006). The main adjustment includes the separation of entrepreneurial characteristics from organizational characteristics. Individual characteristics are expected to be important determinants for internationalization. Thus the adjusted model emphasizes the influence of individual managers and decision makers on the internationalization of firms (Ruzzier et. al. 2006). Other general models of IE have been created, e.g. by Jones and Coviello (2005), which are comparable to the model of Ruzzier et.al. (2006).

Although International Entrepreneurship is a growing research area and is receiving more attention from IB and Entrepreneurship researchers, the area still receives criticism on fragmentation, inconsistency of results and lack of a unifying paradigm (Jones et.al. 2011). The model in Figure 1 emphasizes the influence of many different factors on the

internationalization process of firms. Jones and Coviello (2005) state that the IE model is too comprehensive and broad for the scope of one study. From the general model more precise and detailed research models can be drawn, allowing researchers to test specific measures and constructs. These different and smaller parts in turn add to the larger puzzle of IE, making it

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3 possible to get an comprehensive understanding of the research area (Jones and Coviello, 2005).

Figure 1. An integrative conceptual model of International Entrepreneurship

Source: Ruzzier et al. (2006)

1.1 Research Question

As illustrated by the different IE models, entrepreneurial internationalization was found to be influenced by the entrepreneur’s human and social capital characteristics (Jones and Coviello, 2005; Ruzzier et.al. 2006) Although the entrepreneur together with firm and environmental factors influences SME internationalization, it is difficult to state what the precise influence of individual characteristics is on international strategic decision-making when different factors are combined in one research. Therefore research focussing solely on the individual is valuable for the model. As mentioned by Perks and Hughes (2007) only few studies have considered which motivations and factors induce entrepreneurs to

internationalize. In addition it was observed that most studies focus on the determinants to take the decision to internationalize (e.g. Manolova et.al. 2002; Collison and Houlden, 2005; Hutchinson et. al 2006; Ruzzier et.al. 2007), however less research has been done on the next level of international decision-making, including the decisions regarding foreign entry modes (Nakos and Brouthers, 2002; Herrmann and Datta, 2006; Carlos Pinho, 2007). Results of

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4 previous research on the influence of individual characteristics on the type of foreign entry mode chosen are inconclusive (Carlos Pinho, 2007). Due to these inconclusive results, the opportunities available and the need to investigate smaller parts of the IE model (Jones and Coviello, 2005), this research will focus on the influence of the entrepreneur on foreign entry mode decisions of SME’s by addressing the following research question:

How do human capital characteristics of entrepreneurial managers influence the internationalization mode of Small to Medium sized Enterprises?

The purpose of this study is twofold. First of all, this research aims to contribute to the creation of a comprehensive model of International Entrepreneurship. Second of all, by focussing on the impact of the individual on international strategic decision-making, this research aims to give entrepreneurs insights on how individual characteristics influence and can best be used for internationalization.

1.2 Outline of thesis

The remainder of this thesis is structured as follows. In the next section the main theories and findings within the research areas of foreign entry modes and managerial characteristics will be reviewed. From this theoretical background a research gap is derived, which is the

foundation for the presented conceptual model and propositions. The following section entails the methodology, which elaborates on the choices for a multiple case study design of 14 SME’s with a qualitative data collection method of interviews with the founders or managing directors of these Dutch SME’s. The findings on the propositions are discussed with reference to a within-case and cross-case analysis in the results section. After which statements on the propositions are done. At last this research concludes with a short summary on the key results and the scientific relevance and managerial implications, research limitations and suggestions for future research are discussed.

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2. Literature review

2.1 An hierarchical model of foreign entry mode decisions

After deciding on international expansion and the foreign market location, firms need to determine how to enter these new markets, thus they have to determine what their

international strategy will be. In the literature an entry mode is defined as “an institutional

arrangement for organizing and conducting international business transactions, such as contractual transfers, joint ventures, and wholly owned operations” (Root, 1988).

A well-known model of the distribution of entry modes is the hierarchical model of Pan and Tse (2000). In this model (Figure 2) entry modes are divided into different

hierarchical levels. Managers are expected to makes choices on entry modes along these levels. The decision on every level is influenced by a few specific factors. Therefore dividing the decision-making process into smaller steps enables managers to make thought-out, sound decisions and prevents them from comparing entry modes that differ to a great extent (Pan and Tse, 2000). Managers have to consider two things when deciding on the appropriate entry mode, namely the level of resource commitment they are willing to make and the level of control they prefer (Brouthers, 1995). The first level is concerned with the choice between non-equity or equity investments, which includes the choice whether or not to invest directly in a foreign country. As can be seen in Figure 2, equity modes are divided into two categories, Joint Ventures (JV) and Wholly Owned Subsidiaries (WOS), which both require a certain level of direct investment, resource commitment and control in the foreign country. Contrary non-equity modes, divided into export or contractual agreements, are concerned with lower level of resource commitment and the cooperation between parties can be narrowed down to a contract. Pan and Tse(2000) found support for their argument that some country and industry factors only determine first level decisions of the hierarchy, while not influencing the second level. These factors include prioritized location, host country risk, home country risk

orientation and power distance, the extent of interaction between home and host country and industry factors like advertising intensity and asset turnover (Pan and Tse, 2000). As can be seen in Figure 2 the second hierarchical level include the four most commonly used entry modes. The model has been of great importance in the literature, therefore this model will be used to identify the different entry modes used by SME’s.

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6 Figure 2. An hierarchical model of choice of entry modes

Source: Pan and Tse (2000)

2.2 Research on foreign entry modes

Canabal and White (2008) observed that the interest in foreign entry mode research area started to grow fast since the 1980s and the number of research is still growing. During these years different theories were developed to explain the reasoning behind foreign entry mode decisions. In this research the most important theories will be reviewed.

