Journal of Small Business and Enterprise Development

SME international performance in Latin America: The role of entrepreneurial and

technological capabilities
Constanza Bianchi Charmaine Glavas Shane Mathews
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Constanza Bianchi Charmaine Glavas Shane Mathews , (2017)," SME international performance in
Latin America The role of entrepreneurial and technological capabilities ", Journal of Small Business
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JSBED
24,1 SME international performance in
Latin America
The role of entrepreneurial and
176 technological capabilities
Received 21 September 2016
Constanza Bianchi
Revised 1 November 2016 School of Business, Universidad Adolfo Ibáñez, Santiago,
18 November 2016
Accepted 22 November 2016 Chile and School of Advertising, Marketing and Public Relations,
QUT Business School, Queensland University of Technology,
Brisbane, Australia, and
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Charmaine Glavas and Shane Mathews

School of Advertising, Marketing and Public Relations, QUT Business School,
Queensland University of Technology, Brisbane, Australia

Abstract
Purpose – Small- and medium-sized enterprises (SMEs) from emerging markets in Latin America are
increasingly engaging in internationalization. Nevertheless, there is limited research into how these firms
achieve international performance. The purpose of this paper is to examine managerial and
technology-related capabilities and their impact on international performance of SMEs.
Design/methodology/approach – Drawing on data from 233 Chilean SMEs, a model is developed and
tested using structural equation modeling. Specifically, the model considers the role of international
entrepreneurial orientation and internet technology capabilities on SME international performance, taking
into account the mediating effect of international entrepreneurial opportunity recognition and
technology-related international networks.
Findings – Results show that international entrepreneurial opportunity recognition and international
networks mediate the relationship between international entrepreneurial orientation and internet technology
capabilities on SME international performance.
Research limitations/implications – The context for the study is Chile. However, this is an important
emerging market in Latin America with a strong focus on SME internationalization. The research design is
cross-sectional and so does not allow for any causal claims to be made.
Originality/value – This research contributes to the relatively scant but increasing number of empirical
studies which investigate the link between internationalization strategy and SME performance in emerging
market contexts.
Keywords Internet, Chile, Technological capabilities, Entrepreneurial capabilities,
International entrepreneurship orientation, SME internationalization
Paper type Research paper

1. Introduction
There has been a rising trend in internationalization among small- and medium-sized
enterprises (SMEs) in the last decade, and SME international performance has emerged as an
important topic for investigation (Ruzzier et al., 2006). Particularly, more and more SMEs from
emerging economies are expanding their operations into international markets (Aulakh et al.,
2000). These firms generate a large proportion of economic growth and new-job creation in
emerging markets (Lyon et al., 2000). Academics, businesses, and governments increasingly
recognize that gaining a better understanding of the internationalization process of SMEs,
Journal of Small Business and
especially from emerging markets, is a very important endeavor (Filatotchev et al., 2009).
Enterprise Development However, prior research into SME internationalization has focused mostly on large,
Vol. 24 No. 1, 2017
pp. 176-195
© Emerald Publishing Limited The authors acknowledge financial support from Millennium Nucleus in Entrepreneurial Strategy
1462-6004
DOI 10.1108/JSBED-09-2016-0142 Under Uncertainty (NS130028).
 multinational enterprises from developed countries (Olejnik and Swoboda, 2012; Spence and SME
Crick, 2006), and less attention has been paid to SME internationalization from emerging international
markets (Bianchi and Wickramasekera, 2016). performance
Recent research suggests that superior SME international performance may arise from
technological (Aspelund and Moen, 2004) and entrepreneurial resources and capabilities (Glavas
et al., 2016; Glavas and Mathews, 2014; Reuber and Fischer, 2011). SMEs focus on internal
entrepreneurial capability development in order to overcome their size disadvantage and to take 177
risks as they pursue internationalization (Maranto-Vargas and Gómez-Tagle-Rangel, 2007).
In addition, technology, such as the internet, provides SMEs with specific capabilities that allow
organizations to establish a direct interface with international customers and suppliers
(Gabrielsson and Manek Kirpalani, 2004; Loane, 2005; Mathews and Healy, 2008). However, how
these capabilities impact international performance is still not well understood (Liao et al., 2009;
Mostafa et al., 2006; Reuber and Fischer, 2011), and limited empirical research has been
conducted on the impact of entrepreneurial and technological capabilities on SME international
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performance (Glavas et al., 2016; Sinkovics et al., 2013).

