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Article

Managerial Capabilities and the Internationalization Process of Small and Medium Enterprises: The Sustainable Role of Risk and Resource Management

by
Tengfei Shen
1,* and
Alina Badulescu
2,*
1
International College, Shinhan University, Seoul 11644, Republic of Korea
2
Department of Economics and Business, University of Oradea, 410087 Oradea, Romania
*
Authors to whom correspondence should be addressed.
Sustainability 2025, 17(15), 6943; https://doi.org/10.3390/su17156943
Submission received: 25 June 2025 / Revised: 24 July 2025 / Accepted: 26 July 2025 / Published: 30 July 2025
(This article belongs to the Special Issue Innovation Management and Organizational Performance for Sustainable Future—2nd Edition)
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Abstract

This study explores the internationalization of small and medium enterprises (SMEs), emphasizing the critical role of competent managerial abilities. Specifically, it investigates the sustainable role of managerial capabilities in directly facilitating SMEs’ entry into international markets, or whether these capabilities first assist in risk management and resource utilization, supporting international expansion. We propose that SMEs with skilled and capable managers are better equipped to manage internal risks and leverage available resources, thereby enhancing their internationalization efforts. Drawing on empirical data from 191 Chinese SMEs, our findings support the proposed model, revealing that managerial capabilities contribute to internationalization indirectly—this relationship is fully mediated by risk management and resource utilization. This study recommends that SMEs prioritize building a sustainable management team capable of navigating internal challenges to successfully pursue international growth. Our research contributes to the resource-based view and the Uppsala model of internationalization by contextualizing the role of managerial capabilities, risk management, and resource utilization in the internationalization processes of SMEs.

1. Introduction

The global business environment, due to its importance, is compelling small and medium-sized enterprises (SMEs) to pursue internationalization for their survival and growth [1]. In today’s competitive landscape, SMEs striving for domestic dominance must also demonstrate strong performance in international markets, as heightened domestic competition often requires international expansion in pursuit of sustainability and growth [2]. However, the process of internationalization is marked by several challenges, especially in the case of SMEs that operate in emerging economies, where progress and effectiveness are constrained by limited resources [3]. Considering these challenges, SMEs’ managerial capabilities—including the knowledge and skills possessed by managers—play an important role in navigating firms through the challenges and complexities that SMEs go through in the process of internationalization [4].
There is ample empirical evidence that managerial capabilities are one of the pivotal intangible resources that allow firms to navigate international markets, particularly in the case of SMEs [5,6]. Managerial capabilities include managers’ international experience, strategic thinking, cultural intelligence, and effective decision-making skills, etc. These abilities are widely recognized as a key determinant of managers’ competence to deal with uncertain environments, seize international opportunities, and optimize internal capabilities [7]. Several studies assume a direct relationship between these managerial capabilities and internationalization [8,9,10]. However, this study challenges this purely linear relationship by analyzing the mediating impact of risk and resource management in-between managerial capabilities and internationalization.
Several studies identify risk management practices as a critical tool for SMEs, especially those seeking internationalization, for instance, [11,12]. Risk management, in the context of internationalization, aids SMEs in identifying, assessing, and mitigating risks, such as political instability, cultural differences, currency fluctuations, and other foreign risks [13,14]. Furthermore, the effective risk management practices empower managers to make well-informed decisions based on foreign market penetration strategies [15]. However, the mechanism of how managerial capabilities improve the firm’s risk management practices remains underexplored. Although the existing literature provides ample support for the positive relationship between managerial capabilities and risk management, there is a lack of a comprehensive understanding of the path through which these capabilities are transformed into international growth via effective risk management practices. Our study intends to fill this gap by exploring the mediating role of risk management practices between SME managerial capabilities and international expansion processes.
In addition to risk management, another fundamental tool for SMEs’ international growth is resource management. Resource management is a key element of a firm that shapes the SME’s internationalization strategies. Most SMEs often operate with limited resources, making optimal resource deployments a necessity [16]. Key internal resources include a firm’s financial capital, human capital, and knowledge [17], all of which are equally critical for the sustainability of SMEs in international markets [18]. Sualeh Khattak et al. [19], in this regard, suggest that the effectiveness of a firm’s internationalization process is driven by the level of managerial capabilities it possesses. Hence, it is reasonable to argue that a firm’s resource management is a critical driver of its international performance. Yet, the literature fails to adequately explore the mediating role of resource management in SMEs’ internationalization process. The current study fills this gap by providing deeper insight into the processes of SME internationalization via resource management.
By addressing these identified gaps, our study significantly contributes to the body of literature both theoretically and practically. Theoretically, this study enriches the literature on SME internationalization by providing deeper insight into its mechanisms. For instance, this study answers the following question: Which managerial capabilities are utilized by SMEs to improve their risk and resource management processes that, in turn, reduce the challenges of entering international markets? In essence, this study bridges the macro-level international theories of internationalization with micro-level managerial decision-making, particularly in the context of SMEs. Moreover, the practical implications of our findings are essential for assisting SMEs throughout the processes of their internationalization. They enlighten SMEs about the importance of managerial capabilities in shaping the quality of risk and resource management in the process of internationalization. These findings are particularly crucial for SMEs that operate in a volatile global business environment, where survival with constrained resources is tough.
This research is organized as detailed below. In Section 1, we present the introduction of this study. Section 2 and Section 3 highlights the theoretical background, as well as the literature review to develop the hypotheses. In Section 4, we discuss the methodology of the study. In Section 5, we discuss the results and findings. In Section 6, we discuss the contributions, implications, and limitations of the study.

