Business Model Innovation and Digitalization in SME Internationalization: The Mediating Role of Internationalization Process

Internationalization as a business strategy has become a global trend for both companies and Small and Medium Enterprises (SMEs).This trend occurs when global marketplaces evolve and become more digital, forcing businesses to adapt their business models and embrace digital technology in order to remain competitive and maintain worldwide performance.This study investigates the implications of Business Model Innovation (BMI) and digitalization on international performance, with a particular emphasis on the mediating function of the internationalization process.A quantitative method was used, with survey data obtained from 200 export-oriented Small and Medium Enterprises (SMEs) in East Java, Central Java, and West Java regions of Indonesia.These regions were chosen based on their concentration of exporting SMEs, which account for over 60% of the country's SME exports.This study makes a methodological contribution by using PLS-SEM in the setting of Indonesian SMEs, as well as a theoretical contribution by expanding our understanding of the internationalization process in digital contexts, with practical implications for SME managers and policymakers.Hypothesis testing shows that both digitalization ( = 0.431, p < 0.001) and BMI ( = 0.222, p < 0.001) have a substantial impact on international performance.Internationalization has a significant direct effect on international performance ( = 0.578, p < 0.001) and acts as a mediator for digitalization ( = 0.221, p < 0.001) and BMI ( = 0.128, p = 0.002).These findings emphasize the strategic necessity of combining digital transformation with business model innovation to boost SME competitiveness in global markets, particularly in emerging nations.