Internationalization is recognized in many countries as an important resource for organizations’ growth and expansion. In Malaysia, there have been numerous policies, strategies and support programs formulated by the government aimed at fostering the development of internationalization of Small and Medium Enterprises (SMEs). This paper intends to look into Malaysian policies on business internationalization and to derive a profile of its international SMEs, with the aim of evaluating the effectiveness of these policies in developing firm competitiveness in international markets. The findings revealed that Malaysian SMEs are still at their early phase of involvement in international business, with a low portion of their markets, sales and profits derived from internationalization, despite numerous policies, strategies and programs supporting their internationalization development. This suggests that present policies and strategies concerning SMEs’ internationalization require urgent reviews and revisions to better suit their needs and the ever-changing global environment. Policy makers are also advised to consider the relevance of various regulations which may hamper the growth of SMEs at the international level.

Internationalization is a key element of growth of a firm (Peng and Delios, 2006). It is especially important for Small and Medium Enterprises (SMEs) since they generally have a small financial base and a limited domestic scope (Barringer and Greening, 1998). Many SMEs from developed nations are generating income in the foreign markets more than in the home countries. These enterprises can be described as ‘born global’ or ‘instant internationals’ (traditional SMEs which enter international market almost from inception), ‘backsources’ (SMEs who re-concentrate their international activities back to the home base) and ‘born regionals’ (SMEs that gain their force out of a local embeddedness and never shift capacity beyond export activities) (Schulz et al., 2009). Due to the huge economic contributions of SMEs, most countries have implemented policies with the objective to support them to increase their international activities and boost economic growth (EC, 2007). The most observable approach in which governments can influence SMEs development is through direct support policies and programs that are created to assist SMEs to overcome size-related disadvantages (Smallbone and Welter, 2001).

In Malaysia, SMEs are considered as the backbone of economic growth in driving industrial development (Amini, 2004; Radam et al., 2008; Hoq et al., 2009; and Khalique et al., 2011). At present, there are approximately 645,000 SMEs, which account for 97.3% of total business establishments. Malaysian SMEs have remained resilient since 2011, with the SME GDP continuing to grow at a faster rate of 6.8% than the overall economy of 5.1%. Their positive development over the years has resulted in SMEs’ contribution to GDP increasing gradually from 29.4% in 2005 to 32.5% in 2011. However, this figure is still a long way from achieving the national master plan target of 41% by 2020 (DOSM, 2011). As a strategy to achieve the target, the government has increased efforts to strengthen the performance of SMEs by formulating various policies, incentives and programs based on three main thrusts: (1) strengthening the enabling infrastructure; (2) building firms’ capacity and capability; and (3) enhancing firms’ access to financing (NSDC, 2009/10). The concern is that, while these policies and programs may be able to improve the overall performance of local SMEs, they appear to be too generic to have a significant impact on internationalization.

Business Strategy, Journal, Malaysian, International, Small and Medium Enterprises (SMEs), Born global, Internationalization, Current Performance, National Policies, Malaysian SMEs, Strategic Objectives.