2. Theoretical Background

2.1. Managerial Capabilities

The role of a manager in any organization is a key element for its success or failure, as the power to formulate strategies, manage resources, and exploit opportunities rests with them [20]. According to Graves and Thomas [21], managerial capabilities define management’s capacity (the available human resources for performing managerial tasks), management’s processes (including techniques for planning and controlling), and management’s expertise (managers’ capabilities). Management capabilities refer to the power and ability to communicate with stakeholders, resolve internal and external conflicts, motivate teams, respond promptly to changing environments and opportunities, and align firm resources to achieve the firm’s objectives and attain a competitive advantage [22]. This demonstrates that the SME managers’ capabilities play a pivotal role in uncertain situations through effective strategic planning and efficient resource allocation, especially when the firm is penetrating dynamic international markets.

2.2. Risk Management

Risk management is defined as a set of operational or financial activities aimed at maximizing the firm’s value and portfolio by reducing the risks associated with cash flow volatility [23]. In general, risk management empowers management to consider all alternatives, evaluate their pros and cons, and choose projects that align with the firm’s values and priorities [24]. Risk management is an essential tool for SMEs’ success, given the higher uncertainty and resource constraints that SMEs often face. Effective risk management enhances the SMEs’ capability to identify, assess, and manage perceived threats through internal communication, effective decision-making, and continuous monitoring [25].

2.3. Resource Management

Resource management is defined as the efficient and effective use and utilization of tangible (finances, technologies, and materials, etc.) and intangible resources (information, network, and goodwill, etc.) within an organization [26]. An organization is a single entity that is composed of several key resources that are linked to its operations and require management techniques that extend well beyond the conventional scope of logistics [27]. The strategic planning, allocation, and utilization of an organization’s human, financial, technological, and inventory resources is referred to as resource management [28,29,30]. Limited resources and financial constraints require SMEs to adopt effective resource management practices. With proper resource allocation, SMEs optimize their operations, improve productivity, reduce costs, and remain competitive. Moreover, it enhances the firm’s flexibility to respond to market changes, invest in key innovations, and sustain long-term growth.

2.4. SMEs’ Internationalization

The geographic expansion of SMEs from domestic to foreign markets, aimed at achieving the firm’s growth, is referred to as internationalization [31]. In general, the internationalization process of firms is defined as the entry of a firm into international or foreign markets with products or services [32]. Internationalization is a key element for SMEs that have operated within limited terrestrial boundaries [33]. This process of internationalization can be manifested through various approaches, including exporting, franchising, foreign subsidiaries, and joint ventures [34]. The competition from globalization has made internationalization a critical determinant of SMEs’ competitiveness and long-term sustainability.

2.5. Theoretical Underpinning

SMEs’ internationalization process is viewed as an incremental and complex process that is shaped by key elements, which include managerial decision-making processes through organizational learning. Our study draws theoretical support from two major theories: the Upper Echelons Theory (UET) by Hambrick and Mason [35] and the Uppsala Internationalization Model (UIM) by Johanson and Vahlne [36]. UET highlights the importance of managerial characteristics—such as cognitive style, risk perception, managerial experience, etc.—in determining the strategic choices that are made by managers under different circumstances, whereas UIM enlightens the process of SME internationalization as it states that the internationalization of an SME is a gradual and experiential learning process that enables firms to expand in international markets using managerial risk assessment and market knowledge.
Technically, UET provides us with a framework of how the strategic decision-making and performance of a firm are influenced by key managerial capabilities, such as experience, cognitive traits, and personal values. From the lens of SME internationalization, managerial capabilities (for instance, risk-taking propensity, managerial experience, and managerial strategic vision) play a supporting role in transforming these capabilities. Dominguez and Mayrhofer [37], in this regard, argue that, unlike multinational corporations, the performance of SMEs is more directly influenced by the capabilities of their managers than by formalized internationalization strategies. The study by Popli et al. [38] validates this view that firms’ internationalization decisions and strategic outcomes are driven by the characteristics of their executives. It suggests that the competent managers are better able to assess market risk and are in a strong position to develop effective market strategies, supported by their risk-taking capabilities, leadership style, and learning capabilities, thereby improving their abilities to manage resources in response to assessed uncertainties [39,40].
Hence, international expansion in foreign markets comes with a range of risks—including financial, operational, and institutional risks—that the top managers need to manage in order to mitigate unexpected losses before entering the international markets [41]. Therefore, internationalization inevitably requires optimal resource allocation, such as human talent, financial capital, and technological infrastructure. The role of managerial capabilities in resource and risk management is crucial in mobilizing and deploying such resources to support cross-border expansion. The failure of risk and resource management threatens the sustainability of firms in international operations [42]. In such circumstances, well-managed firms tend to invest in areas like market research, compliance mechanisms, and distribution networks, all of which facilitate a smoother internationalization process [43].
While the UET features the importance of managerial capabilities in shaping strategic decision-making, it does not fully capture the dynamic and incremental process through which SMEs expand their operations into the international market. UET primarily emphasizes the internal capabilities of managers; however, it fails to provide insight into how these characteristics influence the firm-level outcomes. So, as a complementary perspective, this study draws on the Uppsala International Model by Johanson and Vahlne [36], which provides a process-oriented view of internationalization. This model states that internationalization is driven by gradual learning, risk management, and market knowledge accumulation. In the case of SMEs, firms often begin with geographically closer markets to reduce uncertainty and build the required knowledge and confidence essential for further expansion. Thus, using a dual-theoretical framework offers a comprehensive understanding of internationalization processes in the context of managerial capabilities, risk, and resource management.

