Growth and Development in International SME - Desklib

This report explores the growth and development of small and medium-sized enterprises (SMEs) in the context of international entrepreneurship. It covers various entrepreneurship theories related to the topic, including uncertainty bearing theory, innovation theory, and McClelland's achievement motivation theory. The report also discusses the role of digital technology in supporting the growth of international SMEs and the challenges they face in the global market.

Growth and
development in the
international SME

ABSTRACT
Small and medium sized entrepreneurs have to face various obstacles in developing on an
international scale. Despite presence of large number of international small and medium sized
entrepreneurs have gained success and raid growth on an international scale. Entrepreneurs have
to face uncertainty during international expansion and bear such risk to expand internationally.
Innovation also supports rapid growth of small and medium sized entrepreneurs. In addition to
this motivation of entrepreneurs also accelerates growth and development of international small
and medium sized enterprises.

Contents
ABSTRACT.....................................................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Growth of small and medium sized enterprises facilitates economic growth of the region
as small and medium sized enterprises (Aldairany, Omar and Quoquab, 2018). The topic selected
for this report is growth and development in the international SME. The reason for selecting this
particular topic is to understand the development of small and medium sized enterprises in
context of international entrepreneurship. Highlighting the ways in which small and medium
sized enterprises develop to engage in international entrepreneurship helps in gaining a better
understanding of the importance of small and medium sized enterprises on a global scale. This
report utilizes various International entrepreneurship theories related to cover the selected topic.
MAIN BODY
Small and medium sized enterprises are defined as businesses firms which have less than
250 employees. According to the UK government the small and medium sized enterprises are
divided into 3 categories. First category is of micro businesses which have less than 10
employees and an annual turnover under €2 million. The second category encompasses small
enterprises. This type of SME has workforce below 50 employees with yearly turnover of €10
million employees. The last category is of medium sized enterprise which is formed with
workforce below 250 employees. The yearly turnover of medium sized enterprises is €50 million
employees. The growth and development of enterprises in international small and medium
entrepreneurship is beneficial to the global economy. This is because there are more number of
small and medium sized enterprises than large corporations and international expansion of such
enterprises facilitates global economic development. The current global system of open markets
and business friendly environment enables large corporations to gain continuous success while
small and medium sized enterprises have various unmet needs (Albaz et al, 2020). Some of the
challenges which hinder growth of small and medium entrepreneurship are difficulties in gaining
access to resources and capabilities which make them more productive and small scale which
makes them weaker counterpart to established market players. This depicts that growth of small
and medium entrepreneurship on an international scale is filled with barriers and obstacles.
Despite this there are many examples of rapidly growing international start-ups, small
entrepreneurs gaining international success and expansion of medium sized enterprises across
international borders. The entrepreneurship theory which can be used to understand the success
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and growth of international small and medium enterprises is the uncertainty bearing theory of F.
H. Knight. This theory states that profit is the reward of entrepreneurs for bearing non-insurable
risks and uncertainties (Baier-Fuentes and et. al., 2019). The theory divides risk intro two
categories, the risks which can be calculated and anticipated on the basis of statistical data such
as risk of accident and non-calculable risks which includes unpredictable risks. Non-calculable
risks cannot be predicted with statistical data and their future occurrence cannot be calculated
accurately. Thus, the risk element of such events is not insurable and this area of incalculable
risk is uncertainty. In case of international entrepreneurship the number of uncertain events
which have to be faced by small and medium entrepreneur is high. This increases the importance
of decision making function as effective decision making leads to entrepreneurial success by
evading risk of uncertainties. International small and medium sized entrepreneurs engage in
effective decision making to face uncertainties of international business which gives them the
reward of profitability (Ault and Spicer, 2020). This reward encourages small and medium sized
entrepreneurs to move in the direction of uncertainties despite having limited capabilities and
resources. The supply price for baring uncertainty is reward of high profitability. The
competitive global economy has led to creation of minimum supply price for every entrepreneur.
