Globalization Strategies for Small and Medium Enterprises

 Globalization Strategies for Small and Medium Enterprises: A Comparative Analysis Centered on Professor Kenshi Yamakura’s Inter-Organizational Relationships Theory

Abstract

Small and medium enterprises (SMEs) face significant challenges in globalization, such as resource constraints and market entry barriers. This paper centers on Professor Kenshi Yamakura’s theory of inter-organizational relationships, exploring how SMEs leverage inter-firm networks and strategic alliances to advance their business strategies and global expansion. It begins by outlining Yamakura’s research contributions, particularly analyzing his 2009 paper, Strategy and Organization of Small Business, and elucidating the linkage between business strategy and inter-organizational relationships. The paper then focuses on SMEs’ globalization strategies, comparing Yamakura’s network transformation perspective with Michael Porter’s industry structure analysis and Gary Hamel’s strategic intent theory. Findings reveal that inter-organizational relationships serve not only as a resource augmentation tool but also as a dynamic mechanism for transformation, enabling SMEs to overcome globalization barriers. Through this comparison, practical implications are provided, emphasizing the necessity of a hybrid strategy. Additionally, the paper incorporates the global supply chain models of Taiwan Semiconductor Manufacturing Company (TSMC) and Hon Hai Precision Industry (Foxconn) as case studies. While both are large enterprises, their supply chains involve numerous SMEs, illustrating the practical application of inter-organizational relationships in the global semiconductor and electronics industries. Based on academic literature and theoretical analysis, this paper aims to provide a theoretical framework for SME globalization.

Keywords: Inter-Organizational Relationships; Small and Medium Enterprises; Globalization Strategy; Business Strategy; Network Transformation; TSMC; Foxconn; Supply Chain Internationalization

Introduction

In the era of globalization and digital transformation, small and medium enterprises (SMEs) are vital to economic vitality but face intense international competition. How resource-constrained SMEs can formulate effective business strategies to achieve market expansion and sustainable growth is a critical issue in both academic and practical domains. Professor Kenshi Yamakura, a renowned Japanese scholar in organizational theory, has focused his research on inter-organizational relationships, emphasizing the transformative role of inter-firm networks in business strategy. 0 A graduate of Yokohama National University (YNU) in 1973, Yamakura served as a professor there and is now an emeritus professor and vice president of Otsuma Women’s University. His seminal work, Inter-Organizational Relationships: Toward the Transformation of Inter-Firm Networks (1993, Yuhikaku), explores strategic alliances, power dependencies, and platform roles, establishing a foundational theory for inter-organizational relationships. 5 This paper synthesizes Yamakura’s research, focusing on its contributions to SME globalization strategies, and compares his perspectives with those of other scholars to provide a comprehensive analysis. To enhance practical relevance, the paper integrates the global supply chain models of TSMC and Foxconn, examining how their inter-organizational relationships facilitate globalized supply chains, serving as case studies for theoretical extension.

Overview of Professor Kenshi Yamakura’s Research

Yamakura’s research spans organizational theory, inter-organizational relationships, and strategic transformation, with key themes including “inter-organizational relationships,” “business management,” “alliances,” “organizational change,” and “networks.” 0 His academic career began after graduating from YNU in 1973, followed by a long tenure as a professor there, contributing to over 21 research outputs through KAKEN projects. His primary contribution lies in applying transaction cost economics and resource dependence theory to inter-organizational relationships, analyzing how firms overcome internal limitations through network formation. 3

Yamakura’s theory views inter-firm networks as dynamic systems, emphasizing alliances as catalysts for strategic transformation rather than mere static cooperation. For instance, in a globalized context, firms can leverage platforms (e.g., supply chain networks) to share resources, reduce transaction costs, and enhance competitiveness. 1 This framework is particularly relevant for SMEs, which often rely on external alliances to overcome resource constraints and achieve growth. 12 Yamakura’s cross-institutional collaborations, such as industry-academia partnerships, reflect the practical applicability of his theory, and his work continues to influence the Japan Academy of Business Administration and related fields. 8

Analysis of the 2009 Paper: Strategy and Organization of Small Business

Yamakura’s 2009 paper, published in Yokohama Journal of Social Sciences (Vol. 13, No. 6, pp. 409–416), focuses on the business strategy and organizational structure of SMEs. 10 Grounded in organizational theory and transaction cost economics, the paper explores how SMEs can overcome scale limitations through inter-organizational relationships to achieve growth.

