the cultivation of organizational innovation amongst ...

THE CULTIVATION OF ORGANIZATIONAL INNOVATION AMONGST MALAYSIAN INDIGENOUS NEW, TECHNOLOGY-BASED SMALL FIRMS: AN EXPLORATORY STUDY Umar Haiyat Abdul Kohar, School of Management, RMIT University, Level 16 239 Bourke Street Melbourne Vic 3001 Australia. Email: [email protected] (Corresponding Author) Associate Professor Adela McMurray, School of Management, RMIT University, Level 16 239 Bourke Street Melbourne Vic 3001 Australia. Email: [email protected] Dr. Konrad Peszynski, School of Business IT and Logistics, RMIT University, Level 17 239 Bourke Street Melbourne Vic 3001 Australia. Email: [email protected]

ABSTRACT The intent of this exploratory study is to extend our understanding on the cultivation of organizational innovation towards sustainability in business amongst Malaysian Bumiputera New, Technology-Based Small Firms (NTBSFs) by interviewing five Indigenous technology-based entrepreneurs and analysing companies’ documents. The integration of these exploratory qualitative methods reveals that all the entrepreneurs are concern on the importance of organizational innovation towards their long-term performance in the technology industry The finding of this exploratory study generally indicates the perception of Indigenous entrepreneurs on the importance of organizational innovation for sustaining their business operations as well as determinants of organizational innovation in technology-based firms owned or founded by Malaysian Indigenous people. Based on these findings, a conceptual model of organizational innovation drivers is proposed at the end of this paper. Keyword: Organizational Innovation, Technology-Based Small Firms, Business Sustainability. INTRODUCTION In recent years, there has been an increasing number of studies conducted on the importance of innovation concepts towards a firm’s competitiveness (Vaz and Nijkamp, 2009; Marvel and Lumpkin, 2007) as well as a key determinant for a nation’s prosperity and growth (Wan, Ong and Lee, 2005). In fact, innovation and competitiveness amongst firms are currently viewed as one of the main economic multipliers in industrialised and emerging countries (Montalvo, 2006b), specifically as key drivers of endogenous developments in a competitive and open economic system (Vaz and Nijkamp, 2009). The rapid pace of change in technological advancement and the volatile nature of the current global, as well as regional, economic environment have increased the level of competition amongst firms, specifically in technology-based industries. As a result, these technology-based SMEs need to develop and maintain their organizational competitiveness by developing an environment of continuous improvement via the firm’s innovation-based activities. From another perspective, Zhao (2005) suggested that the combination of entrepreneurship and innovation are considered as the main driver to organizational sustainability and success. Entrepreneurship normally involves innovation in terms of the creation of new resources or the gathering of existing resources for new product development (García-Morales, Llorens-Montes and Verdú-Jover, 2006). Schumpeter (1936) emphasized that the entrepreneur acts as a breakthrough innovator and entrepreneurship is an activity that carries out new combinations of resources for the creation of innovation. Hence, innovation has long been considered as of central importance to an entrepreneur and ultimately becomes a primary instrument for a firm’s competitiveness (Marvel and Lumpkin, 2007). 1

A review of the literature reveals that some studies have dealt with the determinants of organizational innovation (Koc, 2007; Romijn and Albaladejo, 2002), the role of knowledge and learning curves in influencing the organizational innovation (Vaz and Nijkamp, 2009; Amara, Landry, Becheikh and Ouimet, 2008) and also the development of a model of innovation (Li and Kozhikode, 2009; Bernstein and Singh, 2006). However, to our best knowledge there have been few empirical studies that explore the cultivation of organizational innovation amongst Malaysian New, Technology-Based Small Firms (NTBSFs), specifically NTBSFs owned by the Indigenous people, or Bumiputera of Malaysia. Moreover, most studies conducted in the field of organizational innovation were conducted in developed countries. Thus, one would question whether the knowledge principles proposed by studies conducted in developed countries may be applicable to developing countries such as Malaysia. Factors such as government policies, the national level of technology as well as national culture need to be considered in the study of Indigenous entrepreneurship in a developing country such as Malaysia. For example, Woolley and Rottner (2008) contend that the policies supporting innovation influence the entrepreneurial activity of a nation. Klaas, Klimchak, Semadeni and Holmes (2010) mentioned that the question on why firms differ in their willingness to adopt innovation has long been received interest by researchers. This exploratory study contends that the cultivation of organizational innovation is influenced by the perception of founding technology-based entrepreneurs on the drivers of innovation that may assist them in sustaining their business operations. In fact, Koberg, Uhlenbruck and Sarason (1996) claimed that one of the most serious challenges facing an entrepreneurial technology-based firms is the art of managing organizational innovation as the firm evolves. The aims of the present study are therefore: o o

