Description
With this brief illustration relating to motivation and factors influencing successful performance of malay entrepreneurs in langkawi island.
Available online at www.globalilluminators.org
GlobalIlluminators FULL PAPER PROCEEDING
Multidisciplinary Studies
Full Paper Proceeding ITMAR -2014, Vol. 1, 393-405
ISBN: 978-969-9948-24-4
*All correspondence related to this article should be directed to Salleh, N.H.M, Faculty of Economics and Management, Universiti
Kebangsaan Malaysia
43600 Bangi Selangor, Malaysia
Email: [email protected]
© 2014 The Authors. Published by Global Illuminators. This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/)
Peer-review under responsibility of the Scientific & Review committee of ITMAR-2014.
ITMAR-14
Motivation And Factors Influencing Successful Performance Of Malay
Entrepreneurs In Langkawi Island, Malaysia
Salleh, N.H.M
1*,
Darawi, Z
2
, Mamat, M.N
3
, Mardzuki, K
4
, Shukor, M.S
5
, Samsudin, M
6
1,2,4,5
Faculty of Economics and Management, Universiti Kebangsaan Malaysia
43600 Bangi Selangor,
3
Malaysia, Faculty of Finance & Economics, College of Business Management and Accounting,
Universiti Tenaga Nasional, Malaysia,
Abstract
This study attempts to investigate the factors that motivate the Malay community to beinvolvedin business at
the Langkawi Island. Generally,the Malays’ businesses arealwayslimited to small food industries serving the
domestic market. However, due to the development of Langkawi Island as a tourism destination,abundance of
opportunitieshad been created for the local community. Besides the motivation factors, this paper addresses the
factors that affect entrepreneurial performance. The approach of this study is through face to face survey of 250
respondents; comprised of operators of the accommodation, transportation, services, wholesale, retail and the
restaurant sub-sectors. This study finds that the most important factors that motivate the Small and Medium
Malay Entrepreneurs (SMMEs) to venture in business are own initiative (64.8%), family encouragement
(15.6%) and opportunities as well as training facilities offered to the community (6%). Meanwhile, the factors
influencing the SMMEs’performance are the factors of business management skills and risk management skills.
Hence, this research concludesthat in order to enhance the success of SMMEs in their business activities, the
skills in managing the business and risk need to be improved.
© 2014 The Authors. Published by Global Illuminators . This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/)
Peer-review under responsibility of the Scientific & Review committee of ITMAR-2014.
Keywords: Entrepreneurs, Langkawi Island, motivation factors, successful performance, Small and Medium
Malay Entrepreneurs.
Introduction
The ethnic Malays who generally lived in rural areas and engaged in peasant
agriculture have lagged in reaping the benefits of economic development, let alone business
opportunities emanating from globalisation. Majority of the Malay owned business entities
are small and medium Enterprises (SMEs). Other ethnics, especially the Chinese, are well
ahead of the Malays in commerce, trade and high technology industries. The involvement of
Malay businesses hasalways been limited to the small food industries serving the domestic
market(Yep Puteh, 1985).In light of thecurrent state of quandary ofthe Malays’ involvement
in business, it is important to inculcate the young with entrepreneurship acumen in order to
develop future creative and knowledgeable Malay society.
Salleh, N.H.M./ITMAR-2014/Full Paper Proceeding/Vol-1,393-405
International Conference on Innovative Trends in Multidisciplinary Academic Research ” (ITMAR- 2014)
394
The island of Langkawi in Kedah is a good laboratory to study the development and
progress of Malay entrepreneurship. This island had been predominantly a rural areawith
agricultural backgroundwith little business opportunities serving only the basic needs of the
society, until the government declared the island as a tax free zone in 1986. This had opened
up the island to trading opportunities for the Malay enterprises following to the development
of tourism industry at the island. This paper seeks to identify the factors that encouraged the
Malays in Langkawi and those who originated elsewhere to venture into businesses as well as
to identify the factors that influence successful performance of their business (thereafter, we
shall refer as the Small and Medium Malay Entrepreneurs - SMMEs). As Langkawi is now
famous for its tourism industry, this study therefore focuses on accommodation, transport,
wholesale, retail, services and the restaurant sectors.
The organization of this paper is as follow: the literature review, a brief background
of Langkawi Island, methodology, the discussion on empirical results; and followed by the
policy implication and conclusion.
Literature Review
The Malays who have lagged behind in commerce and industry since the beginning
require a transformation from their predominantly agrarian origin to a more modern setting.
However, this transformation is time ordered (Bryers, 1984). This transformation is a process
where change occurs from being a traditional agrarian society where land control is
predominant, to an integrated agrarian-industrial society (Bonnett and Furnham, 1990).The
social transformation involves the interrelationship between ecology, technology,
demographic and cultural factors. Presently, many relatively successful Malay businesses
inherit their businesses, or the entrepreneursare from family with business
background(Hashim et al., 2009).The other advantageis their prior knowledge and experience
obtained through previous occupation. Management skill is also an important factor in
influencing the performance of entrepreneurs (Lee and Lim, 1997).Those who can manage
and execute their plans well had generally succeeded in gaining good profit and firm growth.
The Malays however could not afford to follow this time-ordered transformation
process which may take a long time. This is because this translates into a considerable length
of time to catch up with those who are already in the commerce and industry sectors. In order
to short-circuit this process, Malay entrepreneurs could not afford the trial and error path in
order to succeed, but to follow the established path for entrepreneurial accomplishment.
Knowledge, attitude, self-motivation, capital, and business ethics practiced by entrepreneurs
are the essential ingredients to entrepreneurial success (Zakariaet al., 2000).
In addition, planning towards achieving business goal is an additional factor for
success (Mamat, 2009).The lack of satisfaction in the current achievement is also an active
ingredient for further success because it provides the incentive to explore the future , see
opportunities and threats; and therefore anticipate outcomes. With such long-sightedness,
they are able to plan ahead and reposition their firms accordingly.
Brief Background Of Langkawi
The Langkawi Island is located north of the Straits of Malacca in the northern region
of West Malaysia. It had a population of 103,075 people in 2009. The Island was declared a
Salleh, N.H.M./ITMAR-2014/Full Paper Proceeding/Vol-1,393-405
International Conference on Innovative Trends in Multidisciplinary Academic Research ” (ITMAR- 2014)
395
tax free island in 1986; and this marked the rapid transformation of its population from an
agrarian society to a modern society. The policy changehad also induced the birth and
expansion of tourism and theancillary industries. The economy was transformed from a
predominantly rural and agriculture- based economyto urban society, led by the service
industry to cater for the influx of local and international tourists.
