Professional Documents
Culture Documents
SYAHIDA ABDULLAH
FACULTY OF SCIENCE
UNIVERSITY OF MALAYA
KUALA LUMPUR
2008
SYAHIDA ABDULLAH
FACULTY OF SCIENCE
UNIVERSITY OF MALAYA
KUALA LUMPUR
2008
ABSTRACT
This study focuses on firm-level technology entrepreneurship capability. Technology
entrepreneurship is the merging of technology knowledge and ability with
entrepreneurship skill and competency. It includes four interrelated and complementary
factors: context, firm, technology, and entrepreneur; the merging of these factors is
essential to create competitive advantage. To assess firms technology entrepreneurship
capability level, an improvised innovation capability audit tool as introduced by Bessant
et al. (2000) and promoted by the World Bank was used. This tool was modified
following technology entrepreneurship definition. The improvised tool enables the firms
to be analyzed according to eight key dimensions of technology entrepreneurship
identified from the four technology entrepreneurship factors: awareness and search from
the context factor; strategy and core competency from the firm factor; technology
paradigm and linkages from the technology factor; and learning and leadership from the
entrepreneur factor. A summation score obtained from all the dimensions is then used to
determine the technology entrepreneurship capability level of the firms and
simultaneously categorize the firms as Passive, Reactive, Proactive, or Innovative.
The findings suggest that the majority of the national automotive vendor firms
recorded high awareness of environmental changes, and poor ability in developing
strategies. Other apparent weaknesses are the key dimensions of firm and technology.
The results from the eight key dimensions reveal that the national automotive parts and
components industry is in the Proactive category, which reflects that the majority of
firms have an adequate knowledge-base, good leadership quality, and the capability to
search for opportunities and identify threats; however they lack the capability to apply
the knowledge to create competitive advantage and sustain competitiveness. Thus, an
interesting pattern emerged from the results obtained: vendor firms showcased a higher
level of technology awareness compared to the level of technology preparedness. The
ii
firms recognized environmental changes, and are able to search for opportunities and
identify threats; however, they do not have the capability to complement their strength
with implementation, which is essential to achieving competitive advantage.
iii
ACKNOWLEDGEMENTS
I wish to acknowledge the many people who provided me kind assistance to carry out
this study. First and foremost, I wish to acknowledge the excellent guidance, advice,
motivational support and encouragement from my supervisors, notably Dr. Amran
Muhammad who was my first supervisor from the Department of Science and
Technology Studies, University of Malaya, and my second supervisor, Dr. Wan Sabri
Wan Hussin from the School of Business, University of Malaya.
The study was undertaken with financial support from Majlis Amanah Rakyat
(MARA), or the Council of Trust for the Indigenous People. I am also indebted to my
employer, University of Kuala Lumpur (UniKL) for providing me the opportunity to
pursue my doctorate studies on fulltime study leave.
In the course of this study, I received support from many individuals to whom I
am indebted: Mr. Zakwan Zabidi from MIGHT, Mr. Khairon Nizam Hamdzan from
Proton Vendor Management Section, Dr. Lucy Lu from the Newcastle University
Business School, Mr. Ramon Padilla, Researcher from UNIDO, Professor Mammo
Muchie from Denmark, and Dr. Pun-arj Chairatana from Thailand. I am also grateful to
Professor Kong Rae-Lee, the Chief Editor of AJTI; Professor Keun Lee from Seoul
National University Korea; Professor Rishikesha T.K. from IIM Bangalore, India;
Professor Rajah Rasiah from the School of Economics, University of Malaya; Zeeda
Fatimah Mohamad from Faculty of Science, University of Malaya; Mr. Asmadi Md.
Said, the Vice President of MIGHT, Mr. Jamil Halim, the General Manager of MIGHTMeteor Advanced Manufacturing Institute (AMI), and Mr. Ahmad Azrai from MITI.
I also received invaluable assistance from the staff of the Faculty of Science,
University Malaya. In particular, I would like to thank Associate Professor Dr. Siti
Nurani Muhamed Nor, Professor Dr. Mohd. Hazim Shah Abdul Murad, Associate
iv
Professor Dr. K. Thiruchelvam, Pn. Rosnah Sadri, Pn. Che Wan Jasimah Wan Mohamed
Radzi, and the support staff.
My appreciation also goes to a number of organizations that have contributed to
my study. I would like to particularly thank AMI for providing the facilities and
assistance during my fieldwork and completion of my studies. I also wish to
acknowledge the assistance provided by MITI, MIDA, MIGHT, MECD, MAA, Proton
Vendor Department, and Proton Vendors Association. I am also much indebted to the
cooperation received from the vendors or entrepreneurs, engineers, managers, and other
officials who participated in the survey that I conducted.
Last but not least, my sincere appreciation and heartfelt gratitude goes to my dear
husband, Safari Shahrudin and my children, Syaza Nazura and Syakirah Isyraq for their
endurance and patience throughout the course of my work. I am also grateful to my
beloved family members, especially my dear parents, Abdullah Abdul Rahman and
Jameela Syed Ghafur.
TABLE OF CONTENTS
Page
Abstract
ii
Acknowledgement
iv
Table of Contents
vi
List of Figures
ix
List of Tables
List of Acronyms
Chapter 1
1.1
1.2
1.3
1.4
1.5
Chapter 2
2.1
2.2
2.3
2.4
2.5
Chapter 3
3.1
3.2
3.3
3.4
xii
INTRODUCTION
Overview
Research Problems
Research Objectives
Significance of the Study
Organisation of Thesis
1
3
5
6
7
10
Introduction
Entrepreneurship
Innovation
2.3.1 Technology
2.3.2 Technology Capability
Technology Entrepreneurship
2.4.1 Technology Entrepreneur
2.4.2 Technology Entrepreneurship
2.4.3 Technology Entrepreneurship Capability
Summary
10
10
12
15
17
26
27
29
39
41
43
Introduction
Malaysias Economic Development
Entrepreneurship Development in Malaysia
3.3.1 Phase I (1957 1970): Pre-NEP Era
3.3.2 Phase II (1971 1980): Pre- Mahathir Era
3.3.3 Phase III (1981 1990): Mahathir Era
3.3.4 Phase IV (1991 2005): Post-NEP Era
Technology Entrepreneurship Programmes
3.4.1 Cradle Investment Programme
3.4.2 Technopreneur Development Flagship
3.4.3 PHASER Programme
3.4.4 Start Your Own Business
3.4.5 Technology Entrepreneurship Academic Programmes
3.4.6 Technology Entrepreneurship Programmes by Institutions
43
43
45
46
50
55
60
67
67
68
69
69
70
70
vi
3.5
3.6
Chapter 4
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
Chapter 5
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
5.9
5.10
Chapter 6
6.1
6.2
6.3
3.4.6.1
MAVCAP
3.4.6.2
MTDC
3.4.6.3
MIGHT
The Root of Technology Entrepreneurship Practice
Summary
73
74
74
75
80
83
83
84
86
91
95
96
103
105
110
METHODOLOGY
112
Introduction
Research Framework
5.2.1 Research Schedule
Research Strategy
Questionnaire and Analysis Design
Data Collection
5.5.1 The Database
Interview
Data Processing
Conceptual Framework
5.8.1 Technology Entrepreneurship Capability Dimensions
5.8.2 Graphical Representation of Findings
5.8.3 Analysis of Findings
Research Limitations
Summary
112
112
115
115
116
120
120
121
123
124
125
127
127
131
132
134
134
135
135
141
145
149
150
152
152
153
157
161
164
170
vii
6.4
6.5
6.6
6.7
Chapter 7
7.1
7.2
7.3
7.4
7.5
7.6
7.7
172
173
173
174
174
175
175
175
176
177
179
180
180
181
182
183
184
186
187
196
196
196
199
189
193
201
201
202
202
203
203
204
205
206
207
208
209
REFERENCES
211
APPENDICES
Appendix A Summary of Characteristics of Proton Vendor Firms
Appendix B Responses of Personal Communication
Appendix C Technology Entrepreneurship Capability Assessment Score
Appendix D The National Automotive Vendor Firms TADS
Appendix E Malaysia Technology Entrepreneurship Survey
Appendix F Definition of SME
225
225
233
235
239
240
255
viii
List of Figures
Page
Figure 2.1
Technological Entrepreneurship
33
Figure 5.1
124
Figure 6.1
139
Figure 6.2
147
Figure 6.3
151
Figure 6.4
154
Figure 6.5
155
Figure 6.6
Figure 6.7
191
ix
List of Tables
Page
Table 2.1
19
Table 2.2
21
Table 3.1
51
52
Table 3.3
59
Table 3.4
64
Table 3.5
71
Table 3.6
79
Table 3.7
80
Table 4.1
84
Table 4.2
85
Table 4.3
87
Table 4.4
89
Table 4.5
93
Table 4.6
99
Table 4.7
99
100
108
Table 5.1
Study Framework
113
Table 5.2
118
Table 3.2
Table 4.8
Table 4.9
Table 6.1
136
Table 6.2
138
Table 6.3
141
Table 6.4
142
Table 6.5
142
Table 6.6
146
Table 6.7
146
Table 6.8
156
Table 6.9
166
Table 6.10
173
Table 6.11
178
190
Table 6.12
xi
List of Acronyms
ADS
AFTA
AMI
AP
Approved Permit
ASEAN
BBMB
BCIC
BI
Business Incubation
BMI
BPMB
CAD
CBU
CCM
CEO
CIP
CIS
CKD
CNC
CWG-AI
E-Commerce
Electronic Commerce
EON
EPU
FDI
FEER
FELDA
xii
FIDA
FIMA
FRIM
FTA
FTZ
GDP
GM
General Motors
GNP
GSP
H1
HICOM
IAF
ICT
IDE
IJTIETM
Entrepreneurship and Technology Management.
ILO
ILP
IMP
IT
Information Technology
ITAF
JACTIM
KHTP
KLSE
LC
Local Content
LMW
xiii
LNG
MAA
MARA
MARDI
MASTIC
MATRADE
MAVCAP
MC
Mitsubishi Corporation
MDC
MECD
MEDEC
MIDA
MIDF
MIEL
MIGHT
MIM
MITI
MMC
MMU
Multimedia University
MNC
Multinational Companies
MOSTI
MP
Malaysia Plan
MPC
MPV
MSC
MSC-TDF
xiv
MTDC
MUV
NAP
NDP
NDP
NEP
NEPAD
NIC
NIE
NITF
NPC
NSC
NSDC
OECD
OEM
OPP
OPP1
OPP2
PERNAS
PERODUA
PETRONAS
PIO
PNB
PRECISE
Proton website
PROTON
PTS
Partnership
xv
PUL
Public Limited
PVL
Private Limited
QCD
QIP
R&D
REM
RIDA
S&T
SBDC
SEAP
SEDC
SIRIM
SmarT
SME
SMI
SMIDEC
SPR
Sole Proprietorship
SPSS
SYOB
TA
Technical Assistance
TADS
TDC
TDF
TDID
TDM
TeAM
xvi
TLO
TM
Telekom Malaysia
TNB
TPM
TPS
UDA
UDC
UK
United Kingdom
UNCTAD
UNESCAP
UNIDO
UNIDO
UniKL
UniKL-BMI
UniKL-MFI
UniKL-MSI
UNU-INTECH
UPM
USA
UTM
UUM
VDP
xvii
CHAPTER 1
INTRODUCTION
1.1
Overview
parts and components suppliers face difficulty in reducing costs as they are unable to
enjoy economies-of-scale.
Most of the local vendors are competing among themselves for a share of the
small domestic market. They lack technical know-how on product design and
production techniques which concomitantly limits their capability to commercialize
their products in the global market. Thus, deficiencies in entrepreneurship skill and
technological ability are two major obstacles to overcome. As such, this study is
undertaken to analyze capabilities in terms of technology and entrepreneurship of the
local automotive parts and components vendor firms.
1.2
Research Problems
Malaysia has chartered a relatively impressive economic growth in the years following
independence. The growth is guided by government policies that were aimed at two
important goals: poverty eradication for effective economic growth; and society
restructuring through income and wealth redistribution. These policies have led to the
creation of many enterprises; the governments focus on firm creation is to foster
entrepreneurship development.
This has led to an increasing number of entrepreneurs and firms established in
the years following independence. Most of the firms established were in the
manufacturing sector as it is this sector that has taken the lead in driving the economic
growth of the nation in the past decades, and continues to be the major contributor to the
nations economy. In the manufacturing sector, the electrical and electronics industry is
the largest contributor to the economy while the automotive industry is the most
significant contributor to Malaysias industrial development in terms of number of firms
created.
The initiation of the national automotive industry in 1983, and the shift from
assembly activity to manufacture of vehicles and automotive parts in 1985 have led to
an increased number of firms involved in this industry. Furthermore, as a complete car
consists of thousands of parts and components, there is a requirement for a large number
of firms to serve as suppliers of various automotive parts and components to the
national automotive manufacturer. Consequently, a large number of supplier firms have
been created for the automotive industry. The increase in the number of firms
established has simultaneously fostered entrepreneurship development in the automotive
industry. Most of these supplier firms were established under the Proton Vendor
Development Programme (VDP); this is a government initiative to create entrepreneurs
who have an interest in the automotive industry and who are technology oriented.
In its move towards industrialization, Malaysia has gradually shifted its focus to
technology-based entrepreneurial activities and technology intensive products. The
industrial sectors are encouraged to manufacture products that are technology intensive.
With that, the development of technology and entrepreneurship knowledge, and the
enhancement of technological capability and entrepreneurial skills are seen as among
the success factors for industrialization. In addition, globalization and liberalization
have intensified the rate of competitiveness and technological advancement in the
marketplace.
Hence, the national automotive industry is confronted with immense challenges
with increasing competition posing a serious threat to its survival. Most of the national
automotive vendor firms have relatively poor capability to stay competitive and sustain
their performance in terms of sales and profit subsequent to the reduction in government
protection to the national automotive industry on implementation of AFTA. In this
circumstance, this study regards it essential to raise the following questions:
(1) What is the trend of entrepreneurship development in Malaysia?
1.3
Research Objectives
The earlier discussion has addressed the significance of the manufacturing sector to the
economic growth of the nation with emphasis on the challenges faced by the national
automotive industry. Changes in the industrial environment, in particular the
implementation of AFTA have had a great impact on the performance of the industry,
raising the issue of capability as the main theme of discussion in this study. Thus, this
study aims to achieve these objectives:
1. to trace and understand the trend of entrepreneurship development in Malaysia,
and identify the root of technology entrepreneurship practice;
2. to discover and examine the impact of industrial environment change on the
automotive industry in terms of technology entrepreneurship;
3. to determine level of the technology entrepreneurship capability of the national
automotive parts and components industry; and
4. to develop a theoretical framework of technology entrepreneurship which
identifies the strengths and weakness of the national automotive parts and
components industry.
Based on the study objectives, the technology entrepreneurship capability of the
national automotive vendor firms was determined to understand the vendor firms
profile of capabilities and ultimately the strengths and weaknesses in the key areas of
technology entrepreneurship. Generally, the analysis aimed to identify the category of
firm according to the four main categories of vendor firms: passive, active, proactive
1.4
There has been enormous work conducted in the area of entrepreneurship, and most of
these studies relate to the entrepreneur in terms of characteristics, behavior, personality
or other personal attributes as suggested in the conventional entrepreneurship literature.
However, Schumpeter (1928) has been credited with new insights to the field of
entrepreneurship, namely innovation.
Schumpeters earlier thought on economic action is termed Schumpeter Mark I,
in which he introduced the term creative destruction. He associated creative
destruction with new combinations, and regarded the entrepreneur as the prime
innovator, and technology leader in terms of market exploitation and producing
followers in the market (Schumpeter, 1912). In Schumpeters later works, he focused on
large firms ability to carry out innovation and related activities; the large sized firms
are those with better ability to perform innovation activities, which he termed as
creative accumulation (Schumpeter, 1942).
This study thus extends the ideas contributed by Schumpeter (1912) and (1942)
in terms of a combination of both his Mark I and Mark II ideas. It combines technology
capability and entrepreneurship skills to create competitive advantage for firms. As
such, this study does not address just the entrepreneur factor it also considers other
factors as noted in Schumpeters Mark II (1942) explanation. Therefore, the scope of
this research covers the individual who owns the business; the firm, in which he
operates; the technology, which he uses to apply his knowledge; and the context, in
which the firm is located. These factors generate a better understanding of the theme
discussed in this study, which is technology entrepreneurship capability. In this regard,
an entrepreneur in this study refers to an individual who undertakes the multi tasks of an
inventor, innovator and entrepreneur; and integrates his technological knowledge with
entrepreneurial activities. Meanwhile, Schumpeters entrepreneur is defined as one who
is always prepared to accept risk and displays an abiding courage to innovate
(Schumpeter, 1912).
In addition, existing literature on technology entrepreneurship in Malaysia is
found to focus on information technology and related fields; this study, however,
discusses the issue of technology entrepreneurship in the manufacturing sector. As such,
it is believed that this new area of analysis would add to existing literature in the
technology entrepreneurship field. This study is of particular significance for it provides
insights to the entrepreneurs of the automotive industry to improve their technology
entrepreneurship capabilities, and in general, to the policy makers to understand the
capability level of the sector prior to drafting relevant government policies.
1.5
Organisation of Thesis
This thesis consists of seven chapters. Chapter 2 reviews literature relevant to this study;
Chapter 3 presents industrial development in Malaysia with emphasis on entrepreneurial
activities; Chapter 4 illustrates the development of entrepreneurship and technology
entrepreneurship in the context of the national automotive industry; Chapter 5 discusses
the methodology employed to study the technology entrepreneurship capability of the
national automotive parts and components industry; Chapter 6 discusses the analysis of
the research and its findings; and finally, Chapter 7 concludes the thesis with a summary
of the main findings and offers some recommendations. These chapters are briefly
reviewed as follows:
Chapter 1 generally introduces the thesis with an outline of its main objectives;
it also provides the rationale of this study.
Chapter 2 reviews existing literature that is relevant to the theme discussed; it
provides an overview on the terms and definitions used, and relevant studies conducted
by other scholars. The chapter starts with a discussion on entrepreneurship followed by
innovation and then focuses on technology, capability and technology capability issues.
The next part of the chapter looks into emerging concerns, which are technology
entrepreneurship and the main theme of this study, technology entrepreneurship
capability.
Chapter 3 discusses the development of entrepreneurship in Malaysia, and traces
technology-based entrepreneurial endeavor in the industrial activities to determine the
root of technology entrepreneurship practice in Malaysia. This chapter provides the
rationale for the emergence of the technology entrepreneurship activities in the context
of Malaysias industrial development.
Chapter 4 discusses entrepreneurial development in the context of the national
automotive industry over the decades following independence. This chapter deals with
the initiation of the national automotive industry under the governments heavy
industrialization efforts. It also looks into government promotional measures as a
support to the development of the national automotive industry and analyzes the impact
of government protection on the national automotive parts and components industry.
Consequently, Chapter 5 presents the methodology employed to collect data on
the basic characteristics and technology entrepreneurship characteristics of the vendor
firms. The chapter also discusses the conceptual framework adapted to study technology
entrepreneurship, and the methods applied to assess the technology entrepreneurship
capability of the parts and components vendor firms. Finally, the chapter elaborates the
limitation encountered in this study.
Chapter 6 discusses the analysis carried out on the national automotive parts and
components vendor firms. The analysis was conducted to examine the basic
characteristics of the national automotive vendor firms, and to determine their
technology entrepreneurship capability level. The analysis is also useful in providing the
strengths and weakness of the firms assessed, and enables the generation of a profile of
technology entrepreneurship capabilities for the national automotive industry.
Finally, Chapter 7 concludes the discussion by summarizing the main findings of
the study. It then offers some recommendations to overcome the major weaknesses and
to build on the key areas of strengths as the study aims at building the technology
entrepreneurship capability of the national automotive parts and components industry.
The recommendation also includes significant inputs for generating firm-level
information needed for policy-making. Some suggestions are then presented for
consideration of future research.
CHAPTER 2
THE CURRENT STATE OF UNDERSTANDING OF TECHNOLOGY
ENTREPRENEURSHIP
2.1
Introduction
This chapter provides a review of relevant literature on the main theme of this study,
technology entrepreneurship capability. This chapter is organized into five major parts
starting with a brief introduction; the second part discusses the entrepreneurship
discipline while the third part presents a review of the innovation discipline with
pertinent literature on the two major issues emanating from the innovation discussion,
notably technology and technology capabilities. The fourth part discusses the emerging
field of technology entrepreneurship, followed by an explanation of the term,
technology entrepreneurship capability. A brief summary is presented in the final part
of the chapter.
2.2
Entrepreneurship
10
the 'need for achievement' for entrepreneurs to be successful (McClelland and Winter,
1971). Chandler and Redlick (1961) recognized skills and motivation as factors towards
achieving entrepreneurial success.
According to Johnson (2001) entrepreneurial behavior also refers to openness to
new information and people, motivation, and making independent and self-directed
decisions. Meanwhile, Shapiro (1983) defined entrepreneurial activity as one which
aims to change the system, by increasing the productivity of the system, decreasing the
cost of part of the system, producing accrual of personal wealth and, or producing an
increase in social values; he included the magnitude of the attempted change, the
success of the attempt, the cost of the attempt, and the risk of the attempt as the
assessment measures. A study by Filion (1997) associated entrepreneurs with
environment; for instance, entrepreneurs are regarded as a reflection of the
characteristics of a period and place that they are accommodated (McGuire, 1964, 1976;
Toulouse, 1979; Newman, 1981; Gibb and Ritchie, 1981; Ellis, 1983; Filion, 1991;
Julien and Marchesnay, 1996).
From the standpoint of economics, there are a number of authors who associate
entrepreneurship with innovation. The pioneers in this field such as Cantillon (1755)
and Say (1803) viewed entrepreneurship as a risk-taking activity. According to Jennings
(1994), Cantillon specifically viewed entrepreneurs as people who seize opportunities to
earn profit with assumed inherent risk and were directly involved in the equilibrium of
supply and demand. Say (1803; 1815; 1816) regarded economic development as a result
of venture creation, and entrepreneurs as change agents; he recognized the entrepreneur
as leader and manager who plays a vital role in business activity.
Subsequently, Schumpeter (1928) introduced a new notion to the field of
entrepreneurship, namely innovation. He noted that the essence of entrepreneurship
lies in the perception and exploitation of new opportunities in the realm of business it
11
always has to do with bringing about a different use of national resources in that they
are withdrawn from their traditional employ and subjected to new combinations. He
viewed entrepreneurship as a dynamic process of creative destruction, in which he put
forward the idea of innovation that changes the basic technological and demand
parameters of the economy (Schumpeter, 1943).
Schumpeters (1928) view of an entrepreneur differs from the classical
definition of an entrepreneur. In his early theory, also known as Mark I, Schumpeter
argued that entrepreneurs are not mere traders; they are those who create innovation and
technological change in a nation. Schumpeter regarded entrepreneurs as those who have
the ability to commercialize a particular product or process. In his second theory, Mark
II, Schumpeter emphasized that innovation and technological change activities are
generated by big-sized firms that have adequate resources and capital to invest in
research and development type of activities. Both Schumpeters Mark I and Mark II
theories are applicable to todays definition of entrepreneurship, for they complement
each other.
2.3
Innovation
12
13
of economic organization in which the main actor of innovation was the individual
entrepreneur.
Following Schumpeter, Lazonick (1991) defined innovation as a new
combination of existing resources that results in products that are more desirable (higher
quality) and, or more affordable (lower cost) than those products that had previously
been available. It is regarded as a social process that requires the conscious
involvement, or the planned coordination of many people with a variety of specialized
skills and functions; it is also regarded as a complex, cumulative, and continuous
process.
Innovation has also been viewed as the process by which an invention or idea is
translated into the economy; and an invention is the conceiving of a new idea (Twiss,
1974). Porter (1990) regarded innovation as a specific tool used by entrepreneurs to
exploit change to capture opportunity for business purpose; innovation is capable of
being presented as a discipline, capable of being learned, and capable of being
practiced.
Thus, in undertaking an innovative endeavor, a great deal of information is
needed on a variety of subjects such as the market situation, new technological
developments, sources of technical assistance, government promotional measures, etc.
(Rothwell and Zegveld, 1982). Among these various subjects, technology is regarded as
one of the crucial components in an innovation activity; technology has often been
perceived as a function of innovation in creating new things and in matching it with
market needs. Indeed, the focus on technology as a significant factor in Schumpeters
notion of innovation is also emphasized by other scholars (Freeman, 1998). Freeman
recognized that innovation is developed from technology and an outcome of new
scientific results.
14
2.3.1 Technology
Technology is defined as the ability to carry out productive transformation, and includes
the ability to act, and a competence to perform; technology transforms materials, energy
and information from one state to another value-added state (Metcalfe, 1995). Twiss and
Goodridge (1989) viewed technology as a powerful resource in gaining competitive
advantage; technology learning and experimentation are encouraged and managements
vision of the firm embraces a view of the future place of technology in the firm and how
this is to be achieved. Schumpeters theory of economic development indicated that
there is a direct link between the entrepreneur and the generation of technology as
quoted below:
inventions, to the extent they are of practical relevance for the economy, do
not give rise to economic development, but are rather their result. Inventions
occur if the entrepreneur requires them, and if the personality of an entrepreneur
who is capable of making use of new inventions is lacking, they will never be of
any practical relevance. It is not inventions which have made capitalism but
capitalism which has brought forth its necessary inventions.
(Schumpeter, 1912)
Schumpeters notion above reflects that technology is driven by entrepreneurs, and it is
the entrepreneur who plays a major role in creating inventions through the appropriate
implementation of technology.
In addition, Dopfer (1992) defined technology as an engine of growth, and its
application is seen in the branch of Neo-Schumpeterian research like Technological
Paradigm (Dosi, 1988), techno-economic paradigm (Freeman and Perez, 1986),
focusing devices (Rosenberg, 1976), general natural trajectories (Nelson and
Winter, 1982), Technological Trajectory (Nelson and Winter, 1977), general purpose
technology (Bresnahan and Trajtenberg, 1992), and technological system (Carlsson,
15
16
These characteristics of technology reflect the capabilities that are needed for firms to
acquire and build upon. For the purpose of this study, technology is essentially viewed
as the tool that enable the entrepreneurial activities to be carried out effectively; it helps
to define a firms capability in achieving competitive advantage.
2.3.2
Technology Capability
Prior to addressing the term technology capability, it is useful to understand the two key
words: technology and capability. As the word technology has been discussed above,
the following section will discuss the word capability and the term technology
capability.
OECD uses capabilities to refer to both physical and human capital: physical
capital is often referred to as investment, and it determines the rate of growth over time;
while human capital includes skills created by experience and firm-level training as well
as formal education (OECD, 1987). As technology has become increasingly important
in this era of globalization, the concern then is on acquiring technological capability to
achieve competitiveness.
UNIDO (1986) looked at technological capability as the ability to train
manpower, ability to carry out basic research, ability for testing basic facilities, ability
to acquire and adapt technologies, and ability to provide information support and
networking. The World Bank (1985) has categorized technological capability into three
independent capabilities: production capability which consists of production
management, production engineering, maintenance of capital equipment, and marketing
of produced output; investment capability which consists of project management,
project engineering, procurement capabilities, and manpower training; and innovation
capability which creates and carries new technical possibilities for profit-making
purpose.
17
18
Table 2.1
Elements of Production and Investment Capability
Production Capability
Production management
Production engineering
of
Investment Capability
Manpower training
Pre-investment feasibility studies
Project execution
19
Table 2.1 presents the major activities for both production capability and investment
capability. Innovation capability is referred to as the activities of conceiving and
implementing changes in relation to product characteristics and physical processes, and
social arrangements that include various segments.
According to Lawson and Samson (2001), innovation capability is defined as
the ability to continuously transform knowledge and ideas into new products, processes
and systems for the benefit of the firm and its stakeholders, and it includes several
dimensions: vision and strategy; harnessing the competence base; leveraging
information and organizational intelligence; possessing a market and customer
orientation; creativity and idea management; organizational structures and systems;
culture and climate, and management of technology. Terziovski (2003) viewed
innovation capability as the provider of potential for effective innovation as it involves
many aspects of management, leadership, technical aspects, strategic resource
allocation, market knowledge, organizational incentives, and others.
Porter and Stern (1999) thus identified three domains as the enablers of
innovation capability: sustainable development; electronic commerce (e-commerce);
and new product development. These domains are regarded as the critical fields of
interest to many government organizations and business entities to face present and
future challenges and opportunities (Terziovski, 2003).
Besides the definitions above, there is another study that categorized
technological capability into six major areas: production capability, investment
capability, minor change capability, marketing capability, linkage capability and major
change capability (Ernst et al., 1998). These six categories are presented in Table 2.2.
20
Table 2.2
Six Elements of Technological Capability
Production Capability:
Production management
Production engineering
Repair and maintenance of physical
capital
Investment Capability:
Manpower training
Pre-investment feasibility studies
Project execution
Marketing Capability:
Domestic market
Export
Linkage Capability:
Within a firm
Intra-firm linkages
Inter-firm linkages
represents the capability and capacity support available to carry out R&D activities.
represents the extent and the capability to modify or design new products in a radical way.
means the capability to change a product line or introduce a new process.
represents the extent to which completely new products or processes have been invented and introduced.
21
Ernst et al. (1998) have grouped the activities of minor change capability, marketing
capability, linkage capability, and major change capability as innovation capability, and
have therefore included all the activities spanning from minor improvement activities to
major changes as the activities of innovation capability.
Ernst et al. (1998) have also differentiated the type of technological capability
concentration between early stage developing countries and the industrially developed
countries; they noted that the early stage developing countries like Thailand and
Indonesia tend to focus on production, investment and minor change capabilities while,
the industrially developed and successful countries like South Korea, Taiwan and
Singapore focus more on the development of marketing, linkages and major change
capabilities. Despite their different developmental stages, all countries included in their
study were found to be investing in knowledge acquisition and upgrading of their
technological capabilities.
Lall (1990) defined technological capability as the required human skills such as
entrepreneurial, managerial and technical to set up and operate industries efficiently;
there are two levels of technological capabilities identified: firm and national. At firm
level, Lall (1990) noted the requirement for three types of capabilities; namely
entrepreneurial, managerial and technological capabilities. In terms of technological
capabilities, he identified three elements: investment, production and linkages.
Investment capabilities involve the skills required to utilize the invested resources
effectively; production capabilities include all the necessary skills required to carry out
the product, process and industrial engineering activities; and linkages capabilities is the
skills necessary for transferring knowledge and technology infrastructure. Meanwhile,
at national level, Lall (1990) referred to the incentives provided, supply of skills, and
efforts to master, adapt and improve technologies, and institutions to support market
functions.
22
Consequently, this study looked into the literature that discusses technological
capabilities in a context to provide valuable insights as to how capabilities are analyzed
in a particular sector. A few studies were found to be of relevance to the study of
technological capabilities in the industrial sectors. Among them were the studies by
Abdulsomad (2003) on technological capability building of local auto parts firms in
Malaysia and Thailand; Leutert and Sudholf (1999) on technology capacity building of
the Malaysia automotive firms; Wong (1999) on technological capability development
of firms in the Newly Industrialized Economies (NIEs) of East Asia; Vongpanitlerd
(1992) on the development of technological capability in Thailands industry; and
Westphal et al. (1999) on the acquisition of technological capability in The Republic of
Korea.
