Financing the growth of small manufacturing firms in developed and developing countries: a comparative study of the United Kingdom and Malaysia

The rationale for this thesis stems from three interlinked issues. First, there is a general recognition of the importance of the small firm sector and the value of its contribution to the health of economies across the globe. Second, the provision of external finance for growing small firms in developed and developing countries has improved significantly over the last few years in terms of both the total of funds and the range of financial facilities available. Third, despite this rapid expansion in the range of public and private sector financial initiatives, there is widespread perception that financing difficulties continue to exist, difficulties which are perceived to be major obstacles or constraints on small firm growth. This thesis aims to contribute to a better understanding of the practices and problems of financing the growth of small firms in developed and developing countries with particular reference to the United Kingdom (U.K.) and Malaysia. In pursuing the main l objective, empirical study attempts to investigate the characteristics of small firms and their owner-managers, as well as the growth orientation of the firms and the extent to which these characteristics are associated with the need for, and use of, external sources of finance and with the existence of difficulties in obtaining the finance. Subsequently, comparative investigation between the two countries explores the similarities and differences with respect to the sources and patterns of finance as well as the difficulties in raising finance. Having identified the important variables in the theoretical framework of the study, the relationships among the variables are established and research hypotheses are generated. In order to achieve the main objective ofthe study, the empirical investigation was conducted using two research strategies: questionnaires and case studies. Nonparametric gamma and chi-square statistics are used in analysing the empirical results. Two major findings emerge from this study. First, the overall characteristics of firms and owner-managers have no association with the need for, and sources of external finance and the existence of difficulties in raising finance; whereas growth of the firms can be associated with the sources of external finance and the existence of financing difficulties. Second, whilst there is a significant difference in the need for external finance by growthoriented small firms in the U. K. and Malaysia, both the sources/patterns ofexternal finance and the difficulties experienced by small firms in the two countries are not markedly different.