The internationalisation of SMEs

By Rosana Mirkovic, head of SME policy, ACCA

Trading and working internationally is not the sole domain of big corporate business. Small and Medium Enterprises (SMEs) have a part to play in international trading too. Internationalisation matters for them as much as for big business.

Despite this, they remain underrepresented in international trade. Much of this is owed to the lack of capacity that is needed to overcome cultural, regulatory and practical barriers.

While big businesses have the resources to absorb the costs of dealing with these barriers, SMEs are left out in the dry.

These are some of the issues discussed in a new report from ACCA which collects the views of experts from a series of conferences held in Poland, Bulgaria, Ukraine, and Romania late last year.

The internationalisation of SMEs matters not only in terms of their export activity, but also their imports, foreign direct investment, international subcontracting and international co-operation. These activities can be the very essence of many SMEs, including start-ups whose markets for niche products, for example, may well be anywhere in the world.

Removing barriers that will allow SMEs to engage in more international activity is crucial at the time of widespread slow economic growth. In fact, most European governments are betting on export-led recovery and SMEs need to be at the heart of this. Because of their size, they tend to be able to act fast, and can respond to market opportunities as and when they arise. And again, the European Union recognises this fact and has said in the past that SMEs’ growth and innovation will be decisive for the future prosperity of the European Union.

What they need now is an environment in which they can make the most of these opportunities.

There has been a resounding message from governments across the world, urging their SMEs to explore international markets due to weak domestic demand. What they need to bear in mind however is that international activity starts at home; from being able to import, gain the right information and have access to networks and overseas partners.

The emphasis therefore needs to change in urging SMEs to engage in cross border trade, focusing more on the support that is available to make this possible.

And a word of caution: recent evidence suggests that SMEs’ international activity in the UK, both existing and planned, has fallen steadily in the past year.

In general, Western Europe is normally the likeliest place for European SMEs to do business abroad, yet as these countries are also affected by poor economic conditions, SMEs’ international ambitions will need to travel much further to generate the export growth that many European governments are currently banking on.