Factors Influencing Employee Performance in Malaysian SMES: The Mediating of Job Satisfaction and the Moderating Impact of Transformational Leadership

Abstract

The purpose of this study is to examine the factors influencing employee performance in Malaysian SMEs. According to the SME Performance Report 2021 from the Department of Statistics Malaysia, SME productivity is lower than that of non-SMEs across all economic sectors and industries. The Self-Determination Theory serves as the main conceptual framework for this study. A purposive sampling method was employed, and data were collected from 126 Malaysian SME employees at the executive or managerial level. The data were analyzed using the Partial Least Squares Structural Equation Modelling technique. The results reveal that job autonomy and competency do not have a significant impact on job satisfaction. However, psychological ownership is the only variable that significantly influences job satisfaction. Furthermore, job satisfaction has a significant positive effect on employee performance. Transformational leadership is found to positively moderate the relationship between job satisfaction and employee performance. In terms of mediation, job satisfaction successfully mediates the relationship between psychological ownership and employee performance but fails to mediate the relationship between job autonomy and competency on employee performance. This research focuses on a limited number of variables, such as autonomy, competency, and psychological ownership, while neglecting other potentially influential factors like communication, human capital management, rewards, and perceived support. Future studies should consider expanding the research model to include additional factors that may influence employee performance and job satisfaction, such as incentive packages, communication strategies, and sector-specific considerations. The findings of this study provide valuable insights for SME owners and policymakers in their efforts to enhance employee productivity.