1.

0 INTRODUCTION
This paper examines on how strategic leadership can impact the performance of
organisational of the Small and Medium Enterprises (SMEs) and to develop
sustainable competitive advantage.

2.0 SUMMARY
Small and Medium Enterprises (SMEs) play a significant role in a Malaysia’s
economy and social wellbeing. It is essential to understand how strategic leadership
could affect the organizational performance. Thus, this study examines the various
factor of strategic leadership such as leadership vision, strategic direction, core
competencies of leaders, developing people, and innovation capability that effect
organizational performance. This research employs quantitative analysis with 100
participants in this study by implementing the convenience sampling technique from
management teams in various SME’s located in Muar, Johor Malaysia. Structural
Equation Modelling (SEM) was used to test the path analysis and hypothesized. The
result indicates that leadership vision, strategic direction and core competencies
have insignificant positive influence on SME performance. While developing people
has insignificant negative influence on SME performance. Therefore, Innovation
capability has significant positive impact on SME performance. The authors present
a balance evaluation of studies on impact strategic leadership on organization
performance as the limitation and further studies also discussed.

3.0 STRENGHTS
3.1 The literature highlights on the importance of strategic leadership to
organizational performance. The core purpose of strategic leadership
theory and research is to understand how much influence top
management have over performance (Singh et al.2016). In spite of the
importance of leadership, a review of past research suggests few studies
that have positive influence on organization performance. This paper
attempted to review literature that examined the impact of strategic
leadership practiced by organization to give more insights on strategic
leadership of SMEs in Malaysia to researcher, society, top management
and practitioners. Literature has shown that strategic leadership are

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 important for organizational performance, however, it still inadequate
towards research that have been done.

3.2 The researchers discussed five important major conceptual frameworks:

leadership vision, strategic direction, core competencies, developing
people and innovation capability on organizational performance (Pazireh
et al, 2014). The finding of this research showed that developing strategic
leadership practices for high performance by focusing on the innovation
capability. Many of the SME owner-managers implemented innovation
capability to improve their position and they focus more on improving the
existing products and services (Mahmutaj, 2014). The finding also
supported by the articles done by Samad (2012) in Malaysia and Waite
(2013) in USA that new products, creativity, innovation activities, value
creation and new ideas are crucial factor on innovation. Nowadays,
company of all industries are developing innovation to guarantee their
success in the markets. Lawson and Samson (2001) determine
innovation capability as “the ability to continuously transform knowledge
and ideas into new products, processes and systems for the benefit of the
firm and its stakeholders”. Significantly, for instance, the studies by Abul
Bashar Bhuiyan (2016) showed that the changes of Malaysians’ lifestyle
have resulted in an increase in the demand for convenience food and
health food which in turn leads to innovative new products in the food
processing-based SMEs in Malaysia.

3.3 The researchers give suggestion for further studies can be undertaken by
extend the research beyond the SMEs into the Multinational Corporation
(MNC) on the international playing field for gathering more concrete data
in determining the impact of strategic leadership on organizational
performance in a global market. Organizations at the global level are
most concerned with their performance due to high competition in the
market as such companies and organizations are constantly focused on
progressing, setting strategic objective, and expanding their operations. In
addition, Holt and Seki (2012) indicated that global leaders operate in
paradoxical and complex world of different multicultural backgrounds. The
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 research done by Rabiul Islam (2019) stated that the leadership of
multinational companies has become a prominent issue in the 21st
century. The rise of technology, knowledge workforces and globalization
has transformed the world into a global village, where social responsibility
and diversity are not the only major challenges of organizations.
Organizations must compete for effective leaders and with capabilities for
innovation and creativity, flexibility to adapt and change and survive in
future.

