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Performance implications of combining innovation and internationalization for Korean small- and medium-sized manufacturing firms: an exploration–exploitation perspective

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Abstract

While previous studies on firms’ innovation and internationalization have focused on the causal relationship between the two strategies, less is known on whether they are complements or substitutes for enhancing small and medium-sized enterprise (SME) performance. We introduce an exploration–exploitation perspective on the two strategies and examine how the relative weight of explorative versus exploitative innovation and of international versus domestic market scope affect performance, individually and in concert. Analyzing data from 579 South Korean manufacturing SMEs, we find that firms should balance explorative and exploitative orientation within and across the innovation and market scope domains to enhance financial performance. These findings are in contrast to results from previous studies on large companies and Western country firms and suggest that SMEs from newly industrialized Asian countries need to closely align their innovation and internationalization strategies to mitigate the liabilities of foreignness and smallness.

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Acknowledgements

This work was supported by the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea (NRF-2019S1A5A8038506), and by a Korea University Business School Research Grant. On behalf of all authors, the corresponding author states that there is no conflict of interest.

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  1. College of Economics and Business Administration, Daegu University, 201 Daegudaero, Jilyang, Gyeongsan, Gyeongbuk, 38453, South Korea

    Youngwoo Lee

  2. School of Business, Korea University, 145 Anam-ro, Seongbuk-gu, Seoul, 02841, South Korea

    Martin Hemmert

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Lee, Y., Hemmert, M. Performance implications of combining innovation and internationalization for Korean small- and medium-sized manufacturing firms: an exploration–exploitation perspective. Asian Bus Manage 22, 1–25 (2023). https://doi.org/10.1057/s41291-020-00144-w

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