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TECHNOLOGY ENTREPRENEURSHIP DEVELOPMENT IN MALAYSIA: A CASE STUDY OF THE NATIONAL AUTOMOTIVE INDUSTRY SYAHIDA ABDULLAH FACULTY OF SCIENCE UNIVERSITY OF MALAYA KUALA LUMPUR 2008
TECHNOLOGY ENTREPRENEURSHIP DEVELOPMENT IN MALAYSIA: A CASE STUDY OF
THE NATIONAL AUTOMOTIVE INDUSTRY
SYAHIDA ABDULLAH
FACULTY OF SCIENCE UNIVERSITY OF MALAYA
KUALA LUMPUR
2008
TECHNOLOGY ENTREPRENEURSHIP DEVELOPMENT IN MALAYSIA: A CASE STUDY OF THE NATIONAL AUTOMOTIVE INDUSTRY
SYAHIDA ABDULLAH
THESIS SUBMITTED IN FULFILMENT OF THE REQUIREMENTS
FOR THE DEGREE OF DOCTOR OF PHILOSOPHY
FACULTY OF SCIENCE UNIVERSITY OF MALAYA
KUALA LUMPUR
2008
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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
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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.
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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 MIGHT-
Meteor 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
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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.
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TABLE OF CONTENTS Page
Abstract ii
Acknowledgement iv
Table of Contents vi
List of Figures ix
List of Tables x
List of Acronyms xii
Chapter 1 INTRODUCTION 1
1.1 Overview 1 1.2 Research Problems 3 1.3 Research Objectives 5 1.4 Significance of the Study 6
1.5 Organisation of Thesis 7 Chapter 2 THE CURRENT STATE OF UNDERSTANDING OF 10 TECHNOLOGY ENTREPRENEURSHIP 2.1 Introduction 10 2.2 Entrepreneurship 10 2.3 Innovation 12 2.3.1 Technology 15 2.3.2 Technology Capability 17 2.4 Technology Entrepreneurship 26 2.4.1 Technology Entrepreneur 27 2.4.2 Technology Entrepreneurship 29 2.4.3 Technology Entrepreneurship Capability 39 2.5 Summary 41 Chapter 3 ANALYSIS OF TECHNOLOGY ENTREPRENEURSHIP
DEVELOPMENT IN MALAYSIA 43
3.1 Introduction 43 3.2 Malaysia’s Economic Development 43 3.3 Entrepreneurship Development in Malaysia 45 3.3.1 Phase I (1957 – 1970): Pre-NEP Era 46 3.3.2 Phase II (1971 – 1980): Pre- Mahathir Era 50 3.3.3 Phase III (1981 – 1990): Mahathir Era 55 3.3.4 Phase IV (1991 – 2005): Post-NEP Era 60 3.4 Technology Entrepreneurship Programmes 67
3.4.1 Cradle Investment Programme 67 3.4.2 Technopreneur Development Flagship 68 3.4.3 PHASER Programme 69 3.4.4 Start Your Own Business 69 3.4.5 Technology Entrepreneurship Academic Programmes 70 3.4.6 Technology Entrepreneurship Programmes by Institutions 70
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3.4.6.1 MAVCAP 73 3.4.6.2 MTDC 74 3.4.6.3 MIGHT 74
3.5 The Root of Technology Entrepreneurship Practice 75 3.6 Summary 80 Chapter 4 ANALYSIS OF TECHNOLOGY ENTREPRENEURSHIP
DEVELOPMENT IN THE NATIONAL AUTOMOTIVE INDUSTRY 83
4.1 Introduction 83 4.2 Evolution of the World Automotive Industry 84 4.3 Development of Automotive Industry in Malaysia 86 4.4 The National Automotive Industry 91 4.5 Basic Characteristics of Proton Vendor Firms 95 4.6 Proton Vendor Development Programme 96 4.7 Proton Bumiputera Vendor Scheme 103 4.8 Present State of the National Automotive Industry 105 4.9 Summary 110 Chapter 5 METHODOLOGY 112 5.1 Introduction 112 5.2 Research Framework 112 5.2.1 Research Schedule 115 5.3 Research Strategy 115 5.4 Questionnaire and Analysis Design 116 5.5 Data Collection 120 5.5.1 The Database 120 5.6 Interview 121 5.7 Data Processing 123 5.8 Conceptual Framework 124 5.8.1 Technology Entrepreneurship Capability Dimensions 125 5.8.2 Graphical Representation of Findings 127 5.8.3 Analysis of Findings 127 5.9 Research Limitations 131 5.10 Summary 132 Chapter 6 ANALYSIS AND PRESENTATION OF THE STUDY 134 6.1 Introduction 134 6.2 Basic Characteristic of Proton Vendor Firms 135 6.2.1 Year of Establishment and Ownership Structure 135 6.2.2 Size of Firms 141 6.2.3 Business Nature 145 6.2.4 Year of Business Initiation with Proton 149 6.2.5 Types of Business Organization 150
6.3 Analysis of Proton Vendor Firms 152 6.3.1 Industrial Environment Context 152 6.3.1.1 AFTA 153 6.3.1.2 NAP 157 6.3.2 Firm 161 6.3.3 Technology 164 6.3.4 Entrepreneur 170
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6.4 Technology Entrepreneurship Capability 172 6.4.1 Awareness 173 6.4.2 Search 173 6.4.3 Strategy 174 6.4.4 Core Competency 174 6.4.5 Technology Paradigm 175 6.4.6 Linkages 175 6.4.7 Learning 175 6.4.8 Leadership 176 6.5 Technology Entrepreneurship Capability Analysis 177 6.5.1 Graphical Representation of Findings 179 6.5.2 Analysis of Awareness 180 6.5.3 Analysis of Search 180 6.5.4 Analysis of Strategy 181 6.5.5 Analysis of Core Competency 182 6.5.6 Analysis of Technology Paradigm 183 6.5.7 Analysis of Linkages 184 6.5.8 Analysis of Learning 186 6.5.9 Analysis of Leadership 187 6.6 The Overall Technology Entrepreneurship Capability Level of the National Automotive Industry 189 6.7 Summary 193
Chapter 7 CONCLUSION AND POLICY IMPLICATION 196 7.1 Introduction 196 7.2 Summary of Thesis 196 7.3 Summary of Key Findings 199 7.4 Factors that Hinder Building of Technology Entrepreneurship Capability 201
7.4.1 Industrial Environment Context 201 7.4.2 Firm 202 7.4.3 Technology 202 7.4.4 Entrepreneur 203
7.5 Recommendations 203 7.5.1 Industrial Environment Context – Awareness and Search 204 7.5.2 Firm – Strategy and Core Competency 205 7.5.3 Technology – Technology Paradigm and Linkages 206 7.5.4 Entrepreneur – Learning and Leadership 207 7.6 Future Studies 208 7.7 Conclusion 209 REFERENCES 211 APPENDICES 225 Appendix A Summary of Characteristics of Proton Vendor Firms 225 Appendix B Responses of Personal Communication 233 Appendix C Technology Entrepreneurship Capability Assessment Score 235 Appendix D The National Automotive Vendor Firms TADS 239 Appendix E Malaysia Technology Entrepreneurship Survey 240 Appendix F Definition of SME 255
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List of Figures
Page
Figure 2.1 Technological Entrepreneurship 33
Figure 5.1 Technology Entrepreneurship Framework 124
Figure 6.1 Proton Vendor Firms’- Year of Establishment & Phases 139
Figure 6.2 Industrial Activity and Ownership Structure of Proton
Vendor Firms 147
Figure 6.3 Types of Business Organizations and Ownership Structure 151
Figure 6.4 Malaysia Vehicle Sales Performance 154
Figure 6.5 Proton Sales Performance 155
Figure 6.6 Technology Entrepreneurship Capability of Proton Vendor Firms 179
Figure 6.7 Scatter Plot of the National Automotive Industry’s Technology
Entrepreneurship Capability 191
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List of Tables
Page Table 2.1 Elements of Production and Investment Capability 19 Table 2.2 Six Elements of Technological Capability 21 Table 3.1 Ownership and Participation in Industrial & Commercial
Sectors 1970, 1975 51
Table 3.2 Malaysian Ownership and Control of the Corporate Sector 1970-80 52
Table 3.3 Key Industrial Clusters and Subgroups 59 Table 3.4 High-tech Industries and Sub-sectors 64 Table 3.5 Support Programmes for Entrepreneurship Development in
Malaysia 71
Table 3.6 Technology Entrepreneurship Practice 79 Table 3.7 Summary of Four Phases of Malaysia’s Entrepreneurship
Development 80
Table 4.1 The Evolution of the World Automotive Industry 84 Table 4.2 Bloomfield’s Stages of Automotive Industry Development 85 Table 4.3 Comparative Stages of Development in the Automotive Industry 87 Table 4.4 Local Content Programme 89 Table 4.5 Financial Performance of PROTON, 1989-1993 93 Table 4.6 Anchor Companies, Types of Industries and Number of Vendors 99 Table 4.7 Vendor Development Programme – Anchor Companies by Year (1988 – 1995) 99 Table 4.8 Vendor Development Programme-vendors by activity
(1995 & 2006) 100 Table 4.9 Exports and Investment Targets for the 12 Targeted
Manufacturing Industries 108
Table 5.1 Study Framework 113 Table 5.2 Comparison of Innovation Survey Questionnaires 118
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Table 6.1 Proton Vendor Firms Establishment According to Four Phases 136 Table 6.2 Proton Vendor Firms’ Year of Establishment 138 Table 6.3 Number and Percentage of Proton Vendor Firms Based on
SME Status 141
Table 6.4 Firm Size and Ownership Structure 142 Table 6.5 Automotive Vendor Firms’ Size and Firms’ Performance 142 Table 6.6 The Industrial Activity of Proton Vendor Firms 146 Table 6.7 Products Produced by Different Industries 146 Table 6.8 Malaysia Vehicle Sales Performance: 2001-2006 (H1) 156 Table 6.9 Automotive Vendor Firms’ Size and R&D Activity 166 Table 6.10 Technology Entrepreneurship Factors and Dimensions 173 Table 6.11 Average Score of Technology Entrepreneurship Capability
Dimensions 178
Table 6.12 Overall Technology Entrepreneurship Capability Level 190
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List of Acronyms
ADS Average Dimension Score
AFTA Asia Free Trade Agreement
AMI MIGHT METEOR Advanced Manufacturing Institute
AP Approved Permit
ASEAN Association of Southeast Asian Nations
BBMB Bank Bumiputra Malaysia Berhad
BCIC Bumiputra Commercial and Industrial Community
BI Business Incubation
BMI Business Monitor International
BPMB Bank Pembangunan Malaysia Berhad
CAD Computer Aided Design
CBU Completely Built Units
CCM Companies Commission of Malaysia
CEO Chief Executive Officer
CIP Cradle Investment Programme
CIS Community Innovation Surveys
CKD Completely Knocked Down
CNC Computer Numerical Control
CWG-AI Cluster Working Group – Automotive Industry
E-Commerce Electronic Commerce
EON Edaran Otomobil Nasional
EPU Economic Planning Unit
FDI Foreign Direct Investment
FEER Far Eastern Economic Review
FELDA Federal Land Development Authority
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FIDA Federal Industrial Development Authority
FIMA Food Industries of Malaysia
FRIM Forest and Research Institute of Malaysia
FTA Free Trade Agreement
FTZ Free Trade Zone
GDP Gross Domestic Product
GM General Motors
GNP Gross National Product
GSP Global Supplier Programme
H1 First half of a year
HICOM Heavy Industries Corporation of Malaysia
IAF Industrial Adjustment Fund
ICT Information, Communication, and Technology
IDE Institute of Developing Economies
IJTIETM The International Journal of Technological, Innovation,
Entrepreneurship and Technology Management.
ILO International Labour Organization
ILP Industrial Linkage Programme
IMP Industrial Master Plan
IT Information Technology
ITAF Industrial Technical Assistance Fund
JACTIM Japanese Chamber of Trade and Industry in Malaysia
KHTP Kulim Hi-Tech Park
KLSE Kuala Lumpur Stock Exchange or Mesdaq
LC Local Content
LMW Licensed Manufacturing Warehouses
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LNG Liquified Natural Gas
MAA Malaysia Automotive Association
MARA Majlis Amanah Rakyat
MARDI Malaysia Agricultural Research and Development Institute
MASTIC Malaysian Science and Technology information Centre
MATRADE Malaysia External Trade Development Corporation
MAVCAP Malaysian Venture Capital
MC Mitsubishi Corporation
MDC Multimedia Development Corporation
MECD Ministry of Entrepreneur and Cooperative Development
MEDEC Malaysia Entrepreneurship Development Centre
MIDA Malaysian Industrial Development Authority
MIDF Malaysian Industrial Development Finance Berhad
MIEL Malaysia Industrial Estate Land
MIGHT Malaysia Industry Group for High Technology
MIM Malaysia Institute of Management
MITI Ministry of International Trade and Industry
MMC Mitsubishi Motors Corporation
MMU Multimedia University
MNC Multinational Companies
MOSTI Ministry of Science, Technology and Innovation
MP Malaysia Plan
MPC Malaysia Productivity Corporation
MPV Multi Purpose Vehicle
MSC Multimedia Super Corridor
MSC-TDF Multimedia Super Corridor – Technopreneur Development Flagship
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MTDC Malaysia Technology Development Corporation
MUV Multi Unit Vehicle
NAP National Automotive Policy
NDP National Development Policy
NDP New Development Policy
NEP New Economic Policy
NEPAD New Partnership for Africa’s Development
NIC Newly Industrialized Country
NIE Newly Industrialized Economies
NITF National Implementation Task Force
NPC National Productivity Center
NSC Nippon Steel Corporation
NSDC National SME Development Council
OECD Organization of Economic Co-operation and Development
OEM Original Equipment Market
OPP Outline Perspective Plan
OPP1 Outline Perspective Plan I
OPP2 Outline Perspective Plan II
PERNAS Perbadanan Nasional Berhad
PERODUA Perusahaan Otomobil Kedua Berhad
PETRONAS Petroliam Nasional Berhad
PIO Pioneer Industries Ordinance
PNB Perbadanan Nasional Berhad
PRECISE Proton website
PROTON Perusahaan Otomobil Nasional Berhad
PTS Partnership
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PUL Public Limited
PVL Private Limited
QCD Quality, Control and Design
QIP Quality Improvement Programme
R&D Research and Development
REM Replacement Equipment Market
RIDA Rural Industrial Development Authority
S & T Science and Technology
SBDC Small Business Development Centre
SEAP SME Expert Advisory Panel
SEDC States Economic Development Corporation
SIRIM Standard and Industrial Research Institute of Malaysia
SmarT Strategic MARA-MIGHT Technopreneurship Program
SME Small and Medium Enterprises
SMI Small and Medium Industries
SMIDEC Small and Medium Industries Development Corporation
SPR Sole Proprietorship
SPSS Standard Package for Social Sciences
SYOB Start Your Own Business
TA Technical Assistance
TADS Total Average Dimension Score
TDC Tourist Development Corporation
TDF Technology Development Flagship
TDID Technopreneurship Development and Innovation Department
TDM Tool, Die and Mould
TeAM Technopreneurs Association of Malaysia
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TLO Technology Licensing Office
TM Telekom Malaysia
TNB Tenaga Nasional Berhad
TPM Technology Park Malaysia
TPS Total Possible Score
UDA Urban Development Authority
UDC United Development Corporation
UK United Kingdom
UNCTAD United Nations Commission on Trade and Development
UNESCAP United Nations Economic and Social Commission for Asia Pacific
UNIDO United Nations Industrial Development Organisation
UNIDO United Nations Industrial Development Organization
UniKL University of Kuala Lumpur
UniKL-BMI UniKL-British Malaysia Institute
UniKL-MFI UniKL-Malaysia France Institute
UniKL-MSI UniKL-Malaysia Spanish Institute
UNU-INTECH United Nations University Institute for New Technologies
UPM Universiti Putra Malaysia
USA United States of America
UTM Universiti Teknologi Malaysia
UUM Universiti Utara Malaysia
VDP Vendor Development Programme
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CHAPTER 1 INTRODUCTION 1.1 Overview
Entrepreneurship is a significant source of income to most nations. It provides job
opportunities, wealth and societal well-being to the nations. It is entrepreneurial
endeavor that is responsible for creating job opportunities for people. Entrepreneurs are
therefore regarded as the drivers of economy in most nations. Say (1803) defined an
entrepreneur as one who ‘shifts economic resources out of an area of lower and into an
area of higher productivity and greater yield’. They determine the economic growth of
nations.
Concomitant with entrepreneurship is the globalization and liberalization
phenomena that are driving the world’s economy towards increasing competitiveness.
The sustenance of competitiveness thus becomes a major concern in the challenging and
competitive global environment. Greater emphasis is being placed on technology based
industries such as information technology, biotechnology, automotive, and the electrical
and electronics industries. The global trend is thus narrowing towards entrepreneurial
activities that are technology-oriented, also termed as ‘technology entrepreneurship’.
Technology entrepreneurship is an emerging field that combines technology and
entrepreneurship disciplines. It merges technological knowledge and ability with
entrepreneurial skill and competency. As such, technology entrepreneurship includes
technology, entrepreneur, firm, and context; these factors are integrated and
complement each other. Technology entrepreneurship is thus regarded as the catalyst for
creating competitive advantage in the rapidly changing global environment. Indeed,
given the increasing degree of competitiveness, technology entrepreneurship is
recognized as a distinct type of business venture.
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Of equal importance in the increasing global competitiveness is the fostering of
regionalization and free trade economic activities for global market access and larger
economies-of-scale. The transformation of the world’s economy towards free trading
within regions has emerged as the global business trend in the current era of intense
competition. For the member countries of the Association of South East Asian Nations
(ASEAN), the implementation of the Asian Free Trade Area (AFTA) was to promote
greater industrial integration and regional collaboration. The ultimate objective of
AFTA is to increase ASEAN’s competitive edge in terms of production in the world
market through the elimination of protective barriers to various industrial sectors,
including electrical and electronics, chemicals, plastic, machinery, rubber, metal and
transport.
In Malaysia, the implementation impact of AFTA is obvious particularly on the
automotive industry, for it faces greater challenges compared to other industrial sectors.
This is partly due to the fact that the local automotive industry is a state-sponsored
industry which has received government protection in terms of dominant market share
in the competitive market environment. Government protection has enabled the national
automotive industry to dominate the local market with its sales record relatively
outperforming other car makers.
However, the implementation of AFTA has also reduced the impact of
government on the local automotive industry. The local automotive industry is
confronted with intense competition from other car makers as there is increasing foreign
make vehicles in the local market. The increasing number of foreign car makes in the
market has led to competitive pricing, which ultimately has led to cost reduction within
the industry. There is increased usage of automotive parts and components from China
and India to reduce the cost of production of a national automobile. This phenomenon
has particularly affected the national automotive parts and components industry; the
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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 government’s 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
nation’s 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 Malaysia’s industrial development in terms of number of firms
created.
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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?
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(2) What is the root of technology entrepreneurship practice in Malaysia?
(3) What is the effect of AFTA on the national automotive industry?
(4) What are the strengths and weaknesses of the national automotive parts and
components industry in terms of technology entrepreneurship capability?
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
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and innovative. Consequently, suggestions are offered to overcome the weaknesses in
the identified key areas, and simultaneously some recommendations are proposed to
improve and upgrade the performance of the vendor firms. The findings from the
analysis should contribute towards policy measures on technology entrepreneurship
capability of the national automotive industry.
1.4 Significance of the Study
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.
Schumpeter’s 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 Schumpeter’s 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 Schumpeter’s Mark II (1942) explanation. Therefore, the scope of
this research covers the individual who owns the business; the firm, in which he
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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, Schumpeter’s 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
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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 Malaysia’s 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 government’s 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
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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.
10
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
An enormous collection of literature exists in the field of entrepreneurship; it has been
dealt with extensively by numerous scholars from various disciplines such as sociology,
psychology, and economics. On the relation to personality traits, behavior, social and
environmental influences, Weber (1930) is among the early authors who have discussed
entrepreneurship in terms of behavior where a value system is regarded as essential to
an entrepreneur’s behavior.
McClelland (1961; 1971) defined an entrepreneur as one who exercises control
over production, which is not merely for his personal consumption; he explored
psychology to explain an individual’s need for achievement as the motivational factor
that led entrepreneurs to perform better. Generally, he has developed psychological
theories including personal traits, motivational factors and incentives, and discovered
11
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
12
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).
Schumpeter’s (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 Schumpeter’s Mark I and Mark II
theories are applicable to today’s definition of entrepreneurship, for they complement
each other.
