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Financial factors and export behavior of small and medium-sized enterprises in an emerging economy

Facteurs financiers et comportements d’exportation des petiteset moyennes entreprises dans une économie émergente

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Abstract

Financial considerations play a major role influencing the internationalization of firms. However, it is not clear how integrated financial factors such as cost and capital are related to the export behavior of small- and medium-sized enterprises (SMEs). The purpose of this study is to examine financial profiles of SMEs in an emerging economy by discriminating between non-exporters and exporters. Survey data from 356 SMEs in Malaysia was analyzed to see how perceived costs, internal financial resources, and external capital constraint are associated with their export status. Through a multiple logistic regression model, it is found that exporters perceive higher internal financial resources and fewer constraints in accessing external capital. They also perceive higher export costs than non-exporters. This study offers academics, entrepreneurs, and policy-makers a comprehensive understanding of financial characteristics that explain the export behavior of SMEs in developing countries.

Résumé

Les considérations financières jouent un rôle majeur dans la décision des entreprises de s’internationaliser. Cependant, il est difficile de déterminer l’influence de facteurs financiers tels que les coûts et capitaux sur les comportements d’exportation des petites et moyennes entreprises (PME). Le but de cette étude est d’examiner les profils financiers de plusieurs PME d’une économie émergente en distinguant les non-exportateurs des exportateurs. Les données d’une étude sur 356 PME en Malaisie ont été analysées afin de comprendre comment les perceptions des coûts, ressources financières internes, et contraintes de capital externe sont liées au statut d’exportation. Au moyen d’un modèle de régression logistique multiple, nous avons constaté que les exportateurs perçoivent plus de ressources financières internes et moins de contraintes dans l’accès au capital externe. Ils perçoivent également des coûts d’exportation plus élevés que les non-exportateurs. Cette étude offre aux universitaires, entrepreneurs et législateurs une compréhension globale des caractéristiques financières expliquant les comportements d’exportation des PME dans les pays en voie de développement.

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Notes

  1. The questionnaire was written in English, allowing comparison to prior studies. English proficiency in Malaysia is the highest in Asia and ranked 9th in the world among non-native countries (EF English Proficiency Index score in 2011: 55.54, high proficiency).

  2. Definition of manufacturing SME in Malaysia is based on sales turnover and number of full time employees. Small enterprise: sales turnover between RM250,000 and less than RM10 million or full-time employees between 5 and 50; medium enterprise: sales turnover between RM10 million and RM25 million or full-time employees between 51 and 150. Ringgit Malaysia (RM)1 = US$0.3047

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Authors and Affiliations

  1. School of Management, Faculty of Economics and Management, National University of Malaysia, 43600, Bangi, Selangor, Malaysia

    Abu H. Ayob, Shamshubaridah Ramlee & Aisyah Abdul Rahman

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  1. Abu H. Ayob
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  2. Shamshubaridah Ramlee
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  3. Aisyah Abdul Rahman
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Correspondence to Abu H. Ayob.

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Summary highlights

Contributions: This study examines the combined effects of financial factors (risk versus resources) on export decisions of SMEs in an emerging economy, while prior studies tend to examine them separately. Also, focusing on Malaysia provides a novel perspective because its conducive financial market is comparable with that of advanced countries, thus distinguishing it from other emerging economies traditionally studied.

Research Questions/Purpose: How are financial risk (cost) and resources (internal and external capital) associated with the export decisions of a firm? This study seeks to examine the financial profile of exporters and non-exporters to draw conclusions about how both factors affect during the internationalization of firms.

Results/Findings: Through logistic regression analysis on empirical data from 356 SMEs, we found that exporters possess higher internal financial resources and are less constrained by external capital. However, they perceive higher export costs in comparison with non-exporters.

Limitations: Due to numerous possible export determinants, this study is not capable of observing all controls. Also, the statistical technique used prevents us from rigorously demonstrating the interactions and causality between variables.

Theoretical Implications and Recommendations: This study addresses financial factors as export stimuli and inhibitor in a single model. It contributes by explaining the trade-off between risk and return during the internationalization process of firms. Accordingly, it provides micro-level data concerning a macro-level phenomenon.

Practical Implications and Recommendations: Particularly in Malaysia, where access to financing is very high but the export level remains low, the findings from this study suggest that the government programs need to supply credit to potential exporters rather than focusing on investments to cut costs.

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Ayob, A.H., Ramlee, S. & Abdul Rahman, A. Financial factors and export behavior of small and medium-sized enterprises in an emerging economy. J Int Entrep 13, 49–66 (2015). https://doi.org/10.1007/s10843-014-0141-5

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  • DOI: https://doi.org/10.1007/s10843-014-0141-5

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