Service Quality as the Dominant Driver of Customer Loyalty in SME Internationalization: Beyond the Mediating Role of Perceived Value

Abstract

This study investigates whether service quality exerts a direct effect on customer loyalty that outweighs its indirect effect through perceived value in the context of small and medium-sized enterprise (SME) internationalization. While the service-profit chain and extensive literature posit perceived value as a key mediating mechanism, empirical evidence on the relative strength of direct versus indirect pathways remains limited, particularly in developing-economy SME contexts. A quantitative cross-sectional survey design was employed, collecting data from 260 SMEs in Nanning, Guangxi, China, engaged in international business activities. Bootstrap mediation analysis (PROCESS Model 4, 5,000 resamples) was used to test direct and indirect effects of service quality on customer loyalty through perceived value. Service quality demonstrates a dominant direct effect on customer loyalty (β = 0.625, p < 0.001), substantially exceeding the indirect effect transmitted through perceived value (β = 0.194, p = 0.001). The combined model explains 60.4% of variance in customer loyalty. These findings challenge the implicit assumption of full mediation in the service-profit chain, suggesting that service quality operates primarily through direct cognitive and affective mechanisms rather than through deliberate value trade-off evaluations. This study contributes to services marketing and international entrepreneurship literature by providing empirical evidence that service quality's influence on SME customer loyalty is predominantly direct in the internationalization context. It extends the service-profit chain by demonstrating that perceived value plays a supplementary rather than primary mediating role, offering a refined theoretical understanding of loyalty formation in resource-constrained internationalizing SMEs.