The transaction cost theory is the most commonly used theory within entry mode studies (Canabal and White, 2008). Transaction Cost Economics (TCE) emphasizes the importance of transactions costs associated with different strategic decisions. The core

assumption of TCE is the minimization of transaction costs when choosing a governance form (Zhao et. al, 2004). Transaction costs are defined as the sum of information, enforcement and bargaining costs that arise from market imperfections when entering or acting in a foreign market. Market imperfections emerge from the bounded rationality and opportunistic behaviour of people acting in the market. When transactions costs are expected to be high, a firm can overcome these costs by internalizing these transactions (Hennart, 1991a). Thus when deciding on the type of foreign entry mode, a firm should compare the transactions

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7 costs associated with each mode to choose the most suitable option. For example firms which possess tacit knowledge or differentiate through advertising would prefer a WOS over a JV, due to high enforcement costs (Hennart, 1991b). Within TCE no agreement exists on the most influential factors on entry mode decisions. A second well-known theory which includes these factors is the OLI theory.

The OLI, also referred to as the eclectic paradigm, states that entry modes decisions are determined by the interdependency of three factors, namely Ownership (O) specific advantages, Location (L) specific advantages and Internalization (I) advantages (Dunning, 2000). The influence of the three factors and the firms reaction towards these factors is context-dependent. Ownership advantages can be divided into static ownership advantages, which are the resources and capabilities owned by a firm and dynamic advantages, which include the ability of a firm to sustain, exploit or increase these capabilities (Dunning, 2000). Location specific advantages refer to the attractiveness of a foreign market. It is influenced by different factors, e.g. market potential and investment risk. Internalization advantages relate to the TCE theory, whereby advantage is derived from the fact that retaining assets, skills and transactions within the firm provides better control and saves costs (Agarwal and Ramswami, 1992). This emphasizes the fact that not only transaction costs influence entry mode

decisions, but multiple factors are determinant. Each type of advantage has a separate effect on foreign entry mode decisions, however the interrelationship between the three advantages can change the single effects. For example Agarwal and Ramswami (1992) proved that although countries with lower market potential are expected to attract less foreign firms, large firms with ownership advantages, like multinational experience, tend to choose for sole or joint ventures in these countries. These firms are guided by strategic considerations instead of the cost considerations of the TCE.

A third well known and commonly used theory within entry mode studies is the Uppsala Internationalization model (Canabal et. al, 2008). As opposed to TCE, this model, created by Johanson and Vahlne (1977), emphasizes that foreign entry mode decisions are not made according to a cost and benefit analysis. The firm’s internationalization is seen as an incremental process, whereby firms start their foreign expansion through exporting, followed by selling via an agency, then setting up their own sales subsidiary and at last creating a production subsidiary. These incremental steps can be explained by state aspects, including market commitment and market knowledge and change aspects, including current activities and commitment decisions (Johanson and Vahlne, 1977). The resources committed to foreign markets and the knowledge about these markets affect the decision-makers’ perception on

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8 new opportunities and risks. Managers use past foreign market experience to enhance their market knowledge which enables them to make commitment decisions. When market knowledge is extensive an entry mode with a high level of resource commitment is likely to be chosen (Johanson and Vahlne, 2009). In theory the Uppsala model is considered to be behavioural compared to the transaction cost theory and OLI model, which are seen as economic. The Uppsala model emphasizes the fact that the decision-makers’ learning process influences international decision-making, whereby the underlying assumptions are uncertainty and bounded rationality (Johanson and Vahlne, 2009).

A second important statement within the Uppsala model is the prediction that firms tend to start their foreign expansion in proximate countries in terms of distance and would gradually enter countries of greater distance. Distance is defined as a factor, which negatively or positively influences the degree of uncertainty about foreign markets. Especially culture was expected to be of great influence, whereby firms will first choose countries that are culturally close and after gaining more experience will move to countries which are culturally more distant. However support for this hypotheses was not found (Benito and Gripsrud, 1992). Although not supported in the research of Benito and Gripsrud (1992), culture has been of great important within entry mode research. Research integrating culture or cultural distance have tried to explain how national cultures or cultural distance influences entry mode decisions (Canabal and White, 2008).

Kogut and Singh (1988) were the first to statistically test the relationship between culture and entry mode decisions. Support was found that the more culturally distant a foreign country is, the more likely a firm chooses a JV as the optimal entry mode over an acquisition or greenfield investment. The four dimensions of Hofstede, uncertainty avoidance,

individuality, power distance and masculinity were used as measures for national culture. Each single dimension tends to have effect on the entry modes per country. E.g. the higher the uncertainty avoidance within a culture, the less likely an acquisition mode is chosen for foreign expansion due to the risks associated with acquisitions (Kogut and Singh, 1988). Findings indicate that the effect of cultural distance on foreign entry modes is influenced by firm and country factors. Argawal (1994) found for example that the higher the international involvement of firms the lower the chance a joint venture will be chosen. The relationship between culture and foreign entry modes is a difficult construct to measure. Multiple factors influence the impact of cultural difference on entry mode decisions, leading to conflicting conclusions. For example high cultural distance is often related to lower equity entry mode

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9 choices, however when the rationale behind the entry mode is cost minimization a higher equity mode can be preferable (Tihanyi et. al, 2004).

