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The Industrialisation Process of Asian Small and Medium Firms

National governments throughout the Asia-Pacific Region have identified small and medium enterprises as an important source of economic growth and employment. In the past, SME business strategies have focused on production, relying on their subcontracting and sales contacts with large firms for technological innovation and marketing and on abundant domestic labour forces for comparative advantage. Recently, structural problems in the region arising from the Japanese recession, currency appreciation and rising labour costs have upset these relationships forcing SMEs to move offshore (DFI) to restore cost competitiveness and to upgrade their internal technological and organisational capacities to international standards in order to compete for contracts within more open, international markets. This paper analyses this process of change, analysing the development of SMEs within four Asian countries using a six stage evolutionary model. The majority of SMEs in these countries are still in the earlier second (dependency) or third (internalisation) stages. The more advanced SMEs have moved into the fourth (externalisation) stage, where firms develop independent technology and marketing capacities. To the extent that localisation (stage five) had occurred, it involved local embedded relationships which had limited scope for further internationalisation. Little evidence of regional integration or networking among SMEs was found.

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Paper provided by School of Economics, University of Wollongong, NSW, Australia in its series Economics Working Papers with number wp00-10.

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Length: 27 pages
Date of creation: 2000
Date of revision:
Handle: RePEc:uow:depec1:wp00-10
Contact details of provider: Postal: School of Economics, University of Wollongong, Northfields Avenue, Wollongong NSW 2522 Australia
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  1. Abe, Makoto & Kawakami, Momoko, 1997. "A Distributive Comparison of Enterprise Size in Korea and Taiwan," The Developing Economies, Institute of Developing Economies, Japan External Trade Organization(JETRO), vol. 35(4), pages 382-400, December.
  2. Coviello, Nicole & Munro, Hugh, 1997. "Network relationships and the internationalisation process of small software firms," International Business Review, Elsevier, vol. 6(4), pages 361-386, August.
  3. Chetty, Sylvie & Blankenburg Holm, Desiree, 2000. "Internationalisation of small to medium-sized manufacturing firms: a network approach," International Business Review, Elsevier, vol. 9(1), pages 77-93, February.
  4. M-R Cho, 1997. "Large - small firm networks: a foundation of the new globalizing economy in South Korea," Environment and Planning A, Pion Ltd, London, vol. 29(6), pages 1091-1108, June.
  5. Linsu Kim & Nugent, Jeffrey B., 1994. "The Republic of Korea's small and medium size enterprises and their support systems," Policy Research Working Paper Series 1404, The World Bank.
  6. Homin Chen & Tain-Jy Chen, 1998. "Network Linkages and Location Choice in Foreign Direct Investment," Journal of International Business Studies, Palgrave Macmillan, vol. 29(3), pages 445-467, September.
  7. Dieter Ernst, 1997. "Partners for the China Circle? The Asian Production Networks of Japanese Electronics Firms," DRUID Working Papers 97-3, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
  8. Chi Schive, 1995. "Industrial Policies In A Maturing Taiwan Economy," Industry and Innovation, Taylor & Francis Journals, vol. 2(1), pages 5-26.
  9. Dalli, Daniele, 1995. "The organization of exporting activities: Relationships between internal and external arrangements," Journal of Business Research, Elsevier, vol. 34(2), pages 107-115, October.
  10. Cavusgil, S. Tamer, 1984. "Differences among exporting firms based on their degree of internationalization," Journal of Business Research, Elsevier, vol. 12(2), pages 195-208, June.
  11. Ernst, Dieter, 1997. "Partners For The China Circle? The Asian Production Networks Of Japanese Electronics Firms," UCAIS Berkeley Roundtable on the International Economy, Working Paper Series qt5215p84k, UCAIS Berkeley Roundtable on the International Economy, UC Berkeley.
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