The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/2059-6014.htm
Influential dynamic capabilities
and small and medium
enterprises’ internationalization
success: mediating role of
international entrepreneurial
orientation
Influential
dynamic
capabilities
55
Received 29 December 2021
Revised 23 April 2022
15 June 2022
17 September 2022
Accepted 3 October 2022
Moza Rashed AlShehhi, Jacob Poopada Cherian, Sherine Farouk and
Moza Al Nahyan
College of Business, Abu Dhabi University, Abu Dhabi, United Arab Emirates
Abstract
Purpose – This study aims to analyze how international entrepreneurial orientation mediates the
relationship between influential dynamic capabilities and the internationalization success of small and
medium-sized enterprises (SMEs) in the context of the United Arab Emirates (UAE).
Design/methodology/approach – Adopting a quantitative approach, the researchers designed a
questionnaire based on an extensive literature review and used structural equation modeling to ascertain the
mediating role of international entrepreneurial orientation in the relationship between influential dynamic
capabilities and SMEs’ internationalization success.
Findings – The findings of this study indicate that international entrepreneurship orientation mediates the
relationship between dynamic capabilities and internationalization success, as the indirect impact value is
greater than the direct effect value for the relationship. Because the existence of the mediator in the model has
no significant impact on the model’s direct effects, full mediation is the most appropriate mediation type.
Research limitations/implications – This study has some limitations. One of the major limitations of
this study relates to the limited finances of the incumbent, as the questionnaires were delivered to the
respondents via email, but the incumbent had to follow up with phone calls and reminders. Second, this study
mainly relied upon primary data and analysis based on the use of qualitative techniques; in future,
researchers can incorporate qualitative aspects using interviews and other qualitative analysis tools and
techniques. Third, limitation relates to sample size, as the sample size of research was above 500 but was
limited to just UAE. Future researchers can conduct a cross-sectional analysis to determine the mediating role
of different factors for the promotion of internationalization.
Practical implications – This study highlights the fundamental factors affecting the internationalization
of SMEs in the UAE context, which has rarely been discussed. This study broadens the scope of
internationalization by discussing its impact on SMEs’ financial and non-financial performance.
Social implications – This study will contribute to the advancement of current information about the
elements that impact the internationalization of SMEs and develop a new framework for analyzing SMEs’
internationalization in the UAE.
Originality/value – This study contributes to the literature by developing and testing a framework based
on a comprehensive literature review to include different factors and their constructs that impact the potential
internationalization of SMEs in developing economies. This study identifies and addresses a research gap
regarding the relationship between internationalization and company performance among UAE SMEs.
Keywords Dynamic capabilities, International entrepreneurial orientation,
Small and medium-sized enterprises, United Arab Emirates
Paper type Research paper
Review of International Business
and Strategy
Vol. 33 No. 1, 2023
pp. 55-78
© Emerald Publishing Limited
2059-6014
DOI 10.1108/RIBS-12-2021-0171
RIBS
33,1
56
1. Introduction
The greater integration of emerging economies into the global economy has created new
competitive landscapes for enterprises operating in these regions (Kotabe and Kothari,
2016). Emerging markets are undergoing economic, social and political changes, which
provide the foundation for enterprises from these countries to compete in international
marketplaces (Hernandez and Guillén, 2018). The United Arab Emirates (UAE) is considered
an emerging market in this respect, as it has been developing its economic, social and
political environment since the 1970s (Kobal et al., 2018). It is also the most developed
country among the emerging markets within the Gulf Cooperation Council and the region’s
leader in terms of global competitiveness (Khyareh and Rostami, 2021). Indeed, as emerging
markets continue to drive the global economy, the UAE’s proximity to the Middle East,
Africa, India and the Far East means that worldwide organizations are increasingly
choosing the UAE as a dynamic and well-placed meeting point.
Small and medium-sized enterprises (SMEs) in developing and emerging economies play
a crucial role in providing employment opportunities and promoting economic activities.
However, these enterprises also face many challenges in realizing the growth opportunities
presented in a highly competitive environment. One of the best opportunities for these
firms to grow relates to internationalization, which suggests that SMEs should seek
opportunities not only in the country where they are based but also to expand their business
into other countries. It allows them to avoid high competition in their home countries and
provides the vital space they need for expansion. This notion holds particularly true for the
countries referred to as the hub of international and regional economic activities. Usually,
internationalizations is also challenging for SMEs given their capital and skills limitations
(Johanson and Vahlne, 2003). In this respect, the main skills or abilities identified in prior
research are dynamic and sensing. Those SMEs entering the international market generally
tend to improve the overall economic and social dynamics of the local and international
markets as they introduce new products and services, as well as also tend to increase the
flow of foreign exchange and investment into their home countries (Johanson and Vahlne,
2003). International markets are highly competitive, and businesses must compete to their
best abilities in this dynamic climate. Given their limitations of capital and skills, these firms
might face stiff competition from their rivals, including large firms. Therefore, SMEs need to
develop the appropriate skill sets and strategies to compete with their rivals. Another factor
contributing to need to develop appropriate skills and strategies may also be the
protectionism of the local governments in terms of human capital, in the form of restrictions
regarding the acquiring of skilled people from abroad, as is the case in the UAE. Such issues
have had a negative impact on SMEs’ internationalization in developing and emerging
economies (Zaki, 2019).
With the advent of information technology, the pace of SMEs’ internationalization has
increased greatly, sparking a great deal of interest among researchers. However, most
research has been focused on the internationalization of large or multinational firms and
SMEs in developed economies. Given the economic, social and cultural context, most of the
findings of such research cannot be generalized to SMEs originating and operating in
emerging economies (Zaki, 2019; Vuong et al., 2020). Although these studies have
contributed to evolving a theoretical framework concerning the internationalization process,
they have not significantly impacted the development of an empirical framework (Monteiro
et al., 2019). Moreover, in recent studies, authors have observed that it is quite difficult to
develop a theoretical framework encompassing SME’s internationalization process (Rauch
and Frese, 2007; Dabic et al., 2020). Prior studies may not be sufficient to understand the
internationalization of SMEs and the various factors affecting this. Tartaglione et al. (2019)
argued that traditional theories regarding competitive advantages, such as the resourcebased view, are insufficient to explain the international success of SMEs. For conclusive and
in-depth understanding, it is paramount that researchers explore how firms can use
resources to outperform rivals, that is, firms’ capabilities and competencies, which must be
included in the analysis. Although many studies regarding internationalization have been
carried out, studies investigating SMEs’ internationalization from a capabilities perspective
in emerging markets are still limited (Santra, 2018). According to Steinhäuser et al. (2021),
more than 80% of the studies related to the internationalization of SMEs have been
conducted in developed countries whose social, economic and cultural dynamics are
different from those of developing countries.
Even the research on the topics related to the internationalization of SMEs has been
mainly related to export performance and the influence of internal and external factors.
However, this research has excluded the mediation effect of different factors on the
internationalization of SMEs, especially in developing economies. Further, limited empirical
studies have examined the congruence or fit of dynamic capabilities, entrepreneurship and
internationalization success in developing economies such as the UAE by focusing on the
causal relationships and the mediating factors. Existing theories and frameworks provide
several perspectives for exploring and analyzing SMEs’ internationalization success. A
thorough review of the current literature indicates that SMEs’ ability to internationalize
depends on the availability and practical use of critical resources. An SME’s ability to
effectively use its existing resources is closely related to the entrepreneur’s dynamic
capabilities. Considering the above gaps and challenges in analyzing the
internationalization of SMEs, several key questions remain unanswered, for example, how
SMEs can successfully be internationalized and what kinds of capabilities and competencies
SMEs should have to achieve this success. Therefore, there is a need for research that
comprehensively seeks to answer these questions. Based on the capability’s perspective and
by including the components of dynamic capabilities, studies are needed that investigate the
different aspects of internationalization success.
Although there is much research on this topic, the focus seems to be on developed
economies (Ernst and Kim, 2002). One of the major issues highlighted when reviewing the
relevant literature was the lack of discussion regarding the levels of development between
developed and developing economies and how this factor affects the prospects for SMEs’
internationalization (Vrontis and Christofi, 2021). Lawless et al. (2020) had earlier posited
that such an environment creates a barrier, especially for SMEs in underdeveloped or
developing economies. Such factors also impact entrepreneurs’ dynamic capabilities and the
potential chances of success in the international market. Therefore, research should be
conducted in developing nations, such as the UAE. The existing literature provides the basic
framework for understanding the factors affecting the internationalization of SMEs (Saunila
and Ukko, 2014).
