Developing a frameworkof success of Bumiputera

entrepreneursFirdaus Abdullah, Jamil Hamali, Abdul Rahman Deen,

Gluma Saban and Abg Zainoren Abg AbdurahmanUniversiti Teknologi MARA, Sarawak, Malaysia

Abstract

Purpose – Entrepreneurship in developing countries is arguably the least studied significant economicand social phenomenon. Previous studies focused on describing the attributes of entrepreneurship ratherthan providing a framework, in which entrepreneurs and policy makers alike can rationally plan andexecute innovative business models. Current issues facing Malaysian entrepreneurs include low level oftechnology, lack of innovation through research and development, low working capital, and of highlydomestic orientations. This led to a lack of resilience and efficiency among the entrepreneurs, thusrendering them ill-equipped to compete globally. This adverse scenario is increasingly apparent amongBumiputera (Native of Malaysia) entrepreneurs as the growth of entrepreneurial activity has not been intandem with the pace of the overall development of the nation. Hence, this study seeks to identify factorsleading to success and failure so that Bumiputera entrepreneurs can prevent failure by correctingproblems, and appreciate what it takes to succeed. Ultimately, a framework of success is proposed as acomprehensive tool to enhance their survival in a competitive global economy.

Design/methodology/approach – A survey instrument was used, and a total of 1,500 Bumiputeraentrepreneurs participated, covering all the states in Malaysia.

Findings – The findings confirmed that eight factors are vital to the success of Bumiputeraentrepreneurs. In rank order of importance, these factors are advancement drive, achievement oriented,commitment, decision-making ability, managing risk, tenacity, networking, and optimism. As for thefactors leading to the failure of Bumiputera entrepreneurs, inability to compete, lack of competency andcapital, customer-related problems, employee-related problems, unfavourable economic conditions,bureaucracy, supplier discrimination, and negative community attitudes were found to be crucial.

Originality/value – The paper develops a framework to aid the success of Bumiputera entrepreneursin Malaysia.

Keywords Malaysia, Entrepreneurs, Entrepreneurship

Paper type Research paper

IntroductionMalaysia’s post-independence economic success has been variously explained. Somehave attributed it to public policy and governance, while others seem to concur thatprivate sector entrepreneurs contributed significantly to the growth. Small andmedium-sized enterprises (SMEs) characterize the efforts of Malaysia’s present dayentrepreneurs. The importance of SMEs in Malaysia is ever more significant asMalaysia increases the pace of industrialization in meeting future challenges. Some ofthe developmental issues currently faced by SMEs in Malaysia range from low level oftechnology and innovation, low research and development capability, lack of workingcapital to over dependence on the domestic market. This resulted in inadequate marketresearch, unattractive packaging and labeling of products, inefficient promotion andcampaign as well as poor product quality, hence unable to compete globally.

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/1750-6204.htm

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Journal of Enterprising Communities:People and Places in the GlobalEconomyVol. 3 No. 1, 2009pp. 8-24q Emerald Group Publishing Limited1750-6204DOI 10.1108/17506200910943652

It is acknowledged that SMEs are the backbone of Malaysia’s long-term industrialdevelopment programme. Recognising the vital role that entrepreneurship plays,Malaysian government has implemented various strategic initiatives and programs toprovide the necessary support and create a climate in which these enterprises can thrive. Inmany aspects, the effort of the government has borne fruit and Malaysia as a nation hasseen unprecedented development and economic advancement over the last decade.Unfortunately, the growth in Bumiputera entrepreneurial activity has not been in tandemwith the pace of the overall development of the nation. This is evident by the lowBumiputera equity ownership of 18.9 percent in 2005, falling short of the targeted30 percent equity ownership by 2020.

A study commissioned by Perbadanan Usahawan Nasional Berhad (Bernama, 2006)found that indiscipline and poor integrity were the key factors contributing to the failure ofBumiputera entrepreneurs in their business. Similar study also indicated that about13 percent of the entrepreneurs have failed in their business for the five year period from2000 to 2005. If the problems contributing to this current state are not understood properlyand remedial actions are not undertaken, Malaysia may face both economic and socialconsequences that could be detrimental to its long-term industrial development programme.Hence, this study attempts to identify critical success factors so as to create more resilient,efficient, and successful businesses of Bumiputera entrepreneurs. The study also providesappropriate suggestions to the relevant authorities for the purpose of developing effectiveplans to enhance the development of Bumiputera entrepreneurs in Malaysia.

Therefore, this study attempts to:

(1) identify critical success factors of Bumiputera entrepreneurs;

(2) establish the relative importance of the critical success factors;

(3) identify key factors contributing to the failures of Bumiputera entrepreneurs; and

(4) develop a framework of success for Bumiputera entrepreneurs.