2.3 Innovation
Innovation is defined by Schumpeter (1950) as the creation, development and
introduction of new products, processes, systems and organizational forms. Schumpeter
(1939) treats innovation activity as an internal factor in economic change, and the
individuals who bring about innovations as the “entrepreneurs who are stimulated by the
possibility of reaping a temporary surplus profit from being ‘a first mover’ – a profit
that … will vanish in the subsequent process of competition and adaption”. His theory
of economic change on the role of innovation and the entrepreneur was outlined in the
‘Theory of Economic Development (Schumpeter, 1934)’.
13
In this book, Schumpeter (1934) identified five ways of revolutionizing the
pattern of production, that is, the introduction of a new product to the consumers, the
introduction of a new production method, the exploitation of a new market, the
utilization of a new source of supply of raw materials or partly manufactured goods, and
the implementation of a new way of organization. Thus, according to Grupp (1998)
Schumpeter’s Mark I regards technical knowledge as an external factor in economic
development, and the entrepreneur is held responsible for applying technical knowledge
appropriately for his business success. In Schumpeter’s later work, Mark II, the
technical knowledge factor was included as part of economic development and
discussed in his theory of ‘Business Cycles’ (Schumpeter, 1934; 1939).
Schumpeter defined “the changes in the economic process brought about by
innovation together with all their effects, and the response to them by the economic
system…”; he assumed that all innovations are “embodied in New Firms founded for
the purpose” (Schumpeter, 1939). In Mark II, Schumpeter (1942) reinterpreted technical
changes as “the subject of systematic action designed to achieve competitive advantages
in the capitalist competitive arena through the opening up of new markets”.
Schumpeter’s notion of ‘Business Cycles’ has been restated as follows:
the idea of ‘technological revolutions’ as the driving force of the Kondratiev
cycles, and pointed in particular to the role of steam power in the first
Kondratiev (1818-42), railroads in the second (1843-97) and of electric power
and the automobile in the third (1898 to about 1949); these changes were related
primarily to bursts of innovative activity and entrepreneurship by Schumpeter
(Rothwell and Zegveld, 1982).
In a later work, Schumpeter (1942) emphasized the large corporation’s leading role
which he perceived as the process of creative accumulation. He was referring to a mode
14
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 Schumpeter’s
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.
15
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 management’s
vision of the firm embraces a view of the future place of technology in the firm and how
this is to be achieved. Schumpeter’s 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)
Schumpeter’s 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,
16
1992). The Neo-Schumpeterian approach recognized that technology constitutes
technological application of different conceptual notions as suggested by various
researchers in the field (Magnusson, 1993).
Simultaneously, in a firm context where new and improved artifacts are
produced through various product development processes, knowledge, skills and
techniques are essentially required. As such, technology has been considered as
knowledge, as skills and as artifacts by Layton (1974). In this respect, technology is
deemed to have its own specific framework of concepts, ideas and relationships within
which it develops over time, and that this framework is reflected in a division of
innovative expertise between the various institutions which support that technology
(Constant, 1980; Laudan, 1984; Vincenti, 1990).
These studies clearly show that technology carries a comprehensive definition
which is understood as ‘a body of knowledge, tool and techniques, derived from both
science and practical experience that is used in the development, design, production and
application of products, processes, systems, and services’ (Abetti, 1989). In relevance,
some key concepts of technology and its role in competition are provided:
technology is embodied into products and also into processes or methods used to
generate new products or services; technology is knowing how to apply
scientific and engineering knowledge to achieve practical results; technology has
to do with science and practical experience (technique); technology involves
process which starts from scientific knowledge to application, and which starts
with the accumulation of empirical knowledge to technology through its
generalization; technology is not good per se from a business perspective but
when intrinsically related to innovative objectives; and technology, science and
technique are all related to forms of explicit knowledge
(Chiesa, 2001).
17
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 firm’s 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.
18
Production capability refers to operating productive facilities; investment
capability is, for expanding, capacity and establishing new productive facilities; and
finally innovation capability is for developing technologies (Westphal et al., 1999).
These scholars listed the elements of production and investment capability as found in
Table 2.1.
19
Table 2.1
Elements of Production and Investment Capability
Source: Westphal et al.(1999)
Production Capability Production management To oversee the operation of established facilities Production engineering To provide the information required to optimize the operation of established facilities, including:
raw material control – to sort and grade inputs, seek improved inputs; production scheduling – to coordinate production processes across products and facilities; quality control – to monitor conformance with product standards and to upgrade them; trouble-shooting – to overcome problems encountered in the course of operation; adaptation of processes and products – to respond to changing circumstances and to increase productivity.
Repair and maintenance of physical capital
According to regular schedule or when needed.
Marketing To find and develop uses for possible outputs and to channel outputs to markets. Investment Capability Manpower training To impart skills and abilities of all kinds. Pre-investment feasibility studies To identify possible projects and to ascertain prospects for viability under alternative design concepts. Project execution To establish or expand facilities, including:
project management – to organize and oversee the activities involved in project execution; project engineering – to provide the information needed to make technology operational in a particular setting, including: detailed studies – to make tentative choices among design alternatives;
basic engineering – to supply the core technology in terms of process flows, material and energy balances, specifications of principal equipment, plant layout; detailed engineering – to supply the peripheral technology in terms of complete specifications for all physical capital, architectural and engineering plans, construction and equipment installation specifications;
procurement – to choose, coordinate, and supervise hardware suppliers and construction contractors; embodiment in physical capital – to accomplish site preparation, construction, plant erection, manufacture of machinery and
equipment; and start-up of operations – to attain predetermined norms.
20
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.
21
Table 2.2
Six Elements of Technological Capability
Source: Ernst et al. (1998) and Abdulsomad (2003).
Production Capability: Production management Production engineering Repair and maintenance of physical capital
to oversee operation of established facilities. to provide information required to optimize operation of established facilities, including the following: raw material control, production scheduling, quality control, trouble-shooting and adaptations of the process and products. regularly and when needed.
Investment Capability: Manpower training Pre-investment feasibility studies Project execution
to impart skills and abilities of all kinds. to identify possible projects and ascertain prospects for variability under an alternative design concept. to establish or expand facilities, including the following: project management, project engineering, procurement, embodiment in physical capital and start-up of operations.
Minor Change Capability: (Engineering) (Organisation)
to improve and adapt its products continuously. to improve and adapt its processes continuously.
Marketing Capability: Domestic market Export
Replacement Equipment Market (REM) or Original Equipment Market (OEM)
Linkage Capability: Within a firm Intra-firm linkages Inter-firm linkages
} to provide opportunity for learning and to finance innovation to reduce related cost
Major Change Capability: Research and Development (R&D) Radical product modification Major changes New invention
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.
22
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.
23
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 Thailand’s 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 Malaysia’s 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
24
has been progressing slowly due to the national manufacturer’s 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, Wong’s suggestion of
25
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.
Thailand’s experience put forward by Vongpanitlerd (1992) in a six-volume
report on “The Development of Thailand’s Technological Capability in Industry” in
1992 has provided important insights into Thailand’s industrial sectors in terms of
technological capabilities. Vongpanitlerd’s 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
26
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 today’s globalized era
where technological innovation is given high priority. The increasing degree of
27
competitiveness, particularly in technology intensive industries, requires the recognition
of a distinct type of entrepreneur, namely the ‘technology entrepreneur’.
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
28
(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 Schumpeter’s 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 firm’s 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 firm’s
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
29
favorably and effectively the operation and management functions of a firm for
sustainable performance motivation.
2.4.2 Technology Entrepreneurship
The term ‘technology entrepreneurship’ is receiving increasing recognition from
scholars, notably from the school of information technology, management, economics,
and science and technology, and from industry players as well. In this study, the term
technology entrepreneurship is defined from various perspectives; it merges technology
ability and knowledge with entrepreneurial skills and competency. Technology
entrepreneurship therefore includes factors of technology, entrepreneur, firm and
context, and all these factors are merged to create competitive advantage.
The four factors are of concern for they reflect the different fields of study from
which the term has emerged, and the context, within which the study is conducted. For
instance, the entrepreneurship discipline looks into the firm, entrepreneur and context
factors while the innovation discipline looks into the entrepreneur and technology
factors. These factors are interrelated and complement each other as will be discussed in
detail in the analysis chapter.
Furthermore, this notion is in line with Schumpeter’s theory of innovation, in
which an entrepreneur is defined not in isolation but in an integrated form; innovation is
argued by Schumpeter (1912) as the result of entrepreneurs as noted in Schumpeter
Mark I and the outcome of big companies as noted in Schumpeter Mark II. Schumpeter
(1942) believes big companies are capable of having the necessary resources and capital
to invest in research and development, which in consequence can move the innovation
and economy of the nation. This study also looked into the technology entrepreneurship
issue following Schumpeter’s concept of ‘completeness’ where technology
30
entrepreneurship is discussed based on four factors that constitute different fields of
study.
In the search for literature on technology entrepreneurship, few articles of
relevance are found in Malaysia. Among them was the article on 'Technopreneurship as
the New Paradigm for E-Business' by Abu Bakar (2006). The research on the
significance of ‘technopreneurship’ in achieving high-tech venture success was carried
out at Universiti Teknologi Malaysia. He attributed the failure of many ‘dot com’ firms
to the lack of ‘technopreneurship’ skills in its implementers, and thus signified the
difference between an entrepreneur and a technopreneur. Abu Bakar (2006) defined a
‘technopreneur’ as one who has mastered certain technology, and possesses other skills
as well such as intellectual, emotional and spiritual intelligence.
Abdul Rahman and Monroe (2006) investigated a benchmarking study of
entrepreneurship, or ‘technopreneurship’ training programs and incubator projects
within Malaysia. They believed that the result of benchmarking studies will be helpful
to the related ministry, namely Ministry of Entrepreneurship and Cooperative
Development (MECD) to develop its future plans. Their results identified a tremendous
need and desire for high quality entrepreneurship, or ‘technopreneurship’ training
programs to be implemented across Malaysian government agencies. For this purpose,
the authors estimated the need for more than 100 trainers on a full-time basis to deliver
the training programs throughout a year period.
An article entitled, “National Venture Competition and Technopreneurship
Development in Malaysia” was jointly written by three individuals from three different
locations, Tan from Singapore, Egge from the United States of America (USA), and
Mohamed from Malaysia (Tan, Egge, Mohamed, 2003a). These authors outlined a new
strategy towards encouraging technology-based entrepreneurship, also called
‘technopreneurship’. This new strategy was basically in the form of business plan
31
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-
32
based economy. He identified key characteristics of incubators which includes a
managed work space providing shared facilities, advisory, training and financial
services, a nurturing environment for tenant companies, and a small management team
with core competencies to carefully select start-up companies entering the incubator. In
short, Jusoh explored the programs being implemented in Malaysia, the obstacles faced
in implementing the programs, and consequently identified the weaknesses, and
provided recommendation for reform. He concluded that Malaysia’s effort to create
technopreneurs is hampered by bureaucracy, implementation hurdles, and misuse of
funds. Therefore, he suggested that the government provide technopreneurs easier
access to grants and funding; to coach the universities to become entrepreneurship
centers; and to reduce red tape in Malaysia (Jusoh, 2006).
A similar article on incubation was put up by the Multimedia Development
Corporation (MDC) in the internet entitled “Business Incubation (BI) in Malaysia”
(http:www.aabi.info/directory/pdf/Malaysia.pdf) (Malaysia: MDC, 2006). One of the
purposes of this article was to help improve continuously the state of incubation such
that incubators can really add value to technology entrepreneurs, investors and other
stakeholders. Its main goal of support for BI was to facilitate the growth of technology
entrepreneurship, in particular technology entrepreneurs and world class companies in
Malaysia. The source for BI support comes from an extension of MDC, which is called
Multimedia Super Corridor – Technopreneur Development Flagship (MSC-TDF). This
MSC-TDF was operated by Malaysia’s lead agencies; the Ministry of Energy,
Communications and Multimedia.
Considerable literature is also found elsewhere on the term, ‘technology
entrepreneurship’. Burgelman et al. (1996) viewed technological entrepreneurship as a
combination of technical and commercial worlds, and is regarded as the foundation for
the technological innovation process. A comparison was made between the traditional
33
entrepreneur and technological entrepreneur. The traditional entrepreneur is defined as
one who has the ability to recognize and exploit the commercial use of a product,
service, or delivery method while, the technological entrepreneur is defined as one who
has the ability to recognize a market for applied technology, which then leads to
technological innovation and new product development.
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
Technical
Commercial
Technological Entrepreneurship
Technological Innovations
Inventions/Discoveries New Technologies
Research
Development Product/Process
Development
Administrative Capabilities
Market Development
Tinkering
34
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
35
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 attacker’s 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.
36
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 government’s serious
involvement in fostering technical entrepreneurs is due to several factors: to attract
37
foreign direct investments; to replenish the declining population with immigration of
foreign talent; to become a knowledge-based economy; to stimulate indigenous
economic growth through local technopreneurs so as to complement foreign direct
investment; and to turn to innovation so as to improve economically. The authors argue
that large, public listed corporations integrate the socialization of technopreneurism as
part of corporate innovation and technology strategy.
Foo et al. (2005) investigated the inner processes of the psychological adaptation
and changes necessary for a female to become a successful entrepreneur; in other words,
for a technopreneurial matriarch to emerge in Singapore’s society. The authors
structured their empirical investigations to focus on personal traits, interpersonal and
leadership styles that differentiate women as self-leading 'technopreneuress' from the
managerial women.
In addition to the journals that embrace the technology entrepreneurship theme,
there are also particular websites created for discussion on the technology
entrepreneurship issue particularly its development in the Asian region. The
‘technopreneurial’ website provides information on relevant articles, historical
information on entrepreneurship theory, policy recommendations and archives; it was
created by Burnett (2000), who has used the ‘technopreneurial’ website to publish his
first comprehensive research project on technology entrepreneurship in Asia.
In his research, Burnett (2000) looked into the existing role of technology
entrepreneurship and the future economic growth perspective in Asia. His research
provided impetus for the future technology entrepreneurs to grasp a better
understanding of the subject matter as well as utilize available opportunities. He
analyzed the experience acquired by technology entrepreneurs and identified the
obstacles they faced, local new firms and venture capitalists, and discovered the
strategies for success. As for recommendations, he highlighted strategies for
38
government agencies to encourage entrepreneurship. For example, to encourage
‘technopreneurship’ in Singapore, the government created a favorable environment and
directly nurtured ‘technopreneurship’ with assistance schemes and seed financing for
startups, which does not merely includes tax incentives but also actual capital (Burnett,
2001).
With the initiation of Burnett’s technology entrepreneurship website,
innumerable authors have started to publish their articles on this site. The number of
articles published on this site has increased and they provide many new insights and
resources on the issue. Hence, Burnett aims to uncover the wisdom of Asia’s brightest
technology entrepreneurs, and to provide comprehensive information on the technology
entrepreneurship theme.
Further in the “eDiscussionAgenda: ‘Youth Social Technopreneurship’
Conference”, which was held on October 27, 2005 as part of the ‘United Nations Week
2005’, Burnett (2005) used the word “social technopreneur” to refer to an entrepreneur
who has the motivational spirit and creativity to explore and exploit new technological
opportunities in order to promote development, and to improve the environment
gradually.
This conference also discussed that as Information and Communication
Technologies (ICT) become increasingly integrated into traditional development efforts,
young social ‘technopreneurs’ will find innovative ways to contribute, which includes
educating their communities on the uses of the Internet and to creating technological
platforms linking local artisans with global consumers. As this discussion is aimed at
drawing the attention of the youth in addressing development issues through modern
ICT, the moderators of the discussion consisted of young people, equipped with a set of
concrete outcomes and recommendations. Thus, such activity encourages participation
39
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 Technology Entrepreneurship Capability
Literature on technology entrepreneurship capability is scarce. This study is among the
few studies to discuss the emerging discipline, notably the issue of technology
entrepreneurship capability. Technology entrepreneurship capability is simply
understood as the capabilities of the four factors: entrepreneur, firm, technology and
context.
As in conventional entrepreneurship literature, the entrepreneur is of concern in
this study as the person who navigates the direction of the firm. He should be equipped
with adequate knowledge and apply it in his entrepreneurial endeavor. The entrepreneur
should also have the capability to implement the knowledge possessed appropriately, for
instance, in problem-solving activity. The entrepreneur has to be agile which means that
he should act quickly and smartly.
40
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
firm’s 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 firm’s 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.
41
Hence, the merging of these capabilities is termed as ‘technology
entrepreneurship capability’. This study will use all the four capabilities reviewed in this
section to analyze the technology entrepreneurship capability of the local automotive
vendor firms in Malaysia. It is the interplay of all these factor capabilities in a particular
industry and country setting that determines the technology entrepreneurship capability
level of the firms assessed, which will be elaborated in detail in the analysis chapter.
2.5 Summary
Technology entrepreneurship is a relatively new field of study; as such, there is
relatively limited literature in this discipline, notably in Malaysia. Therefore, this study
has made an attempt to explore this emerging topic to add to the limited literature in this
relatively unexplored field of study. To facilitate a better understanding of this new
discipline, relevant terms such as entrepreneurship, innovation, technology, capability,
and technology capability have been defined prior to explaining the main terms in this
study, technology entrepreneurship and technology entrepreneurship capability.
In traditional literature on entrepreneurship, the emphasis is on the entrepreneur,
including his personality traits, behavior, and social and environmental influences, or
rather the concentration of entrepreneurship literature then was ‘person-centric’. It was
Schumpeter (1928), who introduced a new idea in the entrepreneurship discipline,
which is innovation. He added a new attribute to the term ‘entrepreneur’, and was able
to change the basic parameters of entrepreneurship. Schumpeter’s entrepreneur is one
who has technical knowledge and is held responsible for applying it; the entrepreneur is
not merely an inventor but one who is responsible for bringing the innovation to the
market to achieve competitive advantage. Following his notion, this study defines
technology entrepreneur as one who has the capability to acquire knowledge and
entrepreneurial skill and apply them for a firm’s sustainable performance.
42
With that, the term ‘technology entrepreneurship’ is placed at the interface of
four different factors that include the entrepreneur, firm, technology, and context. These
four factors are inter-related and complement each other; taken together, these factors
are believed to provide significant insights into the globalization and liberalization
issues facing the entrepreneurs today. Technology entrepreneurship is thus drawn from
the merging of studies on entrepreneurship, innovation, and science and technology; the
technology entrepreneurship factors: entrepreneur, firm, technology and context reflect
the various fields of study.
Technology entrepreneurship capability is then referred to the variety of
capabilities that firms need to create competitive advantage, and to sustain firm
performance. This rather broad definition includes the capability to recognize changes
in the environment; the capability to apply the technology acquired; the capability to run
the firm’s functions effectively; and the capability to lead the firm towards success and
sustainability. By integrating these capabilities, this study is able to use the technology
entrepreneurship factors to analyze the technology entrepreneurship capability of the
subject under study, which is the local automotive parts and components industry at the
firm level.
43
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 Malaysia’s Economic Development
Since achieving Independence in 1957, the nation’s economic development has been
impressive. Malaysia ranked 13th of 128 countries in terms of per capita Gross National
Product (GNP) growth in 1982 having made impressive advances towards
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
44
employment respectively; the tertiary sector contributed a significant 43.2 % to GDP in
1957 (Okposin et al., 1999).
In the 1960s, the economic trend shifted from the primary sector to
industrialization as an import-substitution strategy was adopted to reduce dependency
on the primary sector and simultaneously diversify the economy so as to create more
employment opportunities for the increasing population. Nevertheless, the small
domestic market limited the economies-of-scale, which in turn exposed the need for a
change in the economic trend; the attention was then diverted to an export-oriented
strategy in the 1970s.
An export-oriented strategy was among the many efforts introduced during the
implementation of the NEP period, which covered the period of 20 years from 1971 to
1990. The two major NEP objectives were the eradication of poverty and restructuring
of society, aimed at providing indigenous people (Bumiputeras) an average 30 % equity
participation in the industrial sector by 1990; it was indeed the turning point for
Bumiputera involvement in the economic activities of the nation. It was also the period
that witnessed the growth of the manufacturing sector. The manufacturing sector
became the fastest growing sector with a growth rate of 10.4 % per annum and
surpassed the agricultural sector, achieving 22.6 % of GDP in 1987 (EPU, 2004).
Consequently, in the 1980s, government emphasis was again on the import-
oriented strategy, known as the ‘second round of import-substitution strategy’; it was
based on the economic and technological development aspirations of Japan and Korea.
The Prime Minister then, Dr Mahathir Mohamad, began to focus on heavy industries
such as iron, steel, cement and cars to produce intermediate goods, consumer durables,
and to generate linkages with the domestic economy through the establishment of
Heavy Industries Corporation of Malaysia (HICOM) (Drabble, 2000).