The present research mainly focuses on answering these questions by testing the notion
that entrepreneurs’ international orientation can affect and, to a large extent, drive their
dynamic capabilities, leading to the successful internationalization of SMEs in the UAE
context. By answering these questions, the present study aims to contribute to the existing
literature on the topic and to contribute to policies that might further facilitate and enhance
the internationalization of SMEs in developing economies. For this purpose, the author
obtained a sample of 660 firms, based on a 99% confidence level (with 5 being the confidence
interval), given that the total number of registered firms in the seven emirates of UAE (Abu
Dhabi, Dubai, Sharjah, Fujairah, Ajman, Umm-Al-Quwain and Ras-Al-Khaimah) is 81,912,
comprising 73,771 small firms and 8,141 medium-sized firms. The present study is also
Influential
dynamic
capabilities
57
RIBS
33,1
58
based on three major constructs: dynamic capabilities (the independent variable),
international entrepreneurial orientation (the mediating variable) and internationalization
success (the dependent variable). The latent constructs of financial and non-financial
performance are used to gauge internationalization success, measured via specific questions
in the questionnaire (Zeng et al., 2011).
The remainder of this paper is organized as follows. Section 2 presents the literature
review and the developed hypotheses. Section 3 details the research methodology. Section 4
presents and discusses the empirical results. Finally, conclusions and implications for
further research are presented in Section 5.
2. Literature review and hypothesis development
Firms’ internationalization can be achieved by engaging in direct and indirect imports and
creating inward strategic alliances for licensing, cooperative manufacturing and purchasing
(Fletcher, 2001). Outward internationalization covers various modes, such as direct and
indirect exports, outward licensing, franchising, strategic alliances and foreign direct
investment (Saeed and Ziaulhaq, 2019). In outward internationalization, the firm’s revenue
is realized through various outward modes (Saeed and Ziaulhaq, 2019). In Welch and
Luostarinen (1988) study, internationalization was a firm’s involvement in international
operations; however, their focus was only on outward-driven activities, such as export.
Although the initial concept of internationalization was established in late 1950s during
the “Cold War” by Mundell (1957), like the international business, it also has evolved with
time and an ever-changing business environment. In his context, the definition of
internationalization has evolved with time; the evolution of these definitions is directly
linked to the evolution of different theories related to internationalization and international
business (Coviello and Martin, 1999). The core skills and potential business opportunities in
other countries have been pointed out as major reasons for internationalization by Penrose
(1959). At the same time, Dunning (2015) relates it to opportunities provided by
governments to attract foreign direct investment. Internationalization has also been
connected to the development and evolution of business (Vahlne, 2009).
The internationalization process mainly relates to developing a business network
comprising a different set of symbiotic relationships. These relationships tend to facilitate
business expansion in foreign markets by facilitating the international transactions
(Johanson and Vahlne, 2009). Earlier studies have adopted several theories to explain the
business internationalization phenomenon since the traditional theory of international trade
was introduced by Mundell (1957). Most researchers conducted studies from the perspective
of large firms’ internationalization between 1950 and 1960 (Ruzzier et al., 2006). Research on
SMEs’ internationalization emerged more rapidly when McDougall et al. (1994) introduced
the international new venture (INV) theory. However, theories explaining SMEs’
internationalization are still in their early stages, and there is no consensus among scholars
on explaining the phenomenon (Lloyd-Reason et al., 2009).
Internationalization processes are categorized into two major streams:
Uppsala internationalization models (U-models) and innovation-related models
(I-models). Internationalization is considered a process and incremental in both models
(Anderson and Sullivan, 1993). However, the model is developed based on a variance-based
approach and is limited to SMEs. The model views internationalization as a process in
which the steps are similar to new product adoption, as suggested by Dominguez and
Mayrhofer (2017) and Lin (2010). Many researchers support this model and consider the
firm’s internationalization decision an innovation. According to Filipescu et al. (2009), each
subsequent step of the process is an innovation for the firm. Therefore, to a certain degree,
mentioned research models are based on the U-model (Andersen, 1993), which focuses on the
learning sequence related to innovation adoption. Consequently, in I-models,
internationalization is viewed as a development by steps and an innovation for the firm (Lin,
2010).
There has always been debate regarding the level of international commitments of
SMEs; because of the ever rapid pace of globalization, the level of commitment of SMEs will
also increase because of increased competition (Yener et al., 2014). But the fact of the matter
is that some SMEs progress rapidly through the steps. At the same time, others may stop
the internationalization process before arriving at the final step to avoid being too dependent
on the international market. Many SMEs are mainly export-oriented even at the start of their
lives, because of potential tax incentives Kemayel (2015). These have led to Morrow’s
coining of “international entrepreneurship “ (1988). According to this author, technological
developments, reduced cultural barriers and increased cultural awareness have opened
previously closed international markets to many businesses, including small businesses,
new enterprises and established businesses. Shortly after this, McDougall’s (1989) empirical
study comparing domestic and international new businesses paved the way for academic
research in international entrepreneurship (McDougall et al., 1994; Coudounaris, 2021).
The INV theory uses various strategies and entry modes to quickly expand into various
foreign markets, and a well-chosen strategy can reduce the risks of internationalization. As a
result, the step-by-step process (U-model) is most likely to interfere with INVs’
internationalization and, thus, may not be useful for their successful expansion. On the other
hand, Costa et al. (2017) stated that SMEs replicate the internationalization modes of their
peers based on business network relationships. SMEs tend to internationalize by using
information from the business, social and intuitional networks. It suggests that network
theory may explain internationalization better than the U-model.
One of the key concepts explaining the underlying reasons for internationalization is
international business. This concept mainly emerged at the end of the 1980s. This era was
mainly dominated by SMEs that started competing with their larger rivals in international
markets, formulating theories such as INV (Jones et al., 2011). One of the most interesting
aspects of these firms was the distinct patterns these firms adopted regarding
internationalization. Most of these businesses were new startups that took full advantage of
innovative practices (Bruneel and De Cock, 2016). Thus, another business class came into
existence based on the speed at which these businesses internationalized; the distinguishing
characteristic of these businesses was that they were relatively new, leading to the coining
of “born global” (Francioni et al., 2016). According to Francioni et al. (2016), the underlying
drivers of internationalization can be divided into main categories, internal and external.
Among these divers of internationalization, human aspects are considered of the utmost
importance, such as the behavioral aspects of entrepreneurs. These include their attitude
towards internationalization and the management of their human resources. Other factors
include R&D, capital, marketing and regulations of the home country in which the business
is based (Bruneel and De Cock, 2016).
In the context of internationalization, SMEs have only limited options, including forming
joint ventures, mergers and exports. In this respect, exports remain one of the most
important vehicles for accessing international markets (Moen and Rialp, 2019). Compared to
other options, such as joint ventures or acquisitions, export is a more appealing method to
access international markets. According to Costanzo et al. (2010), exporting does not entail
large risks or obligations, and it permits greater flexibility in altering the volume of the
goods in different export markets. Some businesses can only internationalize by exporting;
Influential
dynamic
capabilities
59
RIBS
33,1
60
according to Moen and Rialp (2019), market performance is, in general, an important
expected result of exceptional company capabilities.
Notably, UAE SMEs are the most export-focused globally, ranked first in a recent study
carried out by Zurich, entitled “Challenges, risks and opportunities for SMEs,” which
surveyed more than 3,250 SMEs across 12 countries, 250 of which were in the UAE. The
study showed that 25% of UAE SMEs had expanded their export operations in the previous
year. Export promotion (EP) can be used as a tool for businesses to assess their success in
domestic and international markets. As a result, there are significant differences in how EP
has been conceptualized and quantified in the literature. Previous studies have defined EP
by measuring economic and strategic objectives (i.e. export sales, profits, sales ratio, the
tendency to export, export intensity, export variety, acceptance of the product, export
involvement and export orientation and satisfaction) (Volgger et al., 2019). Moreover,
according to Costanzo et al. (2010), techniques to operationalize EP involve objective
measures (such as market share or sales volumes) and subjective markers (such as perceived
satisfaction with export market sales or apparent export success).
It is evident from the above discussions that export studies generally use multidimensional measures. Non-economic and economic measurements have been expanded and
used in prior studies; however, it is still a theme open for discussion between researchers
(Ping and Lin, 2019) because of the multi-faceted nature of the construct. It cannot be
represented by one indicator only, indicating a lack of universal indicators across all studies.
However, Pavlou and El Sawy (2011) considered management’s perception in terms of
quantitative and qualitative perspectives. Hence, EP can be measured using objective and
subjective methods, as is the case in the present study.
When it comes to different management characteristics required for the success of firms in
general, especially in the case of internationalization, the “dynamic capabilities” of
entrepreneurs are the most important. Tartaglione et al. (2019) defined dynamic capabilities as
an entrepreneur’s ability to understand a firm’s growth and survival. A firm’s growth and
survival within a dynamic business environment are ensured by its competitive advantages
and firm performance, which can be obtained through dynamic capabilities. According to Liu
et al. (2020), dynamic capabilities are multi-dimensional, and companies may not always be
strong in all the dimensions. A company may be weak in identifying fresh business models to
benefit from but may be strong in analyzing upcoming opportunities (Virglerova et al., 2021).
