Reframing government support for SMEs’ performance in international market: the critical role of institutional context

Abstract

Purpose This paper seeks to explore how contextual factors influence the effectiveness of government support initiatives in enhancing the international performance (IP) of small and medium-sized enterprises (SMEs). Addressing the fragmented nature of international business literature regarding institutional context, this study adopts an institution-based view (IBV) to examine how specific components of institutional context act as moderators in the relationship between government support and SME performance in international markets. Design/methodology/approach The study is grounded in empirical research, utilizing data collected from 257 exporting SMEs in the Caucasus region through a random sampling method, achieving a response rate of 57.1%, comparable to similar studies in international business. Data analysis was conducted using Partial Least Squares Structural Equation Modeling (PLS-SEM) to assess both direct effects and moderating relationships. Findings The results confirm that government support, whether informational or experiential, significantly enhances SMEs’ performance in international markets. However, the relationship between government support and IP is moderated by the stability and specificity of the institutional environment. Institutional enforceability does not exhibit a significant moderating effect. Notably, institutional predictability moderates only the relationship between informational support and SMEs’ IP, highlighting the nuanced role of institutional context. Originality/value This research contributes to international business literature by applying an IBV, emphasizing the critical role of context in interactions among market stakeholders. It provides novel insights into how institutional context shapes the effectiveness of government support initiatives in fostering international success for SMEs, particularly in emerging economies. These findings advance the understanding of institutional context influences on SME internationalization and highlight the importance of tailoring government support in accordance with institutional context.