Competitive Advantage, Learning Orientation, & SMEs in Malaysia

This paper critically assesses the influence of competitive advantage and strategic orientation on the performance of Small and Medium Enterprises (SMEs), specifically accounting firms in Malaysia, by reviewing an article by Louis Martinette and Alice Obenchain-Leeson. It discusses the importance of SMEs for economic growth, their innovation potential, and the barriers they face. Drawing upon the Resource-Based View (RBV), it emphasizes the role of internal resources and market orientation in achieving a competitive edge. The paper also examines the Malaysian accounting service sector, the significance of learning orientation, and the relationship between market orientation and business performance, highlighting the need for SMEs to embrace innovation and customer retention strategies to improve their business environment.

Running head: GLOBAL ENVIRONMENTS AND MANAGEMENT TRENDS
Global Environments and Management Trends
Name of the Student:
Name of the University:
Author note:

1GLOBAL ENVIRONMENTS AND MANAGEMENT TRENDS
Introduction
When recognising the importance of the small and medium-sized enterprises (SMEs)
for the economic growth and development of a country and their potential of providing job
opportunities to their nearby societies, particularly in the rural areas many researchers have
showcased their interest in studying the success factors along with the failure factors of these
SMEs in gaining competitive advantage. According to some researchers like Rua, Franca and
Fernandez (2018), the key determinants of the SMEs for gaining competitive advantage is
their potential of developing rare products and services and their skill of flexibility in the
process of adoption of new technologies with the growing and changing trends. This suggests
that the SMEs need to get involved in the innovation process for gaining competitive edge in
the market place. On the other hand, researchers like Sawang, Parker and Hine (2016), have
claimed that the continuity of the activities of innovation were all constrained because of the
fact that the SME firms are small. They have opined that small companies are facing several
barriers in their process of innovation and these barriers include the shortage of internal
funds, insufficient skills of management, shortage of labour skills and knowledge and the
shortage of market access. The earlier studies in relation to the competitive advantage and
business performance mainly focused on the SMEs that are engaged in the
internationalisation and trades. Those studies were carried out within the medium and large
enterprises and the companies under these segment have very strong financial resources and
at the same time, are well-equipped with ample of infrastructure for supporting the activities
of innovation to support positive business performance. Notwithstanding this fact, only a
limited empirical studies have successfully focused on the relationship between competitive
advantage and business performance in the other local SMEs in Malaysia despite of their
increasing contribution.
In Malaysia, studies on how competitive advantage influence the business
performance of the have been conducted for the hotel industry and for the wood industry.
Study of the relationship between competitive advantage and business performance in the
accounting service SMEs is still not conducted, although this industry has contributed
significantly in the economic growth of the country. This paper is going to elaborate on
reviewing an article by Louis Martinette and Alice Obenchain-Leeson named- “How
Competitive Advantage Moderates The Learning Orientation/ Business Performance
Relationship”. The main objective of this paper is to critically assess the effect or influence of
competitive advantage and strategic orientation on the performance of the SMEs, more
specifically, the accounting firms in Malaysia by means of reviewing this article and linking
it with the Malaysian SMEs.
Discussion
Critical assessment of the theoretical and research literature
SMEs and innovation
SMEs can be defined as the manufacturing enterprises or firms that give the
customers with the services that are related to the manufacture of sales turnover not more
than RM50 million. These firms employ full time employees and workers but not more than
200 in total. According to Aziz and Samad (2016), SMEs are defined as “an engine of
innovation and growth and (2) they help reduce poverty because they are labour-intensive

