Recursive Learning in Internationalizing SMEs: How context–mechanism fit shapes Capability Development

This study examines how internationalizing SMEs sustain or lose learning coherence under institutional and industry complexity. It introduces the construct of context–mechanism fit to explain how cognition, action, and memory align with external complexity through recursive feedback coordination. Using longitudinal comparative data from 16 UK and Indian SMEs in digital and textile sectors, the study identifies four recursive learning configurations—adaptive recalibrators, drift-reinforcers, inertial responders, and fragile experimenters—that shape capability trajectories. Findings show that feedback coherence enables adaptation, while recursive drift produces rigidity. The study advances a mechanism-based theory of learning capability, clarifying how recursive coordination sustains adaptation within bounded complexity.