Globalization and Local Enterprise Sustainability: A Study of Market Adaptation in Developing Economies

Abstract

The competitive environment of local businesses, especially in developing economies in which the small and medium enterprises (SMEs) are predominant in the economic and employment generation spheres, has been transformed to a great extent by globalization. Globalization presents both opportunities and threats, among these being increased competition, volatility of markets and strain on long term sustainability. Almost every local business is also not quite able to adjust to these dynamic conditions and there are fears about whether they will survive. This research paper will focus on the importance of market adaptability in promoting the sustainability of local businesses in the worldwide environment of globalization. More specifically, the paper examines the way in which the relationship between globalization and enterprise sustainability is mediated by the adaptation strategies of innovation, market diversification, and technology adoption. The study is quantitative based on survey data which was gathered amongst SMEs that operate in developing economies. A structured questionnaire was given to a representative sample and the data analysed by using statistical methods, including regression analysis and Structural Equation Modelling (SEM), to test the hypothesised relationships. The results indicate that globalization has a major positive effect on the market adaptation, and that the market adaptation, in turn, has a strong positive impact on the sustainability of enterprises. Also, market adaptation is discovered to mediate the correlation between globalization, and sustainability outcomes somewhat. The analysis has significant theoretical and practical implications, illustrating the need by enterprises and policy makers to focus more on adaptive strategies in order to guarantee sustainable growth within an ever-globalized environment.