Abstract
This study investigates the potential effect of personal interaction on international technology development in relationships between small and medium-sized enterprises (SMEs) and their foreign customers. The mediating effect of knowledge transfer between these firms and their customers is also examined. The results of a LISREL analysis of 188 relationships between SMEs and their foreign customers demonstrate that the effect of personal interaction on international technology development is not direct but rather is mediated by knowledge transfer. Hence, the study suggests that before international technology development can be enhanced, knowledge transfer needs to be established.