to contribute to an understanding of the cultivation of organizational innovation efforts implemented by founding Indigenous entrepreneurs in NTBSFs. to uncover the level of importance of these cultivation efforts perceived by Indigenous technology-based entrepreneurs towards the sustainability in business of a firm.

These objectives will help answer the research question: how does cultivation implemented by founding entrepreneurs influence the sustainability of technology-based small firms? This paper is organised as follows. First, we provide a brief overview of innovation concept, a firm’s sustainability in business as well as the theoretical background underpinning this study. Second, we discuss the data employed and methodology adopted for the exploratory study. Then, the result of the study undertaken will be discussed. Finally, some conclusions are drawn.

PREVIOUS RESEARCH Innovation: A Concept The term innovation originates from the Latin word “innovare”, meaning “to make something new” (Sarri, Bakouros and Petridou, 2010). In general, there is no consensus of a widelyaccepted definition of innovation despite the massive amount of studies that have been conducted on the topic of innovation (Wan et al., 2005). This led to the difficulty in defining the term innovation precisely (De Propris, 2002). Nonetheless, Massa and Testa (2008) suggested that a widely shared definition originated from seminal work by Schumpeter (1942), who defined innovation as the commercialisation of invention. Based on this definition, many current scholars have developed the definition of innovation is based on different perspectives. Zhao (2005) for example, defines innovation as a firm’s new products and services, markets as well as the development of new skills and human capital in an organization. From another study, Li and 2

Atuahene-Gima (2001) defined innovation as a technology, strategy or management practice that a firm uses for the first or a significant restructuring or improvement of a firm’s process or product. Marvel and Lumpkin (2007) claimed that the most common way of defining innovation is normally using an incremental and radical framework. Radical innovation involves the creation of knowledge for making fundamental changes, involving a technological revolution that totally changes the nature of business operations (Un, 2010). This type of innovation may be translated in terms of the creation of new offerings invented by a firm such as new product development and technology. Jankunc (2007) argued that managing radical innovation is a difficult managerial challenge, yet pertinent for a firm’s success. A high level of complexity and uncertainty of this innovation requires a firm to be more flexible and adaptable to the new nature of doing business. Conversely, the creation of knowledge or exploitation of existing knowledge for minor improvements in a firm’s offerings is considered as incremental innovation. The major differences between both types of innovations lie on the novelty level of technological content and organizational knowledge (Un, 2010). Drivers of Organizational Innovation Based on our literature search, we identified six main determinants of organizational innovation that will be discussed briefly as follows: 1) Communication Channel Generally, frequent internal communications are considered as an important tool to favour and promote organizational innovation as it facilitates the dispersion of ideas within a firm (Wan et al., 2005) and by increasing the possibility of informal knowledge spillovers between the firm and the individual (Simonen and McCann, 2008). Through effective communication, the information should also be safely exchanged amongst organizational members and this may provide an information flow from different aspects and reduce the resistance to innovation (Koc, 2007). Burnett and McMurray (2003) contend that an ability of business owners or top managers to communicate is considerably pertinent in order to initiate change in a firm. Moreover, a clear organizational strategy may be implemented by a firm based on a strong set of values that encourage learning that are conveyed by management through effective communication (Wong, Shaw and Sher, 1999). In fact, the insufficient time spent to communicate with the staff would eventually create a negative effect on a firm’s ability to innovate as well as business growth (Burnett and McMurray, 2003). 2) Decentralised Structure The flexibility and openness of informal organizational structure may facilitate firm innovativeness, specifically through the generation of new ideas amongst employees (Wan et al., 2005). This view is supported by Koc (2007) who argue that the responsibility for coordination and decision making are decentralised and shared amongst organizational members in order to facilitate the implementation of any innovative activity. This is because this situation can create an ambiance where innovative ideas are proposed, critiqued and refined by organizational members and eventually lead to a positive impact of a firm’s innovation capacity. Further, the diversity of organizational innovations may be also understood by replacing the traditional-centralised type of organizational structure to be more decentralised, as product or customer-oriented organizational structures aim at improving organizational flexibility. In a nutshell, a flexible or organic structure of an organization, which encourages teamwork acts as a stimulant to organizational members to be creative and innovative (Armbruster, Bikfalvi, Kinkel and Lay, 2008).

