SMES IN INTERNATIONAL CONTEXTS: AN ITALIAN PERSPECTIVE Laura Gavinelli - laura.gavinelli@unimib.it UNIVERSITY OF MILAN-BICOCCA Cinzia Colapinto - cinzia.colapinto@unive.

it C FOSCARI UNIVERSITY OF VENICE Mariangela Zenga - mariangela.zenga@uniib.it UNIVERSITY OF MILAN-BICOCCA Angelo Di Gregorio - angelo.digregorio@unimib.it UNIVERSITY OF MILAN-BICOCCA SIG: INTERNATIONAL MANAGEMENT TRACK: INTERNATIONAL MANAGEMENT GENERAL TRACK - RESEARCHING THE INTERNATIONALISATION OF SMES AND MICRO-BUSINESSES - ADVANCES AND FUTURE PERSPECTIVES

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SMEs in international contexts: an Italian perspective ABSTRACT

International business strategies by Small and Medium Enterprises (SMEs) are a crucial issue for Italian economy. The process of internationalization seems to be an effective but complex solution for enterprises to survive in the current financial and economic crisis. Thus, this process may require deep changes in decision making, management, organizational and marketing procedures. The paper presents the results of a quantitative research on SMEs located in Monza and Brianza province one of the most productive territories in Italy. The aim is to analyze why and how these SMEs do behave towards internationalization (current and future entry modes, motivations, advantages and difficulties) referring to four key areas: innovation and technology, networking, green approach and human resources competences. A questionnaire was distributed to 792 enterprises with a redemption rate of 24.37%. The data were collected with CAWI method and processed with Rasch analysis, PCA Principal Components Analysis and Cluster analysis methods. Four different clusters have emerged with specific approaches. Keywords: innovation, Rasch-Cluster analysis, Italy

SMEs in international contexts: an Italian perspective

Laura Gavinelli1, Cinzia Colapinto2, Mariangela Zenga1, Angelo Di Gregorio1
1

University of Milan-Bicocca, Milan-Italy; 2C Foscari University of Venice, Venice-Italy

Abstract: International business strategies by Small and Medium Enterprises (SMEs) are a crucial issue for Italian economy. The process of internationalization seems to be an effective but complex solution for enterprises to survive in the current financial and economic crisis. Thus, this process may require deep changes in decision making, management, organizational and marketing procedures. The paper presents the results of a quantitative research on SMEs located in Monza and Brianza province one of the most productive territories in Italy. The aim is to analyze why and how these SMEs do behave towards internationalization (current and future entry modes, motivations, advantages and difficulties) referring to four key areas: innovation and technology, networking, green approach and human resources competences. A questionnaire was distributed to 792 enterprises with a redemption rate of 24.37%. The data were collected with CAWI method and processed with Rasch analysis, PCA Principal Components Analysis and Cluster analysis methods. Four different clusters have emerged with specific approaches.

Keywords: International business strategy, Small and Medium-sized Enterprises, innovation, Rasch analysis, cluster analysis, network

Introduction The small and medium enterprise is the engine backbone of the Italian economy. Small and Medium-sized Enterprises (SMEs) account for nearly 99% of the national enterprises and among them the micro-enterprises (those with less than 10 employees) represent the wide majority. International business strategies by SMEs are affected by economic conditions, thus the current economic/financial crisis may change strategic behaviors and affect decision making processes: for instance credit crunch and sales reductions have reduced financial resources. Indeed, economic theory predicts a reduction in internationalization when the cost of capital is higher, as experienced in the recent global financial crisis (Ricardo, 1963). As internationalization is a form of geographic diversification, an enterprise may decide to focus on core activities in order to reduce its costs. This is particularly true if we consider SMEs which traditionally have a small financial base, a domestic focus and a limited geographic scope (Barringer & Greening, 1998). Empirical evidence is provided for Italian enterprises located in Monza and Brianza Province in Lombardy (North of Italy): we conducted a quantitative research to gather specific information on the internationalization phenomenon. The aim of the paper is to employ a cluster analysis via Rasch model to conduct an exploratory analysis about companies behavior in respect to different competitive areas: innovation and technology, formal and informal networks, green approach, HR training. The paper draws some inference on key elements likely to impact on futures, particularly with respect to internationalization and organizational and technological innovation. The final discussion draws these elements together. Theoretical framework: internationalization and SMEs In the last decade we witnessed a substantial research on the internationalization of SMEs, as the importance of SMEs in international markets has increased.
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Man et al. (2002) assert that smaller firms differ from larger ones in their managerial style, independence, ownership and scale/scope of operations (Coviello & Martin, 1999) and consequently they respond to the environment and compete with other firms in particular ways. However, internationalization is part or a consequence of a firms strategy. Using Ceccantis (1996) firm representation, it is not only a key factor for competitiveness, but it is also a strategy able to keep a firm in its survival area. Some theories describe the internationalization process based on a gradual and sequential staging pattern, with an increasing commitment: the main ones are the international product life cycle (Vernon 1966), the Uppsala-models (or U-Models) developed by Johanson and Vahlne (1977) and the innovation-related internationalization models (or I-models) conceptualized by Cavusgil (1980). According to the U-model, firms tend to favour nearby countries within a low psychical distance when they start their foreign operations and afterward expand them to distant markets: psychically nearby countries are easier to understand and make the business operations easier to implement because they present fewer cultural and/or business practice differences. The model identifies the evolution of entry modes through four stages: no regular export, export through agents, founding an overseas sales subsidiary, and own production. In other words, from indirect entry modes to the establishment of direct operations (usually once the firm has increased knowledge). The taxonomy should be completed considering joint venture operations and acquisition. However, not all surveys confirm the impact of distance and identify alternative factors explaining internationalization, such as customer followership and niche markets (Bell, 1995) or the existence of foreign partners and managers past experiences (Madsen and Servais, 1997).