Services industry refers to the tourism industry in Langkawi, and this includes the
accommodation, travel agencies, transport, catering and retail sectors. With the development
of Langkawi as a tourist destination, Malay entrepreneurs have joined themainstream
development. They began to venture into other kinds of business and are no longer trapped in
the business of only providing food to local residents.
Thus, we can conclude that, by the development of Langkawi Island as a tourism
destination, the Malay community has the opportunity to be involved in tourism industry
through their participation in businessesas entrepreneurs. It is only right thatthe development
of tourism industryto incorporate the local community. Development of tourism industry is
meaningless if it is not able to reduce the economic gap in local community. This problem
always occurs in tourism location that does not involve the participation of local
communities. According to study conducted by Taylor (1995), he found that community
involvement in the current development of tourism industry is often regarded as the key to a
stable development (sustainable). Moreover,communities are expected to share some of the
benefits (such as employment and income growth) and cost reduction (due to low wages)
among them.
Therefore, there is a need for community participation in the mainstream
development. Entries will not only increase the income of the tourism industry itself, but
more importantly, to spread the benefits to the local communities (McCool & Martin 1994;
Salleh et al. 2011). In the long term, this will indirectly guarantee the sustainability of their
lives and enable them to be independent in the mainstreamdevelopment of the tourism
industry (Clayton, 1998).
Figure 1: Research framework of Motivation and Successful Performance Factors of
The Small and Medium Malay Entrepreneurs
Salleh, N.H.M./ITMAR-2014/Full Paper Proceeding/Vol-1,393-405
International Conference on Innovative Trends in Multidisciplinary Academic Research ” (ITMAR- 2014)
396
Research Framework And Methodology
Study framework can be described as follows. From Figure 1, it appears that the
declaration of Langkawi as a tax free zone in 1986 has transformed its economic activities
from that of agriculture-based, to services-based. The services sector in the Langkawi Island
is most related to tourism industry. Development of tourism industry in Langkawi Island has
created business opportunity among the Malays in Langkawi Island.
Based on Figure 1, this paper seeks to identify: i) factors that motivate the Malays to
venture into business, and ii) the factors that affect/influence the success of SMMEs’
businesses.
Research Methods
This study was conducted in several major business areas in Langkawi namely Kuah
Town, Padang Mat Sirat, Ayer Hangat, Ulu Melaka, Kedawang and Bahor. Face to face
interview using questionnaires as the instrument has been conducted for this study with a
total of 500 respondents. Statistical Package for Social Science (SPSS) and Analysis of
Moment Structures (AMOS) were used to analyze this study.
Sampling design emphasised on the demographic profile of SMMEs in Langkawi.
The questionnaire had been designed based on previous studies in order to achieve the two
objectives of this study. Descriptive analyses using the SPSS were used to determine the
frequency distribution of various variables of the demographic profile as well as the
motivation factors. Meanwhile,the AMOS software was utilised in the analysis of the factors
influencing the success of the underlying business.
There are 35 items of independent variables (based on the theories that have been
discussed in previous studies) that have been developed as an item in the constructs of this
study which are: family background (5 items), business management skills (5 items),
leadership skills (5 items), analytical skills (5 items), networking (5 items), and support from
institutions/government (5 items). Response from business operators are based on a 10-point
Likert scale.
Results And Discussions
The discussion of empirical results will be in the following this sequence: profile of
respondents (SMMEs), profile of business, the motivation factors, and analysis of factors that
influence the successof the business.
Profile of Respondents/SMMEs
Salleh, N.H.M./ITMAR-2014/Full Paper Proceeding/Vol-1,393-405
International Conference on Innovative Trends in Multidisciplinary Academic Research ” (ITMAR- 2014)
397
Based on Table 1, about 59.62% respondents are men while woman makes up 40.4%.
Most of the respondents are between the ages of 36-45 old, commanding 36.2% of total
respondents. Most of them are married and have children (85.8%). Majority of the
respondents are natives of Langkawi, at 64%. On the education level, it is found that most
are at least with education up to the secondary level (58.8%) and only 12.0% completed their
education up to the diploma level. Additionally, about 81.6% considered business as their
primary occupation. Majority of the respondents earned a monthly income of between RM1,
000 and RM6, 000.
Profile of Business
Most Malay businesses in Langkawi are relatively small sole proprietors with hired
labour of between 1-10 workers. Generally, the start-up capital is from their personal savings.
Majority of the entrepreneurs begin their business after the year 2000, which is after the
declaration of the tax free zone with an average capital of slightly more than RM10,000, refer
Table 2.
