STRATEGIC CAPABILITIES AND ORGANIZATIONAL PERFORMANCE: THE ROLE OF ENTREPRENEURIAL ORIENTATION, MARKET ORIENTATION, AND LEADERSHIP QUALITIES AMONG BUMIPUTERA SMES IN SABAH, MALAYSIA

Abstract

Small and medium enterprises (SMEs) play a crucial role in Malaysia’s economic development, particularly in regions such as Sabah where SMEs contribute significantly to employment generation and local economic growth. However, many SMEs continue to face challenges in sustaining organizational performance due to limited strategic capabilities and managerial resources. Drawing on the Resource-Based View (RBV), this study examines the relationships between Entrepreneurial Orientation (EO), Market Orientation (MO), Leadership Qualities (LQ), and Organizational Performance (OP) among Bumiputera SMEs in Sabah, Malaysia. A quantitative research design was adopted using survey data collected from 513 SME owners across 22 districts in Sabah. The data were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) to test the hypothesized relationships. The findings reveal that entrepreneurial orientation significantly influences all dimensions of market orientation, including customer orientation, competitor orientation, inter-functional coordination, and profit orientation. Market orientation was found to positively affect organizational performance and mediates the relationship between entrepreneurial orientation and performance. Furthermore, leadership qualities moderate selected relationships between market orientation and organizational performance, particularly strengthening the effect of customer orientation on firm performance. These results suggest that SMEs that effectively integrate entrepreneurial initiatives with strong market orientation and leadership capabilities are better positioned to achieve sustainable organizational performance. The study contributes to the entrepreneurship and strategic management literature by providing empirical evidence from the context of Bumiputera SMEs in Sabah and offers practical insights for policymakers and SME development programs aimed at strengthening entrepreneurial ecosystems in emerging regional economies.