Abstracts Category : Other

Internationalisation of Indonesian SMEs

by Mohamad Dian Revindo

Indonesia faces rapid changes in its international trade policies and environment owing to its engagement in various bilateral, regional and multilateral free trade agreements. Free trade escalates business competition for small and medium-sized enterprises (SMEs) in the domestic market through cheap imported products and the increasing operation of foreign enterprises, but offers enormous opportunities for SMEs to export and venture abroad. However, Indonesian SMEs are less able to take advantage of foreign market opportunities than their large counterparts and only account for a small share of Indonesias non-oil and gas exports, contradicting their important contribution to business establishment, employment provision and value added creation. This study analyses the internationalisation of Indonesian SMEs, with focus on their direct-export activities. In particular, the study examines the characteristics of exporting and non-exporting SMEs in terms of export stimuli, export barriers, network relationships and participation in governments export assistance programmes. The study investigates the strategies and processes undertaken by SMEs to become exporters along with the factors influencing SMEs export engagement, the determinants of SMEs export intensity and the factors influencing SMEs performance improvement due to export engagement. The policy measures to foster SMEs exports are formulated based on the research results.Primary data was obtained from survey questionnaires administered in April-August 2014 to SMEs in seven provinces in Java, Madura and Bali regions and central government agencies whose policies are related to SMEs and/or international trade. The survey yielded a response rate of 53.76% and 497 usable responses, including 271 exporting SMEs and 226 non-exporting SMEs. Descriptive statistics were used to distinguish the characteristics of exporting and non-exporting SMEs. Principal component analysis was used to reduce the dimensions of export stimuli and export barriers. The empirical frameworks include binary logistic regression to estimate the determinants of SMEs export engagement and fractional logit regression to estimate the determinants of SMEs export intensity and exporting SMEs performances. The descriptive statistics results show that SMEs are stimulated to export because they aspire to find new markets, but they initiate export activities because of the presence of foreign buyers. SMEs plan to begin exporting to neighbouring countries but they, in reality, initiate export to large and high income countries. SMEs timing to become exporters varies across provinces. Exporting SMEs in Bali and Yogyakarta, two main tourist destination provinces, on average take less time to internationalise from the outset, indicating a born global firm phenomenon probably due to high exposure to foreigners.The estimation results show that SMEs propensity to engage in export activities is influenced by the international work experience of the owners/managers, product, location,Advisors/Committee Members: Gan, Christopher, Nguyen, Cuong Cao.