ENHANCING ORGANIZATIONAL PERFORMANCE OF MALAYSIAN SMEs THROUGH HUMAN RESOURCE MANAGEMENT (HRM) PRACTICES AND ORGANIZATIONAL INNOVATIVE CAPABILITY: ConclusionThis conceptual paper contributes to an understanding of the impact of HRM on SMEs performance generally and particularly in Malaysia. Even though HRM practices have been considered as one of the significant factors appear to boost the performance of organization, it can be said actually most of the Malaysian SME does not practice HRM effectively in their business (Daud & Mohamad, 2010). Hence, Malaysian SMEs have to realize their own competencies, particularly their internal strengths such as the human resource and their HRM practices in order to support SMEs to be innovative and competitive (Ngah & Ibrahim, 2009).
Amidst the global uncertainty and more subdued external environment, SMEs have to adjust themselves to adapt to the changes. In line with the launch of the SME Masterplan 2012-2020, SMEs have to take a new approach to accelerate their growth by focusing on productivity and innovation. SMEs have also been acknowledged as a source for innovation and contribute to forward-thinking ideas that can improve regional economic growth. In fact, the role of innovation has been identified as the key factor affecting the performance of Malaysian SMEs, particularly to drive productivity (NSDC, 2012). Hence, the entrepreneur or owners/managers of SMEs should have the advantage of innovation to compete with larger established businesses in order to succeed in business (Rosenbusch et al., 2011). This suggests that SMEs should engage in a corporate culture that encourages innovation in their organization to remain relevant, competitive, and could have continued success in a newly domestic and global business market. Moreover, previous studies found that organizations that practice more innovative behavior are likely to initiate organizational changes that could boost organizational performance. 24 hour payday loans
According to prior studies, the activities of innovation in organizations have been influenced by individual, organizational, and environmental factors. However, nearly all studies have been focused on organizational factors as key determinants of innovation (Damanpour, 1991; Kimberly & Evanisko, 1981; Vincent et al., 2004). For such organizational factors, human resource management has been approved as the most significant drivers for innovation (Chen & Huang, 2009; Nasution et al., 2011; Tan & Nasurdin, 2010). These HRM practices are capable of providing needed inputs for innovation, which subsequently improve the performance of an organization (Eisenhardt & Martin, 2000; Lopez-Cabrales, Perez-Luno, & Cabrera, 2009; Rhee et al., 2010). This shows that the innovation activities of the organization are a catalyst for improvements in organizational performance (Jimenez-Jimenez & Sanz-Valle, 2008; Vincent et al., 2004), and thus signifying the fact that innovation could possibly become a mechanism that provides the organizations a competitive advantage in the market through unique organizational resources (Barney, 1991), namely, HRM practices. Therefore, this paper will propose, with organizational innovative capability being the mediating variable, how the implementation of HRM practices affects the organizational performance.