the internationalization of malaysian engineering consulting

Southern Cross UniversityePublications@SCU

Theses

2012

The internationalization of Malaysian engineeringconsulting services firmsWai Wah WongSouthern Cross University

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Publication detailsWong, WW 2012, 'The internationalization of Malaysian engineering consulting services firms', DBA thesis, Southern CrossUniversity, Lismore, NSW.Copyright WW Wong 2012

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THE INTERNATIONALIZATION OF

MALAYSIAN ENGINEERING

CONSULTING SERVICES FIRMS

WONG WAI WAH

BE (HONS.) (MU), MBA (UEL)

A RESEARCH THESIS SUBMITTED IN PARTIAL FULFILLMENT

OF THE REQUIREMENT FOR THE DEGREE OF

DOCTOR OF BUSINESS ADMINISTRATION

SOUTHERN CROSS UNIVERSITY

AUSTRALIA

APRIL 2012

i

DECLARATION

I certify that the work presented in this thesis is, to the best of my knowledge and belief,

original, except as acknowledged in the text, and that the material has not been submitted,

either in whole or in part, for a degree at this or any other university.

I acknowledge that I have read and understood the University’s rules, requirements,

procedures and policy relating to my higher degree research award and to my thesis. I

certify that I have complied with the rules, requirements, procedures and policy of the

University.

………………………………….

Wong Wai Wah

April 2012

ii

ACKNOWLEDGEMENTS

I wish to express my gratitude and thanks all those individuals and organizations who have

helped me and contributed to the completion of this thesis. First and foremost, I want to

thank City University College of Science and Technology for conducting this DBA

programme for which I had the opportunity to participate. I am also indebted to my

company, Sepakat Setia Perunding Sdn Bhd, for providing me the necessary office

facilities, support and assistance in my study and the preparation of this thesis.

A special thank goes to my thesis supervisor, Professor Dr. A Selvanathan for his

invaluable insights, suggestions, encouragement, guidance and time spent in reading and

correcting my manuscript. Also thanks to Dr Tan Lin Lah for encouraging me to

commence this DBA research programme. I also want to thank Ms Chew Chuw Keok

who helped me to source reference books from University Malaya and University Putra

Malaysia as well as journals from the internet database. I must also thank Ms Jeslyn Lam

Kai Yin who untiringly typed the manuscript and organized my study materials. I also like

to extend my appreciation to Mr Mohd Adhafi bin Abdul Hamid who helped me to collect

and return the library books, to all those who responded and replied my survey

questionnaires and those who voluntarily took part in the experience survey and focus

group meeting.

Last but not least, I must thank my wife and children for their support, patience and

understanding as I did not spend enough time with them during the course of my study and

thesis preparation.

iii

ABSTRACT

This exploratory research focused on the internationalization of the Malaysian ECS firms

for increasing the service export and the Research Problem: ‘What are the important

critical factors for the successful internationalization of Malaysian ECS firms?’. It

examined the challenges that the Malaysian ECS industry faces in its efforts to export its

services to international markets.

The research reviewed the key pertinent theories relating to internationalization, the global

engineering consulting industry and the Malaysian ECS industry. It also examined the

Government’s policies towards the Malaysian ECS industry and its export. The review

revealed gaps in the existing body of knowledge and these permitted the crafting of three

research propositions for testing by this research through a mixed methodology involving

both qualitative and quantitative approach with the former being dominant. The primary

data was collected from a focus group meeting and a structured questionnaire survey.

The research findings underlined the need for clear and coordinated Government policies,

and the regulatory framework by the policy makers for the development of the ECS

industry to compete effectively in the world markets. This includes appropriate

amendments to the REA and to change the composition of the Board of Engineers,

Malaysia (BEM) to include more ECS practitioners.

The findings of the study also confirmed the need for a coherent policy to support the

export initiatives of the Malaysian ECS industry. This includes the setting up of a

dedicated one stop agency for the promotion of export programmes and implementation of

effective strategies and focused planning.

The research made recommendations to the Malaysian ECS industry 1) to emphasize on

human capital development in management, financial, marketing and soft skills, 2) to

actively formulate and implement internationalization strategies, 3) to commit resources

for international market expansion, 4) to establish local presence to explore business

iv

opportunities and develop network relationships with local actors and, 5) to enlarge firm

size by mergers and acquisitions (M&As).

In line with the research objectives, the research findings extended the body of knowledge

on the research topic and contributed to theory building. Finally, the study offered

recommendations for further research by undertaking a more comprehensive and detailed

descriptive study on the Modified Internationalization Framework for Malaysian ECS

firms developed by this research.

Keywords:

Internationalization, globalization, liberalization, Malaysian ECS industry, Consulting

Engineers, government policies, mixed methodology, literature review, focus group,

questionnaire survey, Board of Engineers Malaysia, Registration of Engineers Act,

internationalization theories, strategies, Modified Internationalization Framework.

v

LIST OF ABBREVIATIONS

ABET Accreditation Board for Engineering and Technology

ACEM Association of Consulting Engineers Malaysia

AFAS ASEAN Framework Agreement on Services

AFTA ASEAN Free Trade Area

ANOVA Analysis of Variance

APEC Asia Pacific Economic Cooperation

ASEAN Association of South East Asian Nations

BAM Board of Architects Malaysia

BEM Board of Engineers Malaysia

BLS Bureau of Labour Statistics

BQSM Board of Quantity Surveyors Malaysia

CEs Consulting Engineers

CPD Continuous Professional Development

CIDB Construction Industry Development Board

DBA Doctor of Business Administration

EAC Engineering Accreditation Council

ECS Engineering Consulting Services

EIJS European Institute of Japanese Studies

ENR Engineering News – Record

ETP Economic Transformation Plan

EU European Union

EXIM Bank Export-Import Bank of Malaysia Berhad

FDI Foreign Direct Investment

FIDIC International Federation of Consulting Engineers

FTAs Free Trade Agreements

GATS General Agreement on Trade in Services

GATT General Agreement on Tariffs and Trade

GBATA Global Business and Technology Association

GDP Gross Domestic Product

vi

GNI Gross National Income

GOHK Government of Hong Kong

GOM Government of Malaysia

GOS Government of Singapore

GOT Government of Thailand

HICSS Hawaii International Conference on System Sciences

IEM Institution of Engineers, Malaysia

IMF International Monetary Fund

IMP3 Third Industrial Master Plan

IT Information Technology

M&As Mergers and Acquisitions

MATRADE Malaysia External Trade Development Corporation

MBAM Master Builders Association Malaysia

MFN Most Favoured Nation

MITI Ministry of International Trade and Industry

MNCs Multinational Corporations

MRA Mutual Recognition Agreement

MSTI Main Science and Technology Indicators

10MP 10th Malaysia Plan

NAFTA North American Free Trade Agreement

NAPSEC National Professional Services Export Council

NEAC National Economic Advisory Council

NIEs Newly Industrialized Economies

OECD Organization for Economic Co-operation and Development

PAE Professional Assessment Examination

PAM Pertubuhan Akitek Malaysia

PEMANDU Performance Management and Delivery Unit

PEs Professional Engineers

PRC People’s Republic of China

PSDC Professional Services Development Corporation

PSPs Professional Service Providers

RBV Resource-based View

REA Registration of Engineers Act 1967

vii

R&D Research and Development

RM Ringgit Malaysia

SMECM SME Corporation Malaysia

SMEs Small and Medium Enterprises

SPSS Statistical Package for the Social Sciences

S&T Science and Technology

TRIMS Trade-Related Investment Measures

TRIPS Trade-Related Intellectual Property Rights

UISE UNESCO Institute for Statistics in EdStats

UK United Kingdom

UNCTAD United Nations Conference for Trade and Development

UNDP United Nations Development Programme

UNESCO United Nations Educational, Scientific and Cultural Organization

US United States

USA United States of America

USD United States Dollar

USPTO United States Patent and Trademark Office

USTR United States Trade Representative

WTO World Trade Organization

viii

TABLE OF CONTENTS

Title Page

Declaration i

Acknowledgements ii

Abstract iii

List of Abbreviations v

Table of Contents viii

List of Tables xvi

List of Figures xix

CHAPTER ONE - INTRODUCTION

1.1 Introduction 1

1.2 Background to the Research 3

1.3 Justification for the Research and Contributions 4

1.4 The Research Problem 5

1.4.1 The Research Questions 6

1.4.2 The Research Propositions 6

1.4.3 The Research Objectives 7

1.5 Unit of Analysis 7

1.6 Research Methodology 8

1.6.1 Data Collection 8

1.6.1.1 The Literature Review 9

1.6.1.2 The Focus Group 10

1.6.1.3 The Questionnaire Survey 10

1.6.1.4 Data Analysis 11

1.6.1.5 Research Quality 11

1.7 Ethical Issues 12

1.8 Definition of Key Terms 12

1.9 Limitations 12

1.10 Structure of the Thesis 13

1.11 Conclusion 15

ix

CHAPTER TWO – LITERATURE REVIEW

2.1 Introduction 16

2.1.1 Purposes of this Review 16

2.1.2 Concept Map and Structure of Chapter Two 16

2.2 The Malaysian Context 20

2.2.1 The Malaysia’s Economic Structure 20

2.2.2 The Malaysia’s Economic Development 20

2.2.3 Brief History of Malaysian Engineering Consulting Practices 22

2.2.4 Conclusion 23

2.3 The Global Engineering Consulting Industry 23

2.3.1 Defining the Engineering Consulting Industry 23

2.3.2 The Engineering Consultancy Services 25

2.3.2.1 The Engineering Consulting Firms 28

2.3.2.2 The Engineering Consulting Market 29

2.3.2.3 The Engineering Consulting Market Size 31

2.3.2.4 The Global ECS Players 31

2.3.3 The Engineering Consulting Market Trends 32

2.3.3.1 Internationalization of Services 32

2.3.3.2 Offshore Outsourcing 33

2.3.3.3 Mergers and Acquisitions 33

2.3.4 Public Policy Support for Export 34

2.3.5 Conclusion 37

2.4 Internationalization and Globalization 37

2.4.1 The Meaning of Internationalization 37

2.4.2 The Forces of Globalization 39

2.4.2.1 Lowering of the Barriers to Trade and Investment 40

2.4.2.2 The Globalization of Services : The General Agreement on Trade in Services

43

2.4.3 Selected Internationalization Theories and Models 46

2.4.3.1 Stage Models of Internationalization 47

2.4.3.2 Network Perspective to Internationalization 52

2.4.3.3 Internationalization Framework for Service Firms 55

x

2.4.4 Conclusion 57

2.5 The Malaysian Engineering Consulting Industry 57

2.5.1 Registration of Engineers in Malaysia 57

2.5.2 Registration of Engineering Consulting Firms in Malaysia 61

2.5.2.1 Implication of the Registration of Engineers Act 1967

61

2.5.2.2 Comparative Legislations in Selected Regional Countries

62

2.5.3 Other Major Malaysian Engineering Organizations 64

2.5.3.1 The Institution of Engineers, Malaysia 64

2.5.3.2 The Association of Consulting Engineers Malaysia 64

2.5.4 The Malaysian Engineering Consulting Market 65

2.5.4.1 The Major Malaysian ECS Players 65

2.5.4.2 Malaysian ECS Export Performance 67

2.5.5 Challenges Faced By Internationalizing Malaysian ECS Firms

67

2.5.5.1 Global Competition 69

2.5.5.2 Global Mindset 71

2.5.5.3 Financial Capital 73

2.5.5.4 Human Capital 74

2.5.5.5 Innovation 77

2.5.6 Conclusion 78

2.6 The Malaysian Government Policies on Services Exports 79

2.6.1 The Malaysian Government’s Support for Services Exports 79

2.6.2 The Malaysian Government’s Service Support Delivery Framework

81

2.6.2.1 The Malaysian External Trade Development Corporation

82

2.6.2.2 Professional Services Development Corporation 82

2.6.2.3 National Professional Services Export Council 84

2.6.2.4 The SME Corporation Malaysia 85

2.6.2.5 The Export-Import Bank of Malaysia 86

2.6.3 The Effectiveness of the Malaysian Government’s Export Programmes

86

xi

2.6.4 Conclusion 87

2.7 The Competitive Positioning of the Malaysian ECS Industry 87

2.7.1 Threat of New Entrants 88

2.7.2 The Threat of Substitutes 89

2.7.3 The Bargaining Power of Buyers 89

2.7.4 Bargaining Power of Suppliers 90

2.7.5 Rivalry among Competitors 90

2.7.6 Conclusion 91

2.8 Secondary Data Analysis 91

2.8.1 Identification of the Research Gaps 91

2.8.2 Research Questions Development 92

2.8.3 The Research Objectives 95

2.8.4 The Research Propositions 95

2.9 Conclusion 96

CHAPTER THREE – RESEARCH METHODOLOGY

3.1 Introduction 98

3.1.1 Structure of Chapter Three 98

3.2 Research Approach 100

3.2.1 Justification to a Mixed Methodology 105

3.2.2 The Preferred Type of Mixed Methodology 107

3.2.3 Conclusion 109

3.3 The Research Design 110

3.3.1 Exploratory Research 111

3.3.2 Descriptive Research 111

3.3.3 Explanatory Research 112

3.3.4 The Preferred Research Design 112

3.3.5 Unit of Analysis 113


3.4 Data Collection Instruments 114

3.4.1 Secondary Data Collection 114

3.4.2 The Experience Survey 115

3.4.2.1 Selection of the Experience Survey Participants 116

xii

3.4.3 Use of Case Studies as a Data Collection Technique 116

3.4.3.1 Criteria of Case Selection 117

3.4.3.2 The Selected Cases 118

3.4.3.3 Salient Features of the Selected Cases 118

3.4.3.4 Collection of Data from the Case Firms 120

3.4.4 The Focus Group 120

3.4.4.1 Selection and Composition of the Focus Group 122

3.4.4.2 Planning the Focus Group Meeting 123

3.4.4.3 Conduct of the Focus Group 123

3.4.5 The Sample Survey 125

3.4.5.1 Questionnaire Surveys 125

3.4.5.2 Sampling 127

3.4.5.3 The Target Population and the Sample Size 129

3.4.5.4 Recruitment of the Survey Participants 130

3.4.5.5 Designing the Questionnaire 131

3.4.5.6 Attitude Rating Scales 134

3.4.5.7 Pretesting the Questionnaire 135

3.4.5.8 The Finalized Questionnaire 136

3.4.5.9 Administration of the Questionnaire 139

3.4.5.10 The Survey Responses 140


3.5 Research Quality 140

3.5.1 Reliability 140

3.5.2 Validity 141

3.5.2.1 External Validity 141

3.5.2.2 Internal Validity 142

3.5.2.3 Construct Validity 142

3.5.3 Triangulation 143

3.6 Data Analysis Procedures 144

3.6.1 Qualitative Data Analysis 144

3.6.1.1 Data Reduction 144

3.6.1.2 Data Display 145

3.6.1.3 Conclusion Drawing and Verification 145

xiii

3.6.2 Quantitative Data Analysis 146

3.7 Research Ethics 147

3.8 Conclusion 148

CHAPTER FOUR – DATA ANALYSIS

4.1 Introduction 150

4.1.1 Structure of Chapter Four 151

4.2 Data Analysis for Research Proposition 1 153

4.2.1 Analysis of the Focus Group Meeting 153

4.2.2 Analysis of Questionnaire Survey Responses 155

4.2.2.1 Statement 1 155

4.2.2.2 Statement 2 157

4.2.2.3 Statement 3 159

4.2.2.4 Statement 4 161

4.2.2.5 Analysis of the Combined Survey Responses to Proposition 1

163

4.2.3 Testing of Research Proposition 1 167




4.3.2.1 Statement 5 170

4.3.2.2 Statement 6 172

4.3.2.3 Statement 7 175

4.3.2.4 Statement 8 177


179





4.4.2.1 Statement 9 186

4.4.2.2 Statement 10 188

4.4.2.3 Statement 11 190

xiv

4.4.2.4 Statement 12 192


195


4.5 Analysis of Unplanned Data 199

4.6 Conclusion 200

CHAPTER FIVE – CONCLUSION

5.1 Introduction 201

5.2 Conclusions about Each Research Proposition 204

5.2.1 Research Proposition 1 204



5.3 Conclusions about the Research Problem 211

5.3.1 Summary 214

5.4 Implications for Theory 214

5.5 Implications for Policy and Practice 216

5.5.1 Implications for Policy 217

5.5.1.1 The Registration of Engineers Act 1967 218

5.5.1.2 A Dedicated ECS Support Agency 219

5.5.1.3 Additional Financial Support Measures 220

5.5.2 Implications for the Malaysian Engineering Consulting Services Industry

221

5.5.2.1 Venturing Abroad for Corporate Sustainability 221

5.5.2.2 Human Capital Development 222

5.5.2.3 Internationalization Strategy 223

5.5.2.4 Network Relationships 223

5.5.2.5 Mergers and Acquisitions 224

5.5.3 Summary 225

5.6 Research Limitations 225

5.7 Further Research 225

5.8 Conclusion 226

xv

BIBLIOGRAPHY 227

APPENDIX

APPENDIX A : Discussion Guide - Focus Group 261

APPENDIX B : Information Sheet - Focus Group 263

APPENDIX C : Consent Form - Focus Group 266

APPENDIX D : Information Sheet - Questionnaire 268

APPENDIX E : The Survey Questionnaire 271

APPENDIX F : Human Research Ethics Committee (HREC) Notification 275

APPENDIX G : Questionnaire Survey Responses (Raw Data) 278

APPENDIX H : Minutes of Focus Group Meeting 283

xvi

LIST OF TABLES

Chapter 2

Table 2.1 : Structure of Production, 2006 - 2010 20

Table 2.2 : The Characteristics of Professional Service Firms 25

Table 2.3 : Comparison between Engineering and Construction Services 27

Table 2.4 : Major Popular Types of Engineering Consulting Services 28

Table 2.5 : The Top 10 Global Engineering Design Firms in 2010 32

Table 2.6 : Company Needs and Export Promotion Programmes 36

Table 2.7 : Some Definitions of Internationalization 38

Table 2.8 : Forms of Economic Integration 42

Table 2.9 : Abridge Content of GATS 43

Table 2.10 : Modes of International Service Supply 45

Table 2.11 : Selected Innovation-Related Internationalization Models 51

Table 2.12 : Major Differences in Statutory Requirements 63

Table 2.13 : Gross Federal Government Development Expenditure (RM Billion)

66

Table 2.14 : Ten Major ECS Firms in Malaysia 66

Table 2.15 : Foreign Presence of Malaysian ECS Firms 68

Table 2.16 : Expenditure on Education (% of GDP) 75

Table 2.17 : Indicators of Technical Human Capital 76

Table 2.18 : Patents Granted by the USPTO 78

Table 2.19 : MATRADE Export Assistance Programmes 83

Table 2.20 : NAPSEC’s Terms of Reference 84

Table 2.21 : Identification of Research Gaps 93

Chapter 3

Table 3.1 : Principal Research Paradigms and Associated Views 103

Table 3.2 : Characteristics of Quantitative and Qualitative Paradigms 105

Table 3.3 : The Greene and Caracelli Designs for Mixed Methods Research

108

Table 3.4 : The Creswell & Plano Clark Mixed Method Design Types 108

Table 3.5 : Basic Research Designs 110

xvii

Table 3.6 : Emphasis of Case Study Research 117

Table 3.7 : Advantages of Case Studies 117

Table 3.8 : Salient Features of the Case Firms 119

Table 3.9 : Strengths and Weaknesses of Focus Groups 121

Table 3.10 : Discussion Guide and Topic Agenda for the Focus Group 124

Table 3.11 : Non-Probability Sampling Techniques 128

Table 3.12 : Three Attitude Rating Scales 134

Chapter 4

Table 4.1 : Cross Tabulation of Survey Responses – Statement 1 156

Table 4.2 : Case Summary – Statement 1 157

Table 4.3 : Multiple Comparisons between Groups for Statement 1 157










Table 4.13 : Cross Tabulation of Combined Survey Responses for Proposition 1

164

Table 4.14 : Case Summary for Proposition 1 165

Table 4.15 : Pearson Correlations between P1, Statements 1, 2, 3 and 4 166

Table 4.16 : Multiple Comparisons between Groups for Proposition 1 167








xviii







180











Table 4.40 : Case Summary - Statement 11 192






195




Chapter 5

Table 5.1 : Response Pattern to Research Proposition 1 205



Table 5.4 : Investigation of Research Issues 213

xix

LIST OF FIGURES

Chapter 1

Figure 1.1 : The Structure of Chapter One 2

Figure 1.2 : The Research Master Plan 9

Figure 1.3 : Thesis Chapter Structure 14

Chapter 2

Figure 2.1 : The Concept Map of Chapter Two 17

Figure 2.2 : The Structure of Chapter Two 19

Figure 2.3 : Malaysia’s Economic Transformation 21

Figure 2.4 : Market Sector 30

Figure 2.5 : Contributions of Design Markets 30

Figure 2.6 : The Basic Mechanism of Internationalization 48

Figure 2.7 : The Establishment Chain of International Involvement 49

Figure 2.8 : Basic Structure of the Network Model 53

Figure 2.9 : Internationalization Framework for Service Firms 56

Figure 2.10 : The Value Chain of Malaysian Engineer’s Development 59

Figure 2.11 : Regional Breakdown of Malaysian ECS Firms and Their Foreign Markets

68

Figure 2.12 : Challenges Faced By Internationalizing Malaysian ECS Firms

69

Figure 2.13 : Porter’s Three Generic Strategies 70

Figure 2.14 : Sources of Superior Performance in Exporting 71

Figure 2.15 : The Two Dimensions of Global Mindset 72

Figure 2.16 : Conceptual Model of Human Capital Investment, Human Capital Effectiveness and Firm Performances

75

Figure 2.17 : The Innovation Value Chain 78

Figure 2.18 : The Projected Services Sector Growth and Share to GDP for 10MP

80

Figure 2.19 : High Potential Business Services Sub-Segments 81

Figure 2.20 : Porter’s Five Competitive Forces 88

xx

Chapter 3

Figure 3.1 : Structure of Chapter Three 99

Figure 3.2 : Approaches to Theory-Development Research 101

Figure 3.3 : The Research Process 101

Figure 3.4 : Influences on Business Research 102

Figure 3.5 : The Three Major Research Paradigms, Including Subtypes of Mixed Methods Research

106

Figure 3.6 : Morgan Priority-Sequence Model of Mixed Method 109

Figure 3.7 : The Preferred Research Design 113

Figure 3.8 : Data Collection Plan 115

Figure 3.9 : Composition of the Survey Sample 131

Figure 3.10 : Questionnaire Design Process 132

Figure 3.11 : Likert Scale and Score Assigned for the Survey 135

Figure 3.12 : Qualitative Data Analysis 145

Figure 3.13 : Quantitative Data – Preparation Process 146

Chapter 4

Figure 4.1 : Structure of Chapter Four 152

Figure 4.2 : Combined and Re-coded Reponses to Statement 1 156




Figure 4.6 : Combined and Re-coded Reponses to Proposition 1 164

Figure 4.7 : Combined and Re-coded Reponses to Proposition 1 by Groups

165

Figure 4.8 : Group Mean Ratings to Proposition 1 166

Figure 4.9 : Combined and Re-coded Responses to Statement 5 171




Figure 4.13 : Combined and Re-coded Responses to Proposition 2 180


181

xxi






Figure 4.20 : Combined and Re-coded Responses to Proposition 3 195


196


Chapter 5

Figure 5.1 : Structure of Chapter Five 203

Figure 5.2 : Modified Internationalization Framework for Malaysian ECS Firms

217

1

CHAPTER ONE – INTRODUCTION

1.1 Introduction

This Chapter provides an overview of the thesis titled ‘The Internationalization of

Malaysian Engineering Consulting Services Firms’. Guided by Perry (2002), the Chapter

has 11 Sections as shown in Figure 1.1.

This Section introduces the Chapter and presents the chapter structure.

Section 1.2 presents the background to the research based on the preliminary literature

review. It reflects the significant role played by the Malaysian engineering consulting

services (ECS) firms in Malaysia’s economic development.

Section 1.3 discusses the challenges that Malaysian ECS firms face in an increasingly

globalized and liberalized world. It highlights the pertinent research issues and justifies

the need for the research.

Section 1.4 states the research problem, the research questions, the research propositions

and the research objectives.

Section 1.5 presents the unit of analysis for the research.

Section 1.6 provides an overview of the research design and research methodology. It

also outlines the collection of secondary and primary data and their analysis.

Section 1.7 addresses the ethical issues related to the conduct of the research.

Section 1.8 defines the key terms used in the research.

2

Figure 1.1 : The Structure of Chapter One

Source : Developed for this research

1.1 Introduction

1.2 Background to the Research

1.3 Justification for the Research and Contributions

1.4 The Research Problem

1.5 Unit of Analysis

1.6 Research Methodology

1.7 Ethical Issues

1.8 Definition of Key Terms

1.9 Limitations

1.10 Structure of the Thesis

1.11 Conclusion

3

Section 1.9 outlines the limitations of the research.

Section 1.10 depicts the structure of the thesis and briefly discusses each of the five

chapters.

Section 1.11 presents the conclusion of this Chapter.

1.2 Background to the Research

Malaysia gained independence in 1957. Since then the Malaysian ECS industry has

played an increasingly important role in the economic development of the country. In the

sixties and seventies, the Malaysian engineers benefited from technology transfers from

foreign ECS firms through partnership. This enabled them to advance their skills and

expertise to meet world-class standards and to undertake a variety of mega projects

(Accenture 2010; Chelvanayagam 1994; IEM 2001; Judin 2001; Moggie 2000). Some

notable projects were the North-South Highway, Penang Bridge, Petronas Twin Towers,

Kuala Lumpur International Airport and Light Rail Transit Systems (Hamdan 1999).

The Malaysian ECS industry is highly regulated and protected under the Registration of

Engineers Act 1967 (REA). Only qualified Malaysian professional engineers (PEs) are

permitted to submit building plans to regulatory authorities (Chiam 2009b). Foreign ECS

firms can only operate and undertake projects in Malaysia under joint-venture

arrangements with local ECS firms (USTR 2010).

The Malaysian ECS industry’s primary revenue source is the Government’s spending on

infrastructure development. This accounted for 40% to 60% of the industry income

(Accenture 2010). However, the total revenue declined in 2009 due to a sharp drop in

domestic private investment and foreign direct investment (FDI) caused by the worldwide

financial crisis of 2008 / 2009 (GOM 2009). The market size of the Malaysian ECS

industry was estimated to range from 1.59 to 2.39 billion Ringgit Malaysia (RM) in 2009

(Accenture 2010).

4

The larger Malaysian ECS firms have average total staff strength of about 500. These

include Sepakat Setia Perunding Sdn Bhd, Minconsult Sdn Bhd, HSS Integrated Sdn Bhd

and SMHB Sdn Bhd. These multidisciplinary firms offer civil, mechanical and electrical

engineering services. Notwithstanding, the Malaysian ECS industry largely comprises

small firms.

The available literature on the export performance of Malaysian ECS firms indicates that

the actual exports of Malaysia ECS firms are very small (Looi 2003). This could be due

to Malaysian ECS firms preferring the comfort zone of the domestic market rather than to

venture into the highly competitive and unfamiliar international markets (Wong 2000;

IEM 2001). However, due to the small domestic market, Malaysian ECS firms are

increasingly participating in global projects particularly in the Association of South East

Asian Nations (ASEAN) region, other Asian countries and the Middle East (Wong 2000).

1.3 Justification for the Research and Contributions

The global market place for trade and services is being rapidly liberalized with the

implementation of the General Agreement on Trade in Services (GATS) under the World

Trade Organization (WTO) (OECD 2002). This has generated intense competition in the

ECS industry worldwide which is impacting on the Malaysian ECS firms venturing

abroad (Wong 2000). The Malaysian Government targets to achieve full liberalization of

the ECS sector by the end of 2012 (Chuah 2009, 2010; Mohamed 2010).

The Malaysian Third Industrial Master Plan (IMP3) 2006 – 2020 targets the service sector

as the main growth engine of the economy. The professional services are one of the eight

services sub-sectors identified for further development. This includes the enhancement of

the competitiveness of the services sectors through the progressive liberalization and

promotion of export of services (GOM 2006a).

The services sector is projected to grow at 7.2% annually until 2015, with its contribution

to gross domestic product (GDP) increasing to 61.1%. This hinges on the Government

enhancing the capabilities of the domestic services providers to prepare them for the

competitive challenges emerging from trade liberalization (GOM 2010b).

5

As the ECS is the sector with the highest potential for economic impact (GOM 2010c),

the Government is supporting it with market intelligence, networks and government-to-

government agreements (GOM 2010b). However, the findings of prior research on the

effectiveness of Government export support programmes and initiative are contradictory

and inconclusive (Ahmed et al. 2002; Mahajar 2005; Mahajar & Junus 2006).

The findings of a study conducted by Hamdan (1999) were considered significant for this

research as they focused on the competitiveness of Malaysian engineering consulting

services and its future trends. However, these have since been overtaken by the

subsequent dynamic changes in the international market for consulting services, following

the implementation of the World Trade Organization and regional free trade agreements.

This research was therefore justified on the grounds that the findings would:

i) Extend the scholarship on issues relating to the Malaysian ECS industry,

ii) Offer recommendations for improving the export policies, incentives and

programmes of the Malaysian Government for encouraging Malaysian ECS firms

to internationalize their operations.

iii) Offer recommendations for improving the internationalization strategies of the

Malaysian ECS firms.

1.4 The Research Problem

‘The research process begins with problem discovery and identifying the problem is the

first step toward its solution’ (Zikmund 2000, p. 56). Problem definition or problem

statement is ‘a clear, precise and succinct statement of the question or issue that is to be

investigated with the goal of finding an answer or solution’ (Sekaran 2003, p. 70).

Accordingly, the research problem is stated as:

“What are the Important Critical Factors for the Successful

Internationalization of Malaysian ECS Firms?”

6

1.4.1 The Research Questions

Research questions are the translations of the research problem into specific enquiries

(Zikmund et al. 2010). They are ‘refined statements of the specific components of the

problem’ (Malhotra 2010, p. 84). A well stated research question guides the researcher to

stay on track and indicates what data to be collected to answer the questions.

Accordingly, three research questions were developed in Chapter Two on the basis of the

gaps identified in the existing body of knowledge and these are:

Research Question 1

What is the competitive global positioning of the Malaysian ECS firms in the context of

market liberalization?

Research Question 2

How adequate and effective are the existing Malaysian Government support programmes

for the internationalization of Malaysian ECS firms?

Research Question 3

What are the appropriate corporate strategies for the Malaysian ECS firms to successfully

enter new international markets?

1.4.2 The Research Propositions

Propositions are statements of relationships among concepts (Zikmund et al. 2010;

Maxfield & Babbie 2007; Berg 2009). A proposition is a testable statement (Denzin

1978). Guided by these authorities, the three research questions were translated to three

Research Propositions for empirical testing. These are:

Research Proposition 1

The Malaysian ECS firms are well positioned for global competitive advantage in the

liberalizing global markets.


7

The Malaysian Government has effective targeted support policies and programmes to

assist Malaysian ECS firms with their internationalization effort.


The exporting Malaysian ECS firms have appropriate strategies for successfully entering

new international markets.

1.4.3 The Research Objectives

The research objectives explain the purpose of the research and define what the research

tries to achieve (Zikmund et al. 2010). Based on the research questions and Research

Propositions, this research has three objectives.

Research Objective 1

To determine the competitive positioning of the Malaysian ECS firms in the context of

the forces of market liberalization.


To examine the adequacy and effectiveness of the existing Malaysian Government’s

support programmes for the internationalization of the Malaysian ECS firms.


To recommend the appropriate corporate strategies for adoption by the Malaysian ECS

firms to successfully enter new international markets.

1.5 Unit of Analysis

The unit of analysis for the research indicates ‘who should provide the data and at what

level of aggregation’ (Zikmund et al. 2010, p. 119). In view of the time, costs and

resource limitations, the unit of analysis of this study comprised the Malaysian ECS firms,

located mainly in Kuala Lumpur and the Klang Valley areas.

8

1.6 Research Methodology

‘Empirical research in social science proceeds in a variety of settings and contexts. The

choice of a design setting for any research project is generally a vital concern of the

researcher’ (Miller 1991, p. 21). Within the constraints of time and other resources,

‘there will usually be only one major methodology which suits the research problem and

associated research gaps’ (Perry 2002, p. 28).

The researcher examined the qualitative and quantitative paradigms and adopted the

mixed methodology (Cameron & Molina–Azorin 2010; Gill & Johnson 2010; Johnson,

Onwuegbuzie & Turner 2007; Johnson & Turner 2003; Morgan 1998). This is a

combination of qualitative/inductive and quantitative/deductive approaches that build on

the strengths and minimize the weaknesses of both (Denzin 1978; Steckler et al. 1992).

This research used both approaches in a complementary manner to build upon each

other’s findings (Greene & Caracelli 1997; Morgan 1998).

The data collection process involved two stages (Creswell & Plano Clark 2007; Morgan

1998) with the first being principally qualitative and exploratory in nature for theory

generation. The second was quantitative and descriptive to generalize the findings (Perry

1995). Notwithstanding, the research was largely qualitative and exploratory in nature.

The research was guided by a master plan as shown in Figure 1.2. The master plan

depicts the dimensions of the research, the selected data collection instruments, the

sources of data and the analysis procedures.

1.6.1 Data Collection

The collection of the secondary data through a comprehensive literature review is detailed

in Chapter Two. The primary data collection techniques for this research are discussed in

Chapter Three. These were a Focus Group meeting for the collection of qualitative data

and a Questionnaire Survey to obtain pertinent quantifiable data for the descriptive

research.

9

Figure 1.2 : The Research Master Plan


1.6.1.1 The Literature Review

The research as detailed in Chapter Two commenced with a detailed review of the

existing scholarship and the literature on the Malaysian context and public policies as

well as the background and focal theories (Phillips & Pugh 2005). The background

theories are the Malaysian contextual setting, globalization and internationalization

theories and trends in the global engineering consulting industry. The focal theories of

the research are the Malaysian government’s policies and the Malaysian civil, mechanical

and electrical engineering consulting industries. The aim, as suggested by Perry (2002),

was to build a theoretical foundation to serve as a basis for the research.

Literature Review

Stage One Qualitative

(Exploratory)

Stage Two Quantitative (Descriptive)

Secondary Data

Collection

Experience Survey

Focus Group

Questionnaire

Survey

Qualitative

Data Analysis

Quantitative Data

Analysis

Findings

10

The review identified the key research issues and the gaps in the body of knowledge.

This permitted the development of the research questions and the research propositions

for the testing by the research.

1.6.1.2 The Focus Group

A focus group is a group interview that capitalizes on group dynamics and interactions in

the communication between research participants in order to generate data (Kitzinger

1995). It is particularly useful for exploring people’s knowledge and experiences

(Kitzinger 1995) and in obtaining the participants’ views, impressions and opinions on

research issues (Sekaran 2003). For this reason and as discussed in Sub-Section 3.4.4, a

focus group was selected as a data collection technique to supplement the literature

review for the exploratory stage of this research.

1.6.1.3 The Questionnaire Survey

The questionnaire survey is a technique for collecting data in which a respondent is

required to answer the same set of questions in a predetermined way (De Vaus 2002).

Accordingly, this research used a structured questionnaire to ensure ‘comparability of the

data, increase speed and accuracy of recording, and facilitate data processing’ (Malhotra

2010, p. 335). It was based on five-point Likert attitude rating scale. The questionnaires

were self-administered by the respondents (Zikmund et al. 2010). The questionnaires

were pre-tested by an ‘experience survey’ comprising five knowledgeable persons.

The target population comprised the Malaysian consulting engineers (CEs), the regulatory

authorities and the contractors who utilized the ECS in their overseas projects. 180

persons were identified, based on judgemental and quota sampling, from the target

population to participate in the questionnaire survey. The recruitment process is detailed

in Sub-Section 3.4.5.4.

11

1.6.1.4 Data Analysis

The secondary data, collected through a comprehensive literature review, was analyzed to

identify gaps in the existing body of knowledge on the pertinent issues of the research

topic. The identified research gaps permitted the reaffirmation of the relevance of the

research problem, the development of the research questions and the crafting of the three

research propositions for testing by this research.

The qualitative data collected through a focus group meeting were condensed into

analytical categories on the basis of themes or concepts. The reduced data were displayed

in the form of matrices, graphs, charts and networks to facilitate the interpretation of data

and making of conclusions (Miles & Huberman 1994).

The quantitative data, collected through the questionnaire survey was analyzed through

the use of the Statistical Package for the Social Sciences (SPSS) Version 19 statistical

software. Guided by Manning and Munro (2007), the analysis techniques produced the

following outputs:

• Cross tabulations;

• Combined and re-coded responses;

• Case summaries;

• Group mean responses;

• ANOVA multiple comparisons;

• Pearson Product Moment Correlations; and

• Principal components analysis.

1.6.1.5 Research Quality

Research findings must be trustworthy and laden with scientific rigour (Bryman & Bell

2007; Neuman 2006). These relate to issues of reliability, validity and triangulation as

discussed in details in Section 3.5.

12

1.7 Ethical Issues

‘Research has an ethical-moral dimension’ (Neuman 2006, p. 129). Research ethics

ensure that research activities do not cause harm to participants or have any adverse

consequences (Cooper & Schindler 2006; Ticehurst & Veal 1999; Zikmund et al. 2010).

Diener and Crandall (1978) considered research ethics to comprise four main areas: 1)

right to privacy, 2) informed consent, 3) deception and 4) harm to participants.

This research was conducted in compliance with the National Statement on Ethical

Conduct in Human Research (2007) and was approved by the Human Research Ethics

Committee of Southern Cross University (Approval Number ECN-10-223). Details of

ethical issues considered in the research are explained in Section 3.7.

1.8 Definition of Key Terms

This Section provides the definitions of some of the key terms used in this research.

More detailed description of other important terms appears in various Chapters of the

thesis.

• Internationalization is ‘the process by which firms both increase their awareness

of the direct and indirect influence of international transactions on their future,

and establish and conduct transactions with other countries’ (Beamish 1990, p.

77).

• Globalization is ‘the flow of technology, economy, knowledge, people, values,

ideas …… across borders. Globalization affects each country in a different way

due to a nation’s individual history, traditions, culture and priorities’ (Knight

1997, p. 6).

1.9 Limitations

13

The focus group meeting and the questionnaire survey participants were located mainly in

Kuala Lumpur and Klang Valley region. This was a limitation as the findings might not

be transferable and generalized for the whole of Malaysia.

The researcher relied on judgemental and quota sampling for the selection of the

participants in the questionnaire survey. While this was necessary, given the small

number of the ECS firms and knowledgeable participants, the researcher acknowledges

that the selection process could have created an element of ‘survey bias’.

Another limitation is that the research was largely exploratory and qualitative in nature.

Even though it was complemented with quantifiable data through a questionnaire survey,

the findings, being mainly inductive, might not be appropriate for generalization.

1.10 Structure of the Thesis

This thesis adopted a unified structure (Easterby-Smith, Thorpe & Lowe 2002) with five

chapters (Perry 2002) as shown in Figure 1.3.

Chapter One sets the scene for the research. It describes the research background, the

justification of the research, its contributions, the research problem, the research questions

and the research propositions. The unit of analysis, research methodology, ethical issues,

definitions of key terms, limitations of the study and thesis chapter structure are briefly

outlined.

Chapter Two reviews the relevant literature on the background and focal theories

(Phillips & Pugh 2005) with the primary aim to build a theoretical foundation for the

research. These are the scholarship on Malaysian economy, globalization and

internationalization and global engineering consulting industry. It then presents the

Malaysian Government’s policies and the support extended to the Malaysian ECS

industry. The research issues and gaps on the existing body of knowledge were identified,

followed by the development of research questions and the crafting of three research

propositions for testing by the research.

14

Figure 1.3 : Thesis Chapter Structure


Chapter Three discusses the methodology for the research. It examines the various

research paradigms, and justifies the use of the mixed method methodology. It also

justifies the two stages design approach. The first and dominant stage is qualitative and

exploratory with the second complementary stage being quantitative and descriptive. The

data collection instruments are then discussed; namely an experience survey, a focus

group and questionnaire survey. The data analysis processes and the ethical issues

pertinent to the research are also presented.

Chapter Four analyzes the collected primary data from the focus group meeting and the

questionnaire survey. These relate to the three research propositions and the 12 statements

that were in the questionnaire. The chapter also presents the unplanned data that emerged

from the focus group meeting.

Chapter One Introduction

Chapter Two Literature Review

Chapter Three Research

Methodology

Chapter Four Data Analysis

Chapter Five Conclusion

15

Chapter Five presents the conclusions based on the research findings in respect of each

research proposition and the research problem. This includes a comparative analysis of

the research findings with those of the literature reviewed in Chapter Two and then

presents the implications of the research for theory development, policy formulation and

practice. It then offers recommendations for the successful internationalization of the

Malaysian ECS firms, and proposes new theory development. Suggestions are also

offered for future research.

1.11 Conclusion

This Chapter laid the foundation for the research. It introduced the research topic, the

research problem, the research questions and the research propositions. It justified the

need for the research and identified its contributions to scholarships, policy and practice.

It then selected the research paradigms, the research approach, the research design and the

data collection instruments. The Chapter also introduced the measures to improve

research quality and address ethical concerns. The next Chapter presents the literature

review for identifying the key research issues and the gaps in the existing body of

knowledge.

16

CHAPTER TWO – LITERATURE REVIEW

2.1 Introduction

The earlier Chapter discussed the justification for a study on the research problem “What

are the important critical factors for the successful internationalization of Malaysian ECS

firms?”. The research process commenced with a literature review of the accumulated

prior knowledge on the research topic.

2.1.1 Purposes of this Review

The literature review helps the investigator to familiarize the extant knowledge on the

research topic and to assist the investigator to conceptualize the research with precision

and clarity (Neuman 2006). ‘The literature review is not an end in itself, but is a means to

the end of identifying the worthy research issues’ (Perry 2002, p. 19). Guided by Marshall

and Rossman (1999), Baker (2000), Sekaran (2003), Perry (2002) and Neuman (2006),

the review aims to achieve the following objectives:

i) To demonstrate the significance of the research problem;

ii) To identify the key research issues and the emerging themes that influences the

problem situation;

iii) To link the proposed study to prior research;

iv) To develop a theoretical framework for the study;

vi) To identify gaps in the existing body of knowledge for developing the research

questions and crafting the research propositions for testing by the research.

2.1.2 Concept Map and Structure of Chapter Two

The review was facilitated by a concept map shown in Figure 2.1, which depicts the

linkages between the key research issues and the background and focal theories (Phillips

& Pugh 2005). The background theories are the Malaysian contextual setting,

17

globalization, internationalization theories and models, and trends in the global

engineering consulting industry. The focal theories of the research are the Malaysian

Government’s policies and the Malaysian civil, mechanical and electrical engineering

consulting industries.

Figure 2.1 : The Concept Map of Chapter Two


Background Theories

Focal Theories

Global Engineering

Consulting Industry Market Characteristics,

Market Players, Competition and Industry Trends

Introduction

Malaysian Engineering Consulting Industry

Practices, Market and Players

Malaysian Context Economy, History of

ECS Practices

Internationalization and Globalization

Theories and Models

Global Competitive Positioning Malaysian Engineering Consulting Industry

Secondary Data Analysis

Theoretical Gaps Research Questions

Research Propositions

Conclusion

Malaysian Government Policies

Export Incentives, MATRADE, SME Corporation

18

On the basis of the concept map, the structure of Chapter Two consists of nine sections as

shown in Figure 2.2.

Section 2.1 introduces the literature review and the concept map.

Section 2.2 discusses the Malaysian economy and a brief history of Malaysian ECS

practices to provide the contextual setting for the review.

Section 2.3 reviews the global engineering consulting industry. It examines the market

characteristics, the market players, the competition in the international arena and the

industry trends.

Section 2.4 examines the forces of globalization and selected internationalization theories

and models.

The structure of the Malaysian engineering consulting industry, its practices, market and

players are discussed in Section 2.5.

Section 2.6 discusses the Malaysian government policies and legislations on engineering

consultancy services and the support provided for the exports of services.

Section 2.7 analyses the competitive positioning of the Malaysian engineering consulting

industry using Porter’s Five Forces Framework.

Section 2.8 analyses the findings of the literature review in respect of the research

problem. It then identifies the research gaps which are the basis for developing the

research questions and crafting the research propositions for testing by this research.

Section 2.9 concludes the Chapter.

19

Figure 2.2 : The Structure of Chapter Two

Source : Developed for this Research

2.1 Introduction Purpose, Concept Map, Chapter Structure

2.2 The Malaysian Context Economic Development and History of ECS Practices

2.3 The Global Engineering Consulting Industry Market Characteristics, Market Players, Competition and

Industry Trends

2.4 Internationalization and Globalization Theories and Models

2.6 The Malaysian Government Policies on Services Exports Institutional Structure, Statutory Requirements, Adequacy

2.5 The Malaysian Engineering Consulting Industry Practices, Markets and Players

2.8 Secondary Data Analysis Theoretical Gaps, Research Questions, Research Propositions

2.7 The Competitive Positioning of the Malaysian ECS Industry Malaysian Engineering Consulting Industry

2.9 Conclusion

20

2.2 The Malaysian Context

The primary purpose of this Section is to place the research in its contextual setting (Perry

2002). This is considered necessary as the country’s multi-ethnicity, the national

economic development and history of Malaysian ECS practices impact on the research

topic.

2.2.1 The Malaysia’s Economic Structure

Malaysia is a Federation of thirteen states and three Federal Territories. Eleven states are

in the Malay Peninsula or West Malaysia and the other two states in East Malaysia. As a

multi-ethnic, multi-religious and multicultural country, it had a population of 28.25

million people in 2010 (GOM 2010a).

The structure of production of the Malaysian economy, as measured by the share of GDP,

is shown in Table 2.1. The services sector was the largest contributor to GDP at 58.0%,

followed by manufacturing (26.7%), agriculture (7.5%), mining (7.5%) and construction

(3.3%). The services sector also was a driver of GDP growth in the last 5 years (GOM

2010a).

