Journal of Korea Trade

Korea Trade Research Association (한국무역학회)
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Internationalization and Performance of SMEs in Masan Free Trade Zone (Korea): The Direct and Moderating Effects of Firm Size

  • Lee, Sunhae (Department of Business Administration, Changwon National University) ;
  • Park, Sae Woon (Department of Business Administration, Changwon National University) ;
  • Namgung, Dam (NDT Engineering & Aerospace Co., Ltd.)
  • Received : 2019.04.16
  • Accepted : 2019.05.17
  • Published : 2019.06.30
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Abstract

Purpose - This study analyzes the effect of internationalization represented as exporting on firm performance on the subject of SMEs operating in Masan Free Trade Zone which has shown poor performance recently despite its status as the oldest and largest free trade zone in Korea. We also analyze the effect of firm size on firm performance, and the moderating role of firm size in relation to internationalization and firm performance. Design/methodology - This study uses multiple regression models for unbalanced panel data as the empirical tools for the estimation of the effect that internationalization has on firm performance (ROA or ROS). Our sample consists of 91 manufacturing SMEs among all 110 companies located in Masan Free Trade Zone as of 2017. Findings - The degree of internationalization has a negative impact on firm performance. However, firm size turns out to have a positive effect and play a positive moderating role in the relation to internationalization and firm performance. This seems to be because most tenant companies operating in Masan Free Trade Zone are small firms whose costs of internationalization may exceed the benefits. Empirical results also show that longer CEO tenure has a greater negative effect on firm performance. Originality/value - The originality/value of this paper can be found in 3 aspects. First, we conducted an empirical analysis on the relationship between the internationalization and firm performance of SMEs in a specific region, namely, Masan Free Trade Zone. Second, while most previous studies focused on listed medium companies, most of the sample of this study are small and medium non-listed enterprises. Third, it is witnessed that firm size has a positive moderating effect on the relation between internationalization and firm performance.

Keywords

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