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SME entrepreneurial orientation, international performance, and the moderating role of strategic alliances.

International entrepreneurship research maintains that firms with strong entrepreneurial orientations expand to international markets to enhance performance. Yet these firms can suffer from resource constraints as they move abroad. To alleviate this problem, previous research has suggested participation in strategic alliances. We developed and tested a theoretical perspective that merged these ideas, maintaining that firm-level entrepreneurial orientation is associated with higher international performance both directly and in combination with participation in foreign market research or marketing alliances. Based on surveys of U.S. and U.K. firms, our findings indicate that small and medium-sized enterprises (SMEs) have higher international performance when they possess greater entrepreneurial orientation (EO) and when the type of alliance (research or marketing) used is aligned with the capabilities of the firm. Further we find that participating in alliances strengthens the relation between EO and international performance. These results have important implications for managers and policy makers interested in improving SME international performance.

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Successful internationalization helps a firm expand the market for its products and services as well as providing it with access to resources that can strengthen its domestic competitive position (Autio, George, & Alexy, 2011; Sapienza, Autio, George, & Zahra, 2006). These international actions can lead to improved firm performance (Lu & Beamish, 2001). Yet for small and medium-sized enterprises (SMEs), internationalization generates several challenges; for example, due to their size, SMEs tend to suffer from unique resource gaps that are difficult to fill (Brouthers, Nakos, Hadjimarcou, & Brouthers, 2009). SMEs tend to possess limited financial, technical, and managerial resources restricting international activities (Brouthers et al.; Lu & Beamish). Because of this, a growing body of research has focused on understanding how SMEs can improve international performance (Dimitratos, Lioukas, & Carter, 2004; Lu & Beamish). Early research in this area explored how managerial and firm characteristics (Nakos, Brouthers, & Brouthers, 1998) and the external environment (Dimitratos et al.) impact SME international performance. More recently, researchers have suggested that an SME's entrepreneurial orientation (EO) and cooperative relations with others may be crucial factors that can explain international performance differences (Jantunen, Puumalainen, Saarenketo, & Kylaheiko, 2005; Knight, 2000; Street & Cameron, 2007).

The resource-based view (RB V) suggests that firms possess bundles of resources and capabilities that they combine in unique ways to generate superior performance (Barney, 1991). Some have suggested that EO is among these important capabilities (Alvarez & Busenitz, 2001; Lumpkin & Dess, 1996; Teng, 2007) and that for SMEs EO provides one of the key capabilities for building an advantage (Lee, Lee, & Pennings, 2001; Wiklund & Shepherd, 2003). EO is a firm's propensity to utilize novel behaviors, to anticipate and act on future changes in the external environment, and the willingness to undertake investments with uncertain outcomes (Covin & Slevin, 1991; Lumpkin & Dess). EO capabilities provide the firm with the skills to better utilize its internal resources and to obtain and more efficiently exploit resources from outside sources (Wiklund & Shepherd). As such, studies suggest that firms with high EO are more apt to introduce new products, diversify their activities, and learn how to thrive in an uncertain international environment (Dimitratos et al., 2004; Knight, 2000). These undertakings can help SMEs create a competitive advantage in a foreign market, which can lead to better international performance (Jantunen et al., 2005).

Although EO capabilities can help SMEs develop an advantage as they expand abroad, foreign expansion requires the commitment of firm resources (financial, technical, and managerial, for example) that SMEs may lack (Lu & Beamish, 2001). Resource-dependency theory scholars suggest that cooperating with others through strategic alliances is one way to obtain these resources (Hillman, Withers, & Collins, 2009). Strategic alliances are agreements between two or more companies to share knowledge and resources (Lu & Beamish). Participation in alliances can lead to better international performance because alliances act as a source of new knowledge and resources that SMEs can use in order to develop their international organizational capabilities, which will help them overcome the disadvantages of smallness and foreignness in a specific country (Cegarra-Navarro, 2005; Street & Cameron, 2007).

While research in these two areas provides valuable insights about SME international performance, we could not identify any studies that look at how EO capabilities and participation in strategic alliances jointly influence international performance. Yet previous research has found a strong relationship between a firm's EO and participation in alliances (e.g., Marino, Strandholm, Steensma, & Weaver, 2002). Despite this apparent connection, studies have not looked at how these two factors interact and influence performance.

In this paper we build on resource-dependency theory, liability of foreignness, and RBV to examine the relation among SME EO, research and marketing alliance participation, and international performance. There is some concern in the literature about what is meant by international performance and how best to measure it (Hult et al., 2008; Keupp & Gassmann, 2009). We define international performance as the performance an SME achieves in a specific foreign market (He, Brouthers, & Filatotchev, 2013). We improve on previous research by measuring international performance using a multidimensional construct that examines the firm's performance in a specific foreign market instead of looking at firm-level export intensity or scope of international operations.

We make several important contributions to the literature. First, building on the RBV, we theorize that since firms face a liability of foreignness when they expand abroad (Zaheer, 1995), SMEs possessing greater EO capabilities will have higher international performance. The reason for this is that these firms have the capabilities needed to gain legitimacy in the foreign market by taking the actions necessary to proactively adapt technologies so that products align better with foreign market customer demand. In addition, these firms possess the capabilities needed to access and use external knowledge so they can develop new innovative capabilities that help the firm better serve foreign market needs. Lack of legitimacy helps create a liability of foreignness (Zaheer & Mosakowski, 1997) and EO capabilities, we theorize, help the SMEs overcome some of the issues arising from this liability of foreignness.

Second, SMEs also face an increased liability of foreignness simply because of their size (Lu & Beamish, 2001). This lack of resources can have a profound impact on operations as the firm expands abroad (Autio et al., 2011). According to resource-dependency theory, a company's lack of certain critical resources and entry into new (foreign) environmental settings pushes it to seek additional resources from other market participants (Hillman et al., 2009). Strategic alliances can be a source of "critical" resources and can aid firms in overcoming part of the liability of foreignness they face when expanding abroad (Denk, Kaufmann, & Roesch, 2012).

Despite these potential advantages, we theorize and test the notion that not all alliances are equally beneficial. Expanding on the RBV, we make an important contribution by suggesting that certain alliances will be more useful than others depending on a firm's capabilities. Firms with greater research and development (R&D) or marketing capabilities have a greater ability to transfer and use this related knowledge (Martin & Salomon, 2003). Hence, SMEs will generate greater international performance by participating in research (marketing) alliances depending on the level of R&D (marketing) capabilities the SME possesses.

Finally, we contribute by developing and testing the theoretical idea that firms having greater EO capabilities will benefit more from alliance participation, generating higher international performance. These firms have greater capabilities for efficiently accessing external knowledge (Wiklund & Shepherd, 2003). This enables these firms to gamer additional benefits from the resources and knowledge provided by an alliance partner. Our theory suggests that firms possessing greater EO capabilities have better abilities to exploit the opportunities and resources that research/marketing alliance participation provides.

We test these ideas on a sample of U.S. and U.K. SMEs. Our results provided support for the direct impact of EO on international performance and on the moderating effect of research and marketing alliances. Hence, our study makes an important contribution to the literature by providing a better understanding of how EO and participation in different types of alliances influence the international performance of SMEs. By theoretically and empirically exploring the performance implications of research and marketing alliances, we helped explain SME international performance differences, examine important moderators of firm behavior and performance, and enhance our knowledge of international entrepreneurship.

Theory and Hypotheses

Internationalization provides both market growth and technology access opportunities (Autio et al., 2011; Sapienza et al., 2006). But research indicates that firms can suffer from a liability of foreignness (Denk et al., 2012; Zaheer, 1995) making it difficult to take advantage of these opportunities. Firms face a liability of foreignness when they expand abroad because of the additional costs created by unfamiliarity, relational hazards, and discrimination due to a lack of legitimacy in the foreign market (Denk et al.). SMEs tend to be particularly prone to liabilities of foreignness (Lu & Beamish, 2001). Because of their size, SMEs usually do not possess sufficient managerial, technical, or financial resources needed for successful international expansion (Brouthers et al., 2009). Further, because they might be new to operating in a specific foreign market, SMEs often lack the local knowledge necessary to gain legitimacy in these markets (Lu & Beamish; Zaheer & Mosakowski, 1997).

Over the past few decades, research has tried to explain how SMEs can overcome this liability of foreignness and improve international performance (Brouthers et al., 2009; Nakos et al., 1998). Recently researchers have explored variations in SME international performance by examining two factors: entrepreneurial orientation (Jantunen et al., 2005; Zahra & Garvis, 2000) and strategic alliance participation (Street & Cameron, 2007). These studies suggest that SMEs possessing a high level of EO can recognize opportunities in international markets and create the processes, asset base, and strategies needed to take advantage of these opportunities resulting in more successful international operations (Jantunen et al.; Marino et al., 2002). Further, research suggests that SMEs that are not successful in developing external strategic alliances will not possess sufficient organizational capabilities to effectively compete in new markets, adversely impacting international performance (Cegarra-Navarro, 2005).

