Internationalization of SMEs in a Developing Economy: Empirical Evidence from SMEs in the Western Province, Sri Lanka

Abstract

Small and medium enterprises (SMEs) are critical to Sri Lanka’s economy, but their potential for internationalization remains underexplored. This study aims to identify the various antecedents of internationalization and the impact of identified antecedents on the internationalization of Sri Lankan SMEs. This study was conducted following a quantitative approach. Data were collected from 250 SMEs currently engaged in international business activities and located in the Western Province of Sri Lanka. Correlation analysis and multiple regression analysis were performed to test the hypothesis after ensuring the reliability and validity of the measurement items. The results of this study found that marketing and networking capabilities, among others, significantly influence the internationalization of SMEs. In addition, the study discovered that human capital, managerial capabilities, innovation capabilities, marketing capabilities, networking capabilities, financial capabilities and technological capabilities jointly influence the internationalization of Sri Lankan SMEs. The results of this study provide better insights for managers and owners to capitalize more on marketing capabilities and networking capabilities to achieve synergies by collaborating with local and international partners. In addition, study results benefit policymakers in formulating better policies to support SMEs in finding new markets and making information available about foreign markets to better develop their marketing and networking strategies.