Proceedings of Applied International Business Conference 2008
THE EFFECT OF IPC LOCUS OF CONTROL ON SMES’ COMPETITIVE ADVANTAGE
IN MALAYSIA
Jeen Wei Ong ψ, Hishamuddin bin Ismail and Lee Pei Ling
Multimedia University, Malaysia
___________________________________________________________________________________
Abstract
Locus of control (LOC) has emerged as a personality trait to distinguish entrepreneurship. The initial
construct for locus of control is a unidimensional I-E divide but later on is segregated into Internal and
External dimensions until the latest of IPC model. In entrepreneurship study, the research interest is
mainly on internal LOC but in the context of Malaysia, due to the strong influence of political power
over the business (Jaafar and Abdul-Aziz, 2005; Ariff and Abubakar, n.d.), IPC model would be more
meaningful. Taking the advice from Ong and Hishamuddin (2008), competitive advantage is used to
measure the performance of the firm. 365 usable set of responses are collected for the study using
judgemental sampling method. Results of Pearson correlation indicate significant positive association
between internal LOC and competitive advantage and negative but insignificant for the association of
chance and powerful others with competitive advantage. However, some elements in chance and
powerful others have shown significant negative correlation with competitive advantage. The findings
suggest the needs for policy makers to enhance the self-belief among the entrepreneurs in the country.
At the mean time, the policy makers may want to consider constructing a more open market with less
political intervention.
Keywords: Locus of control; Competitive advantage; Entrepreneurship; Small and medium enterprises;
Malaysia.
JEL Classification: M13; M19.
1. Introduction
Personality traits have played very important role in the literature development of entrepreneurship
study (Pandey and Tewary, 1979; Rauch and Frese, 2000; Littunen and Storhammar, 2000; Korunka,
Frank, Lueger and Mugler, 2003; Beugelsdijk, 2007). Once, personality traits have been fashionable
explanatory for entrepreneurial behaviour and intention (Llewellyn and Wilson, 2003). Until the end of
1980, inconsistent between theory and empirical finding bubbled the development of personality traits
in entrepreneurship study (Llewellyn and Wilson, 2003). Through the long history of personality traits,
need for achievement, locus of control (LOC), and risk taking propensity survived through the bubbled
and emerged as the personality traits that are highly associated with entrepreneurship study (Littunen,
2000; Rauch and Frese, 2000; Korunka et al., 2003; Beugelsdijk, 2007). This is especially true for
small firms where the entrepreneur has greater influence over the way company in managed (Rauch
and Frese, 2000). However, studies have argued that risk-taking propensity is associated with
ownership of business rather than entrepreneurship (Schumpeter, 1934; Brockhaus, 1980; Carland, Hoy,
Boultan, and Carland, 1984).
The interest of this study is on one of the two most recognised personality traits associated with
entrepreneurship that is LOC. LOC has developed from initial version of Internal-External (I-E) divide
by Rotter in 1966 to segregation of internal and external LOC dimensions (Mirels, 1970; Reid and
Ware, 1973; Lange and Tiggeman, 1981). Later on, Levenson (1974, 1981) has brought another
revolution to the dimension of LOC by further segregated external LOC into powerful others and
chance to form the Internal-Powerful Others-Chance (IPC) model. Although lacking of empirical
validity, IPC model has to strength to capture cross-cultural psychological research resulting from
differences in political scenario and degree of human freedom across the countries (Kaufmann, Welsh
and Bushmarin, 1996). In entrepreneurship study, undeniable the focus is on the internal LOC (Pandey
and Tewary, 1979; Kaufmann et al., 1996; Mazzarol, Volery, Doss and Thein, 1999; Lee and Tsang,
2001) with not much attention has actually been given to powerful others and chance in explaining the
success of entrepreneurship. However, in a country with high power distance (Hofstede, 2001;
ψ
Corresponding author. Ong Jeen Wei, Faculty of Business and Law, Multimedia University, Jalan
Ayer Keroh Lama, 75450 Melaka. Email: [email protected]
Proceedings of Applied International Business Conference 2008
McShane and Von Glinow, 2008) and high political influence over the business (Jaafar and Abdul-A, a
complete study of all the three internal, powerful others, and chance dimensions would be fruitful to
investigate the performance of SMEs. Following the approach of Ong and Hishamuddin (2008),
competitive advantage, which is segregated into differentiation advantage and cost advantage, is used
as the dependent variable to measure the performance of the firm.