2GLOBAL ENVIRONMENTS AND MANAGEMENT TRENDS
and thus stimulate job growth, but (3) they are constrained by institutional and market
failures”. However, as per the Resource Based View (RBV), all the assets, capabilities and
characteristics that a firm possess along with the knowledge and information etc. are
controlled by the firm and they enable it in conceiving of and implementing the strategies that
will improve its effectiveness and efficiency (Kull, Mena & Korschun, 2016). This RBV
depends on the belief that the competitive advantage does not relied on the market and the
structural characteristics of the industry, but on the superior internal resources that a firm
possess. According to Ferlie et al. (2016), a firm is said to perform better and have
competitive advantage if it is potential enough for offering quality products at lower prices
than its competitors and is able to offer the customers the best possible services. To sum up,
the idea of resources is the centre of this theory that suggests that resources have that unique
and durable characteristics help the firms in achieving a competitive edge.
Since last three decades, market orientation is considered to be one of the other forms
that has occupied the key stage of the theory and the practise of marketing strategy. It is only
recently that researchers have conducted a theory of the consequences and the antecedents of
the market orientation process and have developed a valid measure of the construct and have
tested its effect on the performance of the business. According to the recent studies, there is a
positive relationship in between the business performance and market orientation. However,
there are some scholars as well, who have suggested that the competitive environment could
help in moderating this relationship in between these two (Story, Boso & Cadogan, 2015).
The study by Chen et al. (2015) have examined the impact of the learning orientation on the
business performance in terms of pure service, particularly the public accounting service
companies. They have investigated how the competitive environment influence the strength
of the market orientation performance relationship and whether it can affect the focus of the
external emphasis within a market orientation, which means, higher emphasis on the
customer analysis in relation to the competitor analysis, or vice versa, within a particular
magnitude of market orientation performance relationship.
Malaysian accounting service firms
The accounting service firms and profession in Malaysia is regulated by the MIA
(Malaysian Institute of Accountants) by means of powers that are conferred by the
Accountant Act of 1967. It is an agency that is under the Ministry of Finance and it reports to
the Accountant General Office (Adapa & Sheridan, 2019). It is to note that the Malaysian
government and stakeholders of the profession have acknowledged that accountancy is one of
the significant areas where Malaysia is notably under-served and the private and public
sectors are required to ensure that the demand that is driven by the steady and strong
economic growth of Malaysia is met. More than 33,000 members have been registered with
the MIA as per the reports of (Haji-Abdullah, Othman & Marzuki, 2017). As of the year
2015, there were about 1407 number of firms that offered auditing services and the other 836
firms were providing other accountancy services to the customers. It is to mention that this
industry have given job and employment to more than three lakhs Malaysian public is
regarded to be a key sector of interest for most of the youths. It has also contributed to the
increasing economic growth and development of the country in recent years.
Competitive advantage and learning orientation

