Small and Medium-Sized Enterprises Essay -- International Development

INTRODUCTION 1.1 Introduction Small and medium-sized enterprises (SMEs) have been identified as one of the growth engines for various countries in the world, since SMEs make up over 90 percent of all enterprises. For instance, United States, 99.7 per cent (Heneman, Tansky, & Camp, 2000), China, 99 per cent (Cunningham & Rowley, 2008), Europe, 99 per cent (Andreas Rauch & Frese, 2000), Holland, 95 per cent, Philippines, 95 per cent and Taiwan, 96.5 per cent (C. Y.-Y. Lin, 1998) as well as Malaysia, 99.2 per cent (Man & Wafa, 2007; National SME Development Council (NSDC), 2009; Saleh & Ndubisi, 2006). The figures above show that countries all over the world recognized SMEs as a key business sector. Besides, Asia-Pacific Economic Cooperation (APEC) (2002) pointed out that SMEs are deemed as a supporter to larger enterprises as well as an important foundation in expanding business activities and sustaining economic growth. SMEs even provide more jobs than large companies (APEC, 2002; Department of Statistics Malaysi a (DOSM), 2007; NSDC, 2009). In sum, SMEs play a vital role and contribute to the economy and are likely to be increasingly important as the economy becomes more global. In Malaysia, SMEs are considered as the backbone of industrial development (NSDC, 2009) and give meaningful contributions to the national economy. Hashim (2010) stated that SMEs play a significant role in generating more employment, economic outputs, income generation, export capabilities, training, encouraging competition, innovation and promoting entrepreneurship and supporting the large-scale industries (LSIs) as well. Moreover, Jaswant Singh, Malaysian Industrial Development Authority director in Australia (MIDA Australia), informed that the grow... ...t improve efficiency and effectiveness (J. Barney, 1991; Wernerfelt, 1984). However, in examining other variables, researchers found a significant relationship between HRM practices (Jimenez-Jimenez & Sanz-Valle, 2008; Nasution, Mavondo, Matanda, & Ndubisi, 2010) and EO (Nasution et al., 2010) towards organizational innovation. Other studies also found that there is an inconclusive result on the relationship between organizational innovation and organizational performance (Rosenbusch, Brinckmann, & Bausch, 2010). These findings propose that potential researchers could study the mediating effect of organizational innovation on the relationship between HRM practices, EO and organizational performance. It is also suggesting that, there also have a moderator effect (managerial ties) on the relationship between organizational innovation and organizational performance.