The impact of innovation and digitalization on the international performance of SMEs

Purpose: The research identifies the causal pathways between SMEs’ innovation, digitalization and international performance of SMEs. It particularly explores the determinant of innovation and digitalization within Lebanese SMEs. Design/methodology/approach: This research employed the SEM (structural equational modelling) technique to explore the links between innovation, digitalization and international performance of Lebanese SMEs. Findings: Based on a sample of 208 SME executives, the results of SEM (structural equational modeling) reveal that digitalization is a key success factor of international development of SMEs. The results also show that digitalization boosts innovation namely in small firms; however, innovation does not significantly influence digitalization. Finally, the study confirms that SMEs’ internal innovation capabilities along with a favorable internal business environment are the determinants of their innovation. Originality/value: This research advances knowledge in essential areas of digitalization, innovation and the organizational dynamics of SMEs, especially to the much under-researched organizational typology of SMEs operating in ambiguous and resource-constrained contexts; offering novel and valuable elucidations, as well as avenues for further research and implications to industry and governance.