Relationship between Entrepreneurial Orientation and Business Performance among Malay-Owned SMEs in Malaysia: A PLS Analysis

Abstract

Entrepreneurship has become a key part of economies, and having an entrepreneurial orientation for SMEs is essential for success. EO and dimensions may differ in different cultures and different countries, thus a cross-cultural validation is suggested by the existing literature, which is lacking Malaysian perspectives. The objective of this study is to examine the relationships between entrepreneurial orientation (EO) and business performances of Malay-based SMEs in Malaysia and used the Partial Least Square (PLS) approach for data analysis. The research model for this study was drawn from the literature on entrepreneurship. This study identified five entrepreneurial orientations and tested hypotheses on which EO has a significant influence on business performance with empirical data from a sample of 407 Malay-based SMEs in Malaysia. The PLS regression analysis shows that risk-taking, proactiveness, innovativeness, and achievement factors are the significant elements of entrepreneurship orientation. Nevertheless, one independent variable, i.e., autonomy does not exhibit any relationship. This study offers a significant contribution to the current literature by empirically analyzing the link between the subcomponent of EO and business performance, specifically in the Malaysian SME sector, which has not been explored comprehensively. The paper’s interesting findings can serve to remind entrepreneurs that they cannot neglect the element of EO in their activities, particularly the success of the business. The research could be useful for policymakers to obtain some ideas and develop policies to help SMEs in Malaysia. Specifically, to enhance the performance in the SMEs sectors, the government should enforce easy to use, consistent, and standardized policies in all SMEs sectors and for all other stakeholders in boosting these sectors.