THE INTERNATIONALIZATION AND GROWTH OF SMEs

We examine the individual and joint effects of two internationalization strategies, exporting and foreign direct investment (FDI), on the growth of small and medium-sized enterprises (SMEs). Using a sample of 164 Japanese SMEs, we find that FDI activity is a more effective growth strategy for SMEs than exporting. However, exporting activity has a positive moderating effect on the relationship between an SME's FDI activity and firm growth. A strategy of high exporting concurrent with high FDI leads to higher rates of firm growth. Finally, we find that an SME’s age when it starts to internationalize has a negative moderating impact on the relationship between internationalization and firm growth. Early internationalizers achieve higher rates of firm growth from internationalization activities than late internationalizers