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3) Teamwork Teams are normally considered as social systems of two or more people that are embedded in an organization, whose members perceive themselves as such and are perceived by others, and who collaborate on a common task (Hoegl, 2005). As a matter of fact, effective teambuilding has long been regarded as a pertinent part of organizational creativity and innovation (Folkestad and Gonzalez, 2010). Thus, it is crucial for business owners or managers to understand and accept the critical role that teamwork skills play in a firm, specifically in a team-based innovative firm (Hoegl and Parboteeah, 2007). Further, Folkestad and Gonzalez (2010) also mentioned that the social nature of creativity in current business practices requires the leaders to examine and redesign organizational ecosystems that centre on teamwork cohesion for innovation. Teamwork cohesion is also perceived to promote organizational learning and eventually will stimulate technical and administrative innovation in a firm (Lloréns Montes, Ruiz Moreno and García Morales, 2005). From another perspective, cross-sectional teamwork, which is based on a collaboration of organizational members from different departments on specific projects, may also facilitate organizational innovation. A study conducted by Koc (2007) showed that crosssectional teamwork strongly contributes to a firm’s innovation capacity, specifically through the process of idea generation as this teamwork normally brings together a set of experts to work together on a specific project. 4) Reward System An organization that intends to inculcate creative and innovative organizational culture should set creative goals that focus on a good reward system, specifically amongst employees (Koc, 2007). This is because one important factor that may affect organizational innovation is the commitment to the development of new idea generation by providing psychological and resource support to employees (Wan et al., 2005). Thus, in order for employees to be motivated to innovate, there must be a culture that both supports and rewards innovation. Lemon and Sahota (2004) mentioned that a reward system should be emphasized for stimulation innovation contribution by employees as well as to motivate and appreciate employees to/for the development of organizational innovation. The emphasis on the reward system on innovation may also create a belief that innovation is important for the organization amongst its employees and other stakeholders (Wan et al., 2005). 5) Continuous Organizational Training Training is regarded as an important tool for a firm to develop organizational knowledge and skills in order to maintain, increase and innovate a firm’s core competences in the market (Sarri et al., 2010). Thornhill (2006) also mentioned that firm-level training investment is discovered to be one of the main determinants for a firms innovation as training stimulates internal flow of ideas and information that can enhance organizational knowledge. This view is supported by Koc (2007) who claimed that training is an important factor which encourages innovation in technology-based firms. Through continuous training efforts directed at incremental problem solving and on the job experimentation, firms can enhance their human capital stocks such as skills and knowledge over time (Koc, 2007). As a result, the implementation of organizational training may eventually create a long-term effect towards a firm’s business performance and sustainability. 6) R&D Activities In order to meet the challenges of continuous innovation in technology-based industries, a technology firm needs to focus on developing its in-house Research and Development (R&D) activities and applications, specifically through development of new products (Zahra and Kirchhoff, 2001). In fact, R&D activities are regarded as a determinant of innovation that has 4

