The Impact of Conflicts in Foreign Business Relationships on SME Performance

Objective : The objective of the article is to discuss the impact of conflicts in foreign business relationships on the performance of SMEs. Two possible ways in which conflicts influence the company’s performance are considered: direct (conflicts → company’s performance) and indirect (conflicts → business relationships → company’s performance). Research Design & Methods : The article uses the case study method and presents the results of a study of 13 SMEs operating in international markets. Findings: The article proposes a model of the positive impact of conflicts in foreign business relationships on SME performance. A model links relational and operational sources of conflicts with their direct and indirect (through relationships) impact on SME performance and positive and negative outcomes. Implications & Recommendations: The article provides information how to transform conflicts in foreign business relationships into positive outcomes. A crucial role in this respect is played by moderators: trust and informal relationship development, cultural awareness and formal action development. Contribution & Value Added: The originality of the study is that it identifies the main operational and relational sources of conflict situations that impact (directly and indirectly) SMEs performance in their international activities. The identified 4 moderators, by positively impacting SMEs foreign relationship in conflict situations, help these companies to obtain positive conflict outcomes.