45
Besides the move towards industrialization, other major shifts in government
policies, namely privatization and Malaysia Incorporated, fostered the development of
entrepreneurship in Malaysia, particularly among the Bumiputeras. By 1990, the equity
ratios had changed from 4 % in 1971 to 18 % in the hands of Bumiputeras; from 34 %
in 1971 to 55 % in the hands of non-Bumiputeras; and a reduction from 62 % to 27 % in
the hands of the foreigners (Howell, and Palmer, 1995).
The early 1990s were years of rapid economic growth in which the GDP grew at
8.5 % between 1991 and 1997 with per capita income increasing twofold, and the
incidence of poverty falling from 16.5 to 6.1 % (EPU, 2004). The 1990s marked
Malaysia’s transition to high-technology, knowledge-economy and high value added
activities with the NEP being replaced by the New Development Policy (NDP) which
aimed to achieve a fully developed economic status by 2020.
3.3 Entrepreneurship Development in Malaysia Entrepreneurship development in Malaysia is rooted in the basic trading activities in
practice prior to Independence in 1957. In 1931, Emerson (1966) noted that there were
475 Malays, 16, 894 Chinese, 4,428 Indians and 246 Europeans involved in businesses
of the then Federated Malay States of Perak, Pahang, Negeri Sembilan and Selangor. In
1954, there were 79,673 business units registered in the then Federation of Malaya (Hai,
1962). Upon achieving Independence in 1957, the number of business activities
gradually increased.
To understand the development of entrepreneurship in Malaysia, this study has
categorized Malaysia’s economic activities into four phases based on timeline of the
major government policy, the NEP and the political leader, Dr Mahathir Mohamed. The
NEP was the first government policy that spanned over a 20-year period from 1971 to
1990, and had a great effect on the nation in terms of eradication of poverty, and
46
restructuring of society. Mahathir, as the fourth prime minister, had a great influence on
Malaysia’s 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 Mahathir’s 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 Phase 1 (1957-1970): Pre-NEP Era
The newly-independent government of Malaysia initiated an economic policy, which
simply sought to: “… create a favourable investment climate and leave the projects to
be undertaken entirely by private enterprises” (Khir, 1962). This policy encouraged
more people to be involved in entrepreneurial activities so as to create private
enterprises that would ultimately undertake significant industrial projects. In the mean
time, Malaysia received steadily improved returns for her two main exports, rubber and
47
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 government’s 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
48
businesses registered in 1961 as sole-proprietorship in the then Federation of Malaya
(Ungku Aziz, 1962).
To further encourage the participation of the Bumiputeras in entrepreneurial
activities, the government established the Rural Industrial Development Authority
(RIDA) in the late 1950s to basically stimulate development in the rural areas, and to
change the structure of the rural economy through provision of rural credit, marketing
and technical assistance; specifically, RIDA aimed to foster the development of the
Malay business class (Ness, 1967). However, RIDA was replaced by the Council of
Trust for the Indigenous People or ‘Majlis Amanah Rakyat’ (MARA) in 1965.
MARA was set up to foster the development of the Bumiputeras in commercial
and industrial activities through financial and other assistance, and opportunities
provided by the government. Another agency established was the Federal Land
Development Authority (FELDA) specifically to provide land to the interested
Bumiputera to initiate cultivation activities. A sew years later, the government
established the Perbadanan Nasional Berhad (PERNAS) in 1969 to particularly advance
the economic status of the Bumiputeras.
Apart from the rapid urbanization activities, technology transfer activities also
took place particularly in innovations that were imported like tin dredges, and those
innovations developed locally such as new techniques of rubber production (Drabble,
2000). The different measures taken by the government were basically intended to
encourage infrastructure investment and provision of a conducive economic
environment suitable for entrepreneurship development (Spinanger, 1986). Thus, the
technological-oriented economic activities, and the encouragement and assistance from
the government towards entrepreneurial activities paved the way for a new dimension in
the entrepreneurship field in Malaysia, namely technology-based entrepreneurship.
49
In addition, rapid establishment of industrial estates in Malaysia created more
entrepreneurial opportunities that were technology based as the nature of these estates
were technology based. The industrial estates gave rise to many new industries in
Malaysia, and increased the nation’s involvement in various entrepreneurial activities.
To encourage greater participation of entrepreneurs in the development of industrial
estates, the government established the Malaysian Industrial Development Finance
Limited (MIDF) in March 1960 specifically to assist private enterprises in terms of
medium to long-term loans; equity purchasing; and other services. Indeed, the
development of industrial estates led to the successful establishment of Petaling Jaya in
1952, which then led to additional industrial estates such as Mak Mandin in Penang,
Tasek in Perak, Larkin and Tampoi in Johor, Shah Alam in Selangor, and Senawang in
Negeri Sembilan.
The subsequent years of the 1960s marked the beginning of import-substitution
economic activities; industries to substitute imports such as food, beverages and
tobacco, printing and publishing, building materials, chemicals and plastics grew
rapidly (Sulong, 1997). The government pursued a policy of diversification in its
economic structure, which included not only primary commodities but also
manufactured products. The various industrialization policies were coordinated by the
Federal Industrial Development Authority (FIDA) established in 1965, and renamed
Malaysian Industrial Development Authority (MIDA) in 1978.
MIDA is the government agency under the MITI responsible for promotion and
coordination activities in terms of industrial development in Malaysia; it particularly
assists companies that intend to invest in the manufacturing sector and related services
sectors; facilitates the implementation and operation of firms’ projects; undertakes
planning and industrial feasibility studies; evaluates applications for manufacturing
licenses, manufacturing activities and exemption of duties; facilitates an exchange of
50
information and coordination of industrial development activities; provides
recommendation on policies and strategies on industrial promotion to the MITI.
Meanwhile, official policy towards industrialization began to change after 1965
in response to a decline in industrial growth and the separation of Singapore from
Malaysia (Singapore joined the Federation two years earlier) (Bowie, 1988). The second
decade after Independence saw a focus on intensifying and regionalizing
industrialization policies. In line with the changes and government concentration, the
number of enterprises established increased gradually, and the type of entrepreneurial
activities ventured into also took a different route rather than the basic retail type of
activity; entrepreneurs started participating in transport trade and contracting businesses.
3.3.2 Phase II (1971-1980): Pre-Mahathir Era
The second phase is categorized by developments in the NEP implementation period.
The NEP is a 20-year development programme spanning over four Malaysia Five Years
Plans; however, this second phase looks specifically into the industrial activities during
the Second Malaysian Plan (1971-1975), where the focus was on the manufacturing
sector and during the Third Malaysian Plan (1976-1980), which focused on new
strategies to spur the economic growth of the Bumiputera community. The Third
Malaysian Plan includes the establishment of new growth centers such as the
development of industrial estates and ready-built factories in efforts to encourage
investment in the less developed states (Malaysia: Third Malaysian Plan, 1976).
The incident of racial-riots in 1969 led to the restructuring of equity ownership.
The NEP was formulated to distribute the economic equity ratio to 30% for the
Bumiputeras; 40 % for the non-Bumiputeras; and 30 % for foreigners by 1990 (Howell
and Palmer, 1995). It aimed to provide opportunities for greater Bumiputera
participation in the manufacturing sector in terms of equity, employment, marketing and
51
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%
Source: Malaysia: Fourth Malaysian Plan (1981).
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.
52
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
53
government embarked on new domestic industrial interventions by launching a number
of public firms, which aimed to increase employment opportunities for the locals,
especially for the Bumiputeras; these state-owned firms were classified as statutory
bodies and government-owned private or public limited companies (Gomez and Jomo,
1995).
The Ministry of International Trade and Industry was established as the
government body to formulate policies on industrial development. It had already been in
existence since achieving Independence in 1957 but was known as the Ministry of
Commerce and Industry, and in 1972 it was renamed Ministry of Trade and Industry; in
1990, it saw another name change to Ministry of International Trade and Industry.
Initially, MITI consisted of Ministry of Domestic Trade and Industry, Ministry of
Entrepreneurship and Cooperative Development, and Ministry of Tourism Industry; all
these ministries branched out into separate ministries soon after.
At present, there are five agencies under MITI, namely MIDA in charge of the
implementation of industrial policies; MIDF responsible for promoting the development
of industrial sectors through the provision of financial assistance; Malaysia External
Trade Development Corporation (MATRADE) to provide linkages for international
collaboration, and develop export markets for local goods; Malaysia Productivity
Corporation (MPC) to promote productivity and quality to enhance the nation’s
competitiveness; and Small and Medium Industries Development Corporation
(SMIDEC) to foster the development of small and medium sized enterprises through
various types of assistance.
MITI’s industrial policies have existed in various government policies, including
the Malaysia Plans (MP), Industrial Master Plan (IMP), Vision 2020 and others. These
policies and strategies encompass various industrial sectors, including resource-based,
non-resource based, and services industrial sectors. Specific policies for industrial
54
development were formulated in the industrial master plan; prior to the introduction of
the IMP, industrial policies were discussed generally in Malaysia’s 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 nation’s 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-
55
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 Phase III (1981-1990): Mahathir Era
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
56
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 Malaysia’s 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
57
quality. In consequence, Mahathir initiated programmes such as technical and academic
studies and intensive training for executives and entrepreneurs; implemented a new
work environment such as the use of punch cards, nametags, manual on work
procedures and others; and new mind sets through the implementation of concepts such
as clean, efficient, and trustworthy, and leadership through example.
Besides the initiative to drive the nation towards Japanese work style and ethics,
the Malaysian government also initiated effort to establish linkages with multinational
companies (MNCs) of the NICs in a number of industrial sectors such as
petrochemicals, iron and steel, cement, paper and pulp, and motor vehicles. For
example, a joint venture was initiated between HICOM, Mitsubishi Motors Corporation
(MMC) and Mitsubishi Corporation (MC) for the national automotive project; another
example is the joint venture between Perwaja, a Terengganu firm and a consortium of
eight Japanese firms led by Nippon Steel Corporation (NSC) for the steel project. Thus,
the establishment of joint venture agreements with the NIC partners led to the
deepening of Malaysia’s industrial structure.
Nevertheless in 1982, the government had to go on an austerity drive due to the
deepening recession; with that, public spending in most areas was reduced except for
HICOM’s sponge iron, cement, small engine and auto projects (Bowie, 1988). Of these
few exempted areas, the automotive is the best known project carried out under HICOM
(Searle, 1999). The high recognition given to the automotive project is because it is a
state-led project appreciated greatly in terms of the number of firms established as
suppliers of parts and components, and the number of employment opportunities
created. Besides, it has also fostered technological development in Malaysia. As such,
this study will look into this particular state-led project, which has had great socio-
economic impact on the nation despite being highly protected by the government. The
58
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 Malaysia’s
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 government’s 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.
59
Table 3.3
Key Industrial Clusters and Subgroups
Key Industrial Cluster Subgroups
Electrical and electronics products
(a) Consumer electronics (b) Semiconductors and electronics components (c) Computers, peripherals and telecommunications equipment (d) Electrical appliances and electronic apparatus
Transportation equipment (a) Automotive and motorcycles (b) Aerospace (c)Shipbuilding and repairing (marine transportation)
Chemicals (a) Pharmaceuticals (b) Petrochemicals (c) Palm oil products
Textiles and apparel
Materials (a) Wood-based products and furniture (b) Rubber-based products (c) Advanced materials
Food processing (a) Meat and seafood products (b) Cocoa and confectionery (c) Fruit and vegetable products
Machinery and equipment Source: Sulong (1997)
These clusters and the specific sub-sectors were identified for development under the
IMP’s long-term indicative plan. As such, various measures were taken to foster the
development of these sectors including inducing reinvestments, linkages, exports and
training, conducive environment for investment, and attractive policies and simplified
procedures to minimize administrative bottlenecks (Okposin et al., 1999).
Obviously, the selected industrial sectors and sub-sectors are heavily dependent
on technology; indeed, the various industries included in the clusters are technology
intensive. As such, entrepreneurial development during the phase III period is attributed
to government efforts towards creating industrial sectors that are technology intensive.
In line with this endeavor, most of the firms created were also technology based. Phase
60
III thus marked the beginning of technology based entrepreneurial activities in
Malaysia.
3.3.4 Phase IV (1991- 2005): Post-NEP Era
The period of 1991-2005 witnessed a great increase in government investment in heavy
industries of high technologies as asserted in the Sixth Malaysia Plan (1991-1995),
Seventh Malaysia Plan (1996-2000) and Eighth Malaysia Plan (2001-2005). The
emphasis is on the quality of small and medium scale enterprises rather than on
increasing the number of entrepreneurs, and on finding new ways to achieve a more
equitable share of equity ownership among the various ethnic groups (Abdul Samad,
2002).
In particular, the Sixth and Seventh Malaysian Plans were concerned with the
development of the manufacturing sector, and on the promotion of the efficient use of
natural resources. The Seventh Malaysian Plan emphasized the significance of the small
and medium sized industries (SMIs) in supporting national industrialization efforts
through forging linkages across the manufacturing sector (Malaysia Eighth Malaysia
Plan, 2001). In consequence, a government agency, namely SMIDEC was established in
1996 to provide guidance on the planning and coordination issues of the SMIs in the
manufacturing sector.
Several programmes were introduced by SMIDEC in efforts to nurture the
development of the SMEs, and particularly to enhance the capacity and capabilities of
the SMEs at the global level; among the programmes introduced are the Industrial
Linkage Programme (ILP) aimed at developing domestic SMEs into competitive
manufacturers and suppliers of parts and components and related services to MNCs and
large companies, Global Supplier Programme (GSP) involves training in critical skills
and also linkages to MNCs and large companies, SME Expert Advisory Panel (SEAP)
61
is a programme implemented to strengthen technical advisory services to SMEs; Skills
Upgrading Programme is aimed at enhancing the skills and capabilities of SME
employees in the technical and managerial levels; and ‘Enterprise 50’ is an annual
award programme to recognize the achievements of the enterprises in terms of financial
and management performance (MITI, 2005). These programmes have enabled the
creation of many SME-sized enterprises in the manufacturing sector. These enterprises
are mostly technology based; their involvement in the manufacturing sector has boosted
the significance of technology in entrepreneurial activities.
The focus of the Eighth Malaysian Plan was on sustaining economic growth and
competitiveness to overcome the challenges of the globalization phenomenon. As such,
it included efforts to accelerate technological development; R&D and educational
activities; and aimed to emphasize human resource enhancement and R&D facilities
development (Malaysia: Eighth Malaysia Plan, 2001). As such, the NDP, the successor
to NEP, focused on the human resource factor and the involvement of private sector as
noted in the policy ‘rely more on private sector involvement in the restructuring
process’; therefore the emphasis was on human resource development including moral
and ethical values in order to achieve the objectives of growth and redistribution’
(Malaysia: NEP, 1971).
The NDP, which spanned from 1991 to 2000, focused on transforming the
nation from an agricultural to an industrialized nation by the year 2020. As noted by
Mahathir, “the inefficient smallholder operation in the agriculture sector would be
transformed to production by commercial estates” (Howell and Palmer, 1995). The
NDP as contained in the Second Outline Perspective Plan (OPP2), voiced the Prime
Minister, Mahathir's new vision, ‘Vision 2020’, which aimed to eliminate hard-core
poverty and reduce relative poverty.
62
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, petro-
chemicals, 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
63
adopted a cluster-based approach in order to focus on the development of specific
industry clusters; the clusters at various levels of evolution included naturally evolving
clusters, referred to as resource-based industries such as wood-based, rubber-based,
palm-based, petroleum-based or chemical products; policy-driven clusters that are the
automotive, aerospace, machinery and equipment industries; and clusters with
international linkages such as the electrical and electronics appliances and textiles
industries (Malaysia: IMP II, 1996).
Specifically, the government identified 10 industrial sectors, sub-sectors and
activities in the areas of new and emerging technologies to promote high-tech products
and activities. These industrial sectors and sub-sectors are listed in Table 3.4.
64
Table 3.4
High-tech Industries and Sub-sectors
High-Tech Industries Sub-sectors
Advanced electronics 1. Design, development and manufacture of: (a)computer or peripherals (b)microprocessor application
2. Development and production of communication equipment 3. Design and production of integrated circuits (IC)
Equipment/Instrumentation 1. Design, development and manufacture of: (a)medical equipment (b)medical implant or devices (c)scientific equipment
2. Development and production of high pressure water cutting equipment
Biotechnology 1. Development, testing and production of: (a)pharmaceuticals (b)fine chemicals (c)food or feed supplements (d)bio-diagnostics
2. Development and production of: (a)cell cultures (b)biopolymers
3. Development and production of biotechnology processes for waste treatment
Automation and flexible manufacturing systems
1. Development and production of: (a)computer process (b)process instrumentation (c)robotic equipment (d)computer numerical control (CNC) machine tools
65
Table 3.4, continued
High-Tech Industries Sub-sectors
Electro-optics and non-linear optics 1. Development and production of: (a)optical lenses (b)laser application equipment (c)fiber-optic communications equipment
Software engineering 1. Development and production of: (a)neural networks (b)pattern recognition systems (c)machine vision (d)fuzzy logic systems
Alternative energy resources 1. Development and production of: (a)fuel cells (b)polymer batteries (c)solar cells (d)renewable energy
Aerospace 1.Manufacture and assembly of aircraft 2.Manufacture of aircraft equipment, components, accessories or parts thereof 3. Modification and conversion of aircraft 4.Refurbishment or re-manufacture of aircraft equipment, components, accessories or parts thereof
Source: Sulong (1997)
66
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 world’s 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
67
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 Technology Entrepreneurship Programmes
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 Cradle Investment Programme (CIP)
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
68
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 CIP’s technology investment is in the areas of ICT and high growth
that includes software and information services; internet: e-services, e-commerce and e-
content; 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 Technopreneur Development Flagship (TDF)
Technology Development Flagship functions as a division of Multimedia Super
Corridor (MSC). MSC has set up the TDF division with the intention of conducting
essential technopreneurship development programmes or projects. Among these are the
business plan competition and advisory service to the technopreneurs in need.
69
3.4.3 PHASER Programme
PHASER is a programme organized by the Ministry of Entrepreneur and Cooperative
Development. The PHASER programme is intended to develop a pool of Bumiputera
entrepreneurs who are resilient and competitive both in the local as well as in the
international market. The method used is entrepreneur centered, in which an
experienced entrepreneur will guide the new entrepreneur candidate. The emphasis is on
entrepreneur to entrepreneur experiential learning. In this programme, technopreneurs
are regarded as individuals who develop new products, and/or services and/or processes
to fulfill present market needs and then enhance it through the use of technology.
3.4.4 Start Your Own Business (SYOB)
The Start Your Own Business is a five-day programme organized by the Multimedia
Development Corporation to help graduates from the disciplines of ICT to become
technopreneurs. The programme is carried out in the form of a workshop consisting of
six modules.
The modules are a balance of both technological and business knowledge. Upon
completion of the workshop, the qualified participants attend other relevant significant
programmes that could better prepare them for the business start-up. Among them are a
three-month industrial attachment with the MSC-TDF, business plan preparation and
advisory, and other necessary technopreneurship skills development. Hence, having
acquired both technological and business knowledge, the programme believes that the
participants will be able to set up their own ICT-based businesses. Indirectly, the SYOB
programme has enabled the participants to create their own employment opportunities.
Indeed, the SYOB programme is in line with the nation’s drive towards vision 2020,
that is, the setting up of a vibrant ICT industry in Malaysia.
70
3.4.5 Technology Entrepreneurship Academic Programmes
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 Technology Entrepreneurship Programmes by Institutions
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.
71
Table 3.5
Support Programmes for Entrepreneurship Development in Malaysia
Type of Assistance
Agencies involved Ministry/ Institution
Year est. (Agency)
Purpose
National Productivity Corporation (NPC)
Ministry of International Trade & Industry (MITI)
1962 To provide short courses on entrepreneurial development and management. To contribute towards productivity and quality enhancement of the nation for economic growth.
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.
The Council for Indigenous People (MARA)
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 To encourage potential entrepreneurs in SMEs to participate in manufacturing of food products in the country. To expose entrepreneurs with new technology in food processing and quality control.
Assistances provided to entrepreneurs to foster entrepreneur-ship development
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.
72
Table 3.5, continued
Type of Assistance
Agencies involved
Ministry/ Institution
Year est. (Agency)
Purpose
FRIM Ministry of Natural Resources
1929 To assist entrepreneurs of SMEs to solve problems related to material selection, processing, preservation, utilization, machines, operation, etc.
SMIDEC MITI 1996 To provide technical assistance for SMEs
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 To commercialize local research results To introduce strategic technologies to the country To manufacture products widely used as industrial inputs.
