Corresponding Author: Nor Asmahani Ibrahim, Faculty of Business and Management, Universiti Sultan Zainal Abidin, Terengganu, Malaysia Email: nora_asmahani@yahoo.com 7 International Journal of Business and Management 6 (1): 07-12, 2022 e-ISSN: 2590-3721 © RMP Publications, 2022 DOI: 10.26666/rmp.ijbm.2022.1.2 The Role of Propinquity and Coordination in Influencing Competitive Advantage of Retail SMEs in Malaysia Nor Asmahani Ibrahim 1 , Rosmimah Roslin 2 and Rozita Naina Mohamed 2 1 Faculty of Business and Management, Universiti Sultan Zainal Abidin, Terengganu, Malaysia, 2 Faculty of Business and Management, Universiti Teknologi Mara, Shah Alam, Selangor, Malaysia, Abstract: The existence of hypermarkets and supermarkets with modern retail format has affected the performance of many retailers in the category of small medium enterprises (SMEs) in Malaysia. In this era of disruptive marketing, the main challenges of retail SMEs are the ability to survive, to remain competitive and to sustain the business. With the challenges of finding the right strategies to compete effectively, there is now an inclination to look at social networks as means of establishing strong market presence. Engaging and maintaining social networks in their business relationships is essential for retail SMEs if they want to address strategic positions and subsequently build strong competitive advantage in the business. This study postulates that establishing social networks, specifically in terms of propinquity (related with network cluster, network centrality and geographic proximity) among social network members, will enable the gathering of important resources needed by retail SMEs to secure more sustainable competitive advantage. However, only few studies have focused on social networks especially from the Asian context and many have overlooked the importance of social networks in retailing. This study also suggests the need to focus on coordination in relation to propinquity of social networks which refers to the location of retail SMEs and their ability to coordinate efforts to gain competitive advantage. This study extends the literature on social networks by providing a conceptual framework describing the importance of propinquity on coordination of activities leading to the development of competitive advantage for retail SMEs. Key words: Social networks, Propinquity, Retail SMEs, Coordination, Competitive advantage INTRODUCTION For many countries, small-medium enterprises (SMEs) are the largest contributor of economic, political and social development. In Malaysia, the growth of retail SMEs can be seen through customer demands leading to the rise of revenue for the retail industry whilst there are diversity of retail formats such as hypermarkets, supermarkets and modern grocery stores from the year 1990 onwards [1]. Under the National Key Economic Areas (NKEA), retail and wholesale also provide the foundation to maximize contribution to the Gross National Income (GNI) of the country with the estimation of income around RM156 billion and providing a total of 454,190 new jobs by 2020[2]. It is on this note that many countries rely on the development of SMEs because of their significant contribution in assisting the country’s economic growth, social uplifting and political stability [3][4]. The Malaysian government has also placed much emphasis in facilitating the development of small businesses including the retail SMEs in order to ensure their sustainability and continued contribution to the country’s socio-economic development. In line with the attention given by government, many programs have been developed by numerous government agencies to provide training, financial support and other relevant incentives to assist and monitor the development of SMEs in Malaysia. Despite many facilitating programs and funding given by the government, there are still daunting challenges faced by the SMEs in Malaysia. In retailing specifically, performance has decreased in 2015 (8.1%) compared to 2014 (11.1%). While in 2016, there was a slight increase