Target population comprised of 1,500 Bumiputera entrepreneurs, selected from a total of13,181 Bumiputera entrepreneurs registered with their respective trade associations andcovering all the states in Malaysia. Data had been collected for the period between June andNovember 2006, and the sampling was stratified based on the state, sector and gender.

Research foundationIn most developing countries, small scale industries which is characterized byentrepreneurship, have assumed a critical role in industrialization and economicdevelopment. The literature has recorded a magnitude of social and economic benefitscontributed by small firms, both in the developed and developing countries. Anobservation was made in the 1990s global economic depression that while the largeindustries were retrenching their workers, small industries on the other hand, managed tosustain their production and employment and recurred faster. Small firms by then wereseen as vehicle for employment generation and economic recovery in most of the countries.

The economically advanced countries where problems and constraints are less if notnegligible compared to the developing economies are experiencing a great positiveimpact of small firms’ contributions to their economic growth. The culture ofentrepreneurship has already deeply rooted in their society. However, the positiveimpact of small firms on economic development varies depending on environmental

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conditions prevailing in the society and the extent of influence of such conditions toentrepreneurial activity. The level of entrepreneurial activity differs significantlybetween countries due to some factors like social, government policies and programmesdesigned to support start-ups, education, and training for entrepreneurship.

Considered as one of the growth engines for a nation – creating jobs, inventions anddiversity, entrepreneurship is a process of starting a business venture, organizing thenecessary resources and assuming the associated risks and rewards. Nonetheless, therehas been no consensus among researchers as to the exact meaning of entrepreneurshipand the role of entrepreneurs. Carland et al. (1984) for instance argued thatentrepreneurship could be defined in terms of innovative behavior allied to a strategicorientation in pursuit of profitability and growth; Gartner (1989) defined it as thecreation and management of new business and the characteristics and special problemsof entrepreneurs; while Hisrich and Peters (1992, p. 6) suggest it is the process of“creating something different with value by devoting the necessary time and effort,assuming the accompanying financial, psychological, and social risks and receiving theresulting rewards of monetary and personal satisfaction”. More specifically, Amit et al.(1993), define entrepreneurship as the process of extracting profits from new, unique,and valuable combinations of resources in an uncertain and ambiguous environment.

There have been a number of empirically-based researches to describe the attributesof entrepreneurship in terms of traits, social psychological and behavioral approaches.The trait-based perspective has predominated and continued to be applied where itfocused on the personality or psychological make up of the individual entrepreneurs.The social psychological perspective defines those external factors that act as potentialstimulant to entrepreneurial activity and this approach places entrepreneurship withinthe wider social environment. Behavioral approach meanwhile focuses onunderstanding attitudes, behaviors, management skills and know-how, pastexperience combine in determining entrepreneurial success.

There have been several studies which seek to identify the critical success factorsfor businesses. It is important to define these factors since business owners areconcerned about the chances for success while at the same time a country usuallydepends upon information relative to the success or failure of businesses formaintaining a stable economy (Gaskill et al., 1993). The present study is focused moreupon the success of businesses, however; failure data were also mentioned to indicatehow this data can be translated into survival information, and to discuss discrepanciesin the existing data. It is a fact that failure and success are somewhat bound together,even though at opposite ends of a continuum.

The most commonly cited personal characteristics of owners/entrepreneurs that hadbeen suggested by the majority of authors as key success factors were summarized byZimmerer and Scarborough (1998) and Dollinger (1999). These attributes include needfor achievement, locus of control, propensity for taking risk, desire for responsibility,future orientation, tolerance for ambiguity, knowledge, experience, skill at organizing,reputation, tenacity (commitment to work, long working hours, persistence, high level ofenergy, flexibility, willingness to work), trust, credibility, leadership, self-confidence,capable of sustained intense effort, personal values, and accountable.

In addition to the personal characteristics of the entrepreneur, several demographicfactors of entrepreneurs had also been indicated to have some positive effects on businesssuccess. They are age, gender, education, marital status, race, education, experience in the

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business or prior experience, and had previous training (Hand et al., 1987). In sum, the corecharacteristics of successful entrepreneurs who are often described as conscientiousindividuals value self-control, highly achievement oriented, ambitious, and persistent.

Generally, there is no accepted list of variables distinguishing business success andfailure. However, it is argued that the two most commonly stated variables that seem tomake the difference are capital and management experience. On a macro-economiclevel, it was found that external factors such as sale tax rates, infrastructureexpenditures, university research and expenditure amounts, credit market conditionsand outstanding corporate debt significantly influence business failure rates (Chen andWilliams, 1999). The literature also provides evidence that the absence of successfactors may also contribute to business failure.