3GLOBAL ENVIRONMENTS AND MANAGEMENT TRENDS
Organisations all over the world are continuously searching for strategies for gaining
and sustaining competitive advantage. The contemporary turbulent business environment is
rendering some conventional strategies absolutely obsolete. In this scenario, companies need
to update and enhance their skills, knowledge, resources and capabilities for surviving in the
market and grow further. Effective business strategy for improving and sustaining
competitive advantage of a firm and its performance is all about having high organisational
learning orientation as per Noe et al. (2017). It is to note that learning orientation refers to the
tendency of a firm to create and apply its knowledge and skills in the firm. According to
Obeidat et al. (2016), it is a very important antecedent of the orientation of knowledge
management. It can be referred to as a set of values that are exhibited by a firm that
demonstrate that the company is possibly to develop a culture of learning within itself. It is to
note that one of the most important characteristics of the learning oriented companies is that
they foresee the market changes and the environmental changes and make adjustments
accordingly.
According to Donate and de Pablo (2015), learning organisation refers to the manner
in which the companies regard their environment both internally and externally in their very
own interests. It can be said that it is the extent to which a company gains skills, information
and the required knowledge for the creation of value in it. AI-Somali, Cholami and Clegg
(2015) have opined that learning orientation is the process in which organisations obtain and
disseminate the knowledge regarding their competitors, customers and the market changes for
creating new services, which are superior to their market rivals. It is a mechanism that
influence the ability of a company to challenge the old assumptions regarding the market and
the way a company need to be organised for addressing the same. According to Nadarajah
and Syed (2016), the resources that are used for developing the market offerings comprise of
the sources of competitive advantage. These sources include the sensing, differentiation,
competitor responsiveness and customer responsiveness. They can be both enhanced and
exploited by the higher order learning. It is also to note that the construction of the
competitive advantage put forward by Antony, Setijono and Dahlgaard (2016) was also used
for this article by (___) and it has demonstrated the validity and reliability.
Market orientation and business performance
Mezzei, Flynn and Haynei (2016) have suggested that the SMEs can get more benefit
if they can communicate, develop, explore and embrace the orientation of innovation. The
term innovation by Aziz and Samad (2016), is defined as a mental process. This process
helps in creating a new phenomenon in the form of new service, techniques and materials. It
is to note that business performance refers to the performance of a business or the function of
the market structure within a competitive business world. Firms can create high value by
means of being low-cost producer of undifferentiated product and by providing some
differentiated products in more effective manner. With the same, the term market orientation
is defined as “the culture of the firm which emphasis on the creation of value for customers”
by Homburg, Jozic and Kuehnl (2017). It is suggested that companies that have developed
high market orientation are likely to discover the opportunities present in the business market
before their competitors and can establish market share and customer loyalty which further
could help in improving the business performance of the companies. Ozkaya et al. (2015) in
this context have also claimed that market orientation has a more significant and notable
effect on the profit of a firm than the sales has. This is due to the fact that market orientation

4GLOBAL ENVIRONMENTS AND MANAGEMENT TRENDS
focus on the retention of customers instead of on the acquisition. This is why he has claimed
that the SMEs need to focus on developing more concepts of market orientation in their
company for improving the business environment.
Business performance can be defined as the level to which the company is able to
meet the requirements and needs of the stakeholders along with its own needs for sustaining
and surviving in the business market (Noe et al., 2017). It is to note that business
performance can be influenced by many factors which are combined in many different ways
for increasing and detracting the performance. Measuring the performance might be objective
or subjective. Using subjective measures are very common practice that most of the SMEs
practise in the strategy related research when the financial statement data are not available or
when they do not allow proper comparisons amongst the companies. Lonial and Carter
(2015) has claimed that market orientation is the very first step for responding the changing
business environment. Being in consistent to the discussion presented by Martinette and
Obenchain-Leeson (2012), the learning orientation and the market orientation aspects,
particularly learning from the customers is very important. Jyoti and Dev (2015) have
claimed that the learning orientation only gave impact on the performance of the business
when it is combined with the market orientation within a firm. As per Harvey et al. (2019),
there is a synergy in between the market orientation and the learning orientation. They have
argued that the firm with lower learning capacity is bound to be less adaptive and is weaker
in the market feasibility as compared to the firms with higher learning capacity.
Learning orientations and business performance
Dulger et al. (2016) have viewed that the learning orientation has some notable and
positive influence on the orientation of the customers and the competitors. On the basis of
their findings, it has been revealed that the competitive advantage has an impact on the
relationship between learning orientation and business performance. Effective business
strategy for improving and sustaining competitive advantage of a firm and its performance is
all about having high organisational learning orientation as per Iyer, Srivastava and
Srinivasan (2019). It is to note that learning orientation refers to the tendency of a firm to
create and apply its knowledge and skills in the firm. It has been claimed that the firms that
are learning oriented are more capable of performing well. It is a very important antecedent
of the orientation of knowledge management. It can be referred to as a set of values that are
exhibited by a firm that demonstrate that the company is possibly to develop a culture of
learning within itself. It is to note that one of the most important characteristics of the
learning oriented companies is that they foresee the market changes and the environmental
changes and make adjustments accordingly.
The learning orientation of the SMEs is considered to be an important way for gaining
competitive advantage. The ability of the business units to learn has always been considered
to be the key to competitive advantage. It is to note that learning orientation involves the
individuals present across the organisation to create and use their knowledge for a
competitive advantage. A company should not only be focused on becoming a learning
organisation but at the same time, should also work towards facilitating the learning by
means of whole supply chain for maintaining its competitive edge. It must be noted that both
the new product development and learning orientation are vita for the successful business
performance.

