Keywords

1 Introduction

SME has received much recognition as continue to the backbone in the development and economic growth of a nation (Che Mat et al. 2020; Prasanna et al. 2019). As a small enterprise, SMEs operate with a myriad of disadvantages such as financial constraint and lacking in high skilled human resources (Park et al. 2020). These flaws make it difficult for small businesses to conduct their operations properly, and they may skew their growth (Penrose 1959; Blackburn et al. 2018). A study by Cravo and Piza (2019) found that the lack of performance among SMEs is among others contributed by the lack of capital. Being the main players in economic activities, there were numbers of financial support made available by the government for SMEs. The financial support programs cover; soft loan, fixed capital financing and working capital financing which comprise of the starts-up project, expansion and rehabilitation are among others.

The studies presented thus far provide evidence that there are numerous support programs are provided by the government in supporting SMEs. The issue of SMEs’ performance becomes more critical in view of the fact that previous studies showed the government support were not attractive and perceived gave less impact on SMEs performance (Sciglimpaglia et al. 2013; Robson and Bennet 2000; Barry et al. 2014). This lead to low utilization of the services. Berry et al. (2006) argued that the frequency of utilization of support services give positive influence on SMEs performance. To further complicate, critic has also argued that government support services not only gave less effect, but to some extend gave negative effect on SMEs’ performance (Arshed et al. 2014; Lewis et al. 2007). Lewis et al. (2007) argued that the negative effect emerged when SMEs unable to implement the support given due to the lack of expertise. Overall, there seems to be some evidence to indicate that the effect of external support for SMEs on performance are mixed. Thus, with the mixed result from past studies and the role of entrepreneurial orientation, what are the effects of the government support services on SMEs’ performance and how entrepreneurial orientation moderates this relationship?

In view of all that has been mentioned so far this study applies resources-based view (RBV) theory with intends to fill the aforementioned gaps. From the RBV point of view, external support consists of sources that are able to build firms’ internal capability. The RBV also proposes that the availability of external support is meaningless without firm knowledge to exploit and make use of it (Kraaijenbrink et al. 2010). Thus, this study exploits the fact that the financial support services is one of the valuable resource that is able to exert significant impact on performance and entrepreneurial orientation as one of the variables that moderate the relationship between the usage of the financial support services and the firm’s performance. Thus, this study on the relationship of financial support services, entrepreneurial orientation and performance of SMEs may provide important insights into the effect of the financial support services and the role of entrepreneurial orientation on the SMEs performance.

2 Literature Review

A business support provider, according to Schaper and Vollery (2004) is someone who delivers one or more skills and knowledge in a field connected to business operations. According to Stanger (2004), a business advisor is an organization or an individual who provides support services either verbally or in written form in relation to the preparation of financial statements, tax compliance, law, financing, operation, and financial management. A business support adviser, according to both definitions, is someone who can offer advice to a business owner for the improvement of his or her company. A business support adviser also serves as a mentor and sells the idea to the company’s management (Berry et al. 2006). A business adviser, on the other hand, plays an essential role in bridging the knowledge gap in SMEs and accomplishing company objectives (Cravo and Piza 2019; Bennett and Robson 1999; Adamson 2000).

There are two categories of suppliers for business assistance: government-sponsored business support and private business support. The government, which is non-commercial in nature, and private consultants, who give their expertise for a fee, are the most common suppliers of business support services. Both parties offer a variety of services to help small business owners succeed. Berry et al. (2006), based on the previous literature pertaining to the sources of support for SMEs, grouped them into six areas of function: professional specialists, professional generalists, market contacts, social contacts, business associates, and government agencies. Watson (2010) argued that SMEs seek support from formal and informal suppliers. Formal suppliers are well-structured businesses that specialise in providing support services. Banks, solicitors, industry associations, external accountants, tax offices, and business consultants are among the participants. Informal networks, on the other hand, are made up of friends, family members, local councils, and industry participants or competitors. Support is not a primary business activity in informal networks. Without a set procedure, support can be delivered and gained informally. In summary, the suppliers of support services can be grouped into three broad categories: firstly, the services offered by the Government via various agencies; secondly, the private sector; and thirdly, quasi-government institutions. Obviously, the government’s roles in supporting SMEs’ activities are of paramount importance, especially in developing countries. Concerning the vital roles of the Government in maintaining economic and social stability, the study focuses on the financial support services sponsored by the Government to assist the development of SMEs in Malaysia.

