Getting a Foot in the Door: Trade Credit Strategies and the Pursuit of Entrepreneurial Internationalisation

• Published in: International small business journal 2023-02, Vol.41 (1), p.55-87
• Main Authors: Hunt, Richard A, Hayward, Mathew LA, Song, Yue, Townsend, David M, Stallkamp, Maximilian
• Format: Article
• Language: English
• Subjects: Companies; Credit; Customers; Decision making; Exports; International markets; Liability; Markets; Prediction models; Profitability; Small business; Transactions
• ISSN: 0266-2426; 1741-2870
• DOI: 10.1177/02662426221078940

Trade credit strategies – comprised of the approaches used by internationalising firms to set the payment terms and schedules for their customers – are one of the few levers available to new small firms to overcome the liability of outsidership. They are vital to entrepreneurial firms seeking to achieve international market growth in the context of scarce resources and limited knowledge of foreign markets and partners. Though under-explored and under-theorised to-date, trade credits may unlock material insights for predictive models of entrepreneurial growth. As such, our study develops and tests the notion that trade credits constitute an important mechanism for entrepreneurial firms to initiate goodwill and generate valuable referrals. However, our findings also suggest that while riskier trade credit strategies help first-time exporters combat exclusion from networks key to a firm’s ability to internationalise, the attendant risks often have a detrimental impact on long-term profitability and survival, thus creating a decision-making conundrum for growth-aspirants. Drawing upon a sample of 88,000 export transactions by 1040 small lumber firms from 52 countries, we advance theory and practice by showing how trade credit strategies shape both growth and performance.