The following section of the paper will present the review of previous literatures on interest of this
study. Then, the research methodology of the study, research framework, sampling plan, and data
collection method are discussed. In data analysis, descriptive analysis is first conducted to understand
the mean and standard deviation of the entrepreneurs on all the three dimensions of LOC. It is then
followed by Pearson correlation on the association between the dimensions in LOC and competitive
advantage of the firm. Results of the statistical analysis are interpreted and discussed.
Recommendations on the policy to encourage more successful entrepreneurs are forwarded to the
policy makers. Conclusion of the study is highlighted at the final part of the paper.
2. Literature review
Personality traits have long been linked with the entrepreneurship study and have established as one of
the main school of thoughts in entrepreneurship research (see for Cunningham and Lischeron, 1991). In
small size firms, since the entrepreneurs have strong influence over the company policy, company
culture and company actions, individual entrepreneurs have been the level of analysis rather than the
organisation as the predictor for the firm performance (Rauch and Frese, 2000). However,
inconsistency between theory and empirical findings burst the bubble of personality traits study in
entrepreneurship by the end of 1980 (Llewellyn and Wilson, 2003). Lack of empirical support and
relative success of subsequence research interests which are more environmental sensitive make the
rejection of personality study an extreme one (Llewellyn and Wilson, 2003). However, in the long
history of personality traits study in entrepreneurship (Beugelsdijk, 2007), need for achievement
(McClelland, 1961), LOC (Rotter, 1966), and risk-taking propensity have emerged to be three
personality traits that are highly associated with entrepreneurship study (Beugelsdijk, 2007; Korunka et.
al., 2003; Littunen, 2000; Rauch and Frese, 2000).
Among the three personality traits, risk-taking propensity is said to be associated with ownership of a
business rather than entrepreneurship (Schumpeter, 1934; Brockhaus, 1980; Carland et al., 1984). In
addition, meta-analysis by Rauch and Frese (2000) have shown an obvious indication that risk-taking
propensity is not a good predictor for firm performance. On the other hand, need for achievement has
been proven to be a consistent factor in explaining the achievement of entrepreneurship (see for Rauch
and Frese, 2000; Lee and Tsang, 2001; Ong and Hishamuddin, 2008). Therefore, study on need for
achievement will be reinventing the wheel (Sekaran, 2003). Thus, this study has focused specifically on
LOC. Although LOC has been a very popular personality trait in examining the performance of
enterprises, the findings are rather inconclusive (Rauch and Frese, 2003). In addition, previous studies
have placed emphasise on internal LOC alone with limited study has actually examined the relationship
of powerful others and chance with firm’s performance. Therefore, this study uses IPC model in
examining the performance of SMEs. This approach is needed since previous studies have argued
strong influence of political power in the business world (Ariff and Abubakar, n.d.) such as
involvement of politicians in enhancing the firm’s ability to obtain contract (Jaafar and Abdul-Aziz,
2005). Besides that, Malaysia is also among the country with the highest score of power distance in the
world in terms of acceptance over unequal distribution of power in society (Hofstede, 2001; McShane
and Von Glinow, 2008). This might as well mean that Malaysians are more willing to accept ruling
from the more powerful individual or party. In view of all these scenarios, IPC LOC model might be
meaningful and interesting to investigate the performance of SMEs, a sector with lack of bargaining
power, in the country. The performance of SMEs is observed from the perspective of competitive
advantage, which is arguably a better dependent variable compare with financial performance (Ong and
Hishamuddin, 2008).
Competitive advantage is a popular term in strategic management. It starts to gain popularity by the
efforts of Michael Porter from his series of papers on competitive advantage (Jones, 2003).
Competitive advantage captures firm’s performance relative to competitors (Porter, 1985, 1998).
Peteraf and Barney (2003) have focused on the creation of “economic value” in explaining a firm’s
competitive advantage. “Economic value” refers to the differences between perceived benefits of
purchasers and economic cost of enterprise through provision of goods and services (Peteraf and
Barney, 2003). This greater economic value can be achieved through either lower cost or differentiation
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Proceedings of Applied International Business Conference 2008
advantage (Porter, 1985, 1998; Peteraf and Barney, 2003). Lower cost is results from the efficiency of
firms in producing goods or services that matches with near to the market competitive rate of pricing,
thus, converting lower cost into superior return (Porter, 1985, 1998; Peteraf and Barney, 2003).
