Understanding the Drivers for Innovative Work Behavior in Malaysian SMEs

In Malaysia, small and medium enterprises (SMEs) represent 97.3% of the total business establishment and contribute around 31% to the country's gross domestic product (GDP), but this GDP contribution is relatively low compared to SMEs in other countries i.e. 51% in advanced economies and 39% in high middle income countries. Researchers argue that the low SME contribution to Malaysia's GDP is caused by poor organizational innovation performance. The government's economic transformation programme (ETP) features various initiatives designed to harness SME innovation potential, but there exist internal barriers such as lack of knowledge, funds, or even leadership support for innovation. As good leadership is a vital element in successful SMEs, this paper describes a research project focusing on leadership impacts on innovative work behaviour in Malaysian SMEs. It tests a model capturing how transformational leadership positively influences employees' affective commitment levels, which in turn positively impact innovative work behaviour. Transformational leadership is a leadership style that creates a vision for the organization, and inspires followers to voluntarily expend extraordinary effort to achieve organizational goals. Affective commitment is commitment resulting from employee loyalty and emotional attachment to the organization. The target respondents to be surveyed in the study are 4019 middle managers in medium-sized manufacturing firms in a prime urban area in Malaysia. Middle managers were chosen because their closeness to staff provides a safe psychological environment for employees' trying out new methods and solutions for existing problems. Much of the research on leadership and innovation are on organizations in the West, so findings from the study would shed more light onto the situation in a developing country like Malaysia. It would be important reference for SMEs and any institutions tasked to improve SME innovation performance.