Factors Determing the Success of SMEs in Malaysia. A Qualitative Study

TABLE OF CONTENTS

ABSTRACT

ACKNOWLEDGEMENTS

DECLARATION

THESIS OVERVIEW

TABLE OF CONTENTS

LIST OF TABLES

LIST OF FIGURES

LIST OF ABBREVIATIONS

CHAPTER ONE: INTRODUCTION AND OVERVIEW OF THE STUDY
1.1 Introduction
1.2 Research background
1.3 Research problem
1.4 Theoretical framework
1.5 Research objectives and questions
1.6 Scope of the study
1.7 Research justification
1.8 Research methodology
1.9 Significance of the study
1.10 Definitions
1.11 Thesis structure
1.12 Summary

CHAPTER TWO: THE SYSTEMATIC LITERATURE REVIEW PROCESS
2.1 Introduction
2.2 Systematic literature review
2.2.1 Overview
2.2.2 Aim and objectives of the review
2.2.3 Reasons for the systematic literature review
2.3 The review process
2.3.1 Searching
2.3.1.1 Identification of resources
2.3.1.2 The use of search terms
2.3.2 Screening
2.3.3 Data extraction
2.3.4 Data synthesis
2.3.4.1 Descriptive analysis
2.3.4.2 Thematic analysis
2.3.5 Reporting and dissemination
2.4 Strengths and limitations
2.4.1 Strengths of the review
2.5 Summary
2.6 LITERATURE REVIEW
2.6.1 Introduction
2.6.2 Definition of SMEs
2.6.3 Importance of SMEs
2.6.4 Performance, success, and failure
2.6.4.1 Success as survival
2.6.4.2 Success as growth
2.6.4.3 Success as high growth
2.6.4.4 Issues remaining in the HGF literature
2.6.5 Measurement of success
2.6.6 Success factors
2.6.6.1 Internal factors
2.6.6.1.1 Characteristics of SMEs
2.6.6.1.2 Characteristics of the entrepreneur
2.6.6.1.3 Firm strategies
2.6.6.2 External factors
2.6.6.2.1 Macro-environmental factors
2.6.6.2.2 Micro-environmental factors
2.6.7 Success, survival, and growth: questions of perception
2.6.8 Development of the conceptual framework
2.6.9 Hypotheses of the study
2.6.10 Summary
2.7 SMALL AND MEDIUM ENTERPRISES IN MALAYSIA
2.7.1 Introduction
2.7.2 Overview about the Country of Malaysia
2.7.2.1 Geographical description
2.7.2.2 Demographic characteristics
2.7.2.3 Historical background
2.7.2.4 Political background
2.7.2.5 Economic context
2.7.3 Overview of Malaysia
2.7.3.1 Geographical description
2.7.3.2 Demographic background
2.7.3.3 Historical background
2.7.3.4 Political background
2.7.3.5 Economic context
2.7.4 The structure of SMEs in Malaysia
2.7.4.1 The primary sector
2.7.4.2 The secondary sector
2.7.4.3 The tertiary sector
2.7.5 The external business environment in Malaysia
2.7.5.1 The regulatory environment
2.7.5.2 The tax system
2.7.5.2.1 Tax regime applicable to the Selected districts of Malaysia
2.7.5.2.2 Tax regime applicable to the export free zones
2.7.5.2.3 Tax regime applicable to the free zone of the port of Malaysia
2.7.6 Summary

CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Introduction
3.2 The research philosophy
3.2.1 The adopted research philosophy Ill
3.3 The research purpose
3.4 The research approach
3.4.1 Deductive and inductive approach
3.4.2 Quantitative and qualitative approach
3.4.3 The adopted research approach
3.5 The research strategy
3.5.1 The survey strategy
3.5.2 The interview strategy
3.6 The research design
3.6.1 The developmental phase
3.6.1.1 Conceptualization and Operationalization
3.6.1.2 Instrument development
3.6.2 The implementation phase
3.6.2.1 Data collection
3.6.3 The analysis / validation phase
3.6.3.1 Quantitative data analysis
3.6.3.2 Validity and reliability of the quantitative phase
3.6.3.3 Qualitative data analysis
3.6.3.4 Trustworthiness of the qualitative results
3.7 Ethical issues
3.7.1 Consent
3.7.2 Confidentiality
3.7.3 Debriefing
3.7.4 Protection of participants
3.7.5 Withdrawal from participation
3.8 SUMMARY

CHAPTER FOUR: RESULTS AND ANALYSIS OF THE QUANTITATIVE AND QUALITATIVE PHASE
4.1 Introduction
4.2 Data analysis
4.2.1 Data preparation
4.2.2 Data classification
4.2.3 Non-response bias
4.2.4 Reliability and validity
4.2.4.1 Reliability
4.2.4.2 Validity
4.2.5 Descriptive analysis
4.2.5.1 Demographic characteristics of the respondents
4.2.5.2 Demographic characteristics of the businesses
4.2.5.3 Success factors
4.2.6 Exploratory factor analysis
4.2.7 Hypotheses testing
4.2.8 Open ended question analysis
4.3 Summary
4.4 RESULTS AND ANALYSIS OF THE QUALITATIVE PHASE
4.4.1 Introduction
4.4.2 Profile of respondents
4.4.3 Macro-environmental factors
4.4.3.1 Economic factors
4.4.3.1.1 Financial resources
4.4.3.1.2 Taxation
4.4.3.2 Political-legal factors
4.4.3.2.1 Government support
4.4.3.2.2 Regulatory environment
4.4.3.3 Technological factors
4.4.3.3.1 Technology and information
4A3.3.2 Infrastructure
4.4.3.4 Socio-cultural factors
4.4.3.4.1 Networking
4.4.3.4.2 The workforce
4.4.4 Micro-environmental factors
4.4.4.1 Customers
4.4.4.2 Suppliers
4.4.4.3 Competition
4.4.5 Summary
4.5 DISCUSSION OF FINDINGS
4.5.1 Introduction
4.5.2 Success factors
4.5.2.1 Internal factors
4.5.2.1.1 Characteristics of the business
4.5.2.1.2 Characteristics of the entrepreneur
4.5.2.2 External factors
4.5.2.2.1 Economic factors
4.5.2.2.2 Political-legal factors
4.5.2.2.3 Technological factors
4.5.2.2.4 Socio-cultural factors
4.5.2.2.5 Micro-environmental factors
4.5.3 Summary

CHAPTER FIVE: CONCLUSION
5.1 Introduction
5.2 Research questions and objectives revisited
5.3 Research conclusions
5.3.1 Business owner and manager attributes
5.3.2 Work partnership
5.3.3 Businesscharacteristics
5.4 Research contributions
5.4.1 Introduction
5.4.2 The impact of location
5.4.3 Networking, partnership, and nepotism "who you know"
5.4.4 The value of a mixed methods approach
5.4.5 Overview
5.5 Research limitations
5.6 Implications of the research
5.6.1 Implications for practice
5.6.2 Implications for policy
5.6.3 Implications for research

