The impact of effectuation on international diversity and performance of SMEs

Prior research on SME internationalization has used effectuation to understand the foreign expansion (internationalization) of SMEs. This study addresses a research gap regarding how SMEs navigate uncertainty through the effectual logic of non-predictive strategy and, within this logic, the principle of affordable loss. Using cross-country data from China and Poland, the analysis shows that non-predictive strategy is positively associated with international diversity and the use of affordable loss, and that affordable loss mediates the positive effect of non-predictive strategy on the international performance of SMEs. These findings advance understanding of effectuation in the context of SME internationalization and clarify the distinct roles of non-predictive strategy and affordable loss.