Ethnic Indians constitute only about 7 per cent of Malaysia's population,Footnote 1 and yet this vibrant and diverse minority group has contributed enormously to the development of the country's economy since the turn of the last century.Footnote 2 However, there has been scant research on Indian-owned businesses in Malaysia, specifically in terms of the evolution of their employment of ethnic and class-based resources to develop their enterprises. There has similarly been no research on how these Indian business owners resort to employing their cultural heritage to define and create their products and services to establish a niche for themselves in the economy. Crucially too, many of these enterprises are now run by the second or third generation. In spite of a long history of Indians in business, there has been no assessment of the outcomes and implications of these generational transitions as well as the opportunities and barriers faced by members of this ethnic group in the Malaysian economy.
Another concern is that the theoretical perspectives regularly employed to analyse the growth of enterprises owned by members of particular ethnic groups appear increasingly inapplicable in multiethnic Southeast Asia. Logan et al. define an ethnic economy ‘as any situation where common ethnicity provides an economic advantage’.Footnote 3 Ivan Light and Steven Gold define an ethnic economy more explicitly as an economy where all stakeholders are of the same ethnicity.Footnote 4 Ethnic entrepreneurship is seen as ‘a set of connections and regular interaction patterns established in the name of trade and commerce among people sharing common national background or migration experiences’.Footnote 5 Min Zhou notes that
ethnic entrepreneurs are frequently referred to as both owners and managers of their own enterprises, whose group membership is tied to a familiar cultural heritage and is known to out-group members as having such qualities; more importantly, they are intrinsically intertwined in particular social structures in which individual behavior, social relations and economic transactions are encumbered.Footnote 6
Joel Kotkin popularised these views by presenting a monolithic view of ethnic groups as ‘global tribes’ driven by a ‘strong sense of common origin and shared values’ and that ‘success in the new global economy is determined by the connections which immigrant entrepreneurs carry with them around the world’.Footnote 7
Such transnational perspectives that essentialise ethnic identity can be problematic in the Southeast Asian context. Unlike Europe, which continues to see large-scale migrations, and where migrants may eventually become citizens, similar migrations largely ceased in Southeast Asia by the early 1930s, and migrants find it difficult to acquire citizenship.Footnote 8 Yet in Southeast Asian countries with substantial migrant populations, non-indigenous ethnic groups, such as the Chinese, identify with their country of birth, not with their ancestral homeland.Footnote 9 Arguments based on socially-oriented economic behaviour by minorities who are ascribed a pan-ethnic identity can thus serve to distort their resilience and agency in developing their businesses.
This study therefore critically reviews concepts such as ethnic entrepreneurship, ethnic enclaves and ethnic business that are widely employed to describe how businesses owned by members of ethnic groups operate. These concepts are particularly debateable when employed in Southeast Asia as the empirical evidence, presented from a historical perspective, suggests that they may not provide an accurate representation of core issues such as the use of ethnic identity to nurture corporate ventures. These concepts have also inspired the creation of another major theme in the literature on ethnic enterprise: intra-ethnic business networks. The concept of ethnic networks, based on the idea that the bonds of ethnicity shape business cooperation for mutual benefit, is widely employed in the literature on Chinese business.Footnote 10 One revisionist view is that while co-ethnic business ties still exist, a majority of these networks are now trans-ethnic in nature and forged on the value they will bring to these companies.Footnote 11 The concept of intra-ethnic business networks has been similarly deployed in assessments of Indian-owned enterprises in developed and developing economies.Footnote 12
Malaysia has the second-largest ethnic Indian population in the world outside of India, and it is a community now deeply embedded in the economy and society.Footnote 13 To assess the proposition that concepts such as ethnic entrepreneurship and ethnic enterprise may not be applicable to this country, this study traces the evolution of eleven Indian-owned small and medium-scale enterprises (SMEs) in three sectors. Based on the assessment of these SMEs, with a focus on the impact of generational shifts within each firm, this article reviews the applicability of core concepts such ethnic resources, class resources, ethnic business networks and modes of enterprise development.
Indian business in Malaysian history
Prior to the influx of Indians into Malaya during the late nineteenth and early twentieth centuries, traders from South Asia had been arriving and settling in the trading ports of Penang, Malacca and Singapore. These South Asian traders had initially seen themselves as temporary migrants, or sojourners, though new settlements emerged following inter-ethnic marriages, which gave rise to new communities such as the Chettis of Malacca and the Chulias of Penang; both emerged as prominent business groups in these ports.Footnote 14 However, these two groups no longer have a major presence in the economy, including in these cities.