Abdulsomad (2003) conducted a comparative study on local automotive firms
characteristics of Malaysia and Thailand, and identified the similarities and differences
of the firms under different political regimes and industrial policies. He discovered that
the automotive industry development in both countries followed similar pattern until the
establishment of Malaysias national automotive industry project in the mid-1980s. In
contrast to Malaysia, Thailand maintained its liberal economic policy and depended on
foreign investment of the multinational automotive firms. The different industrial
policies have caused the auto parts firms in Malaysia and Thailand to have different
characteristics in terms of firm establishment, ownership structure, technology transfer,
and establishment motives of new firms. His findings thus indicate that the large sized
auto parts firms achieved high technology capability building in Malaysia and Thailand.
However, the large sized auto parts firms in Malaysia have been dependent on the OEM
production system, while those in Thailand have built strong minor change capabilities.
Leutert and Sudholf (1999) studied the technology capacity building of
automotive firms in Malaysia. They discovered that the automotive industry in Malaysia
23
has been progressing slowly due to the national manufacturers poor technological
development, particularly in terms of technological adaptation and technological
absorption. They cited some government measures and regulatory interventions as the
distortion factors that have led to poor performance of the national automotive car
maker, Proton. Thus, they suggested strong interaction of the institutions and actors
involved, and building of clusters to overcome the weak performance of Proton. In
short, the authors realized that the poor technological capacity of the automotive
industry is rooted to the not so helpful government policies in building successful
industrial clusters. Thus, their study raised the need for effective linkages within actors
in a given industry, and between the state and market forces.
Contrary to the notion put forward by Leutert and Sudholf (1999), Wong (1999)
presented the possible lessons for Malaysia with reference to the technological
capability development by firms from NIEs of East Asia. These countries include
Korea, Taiwan and Singapore that have achieved vital high-tech industrial growth at a
more rapid pace than other developing countries over the last four decades. In his study,
Wong suggested that firms use the mix of mechanisms on a regular change basis to
progress technologically. From the analysis, he noted that state intervention has been
very significant in facilitating the growth of indigenous high-tech firms, and with
reference to the experiences encountered by these firms, Wong identified five generic
routes to develop technological capabilities.
In consequence, he suggested possible options for Malaysia to consider upon
entering a new phase of industrialization: an analysis on the specific strategic routes of
firms to advance their technological capabilities, and government policies to be based
on the desired strategic routes; and pro-active state interventions to facilitate the
development of indigenous technological capabilities. However, Wongs suggestion of
24
strong state interventions contradicts with the idea of Leutert and Sudhoff (1999) who
noted that there is a need for government support but only at a minimum level.
Thailands experience put forward by Vongpanitlerd (1992) in a six-volume
report on The Development of Thailands Technological Capability in Industry in
1992 has provided important insights into Thailands industrial sectors in terms of
technological capabilities. Vongpanitlerds study on 119 firms across the electronics
sector, materials sector and biotechnology sector revealed that these sectors have many
infrastructural deficiencies, and other industry weaknesses. Therefore, the findings from
the study indicated that there is an immediate need for corrective measures to be
mapped out, implemented and closely monitored.
Vongpanitlerd (1992) suggested that the technological capabilities of the
industrial sectors be raised by means of enhancing technological efforts to acquire and
improve technology; strengthening technological infrastructure and support; developing
science and technology human capital; and other specific measures for the three
industrial sectors. The author identified that the key to sustain competitiveness and
economic growth of any nation is through technological capability which is embodied in
the human resource stock, and the supportive infrastructure for technological changes
and market demand. Technological capability is regarded as crucially significant in the
study, particularly to meet new market demands and to pave the way for achieving
international competitiveness.
In a study on South Korean experience, Kim (1999) noted that the firms
achieved maturity stage in terms of technology in the 1960s and 1970s through in-house
R&D activities and capabilities. The South Korean firms started by imitating foreign
technology in the 1960s and 1970s. Subsequently, in the 1980s these firms initiated the
effort to acquire and assimilate intermediate technologies. It was during this period that
25
the firms build up their labor capability and developed their technologies. Indeed, some
of these firms were noted in the study of being able to sustain their competitiveness.
Kim (1999) therefore provided suggestions to change public policies and private
strategies on a continuous basis with the development of market and environmental
changes; to effectively carry out technological learning through the acquisition of an
adequate knowledge base which is believed to enhance domestic technological
capabilities of the local firms; to increase R&D investment for successful technology
transfer; and to intensify technological capability building by setting ambitious goals
through the use of crisis construction. Thus, his study shows precisely that the process
of building technological capabilities for industrialization in South Korea had very
much depended on the process of technological learning at the firm level. In short, the
implications of the South Korean experience are seen in terms of public policy,
learning, R&D, and technological capability.
Thus, it is hoped that the elucidation of various definitions and different
classifications of technological capabilities as presented above provide valuable insights
into the major theme of this study, and simultaneously pave the way for a better
understanding of the significant terms applied in this study, namely technology
entrepreneurship and technology entrepreneurship capability. These terms are discussed
in the next section of this chapter.
2.4
Technology Entrepreneurship
Having discussed the two relevant fields of study, entrepreneurship and innovation, this
section presents the emerging terms, technology entrepreneur and technology
entrepreneurship. These terms are increasingly significant in todays globalized era
where technological innovation is given high priority. The increasing degree of
26
2.4.1
Technology Entrepreneur
Prior to defining the term technology entrepreneur, this study presents similar terms
such as technical entrepreneur, technological entrepreneur and technopreneur that
have been applied in different studies. The term technical entrepreneur was used in the
comprehensive study of ten major innovations conducted by Globe et al. (1973). They
identified twenty-one major factors as significant contributors that played major roles in
the complex series of activities that resulted in the innovations outstanding success. In
their analysis of the frequency of occurrence of the various decisive events during the
innovative sequence, the technical entrepreneur was ranked the sixth factor. Thus,
Globe et al. (1973) defined technical entrepreneur as an individual within the
performing organization who champions a scientific or technical activity; he is
sometimes also called a product champion.(Rothwell and Zegveld, 1982). Hence:
the Technical Entrepreneur, whose importance was highlighted in the study of
the factors, is also a characteristic important in nine of the ten innovations.
This is the strongest conclusion that emerges from the study. In fact, in three
innovations, the technical entrepreneur persisted in the face of the inhibiting
effect of an unfavorable market analysis. If any suggestion were to be made as to
what should be done to promote innovation, it would be to find if one can
technical entrepreneurs
(Globe et al.,1973).
Another similar term used was technological entrepreneurs by Rothwell and Zegveld
(1982) to refer to those interested in new, and often long term, techno-commercial
potentialities. Indeed, the term technological entrepreneur was used by Shimshoni
27
(1966) to suggest that large public laboratories and large firms acted as 'incubators',
spinning off numbers of technological entrepreneurs, to which the laboratories acted as
a first market. Burnett (2000) used the term technopreneur to refer to one who is
willing to embrace risk and take the entrepreneurial plunge into industries ranging from
information technology (IT) to biotechnology; he noted that appropriate infrastructure
and resources are necessary for technopreneurs to grow.
Given these definitions, this study defines a technology entrepreneur as one who
has the mixed capability of an inventor, an innovator, and an entrepreneur. This is
following the definition of several researchers: Nelson and Winter (1982) and Winter
(1984) who suggested that an inventor has to draw on the set of information inputs,
knowledge and capabilities in looking for innovative solutions; Dosi (1988) who
suggested that an innovator refers to information drawn from previous experience and
formal knowledge (e.g., from the natural sciences) as well as specific and uncodified
capabilities in providing solution to technological problems; and Schumpeters notion
of entrepreneurship and innovation that defined an entrepreneur as one who has
technical knowledge and is held responsible for the application of this knowledge to
create competitive advantage for his firms success (Schumpeter, 1912).
Thus, a technology entrepreneur is defined in this study as one who has a
knowledge-base in the fields of innovation and entrepreneurship, and is able to exploit
them for his business astuteness on a continuous basis in order to sustain the firms
performance and competitive advantage motivation. He recognizes environmental
changes and market trend; continuously searches for opportunities; effectively
structures strategies; develops core competencies; establishes strategic linkages;
understands the technology paradigm of the industry; possesses codified and tacit
knowledge of particular technologies; and practices leadership quality to affect
28
favorably and effectively the operation and management functions of a firm for
sustainable performance motivation.
2.4.2
Technology Entrepreneurship
following
Schumpeters
concept
of
completeness
where
technology
29
towards
encouraging
technology-based
entrepreneurship,
also
called
technopreneurship. This new strategy was basically in the form of business plan
30
competitions, and such competitions were regarded by the authors as a way to generate
and exploit interest in entrepreneurship. The business plan competition was a national
effort and supported by the government and other public and private sectors. The
competition was organized by a consulting firm, McKinsey; a stock exchange firm,
namely Mesdaq or Kuala Lumpur Stock Exchange (KLSE); and a nonprofit business
organization, namely the Malaysian Institute of Management (MIM) to show-case
technology-oriented startups to suppliers of capital and to suppliers of know-how and
know-who.
There is another similar article by the same three authors on the issue, entitled
Boosting Technopreneurship Through Business Plan Contests: Malaysia's Venture
2001 & 2002 Competitions (Tan, Egge, Mohamed, 2003b). This paper is similar in its
objective to their earlier paper, which was to foster entrepreneurship as well as to obtain
more participation from the nation; however, there is an additional aspect in this paper;
notably to lower the cost of resistance to technology adoption, the authors suggest the
marrying of the pursuit and need for technology with all elements of entrepreneurship.
This in turn has led to the development of the term technopreneurship in Singapore,
and now in Malaysia, namely the Multimedia Super Corridor (MSC) Technopreneur
2002 program with reference to new or high growth potential enterprises based on
technology.
Jusoh (2006) analysed the incubator centers as the main support system for the
creation of homegrown technologies and entrepreneurship. Accordingly, relevant
infrastructure for incubators such as technology parks and appropriate venture capital
funds and various grant schemes have been created by the government of Malaysia to
provide technology entrepreneurs with access to capital.
Jusoh (2006) noted that incubators are used to nurture new technology
entrepreneurs as part of efforts to transform the Malaysian economy into a knowledge-
31
32
Technological Entrepreneurship
Technological Innovations
Inventions/Discoveries
New Technologies
Research
Administrative
Capabilities
Development
Market
Development
Product/Process
Development
Tinkering
Commercial
Technical
Figure 2.1
Technological Entrepreneurship
Source: Burgelman et al. (1996).
Figure 2.1 illustrates the relationship between the technical world and the commercial
world with technological entrepreneurship being at the interface of these two worlds.
Inventions and discoveries were regarded by Burgelman et al. (1996) as without
commercial value, and the combination of both in practical usage is believed to yield
technology. Technology is regarded as having no commercial value until its merge with
33
other technologies, which is believed to generate the foundation for product and process
development; subsequently the combination of technology and commercial is believed
to enable the creation of new products that can be exploited for profit, termed as
technological innovation.
Further evidence on the application of the term technology entrepreneurship was
found in a special issue of the Research Policy Journal, Volume 32, Issue 2, 2003
provided important insights into the major issues of technology entrepreneurship with a
collection of papers on different themes (Shane and Venkataraman, 2003). The articles
in this volume encompassed three broad themes: the effect of environmental conditions
on technology entrepreneurship; the processes by which entrepreneurs assemble
organizational resources and technical systems; and the strategies used by
entrepreneurial firms to pursue opportunities. The environmental theme looked into the
importance of environmental factors in the creation of new firms. The relationship
between institutional change and opportunities for entrepreneurship, explored as
institutional change, is regarded significant in generating entrepreneurial opportunities.
Environmental jolt, defined by Meyer (1982) as transient perturbations whose
occurrences are difficult to foresee and whose impact on organizations are disruptive
and often inimical, is argued by Sine and David (2003) to prompt search processes
resulting in the reevaluation of existing institutional structures and the generation of
new entrepreneurial opportunities.
In the second theme, Garud and Karnoe (2003) suggested that technology
entrepreneurship involves agency on the part of many actors besides entrepreneurs
themselves, and this agency is embedded in the nature of the technological system that
has developed. Therefore, it can be summarized from this article that technology
entrepreneurship has several interrelated facets: first, it is not just about discovery or
speculation, but involves creation as well; second, these actors are embedded in the very
34
inputs that have been generated through their involvement with a technological path;
third, the specific embedding processes may vary for different technological paths, each
prescribing a particular developmental logic depending upon starting assumptions and
subsequent learning processes that unfold, and thus, agency associated with
technological entrepreneurship is distributed, embedded and can vary by paths.
Lastly, in the third theme, Gans and Stern (2003) focused on industry differences
in how technology start-ups compete, and suggested four different types of start-up
strategy environments: the attackers advantage, ideas factories, reputation-based ideas
trading and architectural competition.
Shane and Venkataraman (2003) identified three key differences in the articles
presented in this journal, which is between traditional entrepreneurship and technology
entrepreneurship. First, traditional literature on entrepreneurship has depended heavily
on the role of the entrepreneur in the founding processes of firms. Whereas in
technology entrepreneurship, they noted that the emphasis was not on the sole ability of
the entrepreneur but on various other factors such as the role of technology, technical
systems, and institutions.
Next, the focus of traditional literature on entrepreneurship is on the atomistic
character of an entrepreneur with the entrepreneur defined as one who acts on foresight,
and the development processes are regarded in an organized manner; meanwhile, the
literature on technology entrepreneurship characterizes the entrepreneurs as those who
do not merely focus on foresight activity. Technology entrepreneurship type of
entrepreneurs are held responsible of a variety of other activities such as identifying
technological opportunities, assembling resources, and moving forward to achieve their
performance goals in a logical and linear pattern. These development processes are
regarded by Shane and Venkataraman (2003) as enacted, incremental and improvised.
35
The third key difference demonstrated in this paper is that the traditional
literature in entrepreneurship is rather limited in its links to other fields of study;
whereas, technology entrepreneurship encompasses a broader spectrum by having
strong links to technology management, which is believed to be helpful in reducing
uncertainty, managing knowledge flows, and developing technological system (Shane
and Venkataraman, 2003).
Shane and Venkataraman (2003) offered recommendations based on their
findings. They suggested that future researchers should examine the context in which
the entrepreneurs operate, inclusive of various factors, instead of concentrating merely
on the entrepreneurs in the founding processes of firms. Next, the researches suggested
examining carefully the founding processes, so that the simple, linear steps of logical
foresight is replaced with the development processes that are enacted, incremental and
path dependence. The final recommendation is that instead of looking at only one or a
limited discipline as in the traditional entrepreneurial activity, future researchers need to
look into technology strategy and management, and the economics and sociology of
technology in explaining technology entrepreneurship.
In another pertinent journal, The International Journal of Technological
Innovation, Entrepreneurship and Technology Management (IJTIETM), the discussion
encompassed
different
fields
of
study
such
as
technological
innovation,
entrepreneurship and technology management, and among the most recent is the
integration of these three fields of study known as technology entrepreneurship. Among
the articles published in this journal were those of Foo and Foo (2000) and Foo et al.,
(2005), both from Nanyang Technological University.
Foo and Foo (2000) discussed an emerging social movement of innovation
through cultivating technopreneurs in Singapore. The governments serious
involvement in fostering technical entrepreneurs is due to several factors: to attract
36
37
38
from the young generation, and therefore, should be continued for healthy growth of all
nations.
In addition to individual efforts, the government of Malaysia is seen to have
embarked on efforts to foster technology entrepreneurship development in the country;
these include the establishment of Malaysian Venture Capital (MAVCAP), Malaysia
Technology Development Corporation (MTDC) and Malaysia Industry Group for High
Technology (MIGHT). Detail of these programs and the relevant organizations are
discussed in Chapter 3.
Besides government agencies, the higher learning institutions have also been
very encouraging in offering relevant courses and programs on the emerging technology
entrepreneurship discipline; indeed, some of these institutions have specific departments
or schools that run pertinent programs both at undergraduate and post-graduate levels.
These programs are further elaborated in Chapter 3.
2.4.3
39
The generic term firm is used in this research as applied in the Oslo Manual
guidelines. Accordingly, a firm can make many types of changes in its methods of
work, its use of factors of production and its types of output which improve its
productivity and, or commercial performance(OECD, 2005). Taking into account these
considerations, it was regarded suitable to use the term firm instead of enterprise in
this discussion. In this study, the firms referred to are the automotive vendor firms that
provide parts and components to the national car make manufacturer, Proton. The
characteristics of these firms are discussed in Chapter 4. The firm factor includes all the
firms functions such as management, finance, and human resource. These functions
need to be managed effectively for the success of the firm. As such, the entrepreneur
should have the capability to develop strategies that can bind the firms functions
effectively so as to sustain high growth performance.
Technology is part of environment as suggested by Porter (1990) but in this
study technology is regarded as an independent factor due to its significance in the
technology entrepreneurship term. Furthermore, in the discussion on technology
entrepreneurship termed by Shane and Venkataraman (2003), the technology element
has been discussed extensively and not inclusively in the environment factor. This is
basically due to its significance in innovation and related activities, which constitutes
the driving force towards achieving sustainable competitive advantage. Therefore, it is
essential for the entrepreneur to have the capability of applying the technology to
exploit opportunities effectively in his industrial environment.
The context factor is of concern in order to know the industrial environment in
which the entrepreneurial activity is carried out. Usually, environment that is conducive
leads to the success of the firm; so, it is essential for the entrepreneur to have the ability
to understand the industrial environment, and the changes that are taking place in order
to take actions deemed appropriate.
40
2.5
Summary
41
42
CHAPTER 3
ANALYSIS OF TECHNOLOGY ENTREPRENEURSHIP DEVELOPMENT
IN
MALAYSIA
3.1
Introduction
This chapter starts with a brief outline of the economic development in Malaysia. It then
explores the field of entrepreneurship and analyzes the development trends in
entrepreneurship. The economic and industrial activities from Independence up to 2005
are categorized into four phases with reference to the New Economic Policy (NEP)
and the political leader and Prime Minister, Dr Mahathir Mohamed as the timeline.
Concomitantly, the support extended by various agencies in support of the development
of entrepreneurship and technology entrepreneurship is discussed. Prior to summarizing
the chapter, a brief analysis at the macro level is provided to identify the root of
technology entrepreneurship practice in Malaysia, using a simple improvised
technology entrepreneurship capability framework as discussed in Chapter 5 of this
study.
3.2
Since achieving Independence in 1957, the nations economic development has been
impressive. Malaysia ranked 13th of 128 countries in terms of per capita Gross National
Product (GNP) growth in 1982 having
industrialization during the 1960s and 1970s (World Bank, 1985; Morrison, 1985).
Immediately after Independence in 1957, the economy was dependent on the primary
sector with agriculture and mining being major contributors to Gross Domestic Product
(GDP) as well as employment, generating 45.7% and 61.3 % of GDP and total
employment respectively; meanwhile the secondary sector including some light
manufacturing, building and construction contributed 11.1 % and 9.6 % to GDP and
43
44
3.3
45
restructuring of society. Mahathir, as the fourth prime minister, had a great influence on
Malaysias industrialization. He initiated the effort towards heavy industries that
ultimately resulted in the establishment of many firms, and fostered the development of
technology-based entrepreneurship in Malaysia. Therefore, this study has used the NEP
and the political leader, namely Mahathir, as the timeline in categorizing the phases of
entrepreneurship development in Malaysia.
The first phase is the period from independence up to the introduction of the
NEP, namely the Pre-NEP Era encompassing the years from 1957 to 1970; it is also
the period, which includes two political leaders: Abdul Rahman and Abdul Razak. The
second and third phases are during the NEP implementation period, in which the second
phase covers the first 10 years of the implementation period of the NEP; it is also the
period encompassing the rule of two political leaders: Abdul Razak and Hussein Onn.
The third phase covers the last 10 years of the NEP implementation period, and the
beginning of Mahathirs administration. As such, the second phase, which spans from
1971 to 1980 is termed as the Pre-Mahathir Era, and the third phase, which covers the
years from 1981 to 1990 is known as the Mahathir Era. Finally, the fourth phase is the
period after the implementation of NEP, also known as the Post-NEP Era; it includes
the years from 1991 to 2005.
3.3.1
46
tin, and was not therefore subject to the same pressures to industrialize as were other
Southeast Asian countries at the time (Milne and Mauzy, 1980). In view of the rapid
industrial development, it was essential for the government to have an active industrial
policy.
The government enacted economic measures, and incorporated them into the
Report of the Industrial Development Working Party 1957. The Working Party, which
was appointed in 1956, was given the task of aiding the government in formulating an
industrial development policy; the proposal was from the 1955 World Bank Mission
(Spinanger, 1986). This industrial development policy actually denotes the beginning of
the governments emphasis on technological development in Malaysia.
The first major industrialization measure enacted by the first Prime Minister,
Tunku Abdul Rahman on 31 July 1958 was aimed at promoting and accelerating the
overall industrialization process; that is, to encourage the establishment and
development in the Federation of industrial and commercial enterprises by way of
income tax relief (Malaysia: Government Gazette, 1958). This measure, which is known
as the Pioneer Industries (Relief from Income Tax) Ordinance, 1958 (hereafter referred
to as PIO) marked the beginning of a conscious effort by the government to promote
industrial development in Malaysia (Sulong, 1997). The PIO was welcomed warmly by
the manufacturers, and evidently the number of pioneer certificates issued increased
rapidly in the years following 1958 (Spinanger, 1986).
Simultaneously, the urban areas in Selangor such as the Klang Valley were
developed, and complemented with infrastructure (railways, power supplies and
telephones) and medical services; all of which led to more entrepreneurial opportunities
for the nation with emphasis on technological development such as electrical,
electronics and mechanical. Government encouragement for entrepreneurial activities is
reflected in the number of enterprises created; for example, there were 84,930
47
48
49
information
and
coordination
of
industrial
development
activities;
provides
3.3.2
50
professional services. (Okposin et al., 1999). It is similar to the target set in the Second
Malaysian Plan, which aimed at enabling the Bumiputeras to acquire at least 30 %
ownership of the economic activities within two decades of Independence.
Table 3.1
Ownership and Participation in Industrial & Commercial Sectors 1970, 1975
1970
1975
Industry
Mining
Manufacturing
Construction
0.8%
0.9%
3.8%
2.1%
3.6%
4.5%
Trade
Wholesaling
Retailing
0.7%
3.0%
1.7%
4.2%
Transport
Taxi
Bus
Haulage
47.7%
18.0%
14.5%
65.5%
18.6%
39.0%
Table 3.1 shows the participation of Bumiputeras in various sectors that included
industry, trade and transport. The NEP had thus accelerated the participation of the
Bumiputeras in major economic activities, and through the Second Malaysia Plan,
indigenous involvement in entrepreneurial activities continued to be encouraged.
Though emphasis was given to the indigenous group, the participation of locals,
including the Bumiputeras and the non-Bumiputeras increased gradually in the
corporate sector from period of the implementation of the NEP. Table 3.2 shows
ownership and control of the Bumiputeras, non-Bumiputeras and Foreigners in the
corporate sector for the years 1970, 1975 and 1980.
51
Table 3.2
Malaysian Ownership and Control of the Corporate Sector 1970-80 (RM Mil)
1970
1975
1980
Annual
Growth
Rate
1972-80
%
Bumiputera
Individuals1
84.4
1.6
549.8
3.6
1880.0
5.3
23.5
Bumiputera
Trust Agencies2
41.2
0.8
844.2
5.6
2170.4
6.7
39.0
Other
Malaysians3
1826.5 34.3
5653.2
37.5
14442.9
44.6
18.8
Foreigners
3377.1
63.3
8037.2
53.3
13927.0
42.9
13.3
Total
6541.1
100.0
15084.4
100.0
26323.0
100.0
16.7
Source: Adapted by Yaacob (1987) from Malaysia: Third Malaysia Plan(1981) and
Malaysia: Fourth Malaysia Plan(1985) and Malaysia: Mid-term Review of
Fourth Malaysia Plan (1984).
Notes:
1. Includes institutions channeling funds to indigenous people (Bumiputeras) such as Lembaga Urusan
dan Tabung Haji, Amanah Saham Mara, and cooperatives.
2. Shares held through institutions classified as Bumiputera trust agencies such as PERNAS, MARA,
UDA, SEDCs, Bank Bumiputera, BPMB, FIMA, and PNB. Previously this item was classified as
Bumiputera interests.
3. Includes shares held by nominees and other companies.
The NEP successfully increased local participation, including the Bumiputeras and the
non-Bumiputeras in the major economic activities on one hand, and relatively decreased
the involvement of Foreigners on the other hand. It has gradually diminished the
identification of race with economic activities, widely prevalent during the British
colonial period and early years after achieving independence.
Besides increasing the participation of the locals in the commercial and
industrial activities, specific projects to reduce poverty were carried out to increase the
participation of the Malays and other indigenous people in the modern sectors of the
economy in the 1970s (Malaysia: Third Malaysia Plan, 1976). For this purpose, the
52
53
development were formulated in the industrial master plan; prior to the introduction of
the IMP, industrial policies were discussed generally in Malaysias five-year plans and
other policies such as the Look East Policy and heavy industries policy.
Besides these moves, government intervention was also obvious in the
establishment of public firms to provide public services such as water supply,
telecommunications and civil aviation; statutory bodies established by law at federal
and state levels such as the Urban Development Authority (UDA), Tourist Development
Corporation (TDC), Petroliam Nasional Berhad (PETRONAS), and States Economic
Development Corporations (SEDC). The government-owned private or public limited
companies were also established under the Companies Act 1965, whose equity holdings
were either fully or partially held by the government such as HICOM, property
developer PEREMBA Berhad, and Food Industries of Malaysia (FIMA) (Abdul Samad,
2002).
Further, the government initiated programmes to establish export-oriented
industries in Malaysia such as the Pioneer Industry status, Export Processing Zones and
numerous other incentives (Tan, 1983; Ariffin, 1983). It was during this period of the
1970s that labor intensive and export oriented industries were actively promoted;
Foreign Direct Investment (FDI) attracted by the liberal government policies on equity,
tax incentives and the provision of extensive infrastructure including Free Trade Zones
(FTZ) and Licensed Manufacturing Warehouses (LMW) flowed into the country, and
simultaneously laid the foundation for the nations transition to high-technology
industries (Sulong, 1997).
Such government intervention in establishing public firms and drawing up
programmes encouraged entrepreneurs to venture into different economic activities that
were more challenging and earned higher profits. Some entrepreneurs ventured into the
contracting businesses by becoming sub-contractors to public firms; of these sub-
54
contractors, there were those who had other suppliers supplying to them. With this
development, the number of entrepreneurs created increased, and to further accelerate
the number of entrepreneurs with technology capability, the government began to take
other measures to increase their participation in major economic activities as elaborated
in Phase III.
3.3.3
The third phase encompassed the period of the Fourth Malaysian Plan, which is from
1981 to 1985, and the Fifth Malaysian Plan from 1986 to 1990. The Fourth and Fifth
Malaysian Plans emphasized export earnings of the cash crops sector, and the
development of the manufacturing sector. To foster the development of the
manufacturing sector, various industrial policies and strategies were implemented;
among them being the Malaysia Incorporated policy, privatization policy and the Look
East policy.
The third phase constitutes the beginning of a new political leadership under
Mahathir Mohamad. He became the Prime Minister in mid-1981, and initiated a number
of efforts towards industrialization, notably of heavy industries. The establishment of
HICOM, a government agency in 1981 by Mahathir signified the beginning of
technology intensive industries in Malaysia. HICOM also fostered technological
development through the initiation of various technology intensive industries such as
petrochemicals and automotive sectors. Thus, the government initiated HICOM in a
deliberate move to promote heavy industries such as steel, automotive, cement,
petrochemicals and shipbuilding but its major operations were in four industries: motor
vehicle industry, engineering industry, building materials, and realty industry (Abdul
Rahman, 1994).
HICOM was set up as neither a government organization nor a statutory body
but a 100-percent government-owned holding company established as a private firm
55
under the Companies Act of 1965 (Machado, 1989). The aim of HICOM was to
transform the Malaysian economy from a relatively small-scaled and labor intensive to a
sophisticated and capital-intensive heavy industry-based economy; to create a number
of nucleus industries such as steel, cement, sponge iron and heavy engineering; and
for other industries to evolve from it such as pulp and paper, small engines and auto
manufacturing (Bowie, 1988). The different industries categorized under HICOM thus
were intended to diversify the Malaysian economy to various industrial sectors, and
state intervention was regarded as essential to encourage private sector investment
(Rasiah, 1995). The government provided subsidies and financial assistances to
manufacturers as well as to the parts and components suppliers in efforts to foster the
development of heavy industries as well as to encourage entrepreneurial activities in the
manufacturing sector. The state-led industries were also given protection by the
government to further accelerate the development of heavy industry sectors.
In 1995 HICOM Holdings became one of Malaysias biggest listed
conglomerates; the listed companies in the HICOM included the Perusahaan Otomobil
Nasional (Proton), whose main product is the Proton automobile, and the Edaran
Otomobil Nasional (EON), which is responsible for distribution for Proton (Giroud,
2003). Other heavy industry projects developed outside the auspices of HICOM were
the ASEAN/Malaysia Urea fertilizer project, Liquified Natural Gas (LNG) exporting
facilities, PETRONAS oil and gas refineries, and several petrochemicals plants (Dhanji
et al., 1983).
Having followed the development and success of the Newly Industrialized
Countries (NICs) like South Korea and Taiwan, the Prime Minister Mahathir was
inspired to launch another significant industrial measure, the Look East policy in 1982.
Through this policy, he intended to transform the nation to be disciplined like the
Japanese in terms of work practices and ethics, morale, discipline, productivity and
56
57
detail of this state-sponsored project, namely the national automotive industry (Proton),
is discussed in the next chapter.
Besides the austerity measures, the government introduced the IMP, which
covered the period from 1986 to 1995 with the aim of diversifying the industrial sectors
and promoting new sectors of growth. In the planning of strategy for Malaysias
industrial development, the IMP adopted the Japanese and South Korean model of
successful economic reconstruction after the Second World War and Korean War
(www.unescap.org). Hence, the IMP was formulated to guide the development of the
manufacturing sector; it conveyed the governments intention to the private investors in
terms of industrial plans and strategies for industrial development in Malaysia.
Several key industrial clusters were identified in the IMP that required critical
efforts in deepening the industrial structure as a whole; they were the electrical and
electronics products, transportation equipment, chemicals, textile & apparel, materials,
food processing and machinery & equipment (Sulong, 1997). These key industrial
clusters together with their subgroups are listed in Table 3.3.
58
Table 3.3
Key Industrial Clusters and Subgroups
Key Industrial Cluster
Electrical
products
and
Subgroups
Transportation equipment
Chemicals
(a) Pharmaceuticals
(b) Petrochemicals
(c) Palm oil products
Food processing
59
3.3.4
60
61
Vision 2020 covers a long period; it is a 30-year plan, spanning the period
between 1991 and 2020. Vision 2020 plans to transform Malaysia into a fully developed
and industrialized nation by the year 2020 through the development of targeted
industries such as aerospace, advanced materials, microelectronics, automated
manufacturing technology, biotechnology and information technology. It focuses on
improvement of human skills in three particular fields: science, technology and IT.