In addition, a firm might be good at developing new business models but may be weak in
implementing the models and updating them. Therefore, Teece (2018) points out that “strong
dynamic capabilities” usually mean strength (relative to competitors) in all the important
areas of sensing, seizing and transforming.
The implications of dynamic capabilities and international opportunity recognition on
the EP of manufacturing SMEs in Malaysia, specifically examining the actual and expected
relationship between dynamic capabilities and EP was assessed by Faiz Masnan and Saad
(2018). The results indicated a direct relationship between dynamic capabilities and SMEs’
export performance. The investigation of the effect of dynamic capabilities on the
performance of the Thai export-based firms indicated that the performance of the firms was
significantly affected by the dynamic capability of contextual ambidexterity (Prasertsakul,
2013). EP was used by Santhosh and Bala Subrahmanya (2020) as the fundamental driver
for building a framework for analysing entrepreneurship export orientation. This
framework was based on analysing 102 SMEs with international exposure within the
engineering industry in Karnataka, India. This study showed higher performance among
companies with younger entrepreneurs with different social ties and industry-related
experiences (Tekin et al., 2021; Dadzie et al., 2020).
Similarly, another study confirmed that entrepreneurial capabilities are vital for successful
strategy formulation related to international business, leading to better performance of SMEs in
the international market (Smallbone et al., 2022). Earlier, Schweizer et al. (2010) confirmed the
importance of dynamic capabilities in explaining internationalization. These authors suggested
that the existing internationalization theories could be enhanced by including the dynamic
capabilities perspective, thus providing a new dimension to the related literature. In addition,
Teece (2018) and Leonaviciene_ and Burinskiene_ (2022) stated that the dynamic capabilities
approach could be further improved compared to the recent dynamic-abilities-based contributions.
When companies internationalize, there is a need to balance the exploitation and exploration
capabilities (ambidexterity). If this is not considered, then there is a risk that the company may fall
prey to its inflexibilities, such as spending too much exploring without learning from experience to
exploit the opportunities (Zucchella and Magnani, 2016), thus concluding that dynamic capabilities
factors such as learning are extremely important. Studies of international entrepreneurship have a
clear link with studies of dynamic capabilities. For example, both approaches consider the
opportunity search processes extremely important. Themes related to resource combination,
mobilization and renewal in SMEs’ capabilities development are common in dynamic capabilities
studies and international entrepreneurship studies (Kuuluvainen, 2013). Dynamic capabilities of
the entrepreneur are a key success factor, as it enables the entrepreneur to recognize opportunities,
but in research, it is often neglected (Teece, 2018).
Given that dynamic capabilities are the resource’s importance, the foundations can be
traced to classical theories such as ownership, location and internalization theory (Dunning,
2015). Scholars have also argued that new ventures internationalize primarily because of
internal capabilities and abilities, although with limited empirical evidence. Dynamic
capabilities are essential for completing the internationalization process, as they encompass
the ability of the entrepreneur to capitalize on potential opportunities and enable the creation
of new profit-making opportunities (Falahat et al., 2020).
Sensing, seizing and reconfiguring capabilities have been considered sub-constructs of
dynamic capabilities by researchers such as Francioni et al. (2016). Regarding the sensing
capabilities of entrepreneurs, the Uppsala internationalization model or U-model comes into
play, as the entrepreneurs’ sensing capabilities relate to their ability to adapt to the everchanging business environment. This adaptation is only possible in the entrepreneur has
market knowledge (Johanson and Vahlne, 2003). The sensing capabilities of an entrepreneur
are of utmost importance, as they determine the resources that must be committed for a
foreign venture. The sensing capabilities also allow the entrepreneur to assess the
usefulness of the available information for sensing the potential business and present and
future business opportunities. This aspect can also be linked to market knowledge and
knowledge about the overall cultural and business norms. A lack of knowledge about such
aspects distorts information flow (Johanson and Wiedersheim-Paul, 1975).
The ability of the entrepreneur to capitalize on potential business opportunities in foreign
markets is, to the most extent, explained by the “Network Theory,” as all of the businesses within
the economy are directly or indirectly interconnected (Cook and Emerson, 1987). Thus, they form
a network that allows for information flow, therefore the firm’s internationalization. Given that
the flow of information and knowledge presents equal opportunities for all of the network firms
seizing and reconfiguring, the entrepreneur who can size the potential business opportunity tends
to gain the first-mover advantage. Still, the advantage is available for a limited period, and once
other businesses recognize this opportunity, the entrepreneur has the business strategy to
maintain the competitive advantage. If the entrepreneur has a “first movers’ advantage,” then
they have limited opportunities to capitalize on and reconfigure strategies to capitalize on limited
opportunities.
Influential
dynamic
capabilities
61
RIBS
33,1
Based on the above discussion, following hypotheses are proposed:
H1. Dynamic capabilities have positive effects on internationalization success.
H2. The sensing capability has a positive effect on internationalization success.
H3. The seizing capability has a positive effect on internationalization success.
62
H4. The reconfiguration capability has a positive effect on internationalization success.
H5. International entrepreneurial orientation mediates the relationship between
dynamic capabilities and internationalization success.
H6. International entrepreneurial orientation mediates the relationship between sensing
capability and internationalization success.
H7. International entrepreneurial orientation mediates the relationship between seizing
capability and internationalization success.
H8. International entrepreneurial orientation mediates the relationship between the
reconfiguration capability and internationalization success.
The proposed research framework contains the following key variables and their dimensions
based on extant theoretical and literature foundations review. The proposed model visualizes
the causal relationships between dynamic capabilities and the internationalization success of
exporting SMEs through the mediating effect of international entrepreneurial orientation.
The research model and proposed hypotheses are presented in Figure 1.
3. Research methodology
3.1 Research design
This study was designed to scrutinize the relationship between the variables, namely,
dynamic capabilities, international entrepreneurial orientation and the internationalization
Figure 1.
Research model
success of exporting SMEs in the UAE. This study adopted a quantitative approach using a
questionnaire based on an extensive literature review.
As per the criteria, the targeted study population comprises 81,912 SMEs from all the
emirates of the UAE, from the three sectors (manufacturing, trade and service). The SMEs
were considered based on the economic activities with the highest percentage from each
sector. The target population is detailed in Table 1.
3.2 Population and sample
The main objective of the sample design is to draw a representative sample of SMEs from the
UAE, giving proportionate representation to each emirate and each of the three sectors. The
appropriate sample size must consider the confidence level, interval and population.
The study aimed to determine the sample size at the 99% confidence level (with 5 as the
confidence interval). As the total population size was 81,912, the required sample size was
660. The sample size from each emirate concerning the sector/economic activity and size
(small and medium) was drawn proportional to the corresponding population figures. The
number of samples according to the targeted study population is provided in Table 2.
Influential
dynamic
capabilities
63
3.3 Sampling procedure
The sampling procedure for the study followed a multistage stratified sampling procedure that
can be summarized in four main steps. The first step involved drawing the sample proportional
to the population figures in each emirate. Emirates formed the first level of strata. The second
step was to categorize SMEs’ small and medium categories into different industrial sectors
based on their core business activities. In the third step, the sample was drawn proportional to
their population figures. The fourth and final steps involved choosing the required number of
firms from each industrial sector using the random sampling approach.
3.4 Measurement of variables
Dynamic capabilities are conceptualized as a construct composed of three sub-constructs:
sensing capability; seizing capability; and reconfiguration capability. These sub-constructs
are conceptualized as the summation of more than one observable or response variable.
The intermediate or mediating variable, international entrepreneurial orientation, is a
construct composed of five sub-constructs: innovativeness; autonomy; proactiveness;
competitive aggressiveness; and risk-taking. These sub-constructs also are conceptualized
as summative figures of more than one observable or response variable.
Internationalization success, the dependent variable, is another construct comprising more than
one response variable relating to SMEs’ financial and non-financial performance. Respondents
Number Economic activity
Small
Medium
Total
SMEs
% SME
1
2
3
8,120
21,820
43,831
1,241
3,828
3,072
9,362
25,648
46,903
11.4
31.3
57.3
73,771
8,141
81,912
100.00
Manufacturing (Transformative industries)
Construction
Wholesale and retail trade; repair of motor vehicles
and motorcycles
Total
Source: Based on the data collected by the researcher using the official government sources of UAE
Table 1.
The targeted study
population
RIBS
33,1
64
Number
Emirates
Category
Manufacturing
1
Abu Dhabi
2
Dubai
3
Sharjah
4
Fujairah
5
Ajman
6
Umm-Al-Quwain
Small
Medium
Total
Small
Medium
Total
Small
Medium
Total
Small
Medium
Total
Small
Medium
Total
Small
Medium
Total
Small
Medium
Total
Small
Medium
Total
10
1
11
23
2
25
21
5
26
1
1
2
8
1
9
1
0
1
2
0
2
66
10
76
7
Ras-Al-Khaimah
Table 2.
