Institutional Pressures and Initiation of Internationalization: Evidence from Taiwanese Small- and Medium-sized Enterprises

Abstract

This study attempts to reveal the pressure aspect of small- and medium-sized enterprises’ (SME) internationalization. We suggest that the decision by an SME to initiate its internationalization can be regarded as an institutional change to respond to its external pressures within the home country. We empirically test our hypotheses regarding three types of institutional isomorphic pressure (i.e., coercive, mimetic and normative pressures), as identified by CEOs of 165 Taiwanese SMEs investing in Southeast Asia and China. The results show that for those SMEs under greater institutional pressures, they are not only tending to expand abroad earlier but also adopting their initial international activities in a more radical style. The results suggest that SMEs are very sensitive to their external environments and will respond to institutional pressures from the home country by moving aggressively to internationalize.