Emanating the key factors of innovation performance: leveraging on the innovation culture among SMEs in Malaysia

Pages559-587
DOIhttps://doi.org/10.1108/JABS-04-2018-0130
Published date07 October 2019
Date07 October 2019
AuthorHaniruzila Hanifah,Hasliza Abdul Halim,Noor Hazlina Ahmad,Ali Vafaei-Zadeh
Subject MatterStrategy,International business
Emanating the key factors of innovation
performance: leveraging on the innovation
culture among SMEs in Malaysia
Haniruzila Hanifah, Hasliza Abdul Halim, Noor Hazlina Ahmad and Ali Vafaei-Zadeh
Abstract
Purpose Innovationhas become an approach to create value for the customer to remaincompetitive in
the market.However, previous research on innovationperformance particularly amongBumiputera small
and medium-sized enterprises (SMEs) had received little intention. Hence, Bumiputera SMEs need to
inculcate theinnovation culture to generate innovationperformance. As such, the purpose of thisstudy is
to examine the ambidextrous orientation and innovation strategy on innovation culture, and how
innovation culture could mediate the relationship between ambidextrous orientation and innovation
strategy and innovation performance. In addition, this study also examines the role of government
supportas the moderator between innovation cultureand innovation performance.
Design/methodology/approach Data were collectedfrom 140 Bumiputera SMEs and analyzedusing
partialleast square-structural equationmodeling via Smart PLS.
Findings Findings indicatedthat ambidextrous orientation (alignmentand adaptability) and innovation
strategy (proactive creativity strategy and growth risk orientation strategy) had a significant impact on
innovation culture. Besides, innovation culture mediated the relationship betweenalignment, proactive
creativity strategy, growthrisk orientation strategy and innovation performance. Surprisingly, innovation
culture does not significantlymediate the relationship between adaptabilityand innovation performance.
However, government support plays an important role to support innovation culture and innovation
performancein Bumiputera SMEs.
Originality/value This study makes both theoretical and practical contributions, especially in
identifyingthe significant role of Bumiputera SMEs in creating an innovationculture. Besides, it explained
government support as an important role in strengthening the relationship between innovation culture
and innovation performance. The findings of the study will provide great help to Bumiputera
entrepreneursin formulating innovationculture in Malaysian SMEs.
Keywords Small and medium-sized enterprises, Innovation performance, Innovation strategy,
Innovation culture, Government support, Ambidextrous orientation
Paper type Research paper
Introduction
Malaysia encountered headwinds from global economic slowdown as theglobal landscape
is increasingly challenging.Therefore, the Eleventh Malaysia Plan (11MP), 2016-2020 marks
a momentous milestone in Malaysia’shistory. To maintain growth momentum, the Malaysian
Government needs to forge ahead with greater bold measures for the long-term benefit of
Malaysians. To achieve the goal which is to become an advanced and inclusive nation by
2020, small and medium-sized enterprises (SME) is one of the most vital entities that
contribute considerably in developing Malaysia’s economy. In addition, SMEs will be
strengthened to increase theirshare in terms of GDP (SMECorp, 2015).
A recent report has estimated that in 2015,more than 99 per cent of businesses in Malaysia
were SMEs. SMEs’ growth is to be based on the SME Masterplan (2012-2020) which aims to
Haniruzila Hanifah, Hasliza
Abdul Halim, Noor Hazlina
Ahmad and Ali
Vafaei-Zadeh are all based
at the Universiti Sains
Malaysia, Penang,
Malaysia.
Received 15 May 2018
Revised 9 December 2018
30 March 2019
Accepted 21 June 2019
The authors would like to thank
Universiti Sains Malaysia for
funding this Bridging Incentive
Grant - 304.PPAMC.6316425.
DOI 10.1108/JABS-04-2018-0130 VOL. 13 NO. 4 2019, pp. 559-587, ©Emerald Publishing Limited, ISSN 1558-7894 jJOURNAL OF ASIA BUSINESS STUDIES jPAGE 559
improve their GDP contribution to 41 per cent by the year 2020 (EPU, 2015). Currently,
SMEs are not achieving superior performance, and this is evidenced by the SMEs’
contribution to GDP at only 32.7 per cent (SMECorp, 2015-2020). In fact, Malaysian SMEs’
contribution to the nation’s GDP is comparatively small when compared with other
countries, as depicted in Table I.
Table I indicated that China’s SMEs as the highest contributor to GDP at 60 per cent,
Indonesia at 57.1 per cent and Australia at 57 per cent. However, Malaysia sadly ranked
second last with 32.7 per cent of GDP contribution. Although SMEs constitute a large
segment of Malaysia’s economy with almost 99 per cent of total established businesses
(EPU, 2015), the contribution of the SMEs is still small as shown by Table I. In this situation,
SMEs need to intensify their business performance and competitiveness by enhancing their
innovative capabilities. According to 11MP (2015), SMEs are the essential elements of the
economy which is responsible for driving innovation and competition in many economic
sectors. This is becauseinnovation is the key to the organization in the long term.
According to 11MP (2016), National Development Strategy is to focus on productivity and
innovation which will be important pillars of the 11MP; through which Malaysia aspires to
become an innovation-driven economy. Therefore, efforts to promote innovation will be
undertaken at enterprise and societal levels, especially of Bumiputera. It is because the
Malaysian Government is particularly concerned about Bumiputera and Bumiputera means
“son of the soil”. According to statistics of the population by EPU (2016), the total population
of Malaysia is 30,751, 602; with 68.6per cent of Bumiputera, 23.4 per cent of Chinese, 7 per
cent of India, and 1 per cent of others. Based on that statistics, Bumiputera holds the
majority population (11MP, 2016). However, Bumiputera SMEs’ ownership and market
sharing are still relatively lower than other races. From the government’s perspective, the
equation of SME distribution among races is unbalanced and worrisome. The role of
Bumiputera SMEs in embarking on innovative products and services is very pertinent. The
vital role of Bumiputera SMEs in the development of a nation cannot be underestimated; in
fact, the exclusion of SMEs Bumiputera will jeopardize Malaysia’s aspiration toward
becoming an innovation-ledeconomy (Awang and Rithauddeen, 2013).
Therefore, Malaysian Government has to encourage the Bumiputera entrepreneurs to be
innovative, creative and proactive as a way of moving towards an innovation-centered
economy (Yusoff and Zainol, 2014;Zainol and Ayadurai, 2010). To be more competitive,
creative and productive, up-to-date as well as have world-class innovation, Bumiputera
SMEs have to instill innovation culture and find success formula in the pursuit of
Table I Comparing SME contribution to GDP
No. Country No. of SMEs
As percent
of total business (%)
SME contribution
to GDP (%)
1 China 40.5m 99.7 60
2 Indonesia 700,000 99.9 57.1
3 Australia 248,358 99.8 57
4 Hong Kong 316,432 98 54
5 Japan 979,135 99.7 53
6 Singapore 407,298 99 50
7 South Korea 566,954 99.9 46.4
8 New Zealand 142,100 98 42
9 India 36.2 m 80 40
10 Vietnam 88,664 97 40
11 Thailand 2.9m 99.8 36.6
12 Philippines 73,509 99.6 35.7
13 Malaysia 645,136 97.3 32.7
14 Taiwan 1.3 m 97.7 30.23
Source: The Asia Pacific SME Cloud Computing Attractiveness Index (2015)
PAGE 560 jJOURNAL OF ASIA BUSINESS STUDIES jVOL. 13 NO. 4 2019

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