4.0 WEAKNESSES

4.1 There are several drawbacks to this research, which is firstly, the sample
size was small. The researchers focused to use a sample of 100
respondents in top management of SMEs only in Muar. With the small size
of population that only collected from Muar, they will not obtain the
excellent and accurate result as there were 74 percent of respondents are
managers and only 7 percent of the participants were from senior
managers which has been stated by the authors in this journal. In fact, the
researchers chose their respondents from various services provided and
obtained the consent of these companies prior proceeding to the
questionnaire given. On the other hand, the researchers admitted that one
of the limitations of this findings is the sample size should be expanded to
several companies or organizations. The lack of diversity was giving
difficulties to this research to generalize the collection of information and
data.
Hence, to curb this limitation, the researchers perhaps should focus on
huge size of population. Instead of choosing Muar as a targeted area of
respondents, they might select other places such as Melaka, Johor Bahru
and Negeri Sembilan. The researchers also pointed out that they should
improve the size of sample to cover more top management teams from
various organization or companies. Indeed, the target population can be
widely spread to the firms or organizations which bound under SME’s as
the are several natures of business can be referred. They can get the list
of the companies from SME Corporation Malaysia. In this list, it provided a

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lot of companies from variable industries. Thus, the researchers can
choose which industries they want to focus on. For instance,
manufacturing and services industries as both industries are contribute
crucially to the economy development in Malaysia (Ahmad Fadhly Arham,
2016).
Furthermore, questionnaires can be used in some circumstances and
might be inevitable for certain situation. In this study, the authors might
use mixed methods for survey research as questionnaires is time
consuming. To reduce the potential of respondents, avoid to give feedback
about the question given, the researchers may approach the participants
with distributing and follow up via telephone interviews to shed light on
unclear survey responses (Singleton & Straits, 2009). Moreover, the
author also can use dichotomous questionnaire. This type of questionnaire
is a question that can have two possible answers which is “Yes” and “No”.
Dichotomous scales provide the participants a clearer answer (Alexx
Birkett, 2019) which will drive them to answer without skip any of the
questions. Because of the respondents might be come from wide range of
areas, this dichotomous method is advisable to be implemented.
According to Holbrook, Krosnick, David Moore and Roger, dichotomous
generally involves in large and nationally representative samples. They
also mentioned that dichotomous method may conduct to recency effects
which more common when question we more difficult to comprehend,
when answer provides were complete sentences and when several prior
questions had been answered (Holbrook, Krosnick, David Moore and
Roger, 2005). This study has mentioned that 74 percent of respondents
are managers and only 7 percent of the participants were from senior
managers were responded to the question provided in the questionnaire
throughout Muar. So, as for the researcher to improve the method of
collecting data besides questionnaire, they can implement the instrument
for assessing transformational and transactional leadership behaviour
which is Multifactor Leadership Questionnaire (MLQ) by Avolio and Bass
(2004). The researchers are required to liaise with the Mind Garden, Inc.
to purchase these forms. There were some findings stated that the used of
MLQ drove to valid result (Ahmad Fadhly Arham, 2016).
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4.2 Secondly, four out of the five hypotheses are rejected in the analysis and
only one criterion of the variables, the innovation capability is found to
have significant positive impact on the organizational performance. For
example, the results of the research indicate that in one of the hypotheses,
the variable of developing people is rejected and is insignificant. It is stated
in the article that 90% of the respondents are the managers and those in
higher positions.

Studies shown that the SME’s managers did not consider training as
priority (Rabie & Cant, 2016) and therefore the results stated in the article
does not reflect the actual need of the SME’s. There is abundance of
literature on the importance of training to businesses to provide
competency to employees to both SME’s and large manufacturing
companies (Corporate Strategy and Insights Department of Pembangunan
Sumber Manusia Berhad (PSMB), Malaysia, 2018).

