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RESEARCH METHODOLOGY

POPULATION FRAME
The unit of analysis in this study is organisation. Before determine the number of
samples, the list of the population needs to establish first. The lack of a comprehensive up-todate database of manufacturing SMEs posed a problem when selecting a sample population,
representing a problem often cited by other researchers (Abdul Hamid et al., 2003; Ahmad,
2007). In order to overcome this obstacle, the sample of manufacturing firms was compiled
through the following sources;1) SME Corporation Malaysia
2) Federation of Malaysian Manufacturers (FFM) and
3) Malaysia External Trade Development Corporation (MATRADE)
The list was then analysed and a new list was compiled to only include manufacturing
firms. The firms were then classified as manufacturing-related services or agro-based industries,
which have either of the following;1) More than 5 and fewer than 150 full-time employees or
2) An annual sales turnover between RM250,000 and less than RM25 million
Additionally, the following criteria were used in sample selection;1) The contact person in the directory is the owner-manager of the firm
2) The full name of the owner has been stated in the directories
3) The firm must been operating a minimum of six years, and
4) The firm is not a franchise-based. This is due to the lack of control over their business
and tailored to the requirement of their parent company
The sectors included in the study are;1) Textiles, apparels and leather
2) Food and beverages
3) Wood-based products
4) Plastic-based products
5) Rubber-based products and

6) Electric and electronics product


SAMPLE AND SETTING
In this study, stratified random sampling was used to select the sample. The total
population comprised of 5576 firms collected from the three sources. Using the table of sample
size provided by Krejie and Morgan (1970), it was determined that the sample size should be
357. All the 5576 companies were then categorised according to their geographical zones
(North, South, East, Central and West). The stratification does not involve the sector but focus on
segregation of states based on region. This has been applied by prior researchers (Ismail, Ishak,
Karim and Ismail, 2010). Then, the random sampling was used to select the sample.
To determine the number of sample in each region, the following calculation was used.
Number of sample = number of firms in each region x number of sample
number of population
For example, to determine the number of sample for the Northern region, firstly, all firms
in Perlis, Kedah, Pulau Pinang and Perak were summed and exhibit 1731 in total. Then, the total
number of firms (1731) was divided by the total number of population (5576) and multiplies by
the required sample number (357). As a result, 111 firms were acted as a sample number for the
Northern region. The same procedures were being applied to calculate the number of sample for
others regions. The calculation in this study was deemed appropriate as other researchers have
not published extensively the way they determine the number of sample in each region (Abu
Bakar, 2007; Ismail et al., 2010).
The numbers of representatives of manufacturing SMEs are shown in Table 4.1. The
total population and sample are 5576 and 357 respectively. The largest representation of SMEs
was from the Western region with a total of 129 companies as this region is known to have the
highest number of SMEs with many companies operating in the Klang Valley. This is followed
by the Northern, Southern and Central region by 111, 59 and 45 companies respectively. The
Eastern region which comprised of Sabah and Sarawak accounted for the least, with a total of
only 13 companies.

TABLE 4.1
Sample Calculation in Each Region
Regions
North

States
Perlis
Kedah
Pulau Pinang
Perak
Selangor
Negeri Sembilan
Kuala Lumpur
Melaka
Johor
Pahang
Kelantan
Terengganu
Sabah
Sarawak

West
South
Central
East
TOTAL

Number of
Firms
30
316
1036
349
1148
190
673
98
824
295
130
273
89
125
5576

Total number of
Firms

Number of sample

1731

111

2011

129

922

59

698

45

214

13

5576

357

INSTRUMENTATION
The current research utilised mailed questionnaires and self-administered questionnaires
to obtain data from the sample companies in Malaysia.
Mail Questionnaires
In order to collect data which was geographically dispersed in both Peninsular Malaysia
and Borneo,15 this study used mailed questionnaires as suggested by Sekaran (2003). This
method is considered effective as it limits transportation cost in data collection.
The benefits of mailed questionnaires have also been highlighted by previous scholars
(Aaker et al., 2007; Awang, 2011; Czaja and Blair, 1996; and Cooper and Schindler, 2001). The
authors identified the benefits of mailed questionnaires as follows;1) Represents a suitable medium to engage in sensitive questions
2) Cost effective when compared to personal and telephone interviews
3) Does not require the interviewer to be present
4) Respondents have the option to complete it in their own time
5) Incentives may be used to increase the response rate
15

Borneo includes Sabah and Sarawak states.

