Skip to main content

Advertisement

SpringerLink
Log in

The Effects of Ownership and Governance on SMEs’ International Knowledge-based Resources

  • Published:
Small Business Economics Aims and scope Submit manuscript

Abstract

Small- and medium-sized enterprises (SMEs) play an important role in today’s global economy. However, there are significant differences in how they respond to the opportunities and threats in international markets. This study␣suggests SMEs’ ownership and governance systems significantly influence the development of knowledge-based resources necessary for internationalization. Using a sample of 384 US SMEs, we find a positive relationship between both the equity held by top management team members and venture capitalists and the development of these important resources. This positive association is further accentuated by the presence of independent outside directors on SMEs’ boards, supporting their monitoring and enterprising roles.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Acs Z. J., Preston L. (1997). Small and Medium-Sized Enterprises, Technology, and Globalization: Introduction to a Special Issue on Small and Medium-Sized Enterprises in the Global Economy Small Business Economics 9(1): 1–6.

    Article  Google Scholar 

  • Adler P. S., Kwon S. (2002). Social Capital: Prospects for a New Concept Academy of Management Review 27(1): 17–40.

    Google Scholar 

  • Andersson, S. (2004). Internationalization in Different Industrial Contexts Journal of Business Venturing 19(6): 851–875.

    Article  Google Scholar 

  • Beatty R. P., Zajac E. J. (1994). Top Management Incentives, Monitoring, and Risk Sharing: A Study of Executive Compensation, Ownership, and Board Structure in Initial Public Offerings Administrative Science Quarterly 39: 313–335.

    Article  Google Scholar 

  • Bell J., McNaughton R., Young S., Crick D. (2003). Towards an Integrative Model of Small Firm Internationalization Journal of International Entrepreneurship 1(4): 339–362.

    Article  Google Scholar 

  • Bennett, R. J. and P. J. A. Robson, 2004, ‹The Role of Boards of Directors in Small and Mediumsized Firms’, Journal of Small Business and Enterprise Development 11(1), 95–113

    Google Scholar 

  • Bloodgood J. M., Sapienza H. J., Almeida J. G. (1996). The Internationalization of New High-Potential U.S. Ventures: Antecedents and Outcomes Entrepreneurship Theory and Practice 20(4): 61–76.

    Google Scholar 

  • Boter H., Holmquist C. (1996). Industry Characteristics and Internationalization Processes in Small Firms Journal of Business Venturing 11(6): 471.

    Article  Google Scholar 

  • Brush C. G., Chaganti R. (1999). Businesses Without Glamour? An Analysis of Resources on Performance by Size and Age in Small Service and Retail Firms Journal of Business Venturing 14(3): 233–257.

    Article  Google Scholar 

  • Buckley P. J. (1997). International Technology Transfer by Small and Medium Sized Enterprises Small Business Economics 9(1): 67–78.

    Article  Google Scholar 

  • Calof J. L. (1993). The Mode Choice and Change Decision Process and its Impact on International Performance International Business Review 2(1): 97–120.

    Article  Google Scholar 

  • Carpenter M. A., Pollock T. G., Leary M. M. (2003). Testing a Model of Reasoned Risk-Taking: Governance, the Experience of Principals and Agents, and Global Strategy in High-Technology IPO Firms Strategic Management Journal 24(9): 803–820.

    Article  Google Scholar 

  • Daily C. M., Dalton D. R. (1992) The Relationship Between Governance Structure and Corporate Performance in Entrepreneurial Firms Journal of Business Venturing 7(5): 375–386.

    Article  Google Scholar 

  • Daily C. M., McDougall P. P., Covin J. G., Dalton D. R. (2002). Governance and Strategic Leadership in Entrepreneurial Firms Journal of Management 28(3): 387–412.

    Article  Google Scholar 

  • Delios A., Beamish P. W. (1999). Geographic Scope, Product Diversification, and the Corporate Performance of Japanese Firms Strategic Management Journal 20(8): 711–727.

    Article  Google Scholar 

  • Dess G., Gupta A., Hennart J.-F., Hill C. W. L. (1995). Conducting and Integrating Strategy Research at the International, Corporate, and Business Levels: Issues and Directions Journal of Management 21(3): 357–393.

    Article  Google Scholar 

  • Dunning J. H. (2000). The Eclectic Paradigm as an Envelope for Economic and Business Theories of MNE Activity International Business Review 9(2): 163–190.

