Internationalisation of SMEs requires political support

Barriers for internationalisation

A dynamic economy comprises companies of all sizes: big, medium, and small. It is also important that at least some of the small companies are eager to grow and strengthen their competitive advantage, as growth may lead to an increase in profits and have a positive impact on employment opportunities (Nurfarida et al., 2022). As countries in Northern Europe are rather small with a limited population and home market, growth-oriented companies have to expand their activities abroad. In most cases internationalisation means export, but it can also be direct investments or international collaboration networks for new innovations (Rahman et al., 2017).

SMEs are facing several barriers for internationalisation. These barriers can be internal, that is, related to factors inside the company, or external which means that the business environment at home or abroad creates difficulties (Urban et al., 2023). Typical internal barriers to internationalisation are insufficient finances, lack of capital to finance expansion, lack of resources (e.g. to develop new products for foreign markets, maintaining standards for export products, meeting requirements associated with packaging and labelling), insufficient market knowledge and lack of foreign market connections (Urban et al., 2023). Of these, financial constraints have been identified as especially challenging as starting an internationalisation process is expensive (Hayet, 2024).  

External barriers for internationalisation can be related, for instance, to bureaucratic export/import procedures, lack of governmental incentives for SME internationalisation, and the behaviour of potential customers and competitors in foreign markets. In many countries, customers tend to trust domestic products more than foreign (Sulhaini, 2021). Finally, many companies face so called environmental barriers when entering a new market.  The government of the target country might, for instance, pay subventions to and create laws favouring domestic companies, but also more regulations related to sustainability might have an impact on companies eager to enter a new country (see e.g. Amer, 2023).

Policy making for enhancing internationalisation of SMEs

Government policy is often regarded as being first and foremost a course of action (Soltau, 2020). Governments can support the internationalisation of SMEs in many ways.  Figure 1 summarises the barriers most commonly discussed in scientific articles (see e.g. Rahman, et al., 2017; Roy, et al., 2016; Urban et al., 2023), where governmental support is eligible. 

Figure 1. The main policy for governments to enhance internationalisation of SMEs (summarised by authors)

Of the policies identified in Figure 1, financial support, capacity building and arrangement of networking possibilities between SMEs have been identified as prioritized policies by governments (EU, 2021). Hahyet (2024) highlights though the possibilities of artificial intelligence (AI) and digital tools as supplements during the internationalisation process. This means that SMEs need external business support such as funding and training to make use of AI's transformative power (Arroyabe et al., 2024).  

Insights from experienced business coaches involved in the BSR Go-abroad project

The partners in the EU’s Interreg-funded project Go Abroad (see Interreg, 2025) met in January 2025 for a partner meeting in Tallinn. One of the final outcomes of the project will be a blueprint comprising policy recommendations for enhancing the internationalisation of especially micro-SMEs in the Baltic Sea region. In a workshop with experienced business coaches, the coaches were asked to identify the main barriers for the internationalisation of SMEs and how they would support the small companies struggling with internationalisation. The coaches were divided into groups of 4-5 people and asked to discuss the main barriers and agree upon the 3 most important ones. The most important barriers identified were the very fragmented offer of information (many organisations support internationalisation, but the information they offer is never comprehensive), lack of sufficient networks, and knowledge on how to start. Moreover, insufficient financial resources were identified as a key challenge as companies starting their internationalisation process might need legal advice and attend fairs abroad.

In the same workshop the business coaches came also up with some recommendations for the governments. The most important political initiative would be to create a platform comprising all important information from one spot. Political decision-makers should also offer funding for internationalisation to SMEs and the representatives at the embassies in the potential target countries should have a responsibility to help the small companies to enter the market. At all governmental levels (local, regional, national, and European) there is also a need for policies supporting both micro-SMEs with long experience of operating domestically and startups that quickly want to upscale their operations. 

Conclusion

The internationalisation of SMEs, particularly in Northern Europe including the Baltic Sea region, is crucial for economic growth, but is hindered by several internal and external barriers. To address both the opportunities and challenges, governments play a key role in supporting SMEs through financial aid, capacity building, and networking opportunities. Emerging technologies like AI can facilitate internationalisation, but SMEs may require external support to leverage these tools effectively.

Insights from experienced business coaches highlight the fragmented nature of available information, insufficient networking opportunities, and financial limitations as key barriers. The need for a centralized platform for internationalisation resources, better funding opportunities, and enhanced governmental support should be emphasized in policy recommendations. A comprehensive approach at all government levels is essential to assist both experienced SMEs and fast-scaling startups in expanding internationally.

References

Amer, E. (2023). Internationalization, institutional pressures in foreign markets, and environmental sustainability, Journal of International Management, 29 (1), article 100974. https://doi.org/10.1016/j.intman.2022.100974

Arroyabe, M. F., Arranz, C. F. A., De Arroyabe, I. F. & de Arroyabe, J. C. F. (2024). Analyzing AI adoption in European SMEs: A study of digital capabilities, innovation, and external environment, Technology in Society, 79, article 102733. https://doi.org/10.1016/j.techsoc.2024.102733

EU (2021). A policy focus from the policy learning platform on SME competitiveness.          https://www.interregeurope.eu/sites/default/files/inline/2021-08-04_Policy_focus_-_Support_schemes_for_SMEs.pdf

Hayet, M. (2024). Internationalisation of European SMEs; challenges & obstacles. LinkedIn. https://www.linkedin.com/pulse/internationalisation-european-smes-challenges-obstacles-mahdyar-hayat-tgn1e/

Interreg (2025). BSR Go-abroad. https://interreg-baltic.eu/project/bsr-go-abroad

Nurfarida, I. N., Mukhlis, M. & Murwani, F. D. (2022). The internationalization of SMEs: Motives and barriers. International Journal of Current Science Research and Review, 5(5), 1749-1756. https://doi.org/10.47191/ijcsrr/v5-i5-43

Rahman, M., Uddin, M. & Lodorfos, G. (2017). Barriers to enter into foreign markets:

Evidence from SMEs in emerging markets. International Marketing Review, 34 (1), 68-86. https://doi.org/10.1108/IMR-10-2014-0322

Roy, A., Sekhar, C. & Vyas, V. (2016). Barriers to internationalization: A study of small and medium enterprises in India. Journal of International Entrepreneurship, 14(4), 513-538. https://doi.org/10.1007/s10843-016-0187-7

Statista (2025). SMEs in Europe – stats & facts. https://www.statista.com/topics/8231/smes-in-europe/#topicOverview

Soltau, F. (2020). Introduction: Public policy development & review. Presentation at NPC Training Workshop. https://sdgs.un.org/sites/default/files/2020-10/Introduction_Policy_FINAL.pdf

Suhlhaini, S. (2021). Consumer behavior towards foreign versus local products and brands: Future research directions, Proceedings of the 2nd Annual Conference on Education and Social Science (ACCESS 2020). https://doi.or/10.2991/assehr.k.210525.124

Urban, W., Krot, K. & Tomaszuk, A. (2023). A cross-national study of internationalisation

barriers with reference to SME value chain. Equilibrium. Quarterly Journal of Economics

and Economic Policy, 18(2), 523–549. https://doi.org/10.24136/eq.2023.016

Texten har granskats och godkänts av Novias redaktionsråd 6.3.2025.