Although a few studies have examined how alliances impact the entrepreneurial process (Hoang & Antoncic, 2003) and how the entrepreneurial process impacts alliance development (Marino et al., 2002), these lines of inquiry do not help us understand how SMEs can overcome liabilities of foreignness and improve international performance through the use of both EO and alliances. Taking both a resource-based (Barney, 1991) and resource-dependency perspective (Hillman et al., 2009), we develop a theory to suggest that EO and alliance participation can help explain differences in SME international performance because these factors provide key mechanisms for mitigating some of the liabilities of foreignness SMEs face when they expand abroad.

Entrepreneurial Orientation and International Performance

EO was initially developed to explain entrepreneurial behavior in a domestic setting (Covin & Slevin, 1991; Miller, 1983). These authors proposed that prior to a firm engaging in certain activities such as the introduction of new products or expansion to new markets, entrepreneurial capabilities need to be present in the firm. Over the years, researchers have discovered strong links between the possession of EO capabilities and firm performance (Rauch, Wiklund, Lumpkin, & Frese, 2009). More recently, a number of researchers have begun applying this concept to the international domain (Jantunen et al., 2005; Knight, 2000; Zahra & Garvis, 2000). As Zahra and George (2002, p. 261) suggest, EO capabilities may be particularly helpful to firms in international markets because they aid a firm in "the process of creatively discovering and exploiting opportunities that lie outside a firm's domestic markets in pursuit of competitive advantage."

Research suggests that EO is especially important for SMEs. First, due to their size, SMEs tend to possess limited financial, technical, and managerial resources (Brouthers et al., 2009; Lu & Beamish, 2001). Although international expansion can improve an SME's performance, it also requires additional resources that SMEs often do not possess (Lu & Beamish). For larger firms, slack human and technical resources can be shifted from other internal divisions to make an international venture successful (Rangan, 1998). But SMEs do not normally have extra or slack resources to divert to their international operations. EO provides an SME with the resource-based capabilities required to better utilize the limited resources it possesses and to efficiently access additional resources from external parties (Wiklund & Shepherd, 2003). Second, although SMEs may possess patents or unique technologies, these firms are constrained by the lack of extensive international experience, insufficient technical and marketing experience, limited product offerings, and a lack of internationally recognizable brands (Berthon, Ewing, & Napoli, 2008; Lu & Beamish). Previous RBV research indicates that EO is one key capability that SMEs can use to develop a sustainable competitive advantage (Lee et al., 2001; Wiklund & Shepherd).

We theorize that SMEs with greater EO will perform better in foreign markets because they possess the capabilities needed to develop innovative strategies that provide an advantage in the foreign market, identify and use technologies that better align with foreign market customer needs, and are willing to take the business risks associated with adopting new strategies and technologies in foreign markets. Our theory suggests that SMEs with higher EO will have the capabilities to overcome some of the liabilities of foreignness created by their lack of legitimacy, to discover and exploit opportunities that appear in a foreign market, and to craft successful foreign subsidiary operations. These actions will lead to better international performance compared with SMEs possessing fewer entrepreneurial capabilities.

More specifically, SMEs possessing innovative capabilities will be very likely to undertake experimental ventures, explore new ideas, and search for new ways to solve problems (Lumpkin & Dess, 1996). Firms high in EO tend to be more likely to expand to foreign markets (De Clercq, Sapienza, & Crijns, 2005; Knight, 2000). But simply entering foreign markets does not guarantee success. Firms may lack legitimacy because foreign market institutional environments, governments, and consumers may differ from those of the home country or other foreign countries where the firm has experience (Zaheer & Mosakowski, 1997). Innovative SMEs have the capabilities to create strategies and structures that help them gain legitimacy in the foreign market and overcome obstacles associated with foreign entry such as the lack of a distribution network, leading to greater success in the foreign market (Knight). These SMEs are also innovative enough to develop new capabilities that enable them to better address the needs of foreign market-based customers, which can provide performance benefits in the foreign market (Zahra & Garvis, 2000). By overcoming the obstacles created by a liability of foreignness, SMEs with higher EO should achieve better international performance.

Entrepreneurial firms also have proactive capabilities; they try to predict trends and the needs that their customers will have in the future (Rauch et al., 2009). These firms look for new technologies that will provide them with a competitive advantage in the marketplace (Lumpkin & Dess, 1996). In foreign markets, SMEs high in proactive capabilities will tend to identify and use those technologies that help align firm products with customer needs and wants resulting in a better fit with the demands of the market, increased legitimacy, and improved performance (Jantunen et al., 2005). While adopting new technologies is one method of overcoming legitimacy concerns in a foreign market, another avenue proactive firms can pursue is to search out and identify market niches where their existing products/services can be sold. Locating and entering a market niche that values the firm's unique assets will result in the creation of sustainable competitive advantages, reduced legitimacy-related liabilities of foreignness, and improved performance (Zaheer, 1995).

Lastly, entrepreneurial firms are more likely to be risk-takers, and risk-taking firms are willing to invest and commit significant resources to activities that have highly uncertain outcomes (Zahra & Garvis, 2000). In the international context, risk-taking is closely related to both innovativeness and proactiveness. To help overcome some liabilities of foreignness, firms need to be willing to develop and introduce innovative strategies and structures, and develop new capabilities that could help them to be successful in a particular foreign market (Zahra & Garvis). In addition, being proactive internationally by identifying and pursuing new markets means a commitment of resources and time without being assured of additional sales. Taking these aggressive actions without the certainty of success may be essential for gaining legitimacy, reducing liabilities of foreignness, and creating a competitive advantage in a foreign market. Hence, internationalizing SMEs need to be risk-taking in order to more effectively utilize innovative and proactive capabilities to help reduce legitimacy-based liabilities of foreignness and generate better international performance. Thus, our first hypothesis states that:

Hypothesis 1: Within a specific foreign country, SME entrepreneurial orientation is positively related to international performance.

Alliance Participation and International Performance

Although having greater EO capabilities may help firms deal with some issues arising from the liabilities of foreignness encountered when expanding abroad, there may be another path that SMEs can follow for reducing such liabilities. Previous research has noted the importance of having sufficient resources/capabilities including market knowledge to help overcome liabilities of foreignness when expanding internationally (Autio et al., 2011; Denk et al., 2012). Yet SMEs often lack the financial, managerial, and technical resources/capabilities necessary for international expansion (Brouthers et al., 2009). Hence, SMEs face an increased liability of foreignness when they expand abroad because internationalization requires a variety of resources and capabilities that the SMEs may not possess (Denk et al.).

Multinational enterprises (MNEs) do not normally suffer from these resource/ capability gaps because they have the ability to close such gaps by shifting resources from one division to another, or by "buying" resources/capabilities through the acquisition of another firm. These actions help reduce the liability of foreignness MNEs face when they expand abroad. In contrast, SMEs are not large enough to have excess resources/ capabilities and usually lack the financial wherewithal needed to acquire another firm. From a resource-dependency perspective, SMEs may therefore be more constrained and affected by the foreign environment (Hillman et al., 2009). The most efficient way for SMEs to fill a resource/capability gap is by forming an alliance with another company (Street & Cameron, 2007). In this context, an alliance should be viewed as a "strategic option" that an SME possesses to reduce uncertainty and dependency, and alleviate some of the liabilities of foreignness created by entry into a foreign market (Denk et al., 2012; Hillman et al.). For this reason previous research has noted that SMEs tend to engage in strategic alliances more widely than larger companies (Marino et al., 2002) and that the two most important types of international alliances that an SME can form are research and marketing alliances (Yu, Gilbert, & Oviatt, 2011).

Research Alliances

A research alliance is an agreement between two or more firms that creates an opportunity to generate new knowledge, share technological and scientific know-how, and develop new products and technical capabilities (Soh, 2003; Yu et al., 2011). For SMEs, the purpose of participating in research alliances in foreign markets is very broad and includes not only the creation of new knowledge, but also many smaller firms undertake research alliances in order to better adapt and assimilate new technologies and provide effective joint after-sales service for increasingly complex product offerings. These joint activities allow an SME to gain legitimacy, overcome some liabilities of foreignness, and build a competitive advantage in the foreign market (Chen & Huang, 2004; Denk et al., 2012).

Because SMEs have limited research budgets, they may be unable to develop new products or incorporate new technologies into existing products. Firms that establish effective research alliances can acquire essential technological resources from partners that possess superior or complementary technology (Mowery, Oxley, & Silverman, 1996). An SME may therefore benefit in two different ways from research alliance participation. First, participating in research alliances may allow the SME to fill a gap in research capabilities. Resource-dependency theory suggests that participating in research alliances can provide a means to access the research capabilities that a firm lacks, allowing it to create an advantage (Hitt, Ahlstrom, Dacin, Levitas, & Svobodina, 2004). Alternatively, SMEs can use research alliances to supplement existing research capabilities, improving on the research abilities of the firm. Previous research (Lee et al., 2001) suggests that under either scenario the transfer of research resources through the alliance will permit an SME to reduce the liability of foreignness created by the technological resource gap that previously existed between the internal resources of the SME and the technical resource demands of the new foreign market (Denk et al., 2012). Therefore, accessing technical knowledge through foreign market alliances should enable the SME to fill a gap in its research capabilities or enhance its existing technological capabilities, reduce legitimacy-based liabilities of foreignness, and create a competitive advantage in the foreign market (Lee et al.; Yu et al., 2011).