Simultaneously, it also emphasizes the rapid development of the Bumiputeras by
encouraging them to participate in commercial and industrial activities to create an
active Bumiputera Commercial and Industrial Community (BCIC).
The government undertook various measures to encourage the indigenous
people to participate in major economic activities such as the manufacturing and
services sectors so as to ensure a more balanced distribution of wealth among the
different ethnic groups and to attain the targeted 30 % Bumiputera equity ownership as
outlined in the NEP, NDP and other government policies. The identified manufacturing
sub-sectors include the electrical and electronics, pharmaceuticals, chemicals, petrochemicals, bio-technology, composite and advanced materials, transport equipment, and
food industries. To facilitate the participation of the Bumiputeras in commercial and
industrial activities, the government provided assistance in the form of incentives and
finance to help them acquire relevant technology and management expertise. In
addition, agencies such as MIDA and SMIDEC were established to assist the
Bumiputera firms in tracing technology and market trends, searching and identifying
opportunities and threats both in the domestic and global market.
In addition, the economic development in the first half of the 1990s placed the
nation at a transition stage to capital-intensive, high-tech and high value-added
industries (Sulong, 1997). This is as announced in the second Industrial Master Plan
(IMP II) which was launched in 1995covering the period 1996 to 2005. The IMP II
62
63
Table 3.4
High-tech Industries and Sub-sectors
High-Tech Industries
Sub-sectors
Advanced electronics
Equipment/Instrumentation
Biotechnology
Sub-sectors
Aerospace
65
These industrial sectors were identified for they were regarded as having a competitive
edge in global markets; the increasing competition and globalization urged the
government to undertake efforts to encourage the development of more capital intensive
technology and skill intensive industries (Giroud, 2003). To promote these high-tech
industries, the government provided incentives, developed suitable infrastructure, and
introduced relevant training programmes to develop appropriate local skills.
In the shift towards high-tech industrial sectors, the government actively
encouraged R&D activities; indeed, the involvement of private companies in R&D
activities is recognized by the government as crucial to drive the nation towards
industrialization (MITI, 1995/1996). The government also improved infrastructure
facilities by introducing science parks. A number of science parks have been initiated in
efforts to promote high-tech industries; among them are the Kulim Hi-Tech Park
(KHTP) established in 1995, Perak Science Park, Johor Technology Park, and the
Multimedia Super Corridor (MSC). These science parks have productivity centers, a
local commercial sector, R&D centers, a resource centre, and a sports and recreation
center (Giroud, 2003).
Further, efforts to develop local skills in high-tech were also undertaken through
training. The government encouraged R&D type of activities to train skilled workers in
high-tech skills. As a result of such training, Malaysia became the worlds third largest
producer of semiconductors; skilled workers were provided training by US electronics
firm on cutting-edge technologies (FEER, 1995). Such training provided for the
acquisition of technology by the skilled workers particularly, and resulted in the
development of technology in the manufacturing sector.
To further encourage such training activities, the government introduced 100 per
cent investment tax allowance for companies that established technical or vocational
66
training institutions. Thus, the government seemed to have taken different measures to
foster the development of the recently introduced high-tech industrial sectors. This
shows that the high-tech industrial sectors are rather young in their development; as
such, most of these high-tech industrial sectors are still at the experimentation stage.
3.4
In relation to the drive towards high-tech industrial sectors, the fourth phase also
witnessed pertinent entrepreneurship programmes and technology-based projects. The
technology based entrepreneurship programmes and activities are being carried out by
different ministries, and interested private organizations and agencies, and among the
programmes offered are the Cradle Investment Programme (CIP) by MAVCAP,
Technopreneur Development Flagship (TDF) by MSC, Start Your Own Business
(SYOB) by the Multimedia Development Corporation (MDC), and PHASER
programme by MECD. These programmes are briefly presented below:
3.4.1
The Cradle Investment Programme (CIP) was launched in May 2003 by The Ministry of
Finance, and is managed by MAVCAP with the aim of stimulating the growth of
technopreneurs and generation of ideas for an innovative and knowledge society.
MAVCAP appointed Technopreneurs Association of Malaysia (TeAM) as its official
Community Partner for CIP to spearhead seed investment, nurture entrepreneurship
development, create a pool of technology oriented ideas, and generate new opportunities
on Information and Communication Technology (ICT). Specifically, the CIP
programme provides pre-seed funding and entrepreneurial support to generate new ideas
and innovations from individuals, research and higher learning institutions; creates
employment through venture development; and commercializes products. MAVCAP
67
also acts as a catalyst to new areas of economic growth; addresses the capital gap and
industry expectations between pre-seed and seed funding; creates a critical mass of
entrepreneurs and technopreneurs; and builds a foundation for entrepreneurs and
technopreneurs to spin-off a global company.
The focus of CIPs technology investment is in the areas of ICT and high growth
that includes software and information services; internet: e-services, e-commerce and econtent; communication and networking-mobile data; high technology consumer and
business products; electronic and semi-conductors; medical devices and advanced
materials; and biotechnology and life sciences. MAVCAP provides assistance to the
CIP technopreneurs to develop, refine and commercialize their technology ideas that are
built and supported on the Microsoft platform based on the partnership collaboration
between CIP and Microsoft.
Monthly workshops are organized by CIP and held in Kuala Lumpur, while road
shows are held in other states of Malaysia to facilitate the application process. Besides,
the workshops and road shows are also intended to provide some guidelines and tips to
the interested candidates. With the aid of CIP, ideas are transformed into innovative
products or services. Indeed, the CIP provides the essential platform for the conversion
of raw ideas, for example from pre-seed into viable and commercial ventures.
3.4.2
68
69
3.4.5
There are number of public and private higher learning institutions in Malaysia that
have initiated entrepreneurship programmes and courses that are technology based. For
example, MARA is collaborating with two public universities, namely the University
Utara Malaysia (UUM), and the University of Technology Malaysia (UTM) to offer
technology based entrepreneurship programmes at post-graduate level, Master of
Science in Technopreneurship. The University of Kuala Lumpur (UniKL) also
conducts relevant technology based entrepreneurship courses but at diploma and degree
levels at its various branch campuses to develop a technopreneurial mentality and
attitude among the youth. A different type of technology entrepreneurship programme
was carried out by the Multimedia University (MMU), namely the business plan
competition on a yearly basis to encourage student and public participation in
technology entrepreneurial activities.
3.4.6
In addition to the programmes presented above, there are other relevant programmes
offered by many other government and non-government institutions to promote
technology entrepreneurship development in Malaysia. Essentially, all these
technology-based entrepreneurship programmes are derived from the entrepreneurial
activities that were introduced by the government in efforts to develop SMEs. Table 3.5
presents the type of assistance provided by the respective institutions to foster the
development of entrepreneurship in Malaysia in the decades following independence.
70
Table 3.5
Support Programmes for Entrepreneurship Development in Malaysia
Type of
Assistance
Assistances
provided to
entrepreneurs
to foster
entrepreneurship
development
Agencies involved
Ministry/
Institution
Year est.
(Agency)
Purpose
National Productivity
Corporation (NPC)
Ministry of
International Trade &
Industry (MITI)
1962
Malaysian Entrepreneurial
Development Centre
(MEDEC)
MARA Institute of
Technology (UiTM)
1975
To provide management courses to potential, new and young entrepreneurs to run their
business operation on SMEs. Entrepreneurial training programmemes are meant for both
public and its students.
Ministry of
Entrepreneurship and
Cooperative
Development (MECD)
1966
To motivate, guide, train and assist Bumiputeras, specifically from rural areas in order to
enable their active involvement in industrial and commercial activities in the country.
Small Business
Development Centre
(SBDC), Universiti Putra
Malaysia (UPM)
Universiti Putra
Malaysia (UPM)
1981
To provide training and extension services to small business and potential entrepreneurs.
Simultaneously, emphasis is also on applied research on small and medium enterprises
business.
Food Technology
Industrial Division
Malaysian Agricultural
Reseacrh and
Development Institute
(MARDI)
1982
SMIDEC
MITI
1996
To create resilient and efficient SMEs in the country who are able to compete in a more
liberalized future market in the global world.
71
Technical
Assistance &
Programmes
for
enterprises
and
technological
development
Assistance to
enterprises in
terms of
location and
infrastructure
facilities
Agencies
involved
Ministry/
Institution
Year est.
(Agency)
Purpose
FRIM
Ministry
Resources
1929
SMIDEC
MITI
1996
SIRIM
MOSTI
1975
To assist enterprises solve technical problems through the use of technology and to help their
businesses grow.
MTDC
Joint-venture
between
government and 17 major
local corporations
1992
MASTIC
MOSTI
1992
MATRADE
MITI
1980
MIEL
MITI
1964
To assist the development of factory buildings in prime industrial estates to cater for
manufacturing activities of small and medium enterprises (SMEs)
UDA
MECD
1971
To assist Bumiputera enterprises gain access to good quality, well located business premises in
urban areas at affordable prices or rents.
TPM
MOSTI
1987
To promote, stimulate, support and commercialize innovative concepts drawn from R&D
activities in order to enable Malaysia industries to compete effectively in the international market.
of
Natural
73
74
research priorities, human capital and funding through various programmes and
activities.
The different types of activities carried out by MIGHT include research, industry
deepening, triple helix, technology partnership network programme, prospecting and
consulting. These programmes and events are carried out in strategic technology areas
like aerospace, green management, constructing and housing, telecommunications,
pharmaceutical, automotive, advanced material, road haulage, herbal, general aviation,
photonics, information and communication technology and maritime.
3.5
In tracing the root of technology entrepreneurship practice in Malaysia, this study has
applied the improvised technology entrepreneurship capability framework as introduced
and discussed in the methodology chapter. The technology entrepreneurship capability
framework consists of eight key dimensions, and they are used as key indicators to
analyze the trend of entrepreneurship development in Malaysia from Phase I to Phase
IV of Malaysias industrial development, which is from 1957 to 2005.
The eight key dimensions include awareness, search, strategy, core competency,
technology paradigm, linkages, learning, and leadership. These eight key dimensions
are analyzed at the macro level to understand the rationale for the transformation of
economic activities from entrepreneurship to technology entrepreneurship in terms of
policy implementation and government initiatives.
As such, the awareness dimension is looked from the governments ability to
recognize environmental changes. Malaysia seems to have been able to recognize global
economic changes since Phase I, and realize the significance of technology and its
impact on the nation. For example, the early commodity crisis that occurred between
75
1957 and 1972; the economic crisis that occurred in the mid-1980s and the currency
crisis in 1997 were identified as the cause for adverse effects on the nations economy.
Being aware of the forthcoming crisis has enabled the government to take
immediate measures deemed necessary. For instance, in the early years of Malaysias
economic development, the emphasis was on the primary sector; however as the
government recognized the economic changes in the other parts of the world, it
immediately switched its focus to diversifying economic activities through the
development of the manufacturing sector.
With regard to search ability, the government was able to scan and monitor the
technology trends effectively since the third phase due to the establishment of particular
agencies, namely MIDA in 1968 and SMIDEC in 1996. Though MIDA was established
in Phase I, its effectiveness in closely monitoring and scanning technology trends on the
global scale, as well as in identifying opportunities and threats is evident in Phase III.
MIDA conducted a feasibility study on the automotive project in 1981 and the findings
were reported to the then Minister of International Trade and Industry. In addition, the
formulation of the Industrial Master Plan (IMP I) in 1986 encouraged the undertaking of
industrial feasibility studies for any entrepreneurial endeavor.
In developing strategies, Malaysia has established concrete strategies through its
various government plans, including short-term plans like the Five-year Malaysia Plans,
and long-term plans like NEP, NDP and Vision 2020. All these plans are the
governments plan of action to achieve vision and mission for the economic growth and
productivity of the nation. These plans have been in action accordingly since Phase I.
The principal strategies and incentives outlined in the years between 1981 and 1990
were intended to develop the manufacturing sector; as such, Phase III recorded an
increase in the growth of the manufacturing sector from 4.6 %in 1981 to 11.6 % in
1984.
76
As the focus of the Phase III period was on development of the manufacturing
sector, the government initiated heavy industries, of which the national automotive
industry was established in 1985. The manufacturing sector experienced a rapid growth
rate of 10.4 % per annum, and in 1987, it performed better than the agricultural sector
for the first time in Malaysias history with record 22.6 % contribution to GDP
(Malaysia: Mid-term Review of Fifth Malaysia Plan, 1988). The emphasis on the
manufacturing sector indeed increased employment opportunities rapidly by 8.6 %
annually in the period between 1981 and 1990. This indicates that the strategy
formulated has favored the nations well-being besides boosting its economic growth.
The building of core competencies is obvious since Phase III due to government
efforts of initiating the national automotive industry. The government established the
national automotive industry to enable the nation to develop its capabilities in the
particular industry, and ultimately to help create competitive advantage. Assistance in
several forms has been provided by the government, particularly financial to assist the
locals to build core competencies in their respective key strength areas.
In terms of technology paradigm, Malaysia has referred to the automotive
industry as it is the pioneer national industry. Thus, Malaysia acquired technological
knowledge on the automotive industry, and efforts were geared towards the
development of technological capabilities of the industry. In other words, the initiation
of the national automotive industry has led to the acquisition of technological
knowledge of that particular industry. There was no particular focus to master
technology of any industry in the previous phases as there was no specific technology to
be referred to.
In forging linkages with other countries, Malaysia seems to have established
collaborative efforts with different countries effectively from the Phase II in order to
support the nature of the industries then, which was export-oriented, through various
77
programmes such as FDI, FTZ and LMWs. Thus, many forms of linkages have been
established by Malaysia with partner countries since the Phase II. In particular,
Mahathirs notion of Malaysia Incorporated called for collaborative relationship
between the public and private sectors in efforts to achieve long term strategic goals
(Abbott, 2003). In Phase III also, Malaysia established a partnership with the Japanese
car maker, Mitsubishi to initiate the national automotive industry, Proton.
In terms of learning, the government has strongly encouraged the learning
activity effective from the Phase II. This is attributed to the governments efforts to
achieve industrialized nation status as achieved by the other NICs like Japan, Korea and
Taiwan. For this purpose, the government increased the fund for learning and education
activities in its various government policies. In addition, the initiation of the national
automotive industry has reiterated the need to acquire relevant engineering and handson knowledge.
With regard to leadership, this dimension looks into the interest and focus of the
political leaders at different phases. The study is cognizant of the fact that it was during
Phase III that efforts towards technology based industrialization took effect. The
government leader then, Dr Mahathir Mohamad took effective measures to promote
technology-based entrepreneurial activities as part of the industrialization effort through
the establishment of HICOM generally and the national automotive industry
particularly.
Hence, the analysis of the eight key dimensions of technology entrepreneurship
at the macro level reflects that technology entrepreneurship practice was apparent in
Phase III; however, it is admitted that technology entrepreneurship practice has
appeared in the earlier phases of Malaysias industrial development rather minimally.
The result of this brief analysis is presented in Table 3.6.
78
Table 3.6
Technology Entrepreneurship Practice
No.
Technology Entrepreneurship
Activities
Phase I
Phase II
Phase III
Phase IV
Awareness
*/
Search
**-
Strategy
Core Competency
Technology Paradigm
Linkages
Learning
Leadership
Table 3.6 clearly reflects that the practice of technology entrepreneurship has been
present since Phase I and Phase II, becoming obvious in Phase III and Phase IV. Thus,
Phase III marked the beginning of a new trend in Malaysias entrepreneurship
development,
namely
technology
entrepreneurship.
The
transformation
from
79
3.6
Summary
This part of the chapter provides a summary table which sums up all the four phases of
entrepreneurship development in Malaysia.
Table 3.7
Summary of Four Phases of Malaysias Entrepreneurship Development.
Phase I
(1957-1970)
Phases
Phase II
(1971-1980)
Phase III
(1981-1990)
Political
Leader
(Prime
Minister)
Tunku Abdul
Rahman,
Tun Abdul
Razak
Tun Abdul
Razak,
Tun Hussein
Onn
Tun Dr.
Mahathir
Mohammad
Policies
Pre-NEP
(1MP)
NEP
(2MP, 3MP)
NEP
(4MP, 5MP &
IMP)
Emphasis
Import
Substitution Agriculture
Export
Orientation
FDI, FTZ, LMW
(Electronics
Industry)
Achievement
National
Amenities,
Socioeconomic
development
Phase IV
(1991-2005)
Tun Dr.
Mahathir
Mohammad,
Dato Seri
Abdullah
Ahmad Badawi
Post-NEP /
NDP
(6MP, 7MP,
8MP, IMPII)
Import
Substitution
(2nd Stage)
High
Technology,
K-economy,
High Value
Added
Entrepreneurship Technology
Technology
small medium entrepreneurship entrepreneurship
industries
heavy
high-tech
industries
(HICOM)
Import
Substitution
(2nd Stage)
Heavy
Industries,
Cluster-based
Strategy
81
82
CHAPTER 4
ANALYSIS OF TECHNOLOGY ENTREPRENEURSHIP DEVELOPMENT IN
THE NATIONAL AUTOMOTIVE INDUSTRY
4.1
Introduction
This chapter deals specifically with the context within which technology
entrepreneurship is studied, namely the national automotive industry. It begins with an
overview of the evolution of the world automotive industry. This is followed by the
development of the automotive industry in Malaysia from as early as the beginning of
20th century. The discussion is then focused on the national car make, Proton that was
established as part of government efforts towards technology entrepreneurship
development in Malaysia; this involves tracing Protons development from its initiation
in 1983 up to 2006, the year when government protection was eliminated.
Consequently, the discussion veers to its vendors with emphasis on pertinent programs
such as the Vendor Development Program and Bumiputera Vendor Scheme. The last
section summarizes the chapter briefly.
Essentially, the growth and success of the automotive industry has had a positive
impact on society. It created job opportunities, raised living standards, reduced poverty,
created entrepreneurial opportunities, developed the involved industrial sectors, enabled
the acquisition of relevant technological knowledge and technical skills, and encouraged
innovation, research and development activities. As noted by Drucker, The automobile
industry stands for modern industry all over the globe. It is to the twentieth century what
the Lancashire cotton mills were to the early nineteenth century: the industry of
industries (Drucker, 1946).
83
4.2
Table 4.1
Evolution of the World Automotive Industry
Stage
Innovation
Process
in
Product/and
Western Europe
Japan
to 1902-1944
Region
United States
The first stage was marked by the introduction of the Ford Model T from the 19021920s period and involved division of skills, which was later adopted and developed by
General Motors and Chrysler. Stage two, however, was geared towards a more
diversified range of products due to differences in travel patterns, road conditions and
consumer tastes among the European producers, which generated four global
corporations such as Volkswagen, Peugeot, Fiat and specialized vehicles like Rover,
Jaguar, Mercedes Benz, BMW, Saab and Volvo. Stage three was marked by the
introduction of quality circles by the Japanese in worker performance as well as in the
products produced; the implementation of the just-in-time system in the organization
of the manufacturing process, which led to a decrease in inventories, and emergence of
nine car corporations under the keiretsu system such as Toyota, Nissan, Mitsubishi,
Mazda, Honda, Isuzu, Suzuki, Daihatsu and Subaru (Gwynne, 1991). According to
84
Gwynne, production in the US and Western Europe between the 1960s and 1980s was
in stagnation while, the Japanese producers were progressing by improving their
manufacturing system so as to produce quality products.
Table 4.2
Stage
Malaysias automotive industry had gone through the first three stages of development,
and is now at the forth stage of development. Malaysias automotive industry
development is discussed in detail in the next subtopic.
4.3
The development of Malaysias automotive industry can be traced to as early as the 20th
century when the Ford Motor Company of Malaya was incorporated in 1926 and began
its operations in a rented shop-house in Singapore (Lee, 1976). The automotive industry
then was 'trading' based. There was no assembly of motor vehicles during those years in
Malaysia; the type of services offered by the automotive retailers then were basic tyre
fixing and simple automobile touch-up such as knocking, painting and minor repairs.
In 1930, Ford started CKD assembly operations with Canadian-sourced vehicles; Ford
was the only automobile assembler in Malaysia and Singapore until 1965 (Lim and
Onn, 1983).
The local retailers involved in the motor vehicle businesses imported CBU
vehicles through distributorship operations. These enterprises were set up under private
initiative, and there was no major government intervention in terms of ownership as
there was no government-owned automotive enterprise. There were a few workshops
and agencies then that were owned by the Australians and the Westeners; meanwhile,
the only local private owned was Cycle and Carriage, formerly known as the Chua
Enterprise, founded by the Chua brothers in Kuala Lumpur in 1899 (Jennings, 1975).
An indication of the significance of the automotive industry was seen as early as
in the 1960s when a report from the 1963 Colombo Plan recommended that the
automobile industry might be a worthwhile industry for Malaysia (Khan, 1962). As a
result, in September 1963, the Federal Government announced its intention to
encourage the establishment of automobile industry in Malaysia (Lim and Onn, 1983).
86
The announcement to encourage the development of motor vehicle industry in 1967 led
to the assembly of CKD parts for motorcycles, passenger and commercial vehicles in
the late 1960s, beginning with small-scale production of common replacement items
such as the tire, battery and filters (Arshad, 1995).
Accordingly, the local content (LC) programme was introduced for the first time
in the 1967 report prepared by Little (1967). Several attempts were then made to
increase the local content of the Malaysia motor vehicle assembly industry in the 1970s
due to the low progress in assembly operations (Abbott, 2003). In 1979, LC averaged an
awful 8 % mainly concentrated in low value-added inputs such as batteries, paints and
filters (Jomo, 1994). With that development, Malaysia is regarded to have passed
through the first and second stages of Bloomfields automotive development quite
smoothly. However, it took a relatively long period before the nation progressed to the
third stage, and even longer before moving to the fourth stage of full scale
manufacturing (Table 4.3).
Table 4.3
Comparative Stages of Development in the Automotive Industry
Stage
Industry Evolution
Before 1967
1996 onwards
The first stage, according to Bloomfields automotive development, refers to the period
before the government of Malaysia officially launched the automotive industry in 1967.
87
Prior to 1967, the type of activities carried out in Malaysias motor vehicle assembly
industry was merely trading based with the enterprises importing vehicles in the form of
CBU from abroad for sale to the customers in the local market. This type of trading
activity has been going on since the 1920s. Subsequently, in the 1930s, the assembly of
CKD kits and parts of the Ford model was initiated in Malaysia; however, the other car
makers were still operating the CBU assembly. The assembly of CKD vehicles for all
the other car makers besides Ford began after the official launch of the motor vehicle
assembly industry in 1967.
Upon the official launch of the Malaysias motor vehicle assembly industry in
1967, the government of Malaysia has taken measures to protect the automotive
industry through the implementation of high tariffs, stringent import licensing and
quantitative restrictions. The outcome of this move became obvious in 1969 when the
import of CBU decreased, while the import of CKD increased; this period is thus
categorized as the second period according to Bloomfields stages of automotive
development.
Subsequently, in 1981, a local content program was introduced after a thorough
consideration of the reports of Little (1967) and Walker (1970). Littles Report set three
main criteria for local content, which were good quality, cost competitiveness with
imports, and reliability of sources. Later in 1971, Walker recommended local content to
40 % by weight for 10 years, and penalties for non-compliance. Walkers report aimed
to reduce the variety of models and makes, and promote standardization of major
components. The percentage of local content for the years between 1972 and 1982 is as
illustrated in Table 4.4.
88
Table 4.4
Local Content Program
Year
1972
10.0
1973
12.5
1974
15.0
1975
17.5
1976
20.0
1977
22.5
1978
25.0
1979
27.5
1980
30.0
1981
32.5
1982
35.0
OEM, and to have encouraged the development of local industrial sectors through the
creation of enterprises to cater to the needs of the original equipment market, most of
the automotive parts and components used in four wheelers are still foreign made as
noted, Although the localization programs have achieved part of the objectives, the
assembly plants (especially the four wheelers) continued to rely substantially on
imported parts while the component parts manufacturers were still very much domestic
market based and unable to penetrate the international market in a significant scale
(Arshad, 1995). This stage denotes the high dependency of the local automotive
industry on imported parts and components.
Consequently, the government upgraded the local automotive industry to
national status in 1983 to encourage the growth of the parts and components industry.
For the first few years of production, the national car, Proton went through a tough
time mainly due to the mid-eighties recession. The total car sales for the year 1987
declined to about 50,000, and worse, only 60,000 units had been sold since the three
years of production (Lim, 1988). In order to support the automotive industry, the
government accorded heavy protection to the industry, namely in the form of tariffs and
other non-tariff barriers. With the heavy protection and strong support from the
government, the automotive parts and components industry witnessed an increase in
local content in the assembly of CKD vehicles, and Proton particularly was able to
dominate the local car market; this is categorized as the third stage in Bloomfields
automotive industry development.
The following five consecutive years were marked as the domination of the first
national car, the Proton SAGA in the domestic market. The first national car was also
awarded the most popular car in its category in the United Kingdom (Abdul Rahman,
1994). The domination of the local market and the increasing recognition by other
countries increased the demand for the national car. Thus, the development of the local
90
automotive industry in turn urged the need for full scale manufacturing, which is
categorized as Bloomfields forth stage of automotive industry development. Full scale
manufacturing took place 13 years after Protons initiation with the introduction of the
Waja in 1996, Protons own designed model. The detail of development of the national
automotive industry ensues in the paragraphs that follow.
4.4
The idea for the national car project was proposed by Mahathir in efforts to encourage
the development of heavy industries in Malaysia. Basically, HICOM was initiated in
1981 to spur the growth of heavy industries, including the motor vehicle industry,
engineering industry, building materials, and realty industry (Abdul Rahman, 1994).
Having embarked on the Look East policy then, the government initiated linkages in
the form of joint venture with the MMC of Japan for its national automotive project.
The national automotive company, namely Proton was initiated by the
government in 1983, specifically to create an industry of this sector in Malaysia, to
provide employment opportunities in the manufacturing sector, and to foster technology
development through the parts and components industry and entrepreneurship
development through the creation of supplier firms. According to Zin (1995), the
national car project was intended to improve the local automotive industry; spearhead
the development of local components industry and enhance greater utilization of local
components; encourage upgrading of technology emphasizing technical and engineering
knowledge and skills of the country; and assist and develop Bumiputera participation in
the automotive industry. The initiation of the national automotive industry was also to
enable every family to afford an automobile, to raise the standard of living, and to
improve the socio-economic well-being of the nation [pers.comm, Senior Manager 1
(requested anonymity), 29 November 2007, 4pm]. As such, the premier purpose of the
91
national automotive industry was not to make profit as perceived by many [pers.comm,
Senior Manager 2 (requested anonymity), 29 November 2007, 5.30pm].
Protons initial involvement was in the manufacturing, assembling and selling of
motor vehicles and related products, including accessories, spare parts and other
components (Abdul Rahman, 1994). The development of the national car was impeded
by the recession that occurred in the mid-1980s; Proton recorded losses for the first few
years, since coming into existence in 1985. Despite the slump in domestic demand, the
first national car Proton Saga was able to dominate the local market in the following
years; it recorded a remarkable increase in sale with 200,000 units sold in Malaysia by
1990. The national car became the most popular car in the domestic market, and
achieved 73 % of market share in 1994; indeed, through government protection, it
became the best selling passenger car in the domestic market (Abdulsomad, 1999).
In addition, the national car was exported to other parts of the world. Proton was
first exported to Bangladesh in 1986 and by 1994, Proton was exported to both the
developed and developing countries such as the United Kingdom, New Zealand,
Bangladesh, Malta, Brunei, Singapore and Jamaica to increase sales volume and enjoy
economies of-scale (Abdul Rahman, 1994). By 1990, Proton recorded sales of 16,000
units in the international market. As a result of the increased sales, the financial
performance of Proton for the years between 1989 and 1993 also recorded an increase.
For instance, in 1989 Proton made a pre-tax profit of RM 32 million, increasing greatly
to an after-tax profit of RM 264 million by 1993 (Table 4.5) (New Straits Times, 21
January 1994).
92
Table 4.5
Financial Performance of PROTON, 1989-1993 (RM MN)
1989
1990
1991
1992
1993
Turnover
820
1399
1786
2192
2287
32
159
261
408
310
32
157
187
259
264
The rather strong financial performance of the national car soon encouraged the
introduction of new models in efforts to continuously capture the interest of the growing
market both domestically and internationally. Among the additional models successfully
launched by Proton were Megavalve in 1990, Iswara in 1992, Wira in 1993,
Satria in 1994, Perdana in 1995, Putra, Tiara in 1996, Juara (MUV) in 2000,
Waja in 2001, Gen-2 in 2004, Savvy in 2005, and Neo in 2006. Most of these
cars were in the hunchback and sedan forms, and were available in both manual
transmission and automatic transmission. As these models were directed at families,
most of these cars had more than 1.3 engine capacity (cc) with four doors except for the
Satria, Putra and Neo models which came with two doors.
The rising demand for the national car led to the establishment of a new plant,
namely Proton City to increase the production capacity, and ultimately to achieve
economies-of-scale. The plant, which is located in Tanjung Malim, is expected to
enable the production of approximately 450,000 units annually; however, current
production levels do not use up the capacity of the new plant [pers.comm, Manager 2
(requested anonymity), 30 October 2007, 3pm]. The Proton City is also equipped with a
test drive circuit, an automotive technology centre, a housing estate, convention centre,
hotel and recreational park.
93
The rapid development of the national automotive industry was a result of strong
government support in terms of protection and assistance. The national automotive
industry was provided protection against competition from foreign car makers in the
form of tariff and non-tariff barriers ranging from 140 to 300 % imposed on foreign car
makes. The implementation of high import tariffs enabled the national automotive
manufacturer, Proton, to earn higher profit margins; the high import tariffs also
decreased foreign exchange outlays as the high price of imported vehicles reduced the
demand for imported automobiles, and increased government revenue as the revenue
from tariffs are collected by the government of the importing country (TED Case
Studies, June 2001).
In addition to the high tariff rates and reduction in excise taxes, the local
automotive industry was also provided financial assistance by the respective ministries
and government agencies. Low interest rates loans were given to the vendors who
established enterprises to supply parts and components to the national manufacturer; an
assistance provided by the government to deliberately encourage entrepreneurship
development in the manufacturing sector.
The governments initiative consequently inspired the development of the local
automobile parts and components industry. Indeed, the government introduced the VDP
through the PROTON Component Scheme on 14 December 1988 to foster the
development of the national automotive parts and components industry, and
simultaneously increase the participation of locals in the major economic sectors
through the creation of vendor firms that are technology oriented as the value chain of
an automobile involves technology from raw material to its completion.
In support of the development of the automotive industry, the IMP was
formulated by the government immediately after the launch of the first national car in
1986. The IMP, which spanned from 1986 to 1995, laid the foundation for the
94
4.5
Proton has taken different measures to foster the development of its vendor firms. From
the beginning, Proton made attempts to procure parts and components from the locals so
as to encourage the growth of the local industrial sector. This encouragement saw the
number of Proton vendor firms increasing, for instance, from 79 in 1995 to 250 in 2006.
These 250 vendor firms supply various parts and components to Proton that
include metal, electrical and electronics, plastic, rubber and fabric based, and others.
Besides differing in business nature, the Proton vendor firms also differ in terms of
ownership, size, type of business, date of incorporation, year of business initiation with
95
Proton, turnover, and number of employees. All these features are the basic
characteristic of Proton vendor firms, and they are discussed in detail in Chapter 6.