Moreover, recently the notion that firms go global gradually has been challenged by several scholars and surveys. Firms are often reported to start international activities right from their birth, to enter very distant markets right away, to enter multiple countries at once, or to form joint ventures without prior experience. Such firms have been labeled in different ways: International New Ventures (Oviatt & McDougall, 1994), High Technology Start-Ups (Jolly et al., 1992), and Born Globals (McKinsey & Co., 1993; Knight & Cavusgil, 1996; Madsen & Servais, 1997). Internationalization is linked to investments in four different areas, such as: innovation (product, process or organizational) and technology, formal and informal networks, green approach and HR training. Several studies explore export and research activities as joint explanatory variables. Technology allows product innovations (products with superior characteristics as the ones offered by the competitors) and process innovation (reducing the costs of production and, consequently prices). Innovative SMEs experience increased productivity, potential growth, and general sustainability in their activities, and they also obtain some competitive advantages in order to compete in foreign different markets (Cefis and Marsili, 2006; Eusebio and Rialp, 2002; Oviatt and McDougall, 1994). Several studies (Acaravci and Ural, 2012; Becker and Egger, 2009; Vandenbussche & Van Beveren, 2010) demonstrated that product and process innovations contribute equally to internationalization, as they act as relevant levers of the propensity of enterprises to export. Nowadays the business environment is viewed as a web of relationships, a network, and many studies (Coviello and Munro, 1995, 1997; Welch and Welch, 1996) have demonstrated the role of networks in the internationalization of firms. In particular, Halln (1986) demonstrated that close and lasting business relationships between suppliers and customers are important, be they within a given country (local, regional or national) or between countries

(international). Moreover, getting back to the innovation issue it is evident that innovation in SMEs consists of an interactive model where technology emerges from the conjunction of several organizations at different stages of the process (Saren, 1990). The green approach is another driver for competitiveness (Porter and Kramer, 2006; Klassen and Mclaughlin, 1996; Porter and Van der Linde, 1995; Dechant and Altman, 1994) especially at an international stage. It is tightly linked to the issues of sustainable development social, economic and environmental (Judge and Douglas, 1998; Daly, 1990) social corporate responsibility (Henriques and Sadorsky, 1999), technological and organizational innovation (Nidumolu, Prahalad and Rangaswami, 2009), effectiveness and efficiency use of resources, reduction of labor and production costs, energy saving, and financial capabilities (Mackey, Mackey and Barney, 2007; Waddock and Graves, 1997) and brand reputation (Scott, 2003). Successful international expansion requires the managerial capabilities necessary to configure and leverage a firms resources in the international marketplace. Human resources constraints often limit the effective implementation of international business strategies, indeed a more rapid pace of internationalization leads to a more strategic role for human resources management (HRM) as well as changes in the content of HRM (Pucik, 1992) and the impact of HRM on organizational performance (Becker and Gerhardt, 1996; Delaney and Huselid, 1996). Gomez-Mejia (1988) has studied the effect of human resources strategy on the export performance showing that the way human resources are selected, deployed, compensated and motivated play a significant role in subsequent export performance. Empirical analysis Motivation for the research The research presented in this article is based on the Osservatorio Impresa Monza e Brianza 2012. The observatory has been organized by Research Centre in Territorial Economics
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(CRIET) - University of Milan-Bicocca, in collaboration with Confindustria Monza and Brianza Association and BNL BNP Paribas Group. Every year the Observatory monitors the enterprises associated with Confindustria Monza and Brianza through a survey which is focused on a specific topic. The theme of the 2012 survey was the economic and financial crisis from the point of view of the factors of competitiveness for the enterprises, the strategic areas to invest in, and business networks and partnerships. The internationalization processes were a subsection in the investments for the competitiveness section. The aim was to investigate the reasons why the sample enterprises do internationalize. In particular, some parts of the items in the questionnaire were devoted to analyze five items/topics: the entry modes the enterprises prefer, the entry modes for the future, the motivations to internationalize, the advantages they achieved and the difficulties they came across with. The competitive behavior of the surveyed enterprises has been then analyzed through 4 main thematic areas (see previous paragraph): innovation and technology, formal and informal networks, green approach, HR training. As said before the principal aim of the research is to analyze and classify managerial behavior (cluster analysis). In order to analyze these topics in a unitary way, a Rasch analysis (Rasch, 1969) was implemented and five latent continuums/variables were identified. For this reason no specific hypotheses have been identified. In fact, Rasch analysis would answer simultaneously to the following questions: which is the position of every enterprise on the latent continuum for each topic? which is the position of every topic on the latent continuum for each area?