6) Requires minimal staff, and


7) Suitable for respondents who cannot be reached by phone
Due to cost constraints, the study did not follow steps (7), (8) and (9). The follow-up mail
was only sent once which was four weeks after the initial questionnaire. In addition, fifty
postcards were also posted after sixteen weeks after the initial questionnaire.
Self-administered Questionnaire
The second method used in data collection was the self-administered questionnaire.
Bernard (1994) suggests that technique is preferred by the researchers compared to personal
interview when;1) Dealing with literate respondents
2) Confident of getting a high response rate, and
3) The nature of the questions do not require a face-to-face interview
Awang (2011) also pointed out the advantages of self-administered questionnaires which
are listed as follows;1) Busy respondents may complete the questionnaire in their leisure time without
interviewer interference, and
2) The response rate is high as the researcher explains and convinces the respondents to
participate in their research
In this study, the self-administered questionnaire was only gathered from the Klang
Valley and Pahang with respondent consent prior to the researcher sending them questionnaires.
Previous research had adopted this method in the Klang Valley to boost response rates (Mat Nor,
Ibrahim, Haron, Ibrahim and Alias, 2012). A stamped return envelope is attached to the
questionnaire.

OPERATIONALISATION OF VARIABLES

Each variable in this proposed research will be evaluated using measurements previously
developed by other authors. The measurements have been shown to exhibit acceptable levels of
reliability and validity.
The self-report survey technique was used to gather data on independent variables such
as network size, network activity, network density and network centrality. The survey-based
study of the social network used the name generator technique to assess the egos network
structure. This technique allows the ego to list down the alters in their social network.
Business Performance
The proposed study incorporates both financial and nonfinancial business performance
aspects.
1) Financial Business Performance
In terms of financial indicators, the items were adopted from Ahmad (2007), Chandler
and Hanks (1993), Dess and Robinson (1984) and Robinson (1982) by using the subjective
measure. The respondents were asked to rate the items using a 5 points Likert scale where 1
point meant that the firm experienced in decreasing rate whilst 5 points signified that the firm
experienced increasing significantly to the items given.
The sample items are as follows;1. Sales growth
2.

Net profit growth

3.

Market share growth

4.

Cash flow growth

2) Non-Financial Business Performance


The modified non-financial business performance items were adopted from Lee and Lee
(2007) and Lee, Lee and Wu (2010). The items were rated using the 5 points Likert scale. In this
scale, 5 points signify strong agreement whilst 1 point shows that the entrepreneurs strongly

disagreed. Both researchers reported a high internal consistency alpha of 0.94 in their research.
The items are as follows;1. My firm is successful in increasing employee productivity (employees productivity)
2. My firm is successfully in increasing the yield of products (product quality)
3. My firm is successful in keeping the consistency of product quality (product quality)
4. My firm is successful in cutting production time of a product (product delivery)
5. My firm has the ability to produce product variety (product flexibility)
6. My firm has the ability to increase production rates quickly (product flexibility)
Table 4.3 compiles the item numbers in the questionnaire according to the dependent
variables and the researchers attributed to developing these variables.
Summary of Item Numbers and the Dependent Variables Developed by Previous Researchers
Variable Name
Financial Business Performance

Sources
Chandler and Hanks (1993), Robinson
(1982) and Dess and Robinson (1984)

Non-Financial Business
Performance

Lee and Lee (2007); Lee, Lee and Wu


(2010)

Variable Name
Management Skills

Sources
Lerner and Almor (2002), Lerner et al.
(1997); Lerner and Haber (2001)

3) Management Skills
Management skills were measured using eight items. The modified items were adopted
from Hisrich and Brush (1984). The variable is measured using the 5 points Likert scale ranging
from 1 which signifies poor to 5 which signifies excellence. Lerner and Almor (2002) had used
the variable and indicated the alpha to be 0.74 whilst Lerner et al. (1997) indicated the reliability
of alpha to be 0.74. Lerner and Haber (2001) showed the internal consistency to be 0.70.
The following are the items for measuring management skills;-

