Factors influencing the Internationalization of Firms: Case of Addis Ababa City Exporters

Abstract

The study aims at identifying factors influencing internationalization and their relation with improved international business performance of export firms found in Addis Ababa city. Explanatory research design was used and data collected through primary source using questionnaire. 287 respondents were participated in the survey based on simple random sampling method of sample selection by using mathematical formula. In order to test the reliability of the instrument, the Cronbanch alpha test was used. Pearson correlation and multiple linear regression analysis were employed to estimate the causal relationships between dependent and independent variables.Finally, the responses of the respondents were analyzed using descriptive Statistics, correlation,andregression through computer loaded SPSS software. The empirical results showed that host countries high market potential, reputation of the company’s in the industry and increased value and number of employees were motivating factors for deciding internationalization of Ethiopian export firms. The effects of all predictors were statistically strong positive and significant effect on improved international business performance. The overall finding of this study suggests that firm size, competitive advantages and market characteristics had statistically strong positive and significant effect on improved international business performance. On this basis, it is recommended that export firms shall increase the value and number of employees and shall concentrate on host countries that have high market potential while deciding presence on international business activity. Moreover, export firms shall increase reputation of their companies in the industry; possession of unique proprietary technology shall be increased and should focus on host countries that have complementary and receptive organizational structures, processes and administrative conveniences while making foreign entry decisions.