Proceedings of 33rd International Business Research Conference

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Proceedings of 33rd International Business Research Conference
4 - 5 January 2016, Flora Grand Hotel, Dubai, UAE, ISBN: 978-1-922069-94-8
Key Determinants of Green Entrepreneurship among SMEs
in Malaysia
Ramraini Ali Hassan* and Rafidah Nordin**
Entrepreneurial activities had contributed tremendous benefits to the humankind. It
does not only create jobs, but also changes people’s lives. Despite the great
contribution of entrepreneurship towards developing a nation’s economy, these
activities have its own drawbacks. Consequently, some of these activities may
downgrade the quality of the environment. Environmental issues have been
discussed since 1970’s and have been an on-going discussion in recent years
globally. The concept of green economy focuses primarily on the intersection of the
environment and the economy and has been the key issue discussed in the 1992 Rio
Conference. Within the summit, it seems that all parties cannot mandate green
economy in consensus. The summit requires entrepreneurs to respond to green
entrepreneurship policy incentives by themselves. Previous research highlighted that
most developed countries often stress more on being green in their attempts to exploit
market opportunities, while developing countries often focus more on
entrepreneurship alone in their efforts to fulfil the market needs. Malaysia is still
considered a developing country and is expected to become a developed country by
the year 2020. It seems very crucial to investigate the green entrepreneurship
scenario in a developing country like Malaysia. Therefore, this research explores the
scenario of green entrepreneurship and investigates key determinants towards
promoting green entrepreneurship particularly among SMEs in Sabah, Malaysia using
a quantitative approach. The result of this research is expected to contribute
significantly towards policy formulation among government agencies responsible for
environmental protection as well as promoting green entrepreneurship in Malaysia.
Keyword: Green
entrepreneurship.
entrepreneurship,
green
economy,
developing
country,
Field of Research: Entrepreneurship
1. Introduction
Entrepreneurship plays a vital role in a country’s economic growth. It is among the
fundamental human activities towards achieving a competitive economy and it is also
a commonplace activity among many countries around the globe. Through the
entrepreneurial activities that occur all around the world, new innovations and ideas
are discovered as a means of better living. The contribution of entrepreneurship is
significant to the nation’s economic and non-economic development. Besides
increasing the quality of our life, it also changes individual’s life, enhances products
and procedures. Thus, allowing for the emergence of new established companies
and new employment opportunities. Even with the benefits it carries along,
entrepreneurial activity does have its own drawback with regards to the
environmental quality since it also contributes to environmental degradation.
Recently, most international organizations such as the World Bank, UNCTAD,
UNIDO, WTO and FAO (Farinelli, Bottini, Akkoyunlu, & Aerni, 2011) were focusing
their discussions on the importance of global transformation towards a greener
technology as well as greener economy. The idea of green economy concentrates
*Dr. Ramraini Ali Hassan, Faculty of Business, Economics and Accountancy, University Malaysia
Sabah, Jalan UMS, 88400, Kota Kinabalu, Sabah, Malaysia. Email : ramraini@yahoo.com
**Rafidah Nordin, Faculty of Business, Economics and Accountancy, University Malaysia Sabah,
Jalan UMS, 88400, Kota Kinabalu, Sabah, Malaysia. Email: rafidahnordin@gmail.com
Proceedings of 33rd International Business Research Conference
4 - 5 January 2016, Flora Grand Hotel, Dubai, UAE, ISBN: 978-1-922069-94-8
principally on the intersection between the environment and the economy and was
highlighted during a discussion in the 1992 Rio Conference, the United Nations
Conference on Environment and Sustainable Development. From the discussion, it
was concluded that since entrepreneurial activities were observed as the main cause
for environmental degradation, entrepreneurs themselves have to play a major role in
managing the environmental sustainability issue (Tilley & Young, 2009).
