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THE IMPACT OF TOP MANAGEMENT GROUPS ON THE INTERNATIONALIZATION OF SMALL AND MEDIUM SIZED SOFTWARE FIRMS
A. Rebecca Reuber
(1)Schulich School of Business
4700 Keele St.
North York, Ontario M3J 1P3
(2)Faculty of Management
10University of Toronto
5 St. George St.
Toronto, Ontario M5E 3E6
(1)(416) 736-2100 x77957
The impact of characteristics of the top management group's background on the internationalization of a sample of Canadian software firms was studied. Following on recent research concerning such groups, it was proposed that the impact of their collective background characteristics on internationalization, a type of performance measure, would be mediated by the internationalization tactics adopted by the firm. The group background characteristics examined were: (1) the diversity of the top management groups experience working in international markets before joining or founding the firm and (2) the average number of years team members had worked in the software industry. The internationalization tactics studied were (1) extent of use of international partners (2) speed of entry into international markets (3) extent of market intelligence gathering in foreign markets (4) extent of adaptation of product line for foreign markets (5) extent of promotion in trade press in foreign markets.
A sample of small and medium sized Canadian software firms was surveyed in 1994. Further data on 48 of the 58 firms originally in the dataset were obtained through the purchase of a commercial data base in 1995. Path analysis was used to analyze the data. The dependent variable, degree of internationalization, was a composite measure reflecting foreign sales as a percent of total sales, number of employees working internationally, and distance from home market of the foreign markets served.
The diversity of the top management group members experience working in international markets, but not the average number of years group members had worked in the software industry, affected the firm's degree of internationalization through some but not all of the tactical variables. Specifically, the use of foreign partners, the speed of entry into international markets and the extent of market intelligence gathering were positively significantly related to the firms' degree of internationalization and mediated the effect of the top management group's experience in international markets. Extent of adaptation of product line was not significantly related to degree of internationalization or to top management group variables. Extent of promotion in trade press in foreign markets was positively related to degree of internationalization but unrelated to top management group variables.
Software firms seeking to internationalize can expect that the international experiences of top management group members will contribute to the way in which firms internationalize, and the extent to which they succeed. They should note, however, that some tactics associated with greater internationalization (e.g. extent promotion in trade press in foreign markets) are unrelated to the foreign experience of the team members: team experience in foreign markets does not teach all that small and medium sized firms need to know. Lenders and investors attempting to evaluate the potential of the firm to penetrate foreign markets can examine the international experiences of top management group members as one, but not the only, useful indicator.