Abstract: This study examines the effocts a/economic globalization on competitive situations oflocalfinns in a small economy, the strategic responses ofthesefinns to the competitive developments, and marketing and financial peiformcmce outcomes of these strategies. Findings indicate both benificial and deleterious ejj(!Cts oj economic globalization un domestic competitive situations. Findings also indicate variations in strategic responses andpeifonncmce outcomes oflocalfinns. Implications are presented along with recommendations/or foture research. Keyvvords: Economic Globalization, Strategic Response, Small Island Developing States, Performance F OR FIRMS IN small economies, the phenomenon of economic globalization has a significantly different meaning than for firms in the large economies of North America, Western Europe, and Asia. Most of the firms in small economies face a different set of constraints in responding to competitive developments due to their size, location, resource endowments, market size, and managerial expertise. For these finns, as competitive pressures continue to increase due to economic globalization, the issues ohmderstanding competitive developments, developing appropriate and effective strategies, and managing performance outcomes have become critically important. Although international business scholars aclmowledge the significance of small and mid-sized enterprises (SMEs) because of the roles they play in an economy, a review of the literature reveals that most of their attention and effort have been devoted to understanding the behavior oflarge firms from large developed economies. Recently, however, in response to calls for examining SMEs (Aulakh et al., 2000; Ramirez-Aleson and Espitia-Escuer, 2001), scholarly attention has shifted to llllderstanding strategic actions and performance outcomes ofSMEs (Chiao et al., 2006; Baird et al., 1994). While there now exists a growing body of research on SMEs from developed and developing economies, there still remains a group of SMEs that has not received much attention. These are the SMEs from very small econOITlles. The focus of existing studies on large developed and developing economies is llllderstandable, given that firms from these economies have played a signi-ficant role in promoting and shaping global trade and investments. However, most ofthe economies in the world are neither large nor developed. Global data indicates that, except for the few developed and developing economies, most of the economies in the world are small economies. And, among these small economies, measured by gross domestic product (GDP), some are considerably small, with GDP less than the annual revenue of a mid-sized company in a large developed economy such as the U. S. or Japan. For example, in the Caribbean, a majority of the island economies have G DP less than $5 billion (see Table I). Firms in these very small island economies face two major issues related to economic globalization. First, they lack financial and managerial resources to compete with corporations from large developed or developing economies. Second, they operate in a market whose size does not yield opportunities to exploit either economies of scale or scope. For these finns, thus, the concern is more pressing and immediate: How to survive when competitive pressure keeps mOllllting due to economic globalization. As such, this paper focuses on three substantive questions: How has economic globalization affected the competitive environment for local firms in a small economy, how have local finns in this small economy responded to competitive threats coming from economic globalization, and what happened to their marketing and financial performance as a result of the strategies they implemented? This paper attempts to answer these questions with respect to Barbados, a small island Caribbean economy.