To answer these questions a sample of enterprises were surveyed. They operate in one of the most productive and competitive territories in Italy, the province of Monza and Brianza (nearby Milan).

Research methodology A questionnaire was distributed to the 792 enterprises associated to Confindustria Monza and Brianza in the period 14th May to 22nd July 2012. The data were collected with CAWI Computer Aided Web Interview method, together with phone recall and a tutorship individual telephone activity (4 trained tutors, 11 days working, 1,123 successful calls). The redemption rate was of 24.37% with 193 fully completed questionnaires, which reached 34.5% rate including the partially filled questionnaires (80 enterprises). The collected data were processed in an aggregated way, in order to maintain the privacy of the respondents. In general, the respondents are small and medium enterprises. Most of them operate mainly in the engineering industry (51 firms), which is the most represented sector in the sample; 14 enterprises operate in the field of manufacturing of plastics, metal products (extra mechanical work), advertising, wholesale trade, informatics, electronic and optical equipment. Finally, the other sectors represented are the chemical (9 enterprises), the wood (4 respondents) and the textile clothing (3 respondents) ones. In order to create a measure of internationalization, a Rasch analysis on the five areas of topics was produced: every enterprise had a score for the five latent continuums regarding the internationalization. The second tool used to understand the position of the enterprises respect to a unique latent variable (the level of internationalization) was the principal component analysis (PCA). The aim of PCA was to reduce the dimensionality of a data set consisting of interrelated variables (the five topics of internationalizations), while retaining as much as possible of the variation present in the data set (Joliffe, 2002). The PCA allows creating a map where it is possible to position the original variables and the enterprises. It was evident that the enterprises behavior (and obviously the position on the PCAs map) about the

internationalization variable was very different, but it was even more manifest to individuate groups of enterprises with similar judgments/opinions about internationalization. A cluster analysis (Johnson and Wickern, 2007) individuated four groups so that the enterprises within each group were similar with respect to five latent variables (produced by Rasch analysis), and the groups themselves stand apart from one another. At the end the four groups were analyzed taking into account anagraphic factors, aspects of competitiveness for the enterprises, the strategic areas to invest in, and business networks and partnerships. Insert here figure 1 Rasch Analysis The Rasch model allows to position at the same time the different items and the enterprises on the areas of the internationalization, creating interval measures1. The position of a single company is given by its answers on every item, whereas the position of a particular item is given by the answers of every company on that item. Generally speaking, the Rasch model converts raw scores into linear and reproducible measurement. It belongs to the item response models aimed at measuring one or more ordinal/quantitative latent variables on a metric level of measurement. The Rasch models hypotheses are the unidimensionality2 and the local independence3. Moreover the Rasch model presents the properties of sufficiency, separability4, specific objectivity5 and invariance6 of parameters estimates (Bond and Fox, 2007).

The measures produced applying the Rasch model to the data are expressed in logit (Wrigth and Masters, 1982) that is an interval scale. 2 The Rasch model requires a single construct to be underlying the items that for a continuum. 3 The items of a questionnaire are statistically independent of each subpopulation of respondents whose members are homogeneous with respect to the latent trait measured. 4 The mathematical form of the Rasch model provides the separation of item and person parameters with the consequence that the total score for the items or persons is sufficient statistic for the item or person parameters. 5 The property of specific objectivity means that the relative location of pairs of persons and pairs of items on the underlying continuum are sample independent. 6 The maintenance of the identity of a variable from one occasion to the next. 8

