The Role of Networking in the Internationalization of Indonesian SMEs

Mohamad Dian Revindo, Sri Mulyani Indrawati, Sean Hambali

Abstract


Indonesian SMEs are less able to take advantage of foreign market opportunities than their large counterparts. This study analyses the internationalization of Indonesian SMEs, particularly the differences between exporting and non-exporting SMEs in terms of their network relationships. Primary data was obtained from survey questionnaires in Jawa, Madura and Bali regions, yielding usable responses from 271 exporting SMEs and 226 non-exporting SMEs. Our results suggest that exporters on average have twice as many frequencies of interaction with various external actors than those of their non-exporting counterparts. Exporting and non-exporting SMEs also differ in the way they interact and maintain relationships with external actors. The exporting SMEs utilize various types of interactions including regular and irregular, as well as formal and informal ones, with various external actors in the network. In contrast, non-exporting SMEs are more dependent on personal relations with key persons in various governmental and private institutions. The policy and managerial implications of the findings are discussed.


Keywords


SMEs; internationalization; network relationships; Indonesia; export assistance

Full Text:

PDF

References


Abdullah, N. A. H. N. & Zain, S. N. M. 2011. The internationalization theory and Malaysian small medium enterprises (SMEs). International Journal of Trade, Economics and Finance, 2, 318-322.

Barney, J. 1991. Firm resources and sustained competitive advantage. Journal of management, 17, 99-120.

Battaglia, L., Corsaro, D. & Tzannis, A. 2006. The role of networks in the internationalisation of a SME: the case of an Italian company. Industrial Marketing and Purchasing Group Conference. Milano.

Buckley, P. J. 2011. The theory of international business pre-Hymer. Journal of World Business, 46, 61-73.

Chang, F. Y. & Webster, C. M. 2019. Influence of innovativeness, environmental competitiveness and government, industry and professional networks on SME export likelihood. Journal of Small Business Management, 57, 1304-1327.

Chetty, S. & Campbell-Hunt, C. 2004. A strategic approach to internationalization: A traditional versus a “born-global” approach. Journal of International Marketing, 12, 57-81.

Coviello, N. E. & Munro, H. J. 1995. Growing the entrepreneurial firm: networking for international market development. European Journal of Marketing, 29, 49-61.

Coviello, N. E. & Munro, H. J. 1997. Network relationships and the internationalisation process of small software firms. International Business Review, 6, 361-386.

Dunning, J. 2006. American investment in British manufacturing industry, Routledge.

Easton, G. & Axelsson, B. 1992. Industrial networks: a new view of reality, Routledge.

Haddoud, M. Y., Jones, P. & Newbery, R. 2017. Export promotion programmes and SMEs’ performance: Exploring the network promotion role. Journal of Small Business Enterprise Developmen, 24, 68-87.

Hammer, A. & Stamps, J. 2010. The Role of Small & Medium Sized Enterprises In U.S. and EU Exports. Paris: OECD.

Hollenstein, H. 2005. Determinants of international activities: are SMEs different? Small Business Economics, 24, 431-450.

ITC. 2019. Trade Map: Export by Products. The International Trade Centre.

Johanson, J. & Mattsson, L.-G. 1988. Internationalization in Industrial Systems - A Network Approach. In: HOOD, N. & VAHLNE, J.-E. (eds.) Strategies in Global Competition. New York: Routledge.

Johanson, J. & Vahlne, J.-E. 1977. The internationalization process of the firm--A model of knowledge development and increasing foreign market commitments. Journal of International Business Studies (pre-1986), 8, 23-32.

Johanson, J. & Vahlne, J.-E. 1990. The mechanism of internationalisation. International Marketing Review, 7, 11-24.

Johnsen, R. E. 2007. The role of focal suppliers in strategic networks for internationalisation: Perspectives from small and medium-sized Italian and Thai silk suppliers. Journal of Fashion Marketing and Management, 11, 135-147.

Kahiya, E. T. & Dean, D. L. 2016. Export stages and export barriers: Revisiting traditional export development. Thunderbird International Business Review, 58, 75-89.

The Ministry of Cooperatives and Small and Medium Enterprises of the Republic of Indonesia. 2009. The KUKM Export Directory. Jakarta.

The Ministry of Cooperatives and Small and Medium Enterprises of the Republic of Indonesia. 2015. Data Development of Micro, Small, Medium Enterprises (UMKM) and Large Enterprises (UB) in 2012-2013. [On line]. [Accessed September 10 2016].

The Ministry of Cooperatives and Small and Medium Enterprises of the Republic of Indonesia. 2018. Development of Data on Micro, Small, Medium Enterprises (UMKM) and Large Enterprises (UB) in 2016-2017. [On line]. [Accessed December 10 2019].

Kontinen, T. & Ojala, A. 2012. Social capital in the international operations of family SMEs. Journal of Small Business and Enterprise Development, 19, 39-55.