    Article  Google Scholar 

  • Dyer J. H., Singh H. (1998). The Relational View: Cooperative Strategy and Sources of Interorganizational Competitive Advantage Academy of Management Review 23(4): 660–679.

    Article  Google Scholar 

  • Filatotchev I., Wright M. (2005). The Corporate Governance Life Cycle. In Filatotchev I., Wright M. (eds) The Life Cycle Of Corporate Governance. Cheltenham: Edward Elgar, pp. 1–19.

    Google Scholar 

  • Gedajlovic E., Lubatkin M., Schulze W. S. (2004). Crossing the Threshold from Founder Management to Professional Management: A Governance Perspective Journal of Management Studies 41(5): 899–912.

    Article  Google Scholar 

  • Gedajlovic, E. and S. A. Zahra, 2005, Entrepreneurship, organizational learning, and capability building. In S. W. Floyd, J. Roos, C. Jacobs and F. Kellermanns (eds.), Innovating strategy processes. Cambridge: Blackwell Publishing.

  • George G., Wiklund J., Zahra S. A. (2005). Ownership and the Internationalization of Small Firms Journal of Management 31: 210–233.

    Article  Google Scholar 

  • Grant, R. M. (1996). Toward a knowledge-based theory of the firm Strategic Management Journal, 17(Special Issue: Knowledge and the Firm): 109–122.

  • Henderson A. D. (1999). Firm Strategy and Age Dependence: A Contingent View of the Liabilities of Newness, Adolescence and Obsolescence Administrative Science Quarterly, 44(2): 281–314.

    Article  Google Scholar 

  • Johannisson, B. and M, Huse, 2000, Recruiting outside board members in the small family business: An ideological challenge. Entrepreneurship and Regional Development, 12.

  • Johanson J., Vahlne J.-E. (2003). Business Relationship Learning and Commitment in the Internationalization Process Journal of International Entrepreneurship 1(1): 83–101.

    Article  Google Scholar 

  • Johnson J. L., Daily C. M., Ellstand A. E. (1996). Boards and Directors: A Review and a Research Agenda Journal of Management 22(3): 408–429.

    Google Scholar 

  • Keasey K., Wright M. (1993). Issue in Corporate Accountability and Governance: An Editorial Accounting and Business Research 23(91A): 291–303.

    Google Scholar 

  • Kogut B., Zander U. (1992). Knowledge of the Firm, Combinative Capabilities, and the Replication of Technology Organization Science 3(3, Focused Issue: Management of Technology): 383–397.

    Article  Google Scholar 

  • Le S. A., Walters B., Kroll M. (2006). The Moderating Effects of External Monitors on the Relationship between R&D Spending and Firm Performance Journal of Business Research 59(2): 278–287.

    Article  Google Scholar 

  • Lu J. W., Beamish P. W. (2001). The Internationalization and Performance of SMEs Strategic Management Journal 22(6–7): 565–586.

    Article  Google Scholar 

  • Lynall, M. D., B. R. Golden and A. J. Hillman, 2003, ‹Board Composition from Adolescence to Maturity: A Multitheoretical View,’ Academy of Management Review 28, 416–431

  • MacMillan I. C., Kudlow D. M., Khoylian R. (1989). Venture Capitalists’ Involvement in their Investments: Extent and Performance Journal of Business Venturing 4: 27–47.

    Article  Google Scholar 

  • MacMillan I. C., Seigel R., Subbanarasimha P. N. (1985). Criteria used by Venture Capitalists to Evaluate New Venture Proposals Journal of Business Venturing 1: 119–128.

    Article  Google Scholar 

  • McDougall P. P., Oviatt B. M. (1996). New Venture Internationalization, Strategic Change, and Performance: A Follow-up Study Journal of Business Venturing 11(1): 23–40.

    Article  Google Scholar 

  • McNulty T., Pettigrew A. (1999). Strategists on the Board Organization Studies 20: 47–74.

    Article  Google Scholar 

  • Mitchell W., Shaver J. M., Yeung B. (1992). Getting there in a Global Industry: Impacts on Performance of Changing International Presence Strategic Management Journal 13 (Sept.): 419–432.

    Article  Google Scholar 

  • Nahapiet J., Ghoshal S. (1998). Social Capital, Intellectual Capital and the Organizational Advantage Academy of Management Review 23(2): 242–266.