Of course, participation in research alliances may not provide the same level of benefits to all firms expanding abroad. Resource-dependency theory suggests that participation in alliances can reduce uncertainty and dependency (Hillman et al., 2009). However, the RBV suggests that firms vary in the capabilities they possess (Barney, 1991) and therefore in their ability to transfer and use this new research knowledge (Martin & Salomon, 2003). Participating in an alliance provides firms with access to external knowledge, but firms possessing greater capabilities to transfer and exploit this knowledge will be able to gamer additional benefits (Martin & Salomon). SMEs with greater R&D capabilities are therefore likely to benefit to a greater extent from research alliances because these firms possess the capability to learn from the alliance partner and generate a competitive advantage (Lee et al., 2001; Mowery et al., 1996).

For SMEs lacking R&D capabilities, knowledge transfer may be problematic; the SME may not gain as much from participating in the alliance because it will have difficulties transferring the new knowledge (Martin & Salomon, 2003; Mowery et al., 1996). Further, for these firms, research alliances can create a dependency relationship where the partner firm has superior technological capabilities and therefore controls the alliance, potentially reducing the SME's performance in the foreign market (Hillman et al., 2009; Miles, Preece, & Baetz, 1999).

Therefore, we suggest that the performance benefits of accessing technical knowledge through foreign market research alliances will enable an R&D-capability-rich SME to enhance its technological capabilities, reduce liabilities of foreignness, and create better international performance. For R&D-capability-poor SMEs these benefits will be far less; participation in foreign market research alliances may actually result in reduced international performance for these firms because of potential dependency relationships that can influence control of the foreign venture. Thus, our second hypothesis suggests:

Hypothesis 2: Within a specific foreign country, participation in research alliances will be positively related to international performance, but these benefits will be greater for R&D-capability-rich firms than for R&D-capability-poor firms.

Marketing Alliances

An international marketing alliance is a cooperative agreement between two or more firms located in different countries that results in the sharing of marketing resources and activities enabling each firm to accomplish more together than it could achieve on its own (Chen & Huang, 2004; Yu et al., 2011). By engaging in a marketing alliance with a foreign partner, an SME has the potential of overcoming severe resource gaps. Previous research (Chen & Huang) suggests that SMEs may benefit in two different ways from marketing alliance participation. First, participating in a marketing alliance may allow the SME to fill a gap in marketing capabilities. Resource-dependency theory suggests that alliance formation can help a company obtain much-needed resources (Hillman et al., 2009; Hitt et al., 2004). SMEs tend to make extensive use of marketing alliances in foreign markets (Chen & Huang) because most SMEs lack the financial resources needed to establish an effective marketing network in a foreign market, leaving the firm at a disadvantage compared with other firms. Partnering with a local firm in a foreign market can, for example, provide the SMEs with a distribution network in that market (Knight, 2000). Hence, marketing alliances help SMEs to build the marketing capabilities that they lack (Chen & Huang) and overcome some size-related liabilities of foreignness they face when expanding abroad (Denk et al., 2012).

Second, resource-dependency theory suggests that SMEs can use marketing alliances to supplement existing marketing capabilities, improving on the marketing abilities of the firm (Hillman et al., 2009). A liability of foreignness is created in part because the SME possesses incomplete information about the political, social, cultural, and economic environment of the host country and how specific strategies need to be changed in order to better adapt to the unique conditions of that country (Chen & Huang, 2004; Denk et al., 2012). SMEs engage in marketing alliances in foreign countries because such alliances bring resources including specialized foreign market knowledge and unique insights about the effectiveness of various advertising and other promotional methods in that country (Yu et al., 2011). Utilizing such country-specific knowledge enables the SMEs to gain legitimacy with foreign market customers and policy makers. Thus, participation in foreign country marketing alliances provides an SME with the ability to better position its products in the market, reduce its legitimacy- and size-based liabilities of foreignness, and create a competitive advantage.

Nevertheless, participating in marketing alliances can also create a dependency relationship which may adversely affect SME international performance (Hillman et al., 2009). For firms lacking strong marketing capabilities, the formation of foreign-market-based alliances might generate a situation where the SME becomes dependent on the foreign-based partner for its marketing activities. This dependency provides an opportunity for the partner organization to take advantage of the SME, capture a larger portion of profits, resulting in reduced SME international performance (Hillman et al.; Miles et al., 1999). In contrast, SMEs with strong marketing capabilities will have the ability to create interdependent alliances where both parties benefit from the alliance and neither has an advantage (Hillman et al.). In addition, SMEs with stronger marketing capabilities will have a greater ability to transfer knowledge and learn about new marketing techniques (Martin & Salomon, 2003). This ability helps these SMEs overcome more of the liabilities of foreignness they face when expanding to new foreign markets and reduces any potential dependency on the foreign alliance partner firm. Thus, for firms possessing stronger marketing capabilities, foreign country marketing alliances can be more beneficial, leading to better international performance. Based on this, our third hypothesis states:

Hypothesis 3: Within a specific foreign country, participation in marketing alliances will be positively related to international performance, but these benefits will be greater for marketing-capability-rich firms than for marketing-capability-poor firms.

EO, International Alliances, and International Performance

As our theory suggests, an SME expanding abroad can overcome some of the liabilities of foreignness it faces and improve international performance by either utilizing its higher level of EO capabilities or by participating in foreign-market-based alliances. Here we theorize that SMEs undertaking both actions will create foreign operations that provide superior international performance because firms possessing greater EO have the capabilities necessary to take advantage of the opportunities that alliance participation provides, while those with lower EO cannot utilize these resources as effectively. We therefore suggest that participation in foreign market alliances moderates the relation between EO and international performance; alliances provide greater benefits to more entrepreneurial firms.

Firms high in EO capabilities tend to be more proactive, displaying a higher propensity to search for opportunities in the external environment (Jantunen et al., 2005). However, due to the lack of resources that plague the majority of SMEs, these opportunities cannot be fully identified or explored without the contribution of other companies. According to the resource-dependency perspective, alliances can be used to assist SMEs in obtaining resources that enable them to understand the foreign market, spot new opportunities, and provide the capabilities needed to take advantage of such opportunities (Hillman et al., 2009; Inkpen & Beamish, 1997). Entrepreneurial firms could do it alone and slowly learn about the foreign market and develop the required capabilities, but because of competitive pressures time matters. Partnering with a local firm allows entre-preneurially oriented SMEs to recognize opportunities and take advantage of them in a timely manner.

Alliances, however, may lead to an increased dependency on a partner and lower performance (Hillman et al., 2009). SMEs engaged in foreign alliances need to be careful not to allow their partners to take control of strategic resources because the relationship will become less stable and the benefits accrued through partnering will disappear (Inkpen & Beamish, 1997). High EO firms, we suggest, have the ability to manage this dependency issue and gamer the benefits that alliance participation can supply. Through alliance participation, high EO firms can take advantage of their proactive capabilities, finding new opportunities that alliance partners present, making certain not to lose control of the partnership, and gain access to new technologies that would otherwise take time and resources to develop internally (Wiklund & Shepherd, 2003). Other less EO-intensive companies also gain access to these opportunities and technology, but because they are not proactive they may be less interested in pursuing these opportunities, they can lose control of the strategic resources of the partnership, become dependent on the partner firm, and as a result, fail to generate as much value from the external knowledge that an alliance partner can provide.

High-EO firms also have innovative capabilities and can use strategic alliances to obtain additional resources and capabilities to gain greater benefits from these innovative activities. Research alliances provide access to additional resources that can improve an entrepreneurial SME's development of new products. Marketing alliances can provide these firms with the knowledge needed to be more innovative in marketing and distribution of products/services. From a resource-dependency perspective, these innovative actions will reduce the chance of dependency on partner organizations (Hitt et al., 2004). That is why previous research has found that more innovative companies are more likely to use partnerships in order to gain resources in the areas of R&D and marketing (Marino et al., 2002). This willingness to engage in alliances tends to increase a firm's performance; performance goes up as the number and diversity of foreign alliance partnerships grows (Street & Cameron, 2007). While having access to these same potential benefits, SMEs with lower EO will be less likely to take advantage of the innovations in technology or marketing that alliance participation provides. The reason for this is that firms with lower EO are less innovative and therefore less willing to make changes in the technology they use or the marketing processes they have become accustomed to (Lumpkin & Dess, 1996; Rauch et al., 2009). As a consequence, lower-EO firms will not benefit to the same degree from participating in foreign marketing or research alliances.

