Understanding small-firm reactions to free trade agreements

Abstract

Purpose -Despite the proliferation of free trade agreements (FTAs) internationally, the limited research available on the subject indicates that few SMEs consider the existence of these agreements as a reason to engage in international markets or expand their existing international engagement. The purpose of this paper is to identify and augment SME international marketing models building on Merrilees and Tiessen's (1999) work; and to explain how these marketing models condition the reaction of small firm exporters to FTAs. Design/methodology/approach -This study comprised in-depth interviews with 51 SME exporters in New Zealand. Participants were selected purposefully and were interviewed in a face-to-face, semi-structured format. Findings -Five international marketing strategies were identified drawing on prior models of international marketing: sales-driven, relationship-driven, international boutique, arbitrager and market seeder. These models are characterised by different relationships to markets and to buyers served, and by the extent of customisation in the export offering. By using these models the authors analyse why SMEs have yet to significantly capitalise on the opportunities provided by New Zealand's recent wave of trade agreements. Research limitations/implications -This study acknowledges the diversity of international marketing strategies between seemingly similar firms by recognising that approaches generally viewed as unlikely to bring success in international markets can work when applied in a particular way and in a particular context. As such the results may offer a useful starting point for the customisation of policy advice on exporting in terms of the context in which SMEs operate. Originality/value -As well as advancing theoretical perspectives on SME international marketing strategies, the findings are presented as a contribution to the as yet limited evaluation of how SMEs in New Zealand have responded to the emerging opportunities created by FTAs. The interest in filling this gap is part of a growing recognition that factors related to the firm's trading environment have been largely neglected in policy considerations.

Understanding immigrant entrepreneurship: a home-country entrepreneurial ecosystem perspective

“…For this potential opportunity to be recognized, entrepreneurs need to be willing and able to take up these new trading opportunities. Previous studies, however, have suggested that few entrepreneurs become exporters or expand their existing export activity as a result of FTAs (Battisti et al, 2014). When an FTA is signed between the host and home countries of immigrants, entrepreneurs potentially profit the most because they have the social connections to assemble resources in their home country and rapidly establish new ventures.…”

Context in international business: Entrepreneurial internationalization from a distant small open economy

“…Six studies (i.e., Akoorie et al, 1993;Battisti et al, 2014;Chung, 2009Chung, , 2012Dana, Chan, & Chia, 2008;Fabling et al, 2012) examine the connection between stimuli and strategy. Akoorie et al (1993) observe that, faced by stiff competition from other exporters targeting the then European Community, resource-deprived INZFs relied on niche marketing.…”

“…In a follow-up study, Chung, Lu Wang, and Huang (2012) underline an analogous pattern of results. Although the lack of policymaker support limits the strategic options available for micro-enterprises (Dana et al, 2008), external stimuli like free trade agreements (FTAs) have no effect on targeting (Battisti et al, 2014).…”

Capabilities and the internationalisation of smaller-sized, service-oriented firms in the southern hemisphere

“…Therefore, for scalability, it is still necessary to increase the international scope of geographically diversified markets. In contrast, being a small geographically distant economy, certain management teams of New Zealand based firms are constrained by the small size of the domestic market with great pressure to internationalise (Battisti et al, 2014;Felzensztein et al, 2019;Kahiya, 2020). However, institutional differences between countries can hinder the international expansion of smaller-sized, underresourced firms (Cuervo-Cazurra et al, 2017), which can be more pronounced when they are from an emerging economy (Brenes et al, 2019).…”