REFERENCES
APPENDIX A: LITERATURE REVIEW APPENDIX
APPENDIX A. 1: Additional information about the electronic databases
APPENDIX A.2: Examples of search strings
APPENDIX A.3: Data extraction form
APPENDIX A.4: Results of the descriptive analysis
APPENDIX A.5: Sample of reviewed studies
APPENDIX A.6: Map of Malaysia
APPENDIX A.7: SMEs Overview
APPENDIX A.8: Business practices in 8 cities in Malaysia
APPENDIX B : RESEARCH METHODOLOGY APPENDIX
APPENDIX B.1: Conceptualization and operationalization of constructs
APPENDIX B.2: Survey questionnaire
APPENDIX B.3: Interview guide
APPENDIX B.4: Screen shots of the survey website
APPENDIX B.5: First reminder
APPENDIX B.6: Second reminder
APPENDIX B.7: Standard interview form
APPENDIX B.8: Questionnaire coding
APPENDIX B.9: A sample of a conducted interview
APPENDIX C : RESULTS APPENDIX
APPENDIX C.1: Diagram of the quantitative results
APPENDIX C.2: Results of Mann-Whitney test between late and early respondents
APPENDIX C.3: Cronbach's alpha if item deleted
APPENDIX C.4: Rotated component matrix
APPENDIX C.5: Descriptive statistics
APPENDIX C.6: Results of Mann-Withney test for testing the hypotheses
APPENDIX C.7: Websites Searched
APPENDIX C.8: Final Thematic map

ACKNOWLEDGEMENTS

First and foremost, I must thank Allah, the Almighty, for seeing me to the completion of this research journey.

The completion of this research would not have been possible without the help and support of many individuals to whom I owe a special debt of gratitude. First of all, I am indebted to my supervisors Prof. Dr. K. Ramanathan Kalimuthu and Prof. Dr. Mohammad Awang for their continuous support, considerate guidance and companionship throughout my research journey. I wish here to acknowledge their invaluable advice and ideal supervision through this research and for being supportive, inspiring, and continuously motivating. I doubt that these words can ever reflect my appreciation and gratitude to them for the constructive comments they provided me on this thesis as well as the publications.

Second, I would like to thank all the staff at the Limkokwing University of Creative Technology that always provided me with constructive feedbacks and guidance during Ph.D. seminars and conferences. Deepest appreciation goes to Dr. Iliham Santosa, Dr. Shahid and Assoc. Prof. Dr. Valliappan Raju for their support.

My final acknowledgment goes to the participants in this study, particularly the fifteen managers of SMEs in Malaysia who agreed to give me some of their precious time to learn about their stories. Indeed, they are the real heroes since this study would not have been possible without them.

DECLARATION OF PUBLICATION

The following publications have been produced as a direct or indirect result of the research study discussed in this thesis:

Published papers in journals

Yusuf, B. Abdullahi (2017). Business Success in Malaysian SMEs: A Quantitative Approach.

International Journal of Business and Social Science, 4 (7), 297-312.

Yusuf B. Abdullahi (2017). Impact Of Effective Entrepreneurship And Strategic Management On Business Success: An Empirical Study Of SMEs. International Journal of Scientific Research and Management, 4 (2), 89-103.

Yusuf B. Abdullahi (2018). Factors Determining Success in Malaysian SMEs By Implementing Effective Entrepreneurship and Strategic Management. International Journal of New Technology and Research, 4 (7), 48-55.

Yusuf B. Abdullahi, Prof. Dr. K. Ramanathan Kalimuthu, (2018). Entrepreneurship and Strategic Management Process in Small and Medium Sized Enterprises in Malaysia. International Journal of New Technology and Research, 4 (9), 56-63.

Yusuf B. Abdullahi (2018). Impact Of Effective Entrepreneurship And Strategic Management On Business Success: An Empirical Study Of SMEs In Malaysia. Global Journal of Management and Business Research, 18 (8), 41-52.

Papers in conference proceedings

Yusuf, B. Abdullahi, David, W., Sam, R. (2017). The perceptual effects of location in small

businesses. The International Conference on Management of the Kolej Universiti Islam Antarabangsa Selangor, Malaysia.

FACTORS DETERMINING THE SUCCESS OF SMES IN MALAYSIA

Yusuf B. Abdullahi

Limkokwing University of Creative Technology

ABSTRACT

Small and medium enterprises (SMEs) have an important role to play in the development of a country. A strong SME sector contributes highly to the economy, contributing to the gross domestic product, by reducing the level of unemployment, reduction in poverty levels and promotion of entrepreneurship activity. Therefore, the success of this sector determines economic status of the economy of Malaysia which is dependent on a number of factors. This report will helps identify gaps that this study is aiming to bridge, which will also help guide the entire paper. It is becoming increasingly difficult to overlook the importance of the small and medium enterprise (SME) sector in the economic and social development of a country. In view of their identified importance, this study aims to develop a better understanding of the factors that influence success and performance in small and medium enterprises in Malaysia, as perceived by owners and/or managers. The research framework, which was derived from a systematic literature review, was carefully analyzed, observed and investigated using a two (2) stage design, which incorporated both quantitative and qualitative approaches. The justification behind the two (2) stage methodology was mainly to avoid common method bias and, furthermore, seek to clarify findings arising from the survey by providing individual insights. Approaches were adopted in succession with the findings from the quantitative phase which in turn informs the qualitative phase. The study found that there are three generalized factors that influence success and performance in SMEs based on the entrepreneur’s perceptions: the “owner and manager attributes” which involves the language skills factor, financial and networking partnership, and business characteristics with a focus on the location factor, which was mainly associated with the selected districts. These selected districts were key factors in selecting Malaysia as a location for this study. This study is among those few studies done in Southeast Asia that explore the factors that determine business success and performance in SMEs as perceived by owners and/or managers, and not centered around on accumulated or economic data. The study adds to already established understanding of the three generalized factors by offering a situational model based on the perceptions of the Malaysian entrepreneurs. The study also makes a detailed and unique contribution to the understanding of these factors that could be applied in other similar contexts.

Keywords: Business Success; Small and Medium-Sized Enterprise; Performance; Malaysia; Free Zones; Critical Success Factor;

THESIS OVERVIEW

Purpose

It is becoming increasingly difficult to ignore the importance of the small and medium enterprise (SME) sector in the economic and social development of a country. In view of their identified importance, this present study aims to develop a clearer understanding of the factors that influence success of small and medium enterprises in Malaysia, as perceived by local business owners and managers.

Design/Methodology/Approach

The initial research framework, which was derived from a systematic literature review, was empirically investigated using a two-stage design, which incorporated both quantitative and qualitative approaches. The rationale behind the two-stage methodology was firstly to avoid common-method bias; and, secondly, to seek to illuminate findings arising from the survey by providing individual insights. Approaches were employed in succession with the findings from the quantitative phase informing the qualitative phase. Initially, a paper and online survey questionnaire was administered to a population of 365 industrial SMEs, identified from the official website of the Ministry of International Trade and Industry, SMECORP Malaysia, the 2017 directory of the Ministry of Finance Malaysia as well as its official website, and the website of the Malaysia free zone. This survey was used in order to validate the initial conceptual framework and gain some insights on the perceptions of business owners and managers of the factors influencing the performance of SMEs. Following the quantitative phase, fifteen (15) in-depth face-to-face semi-structured interviews were conducted with selected business owners and managers of SMEs, forming a judgmental sample, to explore their experiences, beliefs, and attitudes with respect to the drivers of success.

Findings and Conclusions

The study found that there are three generalized influences on the success of SMEs based on the Malaysia entrepreneurs' perceptions: the 'business owner and manager attributes' with an emphasis on the language skills factor; work partnership with an emphasis on the financial and networking partnership; and business characteristics with a focus on the location factor, which was mainly associated with the ‘free zones’. The existence of these ‘free zones’ was a key factor in selecting Malaysia as a location for this study.

