Modeling the Resource Generation Potential: Locational and Cognitive Insights in Small Firms' International Entry Mode Choice

Resource-starving small firms in this era of cut throat competition follow an aggressive attitude towards internationalization. One of the most important challenges faced by the manager’s in small firm in developing economies is to find new ways to successful internationalization through suitable entry modes. In particular when the small firms expand their international operations from emerging to developed economies. The role of cognitive perception remains inconclusive in SME internationalization and this is an area which is relatively under-researched. Based on the integration of cognitive psychology and Dunning eclectic framework, this paper develops a rigorous model and tests a logical hypothesis for entry mode selection. By introducing the new resource value generation taxonomies, this study explores the impact of ownership, location and cognitive dimensions on small firm entry mode choices. The data was collected from a sample of three major provinces of Pakistan through postal and drop-off survey (questionnaire). As the dependent variable was dichotomous, logistic regression was used to analyze the data set. Integration of Dunning framework with cognition(dynamic capabilities) supports new value generation taxonomies of entry mode selection. The findings support the central role of ownership, location and cognitive advantages in the choice and selection of high value generation modes. The new value generation dependent taxonomies (high and low value generation modes)introduced in this research, and complexities associates with IB research highlights the need for further empirical, cross-cultural and longitudinal studies. This research through careful deliberation presents useful implication that will enhance the SME international activity of small firms from developing economies.