Organisational Learning Capability of Malaysia SMEs: Examining the Effects of Entrepreneurial Orientation and Human-Capital Development Practices

Abstract

The current study built and empirically tested a model of the relationships between selected organisational variables, Organisational Learning (OL) capability and performance in the context of small- and medium-sized enterprises (SMEs) in Malaysia. Theoretical advances in the OL domain have been based on the experiences of large organisations in the western hemisphere. In response, the study focuses on analysing the OL capability of SMEs in a transitional economy, namely Malaysia. Structural equation modeling was applied to analyse the datasets from 256 manufacturing and services SMEs. Statistical results showed that entrepreneurial orientation and human-capital development practices have direct positive effects on SMEs' OL capability. It was further found that human-capital development practices mediated the relationship between entrepreneurial orientation and OL capability. This implied that while entrepreneurial orientation fosters the need for a strong OL capability, human-capital development practices serve as the mechanisms for developing such capability. Lastly, empirical evidence was provided to support the notion that OL capability enhances the performance of SMEs.