Risk on the road: How cargo hijacking impacts SMEs' new export market entry and why international experience matters

Abstract

We investigate how exporting SMEs respond to the underexplored, yet increasingly important, risk of cargo hijacking and how two dimensions of firms' international experience, i.e., length and diversity, moderate this relationship. Combining contingency theory and organizational learning theory and using a unique dataset of 3240 French exporting SMEs, we reveal that the risk of cargo hijacking significantly affects SMEs' export strategy in a rather unusual way: when exposed to this risk SMEs tend to enter new export markets to offset the potential loss of affected destinations and maintain a diversified export market portfolio. Moreover, the propensity to enter new markets when exposed to a cargo hijacking risk is amplified by the diversity of experience the firm has acquired through operating in contexts characterized by varying levels of country risk. However, a firm's length of experience in foreign export markets has no significant moderating effect, thus reaffirming that not all experience is equal. We contribute to extant research on SMEs' internationalization and exogenous risks by highlighting that cargo hijacking constitutes not only a risk, but also an opportunity for firms to expand into new markets. We also reveal that it is the diversity, rather than the length of international experience, that plays a key role in strengthening export market expansion.