Abstract:

Innovation is an essential component of competitiveness. It is embedded in the organizational structures, processes, products and services within a firm. The objective of this study was to determine the relationship between innovation (Product, Process, Organizational and Marketing) and SMEs performance (Financial, Operational and Innovative). Innovation in the SMEs can improve the GDP or economy Malaysia. The formulated theoretical framework was empirically tested to identify the relationships between innovations and firm performance through the resource-based (RVB) approach. A total of 43 duly completed forms out of a total of 381 questionnaire survey forms e-mailed to the firms in the state of Johor were used in the data analyses through SPSS software for descriptive, correlation and linear regression analyses. It is found that the firm innovation have significant positive relationships with financial, operational and innovative performances. This is with the exception of marketing innovation which indicated no significant relationship with financial performance. Using linear regression analyses, the result indicated that firm innovation has a 39.4% influence on financial performance, 48.4% on operational performance and 57.5% on innovative performance. Firm innovation has a very strong positive relationship with firm innovative performance. SMEs should focus on organizational innovation to increase the firm financial performance.