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We discuss and explore the effects of internationalization, an entrepreneurial strategy employed by small and medium‐sized enterprises (SMEs), on firm performance. Using concepts derived from the international business and entrepreneurship literatures, we develop four hypotheses that relate the extent of foreign direct investment (FDI) and exporting activity, and the relative use of alliances, to the corporate performance of internationalizing SMEs. Using a sample of 164 Japanese SMEs to test these hypotheses, we find that the positive impact of internationalization on performance extends primarily from the extent of a firm's FDI activity. We also find evidence consistent with the perspective that firms face a liability of foreignness. When firms first begin FDI activity, profitability declines, but greater levels of FDI are associated with higher performance. Exporting moderates the relationship FDI has with performance, as pursuing a strategy of high exporting concurrent with high FDI is less profitable than one that involves lower levels of exports when FDI levels are high. Finally, we find that alliances with partners with local knowledge can be an effective strategy to overcome the deficiencies SMEs face in resources and capabilities, when they expand into international markets. Copyright © 2001 John Wiley & Sons, Ltd.

This article integrates institutional theory and organizational learning perspective and proposes a contingency framework on the relationship between ownership strategies and subsidiary performance. Using a sample of Japanese subsidiaries worldwide, the article finds important main effects of ownership, institutional distance, and host country experience on subsidiary survival. Furthermore, the effect of ownership is contingent on institutional distance and host country experience. In institutionally distant countries, subsidiaries have better survival chances if foreign parents have more ownership. Host country experience has a negative impact on subsidiary survival, but the effect is weaker if foreign parents have larger ownership positions in the subsidiaries.

AustraliaThis study examines and extends the resource dependence logic of diversification for a better understanding of outward foreign direct investment (OFDI) activities by emerging market firms. We contend that the diversification logic is bounded by state ownership, an important but less considered component of interdependence. Our empirical results, based on panel data analysis of Chinese listed firms, suggest that the level of interdependence between Chinese and foreign firms in China in multiple forms, including symbiotic, competitive, and partner interdependencies, is positively associated with the level of the Chinese firms' OFDI activities. However, Chinese firms with higher levels of state ownership are less susceptible to the pressures imposed by foreign firms to invest abroad.(Numbers in parentheses are robust standard errors, based on a Huber-White sandwich estimator); [marginal effects in square brackets];{standard errors of marginal effects in curly brackets}.