Globalization has led to increased competition and risk of business failure for firms venturing abroad over the last decades. A particularly challenging situation is seen for SMEs from developed economies entering emerging markets. We theorize and empirically show that prior market experience with domestic and developed countries helps to reduce the hazard of exit from emerging markets. We further develop competing hypotheses from complementary and compensatory perspectives about the moderating influence of firm-specific resources (reflected by size, productivity and innovation). Using data from all Canadian SMEs having exported to emerging markets between 1993 and 2008, we find that SMEs can compensate for less accumulated experience through being larger, more productive and more innovative. SMEs that lack prior market experience are – with a sufficient set of compensatory resources – thereby able to be resilient in dissimilar export markets.

Introduction

A key challenge for small and medium-sized enterprises (SMEs) is to stay in business and not become a victim of business failure in the highly competitive global market (Arasti, Zandi, & Talebi, 2012; Baldwin, Bian, Dupuy, & Gellatly, 2000; Franco & Haase, 2010; Sui & Baum, 2014). Research on business failure has increased in recent decades (Amankwah-Amoah, Boso, & Antwi-Agyei, 2018; Devece, Peris-Ortiz, & Rueda-Armengot, 2016) but has not reached consensus (Amankwah-Amoah, 2016; Matthyssens & Pauwels, 2000; Mellahi & Wilkinson, 2004). In particular research on export market exit has received limited attention (Bernini, Du, & Love, 2016; Chen, Sousa, & He, 2016; Gima, Greenaway, & Kneller, 2003), which is critical for SMEs (Sui, Baum, & Malhotra, 2018) that commonly use exports to grow and tap into international market potential (Lu & Beamish, 2001).