The purpose of this study was to identify the transformational leadership, transactional leadership, entrepreneurial orientation and organisational performance of Small and Medium Enterprises (SMEs) in Malaysia. Four main constructs were selected namely transformational leadership, transactional leadership , entrepreneurial orientation and organisational performance based on Resource Based Theory (RBT) by Galbreath (2005) and Transformational Leadership Theory by Bass (1985). The research design used in this study was a survey method and data were collected using quantitative approaches. The respondents were 401 owner or manager of SMEs operating in manufacturing and service industries in Kuala Lumpur and Selangor. The respondents were selected using the Stratified Sampling Technique. The study instrument applied was questionnaires. The finding showed that transformational leadership has higher impact towards organisational performance (β=0.257, S.E=0.055) than transactional leadership (β=0.220, S.E=0.054). Entrepreneurial orientation also significantly contributed to organisational performance (β=0.199, S.E=0.054). Furthermore, this study found that entrepreneurial orientation acted as partial mediator between leadership behaviour and organisational performance (β=0.284, S.E= 0.256). The key implications of this study revealed that transformational leadership proved to be more efficient than transactional leadership in term of leadership behaviour. Thus, the leader of SMEs need to practise and nurture the qualities of transformational leadership, and focus on entrepreneurial orientation in order to achieve better organisational performance. This study also acknowledges the leadership and entrepreneurial orientation as a resource and capability in organisation because the integration of these two elements are the yardstick for SMEs’ success in Malaysia.
Transformational leadership,, transactional leadership,, entrepreneurialorientation,, organizational performance,, SMEs
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