Foreign direct investment by small and medium-sized enterprises:the case of German nanotech and biotech SMEs

Freund, David (2014) Foreign direct investment by small and medium-sized enterprises:the case of German nanotech and biotech SMEs. Doctoral thesis (PhD), Manchester Metropolitan University.

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Abstract

Equity entry modes are increasingly important regarding the internationalisation agenda of high-tech SMEs (HTSMEs). However, the fields of international business, international entrepreneurship and strategic management have not been able to provide or identify a specific theory or framework, which is able to explain the relevant factors related to the asset-exploiting and asset-augmenting FDI of HTSMEs. Therefore, in light of the absence of a specified analytical approach to the FDI of HTSMEs, the aim of this study was to test whether the new envelope paradigm framework, which additionally accounts for dynamic knowledge related factors and strategic asset seeking FDI, can serve as an analytical tool to explain the different types of FDI of HTSMEs. This study employed a cross sectional research design and conducted an email survey. The survey was based on an authoritative federal database, which was extended by the researcher into a state of the art tailor made census database of German nanotech and biotech SMEs. The firm- and location-specific variables in the conceptual framework were adopted and adapted from related studies. The results indicate that the envelope paradigm framework is able to explain the asset-augmenting FDI of HTSMEs. The relevant knowledge related firm-specific advantages (O-advantages) are the absorptive capacity and the internal knowledge network of the HTSME. Important knowledge related location advantages (L-advantages) are highly skilled workforce, innovative public and private scientific institutions and industrial concentrations. In terms of the asset-exploiting FDI of HTSMEs, the framework was able to determine relevant O-advantages such as scale economies and the internal support structure of the HTSME. However, the framework was not able to identify important L-advantages for the asset-exploiting FDI of HTSMEs. Overall, the findings imply that the envelope paradigm framework can serve as an analytical tool for understanding a substantial amount of the asset-exploiting and asset-augmenting FDI of HTSMEs. It provides a comprehensive picture of the structure and composition of HTSMEs that engage in the different types of FDI. The results contribute to the interdisciplinary debate on the compatibility and suitability of an IB framework in an entrepreneurial context. Furthermore, this study can assist HTSME managers in effectively configuring FDI strategies according to firm-specific abilities and location specific attributes. Policy makers could use this study in designing policies and support schemes to the specific requirements of this new type of HTSME. In a wider context, the findings bare relevant implications beyond the context of nanotech and biotech industries and the country context of Germany. It provides valuable insights for the group of coordinated market economies such as Germany and for other high high-tech industries, which increasingly define the future of mature industrialised economies.