received the most attention from researchers (Raymond and St-Pierre, 2010). Furthermore, R&D activities may also increase the value of a firm, especially in terms of a firm’s products or process development (Oakey, 2003) by increasing a better understanding on how and where to innovate amongst technology-based firms. As a result, the combination of a firm’s in-house R&D and external R&D such as using external innovation resources or inter-firm strategic alliances will considerably be regarded as a main driver for a firm’s innovation success (Rammer, Czarnitzki and Spielkamp, 2009). In a nutshell, the identification of these organizational innovation drivers is crucial in evaluating the implementation of innovative business practices by founding entrepreneurs, specifically in creating and sustaining a firm’s competitive advantage. The next section will discuss the relationship between innovation and business sustainability. Innovation and Business Sustainability Lagacé and Bourgault (2003) contend that technology-based SMEs must continually enhance their organizational products or processes through innovative activities in order to generate long-term sustainability. Further, Raymond and St-Pierre (2010) also argued that innovation has long been regarded as the key factor for the survival of SMEs. This is because the ability of a firm to innovate will create a firm’s first-mover advantage that will eventually increase and sustain leading edge competitiveness (McAdam and Galloway, 2005) and profitability (O'Connor, Roos and Vickers-Willis, 2007). In similar vein, the emergence of innovation plays an increasingly important role in determining long-term survival and business sustainability amongst SMEs has also raised interest from many scholars. For instance, Wan et al. (2005) claimed that innovation has played a crucial role in predicting or influencing the long-term sustainability of a firm, particularly in terms of the challenges experienced in the business environment (McMurray and Chapman, 2009). The next section will discuss the concept of business sustainability. Business Sustainability Business sustainability has been defined as the ability of a firm to be able to continue the same type of business into the next generation (Elliott, 2005; Mann and Gazzarin, 2004) and has been viewed as a measurement of an enterprise’s long-term viability (Ma, 1999). Business sustainability may be comprised of two main elements with the first being the continuation of the same type of business and long-term viability (Mann and Gazzarin, 2004). The continuation of the same business has been associated with reflecting in a firm’s success (Lussier and Halabi, 2008) and has been claimed as the simplest definition of a firm’s success whilst failure is equivalent to ceasing trade (Simpson, Tuck and Bellamy, 2004). The second element of sustainability is concerned with the viability and growth of a business in the long term (O'Gorman, 2001). Previous business sustainability studies suggest sustainable business may be understood through two perspectives, societal sustainability and enterprise sustainability as illustrated in Figure 1 below (Waite, 2006; Mann and Gazzarin, 2004). Figure 1: Two Concepts of Business Sustainability Sustainability of Business (Enterprise)

Societal Sustainability Enterprise Sustainability

Source: Adapted from Waite (2006) and Mann and Gazzarin (2004)

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Societal sustainability focuses on the development of a business towards societal contribution such as corporate social responsibility and environmental management (Tilley and Young, 2006; Funk, 2003). Meanwhile, enterprise sustainability refers to the development of a business that focuses on the sustainability of the firm itself and deals with the firm’s viability and profitability (Froschhesier, 2009; Baaij, Greeven and Van Dalen, 2004; Acquaah, 2003). The literature is dominated by studies that address societal sustainability when discussing business sustainability amongst firms (Mann and Gazzarin, 2004), thus our study focuses on enterprise sustainability, which emphasizes the firm’s operational perspective and performance (Waite, 2006), profitability (Acquaah, 2003), growth (Audretsch, 2004) and competitive advantage (Baaij et al., 2004) thereby providing justification for explaining business sustainability amongst Bumiputera entrepreneurs. Theoretical Background: Resource-Based View of a Firm Theory Building on a study conducted by Wernerfelt (1984), a Resource-Based View (RBV) of the firm has been defined as a simple economic tool for assessing the position of organizational resources in a firm. This position is analysed by looking at the strengths or weaknesses of the organizational resources in determining the ability of the firm to compete with other firms in the same market or industry. In addition, based on this theory, a firm is viewed as a unique bundle of idiosyncratic resources and capabilities in which the deployment of these valuable resources is crucial for management to increase the value of the organization (Wu and Wang, 2007). If a firm can create a position by which its organizational resources are difficult for other firms to imitate and these resources are high in value from the stakeholder’s perspective, then the firm has managed to create an organizational competitive advantage (Alvarez and Busenitz, 2001; Barney, 1991). Based on this study, the drivers of innovation may be understood from the RBV of the firm by accepting its heterogeneous character (Vaz and Nijkamp, 2009). In addition, the strategies and practices implemented by NTBSFs through continuous innovation may lead to the sustainability of a firm’s competitive advantage. METHODOLOGY Data for this exploratory qualitative study were collected via three methods. First, the review of the relevant literature on organizational innovation and sustainability in business was undertaken. Second, five semi-structured interviews were conducted in April 2010 amongst Indigenous technology-based entrepreneurs. These interviews comprised of three entrepreneurs in the information technology (IT) industry, and one entrepreneur in the biotechnology industry and another in the rubber manufacturing industry. Third, we also conducted a document analysis for each company, specifically to know the directorship and revenue generated by these firms. All of the documents were purchased from the Companies Commission of Malaysia (CCM). The initial data for this exploratory study was obtained from the online business directories from both the SME Corporation and the Malaysia Development Corporation (MDeC). This exploratory study was conducted only to Malaysian Indigenous NTBSFs as studies have shown that small firms are generally more innovative than larger firms (Michael and Pearce II, 2009; Simonen and McCann, 2008). One hundred and four invitation emails were sent to NTBSFs. Forty-three of the emails sent bounced back and only eleven entrepreneurs responded back with ten agreeing to participate in this study. Nevertheless, this exploratory study employed a small sample based on two justifications. First, the purposive sampling provided the researcher information-rich cases (Zhao, 2005). Second, this sampling type is useful in describing a phenomenon or developing something about which only little is know. Based on purposive sampling, we chose the sample based on our judgment of respondents who can provide the best information to achieve the objectives of this study (Kumar, 2005). Based on these justifications, only five technology-based firms owned by 6

