Its 2014 Albion Growth Report, which surveyed a representative sample of 450 British SME, found that 37 per cent of UK small and medium sized enterprises (SMEs) entered new markets over the past year compared to 53 per cent in 2013.
Companies based in London and the North West were the most likely to break into new markets in the past year with 52 per cent having done so, the report said.
In contrast, just 23 per cent of businesses in Scotland attempted to launch into new markets, the lowest of anywhere in the UK.
Nearly half, 43 per cent, experienced a range of problems in trying to enter new sectors and geographical areas.
These included a lack of expertise around their target market (16 per cent), finding the competition too strong (11 per cent) and lacking the financial resources (8 per cent).
But businesses that have tried to enter new markets are more confident about their growth potential than those who have focused exclusively on servicing their core customers.
Albion Ventures also found businesses in London and the North West were the most confident about growth over the next two years.
Managing partner at Albion Ventures Patrick Reeve said it was not surprising so many companies encountered problems moving into new markets.
"As the UK economy recovers it’s understandable that small businesses are less willing to take the risk as more growth opportunities appear closer to home.
"Taking the plunge into a new sector or geography says a lot about the mindset of the business owner, those that decide to go ahead are far more likely to be more optimistic and entrepreneurial in nature.
"While there’s a significant chance they will fail by getting it right their business can be truly transformed. Nothing ventured is nothing gained."
Director of the Social Market Foundation Emran Mian said the research showed a balance across business sectors that "belies the alarmism of those who suggest that we are in a solely consumption-led recovery".