Small Business Enterprise: An Economic Analysis
Abstract
This empirical analysis of a small firm database examines the role of the small business enterprise in a mature mixed market. A database was created using over 40,000 data points gathered from 70 to 80 small business enterprises (SBEs) in Scotland from 1985 and 1988. The data is both qualitative and quantitative, based on a questionnaire, interview, and a subsequent reinterview questionnaire, and including enterprise profiles of the firms. The study covers a range of research areas - including cost, sales and competition, innovation, and scale economies - so that conclusions are numerous and wide-ranging. Results indicate that SBEs are characterized by a kinked demand curve, price increases at economic booms, self-interest over ethical concerns, and a focus on competitive, as opposed to defensive, strategies. Consequently, intra-industry rivalry is a core construct of SBEs. The research also shows strong evidence for short-run scale economies. Small firms can be "large" in terms of market power, though cost controls tend to suffer when an SBE attempts to grow rapidly. Finally, SBEs have a sharp learning curve after inception, so that experience of competition translates into competitive advantage. The study concludes that the research on SBEs is significantly smaller and less mature than that of large firms, and that this is best combated by analysis of such relational databases, that combine and integrate evidence from a given population to be manipulated statistically in sophisticated ways.
... Porter's [48,49] theory of competitive advantage derived three generic strategies: Cost leadership, differentiation and focus, later developed by Reid [50] for small firms. The latter found that cost leadership might not result from scale economies but from the flexibility to produce 'a wide variety of batch sizes according to agreed ('bespoke') specification' [50]. ...
... Porter's [48,49] theory of competitive advantage derived three generic strategies: Cost leadership, differentiation and focus, later developed by Reid [50] for small firms. The latter found that cost leadership might not result from scale economies but from the flexibility to produce 'a wide variety of batch sizes according to agreed ('bespoke') specification' [50]. Firms could differentiate their offering by aiming for customer satisfaction, through 'the personal touch', and the localization of customers encouraged market fragmentation whilst also fostering competitive advantage. ...
... Apart from competitive strategies, Reid [50] expounded a 'defensive strategy' to 'deter or preempt potentially damaging moves by rivals', by showing a strong commitment to re-investment, by palpable intangible asset advantages (e.g. professionalism and trade intelligence), and innovation, by technical advancement. ...
Our research tests the hypothesis that the organizational form of a small firm is determined by the contingencies of environment, strategy, size and technology. It was tested on a sample of private firms in Guangdong Province, PR China, notable for its entrepreneurship. Our methodology was novel, involving detailed fieldwork with entrepreneurs for data collection, allied to rigorous econometrics for contingency analysis, using ordered probits. We found that business strategy was the most important determinant of organizational form, followed by new investment, cost leadership, focus strategy and financial aspects (e.g. cash flow, profit expectations). These findings are of interest both to academic researchers and to government bodies responsible for stimulating superior organizational forms in small businesses, like incubator units.
... increases the dimensions on which the firm competes to protect these advantages. This finding supports evidence that small firms usually seek to cultivate mild forms of product differentiation, especially by customer service and delivery (Reid, 1993). However, it must be borne in mind that strongly differentiated products can only be sold in very limited niche markets, especially if they are constructed on a customer specified basis. ...
... bespoke) basis. However economies of scope perhaps exist for these small firms, in the pursuit of these strategies in more localised or niche markets, Reid (1993). ...
A simultaneous equations model of performance, strategy and size is tested using fieldwork evidence on long-lived firms in Scotland. Estimation is by I3SLS, with correction for sample selection bias. The contributions of this paper are that it: (a) grounds estimation on fieldwork evidence; (b) calibrates performance and competitive strategy; (c) tests and models endogeneity; and (d) computes robust trade-off elasticities between firm size and performance. It shows how this trade-off provides the entrepreneur with two strong incentives: (i) to seek greater efficiency typically by an increase in the human capital of the ‘core’ workforce; (ii) to achieve higher levels of performance by adopting more diverse competitive strategies.
... He also observed that rapidly growing firms often occupied niche markets. Reid (1993) found that the focus strategy emphasized by small firms was based more on differentiation than cost leadership. Typically, small firms sought relatively low cost forms of product differentiation, emphasizing rapid response, service quality and personal treatment of customers. ...
... ; SBRC, 1992;Reid et al., 1993;Hall, 1995;Barkham et al., 1996;Gunasekaran et al., 1996;Julien et al., 1997;Namiki, 1988; Hewitt-Dundas and Roper, 1999;Cragg et al., 2002). Most of these researches tried to identify key factors that contributed to small firms' competitiveness. ...
The present study was conducted in Mazandaran, a province in north of Iran and aimed to analyze the effect of business strategy on IT alignment. According to the registrar Office of Industrial Township in Mazandaran Province, 2000 companies have been selected as the survey population. A total of 380 questionnaires were distributed among the respondents and 329 usable questionnaires were returned. The factor analysis and the findings show that business strategy has a significant positive influence on IT alignment of organizations with their supply chain partners. Moreover, the findings of this paper suggest that organizations that have predictive and appropriate strategy, align their information technology (IT) in a better wayin comparison with their competitors, which contributes to higher organizational outcomes.
... This was an online questionnaire designed by the author. The methodological approach adopted for this census was based on three studies; Reid (1993), Bewley (1999) and Blinder et al (1998). The This follows the approach taken by Reid (1993) in his study of small business enterprises in Scotland. ...
... The methodological approach adopted for this census was based on three studies; Reid (1993), Bewley (1999) and Blinder et al (1998). The This follows the approach taken by Reid (1993) in his study of small business enterprises in Scotland. The responses in a number of the questions use an ordered or Likert scale which follow the approach taken by Blinder et al (1998) in assessing how firms view the different theories of price stickiness. ...
The paper investigates the pricing strategies adopted by Tasmanian tourist accommodation operators and their implications for profitabilty. Data on business practices is obtained from a census of Tasmanian tourist accommodation operators. Economic theory suggests that businesses can increase their profit by utilising price discrimination; selling to different customers at different prices. The paper considers how businesses use the characteristics of their customers, including the distribution channel used for booking, to price discriminate. An ordered probit model is used to test the hypothesis that the better the business is at price discriminating the higher their profit. The analysis suggests that the ability to use the website www.wotif.com is a significant determinant of profitability.
