Small and medium enterprises’ internationalisation and business strategy: some evidence from firms located in an emerging market

DOIhttps://doi.org/10.1108/JABS-03-2013-0012
Date29 April 2014
Pages168-186
Published date29 April 2014
AuthorSyed Zamberi Ahmad
Subject MatterStrategy,International business
Small and medium enterprises’
internationalisation and business
strategy: some evidence from firms
located in an emerging market
Syed Zamberi Ahmad
Syed Zamberi Ahmad is
based at the
Management Department,
College of Business
Administration, Abu Dhabi
University, Abu Dhabi,
United Arab Emirates.
Abstract
Purpose The purpose of this paper is to investigate the international business strategy, key driving
factors and the major barriers that may hinder the internationalisation progress of Malaysian small and
medium-sized enterprises (SMEs).
Design/methodology/approach Based on the aims of the study, the paper encompasses both
quantitative and qualitative data. For quantitative data, structured questionnaires were used, and a total
of 216 SMEs that engaged in international business participated using purposeful sampling, covering
all the states in Peninsular Malaysia. For the collection of qualitative data, the study involved in-depth
interviews with 25 owners/managers of SMEs.
Findings The findings indicate that the motives of SMEs for international expansion are varied, and
that SMEs still face many institutional challenges, which have prevented them from making a greater
contribution.
Research limitations/implications Due to lack of resources, firms from West Malaysia were
included. West Malaysian firms may well possess characteristics concerning the challenges and issues
to internationalisation that are unique to their region.
Originality/value The paper addresses a knowledge gap in respect of the internationalisation
process of SMEs in the context of Southeast Asia. The findings of this paper will have relevance for
policymaking and supportive measures at the government level to create an environment that will
stimulate the competitiveness of SMEs in their attempts for internationalisation.
Keywords Malaysia, Emerging economies, Business strategy, Internationalisation, Small and
medium-sized growth
Paper type Research paper
Introduction
Recognising the increasing role played by small and medium-sized enterprises (SMEs) in
the innovation process, enhancing investment, income generation, sourcing to large firms,
stimulating competition, economic development and job creation, the past two decades
have seen a growing interest in the study of international operations of SMEs (Deakins et al.,
2007;Ruzzier et al., 2006;Lu and Beamish, 2006). With increasing competition from local
and foreign competitors over the past decade and in the face of globalisation, more and
more SMEs are being forced into geographical expansion of economic activities across a
country’s national boundaries for business growth to sustain and survive (Svante, 2004;
Gjellerup, 2000). The ever-changing business environment due to globalisation and market
liberalisation has pressured the SMEs to respond to markets at an increasingly faster pace
and adapt appropriate business strategies for business expansion (Pleitner, 1997). In
addition, small firms could be more involved in international business activities because
of the global market conditions, pursuing growth opportunities, new developments in
Received 11 March 2013
Revised 15 June 2013
Accepted 27 October 2013
PAGE 168 JOURNAL OF ASIA BUSINESS STUDIES VOL. 8 NO. 2, 2014, pp. 168-186, © Emerald Group Publishing Limited, ISSN 1558-7894 DOI 10.1108/JABS-03-2013-0012
transportation and communication technologies, and the increasing number of people with
international knowledge and experience (Svante, 2004).
Justification and parameters of the study
Despite the emergence and importance of the involvement of SMEs in the international
arena, very little is understood about the pattern, process and development of the
internationalisation of SMEs, or the reasons to do so, particularly for SMEs from newly
industrialised countries. A plethora of theoretical and empirical studies on
internationalisation has mainly focused and concentrated on long-established larger firms
and small business enterprises in the advanced developed business society (Zeng et al.,
2008;Ruzzier et al., 2006;Bell et al., 2004;Svante, 2004;Gankema et al., 2000). Although
these Western theories on internationalisation have been successfully applied elsewhere,
they have not yet been proven to be the most appropriate for Malaysia. A further
investigation within the Malaysian context is needed, as the country is perceived to not only
have a different culture but also different business practices (Othman et al., 2006).
However, researchers recognise that the Western-based management theories and
practices adopted within the Asian context differ because of the different business
environments, education and legal systems, beliefs and values, as well as the economic,
political and cultural conditions (Griffin and Pustay, 2005). According to Hofstede (1996),
theories are influenced by their cultural contexts, and the universality of many theories is
therefore doubtful. Indeed, it appears that the process of internationalisation of SMEs,
known for their idiosyncratic and multiple natures, cannot be correctly explained by only
one theoretical perspective. This observation provides scope for an important gap within
the existing literature to be addressed concerning the need for more research to be
undertaken in a number of geographic areas that have been neglected to date –
developing countries – and, particularly, in Malaysia. This paper seeks to redress this issue
and takes a step towards empirically investigating the international expansion behaviour of
Malaysian SMEs, including the entry and development modes strategy, selection of target
market, problems, challenges and key drivers influencing the process. The aim is to
investigate the factors that underlie the internationalisation development, and key driving
factors that influence the international expansion process. According to Yeung (2004), the
internationalisation of Malaysian SMEs is a new research phenomenon. Evidence from
developing countries is still rather limited and remains unexplored (Ahmad, 2010). To gain
an insight, understanding this dynamic scenario is crucial and will provide a better analysis
in explaining the internationalisation process of emerging market SMEs. In addition,
research within the developing country context, and Malaysia in particular, can help to
establish and explain if the existing models developed in the industrialised world are
adequate to explain the development process of these SMEs. In recognising this gap, two
research questions (RQs) are formulated, which can be summarised as follows:
RQ1. What factors that underlie the SMEs in emerging markets, particularly from Malaysia,
internationalise, and what are the key determinants that motivate the
internationalisation process?
RQ2. What are the perceived barriers faced by these SMEs in their internationalisation
attempts?
The paper first reviews the literature on internationalisation with particular emphasis on
several international expansion theories including stage models of the incremental
process, born-global theory, networking approach and resource-based perspective. Then,
the methodology of the present study is described, followed by a presentation of the
findings. The internationalisation of Malaysian SMEs is analysed and compared with
various theoretical perspectives. The paper ends with a conclusion and recommendations
for future research.
VOL. 8 NO. 2 2014 JOURNAL OF ASIA BUSINESS STUDIES PAGE 169

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