Furthermore, while a mere internet presence implies instant internationalization from a
technological perspective, this is limited because the successful deployment of a virtual
presence is restrained by the firm’s functional and organizational capabilities (Kotha et al.,
2001); that is, having internet access does not necessarily mean that a business is instantly
international. Instead, to grow in highly competitive international business environments
firms have to search beyond their current resource base (Liao et al., 2009). Simply
redeploying the firm’s current resources in dynamic, fast-changing internet environments
may not suffice for business performance.
Moreover, research on SME internationalization conducted in developed countries may
not necessarily be relevant for emerging regions due to different environments. Emerging
market contexts have lower levels of economic development compared to developed nations
(Wright et al., 2005); thus, the internationalization process of emerging market SMEs may
require specific resources and capabilities (Bianchi and Wickramasekera, 2016). However,
scant research has considered the internationalization process of SMEs from emerging
economies (Wright et al., 2005), and in particular from Latin American countries (Ciravegna
et al., 2014; Da Rocha et al., 2012).
Latin America’s current strategy of market liberalization relies heavily on private
initiative and entrepreneurship. Thus, a better understanding of SME internationalization
from emerging markets is important to facilitate the international growth of such firms
(Filatotchev et al., 2009) and to maintain the economic vitality of these countries (Bianchi and
Garcia, 2007; Gripsrud, 1990; Ibeh and Kasem, 2011; Katsikea and Skarmeas, 2003; Leonidou
et al., 1998). Further, most Latin American research has focused on the nation of Brazil
(Azzi da Silva and da Rocha, 2001; Christensen et al., 1987; Haar and Ortiz-Buonafina, 1995),
while countries with smaller domestic markets, such as Chile, have received limited
attention from researchers (Bianchi and Wickramasekera, 2016).
This study responds to calls for more research on internationalization of SMEs from emerging
markets (Autio et al., 2011; Coviello, 2006; Coviello and Jones, 2004). Drawing on a resource-based
view (RBV) and capabilities approach (Barney, 1991; Teece, 2007; Teece et al., 1997), this paper
contributes to the understanding of how developing entrepreneurial and technological
capabilities in SMEs can improve emerging market SMEs’ international performance.
Specifically, the authors develop a conceptual model, proposing that entrepreneurial and
technological capabilities such as international entrepreneurial orientation and internet
technology capabilities contribute to emerging market SME international performance
indirectly by impacting international entrepreneurial opportunity recognition and technology-
based network relationships. These two mediating variables have recently been found to be key
antecedents of international performance for small entrepreneurial firms (Glavas et al., 2016).
 JSBED This research makes the following theoretical contributions to the literature on SME
24,1 internationalization in emerging markets. First, this study quantitatively tests a model that
considers the relationship between entrepreneurial and technology-based capabilities
drawing on an RBV and capabilities approach (Barney, 1991; Teece, 2007; Teece et al., 1997).
Second, this research contributes to the relatively scant but increasing number of empirical
studies which investigate the link between internationalization strategy and performance in
178 emerging market contexts (Calantone et al., 2006). This clarifies our understanding of what
factors affect SME international performance in a Latin American market. Finally, this
study contributes to the limited empirical research that advises international SMEs on how
to be more effective in their efforts and practices (Sinkovics et al., 2013). Thus, the findings
and implications of this study should be of value to researchers, practitioners, consultants,
and governments of emerging markets in Latin America. For practitioners and consultants
the findings of this study should enable SME owner/managers and consultants to better
understand the factors that lead to more effective internationalization outcomes.
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The rest of the paper is organized as follows. First, the current literature on SME
internationalization is examined. The next section explains the methodology and conceptual
framework. Finally, the findings are reported and the paper concludes with a discussion of
their implications and suggestions for future research.