Differentiation advantage occurs when firms are able to produce unique or superior value goods or
services which command premium price in the market, matched with competitive cost of production,
thus, transferring premium price into superior return (Porter, 1985, 1998; Peteraf and Barney, 2003).
McGrath, Tsai, Venkataraman, and MacMillan (1996) termed lower cost and differentiation advantage
as distinct efficiency and distinct value, respectively. Through Peteraf and Barney (2003) definition
competitive advantage refers to firm’s ability to create higher value than its marginal competitors. In
order to enjoy competitive advantage, firms are not required to be the best player in the industry
(Peteraf and Barney, 2003). Thus, this opens the door for SMEs to gain competitive advantage.
LOC, on the other hand, is developed by Rotter (1966) as social learning theory (Rauch and Frese,
2000). LOC measures the extent to which people feel in charge (Beugelsdijk, 2007) and have influence
over the outcome (Kaufmann et al, 1996). Individuals with strong internal LOC believe in control over
one’s own life by influencing the outcomes through one’s behaviour, permanent characteristics, skills,
ability and effort (Kaufmann et al., 1996; Littunen, 2000; Littunen and Storhammar, 2000; Twenge,
Zhang and Im, 2004). On the other hand, individuals with an external locus of control are said to
believe in external forces such as actions of others, fate, luck, chance or other factors that are beyond
their control to have control over the outcome (Kaufmann et al., 1996; Dollinger, 1999; Littunen, 2000;
Littunen and Storhammar, 2000).
The initial concept of LOC developed by Rotter (1966) varies along the I-E divide (Lange and
Tiggemann, 1981; Littunen, 2000). This means an individual can only be either internal or external
LOC and the I-E dimensions are perfectly negatively correlated with each other. Evident from previous
studies have also shown the I-E model as a stable attribute of individual (Lange and Tiggeman, 1981)
with sufficient of test-retest reliability despite correlation becoming weaker over a longer time span
(Hersch and Schiebe, 1967; Zerega, Tseng and Greever, 1976; Lange and Tiggemann, 1981). However,
suspicious over unidimensional of LOC has eventually led to the segregation of LOC into multiple
dimensions (Lange and Tiggemann, 1981). The studies conducted by Mirels (1970), Reid and Ware
(1973), and Lange and Tiggeman (1981) have empirically supported that LOC should not consist only
one dimension. Thus, the development led to segregation of LOC into internal and external dimensions
with various relationships might appear between the dimensions (Littunen, 2000). In view of control by
powerful people is more predictable than by control by chance, Levenson (1974, 1981) has proposed
further segregation of external LOC into powerful others and chance. Powerful others concerns about
the belief of individual to be in controlled by other more powerful people while chance measures
individual belief to be controlled by fate (Levenson, 1981; Littunen, 2000; Kaufmann et al, 1996). This
development seen to create IPC model consist of internal, powerful others, and chance in the construct
of LOC. However, this I-P-C segregation of LOC has seemed to be lacked of statistical support (see for
Kaufmann et al., 1996). The strength of the model is the sensitivity towards cultural differences
(Kaufmann et al., 1996).
Theoretically, locus of control is said to have impact on individual performance (Rauch and Frese,
2000). Since individuals with internal locus of control hold the belief that rewards are determined by
themselves (Rotter, 1966; Lange and Tiggemann, 1981), thus, those with higher internal LOC tend to
perform better than their counterparts (Rauch and Frese, 2000). However, empirical results from
previous studies (e.g. Entrialgo, Fernández and Vázquez, 2000; Rauch and Frese, 2000; Lee and Tsang,
2001; Jaafar and Abdul-Aziz, 2005). A mixture of significant and insignificant but mostly positive
associations were discovered. Meta-analysis conducted by Rauch and Frese (2000) indicated very weak
but statistically significant positive association exist between internal LOC and firm performance.
Although have not been the main focus in previous entrepreneurship study, powerful others and chance
are expected to associate negative but not necessarily significant with firm performance. This is mainly
from the logical reasoning from the negative association between internal LOC and external LOC with
no obvious observation on whether the association is statistically significant (Littunen and Storhammar,
2000; Kaufmann et al, 1996). However, with the nature of Malaysians to accept high degree of power
distance (Hofstede, 2001; McShane and Von Glinow, 2008) and influence of political power over the
business (Jaafar and Abdul-Aziz, 2005; Ariff and Abubakar, n.d.), the role of powerful others associate
to firm performance is expected to be interesting.
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3. Research methodology
Research framework
The research framework is indicated in Figure 1 below. Association for I-P-C LOC against competitive
advantage in SMEs is to be tested.
