Government-Business Coordination and Small Enterprise Performance in the Machine Tools Sector in Malaysia

Abstract

This paper compares the performance of small and medium size subcontractors in the machine tools industry in two different states of Malaysia, Penang and Kelang Valley. It is shown that while Penang has developed a fairly successful small and medium subcontracting industry, Kelang Valley has not. The difference in performance (measured by value-added) is due in part to differences in the extent and quality of government-business coordination. In contrast to Kelang Valley, the relatively autonomous state government of Penang took a pro-active approach to business development and provided support to its small and medium enterprises (mainly Chinese-owned) in the form of public training and market-information exchange.