... Teniendo en cuenta que este grupo de firmas puede operar en un entorno industrial fragmentado, con una baja concentración de oferentes o líderes no estables. Es probable que la flexibilidad de las pymes ante los cambios en el entorno en un mercado fragmentado sea entonces característica de un estilo de subsistencia más que una ventaja organizacional (Reid, 1993). Por otro lado, y teniendo en cuenta que todos los individuos son distintos y que la gestión estratégica representa un proceso orgánico y dinámico al interior de cada firma, es imposible sostener con certeza una hipótesis general acerca de las capacidades y perfiles que influencian positivamente el desempeño. ...
... Por un lado, la visión estática de la estrategia cuestiona la ventaja de flexibilidad atribuida a las pequeñas empresas. Teniendo en cuenta que este grupo de firmas puede operar en un entorno industrial fragmentado, con una baja concentración de oferentes o líderes no estables Es probable que la flexibilidad de las pymes ante los cambios en el entorno en un mercado fragmentado sea entonces característica de un estilo de subsistencia más que una ventaja organizacional (Reid, 1993). Por otro lado, y teniendo en cuenta que todos los individuos son distintos y que la gestión estratégica representa un proceso orgánico y dinámico al interior de cada firma, es imposible sostener con certeza una hipótesis general acerca de las capacidades y perfiles que influencian positivamente el desempeño. ...
PROYECTO PICT 97 "Desarrollo y sustentabilidad de las nuevas pymes: los problemas del crecimiento" RESUMEN El trabajo intenta identificar enfoques teóricos adecuados para analizar la conducta estratégica de empresas industriales pequeñas y medianas. Partiendo de los problemas que presenta la aproximación del planeamiento estratégico aplicado a firmas de menor tamaño, la investigación presenta tres corrientes teóricas alternativas que explican el conjunto de opciones estratégicas que enfrentan las firmas en un ámbito dado. La segunda parte del trabajo expone los resultados de un relevamiento realizado a 102 empresas localizadas en Bahía Blanca, siguiendo las líneas de argumentación del marco teórico propuesto. Los resultados muestran que para todos los sectores analizados parece operar un mecanismo de selección entre firmas con determinados patrones de inversión. Estos resultados, junto con la escasa correlación entre las características (observables) del propietario y el desempeño, parecen indicar la limitada influencia de los atributos del empresario sobre los resultados de la firma. A su vez, la edad observada de las firmas muestra que la gran mayoría ha superado la etapa de supervivencia, aunque sólo muy pocas han seguido una trayectoria de expansión. El trabajo propone algunas explicaciones y futuras líneas de investigación para la aplicación de estos enfoques a la dinámica microeconómica desde una perspectiva regional. ABSTRACT This paper aims at identifying apropriate theoretical approaches for analysing "strategic" behavior in small and medium regional manufacturing firms. In a theoretical section we offer a review of 3 alternative conceptualizations about the relevant set of strategic actions available to local small firms. We turn then to an empirical section in which we analyze the scenario-strategy pattern in a panel of 100 manufacturing firms located at Bahía Blanca city. The alternative theoretical views are used in order to interpret the main empirical results. We find that (regardless of the inter-sector heterogeneity) a selection process operating over the investment behaviour of firms seems to be at work. This could be interpreted as a primary evidence against those theoretical views strongly based on the relation between the performance of the individual firm and the entrepreneur's characteristics and background. Additional results relate to the age-performance relation; in this realm we find that although most of the firms exceeded their "high hazard rate period" very few have experienced substantial growth. Finally, the paper suggest some explanations of this phenomenon as well as future research avenues for theory building on firm strategy in local environments.
... Financial institutions accuse these business plans of lacking clarity, being unfeasible or lacking adequate market research. These weaknesses , when coupled with the absence of a verifiable track record in business success, result in the inability of micro-enterprise owners to convince financiers of their potential (Reid, 1993). In addition to these factors, many micro entrepreneurs are overoptimistic and underestimate the amount of capital they need, which could be an additional source of under financing (Rhodes, 1984 in Barber, Metcalfe & Porteous, 1989). ...
... For large financial institutions, this is usually requested in various forms including personal guarantees, life insurance policies, floating charges e.g. notarial bonds on movable assets such as plant, equipment and stocks, heritable securities such as fixed property, land or financial market assets (Reid, 1993). However, the microfinance target group typically lacks marketable assets that are suitable to be used as collateral to access credit from these institutions. ...
... In fact this tradeoff relationship has since been widely explored, by authors like Cubbin and Leech (1986), Dobson and Gerrard (1989). It has also been the focus of my own recent work, as in Reid (1993Reid ( , 1994, where in this case all the businesses analysed were small. 5 Notably by Williamson (1975). ...
... Thus a sole proprietorship, perhaps initially started from home, might become a partnership some months after it has been seriously launched, and then become transformed into a private company after some years, as it enjoys further success. It is possible that an SBE starts as a partnership and then transforms into a private company, or that the partnership form is skipped, with the SBE going directly 6 Reid (1993) is the main work, but Reid and Jacobsen (1987) and Reid, Jacobsen and Anderson (1993) are also relevant. 7 To arrive at these figures I have interpolated within the sales ranges given in the Notes according to the decimal fractions of Table 1 itself. ...
The work of the Oxford Economic Research Group under the chairmanship of George Richardson is taken as the starting point for a new analysis of the limits to small firm growth. Following Richardson's emphasis on costs of organisational change within the growing firm, caused by the need to train and assimilate new managerial recruits, a transactional efficiency explanation is developed emphasising three small business types: sole proprietorship; partnership; and private company. These types are identified from a contemporary database of new small firms, and their growth and performance characteristics are compared both by descriptive statistics and econometric evidence. The importance of business type to the growth/profitability trade-off relationship is confirmed, thus supporting Richardson's analysis. More complex organisational forms reduce short-term performance. A new finding is the additional importance of capital structure to this trade-off: higher geared firms experience lower growth and lower profits than lower geared firms. this effect can be explained by costs of debt servicing and exposure to risk.