In terms of ownership, Proton vendor firms are owned by three different groups:
Bumiputeras consists of mainly the ethnic Malays; non-Bumiputeras consisting of
mainly the Chinese and Indian ethnic groups; and the Foreigners. The majority of the
Proton vendor firms are owned by the Bumiputeras. As for vendor firms size, it is
based on the MITIs definition of SMEs. Proton vendor firms come in two sizes: small
and medium and large size. Most of these vendors firms are privately owned, private
limited, or public listed. There are also partnerships and sole-proprietorship types of
businesses.
The Proton vendor firms were established in different phases of Malaysias
economic development. Some of the vendor firms existed prior to the initiation of the
national automotive industry; these firms have been supplying parts and components to
other OEMs, and subsequently became vendors to the national manufacturer when
Proton began its operations in 1985, notably under the vendor development programme
introduced by the government after the launch of the first national car in 1988.
4.6
The VDP of Proton was launched in 1988, and it was among the governments
initiatives to facilitate the growth of the vendors to become successful entrepreneurs in
their respective industrial fields. The rapid growth of the vendors began with the
initiation of heavy industries in 1980s as the suppliers to the large or anchor firms. For
instance, in the automotive industry, there were tremendous opportunities for the local
SMEs considering that a car incorporates thousands of parts and components.
In terms of vendor activities, Proton has classified them into four types: parts
and components; tool, die and mould (TDM); engineering services; and distribution.
96
The distribution activity is carried out by Protons marketing and distribution arm,
namely Proton Edar and EON. The parts and components vendor group have been
categorized into different levels of vendors - the 1st-tier, 2nd-tier and other lower-tier
vendors. These parts and components vendors supply various types of products that
include metal, electrical and electronics, rubber, plastic, casting and other parts. They
are supplied in two different forms: component, and modular system such as bumpers,
door module and brake system. The acquisition of technology know-how and
entrepreneurship know-what are regarded as significantly vital for the advancement of
the parts and components industry.
The TDM industry started in Malaysia in the early 1970s. It is of strategic
importance to the country as it helps to reduce cost, requires high value-adding, high
precision and skills. As the nature of the industry requires high skills and high
investment, more than 90 % of the products are imported, and relatively dominated by
the SME-sized firms. The majority of the players are the Bumiputeras as they are the
largest group of the SME-sized firms; among the successful Bumiputera players in this
industry are Miyazu (M) and PST Mould S/B.
The engineering services focus on the manufacturing, testing, car design and
R&D and general services activities; these activities require high technological input
and adequate tacit and codified knowledge. Towards this end, the manpower has to be
well trained in order to produce highly skilled and talented manpower. Proton has
invested substantial amounts of money, particularly in efforts to produce improved
versions of the existing models and new models as well.
Though all these vendor activities are of significance, this study focuses on the
development of the parts and components vendor activities as this group is the largest
group compared to other vendor groups. Furthermore, the number of vendor firms in the
parts and components industry is the most, more than 250 firms since the beginning of
97
the vendor program in 1988. Under the VDP, the vendors supply components and spare
parts to Proton for a number of years based on a mutual agreement.
In 1985, only 515 parts and components had been produced by the 42 SME
vendors, which was a meager 17 % of the total parts and component requirements
(Abdul Rahman, 1994). Subsequently, as Proton launched the Proton Component
Scheme in 1988, the local content of the parts and components supplied by the vendors
increased as the scheme aimed to increase the production capacity from 120,000 units in
1993 to 150,000 units by end of 1994 (New Straits Times, 21 January 1994). This
scheme has led to strong demand from the vendors to ensure the targeted production
capacity is achieved.
Consequently, the government introduced the Tripartite Arrangement concept
in 1993 to enhance the development of VDP; it was an effort between MITI, the anchor
company, and the financial institution to overcome problems such as financial
limitations, inadequate technological support and small market share. The financial
institution provides assistances in the form of finance, management and consultation
services; meanwhile, MITI merely acts as the coordinator of the program (Omar, 1992).
The concept was helpful in providing aid to the vendor firms, in which MNCs
and large local companies signed agreements with MITI and designated banks to
provide supplier firms with procurement contracts, technical assistance and subsidized
finance (Felker, 1999). The scheme was not limited to the automotive sector per se and
was available to all other industrial sectors such as electrical and electronics, machine
engineering, furniture and others. Besides being available to various other sectors, it
was also made available to all ethnic groups, including the non-Bumiputeras. Table 4.6
presents the major anchor companies from different types of industrial sectors that have
developed the vendor firms.
98
Table 4.6
Anchor Companies, Types of Industries and Number of Vendors
No
Anchor Companies
Type of Industry
No. of Vendors
Proton
Automotive
19
SONY Group
12
Furniture
12
Telekom Malaysia
Telecommunication
11
Sapura Holdings
Telecommunication
Sharp Group
JVC Group
Matsushita Group
Others
Various
12
Total
94
Table 4.6 indicates that Proton has the most number of vendors developed from the
scheme introduced, and it is also obvious that the involvement of Japanese anchor
companies in vendor development is highest. Accordingly, the study illustrates the
number of anchor companies for the years 1988 to 1995, and their activities for the year
1995 in Table 4.7.
Table 4.7
Vendor Development Programme -Anchor Companies by Year (1988-1995)
Sector
1988-92
Electrical/electronics
Wood-based
Automotive
Telecommunication
Building materials
Ship building and repair
Film production
Ceramics
Engineering
Trade and exports
Total
Source: MITI Annual Report (1995/96)
2
1
3
1993
1994
1995
6
1
7
29
2
1
1
33
2
1
2
2
1
1
1
1
11
Total (Dec.1995)
37
5
3
2
2
1
1
1
1
1
54
99
Table 4.7 shows that by the end of 1995, there were 54 firms that had agreed to become
anchor companies under the Vendor Development Programme.
Subsequently, Table 4.8 presents the number of registered vendor firms under
the VDP program, and the type of activities carried out by the vendor firms between
1995 and 2006. The vendor activities refer to Protons classification of suppliers
business nature, and thus there are some differences in the types of activities carried out
by the vendors in 1995 and in 2006. The total number of vendor firms in 1995 was 79
firms, and in 2006, it rose to 250 vendor firms, which is approximately a three-fold
increase from 1995 to 2006.
Table 4.8
Vendor Development Program-Vendors by Activity (1995 & 2006)
VDP Vendor Activities in 1995
No
Business Nature
1
2
3
4
5
6
7
8
9
10
11
12
13
14
No. of
Proton
Suppliers
18
18
13
Carpet
Casting
Electrical
5
12
37
8
6
5
3
2
Metal
Label
Plastic
Paint
Sealant
86
6
27
3
8
1
1
1
1
1
1
79
Rubber
Others
19
47
Total
250
Source: MITI Annual Report 1995/96 and Proton Vendor Department (2006)
100
Table 4.8 clearly shows that the number of Proton vendors increased quite rapidly from
1995 to 2006, and the concentration of vendor activities in 1995 and 2006 also differs.
The highly concentrated type of business activities in 1995 were metal stamping and
fabrication, and plastic components; while in 2006 the business nature focus was on
metal and electrical.
From the interview conducted on Proton vendor firms in 2006, the study found
that 50 vendors that had been categorized as first-tier vendor firms from a total of 250
Proton vendors. The respective officers from the Proton Vendor Department noted that
the selection criteria for the first-tier vendors are based on three factors: classify;
module or system supplier; and direct vendor or supplier [pers.comm, Senior
Executive 1 (requested anonymity), 4 August 2006, 10am].
According to the classify criterion, the automotive vendors practice the
umbrella concept, which means that there are layers of suppliers/vendors before the
final part or component is supplied to the assembler. The highest rank of the vendors is
known as the first-tier vendors, who are usually supported by the second-tier vendors
and third-tier vendors. As such, the third-tier vendors supply parts and components to
the second-tier vendors, who then supply to the first-tier vendors, who finally supply to
the main assembler, Proton.
The first-tier vendors are those who supply parts or components in the most
complete form. For instance, the dashboard suppliers are categorized as the first-tier
vendor, for they supply the dashboard part in the form that is ready to be fixed directly
to the car. It does not require any other part or component that needs to be installed to
the dashboard prior to fixing it to the automobile. The direct vendor or supplier
criterion refers to those vendors who supply the parts or components in a lose form such
as paint, grease and oil. These parts can be directly fixed to an automobile; any
additional part or component is not required for the assembly of these parts or
101
102
4.7
The Proton Bumiputera Vendor Scheme was an off-shoot of the Proton Vendor
Development Program. This scheme specifically caters for the development of the
Bumiputeras involved in Protons parts and components industry. The Bumiputeras are
given additional assistance, notably in terms of financial assistance; among the most
well-known is the Protons Technical Assistance (TA) arrangement.
The TAs enabled the Bumiputera vendor firms to seek a matching grant for
purchasing capital equipment, intermediate inputs and for acquiring technology transfer;
the Bumiputera vendor firms that apply for TA are identified, assessed, and selected by
Proton and subsequently approved by the Ministry of International Trade and Industry
before approving a maximum grant allocation of RM1 million for each vendor (Abdul
Rahman, 1994). The TA is thus regarded as a helpful tool for the Bumiputera vendor
firms to improve in terms of technology as it provides linkages with foreign firms to
provide technical assistance.
This additional privilege is as envisaged in the government policies, which stress
the significance of nurturing the Bumiputera vendors for the purpose of creating a
BCIC. The opportunities available for the Bumiputeras are tremendous considering that
the government has been giving priority for Bumiputera commercial and economic
development since the implementation of the national policies and plans in the years
following independence. Among others are the NEP and the OPP1 that spanned from
1971 to 1990. The NDP through the OPP2, which covered the period from 1990 to 2000
also emphasized the crucial need to increase Bumiputera participation in the
commercial and industrial sectors so as to develop the BCIC.
Additionally, in the Third Bumiputera Economic Congress which was held in
1992, the government made specific attempts to increase Bumiputera participation in
major economic activities through the implementation of various programs such as
103
104
4.8
Having discussed the development of the national automotive industry, and the various
protectionist measures enjoyed by the national automotive manufacturer and its vendor
firms, it is interesting to note the present state of the national automotive industry
development, which is very much affected by the implementation of the AFTA.
The complete execution of AFTA in March 2006 has eliminated some of the
protection measures accorded by the government to the local automotive players in
order to meet the agreement set in the AFTA. The excise duty structure and the ASEAN
CEPT import duty, reduced to 5 % for qualifying vehicles, was streamlined and
subsequently resulted in an overall deduction in the effective tax rate in most motor
vehicles. The tax differential between the different categories of motor vehicles (for
example, cars, multi purpose vehicles (MPV), four wheel drives and between the
different engine capacities) has also been reduced. Generally, the overall deduction in
the motor vehicle prices fosters the buying capacity of the nation; however, the overall
growth of the national automotive industry has declined, obviously in terms of sale. For
the three months ending December 2006, Proton recorded a loss of RM 281.455milion
(BMI, Q2 2008).
Malaysias automotive sector saw a serious decline in its volume of sales, and in
addition, it lost its dominancy in the local market for the first time in 2006. The poor
sales record reflects that the national automotive industry is in decline. The strong state
support became a drawback to the national automotive industry when AFTA was
105
implemented totally in 2006. The national automotive manufacturer and its vendor firms
are confronted with stiff competition, and competitiveness is the main disadvantage to
them; prices are very competitive, and lowering the cost is significantly crucial for them
to stay competitive [pers.comm, CEO 1 (requested anonymity), 15 August 2006, 6pm].
As such, the NAP is confronted with the challenge of staying competitive with
other car makers. In order to stay competitive, Proton is making every effort to lower
the prices of its automobiles, and simultaneously improve its quality. This means that
the vendor firms that supply parts and components are also affected. The vendor firms
are required to lower the prices of parts and components they produce so that the
national car manufacturer can decrease its cost, and simultaneously stay competitive.
Among the measures taken by the government to remedy the situation, includes
the introduction of a new policy for the automotive industry, namely the National
Automotive Policy (NAP) in 2006. The NAP was formulated to overcome the
challenges facing the national automotive industry as a result of globalization and
liberalization activities. The government introduced a new strategic direction and policy
framework for the domestic automotive industry in the NAP to enable the local
automotive players to sustain their competitiveness, and be viable in the long-term.
The objectives of NAP are to promote a competitive and viable automotive
sector, in particular the national automotive players; to become a regional hub for
manufacturing, assembly, and distribution for automotive vehicles; to enhance value
added and local capabilities in the automotive sector; to promote export-oriented
Malaysian manufacturers as well as components and parts vendors; and finally to
promote
competitive
and
broad-based
Bumiputera
participation
in
vehicle
106
In order to support the objectives set for the automotive sector, the government
established the Industrial Adjustment Fund (IAF) to provide financial assistance to the
national automotive players in terms of interest-free loans and matching grants for
various development purposes such as upgrading of machinery, component
development
costs,
and
technology
enhancement.
To
further
enhance
the
107
Table 4.9
Exports and Investment Targets for the 12 Targeted Manufacturing Industries
Sub-sector
Investment
Exports
2006-2020
(RMbn)
Average Annual
Growth (%)
Total
2020
2006-2020
Share
(RMbn)
2020
Share (%)
(%)
11,403.2
7.1
100.0
362.5
100.0
Non Resource-Based
9,202.5
7.1
80.6
232.8
65.3
7,533.9
6.3
65.9
82.4
23.1
Metal products
514.6
7.6
4.5
44.2
13.6
494.4
6.4
4.3
30.8
7.7
248.8
7.8
2.1
13.7
3.1
Transport equipment
232.5
6.3
2.0
42.3
11.6
Medical devices
178.3
7.6
1.6
19.4
6.2
Resource-based
2,200.7
7.1
19.4
129.7
34.7
Palm oil
781.7
7.6
7.0
26.1
7.6
545.2
6.4
4.7
25.4
6.2
Petrochemical products
377.4
6.3
3.3
34.0
9.4
Food processing
244.6
7.8
2.2
24.6
6.2
Rubber Products
239.0
7.6
2.1
12.9
3.0
Pharmaceuticals
12.8
6.3
0.1
6.7
2.3
(Automotive)
The table 4.9 reflects that the export target for the automotive sector is to achieve an
average annual growth of 6.3 % in the years from 2006 to 2020, and therefore, the
government intends to invest RM129.7 billion to achieve the target set for the period.
In view of this, the government introduced Cluster Working Group
Automotive Industry (CWG-AI) in 2006 under the purview of the National
Implementation Task Force (NITF) to review the automotive sectors weaknesses and
short-falls. The CWG is an initiative drawn from the concept of cluster-based industrial
development introduced in the IMP 2 and continued in the IMP3 with an added
108
emphasis on inter-cluster linkages. In particular, the IMP 2 that covered the period of
ten years from 1996 to 2005 was meant to strengthen clusters across the board, and the
IMP 3, which spans 15 years from 2006 to 2020, aims to achieve international
competitiveness under global integration.
Besides, the government also encourages merging activities in terms of
partnership with other firms. The partnership cooperation initiated by Proton with
foreign car manufacturers include Mitsubishi of Japan, Volkswagen of Germany, Lotus
of U.K., Renault of France, Citroen of U.K., and Daihatsu of Japan; However, not all
the partnership cooperation has succeeded; worse, none of those partners have really
transferred their knowledge and technology effectively as required and aspired by the
Malaysian government [pers.comm, Manager 4 (requested anonymity) 16 August 2006,
2:30pm]. The relatively poor transfer of knowledge and technology can be seen in the
procurement process, in which, the foreign assembly firms procure most of their parts
and components from their own subcontractors.
OEM car makers like Toyota, Honda, Perodua (Daihatsu) and Tan Chong have
never in the past invited companies like ours to supply parts or components to
them because they have their own suppliers, their products are regarded better
in quality than ours
[pers.comm, CEO 2 (requested anonymity), 7 August 2006, 6pm].
The above notion reflects the need for the local firms to strengthen their capabilities in
order to meet the quality standards of the foreign firms. The local firms need to find a
strategic partner who can effectively transfer knowledge and technology according to
international standards. This fact in turn has triggered the study to analyze the
capabilities of the national automotive industry, particularly in terms of technology as
well as entrepreneurship as these factors are regarded by this study as the major driving
factors to achieve competitiveness in the global economy.
109
4.9
Summary
these government initiatives were meant to protect the national automotive industry
from foreign competition.
Unfortunately, the protection given to the national automotive players cannot be
extended due to the implementation of AFTA. The complete execution of AFTA in
2006 led to a tremendous drop in Protons sales. The decreased sales volume has badly
impacted the parts and components industry. Thus, the national automotive vendor
firms are confronted with intense challenges to improve their productivity and
performance, particularly in terms of price and quality. As a remedy to this set of
circumstances, the government introduced new measures through its government policy,
namely the NAP to continue supporting the development of the national automotive
industry.
The national automotive industrys decreased performance is attributed to its
competitiveness, which has resulted in poor sales volume. As competitiveness is
reflected by capability to compete successfully, the national automotive industry is
confronted with the challenge of improving technological capabilities so as to produce
competitive products, and entrepreneurial capability to create competitive advantage.
Hence, it is essential to analyze technology and entrepreneurship capability of the
national automotive industry. This is discussed in the next chapter.
Furthermore, the automotive industry is preferred as a case study to analyze
technology entrepreneurship capability because it provides an example of new trends in
international competitiveness, in which the developments of technological and
entrepreneurial capabilities play a critical role (Leutert and Sudhoff, 1999). Against this
scenario, the automotive industry is regarded as the relatively appropriate context in
which to study technology entrepreneurship in Malaysia.
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CHAPTER 5
RESEARCH METHODOLOGY
5.1
Introduction
This chapter describes the method employed in collecting and analyzing data for the
research. The research framework presents the stages involved in the research process,
from the basic research plan to revising and formatting the thesis as well as the research
schedule to carry out the research project effectively. Next, the approach selected to
address the key research objectives is presented. This is followed by data collection and
analysis. Finally, the research limitations are briefly discussed prior to the summary for
the chapter.
5.2
Research Framework
The framework of this study is shown in Table 5.1. The study is divided into 4 phases:
the first phase includes Research Strategy activities; the second phase involves Data
Collection and Analysis activities; the third phase is the Writing task; and finally, the
forth phase covers Revising, Formatting and Documentation activities. The respective
deliverables for each phase are also included as reference.
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Table 5.1
Study Framework
PHASE 1
Research Strategy
1. Research Plan
2. Find Sources
3. Thesis Outline
PHASE 2
Data Collection &
Analysis
1. List all Industry
Players
2.Identify Active
Vendors
3. Survey Active
Local Automotive
Vendors
Questionnaire &
*Personal
Communication
4. Follow up
5.Data examination
PHASE 3
Writing the Thesis
1.Focusing&
Organizing
2. Drafting
3.Recommendations
4. Conclusion
PHASE 4
Revising,
Formatting, and
Documentation
1. Revising
2. Format Paper
3. Cite Sources
*Note: To obtain salient information on actual firm performance and further insights into technology
entrepreneurship, personal interviews were conducted with top level management of these firms.
Due to assurance of confidentiality, names shall not be revealed.
114
5.2.1
Research Schedule
The research schedule includes all pertinent and important activities that need to be
carried out. In the course of the study, time allocated for each activity had to be altered
as data collection and information gathering was dependent on external sources. The
external sources referred are the Proton vendors who were the subjects in the case study
conducted. Among the institutions and organizations referred are Proton Vendors
Association, The MAA, Malaysia International Trade and Industry (MITI), and other
related organizations for updates on the performance of the national car manufacturer
and its vendors.
5.3
Research Strategy
The study adopted a qualitative approach in analyzing the responses to the research
questions outlined in the first chapter of this study. This approach is believed to allow
for a good appreciation of the salient points gathered as well as provides the necessary
depth of understanding on the subject matter.
The sample for this study was specific: the national automotive manufacturers
vendor firms who supply various parts and components to Proton particularly and a few
other OEMs generally. In all, 250 Proton vendor firms with different nature of
businesses were selected to measure their technology entrepreneurship capability level.
115
This study therefore designed the research questions to identify the sectors competency
level and its strengths and weaknesses from four angles: (a) context, (b) firm,
(c) technology; and (d) entrepreneur.
This study focused on the activities that lead to achieving competitive
advantage, and therefore a set of assessment statements was used for assessing
technology entrepreneurship capability of the vendor firms. The World Bank
methodology was adopted and improvised to suit the local scenario to assess technology
entrepreneurship capability of the automotive sector (Bessant et al., 2000).
5.4
Data for the study was collected by means of structured and open-ended questionnaires
with reference to the Oslo Manual (OECD, 2005) and Technology Innovation
Capability (Bessant et al., 2000) as guidelines. The design of the questionnaire was
based on a number of studies such as Community Innovation Surveys (CIS) that had
used the Oslo Manual as a guideline in collecting standardized information on
innovation activities of firms assessed, and the Technology Innovation Capability audit
tool as a framework to assess firm-level technology entrepreneurship capability.
The Oslo Manuals questionnaire has been the basis for CIS surveys, both in
European and developing countries. However, as the situation in developing economies
is different, an adapted version of the Oslo Manual questionnaire is used in these
countries. The developing countries from the Southeast Asian region that have carried
out innovation surveys are Taiwan, Singapore, Malaysia, Thailand and South Korea.
Malaysia conducted its first national innovation survey in 1995, using a sample
of 815 companies that were identified as possible innovators from the Malaysian
Science and Technology information Centre (MASTIC) R&D survey, SIRIM (ISO
9000 recipients), MITI (R&D incentives recipients) and the tenants of Technology Park
116
Malaysia (TPM) (MOSTE, 1996). Consequently, the second national innovation survey
of registered firms was carried out for the period of 1997 -1999, and the third innovation
survey for the period of 2000-2001, using the same stratified sampling approach used in
the second survey (UNU-INTECH, 2004).
The generic features of innovation surveys are based on three major typologies:
general information; science, technology and R&D measures; and innovation questions.
The general information questions encompass the firm profile, firm size in terms of
number of employees and turnover, international linkages with foreign firms and the
competitive environment. Questions on science and technology (S&T) and R&D
measures focused on the expenditure of science and technology and R&D. Finally, the
questions on innovation consisted of objectives of innovation, sources of information,
collaboration in innovation, barriers to innovation, and financing of innovation.
The Malaysia innovation surveys did not cover questions under the category of
science and technology and R&D measures. Contrarily, questions under the category of
innovation were mostly covered, except for the questions on impact of innovation; the
questions on government assistance for innovation were dealt with quite extensively.
The differences on the emphasis of questions asked between developed and developing
countries are shown in Table 5.2.
117
Table 5.2
Comparison of Innovation Survey Questionnaires
No Innovation
Survey
Questions
1
General
Information
Questions
2
Science and
Technology
and R&D
Measures
Innovation
Questions
European
CIS
Canada
Malaysia
Colombia
South Africa
No. of
R&D
personnel
Employee
education
& training
Except
financing
of
innovation
Added
Except
financing Government
assistance
of
for
innovation
innovation
Except
cooperation
and
alliances in
R&D, IP
and
technology
transfer
x
Employee
education &
training, no.
of R&D
personnel,
and
technology
transfer
Added
innovation
management
tools
Source: UNU-INTECH(2004)
Note:
x indicates that all questions under the category have been covered
This study has adopted questions from the innovation surveys with some modifications:
it has questions which were lacking in Malaysias previous innovation surveys such as
employee education level and employee training, and other questions such as the usage
and optimization of internet service, R&D personnel, investment in R&D, sources of
financing for R&D activities and other questions pertaining to R&D. In addition,
questions pertaining to the entrepreneurship discipline were also included.
This study has also referred to the innovation capability audit tool used by the
World Bank to acquire data on technology innovation capabilities. The technology
innovation capability audit tool designed by Bessant et al.(2000) categorizes a firm as
Passive, Reactive, Strategic or Creative. Firm assessment is based on nine key
dimensions of technological activity: awareness, search, core competencies, strategy,
118
119
5.5
Data Collection
5.5.1
The Database
A database of vendor firms was established to enable the information gathered from the
respective officers of the Proton Vendor Department to be sorted and used according to
the research needs. For the purpose of this study, the vendor firms were clustered
according to four major manufacturing and related activities: engineering design; tool,
die and mould; parts and components; and distribution.
This study, however, focused only on the parts and components activity as it is
here that vendor involvement is highest in comparison to other vendor activities.
Furthermore, an automobile is mainly made up of parts and components. As Chee and
Fong (1977) succinctly state: an automobile is a complex product and consists of about
3,000 different components many of which involve different production processes.
Therefore, this study regards parts and components as the most suitable activity to be
explored and examined.
The data was obtained from the questionnaires sent to the 250 vendors as well as
from the interviews conducted during the fieldwork period from August 2003 to
December 2006, and in 2007. Though 250 questionnaires were sent out, the sample for
this study consists of 217 vendor firms that replied to the questionnaires, which gives a
response rate of 87 %; of this number, 56 vendor firms or 22% were totally engaged in
the study, from acceptance of the questionnaire to the interviews conducted.
Some Proton vendor firms declined to reveal any data pertaining to firms
performance as they feared competition from other vendors despite assuring
confidentiality; the information requested was regarded as a trade secret by some
vendors. In addition, there were also vendors who felt that the interviews were a waste
of their time. However, having a sample of 56 vendor firms is sufficient as the emphasis
120
of this study is on qualitative rather than the quantitative aspects. In addition, the sample
size of 56 vendor firms is larger than the number of firms included in the innovation
capability studies conducted at Korea and Thailand; Korea covered 25 firms and
Thailand included 21 firms in their technology innovation capability studies.
5.6
Interview
The interviews were carried out in 2006 and in 2007 with the help of structured and
open-ended questionnaires. The interview was the main source of reference in this
study, for the analysis emphasized the salient points obtained from the discussion with
the respondents and other resources. The information acquired was treated with
confidentiality and analyzed critically to arrive at the desired outcome. To note, the
interviewees were essentially top level management that included senior executives,
managers, chief executive officers (CEO) and the entrepreneurs. All the respondents
were informed and reminded prior to the actual day of interview, which was held on the
Proton Vendor Briefing Day; a copy of the questionnaire was sent to them via e-mail
and fax.
Additionally, the Proton Vendor Management Section provided essential aid by
uploading the questionnaire, including interview questions on their website known as
PRECISE. PRECISE is a website used by Proton as a communication tool with all its
vendors. Any information, updates or surveys are usually uploaded on this site for easy
access by all its vendors. Similarly, this studys questionnaire was uploaded on to
PRECISE to provide easy and quick access to all its vendors, and to ensure immediate
response and full cooperation from them. The respondents were therefore better
prepared, and indeed some of them came with supporting documents to provide
additional information regarded as essential for the discussion.
121
122
other pertinent issues. Some vendors felt that they ought to participate in the survey due
to their involvement with Proton as the major supporter for the survey, the manufacturer
that the vendors are dependent on for their business activities.
5.7
Data Processing
The data collected from the interviews were processed using simple Microsoft Excel,
Microsoft Word and Standard Package for Social Sciences computer program (SPSS)
mainly at MIGHT METEOR Advanced Manufacturing Institute (AMI), and the library
of University of Malaya. AMI is a subsidiary of the government agency, MIGHT, which
conducts technology-related training for all levels from fresh college to university
graduates up to senior levels of management. AMI provided relevant assistance,
particularly in terms of network establishment with the national automotive
manufacturer, Proton and its vendor firms, printing of relevant documents, and of
importance, was providing the space to carry out the task of writing the thesis in a rather
comfortable environment.
Prior to data entry, the questionnaires were first checked for consistency and
completeness. Most of the answers were pre-categorized and pre-coded. The postsurvey coding involved only those questions that were qualitative in nature and openended. A systems analyst was employed to guide the use of the SPSS program.
However, most of the quantitative analysis was carried out personally using the
Microsoft Excel and Microsoft Word programs. As the main concern of this study was
to conduct qualitative analysis, more effort was devoted to interpreting and examining
the salient information obtained from the interviews and the focus group discussions.
The analysis was carried out with reference to the technology innovation capability
audit tool.
123
5.8
Conceptual Framework
The study framework was adapted from the notion of Shane and Venkataraman (2003)
who used a variety level of analysis to discuss the technology entrepreneurship theme.
In their study on technology entrepreneurship, they included entrepreneur, firm,
industry, and technology to examine the theme. In this study, the four elements have
been adopted with a change in the term industry to context. In this study, these four
elements serve as the four constituencies of technology entrepreneurship, as presented
in Figure 5.1.
Context
Entrepreneurial
Technology
entrepreneurship
Firm
Technical
Technology
Entrepreneur
Figure 5.1
Technology Entrepreneurship Framework
[adapted from the definition of technology entrepreneurship theme by
Shane and Venkataraman (2003)]
124
Figure 5.1 illustrates the four major factors of technology entrepreneurship that are
inter-related to each other, which implies that the four factors complement and affect
each other. For instance, the change in the context factor affects the performance of the
firm, technological development and entrepreneurs capability; this phenomenon is
discussed in the context of the automotive industry in detail in the analysis chapter.
5.8.1
The term technology entrepreneurship capability is used in a similar vein as the term
technology innovation capability introduced by Bessant et al.(2000) to refer to those
activities that enable firms to create competitive advantage. The technology
entrepreneurship capability dimensions are the key activities selected with reference to
the four factors of technology entrepreneurship as noted earlier.
Each technology entrepreneurship factor constitutes two key activities. The
context factor includes the awareness of the changes and the requirement for
improvement, and the search ability is related to the exploration of opportunities and
threats; the firm factor concerns the building of technology strategy to run the business
successfully, and the constructing of distinct core competencies; the technology factor
encompasses the ability to master a particular technological paradigm, and the ability to
form and develop linkages with affiliates; and the entrepreneur factor looks into the
ability to acquire codified and tacit knowledge, and implement them appropriately, and
the ability to lead the firms functions effectively and successfully. In short, there are 8
key activities selected from the four constituencies of technology entrepreneurship.
In todays context of globalization and increasing competition, it is essential for
the entrepreneur and his staff, particularly the senior management to acquire the ability
to recognize environmental changes and technological needs of the firm to be fairly
competitive in the market. As such, the ability to scan the environment is significant in
125
order to detect any threat or opportunity available. In most innovative type of firms,
threats are converted to opportunities.
At the firm level, formulating an appropriate technology strategy is essential to
achieve the firms vision and mission; therefore, it should fit well into the firms
business strategy. Strategies should be structured effectively for a firm to achieve
competitiveness. Only then will a firm be able to develop its core competencies.
Building distinctive core competencies is vital for creating competitive advantage for
the firm.
In terms of technological development in a firm, it is necessary for the
entrepreneur and his staff to have knowledge of the technology being used, and the
knowledge underlying the technology models, which frame what the industry is using,
developing and improving; this is termed in this study as technology paradigm. Only
then, will the firm be able to carry out improvement activities and remain competitive in
the market. Also of importance is for the firm to establish linkages to sources of
knowledge and market improvements. Linkages can take various forms such as
collaboration, joint-venture, licensing and others.
