Essay Grade

Final Paper Guidelines
Throughout this seminar experience, you have explored foundational content, past and
current research, and trends and innovations in the field of entrepreneurial finance. In
addition to acquiring this body of knowledge, you have also considered possible areas
for future research in the field.
To prepare for this Assignment, identify a research topic for this Final Paper. Choose
from any of the following:
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An idea from the general topics in Week 2, 4, or 6
The topic of your own Doctoral Study (only if it concerns entrepreneurial finance)
The topic of your own Presentation
Gaps in the literature identified by you or your colleagues during the Discussions
in Weeks 2, 4, or 6
A topic from any of the readings from Weeks 2, 4, or 6
Please Note: If you choose to write a paper on the topic of your own Doctoral Study, it
must be a unique assignment that you have not already submitted in a prior course
(e.g., not your Prospectus or Proposal document). Your Final Paper must adhere to the
guidelines provided here and within the Week 7 Assignment Rubric.
By Day 7 of Week 7
Submit an 8- to 12-page evaluation (excluding title page and References section) of
your research on entrepreneurial finance. In your evaluation, be sure to address the
following:
Analysis of the Field
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What is your analysis of the state of the field of entrepreneurial finance? Describe
important issues or current dilemmas in the field.
Research Topic
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State and provide background information for your research topic.
What are the current theories and areas of debate for your topic?
Are there particular industries or technologies that will be impacted by your topic?
If this impact is positive, how can it be maximized, and if negative, how can this
impact be mitigated?
Future Directions
As a global change agent, consider the future directions of entrepreneurial finance to
address the following:
© 2017 Laureate Education, Inc.
Page 1 of 2
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Indicate specific areas of further research in this topic that would prove
beneficial.
What potential impact might the topic that you have chosen have on the overall
state of the field and the future directions of entrepreneurial finance research in
the next 3–5 years?
Identify the implications for future social change from your topic area.
Be sure to review the Final Paper Guidelines and Week 7 Assignment Rubric. Use the
APA Course Paper Template, located in the Learning Resources for this 2-week unit.
Your paper should include the following headings: Analysis of the Field, Research
Topic, and Future Directions. Please Note: For each page of your paper, you must
include a minimum of two APA-formatted scholarly citations.
© 2017 Laureate Education, Inc.
Page 2 of 2
The Journal of Business Inquiry 2017, 16, Issue 1 (Special Issue), 88-101
http:www.uvu.edu/woodbury/jbi/articles
ISSN 2155-4072
Assessing the Role of Entrepreneurial Competencies on
Innovation Performance: A Partial Least Squares (PLS) Approach
By AINUL MOHSEIN BINTI ABDUL MOHSIN, HASLIZA ABDUL HALIM,
NOOR HAZLINA AHMAD, AND NADIA FARHANA*
For decades, entrepreneurial competencies have been viewed as essential for entrepreneurs
to perform successfully and transform businesses. However, research on entrepreneurial
competencies and their impact on innovative performance is very much lacking.
Furthermore, research on these two variables among SMEs is also scarce. Thus, the
intention of this study is to review the literature on entrepreneurial competencies and
innovative performance and to investigate the relationships of these two variables within the
Malaysian SME context with empirical evidence. A step by step SmartPLS approach is
utilized to validate the model and find substantial support for the study’s hypotheses.
Keywords: Entrepreneurial Competencies, Innovative Performance, SME, SmartPLS
JEL Classification: L26, O31
I. Introduction
Of late, the Malaysian SME sector has soared in tandem with global business development.
The government has acknowledged that SMEs are the backbone of the Malaysian economy and
continues to provide various support and programs to enhance SME productivity (PEMANDU,
2010). To unlock the growth potential of SMEs, the government has developed an extensive array
of innovation know-how programs among the SMEs. Nevertheless, the 2016 Global Innovation
Index for innovativeness ranked Malaysia at thirty-fifth for innovativeness (Cornell University et
al., 2016). In 2011, Malaysia was ranked at thirty one, and in 2012 it was ranked at thirty-two
(INSEAD, 2012). The decreasing trend in innovation in Malaysia is a concern because it indicates
that Malaysia is losing its footing in innovativeness. This information is supported by Che-Ha and
Mohd-Said (2012); there is a dearth of information on SME innovative activities in Malaysia.