... The cost leadership is often driven by company efficiency, size, scale, scope a nd cumulative experience (learning curve). A cost leadership strategy aims to exploit scale of pro duction, well defined scope and other economies (e.g a good purchasing approach), producing hi ghly standardized products, using high technology (Gavin, 1993). In the last years more and mor e companies choose a strategic mix to achieve market leadership. ...
Despite the fact that ASM operation is very small, the combined economic and social impact is significant in many developing economies. It is estimated that within sub-Saharan Africa, ASM
produces gold and gemstones worth about $2.1 billion. In Kenya for example, 60% of all mineral export earnings ($49 million) in 1992 to 1997 came from ASM activities; meaning that this is a sector that cannot be ignored. Due to the importance of this sector, this research found it necessary to do a study on the strategies that have been effective in relation to the continual existence of this sector. The research therefore sought to examine the strategies for effective
performance of the artisan miners in Kenya‟s Taita Taveta. The study was guided by four objectives that included: to examine the extent to which cost leadership strategy influences the performance of small-scale miners in Kenya; to establish how community involvement/participation strategy influences the performance of small-scale miners in Kenya; to examine the influence of modern technology adoption strategy on the performance of small-scale
miners in Kenya; and, to establish the effects of access to credit and finance as a strategy in the performance of small-scale miners in Kenya. The study adopted a descriptive research design. The target population was 512 respondents from the registered mines in Taita Taveta. A sample representative of 225 respondents was obtained as calculated by Yamane formula of 1967. Primary data was collected using structured questionnaires consisting of both closed and open ended questions. The research used content validity as a measure of the degree to which the data collected using the questionnaire represented the objectives of the study. The data collected was keyed and analysed by simple descriptive analysis using Statistical Package for Social Scientists (SPSS) version 21.0 software. The data was then presented through frequency tables and narrative analysis. The response rate was 40% positive, meaning that 90 questionnaires were
fully filled and returned for the study. The general trend of the results indicate that: 76.4% of the respondents agreed with the idea that cost leadership strategy influence the performance of small-scale miners in Kenya, 77.2% of the respondents agreed with the idea that community
involvement/participation strategy influences the performance of small-scale miners in Kenya, 74% of the respondents agreed with the idea that the modern technology adoption strategy has an influence on the performance of small-scale miners in Kenya, and 66% of the respondents weakly agreed with the idea that access to credit and finance as a strategy has been effective in the performance of small-scale miners in Kenya. Alternative hypothesis was adopted after all the
values of the calculated chi-square values being higher than the critical values. Finally, various future studies were suggested including a study being done to examine the influence of the mining bill of 2014 on the performance of artisan miners in the county; a case of artisan miners
in Taita Taveta county
... We estimated an econometric model of the HNFEs' probability of success by following an idea similar to the one used by Mazzola and Bruni (2000) and (Reid 1993), noting that a dependent variable related with profitability or good performance (Pent) was latent and unobservable. We thus assumed that the observable variable had a value of 1 when a HNFE could be considered as successful; and a value of 0 otherwise. ...
... We estimated an econometric model of the HNFEs' probability of success by following an idea similar to the one used by Mazzola and Bruni (2000) and (Reid 1993), noting that a dependent variable related with profitability or good performance (Pent) was latent and unobservable. We thus assumed that the observable variable had a value of 1 when a HNFE could be considered as successful; and a value of 0 otherwise. ...
Since micro-level understanding of the non-farm sector (NFS) seems to be insufficient for promoting sustainable
livelihoods in rural Bangladesh, this paper examines the significance and growth linkages of Household Non-Farm Enterprises (HNFEs) in four villages at a typically advanced rural location: Comilla Sadar Upazila. The findings show that in relation to the limited scope of earning income from farming and in-country remittance employment, the households’ higher dependency on out-country remittance employment and local low-return NFE could be a threat for sustainability of local livelihoods. Thus, the increasing contribution of non-farm self-employment and non-farm wage employment by promoting HNFEs is critically important. The HNFEs were also found to be locally linked. The HNFEs that purchased inputs locally and sold outputs in distant markets might have higher profit potential.
... However, in the specific case of SME, the CS has been discussed by Keasey and Watson (1987); Storey, Watson and Wynarczyk (1988); Ang (1991 and1992); Reid (1993) and Storey (1994); Robson, et al., (1994) and Jordan, et al., (1998); inter alia. In Spain, Maroto (1996); Boedo and Calvo (1997); López and Aybar (2000); inter alia, have published outstanding studies in this field. ...
... (Namiki, 1988) (Reid ,1993) (Gunasekaran, 1996) (Julien, 1997Lefebvre et al., 1992) who claims that small firms were not as strategically oriented as larger organizations (making the explicit identification of strategy more difficult); we argue that SMEs of manufacturing systems have their own strategy, even if implicit one (Chell et al., 1992), they just need assistance and guidance to formalize it in order to ensure coherent SA. ...
This last decades " SA: Strategic Alignment " has been granted a huge attention from the academic researchers and industrials managers. However, it is an obvious statement that the concept is still unclear especially due to the complexity of the strategic context that SA has to model and formalize. After a large browsing of the literature, the purpose was to gather different comprehensions and classify them according the right use, clarifying the point of view of the different authors. After what, current contribution is positioned, which aim's is to depict the manufacturing systems context to relevantly model the business strategy through the BSRF (Business Strategy Reference Model) and provide methodological framework (called: S3A: Strategic Alignment Assessment Application) helping the managers to get a better understanding of the success of the SA with processes of IS (Information system) through a list of suggested KPI (key Performance Indicators). KPI are classified according two performance attributes, namely: computational performance and field performance.
... Guiding questions for services providers are based on my previous research about market information services for general information and developed according to the quality assurance aspects. The questionnaire used in SME's survey is based on the questionnaire by [3] and [4] as regard to export aspect; the determinant of SME is consulted from the questionnaire by [5]; supplements of the quality assurance of BDS are supported from previous survey about BDS market, and the Quality Assurance Theory is applied for acquiring knowledge of QA system in the plastic sub-sector. ...
