Unpacking Digital Capabilities in SMEs: Pathways to Internationalization through the Value Chain

This study investigates how resource-constrained small and medium-sized enterprises (SMEs) develop and apply digital capabilities across value chain activities for internationalization, addressing a gap in the existing literature. Using six Taiwanese manufacturing SME case studies, and an integrated theoretical lens (Uppsala Internationalization Model, Porter’s Value Chain Framework, and Resource Orchestration Theory), the study explores how digital capabilities embedded in primary and support activities shape internationalization outcomes. Findings show that SMEs prioritize digital investments in primary and downstream activities to enhance foreign market delivery, responsiveness, trust, and visibility. Digital upgrades in support functions primarily enable internal coordination and subsidiary replication. The study identifies three mechanisms – inter-firm value enhancement, inter-firm relationship enhancement, and intra-firm management enhancement – that explain how activity-specific digital capabilities facilitate international expansion. This research offers a detailed understanding of digital capabilities deployment in SMEs and provides practical implications for leaders and policymakers on strategic, phased digital internationalization approaches.