SME Internationalisation: an emerging market perspective

Abstract

Small and Medium-Sized Enterprises (SMEs) are significant drivers of economic activity, accounting for 35% of the GDP in developing and 50% in developed economies (Casado-Belmonte et al., 2020, p.1). In addition, over the past two decades, it has been observed that SMEs from developing and developed markets are increasingly internationalising. However, it cannot be denied that there are significant differences between SMEs from developed economies (DSMEs) and SMEs from emerging economies (ESMEs). Internationalising ESMEs often encounter more obstacles than their developed country counterparts due to negative country-of-origin effects, volatile home environments with unfavourable economic conditions, limited resources, lack of international orientation, managerial competency, and support from its government (Chandra et al., 2020). With the quest to further explore internationalisation occurring from ESMEs, this study conducts a Systematic Literature Review (SLR) to identify the factors affecting an ESME’s internationalisation through the pre and post-internationalisation stages. After reviewing 54 papers, the study focuses on the pre-internationalisation stage of an ESME and proposes a conceptual model to enhance our understanding of what factors lead to an ESME’s intention to internationalise. “A quantitative method was adopted wherein 162 responses from Indian ESMEs were analysed to empirically test how perceived drivers to internationalisation, such as guanxi, social capital, digital infrastructure, and the ESME’s inclination to adopt digital infrastructure combined with decision-making approaches such as effectuation where the ESME opts to make best use of the available resources when faced with scarcity and uncertain environments come together in the presence of the moderating effect of home country institutional factors such as institutional pressures to formulate the intention to internationalise. The study supports the positive association of social capital and the effectuation principles of pre-commitments and flexibility with an ESME’s intention to internationalise. The study also finds interesting findings for underexplored moderating effects of institutional pressure on the ESME’s adoption of an effectuation-based decision-making approach and its intention to internationalise.”