The Linkage between Entrepreneurial Competencies, Innovation, and the Performance of Small and Medium Enterprises (SMEs): The Insight of Northern Malaysia

Abstract

The contributions of Small and Medium Enterprises (SMEs) to the economic development of emerging economies, including Malaysia, are undeniably significant. Recent reports indicate that the importance of such contributions has intensified over the years, prompting the government to allocate substantial resources aimed at enhancing the infrastructure and mechanisms for SME development. Despite these efforts, sustainability within SMEs remains a critical challenge that requires further examination. Various factors, including entrepreneurial competencies and innovation capabilities, have reportedly impeded the growth of these enterprises. Therefore, this study aims to explore the connection between company success, innovation, and entrepreneurial competency among Northern Malaysian SMEs. Employing a simple random sampling procedure, a total of 197 questionnaires were collected and further investigated and analyzed using the latest version of SPSS (SPSS 28.0). The statistical results show that while innovation has a negative association with SME performance, entrepreneurial competency has a strong positive relationship with business performance. Furthermore, it is evident that both entrepreneurial competencies as well as innovation elements collectively exert influence on the performance of the businesses. From a policy perspective, these findings underscore the necessity to bolster entrepreneurial soft skills and actively promote innovative practices within SMEs. This initiative is crucial for enhancing business confidence and capacity for achieving sustainable performance. Practically, this study provides important acumen, particularly on the management and innovation strategies employed by entrepreneurs within Malaysia's as well as worldwide SME landscape.