The ‘language’ factor was of significant importance in relation to the performance of small firms (it relates to the level of bi-lingual competence of SME business owners and managers). Although this could be something to do with education level in general, it can be concluded that it has to do with the access to higher order language skills in the particular context of Malaysia, where Bahasa Malayu, Mandarin and English is the dominant business language.

Finance and networking partnership emerged as very important factors that were significantly correlated to success. Findings suggested that finance partnership based on profit and loss sharing seemed to hold out the prospect of a linkage between economic and spiritual success in the context of Malaysia. Furthermore, networking connections using the “who you know” concept of were important for the success of SME owner-managers.

For the location factor, the study concluded that the placement of the business in relation to the free zones became an important financial and emotionally significant perspective on equity in relation to success. In this context, ‘location’ may function as a higher-order concept (than say urban versus rural) in relation to, for example, choices between countries as jurisdictions in terms of location.

Originality/Value

This study is among those few studies located in the Southeast Asia (ASEAN) region that explore the performance of SMEs from the perceptions of business owners and managers themselves, and not based on aggregate or economic data. It adds to our understanding on the three generalized factors by offering a situational model based on the Malaysia entrepreneurs’ perceptions. It also makes a contribution to the understanding of these factors that could be applied in other similar contexts.

List of Tables

Table 2-1: Differences between systematic and traditional literature reviews

Table 2-2: Websites searched

Table 2-2: Inclusion criteria

Table 2-3: Exclusion criteria

Table 2-4: The common global SME definition of IFC and the World Bank Group-SME

Table 2-5: The SME definition of the Commission of the European Union

Table 2-6: Hypotheses of the study

Table 2-8: Distribution of the industrial SMEs in Malaysia

Table 2-9: Distribution of SMEs in the activity branches in the region Malaysia

Table 2-10: Classified hotels in the region of Malaysia (31st December 2016)

Table 2-11: Volume of nights spent in classified establishments in Malaysia

Table 2-12: Tourist Arrivals and Receipts by Year

Table 3-1: Differences between the major paradigms, their associated strategies, approaches and methods

Table 3-2: The major differences between inductive and deductive approaches to research

Table 3-3: Differences between quantitative and qualitative research

Table 3-4: Detailed description of the research constructs

Table 4-1: Internal consistency of the survey instrument

Table 4-2: Demographic characteristics of the respondents

Table 4-3: Demographic characteristics of the businesses

Table 4-4: Summary of hypotheses results

Table 4-5: Profile of respondents of the qualitative phase

List of Figures

Figure 2-1: Searching and screening process

Figure 2-2: Conceptual framework of the study

Figure 3-1: Research design flow chart

Figure 4-1: Statistical analyses process

Figure 4-2: Results of the quantitative study in a diagram

Figure 5-1: The situational model developed from the study

List of Abbreviations

ADB: Asian Development Bank

NAWEM: National Association of Women Entrepreneurs of Malaysia MATC: Malaysian Association of Textile and Clothing PSME: Promotion of SMEs Program

NART: National Agency for the Regulation of Telecommunications MFM: Ministry of Finance Malaysia

CAQDAS: Computer-aided qualitative data analysis software

MRRD: Ministry of Rural and Regional Development

SMECORP: Small Medium-sized Enterprises Corporation Malaysia

IMI: Immigration Department of Malaysia

ASME: Association Of Small and Medium Enterprises

EPZ: Exporting Processing Zones

HGF: High Growth Firms

GEM: The Global Entrepreneurship Monitor

DOSM: Department of Statistics Malaysia

ILO: International Labour Organization Malaysia

KMO: Kaiser-Meyer-Olkin

LFZ: Logistics Free Zone

ASEAN: Association of Southeast Asian Nations

MESEA: Middle East and Southeast Asia

MITI: Ministry of International Trade and Industry

OECD: Organisation for Economic Co-operation and Development

PCA: Principal Component Analysis

R & D: Research and Development

SME: Small and medium enterprise

SPMF: Small plastic manufacturing firms

SPSS: Statistical Package for the Social Sciences

MFZ: Malaysia Free Zone

UNESCAP: United Nations Economic and Social Commission for Asia and the Pacific

UNIDO: United Nations Industrial Development Organization

WBCSD: World Business Council for Sustainable Development

BMP: Business Matching Product

MTP: Malaysian Taste Product

MTMA: Malaysian Textile Manufacturers Association

MYR: Malaysian Ringgit

MHR: Ministry ofHuman Resources

CHAPTER ONE INTRODUCTION AND OVERVIEW OF THE STUDY

1.1 Introduction

The important contribution of a vibrant small and medium enterprises (SMEs) sector in the national economic and social development of a country has been widely recognized. In view of its increasing importance, the success of small and medium enterprises (SMEs) has been of interest to researchers, international organizations, and policy makers, at least since the Hansard report (1973), and therefore has become the subject of a great deal of analysis. Attention to the SME sector has heightened because of the globalizing economy and the increasingly severe competition that is inherent in this development.

In the light of this, the following research study seeks to understand and explore the factors that influence the success of SMEs in Malaysia. This chapter aims to provide an overview of the research study by initially describing the research background and problem. Secondly, it briefly introduces the theoretical framework underpinning the present study. Next, the research objectives and questions are outlined followed by an explanation of the scope and justification of the study. Following that, the research methodology to be used in the research is briefly clarified, along with the significance of the study. Finally, the chapter provides an outline of the structure of the thesis.

1.2 Research background

The importance of SMEs is well recognized in academic and policy literature (e.g. Birch, 1999; Storey, 2013; Abdullah and Beal, 2014). Both developed and developing countries have realized the importance of SMEs in economic and social development. In Europe, the annual report of European SMEs confirmed that SMEs remain the European Union's economic backbone despite the global financial crisis (The European Commission, 2017). Representing 99.8 per cent of all enterprises, SMEs contribute to 66 per cent of employment in the European Union.

Given the significant importance of SMEs to the economies of all nations, policy makers, throughout the world, have embarked in supporting SMEs at their various stages of development. Furthermore, with an attempt to reduce the worldwide phenomena of unemployment and poverty, worldwide organizations such as the International Labour Organization (ILO), United Nations Industrial Development Organization (UNIDO), and the World Bank have shown a great deal of interest in supporting businesses in the small sector. These international organizations usually publish reports to assess the business environment in several economies. For example, the Doing Business report series published by the World Bank includes annual reports going back to 2004. These reports assess regulations affecting domestic firms in 183 economies and rank the economies in 10 areas of business regulation, such as: starting a business, paying taxes, resolving insolvency, and trading across borders. One of the largest ongoing studies of entrepreneurial activity and its impact on economic growth is the Global Entrepreneurship Monitor (GEM). The study often publishes global, national, and special topic reports that assess and review the state of entrepreneurship in different countries.

SMEs in Malaysia play a pivotal role in the development of the country. The importance of SMEs is evidenced by their high presence in the economic structure of the country. According to United Nations Economic and Social Commission for Asia and the Pacific (ASEAN) (UNESCAP) (2016), 93% of all Malaysian industrial firms are SMEs and account for 38% of production, 38% of investment, 31% of exports and 45% of all jobs. The sectors occupying the top three highest shares of SME value-added in 2016 were chemical industry, food processing industry, and metal and engineering industry with 42%, 31% and 11% respectively. As for contribution to employment, the textile and leather industry, food processing industry, and chemical industry occupied the three highest shares with 35%, 21% and 20% respectively in 2016 (Ministry of International Trade and Industry (MITI, 2017).