In presence of ordinal polytomous data, as in our case, the adopted Rasch model is the Partial Credit, (Writings and Masters, 1982) that incorporates the possibility of having differing numbers of response opportunities for different items on the same questionnaire. Let be X=(xij) the data matrix, where xij is the score given to the j-th item by the i-th company. Moreover, let Y=0, 1, ,m be the vector with the ordinal categories for the j-th item. Using the terminology of Rasch analysis, in the Partial Credit Model, the difficulty to indicate the xth category of the j-th item is given as the passing of the modalities difficulties on the previous items: = = + where is the mean difficulty of the j-th item and is the threshold of the previous categories of x-th category. The probability that the i-th company gives the x-th score to the j-th item is: =
exp

exp

where is the ability of the i-th company. From the last equation we obtain: ln = 1 + ()

which is an adjacent-categories logit model with interactions between items and logits (De Boek and Wilson, 2004). After estimating the parameters and , it is possible to place on the latent continuum both the items and the enterprises. Figure 2, reports an example of 4 enterprises for 5 items measured on the latent continuum, where agreement and disagreement represent the positive and negative poles of the latent trait. Insert here Figure 2

The parameters estimations were obtained using the software WINSTEP7 (Winstep, 2012). The results To test the propensity to internationalization, we considered only the 77 enterprises that internationalize. The opening across the national borders is an established practice. Most respondents do so for over 10 years (47 respondents, of which 31 of the engineering sector). The average foreign sales account for 0% to 25% of the total turnover of all the respondents. This comes out from Europe (56%), mainly. Then, the BRICS countries (Brazil, Russia, India, China and South Africa) account for 17% of foreign sales. The Arab countries produce 10% of the foreign turnover, while the Eastern European countries 7% of turnover. Finally, the U.S., Japan, Korea, Australia, and Northern Africa markets account only for 5% overall.

Entry modes The question to analyze the entry modes of respondents in foreign markets was: What kind of investments have you made to internationalize?". The answer had a multiple choice structure. Table 1 reports the results of Rasch analysis. Using the Rasch analysis terminology, the items with more negative values are considered as the easier, while the items with the more positive values are more difficult. In our analysis more negative values are related to more chosen item, on the contrary, more positive values are related to less chosen items. We assessed the one-dimensionality of the model a priori: given the nature of the response variable, we proceeded with a correspondence analysis. The proportion of inertia explained by its first dimension was not so low (53.7%) and the first axis almost clearly separated the three response options. Moreover infit and outfit ZS estimates showed reasonable values.

Winstep is a statistical software devoted only to Rasch analysis. 10

The data show that the most favored investments by the respondents are direct sales force, agent network and affiliated enterprises, subsidiaries. We deduce from this, that the choice of how to investment is accompanied by the level of development of the enterprise and the risks that it is able to deal with. All three solutions show a clear strategy to cover the target market and to manage business relationships that are one of the most competitive factors reported by respondent enterprises. It can be also said that the enterprises operating in foreign markets pay particular attention to their customers (direct selling), taking all the necessary tools to create value for them (satisfaction and loyalty). In particular, the direct sales force requires specially trained people who deal with the foreign customer directly. The agent promotes the conclusion of commercial contracts, while the subsidiary or affiliate enterprise has staff that is permanently located abroad. The types of investments that were chosen are also coherent with the limits and potentialities of the respondents. Finally, the investment in franchising, shareholdings and licensing are less adopted, due to size and financial problems of the enterprises and to their low level of productive relocation. Insert here Table 1 Entry modes (for the future) The question to analyze the entry modes for the future of respondents in foreign markets was: What kind of investments will you made to internationalize?". The answer had a multiple choice structure. Table 2 reports the results of Rasch analysis on entry modes for the future. The items showed a unique latent variable, in fact infit and outfit ZS estimates have reasonable values, moreover the proportion of inertia explained by its first dimension was very high (73.3%) and the first axis clearly separated the two response options.
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Enterprises operating in foreign markets use principally direct sales force, a network of agents and affiliates or subsidiaries enterprises (as indicated in the last section). As in the last section Franchising and shareholdings are the less chosen modes. Insert here Table 2 Motivations to internationalization For this issue, the question was For what reasons does your enterprise internationalize? The question had a multiple choice structure, with a 1 to 5 points evaluation scale, where 1 meant minimum importance and 5 maximum importance. Table 3 reports the motivations to internationalization according to the Rasch measure. The items were well accorded each other, in fact infit and outfit ZS estimates did not show values greater than 2 or less than -2, moreover the proportion of inertia explained by its first dimension was acceptable (59.6%) and the first axis clearly separated the five response options. Enterprises that internationalize do so for several reasons. The most important reasons are the satisfaction of the foreign market, a well established tradition in operating abroad and the decrease in the domestic demand. Instead, the following reasons are less important: the possibility to imitate competitors and to have some support from public institutions. The data demonstrate that internationalization represents an opportunity for the enterprises to meet the foreign customer needs more effectively, as well as a response to the decreasing domestic demand that drives enterprises towards more competitive markets. Insert here Table 3

