A Resource Based View Analysis of Internationalization Among SMEs
Based on a cross-country analysis of 1,360 SMEs, this study demonstrates that while networking drives internationalization, its impact is significantly mediated by internal capabilities such as decision-making quality, human capital, and domestic market conditions, with online presence playing a comparatively weaker role.
Original paper licensed under CC BY 4.0 (https://creativecommons.org/licenses/by/4.0/). This is an AI-generated explanation of the paper below. It is not written or endorsed by the authors. For technical accuracy, refer to the original paper. Read full disclaimer
To understand how a small business grows beyond its borders, one must first look at what the business actually owns and knows. In the world of business strategy, there is a long-standing idea that a company's success comes not just from watching its competitors, but from looking inward at its own unique strengths. These strengths can be anything from the skills of its workers to the way it makes decisions or the relationships it has built. This perspective suggests that if a company can identify and use these internal assets wisely, it can gain an edge that others cannot easily copy. For small and medium-sized enterprises, which often have fewer employees and tighter budgets than giant corporations, these internal resources are not just helpful; they are essential for survival and growth.
One of the most common ways these smaller companies try to grow is by connecting with others. Building a network of contacts, partners, and mentors is widely seen as a primary way to find new opportunities in foreign markets. However, simply having a list of contacts does not guarantee success. The real question is how those connections actually turn into real business expansion. Does having a network automatically lead to selling products abroad, or are there specific internal qualities that must be present for those connections to work? Researchers have long suspected that the answer lies in the middle: the network provides the door, but the company's internal capabilities determine whether it can walk through.
A team of researchers set out to test this idea by studying 1,360 small and medium-sized enterprises across 11 different countries. They gathered data between 2016 and 2021, interviewing owners and managers to understand how their businesses operated. The researchers focused on four specific internal factors that might act as bridges between networking and international success: the company's online presence, the quality of its decision-making processes, the skills and experience of its human capital, and its strength in the domestic market. They wanted to see if these factors helped explain why some companies with good networks succeeded in going global while others did not.
The study found that all four factors played a significant role in helping networking translate into international growth, but they did not all contribute equally. The most powerful bridges were found to be the quality of decision-making, the development of human capital, and the company's embeddedness in its home market. When a small business had a clear, structured way of making choices, a team with the right skills and international experience, and strong ties to local suppliers and customers, its networking efforts were much more likely to result in successful expansion abroad. These internal strengths allowed the companies to take the opportunities offered by their networks and turn them into concrete business results.
In contrast, the researchers discovered that having an online presence, while still useful, was the weakest link in this chain. While a website or social media profile helped build trust with partners and reduced uncertainty, it did not drive internationalization as strongly as the other three factors. The data suggested that online presence still plays a significant mediating role, but its effect is the weakest among the four factors studied. Simply being visible online was not enough to propel a small business into foreign markets if the company lacked strong internal decision-making or skilled people, yet it remains a supportive tool rather than a non-factor.
The findings offer a clear picture for business leaders. The research suggests that while networking is a vital starting point for growth, it is the internal work of the company that determines the outcome. Leaders are advised to focus their limited resources on formalizing how they make decisions, investing in the training and development of their people, and leveraging their strong local relationships to build credibility. While they should not ignore their online presence, they should not pour excessive resources into it at the expense of these more critical internal capabilities. By strengthening these internal foundations, small businesses can ensure that when they do build a network, they have the capacity to use it effectively to cross borders and grow.
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