A Model of Knowledge Acquisition for Developed Economies SMEs First Entering a Developing Economy

AbstractBackgroundAs economic growth in developed economies has almost peaked, developing economies are becoming to be the source of firm's future growth. Additionally, as SMEs are relevant economic actors in the majority of developed economies where they provide growth and wealth, and also play a relevant role in developing economies where they contribute to alleviate poverty, their international expansion to developing economies deserves research attention. However, extant literature in international business has little addressed SMEs’internationalization; particularly as such firms expand into developing economies.Purpose of Study. To provide a first cohesive model to recommend a process of SME's knowledge acquisition to successfully enter into its first developing economy. Sources of Evidence. We review and integrate the literature on developing economies, international business, and organizational knowledge. Main Argument. Developing economies have weak institutional environments with high levels of business uncertainty, institutional voids, political instability, weak legal systems, and exchanges based on social networks, among other adverse locational factors. These institutional conditions are highly distant from those of SMEs from developed economies; thus, these firms entering into developing economies must develop new strategies in order to succeed in their international expansion processes –e.g., designing operations by creating intermediaries or bypassing inefficient markets, extending the framework for quality to other dimensions such as availability or timeliness. In order to implement these new strategies, SMEs must develop new ownership advantages –e.g., political capabilities, abilities to operate in informal markets, high flexibility–. Within this process of strategic change, SMEs would have to acquire those knowledge resources needed for a successful implementation of the new competitive strategies in developing economies. To the best of our knowledge, no article has been published that attempt to systematically assess type of knowledge required for internationalization to the first developing economy, the challenges its acquisition represents, and the sources for acquiring that knowledge.Conclusions. Four different types of internationalization knowledge and seven different sources of them must be considered by SMEs when internationalizing to their first developing economy. As developing economies as highly distant from developed ones, additional challenges add to those commonly associated with the acquisition of each type of knowledge. This work takes them into account and offers a normative model of SMEs’ knowledge acquisition to successfully enter into their first developing economy. This model suggests the suitable sources for each type of knowledge along time