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The purpose of this study is to emphasize the importance of return on investment (ROI) within training programs in Malaysian small and medium enterprises (SMEs). Specifically, this paper focuses on the determinants that may influence the adoption of ROI in the current training evaluation practice.

The paper highlights the internal and external organizational factors that may influence ROI adoption within the Malaysian context. The internal drivers are identified as management support, while the external drivers are policies and regulation, competitive pressure and customer expectation.

Based on a comprehensive review in the human resource field, the main drivers for ROI adoption are identified as management support, policies and regulations, competitive pressure and customer expectation.

On the face of fierce national and international competitions, SMEs need to seriously consider investing in higher-level training evaluation, i.e. ROI, to increase its labor quality and subsequently organization’s productivity.

Prior studies tend to concentrate on larger organization, whereas research on the adoption of ROI in SMEs has received less attention from the scholars. This study builds a conceptual work based on the integration of internal and external environments in the scope of study rarely analyzed, i.e. Malaysian SMEs. Strong SMEs are undoubtedly important for Malaysia to achieve its vision in becoming a developed nation by end of the decade. It is also worth to note that findings from this study are applicable to other developing countries with similar background to Malaysia.