MASTIC MOSTI 1992 To play an important role in technological development through a number of mechanisms.
Technical Assistance & Programmes
for enterprises
and technological development
MATRADE MITI 1980 To provide Malaysian exporters comprehensive marketing information, advisory services on exporting, and assistance with business appointments and participation in trade fairs and trade missions.
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.
Assistance to enterprises in
terms of location and infrastructure
facilities 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.
Source: Abdullah (1999)
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These programmes served as a predecessor to technology-based entrepreneurial
activities in Malaysia, and accordingly the government established a number of
institutions to carry out entrepreneurial activities that are technology oriented in selected
high-tech areas, notably in the IT and ICT sectors. The institutions that were set up to
foster the development of technology and entrepreneurship are: MAVCAP, MTDC and
MIGHT; these institutions are described in the followings:
3.4.6.1 Malaysia Venture Capital (MAVCAP)
MAVCAP was incorporated on 19 April 2001 by the government of Malaysia, and was
established as a venture capital firm to invest in technology-based companies and as an
engine to spur the growth of the venture capital industry in Malaysia. MAVCAP is
committed purely to the technological sectors and invests in a mix of local and overseas
businesses to bring together a successful blend of technologies and entrepreneurial
skills. The assistance provided comes in various forms: entrepreneurial partnership, seed
provider and early stage venture capital and innovative financing for ICT companies.
In September 2001, MAVCAP disbursed RM100 million in funds to selected
local investee companies involved in high tech sectors. The fund was invested mainly in
companies involved in ICT and related businesses, including electronics, computer
hardware and software, applications, information services, and other sectors such as
internet related e-services, e-commerce and e-content, bio-technology and life-services,
and industrial and advanced materials. MAVCAP has also invested another RM100
million in the Cradle Investment Programme in May 2003. The allocation is used for
developing creative and innovative ideas of the successful applicants, who are given a
grant of up to RM50, 000 each. Thus, as a venture capital firm, MAVCAP is dedicated
to empowering the innovative entrepreneurs to create new wealth and generate returns
to their stakeholders.
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3.4.6.2 Malaysia Technology Development Corporation (MTDC)
MTDC was established in 1992 by the government to spearhead the development of
technology businesses in Malaysia. MTDC provides a range of services in the form of
venture capital and investment, government grants, technology incubation center
programmes and value added services. The priority is to promote and commercialize
local research, and invest in new ventures that allow the transfer of new technologies
from abroad. The investment in such activities has made it possible for MTDC to
become the leading venture capitalist in the country.
As such, MTDC is among the few companies, which has achieved the status of
an integrated venture capital solutions provider. MTDC has become the financing
source provider for high technology-based projects from the initiation of an idea to the
completion of a product or process, and its commercialization. For instance, MTDC has
provided grants totaling RM44.83 million to 121 deserving local companies under the
8th Malaysia Plan budget. Indeed, MTDC has invested RM150 million in more than 50
companies both locally and internationally, including the United States of America and
developed countries in Europe and in the region for the acquisition of high technology.
3.4.6.3 Malaysian Industry Group for High Technology (MIGHT)
MIGHT was established as an independent non-profit company by the fourth Prime
Minister of Malaysia, Dr Mahathir Mohamad in 1993. MIGHT was initially set up
under the Prime Minister’s Department, then placed under the Ministry of Science,
Technology and Innovation (MOSTI) in March 2004 to effectively carry out science
and technology- based activities. MIGHT was initiated based on a ‘Smart Partnership’
effort between the government body and the private sector to identify business and
investment opportunities for the industrial sector, and provide inputs for policy-making.
MIGHT also addresses issues concerning high technology industry development such as
75
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 The Root of Technology Entrepreneurship Practice
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 Malaysia’s 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 government’s 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
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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 nation’s economy.
Being aware of the forthcoming crisis has enabled the government to take
immediate measures deemed necessary. For instance, in the early years of Malaysia’s
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
government’s 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.
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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 Malaysia’s 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 nation’s 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
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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,
Mahathir’s 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 government’s 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 hands-
on 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 Malaysia’s industrial development rather minimally.
The result of this brief analysis is presented in Table 3.6.
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Table 3.6
Technology Entrepreneurship Practice
No. Technology Entrepreneurship Activities
Phase I Phase II Phase III Phase IV
1 Awareness */ / / /
2 Search **- - / /
3 Strategy / / / /
4 Core Competency - - / /
5 Technology Paradigm - - / /
6 Linkages - / / /
7 Learning - - / /
8 Leadership - - / / Note: */ indicates presence of technology entrepreneurship activity **- reflects absence of technology entrepreneurship activity
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 Malaysia’s entrepreneurship
development, namely technology entrepreneurship. The transformation from
entrepreneurship to technology entrepreneurship in Phase III is basically due to the
government’s effort of establishing the national automotive industry.
The national automotive industry had essentially given a positive impact on
society. It had created job opportunities; raised living standards, reduced poverty,
created technology-oriented entrepreneurial opportunities, developed an industrial parts
and components sector, provided a gateway for the acquisition of relevant technological
knowledge and technical skills, and encouraged innovation, research and development
activities.
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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 Malaysia’s Entrepreneurship Development.
Phases Phase I (1957-1970)
Phase II (1971-1980)
Phase III (1981-1990)
Phase IV (1991-2005)
Political Leader (Prime Minister)
Tunku Abdul Rahman, Tun Abdul Razak
Tun Abdul Razak, Tun Hussein Onn
Tun Dr. Mahathir Mohammad
Tun Dr. Mahathir Mohammad, Dato Seri Abdullah Ahmad Badawi
Policies Pre-NEP (1MP)
NEP (2MP, 3MP)
NEP (4MP, 5MP & IMP)
Post-NEP / NDP (6MP, 7MP, 8MP, IMPII)
Emphasis Import Substitution - Agriculture
Export Orientation – FDI, FTZ, LMW (Electronics Industry)
Import Substitution (2nd Stage) – Heavy Industries, Cluster-based Strategy
Import Substitution (2nd Stage) – High Technology, K-economy, High Value Added
Achievement National Amenities, Socio-economic development
Entrepreneurship – small medium industries
Technology entrepreneurship – heavy industries (HICOM)
Technology entrepreneurship – high-tech
It is clear that technology entrepreneurship practice became apparent in Malaysia in
Phase III but there was already minimum occurrence of technology entrepreneurship
practices in the Phase I and Phase II periods. The entrepreneurial activities carried out in
the 1950s and 1960s were merely in the form of trading.
Consequently, when the NEP was introduced by the second political leader in
1971, the focus of the first half of the NEP period was mainly on eradicating poverty
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and restructuring society. As such, efforts towards entrepreneurship development were
seen in the creation of a number of enterprises. As the economic concentration gradually
geared towards industrialization in the second-half of the NEP period, the emphasis was
on the manufacturing sector. The government leader’s interest then narrowed towards
the growth of new industrial sectors, particularly of heavy industries; HICOM was
established to monitor the development of heavy industries. However, the economic
recession that occurred in the 1980s stalled the development of heavy industries in
Malaysia; only the national automotive industry survived.
The automotive industry was given priority by the government due to its
economic influence; it has the capacity to create a large pool of employment and
entrepreneurial opportunities. The government initiated the national automotive industry
as it was aware that it would help create a large number of entrepreneurs as vendors or
suppliers to the national car manufacturer; moreover, the utilization of technological
components throughout its value chain is believed to encourage the mastery of
technological knowledge among the people of the nation.
To further encourage the acquisition of technology, and to create public
awareness on the significance of technology, a number of policies were implemented
during the leadership of Mahathir to foster the development of technology in various
entrepreneurial activities. In other words, the emphasis on technology-based
entrepreneurial activities was carried out more forcefully from the time of his
leadership.
As such, the presence of technology entrepreneurship activity in Malaysia
obviously had its roots in Phase III, particularly upon the initiation of the national
automotive industry. In other words, the establishment of the state-led automotive
industry led to emphasis on the significance of technology in the entrepreneurial
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activities carried out in Malaysia as accentuated in the implementation of the various
government policies.
Given this line of argument, it is regarded essential for this study to discuss
technology entrepreneurship in the context of the national automotive industry solely in
the next chapter as it is the impetus that has led to technology entrepreneurship
development in Malaysia. The analysis of the automotive industry in terms of
technology entrepreneurship capability is presented in Chapter 6.
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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 Proton’s 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).
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4.2 Evolution of the World Automotive Industry
The evolution of the world automotive industry is categorized by three stages of
transformation based on product, production process, innovation and region (Gwynne,
1991). These stages of transformation are simplified in Table 4.1.
Table 4.1
Evolution of the World Automotive Industry
Stage Innovation in Product/and Production Process
Year (Duration) Region
1 Change from custom-built car to standardized product manufacturing
1902-1944 United States
2 Product differentiation and emphasis on product technology
1945-1960s Western Europe
3 Change in labor and manufacturing process organization
From 1980s Japan
Source: Gwynne (1991)
The first stage was marked by the introduction of the Ford ‘Model T’ from the 1902-
1920s 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
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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.
Besides the three stages, Bloomfield (1978) identified four stages of
development in a country’s automotive industry. The first stage recognized by
Bloomfield is the import of completely built-up unit (CBU) vehicles by local retailers;
however, this stage is limited in scale due to high transport cost and government trade
restrictions. The second stage is an improvement of the first stage, notably savings in
transport costs as well as the availability of opportunities to make minor modifications
for the local market; it is the assembly of completely knocked-down (CKD) vehicles
imported from the major auto manufacturers. The acquisition of knowledge from the
first two stages encouraged local content in the assembly of CKD vehicles. As such, the
third stage is marked by an increase in local content by the local components industry
players. Finally, the forth stage is indicated by full-scale manufacture of motor vehicles.
All these stages of automotive development are simplified in Table 4.2.
Table 4.2
Bloomfield’s Stages of Automotive Industry Development Stage Development in the Automotive Industry
1 Import of CBU vehicles by local retailers
2 Assembly of CKD vehicles imported from major auto manufacturers
3 Assembly of CKD vehicles with increased local content
4 Full-scale manufacture of motor vehicles
Source: Bloomfield (1978)
Bloomfield’s suggestion of the four stages of development in the automotive industry is
of relevance to the evolution of the automotive industry in Malaysia. Accordingly,
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Malaysia’s automotive industry had gone through the first three stages of development,
and is now at the forth stage of development. Malaysia’s automotive industry
development is discussed in detail in the next subtopic.
4.3 Development of the Automotive Industry in Malaysia
The development of Malaysia’s 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).
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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 Bloomfield’s 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 Bloomfield (1978) : Development in the
Automotive Industry
Malaysia : Period of Automotive
Industry Evolution
1 Import of CBU vehicles by local retailers Before 1967
2 Assembly of CKD vehicles imported from
major auto manufacturers
1967 – 1980
3 Assembly of CKD vehicles with increased
local content
1981- to present
4 Full-scale manufacture of motor vehicles 1996 onwards
The first stage, according to Bloomfield’s automotive development, refers to the period
before the government of Malaysia officially launched the automotive industry in 1967.
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Prior to 1967, the type of activities carried out in Malaysia’s 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 Malaysia’s 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 Bloomfield’s 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). Little’s 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. Walker’s 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.
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Table 4.4
Local Content Program
Year Percentage of Local Content
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
Source: Lim and Onn (1983)
Table 4.4 clearly shows the high increase in the percentage of local content requirement
in the assembly of automotive parts in Malaysia. This high local content requirement
encouraged the development of local industrial sectors in Malaysia.
Besides the LC Program, the government also introduced the Mandatory
Deletion Program in order to enable penetration of the automotive components industry
into the OEM. The Mandatory Deletion Program deletes a particular part or component
from the CKD pack, which can be supplied by the local parts manufacturers; this gives
the opportunity for the local parts manufacturers to supply the original equipment
market requirements of the assembly plants. The Mandatory Deletion Program list
produced in 1980 had only a few items deleted from the passenger and commercial
vehicles which reflects that the local parts and components manufacturers had the
capability to produce only a few parts of the original equipment market list.
Though the local content program and the mandatory deletion programs are
regarded as having inspired the production of parts and components according to the
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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 Bloomfield’s
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
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automotive industry in turn urged the need for full scale manufacturing, which is
categorized as Bloomfield’s forth stage of automotive industry development. Full scale
manufacturing took place 13 years after Proton’s initiation with the introduction of the
‘Waja’ in 1996, Proton’s own designed model. The detail of development of the national
automotive industry ensues in the paragraphs that follow.
4.4 The National Automotive Industry
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
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national automotive industry was not to make profit as perceived by many [pers.comm,
Senior Manager 2 (requested anonymity), 29 November 2007, 5.30pm].
Proton’s 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).
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Table 4.5
Financial Performance of PROTON, 1989-1993 (RM MN)
1989 1990 1991 1992 1993
Turnover 820 1399 1786 2192 2287
Profit before tax 32 159 261 408 310
Profit after tax 32 157 187 259 264
Source: New Straits Times (21 January 1994)
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.
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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 government’s 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
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development of the manufacturing sector through a number of strategies to overcome
the economic circumstances then. The strategies recommended included the
continuation of the export-led industrialization, which emphasized the promotion of
resource-based industries; further liberalization of trade and investment; and substantial
incentives to encourage investment and exports. Clearly, the focus was on the
significance of science and technology and human resource development to support the
industrialization process (Kanapathy, 2000).
All these government efforts resulted in remarkable success for Proton in the
years following the recovery of the mid-1980s recession (Table 4.5). The successful
growth of Proton nurtured the growth of more than 250 local parts and components
suppliers [pers.comm, Manager 1 (requested anonymity), 7 August 2006, 2.30pm]. In
fact, the government initiated a particular program to assist the parts and components
vendors of the national automotive industry, namely the Proton VDP. In the paragraphs
that follow, the basic characteristics of the national automotive industry vendor firms
are explained.
4.5 Basic Characteristics of Proton Vendor Firms
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
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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 MITI’s 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 Malaysia’s
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 Proton Vendor Development Program (VDP)
The VDP of Proton was launched in 1988, and it was among the government’s
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.
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The distribution activity is carried out by Proton’s 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
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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.
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Table 4.6
Anchor Companies, Types of Industries and Number of Vendors
No Anchor Companies Type of Industry No. of Vendors 1 Proton Automotive 19 2 SONY Group Electrical & electronics 12 3 General Lumber Furniture Furniture 12 4 Telekom Malaysia Telecommunication 11 5 Sapura Holdings Telecommunication 9 6 Sharp Group Electrical & electronics 9 7 JVC Group Electrical & electronics 6 8 Matsushita Group Electrical & electronics 4 9 Others Various 12 Total 94 Source: MIDA (1997)
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 1993 1994 1995 Total (Dec.1995)
Electrical/electronics 2 6 29 - 37Wood-based - 1 2 2 5Automotive 1 - 1 1 3Telecommunication - - - 2 2Building materials - - - 2 2Ship building and repair - - - 1 1Film production - - - 1 1Ceramics - - - 1 1Engineering - - 1 - 1Trade and exports - - - 1 1Total 3 7 33 11 54Source: MITI Annual Report (1995/96)
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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 Proton’s 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 VDP – Vendor Activities in 2006
No Business Nature No. of Proton Suppliers
Business Nature No. of Proton Suppliers
1 Metal stamping and fabrication 18 Carpet 5 2 Plastic components 18 Casting 12 3 Wood-based furniture
components 13 Electrical 37
4 PCB assembly 8 Metal 86 5 Automotive components 6 Label 6 6 Mould and dies 5 Plastic 27 7 Wire cords and wire harnesses 3 Paint 3 8 Surface-mount technology
operations 2 Sealant 8
9 Computer diskettes 1 Rubber 19 10 Rubber keypads 1 Others 47 11 Wooden cable drums 1 12 Cables 1 13 Die-attach wire bonds 1 14 Transformer assembly 1 Total 79 Total 250
Source: MITI Annual Report 1995/96 and Proton Vendor Department (2006)
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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
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components. As such, there is no involvement of other vendors such as the second-tier
vendors or the third-tier vendors. In a way, the first-tier vendors can be considered as
part of the direct vendors. However, these criteria are not stated in ‘black and white’ or
documented but understood by involved individuals and respective staff [pers.comm,
Executive 1 (requested anonymity), 7 August 2006, 9:30am].
The development of the VDP then was seen as a means of upgrading local
engineering and technical skills and development capabilities to manufacture precision,
sophisticated and quality products (Arshad, 1995). In other words, the vendors need to
improve on their technological and entrepreneurial capability in order to acquire the
competency required to produce competitive products and services. This is supported by
looking at the results of the survey conducted by the Japanese Chamber of Trade and
Industry in Malaysia (JACTIM) in 1995 on the local vendor firms that had businesses
with the Japanese firms; the survey indicated that most of the local vendor firms were
dependent on the anchor companies in terms of technological capability, and business
opportunities to expand their market scope (Malaysia: JACTIM, 1995).
In the survey carried out in 2006, the anchor companies noted that the local parts
and components vendors’ technical capability was of ‘low’ level and thus, they
recommended the need for immense improvements by the anchor firms [pers.comm,
Manager 3 (requested anonymity), 15 August 2006, 3pm]. Despite the relatively
negative comments of the anchor companies, the vendors hoped to acquire management
know-how and advanced technologies from the anchor companies [pers.comm, Senior
Executive 2 (requested anonymity), 16 August 2006, 5pm]. In short, the survey
conducted on the anchor and vendor firms reflect two prominent weaknesses on the part
of the Proton vendor firms, namely technological capability and entrepreneurial aspect.
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4.7 Proton Bumiputera Vendor Scheme
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 Proton’s parts and components industry. The Bumiputeras are
given additional assistance, notably in terms of financial assistance; among the most
well-known is the Proton’s 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
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Proton Vendor Scheme, Franchise Development Program, Credible Bumiputera
Contractors’ Program, Financial and Credit Assistance, Umbrella Concept Marketing
Scheme, Manufacturing Assistance Scheme and Venture Capital Scheme.
As a result of all these government programs and assistance, Bumiputeras
involvement in the manufacturing sector increased rather rapidly, particularly in the
national automotive industry. The high percentage of Bumiputeras involvement in the
national automotive industry as presented in Table 4.6 reflects Proton’s success in
encouraging the development of entrepreneurship among the Bumiputeras. As this
sector involves the national automotive parts and components industry, the
entrepreneurial activities carried out in this industry are technology oriented. This is
because the value chain of an automobile involves the use of technology from the raw
material up to its completion, and even up to the commercialization stage in some cases.
Given this scenario, the Proton Vendor Scheme and the Proton Bumiputera
Vendor Scheme are regarded as the major government tools that have led to the growth
of the parts and components industry in Malaysia. Specifically, the schemes have
encouraged the participation of the Bumiputeras in major economic activities. Proton’s
assistance to the Bumiputera vendors has been further intensified through the
introduction of other programs such as Quality Improvement Program (QIP) and
Technical Cooperation Program.
The QIP was organized by SIRIM to improve the quality of the products and
services produced; the Bumiputera vendors were encouraged to apply for grants from
the Industrial Technical Assistance Fund (ITAF) to enable them to conduct quality
improvement activities. The Technical Cooperation Program was introduced in 1994 to
train technical staff to become skilled workers as required by the automotive industry.
Besides these programs, there were also other educational types of activities introduced
by Proton to educate selected vocational school students to acquire knowledge on the
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technology paradigm used by Proton. To facilitate this educational type of activity,
Proton and its marketing partner, EON have donated very old used cars, parts and
components with the aim was of developing a pool of trained, skilled, and
knowledgeable workers.
4.8 Present State of the National Automotive Industry
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).
Malaysia’s 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
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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
manufacturing, distribution and importation as well as in components and parts
manufacturing (JPM: NAP, 2005).
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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
competitiveness of the national automotive players, the government planned to provide
incentives for collaboration projects with bilateral free trade agreements (FTAs)
partners, and customized incentives to meet the specific needs of investors; training
grants to upgrade the skill and competency levels of the national automotive players’
employees; R&D grants to encourage research and development activities; market
development grants for the development of export markets; extension of the
‘Technology Acquisition Fund’ (TAF) to enhance technological capabilities; introduce
the Global Supply Program to encourage global export activities; create production
centers to locate the automotive players in the designated areas so as to encourage the
sharing of infrastructure development costs and other facilities, and to enable the
practice of ‘just-in-time’ manufacturing; and finally move towards amending the
‘Approved Permit’ (AP) to overcome the recent AP conflict in the country.