Distribution of
sample size across
8
UAE
Emirates, size of
small and mediumsized enterprises and
economic activities
Source: Own elaboration
Economic activity
Wholesale and
Construction
retail trade
23
5
28
85
7
92
30
13
43
8
0
8
23
4
27
1
0
1
5
1
6
175
30
205
72
4
76
161
8
169
55
9
64
6
1
7
46
3
49
3
0
3
10
1
11
353
26
379
Total
105
10
115
269
17
286
106
27
133
15
2
17
77
8
85
5
0
5
17
2
19
594
66
660
were asked to rate each item on a five-point Likert scale ranging from very low (1) to very high (5).
Table 3 provides details of the study variables adapted from the literature.
3.5 Data collection and analysis techniques
Convenience sampling techniques were used to collect the data because large amounts of
data were required to be collected within a short period at a minimum cost. A total of 660
Serial no.
Variables
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
IEO
Sensing capability (DCS)
Seizing capability (DCZ)
Reconfiguration capability (DCT)
Autonomy (EOA)
Competitive aggressiveness (EOC)
Innovativeness
Proactiveness (EOP)
Risk-taking (EOR)
Financial performance (IPF)
Non-financial performance (IPO)
Table 3.
Number of items and
source of each
variable
Source: Own elaboration
Items
Sources of questionnaire
25
6
5
6
3
4
3
4
3
5
6
Zeng et al. (2009)
Maklan and Klaus (2011)
Maklan and Klaus (2011)
Maklan and Klaus (2011)
Maklan and Klaus (2011)
Maklan and Klaus (2011)
Maklan and Klaus (2011)
Maklan and Klaus (2011)
Maklan and Klaus (2011)
Zaki (2018)
Zaki (2018)
questionnaires were distributed, of which 556 questionnaires were received and 104 were
eliminated because they were incomplete or not received within the specified time frame (452
usable responses). The data from the questionnaires were recorded in the relevant software.
Mediation analysis enlarges our understanding of an influence by examining how well
it may be explained by another variable called a mediator (Iacobucci, 2008). Consequently,
mediation analysis reveals how the predictor indirectly impacts the outcome via the
mediator.
We have chosen the Preacher and Hayes methodology to determine the mediation effects
for the current research. However, the Baron-and-Kenny mediation approach can also be
used to determine the mediation. The preference of Preacher and Hayes over the Baron-andKenny approach mainly relates to its inability to determine the indirect effect (MacKinnon
et al., 2002). Along with the issues related to discovering the actual mediation, as noted by
Preacher and Hayes (2004), the Baron and Kenny methodology steps are restrictive and
redundant for establishing the mediation (Hayes, 2009).
Before hypothesis testing, a data screening test was conducted to confirm the data
authenticity. Reliability, confirmatory factor analysis (CFA) and structural equation
modeling (SEM) estimation tests were conducted using SPSS and AMOS software.
Influential
dynamic
capabilities
65
3.6 Confirmatory factor analysis
The CFA testing process is a prerequisite before the commencement of the main study, as
this step helps the researcher examine the research instrument. This process saves time and
the wastage of other resources, including financial. CFA testing is also extremely important
in the case of an adopted or adapted questionnaire for data collection. Therefore, it is
common in social research to use CFA to test researchers’ hypotheses and the survey
questionnaire items to support the variables used in the hypotheses. CFA aims to examine
the data fit and validity with other psychometric features. It is necessary to conduct various
statistical tests to ensure that a model is accurate.
According to Kim et al. (2016), a construct with a factor loading greater than 0.5 is
significant. Hair et al. (1998) stated that the average variance extracted and construct
reliability of the construct should be greater than or equal to 0.50 and 0.70, respectively. The
average variance extracted value for every construct was found within the stated acceptance
criteria. The construct reliability of all constructs was higher than the conditions mentioned
above, demonstrating internal consistency. Table 4 presents details of the validity and
reliability statistics. Cronbach’s alpha was used to check the reliability of the constructs
(Hair et al., 1998). The result revealed that all the study constructs had Cronbach’s alpha
values greater than 0.90, which demonstrates excellent reliability.
Variable
No. of items
AVE
Cronbach’s alpha
CR
DCSZC
DCSEC
DCTC
IEOA
IEOCA
IEOI
IEOR
IEOP
ISFP
ISNFP
5
7
7
7
6
8
7
7
5
7
0.83
0.53
0.87
0.52
0.52
0.52
0.51
0.55
0.53
0.52
0.94
0.84
0.97
0.91
0.88
0.90
0.94
0.88
0.91
0.86
0.95
0.89
0.98
0.88
0.87
0.90
0.88
0.88
0.85
0.88
Table 4.
Refined instrument
items and reliability
of each variable
RIBS
33,1
66
4. Results and discussion
4.1 Descriptive statistics
Table 5 presents the descriptive statistics for each variable and the mean score for all the
constructs. The mean scores for sensing capability, seizing capability, reconfiguration capability,
dynamic sensing capability, dynamic seizing capability, dynamic reconfiguration capability,
international entrepreneurial orientation competitive aggressiveness, international entrepreneurial
orientation automation, international entrepreneurial orientation innovativeness, international
entrepreneurial orientation risk-taking, international entrepreneurial orientation proactiveness,
internationalization success in terms of financial performance and internationalization success in
terms of non-financial performance were 3.46, 3.70, 3.35, 3.59, 3.61, 3.66, 3.57, 3.33, 3.73 and 3.64,
respectively. All these scores were above 3. Furthermore, the standard deviation of this construct
fell between 0.70 and 1, demonstrating that the respondents’ answers regarding the constructs of
the study were distributed near the mean value, indicating stable deviations. It was also confirmed
through the estimations of the skewness and kurtosis, which reaffirm how the responses were
similarly distributed.
4.2 Reliability test
As shown in Table 6, an adequate level of acceptance was observed for RMSEA (0.05–0.1),
CFI (higher than the generally accepted value of 0.90) and IFI (0.961).
4.3 Structural equation modeling
After determining the model fit, the next step is the model estimation through regression
coefficients. Hayes and Preacher’s (2014) prescribed procedure was used to analyze the
relationship between the independent and dependent variables. For this purpose, SEM was
used.
It was discovered that each path relationship in the model yielded a different set of
findings (Figure 2 and Table 7). There were several statistically significant links between
dependent and independent variables, but only one link was statistically insignificant
Item
Table 5.
Descriptive statistics
Table 6.
Reliability test result
of the study
DCSEC
DCSZC
DCTC
IEOA
IEOCA
IEOI
IEOR
IEOP
ISFP
ISNFP
Minimum
Maximum
Mean
SD
1.71
1.40
1.71
1.63
1.17
1.50
1.50
1.57
1.57
1.43
5.00
5.00
5.00
5.00
5.00
5.00
5.00
5.00
5.00
5.00
3.4607
3.7053
3.3578
3.5921
3.6171
3.6619
3.5723
3.3314
3.7395
3.6413
0.73871
0.87322
0.89214
0.87817
0.93246
0.87994
0.85977
0.83819
0.73819
0.80110
Skewness
0.093
0.674
0.170
0.696
0.530
0.576
0.625
0.207
0.871
0.634
Kurtosis
0.712
0.396
1.299
0.683
0.589
0.514
0.500
0.860
0.230
0.082
RMSEA
GFI
CFI
IFI
0.1
0.927
0.935
0.961
Influential
dynamic
capabilities
67
Figure 2.
Results of regression
weights
Path
IEOA / DCSEC
IEOCA / DCSEC
IEOI / DCSEC
IEOR / DCSEC
IEOP / DCSEC
IEOA / DCSZC
IEOCA / DCSZC
IEOI / DCSZC
IEOR / DCSZC
IEOP / DCSZC
IEOA / DCTC
IEOCA / DCTC
IEOI / DCTC
IEOR / DCTC
IEOP / DCTC
ISFP / DCSEC
ISNFP / DCSEC
ISFP / DCSZC
ISNFP / DCSZC
ISFP / DCTC
ISNFP / DCTC
ISFP / IEOA
ISNFP / IEOA
ISFP / IEOCA
ISNFP / IEOCA
ISFP / IEOI
ISNFP / IEOP
ISNFP / IEOI
ISFP / IEOP
ISNFP / IEOR
ISFP / IEOR
Note: *** mean 0.000
Path coefficient
0.280
0.458
0.023
0.033
0.370
0.425
0.359
0.296
0.176
0.143
0.633
0.523
0.005
0.082
0.129
0.093
0.011
0.034
0.015
0.042
0.029
0.069
0.024
0.044
0.058
0.111
0.095
0.210
0.153
0.642
0.637
Standard error
t-statistic
p-value
0.038
0.041
0.229
0.094
0.080
0.036
0.038
0.215
0.089
0.075
0.037
0.040
0.225
0.093
0.079
0.076
0.065
0.072
0.061
0.080
0.068
0.083
0.071
0.078
0.066
0.013
0.033
0.011
0.039
0.027
0.032
5.483
8.427
0.279
0.381
4.662
8.333
6.607
3.543
2.059
1.805
12.345
9.567
0.063
0.952
1.613
2.355
3.159
1.487
0.222
2.572
2.393
1.238
0.424
0.837
1.103
3.532
2.701
6.661
4.356
20.035
19.959
***
***
0.781
0.704
***
***
***
***
0.039
0.041
***
***
0.950
0.341
0.107
0.003
0.001
0.034
0.015
0.042
0.029
0.001
0.002
0.032
0.010
***
0.007
***
***
***
***
Decisions
Significant
Significant
Not significant
Not significant
Significant
Significant
Significant
Significant
Significant
Significant
Significant
Significant
Not significant
Not significant
Not significant
Significant
Significant
Significant
Significant
Significant
Significant
Significant
Significant
Significant
Significant
Significant
Significant
Significant
Significant
Significant
Significant
Table 7.
