Firm Size, Technological Capability, Exports and Economic Performance: The Case of Electronics Industry in Malaysia

Article excerpt

1. Introduction

Studies examining the influence of internal and external factors (or resources) on firm performance are plenty (Barney, Ouchi 1986; Barney 1991). A large number of researches focus on the influence of technology on performance (Hitt et al. 2000) and many, among them, have also investigated the relationship among technology, exports and firm performance. Yet, the debate on technological capability, exports and economic performance has remained inconclusive. Likewise, issues of how they are related are less understood (Barney et al. 2001; Strandskov 2006). A large number of studies (Andersen, Foss 2005; Buckley, Casson 1991; Duysters, Hagedoorn 2000; Henderson, Cockburn 1994; Karagozoglu, Lindel 1998; Kim, Nelson 2001; Nelson 1991; Teece et al. 1997; Tsai 2004; Rasiah 2007) focus only on the direct relationship between technology and performance as well as technology and exports. Similarly, at firm level, technological capability serves as a major source of export competitiveness (Ernst et al. 1998; Rasiah 2004; Iammarino et al. 2008; Wignaraja 2008a). However, these studies ignore the complex relationship between the variables and lack the dynamic analysis that analyses the joint effects of technology and exports on performance. Furthermore, size or scale that is of importance for the manufacturing sectors (Cohen, Klepper 1996; Mittelstaedt et al. 2003; Sterlacchini 1999) is less explored in a dynamic way. In other words, size can play an important role in influencing technology capability, exports as well as performance jointly. Despite significant advancement in theories, there are still large gaps in understanding the critical issues in hand (Barney et al. 2001; Strandskov 2006). For instance, technology may have an impact on exports and in return, exports may enhance firm performance. Similarly, size may affect technology, exports and performance. Hence, ignoring the joint or indirect effects of technology on performance may lead to the overlooking of certain critical dimensions in understanding the relationship among technology, exports and performance.

Owing to the existing research gap, this paper attempts to make an analysis of the relationship between technology and performance via the mediating role of exports and the impact of firm size on technology, exports and performance. By examining the complex relationship among firm size, technology, exports and performance, this paper contributes in providing a complete picture showing the interrelationship among the variables under study. Indeed, the empirical evidence contributes to the methodological and theoretical understanding on the issues of technology, export and overall firm performance. To meet this objective, this paper uses the Partial Least Square (PLS) method to analyse the joint effects of technology and exports on firm performance. Furthermore, the paper attempts to provide clarification and further understanding, for reasons both conceptual and methodological.

The rest of the paper is organised as follows. Section 2 discusses the theoretical justification of the relationship among technological capability, exports and performance. Section 3 outlines the data source and methodology employed in the paper. Section 4 discusses the results and implications of policies, followed by the conclusion in Section 5.

2. Theoretical considerations

This section reviews the important works that have been discussed on the relationship among technological capability, size, export and firm performance. It seeks to establish the critical hypotheses that will be examined subsequently.

2.1. Technological capability and exports

In attempting to explain export behavior, researchers have investigated extensively the antecedents of exports. Resources owned by firms, from the point of view of resource-based theories, are regarded as one of the important factors (Barney 1986, 1991; Conner, Prahalad 1996; Penrose 1959). …