The core competence of successful owner-managed SMEs

Abstract

PurposeThe purpose of this paper is to measure the impact of transformational leadership, entrepreneurial competence and technical competence on firm performance via innovativeness in owner-managed small- and medium-sized enterprises (SMEs).Design/methodology/approachData were gathered from 178 owner-managers of SMEs operating in Malaysia using a self-report questionnaire. The data were analysed using partial least squares structural equation modelling.FindingsThe results show that, except in the link between transformational leadership and process innovativeness, all relationships linking transformational leadership, entrepreneurial and technical competence with innovativeness, and linking innovativeness with firm performance are significant.Research limitations/implicationsThe self-report questionnaires that were administered to owner-managers of SMEs constitute a limitation for this research, as they may not always produce reliable and valid responses due to single informant response and common method bias.Practical implicationsThe study findings have strong theoretical and managerial implications for owner-managed SMEs seeking to adopt the four core metrics, namely, transformational leadership, entrepreneurial competence, technical competence and innovativeness, as the management core, all of which are necessary for meaningful, sustainable, disruptive transformation to do well in business, even with limited resources.Originality/valueThe value of this study lies in its effort to focus on the core competence of owner-managed SMEs, which remains relatively underexplored in the context of developing countries. Moreover, little is yet known about their combined effects on firm performance.