Summary of
structural equation
model testing
RIBS
33,1
68
(also known as an exogenous-endogenous construct relationship in SEM). There were also
non-significant results for various tests of correlation between variables.
According to the path analysis, the following relationships were discovered. A p-value of
0.78 was obtained for the path of dynamic sensing capability to international entrepreneurial
orientation innovativeness, and dynamic sensing capability to international entrepreneurial
orientation risk-taking was obtained. The results also indicated that dynamic reconfiguration
capability to international entrepreneurial orientation innovativeness (p = 0.950) was
significantly lower than the mean; the result for dynamic reconfiguration capability to
international entrepreneurial orientation risk-taking was p = 0.340 and the results for
dynamic reconfiguration capability to international entrepreneurial orientation proactiveness
was p = 0.107. There was a considerable positive correlation between one independent
variable (dynamic sensing capability) and the dependent variables (internationalization
success in terms of financial performance and internationalization success in non-financial
performance) when the mediation factor (international entrepreneurial orientation) was used.
In contrast, the other independent variable (dynamic reconfiguration capability) had a
negligible positive correlation with the dependent variables (internationalization success in
terms of financial performance and internationalization success in terms of non-financial
performance). International entrepreneurial orientations’ role in influencing the internal
aspects that contribute to organizational performance was more beneficial than international
entrepreneurial orientation’s role in influencing the internal elements.
4.4 Testing of variables’ direct and indirect effects
As a first step, international entrepreneurial orientation automation was examined for its
role in dynamic sensing capability and internationalization success in terms of non-financial
performance. The direct effect was determined by multiplying the path from dynamic
sensing capability to international entrepreneurial orientation automation and international
entrepreneurial orientation automation to internationalization success in terms of nonfinancial performance (indirect effect = 0.024 0.28 = 0.006). The link between dynamic
sensing capability and internationalization success in terms of non-financial performance
had an indirect impact than a direct effect (0.011). Therefore, the indirect effect’s value was
smaller than the direct effect. In addition, the correlation between the indirect and direct
effects was important. Thus, the study concludes that international entrepreneurial
orientation automation did not mediate the link between dynamic sensing capability and
internationalization success in terms of non-financial performance.
Further, according to the study’s findings, international entrepreneurial orientation and
competitive aggressiveness served as a mediator between dynamic sensing capability and
internationalization success in terms of non-financial performance. We arrived at the direct
impact by multiplying the dynamic sensing capability path with the international
entrepreneurial orientation competitive aggressiveness path and then adding the international
entrepreneurial orientation competitive aggressiveness route to internationalization success in
terms of the non-financial performance path. Indirect effects were compared to the direct effects
of dynamic sensing capability and internationalization success regarding non-financial
performance (0.011). Therefore, the indirect effect’s value was smaller than that of the direct
effect. In addition, the correlation between the indirect and direct effects was significant. As a
result, the study reveals that international entrepreneurial orientation and competitive
aggressiveness did not mediate between dynamic sensing capability and internationalization
success in non-financial performance.
The study also examined the role of international entrepreneurial orientation
innovativeness as a mediator in the dynamic sensing capability–internationalization
success relationship regarding non-financial performance. We determined the direct effect
by multiplying the distances between dynamic sensing capability and international
entrepreneurial orientation, competitive aggressiveness and international entrepreneurial
orientation, innovativeness and internationalization success in terms of non-financial
performance and subtracting the result. Indirect effects were compared to the direct effects
of dynamic sensing capability and internationalization success regarding non-financial
performance (0.011). As a result, the indirect effect’s impact was less significant than its
direct effect. It is also important to note the indirect influence.
Thus, the study concluded that the international entrepreneurial orientation
innovativeness did not mediate the link between dynamic sensing capability and
internationalization success in terms of non-financial performance. The researcher also
examined the role of international entrepreneurial orientation risk-taking in the interaction
between dynamic sensing capability and internationalization success in terms of nonfinancial performance. The direct effect was determined by multiplying the path from
dynamic sensing capability to international entrepreneurial orientation risk-taking and the
path from international entrepreneurial orientation risk-taking to internationalization
success in terms of non-financial performance (indirect effect = 0.033 0.153 = 0.005). In
contrast to the direct effect of the dynamic sensing capability and internationalization
success relationship in terms of non-financial performance, the indirect effect was very
limited given that its value came to (0.011). The researcher concluded that the international
entrepreneurial orientation innovativeness did not affect the relationship between dynamic
sensing capability and internationalization success in terms of non-financial performance.
The role of international entrepreneurial orientation proactiveness as a mediator between
dynamic sensing capability and internationalization success in terms of non-financial
performance was also investigated. The direct impact was determined by multiplying the path
from dynamic sensing capability to international entrepreneurial orientation proactiveness and
the path from international entrepreneurial orientation proactiveness to internationalization
success in terms of financial performance (indirect effect = 0.37 0.637 = 0.236) and the path
from international entrepreneurial orientation proactiveness to internationalization success in
terms of non-financial performance (direct effect = 0.37 0.637 = 0.011). The value of the
indirect impact of international entrepreneurial orientation proactiveness mediated the link
between dynamic sensing capability and internationalization success in terms of non-financial
performance was significantly larger than the value of the direct impact. Therefore, we must
infer comprehensive mediation in this situation. It was also found that international
entrepreneurial orientation automation was a mediator between dynamic seizing capability
and internationalization success in terms of non-financial performance. This condition implies
full mediation, as the mediator’s presence does not significantly alter the model’s direct
consequences.
The role of international entrepreneurial orientation innovativeness as a mediating factor
in the relationship between dynamic seizing capability and internationalization success in
terms of non-financial performance was also investigated. According to the study’s
findings, international entrepreneurial orientation innovativeness mediated the relationship
between dynamic seizing capability and internationalization success in terms of nonfinancial performance. The indirect impact value was greater than the indirect effect value
in this relationship. Because the existence of the mediator in the model had no significant
impact on the model’s direct effects, full mediation is the most appropriate type of mediation
in this situation. Further, it was discovered that international entrepreneurial orientation
risk-taking in foreign markets did not affect the relationship between dynamic seizing
capability and internationalization success in terms of non-financial performance. The value
Influential
dynamic
capabilities
69
RIBS
33,1
70
of direct impact was considerably greater than the indirect impact. Thus, risk-taking
behavior had no impact on the relationship between entrepreneurial orientation risk-taking
in foreign markets and the dynamic seizing capability, because seizing capability mainly
relates to the ability of an organization to react to changing business environments on time,
ensuring the future success of the business as stated by Vrontis and Christofi (2021). Given
SMEs’ small size and nature, the owner or the entrepreneur is the main driving force behind
organizational success. Unlike large organizations, SMEs have limited human and financial
resources. It is only possible when the organization has sound risk management policies. To
summarize, the orientation toward risk has already been incorporated into the strategy,
ensuring business success in the foreign market.
The role of international entrepreneurial orientation proactiveness is as a mediating factor in
the relationship between dynamic seizing capability and internationalization success in terms of
non-financial performance. The study discovered that international entrepreneurial orientation
proactiveness mediated the interaction between dynamic seizing capability and
internationalization success in terms of non-financial performance, as the indirect impact value
was greater than the direct effect value of the relationship. Finally, the results revealed that
international entrepreneurial orientation proactiveness mediated the relationship between
dynamic reconfiguration capability and internationalization success in terms of financial
performance in foreign markets. The findings of this research are in line with that of Prasertsakul
(2013), who conducted similar research on Thai export-oriented companies. The underlying
reason for the absence of mediation can be linked to INV theory. This theory holds that the SMEs
businesses born as the result of international new ventures are often successful despite their small
size and limited resources. Results of the research also indicate the importance of international
entrepreneurial orientation. The results also apply that international entrepreneurial orientation
facilitates the reconfiguration of their business policies. This reconfiguration of policies enables
the business to survive and adapt according to the general economic conditions of the foreign
country. The details of the results are presented in Table 8.
5. Conclusion, limitations and future recommendation
The present study investigated whether international entrepreneurial orientation mediates
the relationship between influential dynamic capabilities and SMEs’ internationalization
Path
Table 8.
