IRACST- International Journal of Research in Management & Technology (IJRMT), ISSN: 2249-9563 Vol. 2 No.2, April 2012 147 Investment in Technology Based Small and Medium Sized Firms in Malaysia: Roles for Commercial Banks Musibau Akintunde Ajagbe 1 , Choi Sang Long 2 , Senin Amat Aslan 3 and Kamariah Ismail 4 1-4 Faculty of Management and Human Resource Development 1-4 Universiti Teknologi Malaysia, 81310, Skudai Johor - Malaysia Abstract—Financing is an important input in every business which allows for the smooth running of day-to-day operations, asset acquisitions, expert recruitment, and development of marketing and distribution channels. This is especially the case for high-tech startups that must undergo four development stages to turn ideas into commercial products and become full-blown enterprises; concept formation, amassing of resources, product development and business development. The purpose of this research is to understand the fundamental role of banks in Malaysia in bridging the startups financing gap, thereby, helping to grow technology based small and medium sized enterprises in the country. A qualitative research approach which aims first to identify all the commercial and investment banks in the country, then with a select sample size of ten biggest banks shall administer a semi-structured/open ended questionnaire. This methodology will allow respondents to open up on critical issues to be discussed and not limiting them to certain choices as in the case with a structured form of interview. Banks in Malaysia are not willing to finance high technology small and medium enterprises since it is a high risk industry. A the findings are compared to what is obtainable in other countries and Europe and America. Keywords-banks; financing; technology based firms; small and medium sized enterprises; malaysia. I. INTRODUCTION There have been a wide acknowledgement of the fact that Small and Medium Enterprises (SMEs) constitute about 99.2% of overall business establishments in Malaysia and are a source of employment for more than 56% of the overall working population and are a significant source of growth for the country [1-2]. There was also a recognition that it will continue to play a substantial role in the country’s New Economic Model (NEM) which envisions transforming Malaysia from a middle-income economy to a high-income knowledge-driven society as anticipated by the year 2020 [3,2]. Furthermore many authors have emphasized that technology small and medium-sized enterprises (SMEs) have been assumed to be a major influence in the economic development, employment and creation of new innovations [4]. Economists also argue that despite the heavy concentration of R and D expenditure in large firms, technology based small firms (TBFs) have consistently accounted for a vast majority of the important inventions and innovations. However, they reported that inability to access adequate funding for either growth or expansion has been one of the main challenge facing TBFs [5,6,7]. It is argued further that technology small firms play a key role in innovation and industrial development by virtue of their numerous size and significant economic and social contribution, small and medium sized enterprises should be considered as an important engine to economic development of every nation. Not minding, their importance, small and medium sized enterprises are still generally perceived as higher credit risk by financial institutions, hence, limiting their access to formal financing sources [5,4,8]. In view of the foregoing, it is expedient to highlight that financial and investment policies play an increasing important role in entrepreneurial venture and economic development .The financial and investment policies are among the important operational priorities in developing countries to support investment by local firms, especially technology based firms, and transnational corporations investing in these countries [5,8]. Rothwell and Zegveld [9] while arguing that technology based small firms play an important role in innovating, point out the problems of access to finance, ability to cope with government regulations and lack of specialist management expertise as a few of the challenges bedeviling technology small firms all over the world. In a knowledge-driven economy such as Malaysia, economic growth is increasingly dependent upon innovation whereby access to finance is seen as a major challenge that may impede this process [10,8]. The importance of financing in gingering local economic growth of a nation cannot be underestimated, hence, the need for policy makers to inculcate the right approach to encourage financing agencies to provide adequate support to technology new ventures for speedy economic development of the nation. The intent of this study is to obtain a clearer insight into the roles of commercial banks in financing technology small and medium sized industries in Malaysia. And also examine the criteria adopted in selecting firms they fund. The findings of this study would be of immense benefit to conventional financial managers, public policy makers and other stakeholders and further enrich academic literature.