Indigenous entrepreneurs were chosen. These firms are considerably relevant to be included in this exploratory paper since the age of the firms operating life is less than eight years. A semi-structured interview with a founding entrepreneur from each firm was conducted. All the interviews were conducted in a mixture of English and Malay. All interviews were recorded and later transcribed and coded manually. Content analysis was used to process and analyse the original text of company documents and the transcripts of interview conducted. The interviews were semi-structured and the questions were divided into four main sections: founding entrepreneurs’ profile, business background, organizational innovation and a firm’s future plan. RESULT In the following section all the answer of the respondents will be analysed. Note that only parts that are relevant to this study will be presented and discussed. Background Table 1 illustrates the formal education and previous work experience of the respondents. All of the respondents have a University degree, and three of these respondents even have a master degree. In terms of the similarities between the respondents’ formal education and current nature of business, four of the respondents have a similar background of study with the nature of their current business. Respondent IT3 was the only respondent who has a different background of formal education where his education background was industrial engineering and business administration, yet his nature of business is information technology field. Nevertheless, due to the relevancy of his formal education background to the nature of his current business, IT3 felt that the dissimilarity between formal education and nature of business is not a problem for him to run the business. “For me, I don’t consider my degree to be totally out of what I do because engineering is considered has a lot of programming and you need programming. To me stimulation or designs are under engineering as well. So, there is nothing like that out of the ordinary (IT3)” Table 1: Respondents’ Profile Industry

Name

Position

Formal Gender Previous History Size Education Area Experience (years in (No. of + Qualification (years) operations) Staff) IT IT 1 MD Animation + M 7 1 3 Degree IT2 MD Creative M 5 1 6 Multimedia + Degree / Master IT3 CEO Industry M 13 2 4 Engineering / Business+ Degree in the USA /MBA RUB RT1 D Agriculture Mgt M 18 4 9 + Degree BIO BT1 MD Counselling / F 16 6 22 Homeopathy + Degree Abbreviations: IT: Information Technology, RUB: Rubber Technology, BIO: Biotechnology, MD: Managing Director, CEO: Chief Executive Officer, D: Director

In terms of gender distribution, only one of the respondents is a female entrepreneur who is involved in the biotechnology industry. From the perspective of previous work experience, sixty percent of the respondents have more than ten years work experience before the formation of their 7

