The Effects of Strategy Formulation on Organisational Performance: Evidence from the Malaysian Local Authorities

Abstract

This study examines the effects of strategy formulation on the performance of Malaysian local authorities (LAs). Strategy formulation, which is the independent variable, is presented in the forms of its four elements, which are mission, objective, strategy, and policy. On the other hand, efficiency is measured as the proxy for performance, which is the dependent variable. Data were collected using self-administered questionnaires. PLS-SEM was employed to analyse the data and test the hypotheses. This technique is justified due to its aptness for small sample sizes. The measurement model analysis revealed that the data had achieved validity, reliability and goodness-of-fit. The results of the structural model analysis suggested that mission significantly influences the performance of the Malaysian LAs. However, objective, strategy, and policy did not significantly affect performance. The findings are explained from the perspective of the contingency theory. The managerial implications of the findings are discussed and the agenda for future research are also proposed.