From Barriers to Gateways: Leveraging Institutional Change for SMEs’ Access to International Markets

Abstract

This paper examines the processes involved in leveraging institutional change to facilitate SMEs’ access to international markets. Drawing on institutional theory and rich qualitative data from 70 interviews in Kyrgyzstan across two time periods, it reveals a nuanced interplay between the reinforcement of formal institutions and the decline of outdated informal practices, as well as the influence of these changes on SMEs’ actions. We find that SMEs’ successful access to international markets stems from their distinct adaptive responses to simultaneous improvements in formal institutions and the reshuffling of informal ones. This enables SMEs to channel institutional change through deliberate behavioral responses toward access to international markets. The study suggests that the evolution of formal institutions alone may not suffice; tackling entrenched, historically embedded, and detrimental informal institutions inherited from the Soviet past is crucial to overcoming barriers to accessing international markets. With more transparent formal and informal institutions and practices, exporting SMEs gain access to resources and capabilities, further enabling their progression from exporting to contracted participation in GVCs. Our study, therefore, contributes to discussions in international business literature on the role of context-specific institutions in local SMEs’ internationalization behavior. It highlights the importance of considering the combined role of formal and informal institutional change in providing adequate conditions for accessing international markets, particularly in transition countries, thereby providing policymakers and businesses operating in these contexts with empirically grounded practical insights.