Direct and indirect
path comparison
(dependent variable
ISNFP)
ISNFP / IEOA / DCSEC
ISNFP / IEOCA / DCSEC
ISNFP / IEOI / DCSEC
ISNFP / IEOR / DCSEC
ISNFP / IEOP / DCSEC
ISNFP / IEOA / DCSZC
ISNFP / IEOCA / DCSZC
ISNFP / IEOI / DCSZC
ISNFP / IEOR / DCSZC
ISNFP / IEOP / DCSZC
ISNFP / IEOA / DCTC
ISNFP / IEOCA / DCTC
ISNFP / IEOI / DCTC
ISNFP / IEOR / DCTC
ISNFP / IEOP / DCTC
Path a
Path b
0.28
0.458
0.023
0.033
0.37
0.425
0.359
0.296
0.176
0.143
0.633
0.523
0.005
0.082
0.129
0.024
0.058
0.095
0.153
0.637
0.024
0.058
0.095
0.153
0.637
0.024
0.058
0.095
0.153
0.637
Indirect effect
0.007
0.027
0.002
0.005
0.236
0.010
0.021
0.028
0.027
0.091
0.015
0.030
0.000
0.013
0.082
Direct effect
0.011
0.011
0.011
0.011
0.011
0.015
0.015
0.015
0.015
0.015
0.029
0.029
0.029
0.029
0.029
Decision
Not exist
Not exist
Not exist
Not exist
Mediation exist
Mediation exist
Not exist
Mediation exist
Not exist
Mediation exist
Not exist
Not exist
Not exist
Not exist
Mediation exist
success. The study discovered that the interaction between dynamic sensing capability and
internationalization success in terms of non-financial performance is mediated by
international entrepreneurial orientation proactiveness, as the indirect impact value is
greater than the direct effect value of the relationship. Because the existence of the mediator
in the model has no significant impact on the model’s direct effects, full mediation is the
most appropriate type of mediation in this situation.
The integrated conceptual model initially provided by Coviello and Martin (1999) is the
foundation for SME internationalization research. This paradigm incorporates integrated
traditional stage theory, the network perspective, global entrepreneurialism, transaction
costs and institutional theory. According to the presents study’s findings, SMEs thinking
about expanding outside the UAE should also examine the ethical implications of their
decisions. Ethical considerations have been incorporated into the integrative conceptual
model to better explain the adoption of internationalization by SMEs in the UAE and to
better understand their behavior. The findings of this study complement those of past
investigations carried out by Coviello and Martin (1999).
5.1 Contributions of the study
The current research establishes the theoretical and practical connection between the
international entrepreneurship orientation, dynamic capabilities and internationalization
success in context of SME’s operating in UAE. The international entrepreneurship
orientation tends to mediate the relationship between dynamic capabilities and
internationalization success in both financial and non-financial respects. The findings
indicate that international entrepreneurship orientation mediates the relationship between
dynamic capabilities and internationalization success, as the indirect impact value is greater
than the direct effect value for the relationship. Because the existence of the mediator in the
model has no significant impact on the model’s direct effects, full mediation is the most
appropriate mediation type.
Entrepreneurship is considered a determining element for social and economic growth,
boosts the production of wealth and value and improves the well-being of nations.
COVID-19 pandemic profoundly influences entrepreneurs’ psychical and psychological
well-being. The issues faced by entrepreneurs such as lockdown, social isolation and
business hours had a profound impact on businesses around the globe and in developing
countries such as UAE, as downsizing and overall contraction of economic activities; in this
context, the entrepreneur needs to nurture their instincts such as dynamic capabilities and
their orientation to reach global markets. These capabilities also allow entrepreneurs to
formulate strategies further to ensure the survival of their businesses by ensuring the
financial success of the businesses.
5.1.1 Methodological contributions. This study used quantitative and qualitative
techniques to understand better the elements impacting SMEs’ internationalization in the
UAE. The methodological triangulation approach was used to address the research
questions in this study. Cronbach’s alpha analysis, simple linear regression, multiple
regression, SEM, CFA and the one-sample t-test were used to analyze the current study’s
quantitative data effectively.
An evaluation of past works on the subject revealed a scarcity of research carried out in
the UAE using the triangulation technique. Therefore, a lack of prior research in this field
has combined many analytic methodologies, such as regression analysis using SPSS, SEM
and CFA using AMOS. This study has significantly added to the existing literature on the
internationalization of SMEs in developing countries.
Influential
dynamic
capabilities
71
RIBS
33,1
72
5.2 Research implications
The present study highlights the fundamental factors affecting the internationalization of
SMEs in the UAE context, which has rarely been discussed. The present research broadens
the scope of internationalization by discussing its impact on SMEs’ financial and nonfinancial performance. As in the UAE, SMEs are thriving. Internationalization has been
thoroughly researched by authors such as Andersson (2004) with varying degrees of
success; the findings are not consistent. According to the findings of the present study, it can
be generalized that SMEs in the UAE have experienced a significant improvement in their
financial performance, because of the orientation of international orientation of the
entrepreneurs.
Non-financial measures that have a significant impact on UAE SMEs include
international marketing knowledge, international knowledge, technical knowledge,
innovative ideas related to the services and products, business methodologies, enrichment of
the company’s management capabilities, acquisition to better value and lower cost
production factors, improvement in production and reduced production costs related to
economies of scale.
The findings demonstrate that SMEs in the UAE are profiting from a worldwide
expansion strategy. A research gap existed regarding the relationship between
internationalization and company performance among SMEs operating in the UAE, and our
research contributes to bridging this gap. Given that globally 90% of the businesses are
categorized as SMEs, these SMEs provide 40% of the total jobs. Besides that, they are
responsible for 40% of global gross domestic product. In UAE, this percentage is even
higher, as 95% of all business establishments are considered SMEs, their gross domestic
product contribution is 60% and employees are 86% total labor force. In the case of the
UAE, the Government aims to nourish this sector further to ensure their continuous
contribution toward the betterment of the economy and society in general. The Emirates
Government has ambitions to further liberalize the economy by simplifying the different
legal processes. It will ensure innovation and R&D.
In this context, the present study highlights the fundamental factors affecting the
internationalization of SMEs in the context of UAE, which has rarely been discussed. The
present research results build upon previous research to help identify the various factors
contributing to the internationalization of SMEs in developing countries such as the UAE.
Unlike previous research, the present study compares internationalization variables across
industries, whereas previous studies have only looked at manufacturing. These results also
have implications for the managers of SMEs, as they can concentrate on the important
factors contributing to the successful internationalization of their businesses, allowing for
the generalization of findings as far as the UAE is concerned.
The study also identifies the level of influence of variables such as dynamic capabilities
and international entrepreneurial orientation on the success of the SMEs in operating in the
UAE; internationalization as international entrepreneurial orientation ensures access to and
efficient administration of extended market information. Without it, the company would be
functioning in isolation.
5.2.1 Practical implications. The present study highlights the fundamental factors
affecting the internationalization of SMEs in the UAE context, which have rarely been
discussed. The present research broadens the scope of internationalization by discussing its
impact on SMEs’ financial and non-financial performance. As in the UAE, SMEs are
thriving. Internationalization has been thoroughly researched by Andersson (2004) with
varying degrees of success; the findings are inconsistent. According to the findings of the
present study, it is generalized that SMEs in the UAE have experienced a significant
improvement in their financial performance, because of the orientation of the international
orientation of the entrepreneurs of UAE.
Non-financial measures that have a significant impact on UAE SMEs include
international marketing knowledge, international knowledge, technical knowledge,
innovative ideas related to the services and products, business methodologies, enrichment of
the company’s management capabilities, acquisition to better value and lower cost
production factors, improvement in production and reduced production costs related to
economies of scale.
The findings demonstrate that SMEs in the UAE are profiting from a worldwide
expansion strategy. A research gap existed regarding the relationship between
internationalization and company performance among SMEs operating in the UAE, and our
research contributes to bridging this gap.
5.2.2 Managerial implication. The findings indicate that international entrepreneurship
orientation mediates the relationship between dynamic capabilities and internationalization
success, as the indirect impact value is greater than the direct effect value for the
relationship. Because the existence of the mediator in the model has no significant impact on
the model’s direct effects, full mediation is the most appropriate mediation type.
Past research has indicated that SMEs should expand their operations in international
markets, as the benefits of going global tend not only provide opportunity for SMEs to grow
but also develop their profile in local and international markets. To achieve this objective,
SMEs should promote knowledge, as it improves international performance and long-term
economic advantage; entrepreneurs should engage themselves and managers in a
specialized local context. So organization members can reveal and analyse fresh worldwide
skills. This can help the organization take advantage of cross-border commercial
possibilities and adapt to global market conditions, boosting internationalization. IEO can
motivate managers to discover new avenues and processes and, ultimately, improve
company performance.