3. Literature Review

3.1. Managerial Capability and SMEs’ Internationalization

SMEs often expand their operations into international markets not only to survive but also to acquire knowledge, thereby strengthening their competitive position in the domestic market through support from international market share [44,45]. The process of internationalization presents firms with uncertain and novel economic contexts, thus posing a risk to their survival [46,47]. In this context, the Upper Echelons Theory underscores the primary role of managerial characteristics and the capabilities that they have in shaping the strategic choices related to international expansion; see [35].
Extending this theoretical foundation, numerous studies have examined how SMEs leverage their internal resources to exploit available opportunities embedded in international markets [45,48,49]. During the process of internationalization, managerial capabilities have a significant role to play in facilitating the expansion process. For instance, managerial capabilities directly impact the decision-making, competitive positioning, and market adaptation of SMEs [50,51,52]. In comparison to large organizations, SMEs often lack extensive operational and financial resources [53,54], making dynamic capabilities crucial for SMEs in navigating complex international environments; see [55].
Therefore, the empirical evidence suggests that managerial capabilities support the smooth transition of SMEs from the domestic market to the international market. Over a period of time, several managerial capabilities have been identified as key drivers of SME internationalization. For instance, managerial expertise provides SMEs with extensive knowledge that is essential for firm internationalization [5,56]. Similarly, SMEs with skilled managers are more likely to discover and analyze foreign market opportunities, assess competitive landscapes, and develop strategic entry modes, which eventually enhances their competitiveness and growth [48,57,58]. Additionally, the capabilities of managers are essential for strong networking, which is fundamental to internationalization; see [59,60].
Grounded in the resource management perspective, several studies provide robust evidence explaining the positive influence of managerial capabilities on SMEs’ internationalization. For instance, Chebbi et al. [61] found that the international expansion of a firm emerges from its managers’ capabilities, such as expertise, personal orientation, cognition, and intuition. Similarly, Moharrak et al. [62] found that capable managers effectively leverage AI to expand the internationalization processes. Notably, Zahoor et al. [63] revealed that the alliance management capability improves SMEs’ post-entry internationalization speed. Additionally, a study by Bianchi and Stoian [64] reported that SMEs with strong managerial and organizational capabilities are able to attract foreign clients instead of directly entering foreign markets, thereby promoting inbound internationalization. Therefore, the following hypothesis is proposed:
H1. 
SMEs with strong managerial capabilities easily enter international markets.

3.2. Managerial Capabilities and Risk Management

The global business environment exposes SMEs to a wide range of risks. Therefore, effective risk management is crucial for SMEs striving for international expansion [65]. Kim [66] states that effective risk management requires not only proactive prevention but also a reactive response from individual managers, as they are the main players in risk mitigation processes. The RBV perspective, in this regard, suggests that the manager’s capabilities act as strategic assets [67,68], enabling SMEs to mitigate risks effectively. Capable managers possess strong decision-making abilities, problem-solving skills, and strategic foresight [69]. Hence, managerial capabilities aid firms in anticipating and critically analyzing the potential risks faced by SMEs. Moreover, managerial capabilities empower managers with advanced analytical and leadership skills that improve their execution of risk and asset management frameworks [70].
Several key studies support the positive role of managerial capabilities in strategic risk management. For instance, Wang and Rafiq [71] suggest that managerial skills and capabilities facilitate management in creativity, providing multiple solutions for various types of risks. Similarly, Bogodistov and Wohlgemuth [25] argue that managerial capabilities are essential for better risk management because they help prevent adverse events and improve an organization’s resilience. The study by Kumar and Zbib [72] suggested that managerial abilities empower firms with resources that are critical during a crisis. In a similar vein, Olsen et al. [73] state that the management capabilities that evolve in munificent industries significantly improve the manager’s ability to react to uncertainty. These findings support the UET [35] and RBV theory [74], suggesting that managerial capabilities act as a valuable resource which might influence key managerial decisions such as risk management.
In conclusion, it is rational to argue that managerial capabilities are key determinants of effective risk management practices, given the strategic role of managers in risk identification, assessment, and mitigation. The knowledge that capable managers possess is essential for implementing strategies that empower firms to respond to unforeseen challenges [75]. Moreover, capable managers could integrate risk considerations into a firm’s decision-making processes, fostering a risk-aware culture that directly contributes to effective risk management procedures [75]. Therefore, the following hypothesis is proposed:
H2. 
Greater managerial capabilities positively influence risk management practices in SMEs.

3.3. Managerial Capabilities and Resource Management

In the context of this study, managerial capabilities—which refer to the abilities of managers—explain the variation in resource-related decisions that lead to different firm-level outcomes [76]. The skills, capabilities, and knowledge possessed by managers are essential for strategic decisions, problem-solving, and ensuring effective resource utilization and allocation [19]. Effective resource management involves the efficient planning, distribution, and utilization of a firm’s tangible and intangible assets, including financial resources, human capital, and technological infrastructure [77]. Competent managers are equipped with strong analytical skills and strategic vision [78]; therefore, they are better able to identify the organization’s resource needs, minimize waste, and align resource allocation with the overall organizational goals [79,80]. Moreover, capable managers tend to be proactive [81], making contingency plans for resource optimization [82]. As a result, capable managers serve as valuable resources, fostering efficient resource management practices that enable firms to adapt to external changes, sustain competitiveness, and enhance their operational performance; see [83].
The role of managerial capabilities is of particular importance in the context of SMEs, where limited resources require vigilant allocation. Helfat and Martin [84] suggest that managerial capabilities are reflected in three core dimensions—managerial social capital, human capital, and cognition. Managerial human capital represents the expertise and skills of managers accumulated over time from training, education, and practical experience [76,85]. Such skills and expertise enable SME managers to identify evolving resource needs and align resource allocation strategies. As the experience of managers deepens over time, competent managers reconfigure their expertise, which in turn improves their decision-making ability in resource deployment [86]. In addition, managerial capabilities allow managers to mobilize internal and external resources through their strong social capital to gain access to critical information, influence resource streams, and adapt internal structures, enhancing resource efficiency [87,88]. Alongside this, the cognitive capacity of managers also plays a positive role, especially under uncertain situations [80].
A rich body of research indicates that managerial capabilities are key determinants of efficient resource allocation. For instance, the study by Sualeh Khattak, Wu, Ahmad, and Ullah [19] reveals that managerial capability is a significant factor in a firm’s efficient resource management. In a similar vein, the study by Badrinarayanan, Ramachandran, and Madhavaram [80], extending RBT, concluded that managers use their capabilities and structure, bundle, and leverage organizational resources to attain firm objectives. D’Oria et al. [89], in this regard, suggested that the knowledge, skills, and experience of managers play a dynamic role in resource management of organizations. They concluded that the role of strategic resources—particularly managerial resources—cannot be overlooked, especially in the context of resource orchestration. Carmeli and Tishler [90] emphasized the importance of managerial capabilities, arguing that they play an important role in resource-use decisions and firm performance differentials. Therefore, the following hypothesis is proposed:
H3. 
Greater managerial capabilities positively influence resource management in SMEs.