If the reward allocated to entrepreneur is lower than the reward than the entrepreneur abstain
from offering their entrepreneurial services. As per this theory entrepreneurs expect profit in
exchange of bearing uncertainty which can explain the growth small and medium
entrepreneurship. Small and medium entrepreneurs who can gain high profits from their
entrepreneurial services engage in international entrepreneurship and gain success ion global
scale. On the other hand, other small and medium entrepreneurs limit their entrepreneurial
activity to domestic market as the reward from international entrepreneurship in their case is
lower is below their minimum supply price. The promise of high reward in the future encourages
small and medium entrepreneurs to face uncertainty and gain global success through effective
decision making. The main criticism of uncertainty bearing theory is that it is true in all the cases
(Dana, 2017). Sometimes entrepreneurs are not able to gain reward even after bearing the risk of
uncertainty. Small and medium sized enterprises need to enter international markets which have
high uncertainty only when they have mitigation plans in place to handle situations in case of
failure of international expansion. This will help in growth of international small and medium
entrepreneurs. Another limitation of this theory is that calculation of uncertainty in qualitative or
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quantitative terms is not possible as depicted by this theory. This results in failure of various
entrepreneurs who take insurable risks and are not able to deal with market fluctuation. Ensuring
that contingency plans are created to help enterprises face new challenges and dynamic nature of
the competitive market is important for growth of international small and medium entrepreneurs.
Apart from these entrepreneurs need to engage in critical thinking so that organizational decision
making accounts for all the variables which affect strategy and future of the enterprise. This will
support the entrepreneurs in facing challenges and be prepared for unpredictable situations and
succeed on a global scale.
The progress of international small and medium entrepreneurship in has increased in
recent years because of digital technology. Business leaders in current times made rapid
international growth because of digital innovation and technology (Etemad, 2017). Elon Musk,
Jeff Bezoz and Mark Zuckerberg are some well-known international entrepreneurs who were
able to gain rapid success from small enterprise to global corporate because of their digital
innovation. This presents an opportunity in growth and development of small and medium sized
entrepreneurs. They can utilize digital technology to build innovative commodities or utilize
digital technology to gain competitive edge in their market. The growth opportunity provided
digital technology to international small and medium entrepreneurs can be explained with the
help of innovation theory of entrepreneurship. This theory of entrepreneurship was developed by
Schumpeter and it states that innovation is defined as any new policy to reduce overall cost of
production or increase demand for products offered by the enterprise. According to this theory
innovation can be divided into two groups, first innovation which can be used to reduce the cost
of production such as introducing new technique of production. The second category of
innovation helps increase demand of commodity such as introduction of new commodity or new
quality of goods. The rise of small and medium international entrepreneur who rely on digital
technology to gain entrepreneurial success is related to this theory. Small and medium sized
entrepreneurs including small start-ups and medium sized company develop digital technologies
to provide consumers unique products and services and rapidly expand on global scale (Ferreira,
Fernandes and Ratten, 2017). Digital entrepreneurs are able to quickly expand their business in
different international markets by using digital technology and attracting attention of consumers
on a global scale through their unique innovations. In addition to this digital technology also
provides small and medium sized entrepreneurs ability to create disruptive innovation. This
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enables the entrepreneur to challenge incumbent established business firms with fewer resources.
This facilitates growth of small medium sized entrepreneurs who develop different business
models through disruptive innovation and are able to gain reach the level of industry incumbents
in time. Digital technology has also helped mall and medium sized entrepreneurs to engage in
digital disruption and build new markets (Moradi, Sakhdari and Saniei, 2017). With the help of
digital innovation strategy small and medium sized enterprises are able to develop on an
international scale and exploit growth opportunities in developing economies. Digital ethnology
also supports growth and development of international small and medium entrepreneurs by
providing equipment and channels to expand internationally at lower cost. digital technology has
introduced tools which can be utilized to enter new international market easily in a cost effective
manner. Digital marketing has made marketing more precise and cost effective and enabled
entrepreneurs to connect with consumers, suppliers and investors on an international scale to
start and manage global expansion of their enterprise. Apart from this Artificial intelligence,
automation and tools like smart printer and product enable small enterprises to reduce cost of
production and expand internationally at lower cost. This is also related with the innovation
theory of entrepreneurship. This is because international small and medium sized entrepreneurs
utilize digital technology to reach new markets through e-commerce and avoiding investment in
building physical distribution channels to lower cost of internationalization. According to theory
of innovation entrepreneurs engage in innovation to lower cost or increase demand. Digital
technology helps small and medium sized entrepreneurs lower cost and grow internationally
rapidly. The main criticism of this theory is that it ignores the importance and role of other
entrepreneurial functions in helping entrepreneurs achieve international success. This has
resulted in many small and medium sized entrepreneurs not being able to progress on an
international scale despite usage of digital technology or unique innovation. This is because such
enterprises are over-dependent on digital technology and do not engage in other entrepreneurial
functions such as risk taking and organization (Zahra, 2021). This reduces their ability to face
barriers associated with internationalization and handle market fluctuations. Small and medium
sized entrepreneurs need to utilize other entrepreneurial functions jointly with digital innovation
and technology in order to develop on a global scale.