Not all theories within entry mode research are described here, however the

abovementioned theories have had the most impact since the existence of the research field. Despite extensive research within the field, future research is needed. Country-specific, industry-specific and firm-specific factors have been included into past research, however team-specific and individual-specific factors are mainly neglected. In the end the decision-maker is responsible for decisions, therefore it is important to include the individual. For example Pan and Tse (2000) mentioned that the perception of the decision-maker on the home culture influences the impact of the home culture on entry mode decision-making. Studying how team and individual characteristics and perceptions influence entry mode decisions can be of great value to the field (Canabal and White, 2008). Brouthers and Hennart (2007) also emphasize how strategic decision-making can enhance our understanding of entry mode decisions. Until recently entry mode decisions were only explained and examined from a rational standpoint. Strategic decision-making theories state that managers are influenced by attitudes, knowledge and specific demographic characteristics, these factors in turn influence the decision-making process, making decisions not fully rational. When examining entry mode decisions it is necessary to take into account these managerial characteristics (Brouthers and Hennart, 2007). Unfortunately only a few researchers have focussed on these

characteristics (e.g. Hermann and Datta, 2006; Pinho, 2007), which will be discussed in the next section. In addition the majority of research is done on MNE’s while, as mentioned before, SME’s have a significant role in the international business environment.

Previous research has shown that an entry mode is a challenging and multilevel phenomenon with a lot of different variables and factors influencing the rationale behind the decision. This research tries to contribute to the field by focussing on the underexplored relationship of managerial characteristics and foreign entry mode decision-making within SME’s.

2.3 Determinants of SME internationalization

Although IE research intends to give answers on entrepreneurial internationalization within small- as well as large enterprises, SME’s have often been the unit of analysis. Specifically the determinants of SME internationalization have been investigated a lot, which until now has led to inconclusive results and a necessity for future research (e.g. Manolova et.al. 2002) . Since the mid-eighties the behavioural component of strategic decisions of top managers has

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10 been a topic of interest. The Upper Echelon theory was initiated by Hambrick and Mason (1984), who stated that a relationship existed between background characteristics of top managers and an enterprise’s strategy and performance. Demographic characteristics like age, functional background, career experiences, education, socio-economic background and

financial position, are perceived to influence preferences and attitudes of individuals. Those preferences in turn determine part of the managers view on strategic opportunities (Hambrick and Mason, 1984). The Upper Echelon theory changed direction from strategy to the effect of Top Management Team (TMT) demographic characteristics on the internationalization of MNE’s in the beginning of the 21st

century. From that time internationalization became the third commonly used theory within Upper Echelon research (Nielsen, 2010). Parallel with the Upper Echelon research, which mainly focussed on TMTs within MNE’s, research was conducted on the determinants of the internationalization process and export development of SME’s (Manolova et. al. 2002). Especially in the past twenty years, research on SME

internationalization grew and was extended with the introduction of IE a few years ago. Within internationalization process theories, export development and IE, individual characteristics, ranging from demographics like age, to attributes like experiential market knowledge and international experience, have been a commonly used research topic. In many studies individual characteristics were combined with other antecedents of

internationalization, like transaction costs and location specific advantages. Therefore little is known about the relative impact of different human capital dimensions on the

internationalization of SME’s (Manolova et. al, 2002).

From the literature different characteristics and factors can be derived which are expected to influence international expansion. Early research indicated that market

knowledge, market motivation and market orientation are observed to be determinants of the attitudes of decision-makers towards export entry and success of international expansion (Reid, 1981). It was found that the decision on foreign market selection was a product of the market orientation, the international experience and relationships of decision-makers. Other influential factors are level of education, place of education, age, foreign language skills, work experience, market opportunities, risk preferences and network possibilities (Cavusgil and Noar, 1987; Collison and Houlden, 2005). Manolova et.al. (2002) combined the literature and narrowed the number of influential characteristics down to the four most important

human capital dimensions, namely international business skills, international orientation, environmental perception and managerial demographics. Important to note is that in comparison with earlier research Manolova et.al. (2002) found that some personal

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11 characteristics have more impact than others. Especially environmental risk perception was found to have a significant impact on internationalization (Manolova, et.al. 2002; Ruzzier et.al. 2007). However inconsistencies exist in research results on the impact of human capital dimensions. Some researchers argue that international orientation does not significantly influence SME internationalization (Nakos and Brouthers, 2002; Manolova et.al. 2002). Unlike Ruzzier et. al. (2007), who found no evidence for international business skills, but did find the predictive character of international orientation on SME internationalization.

Management know how, also referred to as business experience or business skills, has been researched as another important influential managerial characteristic (Ibeh, 2003; Hutchinson et.al. 2006).

It can be concluded that human capital can be an important source for the differential advantage of small internationalized firms (Manolova, 2002). Future research into this area is needed to get conclusive findings on the impact of the different characteristics. In addition previous research has been done in specific contexts and to make more general applicable statements, research in new contexts is needed. The focus of prior research was mainly on the decision whether or not to internationalize, however the decision on how to internationalize, thus which international strategy to choose is another interesting aspect for future research. Therefore in this study attention will be given to the decision on how to enter a foreign market and the determinants for this decision. In short, more attention is needed to research the relative impact of individual characteristics on firm performance, internationalization and international strategies. To keep this research manageable the focus will be on the influential factors of international strategies, especially foreign entry mode decisions. The importance was mentioned by Carlos Pinho (2007), who argued that despite the inconclusive findings of managerial characteristics on the type of foreign entry mode, it is important to explore this research area more extensively.

From the literature the human capital dimensions which have been found to be influential, but require more research due to under-exploration or inconclusive findings, are selected for this research. The conceptual model and propositions that result from the research gaps will be presented in the following section.