The study found that an international entrepreneurial mindset helps born global
enterprises improve their international performance by creating network links among
groups and external partners. In this context, the UAE Government should encourage
existing and potential entrepreneurs by educating them using seminars, workshops and
international marketing training programs to assist companies in accessing new global
markets and overcoming trade barriers.
The present research also broadens the scope of internationalization by discussing its
impact on SMEs’ financial and non-financial performance. Finally, this study contributes to
the literature by developing and testing a framework based on a comprehensive review of
existing literature to include different factors and their constructs that impact the potential
internationalization of SMEs in developing economies.
This framework also holds importance for the policymakers at government and
institutional levels, as it will provide insight into the underlying factors that impact the
internationalization potential of SMEs and enable them to formulate new policies and revisit
their existing policies in this regard. The present study also highlights the importance of
developing entrepreneurial skills, which are at the forefront of any business success,
especially in the case of SMEs. These skills can be enhanced and further polished by
providing them with relevant training, identifying and nurturing talent via professional
training and further research on the topic, which is in line with the overall aims of the UAE
Government.
Influential
dynamic
capabilities
73
RIBS
33,1
74
5.3 Limitations and future research directions
The primary limitation relates to sample size (under 452). Given the scale and
importance of the topic, future research should increase the sample size to provide a
better insight into the important role of each variable in the internationalization of
SMEs. Another limitation is that the data set of the present research consisted of only
the SMEs registered in the UAE. Researchers may opt for cross-sectional data sets by
including other regional and developing economies in the future. The present research
mainly relied upon primary data and analysis based on qualitative techniques; in the
future, researchers can incorporate qualitative aspects using interviews and other
qualitative analysis tools and techniques. Future researchers can also include other
variables to enhance the present framework further, as many variables might gain or
lose their importance with time and developments in economic conditions both at
regional and international levels.
References
Andersen, O. (1993), “On the internationalization process of firms: a critical analysis”, Journal of
International Business Studies, Vol. 24 No. 2, pp. 209-231.
Andersson, S. (2004), “Internationalization in different industrial contexts”, Journal of Business
Venturing, Vol. 19 No. 6, pp. 851-875.
Anderson, E.W. and Sullivan, M.W. (1993), “The antecedents and consequences of customer
satisfaction for firms”, Marketing Science, Vol. 12 No. 2, pp. 125-143.
Bruneel, J. and De Cock, R. (2016), “Entry mode research and SMEs: a review and future research
agenda”, Journal of Small Business Management, Vol. 54, pp. 135-167.
Cook, K.S. and Emerson, R.M. (1987), Social Exchange Theory, Springer.
Costa, E., Soares, A.L. and De Sousa, J.P. (2017), “Institutional networks for supporting the
internationalisation of SMEs: the case of industrial business associations”, Journal of Business
and Industrial Marketing, Vol. 32 No. 8, pp. 1182-1202.
Costanzo, M.R., Dipchand, A., Starling, R., Anderson, A., Chan, M., Desai, S., Fedson, S., Fisher, P.,
Gonzales-Stawinski, G. and Martinelli, L. (2010), “The international society of heart and lung
transplantation guidelines for the care of heart transplant recipients”, Elsevier.
Coudounaris, D.N. (2021), “The internationalisation process of UK SMEs: exporting and non-exporting
behaviours based on a four forces behavioural model”, Review of International Business and
Strategy, Vol. 31 No. 2, pp. 217-256.
Coviello, N.E. and Martin, K.A.-M. (1999), “Internationalization of service SMEs: an integrated
perspective from the engineering consulting sector”, Journal of International Marketing, Vol. 7
No. 4, pp. 42-66.
Dabic, M., Maley, J., Dana, L.-P., Novak, I., Pellegrini, M.M. and Caputo, A. (2020), “Pathways of SME
internationalization: a bibliometric and systematic review”, Small Business Economics, Vol. 55
No. 3, pp. 705-725.
Dadzie, Z., Agyapong, A. and Suglo, A. (2020), “The role of internationalization in entrepreneurial
orientation-performance link: empirical study of SMEs in a developing nation perspective”,
Review of International Business and Strategy, Vol. 31 No. 2, pp. 257-280.
Dominguez, N. and Mayrhofer, U. (2017), “Internationalization stages of traditional SMEs: increasing,
decreasing and re-increasing commitment to foreign markets”, International Business Review,
Vol. 26 No. 6, pp. 1051-1063.
Dunning, J.H. (2015), “The eclectic paradigm of international production: a restatement and some
possible extensions”, The Eclectic Paradigm, Springer, pp. 50-84.
Ernst, D. and Kim, L. (2002), “Global production networks, knowledge diffusion, and local capability
formation”, Research Policy, Vol. 31 Nos 8/9, pp. 1417-1429.
Faiz Masnan, N.M. and Saad, A.A.R. (2018), “Assessing the implications of dynamic capability
and international opportunity recognition on export performance of manufacturing SMEs
in Malaysia”, International Journal of Academic Research in Business and Social Sciences,
Vol. 8.
Falahat, M., Ramayah, T., Soto-Acosta, P. and Lee, Y.-Y. (2020), “SMEs internationalization: the role of
product innovation, market intelligence, pricing and marketing communication capabilities as
drivers of SMEs’ international performance”, Technological Forecasting and Social Change,
Vol. 152, p. 119908.
Filipescu, D.A., Rialp, A. and Rialp, J. (2009), Internationalisation and Technological Innovation:
Empirical Evidence on Their Mutual Relationship, Emerald Group Publishing, Bingley.
Fletcher, R. (2001), “A holistic approach to internationalisation”, International Business Review, Vol. 10
No. 1, pp. 25-49.
Francioni, B., Pagano, A. and Castellani, D. (2016), “Drivers of SMEs’ exporting activity: a review and a
research agenda”, Multinational Business Review, Vol. 24 No. 3, pp. 194-215.
Hair, J.F., Anderson, R.E., Tatham, R.L. and Black, W.C. (1998), Multivariate Data Analysis, Vol. 5,
Prentice Hall, Englewood Cliff, NJ, pp. 207-2019.
Hayes, A.F. (2009), “Beyond baron and Kenny: statistical mediation analysis in the new millennium”,
Communication Monographs, Vol. 76 No. 4, pp. 408-420.
Hayes, A.F. and Preacher, K.J. (2014), “Statistical mediation analysis with a multicategorical
independent variable”, British Journal of Mathematical and Statistical Psychology, Vol. 67 No. 3,
pp. 451-470.
Hernandez, E. and Guillén, M.F. (2018), “What’s theoretically novel about emerging-market
multinationals?”, Journal of International Business Studies, Vol. 49 No. 1, pp. 24-33.
Iacobucci, D. (2008), Mediation Analysis, Sage.
Johanson, J. and Vahlne, J.-E. (2003), “Business relationship learning and commitment in the
internationalization process”, Journal of International Entrepreneurship, Vol. 1 No. 1,
pp. 83-101.
Johanson, J. and Vahlne, J.-E. (2009), “The Uppsala internationalization process model revisited: from
liability of foreignness to liability of outsidership”, Journal of International Business Studies,
Vol. 40 No. 9, pp. 1411-1431.
Johanson, J. and Wiedersheim-Paul, F. (1975), “The internationalization of the firm: four Swedish cases”,
Journal of Management Studies, Vol. 12 No. 3, pp. 305-322.
Jones, M.V., Coviello, N. and Tang, Y.K. (2011), “International entrepreneurship research (1989–2009): a
domain ontology and thematic analysis”, Journal of Business Venturing, Vol. 26 No. 6,
pp. 632-659.
Kemayel, L. (2015), “Success factors of Lebanese SMEs: an empirical study”, Procedia-Social and
Behavioral Sciences, Vol. 195, pp. 1123-1128.
Khyareh, M.M. and Rostami, N. (2021), “Macroeconomic conditions, innovation and competitiveness”,
Journal of the Knowledge Economy, Vol. 13, pp. 1-20.
Kim, H., Ku, B., Kim, J.Y., Park, Y.-J. and Park, Y.-B. (2016), “Confirmatory and exploratory factor
analysis for validating the phlegm pattern questionnaire for healthy subjects”, Evidence-Based
Complementary and Alternative Medicine, Vol. 2016.
Kobal, N., Biloslavo, R. and Raškovic, M. (2018), “SME internationalisation in the United Arab
Emirates: home-host country characteristics and the role of cultural distance”, MIC 2018:
Managing Global Diversities; Proceedings of the Joint International Conference, University of
Primorska Press, Bled, 30 May–2 June 2018, pp. 61-76.
Influential
dynamic
capabilities
75
RIBS
33,1
76
Kotabe, M. and Kothari, T. (2016), “Emerging market multinational companies’ evolutionary paths to
building a competitive advantage from emerging markets to developed countries”, Journal of
World Business, Vol. 51 No. 5, pp. 729-743.
Kuuluvainen, A. (2013), “International growth of a Finnish high-tech SME: a dynamic capabilities
approach”, Research in Economics and Business: Central and Eastern Europe, Vol. 4.