    Article  Google Scholar 

  • Nickerson J. A., Zenger T. R. (2004). A Knowledge-Based Theory of the Firm: The Problem-Solving Perspective Organization Science 15(6): 617–632.

    Article  Google Scholar 

  • OECD, 2002, OECD SME policy outlook. Paris: Centre for Entrepreneurship, SMEs and Local Development.

  • OECD, 2004, 3–5 June, Promoting entrepreneurship and innovative SMEs in global economy. Paper presented at the 2nd OECD Conference of ministers responsible for small and medium-sized enterprises (SMEs), Istanbul, Turkey.

  • Oviatt B. M., McDougal P. P. (1997). Challenges for Internationalization Process Theory: the Case of International New Ventures Management International Review 37(2): 85–99.

    Google Scholar 

  • Perry, L. T. (1988). Venture Capital Connection: How Relationships between Founders and Venture Capitalists Affect Innovation in New Ventures Academy of Management Executive 2: 205–212.

    Google Scholar 

  • Reuber A. R., Fischer E. (1997). The Influence of the Management Team’s International Experience on the Internationalization Behaviors of SMEs Journal of International Business Studies 28(4): 807–825.

    Article  Google Scholar 

  • Samiee S., Walters P. G. P. (1990). Influence of Firm Size on Export Planning and Performance Journal of Business Research 20: 235–248.

    Article  Google Scholar 

  • Sanders W. G., Carpenter M. A. (1998). Internationalization and Firm Governance: The Roles of CEO Compensation, Top Team Composition, and Board Structure Academy of Management Journal 41: 158–178.

    Article  Google Scholar 

  • Sapienza, H. J. (1992), When Do Venture Capitalists Add Value? Journal of Business Venturing 7: 9–27.

    Article  Google Scholar 

  • Short H., Keasey K., Hull A., Wright M. (1998). Corporate Governance, Accountability and Enterprise Scholarly Research and Theory Papers 6(3): 151–165.

    Google Scholar 

  • Short H., Keasey K., Wright M., Hull A. (1999). Corporate Governance: From Accountability to Enterprise Accounting and Business Research 29(4): 337–352.

    Google Scholar 

  • Sirmon D. G., Hitt M. A. (2003). Managing Resources: Linking Unique Resources, Management, and Wealth Creation in Family Firms Entrepreneurship Theory and Practice 27(4): 339–358.

    Article  Google Scholar 

  • Sriram V., Manu F. (1995). Country-of-Destination and Export Marketing Strategy: A Study of U.S. Exporters Journal of Global Marketing 8(3–4): 171–191.

    Article  Google Scholar 

  • Statistical Abstract of the US, 1995–2003, www.census.gov/prod/www/statistical-abstract-us.html.

  • Szulanksi, G. (1996). Exploring internal stickiness: Impediments to the transfer of best practice within the firm. Strategic Management Journal, 17(Winter Special Issue): 27–43.

    Google Scholar 

  • Troy L., 1995–2003, Almanac of Business and Industrial Financial Ratios. Englewood Cliffs, N.J: Prentice-Hall.

  • Tyebjee T. T., Bruno A. V. (1984) A Model of Venture Capitalist Investment Activity Management Science 30: 1051–1066.

    Google Scholar 

  • US International Trade Association, 2005, Small & medium-sized exporting companies: A statistical handbook- Results from the exporter database. Washington, DC: Office of Trade and Industry Information (http://www.ita.doc.gov/td/industry/otea/).

  • Van den Berghe L. A. A., Levrau A. (2003). Measuring the Quality of Corporate Governance: In Search of a Tailormade Approach? Journal Of General Management 28(3) 71–86.

    Google Scholar 

  • Van Gils A. (2005) Management and Governance in Dutch SMES European Management Journal 23(5): 583.

    Article  Google Scholar 

  • Wade J., O’Reilly C. A, Chandratat I. (1990). Golden Parachutes: CEOs and the Exercise of Social Influence Administrative Science Quarterly 35: 587–603.

    Article  Google Scholar 

  • Westhead P., Wright M., Ucbasaran D. (2001). The Internationalization of New and Small Firms: A Resource-Based View Journal of Business Venturing, 16(4): 333–358.

    Article  Google Scholar 

  • Wiklund J. (1998). Small Firm Growth and Performance Jönköping University, Jönköping.

