The effects of corporate entrepreneurship determinants on financial performance of small and medium enterprises in Malaysia

Abstract

This study addresses the issue of poor financial performance among the small and medium enterprises in Malaysia. There is a gap of an imbalance status between the total number of small and medium enterprises which constitute 97.3 per cent of the total number of business establishments in Malaysia and its contribution of only 32.7 per cent to Malaysian Gross Domestic Product. Therefore, there is a need to improve the Malaysian small and medium enterprises financial performance in order to enhance their contribution to Malaysian Gross Domestic Product. The research gap in prior corporate entrepreneurship studies has prompted scholars to further explore the relationship between corporate entrepreneurship and financial performance. The purpose of this study is to investigate the effects of corporate entrepreneurship determinants on financial performance of small and medium enterprises in Malaysia. This study has further investigated the effects of corporate entrepreneurship by synthesizing it from multiple disciplines, incorporating multi-level of analysis and supporting them with empirical evidences. Hypotheses are developed to determine the relationships between the corporate entrepreneurship determinants and financial performance of the Malaysian small and medium enterprises. Data was obtained from a cross-sectional survey involving a population of 618 companies listed as the previous recipients of the Malaysian “Enterprise 50” award winners from 1998 to 2014. The key informant of each company was represented by a permanent staff from the management-level employee in order to acquire the generalisation for this study. Survey data was collected through electronic questionnaires and analysed using the statistical package for social sciences and structural equation modelling by applying partial least squares approach. The research response rate was 221 valid usable sets of respondents or 35.7 per cent. The findings revealed that significant direct effect existed between the determinants of corporate entrepreneurship and the financial performance of small and medium enterprises in Malaysia. Other important findings were the significant moderating role of respondents` age and the significant mediating role of organisations` competitive advantage. The results hold implications for practitioners’ deeper understanding of the intra and inter-organisational factors that affect corporate entrepreneurship practices and will enhance decision-making skills specifically those of the top management level in the small and medium enterprises. The results also hold ramifications for practitioners and scholars on how to sustain competitive advantage of the business organisation and creating significant contribution in improving organisational financial performance in the future.