2.1 Financial Support Program

Financing is a major issue for SMEs, particularly during the start-up period. The ability to acquire funding contributed to the SMEs’ failure (Moha Asri 1999; Ropega 2011). Thus, external participation in the form of financial facilities is much needed by SMEs. The positive impact of financial assistance to SMEs business is widely discussed and supported by a number of studies. Xiang and Worthington (2016) posit that the financial support provided by the government has positively influenced the firm’s performance. The financial position is of paramount importance to SMEs’ operation is supported by a number of researchers in other countries. According to Bohatá and Mládek (1999), one of the impediments to SMEs’ growth is a lack of financing to support business expansion. This finding is supported by Park et al. (2020) who found that the financial obstacle, referring to difficulties accessing financing and the high cost of financing has become a major threat for growing SMEs, beside the tax burden. The issue of the ‘finance gap’ among SMEs, particularly regarding bank finance, and the action taken to close the gap have been acknowledged by academics and practitioners (Rahman et al. 2016).

The government is cognizant of the challenges that SMEs confront, particularly in raising cash to fund their day-to-day operations. A variety of working capital financing financial products are devised and offered by various agencies and government-related organisations to assist SMEs in managing their finances. (Bin Yusoff and Zainol 2012) The products which group according to purpose of financing which are available in the market among others, are financing for acquisition of land and building, acquisition of machinery and modernisation, working capital financing and export financing. However, there were mixed results about the effects of the government support services on SMEs performance. Therefore, this study examines the usage of financial support programs provided by the government among SMEs and its impact on their performances.

2.2 Entrepreneurial Orientation and Performance

Entrepreneurs need a collection of competencies in order to manage their business resources and all the business functions effectively (Bin Yusoff et al. 2018). Entrepreneurial orientation explains about entrepreneur’s behaviour in developing their businesses. That way, entrepreneurs with greater entrepreneurial orientation are capable to deal with the dynamic and challenging business environment. In general, entrepreneurial orientation refers to the entrepreneurs ability to run business and outline strategies pertaining to innovativeness, pro-activeness and risk taking (Bin Yusoff et al. 2018; Keh et al. 2007; Kumar et al. 2018; Rauch et al. 2009; Wiklund 1999; Zahra 1993; Alvarez-Torres Francisco et al. 2019; Baron and Kenny 1986; Lean et al. 1998; Ramsden and Bennet 2005; Kitchenham and Pfleeger 2002; Chin 2010; Henseler et al. 2009; Hair et al. 2011; Fornell and Lacker 1981; Tenenhaus et al. 2005; Henseler and Fassot 2010; Cohen 1988; Xiang and Worthington Andrew 2017; Krasniqi 2007; Krasniqi 2007; Mole 2016; Kamal Abu Amsha 2017). Entrepreneurial orientation is viewed to have strong influence on the performance of a firm. Researchers argue that entrepreneurs or firms with higher level of entrepreneurial orientation is superior than others who do not (Rauch et al. 2009; Wiklund 1999; Zahra 1993; Alvarez-Torres Francisco et al. 2019). Therefore, this study viewed entrepreneurial orientation interacts with utilisation of the financial support and firm’s performance. It is assumed that the presence of entrepreneurial orientation as third variable could affect the zero-order correlation between two other variables which are able to change the effect on causal relation between two variables (Baron and Kenny 1986).

It is also important to note that, the previous studies reviewed fail to address clearly whether the SMEs examined have the desire to grow or having high entrepreneurial orientation. As argued by Lean et al., (Lean et al. 1998) that few SMEs aspire to grow further but, many hoping for survival. So that, by excluding the role of entrepreneurial orientation in the study, existing research failed to clarify whether the impact of the financial support on performance were caused by low utilisation of the services or lack of entrepreneurial orientation (Berry et al. 2006; Bennett and Robson 1999; Ramsden and Bennet 2005)? So, one of the objectives of this study is to take into account, the presence and the influence of entrepreneurial orientation within the firm when measuring the effect of the financial support to SMEs’ performance (Fig. 1).