Research design and methodologyBoth the focus group interviews and questionnaire survey were used as the mainapproaches for data collection. The various steps involved in the study are shown bymeans of the flow chart in Figure 1. In particular, the study attempts to qualitativelydetermine the critical factors contributing to the success and failures of Bumiputeraentrepreneurship, and to incorporate the qualitatively generated determinants into aLikert-type instrument. The survey instrument was then administered to a sampleconsisting of Bumiputera entrepreneurs. The instrument used for this study wasdrawn from a three-stage process involving extensive review of literature and previousstudies, focus group and personal interviews, and validation by the experts (leadingentrepreneurs, policy makers, and academics).

The process begins by undertaking a literature search to ascertain previous works inthe field, and this involves in depth searching of the literature to identify critical factorsleading to the success and failures of entrepreneurship. Next, a series of focus groupmeetings was undertaken to obtain a more comprehensive picture of the importance andrelevancy of these factors. A total of nine carefully selected groups from different zonesin Malaysia were invited to participate in the focus groups. The focus groups consistingof 8-10 participants were drawn from Bumiputera entrepreneurs in the respective zones.A facilitated discussion around a set of questions led by a team of consultants, whereparticipants were asked to identify a series of relevant factors leading to the success andfailures of Bumiputera entrepreneurship.

The literature review of previous studies together with the outcome of focus groupdiscussions provided the basis for generating items for inclusion in the draft questionnaire.The draft questionnaire was piloted to an approximately 40 Bumiputera entrepreneursfrom Sarawak. Findings from the pilot sample were empirically tested for reliability toensure consistency and stability of the questionnaire instrument. Additionally, validitycheck was conducted to confirm that the instrument correctly represents the concept ofstudy. Finally, the revised instrument was fine-tuned based on the comments andsuggestions from eight carefully selected experts comprising leading entrepreneurs, policymakers, and academics. The final survey includes a total of 1,500 sample respondents. Themultistage sampling procedure was used for the study where the entrepreneurs werestratified according to states, followed by industrial sectors, and gender. Data werecollected by enumerators monitored by trained coordinators in their respective states. Thepopulation of this study is defined as Bumiputera entrepreneurs in Malaysia. Table I showsthe distribution of the sample according to the states.

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A nation wide survey covering all the states was carried out and the results were usedfor three major purposes:

(1) deriving the success factors for Bumiputera entrepreneurs statistically;

(2) reporting the business performance of the surveyed Bumiputera entrepreneurs,their main reasons for venturing into business, the ranking of the successfactors as perceived by the entrepreneurs, as well as factors that contribute totheir business failures; and

(3) proposing the framework for business success.

Figure 1.Stages in developing theframework of success forBumiputera entrepreneurs

Development of survey instrument:

• Draft questionnaire• Pilot test• Expert validation

Identification of critical factors of Bumiputera entrepreneurship:

• Literature review• Focus group & personal interviews

Survey

Determining the Critical Comparative Index (CCI)and ranking of the success factors

Exploratory factor analysisDeriving the success factors statistically

Confirmatory factor analysisConfirming the success factors derived statistically

Reliability test

Determining constructvalidity for thesuccess factors

Proposed framework of success forBumiputera entrepreneurs

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Exploratory factor analysis (EFA) is a process of evaluating the “belongingness” of theitems to certain factors in the construct. If the instrument is said to be dimensionallysound, those items should only measure the factors that they belong to and not anyother factors. Some researchers classify dimensionality under content validity arguingthat dimensions are a part of the content of a construct while some others broadlygroup them under construct validity (Sureshchander et al., 2002). If the factor for theconstruct is supported by a sound theory and the researcher has a reasonably goodknowledge of the number of factors and the items, then a confirmatory factor analysis(CFA) is used to test the dimensionality.

In this study, both the EFA and CFA were used. Prior to the exploratory factoranalysis, a reliability test was performed to check the consistency of the items.The item-total correlation was used to filter items that were deemed inconsistent.Items with an index greater than 0.4 were considered for factor analysis (Nunnally,1963). A total of 14 items from the original 90-item list were dropped. The exploratoryfactor analysis was used to identify the success factors of Bumiputera entrepreneurs.The principal component analysis was used as the extraction method to identify thefactors. Items with factor loadings less than 0.3 were deleted and the remaining itemswere subjected to the second round of the EFA. The factors were rotated using theVarimax rotation method with Kaiser normalization while the extraction method usedwas maximum likelihood. The EFA revealed that there are eight factors that explainthe success of Bumiputera entrepreneurs.