2. Literature review
While a number of theoretical frameworks have been developed over the past decade to explain
how international firm performance is achieved, one of the most predominant perspectives has
been the RBV of the firm (Barney, 1986, 1991; Wernerfelt, 1984). The RBV suggests that a firm
can attain a competitive advantage by acquiring-specific resources (Dhanaraj and Beamish,
2003; Lu et al., 2010). Barney (1991) classifies resources broadly as “all assets, capabilities,
organizational processes, firm attributes, information, knowledge, etc.” (p. 101). This definition
has partly resulted in synonymous usage of the terms. This study follows the perspective that
resources, processes, and capabilities clearly differ from one another, as resources cannot be a
source of competitive advantage by themselves (Ray et al., 2004). However, not all processes
will be a source of competitive advantage for a firm. The RBV suggests that processes that
exploit intangible firm resources are more likely to be a source of competitive advantage than
processes that exploit tangible firm resources (Barney, 1991).
Capabilities are defined as “a firm’s capacity to deploy resources, using organizational
processes, to effect a desired end” (Amit and Schoemaker, 1993, p. 35). From this perspective,
capabilities can be understood as a firm’s orientation to integrate and reconfigure its resources
and processes and, even more importantly, transform its processes in response to foreign
environments to achieve sustainable competitive advantage (Wang and Ahmed, 2007).
Thereby, the term “dynamic” refers to the capacity to adapt to changing environments and find
innovative solutions to new problems through the adaptation, integration, and reconfiguration
of resources and processes (Teece et al., 1997). Wang and Ahmed (2007) describe the nature of
dynamic capabilities as behavioral orientation, whereas Teece et al. (1997) consider dynamic
capabilities to be an ability or a capacity. Overall, there are many different conceptualizations
of dynamic capabilities; this study uses the following definition: “A dynamic capability is the
firm’s potential to systematically solve problems, formed by its propensity to sense
opportunities and threats, to make timely and market-oriented decisions, and to change its
resource base” (Barreto, 2010, p. 271).
Following a dynamic capability perspective, resources could be seen as the base elements
(Wang and Ahmed, 2007; Winter, 2003). Capabilities would follow because they combine
resources to achieve a desired objective. Dynamic capabilities build on (mere) capabilities
because they combine resources and processes in response to changing environments;
advantage involves not only the resources owned by a firm but also how the firm integrates,
 combines, and transforms these resources through dynamic capabilities. Hence, simply SME
redeploying the firm’s entrepreneurial or technological resources is not sufficient, and international
dynamic capabilities are needed to achieve international performance (Teece et al., 1997). performance
The perception of opportunities by the entrepreneur or the principal decision maker(s) of an
SME corresponds to the creation and use of dynamic capabilities (Zahra et al., 2006).
Entrepreneurial orientation is viewed as a dynamic capability that has the propensity to sense
and seize international opportunities in an innovative, market oriented, and timely manner. 179
Scanning and planning processes are closely linked to entrepreneurship and the discovery of
opportunities (Teece, 2007). Thus, international opportunity recognition is also a dynamic
capability and refers to “how opportunities to create future goods and services are discovered,
evaluated and exploited” (Shane and Venkataraman, 2000). The literature has linked
entrepreneurs’ international opportunity recognition to the internationalization of SMEs
operating in internet-based environments (Glavas et al., 2016; Glavas and Mathews, 2014).
Moreover, research suggests that SME internationalization is also increasingly
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facilitated through the use of technology (Aspelund and Moen, 2004; Etemad et al., 2010;
Reuber and Fischer, 2011). Technological capabilities are viewed as routines, emergent
knowledge, analytic processes, and simple rules to turn information technology into value
for the firm (Zhu and Kraemer, 2002, p. 278). By increasing the quality and speed of
communications and transactions, and decreasing costs, these advances have made
internationalization more feasible for the resource-constrained SMEs (Mathews and Zander,
2007; Oviatt and McDougall, 2005). The internet also has the capacity to enhance the
learning process about international markets through faster and more-extensive access to
relevant information (Morgan-Thomas and Bridgewater, 2004; Petersen et al., 2002), and
assist in the development of international networks (Morgan-Thomas, 2009). Overall,
internet capabilities can increase SMEs’ ability to transform processes into business
activities that support international market performance (Lewin and Massini, 2003),
especially for internationalizing SMEs given their recognized human and financial resource
constraints (Arenius et al., 2006; Dana et al., 2004; Loane and Bell, 2006).
In sum, this study aims to make a contribution by extending the RBV (Barney, 1991, 2001;
Barney et al., 2001) and empirically examining the relationship between firm-level entrepreneurial
and technological capabilities and the impact on international performance for SMEs in an
emerging market in Latin America. The hypothesized model is presented in Figure 1. The model
exhibits four capabilities: international entrepreneurial orientation, international entrepreneurial
opportunity recognition, internet technology capabilities, and technology-related network
capabilities. The dependent variable is denoted by SME international performance.

3. Hypotheses and conceptual model development

3.1 SME international performance
The success of an SME in international markets relies heavily on the firm’s capacity to
change and adapt to new developments, such as internet-related applications, and embed
these developments in the firm’s social and technical infrastructures (Ruzzier et al., 2006).
In this study it is argued that international performance for SMEs is a multi-dimensional
construct that incorporates different dimensions of firm performance, such as financial
performance and non-financial indicators (Wiklund and Shepherd, 2005). This study uses
the following measures of international SME performance: international sales growth,
international market share, and international profitability (Moen et al., 2008).

3.2 International entrepreneurial orientation

Entrepreneurial orientation refers to a firm’s strategic orientation in seizing entrepreneurial
aspects of decision-making styles and practices (Wiklund and Shepherd, 2005), while also
 JSBED
24,1 International
Entrepreneurial
Orientation (IEO)

H2 H1

180 International H3 SME

Entrepreneurial Opportunity
Recognition (IEOR) International
Performance
(IP)
H5 H4

Technology-related
international
networks (TRIN)
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H7 H6

Internet
Technology
Capabilities (ITC)

Notes: IEO, international entrepreneurial orientation; IEOR, international

Figure 1.
Hypothesized model entrepreneurial opportunity recognition; TRIN, technology-related international
networks; ITC, internet technology capabilities; IP, SME international performance