The paper aims at analyzing general characteristics of the plastic sub-sector in Ho Chi Minh City (HCMC), in-depth quality assurance (QA) implication in the sub-sector, how plastic manufacturers use business development services to improve QA and which QA variables are strongly affected export involvement. Author's survey had assessed to plastic manufacturers and service suppliers to determine the position of demand and supply, then find the potential improvement in BDS market for both demand and supply size. To recognize the attitude of plastic manufacturers in terms of QA awareness and identify the difficulties and weakness of service suppliers are formulated the general picture of QA in plastic sub-sector. The binominal logit model is used to assess the influence of explanatory variables, which are mainly concerned QA variables, on the probability that firm involve in international market. Our econometric analysis indicates that quality assurance level, automatic level, source of machine and ratio of quality assurance personnel are positively significant for the likelihood of international business. Interestingly, non-export group are likely to use quality assurance business development services rather than export group. QA business development services attract more concern for donors and government due to low value added for plastic exporters' use.
... The ultimate aim of the interview technique is to utilise the views of individuals (firms) directly affected by policy in an attempt to identify a 'without policy' position, that is, 'counter-factual position'. As Reid (1995) stated: F a ir M e n t o r O t h e r ...
This paper examines an approach to estimating the net additionality of financial assistance to indigenously-owned firms in Ireland for the period 2000 to 2002. Using a sample of Enterprise Ireland assisted-firms an innovative self-assessment case study methodology was adopted in order to test the ways in which estimates of partial deadweight can be derived. The results show that the net additionality of Enterprise Ireland assistance can be estimated as around 50 per cent for this sample of case studies which represent a pool of clients which accounted for just-over two-thirds of the financial assistance provided by Enterprise Ireland in the period of the study.
... With regard to business characteristics, studies have suggested that major differences in the performance of firms can occur from sector and location (Storey, 1994), whilst research on the size and age of enterprises has indicated that older and larger firms are more likely to have lower growth rates (Davidsson et al., 2006;Hamilton, 2012). Much of the economics literature on the determinants of small firm growth has focused on the combination of life cycle effects (Reid, 1993;Beck et al., 2005;Chiao et al., 2006). These have often used resource-based theory to consider the role of firm assets, for example Rangone (1999) and Davidsson et al. (2006), where the early acquisition by firms of resources that are difficult to replicate by competitors provides them with the ability to develop a competitive advantage, facilitating growth. ...
Purpose
This paper aims to contribute to the understanding of the factors that influence small to medium‐sized enterprise (SME) performance and particularly, growth.
Design/methodology/approach
This paper utilises an original data set of 360 SMEs employing 5‐249 people to run logit regression models of employment growth, turnover growth and profitability. The models include characteristics of the businesses, the owner‐managers and their strategies.
Findings
The results suggest that size and age of enterprise dominate performance and are more important than strategy and the entrepreneurial characteristics of the owner. Having a business plan was also found to be important.
Research limitations/implications
The results contribute to the development of theoretical and knowledge bases, as well as offering results that will be of interest to research and policy communities. The results are limited to a single survey, using cross‐sectional data.
Practical implications
The findings have a bearing on business growth strategy for policy makers. The results suggest that policy measures that promote the take‐up of business plans and are targeted at younger, larger‐sized businesses may have the greatest impact in terms of helping to facilitate business growth.
Originality/value
A novel feature of the models is the incorporation of entrepreneurial traits and whether there were any collaborative joint venture arrangements.
... The advantage of using a 3SLS model is that it provides more efficient results compared to 2SLS and OLS. A 3SLS model is able to access all relevant information about the related variable by running multiple equations simultaneously (Reid, 1996). ...
In this paper, we analyze the M&A activity of Amazon, Apple, Google and Microsoft from 2005-2011 and classify their acquisitions according to a “Media-Internet-Technology” (“MIT”) scheme. This distinctive classification method is designed to capture recent market trends within the Media and Information Technology sectors. The need for constant innovation in post-PC offerings brought about by the rapid uptake of mobile and cloud technology has prompted these companies to use M&A as a vehicle to expand their product portfolios and position themselves better to cater to a converging MIT universe. Our paper analyzes the impact of M&A activity on revenues for each company at a segment level and confirms the presence of a statistically significant positive relationship between the two variables. A reciprocal analysis at a broader group level for the leading US-based technology companies shows no statistical significance between overall revenue CAGR and M&A activity over the same time period.
... When we look for the key factors that may explain the decision on capital structure, in addition to the size, the number of employees, the total assets and the sales revenues, could be found certain qualitative variables, such as market reputation, business experience, structure and control of the ownership, as well as particular lending relationships that are likely to become key issues for the SMEs financing. The capital structure of the SMEs has been discussed by Keasey and Watson (1987), Storey, Watson and Wynarczyk (1988), Ang (1991Ang ( , 1992, Reid (1993), Storey (1994), Robson, Gallagher and Daly (1994), Jordan, Lowe and Taylor (1998), inter alia. In Spain, Maroto (1996), Boedo and Calvo (1997), Aybar, Casino and López (2000), inter alia, have published outstanding studies in this field. ...
The article analyzes the factors determining the capital structure of the Spanish small and medium enterprises [SMEs]. The analysis is grounded on the agency theory, the signalling approach and the pecking order theory. In particular, the article provides a qualitative and quantitative analysis about the impact of company brand, the ownership and control structure, and the relationship between the SMEs and their own financial policy. This analysis is based on defining the expected relationships that one might consider between the referred variables and the total debt ratio. In this regard, the analysis will be conducted by means of considering a survey of 410 Spanish SMEs where an ANOVA test will be applied. Then, a hierarchical regression model will allow comparison of the hypotheses made.
... We regarded previously successful question designs as our point of departure. In terms of the empirical literature of industrial organization, our yardsticks of questionnaire design, on which we based our own questionnaire design, were Wied-Nebbeling (1975), Nowotny and Walther (1978), Converse and Presser (1986), Jacobsen (1986), Reid (1987aReid ( , 1988Reid ( , 1992Reid ( , 1993, Fowler (1995), and Power (2004). The answers to questions generated a wide variety of variables. ...