The CFA was used to confirm whether the items actually belong to the factors forwhich they are theoretically designed (Sureshchander et al., 2002). The CFA was performedby carrying out path analysis using structural equation modeling. In this procedure,the number of factors and the items loading to each factor were specified and thehypothesized measurement model was then tested for model fit. The result shows that thehypothesized model has an overall good fit (x 2/df ¼ 2.56, GFI ¼ 0.89, CFI ¼ 0.902,RMSEA ¼ 0.043). From the result, it is evident that the respective items indeed belong tothe construct as hypothesized (Figure 2). Therefore, it can be concluded that the successfactors for Bumiputera entrepreneurs in business can be generalised into eight majordimensions:

State Planned sample Actual respondents Response rate (percent)

Johore 100 99 99Kelantan 100 100 100Kuala Lumpur 200 68 34Sarawak 200 80 40Melaka 100 72 72Negeri Sembilan 100 84 84Perak 100 68 68Perlis 100 80 80P.Pinang 100 26 26Sabah 100 91 91Selangor 100 82 82Kedah 100 27 27Pahang 100 49 49Total 1500 926 61.7

Table I.The distribution of the

sample

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Advancement drive. Advancement drive refers to the internal force for continuousbusiness improvement. Specifically, it concerns with the importance placed by theentrepreneurs in expanding the business, striving to improve past performance,networking for business development, getting along with people that they work with,and having high level of self confidence.

Achievement oriented. Achievement oriented relates to the ability of entrepreneursto know how they are progressing as businessmen, and the belief that they canovercome challenges. It is also associated with their ability to concentrate in corebusiness, and to use that strength to compete.

Commitment. Commitment relates to entrepreneur having a strong determination insolving business-related problems and improving their business performance. It alsorefers to the entrepreneurs’ dedication in completing their work as planned.

Decision-making ability. This dimension refers to the entrepreneurs of beinginnovative, able to solve business related problems effectively, confronting differencesin opinion openly and converting problem in business into opportunities. It also relatesto their ability to anticipate the outcome of major decision making, and knowing when,where and how to seek help that will eventually help them in winning competition.

Managing risk. Managing risk refers to the ability of entrepreneurs to strive to bethe pioneer in the industry, set realistic goals, manage risk by researching andassessing relevant risk factors, and expand business gradually. It also relates to theirability in using available resources efficiently and being consistently aware of theirstrength and weaknesses.

Figure 2.Framework of success forBumiputera entrepreneurs

Achievement Oriented

Commitment

Decision Making

Tenacity

Networking

Optimism

Managing Risk

Advancement Drive

Financial ManagementEffective Marketing

Capital StrengthStrategic LocationSupportive BusinessPartnersBeing CompetitiveFamily business backgroundCooperation from others

Business Success

Inte

rnal

fac

tors

Ext

erna

l fac

tors

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Tenacity. Tenacity describes entrepreneurs’ capacity to work hard and strive to bethe best in their field. It also refers to the entrepreneurs’ ability to complete the task ontime, continuously monitor business trends and strive to achieve higher profit.

Networking. Networking describes entrepreneurs’ ability in building anddeveloping excellent networking and interpersonal skills, and sensing of businessopportunities. It also relates to one who has developed good network.

OptimismOptimism relates to the entrepreneurs’ belief that they can manage and sustain highlevel of performance through effective planning. This dimension also refers to theirconfidence in performing their job, determining their own business success, and thefeeling of being superior.

The internal-consistency was used to evaluate the consistency of the responses foreach item within the dimension. The Cronbach Alpha values for the variousdimensions of the instruments are shown in Table II. The alpha values (greater than0.7, Nunnally, 1978) show that all the eight dimensions recorded high reliabilityindicating that all the items consistently measure the respective dimensions.

In face validity the operationalization of a certain construct is assessed as towhether it gives a clear meaning of the construct to the respondents. This isestablished qualitatively through panel validation or focus group. In this study, faceand content validity was established through thorough review of the literature and thefocus groups discussions. Furthermore, the final questionnaire was evaluated by agroup of experts mainly to check the various success factors and the specific itemsmeasuring these factors. The concept of convergent validity refers to the degree ofpositive relationships among the dimensions that make up the construct. According toNarver and Slater (1990), if the constructs exhibit convergent validity, then thereshould be a strong correlation between the dimensions that form the construct. In thisstudy, the convergent validity was established by using the correlation analysisbetween the success factors of Bumiputera entrepreneurs (Table III).

The correlation coefficient values ranged from 0.507 to 0.745. This indicates thatthere exists a moderate positive relationship between the eight success factors:achievement oriented, advancement drive, tenacity, commitment, networking,decision-making ability, managing risk, and optimism. This provides strong evidencethat all the eight dimensions explain the success of Bumiputera entrepreneurs.