Table 1:
Respondent Demographic Profile
Information Item Total Percentage (%)
Gender Male
Female
202
298
40.4
59.6
Age
> 25 years old
26 – 35 years old
36 – 45 years old
46 – 55 years old
Above 55 years old
40
133
181
98
48
8.0
26.6
36.2
19.6
9.6
Race Malay
India
Chinese
Siamese
Others
473
12
1
13
1
94.6
2.4
0.2
2.6
0.2
Marital Status
Married
Single
Widow/widower
54
429
17
10.8
85.8
3.4
Residents of origin Yes
No
320
180
64.0
36.0
Education Level
No formal education
Primary school
Secondary school
Diploma
Degree
25
94
298
47
36
5.0
18.8
49.6
9.4
7.2
Business as main job Yes
No
408
92
81.6
18.4
Income > RM1000
RM1000-RM2500
RM2501-RM3500
115
128
87
23.0
25.6
17.4
Salleh, N.H.M./ITMAR-2014/Full Paper Proceeding/Vol-1,393-405
International Conference on Innovative Trends in Multidisciplinary Academic Research ” (ITMAR- 2014)
398
RM3501-RM4500
RM4501-RM6000
RM6000-RM10000
RM10001-RM15000
RM15001-RM20000
Above RM20000
38
66
37
12
6
11
7.6
13.2
7.4
2.4
1.2
2.2
Table 2:
Profile of Business
Information Item Frequency Total Percentage
(%)
Year of
business
operates
1. Before 1987
2. 1987-2000
3. After 2000
28
142
330
5.6
28.4
66.0
Business
operation
Full times 0
1-10
11-20
21-30
More than 30
201
281
11
4
3
40.2
56.2
2.2
0.8
0.6
Part time 0
1-10
11-20
More than 30
394
104
1
1
78.8
20.8
0.2
0.2
Venture
Capital
1. Personal savings
2. Financing from banks
3. Loan from spouse/family/relative
4. Amanah Ikhtiar Mara
5. Illegal money lender
6. Others
421
106
93
40
1
55
84.2
21.2
18.6
8.0
0.2
11.0
Annual Net
income
1. Below 1,000
2. 1001-2500
3. 2501-3500
4. 3501-4500
5. 4501-6000
6. 6001-10000
7. 10000-15000
8. 15000-20000
9. More than 20000
68
95
55
35
54
65
44
15
69
13.6
19.0
11.0
7.0
10.8
13.0
8.8
3.0
13.8
Table 3:
Items Motivation Factors
Item Total Percentage
(%)
1. family encouragement
2. encouragement from friends
3. own initiative
78/500
30/500
324/500
15.66
6.0
64.8
Salleh, N.H.M./ITMAR-2014/Full Paper Proceeding/Vol-1,393-405
International Conference on Innovative Trends in Multidisciplinary Academic Research ” (ITMAR- 2014)
399
4. religious factors
5. loss of employment
6. training opportunities and facilities provided
7. the declaration of Langkawi Island as a duty free
island
8/500
10/500
30/500
20/500
1.6
2.0
6.0
4.0
Motivation Factors
Table 3 shows the factors that influence the SMMEs in participating in business. The
factors are family encouragement, encouragement from friends, own initiative, religious
factors, loss of employment, training opportunities and facilities provided, and the
declaration of Langkawi Island as a duty free island in 1987. From this evaluation, their ‘own
initiative’ factor is the major factor stimulating their involvement in business activities. This
factor showed that they are ready to face future challenges and trials. The second factor is
family encouragement. Family gives them the encouragement to be more enthusiastic.
Analysis of factors that influencing the success of business
The Analysis of Moment Structures(AMOS) had been used in this study in order to
determine the factors that influence business performance among the SMMEs.Based on
AMOS, some tests / analyseshave been performed on the data obtained from the survey,
which include the mean analysis, reliability test, validity test and the test of research
hypothesis.
Mean Analysis
Table 4 shows the mean analysis of 7 constructs, which are the determinants of
successful SMMEs. From this table, it appears that five constructs are with high mean (mean
value exceeds 5.000); which are the business management skills, leadership, risk
management skills, networking and environment.Meanwhile, mean valuesof below 5 are
obtained from the constructs of family background and the role/support by the government
and institutions.
Table 4:
Analysis Mean of the Items/Variables
Items/Variables Mean Std.
Deviation
Total
Mean
FAMILY BACKGROUND 4.988
1. Origin – Poor family 7.38 3.08
2. Family entrepreneur – encouraged / inherit attitude 4.24 3.68
3. Family entrepreneurs – businesses networking 3.75 3.60
4. Majority of family members are engaged in business 4.44 3.70
5. Exposure by family/parents 5.14 3.80
BUSINESS MANAGEMENT SKILLS 7.888
1. Could anticipate/forecast the future performance of the
business
7.91 2.15
2. Aware/know about the financial and capital of business 8.38 1.97
3. Consider/aware of the employees’ needs/welfare 7.57 3.20
4. Have business niche 7.94 2.32
Salleh, N.H.M./ITMAR-2014/Full Paper Proceeding/Vol-1,393-405
International Conference on Innovative Trends in Multidisciplinary Academic Research ” (ITMAR- 2014)
400
5. Always ready enter to new market 7.64 2.92
LEADERSHIP SKILLS 7.587
1. Able work in team and manage the team 8.26 2.49
2. Independent in doing business and highly self confident 6.21 3.43
3. Able to interact with employees 7.60 3.13
4. Ensure staff follow all the instructions 7.54 3.12
5. Have leadership characteristics 8.34 2.23
RISK MANAGEMENT SKILLS
8.379
1. Seeking risk as a business opportunity 8.50 2.04
2. Willingness to take big risks in business 8.23 2.27
3. Ability to analyze the business 8.23 2.05
4. Understanding of the potential of the underlying
business
8.46 1.87
5. Use the power of business opportunities in the market 8.48 1.91
NETWORKING 7.595
1. Have a lot of connections in the business world 8.12 2.44
2. Business partnership gives a healthy competition 7.60 2.56
3. Have a good relationship and have non-Malay
connections
7.51 2.86
4. Connections with the non-Malay influence the business 6.75 3.22
5. Have a trusted business networking 8.00 2.38
GOVERNMENT/INSTITUTIONAL SUPPORT 4.231
1. Training to improve the skills of entrepreneurship 3.73 3.49
2. Facilities, infrastructure and government support are
helping the business
4.07 3.57
3. Training and workshops that enhance business
knowledge
4.24 3.66
4. Access to information related to government regulations 4.91 3.71
5. Business support/assistance from the state 4.21 3.63
ENVIRONMENTAL FACTORS / HISTORICAL
FACTORS IN LANGKAWI
7.097
1. T he status of Langkawi as tourism destination
encourages to venture into business
8.00 2.79
2. Attitude and culture of the Langkawi community which
are business-oriented have encouraged others to venture
into business
6.94 3.24
3. Inherit from the previous generation – traders
communities
6.80 5.31
4. Encouraged by the previous traders communities in
Langkawi
6.43 3.32
5. Encouraged by the economictransformation in
Langkawi
7.31 3.07
From Table 4 also, it is found that risk management is the most important construct
that influences the success of SMMEs’ business (8.379). All items for the construct of risk
management also obtained high mean, such as seeking risk as a business opportunity (8:50),
willingness to take big risks in business (8:23), the ability to analyze the business (8:23),
understanding of the potential of the underlying business (8:46 ) and use the power of
business opportunities in the market (8:48).