About 80 per cent of Malaysian Indians are Tamils whose forefathers were primarily migrant labour recruited during the early 1900s through an indentured system to work in the plantation sector controlled by foreign, particularly British, enterprises.Footnote 15 The other sub-ethnic Indian groups include the Malayalees, Gujeratis, Sindhis, Punjabis and Telegus. The members of these sub-ethnic groups, particularly the Punjabis and Malayalees, have served as professionals or in the civil service. Sindhis and Gujeratis have a long history of involvement in business, with a major presence in the textiles industry. Chettiars were known for their moneylending, but no longer feature prominently in this sector.Footnote 16 Tamil Muslims, comprising also the Chulias, have commanded a particularly telling position in the food industry, due to a perceived affinity with the majority Malay Muslims, stemming from their common religious identity.
The varying degrees of business involvement by these sub-ethnic groups and the evolution of their companies following generational shifts was due to a variety of factors including class background (financial assets, education and skills), purpose of migration (by design as investors or by misfortune as indentured labour), the role of the state (policies and legislation), and market conditions (competition and selective patronage). Like the South Asian traders in the 1800s, these Indians saw themselves as sojourners, though over time a number of them settled in the country. Small Indian-owned businesses began to emerge to cater to the demands of co-ethnics, most of them functioning as micro-based informal enterprises.Footnote 17 These businesses allowed them to shift away from poorly remunerated wage-earning occupations such as rubber-tapping to profit-making enterprises in ethnically Indian-based industries. These traders settled mainly in the more industrialised states on the west coast of the peninsula, in Penang, Perak, Selangor and Negeri Sembilan.
Among Indians in business, the Gujeratis were revered as ‘kings of textiles’, though they have also secured some repute in the import and sale of spices and goods from India. One Gujerati enterprise that emerged as a major textile company is Kamdar, a publicly-listed firm that operates a number of departmental stores in major cities. The Sindhis began establishing themselves as merchants in Malaya around the 1880s, settling mainly in towns in the west coast of the peninsula. Pakistan's partition from India in 1947 had a major impact on members of this sub-ethnic group, contributing to the migration of Sindhi families to Malaya. Sindhis have since ventured into real estate, electronics, departmental stores, entertainment, food and jewellery, though they remain best-known for their involvement in the textiles sector. Reknowned Sindhi businessmen include the textile tycoon Rupchand Binwani, the founder of Binwani's; Utumal Valiram, who established the Valiram Group; and Kishu Thirathai, who owned Globe Silk Store in the heart of Kuala Lumpur, a major retail outlet in the 1970s.
Indian entrepreneurs have had an insignificant presence in the corporate sector, however. By 1970, Indians owned only about 1 per cent of the country's corporate wealth. In 2008, Indian ownership of corporate equity still stood at a mere 1.6 per cent.Footnote 18 When the race riots of 1969 led to the introduction of the affirmative action-based New Economic Policy (NEP) in 1970, this gravely undermined the development of Indian-owned businesses. The NEP entailed active state intervention in the economy through well-funded public enterprises to acquire companies that were to be transferred to Bumiputeras, ostensibly to develop a Bumiputera Commercial and Industrial Community (BCIC).Footnote 19 Although the NEP's stated goals were the eradication of poverty, regardless of race, and equitable redistribution of wealth, this policy had a minimal impact on redressing the pressing socioeconomic problems faced by Indians. Maran Marimuthu contends that the implementation of the NEP undermined the development of Indian-owned small firms as they could not obtain or renew their licences to carry out business activities.Footnote 20 In the mid-1970s, the Malaysian Indian Congress (MIC), a key member of the ruling multi-party coalition, the Barisan Nasional (BN, National Front), had to go so far as to propose the need for a positive discrimination policy to specifically address the plight of poor Indians. When the government refused to act on this call by the MIC, the party incorporated in 1982 its own investment arm, Maika Holdings, to acquire corporate assets on behalf of the Indians. Investments poured into Maika, primarily from poor Indians, while privately-owned firms owned by this ethnic group felt that they would be further crowded out by this potentially huge investment holding company. Although Maika managed to raise RM106 million by 1984, it was soon mired in serious allegations of corruption and failed to make any impact on the economy.Footnote 21
Indian businesses struggled to survive in this context of active state intervention that bypassed this community to focus primarily on developing a BCIC. The state also bypassed Indian SMEs when the Vendor Development ProgrammeFootnote 22 (VDP) was introduced to internationalise SMEs in Malaysia. According to A. Sivalingam, most Indian-owned firms continued to operate as SMEs due to poor state support and because they hardly invested in research and development (R&D) for fear that if they expanded and sought public listing, huge fractions of their equity would be channelled to Bumiputeras, as stipulated by the NEP.Footnote 23 Due to this, the Indians consistently felt that they were facing ethnic discrimination and had little, if any, access to government concessions when seeking opportunities to go into business, getting bank loans — Malaysia's leading banks are state-owned — and renting business premises.
