A Hierarchical Model of Capabilities for Financially Constrained Environments: Internationalization of SMEs in Africa from a Resource-Based View Perspective (Interdisciplinary Journal of the African Alliance for Research Advocacy and Innovation)

Summary

• A survey of 350 Ghanaian manufacturing SMEs shows that 88.0% identify financial constraints as their main impediment to international trade.p.1
• Financial constraints correlate with perceived challenges (r = 0.474) and with digitalization (r = 0.447).p.1
• Financial constraints strongly predict SME difficulties (β = 0.406), and digitalization paradoxically predicts higher financial constraints (β = 0.447).p.1
• The AfCFTA covers about 1.3 billion people and a combined GDP of $3.4 trillion.p.2
• SMEs make up nearly 85% of registered businesses and some 70% of Ghana's GDP.p.2
• Only 14% of Ghanaian SMEs have access to formal bank loans, against a Sub-Saharan average of around 23%.p.9
• The survey had a response rate of 87.5%, with 350 valid responses.p.6

Key insights

1. Financial resources act as meta-capabilities that enable higher-order organizational capabilities for internationalization.p.1
2. Financial constraints are more strongly correlated with challenges (r = 0.474) than digitalization is (r = 0.334).p.5
3. The AfCFTA abolishes 90% of tariffs, opening wider market access for African SMEs.p.2
4. Regressing financial constraints on digitalization gives a positive effect (β = 0.447) with R² = 0.199, a so-called paradox of digitalization.p.8
5. Digitalization raises budgetary burdens for cash-strapped SMEs through hardware, software, training and cyber protection costs.p.8
6. Only 14% of SMEs in Ghana have access to formal bank loans.p.9
7. Financial inclusion should be a precondition for investing in digital infrastructure and capacity building.p.10