company. In fact, all respondents have at least five years work experience before deciding to form their own company. As this study focused on newly established technology-based firms where operating the business is less than eight years, the maximum year of establishment is six years. In fact, two of these firms are still considerably nascent technology-based firms since both companies were established in 2009. The average duration of business operations for all respondents in this study is approximately two years. The number of staff employed by all respondents is less than 50 employees. This result is in line with the definition of Malaysian SMEs that is based on the number of full time employees as proposed by Small and Medium Enterprise Corporation Malaysia, also known as SME Corporation. Organizational Innovation Drivers This section describes organizational innovation drivers perceived or implemented by founding entrepreneurs in this study. Based on the organizational innovation driver identified in the literature review, we discuss all elements that emanated from the present findings. a) Communication Channel All respondents in this study have perceived the importance of having a good communication channel in a firm as important. From this study, organizational communication may be implemented in a firm via several channels such as face-to-face interactions, or other medium of communications such as email or the telephone. One participant mentioned “I need everybody to communicate amongst us” (RT1). Face-to-face interactions between founding entrepreneurs and employees may also provide beneficial advice for employees’ improvement and career development. One of the participants stated that “I usually have a talk and give them advice on how you want to start a company, start professionally, and brand yourself professionally so that if you meet with a good client, client will be confident with you...” (IT1). From another perspective, with the existence of email as well as instant messenger applications such as Skype or Yahoo Messenger (YM), these applications will facilitate communication amongst organizational member and to other stakeholders such as customers and clients. One participant said: IT1: “Usually, if there is anything I need to communicate, mostly I communicate with my clients through email…and sometimes with my freelanced designer, and I communicate with Skype or with Yahoo Messenger”. Additionally, face-to-face meetings amongst organizational members either on a weekly or monthly basis are regarded as an effective channel for organizational communication. One participant stated “…at least once a week, we must have a meeting with all staff” (RT1). The implementation of a firm’s weekly or monthly meeting may also be utilised as an opportunity for founding entrepreneurs to train or brief employees on the development of the firm. One participant mentioned “…I train my employees by doing weekly meeting and also monthly meeting” (BT1). Wong et al. (1999) mentioned that formal on-the-job training of a firm may be also be characterised by weekly study meetings whereby a group of colleagues share information on certain aspects such as what they have read from the technical literature. In addition, one participant mentioned: IT3: “The Company meeting is more at the director-level specifically for innovation and production matters”. Besides the exploitation of these communication channels for organizational innovation, the informal type of communication may also lead to beneficial effects for a firm. The discussion of new ideas could be shared amongst organizational members and will eventually lead to an informal discussion amongst employees. 8

b) Decentralised Structure The concept of openness in a firm’s working environment, specifically in terms of the decentralised structure in decision making processes as well as the working lifestyle has been mentioned by three participants in this study. One participant said: RT1: “We help the employees as well as find a way for the company to be friendly working experience. My concept is open. I’m not a greedy type of person. I just share whatever knowledge that I have”. The openness concept between organizational members does not create any borders amongst entrepreneurs and their employees. Even one of the participants perceived his employees as his friend. This respondent stated “They are not my employees. They are my partners or friends” (IT2). The openness concept in a firm will eventually lead to effective communication, as employees are not hesitant to share their ideas to their employers in a friendly environment. Moreover, this environment may also facilitate employees to be more creative and innovative in doing their jobs. One participant mentioned “… programmers are like an artist to me. They come late or do not go to the office, yet it is okay for me. If you see at their job log, they are still working up to three o’clock in the morning, doing their job at home. Otherwise, they will not creative to do their job” (IT3). c) Teamwork The success of a firm’s business operation and growth is considerably influenced by the ability of employees to work as a team. Ironically, only two participants in this study mentioned the importance of teamwork in running their business. This can be seen in the following extracts: RT1: “We are actually working as a team. The team succeeds and the company will succeed”. IT2: “Without any of us, the business wouldn’t be growing like this. It is not only me. Any of us would do it. Yes, we work as a team”. Based on the above extracts, both participants also agreed that the success of a firm is not only dependent on the ability of the founding entrepreneur, but a good combination of teamwork is considerably far more important, specifically in cultivating organisational innovation via R&D activities. For example, one participant stated: “Our R&D team is about four of them and they are led by a guy with PhD and has previously worked at the RRIM (Rubber Research Institute of Malaysia)” (RT1). Thus, having good synergy amongst employees is pertinent for fostering organizational innovation as well. d) Reward Systems From our findings only one participant who implemented reward systems for cultivating organizational innovation in his firm. This participant mentioned: RT1: “… let’s say they have a very good idea, then we as management will give some sort of incentive to them. Let’s say, some guy manages to create a plantation product using rubber. Something that no-one in Malaysia, so I said, on top of that, if you manage to sell, you will get the profit to make them more motivated to do that”. In addition, one of the interesting strategies that had been implemented by this participant in motivating his employees to come out with a new product invention is by creating a new company and appointing the employees to become his business partners. He mentioned: “…whenever there is a new product coming, I’ll give some incentives. But, let’s say you sell it to the world, then I’ll 9