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Advantages from internationalization For this issue the question was What are the advantages does your enterprise achieve when internationalizing?. The question had a multiple choice structure, with a 1 to 5 points evaluation scale, where 1 meant minimum advantage and 5 maximum advantage. In table 4, the items scale for the advantages from the internationalization is reported. The items did not show problems on the agreement among each other, moreover the proportion of inertia explained by its first dimension was high (64.8%) and the first axis clearly separated the five response options. Thanks to the internationalization process, the respondents declare to have obtained the following advantages: the acquisition of new foreign customers, an improved brand equity and increasing profits. The data lead to some reflections. The enterprise benefits from the creation of value for the customer. Therefore, to acquire new foreign customers is undoubtedly a key performing factor. These results are confirmed by the previous ones about the motivation to internationalize. Improving the brand equity is essential for those enterprises that wish to invest abroad and consolidate their position in increasingly competitive markets. The firm size is a necessary but not sufficient issue to operate and succeed abroad. The size increase makes enterprises more competitive from the point of view of production and financial capabilities, helping them to respond to the foreign markets demands more effectively, as well. Finally, the satisfaction of foreign customers is a strong driver for the surveyed companies to internationalize. Insert here Table 4

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Difficulties in internationalization For this issue the question was What are the difficulties does your enterprise come across when internationalizing?. The question had a multiple choice structure, with a 1 to 5 points evaluation scale, where 1 meant minimum difficulty and 5 maximum difficulty. Table 5 reports the items rank about the difficulties in internationalization according to the Rasch scale. The items seem well accorded each other and the proportion of inertia explained by its first dimension was not so low (49.5%). The custom barriers are the most signaled difficulty to operate at an international level. In fact custom barriers are particularly dissimilar and difficult in some markets, especially in the emerging ones. The second difficulty8 is the limits in firm size, while the third difficulty is to make the brand recognizable beyond national borders. In most cases, although the corporate brand is nationally recognized, its equity and credibility is quite feeble abroad. This means that the respondents do have still much to do to strengthen their branding strategies, especially in foreign markets. The adaptation to local legislation (e.g. on patents, packaging) is seen as more difficult than the adaptation to the local culture, language and customs. As we can see, one of the greatest difficulties is confirmed to be that of the company size. This is a typical characteristic of our entrepreneurship, both in Brianza and in Italy. Moreover, the respondents link the size problem also to their difficulties in developing international collaborative networks. Insert here Table 5 Four clusters: different managerial behaviors towards internationalization A further data processing has been done. The Rasch analysis and the principal components analysis have permitted us to map the internationalization research area. In particular the PCA
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The value of the score is very close to that of the first item. 14

results produced very interesting discussion points. The PCA was used with the objective of establishing the associations between the variables of internationalization and to note any correlations between them. Three principle components were selected that together explain more than 82.47% of the variance (results in the Table 6). Insert here Table 6 The first component represents the internationalization overall, since the first eigenvector shows approximately equal positive loadings on fours of the five variables. The second eigenvector has high positive loadings on the variables entry modes and entry modes (in future) but even higher negative loadings on the variables motivations and difficulties. This component seems to reflect the current and future investments in internationalization, but it also reflects a lack of motivation and a high awareness on the difficulties towards internationalization. The third eigenvector has a very high positive loading on the variable difficulties and a high negative loading on the variable advantages. This component seems to reflect a polarity situation on disadvantages/advantages to internationalize. Figure 3 shows scatter plots of the first, second and third components. Observations 42, 69, 76 and 79 seem like outliers on the three components. Insert here Figure 3
SAS FASTCLUS procedure), was used to group subjects on the basis of similarity in their

The PCA by scatter plots of the components suggested the existence of several groups related by the latent variables of the five topics of internationalization. Cluster analysis, via the hierarchical technique and the Ward method9, was used to group enterprises on the basis of similarity in their scores on the five internationalization topics. The numbers of clusters selected were based on cubic clustering criterion (Sarle 1983). In this way four groups/clusters were examined for inter-cluster differences. Moreover the clusters were also analyzed taking
9

We implemented the proc cluster in SAS software. 15

into account data from AIDA database. The finding of significant differences between clusters in terms of these related external variables provides strong support for the validity of the cluster solutions (Alenderfer and Blashfield, 1989). Insert here Table 7 Table 7 reports the results of the cluster analysis for the total sample and the four clusters. The enterprises in cluster 1 (the non-involved enterprises) do short term investments in internationalization, but they have no intention to invest in the future. Despite they declare the lowest level of difficulties, they show a reasonable motivation to internationalize, even if they do not benefit from it. The cluster consists of micro and small sized enterprises that are specialized in the engineering industry with Srl (limited company) family corporate form, with an average of 30 employees and an estimated average turnover of 10 million Euros. The employees show low-medium level of education and are mainly 31 to 50 years old. This group seems not to be interested in internationalizing, because it is more involved at local level. The cluster 2 (the less motivated enterprises) does short-medium time investments in internationalization and will go on investing in the future, even if without particular advantages. This is confirmed by the fact that they declare having experienced some difficulties in internationalizing. Moreover, cluster 2 is less motivated than the total sample. This cluster, although is heterogeneous, has specific connotations: it consists of medium sized enterprises, specialized in engineering industry, with a Srl (limited company) family corporate form. The estimated average turnover is about 20 million Euros and the average number of employees is 60. The mature human resources have a medium level of education. In short, this cluster is composed by medium-sized enterprises that believe in internationalization as a way for future investments, even if they did not achieve particular advantages. The cluster 3 (the advanced family businesses) does medium-long term investments in

