A cross cultural study of entrepreneurial competencies and entrepreneurial success in SMEs in Australia and Malaysia

Abstract

The present study examined the relationship between entrepreneurial competencies and business success in the context of SMEs in Australia and Malaysia. A “mixed-method” approach was adopted whereby two studies were conducted in a sequential fashion (Study 1 and Study 2). In Study 1, a qualitative method was adopted in which individual interviews were conducted with 20 entrepreneurs – 10 from Australia and 10 from Malaysia – who operated SMEs in the manufacturing and service sectors. The aim was to elicit behaviours that delineate competencies, and thus enable the identification of entrepreneurial competencies that are context-specific and of relevance in the current business environment. A content analysis of the interview data identified 12 competency domains: Strategic; Commitment; Conceptual; Opportunity; Organising and Leading; Relationship; Learning; Personal; Technical; Ethical; Social Responsibility; and Familism. Importantly, nine of these categories were well represented in existing models of entrepreneurial competencies, thereby providing evidence that these models offer a reasonable degree of cross-cultural generalisability. However, three new categories emerged, namely, Ethical, Social Responsibility, and Familism (broadly concerned with the role of “family” in building business success). There was evidence for Ethical and Social Responsibility competencies in both the Australian and Malaysian data, whereas Familism was specific to the Malaysian data and may well reflect the collectivist orientation of Malaysian culture. The identification of these additional categories of entrepreneurial competencies suggests that the existing models may need to be revised to further enhance their applicability to the measurement of entrepreneurial competencies in different cultural contexts. Study 2 Part 1 proceeded with validating the model of entrepreneurial competencies. This involved determining the psychometric rigour of the model and establishing the psychometric properties of all dependent variables (measures of business success) and covariates (i.e., business environment and entrepreneurs’ cultural orientations) using a sample of 391 SME entrepreneurs (179 Australians and 212 Malaysians). The two best fit models of entrepreneurial competencies – the “Comprehensive” model and the “Parsimonious” model – are fully described. The Comprehensive model revealed that all twelve competency areas were perceived as relevant to SME outcomes by entrepreneurs in Australia and Malaysia, even though the behaviours that defined the Organising and Leading competency domain, as well as the Familism competency domain (later renamed “Supporting and Cooperating” for Australia due to the omission of items related to “family”) were somewhat different. The other 10 competency areas identified in the Comprehensive model appeared to be invariant across countries. On the other hand, the Parsimonious model of entrepreneurial competencies showed that, although some competency areas were universal in nature (i.e., Conceptual, Opportunity, Learning, and Ethical), others were country specific (i.e., Relationship, Social Responsibility, and Familism). It was argued that the differences could be traced to cultural variations between the countries, in particular the extent of Individualism versus Collectivism. Study 2 Part 2 tested the causal pathway between entrepreneurial competencies and business success and the possible influence of covariates using a structural equation modeling (SEM) procedure. The results showed that entrepreneurial competencies were strong predictors of business success in SMEs for both Australia and Malaysia. It was also found that both Benign and Stable business environments were significantly related to business success in Australia whereas only a Stable environment was significantly linked with success in Malaysia. Moreover, environmental variables showed a less strong path to success than competencies. When the Parsimonious model of entrepreneurial competencies was used in the model estimation, the association between entrepreneurial competencies and business success was more strongly evident in Hostile and Dynamic environments than in more Benign and Stable environments (for both Australia and Malaysia). The results also showed that cultural orientations (both Collectivism and Tolerance for Ambiguity) have positive effects on entrepreneurial competencies in Malaysia but not in Australia (i.e., Individualism and Tolerance for Ambiguity). The effect of education on entrepreneurial competencies was mixed; significant for only the Comprehensive model for Australia but significant for both Comprehensive and Parsimonious models for Malaysia. The effects of training before and after start up, as well as previous work experience on entrepreneurial competencies appeared to be nonsignificant in both contexts. On the basis of the results of the thesis, it was concluded that self-reported entrepreneurial competencies are predictive of self-reports of success in both Malaysian and Australian SMEs. The models that describe success in both countries are consistent with existing models of entrepreneurial competency although differences in the behaviours that define a domain are evidenced between countries as are the domains that successfully define a parsimonious model in each country. These results are interpreted as supporting a training agenda that identifies entrepreneurial skills as a critical pre-requisite to business success for SMEs.