Finally, because high-EO firms are willing to take greater business risks, they tend to generate greater advantage from alliance participation for the following reasons. First, proactive firms can potentially generate greater performance because they bring new technologies and marketing practices to foreign consumers that can reduce size- and legitimacy-based liabilities of foreignness. However, being proactive means trying out new technologies or marketing practices with which the firm is unfamiliar; this can be risky, but high EO firms are more willing to take these risks (Lumpkin & Dess, 1996). Second, high EO firms are more willing to innovate and adopt new technologies and modify current products/services (Covin & Slevin, 1991; Miller, 1983). Doing so can provide legitimacy in the foreign market because there is a better match between the technology offering of the SME and the demands of consumers in foreign markets. Taking risks with new technology and marketing innovations can be costly but also provides an advantage when successful (De Clercq et al., 2005). Thus, firms possessing greater EO capabilities will gain larger benefits from research or marketing alliance participation because these firms will be more proactive at identifying and pursuing opportunities, more innovative at adopting new technologies and marketing methods, and be more willing to take the risks associated with these entrepreneurial actions. Based on this, our final hypothesis states:

Hypothesis 4: Within a specific foreign country, participation in research or marketing alliances will have a positive moderating impact on the relation between EO and international performance.

Methods

We gathered primary data using a postal survey to test the hypotheses in this study. The population for our study was composed of privately held companies originating in the United States and the United Kingdom. The decision was made to include samples from two different countries in order to eliminate potential national selection bias. To be included in our sample, a company had to meet certain conditions. First, it had to be an independent private company, not a subsidiary or affiliate of another entity. Second, it had to qualify as an SME as defined by the European Union. Therefore, only companies that had a maximum of 250 employees were included in our study (European Commission Small Business, 2009). A third condition was that the company had to be U.S. or U.K. owned. Finally, a company had to have international sales because the main focus of our study was the international performance of a company and companies without international sales have no international performance. Based on these criteria, we identified about 5,000 companies from the Dun and Bradstreet database. Due to cost considerations, we selected a random sample of 350 companies from each country list of qualified firms (700 companies in total) to receive our questionnaire.

Prior to posting the questionnaire, each company was contacted by phone to verify it qualified for inclusion in our study and to get the name of the CEO. This further screening reduced our sample to 601 firms (86%). Subsequently, we mailed the questionnaire to the key informant in each of these firms. Following the initial mailing, we used reminder phone calls and we received 162 completed questionnaires (93 from the United Kingdom and 69 from the United States), for an overall response rate of 27%.

All respondents were asked to focus on the firm's "best-seller foreign market" when completing the questionnaire. This was defined as the foreign country in which the firm had its highest sales, not necessarily its most profitable market. The largest foreign market was used for a number of reasons. As in He et al., (2013), we believe that focusing on this market is a way to capture consistent results between firms and to access information for a market in which there was a greater likelihood that alliance participation would take place. Alternatively, we could have asked firms to choose a market in which they used alliances, but then we would have no variance in this critically important variable. Or we could have asked for the best-performing market, but again this would reduce our ability to identify performance differences. Another alternative we considered was to let the firms choose any market they wanted, but then we would have difficulty comparing firms since some might choose the most profitable, others the largest, and others the newest. Thus, after due consideration, the decision was made to gather data on the largest foreign market for each firm.

Dependent Variable

As suggested by Keupp and Gassmann (2009), our dependent variable international performance examined the performance of the firm in a particular foreign market, not firm-level international performance. It was captured through three 7-point Likert-type questions (Brouthers et al., 2009). Perceptual measures of performance are very common in studies of SMEs because objective financial data are not publically available and SME managers are reluctant to disclose actual figures (Nakos et al., 1998). The recipients of the questionnaire were asked to rate on a 7-point scale, 1--much lower to 7--much higher, the international performance of their company in the "best-seller" foreign market in comparison with their direct competitors over the last 3-year period in the areas of (1) return on investment, (2) profitability, and (3) overall performance. Factor analysis showed that the three items loaded in one factor (Cronbach's alpha = 0.89). Our international performance measure was created by taking the average of the three items.

Independent and Moderating Variables

We included three independent variables in our study. Entrepreneurial orientation was determined by using nine 7-point Likert-type questions taken from Covin and Slevin (1991) and Lumpkin and Dess (1996) which investigate the areas of innovativeness, proactiveness, and risk-taking (Jantunen et al., 2005). We followed past studies (Rauch et al., 2009) and created a unidimensional construct by adding the nine items and then dividing by nine (Cronbach's alpha = 0.85).

The other two independent variables examined the extent to which a company engages in joint research alliances and joint marketing alliances with local firms in the "best-seller" foreign market. Each of these was measured with one 7-point Likert-type question taken from Dollinger and Golden (1992) that asks respondent about the extent to which the firm participates in the specific alliance type with local firms in the "best-seller" foreign market. The range of the 7-point scale was from 1--no joint agreements to 7--heavy use of joint agreements.

We also included two moderating variables that capture the level of R&D and marketing capabilities for each firm. Since our theory suggests that possessing these capabilities will enhance a firm's ability to take advantage of research or marketing alliances, we explored how these factors moderate the relation between alliance participation and international performance (Baron & Kenny, 1986). Our measure of R&D capabilities is based on two items; the tendency to have high expenditures on product/service development and to introduce innovative products/services to the foreign market (Mintzberg, 1988). Our R&D capabilities construct was calculated by taking the average of two 7-point Likert-type scale questions (Cronbach's alpha = 0.73). R&D capabilities are made up of both a research (new innovative products) component and a development (modification of existing products) component (Ahuja, 2000; Kotabe, Srinivasan, & Aulakh, 2002; Song, Droge, Hanvanich, & Calantone, 2005). The first part of our construct is a proxy for the capabilities a firm possesses to make improvements in existing products/ services to adjust for country/consumer differences in things like electrical needs, color, size, and shape. While not altering the product itself, development efforts are an important part of research because they help firms adapt products to changing customer needs and regulatory requirements. The second part of this construct provides a proxy for a firm's capabilities to research new products/services. The introduction of innovative new products to a foreign market may be the only way to gain successful entry and combat foreign-based competitors. A company that has made investments in both these areas (development and research) will have developed internal capabilities that allow it to transfer valuable external knowledge for either development or research purposes. Such firms will also possess capabilities for assimilating and applying this external knowledge either to adapt existing products or for creating innovative new products. Although our EO and R&D capabilities measures are significantly correlated (Table 1), factor analysis showed that these R&D capabilities items load on a different factor than the nine EO components, indicating that the two constructs measure different items.

For our measure of marketing capabilities, we also used a 2-item construct: using extensive advertising and promotion methods and a prestige pricing strategy in the foreign market (Lassar & Kerr, 1996; Mintzberg, 1988; Murray, Gao, & Kotabe, 2011). We calculated our marketing capabilities construct by taking the average of two 7-point Likert type questions (Cronbach's alpha = 0.79). These two items are used as proxies for the underlying capabilities a firm has developed in the marketing area. Marketing encompasses both positioning within a market as well as advertising and promotion efforts (Swaminathan & Moorman, 2009). Firms with greater advertising and promotion experience will have developed capabilities for transferring and using marketing knowledge to differentiate the firm's products from competitors. These same capabilities can be utilized as the firm expands abroad to transfer, assimilate, and apply advertising and promotion knowledge that may differ between countries. The second part of this construct provides a proxy for the quality of the market positioning effort. Firms using prestige pricing policies will have developed capabilities for identifying and addressing the needs of unique market niches and position their products to be desirable for buyers. A firm that uses prestige pricing strategies for positioning its products will have developed capabilities for transferring and using foreign market information that will enable it to successfully position its products in the foreign country.

We calculated six interaction terms. The first four interactions explored the boundaries of our two different types of alliances and were calculated by taking the centered value of R&D capabilities and marketing capabilities and multiplying them by the centered values of research alliances and marketing alliances. Our second set of two interaction terms were calculated by taking the centered value of entrepreneurial orientation and multiplying it by the centered values of research alliances and marketing alliances, respectively (Aiken & West, 1991).

Control Variables

We included a number of control variables to account for factors previous research has found to be related to SME international performance (Brouthers et al., 2009; Nakos et al., 1998). Not all countries are alike, and due to a number of factors such as networks, government support, or incentives firms from some home countries might develop more successful foreign market operations. We controlled for home country nationality using a dichotomous variable. U.S.-based firms were coded zero (0), while those from the United Kingdom were coded one (1). Research also suggests that firms with greater international experience may have developed processes and procedures that lead to more successful international operations (Brouthers et al., 2009). Therefore, we controlled for two types of international experience. First, international experience measured the number of years that a firm had international operations (Dimitratos et al., 2004). Second, number of countries was measured as the number of foreign countries in which the company was selling its products at the time of the survey (Lu & Beamish, 2001).

Other studies indicate that cultural distance can have an impact on international performance (Berry, Guillen, & Zhou, 2010). When distances are large, firms may not perform as well because they have difficulty understanding and adapting to differences in the business environment. We used the cultural distance measure and method taken from Berry and colleagues which is calculated using data from the World Value Survey that mimics Hofstede's four measures of national culture. International performance can also vary simply because of the industry a firm is in (Dimitratos et al., 2004). Since we had firms from multiple industries, we could have created eight dummy variables for our nine different industries; however, several of those industries included only a few firms and hence would have decreased the power of our analysis without providing additional benefits. Instead we created four dummy variables to represent the four main 2-digit NACIS industries in our sample. Approximately 86% of the firms in our sample operated in these four NACIS industry codes. The four major industries codes were: 31 for food and textiles manufacturing, 32 for paper and chemical manufacturing, 33 for electronic and transportation manufacturing, and 54 for professional services. Each industry dummy variable was given a value of 1 if the firm was operating in that industry and a value of zero (0) if the firm was in another industry.