5GLOBAL ENVIRONMENTS AND MANAGEMENT TRENDS
Conceptual underpinnings
It is to note that Martinette in his research study has researched about the influence of
the learning orientation of the organisation on their business performance. However, the
article by Martinette and Obenchain-Leeson (2012) also did the same, taking into
consideration the sector of manufacturing. The article has focused on the pure service
companies and have concluded that the competitive edge is likely to moderate the
relationship in between the learning orientation nature of the organisations and their business
performance in the pure service firms, the SMEs in particular. However, notwithstanding this
fact, it is also to mention that since the year 2006 to 2012, there are different studies that have
made use of the convenience sample and this article by Martinette and Obenchain-Leeson
(2012) have also used the same questionnaire and have conducted a new survey by making
use of random sample of the accounting firms for developing a more specific knowledge in
the pure service industry. This is why, the main objective of this research is likely to test the
prevailing model as it is depicted in the figure one of the article, in context of a particular
firm type- the accounting firm by means of focusing on many research questions like a)
whether or not there is a relationship between the business performance and learning
orientation of a firm in terms of the achievements of the sales and the profit objectives in the
accounting service firms; b) whether or not there is a relationship between the competitive
advantage and learning orientation in the accounting firm; c) does the competitive advantage
of the accounting firms helps in moderating the relationship between the business
performance and learning orientation of the accounting firm.
Figure 1: Conceptual Framework of the Competitive advantage, Learning Orientation and
business performance (Martinette & Obenchain-Leeson, 2012)
Business Performance- Business performance refers to the performance of a
business or the function of the market structure within a competitive business world. Firms
can create high value by means of being low-cost producer of undifferentiated product and by
providing some differentiated products in more effective manner.
Accounting
Service
companies
Competitive Advantage
 Market sensing
 Market responsiveness towards customers
 Market responsiveness towards competitors
 Development of the differentiated products
Learning Orientation
 Open-mindedness
 Shared vision
 Commitment towards
learning
Business performance
 Achievement of the
sales objectives
 Achievement of the
profit objectives

6GLOBAL ENVIRONMENTS AND MANAGEMENT TRENDS
Learning Orientation- Effective business strategy for improving and sustaining
competitive advantage of a firm and its performance is all about having high organisational
learning orientation as per De Clercq, Mohammad Rahman and Belausteguigoitia (2017). It is
to note that learning orientation refers to the tendency of a firm to create and apply its
knowledge and skills in the firm. According to Jyoti and Dev (2015), it is a very important
antecedent of the orientation of knowledge management. Oktavio, Kaihatu and Kartika
(2019) have opined that learning orientation is the process in which organisations obtain and
disseminate the knowledge regarding their competitors, customers and the market changes for
creating new services, which are superior to their market rivals. It is a mechanism that
influence the ability of a company to challenge the old assumptions regarding the market and
the way a company need to be organised for addressing the same. Commitment towards
learning, a shared vision, open-mindedness and the intra organisational skills and knowledge
have a very positive and productive influence on the business performance.
Competitive Advantage- According to Chuang and Lin (2017), the resources that are
used for developing the market offerings comprise of the sources of competitive advantage.
These sources include the sensing, differentiation, competitor responsiveness and customer
responsiveness. They can be both enhanced and exploited by the higher order learning. It is
also to note that the construction of the competitive advantage put forward by Chuang and
Lin (2017) was also used for this article by Martinette and Obenchain-Leeson (2012) and it
has demonstrated the validity and reliability. Market sensing refers to the process that
actively gains and distributed the information regarding the responses and needs of the
market. Banerjee (2017) have suggested that the SMEs that are skilled in this process operate
their business better than the others as they can easily identify the trends and respond
accordingly to the needs and wants of the customers. Furthermore, Dulger et al. (2016) have
paid focus on a total of three critical trends for explaining the importance of learning and they
include-a) rapid pace of the change, b) total amount of accessible information and, c) the
needs for the companies to be proactive in the development and growth of the coherent and
timely strategies that have the potential of addressing the markets. It is very important for the
companies to refine their skills and knowledge about the past for ensuring better
understanding of the present structures that are present within their markets along with the
relationships with the key players. Moreover, it is to note that competitive advantage often
comes from several unexpected places like the day to day activities that the firms perform in
their course of doing business and this allows them in competing with their competitors.
These activities include meeting with the customers, order processing, and employee training
and assembling the products. As per Banerjee (2017), the companies that look inwards are
more possibly to isolate the activities which would further help them in facilitating the
competitive advantage of the firm.
Further recommendations
However, although the article has presented a brief overview of the importance of
being learning orientation and its relation with the overall business performance with a
special regard to the role that competitive advantage plays in the whole process of moderating
the relationship in between these two, there is certain limitations of the study as well. Firstly,
the sample size for the study is small. Also, the study is only focused in the SMEs of
accounting service sector and have not taken into consideration the other sectors. Only a
limited emphasis has been laid on the relationship between competitive advantage and