3.4. Mediating Role of Risk Management

The current study posits that risk management practices can significantly mediate the relationship by transforming managerial capabilities into successful international expansion, especially in the case of SMEs, where the resources are limited. The study by Rehman and Anwar [91] empirically demonstrates a significant mediating role of enterprise risk management between business strategy and SME performance, affirming that the managerial decisions, in order to become effective, require a systematic risk management approach. In a similar vein, Soltanizadeh et al. [92] identified enterprise risk management as a key mediator in the relationship between cost leadership strategies and organizational performance.
In continuation of this perspective, several studies show that the effectiveness of risk management practices is shaped by the quality of the capabilities possessed by a firm’s management. In this regard, Raza Bilal et al. [93] found several managerial capabilities—including problem-solving, decision-making, and strategic thinking—to be key determinants of a firm’s growth-related strategies, which inherently include risk management. Similarly, Gao et al. [94] identified the networking capabilities of managers as an instrumental tool for building effective risk management. The study by Chakabva and Tengeh [95] investigated the impact of managerial characteristics—such as education, experience, and risk perception—on the firm’s risk management strategies, finding managerial cognitive and experiential traits as critical precursors to the risk governance structures of firms. These findings collectively advocate for the positive influence of managerial capabilities over the risk management practices of SMEs.
On the other side of the mediation pathway, numerous studies advocate for the positive impact of effective risk management practices on SMEs’ internationalization perspectives. An illustration of this is the study by González Calzadilla et al. [96], which suggests that the challenges of internationalization—such as cultural barriers and regulatory differences—could be managed effectively through proactive risk management practices. Similarly, Zahoor et al. [97], in their study, stressed that risk management integration into strategic planning not only safeguards SMEs from potential threats but also supports the international expansion of these firms. Therefore, the following hypothesis is proposed:
H4. 
RMP mediates the relationship between MC and SMEs’ internationalization.

3.5. Mediating Role of Resource Management

While risk management in recent years has emerged as a key mediator, an equally critical yet distinct mediating effect lies in effective resource management. As discussed earlier, resource management is defined as the systematic planning, allocation, and utilization of a firm’s resources, including its human capital, financial capital, and inventory, in alignment with firms’ strategic goals [29]. The limited resources of SMEs typically require resource optimization to sustain growth, expansion, and competition [19].
Several studies, in this regard, have investigated the mediating role of resource management between managerial input and firm-level outcomes. For example, Wamba-Taguimdje et al. [98], using resource-based view, argued that a firm’s resource optimization capabilities are significantly important to its agility to respond to international opportunities. Boso et al. [99], in this regard, found strategic resource management to be a crucial element that transforms an entrepreneurial orientation into international market success. They suggested that effective resource management is critical, especially when SMEs are operating in extremely volatile markets. Hence, these studies provide a foundation for our understanding of resource management practices as a mediating mechanism.
There is a general consensus among scholars regarding the positive nexus between managerial capabilities (such as planning, coordination, and operational decision-making) and effective resource deployment. According to [100], highly capable managers tend to leverage their experiential knowledge to reconfigure internal resources such that these resources are aligned with external demands. Similarly, Gharakhani and Mousakhani [101] found the knowledge management capabilities of managers to be key determinants of the knowledge resource management of a firm, whereas Sualeh Khattak, Wu, Ahmad, and Ullah [19], while investigating Pakistani SMEs, found several managerial capabilities to be predictors of resource management.
On the other hand, some studies support the positive impact of resource management on the key decisions of firms, including internationalization. For instance, Fredrich et al. [102] concluded that balanced investment in R&D and external collaboration amplifies the benefits of internationalization, suggesting that optimal resource management is a key to internationalization success. Similarly, Hessels and Parker [103] suggested that SMEs must optimally utilize their limited resources and expand internationally in order to survive in competitive markets. Further support comes from the study by Stoian, Rialp, and Dimitratos [18], which reveals that the SMEs leveraging interorganizational networks (an essential tool of resource management) perform well in international markets, specifically in selecting suitable foreign market entry strategies. Taken together, the aforementioned empirical findings underscore a critical two-stage process. Therefore, the following hypothesis is proposed:
H5. 
RM mediates the relationship between MC and SMEs’ internationalization.

4. Methodology

This study utilizes a purposive sampling strategy to examine SMEs in Shanghai, Shenzhen, and Beijing, focusing on managerial capabilities, risk management, resource management, and internationalization. SMEs are selected based on specific criteria: they must have fewer than 500 employees [104]; belong to the manufacturing, technology, or service sectors that actively pursue international expansion; and have some level of international exposure. The geographic focus on these three cities is due to their status as key economic hubs with significant international business activity. China is one of the largest export markets in the world. Hence, firms located in China have strong network ties for imports and exports. However, research into how the top managers and owners of Chinese SMEs manage risk and resources for the internationalization process is lacking. Additionally, a convenience sampling approach was employed to ensure diverse representation across various industries and firm sizes, facilitating a thorough analysis of managerial capabilities in the context of internationalization. Convenience sampling allows researchers to reach a maximum number of respondents within a region [105].
This study was conducted in three major economic hubs of China: Shanghai, a global financial center with numerous multinational corporations and export-focused SMEs; Shenzhen, known for its technology and innovation, featuring a vibrant startup ecosystem and significant international trade; and Beijing, the political and economic center with many SMEs in technology, finance, and professional services that are pursuing international expansion. The firms were engaged in the trading and manufacturing process.
The data collection for this study was carried out in three phases to develop a robust dataset for analysis. The first phase involved a pilot study with 10 SME managers from Shanghai, Shenzhen, and Beijing to refine the survey instrument and validate its measures through feedback on wording and question sequencing. The primary data collection phase utilized a structured survey distributed to top managers and decision-makers, employing validated scales to assess managerial capabilities, risk management practices, resource management practices, and internationalization outcomes. Various methods, including online surveys and face-to-face meetings, were used to gather a total of 239 responses, with 191 considered valid after data cleaning. This approach allowed for a comprehensive understanding of how managerial capabilities affect SMEs’ internationalization, particularly within the dynamic business environments of China’s major cities.