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internationalization. The high levels of motivations and advantages and the low level of difficulties drive this cluster to invest in internationalization in the future. Cluster 3 consists of medium-large sized enterprises, mainly specialized in engineering industry and textile industries, with Srl and Spa (limited companies) family corporate forms. The estimated average turnover is about 130 million Euros and the average number of employees is 175. The human resources have a medium-high level of education and are slightly older than the employees of the other clusters. Most of the leaders (operating in the engineering and pharmaceutical industries) of our sample are concentrated in this cluster. In short, cluster 3 is composed by medium-large sized enterprises and uses the internationalization process as an established instrument for business. The cluster 4 (the willful enterprises) is the most optimistic one. These enterprises do medium-long term investments in internationalization. Despite the highest level of difficulties, data show high levels of motivations and advantages in operating abroad. They also intend to keep on investing in international markets in the future. This group is heterogeneous (4 small, 3 medium and a big enterprise). Its enterprises are specialized in engineering and textile industries, with Srl and Spa (limited companies) family corporate forms. The human resources have a low-medium level of education and are aged more than 51 years old. The estimated average turnover is about 80 million Euros and the average number of employees is 67. So, despite several difficulties, these enterprises do long-term investments in

internationalization. The four clusters were put on the maps of the PCs. Figure 4 reports the three maps. Insert here Figure 4 On the PCAs maps the clusters are clearly distinct and the axes characterize the groups completely.

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In short, it comes up from the analysis that the Monza and Brianza province is a very productive territory, which is characterized by enterprises investing in the domestic market, but at the same time they want to expand their business abroad, although in different ways and with different approaches. Among the internationalized enterprises, the opening across the national borders is an established practice. Most of them internationalize, even for over 10 years. This is true especially for the respondents operating in the engineering industry. The respondents pay particular attention to their foreign customers (this is the first motivation for internationalization) and take all the necessary tools to create value for them, in order to gain their satisfaction and loyalty. This strategy strongly affects the choice of methods for market penetration, as well as the choice of local investments (direct sales force, network of agents, subsidiaries and branches). However, the investments in franchising, joint ventures and licensing are less evident: this reflects the size and financial performance criticalities of the enterprises surveyed, but it probably also reflects their low rate of productive relocation that makes this type of investments less appropriate. As for the advantages achieved with internationalization, the main ones are the acquisition of new foreign customers, the improvement of the corporate image and an increase in the firm size. Referring to the difficulties the data show that what hinders the opening to international markets is mainly the size of the respondents. This difficulty is followed by a low brand recognition, customs barriers, a lack of support from public agencies, and an inadequate knowledge of the foreign target market.

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Conclusions and managerial implications The process of internationalization involves all firm's decision making, management, organizational and marketing procedures. In order to better understand how the respondents to the questionnaire do behave towards internationalization, we analyzed their strategies and actions related to four key areas: innovation (product, process and organizational innovation), business networks and collaborations (formal and informal ones), green approach, competences and qualification of human resources. Each cluster has a different approach in relation to these four areas. Generally speaking, internationalization is the most complex strategy that any enterprise can undertake. Moreover, family businesses are generally less inclined to grow and this tendency is aggravated in the international markets sphere. However, the subsample of internationalizing firms offers interesting insights. Our sample reveals a quite traditional approach in different areas. Most of the enterprises have been investing in internationalization since the last decade, and their main focus is Europe (which is now considered as a domestic market). The most frequent barriers are the firm size, customs barriers and foreign culture and laws. Innovation and technology should be important for competitiveness, however only cluster 3 has certifications in all three areas (product, process and organization). For micro-firms (cluster 1) certifications are not a strategic issue, especially the organizational ones. Innovation is mainly linked to product innovation for all companies and is mainly incremental: this is confirmed by the fact that many enterprises position is based on the high level of specialization and the product quality. The average investment time is quite long for all enterprises. Micro-firms (cluster 1) confirm their greater flexibility and invest in radical product innovation, but in the last decade they have been changing (or at least investing in change) their organizational asset and process, as well.

