Measuring perceptions of business challenges: the case of Malaysian SMEs

This paper develops and applies a survey instrument to discover

what small and medium sized enterprises (SMEs) in Malaysia see as their

primary business challenges, using a sample of 138 firms. An exploratory

factor analysis yields five key factors: respondents’ perceptions of

government policies, human capital, availability of infrastructure,

business competition, and financial issues. Reliability and item analyses

provide support for the internal consistency of these factors and the

discriminatory power of survey items that constitute the factors. In

particular, this study finds that perceptions of government policies and

infrastructure availability have the highest mean scores, suggesting that

these factors are viewed as the primary business barriers. On the other

hand, respondents did not perceive financial issues as being a major

barrier.

A key finding from the empirical results presented is that the

Malaysian government must play a pivotal role in the further development

of the SME sector. However, this will require considerable improvement

in a number of policy areas as well as a change in emphasis if the SME

sector is to make a substantive contribution to the country attaining

developed economy status by 2020.