<p>This study explores the role of international strategic alliances in the development of dynamic internationalization capabilities and how these capabilities influence the competitive advantage of small and medium-sized enterprises. A quantitative research approach is employed, utilizing a survey methodology to collect data from 211 SMEs in Taiwan. The data is analyzed using SPSS 28.0 and Smart-PLS 4.0 to test the proposed hypotheses. Findings reveal that international strategic alliances significantly contribute to the development of dynamic internationalization capabilities, which in turn enhance the competitive advantage of SMEs. Specifically, both explorative and exploitative alliances play a crucial role in fostering dynamic internationalization capabilities, which subsequently lead to differentiation, cost, and institutional advantages. This study contributes to the existing literature by providing empirical evidence on the relationship between international strategic alliances, dynamic internationalization capabilities, and competitive advantage in the context of SMEs. It extends the understanding of how SMEs can leverage international strategic alliances to develop dynamic internationalization capabilities and gain a competitive edge. From a practical perspective, findings suggest that managers of SMEs should prioritize the maintenance and strengthening of international strategic alliances and adopt foreign network knowledge to enhance the development of dynamic internationalization capabilities. This strategy can help SMEs to improve their competitive position in the international market.</p>