Do political and business relations help emerging markets’ SMEs in their national and international expansion? Evidence from Brazil and China

Gaston E Fornes, Guillermo Cardoza, Maria Altamira

Research output: Contribution to journalArticle (Academic Journal)peer-review

13 Downloads (Pure)


This study aims to understand whether business and political relations help emerging markets’ SME to overcome the challenges posed by low institutionalization in their national and international expansion. It focuses on the role that these relations play in determining access to government funding and contracts, and to market information and business-related knowledge.

The data were collected from 828 SMEs in Brazil and China. The data analysis was developed in two stages: the first stage was based on multivariate regression analyses using the ratio of sales outside the companies’ region of origin divided by total sales as a dependent variable and the survey’s answers as independent variables; outward sales were taken at two different levels – national and international – to consider: (i) the different stages in the national and international expansion process, and (ii) the fragmented nature of domestic markets in both Brazil and China. The second stage was based on a stepwise multiple regression as the relative importance of the variables was not known beforehand and the objective was to rank them according to the managers’ perceptions.

Informal institutions, in particular business and political relations, can help to reduce uncertainty and overcome some disadvantages associated with weak institutionalization. They do this by providing access to trusted distribution channels, improving the familiarity with different institutional environments, and strengthening the management of supply chains and commercial strategies to serve markets outside their region. Also, SMEs in emerging markets getting access to private sources of funding, market knowledge, and government contracts through business and political relations are in a better position to expand nationally and internationally.

The research shows that the domestic environment, in particular one with low levels of institutionalization, impacts negatively the national and international expansion of SMEs and, more importantly, how firms can use business and political relations to overcome the obstacles posed by this environment. The findings also have implications for theory, practice, and policymaking.
Original languageEnglish
JournalInternational Journal of Emerging Markets
Early online date16 Jan 2021
Publication statusPublished - 26 Feb 2021


  • Emerging markets
  • informal institutions
  • political and business relations
  • SMEs national and international expansion
  • China
  • Brazil

Fingerprint Dive into the research topics of 'Do political and business relations help emerging markets’ SMEs in their national and international expansion? Evidence from Brazil and China'. Together they form a unique fingerprint.

Cite this