Small and medium-sized enterprises’ internationalisation in the United Kingdom and the effect of board of directors’ socio-demographic characteristics

Small and medium-sized enterprises (SMEs) are important because they contribute  significantly to the economy and society of every country. However, SMEs face problems regarding internationalisation. It is vital to increase our understanding of the factors that influence SMEs when engaged in internationalisation activities so that their contribution can be increased.

The existing literature reports multiple factors that positively and/or negatively influence SMEs’ internationalisation, such as research and development, innovation, firm size and human and financial resources and capabilities. However, little is known about the effect of corporate governance structures on SME internationalisation, despite the acknowledged effect that corporate leaders have on strategic choices. The main aim of this research was to investigate the effect of board members’ socio?demographic characteristics, including board interlocks, on SME internationalisation in the UK. This study tested the hypothesis that board members’ socio-demographic  characteristics affect SME internationalisation in the UK.

This research employed a positivist philosophical position, collating panel data that were collected both automatically and manually from the FAME database and SMEs’ financial reports. The result was a dataset that contained 5,298 observations on SMEs and industrial sectors from 2015−2021. The representative sample was 773 SMEs in the UK, in accordance with the five criteria that determined the target population.

The findings showed the positive effect of foreign and female board members on SME internationalisation in the UK, indicating the distinctiveness of SMEs’ corporate governance structures compared to the structures of multinational corporations. 

Furthermore, the relationship between board interlocks and SME internationalisation was negative, indicating that board members’ business negatively affects SME internationalisation in the UK.

The findings additionally confirmed the highly situational condition of the upper echelons theory’s career experiences proposition, specifically regarding board interlocks, which left ample room for improvisation while conducting this research. 

Despite the fact that the upper echelon theory has limited explanatory power regarding the effect of relationships between board of directors’ socio-demographic characteristics, including board interlocks, and SME internationalisation, this study indirectly confirmed the theory: Hambrick and Mason (1984) emphasised the specific influence of industrial sectors and firms with which board members are associated. 

There can be industries and firms that, due to their nature, have different SME internationalisation preferences. This study did not confirm all the upper echelons theory’s propositions when the sample included not just one but a variety of industrial sectors.

Overall, the findings suggested that board members’ socio-demographic traits, especially nationality, gender and board interlocks, have an influence on the internationalisation of SMEs in the UK. Thus, while previous studies explored other variables that positively and/or negatively influence SME internationalisation, this study focused on the importance of corporate decision-makers’ influence on SME internationalisation in the UK.