Mitigating the impact of late internationalization of emerging market SMEs: A dynamic capability perspective

ABSTRACT

In this study, we investigate the impact of internationalization timing on the export performance of small and medium-sized enterprises (SMEs) in emerging markets. Our theoretical foci are the learning advantage of newness theory and the dynamic capability perspective to focus on how late internationalization can adversely affect export performance. Our findings suggest that the dynamic capabilities and industry experience of the SME Manager can mitigate these adverse effects. The time since initial international entry and an informal approach during export commencement exacerbate them. This conclusion is based on examining a substantial dataset, encompassing 8,278 SMEs from 84 emerging economies, collected over 14 years (2006–2020). This study uncovers novel insights into the intricate dynamics of SME internationalization and its influence on export performance.

Plain Language Summary

Small and medium-sized (SME) businesses from emerging markets are rapidly expanding into international markets. This shift is making SMEs reconsider their traditional ideas about business. Traditionally, SMEs commence selling their products abroad later in their life cycle. However, a trend has recently occurred where many SMEs are internationalizing earlier. However, we have yet to learn why this is happening and whether it helps or harms the businesses. Our study looks into this topic by examining the impacts of SMEs from emerging markets who go international early. We collected data from over 8,000 such businesses across 84 emerging markets between 2006 and 2020. We focused on how the managers’ experience and ability to adapt quickly to new circumstances affected the businesses’ success in selling their products abroad. We found that businesses that went international later struggled to adapt their operations to foreign markets. In addition, we found that businesses that operated informally (without being officially registered) were less successful in exporting their products. However, we also found that businesses could overcome these challenges if their managers had relevant experience and adapted well to new circumstances. Our research contributes to understanding how businesses from emerging markets can succeed in international markets. We show how businesses can overcome the disadvantages of entering international markets late by having experienced managers and being able to adapt quickly. This study sets the path for future research in this area.

KEYWORDS:

• SME internationalization
• market-entry
• dynamic capabilities
• management experience
• flexibility

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

The work was supported by the Javna Agencija za Raziskovalno Dejavnost RS [P5-0441]; ICN FRANCE.