Purpose: The increasing globalization of trade and the pivotal role of services in value creation have underscored the strategic importance of internationalization for service firms—particularly in developing economies like Iran. Yet, many domestic service enterprises, especially in less-developed provinces, remain reluctant or unable to expand internationally. This study aims to conduct a thorough pathology of the barriers impeding the internationalization of service companies, with a specific focus on insurance firms in Ilam Province, Iran—a peripheral, border-located, and relatively underdeveloped region. By identifying and categorizing these obstacles, the research contributes to a deeper, context-sensitive understanding of the challenges facing service-sector internationalization in emerging economies, where institutional, infrastructural, and geopolitical complexities compound typical market-entry difficulties.
Design/Methodology/Approach: This study adopts a qualitative research design grounded in an applied research objective, targeting practical insights for managerial and policy-level decision-making. The geographical scope is confined to insurance companies operating in Ilam Province. Data collection was carried out through semi-structured in-depth interviews with a purposive and accessible sample of 16 managers and industry experts, selected for their extensive experience and strategic roles within local insurance firms. All interviews were audio-recorded, transcribed verbatim, and subjected to thematic analysis following Braun and Clarke’s six-phase framework: familiarization, initial coding, theme development (organizing themes), reviewing themes (hierarchical integration), defining/naming themes (overarching themes), and report writing. Theoretical saturation was achieved after the 16th interview, as further interviews yielded highly repetitive content. To ensure rigor, methodological triangulation (multiple data sources) and intercoder reliability (two independent coders with >90% agreement) were employed to enhance credibility and trustworthiness. The analytical process revealed a multi-layered typology of barriers, structured into 11 organizing themes nested within 4 overarching thematic categories.
Findings: The thematic analysis identified four core categories of internationalization inhibitors. Structural Barriers: These include weak internal coordination, deficient organizational design, lack of international strategic planning, and inadequate intellectual property (IP) protection frameworks. Many firms lack formalized internationalization strategies and operate with rigid, domestically oriented administrative structures ill-suited to dynamic cross-border operations. Technical Barriers: Characterized by insufficient access to cutting-edge technologies, outdated IT infrastructure, lack of R&D investment, limited absorptive capacity, and inadequate technical expertise in areas such as digital marketing, data analytics, and international compliance systems. Firms also reported weak links between universities/research centers and industry, hindering knowledge transfer and innovation. Financial Barriers: Prominent challenges include severe limitations in access to financial capital (e.g., venture financing, export credits), high perceived risks deterring investment, insufficient budget allocation for international market research, and the high costs associated with negotiation, licensing, M&A due diligence, and adaptation of service delivery models. Environmental Barriers: External, macro-level obstacles dominate this category: international sanctions limiting financial transactions and partnerships; political and regulatory instability in target markets; legal uncertainties (especially regarding insurance regulation harmonization); cultural and linguistic gaps; weak government support mechanisms; and intense international competition. Notably, participants highlighted how environmental uncertainties interact with internal weaknesses, e.g., even firms with adequate strategic intent were paralyzed by the high perceived risk stemming from the volatile regional geopolitical context. These four barrier clusters were further refined into 11 organizing themes: (1) Weak organizational readiness & strategic alignment; (2) IP and technology protection deficiencies; (3) Low absorptive & innovative capacity; (4) Inadequate human & technical resources; (5) Limited R&D and knowledge management; (6) Insufficient financial resources & high transaction costs; (7) Fragile innovation-commercialization linkage; (8) Unfavorable macroeconomic & policy environment; (9) Sanctions and institutional distance; (10) Cultural–social mismatches; and (11) High market, technological, and operational uncertainty. Critically, respondents emphasized the interdependence among barrier types—e.g., financial constraints exacerbate technical backwardness, which in turn deepens structural rigidity.
Discussion and Conclusion: The findings align with—but also extend—existing internationalization literature (e.g., Martins et al., 2022; Ray & Kumar, 2023; Correa da Cunha et al., 2024), confirming that internationalization is neither a uniform nor linear process, particularly for service SMEs in constrained environments. What distinguishes this study is its focus on insurance firms in a geographically peripheral, sanction-affected province, revealing how macro-level geopolitical forces (e.g., sanctions) can override internal firm capabilities. While prior studies often treat financial or technical barriers in isolation, our data show these are systemically interconnected: structural weaknesses prevent efficient resource allocation, which limits R&D, which reduces absorptive capacity, further amplifying vulnerability to environmental shocks. The study challenges the universality of stage-based internationalization models (e.g., Uppsala), suggesting that for firms in contexts like Ilam, “born-global” or accelerated internationalization pathways may be infeasible without targeted external support. Instead, a capability-building-first approach—prioritizing organizational agility, technological upgrading, and financial resilience—is essential before market entry. Managerially, the research offers actionable implications: (1) Firms must strengthen internal governance and develop formal internationalization roadmaps; (2) Strategic investment in digital infrastructure and talent development is non-negotiable; (3) Public–private partnerships (e.g., with Iran Insurance Company or provincial development agencies) could mitigate financial and environmental risks; (4) Collaborating with regional neighbors (e.g., Iraq, given Ilam’s border location) via low-risk modes (e.g., licensing, joint ventures) may serve as a feasible initial step. The study’s limitations include its qualitative, single-province design (limiting statistical generalizability) and its focus only on insurance, though the conceptual framework may apply to other knowledge-intensive service sectors. Future research should employ mixed methods, expand to other provinces, and investigate enablers (not just barriers) to complement this pathology.