After the global financial and economic crisis, most countries placed an important
role of entrepreneurship in boosting their nation’s economic activity. Most priorities
are given to environmental-friendly investments and ventures. This includes those
projects and activities that improve energy efficiency that increase commitment
towards environmental protection (OECD, 2011). Malaysia is not lagging behind in
this effort. The Malaysian government has made a strong commitment to reinforce
sustainability development in a developing country like Malaysia. A sustainable
economic growth relies upon a carefully protected environment. The role of the
Ministry of Energy, Green Technology and Water (KeTTHA) is very important and
play a significant role in improvising Malaysia’s environmental performance (Yacob &
Moorthy, 2012). Green entrepreneurial practice (GEP) might have a different
perspective from one country to another (Min & Galle, 2001), and in Malaysia, from
one state to another state due to the different culture and socio-economic conditions
of each state.
In Malaysia, information with regards to sustainable practices among small and
medium enterprises (SMEs) still remains scarce. As Omar and Samuel (2011)
asserted, SMEs embarkation on environmental management was still less promising
than larger firms. The aim of this research is to identify the key determinants that lead
to green entrepreneurship practices among SME entrepreneurs particularly in the
state of Sabah, Malaysia. Over recent decades, Sabah has been heavily reliant on
the exploitation of its natural resources, forests, coastal habitats and sea. The
‘business as usual’ scenario often involves a repeated logging of forests for largescale monoculture plantations.
2. Literature Review
Green Economy
The green economy focuses primarily on the intersection between the environment
and the economy. United Nations Environment Programme (UNEP) has defined the
green economy as the results in improved human well-being and social equity, while
significantly reducing environmental risks and ecology scarcities which can be
thought as one which is low carbon, resources efficient and socially inclusive. The
United Nations Environment Programme (UNEP) is the leading global environmental
dimension of sustainable development within the United Nations system and serves
an authoritative advocate for the global environment. “A green economy is one
whose growth in income and employment is driven by public and private investments
that reduce carbon emissions and pollution, enhance energy and resource efficiency
as well as prevent the loss of biodiversity and ecosystem services. These
investments need to be catalyzed and supported by targeted public expenditure,
policy reforms and regulation changes. This development path should maintain,
enhance and, where necessary, rebuild natural capital as a critical economic asset
and source of public benefits, especially for poor people whose livelihoods and
security depend strongly on nature” (Green Economy, 2015).
Proceedings of 33rd International Business Research Conference
4 - 5 January 2016, Flora Grand Hotel, Dubai, UAE, ISBN: 978-1-922069-94-8
There are a number of related terms that describes the green entrepreneurship and
have been used interchangeably in the previous research such as ecoentrepreneurship, ecopreneurship, environmental entrepreneurship, sustainable
entrepreneurship,
ecological
entrepreneurship,
enviro-preneurship
or
sustainopreneurship (OECD, 2011). While the green entrepreneurship is a concept,
the implementer of the concept is termed as a green entrepreneur. In other words,
green entrepreneurs provide the source for starting and sustaining a green economy
by providing green products and services, introducing greener production techniques,
boosting demand for green products and services, and creating green jobs.
Green entrepreneur
As has sometimes been observed, an entrepreneur is anything but difficult to
perceive, easy to recognize and hard to define (Schaper, 2010). Entrepreneur can be
defined as ‘a person who have ideas of new business opportunities and creates
enterprises from scratch and normally have limited resources and with an abundance
of risks’ (Schaper, 2002). They may act as catalysts for change and advancement in
both economic and environmental perspectives (Volery, 2002). As summarized by
Kamarulzaman, Hirawaty, Nawi, et. Al, (2012), the conviction that entrepreneurs are
not environmentally aware, or couldn’t care less to be, is rapidly getting to be
obsolete as currently, there is an expanding number of green entrepreneurs known
as ecopreneurs. According to Kirkwood and Walton (2010), the growth in eco-friendly
entrepreneurs may be partially due to increasing market opportunities for sustainable
products and services. Customers are becoming increasingly environmentally
conscious.
