Evolution of the automation industry in Penang 2005-2011. Exception on the national stagnation?

Abstract

Stagnation in economic growth concerns the Malaysian government. The government wants Malaysia to reach a high-income status, but growth figures show that the transition from a mass production industry to a more knowledge based economy is not happening. In this master thesis research a case study is conducted on one of the local-owned, high tech industries. The automation industry in Penang is studied to get a detailed picture of the evolution of a specific industry. With data from 2005 and new data from 2011 the developments of the firms in the industry over the past six years are described and explained. On the industry level the developments point to the shakeout phase of the industry life cycle model. The total number of firms in the industry has decreased and one local starter has joined the industry. The industry is strongly dependent on the semiconductor market, but a market diversification is seen over the past six years. This is making the already heterogeneous group of firms even more heterogeneous. The developments the firms have made over the past period is quite different. Some firms have grown quick, others slow and some declined. There is no unique factor identifiable for the explanation of growth, more strategies have proven to be successful. The transition to more high tech products is however rarely seen, most firms chose a market diversification with their current level of technology. Cooperation among firms is a taboo, and other external sources of knowledge are hardly used. There is a role for the state government to improve the regional innovation system to spur technological upgrading.