XINTRODUCTION
Thistopicintroducestheevolutionanddevelopmentofentrepreneurshipinthe
Malaysiancontextspecificallyandtheglobalarenagenerally.Here,students
wouldbeabletolearnabouttheunderlyinghistorycontributingsignificantlyto
theemergenceofentrepreneurship.Thistopicwillalsoexploretheimportanceof
entrepreneurshipasweexaminethequestionon?Whydoweneed
entrepreneurship?‰
Topic
1
XEntrepreneurship:
AnOverview
LEARNINGOUTCOMES
Bytheendofthistopic,youshouldbeableto:
1.Explainhowentrepreneurshipevolvedandemergedasaleading
economicforceinMalaysiasinceindependence;
2.IdentifytheemergingindustriesavailableforMalaysian
entrepreneurs;
3.Discusstheemergingofentrepreneurshipintheglobalscene;and
4Analysetheimportanceofentrepreneurshipinthecontextof
countryêsdevelopment.
2XTOPIC1ENTREPRENEURSHIP:ANOVERVIEW
Figure1.1:Entrepreneurship
Source:http://www.cartoonstock.com/directory/e/entrepreneur.asp
RefertoFigure1.1.Doyouagreeentrepreneurshipskillisatalent?Orisitsimply
amotivationanddeterminationwithinaperson.
ENTREPRENEURSHIPINMALAYSIA
Entrepreneurshipisacommontrendthatwecanseeinmanycountriesaround
theworld.InMalaysia,entrepreneurshipactivitieshavebeenoneofthemost
importantengineofgrowthforthepast50years.TheMalaysianRegistrarof
Companies(ROC)hasrecordedanastoundingamountofstart-ups,withthetotal
numberofcompaniesregisteredhitting766,087.Thisisinsharpcontrastto
wherewearemanyyearsago.Howdidwegethere?
1.1.1Entrepreneurship:TheRising
Areviewofhistoryclearlydepictsthattheclimbingoftheladderwasnoteasy.
TherulingofMalayabytheBritishcolonialistbackthensetthestagefor
segregatedeconomies(Figure1.2).ItisknownthattheIndianswerebroughtin
toworkinrubberplantations,whereastheChinesewereemployedattinmines
orgiventradingrightstobecomeshopkeepersandpettytraders.TheMalays
wereconfinedmainlytotheagriculturesector.Uponindependencein1957,the
threemajorethnicgroupsagreedthattheMalayswouldbegrantedspecialrights
inordertoelevatetheirstatusandcreateanequitablesociety.
1.1
TOPIC1ENTREPRENEURSHIP:ANOVERVIEWW3
Figure1.2:SegregatedeconomyduringBritishcolonialinMalaya
However,thegrowingdiscontentabouteconomicinequalitiessparkedoffracial
rioton13May1969.TheriotpavedthewayfortheinstitutionoftheNew
EconomicPlan(NEP)in1970.ThisplanfocusedonBumiputeraownershipand
partnership,improvementofBumiputeraparticipationinhighincome
occupationandsubsequently,reducingtheincomegaps.Fundamentally,NEP
becamethedrivingforcetowardstheformationoftheBumiputeraentrepreneur
community.
TheNEPwaseventuallyreplacedwiththeNewDevelopmentPolicy(NDP).The
policyfurtherstrengthenedthegovernmentendeavourinpromoting
entrepreneurialdevelopmentprogrammes.TheestablishmentoftheBumiputera
CommercialandIndustryCommunity(BCIC)andNationalEntrepreneurs
Corporation(NEC)facilitatedthenurturingofBumiputeraentrepreneurs.Since
then,numerousnewpoliciesandsupportmechanismshavebeendevelopedfor
Bumiputeraentrepreneursspecificallyandnon-Bumiputeraentrepreneurs
generally.
Figure1.3:MalaysianTechnologyDevelopmentCorporation(MTDC)was
establishedin1992
Source:http://www.mtdc.com.my/
Malay:AgricultureChinese:TinIndian:Rubber
4XTOPIC1ENTREPRENEURSHIP:ANOVERVIEW
In1992,theMalaysianTechnologyDevelopmentCorporation(MTDC)was
establishedtoaugmentthetechnicalcapabilitiesofentrepreneursbyofferingrisk
capitalforpromisingventuresandalsotechnicaladvice(Figure1.3).
Subsequently,thesettingupoftheMinistryofEntrepreneurCooperative
Development(MECD)in1995wasoneofthemostsignificantstepstakenbythe
governmenttosupportentrepreneurialinitiatives.TheMECDwasestablishedto
fostercooperationbetweenBumiputeraandnon-Bumiputeraentrepreneursin
strategicbusinessbesidescoordinatingentrepreneurialactivitiesingeneral.
