Buffering institutional erosion: organizational ties and SME exports under populism

We argue that pre-existing organizational ties can partially buffer against the adverse effects of populist deinstitutionalization. In contrast with the chronic institutional weakness emphasized in prior literature, populist deinstitutionalization reflects a politically driven weakening of institutions that firms had previously relied on. This disrupts established routines and increases the transaction costs of cross-border exchange. For SMEs, which are highly dependent on external institutional support for internationalization, pre-existing ties to government actors, international suppliers, and foreign owners can provide partial buffering by replacing some of the coordination, information, and enforcement functions lost through institutional erosion. We test these arguments using data on 10,399 SMEs across 29 economies in Central and Eastern Europe and Central Asia. The results support our theoretical expectations: while populism is negatively associated with SME exporting, pre-existing organizational ties attenuate this adverse association, with foreign ownership providing the strongest buffering effect. Our findings extend institution-based research by identifying politically driven institutional erosion as a distinct challenge for international business and by showing that organizational ties can function as selective, imperfect buffers rather than substitutes for formal institutions.