Abstract
This research explores how internationalisation intersects with Small and Medium Enterprises (SMEs) when considering the global economy. The focus of the research is on the ways in which SMEs engage in internationalisation, particularly through exporting, and examines the role of government policies in supporting this process. The study highlights a noticeable research gap related to the barriers encountered by SMEs in underdeveloped economies and the service sector. These areas have received little attention in existing literature, which are focussed on developed nations and considering manufacturing firms.Through a case study of Sri Lanka, this research aims to evaluate the barriers towards internationalisation and the effectiveness of government policies in supporting SMEs in the process of exporting with a focus on the service sector SMEs. The aim of the research is ‘to explore the factors affecting the internationalisation process of SMEs in the Sri Lankan market.’ In order to achieve this, the researcher cover 4 research objectives; To identify internal and external barriers that hinder export-related activities in Sri Lankan SMEs; To understand how Government support affects the export propensity in the Sri Lankan SMEs; To understand whether the perceived barriers differ between manufacturing and service sector firms; To understand how COVID-19 affected Sri Lankan SMEs. To achieve the mentioned research objectives, the research will use a mixed methods approach. An exploratory qualitative method is employed followed by a confirmatory quantitative method to ensure reliability and validity in the data. The researcher uses a pragmatic paradigm of inquiry with an epistemological view to address the research aims and objectives. The qualitative phase involves in-depth semi-structured interviews with key stakeholders of SMEs in Sri Lanka, while the quantitative phase includes surveys and statistical analysis to validate the findings. The study provides key findings relating to policy, social, practise and recommendations for future research.Moreover, the study also highlights the key challenges faced by SMEs in developing countries, including economies of scale, financial constraints, technological obsolescence, skilled labour shortages, and inadequate government support and information. By addressing these barriers, the researcher seeks to provide a comprehensive understanding of the unique obstacles that SMEs in underdeveloped economies encounter taking Sri Lanka as the context. To effectively address the current crisis in Sri Lanka, it is essential to thoroughly understand the specific challenges that exporters face and identify any gaps in government support. By doing so, targeted measures can be developed to enhance support for exporters, which can play a significant role in stabilising the country's economy.Additionally, the study also examines the impact of the COVID19 pandemic on the export activities of SMEs in the Sri Lankan market, considering the significant economic disruptions caused by the pandemic and the post pandemic economic downturn. COVID19 was a significant factor to consider in the context of this research as it coincided with many phases of the research specially the data collection phases. Hence the responses from the participants are coloured by their experiences of exporting during COVID19. Therefore, it was necessary to embrace this unexpected context as an integral part of the study. However, this also provided the researcher some unique perspectives, valuable insights, and contributions. Using a mixed-methods approach, the researcher aims to provide a holistic analysis of the issues at hand. The study highlights the significant role of Small and Medium Enterprises (SMEs) in the Sri Lankan market. SMEs contribute substantially to GDP and employment, especially in rural areas. However, Sri Lankan SMEs face several challenges when it comes to exporting. These challenges include financial constraints, lack of specialised expertise, regulatory barriers, and market volatility. These challenges limit the growth potential of SMEs and hinder their ability to compete globally. Additionally, many SMEs in Sri Lanka are family-owned, which affects their management practices. This often leads to conservative decision-making and a reluctance to adopt innovative practices. The COVID-19 pandemic has further exacerbated these challenges, highlighting the need for stronger contingency planning, supply chain diversification, and increased government support for resilience and recovery.The study also offers a comprehensive analysis of the export barriers that SMEs in Sri Lanka encounter. It provides valuable insights into the specific challenges within a developing country context. Similarly, the study enhances our understanding of the factors that influence SMEs' propensity to export. It emphasises the impact of traditional family business dynamics on internationalisation efforts. It also recognises the potential of young, educated managers to drive innovation and growth, which signals a positive trend in overcoming traditional barriers. The findings of this study significantly contribute to the discourse on SME internationalisation strategies and, the study also provides actionable policy recommendations that can better support SMEs in enhancing their export readiness and capacity. The results of this study are intended to offer valuable insights for policymakers and contribute to the growth of SMEs in emerging economies. Furthermore, the study underscores that informational and marketing barriers represent significant internal obstacles, whereas procedural, task, environmental and governmental barriers constitute the primary external challenges affecting the internationalisation process of SMEs in Sri Lanka. Additionally, the study also identifies a notable deficiency in government support, which adversely influences the export propensity of these enterprises. It was also observed that the COVID19 pandemic has had a substantial impact on the export capacity of Sri Lankan SMEs. By understanding and addressing the barriers to internationalisation in underdeveloped economies, this research aims to inform more effective government policies and support mechanisms that can enhance the export propensity of SMEs globally. The study also underscores the importance of service sector industries in the process of exporting and aims to understand how the identified barriers affect the service sector SMEs differently. In conclusion, this research highlights the importance of exporting to drive economic growth in developing nations and emphasises the critical role of tailored government support in enabling SMEs to overcome global challenges and thrive in international markets.
Document Type
Thesis
Publication Date
2025
Embargo Period
2025-03-26
Recommended Citation
Mendis, S. (2025) Determinants of SME Internationalisation in developing economies: An In-depth analysis of the Sri Lankan Market. Thesis. University of Plymouth. Retrieved from https://pearl.plymouth.ac.uk/pbs-theses/294
