Internationalization of small and mid-sized enterprises: The case of brazilian tool-machines industry

Abstract

Small and mid-sized firms face a challenge to diversify in order to grow. There is scarce literature on Brazilian Small and Medium Enterprises (SMEs) operating internationally, although they play a relevant role in the country’s economic context. This article seeks to understand the internationalization of the small and medium-sized Brazilian machine tool firms based on theories of motivation to expand internationally (for example, the one developed by Johanson and Vahlne in 1977 that was reviewed in 1990), as well as country entry strategies (Root, 1994), and decision making (Tversky and Kahneman, 1974; Brauers and Weber,1988; Gordon, 1994;Hammond et al.,1999). Machine-tool industry provides products used as input to manufacture a wide array of capital goods, which are key to the industrial development of any country. Research findings based on a case study together with a non-probabilistic sample indicate that the majority of SMEs in the industry did not go further than the export stage, and the decision to pursue new markets was made exclusively to increase sales. This decision has been made by either the managing partner or the board of directors without using any method suggested by the decision theory. Firms have remarked a notice able decrease in exports of various types of machine-tool mainly due to inefficient foreign exchange and credit policies supporting SMEs. The hard domestic competition imposed by Chinese products (nearly 70% cheaper) has negatively impacted the SME’s competitiveness in the industry. Aggregate data from this industry suggest reduction in the domestic market too.

Key words: internationalization, entry strategies, decision, machine-tool