The Impact of Strategic Leadership on Organizational Performance of Small Medium Enterprises (SME) in Malaysia
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
Agha, S., L. Alrubaiee, and M. Jamhour. (2012), “Effect of Core Competence on Competitive Advantage and Organizational Perfor- mance.” International Journal of Business and Management, 7(1), pp. 192–204.
Arham, A. F. (2014). “Leadership and Performance: The Case of Ma- laysian SMEs in the Services Sector.” International Journal of Asian Social Science, 4(3), pp. 343–355.
Aris, N. M. (2007). SMEs: Builidng Blocks for Economic Growth. De- partment of Statistic Malaysia.
Armstrong, M. (2006). Human Resource Management Practice. Phil- adelphia.
Asia, H. (2016). “HR Asia.” Retrieved from: http://www.hrinasia. com/hr-news/97-businesses-and-hr-leaders-in-southeast-asia-pri- oritize-leadership-over-talent-issues-as-the-top-human-capital- trend/.
Aziz, R. A., M. H. Abdullah, and A. Tajudin. (2013). “The Effect of Leadership Styles on the Business Performance of SMEs in Malay- sia.” International Journal of Economics Business and Management Studies, 2.
Benis, W., and B. Nanus. (1997). Leaders: Strategies for Taking Charge. New York: HarperCollins.
Benn, S., D. Dunphy, and A. Griffiths. (2006). “Enabling Change for Corporate Sustainability: An Integrated Perspective.” Australasian Journal of Environmental Management, 13.
Bhalla, V., J.-M. Caye, A. Dyer, L. Dymond, Y. Morieux, and P. Orland- er. (2011). “High Performance Organizations: The Secrets of Their Success.” Retrieved from: https://www.bcg.com/publications/2011/ high-performance-organizations-secrets-of-success.aspx.
Boal, K. B., and R. Hooijberg. (2001). “Strategic Leadership Research: Moving On.” Leadership Quarterly, 11(4).
Bolden, R., and R. Terry. (2000). Leadership Development in Small and Medium Sized Enterprises. Center for Leadership Studies.
Borg, S. (2001). “The Research Journal: A Tool for Promoting and Understanding Researcher Development.” Language Teaching Re- search, 5.
Brecken, D. (2004). “Leadership Vision and Strategic Direction.” The Quality Management Forum, 30(1).
Browne, M. W., and R. Cudeck. (1993). Alternative Ways of Assess- ing Model Fit, in: K. A. Bollen, and J. S. Long. (eds.). (1993). Testing Structural Equation Models. Beverly Hills: Sage, pp. 136–162.
Collins, J. C. and J. Porras. (1996). “Building Your Company’s Vi- sion.” Harvard Business Review, September–October.
Columbia, B. Core Competencies for Strategic Leaders. BC Public Ser- vice Agency.
Emerald. (2011). “Becoming More Sustainable: The Role of Leader- ship and Innovation.” Strategic Direction, 27(7), pp. 24–27.
Gabcanova, I., (2011). “The Employees - The Most Important Asset in the Organizations.” Human Resources Management and Ergonom- ics, 5(1).
Gates, L. P. (2010). Strategic Planning with Critical Success Factors and Future Scenarios: An Integrated Strategic Planning Framework. Software Engineering Institute.
Gillham, B. (2000). Developing a Questionnaire. London & New York: Continuum.
Gupta, R. K. (2017). Core Competencies - Concepts and Relevance. Retrieved from: http://www.academia.edu/11707270/Core_Compe- tencies-Concepts_and_Relevance.
Hair, J. F., W. C. Black, B. J. Babin, and R. E. Anderson. (2014). Multi- variate Data Analysis. Essex: Pearson Education Limited.
Hambrick D. C. (2007). “Upper Echelons Theory: An Update.” Acad- emy of Management Review, 32(2), pp. 334–343.
Hameed, A., and A. Waheed. (2011). “Employee Development and Its Affect on Employee Performance A Conceptual Framework.” In- ternational Journal of Business and Social Science, 2(13).