Table 2.1 : Structure of Production, 2006 – 2010

Sector

Share of GDP (%) Contribution to GDP Growth (%)

2006 2007 2008 2009p 2010f 2006 2007 2008 2009p 2010f

Agriculture 7.9 7.5 7.5 7.7 7.5 5.2 1.3 4.3 0.4 3.8

Mining 8.8 8.5 7.9 7.7 7.5 -1.0 2.0 -2.4 -3.8 3.2

Manufacturing 30.9 29.9 28.9 26.6 26.7 6.7 2.8 1.3 -9.4 6.2

Construction 3.1 3.1 3.1 3.3 3.3 -0.3 7.3 4.2 5.8 5.0

Services 52.0 53.8 55.2 57.6 58.0 7.4 10.2 7.4 2.6 6.6

Source : Adapted from GOM (2010a) p : preliminiary

f : forecast

2.2.2 The Malaysia’s Economic Development

21

The Malaysian Government is central to the social and economic development of the

country by playing the role of the initiator, facilitator and implementer of development

projects. Responsible for institutional and basic infrastructure development, public

policies are aimed at providing a stable and conclusive macroeconomic environment to

support private sector involvement in the economy. The Malaysian Government

emphasizes on providing basic education, health, amenities and utilities and attaches

importance to addressing the issues of poverty and economic wealth distribution

(Yogeesvaran 2004).

Since gaining independence in 1957, the Malaysian economy has undergone significant

structural changes (Fong 1989; Jomo 1990; Okposin, Halim & Ong 1999). Progressing

from an agriculture-based economy to an industrial production economy, the country is

now a knowledge-based economy (Yusof & Bhattasali 2008; Yusoff, Hasan & Jalil 2000)

driven by innovation and human capital for producing knowledge-based goods and

services (Poon 2006). The Malaysian economic transformation went through various eras

and with different drivers as shown in Figure 2.3.

Figure 2.3 : Malaysia’s Economic Transformation

Source : Cited in Nga & Tan (2010, p. 9)

As a country reaches higher level of development, the services sector plays an

increasingly important role in the economy, both in terms of the contribution to the GDP

Labour-Driven

1960’s

Export of Rubber, Tin, Palm Oil &

Timber

Manufacture of Import

Substitution Goods

Export Textile & Electronic

Goods

Export High Values Added Electrical & Electronic Goods

Knowledge-Based Goods &

Services

Labour-Driven 1970’s

Investment Driven

1980’s

Knowledge Driven

2000’s

Innovation & Human Capital

Driven

> 2000’s

Productivity Driven

1990’s

22

and the share of employment (Mahbob 1992; GOM 2006b). The services sector is

essential to the national development strategy to re-structure the economy based on

domestic sources of growth (Kanapathy 2003).

The Third Industrial Master Plan (IMP3) 2006–2020, emphasizes the services sector as

the main growth engine of the economy (GOM 2006a). The business and professional

services are one of the eight services sub-sectors identified in IMP3 for further

development. This includes a more proactive approach in the promotion and export of

services (GOM 2006a; Kanapathy 2003).

The 10th Malaysia Plan (2011-2015) currently in force also emphasizes on expanding the

export of services in line with the Economic Transformation Plan (ETP). Introduced by

the Government in 2010, the ETP incorporates fundamental strategic and economic

reform initiatives (GOM 2010b). As discussed in Sub-Section 2.6.1, business service is

one of the twelve targeted sectors in the ETP for shifting Malaysia to a high income

economy.

2.2.3 Brief History of Malaysian Engineering Consulting Practices

Prior to Malaysia gaining independence in 1957, there were very few Malaysian

engineers (Judin 2001) and British expatriate engineers were employed in the public

sector to undertake public projects in the civil, mechanical and electrical disciplines. For

private projects and investments, the ECS were mainly undertaken by British engineering

consulting firms (Hamdan 1999). After independence, the local Malaysian engineers

gradually replaced the British expatriates. The successive implementation of the Five

Year Malaysian Development Plans since 1957 created an elite pool of engineers both in

the public and private sectors. The First and Second Industrial Master Plans, covering the

period from 1986 to 2005 boosted engineering education as both Plans propelled

Malaysia into the industrial age (Hamdan 1999).

Malaysian consultants were initially employed for physical infrastructure projects

encompassing roads, bridges, drainage, irrigation, power generation, marine facilities and

housing projects. The demand for electrical and mechanical engineers rose rapidly with

23

the building boom in the 1980s which led to the rapid development of high rise buildings,

offices, hotels, condominiums, apartments, industrial plants and complexes. Malaysian

engineers were also increasingly involved in the oil and gas, petrochemicals, electrical

and electronic sectors.

However, there was a shortage of engineers with the necessary expertise and experience

to undertake large and complex infrastructure projects. This supply gap led to the award

of contracts to foreign consultants under joint venture arrangements with local firms.

Over time the Malaysian engineers benefited from technology transfer and were able to

advance their skills and expertise to world-class standards and able to undertake a variety

of mega projects (Accenture 2010; Chelvanayagam 1994; IEM 2001; Judin 2001; Moggie

2000). Some notable projects were the North-South Highway, Penang Bridge, Petronas

Twin Towers, Kuala Lumpur International Airport, gas transmission and stations,

hydroelectric dams and light rail transit systems (Hamdan 1999).

2.2.4 Conclusion

This Section reviewed the background theory in Malaysian context. It covered

Malaysia’s economic structure, development and history of Malaysian engineering

consulting practices. The next section reviews the background theory on the global

engineering consulting industry.

2.3 The Global Engineering Consulting Industry

The discussion on this background theory starts by defining the global ECS as the term is

subject to different interpretations. The Section then examines the engineering consulting

market, the principal players and the impact of globalization and internationalization on

the global industry.

2.3.1 Defining the Engineering Consulting Industry

24

An attempt to define the ECS has to start with a definition of the term engineering. For

this purpose the Accreditation Board for Engineering and Technology (ABET) defined

engineering as ‘the profession in which knowledge of the mathematical and natural

sciences gained by study, experience, and practice is applied with judgement to develop

ways to utilize, economically, the materials and forces of nature for the benefit of

mankind’ (ABET 1999).

The scholarship on the global ECS industry reveals several definitions. A pertinent one is

that of ING (2008, p. 30) which defined the ECS as ‘intellectual services aimed at

optimizing investment projects in industry, construction and infrastructure at all stages of

a project from the initial phase to its final operation’. These services are provided by

private engineering consultancy firms, contractors and public institutions. The services

include advice, design, monitoring, supervision management and administration of

building, construction and infrastructure projects. However, this definition is considered

to be inappropriate for this research as it is too wide and includes building contractors as

well as public institutions.

The International Federation of Consulting Engineers (FIDIC) confined the meaning of

engineering consulting firms to ‘independent, for-profit, organizations supplying

technology-based intellectual services on a fee-for-service basis’. However, this

definition does not make any reference to consulting engineers and therefore is also not

considered appropriate for this research (FIDIC 2002, p. 47).

Instead of defining the ECS, the articles of association of the Association of Consulting

Engineers Malaysia (ACEM) defined the consulting engineer (CE) as

‘a person possessing the necessary qualifications to practice in one or more of the

various branches of engineering who devotes himself to advising the public on

engineering matters or to designing and supervising the construction of engineering

works and for such purposes occupies and employs either solely or in conjunction with

another consulting engineer, his own office and staff or, in the case of a partner or

consultant of a firm of consulting engineers uses the office and staff of the said firm, and

is not directly or indirectly concerned or interested in commercial or manufacturing

25

interests such as would tend to influence his exercise of independent professional

judgement in the matters upon which he advises’ (ACEM 2011, p. 34).

Viewed in this context, a CE is an independent professional engineer who performs

engineering services for clients on a fee basis. As it was appropriate and pertinent, the

researcher adopted the ACEM definition as the working definition for this research.

2.3.2 The Engineering Consultancy Services

On the basis of the adopted definition discussed in the proceeding section, engineering is

a knowledge-based service and consultancy is a business and profession. Hence,

engineering consultancy is a business based on the provision of knowledge-based

professional engineering services. The characteristics of typical professional service

firms are depicted in Table 2.2. Briefly, the professional services create value through

Table 2.2 : The Characteristics of Professional Service Firms

� Their value creation centres on the delivery of highly knowledge-intensive services, delivered by highly

educated employees, and frequently closely linked with research and scientific development within the

area. The knowledge of the employees is frequently (though not always) certified by a professional

organization and/or the authorities;

� The services are delivered based on a careful professional assessment or diagnosis carried out by

experts in the field;

� The services are highly customized to each client’s needs;

� Delivery involves a high degree of discretion and personal judgment by the experts involved, and in many

professional service firms industries partners are personally held legally responsible for any liability claim;

� Delivery typically involves a high degree of interaction with the client representatives, both in the

diagnosis and the delivery phase;

� Services are constrained by professional norms of conduct, including setting client needs higher than

profits and respecting the limits of professional expertise.

Source : Løwendahl (2000, p. 145)

26

the use of specialized knowledge and delivered by personnel with recognized

qualification, being accredited and licensed with professional organizations and/or

authorities. The services are highly customized to each client’s requirements and

delivered with a high degree of discretion and judgement of the professionals who assume

responsibility and liability for the service rendered. The service delivery involves a high

degree of interaction with the client and is guided by the professional code of ethics or

conducts (Løwendahl 2000; 2005). As a business, ECS firms have to meet the customer

needs and wants. An enabling business environment is one that will continually improve

the performance of the business by virtue of the business being a factor of production.

The engineering consultancy has to meet the above criteria in order to remain relevant,

viable, and to survive and grow (Hamdan 1999).

Engineering covers a wide field of different areas of specialities. The profession is

categorized into disciplines representing designated areas of interest, though not all

authorities define the disciplines in the same manner. These disciplines include civil,

mechanical, electrical and electronic, chemical, sanitary, industrial, petroleum, mining,

aeronautical and marine engineering (Highbeam Business 2010). According to the

Bureau of Labour Statistics (BLS), civil engineers form the largest engineering discipline,

followed by mechanical engineers, industrial engineers, electrical engineers and

electronic engineers (BLS 2010).

The engineering services, a sub-sector under business services which is one of the 12

services sectors in the WTO’s GATS classification, are often confused with the

construction services in the construction and related engineering services sector. These

two types of services are different but highly related and often complementary.

Datamonitor (2009, cited in Accenture 2010, p. 82) provides a clear comparison in Table

2.3 between engineering and construction services according to the types of services,

contents of service, service characteristics, period of service rendered and service value.

The engineering services are diverse and comprise the pre-investment stage of feasibility

study, data collection, investigations and reports. The implementation stage covers the

design of construction projects, product designs for manufacturing, procurement,

construction and project execution, operation and maintenance. The services also include

27

management advice and consultation, project management, quality assurance, quality

control and construction supervision, design audit and independent design check (Rimmer

1991).

Table 2.3 : Comparison between Engineering and Construction Services

Engineering Services

Construction Services

Types of services

• Consulting, Conceptual Design, Detailed Design, Supervision

• Site Preparation, Civil Work, Building, Procurement

Contents of service

• Knowledge-intensive service by a small number of experts

• Actual implementation of engineering service requires a small number of skilled workers and/or technical experts with professional license and experience

• Foreign professional license may not be permitted by the host country

• Efficient construction management (cost, schedule, specification) by a few members of project management

• Actual implementation of civil work and/or building requires many unskilled manual workers whose transnational mobility is usually under strict control

Characteristics

• Originality and creativeness in terms of conceptual and detailed design by using 3D computing

• Service can be provided from a different country via telecommunication

• Supervision in terms of cost, schedule and specification can be done by a small number of engineers; value-add per individual is significant

• Actual implementation requires many unskilled workers who engage in manual jobs

• From viewpoint of site management, unit cost per worker and time consumed per worker to complete to specifications are closely recorded

Period of service rendered

• Consulting and designing services are rendered mainly during the preparation phase

• Supervisory services are provided during actual construction

• Construction services are rendered during actual construction

Service value

• 10-20% of total project cost, but value-add per head is large

• 80-90% of total project cost, but value-add per head is small

Source : Datamonitor (2009, cited in Accenture 2010, p. 82)

While the range of engineering services that a CE can provide is wide, they generally fall

into six major categories as outlined in Table 2.4. The most popular type of services is

the design of structures, mechanical and electrical systems. Second is the analysis of

client problems in specific technical areas such as stress and strain in machine and

structural components. Third is the calculation and analysis of other special features of an

engineering project (Hicks & Mueller 1996).

28

Table 2.4 : Major Popular Types of Engineering Consulting Services

Popularity Ranking

Major Types of Engineering Consulting Services

1

Designing mechanical, electrical, and energy systems, transportation facilities, communications systems, and utilities.

2

Analyzing client problems in specific technical areas, such as structural stress and strain, materials defects, equipment lubrication, transport scheduling, and control of energy and power processes.

3

Calculating special structural or design features like piping flexibility, bridge and tower strength, foundation materials, and components for communications products and equipment.

4

Providing computer services for professional firms, such as routine design calculations, specification preparation, payroll, project completion, and cost evaluation.

5

Developing manufacturing designs and analyses; preparing assessments of the environmental impact of specific building projects.

6

Offering miscellaneous specialties in any one of many highly technical disciplines, such as magneto-hydrodynamics, nuclear waste disposal, unique uses for electronic chips, all kinds of pollution control, etc.

Source : Hicks & Mueller (1996, p. 1-16)

2.3.2.1 The Engineering Consulting Firms

In general, there are broadly two categories of ECS firms. The first group comprises

specialists that provide a single service to their clients or that provide several services to a

specific sector. Usually small and medium sized firms with developed specific market

niches, they often seek strategic alliances for competing both locally and globally. The

second group comprises generalists that provide multidisciplinary services to clients.

Usually large, they are growing in size through mergers, acquisitions and expansion, both

geographically and in terms of capability (FIDIC 2004).

The ECS firms that are limited to only consulting and engineering services may be

independent and owned privately by individual, or by a group of people. They may also

be owned by the State or public organizations such as higher learning institutions,

industrial research institutes, industrial design organizations and technical information

centres. There are also in-house engineering organizations or departments in private

enterprises, contractors, manufacturers or suppliers that offer services to clients and are

not independent (Hamdan 1999; Looi 2003).

29

In most countries and irrespective of their size, the ECS firms usually form national

associations. They share common objectives to promote the engineering consulting

profession through consultation and cooperation, for the member firm’s business interests

(FIDIC 2002). These associations often recognized by Governments and multinational

agencies, are generally affiliated to the International Federation of Consulting Engineers

(FIDIC) which aims to be fully representative of the global engineering consultancy

industry.

2.3.2.2 The Engineering Consulting Market

The ECS, as a specialized field of activities, emerged at a later stage of industrial

development in response to the need for innovative solutions and improved designs for

construction projects and industrial plants. The markets for the ECS are therefore

primarily related to the manufacturing industries and construction. The major

determinant of the demand for ECS is construction spending and investment, which in

turn is influenced by economic development and government investment in infrastructure

(Baark 1999). The client base of ECS firms is predominantly made up of national and

local governments, contractors, investors and industrial organizations (UNCTAD 2002;

CBI 2009a, 2009b).

The market of engineering consulting services is volatile and tends to fluctuate with

cycles of growth and stagnation in manufacturing in major markets and public spending

on infrastructure such as transportation or environmental facilities (Baark 1999). The

market is characterized by a competitive environment with low entry barriers and a strong

impact of political decision making. Demand for the services is price driven even though

the industry is intellectual and technology based (ING 2008). The main threats to the

industry are price competition and low fees. Other important threats include economic

downtown, corruption and unfair competition from government agencies (FIDIC 2004).

The composition of global market for engineering design is dominated by petroleum

sector, which constituted 33.4% in 2010. This was followed by transportation at 17.1%

and building, 16.2% (ENR 2010) as depicted in Figure 2.4.

30

23.7%

20.9%

18.2%

11.9%

10.7%

7.8%

6.0%

0.8%

0 5 10 15 20 25

Carribean Island

Latin America

Africa

Canada

US

Middle East

Asia / Australia

Europe

International Regions

Percent of Total

17.1%

33.4%

16.2%

8.5%

7.3%

5.3%

4.0%

3.4%

0.8%

0.4%

3.6%

0 5 10 15 20 25 30 35 40

Other

Telecommunication

Manufacturing

Sewer / Waste

Hazardous Waste

Water

Industrial

Power

Building

Transportation

Petroleum

Type of Work

Percent of Total

Figure 2.4 : Market Sector

Source : Adapted from ENR (2010)

For the international regions where design revenue was earned in 2010, according to ENR

(2010), the largest design market among the top 200 international design firms was

Europe, which contributed 23.7% of the total as shown in Figure 2.5. Asia/Australia

region was second, contributing 20.9%. This was followed by Middle East at 18.2%.

The United States (US) market was fourth at 11.9%.

Figure 2.5 : Contributions of Design Markets

Source : Adapted from ENR (2010)

31

2.3.2.3 The Engineering Consulting Market Size

The size and scope of the world market for engineering consulting services is difficult to

estimate due to the lack of up-to-date empirical research. Furthermore, the estimates from

various sources vary significantly due to different definitions and different basis of

estimations (CBI 2009a). In some cases, the engineering consulting industries are lumped

together with other design industries and other business services (Solum & Hubak 2004,

CBI 2009a).

FIDIC (2002) estimated that the size of the world market for construction and building

service was USD 146 billion in 1999. ENR (2010) reported that the revenue in 2009 of

the top 200 design firms was USD 111.81 billion. This comprised architectural design,

engineering design and design services provided for physical construction, installation,

assembly, completion and finishing.

2.3.2.4 The Global ECS Players

Most of the engineering consulting firms are small (FIDIC 2002; ING 2008; Kreitl &

Oberndorfer 2004). Firms with less than ten employees form the largest category (FIDIC

1998). In 2001, about 60% to 70% of ECS firms worldwide were SMEs with less than 50

employees and with a turnover of less than USD 10.0 million per firm. These SMEs

account for about 10% to 20% of the industry’s total turnover (FIDIC 2002).

Against this background, there are also few large global design firms with large annual

revenues. They are mainly located in Europe and the US (Baark 1999). ENR (2010) gave

a list of top 150 global design firms based on total firm design revenue in 2009. Table 2.5

summarizes a list of top 10 firms providing only engineering design services. It can be

seen that out of the 10 firms, 4 firms are from United Kingdom (UK), 3 from Netherlands,

1 each from United States of America (USA) and Canada.

32

Table 2.5 : The Top 10 Global Engineering Design Firms in 2010

Rank

Firm Name

Country

2008 Total Revenue USD Million

1 AMEC PLC UK 2,928.8

2 Fugro Netherlands 2,851.0

3 Arcadis Netherlands 2,484.0

4 Tetra Tech Inc. USA 2,135.0

5 Mott MacDonald UK 1,641.2

6 Arup UK 1,377.5

7 Hatch Canada 1,215.9

8 WSP UK 1,132.6

9 Grontmij Netherlands 1,086.0

10 Ramboll Group Denmark 1,029.9

Source : Extracted from ENR (2010)

2.3.3 The Engineering Consulting Market Trends

There are a number of major global trends that affect the engineering consulting industry

(CBI 2009a, 2009b; UNCTAD 2000; 2002; ING 2008). These are discussed below:

2.3.3.1 Internationalization of Services

The world is now borderless due to technological advancement (Javalgi & White 2002;

Ohmae 1990). National economies are increasingly integrated into one global economy

due to the forces of globalization (Daly 2001; Douglas & Craig 1992; IMF 2000). The

General Agreement on Tariffs and Trade (GATT) and GATS are promoting free trade,

lowering and removing barriers, increasing the accessibility of goods and services, and

the movement of people across the borders.

In response, many ECS firms are becoming more and more internationalized by

expanding their operations to foreign countries. This has been achieved mainly via two

different strategies: client following or market seeking (Erramilli & Rao 1990). In the

case of the former, ECS firms follow their domestic clients that have projects abroad and

then expand their international activities on the basis of these client relationships. In the

case of the latter, they tend to adopt market seeking strategies and expand their businesses

in markets by setting up new offices and acquiring or partnering foreign firms to serve

33

foreign clients (Ojanen, Salmi & Torkkeli 2008). The motivations are mainly survival,

growth, profitability and diversification (Albaum & Peterson 1984; Barrett & Wilkinson

1986; Diamantopoulos, Schlegelmilch & Allpress 1990; Johnston & Czinkota 1982;

Kaynak & Erol 1989; Leonidou 1995; Leonidou et al. 2007; Ramaseshan & Soutar 1996).

Similarly, foreign firms are also entering the local domestic market and are competing

with local firms (Leonidou et al. 2007; Sullivan & Bauerschmidt 1998).

2.3.3.2 Offshore Outsourcing

Information technology (IT) facilitates the transmission and delivery of core ECS over

long distances within a short time. It enhances the tradability of services such as

engineering reports, basic and detailed design across national borders and enables the out-

sourcing of these components of engineering works to low-cost office sites or overseas

low-cost suppliers (Baark 1999).

Increasingly engineering consulting firms are resorting to offshore outsourcing to the

emerging countries (Rothstein 1998). The primary drivers for outsourcing are costs and

shortage of engineering professionals in the home market since outsourcing enables

companies to transform a fixed cost into a variable cost (Andy 2004). This enables ECS

firms to meet fluctuations in labour demand and respond to market changes. The firms

can also focus on their core business activities and outsource the others and achieve

efficiency through centralized operations (Ojanen, Salmi & Torkkeli 2008). By offering

both better quality and lower cost service (Løwendahl 2000; Windrum, Reinstaller & Bull

2009), the firm can become more competitive in the increasingly globalized market (CBI

2009a).

2.3.3.3 Mergers and Acquisitions

Mergers and acquisitions (M&As) are a general global trend associated with a worldwide

corporate restructuring across industries (Duksaitė & Tamošiūnienė 2009). Driven by

globalization, increased outsourcing and the internationalization of services is leading to

consolidation in the ECS industry (Ojanen, Salmi & Torkkeli 2008) which still comprises

several small and medium size firms (Kreitl & Oberndorfer 2004). Firms are therefore

34

growing in size through organic growth, M&As and cross-border M&As (Ojanen, Salmi

& Torkkeli 2008).

M&As in the ECS industry are driven by the instant access to service/client markets,

penetration of new geographic markets and increasing the firm’s market share (Kreitl &

Oberndorfer 2004). Firms also aim to achieve economies of scale by merging the

resources of both companies, or creating economies of scope by acquiring a company that

permits service/market diversification. Overall, value creation is generally the underlying

reason; through either cost cutting or through increased scope (Ghauri & Buckley 2003).

Other motives include quick gain of new expertise, innovation capability (Ojanen, Salmi

& Torkkeli 2008) and knowledge acquisition (Ghauri & Buckley 2003).

Despite the advantages, M&As carry substantial risks (Ojanen, Salmi & Torkkeli 2008)

and are beset by numerous problems (Newburry & Zeira 1997). In the 1990s, almost 50%

of domestic acquisitions and 70% of cross-border acquisitions failed to achieve intended

results (Capron 1999). Differences in organizational cultures and values, poor planning of

the integration process, lack of compelling strategic rationale, unrealistic expectations of

possible synergies, exit of highly mobile valued employees and the lack of understanding

of foreign business practices and legislation are contributing factors for the failure of

M&As (Aguilera & Dencker 2004; Ojanen, Salmi & Torkkeli 2008; Kreitl & Oberndorfer

2004).

2.3.4 Public Policy Support for Export

Export development is high on the agendas of both public and private sector policy

makers as there are numerous economic benefits to be gained (Albaum & Duerr 2008;

Czinkota & Ronkainen 2006; Hollensen 2004; Katsikeas, Leonidou & Morgan 2000;

Leonidou & Katsikeas 1996). From a macroeconomic perspective, service exports enable

countries to increase their foreign exchange reserves, reduce trade deficits, provide

employment, increase productivity and enhance societal prosperity (Czinkota, Ronkainen

& Moffett 2005; Czinkota 1994; Leonidou et al. 2007; Piercy, Kaleka & Katsikeas 1998).

From the microeconomic view, exporting enables firms to survive and grow, develop

competitive advantages and capability, improve financial performance, increase capacity

35

utilization and raise technological standards (Kumcu, Harcar & Kumcu 1995; Leonidou et

al. 2007; Piercy, Kaleka & Katsikeas 1998; Samiee & Walters 1990; Terpstra & Sarathy

2000).

Indigenous firms, particularly the small and medium sized companies, face barriers and

difficulties for exporting and required governmental export assistance and promotion

programmes (Cavusgil & Michael 1990; Hashim & Hassan 2008; Marandu 1995;

Seringhaus & Rosson 1990). Generally, export assistance and promotion refers to all

public policy measures that seek to enhance exporting activity at the company, industry or

national level (Root 1971).

Export assistance programmes include financial assistance by way of tax incentives,

export financing and insurance, export grants, multilateral and bilateral trade aid,

technical assistance by way of technology innovation support, research and development

support and marketing assistance which includes the provision of standardized and

customized market information, guidance on exporting and export marketing, marketing

research on specific foreign markets, trade missions, market visits and trade fairs

(Seringhaus 1986). These export programmes usually emphasize on motivational,

informational and operational needs of the firms (Czinkota 1982; Cavusgil 1984b;

Seringhaus 1987).

The findings of earlier studies on the effectiveness of the government export promotion

programmes indicate that they could lead to successful export (Bilkey 1978; Bilkey &

Tesar 1977; Cavusgil 1983). However, some studies found that the government export

assistance programmes were also generally viewed unfavourably (Albaum 1983), rated

low by firms (Crick & Chaudhry 1997) and had limited effects on export growth

(Leonidou et al. 2007; Seringhaus & Rosson 1990). One finding was that most small and

non-interested firms were unaware of the government promotion programmes and

services on offer due to lack of communication (Ahmed et al. 2002; Crick & Chaudhry

1997; Kedia & Chhokar 1986; Moini 1998). Gencturk and Kotabe (2001) found that the

usage of export assistance programmes increased the profitability of experienced

exporters rather than new exporters. Moini (1998) argued that firms that progress beyond

the initial export development stage have less need for export assistance programmes.

36

As shown in Table 2.6 by Seringhaus and Rosson (1991), firms can be categorized into

four categories as non-exporter, new exporter, expanding exporter and continuing

exporter. The nature of the required export assistance varies for firms in the different

categories.

Table 2.6 : Company Needs and Export Promotion Programmes

Type of export involvement

Key questions

Company need

Export promotion focus and typical initiatives

Motivational

Informational

Operational / Resource

Non-exporter

Should we even consider exporting?

To be made aware of opportunities

Advertising Local seminars Export weeks/ months

-

-

New exporter

Should we initiate exporting? Which market should we investigate?

To determine feasibility of exporting

Seminars Export bulletin/ newsletter

Market reviews Supplier/Buyer newsletter Custom market research

Trade missions Financing, insurance

Expanding exporter

Which new market should we enter and how?

To select the most promising market and the best market entry method

-

Market visits Export seminars/ meetings Export newsletter

Trade fairs Trade missions Financing, insurance

Continuing exporter

How can we achieve better performance?

To improve and fine tune existing operations

-

Export seminars/ meetings Export newsletter

Trade fairs Foreign buyer visit Sales offices Financing, insurance

Source : Seringhaus & Rosson (1991, p.7)

Export programmes focusing mainly on financial incentives are ‘not having their desired

impact’ (Welch & Wiedersheim-Paul 1979, p. 166) and ‘have a limited effect on

enhancing firms’ exporting capabilities’ (Ahmed et al. 2002, p. 841). Financial incentives

‘will also not be sufficient to provide export stimulation and, particularly for new

exporters and non-exporters’ (Barrett & Wilkinson 1985, p. 55). Karafakioglu (1986) and

Christensen, da Rocha & Gertner (1987) argued that financial incentives did not cause

sustained exporting because the firms might only be interested in using financial

incentives to compensate for managerial inefficiency, high cost production and non-

competitive products. Such firms also may cease to export once the incentives are

reduced or withdrawn (Christensen, da Rocha & Gertner 1987).

Some authorities also suggest that technical support programmes are more desirable and

more effective for enabling firms to develop competitive advantage, improve managerial

37

and productive systems, increase information handling capacity, gain export expertise and

foster foreign networking and contacts (Seringhaus & Rosson 1990; Kumcu, Harcar &

Kumcu 1995). All are important for sustained and continuing exporting (Welch &

Wiedersheim-Paul 1979; Christensen, da Rocha & Gertner 1987).

2.3.5 Conclusion

This Section presented the global engineering consulting industry. It defined the

engineering consulting industry and then described the engineering consulting services,

the consulting firms, the engineering consulting market and the market trends. It ended

with a review of the public policy support for ECS export. The next section reviews the

background theory of internationalization and globalization.

2.4 Internationalization and Globalization

This Section starts by defining the meaning of internationalization. It then proceeds to

discuss the forces of globalization and the impact of GATS on the globalization of

services. The Section also examined the internationalization theories and models that are

considered relevant for the research.

2.4.1 The Meaning of Internationalization

There is no single universally accepted definition for internationalization (Coviello &

McAuley 1999; Welch & Luostarinen 1993). Internationalization has been

conceptualized differently by various authorities and researchers and used in a variety of

ways (Knight 2004, 2005; Turnbull 1987). Different definitions of internationalization

give rise to different understandings due to different perspectives, contexts, emphasizes,

approaches and viewpoints (Fok 2007; Knight & de Wit 1995). However, from the

international business perspective, internationalization is widely used to describe the

outward movement of a firm’s business activities from its domestic market place to

international markets (Andersen 1993; Buckley & Casson 1998; Javagil, Griffith & White

2003; Johanson & Wiedersheim-Paul 1975; O’Farrell, Wood & Zheng 1998; Turnbull

38

1987). There are several definitions of the term for internationalization and the pertinent

ones are shown in Table 2.7.

Table 2.7 : Some Definitions of Internationalization

Authority and Source

Definition

Focus

Ruzzier, Hisrich and Antoncic (2006, p.477)

A synonym for the geographical expansion of economic activities over a national country’s borders.

Process, firm’s operations.

Welch and Luostarinen (1993, p. 156)

The process of increasing involvement in international operations.


Calof and Beamish (1995, p. 116)

The process of adapting firms’ operations (strategy, structure, resource, etc.) to international environment.


Johanson and Mattsson (1988, p. 306)

A cumulative process, in which relationships are continually established, maintained, developed, broken and dissolved in order to achieve the objectives of the firm.

Networks, relationships.

Johanson and Vahlne (1990, p. 20)

The process of developing networks of business relationships in other countries through extension, penetration, and integration.

Networks, relationship.

Beamish (1990, p. 77)

The process by which firms both increase their awareness of the direct and indirect influence of international transactions on their future, and establish and conduct transactions with other countries.

Process, firm’s operations, networks, relationship.

Source : Beamish (1990, p. 77); Calof & Beamish (1995, p. 116); Johanson & Mattsson (1988, p. 306);

Johanson & Vahlne (1990, p. 20); Ruzzier, Hisrich & Antoncic (2006, p. 477); Welch & Luostarinen (1993, p. 156).

Ruzzier, Hisrich and Antoncic (2006, p. 477) defined internationalization as a ‘synonym

for the geographical expansion of economic activities over a national country’s borders’.

This definition implies that internationalization is related to the outward involvement of

the firm in the international markets. Calof and Beamish (1995, p. 116) provided a wider

definition for internationalization as ‘the process of adapting firms’ operations (strategy,

structure, resource, etc.) to international environment’. They viewed internationalization

as a form of de-investment or de-internationalization when a firm reduces or withdraws

its international activities (Oesterle 1997). These internationalization definitions

generally lie in the domain which concerns the process of the firm’s business operations.

39

Internationalization can also be defined from a network perspective in line with Johanson

and Mattsson (1988, p. 306) that internationalization is a ‘cumulative process, in which

relationships are continually established, maintained, developed, broken and dissolved in

order to achieve the objectives of the firm’. Johanson and Vahlne (1990, p. 20) extended

this further and treate internationalization as the ‘process of developing networks of

business relationships in other countries through extension, penetration, and integration’.

The internationalization process is also a multidimensional phenomenon as it goes beyond

a firm’s operations to business network development by the firm (Johanson & Vahlne

2003). Viewed in this context, the definition of internationalization by Beamish (1990, p.

77) as

‘….. the process by which firms both increase their awareness of the direct and indirect

influence of international transactions on their future, and establish and conduct

transactions with other countries’.

is considered appropriate for this research as it covers four aspects of internationalization.

First, it integrates organization learning with foreign investment, thus recognizing the

behavioural and economic components of internationalization. Secondly,

internationalization is a dynamic and evolutionary process. Third, it recognizes the

outward and inward movement of internationalization activities. Finally, international

transactions help to develop networks relationship which influences the future growth of

the firm and its business prospect (Coviello & McAuley 1999).

2.4.2 The Forces of Globalization

The term globalization embodies many different concepts and is defined in many

different ways (Kefalas 1998). It can be interpreted and given different meanings by

different people according to the different dimensions, contexts and perspectives (Yang

2003; Fok 2007; Robinson 2007). Globalization has been described by International

Monetary Fund (IMF 2000 p. 2) as the ‘increasing integration of economies around the

world, particularly through trade, financial flow, movement of people and knowledge

across international borders’.

40

There are two main forces underlying the trend toward greater globalization. The first is

the lowering or the removal of the barriers to trade and investment that promote the free

flow of goods, services and capital (Javalgi & White 2002; Porter 1979). The second is

technological innovation that propels rapid developments in communication, information

and transportation technologies (Hill 2009; Iskanius & Lamminsalo 2005; Javalgi &

Martin 2007; Javalgi & White 2002; Wild, Wild & Han 2006). ‘Technology makes

globalization feasible, while liberalization which eliminates cross-border controls makes

globalization happen’ (Kefalas 1998, p. 553).

2.4.2.1 Lowering of the Barriers to Trade and Investment

The General Agreement on Tariffs and Trade (GATT) was created in 1947 with the

objectives of:

• raising standards of living;

• ensuring full employment;

• a large and steadily growing volume of real income and effective demand;

• developing the full use of the resources of the world ; and

• expanding the production and exchange of goods.

It promotes free trade by reducing both tariffs and non-tariff barriers. Average tariffs

dropped from 40 percent to five percent and the outcome was a 20 fold increase in world

merchandise trade between 1947 and 1988. However, GATT did not have the powers to

enforce world trade rules and this led to the Uruguay Round of Negotiations in 1986

following pressures from both developed and developing countries. This led to the

establishment of the World Trade Organization (WTO) in 1995 (Wild, Wild & Han 2006).

(i) The World Trade Organization

The WTO is the only global international organization dealing with the rules of trade

between nations. The three major goals of WTO are: (1) ‘to promote trade flows by

encouraging nations to adopt non-discriminatory, predictable trade policies; (2) to reduce

41

remaining trade barriers through multilateral negotiations; and (3) to establish impartial

procedures for resolving trade disputes between members’ (Mahoney et al. 2001, p. 292).

The WTO oversees about 60 diverse agreements which have the status of international

legal texts and the more important Agreements are the GATT, the GATS, the Agreement

on Trade-Related Intellectual Property Rights (TRIPS) and the Agreement on Trade-

Related Investment Measures (TRIMS) (WTO 2008).

The lengthy and complex agreements cover a wide range of activities, including

agriculture, textiles, banking, telecommunications, intellectual properties, government

purchases and much more (WTO 2008). Essentially, the agreements are contracts

between member countries that commit them to maintain fair and open trade policies and

to guarantee their trade rights. Negotiated, signed and ratified by the majority of world’s

trading nations, they provide the legal ground-rules for international commerce. The

common aim is to help producers and consumers of goods and services, exporters and

importers to conduct their business, while allowing governments to meet their social

objectives (Mahoney et al. 2001).

The WTO is also a governing body for settling international trade disputes and has the

responsibility to monitor the trade policies of member countries for compliance (Hill

2009). The WTO’s procedure of settling disputes is based on clearly-defined rules with

fixed timeline for completion (WTO 2008). Countries that are in breach of trade policies

could suffer financial penalties and even trade sanctions. To penalize the offending

member countries, the WTO dispute settlement system was made the backbone of the

global trading system (Hill 2009; Wild, Wild & Han 2006).

(ii) Regional Trade Agreements and Economic Integration

Small groups of countries in geographical regions have also entered into regional trade

pacts with the goal of cooperating with one another by reducing or eliminating trade

barriers (Javalgi & Martin 2007). These served to boost regional trade and cross-border

investment. Some countries are placing greater importance on these regional agreements

because of the difficulties to reach worldwide trade agreement. Examples of such

42

agreements are the North American Free Trade Agreement (NAFTA) formed by Canada,

United States and Mexico. The Asia Pacific Economic Cooperation (APEC) makes up of

21 countries around the Pacific Rim and the ASEAN Free Trade Area (AFTA) formed by

the countries in South East Asia (Wild, Wild & Han 2006). However, all these regional

agreements share the common characteristics of being WTO-Plus or GATS-Plus

agreements with the aim of increasing the depths and the coverage of the commitments

compared to GATS or the WTO.

There are five different forms of economic and political integration for regional trading

blocs as shown in Table 2.8 (Griffin & Pustay 1999; Mahoney et al. 2001). These are: (1)

free trade area, (2) customs union, (3) common market, (4) economic union, and (5)

political union. A free trade area is the lowest level of national integration, whilst the

political union is the highest level. Each level of integration has the features of those

levels that precede it (Wild, Wild & Han 2006). While the aims and scope of each

regional trading bloc may be different, they could result in differential treatment between

firms from member countries as compared to non-member countries.

Table 2.8 : Forms of Economic Integration

Degree of Economic Integration

Form of Economic Integration

Main Characteristics

Example

High

Low

Political Union

By encompassing both political and economic integration, the union effectively transforms itself into one country.

USA

Economic Union

Common Market policy

+

Members more fully integrate their economies by coordinating their economic policies.

EU

Common Market

Customs

Union policy

+

Members also eliminate barriers that restrict movement of factors of production among themselves.

Customs Union

Free trade area policy

+

Members also adopt common trade policies toward nonmember countries.

MERCOSUR,

Andean Community

Free Trade Area

Members remove tariffs and other barriers to international trade among themselves; however, each member may establish its own trade policies with nonmember countries.

NAFTA, AFTA

Source : Adapted from Griffin & Pustay (1999, p. 256); Mahoney et al. (2001, p. 299)

43

2.4.2.2 The Globalization of Services : The General Agreement on

Trade in Services

The service sector is subject to significant developments in the international economic

system triggered by the GATS which came into effect in 1997. The GATS has 29

Articles and eight Annexes and constitutes Annex 1B of the WTO Agreement (Hopkins

2005). The abridged content of the GATS is shown in Table 2.9. GATS covers all

internationally-traded services except services provided in the exercise of government

authority and all services related to air transport. However, individual countries have the

power to determine the degree of market access.

Table 2.9 : Abridge Content of GATS

The Text

Part I Scope and Definitions (Article I)

Part II General Obligations and Disciplines (Articles II to XV)

Part III Specific Commitments (Articles XVI to XVIII)

Part IV Progressive Liberalization (Articles XIX to XXI)

Part V Institutional Provisions (Articles XXII to XXVI)

Part VI Final Provisions (Articles XXVII to XXIX)

ANNEXES ON

I Article II Exemptions

II Movement of Natural Persons Supplying Services Under the Agreement

III Air Transport Services

IV Financial Services

V Financial Services (Second Annex)

VI Negotiations on Maritime Transport Service

VII Telecommunications

VIII Negotiations on Basic Telecommunications

Source : WTO (2007)

The GATS broadly comprises three main sections. The first is a framework of principles

and rules outlining the general obligations governing trade in services. This framework is

still under negotiation in respects of certain issues such as emergency safeguards,

subsidies, government procurement and domestic regulation. The second section consists

of the national schedules which list a country’s specific commitments on access to their

domestic market by foreign service providers and the list of exemptions from most

44

favoured nation (MFN) treatment submitted by member governments. The third section

contains the annexes on specific service sectors comprising air transport, financial

services, maritime transport and telecommunications as well as the movement of natural

persons (Knight 2002; Sauve 2002).

The GATS is liberalizing trade and services and creating a more open global market by

eliminating or reducing non-tariffs and related protectionist barriers. Significantly, GATS

only deals with services which have been subjected to non-tariff barriers. Viewed in this

context, the relevant provisions in GATS are aimed at liberalizing the regulations that

control the mode of entry into the service sectors and other regulatory requirements.

For international services supply, only a small fraction of service products, like software

packages and engineering drawings can be stored and shipped like traditional

merchandise goods. In most other cases, this mode of supply cannot be done due to the

inseparability of production and consumption in time and space (Bateson & Hoffman

1999; Lovelock & Wirtz 2007; Palmer 1994). This implies that for international

transaction to take place, either the consumer or the producer must go abroad. The

producer can set up a foreign production unit (Sampson & Snape 1985; Kox & Lejour

2004) or send the employees abroad temporarily.

The GATS adopting Bhagawati’s (1984) and Sampson and Snape’s (1985) classification

of trade in services on the basis of location of the service providers, identifies four modes

of international service supply as shown in Table 2.10. These are 1) cross-border supply,

2) consumption abroad, 3) commercial presence, and 4) presence of natural person (Chan

1996; Knight 2002, 2003; Kox & Lejour 2004; Qian 2003; Sauve 2002; WTO 2001).

Commercial presence through subsidiaries forms the major share in world service trade at

57%, whereas the presence of natural person is the least at 1% (Kox & Lejour 2004).

Several governments regulate domestic service markets and create impediments and

barriers to the presence, operation and movement of foreign service providers. Members

are at liberty to liberalize progressively including the mode of supply, the extent of

liberalization and the time span of implementation. The types of regulation-based trade

barriers in relation to the four modes of supply are shown in Table 2.10. Some supply

45

modes are affected more than others. The toughest regulation-based barriers are usually

found for Mode 4, followed by Mode 3 and Mode 1. Market access for Mode 2 is

relatively free and with little control (Kox & Lejour 2004).

Table 2.10 : Modes of International Service Supply

Mode

Explanation

Examples

Supplier Presence

Share In

World

Service

Trade

Regulation-Based Trade

Barriers Affecting This

Supply Mode

Mode 1 :

Cross-border

supply

Provision of a

service which

crosses the border

E-trading,

distance

education

Service supplier not

present in the

territory of the

consumer

28%

Network access

restrictions.

Mode 2 :

Consumption

abroad

Provision of the

service involving

the consumer

crossing the

border to the

territory of the

supplier

Tourism,

foreign

students

Service supplier not

present in the

territory of the

consumer

14%

Discriminatory levies.

Mode 3 :

Commercial

presence

Service supplier

establishes or has

commercial

presence in the

territory of the

consumer

FDI, branch

campus of

foreign

universities,

Financial

services

Service supplier

present within the

territory of the

consumer

57%

Qualification

requirements, equity

constraints, quantitative

restrictions, licensing

procedures.

Mode 4 :

Presence of

natural

persons

Service supplier

present as natural

persons in the

territory of the

consumer

Expatriates,

foreign

workers

Service supplier

present within the

territory of the

consumer

1%

Qualification requirement,

quantitative restrictions,

visa procedures,

discriminatory levies, work

permit procedures.

Source : Adapted from Kox & Lejour (2004); OECD (2002); WTO (2001)

The GATS rules and WTO enforcement mechanism can put severe constraints on the

policy making space and regulatory powers of governments on domestic issues (Strickner

& Clarke 2006). GATS can therefore undermine the authority and sovereignty of

government in setting and pursuing their national interests and public policy goals.

Given the weakness in the service supply capacity of the developing countries, they are

generally apprehensive that the opening up of services especially public services such as

health care, education, transport, water supply and sanitation to foreign competition will

adversely impact on the availability, quality, costs and affordability of such services to the

general public, particularly the poor. Thus, GATS has been perceived to serve the

interests of the developed countries (Chanda 2002).

46

2.4.3 Selected Internationalization Theories and Models

There are several theories that emerged in 1970s and 1980s which explain the

internationalization process of firms and they originate largely from the industrial

organization and mainstream economics (Axinn & Matthyssens 2001; Coase 1937;

Williamson 1971, 1976). However, they generally relate to the international

manufacturing operations of multinational corporations (MNCs) and not on services

(Axinn & Matthyssens 2001; Buckley, Pass & Prescott 1992; Coviello & Martin 1999;

Erramilli & Rao 1993; Grönroos 1999; Sharma & Johanson 1987).

Services are fundamentally different from goods in terms of intangibility, perishability,

inseparability of production and consumption and heterogeneity (Buckley, Pass &

Prescott 1992; Contractor, Kundu & Hsu 2003; Javalgi & Martin 2007; Javalgi & White

2002; Lovelock & Yip 1996; Majluf & Zarrilli 2007; Winsted & Patterson 1998). Goods

are physical and tangible objects while services are generally performances or

experiences (Patterson & Cicic 1995). Zeithaml and Bitner (1996, p. 5) contended that

‘service are deeds, processes and performances’. Services cannot be touched, seen, stored

or transported (Grönroos 1990; Javalgi & Martin 2007).

Rapid technological advances, including the advent of the internet, have triggered parallel

increases in the trade in services and are creating a separation between production and

consumption in certain service sectors. This is borne out by franchised programmes in the

higher education sector whereby foreign universities can offer their full degree

programmes through franchise arrangements with local partners. The foreign provider

usually assesses the ability of the local partner to meet minimum quality standards and

provides guidelines and/or supports/monitors student admission criteria and assessment.

The course belongs to the foreign provider which charges for the use of syllabi, course

materials, examinations and technical support to staff (Knight 2005).

The internationalization theories developed from manufacturing of goods may not

necessarily be applicable to service firms (Blomstermo, Sharma & Sallis 2006; Coviello

& Martin 1999; Coviello & Munro 1997; Erramilli 1990; Erramilli & Rao 1990, 1993;

47

Løwendahl 2000; Majluf & Zarrilli 2007; Sharma & Johanson 1987), since ‘for

international services, theory lags behind practice by a considerable degree’ (Clark,

Rajaratnam & Smith 1996, p. 9).

Some authorities (Boddewyn, Halbrich & Perry 1986; Katrishen & Scordis 1998;

O’Farrell, Wood & Zheng 1998) suggested that researchers may adapt existing theories

applicable to manufacturing firms for explaining the service industries. Agarwal and

Ramaswami (1992) found that the factors influencing the choice of entry mode are the

same for the service providers and manufacturing firms. Javalgi, Griffith and White

(2003, p. 195) asserted that ‘manufacturing based research may provide a fruitful

foundation from which to begin research into the service sector’. Guided by these

authorities, this study will rely on the current pertinent theories and models which are

examined in the subsequent sections.

2.4.3.1 Stage Models of Internationalization

The internationalization process is a time-dependent, gradual development that occurs in

distinct phases for a firm to increase its involvement in foreign markets (Melin 1992).

There are primarily two, stage or sometimes called establishment chain, models of

internationalization. The first developed in the Nordic countries, is the Uppsala

Internationalization Model (U-Model). The other, developed in USA, is often referred to

as the Innovation-Related Internationalization Models (I-Models) (Axinn & Matthyssens

2001).

(i) Uppsala Internationalization Model (U-Model)

The U-Model was initiated by Johanson and Wiedersheim-Paul (1975) and further

expanded and refined by Johanson and Vahlne (1977, 1990). The U-Model, evolving and

dynamic, drew upon the ‘behavioral theory of the firm (Aharoni 1966; Cyert & March

1963) and Penrose’s (1959) theory of the growth of the firm’ (Johanson & Vahlne 1990, p.