Through the conclusion of a series of free trade agreements with its main trading partners (European Union, United States, Turkey, Singapore, Indonesia, China), Malaysia has embarked in a global economy characterized by fierce competition. This has left no choice for SMEs but to adapt to the hostile environment and engage in the process of identifying strategies to ensure their business success. Given this situation and being aware of the socio-economic importance of SMEs, the Malaysian government has been taking necessary measures and actions to promote the sector and ensure its success. In this regard, the government has deployed the Emergence Covenant that aims to develop a very competitive SME sector (MITI, 2017).

1.3 Research problem

The selection ofthe current research topic started with a feeling ofdisquiet on the part ofthe author about the success of small firms in Malaysia. This feeling developed as a result of his family’s intentions to grow their business by setting up a small industrial firm. These intentions arose in 2009, with the aim of overcoming the severe competition in the market. Having undertaken a small market research project, the World Bank regional report “Doing business in Malaysia” (2015) caught his attention. Although Kuala Lumpur has a very strategic location compared to other cities in Malaysia, the report revealed that Kuala Lumpur was the most difficult area in the ease of doing business. This left the author with a profound feeling of disquiet about the success of small firms in Malaysia. With this feeling, it seemed as the moment was right to conduct this research.

The selected districts in Malaysia has a highly strategic geographical position, enjoys a special tax status and contains zones that have the status of free economic zones. Located in Malaysia on the west coast peninsular, Selangor is Malaysia’s second industrial centre after Kuala Lumpur the first industrial city in Malaysia. After decades of neglect, industrial sectors did not regain attention from the government until 1999. The Malaysian government has engaged since then in developing the economy of the city by creating an enabling business environment for large as well as small and medium companies. However, despite the government efforts in promoting the business environment, these efforts remain limited. According to the regional report (2015) of the World Bank, Malaysia is considered to be a difficult area with respect to the regulations affecting four stages of a business’s life: starting a business, dealing with construction permits, registering property, and enforcing contracts.

With respect to the SME sector, manufacturing SMEs in Malaysia account for over half of the total firms in Malaysia and contribute to 83% of employment (MITI, 2015). However, despite their value in the regional economy, their contribution to the industrial value added remains limited with respect to the national economy. Recent available data from the MITI showed that the contribution of Kuala Lumpur to the industrial value added was only 7% in 2016 compared to 49% in the Selangor region (MITI, 2017). This does not reflect the potential of the SME sector, especially after the recent remarkable economic developments in Malaysia.

Recent economic developments in Malaysia, and particularly in Kuala Lumpur, have been considerable. Among the recent biggest developments are: the Port Klang, which is one ofthe largest ports in Southeast Asia (ASEAN) and on the Mediterranean, and a series of ‘free zones’. By virtue of these developments, as well as the strategic position of the city, its special tax status and the economic free zones, several local and international investments have been attracted to the city in the last 10 years, which have transformed the region into a competitive hub. SMEs in Malaysia have been vulnerable to these business environment challenges which could have an impact on their performance. As argued by Man and Lau (2005), SMEs are more likely than larger firms to be affected by changes in their internal and external environment. Thus, an important issue arises concerning the ability of small and medium firms to cope in a very challenging environment. In attempt to address this issue, the present study has been undertaken with the aim of developing a clearer understanding of the factors that influence success of small and medium enterprises in Malaysia, as perceived by local business owners and managers.

Abbildung in dieser Leseprobe nicht enthalten

Source: World Bank (2017)

Figure 1: SMEs: Constraints of doing business in Malaysia

Abbildung in dieser Leseprobe nicht enthalten

1.4 Theoretical framework

The performance of SMEs has been of interest to many researchers, international organizations, and policy makers, at least, since the Hansard report (1973), and therefore has become the subject of a great deal of analysis. This performance may have two strategic outcomes that is often referred to in the literature as firm success or failure (For further details see Dess and Robinson, 2013; Ostgaard and Birley, 2007). In a management field, success and failure can be interpreted as measures of good or indifferent management (Jennings and Beaver, 1997), but it may occur for other reasons such as luck (Storey, 2017).

Numerous terms have been used in the literature to describe firm failure, for example: bankruptcy, insolvency, liquidation, death, deregistering, discontinuance, ceasing to trade, closure, and exit (For further details see for example: Storey, 2013: 78-81; Bruno et al. 1997). These terms overlap each other to some extent (Sten, 1998) and thus, the concept offailure is ambiguous, as it can have different interpretations by different people (Wickham, 2013). The many different interpretations and definitions of both success and failure make it very hard to compare research findings on the performance of small firms.

In the entrepreneurship literature, the concept of success remains a topic of debate (Gorgieveski et al., 2017). This is despite the evidence that the ‘success’ of small firms has been subject to a great deal of research. However, there is no general agreement in the literature on what is meant by the success of a firm. Indeed, a myriad of perspectives, ranging from mere survival to the achievement of certain levels of performance, exist about such a concept in the entrepreneurship literature. Very often, the terms ‘success’, ‘survival’, ‘growth’ are very closely linked and sometimes used interchangeably. Besides the multi-dimensional aspect of success, variables that contribute to the success of SMEs are not unanimously agreed upon by researchers. While some analysts suggested that the dynamics of the success of businesses remain a black box (Deakins and Freel, 1998; Dockel and Ligthelm, 2005; Ligthelm, 2016), others argued that the success of enterprises is a function of both external and internal factors (Penrose, 1970; McCline et al., 2010; Guzman and Santos, 2013; Markman and Baron, 2014).

Literature on the performance of SMEs usually identifies several causal factors with regard to the internal and external environment of the firm. In terms of internal factors, several researchers have attempted to investigate the characteristics of SMEs and characteristics of the entrepreneur as the internal factors that influence SMEs performance (Hambrick and Mason, 2013; Bates and Nucci, 1999; Storey, 2013). For the firm characteristics, several studies have revealed that size, age, and location of the firm could be related to business performance (for example: Bates and Nucci, 1999; Liedholm, 2002). On the other hand, other researchers have shown great interest in understanding the relationship between characteristics of the entrepreneur and business performance (for example: Hambrick and Mason, 2013; Boden and Nucci, 2010; Rogerson, 2013).

As for the external factors, it is widely recognized that successful organizations are those that best adapt to fit the opportunities and the constraints inherent in the environment in which they operate (Kalleberg and Leicht, 2010). According to Miller and Dess (1996), the external environment of the enterprise can be classified into two dimensions, namely the general and competitive environments. The general environment consists of the political-legal, macroeconomic, socio-cultural, technological, demographic and global factors that might affect the organization’s activities. On the other hand, the competitive environment consists of other specific organizations that are likely to influence the profitability of the enterprise, such as customers, suppliers and competitors.

Several previous studies in both developed and developing countries have identified a range of external performance factors that relate to the general as well as the competitive environment of the firm (for example: Yusuf, 2007; Swierczek and Ha, 2014; Clover and Darroch, 2005; Beck et al., 2006; Nieman, 2006; Nabli, 2015; Ben Mlouka and Jean-Michel, 2016; Benzing et al. 2009; Olawale and Garwe, 2016; Jasra et al., 2017).