reflecting how a firm operates (Lumpkin and Dess, 1996). This concept is one of the most
widely accepted firm-level constructs in the entrepreneurship literature (Wales et al., 2011).
The entrepreneurial orientation concept has been advanced by Knight (2001), who suggests
that entrepreneurial orientation can extend to international market environments.
International entrepreneurial orientation involves seizing international market offerings
by taking risks to be more proactive than competitors to gain new international market
opportunities ( Jantunen et al., 2005; Wang, 2008).
Research views international entrepreneurial orientation as an antecedent of
internationalization (Knight, 2001; Ripollés-Meliá et al., 2007) and international performance
( Jantunen et al., 2005; Mostafa et al., 2006; Wiklund and Shepherd, 2003). Firms with an
international entrepreneurial orientation engage in innovative, proactive, and risk-seeking
behaviors in order to achieve the firm’s competitive and internationally oriented goals and
successful SME international performance (Glavas and Mathews, 2014). Similarly, Zahra and
Garvis (2000) identified those entrepreneurial activities that positively influence the international
profitability of firms in the USA. Overall, a majority of scholars indicate that international
entrepreneurial orientation can positively influence international performance (e.g. Jantunen
et al., 2005; Knight, 2001; Moreno and Casillas, 2008; Ripollés-Meliá et al., 2007; Slevin and
Terjesen, 2011; Wang, 2008). Thus, the following is stated:
H1. International entrepreneurial orientation is positively related to SME international
performance.
International entrepreneurial orientation has also been found to increase the firm’s chance of
identifying new means – end relationships, leading to international market opportunity
(Chandra et al., 2009). Accordingly, international entrepreneurial orientation is also suggested
to be instrumental in developing and enacting key organizational international business
processes (Knight and Cavusgil, 2004). Further, Jantunen et al. (2005) suggest that an
international entrepreneurial orientation supports opportunity recognition in international
 markets, giving reason to suppose that international entrepreneurial orientation has a positive SME
effect on international performance. Having an international entrepreneurial orientation can international
prompt the development of international opportunity recognition and exploitation of new performance
market opportunities (Glavas and Mathews, 2014), as such:
H2. International entrepreneurial orientation is positively related to international
entrepreneurial opportunity recognition.
181
3.3 International entrepreneurial opportunity recognition
Penetrating a new market is an entrepreneurial process because it entails searching for
opportunities, recognizing them, and creating exchange relationships in new locations with
partners that were not previously known (Chandra et al., 2009; Zahra et al., 2005). The first
time a company enters a foreign market it entails risk, resource commitment, and venturing
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into new markets (Dimitratos and Jones, 2005; McDougall and Oviatt, 2000; Shane and
Venkataraman, 2000).
Opportunity recognition is a crucial dimension of entrepreneurship (e.g. Kiss et al., 2012).
Research suggests that the process of international entrepreneurial opportunity recognition
is a critical component of a firm’s international market strategy, because it is primarily
concerned with the ways in which firms identify and take advantage of new international
market opportunities to leverage international market performance (Chandra et al., 2009;
Dimitratos et al., 2012; Zahra et al., 2005). Empirical studies of opportunity recognition for
entrepreneurial firms have been primarily conducted in a domestic context (Lumpkin and
Lichtenstein, 2005; Shane and Venkataraman, 2000). Scant attention has been paid to the
relationship between international opportunity recognition and SMEs’ international
performance (Chandra et al., 2009, 2012; Zahra et al., 2005). As such, it is evident that
opportunities are recognized, acted on, and exploited by international entrepreneurial firms
to achieve international firm performance in various ways that are not yet well understood
(Chandra et al., 2009). As such, the following hypothesis can be postulated:
H3. International entrepreneurial opportunity recognition is positively related to SME
international performance.

3.4 Technology-related international networks

Numerous scholars have suggested that networks and relationships play an important part in
internationalization, particularly allowing SMEs to overcome resource constraints (Coviello
and Munro, 1995; Coviello and Cox, 2007; Lee, 2001; Oviatt and McDougall, 1995; Poon and
Jevons, 1997; Rothaermel, 2007). Research also suggests that firms with extensive
international networks internationalize quicker and more successfully than established
firms (Mort and Weerawardena, 2006; Oviatt and McDougall, 1995). The role of international
networks as part of international entrepreneurial success is also acknowledged in the
literature (Coviello and Munro, 1995; Dimitratos and Plakoyiannaki, 2003; Loane, 2006; Loane
and Bell, 2006; Mort and Weerawardena, 2006). The value of international networking
capabilities as an integral part of the explanation of international entrepreneurial success is
also widely acknowledged in the literature (Coviello and Munro, 1995; Dimitratos and
Plakoyiannaki, 2003; Loane and Bell, 2006; Mort and Weerawardena, 2006). Developing
international networking capabilities can enhance the firm’s progression and successful
pursuit of opportunities to achieve international performance outcomes (Glavas and Mathews,
2014). This is in line with research that argues that networks have a positive influence on
firms’ international performance outcomes (Aspelund and Moen, 2004; Moen et al., 2008;
Reuber and Fischer, 1997).
 JSBED Specifically, technology-related international networks do not rely on a physical interaction
24,1 between people, but rather require the use of an internet platform for international
communication. Researchers have recognized the importance of information technology,
specifically the internet, and its potential to stimulate and develop interaction, and achieve
performance through network relationships (Glavas et al., 2016). Research suggests that
technology-related international networks are an important and unique firm dynamic
182 capability (Reuber and Fischer, 2011), providing firms with new ways to conduct international
business, acquire information and knowledge, communicate ideas, and exchange information
(Aspelund and Moen, 2004; Bell and Loane, 2010). As such, the following hypothesis is stated:
H4. Technology-related international networks are positively related to SME
international performance.
Scholars also suggest that networks can assist firms to recognize and exploit new
international market opportunities (Loane, 2006; Mort and Weerawardena, 2006). Further, it
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can be said that developing international networking capabilities also forms an important
part of the firm’s capability base that builds toward successful internationalization and
exploitation of new international market opportunities, thus driving the firm’s growth
performance outcomes. As such, the following is stated:
H5. International entrepreneurial opportunity recognition is positively related to
technology-related international networks.