Fig. 1
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Theoretical framework

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3 Methodology

This study adopted a cross-sectional design with the target population, comprising of SMEs in Malaysia, and measured the relationship between financial support services, and entrepreneurial orientation, with the influence of entrepreneurial orientation as a moderating factor. The study used scales of assessment that had been established, tested, and used in prior studies to determine the impact of the factors on performance. This method was extensively used by researchers while creating survey instruments. According Kitchenham and Pfleeger (Kitchenham and Pfleeger 2002) this approach has two significant advantages: the instruments’ trustworthiness based on validity and reliability testing, and the comparison of new results to earlier research’ results.

The closed ended questionnaires used in this study and was distributed via mail among SMEs in Malaysia. There were 1,500 respondents selected as sample from 14 states in Malaysia and utilised a random sampling method. There were 3,832 sets of questionnaires were sent to SMEs. The instruments was developed by adapt and adopt from previous literatures. All measurements were using 5 point Likert Scale which 1, represent strongly disagree and 5 refers to strongly agree. 728 questionnaires were returned and only 670 were accounted for used due to incomplete responses. The link between financial support services and performance as the moderating influence of entrepreneurial orientation was investigated using the Structural Equation Modelling-Partial Least-Square (SEM-PLS) technique. Apart from measuring data quality through the measurement model, the goal is to maximise the explained variation in the dependent constructs.

4 Findings

The largest respondents were from state of Selangor which represents 15.1% of total respondents followed by Federal Territory (12.2%), Johor (12.2%) and other states (>10%). The two largest respondents who used the financial support were from Selangor (18.4%) and Federal Territory (15.7%). The large responses from the two states are due to main business activities are concentrated in the central region of Peninsular Malaysia which the states are located (Table 1).

Table 1 Total respondents
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63% of the respondents were aged between 36 years old to 55 years old. 67% respondents were male and 33% were female. 22% of the respondents have first-degree qualifications, 9.5% master degree, 1.5% PhD and the balance 67% with Diploma, Certificate and other qualifications. 78% are owners and the other 22% are Chief Executive Officer of the firms (Table 2).

Table 2 Respondents demographic profile
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In terms of business experience 21% respondents having less than 5 years of experiences, 27% (10 years), 22% (15 years), 19% (20 years) and 10% of the respondents having more than 20 years of business experience. Only 10% of the respondents are under medium-sized firm, 55% is under small-sized and 35% is under micro-scaled firms. More than half of the respondents are located in urban areas (67%). Finally, 46% of the respondents are involved in services sector, 37% in manufacturing and the remaining 17% are in construction (Table 3).

Table 3 Respondents organisation profile
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4.1 Multivariate Analysis

The full model applied in this study comprises of one construct for independent variables, one construct each for moderator and dependant variable.

Measurement Model Results.

As a result of the cross-loading computation, no items in one construct loaded lower than items in another, suggesting that the measures are conceptually distinct (Chin 2010) (Table 4).

Table 4 Outer model loadings and cross loadings
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The Composite Reliability coefficients of all constructs were exceed 0.9, its signify that the items are reliable (Henseler et al. 2009) (Table 5).

Table 5 Reliability and validity test
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Convergent validity test was performed to assess items used to measure constructs are in agreement. For this study, both CR and AVE were exceeded 0.6 and 0.5, respectively as shown in the Table 6 (Hair et al. 2011).

Table 6 Measurement model
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Discriminant validity was accessed by examining correlations between the measures of potentially overlapping constructs. The results in Table 7 demonstrated that all constructs had acceptable discriminant validity, as the squared correlations were smaller than the average variance retrieved thus, met the Fornell and Lacker (Fornell and Lacker 1981) criterion.

Table 7 Discriminant validity of the constructs
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Goodness of fit (GOF) is also known as the geometric mean of the average communality and the average of R2 is to test the overall model fit (Tenenhaus et al. 2005). The GOF result 0.547 which is exceeding 0.5, therefore, the model has predictive relevance and performs well (Table 8).

Table 8 Goodness of fit
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Structural Model Results

The result in Table 9 indicates all hypotheses (H1 and H2) were accepted. The R2 value for soft performance and hard performance were 0.360 and 0.335 respectively. These indicated that 36.0% of the variance of soft performance and 33.50% of the variance of hard performance can be explained by financial support services. In the case of the present study, the value for both performance lie in between moderate and substantial (Chin 2010).

