Page 1 of 13

Journal for Studies in Management and Planning

Available at

http://edupediapublications.org/journals/index.php/JSMaP/

e-ISSN: 2395-0463

Volume 02 Issue 11

November 2016

Available online:http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 177

The Effect of Organizational Cultureon the Relationship between Entrepreneurial

Competencies and SMEs Business Performance in Malaysia

1Juzaimi Nasuredin, 2Azizi Haji Halipah, 2Abdul ShukorShamsudin

1Faculty of Technology Management and Business, UniversitiTun Hussein Onn

Malaysia. juzaimi@uthm.edu.my

2School of Business Management, College of Business, Universiti Utara Malaysia.

h.azizi@uum.edu.myshukor@uum.edu.my

Abstract

Generating up to 80 per cent of the

economic growth, providing jobs and

making up the majority of businesses that

operate around the world, the crucial role

of SMEs in the global economy is

undeniable. This paper tends to investigate

the relationships between the dimensions

of entrepreneurial competency,

organizational culture and SMEs

performance particularly in Malaysia that

have been proven as lacking in the

entrepreneurship study. In addition, this

paper also focused primarily on testing the

possibility of organizational culture as a

moderating variable in the relationship

between entrepreneurial competencies and

SMEs business performance. By employing

a quantitative cross-sectional survey

approach, data were collected through

mail survey questionnaire distributed to

SMEs owner-managers throughout

Malaysia. The constructs used were

adapted from earlier research and data

obtained was analysed using Statistical

Package for Social Sciences (SPSS)

version 21 for Windows. Statistical results

revealed that opportunity competency,

organizing competency and strategic

competency significantly affected

Malaysian SMEs performance. However,

organizational culture was found not to

moderate the relationships between

entrepreneurial competency and

Malaysian SMEs performance.

Conclusively, implications of the study and

some suggestions for forthcoming research

are also reviewed.

Keywords: Entrepreneurial

Competencies, Business Performance,

Organizational Culture, SMEs Owner- Managers, Moderating Effect.

1.0 Introduction

SMEs has been largely ignored for a long

time, until the emergence of several

reports including Bolton Report (1971) in

the UK and the Wiltshire Report (1971) in

Australia that focuses on the significant

contribution of SMEs in these

countries(Qirim, 2004).The role of SMEs

not only in maintaining a healthy and

dynamic economy in the industrialized

countries but also in the introduction of

inventions and innovations(Iacovou,

Benbasat, & Dexter, 1995).

In Malaysia, the importance of SMEs was

given attention in 1971 during

implementation of the New Economy

Policy (Saad, 2012). Therefore, being one

of the key players in Malaysia’s economy

development,SMEs are seen as a

mechanism to improve income distribution,

economic growth and reshape the

economic structure that is highly

dependent on the activities of big business

Page 2 of 13

Journal for Studies in Management and Planning

Available at

http://edupediapublications.org/journals/index.php/JSMaP/

e-ISSN: 2395-0463

Volume 02 Issue 11

November 2016

Available online:http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 178

(Abdullah, 1999; Abdullah & Manan,

2011).Therefore, the survival and growth

of SMEs venture in Malaysia is very

important (Rose, Kumar, & Yen, 2006).

Previous studies revealed that psychology

and behavioural skills of entrepreneurs,

demographic characteristics, and technical

management are seen as the most

important factor for the performance and

the success or failure of SMEs (Chandler

& Hanks, 1994; Man, Lau, & Chan, 2008;

Ahmad, Ramayah, Wilson, & Kummerow,

2010). Bird(1995) and Man, Lau, and

Chan(2002)explains that the psychological

characteristics and behaviour of the owner- manager of the company together with its

management skills and specialized areas

known as entrepreneurial competencies

(EC), which ultimately affects the

competitiveness of their

companies.Shane(2003) then added that

from the point of view of the

entrepreneurial process, ECis important,

and basis to the existence of the firm.

In other cases, entrepreneurs with EC can

scan and discover for business

opportunities from different

sources,acquire the resourcesdemanded for

the realisation of the opportunity, and

successfullyand increasingly take the risk

concerning the future of the

company(Gibb, 2005; Man & Lau, 2005).

Thus, it is important to study

entrepreneurial competencies enabling

business continuity from a holistic point of

view at the SME level.This is to gain a

better understanding of the need for

various competencies for business

performance, which in turn also generate

wealth in communities across SMEs.