Since Indians have struggled to increase their presence in the corporate sector, in June 2012, following an evident shift in political support by this ethnic group to the opposition in the 2008 general election, the government established the Special Secretariat for Empowerment of Indian Enterprises (SEED). Through SEED, the government hoped to bring together a multitude of public agencies and financial institutions to aid the development of small and micro firms. A special RM180 million fund was created for this endeavour, with SEED providing microfinancing for enterprises in eight sectors: florists, textiles, Indian wedding planners and decorators, franchising, tailoring, barber shops, provision shops and transport.Footnote 24 It is still too early to gauge the impact of SEED on the development of small Indian-owned firms.
While the NEP has hampered the rise of enterprises owned by ethnic minorities, Indians have managed to retain a prominent role in three sectors, food catering, textiles and jewellery. These companies function primarily as SMEs, which now constitute about 99.2 per cent of Malaysia's corporate sector, employ about 56.4 per cent of the total workforce, and contribute about 47.3 per cent of the GDP.Footnote 25 Realising rather belatedly the importance of SMEs, the government established the Small and Medium Industries Development Corporation (SMIDEC) in 1996. This agency has served to facilitate the development of SMEs by providing them with financial assistance, advisory services, infrastructure facilities, market access and other support programmes, a core factor that has contributed to the growth of the enterprises. The Department of Statistics in Malaysia reports that from 2006 to 2010, with the government focus on small firms, the SME sector grew at an annual rate of 7.8 per cent, faster than that of the overall economy.
When Malaysia embarked on export-oriented industrialisation in the 1970s, this contributed to the growth of the textiles and apparel industry; with intensified global competition, domestic textile manufacturers moved up the value chain by diversifying into the production of higher value-added textiles, implementing automation and computerising manufacturing. Indian firms in the textiles industry have been continuously dominated by the Sindhis and Gujeratis, though the Chulias also have a presence in this sector.Footnote 26 Key players in the textiles industry who have been in business for two generations or more are companies such as Binwani's, Kamdar and Gulati's Silk House. Among SMEs in the food industry, Indian companies have fared well in the spices and catering sub-sectors. In these sub-sectors, key players who have been around for two generations or more include the Lotus Group, the Big Rajah Food Caterers, and Jumbo Restaurant and Catering. In the jewellery sector, among Indian-owned small firms, those that have been in business for two generations or more are companies that cater to Malaysians who prefer purchasing simple designs in both fine and costume jewellery. Key players in this industry in business for at least two generations are Habib Jewels, Madras Jewellers, Sri Ganesh Jewellers and V. Gopal Pather & Sons.
Ethnic entrepreneurship in transition?
Interest in the links between ethnicity and entrepreneurship can be traced to the classic works of Werner Sombart, Max Weber and Georg Simmel. These scholars’ concept of the stranger as trader, along with social structures and ubiquitous religious canons, inspired a body of literature about ethnic entrepreneurship. An ethnic business typically is one where an entrepreneur serves members of the same ethnic group, satisfying their specific needs. Ethnic groups who live in geographically concentrated areas outside of their countries of origin are usually served by ethnic businesses. Ivan Light introduced the concept of ‘protected market’ to describe how ethnic enterprises dealing in ethnically-based products could thrive by serving co-ethnics.Footnote 27
Ivan Light and Edna Bonacich employed the concept of ‘ethnic resources’ to argue that ethnic businesses exploit their ethnicity in ways that are of benefit to them.Footnote 28 They contend that certain skills can be transmitted by co-ethnics, who are also a source of cheap labour, especially from abroad, that can be exploited and that ethnic groups can depend on ethnically-based support networks and trade organisations to protect and develop their business base.