As summarized by Edobor & Ogunleye (2015), numerous clients are losing trust in
bigger enterprises and have desires of organizations to show more social and natural
obligation. Schumpeter (1934) contended that the advancements made by business
visionaries are the vital elements in monetary improvement and the focal variables in
the exchange cycle. Further, there is influencing affirmation in Volery (2002) that over
the previous decades the regular habitat development does not run as one with the
protection of nature. Expanding contamination levels, loss of biodiversity, area
corruption, and environmental change are just some examples of this situation. This
recommends an expanding requirement for ecological obligation in ecopreneurship is
critical. The fundamental element differentiating the green entrepreneur from the
traditional entrepreneur is that, the green entrepreneur tries to make a plan of action
that is both monetarily beneficial as well as makes ecological actions concurrent with
social quality. The green entrepreneur does this by engaging in activities such as
ecotourism, recycling, energy efficiency, sustainable mobility, organic agriculture and
renewable energy among others, and the number of green jobs associated to these
new activities (Lacroix & Stamatiou, 2007).
Green Entrepreneurship
There seems to be no solid definition of entrepreneurship especially with respect to
the degree of innovation and size of a specific activity that consider as
entrepreneurial. Nonetheless, entrepreneurs are business people who envision new
business opportunities and ventures by taking risks and changing their ideas into
profitable and commercial reality. Nonetheless, green is a term that is applicable
relatively and absolutely depending on the intended meaning of the user of the term.
In popular usage, the expression ‘green’ is used in both a relative and an absolute
sense. “Green” can refer to either a product or a process. “Green is a term used
showing moving towards environmental or ecological sustainability. (Pearce &
Proceedings of 33rd International Business Research Conference
4 - 5 January 2016, Flora Grand Hotel, Dubai, UAE, ISBN: 978-1-922069-94-8
Barbie, 2000). There is an essential difference between the way of looking at green
entrepreneurship in developed countries and developing countries. Developed
countries tend to put more emphasize on the term ‘green’ and on the market
opportunities. In contrast, developing countries tend to focus more on the term
‘entrepreneurship’ and on the market needs instead. Green entrepreneur often
struggle to survive, due to unstable commitment from the public sector, whose
support is being easily overturned by everyday changes in politics and lobbying
(Farinelli, Bottini, Akkoyunlu, & Aerni, 2011). According by Moorthy, Yacob, Chelliah,
& Arokiasamy (2012), the concept of green is still very new to Malaysian SME
owners/managers, though many green conferences, seminars and campaigns have
been carried out for quite some time. The concept for green process and products in
Malaysia is at the early stages stage. There is only a little knowledge about the green
idea in Malaysia in spite of all endeavours from governmental and private institutions.
About Sabah
Sabah is a state in Malaysia that is situated in the East Malaysia. It is located on
Borneo Island and it occupies the northern tenth of the island. Its tropical climate and
abundant rainfall support some of the most biologically diverse and ecologically
significant habitats known as lowland rainforests, richly vegetated mountains, peat
swamps and coastal mangroves. It is well-known as ‘The Land Below the Wind’, is
the second largest state in Malaysia. The region compasses 72,500 sq. kilometres,
finished with a coastline encompassed by the South China Sea in the West, the Sulu
Sea in the Northeast and Celebes Sea in the East, Sabah sits on the northern-most
piece of Borneo, the third biggest island on the planet, favoured with an abundance
of natural resources and indescribable beauty of its nature, Sabah is the mixture of
extraordinary and distinctive cultural identity and ethnicity of its folks, with the climate
that considered to be tropical. Sabah is blessed with its lavishness of flora and fauna
whereby the jungles in Sabah are classified as rainforest.
The economy of Sabah has always been heavily dependent on the export of its
primary and minimally processed commodities. Aside from the usual lumber milling,
the agriculture, tourism and manufacturing sectors are growing vastly, and it is
quickly becoming the main source of economy in Sabah. However, petroleum, palm
oil and cacao still remained three of the most exported commodities from the state.
