SME of Entrepreneurial Success Study

the university of adelaideThis study by Noor Hazlina Ahmad focused on understanding how small and medium-sized enterprises (SME’s) in both Australia and Malaysia measure their success in relation to entrepreneurial competency. The study was divided into two parts in order to obtain well-rounded data.

For the first part of the study, a qualitative method was used, which interviewed 20 different entrepreneurs. 10 of these entrepreneurs were from Australia and 10 were from Malaysia. Each of these entrepreneurs operated SMEs in either the service or manufacturing sectors. From the qualitative data gathered by these entrepreneurs, it was possible to elicit behaviors come from key identifiable entrepreneurial competencies. These key 12 competencies were: Strategic, Conceptual, Commitment, Organising and Leading, Opportunity, Learning, Relationship, Technical, Personal, Social Responsibility, Ethical, and Familism.

The second part of the study was divided into two parts. The first part focused on determining the psychometric rigour of the model and establishing dependent variables of business success in relation to key entrepreneurial competencies. In this portion of the study, 391 SME entrepreneurs that included 179 entrepreneurs from Australia and 212 from Malaysia. The study resulted in 10 out of 12 of the entrepreneurial competencies being similar between the two countries. That said, the entrepreneurial competencies relating to Familism and Organizing and Leading were different between the two countries due to cultural influences.

The second part of Part 2 was investigating the casual correlation between entrepreneurial competencies and business success while utilizing SEM procedure. What the results ended up revealing is that entrepreneurial competencies were attributed to business success in SMEs for both Australia and Malaysia.

The comprehensive result from all sectors of the study indicated that even in differing cultures such as Australia and Malaysia, there is strong evidence that entrepreneurial skills are pivotal to business success for entrepreneurs that have SMEs.

Comparative Study Regarding the Factors Influencing Entrepreneurial Success in SMEs In Australia & Malaysia

There have been previous studies about Bird’s 1995 theory of entrepreneurial competencies by individuals such as: Man (2001), McGee & Peterson (2000), and Salomo, Gemuenden & Brinckmann (2005). What Bird’s theory alludes to is that entrepreneurial competencies are the crucial mechanism whereby the likelihood of achieving business success can be achieved and improved.

Previous studies about Bird’s theory focused on distinct sectors of SMEs that were either focused on one specific market or Western-biased. What this study does is to provide the opportunity for an international comparison of SMEs in the service and manufacturing sectors that occurs between two very different cultures of Australia and Malaysia and how entrepreneurial competencies are related to their success.

Understanding the Linkage of Entrepreneurial Competencies, Business Environmental, and Cultural Orientations with Entrepreneurial Success

At the early stages of the analysis, Noor Hazlina Ahmad focused on the existing research studies that were completed in order to assess what variables were solely responsible for the success of SMEs.

One of the first that is analyzed is Gartner, Shaver, Gatewood, and Katz, which voiced the need to clearly identify which entrepreneurial tendencies were aligned with successful SMEs. It is here where the study continues onto Bird’s analysis that expressed the need to identify what the competencies associated with entrepreneurship are. Bird felt that studying the trends of these entrepreneurial competencies was fascinating and essential to assess the reasons for an organization’s success or failure.

The third research study that is mentioned by Noor Hazlina Ahmad is by Child who attributes an organizations success or failure to the power-holder at the top of the organization. These ideas being research had seldom been studied in the 1970’s, which is precisely why these researchers began to assess domestically in Australia and Malaysia by looking at patterns amongst SME’s, which typically consisted of an internal and external analysis of the causes of success and failure. What was missing in the research was the impact of globalisation on the comparison of the entrepreneurial competencies and their impact of success on SME’s.

Creating a Theoretical Framework that Links Entrepreneurial Competencies, Business Environment, Cultural Orientation, and Business Success

One of the main issues that Noor Hazlina Ahmad faced in his research was to find a theoretical framework that likes the factors of entrepreneurial competencies, cultural factors, and business environment to the success of SMEs in both Australia and Malaysia.

Two forms of analysis were compared, which were outcome variables in terms of business success and covariates related to situational and cultural factors. While the link of cultural and situational factors was quite clear, the next part of the study needs to focus in more on the relationship between entrepreneurial competencies and the success of SMEs while using structural equation modelling (SEM) to test the relationship between the two variables.

Study 1: Exploring Behaviours Delineating Entrepreneurial Competencies Amoung Entrepreneurs in SMEs in Australia & Malaysia

When utilizing SEM, there are several definitive conclusions that can be drawn. The first is related to a measure of the reliability of entrepreneurial competencies as a viable framework for measuring a business’ success in both Australia and Malaysia.

Secondly, Man’s (2001) model of entrepreneurial competencies is useful to apply to data from Malaysia and Australia; however, it needs to be modified to take into account the differences in Familism, Social Responsibility, Supporting and Cooperating, and Ethical differences between the business culture of Australia and Malaysia.

The third consideration to take into account is that while Familism appeared to have more weight in Malaysia, it actually had a greater variance in the data taken from Australian entrepreneurs. The fourth realization of the analysis is that both the Comprehensive and Parsimonious models are applicable to the participants from Australia and Malaysia.

Lastly, while the existing set of entrepreneurial competencies is favourable to analyse both countries, it is important to take into account cultural practice when assessing these competencies to have the most revealing and insightful data in both countries.