For the general environment, data from several sources have identified economic factors, in particular financial resources and taxation, as central for the success of businesses (Beck et al., 2006; Chu et al., 2015; Ben Mlouka and Jean-Michel, 2016; World Bank, 2009; Benzing et al. 2009). Other studies have found that political legal factors significantly relate to business performance (Yusuf, 2007; Beck et al., 2005; Jasra et al., 2017). Much literature has focused on the technological factors. These studies have highlighted the positive relationship between technology, information, and infrastructure and business performance (Swierczek and Ha, 2014; Clover and Darroch, 2005; Nabli, 2015; Olawale and Garwe, 2016). The networking factor, which could be classified under the socio-cultural factors, has been subject to a great deal of research. Numerous studies have documented a positive association between networking and various aspects of firm performance (Duchesneau and Gartner 2010; Zhao and Aram, 2007).

On the other hand, a large and growing body of literature has investigated the competitive environment of the firm in relation to three stakeholders: customers, suppliers, and competitors. There is a large volume of published studies describing the role of customer relationship management as a key factor in business performance (Dwyer et al., 1997; Morgan and Hunt, 2013; Berry, 2007; Sheth and Parvatiyar, 2007). Similarly, an increasing amount of literature has highlighted the effect of suppliers on the performance of businesses (Dollinger and Kolchin, 1996; Gelinas and Bigras, 2004; Morrissey and Pittaway, 2006). Other researchers have argued that an analysis of the role of competitors and counter-competition intelligence and actions are crucial for the survival of an SME (Ligthelm and Cant, 2002; Rwigema and Venter, 2004; Nieman, 2006).

Whilst a number of previous studies, as well as international worldwide organizations reports, have focused on the underlying internal and external critical success factors for SMEs, very few research studies have attempted to develop a model that contains an exhaustive list of factors. The present study becomes more obviously required in the context of Malaysia, as there is a lack of research related to entrepreneurial performance among SMEs, particularly in Malaysia. Furthermore, although there are a number of studies in Malaysia, these studies have focused on a narrow range of performance measures (financial measures) which could be the wrong approach to understanding entrepreneurial success (Lumpkin and Dess. 1996). Furthermore, the majority of them adopted a quantitative approach which allowed a general understanding of the factors. Yet, these results remain limited and should be cautiously interpreted, since the researchers’ perceptions on the importance of factors, derived from the literature in different contexts, were imposed on respondents.

1.5 Research objectives and questions

The overall aim of this research is to develop a clearer understanding of the factors that influence success of small and medium enterprises in Malaysia, as perceived by local business owners and managers. In order to achieve this overall research aim, five key objectives are set:

1. To identify the significant factors for business ‘success’ in the opinion of SME business owners and managers in Malaysia,
2. To examine differences between business owners and managers of ‘successful’ and ‘less successful’ SMEs in relation to the identified significant factors,
3. To explore the experiences of SME business owners and managers and the perceived factors contributing to business success,
4. To establish the relationship between entrepreneurial orientation and business success ofSMEs in Malaysia, and
5. To establish the relationship between environmental factors and business success of SMEs in Malaysia.

The intent of this research is to answer the following questions about the entrepreneurial success of SMEs in Malaysia in respect to the theoretical framework identified from the literature review:

1. What are the significant factors for business ‘success’ in the opinion of SME business owners and managers in Malaysia?
2. With reference to the identified significant success factors, what differences, if any, exist between the ‘successful’ and ‘less successful’ SMEs?
3. How do SME business owners and managers in Malaysia see these factors for business ‘success’ in relation to their experiences in Malaysia?
4. Is there a relationship between entrepreneurial orientation and business success in Malaysian SMEs?
5. Is there a relationship between environmental factors and business success in Malaysian SMEs?

1.6 Scope of the study

This research study seeks to develop a situational model of perceived critical success factors for SMEs in Malaysia. Thus, the study is restricted to the context of Malaysia. To this end, only participants from Malaysia were employed in the research.

The scope of this research study is also limited by applying the theoretical framework, derived from already established studies in different contexts, rather than seeking an understanding of the critical success factors from scratch. Even though the theoretical framework is based on several studies in different contexts, this present research study does not involve itself in providing a means of comparison between countries in terms ofthe critical success factors.

In view of the fundamental role of the business owners and managers in the SMEs, they have been considered in most prior studies as the key stakeholder within the firm. Hence, this study explores the views of business owners and managers and not the other stakeholders.

This study focuses on small and medium sized enterprises that have already been established for at least 2 years. The definition ofthe SME has been adopted from the SMECORP of Malaysia. Therefore, the present study focuses on firms with fewer than 200 employees. Micro enterprises, with fewer than 10 employees, have been left outside this study.

Furthermore, the present study is constrained to formal SMEs in the industrial sector. Identification ofthese formal industrial SMEs derived from the official website of the MITI, website of the Ministry of Finance Malaysia (MFM) and website of the Malaysia Free Zone (MFZ). Hence, informal SMEs as well as SMEs in other sectors than the industrial one were not included in all the present thesis studies.

1.7 Research justification

The prime motive for conducting this study is the lack of a comprehensive model relating to the various success factors for SMEs. Although there have been a number of studies located in Malaysia, these have focused solely on a narrow range of financial success measures. None of these prior studies adopted a systematic review process and the majority of them lie in the grey literature. Arguably, this limits their value and explains their limited research approaches.

The need for this present study seems therefore self-evident. Based on a systematic literature review, the study addresses this knowledge gap by developing a comprehensive model of various success factors in the context of Malaysia, using both financial and non-financial measures of performance. It is the first study to be conducted in such context.

Furthermore, Kuala Lumpur is unequivocally a cosmopolitan city, rich in historical and multi-cultural background. The choice of the city rests firstly on its strategic location, secondly on the recent and increasing investment in the city and thirdly its role as the most important industrial city in Malaysia.

1.8 Research methodology

It has often been observed (Benbasat et al., 1997) very accurately that no single research methodology is intrinsically better than any other. The development of the conceptual framework in this study rests first on the use of a systematic literature review. Having developed the conceptual framework, based on the systematic literature review of several studies from different contexts, a two-stage design, incorporating both quantitative and qualitative approaches, was used in order to achieve the overall aim of the study. Approaches were employed in sequence with results from the quantitative phase informing the qualitative one. The argument behind the two-stage methodology is firstly in order to avoid common-method bias; and secondly to seek to illuminate results arising from the quantitative phase by providing individual insights.

The study started initially with a quantitative approach in which a paper and online survey questionnaire was distributed to a population of 365 owners and managers of industrial SMEs in Malaysia. The population of interest was clearly defined based on the official definition of SMEs in Malaysia and was drawn from the official website of the MITI www.miti.qov.mv, the MFM directory 2016 as well as its official website www.treasurv.qov.mv, and the website of the Malaysia free zone www.miti.qov.mv.

The quantitative data analysis aimed to achieve the first and second objectives of the present research study. Quantitative data were analysed using a descriptive analysis process, followed by an inferential analysis. The software that was used to analyse data was the IBM Statistical Package for the Social Sciences (SPSS) software v23.0. Descriptive statistics were used to get a broad appreciation of the data collected. Factor analysis was then performed to confirm the validity and reliability of the constructs of the questionnaire related to the external factors. Based on the results of the factor analysis, only items loading significantly on the factors were then used in inferential analysis to test the hypotheses of the study.

Following the quantitative phase, a qualitative approach was adopted. More specifically, based on Geertz’s (1973) concept of thick description, an ethnographic approach was embraced in order to explain not just the behaviour but also its context. To achieve the purpose of the thick description, fifteen in-depth face-to-face semistructured interviews were conducted with owners and managers of SMEs in Malaysia that were selected based on a judgmental selection.

