Despite liabilities of newness, small size and foreignness, an increasing number of SMEs pursue international markets for their goods/services. Extant internationalization research focuses on ventures’ direct (e.g. exporting) means to internationalization, however an emerging strand of research explores how firms pursue an indirect path to internationalization (e.g. Acs, Morck & Yeung, 1997; Peng & York, 2001, Acs & Terjesen, 2006) using local and foreign intermediaries to sell their goods/services across national borders.

This paper develops and tests two theoretical arguments for why firms choose an indirect path to internationalization. Institutional and resource dependency theory both assume organizational choice is constrained by multiple external pressures, and that organizations are concerned with building legitimacy and acceptance vis-à-vis external stakeholders (Oliver, 1991). According to institutional theory, organizations operate within a social framework of assumptions about what constitutes appropriate behavior (Oliver, 1997; Scott, 1995) within an “organization field” which typically moves towards common structures and processes (DiMaggio & Powell, 1983). Resource dependency theory is also concerned with the organization-environment relationship, but assumes the organization makes active choices to achieve objectives by reducing reliance or increasing influence over key environmental resources. Resource dependency could also be interpreted to explain how an entrepreneurial firm might seek indirect internationalization to reduce its exposure to an undesirable home market.