This paper has three contributions. First, it shows how field work within small firms in PR Chinese has provided new evidence which enables us to measure and calibrate Entrepreneurial Orientation (EO), as ‘spirit’, and Intangible Assets (IA), as ‘material’, for use in models of small firm growth. Second, it uses inter-item correlation analysis and both exploratory and confirmatory factor analysis to provide new measures of EO and IA, in index and in vector form, for use in econometric models of firm growth. Third, it estimates two new econometric models of small firm employment growth in PR China, under the null hypothesis of Gibrat’s Law, using our two new index-based and vector-based measures of EO and IA. Estimation is by OLS with adjustment for heteroscedasticity, and for sample selectivity. Broadly, it finds that EO attributes have had little significant impact on small firm growth, and indeed innovativeness and pro-activity paradoxically may even dampen growth. However, IA attributes have had a positive and significant impact on growth, with networking, and technological knowledge being of prime importance, and intellectual property and human capital being of lesser but still significant importance. In the light of these results, Gibrat’s Law is generalized, and Jovanovic’s learning theory is extended, to emphasise the importance of IA to growth. These findings cast new empirical light on the oft-quoted national slogan in PR China of “spirit and material”. So far as small firms are concerned, this paper suggests that their contribution to PR China’s remarkable economic growth is not so much attributable to the ‘spirit’ of enterprise (as suggested by propaganda) as, more prosaically, to the pursuit of the ‘material’.
... The methodology behind the main study follows that of previous empirical studies that have employed ®eldwork data-gathering techniques (Reid, 1993;Reid et al., 1993;Reid, 1996;Smith, 1997), and included a rigorous piloting of the AQ. The sample was provided by a number of Enterprise Trusts in Scotland, covering 18 areas in the country (see Table 1). ...
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.
... There were also several other variables that were included initially, but which a preliminary inspection of the data revealed to be uncorrelated either with each other or with any of the variables listed above. These included whether the individual: was registered disabled; cared for a disabled person or someone else in the household; had a vocational qualification ; had switched into self-employment in the previous year; or had lived in Scotland (a country within Great Britain with a fairly low level of en- trepreneurship: Reid, 1993). These variables were excluded after inspecting the correlation matrix and their communalities. ...
... this research has undertaken. Since this research focused on advanced SMEs in Korea where certain industrial sectors have technological competitiveness in the world market such as electronics industry(Kim, J 2000), it becomes quite natural that advanced SMEs in that country would likely to emulate the industrial terrain of the mainstream industry.(Reid 1993aReid , 1993b) In the Korean context, it would be the electronics, communication and information related sectors. In selecting the people who actually were surveyed, this research had a sampling scheme of asking researchers at both SMEs and research labs. The fact that SMEs under the sampling frame is advanced ones denotes that there are ...
As the economies and the regions being transformed into knowledge based entities, the importance of science & technology as the locomotive for economic growth has been increasing in many different parts of the world. In the awakening of the importance, one of the clear trends has been the research network building in different levels. From a macro level National innovation system and international cooperation in research, to regional level science cities, and to micro level technology incubators, a common thread has been building an effective network. While much has been studied on macro and middle level institutions such as National innovation system and science city, it is understood that micro level research network building has been left as areas for further research. With this aim, this research, focused on the necessity to build research networks between government funded research institutions and small & medium sized enterprises(SMEs) with strong demand for technology. In undertaking the research, this paper employed a survey as the source for data collection and utilized Logit regression model to analyze the feasibility of proposing a more formal research network as the policy option. In the conclusion, this research presents a possibility that the results from this research can be applied in other countries, despite the fact that this study has been based on a survey in Korea.
... Differences have also been found between those who set-up from scratch and those who purchase existing businesses, those who rely on one large customer as opposed to those who develop relationships with a variety of small customers, and those who pursue a niche market (Reid, 1993; Sullivan et al 1998; Johnson, Kattuman & Conway, 1996). It should be noted that whilst innovation can provide new market opportunities, innovative businesses often face rapid growth, which can be disastrous if not managed correctly. ...
This paper examines the determinants of business start-up, long and short-term success, and failure of small businesses. Entrepreneurs and small firm success and failure have been the subject of extensive research. It is important to understand the external, internal, and motivational factors responsible for business start-up, the barriers faced during the initial and continuous stages of trading and the advice and assistance available to entrepreneurs. This paper is aiming in explaining the main factors are related to successful, and failure of entrepreneurs in small industrial business in Ahvaz city. Based on a random sampling 51 enterprisers marked as successful and failures are selected. The data collected based on a triangulation method (interview, questionnaire, and observation). The results show that: a- from the failure entrepreneurs point of view the following issues were important effects on their weak performance and failure their business: weak managing technical skills, financial issues, planning and organizing of their business, economic issues, informal issues, weak managing conceptual skills, personnel skills, education and low training, and weak human relation. b- from the successful entrepreneurs point of view the following issues were important effects on their high performance in their business: suitable managing technical skills, selecting appropriate personnel with relevant skills, education and paying more attention to personnel training, application of management conceptual skills, financial issues, better human relation, recognize the economic situation, planning and organizing of their business and informal issues.
... Most theoretical and empirical studies of capital structure focus on large corporations. Similar studies of small independent firms which are owner-managed (Dobson and Gerrard, 1998; Reid, 1993) are much less common in the economics literature because firm owners have the majority of the firms assets in MSMS firms, control of capital and final decisions about activities of firms are made by firms owners. Only a limited number of studies on capital structure have been conducted on micro, MSMS, and this deficiency is particularly evident in investigations into factors that influence funding decisions of family business owners. ...
Most theoretical and empirical studies of capital structure focus on large corporations. Only a limited number of studies on capital structure have been conducted on micro, small and medium size enterprises (MSMS), and this deficiency is particularly evident in investigations into factors that influence funding decisions of family business owners. The study aims to explore the capital structure and financing preferences of MSMS firms owners and focuses more narrowly on the debt vs. equity preferences revealed in the initial and ongoing financing of MSMS firms in forest products industry. In this study, financial preferences of MSMS firm owners in forest products industry were investigated in 18 cities across the Black Sea Region in Turkey. Some of the financial characteristics and capital structure of these sectors were identified on the basis of a sample survey of 851 firms. The preliminary results that emerged from the study illustrate that owners of MSMS firms preferred internal financial sources against too high cost capital from external market in initial and ongoing facilities of firms.
