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EMERGENCE AND INTERNATIONALIZATION OF SMALLER
MANUFACTURING ENTERPRISES IN CENTRAL EUROPE:
IMPLICATIONS FOR ENTREPRENEURS
AND MANAGERS
George Tesar, Ph.D., Professor Emeritus
Umeå University (Sweden) and University of Wisconsin-Whitewater
Abstract
Research concerning internationalization of smaller manufacturing enterprises, and more specifically research concerning their entry into
international markets, has been the focus of the researchers listed below. This research has produced an enormous amount of knowledge on the
subject and is not necessarily limited to the conventionally specified countries in Central Europe (CE) after the systemic changes in late 1989. The
outcomes of many of the studies were compared to strategies and operations of other smaller manufacturing enterprises worldwide. Some of the
original research instruments and open ended research methodologies were successfully replicated in other countries. Most of the studies were
quantitative in nature; however, some were conducted in a qualitative format using case studies.
In order to understand some of the internationalization issues related to market entries by smaller manufacturing enterprises, it became obvious early
on in the studies that researchers needed to understand some of the operational and theoretical aspects of the external business environments in which
these enterprises were funded and operated. In some early studies, the major forces were identified and their significance was related to strategies
and operations of smaller manufacturing enterprises attempting to enter international markets. Typically these included: technological, social, life
style, and legal forces.
Since smaller manufacturing enterprises are managed by a variety of managers, in some cases executives, it was also necessary to identify the top
operating managers and develop their strategic and operational profiles—those of craftsman, promoters, and rational managers. Some of the top
operating managers also projected entrepreneurial characteristics. Not all top operating managers can be classified as above. Entrepreneurial
tendencies are primarily found among craftsmen and promoter type managers. It should be noted that many of the initial internationalization
activities such as exporting are frequently perceived as an entrepreneurial initiative by the top operating managers.
The objective of this presentation is to highlight some of the longitudinal research studies focusing on the evolution of international orientation and
market entry strategy and operations among smaller manufacturing enterprises in Central Europe. The presentation is divided into two parts. The
first part focuses on environmental forces that act on Central European smaller manufacturing enterprises, and the second part discusses factors that
influence propensities of smaller manufacturing enterprises to enter international markets.
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Propositions:
Proposition 1: SMEs in CE are clearly a product of rapidly changing environments. As the environment in each CE country moves closer to the
international “standard” and the environmental forces stabilize, SMEs will become more professionally stable and will increase their propensity to
enter international (export) markets.
Proposition 2: The propensity of individual SMEs in CE to enter international markets is still a subjective decision made by SMEs’ management
based on insufficient resources—including technology—and individual perceptions of international markets.
Proposition 3: SMEs in CE still perceive international markets as limiting in scope and restrictive in market opportunities. SMEs’ managers feel that
they have more market flexibility by not directly entering international markets.
Proposition 4: The international potential of SMEs in CE through their participation in international markets is still limited.
What is needed?
1. Comprehensive research to focus on the external business environment itself. More specifically, it is important to examine the nature of the
external business environment that is needed to stimulate the growth of SMEs in CE countries. The external business environments are still
substantially different and provide different levels of opportunities for SMEs.
2. Understand what types of SMEs are more likely to grow and expand in what kind of external business environment, for example, more
aggressive international market oriented SMEs might be products of more stable and open external business environments.
3. Exploration of the decision-making process among SMEs in CE regarding their participation in international markets. It appears that
managers of SMEs in CE are preoccupied with relatively low-level operational issues without the necessary understanding of major strategic
issues.
Sources and previous studies:
Marks, Denton and George Tesar, “Different Objectives, Different Models: The Challenge of Integrating EU and CEE Higher Education,”
Transformation in Business and Economics, 4/1 (2005), 7-18.
Moini, Hamid, “ABC Plastic Limited,” a case study, in Tesar, George and others, Smaller Manufacturing Enterprises in an International Context: A
Longitudinal Exploration (London: Imperial College Press, 2010), 180-93.
Moini, Hamid, “KMF Limited,” a case study, in Tesar, George and others, Smaller Manufacturing Enterprises in an International Context: A
Longitudinal Exploration (London: Imperial College Press, 2010), 194-206.
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Moini, Hamid, “Winery Startup within a Wine-Producing Cluster,” in Marketing Management in Geographically Remote Industrial Clusters:
Implications for Business-to-Consumer Marketing by G. Tesar and J. Bodin (London: World Scientific Press, 2013), 405-17.
Moini, Hamid, František Kalouda, and George Tesar, “Foreign Market Entry: The Case of SMEs in the Czech Republic,” Journal of East-West
Business, 14/1 (2008), 41-64.
Moini, Hamid, František Kalouda, and George Tesar, “Internationalization of Family-Owned Businesses in the Czech Republic,” International
Journal of Entrepreneurial Venturing, 4/4, 2010.
Tesar, George, Steven W. Anderson, and Miroslav Keřkovský, “SH a.s. A Company in Search of its Market Options,” in Strategic Technology
Management: Building Bridges between Sciences, Engineering, and Business Management, 2nd edition, edited by Tesar, G. and others (London:
Imperial College Press, 2008), 333-59.
Tesar, George and Hamid Moini, “A Look at Academic Research in Central and Eastern Europe: Ten Years Later,” 8th Annual Conference on
Marketing Strategies for Central and Eastern Europe, Conference Proceedings, Vienna, Austria, December 13 to 15, 2000.
Tesar, George and Hamid Moini, “Long-term Analysis of Technologically Focused Smaller Manufacturing Enterprises,” Scandinavian Journal of
Management, 15 (1999), 239-48.
