Malaysian SMEs internationalization through networks approach

Abstract. In Malaysia, 98.5 per cent of business incorporation is related to small and medium-sized enterprises (SMEs). SMEs had contributed 36.6 per cent of the total gross domestic product in 2016, and it is expected to increase to 41 per cent in 2020. Importantly, Malaysian SMEs create 65 per cent of employment opportunities, and around 20 per cent of the Malaysian SMEs are actively operating their businesses with international partners or clients—internationalization. Although building and managing network relationship has been view as one of the most important ways to ensure the business sustainability in Malaysia, and yet, most of the Malaysian SMEs entrepreneurs are not equipped with a fundamental knowledge of networks in business management. Generally, the Malaysian SMEs entrepreneurs gain networks knowledge through practice, which means that they learn of how to develop, coordinate, and maintain a network relationship via trial and error approach. Undeniably, the trial and error approach is considered a meaningful learning process in business management. Notwithstanding, such a strategy is relatively risky and improper to be applied on internationalization. The reason given is that operating in the international market is more challenging than running a business in the domestic market; the Malaysian SMEs entrepreneurs may face many uncertainties in the global market without proper networks, such as customer needs, distribution channel, legislation, and so on. Thus, the objective of this thesis serves to answer: 1) How do networks affect Malaysian SME entrepreneurs to discover international opportunities and to operate their business in the international markets? 2) During the internationalization, what are the influences of networks on Malaysian SME entrepreneurs’ knowledge, experience, and future business ideas? The current thesis used Gioia methodology, a systematic inductive approach and rigorous qualitative method to develop the empirical model. Five companies from different industry were selected for the interview, including instant beverage, restaurant, bird’s nest supply, design and printing services, and hardware trading. This thesis contributes to the current literature of the Malaysian SMEs by integrating business network internationalization process model (Johanson & Vahlne 2009) and guanxi (i.e., personal relationship). In this regard, the Malaysian SME entrepreneurs are more focusing on the development of guanxi for the sustainability of businesses. In term of managerial implications, entrepreneurs could benefit from knowing how to make a prospect list of global markets and manage international network relationships. The findings of this thesis also important to Malaysian government and institutions; it could be served as a blueprint to plan and design a better training programme for the Malaysian SME entrepreneurs, such as the art of turning a business partnership into a personal relationship