Haque, M., A. TitiAmayah, and L. Liu. (2016). “The Role of Vision in Organizational Readiness for Change and Growth.” Leadership & Organization Development Journal, 37(7), pp. 983–989.
Heinen, J. S. and C. O’Neill. (2004). Managing Talent to Maximize Performance. Retrieved from: https://onlinelibrary.wiley.com/doi/ pdf/10.1002/ert.20018.
Hinkin, T., B. C. Holtom, and M. Klag. (2007). “Developing Mutual- ly Beneficial Relationships Between Researchers and Organizations.” Organizational Dynamics, 36.
Hitt, M. A., and R. D. Ireland. (2002). “The Essence of Strategic Lead- ership: Managing Human and Social Capital.” The Journal of Leader- ship and Organizational Studies, 9(1).
Hitt, M. A., K. T. Haynes, and R. Serpa. (2010). “Strategic Leadership for the 21st Century.” Business Horizons, 53, pp. 437–444.
Hooper, D., J. Couglan, and M. R. Mullen. (2008). Structural Equa- tion Modelling: Guidelines for Determining Model Fit. Dublin Insti- tute of Technology.
Hoskisson, R. E., M. A. Hitt, R. D. Ireland, and J. S. Harrison. (2012). Strategic Leadership, in: R. E. Hoskisson, M. A. Hitt, R. D. Ireland, and J. S. Harrison. (2012). Competing for Advantage. Mason: Cen- gage Learning.
Hosmer, L. T. (1986). “The Importance of Strategic Leadership.” Jour- nal of Business Strategy, 3, p. 47.
House, R. J., and R. N. Aditya. (1997). “The Social Scientific Study of Leadership: Quo Vadis?” Journal of Management, 23(3), pp. 409–473.
Hubbard, G., Samuel, D., Cocks, G. & Heap, S., (2007). The First XI: Winning Organisations in Australia. Wrightbooks.
Ifeoma, O. R., N.-O. Purity, and C. Okoye-Nebo. (2015). “Effective Talent Management: Key to Organizational Success.” Journal of Poli- cy and Development Studies, 9(2).
Ireland, R. D., and M. A. Hitt. (2005). “Achieving and Maintaining Strategic Competitiveness in the 21st Century: The Role of Strategic Leadership.” Academy of Management Perspectives, 19(4), pp. 63–77.
Jabbouri, N. I., and I. Zahari. (2014). “The Role of Core Competen- cies on Organizational Performance: An Empirical Study in the Iraqi Private Banking Sector.” European Scientific Journal, 1.
Jansen, J. J., D. Vera, and M. Crossan. (2009). “Strategic Leadership for Exploration and Exploitation: The Moderating Role of Environ- mental Dynamism.” The Leadership Quarterly, 20.
Kantabutra, S. and G. C. Avery. (2010). “The Power of Vision: State- ments that Resonate.” Journal of Business Strategy, 31.
Kilpatrick, A., and L. Silverman. (2005). “The Power of Vision.”
Kitonga, D. M., W. O. Bichanga, and B. K. Meuma. (2016). “Stra- tegic Leadership and Organizational Performance in Not-for-Profit Organizations in Nairobi County in Kenya.” International Journal of Scientific & Technology Research, 5(5).
Lall, S. (1992). Explaining Industrial Success in the Developing World, in: V. N. Balasubramanyam, and S. Lall. (eds.). (1992). Current Issues in Development Economics. London: Macmillan, pp. 118–155.
Lawrence, S., F. Coetzee, E. Glover, D. Pennock, G. Flake, F. Nielsen, R. Krovetz, A. Kruger, C. L. Giles. (2001). “Persistence of Web Refer- ences in Scientific Research.” Computer, 34(2), pp. 26–31.
Lawson, B., and D. Samson. (2001). “Developing Innovation Capa- bility in Organizations: A Dynamic Capabilities Approach.” Interna- tional Journal of Innovation Management, 5(3).
