The Effect of Performance Appraisal on Employee Innovation Performance in Malaysian SMEs: The Moderating Role of Perceived Organizational Support
DOI:
https://doi.org/10.53797/ujssh.v5i1.7.2026Keywords:
Performance Appraisal, Employee Innovation Performance, Perceived Organizational Support, Malaysian Smes, Social Exchange Theory, Human Resource ManagementAbstract
Industry 4.0 and Malaysia's "Shared Prosperity Vision 2030" have made innovation imperative for Small and Medium Enterprises (SMEs). Yet the human resource mechanisms driving innovative work behavior in resource-constrained SMEs remain underexplored. Grounded in Social Exchange Theory, this study examines the relationship between performance appraisal and employee innovation performance, investigating perceived organizational support as a moderator. Using a quantitative design, purposive sampling collected data from 382 full-time employees in Klang Valley manufacturing and service SMEs. Hierarchical regression analysis tested direct and interaction effects. Findings reveal that developmental performance appraisal positively predicts employee innovation performance, with structured feedback and goal setting providing role clarity for innovation. Perceived organizational support also predicts innovation, functioning as a psychological safety net. Critically, organizational support moderates the performance appraisal-innovation relationship, strengthening it under high support conditions. These findings extend strategic human resource management literature by showing formal appraisal systems are most effective within supportive climates. Practically, Malaysian SME owners should cultivate a "high-support, high-performance" culture to unlock workforce creative potential.
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