Government Policies, Regional Trading Agreements and the Economic Performance of Local Electronics Component Producing SMEs in Malaysia

Several governments, including Malaysia's, have promoted small and medium enterprises (SMEs) for the socio-economic benefits such policies bring. Since the 1990s, Malaysian SMEs have progressed to take advantage of the exporting opportunities opened up by regional trading arrangements (RTAs). Using the electronics industry, which is prevalent in the manufacturing sector of Malaysia, this paper seeks to analyse the relationships between size and technological and performance variables. While foreign electronics firms in Malaysia have been thoroughly studied in the past, this paper focuses on national firms, which have been understudied thus far. SMEs show stronger participation in exports to ASEAN countries than large firms. Size did not matter in the intensity of use of technological capability variables. The government's initiatives to support them with ICT infrastructure, and trade promotion may have been successful. Also, RTAs show significant importance as the relationship between firms using them and intensity of exports to ASEAN and Northeast Asia is positive and strong. Also, while the incidence of participation in in-house R&D (IHRD) and training expenditure in payroll (TEP) is higher among firms that have used RTA instruments compared to firms that have not, firm size was not significant.