4.1. Measurement of the Variables

The variables were adopted from previous studies and have been measured using 5-point Likert scales, ranging from strongly disagree (1) to strongly agree (5).

4.1.1. Managerial Abilities

Sometimes also referred to as “managerial capabilities,” these show the capabilities of top management in terms of problem solving, managing resources, and responding to external threats and challenges. We adopted six items from the previous study [22], with slight modifications made to match them with internationalization. A sample item indicates that the “top management team provides good leadership to expedite the internationalization process”.

4.1.2. Risk Management

It indicates the abilities of firms to assess and reduce risks associated with various operational activities. To measure risk management, we used six items adopted from previous studies [91,92]. A sample item is “we have standard procedures in place for launching risk-reducing measures”.

4.1.3. Resource Management

It demonstrates how firms effectively and efficiently manage resources to gain productivity and performance. To measure resource management, we used seven items taken from previous studies [26,106]. A sample item is “My firm encourages the utilization of resources in such a way as to get maximum outputs via minimum inputs”.

4.1.4. SMEs’ Internationalization

It describes firms’ entry into and process of joining international markets, either by selling and purchasing products or services. To measure internationalization, we used four items adopted from previous studies [32,107]. A sample item is “We are expanding the firm’s international operations”.

4.2. Control Variables

To reduce the probability of spurious results in the model, we controlled the attributes of firms and managers during analysis. For instance, firm age, firm size, financial performance, manager age, manager experience, and manager education were controlled in the model that provided different results. While the rest of the variables were categorized as shown in Table 1, firm performance was measured using a 5-point Likert scale, corresponding to the main variables of the study.

5. Data Analyses

We analyzed the data through SPSS 24 and SmartPLS 4. Initial screening tests were performed through SPSS, such as frequency analysis and common method bias, etc. The main model was executed through SmartPLS for two major reasons. First, SmartPLS is strongly recommended for a small data sample. Our sample size was small, and therefore, SmartPLS was a suitable software in this case. Second, being user-friendly, it provides various validity and reliability tests that are not executed in other types of software.

5.1. Confirmatory Factor Analysis

We performed confirmatory factor analysis (see Figure 1) to evaluate the acceptance of the model using cross-loading, validity, and reliability. We added all the items to their relevant constructs and ran the model using the algorithm. Our results confirmed (see Table 2) desirable factor loading, with individuals or collective values of 0.70 or greater [108].
Validity and reliability are given in Table 3 and Table 4. Convergent validity, sometimes illustrated as average variance extracted (AVE), was also acceptable as recommended by previous studies [109,110]. Discriminant validity, shown as (√AVE), also provided desirable values, such as 0.70 or above [111]. Finally, composite reliability was evaluated, which provided a desirable value of 0.70 or above for all the constructs [108].
Additionally, due to criticism of the discriminant validity, an additional test of HTMT was performed to ensure the validity of the model [112]. HTMT also confirmed (see Table 4) desirable validity, as all the relationships were below 0.85 [112].
Additionally, we used Harman’s single-factor test to evaluate the presence of common method bias in the data [113]. Based on the results, we found only five factors with eigenvalues of 1, of which the first factor only explained 38.44% of the total variance of 66%. This confirms that common method bias is not an issue in our data, as the first factor does not account for major variance. Further screening tests such as multicollinearity are discussed in Table 5.

5.2. Structural Model

The hypothesized model was tested through a structural model (see Figure 2) using bootstrapping (5000-resampling approach) in SmartPLS. In the first step, we have shown the role of the control variables. The second step illustrates the direct effect, while the third step shows the indirect impact of managerial capabilities on SMEs’ internationalization through risk management and resource management.
The results of the structural model are shown in Table 6. Looking into the direct effect of managerial capabilities in SMEs’ internationalization, we see that managerial capabilities do not directly affect SMEs’ internationalization process (β = 0.118, p = 0.221), and thus H1 is not supported. However, managerial capabilities significantly affect risk management (β = 0.523, p = 0.000) and resource management (β = 0.583, p = 0.000), supporting H2 and H3. We further found that the indirect effects of managerial capabilities on SMEs’ internationalization through risk management (β = 0.131, p = 0.028) and resource management (β = 0.170, p = 0.002) are significant, supporting H4 and H5. This illustrates that risk management and resource management fully mediate the relationship between managerial capabilities and SMEs’ internationalization. The control variables in the model show heterogeneous results, of which only managers’ age and financial performance are significant, while managers’ education and experience, and firm age and size are insignificant.