Finally, we included variables to control for firm size and the foreign market institutional environment. Larger SMEs have more resources to devote to international operations and therefore might perform better compared with smaller firms (Nakos et al., 1998). We measured firm size as the total number of employees. Foreign markets can differ significantly from each other making it more (less) difficult for foreign firms to do business in them. Although cultural distance captures some of these differences, other institutional factors might also impact performance (Berry et al., 2010). We captured these target market institutional environment variations using three 7-point Likert-type questions taken from previous research (Covin & Slevin, 1989). The questions asked (1) how safe/risky the environment was in the foreign country, (2) what type of investment and marketing opportunities this market possesses, and (3) how controllable the environment was in this foreign country. These three items loaded on one factor (Cronbach's alpha = 0.70) and were summed and then averaged to create our variable.

Nonresponse and Common Methods Issues

Nonresponse bias was examined in two different ways. We compared two variables, number of employees and age of the firm, from the responses that we received from the first mailing with later responses (t = 0.139, p = .889; t = 0.138, p = .393). We compared these same variables for all respondents and the entire population of firms from which the sample was selected (t = 1.245, p = .214; t = 1.1, p = .253). The results of the two tests showed no indication of response bias.

Following the suggestions of Podsakoff, MacKenzie, Lee, and Podsakoff (2003) we utilized two techniques to protect our results from common method biases. The first method was through the design of the study's procedures. When we designed our questionnaire, we used different response formats to measure our variables. For example, for EO and performance we used Likert scales, for variables such as industry we used direct selection, and for items such as firm size and international experience we used open-ended questions. Certain independent variable questions were reverse-scaled to eliminate response patterns that can potentially distort the accuracy of data. The second technique utilized confirmatory factor analysis (CFA) to investigate potential common methods bias (Podsakoff et al.). The estimated CFA loaded all the items of the survey on a common "method" factor. The proposed model illustrated a poor fit to the data (TLI = 0.253; CFI = 0.426; IFI = 0.432; RMSEA = 0.175). These results suggest that common methods bias is not a problem in our data.

Results

Table 1 shows the means, standard deviations, and correlations for all our variables. Some significant correlations were observed among the dependent, independent, and control variables, but multicollinearity does not seem to be a problem; the variance inflation factors (VIFs) were under the value of 3. According to Neter, Wasserman, and Kutner (1983) values below 3 suggest that multicollinearity is not a problem.

In order to test our hypotheses we used hierarchical regression analyses (Tables 2-4). (1) The first model in each of these tables investigated the influence of the control variables on our dependent variable, international performance. The regressions were significant (p < .05). The control variables, number of countries (p < .01), manufacturer NACIS 31 (p < .05), and cultural distance p < .05) were all significantly related to international performance.

We began our analysis by investigating hypothesis 1 and testing this hypothesis in the second model of each table. Model 2 included all the control variables and entrepreneurial orientation. These models were significant (p < .01) and indicate that EO was positive and significantly (p < .01) related to international performance. These models provide support for hypothesis 1: Firms with higher EO also have higher international performance.

We tested hypothesis 2 in Table 2 (Models 3-6). Hypothesis 2 suggests that participation in research alliances will lead to better international performance especially for firms possessing stronger R&D capabilities. In Model 3 we note that the direct effect of participation in foreign market research alliances is positive and significantly (p < .01) associated with international performance. Model 4 shows that R&D capabilities moderate this relation and indicates that firms possessing stronger R&D capabilities participating in more research alliances tend to have higher international performance (p < .05).

Further, as indicated in Model 6, these same R&D capabilities do not lead to international performance differences for firms participating in marketing alliances (p > .05). Thus, these results provide support for hypothesis 2: Firms with greater participation in foreign market research alliances have higher international performance but the benefits are greater for SMEs possessing stronger R&D capabilities.

We tested hypothesis 3 in Table 3 (Models 4 through 6). Hypothesis 3 suggests that participation in marketing alliances will lead to better international performance especially for firms possessing stronger marketing capabilities. In Model 5, we note that the direct effect of participation in foreign market marketing alliances is positive and significantly (p < .05) associated with international performance. Model 6 shows that marketing capabilities moderate this relation and indicates that firms possessing stronger marketing capabilities and participating in more marketing alliances tend to have higher international performance (p < .05). Further, as indicated in Model 4, these same marketing capabilities do not lead to international performance differences for firms participating in R&D alliances (p > .05). Thus, these results provide support for hypothesis 3; firms with greater participation in foreign market marketing alliances have higher international performance, but the benefits are greater for SMEs possessing stronger marketing capabilities.

Finally, in Table 4 we tested hypothesis 4 and examined the moderating effect of research or marketing alliances on the relation between EO and international performance. Model 4 indicates that the interaction between EO and research alliance participation is significant (p < .05). Model 6 indicates that the interaction between EO and marketing alliance participation is also significant (p < .05).

To help interpret the results of our interaction variables (Table 4, Models 4 and 6), we created two figures. In Figure 1 we plotted the interaction between EO and participation in foreign market research alliances. As can be seen in the figure, we found that more active participation in research alliances improves the application of EO and leads to greater international performance. Figure 2 illustrates the interaction between EO and marketing alliances. This figure shows that more active participation in marketing alliances in foreign markets improves the application of EO resulting in improved international performance. Thus, as hypothesis 4 suggested, it appears that participation in foreign market research or marketing alliances moderates the relation between EO and international performance. Firms with higher EO tend to generate greater benefits from participating in research or marketing alliances in foreign countries.

Additional Test

Some studies suggest that there are differences between firms operating in multidomestic industries and those producing global products (e.g., Allred & Swan, 2004). From a theoretical perspective, it could be firms operating in multidomestic industries will need expertise in both marketing and R&D as they expand abroad; however, firms involved in global industries tend to standardize the product and promotion efforts. For these firms, alliances may provide few benefits. To capture this potential confounding affect, we developed a new variable using the industry classification list developed by Ghoshal and Nohria (1993). Our new variable, global/multidomestic, takes the value of 0 if a firm operates in a global industry and takes the value of 1 if it operates in a multidomestic industry.

Table 5 contains the revised analysis. Before we added the new variable, we checked for potential collinearity and found no significant correlation with the other variables in our model and the VIF scores did not show an increase. Although all six models are significant, our globaiymultidomestic variable is not significant in any of the models. Hence, we find no support for the notion that SMEs operating in global industries benefit more or less from alliance participation than SMEs operating in multidomestic industries.

Discussion, Limitations, and Conclusion

SMEs play a vital role in international business and for this reason researchers have expended considerable effort in trying to identify methods of improving SME international performance (Brouthers et al., 2009; Lu & Beamish, 2001; Nakos et al., 1998). Building on previous research (Dimitratos et al., 2004; Jantunen et al., 2005; Street & Cameron, 2007), in this paper we theorized that EO capabilities and participation in research or marketing alliances are both important in helping SMEs overcome the liabilities of foreignness they encounter when expanding to foreign markets and that the joint impact of these two factors can provide greater benefits to internationalizing SMEs. Based on samples of U.S and U.K. SMEs we found some support for these ideas.

We make several important contributions to the international business and entrepreneurship literatures. First, we make a unique contribution to the literature by examining both marketing and research alliances. Building on the RBV and resource-dependency perspectives (Barney, 1991; Hillman et al., 2009), we developed and tested theories to explain how participation in foreign market research or marketing alliances can benefit SMEs as they internationalize. Our results tend to suggest that both types of alliances can be beneficial depending on SME capabilities. SMEs with stronger R&D capabilities have a greater ability to take advantage of research alliance partner knowledge to improve technology and better align products with customer needs and wants. In addition, marketing alliances help marketing-capability-rich SMEs overcome some of the size- and legitimacy-related liabilities of foreignness. Hence, we make an important contribution to knowledge by examining marketing and research alliances separately and identifying the boundaries within which each type of alliance can provide SMEs with international performance benefits.

Second, our results help clarify potentially conflicting issues raised in resource-dependency theory. In essence, this theory provides two arguments about the potential benefits of alliance participation. One is based on filling a capabilities/resource gap in firms (Hitt et al., 2004). The other focuses on improving existing resources (Hillman et al., 2009). Our results appear to suggest that research and marketing alliances tend to enhance existing firm-level resources/capabilities, at least for SMEs, rather than simply providing some additional missing resources/capabilities that the firm can use. That is why firms benefit to a greater extent from alliance participation if they have the requisite capabilities to transfer and use the externally provided knowledge. Without these specific capabilities, the firm can find itself in a dependency relationship which benefits the partner organization at the expense of the focal SME.

