In line with the commitment of country leaders to establish an ASEAN Economic
Community (AEC) by 2015, the AEC Policy Blueprint for 2004-2014 outlines the
framework for small and medium sized enterprise (SME) development, as a key
measure aimed at achieving equitable economic development in the ASEAN region.
Promotion of SME participation in the regional production and distribution networks is
among the actions set out in the policy blueprint. The last three decades have witnessed
the rapid creation of production and distribution networks across the countries in East
Asia, and firms in ASEAN member states take an active part in the activities of these
networks. Integrating SMEs into the networks, therefore, has become a strategic action
for SME development in the ASEAN region, in the light of expectations that there will
be more intensive and extensive East Asian production networks in the future.
SMEs are inherently part of international or local production networks. They are
usually located in the lowest tiers of the networks that supply a flagship company, or an
assembler of final goods, with intermediate inputs. The main competitive value of
SMEs comes from their low cost structure and high degree of flexibility.
Notwithstanding their strength, the survival of a significant proportion of SMEs may be
at risk, owing to the liberalized and fiercely competitive environment at the level of the
weakest links in the production networks, where the SMEs are located.
Against this backdrop, this research project aims at improving our understanding of
how to effectively increase SME participation in production networks, and what their
issues and challenges are. The research not only contributes to filling the theorypractice
gap, but also is expected to lay down a foundation for designing national
arrangements, as well as a regional institutional framework for supporting SMEs.
In an attempt to achieve this objective, the study puts forward two interrelated
questions: (1) what are the constraints on SME growth, both in general and according to
the status of SME participation in production networks, and (2) which firm
characteristics determine SME participation and performance in production networks?
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Answering these questions would extend previous studies, among others the ERIA SME
research project carried out in Fiscal Year 2007. The research project is an attempt to
create a coherent understanding of the issue of SME development in the ASEAN region.
The project utilizes a uniform questionnaire survey, in order to accommodate the
integrative nature of the research. The survey was conducted over the two or three final
months of 2009 and adopts a one-to-one approach to minimize reporting errors. The
study successfully gathered a sample of 900 respondents covering eight countries (i.e.,
Cambodia, Lao PDR, Vietnam, Thailand, Malaysia, Indonesia, the Philippines and
China) over this survey period.