Lear, L. W. (2012). The Relationship between Strategic Leadership and Strategic Alignment in High Performing Companies in South Africa. University of South Africa.
Mahmutaj, L. R. (2014). “The Impact of Innovation in SME’s Perfor- mance.” International Scientific Journal, 12.
PWC. (2016). “PWC Malaysia.” Retrieved from: http://www.pwc. com/my/en/press/150420-my-family-biz-survey.html.
Marsh, H. W., and D. Hocevar. (1985). “Application of Confirmatory Factor Analysis to the Study of Self-Concept: First- and Higher Or- der Factor Models and Their Invariance Across Groups.” Psychologi- cal Bulletin, 97, pp. 562–582.
Mazzarol, T. (2004). Strategic Management of Small Firms: A Pro- posed Framework for Entrepreneurial Ventures, in: (2004). 17th An- nual SEAANZ Conference 2004. Brisbane, 2004.
McCauley, C., and M. Wakefield. (2006). “Talent Management in the 21st Century: How to Help Your Company Find, Develop, and Keep its Strongest Workers.” The Journal for Quality and Participation, 29(4).
McMillan, C. (2010). “Five Competitive Forces of Effective Leader- ship and Innovation.” Journal of Business Strategy, 31(1).
Morden, T. (1997). “Leadership as Vision.” Management Decision, 35(9), pp. 668–676.
Neuman, W. L. (2014). Social Research Methods: Qualitative and Quantitative Approaches. Essex: Pearson Education Limited.
Norzailan, Z., S. Md Yusof, and R. Othman. (2016). “Developing Strategic Leadership Competencies.” Journal of Advanced Manage- ment Science, 4(1).
Nthini, E. K. (2013). Effect of Strategic Leadership on the Performance of Commercial and Financial State Corporation in Kenya. School of Business University of Nairobi.
O’Regan, N. and A. Ghobadian. (2004). “The Importance of Capa- bilities for Strategic Direction and Performance.” Management Deci- sion, 42(2), pp. 292–313.
Obiwuru, T., A. T. Okwu, V. O. Akpa, and I. A. Nwankwere. (2011). “Effects of Leadership Style on Organizational Performance.” Austra- lia Journal of Business and Management Research, 1(7).
Oghojafor, B.E.A., O. O. Olayemi, and P. S. Okonji. (2011). “Enhanc- ing Organization’s Performance Through Effective Vision and Mis- sion.” Chinese Business Review, 10(11).
Ozer, F., and C. Tinaztepe. (2014). “Effect of Strategic Leadership Styles on Firm Performance: A Study in a Turkish SME.” Procedia - Social and Behavioral Sciences, 150.
Parry, S. B. (1996). “The Quest for Competence.” Training Magazine, pp. 48–56.
Parthasarathy, R., C. Huang, and S. Ariss. (2011). “Impact of Dy- namic Capability on Innovation, Value Creation and Industry Lead- ership.” IUP Journal of Knowledge Management, 9(3), pp. 59–73.
Perdomo-Ortiz, J., J. Gonzalez-Benito, and J. Galende. (2006). “Total Quality Management as a Forerunner of Business Innovation Capa- bility.” Technovation, 26.
Prahalad, C., and G. Hamel. (1990). “The Core Competence of the Corporation.” Harvard Business Review, 68(3), pp. 79–91.
Proctor, T. (1997). “Establishing a Strategic Direction: A Review.” Management Decision, 35(2).
Ratanjee, V., and A. Pyrka. (2015). “Fixing the Leadership Gap in Southeast Asia.” Harvard Business Review. Retrieved from: https:// hbr.org/2015/05/fixing-the-leadership-gap-in-southeast-asia.
Redmond, J. Strategy and the Importance of Strategic Leadership. Cer- tified Public Accountants.
Richard, P. J., T. Devinney, G. Yip, and G. Johnson. (2009). “Mea- suring Organizational Performance: Towards Methodological Best Practice.” Journal of Management, 35(3).
