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Social Networks Key Driver for People to Start Business

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SOCIAL networks are the most prominent source of support in encouraging individuals to start a business, research has found. Research by the Asia School of Business (ASB) found that social networks provide financial and social capital as well as practical help and business opportunities. Conducted as part of its Rapid Youth Success Entrepreneurship (RYSE) programme, the survey involved 37 Malaysian micro and small business owners with ages ranging from the 20s to late 30s.

Most MSMEs know the fundamentals to do business and the only assistance that they need is funding, says Melati

The research author, Dr Melati Nungsari said the people she interviewed are, in fact, people who already have businesses and who are already making sales.“So, these people definitely have the entrepreneur intention (EI),” she told The Malaysian Reserve (TMR). According to the ASB assistant professor of economics, some individuals act upon their EI due to their financial situation on the back of the unprecedented collapse in employment.

“When the pandemic happened and unemployment went up, we saw that entrepreneurship was one of the things that people went into,” she said. She noted that roadside stalls also increased by more than 200% during the pandemic, based on her recent study. “I think Malaysians in general are very entrepreneurial and it is sort of within our culture already,” she added.

Notably, entrepreneurial traits such as proactiveness, resourcefulness and passion enable individuals to overcome entrepreneurial structural constraints, such as lack of resources and negative action-related emotions. Meanwhile, she said that organisations such as schools, universities and employers play an important role in instilling the motivation for a career shift to entrepreneurship and providing opportunities to upskill.

“The role of organisations in upskilling and providing an entrepreneur-friendly environment is also instrumental in increasing the propensity of start-up behaviour,” she noted. On the other hand, the research found that the role of macroenvironmental factors such as governmental support play less prominent roles in the narratives of entrepreneurs. “We were trying to understand what actually drove the entrepreneurs to open up businesses, however, government support was not mentioned very much.

“We found that successful micro, small and medium enterprises (MSME) owners did not actually benefit a lot from the government programmes although the government spends a lot of money on business training programmes,” she said. Melati noted that most MSMEs know the fundamentals to do business and the only assistance that they need is funding as well as connections to expand their customer base and suppliers.

“These people already know what to do for their business and it will be more helpful when the government helps them to market and expand their connections,” she added. Melati opined that the government should conduct an impact assessment for every entrepreneurship programme they have conducted to ensure the success of those programmes.

Moreover, the research found important implications for governments and policymakers in implementing support for those transitioning from salaried employment to self-employment. “Combined with the importance of having entrepreneurial personality traits, which enable individuals to overcome structural barriers, these findings have important implications for expanding entrepreneurship interventions beyond monetary, incentive-based approaches while also including character development approaches,” she noted.

On the online marketplace, Melati saw this platform as very beneficial for a lot of MSMEs, especially during the lockdown. “The e-commerce basically widens their customer base, especially during the pandemic — so they had to rely on bigger platforms to sell their products as well as to reach their customers,” she said. However, relying too much on the online platform also comes with drawbacks, mainly for food vendors that had to rely on the p-hailing platforms and were charged platform fees and commissions.

“If the MSME profit margin is not very high and they are giving a lot into the platform — that could be a problem,” she said. Nonetheless, she viewed that the way forward for MSMEs in Malaysia is to start taking entrepreneurship as a high-value and high-volume generating activity to help increase opportunities in the labour market. “When we talk about entrepreneurship in Malaysia, we tend to think about very low-value ways to generate income, thus, it would be really nice if we could take the conversation to higher values.

“It is about time we should think about businesses that actually innovate new social development and do interesting technological advancements,” she further said. Meanwhile, ASB is currently conducting the RYSE programme which aims to promote upward mobility and lower youth unemployment rates. RYSE is open to the public to train young people with the skills needed to plan, design and operate their own businesses from scratch.

For more information, visit https://asb.edu.my/ryse.
This article was originally published on The Malaysian Reserve