Internal LOC
Competitive Advantage
• Cost Advantage
• Differentiation
Advantage
Powerful Others
Chance
___________________________________________________________________________________
Figure 1: Research framework
Questionnaire development
The questionnaire for the LOC construct is adapted from Levenson (1974, 1981) and Kaufmann et al.
(1996) measure of IPC model. Some of the items are dropped and some are amended to suit the local
context. The final version of the instrument for LOC consists of 15 items, 5 for each of the dimensions.
The instrument for the dependent variable, competitive advantage is self-developed mainly based on
the literature works of Porter (1980, 1985, 1998), McGrath et al. (1996), and Peteraf and Barney (2003).
There are 5 items each for both of the dimensions, cost advantage and differentiation advantage, in the
construct of competitive advantage. All the items are measured using 6-point Likert scale ranging from
strongly disagree to strongly agree.
Sampling plan and data collection method
Judgemental sampling method is used as the sampling plan for the study. Entrepreneurs with the name
and contact information appear in Multimedia Development Corporation Sdn. Bhd. (MDeC) database
are contacted through email. Approximately 2572 personal emails are sent to the contact person of the
companies. However, only 1575 emails have successfully reached the targeted respondents. With a
follow up email, 152 usable responses were collected. In addition, entrepreneurs participated in trade
exhibitions and cited in Klang Valley area are approached on face-to-face basic. About 500
entrepreneurs have been approached on this basic where 204 usable responses were collected. Together,
365 set of usable responses were successfully collected within the three months period from May 2007
to July 2007. These groups of respondents are approached because their participation in MDeC
programme and trade exhibitions has shown their eager to expand and develop their business. Besides
that, Klang Valley is the heart of Malaysia commercial activity, therefore, selection of entrepreneurs
from this area is hopefully can better represent the majority of the entrepreneurs in SMEs in the country.
Data analysis and interpretation
For the statistical analysis of the primary data collected, SPSS version 15 is used to perform all the
statistical analyses. First, descriptive analysis is conducted to get some idea of entrepreneurs
participated in the study. In addition, the descriptive analysis is also used to capture the mean and
standard deviation score for LOC of the entrepreneurs. The association of LOC of the entrepreneurs
and competitive advantage of the firm is examined using Pearson correlation.
Analysis on the background of respondents indicates that most of the respondents are male (71.8%) and
make up mainly from the two main races in the country, Malay (46.5%) and Chinese (46.3%). The
education level of the respondents are high, with 75.8 percent of them have tertiary level of education.
Table 1 above presents the mean analysis of all the three dimensions of LOC. From the table,
entrepreneurs are found to score highest in internal LOC with mean of 4.9967 and standard deviation of
0.6751. The mean for chance is 2.5845 and mean for powerful others is 2.9648 with standard deviation
of 0.9393 and 0.9401, respectively. This indicates that entrepreneurs in SMEs in Malaysia have high
level of confidence towards themselves. The low standard deviation value can further confirm the
consistency of internal locus of control as a trait to measure the personality of the entrepreneur. Among
the items, entrepreneurs hold the highest level of believe over their ability to control their own plan
(LOC 3) (mean = 5.1185; std. dev. = 0.8856). The analysis also shows that mean for powerful others is
higher than chance. However, referring to the break down of six-point Likert scale used to measure the
items, the mean for both powerful others and chance is still below the mid-point of the scale. Thus,
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although entrepreneurs’ believe on control by powerful parties is stronger than belief in control by
lucky events, they believe neither in control of powerful parties nor chance over their success. However,
worth to take note that mean for entrepreneurs believe to have to please the others to get what they
desire (LOC 14) is almost hitting the mid point of the six-point Likert scale use in the study, with mean
of 3.4038 and standard deviation of 1.3398. This finding might provide the clue that entrepreneurs
needs to gain favouritism from powerful parties to get certain benefit such as rewarding of contract as
highlighted by Jaafar and Abdul-Aziz (2005).
