The Effect of the Global Financial Crisis on Malaysian Entrepreneurs and SMEs and their Response to the Crisis

Abstract

The recent global financial crisis which has affected multinationals in the like of AIG, Ford, Chrysler and General Motors is said to be the worst financial crisis of the century. Paul Krugman, 2008's Nobel Prize winner in economics dubbed it as the "First Great Financial Crisis" of the 21st century. As global organizations strive to come to terms with this crisis, it will be interesting to study how entrepreneurial ventures respond to this crisis. Entrepreneurs by nature have been said to be innovative, proactive and risk-taking which implies that they will be able to respond to this change in a swift manner. Likened to a 'small motorboat,' these entrepreneurial ventures have been noted for making immediate changes, responding to an impending 'attack,' changing strategy and steering their way out into safer grounds. Is this for a fact and is this how the Malaysian Entrepreneurs and SMEs are responding? This study looked at 59 Malaysian Entrepreneurs who have been in business for more than one year and studied their response to the present financial crisis, their change in strategy and their short-term and long-term measures to overcome the effects of the crisis. These entrepreneurs are involved in businesses over a wide range of industries and they are located in the capital city of Kuala Lumpur, one of the most highly developed cities of Malaysia. The primary research focused on the immediate effect of the financial crisis on the entrepreneurial ventures in terms of revenue and profitability, the entrepreneurs' response to the crisis, change in strategy, if any, and the entrepreneurs' short-term and long-term measures to counteract the effects of the crisis. This will be able to measure innovativeness, proactiveness and risk-taking measures, the three dominant features of an entrepreneur, during a financial crisis. The findings will act as an accurate indicator to identify entrepreneurial behavior during an economic crisis. In addition to that, it will be a recent study on the effect of the global financial crisis, yet to be initiated in Malaysia.