How can emerging-market SMEs domestically benefit from their performance in developed countries? Empirical evidence from China

Abstract

Many small and medium-sized enterprises (SMEs) from emerging economies consider entry into developed markets as a way to promote home country performance. Nevertheless, the extant literature aiming at large companies are not applicable to SMEs, and it is unclear how SMEs with a weak resource basis can improve their domestic performance through overseas venturing. This study leverages a resource-based view on data from 377 Chinese SMEs with operations in developed nations. The findings reveal that emerging-market firms’ overseas performance (both financial and non-financial) is positively related to their home country performance, with the technological learning and demonstration effect playing mediating roles. The relationship between host country performance and technological learning is positively moderated by firms’ resource integration capability. This study is among the first to identify the mechanism through which emerging-market SMEs’ operations in developed countries affects their home country performance. The findings are helpful in guiding emerging-market SMEs’ internationalization.