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The capability of setting-up or consolidating the organizational structure in terms of human resources and their competences is getting more and more important to face an increasing complex market. As human resources training is a competitiveness driver, enterprises will invest in managerial courses. Human resource training is also relevant if it deals with linguistic skills (in order to cope with foreign markets which are geographically and culturally distant) or with product innovation (practical courses). Diversely, all enterprises are not interested in training linked to green issue. It seems that cluster 3 relies on training more than the other enterprises in all areas. The green issue is not dominant or overriding. Companies choose to pursue green objectives, only in order to reduce production costs and save energy. The green approach is not widespread among the sample, only few enterprises are adopting it, investing in energy saving (photovoltaic systems) and in the implementation of solar installation. A scarce interest in training focused on this issue is in line with this setting, as already pointed out in the previous paragraph. Even if literature points out the relevance of formal and informal networks, our sample shows that alliances and cooperative arrangements may not offer an effective means of internationalization. Franchising and licensing represent a marginal instrument, maybe because they are not suitable for enterprises that are mainly engineering production organizations. It seems that small enterprises do not think that networking is an impressive and effective solution. At an international level, strategic alliances, informal networks and contractual agreements outnumber. The internationalization strategy is linked to the development of the enterprises and to the risks they are able to cope with. Thus an increasing necessity of controlling the end market and improving the customers relationships is evident. The investments show the intention of enterprises in the sample of choosing an entry mode coherent with their limits and

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wherewithal (the most important route of export is direct sales force). Investments in franchising, joint venture and licensing are less frequent. This trend witnesses the existence of dimensional and financial barriers, and maybe also the low level of productive relocation. One explanation should be that most enterprises are family business and they prefer to control their markets tightly and to set a direct relationship with their customers. In other words, the family objective of controlling the future of the firm may conflict with the business objective of growing abroad. The traditional direct export route allows local exporting firms to have full control of their products positioning abroad or to acquire a direct knowledge of foreign markets opportunities and threats. The research we presented in this paper gives empirical evidence for Italian enterprises that are located in Monza and Brianza province, Lombardy (North of Italy) with respect to international business strategies. Our cluster analysis identifies potential guidelines for entrepreneurial behavior in respect to key and actual factors (innovation and technology, formal and informal networks, green approach, HR training) able to sustain competitiveness especially along a deep financial crisis. Further research could deepen the present analysis in two directions: with a longitudinal survey on the same sample; covering different territories on the same topics. References Analisi informatizzata delle aziende italiane (AIDA), https://aida.bvdep.com. Acaravci, T. and Ural, S.K., 2012, Role of Innovation Capability and Appropriability Regime in Internationalization: Empirical Evidence from Turkish Firms http://eco-

science.net/f_articles/232-role-of-innovation-capability-and-appropriability.html Aldenderfer, M. S., and Blashfield, R.K., 1989,Cluster Analysis. in: Michael S. Lewis-Beck, ed., Quantitative Applications in the Social Sciences. Newbury Park, CA: Sage University Papers. 1989.
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Welch, D.E., and Welch, L.S., 1996, The internationalization process and networks: A strategic management perspective. Journal of International Marketing, 4(3): 1128. Winstep (2012), ManualCurrent Version: 3.75.0, October 2012,

http://www.winsteps.com/winsteps.htm Wright, B.D., Masters, G.N. (1982). Rating Scale Analysis, Chicago: MESA Press. Figures and Tables Figure 1 Research design

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Figure 2 An example of graphical representation for enterprises and items on the same latent variable using Rasch model.

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Figure 3 Scatter plots of the three principal components with the 77 enterprises.

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Figure 4 The maps of the PCA with the four clusters by cluster analysis.

Table 1 The modes of internationalization

ChiNAME Measure Std. err Infit ZS Outfit ZS Square Direct sales force Agent network Affiliated enterprises, subsidiaries Importers Exporters Own local sales network Joint venture Consortia -1.48 -1.1 -0.68 -0.4 -0.26 -0.2 0.09 0.38 0.1 0.1 0.11 0.13 0.14 0.15 0.18 0.23 0.26 0.33 -1.29 0.78 1.85 -0.43 -0.31 0.55 0.12 -0.1 -0.76 -0.4 0.98 -0.78 -0.31 0.57 2.82 2.31 1.79 1.53 1.43 1.39 1.25 1.16

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Export consortia Licensing Shareholdings Franchising

0.74 0.84 0.97 1.11

0.31 0.33 0.36 0.4

0.39 0.94 -0.23 -0.59

0.32 0.73 -0.81 -0.27

1.09 1.08 1.06 1.05

Table 2 Mode of internationalization (future)