Due to the land's rich natural resources, almost 1/7 of the land in areas around
Sabah is suitable for agriculture development. Figure 1 described where is Sabah
located in the map of Malaysia whilst Table 1 described Sabah at glance (Malaysia at
a glance, 2015).
Proceedings of 33rd International Business Research Conference
4 - 5 January 2016, Flora Grand Hotel, Dubai, UAE, ISBN: 978-1-922069-94-8
Figure 1, Map of Sabah, Malaysia..
2012
2013
2014
2015
73,902
73,902
Total
3.43
Male
1.79
3.61
3.67p
3.74e
1.89
1.92p
1.95e
1.64
1.72
1.75p
1.78e
2.6
5.1
1.7p
1.7e
GDP at constant 2010 prices (RM million)
61,223
63150e
66,283p
GDP per capita at current prices (RM)
19,487
18,647e
19,672p
3.2
3.1e
5.0p
Labour Force
('000)
1,579.8
1,669.4
1,703.9
Employed ('000)
1,494.5
1,583.4
1,624.4
85.3
86
79.5
67.4
69.9
70.0
5.4
5.2
4.7
2
Area (km )
Population (million)
Female
Average Annual Population Growth Rate
(%)
Gross Domestic Product (GDP)
GDP Growth (%)
Employment
Unemployed ('000)
Labour Force
Participation
Rates, LFPR (%)
Unemployment
Rate (%)
Table 1, Sabah at a Glance
SMEs Definitions
As summarized by Jan Khan & Khalique (2014), throughout the world, the role of
small and medium sized enterprises (SMEs) is turning out to be progressively
noticeable and is seen as very crucial to the world economies (Wiklund & Shepherd,
2005). SMEs can be established in any locality for any sort of business activity in
urban or rural area (Khalique et al., 2011). The abbreviation form of SME is regularly
used as a part of universal associations and in European Union nations, for example,
the United Nations (UN), the World Bank and the World Trade Organization (WTO).
The small and medium business (SMB) is additionally overall in a couple of different
nations of the world (Syed et al., 2012).
In Malaysia the SME Corporation is an agency that is responsible towards the
development of small and medium enterprises (SMEs) which was established on the
2nd of May 1996. It is a central coordinating agency that formulates overall policies
and strategies for SMEs as well as coordinate the implementation of the
development programmes. Further, in 2004 the National SME Development Council
(NSAC) was established that acts as the highest policy making body to formulate
strategies for SME development across all economic sectors in the country. The
NSDC is chaired by the Prime Minister of Malaysia (SME Corporation Malaysia,
2015).The definition of SMEs in Malaysia according to SME Corporation Malaysia as
the Secretariat to the NSDC, is tabulated in Table 2. Jan Khan & Khalique (2014)
summarized that the classification and definition of businesses are generally based
on the quantifiable characteristics such as number of employees, sales volume or
worth of assets. The particular definition for SMEs, utilized by every nation as a part
of the world, is generally taking into account a few distinctive criteria which
Proceedings of 33rd International Business Research Conference
4 - 5 January 2016, Flora Grand Hotel, Dubai, UAE, ISBN: 978-1-922069-94-8
incorporate deals or resources, number of workers and levels of capital,
(Mohammad, 2012). No uniform meaning of SMEs is accessible in the literature.
