Balancing innovation and internationalization activities for SMEs growth: an empirical analysis on Italian and Spanish SMEs

Nowadays more and more SMEs have to face pressures imposed by the globalization which limit their capability to grow. To overcome such liability, SMEs are called to innovate in order to introduce new products on new markets. However, threats imposed by shorter product life-cycle may render expensive and ineffective such strategy for the sustainability of SMEs business. In this vein, the capability of SMEs to excel into innovation and internationalization activities is gaining momentum in the agenda of scholars, practitioners and policy makers. The crucial dilemma affecting all these stakeholders is related with the complementarity existing between innovation activities, internationalization and firm performance (growth in particular for SMEs). In fact, despite the problems identified above, innovation may guarantee SMEs to enter market niches abroad more easily and to achieve a competitive advantage. At the same time, internationalization may enhance the product innovation capabilities of SMEs, thus sustaining business growth. Despite the importance of such topic, literature has provided contradictory indications about the complementarity and the capability to balance innovation and internationalization activities for SMEs growth. Some literature has pointed toward the existence of a positive relationship between export, innovation and growth, implying that such activities should be pursued and balanced to achieve superior performance. However, more and more scholars are trying to question such link recognizing it as problematic for SMEs, since it requires managers to allocate properly scarce resources among very different activities which may end up in a drain of resources and a loss of managerial attention in other strategic activities. Innovating and exporting are two activities which bring a number of benefits for SME performance when undertaken in isolation. (e.g. superior market and product knowledge, superior productivity). However, operating into international markets and developing new products entail also significant costs and organizational problems for SMEs. For these reasons, in this thesis, we analyse the relationship existing between internationalization, innovation and SMEs growth to explore the conditions enabling the balancing of such activities to achieve superior growth. In doing this, this work aims to answer two main questions, namely “if” and “how” SMEs can benefit from the contemporary balancing of internationalization and innovation endeavors. To explore these issues, this work analyses the relationship between internationalization, innovation and growth in the context of SMEs through the development of three empirical studies in different settings (Italy and Spain). To understand “if” the contemporary undertaking of those two activities could be beneficial to growth - after reviewing previous literature on the effect that international activities, innovation and their interplay have on SMEs growth - this work explores the relationship existing between internationalization, innovation and growth using a domain ambidexterity framework. In detail, it testes empirically the relationship existing between exports, R&D activities and growth showing that their balancing limits SMEs growth. To explore “how” SMEs can balance such activities to achieve growth, some conditions which may limit or boost the conjunct effect on growth of innovation and internationalization and some activities which may simplify their contemporary development are tested. In detail, this thesis investigates the role that innovation collaborations with universities and research centres, international experience and firm’s age have in moderating the impact of innovation and internationalization activities on SMEs growth. Specifically, we highlight that young firms are constrained if they try to balance such activities. However, “adolescent” firms are more able to balance them to grow. Moreover, empirical models show that being open to innovation partners as universities and research centres, or having some previous experience in international markets allows firms to successfully combine innovation and internationalization activities to sustain their growth. Finally, to provide a finer grained contribution the thesis deepen the exploration of the “how” question through the exploration of another way of internationalization (imports, rather than exports) in which firms are involved. Firms can be engaged not only in outbound international activities (i.e., selling products abroad through exports), but may also be involved in international operations through import activities. Despite the different finality that import and export have, importing requires anyway a commitment and an exploration of international markets to identify solutions viable for firm’s business and may complement the development of innovation activities. In this vein, the same managerial problems identified above may arise even when firms are engaged in import activities, but imports may enable SMEs to pursue more successfully exports and innovation, thus suggesting that it can be a relevant factor influencing the capability of firms to balance export and innovation to achieve growth. This work shows how SMEs can balance imports, exports and innovation to sustain growth. In this vein this research advances that imports should be an antecedent of innovation and export strategies. Several contributions are offered and discussed in relation to SMEs, international business, strategy and organization science literature.