2.0 Literature Review and

Hypothesis Development

2.1 Entrepreneurial

Competencies (EC)

The concept of competence was

recognized since the 16th century(Mulder,

Weigel, & Collins, 2007), and the term

“competency” itself was originally used in

the field of education to explain the

behaviour of trainee teachers before they

are widely used in the fields of

management (Mitchelmore & Rowley,

2010), initially in the US headed by

Boyatzis (1982).

In the literature, terms such as

competencies, capabilities, resources,

assets, and skills are often used

interchangeably (Colombo & Grilli, 2005).

Yet, in general,the word competency

usually focus onthe aspects of human

behaviour (Gerli, Gubitta, & Tognazzo,

2011).

According to Man and Lau (2005),

entrepreneurial competencies

(EC)comprise of components that are more

deeply rooted in a person’s background

(traits, personality, attitudes, social role

and self-image) as well as those that can be

obtained at work or through training and

education (skills, knowledge and

experience). Therefore, they divided the

EC’sareas into six dimensions,namely

opportunity, relationship, conceptual,

organizing, strategic and commitment(Man

& Lau, 2000).

Opportunity competencies are related to

recognizing market opportunities through

different ways(Man & Lau, 2000).This

category ofcompetencies comprises of the

entrepreneurial activities in spotting

opportunities,actively seeking new

opportunities, and developing the

opportunities(Li, 2009). Meanwhile,

relationship competenciesare conveyed to

person-to-person orindividual-to-group- basedinteractions, e.g., building a

contextof cooperation and trust, using

contacts and connections,persuasive ability,

Page 3 of 13

Journal for Studies in Management and Planning

Available at

http://edupediapublications.org/journals/index.php/JSMaP/

e-ISSN: 2395-0463

Volume 02 Issue 11

November 2016

Available online:http://edupediapublications.org/journals/index.php/JSMaP/ P a g e | 179

communication and interpersonal

skill(Man et al., 2002). This relationship

building activities as entrepreneurial

bonding, which includes not only

thecreation of relationship, but also the

restructuring of relationships as the

company grows or apartnership is

dissolved(Bird, 1995).In other words, the

higher the relationship competencies of an

entrepreneur, the greater the success of

their business(Santos, Caetano, & Curral,

2013).

Conceptual competencies then associated

with the different conceptual abilities,

whichare reflected in the behaviours of the

entrepreneur, e.g.,decision skills,

absorbing and understanding

complexinformation, and risk-taking, and

innovativeness(Man et al., 2002). This

followed by organizing competencies

which related to the organization of

different internaland external human,

physical, financial and

technologicalresources, including team- building, leading employees,training, and

controlling(Man et al., 2002).Organizing

competencies also refer to entrepreneurs

abilities required to take up a variety of

tasks and handle different functional areas

which demand the ability to plan and

organize various resources in the

organization(Mamun et al., 2016).

Strategic competencies correlated to

setting, evaluating and implementingthe

strategies of the firm(Man et al.,

2002).This category of competencies

requires the entrepreneur to have a vision

or a big picture in their mind for their

business, to have clear goals to achieve, or

to formulate and implement strategies to

achieve these vision and goals(Li, 2009).

Finally, commitment competencies is the

competence that led entrepreneurs to move

forward with the business(Man et al.,

2002). This competencies refers to the

basic characteristics of successful

entrepreneurs including business,

commitment, determination, dedication,

initiative and proactive

oriented(McClelland, 1987).

2.2 SMEs Business

Performance

Business performance is one of the most

important constructs in management

research(Venkatraman & Ramanujam,

1986; Richard, Devinney, Yip, & Johnson,

2009).According to Carton and

Hofer(2010), the performance of SME has

been the focus of many prior researchers

making it one of the most widely used

construct as a dependent variable.

Despite the importance of business

performance that illustrates the

effectiveness of an organization, in a

broader concept, there are two clear

indicators of business performance

including financial performance (sales

growth, profitability, earning per share)

and operating performance (market share,

new product, product quality, marketing

effectiveness and value added)

(Venkatraman & Ramanujam, 1986).

SMEs business performance in this study

will be looked subjectivelyin terms of nine

factors, namely sales and profitability of

cash flow, gross profit margin, net profit

from operations, sales growth, return on

sales, return on investment, the ratio of

profit on sales, return on shareholders'

equity and the ability to finance business

of profits, prior to the work of Gupta and

Govindarajan(1984). This is due to

thedifficulties in obtaining objective

financial data during the assessment of

business performance (Zulkiffli & Perera,

2011).

2.3 Entrepreneurial

Competencies (EC) and