2015 International Conference On Transnational Corporations and China’s Economy: Challenges and Opportunities (TNC-CD)

102 / 2015-12-31 19:31:03

Effects of Social Capital on Internationalization Speed and Performance – Empirical Study of SMEs in Zhejiang

In many marketplaces, SMEs (small and medium-sized enterprises) are taking the same way towards internationalization as large MNCs (multinational corporations). The two participants face similar problems in the internationalization process, but the conditions for SMEs are completely different due to their limited resources. Social capital could serve as a compensation for the disadvantages SMEs are confronted with. This paper attempts to take a closer look at the effects of social capital on internationalization speed and performance of SMEs in China. Based on already existing research on social capital theory and international entrepreneurship, this paper proposes hypotheses concerning various aspects of social capital (e.g. the frequent and intensive participation in personal networks or the frequency of the contacts and the intensity of the ties with the government) and discusses their effects on both the SME’s internationalization speed and performance. The hypotheses are tested on a representative sample of 99 SMEs located in Zhejiang (China) with the help of a regression analysis. The data were exclusively collected for this study. The findings indicate that some aspects of social capital contribute to a faster internationalization speed (e.g. inter-organizational networks) and a superior performance (e.g. ties with financial institutions). The results of this study are valuable for managers and founders or representatives of political institutions and point to possibilities of further research.