Home country institutional impediments and international expansion of developing country SMEs

Though institutional contexts are critical drivers of firms’ international expansion, very limited research efforts have focused on how and when these factors facilitate developing country firms’ outward market activities. This study derives insights from the institution-based view and activity theory to test how perceived environmental uncertainty mediates the link between institutional impediments and international expansion. Using data from small and medium-sized firms from Ghana (N = 222) and Ethiopia (N = 203), the findings suggest that high levels of perceived regulatory and cognitive impediments amplify the mediation effect of perceived environmental uncertainty on the degree of SME’s international expansion. Additionally, the findings suggest that, when political connections are well-developed and deployed, the potency of perceived environmental uncertainty as a driver of international expansion is attenuated. Moreover, the study finds that varying levels of home-country industry competition moderate the relationship between perceived environmental uncertainty and the degree of international expansion. Implications relating to theory and practice are discussed.