Antecedents of SME internationalization: multiple case study of Finnish SMEs' expansion into Estonia

This thesis studies the phenomenon of SME internationalization in the context of the Finnish me-chanical engineering and metals industry. The first objective of the study is to identify and examine the Finnish mechanical engineering and metals industry SMEs' antecedents of internationalization. The second objective is to examine why these SMEs decide to expand their operations into Estonia in particular. The topic of this study is very timely, as the high interest towards Estonia as a target market for Finnish SMEs' international expansion is expected to continue. The theoretical framework of this study is formed by taking a look at the earlier literature focus-ing on antecedents of SME internationalization. Existing models, as well as major internationaliza-tion theories, are discussed in the light of the research questions and objectives of the study. Since there is a relatively limited amount of data on Finnish SMEs' internationalization to Estonia avail-able, a broader range of literature on SME internationalization to the CEEC is examined. The empirical research was conducted as a multiple case study of three Finnish mechanical en-gineering and metals industry SMEs. All of the case companies had expanded into Estonia after the country gained its independence in 1991. The data was collected through personal interviews with the case companies' founders and key executives. Moreover, some additional and corrective ques-tions were placed by e-mail. Secondary sources were used to complement the data. The results of this study indicate that an in-depth understanding of internationalization anteced-ents in the Finnish mechanical engineering and metals industry SMEs requires an analysis at three different levels: environmental level, firm level and managerial level. At all levels of the analysis, internationalization antecedents can be divided into two interlinked groups. The first group consists of internationalization antecedents of primary importance. Among other things, the entrepreneur's prior international experience and commitment to internationalization, the company's networks, as well as several host country and home country related factors fall into this category. The second group consists of internationalization antecedents of secondary importance, and includes factors such as the global mindset of the entrepreneur, the strategic orientation of the company, and costs of the target market. The key findings of this research show that existing customer networks and the increasing de-mand for the industry products, in particular, appear to be the most important factors for Finnish mechanical engineering and metals industry SMEs to expand into Estonia. Lower labour and pro-duction costs, the Estonian taxation system, and financial benefits for investing companies, in turn, seem to help SMEs make the final internationalization decision in favour of Estoni