Intangible Factors Influencing Firm Performance in Developing Countries: Malaysian Evidence

Abstract

This study, which is conducted in Malaysia, develops hypotheses, first to examine how the CEOs upper echelon variables, leadership style and belief in budgetary participation influences their organizational commitment, and then examines if these same explanatory variables help predict high firm performance. Based on the survey of 102 CEOs and senior managers the study finds that there is an association between CEOs profiles particularly, the CEOs age and education level are associated with their level of organizational commitment. The CEOs preference for the level of budget participation is also significantly and positively associated with their level of organizational commitment. With regard to firm performance, our results suggests that longer the CEOs tenure in their current job and higher the level of education the lower the firm performance, but the greater the CEOs organizational commitment the higher the firm performance. Additionally, we find that the task oriented leadership style is more significant than considerate leadership style in being associated with high firm performance. Prior studies in leadership, participation and organizational commitment as well as the organizational and institutional contexts of Malaysia are used to explain these findings.