Do Competitive Advantages in the Local Market Encourage Firms to Export?

Abstract

Trade liberalization offers exporting opportunities for firms around the world. However, little is known if firms export as a strategy for leveraging their competitive advantages in the local market into the international level. The purpose of this study is to examine the effect of competitive advantages in the local market on the export intention of manufacturing-based small and medium sized enterprises (SMEs) in an emerging economy. In particular, we test hypotheses on generic competitive advantages of cost, differentiation, focus, and integrated advantages on a sample of 140 SMEs in Malaysia. Using OLS regression, the results depict that differentiation, focus and integrated differentiation-focus advantages encourage firms to export. However, cost advantage does not significantly affect the export intention, while integrated cost-focus advantage holds firms back from going abroad. This study contributes by defining the types of competitive advantages in the local market that encourage domestic firms in developing countries to initiate exporting.