Concurrent validity refers to the ability of the construct to distinguish betweengroups that they are theoretically able to differentiate (Sekaran, 2000; Trochim, 2004).In this study, the concurrent validity was established by using the independent sample

Success factors of Bumiputera entrepreneurs Cronbach alpha values

Achievement oriented 0.816Decision-making ability 0.788Managing risk 0.831Optimism 0.754Commitment 0.720Advancement drive 0.778Tenacity 0.759Networking 0.705

Table II.Summary of thereliability index

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15

Su

cces

sfa

ctor

sA

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vem

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orie

nte

dA

dv

ance

men

td

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ing

Dec

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ilit

yM

anag

ing

risk

Op

tim

ism

Ach

iev

emen

tor

ien

ted

10.

677

0.65

10.

578

0.53

70.

571

0.68

60.

606

Ad

van

cem

ent

dri

ve

0.67

71

0.69

00.

612

0.63

20.

584

0.74

50.

662

Ten

acit

y0.

651

0.69

01

0.59

20.

507

0.51

70.

701

0.63

2C

omm

itm

ent

0.57

80.

612

0.59

21

0.54

30.

534

0.59

10.

653

Net

wor

kin

g0.

537

0.63

20.

507

0.54

31

0.63

70.

627

0.62

4D

ecis

ion

mak

ing

abil

ity

0.57

10.

584

0.51

70.

534

0.63

71

0.67

20.

647

Man

agin

gri

sk0.

686

0.74

50.

701

0.59

10.

627

0.67

21

0.66

5O

pti

mis

m0.

606

0.66

20.

632

0.65

30.

624

0.64

70.

665

1

Note:

All

val

ues

are

sig

nifi

can

tat

the

0.01

lev

el(t

wo-

tail

ed)

Table III.Correlation coefficientsbetween the successfactors

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t-test, comparing the differences in “success factors of Bumiputera entreprenuer” and“performance of Bumiputera entrepreneurs”. The t-values show that there aresignificant differences between the two groups for all the eight factors. This providesevidence for convergent validity, in other words the eight success factors are able todifferentiate the high and low performing entrepreneurs. Table IV displays the resultsof the t-tests comparing the various success factors for the two groups.

The purpose of the discriminant validity is to differentiate the eight success factors fromother variables, and it was established using correlation analysis between the successfactors and external variables. High correlation among the eight success factors and lowcorrelation with external variables are indicators of discriminant validity (Table V).

The results provide evidence that the correlations between the eight success factors andthe external variables are relatively low compared the correlations within the eight successfactors (the value ranges from 0.507 to 0.745). This shows that there is discriminantvalidity, the eight success factors identified are different from external factors.

Dimensions of success factor External variables

Achievement oriented 0.217Advancement drive 0.235Tenacity 0.205Commitment 0.134Networking 0.269Decision-making ability 0.253Managing risk 0.315Optimism 0.173Achievement oriented 0.217

Note: Values are significant at a ¼ 0.01 (two-tailed)

Table V.Correlation analysis

indicating discriminantvalidity

Success factors Performance N Mean SD t-value

Achievement oriented High 530 4.304 0.514 7.59Low 332 4.036 0.499

Advancement drive High 531 4.362 0.493 6.71Low 332 4.132 0.481

Tenacity High 531 4.398 0.504 6.69Low 332 4.165 0.487

Commitment High 531 4.365 0.501 7.02Low 332 4.125 0.467

Networking High 531 4.135 0.494 7.90Low 332 3.852 0.536

Decision-making ability High 531 4.010 0.528 7.79Low 332 3.733 0.478

Managing risk High 531 4.228 0.465 7.45Low 332 3.985 0.463

Optimism High 531 4.297 0.473 7.73Low 332 4.046 0.450

Table IV.T-test indicating

convergent validity

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Other success factorsApart from determining the success factors statistically, other factors that may havecontributed to the success of Bumiputera entrepreneurs were also gauged. An open-endedquestion was used to solicit these factors. A total of 503 responses were received, whichconstituted 57.4 percent of the total number of respondents. Specific items identified fromthese responses were grouped into common factors. A total of 25 factors were initiallyidentified and from these 14 factors were dropped either due to low frequency or has beenconsidered in the earlier analysis. Table VI shows the other success factors qualitativelyderived: effective marketing strategies, support and cooperation from others, strong capitalbase, strategic location, being competitive, effective financial management, religiousvalues, supportive business partner, family business background, Bumiputera status.

