1. Faculty of Business Management
GSEC 2006
STRATEGIC ORIENTATION OF SMALL
AND MEDIUM AGRO-BASED ENTERPRISES
(SMAEs) IN MALAYSIA: DIRECT AND
MEDIATION EFFECT OF DISTINCTIVE
CAPABILITIES ON ENTREPRENEURIAL
ORIENTATION AND RETURN ON SALES.
Amran Awang
Abdul Rashid Said Asghar
Khairul Anwar Subari
Faculty of Business Management
UiTM Perlis

2. SMALL AND MEDIUM AGRO-BASED
ENTERPRISES (SMAEs)
Small and medium agro-based enterprises
operates in Malaysia with paid-up capital less than
RM2.5 million, number of employees less than 150 and
turnover less than RM75 million(SMIDEC, 2004).
SMAEs are producers, manufacturers,
and/or provide services for agricultural business
activities. SMAEs were organized in various legal forms
such as proprietorship, partnership, private limited and
limited companies.

3. DISTINCTIVE CAPABILITIES (DC)
Uniqueness of the firm’s driven by knowledge and
behavioral routines (Prahalad & Hamel, 1990)
Alpha
Development process (.83)
Financial information (.82)
Human resources (.78)
Capital structure (.69)
General administration (.60)
Entrepreneurial management (.67)
Information technology (.69)
Engineering (.64)

4. ENTREPRENEURIAL ORIENTATION (EO)
The Methods, Practices and Decision making
Styles Managers Use to Act Entrepreneurially
(Lumpkin & Dess, 1996).
Alpha
Innovativeness (.54)
Proactiveness (.72)
Risk taking (.71)
Autonomy (ns)
Competitive aggressiveness (.89)

5. RETURN ON SALES (ROS)
ROS = Average Net Profit/Average Sales
Net Profit
< RM50,000 92%
> RM50, %
Average Sales
< RM50,000 92%
> RM50, %

6. CONTROL VARIABLES
Firm’s age (Older i.e. > 10 years)
Business Types (Producers)
Business Forms (Private Limited Companies)

7. SAMPLE AND DISTRIBUTION
Small and medium Agro-based Firms (SMAEs)
in the state of Kedah, Malaysia
Ownership
Owner 97.6%
Manager %
Firm’s Tenure
Older firms 23.2%
Younger firms 76.8%
Type of Business
Manufacturer 64.8%
Producers* 24.8%
Services 10.4%
*Subject to agricultural
cycle
Business Registration
Status
Proprietor 91.2%
Private Limited 5.6%
Partnership %

8. ANALYSIS
Factor Analysis (Construct Validity)
Principal component
Varimax Rotation
Loading (> .50 for sample of 100)
(Hair et al., 1998)
Multiple Regression Analysis
Two-stage analysis (Direct relationship)
Three-stage analysis (Mediating)
(Baron & Kenny, 1986)

9. ASSUMPTIONS FOR REGRESSION
ANALYSIS
Normality
Linearity
Homoscedasticity
Free from multicollinearity
Free from error term
Free from outlier

10. FINDINGS EO ROS DC a Innovativeness b c Financial Information
Proposed by Baron and Kenny (1986)

11. EO directly related to ROS (a)
Beta
Control (Adj. R2 =.22, F = 12.79**)
Older firm **
Producers **
Private Limited Company
EO (Adj. R2 = .48, F = 16.18**)
Competitive Aggressiveness -.53**
Proactiveness
Risk Taking
Innovativeness **
** p < .01, * p < .05.

12. EO relationship to DC (b)
PD FI HR CS GA EM IT EN
Control
Older ** **
Producers -49** .69** ** -.41**
Private Ltd .16* .19* .28** *
Adj. R
F ** 20.25** 7.05* ** 10.61** EO
Com. Agg ** ** .34** .32** .11
Proactive .24** ** **
Risk taking .43** ** .21* **
Innovative .22** .24** .26** .42** * .13
Adj. R
F ** 10.02** 16.38** 13.35** 4.64** 7.21** 3.55** 9.40**
** p < .01, * p < .05.

13. DC and ROS Relationship (c)
Beta
Control (Adj. R2 =.22, F = 12.79**)
Older firm **
Producers **
Private LTD
EO (Adj. R2 = .43, F = 6.47**)
Process development .08
Financial information .55**
Human resources
Capital structure
General administration
Entrepreneurship management *
Information technology
Engineering
** p < .01, * p < .05.

14. Financial Information mediates innovativeness-ROS Relationship (abc)
Beta
Control (Adj. R2 =.22, F = 12.79**)
Older firm **
Producers **
Private LTD
EO (Adj. R2 = .48, F = 16.18**)
Comp. Aggressiveness **
Proactiveness
Risk Taking
Innovativeness **
DC (Adj. R2 = .52, F = 10.15**)
Financial Information **
** p < .01, * p < .05.

15. IMPLICATIONS
EO and DC dimensions vary to each other
Older firms and producers affect ROS
EO predicts 5 DC components positively
Innovativeness predicts higher ROS
Financial information predicts higher ROS
Financial information mediates innovativeness
ROS relationship.

16. WISHING YOU ALL THE BEST
THANK YOU
WISHING YOU ALL THE BEST