24 March 2016

Are we doing enough to foster entrepreneurship?

By Dr Voon Mung Ling

The Global Entrepreneurship Monitor (GEM) 2013, a global study of national entrepreneurship performance, found that Malaysia was one of the few economies in the Asia Pacific where the government offers generous funding and physical infrastructure to support entrepreneurship. Strong internal market dynamics and quality support services mean that young entrepreneurs here enjoy good opportunities, reflected in the high rate of opportunity-driven entrepreneurship — those starting businesses to pursue an opportunity.

Despite this, however, the country’s total early stage entrepreneurial activity rate was the second lowest in the region. ? What this means is that the proportion of young people intending to start a business and holding positive attitudes towards entrepreneurship is very low. Less than seven per cent of new businesses expected to hire more than 20 workers, and close to 84% saw themselves creating less than five jobs. The GEM report attributed the dismal rate of business start-up among Malaysians to the lack of entrepreneurial education in primary and secondary schools, cumbersome regulations (taxes and bureaucracy), poor R&D transfer, and market openness. These weaknesses stifle innovation, and the lack of entrepreneurial abilities and skills hamper start-up sustainability and profitability.

If, as the GEM report suggests, public investments in policies and programs have not yielded returns, the local entrepreneurship ecosystem needs to be evaluated in order to identify and address the barriers and create opportunities for entrepreneurship. The entrepreneurship ecosystem, a cluster of individuals, organisations and institutions that influence entrepreneurship, plays a significant role in entrepreneurial success, according to former Harvard Professor Daniel Isenberg. A supportive ecosystem is characterised by a conducive culture, enabling policies and leadership, availability of appropriate finance, quality human capital, and venture-friendly markets for products. Isenberg stressed that each entrepreneurship ecosystem is unique, shaped by the historical and socio-economic conditions of a country, and it is not possible to take one country’s ecosystem and blindly apply it to another.

The entrepreneurship ecosystem in Malaysia comprises three key stakeholders: government, industry and universities. But what is the ideal role of each stakeholder?

Role of government. Historically, the government has adopted an interventionist approach in developing the economy, driving export-oriented industrialisation with foreign direct investment. This stimulated rapid economic growth in the early 1990s. In Sarawak, the entrepreneurship ecosystem evolved in the 1980s fuelled by booming timber, oil and gas industries, high political stability and high levels of educational attainment. In the last decade, the state government has actively promoted private investment in the Sarawak Corridor of Renewable Energy (SCORE), focusing on a broad range of energy-intensive manufacturing and processing industries. More recently, the Pan-Borneo Highway Project has opened up rural lands.

The state government has set clear policy agenda and prioritised specific industries through SCORE based on local conditions. According to Isenberg, government should grow existing industries and build on their foundations, skills and capabilities, rather than attempt to launch high-tech industries from scratch. Furthermore, programs should offer support to the most deserving entrepreneurs, that is, those with the most growth potential and financially sound, profitable and well-managed. In other words, government policies should encourage sustainable, growth-oriented businesses, instead of simply fostering more start-ups.

Role of companies. Usually, at the heart of an entrepreneurship ecosystem are several large, well-established businesses that nurture and provide commercial opportunities for smaller businesses. Having the resources to recruit graduates, large businesses can develop skills and expose them to technological know-how. Some may leave to start their own companies, and many successful entrepreneurs started off by supplying their former employers. This type of collaboration benefits the branding of start-ups, gives them access to a large pool of customers and often, direct investment. For example, the timber-based conglomerates in Sarawak have successfully diversified into shipping, plantation, real-estate development and hospitality.

Role of universities. By convention, universities fulfil the traditional mandates of teaching and research. Only recently have universities demonstrated a readiness to promote entrepreneurship, which takes the form of faculty-level research and education programs to foster entrepreneurial attitudes, behaviour and skills, and collaboration with industry. Through these activities universities generate new knowledge, build reputation and attract funding from alumni, corporate bodies and government.

These activities have created a new style of university. An entrepreneurial university actively promotes and engages in creating new value, and an entrepreneurial academic engages with industry partners. However, a recent research by Swinburne University of Technology Sarawak Campus on academic-industry engagement found that less than 40% of academics from private universities and foreign university branch campuses collaborate with industry partners in teaching, research or business creation.

The low level of engagement will likely impact entrepreneurial skills development. Academics must work with experienced entrepreneurs to develop curriculum that either simulates entrepreneurship or engage students in the experience of entrepreneurship. For example, projects may require students to work in concept testing, product development, marketing and financing, and to interact with entrepreneurs and funders.

Sustained development of the entrepreneurship ecosystem requires close collaboration among the government, industry and universities. It is hoped that as Sarawak embarks on the next phase of industrialisation, the stakeholders in the entrepreneurship ecosystem will be proactive in growing businesses that are competitive, not only in the domestic market, but also abroad.

Dr Voon Mung Ling is a lecturer with the Faculty of Business and Design at Swinburne University of Technology Sarawak Campus. She is contactable at mvoon@swinburne.edu.my