The influence of digitalization on SMEs’ OFDI in emerging countries

Abstract

The role of digitalization has been understudied in the literature on small and medium-sized enterprises’ (SMEs) outward foreign direct investment (OFDI) in emerging countries. Building on the internalization and dynamic capabilities theories, this paper examines how digitalization facilitates OFDI by SMEs in emerging countries. Using a dataset of 562 Chinese SMEs from 2011 to 2020, we find that SMEs’ digitalization has a positive impact on their OFDI levels, measured using both the number of overseas subsidiaries and the number of host countries. This effect is mediated by a firm’s dynamic capability and moderated by top managers’ international experience and industry competitive intensity. This paper contributes to the literature by revealing the mechanisms by which digitalization affects SMEs’ OFDI and the boundary conditions that may moderate this relationship.