1. Finance
2. Dealing with people
3. Marketing
4. Sales
5. Idea generation
6. Product innovation
7. Business operation
8. Planning
Respondents Profile
1) Entrepreneurs Age
The age of the entrepreneurs were categorised by using an ordinal scale; 1 = 25 or below,
2 = 26 to 30, 3 = 31 to 35, 4 = 36 to 40, 5 = 41 to 45 and 6 = above 45.
2) Gender
Gender variable was measured using a nominal scale; 0= female, 1= male.
3) Education Level
The level of education was categorised into SPM, STPM, certificate, diploma, bachelor
degree, Masters degree and Ph.D.
4) Work Experience
Work experience was measured by the following scale; 1 = 5 years and below, 2 = 5 to 10
years, 3 = 11 to 15 years, 4 = 16 to 20 and 5 = above 20 years.
Data analysis.
1. Reliability assessment
This study defines reliability as measurements for a particular test that are repeatable and
produce equivalent results even when distributed amongst different people (Nunnally, 1970). It
implies that the measurement of variables should consistently produce results that are repeatable.
Cronbachs alpha is a perfect measure of reliability.

The closer the Cronbach Alpha is to 1.0, the more reliable the items are. Sekaran (2003)
stated that reliability levels of less than 0.6 are weak, the range of 0.6 to 0.7 is acceptable and
that those above 0.8 are good. Scholars have suggested that a reliability measure of at least 0.7 is
sufficient for research (Hair et al., 2010; Sekaran, 2003).
2. correlation analysis
Correlation analysis was conducted to determine the strength of association between two
variables using the Pearson product-moment test. Piaw (2008) provides guidelines for correlation
coefficients as follows;
r= 0.91 up to 1.00 or r= -0.91 up to -1.00 very strong effect
r= 0.71 up to 0.90 or r= -0.71 up to -0.90 strong effect
r= 0.51 up to 0.70 or r= -0.51 up to -0.70 moderate effect
r= 0.31 up to 0.50 or r= -0.31 up to -0.50 weak effect
r= 0.10 up to 0.30 or r= -0.10 up to -0.30 very weak effect
r= 0.00

no correlation

Pallant (2007) suggested that a correlation of 0 shows no correlation. The perfectly


positive correlation refers to a correlation value of 1.0 while a correlation of -1.0 signifies a
perfectly negative correlation. The Pearson product-moment is suitable for measuring the
strength of associations between the variables in this study (Sekaran, 2003).
3. HYPOTHESES TESTING
In analysing the hypothesis, the simple regression method will be employed. The simple
regression will be used to analyse the direct relationship between the independent variables and
dependent variables.

Sample of questionnaire.

Management skills.
Please circle one of the following responses to indicate your management skills level based on
the criteria given:
1
Poor

1
2
3
4
5
6
7
8

2
Fair

3
Good

4
Very Good

Management Skills
Finance
(capital, forecasting and budgeting)
Dealing with people
(managing workers, development and training)
Marketing
(marketing research)
Sales
Idea generation
Product innovation
Business operation
(managing inventory, day-to-day operations)
Planning
(planning for business strategy)

5
Excellent

Scale
3 4

1
1
1
1

2
2
2
2

3
3
3
3

4
4
4
4

5
5
5
5

Business performance
a) Financial business performance.
Please circle one of the following responses to indicate your companys business performance
growth for the past 12 months based on the criteria given.
1
Decreasing

1
2
3
4

2
Holding
its own

Business Performance
Sales growth
Net profit growth
Market share growth
Cash flow growth

3
Increasing
slightly

4
Increasing moderately

5
Increasing
significantly

Scale
1
1
1
1

b) non-financial business performance

2
2
2
2

3
3
3
3

4
4
4
4

5
5
5
5

Please circle the answer to indicate your agreement and disagreement with each of the following
statements.
1
Strongly
Disagree

1
2
3
4
5
6

2
Disagree

3
Neutral

4
Agree

Business Performance
My firm is successful to increase employee productivity
My firm is successful in increasing the yield of products
My firm is successful in keeping the consistency of product quality
My firm is successful in cutting production time of a product
My firm has the capability to produce product variety
My firm has the capability to increase production rate quickly

5
Strongly Agree

1
1
1
1
1
1

2
2
2
2
2
2

Scale
3
3
3
3
3
3

4
4
4
4
4
4

5
5
5
5
5
5