Lawless, M., Martinez-Cillero, M., O’toole, C., Gargan, E., Cantwell, L. and McGoldrick, P. (2020), “SME
investment report 2019”, Economic and Social Research Institute (ESRI) Research Series,
pp. 1-56.
Leonavicien_e, E. and Burinskien_e, A. (2022), “Accelerating cultural dimensions at international
companies in the evidence of internationalisation”, Sustainability, Vol. 14 No. 3, p. 1524.
Lin, S. (2010), “Internationalization of the SME: towards an integrative approach of resources
and competences. 1er Colloque Franco-Tchèque”, Trends in International Business,
pp. 117-135.
Liu, J.-L., Ma, C.-Q., Ren, Y.-S. and Zhao, X.-W. (2020), “Do real output and renewable energy
consumption affect CO2 emissions? Evidence for selected BRICS countries”, Energies, Vol. 13
No. 4, p. 960.
Lloyd-Reason, L., Ibeh, K. and deprey, B. (2009), “Top barriers and drivers to SME
internationalisation”.
McDougall, P.P. (1989), “International versus domestic entrepreneurship: new venture
strategic behavior and industry structure”, Journal of Business Venturing, Vol. 4 No. 6,
pp. 387-400.
McDougall, P.P., Shane, S. and Oviatt, B.M. (1994), “Explaining the formation of international new
ventures: the limits of theories from international business research”, Journal of Business
Venturing, Vol. 9 No. 6, pp. 469-487.
Mackinnon, D.P., Lockwood, C.M., Hoffman, J.M., West, S.G. and Sheets, V. (2002), “A comparison of
methods to test mediation and other intervening variable effects”, Psychological Methods, Vol. 7
No. 1, p. 83.
Maklan, S. and Klaus, P. (2011), “Customer experience: are we measuring the right things?”,
International Journal of Market Research, Vol. 53 No. 6, pp. 771-772.
Moen, Ø. and Rialp, A. (2019), “European SMEs and the born global concept”, The Routledge
Companion to European Business, Taylorfrancis.
Monteiro, A.P., Soares, A.M. and Rua, O.L. (2019), “Linking intangible resources and entrepreneurial
orientation to export performance: the mediating effect of dynamic capabilities”, Journal of
Innovation and Knowledge, Vol. 4 No. 3, pp. 179-187.
Mundell, R.A. (1957), “International trade and factor mobility”, The American Economic Review,
Vol. 47, pp. 321-335.
Pavlou, P.A. and El Sawy, O.A. (2011), “Understanding the elusive black box of dynamic capabilities”,
Decision Sciences, Vol. 42 No. 1, pp. 239-273.
Prasertsakul, D. (2013), “The role of dynamic capabilities in export performance of firms from emerging
economies”, International Business Research, Vol. 6 No. 8, p. 102.
Preacher, K.J. and Hayes, A.F. (2004), “SPSS and SAS procedures for estimating indirect effects in simple
mediation models”, Behavior Research Methods, Instruments, and Computers, Vol. 36 No. 4,
pp. 717-731.
Rauch, A.F. and Frese, M. (2007), “Born to be an entrepreneur? Revisiting the personality approach of
entrepreneurship”, in Baum, J., Frese, M. and Baron, R. (Eds), The Psycology of Entrepreneurship,
1st ed., Lawrence Erlbaum Associates, Filadelfia.
Ruzzier, M., Hisrich, R.D. and Antoncic, B. (2006), “SME internationalization research: past, present,
and future”, Journal of Small Business and Enterprise Development, Vol. 13 No. 4, pp. 476-497.
Saeed, A. and Ziaulhaq, H.M. (2019), “The impact of CEO characteristics on the internationalization of
SMEs: evidence from the UK”, Canadian Journal of Administrative Sciences/Revue Canadienne
des Sciences de l’Administration, Vol. 36, pp. 322-335.
Santhosh, C. and Bala Subrahmanya, M.H. (2020), “The speed and the degree of SME internationalisation
in Bangalore: an analysis of its determining factors”, Journal of Entrepreneurship and Innovation in
Emerging Economies, Vol. 6 No. 2, pp. 315-328.
Santra, I.K. (2018), “Entrepreneurial orientation and marketing performance of budget hotel SMEs in
Bali Island”, International Journal of Entrepreneurship, Vol. 22, pp. 1-11.
Saunila, M. and Ukko, J. (2014), “Intangible aspects of innovation capability in SMEs: impacts of size
and industry”, Journal of Engineering and Technology Management, Vol. 33, pp. 32-46.
Schweizer, R., Vahlne, J.-E. and Johanson, J. (2010), “Internationalization as an entrepreneurial process”,
Journal of International Entrepreneurship, Vol. 8 No. 4, pp. 343-370.
Smallbone, D., Saridakis, G. and Abubakar, Y.A. (2022), “Internationalisation as a stimulus for SME
innovation in developing economies: comparing SMEs in factor-driven and efficiency-driven
economies”, Journal of Business Research, Vol. 144, pp. 1305-1319.
Steinhäuser, V.P.S., Paula, F.D.O. and De Macedo-Soares, T.D.L.V.A. (2021), “Internationalization of
SMEs: a systematic review of 20 years of research”, Journal of International Entrepreneurship,
Vol. 19 No. 2, pp. 164-195.
Tartaglione, A.M., Sanguigni, V., Cavacece, Y. and Fedele, M. (2019), “Analyzing the role of dynamic
capabilities in the internationalization of gradual global SMEs”, International Business Research,
Vol. 12 No. 12, pp. 1-61.
Teece, D.J. (2018), “Business models and dynamic capabilities”, Long Range Planning, Vol. 51 No. 1, pp. 40-49.
Tekin, E., Ramadani, V. and Dana, L.-P. (2021), “Entrepreneurship in Turkey and other Balkan
countries: are there opportunities for mutual co-operation through internationalisation?”, Review
of International Business and Strategy, Vol. 31 No. 2, pp. 297-314.
Virglerova, Z., Panic, M., Voza, D. and Velickovic, M. (2021), “Model of business risks and their impact
on operational performance of SMEs”, Economic Research-Ekonomska Istraživanja, pp. 1-18.
Volgger, M., Pechlaner, H., Scuttari, A. and Innerhofer, E. (2019), “Architectural governance and the
coordination of building culture: an exploratory reflection”, Atmospheric Turn in Culture and
Tourism: Place, Design and Process Impacts on Customer Behaviour, Marketing and Branding,
Emerald Publishing, Bingley.
Vrontis, D. and Christofi, M. (2021), “R&D internationalization and innovation: a systematic review, integrative
framework and future research directions”, Journal of Business Research, Vol. 128, pp. 812-823.
Vuong, B.N., Duy Phuong, N.N., Huan, D.D. and Quan, T.N. (2020), “A model of factors affecting
entrepreneurial intention among information technology students in Vietnam”, Journal of Asian
Finance, Economics and Business, Vol. 7 No. 8, pp. 461-472.
Welch, L.S. and Luostarinen, R. (1988), “Internationalization: evolution of a concept”, Journal of General
Management, Vol. 14 No. 2, pp. 34-55.
Yener, M., Do
gruo
glu, B. and Ergun, S. (2014), “Challenges of internationalization for SMEs and
overcoming these challenges: a case study from Turkey”, Procedia – Social and Behavioral
Sciences, Vol. 150, pp. 2-11.
Zaki, A.M. (2018), “Determinants of SME internationalization and the impact on business performance:
an empirical study of outward internationalization adoption by Malaysian SMEs”, Doctoral
thesis, Birmingham City University, available at: www.open-access.bcu.ac.uk/7274/
Zaki, A.M. (2019), “Determinants of SME internationalisation and the impact on business performance:
an empirical study of outward internationalisation adoption by Malaysian SMEs”, Birmingham
City University.
Zeng, S., Xie, X., Tam, C.M. and Wan, T. (2009), “Relationships between business factors and
performance in internationalization: an empirical study in China”, Management Decision.
Influential
dynamic
capabilities
77
RIBS
33,1
Zeng, S.-X., Meng, X.-H., Zeng, R.-C., Tam, C.M., Tam, V.W. and Jin, T. (2011), “How environmental
management driving forces affect environmental and economic performance of SMEs: a study in
the Northern China District”, Journal of Cleaner Production, Vol. 19 No. 13, pp. 1426-1437.
Zucchella, A. and Magnani, G. (2016), International Entrepreneurship: Theoretical Foundations and
Practices, Springer.
78
Further reading
Wach, K. and Wehrmann, C. (2014), “Entrepreneurship in international business: international
entrepreneurship as the intersection of two fields”, International Entrepreneurship and
Corporate Growth in Visegrad Countries, Vol. 9.
Corresponding author
Jacob Poopada Cherian can be contacted at: jacob.cherian@adu.ac.ae
For instructions on how to order reprints of this article, please visit our website:
www.emeraldgrouppublishing.com/licensing/reprints.htm
Or contact us for further details: permissions@emeraldinsight.com