The two major themes applied in the literature appraising the evolution of enterprises that function in an ethnic economy are ethnic enclaves and middlemen minorities. These concepts are applied when analysing relatively new and unassimilated migrants in developed and developing economies, including in Southeast Asia when waves of Indian and Chinese migration were recorded around the turn of the twentieth century.Footnote 29 In North America, Edna Bonacich and John Modell's theory of the middleman minority was that immigrants in the host country had the outlook of sojourners seeking a quick profit in often marginal business niches selling products and services in high demand by fellow ethnic minorities.Footnote 30 Scholars in this tradition further argue that ethnic enterprises have a business style characterised by family firms, trade guilds and extensive intra-ethnic business transactions, locally and with their ‘homelands’.Footnote 31
Meanwhile, the concept of ‘ethnopreneurship’, introduced by anthropologists John and Jean Comaroff in their thought-provoking Ethnicity Inc., provides another dimension of the links between ethnicity and business. For the Comaroffs, ethnopreneurship involves a triangulation of culture, identity and market. However, the Comaroffs are extremely critical of the ‘commodification’ of ethnicity for marketing purposes. For these anthropologists, the commodification of ethnicity indicates the pervasiveness of neoliberal practices, which have been adopted by people who misrepresent their own culture and identity in the pursuit of profits. The marketing of ethnic-based products merely serves to essentialise identities, transmitting the idea of communities and cultures that have not evolved over time. For the Comaroffs, the imperatives of capital determine how identity is adopted, quite evident in the case of migrants entering into a business venture.
Since the involvement of migrants in business meant more competition in the marketplace, this increased majority-group antagonism and reinforced minority-group solidarity and economic segregation. The sojourner mentality is not a prerequisite for minorities to face antagonism, discrimination and a lack of opportunities. However, since migrants possibly face severe discrimination or antagonism, self-employment becomes a desirable alternative to participating in the market. This is similar to the structuralist focus which suggests that factors in the host environment such as discrimination or entry barriers due to education and language deficits encourage migrants into self-employment.
Light and Bonacich contend that migrants in business are motivated by family values, religious beliefs and communal solidarity.Footnote 32 While these are seen as coping strategies for migrants in an alien business environment, they serve also as core factors that have enabled them to nurture more competitive family-run companies. Family members in these migrant-owned businesses willingly accept low wages though they work long hours while companies owned by the indigenous community rely on local workers whose wages are determined by the market; inevitably, the latter encounter higher operating costs.
Light and Rosenstein further developed the concept of group characteristics by focusing on ethnic, class and other resources utilised by immigrants when developing their business start-ups.Footnote 33 Yoon In-Jin suggests that while ethnic resources are important at the initial stage of building an enterprise, at a more advanced stage, class resources become more significant.Footnote 34 The contention that owners need class-based resources to develop their enterprises has been reinforced by studies of migrants in business by Satnam Virdee and David Deakins et al.Footnote 35
More recent studies of ethnic groups in business emphasise other perspectives. Roger Kloosterman and Jan Rath stress the concept of ‘mixed embeddedness’, building on the work of Mark Granovetter.Footnote 36 Here, the rise of ethnic entrepreneurship is located at the intersection of changes in socio-cultural and modernisation processes. In this line of theorising, context matters, necessitating an assessment of how ethnic businesses are embedded in a wider sectoral, spatial and regulatory environment.Footnote 37 It stresses that individual experiences of immigrant entrepreneurs are embedded within political, economic and social institutions, locally, nationally and internationally, as well as regimes of governance, regulation and policy that vary over time from country to country. The mixed embeddedness approach is a comprehensive one that entails taking into account the characteristics of the supply of ethnically-based enterprises, the shape of the opportunity structure, and the institutions mediating between aspiring entrepreneurs as well as concrete openings to start a business.
Although the mixed embeddedness model stresses the importance of ethnic resources and opportunity structure of the market, its theorising of ethnic entrepreneurship does not factor in the topic of generational change. This is crucial for the case of Malaysia, as most ethnic minority-owned enterprises are now under the control of a second or third generation.
Ethnic resources, class resources and generational change
A close review of the literature will indicate scant research on the evolution of Indian enterprises through the generations in developing economies. While scholars argue that ethnic enterprises are largely typified by traits such as a common language,Footnote 38 shared culture,Footnote 39 social normsFootnote 40 and social networks,Footnote 41 such arguments are being increasingly challenged as generational changes occur. As these firms undergo a shift in ownership and control with the takeover of a new generation, the concept of ethnic enterprise merits urgent re-examination.