Salleh, N.H.M./ITMAR-2014/Full Paper Proceeding/Vol-1,393-405
International Conference on Innovative Trends in Multidisciplinary Academic Research ” (ITMAR- 2014)
401
Meanwhile, the construct with less influence on the performance of SMMEs is the
institutional or government support (4.231). All the items for institutional or government
support also recorded low mean values such as: training to improve entrepreneurship skills
(3.73), facilities, infrastructure and government support are helping the business (4:07),
followed by training and workshops that enhance business knowledge (4:24), access to
information related to government regulations (4.91) and business support/assistance from
the state (4.21). Test results showed that the government supports are still low and need more
attention in the future in order to improvethe SMMEs’ performance, see Table 4.
Reliability and Validity Test
Table 5 below shows the validity of the item/variable for each construct. The validity
test in this study is based on factor analysis, which refers to exploratory factor analysis (EFA)
and confirmatory factor analysis (CFA). The analyses were conducted by utilizingthe AMOS
5 package. Based on the analysis, the factor loading for each item/variable should be equal to
or greater than 0.6 (Hair, et al. 1998). The results of the test, several items were
removed/eliminated from the established model since they do not meet the required values.
The Cronbach Alpha reliability test (CA) shows that the values of all items/variables
are between 0.847 and 0.979. Thus, these show that all items/variables have a very strong
correlation to their own construct as suggested by Hair et al. (2007).From Table 5, majority
of the study’s items support the established constructs.
Table 6 indicates the results of data confirmation through the utilization chi-square
and values of the index. These values were obtained after evaluating the factor loading. The
purpose of evaluation on the value of factor loading is to ensure that the factor loading
satisfies the acceptable value. If the value does not measure up to the acceptable value, then
the said item/variable will be eliminated. High value of factor loading will increase the value
of fit index and, thus deemed the model acceptable.
For the chi square ( ) test, the results of the test found value of 10563.996, with 435
degree of freedom and statistical significance of 0.00. This indicates that there is no
significant difference between the predicted, and real models. Nonetheless, the value of the
said exceeds 2. Past researchers proposed that if this happens, then other fit indices need to
be employed in measuring the fit model; among which are the goodness-of-fit index (GFI),
adjusted goodness-of-fit index (AGFI), parsimony goodness fit index (PGFI), normalized fit
index (NFI), comparative fit index (CFI), root mean square residual (RMSR) and root mean
square error of approximation (RMSEA) (Hair, et al, 2007; Arbuckle and Wothke, 1999).
The results of the fit indices are: GFI (0.857), AGFI (0.829), PGFI (0.715), TLI (0.917), and
NFI (0.892). Thus, as the all values exceed 0.700, then the proposed model fits with the
collected data(Joreskog and Sorbom, 1989).
There are also other alternative indices that can be utilized to evaluate fit model,
namely the RMSEA and CFI. Study results found that RMSEA and CFI have a value of
0.062 and 0.926, respectively. This alternative fit index of CFI shows that the structure of
model is acceptable and the data fit the model.
Salleh, N.H.M./ITMAR-2014/Full Paper Proceeding/Vol-1,393-405
International Conference on Innovative Trends in Multidisciplinary Academic Research ” (ITMAR- 2014)
402
As a conclusion, in this study, clearly the researchers utilized other indices, in
conjunction with the chi square test because large sample size will tend to produce large chi
square value (>2.0). The fit model tests utilized in this study are GFI, AGFI, PGFI, TLI, NFI
as well as CFI and RMSEA.
Table 5:
Measurement Properties of Variables
Loadings Cronbach ?
FAMILY BACKGROUND 0.882
1. Origin : Poor Family X
2. Family Entrepreneur – Encouraged / Inherit Attitude 0.681
3. Family Entrepreneurs – Businesses Networking 0.636
4. Majority Of Family Members Engaged Business 0.913
5. Exposure By Family/Parents 0.943
BUSINESS MANAGEMENT SKILLS 0.979
1. Could Anticipate/Forecast The Future Performance Of The Business 0.650
2. Aware/Know About The Financial And Capital Of Business 0.722
3. Consider/Aware Of Employees’ Needs/Welfare X
4. Have Business Niche 0.799
5. Always Ready Enter To The New Market 0.633
LEADERSHIP SKILLS 0.969
1. Able Work In Team And Manage The Team X
2. Independent In Doing Business And Highly Self Confident X
3. Able To Interact With Employees 0.976
4. Ensure Staff Follow All The Instructions 0.962
5. Have Leadership Characteristics In Business X
RISK MANAGEMENT SKILLS
0.935
1. Seeking Risk As A Business Opportunity 0.770
2. Willingness To Take Big Risks In Business 0.799
3. Ability To Analyze The Business 0.870
4. Understanding Of The Potential Of The Underlying Business 0.924
5. Use The Power Of Business Opportunities In The Market 0.917
NETWORKING 0.875
1. Have A Lot Of Connections In The Business World 0.786
2. Business Partnership Gives A Healthy Competition 0.771
3. Have A Good Relationship And Have Non-Malay Connections 0.759
4. Connections With The Non-Malay Influence The Business 0.642
5. Have Trusted Business Networking 0.813
GOVERNMENT/INSTITUTIONAL SUPPORT 0.900
1. Training To Improve The Entrepreneurship Skills 0.788
2. Facilities, Infrastructure And Government Support Are Helping The
Business
0.846
3. Training And Workshops That Enhance Business Knowledge 0.775
4. Access To Information Related To Government Regulation 0.842
5. Business Support/Assistance From The State 0.722
ENVIRONMENTAL FACTORS / HISTORICAL FACTORS IN
LANGKAWI
0.847
1. The Status Of Langkawi As Tourism Destination Encourage To Venture
Into Business
0.717
Salleh, N.H.M./ITMAR-2014/Full Paper Proceeding/Vol-1,393-405
International Conference on Innovative Trends in Multidisciplinary Academic Research ” (ITMAR- 2014)
403
2. Attitude And Culture Of The Langkawi Community Which Are
Business-Oriented Have Been Encourage Others To Venture Into
Business
0.826
3. Inherit From The Previous Generation – Traders Communities X
4. Encouraged By The Previous Traders Communities In Langkawi 0.824
5. Encouraged By Economic Transformation In Langkawi 0.681
Table 6:
Goodness of Fit Indices of Measurement Model and the Structural Model (N = 333)
Criteria Indicators of SEM
X
2
Test
X
2
/df
0.700
>0.700
>0.500
>0.700
>0.700
0.857
0.829
0.715
0.917
0.892
Alternative indices
CFI
RMSEA
>0.900
With this brief illustration relating to motivation and factors influencing successful performance of malay entrepreneurs in langkawi island.