Korhonen, H., Luostarinen, R. & Welch, L. 1996. Internationalization of SMEs: Inward--outward patterns and government policy. Management International Review, 36, 315-329.

Laghzaoui, S. 2007. Internationalization of SME: A reading in terms of resources and competencies. 3rd Iberian International Business Conference. Aveiro, Portugal.

Leonidou, L. C. & Katsikeas, C. S. 1996. The export development process: an integrative review of empirical models. Journal of international business studies, 27, 517-551.

Lim, H. & Kimura, F. 2010. The Internationalization of Small and Medium Enterprises in Regional and Global Value Chains. ADBI Working Paper No. 231.

OJALA, A. 2009. Internationalization of knowledge-intensive SMEs: The role of network relationships in the entry to a psychically distant market. International Business Review, 18, 50-59.

Onkelinx, J. & Sleuwaegen, L. 2008. Internationalisation of SMEs. Flanders District of Creativity.

Oviatt, B. M. & Mcdougall, P. P. 1994. Toward a theory of international new ventures. Journal of international business studies, 25, 45-64.

Paul, J., Parthasarathy, S. & Gupta, P. 2017. Exporting challenges of SMEs: A review and future research agenda. Journal of World Business, 52, 327-342.

Pendergast, W. R., Sunje, A. & Pasic, M. 2008. The internationalization of SMEs in Bosnia and Herzegovina. In: Dana, L.-P., Wellpe, I. M., Han, M. & Ratten, V. (eds.) Handbook of Research on European Entrepreneurship: Towards a Theory of Internationalization London: Edward Elgar.

Peng, M. W. 2001. The resource-based view and international business. Journal of Management, 27, 803-829.

Revindo, M. D. & Gan, C. 2016. Export Stimuli, Export Stages and Internationalization Pathways: The Case of Indonesian SMEs. EFI, 62, 191-205.

Revindo, M. D. & Gan, C. 2017. Factors Influencing SMEs Engagement in Direct Export Activities. LPEM, Faculty of Economics and Business, University of Indonesia.

Revindo, M. D. & Gan, C. 2018. Factors Affecting Variation in SMES'Export Intensity. LPEM, Faculty of Economics and Business, University of Indonesia.

Rodrigues, S. B. & Child, J. 2012. Building social capital for internationalization. Revista de Administração Contemporânea, 16, 23-38.

Ruzzier, M., Hisrich, R. D. & Antoncic, B. 2006. SME internationalization research: past, present, and future. Journal of Small Business and Enterprise Development, 13, 476-497.

Sabila, F. 2014. Perancangan Promosi Produk UKM Plasa Pameran Kementerian Perindustrian. Universitas Multimedia Nusantara.

Sari, D. Internationalisation of Manufacturing SMEs: The Case of Indonesia. International Council for Small Business (ICSB) World Conference 2011 Washington. International Council for Small business (ICSB), 1.

Senik, Z. C., Scott-Ladd, B., Entrekin, L. & Adham, K. A. 2011. Networking and internationalization of SMEs in emerging economies. Journal of International Entrepreneurship, 9, 259-281.

Shamsuddoha, A. K., Ali, M. Y. & Ndubisi, N. O. 2009. Impact of government export assistance on internationalization of SMEs from developing nations. Journal of Enterprise Information Management, 22, 408-422.

Thai, M. T. T. 2008. The internationalization of Vietnamese small and medium-sized enterprises. Doctora Oeconomiae, University of St. Gallen.

Uchikawa, S. & Keola, S. 2008. Small and medium enterprises in Cambodia, Laos, and Vietnam. ERIA Research Project Report 2008, 237-273.

Wernerfelt, B. 1984. A resource‐based view of the firm. Strategic Management Journal, 5, 171-180.

Wignaraja, G. 2012. Engaging Small and Medium Enterprises in Production Networks: Firm-level Analysis of Five ASEAN Economies. ADBI Working Paper Series No. 361. ADBI.

Wilkinson, T. & Brouthers, L. E. 2006. Trade promotion and SME export performance. International Business Review, 15, 233-252.

Yamin, M. & Ghauri, P. N. 2004. Rethinking MNE-emerging market relationships: Some insights from East Asia. In: PRASAD, S. B. & GHAURI, P. N. (eds.) Global Firms and Emerging Markets in an Age of Anxiety. London: Praeger.

Zain, M. & Ng, S. I. 2006. The impacts of network relationships on SMEs' internationalization process. Thunderbird International Business Review, 48, 183-205.

Zhang, X., Ma, X., Wang, Y., Li, X. & Huo, D. 2016. What drives the internationalization of Chinese SMEs? The joint effects of international entrepreneurship characteristics,

network ties, and firm ownership. International Business Review, 25, 522-534.

Zhou, L., Wu, W.-P. & Luo, X. 2007. Internationalization and the performance of born-global SMEs: the mediating role of social networks. Journal of International Business Studies, 38, 673-690.




DOI: https://doi.org/10.15294/jejak.v12i2.21821

Refbacks

  • There are currently no refbacks.




Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.