Innovation at the Core: How Digitalization Transforms SMEs’ International Entrepreneurship Strategy

In an era of rapid technological disruption, digitalization has become a critical enabler of international competitiveness for SMEs. Yet, the mechanisms through which digitalization shapes international entrepreneurship strategies (IES), particularly in resource-constrained contexts, remain underexplored. This study investigates the role of innovation capability in the relationship between digitalization and IES, focusing on SMEs in Ghana, a Sub-Saharan African economy where SMEs dominate national output but face persistent institutional and infrastructural challenges. Drawing on Dynamic Capabilities Theory (DCT), the study develops and empirically tests a structural model using survey data from 367 SMEs. Data was collected in two phases to minimize common method bias and analyzed through covariance-based structural equation modeling (CB-SEM). The results demonstrate that digitalization exerts a significant direct effect on IES and strongly predicts innovation capability. Innovation capability, in turn, positively influences IES. Mediation analysis confirms that innovation capability partially mediates the digitalization–IES relationship, highlighting that the strategic value of digitalization depends on SMEs’ ability to develop and apply innovation routines. The findings contribute theoretically by extending DCT to the underexplored context of African SMEs, positioning innovation capability as a central mechanism that translates digital adoption into international performance. Practically, the study emphasizes that digital tools must be embedded in organizational innovation systems to drive global competitiveness, offering actionable insights for SME managers and policymakers. This research underscores that sustainable internationalization in emerging markets requires not only digital adoption but also the dynamic capabilities necessary to transform technology into innovation-driven growth.