Failure factorsThrough an open ended question, the respondents were asked to indicate the key factorsthat they perceived to have contributed to their business failures or setbacks. A total of479 responses were received. Both content and interpretive analyses (Erlandson, 1993)were conducted on each of the responses and the specific items identified from theseresponses were grouped into common factors. A total of 13 factors were identified.Table VII shows these failure factors.

Other success factors Frequency Percentage

Effective marketing strategies 148 23.0Support and cooperation from others 113 17.6Strong capital base 34 5.3Strategic location 24 3.7Being competitive 15 2.3Effective financial management 14 2.2Religious values 11 1.7Supportive business partner 7 1.1Family business background 4 0.6Bumiputera status 2 0.3

Table VI.Other success factors

Failure factors Frequency Percentage

Inability to compete 129 26.93Lack of capital 78 16.28Employee related problems 39 8.14Customer related problems 37 7.72Economic conditions 35 7.31Poor management competency 33 6.89Government related problems 30 6.08Unwilling/unable to take risk 24 5.01Community attitude 23 4.80Bureaucracy 19 3.97Supplier related problems 11 2.30Dishonesty 11 2.30Lack of experience 11 2.30

Table VII.Failure factors

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Inability to compete. Respondents stated that they were unable to compete eitherbecause the competition was too intense or because of unfair tactics. Source ofcompetition included bigger local business, new businesses and foreigners particularlythose from neighboring countries who were able to offer cheaper goods and services.

Lack of capital. This is supported by the findings of Shieh (2005) who found that themain reasons for shortage of capital were high degree of reliance on their own limitedresources as initial capital, difficulties in obtaining loan from commercial banksand financial institutions, pressure to extend credit to customers and the associatedproblems of bad debts as well as the shortage of internal funds due to low levels of profit.

Employee related problems. Problems identified by the respondents included lack ofexperience and skill, poor attitude, dishonesty and indiscipline. They also experiencedproblems because of high turnover and the unavailability of skilled labor.

Customer related problems. Amongst the problems encountered include the difficultyin finding customers because they lacked the trust and confidence in Bumiputerabusinessmen. Other customer related problems involve collecting payments from thecustomers, lacking customer focus, and having too narrow customer base.

Economic conditions. These are external factors beyond the control of the entrepreneurand they include economic recession, catastrophic events, regulatory and environmentalrequirements.

Poor management competency. Most studies have attributed business failures tothis factor. Strategic planning, control and financial management were identified as themajor areas of weaknesses.

Government related problems. These include poor dissemination of information, latepayment, inappropriate policies and difficulty in getting government aid. Respondentsalso cited bureaucratic officials as a major hindrance in their business.

SuggestionsApart from the closed ended questions, the respondents were also asked to providesuggestions on how to enhance the success of Bumiputera entrepreneurs. Majority of therespondents stated that the success of their business can be enhanced through businessexpansion and development, government assistance and support, personal commitmentand involvement, and effective marketing and promotion. Table VIII summarizes thesuggestions.

Conclusion and recommendationsThis study has determined two categories of success factors. The principal successfactors are those that have been derived using statistical technique while the othersuccess factors were those that were derived through qualitative analysis ofopen-ended responses. The emphasis for the proposed framework of success is on theprincipal success factor as they have been statistically validated. The principal successfactors for Bumiputera entrepreneurs in business can be grouped into eight majordimensions in rank order: advancement drive, achievement oriented, commitment,decision making ability, managing risks, tenacity, networking, and optimism.

Qualitatively determined other success factors in order of emphasis are effectivemarketing strategies, support and cooperation from others, strong capital base, strategiclocation, being competitive, effective financial management, religious values, supportivebusiness partner, family business background, Bumiputera status. The most

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emphasized factors are effective marketing strategies and support and cooperation fromothers. Effective marketing strategies refer to offering unique and quality products andservices, managing customer relation and satisfaction, effective promotion, andmaintaining customer loyalty. Support and cooperation from others includes familymembers, society, government agencies, suppliers and employees.

The study also identified the factors contributing to the failure of Bumiputeraentrepreneurs which were derived qualitatively through open-ended responses. Amongthe commonly stated factors in order of emphasis are: inability to compete, lack ofcompetency and capital, customer-related problems, employee-related problems,unfavourable economic conditions, bureaucracy, supplier discrimination, and negativecommunity attitudes.