3.5 Internet technology capabilities

Technology such as the internet can be considered as a resource within firms, providing the
basis for resource conversion into specific activities or capabilities (Liao et al., 2009). Internet
technology capabilities refer to the internet as a resource and how it is turned into a business
activity that can then be used as a competitive advantage or exploited for firm performance
(Mathews et al., 2016). Internet technology is a strategic organizational resource that may help
firms achieve operational efficiency through the development of technology-based dynamic
capabilities when operating internationally (Li and Ye, 1999). For example, it is widely
acknowledged that the internet provides SMEs with new ways to conduct business,
communicate ideas, and exchange information, allowing businesses to improve the efficiency
of their internationalization activities (Aspelund and Moen, 2004; Gibbs and Kraemer, 2004;
Loane, 2006; Loane and Bell, 2006). This implies that internet technology can be an important
and unique dynamic capability instead of just an organizational resource (Etemad et al., 2010;
Loane, 2006; Reuber and Fischer, 2011). More than the internet itself, the sustainability of
competitive advantage in the international marketplace lies in the firm’s ability to reconfigure
and leverage the capabilities provided by the internet to achieve successful international
performance outcomes. As such, the internet has been found to be associated with increased
SME international performance (Bell and Loane, 2010; Mostafa et al., 2006). Thus, the
following can be postulated:
H6. Internet technology capabilities are positively related to SME international
performance.
The importance of networks and relationships in the internationalization of firms operating
in an internet environment is widely accepted (Bianchi and Mathews, 2016; Knight and
Cavusgil, 2004; Loane, 2006; Loane and Bell, 2006; Mathews et al., 2012). SMEs utilize the
internet increasingly to develop and maintain international network relations (Aspelund
and Moen, 2004; Moen et al., 2008; Reuber and Fischer, 1997). It is argued that international
virtual networking capabilities substantially enhance the knowledge base of SME
entrepreneurial firms by providing businesses with the ability to generate international
 performance through internet environments. Thus, international virtual network SME
capabilities are a valuable resource for SMEs operating in internet environments international
(Coviello and Munro, 1995; Loane, 2006; Loane and Bell, 2006; Poon and Jevons, 1997). performance
As such, the following is postulated:
H7. Internet technology capabilities are positively related to technology-related
international networks.
183
4. Research methodology
Hypotheses were tested using an online survey applied to entrepreneurial SMEs in Chile,
between January and April 2015. Chile was chosen as the context for this study based on the
World Economic Forum’s (WEF) 2016 competitiveness report. Chile is considered one of Latin
America’s most stable and prosperous nations, leading the region in competitiveness, income
per capita, globalization, economic freedom, and low perception of corruption (WEF, 2016).
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Chile has a small domestic market so internationalization is essential for country growth.
Governmental regulations in Chile have increased to comply with international standards, and
Chilean standard guidelines follow those of the World Trade Organization. However, many
Chilean SMEs are still reticent about internationalizing due to a lack of resources and expertise,
which are not suited to perceived risky ventures (The Economist, 2015; Sommer, 2010).
The sample frame of 2,000 firms was chosen from the National Chilean database of
entrepreneurs (www.ASECH.com). This database was selected as the most comprehensive
and current database available of entrepreneurs in Chile. An e-mail invitation presenting the
research team, objectives of the study, and the online survey link was sent to participants
and yielded a total of 239 responses, with a response rate of 10 percent. This is considered a
reasonable rate given that business surveys normally have poor response rates (Frazer and
Lawley, 2000). A reminder e-mail was also sent to participants. After eliminating six cases
with extensive missing data 233 cases were used to test the proposed structural model.
The questionnaire was developed in English, then translated into Spanish by one of the
research team members, and was then back-translated by a colleague in Chile (Brislin, 1970).
Pretesting is considered essential prior to administering a questionnaire in order to ensure
reliability (Hair et al., 2000). The survey was pretested with a convenience sample of five
Chilean exporters, which resulted in minor changes to wording in some questions. To reduce
common method bias semantic differential scales and seven-point Likert-type scales were
used (Podsakoff et al., 2003). e-Mail was chosen as the distribution method following
research highlighting that top managers prefer electronic surveys (Griffis et al., 2003).
The owner or the main decision maker for international activities was chosen as the key
informant. They were asked to either complete the survey themselves or direct it to the
person most responsible for the firm’s exporting decisions (Malhotra, 1996). Only those
respondents with knowledge of the firm’s internationalization process were eligible to
complete the survey (Mitchell, 1994).
Construct measures were adopted and adapted from existing literature. Specifically,
international entrepreneurship orientation was measured using a four-item scale adopted
from Knight and Cavusgil (2004), with questions concerning the firm’s innovativeness,
proactiveness, and risk-taking propensities. International entrepreneurial opportunity
recognition was adapted from Lumpkin and Lichtenstein (2005) and Dimitratos et al. (2012)
and was measured with questions related to the firm’s ability to seek out and evaluate new
international opportunities. Technology-related international networks was adapted from
Wu et al. (2003) and Loane (2006) and measured with questions related to the firm’s use of
the internet for acquiring, maintaining, developing, and strengthening customer
relationships. Internet technology capabilities was adapted from Zhu and Kraemer (2002),
Aspelund and Moen (2004), Gibbs and Kraemer (2004), and Liao et al. (2009), and was
 JSBED measured with questions regarding the firm’s ability to integrate the internet into the firm’s
24,1 international business activities. Finally, the dependent variable, SME international
performance, was adapted from Moen et al. (2008), Nummela et al. (2004), and Jantunen et al.
(2005) and was measured using the extent of increase or decrease in market share, sales
growth, international profitability, and overall international performance. The scale anchors
were derived from a seven-point Likert scale including: 1 “significantly increased” to
184 7 “significantly decreased” and 1 “satisfied” to 7 “dissatisfied.”
Common method variance was assessed using a variety of scale anchors so that
respondents did not simply gloss over questions (Podsakoff et al., 2003). Further, dependent
and independent variables were separated and different types of questions asked for each to
stimulate a specific response for a particular item (Podsakoff et al., 2003). Furthermore, to
reduce common method variance the questionnaire initially mixed positively and negatively
worded items. Recoded questionnaire items make all the constructs symmetric and this
procedure satisfies the statistical contention of common method bias variance. Applying
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Podsakoff and Organ (1986) factor analysis procedure to all constructs resulted in no single
or general factor accounting for most of the variance in the independent and dependent
variables. Thus, no common method bias variance issues were identified. To increase
content validity established scales or adapted scales were used. Data analysis was used to
help differentiate similar scale measures and distinguish accurate measures for specific
constructs. Lastly, a two-tail t-test was used to ensure no non-response bias issues
(Armstrong and Overton, 1977).

