Entrepreneurs success factors and Escalation of small and medium-sized enterprises in Malaysia.

Author:Rose, Raduan Che
 
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Abstract: This research aims to identify the success factors of founding entrepreneurs in Malaysia contributing to their companies' venture growth. Specifically this study was initiated to examine the relationship between venture growth and the following factors, namely personal initiative, human capital, areas of focus on competency and government support programs. From this research, it has been made clear that a large number of entrepreneurs affirmed personal initiative as one of the major key to success. Entrepreneurs with high personal initiative will naturally overcome the disadvantages nor weaknesses in them with their self-starting and proactive attitude. The study found that the entrepreneurs' education level, working experience and whether their parents own business have a positive relationship with their success. The research has also provided a clear indication as to which area of competency the entrepreneurs should focus on. On the whole the findings of this study serve as a guideline for founding entrepreneurs to succeed in their attempt to achieve superior venture growth.

Key words: Entrepreneur, personal initiative, human capital, competency, government support programs, venture capital, Malaysia

INTRODUCTION

Small and medium enterprises (SMEs) are important to the development of Malaysia's economy and unemployment issue. According to Dun and Bradstreet [1], SMEs should be the main focus for developing nations. The 2000 Census by the Malaysian Department of Statistics (DOS) enumerated 89.8% of the 20,455 establishments in the manufacturing sector and 96.8% of the 192,527 establishments in the services sector were SMEs. There is a shift from a managerial to an entrepreneurial economy as thousands of new businesses being created each year hoping to grow into large enterprises [2]. Therefore, ensuring the survival and venture growth (VG) of the Malaysian SMEs is crucial. Many studies have been done on SMEs' growth and the key success factors contributing to VG, yet only 10% of these start-ups survived beyond the 10 years mark. 79,310 businesses discontinued in Malaysia during the year 2002 [3], as most were unable to cope with the transition from an entrepreneurial style of management to an organized, professionally managed workforce and as a result, not being able to capitalize on further market opportunities [4].

Several studies found that founding entrepreneurs should be replaced by professional managers, whom are able to manage organizational growth better [5]. On the contrary, Willard, Krueger and Freeser [6] found that founding entrepreneurs could have the competencies to perform equally well as professional managers. Entrepreneurs who have the necessary competencies especially in the area of operations, finance, marketing, human resources and management skills required for the business are more likely to be successful at startup [7-9]. Bruno, Leidecker and Harder [10] showed that a major reason business venture fall short was managerial problems and this view was supported by Ibrahim and Ellis [11] and Landesberg and Edmunds [12] who attribute the vast majority of business failures in the formative years to managerial shortcomings. Literatures revealed that competency are positively related to companies at VG, nevertheless such studies have been greatly researched mostly developed countries and not extensive in developing countries, furthermore, one was found pertaining Malaysia. From the literatures review on factors such as personal initiative (PI), human capital (HC), competency, social networking skill and government support (GS) in relation to VG, this research aims to examine the following questions:

* Does the high PI factor of successful founding entrepreneurs contribute to their success in VG?

* Does the high level HC of the successful founding entrepreneurs contribute to their success in VG?

* Do successful founding entrepreneurs focus on different area of competencies in order to successfully manage their companies at VG?

* Are successful Malaysian entrepreneurs of growing enterprises utilizing any of the local government-support programs and are the programs beneficial for VG? If not, what are the reasons for not using these programs?

Research method: The target population for this study is Malaysia E-50 winners for the year 1997 to 2003. Enterprise 50 (E-50) is an annual award program organized by the Small and Medium Industries Development Corporation (SMIDEC), Malaysia [13]. This award recognizes the achievements of Malaysia's enterprising homegrown companies which are well positioned for the future. 50 winners are selected from among the nominations received and the evaluation is based on the companies' management and financial performance. From the 350 winners in the Enterprise 50 list, there are only 252 unique companies as they are repeated winners. A letter was sent to all 252 founding CEOs requesting for their participation. However, only 100 of them managed to participate in this study. Interviews and self completion questionnaire was utilized to collected data for this study. Interviews were conducted with all the participants particularly to collect information pertaining to personal initiative. The interviewer has a standard category for the answers as per the original study of personal initiative proposed by Frese and Fay [14] and Frese et al. [15,16].

Questionnaires were delivered to all participants prior to accomplishing the interviews. Literature review and feedback from the panel of experts provides inputs for the development of research questionnaire. The pilot study further refines the questionnaire prior to finalization. The Cronbach's Alpha values for all the items were well above the commonly acceptable value of .70. The questionnaire was divided into five sections. The first section collected data pertaining to human capital, whereby the participants were asked to indicate their level of education, whether family owned the business, length of work experience prior to owning business and length of managerial experiences prior to starting the business. The second section measures competencies which are divided into two types: functional competencies and interpersonal competency. There are four functional competencies--finance, operations, marketing and human resources. Interpersonal competency is specifically associated to social network support. Participants were asked to respond on a five-point scale; (1) being no emphasis and (5) being major and constant emphasis for each of the five competencies they focused while managing growth. The questions are similar to Lussier and Pfeifer [17] and Yusuf [18]; however, for the purpose of this study additional questions relevant to the various competencies were added. The third section focused on government support programs. Questions asked were whether the entrepreneurs are aware of the availability of such programs and if so, are they utilizing these programs and whether there are any difficulties faced in obtaining assistance of these programs. Dichotomous 'yes' or 'no', multiple choices and open ended questions were used in this section.

The dependent variable is the venture growth level. Venture growth is measured by annual sales growth. To measure sales growth, the participants...

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