In addition, this study looked into the key activities of an entrepreneur such as
learning and leadership capabilities. Learning is an important activity for competence
building; therefore, this study has emphasized the learning capability that needs to be
acquired by the entrepreneur particularly and generally by his employees. It is essential
for an entrepreneur to have both codified and tacit knowledge to enable him to lead his
firm successfully. Leadership is regarded an important quality in an entrepreneur as it
determines the success of a firm. A good leader is able to organize, manage and operate
his firm well; therefore, an entrepreneur should possess leadership quality.
Having identified these dimensions, a series of questions to help assess the
firms technology entrepreneurship capability level was developed. The responses were
126
coded on a score of 1 to 4 to show the capability level of each activity; score 1 denotes
strongly disagree, score 2 merely disagree, score 3 indicates merely agree, and
score 4 represents strongly agree. The detailed questions that capture the data on each
of these key activities of technology entrepreneurship, together with assessment
statements, are attached in the appendix.
From the scores obtained, the overall technology entrepreneurship capability
level of a firm can be calculated, and simultaneously the strengths and weaknesses in
terms of eight key activities and four major factors of technology entrepreneurship are
identified.
5.8.2
Following the determining of scores from the 8 dimensions, they are presented in a
graphical way using a Radar Diagram. The score obtained for each dimension is
presented over the highest possible score, which is 4, and is termed as the Best Practice
Model with reference to the best practices in general. The radar diagram presents the
capabilities of the eight technology entrepreneurship dimensions.
With reference to the radar diagram, a profile of technology entrepreneurship
capability is generated for the surveyed vendor firms. The radar diagram will
demonstrate the strengths and weaknesses of firms. The average score of the capabilities
achieved is then used to determine the type of firm assessed.
5.8.3
Analysis of Findings
Upon obtaining the average score of the technology entrepreneurship capability, the
firms are categorized into four main categories on a scale of 1 to 4. This study uses the
total average score derived from the 8 dimensions, namely the Total Average
Dimension Score (TADS) which is achieved by adding up the average scores from all
127
128
development that occur around them, and are comparatively average in their tacit
knowledge to tackle those problems. They only have rather average information,
limited scope of experience and less appropriate skills for continuous improvement.
Though they are able to respond to the development and changes that take place around
them, they are somehow moderate in exploiting the challenges to become
opportunities for them, or in other words for the advantage of their firms.
Their strategies are averagely defined; thus, they develop relatively moderate
technology strategy. They have average knowledge on the particular technology being
used. The entrepreneur has relatively average capability in leading the firms functions.
In addition, the firm has a relatively average built network, which results in less
effective technological collaboration. In all, these firms are relatively average in their
overall technology entrepreneurship capability development.
129
their firms. In general, these firms have the capability to react to the changes that occur
around them but are somehow limited, for they have moderate non codified
knowledge and innovative skills.
130
5.9
Research Limitations
The limitations faced in this study are basically in terms of the subjects of study and
respondents. This study focused on the automotive sector for it is interrelated to other
industrial sectors. The automotive sector is regarded as a complex sector, for a complete
car consists of thousands of parts and components that are made by many different
industrial sectors. Furthermore, the national automotive industry has gained much
131
5.10
Summary
This chapter describes the methodology adopted in this study. It elaborates the approach
selected, namely case study and the various processes involved in collecting and
analyzing the data. A framework was conceptualized to guide analysis, complemented
with a set of 8 dimensions that were identified as the key activities in achieving
competitive advantage. The framework consists of 4 constituencies and 8 dimensions
132
were used as a tool in assessing the technology entrepreneurship capability of the firms.
The results of the analysis are elaborated, interpreted and discussed in Chapter 6 to
achieve the main objectives of this study.
133
Introduction
This chapter aims to analyze the technology entrepreneurship capability of the national
automotive industry. The chapter begins with a brief introduction to the technology
entrepreneurship framework, and continues with a discussion and analysis of the major
characteristics of the national automotive vendor firms. The information obtained is
then used to broaden the understanding of the study theme, which is technology
entrepreneurship capability. Consequently, the study analyzes the overall technology
entrepreneurship capability of the national automotive parts and components industry
prior to summarizing the chapter.
The technology entrepreneurship framework used in this study is as illustrated in
Figure 5.1 of Chapter 5. The framework illustrates the dynamic interaction between
information external to the firm within a particular context, the carrying out of activities
in a firm, the appreciation of technology as the engine of growth of the firm, and the
preparedness of the entrepreneur to drive entrepreneurial activities. As each of these
factors is significant, the interaction between them is especially important. The context
provides the outline to the framework by detailing the policy changes, acts and political
issues; the firm develops the strategies to create competitive advantage and
sustainability; the technology details the ways to optimize the benefits and manipulate
them for more gain; and the entrepreneur builds on his knowledge-base in exploring and
exploiting opportunities, and in developing innovative problem solutions.
Against this explanation, this study analyzes the issue of technology
entrepreneurship using four key factors that are not only integrated but also complement
each other. For example, a change in the context has an influence on a firms
performance; the appropriateness of technology used; and the preparedness of the
entrepreneur in addressing the challenges emerging from the changes that occur.
134
Hence, this study looks into all these four significant factors collectively in analyzing
the technology entrepreneurship issue.
6.2
6.2.1
The study data reveals that most of the Proton vendor firms were established during the
fourth phase (48.85%), followed by the firms established during the third phase
(37.33%); 12.44 % of the firms were established during the second phase, and only 1.38
135
% of firms were established during the first phase. Firm establishment according to the
four different phases as set by this study is presented in Table 6.1.
Table 6.1
Proton Vendor Firms Establishment According to Four Phases
Phase
1
2
3
4
Year
1957-1970
1971-1980
1981-1990
1991-2005
Total
No. of Firms
3
27
81
106
217
In term of the age of the Proton vendor firms, the study found that the youngest vendor
firms are 1 year old, and the oldest firm is 41 years old. The average or mean age of the
firms in the sample is 16.24 years, while the median age is 16 years. The mode age of
the vendor firms is 6 years, and there are 26 firms of this age; most of these firms are
found to be involved in the metal type of business. Meanwhile, the other vendor firms
of different ages are involved in business of a different nature, including electrical and
electronics, metal, casting and others. Thus, there is no particular pattern in relation to
the age of the vendor firms and business nature, except for the 26 vendor firms who are
all 6 years old.
Besides, the vendor firms average age reflects the timing of Malaysias
industrialization, and the vendor firms entry into the automotive industry business. The
Proton vendor firms are on average young in comparison to other successful OEMs
vendor firms age. As such, more effort is needed for the local vendor firms to
strengthen their capability so as to create competitive advantage for their firms.
Therefore, the local vendor firms believe that they need more time to be in pace with
their competitors; this has been voiced in the interview conducted: the automotive
136
industry for example started as early as before World War II in Japan, and at least 40
years ago in Korea. Their industry has already come of age, whereas ours is still a
fledgling at 20 years. We need more time to catch up [pers.comm, CEO 3 (requested
anonymity), 17 August 2006, 4pm].
Needless to say, the situation and circumstances then were different, and the fact
that the local automotive vendors are in need of more time to be fairly competitive as in
the case of the Korean and Japanese automotive vendors is rather untimely with the
current globalization era that emphasizes speed in the marketplace. Therefore, the time
factor needs to be manipulated by the vendors themselves for their firms advantage;
they should be able to convert the threat to an opportunity for themselves. Though they
are less competitive, they can strengthen themselves with strategic efforts and
appropriate capability.
Generally, age denotes maturity; as such, most of the Proton vendor firms are
regarded as young compared to the other OEM vendor firms such as the Japanese and
Korean vendor firms. For example, the metal type of business nature requires many
years of experience for the vendors to accumulate and gain tacit knowledge in order to
develop skills and competencies. It would appear then that the Proton vendor firms
involved in the metal type of business would require more years of experience to
develop their capabilities, particularly in terms of technology in order to be able to use
relevant tools and machines, and to be able to read and understand the blueprints.
In terms of Bumiputera achievement, the study discovered that most of the
Bumiputera vendor firms (48.86%) came into existence during the fourth phase, which
is from 1991 to 2006. About 44.32 % of the Bumiputera firms were established during
the third phase, 5.68 % during the second phase, and only 1 vendor firm or 1.14 % was
established during the first phase. The year of establishment of the Bumiputera firms in
comparison to the other vendor firms year of establishment is presented in Table 6.2.
137
Table 6.2
Proton Vendor Firms Year of Establishment
Phase
1
2
3
4
Year
19571970
19711980
19811990
19912005
Total
No. of
Bumi
Firms
% of
Bumi
Firms
No. of
Foreign
Firms
% of
Foreign
Firms
No. of
Non
Bumi
Firms
% of Non
Bumi
Firms
Firm
W/Out
Ownership
Info
% of
Firms
W/Out
Ownership
Info
No. of
Vendor
Firms
%of
Vendor
Firms
1.14
3.77
1.38
5.68
10.53
14
26.42
10.53
27
12.44
39
44.32
17
29.82
23
43.40
10.53
81
37.33
43
48.86
34
59.65
14
26.42
15
78.95
106
48.85
88
40.55%
57
26.27%
53
24.42%
19
8.76%
217
100.00%
Based on the analysis, the number of vendor firms established during the first phase,
between 1957 and 1970 was very few, and accounted for 1.38 % out of the total number
of firms assessed. The small number of vendor firms during this period is attributed to
poor government attention to the manufacturing sector. The concentration of the
economy during the first phase was on commodity-based agriculture.
The first political leader or the first Prime Minister, Tunku Abdul Rahman was
interested in raw materials production; as such, government effort then focused on cashcropping agriculture. Subsequently, the second Prime Minister, Tun Abdul Razak
diverted his attention to poverty eradication and reducing the identification of economic
function with race through the implementation of a new government policy, namely the
NEP. The NEP encouraged the participation of the Malay ethnic group and other ethnic
groups, collectively known as the Bumiputeras, to participate in the commercial and
industrial sectors. The number of Bumiputera-owned firms started to increase steadily
during this period, and this is evidenced by looking at the analysis shown in Table 6.2
which recorded a gradual increase from 1.14 % to 5.68 % during the second phase.
Similarly, economic development under the leadership of the third Prime Minister, Tun
Hussein Onn, was to improve the economic imbalances between the communities.
138
Nevertheless, the fourth Prime Minister Tun Dr. Mahathir made radical changes
by diverting the focus from commodity-based agriculture to the manufacturing sector
with particular emphasis on the electrical and electronic products, chemicals, processed
foods, textiles, processed timber and rubber products, and steel and automobile
industries. This resulted in an increase in the number of manufacturing firms; the
number of Proton vendor firms for instance increased from 27 to 81 firms, which
reflected an increase of 24.89 % from the previous phase (1971-1980) as shown in
Table 6.2, and graphically in Figure 6.1
50
40
30
20
10
0
1957-1970
1971-1980
1981-1990
1991-2005
Foreign Firms
NonBumi Firms
Figure 6.1:
Proton Vendor Firms- Year of Establishment & Phases
Political leader interests and differing government policies help to explain the economic
development of the nation, notably the establishment of firms in the automotive
industry. As most local vendors firms were established during the fourth phase, it
indicates the relatively young age of most firms. The observation that non-Bumiputera
vendor firms, however, were established mostly in the third phase indicates that the
non-Bumiputera vendor firms are generally older than the Bumiputera firms. The older
age of the non-Bumiputera firms shows that the non-Bumiputeras have shown interest
139
and participated in the manufacturing sector earlier than the Bumiputeras. The earlier
involvement of the non-Bumiputeras in the manufacturing sector was partly the result of
governments encouragement to get more locals to participate in major economic
activities.
On the other hand, Bumiputeras involvement in the manufacturing sector was
rather gradual. The number of Proton vendor firms established by the Bumiputeras has
increased steadily from 5 firms in phase 2 to 39 firms in Phase III, and 43 firms in Phase
IV. This fact was complemented by the introduction of government programmes and
various types of assistance to realize the objective of restructuring the socio-economic
imbalances as set in the NEP. Among the programmes introduced are: the BCIC
programme, Proton Vendor Scheme, Franchise Development Programme, Credible
Bumiputera Contractors Programme, and financial assistance such as Financial and
Credit Assistance for easy availability of loans and finance, Umbrella Concept
Marketing Scheme, Manufacturing Assistance Scheme and Venture Capital Scheme. In
particular, the aftermath of NEP enabled the Bumiputeras to own and manage at least
30% of the commercial and industrial activities in all sectors of the economy. More
Bumiputeras were seen to emerge as entrepreneurs in the commercial and industrial
sectors, mainly with the assistance provided by the government that included financial
aid, training, technical assistance, and guidance and consultation by the government
agencies.
Looking at the remarkable increase in the number of Bumiputera and nonBumiputera involvement in the industrial sector, the government of Malaysia continued
with a similar policy as the successor of the NEP. The NEP was continued with the
NDP spanning the period 1991 to 2000, with the focus on raising workforce quality and
developing expertise in sophisticated industries.
140
6.2.2
Size of Firms
The study found only small, medium and large-sized firms, and none of micro size
(Table 6.3) by applying the definition of SME for small-and medium -sized firms as one
which employs less than 150 workers, Table 6.3 shows that 58.1 % of the firms are
small and medium sized. Based on a similar definition of SME, a large-sized firm is
defined as one that has more than 150 workers; Table 6.3 shows that 29.5 % of the
sampled firms are large sized.
Table 6.3
Number and Percentage of Proton Vendor Firms Based on SME Status
SME Status
Small and Medium
Large
Unknown
Total
Number of Firms
126
64
27
217
Percentage
58.1%
29.5%
12.4%
100%
The analysis on Proton vendor firms identified the presence of 28 large-sized firms
owned by the Bumiputeras, 16 large-sized firms owned by the Foreigners and 17 by the
non-Bumiputeras. Likewise, for the sampled SME firms, 60 of the vendor firms are
owned by the Bumiputeras, 35 by non-Bumiputeras, and 19 by the Foreigners. Besides
the large, and small and medium-sized firms, there are 22 foreign-owned firms and 1
non-Bumiputera owned that could not be categorized as either large or small or medium
sized firm due to lack of information.
141
Table 6.4
Firm Size and Ownership Structure
Ownership
Bumiputera
Non-Bumiputera
Foreign
Unknown
Total
Large
28
17
16
3
64
Total
88
53
57
19
217
At times, the size of firm reflects the firms performance drive; Table 6.5 presents
vendor firm performance in relation to sales records.
Table 6.5
Automotive Vendor Firm Size and Firm Performance
SME
Status
No. of
Firms
Below Average
Sales Record
Above Average
Sales Record
No Sales
Record
Performing
Firm
(%)
Non
Performing
Firms (%)
Large
Small &
Medium
Unknown
Total
64
126
42
83
18
15
4
28
28
12
66
66
27
217
0
125
0
33
27
59
15
58
The average sales record of the firms is used as an indicator of performance of the
vendor firms; there are two average sales records used: one for the large-sized firms and
another for the small- and medium-sized firms. The firm that has higher sales records
than the average sales is categorized as a performing firm; while a vendor firm with
sales records below average is categorized as a non-performing firm. Of the total of 64
large-sized firms, 18 firms (28%) recorded above average sales. Meanwhile, for the
small- and medium-sized firms, 15 out of 126 firms recorded above average sales
performance. This analysis shows that the large-sized Proton vendor firms recorded
better sales performance compared to the small- and medium-sized vendor firms.
Though the percentage of the sales performance of both large-, and small- and medium142
sized vendor firms differ, the non-performance rate is the same, which is 66% for both
categories of firms. The similarity in the non-performance sales record of the large-, and
small- and medium- sized firms is due to the lack of information on the sales record of
few firms as shown in Table 6.5.
It is a norm in most studies that the large-sized firms perform better than the
small- and medium-sized firms. The better sales performance of most of the large-sized
firms is basically due to better facilities, broad network, and stable financial status. In
the case of Proton vendor firms, the large-sized vendor firms have better facilities that
include infrastructure and resources. In terms of resources, the large-sized firms have
sufficient stock available to develop parts and components as scheduled. They have
sufficient money to purchase the raw materials in advance and make them available
prior to the actual usage date. The time to wait for the raw material is omitted, which
ultimately enables the large-sized vendor firms to meet the customers expected date of
delivery as scheduled; such practice shortens the product cycle.
In contrast, most of the small- and medium-sized vendor firms face difficulty in
purchasing sufficient raw materials for the production of the next cycle due to financial
limitations. They have to wait before starting each production process; at times, their
production is disturbed as the required material does not arrive on time. The delay in the
arrival of the material causes failure on the part of the small- and medium-sized vendor
firms to meet the dateline, which then lengthens the product cycle.
In terms of network, the large-sized vendor firms have a wider network of
suppliers and customers. The size usually convinces the customers that the vendors are
capable of meeting their expectations; thus, the large-sized firms are at an advantage
compared to the small- and medium-sized vendor firms. As such, the large-sized firms
are able to secure more business opportunities, which imply that the market scope is
greater in comparison to the small- and medium-sized firms. This enables the large-
143
sized vendor firms to perform better than the small- and medium-sized vendor firms; as
such, 18 % of the large-sized vendor firms achieved above average sales records as
presented in Table 6.5.
Besides, the large-sized Proton vendor firms are financially more stable and are
able to sustain their businesses at difficult moments, particularly when the industry was
badly affected by policy changes such as the implementation of AFTA in 2006. This is
as noted by some of the vendors: we managed to sustain our businesses after the
implementation of AFTA and NAP, and even when the product price kept decreasing
and cost of the raw material rising [pers.comm, CEO 5 (requested anonymity), 25
August 2006, 9am]. Often, the large-sized vendor firms are capable of overcoming the
challenges by implementing immediate recovery plans through expert advice,
collaborative effort and out-sourcing. Some of the large-sized firms immediately
collaborated with other industrial players, or, and higher learning institutions, or, and
research institutions to produce competitive products despite the high cost. Thus, the
large-sized vendor firms could sustain their performance better than the small- and
medium-sized firms during difficult times.
Some of the small- and medium-sized Proton vendor firms are financially
unstable and not able to overcome the challenges emanating from policy changes; as
such, these firms are unable to sustain their businesses, and some of these vendors have
even shut down their businesses operations. Constraints to improving their finance
include the application process and the loan requirement as noted in the interview: the
financial assistance provided by the government is stringent in terms of the application
process; high collateral and several guarantors are required before a loan is approved,
and the amount is insufficient after the long wait [pers.comm, Vendor 2 (requested
anonymity), 23 August 2006, 2:30pm]. As such, most of the Proton vendors do not want
144
to go through the hassle of the unfriendly application processes and the long waiting
period of loan approval, which does not confirm the success of the loan application.
Furthermore, financial institutions also faced difficulty in providing a large
financial facility to the firms during the policy change period; as noted in the interview:
arising from the macro view of the automotive industry, many banks or
financial institutions are reluctant to expand their credit facilities especially in
financing tooling and moulds. As OEM customers expect vendors to pay for
tooling and moulds upfront; and coupled with the reduced cash-in-flow due to
dropping sales, financial constraints stand in the way of securing new business
[pers.comm, Vendor 3 (requested anonymity) 23 August 2006, 3:30pm].
Thus, most of the small- and medium-sized Proton vendor firms have difficulty
obtaining bank loans, and therefore are unable to sustain their businesses as shown in
Table 6.5. Only a few small- and medium-sized firms recorded performing firm status
when the study was conducted.
6.2.3
Business Nature
145
Table 6.6
Industrial Activities of Proton Vendor Firms
No
1
2
3
4
5
6
Business Nature
Casting
Electrical & Electronics
Metal
Plastics
Rubber
Others
No information
Total
Percentage (%)
5.1
16.1
37.8
12.4
8.8
17.5
2.3
100.0
The analysis revealed that most Proton vendors are concentrated in the field of metalbased activities (37.8 %); the next most popular field is the group of various types of
activities, which is classified as others (17.5 %). Finally, the third highly involved
field by Proton vendors is electrical and electronics (16.1%). A smaller number of
Proton vendors are involved in plastics (12.4%); rubber (8.8%) and casting (5.1%).
Subsequently, this study presents the major products of the focus of Proton
vendor firms, namely metal, others, and electrical and electronics industries as
presented in Table 6.7.
Table 6.7
Products Produced by Different Industries
Products Produced by Industry
Metal
Engine,
transmission
component
Body assembly
Struts absorber
assembly
Interior parts
Plastic injection &
moulding
Springs, and others
Others
Label
Carpet
Paint
Sealants,
and others
Electrical &Electronics
146
The other types of business activities carried out by Proton vendor firms include
plastics, rubber and casting. The participation of the Proton vendor firms in these types
of business activities is relatively low as shown in Table 6.6.
Next, the relation between business nature and ownership of the vendor firms is
presented in Figure 6.2.
No. of Firms
Bumiputera
NonBumiputera
Foreign
Unknown
Casting
Electrical
and
Electronics
Metal
Plastic
Rubber
Others
No Info
Business Nature
Figure 6.2
Industrial Activity and Ownership Structure of Proton Vendor Firms
147
148
The third focus area by the Bumiputeras is the productions of electrical and
electronics based parts and components. In comparison to the other vendor firms in
Proton, Bumiputera participation in the electrical and electronics industry constituted 37
%; non-Bumiputera involvement constituted 34 %; the Foreigners 26 %.
The high representation of the Bumiputeras in Protons vendor activities is due
to the allocation and schemes provided by the government, which allows for good
opportunities for the Bumiputeras compared to the non-Bumiputeras, or Foreigners. The
government sees it as a way to promote Bumiputera participation in major industrial
activities, and in recent years government incentives have been directed at encouraging
more Bumiputeras to become technology entrepreneurs.
6.2.4
The analysis on the year of business initiation with Proton indicates that most of the
vendor firms were set up in 1985 (22 %). In terms of size, 58 % of these firms are of
large size; while, 42 % are of small and medium size. The greater number of large-sized
vendor firms compared to the small- and medium-sized vendor firms indicates that
majority of the vendor firms were already well-established when they started their
businesses with Proton in 1985.
In term of ownership, most of these vendor firms were owned by nonBumiputeras (39%), followed by Bumiputeras (36%) and the Foreigners (18%). The
higher percentage of non-Bumiputera ownership in 1985 was due to their long presence
in the manufacturing industry. In contrast, most Bumiputeras began to be involved in
the manufacturing sector, particularly in the automotive industry, after the initiation of
the national automotive industry in 1983. The Bumiputeras have gradually increased
their participation in various industrial activities as suppliers to the national automotive
assembler and as manufacturers.
149
6.2.5
In this study, all the four common types of business organizations are found among the
Proton vendor firms. The most common type of business organization is private limited
(82.9%), followed by public listed (6.5%), partnerships (3.7%), and sole proprietorship
(1.4%). Another 5.5 % of vendor firms declined to give relevant information on
business organization.
In term of ownership structure, Bumiputera-owned businesses were mainly
structured as private limited (90%); partnership (4.5%); public listed (2.3%), and sole
proprietorship (2.3%). In the case of non-Bumiputeras, private limited took the lead
(88.7%), followed by public listed (5.7%) partnership (3.8%) and sole proprietorship
(1.9%).
again took the lead (64.9%), followed by public listed (14%) and partnership (1.8%).
Thus, for Bumiputeras, non-Bumiputeras and Foreigners, Proton vendor firms were
mainly structured as private limited; this is illustrated in Figure 6.3.
150
No. of Firms
90
80
70
60
50
40
30
20
10
0
Bumi
nonBumi
Foreigners
No Info
Ownership Structure
PTS
PUL
PVL
SPR
No Info
PTS: partnership
PUL: public limited
PVL: private limited
SPR: sole proprietorship
Figure 6.3
Types of Business Organization and Ownership Structure
Based on this analysis, together with information gleamed from the interview conducted
with the Proton vendors, the higher percentage of the private limited type of business
organization prevalent among Proton vendor firms is attributed to a number of factors: a
number of the vendor firms were initially set up as private limited firms under the
government initiatives to encourage more Bumiputera participation in commercial and
industrial activities; those firms established during the first national car project were
mostly structured as private limited; some of the large-sized business organizations
expanded their business activities by venturing into a different sector, namely the
automotive sector; or by venturing into a new segment within the same industry; all
these firms were set up as private limited firms.
151
6.3
The results obtained from the analyses on the basic characteristics of the Proton vendor
firms, namely the year of establishment, ownership structure, firm age, size of firms,
business nature, year of business initiation with Proton, and types of businesses were
used to analyze the technology entrepreneurship capability of Proton vendor firms
according to the four constituencies of technology entrepreneurship; the context
conditions, which include environmental changes and policy implementation; the
functioning of firms activities, essentially the operational and managerial; adequate
acquisition and appropriate application of technology; and the opportunistic and
innovative character of the entrepreneur. Industrial environment context, firm,
technology and entrepreneur all interact to determine the technology entrepreneurship
capability of the vendor firms.
6.3.1
The context factor constitutes the government, industrial, science and technology
infrastructure, and various other issues that influence the performance of the firms in a
particular industry. Realizing that context conditions are complex and changing, it is
necessary for firms and entrepreneurs to grasp an understanding of the changes and be
able to comprehend them, and produce innovative solutions so as to overcome the
challenges. As such, this study focuses on the policy changes that occurred during the
three years of the research period, and the impact it had on the national automotive
vendor firms particularly. This study examined the effect of the policy changes, namely
the AFTA and NAP on the national automotive manufacturer and its vendor firms
between 2003 and 2006.
152
6.3.1.1 AFTA
Under the AFTA agreement, the ASEAN nations agreed to cut tariffs on most of their
products in order to liberalize the economic sectors of the ASEAN member countries.
The ASEAN countries initiated the efforts to deepen the regions economic integration
by reducing tariffs for a larger volume of trade among the member countries. In gearing
up for automotive sector liberalization under the implementation of AFTA, Malaysia
phased out several measures that served to protect the local automotive industry such as
the Local Content Policy and Mandatory Deleted Items.
Among the challenges faced by the automotive sector are increased competition;
increased barriers such as higher tariffs for non-ASEAN imports; preference for
established vendors, cheaper price products, and products manufactured in ASEAN;
greater market access; more standardized trading regulations; less reliance on export
markets as the concentration is on growth within ASEAN member countries; and
decreased manufacturing costs due to lowered tariffs. The Proton vendors particularly
faced stiff competition from other players, and their performance began to weaken due
to a lower volume of sales as illustrated in Figure 6.4.
Based on the analysis, the study found that the adverse effects faced by Proton
vendor firms are mainly a result of the drop in the national car sales that consequently
affected the sale of the parts and components produced, or, and supplied by Proton
vendor firms. As the sales of the national car continued to drop, the requirement for
parts and components also decreased. Lower car sales have a direct impact on car
manufacturers, component manufacturers, and dealers. The whole value chain for the
automotive sector, that is, car distributors, component manufacturers, dealers, logistics
companies and financing firms, are facing a challenging time. Figure 6.4 shows the
volume of sale for the vehicles sold in Malaysia from year 2001 to June 2006.
153
552,316
600,000
550,000
487,605
500,000
450,0000
400,000
-6%
434,954
Passenger Vehicle
Commercial Vehicle
405,745
396,381
350,000
300,000
250,000
248,407
200,000
150,000
100,000
2001
2002
2003
2004
2005
June
2006
Source:
Figure 6.4
Malaysia Vehicle Sales Performance
Source: Malaysia Automotive Association (2006a)
Particularly obvious is the sales performance for the first six months of the year 2006.
The Malaysian automotive industry faced a decrease in sales volume after eight
consecutive years of growth. The forecasted sales for year 2006 dropped 6% in
comparison to the previous year. The sales volume of 248,407 units for the first half of
2006 is 5% lower than that achieved in 2005. Worse, the local car make, Proton
contributed only 24 % of the total vehicle sales volume for the first half of 2006, which
is 60,291 units. A better view of Protons performance for six consecutive years is
illustrated in Figure 6.5, though the study is only concerned with the three years
between 2003 and 2006.
154
220,000
209,514
214,985
200,000
180,000
157,313
160,000
168,616
166,812
140,000
120,000
100,000
80,000
60,291
60,000
40,000
20,000
2001
2002
2003
2004
2005
June
2006
Source:
Figure 6.5
Proton Sales Performance
Source: Malaysia Automotive Association (2006b)
Figure 6.5 illustrates Protons sales performance for the years 2001 to June 2006. Proton
car sales registered a lower volume, notably in the first half of year 2006. In comparison
to sales volume of other car makes, Proton recorded 53 % of the total vehicle sales in
2001 with 209,514 units. In 2002, Protons sales volume increased to 214,985 units;
however, the contribution to total vehicle sales dropped from 53 % to 49%. In 2003,
Proton recorded a sales volume of 157,313 units, which was 39 % of total vehicle sales.
Consequently in 2004, Proton registered a sales volume of only 35 % of the total
vehicle sales; similarly, in 2005 Proton sales decreased to 30 % of the total vehicle
sales. With reference to the vehicle sales in Malaysia, the automotive industry recorded
a 9.8 % increase in sales from year 2001 to 2002. From the year 2002 to year 2003, the
automotive industry sales volume decreased by 6.7 %; however, in 2004 the automotive
industry registered a better sales volume with a 20.2 % increase. Similarly, vehicle sales
155
volume increased 13.3 % in year 2005; unfortunately, in the first half of 2006, vehicle
sales volume dropped by 6 %, indicating a turning point for the automotive industry in
Malaysia.
Meanwhile, an analysis of the growth of the local car maker, Proton, reveals that
for the years 2001 to 2002 there was an increase of 2.6% in sales volume.
Unfortunately, years 2002 to 2003 recorded a marked decrease in sales volume, of about
26.8 %; overall vehicle sale in Malaysia also showed a similar trend as illustrated in
Table 6.8. Consequently, the years 2003 to 2004 showed some improvement with an
increase of 7.2 %. Alas, the sales volume of Proton for the year 2004 to 2005 dipped by
1.1%, while the trend differed for the overall vehicle sale in Malaysia. The poor
performance of Proton became worse with the full implementation of AFTA in 2006 as
shown in Table 6.8.
Table 6.8
Vehicle Sales Performance in Malaysia: 2001-2006 (H1)
Car Make
2001
2002
2003
2004
2005
2006(H1)
Proton
209,514
214,985
157,313
168,616 166,812
60,291
Other Makes
396,381
434,954
405,745
487,608 552,316
248,407
Year
The study analysis revealed that on full implementation of AFTA, Proton vehicle sales
performance dropped drastically. In addition, the Proton vendors viewed the AFTA as
having an unfavorable impact in terms of competition; a spokesman for one of the
Proton vendor firms noted:
156
We find the implementation of AFTA has created unfair competition for the
automotive vendors, for our automotive industry is still a fledgling at 20 years of
age; whereas the industry for example started as early as before World War II in
Japan & at least 40 years ago in Korea, which indicates that their industry has
already come of age. You don't see many foreign cars in Japan & Korea. We are
letting too many cars in CBU & CKD (locally assembled) to compete head to
head with national cars. Countries like Korea only allow 3% imported cars but
we are importing 40% (CKD & CBU). Those people are loyal to local products.
Japanese interest rates are very low. Thailand has 90% imported vendors
whereas we have 90% local vendors. We need more time to catch up
[pers.comm, Vendor 4 (requested anonymity) 23 August 2006, 4:30pm].
As such, the majority of Proton vendors believe that they need more time to strengthen
their capabilities and that policies implemented by the government implemented ought
to favor the interests of local firms; hence, continuous protection from the government
is believed necessary to enhance the development of the local automotive industry.