7GLOBAL ENVIRONMENTS AND MANAGEMENT TRENDS
business performance in the other local SMEs in despite of their increasing contribution.
Hence, it is recommended that the study should also take into consideration the other sectors
like the food manufacturing industry. Also, it is to note that in several different ways, the
study by Martinette and Obenchain-Leeson (2012) have confirmed that there is a significant
relationship among the learning orientation and business performance and also, between
learning orientation and competitive advantage. With the same, it is also to note that one
thinks regarding many pure service industries like heath care, food manufacturing etc., where
the values are required to be formed as a collaboration in between the client and the seller, it
can be very useful for evaluating the important relationships of the model can further
demonstrate some stronger correlations. For replicating this study, it is recommended to take
into consideration all the factors that are influencing the access of the respondents such as the
currency of contact, the business seasons etc. along with the willingness of the respondents.
Also, a bigger sized sample would be more desirable for avoiding the non-response biases.
Conclusion
Hence, from the above analysis it can be concluded that market orientation has a
notable association with the innovation and the learning orientation has notable impact on
innovation. It has discussed about the important of strategic orientation as well for acquiring
the different opportunities for the generation of the profits. With the same, it is competitive
advantage that mediates the relationship in between business performance and learning
orientation From the analysis of the article it is clear that commitment towards learning, a
shared vision, open mindedness and the intra organisational skills and knowledge have a very
positive and productive influence on the business performance. It is to note that the
Malaysian government and stakeholders of the profession have acknowledged that
accountancy is one of the significant areas where Malaysia is notably under-served and the
private and public sectors are required to ensure that the demand that is driven by the steady
and strong economic growth of Malaysia is met. Organisations today are continuously
searching for strategies for gaining and sustaining competitive advantage. The contemporary
turbulent business environment is rendering some conventional strategies absolutely obsolete.
In this scenario, companies need to update and enhance their skills, knowledge, resources and
capabilities for surviving in the market and grow further. Effective business strategy for
improving and sustaining competitive advantage of a firm and its performance is all about
having high organisational learning orientation. The Malaysian SMEs need to be fully
understand their market conditions for developing their new products. Also, understanding
the nature of the learning organisations can also provide a brief understanding of the high
performing firms as well. In many ways, the study have confirmed that there is a significant
relationship among the learning orientation and business performance and also, between
learning orientation and competitive advantage. Also, unlike the results of the article, it has
also been found that competitive advantage does not help in moderating the relationship
between the learning orientation of the organisation and their business performance in the
public accounting service firms.

8GLOBAL ENVIRONMENTS AND MANAGEMENT TRENDS
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