Table 9 Path coefficient and hypothesis testing
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Moderating Effect of Entrepreneurial Orientation

This section presents the moderation analysis applying product-indicator approach. This approach was applied to detect the moderation effect of EO on the relationship of independent variable and dependant variable; performances.

This study follows the three steps approach as suggested by Baron and Kenny (1986) in order to test the moderation effect. In step 1, the direct effect of usage of financial support services on performance (a) was estimated. The result shows that there is a significant relationship between the usage of financial support service and performances (t = 26.303 and 24.589, p < 0.001). In step 2, the direct impact of the moderating variable on criterion variable was measured. The result shows that there is a significant relationship between moderating variable and criterion variable (t = 6.753 and 7.391, p < 0.01). In Step 3, to examine the moderating effect of EO on the relationship, the usage of financial support services (predictor) and EO (moderator) were multiplied to create an interaction construct (financial support services × EO) and to predict continuance intentions (Chin 2010; Henseler and Fassot 2010). In this case, usage of financial support services comprises of seven items and six items of EO thus, the interaction construct represents a total of forty two items (7 × 6). The AVE and CR of this interaction variable are 0.752 and 0.924, respectively, which exceeds the minimum cut-off value (see Table 10) (Fig. 2).

Table 10 Hierarchical regression result
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Fig. 2
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A model with a moderating effect (c)

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In summary, according to Henseler and Fassot (2010), the moderator is said to be significant if the interaction effect is substantial. For the present study, the β for interaction is 0.587 which is not significant at p < 0.05. However, test on size effect indicates a moderating effect presence at small interaction (see Table 11).

Table 11 Effect size (f2)
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Table 11 shows that the size of the moderating effect is 0.064 which is categorised as small (Cohen 1988). Furthermore, the result of beta changes is also not significant (β = 0.063, t = 0.587). Therefore, EO does not moderate the relationship between the usage of financial support services and hard performance. Thus, statistically H2a was rejected. However, the moderator’s role should not be neglected even if the interaction is small. Chin (2010) states that;

“Even a small interaction effect can be meaningful under extreme moderating conditions, if the resulting beta changes are meaningful, then it is important to take these conditions into account”.

Thus, the entrepreneurial orientation as a moderator in the present study is considered important and have positive impact plus it is able to influence the firm’s performance. The moderating effect is small but should not be neglected.

5 Conclusion and Recommendations

In general, the results fully support the concept of external resources and firms’ performance in resource-based theory, which claims that firms’ resources are the determinants of their performance (Penrose 1959). The result also indicated that entrepreneurial orientation failed to influence significantly the relationship between the usage of the financial support services and the performance. From the theoretical point of view, supposed entrepreneurial orientation positively influenced the performance. In other words, firms that possessed higher entrepreneurial orientation were inclined to perform better than others. However, this study found that entrepreneurial orientation did not significantly influence the relationship between the usage of the service and the performance.

This study found that the usage of financial support services by the Government has a significant positive effect on SMEs’ performance. This result indicates that the usage of the services is able to increase SMEs’ performance. The positive impacts of the financial support services of the Government reflect the success of the agencies in assisting SMEs to manage their business effectively and efficiently. It is argued that financial support is crucial for SMEs. The ability to fulfil financial requirements by constantly seeking external support would ensure the success of SMEs. Based on the result of this study, financial support is importance for SMEs’ business activities. Without the right and proper financial support from the Government, SMEs’ growth would be impeded. In contrast, to some extent, inadequate financial support can also contribute to the failure of SMES (Xiang and Worthington Andrew 2017). Krasniqi (2007) and Mole (2016) argued that inadequate financing and tax burdens are among the factors that slow down SMEs’ growth. This implies that the current financial support services provided by the Government have successfully acted as a catalyst for growth and overcome the critical barriers to growing SMEs. The most important finding from the result of this study is that despite the failure of the market mechanism even in developed economies to address the financing needs of SMEs (Krasniqi 2007), the Malaysian government agencies have effectively delivered the services and SMEs have executed them. The usage of these services has further enhanced the adequate financial position of SMEs. As mentioned earlier, an adequate financial level is a crucial factor for SMEs’ success. For that reason, the availability and usage of financial support have strongly influenced SMEs’ performance. Broadly speaking, the government financial support services have successfully met the SMEs’ need and supported their growth.