Third, although previous research has indicated that firms with greater EO capabilities tend to have higher performance (Rauch et al., 2009), there are only a few studies that have looked at this in the international context. Moreover, as Keupp and Gassmann (2009) suggest, these studies often misspecify the international performance measure, making the results of such studies questionable. Building on recommendations from Keupp and Gassmann, and Hult and colleagues (2008), we resolved this issue by exploring performance in one focal international market. Doing so helped control for other factors that past studies have ignored. In this way, we made an important contribution by improving on past research and extending our knowledge about how EO capabilities can provide performance benefits in a specific foreign market for SMEs as they expand abroad.

Finally, our study made an important contribution to the literature by examining the moderating impact of alliance participation on the relation between EO and international performance. Building on the RBV (Barney, 1991), we suggested and found that SMEs possessing greater EO capabilities benefit more from foreign market alliances because these firms can obtain and efficiently exploit resources from outside parties (Wiklund & Shepherd, 2003), allowing such firms to leverage the benefits that alliances provide. Although less entrepreneurially oriented firms also gain from alliance participation, it is high-EO firms that see the greatest benefits since they possess a more appropriate bundle of capabilities. Thus, our paper extended work on the RBV, EO, and alliance participation by showing how these factors can be used to enhance the international performance of SMEs.

Limitations

Although we provided valuable insights about EO, alliance participation, and international performance, our study suffers from a number of limitations. First, because we examined SMEs from the United States and United Kingdom, we do not know if our findings are generalizable to firms from other countries, especially emerging market countries such as China. In addition, because our sample firms had significant international experience, our results may not be generalizable to newly internationalizing or less internationally experienced firms. Second, we used the European Union definition of SMEs and hence did not include certain firms that are considered SMEs in the United States (firms with 250-500 employees). Future studies including these larger firms can help determine if our findings are generalizable to these other organizations. Third, although our tests of common methods variance indicate this is not a problem with our study, future research could improve on the data collection techniques we used, possibly obtaining some data from secondary sources or collecting data at two different times.

Fourth, while we explored alliance use in the largest market for each firm, it could be that alliance use is dependent on past actions, and therefore the relation between alliance use and performance may differ. It could be that past experience using either research or marketing alliances may influence the use and benefits derived from these alliances in the future and hence impact an SME's success. We did not have a measure of past research or marketing alliance use; future studies might want to include such a measure and add to our knowledge by exploring how past alliance usage impacts current alliance choices and international performance. Further, our study focused on alliances with local foreign market-based firms. Forming alliances with other firms in foreign markets (third-country or home-country firms) would also provide SMEs with access to certain resources, thus potentially reducing resource dependency. However such alliances might have only a limited impact in helping SMEs overcome liabilities of foreignness because such ventures provide less country-specific knowledge. Future research might want to explore whether such resource dependency effects do occur and how these other alliances impact a firm's ability to overcome liabilities of foreignness.

Fifth, we used two different multidimensional measures of firm capabilities. Although they are based on previous research and provide an improvement on past studies, additional work could still be done. Developing better measures of firm capabilities would help us gain greater insights about how these capabilities can be deployed most effectively. In addition, because firms can choose to develop R&D or marketing capabilities, these variables are endogenous. Future studies looking at this issue could make an important contribution.

Sixth, we noted no significant difference between companies operating in industries classified as global and those defined as multidomestic. Yet theory suggests that firms undertaking global standardization strategies would not benefit as much from participating in research alliances compared with firms pursuing multidomestic strategies. Our insignificant results might have come about because we measured these strategies at the industry level, not the firm level. Future research could look more closely at this issue and collect firm-level data on global/multidomestic strategy to determine if the benefits of alliance participation do vary because of firm strategy.

Finally, our results are limited because we used cross-sectional data. While gathering longitudinal data is difficult and time-consuming, it can provide us with a more accurate understanding of the relationship between managerial decisions and performance outcomes. Our cross-sectional data cannot be used to determine causality, so it could simply be that firms that perform better abroad tend to use more alliances than poorer performing firms. Future longitudinal studies can help clarify the direction of this relationship.

Implications

Our results have important implications for managers of SMEs. First, our results extend support for the relation between EO and performance as identified in domestic operations (Rauch et al., 2009). It appears that developing EO capabilities can also play a significant role for firms expanding to international markets. Managers need to take steps to improve EO capabilities prior to expanding abroad so that the firm can take full advantage of the opportunities provided in foreign markets and reduce the liabilities of foreignness that firms, especially SMEs, face when they operate abroad.

Second, our study also tends to indicate that participation in foreign market alliances can be of benefit to SMEs especially if they match the type of alliance with the capabilities of the firm. While alliances hold the promise of helping SMEs overcome some size- and legitimacy-related (Lu & Beamish, 2001) liabilities of foreignness, our study indicates that SMEs need to possess certain capabilities to take full advantage of these potential benefits. Managers therefore need to be cognizant of these differences and, to be successful in a foreign market, should align alliance participation with firm level capabilities.

Conclusion

In sum, our study makes several important contributions. By exploring the impact of EO and research or marketing alliance participation on SME international performance we add valuable insights about how EO and different types of alliances can be used by SMEs to mitigate some liabilities of foreignness and improve international performance. Our study highlights the importance of having both EO capabilities and alliance participation for SMEs expanding abroad. We note that participation in research or marketing alliances can help SMEs be more successful in foreign markets if the alliance is aligned with the SME's capabilities. We add to knowledge by investigating the moderating relation between EO and alliance participation; noting that alliance participation can lead to enhanced performance for firms with greater EO capabilities. Thus, we advance international business and entrepreneurship research and provide valuable guidance for firm managers.

DOI: 10.1111/etap.12101

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Zahra, S.A. & Garvis, D.M. (2000). International corporate entrepreneurship and firm performance: The moderating effect of international environmental hostility. Journal of Business Venturing, 15(5/6), 469-492.

Keith D. Brouthers is Professor of Business Strategy at King's College London, 150 Stamford Street, London SE1 9NH, UK and Visiting Professor at the University of Groningen, the Netherlands.

George Nakos is Professor of Marketing at the College of Business, Clayton State University, 2000 University Boulevard, Morrow, GA 30260, USA.

Pavlos Dimitratos is Professor of International Business at Adam Smith Business School, University of Glasgow Business School, University Avenue, Glasgow, G12 8QQ, UK.

(1.) Similar analyses were performed with firm age included. Results were substantially the same. Full results are available from the first author.

Please send correspondence to: Keith D. Brouthers, tel.: 44 207 848 4093; e-mail: at Keith.brouthers@kcl .ac.uk, to George Nakos at georgenakos@clayton.edu, and to Pavlos Dimitratos at Pavlos.Dimitratos @glasgow.ac.uk.

Table 1
Correlation and Descriptive Statistics

Variable                                        l        2        3
Mean                                           .44       20       18
SD                                             .49       19       22

 1. Nationality                               1.00
 2. International experience                  -.23 *   1.00
 3. Number of countries                        .03      .17     1.00
 4. Manufacturer 31                           -.24 *    .38 *    .02
 5. Manufacturer 32                           -.07      .12     -.06
 6. Manufacturer 33                            .09     -.15      .09
 7. Professional services 54                   .03     -.22 *   -.10
 8. Firm size                                 -.06      .11      .13
 9. Target market institutional environment    .16     -.12     -.22 *
10. Entrepreneurial orientation (EO)           .03     -.17      .06
11. Cultural distance                         -.02     -.11      .03
12. R&D capabilities                          -.01     -.09      .17
13. Marketing capabilities                     .17     -.11      .32 *
14. Research alliances                         .22 *   -.22 *   -.06
15. Marketing alliances                        .18     -.04      .06
16. International performance                 -.13      .07      .24 *

Variable                                        4        5        6
Mean                                           .09      .12      .44
SD                                              29      .32      .50

 1. Nationality
 2. International experience
 3. Number of countries
 4. Manufacturer 31                           1.00
 5. Manufacturer 32                           -.12     1.00
 6. Manufacturer 33                           -.28 *   -.33 *   1.00
 7. Professional services 54                  -.16     -.19     -.45 *
 8. Firm size                                 -.05      .22 *   -.06
 9. Target market institutional environment   -.06      .11     -.10
10. Entrepreneurial orientation (EO)          -.13      .04      .06
11. Cultural distance                         -.01      .15      .01
12. R&D capabilities                          -.13     -.13      .12
13. Marketing capabilities                    -.10     -.01      .05
14. Research alliances                        -.25 *    .06      .11
15. Marketing alliances                       -.11     -.05      .02
16. International performance                 -.16      .04     -.01

Variable                                       7      8      9
Mean                                          .21    118    3.6
SD                                            .41     75    1.0

 1. Nationality
 2. International experience
 3. Number of countries
 4. Manufacturer 31
 5. Manufacturer 32
 6. Manufacturer 33
 7. Professional services 54                  1.00
 8. Firm size                                 -.03   1.00
 9. Target market institutional environment   -.01   -.06   1.00
10. Entrepreneurial orientation (EO)           .13   -.01   -.18
11. Cultural distance                         -.07   -.06    .06
12. R&D capabilities                           .09    .01   -.07
13. Marketing capabilities                    -.06    .18   -.02
14. Research alliances                         .08   -.03    .19
15. Marketing alliances                        .07   -.09    .08
16. International performance                  .07    .00   -.13

