A Conceptual Exploration of Alternative Dispute Resolution (ADR) as a Problem Solution Mechanism for SMEs

This research explores the alternative dispute resolution mechanisms for business disputes among Small- Medium Enterprises in Malaysia. In today’s fast-paced and competitive market, disputes are sometimes inevitable. Additionally, conservative litigation also often leads to costly delays and strained relationships between parties in disputes. Therefore, ADR offers a timely and more cost-efficient alternative by providing businesses with tools to resolve conflicts while maintaining key relationships and minimizing operational disruptions. This study will adopt a quantitative approach with interviews as supporting result. It aims to look into ADR if it is perceived and instigated within business sectors, focusing on small and medium enterprises (SMEs). Given the resource constraints that SMEs often face, ADR presents itself as a valuable option to avoid the high costs associated with litigation. The study will examine the concepts, the factors and the barriers that Malaysian businesses face in adopting ADR mechanisms in settling their business disputes. Eventually, the findings are expected to offer practical amicable alternative to litigation, where ADR improve the way businesses manage conflicts, contributing to a more harmonious and productive business ecosystem.

Alternative Dispute Resolution (ADR), Mechanism

1. Abe, O., & Ouma, S. (2017). A re-assessment of the impact and potency of traditional dispute resolution mechanisms in post-conflict Africa. RELX Group (Netherlands). https://doi.org/10.2139/ssrn.3030666 [Google Scholar] [Crossref]

2. Ahmad, N., & Azeem, R. (2019). The impact of unresolved disputes on SMEs: Financial and operational risks. Journal of Small Business and Enterprise Development, 26(4), 592–610. [Google Scholar] [Crossref]

3. Ahmed, S. (2023). Mediation and its role in commercial dispute resolution. [Google Scholar] [Crossref]

4. Alessa, H. (2022). The role of artificial intelligence in online dispute resolution: A brief and critical overview. Taylor & Francis, 31(3), 319–342. https://doi.org/10.1080/13600834.2022.2088060 [Google Scholar] [Crossref]

5. Alternative dispute resolution mechanisms. (2023). https://www.undp.org/uzbekistan/publications/alternative-dispute-resolution-mechanisms [Google Scholar] [Crossref]

6. Asian International Arbitration Centre. (2020). Efficiency of ADR in business disputes. https://www.aiac.world/ [Google Scholar] [Crossref]

7. Bhushan, T. (2023). The impact of digital technologies on alternative dispute resolution. Revista Brasileira de Alternative Dispute Resolution, 5(10), 329–352. [Google Scholar] [Crossref]

8. Fan, J., Harland, D., & Ahmed, S. (2020). Dispute resolution and business sustainability: A focus on SMEs. International Journal of Business Studies, 22(1), 33–45. [Google Scholar] [Crossref]

9. Francis, M., Perera, S., Zhou, W., & Nanayakkara, S. (2025). Artificial intelligence applications for proactive dispute management in the construction industry: A systematic literature review. Journal of Information Technology in Construction, 30, 711–730. [Google Scholar] [Crossref]

10. Haddad, M. (2010). Drafting an effective ADR provision in international commercial contracts. International Journal of Private Law, 3(3), 271–285. [Google Scholar] [Crossref]

11. Haddara, M., Gøthesen, S., & Langseth, M. (2021). Challenges of cloud-ERP adoptions in SMEs. Procedia Computer Science, 196, 973–981. [Google Scholar] [Crossref]

12. Harris, L., Tuckman, A., & Snook, J. (2012). Supporting workplace dispute resolution in smaller businesses: Policy perspectives and operational realities. International Journal of Human Resource Management, 23(3), 607–623. [Google Scholar] [Crossref]

13. Harris, J., Stevenson, M., & Green, K. (2020). Dispute resolution trends in small and medium enterprises. Journal of Business Law, 32(4), 345–362. [Google Scholar] [Crossref]

14. International Finance Corporation. (2021). Cost of litigation for businesses. https://admin.aiac.world/uploads/ckupload/ckupload_20220729062318_34.pdf [Google Scholar] [Crossref]

15. Kritzer, H. (2021). Dispute resolution in theory and practice: Mediation and arbitration revisited. Dispute Resolution Journal, 36(3), 44–59. [Google Scholar] [Crossref]

16. Lee, T., & Rahim, Z. (2021). ADR for SMEs: Barriers and opportunities. Asia-Pacific Journal of Law and Business, 12(2), 109–124. [Google Scholar] [Crossref]

17. Leow, L. P. (2024). Awareness and perception of alternative dispute resolution methods in Penang. Issues and Perspectives in Business and Social Sciences, 4(1), 28–42. https://doi.org/10.33093/ipbss.2024.4.1.3 [Google Scholar] [Crossref]

18. Menkel-Meadow, C. (2021). Arbitration and its role in dispute resolution: Global perspectives. Global Arbitration Review, 18(1), 9–29. [Google Scholar] [Crossref]

19. Meskic, Z. (2025). Challenges of arbitration in the Western Balkans. In European Union and Its Neighbours in a Globalized World (Vol. 20, pp. 1–19). https://doi.org/10.1007/978-3-031-76345-8_1 [Google Scholar] [Crossref]

20. Mustafa, H. (2022). Adoption of ADR among Malaysian SMEs: An empirical study. Malaysian Journal of Business Law, 41(1), 72–91. [Google Scholar] [Crossref]