From1971tolate1990s,Malaysiahastransformedfromaproducerofraw
materialsintoanemergingmulti-sectoreconomy,withstrongrelianceon
exports.However,theglobaleconomicdownturnin1997stronglyaffectedthe
Malaysianeconomy.TheGrowthDomesticProducts(GDP)increasedbyonly0.3
percentduringtheslumpand46,643workerswereretrenchedfromJuly1997to
June1998.Understandingthepredicamentofhighunemploymentrateatthat
time,thegovernmentarrangedspecialassistanceandsupportsystemsto
encourageentrepreneurshipasanalternativesourceofincomeamongthe
retrenchedworkers.
MTDCsetupfiveincubatorsinthecountrywithcollaborationofuniversitiesto
facilitateentrepreneurialstart-upsin1998.Inaddition,theMalaysian
governmentthroughtheMultimediaDevelopmentCorporation(MDC),setup
theMSCventurecapitalcompanytoprovidefinancialassistanceandadviceto
informationtechnologystartups.Astimewentby,moreeffortwasputinplace
topromoteentrepreneurialactivities.SincetheinceptionoftheSecondIndustrial
Plan,theThirdOutlinePerspectivePlan(OPP3),theEighthMalaysiaPlanupto
therecentNinthMalaysiaPlan(2006-2010),variousformsofsupportsystem
werederivedinordertoencourageentrepreneurialactivitiesinemergingsectors
suchasagriculture,manufacturing,informationandcommunications
technology.
Todate,thereare12ministriesand40governmentagenciesthatshoulderthe
responsibilityofdevelopingsmallandmediumenterprises(UtusanMalaysia,
2007).Theseagenciesprovidesupportsuchasfinancialassistance,adviceand
trainingprogramstofacilitatethedevelopmentofSMEs.Atotalof190
programmesarecurrentlyinplacetosupportthesedevelopmentinitiatives.For
instance,DevelopmentFinancialInstitutions(DFIs)weredevelopedtoprovide
financingforstrategicactivitiesasstatedabove.In2005alone,atotalofRM47.5
billionwasallocatedforfinancingpurposesa50percentincreasesince2000.
TOPIC1ENTREPRENEURSHIP:ANOVERVIEWW5
TheRoleofSmallandMediumEnterpriseBank
SMEBank(Figure1.4)wasintroducedin2005toeasethefinancialburdenof
start-upsandtoassiststart-upsinpropellingthemselvesforwardinthedomestic
andinternationalmarket.TheMalaysiaVentureCapitalistAssociation(MVCA)
providesfinancialassistanceforallstagesoffunding.BankPembangunan
MalaysiaBhdwasassignedtheresponsibilityoffinancingcapitalintensiveand
hightechnologyindustries,maritimeandinfrastructure.Additionally,women
entrepreneurshiphasbeenpromotedintensively,withtheestablishmentof
bodiessuchastheNationalAssociationofWomenEntrepreneursofMalaysia
(NAWEM).Essentially,withtheNinthMalaysiaPlan,thegovernmentismoving
atfullspeedtopromoteentrepreneurshipandachieve?Thrust1:tomovethe
economyupthevaluechain.‰
Figure1.4:ThemainbuildingofSMEbankinKualaLumpur
EntrepreneurshipinMalaysiahascomealongway.Thereareavastnumberof
industriesthatholdgreatpotentialasafertilegroundfornewventures.Thenext
sectionbrieflylistspotentialindustriesinMalaysiathatarefavourabletonew
start-ups.
6XTOPIC1ENTREPRENEURSHIP:ANOVERVIEW
Table1.1belowisasummaryofthearisingofentrepreneurshipsinMalaysia.
Table1.1:TheRiseofEntrepreneurshipinMalaysia
DatePlan/Action
Before1957BritishcolonialruleofMalayasetthestageforsegregatedeconomy
?Indians=rubberplantations.
?Chinese=tinmines.
?Malays=agriculturesector.
1957MalaysiaIndependent
?Malaysaregrantedspecialrights.
May13,1969RacialRiots
1970NewEconomicPlan(NEP)
?Bumiputeraownership.
After1970ReplacedNEPwithNewDevelopmentPolicy(NDP)
?BumiputeraCommercialandIndustryCommunity(BCIC).
?NationalEntrepreneursCorporation(NEC).
1992SettingupofMalaysianTechnologyDevelopmentCorporation
(MTDC).
1995FormationofMinistryofEntrepreneurDevelopment(MED).