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3. Conceptual model and propositions

Building on findings within previous work of International Entrepreneurship and the need for further exploration and research on the determinants of foreign entry mode decision-making, this research presents four propositions on the influence of managerial characteristics on the internationalization mode of Dutch Small- to Medium sized Enterprises. The conceptual model of this research can be found in Figure 3. The literature that has been used as the foundation of these propositions will be explained in the following paragraphs.

Figure 3. Conceptual Model

Source: Author

3.1 International Experience

As was mentioned earlier, prior international experience of managers is expected to influence decision-making on internationalization. International experience has been defined and measured in multiple ways. For example it is defined as an individual’s exposure to foreign markets. This foreign exposure includes different factors, like the number of foreign

languages spoken, foreign nationality, whether someone has lived or worked abroad, world-mindedness and the extent of foreign travel (Reid, 1981; Reuber and Fischer, 1997; Ibeh, 2003). In contrast Nakos et.al. (1998) simplified the definition of international experience to the number of years living abroad, excluding other forms of foreign exposure. Others have classified the different forms of international experience under two terms, namely

international business skills and international orientation. International business skills are obtained through international relationships, international work experience and international education. Although measured as a separate dimension in different studies (Manolova, 2002; Ruzzier, 2007) the definition of international orientation, defined as the extent of travel and

SME foreign entry mode

Non-equity or Equity

The Manager: Human capital characteristics

P1: international experience P2: risk perception P3: access to network P4: industry-specific experience

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13 the amount of time spent abroad, has similarities with the dimension of international business skills. Therefore it should be discussed whether these two dimensions should be combined and measurement as one. Despite the use of multiple terms, in this study the broader term ‘international experience’ will be used to refer to the extent of the manager’s foreign exposure stemming from the different factors mentioned above. The reason for this choice is the fact that the term includes all different types of international exposure and it is well-known by researchers as well as managers.

International experience not only is expected to influence the decision whether or not to internationalize, but also the decision on how to internationalize. Internationally

experienced managers often choose strategic partnerships as the ideal strategy for their international expansion (Reuber and Fischer, 1997). International experience is also expected to lead to higher export performance (Nakos et. al. 1998). Reasons for this could be that these managers acquired tacit knowledge during the times spent abroad or that they are more willing to respond to export opportunities and will spend more attention to international expansion (Ruzzier, 2007). International experienced managers do not only have a preference for non-equity entry modes. It is argued that they have greater confidence in managing

foreign operations and can better deal with uncertainty, which leads to a preference for equity entry modes like, acquisitions or greenfield investments (Hermann and Datta, 2006).

Although the impact of international experience of managers on the international expansion of firms has been studied a lot already, more research is needed to make more explicit statements on the impact of international experience on specific entry mode decisions. Past research on the topic has shown that a certain relationship exists, which leads to the following proposition of this study.

P1: The manager’s decision on equity or non-equity foreign entry modes is expected to be influenced by the international experience of the entrepreneurial manager

3.2 Risk Perception

Related to the decisions and behavior of managers is the environmental risk perception. A strategic decision could be seen as highly risky by one manager and the same decision could be seen as less risky by another manager. These different views are formed by past

experiences, the information available and the specific context the manager is facing during the decision-making process (Carpenter, 2003). Whether decision-makers are risk-taking or risk-averse also influences the decisions made. For example risk-taking managers and

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14 managers who see less risks will engage in export opportunities more likely compared to risk-averse managers (Ruzzier, 2007). Especially when making international strategic decisions the perception on international risks is argued to be of great influence on the manager’s considerations. When expanding abroad firms face risks and uncertainties at three levels, namely environmental, industry and firm. Every strategic risk could in some way impact the long term profitability of the firm. Therefore it is important for the manager to take into account the different strategic risks in place while choosing the ideal entry mode (Brouthers, 1995). Entry modes require different degrees of resource commitment and control, therefore the risk and uncertainties associated with every entry mode are different.

Even though risk and uncertainties have an important role in the internationalization process of firms, the impact of risk perception on entry mode choices is an under explored topic. Brouthers (1995) argued that the perception of control risk and market complexity risk determines the ideal entry mode chosen. Control risk includes the manager’s desire to control the foreign operation, cultural difference and the international industry structure. Market complexity risk factors are associated with the ability of the firm to enter the foreign market. As international risk increases, an entry mode where risks could be shift to other parties is likely to be chosen (Brouthers, 1995). For example non-equity entry modes like export, which require less resources and control from the firm, will be chosen when international risk is perceived to be high (Ahmed et. al. 2002). Another study found that in exporting firms less risk is perceived than in non-exporting firms (Cavusgil and Noar, 1987). Comparable is the statement that managers with positive perceptions of the international environment are more likely to expand their business abroad (Manolova et.al. 2002). Ruzzier et.al. (2007) defined environmental risk perception as the degree of risk managers link to certain international activities. The definition was derived from the broader definition of environmental perception, which also contained the perception on the domestic and international

environment and the perception on regulations (Manolova et.al. 2002). In line with earlier results, risk perception was found to have a significant impact on SME internationalization, meaning that a positive risk perception is a predictor of internationalization. Not all results reflected a significant relationship, Carlos Pinho (2007) found no evidence for the hypothesis that the higher the entrepreneur’s risk orientation the more likely equity entry modes are chosen. Prior research on the relationship between risk perception and entry mode choices has been mainly done on Multinationals, although within SME internationalization research the focus has been on the difference between internationalized and non-internationalized SME’s. The different definitions and measurements of risk perception and the under explored status

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15 ask for future research. Although risk perception is influenced by prior international

experience, it is individually expected to impact entry mode decisions. Therefore in this study it will be explored as a separate variable, using the definition created by Ruzzier et.al. (2007). In line with Carlos Pinho (2007) the impact of risk perception on the choice for foreign entry modes will be explored. The above leads to the following proposition.

