Internationalizing SMEs and their modes of adaptation : applying an integrated approach of dynamic capabilities and ambidexterity

Abstract

Purpose: The purpose of this research is to identify and investigate how internationalizing SMEs adapt to the dynamic environment by applying the three new modes of adaptation – structural separation, behavioural integration and sequential alternation – to the dynamic environment. And if the incremental development of resources determine which mode is evident in each SME when this identification is made. Design/Methodology: Qualitative research method was deployed, with inductive strategy as the adopted strategy used in gaining richer and deeper understanding into the three new modes of adaptation. Since they have never been applied within the context of internationalizing SMEs. A case study approach was used to investigate each internationalizing SMEs to develop a constructive perspective towards developing a framework for managers, researchers and agencies support. The industries in which each SME are chosen from are characterized by constant changes in terms of technological advancement, market forces and pattern of demand. In a way that it demands the SME operating in such an industry to internationalize either to learn or to increase its market share. These industries include the knowledge-intensive industry, fashion industry, real-estate industry and business product & service industry. Findings: Internationalizing SMEs develop three unique set of capabilities namely resourceshifting capability, context-shaping capability and focus-shifting capability to undergo each mode of adaptation. As those SMEs who develop a resource-shifting capability is as a result of the incremental development of their resources to undergo structural separation as a mode of adaptation to the dynamic environment. while those SMEs who integrate their resources under one body (its head-office) develop a context-shaping capability to undergo behavioural integration. This research also discovered that those SMEs who develop their resources incrementally or otherwise to develop both resource-shifting and context-shaping capability, is as a result of the market demand for their services. While those internationalizing SMEs that were established as a result of a gap identified in the market, develop a focus-shifting capability to undergo sequential alternation as a mode of adaptation. Each of these unique set of capabilities enable each SME build competitive advantage that is unique to their mode of operation. Research Limitation: This research focused on internationalizing SMEs in Malta, however, due to the complexity and organic nature of internationalizing SMEs, the factors identified in this research may vary based on the context in which the SME is being studied. Managerial Implication: This research provides a detailed understanding of the key factors necessary in developing unique set of capabilities that are congruent with the chosen strategy each internationalizing SME choose to adopt. Furthermore, it provides a conceptual framework that provides a blueprint for managers and agencies support – like TradeMalta – in building competitive advantage despite the dynamism of the international market Originality/Value: This research is the first to test these three new modes of adaptation to internationalizing SMEs in Malta and globally. The arguments and discoveries around the quasientrepreneurial and nimble nature of these internationalizing SMEs, contributes greatly to the understudied literature on dynamic capabilities and ambidexterity on SMEs. Furthermore, it addresses gap identified in the resource-based view (RBV) of firms. By postulating that being part of the value chain of an MNE and getting support from local agencies – like TradeMalta, are two factors that strongly contributes to the competitive advantage of these internationalizing SMEs