5.3. Multicollinearity, Size Effect, and Average Effect

To evaluate the multicollinearity issue in the model, we evaluated the Variance Inflation Factor (VIF), as shown in Table 5. All the values were found in the acceptable range (below 3) [114,115], thereby confirming that there were no multicollinearity issues in the variables that were tested in the model.
We tested the size effects of the constructs in the outcomes through the F-squared test (see Table 5). An f-square value in the range of 0 to 0.15 indicates a smaller effect; in the range of 0.16–0.30 indicates a medium effect; while above 0.30 shows a greater effect of particular constructs in the model [116]. Looking into our results, we see that all the variables show small-to-medium-sized effects in the SMEs’ internationalization process. However, managerial capabilities show a large effect in risk management and resource management, revealing that managerial capabilities are very important for managing risk and utilizing resources efficiently for SMEs’ internationalization.
The R-squared value elaborates on the average variance of the constructs in the outcomes. In our model, we see that managerial capabilities explain 34% of variance in resource management, 28% in risk management, and 51% in SMEs’ internationalization.

5.4. Predictive Relevance

To assess the predictability of the model, we performed a blindfolding test in SmartPLS, and the results are shown in Table 7. It shows how the model is well-fitted and accurate, given the variables tested. The impact value greater than 0 indicates a well-predictive model. In our model, we see that all the variables have desirable values and therefore, we confirm that the model is predictive and accurate.

6. Discussion

Based on empirical evidence from 191 Chinese SMEs, this study enriches the scholarship and literature on the role of managerial capabilities in SMEs’ internationalization through the mediating mechanisms of risk management and resource management practices. Although previous studies have contributed to the knowledge on SMEs’ internationalization in different ways, this study emphasizes the prominence of managerial capabilities in risk management and resource management for SMEs’ internationalization processes in emerging economies.
Contrary to traditional assumptions, our findings indicate that managerial capabilities and SMEs’ internationalization processes are not directly linked to each other, thereby rejecting Hypothesis 1. Our findings align with recent emerging studies that argue that managerial capabilities alone are not sufficient to support the complex process of internationalization; see [117,118]. In fact, findings suggest that the effectiveness of managerial input and its transformation into successful output depends on how these capabilities are operationalized through the firm’s internal systems. In contrast, our study confirms that managerial capabilities strongly influence firms’ risk management practices, supporting Hypothesis 2. Our findings are in line with the studies by Tillema et al. [119], Koh et al. [120], and Monazzam and Crawford [121]. These findings reinforce the importance of managerial capabilities, suggesting that SMEs must invest in developing capabilities essential for effective risk management practices, which in the long run affect the sustainability and growth of a firm. Similarly, this study confirms the positive relationship between managerial capabilities and resource management, corroborating the findings of Sualeh Khattak, Wu, Ahmad, and Ullah [19]; Badrinarayanan, Ramachandran, and Madhavaram [80]; and D’Oria, Crook, Ketchen Jr, Sirmon, and Wright [89]. This finding highlights the importance of a firm’s resource optimization and its pivotal role in a firm’s sustainability, growth, and expansion.
Empirical findings also confirm the mediating role of risk management and resource management between managerial capabilities and the SME internationalization process, accepting Hypotheses 5 and 6. It shows that the managerial capabilities, without key organizational practices (such as risk and resource management), might not directly lead to SMEs’ internationalization. Instead, risk and resource management act as critical enablers of the internationalization process. Particularly, the acceptance of Hypothesis 4 demonstrates the pivotal role of managerial capabilities in structuring SMEs’ risk management systems, which subsequently support SMEs in internationalization processes. SMEs operating in volatile and uncertain market environments require managerial capabilities that are essential to strategically identify, assess, and mitigate risk. Our findings align with the previous researchers, e.g., [91,92], who identified enterprise risk management as a mechanism through which the internal managerial inputs are transformed into organizational outputs.
Similarly, the acceptance of Hypothesis 5 emphasizes the critical role of resource management as a tool for translating a firm’s managerial capabilities into successful internationalization outcomes. Moreover, our findings suggest that firms with capable managers are able to mobilize and allocate scarce resources—including financial capital, human capital, and operational assets—in ways that meet external demands. Empirically, this finding resonates with the study by Sualeh Khattak, Wu, Ahmad, and Ullah [19], which found resource management to be a key mediator between managerial capabilities and SMEs’ sustainability. Moreover, this finding corroborates the results of Fredrich, Gudergan, and Bouncken [102] and Stoian, Rialp, and Dimitratos [18], stressing that effective resource deployment not only supports the scalability of firms but also spurs on SMEs’ agility and readiness to seize cross-border opportunities.
Together, all the findings of the current research significantly contribute to a refined understanding of how the SME internationalization process is affected through a two-stage process: managerial capabilities enhance organizational systems (e.g., risk and resource management), which in turn facilitate SMEs’ international growth. This insight is of key importance, particularly for SMEs that often operate in resource-constrained and volatile environments.

6.1. Theoretical Contributions

This research contributes to the literature in two key ways. First, it addresses a notable gap by examining the role of managerial capabilities in the internationalization of SMEs through the mediating effects of risk management and resource management. Our findings reveal that managerial capabilities do not directly lead to internationalization; rather, their impact is fully mediated by how effectively managers handle internal risks and utilize available resources. While previous studies have acknowledged the importance of managerial skills and abilities in shaping the internationalization process [32,107,122,123], the specific mechanisms—particularly how managers mitigate risk and allocate resources efficiently—have remained underexplored. By focusing on these mechanisms, our study provides fresh insights into how SMEs can successfully enter international markets.
Second, this research contributes to the RBV [74] and the Uppsala Model [36] in the context of small businesses in emerging economies. Our results support the RBV argument that firms possessing unique and well-managed resources are better positioned to compete than those lacking such assets. These findings deepen our understanding of the RBV by highlighting how managerial capabilities can shape the strategic deployment of resources in dynamic markets. Additionally, this study extends the Uppsala Model by revealing how heterogeneity in SMEs’ internationalization paths can be explained through differences in managerial capabilities, risk management practices, and resource utilization. Grounded in the Uppsala framework, our results suggest that SMEs equipped with strong managerial capabilities and internal resource strategies are more likely to navigate international markets successfully.

