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1.4 Methodology

The study uses secondary data to explore the adoption of TI in manufacturing at the firm level in SMEs' sectors in Malaysia. The study undertakes cross-sectional data sets of the World Bank PICS II[1] (Malaysia Productivity and Investment Climate Survey II carried out by the Department of Statistics and EPU) for years 2004–2006.

PICS II collects data on a wide range of aspects related to TI, innovation activities, and performances. Firms are asked about various questions on TI over a 3-year period covered by the survey. Therefore, PICS II has a major strength, whereby it collects data for very large sample of the firms, representative of all manufacturing firms across Malaysia.

A. The Methodology PICS II

The sampling frame is extracted from the Central Register of Establishments (SIDAP) maintained by the Department of Statistics, Malaysia. The register is updated using information supplied by the Companies Commission of Malaysia (CCM), Employees Provident Fund (EPF), the 2006 Economic Census data, and several regular surveys or censuses conducted by the Department of Statistics, Malaysia (DOSM). PICS 2007 covers 1,200 establishments in the manufacturing sector from 3,322 total establishments in the frame.

B. Data Analysis

The PICS II raw data has been through “cleaning process” [2] before it can be used in the statistical analysis. From 1,115 data, only 1,102 data are accepted. Overall, the total number of firms covered in this study is as follows:

1. Small (x < 50): 498 firms (45.1 %)

2. Medium (50 < ¼ x < 150): 313 firms (28.3 %)

3. Large (x > 150): 294 firms (26.6 %)

The objective of this study is to explore the internal factors that influenced the adoption of TI in SME sectors by the firm size. TI as suggested by Nieto [18] is used to refer to the process through which technological advances are produced. The innovation process includes a set of activities that contribute to increase the capacity to produce new goods and services (product innovations) or to implement new forms of production (process innovation). To achieve the study goals, the statistical analysis will be processed with simple statistical method. In order to process the statistical analysis, the statistical software application SmartPLS 2.0 [19] has been applied for the utilization of the partial least squares methodology to estimate the theoretical model used in the study. PLS-SEM estimates loadings of the indicator variables for the exogenous constructs based on their prediction of the endogenous constructs, not their shared variance among indicator variables on the same construct. Thus, the loadings in PLS-SEM are in a way their contribution to the path coefficients [20].

  • [1] Based on PICS (2007) data, Malaysia's investment climate is benchmarked with the following East Asian countries such as China (2003), Indonesia (2003), the People's Republic of Korea (2005), the Philippines (2003), Thailand (2006), and Vietnam (2005) and some higher middleincome countries such as Turkey (2005), Brazil (2003), and Mexico (2006).
  • [2] Cleaning data whereby only useful data are maintained in the analysis. For those respondent that did not indicated the firm size in the questionnaire will be executed from the data set.
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