Determinants of Capabilities of Export-Oriented SMEs in the Manufacturing Sector During an Economic Crisis: Evidence from the Colombo District, Sri Lanka

Abstract

Capabilities of the export-oriented small and medium enterprises in Sri Lanka play a crucial role in the nation’s economy. Their capabilities are determined by several factors, and they face substantial barriers in international trade. The recent economic crisis has heightened the importance of small and medium-sized enterprises and altered the key factors influencing their capabilities. This study examines the specific factors that influence the capabilities of export-oriented small and medium-sized enterprises in the Colombo district during the economic crisis. Primary data collected from 30 export-oriented small and medium-sized enterprises in the Colombo district were analysed using frequency analysis, normality tests, and ordinal regression analysis to derive meaningful insights. The study identifies political and legal barriers as significant negative determinants of SME export capabilities, while marketing capabilities demonstrate a positive influence. Major political and legal constraints identified include tariff and non-tariff barriers, regulatory challenges, and political instability in foreign markets. The findings underscore the critical need for targeted policy interventions to mitigate these barriers. Policymakers should work to reduce tariffs and non-tariff barriers, enhance the regulatory environment, and promote political stability. The findings offer valuable insights for designing effective policies and interventions to support the growth and sustainability of small and medium-sized enterprises, serving as a foundation for future research on SME export challenges.