Besides the specific measures introduced in the NAP, the government also has
taken other measures such as the encouragement of consolidation activities. The
national automotive players are encouraged to consolidate and form clusters to achieve
international competitiveness under global integration as noted in the IMP3. The IMP3
has identified 12 growth industries in the manufacturing sector, which includes the
automotive industry for further development and promotion of the manufacturing sector
towards global competitiveness. The export and investment targets for the 12 targeted
manufacturing industries are presented in Table 4.9.
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Table 4.9
Exports and Investment Targets for the 12 Targeted Manufacturing Industries
Sub-sector Exports
2006-2020 2020
(RMbn) Average Annual Share
Growth (%) (%)
Investment
2006-2020 2020
(RMbn) Share (%)
Total 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
Electrical & electronics products
7,533.9 6.3 65.9 82.4 23.1
Metal products 514.6 7.6 4.5 44.2 13.6
Machinery & equipment 494.4 6.4 4.3 30.8 7.7
Textile & apparel 248.8 7.8 2.1 13.7 3.1
Transport equipment
(Automotive)
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
Wood based products 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
Source: Ministry of International Trade and Industry (2006)
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 sector’s 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
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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.
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4.9 Summary
This chapter provides a brief overview of the world automotive industry as a
background to the discussion of the national automotive industry and the automotive
vendor firms. The national automotive industry was initiated by the government with
three justifications: to create our own local automotive industry and create employment
opportunities for the locals; to encourage entrepreneurship development through the
creation of supplier firms; and to foster technological development through the use of
technology in the manufacturing activities.
The automotive industry created by Malaysia was solely a state-led initiative;
thus, continuous protection from the government has been regarded as essential to the
successful growth of the industry. The government introduced high tariff rates,
decreased the excise taxes, and introduced other types of assistance to encourage the
development of the national automotive industry. With the protection provided, the
national manufacturer recorded high performance in the years following the mid-1980s
recession. Consequently, the rapid development of Proton led to the growth of the parts
and components industry.
To support the development of the national parts and components industry, the
government provided various assistance measures through programs such as the Vendor
Development Program through its Proton Vendor Scheme. The Proton VDP was
introduced in 1988 after the launch of the first national car particularly to increase the
number of local firms in the automotive sector so as to cater to the needs of the national
automotive manufacturer. Besides the VDP, the government also introduced other
programs and activities to foster the growth of the national automotive industry. All
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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 Proton’s 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 industry’s 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
PHASE 2 Data Collection &
Analysis
PHASE 3 Writing the Thesis
PHASE 4 Revising,
Formatting, and Documentation
1. Research Plan 2. Find Sources 3. Thesis Outline
1. List all Industry Players 2.Identify Active Vendors 3. Survey Active Local Automotive Vendors – Questionnaire & *Personal Communication 4. Follow up 5.Data examination
1.Focusing& Organizing 2. Drafting 3.Recommendations 4. Conclusion
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.
Procedures and Processes
Phase 1: Research Strategy
The first step was to strategize the processes involved in developing the thesis. A plan
was thought through and systematic procedures were established in order to
systematically undertake the diverse activities of research writing. Next, a schedule was
drawn up to allocate available time to carry out the necessary work. Then researchable
topics were outlined and questions and research goals were constructed. Then, a
secondary literature search was carried out, referring to both print and electronic
resources. Having been equipped with adequate knowledge on the subject, primary
research was conducted; the data obtained was then analyzed qualitatively to capture the
salient points relevant to the aims of this study.
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Phase 2: Data Collection and Analysis
Local automotive vendors were identified from the database of Perusahaan Otomobil
Nasional (Proton), Ministry of Entrepreneurs and Cooperative Development (MECD),
and Malaysia Automotive Association (MAA). The active vendors were identified from
the list of active vendors obtained from the Proton Vendor Department and MAA. The
questionnaires were delivered to the persons in charge, and subsequently the interviews
were carried out with respective individuals. Details of the survey carried out are
elaborated in the next part of the chapter. The data was then analyzed using the
technology innovation capability audit tool which had been improvised to suit the
context of this study. The chapter on ‘Analysis and Presentation of the Study’ was a
time consuming task which demanded thorough efforts for its completion; it is therefore
discussed in great detail in Chapter 6.
Phase 3: Writing the Thesis
This part of the thesis built on the information gathered from both primary and
secondary research to develop the chapters. A major concern in writing the thesis was to
focus on the main idea while providing the link between the chapters to ensure a
continuous flow from one chapter to the other. In other words, forging relationships
among ideas is significantly important in presenting the chapters. The thoughts that flow
in the mind need to be conveyed clearly for readers to comprehend the subject matter.
As the focus of this research is on technology entrepreneurship capability, it was traced
from the literature search at the start of the thesis to the conclusion and
recommendations
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Phase 4: Revising, Formatting and Documentation
Revising, editing, and checking format and citations which constitute the final phase are
important to minimize carelessness and a redundancy in ideas. The chapters were
checked for grammar errors and flaws in sentence structure.
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 manufacturer’s
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.
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This study therefore designed the research questions to identify the sector’s 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 Questionnaire and Analysis Design
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 Manual’s 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
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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.
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Table 5.2
Comparison of Innovation Survey Questionnaires
No Innovation Survey Questions
European CIS
Canada Malaysia Colombia South Africa
1 General Information Questions
x x x x x
2 Science and Technology and R&D Measures
No. of R&D personnel
Employee education & training
- Except cooperation and alliances in R&D, IP and technology transfer
Employee education & training, no. of R&D personnel, and technology transfer
3 Innovation Questions
Except financing
of innovation
Except financing
of innovation
Added Government assistance
for innovation
x 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 Malaysia’s 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,
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assessment/selection, acquisition, implementation, learning and linkages. The results
obtained from these dimensions are referred to a simple model to differentiate between
degree of awareness, which encompasses dimensions of awareness, search and strategy,
and degree of preparedness, covering dimensions of core competency, assessment,
acquisition, implement, learning and linkages.
The innovation capability audit tool has been adopted and improvised to meet
the main aim of this study, which is to determine technology entrepreneurship capability
of the firms. As such, this study did not limit its scope of analysis to just the innovation
field; instead, the scope has been broadened to include questions on the
entrepreneurship discipline. The key activities are selected based on the four
constituencies of technology entrepreneurship as highlighted by Shane and
Venkataraman (2003) in their special issue on technology entrepreneurship, which
includes industry, firm, technology and entrepreneur. However, the term ‘industry’ is
replaced with ‘context’ as it is regarded more suitable in this study.
There are eight key activities selected with each having two key dimensions.
They are ‘awareness’ and ‘search’ for the context factor; ‘strategy’ and ‘core
competency’ for the firm factor; ‘technology paradigm’ and ‘linkages’ for the
technology factor, and ‘learning’ and ‘leadership’ for the entrepreneur factor. In
addition, the categorization of dimensions for degree of awareness and degree of
preparedness has also been somewhat modified. In analyzing the degree of awareness,
this study has included the ‘awareness’ and ‘search’ dimensions only; while in
analyzing the degree of preparedness, all other dimensions have been included.. It is
hoped that the improvised capability tool is of relevance and more appropriate to
analyze technology entrepreneurship capability of the firms.
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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 firm’s
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
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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 study’s 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.
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For a smooth interview, three undergraduates from public universities were
employed as enumerators; they had been trained and given proper guidance and useful
information to ensure that they understood the methodology and purposes of the survey.
The researchers had to go through pre-tests of the questionnaire to acquire knowledge
on the technical aspects of interviewing, including essential communication and
presentation skills and important interviewing techniques. It was only after going
through such training and skills enhancement were the research assistants able to gain
the confidence to conduct the actual interview with the respective individuals from
Proton vendor firms.
Further, the Proton Vendor Department had also assigned three of its staff, an
executive and two clerks, to assist in the survey. The executive informed the vendors
about the survey being carried out and requested for full cooperation from all of them;
meanwhile, the two female clerks helped the researchers to conduct the interview and
collect data on the required information. As the Proton staff had been previously
exposed to providing assistance to researchers to conduct interviews, no problems were
encountered from Proton staff during the interview exercise.
Meanwhile, to ensure confidentiality of the data provided by the respondents,
effort was made to explain to them that the survey was solely for academic purpose, and
that no private or government agency was involved or had an interest. Moreover, the
respondents were promised that as the responses were considered confidential, any part
of the data or their business identity will not be disclosed to any unauthorized person. A
written assurance was provided on the cover page of the questionnaire that all
information would be kept strictly confidential.
Next, the interviews were followed up by phone calls to get details on the parts
of the questionnaire that were not completed. In some instances, the respondents called
the researchers to share their views on certain issues raised in the questionnaire and
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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 post-
survey coding involved only those questions that were qualitative in nature and open-
ended. 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.
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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.
Figure 5.1
Technology Entrepreneurship Framework
[adapted from the definition of technology entrepreneurship theme by
Shane and Venkataraman (2003)]
Entre
pren
euria
l
Firm
Entrepreneur
Tech
nica
l
Tec
hnol
ogy
ent
repr
eneu
rshi
p
Technology
Context
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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 entrepreneur’s capability; this phenomenon is
discussed in the context of the automotive industry in detail in the analysis chapter.
5.8.1 Technology Entrepreneurship Capability Dimensions
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 firm’s functions effectively and successfully. In short, there are 8
key activities selected from the four constituencies of technology entrepreneurship.
In today’s 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
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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 firm’s vision and mission; therefore, it should fit well into the firm’s
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
firm’s technology entrepreneurship capability level was developed. The responses were
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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 Graphical Representation of Findings
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
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the 8 dimensions as illustrated in Table 6.10 of Chapter 6. The scale of categorization is
in ascending form, from the lowest to the highest capability level. Level 1 indicates
‘passive’ type of firm, level 2 denotes ‘reactive’ type of firm, level 3 represents
‘proactive’ type of firm, and finally level 4 represents ‘innovative’ type of firm.
The characteristics of each type of firm are set in accordance to the key activities
of technology entrepreneurship in achieving competitive advantage. Details on
characteristics of the four types of firms are elaborated as follows:
Firm Type: Passive
Passive firms refer to those firms that have poor technology entrepreneurship capability.
They are not attentive to the development and changes that occur around them; for
instance, they do not know of the latest policy changes or policy implementation,
economic changes, social needs and trends, and technological development and
advancement. They are lagging on the cutting edge issues. As such, they do not
recognize the need for any change in their firm to respond to up-to-date requirements
and changing needs. They do not have the knowledge of what to change or where to
improve, nor the knowledge-base to identify the set of information inputs, knowledge
and capabilities that they should draw on to address problems. This is partly a result of
the poor leadership quality possessed by the entrepreneur. Thus, they are unable to
formulate an appropriate technology strategy to meet their business goals. This type of
firms is at very high risk when challenged by their competitors, particularly in today’s
highly competitive world.
Type B Firms: Reactive
Reactive firms refer to those firms that are of relatively average level of technology
entrepreneurship capability, which means that they are aware of the latest changes and
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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 firm’s 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.
Type C Firms: Pro-active
These firms are always attentive and realize the changes that take place around them;
they recognize the need for change and for continuous improvement and development.
These firms are able to develop a good technology strategy, for they have clear vision
and mission. They possess adequate codified knowledge, sufficient information inputs
and good tacit knowledge. The entrepreneurs have fairly good capabilities to lead the
firms towards innovation or improvement type of activities for new market segments
and to achieve competitiveness; as a result, some of these firms are capable of inventing
or creating new products or processes. However, they have relatively little creative
skills.
The entrepreneurs are fairly good in looking for innovative solutions, and to
some significant degree may share their problems with their collaborators who share the
same interest. They are fairly capable of exploiting the opportunities to the advantage of
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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.
Type D Firms: Innovative
Innovative firms are those firms with the highest degree of informed knowledge of
technology and innovation, and with the highest degree of entrepreneurship practice.
These firms are well aware of the events or the changes that occur around them, and are
always kept up-to-date with the latest technological developments. Therefore, they are
always the pioneer when exploring opportunities. They are quick in taking action or
making decisions, for they have an adequate knowledge base. They also know ‘how’ to
react to any change and ‘what’ needs to be done in order to be prepared for the future.
Indeed, having acquired both tacit and codified knowledge, they are able to exploit the
threats faced to the advantage of their firms. Thus, these firms have the necessary skills
and competency to compete with the other players.
The entrepreneurs are capable of becoming the leaders of the selected industrial
sectors, for they dare to take risks, or in other words, they are ‘risk takers’. They invest
quite heavily in research and human development activities, and strongly encourage
innovation and related activities. The entrepreneurs are able to lead most of the firm’s
functions successfully. In fact, most of these firms reward those who participate in
invention or innovation activities, which is essentially the effort taken by these firms to
sustain their competitiveness, and simultaneously produce competitive products. In all,
these firms have developed strong technology entrepreneurship capabilities.
The categorization of firms into 4 types - ‘Passive’, ‘Reactive’, ‘Proactive’, and
‘Innovative’- is very significant in identifying the dimensions that can be improved, and
the dimensions that need further improvement in order for the firm to move up along the
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ladder of technology entrepreneurship capability, and simultaneously to sustain its
competitiveness.
Consequently, the results of each firm are used to differentiate the firms in terms
of ‘degree of awareness’ and ‘degree of preparedness’. ‘Degree of awareness’ refers to
the degree to which the firms are aware of industrial environment issues and the ‘degree
of preparedness’ refers to the degree to which the firms are prepared to improve
practically. Bessant et al.(2000) covered the dimensions of ‘awareness’, ‘search’ and
‘technology strategy’ in the ‘degree of awareness’, and the dimensions of ‘core
competency’, ‘assessment’, ‘acquire’, ‘implement’, ‘learn’ and ‘linkages’ in the ‘degree
of preparedness’. However in this study, the ‘degree of awareness’ refers to the
dimensions of ‘awareness’ and ‘search’, and the ‘degree of preparedness’ covers the
other dimensions including strategy, core competency, technology paradigm, linkages,
learning and leadership. The results obtained for each firm are presented graphically
using a scatter plot diagram.
The scatter plot diagram represents the different positions from the results of
individual firm according to their technology entrepreneurship capability. The average
score of degree of awareness against the degree of preparedness enables the firm to be
categorized according to the four main categories of firm, that is, passive, reactive,
proactive and innovative with their characteristics.
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
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recognition from the Malaysian government, particularly in terms of the protection
provided to the national manufacturer, Proton and its vendor firms.
A second limitation noted was the scoring criteria used in determining
technology entrepreneurship capability level. The criteria used in the scoring were
subjective and therefore may not provide a clear demarcation of scoring procedures
between the dimensions; its qualitative nature necessitated a subjective scoring for
interpretation of the salient information provided.
The third limitation of this study is the difficulties faced in identifying the key
technology entrepreneurship activities, and using these to analyze technology
entrepreneurship development at the macro level and to examine technology
entrepreneurship capability of the firms at the micro level.
Finally, the fourth limitation that was obvious was the dearth of literature in the
newly emerging field of technology entrepreneurship. The limited literature is
constrained to the IT and ICT research areas. Therefore, additional effort was made to
review other pertinent fields of study to provide a broader view of technology
entrepreneurship and to comprehend better the main theme of this study, which is
technology entrepreneurship capability. Thus, it is hoped that the new dimension
explored in this study would be an addition to the relatively limited technology
entrepreneurship literature in Malaysia.
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
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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.
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CHAPTER 6: ANALYSIS AND PRESENTATION OF THE STUDY
6.1 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 firm’s
performance; the appropriateness of technology used; and the preparedness of the
entrepreneur in addressing the challenges emerging from the changes that occur.
135
Hence, this study looks into all these four significant factors collectively in analyzing
the technology entrepreneurship issue.
6.2 Basic Characteristics of Proton Vendor Firms
Prior to analyzing the technology entrepreneurship issue, it is essential to have a view of
the industry under study, particularly the vendor firms’ characteristics. The national
manufacturer’s vendor firms’ basic characteristics are briefly discussed.
The automotive parts industry is divided into six main categories according to
the nature of business of the industry; they are: 1. Casting, 2.Electrical and Electronics,
3. Metal, 4. Plastic, 5. Rubber and 6. Others. These automotive parts and components
firms are mainly owned by the Malays, who are the majority owners of the Proton
vendor firms; the non-Malays, namely the Chinese and the Indians; and the Foreigners.
Some of the Proton vendor firms are large in size, while others fall into the small- and
medium-sized category. These vendor firms could be a partnership, public listed, private
limited or a sole proprietorship. As these firms were established in different years, this
study has categorized the year of establishment of the Proton vendor firm according to
the four phases of Malaysia’s entrepreneurship development as discussed in the
previous chapter; Phase I refers to the years 1957 to 1970; Phase II refers to the period
from 1971 to 1980; Phase III to the years from 1981 to 1990; and finally Phase IV refers
to the years from 1991 to 2006.
6.2.1 Year of Establishment and Ownership Structure
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
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% 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 Year No. of Firms Percentage of Firms (%)1 1957-1970 3 1.38 2 1971-1980 27 12.44 3 1981-1990 81 37.33 4 1991-2005 106 48.86
Total 217 100
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 Malaysia’s
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
137
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.
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Table 6.2
Proton Vendor Firms’ Year of Establishment
Phase Year 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 1957-1970 1 1.14 0 - 2 3.77 0 - 3 1.38
2 1971-1980 5 5.68 6 10.53 14 26.42 2 10.53 27 12.44
3 1981-1990 39 44.32 17 29.82 23 43.40 2 10.53 81 37.33
4 1991-2005 43 48.86 34 59.65 14 26.42 15 78.95 106 48.85
Total 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 cash-
cropping 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.
139
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
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
Proton Vendor Firms’ Establishment
0 10 20 30 40 50
1957-1970 1971-1980 1981-1990 1991-2005
1 2 3 4 Year of Establishment According to Phases
Number of Vendor Firms Established
Bumi Firms Foreign Firms
NonBumi Firms Firms W/Out Ownership Info
140
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
government’s 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 non-
Bumiputera 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.
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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 Number of Firms Percentage Small and Medium 126 58.1% Large 64 29.5% Unknown 27 12.4% Total 217 100%
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.
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Table 6.4
Firm Size and Ownership Structure
Firm Size According to SME Status Ownership Large SME No Info Total Bumiputera 28 60 - 88
Non-Bumiputera 17 35 1 53 Foreign 16 19 22 57
Unknown 3 12 4 19 Total 64 126 27 217
At times, the size of firm reflects the firm’s 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 64 42 18 4 28 66 Small & Medium
126 83 15 28 12 66
Unknown 27 0 0 27 Total 217 125 33 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 medium-
143
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 customer’s 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-
144
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
145
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
The types of entrepreneurial activities undertaken by Proton vendors can be categorized
as the following: metal, electrical and electronics, plastics, rubber, casting, and others.
There are 11 firms involved in casting, 35 firms are electrical and electronics based, 82
firms are metal based, 27 firms are in plastics, 19 firms are rubber based, and 38 firms
are involved in label, paint, sealant, carpet, and glass as shown in Table 6.6.
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Table 6.6
Industrial Activities of Proton Vendor Firms
No Business Nature Number of Sampled Firms Percentage (%) 1 Casting 11 5.1 2 Electrical & Electronics 35 16.1 3 Metal 82 37.8 4 Plastics 27 12.4 5 Rubber 19 8.8 6 Others 38 17.5 No information 5 2.3 Total 217 100.0
The analysis revealed that most Proton vendors are concentrated in the field of metal-
based 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 “Others” Electrical &Electronics
• Engine, transmission component
• Body assembly • Struts absorber
assembly • Interior parts • Plastic injection &
moulding • Springs, and others
• Label • Carpet • Paint • Sealants,
and others
• Alternator, starter motor • Spark plugs • Car accessories • Alarm • Air-conditioner, radiator,
and others
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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.
Figure 6.2
Industrial Activity and Ownership Structure of Proton Vendor Firms
Figure 6.2 illustrates comparative ownership structure of Proton vendor firms in
different types of industrial activities. In terms of ownership, the analysis discovered
that most Bumiputeras firms are involved in metal-based type of industrial activity with
their representation being 41 % in comparison to their overall participation in Proton
vendor activities. The non-Bumiputeras owned 18 %, and the Foreigners owned 29 % of
the metal type of industrial activity. In comparison, a higher percentage of non-
Bumiputeras is seen in the rubber industry; while Foreigners enjoy a higher
representation in the casting industry.
Business Nature and Ownership Structure
0 5 10152025303540
Casting Electricaland
Electronics
Metal Plastic Rubber Others No Info
Business Nature
No.
of F
irms Bumiputera
NonBumiputera
Foreign
Unknown
148
This analysis is significant as it clearly reveals the participation of different
groups of people, namely the Bumiputeras, non-Bumiputeras and the Foreigners in
various vendor activities. Obviously, the metal-based business is the focus field for the
Bumiputeras, which may be an indication of the assistance provided by the government
to encourage more locals to participate in heavy industries, including the metal industry.