Key arguments include:

• SMEs’ strategies must emphasize flexibility, with organizational structures adapted to external networks.
• Inter-organizational relationships facilitate resource sharing, knowledge exchange, and market expansion, such as alliances with suppliers or distributors to reduce costs and enhance innovation. 0 
• The paper concludes that strategic network formation is critical to SMEs’ competitive advantage, particularly post the 2008 global financial crisis.

This paper aligns with Yamakura’s earlier work, emphasizing the practical significance of network transformation and laying the groundwork for subsequent globalization research. 11

Linkage Between Business Strategy and Inter-Organizational Relationships

Yamakura’s research positions business strategy as an integration of internal and external factors, with inter-organizational relationships as a core tool. 8 Business strategy involves resource allocation, market positioning, and competitive advantage building, while inter-organizational relationships provide external augmentation mechanisms:

1. Resource Augmentation: SMEs access funding, technology, and channels through alliances. 4 
2. Knowledge Sharing and Innovation: Information exchange within networks fosters business model innovation. 2 
3. Risk Diversification: Alliances mitigate market uncertainties and enhance adaptability. 6 

In Inter-Organizational Relationships (1993), Yamakura analyzes power dependencies and platform roles, advocating that business strategies incorporate network dynamics. 9 This linkage is critical for SME globalization, as global markets amplify resource disparities, necessitating international alliances for transformation. 13

Comparative Analysis of SME Globalization Strategies

Kenshi Yamakura’s Perspective: Network Transformation-Oriented

Yamakura posits that SME globalization relies on network formation through inter-organizational relationships, enabling resource sharing and transformation via international alliances. 0 In manufacturing, Japanese SMEs can ally with overseas suppliers to reduce transaction costs and expand markets. 1 Strengths include practical applicability and dynamic analysis, though limited by a lack of empirical case studies. 3

Michael Porter’s Perspective: Industry Structure Analysis

Porter’s Five Forces model emphasizes that globalization strategies should analyze industry structures, using alliances to lower entry barriers and enhance competitive advantage. 14 In the food and beverage industry, SMEs can achieve differentiation through alliances. 15 Its strength lies in its macro perspective, but it overlooks collaborative dynamics. 18 Compared to Yamakura, Porter prioritizes competition over transformation. 19

Gary Hamel’s Perspective: Strategic Intent and Core Competence Internalization

Hamel’s strategic intent theory suggests SMEs internalize partner skills through alliances to achieve global innovation. 24 In manufacturing, SMEs can adopt JIT production to scale globally. 26 Its strength lies in its learning orientation, but it is idealistic, overlooking power imbalances. 32 Similar to Yamakura, it emphasizes intent-driven transformation. 27

Case Studies: TSMC and Foxconn’s Global Supply Chains

Although this paper focuses on SMEs, the global supply chain models of TSMC and Foxconn serve as extended applications of inter-organizational relationship theory, as their supply chains involve numerous SME suppliers, exemplifying Yamakura’s network transformation perspective.