Consequently, measures to overcome the effect of AFTA have been identified in the
subsequent government policy, namely the NAP.
157
158
linkages, invention and innovation activities; and finally the sixth strategic thrust
concentrates on training and skills upgrading through various training programmes and
courses.
The study noted that there is only one strategic thrust concerned with the issue of
human capital development. In terms of quantity, there is an obvious imbalance of
strategic thrusts; however this study is not concerned with the quantity aspect but
quality. To an important extent, the NAP has included all the factors that are specific to
the industry concerned. This policy should result in different measures for strengthening
industrial development; these measures will not be just aimed at overcoming the
problem per se, but on other aspects such as firm development, technology capabilities,
entrepreneurial competency and the like.
The introduction of NAP seems to have had a negative impact on a number of
Proton vendor firms as noted earlier in page 163 in the interview conducted. The firms
have to compete with local as well as foreign players as there are more products from
abroad in the local market; there are many CBU and CKD cars that compete
aggressively with other car makes. This statement is supported by data obtained from
the Ministry of International Trade and Industry (MIDA, 2005), which confirms that
Malaysias import of passenger vehicles in 2005 was 44.3 %, comprising 34.6 % CKDs,
and 9.7 % CBUs. This indicates that the number of CKD and CBU in the local market
is rather large compared to a country like Korea, and therefore local vendor firms are of
the opinion that they are not being helped to improve their performance.
The dissatisfaction of the national automotive vendor firms in terms of policy
implementation is further noted:
While foreign products are swarming into our market, our products have failed
to penetrate their market, should our government be doing more in
understanding the problem and helping us to resolve it? A lot of times, it is not
159
our capabilities that limit our expansion; it is the policies, the connection and
perception that need improvement. AFTA is meant for Asian countries but why
do Proton and Perodua keep looking for markets away from Asian countries?
NAP has not been a success for our country, the government failed to anticipate
the effect of the NAP. Looking at it from both the consumer and also producer
standpoints, it has caused more problems to the market rather than helping it
[pers.comm, Vendor 1 (requested anonymity), 22 August 2006, 2pm].
The local vendor firms regard the government policy implemented as not being helpful
and that it is contributing to worsening performance. While the vendors complain that
their sales volume had dropped significantly, the national OEM manufacturers claim
that they are witnessing a slow down in production due to unsold stock. They conclude
that government policies are at fault and need significant modifications to result in
better performance of the vendor firms.
On the other hand, those vendors who depend only on Proton as their customer
suffered poor sales when the sale of the local car make, Proton dropped quite badly as
illustrated in Charts 6.5 and 6.6. Comparatively, the Foreign-owned vendor firms are at
an advantage, for their sales volume is larger, covering both local and international
markets. This is as recorded in the interview: Our competitors are at an advantage due
to their volume, which we do not have in Malaysia [pers.comm, Manager 6 (requested
anonymity), 18 August 2006, 3pm]. Thus, the policy changes that occurred have not
only impacted the firms per se but the whole automotive value chain, notably the firms,
technology and the entrepreneurs. This aspect will be discussed in the next subheadings
of this chapter.
160
6.3.2
Firm
161
162
Finance is the greatest problem - arising from the macro view of the automotive
industry, many banks/financial institutions are reluctant to expand their credit
facilities especially to finance tooling and moulds. In other instances, banks are
not lending to the automotive industry. As OEM customers expect vendors to pay
for tooling and moulds upfront and coupled with the reducing cash in-flow due
to declining sales, finance is a constraint to securing new business
[pers.comm, Vendor 7 (requested anonymity), 24 August 2006, 2pm].
The financial constraint is mainly due to the reluctance of the financial institutions, or
banks in providing loans or other financial assistance to the automotive vendors. The
financial institutions implemented strict regulations such as the requirement for good
collaterals and several guarantors so as to discourage the automotive vendor firms from
applying the loans on one hand, and on the other, for greater prudence in providing
financial assistance to those who are convincingly capable of paying the loan amount.
Such practices became obvious when AFTA was implemented in 2006; vendor firms
have been unable to acquire loans and other forms of financial assistance to overcome
the challenges imposed.
In terms of market, the vendor firms noted, there are many competitors
competing for the same OEM market [pers.comm, Manager 7 (requested anonymity),
18 August 2006, 7pm]. The competition between vendors is high and increasing,
ultimately resulting in a reduced market share. AFTA has had the effect of decreasing
the sales volume of Proton, which has ultimately reduced the demand for parts and
components; as such, the vendor firms sales are also affected, especially those who are
solely dependent on one car manufacturer (Proton) as their customer.
In addition, the free trade system has encouraged more foreign car makes in the
local market; this scenario has worsened the competition in the local market as noted by
one of the vendor firms: competition is getting tougher as the foreign manufacturers
163
are penetrating our local market [pers.comm, Senior Executive (requested anonymity),
18 August 2006, 5pm]. The local market condition is further worsened by the rising cost
of raw materials, fuel, transport and labor, and as recorded: The cost keeps on
increasing but customers are demanding lower prices, and OEMs on the other hand do
not increase their sales volume but yet aggressively push vendors to reduce prices; with
no volume to reach economic of scale, we lack the capability to further reduce cost
structure [pers.comm, CEO 4 (requested anonymity), 24 August 2006, 5pm]. Hence,
the local vendor firms have a very small and highly competitive market, which requires
immediate improvement in terms of the quality of the products produced and price
offered.
While, the local firms have to rise to meet the high challenges, they have
significantly improved in terms of competitiveness, and capabilities seem especially
high among firms with a high share of the domestic market; the local vendor firms have
higher export propensities than would be expected on the basis of their improved
technological and entrepreneurial skills, and capabilities.
6.3.3
Technology
Technology in the automotive context is perceived to play a crucial role. The analysis
ascertained that a large number of Proton vendor firms do carry out research and
development activities but the focus and efforts differ. The research and development
activities carry out at Proton include basic collecting of information for product
planning, development and modification activities; full-scale model making; computeraided engineering design and manufacturing; and component and engine emissions
testing (Nor, 2000). Meanwhile, the R&D activities carried out by the Proton vendor
firms range from the basic product and process improvement activities to more valueadded activities such as design, prototype and testing [pers.comm, Manager 5 (requested
164
anonymity), 17 August 2006, 2pm]. The majority of Proton vendor firms, including the
large and the small- and medium- sized firms have invested moderately in R&D
activities; a few vendor firms have heavily invested in R&D activities, especially the
large-sized firms that have started venturing abroad. Those firms that have embarked on
overseas project believe that investment in R & D is not a choice but a must for them
to be able to compete in the global market [pers.comm, Manager 10 (requested
anonymity), 25 August 2006, 2pm].
On the other hand, there are a few Proton vendor firms that have invested very
little in R&D activities. These firms face difficulties in terms of finance as R & D
activities are costly and they are unable to continuously invest in an activity that does
not bring immediate returns to investment; as recorded: the R&D activities were too
slow due to small budget allocation [pers.comm, Manager 9 (requested anonymity), 25
August 2006, 9am]. The limited financial capability of some of the vendor firms
discourages them from actively carry out research and development activities, and thus
their focus is on basic improvement activities as noted by a few of the vendors: we
have not had an R&D facility as such; however, we have a production engineering
group that undertakes studies for improvements on product and process [pers.comm,
Manager 15 (requested anonymity), 8 September 2006, 2pm].
On the other hand, there is another group of vendors who actively carry out
R&D activities, and they are both from the large and small- and medium-sized firms.
These vendor firms have R&D departments, and the extent of their participation is
presented in Table 6.9.
165
Table 6.9
Automotive Vendor Firms Size and R&D Activity
SME
No. of
Perform
Has R&D
Status
Firms
R&D Activity
Department
Large
64
64
64
100
Small &
126
126
47
37
Unknown
27
Total
217
190
111
51
Medium
Fifty-one percent of the firms have particular R&D departments; they appear to have
upstream and value-added activities on a continuous basis, and they believe that they
have improved on the capabilities of designing parts, moulds, jigs and fixtures, and
prototypes. Indeed, these firms have continued to emphasize R&D activities so as to
bring their firms to the next level of progress. As noted by one of the vendors: we were
able to widen our product range and develop core competence in more value-added
services for development in the supply chain [pers.comm, Manager 12 (requested
anonymity), 29 August 2006, 4pm].
Few of the Proton vendor firms have strong R&D teams, including definite
personnel to carry out R&D activities, as well as specific equipment and facilities for
use in the R&D activities. Though these firms have invested heavily in R&D, and
initiated collaboration with various international suppliers for high end products as well
improved methods, they tend to face problems of a market that is limited. In this
instance, these vendor firms blame the lack of initiative on customers and the
government. As one of the vendor firms noted:
166
R&D is a trial and error activity. We need funding and a sense of exploration in
the industry. There should be more initiatives from the government to promote
the growth of R&D from the universities as academic institutions are regarded
as the best source to test the industrys new ideas and consequently to create a
pool of capable human resources that meet industry needs
[pers.comm, Vendor 6 (requested anonymity), 24 August 2006, 11am].
This statement, however, contradicts government efforts towards technological
development, notably promoted through the implementation of policies, introduction of
new programmes, and financial assistance. Among the policies emphasizing
technological development are the Malaysia five year plans, NDP and IMP; the
programmes introduced were BCIC, VDP; and finally, the financial assistance provided
in the form of SME fund, TDF fund, MAVCAP and a few others.
All the stated government policies, programmes and financial assistance are
designed to encourage the involvement of locals in major economic activities as
discussed in detail in Chapter 4. Indeed, the establishment of the SME Bank was meant
specifically to assist the small- and medium-sized firms to attain financial assistance.
Thus, it is obvious that the governments policies, programmes and financial assistance
are in place but to what extent they offer help is a point to ponder.
Another disappointment recorded during the interview was that local R&D effort
was rather less appreciated:
Our firm has invested in R&D facilities and test equipment in Malaysia with
trained Malaysian engineers and draughtsman. Our R&D investment in
Malaysia is very much more than in those Japanese joint venture vendors in
Malaysia but even so, our R&D in Malaysia was never regarded as good as
those Japanese joint venture vendors in Malaysia because their mother
companies in Japan have bigger R&D facilities. Owing to the above reasons,
167
our firm did not foresee any future to invest in R&D in Malaysia and we began
to shift our R&D activities to external technical sourcing and collaboration
[pers.comm, Vendor 5 (requested anonymity) 24 August 2006, 9am].
The dismay was basically due to the fact that there is less recognition accorded to locals
on local R&D effort; the preference has always been for foreign products produced by
joint venture vendors. This indicates that those vendors firms that have established joint
ventures with Japanese firms are in a better position compared to those that do not have
any collaboration programmes with foreign firms. This stereotype perception has partly
hindered the development of R&D in Malaysia.
Besides these hindering factors, the study noted that vendors paid less attention
to R&D activities due to the fact that the present competition is not in terms of quality
but in terms of price only. One of the vendors recorded: our local market share has
slowed down in terms of total industry volume; competition in the market is based on
pricing, not quality and firm capability, and four competitors are competing in the
OEM market and low cost is still the priority [pers.comm, Manager 14 (requested
anonymity) 6 September 2006, 5pm]. As suggested by Schumpeter (1942), the ultimate
reason for firms to innovate is to improve performance, which is through increasing
demand and reducing costs. Thus, the Schumpeterian perspective needs to be taken into
serious consideration by the local vendor firms, which is to reduce their cost structure in
order to reduce the price of their products, which ultimately will enable them to improve
their performance and stay competitive.
The competition became worse when Proton initiated shortening of the
development cycle of a completed car; for instance, the current development cycle of
18-24 months is to be shortened to about 15-19 months. This saw the vendors struggling
to shorten the development cycle of their parts and components in order to meet the
manufacturers requirement and to reduce the cost of producing competitive products.
168
The shortening of the product development cycle requires the vendor firms to acquire
adequate technological knowledge and skills to find innovative solutions to meet market
demand.
The study analysis demonstrates that 95 firms out of the sampled 217 firms have
technical collaboration with foreign firms; these technical partners are from the
developed and developing countries that include Japan, Korea, Germany, United
Kingdom, Taiwan, United States, Thailand, Denmark, Australia, Italy, India, South
Africa, Holland, New Zealand, Belgium, France, Switzerland, Indonesia, Philippines
and Sweden. Generally, the technical collaboration suggests that the Proton vendors
have the opportunity to learn and acquire technological knowledge and skills from the
experts for them to improve their codified and tacit knowledge, which ultimately will
enable the Proton vendors to produce competitive products as well as to come up with
innovative solutions when problems arise.
However, some Proton vendor firms do not have, or have rather limited
technological collaboration with foreign firms. The study regards this as a rather
worrying factor especially in the era of globalization and liberalization that necessitates
technical tie-ups with regional or international manufacturers in order to tap export
markets. This view is recorded in the interview: Collaboration with foreign partners in
terms of capital and technology; to increase the number of products and services to
customers so that we can move up in the supply chain; and to expand into foreign
market via strategic linkages [pers.comm, Manager 13 (requested anonymity),
6 September 2006, 10am]. In another vendors view: technological collaboration is
essential, for it fills up at the available capacity, helps us to get high volume projects for
an export market, and to train staff on new methods for spring manufacturing and
modules related to design technologies [pers.comm, CEO 6 (requested anonymity),
28 August 2006, 2pm]. Hence, there is crucial need for Proton vendor firms to establish
169
6.3.4
Entrepreneur
With reference to the case study conducted on the local automotive vendor firms, most
of the Proton vendor firms are owned by people with a technical background. Some of
the vendors were previous employees of the national manufacturer, Proton and they quit
when they realized there were great opportunities in the manufacturing industry; this is
as recorded in the interview: I worked with Proton for about 7 years before I decided to
become a supplier of parts and components to Proton [pers.comm, Manager 11
(requested anonymity), 29 August 2006, 11am]. In addition, the assistance provided by
the government that includes incentives and protection has encouraged more local
participation in the industrial sector. Such occurrences were obvious when the first local
car project was initiated in 1985. Local-owned firms began to emerge during this period
mostly as vendors supplying parts and components to the local car manufacturer.
Some of these vendors are former employees from the technical line, who had
previously worked as technicians and engineers, and thus they have had hands-on
experience. These vendors have acquired relevant knowledge, and technical skills from
the experience encountered during their paid employment; as noted in the interview: I
accumulated the necessary technical skills from the few years of my service with the
OEM. The knowledge I have acquired during my diploma years and together with the
experience I gained from my paid job have been very helpful in running my business
[pers.comm, Vendor 8 (requested anonymity), 12 September 2006, 10am]. In another
scenario, there are also some Proton vendor firms that were established by individuals
from the top management, who have adequate codified knowledge but comparatively
poor experience on technical aspects. This type of vendors began their businesses as a
170
partnership, teaming up with a partner who had the same interest but had better
technical knowledge and experience.
In terms of the characteristics of the entrepreneurs of the local automotive
vendor firms, they are generally committed to their business activities and appear to
have the enthusiasm. The differences encountered were mainly in terms of authority,
which is more apparent in large firms than in small- and medium-sized firms. Of
relevance to this study is the project SAPPHO which studied the innovation process in
the chemicals and scientific instruments industries (Freeman, 1973). The study
compared the characteristics of the successful innovations with those of its less
successful counterparts in both industries and came to the conclusion that authority and
power are vital to drive entrepreneurial activities successfully.
In terms of the characteristics of the entrepreneurs, the analysis carried out on
the Proton vendors of both the large, and small- and medium-sized vendor firms
indicated that the small- and medium-sized firms are often led by entrepreneurs who are
quick in adapting to changes and in optimizing their strength to grasp available
opportunities; while the entrepreneurs of large-sized vendor firms often take a longer
time to adjust to any change as the managers will have to go through a few channels
before a decision is made by the owner of the firm. It would therefore seem to be of
crucial importance for entrepreneurs not to be disturbed by organizational routines and
other impediments that limits their capabilities.
Therefore, this study explicitly includes consideration of the technology
entrepreneur as one who has knowledge, skill and experience of both technology and
the entrepreneurship disciplines, and has venture credibility to exploit technologies for
commercialization purpose; the entrepreneur has to integrate both the technical and
commercial aspects in his entrepreneurial endeavor and concerns other elements such as
the firms competitiveness, technological capability and the contextual changes.
171
6.4
This part of the chapter reviews a variety of information obtained from the interview
and survey to assess the technology entrepreneurship capabilities of Proton vendor firms
and to explain these with reference to contextual changes, firms competitive ability,
entrepreneurs depth of knowledge, and technological path. This assessment is the main
purpose of the analysis to understand the technology entrepreneurship capability of the
local automotive vendor firms.
The variables selected for determining technology entrepreneurship capability
level were based on the activities that enable a firm to create competitive advantage.
Such activities includes: (i) the ability to recognize changes that are related to the
automotive industry and the macroeconomic environment; (ii) the ability to search for
opportunities; (iii) the ability to identify strengths and build core competencies of the
firms; (iv) the ability to structure technological strategies tactically; (v) the ability to
understand the theoretical framework in-use, concepts and practices on the technology
that is commonly referred to by industry players; (vi) the ability to undertake
cooperative effort to build linkages among the vendors and with the suppliers,
manufacturers, research institutions, and higher learning institutions; (vii) the ability to
have a depth of codified and tacit knowledge for the entrepreneur to understand,
respond and act smartly and promptly; and (viii) the ability to lead the firm along paths
dictated by commercial drive and venture credibility . These critical variables interrelate
to show the significant influence of one variable on the others, and the sum of these
activities lead to the achievement of competitive advantage for a firm. It is hoped that
this studys concentration on the interaction of these critical variables, namely the
dimensions
would
provide
fairly
satisfactory
explanation
of
technology
entrepreneurship capability of Proton vendor firms. These eight variables are presented
in Table 6.10 according to the four constituencies of technology entrepreneurship.
172
Table 6.10
Technology Entrepreneurship Factors and Dimensions
Technology Entrepreneurship Factor
Dimension
Environment
1.
2.
Awareness
Search
Firm
3.
4.
Strategy
Core Competency
Technology
5. Technology Paradigm
6. Linkages
Entrepreneur
7. Learning
8. Leadership
All these variables are also known as technology entrepreneurship dimensions; they are
fairly important, and the sequence presented in Table 6.10 does not indicate the
importance of one factor or dimension to the others.
6.4.1
Awareness
The awareness dimension allows us to know to what extent the firm and the
entrepreneur are attentive to changes in the context; in other words, how alert are they
to the changes that are taking place in a particular environment, which includes
government, socio-economics and science and technology changes, and ultimately how
are they taking advantage of such changes. In this study, the issue of government policy
implementation that occurred during the period of this study was regarded as a change
in the context, and was assessed in terms of awareness.
6.4.2
Search
The search activity is viewed by Tidd et al.(2005) as the scanning of the environment
both internal and external, and processing relevant signals about threats and
173
opportunities for change. This activity is rather similar to Schumpeters idea of creative
destruction, where he insisted on constant search to create something new which
simultaneously destroys the old rules and establishes new ones. Hence, the search
activity is referred to in this study as the process of discovering and exploiting
opportunities, and detecting any threat in the environment. As such, search activity has
to be carried out on continuous basis in order to acquire cutting-edge information on
market trends, environmental change, and more importantly to secure opportunities
faster than the competitors.
6.4.3
Strategy
Strategy provides the key direction for a firm. It provides guidance on the effort
required to acquire resources and to implement it together with the firms existing
knowledge-base. Chiesa (2001) defines technology strategy as a trajectory that links
steps in a technology strategy with previous actions and programmes, and opens
opportunities and creates options for future investments along the defined trajectory.
Technology strategy is defined by this study as the plan of action on how to carry out
the technical and commercial activities successfully to the firms advantage. Through a
strategic policy, firms will be able to attend to the threats and opportunities effectively.
6.4.4
Core Competency
Core competency is viewed by Prahalad and Hamel (1990) as the collective learning in
the organization, especially on how to coordinate diverse production skills and integrate
multiple streams of technologies. Collis (1991) defines core competency as a set of
irreversible assets along which the firm is uniquely advantaged. In this study, this
dimension is referred to as the ability of a firm to identify its strengths from a set of
activities in which it can be developed to gain competitive advantage.
174
6.4.5
Technology Paradigm
Technology paradigm is defined by Dosi (1988) as the needs that are meant to be
fulfilled, the scientific principles utilized for the task, and the material technology to be
used; it involves a specific technology of technical change. For the purpose of this
study, technology paradigm is viewed as the existing platform of technology that is
referred to by everyone as a framework. It is also viewed as the solution model, or a
pattern of solutions for technological problems, and encompasses the development and
improvement of technological and related activities, and the future direction of a firm. A
firm needs to have a good understanding of the technology that is being referred or used
to enable the firm to come up with innovative solutions, and to be able to carry out
improvement and innovation activities.
6.4.6
Linkages
Linkages are essential to share knowledge and to transfer technology from one firm to
another, research institutions or higher learning institutions. Linkages can occur with
customers, markets, suppliers, competitors and other external sources of knowledge. It
can take various forms such as licensing agreements, alliances, and joint venture. In this
study, linkages are referred to as the collaboration among the vendor firms, and between
the vendor firms and suppliers and manufacturers. It provides opportunities for the
vendor firms to learn from their partners, and simultaneously develop strong
relationships with their affiliates.
6.4.7
Learning
Learning is defined by Tidd et al.(2005) as the ability to evaluate and reflect upon the
innovation process and identify lessons for improvement in the management routines.
Forbes and Wield (2001) viewed learning as the ability to adapt organizationally and
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6.4.8
Leadership
Leadership is the quality acquired by the entrepreneur to lead the firm effectively and
successfully. Entrepreneurs are required the have leadership quality, especially in
coercing for change to take place effectively in a firm. For example, the SAPPHO
project underlined the crucial importance of authority and power characteristics in an
entrepreneur in order to alter significantly the course of the project (Rothwell and
Zegveld, 1982). Acquiring a leadership quality will enable the entrepreneur to have the
ability to affect favorably his entrepreneurial endeavor in a win-win situation with his
staff, and simultaneously foster an atmosphere conducive to encourage learning and
knowledge sharing culture in the firm.
176
6.5
177
Table 6.11
Average Score of Technology Entrepreneurship Capability Dimensions
No Dimension
Average Dimension
Score (ADS)
Awareness
49
3.1
Search
28
28
2.5
Strategy
46
2.1
Core Competency
35
21
2.4
Technology Paradigm
40
16
2.3
Linkages
10
31
15
2.3
Learning
23
30
2.5
Leadership
22
34
2.6
19.8 / 8 = 2.48
The detailed score for each dimension is used to come up with a profile of technology
entrepreneurship strengths and weaknesses. The assessments basically encompass 8
main activities of technology entrepreneurship capability as presented in Table 6.11
From Table 6.11, it can be seen that the average dimension score (ADS) of the
56 firms for the awareness dimension is 3.1; the ADS for the search dimension is
2.5; the ADS for the strategy dimension is 2.1; the ADS for the core competency
dimension is 2.4; the ADS for the technology paradigm dimension is 2.3; the ADS for
the linkages dimension is 2.3, the ADS for the learning dimension is 2.5, and finally the
ADS for the leadership dimension is 2.6. The inference that can be made from the score
obtained for each dimension of the firms assessed is discussed in the following
paragraphs.
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6.5.1
The average dimension score obtained by the 56 firms for each of the eight dimensions
is presented graphically through the Radar Diagram. Using the eight dimensions, an
overall profile of technology entrepreneurship capabilities is generated for the 56 firms
assessed. The Radar diagram as illustrated in Figure 6.6 reveals the strength in one key
area (e.g. awareness) and weakness in another key area (e.g. strategy) of the assessed
firms. The identification of strength refers to the dimension that achieved the highest
average dimension score, while weakness is indicated by the dimension that has
obtained the lowest average dimension score. With that, the strength is seen in the
highest score achieved, which is 3.1 for the awareness dimension, and the weakness is
obvious in the lowest average score registered, which is 2.1 for the strategy dimension.
Awareness
4
Leadership
Search
Learning
Linkages
Strategy
Core Competency
Technology Paradigm
Figure 6.6
Technology Entrepreneurship Capability of Proton Vendor Firms
179
The rationale for the score obtained for each technology entrepreneurship key activity
illustrated in Figure 6.6 is elaborated in the paragraphs that follow.
6.5.2
Analysis of Awareness
In term of awareness, most of the vendor firms registered a high score with only one
firm scoring 2. On average, the parts and components vendor firms registered a score of
3.1 demonstrating that the local vendor firms are well aware of the environmental
changes that occur around them. Most of the vendors were able to recognize the
technological changes and the increasing competitiveness, resulting particularly from
the policy implementation, notably AFTA in 2006. As such, the period under study,
between 2003 and 2006 witnessed great challenges faced by the automotive industry in
general, and Proton and its vendor firms in particular.
During the 3-year period of study, the local automotive vendors were confronted
with increasing competition that inhibited them from acquiring economies-of-scale, and
creating competitive advantage for their firms. However, having a fairly good
understanding of the contextual changes better prepared the Proton vendors to face the
immediate challenges at the point of the study period. As such, one of the vendor firms
noted, after the implementation of AFTA & NAP, we managed to sustain even when
the product price kept on decreasing and the cost of raw materials increasing
[pers.comm, Manager 18 (requested anonymity), 15 September 2006, 9:30am].
6.5.3
Analysis of Search
With regard to searching, on average the companies have the capability to scan the
environment and look for opportunities and threats. Some of the firms have separate
departments like Business Intelligence Unit or at the least, a marketing department with
a few personnel often headed by Chief Technical Officer to scan the technology
180
landscape through network and other linkages. They monitor industry development both
domestically and internationally, and are able to identify the market trends and the
forthcoming opportunities and threats. As such, the firms that scored 3 in the search
dimension are better prepared to overcome the challenges than their competitors.
However, the group of firms that scored 2 does not have any particular personnel
to carry out such scanning activities; it is often done by the senior management or the
entrepreneur himself. These firms monitor technology development and environmental
threats on an occasional basis, and there is no any specific procedure or an appropriate
structure to monitor technology and product development.
6.5.4
Analysis of Strategy
In terms of strategy, the firms on average scored the lowest which is 2.1. Most of the
vendor firms do not have an explicit technology strategy; however, they do have a
strategy to develop components based on Protons specification. Strategy is viewed as
the plan of action and selection of emphasis for the firms long term and short term
activities. During the period of this study, most of the firms seemed to have diverted
their strategy to structure cost-reducing methods in the production of their components
as the competition is based more on price than quality. Thus, the strategies of these
firms are rather short-term based, for their effort is often concentrated on resolving
problems as they arise.
On average, most of the vendor firms have adopted relatively inappropriate
strategies. However, there are few vendor firms that have scored 3, and these firms have
well-developed technology strategies and well-structured action plans. As such, they
have better knowledge of technology options and the priorities to be given for the
activities planned.
181
Besides the vendor firms, the national automotive manufacturer too has drawn
strategic action plans to enable the vendor firms to compete fairly in the domestic
market. Among the actions taken by Proton were to reduce the product development
cycle from 24 to 19 months; to reduce production and development costs; and to reduce
the number of vendors from 250 to 100 or less. All of these initiatives are aimed at
improving competitive pricing and better after sales service quality as well as enhancing
the quality of production to globally acceptable standards.
6.5.5
182
progress. Arising from these R&D activities, we were able to widen our products range
and develop core competence in more value-added services for development in the
supply chain [pers.comm, Manager 19 (requested anonymity), 21 September 2006,
9am]. This implies that a small percentage of local vendor firms have embarked actively
on R&D activities, while the majority have rather limited ability in building and
strengthening their core competencies.
6.5.6
In the area of technology paradigm, the average score obtained by the vendor firms is
2.3. Such a score reflects the relatively fair dependency of the vendor firms on foreign
technology. The dependency began when Malaysia launched its fist national car project
in 1985. Proton became very dependent on Mitsubishi technology for an extensive
period of about 15 years, and as a result made very little attempt to change the
underlying technology models which is its reference point. Thus, the score was basically
due to poor acquisition of technology, technical skills, and adequate knowledge to
comprehend the technology transferred from Japan, and worse to exploit the technology
adopted.
In consequence, the national automotive vendor firms had relatively poor
mastery of the particular technology platform that was referred to and used by the
national automotive manufacturer. On average, the national automotive vendor firms
were dependent on foreign technology, and therefore, made less effort to develop
indigenous technology; this is as noted in the survey, the dependency on Japanese
technology is one of the factors that has somehow inhibited indigenous technological
development of the industry [pers.comm, Senior Manager 4 (requested anonymity),
5 September 2006, 10am].
183
Only a few of the national automotive vendor firms are less dependent on
foreign technology, and they revealed that they are able to improvise on the technology
adopted and develop their own design. These firms basically scored 3 in this dimension,
and they were able to conduct the upgrading of product or process on a continuous
basis. Indeed, these firms seemed to have vigorously taken the effort to improve and
enhance the research and development activities to develop indigenous technology
capability, as recorded in the survey:
We undertake consolidation of inter-department activities and carry out R&D
activities that includes capabilities on designing parts, moulds, jigs & fixtures
and prototypes, supported by our CAD software e.g. CATIA, Auto-CAD &
Unigraphic. We have given full commitment to our development team in
delivering our customer's request through the TS 400 & ISO 9000 system. We
have expanded staff force especially engineers to support business growth;
created a specialized styling & design team and set-up a design center to
develop products in-house; we have adopted the ISO/TS 16949:2002 quality
management system in addition to ISO 9001:2000
[pers.comm, CEO 7 (requested anonymity), 15 September 2006, 6pm].
Thus it can be seen that a few of the Proton vendor firms progressed in technological
development with initiatives in terms of R&D and quality implementation. In other
words, these few vendor firms have acquired adequate technological knowledge that
enabled them to establish a good understanding of the technology being referred to; they
know the technology paradigm of the industry they are involved in.
6.5.7
Analysis of Linkages
In terms of linkages, on average the vendor firms registered a score of 2.3 that gives an
indication that most of the local vendor firms acknowledged the significance of having
184
185
Besides these constraints, the vendor firms are also confronted with price competition,
which has led them to collaborate with car parts and components makers from China, in
an attempt to lower their cost of production, and ultimately to lower their prices and stay
competitive in the market, which is essentially determined by price, and less on quality
or firm capability. Thus, to be competitive in the present explosive pace of
technological development, the local vendor firms should make additional efforts to
convince the foreign firms to establish strategic linkages with them, or other institutions.
6.5.8
Analysis of Learning
The next dimension presented in the Radar diagram is learning. On average, the
vendor firms registered a level score of 2.5, which suggests that the entrepreneurs of the
vendor firms acknowledged the importance of codified knowledge, skills and
experience for the firms better performance. Some of the firms have well-structured
policies to encourage continuous learning for their staff and knowledge sharing between
the superiors and subordinates. Indeed, a few of these firms have their own training
centers with in-house designed programmes and activities to improve staff skills and
knowledge, as noted in the interview:
We expanded staff force especially engineers to support business growth;
created a specialized styling and design team and set-up a design center to
develop products in-house. We also adopted ISO/TS 16949:2002 quality
management system in addition to ISO 9001:2000. In addition, we have
designed our own Kobetsu Kaizan activity to further enhance our companys
cost structure
[pers.comm, CEO 8 (requested anonymity), 14 September 2006, 2:30pm].
