Understanding the De‐internationalization of Entrepreneurial SMEs in a Volatile Context: A Reconnoitre on the Unique Compositions of Internal and External Factors
| Published date | 01 October 2023 |
| Author | Vahid Jafari‐Sadeghi,Hannan Amoozad Mahdiraji,Pawan Budhwar,Demetris Vrontis |
| Date | 01 October 2023 |
| DOI | http://doi.org/10.1111/1467-8551.12688 |
British Journal of Management, Vol. 34, 2116–2137 (2023)
DOI: 10.1111/1467-8551.12688
Understanding the De-internationalization
of Entrepreneurial SMEs in a Volatile
Context: A Reconnoitre on the Unique
Compositions of Internal and External
Factors
Vahid Jafari-Sadeghi ,1Hannan Amoozad Mahdiraji ,2
Pawan Budhwar 1and Demetris Vrontis 3
1Aston Business School, Aston University, The Aston Triangle, Birmingham, B4 7ET, United Kingdom,
2School of Business, University of Leicester, Brookeld, London Road, Leicester, LE2 1RQ, United Kingdom,
and 3School of Business, University of Nicosia, Μακδον´ιτισσης46, Nicosia, 2417, Cyprus
Corresponding author email: v.jafari-sadeghi@aston.ac.uk
In recent years, the global business environment has witnessed a wave of de-
internationalization not only among multinationals but also among small- and medium-
sized enterprises (SMEs). This disengagement of cross-border activities is deemed to
be driven by various rm-specic factors, as well as by external factors. Building on
the premise of the non-linear internationalization debate and focusing on the dynamic
capabilities view and institutional theory, this paper aims to disentangle the extent
to which internal factors (IFs) and external factors (EFs) drive SMEs towards de-
internationalization. To do this, we take advantage of a hybrid multilayer decision-
making mathematical modelling approach to exploreSME de-internationalization at two
levels. Our ndings at the exhaustivelevel contribute to the de-internationalization liter-
ature by proposing distinct frameworks that highlight the interrelationshipamongst IFs
and EFs. And our results at the subordinate level constitute the identication of four
unique compositions leading to different de-internationalization modes. In this vein, we
dene two categories of factors, namely reducing and terminating factors, which drive
SMEs into respectively partial and full de-internationalization.
Introduction
The international entrepreneurship literature has
extensively investigated the extent to which small-
and medium-sized enterprises (SMEs) interna-
tionalize (e.g. Freixanet and Renart, 2020). For
instance, research on micro-foundations seeks to
explore the psychological and behavioural compo-
nents of internationalization, such as managerial
capabilities and internationalization intention
(Vanderstraeten et al., 2020). Also, environmental
studies build on external factors such as institu-
tional arrangements to disentangle the hows and
whys of the interactions of internationalizers with
various settings and institutional systems (Sadeghi
et al., 2019). However, it should be noted that in-
ternationalization is not always a forward-moving
phenomenon but rather an intricate and high-
risk process within which rms are likely to fail
(Freeman, Deligonul and Cavusgil, 2013). Vissak
and Francioni (2013) highlight that interna-
tionalization is not merely a linear process, and
rms tend to experience a uctuation in their
level of international market engagement. Hence,
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of Management.
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Understanding the De-internationalization of Entrepreneurial SMEs 2117
internationalized rms are likely to decrease or
increase the intensity of their cross-border ac-
tivities (Lafuente, Stoian and Rialp, 2015) and,
irrespective of their initial entry mode, they
might partially withdraw from foreign markets,
completely discontinue their cross-border com-
mitments, or re-internationalize later (Bernini, Du
and Love, 2016).
Despite increasing insights into multinational
enterprises, little attentionhas been paid to explor-
ing de-internationalization among SMEs. This is
surprising, because small rms are deemed to be
highly fragile in foreignmarkets (Hagen, Zucchella
and Ghauri, 2019), and hence it is more likely for
them to de-internationalize. SMEs’ limited capa-
bilities and dynamism, along with their liability
of newness in the intricate international business
environment (Lahiri, Mukherjee and Peng, 2020;
Sadeghi et al., 2019), can mean that they are
likely to give up their cross-border commitments.
Following Morgan’s (1997) seminal classication,
several external and internal factors push SMEs to
de-internationalize. External factors are regarded
as being strongly related to environmental insti-
tutions (Tang et al., 2021). For example, Kostova,
Roth and Dacin (2008) point out that the organi-
zational survival of international rms is highly
dependent on their alignment with the external
environment. Similarly, Santangelo and Meyer
(2011) conrm that, depending on the institutional
context, the international commitments of rms
can decline. As such, high levels of institutional
voids and uncertainty will increase the risk of
adaptation to the host market, thus making it
more likely for them to decide against internation-
alization (Dominguez and Mayrhofer, 2017).
In a parallel vein, internal factors explain that
insufcient development or a lack of dynamic ca-
pabilities can be seen as antecedents of SMEs
withdrawing from internationalization. In this re-
gard, Teece (2007) considers dynamic capabilities
from the perspectives of sensing, seizing and re-
conguring capabilities. Indeed, dynamic capabil-
ities are a portfolio that includes several crucial
managerial and organizational competencies that
enable ventures not only to promptly anticipate
and shape their business environment but also to
obtain agility, which is crucial in the complex pro-
cess of internationalization (Mudalige, Ismail and
Malek, 2019; Shams et al., 2021). Furthermore, re-
lying on such capabilities provides dynamism so
that rms can be responsive to their ever-changing
environment, such as constant technological evo-
lution or targeting new business opportunities
in cross-national markets (Cavusgil, Seggie and
Talay, 2007; Uner,Cetin and Cavusgil, 2020). That
is, de-internationalization is strongly triggered
by SMEs’ poor development of their dynamic
capabilities (Crick, Crick and Chaudhry, 2020;
Weerawardena et al., 2007).
Although the literature does offer insights
into external factors (EFs) and internal factors
(IFs) that decrease/terminate the cross-border
footprint of rms, this research builds on two
distinct levels of exhaustive and subordinate
analysis to address several shortcomings in SME
de-internationalization research. The former (ex-
haustive level) considers de-internationalization
generally as the reduction or termination of SMEs’
international commitment regardless of their ini-
tial internationalization strategy. In this regard,
the literature has a limited understanding of the
varying nature of pertinent IFs and EFs, as well
as of their inter-relationships, that drive SMEs
towards de-internationalization. Accordingly, the
exhaustive level of analysis strives to bridge this
gap by dividing IFs and EFs into two categories.
Causal factors are those that play as root contrib-
utors, which directlyor indirectly impact the sever-
ity of others, and effect factors are those whose
intensity is highly dependent on causal factors
(Jafari-Sadeghi et al., 2022a). The subordinate
level of study, on the other hand, aims to synthe-
size the alternative under-researched modes by
which SMEs de-internationalize. Our rationale is
that, as SMEs employ various international com-
mitments, such as exporting, international R&D,
and foreign technologylicensing (e.g. Davcik et al.,
2021), their subsequent de-internationalization
can occur in different modes. Accordingly, al-
though the majority of studies have focused on
the reduction or withdrawal of direct exports
(e.g. Crick, 2004), the subordinate-level explo-
ration assists in identifying the compositions
of IFs and EFs that drive SMEs to various
de-internationalization modes.
Furthermore, extant de-internationalization
studies have extensively focused on more stable
countries – such as France (Bernini, Du and
Love, 2016) – and there is limited knowledge
of divergent contexts in which unique geopolit-
ical characteristics are associated with volatility
and restrictions. This is particularly important
because geopolitical contexts radically increase
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