Category
Manufacturing
Services & Other Sectors
Small
Medium
Sales
turnover
from
RM300,000 to less than
RM15 million OR full-time
employees from 5 to less
than 75
Sales
turnover
from
RM300,000 to less than
RM3 million OR full-time
employees from 5 to less
than 30
Sales turnover from RM15
million to not exceeding
RM50 million OR fulltime employees from 75
to not exceeding 200
Sales turnover from RM3
million to not exceeding
RM20 million OR fulltime employees from 30
to not exceeding 75
Table 2, Definition by Size of Operation (SME Corporation Malaysia, 2015)
Based on Table 2, in the event that a business fulfils either one criteria over the
diverse sizes of operation, then the smaller size will be pertinent. For instance, if an
association's business turnover falls under microenterprise however job falls under
small, the business will be deemed as a microenterprise. According to Jan Khan &
Khalique, (2014), some advanced economies have succeeded because small and
medium enterprises form a fundamental part of the economies, comprising over 98%
of total establishments and contributing to over 65% of employment as well as over
50% of the gross domestic product. In spite of the fact that, the numbers may be
lower in Malaysia, SMEs can possibly contribute significantly to the economy and can
give a solid establishment to the development of new businesses and additionally
reinforcing the current ones, for Malaysia's future advancement. Now the economy is
shifting from industry-based to a knowledge-based economy to achieve the vision
2020 to become a developed country (Jan Khan & Khalique, 2014)
According to Samad (2007), competitive and resilient SMEs are imperative in the
improvement and development process of the Malaysian economy including the
adoption of appropriate strategy, as SMEs have great potential to be the engine of
the economic growth as could be seen in other developed countries. In Malaysia,
most SMEs require support or assistance from the government, especially to be
more competitive in the global business environment.
Key determinants to green entrepreneurship among SME entrepreneurs in Malaysia
Accordingly, in terms of green entrepreneurship practices, previous research has
highlighted various key determinants towards promoting green entrepreneurship
practices among SME entrepreneurs. The factors are:
a) Economic benefits
In general, one will always think that to apply green entrepreneurship in daily
operation will be costly as additional measures is required when implementing it. For
example when applying an Integrated Building System (IBS) for building construction,
if looking on the materials only will be costly. IBS can be considered as green
entrepreneurship since applying the system will reduce the uncertainty during
construction and hence has a better control of the work process. Even though the
materials cost is a bit higher, the work can be carried out faster and fewer workers
Proceedings of 33rd International Business Research Conference
4 - 5 January 2016, Flora Grand Hotel, Dubai, UAE, ISBN: 978-1-922069-94-8
are required to perform the works if compared to the conventional method. With
better control of the work process, the total cost of carrying out the job will be
competitive enough for this system to be chosen. Economic benefits can also be in
the form of green incentives. As highlighted in the previous research (Ahmed, Julian,
& Mahajar, 2006), incentives for green entrepreneurship include tariff reduction,
attractive export incentive, opportunities to reduce inventories and a few other
incentives are able to help in promoting green entrepreneurship in Malaysia.
b) Site location
These factors of site location will look into how the implementation of green
entrepreneurship will be affected. In general, one will think that if the location is a bit
far from the town area, the implementation of green entrepreneurship is a bit difficult.
In theory, one needs access to the readily supply chain in adopting this green
entrepreneurship. Say, to implement IBS system for building construction, the road
leading to site must be readily available. The materials which is in a modular form
needs to be transported to the project site. Without good access road, this green
entrepreneurship cannot be implemented and hence has to adopt the conventional
method in carrying out the work. For agriculture sector, this access road issue will not
contribute much on the success of implementing the green entrepreneurship. The
work control process is a more practical way of achieving the success. The location
of waterways and internal access must be fully determined in establishing the most
suitable area for plantations.
c) Government policies
Government has a major role to play in making sure the success of implementing the
green entrepreneurship. Incentive to be given for adopting the green
entrepreneurship will be a catalyst to the company. This is to include grant, tax
deduction and others that to be given to any company that adopting green
entrepreneurship in their daily operations. For Malaysia case, this development of
green entrepreneurship is directly under the ‘Kementerian Tenaga Teknology Hijau
Dan Air’ (KeTTHA). The agency been established in April 2009, with green
entrepreneurship as one of their main function has shown government’s commitment
in adopting green entrepreneurship. Sabah Forestery Department has also shown a
great impact on the green entrepreneurship practices in Sabah.
Based on the above, the theoretical framework is established.