1997-1998Globaleconomicdownturn:
?GDPincreasedonly0.3percent.
?44,643workerswereretrenched.
1998MTDCsetupfiveincubatorsinthecountrywithcollaborationof
universities.
MDCsetuptheMSCVentureCapitalCompany.
2005SMEBankwasintroduced.
200712ministriesand40governmentagenciesresponsiblefor
developingsmallandmediumenterprises
TOPIC1ENTREPRENEURSHIP:ANOVERVIEWW7
1.1.2EmergingIndustries
Therearemanyopportunitiesinthebusinessarenathatarewaitingtobetapped
andholdgreatpotential.Table1.2showsthemajorindustriesthatcalloutfor
newventuresbasedontheNinthMalaysiaPlan.
Table1.2:TheMajorIndustriesbasedontheNinthMalaysiaPlan
TypesofIndustryDescription
Agriculture
Revitalisedasthethirdpillarofeconomic
growthwhichleanstowardsmodernand
commercialscaleproduction.Examples:
?Aquaculture,deepseafishingand
seaweed.
?Herbs.
?Ornamentalfishandfloriculture.
?Halalproducts.
Modernisedtechnologyinoilpalmand
rubber.
Manufacturing
Applicationofhightechnologyand
productionofhighvalueaddedproducts.
Examples:
?ElectricalandElectronics.
?Petrochemical,maritime,aerospace,
heavymachinery,etc.
?Modernisedhome-basedindustrysuch
asbatik,handicraftandsoforth.
InformationandCommunications
Technology
Useofinformationandcommunication
technologiestoenhancebusinessprocess
aswellasventuringintonewICTrelated
investmentactivities.Examples:
?Informationtechnology.
?E-commerce.
?Telecommunication.
?Networking.
8XTOPIC1ENTREPRENEURSHIP:ANOVERVIEW
Table1.2(Continued)
Services
Examples:
?Aviationmaintenance,repairand
overhaul.
?Sharedservicesandoutsourcing.
?Transportandlogistics.
?Businessandprofessionalservices.
THEGLOBALSCENE
EntrepreneurshipisgrowingrapidlynotonlyinMalaysia.Theemergenceof
entrepreneurshipisalsomakingitswayintheglobalcontext.Realisingthe
potentialbenefitsofentrepreneurship,countriesaroundtheglobeareembracing
itandinitiatingprogrammesthatcouldfuelthegrowthofentrepreneurial
ventures.Listedbelowarefewexamplesthatshowtheacceptanceof
entrepreneurshiparoundtheworld:
(a)TheemergenceinChinaisonegoodexamplewheremanysmalland
mediumentrepreneurialstart-upshavegrownatasignificantratethrough
foreigndirectinvestments.SMEsinChinaaresaidtoberesponsiblefor
approximately60percentofChinaêsindustrialoutputandemploy75
percentoftheworkforceinChina.
(b)NigeriaisoneofthecountryinAfricathatinitiatenon-profitorganisations
suchastheFateFoundation.Theexistenceofthirdfoundationisto
promoteentrepreneurialactivitiestoovercomepovertyandunemployment
inthecountry.
(c)While?middle-income‰nationssuchasPeru(40.2%)tendtostartmore
entrepreneurialventurescomparedto?high-income‰countrieslike
Belgium(2.7%).
1.2
1.Giveexamplesofentrepreneurshipactivities.Reviewthe
evolutionofentrepreneurshipinMalaysiaanddiscuss.
2.Whatarethepotentialindustriesfornewventures?
SELF-CHECK1.1
TOPIC1ENTREPRENEURSHIP:ANOVERVIEWW9
(d)InthereportoftheInternationalEntrepreneurship(www.international
entrepreneurship.com)itisindicatedthatthatsincetheliberalisationofthe
economyin1990,entrepreneurshipinIndiahasgrownbyleapsand
boundsthroughinstitutionalsupports,betterinfrastructure,andtraining
providedbythegovernment.Thegovernmentefforttopromote
entrepreneurshipprimarilyinruralareaspropelledIndiatothesecond
spotintheTotalEntrepreneurshipActivity(TEA)asperGlobal
EntrepreneurshipMonitor(GEM)Report2002.
(e)InasimilarreportinIndonesia,its42.4millionSMEscontributed56.7%of
GDP,whichaccountsfor19.4%oftotalexportsandprovideemployment
for79millionpeople.
Insummary,theprevalenceofentrepreneurialactivitiesinclusiveofearly-stage
entrepreneurialactivitiesandestablishedbusinessownershipincountries
aroundtheglobeisshowninFigure1.5andFigure1.6.