... Reference [6] observed that rapidly growing firms often occupied niche markets. Reference [7] found that the focus strategy emphasised by SMEs was based more on differentiation than cost leadership. Typically, small firms sought relatively low cost forms of product differentiation, emphasising rapid response, quality of service and personal treatment of customers. ...
This study focused on the alignment of business strategy and IT strategy among 256 small UK manufacturing firms. IT alignment was explored using both the matching and moderation approaches, leading to a measure of alignment for each firm. The group of firms with high IT alignment achieved better organisational performance than firms with low IT alignment. As well as confirming prior findings in large firms, the study extended our understanding of IT alignment in small firms.
... Firm Performance Previous research suggests that there is a trade-off between the size of a firm and its performance (Cubbin and Leech, 1986;Dobson and Gerrard, 1989;Reid, 1993Reid, , 1995. Companies with higher performance may as well be better positioned to finance their R&D investments. ...
The mixed picture of extant research on the relationship between internal and external R&D prompts us to ask such a question: under what conditions is there complementarity or substitutability between different R&D strategies? The goal of this paper is to contribute to the empirical literature by advancing and testing the contingency of the relationship between internal and external R&D strategies in shaping firms‘ innovative output. Using a panel sample of incumbent pharmaceutical firms covering the period 1986-2000, our empirical analysis suggests that the level of in-house R&D investments, which is characterized by decreasing marginal returns, is a contingency variable that critically influences the nature of the link between internal and external R&D strategies. In particular, internal R&D and external R&D, through either R&D alliances or R&D acquisitions, turn out to be complementary innovation activities at higher levels of in-house R&D investments, whereas at lower levels of in-house R&D efforts internal and external R&D are substitutive strategic options. These findings are robust to alternative specifications and estimation techniques, including a dynamic perspective on firm innovative performance.
... As Bryman and Bell point out: 'In other words, they fall somewhere between grand theories and empirical findings. They represent attempts to understand and explain a limited aspect of social life' (Bryman and Bell, 2003 sophistication and span the very early analyses of Marshall, to those in the 1970s to 1990s (Boswell, 1973; Bannock, 1981; Reid, 1993) and more recent analyses (Parker, 2004). ...
... The managers tend to avoid the cutting edge of technology because they generally don't have the time, resources, or expertise to examine options and develop appropriate plans to incorporate technologies into their business operations (Yap et al, 1992; Thong, Yap, 1995; Burgess et al, 1997). The importance of small business to economies at all levels is well documented and the subject of considerable research (ABS, 1995; Reid, 1993; Hettihewa, 1997; Bastian & Houghton, 1997). Identifying the factors that help to determine successful adoption of information systems (IS) in small business is therefore a matter of economic significance. ...
In 1996 Seddon and Kiew undertook a partial test of DeLone and McLean's (1992) model of Information Systems (IS) success in small business, albeit with some changes to the underlying theoretical assumptions. This paper reports the findings of a study that used the model proposed by Seddon and Kiew as the basis for a survey of small businesses on the Mid North Coast Region of New South Wales in Australia. The path model provided a good fit to the data and accounted for 42 percent of the variance in perceived system usefulness and 67 percent of the variance in user satisfaction. Implications for IS success in small business operations are discussed.
... The sampling procedure used has previously been used successful in the study by Reid (1993) When considering agency theory, we are concerned with relationships within the business and, specifically, with those of principal and agent. The database stores details on the organisational hierarchy of the firm. ...
La transparence est habituellement présentée comme la condition d’une meilleure gouvernance des entreprises, dans la mesure où elle est supposée favoriser l’efficience des marchés et la moralisation de la vie des affaires. Nous explorons dans cet article les racines théoriques du concept et mettons en lumière ses effets pervers. Nous suggérons en conséquence une modélisation alternative de l’entreprise, fondée sur la créativité économique et la confiance.
... The latter two are often designed after preliminary, unstructured field work has been accomplished. In my work, Reid (1993), on small business enterprise, I used both semi-structured and structured interviews. The former investigated, by face to face interview, pricing, competition, costs, finance etc. in a relatively formal way. ...
The theme of this paper is developed in three parts. The first is concerned with methodology. The case is argued for a 'grounded' approach to the analysis of business economics. The second is concerned with intellectual history. It argues that the great economists, such as Smith, used this method, and that the best business economists have followed this lead. The third is concerned with displaying how the method espoused and justified is applied to the theme of 'new business, new life'. It appeals to an empirical model of small firm survival, emphasising the complex of decisions undertaken by the entrepreneur.
Hans-Peter Büttner: Critique of ruling economics. The discourse of Piero Sraffa. Neoclassicaleconomic theory and its apparatus of methodological individualism, subjectivism andmarginalism is the dominant paradigm within the field of economic science. Nevertheless theresearch program of Piero Sraffa and the neo-Ricardian school has shown that neoclassicaltheory is internally inconsistent and faced with serious problems with respect to its empiricalrelevance – as a concrete and well investigated example for empirical observation, I presentneoclassical cost theory, the fundament of standard neoclassical supply function. The textdiscusses three historical debates initiated by the neo-Ricardian school against neoclassicalecomomics and shows the importance of these results for critical economic approaches.
This article analyses the pricing in the short-stay accommodation industry in Tasmania. It utilizes a novel 2008 survey of Tasmanian short-stay accommodation firms in which business managers were asked about their perception of the elasticity of their firm’s demand in each of the market segments that their firm supplied. This direct observation of elasticity allows us to demonstrate that firms’ price across market segments act in a manner consistent with the Lerner index and the theory of third-degree price discrimination. Further we show, in line with expectations based on the literature, that increased quality of the accommodation lowers the elasticity of demand, while the elasticity of demand is higher in winter. Surprisingly, Internet sales channels do not exhibit a different elasticity of demand to other sales channels.
This chapter provides a framework to understand government decisions on dispute settlement and WTO litigation in East Asia, a region where the executive branch has a history of promoting an export-led economy and continues to hold substantial power in trade affairs. It first explains state power in East Asia’s economic and trade policymaking and then how to assess state capacity in handling trade disputes and why this capacity is determined by government-business collaboration. Finally, this chapter lays out a framework to examine the extent of this collaboration based on a country’s export structure and policy networking system.