Variable                                        10      n       12
Mean                                           4.1     11.5    3.6
SD                                             1.1     7.6     1.6

 1. Nationality
 2. International experience
 3. Number of countries
 4. Manufacturer 31
 5. Manufacturer 32
 6. Manufacturer 33
 7. Professional services 54
 8. Firm size
 9. Target market institutional environment
10. Entrepreneurial orientation (EO)          1.00
11. Cultural distance                         -.13     1.00
12. R&D capabilities                           .49 *   -.06   1.00
13. Marketing capabilities                     .20      .03    .25 *
14. Research alliances                         .09     -.06   -.02
15. Marketing alliances                       -.02     -.01   -.10
16. International performance                  .46 *   -.19    .16

Variable                                        13       14      15
Mean                                           3.2      2.8     2.7
SD                                             1.4      1.8     1.7

 1. Nationality
 2. International experience
 3. Number of countries
 4. Manufacturer 31
 5. Manufacturer 32
 6. Manufacturer 33
 7. Professional services 54
 8. Firm size
 9. Target market institutional environment
10. Entrepreneurial orientation (EO)
11. Cultural distance
12. R&D capabilities
13. Marketing capabilities                    1.00
14. Research alliances                         .11     1.00
15. Marketing alliances                        .21 *    .46 *   1.00
16. International performance                  .10      .21 *    .11

Variable                                       16
Mean                                          4.3
SD                                            1.3

 1. Nationality
 2. International experience
 3. Number of countries
 4. Manufacturer 31
 5. Manufacturer 32
 6. Manufacturer 33
 7. Professional services 54
 8. Firm size
 9. Target market institutional environment
10. Entrepreneurial orientation (EO)
11. Cultural distance
12. R&D capabilities
13. Marketing capabilities
14. Research alliances
15. Marketing alliances
16. International performance                 1.00

* p < .01.

R&D, research and development; SD, standard deviation.

Table 2
Hierarchical Regression Test of International Performance Including R&D
Capabilities

Variables                              Model 1    Model 2    Model 3

Control variables:
  Nationality                            -1.3       -1.7     -2.4 **
                                                   (-.13)     (-.19)
  International experience               .34        1.4        1.8
                                        (.04)      (.12)      (.15)
  Number of countries                  3.1 ***    2.9 ***    2.9 ***
                                        (.27)      (.23)      (.22)
  Manufacturer NACIS 31                -2.2 **    -2.3 **    -2.3 **
                                        (-.23)     (-.22)     (-.21)
  Manufacturer NACIS 32                  .41        -.03       -.20
                                        (.04)      (-.03)     (-.02)
  Manufacturer NACIS 33                  .01        .27        -.29
                                         (01)      (.03)      (-.03)
  Professional services NACIS 54         .84        .61        .06
                                        (.09)      (.06)      (.01)
  Firm size                              -.77       -.53       -.71
                                        (-.07)     (-.04)     (-.05)
  Target market institutional            -.41       -.64       -1.2
    environment                         (-.04)     (-.64)     (-.09)
  Cultural distance                    -2.2 **      -1.5       -1.5
                                        (-.19)     (-.12)     (-.11)
  Constant                             14.9 ***   16.0 ***   16.8 ***
                                        (4.7)      (4.5)      (4.6)
Independent variables:
  Entrepreneurial orientation (EO)                5 7 ***    5 7 ***
                                                   (.44)      (.43)
  Research alliances                                          3.2 **
                                                              (.26)
  Marketing alliances

  R&D capabilities

  R&D capabilities x research
    alliances
  R&D capabilities x marketing
    alliances
Model R square                         .166 **    .345 ***   399 ***
  R square change--model 1                        .179 ***
  R square change--model 2                                   .054 ***
  R square change--model 3
  R square change--model 5
Model adjusted R square                  .095       .284       .337

Variables                              Model 4    Model 5    Model 6

Control variables:
  Nationality                          -2.6 **    -2.2 **    -2.4 **
                                        (-.20)     (-.17)     (-.18)
  International experience               1.5        1.6        1.5
                                        (.11)       (13)      (.11)
  Number of countries                  3.3 ***     2.6 **    3.0 ***
                                        (.26)      (.20)      (.23)
  Manufacturer NACIS 31                -2.5 **    -2.2 **    -2.4 **
                                        (-.22)     (-.20)     (-.21)
  Manufacturer NACIS 32                  -.29       .05        -.26
                                        (-.02)     (.01)      (-.02)
  Manufacturer NACIS 33                  -.17       .40        .35
                                        (-.02)     (.04)      (.04)
  Professional services NACIS 54         -.08       .48        .27
                                        (-01)      (.05)      (.03)
  Firm size                              -.52       -.43       -.34
                                        (-.04)     (-.03)     (-.02)
  Target market institutional            -1.2       -.97       -1.0
    environment                         (-.09)     (-.07)     (-.08)
  Cultural distance                      -1.3       -1.8       -1.7
                                        (-09)      (-.13)     (-.12)
  Constant                             16.9 ***   16.2 ***   16.7 ***
                                        (4.5)      (4.4)      (4.5)
Independent variables:
  Entrepreneurial orientation (EO)     5 8 ***    6.1 ***    6.7 ***
                                        (.49)      (.46)      (.55)
  Research alliances                   3.1 ***
                                        (.24)
  Marketing alliances                              2 2 **     2.4 **
                                                   (.17)      (.18)
  R&D capabilities                       -1.7                -2.1 **
                                        (-.14)                (-.18)
  R&D capabilities x research           2.1 **
    alliances                           (.16)
  R&D capabilities x marketing                                 1.9
    alliances                                                 (.14)
Model R square                         446 ***    .383 ***   431 ***
  R square change--model 1
  R square change--model 2                        .038 ***
  R square change--model 3             .047 ***
  R square change--model 5                                   .048 ***
Model adjusted R square                  .379       .320       .362

** p < .05; *** p < .01

Table 3
Hierarchical Regression Test of International Performance Including
Marketing Capabilities

Variables                               Model 1    Model 2    Model 3

Control variables:
  Nationality                             -1.4       -1.8     -2.5 **
                                         (-.13)     (-.15)     (-.20)
  International experience                .52        1.5        1.8
                                         (.05)      (.13)      (.15)
  Number of countries                   3.0 ***     2.8 **    2 g ***
                                         (.27)      (.22)      (.22)
  Manufacturer NACIS 31                 -2.2 **    -2.4 **    -2.4 **
                                         (-.23)     (-.22)     (-.21)
  Manufacturer NACIS 32                   .41        -.04       -.20
                                         (.04)      (-.01)     (-.02)
  Manufacturer NACIS 33                   -.13       .14        -.40
                                         (-.02)     (.02)      (-.04)
  Professional services NACIS 54          .89        .65        .11
                                         (.10)      (.07)      (.01)
  Firm size                               -.64       -.39       -.56
                                         (-.06)     (-.03)     (-.04)
  Target market institutional             -.18       -.44       -1.0
    environment                          (-.02)     (.03)      (-.08)
  Cultural distance                     -2.4 **      -1.7       -1.7
                                         (-.20)     (-.13)     (-.13)
  Constant                              14.9 ***   15.9 ***   16.8 ***
                                         (4.7)      (4.5)      (4.6)
Independent variables:
  Entrepreneurial orientation (EO)                 5.5 ***    5.6 ***
                                                    (.44)      (.43)
  Research alliances                                          3.2 ***
                                                               (.26)
  Marketing alliances

  Marketing capabilities

  Marketing capabilities x research
    alliances
  Marketing capabilities x marketing
    alliances

Model R square                          .172 **    .345 ***   .398 ***
  R square change--model 1                         .173 ***
  R square change--model 2                                    .053 ***
  R square change--model 3
  R square change--model 5
Model adjusted R square                   .101       .283       .335

Variables                               Model 4    Model 5    Model 6

Control variables:
  Nationality                           -2.6 **    -2.3 **    -2.2 **
                                         (-.21)     (-.18)     (-.23)
  International experience                1.4        1.6        1.1
                                         (.12)      (.14)      (.10)
  Number of countries                   3 i ***     2.4 **     2.3 **
                                         (.26)      (.19)      (.20)
  Manufacturer NACIS 31                 -2.3 **    -2.2 **    -2.2 **
                                         (-.21)     (-.20)     (-.20)
  Manufacturer NACIS 32                   -.24       .04        -.06
                                         (-.02)     (.01)      (-.01)
  Manufacturer NACIS 33                   -.32       .28        .11
                                         (-.03)     (.03)      (.01)
  Professional services NACIS 54          .15        .51        .40
                                         (.02)      (.05)      (.04)
  Firm size                               -.33       -.24       .10
                                         (-.03)     (-.02)     (.01)
  Target market institutional             -1.0       -.79       -.85
    environment                          (-.08)     (-.06)     (-.06)
  Cultural distance                       -1.5       -1.9       -1.8
                                         (-.11)     (-.14)     (-.13)
  Constant                              15 9 ***   16.2 ***   15.9 ***
                                         (4.5)      (4.5)      (4.5)
Independent variables:
  Entrepreneurial orientation (EO)      5.5 ***    6.0 ***    6.2 ***
                                         (.45)      (.46)      (.49)
  Research alliances                    3.2 ***
                                         (.26)
  Marketing alliances                               2.2 **     2.2 **
                                                    (.16)      (.18)
  Marketing capabilities                  -.64                  -1.1
                                         (-.05)                (-.10)
  Marketing capabilities x research       1.0
    alliances                            (.09)
  Marketing capabilities x marketing                           2.0 **
    alliances                                                  (.15)

