The Globalization of Small and Medium-Sized Enterprises and Its Challenges and Opportunities

Abstract

SMEs have increasing exposure to global markets to attain higher growth and competitive advantage. The objective of the study is to investigate the role of SME capabilities in affecting their international performance. The study addresses internal capabilities such as financial, managerial, technological, and marketing capabilities, as well as operational capabilities of SMEs. Multiple sectors were chosen, and a survey questionnaire, in-depth interviews, and secondary data were utilized in a mixed-method research design. Regression and Pearson correlation coefficients show financial resources (β = 0.42, r = 0.57, p < 0.01) and technological capabilities     (β = 0.46, r = 0.60, p < 0.01) exert significantly high impacts on revenue growth, market entry, and export intensity of SMEs, followed by managerial and marketing/network capabilities. SMEs are facing severe challenges in the process of internationalization due to a lack of financial resources (71%), compliance issues (65%), technological limitations (58%), and cultural obstacles (53%). This study reveals that effective internal capability, combined with effective resource configuration, is necessary to overcome obstacles and to achieve the success of internationalization. The theoretical implication supports existing global management theory with evidence of SME capabilities in moderating the association between internationalization drivers and performance outcome. From the managerial implication aspect, SMEs' top managers must actively allocate a significant amount of resources to financial, technological, and managerial aspects, build a relationship with potential partners, and explore the opportunity in digital technology to achieve international success. On the policy implication side, it implies the government has to take actions to support SMEs by financial assistance, consulting services, and policy deregulation to overcome entry barriers. However, longitudinal studies, cross-cultural studies, and investigations into the effect of digitalization on SMEs' international performance remain for future research.