Regional Development
Building Regional Export Champions: A New Framework for Understanding SME Success
Rethinking Space in International Business
While most research looks at exports through a national lens, this innovative study reveals how sub-national spaces – individual states and regions – play a critical role in determining which small businesses succeed internationally. Through rigorous analysis of Indian manufacturing SMEs, the research introduces a novel concept: Regional Export Advantage (REA).
Key Research Innovation: The REA Framework The study develops a comprehensive analytical model showing how different regional factors combine to create export advantages:
- Market Conditions
- Size of local demand
- Growth dynamics
- Market sophistication
- Factor Conditions
- Human resource quality
- Infrastructure availability
- Capital access
- Technological Base
- Regional knowledge stock
- Industry specialization patterns
- R&D capabilities
- Spatial Elements
- Urban concentration
- Industry clustering
- Foreign investment presence
Testing the Model: The Indian Experience Using advanced statistical techniques (fractional logit modeling), the study examines how these factors played out across Indian states during 1995-2008. Key findings include:
- The Technology Effect
- States with higher patent activity showed consistently better export performance
- This effect was particularly strong for high-tech sectors
- Knowledge spillovers appear to benefit all firms in tech-rich regions
- The Human Capital Connection
- Regions with better skilled workforces exported more
- The effect was consistent across all technology levels
- Skills matter more than basic infrastructure
- The Urban Advantage
- Cities act as export catalysts
- Urban areas facilitate knowledge sharing
- Metropolitan regions show higher export intensity
Changing Regional Dynamics The study captures fascinating shifts in regional export patterns:
- South India emerged as a dominant force, driven by states like Karnataka
- Traditional industrial regions saw relative decline
- New export hubs emerged around technology centers
Practical Applications
For Regional Policymakers:
- Create integrated development strategies combining multiple factors
- Focus on building knowledge infrastructure
- Develop urban-centric export promotion policies
For National Planners:
- Recognize regional differences in export potential
- Design location-specific support programs
- Balance regional development with specialization
Looking Ahead This framework opens new possibilities for understanding how regions can build sustainable export advantages. It suggests that successful export promotion requires a holistic approach considering multiple regional factors rather than focusing on individual company capabilities.
Research Impact The study makes three major contributions:
- Provides first comprehensive data on state-level SME exports
- Develops new statistical approaches for analyzing regional export patterns
- Creates a theoretical framework for understanding regional export advantage
Academic Abstract:
Purpose: The purpose of this study is to examine the subnational regional dimension of exports by small and medium-sized enterprises (SMEs) in India, one of the prominent emerging economies or “rising powers”.
Design/methodology/approach: To understand the forces driving the variation in subnational region’s share in international business of rising power SMEs, an analytical conceptual framework on regional export advantage (REA) was formulated based on the review of relevant theoretical and empirical literature. The model was estimated for Indian states using the most appropriate and recently developed econometric technique of fractional logit model.
Findings: The paper provides evidence that the emergence of exports by rising Indian power SMEs is geographically limited to a few select regions/states. Southern Indian states alone accounted for half of exports from SMEs in the organized manufacturing sector during 2000-2008, followed by Western India. The REA analysis has brought to the fore that regional stock of technological knowledge, availability of skill, port facilities, urban areas and foreign direct investment stocks are crucial factors determining states’ share in SME exports across technological subcategories. However, the size and sophistication of local demand continue to influence states’ efforts at enhancing exports by SMEs, at least those belonging to the medium- and high-technology categories.
Research limitations/implications: The proposed empirical framework could be extended to include institutional and political economy factors. Its application to subnational regional shares in total exports by all firms taking into account fixed effects for regions may be another feasible line of future research.
Practical implications: Empirical findings recognize that appropriate strategies by subnational policymakers are important for a region to achieve a higher contribution in national SME exports. Subnational policy measures aimed at upgradation of regional technological assets and skill base through the promotion of technology clusters and R & D of local firms, facilitation and creation of better industry-university linkages and investments in education and training institution may help the states to gain higher export advantage.
Originality/value: This paper provides new analytics and insights into the role of subnational spaces in the internationalization of rising power SMEs from India and serves to contribute to the extant international business research that is predominantly occupied with “nation” as the unit of location.
Learn More:
Full citation: Pradhan, Jaya Prakash and Keshab Das (2015), ‘Regional Export Advantage of Rising Power SMEs: Analytics and Determinants in the Indian Context’, Critical Perspectives on International Business, 11 (3&4), pp. 236–258, Publisher: Emerald Group Publishing.
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