RecommendationIn order for Bumiputera entrepreneurs to be successful in business, they should cultivatepositive characteristics as explained by the success factors in rank order, namelyadvancement drive, achievement oriented, commitment, decision-making ability,managing risks, tenacity, networking, and optimism. Advancement drive refers to theinternal force for continuous business improvement. Achievement oriented relates to

Suggestions Frequency Percentage

Expanding and developing business 130 20.2Obtaining government assistance and support 79 12.2Enhancing personal commitment and involvement 62 9.6Effective marketing and promotion 52 8.1Offering variety of product and services 42 6.5Increasing employees competency and professionalism 36 5.6Improving product and service quality 34 5.3Strengthening business capital 33 5.1Investing in new technologies 19 2.9Improving business processes 19 2.9Seeking new opportunities 14 2.2Enhancing networking 13 2.0Being creative and innovative 12 1.9Satisfying customer 11 1.7Seeking financial support from private institutions 11 1.7Effective financial management 9 1.4Increasing competitiveness 9 1.4Improving production efficiency 9 1.4Monitoring market trends 8 1.2Observing religious values 7 1.1Managing and taking risk 6 0.9Seeking strategic location 6 0.9Improving customer relationship 5 0.8Obtaining suppliers support 5 0.8Joining trade association 4 0.6Effective planning 3 0.5Exchanging and sharing of information 3 0.5Engaging in joint venture 2 0.3Seeking support from family and community 2 0.3

Table VIII.Suggestions from openended question

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the ability of entrepreneurs to know how they are progressing as businessmen, andthe belief that they can overcome challenges. Commitment relates to entrepreneurhaving a strong determination in solving business-related problems and improving theirbusiness performance. Decision-Making Ability refers to the entrepreneurs of beinginnovative, able to solve business related problems effectively, confronting differencesin opinion openly and converting problems in business into opportunities.

Likewise, managing risk refers to the ability of entrepreneurs to strive to be thepioneer in the industry, set realistic goals, manage risk by researching and assessingrelevant risk factors, and expand business gradually. Tenacity describes entrepreneurs’capacity to work hard and strive to be the best in their field. It also refers to theentrepreneurs’ ability to complete the task on time, continuously monitor businesstrends and strive to achieve higher profit. Networking describes entrepreneurs’ ability inbuilding and developing excellent networking and interpersonal skills, and sensing ofbusiness opportunities. Optimism relates to the entrepreneurs’ belief that they canmanage and sustain high level of performance through effective planning.

In addition, government and relevant parties should also recognize the importanceof these eight success factors and therefore, play an important role in developing thesepositive characteristics among entrepreneurs. There is a need to build confidence andchange the expectation and cultural mindset of Malaysians towards becoming moreentrepreneurial. This would require collective action from both government and thepeople. The following are various initiatives aimed at cultivating and strengtheningthe positive characteristics:

. Developing entrepreneurial spirit.

. Developing mentoring relationship through Mentor-protege program.

In addition to having the positive characteristics of successful entrepreneurs, attentionshould also be given to develop the following:

. effective marketing strategies through participation in marketing-relatedprograms, seminars, and conferences;

. support and cooperation from others through networks and linkages withgovernment, private, and social groups and agencies;

. strong capital base by improving their credit worthiness;

. strategic location by analyzing government and public sectors developmentplans and programs;

. competitiveness by acquiring knowledge and skills to understand the businessenvironment and trends; and

. effective financial management through participation in finance-relatedprograms, seminars, and conferences.

In addition entrepreneurs should also recognize the importance of religious values,supportive business partners, strong family business background, and advantages ofhaving Bumiputera status in enhancing their business success. The governmentshould look into reviewing its current policies and revise if necessary to make it moreconducive to the needs of entrepreneurs as well as encourage other individuals to

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follow the same path of business success. In particular, the government’s role indeveloping successful Bumiputera entrepreneurs can be achieved through:

. development and enhancement of government support systems in providingservices to the entrepreneurs;

. provision of consultancy and advisory services to Bumiputera entrepreneursparticularly in the first five years of business;

. selection of candidates for entrepreneurship development programs based on thepresence of the eight success factors;

. development of training programs designed to nurture the eight success factors;and

. development of tailor-made programs for the benefit of ethnic minority amongBumiputera entrepreneurs.

Policy makers should overcome a misconception typically suffered by most governmentagencies – that they are bureaucratic. Entrepreneurship development agencies haveto cease emphasis only on growing firms that have potential. If SMEs are underthe impression that the government is only picking winners, they may not seek toutilize the infrastructure. An alternative means to foster entrepreneurship would beto create business counselors who could come from established SMEs or large firms toshare their experience and provide advisory services to nascent entrepreneurs. This willenable individuals desiring to be entrepreneurs to engage in self-directed learning fromthe experienced counselors. While there are management consultants who could adviceSMEs, not all SMEs and entrepreneurs can afford their rates.