Economic
benefits
Site location
Government
policies
Figure 2, Theoretical Framework.
Green
entrepreneurship
practices
Proceedings of 33rd International Business Research Conference
4 - 5 January 2016, Flora Grand Hotel, Dubai, UAE, ISBN: 978-1-922069-94-8
3. The Methodology and research hypotheses
Based on the framework, the study proposes the following hypotheses:
H1: Economics benefits influences the green entrepreneurship in Malaysia.
H2: Site location of industry influences the green entrepreneurship in Malaysia.
H3: Government policies influences the green entrepreneurship in Malaysia.
The first part of the research will be qualitative in nature which comprise of interviews
with SME entrepreneurs in Malaysia. The second part of this study is a quantitative
type of research which specifies a correlation study. It is mainly to analyze the
relationships among variables. This study will utilize a cross sectional data collection
method. Currently there are approximately almost 500 SME entrepreneurs in Sabah
(SMECorp, 2015).
In the first phase of data collection, a purposive sampling method selecting a mixture
of SMEs across industries ranging in size will be carried out. Interviews will then be
carried out with the SME entrepreneurs to understand in-depth their day-to-day
activities, problems and difficulties in practicing green entrepreneurship.
The second phase of data collection involves the distribution of survey
questionnaires to the SME entrepreneurs in Sabah which will be selected randomly
from the list provided by SMECorp. Data collected from the completed questionnaire
will be coded and analyzed using the aid of statistical analysis tool, Statistical
Package for the Social Science Software (SPSS) version 21.0. Inferential statistics
will be used in hypotheses testing for all variables. The factor analysis will be used
for all items in this study in order to confirm the dimensions of the concept that have
been operationally defined, as well as indicating which of the items are appropriate
for each dimension (Sekaran and Bougie, 2009). In addition, the reliability test will be
used to test the reliability of each item. Next the Correlation and Multiple Regression
will also be used in this study; Correlation analysis will also be used to establish
concurrent and predictive validity or convergent and discriminate validity and Multiple
regression analysis will be used to assess the degree and the character of the
relationship between the independent variables and dependent variable.
5. Expected findings and Conclusions
This is a preliminary study on green entrepreneurship in Malaysia. Therefore, at this
stage only three key variables are highlighted particularly when established data on
the green entrepreneurship practices among SMEs in Malaysia especially in Sabah
is scarcely available. The acceptance of SMEs in adopting the green
entrepreneurship practices in their daily operation can also be questioned. In general,
the perception among the industry players is an extra cost that will be directly
associated with the green entrepreneurship practice. Lacking of available data is
obviously seen during the studies.
This is similar for the key determinants that influence the adaptation of green
entrepreneurship practices. Three key determinants were discussed; economic
benefits, government policies and site locations. This study will help to provide an
understanding on the key determinants of green entrepreneurship, as different nature
of businesses required different approach in adopting green entrepreneurship
practice. Hence, proper planning can be done beforehand, which will result in higher
Proceedings of 33rd International Business Research Conference
4 - 5 January 2016, Flora Grand Hotel, Dubai, UAE, ISBN: 978-1-922069-94-8
probability of success. On the three key determinants being discussed that are
Economic benefits, and Site Locations and Government policies; ranking of these
three key determinants need also be established. This will benefit the SMEs players,
as one can forecast the direction in anticipating the green entrepreneurship practices.
Green entrepreneurship among SMEs in Malaysia, especially in Sabah is obviously
scarce. The acceptance of SMEs in adopting the green technology in their daily
operation can be questioned since in general, one will think that extra cost will be
directly associated with it. Lack of studies and available data are noticeable when
carrying out the studies. This is also the same for the key determinants that
influencing the adaptation of the green technology. Further studies will be carried out
in near future on the three key determinants being discussed which are the economic
benefits, motivation and knowledge, government policies and site locations. Ranking
of these five key determinants will be made and thus will be benefited to the
development of the green technology among the SMEs in Malaysia.
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