Returning To Succeed: The Role of Innovation in Enhancing SME Re-Internationalisation Performance in An Emerging Economy

Abstract

Why do some SMEs thrive when re-entering international markets, while others stumble? Despite the surprising frequency with which SMEs return to foreign markets after failed attempts, we know remarkably little about what distinguishes the winners from the losers during re-internationalisation. Drawing on the dynamic capabilities view and institutional theory, this study examines how four types of innovation influence the performance of SMEs upon re-entering foreign markets. It further explores the moderating effects of formal and informal appropriation mechanisms. Using survey data from 219 re-internationalised Nigerian SMEs and applying ordered logistic regression, our findings reveal that all four innovation types are positively associated with re-internationalisation performance, with marketing innovation demonstrating the most substantial effect. Formal appropriation mechanisms significantly strengthen the positive relationship between innovation and performance, whereas informal mechanisms exhibit a negative moderating effect. This study makes several significant contributions to both theory and practice. Firstly, it extends the SME re-internationalisation literature by focusing on emerging economies and integrating dynamic capabilities and institutional theories to explain how innovation contributes to a successful re-entry outcome. Secondly, it highlights the role of appropriation mechanisms. Practically, it provides guidance to SME managers on innovation and IP protection and informs policymakers on strengthening formal appropriation systems.