This study's primary concern is what happens when ethnically-based enterprises incorporated by migrants are passed on to the second and third generation, in this case, people born and bred in Malaysia with little or no ties to the South Asian countries of their forebears. Generational change refers to the natural evolution of ethnic enterprises and the distinctive transformations that take place in these firms as they pass from the hands of the first generation to the next. The newer generations’ mode of doing business is shaped not just by experience garnered from the founding members of these enterprises, but also by changing social, economic, political and technological mores in wider society.
The literature argues that migrants, the first generation, ventured into business to attain economic well-being and security for themselves and their families.Footnote 42 While taking advantage of the opportunities present in the host country, they also strove to maintain the culture, heritage and traditions of their homeland. These businesses were established in order to keep family members together and in employment. Key features of the migrant cohort that helped them develop their enterprises included prudence, hard work and dependence on family labour, all crucial due to their shortage of financial resources.
Since entrepreneurship was for some of these migrants a pathway out of poverty, they saw a sound education as crucial to increasing the opportunities and choices available to their children. Some of the migrant founding owners also hoped that having well-educated children would aid the development of their enterprises.Footnote 43 For the next generation, these enterprises were a means to achieve social mobility as they were a source of employment and training opportunities.Footnote 44 These companies allowed the subsequent generations to deal with labour market challenges and the lack of alternative opportunities.Footnote 45 However, while ethnic businesses function to support migrants, they could trap the second generation in unpromising businesses. These different assessments of how the second generation relate to business activities demonstrate the tensions between group cohesiveness and the different trajectories available to — and taken by — the second generation. Importantly too, national and ethnic identities in Southeast Asia have evolved over time, following economic and political change; hence, the sense of cohesion of the migrant generation dies away, from one generation to the next.
However, as the empirical evidence in this study will indicate, there have been situations where second and third generation Indians have resorted to, or draw on, or commodify their ethnicity to develop their enterprises. This ethnic-based commodification of their products and services is an idea conditioned by the need to capture a particular segment of the market.
The class resources of members of an ethnic group include material goods such as property or wealth as well as ‘bourgeois values, attitudes and knowledge’.Footnote 46 For example, well-educated migrants in the United States often run their own businesses as tertiary education is a form of human capital that can help entrepreneurs tap into opportunities emerging in the market.Footnote 47 Entrepreneurs with higher education and business training are likely more adept at expanding their enterprises. Education allows migrants to overcome internal barriers and negotiate external market barriers. The market strategies they pursue also depend on factors such as previous experience of and exposure to business.Footnote 48
Since education also opens up the possibility for professional opportunities, however, higher qualifications may significantly reduce the inclination for self-employment among those with such credentials.Footnote 49 Trevor Jones et al. report that minorities from the British-born generations, especially Indians and Chinese, with their burgeoning acquisition of high-level educational qualifications, were able to create alternative routes to social mobility, by becoming professionals.Footnote 50 Similar trends are evident in Malaysia among the Indians and Chinese.
Moreover, Juliette Koning and Michiel Verver, after investigating the importance of cultural values among ethnic entrepreneurs in Southeast Asia, argue that these values and norms are plummeting in importance among the second and third generation of the migrant cohort.Footnote 51 Over time, the descendants of the migrant generation shift their identity from one that is predominantly cultural to one that is mainly national.Footnote 52 This strong national identity reduces the tendency of the new generation to view themselves primarily in terms of their cultural norms, belief and practices. These new trends shape their manner of conducting business.
Case studies
The implications of generational change on Indian-owned SMEs in Malaysia are traced through case studies of eleven firms in three sectors where the Indians have a prominent presence. Five companies are from the food industry, three are involved in the textiles sector and the final three trade in jewellery. Companies in the textiles, food and jewellery sectors were chosen for assessment as these three industries also offer the products and services of the ‘homeland’, which were in high demand in the ‘host country’, particularly by the migrant cohort. The products and services offered by these industries remain important in the lives and culture of latter-generation Malaysian Indians.
