The mediating effect of strategic decision making quality on the relationship between internal and external perspectives and performance of traditional coffee shops

Abstract

Traditional coffee shops (TCS) represent a significant sector of the small and medium enterprise (SMEs) food services economy in Southeast Asia. Most of the Malaysian TCS are micro enterprises and therefore have low business sustainability due to low profitability and fierce competition in food service industry. However, knowledge about the determinants of food service business performance, particularly those related to the TCS in Malaysia is lacking. Despite TCS being a cultural heritage of the country, TCS proprietors are unaware of the performance determinants that could help to increase business sustainability. Thus, the purpose of this study is to identify the performance determinants of Malaysian TCS. This study advances the discussion in business performance by integrating entrepreneurial theories, including the resource-based view (RBV), the sustainability family business (SFB), the three circles (3Cs) and the dynamic capability (DC) to develop comprehensive performance determinants of TCS in Malaysia. This study categorises performance determinants into ten internal and three external perspectives. In addition, this study also investigates the mediating effect of strategic decision making quality on the relationship between performance determinants and TCS performance. A total of 250 TCS proprietors’ data were collected by using structured questionnaires. Structural Equation Modeling (PLS) was used as data analysis method used to examine the relationship between variables, as well as to test the mediator. Findings of the study revealed that three out of ten internal perspectives namely entrepreneurial characteristic, financing accessibility and marketing competency and two out of three external perspectives namely location, government agency and policy have the impact on TCS performance. In addition, strategic decision making quality has a mediating effect on the entrepreneurial characteristic, financing accessibility, and government agency and policy toward TCS performance. These findings not only revealed the performance determinants of TCS but extend the body of knowledge of entrepreneurship through understanding the mediating effect of strategic decision-making quality in business performance. This study also makes a contribution in extending existing models of business performance beyond firm’s resources and thus overcomes the weakness of the current business sustainability theoretical frameworks. Practically, the findings could deliver a useful message to policy makers and TCS entrepreneurs to place an emphasis on performance determinants in order to increase the sustainability of TCS. As the study also delivers a performance determinants framework which could be replicated, it is recommended that future research conduct a study on other segments of food services in Malaysia.