Perceptions of home-country Institutions, Decision-Making Logics, and International Performance of SMEs

Abstract

In today's complex and uncertain world, entrepreneurs, especially those leading small- and medium-sized enterprises (SMEs), play a crucial role in societal development. The international growth of SMEs not only drives macroeconomic progress but also addresses significant global challenges. However, rising tensions, risks, and regulations in international business often create more losers than winners, despite governmental support. Our study of 210 international SMEs from Finland seeks to identify factors that differentiate better-performing SMEs. We theorise and empirically examine how perceptions of home country institutions and decision-making logic influence international performance. Our findings reveal that while perceptions of the institutional environment do not directly impact international performance, the regulatory dimension of institutions fosters flexibility in decision-making, which in turn enhances SMEs' international success. Specifically, SMEs that perceive their home-country regulatory environment as supportive tend to adopt a more flexible decision-making approach, which positively affects their international performance. By linking the understanding of the institutional environment with entrepreneurial choices, our research offers valuable insights for global strategy, and international entrepreneurship research, and provides guidance for entrepreneurs, investors, and policymakers.