Therefore, the Malaysian SMEs need to embrace innovativeness to stay relevant in today’s global
economy because their survival depends highly on their innovativeness, creativity, and
entrepreneurship.
One of the ways for SMEs to become innovative is to rely on the entrepreneur’s ability and
creativity to innovate. There is a suggestion that the Malaysian SMEs do not have the prerequisite
entrepreneurial competencies (ECs) to engage in activities which lead to innovative performance
(IP). While it is true that entrepreneurs with highly developed entrepreneurial competencies are
more likely to introduce innovation to their businesses (Mitchelmore and Rowley, 2010), it is
* Ainul Mohsein Binti
Abdul Mohsin, corresponding author, Senior Lecturer, School of Management (International
Business), Universiti Sains Malaysia,11800 USM Penang, Malaysia. Email:ainabdulmohsin@usm.my. Hasliza Abdul
Halim, Associate Professor, School of Management (Organisational Behaviour), Universiti Sains Malaysia,11800
USM Penang, Malaysia. Email: haslizahalim@usm.my. Noor Hazlina Ahmed, Professor, School of Management
(Organisational Behaviour), Universiti Sains Malaysia,11800 USM Penang, Malaysia. Email: hazlina@usm.my.
Nadia Farhana, Doctoral Student, School of Management, Universiti Sains Malaysia,11800 USM Penang, Malaysia.
Email:nadiafarhana@gmail.com.
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postulated that some of the competencies have more influence than others on innovativeness
among entrepreneurs. Given the fact that ECs are important to SME innovativeness, this paper
argues that it is essential to understand the EC relationship to innovative performance in business
practices. Therefore, the purpose of this paper is to investigate the relationships between these two
variables – entrepreneurial competencies and innovative performance among the Malaysian
SMEs – with empirical evidence.
II. Literature Review
A. Entrepreneurial Competencies
Frey and Ruppert (2013) categorize competencies as belonging to either personal or
organizational categories. Personal competencies are abilities acquired by individuals such as
knowledge, skills, abilities, experience, and personality, whereas organizational competencies are
the embedded processes and structures that continue within an organization even when individuals
leave the organization. These two categories are not mutually exclusive because all the personal
techniques in the organization process or the work culture can be embedded in the organization.
According to Spencer and Spencer (1993), competency is driven by the need to achieve superior
performance and acquire economic gain and business success. Baum et al. (2001) emphasize that
competency can be classified as either specific competency or general competency. Specific
competency is technical and industrial skill whereas, general competency is organizational and
opportunity recognition skill. Moreover, many studies have attributed the success of small
businesses to the competencies of the entrepreneurs (Mitchelmore and Rowley, 2013). There is no
denying that entrepreneurial competencies are vital to an organization’s establishment, expansion,
and success; however, the discussion of competencies in the entrepreneurial literature is still in its
infancy (Brinckmann, 2008). Studies from Henderson and Cockburn (1994), Man et al. (2002),
and Chandler and Jensen (1992) that spur from research productivity, competitive advantage and
business performance have been closely associated to specific competencies; nevertheless the
competencies needed to initiate and sustain the entrepreneurial process are less clearly identified
(Rasmussen et al., 2014).
Entrepreneurial competencies (ECs) have been identified as a specific group of competencies
that are necessary to be implemented for successful entrepreneurship (Mitchelmore and Rowley,
2010). Since this study focuses on SMEs, ECs are scrutinized in detail to distinguish between
general competencies and entrepreneurial competencies. Entrepreneurial competencies have often
been associated with the occurrence of small and new businesses (Colombo and Grilli, 2005;
Nuthall, 2006). The research of Chaston et al. (1999) on small organizations looks into the different
modes of behavior which relate to and impact organizational capability. They also reveal that there
have been only a few literature attempts to investigate the constructs on small organizations using
quantitative techniques. Interestingly, scholars who specialize in the field of entrepreneurship
make a distinction between managerial competencies and entrepreneurial competencies (Lerner
and Almor, 2002; Chandler and Hanks, 1994a and 1994b). Man et al. (2002) clarify that ECs
involve both managerial and entrepreneurial competencies and view ECs as the total ability
package of an entrepreneur to perform the job role successfully and to also transform the business.
