Relationship between National Automotive Policy (NAP), innovation and automotive vendors’ performance in Malaysia

Abstract

Automotive industry in Malaysia started in 1985 with the launch of the first national car. However after thirty years, overall performance of the industry is still far behind the neighboring countries like Thailand and Indonesia which ranked first and second top producers in the automotive industry. In order for the automotive players in Malaysia to be globally competitive, innovation is an important element to drive competitiveness. Thus, the aim of this study is to determine the relationship between NAP strategies and innovation performance in the Malaysian automotive component industry. NAP was launched in 2006 with six main directions and strategies. Study is focused on local automotive vendor and a completed survey was completed with 300 respondents. Data was ana-lyzed through structural equation modelling (SEM) using SmartPLS 3.0. Empirical evidence shows that NAP supports all types of innovation among automotive vendors in Malaysia. The study also found innovation mediates between National Automotive Policy (NAP) and vendor’s performance except in the process innovation. This supported previous research in this area where government policy partially mediates on firm competitiveness. The finding of the study suggests NAP is still relevant for the automotive vendors in Malaysia in improving innovation and performance

Keywords

• Government Support
• Innovation
• Vendor Performance
• Structural Equation Modelling