Obstacles and Enablers of Internationalization of Philippine SMEs Through Participation in Global Value Chains

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Small and medium-sized enterprises (SMEs) are important in many developing countries, including the Philippines. However, this sector remains much less productive than their large counterparts. One factor that can help SMEs achieve higher productivity is to connect them to global value chains (GVCs) through internationalization. However, SMEs are faced with a host of obstacles in trying to participate in GVCs. This paper attempts to determine the challenges and enablers of connecting small and medium businesses to GVCs. It uses data from a survey of Metro Manila SMEs and a set of key informant interviews of SME owners and of government officials tasked to assist SMEs. Findings show that Philippine SMEs are weakly linked to GVCs. The challenges and enablers can be grouped into five themes, namely: (1) competition in ASEAN and East Asia; 2) international standards, regulatory requirements, and local institutions; (3) role of the government; (4) international market demand and inputs supply; and (5) entrepreneurial mindset. Based on the results, some policy implications were formulated.