Advertisement

Understanding the Links between Transformational Leadership and Entrepreneurial Orientation in Malaysian SMEs

  • Ahmad Fadhly Arham
  • Norhayati Sulaiman
  • Fazlul Haque Kamarudin
  • Nuttawuth Muenjohn
Chapter

Abstract

The study focused on the relationship between transformational leadership and entrepreneurial orientation. There were 325 respondents representing either the owner or top manager of SME establishments operating in manufacturing or services industry involved in this study. A cross-sectional survey and structured questionnaire were used for data collection. A quantitative survey was designed using self-administrative questionnaire. Based on the findings, transformational leadership and all of its factors are having a significant positive correlation with entrepreneurial orientation. Also, it was found that inspirational motivation and intellectual stimulation of transformational leadership contribute significantly towards entrepreneurial orientation.

Keywords

Transformational leadership Entrepreneurial orientation SMEs 

References

  1. Abdul Razak, R. (2011). Entrepreneurial orientation as a universal remedy for the receding productivity in Malaysian small and medium enterprises: A theoretical perspective. International Journal of Business and Social Science, 2(19), 249–257.Google Scholar
  2. Arham, A., Muenjohn, N., & Boucher, C. (2012). Leadership, entrepreneurial orientation and performance: The case of SMEs in Malaysia. In N. Muenjohn (Ed.). Organisational leadership: Concepts, cases and research (pp. 27–50). Melbourne: Cengage Learning Australia.Google Scholar
  3. Arham, A. F. (2014). The relationship between leadership behaviour, entrepreneurial orientation and organisational performance in Malaysian Small and Medium enterprises. RMIT University. Retrieved from https://researchbank.rmit.edu.au/eserv/rmit:160765/Arham.pdf.
  4. Arham, A. F, Boucher, C., & Muenjohn, W. (2013). Leadership and entrepreneurial success: A study of SMEs in Malaysia. World Journal of Social Sciences, 3(5), 117–130.Google Scholar
  5. Awang, A., & Ahmad, Z. A. (2005). Firm’s entrepreneurial orientation and Bumiputera SMEs performance: The impact of munificent environment. Paper presented at the 7th International Research Conference on Quality, Innovation and Knowledge Management, Monash University, Melbourne.Google Scholar
  6. Awang, A., Asghar, A. R. S., & Subari, K. A. (2010a). Study of distinctive capabilities and entrepreneurial orientation on return on sales among small and medium agro-based enterprises (SMAEs) in Malaysia. International Business Research, 3(2), 34–48.CrossRefGoogle Scholar
  7. Awang, A., Asghar, A. R. S., Ahmad, Z. A., & Subari, K. A. (2010b). Entrepreneurial orientation among Bumiputera small and medium agro-based enterprises (BSMAEs) in West Malaysia: Policy implication in Malaysia. International Journal of Business and Management, 5(5), 130–143.CrossRefGoogle Scholar
  8. Awang, A., Khalid, S. A., Yusof, A. A, Kassim, K. M., Ismail, M., Zain, R. S., & Madar, A. R. S. (2009). Entrepreneurial orientation and performance relations of Malaysian Bumiputera SMEs: The impact of some perceived environmental factors. International Journal of Business and Management, 4(9), 84–96.CrossRefGoogle Scholar
  9. Bass, B. M. (1985). Leadership and performance beyond expectations. New York: The Free Press.Google Scholar
  10. Bass, B. M. (1990). From transactional to transformational leadership: Learning to share the vision. Organisational Dynamics, 18(3), 19–31.CrossRefGoogle Scholar
  11. Bass, B. M. (1996). Is there universality in the full range model of leadership? International Journal of Public Administration, 19(6), 731–761.CrossRefGoogle Scholar
  12. Bass, B. M. (2000). The future of leadership in learning organizations. Journal of Leadership & Organizational Studies, 7(3), 17–40.Google Scholar
  13. Bass, B. M., & Avolio, B. J. (1990). The implications of transactional and transformational leadership for Individual, team, and organizational development. In W. Pasmore & R. W. Woodman (Ed.), Research in organizational change and development. Greenwich, CT: Jai Press.Google Scholar
  14. Bass, B. M., & Avolio, B. J. (1993). Transformational leadership: A response to critiques. In M. M. Chemers & R. Ayman (Ed.), Leadership theory and research: Perspectives and directions. Sydney: Academic Press Inc.Google Scholar
  15. Bass, B. M., & Avolio, B. J. (2004). Multifactor leadership questionnaire. Manual and sampler set (3rd ed.). Redwood City, CA: Mindgarden.Google Scholar