P2. The manager’s decision on equity or non-equity foreign entry modes is expected to be influenced by the environmental risk perception of the entrepreneurial manager

3.3 Access to network

According to the resource based view, firms with the intention to internationalize need to possess a certain set of firm-specific resources to ensure competitive advantage (Ruzzier, 2006). A lack of critical resources can be a barrier for internationalization, because decision makers will be faced with the dilemma of replacing resources from current profitable

activities to uncertain international activities. Especially smaller companies can face problems regarding the availability of critical resources. However entrepreneurial managers still seek to internationalize without the critical resources, which implies that these managers are

confident of access to these resources (Perks and Hughes, 2007). Through formal and informal network and relationships SME’s can access the resources needed to be successful internationally. The formation of personal contacts and formal networks was found to have a significant impact on the decision of early internationalization, the choice for a foreign market and the support needed for the international business (Hutchinson et.al. 2006). In addition in SME’s with a high export-entrepreneurial orientation, managers often had international contacts (Ibeh, 2003). From the literature can be concluded that the ability to network enables managers of SME’s to get access to critical resources for international expansion and therefore influences the internalization of these companies. Previous studies classified international relationships under international experience (Manolova et.al. 2002; Ruzzier et.al. 2007). Whether the access to a network influences foreign entry modes decisions is still unclear, but it is expected to have impact on strategic decision-making independent from international experience. Therefore it is explored as a separate dimension, leading to the following proposition.

P3. The manager’s decision on equity or non-equity foreign entry modes is expected to be

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16 3.4 Industry-specific experience

Industry-specific experience is another human capital dimension which is expected to influence decision-making on internationalization and foreign entry modes. In the literature different terms are used for industry experience, it is referred to as work experience, business experience and management know-how (Ibeh, 2003; Ruzzier et.al. 2007). Experience within the current industry provides the founder of a SME with detailed knowledge on the market, its customers and suppliers. This enables the manager to identify international market

opportunities (Westhead et.al. 2001). Ibeh (2003) found that previous business experience is a common characteristic of decision-makers within high export-entrepreneurial oriented

SME’s. Comparably Westhead et.al. (2001) found that founders of SME’s who have industry-specific know-how acquired in previous jobs, are more likely to export their own business. Business skills are even said to be of more importance than speaking a foreign language when expanding abroad (Hutchinson et.al. 2006). Experience within one functional area is also found to have implications for strategic decision-making. Different functional backgrounds are expected to reflect different preferences for entry modes. For example, managers with experience in areas like financing, information systems and operations prefer to have control over their foreign operations, leading to full-control entry modes, like greenfield investments and acquisitions (Herrmann and Datta, 2006).

From the above can be concluded that experiential knowledge within one industry or functional area influences the manager’s view on business problems and solutions, which in turn influences strategic decisions. In this study previous business experience will be referred to as specific experience. The small number of research on the impact of industry-specific experience on entry mode choices induces the need for future research, leading to the fourth proposition of this research.

P4. The manager’s decision on equity or non-equity foreign entry modes is expected to be influenced by the industry-specific experience of the entrepreneurial manager

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17

4. Methodology

This chapter elaborates on the choices made according to the methodology of this research. The research method and research design determine how data will be obtained on the different research issues and how this data will be analyzed. At first the ontological and

epistemological assumptions of this study will be described. This is followed by an explanation of the research method, in which a deductive qualitative research approach is utilized. A multiple case study is applied and the case selection is based upon the criteria set by the European Commission. At last there will be elaborated on the data collection and analysis approach of this study.

4.1 Research Philosophy

Before choosing on the research strategy and methods used, the process starts with decisions regarding the research philosophy that underpins the research, because whatever method chosen researchers should be aware of the philosophical commitments and paradigms underlying these methods (Creswell, 2003).

Ontological assumptions are concerned with the researcher’s perception on reality (Grix, 2002). It can be divided into two perspectives, namely ‘objectivism’ and ‘subjectivism’ (Holden and Lynch, 2004). The objectivistic perspective, also referred to as realism, reflects the assumption that social phenomena and their meanings are independent from social actors. Meaning that a reality and world exist that are separate from our beliefs and understandings (Ritchie et.al. 2013). At the other end of the continuum is the subjectivist perspective, also referred to as idealism, which refers to the fact that social phenomena are created through social interactions and are constantly subject to revision. Therefore reality is socially constructed (Grix, 2010). This research adopts the subjective perspective of ontology to construct reality. It is viewed as the most appropriate perspective, due to the fact that the decision-making process regarding internationalization of SME’s is subject to individual actors. By adopting this view on reality, perspectives and beliefs of different actors could be integrated to get a comprehensive impression of the research issue within its context.

The next step is concerned with the theory of knowledge, the epistemology.

Epistemology is concerned with how knowledge is obtained and how we know that what we claim to exist, does exist. (Grix, 2002). Contrasting epistemological assumptions are found within the two perspectives of ‘positivism’ and ‘interpretivism’. The positivist perspective is often referred to as the scientific approach for research. Within this perspective there is an

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18 emphasis on objective measurements of phenomena. Reality is expected to be based on facts, enabling researchers to observe and measure reality in an objective way without the influence of the investigator. Contextual influences are excluded from research (Hennink et.al. 2010) As a reaction to positivism, the interpretive perspective emerged. This approach focuses on the subjective perceptions of human beings on specific experiences and situations.

