Small and Medium Enterprises (SMEs) in manufacturing serve as a cornerstone of Malaysia’s economic development, making substantial contributions to industrial output, job creation, and technological innovation. Despite their strategic importance, many manufacturing SMEs continue to face persistent challenges in sustaining employee productivity. Traditional efforts to improve productivity have largely focused on operational upgrades and technology adoption, often overlooking the psychological dimensions of employee motivation. To address this gap, this study adopts Self-Determination Theory (SDT) as a conceptual framework to explore how fulfilling employees’ psychological needs autonomy, competence, and relatedness can enhance intrinsic motivation and, in turn, improve productivity within manufacturing SMEs. A literature review was conducted. Empirical studies published between 2011 and 2024 were identified from academic databases including Scopus, Web of Science, and Google Scholar. Relevant articles were selected based on relevance and focus on SDT constructs in workplace settings. The selected studies were then synthesized accordingly to examine how each SDT component contributes to employee productivity in the context of Malaysian manufacturing SMEs. The findings affirm that autonomy, promoted through participatory decision-making and flexible work arrangements, enhances employee initiative, innovation, and accountability factors directly linked to improved work output and operational agility. Competence is supported by targeted training, mentoring, and psychologically safe environments, leading to higher task performance, skill mastery, and adaptive learning, which are critical in lean-staffed manufacturing settings. Relatedness, rooted in interpersonal trust and team cohesion, fosters collaboration, emotional commitment, and employee retention. When employees feel connected to their teams and supported by leadership, they are more likely to engage proactively, remain loyal, and sustain consistent performance even under resource constraints. Overall, the review underscores the strategic value of embedding psychological need satisfaction into human resource and leadership practices, particularly for manufacturing SMEs with limited capacity to rely solely on extrinsic incentives. Integrating SDT principles offers a low cost yet effective pathway for cultivating intrinsically motivated, high-performing employees capable of driving innovation and operational resilience. The review also identifies previous study on SDT construct relevance to employee productivity especially in context of SMEs. Future research should explore how SDT based interventions unfold over time and across diverse manufacturing subsectors. This study contributes to advancing theoretical understanding of motivation in SME contexts and offers practical insights for manufacturing SME leaders seeking sustainable, human centered strategies to enhance employee productivity.
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