SME’s training activities is up to 50% less than that in the larger

organisations (Rabbie , Cant & Wiid, 2016). They listed various reasons
for SME’s to be least likely to provide formal training for employees. In
their research, they shown that costs as being the main factor (Rabie,
Cant & Wiid, (2016). Other research also conclude the same findings
where it was found that many SME’s do not conduct training because the
high cost and spending is considered as big investment despite there is a
demand for it (Priyantha & Premarathne, 2015). The SME’s underestimate
the benefits that training can offer to the business, the workforce and
managers (Rabbie, Cant & Wiid, 2016).

In another study however, it was found that the employee training

improves organizational performance (Esteban-Lloret, AragónSánchez &

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 Carrasco-Hernández, 2018) and quality and quantity of employee’s work
(Nwankwo, 2018). The employee training enables SMEs to retain
competitive globally as well (Peter et al., 2018 as cited in Sirinaga, Kitibi &
Azam, 2020). The employee training and development programs also
have an influence on employee retention (Fletcher, Alfes & Robinson,
2018). Findings that SME’s reluctance to provide training is the possibility
of employees leaving the company for other employment ( Rabie,Cant &
Wiid, ,2016). In short, it could be said that the success of an organizations
could be achieved when organizational strategies are linked with the
training and development (Sirinaga, Kitibi & Azam (2020).

Thus, this findings shall do some improvements such as respondents

should include those from the lower level positions as well in order to get
accurate feedbacks of the current situation in the plant. Besides, to verify
information disseminate from management to employees and to provide
check and balance that information highlighted by the employees are
consistent with what the management presented.

4.3 Another weakness relates to the selection of respondents in the study. The
data were collected from 100 respondents in the top management
representing 10 SME’s of different industries. Nine out of the ten
companies selected using convenience sampling are designed oriented
companies, hence the results from the survey could not represent SME’s
of different business natures, needs, visions and objectives.

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 Convenience sampling although it is least expensive, least time
consuming, most convenient, it is selection bias, the sample are not the
representative of the whole research and not recommended by descriptive
or casual research (Taherdoost, 2016). Most of the research conducted on
the impact of strategic leadership involves participants from the same
industry (Zia-ud-Din, Shabbir, Asif, Bilal & Raza, 2017) and not like the
present research which includes different SME’s industries. The study
conducted by Abdul Rahman et al, 2018) on the same area also focus on
one industry, i.e. the automobile industry. In the present article, one of the
samples is the education sector, in which certain level of competency is
needed before a person could be employed in such sector. Hence, such
sector would not consider training as its main priority nor as frequent.
Manufacturing industries selected were design-based sector which
employees were selected with skills and competency to meet amongst, the
technology demand. The design-based industry also perceived innovation
as upmost important for them to compete in the market. This explained the
results of the analyses which shown innovative capabilities as the
significant hypothesis. This result, in the writer’s view could not represent
the perspective of the whole SME’s.

5.0 RECOMMENDATION
5.1 The selection of respondents to be from the same industries for the
purpose of uniformity in the visions, missions, and operational
performance. This selection would ensure that the samples collected and
analysed would be applicable to the SME’s within the sector. For example,
if the research focus on the tool fabrication industries, all respondents
should be from the companies of the same nature. Likewise, if the
objective is to analyse the impact of strategic leadership on education
sectors, care should be taken to ensure that all respondents represent the
same.
5.2 Literature has shown that strategic leadership are important for
organizational performance but still inadequate towards research that have
been done. Thus, further studies and investigation is required as

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 researcher suggested to close this gap in the literature and contribute to a
new understanding of relationships between strategic leadership and
organizational performance of SMEs in Malaysia.
5.3 The finding of this research has been discussed in general manner. It is
recommended that if the researcher give specific of an example of
innovation capability on organizational performance of SMEs in Malaysia.

6.0 CONCLUSION

As findings of this research is highly recommended to top management of SMEs in

Malaysia to focus on Innovation capabilities of strategic leadership for their
organizational performance. However, further studies and investigations will be
undertaken as to close the gap in the literature and contribute to a new understanding of
relationships between strategic leadership and organizational performance of SMEs in
Malaysia.

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