All eleven companies, owned by Malaysians, deal with ethnically-Indian products and services and have been in operation for two generations or more. The primary data collection method was an in-depth analysis of the annual company reports of these eleven firms that were filed with the government agency, Companies Commission of Malaysia (CCM). All companies in Malaysia are required by law to file an annual report, which must include their profit & loss account, list of shareholders and directors, and statement by the chairperson on key corporate events. The second major source of data were in-depth interviews with the founders as well as the second or third-generation owners of these businesses. These interviews provided the most suitable means to explore and review processes of change, including decision-making about product development or diversification and the endeavour, in some cases, to capture a clientele beyond ethnic Indians.
Table 1 presents the key features of the evolution of all eleven companies, such as date of incorporation, volume of share capital, number of employees, branches and associated companies, and forms of product development and diversification, including how they have evolved following a generational change. Table 2 provides detail on the outcomes of generational change in these companies on the deployment of ethnic- and class-based resources, and the extent to which these businesses remain as ethnic enterprises.
Table 1: Key growth and development features of Indian-owned companies
Notes: In 2014, the exchange rate for US$1 was Ringgit Malaysia (RM) 3.20. aLocations that can be classified as ethnic enclaves.
Sources: Annual company records (Companies Commission of Malaysia); interviews were conducted with the owners of all 11 companies.
Table 2: Key features of Indian-owned companies following generational change
Findings and discussion
Tables 1 and 2 provide insights into transitions that have occurred with rapid modernisation, specifically the willingness of a growing segment of Malaysians to buy products seen as Indian in nature. Most of these enterprises have evolved to suit changing market trends. The case studies indicate the importance of class resources, following a generational change, to cater to these market trends.
In the food sector, while the founder of Santha Store Flour Mill relied heavily on co-ethnics to develop his enterprise, his son-in-law, who obtained a doctoral degree and had managerial experience, was adept at using technology to expand the company's range of products and creating ties with people in government and in business to develop this enterprise. M.P. Lingam & Sons grew by identifying a niche, the sale of gingelly oil, and when demand for this product diminished over time, the second generation, privy to higher education, was able to venture into other business areas. Gemini Flour Mills's expansion was due to the experience its owner had acquired while in the sector, a trend seen also in the Big Rajah Food Caterers whose founder exposed his son to the business from a very early age, a crucial factor for its development. Jumbo Restaurant & Catering's founder was a pioneer in the industry while his daughter, an international business studies graduate, had knowledge of management techniques to enhance the company's operations and the confidence to incorporate Malays as co-owners as a method to increase the size of its clientele.
The extremely trans-ethnic nature of Binwani's products and customer base is attributable to the exposure gained by the third generation while studying in the United States, which equipped them with the skills to create business ties with renowned fashion designers. Their awareness of emerging opportunities following rapid modernisation is the reason why their target market is primarily the upper middle class, where they encounter little competition from co-ethnics. The founders of Ajuntha Textiles and Sri Kumaran's Textile acquired experience in the textiles sectors before venturing into business on their own, emerging as competitors to the companies where they secured their training, indicating strong competition among co-ethnics.
The owner of Abdul Razak Jewellers acquired knowledge, skills and experience to increase efficiency, productivity and sales, while his investment in technology allowed him to produce jewellery in bulk over a shorter period, resulting in greater yields. In Sri Ganesh Jewellery & Gem Corner, prior business experience was crucial for the first and second generation, a trend similar in V. Gopal Pather. These three SMEs remain ethnically Indian, continue to locate themselves in ethnic enclaves, offer traditional products and mainly target the Indians.
Two core findings can be drawn from Tables 1 and 2. First, there are significant variations regarding whether these companies, established as ethnic-based enterprises, have shed their ethnic identity following a generational shift. The extent to which these firms discard an ethnically focused business identity is associated with their class resources as discussed above,Footnote 53 specifically the second and third generations’ acquisition of higher education, and how changing market trends influence demand for their products and services. These factors, in turn, had a bearing on how, or if, they drew upon or continued to commodify their ethnic identity. The new generations are conversant in Malaysia's national language, Malay, as well as English, a crucial resource that has helped them respond effectively to changes in society and expand their customer base, domestically, and in three cases internationally (Santha Store Flour Mill, Jumbo Restaurant and Catering, Binwani's). Following generational shifts, the dependence of these firms on strong co-ethnic ties to source funds and labour has diminished appreciably.
