The Impact of Strategic Leadership on Organizational Performance of Small Medium Enterprises (SME) in Malaysia

Helen Kong Yeok Mui, Abdul Basit, Zubair Hassan


This research is aimed at establishing the impact of strategic leadership on organizational performance on SMEs in Malaysia. The research has been done in Muar, Johor, Malaysia. A review was done on the strategic leadership theories, models and past literature done by other researchers to adopt the various determinants that impact the organizational performance. A theoretical framework was established with five major independent variables: leadership vision, strategic direction, core competencies, developing people and innovation capability and dependent variable: organizational performance. A set of questionnaire with structured questions was generated and measured using 5-point Likert Scale. The primary data was collected from the top management using convenience sampling. The sample size consists of 100 respondents who are directors, CEO, managers and top executives of 10 SMEs in Muar. This study used AMOS software to analyze the data. Confirmatory Factor Analysis (CFA) was used to determine the factor loading of the variables. Structural equation modeling was used to test the path analysis and the hypotheses. The results showed that leadership vision, strategic direction, core competencies have insignificant positive impact on organizational performance and developing people have insignificant negative impact on organizational performance. However, the study found that only innovation capability has significant positive impact on organizational performance. Therefore, innova- tion capability of strategic leadership such as new products, creativity, innovation activities, value creation and new ideas with radical changes are reckoned as the most important determinants in impacting organizational performance. It is highly recommended to all top management of SMEs in Malaysia to focus on innovation capability of strategic leadership for their organizational performance.

Keywords: strategic leadership, organizational performance, Small Medium Enterprises (SME), Malaysia

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