The result of this study also indicates that the level of SMEs’ soft skills in terms of the ability to reduce cost, the improved ability to manage, increased networking, and increased business information is significantly related to the usage of the financial support services provided by the Government. The ability to improve soft skills, then has impacted on the achievement of hard performance. For instance, by reducing costs, firms may experience a higher level of productivity, which means more chances to gain higher profit. Besides that, the capability to manage effectively will avoid working on uneconomic activities, thus saving a great deal of time, which will further create a positive impact on performance.

This study provides evidence highlighting the importance of the usage of financial support services supplied by the Government to SMEs’ performance. The SMEs that successfully secured financial support have experienced an improvement in performance achievement. This provides wider chances to fulfil the role of creator of new employment.

Entrepreneurial orientation did not work well as a moderator in the relationship between financial support services and firm’s performance, possibly due to the financial products offered by the government agencies are inflexible. Apparently, the variety of the products are very limited. For instance, most of the financial products offered by the various numbers of business support providers are similar which concentrated to the basic financing requirement such as working capital and fixed asset financing. These products are normally to fulfil basic business needs of SMEs who are the majority operating as micro-sized enterprise. Thus, the perception about the effect of the financial support services among SMEs with low entrepreneurial orientation and high entrepreneurial orientation were almost similar as similar products offered to both groups which may look for other type of financing. Perhaps, high entrepreneurial orientation firms which are more innovative and aggressive need other than basic financing. They may eyeing for flexible and customize product to accommodate their requirement for innovation activities. The restriction of the Banking and Financial Institutions Act of Malaysia limits the variety of financial products offered by non-banking institutions, in this case the suppliers of financial support services. There are no significant difference between high entrepreneurial orientation and low entrepreneurial orientation SMEs in terms of frequency of usage of the services. In terms of a direct relationship, financial support services have a significant positive relationship with firms’ performance. However, the firms’ entrepreneurial orientation clearly did not significantly influence the relationship.

Theoretically, the finding reflects that the impact of the usage of the financial programs is not significantly influenced by the presence of entrepreneurial orientation. This implies a positive impact of the services on firms’ performance contributed by the services solely without the intervention by entrepreneurial orientation. The findings also indicate that despite the critiques about the weaknesses of government support services, they were successfully implemented and contributed to the success of the SMEs. The success of the implementation was not influenced by the degree of entrepreneurial orientation among the SMEs. From another point of view, this finding discloses the degree of importance of financial support services to SMEs. Every business, disregarding the characteristics of the firm (entrepreneurial orientation), size, and type of business, is in dire need of external financial support. SMEs believe that without financial support their performance will be affected. This means to say that low entrepreneurial orientation SMEs are also users of the services and recognize the importance of these services for their business.

Evidently, the issue of performance of SMEs and the role of financial support services in supporting their businesses is not much related to the level of entrepreneurial orientation of the firms. The issue that came into view was the effectiveness of the financial support services which may refer to the content of the services which are fit to SMEs need and timely delivered. In this study, the financial support services is perceived gave significant effect on the firm’s performance when SMEs believed that the services practically fulfilled the basic business financing requirements of SMEs. To conclude, this study highlighted the significant effect of the financial support provided by the government to the SMEs’ performance. SMEs who frequently use the services have better performance compared to those who do not. Furthermore, the role of entrepreneurial orientation has no significant effect in moderating the relationship between the financial support services and SMEs’ performance. However, the role of entrepreneurial orientation should not be side-lined as it might have a negative impact in the long run.

This study is not without limitations despite significant contributions. The measurement of the utilization of the financial support services did not cover all the types of services available for SMEs in the market since this would require expense and time. This study only focused on major services and those mostly known to and popular with SMEs. Future study could examine a single type of sector and different sizes of firms (micro, small, and medium) to confirm the results’ similarity or differences. With the positive impact of financial support services on the SMEs’ performance, it is essential to promote the usage of the services among SMEs further. Therefore, future studies could explore the antecedents to the usage of financial support services. This will provide an insight into the potential factors that influence the usage of the services.