Government support, strategic capability and SMEs’ international competitiveness: evidence from a small open economy

What the paper says

Purpose This study asserts that the enhancement of international competitiveness depends on a combination of both endogenous and exogenous factors, extending beyond the scope of firms’ capabilities alone. To address this challenge, the research aims to understand the impact of government support, acting as an exogenous intervention through both informational and experiential initiatives, on enhancing the competitiveness of SMEs in the international market. To provide a comprehensive explanation, the research framework also incorporates strategic capability (SC) to represent endogenous effects. Design/methodology/approach This inquiry employs an empirical methodology utilizing data obtained from Armenian exporter SMEs. The data collection utilized a quota sampling approach, aiming to adequately represent the three primary categories aligned with the structure of international trades in Armenia. The relationships within the data were scrutinized through partial least squares structural equation modeling. Findings The examination identifies a positive and direct correlation between experiential initiatives and the competitiveness of SMEs, while informational initiatives do not demonstrate a direct influence on competitiveness. However, the findings reveal the role of SC in directing exogenous interventions to enhance the competitiveness of SMEs in the international market, encompassing both experiential and informational initiatives. Therefore, the findings of this study emphasize the combination of both endogenous and exogenous factors to foster competitiveness and underscore the importance of not neglecting either of these factors. Originality/value This study breaks new ground by examining how external interventions impact international market competitiveness, challenging the conventional view that competitiveness is solely shaped by internal factors. It investigates the intricate relationships among competitiveness, government support, and SC, uncovering both direct and indirect associations. Moreover, it contributes to the international business literature by shedding light on the pivotal role of government support in enhancing competitiveness. Practically, the findings offer valuable guidance to policymakers and managers, stressing the importance of customizing external interventions to meet the specific needs of SMEs and strategically aligning them with internal factors for maximum effectiveness.