primarily defined the industrial structure
of the world to a larger extent. Significance of SMEs is not limited to
emerging economies. Establishing and nurturing SMEs is equally important
either we talk about the least developed, developing or developed economies of
the world. SMEs
are significant because of various reasons. For example, 66% of
employment in Japan is generated by SMEs. This figure is 53% for USA and
68% for Germany (UK Essay, 2014). In addition to this SMEs are
responsible for 55% value addition in Japan, 51% for USA and 45% for Germany
(UK Essay, 2014).
SMEs have also been increased focus of research
attention because of various reasons (Shaw, 2004; Shaw
and Willams, 1998). Their potential to export and thus import employment is one
of these reasons. It is important to understand and keep on enhancing
this understanding about what determines SMEs export
performance. This understanding is important because of significant role
SMEs are playing in national economies around the world. Scholarly
literature is very much rich on what determines SMEs’ ability to
export. One of the classifications to study determinants of SMEs’
export performance is based on industrial structure of these SMEs i.e.,
SMEs in manufacturing and SMEs in services sector.
1.2 Literature Review
Various authors have reflected on determinants
of SMEs export performance (Iqbal and Urata, 2002). Authors such as
Zou and Stan (1998), have highlighted the factors common to what determine SMEs
export performance. According to these authors commitment, networking,
specific internal resources, entrepreneurship spirit and reliability of supply
are the important factors. Ellis and Pecotich
(2001), highlighted the determinants
of SMEs in services export business. According to these authors in
service sector there are some factors which can be associated with
all types of SMEs dealing in services. Authors referred these
factors as fundamental performance drivers. These consist of: 1) long
term commitment to the market, 2) relationship and network development, 3)
concept proved in home market, 4) patience and 5) entrepreneurial spirit.
In addition to these factors, the authors identified separate set of factors
contributing towards performance of SMEs exporting services which can be
classified as low vs. high on degree of face to face contact and low vs. high
on degree of tangibility.
The literature pertained to export performance
determinants of SMEs is substantially rich. Richness of the
literature is defined in terms of various streams of studies.
Studies focusing on e.g., geographical belongingness of SMEs, in context
of developed and developing countries of the world, with respect to industry
and possibly with respect to markets SMEs have targeted.
(2013), studied the SMEs performance in the Kyaing Tong area, Myanmar. He found
that export performance of SMEs in
Myanmar have a positive relation with nature of firm, firm knowledge, location
of firm, customer orientation, competitor orientation, organizational capability, strategic competencies,
commitment competencies, external factors and inside -firm orientation. External
factors are important performance oriented factors for firm survival and
1993). These factors influence directly or indirectly on Decisions
making in Entrepreneurial process and contribute in firm’s performance at the
end. External factors also make impact on personality and attitude of
Mohd Azid, 2009).
developing countries economic progress is largely depend on small and medium
enterprises. Large employment is also generated by SMEs and it makes large
participation in gross domestic product (Nwokah,
2008). Expansion of SME’s has not only make opportunities for
employment but also help to reduce poverty of all countries (Schumacher, 1973).
Shah, javed and syed (2013), had discussed
internationalization of small and medium enterprises in Pakistan. Research had
focused on the factors that effect the internationalization of SMEs in Pakistan
and it revealed that research and development, government support, growth of
export industry, entrepreneurial
associations are important
factors for internationalization development. Whereas international trade
restrictions, inadequate economic policies, lack of research facilities, lack of infrastructure, not enough finance are the
barriers for export performance of SMEs.
Research and development is also a very important
contributor in export performance of SMEs. Uniqueness of product or service
with low price can be done through R&D which generate a good image of the
product and able to get more competitive advantage (Ali & Faisal, 2010).
There will be focus on foreign qualified
and highly trained staff which will be aware of the new dimensions of changing
economic world. Managerial skills are
also important for export performance of industry. Skillful decision makers,
with talented team, are able to develop competitive products which contribute
in national economy and promote more employment and revenue. Small businesses
contribute more in national economic growth as compared to large business (Phulpoto,
Shaikh & Rahpoto, 2012).
Mesquita and Lazzarini (2008), discussed
the collective efficiencies in weak infrastructure of developing and poor
economies. Researcher discussed the vertical ties and horizontal ties in SMEs
economies. Supply chain is a source of vertical ties which helps to increase
manufacturing productivity whereas horizontal ties with the help of joint
product innovation enable to raise production. These two concepts jointly make
competitive product for SMEs.
Ahmad and Khawaja (2006), made a research on 75 developing countries including South
East Asian countries. They found that continual economic growth rate is
extremely important for export promotion. Sustained economic progress effects
export promotion in a positive way. Strong communication infrastructure is
required for growth of export performance. All modules of business, which are
different in nature, must have a strong collaboration with each other. These
modules can be research and development, technology, infrastructure, govt.
policies, economic policies, growth
of export industry, entrepreneurial associations. Exchange rate policy
should be stable so that exchange-rate risks are minimized so that investors