SME participation in cross-border e-commerce as an entry mode to foreign markets: A driver of innovation or not?

In the context of globalization, it is not just large corporates that need to update their technologies and processes to maintain competitiveness. Small-to-medium-sized enterprises (SMEs) also need to innovate if they are to satisfy customer preferences in both domestic and foreign markets. Today, internationalization is considered to be an essential factor in promoting SME innovation. However, it is often difficult for SMEs to innovative with overseas customers because many lack easy access to foreign markets. Compared to other traditional entry modes, cross-border e-commerce, with its low costs and high levels of control, can help to remove some of the barriers to internationalization for SMEs. In turn, it may be that cross-border e-commerce also promotes innovation in these firms. We gathered data on 781 Chinese SMEs to test several hypotheses surrounding this notion. The results of panel regression estimates indicate that cross-border e-commerce does indeed have a direct and positive effect on market innovation. More importantly, it has an indirect and positive impact on technology and process innovation by fully mediating the effects of an entrepreneurial orientation. These results shed light on how cross-border e-commerce impacts SME innovation performance, providing valuable implications for both academics and SME managers.