5. Results
5.1 Descriptive statistics
The respondent data (see Table I) revealed that 66.1 percent of sample firms were classified
as small sized (1-5 employees), 20 percent were small-medium sized firms (6-20 employees),
and 13.9 percent were medium sized (21-200 employees). The majority of firms (81.9 percent)

Profile Parameters Number %

Nationality of the owner/respondent Chilean 218 93.6

Other 15 6.4
Age of the owner 18-29 44 18.9
30-39 63 27.0
40-49 68 29.2
50-59 40 17.2
60 or above 18 7.7
Level of education No formal education 3 0.1
TAFE/college 13 5.6
High school 30 12.9
Undergraduate 86 36.9
Postgraduate 101 43.3
Previous years of export experience No experience 90 38.6
1-5 years 74 31.8
Between 5 and 10 years 15 6.4
10+ years 54 23.2
Size of firm (no. employees) 1-5 154 66.1
6-20 46 19.7
21-200 21 9.0
Between 200 and 250 12 5.2
Table I. Business sector Goods 58 66.1
Profile of respondents Services 150 19.7
(n ¼ 233) Retailing/wholesale 25 9.0
 were established between the years 2000 and 2015 and 12.0 percent of firms were SME
established between 1980 and 1999. Recent business start-ups established between 2010 and international
2015 account for 54.5 percent of the sample. A total of 32.2 percent of the sample were goods performance
and manufacturing firms, 10.7 percent were retail and wholesale businesses, and
57.1 percent were services firms. The annual figures indicate that 68.5 percent of firms
receive between US$10,000 and US$50,000 of their revenue from international markets,
12.5 percent of firms receive between US$50,000 and US$250,000 of revenue from 185
international markets, and only 8 percent of firms receive over US$1,000,000 of revenue
from international markets. Furthermore, a total of 77.2 percent of respondent firms have
customers in five countries or less, 4.7 percent of firms are active in six to ten markets, and
5.1 percent of firms are active in more than ten markets. On average, these firms operate in
two international markets. The top three international markets for Chilean SMEs are the
USA (12.8 percent), Peru (11.4 percent), and Colombia (11.0 percent).
Most respondents in this study were owners/founders of an SME or top managers
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responsible for key decision making within the firm, and 54.3 percent were aged between 30
and 49 years. Regarding respondents’ level of education, 71.1 percent of the sample had
obtained a university or postgraduate degree. The majority of respondents (70.5 percent)
indicated that they had less than five years of international experience, while 6.6 percent of
the sample indicated having over ten years of international experience, 98 percent of firms
used the internet for e-mail purposes and 72.3 percent of firms indicated extensive use of
e-mail applications within the firm.