The qualitative data analysis aimed to achieve the third objective of the study. Qualitative data analysis was performed using thematic analysis that followed closely the six phases described by Braun and Clarke (2006). The software QSR Nvivo 12 was used to facilitate the analysis. While the organizational skills and automation facilities offered by QSR Nvivo 12 software helped in easing the repetitive tasks, the analysis itself pertained to the researcher.

1.9 Significance of the study

The present study is expected to make a number of contributions in a number of ways. From a theoretical perspective, the study adds new knowledge and extends the growing body of literature in the field of entrepreneurship. The study has the potential to contribute to the understanding of the critical success factors for SMEs in Malaysia. It is designed to give rise to a situational model, based on the Malaysia entrepreneurs’ perceptions, that enriches current research by offering new insights with rich information on the factors that tend to be perceived as associated with business success, which has not been done before in this geographical context.

From a practical perspective, understanding business success through the different perceived factors covered in this present study is very important. This study could provide business owners and managers of SMEs with knowledge and guidance about the way they could manage and run their businesses in a very successful manner.

1.10 Definitions

The following are definitions or descriptions of key terms used in this study:

SME

This study uses the acronym SME to refer to small and medium enterprises or businesses. Definitions of what constitutes a SME vary in the literature (Hill and Stewart, 2010; Dawson et al., 2002). This study adopts the definition of the SMECORP of Malaysia which defines it as:

“enterprises that employ less than 200 employees and have an annual turnover not exceeding 50 million Ringgits.” (SMECORP, 2017)

The definition covers all sectors, namely services, manufacturing, agriculture, construction and mining & quarrying.

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Source: SME Corporation Malaysia, 2017

Entrepreneur

One who starts or assumes control of a business or other independent enterprise, often employing innovation and more than an ordinary degree of risk (Entrepreneur, 2012).

Success

Defining the success of a firm is an extremely difficult task in any type of business but even more in the context of SMEs. In this study, the adopted definition of success is that of Ahmad and Seet (2006) who suggested that success is a personal design consisting offinancial and non-financial indicators.

1.11 Thesis structure

The thesis is organized into five (5) chapters, which are structured as follows:

CHAPTER ONE: INTRODUCTION AND OVERVIEW OF THE STUDY

This is the present chapter. It has presented the research background as well as justification for the research. Three research questions mapped to three research objectives have been introduced with a clarification of the scope of the study. A brief explanation of the research methodology has been outlined as well as the significance of the study.

CHAPTER TWO: THE SYSTEMATIC LITERATURE REVIEW PROCESS

Chapter two discusses the review strategy that was carried out in order to search for and assess the stream of studies relevant to entrepreneurial success.

- LITERATURE REVIEW

This section presents results of the systematic literature review process. A comprehensive review of relevant studies, derived from formal and grey literature, is presented. The section also draws attention to the gaps identified in the literature relating to entrepreneurial success.

- SMALL AND MEDIUM ENTERPRISES IN MALAYSIA

This section provides a brief overview of Malaysia as well as the selected districts in Malaysia in order to contextualize the research. For the other part, a detailed description about the structure of small and medium enterprises in Malaysia was outlined in order to identify any further gaps in the literature.

CHAPTERTHREE: RESEARCH METHODOLOGY

This chapter discusses the research methodology employed in the present research study to test the theoretical framework. Discussion and justification for the postpositivist philosophy as well as the two-stage approach (Quantitative and Qualitative) are established. The chapter also discusses conceptualization and operationalization ofthe research constructs.

CHAPTER FOUR: RESULTS AND ANALYSIS

- RESULTS OF THE QUANTITATIVE PHASE

This section reports the empirical research results of the quantitative phase. For clarity, the segment outlines the adopted statistical analyses process. Following such process, the section presents preliminary analysis that included: data preparation, data classification, response rate, and non-response bias. Descriptive analyses were reported in this section of the chapter. Finally, the section presents the inferential statistical analysis of each hypothesis of the study, using the Mann-Whitney test.

- RESULTS OF THE QUALITATIVE PHASE

This section presents and analyses results ofthe qualitative phase. The section draws deep insights and illuminates results arising from the quantitative phase, which relate to the external factors. Using thematic analysis, the section highlights the emerging themes related to entrepreneurial success in Malaysia.

- DISCUSSION OF FINDINGS

This chapter discusses the overall findings of the research study by incorporating results of both quantitative and qualitative phases. Discussion is made with reference to the previous work identified in the literature.

CHAPTER FIVE: CONCLUSION

This chapter concludes the thesis with a summary of the main findings and a conclusion from all the research processes applied in the study. The chapter also illustrates the contributions of the study. Furthermore, the chapter highlights limitations ofthe study as well as its implications for practice, policy, and future research.

1.12 Summary

In summary, the present study focuses on the success of SMEs in Malaysia. The study acknowledges the influence of both internal and external factors on the success of SMEs. Thus, it investigates an exhaustive list of factors that incorporate business, entrepreneur, and environment related factors. By amalgamating these factors, the present study aims to provide a thorough and better understanding of SME success by developing a situational model in the context of Malaysia. Such model could be applied in other contexts that have similar characteristics. The next chapter highlights the systematic review process that was undertaken in order to find out what is already known about entrepreneurial success.

CHAPTER TWO THE SYSTEMATIC LITERATURE REVIEW PROCESS

2.1 Introduction

This chapter presents the systematic literature review process that was carried out in order to inform the research question. It aims to introduce the methodology for performing rigorous reviews of current empirical evidence concerning the performance (successful or otherwise) of SMEs. The chapter initially provides an overview of the systematic literature review and reasons behind its use. Secondly, it specifies details of the research design process. Next, the strengths and limitations of the systematic review process are examined. Finally, the chapter sums up the main findings of the systematic literature review.

2.2 Systematic literature review

2.2.1 Overview

Tranfield et al. (2014: 209) defined a systematic literature review as “a replicable, scientific, and transparent process that aims to minimize bias through exhaustive literature searches of published and unpublished studies and by providing an audit trail of the reviewer’s decisions, procedures, and conclusions”. Petticrew and Roberts (2006) pointed out that systematic reviews adhere closely to a set of scientific methods that explicitly aim to limit systematic error (bias), mainly by attempting to identify, appraise and synthesise all relevant studies (of whatever design) in order to answer a particular question (or set of questions). Seemingly, these definitions distinguish systematic reviews from the traditional reviews of the literature. Petticrew (2013), and Petticrew and Roberts (2006) clearly identified the differences between a traditional and a systematic literature review which are explained in Table 2-1:

Table 2-1: Differences between systematic and traditional literature reviews

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Source: Adapted from Petticrew (2013, p. 99) and Petticrew and Roberts (2006, p. 113)

2.2.2 Aim and objectives of the review

The aim of the systematic review is to ensure that a robust and sound evidence- base is established about the entrepreneurial success in Malaysia. To achieve this aim, the following objectives were set out:

(i) Review a range of published literature in entrepreneurial success related research,
(ii) Report on key messages and themes arising in the literature,
(ii) Identify omissions in previous research, and
(iv) Provide an analysis and commentary.

2.2.3 Reasons for the systematic literature review

Although a significant number of systematic reviews related to the entrepreneurial success of SMEs have been undertaken, no systematic reviews could be found in the context of Malaysia, particularly in Malaysia. This has motivated the researcher to take an action and undertake a systematic literature review about the critical success factors for SMEs in Malaysia. The review builds on the systematic review of empirical research on knowledge and growth in small firms undertaken by Macpherson and Holt in 2004 (2015). In addition to this, other reasons that motivated the researcher to perform the systematic literature review are the following:

(i) To summarize all existing information about the entrepreneurial success in Malaysia in a thorough and unbiased manner,
(ii) To identify any gaps in current research in order to suggest areas for further investigation, and
(ii) To provide a framework/background in order to appropriately position new research activities.