ChiNAME Measure Std. err Infit ZS Outfit ZS Square Direct sales force Agent network Affiliated enterprises, subsidiaries Own local sales force Joint Venture Importers Exporters Consortia Licencing Export consortia Franchising Shareholdings -2.37 -1.97 -0.99 -0.44 -0.44 0.11 0.61 0.61 0.61 2.14 2.14 3.37 0.32 0.32 0.35 0.4 0.4 0.46 0.55 0.55 0.55 1.03 1.03 1.83 0.62 0.7 -0.39 1.13 -0.3 0.77 -0.05 -0.26 -0.26 0.23 0.23 0 0.77 0.72 -0.54 1.15 -0.09 0.32 -0.53 -0.52 -0.52 -0.33 -0.33 0 0.34 0.29 0.17 0.12 0.12 0.08 0.05 0.05 0.05 0.01 0.01 0

Table 3 Motivation to internationalization

ChiNAME Measure Std. err Infit ZS Outfit ZS Square To meet the demand of the foreign -1.49 market Weve always done The domestic demand has decreased Reduction of production costs Reduction of labor costs -1.32 -0.76 -0.35 -0.04 0.24 0.21 0.27 0.31 -1.37 0.95 0.05 -1.12 -1.27 1.16 -0.01 -1.05 4.00 3.63 3.06 2.67 0.23 0.4 -0.08 4.17

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As a result of past experiences To imitate competitors To benefit from support

-0.02 1.36

0.28 0.47

1.63 -0.78

1.53 -0.43

2.73 1.92

2.62 programs/initiatives

0.99

0.25

0.24

1.11

Table 4 Advantages to internationalize

ChiNAME Measure Std. err Infit ZS Outfit ZS Square Acquisition of new foreign -1.85 customers Brand equity Increase in firm size Increase in profits Reduction of production costs Acquisition of new domestic 1.24 customers Improvements in the supply chain 1.9 0.37 0.47 0.29 2.81 0.36 0.6 1.12 3.12 -1.78 -0.63 0.07 1.04 0.41 0.39 0.33 0.36 0.05 -0.7 -0.15 0.39 0 -0.37 -0.5 0.98 4.23 3.92 3.56 3.22 0.33 -1.2 -0.63 4.1

Table 5 Difficulties to internationalize

ChiNAME Measure Std. err Infit ZS Outfit ZS Square Customs barriers Limits in firm size Making products/brand recognizable Comply with local laws Get support from Italian agencies Get used with local culture, language 0.37 and customs 0.2 0.44 0.43 2.56 -0.28 -0.25 -0.14 -0.02 0.32 0.21 0.19 0.18 0.21 0.23 -1.2 -0.32 -0.69 0.4 1.77 -1.06 -0.56 -1.1 0.44 1.66 2.89 3.29 3.06 2.84 2.66

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Table 6 PCAs results: the eigenvectors values of the first three principal components
Variable Entry mode Entry mode (in the future) Motivations Advantages Difficulty PC 1 0.0505 0.3275 0.5559 0.5857 0.4879 PC 2 0.7041 0.6121 -0.2766 0.0472 -0.2253 PC 3 -0.0233 0.2215 -0.2936 -0.4974 0.7853

Table 7 The cluster analysis results

Total sample Entry modes Entry modes for the future Motivations Advantages Difficulties Cluster 1 Entry modes Entry modes for the future Motivations Advantages Difficulties Cluster 2 Entry modes Entry modes for the future Motivations Advantages Difficulties Cluster 3 Entry modes Entry modes for the future Motivations Advantages Difficulties Cluster 4 Entry modes Entry modes for the future Motivations Advantages Difficulties 8 8 8 8 8 -1.059 -1.933 2.211 4.960 2.923 0.756 0.732 1.096 2.092 1.514 -2.100 -3.010 0.860 2.340 0.570 0.520 -1.340 4.270 7.830 5.030 13 13 13 13 13 -0.948 -1.944 0.494 2.868 -0.296 0.482 0.704 1.634 1.840 1.107 -1.760 -3.010 -3.600 1.260 -2.040 -0.220 -0.250 3.040 7.580 1.360 31 31 31 31 31 -1.171 -2.580 -0.419 -0.543 0.460 0.711 1.254 0.805 1.120 1.476 -2.700 -4.390 -2.310 -4.180 -1.840 1.170 0.260 1.700 1.420 3.430 25 25 25 25 25 -1.559 -4.390 0.000 0.000 -0.950 0.652 0.000 0.000 0.000 1.301 -2.700 -4.390 0.000 0.000 -4.630 -0.750 -4.390 0.000 0.000 0.250 N 77 77 77 77 77 Mean -1.248 -2.993 0.144 0.781 0.130 Std Dev 0.690 1.329 1.181 2.221 1.755 Minimum -2.700 -4.390 -3.600 -4.180 -4.630 Maximum 1.170 0.260 4.270 7.830 5.030

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