Enchancing organizational performance of Malaysian SMEs through human resource management (HRM) practices and organizational innovative capability: A proposed framework

Generally, the literature says that SMEs play an important role in the development of the country to a superior level. However, the performance of Malaysian SMEs still has not reached the stage of full potential.To improve the performance, the SMEs need to realize their full potential and seize any opportunities to upgrade them to become more competitive.To remain competitive, SMEs have to shift towards higher value added activities, and adopt be st industry business practices.Thus, SMEs need to change their mindset to transform themselves to support the strategies of Malaysia to become a high-income, developed country by 2020.This transformation requires SMEs to develop their organizational resources and capabilities that will move them to become more competitive, innovative, and with a technologically strong SME sector. Unfortunately, empirical studies on the impact of organizational resources and capabilities of SMEs to the issue of their performance, particularly in the Malaysian context have been less than encouraging. Given the importance of organizational resources, such as human resources (Abdullah, Ahsan, & Alam, 2009), and how they play a crucial role in the organizational operation and success, there is a need to investigate how the HRM helps the organization manage their employees in achieving higher performance and success.Apart from that, in order to be more effective, more successful, and keep on surviving (Damanpour & Schneider, 2006), SMEs should be actively involved in innovation. This is due to the capability of the organization to innovate mostly in promising positive implications for its performance (Pinho, 2008). Potentially, improved SMEs performance can begained through HRM practices and organizational innovative capability. A survey to the SME manufacturing companies can show the relevance of HRM practices and organizational innovative capability towards improving performance. Therefore, empirical work in this relationship is needed to overcome this shortcoming