Table 1: Mean analysis on IPC LOC
Item
N
Belief ability determine oneself (LOC 1)
365
Belief in success due to own skills and abilities (LOC 2)
365
Belief in control over own plan (LOC 3)
363
Belief in protection over self interest (LOC 4)
365
Belief in control over own life (LOC 5)
363
Internal Locus of Control (Internal)
361
Belief life is control by luck (LOC 6)
Belief no chance to protect oneself from bad luck
(LOC 7)
Belief luck gives oneself what they want (LOC 8)
Belief success is a matter of luck (LOC 9)
Belief success influenced by luck (LOC 10)
Chance (Chance)
Belief life is determined by other powerful people
(LOC 11)
Belief success must be help by other people (LOC 12)
Belief no chance to protect own interest from other (LOC 13)
Belief have to please other to get what is wanted
(LOC 14)
Belief the other people will influence the life (LOC 15)
Powerful Others (PO)
Mean
5.0411
5.0822
5.1185
4.8329
4.9256
4.9967
Std. Deviation
1.01689
0.87946
0.88559
1.03085
1.12357
0.6751
364
2.7143
1.30720
364
365
364
364
361
2.8901
2.6274
2.3654
2.3352
2.5845
1.40601
1.27025
1.18112
1.19354
0.93926
360
361
362
2.6667
2.8310
2.9282
1.37628
1.33614
1.22997
364
365
358
3.4038
3.0082
2.9648
1.33983
1.37379
0.94058
Results for Pearson correlation between LOC and competitive advantage is indicated in Table 2, Table
3, and Table 4. Table 2 shows the association for internal LOC and competitive advantage, Table 3
shows relationship between chance and competitive advantage, and Table 4 indicates the correlation
between Powerful Others and competitive advantage.
Table 2: Pearson correlation for association between internal LOC and competitive advantage
Internal
LOC 1
LOC 2
LOC 3
LOC 4
LOC 5
0.317**
0.248**
0.181**
0.311**
0.183**
0.179**
Differ
Pearson
0.000
0.000
0.001
0.000
0.000
0.001
Sig. (2-tailed)
358
362
362
360
362
360
N
0.237**
0.137**
0.107*
0.235**
0.225**
0.131*
Cost
Pearson
0.000
0.009
0.042
0.000
0.000
0.13
Sig. (2-tailed)
359
363
363
361
363
361
N
Note: ** Correlation is significant at the 0.01 level (2-tailed). * Correlation is significant at the 0.05
level (2-tailed).
From the result, internal LOC is positively significantly correlated with differentiation advantage
(r=0.317; p<0.05) and with cost advantage (r=0.237; p<0.05). The entrepreneurs with high internal
LOC can achieve better performance in term of competitive advantage. Belief in ability to control over
oneself (LOC 1) has the highest correlation coefficient with differentiation advantage (r=0.248; r<0.05).
For entrepreneurs believe with stronger believe to have the said over their own life (LOC 1), the higher
is their achievement of differentiation advantage. On the relationship with cost advantage,
entrepreneurs believe over control of their own plan (LOC 3) is found to have highest correlation
coefficient (r=0.235; p<0.05). This could be linked with the logical reason that when entrepreneurs
believe they have greater controlled over their plan, it indicates also they are more confidence in
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making sure that the cost of the project is within budgeted. Thus, this leads to greater achievement of
cost advantage as well.
Table 3: Pearson correlation for association between Chance and Competitive Advantage
Chance LOC 6
LOC 7
LOC 8
LOC 9
LOC 10
-0.102
-0.046
-0.022
-0.55
-0.144**
-0.134*
Differ
Pearson
0.053
0.387
0.674
0.299
0.006
0.011
Sig. (2-tailed)
358
361
361
362
361
361
N
-0.011
0.031
0.067
-0.048
-0.072
-0.064
Cost
Pearson
0.842
0.563
0.201
0.362
0.169
0.255
Sig. (2-tailed)
359
362
362
363
362
362
N
Note: ** Correlation is significant at the 0.01 level (2-tailed). * Correlation is significant at the 0.05
level (2-tailed).
From Table 3, chance is negatively but statistically insignificantly associate with differentiation
advantage (r=-0.105; p<0.05) and cost advantage (r=-0.011; p<0.05). Among the items, belief over
their success is a matter of luck (LOC 9) and their success is influenced by luck (LOC 10) are
negatively significantly associated with differentiation advantage. This might because of differentiation
advantage involve innovation to bring greater value to the consumers thus require willingness to take
risk. If the entrepreneurs believe their success is associated with luck, thus, their willingness to take
risk to innovate will reduce as well since they do not foresee to have controlled over the outcome.
Surprisingly, belief over the life is controlled by luck (LOC 6) and have no chance to protect over the
bad luck (LOC 7) is positively but insignificantly associate with cost advantage. This might be due to
lack of confident of themselves have led some of the entrepreneurs to take more conservative method
by tightly control the cost of the company.