Figure1.5:Earlystageentrepreneurialactivitybycountry,2006
Source:http://www3.babson.edu/ESHIP/upload/GEM_2006_Global_Report.pdf
10XTOPIC1ENTREPRENEURSHIP:ANOVERVIEW
Figure1.6:Establishedbusinessownershipbycountry,2006
Source:http://www3.babson.edu/ESHIP/
upload/GEM_2006_Global_Report.pdf
Globalisationissuchapowerfulphenomenon,withitsimpactfeltby
entrepreneurialfirmsinindustrialisedanddevelopingcountriesalike.Ithas
pavedthewayforinternationalexpansionandfurtherencouragedthenumberof
newstart-ups.Newstart-upshavetheopportunitytoexplorenewmarkets,
accesscriticalresourcesorevenestablishpartnershipswithfirmsinother
countries.Althoughglobalisationseemstobringaboutgreatexpansionand
opportunities,itisimportantforthenewventurestograspthefactthatitalso
exposesthebusinesstoincreasedcompetition.Asoundunderstandingofthe
globalmarketlaysthefoundationforimprovedperformanceintheinternational
arena.
SELF-CHECK1.2
Namevariousentrepreneurshipinitiativesintroducedbydifferent
countries?
TOPIC1ENTREPRENEURSHIP:ANOVERVIEWW11
WHYDOWENEEDENTREPRENEURSHIP?
NowthatweareawareofhowentrepreneurshiphasevolvedinMalaysia,as
wellashowitrapidlygrewglobally,wemightwonderwhyentrepreneurshipis
neededandisimportant.Figure1.7summarisesthethreemainreasonswhy
entrepreneurshipisvital.
Figure1.7:Whydoweneedentrepreneurship?
1.3
ACTIVITY1.1
1.Identifyandexplainthehistoricaldevelopmentthatleadstothe
riseofentrepreneurshipinMalaysia.
2.Discussingroup,whyglobalisationissuchapowerful
phenomenonwhichimpactisfeltbyentrepreneurialfirmsin
industrialisedanddevelopingcountriessuchasMalaysia.
12XTOPIC1ENTREPRENEURSHIP:ANOVERVIEW
1.3.1SourceofEconomicVitality
Entrepreneurshipisoftensaidtobethecatalystforanimprovedeconomic
performanceandpovertyreduction.Itcouldrejuvenatethemarketthroughthe
creationofnewbusinesseswhichpilotsjobcreationandpromotesdramatic
innovations.Fundamentally,entrepreneurshippositivelyaffectsthestrengthand
stabilityofacountryêseconomythrough:
(a)Innovation
Entrepreneursareknownfortheirnatureofchallengingstatusquoand
seizeopportunitiesthatcouldhavebeenoverlookedbyothers.Their
distinctiveideaspropelnewstart-upstomoveforwardandinjectthe
industrywithcreativeandinnovativewaysofdoingbusiness.Itcanbein
theformofnewproductsorservices,improvedbusinessprocessesor
discoveringnewmarketsforexistingproducts.Theformationofnewor
improvedbusinessesincreasesthecompetitivenessofthenationês
industriesintheglobalworldandaddsaboosttothenationêseconomy.
ThereportbyNewStraitsTimeDecember24,2008indicatedthat,small
andmediumenterprises(SMEs)contributed32percentoftheGross
DomesticProduct(GDP).
(b)Jobcreation
TheMalaysiaeconomicrecessionin1997thatledtoamassivecompanies
downsizingexercisewaslessonthatneedstobekeptinmind.The
unemploymentrateskyrocketedandretrenchedindividualswerelefthigh
anddry.Duringthatperiodofslump,entrepreneurshipmanagedto
salvagethelifeofsomeoftheseindividualsbyprovidinganalternative
sourceofincome.
Atpresent,entrepreneurshipisstillneededtocreatenewjobsinthe
economyaslargefirmsarenolongergeneratingjobsastheyonceusedto.
Largeorganisationsaredownsizingtocutcostandtoremaincompetitive.
Furthermore,jobsarebeingeliminatedthroughtheemploymentof
technologyinsteadofworkers.Entrepreneurshipisneededtocreatenew
businessesthatgeneratenewjobsintheeconomy.Forexample,inthe
reportbyUtusanMalaysia(2007)andSMEAnnualReport(2005),SMEsin
Malaysiageneratedemploymentopportunitiesfor5.6millionindividuals
andisthemajoremployerinthelabourmarket.
