Entrepreneurial orientation and SME performance in Malaysia during the COVID-19 pandemic: The effects of economic stimulus packages and differentiation strategy / Natalia Inani Norsalehe

Natalia Inani , Norsalehe (2023) Entrepreneurial orientation and SME performance in Malaysia during the COVID-19 pandemic: The effects of economic stimulus packages and differentiation strategy / Natalia Inani Norsalehe. PhD thesis, Universiti Malaya.

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Abstract

In March 2020, the World Health Organization (WHO) declared the COVID-19 outbreak as a pandemic, leading countries to implement various measures to contain the spread, such as social distancing, widespread lockdowns, and travel bans. These actions have had severe economic consequences, with the downturn being considered more severe than previous financial crises, including the Asian financial crisis, the global financial crisis, and the subprime mortgage crisis. In Malaysia, 97.4% of businesses are small and medium-sized enterprises (SMEs), and they contribute 37.4% and 47.8% of Malaysia’s GDP and employment, respectively. During the COVID-19 pandemic, businesses have either halted or closed down. Most companies have used up their savings to sustain their businesses, paying for fixed costs, R&D, and others. To help ease their burden during the pandemic, the Malaysian government has introduced various economic stimulus packages, such as PRIHATIN, PENJANA, PERMAI, PEMERKASA, and PEMULIH, to support the “rakyat” (people), including SMEs. However, the effectiveness and impact of the economic stimulus packages on SME business performance are still arguable until to date. SMEs with high entrepreneurial orientation (EO), tend to exhibit positive business performance. In challenging times, SMEs need to be unique; they require financial assistance for R&D and business expansion. It is crucial for SMEs to be different from their competitors to gain a competitive advantage. Based on previous financial crises, SMEs still require time to recover post-crisis despite the financial assistance provided to them in challenging markets. Hence, this study aims to examine the effects of EO, SME performance, differentiation strategy, and economic stimulus packages during the COVID-19 pandemic on SMEs in Malaysia. Based on existing empirical research and the current environment during the COVID-19 pandemic, five (5) hypotheses were developed for this study. This study underpins the Resource-Based View (RBV) theory and Contingency theory which fills the current gap in the EO and SME performance relationship within the strategic management literature, particularly during the COVID-19 pandemic in Malaysia. The research method for this study is based on quantitative via questionnaires. The instruments for EO, SME performance, and differentiation strategy were adopted and modified based on existing empirical instruments, while the instruments for the economic stimulus packages were based on self-developed constructs. The questionnaire consists of 61-items. A pilot test was conducted on 70 MD/CEO/business owners/business partners/senior representatives of SMEs, and a field study was conducted on 325 for SMEs in Selangor, Kuala Lumpur, Johor Bahru, Perak, and Pulau Pinang from the service and manufacturing industries. In analysing the result, first, the hypotheses of interest were developed, then EFA is then conducted for ddetermining the dimensionality of items and to evaluate internal factor loading. Subsequently, Pooled-CFA was conducted for the validation of the constructs. Lastly SEM was conducted this is to estimate the interaction among constructs. The data analysis was conducted using SPSS 26 and IBM SPSS AMOS 26. Based on the findings, all the five (5) hypotheses were supported and significant. This study will contribute to SME development plans, post-COVID-19 pandemic and any future crises based on the economic stimulus packages and future assistance provided by the Malaysian government.

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