National and international expansion of Chinese SMEs: a different story?

This chapter presents the results of one of the first empirical studies on the national and international expansion of Chinese SMEs and also compares these findings with some of the characteristics of China’s multinational companies reported in recent academic literature. In particular, the chapter analyses the interaction of SMEs with the Government and their relatively weak competitive position in relation to their Western counterparts. The analysis is based on data collected from more than 500 small and mid-sized firms operating in the provinces of Anhui, Jiangsu, Ningxia, and Shandong. The first characteristic, interaction with the Government, was analysed using two proxies (funding from the state and state ownership) and measured at three levels of possible expansion: regional, national, and international. The second characteristic, relatively weak competitive position, was studied using the barriers (internal and external) collected by Leonidou (2004) and also measured at the same three levels. Contrary to what has been reported in previous studies about Chinese MNCs, the first set of results shows that the interaction with the Government does not seem to be relevant in the firms’ expansion, but that working jointly with foreign partners, getting funding from other private sources, and the international vision and/or entrepreneurial attitude are important factors for these companies to go international. The second set of results shows that SMEs face barriers related to weak knowledge of international finance, operations and logistics, weak skills and internal capabilities, and problems in the development of products; this set of results also presents that different barriers affect SMEs in different stages of their expansion process.