11). The basic mechanism of internationalization comprises the state aspects and the

change aspects as illustrated diagrammatically in Figure 2.6.

48

Figure 2.6 : The Basic Mechanism of Internationalization

STATE ASPECTS CHANGE ASPECTS

Source : Johanson & Vahlne (1977, p. 26)

The state aspects are the market commitment (commitment of firm resources to the

foreign markets) and the market knowledge (knowledge about foreign markets and

operations). The change aspects are the commitment decisions (decisions to commit

resources to foreign markets) and the current business activities. The state aspects impact

on the change aspects and vice-versa, hence creating causal cycles.

The model emphasizes on organizational learning and focuses on experience (Vida &

Fairhurst 1998). Increased learning and experiential knowledge reduce uncertainty and

risk associated with foreign market commitment (Buckley & Ghauri 1993). The central

thesis of this model is the ‘gradual acquisition, integration, and use of knowledge about

foreign markets and operations and on the incrementally increasing commitments to

foreign markets’ (Johanson & Vahlne 1977, p. 23). The internationalization process is

thus viewed as ‘an interplay between an international learning process and an

international resource commitment process’ (Sharma & Johanson 1987, p. 21).

According to the U-Model, the penetration of each individual foreign market takes place

in small steps due to uncertainties, and firms will respond to opportunities and challenges

in the foreign markets where they currently operate. The internationalization process of

the firms follows the establishment chain which has four different distinct stages of

entering an international market. Each stage represents a higher level of international

involvement. Starting with ‘no regular export but with interest in a new foreign market’,

a firm will then start exporting via agents. In the third stage, it will establish a foreign

Market Knowledge

Market Commitment

Commitment Decisions

Current Activities

49

sales subsidiary and finally build production facilities in the country (Johanson &

Wiederheim – Paul 1975). The establishment chain is diagrammatically shown in Figure

2.7.

Figure 2.7 : The Establishment Chain of International Involvement


Johanson and Vahlne (1977, p. 28) argued that ‘market-specific knowledge can be gained

mainly through experience in the market’ and the main source of experience comes from

current business activities. Thus, because of the lack of knowledge about foreign markets,

firms initially start internationalization by going to those markets which are similar to

their domestic markets which they can easily understand, often in neighbouring countries

(Johanson & Wiedersheim - Paul 1975). As experience and knowledge about the new

markets accumulate, the firms will enter them with greater psychic distance.

The U-Model makes three exceptions to the small incremental market commitments.

First, firms with large resources can skip the steps and make larger strikes. Second, under

stable and homogeneous market conditions, there are other ways to gain market

knowledge rather than through experience and learning by doing. Third, it is possible to

Stage 3

Expansion

Stage 4

Maturity

International Involvement

Stage 1 Start-up

Stage 2

Growth

• No regular export. Interest in a new foreign market

• Start exporting via agents

• Establish foreign sales subsidiary

• Build foreign production facilities

International Involvement

Time

50

generalize the experience from a specific market to other markets of similar conditions

(Johanson and Vahlne 1990).

(ii) Innovation – Related Internationalization Models (I-Models)

The term ‘innovation-related’ is derived from Rogers’ (1962) diffusion of innovation

theory (Bell 1995; Crick & Chaudhry 1997; Ruzzier, Hisrich & Antoncic 2006). The I-

Models treat each stage of internationalization as an innovation for the firm (Andersen

1993; Gankema, Snuif & Zwart 2000; Morgan & Katsikeas 1997) as the development of a

particular stage impacts the succeeding stage in an ordered unitary progression (Van de

Ven 1992). These stages, reflecting changes in the attitudinal and behavioural

commitment of managers (Bilkey & Tesar 1977; Cavusgil 1984a; Coviello & Martin

1999; Czinkota 1982; Reid 1981) result from manager’s perceptions and beliefs which

interact and are influenced by foreign market involvement (Coviello & McAuley 1999).

The I-Models mainly focus on export development process (Clark, Pugh & Mallory 1997;

Leonidou & Katsikeas 1996; Ruzzier, Hisrich & Antoncic 2006) and the features of some

of the most commonly cited models are summarized in Table 2.11.

A common feature of all the models is a number of fixed, incremental and sequential

stages varying from three to six stages (Clark, Pugh & Mallory 1997; Ruzzier, Hisrick &

Antocic 2006). In general, three broad categories of stages can be identified: the pre-

export stage, the initial export stage, and the advanced export stage (Clark, Pugh &

Mallory 1997; Leonidou & Katsikeas 1996; Ruzzier, Hisrich & Antoncic 2006). Despite

the differences in the number, nature, content and terminology of the stages, the models

share many common features (Andersen 1993; Morgan & Katsikeas 1997). ‘The

differences between the models seem to be semantic differences rather than real

differences about the nature of the internationalization process’ (Andersen 1993, p. 212).

51

Table 2.11 : Selected Innovation-Related Internationalization Models

Bilkey and Tesar

(1977)

Cavusgil (1980)

Czinkota (1982)

Reid (1981)

Stage 1

Management is not interested in exporting Stage 2

Management is willing to fill unsolicited orders, but makes no effort to explore the feasibility of active exporting Stage 3

Management actively explores the feasibility of active exporting Stage 4

The firm exports on an experimental basis to some psychologically close country Stage 5

The firm is an experienced exporter Stage 6

Management explores the feasibility of exporting to other more psychologically distant countries

Stage 1

Domestic marketing : The firm sells only to the home market Stage 2

Pre-export stage : The firm searches for information and evaluates the feasibility of undertaking exporting Stage 3

Experimental involvement : The firm starts exporting on a limited basis to some psychologically close country Stage 4

Active involvement : Exporting to more new countries – direct exporting – increase in sales volume Stage 5

Committed involvement : Management constantly makes choices in allocating limited resources between domestic and foreign markets

Stage 1

The completely uninterested firm Stage 2

The partially interested firm Stage 3

The exploring firm Stage 4

The experimental firm Stage 5

The experienced small exporter Stage 6

The experienced large exporter

Stage 1

Export awareness : Problem of opportunity recognition, arousal of need Stage 2

Export intention : Motivation, attitude, beliefs, and expectancy about export Stage 3

Export trial : Personal experience from limited exporting Stage 4

Export evaluation : Results from engaging in exporting Stage 5

Export acceptance: Adoption of exporting/rejection of exporting.

Source : Andersen (1993, p. 213)

(iii) Critical Views on the Stage Models

The stage models have been subject to widespread research and empirical investigation.

There is empirical evidence that firm internationalization occurs in gradual and

incremental stages (Chetty & Hamilton 1996; Dalli 1994; Fina & Rugman 1996; Welch &

Luostarinen 1988). Similar support was also reported in Canada (Denis & Depelteau

1985), China (Young, Huang & McDermott 1996), Germany (Dichtl et al. 1983), Hawaii

(Hook & Czinkota 1988), Japan (Johansson & Nonaka 1983), Norway (Juul & Walters

1987), South Africa (Calof & Viviers 1995) and Turkey (Karafakioglu 1986).

52

Despite this impressive evidence and support, the stage models have been criticized. The

stage models stipulate that firms will start at one stage and go to the next stage in

sequence without considering whether other options of strategic choices are made

(Andersson 2000; Johanson & Vahlne 1990; Melin 1992; Reid 1983; Turnbull 1987).

Turnbull and Valla (1986) showed that firms do not follow a regular fixed path as they

enter foreign markets. Some firms have exported since inception without going through

the sequential stages (Andersson & Wictor 2003; Knight & Cavusgil 1996; Madsen &

Servais 1997; McAuley 1999; Westhead et al. 2001).

The contrasting views offered by the cited authorities illustrate that the stage models have

strengths and weaknesses in terms of explaining the internationalization process.

Pertinent to this research, is the view expressed by the authorities that the explanatory

power of the stage models are more appropriate and applicable to the manufacturing

industry rather than the service industry (Buckley, Pass & Prescott 1992; Chadee &

Mattsson 1998; Engwall & Wallenstal 1988; Johanson & Vahlne 1990; Sharma &

Johanson 1987).

2.4.3.2 Network Perspective to Internationalization

(i) Network Model

The network model postulates that a firm is embedded in a complex and evolving web of

interdependent social, business and industrial relationships (Bridgewater 1999; Johanson

& Mattsson 1988). Johanson & Mattsson (1987, p. 34) described the industrial systems

as ‘networks of relationships among firms’. The markets are structured as networks with

the focal firm connected to the actors and the networks are affected by the interplay

between actors and actors’ interaction (Axelsson & Easton 1992; Johanson & Vahlne

1992; Blankenburg-Holm 1995).

A business network is defined as ‘a set of two or more connected business relationships,

in which each exchange relation is between business firms that are conceptualized as

collective actors (Blankenburg-Holm, Eriksson & Johanson 1996, p. 1036). Connected

53

means the extent to which ‘exchange in one relation is contingent upon exchange (or non-

exchange) in the other relation’ (Cook & Emerson 1978, p. 725). ‘The relationships are

characterized by continuity, multiplexity and specificity’ (Andersson & Florēn 2008, p.

35). Accordingly, network theory emphasizes relationship as an exchange governing

mechanism (Kuada 2006) and does not occur through a central plan, or a bureaucratic

organizational hierarchy, or the traditional price mechanism (Overby & Min 2001).

A business network comprises three basic components: actors, resources and activities

(Håkansson & Johanson 1992, 1993; Håkansson & Snehota 1995) as shown in Figure 2.8.

All form their own interdependent networks, are related to each other in the overall

network structure through a number of various different bonds or ties, and are also

important forces acting in the networks. The actors can be defined at different levels such

as individual, departmental or organizational level. The actors include customers,

suppliers, competitors, agents, distributors, regulatory and other public agencies

(Axelsson & Johanson 1992; Iskanius & Lamminsalo 2005; Johanson & Vahlne 1990;

Sharma & Johanson 1987). The actors are in control of resources, perform activities,

develop relationships through exchange process and aim to increase their control over the

network (Brito 2001; Håkansson & Johanson 1992).

Figure 2.8 : Basic Structure of the Network Model

Source : Håkansson & Johanson (1992, p. 29)

Actors

Activities Resources

Network of Actors

Network of Activities Network of Resources

54

An activity takes place when one or several actors combine, develop, exchange or create

resources by using other resources. Activities do not occur alone in isolation. A change

in one activity will affect other activities in the network. Coordination is essential because

of various dependency relationships between the activities (Håkansson & Johanson 1992;

Iskanius & Lamminsalo 2005).

The resources of a firm are heterogeneous and include physical resources, financial

capital, technology, human capital, market and knowledge. An actor can exercise control

over the resources directly by formal ownership, or indirectly through network

relationships with other actors (Håkansson & Johanson 1992). The power of influence

within the network comes from control over key resources (Ford et al. 2003) and the skill

of influencing the decisions of other network actors (Thorelli 1986; Brito 2001).

The network approach emphasizes cooperation, complementarity and coordination

(Easton 1992). Network development requires investments (Johanson & Mattsson 1985,

1987; Håkansson 1982; Turnbull & Wilson 1989; Turnbull, Ford & Cunningham 1996).

It takes time, efforts and resources to establish, develop and build relationships (Easton

1992; Johanson & Mattsson 1987, 1988). Relationships built on strong bonds are based

on trust and mutuality whereas weak relationships are informal without bonds (Bjorkman

& Kock 1995).

Firms form relationship through their activities in networks and gain access to resources

and markets. The network model assumes that the resources required by a firm are

controlled by other firms and can only be obtained through the network positions

(Johanson & Mattsson 1988). By using their positions in the business network, firms can

improve their access to the necessary market information, knowledge and expertise; learn

from experiences, access to new opportunities and pool resources by drawing the

complimentary strength of other actors in the networks (Chetty & Blankenburg-Holm

2000; Etemad & Wright 1999).

(ii) Network Approach to Internationalization

55

For competing successfully in a global economy, firms can take advantage of every

emerging opportunity by establishing business network which is characterized ‘by

relationships of collaboration or interdependence among firms. Any one firm neither

dominates the interaction among participants nor is it a simple economic exchange

motivated by calculations of price and quantity. Networks functions best when their

organization and activities are flexible’ (Cobb, 1997, p. 2).

The internationalization network model implies that a firm’s success in entering new

international markets depends on its network relationships within the current market, both

domestic and international, rather than on the chosen market, its cultural characteristics

and firm-specific advantages (Coviello & McAuley 1999; Johanson & Mattsson 1988). A

firm’s current business networks can form a bridge to enter foreign markets (Sharma &

Johanson 1987). The choice of foreign market and entry mode, a consequence of

business opportunities, is often a result of network relationships rather than basing on

choices and comparisons of various markets (Coviello & Munro 1997; Sharma &

Johanson 1987).

The network theory was found most appropriate for this research as technical consultancy

firms operate in an environment of network relationships which provide firms the

opportunity and motivation to internationalize (Sharma and Johanson 1987). The

professional services firms depend much on strong interpersonal relationships and

contacts to gain competitive advantage in foreign markets (Winsted & Patterson 1998).

Furthermore interfirm and interpersonal relationships play an important role in foreign

market selection (Andersen & Buvik 2002), market servicing (Welch & Welch 1996),

international market development (Coviello & Munro 1995), strategic choices and

performance (Peng & Luo 2000) and the degree of internationalization (Brush, Edelman

& Manolova 2002).

2.4.3.3 Internationalization Framework for Service Firms

The Internationalization process is a complex phenomenon. There are a number of

internationalization frameworks developed by various authorities based on different

perspectives (Aaby & Slater 1989; Asgari, Ahmad & Gurrib 2010; Baird, Lyles & Orris

56

1994; Chelliah et al. 2010; Cicic, Patterson & Shoham 1999; Javalgi & Martin 2007;

Kuada 2006; Lommelen & Matthyssens 2005; Styles & Ambler 1994). Most of these

focused on manufacturing sector and comparatively few on services (Kennedy 2005;

Lommelen & Matthyssens 2005; Samiee 1999). Only a few were pertinent to firms in the

services sector and a pertinent framework is that developed by Asgari, Ahmad and Gurrib

(2010) as depicted in Figure 2.9.

Figure 2.9 : Internationalization Framework for Service Firms

Source : Asgari, Ahmad and Gurrib (2010, p. 71)

Asgari, Ahmad and Gurrib (2010) acknowledged that business firms do not have a fixed

pattern of internationalization due to different environmental settings in which the firms

operate. The internationalization of the firms is influenced by both internal and external

factors (Choo & Mazzarol 2001; Ekeledo & Sivakumar 1998, 2004; Koch 2001; Quer,

Claver & Andreu 2007). The internal factors include firm specific resources, strategic

considerations, owner advantage factors, foreign business experience and networking

Strategic Considerations

• Motives for expansion

• Business strategy

Competitive Advantages

• Firm-specific resources

• Network relationships

Industry Characteristics

• Industry potential

• Industry uncertainty

Target Market Factors

• Market potential

• Country risk

Internationalization of Service Firms

• Decision to expand

• Choice of target market

• Timing of market entry

• Choice of entry mode

Expansion Outcomes

• Business performance

• Country image

57

capability (Ahmad & Kitchen 2008; Ekeledo & Sivakumar 1998, 2004; Koch 2001).

External factors, such as country factors, industry factors, target market potential and risk,

are usually beyond the control of the firms (Ekeledo & Sivakumar 1998, 2004; Koch

2001). This framework also investigates the impact of internationalization on firm

performance and country image.

2.4.4 Conclusion

This Section reviewed the scholarship on internationalization and globalization that relate

to service industry. It identified the pertinent theories including the U-model, I-model,

the network perspective and the internationalization frameworks. The next section

discusses the Malaysian engineering consulting industry.

2.5 The Malaysian Engineering Consulting Industry

This Section discusses the first focal theory on the evolution of the Malaysian engineering

consultancy industry following the enactment of the Registration of Engineers Act 1967

(REA). Starting with an examination of the legal framework for the registration of

engineers, it then presents the Malaysian engineering consultancy market and the major

players. The discussion includes the engineering profession’s responses to global and

regional changes. This was largely generated by technological developments and

Malaysia’s participation in the WTO and the ASEAN Free Trade Area.

2.5.1 Registration of Engineers in Malaysia

As discussed in Sub-Section 2.2.3, the country was largely dependent on British

expatriate engineers for projects in the civil, mechanical and electrical disciplines (Judin

2001). Most of the large public and private sector projects were also undertaken by

British engineering consultancy firms. During the 60s, the University of Malaya increased

its enrolments for engineering students. Several Malaysians also undertook engineering

programmes in the United Kingdom and Australia. These developments increased the

pool of Malaysian engineers who gradually replaced the British expatriates. During the

58

2nd Malaysia Plan (1965 – 1970), the Government introduced measures which were

aimed at increasing the use of Malaysian engineers and consultants at all levels of

developmental projects (Hamdan 1999). Malaysian engineers also called on the

Government to enact appropriate legislation that would protect the industry through a

registration process as well as regulate the conduct and practice of registered engineers.

The outcome was the Registration of Engineers Act 1967 (REA) which led to the

establishment of the Board of Engineers Malaysia (BEM) in 1972. All qualified

engineering graduates are legally required to register with the BEM before they

commence professional practices either as Graduate Engineers or as Professional

Engineers (PEs). The candidate must possess a basic engineering degree accredited under

the purview of the Engineering Accreditation Council (EAC) (Chiam 2009a).

Registration with the BEM is therefore a pre-requisite for registered Professional

Engineers (PEs) and engineering consulting practices to undertake and submit

engineering feasibility studies, plans, drawings, schemes, proposals, designs and reports

(Chiam 2009b). In line with the BEM’s main objective of protecting the public through

safe and ethical engineering practices, it has the authority to cancel the registration of

engineers or practices which are in breach of BEM regulations (GOM 1967).

The value chain of Malaysian engineers’ development is depicted in Figure 2.10. It starts

with a talent pool of students pursuing engineering education and obtaining engineering

degrees from recognized Malaysian or foreign universities or institutions of higher

learning. The Malaysian engineering graduates have to undergo at least three years of

training to meet the BEM requirements. The graduates who pass the Professional

Assessment Examination (PAE) can seek registration as PEs with the BEM.

The establishment of the ASEAN Free Trade Area in 1993 resulted in the partial removal

of barriers in the trade in services. A significant development was the Mutual Recognition

Agreement (MRA). Signed in 2005, the MRA permitted registered engineers in ASEAN

member countries to practise in other ASEAN countries. This regional market

liberalization made it necessary for the BEM to also permit registered engineers from

other ASEAN countries to practise in Malaysia.

59

Figure 2.10 : The Value Chain of Malaysian Engineer’s Development

Education

• Engineering degrees from either

• 38 Malaysian Universities, OR

• Pass Phase I to III of Engineering Council Examination of UK

Mutual Recognition Agreement (MRA)

• Qualified Engineers from ASEAN region signed in 2005

Related Industries

• Engineers play crucial role in infrastructure ‘Design & Build’ Projects

� Engineers can determine selection of other service providers to execute project

Source : Adapted from Accenture (2010, p. 88)

Due to the rapid changes in technology and the world economic environment, the PEs are

also required to continuously update their capabilities through the Continuing

Professional Education scheme. This requires them to accumulate 150 hours of training

every three years with a minimum of 50 hours per year. The training process is also

aimed at improving the service delivery which is interlinked with project delivery. This

continuing professional training enables the professionals to continuously learn and apply

new approaches to solve new engineering problems and challenges.

Knowledge Capital / Assets

• Green Building Index

• Various programs on

� Quality Assurance

� Health & Safety

� Material Quality

Accreditation

• Registered Graduate Engineer

• Satisfied the training requirements

• Passed the Professional Assessment Examination (PAE)

• Residing for at least 6 months prior to application

Continuing Professional Education

• 150 hours every 3 years

• Minimum of 50 hours per year

� Graduate members have

degree and are undergoing training to gain full membership

Accreditation

Natural person flow Services flow

Contractors/ Builders

Architects

Project Managers

Related Industries

Exports Imports

Accreditation Professional Engineers; Graduate

Engineers �

Surveyors

Talent Pool

Professional

Training

Education

Delivery

Knowledge

Capital / Assets

60

The protectionist orientation of the BEM is also reflected by the stipulation that only

Malaysian citizens or permanent residents are eligible for registration as Professional or

Graduate Engineers. Foreign engineers are also not permitted to operate independently of

Malaysian partners or serve as directors or shareholders of an ECS firm (USTR 2010).

However, foreign engineers can be licensed by the BEM as Temporary Engineers only for

specific projects. Furthermore, they must be sponsored by Malaysian ECS firms that are

carrying out the projects. Malaysian firms applying for licenses for foreign engineers are

required to show proof to the BEM that they were unable to find Malaysian engineers

with the necessary experience for the specific technical position. The licenses issued to

Temporary Engineers are for a renewable period of one calendar year.

All foreign applicants have to be (i) registered as a professional engineer in their home

country, (ii) have a minimum of ten years working experience, and (iii) have a physical

presence in Malaysia of at least 180 days in one calendar year (GOM 1967).

BEM registration is classified according to engineering disciplines of which the five main

disciplines are civil, mechanical, electrical and electronics, chemical and mining. There

are 45 subsidiary disciplines, mainly to cater for the specialized branches of engineering

offered by universities (Chiam 2009b).

There were a total of 69,714 engineers registered with BEM as at 30 September 2011.

They comprised 10,654 Professional Engineers, 58,994 Graduate Engineers and

66 Temporary Engineers. PEs formed 16% of the total engineers registered with the

BEM, with the remaining being mainly Graduate Engineers (BEM 2011).

As discussed, the Registration of Engineers Act was enacted in 1967 with the aims of (i)

regulating the professional conduct and practice of registered engineers, (ii) safeguarding

public interests and (iii) protecting the then infant ECS industry from foreign competition.

However, significant changes have taken place in the national, regional and global arenas

over the past five decades. Malaysia has made rapid progress in developing a large pool

of engineers with the skills and expertise to undertake a variety of mega projects

(Accenture 2010) and the ECS is now better positioned to withstand foreign competition.

61

Despite this, the REA still retains a protectionist’s orientation due to the absence of a

critical review to enhance its relevance in an era of trade and service liberalization.

2.5.2 Registration of Engineering Consulting Firms in Malaysia

All engineering consulting firms have to be registered with the BEM as engineering

consultancy practices regardless of whether they operate as sole proprietorships,

partnerships or body corporates. In the case of sole proprietorship, the sole proprietor is a

PE. In the case of partnership, all the partners have to be PEs and in the case of body

corporate, its board of directors must comprise PEs, Professional Architects and/or

registered Quantity Surveyors. While any other persons can hold a maximum share of

30% of the overall equity of the body corporate, the balance must be owned by the PEs,

Professional Architects and registered Quantity Surveyors with the PEs holding not less

than 10% (GOM 1967).

Foreign ECS firms are also permitted to establish a commercial presence on the condition

that all directors and shareholders are Malaysians. While these foreign ECS firms are also

allowed to collaborate with Malaysian firms, they are not permitted to submit engineering

plans for domestic authority approval (USTR 2010).

There were a total of 1,917 engineering consulting practices registered with the BEM as

of 30 September 2011. This comprised 838 sole proprietorships, 178 partnerships and 901

body corporates. The majority of practices were sole proprietorships (43.7%) and body

corporates (47.0%). Partnerships formed less than 10% of the total practices (BEM 2011).

2.5.2.1 Implication of the Registration of Engineers Act 1967

The REA continues to meet its aim of protecting the domestic infant ECS industry from

foreign competition since foreign ECS consultants and firms are prohibited to register

with the BEM except under certain conditions. However, the situation has now changed.

The Malaysian ECS industry has grown and matured over the years. Continued

protection is likely to result in the industry becoming over dependent on the domestic

market which being small has limited opportunities for growth and expansion. The

62

removal of the protection provided by the REA would make it necessary for the

Malaysian ECS industry to become more competitive and therefore be better positioned

to move into overseas markets.

The REA also limits the public ownership of the ECS firms to not more than 30%.

Furthermore, the management of the firms is restricted to Professional Engineers,

Professional Architects and / or registered Quantity Surveyors. This limitation constrains

the firms from being able to recruit top business experts to join its management team.

This also discourages investors to invest in the ECS firms as they would not be able to

provide business inputs and participate in management decisions. Consequently, the ECS

firms have difficulty to source for public funding and financing from financial institutions

for growth and expansion. Viewed in this context, the REA can now be considered to be a

burden to the ECS industry as it acts against the smaller and financially weaker ECS firms

gaining access to additional capital and becoming stronger and more competitive in order

to successfully enter foreign markets.

2.5.2.2 Comparative Legislations in Selected Regional Countries

This Section examines the statutory requirements relating to the registration of

professional engineers and consulting engineering practice in Malaysia, Singapore,

Thailand and Hong Kong. Table 2.12 sets out the differences in the requirements for

membership, engineering/consulting practice, ownership/equity structure and

management.

Significantly, membership of the BEM in Malaysia and Council of Engineers in Thailand

is limited to the citizens of the respective countries (GOM 1967; GOT 1999). The rules

are more relaxed in Singapore and Hong Kong with membership being also open to

ordinary residents (GOS 1991; GOHK 1997a). In Malaysia, Singapore and Thailand the

engineering consultancy practices are regulated by the professional boards or council. In

Hong Kong, only individual professionals are regulated.

63

Table 2.12 : Major Differences in Statutory Requirements

Requirement

Malaysia

Singapore

Thailand

Hong Kong

Citizenship

Malaysian

Open

Thai

Ordinary Resident

Engineering Consulting Practice

� Sole proprietorship � Partnership � Body Corporate

� Partnership � Multi-Discipline and

Corporate Practice

� Individual � Company

� Individual

Ownership / Equity Structure

For Body Corporate:

• Related Professionals

- min 70%

• Professional Engineers - min 10%

• Public - max. 30%

OPEN

(Not stated)

(Not regulated)

Management

• Sole proprietor and partners of Partnership must be

Professional Engineers

• Board of Directors of body corporate must be Professional Engineers, Professional Architects, and/or registered Quantity Surveyors

• The managing partner or company director must be a Professional Engineer with practising certificate.

• At least half of the total partners in a partnership or directors in a company are licensed.

• The managing partner or managing director of a company must be licensed.

(Not regulated)

Source : GOM (1967); GOHK (1997a); GOS (1991); GOT (1999)

Singapore, Thailand and Hong Kong do not regulate the shareholding of the ECS practice.

In Malaysia however, equity ownership of ECS firms by the public is limited to a

maximum of 30%. Furthermore, the sole proprietor and partners of partnership in

Malaysia must be Professional Engineers, whereas for the body corporate, the board of

directors must be Professional Engineers, Professional Architects and / or registered

Quantity Surveyors. In Singapore, the managing partner or managing director must be

Professional Engineer with practising certificate (GOM 1967; GOHK 1997a; GOS 1991;

GOT 1999).

In Thailand, at least half of the total partners in a partnership or directors in a company

are licensed. In addition, the managing partner or managing director of a company must

be licensed (GOT 1999). In Hong Kong, the consulting engineer must be registered with

64

the Building Authority as well in order to be appointed as the Authorized Person for the

engineering work (GOHK 1997b).

2.5.3 Other Major Malaysian Engineering Organizations

In addition to the BEM, Malaysian engineers may also be affiliated to two other major

engineering bodies. These are namely, the Institution of Engineers, Malaysia (IEM) and

the Association of Consulting Engineers Malaysia (ACEM).

2.5.3.1 The Institution of Engineers, Malaysia

The IEM, registered under the Malaysian Societies Act 1966, is a private professional

body that promotes and advances the science and profession of engineering in all its

disciplines. It also facilitates the exchange of information and ideas related to engineering

(Chiam 2009c). With a total membership of over 21,000 in 2010, the IEM has 17

divisions of engineering with civil engineering being the major division. The IEM

membership is voluntary and is accepted by the BEM as a qualification for registration as

a PE. The IEM plays an important role in the BEM as five of the 17 council members of

the BEM are nominated by the IEM (Chiam 2009b).

2.5.3.2 The Association of Consulting Engineers Malaysia

The ACEM was founded in 1963 with the objective of

‘promoting the advancement of the profession of consulting engineering by associating

together for consultation and cooperation those engineers whose work is of a purely

consultative nature, and of providing facilities for Governments, Public Bodies,

Associations representing industry and trade, and others to confer with CE as a body and

to ascertain their collective views’ (ACEM 2011, p. 34).

The ACEM deals with matters relating to the status, professional conduct and

emoluments of CEs. While membership is voluntary, it is limited to engineers practicing

65

in Malaysia as a CE either individually or as a partner or consultant of a firm of CE in

Malaysia or as a director or shareholder of an engineering consulting company in

Malaysia (ACEM 2011).

As of 8th February 2011, the ACEM had a total individual membership of 698 PEs,

representing 142 engineering consultancy practices of which 117 were body corporates

(ACEM 2011). The majority of the ACEM members comprised the bigger practices of

body corporates.

Although the ACEM was established before the enactment of the Registration of

Engineers Act 1967 (REA) and the establishment of the Institution of Engineers,

Malaysia, it is noteworthy that there is no specific provision in the REA for ACEM

representation in the BEM Council. Members of the ACEM are fundamentally business

entities. This again points to the need for amendments to be made to the REA to enable

ACEM members to perform as successful and expanding business entities.

2.5.4 The Malaysian Engineering Consulting Market

The Malaysian Government’s spending on infrastructure development is a major revenue

source for Malaysian ECS and construction industries as it accounted for 40% to 60% of

the total value of the projects in both in 2009 (Accenture 2010). The gross Federal

Government development expenditure, domestic private investment and FDI are shown in

Table 2.13. In 2009, the Malaysian gross development expenditure amounted to

RM53.563 billion or an increase of 25% from previous year. However, domestic private

investment and FDI declined due to the worldwide financial crisis of 2008/2009.

The revenues of the domestic ECS industry were estimated to be worth between RM1.59

billion to RM2.39 billion against the total construction project size of RM78.6 billion

(Accenture 2010).

2.5.4.1 The Major Malaysian ECS Players

66

a

Table 2.13 : Gross Federal Government Development Expenditure

(RM billion)

Year

2005

2006

2007

2008

2009

2010

Gross Development Expenditure (RM billion)

30.534

35.807

40.564

42.847

53.563

51.220

Domestic Private Investment (RM billion)

27.688

22.150

21.915

28.274

12.573

-

Foreign Direct Investment (RM billion)

17.883

20.228

33.426

48.099

12.160

-

Source : GOM (2009)

a) Revised estimate

c) January – June 2009

b) Budget allocation d) January – August 2009

The total number of staff and the number of engineers employed are indicators of the size

of the ECS firms (Kreitl, Urschitz & Oberndorfer 2002). Based on these criteria, the ten

major Malaysian ECS firms and the disciplines in which they are involved are shown in

Table 2.14. The big Malaysian ECS firms have generally average total staff strength of

about 500. They are multidisciplinary offering civil, mechanical and electrical services

and are service exporters.

Table 2.14 : Ten Major ECS Firms in Malaysia

Ranking

Name of Firm

Total no. of

Staff

Total no. of Engineers

Disciplines

Service Export

1

Sepakat Setia Perunding Sdn Bhd

515

246

C, M, E

Yes

2

Minconsult Sdn Bhd

450

225

C, M, E

Yes

3

HSS Integrated Sdn Bhd

370

150

C, M, E

Yes

4

SMHB Sdn Bhd

300

NA

C, M, E

Yes

5

SKM Consulting Services (M) Sdn Bhd

230

108

C

Yes

6

G& P Professionals Sdn Bhd

221

140

C, M, E

Yes

7

KTA Tenaga Sdn Bhd

212

83

C, M, E

Yes

8

Zaidun – Leeng Sdn Bhd

199

76

C, M, E

Yes

9

KTA (Sarawak) Sdn Bhd

190

84

C, M, E

Yes

10

Arup Jururunding Sdn Bhd

181

86

C, M, E

Yes

Source : ACEM (2011)

a) Include specialists other than engineers

b) C : Civil, M : Mechanical, E : Electrical

a

c

d

b

67

2.5.4.2 Malaysian ECS Export Performance

There is limited recent literature on the export performance of Malaysian ECS firms.

However, the findings of a survey conducted in 2002 by the BEM in collaboration with

the ACEM and the Professional Services Development Corporation (PSDC), Looi (2003)

revealed that:

• About 12% of the surveyed ECS firms earned foreign income;

• Export earnings accounted for a 5.5% share of the total revenue of the exporting

firms;

• Total export earnings amounted to 1.5% of the total industry earnings.

Viewed in this context, the actual exports of Malaysian ECS firms are small. Further

more, only a handful of ECS firms benefited from exports. Looi (2003, p. 16) concluded

that for the Malaysian ECS firms ‘the spirit is willing but the flesh is weak’. The lack of

service export could be also due to Malaysian ECS firms being complacent and ignorant

of the gains emerging from exports. Preferring the comfort zone of the domestic market,

they were hesitant to venture into a highly competitive and unfamiliar international

market (Wong 2000; IEM 2001).

Notwithstanding, the Malaysian ECS firms are participating in global projects particularly

in the ASEAN region, other Asian countries and the Middle East as shown in Figure 2.11.

Vietnam, Indonesia, India, Saudi Arabia and Pakistan were the five most active markets

for Malaysian ECS firms in 2008 as shown in Table 2.15.

2.5.5 Challenges Faced By Internationalizing Malaysian ECS Firms

Firms face various barriers, obstacles and challenges in their effort to market and export

their products or services in the international markets (Bilkey 1978; Bilkey & Tesar 1977;

Eshghi 1992; Grönroos 1999; Rabino 1980; Welch & Luostarinen 1993). Accordingly,

68

Table 2.15 : Foreign Presence of Malaysian ECS Firms

Ranking

Country

No. of Firms

No. of Projects

1

Vietnam

9

14

2

Indonesia

9

11

3

India

5

11

4

Saudi Arabia

5

7

5

Pakistan

4

8

6

Philippines

4

5

7

Dubai

3

12

8

China

3

7

9

Syria

3

5

10

Abu Dhabi

3

3

11

Qatar

3

3

12

Singapore

3

3

Source : PSDC (2008)

Malaysian internationalizing ECS firms are facing key challenges as shown in Figure 2.12.

Figure 2.11 : Regional Breakdown of Malaysian ECS Firms and Their Foreign Markets

21

10

31 2

15

2

44

32

31 2

41

2

0

5

10

15

20

25

30

35

40

45

50

ASE

AN

Oth

er Asian

Count r

ies

Af ric

a

Aust

ralasia / Ocea

nia

Euro

pe

Mid

dle

Eas

t

N&S Am

erica

Regions

Number

Number of Companies

Number of Projects

Source : PSDC (2008, p. 9)

69

Figure 2.12 : Challenges Faced By Internationalizing Malaysian ECS Firms


These are global competition, global mindset, financial capital, human capital and

innovation. They are subsequently discussed.

2.5.5.1 Global Competition

The GATS, bilateral, multilateral and regional free trade agreements (FTAs) create a

more liberalized and open trading environment leading to an increasingly integrated

world market for services. The entry of new players and rivals threaten Malaysian

ECS providers operating in both the domestic and international markets. Rivalry and

competition among the industry players will be intensified and may lead to

hypercompetition, which is described by Grant (2005, p. 105-6) as ‘industry

environments characterized by intense and rapid competitive moves where competitors

Internationalization of Malaysian

ECS Firms

Global Competition

Financial Capital

Human Capital

Global Mindset

Innovation

70

must move quickly advantages and erode the advantages of their rivals’. This speeds up

the dynamic strategic interactions among competitors.

This definition implies that competition is dynamic and transitory. Competitive

advantage is the foundation of a firm’s performance in competitive market (Porter 1985).

To compete successfully in an industry, Porter (1980) contended that a firm must exploit

its strength by pursuing one of three generic strategies: 1) differentiation, 2) cost

leadership or 3) focus as illustrated in Figure 2.13. Porter’s generic strategies are

founded on pricing advantages and product uniqueness. Porter (1985) also identified five

sources of competitive advantage: 1) marketing, 2) research and development, 3)

organization advantages, 4) firm functional area advantages and 5) network relationship

advantages. Competitive advantage in international markets can be derived from the

firm’s products, markets, technology orientation, and resources (Cavusgil & Nevin 1981).

Figure 2.13 : Porter’s Three Generic Strategies

Strategic Advantage

Perceived Uniqueness by the Customer

Low Cost Position

Strategic Target

Industry wide

Differentiation

Overall

Cost Leadership

Particular Segment Only

FOCUS

Source : Porter (1980, p. 39)

Superior export performance is driven by competitive advantages which are linked to

competitive resources and competitive skills in exporting as shown in Figure 2.14 (Piercy,

Kaleka & Katsikeas 1998). As such, the Malaysian ECS providers have to continuously

create new competitive advantages deriving from competitive resources and skills to

neutralize their rivals’ competitive advantages.

71

Figure 2.14 : Sources of Superior Performance in Exporting

Source : Piercy, Kaleka & Katsikeas (1998, p. 381)

2.5.5.2 Global Mindset

Organizations and individuals need to develop global mindsets in facing the challenge of

globalization (den Dekker, Jansen & Vinkenburg 2005). According to Rhinesmith (1993,

p. 24), a global mindset is

‘a way of being rather than a set of skills. It is an orientation of the world that allows one

to see certain things that others do not. A global mindset means the ability to scan the

world from a broad perspective, always looking for unexpected trends and opportunities

that may constitute a threat or an opportunity to achieve personal, professional or

organizational objectives.’

‘An individual global mindset is a way one perceives the world and the globalization of

markets, people and companies’ (den Dekker, Jansen & Vinkenburg 2005, p. 2). Global

mindset has been found to link to values, attitudes, foreign works experience and

education of the managers (Bilkey & Tesar 1977; Joynt & Welch 1985; Wiederheim-Paul,

Olson & Welch 1978). Managers with a global mindset understand the interdependence

of their firms with the global economy (Javalgi & Martin 2007; Kedia & Mukherji 1999;

Kefalas 1998), are aware of the diversity across cultures and markets and able to response

with speed and accuracy in the fast changing globalized world (Gupta & Govindarajan

2002).

Kefalas (1998) developed the taxonomy of global mindset using the two dimensions of

thinking or conceptualizing and acting or contextualizing as depicted in Figure 2.15. He

concluded that the mindset combining global thinkers and local actors is the most

appropriate for organizations’ global expansion.

Competitive

Advantage

Superior Export

Performance

Resources

Skills

72

Malaysian ECS providers that are in the process of becoming globally competitive by

internationalizing their operations have to formulate strategies for successfully entering

into foreign markets (Thompson, Strickland & Gamble 2007). They also have to comply

with the regulatory requirements in the targeted new markets. These regulations could

relate to the securing of business licenses, the registration of professional engineers,

equity capital and partnerships with domestic engineering firms. Viewed in this context

(Kefalas 1998), taxonomy of global mindset in particular the global dimension of ‘think

globally, act globally’ is very pertinent as it clearly requires the senior management of

exporting ECS firms to have a full understanding of the regulatory environment in the

targeted new market as well as to have a global orientation in order to successfully meet

the regulatory requirements.

Figure 2.15 : The Two Dimensions of Global Mindset

Think : Conceptualization

Act : Contextualization

Locally

Globally

Locally

Think Locally Act Locally

Think Globally

Act Locally

Globally

Think Locally Act Globally

Think Globally Act Globally

Source : Adapted from Kefalas (1998, p. 558)

Inappropriate mindset, apart from other external factors, was identified by Peng (2007) to

be a major factor that resulted in the low percentage of export of the total output of

Malaysian small and medium organizations. When asked about exporting their services,

Peng (2007, p. S10) reported that the typical responses were:

• ‘We’re just a small business.

• We’re too small to go international.

73

• We can’t even cope with local markets, how can we penetrate international markets?

• Let me be successful in Malaysia first. Only then I think about going abroad.’

The cited responses show that Malaysian firms lack global mindsets and are basically

domestic orientated. The global mindset is an important determinant for international

export involvement particularly at the pre-export stage (Cavusgil & Nevin 1981; Lim,

Sharkey & Kim 1993). The decision makers with broad global mindset have a higher

probability of being exposed to and perceiving export stimuli (Wiedersheim-Paul, Olson

& Welch 1978).

2.5.5.3 Financial Capital

The typical Malaysian ECS firm is relatively small (Ling, Abidin & Heng 2000). Lack of

capital to finance export activities is a major challenge preventing non-exporters from

exporting (Edmunds & Khoury 1986; Patterson 2004; Saleh & Ndubisi 2006). Most of

the firms rely on their own savings or internally generated funds, borrowings from friends

or relatives or informal lenders to finance their business operations (Aris 2006; Chin 2010;

Tambunan 2009). Although exporting increases revenues and greater profits, these

benefits only come much later since capital is immediately needed to finance the required

increases in business activities. Furthermore, the exporter may face serious non-payment

problems as the firms are dependent on cash flow for survival (Coulthard 2008).

The Census of Establishment and Enterprises, conducted by the Malaysian Department of

Statistics Malaysia in 2005, indicated that the exporting service firms need financing for a

range of activities in support of their internationalization. These include:

• Investment in new and strategic technology such as computer systems, softwares,

information and communication technologies.

• Improving and upgrading existing services and work processes.

• Quality certification, management system improvements and skill upgrading.

• International market development.

• New business start-ups.

74

Service exporters face problems in securing finance from financial institutions which are

usually very conservative in their lending policies toward service firms (Saleh & Ndubisi

2006). Lenders insist on borrowers providing traditional collateral such as fixed assets as

security. Usually service firms have little collateral to pledge other than the assignment

of the proceeds of the service (Aris 2006; Chan & Coulthard 2005; Chin 2010). This

situation arises because the most valuable asset of a service firm is the knowledge asset

and the human resources which are not shown in the balance sheets (Coulthard 2008).

For service firms with limited asset bases, they generally lack the financial track record

and have insufficient documents to support loan application (Aris 2006).

The Malaysian Government has a range of financial support programmes to help the

service exporters as discussed in Sub-Section 2.6.2. However, as noted in Sub-Section

2.6.3, these loans have been suspended. Firms therefore have to obtain loans from the

banking sector and tend to pay higher interest rates (Saleh & Ndubisi 2006).

2.5.5.4 Human Capital

The resource-based view (RBV) theory postulates that human resource is a strategic asset

in the firm (Wright & McMahan 1992) especially for a knowledge-based ECS firm.

Knowledge is the most critical competitive asset that a firm possesses (Grant 1996) and is

the driving force for sustainable long term growth (NEAC 2010). A firm’s knowledge

mainly resides in its human capital. People possess knowledge which has its own value

and that makes individuals unique and valuable to society and to organization (Syed-

Ikhsan & Rowland 2004). An organization can build sustainable competitive advantage

based on valuable, rare, imperfectly imitable and non-substitutable internal resources

(Barney 1986, 1991, 1995; Barney, Wright & Ketchen 2001) or by using human resource

strategies (Lado & Wilson 1994; Pfeffer 1994; Wright & McMahan 1992).

Human capital constitutes the knowledge stock of the employees of an organization

(Bontis, Crossan & Hulland 2002). Education and training are the most important

investments in human capital (Becker 1993) as they increase the capabilities of a person

in performing activities of economic value (Marimuthu, Arokiasamy & Ismail 2009). A

75

conceptual model linking human capital investment, human capital effectiveness and firm

performances is depicted in Figure 2.16.

Figure 2.16 : Conceptual Model of Human Capital Investment, Human Capital Effectiveness and Firm Performances

Source : Marimuthu, Arokiasamy & Ismail (2009, p. 270)

Malaysian ECS firms require professional management structures that are well suited to

research global markets, understand the competitive landscape and be competent to meet

the regulatory requirements of countries in which they intend to start foreign operations

(Norton 2007). Malaysian ECS firms can meet this external challenge by hiring

knowledge based professional staffs that are able to understand, interpret and effectively

address the complex external regulatory environment (David 2005).

Malaysia’s commitment toward human capital development, as indicated by its

expenditure in public education expressed in percentage of GDP and shown in Table 2.16,

Table 2.16 : Expenditure on Education (% of GDP) Country

1980

1990

2000

2005

2007

China

2.5

2.3

•

•

•

Japan

5.8

4.6

3.7

3.5

3.4

South Korea

3.5

3.3

•

4.1

4.2

Singapore

2.7

3.0

•

•

•

US

6.5

5.0

•

5.4

5.5

Malaysia

5.7

5.1

6.0

7.5

4.5

Source : UNDP (2010)

• Not available

Human Capital Investment

• Training

• Education

• Knowledge

• Skills

Firm Performance

• Financial performance

• Non-financial performance

Human Capital Effectiveness

76

is in par with newly industrialized economies (NIEs) and the developed countries such as

Japan and USA (Mani 2004).

However, compared to the NIEs and as shown in Table 2.17, Malaysia has a

comparatively scarce and less qualified human capital in science, engineering and

technology (Mani 2000; Rasiah 2010). It trailed far behind the NIEs as shown by the

indicators in technical enrolment as percentages of all secondary students, science

and technology (S&T) graduates as percentage of all graduates, engineering

enrolment as percentage of population, and research scientists and engineers per 10,000

labour force. Furthermore, Malaysia is experiencing a steady decline in the output of

science and engineering graduates as a percentage of total graduates of first and post-

graduate degrees (NEAC 2010).

Table 2.17 : Indicators of Technical Human Capital

Table 2.17a : Technical enrolment as percentage

of all secondary students

Table 2.17b : S&T graduates as percentage of

all graduates

1988-1991

2000

2009

1990

2000

Republic of Korea

18.6

18.6

12.1

Republic of Korea

42

44

Singapore

n.a.

5.6

11.6

Singapore

53

63

Taiwan Province of China

n.a.

n.a.

n.a.


48

56

Malaysia

2.2

2.2

6.6

Malaysia

32

39

Source : Lai & Yap (2004, p. 58 ); MSTI (2012); UISE (2011) n.a. : not available

There are also poor linkages between industry and the higher education institutions and

this is resulting in the supplied learning and training not meeting industry needs. (Lall

Table 2.17c : Engineering enrolment as

percentage of population

Table 2.17d : Research scientists and engineer

per 10,000 labour force

1990

2000

1990

2000

2009

Republic of Korea

0.46

0.68

Republic of Korea

53

45

100

Singapore

0.45

0.65

Singapore

30

85

101


0.51

0.70


31

80

109

Malaysia

0.02

0.16

Malaysia

2

10

21

77

1999; NEAC 2010) The situation is also compounded by Malaysia’s high labour

mobility and brain drain. The country’s highly skilled and qualified engineers are

continuously searching for better career prospects, higher job remuneration and improved

working conditions in other professions or in foreign countries. A large number of

overseas graduates are also reluctant to return home after completing their studies abroad

(Chiam 2009a; Edge 2011; Knight 1999; Lai & Yap 2004; PEMANDU 2010; Sjöholm

2002; Wong 2011; World Bank 2011).