Second, whether these companies have been able to move beyond the production and sale of only ethnically-based products can be gauged in the type of goods they now market. In the food sector, a major conversion occurred in all firms, from an ethnic enterprise to one where the products offered are now extremely inter-ethnic in nature, though Indian cuisine remains their main fare. Companies in this sector make little attempt to draw exclusively on their ethnicity as this serves to severely limit their customer base. In the textiles sector, the primary merchandise of two firms, Ajuntha Textiles and Sri Kumaran's Textiles, is still Indian-type fabric and clothes, but their clientele was extended to include Malays, due to the growing popularity of Bollywood movies. In this sector, the commodification of ethnicity to draw non-Indian customers has appreciably increased sales revenue. Binwani's, however, a fairly large-sized firm company compared to the other two, and one dealing in upmarket fabrics, makes no attempt to stress an ethnic identity. This variance among textiles firms is due to class differences, though sub-ethnic identity is also a core matter. Binwani's is owned by Sindhis, a sub-ethnic Indian community that has a long history of trading not seen among Tamils. In the jewellery sector, all three extremely small firms are deeply situated in what can be seen as ethnic enclaves and have made no attempt to move beyond their Indian clientele. In fact, these jewellery firms have made a concerted attempt to reinforce the commodification of their ‘Indianness’ to court customers. The owners of these SMEs speak little English and Malay, a reason for their reluctance to move beyond their current clientele.Footnote 54
The first generation effectively tapped into market opportunities, but learnt the trade first. As they had little or no class resources, they typically obtained credit facilities and labour from family members and co-ethnics. The latter generations secured tertiary education, a major class resource that aided the expansion of their businesses. Higher education gave this generation the confidence necessary to network on an inter-ethnic basis as well as embark on transnational business ventures. Better education provided for better management and access to market information, which allowed these businesses to alter their products to suit the needs and demands of a larger cohort of customers. These SMEs avail themselves to loans from banks, a practice not evident among most of the founders, particularly poor migrants. Business opportunities emerged following rapid modernisation which new generations effectively tapped into.
Other significant dissimilarities between the founding and subsequent generations are evident, determining the importance of functioning as an ethnic enterprise and commodifying their ethnicity. There was no certainty of survival of the companies established by migrants with little education, confronted also as they were with economic uncertainties arising from running a business in an alien land (M.P. Lingam & Sons, V. Gopal Pather, Sri Ganesh Jewellery & Gem Corner, Kedai Emas Abdul Razak). A similar situation prevailed among the founders of firms who were only conversant in an Indian language (Santha Store Flour Mill, Ajuntha Textiles, Sri Kumaran's Textiles). In order to survive, they had to create strong intra-ethnic group ties. The building of ties based on co-sub-ethnic identity was particularly useful as the founders primarily served fellow sub-group members, a factor that also indicated deep class, language and spatial cleavages among Indians. Such differences hampered these firms’ early development, but the subsequent generations have been able to create business networks that transcend these cleavages.
The migrants among the first generation viewed India as their ‘homeland’ while Malaysia was merely a ‘host country’, a place to obtain income and savings. Since they thought they were on a short sojourn from India, this had an impact on business decision-making processes, in terms of extending the range of products sold, a factor that hindered their pursuit of a larger client base. Intra-ethnic networks were forged to secure credit, a reliable and competent labour force, and a trustworthy supply of raw products.
The first generation's ability to develop their firms stemmed from some entrepreneurial know-how, such as business experience in India or an apprenticeship with an enterprise owned by a co-ethnic (or co-sub-ethnic) (Santha Store Flour Mill, Gemini Flour Mills, Binwani's, Ajuntha Textiles, Sri Kumaran's Textiles, Kedai Emas Abdul Razak, Sri Ganesh Jewellery & Gem Corner, V. Gopal Pather). They were able to identify a market niche. These market opportunities included interest in ethnic-type goods such as gingelly oil, in high demand among fellow migrants (M.P. Lingam & Sons).
The second generation had to respond to demographic changes involving the declining population growth rates of Malaysian Indians. As this decline occurred, the second generation chose to alter the type of products sold to cater to an inter-ethnic clientele in order to expand their enterprises. These changes entailed altering production, operation and marketing methods. Product diversification was particularly imperative for companies wishing to capture a non-Indian clientele, a change that provided them the opportunity to expand their markets. When affirmative action based on supporting Malays in business was introduced, some Indian-owned SMEs had to diversify their products as they lost sales to government agencies. In the case of Gemini Flour Mills, interestingly, this loss of a major client compelled the owners to introduce novel products that allowed them to create a niche for themselves.
