Government-Business Coordination and Small Business Performance in the Machine Tools Sector in Malaysia

This paper compares the performance of small and medium size subcontractors in the machine tools industry in two different regions of Malaysia, Penang state and Kelang Valley. It is shown that while Penang state has developed a fairly successful small and medium subcontracting industry, Kelang Valley has not. The difference in performance (measured by value-added) is due in part to differences in the extent and quality of government-business coordination. In contrast to Kelang Valley, the relatively autonomous state government of Penang took a pro-active approach to business development and provided support to its small and medium enterprises (mainly Chinese-owned) in the form of subsidized and governmentfirm intermediated training, and market-information exchange.