In addition, the vendor firms that are collaborating with foreign partners conduct
training at the universities that have established a partnership with the particular foreign
186
firm, as recorded during the interview: We emphasize QCD learning and a knowledge
based environment. We have increased training hours per employee and our
management training is held at our university abroad [pers.comm, Manager 17
(requested anonymity), 13 September 2006, 10am].
In contrast, the vendor firms that scored 2 for this dimension appear to have less
policies and mechanisms to improve staff skills and knowledge. They do not have
formal procedures to capture knowledge from past projects and to use it for future
projects. As the knowledge is not transmitted in written form, the knowledge is not
secured, and the firm gets into a risky position if the particular employee leaves the
firm. The knowledge is lost and consequently provides an opportunity for the firm to be
threatened by its competitors.
Also, these firms have difficulty in reading and understanding blueprints, which
are essential for problem-solving, improvement and upgrading of the products
produced. Worse, there are a small number of few firms that scored 1 in the learning
dimension, which reflects that they are not concerned about staff learning. They do not
encourage learning activity in the firm, and thus the learning mechanism in these firms
is relatively unclear and questionable.
6.5.9
Analysis of Leadership
In terms of leadership, the vendor firms on average scored 2.6 for this dimension. Often,
the entrepreneurs perform the leading function in bringing, inter alia, new industrial
enterprises into existence; they function as powerful agents of change, not only
economic change but also social change which inevitably accompanies it
(Gerschenkron, 1966). In this study, most of the vendors are found to be dedicated to
managing most of the operations of their firms and some of these vendors used
workflow project management procedures to manage their firms effectively.
187
188
6.6
The analysis of the average score obtained by the 56 firms for the eight dimensions
enables the categorization of the firms into four main types in a scale of 1 to 4. Scale 1
is also referred as Level 1, and it denotes a Passive type of firm, level 2 represents a
Reactive type of firm, level 3 is a Proactive type of firm, and finally level 4 is the
Innovative type of firm. The categorization of firms according to these four different
types is achieved by adding up the average scores from all the eight dimensions and
dividing it by 8 as presented in Table 6.12. The number of firms in each category
according to their technology entrepreneurship capability is presented in this table as
well.
189
Table 6.12
Overall Technology Entrepreneurship Capability Level
Technology
Entrepreneurship
Capability Level
No. of
Firms
1
(Passive:
0.1 to 1.0)
Poor codified
knowledge, and low
skills.
Lack of leadership
skills.
2
(Reactive:
1.1 to 2.0)
3
(Proactive:
2.1 to 3.0)
48
Good knowledge-base.
Good leadership skills.
4
(Innovative:
3.1 to 4.0)
Excellent knowledgebase.
Excellent leadership
skill.
Entrepreneur
Technology
Firm
Context
Recognizes the
environmental changes,
and has adequate
capability to search for
opportunities and
threats.
190
Recognizes the
environmental changes
but has limited
capability to search for
opportunities and
threats.
The overall average dimension score achieved is 2.48, which categorizes the national
automotive parts and components industry into level 3.
technology entrepreneurship capability level where the majority of vendor firms are as
presented in Table 6.12. In terms of percentage, the third level accounts for 85.7 % of
the vendor firms. Within the sector, another 8.9 % of the firms are in the Reactive
category; and another 5.4 % are categorized as the Innovative type of firms.
The results obtained for each firm is then presented in graphically, using a
scatter plot diagram as shown in Figure 6.7.
Degree of Preparedness
4.00
Innovative
3.00
Proactive
2.00
vendor firm
Reactive
1.00
Passive
0.00
0.00
1.00
2.00
3.00
4.00
Degree of Awareness
Figure 6.7
Scatter Plot of the National Automotive Industrys
Technology Entrepreneurship Capability
The scatter plot diagram presents the results of an individual firm according to its
technology entrepreneurship capability. Generally, the scatter plot enables the clustering
of firms into four different types: passive, reactive, proactive and innovative with their
characteristics presented in Table 6.12. The majority of the vendor firms are found to be
spread in the range of Proactive capability, and within this category, there are firms
191
that are highly Proactive, Proactive or barely Proactive in their approach. There are
also a few firms that exhibit capability in the Reactive range, and very few firms are
found in the Innovative category. There is no representation in the Passive category.
It is observed that most of the vendor firms are relatively above average in their
technological and entrepreneurial capability but are relatively less capable of
developing new products or processes, and thus they are relatively less competent when
it comes to sustaining their businesses. This notion is as noted in the interesting pattern
that emerged out of the vendor firms performance of technology entrepreneurship
capability, in which the vendor firms appeared to have a higher level of technology
awareness compared to the level of technology preparedness. This reflects that the
automotive sector has strengths in the acquisition of knowledge on industrial
environment and technological changes, which is known as technology awareness,
and weaknesses in the implementation of technology, or technology preparedness.
The relatively high score in technology awareness is generally reflected by the
range of scores obtained for the first and second dimensions, namely awareness and
search; while the low score in technology preparedness is a reflection of the wide range
of scores obtained by the vendor firms for the dimensions 3 to 8. These are strategy,
core competency, technology paradigm, linkages, learning and leadership. The analysis
showed that regardless of a relatively high awareness of technology, many vendor firms
have problems in structuring strategies strategically.
On average, most firms do not have strategic road maps; therefore, almost all
were followers rather than innovation leaders. As followers, many have relatively poor
to average structured strategies; they cannot be fast followers in terms of quick
reproduction and improvement of products and processes. This poorly scored strategy
dimension affects the firms technology preparedness; for instance, most firms are
found to have relatively average capability in identifying and developing core
192
competencies to create competitive advantage for their firms. As such, most of these
firms did not complement their strengths in awareness with strategic actions and other
key activities.
Since the firms assessed are of large and small and medium size, a comparison
is made with regard to relative level of technology entrepreneurship capability. The
small- and medium-sized firms generally lack the resources such as capital and staff to
acquire and develop technology and new products; they also have difficulty in reducing
cost structure. However, some of the small- and medium-sized firms are capable of
undertaking product improvement activities. Less bureaucracy and less management
structures enable the small- and medium-sized firms to be quick in decision making and
in exploiting opportunities.
The large size firms have an advantage in terms of acquiring and securing
financial assistances and commercialization of products due to brand recognition, a
result of their long years of establishment. The large-sized firms place emphasis on
technology and product development through their active involvement in R&D
activities. They have the capability to carry out innovation type of activities such as
product development and process improvement.
6.7
Summary
193
capability for opportunities and threats. The entrepreneurs are observed to possess
relatively adequate codified and tacit knowledge for continuous improvement; in
addition, most of the firms are owned by entrepreneurs with relatively average
leadership qualities which enable them to coordinate and manage firms accordingly.
However, in the domain of implementing entrepreneurs knowledge and
leadership skills together with a relatively good sense of awareness and search
capability, the vendor firms registered a relatively lower scale of the average level with
figures such as 2.1 for strategy, 2.3 for technology paradigm and linkages, and 2.4 for
core competency. In terms of technology entrepreneurship, the weaknesses are in the
key activities of the firm and technology constituencies; they are: strategy, core
competency, technology paradigm, and linkages. In general, many firms have relatively
poor to average developed strategies. Most of the firms do not have explicit technology
strategy, which could provide them the strategic path to take in order to create
competitive advantage. The analysis revealed that the vendor firms are at a crucial
juncture in terms of sustaining their businesses, particularly price competition, as many
of them had not developed strategies to reduce cost structure.
The analysis showed that in general, weakness in developing strategy
strategically has affected their performance in other key activities such as identification
of core competencies, establishing linkages with external affiliates like technology
suppliers, and mastering technology paradigm for improvement and development
activities. As such, it is observed that most vendor firms fall under barely Proactive
and Proactive in these dimensions.
An interesting pattern emerged from the analysis of technology entrepreneurship
capability of the vendor firms in the automotive sector. The analysis revealed that the
vendor firms are relatively stronger in their degree of awareness, which is represented
by the awareness and search dimensions in comparison to degree of preparedness. The
194
lower scores reflect the range of low scores obtained by firms for dimensions 3 to 6. In
other words, most vendor firms recognized technological changes and are aware of their
need but their strength in these dimensions is not complemented with actions. Thus,
most vendor firms need improvement in terms of two factors of technology
entrepreneurship, namely firm capability, which includes developing strategies and
identifying core competencies, and technology capability, which addresses mastering of
technology paradigm and establishing linkages.
195
7.1
Introduction
This final chapter provides an overall summary of the thesis followed by a summary of
the key findings. It then looked into the impeding factors that affect the building of
technology
entrepreneurship
capability.
Then,
recommendations
with
policy
implications are provided in terms of the four factors and eight key dimensions of
technology entrepreneurship. Consequently, suggestions for future research in the field
of technology entrepreneurship are offered. The chapter ends with concluding remarks.
7.2
Summary of Thesis
196
achieving independence (1957) up to 2005. The year 2005 marked the end of IMP 2
(1996-2005) and 8th Malaysia Plan (8MP) (2001 2005) periods. Both IMP2 and 8MP
were introduced by Mahathir, the prime minister then, who had significant influence on
the initiation of the drive towards technology based entrepreneurship in Malaysia. Thus,
Chapter 3 presents the analysis of technology entrepreneurship from the macro
perspective to trace the root of technology entrepreneurship practice in Malaysia.
Accordingly in Chapter 4, the study narrows the discussion of entrepreneurship
and technology entrepreneurship development in the context of the automotive industry
as it is regarded as one of the most appropriate industries to analyze the main theme of
this study, which is technology entrepreneurship capability. The selection of the
automotive industry was based on its value chain, which involves use of technology in
all its processes, from raw material acquisition to completion of an automobile.
Moreover, as the automotive industry is a complex industry, which is made of
thousands of parts and components, the number of firms involved as suppliers of these
parts and components is also many; the participation of a huge number of supplier firms
reflects obvious practice of entrepreneurship in the automotive industry.
In addition, the nature of activities performed by these automotive supplier firms
is technology oriented. As such, the widespread use of technology in the automobile
value chain, the vast entrepreneurship opportunities in the automotive industry, and the
increasing use of technology in the entrepreneurial activities carried out by the supplier
firms reflect the convincing exercise of technology entrepreneurship in the automotive
industry. Therefore, the study of technology entrepreneurship is regarded as most
suitable in the context of the automotive industry.
Having acquired relevant literature, and pertinent data on the main theme of this
study, Chapter 5 discusses the methodology adopted, namely the Oslo Manual (OECD,
2005). The Oslo Manual was adapted to the field of technology entrepreneurship in
197
198
7.3
199
In terms of strategy, on average the vendor firms have rather poorly structured
strategy to create competitive advantage. The lowest score obtained, 2.1 for this
dimension, has an influence on the building of core competency. As such, the vendor
firms recorded a lower scale of a 2.4 average score for the core competency dimension.
In the area of technology paradigm, the national automotive vendor firms were
dependent on foreign technology, and therefore, scored 2.3 as they have relatively
average mastery of technology used. Generally, the vendor firms have a poorly
developed level of technology which would not enable them to sustain competitiveness.
In term of linkages, on average, the vendor firms acknowledged the significance of
having strategic collaborations; however, they are less preferred by foreign firms as
they have their own established supplier network. Thus, the Proton vendor firms scored
a lower average score of 2.3 for the linkages dimension.
In the learning dimension, the local vendor firms on average scored 2.5, for
they acknowledged the importance of codified knowledge, skills and experience for the
firms better performance. Some of these firms have started to encourage learning
activity on a continuous basis; a few others have instituted appropriate learning
mechanisms to foster a learning culture in the firm. The learning activity is attributed
to the focus and target of the firms leader. As such, in the leadership dimension, the
local parts and component vendors on average obtained a score of 2.6 as they were
dedicated to managing their firms effectively. Some of these local parts and components
firms have ventured into the international market as a result of efficient leadership.
Against these findings, the overall dimension score obtained was 2.48, which
categorizes the national automotive sector into the proactive level. It is level 3 of
technology entrepreneurship capability on a scale of 1 to 4. It is obvious that the firms
on average have good business and technology understanding but are only moderate in
exploiting them to create opportunities and to achieve their business goals. They indeed
200
face difficulty in creating competitive products and penetrating the foreign market
though they report a high awareness of technology. Thus, they are confronted with
challenges which require immediate improvements in terms of strategy, technology
capability, and entrepreneurship skills to be able to compete in the increasingly
competitive environment.
7.4
The analysis presented in Chapter 6 has identified a list of impeding factors that hinder
the national automotive industry from building technology entrepreneurship
capabilities. These factors are presented according to the four factors of technology
entrepreneurship.
7.4.1
201
7.4.2
Firm
The introduction of AFTA has permitted the entry of many foreign cars in the local
market; as such, the volume of sales of the national car, namely Proton, has dropped
tremendously. This has a direct impact on the local vendor firms performance; it has
deteriorated as the volume of sales for the national car decreased. The decreased
demand for the national car has affected the vendor firms so badly that some of them
are unable to sustain their businesses, especially those firms that do not have a
structured road-map to enable them to stay fairly competitive in the market. The
relatively poorly drawn strategies of some of the vendor firms has led to their poor
performance in most of the other seven key dimensions of technology entrepreneurship,
particularly core competencies, technology paradigm and linkages.
7.4.3
Technology
The current economic scenario requires the vendor firms to produce products that are
good in quality and low in price. The local vendor firms are comparatively less capable
of producing competitive products due to relatively poor capability in terms of
technology. In the survey conducted, most of the vendors encountered limitation in their
technological ability to improve their performance, and ultimately this constrains
business expansion.
Most of the local vendor firms appear to have limited linkages with foreign
firms. For many firms, their efforts at building strategic alliances with foreign firms
were relatively less significant due to poor absorption of technological knowledge from
their foreign alliances. Thus, technological development has not shown any
improvement among the parts and components vendor firms. This issue is pinching
the vendors from further improvement and advancement, and therefore, an actionable
202
7.4.4
Entrepreneur
7.5
Recommendations
The above discussion and summary calls for a number of recommendations to foster the
development of technology entrepreneurship in Malaysia. Suggestions are listed in an
effort to effectively upgrade the technology entrepreneurship capability of the national
203
automotive parts and components industry. The globalization scenario requires the
firms to be independent and competitive. Some government protection measures can no
longer be extended though the national automotive industry still needs government
protection though not forever. New ways of staying abreast with other competitors have
to be strategized. In view of such circumstances, this study recommends suggestions in
relation to the four main factors and eight key dimensions of technology
entrepreneurship.
7.5.1
The policy implications of this study are based on the results obtained from the analysis
of technology entrepreneurship capability. As most of the local vendor firms encounter
difficulties in enlarging their market scope, it is imperative for the government to
indicate awareness of the urgent need for the national automotive parts and components
vendor firms to enlarge the market scope of the local products. It is suggested that the
government adopt a particular automotive engineering standard according to the local
industrial environment as was introduced by the Japanese government in 1919 through
its Ministry of Commerce and Industry to enlarge the size of the Japanese national
market (Odaka,1999). The engineering standard introduced by the Japanese government
had encouraged the general development of the machinery industry, and upgraded the
quality of the domestic machines. In fact, the introduction of the Japanese engineering
standard and related industrial policies fostered the development of automobile industry
in Japan (Odaka,1999).
Besides, the local parts and components vendor firms are also urged to search
for opportunities in an alternative market to enable them to expand their market size,
and ultimately realize economies-of-scale relatively easily. If this is achieved, the
vendor firms do not have to depend on a single manufacturer as practiced by some of
204
the national automotive parts and components vendor firms. The survey results show
that some vendor firms are totally dependent on the national car manufacturer and sell
their parts and components only to Proton, and not to other manufacturers or OEMs.
This saw their sales performance dipping badly when the sales volume of the Proton car
decreased as a result of AFTA implementation.
7.5.2
205
suppliers who prefer to focus on their core activities rather than encompassing the
whole market spectrum. For example, the large automotive supplier, Delphi, has sold
off units that are not part of its core activities, and Lear, on the other hand, has started to
focus on interior systems (UNCTAD, 1999).
In addition, this study suggests that the government pass a legislation to
specialize on a particular type of automobile according to the national automotive
industrys capability and competency. This is significant to enable the national
automotive parts and components vendor firms to build on their core competencies. As
suggested by the Institute of Developing Economies (IDE) of Japan, Malaysia can
specialize in compact cars with automatic transmission; while Thailand and Indonesia
can continue to specialize in pick-up trucks and multi-purpose vehicles (IDE, 2007).
With that, the national automotive industry will have a clear direction on creating
competitive advantage though rivals are expected in the production of compact cars,
notably India and China.
7.5.3
In terms of linkage, the national automotive vendor firms should find a market
niche globally. They must go global to tap export markets and reduce their dependency
on the national OEM. This is crucially important as global networks are replacing local
206
supply linkages; the endeavor for a global network has led to considerable consolidation
and restructuring of the parts and components industry in countries such as Brazil, the
Czech Republic, India, Poland and South Africa (Humphrey and Memedovic, 2003).
Indeed, the worlds vehicle manufacturers are making serious efforts to consolidate and
rationalize to gain access to global markets. Thus, it is recommended that the local
vendor firms find ways to consolidate through the vendors association as such an
exercise would promote sharing of expertise to produce competitive parts and
components.
7.5.4
As the vendor firms require skilled labor at all levels of the automotive value chain, it is
imperative that the entrepreneur is equipped with multiple skills so as to be able to
advise the workers accordingly and to encourage a multi-skill culture at the firm. As
such, the entrepreneur has to make an attempt to reward multi-skilled workers and it can
be exercised through job rotation, which is practiced by the Japanese car maker, Toyota
(ILO, 2000).
Besides, the education and training system also has to address industry needs for
multi-skilled human resources. It is therefore recommended that the government
particularly highlights the significance of collaboration between institutions of higher
learning and industries for producing multi-skilled and competitive workers. A special
grant can be awarded to the institutions of higher learning that have collaborative
programs for industry players. In addition, the incorporation of entrepreneurship courses
in various technical-based programs such as engineering is regarded essential to equip
engineering students with entrepreneurship knowledge, as well to inculcate an
entrepreneurial culture among the students with technological background; this exercise
is essential to generate human resources who are multi-skilled and compatible. The
207
7.6
Future Studies
208
7.7
Conclusion
This study is distinct from previous studies as it contributes to Malaysias industrial and
entrepreneurship development by being among the pioneer studies employing an
improvised technology entrepreneurship capability framework that denotes the
technology entrepreneurship capability of the national automotive industry at a period
when the state-supported national automotive industry is being badly affected by the
regional trade policy, AFTA.
As such, this study sought to understand the trend of entrepreneurship
development in Malaysia, and identified the root of technology entrepreneurship
practice, prior to determining the technology entrepreneurship capability level of the
national automotive parts and components industry, which was the main objective of
this thesis. This study also examined the impact of industrial environment change on the
automotive industry in terms of technology entrepreneurship, and consequently
identified the strengths and weaknesses of the national automotive parts and
209
components industry. Thus, the outcomes from this study should be useful to the
automotive industry players particularly to overcome their weaknesses in building
technology entrepreneurship capability, and generally to provide guidelines to the
policy makers in drafting government policies to upgrade the technology
entrepreneurship capability of the national automotive industry and to promote the drive
towards technology entrepreneurship in Malaysia.
The contributions of this study to literature include a relatively new definition of
the term technology entrepreneurship, and the identification of a set of factors to
provide a better understanding of the term; and a set of key activities of technology
entrepreneurship to achieve competitive advantage at firm level. This study has
supplemented literature on technology entrepreneurship by exploring a new research
area, the automotive industry as a case study.
In addition, this study has developed a modified version of the approach of
Bessant et al.(2000) to the innovation capability audit tool, which is suited to the study
of technology entrepreneurship and the Malaysian industrial context in terms of changes
in the key dimensions, and the categorization of dimensions for the analysis between the
degree to which firms are aware of technology entrepreneurship issues, and how well
the firm is prepared to put them into practice. In providing an improvised technology
entrepreneurship audit framework, this study has provided the gateway for further
research on the appropriate dimensions and the research areas to be explored. It may be
interesting to examine the technology entrepreneurship capability of other industrial
sectors and the impact of their capabilities on the Malaysian economy or other
developing countries.
210
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Appendix A
Table 1
Summary of Characteristics of 11 Proton Vendor Firms - Casting
NO.
VENDOR
CODE
OWNERSHIP
SME
STATUS
*TYPE OF
BUSINESS
DATE OF
INCORPORATION
YEAR OF
BUSINESS
ANNUAL
TURNOVER
(2005)
NO. OF
STAFF
10156
Bumiputra
Large
(PVL)
26/07/1984
1985
32,653
267
10474
Bumiputra
Large
(PVL)
01/06/1993
1995
20,297,099
100
10619
NonBumiputra
SME
(PVL)
14/04/1980
1988
274,490
40
10723
Bumiputra
Large
NA
26/07/1984
1985
NA
NA
10827
Foreigner
Large
(PVL)
22/04/1989
1999
34,030,811
650
10988
NA
SME
(PVL)
06/12/2003
1993
NA
162
11918
Foreigner
Large
(PVL)
18/04/1989
1990
42,098,449
393
12167
Foreigner
SME
(PVL)
01/06/1998
1999
1,278,000,000
110
14775
NonBumiputra
SME
(PVL)
18/05/1996
1999
NA
NA
9
10
15059
Foreigner
NA
NA
01/01/2000
2003
NA
NA
11
17720
Foreigner
Large
(PVL)
01/01/2004
2004
358,787,500
1,170
Table 2
Summary of Characteristics of 35 Proton Vendor Firms
Electrical & Electronics
NO.
VENDOR
CODE
OWNERSHIP
SME
STATUS
*TYPE OF
BUSINESS
DATE OF
INCORPORATION
YEAR OF
BUSINESS
ANNUAL
TURNOVER
(2005)
10389
Bumiputra
SME
(PVL)
02/03/1994
1994
4,867,487
69
10457
Bumiputra
SME
NA
01/01/1988
1988
NA
NA
10478
SME
(PVL)
06/12/1983
1985
2,070,000
12
10486
Large
(PVL)
30/09/1981
1985
69,252,078
136
10510
SME
(PVL)
01/01/1984
1985
31,000,000
139
10592
Large
NA
31/12/1970
1998
260,000,000
273
10630
Large
(PVL)
07/08/1989
1994
122,394,373
639
10631
SME
(PVL)
24/02/1995
1995
14,607,068
14
10766
Bumiputra
SME
(PVL)
01/01/1993
1993
31,842,141
10
10769
Bumiputra
SME
(PVL)
02/10/1991
1996
4,384,486
NA
11
10861
Foreigner
Large
NA
02/12/1988
1988
322,000,000
895
10941
NonBumiputra
SME
(PVL)
15/03/1973
1985
61,553,613
102
12
NonBumiputra
NonBumiputra
NonBumiputra
NonBumiputra
NonBumiputra
NonBumiputra
NO. OF
STAFF
225
Table 2, continued
NO.
VENDOR
CODE
OWNERSHIP
SME
STATUS
*TYPE OF
BUSINESS
DATE OF
INCORPORATION
YEAR OF
BUSINESS
ANNUAL
TURNOVER
(2005)
NO. OF
STAFF
13
10986
Bumiputra
Large
(PVL)
12/10/1983
1985
106,481,897
254
14
11056
Foreigner
Large
(PVL)
28/04/1972
1985
NA
1,486
15
11071
Bumiputra
Large
(PVL)
25/09/1978
1994
124,144,000
180
16
11147
Foreigner
Large
(PVL)
19/10/1985
1991
66,768,318
304
17
11230
Bumiputra
Large
(PVL)
10/01/1985
1996
NA
287
18
11233
Bumiputra
Large
(PVL)
15/08/1972
1985
18,900,000
267
19
11254
Foreigner
Large
(PVL)
13/11/1984
1985
109,045,000
474
20
11590
Foreigner
Large
(PVL)
03/04/1980
1988
1,376,000,000
1,288
21
11767
Large
NA
06/02/1990
1990
56,965,620
401
22
12165
SME
(PVL)
09/02/1985
1996
3,062,926
10
NonBumiputra
NonBumiputra
23
12171
Foreigner
SME
(PVL)
05/06/1995
1995
3,623,000
11
24
12700
Foreigner
Large
(PVL)
01/01/1996
1996
84,064,705
629
25
12703
Bumiputra
SME
NA
01/01/1999
1999
NA
NA
554
26
13491
Bumiputra
Large
(PVL)
06/01/1993
2000
93,468,892,30
0
27
13633
Bumiputra
SME
(PVL)
25/04/1989
1989
24,855,457
99
28
13710
NonBumiputra
SME
(SPR)
04/11/1997
2000
3,080,239
102
29
14853
Bumiputra
SME
(PVL)
23/01/2002
2003
NA
17
NA
(PVL)
31/10/1980
1985
NA
138
SME
(PVL)
01/01/2004
2004
259,372,926
85
Bumiputra
SME
(PVL)
04/04/1996
2002
52,725,597
144
30
14945
31
15002
32
15345
NonBumiputra
NonBumiputra
33
18881
NA
SME
(PVL)
01/01/2006
2006
7,000,000
10
34
30545
Foreigner
NA
NA
01/01/1999
1999
NA
NA
35
31651
Foreigner
NA
NA
01/01/2000
2005
NA
NA
Table 3
Summary of Characteristics of 82 samples of Proton vendor firms Metal
NO.
VENDOR
CODE
OWNERSHIP
SME
STATUS
*TYPE OF
BUSINESS
DATE OF
INCORPORATION
YEAR OF
BUSINESS
ANNUAL
TURNOVER
(2005)
NO. OF
STAFF
10469
Bumiputra
SME
(PVL)
01/01/1990
1990
NA
NA
10489
NonBumiputra
Large
(PVL)
09/07/1980
1985
65,794,149
278
10501
Foreigner
Large
(PVL)
01/03/1992
1993
127,000,000
333
10503
NA
SME
(PVL)
21/09/1992
1992
1,891,185
34
10512
Bumiputra
SME
(PVL)
16/03/1990
1990
4,868,494
38
10513
Bumiputra
Large
(PVL)
12/03/1988
1988
18,347,698
167
226
Table 3, continued
NO.
VENDOR
CODE
OWNERSHIP
SME
STATUS
*TYPE OF
BUSINESS
DATE OF
INCORPORATION
YEAR OF
BUSINESS
ANNUAL
TURNOVER
(2005)
NO. OF
STAFF
10514
Bumiputra
SME
(PVL)
06/09/1990
1991
9,712,371
114
10515
Bumiputra
SME
(PVL)
13/07/1985
1991
7,913,086
98
10516
Foreigner
Large
(PVL)
14/10/1980
1985
156,381,000
439
10
10518
Bumiputra
SME
(PTS)
13/01/1995
1995
21,424,800
61
11
10532
NonBumiputra
SME
(PVL)
01/01/1980
1985
23743917.00
94
12
10549
Bumiputra
SME
(PVL)
10/02/1982
1985
5,105,106
58
13
10555
Bumiputra
SME
(PVL)
12/06/1990
1990
11,007,943
159
14
10564
Bumiputra
SME
(PVL)
01/01/2000
2002
NA
NA
15
10584
NonBumiputra
SME
(PVL)
28/03/1980
1988
11,000,000
103
16
10633
NA
Large
(PVL)
03/07/1991
1993
NA
186
17
10660
NonBumiputra
SME
(PVL)
10/11/1983
1985
15,000,000
153
18
10665
Foreigner
SME
(PVL)
26/07/1993
1993
19,680,270
148
19
10751
Bumiputra
SME
(PVL)
19/02/1992
1993
13,400,000
280
20
10756
Bumiputra
Large
(PVL)
05/01/1994
1995
25,593,992
236
21
10792
NA
Large
(PVL)
18/04/1983
1985
117,173,092
749
22
10793
NA
SME
(PVL)
18/04/1993
1993
64,801,819
56
23
10830
Bumiputra
SME
(PVL)
11/11/1993
1993
3,870,302
49
24
10831
NonBumiputra
SME
(PVL)
10/08/1987
1988
5,830,000
89
25
10854
Bumiputra
SME
(PTS)
14/06/1995
2000
12,000,000
141
26
10869
Bumiputra
SME
(PVL)
01/01/1993
1993
NA
38
27
10898
Bumiputra
SME
NA
01/01/1985
1985
NA
NA
28
10953
Bumiputra
SME
NA
12/04/1993
1994
3,774,819
88
29
10960
Bumiputra
SME
(PVL)
01/01/1993
1993
65,221,000
53
30
10961
Foreigner
SME
(PVL)
01/01/1990
1990
62,746,000
50
31
10972
NonBumiputra
Large
(PVL)
18/06/1980
1985
23,825,000
151
32
10975
Bumiputra
Large
(PVL)
01/02/1982
1985
190,557,401
397
33
10994
Bumiputra
Large
(PVL)
01/07/1993
1993
88,813,000
531
34
11007
Bumiputra
SME
(SPR)
30/04/1992
2000
24,150,305
154
35
11015
Bumiputra
Large
(PVL)
29/10/1990
1992
118,363,000
718
36
11021
NonBumiputra
SME
NA
01/09/1980
1993
39,815,309
207
37
11028
Bumiputra
Large
(PVL)
20/01/1989
1989
24,830,035
221
38
11045
NA
SME
NA
27/08/1996
1997
NA
NA
39
11074
Bumiputra
SME
(PVL)
14/05/1991
1993
21,000,000
81
40
11075
Bumiputra
Large
(PVL)
11/06/1984
1985
36,592
89
41
11076
Bumiputra
Large
(PUL)
25/02/1985
1991
74,304,552
314
42
11098
Foreigner
SME
(PVL)
15/07/1993
1997
10,492,247
73
43
11122
Foreigner
SME
(PVL)
01/12/1985
1985
87,795,483
49
44
11161
Bumiputra
SME
(PVL)
05/12/1980
1997
24,100,000
123
45
11214
Bumiputra
Large
(PVL)
28/02/1984
1985
44,132,634
320
227
Table 3, continued
NO.
