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Technology development and entrepreneurship in Malaysia.



1.1 Definition of entrepreneurship

In this world of accelerating economic globalization, enhancement in science and technology continue increasing day by day, and in the process of accumulating wealth the main point is to have knowledge (Lalkaka, 2002). From a business perspective, it is toward to entrepreneurship. 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’.

Technopreneurship is a combination of “technology” and “entrepreneur”. It is also combines technology and entrepreneurship disciplines. It merges technological knowledge and ability with entrepreneurial skill and competency. They are naturally gifted, smart, creative, but not necessarily formally educated; aggressive young men & women passionate for success; mostly assemblers and at times innovators. As such, includes technology, entrepreneur like software developer or PC Manufactures, 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. Technopreneurship is different from entrepeneurship because entrepeneurship is a risk-taking factor, which is responsible for the end result in the form of profit or loss. While, technopreneurship are more likely to innovation, create, develop and make it as a business.

1.2 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 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

1.4 Entrepreneurship in Malaysia

In comparison with other countries within this GEM analysis Malaysia’s GDP per capita is relatively low coupled with a very low total early-stage entrepreneurial activity rate or TEA rate. This is at odds with norm where generally low GDP is associated with high TEA rates. Malaysia’s TEA rate is also very low within the efficiency-driven economies grouping. It is the second lowest and share this spot with Bosnia and Herzegovina. This result is not in tandem with its positioning as a efficiency-driven economy as such low new business ownership rates are more in the domain of innovation driven economies. Thus, for countries with low levels of per capita income, a decrease in prevalence rates of early stage entrepreneurial activity may be a good sign of sustainability, especially if this is accompanied by economics growth and political stability as appears to be case with Malaysia currently.

Where early stage social entrepreneurship activity is concerned, Malaysia is well below the average and in fact the lowest for efficiency –driven economics. This suggest that the opportunity costs are high or that Malaysia has well placed institutional support from the government that undertakes a major portion of such tasks. Either way it is important for Malaysians to be more cognizant of social obligations and social entrepreneurship needs to be further encouraged and developed.

Media attention provided to entrepreneur is high in Malaysia but ranks low as a career choice as people have many options available to them. An indication that the opportinityy costs for entrepreneurship may be high despite there existing a high level of status and respect for successful entrepreneurs.

There is hardly gender difference in attitude towards entrepreneurship between males and females in Malaysia as one would expect. In general it is agreed by most experts that there are more good opportunities for the creation of new firms than there are people who are able to take advantage of them. This links up with the finding that many people generally do not have experience in starting a new business and do not know how to start and manage a high-growth business.

1.3 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.

1.1 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 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 importoriented 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).

esides 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.

1.5 Technology development in Malaysia

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