Available online at www.globalilluminators.org
GlobalIlluminators FULL PAPER PROCEEDING
Multidisciplinary Studies
Full Paper Proceeding ITMAR -2014, Vol. 1, 393-405
ISBN: 978-969-9948-24-4
*All correspondence related to this article should be directed to Salleh, N.H.M, Faculty of Economics and Management, Universiti
Kebangsaan Malaysia
43600 Bangi Selangor, Malaysia
Email: [email protected]
© 2014 The Authors. Published by Global Illuminators. This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/)
Peer-review under responsibility of the Scientific & Review committee of ITMAR-2014.
ITMAR-14
Motivation And Factors Influencing Successful Performance Of Malay
Entrepreneurs In Langkawi Island, Malaysia
Salleh, N.H.M
1*,
Darawi, Z
2
, Mamat, M.N
3
, Mardzuki, K
4
, Shukor, M.S
5
, Samsudin, M
6
1,2,4,5
Faculty of Economics and Management, Universiti Kebangsaan Malaysia
43600 Bangi Selangor,
3
Malaysia, Faculty of Finance & Economics, College of Business Management and Accounting,
Universiti Tenaga Nasional, Malaysia,
Abstract
This study attempts to investigate the factors that motivate the Malay community to beinvolvedin business at
the Langkawi Island. Generally,the Malays’ businesses arealwayslimited to small food industries serving the
domestic market. However, due to the development of Langkawi Island as a tourism destination,abundance of
opportunitieshad been created for the local community. Besides the motivation factors, this paper addresses the
factors that affect entrepreneurial performance. The approach of this study is through face to face survey of 250
respondents; comprised of operators of the accommodation, transportation, services, wholesale, retail and the
restaurant sub-sectors. This study finds that the most important factors that motivate the Small and Medium
Malay Entrepreneurs (SMMEs) to venture in business are own initiative (64.8%), family encouragement
(15.6%) and opportunities as well as training facilities offered to the community (6%). Meanwhile, the factors
influencing the SMMEs’performance are the factors of business management skills and risk management skills.
Hence, this research concludesthat in order to enhance the success of SMMEs in their business activities, the
skills in managing the business and risk need to be improved.
© 2014 The Authors. Published by Global Illuminators . This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/)
Peer-review under responsibility of the Scientific & Review committee of ITMAR-2014.
Keywords: Entrepreneurs, Langkawi Island, motivation factors, successful performance, Small and Medium
Malay Entrepreneurs.
Introduction
The ethnic Malays who generally lived in rural areas and engaged in peasant
agriculture have lagged in reaping the benefits of economic development, let alone business
opportunities emanating from globalisation. Majority of the Malay owned business entities
are small and medium Enterprises (SMEs). Other ethnics, especially the Chinese, are well
ahead of the Malays in commerce, trade and high technology industries. The involvement of
Malay businesses hasalways been limited to the small food industries serving the domestic
market(Yep Puteh, 1985).In light of thecurrent state of quandary ofthe Malays’ involvement
in business, it is important to inculcate the young with entrepreneurship acumen in order to
develop future creative and knowledgeable Malay society.
Salleh, N.H.M./ITMAR-2014/Full Paper Proceeding/Vol-1,393-405
International Conference on Innovative Trends in Multidisciplinary Academic Research ” (ITMAR- 2014)
394
The island of Langkawi in Kedah is a good laboratory to study the development and
progress of Malay entrepreneurship. This island had been predominantly a rural areawith
agricultural backgroundwith little business opportunities serving only the basic needs of the
society, until the government declared the island as a tax free zone in 1986. This had opened
up the island to trading opportunities for the Malay enterprises following to the development
of tourism industry at the island. This paper seeks to identify the factors that encouraged the
Malays in Langkawi and those who originated elsewhere to venture into businesses as well as
to identify the factors that influence successful performance of their business (thereafter, we
shall refer as the Small and Medium Malay Entrepreneurs - SMMEs). As Langkawi is now
famous for its tourism industry, this study therefore focuses on accommodation, transport,
wholesale, retail, services and the restaurant sectors.
The organization of this paper is as follow: the literature review, a brief background
of Langkawi Island, methodology, the discussion on empirical results; and followed by the
policy implication and conclusion.
Literature Review
The Malays who have lagged behind in commerce and industry since the beginning
require a transformation from their predominantly agrarian origin to a more modern setting.
However, this transformation is time ordered (Bryers, 1984). This transformation is a process
where change occurs from being a traditional agrarian society where land control is
predominant, to an integrated agrarian-industrial society (Bonnett and Furnham, 1990).The
social transformation involves the interrelationship between ecology, technology,
demographic and cultural factors. Presently, many relatively successful Malay businesses
inherit their businesses, or the entrepreneursare from family with business
background(Hashim et al., 2009).The other advantageis their prior knowledge and experience
obtained through previous occupation. Management skill is also an important factor in
influencing the performance of entrepreneurs (Lee and Lim, 1997).Those who can manage
and execute their plans well had generally succeeded in gaining good profit and firm growth.
The Malays however could not afford to follow this time-ordered transformation
process which may take a long time. This is because this translates into a considerable length
of time to catch up with those who are already in the commerce and industry sectors. In order
to short-circuit this process, Malay entrepreneurs could not afford the trial and error path in
order to succeed, but to follow the established path for entrepreneurial accomplishment.
Knowledge, attitude, self-motivation, capital, and business ethics practiced by entrepreneurs
are the essential ingredients to entrepreneurial success (Zakariaet al., 2000).
In addition, planning towards achieving business goal is an additional factor for
success (Mamat, 2009).The lack of satisfaction in the current achievement is also an active
ingredient for further success because it provides the incentive to explore the future , see
opportunities and threats; and therefore anticipate outcomes. With such long-sightedness,
they are able to plan ahead and reposition their firms accordingly.
Brief Background Of Langkawi
The Langkawi Island is located north of the Straits of Malacca in the northern region
of West Malaysia. It had a population of 103,075 people in 2009. The Island was declared a
Salleh, N.H.M./ITMAR-2014/Full Paper Proceeding/Vol-1,393-405
International Conference on Innovative Trends in Multidisciplinary Academic Research ” (ITMAR- 2014)
395
tax free island in 1986; and this marked the rapid transformation of its population from an
agrarian society to a modern society. The policy changehad also induced the birth and
expansion of tourism and theancillary industries. The economy was transformed from a
predominantly rural and agriculture- based economyto urban society, led by the service
industry to cater for the influx of local and international tourists.
