The influence of institutional factors on the internationalisation of foreign small- and medium-sized enterprises (SMEs) on the Russian market: The case of Finnish SMEs

Abstract

The goal of the study was to analyze the influence of host institutional environment on the foreign SME internationalization on the emerging market of Russia. Degree of company’s internationalization on the targeted market served as a measurement for internationalization activity on that market. Among the main tasks of the study were the identification of institutional factors that influence the foreign SMEs internationalization in Russia, main institutional barriers that hinder the internationalization of foreign SMEs on the Russian market and main motives for internationalization in Russia. Finnish SMEs that already have entered the Russian market were the object of the study. Institutional environment was defined as the combination of formal and informal institutional factors. Government policy and programs, commercial infrastructure, physical infrastructure and market openness were identified as factors of formal institutional environment. The informal institutional distance was analyzed through business culture. Five hypotheses were stated and tested in the research. The test of hypotheses revealed that favorable formal institutional factors have a positive influence of the degree of internationalization. The test for hypothesis about business culture was statistically insignificant. The research revealed that the main motive of Finnish SMEs to internationalize in Russia is the size and the fast development of the Russian market. As the research showed, the Russian institutional environment is unpredictable and hostile towards foreign SMEs internationalization efforts.