The Internationalization of SMES in Emerging Economies: Institional Embeddedness and Absorptive Capacities

We examine the importance of institutional embeddedness and dynamic capabilities in the internationalization strategies of small and medium-sized enterprises (SMEs) in emerging economies. We focus on two types of SMEs - incumbent SMEs and entrepreneurial start-ups. We argue that incumbent SMEs can increase their internationalization capabilities by using their embedded networks with local governments and business groups. Entrepreneurial start-ups in emerging economies may develop new capabilities by learning from foreign firms and business groups. Therefore, entrepreneurial start-ups identify, create, and exploit new opportunities continuously in foreign markets. This work contributes to our knowledge of how incumbent SMEs and entrepreneurial ventures in emerging markets build knowledge and capabilities to enter and compete successfully in international markets.