First, TSMC, the world’s leading semiconductor foundry, employs a globalization strategy emphasizing supply chain diversification and geopolitical risk mitigation. Its global expansion, including a $16.5 billion investment in three Arizona factories, Japan, and Europe, facilitates nearshoring to reduce reliance on China. 10 11 This strategy enhances TSMC’s resilience while promoting supply chain localization by supporting local suppliers to improve technology and quality, aligning with sustainable practices like low-carbon initiatives. 16 0 Through Yamakura’s lens, TSMC’s strategic alliances with clients (e.g., Apple, Nvidia), knowledge-sharing with SME suppliers, and industry-academia collaborations align with resource dependence and platform theories. 14 4 For instance, its Dresden, Germany, facility involves Taiwanese supply chain firms establishing operations in the Czech Republic, forming a transnational network to mitigate risks. 5 This case illustrates how SMEs can leverage large-firm networks for global participation, resource augmentation, and innovation. 7 Integrating Porter’s Five Forces, TSMC addresses supplier power and competitive threats in the semiconductor industry; aligning with Hamel’s strategic intent, its advanced process internalization (e.g., CoWoS expansion) drives global innovation. 15

Second, Hon Hai Precision Industry (Foxconn), the world’s largest electronics manufacturing services (EMS) provider, exemplifies inter-organizational relationships through its role as Apple’s primary contract manufacturer for products like the iPhone and iPad. 18 Its OEM model, characterized by “atypical vertical integration,” involves assembly, component manufacturing (e.g., connectors, casings), and supply chain integration, enabling Apple to focus on innovation while Foxconn optimizes costs through economies of scale. 0 8 Foxconn’s global supply chain adopts a “China+1” strategy, expanding to India, Vietnam, and the U.S. to mitigate geopolitical risks, such as U.S.-China trade tensions. 1 4 For example, its Tamil Nadu, India, facility produces iPhones, with a $1.5 billion investment to expand by 2026, aiming to shift all U.S.-market iPhone assembly to India. 2 Through Yamakura’s framework, Foxconn’s network with SME suppliers facilitates resource sharing and knowledge exchange, such as guiding Indian suppliers to enhance capabilities. 9 Recent developments in 2025 highlight challenges, such as recalling 300 Chinese engineers from India, underscoring technology transfer issues. 7 Foxconn’s diversification into AI servers (40% market share) and electric vehicles reduces reliance on Apple, which now accounts for 50–60% of revenue. 6 3 This aligns with Porter’s Five Forces by mitigating supplier power and competitive threats and with Hamel’s strategic intent through AI skill internalization via partnerships like NVIDIA. 5 For SMEs, Foxconn’s supply chain offers globalization opportunities, with Taiwanese SMEs comprising over 30% of Apple’s supply chain. 8 Despite tariff uncertainties impacting 2025 outlooks, Foxconn’s network resilience strengthens SME integration. 8

Comparative Summary

All three scholars recognize the importance of alliances in globalization, but their focuses differ: Yamakura emphasizes network transformation (Japan-centric), Porter prioritizes industry structure analysis (competition-oriented), and Hamel focuses on intent-driven internalization (innovation-oriented). 16 21 SMEs should adopt a hybrid strategy combining network and structural analysis. The TSMC and Foxconn cases reinforce this, demonstrating how inter-organizational relationships amplify SME opportunities in high-tech supply chains.

Conclusion

Professor Kenshi Yamakura’s inter-organizational relationship theory provides a robust framework for SME globalization, highlighting the strategic value of network transformation. Through comparisons with Porter and Hamel, this paper reveals theoretical complementarities, recommending that SMEs actively build international alliances integrating learning and structural analysis. The global supply chains of TSMC and Foxconn validate this framework, showing how their strategies not only mitigate risks but also enable SME suppliers to participate in globalization. Future research could explore digital networks and sustainability to deepen empirical applications.

References

1. Yamakura, K. (1993). Inter-Organizational Relationships: Toward the Transformation of Inter-Firm Networks. Yuhikaku.
2. Yamakura, K. (2009). Strategy and organization of small business. Yokohama Journal of Social Sciences, 13(6), 409–416.
3. Porter, M. E. (1980). Competitive Strategy. Free Press.
4. Hamel, G., & Prahalad, C. K. (1989). Strategic Intent. Harvard Business Review.
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25. Foxconn’s Recall of More Chinese Staff Tests Apple’s India Push. (2025). https://www.bloomberg.com/news/articles/2025-08-23/foxconn-s-recall-of-more-chinese-staff-tests-apple-s-india-push 7 
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