Internationalization of SMEs is a new direction for research and more and more scholars focus their attention on this phenomenon. Since SMEs comprise the vast majority of the population of firms in Europe, and barriers to internationalization are falling, researchers are increasingly examining SME internationalization issues. However, knowledge about the impact of the foreign country’s institutional context on internationalization of SMEs is still rather limited. The research devoted to the influence of institutional environment on the degree of SMEs internationalization is restricted in the form of examining domestic environment that pushes SMEs to go international. The host institutional context may significantly challenge firm’s internationalization efforts, though. For the successful internationalization, SMEs should be aware of the challenges that arise from insufficiently developed institutions. These challenges are only limitedly explored.