Internationalisation, liabilities of foreignness and learning processes: Dutch SMEs internationalising to the UK

Abstract

In this thesis the motivations behind internationalising SMEs' choices for particular host-countries and entry-modes are researched. Literature indicates that internationalising firms have to deal with institutional differences between home and host country, and for that reason face liabilities of foreignness. This conceptualisation leads to the presumption that SMEs primarily internationalise to countries which are institutionally similar and which allow them to utilise equity entry-modes, because SMEs would face limited liabilities of foreignness in these countries. This theory was researched through a qualitative study of nine Dutch SMEs which operate in the UK through non-equity and equity entry-modes. The outcome of this thesis indicates that the institutional distance between the UK and the Netherlands compels internationalising Dutch SMEs to engage in external learning processes with network-partners in order to reduce their liability of foreignness in the UK. This state of affairs explains the essential role of networks in host country selection processes and the preference of internationalising SMEs to use non-equity entry-modes to enter the British market.