Services industry refers to the tourism industry in Langkawi, and this includes the
accommodation, travel agencies, transport, catering and retail sectors. With the development
of Langkawi as a tourist destination, Malay entrepreneurs have joined themainstream
development. They began to venture into other kinds of business and are no longer trapped in
the business of only providing food to local residents.
Thus, we can conclude that, by the development of Langkawi Island as a tourism
destination, the Malay community has the opportunity to be involved in tourism industry
through their participation in businessesas entrepreneurs. It is only right thatthe development
of tourism industryto incorporate the local community. Development of tourism industry is
meaningless if it is not able to reduce the economic gap in local community. This problem
always occurs in tourism location that does not involve the participation of local
communities. According to study conducted by Taylor (1995), he found that community
involvement in the current development of tourism industry is often regarded as the key to a
stable development (sustainable). Moreover,communities are expected to share some of the
benefits (such as employment and income growth) and cost reduction (due to low wages)
among them.
Therefore, there is a need for community participation in the mainstream
development. Entries will not only increase the income of the tourism industry itself, but
more importantly, to spread the benefits to the local communities (McCool & Martin 1994;
Salleh et al. 2011). In the long term, this will indirectly guarantee the sustainability of their
lives and enable them to be independent in the mainstreamdevelopment of the tourism
industry (Clayton, 1998).
Figure 1: Research framework of Motivation and Successful Performance Factors of
The Small and Medium Malay Entrepreneurs
Salleh, N.H.M./ITMAR-2014/Full Paper Proceeding/Vol-1,393-405
International Conference on Innovative Trends in Multidisciplinary Academic Research ” (ITMAR- 2014)
396
Research Framework And Methodology
Study framework can be described as follows. From Figure 1, it appears that the
declaration of Langkawi as a tax free zone in 1986 has transformed its economic activities
from that of agriculture-based, to services-based. The services sector in the Langkawi Island
is most related to tourism industry. Development of tourism industry in Langkawi Island has
created business opportunity among the Malays in Langkawi Island.
Based on Figure 1, this paper seeks to identify: i) factors that motivate the Malays to
venture into business, and ii) the factors that affect/influence the success of SMMEs’
businesses.
Research Methods
This study was conducted in several major business areas in Langkawi namely Kuah
Town, Padang Mat Sirat, Ayer Hangat, Ulu Melaka, Kedawang and Bahor. Face to face
interview using questionnaires as the instrument has been conducted for this study with a
total of 500 respondents. Statistical Package for Social Science (SPSS) and Analysis of
Moment Structures (AMOS) were used to analyze this study.
Sampling design emphasised on the demographic profile of SMMEs in Langkawi.
The questionnaire had been designed based on previous studies in order to achieve the two
objectives of this study. Descriptive analyses using the SPSS were used to determine the
frequency distribution of various variables of the demographic profile as well as the
motivation factors. Meanwhile,the AMOS software was utilised in the analysis of the factors
influencing the success of the underlying business.
There are 35 items of independent variables (based on the theories that have been
discussed in previous studies) that have been developed as an item in the constructs of this
study which are: family background (5 items), business management skills (5 items),
leadership skills (5 items), analytical skills (5 items), networking (5 items), and support from
institutions/government (5 items). Response from business operators are based on a 10-point
Likert scale.
Results And Discussions
The discussion of empirical results will be in the following this sequence: profile of
respondents (SMMEs), profile of business, the motivation factors, and analysis of factors that
influence the successof the business.
Profile of Respondents/SMMEs
Salleh, N.H.M./ITMAR-2014/Full Paper Proceeding/Vol-1,393-405
International Conference on Innovative Trends in Multidisciplinary Academic Research ” (ITMAR- 2014)
397
Based on Table 1, about 59.62% respondents are men while woman makes up 40.4%.
Most of the respondents are between the ages of 36-45 old, commanding 36.2% of total
respondents. Most of them are married and have children (85.8%). Majority of the
respondents are natives of Langkawi, at 64%. On the education level, it is found that most
are at least with education up to the secondary level (58.8%) and only 12.0% completed their
education up to the diploma level. Additionally, about 81.6% considered business as their
primary occupation. Majority of the respondents earned a monthly income of between RM1,
000 and RM6, 000.
Profile of Business
Most Malay businesses in Langkawi are relatively small sole proprietors with hired
labour of between 1-10 workers. Generally, the start-up capital is from their personal savings.
Majority of the entrepreneurs begin their business after the year 2000, which is after the
declaration of the tax free zone with an average capital of slightly more than RM10,000, refer
Table 2.
