Public policies for internationalization: a study for portuguese firms

Abstract

Internationalization can be considered as a gradual and evolutionary process in which firms progressively increase their involvement in international business. Most small and medium-sized enterprises (SMEs) that internationalize face a variety of constraints in terms of resources and skills, information, financial capital, the experience of their managers, as well as the constraints inherent to the vulnerability of the external environment. Many firms that could succeed in international markets may not have the resources to make the investment. It is also widely acknowledged that the external institutional environment in which firms are embedded may shape firms' strategic responses. Internationalization is a beneficial process for the firm and for the national and local economy and can generate economies of scale in local firms and promote the transfer of technology and managerial knowledge, generating growth and employment. These benefits explain the implementation of export promotion activities and publicly funded programs, as the benefits justify the costs associated with this government expenditure. In light with such facts, governmental assistance may be able to promote the internationalization process of firms. In the international business literature, researchers have examined how home and host market institutions affect the internationalization strategy of multinational enterprises (MNEs), but our focus is to understand how the home institutional environment, and more specifically the public policies act or not as an enhancing factor for internationalization. This paper tackles this question by using a novel survey dataset of 320 Portuguese firms and a quantitative approach based on a regression analysis. We aim at identifying which firm and managerial characteristics are related with a more proficient use of public support for internationalization. The originality of this research lies in the fact that it seeks to ascertain the importance of public policies to support internationalization, in the entrepreneur's perspective.