The government of Malaysia wants to see reduced dependency on metal-based parts and
products and therefore encourages the locals, especially the Bumiputeras to be involved
in heavy industry.
Meanwhile, the concentration of non-Bumiputeras’ in the rubber industry can be
related to history, which saw the development of the nation’s economic activities along
ethnic lines; as of the date of this study, the Chinese and the Indians are found to be the
majority owners of the Proton vendor firms that are rubber based. Lastly, the Foreigners
are found to monopolize the casting industry simply due to the accessibility provided by
the government as well as the acquisition of knowledge on the particular technology;
this is as noted by one of the vendor firms: “we have knowledge of the module to be
able to co-design and we know our customers needs” [pers.comm, Manager 8
(requested anonymity) 22 August 2006, 9am]. The Foreigners seemed to have acquired
a good knowledge-base in this particular casting technology, enabling them to
monopolize the casting industry compared to the local vendors, who are still in the
process of acquiring technological knowledge of the technology.
Consequently, this study analyzed Bumiputera involvement in other industrial
activities such as plastics, electrical and electronics, and ‘others’. In comparison to the
non-Bumiputeras and the Foreigners, Bumiputera ownership in plastics was 59 %; the
non-Bumiputeras owned 22 %; and the Foreigners owned 18 %. In the ‘others’ type of
activity, which included label, carpet, paint, sealants and others, the Bumiputeras had a
42 % representation, the non-Bumiputeras, 26 % and the Foreigners, 21 %.
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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 Proton’s 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 Year of Business Initiation with Proton
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 non-
Bumiputeras (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.
150
Generally, the Bumiputeras were encouraged by government promotional
programmes, incentives and schemes such as the BCIC programme and the Proton
Vendor Scheme to increase the number of technology entrepreneurs in the
manufacturing sector, notably in the automotive industry. These government activities
have contributed to the emergence of more Bumiputeras as Proton vendors during the
fourth phase of Malaysia’s entrepreneurship development, which is between 1991 and
2006.
6.2.5 Types of Business Organization
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%). For the type of business organization owned by Foreigners, private limited
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.
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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.
0 102030405060708090
Bumi nonBumi Foreigners No Info
Ownership Structure
No.
of F
irms
PTS PUL PVL SPR No Info
PTS: partnership PUL: public limited PVL: private limited SPR: sole proprietorship
152
6.3 Analysis of Proton Vendor Firms
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 Industrial Environment Context
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.
153
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 region’s 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.
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Passenger VehicleCommercial Vehicle
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,0000
500,000
550,000
600,000
2002 2003 2004 20052001June2006
396,381396,381
434,954434,954
405,745405,745
487,605487,605
552,316552,316
248,407248,407
Source:Source:
--6%6%
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 Proton’s 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.
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20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
220,000
2002 2003 2004 20052001
209,514209,514214,985214,985
157,313157,313168,616168,616 166,812166,812
June2006
60,29160,291
Source:Source:
Figure 6.5
Proton Sales Performance
Source: Malaysia Automotive Association (2006b)
Figure 6.5 illustrates Proton’s 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, Proton’s 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
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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 \
Year
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
Source: Malaysia Automotive Association (2006c)
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:
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“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.
6.3.1.2 National Automotive Policy (NAP)
As the automotive industry became highly competitive, and the performance of the local
automotive manufacturers and vendors dropped drastically, the government took
immediate action by introducing a new policy, known as the NAP to cater specifically
to this sub-sector. The NAP was established with the aim: of promoting a competitive
and viable domestic automotive sector, particularly to serve the national car
manufacturers; to promote Malaysia as an automotive regional hub, focusing on niche
areas; to promote a sustainable level of economic value-add and enhance domestic
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capabilities; to promote a higher level of exports of vehicles as well as components and
parts that are competitive in the global markets; to promote competitive and broad based
Bumiputera participation in the domestic automotive sector; and to safeguard the
interests of consumers in terms of value for money, safety and quality of products and
services (Malaysia: NAP, 2006).
In order to meet the NAP objectives, strategic thrusts, strategies and policies
have been set in the IMP3 to further develop the sub-sector; there are nine strategic
thrusts that have been set in the IMP3, they are: (i) providing Government support based
on sustainable economic contribution; (ii) increasing the scale of operations through
rationalization to enhance the competitiveness of the sub-sector; (iii) promoting
strategic linkages with international partners; (iv) developing Malaysia as a regional
hub, focusing on niche areas and complementary activities; (v) promoting investments
in the growth areas; (vi) intensifying skills upgrading; (vii) strengthening institutional
support for the sub-sector; (viii) encouraging and promoting the participation of the sub-
sector in regional and global supply chains; and (ix)enhancing the competitiveness of
manufacturers of parts and components (Malaysia: IMP 3, 2006).
In this research paper, these strategic thrusts can ultimately be grouped into four
categories as suggested in the technology entrepreneurship framework: government
support and policy changes refer to the context factor; technological capability
strengthening refers to the technology factor; firms’ competitiveness refers to the firm
factor; and training and skills upgrading refers to the entrepreneur factor. Accordingly,
the first, fourth and seventh strategic thrusts focus on government support in the form of
access to the IAF, R&D grants, incentives and strengthening existing institutions; the
second, eighth and ninth strategic thrusts emphasize firms’ competitiveness through
rationalization and participation in the regional and global supply chains; the third, fifth
and ninth strategic thrusts centre on strengthening technological capability via strategic
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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
Malaysia’s 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
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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.
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6.3.2 Firm
The changing competitive context demands firms to be competitive to outperform their
competitors. According to the Oslo Manual guidelines used by the OECD member
countries, a firm’s capabilities include what it has to take advantage of market
opportunities; it includes the knowledge accumulated by the firm, which is embedded in
human resources, procedures, routines, and other characteristics of the firm (OECD,
2005). Forbes and Wield (2001) define capabilities as the skills and functional
competencies that allow the firm to take advantage of opportunities. In this study, a
firm’s competency is viewed as a reflection of its capability, and is mainly determined
by the acquisition and exploitation of the knowledge-base embedded in the firm.
Knowledge-base is simply understood as the knowledge acquired through
formal learning, and the knowledge and skill accumulated through experience; in other
words it includes both codified knowledge and tacit knowledge. Polanyi (1967) referred
to tacitness as those elements of knowledge, insight, and so on that individuals have
which are ill defined, uncodified, and unpublished, which they themselves cannot fully
express and which differ from person to person. In the case of the Proton vendor firms,
there is a shortage of skilled workers and qualified professionals; as quoted “there is a
critical need of technical literate personnel for both shop floor and managerial level,
especially to meet the demand of customers for product varieties.”, and “there is limited
local vendor capability in developing high tech parts due to limited skilled and
professional workers; actual volume of OEM is not meeting the sales forecast; and
amortization of toolings is not fulfilled” [pers.comm, Senior Manager (requested
anonymity), 4 August 2006, 2pm]. In the long term, this seems to reflect a
disinvestment in terms of the supply of qualified professionals and skilled workers and
the capabilities required for innovative type of activities that are essential for sustaining
competitiveness.
162
Therefore, the government has taken immediate measures by strongly
encouraging learning and development programmes through its various agencies and
ministries such as MECD, Perbadanan Nasional Berhad (PNB), MARA, Tenaga
Nasional Berhad (TNB), Telekom Malaysia Berhad (TM), Petronas and others. In fact,
the arts and soft sciences programmes currently offered at the higher learning
institutions are mostly attached to technology courses such as ‘Technology for
Education’, ‘Technology in Arts’, and ‘Science and Technology Studies’.
At the same time, a number of vendor firms claim that the shortage of skilled
workers and qualified professionals is also due to the capital constraints of the firms.
Some of the vendor firms are not able to afford the high salaries demanded by
professional and skilled workers as the rising demand for this group of workers has
raised their salary level.
In addition, some of the vendors complain that they face difficulty in finding the
right candidates to match their firms’ vision and mission, and indeed it is the reason
given for the large number of unemployed graduates. In general, the industrial sector
has been complaining that the graduates produced in recent years by the higher learning
institutions are deficient in both core and general skills such as language proficiency
and public relations skill. The courses taken by the graduates appear to be less relevant
to manufacturing activities, particularly to the automotive industry.
Besides, the vendor firms are confronted with immense challenges in terms of
financial constraints and a stringent market. This notion is supported by evidence from
the survey, where financial constraints are stated to be the utmost problem for many
vendors:
163
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
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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; computer-
aided 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 value-
added activities such as design, prototype and testing [pers.comm, Manager 5 (requested
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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.
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Table 6.9
Automotive Vendor Firms’ Size and R&D Activity
SME
Status
No. of
Firms
Perform
R&D Activity
Has R&D
Department
Percentage (%) of Firms
with R&D Activity
Large 64 64 64 100
Small &
Medium
126 126 47 37
Unknown 27 0 0 0
Total 217 190 111 51
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:
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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 industry’s 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 government’s 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,
168
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
manufacturer’s requirement and to reduce the cost of producing competitive products.
169
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 vendor’s 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
170
technological collaboration to gain technology and enjoy knowledge transfer; to
improve performance in terms of sales volume; and to be technologically competitive.
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
171
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 firm’s competitiveness, technological capability and the contextual changes.
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6.4 Technology Entrepreneurship Capability
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, firm’s competitive ability,
entrepreneur’s 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 study’s concentration on the interaction of these critical variables, namely the
dimensions would provide a 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.
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Table 6.10
Technology Entrepreneurship Factors and Dimensions
Technology Entrepreneurship Factor Dimension
Environment 1. Awareness 2. Search
Firm 3. Strategy 4. 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
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opportunities for change. This activity is rather similar to Schumpeter’s 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 firm’s 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 firm’s 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.
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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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culturally in order to accommodate technological changes. Therefore, learning requires
the acquisition of both codified and tacit knowledge, which can be obtained through
formal education, imitation and diffusion (Mill, 1848). Codified knowledge is
accessible through literature that is permanent and is often used as the basis to capture
tacit knowledge, which is not codified but translated to an individual who seeks to
acquire it. It is through learning the entrepreneurial functions such as management,
finance, and others that it can be acquired. The R&D functions as the learning unit, and
plays the role to provide information particularly to the entrepreneur to benefit from the
knowledge gained. This means that the entrepreneur should capture both codified and
tacit knowledge in order to build up his capability and ultimately use it for the firm’s
advantage.
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.
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6.5 Technology Entrepreneurship Capability Analysis
Having established the eight dimensions, a series of questions and assessment
statements were designed to assess the automotive vendor firms’ technology
entrepreneurship capability. A set of statements is used to provide an understanding on
technology entrepreneurship capability, and is scored on a scale of 1 to 4 for each
assessment statement.
The score 1 indicates that the firm strongly disagrees with the notion of the
statement; score 2 denotes that the firm disagrees with the statement; meanwhile, score
3 indicates that the firm agrees with the notion stated; and score 4 indicates that the firm
strongly agrees with the suggested notion. For example, the firm, which rated 2 for a
particular assessment statement suggests that the firm simply disagrees with the
particular notion of the statement. If a firm is highly certain or highly positive of the
statement suggested, then the firm rates a score of 4, which denotes that the firm
strongly agrees with the statement suggested.
The total average dimension score achievable from all the eight dimensions is
32. The score is then used to determine the firm’s overall technology entrepreneurship
capability level. The assessment is also used to identify the detailed strengths and
weaknesses according to the activities that are vital for the creation of competitive
advantage position. The average scores obtained by the 56 firms for each dimension are
shown in Table 6.11.
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Table 6.11
Average Score of Technology Entrepreneurship Capability Dimensions
No of Firms for Each Score No Dimension
1 2 3 4 Average Dimension
Score (ADS)
1 Awareness 0 1 49 6 3.1
2 Search 0 28 28 0 2.5
3 Strategy 2 46 8 0 2.1
4 Core Competency 0 35 21 0 2.4
5 Technology Paradigm 0 40 16 0 2.3
6 Linkages 10 31 15 0 2.3
7 Learning 3 23 30 0 2.5
8 Leadership 0 22 34 0 2.6
Total Average Dimension
Score 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 Graphical Representation of Findings
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.
0
1
2
3
4Awareness
Search
Strategy
Core Competency
Technology Paradigm
Linkages
Learning
Leadership
Best practice modelProton vendor firms profile
Figure 6.6
Technology Entrepreneurship Capability of Proton Vendor Firms
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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
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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 Proton’s specification. Strategy is viewed as
the plan of action and selection of emphasis for the firm’s 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.
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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 Analysis of ‘Core Competency’
In building and strengthening core competency, on average the firms registered a
relatively low score of 2.4. This is not surprising considering the low score obtained in
the strategy dimension; the structuring of sound strategy somehow influences the
building of appropriate core competency. Core competency is the business activity that
can enable a maximum profit return. On average, the vendor firms have some form of
structured process to identify and build their core competencies based on their
inadequate intangible assets, which is represented by the skills and knowledge
embedded in the firms; however, their ability to develop the core competencies is rather
limited. They focus their activities on routine operations, maintaining, and maximizing
returns but have relatively below average ability to develop their area of strengths, or
core competencies.
Contrarily, there are a few firms that recorded a score of 3 for this dimension;
these firms began identifying and focusing on their core activities from the initial stage
of their establishment, and they undertook value adding on a continuous basis in order
to produce competitive products and processes. They do upstream and more value-
added activities such as design, prototype and testing, as recorded in the interview: “We
have continued to emphasize R&D activities to bring the company to the next level of
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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 Analysis of ‘Technology Paradigm’
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].
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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
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strategic collaborative efforts to acquire economies-of-scale, and ultimately to produce
competitive products in terms of prices and quality but the local vendor firms are less
preferred by the foreign firms due to having their own network of suppliers.
For purposes of market penetration, a few of the local vendor firms have
established linkages with Japanese OEMs in order to be able to supply parts to the
Japanese OEMs car makers like Toyota, Honda, Perodua (Daihatsu) and Tan Chong.
This has provided an opportunity for the local vendor firms to enlarge their market
scope and increase the economies-of-scale. However, the survey shows that most of the
Japanese OEMs do not prefer to buy automotive parts or components from the local
vendor firms, for they have built their own supplier network, and also regard the quality
of the local made parts and components as inferior to theirs. As such, most of the local
vendor firms face difficulty in supplying parts and components to the Japanese OEMs
as recorded in the survey:
Our organization changes have been stagnant for the past 4 years and now we
are deteriorating owing to the smaller demand from Proton. Being a 100%
Malaysia-owned company, our products unfortunately are competing with
several Japanese joint-venture or linked vendors in Malaysia. 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,
and because we are 100% Malaysian and we do not have Japanese partnership.
Therefore, our company depends only on Proton to survive but unfortunately
some Proton senior staffs prefer Japanese joint venture vendors as well instead
of 100% Malaysian vendors who have been marginalized to a certain extent
[pers.comm, Vendor 9 (requested anonymity), 21 September 2006, 5:30pm].
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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 company’s
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
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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.
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In addition, some of these vendors coordinate the firms’ functions such as
finance, administration, management and operations effectively resulting in good
performance and sustainable competitiveness. Indeed, some of these firms have
ventured into the international market as a result of efficient leadership and capability.
Thus, in the increasingly competitive environment, the quest for entrepreneurs with
inexhaustible inspiration and momentum for high achievement and high sustainability is
crucially significant. The need for such leadership quality is as recorded in the following
interview:
During this period of globalization and high competition, the firm established
partnership with another foreign firm, particularly to be led by the foreign
firm’s entrepreneur or leader who has the appropriate capability to improve the
performance of this firm. Indeed, this firm has gone through a transfer of
management so that the firm is better managed by the new leader
[pers.comm, Manager 16 (requested anonymity), 12 September 2006, 1pm].
On the other hand, there are some vendor firms that are not managed well due to poor
leadership. Without appropriate leadership qualities, it is difficult for the entrepreneur to
manage effectively and improve performance. In fact, a few of the vendor firms
recorded financial loss due to poor management by the leader; while a few others
invested inappropriately due to poor acquisition of knowledge on the matter. As such,
this study regards it essential for entrepreneurs to equip themselves with adequate
knowledge in order to lead their firms successfully and to sustain competitiveness.
Thus, firm performance essentially depends on the capability and drive of the
entrepreneur, which necessitates that he has or acquires leadership qualities.
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6.6 The Overall Technology Entrepreneurship Capability Level of the National
Automotive Industry
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.
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Table 6.12
Overall Technology Entrepreneurship Capability Level
Technology Entrepreneurship Capability Level
No. of Firms
Entrepreneur Technology Firm Context
1 (Passive: 0.1 to 1.0)
0 Poor codified knowledge, and low skills. Lack of leadership skills.
Lack of capability for development and improvement of basic artifacts, Very poor technological development No innovation activity. Unable to establish linkages.
Short-term plans, does not have a framework for strategizing activities strategically. Incapable of understanding the market needs and trends. Unable to identify core competency and build distinctive core capabilities.
Ignorant of the changes that occur around them. Does not search for opportunities and threats.
2 (Reactive: 1.1 to 2.0)
5 Barely average codified knowledge, poor tacit skills. Poor leadership skills.
Limited capability for development and improvement of basic artifacts, and has below average set of heuristics Barely average technological development. No innovation, Limited external linkages
Poorly structured technology strategy. Relatively average in understanding the market trend but a ‘slow’ follower. Able to identify core competency but limited capability to develop it.
Recognizes the environmental changes but has limited capability to search for opportunities and threats.
3 (Proactive: 2.1 to 3.0)
48 Good knowledge-base. Good leadership skills.
Fairly good capability for development and improvement of basic artifacts, and has fairly good set of heuristics. Good technological development. Minimum innovation. Established various external linkages.
Well structured strategy. Capable of understanding the market, and follows the market trends. Has the ability to develop core competencies.
Recognizes the environmental changes, and has adequate capability to search for opportunities and threats.
4 (Innovative: 3.1 to 4.0)
3 Excellent knowledge-base. Excellent leadership skill.
Excellent capability for development and improvement of artifacts, and has excellent set of heuristics. Excellent technological development. Innovative success. Well-formed linkages with various external sources.
Explicit technology strategy. Capability to understand and influence the market trends. Has robust capability to develop core competencies.
Highly recognizes the environmental changes, and has excellent capability to search for opportunities and threats.
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The overall average dimension score achieved is 2.48, which categorizes the national
automotive parts and components industry into level 3. This is the ‘Proactive’
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.
Scatter Plot of Technology Entrepreneurship Capability
0.00
1.00
2.00
3.00
4.00
0.00 1.00 2.00 3.00 4.00
Degree of Awareness
Degr
ee o
f Pre
pare
dnes
s
vendor f irm
Passive
Reactive
Proactive
Innovative
Figure 6.7
Scatter Plot of the National Automotive Industry’s
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
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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
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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
This chapter contributes towards greater understanding of technology entrepreneurship
capability and the key issues at the firm level in the automotive sector. The results of
this analysis show that the national automotive vendor firms are relatively above
average in terms of awareness, search, learning and leadership. These dimensions are
the key activities of the context and entrepreneur constituencies of technology
entrepreneurship. The results reflect that the vendor firms have relatively average
capability in terms of their awareness of the environmental changes, and their search
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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 entrepreneur’s 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
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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.
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CHAPTER 7: CONCLUSION AND POLICY IMPLICATION
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
This study discusses technology entrepreneurship development in Malaysia, and
analyzed technology entrepreneurship capability of the national automotive parts and
components vendor firms utilizing an improvised technology entrepreneurship
capability framework. Chapter 1 introduces the topic with a brief overview of the study.
Chapter 2 reviews literature relevant to the theme of this study, which is
technology entrepreneurship capability. Based on the review, it was realized that there
is a dearth of literature in this emerging field, with existing literature being focused on
IT, and IT-related fields. The study, therefore, decided to look at technology
entrepreneurship in the automotive industry, which has not been previously explored.
With that, it is hoped that this study will enlarge the relatively limited scope of the
existing technology entrepreneurship literature.
Chapter 3 subsequently looks into the various industrial policies, and their
significance on the development of entrepreneurship and technology entrepreneurship
in Malaysia. This study applied the improvised technology entrepreneurship framework
to trace the trend of entrepreneurship development in Malaysia from the time of
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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
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order to acquire pertinent technology entrepreneurship information on the national
automotive parts and components vendor firms. The study then improvised on the
World Bank methodology, introduced by Bessant et al.(2000) to analyze the findings
from the survey with the aim of achieving the main objectives of this study. The
improvised technology entrepreneurship framework consists of eight key dimensions
derived from the four constituencies of technology entrepreneurship. These dimensions
and constituencies are ‘awareness’ and ‘search’ from the context constituency;
‘strategy’ and ‘core competency’ from the firm constituency; ‘technology paradigm’
and ‘linkages’ from the technology constituency; and finally ‘learning’, and ‘leadership’
from the entrepreneur constituency. These technology entrepreneurship constituencies
are inter-related and complement each other; the key dimensions referred to are the key
activities of technology entrepreneurship that enable a firm to create competitive
advantage.
