Small and medium-sized enterprises (SMEs) are the backbone of our economies, representing around 99 % of all businesses in both Finland (OECD 2022) and the EU (Di Bella et al. 2023). They are not just numerous: they are also powerhouses, contributing to over half of Europe’s GDP and providing jobs for around 100 million people (Di Bella et al. 2023).
While the global economy is expected to grow, 90 % of this growth is predicted to happen outside of Europe. Also, SMEs that engage in exports grow more than twice as fast as those that don’t. (European Council 2020.) Thus, internationalisation is vital for European SMEs and even more so for SMEs in smaller countries.
Finland, a small open economy, relies heavily on foreign trade. It is unable to produce all goods and services, making it dependent on global markets. However, despite Finland being so reliant on trade, the exports stand at just 40 % of the GDP, lagging behind the EU’s average of 70 %. (Oinonen & Virén, 2022.)
Clearly, there’s room for improvement. But internationalisation is not a walk in the park. SMEs face challenges in their internationalisation such as complicated administrative procedures, high delivery costs, partner identification, financing issues, and lack of specialised staff (European Commission 2015).
The rapid advancement of AI and implications for SME business
Research shows that technology plays a key role in better international performance (Neubert 2018). Therefore, it may also be an answer to some of the main challenges SMEs face in their internationalisation.
There has been a lot of buzz around Artificial Intelligence (AI) and how it could be a game-changer, especially in predicting how attractive foreign markets might be in the future. Even with all the potential AI offers and the improved access to AI solutions, SMEs are often held back by their readiness, limited resources, and the need for strategic decisions to implement AI solutions (Denicolai, Zucchella & Magnani 2021).
The former Chief Business Officer of Google, Mo Gawdat, openly discussed the rate of AI advancement at the Nordic Business Forum in autumn 2023. He mentioned as an example that GPT-4 has an IQ of 155, the same as Elon Musk, and that the performance of GPT-4 is tenfold compared to GPT-3. If this development continues, AI will be more intelligent than humans in the future, and we are talking about the near future.
Not only will AI bring more solutions to SME internationalisation, it will also bring in more challenges. AI will change the nature of how we conduct business, with whom, and how our business environment will be in the future. In order to remain competitive, European SMEs have no other option, but to rethink their core business and to predict what the new business environment will look like. This is not an easy task.
Developing needed AI talent for the future
The Ulysseus European University is currently developing a joint master’s degree on AI in business transformation. The aim is to educate our students with the competencies needed in the future to reap the benefits and respond to the challenges of AI for business.
Educating new AI-knowledge workers for the future will support SMEs in implementing AI for internationalisation, and will further enhance our AI knowledge along with our other AI Innovation Hub activities.
Denicolai, S., Zucchella, A., & Magnani, G. 2021. Internationalization, digitalization, and sustainability: Are SMEs ready? A survey on synergies and substituting effects among growth paths. Technological Forecasting and Social Change, 166.
Di Bella, L., Katsinis, A., Laguera Gonzalez, J., Odenthal, L., Hell, M. and Lozar, B. 2023. Annual Report on European SMEs 2022/2023. Publications Office of the European Union, Luxembourg.
European Council. 2020. EU trade policy.
European Commission. 2015. SME internationalisation beyond the EU.
Neubert, M. 2018. The Impact of Digitalization on the Speed of Internationalization of Lean Global Startups. Technology Innovation Management Review, 8(5), 44–54.
OECD. 2022. Financing SMEs and Entrepreneurs 2022: An OECD Scoreboard. OECD Publishing, Paris.
Oinonen, S., & Virén, M. 2022. Why is Finland lagging behind in export growth? BoF Economics Review, 5, Bank of Finland.