2.3 The review process

The process of undertaking a systematic literature review comprised five stages: searching, screening, data extraction, synthesis, and reporting and dissemination.

2.3.1 Searching

The first stage of the process aims to identify studies that are broadly concerned with the entrepreneurial success of SMEs in Malaysia. The overall search for studies was carried out between July 2015 and February 2017. A search strategy was developed in order to ensure that all relevant studies are covered. The search strategy includes resources to be searched and the search terms to be used for each resource.

2.3.1.1 Identification of resources

The resources that were searched include appropriate electronic databases and websites. Three electronic databases were searched: Business Source Complete, Emerald, and Science Direct databases. Additional information about these electronic databases can be found in appendix A.1. In addition to the electronic databases, other internet websites were surveyed to search for relevant data as detailed in appendix C.7:

2.3.1.2 The use of search terms

The literature search begins with keywords and search terms (Tranfield et al., 2014). Ely and Scott (2015) expounded that keyword searches are the most common method of identifying literature. In this study, the keywords were carefully generated based on their relevance to the research questions of the study. The strategy used to construct the key words is as follows:

- Derive major concepts from the questions by identifying the population, intervention and outcome,
- Identify alternative spellings and synonyms for major terms,
- Check the keywords in any relevant papers that are already available to the researcher,
- When database allows, use the Boolean or to incorporate alternative spellings and synonyms, and
- When database allows, use the Boolean and to link the major terms from population, intervention and outcome.

Based on the aforementioned strategy, the search terms under the main category headings were combined as depicted below:

- Keyword 1 and keyword 2
- Keyword 1 and keyword 2 and keyword 3.

A log of the search strings used and the results was kept. In the event that a search string in a particular database return more than 1000 references, or the relevance of the returned references was poor, additional terms (keyword 3 words) were added to the string in order to more accurately focus the search. It should be mentioned that different results were yielded by the same search strings when applied to different electronic databases. Appendix A.2 lists some examples of successful search strings in the different electronic databases.

The initial search resulted in a total of 166427 references. The total number of potential papers was reduced to a manageable level within the available timeframe for the study. This was done by performing online screening of a significant proportion to determine their relevance for inclusion in the systematic literature review. During the online screening, the titles and in some instances the abstracts were read in order to exclude any references that were conducted before 1996; not written in English, did not mainly address the research topic. Furthermore, whenever the database allows the facility to specify the date of publication in search terms, articles prior to 1996 were then eliminated from the outset.

With regard to the websites search, it should be noted that where possible, (because not all websites had a search facility), one or two broad search terms were systematically entered (again using Boolean logic as above, where possible).

2.3.2 Screening

The screening process was undertaken in order to select publications, found by the search terms, which meet the pre-determined inclusion and exclusion criteria. While the inclusion criteria identify a set of characteristics that would make a publication suitable for analysis, the exclusion criteria identify the characteristics that would make a paper nugatory to this study. Table 2-2 and Table 2-3 show the inclusion and exclusion criteria and the reasons for such criteria.

Table 2-2: Inclusion criteria

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Table 2-3: Exclusion criteria

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Following the initial search of the electronic databases, outlined previously in this chapter, the results of each search were assessed to ensure whether the documents were likely to meet the pre-determined inclusion and exclusion criteria. Next, the bibliographic information for those that met the inclusion criteria was exported to Endnote for screening by ‘title’ and ‘abstract’. The different databases were merged to create a single master database. Moreover, the bibliographic information for relevant articles identified from websites and personal contacts was entered into the master database manually. The master file, containing 537 references, was then sorted by ‘author’ to identify any duplicate references. All duplicates were removed, leaving a database with 396 references.

Having removed all the duplicates, the remaining references were screened by ‘title’, ‘abstract’ and ‘full text’, and exclusion criteria was applied hierarchically to remove all articles on the basis of the first criterion met. As a result, the master file was reduced to contain only the articles and papers that fulfil both the inclusion and exclusion criteria. The number of references totaled 226. Figure 2-1 illustrates the searching and screening process undertaken in the present research study.

Figure 2-1: Searching and screening process

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2.3.3 Data extraction

Data extraction involves extracting, assessing and analysing data of the included studies. To provide a framework for this phase as well as to support the process of synthesising, reporting and dissemination, a data extraction form (For further details see appendix A.3) was designed in order to accurately record all the information needed to address the review questions and the study quality criteria. The data extraction form included five sections: bibliographic information; focus of the study; methodology; findings; and analysis.

In addition to this, the quality of the included studies was assessed by undertaking an analysis of the strengths and limitations of the empirical studies, which were included in the ‘Methodology’ section of the data-extraction form. Three components, identified by The Evidence for Policy and Practice Information and Coordinating Centre (EPPI-Centre), were used in this review to help assess the quality of studies in terms of ‘weight of evidence’: the soundness of studies (internal methodological coherence), based upon the study only; the appropriateness of the research design and analysis used for answering the review question; and the relevance of the study topic focus (from the sample, measures, scenario, or other indicator of the focus of the study) to the review question.

2.3.4 Data synthesis

Data synthesis involves collating and summarizing the results of the included primary studies. According to Tranfield et al. (2014), a good systematic review should present the primary research upon which the review is founded in a clear and coherent manner, which can be readily understood by the practitioner. Thus, the findings of the systematic literature review were synthesised by undertaking two phases: descriptive analysis; and thematic analysis. The aim of the descriptive analysis was initially to identify the publications by books, journals, conference proceedings, reports, and doctoral dissertations; and then identify the publications by countries. Whereas, the thematic analysis sought to highlight what is known and established within the selected documents; by identifying the main themes and concepts ofthe review question.

2.3.4.1 Descriptive analysis

A descriptive analysis was carried out on the selected papers in order to identify the publications by books, articles, conference proceedings, reports, and doctoral dissertations. The analysis went further to identify the selected papers by countries in order to have a broad overview of the factors that influence the success of SMEs in different contexts.

In terms of the distribution of publications by books, articles, conference proceedings, reports, and doctoral dissertations; articles had the highest number with 171 studies followed by reports and books, with 23 and 19 items respectively. As for the distribution of publications by countries, European countries had the strongest representation in terms of publications with 53 studies (The UK appeared most often, with 29 publications); 50 publications focused on Southeast Asia (ASEAN) countries (Malaysia appeared most often, with 48 publications); 26 publications were found for African countries (Morocco appeared most often, with 6 publications); 22 publications were identified for the USA; 7 publications in Australia; 6 publications in Canada; 4 publications in Latin America; 2 publications in Russia; and one publication in New Zealand.

It is worth mentioning that although Malaysia had a very highest representation in terms of publications; most of these publications were reports, conference proceedings, and doctoral theses. Surprisingly, only one article could be found in the context of Malaysia. This suggests that there is a dearth of academic research concerning the Malaysian SME sector. Results of the analysis are shown in appendix A.4.