Small and medium sized entrepreneurs are able to gain international success despite lack
of ecosystem which support development of small and medium enterprises. These types of
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entrepreneurs have to face barriers including market fluctuations, competition from industry
leaders and changes in consumer preferences to rise on an international scale. Apart from this
various macro-economic forces including political, social and economic factors also introduce
threats to development of international small and medium entrepreneurs. McClelland’s
achievement motivation theory explains the reason behind global success of entrepreneurs
despite presence of many obstacles. This theory states that there are three types of needs which
build motivation of an individual. These needs are need for achievement: a drive to excel,
advance and grow; need for power: a drive to influencing others and situations and need for
affiliation: a drive for friendly and close interpersonal relationships (Smith and Karaman, 2019).
In case of an entrepreneur the need for achievement is particularly high. International small and
medium entrepreneurs have high desire to gain personal accomplishments and prefer taking
challenging tasks to fulfil this need for achievement. As per this theory entrepreneurial
motivation may be defined as a set of motives such as high need to achieve, moderate need for
power and low affiliation motive which induce people to set up and run their own enterprises.
This encourages and motivates small and medium sized entrepreneurs to make extra effort in
accomplishing entrepreneurial success on an international success. This theory explains a major
reason which facilitates development of international small and medium entrepreneurs which is
high motivation (Staniewski and Awruk, 2019). The main criticism of this theory is that it
ignores presence of basic needs which have to be fulfilled to encourage entrepreneurs because
basic needs are required for survival.
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CONCLUSION
From the above report it is determined that different theories can be used to understand
development of international small and medium sized entrepreneurs. Uncertainty bearings theory
states that entrepreneurs take insurable risks in exchange of reward of profits. This explains that
small and medium sized entrepreneurs take insurable risks associated with international
expansion to enhance profitability. Innovation theory of entrepreneurship states that innovation
enables entrepreneurs to lower cost of production or increase demand. Small and medium sized
entrepreneurs utilize digital technology to offer innovative products and lower cost of
internationalization. McClelland’s theory of achievement motivation states that the need for
achievement is dominant in case of entrepreneurs. This explains the perseverance of small and
medium sized entrepreneurs which supports development on international level.
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REFERENCES
Books and Journals
Aldairany, S., Omar, R. and Quoquab, F., 2018. Systematic review: Entrepreneurship in conflict
and post conflict. Journal of Entrepreneurship in Emerging Economies.
Ault, J. K. and Spicer, A., 2020. State fragility as a multi-dimensional construct for international
entrepreneurship research and practice. Asia Pacific Journal of Management, 37(4).
pp.981-1011.
Baier-Fuentes and et. al., 2019. International entrepreneurship: a bibliometric
overview. International Entrepreneurship and Management Journal, 15(2). pp.385-429.
Dana, L. P., 2017. International entrepreneurship research: how it evolved and directions for the
future. International Journal of Entrepreneurship and Small Business, 30(4). pp.477-
489.
Etemad, H., 2017. Towards a conceptual multilayered framework of international
entrepreneurship. Journal of International Entrepreneurship, 15(3). pp.229-238.
Ferreira, J. J., Fernandes, C. I. and Ratten, V., 2017. International entrepreneurship research:
mapping and cognitive structures. International Journal of Entrepreneurship and Small
Business, 30(4). pp.545-566.
Moradi, M. A., Sakhdari, K. and Saniei, S., 2017. The Impact of Institutional Factors on the Rate
of International Entrepreneurship in Developing Countries. Journal of Entrepreneurship
Development, 10(2). pp.339-358.
Smith, R. and Karaman, M. A., 2019. Development and Validation of the Contextual
Achievement Motivation Measure. International Journal of Psychology and
Educational Studies, 6(3). pp.16-26.
Staniewski, M. W. and Awruk, K., 2019. Entrepreneurial success and achievement motivation–A
preliminary report on a validation study of the questionnaire of entrepreneurial
success. Journal of Business Research, 101. pp.433-440.
Zahra, S. A., 2021. International entrepreneurship in the post Covid world. Journal of World
Business, 56(1). p.101143.
Online
Albaz, A., Dondi, M., Rida, T and Schubert, J., 2020. Unlocking growth in small and medium-
size enterprises. [Online] Available through
<https://www.mckinsey.com/industries/public-and-social-sector/our-insights/unlocking-
growth-in-small-and-medium-size-enterprises>
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