Internationalization effects on performance: the case of the Portuguese textile and apparel SMEs

Abstract

The objective of this paper is to empirically examine the relationship between the firms’ degree of internationalization and their financial performance. The literature about performance determinants is abundant however the relation between performance and internationalization in the context of Small and Medium Enterprises (SMEs) from a small and open economy is much less studied. This paper is focused on the Portuguese textile and wearing firms due to their importance for the economy. It is used an unbalanced panel data of 638 firms for the period from 2010 to 2016 and applied a random effects model. The results indicate that internationalization promotes firm performance, in particular when exports are directed to closer markets and conducted by small firms. Also, the presence of a non-linear relationship between internationalization and performance calls for managers’ attention to its dysfunctional consequences for firm performance, especially at intermediate levels of internationalization.