5.2 Data analysis and hypotheses testing

The model was tested using a structural equation model (SEM) technique, AMOS 22. SEM
has several advantages over other techniques, such as multiple regression, because of the
greater flexibility provided for the interaction between theory and data (Chin, 1998; Fornell
and Larcker, 1981). Specifically, SEM provides researchers with flexibility to model
relationships among multiple predictors and criterion variables, model errors in
measurements for observed variables, and statistically test theoretical and measurement
assumptions against empirical data (Chin, 1998).
Correlations and construct measures are shown in Tables II and III. Confirmatory factor
analysis eliminated a total of five items with factor loadings below the accepted W0.7 level
(Hair et al., 2010). The summary of model fit for the full structural model indicates that the
data had a good fit with the model (CMIN χ2/df ¼ 2.291, IFI ¼ 0.952, CFI ¼ 0.952, TLI ¼ 0.943
and RMSEA ¼ 0.075) (Hair et al., 2010; Kline, 2005). To establish internal consistency and
reliability, all Cronbach’s α coefficients exceeded the optimal level of W0.7 (see Table III).
The composite reliability values for each factor also exceeded the acceptable threshold level
of W0.7 (Hair et al., 2010). The values for the average variance extracted also exceeded the
threshold of W 0.5, indicating convergent validity (Hair et al., 2010).
The results of hypotheses testing are shown in Table IV. Findings of this study show
that for H1, international entrepreneurial orientation is not significantly related to SME
international performance ( β ¼ 0.017, p ¼ 0.883). Thus, H1 is not supported. For H2,
international entrepreneurial orientation is positively related to international
entrepreneurial opportunity recognition ( β ¼ 0.57, p ¼ 0.000). Therefore, H2 is supported.
Further, for H3, international entrepreneurial opportunity recognition is positively related to
SME international performance ( β ¼ 0.46, p ¼ 0.000). Therefore, H3 is also supported.
Regarding H4, technology-related international networks are positively related to SME
international performance ( β ¼ 0.22, p ¼ 0.042). Thus, H4 is supported. For H5,
international entrepreneurial opportunity recognition is positively related to technology-
related international networks ( β ¼ 0.69, p ¼ 0.000). Therefore, H5 is supported. For H6,
however, internet technology capabilities are not significantly related to SME international
 JSBED Constructs Items Mean SD
24,1
International entrepreneurial Our firm views the world as the marketplace 5.33 1.70
orientation (IEO) (α ¼ 0.893) Our firm’s culture is to explore and pursue new international 5.33 1.67
business opportunities
Our top management constantly communicates its mission 4.74 1.79
of being successful in international markets
186 Our top management develops resources to achieve goals in 4.62 1.80
international markets
Our entrepreneurs place great importance on the drive to 5.21 1.98
enter international markets
International entrepreneurial Our firm actively seeks out new international market 4.94 1.99
opportunity recognition opportunities
(IEOR) (α ¼ 0.887) When we see a new international market opportunity we 4.52 1.96
invest resources to exploit the new international opportunity
We pursue international opportunities regardless of the 4.95 1.89
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resources the firm may have

The firm has many formal or informal processes that 4.08 2.02
evaluate the effectiveness of its activities in
international markets
Internet technology Investment in technology has led to greater 4.55 1.91
capabilities (ITC) (α ¼ 0.827) international sales
The firm has strong IT operations capabilities 4.69 1.96
The firm has the technological infrastructure and 4.49 2.02
competencies to engage in e-commerce initiatives
Technology-related network My firm uses the internet to maintain international customer 4.98 2.15
(TRIN) (α ¼ 0.967) relationships
The firm uses the internet to strengthen existing 4.91 2.12
international relationships
The firm uses the internet to acquire new international 4.66 2.10
customers
The firm uses the internet to enter new international country 4.75 2.11
market(s)
The firm uses the internet to enhance our firm’s 4.64 2.12
international performance
SME international The performance of our firm has improved in international 3.97 1.78
performance (IP) (α ¼ 0.946) market share
The performance of our firm has improved in 4.02 1.81
international growth
The performance of our firm has improved in international 3.88 1.80
profitability
Table II. I am satisfied with the international activities of our firm of 3.78 1.84
Construct measures the last 5 years

Mean SD IP IEO IEOR ITC TRIN

IP 3.91 1.81 1 0.45** 0.63** 0.44** 0.62**

IEO 5.05 1.79 0.45** 1 0.61** 0.38** 0.57**
IEOR 4.62 1.97 0.63** 0.61** 1 0.56** 0.73**
ITC 4.58 1.96 0.44** 0.38** 0.56** 1 0.599**
Table III. TRIN 4.79 2.12 0.62** 0.57** 0.73** 0.59** 1
Means, standard Notes: IEO, international entrepreneurial orientation; IEOR, international entrepreneurial opportunity
deviations, and recognition; TRIN, technology-related international networks; ITC, internet technology capabilities; IP, SME
correlation matrix international performance. **Correlation significant at 0.01 level
 Overall fit
SME
Model fit indices international
Model χ²/df RMSEA IFI CFI TLI p-valueW 0.05 performance
CMIN
Proposed model 1.149/134 0.033 0.976 0.968 0.975 0.000 sig.
Independent variable Dependent variable Β (St. Est.) p Hypotheses
IEO H1 IP 0.02 0.883 Not supported
IEO H2 IEOR 0.57 0.000 Supported 187
IEOR H3 IP 0.46 0.000 Supported
TRIN H4 IP 0.22 0.045 Supported
IEOR H5 TRIN 0.69 0.000 Supported
ITC H6 IP 0.03 0.690 Not supported
ITC H7 TRIN 0.20 0.001 Supported
Notes: IEO, international entrepreneurial orientation; IEOR, international entrepreneurial opportunity Table IV.
recognition; TRIN, technology-related international networks; ITC, internet technology capabilities; IP, SME Model fit and
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international performance hypotheses testing

performance ( β ¼ 0.03, p ¼ 0.690). Therefore, H6 is not supported. Regarding H7, internet

technology capabilities are positively related to technology-related international networks
( β ¼ 0.20, p ¼ 0.001). Thus, H7 is supported. The results are shown in Table IV.