  16. Bass, B. M., Jung, D. I., Avolio, B. J., & Berson, Y. (2003). Predicting unit performance by assessing transformational and transactional leadership. Journal of Applied Psychology, 88, 207–218.CrossRefGoogle Scholar
  17. Bass, B. M., & Riggio, R. E. (2012). Transformational leadership (2nd ed.). New Jersey: Lawrence Erlbaum.Google Scholar
  18. Brislin, R. W. (1980). Translation and content analysis of oral and written material. In H. C. Triandis & J. W. Berry (Eds.), Handbook of Cross-Cultural Psychology. Boston: Allyn & Bacon.Google Scholar
  19. Covin, J. G., & Slevin, D. P. (1989). Strategic management of small firms in hostile and benign environments. Strategic Management Journal, 10(1), 75–87.CrossRefGoogle Scholar
  20. Covin, J. G., & Slevin, D. P. (1991). A conceptual model of entrepreneurship as firm behaviour. Entrepreneurship: Theory and Practice, 16(1), 7–24.Google Scholar
  21. Covin, J., & Wales, W. (2012). The measurement of entrepreneurial orientation. Entrepreneurship Theory and Practice, 36(4), 677–702.CrossRefGoogle Scholar
  22. Eisenbeiss, S. A., van Knippenberg, D., & Boerner, S. (2008). Transformational leadership and team innovation: Integrating transformational leadership and team climate models. Journal of Applied Psychology, 93(6), 1438–1446.CrossRefGoogle Scholar
  23. Entebang, H., Harrison, R. T., & de Run, E. C. (2010). Entrepreneurial orientation of public enterprises in Malaysia. Business Strategy Series, 11(2), 75–77.CrossRefGoogle Scholar
  24. Gumusluoglu, L., & Ilsev, A. (2009). Transformational leadership, creativity, and organizational innovation. Journal of Business Research, 62(4), 461–473.CrossRefGoogle Scholar
  25. Hashim, M. K., Ahmad, S., & Zakaria, M. (2012). A study on leadership styles in SMEs. Paper presented at the International Conference on Islamic Leadership-2 (ICIL 2), The Royale Chulan, Kuala Lumpur, 26–27 September.Google Scholar
  26. Hassim, A., Abdul Talib, A., & Abu Bakar, A. (2011). The effects of entrepreneurial orientation on firm organisational innovation and market orientation towards firm business performance. Paper presented at the International Conference Sociality and Economic Development, Singapore.Google Scholar
  27. Hilmi, M. F., Ramayah, T., Mustapha, Y., & Pawanchik, S. (2010). Product and process innovativeness: Evidence from Malaysian SMEs. European Journal of Social Sciences, 16(4), 547–555.Google Scholar
  28. Howell, J. M., & Avolio, B. J. (1993). Transformational leadership, transactional leadership, locus of control, and support for innovation: Key predictors of consolidated business-unit performance. Journal of Applied Psychology, 78, 891–902.CrossRefGoogle Scholar
  29. Jandaghi, G. H, Matin, H., & Farjami, A. A. (2009). Comparing transformational leadership in successful and unsuccessful companies. International Journal of Social Sciences, 2(6), 356–372.Google Scholar
  30. Judge, T., & Piccolo, R. (2004). Transformational and transactional leadership: A meta-analytic test of their relative validity. Journal of Applied Psychology, 89(5), 755–768.CrossRefGoogle Scholar
  31. Knight, G. (2000). Entrepreneurship and marketing strategy: The SME under globalization. Journal of International Marketing, 8, 12–32.CrossRefGoogle Scholar
  32. Law, M. J. (2011). The study of transformational leadership and leader development of public health directors in the Midwest. PhD thesis, School of Business, Capella University.Google Scholar
  33. Lee, C., & Ging, L. C. (2007). SME innovation in the Malaysian manufacturing sector. Economics Bulletin, 12(30), 1–12.Google Scholar
  34. Lo, M-C., Ramayah, T., & Hii Wei, M. (2009). Leadership style and organizational commitment: A test on Malaysia manufacturing industry. African Journal of Marketing Management, 1(6), 133–139.Google Scholar
  35. Lumpkin, G. T., & Dess, G. G. (1996). Clarifying the entrepreneurial orientation construct and linking it to performance. The Academy of Management Review, 21(1), 135–172.Google Scholar
  36. Lussier, R. N., & Achua, C. F. (2001). Leadership: Theory, application, skill-building. Cincinnati: South-Western College.Google Scholar
  37. Miller, D. (1983). The correlates of entrepreneurship in three types of firms. Management Science, 29(7), 770–791.CrossRefGoogle Scholar
  38. Mohd Sam, M. F., Tahir, M. N. H., & Abu Bakar, K. (2012). Owner-manager of SMEs in IT sector: Leadership and company performance. International Journal of Business and Social Science, 3(14), 195–205.Google Scholar
  39. Morris, M. H., & Paul, G. W. (1987). The relationship between entrepreneurship and marketing in established firms. Journal of Business Venturing, 2, 247–259.CrossRefGoogle Scholar
