The interplay of innovation and internationalisation in the foreign market entry mode and international market selection process of SMEs

Abstract

In an interconnected, globalised world where the success of companies increasingly relies on internationalisation, innovation has emerged as a crucial strategic decision for firm’s strong development and competitiveness. While there tends to be a consensus in the literature regarding the growing significance of internationalisation and innovation, certain questions arise regarding the relationship between innovation and entry modes with lower market commitment as well as destination markets with lower risks. This study aims to investigate whether a discernible pattern of relationship exists between internationalisation modes, destination markets, and innovation among small and medium-sized Portuguese firms. To accomplish this research objective, we developed and distributed an online questionnaire survey and collected empirical data from Portuguese SMEs. The final dataset consisted of 310 valid responses, which were subjected to statistical analysis using IBM SPSS 27.0 Statistics software. Considering the categorical nature of the data (measured on a nominal or ordinal scale), we applied robust quantitative analysis techniques. More specifically, we employed exploratory statistical analyses, including univariate and multivariate exploratory factorial analysis (EFA), as well as inferential analysis (e.g., Spearman's correlation and Chi-square test for correlation analysis, and Mann-Whitney nonparametric test). Our findings provide empirical evidence that companies employing internationalisation modes requiring greater commitment, along with those targeting geographically and psycho-logically distant destination markets, tend to attach greater importance to innovation as a determinant of internationalisation. Our study carries important theoretical and practical implications.