Table 4: Pearson correlation for association between powerful others and competitive advantage
PO
LOC 11
LOC 12
LOC 13
LOC 14
LOC 15
-0.073
-0.154**
-0.058
-0.074
0.062
-0.050
Differ
Pearson
0.168
0.003
0.273
0.164
0.238
0.338
Sig. (2-tailed)
355
357
358
359
361
362
N
-0.027
-0.135*
-0.019
-0.041
0.078
0.027
Cost
Pearson
0.614
0.010
0.726
0.429
0.138
0.612
Sig. (2-tailed)
357
359
360
360
362
363
N
Note: ** Correlation is significant at the 0.01 level (2-tailed). * Correlation is significant at the 0.05
level (2-tailed).
Similar with chance, powerful others is associated negatively but not significantly with both
differentiation advantage (r=-0.073; p<0.05) and cost advantage (r=-0.027; p<0.05). Among the items
in powerful others, belief in life is determined by powerful people (LOC 11) is the only item found to
be significantly associated with differentiation advantage (-0.154; p<0.05) as well as cost advantage
(r=-0.135; p<0.05). This shows that the greater belief in their life is controlled by other people, the
lesser is the tendency for the entrepreneurs to achieve greater performance for their business. On the
other hand, entrepreneurs believe to have please the others in order to get what they want (LOC14) is
positively but not significantly associated with differentiation advantage and cost advantage while their
believe that the life is influenced by other people (LOC 15) is also found to be associated positively but
statistically insignificantly with cost advantage. This again indicates the signal that some extent of
success of the SMEs in Malaysia is influenced by the strong power, which according to Jaafar and
Abdul-Aziz (2005) and Ariff and Abubakar (n.d.) is the political influence.
The statistical findings above lead to general conclusions that internal LOC is a factor associate with
entrepreneurship as well as success of SMEs. Influence of political power over the businesses is not
obviously observed in this study. This might be due to influence of political power is only on certain
group of people or certain industries. However, the sign of existence of the powerful parties in
influencing the entrepreneurs as well as the success of entrepreneurs can be weakly observed. In
general, neither powerful others nor chance is seemed to have great influence over the success of SMEs.
4. Policy implication
From the findings, this study urges the policy makers to take some initiative to enhance the
entrepreneurship and SMEs development in the country. Results of the study send a clear message that
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policy makers have to enhance the self-belief among the citizens at the same time reduce the level of
influence over the business.
For the long term solution, enhancing internal LOC among the citizens needs to start from the early
schooling age. This could be done by changing the current education system in the country. The
existing education system in Malaysia focuses heavily on knowledge learning and examination. With
the huge amount of text to be studied, some students are expected to get lucky but only focusing on
some “important” area to memorise by hoping that the luck will be on their side. Apart from that, some
teachers will also do the students a favour by giving the “tips” on what are the important materials to be
studied. All these will eventually lead to lower internal LOC but enhancing external LOC, by either
way of belief in chance or belief in powerful others. In order to enhance internal LOC, the amount of
materials to be studied by the students should be reasonable. In addition, the assessment of the students
should not be too examination base. Some rooms should be given to assess other talents of the students
to ensure those who are relatively weak in exam can have a fair and healthy development in the
education system. This will definitely help in developing their self-belief over the long term.
Besides that, the government should also ensure a fair and competitive market is maintained. Therefore,
government should be re-looked into the existing policies of granting special right, subsidy, contract,
and others elements which will give advantages to some firms. In long run, this will enhance the belief
that political powers or the linkage with politicians will ensure success in business world. In addition,
some rules might be implemented to control the monopoly power of mega sized company on SMEs.
This will also ensure that the market is competitive thus giving greater confidence to the entrepreneurs
as they know that they do not need favouritism from the mega sized companies to be successful.
Both of the short term and long term methods are hopefully able to enhance the internal LOC of the
existing entrepreneurs and the citizens in the country to encourage more entrepreneurs and to enhance
the success of SMEs. This will eventually boast the economic of the country since more than 99
percent of the businesses in Malaysia fall into the category of SMEs (Bank Negara Malaysia, 2007).
5. Conclusion
This study demonstrated that even internal LOC is the focus in entrepreneurship study, powerful others
and chance should be given more emphasis as well as they do not provide completely opposite results
compared with internal LOC. Thus, future studies might consider IPC LOC rather than internal LOC
alone in the study of entrepreneurship, especially in countries where government intervention in the
business world is significant.
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