create a company then he will be a partner”. Due to this strategy, this participant has managed to penetrate international markets (in China) by forming a company that is managed by his exemployee. He also mentioned: “... we just did one deal with China. Actually this guy managed to create a product, our new product in the market and give him about ten percent share in that company. So, whenever we go overseas, we are actually using that company”. e) Continuous Organizational Training The implementation of continuous organizational training is considered pertinent for a technology-based firm’s innovativeness, specifically in term of R&D activities. In this study, four participants mentioned the implementation of organizational training in cultivating a firm’s organizational innovation to varying degrees. One participant stated that “In our industry (rubber manufacturing industry), you must send them (employees) for training, either we send them to the research centre probably we send them to rubber manufacturers that have machines or have a lab. We send them for may be one to two weeks” (RT1). Nevertheless, only one participant in the IT industry perceived that organizational training such as IT-based development programmes does not really contribute much to a firm’s innovation. He mentioned: IT2: “…because usually the software development programme improvement is not really big. So, we learn from time to time because they always explore new things. Almost everyday they will explore new things… technology keeps changing, so they try to cope to with that”. In addition, the identification of employees’ training needs is sometimes based upon requests made by employees, yet the decision on what kind of training is needed or relevant to employees will be decided by top management. One participant mentioned: “…they will request any training to management… when the time comes and when employees think that they need the training, they will propose to the company and the company will decide” (IT3). Nevertheless, two of the repondents mentioned that they will directly give on-the-job training either through company’s meeting (as mentioned above) or face-to-face interaction: IT1: “If I have training so there’s easy course that to be conducted, so I’ll ask him whether he like it or not? So I train him to be a trainer. One thing may be he can run part of my business”. BT1: “I train my employees by conducting weekly meetings and also monthly meetings and…of course we always doing in-house training such as training in Traditional Complementary Medicine (TCM) homeopathy”. f) R&D activities The significant role of R&D activities towards a firm’s organizational innovation has been mentioned by all participants in this study. The implementation of R&D activities in a firm is seen as crucial for a firm in the development of new products as well as commercialisation activities. This will eventually enhance and optimise a firm’s business operations. One participant mentioned: “It is quite important for the company to have R&D research, especially how to optimise their business” (IT1). Additionally, another participant mentioned: “Now I have seven new products and we already tested to customers for two years. We expect these products will be launched in the middle of 2010 and these seven products will increase the company’s income” (BT1). Interestingly, one of the respondents had conducted an intensive R&D activity two years before establishing the company. Due to the positive result that he got from his research, he was more confident to venture into rubber technology industry:

