Stakeholder and stewardship issues of performance in family business: a Franco-Scot comparison
The paper investigates financial management directed towards funding growth in the new small firm in Scotland. It makes appeal to two sources of first-hand data, gathered using fieldwork methods during the period 1993-97. The first evolved from interviews with 150 owner-managers of micro firms using an administered questionnaire (AQ); and the second, from a subset of 17 of these respondents, using a semi-structured interview schedule (SSI). The paper investigates: (1) aims and ambitions of owner-managers; (2) initial financial structure; (3) preferred alternatives for funding growth; (4) evolving financial structure; and (5) current position. It is shown that those owner-managers who start with a superior business idea and express that idea clearly and efficiently are also those who will attract more external funding, and subsequently perform better. In addition, they tend to have more sophisticated methods of managing finances and accounting information, using forecast figures rather than historical data, and working from sales and profit margins rather than merely cash flow.
Three tests of contingency theory are presented. The central hypothesis is that information system development is determined by contingencies. Data relate to the period 1994-98 for a sample of new Scottish micro firms. Contingency theory is tested by correlation, cluster and regression analysis. First, correlation analysis is applied to the timing of information system development and the timing of: severe cashflow crises; severe shortfalls of finance which seriously restrict strategic investment; and significant innovations. Second, cluster analysis is used to test the morphology suggested by contingency theory, of adaptive, running blind, and stagnant small firms. Third, regression analysis is used to test contingency theory in two forms. One explains a new weighted headcount measure of organizational form, and the other explains information system complexity. The three statistical methods used are generally supportive of contingency theory, suitably modified to a small firm context.
This paper reports on the importance and use of information technology in a sample of 150 new small firms. It provides statistical evidence to show that the greater the use of IT, the higher the firm’s performance. By contrast, the owner manager’s belief in the importance of IT to the management of their business is not correlated with performance. Empirical evidence is then presented to confirm that IT use is increasing, in general, year on year, and is being implemented as a management information tool. Finally, a profile is presented of the typical components of a young management information system, within the context of a management accounting framework. It is suggested that, given the proven importance of IT to the new small firm, a management information system should be developed that takes advantage of the opportunities offered by new technology, and that this, in turn, should lead to enhanced performance.