(c)Globalisation
Globalisationhascreatedanavenueforrevenuegenerationinaneconomy
throughexport.Globalisationhasalsocreatedmoreopportunitiesnotonly
tolargerfirmsbutalsospillovereffectstothedownstreamindustries.This
TOPIC1ENTREPRENEURSHIP:ANOVERVIEWW13
spillovereffectshavehadrelativelypositiveimpactstosmaller
entrepreneurialfirmswithinthesupplychain.Infact,thesessmallerfirms
hasbeensuccessfullysupportingthesupplychainbusinessofthelarger
multinationalcorporationsinMalaysiathroughtheconceptofvendors.
1.3.2ImprovedQualityofLife
Entrepreneursarecloselyassociatedwithinnovation.Theirinnovativenature
hasbroughtaboutthebirthofnewandimprovedproductsandservicesthat
makelifeeasier,improveproductivity,andentertaininginotherwords,
improvethequalityoflife.Forinstance,AirAsiaêsstrategyasalow-fare,no-frills
airlineinAsiawithfrequentflightsinroutesnotcoveredbymainlineoperators
hasgivenmanypeopletheopportunitytofly.
1.3.3ImpactonLargerFirms
Attemptstoremainleanandcompetitivehasnotonlycausedlargeorganisations
todownsizebuttoalsooutsource.Outsourcinginvolvesusingoutsidesuppliers
orvendorstoperformtaskthatareotherwiseperformedinternally.Forexample,
largefirmsmayoutsourcetheproductionofcomponentswhichwilllaterbe
assembledintoproductsthelargefirmsmanufacture,tosmallerentrepreneurial
firms.Essentially,entrepreneurialfirmsareneededtoperformthesetaskand
contributetotheeffectivenessoflargerfirms.
SELF-CHECK1.3
1.Whyisentrepreneurshipdeemedimportanttooureconomy?
2.Thinkofotherexamplesthatshowhowentrepreneurship
improvesthequalityoflife.
3.Entrepreneurialfirmshaveapositiveimpactonlargerfirms.Do
youagree?Explain.
14XTOPIC1ENTREPRENEURSHIP:ANOVERVIEW
WHATISINITFORME?
Itisundeniablethatentrepreneurshipplaysacrucialroleinthedevelopmentofa
nationandbettermentofthesociety.However,thequestiontoponderis?What
isinitforme?‰
Onethingyouneedtobearinmindisthatlargeorganisationsarenolonger
providingthejobsecuritytheyusedto.Therefore,youneedtoprepareyourself
toventureoutintothelabourforceonyourownandestablishyourfuture.
Learningthenuancesofentrepreneurshipandmasteringthoseskillswill
definitelycomeinhandywhenyouintendtostartyourownventure.
Entrepreneurialventuresalsoallowyouampleroomtopursueyourownideas.
Independentinexecutingyourcreativeideasandreapingthebenefitfromitis
possibleinyourownentrepreneurialstart-up.Inanutshell,youareyourown
boss!
?EntrepreneurshipinMalaysiahasgrownandwillcontinuegrowingwiththe
financialandadvisorysupportprovidedbytheGovernment.
?EntrepreneurshipwasgivenaheadstartinMalaysiawiththeinceptionofthe
NewEconomicPlan(NEP).
?Agriculture,manufacturing,servicesandinformationandcommunication
technologyaretheemergingindustriesthatholdgreatpotentialfornew
start-upsinMalaysia.
?Entrepreneurshipisthedrivingforceforeconomicperformancethrough
innovation,jobandwealthcreation,andincreasedincomethroughexport
activities.
1.4
VisitSMEInfoathttp://www.smeinfo.com.my/.Reviewthe
programmes,assistanceandsupportsystemsavailableforSMEsin
Malaysia.Discussiftheseinitiativesaresufficientforthedevelopment
ofSMEs.Provideyoursuggestionsonhowcanweimprovethe
supportsystemsforSMEsinMalaysia?
ACTIVITY1.2
TOPIC1ENTREPRENEURSHIP:ANOVERVIEWW15
?Entrepreneurshipisinnovationinthemarketplacethatpromotesthe
establishmentofhigh-growthfirms.
?Anentrepreneurêscreativeendeavourcreatesnewandimprovedproducts
thatbringsaboutbusinessgrowth,improvementinproductivity,jobcreation,
enhancedeconomyandbetterqualityoflife.
?Entrepreneurialfirmprovidesupportservicestolargeorganisationsthatseek
tooutsourcetheirproductionorotherinternaltaskssuchasresearchand
development.
EconomicvitalityLargefirms
EntrepreneurshipGlobalisation
InnovationOutsource
JobcreationQualityoflife
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