Romijn, H., and M. Albaladejo. (2002). “Determinants of Innovation Capability in Small Electronics and Software Firms in Southeast En- gland.” Research Policy, 31(7), pp. 1053–1067.
Rowe, G. and M. H. Nejad. (2009). “Strategic Leadership: Short-term Stability and Long-term Viability.” Ivey Business Journal. Retrieved from: https://iveybusinessjournal.com/publication/strategic-leader- ship-short-term-stability-and-long-term-viability/.
Rust, R. T., T. Ambler, G. S. Carpenter, V. Kumar, and R. K. Srivas- tava. (2004). “Measuring Marketing Productivity: Current Knowl- edge and Future Directions.” Journal of Marketing, 68(4), pp. 76–89.
Samad, S. (2012). “The Influence of Innovation and Transformation- al Leadership on Organizational Performance.” Procedia - Social and Behavioral Sciences, 57, pp. 486–493.
Saunders, M., P. Lewis, and A. Thornhill. (2009). Research Methods for Business Students. Essex: Prentice Hall.
Serfontein, J. J. (2010). The Impact of Strategic Leadership on the Operational Strategy and Performance of Business Organizations in South Africa. University of Stellenbosch.
Silverman, A. K. L. (2005). “The Power of Vision.” Strategic & Lead- ership, 33(2), pp. 24–26.
SME Corp Malaysia. (2018). “SME Definitions.” Retrieved from: http://www.smecorp.gov.my/index.php/en/poli- cies/2015-12-21-09-09-49/sme-definition.
Smith, J. (1999). “One of Volvo’s Core Values.” Retrieved from: http:// www.volvo.com/environment/index.htm.
Strand, R., 2014. Strategic Leadership of Corporate Sustainability. Co- penhagen Business School.
Strunk, W., Jr., and E. B. White. (1979). The Elements of Style. New York: Macmillan.
Taiwo, M. A., A. M. Ayodeji, and B. A. Yusuf. (2012). “Impact of Small and Medium Enterprises on Economic Growth and Devel- opment.” American Journal of Business and Management, 1(1), pp. 18–22.
Tanaka, J. S., and G. J. Huba. (1985). “A Fit Index for Covariance Structure Models Under Arbitrary GLS Estimation.” British Journal of Mathematical and Statistical Psychology, 38, pp. 197–201.
Van der Geer, J., J. A. J. Hanraads, and R. A. Lupton. (2000). “The Art of Writing a Scientific Article.” Journal of Scientific Communications, 163, pp. 51–59.
Waite, A. M. (2014). “Leadership’s Influence on Innovation and Sus- tainability.” European Journal of Training and Development, 38.
Wang, C., E. Walker, and J. Redmond. (2007). “Explaining the Lack of Strategic Planning in SMEs: The Importance of Owner Motiva- tion.” International Journal of Organizational Behavior, 12.
Wheaton, B., B. Muthen, D. F. Alwin, and G. Summers. (1977). “As- sessing Reliability and Stability in Panel Models.” Sociological Meth- odology, 8(1), pp. 84–136.
Wheeler, S., W. McFarland, and A. Kleiner. (2007). A Blueprint for Strategic Leadership. Booz & Company.
Yukl, G., 2010. Leadership in Organizations. New Jersey: Pearson.
Strategy & Leadership, 33(2), pp. 24–26.
Pasaribu, R. H., B. W. Soetjipto, A. Widjaja, and I. Heruwasto. (2013).
The Effect of Strategic Leadership Competences on Dynamic Capabili- ties and Firm Performance. Universitas Indonesia.
Pazireh, M., E. M. Akhlagh, and M. Akbari. (2014). “Evaluation the Role of Strategic Leadership in Organizational Performance.” Uni- versal Journal of Management and Social Sciences, 4(9).
- There are currently no refbacks.
Copyright (c) 2019 Author & JLM