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RT1: “The first two years, I’m doing a lot of R&D. Due to the result I got in the RRIM made me confident to be in the market. Then, when I do my study in Malaysia and the world, there is nobody that does this yet. So, based on that result, I compile everything and then I get my team. I get my R&D team and I get one doctor who is an expert in polymer. After that we merged and set up a company”. The above extract shows how R&D activities could lead to the development of new products as well as new venture formation. Additionally, this extract also shows that having a good team of R&D activities, which is comprised of a pool of competent workers, is crucial for the development of a firm’s R&D capability. Further, the R&D capability amongst firms in this study is also influenced by the financial resources of a firm. As mentioned by one participant: “We need to have a large sum of money to develop and commercialise our own products. Without the money, how can we sustain the company when we still do not generate any income yet?” (IT2). In fact, three participants in this study that had already been in business for more than two years had received financial assistance from the government, specifically in terms of a research grant and loan: RT1: “…the next six months after we formed the company, we managed to get a grant from the MTDC (Malaysia Technology Development Corporation)”. BT1: “...and also when I started to buy all the machines for my factory, MARA (The Council of Trust for Indigenous People) gave me a loan about four hundred thousand in order to increase my production”. The process to get the financial assistance from the government is not an easy process. One participant stated: “…after about five presentations we got the maximum fund” (RT1). Additionally, one participant also mentioned that he needed to come out with the product prototype in order to get the government grant: “The grant that we got was for a prototype to commercialisation. Thus, in order to qualify for that grant, we must have the product prototype” (IT3). Meanwhile, the other two companies in this study still have not managed to get any grants from the government. Both companies have been operating their business for more than two years. Further, a set of requirements such as a good working paper and convincing financial standings of a firm must be presented upon application of any grant. One of the participants stated: “We are trying to get a grant…I am in the process of doing the working paper for applying for any grant from the government” (IT2). DISCUSSION Based on the interviews conducted, we would like to shed light on three major findings. Firstly, two drivers of organizational innovation, which are the communication channel and R&D activities, were mentioned by all participants in this study. This depicts the level of importance of these drivers in cultivating the organizational innovation in a firm. Due to this fact, the Malaysian government has provided several R&D incentives in order to further strengthen Malaysia’s foundation in R&D activities. Thus, companies that are involved in conducting R&D activities as well as carrying out designs, development and prototyping a technology-based product or service may eligible for incentives. For instance, a company that provides R&D services in Malaysia to its related company or to any other company can make an application to the Malaysian Industrial Development Authority (MIDA) for an Investment Tax Allowance (ITA) of 100% on the qualifying expenditure incurred within ten years. The allowance can be offset against 70% of the statutory income for each year of assessment. Additionally, any unutilised allowances can be carried forward to subsequent years until fully utilised (MIDA, 2009).

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Secondly, the cultivation of organizational innovation is generally driven and inspired by founding entrepreneurs in the company. This is because the implementation of any organizational innovation decision is typically made by decision makers of a firm based on their willingness to change and innovate (Montalvo, 2006a; Klein and Sorra, 1996). Finally, the capability of a firm to initiate innovation in a company may be depended on organizational resources of a firm, specifically in terms of both financial and human capital. Firms that are newly-established will have scarce resources and eventually their capability to cultivate innovation in a firm. The analysis presented in this study uncovered the important drivers of organizational innovation practised by Malaysian Indigenous NTBSFs which eventually will influence a firm’s sustainability in business. From this analysis and the consolidation of the literature, as shown in Figure 2 below, we propose the conceptual model of organizational innovation drivers that may be crucial determinants for Indigenous technology-based entrepreneurs to sustain their business. Figure 2: Conceptual Framework Organisational Innovation Drivers • • • • • •

Communication Channel Decentralised Structure Teamwork Reward System Organisational Training R&D Activities

Sustainability in Malaysian Indigenous New Technology-Based Small Firms

Source: Authors The identification of these drivers as shown in Figure 2 will aid the researchers in the next research phase, which is the development of sustainability in business model for Malaysian Indigenous NTBSFs. Hence, the conceptual model in this study may also provide theoretical and practical implications for Bumiputera NTBSFs by providing a foundation for future Malaysian Indigenous NTBSFs research and the development of National Policy as well as being considered by other Indigenous entrepreneurs in their developing countries. An essential point is that this exploratory study is not to be intended as an endeavour to determine which perspective is right but rather attempt at finding constructs of organizational innovation where perspective diverge and suggest how to reconcile them. There are several ways that future research might move forward. Future research could focus on analysing the comparison of organizational innovation drivers between Malaysian Indigenous and Non-Indigenous NTBSFs. Additionally, the scope of the study could be expanded into other types of respondents such as amongst government officers as well as academics by discipline. The holistic view of the organizational innovation driver might be investigated and eventually could generate a comprehensive model of Malaysian organizational innovation drivers. Alternatively, the sample size of the current respondents amongst entrepreneurs in technologybased industries might be fruitful to be expanded. REFERENCES Acquaah, M (2003), 'Corporate Management, Industry Competition and the Sustainability of Firm Abnormal Profitability', Journal of Management & Governance, vol. 7, no. 1, p. 57. Alvarez, SA and Busenitz, LW (2001), 'The entrepreneurship of resource-based theory', Journal of Management, vol. 27, no. 6, pp. 755-75. Amara, N, Landry, Re, Becheikh, N and Ouimet, M (2008), 'Learning and novelty of innovation in established manufacturing SMEs', Technovation, vol. 28, no. 7, pp. 450-63. 12

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