Effects of Industry forces on International Small and Medium-Sized Entrprises' Performance

Iran is potentially an attractive market for businesses, with a population of 85 million people making it the 19th biggest economy in the world. However, international small and medium-sized enterprises (SMEs) need to navigate industry forces, dynamic capabilities, and sanctions to achieve their performance goals. The challenges of this market are more pronounced for international SMEs due to their limited resources. Therefore, they need to have the competencies to face the unique challenges of operating in this market. Existing studies focus on dynamic capabilities and industry forces in developed countries, however, they are hardly ever explored in a single research. Moreover, competitive advantage and impact of sanctions are usually not included. In light of that, and by focusing mainly on international SMEs, this study aims to explore the aforementioned problem by examining competitive advantage as a mediator for the relationship between industry forces, impact of sanctions, and dynamic capabilities, with international SME’s performance from the perspectives of industrial organization (IO) and the resource-based view (RBV). The population for this study is mainly international SMEs and it concentrates solely on the Iranian economy. This study employed a quantitative approach, and the data has been gathered through a survey. After multiple follow ups, 166 questionnaires were gathered. SPSS and PLS-SEM software packages were used to analyse the collected data. It was found that industry forces have a significant impact on performance. Industry forces and sanctions were found to significantly impact firm performance, however, dynamic capabilities do not. Surprisingly, it was found that competitive advantage did not have a mediating role in the model. The present research closes these gaps in the knowledge by demonstrating the consequences of industry forces, dynamic capabilities, and sanctions on firm performance, and by validating the effect of competitive advantage on the hypothesized dimensions of RBV and IO, thus contributing to the knowledge in management scholarship within the context of international business. In addition to the suggestions to policy makers, this study seeks to offer recommendations to the management in international SMEs which could help enhance their performance. This research provides several routes to international SMEs towards this goal based on the results