2.5.5.5 Innovation

Innovation is one of the key success factors in today’s new knowledge economy

(Mustapha & Abdullah 2004). The business world keeps evolving in this era of

globalization and competition, constant and continuous innovation is the only strategy for

survival, success and excellence of organizations (Peters 1997). While innovation brings

opportunities in today’s competitive environment, it also creates uncertainties and risks if

resisted (Ahmed 1998). Innovation results in higher quality job, successful businesses,

better and cheaper products and services, more efficient processes and greater

productivity. Firms that do not continually innovate products, services or processes will

be at a distinct disadvantage, losing customers and market share to competitors (Mowry

2007). Innovation is therefore vital for the success of Malaysian ECS firms in the

international arena.

Majaro (1988) referred innovation as a process where ideas were generated and

implemented as business products or services. Creativity is thus seen as the front end of

the innovation value chain which comprises creation, research, development and

commercialization under the supply push and demand pull factors (Endut 2007) as

depicted in Figure 2.17.

Malaysia is lagging behind and lacking in innovation. This is evident by a review of

patents granted by the United States Patent and Trademark Office (USPTO). In 2009,

Malaysia had 181 patents granted by USPTO. This was much lower compared to patents

78

Figure 2.17 : The Innovation Value Chain

Source : Adapted from Endut (2007)

granted by the same agency to Taiwan (7,781), Singapore (493), South Korea (9,566),

Japan (38,066) and China (2,270) as shown in Table 2.18.

Table 2.18 : Patents Granted by the USPTO

Country

2002

2003

2004

2005

2006

2007

2008

2009

China

390

424

597

565

970

1,235

1,874

2,270

Japan

36,339

37,248

37,032

31,834

39,411

35,941

36,679

38,066

South Korea

4,009

4,132

4,671

4,591

6,509

7,264

8,730

9,566

Singapore

421

460

485

377

469

451

450

493

Taiwan

6,730

6,676

7,207

5,993

7,920

7,491

7,779

7,781

Malaysia

62

63

93

98

131

173

168

181

Source : USPTO (2009)

2.5.6 Conclusion

This Section discussed the Malaysian engineering consulting practice, the processes

associated with the registration of engineers and consulting practices in Malaysia, the

Supply Push Demand Pull

The Innovation

Value Chain

Creation – Research – Development - Commercialization

• Supply of skilled workers

• Supply of creative employees

• Supply of ideas

• Demand from market

• Demand from population

• Demand from industry

79

Malaysian engineering institution and organizations. It described the Malaysian

engineering consulting market, the major Malaysian ECS players and their export

performance. The Section ended with the challenges faced by internationalizing

Malaysian firms. The next section discusses the focal theory of the Malaysian

Government policies on service exports.

2.6 The Malaysian Government Policies on Services Exports

This Section discusses the Malaysian Government’s support for services export and the

service support delivery framework. These are largely through the Malaysia External

Trade Development Corporation (MATRADE) and National Professional Services Export

Council (NAPSEC). The section ends with an assessment of the effectiveness of the

Malaysian Government’s export programmes.

2.6.1 The Malaysian Government’s Support for Services Exports

Malaysia is dependant on export earning to sustain its growth and development.

Services exports constitute the smallest percentage of the total output within the service

sector, compared with the primary and secondary sectors. Furthermore, the service

account in the balance of trade from 1991 to 2000 had been consistently in the deficits.

Although, the percentage of output of services exported increased from 8.5 percent in

1991 to 14.4 percent in 2000, it was smaller than the share of imported service inputs

which increased from 18.8 percent in 1991 to 35.8 percent in 2000. Significantly,

engineering services and construction which did not export in 1991, registered 4.3 percent

in 2000 (GOM 2006a).

Accordingly, the IMP3 covering the period 2006-2020, focuses on the continuing

development and growth of the services sector. The goal is for services export to increase

from 12.4 percent in 2005 to 19.5 percent of the total export by 2020 (GOM 2006a).

Measures are therefore being taken to enhance the country’s position as a major exporter

of services in order to meet the targeted average GDP growth of 6.3 percent during the

IMP3 period.

80

Average annual growth rate in %

for 2011-15 period

Share to GDP in % in 2015

Manufacturing

Construction

MiningAgriculture

Services61.1

5.96.6

26.3

2.9

6.0

7.2

5.7

3.7

3.3

1.1

GDP

Services

Manufacturing

Construction

Agriculture

Mining

Intensifying exports of services is one of the eleven strategic thrusts of the Government’s

policies to increase export earnings in the highly competitive and challenging

international trade arena. The measures underway to enhance the exports of services

include:

a) using the two services funds, the Export Services Fund and the SMEs Export

Services Fund as vehicles to increase the capacity and the export capabilities of

the services sector;

b) enhancing market access through multilateral, regional and bilateral agreements;

and

c) encouraging SMEs in professional services to venture into export markets with

support from MATRADE.

The 10MP for the period 2011-2015 also highlights the importance of the services sector.

As shown in Figure 2.18, the services sector is expected to grow at 7.2% annually until

2015, with its contribution to GDP increasing to 61.1%. To achieve this, the Government

Figure 2.18 : The Projected Services Sector Growth and Share to GDP for 10MP

Source : GOM (2010b, p. 75)

is increasing its support to domestic services providers to prepare them for the challenges

emerging from the increased competitive pressures arising from trade liberalization. With

81

parallel, several added initiatives are being introduced to expand global export market

share by creating new export markets particularly in the Gulf region and taking advantage

of the opportunities emerging from the Free Trade Agreements (FTAs) (GOM 2010b).

The Government has also pinpointed the business sector which covers construction

related services and engineering consultancy services as a sector with the highest

potential for economic impact and the ability to compete in foreign markets as shown in

Figure 2.19 (GOM 2010c). The strategy is to enable firms to export professional

construction services overseas (GOM 2010b). The support provided includes market

intelligence, networks and government-to-government relations.

Figure 2.19 : High Potential Business Services Sub-Segments

Source : GOM (2010c, p. 405)

2.6.2 The Malaysian Government’s Service Support Delivery

Framework

Several Government Ministries, Government related agencies and State Government

agencies are involved with export assistance and promotion programmes. At the Federal

Architecture

● ● Civil & Mech. Engineering

Project ● management

Environment Engineering ●

Creative Services

●

Accounting Services

● Systems ● Integration

IT Consulting

● Surveying & Planning ● MICE

Public Relations

●

● Quantity Survey General Practice ●

Property

Management ● Fashion

Design ●

Interior ● Design

● Litigation

● Dentistry

● Media Purchasing

Pharmacy

● Tax

Arbitration

● Corporate

Law

● Adult

● Market Research

● IT Support

Nursing

● ● Management Consulting

Low

Low

High

Ability to compete

Potential GNI Impact

Oil & Gas Engineering ●

Medical Services ●

High

● Outsourcing

82

Government policy level, the Ministry of International Trade and Industry (MITI) has the

responsibility for the formulation and implementation of all international trade and

investment policies. At the implementation level the agencies are the MATRADE and

NAPSEC. The roles of each of them are discussed briefly below.

2.6.2.1 The Malaysia External Trade Development Corporation

MATRADE established in 1993, is the Malaysian national export promotion agency

which assists Malaysian exporting companies in international markets. With five local

branches in Malaysia and a network of 40 overseas offices, MATRADE’s principal

functions are (www.matrade.gov.my, viewed 18 September 2010):

• Channel overseas trade enquiries to Malaysian businesses and assist Malaysian

exporters doing business overseas.

• Co-ordinate and facilitate business networking with foreign buyers through the

participation of Malaysian exporters in international trade fairs, trade exhibitions

and investment missions abroad.

• Organise promotional activities for Malaysian products and services in the countries

where MATRADE overseas offices are located.

MATRADE also assists Malaysian firms, particularly the small and medium sized

companies to undertake activities and develop export markets through three main

assistance programmes: 1) Market Development Grant, 2) Brand Promotion Grant and

3) Services Export Fund as shown in Table 2.19. These grants are to partly compensate

the cost incurred in undertaking the export promotion activities. However, these grants

are only accessible to SMEs or service firms with an annual sales turnover of less than

RM5 million and with less than 50 full-time employees.

2.6.2.2 Professional Services Development Corporation

83

Table 2.19 : MATRADE Export Assistance Programmes

Assistance Programme

Objective

Market Development Grant

To undertake activities for the developments of exports.

Brand Promotion Grant

To develop and promote an international brand.

Services Export Fund

Grant 1

To participate in tenders to undertake studies.

Grant 2

To participate in tenders for projects or to prepare negotiated project proposals.

Grant 3

To carry out pre-feasibility and feasibility study.

Grant 4

To undertake services promotion activities.

Source : MATRADE website (www.matrade.gov.my)

PSDC was established in 2002 as a private limited company. While it was wholly owned

by Malaysia’s Ministry of Finance Incorporated, it was under the purview of the Ministry

of Works. Its main objective was to make Malaysia a leading exporter of professional

services and its principal activities were:

• Dissemination of information on overseas opportunities to Malaysian Professional

Service providers (PSPs).

• Development and maintenance of database of Malaysian PSPs for the reference of

overseas customers.

• Capacity and capability building of Malaysian PSPs through training.

• Overseas promotion of achievements and capabilities of Malaysian PSPs.

• Be the voice of Malaysian Professionals by raising issues pertinent to the

professional services sectors.

Over the period 2002 to 2010, the PSDC had set up an information hub as a repository of

information on and for Malaysian professional service providers towards exporting their

services. This included statistics related to professional services, market intelligence and

84

market entry strategies, database of professional consultants and a number of publications

(PSDC 2010).

The PSDC however lacked funding for its operations and was ineffective in its unfocused

activities covering all regulated professional services under various ministries and

agencies (Accenture 2010). PSDC ceased operations on 15 April 2011 and its functions

and duties were assigned to the Construction Industry Development Board (CIDB).

2.6.2.3 National Professional Services Export Council

NAPSEC formed in 2001 is the Advisory Council to MATRADE on matters related to

the export of professional services and its terms of reference are depicted in Table 2.20.

NAPSEC’s members comprise representatives from professional councils, institutions,

professional trade associations as well as Government Ministries and agencies pertaining

to professional services. The professional members include town planners, architects,

engineers, contractors, surveyors, accountants, lawyers and healthcare. With the

participation of its members, NAPSEC provides a forum for obtaining the views and

inputs of the private sector in the formulation of the strategies and programmes for the

export of professional services (www.matrade.gov.my, viewed 18 September 2010).

Table 2.20 : NAPSEC’s Terms of Reference

� Formulate and review national strategies and promotional programmes for the export of professional

services.

� Recommend and facilitate funding for the export of professional services.

� Increase participation of Malaysian professionals in overseas projects funded by international lending

agencies.

� Gather and disseminate information related to market opportunities.

� Review and recommend incentives for the export of professional services.

� Compile database/directories of export ready professional services.

� Develop database on market access issues and regulations affecting export of professional services.

� Monitor global developments and its implications on Malaysia’s professional service export.

Source : MATRADE website (www.matrade.gov.my)

85

2.6.2.4 The SME Corporation Malaysia

The SME Corporation Malaysia (SMECM) formulates overall policies and strategies for

SMEs, coordinate programmes across all ministries and government agencies. It is the

central point of reference for information and advisory services for all SMEs in Malaysia.

It also provides business support such as capacity building and enhanced access to

financial assistance offered by various ministries and government agencies. However,

this agency mainly focuses on small industrial enterprises and manufacturing related

services (www.smecorp.gov.my, viewed 16 February 2012). Furthermore, SME activities

fall into three broad categories (Asokkumar 2006):

• ‘Stimulatory’ which focuses on supporting entrepreneurship. The programmes for

this include entrepreneurial education, identification of potential entrepreneurs and

motivating entrepreneurs.

• ‘Promotional’ support for entrepreneurs to establish and operate their enterprises

efficiently.

• ‘Enhancement’ activities which are aimed at moving SMEs up the value chain,

producing high quality and high value added products for international markets.

The SMECM development programme for 2011 highlights five key programmes

(SMECM 2011). These are:

• Access to financing

• Entrepreneur development

• Marketing and promotion

• Advisory services

• Infrastructure

Advisory services however, only cover the (i) SME business advisers’ network, (ii)

entrepreneur support services programme and (iii) contractor advisory services.

Accordingly, the SMECM’s involvement with the ECS industry is marginal and very

limited. The functions of the SMECM are therefore not specifically supportive of the ECS.

86

2.6.2.5 The Export-Import Bank of Malaysia

The Export-Import Bank of Malaysia Berhad (Exim Bank) provides working

capital/guarantee/assets financing of foreign services contracts to Malaysian owned or

controlled companies. The margin of financing is up to a maximum of 70% of the

contract value and security is required (www.exim.com.my, viewed 16 February 2012).

Despite the availability of this financing facility, the ECS firms still face problems as

discussed in Sub-Section 2.5.5.3 to secure the finance after procuring the project. The

Exim Bank export programmes were therefore perceived as being not very helpful to the

SMEs (Mahajar 2005; Mahajar & Yunus 2006).

2.6.3 The Effectiveness of the Malaysian Government’s Export

Programmes

The literature revealed that the Malaysian Government and its agencies have a range of

supportive programmes and incentives to assist firms to export their products and services.

However, the findings of prior research on the effectiveness of Government export

support programmes and incentives were contradictory and not conclusive (Ahmed et al.

2002; Mahajar 2005; Mahajar & Junus 2006). There was also a low level of awareness

among Malaysian small-and medium-sized firms of the export programmes and

incentives available to assist them and as such the firms did not fully benefit from them

(Ling 1992; Tan 2008). Earlier studies in other countries revealed broadly similar

findings (Austrade 1994; Coulthard 2005; Crick 1997; De Noble, Castaldi & Moliver

1989; Edmunds & Khoury 1986; Kedia and Chhokar 1986; Moini 1998).

It appears that some Malaysian firms perceived the export assistance programmes as not

being helpful (Mahajar 2005; Mahajar & Yunus 2006). However, studies implied that the

Malaysian Government export assistance programmes did encourage and promote smaller

firms to export. Some of the benefits include increased export sales, new market

penetration, increased productivity, increased profitability, increased market growth,

87

improved international networking and more foreign customers (Mahajar 2005; Mahajar

& Yunus 2006).

As discussed in Sub-Section 2.6.2, several Government Ministries and agencies are

responsible for the delivery of services export promotion and assistance programmes.

This raises the issue of the duplication of efforts and coverage as well as overlapping

responsibilities among the agencies. There is therefore a need to streamline the delivery

systems of the various Government programmes for making them more focused and

effective (Selvanathan 1999; Asokkumar 2006; Saleh & Ndubisi 2006).

Inadequate funding can render the export assistance programmes ineffective. Some of the

Services Export Fund Grants 1, 2 and 3 had been suspended since September 2009.

Another Fund had been fully utilized due to overwhelming responses from professional

services providers. Since then the funds have been kept in abeyance pending new

allocations.

2.6.4 Conclusion

This Section reviewed the Malaysian Government’s policies on services exports and the

delivery frameworks through MATRADE, PSDC/CIDB, NAPSEC, SMECM and EXIM

Bank. It assessed the effectiveness of the Malaysian Government’s export programmes.

The next section examines the global competitive advantage of the Malaysian ECS

industry.

2.7 The Competitive Positioning of the Malaysian ECS Industry

This Section assesses the competitiveness of Malaysian ECS providers embarking on

internationalization. It determines the competition scenario of Malaysian ECS providers

by using Porter’s ‘five forces framework’ (Porter 1979) and the analysis takes account of

the strengths, weaknesses, opportunities and threats to the ECS industry.

According to Porter (1979), there are five forces influencing competition in an industry :

1) the entry of new competitors, 2) the threat of substitutes, 3) the bargaining power of

88

buyers, 4) the bargaining power of suppliers and 5) the rivalry among the existing

competitors. A diagrammatic representation of the five forces framework is shown in

Figure 2.20. ‘The strength of each of the five competitive forces is a function of industry

structure or the underlying economic and technical characteristics of an industry’ (Porter

1985, p. 5).

Figure 2.20 : Porter’s Five Competitive Forces

Source : Porter (1985, p. 5)

2.7.1 Threat of New Entrants

An industry’s profitability is influenced by existing competitors as well as the potential

new entrants. While new entrants bring new capacity and resources, they reduce the

market share of existing players. The seriousness of the threat of the new entrants

depends on the entry barriers which may appear in different forms including physical,

financial or legal in nature (Porter 1979).

In Malaysia, the ECS industry is well protected from foreign competition as discussed in

Sub-Sections 2.5.1 and 2.5.2. The entry of big foreign ECS firms is currently not a major

Potential

Entrants

Industry Competitors

Rivalry Among

Existing Firms

Suppliers

Buyers

Substitutes

Threat of Substitute

Products or Services

Threat of

New Entrants

Bargaining Power of

Suppliers

Bargaining Power of

Buyers

89

threat, as the existing regulations require them to enter into joint ventures with the local

Malaysian firms to undertake projects in Malaysia. Furthermore, their services are

relatively costly compared to those offered by the Malaysian firms. Accordingly,

Malaysian ECS firms have a comparative advantage in the domestic market and protected

from foreign competition.

However, the situation could change with the Malaysian Government’s commitments to

GATS and ASEAN Framework Agreement on Services (AFAS) which call for the

progressive liberalization of the services sector. The lowering or removal of trade

barriers and protectionist measures will expose Malaysian ECS firms to major

competitive pressures. First, they have to contend with the entry of low cost service

providers from developing countries. Second they have to face the challenges of

competing with large multinational firms from the developed nations with superior

technical know-how and high quality services. Malaysian firms therefore have to build

and retain their competitive advantage to cope with the competition.

2.7.2 The Threat of Substitutes

Substitutes for ECS are hard to come by as professional services are usually legislated

and regulated. While the engineering services may be undertaken by different

organizations, they have to be performed by registered licensed engineers. Contractors or

developers may establish engineering departments or divisions in the organization mainly

to serve the needs of the in-house projects in lieu of engaging external ECS firms.

However, they do not form a serious threat to the ECS industry.

2.7.3 The Bargaining Power of Buyers

Buyers are in an enviable position of being able to press down prices, demand for more

services or higher quality and play one supplier against the other. Their ultimate aim is to

pay the lowest price and extract the maximum benefits. These have a direct impact on the

industry profitability. The buyers are powerful if 1) they are concentrated, 2) the

purchase size is large, 3) the competition in the industry is intense, and 4) the services are

standard or undifferentiated (Keegan & Green 2005; Porter 1979).

90

The buyers of ECS are mainly the public sector and the private investors or developers.

The buyers are few and highly concentrated and are often repeated buyers. They thus

possess large bargaining power over the ECS firms who have little bargaining leverage

and are generally unable to secure good concessions. The ECS firms are therefore ‘price

takers’ and ‘not price makers’ (Selvanathan 1999, p. 70).

2.7.4 Bargaining Power of Suppliers

Supplier power is the opposite of buyer power. The suppliers can exert bargaining power

by raising prices or reducing service quality. Powerful suppliers can extract profitability

from the industry if the industry is unable to recover the cost increases in its own prices.

The suppliers are powerful if : 1) they are more concentrated than the industry, 2) they

are relatively few in number, 3) the suppliers’ services are important inputs to the buyers,

4) suppliers’ services are unique, highly differentiated and carry switching costs and 5)

the industry is not a major customer of the suppliers (Keegan & Green 2005; Porter 1979).

In the Malaysian ECS industry, the suppliers only play a supportive role as most of the

services required are generated within the organizations by in-house professionals. In the

case of multidisciplinary assignments, specialist still can be readily outsourced by the

industry from other organizations on a collaborative basis. Hence the bargaining power

of suppliers for ECS industry in Malaysia is low.

2.7.5 Rivalry among Competitors

Rivalry among competitors in an industry refers to the actions taken by firms to improve

their positions for gaining advantage over the other. There are numerous competitors and

rivalry takes the form of price competition, service positioning and differentiation. Price

competition drives down prices, reduces industry profitability and creates instability in

the industry. Intense rivalry is due to a number of factors. The industry has become

mature with slow or even declining growth and market share can only be gained at the

expense of rivals. Firms are under pressure to keep production at full capacity to cover

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fixed cost and reduce costs as a low price is the criterion for selection by customers

(Keegan & Green 2005; Porter 1979).

Malaysian ECS firms have to contend with the forces of globalization and the challenges

and opportunities come with it. These forces will intensify the competition in the

domestic market with the gradual lowering or the removal of tariff and non-tariff barriers

and the entry of foreign competitors. Malaysian ECS firms also face the prospect of

being challenged by the low cost rivals from Indonesia, India and People’s Republic of

China (PRC) and Philippines. Since they are also likely to lose ground to rivals with

advanced technology and know-how, this requires them to upgrade their technology and

skill levels. They also have to seize foreign market opportunities by exporting through

branding, price advantage and customer loyalty (Tan, 2008).

2.7.6 Conclusion

This Section evaluated the competitive advantage of the Malaysian ECS industry in the

global market using Porter’s five competitive forces. This included the threat of new

entrants, the threat of substitutes, the bargaining power of buyers, the bargaining power of

suppliers and rivalry among competitors. The next section reviews the secondary data

analysis and the conceptual framework for the research.

2.8 Secondary Data Analysis

This Section analyzes the secondary data derived from the literature review. As stated in

Sub-Section 2.1.1, the literature review had several purposes, in particular to identify the

gaps in the existing body of knowledge for developing the research questions and crafting

the research propositions for testing on this research.

2.8.1 Identification of the Research Gaps

The literature review revealed adequate information on the parent disciplines of

internationalization, globalization, the Malaysian economy and the global engineering

92

consulting industry. There was also much literature on the immediate discipline of

Malaysian Government’s support policies for services export. However, as depicted in

Table 2.21, there were gaps in the existing body of knowledge in respect of three key

research issues as follows :-

• The export positioning of Malaysian ECS firms.

• The coverage, effectiveness and delivery systems of the Malaysian Government’s

export policies and programmes.

• The appropriate strategies for the successful internationalization of Malaysian

ECS firms.

These gaps in the literature show that there is a limited body of knowledge on these issues

despite their importance to the Malaysian ECS industry. These therefore reaffirm the

relevance of the Research Problem as stated in Section 1.4 – ‘What are the Important

Critical Factors for the Successful Internationalization of Malaysian ECS Firms?’.

2.8.2 Research Questions Development

‘Empirical research is driven by research questions’ (Punch 2005, p. 34). Research

questions ‘define an investigation, set boundaries, provide direction, and act as a frame of

reference for assessing the research work’ (O’Leary 2005, p. 33). To address this

research problem and based on the research gaps identified from the research issues, three

research questions are developed in this Section.

Research Question 1

There is limited literature on the internationalization of services as compared to those for

the manufactured goods. The available literature on ECS largely relates to the situation in

the industrialized Western countries such as Sweden, New Zealand and USA (Coviello &

Martin 1999; Sharma 1988; Sharma & Johanson 1987; Warf 1996). As there is a dearth

of earlier research on competitive positioning of the Malaysian ECS industry players in

93

Table 2.21 : Identification of Research Gaps

Research Issues

Prior Literature

Research Gaps

The Malaysian Economic Development Policies

Adequate

Globalization of Services

Adequate

Internationalization Theories

Adequate

The Global ECS Industry

Adequate

The Malaysian ECS Industry

Adequate

Competitive positioning of Malaysian ECS industry under GATS

• National legislations

Inadequate

Known

• No

• Entry of international ECS firms

Known

• Impact on Malaysian ECS market.

• Competences, expertise and strengths to compete in world market

Unknown

• Yes

• Industry preparedness

Unknown

• To take advantage of emerging new market opportunities.

The Malaysian Government’s support policies and programmes for exports services

Adequate

Adequacy of Malaysian Government support policies and programmes for ECS exports.

• Effective Policy frameworks

Inadequate

Unknown

• Yes

• International promotion

Known

• Effectiveness

• Support schemes

Known

• Effectiveness

• Collaboration with Malaysian ECS industry

Known

• Effectiveness

The appropriate strategies for enhancing the global outreach of the Malaysian ECS industry

• Strategy adoption

Inadequate

Unknown

• Active formulation and implementation of internationalization strategies.

• Competent staff

Unknown

• Staff with international and entrepreneurial orientation.

• Human capital development and knowledge management

Known

• No

• Appropriate mechanisms for pooling specific competencies for joint international bidding

Unknown

• Yes


94

the context in global market liberalization, the research question emerging from this gap

is:

What is the competitive global positioning of the Malaysian ECS firms in the context

of market liberalization?

Research Question 2

The discussions in Section 2.6 revealed that the Malaysian Government has a wide range

of promotional and assistance programmes as well as different delivery systems to

support Malaysian ECS firms with their export efforts. The assistance includes access to

export services funds, market development grant and capacity building programmes to

enhance export capabilities, brand development and establishing linkages with foreign

partners. The support activities include market intelligence, trade missions, trade fairs,

exhibitions, business matching, market development, brand promotion, seminars,

workshops and trainings.

However, there are few studies on the effectiveness of the Government’s policies and

their implementation. Hence, the second research question is:

How adequate and effective are the existing Malaysian Government support

programmes for the internationalization of Malaysian ECS firms?

Research Question 3

The literature review revealed that the global ECS industry is now nominated by firms

from the developed countries. Although some Malaysian ECS firms are already

participating in global projects, they face several challenges as discussed in Sub-Section

2.5.5. The key issues which have to be addressed are whether the current

internationalization strategy of the exporting firms is appropriate to stay abreast of the

global competition. Accordingly, the third research question is:

95

What are the appropriate corporate strategies for the Malaysian ECS firms to

successfully enter new international markets?

2.8.3 The Research Objectives

The research objectives explain the purpose of the research and define what the research

tries to achieve (Zikmund et al. 2010). These objectivities have to be precise and ‘lead to

observable outcome’ (Saunders, Lewis & Thornhill 2003, p. 30) and have ‘achievable

goals’ (Emory & Cooper 1991, p. 121). Guided by these authorities, and based on the

gaps in the literature review as reflected by the research questions, this research has three

main objectives.


To determine the competitive positioning of the Malaysian ECS firms in the context of

the forces of market liberalization.


To examine the adequacy and effectiveness of the existing Malaysian Government’s

support programmes for the internationalization of the Malaysian ECS firms.


To recommend the appropriate corporate strategies for adoption by the Malaysian ECS

firms to successfully enter new international markets.

2.8.4 The Research Propositions

As stated in Section 1.6 and detailed in Sub-Section 3.2.2, this research relies on a mixed

methodology in line with Creswell and Plano Clark (2007), Greene and Caracelli (1997)

and Morgan (1998). Although the research is largely qualitative in nature, the researcher

considered it necessary to collect and analyze some quantifiable data in order to

96

generalize the findings. Accordingly, this research adopted a two stage approach

(Creswell & Plano Clark 2007; Morgan 1998) and the second stage being quantitative,

requiring the collection of quantitative data by testing through research propositions.

‘Many theories contain propositions. A proposition is a theoretical statement that

specifies the relationship between two or more concepts’ (Neuman 2006, p. 58). A

proposition is a testable statement (Denzin 1978). A concept is ‘the unit for theory

development’ (Zikmund et al. 2010, p. 40) and they must be clearly defined and be

apparent between the cause and the causal (Denzin 1978). ‘A researcher will try to learn

the truthfulness of a proposition by evaluating whether it conforms to empirical evidence

or data’ (Neuman 2006, p. 58). Guided by these authorities, the three research

propositions based on the identified research questions for empirical testing by this

research are:


The Malaysian ECS firms are well positioned for global competitive advantage in the

liberalizing global markets.


The Malaysia Government has effective targeted support policies and programmes to





2.9 Conclusion

The Chapter reviewed the literature pertinent to the research topic, namely the global

engineering consulting industry, relevant theories, the Malaysian Government’s support

97

policies and the Malaysian ECS industry. The review revealed significant research gaps

which led to the development of three research questions, the setting of the research

objectives and the crafting of the research propositions for testing by this research. The

next chapter, Chapter Three, describes the methodology used for the collection and

analyses of the primary data for this research.

98

CHAPTER THREE – RESEARCH METHODOLOGY

3.1 Introduction

Chapter Two reviewed the literature on the research issues pertaining to the study. It then

developed the research questions and the Research Propositions which are restated below:

• The Malaysian ECS firms are well positioned for global competitive advantage in

the liberalizing global markets.

• The Malaysian Government has effective targeted support policies and

programmes to assist Malaysian ECS firms with their internationalization effort.

• The exporting Malaysian ECS firms have appropriate strategies for successfully

entering new international markets.

Guided by Denzin (1978), Miles and Huberman (1994), Miller (1991), Neuman (2006),

O’leary (2005), Parkhe (1993), Perry (1995), Sekaran (2003), Tashakkori and Teddlie

(1998), Yin (2009) and Zikmund et al. (2010), this Chapter describes the methodology for

the research. It includes the research approach, research design, the data collection

instruments, research quality and the ethical issues.

3.1.1 Structure of Chapter Three

This Chapter has eight sections as depicted in Figure 3.1.

Section 3.1 presents the chapter structure.

Section 3.2 examines the research approach. The various research paradigms are

examined prior to the selection of the preferred research mixed methodology.

Section 3.3 discusses the various research designs and the selection of the preferred

design for this research.

99

Figure 3.1 : Structure of Chapter Three


Section 3.1 : Introduction

• Chapter Structure

Section 3.2 : Research Approach

• Research Paradigms

• Preferred Research Methodology

Section 3.3 : Research Design

• Preferred Research Design

• Unit of Analysis

Section 3.4 : Data Collection Instruments

• Secondary Data

• Experience Survey

• Case Studies

• Focus Group

• Sample Survey

Section 3.5 : Research Quality

Section 3.6 : Data Analysis Procedures

• Qualitative Data Analysis

• Quantitative Data Analysis

Section 3.7 : Research Ethics

Section 3.8 : Conclusion

100

Section 3.4 outlines the data collection instruments. These are the literature review for

secondary data, the experience survey, case studies, the focus group and a sample survey.

Section 3.5 spells out the measures taken to enhance research quality including reliability,

validity and triangulation.

Section 3.6 describes the data analysis procedures for both qualitative and quantitative

data.

Section 3.7 discusses the ethical considerations for the study.

Section 3.8 presents the conclusions of this Chapter.

3.2 Research Approach

This section consists of two parts. The first is the preferred research paradigm which

incorporates the inductive and deductive approaches. The second elaborates on the

research design.

Social research is ‘a collection of methods and methodologies that researchers apply

systematically to produce scientifically based knowledge about the social world’

(Neuman 2006 p. 2). The approaches to theory development research was developed by

Parkhe (1993) based on three primary interrelated dimensions (inductive/deductive,

subjective - idiographic – qualitative-insider/objective – nomothetic – quantitative -

outsider and theory generation/theory testing. These are depicted in Figure 3.2.

101

Figure 3.2 : Approaches to Theory-Development Research

Source : Parkhe (1993, p. 235)

The research process involves several levels. It starts from research philosophy or

paradigm and is followed by the research approach, the research strategy, time horizons

of the research and finally the data collection methods and analysis (Saunders, Lewis &

Thornhill 2003). These are shown graphically in Figure 3.3.

Figure 3.3 : The Research Process

`

Source : Adapted from Saunders, Lewis & Thornhill (2003, p. 83)

Positivism

Critical

theory

Constructivism

Deductive

Inductive

Experiment

Survey

Case

study

Grounded

theory

Ethnography

Action

research

Cross

sectional

Longitudinal

Sampling Secondary data Observation Interviews

Questionnaires

Research

philosophy

Research

approaches

Research

strategies

Time

horizons

Data collection methods

Realism

1 2

3 4

Objective

Nomothetic

Quantitative

Outsider

Deductive Theory Generation

Inductive

Subjective

Idiographic

Qualitative

Insider

Theory Testing

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Research covers a wide range of phenomena and is guided by research philosophy or

paradigms. ‘Paradigms are the lens through which we choose to view the social world’

(McMurray 2008, p. 23). Kuhn (1970, p. 175) defined paradigm as ‘the entire

constellation of beliefs, values, techniques, and so on shared by the members of a given

community’. Paradigm issues are crucial as a researcher must be clear about the

paradigm that is best suited to inform and guide one’s research approach (Guba &

Lincoln 1994).

The paradigm consists of a basic set of assumptions about the nature of the social world

and reality, the relationship between the research participant and the researcher and the

process of the research which is a methodological issue (McMurray 2008; Ponterotto

2005). Taken together they frame the nature of the research in theory testing or theory

building, the role of the researcher and researcher’s values and ethics in the scientific

inquiry (HICSS 2003). These are depicted in Figure 3.4.

Figure 3.4 : Influences on Business Research

Source : Adapted from Bryman & Bell (2007, p.30)

Ontology

Theory Axiology

Business Research Epistemology Methodology

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Ontology is the fundamental assumption or belief that is made about the nature of reality

or being, specifying what and how it exists (Guba & Lincoln 1994; Jankowicz 2000;

Parkhe 1993). Epistemology means the treatment of the subject of knowledge (Croasdell

et al. 2003) and to the ‘process of knowing and the relationship between the researcher

and that which is to be known’ (Guba & Lincoln 1994, p. 108). Methodology determines

how the researcher goes about investigating what is to be known (Guba & Lincoln 1994;

Zikmund et al. 2010). Axiology concerns the role and place of values in the research

process (Creswell 2007, Ponterotto 2005). It is about ‘values of being, what is

intrinsically worthwhile and the valuing of knowledge’ (Heron & Reason 1997, p. 286)

There are a number of paradigms to guide research. There is no universal paradigm and

‘philosophers of science and methodologists have been engaged in a long- standing

epistemological debate about how best to conduct research’ (Patton 1990, p. 37). There

are four main paradigms, namely positivism, constructivism, critical theory and realism

(Guba & Lincoln 1994; Healy & Perry 2000; Perry, Reige & Brown 1999), and their

salient features are shown in Table 3.1.

Table 3.1 : Principal Research Paradigms and Associated Views

Paradigm

Positivism

Constructivism

Critical Theory

Realism

Also known as

Quantitative Paradigm.

The combination is also known as the qualitative or the interpretive paradigm.

Ontology

Reality is real and apprehensible.

Multiple realities constructed from the interaction and beliefs of people.

Apprehensible multiple realities incorporating historically situated structures.

Reality is real but only imperfectly and probabilistically apprehensible.

Epistemology

Researcher and the object investigated are independent. Findings are objective and value free.

Researcher is an involved participant. Findings are subjective and value laden.

Researcher is a transformative intellectual. Findings are value mediated.

Researcher and object investigated are interactively related. Findings are subjective and value-aware.

Common methodologies and process

Quantitative methods.

Qualitative methods.

Qualitative methods.

Principally qualitative methods.

Source : Adapted from Guba & Lincoln (1994); Healy & Perry (2000); Lincoln & Guba (1985); Perry,

Alizadeh & Riege (1997); Perry, Riege & Brown (1999).

104

These four paradigms can be broadly classified into two major frameworks: the

quantitative paradigm and the qualitative paradigm. The main features of these

paradigms are depicted in Table 3.2 and further described below.

• The quantitative paradigm provides objective and value free findings using highly

structured methodology that facilitates replication (Gill & Johnson 2010).

Focusing on measuring, confirming or validating causal relationships between

variables, it is suitable for theory testing (Leedy & Ormrod 2005). It requires the

collection of large amounts of hard and quantifiable data to meet the evaluation

criteria of validity and reliability for statistical analysis (Easterby-Smith, Thorpe

& Lowe 2002; Neuman 2006). The findings are deductive and generalizable.

However, it is rather deterministic and ineffective in understanding processes and

human actions as it treats people mechanistically and ignores internal motivations

(Greene 2007; Molina-Azorin 2007; Neuman 2006). Thus the quantitative

approach develops theory without the benefit of informed and non-observable

data (Van Maanen 1982; Yin 2003).

• The qualitative paradigm is well suited to investigate change processes,

understand peoples’ meaning, explore new emerging issues and realities, and

contribute to theory generation (Creswell 2003; Leedy & Ormrod 2005; Perry &

Coote 1994). The investigation is subjective, value laden, inductive and looked

from within. Data are rich in words, images and pictures from a small number of

people or organizations (Ticehurst & Veal 1999). However, data collection

requires much time and resources, and the analysis as well as interpretation of

data could be difficult. The findings are usually context specific, judgement based

and not generalizable (Creswell 2003; Lincoln & Guba 2000). Furthermore, many

policy-makers, academics, administrators and programme commissioners give

low credibility to studies based on pure qualitative approach (Johnson &

Onwuegbuzie 2004). They are also reluctant to make decisions based on small

sample research that relies on the subjectivity and interpretation of the researcher

(Easterby-Smith, Thorpe & Lowe 2002).

105

Table 3.2 : Characteristics of Quantitative and Qualitative Paradigms

Quantitative

Qualitative

Objective

Theory testing

Theory generating

Ontology

Naïve realism

Relativist

Epistemology

Dualist and objectivist

Transactional and subjectivist

Methodology

Experiments / surveys

Case studies / convergent interview

Axiology

Value free

Value laden

Logic

Hypothetico -deductive

Inductive

Purpose

Generalizability

Contextualization

Procedures

Standard and replicable

Specific and particular

Concepts

Constructs, variables

Themes, patterns, categories, taxonomies

Data

Numerical

Words, images

Sample size

Large

Small and limited

Data analysis

Statistical

Interpretive

Sources : Adapted from Lincoln & Guba (1994); McMurray (2008); Neuman (2006); Perry, Riege & Brown (1999)

3.2.1 Justification to a Mixed Methodology

The quantitative and qualitative paradigms are at each end of the quantitative – qualitative

continuum of research (Casebeer & Verhoef 1997). A research can make use of both

approaches as well as the mixed paradigm emerges as depicted in Figure 3.5. Mixed

methods can have similar weighting of qualitative and quantitative approaches in one

research or, one approach is dominant with the other supporting (Johnson &

Onwuegbuzie 2004; Johnson, Onwuegbuzie & Turner 2007). Silverman (1998, p. 6-7)

asserted that

‘it is inaccurate to assume that quantitative and qualitative research are polar

opposites ...... there are no principled grounds to be either quantitative or qualitative in

approach. It all depends on what you are trying to do’.

106

Figure 3.5 : The Three Major Research Paradigms, Including Subtypes of Mixed Methods Research

Source : Adapted from Johnson, Onwuegbuzie & Turner (2007, p. 124)

The research problem under investigation should dictate the methods of investigation

(Trow 1957) rather than being dictated by a particular paradigm (Cavaye 1996). Hussey

and Hussey (1997, p. 72) suggested that ‘it is not unusual in business research to use a

mixture of approaches as it permits a broader and complementary perspective on the

research’. ‘Methods should be mixed in a way that has complementary strengths and non-

overlapping weaknesses’ (Johnson & Turner 2003, p. 299). Furthermore, the weakness

of the qualitative paradigm is the strength of the quantitative paradigm and vice versa

(Bonoma 1985; Eisenhardt 1989; Gill & Johnson 2010; Morgan 1998). Thus, ‘the flaws

of one method are often the strengths of another; and by combining methods, observers

can achieve the best of each while overcoming their unique deficiencies’ (Denzin 1978, p.

302).

This reinforces the justification for integrating both approaches to provide a more

complete picture of the research issues being addressed (Miles & Huberman 1984, 1994;

Steckler et al. 1992; Strauss 1990; Yin 2003), and with superior outcomes compared to

monomethod studies (Johnson & Onwuegbuzie 2004). It also enables the use of

triangulation to achieve cross-validation and to overcome the potential bias of a single

method approach (Collis & Hussey 2003; Denzin 1978; Shah & Corley 2006).

Mixed Methods

Broadly Speaking

“Pure”

Mixed

Qualitative

Mixed Pure

Qualitative

Quantitative

Mixed

Pure

Quantitative

Qualitative

Dominant Equal Status Quantitative

Dominant

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Johnson, Onwuegbuzie and Turner (2007, p. 123) defined mixed methods research as ‘the

type of research in which a researcher or team of researchers combine elements of

qualitative and quantitative research approaches for the broad purposes of breadth and

depth of understanding and corroboration’ in one single project.

Quantitative and qualitative methods can be complimentary (Hanson et al. 2005; Jick

1979). Both can ‘uncover some unique variance which otherwise may have been

neglected by a single method’ (Jick 1979, p. 603). To overcome the philosophical

difficulties of combining the dichotomous and incommensurable qualitative and

quantitative paradigms in the mixed approach (Sale, Lohfeld & Brazil 2002), pragmatism

is the primary philosophy to support mixed methods research (Johnson & Onwuegbuzie

2004; Johnson, Onwuegbuzie & Turner 2007; Maxcy 2003; Morgan 2007; Patton 2002;

Tashakkori & Teddlie 1998, 2003; Teddlie & Tashakkori 2003; Yardley & Bishop 2008).

Taking full account of the objectives and the advantages of the study, the researcher

adopted a mixed method paradigm. Accordingly, both the qualitative and quantitative

approaches were used in a complementary manner to cross validate, triangulate and

enhance the findings of this research. However, this research was largely qualitative in

nature as there was limited prior research.

3.2.2 The Preferred Type of Mixed Methodology

There are several mixed method typologies (Creswell & Plano Clark 2007; Greene &

Caracelli 1997; Morgan 1998; Tashakkori & Teddlie 2003). A typology or classification

scheme is a systematic classification of types that have common characteristics or traits

and being ‘created by cross-classifying or combining two or more simple concepts to

form a set of interrelated sub-types’ (Neuman 2006, p. 55). Typologies are ‘useful aids in

identifying themes and developing concepts and theory’ (Taylor & Bogdan 1998, p. 144).

Greene and Caracelli (1997) developed a typology of mixed methods design comprising

of three component designs (triangulation, complementary and expansion) and four

integrated designs (iterative, embedded/nested, holistic and transformative), based on

function or purpose as depicted in Table 3.3.

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Table 3.3 : The Greene and Caracelli Designs for Mixed Methods Research

Component Designs

Integrated Designs

Triangulation Different methods are used to assess the same phenomenon toward convergence and increased validity.

Iterative Dynamic and ongoing interplay over time between the different methodologies associated with different paradigms. Spiral type design.

Complementary One dominant method type is enhanced or clarified by results from another method type.

Embedded / nested One methodology located within another, interlocking inquiry characteristics in a framework of creative tension.

Expansion Inquiry paradigms frame different methods that are used for distinct inquiry components. The results being presented side-by-side.

Holistic Highlight the necessary interdependence of different methodologies for understanding complex phenomena fully.

Transformative Give primacy to the value-based and action-orientated dimensions of different inquiry traditions. Mix the value commitments of different traditions for better representation of multiple interests.

Source : Greene & Caracelli (1997, p. 23)

Creswell and Plano Clark (2007) developed a four type typology with the four mixed

methods research design types (triangulation, embedded, explanatory and exploratory)

classified under the categories of timing, mix and weighting as depicted in Table 3.4.

Table 3.4 : The Creswell & Plano Clark Mixed Method Design Types

Design Type

Timing

Mix

Weighting/Notation

Triangulation

Concurrent : quantitative and qualitative at the same time

Merge the data during interpretation or analysis

QUAN + QUAL

Embedded

Concurrent and sequential

Embed one type of data within a larger design using the other type of data

QUAN (qual) Or QUAL (quan)

Explanatory

Sequential : Quantitative followed by qualitative

Connect the data between the two phases

QUAN qual

Exploratory

Sequential : Qualitative followed by quantitative

Connect the data between the two phases

QUAL quan

Source : Adapted from Creswell & Plano Clark (2007, p. 85)

Morgan (1998) developed the Priority-Sequence Model based on the priority and

sequence decisions. This led to four basic research designs as depicted in Figure 3.6

using Morse’s (1991) notation, depending on (1) whether the principal method is

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qualitative or quantitative and (2) whether the complementary method is a preliminary or

follow-up stage to the principal method.

Figure 3.6 : Morgan Priority-Sequence Model of Mixed Method

Priority Decision

Principal Methods : Quantitative

Principal Methods : Qualitative

Qualitative Preliminary

Quantitative Preliminary

Complementary Method : Preliminary

Qual QUANT

quant QUAL

Sequence Decision

Qualitative Follow-up

Quantitative Follow-up

Complementary Method : Follow-Up

QUANT qual

QUAL quant

Source : Adapted from Morgan (1998, p. 368)

The research was mainly aimed at generating ideas rather than evaluating ideas, and to

gain an in-depth understanding of the competitive positioning of the Malaysian ECS

industry in a globalizing world. For this purpose, it was considered necessary to collect

real, rich and deep data through interviewing those associated and familiar with the

research topic. It was considered necessary to collect objective quantifiable data for

analysis through statistical techniques in order to enhance the validity and reliability of

the findings (Deshpande 1983).

Following detailed consideration of the different types of mixed methodology, and guided

by the objectives of this study, the researcher found the complimentary approach as

proposed by Greene and Caracelli (1997) as well as Morgan (1998) as being best suited

for the research. Data collection involved two phases with the first being principally

qualitative and the second being quantitative (Creswell & Plano Clark 2007; Morgan

1998).

3.2.3 Conclusion

110

This Section discussed the various research paradigms and justified the use of a mixed

methodology of a complementary nature. The next section presents the research design.

3.3 The Research Design

A research design is a framework or plan specifying the methods and procedures for

collecting and analyzing the data (Zikmund et al. 2010). It gives focus to the research,

guides the researcher in answering the research questions and controls the potential

sources of error in the research (Davis 2000; Kerlinger & Lee 2000). The research design

also determines the information needed, states the sampling method, and the data analysis

procedures (Davis 2000; Malhotra 2010). Several different alternative designs are

available for solving problems (Emory & Cooper 1991; Zikmund et al. 2010).

There are three basic types of research designs: exploratory, descriptive and explanatory

to guide data collection and analysis (Emory & Cooper 1991; Neuman 2006). The

objectives, characteristics, data collection methods and status of research problems for

each design are depicted in Table 3.5.

Table 3.5 : Basic Research Designs

Exploratory

Descriptive

Explanatory

Objective

Discover ideas and

insights

Describe market

characteristics or functions.

Determine cause and effect

relationships.

Characteristics

Flexible Versatile Often the front end of total

research design.

Marked by the prior

formulation of specific hypotheses.

Preplanned and structured design.

Manipulation of one or more

independent variables. Control of other mediating

variables.

Methods

Expert surveys Pilot surveys Secondary data Qualitative research

Secondary data Surveys Panels Observational and other data.

Experiments

Research Problem Status

Unknown or little is

known.

Known

Clear definition.

Source : Emory & Cooper (1991); Easterby-Smith, Thorpe & Lowe (2002); Malhotra (2010); Neuman (2006)

111

3.3.1 Exploratory Research

An exploratory research is undertaken when there is no or limited information available

or not much is known about a phenomenon or a situation. It is particularly essential and

useful ‘when a researcher has a limited amount of experience with or knowledge about a

research issue’ (Zikmund et al. 2010). It is a valuable means of finding out ‘what is

happening; to seek new insights; to ask questions and to assess phenomena in a new light

(Robson 2002, p. 59).