  40. Muenjohn, N., & Armstrong, A. (2008). Evaluating the structural validity of the Multifactor Leadership Questionnaire (MLQ): Capturing the leadership factors of transformational-transactional leadership. Contemporary Management Research, 4(1) 3–14.CrossRefGoogle Scholar
  41. Muenjohn, N., Armstrong, A., & Hoare, L. (2012). Leadership assessment: Differences in a cross-cultural setting. In N. Muenjohn (Eds.), Organisational leadership: Concepts, cases and research (pp. 223–238). Melbourne: Cengage Learning.Google Scholar
  42. Nunnally, J. (1967). Psychometric theory. New York: McGraw-Hill.Google Scholar
  43. Othman, N., Sulaiman, M., Zainudin, N., & Hasan, Z. (2008). Entrepreneurial acculturation in Malaysia: Efforts and achievements. Munich RePEc Archive Personal, viewed 4 July 2012, http://mpra.ub.uni-muenchen.de/8980/.
  44. Pawar, B. S. (2003). Central conceptual issues in transformational leadership research. Leadership & Organization Development Journal, 24(7), 397–406.CrossRefGoogle Scholar
  45. Podsakoff, P. M., Mackenzie, S. B., Moorman, R. H., & Fetter, R. (1990). Transformational leader behaviors and their effects on followers’ trust in leaders, satisfaction, and organizational citizenship behaviors. Leadership Quarterly, 1, 107–142.CrossRefGoogle Scholar
  46. Rajasekar, J. (2014). Factors affecting effective strategy implementation in a service industry: A study of electricity distribution companies in the sultanate of Oman. International Journal of Business and Social Science, 5(9), 169–183.Google Scholar
  47. Rauch, A., Wiklund, J., Lumpkin, G.T., & Frese, M. (2009). Entrepreneurial orientation and business performance: An assessment of past research and suggestions for the future. Entrepreneurship Theory and Practice, 33(3), 761–787.CrossRefGoogle Scholar
  48. Runyan, R. C., Ge, B., Dong, B., & Swinney, J. L. (2012). Entrepreneurial orientation in cross-cultural research: Assessing measurement invariance in the construct. Entrepreneurship Theory and Practice, July, 819–836.Google Scholar
  49. Sarros, J. C., & Santora, J. C. (2001). The transformational-transactional leadership model in practice. Leadership & Organization Development Journal, 22(8), 383–393.CrossRefGoogle Scholar
  50. Swierczek, F. W., & Thanh Ha, T. (2003). Motivation, entrepreneurship and the performance of SMEs in Vietnam. Journal of Enterprising Culture, 11(1), 47.CrossRefGoogle Scholar
  51. Tosi, H. L., Misangyi, V. F., Fanelli, A., Waldman, D. A., & Yammarino, F. J. (2004). CEO charisma, compensation, and firm performance. The Leadership Quarterly, 15, 405–425.CrossRefGoogle Scholar
  52. Waldman, D. A., Ramirez, G. G., House, R. J., & Puranam, P. (2001). Does leadership matter? CEO leadership attributes and profitability under conditions of perceived environmental uncertainty. Academy of Management Journal, 44, 134–143.CrossRefGoogle Scholar
  53. Wang, C. L. (2008). Entrepreneurial orientation, learning orientation, and firm performance. Entrepreneurship Theory and Practice, 32(4), 635–657.CrossRefGoogle Scholar
  54. Wiklund, J. (1999). The sustainability of the entrepreneurial orientation – performance relationship. Entrepreneurship: Theory & Practice, 24(1), 39–50.Google Scholar
  55. Wiklund, J., & Shepherd, D. (2005). Entrepreneurial orientation and small business performance: A configurational approach. Journal of Business Venturing, 20(1), 71–91.CrossRefGoogle Scholar
  56. Yang, C. W. (2008). The relationships among leadership styles, entrepreneurial orientation, and business performance. Managing Global Transitions, 6, 257–275.Google Scholar
  57. Yukl, G. (1989). Managerial leadership: A review of theory and research. Journal of Management, 15, 251–289.CrossRefGoogle Scholar
  58. Zainol, F. A., & Ayadurai, S. (2011). Entrepreneurial orientation and firm performance: The role of personality traits in Malay family firms in Malaysia. International Journal of Business and Social Science, 2(1), 59–71.Google Scholar
  59. Zainol, F. A., & Wan Daud, W. N. (2011). Indigenous (Bumiputera) Malay entrepreneurs in Malaysia: Government supports, entrepreneurial orientation and firms performances. International Business and Management, 2(1), 86–99.Google Scholar

Copyright information

© The Author(s) 2017

Authors and Affiliations

  • Ahmad Fadhly Arham
    • 1
  • Norhayati Sulaiman
    • 2
  • Fazlul Haque Kamarudin
    • 3
  • Nuttawuth Muenjohn
    • 4
  1. 1.Department of Business & ManagementUiTM MalaysiaShah AlamMalaysia
  2. 2.RMIT UniversityMelbourneAustralia
  3. 3.Department of Communication and Media StudiesUniversiti Teknologi MARAShah AlamMalaysia
  4. 4.School of ManagementRMIT UniversityMelbourneAustralia

Personalised recommendations