Interpretive researchers try to find the meaning of social actions through interpretation of the context people are in (Hennink et. al. 2010). An interpretative perspective is adopted in this study, as the influence of human capital characteristics on international decision-making is explored within the wider context of the firm. Through this approach the ‘how’ and ‘why’ questions and motivations behind certain decisions could be better addressed.

4.2 Research design

4.2.1 Inductive vs. Deductive

The two approaches for conducting research include inductive and deductive reasoning. Inductive reasoning is concerned with theory building. As opposed to deductive reasoning which is concerned with theory testing(Hyde, 2000). Research which is inductively done is mainly expected to be qualitative by nature. Especially case studies, in which phenomena are studied within the real-world context, are seen as one of the best methods for theory building (Eisenhardt and Gaebner, 2007). Mainstream deductive research is often used in quantitative research, because it allows statistical analysis to be done on large populations (Hyde, 2000). In this study a deductive research approach has been used, as propositions on human capital characteristics and foreign entry modes decisions were drawn from the literature with the purpose of testing these propositions by the use of the appropriate research strategy. Although the research design allows for the inclusion of new findings.

4.2.2 Research Method

The next step in the process of research design was the decision on the research methodology. The two most commonly used methods for data collection and data analysis are the

quantitative approach and the qualitative approach. The main differences between quantitative and qualitative methods relate to the different ideas about reality, whether it is measurable and whether we can best use objective or subjective methods to understand what we know

(Newman, 1998). Quantitative research methods are most appropriate when the goal of the researcher is to discover general descriptions or to test hypotheses (Thomas, 2003). The main

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19 purpose of this type of research is to create knowledge through the testing of existing theory. This is done through the isolation of specific variables from its environment, allowing the researcher to discover relationships between those variables with the aim to explain, predict and control behavior of populations (Borland, 2001). Through careful sampling and the use of numerical data the researcher tries to avoid the influence of personal biases, thereby ensuring objectivity (Thomas, 2003). In contrast qualitative research is often referred to as a method focusing on exploring phenomena from the inside, while taking the research participants as the starting point. The interpretative perspective is the core of this type of research (Ritchie, 2013). It is concerned with finding detailed descriptions about selected phenomena with the objective to get a comprehensive understanding of underlying beliefs, motivations and perceptions of individuals (Hennink et.al. 2010). ‘How’ and ‘why’ questions are the core of qualitative research.

Therefore this research uses a qualitative research method to find out how human capital characteristics influence international decision-making of entrepreneurs. This is the most suitable approach, because detailed, rich and complex data on the motivations and perceptions behind decisions can be obtained. This research aims to get a deeper

understanding of the international decision-making process and explores specific issues within the wider social context.

Although the distinction is generally made between a deductive-quantitative approach and an inductive-qualitative approach, both methods include inductive and deductive

approaches in the practice of their research. Different researchers observed that deductive processes are part of qualitative research and that it should be formally used more often (Hyde, 2000). In addition researchers claim that certain research designs require deductive processes to be incorporated (Yin, 1994) This leads to the research design chosen for the data collection of this research issue.

4.3 Multiple case study design

Several approaches can be used to conduct qualitative research. A multiple case study design is applied in this research in order to explore whether the manager’s human capital

characteristics influence foreign entry mode decisions.

In a case study the researcher explores a research issue through the in-depth

examination of one or multiple cases. The comprehensive character of qualitative case studies results in a detailed and valuable understanding of the cases and its general meaning for the

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20 issue being studied (Creswell, 2012). This approach of conducting research provides the opportunity to explore or describe complex issues within their real contexts using different data sources (Baxter and Jack, 2008). A disadvantage entails that a case study could not be representative due to its smaller number of observations. The results are less precise

compared to quantitative measures and it is claimed to be difficult to test theories with case studies. However others claim that precision and testing of theories could be reached with this research design (Bennett, 2004). A case study design is suitable when the study aims to answer ‘how’ and ‘why’ questions, when the context is relevant for the subject being studied and when the subject cannot be separated from its context (Baxter and Jack, 2008). In this research ‘how’ questions are addressed to find the influence of managerial characteristics on SME internationalization. In addition the international decision making of managers could not be explored outside of its context, because both the SME and the individual are influenced by contextual factors, for example the market environment of the firm.

A multiple case design is preferred over a single case design, because it enables an understanding of the similarities and differences between several cases. In addition it can be used to predict similar or contrasting results, thus allowing literal and theoretical replication (Baxter and Jack, 2008). Like previous research on the influential factors on international decision-making of entrepreneurial managers (Perks and Hughes, 2007; Hutchinson et.al. 2006) a multiple case design is used to explore common patterns across cases and to find evidence for the propositions derived from the literature. This reflects the exploratory as well as the explanatory character of this design, because statements in the literature are tested in multiple cases, while new information is sought to contribute to the field of IE.

4.4 Case criterion and selection

Before case selection could be done, the case criteria have been established. To select SME’s the common definition of SME’s established by the European Commission was utilized.

The European Commission established this definition to ensure consistent and efficient measures to support the development of SME’s. Whether a company is a micro, small, medium or large enterprise can be determined according to the staff headcount, annual turnover and annual balance sheet (European Commission, 2005). Small enterprises are defined as enterprises with a maximum of 50 employees and an annual turnover or balance sheet total with a maximum of 10 million euro. Medium sized enterprises are defined as enterprises which employ less than 250 persons, with a annual turnover not exceeding 50

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21 million euro or an annual balance sheet total not exceeding 43 million euro (European

Commission, 2005). Within the Netherlands the number of employees is counted according to the number of Full-Time Equivalents (FTE’s). The annual turnover entails the income

received from sales and services with all kinds of taxes excluded. The value of an enterprise main assets are covered in the annual balance sheet total. The financial data depends on whether the enterprise is autonomous, partner or linked. In case of partner or linked

enterprises financial data from other companies should be included (European Commission, 2005). Another criterion entails that the companies should not be publicly listed. While selecting this group of firms it became clear that financial data is often not transparent and available. Therefore the main criterion has been the number of employees. In addition the SME’s are originally Dutch and should be internationally active, either through non-equity or equity entry modes. No distinction has been made between sectors or industries or the type of product or service the firms provide. The individual as the unit of analysis should be the owner-manager or managing director responsible for the international decisions of the firm, as well as international decisions made in the past.

