Growing new MNEs in New Zealand: the FSA/CSA framework revisited

Purpose – This article aims to investigate how country location, as a source of country‐specific advantage (CSA), and product innovation, as a source of firm‐specific advantage (FSA), influence the international expansion of small and medium‐sized enterprises (SMEs) and their growth to become multinational enterprises (MNEs). It also aims to confirm internalization theory by testing the applicability of an extant concept, the FSA/CSA framework for the international expansion of SMEs. Developed and empirically validated largely in the context of the MNE, this paper seeks to show how the framework can be applied in the context of SMEs that develop into MNEs. Design/methodology/approach – A qualitative approach is employed within a single industry setting using multiple cases. Propositions are formulated to explain the theorized relationships between innovation and the growth of SMEs in a sector which depends heavily on specific CSAs. Data were collected through semi‐structured interviews and archival data, and are analyzed in data displays, tables and matrices. Findings – The article finds that location of the industry cases as a source of CSAs, and product innovation as a source of FSAs, are highly relevant for growing New Zealand SMEs into MNEs. The study applies internalization theory to the growth strategies of SMEs. Originality/value – This research combines extant theory and a specific context in order to analyze phenomena through a distinct conceptual lens. It confirms the CSA/FSA framework by applying it in a new empirical context. It can inform decision‐makers in growing SMEs on the strategic and international implications of firm and location advantages.