Systemic Coordination and Human Capital Development: Knowledge Flows in Malaysia’s MNC-Driven Electronics Clusters

Using two MNC dominated electronics clusters in Malaysia, this paper examines the development of human capital from two knowledge and skills acquisition modes – formal education and learning by performing which were dominant in the successful evolution of industrial districts. Ineffective systemic coordination throughout the country from federal institutions has restricted the supply of high tech human capital from formal institutions of education and training. Hence, firms in Penang and Kelang Valley have faced growing demand-supply deficits. Restrictive immigration policies have hampered firms’ options of seeking high tech human capital from abroad. Differential systemic coordination at the regional level has produced different levels of network synergies in Penang and Kelang Valley. Stronger systemic coordination and network cohesion has stimulated greater differentiation and division of labor, engendering the movement of tacit and experiential knowledge embodied in human capital to support industrial dynamism in Penang. Weak systemic coordination and network cohesion has confined MNCs to largely truncated operations without significant levels of differentiation and division of labor in the Kelang Valley.