Study 2: Part I: Towards a Multidimensional Model of Entrepreneurial Competencies: Preliminary Findings & Data Collection

The objective of Study 2 was to analyse possible links between the business environment, cultural orientations, and business success with entrepreneurial competencies while using a selection of SME entrepreneurs in Malaysia and Australia.

Man’s (2001) model illuminates that a high level of entrepreneurial competencies have a direct impact on the firm’s present and future performance. This is attributed to the importance of a positive business environment on staff motivation and overall company success. In this portion of the research, there is a debate about whether success can be measured both financially and intrinsically based on the study by Walker and Brown (2004).

Financial success indicators that are analysed are related to: net profits, cash flow, return on sales, return on growth, return on investment, and return on market share, and overall business growth.  The non-financial indicators of success that are measured are: customer satisfaction, owner self-satisfaction, employee satisfaction, workplace industrial relations, and relationships with suppliers.

What ended up being the result with these data indicators was that they were sufficiently measurable between two distinctly different cultures such as Australia and Malaysia. Where the entrepreneurial competencies failed was in the Comprehensive model where it was apparent that there was a need for an inclusive model about contemporary concerns of good business practices.

In terms of the Parsimonious model, the data failed in that the entrepreneurial competencies need to be more robust in terms of how they are relevant to the specific day-to-day business interactions and experiences of entrepreneurs in Australia and Malaysia.

Study 2: Part II: Model Testing Using SEM Procedure

As the study further progressed, it was quite clear that the data supported competencies in both Australian and Malaysian entrepreneurs by using both the Comprehensive and Parsimonious research models. Due to the success of this research, it is believed that the data can be utilized for entrepreneurship training modules.

That said, there was a discrepancy with the Australian data with respect to cultural orientations on entrepreneurial competencies. When trying to analyse the implications of cultural norms within the Australian business culture that impacts the competencies of entrepreneurship, it was clear that the data could not be measured to detect the subtleties within the Australian business culture to render results. The distinct factor that was detected in Australian business culture with only the Parsimonious model of entrepreneurial competency was how entrepreneurs were able to excel in both hostile and dynamic work environments.

The entrepreneurs that had higher competencies were able to excel and those with lower found it difficult to navigate hostile work environments. What the combined results reveal is that entrepreneurial competencies are an excellent way to gage a prospective entrepreneur’s potential to navigate difficult work challenges effectively in many cultures. Furthermore, that higher education was a key indicator in an entrepreneur’s confidence for utilizing the competencies of entrepreneurship both effectively to drive their company’s ultimate success.

Entrepreneurial Competencies as Drivers of SME in Australia & Malaysia: Discussion & Conclusion

The primary objective of this study from the outset was to evaluate and comprehend the relationship between business success and entrepreneurial competencies of SME owners in Malaysia and Australia. In order to delve deeper into the research process, it was important to analyse unique cross-cultural factors to make effective and productive conclusions.

The overall study took a “mixed-method” approach in that Study 1 focused on a qualitative research approach with the objective of obtaining evidence about whether the prior identified competencies by Bird were deemed important amongst SME entrepreneurs. Within that analysis, it was also important to assess whether these SME entrepreneurs felt the scale of importance of these entrepreneurial competencies as indicated in prior research frameworks.

The aspect that provided a unique twist to prior research was the difference between Australian and Malaysian culture overall. In Study 2, it was necessary to adopt a quantitative approach to further analyse and understand the results regarding the entrepreneurial competencies and their impact from Study 1.

This was achieved by testing a larger pool of entrepreneurs in order to see if the results were overall consistent. This data came back varied, which showed the importance of distinct cultural differences in how Australian and Malaysian entrepreneurs respond to either hostile or overly positive work environments. What made this portion of the data unique is that various demographic variables such as: prior education level, overall work experience, and training before and after the startup of the SME were taken into account and measured between the cultures.

This is what truly provided varied results and suggest the potential need to modify the research should professors or researchers desire to compare two different distinct SME entrepreneurs in other global cultures.

The final takeaway questions that were studied researched and answered in this study were as follows: 

1) “What were the competencies perceived to be important by entrepreneurs in SMEs in Australia and Malaysia?”

2) “Are there cross-cultural differences in the competencies identified by Australian and Malaysian entrepreneurs?”

3) “To what extent does the competency model developed in Study 1 predict SME business success in Australia and Malaysia?”

4) “To what extent does the business environment directly or indirectly influence business success in SMEs?”

5) “To what extent do the individual cultural orientations of entrepreneurs influence the behaviours reflecting entrepreneurial competencies?”

6) “To what extent do education, training before and after startup and prior work experiences influence the development of entrepreneurial competencies?”

After pinpointing the questions answered, there was a debate about what sorts of elements entrepreneurs in SMEs in Australia and Malaysia should implement into their corporate training and future personal development.

One of the strongest words of advice was to include: direct and concise modules that show clear targeted results, be relevant to both the needs of the employee’s job description and the growth/developmental needs of the entrepreneur’s business, provide an ongoing dialogue that is balanced between support and advice, and demonstrate a concrete link to desirable business outcomes.

The study closed with potential future avenues of research that could be pursued in this area should there be a desire for knowledge from different cultures or entrepreneurs from larger business entities while stressing the importance of tailoring the research study to the particular needs of both distinct cultures and not just transplanting the study from Australia/Malaysia to entrepreneurs in SMEs in other markets.