Due to the lack of a publicly available general database of all Dutch SME’s several public institutions, research institutions and other organizations were approached to get access to a list of this group. Unfortunately none could provide a complete list of Dutch SME’s due to anonymity issues. Therefore a different direction was chosen and several lists present online have been used for the case selection. These lists include the Great Place to Work, FD Gazellen, MKB export award, MKB innovation top 100, Techfund, Oranje Handelsmissie Fonds and Deloitte Fast50 technology. From these lists a selection of 36 companies was created, who met the criteria according to the number of employees, Dutch origin and international presence. Through LinkedIn or by e-mail the founder or managing director of each company was approached. After a week a reminder was send when no reply was

received. These 36 messages resulted into 15 positive responses. A detailed description of the different cases is presented in table 1a and 1b. To increase the representativeness of the research sample, a wide range of companies from different sectors and entrepreneurs with different backgrounds have been included in the research. In addition to ensure the construct validity of this study a different source of evidence was included. A business advisor from the Dutch Chamber of Commerce was approached to give an external perspective on the

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22 Table 1a. General information on selected cases A-G

Company A B C D E F G Interviewee role Founder CEO Founder CEO Founder CEO Founder Founder CEO Founder CEO Co-founder CCO Sector IT consulting IT service and software Wireless products and software solutions Consumer goods IT service Medical technology IT service, soft-ware as a service Founding year 1996 2010 new name 2005 2007 2012 2008 2011 2001 Location Amster-dam

Amsterdam Utrecht Amsterdam Amster-dam

Deventer Huis ter Heide

Number of employees 210 50 60-70 7 110-120 5 60 Year of international ization 2000-2001 2010 2009-2010 From the start From the start 2011 2014 2004 Foreign entry modes Equity: 2 WOS* Non-equity: Export of service Equity: 1 WOS 4 Sales* Non-equity: Export of service Equity: 2 WOS Non-equity: Export of product Non-Equity: Contractual agreement Equity: 1 WOS 2 Sales Non-equity: Export Contractual agreement Equity: 10 WOS Non-equity: Contractual agreement Countries Spain Turkey Brazil Spain, Dubai, Singapore, South- Africa Belgium, Hong Kong Sells in Africa, Asia, VS, South America and Europe Spain UK, Singapore Sells in Europe Sweden, VS, Japan, Germany, France, UK, Spain, Italy, Portugal, Morocco Source: Author

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23 Table 1b. General information on selected cases H-N

Company H I J K L M N Interviewee role Founder Owner CEO Since january ‘14 Founder Managing Director Founder CEO Founder Owner Co-founder Managing Director Founder

Sector Agriculture IT service and consultancy Chemical technology E-health services Consumer goods Recruitme nt Health and fitness Founding year 1995-1996 2000 2004 2008 2013 2007 2008

Location Klaaswaal Amsterdam Hoofddorp Amster-dam Baarn Amster-dam Haarlem Number of employees 3 (in season 10) 80 2 40 4 75 75 Year of international ization From the start 2005 2006 2011 From the start 2014 2013 Foreign entry modes Non-equity: Export Contractual agreement Equity: 3 WOS 1 JV* Non-equity: Export of service Non-equity: Export Contractual agreement Equity: 2 WOS Non equity: Export of product Equity: 1 WOS Non-equity: Contractual agreement Equity: 1 WOS (2nd in april 2015) Non-equity: Franchise Equity: in future JV Countries Sells in Europe, VS, Canada, Australia Scandinavia, Germany, Belgium, Switzerland Middle-East, Asia, Europe (Before in Scandinavia , Scotland, Canada, Chili) Germany, UK Hong Kong Sells in Europe, VS, Asia, Africa Germany (Belgium in April) Franchise in Europe and Singapore Source: Author

*WOS=Wholly Owned Subsidiary, Sales=Sales team situated locally abroad, JV= Joint Venture

4.5 Data collection; semi structured interviews

Through semi-structured interviews with experienced entrepreneurs of Dutch SME’s, data has been collected on the motives and factors influencing international strategic decision-making with regard to foreign entry modes.

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24 In-depth interviewing is the most commonly used method in qualitative research. It is a powerful method to gather a detailed description and interpretation of the individual’s world (Ritchie et.al. 2003) The main advantage of in-depth interviewing is that it creates the

opportunity to collect much more detailed information on the subject studied, compared to other data collection methods. A pleasant atmosphere could be created, which could make individuals more comfortable in sharing information about themselves or their organization (Boyce and Neale, 2006). However in-depth interviewing also has some limitations. First of all, interviewing is time-consuming. Due to the amount of time it takes approaching

interviewees, conducting and transcribing the interviews and analyzing the results (Seidman, 2013). It is also prone to bias, because interviewees could give responses they think are most appropriate, but biased. In addition it is often difficult to make generalizations on the results due to the small sample size. However it is claimed that when the same statements and issues emerge from the interviews, a sufficient sample size is reached (Boyce and Neale, 2006).