Tesar, George and Hamid Moini, “The Internet and Internationalization of Smaller Manufacturing Enterprises, Journal of Global Marketing, 18/3&4
(2005), 79-94.
Tesar, George, Hamid Moini, John Kuada, and Olav Jull Sørensen, Smaller Manufacturing Enterprises in an International Context: A Longitudinal
Exploration (London: Imperial College Press, 2010).
Tesar, George, Hamid Moini, and Jerome K. Laurent, “Expectations before Privatization and Market Realities after Privatization: Technology
Transfer,” International Journal of Technology Management, 21, 5/6 (2001).
Tesar, George and Marie Přibová, "Electro-Products Limited," in Managing in Emerging Market Economies: Cases from the Czech and Slovak
Republics, edited by Daniel S. Fogel (Boulder, Colorado: Westview Press, 1994, 202-8.
Tesar, George and Marie Přibová, "Lusico: In Search of Market Opportunities," in Managing in Emerging Market Economies: Cases from the Czech
and Slovak Republics, edited by Daniel S. Fogel (Boulder, Colorado: Westview Press, 1994, 196-201.
Other sources by:
Håkan Boter, Tom Bramorski, Marin Marinov, Denton Marks, Stan Paliwoda, Romeo V. Turcan
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Environmental
forces
Technological climate
Economic conditions
Social conditions (including
legal, ethical, and political)
Life styles
Figure 1.—ENVIRONMENTAL FORCES ACTING ON CENTRAL EUROPEAN
SMALLER MANUFACTURING ENTERPRISES
Periods of Development and Growth among Smaller
Manufacturing Enterprises in Central Europe
1989 to 1993
1994 to 1998
1999 to 2010
Formation years
Shake-out years
Tenuous growth
Completely open—with
The lack of appropriate
Appropriate technology
adequate financial resources,
technology started impacting becomes an issue especially
global technology became
financial efficiency.
among existing and potential
available.
exporters.
Very unstable—privatization Stabilizing economic and
Relative stability with
issues—financially unstable
financial transaction;
linkages to international
commercial transaction.
problematic international
economies.
payments.
Very unstable—changing
Unstable—legal structure
Stabilizing—legal structure
legal structure, questionable
stabilizing, low ethical
stabilized, ethical behavior
ethical framework, and
standards, political situation
more positive in response to
unstable political climate.
in flux.
outside influences, political
situation in flux.
Completely open—only
Completely open—personal
Constrained by managerial
constrained by disposable
gain from entrepreneurial
behavior—partial separation
income and ability to get
income, life styles reflected
between personal life style
manufacturing. Little
the type of entrepreneurial
and managerial life style
differentiation between
culture.
personal and entrepreneurial
consumption.
Factors connected with environmental forces in Central Europe:
Corruption
Political conflicts
Economic instabilities (exports of low value items)
Lack of innovation (entrepreneurial initiatives)
© G. Tesar, 2015 (Madison)
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2011 to present
Stabilization
Indigenous technology
becomes available for
exports; diminishing financial
resources.
Normalization of domestic
and international payments.
Stabilized—legal structured
refined to meet outside
standards, ethical behavior
improving, political situation
in flux.
Managerial behavior—legal
and tax separation between
personal life and managerial
life style. Ownership life
style issues emerge among
entrepreneurial concerns.
Figure 2.—FACTORS INFLUENCING PROPENSITIES TO ENTER INTERNATIONAL MARKETS
BY SMALLER MANUFACTURING ENTERPRISES
IN CENTRAL EUROPE
Periods of Development and Growth among Smaller
Manufacturing Firms in Central Europe
1989 to 1993
1994 to 1998
1999 to 2010
2011 to present
Factors
Formation years
Shake-out years
Tenuous years
Stabilization years
Psychological distances
Very short—lack of
Short—international markets Medium—international
Medium to long—
experiences and
and potential customers
markets are perceived as the
international markets are
understanding of how
placed undue burden on
necessary evil—a great deal
opening up—unsolicited
international markets operate. management and operations.
of caution is required.
orders are received.
Trust
Very low—frequently
Low—concerned about
Low but increasing—
Medium—good relationships
accompanied by stereotypes
financial disclosure and
formation of working
with existing customers—
and suspicions.
foreign competition.
relationships with customers
good relationships with
abroad—need for financial
financial institutions (foreign
transparency.
exchange).
Commitment
None—preferred individual
Very low—contractual
Low—international market
Low to medium—learning
orders frequently without
agreements emerged but were participation increasing but
how to manage in
contractual agreements—
generally unenforceable—
perceived as disclosing
international markets—
opportunistic market
prepaid orders were common proprietary information.
mentoring by foreign
selection.
(conform letters of credit).
customers.
Time urgency
Very low—opportunistic
Very low—opportunistic
Low—too much pressure on
Medium—opportunities and
behavior focused on
behavior focused on best
management—short delivery time dimensions in
immediate results.
results at the time—
deadlines.
international markets are
international market options
require attention of top
were immerging.
managers.
Cooperation
Very low—cooperation is
Very low—cooperation is
Low—cooperation is
Medium—cooperation in
perceived as a compromise— perceived as a compromise— perceived and viewed as a
sales and marketing—but not
limits flexibility.
limits opportunities.
long term obligation—needs
in research and
a different managerial
development—necessary
perspective.
commitment in international
markets.
Commitment to quality
None—new international
Very low—quality is not
Low—quality is specified by Low—recognized need to
markets are price sensitive— important—most customers
foreign customers—we try to meet quality demands—
anything sells.
abroad are one time
meet it.
quality demands require
customers.
attitudinal changes in
management.
Factors limiting foreign market entry:
Attitudes, Perceptions, Preferences
© G. Tesar 2015 (Madison)
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