To meet the challenges of global economic environment, it is recommended that avirtual center should be established with the purpose of offering entrepreneurs theadvantages that traditional support structures for small businesses lack. A center to beknown as Virtual Center for Entrepreneurs (VCEs) should facilitate the entrepreneur’sability to obtain expert assistance through the mechanism of an electronic community ornetwork and it should minimize some of the issues of geography that plaguedisadvantaged and small firms. Entrepreneurs should be ready to take up all thenecessary actions in order to prevent a business failure. Businesses rarely fail suddenly:failure is a gradual process which usually involves a downward spiral. However,sometimes failure results from ambitious expansion plans not accompanied by theappropriate level of finance. It should be stressed that entrepreneurs should have aproactive approach, taking the necessary actions as soon as financial problems becomeapparent. While, external causes of business failure cannot always be predicted withaccuracy in advance, the overwhelming majority of factors leading to failure are precededby premonitory signs of insolvency. Therefore, entrepreneurs should be trained to detectand identify warning signs in good time.

Advice from professionally qualified financial accountants should be soughtregularly, beginning at the start up phase, and continuing through all the stages ofbusiness life. Entrepreneurs need to be aware of the benefits of acquiring basicfinancial management skills to take advantage of any opportunities of growth and toanticipate any threats to the survival of the business, reacting to them promptly.Where the financial statements of the company are audited, the entrepreneur will havea higher level of assurance that the company’s financial information provides a sound

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basis for economic decisions. Independent audit is also a deterrent against fraud andincreases the likelihood that any frauds committed will be detected.

Entrepreneurs should consider monitoring of business performance and planning,together with a subsequent gap analysis between actual and budget, as regularactivities. Benefit can be drawn from the financial statements when they are comparedto other statistics, such comparisons are the essence of why business and financialratios are developed. The monitoring of such indicators can help in taking appropriateand prudent decisions related to investment and loan finance. Finally, other efficienttools to avoid business failure in an SME can be borrowed from the organizationalstrategies of larger companies, adapting them to the specific needs of SMEs.

Finally, in order to be successful, we propose that the following framework be adoptedby Bumiputera entrepreneurs. Although the comprehensive framework incorporates bothinternal and external factors, emphasis should be placed on the eight success factors asthey have greater bearing on the success of Bumiputera entrepreneurs. The use of thisframework needs to be complemented by the efforts of relevant parties in areas such asengaging business counselors, strengthening incubator development, establishing virtualcenter for entrepreneurs, and providing relevant training programs.

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Further reading

Beaver, G. (2003), “Small business: success and failures”, Strategic Change, Vol. 12, pp. 115-22.

Becherer, R.C., Halstead, D. and Haynes, P. (2001), “Marketing orientation in SMEs: effect of theinternal environment”, Journal of Research in Marketing and Entrepreneurship, Vol. 3No. 1, pp. 1-17.

Bewley, T.F. (1989), Market Innovation and Entrepreneurship: A Knightian View, CowlesFoundation Discussion Papers 905, Cowles Foundation, Yale University, New Haven, CT.

Canadian Foundation for Economic Education (1996), “Catching the wave: framework for youthentrepreneurship success, CFEE, Ontario”.

Daft, R. (2000), Management, 5th ed., The Dryden Press, Fort Worth, TX.

Drucker, P.F. (1985), Innovation and Entrepreneurship, Harper, New York, NY.

European Federation of Accountants (2004), “Avoiding business failures: a guide for SMEs’”, FEE,Brussels.

Filley, A. and Pricer, R. (1991), Growing companies: Tools for small-business success, MagnaPublications, Inc., Madison, WI.

Flora, B.C. and Jan, L.F. (1993), “Entrepreneurial social infrastructure: a necessary ingredient”,ANNALS, AAPSS, Vol. 529, pp. 48-58.

Kirzner, I.M. (1985), Discovery and the Capitalist Process, University of Chicago Press, Chicago, IL.

Low, K.C.P. (2006), “Cultural obstacles in growing entrepreneurship: A study in Singapore”,Journal of Management Development, Vol. 25 No. 2, p. 169.

Noor, I. (2006), “Malaysian management review”, Development Concerns, Needs andExpectations of Small Entrepreneurs, available at: http://mgv.mim.edu.my/MMR/8308/830803.htm

Sapienza, H.J. (1991), “Comets and duds: characteristics distinguishing high and low performinghigh potential ventures”, Frontiers of Entrepreneurial Research, p. 124.

Shonesy, L. and Gulbro, R.D. (2005), “Small business success: a review of the literature”, availableat: www.sbaer.uca.edu/research/1998/ASBE/98asb040.txt (accessed August 25, 2005).

Turner, C. (2002), Lead to Success: Creating Entrepreneurial Organizations, Texere Publishing,New York, NY.

Corresponding authorFirdaus Abdullah can be contacted at: dr_firdausabdullah@yahoo.com

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