In general interviewing is divided into two types, namely structured or unstructured interviews. Structured interviews are most appropriate when already a lot is known about the subject matter and the goal is to find specific answers to specific questions. On the opposite unstructured interviews are most useful as a source of insight when the researcher wants to expand its knowledge base on the subject. In between the semi-structured interview exists, which enables the obtainment of detailed and in-depth information on the subject matter, while allowing proposition testing (Leech, 2002).

As the goal of this study is to get a deeper insight on the rationale behind and the influences on international strategic decision-making, semi-structured interviewing is the most appropriate data collection method. Through one-on-one conversations, entrepreneurs have the opportunity to think and elaborate on the impact of different factors on their business decisions. An interview protocol was created to ensure every proposition derived from the literature was discussed. The interview protocol was used as a guideline, leaving space for new findings and additional input from the interviewees. In table 2a the interview questions are linked to the propositions studied. The questions prepared for the interview with the business advisor are different from the questions used for the entrepreneurs. In table 2b this protocol is presented.

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25 Table 2a. Linking interview questions to propositions

Questions

P1

P2

P3

P4

Introduction question:

Can you introduce yourself and can you tell me something about your background? What is your role at the moment?

X X X X

Introduction question:

How did you start your company and what was your motivation to start your company?

Introduction question:

How many employees does your company have in total, nationally and internationally?

Can you tell me about your company’s internationalization process? When did it start and how did it develop from the start until now?

X X X X

To what extent have you been involved with the internationalization of your company?

X X X X

Why did you decide to enter foreign markets with these entry

modes? X X X X

Which factors have influenced the international strategic decisions?

Follow-up: Why and how did they influence these decisions?

X X X X

What are the individual characteristics from you as an entrepreneur that have influenced the internationalization strategy of your company? Why?

Follow-up: Can you give an example of how you can observe this influence?

X X X X

What is your work experience within the industry of this

company? X

Did this experience influence the international decisions of foreign entry modes? If so, how?

Follow-up: Can you give an example?

X

Do you have international experience either by living or

working abroad, before you started this company? X To what extent did this influence the internationalization and

strategic decisions? X

To what extent did your personal network influence the decisions on internationalization?

Follow-up: How? Can you give an example?

X

How are you going to make use of your network in the future? X How do you perceive the risks and uncertainties related to

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26 How do you deal with risks in general?

Follow-up: Are you risk-averse or risk-taking? X

Have these risks influenced your decisions on entry modes? Follow-up: Can you give an example from previous

experiences?

X

How do you imagine your company in 5 years internationally?

Where and how are you present? X X X X

If you had to choose between work- or industry experience, international experience, network opportunities and risk perception, which one has been of most influence on decisions with regard to foreign entry modes?

X X X X

Source: Author

Table 2b. Linking interview questions to propositions Chamber of Commerce

Questions

P1

P2

P3

P4

Introduction question: Can you introduce yourself and can you explain me about your role within the Chamber of Commerce? Introduction question: Can you tell me about your

background? Did you already have experience in advising entrepreneurs on internationalization, before you started this job?

How are you involved in the internationalization process of Dutch Small- to Medium sized Enterprises (SME)?

With whom are you in contact with from the different companies? Are these individuals mainly responsible for the international decision-making?

X X X X

To what extent do you support them in the decisions regarding the international strategy? With an international strategy I mean the foreign entry mode chosen, for example export or foreign direct investment.

Can you tell me from your experience which factors are most

determinant for the decisions regarding foreign entry modes? X X X X Are there individual characteristics from entrepreneurs that are

determinant for the internationalization and international decisions made within SME’s?

Follow-up: If so, which characteristics? Can you give an example of how you did observe this?

X X X X

Do you observe similarities between the entrepreneurs from different SME’s in terms of personal characteristics and backgrounds?

Follow-up: If so, what are these similarities?

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27 To what extent does work- or industry experience of the

entrepreneur influence the international expansion and related strategic decisions of the SME?

Follow-up: How does it affect these decisions? Can you give an example of a company where you observed this influence?

X

To what extent does international experience of the entrepreneur, either through living or working abroad,

influence the international expansion and related strategy of the SME?

Follow-up: How? Do you observe this influence at many companies?

X

To what extent does the entrepreneur’s personal network influence the international expansion and related strategy? Follow-up: Do entrepreneurs often make use of their network when they want to grow? How?

X

How do the entrepreneurs with whom you are in contact, in general perceive the risks and uncertainties associated with internationalization? Are they risk-taking or risk-averse?

X

To what extent does the risk perception influence the

international expansion and the related international strategy? X If you had to choose between work- and industry experience,

international experience, network opportunities and risk perception, which one has the most influence on the

international strategic decisions of entrepreneurs within Dutch SME’s?

X X X X

Source: Author

4.6 Data analysis method

The qualitative data analysis procedure is designed to seek for answers on the ‘how’ questions and to find evidence for the working propositions derived from the literature.

Before analyzing the data collected, the voice recordings of the interviews where transformed into transcripts. All transcripts are attached in the appendices. Due to information sensitivity the transcripts are anonymous. Thematic coding has been used as the data analysis method of this research. As was mentioned by Ryan and Bernard (2003): “Theme

identification is one of the most fundamental tasks in qualitative research”. By assigning themes or codes to particular data chunks the researcher is able to quickly find the

information that is relevant for the research question and propositions that are being studied (Miles and Huberman, 2013). The research software program Nvivo has been used to code and analyze the transcripts.

In this research the following main themes were derived from the conceptual model and available literature; international experience, industry experience, network, risk

SME internationalization : the influence of managerial characteristics on foreign entry mode decisions of Dutch SME’s