Exploratory research is unstructured and highly flexible, versatile with the researchers

following clues, ideas and hunches. Researchers explore all sources of information, and

are alert to new ideas and insights (McDaniel & Gates 1996). The direction of inquiry

may keep changing as new insights are discovered (Saunders, Lewis & Thornhill 2003).

Thus the creativity and ingenuity and open mindedness of the researcher significantly

affects the directions and nature of the exploratory research (Malhotra 2010; Neuman

2006).

While exploratory research may be accomplished with different techniques, it relies more

on qualitative methods which include literature reviews, expert surveys, case studies,

focus groups, personal interviews and participant observations (Cooper & Schindler

2006).

3.3.2 Descriptive Research

The main purpose of descriptive research is to describe market characteristics or

functions or characteristics of a population or phenomenon (Malhotra 2010; Zikmund et

al. 2010). ‘Descriptive research tries to ‘paint a picture’ of a given situation by

addressing who, what, when, where and how questions’ (Zikmund et al. 2010, p. 55) and

may be done in many settings.

112

Descriptive research uses a number of methods for data collection which includes

secondary data, surveys, expert panels, case studies and observations (Malhotra 2010).

The findings of the descriptive research, according to Sekaran (2003, p. 122) will help to:

i) ‘Understand the characteristics of a group in a given situation,

ii) Think systematically about aspects in a given situation,

iii) Offer ideas for further probe and research, and/or

iv) Help make certain simple decisions.’

3.3.3 Explanatory Research

The major purpose of explanatory research is to explain a situation or a problem by

establishing the casual relationships between variables (Saunders, Lewis & Thornhill

2003). Explanatory research builds on exploratory and descriptive research and proceeds

to identify the reason something occurs. The explanatory research is formalized and

structured with hypotheses testing, or research questions to be answered.

Since all factors, except the independent variables, must be controlled and held constant

in explanatory research, it is not suited for most business studies as the business

environment is always changing. Therefore, where applicable, the factors can be

controlled or held constant to help the researcher to draw a firmer conclusion (Cooper &

Schindler 2006; Emory & Cooper 1991).

3.3.4 The Preferred Research Design

The findings of the literature review in Chapter Two revealed gaps in the existing body of

knowledge relating to the research problem. For this reason, it was necessary to use

exploratory research for securing a better understanding of the research problem and the

data required to conduct the research.

However, exploratory research has two main limitations. Being qualitative in nature the

findings can be subjective. Secondly, the use of small sample size impedes the

projectibility, transferability and the generalizability of the findings to meet the validity

113

and credibility criteria of the research. Furthermore, the objectives of the study extended

beyond the mere identification of the research problem. It aimed to obtain a complete

and accurate description of the Malaysian ECS industry and generalize the findings.

Taking these factors into account, the researcher adopted a two stage design approach as

depicted in Figure 3.7 in line with Miles and Huberman (1994) and Perry (2002).

Figure 3.7 : The Preferred Research Design

Stage

The Research Design

Role

Research Method

1

Exploratory

• Collect background information.

Dominant

Qualitative

2

Descriptive

• Obtain complete and accurate description.

• Generalize the findings.

Complementary

Quantitative


The first and dominant stage was exploratory. Qualitative data were collected and

analyzed for gaining insights into the research problem. The second and complementary

stage was descriptive. As discussed in Sub-Section 3.4.5, quantifiable data was collected

through a structured questionnaire survey using a five-point Likert scale for measurement

of survey responses.

3.3.5 Unit of Analysis

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Having determined the research design, the next issue to address was the unit of analysis.

This is defined as ‘the level of aggregation of the data collected during the subsequent

data analysis stage’ (Sekaran 2003; p. 135). It can be ‘the primary empirical object,

individual, or group under investigation’ (Davis 2000, p. 167). This research was

targeted at Malaysian ECS firms, government trade promotion agencies and construction

firms. Due to time and resource constraints, the unit of analysis comprised the Malaysian

ECS firms, government trade promotion agencies and construction firms located mainly

in Kuala Lumpur and the Klang Valley areas.

3.3.6 Conclusion

This Section discussed the three basic types of research design leading to the adoption of

preferred two stage design approach and unit of analysis for the research. The next

section discusses the data collection instruments.

3.4 Data Collection Instruments

This Section discusses the techniques of collecting primary data for the testing of the

research propositions developed in Chapter Two. Good research requires data to be

collected from multiple sources and through multiple collection methods. However, the

choice of the data instruments is dependent on the availability of facilities, time, funding,

the required level of accuracy and the research objectives (Sekaran 2003).

As discussed in Sub-Section 3.3.4, this research adopted a two stage approach involving a

dominant qualitative approach followed by a complementary quantitative approach. The

instruments used for each stage are shown in Figure 3.8 and discussed in the subsequent

sub-sections.

3.4.1 Secondary Data Collection

Secondary data collection has the advantage of being fast and cost effective compared to

primary data collection (Davis 2000; Ghauri & Grønhaug 2005; Sekaran 2003; Zikmund

115

et al. 2010). Secondary data are also easily accessible (Malhotra 2010) and likely to be of

higher quality compared to one’s own primary data collection (Stewart & Kamins 1993).

Secondary data source is easily reviewed by others (Denscombe 1998) and may lead to

unforeseen or unexpected new discoveries (Dale, Arber & Proctor 1988).

Figure 3.8 : Data Collection Plan


The secondary data that emerged from the literature review was discussed in Chapter

Two. The sources were written documents and published information such as books,

journals, government publications, periodicals, newspapers, and the internet (Saunders,

Lewis & Thornhill 2003; Sekaran 2003).

3.4.2 The Experience Survey

Literature Review

Focus

Groups

Experience

Survey

Sample

Survey

Secondary Data Discussion

Topics

Pre-Test Questions

Questionnaire

Data

Analysis

Qualitative Quantitative

Data Collection

Case Studies

116

The experience survey is an exploratory research technique for gathering information and

data from a small group of individuals with expert knowledge in the area of study. The

primary aim is to clarify concepts and to help formulate the research problem (Cooper &

Schindler 2006; Zikmund et al. 2010) and to pretest the survey questionnaire.

3.4.2.1 Selection of the Experience Survey Participants

The researcher is the Group Managing Director of a large engineering consulting firm in

Malaysia. Over the years, he has established a wide network of professional and business

contacts with members of the public and private sectors, government bodies, the

academia community and associations representing the business community.

Using his contacts, the researcher identified five knowledgeable persons who agreed to

take part in this research. To maintain their anonymity, only their job positions are stated.

They comprised a senior civil servant, a past president of IEM, a past president of ACEM

and two retired Managing Directors of ECS firms. As discussed in Sub-Section 3.4.5.7,

these knowledgeable persons also helped to pre-test and finalize the survey questionnaire.

3.4.3 Use of Case Studies as a Data Collection Technique

The case study is ‘the method of choice when the phenomenon under study is not readily

distinguishable from the context’ (Yin 2003, p. 4). Case studies focus on ‘a particular

phenomenon with a view to providing an in-depth account of events, relationships,

experiences or processes occurring in that particular instance’ (Denscombe 1998, p. 32)

emphasizing on a number of factors as depicted in Table 3.6. They allow the use of

multiple sources, multiple methods and a variety of types of data in the investigation

(Creswell 2007; Denscombe 1998; Lewis 2003; Ticehurst & Veal 1999).

Case study research is treated differently by authorities as either a ‘method’ or a

‘technique’ (McGuire 1985). The former is a procedure of inquiry, research design or

research strategy that relates to the scale and scope of an investigation and does not

dictate the methods of data collection to be used (Denscombe 1998). The latter is only

117

‘an instrument of the overall research effort for the collection of data for theory building’

(Perry & Coote 1994, p. 107) and therefore a data collection technique.

Table 3.6 : Emphasis of Case Study Research

Case Study Research Characteristically Emphasizes

Depth of study

rather than

Breadth of study

The particular rather than The general

Relationships / processes rather than Outcomes and end-products

Holistic view rather than Isolated factors

Natural settings rather than Artificial situations

Multiple sources rather than One research method

Source : Denscombe (1998, p.32)

While case studies have several advantages as depicted in Table 3.7, it was not possible

for the researcher to use case studies as a methodology as the Malaysian ECS industry is

small and highly competitive. As such the ECS firms were reluctant to be used as case

studies as it would require them to permit this researcher to review all their competitive

strategies, clients’ list and confidential company documents. For this reason, case studies

were employed as a data collection technique and not as a methodology for this research.

Table 3.7 : Advantages of Case Studies

Advantages

• Focus on one or a few cases.

• In-depth study to deal with the subtleties and intricacies of complex social situations.

• Use of multiple research methods.

• Use of multiple sources of data.

• No need to exercise control over events.

• Can be either qualitative, quantitative or mixed.

• Theory–building and theory-testing are permissible.

Source : Adapted from Bryman & Bell (2007); Denscombe (1998); Gay & Diehl (1992); Gill &

Johnson (2010)

3.4.3.1 Criteria of Case Selection

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Careful attention was given to case selection to ensure that the selected cases met the

purposes of the research. Guided by the authorities, the exercise started with the

formulation of appropriate criteria so that the selected cases:

• Were ‘typical’, or cases that were similar with findings that could be generalized

(Denscombe 1998, p. 33).

• Constituted ‘extreme situations’ or ‘polar types’ that provided a contrast with the

norm and disconfirm patterns from other cases (Pettigrew 1990, p. 275).

• Were both a ‘literal replication’ predicting similar results and a ‘theoretical

replication’ predicting contrasting results (Yin 2009, p. 54).

• Were rich in information offering a deep in-sight about the research issues

(Ghauri & Grønhaug 2005).

A screening process was performed with the desk study of the ECS firms that were

members of the ACEM to identify the suitable cases.

3.4.3.2 The Selected Cases

Hedges (1985, p. 76-77) suggested that ‘in practice four to six groups form a reasonable

minimum for a serious project’. Pettigrew (1990) also suggested four to six. Cooper and

Schindler (2006) recommended a minimum of four cases with a maximum of 15 for

multiple case designs.

Guided by the criteria outlined in Sub-Section 3.4.3.1, four firms were selected in close

consultation with the ACEM as case studies. All the four firms were data rich in

information and useful for cross case analysis to test the research propositions (Eisenhardt

1989; Yin 2009).

3.4.3.3 Salient Features of the Selected Cases

The four selected firms requested anonymity and were therefore only identified by

numerical labels (1, 2, 3 & 4). The representatives from the selected cases also

participated in the focus group interview and the questionnaire survey. A brief profile of

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each of the four selected cases is described below and their salient features are listed in

Table 3.8. For the purpose of description and to avoid direct identification of the case

firm, the size of the firm was described as ‘big’ if it had a total staff strength of more than

350, ‘medium’ if between 100 and 350, and ‘small’ if it had less than 100. The firm was

‘old’ if it was established earlier than 1970, ‘mature’ if between 1970 and 1990, and

‘young’ if it was established after 1990.

Table 3.8 : Salient Features of the Case Firms

Firm

Age

Firm Size

Speciality

Service Export

1

Old

Big

General and multidisciplinary

Occasional

2

Old

Medium

Water resources

Occasional

3

Mature

Medium

Structures

Occasional

4

Old

Small

General civil

Limited

Source : Company Brochures & Websites of Case Firms

Case 1

This firm can be classified as being ‘old’ and ‘big’. It offers general ECS and has

multidisciplinary capabilities including export services.

Case 2

This is an ‘old’ and ‘medium’ in size. While it is multidisciplinary, its specialty is on

water resources development. It is also an occasional exporter by way of either following

clients or accepting unsolicited orders from overseas markets.

Case 3

This ‘mature’ and ‘medium’ firm specializes in structural engineering. An affiliate of an

international ECS firm, it occasionally exports its services to overseas countries where the

parent firm has no foreign branch offices.

120

Case 4

The firm is ‘old’ but ‘small’ in size. It practices general consulting engineering. Its

international export services are limited and it mainly focuses in the domestic market.

3.4.3.4 Collection of Data from the Case Firms

The required data from the selected cases came from three sources. These were: firstly,

the review of the case firms’ brochures and reports, secondly, participation in the focus

group meeting and lastly, participation in the questionnaire survey.

3.4.4 The Focus Group

The focus group is a special qualitative research technique (Neuman 2006) using group

interviews to elicit data from dialogue and discussion on certain defined research topic

(Jankowicz 2000). As such, the focus group contains elements of two methods: the group

interview and the focused interview (Bryman & Bell 2007). As regards the former, the

members are homogenous and selected because they ‘are known to have been involved in

a particular situation’ (Merton, Fiske, Kendall 1956, p. 3). The discussion is unstructured

and free flowing (Zikmund et al. 2010) based on a number of open-ended items in the

discussion guide prepared by the researcher (Johnson & Turner 2003). As regards the

latter, the participants are encouraged to express their different points of view and the aim

is neither to build consensus nor to determine the strength of their opinions (Vaughn,

Schumm & Sinagub 1996).

Focus groups have strengths and weaknesses as shown in Table 3.9. An important

advantage is that the focus groups ‘offer the researcher the opportunity to observe directly

the construction of meaning in a social context via interactions of group participants’

(Wilkinson 1999, p. 228) and how ‘individuals collectively make sense of a phenomenon

and construct meanings around it’ (Bryman & Bell 2007, p. 512). Some of the specific

advantages are highlighted below:

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• Focus group interviews are highly synergistic as the dynamic group interaction

produces a wider bank of rich, in-depth data as ‘that would be less accessible without

the interaction found in a group’ (Morgan 1988, p. 12) and ‘that would not be

available outside the group context’ (Wilkinson 1999, p. 229).

• In a focus group, as no one is required to answer any specific questions, the

individual’s responses are likely to be spontaneous and tend to be more accurate

(Malhotra 2010).

Table 3.9 : Strengths and Weaknesses of Focus Groups

Strengths

Weaknesses

• Useful for exploring ideas

• Can obtain in-depth information

• Allows study of participant’s interaction

• Allows probing

• Allows quick turnaround

• Allow observation of non-verbal responses including body language

• Very flexible

• Sometimes expensive

• May be dominated by one or two participants

• Very difficult to generalize due to small sample size

• Moderator may be biased

• May have high dross rate

• Data analysis is sometimes time consuming and difficult

Source : Adapted from Bryman & Bell (2007); Johnson & Turner (2003); Stewart, Shamdasani & Rook

(2007)

The advantages of the focus group justified its use as a primary data collection tool for

the qualitative component of this research.

There is no fixed way to predetermine the exact number of focus groups required for a

research. This is dependent on the purpose of the research, the background information

needed, the nature of the focus group, and the success of the proceeding focus group, if

any. When the population is relatively homogeneous and the research questions are

relatively simple, a single group may be sufficient (Stewart, Shamdasani & Rook 2007).

Due to time and resource constraints, the researcher decided to engage only one focus

group with the consideration that there will be a complementary questionnaire survey

later.

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3.4.4.1 Selection and Composition of the Focus Group

There is no fixed size for a focus group. Different authorities recommend different

member sizes and there is little consensus on what is most appropriate. Johnson and

Turner (2003) as well as Bryman and Bell (2007) recommended a range of seven to ten

people per focus group. Krueger (1994) suggested three to twelve; Nassar-McMillan &

Borders (2002), four to six. The size must be large enough to generate diverse viewpoint

for generation of in-depth information but not too large for adequate participation by each

group member (Zikmund et al. 2010). Guided by these authorities, the researcher

considered eight focus group participants as this number falls within the range

recommended by most authorities.

The success of the focus group is dependent on its composition so the selection and

recruitment of participants for focus group is critical (Davis 2000). A homogenous group

with similar lifestyles, job classification and experiences will not have too many

arguments and different viewpoints arising from the diverse background of the

participants (Zikmund et al. 2010). Guided by this, the membership of the focus group

for this research was confined to senior personnel.

The participants were identified based on non-probability, non-randomly selected

samples of various groups based on predetermined characteristics. The invited

participants were stratified according to business and organizations covering the ECS

firms, government export support bodies and construction firms which were involved in

foreign projects in partnership with Malaysian ECS firms.

Using his personal and business contacts, the researcher contacted:

• Each of the ACEM four case study firms and requested them to nominate one

participant. The ACEM was also requested to nominate a participant.

• The Malaysia External Trade Development Corporation (MATRADE), the

government agency responsible for export promotion, to nominate one participant.

• The Master Builders Association Malaysian (MBAM) to identify one participant.

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• City University College of Science and Technology to nominate an academic familiar

with export and promotion issues.

The identified organizations were requested to alert the participants who were selected by

them.

3.4.4.2 Planning the Focus Group Meeting

A discussion guide and topic agenda were drawn up, as depicted in Table 3.10, to

facilitate the focus group discussion. The topic agenda highlighted the key research issues

related to the three propositions.

The researcher telephoned and e-mailed the members of the focus group to reconfirm

their participation and to decide on the time, date and venue of the focus group meeting.

Prior to the meeting, the researcher sent the Discussion Guide, the Information Sheet and

Consent Form to the participants as shown in Appendix A, B and C. The focus group

meeting only proceeded after receipt of the signed consent forms from the participants.

3.4.4.3 Conduct of the Focus Group

The focus group meeting was held on 28th July 2011 in the meeting room of the ACEM’s

office to provide a relaxed and comfortable setting. The researcher played the role of a

facilitator and moderator. Staying at the process level, he only intervened when necessary

to prevent the group from straying and to remain focused on the discussion topics. The

discussion was free flowing and the participants were encouraged to express their frank

views and comments on a range of issues related to the topic. The resulting group

interaction provided valuable data and information on the research topics. The pertinent

points made by the focus group members and which fell outside the scope of the

discussion guide were treated as ‘unplanned data’.

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Table 3.10 : Discussion Guide and Topic Agenda for the Focus Group

Topics for discussion

(A) Introduction: (10 mins) Introduce the researcher and roles. Personal introduction of participants, their background and business. Aim and format of the focus group.

Conventions (confidentiality, speak one at a time, everybody’s views, open debate, recordings and report of proceeding).

(B) Discussion topics / issues: (25 mins)

(I) The Malaysian engineering consulting services (ECS) firms are well positioned for global competitive advantage in the liberalizing global markets.

(1) Malaysian ECS industry can no longer be protected by national legislations

with the implementation of the General Agreement on Trade in Services (GATS) which is liberalizing global markets.

(2) The bigger, older established international ECS firms are better placed to enter the Malaysian engineering consulting market following the implementation of GATS.

(3) The Malaysian ECS industry has the competences, expertise and strengths to compete effectively in a liberalizing world.

(4) Malaysian ECS industry is well prepared to take advantage of emerging new market opportunities with the implementation of GATS.

(II) The Malaysian Government has effective support policies and programmes to assist Malaysian ECS firms with their internationalization efforts. (25 mins)

(5) The Malaysian Government has an effective policy framework to promote the

interests of the domestic ECS industry. (6) The Malaysian Government is actively promoting new international market

penetration effort by Malaysian ECS firms. (7) The existing funding support and incentives provided by the Government

enable the Malaysian ECS industry to more effectively compete in the international markets.

(8) The Malaysian Government collaborates closely with Malaysian ECS industry in devising new policies and support measures for increasing the international competitive positioning of Malaysian ECS industry.

(III) The exporting Malaysian firms have appropriate strategies for successfully entering new international markets. (25 mins)

(9) The Malaysian ECS firms are actively formulating and implementing

internationalization strategies. (10) The Malaysian ECS firms have competent staff with an international and

entrepreneurial orientation to take advantage of emerging international marketing opportunities.

(11) The Malaysian ECS industry places emphasis on human capital development and knowledge management to stay abreast of the technological changes impacting on the ECS.

(12) The Malaysian ECS firms have appropriate mechanisms for pooling the specific competencies for jointly bidding for international projects on a consortium basis.

(C) Summing up (5 mins)


The 90-minute meeting was within the typical duration of one to three hours (Malhotra

2010; Vaughn, Schumm & Sinagub 1996). The minutes of meeting are attached in

Appendix H.

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3.4.5 The Sample Survey

A sample survey is a method of primary data collection (Zikmund et al. 2010) from

which information is collected about a population of interest based on communication

and responses of a sample drawn from that population (Gay & Diehl 1992). It provides a

quick, inexpensive, efficient and accurate means of data collection (Zikmund et al. 2010).

A sample survey can be either cross-sectional or longitudinal.

In a cross-sectional survey, information is collected once at a specific single point in time

(Gay & Diehl 1992; Bryman & Bell 2007; Neuman 2006). While it is the ‘simplest and

least costly’ it suffers from the weakness that ‘it cannot capture social processes or

change’ (Neuman 2006, p. 37).

In a longitudinal survey, data are collected at more than one point in time and at different

times (Sekaran 2003). Its purpose ‘is to examine continuity of response and to observe

change that occurs over time’ (Zikmund et al. 2010). While it is usually more complex,

costly and time consuming compared to cross-sectional survey, its main strength is in the

study of social change and development (Saunders, Lewis & Thornhill 2003).

Since this researcher had to complete this doctoral thesis within a specific time frame and

with both financial and time constraints, a longitudinal research was not appropriate.

Furthermore, the purpose of the research was to capture the views of the target population

at a point in time. Accordingly, a cross-sectional study was more appropriate.

The sample survey has two main data collection methods, namely structured interview

and questionnaire (Bryman & Bell 2007; Easterby-Smith, Thorpe & Lowe 2002; Gay &

Diehl 1992). The questionnaire method was used for this research and discussed below.

3.4.5.1 Questionnaire Surveys

A questionnaire ‘is a formalized set of questions for obtaining information from

respondents’ (Malhotra 2010, p. 335). Questionnaire surveys have various meanings

(Oppenheim 2000). Some authorities (Kervin 1999; Sekaran 2003) confined

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questionnaire surveys to surveys where the respondents answer and record their own

answers. Others used the term more generally to also include structured interview surveys

(Bell 2005; Saunders, Lewis & Thornhill 2003). This researcher adopted Kervin’s (1999)

and Sekaran’s (2003) view on questionnaire survey as self-administered survey for this

research.

Questionnaire surveys have advantages and disadvantages. The advantages are:

• Cheap to administer,

• Quick to administer,

• Absence of interviewer effect,

• No interviewer variability, and

• Convenience for respondents (Bryman & Bell 2007).

The main setback of questionnaire survey is the low response rate (Neuman 2006;

Ticehurst & Veal 1999). Factors that affect questionnaire survey response rates as

identified by Ticehurst and Veal (1999, p. 142) are:

• ‘The interest of the respondent in the survey topic;

• The length of the questionnaire;

• Questionnaire design, presentation and complexity;

• The style, content and authorship of the accompanying letter;

• The provision of a reply-paid envelop;

• Rewards for responding; and

• The number and timing of reminders and follow-ups.’

Despite the disadvantages, the questionnaire survey was chosen for this research due to

the cheaper cost incurred and faster data collection especially when the survey covered a

wide area. Furthermore, it was considered more appropriate and practical when a large

sample size was required to improve the trustworthiness of the research and for the

generalizability of the research findings.

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3.4.5.2 Sampling

Sekaran (2003, p. 266-267) defined sampling as

‘The process of selecting a sufficient number of elements from the population, so that a

study of the sample and an understanding of its properties or characteristics would make

it possible for us to generalize such properties or characteristics to the population

elements’.

It is practically impossible to collect data from every element due to the constraint of time,

cost, and other human resources (Gay & Diehl 1992; Sekaran 2003; Zikmund et al. 2010).

If a sample is well selected, the research results from that sample will be ‘reasonably

accurate’ (Zikmund et al. 2010, p. 388) and ‘generalizable to the population’ (Gay &

Diehl 1992, p. 126).

There are two major types of sampling techniques: probability sampling and non-

probability sampling (Bryman & Bell 2007; Saunders, Lewis & Thornhill 2003).

Probability Sampling

In probability sampling or random sampling, all elements in the defined population have

‘an equal and independent chance of being selected for the sample’ (Gay & Diehl 1992, p.

129). This permits the determination of the precision of the sample estimates of the

characteristic of interest and hence the inferences or projections about the target

population from which the sample was drawn (Malhotra 2010). However, the probability

sampling was not adopted for this research in view of the small target population since

the Malaysian ECS industry is relatively small. Furthermore, few members of the ECS

industry were knowledgeable about the internationalization of Malaysian ECS industry.

Non-Probability Sampling

In non-probability sampling, ‘it is not possible to specify the probability, or chance, that

each member of a population has of being selected for the sample’ (Gay & Diehl 1992, p.

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142). As such, ‘the estimates obtained are not statistically projectable to the population’

(Malhotra 2010, p. 376). However, it is still ‘able to generalize from non-probability

samples about the population, but not on statistical grounds’ (Saunders, Lewis &

Thornhill 2003, p. 152). Non-probability sampling depends on the personal judgement of

the researcher to arbitrarily or consciously decide what elements or members to include in

the sample (Malhotra 2010). Commonly used non-probability sampling techniques

include convenience sampling, judgemental sampling, quota sampling, and snowball

sampling as depicted in Table 3.11 and briefly described below.

Table 3.11 : Non-Probability Sampling Techniques

Techniques

Sample Selection

Convenience sampling

The elements are haphazardly chosen depending on the ease and convenience of obtaining the information.

Judgemental sampling or purposive sampling

The elements are selected based on the researcher’s judgement about some appropriate characteristics required of the sample elements that will best answer the research questions and meet the research objectives.

Quota sampling

The sample is chosen on the basis that the pertinent sample characteristics are the same as those in the population.

Snowballing sampling

Initial elements are selected and who identify further elements of the population. The latter identify more elements and so on resulting in a snowballing effect in the recruitment and size of the sample.

Source : Adapted from Saunders, Lewis & Thornhill (2003); Zikmund et al. (2010)

• Convenience Sampling

In convenience sampling, the elements are selected on the basis that they are

conveniently available. Convenience samples are therefore not representative of

any definable population and are not appropriate for research involving population

inferences. They are also not recommended for descriptive or explanatory

research, but can be used for exploratory research (Malhotra 2010).

• Judgemental Sampling

In judgemental sampling, the elements are selected based on the judgement of the

researcher who believes that the elements are appropriate for the population of

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interest. Judgemental sampling is therefore subjective and not appropriate for

population inferences. Its value is dependent on the researcher’s expertise in

making the right judgement on element selection (Malhotra 2010).

• Quota Sampling

In quota sampling, quotas are used to ‘ensure that the composition of the sample is

the same as the composition of the population with respect to the characteristics of

interest’ (Malhotra 2010, p. 380). Once the quotas have been assigned, the sample

elements are freely selected based on either convenience or judgement, hence

selection bias are potentially present (Malhotra 2010).

• Snowballing Sampling

In snowballing sampling, the initial sample elements are randomly selected.

Subsequent elements are chosen based on the referrals or information provided by

the initial elements to locate elements of rare population. This process is repeated

in cycles by obtaining referrals from referrals leading to snowballing effect. Even

though probability sampling is used to select the initial sample, the final sample is

a non-probability sample (Malhotra 2010).

Taking all factors into account in particular the objectives of the study, the researcher

adopted a combination of judgemental and quota sampling for this research. Judgemental

sampling permitted the sample to comprise participants who were knowledgeable about

the research issues. Quota sampling enabled the sample size to include the varied groups

of people who were associated with the export of Malaysian ECS. Furthermore, it also

permitted the data to be collected at a cheaper cost and at faster rate.

3.4.5.3 The Target Population and the Sample Size

The target population for this research was Malaysian ECS firms who were members of

ACEM. In order to secure a broad spectrum of data, other government agencies and

construction firms involved in the export of Malaysian ECS were also targeted for the

survey sample. They were grouped under four categories as follow:

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• Group A - Four case study Malaysian ECS firms.

• Group B - Non-case study Malaysian ECS firms.

• Group C - Representatives from government agencies such as MATRADE, CIDB.

• Group D - Members of Master Builders Association of Malaysia (MBAM).

Sample size is important for the generalizability of the research findings. Roscoe (1975)

recommended a sample size larger than 30 and less than 500 being appropriate for most

research. Guided by these authorities, 180 participants were identified from the target

population to participate in the survey questionnaire. While this might appear small to

generalize the findings of the research, it was considered sufficient for this study. The

composition of the respondents by way of each of the groups A, B, C and D is shown in

Figure 3.9 and is described below:

• Group A comprised 60 participants from 15 each of the four case study ECS firms.

• Group B comprised 60 participants from non-case study ECS firms.

• Group C comprised 30 participants from government agencies such as MATRADE,

CIDB.

• Group D comprised 30 participants from members of MBAM.

3.4.5.4 Recruitment of the Survey Participants

The researcher used his business and personal contacts to secure meetings with

representatives of ACEM, MATRADE, CIDB and MBAM. They were informed of the

purposes of the research survey and were requested to assist in the identification of

suitable persons as respondents.

After receiving their suggestions on prospective participants, the researcher contacted the

suggested participants, by phone or e-mail or both to seek their agreement to participate.

They were briefed on the purpose of the research survey and their expected roles. The

researcher assured them that their rights would be protected and that information

provided would be kept confidential. They were also entitled to receive the results of the

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Figure 3.9 : Composition of the Survey Sample


research in which they participated once the research was completed. All 180 persons

expressed their interest to participate and returned the duly filled questionnaire. This also

indicated their implied consent.

3.4.5.5 Designing the Questionnaire

‘A research survey is only as good as the questions it asks ………. questionnaire design

is one of the most critical stages in the survey research processes’ (Zikmund 2000, p. 309).

‘When designing questionnaires, it is important to take it slowly and carefully and also to

remember why the research is being done’ (Ticehurst & Veal 1999, p.143). The

questionnaire design process started with the examination of the research problem and

research questions. It was followed by a listing of information required and the

development of the questions in the questionnaire (Ticehurst & Veal 1999) as depicted in

Figure 3.10.

Organization

Ca

se

Stu

dy F

irm

s

No

n-C

ase

Stu

dy F

irm

s

Go

ve

rnm

en

t A

ge

ncie

s

MB

AM

30 30

60 60

A B

D

Group Sample

Size

C

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List of

Information

required

Questionnaire

Survey

Other Research

Method

Draft Design

Pilot Test

Final Design

Direct link between questions and information needs

Management

Problem

Conceptual

Problem

Research Question

Figure 3.10 : Questionnaire Design Process

Source : Adapted from Ticehurst & Veal (1999, p. 144)

The designing of the research questionnaire took account of five key factors. They were

relevancy, accuracy, minimizing bias, sequencing the questions and the length of the

questionnaire and these are discussed below.

(i) Relevancy

‘A questionnaire is relevant to the extent that all information collected addresses a

research question’ (Zikmund et al. 2010, p. 336). The questions were related to the

information need and linked back to the research questions (Ticehurst & Veal 1999) as

shown in Figure 3.10. Wrong or irrelevant questions were not included in the

questionnaire.

(ii) Accuracy

‘Accuracy means that the information is reliable and valid’ (Zikmund et al. 2010, p. 337).

The questions were presented in simple, understandable and unbiased manner. They were

also specific and set in clear terms to avoid misunderstanding by the respondents.

Double-barreled questions were avoided. Both positively and negatively worded

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questioned were used to overcome the tendency of the respondents to answer at one end

of the scale. Furthermore, the sample comprised participants who were proficient in

English, well educated and interested in the research topic.

(iii) Minimizing Bias

Closed-ended questions were used to minimize bias with the respondents being given

specific, limited alternative responses to choose the one closest to the respondents’ own

viewpoint (Zikmund et al. 2010). Leading and emotionally charged questions were

avoided (Sekaran 2003).

(iv) Sequencing the Questions

The researcher used the funnel approach to sequence the questions (Festinger & Katz

1966). Funnel sequence is defined as ‘organizing survey research questions in a

questionnaire from general to specific questions’ (Neuman 2006, p. 294), and ‘from

questions that are relatively easy to answer to those that are progressively more difficult’

(Sekaran 2003, p. 242). The questionnaire, starting with questions that were general and

easy to answer, enabled the respondent to progress through the questionnaire with ease

and comfort (Zikmund et al. 2010; Sekaran 2003). The more difficult questions were left

to the end of the questionnaire.

(v) The Layout and Length of the Questionnaire

An attractive layout of the questionnaire is crucial for the self-administered questionnaire

as it improves accuracy and completeness and reduce non-response rate (Neuman 2006;

Zikmund et al. 2010). Attractive questionnaire persuades and motivates respondents.

Accordingly ‘questionnaires should be clear, neat and easy to follow’ (Neuman 2006, p.

295). Questionnaire should never be cramped and overcrowded, space should be

provided to ensure decent margins (Zikmund et al. 2010).

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Guided by these authorities, the researcher prepared a three page questionnaire

comprising 12 questions. The pages were numbered and the questions were printed in 12

point Times New Roman font for easy reading.

3.4.5.6 Attitude Rating Scales

Measurement is defined as ‘the assignment of numbers of other symbols to characteristics

of objects according to certain prespecified rules’ (Malhotra 2010, p. 282). Rating is ‘a

measurement task that requires the respondent to estimate the magnitude of a

characteristic or quality that a brand, store or object possesses’ (Zikmund et al. 2010, p.

316). Scaling is the ‘generation of a continuum upon which measured objects are located’

(Malhotra 2010, p. 282). The survey questionnaire was aimed to collect quantifiable data.

This required the adoption of an appropriate rating scale to measure attitude responses.

There were several rating scales but three were considered here, namely simple attitude

scale, category scale and Likert scale. The features, advantages and disadvantages of

each are shown in Table 3.12.

Table 3.12 : Three Attitude Rating Scales

Type

Features

Advantages

Disadvantages

Simple Attitude

Either agree or disagree with a statement or question.

Ease of response.

Do not allow for making fine distinctions in the attitude of the respondents. No neutral reply.

Category Scale

Several response categories.

Provide more information flexibility and sensitive measure.

Ambiguous items due to few categories. Only gross distinction can be made.

Likert Scale

Statement evaluated on a number of point scale.

Simple and easy to administer.

Difficult to judge what a single summated score means.

Source : Adapted from Zikmund et al. (2010)

A five-point Likert scale was selected for this questionnaire survey as it was considered

appropriate for:

• Drawing distinctions in the attitudes of the survey participants.

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• The ease and simplicity of administration.

• The flexibility of allowing the respondent to adopt an uncertain or don’t know

position.

As shown in Figure 3.11, respondents could select one of five ranges of attitudes, with

score assigned to the alternative responses. The five points are: ‘strongly disagree’,

‘disagree’, ‘uncertain’, ‘agree’ and ‘strongly agree’.

Figure 3.11 : Likert Scale and Score Assigned for the Survey Strongly Disagree Uncertain Agree Strongly Disagree Agree

1 2 3 4 5


3.4.5.7 Pretesting the Questionnaire

Pretesting refers to ‘the testing of the questionnaire on a small sample of respondents to

identify and eliminate potential problems’ (Malhotra 2010, p. 354). All aspects of the

questionnaire were tested for relevancy, accuracy, sequencing, layout, length of question,

wording and instruction.

In line with Malhotra (2010) that the respondents for the pretest should be drawn from the

same population for the questionnaire survey, five knowledgeable persons who

participated in the experience survey were invited to complete and pretest the draft

questionnaire. After they completed the questionnaire, the researcher personally

interviewed each of them to pose the following questions:

• Were the questions relevant to the research issues?

• Were the questions ambiguous and not comprehensible?

• Were the questions sensitive, irritating or offensive?

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• Was the format of the questionnaire easy to follow?

• Was the questionnaire lengthy?

The pretest yielded useful comments from the knowledgeable persons on some of the

poorly worded and ambiguous questions which could lead to misunderstanding and

misinterpretation by the participants. Guided by these comments, the researcher refined

the questionnaire.

3.4.5.8 The Finalized Questionnaire

The 12 questions were recast as statements as follows:


The Malaysian Engineering Consulting Services (ECS) firms are well positioned for

global competitive advantage in the liberalizing global markets.

1) Malaysian ECS industry can no longer be protected by national legislations with

the implementation of the General Agreement on Trade in Services (GATS)

which is liberalizing global markets.

Strongly Disagree Uncertain Agree Strongly Disagree Agree

1 2 3 4 5

2) The bigger, older established international ECS firms are better placed to enter the

Malaysian engineering consulting market following the implementation of GATS.


1 2 3 4 5

137

3) The Malaysian ECS industry has the competences, expertise and strengths to

compete effectively in a liberalizing world.


1 2 3 4 5

4) Malaysian ECS industry is well prepared to take advantage of emerging new

market opportunities with the implementation of GATS.


1 2 3 4 5


The Malaysia Government has effective targeted support policies and programmes to


5) The Malaysian Government has an effective policy framework to promote the

interests of the domestic ECS industry.


1 2 3 4 5

6) The Malaysian Government is actively promoting new international market

penetration effort by Malaysian ECS firms.


1 2 3 4 5

138

7) The existing funding support and incentives provided by the Government enable

the Malaysian ECS industry to more effectively compete in the international

markets.


1 2 3 4 5

8) The Malaysian Government collaborates closely with Malaysian ECS industry in

devising new policies and support measures for increasing the international

competitive positioning of Malaysian ECS industry.


1 2 3 4 5




9) The Malaysian ECS firms are actively formulating and implementing

internationalization strategies.


1 2 3 4 5

139

10) The Malaysian ECS firms have competent staff with an international and

entrepreneurial orientation to take advantage of emerging international marketing

opportunities.


1 2 3 4 5

11) The Malaysian ECS industry places emphasis on human capital development and

knowledge management to stay abreast of the technological changes impacting on

the ECS.


1 2 3 4 5

12) The Malaysian ECS firms have appropriate mechanisms for pooling the specific

competencies for jointly bidding for international projects on a consortium basis.


1 2 3 4 5

3.4.5.9 Administration of the Questionnaire

The researcher telephoned all the participants to alert them of the invitation to participate

in the questionnaire survey for this research. The Information Sheet and the Questionnaire

as shown in Appendix D and E respectively were sent to each of the identified

participants. These provided the details of the research, responsibilities of the researcher

and the participants and the importance attached to their participation. E-mails were sent

to the participants to ensure that they received the questionnaire with the request that they

complete and return the questionnaire within a period of two weeks.

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3.4.5.10 The Survey Responses

All the survey participants were located in Kuala Lumpur and the Klang Valley region.

This enabled the researcher to have easy access to the participants. The questionnaire had

only 12 closed end statements for which responses were sought. Due to a combination of

these factors, all 180 participants completed and returned the questionnaire for this

research.

3.4.6 Conclusion

This Section discussed the collection of primary date using the focus group meeting and

questionnaire survey. The next section discusses the measures taken to improve the

quality of primary data collected.

3.5 Research Quality

Research findings must be trustworthy (Bryman & Bell 2007; Neuman 2006). This

section discusses the measures taken to secure valid and reliable data. These relate to

issues of reliability, validity and triangulation.

3.5.1 Reliability

Reliability applies to a measure, which yields consistent similar results across situations

and over time, or similar observations by other observers (Easterby-Smith, Thorpe &

Lowe 2002; Zikmund et al. 2010). ‘Reliability is an indicator of a measure’s internal

consistency’ (Zikmund et al. 2010, p. 305). However, qualitative researchers ‘accept that

different researchers or researchers using alternative measures will get distinctive results’

(Neuman 2006, p. 196). This is because qualitative data is collected in an evolving

interactive setting between the researchers and what are being studied and that the

setting’s context dictates the use of measures that cannot be repeated. Consequently,

reliability may be threatened from four sources of errors: participant error, participant

bias, observer error and observer bias (Robson 2002).

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The measures taken, in line with Cooper and Schindler (2003), to reduce or eliminate

errors and bias included:

• An attractive layout of questionnaire with funnel sequence and the use of clear

simple words to avoid ambiguity, misunderstanding and misinterpretation by the

participants. Leading questions, loaded questions, double barrel questions,

irritating, offensive or sensitive questions were avoided.

• The use of closed-ended questions in the questionnaire encouraged response

because of the quick and easy way to reply.

• The use of a five-point Likert scale in the questionnaire to accurately measure

variability in the respondents’ responses.

• Pre-testing of the questionnaire by knowledgeable persons to ensure that the

statements were easily understood.

• The selection of the focus group and survey participants with similar demographic

and socioeconomic features in terms of lifestyle, job classification, education,

years of experience and levels of responsibility in their respective organizations.

• The provision of a Discussion Guide and Information Sheet to the focus group

participants to enable them to give informed views on the research issues.

3.5.2 Validity

Validity and reliability are usually complementary but at times they may be in conflict

with each other (Neuman 2006). ‘Reliability is a necessary but not sufficient condition

for validity. A reliable scale may not be valid ……… A reliable but invalid instrument

will yield consistently inaccurate results’ (Zikmund et al. 2010, p. 309). Validity is the

‘accuracy of a measure or the extent to which a score truthfully represents a concept’

(Zikmund et al. 2010, p. 307). There are a number of different forms of validity and three

of the more prominent ones are external validity, internal validity and construct validity.

3.5.2.1 External Validity

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External validity is the quality of the research findings from a specific setting and small

group of being able to be generalized, transferred or applied to the external environment

across persons, settings and times (Cooper & Schindler 2006; Ritchie & Lewis 2003;

Zikmund et al. 2010). In essence, it is a sampling issue and relate to the

representativeness of the sample, the size of the sample and the response rate (Zikmund et

al. 2010). For this research, external validity was secured by the use of typical cases for

case studies, the careful selection of focus group participants to present the views of the

population, a relatively large survey sample with a high response rate. These resulted in a

higher probability of valid findings for truthful conclusion to be drawn.

3.5.2.2 Internal Validity

Internal validity seeks to ‘establish a causal relationship, whereby certain conditions are

believed to lead to other conditions’ (Yin 2009, p. 40). This is the main concern of

explanatory or causal research but not for descriptive or exploratory research (Yin 2009).

Qualitative research usually tries to identify variables involved in a phenomenon and not

causal relationship between the variables (Neuman 2006). However, internal validity is

still important to qualitative research as it determines the credibility, truth, and the extent

of fit between the research findings about the social world and what is actually occurring

in it (Neuman 2006). Accordingly, the internal validity of this research was addressed by

ensuring that the data content and the findings, emerging from the focus group meeting

and questionnaire survey adequately captured the true views, opinions and attitudes of the

participants in relation to the research issues and questions.

3.5.2.3 Construct Validity

Construct validity relates to the identification of ‘correct operational measures for the

concepts being studied’ (Yin 2009, p. 40). ‘Construct validity testifies to how well the

results obtained from the use of the measures fit the theories around which the test is

designed’ (Sekaran 2003, p. 207). Accordingly, the measures taken to increase the

construct validity of the research findings were:

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• The operationalization of the concepts based on the constructs identified in the

literature review of the secondary data in Chapter Two.

• The use of multiple sources of data and evidence to provide multiple measures of

the same phenomenon by triangulation and corroboration of findings.

3.5.3 Triangulation

Triangulation improves research practice by enhancing the validity of research findings

(Mathison 1988). It looks at something from multiple points of view in order to improve

accuracy (Neuman 2006). ‘Triangulation refers to the use of different data collection

methods within one study’ (Saunders, Lewis & Thornhill 2003, p. 99). Miles and

Huberman (1994, p. 266) argued that ‘triangulation is supposed to support a finding by

showing that independent measures of it agree with it or, at least, do not contradict it’.

The logic of triangulation is based on the premise that single investigator or monomethod

is subject to personalistic biases that cannot adequately solve ‘the problem of rival causal

factors. Because each method reveals different aspects of empirical reality, multiple

methods of observations must be employed’ (Denzin 1978, p. 28) to ‘circumvent the

personal biases of investigators and to overcome the deficiencies intrinsic to a single-

investigator, single-theory, or single method study, thus increasing the validity of the

findings’ (Kimchi, Polivka & Stevenson 1991, p. 365). The ‘converging lines of enquiry’

(Yin 2009, p. 115) and agreement between two methods will strengthen the validation

process (Bouchard 1976). Accordingly, to improve confidence in findings the researcher

adopted:

• Data triangulation to enhance construct validity through the use of multiple

sources of data which included secondary data from literature review, archival and

documentary records and primary data which were obtained from a focus group

meeting and a questionnaire survey.

• Methodological triangulation to increase internal and external validity and

reliability. This included the between – method triangulation of using the mixed

methods of qualitative and quantitative approaches (Patton 2002).

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3.6 Data Analysis Procedures

Data analysis is ‘the application of reasoning to understand the data that have been

gathered’ (Zikmund et al. 2010, p. 70). It gives meaning to the data. The appropriate

analytical technique of data analysis depends on the characteristics of the research design

and the nature of data collected.

This research employed a mixed methodology, generating both qualitative and

quantitative data. Therefore, two methods of data analysis were required and outlined

below:

3.6.1 Qualitative Data Analysis

Qualitative data are empirical information in the form of words, images and symbols

from documents, observations, transcripts, records, notes, artifacts, photographs and

audiovisual materials describing human actions and social events (Neuman 2006; Punch

2005). The qualitative data are usually voluminous, messy, due to its richness and is

therefore time consuming and cumbersome to analyze (Bryman & Bell 2007).

Guided by Miles and Huberman (1994), and Neuman (2006), the researcher adopted a

three step approach for the analysis of the qualitative data emerging from the literature

review and the focus group meeting, namely data reduction, data display, conclusion

drawing and verification. These three analysis activities together with the data collection

activity form an interactive cyclical process as depicted in Figure 3.12.

3.6.1.1 Data Reduction

This refers to the reduction of large volume of qualitative raw data into small manageable

pile by analytic choices of selecting, focusing, simplifying, abstracting, summarizing and

converting the data. To facilitate data reduction, the detailed notes taken during the focus

group meeting were condensed into analytical categories on the basis of themes or

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concepts. This process continued until major themes emerged for conclusions to be

drawn and verified.

Figure 3.12 : Qualitative Data Analysis

Source : Adapted from Miles & Huberman (1994, p. 12)

3.6.1.2 Data Display

The reduced data were displayed in the form of matrices, graphs, charts and networks to

facilitate the interpretation of data. The display of data in this compact form made the

data immediately accessible for the researcher to draw justified conclusions (Miles &

Huberman 1994).

3.6.1.3 Conclusion Drawing and Verification

The researcher induced conclusions from the research findings basing on data display and

in relation to the research propositions. The conclusions were also verified accordingly

based on the evidence obtained from the data. These are presented in Chapter Four and

Five.

