The Influence of Top Management Team Characteristics on the Foreign Market Entry Mode Decision of German SMEs

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School of Business | Master's thesis
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Degree programme
Management and International Business (MIB)
International opportunities and growth limitations of the domestic market increasingly encourage small and medium-sized enterprises (SMEs) to seek customers, resources and markets outside the boundaries of the home country. These developments lead to a steadily increasing number of internationally active SMEs, which are faced with a choice between a variety of internationalization strategies that vary in degrees of risk, control and benefits. This thesis complemented research on the Upper Echelons Theory, which presumes that strategic decisions in a firm are strongly affected by the top-level executives as they analyze the situation and develop the corporate strategy accordingly. Personal values and cognition of each executive influence the decision making process as these ‘givens’ (i.e. values, beliefs, assumptions, knowledge) shape the perception of the situation. According to the Upper Echelon Theory, managerial characteristics (e.g., age, tenure) serve as indicators of the ‘givens’. Further, SMEs are associated with a managerial style that is significantly influenced by the leading executives of the organization, especially in family-owned and/or family-managed businesses, which are still very common for SMEs. Therefore, this research analyzed the influence of the age, position tenure, international experience, educational level and family control of the top management team on the foreign market entry mode decision of German SMEs. It was based on a cross-sectional online survey design. The sample of 1,000 German SMEs was drawn from an online databank by the Chamber of Industry and Commerce South Westphalia. The findings emphasized that international experience of top executives positively influenced the preference for equity modes of foreign market entry. Experience shapes the understanding of foreign cultures, markets and processes, and equips executives with confidence in their ability, enabling them to pursue riskier strategies. Further, the results showed that owner-family affiliation negatively influenced the preference for equity modes of entry, supporting the notion that family firms are linked to more cautious internationalization processes in order to maintain control. As a practical implication, the research results highlighted that the internationalization decision is not purely analytical and suggested that international experience enables organizations to consider a wider spectrum of entry modes.
Thesis advisor
Humphries, Lucas
small and medium-sized enterprises, upper echelons theory, foreign market entry mode, top management team characteristics
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