The internationalization of Australian innovative small-to-medium enterprises utilizing wholly foreign-owned entities in China

Abstract

The purpose of the paper is to investigate how innovative, small-to-medium enterprises (SMEs) internationalize through utilizing wholly foreign-owned entities (WFOEs), as there is a little research explaining this. This paper presents the findings from in-depth case studies with 14 SMEs that internationalized to China as WFOEs. The SMEs internationalized as WFOEs in order to tap into opportunities and develop presence. WFOEs were developed either proactively or reactively, which provided a catalyst for internationalization. SMEs mostly used radical, game-changing product innovations. However, findings from the case studies revealed that the Chinese market did not always accept western innovations, and adaptations had to be made. A new conceptual model with a range of theoretical propositions for future researchers is developed, based on the findings.