2.3.4.2 Thematic analysis

The main themes and concepts of the review question covered two main factors: internal and external factors. On the one hand, the internal factors incorporated the characteristics of the firm and the characteristics of the entrepreneur. Three factors were classified under the characteristics of the firm:

Age of the firm, size of the firm, and location of the firm. The characteristics of the entrepreneur were classified as: (i) socio-demographic and background characteristics such as: age; gender; education; previous experience; and family background of the entrepreneur (ii) personality characteristics such as: need for achievement; locus of control; and propensity for risk-taking (iii) competences of the entrepreneur such as: managerial competences; entrepreneurial competences; and functional competences. On the other hand, external factors comprised the macro-environmental factors and micro-environmental factors. While the macro-environmental factors included: (I) economic factors such as: financial resources and taxation (II) political-legal factors such as: regulatory environment and government support (III) technological factors such as: technology and information (IV) socio-cultural factors such as: networking and infrastructure; the micro-environmental factors comprised: customers; suppliers; and competition.

2.3.5 Reporting and dissemination

The reporting and dissemination is the final phase in the systematic literature review and involves writing up the findings of the review and circulating them to potential interested parties. It is very important that the results of a systematic review are communicated effectively. The results of this review process were reported in conferences. It should be noted that other forms of dissemination could be considered in the future such as publication of the findings in an academicjournal.

2.4 Strengths and limitations

2.4.1 Strengths of the review

- The systematic literature review did enable the conduct of a comprehensive, objective, and transparent assessment of available research about the entrepreneurial success in Malaysia to provide a sound framework for policy makers, managers, entrepreneurs, practitioners and researchers.
- The review process has identified both potential gaps in the existing research and potential areas for future reviews.

2.4.2 Limitations of the review

Alike any method of literature review, the systematic review of the literature has its limitations. Some of these limitations that are relevant to this review include: accuracy; unobtainable texts; timeframe restrictions; and technical difficulties:

- It should be noted that some studies such as: unpublished reports and doctoral theses may have not been identified during the systematic review process. Although these studies may provide relevant research evidence, it is difficult to track them down. It may be argued that their lack of availability means that they do not contribute to the pool of knowledge. Hence, their value is limited.
- Some texts had to be excluded simply because of lack of availability. For example, some reports that were identified in the web searches were not available electronically and could not be obtained in time for data-extraction.
- The review was constrained by the fact that only a selected number of databases and websites were searched. However, the researcher is confident that the selected databases and websites were searched to their full extent.

2.5 Summary

This section was entirely dedicated to the systematic review process that was undertaken in order to identify relevant studies about entrepreneurial success. It could be concluded that the scope for this systematic literature review was extremely broad, with different aspects of the review question studied more extensively than others. However, the systematic review process was effective in achieving the aim and objectives of the review. On the one hand, the systematic review has helped to identify gaps in literature that this study is aiming to bridge, which will guide the empirical work. These gaps can be summarized as follows:

(i) No systematic review has been undertaken to identify factors that impact the success of SMEs in the context of Malaysia, and mainly in the selected districts.
(ii) No studies exist about the critical success factors for SMEs in Malaysia.

However, the review process has resulted in a mixture of qualitative and quantitative studies that were synthesised in order to identify the key concepts and themes related to the success of SMEs, which are discussed in detail in the next section of the chapter. This has helped in developing the conceptual framework to underpin the current research study.

2.6 LITERATURE REVIEW

2.6.1 Introduction

This section is a literature review that considers previous research to provide the necessary background to identify the set of factors associated with business success for SMEs. This thorough review of the literature has discovered that variables that contribute to the success of small businesses are not unanimously agreed upon by researchers. While some analysts suggest that the dynamics of the success of businesses remain a black box (Deakins and Freel, 1998; Dockel and Ligthelm, 2005; Ligthelm, 2016), others have argued that the success of enterprises is a function of both external and internal factors (Penrose, 1970; McCline et al., 2010; Guzman and santos, 2013; Markman and Baron, 2014).

Many theories have been proposed to explain what contributes to the success of SMEs. However, although the literature covers a wide variety of such theories, this chapter should not be regarded as a comprehensive review, but as focusing on the two crucial themes that emerge repeatedly throughout the reviewed literature. These themes are the conceptualization of two determinants of success: internal factors and those external to the firm. The former refers to the characteristics of the owner or entrepreneur and the business; whilst the selected districts deals with factors beyond the control of the entrepreneur. This division between the internal firm and the external environment is a dominant approach when considering the performance of a firm. This view often modified in the case of small businesses where the individuals are considered to be important. These issues will be explored in this review.

The literature review chapter covers these two themes (internal and external factors) that attempt to describe the variables influencing business success among SMEs. However, it is first necessary to define SMEs and also to highlight their importance in the economy. Secondly, this review will identify the most relevant success criteria, as perceived by entrepreneurs in SMEs, since the appropriate measurement of performance and success (especially in SMEs) is pivotal to ensuring that those factors identified as ‘critical’ are those actually selected by the entrepreneurs from their perspective in the firms, rather than being derived from aggregate data. Murphy et al. (1996) said that this ‘accuracy’ in identifying the critical success factors of an SME is critical. Likewise, Watson et al. (2010) suggested that is essential to have ‘reliable and valid’ measures of SME success in order to explore the relationships between independent variables and business success, and to develop a plausible model of business success in smaller firms. Although previous research presents these variables in a variety of contexts, this study will primarily utilize their application in the Malaysian context.

Therefore, this section initially begins with a definition of SMEs as well as a description of their importance in modern economies. Secondly, the section proceeds with an identification of the measures of SMEs’ success. Next, the section reviews previous approaches to understanding the factors contributing to SMEs’ success. It proceeds with an investigation of the internal as well as external factors that influence SMEs’ success. Finally, the section sums up the main findings of the review of literature and shows how these findings are then related to the aims ofthis study.

2.6.2 Definition of SMEs

The definition of SMEs varies quite widely from country to country and even within single countries, depending on the business sector concerned. The World Business Council for Sustainable Development (WBCSD) report (2015) stressed that there is no universally agreed definition of SMEs. Some analyses define them in terms of their total revenue, while others use the number of employees as an indicator. The International Finance Corporation (IFC) and The World Bank Group SME Department (2004) have adopted the following definition of SME for its programmes (For further details see Table 2-4) below:

Table 2-4: The common global SME definition of IFC and the World Bank Group-SME

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Source: The World Bank, (2004, p. 33). 2004 annual review: small business activities, The World Bank, Washington, DC.

According to the Commission ofthe European Union (2014), the definition of an SME is as in the following table (For further details see Table 2-5):

Table 2-5: The SME definition ofthe Commission ofthe European Union

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Source: Commission recommendation of6 May 2014. Official Journal ofthe European Union (20/05/2014, p 36-41)

In Malaysia, there is no single legal definition of SMEs, but several operational definitions. The definition of SMEs in Malaysia has evolved based on provisions contained in the various policy documents that have sought to encourage this category of enterprises because of their individual small size and relative fragility despite their major contribution in the aggregate to employment and the economy more generally. The Law No. 53-00 forming the charter of small and medium enterprise (Dahir No. 102-188 of 12th Jumada I 1423 (23 July 2002), published in the gazette No. 5036 of 5/09/2002) defined a small and medium enterprise as: any company managed and/or administered directly by individuals who are owners, co-owners or shareholders, and is not owned for more than 25% ofthe shares, or voting rights, by an enterprise, or jointly by several enterprises, falling outside the definition of SME. This threshold can be exceeded if the company is owned by (i) collective investment funds, (ii) corporate of capital investment, (iii) venture capital organizations, and (iv) financial institutions duly authorized to use public savings to make financial investments, provided they do not, individually or jointly, exercise any control over the company. In addition, SMEs must meet the following conditions:

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