The main strength of Man et al.’s (2002) argument is that ECs are exercised by individuals who
start and transform their businesses. Hunt and Meech (1991) also stress that in the entrepreneurial
context, the focus is not on an organization but on the individual. In addition to entrepreneurial
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and managerial competencies, an entrepreneur needs to master the technical functional role too
(Camuffo et al., 2012). These findings are supported by Bruyat and Julien (2001) and Stevenson
and Jarillo (1990), who conclude that entrepreneurial competencies are distinct individual abilities
to identify, develop, and exploit opportunities and resources. Additionally, Johnson and
Winterton’s (1999) positive contribution to the study of entrepreneurship is that the range of
competencies needed to run a small organization is vastly different from that of a large
organization, from both the qualitative and quantitative aspects. This argument is consistent with
the Resource-Based-Theory which states that the value creation of an organization is closely
related to the capability of its managers in attaining and developing resources (Barney, 1991;
Grant, 2010).
The EC constructs used to build the framework for this study are from Man (2001) and
Ahmad (2007). These entrepreneurial competency constructs are opportunity, strategy,
relationship, concepts, and technical expertise. According to Man et al. (2002), an entrepreneur
who masters these entrepreneurial competencies will have a positive impact on the firm’s decision
making, business strategy, and capabilities, which include innovative ability (new products,
services, and processes), quality (maintaining high quality and image), cost-effectiveness
(competitive price), and organicity (flexible organization structure and system to achieve
production speed and responsiveness). A study by Ahmad et al. (2010) on Malaysian SMEs in the
service sector confirmed that ECs are also strong predictors of business success. The result
validates Gibb’s (2005) argument that SMEs’ competitive advantage is achieved and sustained by
the ability of the entrepreneur and not the size of the organization. Entrepreneurship also refers to
a process of opportunity recognition and pursuit that leads to growth that creates value and bears
risk. Thus, it is strongly associated with innovation. The study by Ahmad et al. (2010) clearly
explains that entrepreneurs are capable of minimizing the negative impact of the business
environment if they always equip themselves with the necessary competencies.
B. Innovative Performance
Innovation is defined as the adoption of an idea or behavior that is new to an organization
(Daft, 1978; Damanpour and Evan, 1984). The adoption of innovation is described as a process
that includes generation, development, and implementation of new ideas or behaviors. Innovation
is not only an adoption but also an adaptation of new information and practices, which leads to the
ability to create new ideas and apply them to improvise new products, services, processes, and
procedures (Bates and Khasawneh, 2005). The definition of innovation has evolved into different
categories which include products, production methods and technologies, markets, services, and
organizational structures, and an assumption is made that the source of information varies between
different types of innovation (Freel and de Jong, 2009; Tödtling et al., 2009). Innovation can either
be radical, which is revolutionary and original (Green et al., 1995) or incremental, which is small
improvements on an established process, product, or service. In sum, incremental innovations are
improvements of existing products, services, processes, technical, or administrative conditions.
Innovation, then, is multi-dimensional and is practiced by all types of organizations regardless of
size because it is proven that organizations that are innovative have higher profits and market share
(Prajogo and Ahmed, 2006). Many or most authors would agree that having distinguished
entrepreneurial competencies is very important because such competencies will spur innovation.
Entrepreneurial competencies and innovations have always had a unique relationship.
Schumpeter (1934) argued that technological and innovation change of a nation derived from the
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entrepreneurs and innovation has been recognized as a competitive edge in business organizations.
An individual who has developed his entrepreneurial competencies will eventually become
involved in a special process of something new in the managerial, services, or product
development process where he is willing to take on calculated risk (Ivanov and Bikbulatov, 2013).
In this study, innovation involves the undertaking of actions to improve the products, processes,
and procedures that help to increase the significance, usefulness, and performance of the products,
processes, or procedures (Pinho, 2008), and innovative performance is defined as incremental
product, service and process innovation because SMEs’ innovation activities are more likely to be
ad hoc or project driven (Hoffman et al., 1998). Furthermore, SMEs are likely to focus on
incremental innovation as posited by Oke et al. (2007).
III. Theoretical Framework
Based on the aforementioned literature review, the proposed hypotheses are listed below.