    Google Scholar 

  • Wiklund J., Shepherd D. (2003). Knowledge-Based Resources, Entrepreneurial Orientation, and the Performance of Small and Medium-Sized Businesses Strategic Management Journal 24(13): 1307–1314.

    Article  Google Scholar 

  • Wright P., Ferris S., Sarin A., Awasthi V. (1996). Impact of Corporate Insider, Blockholder, and Institutional Equity Ownership on Firm Risk Taking Academy of Management Journal 39(2): 441–463.

    Article  Google Scholar 

  • Wright M., Robbie K. (1998). Venture Capital and Private Equity: A Review and Synthesis Journal of Business Finance and Accounting 25(5–6): 521–570.

    Article  Google Scholar 

  • Yli-Renko H., Autio 0E., Sapienza H. J. (2001). Social Capital, Knowledge Acquisition, and Knowledge Exploitation in Young Technology-Based Firms Strategic Management Journal 22(6–7): 587–613.

    Article  Google Scholar 

  • Zahra S. A. (1996). Governance, Ownership, and Corporate Entrepreneurship: The Moderating Impact of Industry Technological Opportunities Academy of Management Journal 39(6): 1713–1735.

    Article  Google Scholar 

  • Zahra S. A. (2003). International Expansion of U.S. Manufacturing Family Businesses: The Effect of Ownership and Involvement Journal of Business Venturing 18(4): 495–512.

    Article  Google Scholar 

  • Zahra S. A., Filatotchev I. (2004). Governance of the Entrepreneurial Threshold Firm: A Knowledge-Based Perspective Journal of Management Studies 41(5): 885–897.

    Article  Google Scholar 

  • Zahra S. A., Ireland D. R., Hitt M. A. (2000). International Expansion by New Venture Firms: International Diversity, Mode of Market Entry, Technological Learning, and Performance Academy of Management Journal 43(5): 925–950.

    Article  Google Scholar 

  • Zahra S. A., Neubaum D., Huse M. (1997). The Effect of the Environment on the Firm’s Export Intensity Entrepreneurship: Theory & Practice 22 (1): 25–46.

    Google Scholar 

  • Zahra S. A., Neubaum D. O., Huse M. (2000). Entrepreneurship in Medium-Size Companies: Exploring the Effects of Ownership and Governance Systems Journal of Management 26(5): 947–976.

    Article  Google Scholar 

  • Zahra S. A., Pearce J. A. (1989). Boards of Directors and Corporate Financial Performance: A Review and Integrative Model Journal of Management 15: 291–334.

    Article  Google Scholar 

  • Zajac E. J., Westphal J. D. (1994). The Costs and Benefits of Managerial Incentives and Monitoring in Large U.S. Corporations: When is More not Better? Strategic Management Journal 15: 121–142.

    Article  Google Scholar 

  • Zutshi R. K., Tan W. L., Allampalli D. G., Gibbobs P. G. (1999) Singapore Venture Capitalists (VCs) Investment Evaluation Criteria: A Re-examination Small Business Economics 1(13): 9–26.

    Article  Google Scholar 

Download references

Acknowledgments

We appreciate the comments of Morten Huse, Lorraine M Uhlaner, Mike Wright, R. Isil Yavuz, and Patricia H. Zahra on earlier drafts of this paper. Data collection was supported by a grant from the Glavin Center for Global Management at Babson College.

Author information

Authors and Affiliations

  1. Center for Entrepreneurial Studies & Strategic Management & Organization Department Carlson School of Management, University of Minnesota, 321 19th Ave. South, Minneapolis, MN, 55455, USA

    Shaker A. Zahra

  2. Oregon State University College of Business, 330 Bexell Hall, Corvallis, OR, 97331-2603, USA

    Donald O. Neubaum

  3. Jönköping International Business School, PO Box 1026, 551 11, Jönköping, Sweden

    Lucia Naldi

Authors
  1. Shaker A. Zahra
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Donald O. Neubaum
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Lucia Naldi
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Shaker A. Zahra.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Zahra, S.A., Neubaum, D.O. & Naldi, L. The Effects of Ownership and Governance on SMEs’ International Knowledge-based Resources. Small Bus Econ 29, 309–327 (2007). https://doi.org/10.1007/s11187-006-9025-y

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11187-006-9025-y

KEY WORDS

JEL Classifications

Search

Navigation