Model R square                          .408 ***   .383 ***   .414 ***
  R square change--model 1
  R square change--model 2                         .038 **
  R square change--model 3                .009
  R square change--model 5                                    .031 **
Model adjusted R square                   .334       .320       .335

** p < .05; *** p < .01

Table 4
Hierarchical Regression Test of International Performance With
Entrepreneurial Orientation-Alliance Moderation

Variables                               Model 1    Model 2    Model 3

Control variables:
Nationality                               -1.3       -1.7     -2.4 **
                                         (-.12)     (-.14)     (-.19)
International experience                  .39        1.5        1.8
                                         (.04)      (.12)      (.14)
Number of countries                      3.1 **     2.9 **     2 9 **
                                         (.27)      (.22)      (.22)
Manufacturer NACIS 31                   -2.2 **    -2.3 **    -2.3 **
                                         (-.23)     (-.22)     (-.20)
Manufacturer NACIS 32                     .41        -.03       -.20
                                         (.04)      (-.03)     (-.02)
Manufacturer NACIS 33                     .01        .27        -.29
                                         (.01)      (.03)      (-03)
Professional services NACIS 54            .84        .61        .06
                                         (.09)      (.06)      (.06)
Firm size                                 -.77       -.53       -.71
                                         (-.07)     (-.04)     (-.05)
Target market institutional               -.41       -.64       -1.2
    environment                          (-.04)     (-.05)     (-.09)
Cultural distance                       -2.2 **      -1.5       -1.5
                                         (-.19)     (-.12)     (-.11)
Constant                                14.9 ***   15.9 ***   16.9 ***
                                         (4.7)      (4.5)      (4.6)
Independent variables:
Entrepreneurial orientation (EO)                   5.7 ***    5.7 ***
                                                    (.44)      (.43)
Research alliances                                            3.2 ***
                                                               (.26)
Marketing alliances

EO x research alliances

EO x marketing alliances

Model R square                          .166 **    .345 ***   .399 ***
R square change--model 1                           .179 ***
R square change--model 2                                      .054 ***
R square change--model 3
R square change--model 5
Model adjusted R square                   .095       .284       .337

Variables                               Model 4    Model 5    Model 6

Control variables:
Nationality                             -2.8 **    -2.2 **    -2.5 ***
                                         (-.21)     (-.17)     (-.19)
International experience                  1.9        1.6        1.9
                                         (.15)      (.13)      (.15)
Number of countries                      3.2 **     2.6 **     2 9 **
                                         (.24)      (.20)      (.22)
Manufacturer NACIS 31                   -2.6 **      -2.2     -2.3 **
                                         (-.23)     (-.20)     (-.20)
Manufacturer NACIS 32                     -.34       .05        -.04
                                         (-.03)     (.01)      (.01)
Manufacturer NACIS 33                     -.56       .40        .25
                                         (-.06)     (.04)      (.03)
Professional services NACIS 54            -.12       .470       .40
                                         (-.01)     (.05)      (.04)
Firm size                                 -.18       -.43       -.97
                                         (-.01)     (-.03)     (-.07)
Target market institutional               -1.2       -.97       -1.7
    environment                          (-.09)     (-.08)     (-.13)
Cultural distance                         -1.4       -1.8       -1.7
                                         (-.10)     (-.13)     (-.13)
Constant                                16.6 ***   16.1 ***   16.1 ***
                                         (4.5)      (4.5)      (2.2)
Independent variables:
Entrepreneurial orientation (EO)        5.6 ***    6.1 ***    6.3 ***
                                         (.41)      (.46)      (.47)
Research alliances                      3.4 ***
                                         (.26)
Marketing alliances                                 2.2 **     2.7 **
                                                    (.17)      (.21)
EO x research alliances                  2.4 **
                                         (.18)
EO x marketing alliances                                       2.1 **
                                                               (.17)
Model R square                          .428 ***   .383 ***   .406 ***
R square change--model 1
R square change--model 2                           .038 ***
R square change--model 3                .029 ***
R square change--model 5                                      .023 ***
Model adjusted R square                   .363       .320       .340

** p < .05; *** p < .01

Table 5
Hierarchical Regression Test of International Performance With Global
Versus Multidomestic Industry Variable

Variables                               Model 1    Model 2    Model 3

Control variables:
  Nationality                             -1.2       -1.6     -2.3 **
                                         (-.10)     (-.13)     (-19)
  International experience                .28        1.4        1.7
                                         (.03)      (.12)      (.14)
  Number of countries                   3.1 ***    2.9 ***    3.0 ***
                                         (.27)      (.23)      (.22)
  Manufacturer NACIS 31                 -2.1 **    -2.3 **    -2.3 **
                                         (-.22)     (-.21)     (-.21)
  Manufacturer NACIS 32                   .24        -.10       -.28
                                         (.02)      (-.01)     (-.02)
  Manufacturer NACIS 33                   -.18       .17        -.39
                                         (-.02)     (.02)      (-.04)
  Professional services NACIS 54          .59        .49        -.05
                                         (.07)      (.05)      (-.01)
  Firm size                               -.90       -.59       -.77
                                         (-.08)     (-.05)     (-.06)
  Target market institutional             -.45       -.65       -1.2
    environment                          (-.04)     (-.05)     (-.10)
  Cultural distance                     -2.2 **      -1.6       -1.6
                                         (-.19)     (-.12)     (-.12)
  Global/multidomestic                    -1.5       -.71       -.76
                                         (-.13)     (.06)      (-.06)
  Constant                              14.8 ***   15.5 ***   16.4 ***
                                         (4.8)      (4.6)      (4.5)
Independent variables:
  Entrepreneurial orientation (EO)                 5.4 ***    5.5 ***
                                                    (.44)      (.42)
  Research alliances                                          3.2 ***
                                                               (.26)
  Marketing alliances

  EO x research alliances

  EO x marketing alliances

Model R square                          .182 **    .347 ***   .402 ***
  R square change--model 1                         .117 ***
  R square change--model 2                                    .054 ***
  R square change--model 3
  R square change--model 5
Model adjusted R square                   .106       .281       .335

Variables                               Model 4    Model 5    Model 6

Control variables:
  Nationality                           -2.7 **    -2.1 **     2.4 **
                                         (-.21)     (-.17)     (-.19)
  International experience                1.8        1.5        1.8
                                         (.15)      (.12)      (.15)
  Number of countries                   3.2 ***     2.5 **    2.9 ***
                                         (.24)      (.20)      (.22)
  Manufacturer NACIS 31                 -2.5 **    -2.1 **    -2.2 **
                                         (-.23)     (-.20)     (-.20)
  Manufacturer NACIS 32                   -.41       -.03       -.01
                                         (-.04)     (-.01)     (-.01)
  Manufacturer NACIS 33                   -.66       .28        .13
                                         (-.07)     (.03)      (.01)
  Professional services NACIS 54          -.24       .33        .26
                                         (-.02)     (.03)      (.03)
  Firm size                               -.25       -.51       -.04
                                         (-.02)     (-.04)     (-.01)
  Target market institutional             -1.2       -1.0       -1.0
    environment                          (-.09)     (-.08)     (-.08)
  Cultural distance                       -1.4       -1.8       -1.8
                                         (-.10)     (-.14)     (-.13)
  Global/multidomestic                    -.78       -.88       -.86
                                         (.06)      (.07)      (-.06)
  Constant                              16.2 ***   15.8 ***   15.7 ***
                                         (4.5)      (4.6)      (4.6)
Independent variables:
  Entrepreneurial orientation (EO)      5.3 ***    5.8 ***    6.1 ***
                                         (.40)      (.45)      (.46)
  Research alliances                    3.4 ***
                                         (.27)
  Marketing alliances                               2.3 **    2 8 ***
                                                    (.17)      (.22)
  EO x research alliances                2.4 **
                                         (.18)
  EO x marketing alliances                                     2.1 **
                                                               (.17)
Model R square                          .431 ***   .387 ***   .407 ***
  R square change--model 1
  R square change--model 2                         .030 **
  R square change--model 3              .029 **
  R square change--model 5                                    .023 **
Model adjusted R square                   .361       .319       .328

** p < .05; *** p < .01.
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Title Annotation:small and medium-sized enterprises
Author:Brouthers, Keith D.; Nakos, George; Dimitratos, Pavlos
Publication:Entrepreneurship: Theory and Practice
Article Type:Report
Geographic Code:4EUUK
Date:Sep 1, 2015
Words:13828
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