The effects of firm internationalisation

Abstract

In a global business environment, internationalisation is now an “economic imperative” (Rutashobya & Jaesson, 2004, p.159) for many firms that wish to remain competitive. Some of the developments that have pushed or encouraged firms (including SMEs) to increasingly participate in international business are improved technological advances and infrastructure, increased cross border movement and international relocation of persons, increased number of social ties across national borders, and the participation of firms in global value chains and free trade. This being the case, this thesis, seeks to determine the implications of this phenomenon to the firm itself, to the employees that work in these firms, and in order to offer comprehensiveness, to the economy or a nation in general terms. This thesis therefore offers a multi-level perspective to the investigation of the effects of firm internationalisation at three different and related levels, namely: the macro level, the firm level and the individual level. Firstly, at the macro or national level, assuming appropriate policies are in place, internationalisation of firms for example, through trade and FDI, serves as a means towards generally facilitating economic growth. Through policy or direct measures therefore, most governments attempt to facilitate FDI and create conducive business environments, because it is generally agreed, that there are at least positive spill-over effects to be expected. For developing countries, in particular, it is a source of capital, technological spill-overs, developing HC and so on. Appropriate policies and a conducive environment in these hosting countries are however integral to minimizing the negative effects. The actions taken to attract FDI and enjoy its benefits are some of the effects of internationalisation at national level. These policy-related implications include entering intergovernmental trade agreements, economic integration measures and creating a conducive business environment involving political stability, HC endowment, enforcement of legal and employment regulations and contracts, state of infrastructure, etc. All of these also inform and influence internationalisation at the firm level and the individual level. Secondly, the increase in international involvement by firms also has various implications for these same firms – the firm level. Some of these implications or effects are intended or aspired for, whilst other outcomes may be unexpected and may indeed positively or negatively affect the firm. Those effects of internationalisation that are aspired for by a firm, can be traced back to the initial motivating factors that led the firm to internationalise in the first place. These may include, for example, the intent to acquire more profits, growth and market development. Further, firm level effects of internationalisation can be derived from the process of internationalisation itself. For example, the stepwise increase in the international involvement of a firm may cause changes in organisational structures, philosophies (and even cultures). Therefore, it is important to understand how firms internationalise in order to reveal further implications of internationalisation on the firm, such as network expansion and knowledge acquisition and orientation. The amount of research in these areas is relatively abundant but based largely on findings from firms in Europe, the Americas and Asia, neglecting developing nations especially in Sub-Sahara African (SSA). This study thus provides insights into the motivating factors, the internationalisation process of SSA SMEs and the implications foreign expansion has on the firm itself. Focusing on SSA firms is justified also because it contributes towards determining the applicability of existing theory for countries from the Sub-Saharan region. This is especially important because of the unique and complex nature of the environment that these firms operate in. Additionally, market potential and economic growth in the region is increasingly becoming attractive to Asian and Western trade and investment companies. Lastly, at the individual level, this dissertation investigates the effects of internationalisation on the employee. A theoretical study raises the question as to whether IAs, which are necessary for internationalisation, can be regarded as breeding grounds for entrepreneurs. Based on existing research, this is argued as follows: due to IA experiences, employees increase their HC and SC endowments, and will become Jack-of-all trades (as viewed in entrepreneurship theory) – all of which are proven antecedents of entrepreneurship. Additionally, and as a potential trigger, some well-known and empirically verified effects of IAs, may also cause these individuals to return to dissatisfying conditions in their workplace. Building on this theoretical work, an empirical study seeks to further establish the potential effects of firm internationalisation on individuals. Specifically, it empirically examines the questions raised in the previous chapter regarding the accumulation of HC and SC, as well as diverse skill-sets by IA employees, that may affect entrepreneurial intention. It also incorporates the mediating effect of poor career prospects that may result from IAs. Because it is expected that international working experience not only enhances the development of both diverse HC and broad SC endowments but also negatively influences the career prospects of employees within a company, it is concluded that these factors mediate the relationship between IAs and entrepreneurial intentions. The empirical findings reveal that skill diversity and broad networks, as well as poor career prospects - all resulting from IAs - play an important role regarding the aspirations of long-term assignees to enter self-employment.