Internationalization pathways of family SMEs: psychic distance as a focal point

Abstract

Purpose – The purpose of this paper is to investigate how psychic distance affects the internationalization process, foreign market entry (FME), and entry mode choice of Finnish small and medium-sized family enterprises (family SMEs) operating in France.

Design/methodology/approach – The paper reports findings from an in-depth case study covering four Finnish manufacturing family SMEs operating in the French market. The data were analyzed using the Uppsala model and distance creating and distance-bridging factors encountered in the FME to France.

Findings – The findings reveal that the family SMEs mainly followed a sequential process and favored indirect entry modes before entering the French market. The French market was psychically distant, but the case firms were able to overcome the distance by using different distance-bridging factors. Based on the findings, it can be argued that psychic distance has an especially important role in the internationalization and the FME of family SMEs, mainly because of their general cautiousness caused by family presence.

Research limitations/implications – Although the case study method made it possible to acquire detailed knowledge about the firms' internationalization, the findings can be generalized only to some extent.

Practical implications – Managers of family SMEs and family members should be provided with the capacity to overcome distance-creating factors, they might encounter in their FME. The decision to internationalize is a strategic change that will most probably change the historical harmony of the firm.

Originality/value – Prior research has mainly focused only on general internationalization pathways of family SMEs. In addition and contrast to the previous studies, this paper investigates the role of perceived psychic distance in family SMEs' FME and entry mode choice in a certain target market.