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Although small and medium-sized enterprises (SMEs) have been a major source of economic growth in Central and Eastern Europe (CEE), the capabilities underlying their expansion into international markets have received very little attention in the literature. We hypothesize that the level of internationalization will be positively related with knowledge orientation, cost –orientation and managerial IB orientation of a CEE based SME. Using data from 90 manufacturing SMEs from six CEE countries, we examine the impact of different capabilities on the level of internationalization. The results indicate that low-cost manufacturing capabilities and pro-active managerial orientation towards international operations are positively associated with increased internationalization. Surprisingly, a focus on using knowledge resources is not related to CEE firms‟ level of internationalization. The implications of these findings are discussed within the context of developing sustainable competitive advantage in transition and emerging economies.


internationalization, SMEs, Central and Eastern Europe, capabilities, management

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