VENDOR
CODE
OWNERSHIP
SME
STATUS
*TYPE OF
BUSINESS
DATE OF
INCORPORATION
YEAR OF
BUSINESS
ANNUAL
TURNOVER
(2005)
NO. OF
STAFF
41
11076
Bumiputra
Large
(PUL)
25/02/1985
1991
74,304,552
314
42
11098
Foreigner
SME
(PVL)
15/07/1993
1997
10,492,247
73
43
11122
Foreigner
SME
(PVL)
01/12/1985
1985
87,795,483
49
44
11161
Bumiputra
SME
(PVL)
05/12/1980
1997
24,100,000
123
45
11214
Bumiputra
Large
(PVL)
28/02/1984
1985
44,132,634
320
46
11227
Foreigner
SME
(PVL)
01/01/1982
1987
38,000,000
153
Large
(PVL)
26/07/1980
1985
31,570,895
349
Large
(PVL)
07/08/1982
1985
94,506,955
515
NonBumiputra
NonBumiputra
47
11240
48
11241
49
11296
Bumiputra
SME
(PVL)
16/11/1974
1988
333,456
11
50
11299
Foreigner
Large
(PVL)
14/05/1984
1988
80,700,000
262
51
12021
NonBumiputra
SME
(PVL)
19/09/1990
1999
3,944,367
66
52
12163
Bumiputra
SME
(PVL)
01/01/1995
1995
190,000
Large
(PVL)
03/12/1971
1991
195,000,000
817
SME
(PVL)
25/02/1985
1985
18,339,917
350
NonBumiputra
NonBumiputra
53
12880
54
13063
55
13260
Foreigner
SME
NA
31/12/1997
2000
3,900,000
56
13620
Foreigner
NA
(PVL)
01/01/2000
2000
NA
NA
57
13786
NonBumiputra
SME
(PVL)
14/02/1998
2000
2,756,003
47
58
13895
Bumiputra
SME
(PVL)
05/06/1998
1998
158,326
46
59
14063
Bumiputra
SME
(PVL)
28/06/1985
1997
1,673,000
SME
(PVL)
15/07/1991
1995
NA
NA
SME
(PUL)
18/11/2001
2002
NA
NA
NonBumiputra
NonBumiputra
60
14115
61
14117
62
14127
Bumiputra
Large
(PVL)
05/09/1997
1999
100,106,294
366
63
14147
NA
SME
(PVL)
21/01/1989
1989
16,661,589
125
64
14666
Bumiputra
SME
NA
22/03/1995
1995
1,021,592
18
65
15172
Bumiputra
SME
(PTS)
01/01/2000
2003
NA
NA
66
15225
NA
SME
(PVL)
10/03/1992
1996
5,500,000
56
67
15488
Bumiputra
SME
(PVL)
23/08/1993
2003
1,000,000
45
Bumiputra
SME
NA
12/04/2004
2004
NA
18
NA
68
15760
69
30112
Foreigner
NA
01/01/1998
1998
NA
NA
70
30295
Foreigner
NA
NA
01/01/1998
1998
NA
NA
Foreigner
NA
NA
01/01/2000
2000
NA
NA
71
30515
72
30809
Foreigner
NA
NA
01/01/2000
2000
NA
NA
73
30925
Foreigner
NA
NA
01/01/2000
2001
NA
NA
74
30964
Foreigner
NA
NA
01/01/2000
2001
NA
NA
Foreigner
NA
NA
01/01/2000
2001
NA
NA
NA
75
30972
76
30974
Foreigner
NA
01/01/2000
2001
NA
NA
77
30976
Foreigner
NA
NA
01/01/2000
2001
NA
NA
Foreigner
NA
NA
01/01/2000
2001
NA
NA
78
30985
228
Table 3, continued
NO.
VENDOR
CODE
OWNERSHIP
SME
STATUS
*TYPE OF
BUSINESS
DATE OF
INCORPORATION
YEAR OF
BUSINESS
ANNUAL
TURNOVER
(2005)
NO. OF
STAFF
79
31100
Foreigner
NA
NA
01/01/2000
2000
NA
NA
Foreigner
NA
NA
01/01/2000
2002
NA
NA
NA
01/01/2000
2003
NA
NA
(PVL)
01/01/2000
2004
NA
NA
80
31141
81
31321
Foreigner
NA
82
31345
Foreigner
NA
Table 4
Summary of Characteristics of 27 Proton Vendor Firms Plastics
NO.
VENDOR
CODE
OWNERSHIP
SME
STATUS
*TYPE OF
BUSINESS
DATE OF
INCORPORATION
YEAR OF
BUSINESS
ANNUAL
TURNOVER
(2005)
NO. OF
STAFF
10270
NonBumiputra
SME
(PVL)
05/10/1991
1993
22,260,846
191
10301
Bumiputra
SME
(PTS)
03/06/1993
1994
8,042,844
28
10488
NonBumiputra
Large
(PVL)
07/04/1981
1990
1,000,000
619
10504
Bumiputra
SME
(PVL)
12/02/1993
1993
NA
10520
Bumiputra
SME
(PVL)
01/01/1990
1990
8,194,000
50
10523
Bumiputra
Large
(PVL)
27/11/1987
1987
24,798,638
316
10548
Bumiputra
SME
(PVL)
01/12/1985
1985
15,331
63
10629
NonBumiputra
SME
(PVL)
01/01/1994
1994
5,601,815
79
10659
Bumiputra
Large
(PVL)
07/08/1982
1988
76,567,789
61
10
10727
NonBumiputra
Large
(PUL)
01/10/1969
1985
29,290,013
490
11
10755
Bumiputra
SME
NA
07/05/1991
1995
18,290,446
163
12
10794
Bumiputra
SME
(PVL)
15/03/1988
1988
14,114,614
220
13
10944
Foreigner
SME
(PVL)
05/10/1990
1998
23,400,000
145
14
11042
Bumiputra
SME
(PVL)
31/12/1982
1985
12,340,000
159
15
11079
Bumiputra
SME
(PVL)
13/10/1988
1989
405,703
NA
16
11116
Bumiputra
SME
(PVL)
09/05/1992
1992
10,980,200
145
17
11179
NonBumiputra
Large
(PVL)
05/06/1984
1985
1,000,000
305
18
11244
Bumiputra
SME
(PVL)
28/12/1988
1988
13,418,865
306
19
11245
Bumiputra
Large
(PVL)
26/09/1988
1988
29,631,918
230
20
11669
Bumiputra
Large
(PVL)
10/12/1985
1985
225,000,000
619
21
12160
Bumiputra
SME
(PVL)
23/07/1993
1993
313,030
14
22
12628
Bumiputra
Large
(PVL)
03/01/1995
1999
44,223,856
226
23
12643
Foreigner
SME
(PVL)
12/07/1996
1999
45,512,949
52
24
13791
Foreigner
Large
(PVL)
24/11/2000
2002
30,000,000
162
25
13883
Foreigner
SME
(PVL)
17/02/1983
2005
11,259,870
72
26
14032
Foreigner
SME
(PVL)
09/03/1984
2003
210,075,220
77
15206
NonBumiputra
SME
(PVL)
14/08/1990
2003
6,823,952
40
27
229
Table 5
Summary of Characteristics of 19 Proton Vendor Firms Rubber
NO.
VENDOR
CODE
OWNERSHIP
SME
STATUS
*TYPE OF
BUSINESS
DATE OF
INCORPORATION
YEAR OF
BUSINESS
ANNUAL
TURNOVER
(2005)
NO. OF
STAFF
10684
NonBumiputra
SME
(PVL)
05/12/1979
1985
9,998,107
190
10701
Foreigner
Large
(PTS)
01/09/1972
1985
83,471,000
713
10729
Foreigner
SME
(PVL)
27/11/1989
1991
19,500,000
150
Large
NA
11/12/1975
1985
67,320,000
345
SME
(PVL)
14/10/1992
1997
14,025,878
46
NonBumiputra
NonBumiputra
10819
10826
10987
Foreigner
SME
(PVL)
16/01/1991
1992
28,812,000
29
11006
Bumiputra
Large
(PVL)
01/01/1985
1985
27,698,180
472
11020
NonBumiputra
Large
(PTS)
17/06/1988
1988
29,000,000
376
Large
NA
10/06/1989
1991
27,291,000
349
Large
NA
20/12/1979
1985
715,238,000
1,568
SME
(PVL)
24/03/1986
1990
5,503,548
80
SME
(PVL)
30/09/1994
1996
40,300,000
134
8
9
10
11089
11108
Bumiputra
NA
NonBumiputra
NonBumiputra
11
11140
12
11177
13
11205
Bumiputra
SME
(SPR)
15/06/1985
1993
16,000,000
122
14
11271
NonBumiputra
SME
(PVL)
03/07/1981
1985
11,000,000
147
15
11364
Foreigner
SME
(PVL)
13/12/1988
1989
13,000,000
172
16
11878
NonBumiputra
Large
NA
12/07/1985
1985
209,258,000
1,224
17
14133
Bumiputra
SME
(PVL)
23/05/1994
2001
NA
38
01/01/2000
2003
NA
NA
01/01/2000
2001
NA
NA
18
14760
NA
SME
NA
19
30977
Foreigner
NA
NA
Table 6
Summary of Characteristics of 38 Proton Vendor Firms Others
NO.
VENDOR
CODE
OWNERSHIP
SME
STATUS
*TYPE OF
BUSINESS
DATE OF
INCORPORATION
YEAR OF
BUSINESS
ANNUAL
TURNOVER
(2005)
NO. OF
STAFF
10117
Bumiputra
SME
NA
28/09/1989
1989
NA
NA
10466
Bumiputra
SME
(PVL)
14/12/1993
1993
19,192,541
68
10496
NonBumiputra
Large
(PVL)
02/01/1980
1985
64,752,853
416
10563
Bumiputra
Large
(PVL)
06/09/1983
1989
263,584,955
334
10565
Bumiputra
Large
(PVL)
06/09/1983
1989
84,409,100
121
10566
Bumiputra
SME
(PVL)
27/09/1965
1993
14,138,760
142
10704
Bumiputra
SME
(PVL)
29/09/1983
1985
6,935,984
153
10795
NA
SME
(PVL)
11/11/1980
1985
7,761,683
47
10816
Foreigner
SME
(PVL)
04/10/1990
1991
12,429,000
85
10838
NonBumiputra
SME
(PVL)
14/07/1980
2001
6,759,351
80
10
230
Table 6, continued
Summary of Characteristics of 38 Proton Vendor Firms Others
NO.
VENDOR
CODE
OWNERSHIP
SME
STATUS
*TYPE OF
BUSINESS
DATE OF
INCORPORATION
YEAR OF
BUSINESS
ANNUAL
TURNOVER
(2005)
NO. OF
STAFF
11
10850
Foreigner
SME
(PVL)
01/11/1982
1985
7,478,000
108
12
10863
Foreigner
Large
(PVL)
17/11/1980
1985
212,600,000
666
13
10866
Bumiputra
SME
NA
19/08/1980
1985
NA
NA
14
10868
NonBumiputra
SME
(PTS)
30/09/1994
1993
NA
109
15
10875
Bumiputra
Large
NA
19/04/1985
1985
69,016,000
443
10891
NonBumiputra
SME
(PVL)
09/03/1995
1995
4,929,901
58
Foreigner
NA
NA
01/01/1998
1998
NA
NA
SME
(PVL)
11/11/1992
2003
3,600,000
39
SME
(PVL)
01/01/1983
1993
NA
96
SME
(PVL)
01/12/1985
1985
26,383,632
269
Large
(PVL)
31/10/1983
1985
31,290,186
190
SME
(PVL)
27/06/1984
1985
17,000,000
116
16
17
10913
NonBumiputra
NonBumiputra
NonBumiputra
NonBumiputra
NonBumiputra
18
10954
19
11126
20
11152
21
11237
22
11671
23
11850
Bumiputra
SME
(PTS)
19/12/1997
1997
5,155,612
54
24
12164
Foreigner
Large
(PVL)
23/11/1990
1999
39,654,683
204
25
12198
Foreigner
SME
NA
01/01/1991
1991
NA
NA
26
14433
Bumiputra
SME
NA
01/01/2000
2003
NA
NA
27
14506
Bumiputra
SME
NA
03/01/1995
2004
NA
NA
28
14622
Bumiputra
SME
(PVL)
03/02/1995
2003
NA
43
29
14847
Bumiputra
SME
(PVL)
01/01/1999
1999
NA
11
30
15095
Bumiputra
SME
(PVL)
26/01/1994
2005
484,000
11
31
15593
NA
SME
(PVL)
28/06/2000
2004
47,315,896
409
32
16115
Bumiputra
SME
NA
01/01/1996
1996
NA
NA
33
16380
NA
SME
(PVL)
01/01/2004
2004
1,000,000
34
17475
NonBumiputra
SME
(PVL)
01/01/1984
2004
31,000,000
139
35
17543
Bumiputra
SME
(PVL)
01/01/2004
2004
50,300,000
32
NA
36
30044
Foreigner
NA
01/01/1998
1998
NA
NA
37
30101
Foreigner
NA
NA
01/01/1998
1998
NA
NA
38
31430
NA
NA
(PVL)
01/01/2000
2004
NA
NA
231
Table 7
Summary of Characteristics of 5 Proton Vendor Firms
Insufficient Information
NO.
VENDOR
CODE
OWNERSHIP
SME
STATUS
*TYPE OF
BUSINESS
DATE OF
INCORPORATION
YEAR OF
BUSINESS
ANNUAL
TURNOVER
(2005)
NO. OF
STAFF
10873
Foreigner
SME
NA
NA
13,218,589
13
SME
NA
25/03/2000
227,458
15
12168
NA
30990
NA
NA
NA
01/01/2000
NA
NA
30970
NA
NA
NA
01/01/2000
NA
NA
NA
NA
NA
NA
NA
19108
NA
Note:
NA : Not Available
*Type of Business
SPR: sole proprietorship
PTS: partnership
PVL: private limited
PUL: public limited
232
Appendix B
Table 1
Responses of Personal Communication (pers.comm)
No
Firm
Designation
No.
Requested
Date
Anonymity
Time
(Hour)
Senior Executive 1
Requested Anonymity
04/08/06
10.00
20
Senior Manager 3
Requested Anonymity
04/08/06
14.00
Executive 1
Requested Anonymity
07/08/06
09.30
Manager 1
Requested Anonymity
07/08/06
14.30
11
CEO 2
Requested Anonymity
07/08/06
18.00
Manager 3
Requested Anonymity
15/08/06
15.00
CEO 1
Requested Anonymity
15/08/06
18.00
10
Manager 4
Requested Anonymity
16/08/06
14.30
Senior Executive 2
Requested Anonymity
16/08/06
17.00
10
25
Manager 5
Requested Anonymity
17/08/06
14.00
11
12
CEO3
Requested Anonymity
17/08/06
16.00
12
19
Manager 6
Requested Anonymity
18/08/06
15.00
13
23
Senior Executive 3
Requested Anonymity
18/08/06
17.00
14
22
Manager 7
Requested Anonymity
18/08/06
19.00
15
16
Manager 8
Requested Anonymity
22/08/06
09.00
16
18
Vendor 1
Requested Anonymity
22/08/06
14.00
17
14
Vendor 2
Requested Anonymity
23/08/06
14.30
18
15
Vendor 3
Requested Anonymity
23/08/06
15.30
19
17
Vendor 4
Requested Anonymity
23/08/06
16.30
20
31
Vendor 5
Requested Anonymity
24/08/06
09.00
21
30
Vendor 6
Requested Anonymity
24/08/06
11.00
22
21
Vendor 7
Requested Anonymity
24/08/06
14.00
233
Table 1, continued
No
Firm
Designation
No.
Requested
Date
Time
Anonymity
23
24
CEO 4
Requested Anonymity
24/08/06
17.00
24
26
Manager 9
Requested Anonymity
25/08/06
09.00
25
13
CEO 5
Requested Anonymity
25/08/06
10.00
26
27
Manager 10
Requested Anonymity
25/08/06
14.00
27
34
CEO 6
Requested Anonymity
28/08/06
14.00
28
35
Manager 11
Requested Anonymity
29/08/06
11.00
29
29
Manager 12
Requested Anonymity
29/08/06
16.00
30
38
Senior Manager 4
Requested Anonymity
05/09/06
10.00
31
33
Manager 13
Requested Anonymity
06/09/06
10.00
32
32
Manager 14
Requested Anonymity
06/09/06
17.00
33
28
Manager 15
Requested Anonymity
08/09/06
14.00
34
36
Vendor 8
Requested Anonymity
12/09/06
10.00
35
43
Manager 16
Requested Anonymity
12/09/06
13.00
36
42
Manager 17
Requested Anonymity
13/09/06
10.00
37
41
CEO 8
Requested Anonymity
14/09/06
14.30
38
37
Manager 18
Requested Anonymity
15/09/06
09.30
39
39
CEO 7
Requested Anonymity
15/09/06
18.00
40
44
Manager 19
Requested Anonymity
21/09/06
09.00
41
40
Vendor 9
Requested Anonymity
21/09/06
17.30
42
Manager 2
Requested Anonymity
30/10/07
15.00
43
Senior Manager 1
Requested Anonymity
29/11/07
16.00
44
Senior Manager 2
Requested Anonymity
29/11/07
16.30
234
Appendix C
Table 1
Technology Entrepreneurship Capability Assessment Score
Technology
Entrepreneurship
Factors &
Dimensions
Firm
Key
Questions
Assessment
Statements
1. Where is your
firm located?
2.Provide some
background
information of your
firm?
3.My firm
experienced positive
growth during this
period (2003-2006)
Strategy
Assessment Score
Strongly
Disagree
Disagree
Agree
Strongly
Agree
235
Table 1, continued
Technology
Entrepreneurship
Factors &
Dimensions
Firm
Core Competency
Key
Questions
Assessment
Statements
Assessment Score
Strongly
Disagree
Disagree
Agree
Strongly
Agree
Technology
Technology
Paradigm
19.Technology plays
an important part in
my firm
20.My firm has
invented or
innovated during this
period (2003-2006)
21.My firm has
patented during this
period (2003-2006)
22.My firm has latest
technological
infrastructure
23.My firm has a
proactive approach
to encourage
innovation on a
continuous basis
236
Table 1, continued
Technology
Entrepreneurship
Factors &
Dimensions
Technology
Technology
Paradigm
Key
Questions
Linkages
Strongly
Agree
2. What is the
highest qualification
of the entrepreneur?
Agree
Disagree
28.My firms
technological
development is at par
with its competitors
Assessment Score
Strongly
Disagree
Entrepreneur
Learning
Assessment
Statements
32.The entrepreneur
knows well the
firms vision and
mission
33.The entrepreneur
has post-graduate
degree
(codified
knowledge)
34.The entrepreneur
has extensive
experience and is
skillful (tacit
knowledge)
35. The entrepreneur
encourages learning
activity and creates a
learning culture in
his firm
237
Table 1, continued
Technology
Entrepreneurship
Factors &
Dimensions
Entrepreneur
Leadership
Key
Questions
Assessment
Statements
Assessment Score
Strongly
Disagree
Disagree
Agree
Strongly
Agree
Context
Awareness
1. Is your firm
aware of the latest
environmental
changes?
2. Does the firm
recognize the
assistance provided
by the
government?
Search
43.The firm
continuously explore
opportunities and
threats
238
Appendix D
Table 1: The National Automotive Vendor Firms Total Average Dimension Score
FIRM
NO
DIMENSION
Awareness
Search
Strategy
Core Competency
Technology Paradigm
Linkages
Learning
Leadership
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
FIRM
NO
DIMENSION
Awareness
Search
Strategy
Core Competency
Technology Paradigm
Linkages
Learning
Leadership
Average
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
3.10
2.50
2.10
2.40
2.30
2.3
2.50
2.60
2.48
239
Appendix E
SERIAL NO
To be completed for:
Doctoral Study (PhD) in Technology Entrepreneurship at
Department of Science & Technology, Faculty of Science,
University of Malaya, Kuala Lumpur.
Authorized by:
From:
To be completed by:
Syahida Abdullah
PhD Student
This inquiry will benefit the parts and components vendor firms by allowing the policy makers to
better understand the needs of vendor firms and ultimately develop effective technology, economy
and automotive policies and programmes that will strengthen the technology entrepreneurship
capability of the national automotive industry in Malaysia.
It is illegal for us to reveal your data or identify your business to unauthorised persons. Nothing that
we release will allow you or your firm to be identified.
INFORMATION
This survey collects information about technological and entrepreneurial activities, including
firms performance and capability, technological capability, entrepreneurs ability, and industrial
environments preparedness of Malaysias national automotive parts and components industry for
three years period between 2003 and June 2006.
to identify the strengths and weaknesses of the national automotive parts and components
industry in terms of technology entrepreneurship capability.
The questionnaire consists of 15 printed pages, excluding the cover page and encompasses four
major sections: context, firm, technology, and entrepreneur.
For further information, do not hesitate to call: Ms.Syahida Abdullah at 013-2242470, or email:
syahida@ami.net.my, syahida24@yahoo.com
Introduction
This questionnaire requests information on technology entrepreneurial activities in your firm during
the three years period from 2003 to June 2006. The questionnaire looks into the issue of technology
entrepreneurship by categorizing the questions into four sections according to the four factors of
technology entrepreneurship that are the contextual industrial environment, the firms performance
and capability, the technological capability, and the entrepreneurs ability.
entrepreneurial activities, and their importance during the period 2003 to June 2006.
(please tick one box in each row)
Internal
Market
1.1.1
1.1.2
1.1.3
Degree of importance
Not used
Low
Med
High
Not used
Low
Med
High
Not used
Low
Med
High
Not used
Low
Med
High
components or software
Institutional
1.1.4
Clients or customers
1.1.5
Competitors
1.1.6
Consultants
1.1.7
1.1.8
1.1.9
Specialised
1.1.12 Technical standards
1.1.13 Quality standards and regulations
1.1.14 Health, safety and environmental
standards and regulations
241
Others
1.1.15 Professional
conferences,
meetings
Not used
Low
Med
High
press,
computer
databases
1.1.18 Business matching, fairs, exhibition
1.2
Is your firm aware of the latest environmental changes, and what is your view on your
1.3
1.4
Is your firm able to make use of the threat by changing it to an opportunity and to
firms advantage?
2.
2.1
Did your firm receive any Government support (financial or other assistance and
advice) for technological and entrepreneurial-related activities in the period 2003 June 2006?
No
Go to question
2.3
Yes
2.2
What were the sources of this government support for technology entrepreneurship-
2.3
2.2.1
State government
2.2.2
Federal government
Other
participation
Has your firm participated in or received programs in the period 2003 to June 2006?
2.3.2
2.3.3
2.3.4
SME Bank
2.3.5
Others -
242
B. Firm
3. Please briefly describe your firms main product (goods or services):
Product: ..
Nature of business: .
Category:
Type of business:
4. Did any of the following significant changes occur to your firm during the threeyear period 2003 June 2006? (please tick one)
The firm was established ..
Turnover increased by at least 10% due to merger with another firm or part of it.
Turnover decreased by at least 10% due to sale or closure of part of the firm.
None of the above
(b) June2006
5.2
5.3
Capital expenditure
(enter nil if inappropriate)
5.4
(RM)
(RM)
Number of employees
(incl. full-time contract workers)
Of which:
Approximate proportion sent for training
Technology and engineering courses (%)
Motivation programs (%)
Other programs/courses and the percentage _______________________________ (%)
6. Where is your firms largest market (market orientation)? (please tick one)
Local1
Regional2
National
International
1
2
2003
2006
Proton
(%)
Perodua
(%)
Naza
(%)
UMW Toyota
(%)
Honda
(%)
(%)
Ford
(%)
Oriental Hyundai
(%)
Inokom
(%)
Others__________________
(%)
8. Did your firm make major changes during the period 2003 to June 2006 in the
following and how far did business performance improve as a result? (please tick
one box in each row)
Impact on performance
Not used
8.1.1
Low
Med
High
8.1.2
8.1.3
8.1.4
8.2
What is your strategy for achieving competitive advantage and sustainability of your
firm?
244
C. Technology
9. Technological Capabilities
9.1
Patents acquisition
Licensing agreement
Purchase of machinery and equipment
Purchase of turnkey plants
Overseas training
Imitation
In-house capability development
Others (please specify)
Technical Collaborator:-_______________________
9.2
Can you indicate the extent of your firms use of e-business activities over the period
9.2.1
Basic internet
9.2.2
9.2.3
9.2.4
10. Innovation
An innovation, as defined in this survey, is a new or significantly improved product (good or
service) introduced to the market or the introduction within your firm of a new or significantly
improved process. The innovation is based on the results of new technological developments, new
combinations of existing technology or utilisation of other knowledge acquired by your firm.
10.1
For this survey, product innovation is referred to as a good or service which is either new or
significantly improved with respect to its fundamental characteristics, technical specifications,
incorporated software or other immaterial components, intended uses, or user friendliness. The
innovation should be based on the results of new technological developments, new combinations of
existing technology or utilisation of other knowledge by your firm. This research is interested in
products new to your firm even if already on the market as well as those that are new to your
market.
245
10.1.1 During the three year period 2003 June 2006, did your firm introduce any
technologically new or significantly improved products (goods or services) which were new to
your firm?
No
Go to question 10.2
Yes
10.1.3 Please estimate in percentage how your turnover in June 2006 was distributed between
products (goods and services) introduced during the period 2003-June2006 which were:
10.1.3.1 New to your firm
10.1.4 During the three-year period 2003-June2006, did your firm introduce any new or
significantly improved products (goods or services) which were also new to your firms
market?
No
Yes
Please estimate the share of turnover of these products in June 2006? ____(%)
10.1.5 Please give a short description of your most important production innovation:
246
10.2
Process innovation
For this part, the research is interested in new or significantly improved technology for
production or the supply of goods and services. The research is interested in processes new to
your firm even if already in use in your industry as well as those that are new to your industry.
10.2.1 During the three-year period 2003-June2 006, did your firm introduce new or
significantly improved processes for producing or supplying products (goods or services)
which were new to your firm?
No
Go to question 10.3
Yes
10.2.3 During the three-year period 2003-June 006, did your firm introduce new or
significantly improved processes for producing or supplying products (goods or services)
which were new to your industry?
No
Yes
10.2.4 Please give a short description of your most important process innovation:
10.3.
During the period 2003-June 2006, did your firm have any projects to develop or introduce
new or significantly improved products (goods or services) or processes that were:
(please tick all that applies to you)
10.3.1 Abandoned
10.3.2 Still in-progress
10.3.3 Not yet completed but seriously delayed
10.3.4 Not even started
247
10.4
During the period 2003-June2006, did your firm have any other innovation activities
10.5.
A range of factors may inhibit your ability for technological development. Please grade the
importance of the following constraints during the period 2003-June2006:
(Please tick one box in each row)
Economic
factors
Importance
No effect
Low
Med
High
No effect
Low
Med
High
No effect
Low
Med
High
No effect
Low
Med
High
Internal
factors
Government
Incentive
factors
Other
factors
248
10.6
10.7
Effects of Innovation
Please indicate the impact that your innovation activities have had on your firm in the period
2003 to June 2006? (Please tick one box in each row)
Degree of impact
None
Product 10.7.1
oriented 10.7.2
effects
10.7.3
Low
Med
High
249
Degree of impact
Process 10.7.4
None
Low
Med
High
None
Low
Med
High
10.7.6
Other
effects
11.
Linkages
For this survey, linkages means active participation in joint projects (including R&D) with other
firms. It does not necessarily imply that either partner derives immediate commercial benefit from
the venture. Pure contracting out of work, where there is no active collaboration, is not defined as
linkages in this survey.
11.1
entrepreneurial activities with other firms or institutions from 2003 to June 2006?
No
Go to question
12
Yes
11.2
Note:
J2 - Japan
K3 - Korea
T4 - Taiwan
O6 - Others
Market
M1
J2
K3
T4
US5
O6
M1
J2
K3
T4
US5
O6
M1
J2
K3
T4
US5
O6
M1
J2
K3
T4
US5
O6
components or software
11.2.3 Clients or customers
11.2.4 Competitors
11.2.5 Consultants
11.2.6 Commercial labs / R&D firms
Institutional
Specialized
D. Entrepreneur
12
Learning activities
If you have internal learning activities:
12.1
programs/courses
and
____________________________________
12.2
the
percentage
(%)
Can you indicate the extent of your employers knowledge acquisition over the period
12.2.1 Certificate
12.2.2 Diploma
12.2.3 Degree
12.2.4 Post-graduate degree
12.3
The number of the following professionals and their qualification in 2003 and June 2006
Professional
Owner/Entrepreneur
Highest Qualification
SPM
Cert
Dip
Deg
2003 (no)
Masters
PhD
June2006 (no)
Others
Consultant/s
Manager
R&D Engineer
Production Engineer
Supervisor
Technical Assistant
Technician/Maintenance
Operators
Others
12.4
How did your firm engage in learning activities during the three-year period 2003June2006?
Continuously
Occasionally
251
12.5
12.5.1 If your firm had NO learning/training activity in the period 2003 to June 2006, please
indicate why it has not been necessary or possible or desirable. (Please tick all that applies to
you)
12.6
What mechanisms are in place to enable learning and continuous improvement within
the firm?
13.
Leadership
Internal research and development (R&D)
If you have internal R&D activities:
13.1
How many persons and percentage (%) were involved in R&D activities within your
firm in 2003 and 2006?
(incl. Technical/Research Assistants under R&D dept) 2003
2006
ppl
,
% ppl
,
%
13.2
How did your firm engage in R&D during the three-year period 2003-June2006?
Continuously
Occasionally
13.3
13.3.1 The entrepreneur articulates a clear, compelling vision for the venture and stimulates
the employees to achieve high performance.
Yes
No
252
13.3.3 The entrepreneur uses a collaborative style while setting high standards and driving
toward achievement.
Yes
No
13.3.4 The entrepreneur displays an inner strength and a constant set of values that every
employee knows and can rely on.
Yes
No
13.3.5 The entrepreneur has a strong sense of awareness of the internal and external issues to
create competitive advantage.
Yes
No
13.3.6 The entrepreneur offers helpful feedback and good coaching to all employees.
Yes
No
13.3.7 The entrepreneur has solid experiences, adequate knowledge and relevant skills that
have helped shape and build his leadership skills.
Yes
No
253
GLOSSARY
Capability: refers to the whole range of skills and knowledge to take action, to
intervene in the made world, and to create new or improved products or systems.
Clusters: Technology clusters are geographic concentrations of interconnected
companies, academic or government research institutions, financial institutions, and
other service providers working together to achieve innovation for economic growth.
Contract workers and consultants: People working under contract for the firm
normally to undertake specific services often on a short-term basis.
Domestic: For this study, domestic refers to activities in Malaysia
Employees: Full-time equivalents excluding partners and directors of the corporation.
Entrepreneurship: illustrated as a dynamic process of creative destruction, in which
the idea of innovation changes the basic technological and demand parameters of the
economy. (Schumpeter,1943)
Firm: For this study, we are focusing on automotive vendor companies.
Growth: We are focusing on the companies that have increased in terms of number of
employees or revenues or others over the past 5 years or less.
Innovation: For this study, innovation is translating knowledge into new or improved
products, processes and services that improve the firms competitiveness.
Invention: is the conceiving of a new idea (Twiss, 1974).
Product: includes goods and services. For this study, product refers to parts and
components (plastic, metal, rubber, electrical & electronics, glass), tools, die and mould,
engineering design and distribution
R&D (Research and Development): Expenditure on scientific research and
experimental development through which new or improved products, processes and
services are produced.
Technology: as the ability to carry out productive transformation, and includes the
ability to act, a competence to perform, transforming materials, energy and information
in one set of state into another more highly valued state (Stan Metcalfe, 1995).
Technology entrepreneurship: a merge of two disciplines: technology and
entrepreneurship, and identifies four factors to achieve competitive advantage.
Technology entrepreneurship factors: refers to the context of industrial environment,
firms performance, technological capability, and entrepreneurs ability.
254
Appendix F
Definition of Small and Medium Enterprises (SMEs)
Malaysian SMEs can be grouped into three categories : Micro, Small, or Medium.
These groupings are decided based on EITHER
I. Number of Employees
Based on the number of full-time employees :
Primary Agriculture
Manufacturing (including
Agro-Based) & MRS*
Micro
Small
Medium
Primary Agriculture
Manufacturing (including
Agro-Based) & MRS*
Micro
Small
Medium
Note:
*MRS : Manufacturing-Related Services
** ICT : Information and Communications Technology
255