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SME Internationalization Through Global Value Chains and Free Trade Agreements: Evidence from Malaysia

In: Production Networks and Enterprises in East Asia

Author

Listed:
  • Menaka Arudchelvan

    (Asian Development Bank Institute)

  • Ganeshan Wignaraja

    (Asian Development Bank)

Abstract

Growing internationalization of firms in Asia through participation in global value chains (GVCs) and free trade agreements (FTAs) has focused attention on small and medium-sized enterprises (SMEs). Yet there is scant literature on the characteristics of SMEs involved in GVCs and FTAs. Malaysia is reputed for its engagement in GVCs and is actively pursuing FTAs. Drawing on a survey of Malaysian enterprises, this chapter examines the characteristics of SMEs in GVCs and FTAs and explores the policy implications. It finds that even among SMEs, firm size matters for participation in GVCs and FTAs. But size is not the whole story for SME internationalization. Licensing of foreign technology and investment in research and development are also positively associated with SMEs joining GVCs. Furthermore, increased exposure to international trade, knowledge of FTA provisions and central location positively affects the use of FTAs by SMEs. More business support for SMEs can help them to engage in GVCs and FTAs.

Suggested Citation

  • Menaka Arudchelvan & Ganeshan Wignaraja, 2016. "SME Internationalization Through Global Value Chains and Free Trade Agreements: Evidence from Malaysia," ADB Institute Series on Development Economics, in: Ganeshan Wignaraja (ed.), Production Networks and Enterprises in East Asia, edition 1, chapter 0, pages 207-227, Springer.
    • Handle: RePEc:spr:adbchp:978-4-431-55498-1_10
    DOI: 10.1007/978-4-431-55498-1_10
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