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Entrepreneurship, globalization, and public policy

  • Acs, Zoltan J.
  • Morck, Randall K.
  • Yeung, Bernard

This paper examines the impact of governmental policies in influencing the path of internationalization of small- and medium-sized enterprises (SMEs). It focuses on the role of institutions mandated to assist internationalization, as exemplified by Canada's Export Development Corporation (EDC). We illustrate and examine critically the role that governments typically play in assisting and influencing the international expansion of domestic firms. We argue that the activities of agencies such as EDC -- mainly in financing and in insuring against the risks inherent in export activities -- may actually be counterproductive to the long-term interests of many SMEs by skewing managers' decisions toward direct exporting, rather than toward indirect exporting by entering the value chain of already-established multinational enterprises (MNEs). A consequence may be to divert the constrained resources of entrepreneurial firms away from their greatest comparative advantage -- innovation -- toward managing direct entry into international markets in which they are at a comparative disadvantage relative to larger established MNEs. Highly innovative SMEs might be better off by leaving the internationalization of their innovations to MNEs and sharing some of the international direct exporting profits with them instead. The implications are relevant for governmental policies toward internationalizing SMEs not just in Canada but in open, market-oriented economies everywhere.

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Article provided by Elsevier in its journal Journal of International Management.

Volume (Year): 7 (2001)
Issue (Month): 3 ()
Pages: 235-251

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Handle: RePEc:eee:intman:v:7:y:2001:i:3:p:235-251
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  1. Krueger, Anne O, 1990. "Government Failures in Development," Journal of Economic Perspectives, American Economic Association, vol. 4(3), pages 9-23, Summer.
  2. Morck, Randall & Yeung, Bernard, 1992. "Internalization : An event study test," Journal of International Economics, Elsevier, vol. 33(1-2), pages 41-56, August.
  3. Acs, Zoltan J & Audretsch, David B, 1988. "Innovation in Large and Small Firms: An Empirical Analysis," American Economic Review, American Economic Association, vol. 78(4), pages 678-90, September.
  4. Morck, Randall & Yeung, Bernard, 1991. "Why Investors Value Multinationality," The Journal of Business, University of Chicago Press, vol. 64(2), pages 165-87, April.
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