Entrepreneurial competencies constructs are represented by strategic, conceptual, opportunity,
relationship, and technical categories and are viewed as possible predictors of innovative
performance (Man et al., 2002). This study argues that innovation is characteristic of
entrepreneurial competencies (Edwards-Schacter et al., 2015) and can be learned as part of the
personal development process. Furthermore, innovation relates to innovative behavior that triggers
cognitive processes to produce novel business ideas (Bird, 2002). Given that entrepreneurial
competency constructs are predictions of an entrepreneur’s tendency towards innovation, it then
can be anticipated that:
Hypothesis 1: There will be a positive statistically significant relationship between conceptual
competency and innovative performance.
Hypothesis 2: There will be a positive statistically significant relationship between opportunity
competency and innovative performance.
Hypothesis 3: There will be a positive statistically significant relationship between
relationship competency and innovative performance.
Hypothesis 4: There will be a positive statistically significant relationship between strategic
competency and innovative performance.
Hypothesis 5: There will be a positive statistically significant relationship between technical
competency and innovative performance.
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IV. Methodology
This study is quantitative in nature, and the scope focuses on SMEs that are registered with
the SME Corporation Malaysia. Since this study focuses on SME entrepreneurs, the definitions of
SMEs provided by the Small and Medium Industries Development Corporation (SMECorp
Malaysia, 2014) will be used to identify appropriate businesses for inclusion in the study. A survey
instrument was developed by adapting items from previous literature that are reliable and validated
to evaluate the relationships between the entrepreneurial competency constructs and innovative
performance.
Since many SME entrepreneurs in Malaysia are comfortable in answering in the Malay
language, the survey instrument was also translated into the Malay language. The translation in
this study applied the extended parallel translation procedure known as collaborative translation.
By applying this technique, the equivalence in meaning and the intended sense of statement was
captured (Limpanitgul and Robson, 2009). Again, the translated questionnaire was pre-tested by
the respondents to ensure the questions were the same in the English and Malay versions of the
questionnaire.
Data were collected by sending mail surveys where the questionnaires were distributed to
1,000 companies in all states of Malaysia. The respondents were the business owners cum
entrepreneurs of SMEs. This study is a cross-sectional type of inquiry. Two screening questions
were used to check the sample for any form of response bias (Podsakoff et al., 2012). A total of
191 replies were received. Twenty-four questionnaires were not usable because they were partially
completed and did not meet the screening questions criteria. Therefore, only a sample size of
N=167 was used for this study, resulting in a response rate of 16.7 percent. This response rate is
considered satisfactory because it is a common scenario in Malaysia to obtain a standard response
rate of between 15 and 20 percent from SMEs (Othman et al., 2001).
V. Sample Profile
This study surveys SME organizations in Malaysia either from the manufacturing or the
services sectors. From the total of respondents, 65 were from the manufacturing sector and 102
were from the services and other sectors. This study complies with the new SME definition made
by SME Corporation Malaysia. From the profile, 100 percent of the respondents are owners and
also entrepreneurs for their respective organizations. All respondents have been operating their
businesses for 3 years or more. The majority of the respondents have been operating between 4
and 10 years (31.14 percent), 25.15 percent have been operating for 21 years or more, 23.95
percent have been operating for 3 years, 12.57 percent have been operating between 16 and 20
years, and only 7.19 percent have been operating between 11 and 15 years. Micro size businesses
form the majority of the respondents of the survey (43.71 percent), followed by small size
businesses (37.13 percent) and medium size businesses (19.16 percent). This is in sync with the
Malaysian 2011 census that confirms the majority of SMEs are micro establishments (77.0
percent) (Jabatan Perangkaan Malaysia, 2012). The majority of the respondents are private limited
companies (61.08 percent) followed by sole proprietorships (22.75 percent), and only 16.08
percent are partnerships. More than half of the respondents are male (62.28 percent). The biggest
group of respondents in this study falls between 40-49 (28.14 percent) years old, and the highest
level of education attained by most of the respondents is the university degree level (52.69
percent). The majority of the respondents are Malays (79.04 percent).