6.2. Implications for Practice

6.2.1. Implications for SMEs

According to the findings, managerial capabilities do not directly drive SME internationalization; rather, their influence is mediated by practices in risk management and resource management. This insight suggests that SME owners and managers aiming for entry into international markets should concentrate on three main areas: first, improving risk management by using structured assessment frameworks, conducting extensive market research, and developing effective risk mitigation strategies; second, optimizing resource allocation through strategic planning, financial prudence, and workforce development to support sustainable growth; and third, investing in managerial training and development to improve decision-making skills and knowledge of global markets. These capabilities can be further enhanced through collaboration with business schools and industry associations, making it easier for SMEs to successfully navigate the complexity of international markets. SMEs should not invest in unnecessary operations and activities; rather, they should focus on the key capabilities to configure entry into internationalization markets.

6.2.2. Implications for Policymakers

Policymakers should prioritize enhancing SMEs’ risk and resource management capabilities, instead of solely focusing on improving managerial skills. In support of this, it is suggested that trade organizations and government agencies develop risk management training programs specifically for small- and medium-sized businesses. These programs should include mentorship programs with experienced exporters and tools for financial risk assessment, as well as information about international markets. In addition, in order to assist SMEs in effectively managing their resources in global markets, policymakers ought to promote digital transformation initiatives and make access to financial resources like grants and loans with low interest rates easier. SMEs can receive additional assistance in acquiring the resources and best practices necessary for successful internationalization by establishing internationalization roadways and knowledge-sharing platforms, such as business networks and trade fairs. In the end, giving support to these areas will make the SME sector more resilient and competitive in the global market.

6.2.3. Limitations and Future Directions

This research has a few limitations that future scholars working in similar areas could address. First, although the study was conducted using a two-time-lagged design, concerns regarding common method bias and social bias may remain. To mitigate these issues, future researchers are encouraged to conduct interviews or utilize secondary data sources, such as annual reports and financial data, where applicable. This approach can offer deeper insights and help reduce potential biases. Moreover, purposive sampling has limitations as it can exclude random firms from the list. Hence, future researchers should evaluate the internationalization process in random firms to avoid biases. Similarly, the sample size is relatively small, and thus, further scholars should extend this study to other regions of China with a larger number of SMEs. This will reduce geographical biases and will give a better generalization of the implications.
Second, our focus in this study is on Chinese SMEs. While the small business sector in China has experienced significant growth and has entered various markets with unique products and services, it may not fully represent other geographical contexts. Scholars from other regions—such as India, Pakistan, Malaysia, and developed economies like those in Europe and the USA—could contribute valuable comparative insights into the dynamics of small business industries.
Third, this study tested a model focusing on the role of managerial capabilities in risk and resource management within SMEs. Future researchers could explore additional variables such as international network ties, digitalization capacity, and regulatory environments that may influence the internationalization process of SMEs across diverse settings. Furthermore, future researchers (especially from developing economies) could take into account how digitalization influences the entire internationalization process, what risks may arise, and whether there is any change in the skills of managers. Additionally, future researchers can test variables such as financial resources, access to financial capital, and various network ties in the context of SMEs’ internationalization.
Finally, the model was tested in SMEs. Although the small business industry has several advantages and represents the majority of businesses around the world, it does not share the characteristics of large firms. Therefore, future researchers should focus on large firms to see how CEOs and top management teams manage risk and resources for the internationalization process in companies.

6.3. Conclusions

This study aims to understand the importance of managerial capabilities in managing risk and utilizing resources for the internationalization process in SMEs. Using RBV and internationalization theories, we tested the conceptualized model based on 191 Chinese SMEs. Our findings indicate that managerial capabilities influence SMEs’ internationalization process. However, we further found that the relationship between managerial capabilities and SMEs’ internationalization is mediated by risk management and resource management. Based on the insights, this study recommends that firms focus on improving their managerial skills to mitigate the risks and manage their resources effectively for the internationalization process. Moreover, our research contributes to the theories of RBV and internationalization by revealing the importance of resources and capabilities in the internationalization process.

Author Contributions

Conceptualization, T.S. and A.B.; formal analysis, T.S.; methodology, T.S.; resources, A.B.; supervision, A.B.; writing—original draft, T.S.; writing—review and editing, A.B. and T.S. All authors have read and agreed to the published version of the manuscript.

Funding

No external funding received.

Institutional Review Board Statement

The study was conducted in accordance with the Declaration of Helsinki, and approved by Research Ethics Committee (approval code: R14REA262; date of approval: 17 June 2025).

Informed Consent Statement

Yes, consent is granted for publication.

Data Availability Statement

Data is available upon reasonable request.

Conflicts of Interest

All the authors declare no conflicts of interest.