Table 1:
Respondent Demographic Profile
Information Item Total Percentage (%)
Gender Male
Female
202
298
40.4
59.6
Age
> 25 years old
26 – 35 years old
36 – 45 years old
46 – 55 years old
Above 55 years old
40
133
181
98
48
8.0
26.6
36.2
19.6
9.6
Race Malay
India
Chinese
Siamese
Others
473
12
1
13
1
94.6
2.4
0.2
2.6
0.2
Marital Status
Married
Single
Widow/widower
54
429
17
10.8
85.8
3.4
Residents of origin Yes
No
320
180
64.0
36.0
Education Level
No formal education
Primary school
Secondary school
Diploma
Degree
25
94
298
47
36
5.0
18.8
49.6
9.4
7.2
Business as main job Yes
No
408
92
81.6
18.4
Income > RM1000
RM1000-RM2500
RM2501-RM3500
115
128
87
23.0
25.6
17.4
Salleh, N.H.M./ITMAR-2014/Full Paper Proceeding/Vol-1,393-405
International Conference on Innovative Trends in Multidisciplinary Academic Research ” (ITMAR- 2014)
398
RM3501-RM4500
RM4501-RM6000
RM6000-RM10000
RM10001-RM15000
RM15001-RM20000
Above RM20000
38
66
37
12
6
11
7.6
13.2
7.4
2.4
1.2
2.2
Table 2:
Profile of Business
Information Item Frequency Total Percentage
(%)
Year of
business
operates
1. Before 1987
2. 1987-2000
3. After 2000
28
142
330
5.6
28.4
66.0
Business
operation
Full times 0
1-10
11-20
21-30
More than 30
201
281
11
4
3
40.2
56.2
2.2
0.8
0.6
Part time 0
1-10
11-20
More than 30
394
104
1
1
78.8
20.8
0.2
0.2
Venture
Capital
1. Personal savings
2. Financing from banks
3. Loan from spouse/family/relative
4. Amanah Ikhtiar Mara
5. Illegal money lender
6. Others
421
106
93
40
1
55
84.2
21.2
18.6
8.0
0.2
11.0
Annual Net
income
1. Below 1,000
2. 1001-2500
3. 2501-3500
4. 3501-4500
5. 4501-6000
6. 6001-10000
7. 10000-15000
8. 15000-20000
9. More than 20000
68
95
55
35
54
65
44
15
69
13.6
19.0
11.0
7.0
10.8
13.0
8.8
3.0
13.8
Table 3:
Items Motivation Factors
Item Total Percentage
(%)
1. family encouragement
2. encouragement from friends
3. own initiative
78/500
30/500
324/500
15.66
6.0
64.8
Salleh, N.H.M./ITMAR-2014/Full Paper Proceeding/Vol-1,393-405
International Conference on Innovative Trends in Multidisciplinary Academic Research ” (ITMAR- 2014)
399
4. religious factors
5. loss of employment
6. training opportunities and facilities provided
7. the declaration of Langkawi Island as a duty free
island
8/500
10/500
30/500
20/500
1.6
2.0
6.0
4.0
Motivation Factors
Table 3 shows the factors that influence the SMMEs in participating in business. The
factors are family encouragement, encouragement from friends, own initiative, religious
factors, loss of employment, training opportunities and facilities provided, and the
declaration of Langkawi Island as a duty free island in 1987. From this evaluation, their ‘own
initiative’ factor is the major factor stimulating their involvement in business activities. This
factor showed that they are ready to face future challenges and trials. The second factor is
family encouragement. Family gives them the encouragement to be more enthusiastic.
Analysis of factors that influencing the success of business
The Analysis of Moment Structures(AMOS) had been used in this study in order to
determine the factors that influence business performance among the SMMEs.Based on
AMOS, some tests / analyseshave been performed on the data obtained from the survey,
which include the mean analysis, reliability test, validity test and the test of research
hypothesis.
Mean Analysis
Table 4 shows the mean analysis of 7 constructs, which are the determinants of
successful SMMEs. From this table, it appears that five constructs are with high mean (mean
value exceeds 5.000); which are the business management skills, leadership, risk
management skills, networking and environment.Meanwhile, mean valuesof below 5 are
obtained from the constructs of family background and the role/support by the government
and institutions.
Table 4:
Analysis Mean of the Items/Variables
Items/Variables Mean Std.
Deviation
Total
Mean
FAMILY BACKGROUND 4.988
1. Origin – Poor family 7.38 3.08
2. Family entrepreneur – encouraged / inherit attitude 4.24 3.68
3. Family entrepreneurs – businesses networking 3.75 3.60
4. Majority of family members are engaged in business 4.44 3.70
5. Exposure by family/parents 5.14 3.80
BUSINESS MANAGEMENT SKILLS 7.888
1. Could anticipate/forecast the future performance of the
business
7.91 2.15
2. Aware/know about the financial and capital of business 8.38 1.97
3. Consider/aware of the employees’ needs/welfare 7.57 3.20
4. Have business niche 7.94 2.32
Salleh, N.H.M./ITMAR-2014/Full Paper Proceeding/Vol-1,393-405
International Conference on Innovative Trends in Multidisciplinary Academic Research ” (ITMAR- 2014)
400
5. Always ready enter to new market 7.64 2.92
LEADERSHIP SKILLS 7.587
1. Able work in team and manage the team 8.26 2.49
2. Independent in doing business and highly self confident 6.21 3.43
3. Able to interact with employees 7.60 3.13
4. Ensure staff follow all the instructions 7.54 3.12
5. Have leadership characteristics 8.34 2.23
RISK MANAGEMENT SKILLS
8.379
1. Seeking risk as a business opportunity 8.50 2.04
2. Willingness to take big risks in business 8.23 2.27
3. Ability to analyze the business 8.23 2.05
4. Understanding of the potential of the underlying
business
8.46 1.87
5. Use the power of business opportunities in the market 8.48 1.91
NETWORKING 7.595
1. Have a lot of connections in the business world 8.12 2.44
2. Business partnership gives a healthy competition 7.60 2.56
3. Have a good relationship and have non-Malay
connections
7.51 2.86
4. Connections with the non-Malay influence the business 6.75 3.22
5. Have a trusted business networking 8.00 2.38
GOVERNMENT/INSTITUTIONAL SUPPORT 4.231
1. Training to improve the skills of entrepreneurship 3.73 3.49
2. Facilities, infrastructure and government support are
helping the business
4.07 3.57
3. Training and workshops that enhance business
knowledge
4.24 3.66
4. Access to information related to government regulations 4.91 3.71
5. Business support/assistance from the state 4.21 3.63
ENVIRONMENTAL FACTORS / HISTORICAL
FACTORS IN LANGKAWI
7.097
1. T he status of Langkawi as tourism destination
encourages to venture into business
8.00 2.79
2. Attitude and culture of the Langkawi community which
are business-oriented have encouraged others to venture
into business
6.94 3.24
3. Inherit from the previous generation – traders
communities
6.80 5.31
4. Encouraged by the previous traders communities in
Langkawi
6.43 3.32
5. Encouraged by the economictransformation in
Langkawi
7.31 3.07
From Table 4 also, it is found that risk management is the most important construct
that influences the success of SMMEs’ business (8.379). All items for the construct of risk
management also obtained high mean, such as seeking risk as a business opportunity (8:50),
willingness to take big risks in business (8:23), the ability to analyze the business (8:23),
understanding of the potential of the underlying business (8:46 ) and use the power of
business opportunities in the market (8:48).
