Internationalisation of SMEs: Why Going Abroad Is Still a Systemic Challenge

International expansion is often presented as a natural next step for small and medium-sized enterprises. Access to new markets promises growth, diversification and long-term resilience. In practice, however, internationalisation remains a complex and resource-intensive process — especially for SMEs.

Research and policy analyses across the EU consistently show that SMEs face structural barriers that go beyond individual ambition or product quality.

Knowledge gaps and market uncertainty

One of the most frequently cited challenges is lack of market-specific knowledge.
Entering a foreign market requires understanding:

• regulatory frameworks and compliance requirements

• customer expectations and purchasing behaviour

• competitive landscapes and pricing models

For SMEs, acquiring this knowledge is costly and time-consuming. Unlike large firms, they rarely have dedicated international teams or local representation in target markets.

As a result, many internationalisation attempts are based on incomplete information, increasing uncertainty and perceived risk.

Limited resources and organisational capacity

Internationalisation places additional pressure on already limited resources. SMEs often face:

• financial constraints

• limited managerial capacity

• difficulties in reallocating staff to international activities

This makes it challenging to sustain long-term market entry strategies. Short-term pilot activities may take place, but without sufficient capacity, scaling and continuity remain difficult.

Networks matter — but are not equally accessible

Multiple studies highlight the importance of networks and partnerships in successful internationalisation. Local intermediaries, business support organisations and peer networks can significantly reduce entry barriers.

However, access to such networks is uneven. SMEs operating outside major innovation hubs or established clusters often lack connections that could facilitate cross-border collaboration and knowledge exchange.

This creates a situation where opportunity is not only market-dependent, but ecosystem-dependent.

Institutional and regulatory complexity

Despite progress within the EU Single Market, regulatory fragmentation remains a challenge. Differences in:

• taxation

• labour regulations

• product standards

• administrative procedures

continue to create friction for cross-border operations, particularly for smaller firms with limited legal and administrative support.

Navigating these differences adds cost and complexity to international expansion decisions.

Internationalisation as a learning process

Increasingly, research frames internationalisation not as a one-time strategic move, but as a learning process. Firms that approach new markets incrementally — testing, adapting and building knowledge over time — tend to be more resilient.

This perspective shifts the focus from “going global” to building international capabilities.

A systemic perspective

The challenges faced by SMEs are rarely isolated. They emerge from the interaction between firm-level constraints, market conditions and institutional environments.

From this perspective, internationalisation is not only a business challenge, but a systemic one, requiring coordinated support, shared knowledge and long-term capacity building.

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