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VI. Findings and Discussion
The model was tested by applying the Structural Equation Modelling (SEM) procedure using
SmartPLS which was developed by Ringle et al. (2010). The first step was to test for the
convergent validity. Hair et al. (2010) suggested using the factor loadings, composite reliability,
and average variance extracted to measure the convergence validity. Hair et al. (2014) state that
an outer loading of 0.7 is acceptable because it is considered close enough to 0.708. Nevertheless,
Hair et al. (2014) caution social sciences researchers to initially analyze the impact of deleting
indicators between 0.40 and 0.70 on AVE and composite reliability. If deleting the outer loading
does not increase the measure above the threshold, the reflective indicator should be retained.
However, indicators with outer loading below 0.40 should always be eliminated from the scale
(Hair et al., 2012). The loadings after deleting some of the items exceeded the recommended value
of 0.7 (Hair et al., 2010) as depicted in Table I. The Composite Reliability as depicted in Table 1
ranged from 0.871 to 0.944 which exceeded the recommended value of 0.7 (Hair et al., 2010). The
average variance extracted, which reflects the overall amount of variance in the indicators
accounted for by the latent construct, was in the range of 0.606 and 0.688, which also exceeded
the recommended value of 0.5 (Hair et al., 2010).
Table 1: Result of the Measurement Model
Constructs
Strategic Competency
Conceptual Competency
Opportunity Competency
Relationship Competency
Items
Loadings
AVE
CR
ECS1
ECS2
ECS3
ECS4
ECS5
ECS6
ECS7
ECS8
ECS9
ECC10
ECC14
ECC15
ECC16
ECO17
ECO18
ECO19
ECO20
ECR21
ECR22
ECR23
ECR24
ECR25
ECR26
0.757
0.749
0.854
0.773
0.864
0.770
0.855
0.854
0.779
0.750
0.828
0.807
0.784
0.853
0.803
0.850
0.794
0.711
0.811
0.819
0.735
0.795
0.794
0.652
0.944
0.628
0.871
0.681
0.895
0.606
0.902
Deleted Due
to Low Loading
ECC11
ECC12
ECC13
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Table 1: Result of the Measurement Model: Continues
Constructs
Technical Competency
Innovative Performance
Items
Loadings
AVE
CR
ECT27
ECT28
ECT29
ECT30
IP1
IP2
IP3
IP5
IP6
0.810
0.795
0.835
0.875
0.808
0.834
0.806
0.751
0.792
0.688
0.898
0.638
0.898
Deleted Due
to Low Loading
IP4
Note: Loadings > 0.7, AVE>0.5, CR>0.7.
The next step was to measure the discriminant validity to check if the construct is exclusive
from the other constructs by empirical standard (Hair et al., 2014). For discriminant validity, the
initial cross loadings of the items should correspond to their constructs and should be greater than
the other constructs. Table 2 shows that there is sufficient discriminant validity for all constructs
in this research. As shown in Table 2, all the square roots of the average variance extracted were
higher than the correlations values in the row and the column, indicating adequate discriminant
validity. In sum, the measurement model demonstrated adequate convergent validity and
discriminant validity.
Table 2: Discriminant Validity of Construct
Conceptual
Conceptual
0.793
0.781
Opportunity
0.717
Relationship
0.650
Strategic
0.679
Technical
0.609
IP
Opportunity
0.825
0.661
0.665
0.576
0.570
Relationship Strategic
0.779
0.669
0.666
0.524
0.808
0.668
0.579
Technical
IP
0.829
0.523
0.799
Note: Diagonals represent the square roots of the AVE while the off diagonal represents the correlations.
To test the hypotheses, an evaluation of the structural model was conducted. The analysis for
the hypotheses was performed using the bootstrapping method. Table 3 shows that H1 and H4 are
supported. Conceptual and strategic competencies are positively related to innovative
performance. From Figure 1, the innovative performance R2 value is 0.438, which suggests that
43.8 percent of the variance in the dependent variable is explained by EC.
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Table 3: Hypothesis Testing
Hypotheses
Relationships
Std Beta
Std Error
t-value
Decisions
H1
H2
H3
H4
H5
Conceptual -> IP
Opportunity -> IP
Relationship -> IP
Strategic -> IP
Technical -> IP
0.279
0.128
0.022
0.241
0.084
0.136
0.120
0.094
0.092
0.085
2.056**
1.068
0.228
2.617***
0.993
Supported
Not Supported
Not Supported
Supported
Not Supported
Note: * p
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