Analyzing the mediating effect of innovation capability on strategic orientations in agricultural Malaysia

Abstract

Innovation has been a topic of interest to be applied in any firms as the best weapon to achieve competitive advantage position and to survive particularly in this competitive environment. Firms without innovation are reluctant to change and regards as laggard. Numerous studies on the combination of innovation with firm’s strategic orientation were done in the developed countries, across sectors such as manufacturing or service sector, but lacking in the developing countries, particularly to the small agricultural sector. The contributions of agricultural sector in the economic growth of one country are undeniable. The sector provides one country with employment, reduce poverty rate, increase rural income, food security and growth to the economy. Although number of studies on small and medium enterprises on strategic orientations (SO) were done across sectors, however, farmer’s strategies in making the business a success and can sustain longer in the market are lacking in numbers. Therefore, this paper aim to examine the determinants of strategic orientation towards the small and medium agricultural performance in Malaysia with mediation effect of innovation capability (IC) as a dynamic approach to farmers’ sustainability. The exploration of SO and IC effect on small farmers in Malaysia were analyzed from 235 respondents throughout Peninsular Malaysia using scale’s reliability, factor loading and hypotheses testing. Result showed that MLO and EO have greater positive impact to IC as well as farm performance. This paper contributed are on the conceptual model and the hypotheses development, particularly how MLO and EO give small farmers’ ability to innovate and implement it towards better farm’s performance.