Data

Collection

Data

Display

Data

Reduction

Conclusion Drawing and

Verification

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3.6.2 Quantitative Data Analysis

The quantifiable data are numbers based on five-point Likert scale in the survey

questionnaire. Before the data were analyzed, the data needed to be prepared and

processed as outlined in Figure 3.13. The process started with the stages of questionnaire

checking, editing, coding, transcribing, data cleaning and finally selecting a data analysis

strategy (Malhotra 2010) as below :

Figure 3.13 : Quantitative Data – Preparation Process

Source : Adapted from Malhotra (2010, p. 453)

• Editing. The questionnaires were screened with the objective of increasing

accuracy and precision by identifying illegible, incomplete, inconsistent, or

ambiguous responses.

• Coding. The response to each question was assigned a code in the form of

number for the purpose of statistical analysis.

• Transcribing. The coded data from the questionnaire were transferred directly

into the computer by keying in a format suitable for the chosen statistical software

for analysis.

• Cleaning. The data were checked for consistency by identifying those that were

out of range, logically inconsistent or extreme. Any missing responses were

treated by either substituting a neutral value or an imputed response, or casewise

or pairwise deletion.

Guided by Carver and Nash (2006), Coakes, Steed and Price (2008), Manning and Munro

(2007), the processed data were analyzed using the Statistical Package for the Social

Sciences (SPSS) Version 19, to produce the following outputs :

Questionnaire Checking

Editing

Coding

Transcribing

Data

Cleaning

Selecting a Data

Analysis Strategy

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• Cross tabulations;

• Combined and re-coded responses;

• Case summaries;

• Group mean responses;

• ANOVA multiple comparisons; and

• Pearson Product Moment Correlations.


3.7 Research Ethics

Research ethics was defined by Wells (1994, p. 284) ‘in terms of a code of behaviour

appropriate to academics and the conduct of research’. This is to ensure that research

activities do not cause harm to participants or have any adverse consequences (Cooper &

Schindler 2006; Ticehurst & Veal 1999; Zikmund et al. 2010). There is no single

approach to ethics (Cooper & Schindler 2006, p. 116) as ethical values are influenced by

one’s moral standards and the broader social norms of behaviour (Wells 1994; Zikmund

et al. 2010). Diener and Crandall (1978) considered research ethics to comprise four

main areas: 1) right to privacy, 2) informed consent, 3) deception and 4) harm to

participants.

For this research, ethical issues concerned three parties – the researcher, the participants

and Southern Cross University. Each party has certain rights and obligations to other

parties (Zikmund et al. 2010). On his part, the researcher maintained objectivity,

presented the honest and true research findings and obtained the approval of the Human

Research Ethics Committee of Southern Cross University (Approval Number ECN-10-

223) as shown in Appendix F, before commencing the primary data collection activities.

This research was conducted in compliance with the National Statement on Ethical

Conduct in Human Research (2007) and the ethical issues included:

• Informed consent. The discussion guide and information sheets were sent to the

participants of experience survey and focus group to inform them of the

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discussion topics. The nature and purpose of the research, the benefits and

possible risk to those involved, and the estimated time taken. Similarly the

information sheets were sent to the survey participants for their information. The

researcher secured the informed consent of the intended focus group interviewees

in writing prior to interviews. The receipt of the completed questionnaires meant

implied consent.

• Voluntary participation. Participation of the interviewees and survey

respondents were voluntary without coercion and inducement. The participants

could withdraw any time without any questions being asked.

• Privacy. The right of privacy of the participants was to be respected and not to be

intruded. Participants had the right to refuse to participate or to refuse answering

any question in the interview or questionnaire.

• Confidentiality. The data collected was kept confidential including participants’

identity and not to be disclosed to third parties. After the mandatory storage

period, the data would be destroyed. In the report, the data will be presented in

the aggregate form and no individual data will be shown.

• Anonymity. The participants would not be named in the report. Case

participants and focus group interviewees were identified using case numbers or

participant alphabets.

• Harm and risk. The participants were informed that the potential harm and risk

for involving in this research was negligible. The confidentiality and anonymity

of the participants were assured and would be maintained. All data published

would be presented as overall data and participants would not be named. Further,

the research dealt with non-personal and non-sensitive issues.

• Deception. Participants would not be deceived to participate or in giving

information.

3.8 Conclusion

This Chapter presented the selected research approach and the research design for a two-

stage mixed methodology. This was followed by a discussion on the data collection

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instruments and the data analysis procedures. Issues relating to research quality and

ethics were also examined. The next Chapter presents the data analysis for this research.

150

CHAPTER FOUR – DATA ANALYSIS

4.1 Introduction

Chapter Three discussed the preferred research methodology, the preferred research

design and data collection instruments for this research. As explained in Sub-Section

3.2.2, this research adopted a mixed method methodology. Consequently, the data

collection involved two phases with the first being principally qualitative and the second

being quantitative.

The qualitative data for the first phase was collected from the literature review and a

Focus Group meeting. The quantitative data for the second phase was collected through a

questionnaire survey.

The Focus Group comprised eight participants and provided valuable insights to the key

research issues. The questionnaire survey involved 180 respondents. Categorized into

four groups, they were selected by a combination of judgemental and quota sampling.

The collected data were used to test the three Research Propositions, which emerged from

the literature review. Each Research Proposition had four related questions which were

re-cast as statements. The respondent’s responses to each of the statements were

measured using a five-point Likert rating scale. The collected raw survey data, shown in

Appendix G, were analyzed using SPSS Version 19 to identify patterns and relationships.

The outputs were summarized and tabulated, including:

• Cross tabulations of survey responses for each statement;

• Case summary for each statement;

• Cross tabulation of combined responses for each proposition;

• Combined and re-coded responses to each proposition by groups;

• Case summary for each proposition;

• Group mean ratings to each proposition;

• Pearson Product Moment Correlations;

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• ANOVA multiple comparisons between groups;


The analysis process for each research proposition involved three stages:

• Stage 1 - Detailed notes were taken to record the views and opinions expressed

by the Focus Group participants. The notes were edited, categorized

and analyzed to identify the common themes and patterns.

• Stage 2 - The quantifiable data from the Questionnaire Survey were analyzed in

two ways. First, the responses to each of the four statements related to

each research proposition were analyzed using cross tabulations, case

summaries and multiple comparisons from one-way analysis of

variance (ANOVA). The responses were combined and re-coded in

terms of the scale ‘disagree’, ‘uncertain’ and ‘agree’. Next, was the

analysis of the combined survey responses to each proposition using

the combined cross tabulation, bar and pie charts to reflect the

breakdown of the overall responses and the composition by group type.

The Pearson Product Moment Correlations were also used to detect

any significant relationship between the statements for each

proposition.

• Stage 3 - Each research proposition was tested during this stage. This was done

by matching the findings of the Focus Group meeting with those of the

questionnaire survey. In situations when the views of the Focus Group

differed from the survey findings, they were categorized as ‘mixed’ or

‘no concrete agreement’.

4.1.1 Structure of Chapter Four

This Chapter presents the findings emerging from the analysis of the views expressed by

the Focus Group and the responses to the Questionnaire Survey. It has five sections as

shown in Figure 4.1.

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Figure 4.1 : Structure of Chapter Four


Section 4.1 introduces the Chapter, providing continuity from Chapter Three. It discusses

the analysis process and outlines the Chapter structure.

Section 4.2 analyzes the qualitative and quantitative data and tests the three Research

Propositions.

Section 4.3 deals with the unplanned data. These related to the views expressed by the

Focus Group participants that fell outside the scope of the Research Propositions and

Statements.

Section 4.4 sets out the conclusion of the Chapter.


• Analysis Process


Section 4.2 : Data Analysis

• Testing of Research Proposition 1



Section 4.3 : Unplanned Data


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4.2 Data Analysis for Research Proposition 1

Proposition 1 : The Malaysian Engineering Consulting Services (ECS) firms are well

positioned for global competitive advantage in the liberalizing global

markets.

Statements 1, 2, 3 and 4 in the Questionnaire Survey which relate to Proposition 1 are

presented below:

Statement 1 : Malaysian ECS industry can no longer be protected by national

legislations with the implementation of the General Agreement on Trade

in Services (GATS) which is liberalizing global markets.

Statement 2 : The bigger, older established international ECS firms are better placed

to enter the Malaysian engineering consulting market following the

implementation of GATS.

Statement 3 : The Malaysian ECS industry has the competences, expertise and

strengths to compete effectively in a liberalizing world.

Statement 4 : Malaysian ECS industry is well prepared to take advantage of emerging

new market opportunities with the implementation of GATS.

4.2.1 Analysis of the Focus Group Meeting

All the four statements that related to Proposition 1 were discussed by the eight members

of the Focus Group. They comprised four representatives from each of the four Case

Study Firms, one from a Non-Case Study Firm and one each from MATRADE, MBAM

and academia. The meeting generated a wide range of perspectives and views on global

positioning and competitiveness of the Malaysian ECS industry. The Focus Group

reached consensus on the following issues:

154

(i) The Malaysian Government is progressively opened up the Malaysian market to

foreigners. However, the Malaysian ECS industry is small compared to other

industries. Accordingly, the Malaysian Government could well pay less attention

to protect the interests of the small Malaysian ECS industry as compared to the

larger industrial and other services sectors which have much larger ‘lobbying’

powers. Hence with the implementation of GATS, the Malaysian ECS industry

may not be protected by national legislations. Consequently any existing

prohibitive legislations and barriers could be removed.

(ii) Some of the larger and well established Western foreign ECS firms already have a

presence in Malaysia. They are involved in major complex projects in partnership

with the local firms which lack the necessary expertise. They involve specialist

inputs only and generally hire local staff. This may include local professional

engineers to facilitate signing of plans and reports for submission to authorities.

Due to the localization of their operations, they are able to compete with

indigenous Malaysian firms. Further, they have the advantage of their

international networks to outsource work to other third world countries at low cost.

Following the implementation of GATS, more foreign ECS firms, particularly

those from the developing countries such as China, India, Indonesia and

Philippines, are expected to enter the Malaysian market if the market conditions

are favourable. Accordingly, the Malaysian indigenous ECS firms will have to

face stiff competition from the ECS firms of these developing countries due to the

lower cost factor.

(iii) Malaysian engineers have the competences, expertise and strengths to compete

effectively in the liberalizing world market. A Focus Group member quoted

FIDIC’s view that Asian ECS firms are competitive compared to European ECS

firms and are able to offer low cost engineering solutions. The REA requires the

engineers to be competent and professional in their work while emphasizing on

the code of ethics and professionalism. However, the engineers were not trained

in the management field, thus making them ‘bad businessmen’ and poor

155

entrepreneurs. Furthermore the Malaysian engineers are generally weak in

financial management and also lack the skills required for the pricing of ECS.

(iv) The Malaysian ECS firms are prepared to take advantage of emerging new

opportunities with the implementation of GATS. However, they have difficulty in

securing the financial resources required for entering international markets. This

is compounded by the REA which forbids the general public to own more than

30% shares in Malaysian ECS firms. As such, the ECS firms are unable to secure

the needed finances from public funding and financial institutions. They therefore

have to generate funds from internal sources, personal borrowing or retained

profits. Due to the size limitation, the Malaysian ECS firms also have difficulties

in raising performance bonds and professional indemnity insurance coverage for

major projects.

Taking all the expressed views into consideration, the Focus Group supported the

Research Proposition 1 that the Malaysian ECS firms are well positioned for

global competitive advantage in the liberalizing global markets.

4.2.2 Analysis of Questionnaire Survey Responses

4.2.2.1 Statement 1

Statement 1 : Malaysian ECS industry can no longer be protected by national

legislations with the implementation of the General Agreement on Trade

in Services (GATS) which is liberalizing global markets.

The cross tabulation of survey responses to Statement 1 shown in Table 4.1, and the

combined and re-coded responses shown in Figure 4.2, reveal that the majority or 63.3%

of the survey respondents supported the statement, 19.5% disagreed and 17.2% were

uncertain. The main support was from the Case Study Firms with 63.4%, the Non-Case

Study Firms with 71.7% and the Contractors with 80.0%. However, half of the

respondents from the Government Agencies disagreed with the Statement.

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Table 4.1 : Cross Tabulation of Survey Responses - Statement 1

Statement 1

Group Type

Statistics

Strongly Disagree

Disagree

Uncertain

Agree

Strongly Agree

Total

Case Study Firms

Count 1 12 9 37 1 60

% within Group Type 1.7% 20.0% 15.0% 61.7% 1.7% 100.0%

% within Statement 1 20.0% 40.0% 29.0% 37.4% 6.7% 33.3%

% of Total 0.6% 6.7% 5.0% 20.6% 0.6% 33.3%

Non-Case Study Firms

Count 1 4 12 33 10 60



% of Total 0.6% 2.2% 6.7% 18.3% 5.6% 33.3%

Government Agencies

Count 2 13 6 7 2 30



% of Total 1.1% 7.2% 3.3% 3.9% 1.1% 16.7%

Contractors Count 1 1 4 22 2 30



% of Total 0.6% 0.6% 2.2% 12.2% 2.2% 16.7%

Total Count 5 30 31 99 15 180



% of Total 2.8% 16.7% 17.2% 55.0% 8.3% 100.0%

Source : Developed from the Survey Data

Figure 4.2 : Combined and Re-coded Responses to Statement 1


Table 4.2 shows the case summary of the responses to Statement 1. The overall mean

rating of 3.49 reflects a moderately good support for the Statement even though there

were varied opinions as indicated by a high standard deviation of 0.96. The respondents

from the Non-Case Study Firms, the Contractors and the Case Study Firms were the

strongest supporters with the mean ratings of 3.78, 3.77 and 3.42 respectively. The

respondents from the Government Agencies did not support the Statement as reflected by

the low mean rating of 2.80. They were also divided on the issue given the high standard

deviation of 1.095.

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Table 4.2 : Case Summary – Statement 1

Group Type N Mean Std. Deviation

Case Study Firms 60 3.42 0.889

Non-Case Study Firms 60 3.78 0.865

Government Agencies 30 2.80 1.095

Contractors 30 3.77 0.774

Total 180 3.49 0.960


The Tukey’s Honestly Significant Difference test of one-way ANOVA with multiple

comparisons, appended in Table 4.3, shows a significant difference in opinions between

the Government Agencies and the rest of the groups. However, there were no significant

differences in opinions between the Case Study Firms, the Non-Case Study Firms and the

Contractors.

Table 4.3 : Multiple Comparisons between Groups for Statement 1

Tukey HSD

Dependent Variable (I) GROUP (J) GROUP

Mean Difference (I-J) Std. Error Sig.

95% Confidence Interval

Lower Bound Upper Bound

STATEMENT 1 A B -.367 .165 .120 -.79 .06

C .617* .202 .014 .09 1.14

D -.350 .202 .308 -.87 .17

B A .367 .165 .120 -.06 .79

C .983* .202 .000 .46 1.51

D .017 .202 1.000 -.51 .54

C A -.617* .202 .014 -1.14 -.09

B -.983* .202 .000 -1.51 -.46

D -.967* .233 .000 -1.57 -.36

D A .350 .202 .308 -.17 .87

B -.017 .202 1.000 -.54 .51

C .967* .233 .000 .36 1.57

A : Case Study Firms; B : Non-Case Study Firms; C : Government Agencies; D : Contractors

* The mean difference is significant at the 0.05 level.


4.2.2.2 Statement 2

Statement 2 : The bigger, older established international ECS firms are better placed

to enter the Malaysian engineering consulting market following the

implementation of GATS.

The cross tabulation of survey responses to Statement 2 shown in Table 4.4, and the

combined and re-coded responses shown in Figure 4.3, reveal that the majority or 77.2%

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Statement 2

Group Type

Statistics

Strongly Disagree

Disagree

Uncertain

Agree

Strongly Agree

Total

Case Study Firms

Count 0 3 7 40 10 60



% of Total 0.0% 1.7% 3.9% 22.2% 5.6% 33.3%


Count 1 5 10 31 13 60



% of Total 0.6% 2.8% 5.6% 17.2% 7.2% 33.3%

Government Agencies

Count 3 3 6 12 6 30



% of Total 1.7% 1.7% 3.3% 6.7% 3.3% 16.7%




% of Total 0.0% 0.6% 1.1% 12.2% 2.8% 16.7%

Total Count 4 12 25 105 34 180



% of Total 2.2% 6.7% 13.9% 58.3% 18.9% 100.0%




of the survey respondents supported the Statement, 13.9% were uncertain and 8.9%

disagreed. The respondents of the Case Study Firms supported the Statement at 83.4%,

the Non-Case Study Firms at 73.4%, the Government Agencies at 60.0% and the

Contractors at 90.0%.


rating of 3.85 reflects a strong support for the Statement. The respondents from the Case

Study Firms, the Non-Case Study Firms and the Contractors supported the Statement as

159

indicated by the mean ratings of 3.95, 3.83 and 4.03 respectively. The respondents from

the Government Agencies also supported but with the lowest mean rating of 3.50 and they

had varying opinions as indicated by a high standard deviation of 1.225.







Total 180 3.85 0.881


The multiple comparisons of the Tukey’s test of one-way ANOVA, appended in Table

4.6, show that there are no significant differences in opinions between the groups.


Tukey HSD

Dependent Variable (I) GROUP

(J) GROUP




STATEMENT 2 A B .117 .159 .884 -.30 .53

C .450 .195 .100 -.06 .96

D -.083 .195 .974 -.59 .42

B A -.117 .159 .884 -.53 .30

C .333 .195 .321 -.17 .84

D -.200 .195 .734 -.71 .31

C A -.450 .195 .100 -.96 .06

B -.333 .195 .321 -.84 .17

D -.533 .225 .087 -1.12 .05

D A .083 .195 .974 -.42 .59

B .200 .195 .734 -.31 .71

C .533 .225 .087 -.05 1.12




4.2.2.3 Statement 3

Statement 3 : The Malaysian ECS industry has the competences, expertise and

strengths to compete effectively in a liberalizing world.

The cross tabulation of the survey responses to Statement 3, shown in Table 4.7, and the

combined and re-coded responses shown in Figure 4.4, reveal that more than half or

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55.6% of all the survey respondents supported the Statement, 25.5% were uncertain and

18.9% disagreed. The respondents of the Government Agencies showed the strongest

support at 70.0%, followed by the Non-Case Study Firms at 61.7%, the Case Study Firms

at 48.4% and the Contractors at 43.3%. A large proportion of the respondents also

showed uncertainty ranging from 20.0% for the Non-Case Study Firms to 36.7% for the

Contractors.


Statement 3

Group Type

Statistics

Strongly Disagree

Disagree

Uncertain

Agree

Strongly Agree

Total

Case Study Firms

Count 0 15 16 25 4 60



% of Total 0.0% 8.3% 8.9% 13.9% 2.2% 33.3%


Count 2 9 12 34 3 60



% of Total 1.1% 5.0% 6.7% 18.9% 1.7% 33.3%

Government Agencies

Count 0 2 7 17 4 30



% of Total 0.0% 1.1% 3.9% 9.4% 2.2% 16.7%




% of Total 0.0% 3.3% 6.1% 6.7% 0.6% 16.7%

Total Count 2 32 46 88 12 180



% of Total 1.1% 17.8% 25.6% 48.9% 6.7% 100.0%





rating of 3.42 reflects a fair support for the Statement. The mean ratings for the Case

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Study Firms, the Non-Case Study Firms, the Government Agencies and the Contractors

are 3.30, 3.45, 3.77 and 3.27 respectively.







Total 180 3.42 0.897


The Tukey’s test of one-way ANOVA with multiple comparisons shown in Table 4.9

reveals that there are no significant differences in responses between the various groups.

Table 4.9 : Multiple Comparisons between Groups for Statement 3 Tukey HSD


(J) GROUP




STATEMENT 3 A B -.150 .162 .791 -.57 .27

C -.467 .198 .091 -.98 .05

D .033 .198 .998 -.48 .55

B A .150 .162 .791 -.27 .57

C -.317 .198 .384 -.83 .20

D .183 .198 .792 -.33 .70

C A .467 .198 .091 -.05 .98

B .317 .198 .384 -.20 .83

D .500 .229 .132 -.09 1.09

D A -.033 .198 .998 -.55 .48

B -.183 .198 .792 -.70 .33

C -.500 .229 .132 -1.09 .09




4.2.2.4 Statement 4

Statement 4 : Malaysian ECS industry is well prepared to take advantage of emerging

new market opportunities with the implementation of GATS.

The cross tabulation of the survey responses to Statement 4 shown in Table 4.10, and the

combined and re-coded responses shown in Figure 4.5, reveal that less than half or 43.9%

of the survey respondents supported the Statement, 32.8% were uncertain and 23.3%

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disagreed. The respondents from the Government Agencies showed the strongest support

at 56.6%, followed by the Non-Case Study Firms at 41.7%, the Case Study Firms at

41.6% and the Contractors at 40.0%. Uncertain responses were sizable, ranging from

23.3% for the Government Agencies, 26.7% for the Case Study Firms, 38.3% for the

Non-Case Study Firms and 43.3% for the Contractors.


Statement 4

Group Type

Statistics

Strongly Disagree

Disagree

Uncertain

Agree

Strongly Agree

Total

Case Study Firms

Count 0 19 16 23 2 60



% of Total 0.0% 10.6% 8.9% 12.8% 1.1% 33.3%


Count 3 9 23 21 4 60



% of Total 1.7% 5.0% 12.8% 11.7% 2.2% 33.3%

Government Agencies

Count 1 5 7 13 4 30



% of Total 0.6% 2.8% 3.9% 7.2% 2.2% 16.7%




% of Total 0.0% 2.8% 7.2% 6.1% 0.6% 16.7%

Total Count 4 38 59 68 11 180



% of Total 2.2% 21.1% 32.8% 37.8% 6.1% 100.0%





rating of 3.24 reflects a weak support for the Statement. The respondents from the Case

Study Firms, the Non-Case Study Firms, the Government Agencies and the Contractors

163

had the mean ratings of 3.13, 3.23, 3.47 and 3.27 respectively. Even though the

Government Agencies had the highest mean rating, their opinions were varied as

indicated by a high standard deviation of 1.042.







Total 180 3.24 0.931


The Tukey’s test of one-way ANOVA with multiple comparisons shown in Table 4.12

reveals no significant differences in opinions between the groups.


Tukey HSD


(J) GROUP




STATEMENT 4 A B -.100 .170 .936 -.54 .34

C -.333 .208 .382 -.87 .21

D -.133 .208 .919 -.67 .41

B A .100 .170 .936 -.34 .54

C -.233 .208 .678 -.77 .31

D -.033 .208 .999 -.57 .51

C A .333 .208 .382 -.21 .87

B .233 .208 .678 -.31 .77

D .200 .241 .840 -.42 .82

D A .133 .208 .919 -.41 .67

B .033 .208 .999 -.51 .57

C -.200 .241 .840 -.82 .42 A : Case Study Firms; B : Non-Case Study Firms; C : Government Agencies; D : Contractors




The cross tabulation of combined survey responses to Statements 1, 2, 3 and 4 for

Proposition 1 is shown in Table 4.13. The combined responses re-coded in terms of

‘disagree, uncertain and agree’ are shown in Figure 4.6. The Table and Figure reveal that

164

60% of the survey respondents supported Proposition 1, 22.4% were uncertain and 17.6%

disagreed.

Table 4.13 : Cross Tabulation of Combined Survey Responses for

Proposition 1

Proposition 1

Group Type

Statistics

Strongly Disagree

Disagree

Uncertain

Agree

Strongly Agree

Total

Case Study Firms

Count 1 49 48 125 17 240


% within Proposition 1 6.7% 43.8% 29.8% 34.7% 23.6% 33.3%

% of Total 0.1% 6.8% 6.7% 17.4% 2.4% 33.3%


Count 7 27 57 119 30 240



% of Total 1.0% 3.8% 7.9% 16.5% 4.2% 33.3%

Government Agencies

Count 6 23 26 49 16 120



% of Total 0.8% 3.2% 3.6% 6.8% 2.2% 16.7%




% of Total 0.1% 1.8% 4.2% 9.3% 1.3% 16.7%

Total Count 15 112 161 360 72 720



% of Total 2.1% 15.6% 22.4% 50.0% 10.0% 100.0%


Figure 4.6 : Combined and Re-coded Responses to Proposition 1


The combined and re-coded responses to Proposition 1 by groups are shown in Figure 4.7.

Proposition 1 was supported by 59.2% of the Case Study Firms, 62.1% of the Non-Case

Study Firms, 54.1% of the Government Agencies and 63.3% of the Contractors.

165

0%

10%

20%

30%

40%

50%

60%

70%

Percent

Disagree 20.8% 14.2% 24.2% 11.7%

Uncertain 20.0% 23.7% 21.7% 25.0%

Agree 59.2% 62.1% 54.1% 63.3%

Case Study FirmsNon-Case Study

Firms

Government

AgenciesContractors


by Groups


Table 4.14 shows the case summary of the responses to Proposition 1 and Figure 4.8

graphically depicts the group mean ratings to Proposition 1. The overall mean rating of

3.50 reflects a strong support for the Proposition. The mean ratings for the Case Study

Firms, the Non-Case Study Firms, the Government Agencies and the Contractors are 3.45,

3.58, 3.38 and 3.58 respectively, reflecting a common consensus to Proposition 1 among

the groups.

Table 4.14 : Case Summary for Proposition 1






Total 180 3.50 0.550


166

0

1

2

3

4

5

Case StudyFirms

Non-CaseStudy Firms

GovernmentAgencies

Contractors Total

3.453.58

3.383.58 3.5

Mean

Figure 4.8 : Group Mean Ratings to Proposition 1


A composite item P1 representing Proposition 1 was created by taking the mean score

across the scores of Statements 1, 2, 3 and 4. The Pearson Product Moment Correlation

coefficients between P1 and Statements 1, 2, 3 and 4 are shown in Table 4.15. The item-

to-total correlations are all significant and greater than 0.50 (criterion suggested by Hair

et al. (1998)). This indicates that P1 is a good representation of Proposal 1 comprising

Statements 1, 2, 3 and 4. The correlations between Statements 1 and 2 is significant and

positively correlated with the inter-item correlations greater than 0.30; the criterion

recommended by Hair et al. (1998). So are the correlations between Statements 3 and 4.

However, Statements 1 and 2 are not significantly correlated to Statements 3 and 4. This

indicated that P1 has two components and is not homogeneous. One component is

represented by Statements 1 and 2, and the other by Statements 3 and 4. This observation

was also confirmed by principal components analysis with varimax rotation using

Statements 1, 2, 3 and 4 as variables.

Table 4.15 : Pearson Correlations between P1, Statements 1, 2, 3 and 4

P1 Statement 1 Statement 2 Statement 3 Statement 4

P1 1

Statement 1 0.530** 1

Statement 2 0.574** 0.326** 1

Statement 3 0.620** -0.043 -0.011 1

Statement 4 0.672** -0.030 0.086 0.558** 1

** Correlation is significant at the 0.01 level (2-tailed)


167

A one-way ANOVA was conducted with P1 as the independent variable and Group as the

dependent variable. Levene’s test was not significant, F(3, 176) = 0.412, p > 0.05,

indicating that the assumption of homogeneity of variances was not violated. The overall

F (3,176) = 1.217 is not significant with p = 0.305 > 0.05. This shows that the opinions

of the groups are not significantly different from one another for Proposition 1. This is

further reflected by the multiple comparisons of the Tukey’s test of one-way ANOVA as

shown in Table 4.16.

Table 4.16 : Multiple Comparisons between Groups for Proposition 1 P1 Tukey HSD

(I) GROUP (J) GROUP Mean Difference

(I-J) Std. Error Sig.



A B -.12500 .10033 .599 -.3852 .1352

C .06667 .12287 .948 -.2520 .3854

D -.13333 .12287 .699 -.4520 .1854

B A .12500 .10033 .599 -.1352 .3852

C .19167 .12287 .404 -.1270 .5104

D -.00833 .12287 1.000 -.3270 .3104

C A -.06667 .12287 .948 -.3854 .2520

B -.19167 .12287 .404 -.5104 .1270

D -.20000 .14188 .495 -.5680 .1680

D A .13333 .12287 .699 -.1854 .4520

B .00833 .12287 1.000 -.3104 .3270

C .20000 .14188 .495 -.1680 .5680




4.2.3 Testing of Research Proposition 1

As discussed in Sub-Section 4.2.1, the Focus Group deliberated Statements 1, 2, 3 and 4

of the Research Proposition which states that ‘the Malaysian ECS firms are well

positioned for global competitive advantage in the liberalizing global markets’. Even

though the Focus Group identified several weaknesses of the Malaysian ECS firms in

respect of global competition, the Focus Group unanimously supported the Statements

and the Proposition.

Similarly, the survey respondents also supported Statements 1, 2, 3 and 4. Overall, 60%

of the respondents supported Proposition 1 as shown in Figure 4.6 and all the groups

168

supported the Proposition as shown in Figure 4.7. Thus, Proposition 1 was supported by

the survey respondents.

Taking full account of the Focus Group meeting and the Questionnaire Survey,

Proposition 1 was supported.


Proposition 2 : The Malaysian Government has effective targeted support policies and

programmes to assist Malaysian ECS firms with their

internationalization effort.

Statements 5, 6, 7 and 8 in the Questionnaire Survey are related to Proposition 2 and are

presented below:

Statement 5 : The Malaysian Government has an effective policy framework to

promote the interests of the domestic ECS industry.

Statement 6 : The Malaysian Government is actively promoting new international

market penetration effort by Malaysian ECS firms.

Statement 7 : The existing funding support and incentives provided by the

Government enable the Malaysian ECS industry to more effectively

compete in the international markets.

Statement 8 : The Malaysian Government collaborates closely with Malaysian ECS

industry in devising new policies and support measures for increasing

the international competitive positioning of Malaysian ECS industry.


169

The Focus Group meeting discussed the research issues as reflected by Statements 5, 6, 7

and 8 in relation to Research Proposition 2. They offered a wide range of views and these

permitted the researcher to gain useful insights on the concerned issues.

(i) The Focus Group members were of the view that the Malaysian Government has a

good policy framework which served to develop the interests of the domestic ECS

industry over the past 30 years. However, the policy has been overtaken by the

changes in the international arena and is therefore now ineffective. Furthermore,

it becomes a hindrance and obstacle for the development and promotion of the

domestic ECS industry. There is a need for policy change.

(ii) The Focus Group agreed that the pertinent Malaysian Government agencies were

actively promoting Malaysian ECS overseas. These were via trade missions,

market intelligence, information exchange and government-to-government

bilateral trade arrangements. Notwithstanding, the Focus Group members were of

the view that the desired results and outcomes were not achieved due to the lack

of appropriate strategies and focused planning. Furthermore, most of these

activities were directed at the promotion of goods and not the promotion of

services.

(iii) Significantly all the Focus Group members highlighted the need to funding

support and incentives for the Malaysian ECS firms to compete in the

international markets. It was noted that such support is not being provided by the

Government.

(iv) The Malaysian Government collaborates with all Malaysian service industries in

formulating new policies and support measures to promote the competitive

positioning of all Malaysian service industries. Despite the good policy intentions,

the results and outcomes are poor as reflected by the example of NAPSEC which

represents all service sectors. Its activities were viewed as being unfocused,

diffused and ineffective. The Focus Group also noted that since the Government

agencies invite views from a wide range of industries, the views of the ECS

170

industry as well as the ACEM are often overlooked. Accordingly, the Focus

Group members disagreed with the Statement that the Malaysian Government

collaborates with Malaysian ECS industry in devising new policies and support

measures for increasing the international competitive positioning of Malaysian

ECS industry.

(v) The Focus Group suggested that the Government introduces a coherent policy to

support the ECS industry with a dedicated one stop agency for the focused

implementation and promotion programmes which the agency is to be held

accountable for its achievements.

(vi) The Focus Group also suggested that the Malaysian Government establishes local

presence in prospective countries. This could be providing through foreign trade

offices and establishing network arrangement for Malaysian ECS firms.

On the basis of the views offered, the Focus Group rejected Proposition 2.


4.3.2.1 Statement 5

Statement 5 : The Malaysian Government has an effective policy framework to

promote the interests of the domestic ECS industry.


combined and re-coded responses shown in Figure 4.9, reveal that 40.6% of the survey

respondents did not support the Statement, 35.5% were uncertain and 23.9% agreed. The

main disagreement was from the Non-Case Study Firms at 48.3%, the Contractors at

43.3% and the Case Study Firms at 43.3%. Significant number of respondents was

uncertain varying from 41.7% of the Case Study Firms to 23.3% of the Government

Agencies. However, 60.0% of the respondents from the Government Agencies supported

the Statement.

171

Agree

23.9%

Uncertain

35.5%

Disagree

40.6%


Statement 5

Group Type

Statistics

Strongly Disagree

Disagree

Uncertain

Agree

Strongly Agree

Total

Case Study Firms

Count 5 21 25 9 0 60



% of Total 2.8% 11.7% 13.9% 5.0% 0.0% 33.3%


Count 6 23 23 6 2 60



% of Total 3.3% 12.8% 12.8% 3.3% 1.1% 33.3%

Government Agencies

Count 1 4 7 15 3 30



% of Total 0.6% 2.2% 3.9% 8.3% 1.7% 16.7%




% of Total 0.0% 7.2% 5.0% 4.4% 0.0% 16.7%

Total Count 12 61 64 38 5 180



% of Total 6.7% 33.9% 35.6% 21.1% 2.8% 100.0%




Table 4.18 shows the case summary of the responses to Statement 5. The Questionnaire

Survey respondents did not support the Statement as reflected by a mean rating of 2.79.

They were also differed widely on the issue given the high standard deviation of 0.94.

The majority of the respondents from the Case Study Firms, the Non-Case Study Firms

and the Contractors did not agree with the Statement as indicated by the mean ratings of

2.63, 2.58 and 2.83 respectively. However, the respondents from the Government

Agencies supported with a mean rating of 3.50.

172







Total 180 2.79 0.944


The Tukey’s test of one-way ANOVA provided the multiple comparisons as appended in

Table 4.19. The table shows that there is a significant difference in opinions between the

Government Agencies with the rest of the groups. However, there are no significant


Contractors.


Tukey HSD


(J) GROUP



Lower Bound Upper Bound STATEMENT 5 A B .050 .163 .990 -.37 .47

C -.867* .200 .000 -1.38 -.35

D -.200 .200 .748 -.72 .32

B A -.050 .163 .990 -.47 .37

C -.917* .200 .000 -1.43 -.40

D -.250 .200 .594 -.77 .27

C A .867* .200 .000 .35 1.38

B .917* .200 .000 .40 1.43

D .667* .230 .022 .07 1.26

D A .200 .200 .748 -.32 .72

B .250 .200 .594 -.27 .77

C -.667* .230 .022 -1.26 -.07




4.3.2.2 Statement 6

Statement 6 : The Malaysian Government is actively promoting new international

market penetration effort by Malaysian ECS firms.


combined and re-coded responses shown in Figure 4.10, reveal that 37.2% of the survey

respondents did not support the Statement while another 37.2% supported and the rest,

173

25.6% were uncertain. The main disagreement was from the respondents of the Case

Study Firms and the Non-Case Study Firms at 45.0% and 50% respectively. While the

strongest support came from the Government Agencies at 80.0%. 40% of the respondents

from the Contractors supported and 36.7% were uncertain with the Statement.


Statement 6

Group Type

Statistics

Strongly Disagree

Disagree

Uncertain

Agree

Strongly Agree

Total

Case Study Firms

Count 2 25 18 14 1 60



% of Total 1.1% 13.9% 10.0% 7.8% 0.6% 33.3%


Count 4 26 4 15 1 60



% of Total 2.2% 14.4% 7.8% 8.3% 0.6% 33.3%

Government Agencies

Count 1 2 3 18 6 30



% of Total 0.6% 1.1% 1.7% 10.0% 3.3% 16.7%




% of Total 0.0% 3.9% 6.1% 6.7% 0.0% 16.7%

Total Count 7 60 46 59 8 180



% of Total 3.9% 33.3% 25.6% 32.8% 4.4% 100.0%




The case summary of the responses to Statement 6 is shown in Table 4.21. The overall

mean rating for the Statement is 3.01 with standard deviation of 1.0. This reflects mixed

174

responses with widely differing opinions. The Case Study Firms and Non-Case Study

Firms disagreed with the Statement and had the mean ratings of 2.78 and 2.72

respectively. The Contractors provided a weak support with a mean rating at 3.17. The

strongest support was from the Government Agencies at a mean rating of 3.87.







Total 180 3.01 1.000


The multiple comparisons from the Tukey’s test of one-way ANOVA, as shown in Table

4.22 shows that there is a significant difference in responses between the Government

Agencies compared to the rest of the groups. However, there are no significant


Contractors.


Tukey HSD


(J) GROUP




STATEMENT 6 A B .067 .167 .979 -.37 .50

C -1.083* .205 .000 -1.62 -.55

D -.383 .205 .245 -.92 .15

B A -.067 .167 .979 -.50 .37

C -1.150* .205 .000 -1.68 -.62

D -.450 .205 .129 -.98 .08

C A 1.083* .205 .000 .55 1.62

B 1.150* .205 .000 .62 1.68

D .700* .237 .018 .09 1.31

D A .383 .205 .245 -.15 .92

B .450 .205 .129 -.08 .98

C -.700* .237 .018 -1.31 -.09




175

4.3.2.3 Statement 7

Statement 7 : The existing funding support and incentives provided by the

Government enable the Malaysian ECS industry to more effectively

compete in the international markets.


combined and re-coded responses shown in Figure 4.11, reveal that more than half or

51.1% of the survey respondents disagreed with the Statement, 31.7% was uncertain and

17.2% agreed. The main disagreement was from the Case Study Firms with 60.0%, the

Non-Case Study Firms with 56.6% and the Contractors with 53.3%. However, 60.0% of

the respondents from the Government Agencies supported the Statement.


Statement 7

Group Type

Statistics

Strongly Disagree

Disagree

Uncertain

Agree

Strongly Agree

Total

Case Study Firms

Count 6 30 19 5 0 60



% of Total 3.3% 16.7% 10.6% 2.8% 0.0% 33.3%


Count 11 23 23 3 0 60



% of Total 6.1% 12.8% 12.8% 1.7% 0.0% 33.3%

Government Agencies

Count 1 5 6 13 5 30



% of Total 0.6% 2.8% 3.3% 7.2% 2.8% 16.7%




% of Total 0.6% 8.3% 5.0% 2.8% 0.0% 16.7%

Total Count 19 73 57 26 5 180



% of Total 10.6% 40.6% 31.7% 14.4% 2.8% 100.0%


176

Agree

17.2%

Uncertain

31.7%

Disagree

51.1%




rating is 2.58 which reflect disagreement to the Statement. The respondents were also

having widely different opinions as reflected by the high standard deviation of 0.956.

The main disagreement was from the Case Study Firms, the Non-Case Study Firms and

the Contractors as shown by the mean ratings of 2.38, 2.30 and 2.60 respectively.

However, the Government Agencies supported the Statement at a mean rating of 3.53.







Total 180 2.58 0.956


The multiple comparisons of the Tukey’s test of one-way ANOVA, shown in Table 4.25,

reveal that the respondents from the Government Agencies had significantly different

opinions compared to those of the Case Study Firms, the Non-Case Study Firms and the

Contractors. The latter three groups did not have significant differences in opinions

between them.

177


Tukey HSD


(J) GROUP




STATEMENT 7 A B .083 .157 .951 -.32 .49

C -1.150* .192 .000 -1.65 -.65

D -.217 .192 .672 -.71 .28

B A -.083 .157 .951 -.49 .32

C -1.233* .192 .000 -1.73 -.74

D -.300 .192 .402 -.80 .20

C A 1.150* .192 .000 .65 1.65

B 1.233* .192 .000 .74 1.73

D .933* .221 .000 .36 1.51

D A .217 .192 .672 -.28 .71

B .300 .192 .402 -.20 .80

C -.933* .221 .000 -1.51 -.36




4.3.2.4 Statement 8

Statement 8 : The Malaysian Government collaborates closely with Malaysian ECS

industry in devising new policies and support measures for increasing

the international competitive positioning of Malaysian ECS industry.


combined and re-coded responses shown in Figure 4.12, reveal that 36.7% of the

respondents were not sure about the Statement, 35.0% disagreed and 28.3% agreed. The

uncertain respondents comprised 45.0% of the respondents from Case Study Firms,

38.3% from the Non-Case Study Firms, 40.0% from the Contractors and 13.3% from the

Government Agencies. 35% of the respondents from the Case Study Firms disagreed

with the Statement, so were 46.7% from the Non-Case Study Firms and 40% from the

Contractors. However, 80% of the respondents from the Government Agencies supported

the Statement.

178

Agree

28.3%

Uncertain

36.7%

Disagree

35.0%


Statement 8

Group Type

Statistics

Strongly Disagree

Disagree

Uncertain

Agree

Strongly Agree

Total

Case Study Firms

Count 2 19 27 11 1 60



% of Total 1.1% 10.6% 15.0% 6.1% 0.6% 33.3%


Count 4 24 23 9 0 60



% of Total 2.2% 13.3% 12.8% 5.0% 0.0% 33.3%

Government Agencies

Count 0 2 4 16 8 30



% of Total 0.0% 1.1% 2.2% 8.9% 4.4% 16.7%




% of Total 0.6% 6.1% 6.7% 3.3% 0.0% 16.7%

Total Count 7 56 66 42 9 180



% of Total 3.9% 31.1% 36.7% 23.3% 5.0% 100.0%




The case summary of the responses to Statement 8 as depicted in Table 4.27, shows that

the overall mean rating is 2.94 indicating mild disagreement to the Statement. The

disagreement mainly derived from the Case Study Firms, the Non-Case Study Firms and

the Contractors as indicated by the mean ratings of 2.83, 2.62 and 2.77 respectively.

However, the Government Agencies exhibited strong support to the Statement as

reflected by the mean rating of 4.00.

179







Total 180 2.94 0.950


The multiple comparisons of the Tukey’s test of one-way ANOVA for Statement 8,

shown in Table 4.28, reveal that the Government Agencies had significant different

opinions compared to the rest of the groups. However, there were no significant


Contractors.


Tukey HSD


(J) GROUP




STATEMENT 8 A B .217 .151 .477 -.17 .61

C -1.167* .185 .000 -1.65 -.69

D .067 .185 .984 -.41 .55

B A -.217 .151 .477 -.61 .17

C -1.383* .185 .000 -1.86 -.90

D -.150 .185 .848 -.63 .33

C A 1.167* .185 .000 .69 1.65

B 1.383* .185 .000 .90 1.86

D 1.233* .213 .000 .68 1.79

D A -.067 .185 .984 -.55 .41

B .150 .185 .848 -.33 .63

C -1.233* .213 .000 -1.79 -.68




4.3.2.5 Analysis of the Combined Survey Responses to Proposition

2

The cross tabulation of the combined survey responses to Statements 5, 6, 7 and 8 for

Proposition 2 is shown in Table 4.29. The combined and re-coded responses in terms of

‘disagree, uncertain and agree’ are shown in Figure 4.13. They reveal that 40.9% of the

respondents disagreed with the Proposition, 32.4% were uncertain and 26.7% agreed.

180

Uncertain

32.4%

Disagree

40.9%

Disagree

40.9%

Agree

26.7%


Proposition 2

Group Type

Statistics

Strongly Disagree

Disagree

Uncertain

Agree

Strongly Agree

Total

Case Study Firms

Count 15 95 89 39 2 240



% of Total 2.1% 13.2% 12.4% 5.4% 0.3% 33.3%


Count 25 96 83 33 3 240



% of Total 3.5% 13.3% 11.5% 4.6% 0.4% 33.3%

Government Agencies

Count 3 13 20 62 22 120



% of Total 0.4% 1.8% 2.8% 8.6% 3.1% 16.7%




% of Total 0.3% 6.4% 5.7% 4.3% 0.0% 16.7%

Total Count 45 250 233 165 27 720



% of Total 6.2% 34.7% 32.4% 22.9% 3.8% 100.0%




Figure 4.14 shows the combined and re-coded responses to Proposition 2 by groups. The

Proposition was not accepted by 45.9% of the respondents from the Case Study Firms,

50.4% of the Non-Case Study Firms and 40.0% of the Contractors. However, 70.0% of

the respondents from the Government Agencies supported the Proposition. Furthermore,

a significant number of respondents from the Case Study Firms (37.1%), Non-Case Study

Firms (34.6%) and Contractors (34.2%) were uncertain.

181

0%

10%

20%

30%

40%

50%

60%

70%

Percent

Disagree 45.9% 50.4% 13.3% 40.0%

Uncertain 37.1% 34.6% 16.7% 34.2%

Agree 17.0% 15.0% 70.0% 25.8%


Firms

Government

AgenciesContractors

Figure 4.14 : Combined and Re-coded Responses to Proposition 2 by

Groups


Table 4.30 shows the case summary of the responses to Proposition 2 and the group mean

ratings are shown diagrammatically in Figure 4.15. The overall mean rating for

Proposition 2 is 2.83 reflecting a weak disagreement to Proposition 2. The mean ratings

of 2.66, 2.55 and 2.84 respectively for the Case Study Firms, the Non-Case Study Firms

and the Contractors show that these groups disagreed with the Proposition. However, at a

mean rating of 3.73, the Government Agencies strongly supported the Proposition.







Total 180 2.83 0.809


182

0

1

2

3

4

5

Case StudyFirms

Non-CaseStudy Firms

GovernmentAgencies

Contractors Total

2.66 2.55

3.73

2.84 2.83

Mean




across the scores of Statements 5, 6, 7 and 8. The Pearson Product Moment Correlation

coefficients between P2 and Statements 5, 6, 7 and 8 are shown in Table 4.31. Using the

criteria presented by Hair et al. (1998), the item-to-total correlations are all greater than

the criterion of 0.50. They are positive and significant, indicating that P2 is a good

representation of Proposition 2 comprising Statements 5, 6, 7 and 8. P2 is homogeneous

and has good reliability with Cronbach’s alpha equals 0.862 (Gregory 2004). Statements

5, 6, 7 and 8 also displayed inter-item correlations greater than the criterion of 0.30 and

are significant. Principal components analysis was performed with varimax rotation.

One component was extracted with an eigenvalue greater than 1 and the component

loadings are all greater than 0.50. Thus, Statements 5, 6, 7 and 8 represent a single

underlying construct and jointly account for 70.7% of the total variance.

Table 4.31 : Pearson Correlations between P2, Statements 5, 6, 7 and 8


P2 1


Statement 6 0.830** 0.564** 1

Statement 7 0.855** 0.641** 0.604** 1

Statement 8 0.846** 0.611** 0.606** 0.632** 1



183


dependent variable. Levene’s test was not significant indicating that the assumption of

homogeneity of variances was not violated. The overall F(3, 176) = 20.51 is significant

with p = 0.000 < 0.05. This indicates that there are significant differences in opinions

between one or more groups.

Table 4.32 shows the multiple comparisons of the post-hoc tests (Tukey HSD) of one-

way ANOVA. There were significant differences in views between the Government

Agencies with the rest of the group of the Case Study Firms, the Non-Case Study Firms

and the Contractors. The latter three groups did not show any significant different

opinions among them.

