SMEs and start-ups engaged in international activities tend to perform their domestic-only counterparts in terms of  productivity,  growth,  job creation and innovation. Access to foreign markets fuels this growth, but integration into Global Value Chains (GVCs) and networks of multinational enterprises (MNEs), are also important determinants, , leading to knowledge and innovation spillovers. Furthermore, internationalisation can act as a source of resilience. Despite their vulnerability to recent global trade disruptions,  SMEs  in GVCs have shown a faster recovery.

SMEs and start-ups play a critical role in the development of more resilient, sustainable, and circular GVCs. Owing to their agility in response to  changes in markets and technologies, key role in the development and diffusion of digital and green practices, local footprint, proximity and understanding of end markets, SMEs and start-ups are particularly well placed to support the deployment of circular models.

SMEs and start-ups with international presence can attract quality inward foreign direct investment (FDI) to sub-national regions and contribute to s FDI-SME ecosystems that support regional development. 

Strong and reliable customer/supplier relationships, particularly those that align with Environmental, Societal, and Governance (ESG) and Responsible Business Conduct (RBC) standards, influence foreign affiliates’ investment decisions, as well as reporting by Multinational Enterprises, making disinvestment less likely.  

SMEs’ ability to engage in Global Value Chains (GVCs) is constrained by internal capacity (e.g. managerial skills, access to finance, compliance with standards) and external factors (e.g. the quality of logistics services and infrastructure, and regulatory barriers). Strengthening the positioning of SMEs in global markets and GVCs is a priority for many governments. Strategies and tools to support SMEs access new markets abroad and diversify their global integration patterns include  financial instruments, training, market intelligence and networking, and advisory support services.

In addition to national government actions, policies designed and implemented at subnational level can determine a supportive environment for the participation of SMEs and start-ups in global markets and GVCs. In particular, subnational authorities are key to build healthy regional FDI-SME ecosystems. This requires co-operation across diverse institutions and agencies and across a number of policy areas, including investment promotion, trade and investment facilitation, intellectual property (IP) protection, contract enforcement, innovation and industrial policies, and targeted SME and entrepreneurship policies.