Innovation is often recognized as a vital source of competitive advantage for business. Taking into account the conditions of increasing globalization at a high level of intensity as well as a rapidly changing technological landscape and also continuous customer demands for new products and services on the modern market, it is needed to assume that businesses have to innovate in order to survive and prosper in the contemporary environment. In the context of the paper at hand the main attention is given to the analysis of the theoretical and empirical aspects of the concept of innovation. There were applied such economic science research methods as monographic, grouping, reference, generalization, graphical analysis and content analysis.
The purpose of this research is to identify the entrepreneurship ecosystem in Malaysia based on PFP methodology from the Global Entrepreneurship Index (GEI). As one of the top performing economies in Asia, the Global Entrepreneurship Index (GEI) score of Malaysia stood in the ‘middle rank’ from 2012 to 2016 (ranked 46th out of 96 surveyed countries). The analysis has revealed that Malaysia has two strong pillars that are unique to the country, namely ‘human capital’ and ‘process innovation’. There are seven other pillars that did not perform well, namely, technology absorption pillar, high growth, risk capital, cultural support, product innovation, start-up skills, and internationalisation. In order to improve these areas, the Malaysian government needs to enact ‘supportive regulation’ for entrepreneurs, such as promoting entrepreneurs in external events, tax holidays, a less complicated business permit application process, ease of access to bank loans, and business training.