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Sustainability 17 06943 g001
Figure 1. Measurement model results.
Figure 1. Measurement model results.
Sustainability 17 06943 g001
Sustainability 17 06943 g002
Figure 2. Structural model results.
Figure 2. Structural model results.
Sustainability 17 06943 g002
Table 1. Demographic information.
Table 1. Demographic information.
Description (Managers)FrequencyRatioDescription (Firms)FrequencyRatio
Gender Age
Male14575.9Less than 10 years2312.0
Female4624.111–206333.0
Age 21–408946.6
30 and below94.741 and above168.4
31–404121.5Size
41–507036.6100 and below189.4
51–605227.2101–2004825.1
60 and above199.9201–3009047.1
Education 301–4003116.2
Bachelor and below14777.0401–50042.1
Master3417.8
MS/MPhil84.2
PhD21.0
Experience
Below 5 years2915.2
6–10 years8343.5
11–15 years4523.6
16–20 years2513.1
21 and above94.7
Total191100.0Total191100.0
Table 2. Cross-loading.
Table 2. Cross-loading.
ItemsFinancial PerformanceManagerial CapabilitiesResource ManagementRisk ManagementSMEs’ Internationalization
Int10.4700.3930.4250.4530.778
Int20.4240.4350.5630.5190.855
Int30.4020.3890.4870.4840.823
Int40.4770.4020.4720.4720.749
erm10.5080.4330.5910.8370.491
erm20.4700.3890.4180.7490.439
erm30.5380.4750.5610.8150.483
erm40.4670.4110.4160.7550.426
erm50.4260.3890.4450.7530.533
erm60.4870.4090.4700.8020.459
fp10.8130.3750.2980.4290.416
fp20.7600.3790.4340.4920.445
fp30.7860.3540.3950.5140.451
fp40.8030.4440.3840.4910.483
fp50.6860.3890.3270.3270.271
fp60.7940.4890.4800.5590.450
mc10.4770.8700.5280.4830.445
mc20.3710.7590.4120.3400.379
mc30.3780.7920.4570.3950.404
mc40.4520.7910.5100.3760.374
mc50.2750.5040.2900.3660.263
mc60.2480.5250.2500.3290.287
rm10.4380.5000.8560.5310.529
rm20.3430.3750.6500.4340.386
rm30.3570.4170.7900.4960.467
rm40.3510.5020.7430.4260.391
rm50.4200.3910.7830.5110.528
rm60.3980.5070.7600.4570.500
rm70.3490.3870.7160.4240.414
Table 3. Validity and reliability.
Table 3. Validity and reliability.
VariablesCronbach’s AlphaComposite Reliability (rho_a)Composite Reliability (rho_c)AVE
Financial Performance0.8680.8760.90.601
Managerial Capabilities0.8030.8340.8620.519
Resource Management0.8760.8830.9040.576
Risk Management0.8760.8780.9060.618
SMEs’ Internationalization0.8150.8170.8780.644
Table 4. HTMT.
Table 4. HTMT.
Variables 12345678910
1. Manager Education
2. Manager Experience0.061
3. Financial Performance0.0730.162
4. Firm Age0.0190.0760.076
5. Firm Size0.0560.0220.1010.607
6. Managerial Capabilities0.0680.0480.620.0780.039
7. Manager Age0.0250.3760.0580.0830.1710.11
8. Resource Management0.0560.0570.570.1520.0810.6820.106
9. Risk Management0.1140.0780.6930.0730.1320.640.0560.703
10. SMEs’ Internationalization0.030.0320.6440.1430.0590.6250.0710.7160.711
Table 5. Multicollinearity and size effect.
Table 5. Multicollinearity and size effect.
VariablesVIFF2R2
SMEs’ Int.SMEs’ Int.Risk ManagementResource ManagementSMEs’ Int.Risk ManagementResource Management
Manager Education1.0360.005-----
Manager Experience1.2500.001-----
Financial Performance1.8760.037-----
Firm Age1.7380.009-----
Firm Size1.8000.004-----
Managerial Capabilities1.8230.0160.5150.395---
Manager Age1.2570.027 ---
Resource Management2.0210.086 --0.34
Risk Management2.1190.059 -0.283-
SMEs’ Int.----0.511--
Note: Int. = internationalization, VIF = Variance Inflation Factor.
Table 6. Hypothesis testing.
Table 6. Hypothesis testing.
PathsβSDTp
Control Effects
Manager Age → SMEs’ Internationalization−0.1290.062.1430.032
Education → SMEs’ Internationalization−0.0520.0570.9050.365
Experience → SMEs’ Internationalization0.0240.0520.4530.651
Financial Performance → SMEs’ Internationalization0.1840.0772.370.018
Firm Age → SMEs’ Internationalization−0.0870.0641.350.177
Firm Size → SMEs’ Internationalization0.0570.0670.8460.398
Direct Effects
Managerial Capabilities → SMEs’ Internationalization0.1180.0961.2240.221
Managerial Capabilities → Risk Management0.5320.1065.0150.000
Managerial Capabilities → Resource Management0.5830.0698.4590.000
Risk Management → SMEs’ Internationalization0.2460.0842.940.003
Resource Management → SMEs’ Internationalization0.2920.0843.4950.000
Indirect Effects
Managerial Capabilities → Risk Management → SMEs’ Internationalization0.1310.062.2010.028
Managerial Capabilities → Resource Management → SMEs’ Internationalization0.1700.0543.1510.002
Table 7. Predictive relevance.
Table 7. Predictive relevance.
VariablesConstruct Cross-Validated RedundancyConstruct Cross-Validated Commonality
SSOSSEQ2 (=1 − SSE/SSO)SSOSSEQ2 (=1 − SSE/SSO)
Manager Education191191-191--
Manager Experience191191-191--
Financial Performance11461146-1146644.1150.438
Firm Age191191-191--
Firm Size191191-191--
Managerial Capabilities11461146-1146753.7140.342
Manager Age191191-191--
Resource Management13371087.8260.1861337757.790.433
Risk Management1146960.6660.1621146617.5260.461
SMEs’ Internationalization764530.2930.306764454.1830.406
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Shen, T.; Badulescu, A. Managerial Capabilities and the Internationalization Process of Small and Medium Enterprises: The Sustainable Role of Risk and Resource Management. Sustainability 2025, 17, 6943. https://doi.org/10.3390/su17156943

AMA Style

Shen T, Badulescu A. Managerial Capabilities and the Internationalization Process of Small and Medium Enterprises: The Sustainable Role of Risk and Resource Management. Sustainability. 2025; 17(15):6943. https://doi.org/10.3390/su17156943

Chicago/Turabian Style

Shen, Tengfei, and Alina Badulescu. 2025. "Managerial Capabilities and the Internationalization Process of Small and Medium Enterprises: The Sustainable Role of Risk and Resource Management" Sustainability 17, no. 15: 6943. https://doi.org/10.3390/su17156943

APA Style

Shen, T., & Badulescu, A. (2025). Managerial Capabilities and the Internationalization Process of Small and Medium Enterprises: The Sustainable Role of Risk and Resource Management. Sustainability, 17(15), 6943. https://doi.org/10.3390/su17156943

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