One feature, however, has remained unchanged; family ties are essential for sustaining and building a business. With only one exception, Jumbo Restaurant & Catering, ownership and directorships have remained in the hands of family members. This trait is common among family enterprises.Footnote 55 However, the second and third generations do not rely on family or intra-ethnic ties to secure funding, availing themselves of loans from banks for this purpose. Similarly, the subsequent generations were open to hiring foreign labour, not only co-ethnics, to serve as part of their workforce. In most of these companies, foreigners constitute a major segment of their employees. The cost of employing foreign labour is low and they do not participate in sectoral-based unions.
Conclusion
The case studies indicate that although concepts such as ethnic enterprise and ethnic enclaves are still applicable to Indian-owned businesses in Malaysia, they have to be used cautiously, paying attention to the sectors under review. The term ethnic enterprise is increasingly invalid in the food catering sector, partially applicable in the textiles industry and still relevant in the jewellery production and trade. However, this statement has to be qualified because a comparative review of companies in these sectors indicates that shareholders with limited class resources prefer to operate as ethnic enterprises, in areas that can be construed as ethnic enclaves. Shareholders without class resources, typically the first generation entrepreneurs, do not have the management skills to diversify their products and services in a manner that can allow them to increase their market base.
For these SMEs, the need to preserve a secure clientele is a key reason why they continue to draw upon their identity, some to a small degree while for others this is imperative to sustain their business; these small firms are ethnopreneurs differently. These firms do not hide their identity or culture when pursuing sales, but build on it. Small firms in the jewellery sector essentialise and reify ethnic and religious identity to create entry barriers into their business domain, limiting competition to one based on an intra-ethnic basis. This limits their customers to middle- and lower middle-class co-ethnics, though these firms do not appear too perturbed by their limited capacity to grow, suggesting that they are comfortable operating in enclaves. Their marketing techniques do serve to essentialise Indian identity, transmitting an idea of communities and cultures that have not evolved over time, a method to muster sales. However, SMEs in the textiles and jewellery sectors sell different understandings of their ‘Indianness’ through their products. Large enterprises, on the other hand, with much class resources such as wealth and a better education look to shed their ethnic identity, evident in the case of Binwani's as well as high-end jewellers. Commodifying identity is increasingly seen as an obstacle to business growth among firms in food catering. All food caterers have had to shed their stress on the Indianness of their products to secure a larger market base.
Another reason why some firms seek to commodify their ethnicity while others strive to discard it is intra-sectoral competition. In food production, companies target co-ethnics and non-co-ethnics to stay ahead of the competition by expanding their customer base. In food catering, all companies have dispensed with their distinct ethnic identity, allowing them to diversify into related areas such as events management. The textile firms have striven to find a balance between Indian-based and non-Indian based products. Companies innovative enough to use Indian fabric to create Malay-type attire have been most adept at expanding their clientele. Meanwhile, small-scale Indian jewellers have shifted to producing religious-based jewellery, relying on their Hindu identity as a further means to survive.
Members of the second and third generations thus selectively employ ethnicity as a business tool when determining how their firms should operate. The extent to which firms de-commodify their ethnic identity is linked to what they see as business opportunities; such decisions are closely associated with their class resources. Their ability to adapt to changing economic conditions and state policies, by diversifying their products or by changing their marketing techniques, is why these firms have managed to grow or have consigned themselves to a clearly defined ethnic space. Shareholders with more class resources are more adept at incorporating innovation, coping with change and pursuing new opportunities. They have sufficient flexibility to create inter-ethnic business networks conditioned by the need to tap into these new opportunities.
The current conception of an ethnic enterprise negates the complex situation in which these firms operate as well as the changes arising from a generational shift when shareholders acquire class resources. The imperatives of business development and capital accumulation have determined how identity is adopted and developed or discarded. A key facet of an ethnic enterprise is its strong dependence on ethnic-based resources. Co-ethnic support among the migrant generation was vital and easily gained due to ease of communication and cultural compatibility. This view is becoming increasingly obsolete in modern Malaysia. Most SMEs studied here indicate a growing dependence on inter-ethnic, not intra-ethnic, resources for development and diversification of their businesses; this transition has not been difficult for the second and third generations, though whether they will continue to employ their ethnicity to market their products depends on the sector they operate in and the class resources at their disposal.
