SMEs’ impediments and developments in the internationalization process. Malaysian experiences
| Date | 11 May 2015 |
| DOI | https://doi.org/10.1108/WJEMSD-11-2013-0055 |
| Published date | 11 May 2015 |
| Pages | 100-119 |
| Author | Fariza Hashim |
| Subject Matter | Strategy,Business ethics,Sustainability |
SMEs’impediments and
developments in the
internationalization process
Malaysian experiences
Fariza Hashim
College of Business Administration, Prince Sultan University,
Riyadh, Kingdom of Saudi Arabia
Abstract
Purpose –The purpose of this paper is, first, to examine the factors that impede SMEs in their
internationalization process; second, to analyse the effectiveness of the government support and
development programs of the SMEs; and finally, to examine the networking efforts by Malaysian
SMEs at the industrial level.
Design/methodology/approach –This study is descriptive in nature. Secondary data are the main
source of data collection. Data were obtained from reliable and authoritative sources such as SME
Corp, government agency publications, newspapers, international business journals and other related
periodicals. A meta-analysis technique was used in this study where results from previous and current
studies on similar topics were critically reviewed.
Findings –This study found that Malaysian SMEs faced external and internal impediments in
their efforts of expanding their operations internationally. Externally there is a lack of skilled
workers available in the domestic labour market; increased competition in the domestic market
due to the regional economic agreement among neighbouring countries; lack of physical
infrastructure allocated to the SMEs; and government assistance offered does not reach SMEs due
to high level of bureaucracy and poor communication. Despite the impediments encountered by
SMEs, they still obtained benefits from various policies, programmes and incentives provided by
the government.
Research limitations/implications –Meta-analysis conducted on the challenges of Malaysian
SMEs in its internationalization process might be inadequate as it is limited to the availability of the
current and previous studies. Additionally, quantitative data obtained from the secondary source was
not raw data thus statistical testing could not be further conducted and analysed. Data obtained from
the local authoritative sources detected different problems and challenges from those found in previous
and current studies.
Practical implications –This study indicates several implications for managers and policy
makers. Malaysian SMEs need to evaluate its capability before embarking into new geographic
locations and engage internationally. With diverse programmes offered by the government,
SMEs have a wide range of choice when involving the whole value chain activities, either
through marketing their products in the market or manufacturing and supplying the products
to large firms or MNCs. Involving international markets is not only about expanding the
market but also for seeking lower costs and resourcesaswellasoperating with management
efficiency.
Originality/value –This study contributes to the body of knowledge of international business and
entrepreneurship literature in three ways. First, research on SMEs from emerging countries involved in
international market tend to be limited in literature, most of them are concentrated in the developed
countries; thus this study would extend the understanding about the internationalization process
among SMEs. Second, this study focused on the impediments of SMEs in their implementation
strategies which represent the practicality of the phenomenon thus bridging the gap between theories
and realities. Third, this study brings to light the significance of networking relationships in
international business and entrepreneurship primarily among SMEs due to their size limitations.
Finally, the meta-analysis technique which is seldom used in the international business and
World Journal of
Entrepreneurship, Management
and Sustainable Development
Vol. 11 No. 2, 2015
pp. 100-119
©Emerald Group Publishing Limited
2042-5961
DOI 10.1108/WJEMSD-11-2013-0055
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/2042-5961.htm
100
WJEMSD
11,2
entrepreneurial literature is adopted in this study. This technique provides another approach for the
researchers to examine and address the issues in the field.
Keywords SMEs, Management, Strategy, Entrepreneurship, International business
Paper type Research paper
Introduction
The contribution of SMEs to the economy of a country has been recognized in emerging
countries and its effect can be seen in income growth, entrepreneurial training, the creation
of technological capability, greater flexibility in changing market circumstances,
job creation, lower wage inequality and the dispersion of industry away from urban areas
and regional development (Katrak and Strange, 2002; Weeks, 2002). This is a remarkable
achievement considering the natural drawbacks of SMEs caused by their size and lack
of industrial experience. SMEs have also been the dominant drivers of export growth and
manufacturing advances in the emerging economies. Both the significant growth in
exporting, and the involvement in the international markets characterize the process
of internationalization. The global market provides new business opportunities for
innovation and new export markets, through both upstream and downstream activities,
with large firms and between SMEs themselves. The trend in internationalization has
witnessed significant and active participation from SMEs in international markets and is
anticipated to become stronger due to the integration of the world economy, continuous
declines in trade barriers and advances in technology (Oviatt and McDougall, 1994, 1999;
Lu and Beamish, 2001). SMEs have been a primary focus of entrepreneurship literature,
and the entry into new international markets has fundamentally been considered as an
entrepreneurial achievement (Burgelman, 1993; Lumpkin and Dess, 1996; Barringer and
Greening, 1998).
The internationalization of SMEs has expanded due to technological developments,
the deregulation of markets, the liberalization of world trade and the emergence
of regional economic cooperation agreements. The advances in telecommunication and
technologies have facilitated SMEs to become involved in the global market through
the reduction of costs and risks. SMEs that engage in the global market are at an
advantage on both international and domestic platforms. Internationally, SMEs that
operate in overseas markets can gain new experience and incorporate this into their
local operations, thus leading them to strengthen their competitiveness and global
presence (Lages and Montgomery, 2004). Domestically, internationalization creates
social prosperity, helps national industries to improve productivity, engenders foreign
exchange, supports socio-economic development, diminishes the national deficit and
enhances employment opportunities. Furthermore, international expansion has bec ome
a significant route by which SMEs can develop as entering new and larger markets
enables them to expand their customer base, produce larger volumes and increase their
profits and growth. All these factors have motivated SMEs to internationalize an d
move to new geographic locations; however, the process of internationalization itself is
very challenging due to its involvement in many distinctive conditions in addition to
having to face the common obstacles associated with local growth (Barringer and
Greening, 1998; Lu and Beamish, 2001).
Malaysian SMEs have contributed to the local economy by providing new job
opportunities, introducing innovation, stimulating competition and supplying large
multinational firms within the country (Hashim and Wafa, 2002). Following the trend in
the South-East Asian economies, the SME sector in Malaysia continues to play a vital
role in the country’s industrialization programme, and represents the backbone
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SMEs’
impediments
and
developments
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