Having established the methodology, an analysis is carried out in Chapter 6
using the improvised framework to determine technology entrepreneurship capability
level of the national automotive industry. Prior to the major analysis, the study
discussed the basic characteristics of the parts and components vendor firms in terms of
firm size, ownership structure, nature of business, and year of establishment.
Basically, the vendor firms are of two sizes, SME and large; there are more
SME-sized firms than the large-sized firms: there are 126 SME-sized vendor firms
compared to 64 large-sized vendor firms. They are owned by three different groups of
people, the Bumiputeras, the non-Bumiputeras, and the Foreigners. The Bumiputeras
own 44 % of the large-sized vendor firms and 48 % of the SME-sized vendor firms.
The study found that the vendor firms run different types of business activities
which have been categorized for study purposes into metal, rubber, plastics, electrical
and electronics, casting and others. The Bumiputera vendor firms are highly
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concentrated in the metal-based business making up 39 %; while the non-Bumiputeras,
mainly the Indians, are involved in the rubber-based business, with a preponderance of
Foreigners in the casting-based business. The segregation of business nature according
to ethnic lines is slowly diminishing though marked during the colonial period.
Most of the vendor firms (48.85%) were established during the fourth phase,
which was between 1991 and 2005 due to strong government intervention. As such, the
average age of most Proton vendor firms is 6 years; the relatively young age of the
national automotive parts and components vendor firms is reflected in their competency
level, which is relatively low in comparison to other Asian car-makers such as Hyundai
of Korea, and Honda and Toyota of Japan. Other factors that have contributed to the
low competency level of Proton vendor firms are government policy, technology
capability, entrepreneurship skill, and knowledge-base.
7.3 Summary of Key Findings
This study focuses on firm-level technology entrepreneurship. It analyzes technology
entrepreneurship capability and key issues at the firm level in the national automotive
parts and components industry.
Interesting results emerged from the case study analysis. The analysis revealed
that the parts and components vendor firms are relatively strong in terms of awareness
and rather weak in terms of strategy. The score of 3.1 in the scale range of 1 to 4 is a
reflection of the firms’ understanding of the environmental changes; most vendor firms
were able to recognize the technological changes and the increasing competition posed
by AFTA implementation. The average dimension score of 2.5 for the ‘search’
dimension reflects that on average, the vendor firms were able to scan and trace the
technology trends for identification of threats and opportunities available.
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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 firm’s 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
201
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 Factors that Hinder Building of Technology Entrepreneurship Capability
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 Industrial Environment Context
As the establishment of the national automotive industry is a state-led initiative, various
categories of assistance were provided by the government to protect the industry. The
large pool of vendor firms was created and developed with government assistance. In
fact, the growth of the national automotive parts and components industry was a result
of government encouragement to promote entrepreneurship development through the
setting up of vendor firms. These firms were protected from competition from foreign
firms.
In turn, the assistance and protection provided by the government have created
complacency within the industry. The national automotive vendor firms have been
enjoying the complacent environment that ultimately has inhibited them from searching
for new market scope and tapping opportunities from abroad. As a result, most of the
local vendor firms supply parts and components only to Proton.
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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
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recommendation is needed to encourage technological development of the national
automotive industry.
7.4.4 Entrepreneur
The increasingly competitive global scenario demands competitive entrepreneurs who
are knowledgeable and multi-skilled. Most of the Proton parts and components vendors
are in the average category in terms of acquisition of knowledge, and low to medium
in terms of skills. As such, most of them generally specialize in one type of job
specification. The limited knowledge-base of most of the Proton vendors has led to the
difficulty in producing competitive products both in terms of price and quality. The
local entrepreneurs are therefore restrained by limited skill and knowledge ability to
respond to competitive pressure.
In addition, most of the vendors who are the firms’ leaders possess ‘heroic’ type
of character as practiced in the traditional entrepreneurship. As such, most of the Proton
vendors prefer to work individually, instead of in teams. Such individualistic
characteristics contradict with the globalization phenomenon which encourages team
effort in the world automotive industry’s drive towards lean production; the lean
production concept is viewed as a response to global competition (Womack et al.,
1990). Hence, the Proton parts and components vendors are confronted with the
problem of changing the ‘individual’ work concept to team performance so as to
emulate the world industry leaders.
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
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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 Industrial Environment Context – Awareness and Search
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
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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 Firm – Strategy and Core Competency
The focus of this recommendation is to encourage the development of strategic plans
through appropriate long-term road maps that would enable the realization of the
growth potential of the national automotive industry. It is suggested that the government
draw up a particular strategic plan under the National Automotive Plan for the
development and growth of the national automotive industry. The NAP, which was
designed to overcome the challenges faced by the local automotive players has set five
major objectives: (i) to promote a competitive and viable automotive sector; (ii) to
become a regional hub for manufacturing, assembly and distribution; (iii) to enhance
value added and local capabilities; (iv) to promote export-oriented Malaysian
manufacturers and parts and components vendors; and (v) to promote competitive and
broad-based Bumiputera participation.
Nevertheless, the objectives set were general, and did not address the problems
faced by the industry players specifically. Therefore, the NAP is recommended to
incorporate vision and growth strategies for the different parts and components of the
automotive industry. Specific plans and programs need to be drawn for each type of the
automotive business nature such as metal, electrical and electronics, rubber, plastics,
castings, and others in order to achieve vision and growth for the different types of
automotive parts and components. Only then, can the vendor firms explore their niche
area and specialize, which is in accordance with world trends in the automotive
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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
industry’s 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 Technology – Technology Paradigm and Linkages
In the present world scenario, sustaining competitiveness is significant and it can be
achieved through continuous technological developments and cost improvements. The
national automotive industry has to find alternative ways to improve the technology used in
the value-chain of the automobile. As such, the vendor firms require a shift in their
technology paradigm to keep abreast with the new technologies that are being applied to
automobiles. The shift in technology paradigm will enable the national automotive industry
to emulate world automotive industry leaders such as the United States, United Kingdom,
and Japan.
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
207
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 world’s 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 Entrepreneur – Learning and Leadership
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
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integration of entrepreneurship and technical course is offered by University of Kuala
Lumpur (UniKL) in its different engineering courses at its various branch campuses
such as mechanical engineering at UniKL Malaysia France Institute (UniKL-MFI),
automotive parts and components engineering at UniKL Malaysia Spanish Institute
(UniKL-MSI), electrical and electronics engineering at UniKL British Malaysia
Institute (UniKL-BMI), and other courses at different branch campuses; all these
engineering courses are complemented by an entrepreneurship course to instill
entrepreneurial capability to the future engineers or technology entrepreneurs as
required by industries.
The vendors, who are entrepreneurs, have the responsibility as firm leaders to
break away from the traditional practice of working alone to perform as a team member.
It is suggested that the vendors move away from the ‘heroic’ character as practiced in
traditional entrepreneurship to the teamwork concept, which is associated with lean
production. This is essential as lean production is a widely accepted concept to create
competitive advantage. It can thus be seen that the competitiveness of the Proton vendor
firms depends partly upon the leadership of the entrepreneurs.
7.6 Future Studies
To facilitate the accumulation of knowledge in the field of technology entrepreneurship,
this study suggests two generic types of knowledge expansion on the topic for future
scholarly inquiry: vertical and horizontal. For vertical expansion of knowledge, the
research area may include technology entrepreneurship development within the
technology entrepreneurship spectrum. Future studies may look into the development
and growth of the four factors of technology entrepreneurship in order to suggest a
technology entrepreneurship path for achieving competitive advantage. For example, a
study of technology entrepreneurship capability of the automotive industry suggests the
209
possibility of building technology entrepreneurship capability of the various parts and
components of an automobile such as engine, tire, chassis and others.
For horizontal expansion, future researchers may look into other facets that are
affected by developments in technology entrepreneurship. Horizontal expansion of
knowledge should enable the introduction or inhibition of new aspects to the technology
entrepreneurship discipline. For instance, the building of technology entrepreneurship
capability of the automotive industry affects the performance and development of other
industrial sectors that are related such as rubber, metal, plastics and others. Future
research may then consider analyzing other industrial sectors and the relationship
among the inter-related sectors. It may be interesting to analyze further the creation of
an environment conducive for technology entrepreneurship activity to flourish.
7.7 Conclusion
This study is distinct from previous studies as it contributes to Malaysia’s 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
210
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.
211
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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 INCORPO-
RATION YEAR OF
BUSINESS ANNUAL
TURNOVER (2005)
NO. OF STAFF
1 10156 Bumiputra Large (PVL) 26/07/1984 1985 32,653 267
2 10474 Bumiputra Large (PVL) 01/06/1993 1995 20,297,099 100
3 10619 Non-Bumiputra SME (PVL) 14/04/1980 1988 274,490 40
4 10723 Bumiputra Large NA 26/07/1984 1985 NA NA
5 10827 Foreigner Large (PVL) 22/04/1989 1999 34,030,811 650
6 10988 NA SME (PVL) 06/12/2003 1993 NA 162
7 11918 Foreigner Large (PVL) 18/04/1989 1990 42,098,449 393
8 12167 Foreigner SME (PVL) 01/06/1998 1999 1,278,000,000 110
9 14775 Non-Bumiputra SME (PVL) 18/05/1996 1999 NA NA
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 INCORPO-
RATION YEAR OF
BUSINESS ANNUAL
TURNOVER (2005)
NO. OF STAFF
1 10389 Bumiputra SME (PVL) 02/03/1994 1994 4,867,487 69
2 10457 Bumiputra SME NA 01/01/1988 1988 NA NA
3 10478 Non-Bumiputra SME (PVL) 06/12/1983 1985 2,070,000 12
4 10486 Non-Bumiputra Large (PVL) 30/09/1981 1985 69,252,078 136
5 10510 Non-Bumiputra SME (PVL) 01/01/1984 1985 31,000,000 139
6 10592 Non-Bumiputra Large NA 31/12/1970 1998 260,000,000 273
7 10630 Non-Bumiputra Large (PVL) 07/08/1989 1994 122,394,373 639
8 10631 Non-Bumiputra SME (PVL) 24/02/1995 1995 14,607,068 14
9 10766 Bumiputra SME (PVL) 01/01/1993 1993 31,842,141 8
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
12 10941 Non-Bumiputra SME (PVL) 15/03/1973 1985 61,553,613 102
226
Table 2, continued
NO. VENDOR CODE OWNERSHIP SME
STATUS *TYPE OF BUSINESS
DATE OF INCORPO-
RATION 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 Non-Bumiputra Large NA 06/02/1990 1990 56,965,620 401
22 12165 Non-Bumiputra SME (PVL) 09/02/1985 1996 3,062,926 10
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
26 13491 Bumiputra Large (PVL) 06/01/1993 2000 93,468,892,300 554
27 13633 Bumiputra SME (PVL) 25/04/1989 1989 24,855,457 99
28 13710 Non-Bumiputra SME (SPR) 04/11/1997 2000 3,080,239 102
29 14853 Bumiputra SME (PVL) 23/01/2002 2003 NA 17
30 14945 Non-Bumiputra NA (PVL) 31/10/1980 1985 NA 138
31 15002 Non-Bumiputra SME (PVL) 01/01/2004 2004 259,372,926 85
32 15345 Bumiputra SME (PVL) 04/04/1996 2002 52,725,597 144
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 INCORPO-
RATION YEAR OF
BUSINESS ANNUAL
TURNOVER (2005)
NO. OF STAFF
1 10469 Bumiputra SME (PVL) 01/01/1990 1990 NA NA 2 10489 Non-
Bumiputra Large (PVL) 09/07/1980 1985 65,794,149 278
3 10501 Foreigner Large (PVL) 01/03/1992 1993 127,000,000 333
4 10503 NA SME (PVL) 21/09/1992 1992 1,891,185 34
5 10512 Bumiputra SME (PVL) 16/03/1990 1990 4,868,494 38
6 10513 Bumiputra Large (PVL) 12/03/1988 1988 18,347,698 167
227
Table 3, continued
NO. VENDOR CODE OWNERSHIP SME
STATUS *TYPE OF BUSINESS
DATE OF INCORPO-
RATION YEAR OF
BUSINESS ANNUAL
TURNOVER (2005)
NO. OF STAFF
7 10514 Bumiputra SME (PVL) 06/09/1990 1991 9,712,371 114
8 10515 Bumiputra SME (PVL) 13/07/1985 1991 7,913,086 98
9 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 Non-Bumiputra 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 Non-
Bumiputra SME (PVL) 28/03/1980 1988 11,000,000 103
16 10633 NA Large (PVL) 03/07/1991 1993 NA 186
17 10660 Non-Bumiputra 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 Non-Bumiputra 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 Non-Bumiputra 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 Non-Bumiputra 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
228
Table 3, continued
NO. VENDOR CODE OWNERSHIP SME
STATUS *TYPE OF BUSINESS
DATE OF INCORPO-
RATION 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
47 11240 Non-Bumiputra Large (PVL) 26/07/1980 1985 31,570,895 349
48 11241 Non-Bumiputra Large (PVL) 07/08/1982 1985 94,506,955 515
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 Non-Bumiputra SME (PVL) 19/09/1990 1999 3,944,367 66
52 12163 Bumiputra SME (PVL) 01/01/1995 1995 190,000 8
53 12880 Non-Bumiputra Large (PVL) 03/12/1971 1991 195,000,000 817
54 13063 Non-Bumiputra SME (PVL) 25/02/1985 1985 18,339,917 350
55 13260 Foreigner SME NA 31/12/1997 2000 3,900,000 8
56 13620 Foreigner NA (PVL) 01/01/2000 2000 NA NA 57 13786 Non-
Bumiputra 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 7
60 14115 Non-Bumiputra SME (PVL) 15/07/1991 1995 NA NA
61 14117 Non-Bumiputra SME (PUL) 18/11/2001 2002 NA NA
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
68 15760 Bumiputra SME NA 12/04/2004 2004 NA 18
69 30112 Foreigner NA NA 01/01/1998 1998 NA NA 70 30295 Foreigner NA NA 01/01/1998 1998 NA NA 71 30515 Foreigner NA NA 01/01/2000 2000 NA NA 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 75 30972 Foreigner NA NA 01/01/2000 2001 NA NA 76 30974 Foreigner NA NA 01/01/2000 2001 NA NA 77 30976 Foreigner NA NA 01/01/2000 2001 NA NA 78 30985 Foreigner NA NA 01/01/2000 2001 NA NA
229
Table 3, continued
NO. VENDOR CODE OWNERSHIP SME
STATUS *TYPE OF BUSINESS
DATE OF INCORPO-
RATION YEAR OF
BUSINESS ANNUAL
TURNOVER (2005)
NO. OF STAFF
79 31100 Foreigner NA NA 01/01/2000 2000 NA NA 80 31141 Foreigner NA NA 01/01/2000 2002 NA NA 81 31321 Foreigner NA NA 01/01/2000 2003 NA NA 82 31345 Foreigner NA (PVL) 01/01/2000 2004 NA NA
Table 4
Summary of Characteristics of 27 Proton Vendor Firms – Plastics
NO. VENDOR CODE OWNERSHIP SME
STATUS *TYPE OF BUSINESS
DATE OF INCORPO-
RATION YEAR OF
BUSINESS ANNUAL
TURNOVER (2005)
NO. OF STAFF
1 10270 Non-Bumiputra SME (PVL) 05/10/1991 1993 22,260,846 191
2 10301 Bumiputra SME (PTS) 03/06/1993 1994 8,042,844 28
3 10488 Non-Bumiputra Large (PVL) 07/04/1981 1990 1,000,000 619
4 10504 Bumiputra SME (PVL) 12/02/1993 1993 NA 7
5 10520 Bumiputra SME (PVL) 01/01/1990 1990 8,194,000 50
6 10523 Bumiputra Large (PVL) 27/11/1987 1987 24,798,638 316
7 10548 Bumiputra SME (PVL) 01/12/1985 1985 15,331 63
8 10629 Non-Bumiputra SME (PVL) 01/01/1994 1994 5,601,815 79
9 10659 Bumiputra Large (PVL) 07/08/1982 1988 76,567,789 61
10 10727 Non-Bumiputra 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 Non-Bumiputra 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
27 15206 Non-Bumiputra SME (PVL) 14/08/1990 2003 6,823,952 40
230
Table 5
Summary of Characteristics of 19 Proton Vendor Firms – Rubber
NO. VENDOR CODE OWNERSHIP SME
STATUS *TYPE OF BUSINESS
DATE OF INCORPO-
RATION YEAR OF
BUSINESS ANNUAL
TURNOVER (2005)
NO. OF STAFF
1 10684 Non-Bumiputra SME (PVL) 05/12/1979 1985 9,998,107 190
2 10701 Foreigner Large (PTS) 01/09/1972 1985 83,471,000 713
3 10729 Foreigner SME (PVL) 27/11/1989 1991 19,500,000 150
4 10819 Non-Bumiputra Large NA 11/12/1975 1985 67,320,000 345
5 10826 Non-Bumiputra SME (PVL) 14/10/1992 1997 14,025,878 46
6 10987 Foreigner SME (PVL) 16/01/1991 1992 28,812,000 29
7 11006 Bumiputra Large (PVL) 01/01/1985 1985 27,698,180 472
8 11020 Non-Bumiputra Large (PTS) 17/06/1988 1988 29,000,000 376
9 11089 Bumiputra Large NA 10/06/1989 1991 27,291,000 349
10 11108 NA Large NA 20/12/1979 1985 715,238,000 1,568
11 11140 Non-Bumiputra SME (PVL) 24/03/1986 1990 5,503,548 80
12 11177 Non-Bumiputra SME (PVL) 30/09/1994 1996 40,300,000 134
13 11205 Bumiputra SME (SPR) 15/06/1985 1993 16,000,000 122
14 11271 Non-Bumiputra 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 Non-Bumiputra Large NA 12/07/1985 1985 209,258,000 1,224
17 14133 Bumiputra SME (PVL) 23/05/1994 2001 NA 38
18 14760 NA SME NA 01/01/2000 2003 NA NA 19 30977 Foreigner NA NA 01/01/2000 2001 NA NA
Table 6
Summary of Characteristics of 38 Proton Vendor Firms – Others
NO. VENDOR CODE OWNERSHIP SME
STATUS *TYPE OF BUSINESS
DATE OF INCORPO-
RATION
YEAR OF BUSINESS
ANNUAL TURNOVER
(2005)
NO. OF STAFF
1 10117 Bumiputra SME NA 28/09/1989 1989 NA NA 2 10466 Bumiputra SME (PVL) 14/12/1993 1993 19,192,541 68
3 10496 Non-Bumiputra Large (PVL) 02/01/1980 1985 64,752,853 416
4 10563 Bumiputra Large (PVL) 06/09/1983 1989 263,584,955 334
5 10565 Bumiputra Large (PVL) 06/09/1983 1989 84,409,100 121
6 10566 Bumiputra SME (PVL) 27/09/1965 1993 14,138,760 142
7 10704 Bumiputra SME (PVL) 29/09/1983 1985 6,935,984 153
8 10795 NA SME (PVL) 11/11/1980 1985 7,761,683 47
9 10816 Foreigner SME (PVL) 04/10/1990 1991 12,429,000 85
10 10838 Non-Bumiputra SME (PVL) 14/07/1980 2001 6,759,351 80
231
Table 6, continued
Summary of Characteristics of 38 Proton Vendor Firms – Others
NO. VENDOR CODE OWNERSHIP SME
STATUS *TYPE OF BUSINESS
DATE OF INCORPO-
RATION
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 Non-Bumiputra SME (PTS) 30/09/1994 1993 NA 109
15 10875 Bumiputra Large NA 19/04/1985 1985 69,016,000 443
16 10891 Non-Bumiputra SME (PVL) 09/03/1995 1995 4,929,901 58
17 10913 Foreigner NA NA 01/01/1998 1998 NA NA 18 10954 Non-
Bumiputra SME (PVL) 11/11/1992 2003 3,600,000 39
19 11126 Non-Bumiputra SME (PVL) 01/01/1983 1993 NA 96
20 11152 Non-Bumiputra SME (PVL) 01/12/1985 1985 26,383,632 269
21 11237 Non-Bumiputra Large (PVL) 31/10/1983 1985 31,290,186 190
22 11671 Non-Bumiputra SME (PVL) 27/06/1984 1985 17,000,000 116
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 5
34 17475 Non-Bumiputra SME (PVL) 01/01/1984 2004 31,000,000 139
35 17543 Bumiputra SME (PVL) 01/01/2004 2004 50,300,000 32
36 30044 Foreigner NA 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
232
Table 7
Summary of Characteristics of 5 Proton Vendor Firms –
Insufficient Information
NO. VENDOR CODE OWNERSHIP SME
STATUS *TYPE OF BUSINESS
DATE OF INCORPO-
RATION
YEAR OF BUSINESS
ANNUAL TURNOVER
(2005)
NO. OF STAFF
1 10873 Foreigner SME NA NA 0 13,218,589 13
2 12168 NA SME NA 25/03/2000 0 227,458 15
3 30990 NA NA NA 01/01/2000 0 NA NA 4 30970 NA NA NA 01/01/2000 0 NA NA 5 19108 NA NA NA NA 0 NA NA
Note: NA : Not Available *Type of Business SPR: sole proprietorship PTS: partnership PVL: private limited PUL: public limited
233
Appendix B
Table 1
Responses of Personal Communication (pers.comm)
No Firm
No.
