This thesis seeks to develop insights into the nature of small and medium sized enterprises (SMEs) that are effective in competing internationally, over the longer term. It therefore aims to provide a better understanding of the behaviour that engenders this capability. Its contributory value lies in the development of the new perspectives which emerged from inductive theory development grounded in longitudinal data collected between1996-1999. Traditionally explanations for the success of SMEs in export markets, it is suggested, have been sought in the marketing mix paradigm rooted in exchange theory. This thesis draws from a range of literature in seeking an understanding of the behaviours observed. In developing a substantive theory to explain the dynamic nature of firms that sustain their competitive effectiveness on international markets this thesis then seeks explanations from the organisational learning paradigm. This study follows the tradition of the naturalistic paradigm and as such the research was a phenomenological study of an exploratory and qualitative nature. The naturalistic paradigm recognises the importance of the subjective experiences of individuals and groups. In the verstehen tradition this study stresses the importance of the informant as the primary source of information. The aim of the inquiry was to develop an ideographic body of knowledge, the emphasis being on explanation and understanding rather than the identification of general and universal laws. The epistemological stance taken required an inductive approach to theory building. Examining the firms longitudinally was the means by which the author was able to take an holistic view of the international activities of the firms studied and focus on the change processes and challenges faced in the study period. The central proposition of this thesis is that the firms that compete effectively on international markets exhibit a positive marketing orientation, and have a strong core purpose on which is generated a clear internationally based strategic direction. It is further proposed that over a period of time, through an iterative process of strategy development, firms build a sustainable competitive advantage in their international markets and develop the ability to maintain this advantage, even when faced with hostile challenges in their international markets. Firms, it is suggested through their relationships, build a virtual structure to their international markets, which provide the means through which a knowledge of their markets is acquired, and an input is made to the strategy development process by external partners. However, it is through the dynamic processes of organisational learning that SMEs develop these capabilities and so enhance their ability to sustain a competitive advantage over a period of time.