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The Internationalization of Small and Medium Enterprises in Regional and Global Value Chains

Author

Listed:
  • Lim, Hank

    (Asian Development Bank Institute)

  • Kimura, Fukunari

    (Asian Development Bank Institute)

Abstract

Production networks and the regional division of labor have been established in East Asia resulting in massive vertical intra-industry trade in parts and components within the region. This phenomenon is known as cross-border production sharing or the fragmentation of production processes into many stages across different countries. New development strategies claim that participation in international production and distribution networks is the key to accelerating economic development in the era of globalization. This process suggests that vertical input-output linkages between local firms and multinational corporations are the most powerful channels to accelerate technology transfers and spillovers. Given the trends of globalization and economic integration in East Asia, there is significant potential for the small and medium enterprise (SME) sector to increase its contribution to the region's development through greater participation in global value chains. However, multiple market failures exist with regard to the development of SMEs and local entrepreneurship. These risks can be mitigated by proper policy measures such as strengthening technological and human resource capabilities through better networking and facilitating access to financing for SMEs. Despite many distortions and inefficiencies in implementing regional economic integration schemes in East Asia, there are many cumulative positive effects contributing to the emerging trend internationalization of SMEs in the region. This process can be significantly strengthened by creating a positive business environment through the standardization of products and services, rules and regulations, and a seamless market infrastructure in the region.

Suggested Citation

  • Lim, Hank & Kimura, Fukunari, 2010. "The Internationalization of Small and Medium Enterprises in Regional and Global Value Chains," ADBI Working Papers 231, Asian Development Bank Institute.
  • Handle: RePEc:ris:adbiwp:0231
    as

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    References listed on IDEAS

    as
    1. Jan Wengel & Edgard Rodriguez, 2006. "SME Export Performance in Indonesia After the Crisis," Small Business Economics, Springer, vol. 26(1), pages 25-37, February.
    2. Etemad, Hamid & Wright, Richard W, 2003. "Internationalization of SMEs: Toward a New Paradigm," Small Business Economics, Springer, vol. 20(1), pages 1-4, February.
    3. Fukunari KIMURA, 2006. "International Production and Distribution Networks in East Asia: Eighteen Facts, Mechanics, and Policy Implications," Asian Economic Policy Review, Japan Center for Economic Research, vol. 1(2), pages 326-344.
    4. Jan Johanson & Jan-Erik Vahlne, 1977. "The Internationalization Process of the Firm—A Model of Knowledge Development and Increasing Foreign Market Commitments," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 8(1), pages 23-32, March.
    5. Giuliani, Elisa & Pietrobelli, Carlo & Rabellotti, Roberta, 2005. "Upgrading in Global Value Chains: Lessons from Latin American Clusters," World Development, Elsevier, vol. 33(4), pages 549-573, April.
    6. Kimura, Fukunari & Ando, Mitsuyo, 2005. "Two-dimensional fragmentation in East Asia: Conceptual framework and empirics," International Review of Economics & Finance, Elsevier, vol. 14(3), pages 317-348.
    7. Madsen, Tage Koed & Servais, Per, 1997. "The internationalization of Born Globals: An evolutionary process?," International Business Review, Elsevier, vol. 6(6), pages 561-583, December.
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    Cited by:

    1. Alessandro Nicita & Victor Ognivtsev & Miho Shirotori, 2013. "Global Supply Chains: Trade And Economic Policies For Developing Countries," UNCTAD Blue Series Papers 55, United Nations Conference on Trade and Development.
    2. Willem THORBECKE, 2016. "Understanding the Flow of Electronic Parts and Components in East Asia," Discussion papers 16072, Research Institute of Economy, Trade and Industry (RIETI).
    3. Yothin Jinjarak & Paulo Jose Mutuc & Ganeshan Wignaraja, 2014. "Does Finance Really Matter for the Participation of SMEs in International Trade? Evidence from 8,080 East Asian Firms," Trade Working Papers 24047, East Asian Bureau of Economic Research.
    4. Ganeshan Wignaraja, 2012. "Engaging Small and Medium Enterprises in Production Networks : Firm-level Analysis of Five ASEAN Economies," Governance Working Papers 23316, East Asian Bureau of Economic Research.
    5. Arudchelvan, Menaka & Wignaraja, Ganeshan, 2015. "SME Internationalization through Global Value Chains and Free Trade Agreements: Malaysian Evidence," ADBI Working Papers 515, Asian Development Bank Institute.
    6. Ganeshan Wignaraja, 2015. "Factors Affecting Entry into Supply Chain Trade: An Analysis of Firms in Southeast Asia," Asia and the Pacific Policy Studies, Wiley Blackwell, vol. 2(3), pages 623-642, September.
    7. THORBECKE, Willem, 2014. "Rebalancing Trade within East Asian Supply Chains," Discussion papers 14002, Research Institute of Economy, Trade and Industry (RIETI).
    8. repec:eee:asieco:v:55:y:2018:i:c:p:58-70 is not listed on IDEAS
    9. -, 2014. "Regional integration: towards an inclusive value chain strategy," Libros y Documentos Institucionales, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 36734 edited by Eclac, April.

    More about this item

    Keywords

    internationalization SMEs; regional development policies; regional market failure;

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General

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