SMEs’ Strategic Responses to a Multinational’s Entry Into a Cluster

Using novel and primary data on local SMEs belonging to the Portuguese furniture production cluster, this study examines local firms’ strategic responses to IKEA’s entry and its impact on their performance. Local firms seem to respond in diverse ways and implement different strategies to obtain performance gains, leading to an upgrade in size, resources and competences. A differentiation focus strategy is one of the most frequently adopted strategic responses, having a positive and significant effect on the evolution of the local firms’ performance after IKEA’s entry. By contributing towards the knowledge on the strategic responses of firms located in clusters, this study offers an original view on the impact of MNCs’ entry on the SMEs’ strategy of local firms, blending together contributions from different strands of the literature on MNCs, clusters and SMEs’ strategy.