Table 4.32 : Multiple Comparisons between Groups for Proposition 2

P2 Tukey HSD

(I) GROUP (J) GROUP Mean Difference (I-J) Std. Error Sig.



A B .10417 .12826 .849 -.2285 .4368

C -1.06667* .15709 .000 -1.4741 -.6592

D -.18333 .15709 .648 -.5908 .2241

B A -.10417 .12826 .849 -.4368 .2285

C -1.17083* .15709 .000 -1.5783 -.7634

D -.28750 .15709 .263 -.6949 .1199

C A 1.06667* .15709 .000 .6592 1.4741

B 1.17083* .15709 .000 .7634 1.5783

D .88333* .18139 .000 .4129 1.3538

D A .18333 .15709 .648 -.2241 .5908

B .28750 .15709 .263 -.1199 .6949

C -.88333* .18139 .000 -1.3538 -.4129





As discussed in Sub-Section 4.3.1, the Focus Group considered the four Statements that

related to Proposition 2 which states that ‘The Malaysian Government has effective

support policies and programmes to assist Malaysian ECS firms with their

internationalization efforts’. Although the Focus Group acknowledged that the

Malaysian Government has policies and programmes, they considered these to be

184

ineffective. They also suggested policy changes. Accordingly, the Focus Group did not

support this Proposition.

The Survey Respondents disagreed with Statements 5, 7 and 8, and were divided on

Statement 6. Overall, 40.9% of the respondents disagreed with Proposition 2, 32.4%

were uncertain and only 26.7% agreed as shown in Figure 4.13. The Case Study Firms,

The Non-Case Study Firms and the Contractors rejected all the Statements while the

Government Agencies supported them. Thus overall, Proposition 2 was not supported.

Taking full account of the Focus Group meeting and the Questionnaire Survey,

Proposition 2 was not supported.


Proposition 3 : The exporting Malaysian ECS firms have appropriate strategies for

successfully entering new international markets.

Statements 9, 10, 11 and 12 in the Questionnaire Survey are related to Proposition 3 and

are presented below:

Statement 9 : The Malaysian ECS firms are actively formulating and implementing


Statement 10 : The Malaysian ECS firms have competent staff with an international

and entrepreneurial orientation to take advantage of emerging

international marketing opportunities.

Statement 11 : The Malaysian ECS industry places emphasis on human capital

development and knowledge management to stay abreast of the

technological changes impacting on the ECS.

185

Statement 12 : The Malaysian ECS firms have appropriate mechanisms for pooling the

specific competencies for jointly bidding for international projects on a

consortium basis.


The Focus Group addressed Statements 9, 10, 11 and 12 which relate to the Proposition 3

that ‘the exporting Malaysian firms have appropriate strategies for successfully entering

new international markets’. The Focus Group meeting generated a wide range of views

and enabled the researcher to gain useful insights on the concerned issues.

(i) The Focus Group members were generally of the view that the Malaysian ECS

firms are not actively formulating and implementing internationalization strategies

for their service exports. The current practice of following client on ad-hoc, one-

off, project to project basis is not sustainable. They noted that ECS firms are

reluctant to be more proactive as this exposes them to higher risk. The absence of

physical presence in foreign markets has also acted against networking strategies

which is important for business and export expansion.

(ii) The Focus Group participants noted that while the Malaysian ECS firms have

competent technical staff, they lack entrepreneurship, management, marketing and

soft skills. The CEs are generally competent engineers but not necessarily

effective managers, possibly due to the REA which are a hindrance to the

advancement of engineers in business field.

(iii) The ECS industry is a knowledge driven industry which emphasizes on

knowledge development and knowledge management. Since new knowledge is

continually emerged, engineers must be able to harness the new knowledge and

apply it in their work. They also need to develop knowledge from their database

to facilitate the ease and speed of application of this knowledge.

186

(iv) The Focus Group highlighted that the Malaysian engineers are egocentric.

Largely for this reason, they find it difficult to work together as a team and

therefore they prefer to work independently.

The Focus Group was of the view that the Malaysian ECS firms have yet to develop

appropriate internationalization strategies and appropriate mechanisms for pooling their

resources for international marketing. On the basis of these views, the Focus Group

rejected Proposition 3.


4.4.2.1 Statement 9

Statement 9 : The Malaysian ECS firms are actively formulating and implementing


The cross tabulation of the Survey responses to Statement 9 shown in Table 4.33, and the


Statement 9

Group Type

Statistics

Strongly Disagree

Disagree

Uncertain

Agree

Strongly Agree

Total

Case Study Firms

Count 0 20 14 26 0 60



% of Total 0.0% 11.1% 7.8% 14.4% 0.0% 33.3%


Count 1 14 21 23 1 60



% of Total 0.6% 7.8% 11.7% 12.8% 0.6% 33.3%

Government Agencies

Count 2 0 13 14 1 30



% of Total 1.1% 0.0% 7.2% 7.8% 0.6% 16.7%




% of Total 0.0% 6.7% 6.1% 3.3% 0.6% 16.7%

Total Count 3 46 59 69 3 180



% of Total 1.7% 25.6% 32.8% 38.3% 1.7% 100.0%


187

combined and re-coded responses shown in Figure 4.16 reveal that 40.0% of the

respondents agreed with the Statement, 32.8% were uncertain and 27.3% disagreed. The

strongest support was from half of the respondents of the Government Agencies, followed

by 43.3% of the Case Study Firms and 40.0% of the Non-Case Study Firms. However,

40.0% of the respondents from the Contractors disagreed and only 23.3% of them

supported the Statement.




rating is 3.13 reflecting a mild support of the respondents to the Statement. They also

have widely varying opinions as reflected by the high standard deviation of 0.872. The

Case Study Firms, Non-Case Study Firms and Government Agencies also exhibited weak

support as shown by the mean ratings of 3.10, 3.15 and 3.40 respectively. While the

Contractors, with a mean rating of 2.87, did not support the Statement.







Total 180 3.13 0.872


188


indicate no significant differences in opinions among the four groups.


Tukey HSD


(J) GROUP




STATEMENT 9 A B -.050 .158 .989 -.46 .36

C -.300 .193 .410 -.80 .20

D .233 .193 .624 -.27 .74

B A .050 .158 .989 -.36 .46

C -.250 .193 .569 -.75 .25

D .283 .193 .461 -.22 .79

C A .300 .193 .410 -.20 .80

B .250 .193 .569 -.25 .75

D .533 .223 .083 -.05 1.11

D A -.233 .193 .624 -.74 .27

B -.283 .193 .461 -.79 .22

C -.533 .223 .083 -1.11 .05




4.4.2.2 Statement 10

Statement 10 : The Malaysian ECS firms have competent staff with an international

and entrepreneurial orientation to take advantage of emerging

international marketing opportunities.


combined and re-coded responses shown in Figure 4.17, reveal that majority or 58.3% of

the respondents agreed with the Statement, 23.9% were uncertain and 17.8% did not

agree. The strongest support was from the Government Agencies at 66.7%. The Case

Study Firms and Non-Case Study Firms, each with 58.3% of the respondents from the

respective groups agreed. Half of the respondents from the Contractors also agreed with

the Statement.

189


Statement 10

Group Type

Statistics

Strongly Disagree

Disagree

Uncertain

Agree

Strongly Agree

Total

Case Study Firms

Count 0 11 14 35 0 60



% of Total 0.0% 6.1% 7.8% 19.4% 0.0% 33.3%


Count 2 6 17 32 3 60



% of Total 1.1% 3.3% 9.4% 17.8% 1.7% 33.3%

Government Agencies

Count 1 3 6 20 0 30



% of Total 0.6% 1.7% 3.3% 11.1% 0.0% 16.7%




% of Total 0.6% 4.4% 3.3% 7.8% 0.6% 16.7%

Total Count 4 28 43 101 4 180



% of Total 2.2% 15.6% 23.9% 56.1% 2.2% 100.0%





rating is 3.41 indicating good support to the Statement. The mean ratings for the groups

are: 3.4 for the Case Study Firms, 3.47 for the Non-Case Study Firms, 3.5 for the

Government Agencies and 3.20 for the Contractors. This implies that all the groups

unanimously supported the Statement.

190







Total 180 3.41 0.857



indicate no significant differences in opinions among the four groups regarding Statement

10.


Tukey HSD


(J) GROUP




STATEMENT 10 A B -.067 .157 .974 -.47 .34

C -.100 .192 .954 -.60 .40

D .200 .192 .725 -.30 .70

B A .067 .157 .974 -.34 .47

C -.033 .192 .998 -.53 .46

D .267 .192 .508 -.23 .76

C A .100 .192 .954 -.40 .60

B .033 .192 .998 -.46 .53

D .300 .222 .530 -.27 .87

D A -.200 .192 .725 -.70 .30

B -.267 .192 .508 -.76 .23

C -.300 .222 .530 -.87 .27





Statement 11 : The Malaysian ECS industry places emphasis on human capital

development and knowledge management to stay abreast of the

technological changes impacting on the ECS.


combined and re-coded responses shown in Figure 4.18, reveal that less than half or

191

47.2% of the respondents agreed with the Statement, 33.3% were uncertain and 19.4%

disagreed. 60.0% of the respondents from the Government Agencies supported the

Statement. The support also was from the Case Study Firms at 51.7%, from the Non-

Case Study Firms and the Contractors at 40.0% each. Generally, about one third from

each groups were uncertain.


Statement 10

Group Type

Statistics

Strongly Disagree

Disagree

Uncertain

Agree

Strongly Agree

Total

Case Study Firms

Count 0 11 18 31 0 60



% of Total 0.0% 6.1% 10.0% 17.2% 0.0% 33.3%


Count 1 14 21 23 1 60



% of Total 0.6% 7.8% 11.7% 12.8% 0.6% 33.3%

Government Agencies

Count 2 1 9 16 2 30



% of Total 1.1% 0.6% 5.0% 8.9% 1.1% 16.7%




% of Total 0.6% 2.8% 6.7% 6.1% 0.6% 16.7%

Total Count 4 31 60 81 4 180



% of Total 2.2% 17.2% 33.3% 45.0% 2.2% 100.0%





mean rating is 3.28 which indicate a weak support for the Statement. This is also borne

192

out by the high standard deviation of 0.853. All the groups supported the Statement, as

reflected by the mean rating of 3.33 for the Case Study Firms, 3.15 for the Non-Case

Study Firms, 3.5 for the Government Agencies and 3.2 for the Contractors.







Total 180 3.28 0.853



indicate no significant differences in opinions among the four groups with respect to

Statement 11.


Tukey HSD


(J) GROUP




STATEMENT 11 A B .183 .155 .640 -.22 .59

C -.167 .190 .817 -.66 .33

D .133 .190 .897 -.36 .63

B A -.183 .155 .640 -.59 .22

C -.350 .190 .258 -.84 .14

D -.050 .190 .994 -.54 .44

C A .167 .190 .817 -.33 .66

B .350 .190 .258 -.14 .84

D .300 .220 .522 -.27 .87

D A -.133 .190 .897 -.63 .36

B .050 .190 .994 -.44 .54

C -.300 .220 .522 -.87 .27





Statement 12 : The Malaysian ECS firms have appropriate mechanisms for pooling the

specific competencies for jointly bidding for international projects on a

consortium basis.

193


combined and re-coded responses shown in Figure 4.19, reveal that 46.7% of the

respondents agreed with the Statement, 27.3% disagreed and 26.1% were uncertain. Half


Statement 12

Group Type

Statistics

Strongly Disagree

Disagree

Uncertain

Agree

Strongly Agree

Total

Case Study Firms

Count 0 16 15 29 0 60



% of Total 0.0% 8.9% 8.3% 16.1% 0.0% 33.3%


Count 2 18 14 26 0 60



% of Total 1.1% 10.0% 7.8% 14.4% 0.0% 33.3%

Government Agencies

Count 1 7 7 13 2 30



% of Total 0.6% 3.9% 3.9% 7.2% 1.1% 16.7%




% of Total 0.0% 2.8% 6.1% 7.2% 0.6% 16.7%

Total Count 3 46 47 81 3 180



% of Total 1.7% 25.6% 26.1% 45.0% 1.7% 100.0%




of the respondents from the Government Agencies supported the Statement. 48.3% of the

Case Study Firms, 43.3% of the Non-Case Study Firms and 46.6% of the Contractors also

supported the Statement. About one quarter to one third of each groups were uncertain.

194

About one third of the Non-Case Study Firms and one quarter of the Case Study Firms

and the Government Agencies did not agree with the Statement.


mean rating of 3.19 indicates weak support for the Statement. Since the mean ratings for

each groups ranged from 3.22 for the Case Study Firms, 3.07 for the Non-Case Study

Firms, 3.27 for the Government Agencies and 3.33 for the Contractors, it can be

concluded that the respondents generally expressed support for the Statement.







Total 180 3.19 0.898



indicate no significant differences in views between the four groups with respect to

Statement 12.


Tukey HSD


(J) GROUP




STATEMENT 12 A B .150 .164 .798 -.28 .58

C -.050 .201 .995 -.57 .47

D -.117 .201 .938 -.64 .41

B A -.150 .164 .798 -.58 .28

C -.200 .201 .753 -.72 .32

D -.267 .201 .548 -.79 .26

C A .050 .201 .995 -.47 .57

B .200 .201 .753 -.32 .72

D -.067 .232 .992 -.67 .54

D A .117 .201 .938 -.41 .64

B .267 .201 .548 -.26 .79

C .067 .232 .992 -.54 .67




195

Uncertain

46.1%

Disagree

22.9%

Agree

48.0%Agree

48.0%


The cross tabulation of the combined survey responses to Statements 9, 10, 11 and 12 for

Proposition 3 is shown in Table 4.45. The combined and re-coded responses in terms of

‘disagree, uncertain and agree’ are shown in Figure 4.20. These reveal that 48.0% of the

respondents agreed with the Proposition, 46.1% were uncertain and 22.9% disagreed.


Proposition 3

Group Type

Statistics

Strongly Disagree

Disagree

Uncertain

Agree

Strongly Agree

Total

Case Study Firms

Count 0 58 61 121 0 240



% of Total 0.0% 8.1% 8.5% 16.8% 0.0% 33.3%


Count 6 52 73 104 5 240



% of Total 0.8% 7.2% 10.1% 14.4% 0.7% 33.3%

Government Agencies

Count 6 11 35 63 5 120



% of Total 0.8% 1.5% 4.9% 8.8% 0.7% 16.7%




% of Total 0.3% 4.2% 5.6% 6.1% 0.6% 16.7%

Total Count 14 151 209 332 14 720



% of Total 1.9% 21.0% 29.0% 46.1% 1.9% 100.0%




196

0%

10%

20%

30%

40%

50%

60%

Percent

Disagree 24.2% 24.2% 14.2% 26.7%

Uncertain 25.4% 30.4% 29.2% 33.3%

Agree 50.4% 45.0% 56.6% 40.0%


Firms

Government

AgenciesContractors

The combined and re-coded responses to Proposition by groups are shown in Figure 4.21.

The Proposition was supported by 50.4% of the Case Study Firms, 45.0% of the Non-

Case Study Firms, 56.6% of the Government Agencies and 40.0% of the Contractors.

About a quarter to one third of the respondents in each group were uncertain. The Case

Study Firms, the Non-Case Study Firms and the Contractors accounted for a quarter of

the respondents who disagreed with the Proposition.

Figure 4.21 : Combined and Re-coded Responses to Proposition 3 by Groups


Table 4.46 shows the case summary of the responses to Proposition 3 and the group mean

ratings are graphically shown in Figure 4.22. The overall mean rating for Proposition 3 is

3.25 indicating a weak support to Proposition 3. The mean ratings for the groups are:

3.26 for the Case Study Firms, 3.21 for Non-Case Study Firms, 3.42 for Government

Agencies and 3.15 for the Contractors, implying that the respondents of all the groups

generally supported Proposition 3.

197

0

1

2

3

4

5

Case StudyFirms

Non-CaseStudy Firms

GovernmentAgencies

Contractors Total

3.26 3.213.42

3.15 3.25

Mean







Total 180 3.25 0.630





across the scores of Statements 9, 10, 11 and 12. The Pearson Product Moment

Correlation coefficients between P3 and Statements 9, 10, 11 and 12 are shown in Table

4.47. Using the criteria presented by Hair et al. (1998), the item-to-total correlations are

all greater than the criterion of 0.50, indicating that P3 is a good representation of

Proposition 3 comprising Statements 9, 10, 11 and 12. The Statements also displayed

inter-item correlations greater than the criterion of 0.3 and are significant, except the

correlation between Statement 9 and 11 which is 0.290. P3 is homogeneous and has an

acceptable reliability with Cronbach’s alpha of 0.70 (Gregory 2004). From the principal

components analysis, one component was extracted with an eigenvalue greater than 1 and

the component loadings are all greater than 0.5. Thus, Statements 9, 10, 11 and 12

represent a single underlying construct and explain 52.33% of the total variance.

198

Table 4.47 : Pearson Correlations between P3, Statements 9, 10, 11 and

12


P3 1


Statement 10 0.743** 0.469** 1

Statement 11 0.697** 0.290** 0.327** 1

Statement 12 0.732** 0.325** 0.362** 0.411** 1




dependent variable. Lavene’s test was not significant indicating that the assumption of

homogeneity of variances was not violated. The overall F(3, 176) = 1.051 is not

significant with p = 0.371 > 0.05. This indicates that there were no significant differences

in opinions between the four groups. This is further reflected by the multiple

comparisons of the Tukey’s test of one-way ANOVA as shown in Table 4.48.

Table 4.48 : Multiple Comparisons between Groups for Proposition 3 P3 Tukey HSD

(I) GROUP (J) GROUP Mean Difference (I-J) Std. Error Sig.



A B .05417 .11478 .965 -.2436 .3519

C -.15417 .14058 .692 -.5188 .2105

D .11250 .14058 .854 -.2521 .4771

B A -.05417 .11478 .965 -.3519 .2436

C -.20833 .14058 .451 -.5730 .1563

D .05833 .14058 .976 -.3063 .4230

C A .15417 .14058 .692 -.2105 .5188

B .20833 .14058 .451 -.1563 .5730

D .26667 .16233 .357 -.1544 .6877

D A -.11250 .14058 .854 -.4771 .2521

B -.05833 .14058 .976 -.4230 .3063

C -.26667 .16233 .357 -.6877 .1544




199


As discussed in Sub-Section 4.4.1, the Focus Group addressed Statements 9, 10, 11 and

12 of the Research Proposition 3 which states that ‘the exporting Malaysian firms have

appropriate strategies for successfully entering new international markets’. Although the

Focus Group agreed with the emphasis placed by Malaysian ECS firms on human capital

development and knowledge development, they disagreed that Malaysian ECS firms have

internationalization strategies, competent staff with international and entrepreneurial

orientation, and appropriate mechanisms for the pooling of resources for international

bidding. Accordingly, the Focus Group did not support Proposition 3.

The survey respondents weakly supported all the Statements 9, 10, 11 and 12. Overall

48.0% of the respondents agreed with Proposition 3 as shown in Figure 4.20 and all the

groups showed mild support to Proposition 3. On balance, there was weak support for

Proposition 3 by the survey respondents.

Taking account of the findings of the Focus Group meeting and the Questionnaire Survey,

there was no concrete agreement. Hence Proposition 3 could not be supported.

4.5 Analysis of Unplanned Data

As discussed in Section 2.8, the literature review revealed several gaps in the existing

body of knowledge. These formed the basis for developing the research propositions for

testing. The researcher endeavoured to identify all the research issues that merited

addressing by the Focus Group. However, some Focus Group members raised some

pertinent and relevant issues which were outside the scope of the Questionnaires and

Discussion Guides. They were therefore treated as ‘unplanned’ data and these are

presented below:

(i) The Focus Group members commented that the REA is limiting to engineering

business practices and professionalism and not for the business development of

the Malaysian ECS industry. Accordingly, the Focus Group suggested that the

REA be amended to separate the business and the profession so that the ECS

200

industry can move forward in the changing domestic and international engineering

business landscape.

(ii) The Focus Group noted that the standard of education is declining in Malaysia.

Malaysian ECS industry has a narrow lead of 10 years ahead of other developing

countries. However, this advantage is being quickly eroded when the other

developing countries are catching up fast and the current good, experienced and

aging Malaysian engineers retire.

4.6 Conclusion

This chapter presented and analyzed the primary data collected from the Focus Group

meeting and the Questionnaire Survey. Qualitative analysis procedures were used for the

views expressed by the members of the Focus Group. The quantitative data from the

Questionnaire Survey were analyzed using SPSS statistical software package. The

findings permitted the testing of the three Research Propositions. The unplanned data that

emerged during the Focus Group meeting were also recorded.

The next and final chapter discusses the conclusions that can be drawn with the testing of

the Research Propositions. It then discusses the implications on the Research Problem,

theory development, policy and practice.

201

CHAPTER FIVE – CONCLUSION

5.1 Introduction

This research investigated the internationalization of Malaysia ECS firms and the factors

necessary for their successful internationalization. This Chapter presents the findings of

this research and commences with an overview of the earlier chapters.

Chapter One introduced the Research Problem: ‘What are the important critical factors

for the successful internationalization of Malaysian ECS firms?’. It presented the

background and justification for this research. It outlined the research methodology and

the measures taken to safeguard research quality and addressed the ethical issues. It also

defined the key terms and set out the limitations of this research.

The second Chapter reviewed the literature on the background and focal theories (Phillips

& Pugh 2005) with the primary aims of developing the theoretical foundations for the

research and identifying the research gaps. The review included a discussion on the

national setting, the pertinent theories and models on internationalization, the global and

Malaysian engineering consulting industry and the Malaysian Government policies

towards services export. The review pin-pointed the key research issues and identified

gaps in the existing body of knowledge on the internationalization of Malaysian ECS

firms in a globalizing business environment. It also reaffirmed the relevance of the

research questions and these were the basis for the crafting of the three Research

Propositions that were tested by this research. The Research Propositions were:

• Research Proposition 1 : The Malaysian ECS firms are well positioned for

global competitive advantage in the liberalizing global

markets.

• Research Proposition 2 : The Malaysian Government has effective targeted

supported policies and programmes to assist

Malaysian ECS firms with their internationalization

effort.

202

• Research Proposition 3 : The exporting Malaysian ECS firms have appropriate

strategies for successfully entering new international

markets.

Chapter Three discussed the research paradigm and research design. It justified the

adoption of the mixed methodology for the research, using both the qualitative and

quantitative methods. It discussed the use of case studies, a Focus Group meeting and

Sample Survey as the data collection instruments. The Chapter presented the data

analysis processes, the measures taken to address the issues of reliability, validity and

ethical concerns.

Chapter Four analyzed and presented the findings of the primary data collected from the

Focus Group meeting and the Questionnaire Survey. The three Research Propositions

were tested in accordance with the established procedures of data analysis and techniques.

It also presented the unplanned data that emerged from the Focus Group meeting.

This final Chapter presents the conclusions, implications and impact of the research on

the basis of the evidence emerging from the primary data analysis process detailed in

Chapter Four and the findings of the literature review in Chapter Two. Accordingly, this

Chapter is divided into eight sections as shown in Figure 5.1.

Section 5.1 introduces the Chapter and outlines the chapter structure.

Section 5.2 presents the conclusions on each of the three Research Propositions. These

are derived from the findings of the literature review and the primary data analysis.

Section 5.3 addresses the Research Problem and provides the overall conclusions for this

research.

203

Figure 5.1 : Structure of Chapter Five




Section 5.2 : Conclusios about Each Research Proposition

• Research Proposition 1



Section 5.3 : Conclusions about the Research Problem

Section 5.4 : Implications for Theory

Section 5.5 : Implications for Policy and Practice

Section 5.6 : Research Limitations

Section 5.7 : Further Research


204

Section 5.4 discusses the implications of the research on new theory development.

Section 5.5 presents the contributions of this research for Government policies and

practices by the ECS firms.

Section 5.6 deals with the limitations for this research.

Section 5.7 addresses the areas that warrant further research.

Section 5.8 sets out the conclusions.

5.2 Conclusions about Each Research Proposition

This Section aims to draw pertinent conclusions for each of the three Research

Propositions as a prelude to addressing the Research Problem in the next section. The

conclusions about each Research Proposition were drawn from the evidence and findings

of the literature review in Chapter Two and the analysis of the primary data obtained from

the Focus Group meeting and the Questionnaire Survey as discussed in Chapter Four.

The triangulation of findings served to ensure reliability and validity for each Research

Proposition.

5.2.1 Research Proposition 1

This Section summarizes the findings emerging from the testing of Research Proposition

1 that ‘The Malaysian ECS firms are well positioned for global competitive advantage in

the liberalizing global markets’. The discussion takes into account the findings of the data

analysis presented in Chapter Four relative to the literature review findings presented in

Chapter Two.

The literature review revealed that the Malaysian Government attaches high priority to

the expansion of services exports including ECS exports. However, the industry now has

to contend with the forces of globalization which is intensifying competition with the

removal of tariff and non-tariff barriers. The Malaysian ECS firms are also challenged by

205

lower cost rivals from neighbouring countries including Indonesia, India, China and the

Philippines.

The literature also revealed that Malaysian ECS firms have the technical competences

and world class expertise for undertaking a variety of projects in the domestic as well as

international markets. However, the literature was silent on whether Malaysian ECS

firms had the necessary attributes and the competitive positioning to take advantage of the

emerging new market opportunities arising from the global liberalization of the ECS

industry. These are shown in Table 2.21 and Table 5.1 below.

Table 5.1 : Response Pattern to Research Proposition 1

Issues

Literature Review

Focus Group

Questionnaire Survey

National legislation protection

Known

Agreed

Agreed

Entry of international ECS firms

Known

Agreed

Agreed

Competences, expertise and strengths to compete in world market

Unknown

Agreed

Agreed

Taking advantage of emerging new market opportunities

Unknown

Agreed

Agreed

Source : Developed from the Research Data

Sub-Section 4.2.1 presented the findings of the Focus Group, while Sub-Sections 4.2.2

presented the results of the Questionnaire Survey in respect of Research Proposition 1.

The issues, reflected in Statements 1, 2, 3 and 4 of the Questionnaire Survey and in the

Discussion Guide for the Focus Group meeting, are summarized in Table 5.1. On the

basis of the findings, the following conclusions can be drawn:

(i) With the implementation of GATS and the liberalization of the ECS sector, the

Malaysian ECS industry will no longer be fully protected by legislations in the

domestic market from foreign competition. Existing prohibitive legislations and

protective barriers could be changed.

206

(ii) The bigger, older and well established international ECS firms already have

presence in the Malaysian market even prior to the implementation of GATS.

They are well positioned with their more superior technical know-how, expertise

and international experience. In line with GATS, more foreign ECS firms

particularly those from the developing countries such as China, India, Indonesia

and Philippines could extend their activities to Malaysia and compete with the

Malaysian indigenous firms. This does not bode well for the Malaysian ECS firms

as the larger international ECS firms have the advantage at the high end of the

market and the ECS firms from the developing countries being more competitive

at the low end.

(iii) The Malaysian ECS industry has the technical competencies, expertise and

strengths to compete effectively in the liberalizing world markets, particularly the

third world countries. However, Malaysian engineers are weak in management,

financial knowledge, marketing and soft skills to compete effectively.

(iv) The Malaysian ECS industry has to be well prepared to take advantage of the

opportunities arising from the emerging new markets with the implementation of

GATS. For this purpose, they have to overcome the difficulties of securing the

financial resources required for entering international markets. A stumbling block

is the REA which limits the general public to not more than 30% shares in the

Malaysian ECS firms. Furthermore, the Malaysian ECS firms have difficulties to

secure the needed finances from public funding and financial institutions. This is

particularly so with the smaller Malaysian ECS firms that find raising the

necessary performance bonds and professional indemnity insurance for large

projects a formidable task.

(v) The Malaysian ECS firms are well positioned technically for global competition

in the liberalizing world markets. However, they have to improve their

management and marketing skills as well as increase their access to financial

resources. Malaysian CEs also generally prefer to work in Malaysia rather than to

take up overseas postings as this could disrupt their children’s schooling and long

207

term career prospects. Furthermore, the Malaysian CEs are not mobile and do not

like overseas posting.



2. This was stated as ‘The Malaysian Government has effective targeted support policies

and programmes to assist Malaysian ECS firms with their internationalization effort’.

The discussion takes into account the findings of the data analysis presented in Chapter

Four relative to the literature review findings presented in Chapter Two.

The literature review, in Section 2.6, revealed that the Malaysian Government actively

promotes export orientated Malaysian ECS firms. The Government provides funding

support and incentives and collaborates closely with the Malaysian ECS industry to

devise new policies and support measures for international market entry. However, as

indicated in Table 2.21 and Table 5.2 there were gaps in the literature on the adequacy

and effectiveness of the Malaysian Government policy framework for promoting the

Malaysian ECS industry


Issues

Literature Review

Focus Group


Effective Government policy framework

Unknown

Disagreed

Disagreed

Government promotion of new international market penetration

Known

Agreed

Divided

Government funding and incentives for service export

Known

Disagreed

Disagreed

Government collaboration with Malaysian ECS industry to devise new policies and support measures

Known

Disagreed

Disagreed


Sub-Section 4.3.1 presented the findings of the Focus Group, while Sub-Section 4.3.2

provided the results of the Questionnaire Survey in respect of Research Proposition 2 in

relation to Statements 5, 6, 7 and 8. These are summarized in Table 5.2. The majority of

the Focus Group participants and Questionnaire Survey respondents, particularly the Case

208

Study Firms, the Non-Case Study Firms and the Contractors, rejected the Proposition

while the Government Agencies strongly supported it. Despite the Government Agencies

being a minority in the survey, their stance has an important bearing, as they are

instrumental in initiating policy changes. On the basis of the findings, the following

conclusions can be drawn:

(i) The Government has policies to support Malaysian export ready firms that are

venturing into international markets. The emphasis however, is on the export of

goods rather than the ECS. MATRADE, the Government agency responsible for

promoting Malaysian exports also mainly focuses on products rather than services

and more specifically ECS. The requirement therefore, is a focused services

export policy to encourage Malaysian ECS firms to develop the capabilities

necessary for successfully internationalizing their operations. The Government

also has export assistance programmes which reflect support for export ready and

exporting firms. Since these programmes are implemented by several government

agencies, there is considerable overlap and duplication of efforts. Furthermore, the

Malaysian ECS industry has not been able to benefit much from the export

assistance programmes.

(ii) The Malaysian government is promoting ECS overseas by organizing trade

missions, market information, market intelligence and government-to-government

bilateral trade arrangements. Notwithstanding, the activities have to be supported

by focused planning and effective strategies in order to achieve the desired

outcomes. Since the current activities are more appropriate and geared to the

trading of goods, these have to be re-orientated towards the needs of engineering

services.

(iii) The Malaysian ECS firms require Government funding and incentives to enter and

compete in the world markets. The lack of funding also constraints the

Government Agencies from effectively carrying out the necessary programmes for

services exports.

209

(iv) Although the Government collaborates with the ECS industry players to device

new policies and support measures, the nature of engagement and the bodies with

which the Government collaborates also requires review. This is necessary as the

existing activities with NAPSEC appear to be unfocused, too diffused and

ineffective. To rectify the situation, the Government agencies should also engage

with the ECS industry and the ACEM.



3. This was stated as ‘The exporting Malaysian ECS firms have appropriate strategies for

successfully entering new international markets’. The discussion takes into account the

findings of the data analysis presented in Chapter Four relative to the literature review

findings presented in Chapter Two.

The literature revealed much information on internationalization strategy and human

resource to take advantage of international marketing opportunities. The literature review,

in Sub-Section 2.5.5.4 indicated that Malaysia’s commitment to human capital

development is on par with the NIEs and developed countries. Further, in Sub-Sections

2.5.1, the literature revealed that the ECS industry emphasizes on human capital

development and knowledge development. This is necessary for the CEs to be well

equipped with the latest know-how for continuously upgrading their engineering skills.

The network perspective, as discussed in Sub-Section 2.4.3.2, revealed that firms can take

advantage of emerging internationalization opportunities by collaborating and pooling

expertise and resources with other firms in the networks. However, there are gaps in the

existing body of knowledge on whether the exporting Malaysian ECS firms have the

appropriate strategies for successfully entering new international markets. These are

shown in Table 2.21 and Table 5.3.

Sub-Section 4.4.1 presented the findings of the Focus Group, while Sub-Sections 4.4.2

provided the findings of the Questionnaire Survey in respect of Research Proposition 3 in

relation to Statements 9, 10, 11 and 12 as summarized in Table 5.3. Proposition 3 was

not supported by the Focus Group participants while the Questionnaire Survey

210

respondents expressed weak support. On the basis of the findings, as depicted in Table

5.3, the following conclusions can be drawn:


Issues

Literature Review

Focus Group


Internationalization strategies of Malaysian ECS firms

Unknown

Disagreed

Agreed

Malaysian ECS firms have Competent staff with international and entrepreneurial orientation

Unknown

Disagreed

Agreed

The Malaysian ECS industry emphasizes on human capital development and knowledge development

Known

Agreed

Agreed

The Malaysian ECS firms have appropriate mechanisms for pooling competencies and resources for international bidding

Unknown

Disagreed

Agreed


(i) The exporting Malaysian ECS firms have to give greater emphasis to the

formulation and implementation of appropriate strategies for successfully entering

new international markets. Furthermore, the current internationalization practices

of the Malaysian ECS firms following clients on an ad-hoc, one off, and project to

project basis are not sustainable. The Malaysian ECS firms should also be more

proactive and be prepared to deal with the risks associated with overseas ventures.

They should also establish a local presence in foreign markets to enable them to

participate in rewarding network arrangements.

(ii) The Malaysian ECS firms have competent technical personnel who are well suited

to take advantage of emerging international market opportunities. They however

require staff with a strategic global outlook, international marketing capabilities,

knowledgeable about legal structures, financial knowledge and language skills for

competing successfully in foreign markets.

(iii) The Malaysian ECS firms and engineering organizations recognize the importance

of human capital development and knowledge management to stay abreast of the

technological changes impacting on the ECS industry. Since this is basically a

knowledge driven industry, new knowledge is continuously generated and CEs

211

must be able to harness and apply them to their work to remain competitive. The

stock of knowledge in the CEs’ database also has to be utilized and shared by all

staff in the ECS firms to enhance their professional competencies.

(iv) The Malaysian ECS firms appear to be disinclined to establish and implement

appropriate mechanisms for pooling their specialized skills to make them better

positioned to bid for international projects on a consortium basis. The Malaysian

ECS firms therefore have to adopt a broader perspective and cooperate with each

other for mutual benefit.

5.3 Conclusions about the Research Problem

This Section discusses the findings emerging from the research that relate to the Research

Problem. The literature review in Chapter Two identified the key research issues and the

pertinent theories that underpinned the parent and immediate disciplines of the research.

The findings of earlier related research revealed that:

• Malaysian ECS firms are giving greater emphasis to the internationalization of

their operations and moving away from the past practice of preferring the

‘comfort zone’ of the domestic market. This was largely due to the difficulties

faced by the firms in expanding their operations in the small domestic market.

• The implementation of GATS, under the WTO, has resulted in the global market

for trade and services being rapidly liberalized. This is generating intense

competition in the ECS industry worldwide and compelling Malaysian ECS firms

to venture abroad. However, they face several challenges including changes in

their mindsets, the mastering of global languages, securing financial resources and

formulating appropriate strategies for successfully penetrating international

market.

212

• The Malaysian Government has policies to promote the export of services.

However, there were doubts as to whether they were geared to the needs of the

ECS firms.

Notwithstanding, the existing body of knowledge did not fully address several key issues

that affect and contribute to the successful internationalization of Malaysian ECS firms.

These gaps presented in Table 2.21 are summarized as follows and relate to:

i) The competitive positioning of the Malaysian ECS industry under the GATS and

the adequacy of national legislations.

ii) The effectiveness of the Malaysian government’s support policies and programs

for ECS exports in particular the policy frameworks.

iii) The desired strategies for enhancing the global outreach of the Malaysian ECS

industry. The literature was also silent on the strategies adopted by Malaysian

ECS firms and on whether they had appropriate mechanisms for pooling their

specific competencies to better position themselves for joint international bidding.

The research gaps formed the basis for the development of the Research Propositions that

were tested by this research. Qualitative and quantitative data were collected through a

Focus Group meeting and a Questionnaire Survey. The analysis of the literature review,

the qualitative and quantifiable primary research data yielded comprehensive and useful

insights on the research gaps as set out in Table 5.4 and underlined the relevance of the

Research Problem stated as ‘What are the important critical factors for the successful

internationalization of Malaysian ECS firms ?’

These findings indicate that:

• There is a need to enhance human capital development and knowledge

management since human resource is a strategic and competitive asset for the

knowledge driven ECS industry. Furthermore, ECS firms should also have

technically competent staff with global mindsets and equipped with management,

financial, marketing and soft skills in order to compete in the world markets.

213

Table 5.4 : Investigation of Research Issues

Research Issues

Prior Literature

Research Gaps

Research Findings

The Malaysian Economic Development Policies

Adequate

Globalization of Services

Adequate

Internationalization Theories

Adequate

The Global ECS Industry

Adequate

The Malaysian ECS Industry

Adequate

Competitive positioning of Malaysian ECS industry under GATS

• National legislations

Inadequate

Known

• No

Yes

Yes

• Entry of international ECS firms

Known

• Impact on Malaysian ECS market.

Yes

• Competences, expertise and strengths to compete in world market

Unknown

• Yes

Yes

• Industry preparedness

Unknown

• To take advantage of emerging new market opportunities.

Yes

The Malaysian Government’s support policies and programmes for exports services

Adequate

Adequacy of Malaysian Government support policies and programmes for ECS exports.

• Effective Policy frameworks

Inadequate

Unknown

• Yes

Yes

Yes

• International promotion

Known

• Effectiveness

Yes

• Support schemes

Known

• Effectiveness

Yes

• Collaboration with Malaysian ECS industry

Known

• Effectiveness

Yes

The appropriate strategies for enhancing the global outreach of the Malaysian ECS industry

• Strategy adoption

Inadequate

Unknown

• Active formulation and implementation of internationalization strategies.

Yes

Yes

• Competent staff

Unknown

• Staff with international and entrepreneurial orientation.

Yes

• Human capital development and knowledge management

Known

• No

Yes

• Appropriate mechanisms for pooling specific competencies for joint international bidding

Unknown

• Yes

Yes


• That appropriate strategies are important for successfully entering international

markets. This requires ECS firms that are internationalizing their operations to

214

foreign countries to create and maintain relationships and networks with business

network actors in foreign market. The current practices of Malaysian ECS firms

following clients on ad-hoc, one-off, project to project basis are not sustainable.

• It is necessary for the Malaysian Government to have policies and provide

funding support and incentives for the Malaysian ECS industry to export its

services. The existing Government policies and support effort have been

overtaken by the changing world economic environment and need to be reviewed

in order to stay relevant and be effective.

5.3.1 Summary

This Section summarized the findings of this research and matched them with the gaps in

the existing body of knowledge which were identified by the literature review. The

research findings enabled the research gaps to be bridged. This permitted the

reaffirmation of the relevance of the Research Problem stated as ‘What are the important

critical factors for the successful internationalization of Malaysian ECS firms?’. The

next Section discusses the implications of this research on theory development.

5.4 Implications for Theory

This research is mainly exploratory and fits into the interpretive paradigm. Accordingly,

the inductive reasoning of the research findings yields useful insights for theory building.

The literature review identified three theories pertinent to the internationalization of ECS.

As discussed in Sub-Section 2.4.3, these are the stage theories, network theory as well as

the internationalization framework for service firms.

The stage theories, comprising the Uppsala Internationalization Model (U-Model) and the

Innovation-Related Internationalization Model (I-Model), suggest that

internationalization activities are time dependent and occur in distinct incremental and

sequential steps or stages (Melin 1992, Axinn & Matthyssens 2001). The findings of this

research indicated otherwise and that the international expansion of the Malaysian ECS

215

firms occurred on ad-hoc, one-off and project to project basis. Thus, the research

supported the views of Sharma and Johanson (1987), Engwall and Wallenstal (1988) and

Buckley, Pass and Prescott (1992) that the stage models were not appropriate for

knowledge-intensive and business service industries.

The network theory postulates that a firm is embedded in a complex and evolving web of

interdependent social, business and industrial relationships (Bridgewater 1999; Johanson

& Mattsson 1988). A firm can internationalize by developing, establishing and

maintaining relationships and networks with business actors in foreign markets by

extension, penetration and integration (Johanson & Mattsson 1988). Sharma and

Johanson (1987) suggested that the network theory is most appropriate for the

internationalization of technical consultancy firms. The findings of this research support

this view. Furthermore, to achieve internationalization with network relationships, this

research revealed that a ‘local presence’ is necessary.

‘The internationalization framework’ offered by Asgari, Ahmad and Gurrib (2010), and

discussed in Sub-Section 2.4.3.3 and depicted in Figure 2.9 highlighted the key variables

for the internationalization of Malaysian services sectors. The key variables included the

firm internal factors of strategic considerations and competitive advantages, and external

factors of industry characteristics and target market factors.

However, based on the findings of this research, there are other important critical factors

that need to be considered for the successful internationalization of Malaysian ECS.

These are:

(i) A strong regulatory framework as this is now important to promote ECS exports.

The existing policies have to be reviewed for this purpose.

(ii) Export funding support since the Malaysian ECS firms are mostly small and

international expansion requires major financial commitment. This requires the

Government to provide export funding support.

216

(iii) Appropriate internationalization strategies which clearly determine the target

markets. Equally important are the timing of market entry and the choice of the

entry mode.

(iv) Adoption of the network strategy which involves the development, establishment

and maintaining of foreign business networks characterized by relationships of

collaboration or interdependence among firms. By utilizing such networks, ECS

firms can gain access to valuable resources and potential markets.

Accordingly, Asgari, Ahmad and Gurrib’s framework was modified by the researcher to

reflect the additional critical factors that emerged from this research for the successful

internationalization of Malaysian ECS firms. This is depicted in Figure 5.2.

5.5 Implications for Policy and Practice

As stated in Sub-Section 1.4.3, an important objective of this research was to recommend

appropriate corporate strategies for adoption by the Malaysian ECS firms to successfully

enter new international markets. Another significant objective was to examine the

adequacy and effectiveness of the existing Malaysian Government’s support programs for

the internationalization of the Malaysian ECS firms.

In line with these objectives, this Section offers recommendations, based on the findings

of the research, to support the efforts of the Malaysian ECS firms to become major

service providers in the highly competitive international market. As these

recommendations are for consideration by the government policy makers and Malaysian

ECS firms, this Section has two parts. The first, to examine the impact of the research

findings on public policies and the second, offers recommendations for consideration by

the Malaysian ECS firms.

217

Figure 5.2 : Modified Internationalization Framework for Malaysian ECS Firms

Source : Modified from Asgari, Ahmad & Gurrib (2010, p. 71)

5.5.1 Implications for Policy

As discussed in Chapter Four, several conclusions emerged from the analysis of the

research propositions. These call for a critical review of the existing policies on ECS

industry as they appear to hinder, rather than promote, the further development of the

industry in a rapidly changing international business landscape. The findings also indicate

the need for additional policy support to promote the internationalization of the Malaysian

ECS. The policy changes that merit considerations are listed below and elaborated.

(i) The Registration of Engineers Act 1967

(ii) A dedicated ECS Support Agency

Strategic Considerations

• Motives for expansion

• Business strategy

Competitive Advantages

• Firm specific resources

• Network relationships

Industry Characteristics

• Industry potential

• Industry uncertainty

Target Market Factors

• Market potential

• Country risk

Government

• Regulatory Framework

• Funding support

Network Strategy

• Extension

• Penetration

• Integration

Expansion Outcomes

• Business performance

• Country images

Represents the new relevant factors

Internationalization Strategy

• Choice of target market

• Timing of market entry

• Choice of entry mode

218

(iii) Additional Financial Support Measures

5.5.1.1 The Registration of Engineers Act 1967

Enacted in 1967 to regulate the professional conduct and practice of registered engineers,

the main objective of the REA is to safeguard the safety and the interests of the public. It

has also served to nurture the infant ECS industry by protecting it from foreign

competition. Over the past five decades, the Malaysian ECS industry has made rapid

progress and now has the skills and expertise to undertake a variety of mega projects

(Accenture 2010; IEM 2001). Furthermore, the small size of the domestic market

compels Malaysian ECS firms to participate in global projects (Wong 2000). Despite

these significant developments, the REA has not benefitted from a critical review with the

aim of enabling the ECS industry to move forward in an era of trade and service

liberalization. Viewed in this context, the following recommendations are offered.

Recommendations

• With the implementation of GATS under WTO and AFAS under AFTA, the REA

needs to change and allows entry of foreign ECS firms and PEs to practice and

compete in Malaysia. As a safeguard measure, all PEs should also be required to

pass a Competency Examination to demonstrate that they have a full

understanding of national and local standards, rules, regulations and laws.

• That the REA be amended to provide for the separation or the de-coupling of the

regulations on professionalism and consultancy practice. The amendments in

respect of the professionalism aspect could be limited to academic qualifications,

training needs, the registration of engineers and a code of ethics. However, the

ECS practice as a business entity should be treated as any other business entity

and fall under the purview of the existing Company’s Act.

• That the BEM council members comprise largely of PEs representing ECS firms

that are members of the ACEM. This is on the grounds that they are better placed

to fully understand and address the issues affecting the ECS industry.

219

• That the current requirement, a minimum 70% of the shareholding of ECS firms is

owned by only PEs, members of other allied professions such as architects and

quantity surveyors be changed to also permit ownership by the public. This will

increase the access of ECS firms to the financial resources required for funding

their overseas operations.

• That the composition of the board of directors of the ECS firm be changed to

include experts from other professions and not be confined to regulated

professionals. This change would enable the industry and the firms to benefit from

their talents and contributions for moving ahead as successful and expanding

business entities.

5.5.1.2 A Dedicated ECS Support Agency

The research findings revealed that several Government Ministries and agencies now

have responsibility for the delivery of services export promotion and assistance

programmes. Consequently, this has led to the duplication of efforts as well as

overlapping responsibilities and this has resulted in the non-achievement of the desired

results and outcomes. Furthermore, the existing policy environment does not provide for

funding support, grants or incentives for the Malaysian ECS firms to venture overseas.

Recommendations

• It is necessary for the Government to introduce a coherent policy to support the

ECS industry with a dedicated ‘one stop agency’. This accountable agency should

have the full responsibilities for the formulation of effective strategies and the

implementation of all export support programs. These could include capacity

building programs to enhance the qualifications and standards of Malaysian

engineers to better positioned themselves for competing successfully in

international markets. Another supportive measure is the provision of incentives

to Malaysian ECS firms to encourage them to grow in size by way of mergers and

acquisitions.

