Academic journal article Academy of Entrepreneurship Journal

Growth Determinants of Smes in the Korea Nuclear Equipment Market

Academic journal article Academy of Entrepreneurship Journal

Growth Determinants of Smes in the Korea Nuclear Equipment Market

Article excerpt

ABSTRACT

This study investigates the impacts of market scope and industry-specific competitiveness characteristics on the growth of small and medium-sized enterprises in the nuclear equipment industry. The nuclear equipment industry can be characterized as a large complex systems procured by the government to profoundly influence on the overall market size and business opportunities. In order to growth beyond highly regulated market, SMEs can pursue their growth opportunities through oversea market expansion, business diversification and enhanced competitiveness in the market. Empirical results show these growth strategies have different impacts on the performance of SMEs. Overseas market expansion is not significant on the performance. There is a U-shaped relationship between business diversification and growth performance. Internal competitiveness factors have diverse relationships with the performance.

[Keywords] Growth, SMEs, Export, Diversification, Nuclear Equipment

INTRODUCTION

The creation and growth of SMEs have contributed to national competitiveness and employment. Previous research and policy directions for the stimulation of sustainable growth and competitiveness enhancement of SMEs emphasized specific directionalities of growth strategies. In other words, for sustainable growth of SMEs, the importance of market scope expansion and internal competitiveness strengthening efforts have been recommended. Most popular growth strategies include market expansion through innovation (Golovko & Valentini 2011), exports (Kim & Suh 2009), customer diversification (Bok 1998, Hong & Yoon 2001) and business diversification (Lee & Nam 2003; Lee & Choi 2010; Kang & Lee 2012). In addition, distinct competitive strategies with quality or technological competitiveness (Yam et al. 2011) and brand (Eggers et al. 2013) have been presented in order to secure dominance in the intense market competition (Han & Shin 2006; Lee et al.; Lee 2008).

Governments also have initiated many policy measures for export expansion and internal competitiveness improvement as core policies for SMEs growth stimulation. For example, numerous policies for active overseas expansion and quality and technological competitiveness securement have been implemented to support sustainable growth of domestic small and medium sized companies.

However, it is unclear whether previous academic research results and policy directions for small and mid-sized company growth strategies are universal growth strategies applicable to various industries. By examining the growth determinants of small and medium sized enterprises through companies in various industries, prior studies have suggested similar growth strategies in automobile parts (Lee & Choi 2010; Bok 1998, Hong & Yoon 2001), IT industry (Chung 2002, Lee 2012), or components and materials (Choi 2010). For mass manufacturing sectors such as IT and automobile parts, there are many customers and related markets where individual firms can enter and expand their business areas.

In contrast, for the large systems integration industry such as nuclear power plants, there are only a small number of customers and markets where government regulate overall market size and projects. In these markets, overseas market expansion of individual parts suppliers is made possible through the contracts with upper-level system integrators rather than the independent strategic choices of the each firm (Hobday, Davies, and Prencipe 2005). Growth opportunity of SMEs in system integration markets is highly restricted by overall market size and government policy. In these regulated markets, it is unclear whether the growth strategy for the general product markets can be applied to such project-based large systems integration industry.

In this study, we explore the growth determinants of domestic nuclear equipment SMEs. Although the nuclear equipment industry has a very large global market, however, this market can be characterized as a relatively small number of customers, highly government regulations and large scale complex large systems. …

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