Institutional and organizational capabilities as drivers of internationalisation: Evidence from emerging economy SMEs

Abstract

Internationalisation, the notion of cross border business, has become one of the key strategies for growth for small and medium enterprises (SMEs) in developing countries in recent years. Although many SMEs have used internationalisation strategies, there remains a gap of understanding the relative importance of factors influencing SMEs internationalisation particularly from developing countries perspectives. Drawing on the Resource Based View of the firm (RBV) theory, this research develops and validates the dimensions and sub-dimensions of the drivers of internationalisation. The study further identifies the relative importance of these dimensions from a developing country context. The study used a questionnaire survey to collect primary data from 212 Bangladeshi SMEs based on area wise cluster sampling. This study used partial least square based structural model (PLS-SEM) to assess the key drivers for foreign market entry by developing country SMEs. The findings confirm that the drivers of internationalisation represent a hierarchical construct consisting of three primary and eight sub-dimensions. The study suggests that SME internationalisation in a developing country is contingent upon two categories of capabilities: critical organisational capabilities or resources (linked to internal processes largely associated with human resources) and critical institutional capabilities (associated with state level provision and the cultural fabric).