Small firm performance: an empirical analysis in Malaysian housing construction industry

Purpose - The purpose of this paper is to evaluate the importance of innovation for the performance of small firms in the construction sector. Furthermore, this paper also examines the influence of several factors related to entrepreneurial capital (entrepreneurial value, business strategy, experience and training) on small firm performance in the sector. Design/methodology/approach - This study uses primary data of 255 small firms in the construction sector under the category of small contractors (G1). Stratified sampling method was utilized for data collection, which is then analyzed using the descriptive and multiple regression analysis to achieve the objectives of the study. Findings - The findings showed that the factor of innovation and several factors related to entrepreneurial capital (entrepreneurial value, business strategy and business experience) have a significant positive relationship with the performance of small firms in the construction sector. However, factor of training indicated a significant negative correlation with small firm performance. Research limitations/implications - Although this study found a significant impact in explaining the factors that affect performance, particularly in the construction sector, it only takes into account only some internal factors (entrepreneurial capital and innovation). Proposed future research should consider a variety of other factors mainly related to external factors, such as economic development, growth potential, industry structure, internal social capital and government policy. Practical implications - This study provides clear implications related to the theory and contributions to the literature related to research in the construction sector. The study also provides invaluable insightfulness to various stakeholders including policy makers, institutional support and small contractors about the importance of innovation and entrepreneurial capital in determining the performance of small firms in the sector. Originality/value - The results provide supportive evidence that entrepreneurial values and business strategy are important internal factors in determining the performance of a firm, which is consistent with the theory of resource-based view. Experience and training factors, as indicators of firm performance, are articulated in the theory of human capital. Hence, the findings not only can strengthen both the theories but also make a significant contribution to the literature of the study, particularly in the construction sector.