The role of networks and capabilities in the internationalization of SMEs in North Africa: The case of Egyptian SMEs

Executive SummaryThis research studies the role of networks in the internationalization of small and medium enterprises (SMEs) in an emerging country; mediated by internationalization capabilities. Self-administered surveys targeting 300 SMEs in Egypt were employed, and Structural Equation Modeling (SEM) was used to test the proposed hypotheses. The results indicated that nonbusiness institutional networks have a direct positive impact on Egyptian SMEs' international performance, while the direct relationship between interfirm networks and social networks with international growth showed insignificant results. Moreover, the mediating role of the internationalization capabilities showed significant results between the three types of networks and SMEs' international performance. This study is an original attempt to differentiate among the types of networks, and how each affect SMEs' international growth. Additionally, empirical evidence is provided for the role of networks in building SMEs' internationalization capabilities in an emerging country context, where research has received less attention. This research aims to study the role of networks in the internationalization of small and medium enterprises (SMEs) in an emerging country. The research also investigates the mediating effect of internationalization capabilities; namely disruption and value-adding capabilities in the internationalization process. This study is following a conclusive descriptive research design, utilizing a quantitative methodology using self-administered surveys. Data were collected from 300 SMEs in Egypt from various industries. The results indicated that nonbusiness institutional networks have a direct positive impact on Egyptian SMEs' international performance. However, the direct impact of interfirm networks and social networks on SMEs' international performance showed insignificant results. Moreover, the mediating role of the internationalization capabilities, namely disruption capabilities and value-adding capabilities, showed significant results; mediating the relationship between the three types of networks and SMEs' international performance. This study contributes to the networks theory as well as the dynamic capabilities theory, where we postulate that various types of networks support the development of specific capabilities crucial for firms' internationalization. The study is important for SME managers as it identifies the specific importance of business, social, and nonbusiness institutional networks to enhance SMEs' international performance in emerging countries. This study employed AMOS-SPSS version 21 for data analysis.