220

• Although national legislation may be changed to allow the access of foreign firms

to the domestic market, under the MFN Equal Treatment Principle, it is suggested

that the Government introduces stringent requirements such as local experience

and local partners that foreign services providers must satisfy in order to conduct

operations in Malaysia. That the Malaysian Government introduces the necessary

measures to ensure that all foreign ECS firms fully comply with these

requirements.

• That the Government establishes a local presence in prospective countries where

MATRADE does not have offices to build network arrangement for the benefit of

the Malaysian ECS firms. These offices should be staffed by dedicated foreign

trade officers who are fully supportive of the efforts of the Malaysian ECS firms

which are venturing into unfamiliar but lucrative foreign markets.

• That the Malaysian Government establishes a foreign development aid agency to

conduct feasibility and related studies by Malaysian ECS firms in other

developing countries. This will serve to facilitate the entry of Malaysian ECS

firms to foreign markets.

5.5.1.3 Additional Financial Support Measures

The literature review revealed that the typical Malaysian ECS firm is relatively small

(Ling, Abidin & Heng 2000). As they have difficulty in securing the required funding,

they have to largely rely on internally generated funds or personal borrowings to finance

their business operations (Tambunan 2009). The findings of the Focus Group meeting and

the Questionnaire Survey also revealed that Malaysian ECS firms have difficulties in

securing the financial resources required for entering international markets. This situation

justifies the needs for additional financial support measures.

221

Recommendations

• That the Malaysian Government introduces tax incentives to ECS firms for a

period of five years for profits earned from overseas operations. This will

encourage the Malaysian ECS firms to venture into overseas markets.

• That the Malaysian Government also provides funding support, grants and other

financial incentives to all Malaysian ECS firms to expand to foreign markets. This

is necessary as the majorities of the ECS firms are small and have difficulties in

securing financing for venturing abroad.

5.5.2 Implications for the Malaysian Engineering Consulting

Services Industry

Firms face various barriers, obstacles and challenges in their effort to market and export

their products or services in the international markets (Welch & Luostarinen 1993). The

findings of the literature review, reaffirmed by the findings of the Focus Group meeting

and the Questionnaire Survey, also revealed that Malaysian ECS firms venturing abroad

face key challenges. These include strong global competition, developing technological

capabilities through human resources development, formulating appropriate

internationalization strategies and creating business networks in order to gain better

access to resources and markets (Chetty & Blankenburg-Holm 2000). They also have to

address the growing competitive pressures from the larger ECS global industry players as

well as their low cost rivals from neighbouring developing countries.

The Malaysian ECS firms therefore have to take the necessary measures to overcome

these challenges. This is necessary for improving their positioning in the liberalizing

domestic and global markets. The recommendations based on the findings of this research

are outlined below.

5.5.2.1 Venturing Abroad for Corporate Sustainability

222

As discussed in Chapter Four, the implementation of GATS and AFAS are rapidly

liberalizing the provision of ECS and the Malaysian industry can no longer benefit from

the protection that it enjoyed in the past. It now has to contend with the threats posed by

the larger and well established Western ECS firms, with their superior technological

capabilities, who are gaining entry into the high end of the Malaysian ECS market. The

Malaysian ECS firms are also losing out to their low cost rivals from China, India,

Indonesia and Philippines. The situation implies that the Malaysian ECS firms can no

longer take the domestic market for granted.

Recommendation

• Despite the higher risk, the Malaysian ECS firms must move out and seek

opportunities in foreign countries for their corporate sustainability.

5.5.2.2 Human Capital Development

The resource-based view (RBV) theory postulates that human resource is a strategic asset

in the firm (Wright & McMahan 1992) especially for a knowledge-based ECS firm. The

research findings indicated that Malaysian ECS firms should emphasize on human capital

development to stay abreast of the technological changes impacting on the industry.

While the Malaysian ECS firms have competent technical personnel to undertake major

complex projects, it was necessary for them to develop management and marketing

competencies as these are vital for successful corporate performance.

Recommendations

• Malaysian ECS firms increase the investments in the training of their staff through

formal and structured programs of in-service training on international

management, marketing and entrepreneur skills.

223

• The training programs should also emphasize on financial management and the

development of soft skills to provide the PEs with an international and

entrepreneurial orientation.

5.5.2.3 Internationalization Strategy

An internationalization strategy is ‘…… the determination of the basic long-term goals

and objectives of an enterprise, and the adoption of courses of action and the allocation of

resources necessary for carrying out these goals’ (Chandler 1962, p. 13). An

internationalization strategy involves the choice of target market, choice of entry mode

and timing of market entry. Viewed in this context, the current practice of Malaysian ECS

firms venturing abroad on ad-hoc, one-off, project to project basis requires review.

Recommendations

• The Malaysian ECS firms have to formulate and implement coherent and focused

internationalization strategies in order to successfully venture overseas.

• It is important for the Malaysian ECS firms should commit resources to meet their

internationalization objectives. These include the deployment of personnel and

adequate funding for participation in trade fairs, trade visits and the setting up of

representative offices in prospective markets to gather trade information and

explore market opportunities.

• It is also important that ECS firms take full account of the external challenges that

they would have to address when venturing into external markets. These include

the regulatory requirements of the countries which they have targeted for starting

operations.

5.5.2.4 Network Relationships

224

For competing successfully in a global economy, firms can take advantage of business

network which is characterized ‘by relationships of collaboration or interdependence

among firms’ (Cobb, 1997, p.2). Sharma and Johanson (1987) also contended that the

network relationship is most appropriate for the internationalization of technical

consultancy firms. This has been reaffirmed by the findings of the literature review, the

Focus Group meeting and the Questionnaire Survey. The findings also showed that

Malaysian ECS firms follow their Malaysian clients overseas on the basis of a developed

relationship. However, successful internationalization requires ECS firms to establish a

‘local presence’ for developing and maintaining sustainable network relationships with

actors in foreign markets.

Recommendation

• It would be advantageous for the Malaysian ECS firms to benefit from a local

presence in targeted foreign markets for improving the access to pertinent market

information, knowledge and expertise. The local presence would better position

the Malaysian ECS firms to draw upon the complementary strength of other actors

in the network as well as to learn from their experiences.

5.5.2.5 Mergers and Acquisitions

The findings of this research revealed that the majority of the Malaysian ECS firms are

small. They therefore lack financial and human resources to expand overseas and

compete in the world markets. Furthermore, Malaysian ECS firms were reluctant to pool

their respective specific competences and strengths and to assist each other through

mutually beneficial arrangements.

Recommendation

• The Malaysian ECS firms need to grow in size in order to benefit from economies

of scale and to improve the access to the financing necessary for venturing abroad.

Since organic growth is too slow, they should give serious considerations to

225

mergers and acquisitions (M&As) to increase their pool of competences and

expertise.

5.5.3 Summary

This Section discussed the implications of the research in respect of policy and practice. It

offered recommendations for considerations by the Malaysian Government towards

enhancing the effectiveness of ECS export support programs. It also offered

recommendations for consideration by the ECS firms in order to make them better placed

to successfully venture abroad.

5.6 Research Limitations

The boundaries of the research were broadly outlined in Section 1.9. During the course

of this research, four other significant limitations became apparent.

The first limitation arises from this research being mainly exploratory and qualitative. It

therefore had to rely on a judgemental interpretation of the findings.

The second limitation relates to the use of quota sampling. While this permitted

participation by various important sub-groups related to the industry, the different group

sizes used in the Questionnaire Survey could have created an element of survey bias.

The third limitation stems from the insufficient number of government representatives in

the Focus Group. This may have distorted the findings of the Focus Group.

The fourth relates to the unplanned data which emerged during the Focus Group meeting.

Since these were not taken into account in the Survey Questionnaire, the researcher

considers this as a limitation.

5.7 Further Research

226

This research presented a pre-paradigmatic body of knowledge that required inductive

theory building as opposed to deductive theory testing. The findings provided added

insights to the gaps in the existing body of knowledge and served to clarify the research

problems. During the course of the research, several issues emerged and this pointed to

the need for further research. This final section of the thesis outlines those areas that merit

further exploration.

Although this research adopted a two stage methodology, it was largely exploratory and

qualitative with a relatively small number of survey participants and a single focus group

meeting. It would therefore not be appropriate to generalize the findings. To achieve this,

it is recommended that a more comprehensive and detailed descriptive study with a larger

survey sample size be conducted in order to offer ideas for further probe and research on

the Modified Internationalization Framework for Malaysian ECS firms which was

developed by this research and depicted in Figure 5.2.

5.8 Conclusion

This final Chapter presents the conclusions based on the research findings for each of the

three Research Propositions and the Research Problem. It then discussed the implications

of the findings and their contributions to theory development and offered a Modified

Internationalization Framework for Malaysian ECS firms. Recommendations were also

offered for consideration by Government policy makers and the senior management of

Malaysian ECS firms. The Chapter then discussed the limitations that emerged during

the course of the research and outlined the opportunities for further research.

227

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261

APPENDIX A

DISCUSSION GUIDE

FOCUS GROUP

THE INTERNATIONALIZATION OF MALAYSIAN ENGINEERING CONSULTING SERVICES FIRMS

(A) INTRODUCTION:

• Introduction of the researcher and roles. • Personal introduction of participants, their background and business. • Aim and format of the focus group. • Conventions (confidentiality, speak one at a time, everybody’s views, open

debate, recordings and report of proceeding). (B) DISCUSSION TOPICS / ISSUES: (I) The Malaysian engineering consulting services (ECS) firms are well positioned for

global competitive advantage in the liberalizing global markets. (1) Malaysian ECS industry can no longer be protected by national legislations

with the implementation of the General Agreement on Trade in Services (GATS) which is liberalizing global markets.

(2) The bigger, older established international ECS firms are better placed to

enter the Malaysian engineering consulting market following the implementation of GATS.

(3) The Malaysian ECS industry has the competences, expertise and strengths

to compete effectively in a liberalizing world. (4) Malaysian ECS industry is well prepared to take advantage of emerging

new market opportunities with the implementation of GATS. (II) The Malaysian Government has effective support policies and programmes to

assist Malaysian ECS firms with their internationalization efforts. (5) The Malaysian Government has an effective policy framework to promote

the interests of the domestic ECS industry.

262

(6) The Malaysian Government is actively promoting new international market

penetration effort by Malaysian ECS firms. (7) The existing funding support and incentives provided by the Government

enable the Malaysian ECS industry to more effectively compete in the international markets.

(8) The Malaysian Government collaborates closely with Malaysian ECS

industry in devising new policies and support measures for increasing the international competitive positioning of Malaysian ECS industry.

(III) The exporting Malaysian firms have appropriate strategies for successfully

entering new international markets. (9) The Malaysian ECS firms are actively formulating and implementing

internationalization strategies. (10) The Malaysian ECS firms have competent staff with an international and

entrepreneurial orientation to take advantage of emerging international marketing opportunities.

(11) The Malaysian ECS industry places emphasis on human capital

development and knowledge management to stay abreast of the technological changes impacting on the ECS.

(12) The Malaysian ECS firms have appropriate mechanisms for pooling the

specific competencies for jointly bidding for international projects on a consortium basis.

(C) SUMMING UP

263

APPENDIX B

INFORMATION SHEET

FOCUS GROUP


My name is Wong Wai Wah and I am conducting research as part of my Doctor of Business Administration (DBA) degree at Southern Cross University, Australia. My thesis is investigating the critical success factors and the impact of strategic issues on the successful internationalization of Malaysian engineering consulting services firms. I am inviting selected informed individuals to participate in the Focus Group meeting as part of this study and would welcome and appreciate your participation. I believe your participation will contribute useful and valuable information for the research. Overview of the Research:

The Malaysian engineering consulting services (ECS) sector will be gradually liberalized under the impact of the General Agreements on Trade in Services and Asean Free Trade in Services. The Malaysian ECS firms will face intense competition in the domestic market from both the local and foreign players. On top of that, the Malaysian ECS market has not been growing since the Asian Financial Crises in 1997/1998. This necessitates the Malaysian ECS firms to strategize by seeking new avenues for growth, sustainability and survival.

My research aims to determine the competitive positioning of the Malaysian ECS firms in the face of globalization and to identify the appropriate strategies for successful entry into new international markets. The findings of this research will lead to recommendations for Malaysian ECS firms to be better prepared for successful competition in the global economy. Procedures of the Focus Group Meeting: The Focus Group meeting will take approximately 90 minutes and will be held at a date, time and place to be determined later.

264

The forum will provide an opportunity for all 8 participants to share their views, opinions and issues facing Malaysian ECS firms as they internationalize. Participation is on a voluntary basis and no financial remuneration or incentive will be offered for taking part. Refreshments and light snacks will be served, however, travel expenses or any other costs associated for participation will not be reimbursed. Responsibilities of the Researcher: As the facilitator and moderator for the focus group meeting, I will ensure that the discussion remains focused and I will clarify and summaries key points where required and appropriate. To ensure confidentiality, apart from utilizing your name and contact details for the invitation for participation, your name and other identifying information will not be attached in the data collected. As a participant, you will be required to sign a consent form. The consent form outlines your permission to utilize the information collected in the focus group meeting as part of this study, without identifying you or your organization. All signed consent forms will be held in safe storage for a period of seven years before being destroyed. The research findings may be submitted for publication. All data collected will be presented as overall data and participating organizations will only be referred to as cases with numbers. The results of the research will be made available as part of the Final Thesis through the Southern Cross University library.

Responsibilities of the Participants: Your responsibility in participating in this research involves your time, opinions, ideas and views about the research topic. There is no risk associated to participants in this research. You will be free to leave and withdraw consent without any explanation at any time. Research Results: The research findings may be submitted for publication. All data collected will be presented as overall data. The results of the research will be made available as part of the Final Thesis at the Southern Cross University library. As a participant, you are entitled to the feedback and the summary results of the research. If you wish to receive the summary results, please provide your e-mail address or mailing address (confidential) as indicated in the consent form. Enquiries: The form is yours to keep for future reference. Please feel free to contact us should you require any additional information or have any queries:

265

Researcher Candidate Wong Wai Wah c/o City University College of Science and Technology Phone: +6012-9594181 E-Mail: [email protected]

Supervisor

Professor Dr A. Selvanathan Deputy Vice Chancellor (Research and Internationalization) City University College of Science and Technology Telephone: +6012-2231664 E-Mail: [email protected]

This research has been approved by the Human Research Ethics Committee at Southern Cross University. The approval number is ECN-10-223. If you have concerns about the ethical aspects of this research or the researcher, please write to the following: The Ethics Complaints Officer Southern Cross University PO Box 157 Lismore NSW 2480 Email: [email protected] All information is confidential and will be handled as soon as possible.

266

APPENDIX C

CONSENT FORM - FOCUS GROUP AS PART OF A DOCTOR OF BUSINESS ADMINISTRATION (DBA)

RESEARCH THESIS

Title of research project: The Internationalization of Malaysian Engineering Consulting Services Firms

Name of researcher: Wong Wai Wah

Name of Supervisor: Prof. Dr A Selvanathan, Deputy Vice Chancellor (Research and Internationalization) City University College of Science and Technology Telephone: +6012-2231664 E-Mail: [email protected] Tick ( √ ) the box that applies, sign and date and give to the researcher

* I agree to take part in this Southern Cross University research project Yes No

* I understand the information that has been provided to me by the Researcher in relation to my participation Yes No

* I agree to be interviewed by the researcher Yes No * I agree to make myself available for further interview if required Yes No * I understand that my participation is voluntary Yes No

* I understand that I can choose not to participate in part or all of this research at any time, without negative consequence to me Yes No

* I understand that any information that may identify me, will be de-identified at the time of analysis of any data. Yes No

* I understand that all information gathered in this research is confidential.

It will be kept securely and confidentially for 7 years at the University. Yes No

* I am aware that I can contact the supervisor or researcher at any time with any queries Yes No

* I understand that the ethical aspects of this research have been approved by the SCU Human Research Ethics Committee Yes No

267

Participant’s Name

Signature

Date

If you wish to receive the summary results of the research, please provide your email address or mail address (confidential) below : Email :

Mailing Address :

268

APPENDIX D

INFORMATION SHEET

QUESTIONNAIRE


My name is Wong Wai Wah and I am conducting research as part of my Doctor of Business Administration (DBA) degree at Southern Cross University, Australia. My thesis is investigating the critical success factors and the impact of strategic issues on the successful internationalization of Malaysian engineering consulting services firms. I am inviting selected informed individuals to participate in the questionnaire survey as part of this study and would welcome and appreciate your participation. I believe your participation will contribute useful and valuable information for the research. Overview of the Research:

The Malaysian engineering consulting services (ECS) sector will be gradually liberalized under the impact of the General Agreements on Trade in Services and Asean Free Trade in Services. The Malaysian ECS firms will face intense competition in the domestic market from both the local and foreign players. On top of that, the Malaysian ECS market has not been growing since the Asian Financial Crises in 1997/1998. This necessitates the Malaysian ECS firms to strategize by seeking new avenues for growth, sustainability and survival.

My research aims to determine the competitive positioning of the Malaysian ECS firms in the face of globalization and to identify the appropriate strategies for successful entry into new international markets. The findings of this research will lead to recommendations for Malaysian ECS firms to be better prepared for successful competition in the global economy.

269

Procedures of the Questionnaire Survey: The questionnaire comprises 12 questions which have been cast as statements. Each statement relates to an issue which is pertinent to the research. In order to measure your responses, a five-point Likert scale is used. There are five boxes ranging from ‘Strongly Disagree’ to ‘Strongly Agree’ for each statement. Please tick the appropriate box for your answer. Based on an earlier pre-testing of the questionnaire, it is estimated that you would require no more than 15 minutes in total to complete all the questions. After you have completed the questionnaire, please return the questionnaire to us in the enclosed self-addressed and stamped envelope or by returned e-mail. Participation is purely voluntary and no financial remuneration or incentive will be offered for taking part in this research. There are no travel expenses, nor are there any costs associated with participation in this research apart from your time. Responsibilities of the Researcher:

It is our duty to make sure that any information given by you is protected. To ensure confidentiality, apart from utilizing your name and contact details for the invitation for participation, your name and other identifying information will not be attached in the data collected. The returned questionnaire is an implied consent that you have given your permission to utilize the information collected in the survey as part of this study, without identifying you or your organization. All returned questionnaire will be held in safe storage for a period of seven years before being destroyed. Responsibilities of the Participants:

Your responsibility in participating in this research involves your time, opinions, ideas and views about the research topic. If there is anything that might unduly affect your response to the statements in the questionnaire, you can decline to answer. There is no risk associated to you in this research. You are free to withdraw and to discontinue participation at any time without explanation. However, we would appreciate you letting us know your decision. Research Results The research findings may be submitted for publication. All data collected will be presented as overall data. The results of the research will be made available as part of the Final Thesis at the Southern Cross University library. As a participant, you are entitled to the feedback and the summary results of the research. If you wish to receive the summary results, please provide your e-mail address or mailing address (confidential) as indicated in the front page of the survey questionnaire.

270

Enquiries: The form is yours to keep for future reference. Please feel free to contact us should you require any additional information or have any queries: Researcher Candidate Wong Wai Wah c/o City University College of Science and Technology Phone: +6012-9594181 E-Mail: [email protected]

Supervisor

Professor Dr A. Selvanathan Deputy Vice Chancellor (Research and Internationalization) City University College of Science and Technology Telephone: +6012-2231664 E-Mail: [email protected]

This research has been approved by the Human Research Ethics Committee at Southern Cross University. The approval number is ECN-10-223. If you have concerns about the ethical aspects of this research or the researchers, please write to the following: The Ethics Complaints Officer Southern Cross University PO Box 157 Lismore NSW 2480 Email: [email protected] All information is confidential and will be handled as soon as possible.

271

APPENDIX E

THE SURVEY QUESTIONNAIRE


INSTRUCTIONS: Please read carefully and complete the appropriate sections. Upon completing the survey, please return the survey sealed in the self-addressed and stamped envelope provided. (A) Your Organization Please Tick ( √ ) only One Box: Government / Regulatory Body Consulting Firm Contracting Firm (B) Your Position in Your Organization: (C) If you wish to have the summary results of this research, please provide your e-

mail address or mailing address (confidential) as indicated below:

E-mail :

Mailing Address :

272

INSTRUCTIONS: Please rate how strongly you agree or disagree with each of the following statements by placing a tick ( √ ) in the appropriate box. RESEARCH PROPOSITION 1: The Malaysian Engineering Consulting Services (ECS) firms are well positioned for global competitive advantage in the liberalizing global markets. STATEMENT 1 Malaysian ECS industry can no longer be protected by national legislations with the implementation of the General Agreement on Trade in Services (GATS) which is liberalizing global markets.

STATEMENT 2 The bigger, older established international ECS firms are better placed to enter the Malaysian engineering consulting market following the implementation of GATS.

STATEMENT 3 The Malaysian ECS industry has the competences, expertise and strengths to compete effectively in a liberalizing world.

STATEMENT 4 Malaysian ECS industry is well prepared to take advantage of emerging new market opportunities with the implementation of GATS.

1 2 3 4 5

Strongly Disagree

Disagree

Uncertain

Agree

Strongly Agree

1 2 3 4 5

Strongly Disagree

Disagree

Uncertain

Agree

Strongly Agree

1 2 3 4 5

Strongly Disagree

Disagree

Uncertain

Agree

Strongly Agree

1 2 3 4 5

Strongly Disagree

Disagree

Uncertain

Agree

Strongly Agree

273

RESEARCH PROPOSITION 2: The Malaysian Government has effective targeted support policies and programmes to assist Malaysian ECS firms with their internationalization effort. STATEMENT 5 The Malaysian Government has an effective policy framework to promote the interests of the domestic ECS industry.

STATEMENT 6 The Malaysian Government is actively promoting new international market penetration effort by Malaysian ECS firms.

STATEMENT 7 The existing funding support and incentives provided by the Government enable the Malaysian ECS industry to more effectively compete in the international markets.

STATEMENT 8 The Malaysian Government collaborates closely with Malaysian ECS industry in devising new policies and support measures for increasing the international competitive positioning of Malaysian ECS industry.

1 2 3 4 5

Strongly Disagree

Disagree

Uncertain

Agree

Strongly Agree

1 2 3 4 5

Strongly Disagree

Disagree

Uncertain

Agree

Strongly Agree

1 2 3 4 5

Strongly Disagree

Disagree

Uncertain

Agree

Strongly Agree

1 2 3 4 5

Strongly Disagree

Disagree

Uncertain

Agree

Strongly Agree

274

RESEARCH PROPOSITION 3:

The exporting Malaysian ECS firms have appropriate strategies for successfully entering new international markets. STATEMENT 9

The Malaysian ECS firms are actively formulating and implementing internationalization strategies.

STATEMENT 10

The Malaysian ECS firms have competent staff with an international and entrepreneurial orientation to take advantage of emerging international marketing opportunities.

STATEMENT 11

The Malaysian ECS industry places emphasis on human capital development and knowledge management to stay abreast of the technological changes impacting on the ECS.

STATEMENT 12

The Malaysian ECS firms have appropriate mechanisms for pooling the specific competencies for jointly bidding for international projects on a consortium basis.

Thank you for your participation!

Please remember to mail the survey back in the self-addressed and stamped envelope.

1 2 3 4 5

Strongly Disagree

Disagree

Uncertain

Agree

Strongly Agree

1 2 3 4 5

Strongly Disagree

Disagree

Uncertain

Agree

Strongly Agree

1 2 3 4 5

Strongly Disagree

Disagree

Uncertain

Agree

Strongly Agree

1 2 3 4 5

Strongly Disagree

Disagree

Uncertain

Agree

Strongly Agree

275

APPENDIX F

HUMAN RESEARCH ETHICS COMMITTEE (HREC)

NOTIFICATION

To: Professor A. Selvanathan/Wong, Wai Wah Graduate College of Management [email protected],[email protected]

From: Secretary, Human Research Ethics Committee Division of Research, R. Block Date: 23 December 2010 Project: The Internalization of Malaysian Engineering Consulting Services Firms.

Approval Number ECN-10-223 The Southern Cross University Human Research Ethics Committee has established, in accordance with the National Statement on Ethical Conduct in Human Research – Section 5/Processes of Research Governance and Ethical Review, a procedure for expedited review by a delegated authority. Your application has been considered by the HRESC, Tweed Heads/GC and has now been approved. Please note that this approval is subject to the usual standard conditions of approval. Standard Conditions in accordance with the National Statement on Ethical Conduct in Human Research (National Statement) (NS). 1. Monitoring NS 5.5.1 – 5.5.10 Responsibility for ensuring that research is reliably monitored lies with the

institution under which the research is conducted. Mechanisms for monitoring can include:

(a) reports from researchers; (b) reports from independent agencies (such as a data and safety monitoring

board);

T (61 2) 6620 3000 F (61 2) 6620 3700 PO Box 157 Lismore NSW 2480 Australia www.scu.edu.au ABN 41 995 651 524

276

APPENDIX F

(c) review of adverse event reports; (d) random inspections of research sites, data, or consent documentation; and (e) interviews with research participants or other forms of feedback from them. The following should be noted:

(a) All ethics approvals are valid for 12 months unless specified otherwise. If research is continuing after 12 months, then the ethics approval MUST be renewed. Complete the Annual Report/Renewal form and send to the Secretary of the HREC.

(b) NS 5.5.5

Generally, the researcher/s provide a report every 12 months on the progress to date or outcome in the case of completed research specifically including: • The maintenance and security of the records. • Compliance with the approved proposal. • Compliance with any conditions of approval. • Any changes of protocol to the research.

Note: Compliance to the reporting is mandatory to the approval of this research. (c) Specifically, that the researchers report immediately and notify the HREC, in

writing, for approval of any change in protocol. NS 5.5.3 (d) That a report is sent to HREC when the project has been completed. (e) That the researchers report immediately any circumstance that might affect

ethical acceptance of the research protocol. NS 5.5.3 (f) That the researchers report immediately any serious adverse events/effects on

participants. NS 5.5.3 2. Research conducted overseas

NS 4.8.1 – 4.8.21 That, if research is conducted in a country other than Australia, all research

protocols for that country are followed ethically and with appropriate cultural sensitivity.


277

APPENDIX F

3. Complaints

NS 5.6.1 – 5.6.7 Institutions may receive complaints about researchers or the conduct of research, or

about the conduct of a Human Research Ethics Committee (HREC) or other review body. Complaints may be made by participants, researchers, staff of institutions, or others. All complaints should be handled promptly and sensitively. Complaints about the ethical conduct of this research should be addressed in writing to the following: Ethics Complaints Officer HREC Southern Cross University PO Box 157 Lismore, NSW, 2480 Email: [email protected] All complaints are investigated fully and according to due process under the National Statement on Ethical Conduct in Human Research and this University. Any complaint you make will be treated in confidence and you will be informed of the outcome. All participants in research conducted by Southern Cross University should be advised of the above procedure and be given a copy of the contact details for the Complaints Officer. They should also be aware of the ethics approval number issued by the Human Research Ethics Committee.

Sue Kelly Prof Bill Boyd HREC Administration Chair, HREC Ph: (02) 6626 9139 Ph: 02 6620 3650 E. [email protected] E. [email protected]


278

APPENDIX G

QUESTIONNAIRE SURVEY RESPONSES (RAW DATA)

No. Group S1 S2 S3 S4 S5 S6 S7 S8 S9 S10 S11 S12

1 1 2 2 2 2 1 2 2 1 3 3 3 2

2 1 4 4 3 2 2 2 2 2 4 4 4 2

3 1 4 5 2 4 1 2 2 3 4 2 2 4

4 1 2 4 2 2 2 2 2 2 2 3 2 2

5 1 2 4 2 2 2 2 1 1 2 2 2 2

6 1 4 5 4 4 4 2 2 2 2 4 4 4

7 1 4 4 2 2 2 4 3 2 2 3 4 2

8 1 4 4 4 4 4 4 4 4 3 4 4 4

9 1 2 4 2 4 2 4 2 2 3 4 2 2

10 1 4 4 3 3 2 2 2 2 2 2 2 2

11 1 4 5 4 4 3 3 3 3 3 4 4 4

12 1 4 4 3 3 2 2 3 3 2 4 3 3

13 1 4 5 4 3 3 3 3 3 4 4 3 3

14 1 4 4 3 2 2 2 2 3 3 4 4 2

15 1 4 4 3 2 3 2 2 2 4 4 4 2

16 1 2 4 4 4 4 2 4 4 4 4 3 4

17 1 2 4 5 4 3 4 2 3 4 4 3 3

18 1 3 4 4 4 2 2 2 4 4 4 4 4

19 1 4 3 4 4 3 4 3 4 4 4 3 4

20 1 4 3 3 2 2 3 3 2 2 4 3 2

21 1 4 5 2 2 2 4 2 2 2 2 2 4

22 1 2 3 2 4 3 3 3 3 4 3 4 4

23 1 5 4 2 3 3 3 2 4 4 2 2 4

24 1 4 4 4 3 2 4 3 3 4 4 4 4

25 1 4 4 4 4 4 4 3 4 4 4 4 4

26 1 4 4 3 3 2 2 2 2 2 2 3 2

27 1 4 4 4 4 3 4 2 4 4 3 4 4

28 1 4 4 3 3 3 3 3 4 3 3 3 3

29 1 4 3 3 3 3 3 3 3 4 3 3 3

30 1 4 4 2 2 2 4 2 4 2 3 2 2

31 1 4 4 4 3 2 4 2 2 2 4 3 3

32 1 4 4 3 3 2 2 2 3 2 3 3 3

33 1 4 4 4 2 3 2 2 2 4 3 2 2

34 1 4 5 3 4 3 3 3 3 4 3 3 3

35 1 3 4 2 2 2 2 2 2 4 4 4 4

36 1 3 4 4 3 2 2 2 2 4 3 4 3

37 1 2 4 2 2 1 1 1 2 2 2 4 3

38 1 3 4 3 3 3 2 2 3 4 4 4 4

39 1 3 4 4 4 4 4 4 3 4 4 4 4

40 1 4 4 4 4 3 3 3 3 4 4 4 4

279



41 1 3 4 3 2 4 4 2 3 4 4 4 4

42 1 2 3 4 4 3 3 4 3 4 4 4 4

43 1 4 2 5 4 3 3 3 3 4 4 4 4

44 1 4 5 5 5 3 2 2 3 4 4 4 3

45 1 4 4 4 4 2 2 2 2 3 4 4 4

46 1 3 3 4 4 3 3 3 3 3 4 4 4

47 1 1 3 2 2 1 1 1 3 2 4 4 2

48 1 4 4 2 2 1 2 1 3 2 4 3 4

49 1 3 4 4 3 3 3 3 3 3 4 4 4

50 1 2 4 4 2 4 4 1 4 2 4 4 4

51 1 4 5 3 3 3 3 2 2 3 2 4 3

52 1 4 4 3 3 3 2 2 2 2 2 3 4

53 1 4 2 4 4 2 3 1 3 3 4 3 3

54 1 4 5 5 4 3 3 3 5 3 4 4 4

55 1 4 4 4 4 3 3 3 3 2 2 4 3

56 1 2 4 2 2 3 2 2 3 2 2 2 2

57 1 4 4 3 3 3 3 3 3 3 4 3 3

58 1 3 4 4 4 4 2 2 3 3 3 4 4

59 1 4 4 4 5 4 5 4 4 4 3 3 4

60 1 2 5 4 2 2 2 2 2 2 4 2 2

61 2 4 2 2 2 2 4 2 2 2 2 2 2

62 2 2 5 5 5 3 1 1 1 3 4 3 3

63 2 4 4 3 4 4 2 2 3 3 3 4 2

64 2 3 2 4 3 5 4 4 4 4 4 4 4

65 2 4 3 2 2 2 2 2 2 3 3 4 2

66 2 4 5 2 2 1 2 1 2 4 4 2 1

67 2 4 5 4 4 3 3 3 4 3 3 4 4

68 2 3 3 2 2 2 2 2 2 2 2 2 2

69 2 4 5 3 3 3 4 4 4 3 3 4 4

70 2 4 5 4 4 3 4 3 3 4 4 3 4

71 2 4 4 4 3 3 4 3 3 3 4 3 2

72 2 5 4 4 4 3 3 3 3 4 4 3 3

73 2 4 5 3 1 1 1 1 1 2 3 4 4

74 2 4 3 2 3 2 3 2 2 2 3 2 4

75 2 4 5 4 4 2 2 2 3 3 4 4 4

76 2 4 3 4 4 2 3 2 2 3 4 2 3

77 2 2 4 1 2 2 2 1 2 3 2 4 2

78 2 4 4 4 4 4 4 4 4 4 5 4 4

79 2 2 4 4 4 2 2 2 2 3 4 2 2

80 2 1 1 1 1 5 4 2 4 5 5 2 2

280



81 2 5 3 4 3 2 3 1 2 4 4 4 2

82 2 3 3 4 3 2 2 2 2 2 1 3 2

83 2 5 4 4 4 3 3 3 3 4 4 3 3

84 2 5 2 3 3 2 4 2 3 4 4 4 4

85 2 3 2 4 3 2 3 2 2 3 4 3 2

86 2 5 5 3 1 1 1 1 2 1 2 3 1

87 2 5 4 4 4 3 3 3 3 3 4 4 3

88 2 4 4 2 3 3 3 3 3 3 3 3 4

89 2 5 4 4 3 2 2 2 3 2 3 3 4

90 2 3 5 3 3 2 2 3 3 2 4 2 2

91 2 3 4 4 4 3 3 3 3 4 4 4 4

92 2 4 5 3 3 2 2 1 2 3 3 3 2

93 2 4 4 3 4 3 2 3 2 3 4 3 3

94 2 3 3 4 5 3 2 2 2 4 4 4 4

95 2 4 3 4 4 2 2 3 3 4 5 3 4

96 2 5 4 3 3 2 2 1 3 3 1 4 3

97 2 3 4 4 2 1 1 1 1 2 3 3 2

98 2 4 5 3 3 4 4 3 3 4 3 3 4

99 2 5 5 3 4 2 3 1 2 2 4 3 3

100 2 4 3 4 3 3 4 3 3 4 4 4 4

101 2 4 4 4 4 3 4 3 3 4 4 4 3

102 2 3 4 4 3 3 2 2 3 4 4 2 4

103 2 4 4 4 4 3 3 3 3 4 3 4 4

104 2 4 4 4 2 2 2 2 3 3 4 2 2

105 2 4 4 3 2 2 2 3 2 2 2 3 3

106 2 4 5 5 5 2 2 2 2 2 2 3 2

107 2 4 4 4 4 2 2 1 1 4 3 2 2

108 2 3 4 4 4 3 3 3 3 4 4 4 4

109 2 2 2 5 5 1 2 2 2 3 4 1 4

110 2 3 4 4 3 3 2 2 3 2 3 3 3

111 2 5 4 4 4 2 2 3 2 3 4 3 4

112 2 4 4 2 3 4 2 2 2 3 3 3 3

113 2 4 4 4 3 4 3 3 4 4 4 4 4

114 2 4 4 2 3 3 2 3 3 2 3 5 3

115 2 4 4 4 3 3 4 3 2 2 3 4 4

116 2 3 4 4 3 4 4 3 4 4 4 2 4

117 2 4 4 4 4 3 4 3 4 4 4 4 4

118 2 4 4 4 3 3 4 2 2 4 4 4 3

119 2 4 3 2 2 1 2 2 2 3 4 2 4

120 2 4 4 4 4 3 5 2 4 4 4 2 2

281



121 3 2 3 3 4 2 4 3 5 3 2 1 4

122 3 2 4 4 2 2 3 2 2 4 4 4 4

123 3 2 3 4 4 4 4 4 4 4 3 3 3

124 3 2 1 5 5 4 5 5 4 4 4 4 4

125 3 2 4 4 4 4 4 4 4 4 4 4 3

126 3 3 3 5 2 3 4 3 4 4 4 4 2

127 3 1 1 5 4 5 5 5 5 4 4 4 4

128 3 2 4 4 4 4 5 5 5 3 4 4 5

129 3 2 2 4 2 4 3 4 5 4 4 3 2

130 3 3 1 3 1 1 1 1 3 1 1 3 1

131 3 4 5 3 3 4 4 4 4 3 4 4 3

132 3 3 4 4 5 5 5 5 5 4 3 3 2

133 3 4 4 4 3 3 4 3 3 3 4 3 4

134 3 3 3 4 4 4 4 3 4 4 3 3 3

135 3 5 5 5 5 3 4 3 4 3 4 5 4

136 3 5 4 3 3 3 4 3 3 3 2 3 2

137 3 1 5 4 5 4 4 2 5 4 4 4 4

138 3 2 4 4 4 4 4 4 4 3 4 4 4

139 3 2 4 4 4 5 4 4 4 4 4 4 4

140 3 3 3 3 3 4 3 4 3 3 4 4 3

141 3 4 5 2 3 3 4 2 4 3 3 2 2

142 3 4 4 3 3 4 4 4 4 3 4 3 2

143 3 4 5 4 4 2 5 5 5 5 4 4 4

144 3 2 4 4 4 4 5 4 5 4 4 4 4

145 3 4 5 4 2 3 2 4 2 3 4 4 4

146 3 2 2 4 4 3 4 4 4 3 4 5 5

147 3 3 4 2 4 2 2 2 4 3 3 3 3

148 3 4 4 3 3 4 4 4 4 4 3 4 3

149 3 2 3 4 4 4 4 4 4 4 4 4 4

150 3 2 2 4 2 4 4 2 4 1 2 1 2

151 4 4 5 4 4 4 3 3 3 2 4 3 4

152 4 5 4 3 4 2 4 2 2 4 3 3 3

153 4 4 4 2 2 3 2 3 3 2 2 3 3

154 4 4 4 2 2 2 3 2 3 3 2 3 2

155 4 4 4 3 3 3 2 2 2 2 4 4 4

156 4 4 3 4 3 3 4 3 2 4 3 3 3

157 4 4 4 4 4 3 3 2 2 2 2 2 3

158 4 4 5 3 4 4 4 3 4 4 2 2 4

159 4 3 5 4 3 3 3 3 3 3 4 4 4

160 4 5 5 4 3 4 3 3 3 3 3 4 3

282



161 4 4 4 4 4 3 4 2 3 2 4 3 4

162 4 1 4 5 5 4 4 4 4 5 5 5 5

163 4 4 4 4 3 2 3 3 2 3 4 4 4

164 4 4 5 3 3 3 4 2 3 2 3 2 3

165 4 4 4 3 3 2 3 2 3 3 2 3 2

166 4 3 4 2 3 4 2 3 3 3 3 2 2

167 4 4 4 2 3 3 4 3 4 2 4 4 3

168 4 4 4 3 4 2 2 2 2 2 3 3 3

169 4 4 3 2 4 2 3 2 2 3 4 3 4

170 4 4 4 4 2 3 3 2 2 3 4 4 4

171 4 3 4 2 2 2 2 2 3 2 2 3 3

172 4 2 4 3 4 4 4 4 4 2 1 3 4

173 4 4 2 4 4 4 4 4 4 4 4 4 4

174 4 3 4 4 4 2 2 2 2 3 4 3 4

175 4 4 4 3 3 2 4 4 3 2 2 1 2

176 4 4 4 4 3 2 2 2 2 3 4 4 3

177 4 4 4 3 2 2 3 2 3 3 2 4 2

178 4 4 4 4 4 2 3 1 1 4 4 4 4

179 4 4 4 3 3 4 4 4 4 4 4 4 4

180 4 4 4 3 3 2 4 2 2 2 4 2 3

Group 1 : Case Study Firms Group 2 : Non-Case Study Firms

Group 3 : Government Agencies Group 4 : Contractors

Source : From Questionnaire Survey

283

APPENDIX H

MINUTES OF FOCUS GROUP MEETING

Date : 28 July 2011 Time : 3.00 pm – 5.30 pm Venue : ACEM Conference Room (2nd Floor) 63-2 & 65-2 Medan Setia 1 Damansara Heights 50490 Kuala Lumpur Attendees : 9 persons (names removed for reason of anonymity in line with ethical

requirements)

Issues

Salient Points

1)

• It is the trend that the Government intends to open up the Malaysian

market. • The Malaysian ECS industry is small compared to other industries. • In GATS, there is no classification for engineering services. It is

parked under construction. • Government has other bigger issues to consider and to weigh the

benefits. If necessary, it can sacrifice the small Malaysian ECS industry for greater benefits of other important industries.

• Agreed to Statement 1 because we are forced to. • USA is requesting Malaysian Government to liberalize its

procurement.

284

Issues

Salient Points

2)

• Foreign ECS firms are already here. They will come if there are

major projects. • They are mobile. Typical characteristics of the service industry. • In terms of competition from foreign firms, it is neutral as service

procurement is still very much depended on personal relationship. • The operation of foreign ECS firms is not full scale. Just one foreign

expatriate and the rest are hired locally including signing for authority submission. Foreign input as and when required.

• Foreign ECS firms from first world country take the high end of the

project while the firms from the less developed countries will take the low end. Malaysian ECS firms will get stuck in the middle and nowhere to go.

• Competition is expected from China, India, Indonesia and

Philippines. • Foreign firms here have the network to outsource to third world

countries at lower cost. • Foreign ECS firms learn to be localized to compete with local firms. • Statement 2 is agreed. Malaysian ECS firms have to go out in order

not to get stuck in the middle.

3) & 4)

• Agreed, but the major problem is that Malaysian ECS firms have no

finance and no money to compete. • Government does not have a coherent policy to support. • The Act is an impediment as Malaysia ECS firms cannot be owned

by the public. • FIDIC recognized that the future ECS markets are in Middle East,

China and South East Asia. • Asian ECS firms are competitive compared to European firms and

are able to offer low cost solutions using better technology.

285

Issues

Salient Points

3) & 4)

(cont…d)

• Malaysian engineers are equally good compared to European

engineers. • Malaysian ECS firms are at a disadvantage due to size limitation and

weak financial resources. Difficult to compete with large foreign firms and have difficulty to raise performance bond.

• Malaysian mindset still has old school of thought where business and

professionalism are mixed. • Malaysian Act is used to protect the profession resulting in reduced

competitive advantage. • Act needs to change to support the profession. However, the Boards

including BEM, BAM and BQSM are very defensive. The Board is creating the Act and not the Act creates the Board. Act should not be used to protect the practice but to protect the public. The Act only protects if one is weak. There is a lot of vested interest in the Boards which are difficult to change. The learn society / institution is far from practice and profession.

• Act must recognize the separation of business and professionalism. • Malaysian ECS industry is hindered by the Act. • Malaysian ECS firms should go out. Malaysian engineers are too

complacent. Fees are good and projects are given. Therefore there is no incentive to go out and compete. However, Malaysians are not mobile.

• Malaysian standard of education is declining. We have a narrow

window to be ahead of others. The opportunity is fast closing. In 10 year time, we will be taken over by other developing 3rd world countries as the current competent engineers will be retired.

• The Malaysian ECS markets are shrinking but the CEs are increasing

in number. There is insufficient cake to go by. • Past policy is acting against the profession now instead of promoting

it.

286

Issues

Salient Points

5), 6) & 7)

• Malaysia has good policy framework to develop the ECS industry in the past 30 years. But not now as things have changed. The policy became obsolete, ineffective, a hindrance and needs to change.

• MITI & CIDB tried very hard to export services but not effective due

to lack of appropriate strategy and focused plan. Effort was not sustainable.

• There were also internal rivalry between Government ministries,

departments and agencies. • Malaysian Government has policy but it is not effective. • There was no more funding support and incentives provided due to

lack of fund. • The Government officers must be actively involved in overseas

promotion and not just left to the individual firms to find their own way.

• Government must set up foreign trade offices in prospective

countries for service export, to have local presence and provide support.

• Government must have foreign aid agency to conduct feasibility or

preliminary study utilizing Malaysian ECS firms. • There are too many Government agencies involved. This has to be

streamlined to a single one stop agency to coordinate and focus the activities and to establish foreign trade networks.

• Promotion of service trade is different from promotion of goods.

8)

• NAPSEC represents too many services. Activities are not focused and too diffuse to be effective.

• ACEM refuses to participate in NAPSEC. • Activities must be narrow down to construction industry and related

services. • Government must listen to the public and get the feedback to

formulate the policies and not impose any policy without consulting the relevant stakeholders.

287

Issues

Salient Points

8) (cont…d)

• However, if all are invited, then the purpose is defeated and the ECS industry is too minor to speak compared to other service industries.

• Often, the Government does not listen to the industry. • According to the Government study, the service industries that are

projected to have high growth are: 1) health and 2) engineering. • Engineering ECS industry is small but has a lot of spin off e.g.

construction, manufacturing, education, etc. • Construction is treated a strategic industry in some countries.

9) & 10)

• Malaysian ECS firms adopt client following strategy and not market seeking in the service export.

• Malaysian ECS firms do not implement network strategy due to

absence of physical presence in foreign countries. • Malaysian ECS firms do not have strategy to enter foreign market. • The method is touch and go or hit and run approach. • Any coordinated strategy among ECS industry players has to be

organized by the Government. At the moment, individual ECS firms try to enter the market on their own and are therefore weak.

• Any foreign involvement without appropriate strategy will ultimately

lead to failure of the expansion endeavour. • However, having a strategy in foreign expansion will not necessary

lead to success. • Engineers are trained to be a technocrat but they are bad businessman

and poor entrepreneur. • They work from bottom up. First as engineer, then they grow into

the business and end up in management where they learn to manage. • Engineers are protected by the Act to only work as engineers, be

professional and competent and not in management. The emphasis is on ethics and professionalism.

288

Issues

Salient Points

9) & 10)

(cont…d)

• Malaysian does not like to go overseas. Culture may be a factor. It also depends on the compensation and reward.

• For foreign expansion, the ECS firms have to be selective in

entering. Preferably to choose those with least psychic distance and have similar cultural background.

11)

• Must choose the countries to enter where we have competitive advantage with low risk especially with good or similar legal institutions. ECS firms must learn how to manage risk.

• Consultancy industry emphasizes on knowledge and knowledge

management. It is a knowledge driven industry. New knowledge is continually generated and emerged all the times. Engineers must assimilate the new knowledge and use it all the times.

• Marketing also requires knowledge. • Engineers lack soft skill. • The productivity of Malaysian engineers is low compared to western

engineers. This will somewhat negate the lower factor cost. • The Government system does not encourage competition. • Engineers lack the skill in pricing their products. • Malaysian engineers are not geared for competition. They are

technically sound but weak in financial knowledge to make management or business decision.

12)

• Engineers are egocentric. • PSDC at one time tried to form cluster of consultants to bid for

overseas projects. There was no follow up activities. Consulting engineers are too egoistic as everyone tries to be the leader in the team.

• It is best that the team members are of similar size and strength so

that personnel ego does not come into the picture. • Locks in the middle, the Malaysia ECS firms have no opportunity to

move up.

the internationalization of malaysian engineering consulting

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