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Title: An assessment of external funding opportunities available to small and medium-sized enterprises (SMEs) in the UK and Malaysia, with special reference to: venture capital; and loan guarentees offered by the credit guarantee corporation in Malaysia
Authors: Boocock, Grahame
Issue Date: 2010
Publisher: © Grahame Boocock
Abstract: The articles presented in this thesis give new insights into the funding of small and medium-sized enterprises (SMEs) in both Malaysia and the UK, based on exceptional access to the SME community and financial bodies serving SMEs. Seven core papers comprise: two overviews of SME funding in the UK and Malaysia; an exploration of the determinants of usage of the guarantee scheme offered by the Credit Guarantee Corporation (CGC) of Malaysia, together with two reviews of the effectiveness of the CGC’s activities; and, an evaluation of the early years of the VC industry in Malaysia, and an assessment of the venture capital (VC) investment cycle in the UK. The core papers are complemented by two contributions drawn from other research projects in the SME sphere, dealing with learning/internationalisation and learning/innovation respectively. Together, the two ‘overview ’papers, which reviewed the funding of SMEs in the UK and Malaysia, make an important contribution by confirming and shedding further light on the existence of funding gaps in the two economies. Moreover, it is demonstrated that manufacturing firms in Malaysia had significantly higher requirements for external finance than equivalent UK firms, and that (quasi-) Government bodies play a key role in satisfying those demands. Yet, the effectiveness of these official funding bodies has rarely (if ever) been subject to independent empirical scrutiny. The papers submitted here go a significant way to addressing that deficiency. The three ‘CGC’ papers show that the utilisation of its principal guarantee scheme depends upon factors that would not (and should not) be present in any fair and efficient loan guarantee system. Despite some positive aspects, the overall performance of the CGC in relation to accepted criteria for measuring the effectiveness of guarantee schemes is also shown to be suspect, for example: the generation of Finance and Economic Additionality has been relatively modest. Under the VC theme, a review of the industry in Malaysia reveals a chasm between the investment policies and practices of private sector VCFs and the principal Government-backed VCF. This study also demonstrates that legislation offering financial incentives to VCFs is ineffective and unworkable, and that the VC industry is not helped by factors in the wider social and political framework. The final core paper examines the appraisal criteria applied by a UK VCF at each stage of the investment cycle. This paper filled a prominent gap in the literature at the time by showing how the reasons for rejection altered as applications were processed by the Venture Fund. The two ‘non-core’ articles demonstrate how large firm models of learning have to be adapted to enhance the prospects for success in growth-oriented, entrepreneurial SMEs that are innovative and international in outlook. Guarantee providers (through the agency of the banks) and VC investors, and also SMEs, could utilise key findings from these papers when providing or seeking funds respectively. The commentary concludes by mapping out a future research agenda, namely the opportunity to use the evolving perspective of institutional theory to reinterpret the core papers’ findings and implications in an alternative, yet in many ways complementary, manner. The final section explains how previously unexploited data could be used to reappraise developments in the Malaysian VC industry over the period 1986-2006.
Description: This thesis is Restricted. It contains publications submitted in partial fulfilment of the requirements for the award of Doctor of Philosophy of Loughborough University.