6. Discussion and conclusions

The impact of organizational capabilities for emerging market SMEs on international
performance in a technology-based environment is largely absent from the existing
literature. This study addresses a limitation of previous research and draws on the RBV and
a capabilities approach (Barney, 1991; Teece, 2007; Teece et al., 1997) to develop and test a
conceptual model that considers the impact of entrepreneurial and technological capabilities
on the international performance of SMEs in a Latin American context. The aim of the
research was to enrich the current understanding of how SMEs from emerging markets
improve their international performance. This study considers the role of specific dynamic
capabilities – international entrepreneurial orientation, international entrepreneurial
opportunity recognition, technology-related international networks, and internet
technology capabilities – for leveraging SME international performance. Based on data
collected from Chilean SMEs, the findings of this study contribute to previous research by
showing that entrepreneurial and technological capabilities have a positive impact on the
international performance of SMEs (Morgan-Thomas, 2009).
This research adds to the existing literature in several ways. First, it brings into place the
impact of entrepreneurial and technological capabilities on the international performance of
firms from emerging markets. Second, by examining a model that combines direct and
mediated effects of international entrepreneurial orientation and technology-based capabilities
this study adds to the scant but rising literature on emerging market SME internationalization.
Third, the results show a mediated model whereby international entrepreneurial orientation
and technological capabilities do not share a direct relationship with SME international
performance, as previously predicted by a number of scholars (Knight, 2001; Wang, 2008;
Wiklund and Shepherd, 2005; Zahra and Garvis, 2000). Instead, the results signify that
international entrepreneurial orientation is a firm-level dynamic capability that influences the
deployment of technological capabilities for the firm’s international performance.

6.1 Theoretical contribution

The results of this study contribute to the literature by expanding the extant research on
SME internationalization, assessing the impact of entrepreneurial and technological
 JSBED capabilities on international performance of SMEs in an emerging Latin American context.
24,1 These results are important because they empirically test theories predominately developed
in first-world countries in the context of Chile, a vigorous emerging Latin American
marketplace that increasingly attracts foreign investment. The findings suggest that
researchers should not assume that SMEs in less-developed countries, particularly those
from Latin America, are not engaging with the benefits of entrepreneurship and technology
188 for internationalization.
The findings also support seminal research studies by Eisenhardt and Martin (2000)
and Winter (2003), who argue that resources do not directly influence a firm’s
performance, but instead firms need to develop-specific capabilities. The findings
indicate that internet technological capabilities are critical in assisting firms to seize new
international markets in a dynamic context. This is consistent with studies which
support a non-significant direct relationship between internet resources and firms’
international performance (Celuch and Murphy, 2010). To exploit these capabilities,
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however, the findings suggest that firms must possess entrepreneurial capabilities in
terms of international entrepreneurial orientation.
The results also suggest that international entrepreneurial opportunity recognition and
technology-based networks are critical variables for exploiting internet technology
capabilities and international entrepreneurial orientation, and for leveraging SME
international performance. Internet technology capabilities create augmented
opportunities for international technology-based networks. Similarly, international
entrepreneurial orientation positively impacts international entrepreneurial opportunity
recognition. Thus, international entrepreneurial opportunity recognition and international
technology-based networks are key in explaining how capabilities are leveraged for SME
international performance within emerging markets.

6.2 Managerial contributions

The findings of this research have important implications for practitioners, consultants, and
government agencies. First, these insights allow managers and consultants to identify key
firm capabilities that can be used as tools to reconfigure the existing resources to achieve
international performance. The findings highlight the need for technological capabilities,
international entrepreneurial orientation, international entrepreneurial opportunity
recognition, and technology-related international networks for improving SME
international performance.
Second, the findings of the research show that while the internet is one of the most
important tools for internationally focused businesses in recent times (Petersen et al., 2002;
Loane, 2006; Mathews et al., 2012), the entrepreneurial component of internationalization
remains an essential element. This study shows that while internet technology capabilities
and international entrepreneurial orientation are important for SME international
performance, entrepreneurial opportunity recognition and technology-related networks
are necessary considering the evolving nature and increasing need for digital capabilities for
the internationalizing firm.
Third, international entrepreneurial orientation is important for the firm’s competitive
strategy. This is even more relevant for smaller international entrepreneurial firms from
emerging markets that experience financial and human resource constraints. Therefore,
internationalizing SMEs from emerging countries should seek to recruit employees who
encompass the traits of international entrepreneurial orientation; that is, SMEs should
consider recruiting employees who exhibit innovative behaviors, those who are forward-
looking and proactive, and those who are willing to take risks in both technology-mediated
and international business environments.
 6.3 Limitations and future research SME
Some limitations may affect the generalizability of the results of this study. First, with international
respect to data collection, this study is limited to a sample from Chilean SMEs, which performance
hinders the external validity of this study. A second limitation refers to the fact that
the findings are based on the use of self-reported data by the owner/managers of the
Chilean SMEs. In addition, these self-reported perceptions of organizational capabilities and
international performance are considered at a single point in time, thus this study is 189
cross-sectional and does not reflect the dynamic nature of the internationalization
phenomena that occur over time. Future longitudinal studies will help in strengthening the
findings of this study. Finally, the response rate of participants is not very high (10 percent);
however, it is similar to response rates reported by other export performance studies using
e-mail-based questionnaires (e.g. Diamantopoulos and Kakkos, 2007).
Several opportunities for future research arise from this study. For example, replicating
the study in other Latin American countries where firms have a large take-up of the internet,
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such as Argentina, Brazil, or Mexico, can improve generalizability of the findings.

Additionally, one can extend the findings by investigating how other variables act as
moderators or mediators in further explaining export market growth. Finally, future
research examining these constructs with longitudinal data can provide a richer
understanding of the relationships between them.

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Corresponding author
Constanza Bianchi can be contacted at: [email protected]
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