Effects of entrepreneurial leadership, innovation capability, environmental dynamism and absorptive capacity on innovation performance in Malaysian service SMEs

Small and Medium Enterprises (SMEs) are vital contributors to Malaysia's service sector, playing a key role in driving economic growth. However, a significant hurdle within this sector is the insufficient emphasis on innovation, adversely impacting the innovation performance of SMEs. The 2021 Malaysian Innovation Survey reveals a stark reality, with 77.5 percent of service sector firms categorized as non-innovative, while only 22.5 percent are classified as innovative. This decline from 74 percent in 2018 to 62 percent in 2021 underscores the urgent need for service SMEs to enhance their innovation performance to remain competitive in dynamic business environments. This research addresses this critical innovation gap within the Malaysian service SMEs, focusing on the impact of entrepreneurial leadership on innovation performance. Using the resource-based view (RBV) and dynamic capability view (DCV), this study explores the intricate relationships between these variables. Data from 351 managerial-level respondents in the Malaysian service SMEs, with a specific focus on the Klang Valley region, the central business hub housing nearly half of Malaysia's SMEs, was analyzed using partial least squares structural equation modeling (PLS-SEM). The findings affirm a direct and positive relationship between entrepreneurial leadership and both innovation capability and performance. Additionally, the findings highlight the significant role of innovation capability as a partial mediator between entrepreneurial leadership and innovation performance. The study also reveals the moderating effect of absorptive capacity on the relationship between innovation capability and performance. However, the moderating impact of environmental dynamism on the connection between entrepreneurial leadership and innovation performance is found to be insignificant, challenging assumptions about leaders navigating dynamic environments for superior performance. The current study contributes theoretically by extending the RBV framework, shedding light on the mechanisms linking entrepreneurial leadership to innovation performance, and fortifying the connection between RBV and DCV. On a practical note, the study underscores the critical importance of entrepreneurial leadership, innovation capability development, and adaptability to dynamic business environments for SMEs. Policymakers are urged to implement targeted measures to foster innovation and economic growth, providing actionable strategies for SMEs, their leaders, and policymakers to promote innovation, optimize resource utilization, and contribute to economic development. However, the study acknowledges a limitation in the geographical focus on the Klang Valley, potentially impacting the generalizability of findings to the broader research population in Malaysia.

Text 125140 - Full Text.pdf Download (3MB) Official URL or Download Paper: http://ethesis.upm.edu.my/id/eprint/18817

Actions (login required)

View Item