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Capital and Knowledge Constraints: Swedish SME’s Internationalization to China

SMEs are established as an important cornerstone for the Swedish economy, due to the amount of people they employ and the economic activity they present. Due to a changing world SMEs are faced with new competition from foreign firms.

In order to counter the new environment, an option for the firms is to move abroad, to internationalize. Furthermore China is established as an attractive country for SMEs to expand into, due to the major economic growth.

During internationalization the Swedish agency for regional and economic growth identified SMEs to experience a lack of knowledge and capital, which hinders them in their expansion. The paper observes how four different Swedish SMEs, with activity in China moved abroad and how the mentioned lack of capital and knowledge was bridged.

A theoretical framework is acquired through established research questions which are meant to analyze the problem description. The firms are identified as Swedish SMEs. In order to acquire empirical data, face to face interviews are conducted with the identified Swedish SMEs. Through the interview the empirical data is gathered, at which point, the paper analyzes the empirical data using the problem statement and the theories previously derived.

The paper establishes that the experiential knowledge is the major influence on the resources committed by the firm. The amount of resources committed influences the type of entry mode as well as the accompanied advantages. In affect all firms have limited knowledge and ergo their resources committed are limited.

This paper draws the conclusion that due to this, the firms were all able to finance their internationalization and no capital gap was experienced. The firms which were interviewed held experiential knowledge within the firm except one case where it was bridged with the assistance of a consultant.

The experiential knowledge is held by individuals and has had a deep impact on the manner of the internationalization. It is identified that the personal relationships between individuals is shown to be of great importance to the firm. The knowledge constraints were bridged by the individuals’ experiential knowledge.
Source: Jönköping University
Author: Bergkuist, Fredrik | Andersson, Andreas | Glovéus, Sebastian

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