Salleh, N.H.M./ITMAR-2014/Full Paper Proceeding/Vol-1,393-405
International Conference on Innovative Trends in Multidisciplinary Academic Research ” (ITMAR- 2014)
401
Meanwhile, the construct with less influence on the performance of SMMEs is the
institutional or government support (4.231). All the items for institutional or government
support also recorded low mean values such as: training to improve entrepreneurship skills
(3.73), facilities, infrastructure and government support are helping the business (4:07),
followed by training and workshops that enhance business knowledge (4:24), access to
information related to government regulations (4.91) and business support/assistance from
the state (4.21). Test results showed that the government supports are still low and need more
attention in the future in order to improvethe SMMEs’ performance, see Table 4.
Reliability and Validity Test
Table 5 below shows the validity of the item/variable for each construct. The validity
test in this study is based on factor analysis, which refers to exploratory factor analysis (EFA)
and confirmatory factor analysis (CFA). The analyses were conducted by utilizingthe AMOS
5 package. Based on the analysis, the factor loading for each item/variable should be equal to
or greater than 0.6 (Hair, et al. 1998). The results of the test, several items were
removed/eliminated from the established model since they do not meet the required values.
The Cronbach Alpha reliability test (CA) shows that the values of all items/variables
are between 0.847 and 0.979. Thus, these show that all items/variables have a very strong
correlation to their own construct as suggested by Hair et al. (2007).From Table 5, majority
of the study’s items support the established constructs.
Table 6 indicates the results of data confirmation through the utilization chi-square
and values of the index. These values were obtained after evaluating the factor loading. The
purpose of evaluation on the value of factor loading is to ensure that the factor loading
satisfies the acceptable value. If the value does not measure up to the acceptable value, then
the said item/variable will be eliminated. High value of factor loading will increase the value
of fit index and, thus deemed the model acceptable.
For the chi square ( ) test, the results of the test found value of 10563.996, with 435
degree of freedom and statistical significance of 0.00. This indicates that there is no
significant difference between the predicted, and real models. Nonetheless, the value of the
said exceeds 2. Past researchers proposed that if this happens, then other fit indices need to
be employed in measuring the fit model; among which are the goodness-of-fit index (GFI),
adjusted goodness-of-fit index (AGFI), parsimony goodness fit index (PGFI), normalized fit
index (NFI), comparative fit index (CFI), root mean square residual (RMSR) and root mean
square error of approximation (RMSEA) (Hair, et al, 2007; Arbuckle and Wothke, 1999).
The results of the fit indices are: GFI (0.857), AGFI (0.829), PGFI (0.715), TLI (0.917), and
NFI (0.892). Thus, as the all values exceed 0.700, then the proposed model fits with the
collected data(Joreskog and Sorbom, 1989).
There are also other alternative indices that can be utilized to evaluate fit model,
namely the RMSEA and CFI. Study results found that RMSEA and CFI have a value of
0.062 and 0.926, respectively. This alternative fit index of CFI shows that the structure of
model is acceptable and the data fit the model.
Salleh, N.H.M./ITMAR-2014/Full Paper Proceeding/Vol-1,393-405
International Conference on Innovative Trends in Multidisciplinary Academic Research ” (ITMAR- 2014)
402
As a conclusion, in this study, clearly the researchers utilized other indices, in
conjunction with the chi square test because large sample size will tend to produce large chi
square value (>2.0). The fit model tests utilized in this study are GFI, AGFI, PGFI, TLI, NFI
as well as CFI and RMSEA.
Table 5:
Measurement Properties of Variables
Loadings Cronbach ?
FAMILY BACKGROUND 0.882
1. Origin : Poor Family X
2. Family Entrepreneur – Encouraged / Inherit Attitude 0.681
3. Family Entrepreneurs – Businesses Networking 0.636
4. Majority Of Family Members Engaged Business 0.913
5. Exposure By Family/Parents 0.943
BUSINESS MANAGEMENT SKILLS 0.979
1. Could Anticipate/Forecast The Future Performance Of The Business 0.650
2. Aware/Know About The Financial And Capital Of Business 0.722
3. Consider/Aware Of Employees’ Needs/Welfare X
4. Have Business Niche 0.799
5. Always Ready Enter To The New Market 0.633
LEADERSHIP SKILLS 0.969
1. Able Work In Team And Manage The Team X
2. Independent In Doing Business And Highly Self Confident X
3. Able To Interact With Employees 0.976
4. Ensure Staff Follow All The Instructions 0.962
5. Have Leadership Characteristics In Business X
RISK MANAGEMENT SKILLS
0.935
1. Seeking Risk As A Business Opportunity 0.770
2. Willingness To Take Big Risks In Business 0.799
3. Ability To Analyze The Business 0.870
4. Understanding Of The Potential Of The Underlying Business 0.924
5. Use The Power Of Business Opportunities In The Market 0.917
NETWORKING 0.875
1. Have A Lot Of Connections In The Business World 0.786
2. Business Partnership Gives A Healthy Competition 0.771
3. Have A Good Relationship And Have Non-Malay Connections 0.759
4. Connections With The Non-Malay Influence The Business 0.642
5. Have Trusted Business Networking 0.813
GOVERNMENT/INSTITUTIONAL SUPPORT 0.900
1. Training To Improve The Entrepreneurship Skills 0.788
2. Facilities, Infrastructure And Government Support Are Helping The
Business
0.846
3. Training And Workshops That Enhance Business Knowledge 0.775
4. Access To Information Related To Government Regulation 0.842
5. Business Support/Assistance From The State 0.722
ENVIRONMENTAL FACTORS / HISTORICAL FACTORS IN
LANGKAWI
0.847
1. The Status Of Langkawi As Tourism Destination Encourage To Venture
Into Business
0.717
Salleh, N.H.M./ITMAR-2014/Full Paper Proceeding/Vol-1,393-405
International Conference on Innovative Trends in Multidisciplinary Academic Research ” (ITMAR- 2014)
403
2. Attitude And Culture Of The Langkawi Community Which Are
Business-Oriented Have Been Encourage Others To Venture Into
Business
0.826
3. Inherit From The Previous Generation – Traders Communities X
4. Encouraged By The Previous Traders Communities In Langkawi 0.824
5. Encouraged By Economic Transformation In Langkawi 0.681
Table 6:
Goodness of Fit Indices of Measurement Model and the Structural Model (N = 333)
Criteria Indicators of SEM
X
2
Test
X
2
/df
0.700
>0.700
>0.500
>0.700
>0.700
0.857
0.829
0.715
0.917
0.892
Alternative indices
CFI
RMSEA
>0.900