Designation Requested
Anonymity
Date Time
(Hour)
1 5 Senior Executive 1 Requested Anonymity 04/08/06 10.00
2 20 Senior Manager 3 Requested Anonymity 04/08/06 14.00
3 6 Executive 1 Requested Anonymity 07/08/06 09.30
4 4 Manager 1 Requested Anonymity 07/08/06 14.30
5 11 CEO 2 Requested Anonymity 07/08/06 18.00
6 7 Manager 3 Requested Anonymity 15/08/06 15.00
7 9 CEO 1 Requested Anonymity 15/08/06 18.00
8 10 Manager 4 Requested Anonymity 16/08/06 14.30
9 8 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
234
Table 1, continued
No Firm
No.
Designation Requested
Anonymity
Date Time
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 3 Manager 2 Requested Anonymity 30/10/07 15.00
43 1 Senior Manager 1 Requested Anonymity 29/11/07 16.00
44 2 Senior Manager 2 Requested Anonymity 29/11/07 16.30
235
Appendix C
Table 1
Technology Entrepreneurship Capability Assessment Score
Assessment Score Strongly Disagree
Disagree Agree Strongly Agree
Technology Entrepreneurship
Factors & Dimensions
Key Questions
Assessment Statements
1 2 3 4 Firm Strategy
1. Where is your firm located? 2.Provide some background information of your firm? 3. What are the main activities of your firm? 4. What is the size of your firm? 5.What is your annual turnover? 6.What is your capital expenditure? 7. What is your product/process market orientation? 8. How is the market distribution of your product/process? 9. How many staff/s do you have and what are their qualifications? 10. What is the ratio of R&D staff to the total number of staff? 11. Does your firm deliver benefits that exceed those of competing products? 12. How do you formulate your strategy?
1.My firm is located strategically 2.My firm’s main activities are profit oriented 3.My firm experienced positive growth during this period (2003-2006) 4.The market for my product/process is extensive 5.My product/process meets market demand/needs 6.My product/process is of high quality 7.My firm is well equipped with technological infrastructure 8.The staff are highly loaded with extensive duties and responsibilities 9.The average level of education of the staff is certificate 10.There is a very few number of researchers/ R&D staff/ Professional staff. 11.My firm has the ability to utilize its resources effectively 12.My firm is able to bring its product/process faster to the market than its competitors
236
Table 1, continued
Assessment Score Strongly Disagree
Disagree Agree Strongly Agree
Technology Entrepreneurship
Factors & Dimensions
Key Questions
Assessment Statements
1 2 3 4 Firm Core Competency
13. What are your firm’s main strengths and weakness? 14. Does your firm have any distinctive competency/ies? 15. Does your firm deliver the same benefits as its competitors? If yes, is it at a lower cost? 16. Is your firm able to bring its product/process faster than its competitors? 17. Does your firm perform one or more value creating or adding activities that ultimately create more value than its competitors? 18. How different is your product in comparison to the competitors’? -lower cost or -superior benefits
13. My firm has a good plan of action of utilizing technology optimally 14.My firm has its own distinctive competencies 15.My firm has the ability to acquire and adapt technology according to the firm’s needs 16.My firm offers better benefits than its competitors 17.My firm offers same benefits as its competitors but at a lower cost 18.My firm performs value creating/ adding activities on a continuous basis
Technology Technology Paradigm
1. Did any invention or innovation occur during this period (2003-2006)? 2. What is the percentage invested in R&D? 3. Have you patented before? 4. Is there any internet connectivity? 5. What is the percentage of internet access to the staff? 6. What are the main technology priorities of your firm?
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
237
Table 1, continued
Assessment Score Strongly Disagree
Disagree Agree Strongly Agree
Technology Entrepreneurship
Factors & Dimensions
Key Questions
Assessment Statements
1 2 3 4 Technology Technology Paradigm Linkages
7. What are the main technology priorities of your firm? 8. How much does your firm invest (in percentage) in technology? 9. How much do you know about the existing technology? 10. How long have you been using the same technological knowledge and technology skills? 11. How often do you make changes to your technology and who/what determined these changes to technology? 12. Do you have any linkages; if yes, with whom? 13. What do you aim to achieve from the linkages? 14. What have you achieved from the linkages activity?
24.My firm knows its main technology priorities
25.My firm has invested heavily in technological development during this period (2003-2006) 26.My firm has adequate knowledge of the existing technology in-use 27.My firm has been using the same technology since the previous model 28.My firm’s technological development is at par with its competitors 29.My firm has good partner/s 30.My firm exploits the linkages activity for its advantage 31.My firm achieve its goal through its linkages
Entrepreneur Learning
1. Do you know the vision and mission of your firm? 2. What is the highest qualification of the entrepreneur? 3. What are the experiences accumulated? 4. Is learning encouraged in your firm?
32.The entrepreneur knows well the firm’s 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
238
Table 1, continued
Assessment Score Strongly Disagree
Disagree Agree Strongly Agree
Technology Entrepreneurship
Factors & Dimensions
Key Questions
Assessment Statements
1 2 3 4 Entrepreneur Leadership
9. Are you seen as authentic and decisive? 10. Are you focused on creating a priority list and sticking to it ? 11.Do you care to build relationships, and communicate vision? 12. Do you offer helpful feedback and good coaching to all employees? 13. Do you evidence the capability to keep learning and energy flowing in the firm, retain optimism?
36. The entrepreneur articulates a clear, compelling vision for the venture and stimulates the employees to achieve high performance.
37.The entrepreneur strives to develop a sustainable competitive advantage through building new competencies and products in a timely way. 38.The entrepreneur has the guiding vision and passion that allow him to communicate effectively.
39.The entrepreneur offers helpful feedback and good coaching to all employees.
40.The entrepreneur with solid experiences, adequate knowledge and relevant skills help to shape and build leadership skills.
Context Awareness Search
1. Is your firm aware of the latest environmental changes? 2. Does the firm recognize the assistance provided by the government? 3. Does your firm explore opportunities and threats? 4. Is your firm able to make use of the threat by changing it to an opportunity and to the firm’s advantage?
41.My firm is well aware of the environmental changes, e.g. policies and technological development 42. The firm recognizes the assistance provided by the government. 43.The firm continuously explore opportunities and threats 44.The firm is able to change the threat to opportunity.
239
Appendix D
Table 1: The National Automotive Vendor Firms Total Average Dimension Score
FIRM NO DIMENSION
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 Average
1 Awareness 3 3 3 3 3 3 3 3 3 3 3 3 4 3 2 3 3 3 3 3 3 3 3 3 3 3 3.10
2 Search 2 3 3 2 2 2 3 3 3 2 2 3 3 3 3 3 3 2 2 2 3 2 3 2 3 2 2.50
3 Strategy 2 3 2 2 2 2 3 2 2 2 2 3 2 2 3 2 2 2 3 2 2 3 2 2 2 2 2.10
4 Core Competency 3 2 3 2 2 3 3 2 2 2 3 3 2 3 3 2 2 2 2 2 3 2 2 2 3 2 2.40
5 Technology Paradigm 2 3 3 3 2 3 2 3 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 3 2 2.30
6 Linkages 3 2 2 2 3 3 2 2 3 2 3 2 3 3 3 3 2 1 2 2 2 2 1 3 3 2 2.3
7 Learning 2 2 2 3 2 2 3 2 3 3 3 2 3 2 3 2 3 3 2 3 2 3 2 2 3 3 2.50
8 Leadership 2 2 3 2 3 2 3 2 2 3 3 3 2 3 3 2 3 2 3 3 2 3 2 3 3 3 2.60
TOTAL AVERAGE DIMENSION SCORE (TADS) 2.48
FIRM NO DIMENSION
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
1 Awareness 3 3 4 3 3 4 3 3 4 3 3 3 3 3 3 3 4 3 3 3 3 3 3 4 3 3 3 3 3 3
2 Search 2 3 2 3 3 2 2 2 2 3 2 3 3 2 3 3 3 2 2 3 2 3 2 2 3 2 3 2 2 3
3 Strategy 2 2 2 2 2 2 2 2 3 2 2 2 2 3 2 2 2 1 2 2 1 2 2 2 2 2 2 2 2 2
4 Core Competency 2 3 2 3 2 3 2 3 2 2 3 2 2 3 2 2 2 2 2 2 2 3 2 3 2 3 3 2 3 2
5 Technology Paradigm 2 3 3 3 3 2 2 2 3 3 2 2 2 2 2 2 2 2 3 2 3 2 2 2 3 2 2 2 2 3
6 Linkages 3 3 2 2 2 3 3 2 2 3 2 3 2 3 2 2 2 3 1 2 2 1 3 1 3 2 3 1 1 3
7 Learning 3 2 3 3 2 3 2 3 1 2 3 2 3 3 1 2 3 3 2 3 2 3 3 3 1 2 2 3 3 3
8 Leadership 3 2 3 2 3 3 3 2 3 2 3 2 3 3 2 3 2 3 3 3 3 2 3 2 3 2 3 3 2 3
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Appendix E SERIAL NO………………………
Malaysia Technology Entrepreneurship Survey
affix business card here 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
PLEASE COMPLETE AND RETURN THIS FORM BY 28 SEPTEMBER 2006 IMPORTANT
• 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
firm’s performance and capability, technological capability, entrepreneur’s ability, and industrial
environment’s preparedness of Malaysia’s national automotive parts and components industry for
three years period between 2003 and June 2006.
• The survey aims:
o to determine the technology entrepreneurship capability of the national automotive vendor
firms, and the impact to the industry caused by the globalization and liberalization
phenomena.
o 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:
[email protected], [email protected]
• You are kindly requested to answer all questions.
• Your urgency in replying this survey is highly appreciated.
THANK YOU FOR YOUR COOPERATION AND VALUABLE TIME SPENT
241
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 firm’s performance and capability, the technological capability, and the entrepreneur’s ability.
A. Context – Industrial environment
1. Sources of information for technology and entrepreneurship activities 1.1 Please indicate the sources of knowledge or information used in your technological
entrepreneurial activities, and their importance during the period 2003 to June 2006.
(please tick one box in each row) Degree of importance
Internal 1.1.1 Within the firm
1.1.2 Other firms within the firm group
Market 1.1.3 Suppliers of equipment, materials,
components or software
1.1.4 Clients or customers
1.1.5 Competitors
1.1.6 Consultants
1.1.7 Commercial laboratories/ R&D firms
Institutional 1.1.8 Universities/other tertiary institutions
1.1.9 Government research organisations
1.1.10 Other public sector e.g. bus. links,
Govt. offices
1.1.11 Private research institutes
Specialised
1.1.12 Technical standards
1.1.13 Quality standards and regulations
1.1.14 Health, safety and environmental
standards and regulations
Not used Low Med High
Not used Low Med High
Not used Low Med High
Not used Low Med High
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Others 1.1.15 Professional conferences, meetings
1.1.16 Trade associations
1.1.17 Technical/trade 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
firm’s performance after the implementation of AFTA and NAP?
1.3 Does your firm explore opportunities and threats? 1.4 Is your firm able to make use of the threat by changing it to an opportunity and to
firm’s advantage?
2. Government support for technology entrepreneurship 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-
related activities in the period 2003 to June 2006? (please tick all that apply)
Financial Other
support participation
2.2.1 State government
2.2.2 Federal government
2.3 Has your firm participated in or received programs in the period 2003 to June 2006?
(please tick all that applies to you)
2.3.1 Vendor Development Programme (VDP)
2.3.2 Technology Development Flagship (MSC-TDF)
2.3.3 Malaysia Venture Capital (MavCap-Ignite)
2.3.4 SME Bank
2.3.5 Others - ……………………………………………………
Not used Low Med High
243
B. Firm
3. Please briefly describe your firm’s 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 three-
year 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
5. Basic economic information about the firm (a) 2003 (b) June2006
5.1 Total turnover: market sales of goods and
services including export and taxes. (RM)
5.2 Exports of goods and services
(enter nil if inappropriate) (RM)
5.3 Capital expenditure
(enter nil if inappropriate) (RM)
5.4 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 firm’s largest market (market orientation)? (please tick one)
Local1
Regional2
National
International 1Situated within approximately 50 km of your firm 2Situated within approximately 100 km of your firm
244
7. Please state the distribution of your product to the market?
OEM \ Year
Proton (%)
Perodua (%)
Naza (%)
UMW Toyota (%)
Honda (%)
Tan Chong (Nissan) (%)
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 Low Med High
8.1.1 Implementation of new or significantly changed
corporate strategies
e.g. mission statement, market share.
8.1.2 Implementation of advanced management /
organisational techniques within your firm
e.g. knowledge management, quality circles.
8.1.3 Implementation of new or significantly
changed organisational structure
e.g. Investors in People, diversification of business
8.1.4 Changing significantly your firms marketing
concepts/strategies
e.g. marketing methods
8.2 What is your strategy for achieving competitive advantage and sustainability of your
firm?
2003 2006
245
C. Technology
9. Technological Capabilities 9.1 How did your firm acquire technology? (please tick one)
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 firm’s use of e-business activities over the period
2003 to July 2006. (please tick all that applies to you)
9.2.1 Basic internet
9.2.2 Internet used for information
9.2.3 Customers can place orders through the internet site
9.2.4 Commerce with other businesses through the internet site
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 Product innovation (goods and services) 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.
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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
10.1.2 How were these products developed? (please tick one)
Mainly by your firm or firm group
Mainly by your firm in co-operation with other firms or institutions
Mainly by other firms or institutions
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 %
10.1.3.2 Significantly improved %
10.1.3.3 Unchanged or only marginally modified %
Total turnover in June2006 %
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 firm’s
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:
10.1.6 What is the category of your current product technology?
(You may tick more than one answer)
10.1.6.1 Simple fabrication and primarily using borrowed technology
10.1.6.2 Replacement Equipment Manufacture (REM)
10.1.6.3 Original Equipment Manufacture (OEM)
10.1.6.4 Own Designed Manufacture (ODM)
10.1.6.5 Own Brand Manufacture (OBM)
247
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
10.2.2 How were these processes developed? (please tick one)
Mainly by your firm or firm group
Mainly by your firm in co-operation with other firms or institutions
Mainly by other firms or institutions
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. Innovation activities not completed or abandoned 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
248
10.4 During the period 2003-June2006, did your firm have any other innovation activities
to develop or improve products or processes e.g. basic R&D, technology watch?
No Yes
10.5. Factors hampering innovation 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) Importance
Economic 10.5.1 Excessive perceived economic risks
factors 10.5.2 Direct innovation costs too high
10.5.3 Cost of finance
10.5.4 Availability of finance
Internal 10.5.5 Organisational rigidities within the firm
factors 10.5.6 Lack of qualified personnel
10.5.7 Lack of information on technology
10.5.8 Lack of information on markets
Government 10.5.9 Research grant
Incentive 10.5.10 Tax rebate
factors 10.5.11 Scheme/package (protection)
Other 10.5.12 Impact of regulations or standards
factors 10.5.13 Lack of customer responsiveness to
new goods or services
No effect Low Med High
No effect Low Med High
No effect Low Med High
No effect Low Med High
249
10.6 Innovation – related expenditure in 2006 Did your firm engage in the following innovation activities in 2006?
(Please estimate expenditure where appropriate)
Please estimate innovation expenditure in 2006, incl. personnel and related investment expenditure
(in % of total expenditure) 10.6.1 Research and development (R&D) 10.6.2 Acquisition of external R&D 10.6.3 Acquisition of machinery and equipment
(including training) in connection with product or process innovation.
10.6.4 Acquisition of other external knowledge
such as licenses to use intellectual property (e.g. patents, know-how) or specialized services (e.g. consultants, universities)
10.6.5 All design functions,
including industrial, product, process and service design and specifications for production or delivery.
10.6.6 Internal or external training
for your personnel directly related to innovation activity. 10.6.7 Internal or external marketing
activities aimed at the introduction of your firm’s innovations. (Innovation related expenses).
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
Product 10.7.1 Increased range of goods or services
oriented 10.7.2 Opened new market or increased market share
effects 10.7.3 Improved quality of goods or services
%
%
%
%
%
%
%
None Low Med High
250
Degree of impact
Process 10.7.4 Improved production flexibility
oriented 10.7.5 Reduced unit labour costs
effects 10.7.6 Increased production capacity
10.7.7 Reduced materials and/or energy per produced unit
Other 10.7.8 Improved environmental, health and safety aspects
effects 10.7.9 Met quality and product standards
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 Did your firm have any co-operation arrangements on technological and
entrepreneurial activities with other firms or institutions from 2003 to June 2006?
No Go to question 12
Yes
11.2 Please indicate the type of linkages and location Note: M1 - Malaysia J2 - Japan K3 - Korea T4 - Taiwan US5 - United States O6 - Others
(Please tick all that applies to you)
Type of partner
Internal 11.2.1 Other firms within the firm group
Market 11.2.2 Suppliers of equipment, materials,
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 11.2.7 Universities or other tertiary inst.
11.2.8 Government research organisations
Specialized 11.2.9 Private research institutes
None Low Med High
None Low Med High
M1 J2 K3 T4 US5 O6
M1 J2 K3 T4 US5 O6
M1 J2 K3 T4 US5 O6
M1 J2 K3 T4 US5 O6
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D. Entrepreneur
12 Learning activities If you have internal learning activities: 12.1 Of total employees (incl. full time contract workers),
Approximate proportion sent for training in 2003 and 2006
12.1.1 Technology and engineering courses (%)
12.1.2 Motivation programs (%)
12.1.3 Other programs/courses and the percentage
____________________________________ (%)
12.2 Can you indicate the extent of your employer’s knowledge acquisition over the period
2003 to July 2006. (Please tick all that applies to you)
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 Highest Qualification ( please tick one) 2003 (no) June2006 (no) Owner/Entrepreneur SPM Cert Dip Deg Masters PhD 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 2003-June2006?
Continuously
Occasionally
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12.5 Firm with no learning activity
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)
Firm policy does not allow
Firm conditions do not allow
No encouragement from the management
Others
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) 13.2 How did your firm engage in R&D during the three-year period 2003-June2006?
Continuously
Occasionally
13.3 The characteristic of your entrepreneur leader
13.3.1 The entrepreneur articulates a clear, compelling vision for the venture and stimulates
the employees to achieve high performance.
Yes
No
13.3.2 The entrepreneur strives to develop a sustainable competitive advantage through
building new competencies and products in a timely way.
Yes
No
2003 ppl , %
2006 ppl , %
253
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
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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 firm’s 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, firm’s performance, technological capability, and entrepreneur’s ability.
255
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 • the number of people a business employs OR • on the total sales or revenue generated by a business in a year.
I. Number of Employees Based on the number of full-time employees :
Primary Agriculture Manufacturing (including Agro-Based) & MRS*
Services Sector (including ICT**)
Micro Less than 5 employees Less than 5 employees Less than 5 employees
Small Between 5 & 19 employees Between 5 & 50 employees Between 5 & 19 employees
Medium Between 20 & 50 employees Between 51 & 150 employees Between 20 & 50 employees
II. Annual Sales Turnover Based on annual sales turnover :
Primary Agriculture Manufacturing (including Agro-Based) & MRS*
Services Sector (including ICT**)
Micro Less than RM200,000 Less than RM250,000 Less than RM200,000
Small Between RM200,000 & less than RM1 million
Between RM250,000 & less than RM10 million
Between RM200,000 & less than RM1 million
Medium Between RM1 million & RM5 million
Between RM10 million & RM25 million
Between RM1 million & RM5 million
Note: *MRS : Manufacturing-Related Services ** ICT : Information and Communications Technology
