Human Capital in Malaysian SMEs: HR Practices, Uniqueness, and Value

Human Capital in Malaysian SMEs: HR Practices, Uniqueness, and Value

Kenneth Cafferkey, Brian Harney, Pua Eng Teck
DOI: 10.4018/978-1-4666-4731-2.ch002
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This chapter explores Human Capital in Malaysian SMEs. Malaysia has placed significant policy emphasis on indigenous SMEs as a basis for achieving economic growth and competitiveness. This renders the human capital infrastructure of SMEs of critical importance. However, the reality is that there is little information as to the nature of HR practices and their impact in Malaysian SMEs. This chapter aims to fill this void by exploring descriptive findings from a unique sample of over 200 Malaysian SMEs. Drawing on the work of Lepak and Snell in particular, the chapter offers insights into human capital uniqueness and human capital value in the firms investigated. The performance and policy implications of the research are discussed and future research avenues outlined.
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Background: The Malaysian Context

Government Policy

The Malaysian government has a long history of planned economic development, namely through three critical policy plans; the New Economic Policy (NEP), National Development Policy (NDP), and National Vision Policy (NVP) (Ong et al., 2010). The present conceptualisation for economic development is contained in the recent ‘SME Master Plan’ (2012-2020). As a consequence of the Asian financial crisis of 1997, the Malaysian government has changed focus and recognised the value of the SME sector as a key means to insulate the economy from its previous vulnerability to external global shocks, in particular by reducing an overreliance on foreign direct investment (Ong et al., 2010; Ahmed et al., 2011). Allied to this, in aspiring to achieve a ‘developed nation’ standing by, or before, 2020 the Malaysian government has also refocused attention on the human capital requirements of the nation (Hashim et al., 2005). The SME Master Plan sets out six specific growth areas for SME development and performance improvement, one of which centres upon human capital development. The plan notes that the Malaysian workforce typically lacks job readiness, has low utilization of existing training, and typically receive non-competitive rewards and benefits. The government’s intention is to increase human capital levels and intensity across the SME sector to enable innovation as a key driver of enhanced economic growth across the economy. At a macro-level the government objective is to broaden the employment base and increase average per capital income in an attempt to achieve the status of a high income economy. At a more micro-level, however, very little is known about the actual in-firm processes which can potentially drive economic growth in Malaysia (Hashim et al. 2005). Similarly there is limited knowledge of the existing human capital levels or requirements of SMEs and how they may potentially help or hinder this objective (Garengo and Bernardi, 2007).

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