Abstract

Firms are affected by resources access, capability and unfavourable business environment, but there is little research on how institutions affect Small and Medium Enterprises (SMEs) internationalization process in developing countries. Drawing on institutional theory, this Chapter reviews the variety of institutions (internal and external barriers) and how it affects SMEs’ internationalization process in the Developing World. First, it explores the stages of internationalization, modes of entry and benefits of internationalization. Second, it explains the ‘Cultural, Administrative, Geographic and Economic’ distances (CAGE framework) and theories of internationalization. Third, it examines the evidence on the role of government in promoting SMEs and drivers of internationalization. These have significant practical and policy implications, especially for policymakers that are concerned with business reforms and ease of doing business.