Do export activities improve small firm performance? Evidence from Indonesia

Abstract

Research Aims: This study investigates the link between firm’s involvement in export activities and firm performance, with reference to small and medium-sized enterprises (SMEs) in Indonesia. Design/Methodology/Approach: The study employed primary data collected from questionnaires administered to 271 exporting SMEs in seven provinces in Jawa-Bali Region. The OLS and GLM regression techniques were employed to estimate the export impact model. Research Findings - The results show that SMEs’ involvement in export activities lead to highest performance improvement in product quality; slight improvement in networking and marketing techniques, sales, profit, production technology or technique and employee productivity, and least improvement in domestic sales. SMEs’ exports-induced performance improvement is positively affected by firm size, owners’ education, the presence of foreign investors, and assistance from central government agencies, negatively affected by years of exporting, and shows an inverted U-shaped relationship with export intensity. Theoretical Contribution/Originality - The discourse of firm internationalization theories should not only focus on pre-export activities, but also post-export activities. The discourse on the relationship between firm performance and firm internationalization should consider non-linear relationship. Research Limitations and Implications - Future research may investigate certain stimuli and barriers to expand the export at the post-export stage. Future research may also expand its scope to provincial or country comparison in Southeast Asia, taking into account differences in social and economic characteristics, or specified to a particular province/region or product group/industry. Other definitions of SMEs—such as those based on asset or turnover size—might be considered. Data accuracy may also be improved through the use of factual (quantitative) data to replace some perceptual data used in this study.