Our main purpose is to analyse the evolution experienced by a local productive system based on SMEs specialising in a traditional food segment: the nougat sector. This local system has undergone a serious crisis in the last decade due to a variety of factors. The Xixona SMEs have failed to behave as a real local productive system, fully integrated and benefiting from scale and agglomeration economies. In our empirically-based study on 21 Xixona SMEs, we look into the reasons that explain their failure to understand the nature of change, and we provide a Strategic Innovation Programme, which in our view, would help to convert the present Xixona productive system into an authentic local productive system.
Purpose
With the rapid emergence of scholarly thinking and analysis about entrepreneurship has come a multiplicity of approaches, emanating from different academic traditions. This has resulted in an academic field that is complex and heterogeneous with respect to approaches, methodologies and even the understanding about what exactly constitutes entrepreneurship. The purpose of this paper is to try to reconcile the different approaches and views about entrepreneurship that are prevalent in the literature.
Design/methodology/approach
The paper takes the form of a literature review.
Findings
The paper finds that while such heterogeneity can be the source of a nuanced and at times contractor research field, it is also the source of richness and diversity that has contributed to making the emerging field so dynamic.
Practical implications
The field of entrepreneurship should remain committed to a diversity of approaches, understandings and methodologies about what constitutes entrepreneurial activity.
Originality/value
The value of the paper is that it presents a coherent framework that reconciles disparate approaches and understandings about what actually constitutes entrepreneurship.
This paper examines the economic efficiency of SMEs active in the field of trade and tourism. The paper draws on survey evidence from SMEs in Brasov city. The research has been conducted between April-May 2005 on a number of 133 SMEs. According to a statistical database, research has been limited to 114 trade SMEs and 19 tourism SMEs, which account for approximately 13% of the total number of SMEs in the two fields mentioned above, and which, additionally, have at least one employee. Managers from the chosen SMEs were required to fill in a semi-structured questionnaire, most of the questions being of closed type. Respondents have also been allowed to write their views on a number of open questions. The focus of the research has been put on the management of SMEs, including managerial behavior, success factors and barriers regarding the firm’s activity, as well as the competitive position of the firm. Some of the questions were particularly concerned about the efficiency and growth of the firm, as one of the major aims of the research is to enquire about the relationship between efficiency and growth in SMEs.
This paper reports on determinants of small firm growth and survival, using fieldwork evidence collected by face-to-face and
telephone interviews. It extends the ‘basic’ size-age model to a ‘comprehensive’ growth model with two types of additional
explanatory variables: firm specific and business environmental. Estimation is by log-linear regression on Chinese cross-section
data, with corrections for sample selection bias and heteroskedasticity. Our results from the comprehensive model highlight
the importance of location choice and customer orientation for the growth of Chinese private firms.
This study, applying different statistical techniques on survey data, depicts variables that increase the probability to export of a small enterprise. Our analysis shows that business linkages such as networks, joint ventures and subsidiaries play an important role in increasing the probability to export of small enterprises. In addition to that, access to information, access to capital and the level of education increase the probability of a small enterprise to be an exporter. Consequently, we suggest that a national small business strategy should incorporate an element of networking amongst small enterprises and that small enterprise programs should encourage intermediaries to assist not only with networks but also with international market intelligence.
The success or failure of a new business is often dependent on overcoming a series of potential barriers, eg securing sufficient financial backing, adequate and appropriate guidance and training etc. Yet, in light of the substantial growth rate of micro and small businesses, there has been little research into the experiences of potential and new business owners during the start-up of such enterprises. To date there has been no systematic study of this group in the UK, and many questions remain unanswered. This study of micro and small business during the initialisation and formation of new venture creation (eg pre-start-up, 0-6 months and 6-12 months? sought to answer some of those questions. It identifies the needs of new business owners, the barriers they encounter, and the strategies they use to overcome those obstacles. The findings indicate that financial difficulties and the attitudes of banks towards new business owners are the main barriers to successful enterprise creation, with mentors and more specific advice cited as the assistance regarded as affording the greatest benefit to potential and new business owners. In addition, small and micro business owners are going out of business, or are unable to fulfil their potential, because they are denied access to those factors that promote success.
The relationship between the size of an enterprise and other enterprise dynamics seems ambiguous. This paper highlights critical policy and research questions, with specific reference to the links between enterprise size, enterprise growth and the propensity to export. Preliminary findings suggest that the prevalence of some systematic gaps in size -class economic research may lead to a misguided policy framework for supporting small and medium enterprises. The paper articulates that public policy should encompass selective enterprise programs directed at enterprises of different size-classes, informed by a thorough comprehensive appreciation of the factors, systematic and unsystematic, involved in growth and exporting of small and medium enterprises. The tentative finding of this study imply that provision of finance, provision of information and training, ensuring an enabling environment, are the most important variables to take into account when crafting support framework for small and medium enterprises. It is therefore recommended that government should address high interest rates, high inflation, ameliorate access to information and markets, accelerate training of small and medium entrepreneurs, and most significantly embellish coordination and monitoring of units dealing with SME support. It is, however, argued that small enterprises should address certain constraints that are within their control. In addition to the issue of growth and exports of small enterprises, reference to employment and output trends of small enterprises is made, a theoretic model of possible relationships between enterprise export, employment and output is presented. This paper argues for a deeper examination of export processes and export success/ failure of small enterprises. To better understand the intricate dynamics of small enterprises, researchers should undertake comprehensive case studies, longitudinal studies and surveys on SME policy issues.
Using accounts data for a sample of 38 small manufacturing firms located in Tayside Region, this paper investigates the relationship between company characteristics including size, age, location and industry group, and profitability and growth. The trade-off between the possibly conflicting objectives of profit and growth is considered primarily from the entrepreneurial rather than the managerial standpoint which previous econometric studies of small firm performance have concentrated on. Motivations for undertaking entrepreneurial activity and their possible relationships with profitability and growth are discussed and a number of hypotheses developed. From this perspective it is argued that a firm size measure based on employment is more appropriate than one based on sales or assets which previous studies have used. Firm characteristics are found to be of limited value in explaining profitability. However, larger firms are found to grow faster than smaller, and younger firms are found to grow faster than older. This is also some evidence that growth is stronger in urban than in suburban or rural locations. It is possible that entrepreneurial motivations are an important factor in this regard and it is suggested that future econometric studies of small firm performance take these into account.
