The role of networks in new international ventures is an issue which has been discussed in the literature quite extensively. Previous research indicates that connections and relationships (‘networking’) both at home and abroad can be crucially important for SMEs seeking to export or invest abroad (Harris & Li 2005, Zhou et al., 2007). However, little is known about how social innovation through inter-organizational networks fosters internationalization. This research fills this gap. It aims to investigate the role of social innovation in the internationalization of SMEs, and recursively, how internationalization shapes innovation in social arrangements. It focuses on the internationalizing firm and the characteristics of the core network with which the firm interacts. The central argument assumes that (1) international markets bring new requirements for exploration and exploitation activities over and above those that SMEs have learned domestically; (2) SMEs that are integrated into particular inter-organizational arrangements are better equipped to solve this challenge, due to the structural and cultural attributes of these arrangements. Some of these arrangements constitute specialized communities, public and private sector actors, which are more effective in developing mechanisms that support the internationalization of SMEs. Thus, social arrangements differ in their structural and institutional characteristics, in the resources they possess, and the way in which their organizational culture fosters innovation and internationalization. This research proposal intends to investigate three distinct organizational arrangements which differ in these characteristics. The investigation requires an understanding of the interaction between factors at the micro and macro levels of analysis, the mutual effects between SME internationalization and the local community with which it interrelates. The proposal is therefore divided into two projects: the first project is concerned with how SMEs cope with the exploration and exploitation requirements of the international context and how the inter-organizational arrangements in which they are involved contribute to their internationalization. The second project aims to understand the recursive effects of this phenomenon - how small firm internationalization gives rise to innovation in local inter-organizational arrangements, and how such innovation may in turn help to support further internationalization. The design is informed by a meta-theory, such as that provided by the co-evolution perspective. Co-evolution theory assumes that there is a reciprocal relationship between the SME internationalization and its environments. It posits a framework of analysis, focusing on firms, in which there are ongoing recursive processes linking the internationalization with that of inter-organizational environments (Lewin et al., 1999). The two projects contained in the research have different primary unit of analysis. The first is entrepreneurial firm (the SME) and the second unit of analysis is the social inter-organizational arrangements in which the firm participates.