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SME participation in cross-border e-commerce as an entry mode to foreign markets: A driver of innovation or not?

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Abstract

In the context of globalization, it is not just large corporates that need to update their technologies and processes to maintain competitiveness. Small-to-medium-sized enterprises (SMEs) also need to innovate if they are to satisfy customer preferences in both domestic and foreign markets. Today, internationalization is considered to be an essential factor in promoting SME innovation. However, it is often difficult for SMEs to innovative with overseas customers because many lack easy access to foreign markets. Compared to other traditional entry modes, cross-border e-commerce, with its low costs and high levels of control, can help to remove some of the barriers to internationalization for SMEs. In turn, it may be that cross-border e-commerce also promotes innovation in these firms. We gathered data on 781 Chinese SMEs to test several hypotheses surrounding this notion. The results of panel regression estimates indicate that cross-border e-commerce does indeed have a direct and positive effect on market innovation. More importantly, it has an indirect and positive impact on technology and process innovation by fully mediating the effects of an entrepreneurial orientation. These results shed light on how cross-border e-commerce impacts SME innovation performance, providing valuable implications for both academics and SME managers.

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Notes

  1. Small and medium enterprises (SMEs) finance, available at: https://www.worldbank.org/en/topic/smefinance. Assessed 14 of April 2020.

  2. http://www.51ifind.com/index.php?c=index&a=contact.

  3. https://www.baiten.cn/.

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Acknowledgements

This research was supported by National Planning Office of Philosophy on Social Science (China) #18CGL002.

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Authors and Affiliations

  1. Zhejiang Informatization Development Institute, Hangzhou Dianzi University, Hangzhou, 310018, China

    Lipeng Pan & Xiao Fu

  2. Western Sydney University, 169 Macquarie Street, Parramatta, NSW, Australia

    Yongqing Li

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  1. Lipeng Pan
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  2. Xiao Fu
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  3. Yongqing Li
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Correspondence to Lipeng Pan.

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Appendix A. Definition of variables

Appendix A. Definition of variables

Variables

Description

Source

TI

Technological innovation—measured as the number of invention patent applications lodged by a firm in a given year

Baiten

PI

Process innovation—measured as the number of model patent applications lodged by a firm in a given year

Baiten

MI

Market innovation—measured as the number of design patent applications lodged by a firm in a given year

Baiten

CBEC

A dummy variable—equal to 1 when firm has used cross-border e-commerce as a foreign market entry model in the year t, and 0 otherwise

1. China.cn (China suppliers)

2. Made-in-chian.com

3. Alibaba.com

4. EC Plaza

EO

Entrepreneurial orientation—measured as the ratio of research and development investment to corporate net income

IFind

SIZE

Firm size—equal to the natural logarithm of total sales

IFind

ROA

Return on assets—measured as net operating income divided by total assets at year-end

IFind

LEV

Leverage—equal to the corporate interest-bearing debt ratio

IFind

MV

Market value—measured as the price per share of a listed company multiplied by the total number of shares issued

IFind

SHARES

Negotiable share—measured as the total number of shares the company can trade on the stock market

IFind

PC

Production capacity—measured as the percentage of production employees in total employees

IFind

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Pan, L., Fu, X. & Li, Y. SME participation in cross-border e-commerce as an entry mode to foreign markets: A driver of innovation or not?. Electron Commer Res 23, 2327–2356 (2023). https://doi.org/10.1007/s10660-022-09539-7

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