This explorative research paper considers the strategic development objectives of small owner-managed ventures in order to have an insight into how to systematically categorise the heterogeneous owner-managed small business economy. It commences with a review of the literature and other studies pertinent to the strategic objectives of small business owner- managers from which the general research hypothesis is established; small firms have a variant form of strategic orientation owing to a plethora of internal (behavioural) and external market economic factors. This is followed by the research methodology and statistical analysis of a database which incorporates the views of 922 small firm owner-managers on strategic objectives. The empirical evidence identifies four generic clusters of owner-managers namely: growth stars, exiteers, survivors, and controllers. In order to throw more light on the profile of the variant clusters of owner-managed small firms, the paper briefly examines the inter-relationship of small business strategic orientation with structure (e.g. size, age, sectoral distribution), behaviour (e.g. legal form, family business control) and performance (e.g. growth, profitability). In conclusion, some tentative policy implications from the perspective of management, service providers (financiers and advisors) and policy makers, are discussed.
The vast majority of indigenous Irish enterprises can be classed as small (less than 50 employees). Latest figures from the census of industrial production indicate a figure of 90 per cent. However the Irish small firm sector is notoriously volatile in that a large percentage of new companies “die” in the first five years. For those that survive there are many barriers to growth. Therefore the potential of our small firm sector in aiding employment creation and economic development is not realised. Studies on life cycle and growth indicate that internal managerial capabilities are a significant factor in constraining growth. This paper details an investigation into a particular aspect of management; HRMs and highlights how managerial behaviour in this respect can affect the success of a small firm. Implications for providers of HRD are also analysed and discussed.
This paper places firm competitive strategy in an institutional context to offer a competitive institutional strategy typology. The structure of a competitive institutional environment is explained in terms of its constituents: institutional support, and institutional influence on governance orientation. Firm and competitor position are given in terms of this framework. Proposals dealing with firm strategic aim are identified. Firm strategy is described in terms of movement towards or maintenance of positions within the framework through four strategy types: Dominant market competition, niche market competition, institutional competition-support and institutional competition-governance. Propositions relating firm position, competitor position, strategy and performance are advanced in the context of short and longer time frames. Finally, the paper includes a discussion of firm characteristics, which affect the choice of strategy by firms.
This paper provides a survey on the current status of research in the field of public entrepreneurial
financing. Most importantly, we investigate the economic justification of public activities in the market
for start-up financing by addressing four research questions. First, the paper evaluates whether start-ups
support macroeconomic growth at all. Second, we look for evidence of imperfections and market failure in
the market for entrepreneurial finance. Third, the paper investigates whether public financing of start-ups
is effective in the sense that subsidized firms perform better than non-subsidized ones. Fourth, it needs
to be analyzed if existing measures of public financial support for start-ups are efficient, i.e. reach
their economic goals cheaper than other measures. The answers to these questions are mostly negative which
shows that economic research has no justification to offer for public entrepreneurial financing.
The concept of IT alignment has been discussed in the literature, but almost always in the context of large firms. Similarly, attempts to measure alignment and relate it to performance have been made, but primarily based on work in larger firms. This study focused on measuring the alignment of business strategy and IT strategy (ITS) among small UK manufacturing firms and then investigated the link between alignment and performance. The method built on prior studies, developing approaches to alignment used with larger firms and integrating other concepts and measures from the small firm literature. Using a mail questionnaire, data from 250 firms was collected on nine strategy areas so that business and ITS responses could be compared. IT alignment was explored using both the matching and moderation approaches. The moderation approach appeared more effective in identifying IT alignment. The results indicated that a significant proportion of small firms had achieved high IT alignment. Furthermore, the group of small firms with high IT alignment had achieved better organisational performance than firms with low IT alignment. This is consistent with findings in large firms and opens up possibilities for further study of IT alignment in small firms.
This study note explores the major causes that stimulate Radical Strategic Change (RSC) in Israeli high technology new ventures. It explores the factors that make RSC successful in these ventures, based on the Resource-Based-View (RBV).
A multiple case study methodology was applied on four Israeli-based start-up companies that experienced both an un-favorable and a favorable RSC, sequentially.
Our findings suggest that the level of resources was the major impetus for these RSCs, and that the alignment of resources to the environment yielded the desired performance goals for these venture.
Further research is needed to validate the findings of this study.
The U.S. tax code provides a number of subsidies for low-carbon technologies. I discuss the difficulties of achieving key policy goals with subsidies as opposed to using taxes to raise the price of pollution-related activities. In particular, subsidies lower the cost of energy (on average) rather than raising it. Thus consumer demand responses work at cross purposed to the goal of reducing emissions (especially as average cost pricing is used for electricity). Second, it is difficult to achieve technology neutrality with subsidies-here defined as an equal subsidy cost per ton of CO2 avoided. Third, many subsidies are inframarginal. Finally, subsidies often suffer from unintended interactions with other policies. I conclude with some observations on the use of price-based instruments. In particular I discuss how a carbon tax could be designed to achieve environmental goals of emission caps over a control period.
A dynamic theory of the small firm is expounded, assuming entrepreneurs maximise business value over a finite time horizon. Its predicted trajectories for key financial variables depend on which of debt and equity are cheaper. The predictions are compared with empirical evidence constructed from three years of primary source data on one hundred and fifty new businesses. Evidence largely confirms predictions of the model, favouring a cheap equity view. As capital and sales rise steadily, debt is retired rapidly, except when interest rates on long-term debt are low. Dividends are usually deferred.
This paper has two goals. First, to provide an accurate characterisation of the new small firm in Scotland by reference to markets, finance, costs, business strategy, human capital, internal organisation and technical change. Second, to use these same features to discover salient differences between small firms which either survive or close, two or three years after inception. The empirical evidence is based on interview data from 150 entrepreneurs over a three year period. It was found that surviving firms were larger, better funded, lower geared, and more profit oriented. They also paid higher wages, and were both more attuned to, and realistic about, new technologies. The conclusion formed was that firms which survived generally displayed wider and deeper competencies than firms which closed.
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