21. Ningsih, A. S. (2019). Alternative dispute resolution as soft approach for business dispute in Indonesia. Proceedings of the 2nd International Conference on Indonesian Legal Studies (ICILS 2019). https://doi.org/10.2991/icils-19.2019.6 [Google Scholar] [Crossref]

22. Noone, A. M., & Ojelabi, A. L. (2020). Alternative dispute resolution and access to justice in Australia. Cambridge University Press, 16(2), 108–127. https://doi.org/10.1017/s1744552320000099 [Google Scholar] [Crossref]

23. Palanissamy, A., Magd, H., & Kesavamoorthy. (2024). Redressal of disputes using online dispute resolution—The way forward. In A. Salman & A. Tharwat (Eds.), Digital Governance & Security. AUEIRC 2020. Advances in Science, Technology and Innovation (pp. 71–76). Springer, Cham. https://doi.org/10.1007/978-3-031-49302-7_8 [Google Scholar] [Crossref]

24. Sahin-Sengül, E., & Kaya, S. (2025). Consumer alternative dispute resolution in emerging economies (1st ed.). Routledge. https://doi.org/10.4324/9781032689739 [Google Scholar] [Crossref]

25. Sarira, I. (2016). Mediation on industrial relation dispute and its relation with relative authority in the legal proceedings process. Humaniora, 7(2), 263–272. https://doi.org/10.21512/humaniora.v7i2.3529 [Google Scholar] [Crossref]

26. SME Association of Malaysia. (2022). Survey on ADR adoption among SMEs. https://smecorp.gov.my/index.php/en/resources/2015-12-21-10-55-22/news/4461-challenges-in-digital- adoption [Google Scholar] [Crossref]

27. Smith, J., & Morrison, L. (2020). ADR for SMEs: A cost-effective solution. Business Dispute Resolution Review, 12(1), 45–67. [Google Scholar] [Crossref]

28. Stipanowich, T. (2019). ADR and the pursuit of justice: Mediation, arbitration, and the role of business. International Journal of Conflict Resolution, 30(2), 33–51. [Google Scholar] [Crossref]

29. Storrow, R., & Coleman, A. H. (2020). Exploring research regarding mediation party preferences and mediation within commercial arbitration. Conflict Resolution Quarterly, 37(4), 289–303. https://doi.org/10.1002/crq.21278 [Google Scholar] [Crossref]

30. Sukaenah, S., Rusli, R., & B., T. M. (2020). The effectiveness of Indonesia Supreme Court Regulation Number 1 Year 2016 concerning mediation of marriage disputes. International Journal of Contemporary Islamic Law and Society, 2(1), 63–80. https://doi.org/10.24239/ijcils.vol2.iss1.15 [Google Scholar] [Crossref]

31. Supriyadi, A. P., Amnesti, S. K. W., & Zulaicha, S. (2021). The online-based economical dispute resolution for 4.0 industry in the new normal era. Jurisdictie: Jurnal Hukum dan Syariah, 12(2), 145–169. [Google Scholar] [Crossref]

32. Susskind, R., & Cruickshank, C. (2021). The future of dispute resolution: Mediation and arbitration in a globalized world. Oxford University Press. [Google Scholar] [Crossref]

33. Razak, M. A., & Abdullah, H. (2021). The role of ADR in Malaysia's construction and financial sectors. Journal of Arbitration and Mediation, 14(2), 89–101. [Google Scholar] [Crossref]

34. Tahir, Z., Hashim, F., & Mokhtar, N. (2021). Mediation in resolving business disputes: A study of Malaysian SMEs. Journal of Corporate Law Studies, 25(4), 120–139. [Google Scholar] [Crossref]

35. Taylor, J. (2019). Access to justice and the role of ADR in modern legal systems. [Google Scholar] [Crossref]

36. Ting, L. S., Mohd-Danuri, M. S., Rashid, Z. Z. A., Zulkifly, U. K. Z., & Abdul-Samad, Z. (2024). Enhancing legal mechanisms to address project payment issues encountered by small and medium-sized contractors in Malaysia. Planning Malaysia, 22(3), 15–30. [Google Scholar] [Crossref]

37. Wallgren, C. (2022). ADR in international business: A comparative study. Journal of International Arbitration, 11(4), 503–517. [Google Scholar] [Crossref]

38. Wei, Y., & Liang, D. (2023). Harmonising compliance in China and Malaysia cross border commercial relationship: An alternative dispute resolution perspective. Russian Law Journal, 11(9s). https://doi.org/10.52783/rlj.v11i9s.1676 [Google Scholar] [Crossref]

39. Wilhelm, S., & Keenan, D. (2020). The cost of litigation vs. ADR: A financial analysis for SMEs. Business Economics Review, 45(3), 217–234. [Google Scholar] [Crossref]

• Empowering SME Performance Through Social Media: The Mediating Role of Entrepreneurial Orientation in Malaysian Manufacturing SMEs
• Effective School Bullying Prevention Strategies: A Thematic Review
• Impact of Workplace Conflict on the Operational Performance of Deposit Money Banks in Enugu State.
• Towards Digital Financial Solutions: A Conceptual Model of SME Strategies and Strategic Development
• Effect of Work-Life Balance and Affective Commitment on Employee Performance in the Hotel Industry in Plateau State