Institutional Fragility, Firm-Level Factors, and Internationalization: The Case of Chinese SMEs

Abstract

Compared to their sizable state-owned counterparts, Chinese small and medium-sized enterprises (SMEs) are facing a more stringent institutional environment, which leads to regulative institutional fragility and significantly influences internationalization of Chinese SMEs. Using the dataset from the 2012 World Bank Enterprise Survey, we divide the internationalization of Chinese SMEs into two phases: internationalization decision-making and international development. We found that institutional fragility is positively associated with the propensity of Chinese SMEs to go international but negatively associated with their international growth stage. Additionally, these effects were contingent on firm- level factors including managers’ experience and possession of an internationally-recognized certification.