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Building an Integrative Model of Small Business Growth
Abstract and Figures
The purpose of this article is to develop an integrative model of small business growth that is both broad in scope and parsimonious
in nature. Such a “big picture” model provides an opportunity (1) to gauge how much we really know about small business growth,
when we simultaneously consider the constructs from the dominant perspectives, (2) to assess the contribution of each of these
perspectives, (3) to examine the indirect effects that some constructs from one perspective might have on small business growth
through constructs from another perspective, and (4) to consider different levels of analysis. Based on an analysis of data
from 413 small businesses, we derive a set of propositions that suggest how entrepreneurial orientation, environmental characteristics,
firm resources, and managers’ personal attitudes directly and/or indirectly influence the growth of small businesses.
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... Fuentes et al. (2009) defined entrepreneurial orientation as a firm's capability to sense and seize opportunities; allocate external resources; and attract new customers. Particularly, this capability is included as a mediating variable in several studies related to resources and performance (Lumpkin & Dess, 1996;Wiklund et al., 2007;dos Reis et al., 2013). ...
En Perú, al igual que en América Latina, hasta un 30% de las nuevas empresas son sostenibles. Los estudios sobre el desempeño se han centrado en factores internos como recursos, capacidades u orientaciones. Sin embargo, las empresas rurales han sido poco estudiadas en términos de factores impulsados por el desempeño. Este estudio tiene como objetivo determinar los recursos que inciden en el desempeño de las PYMES rurales peruanas, con la mediación de la capacidad de marketing. En particular, se incluyen en el modelo conceptual la orientación emprendedora, los recursos de marketing y los recursos de Tecnologías de la Información y Comunicación (TIC). Se presenta un enfoque cuantitativo, que incluye el análisis de datos mediante modelos de ecuaciones estructurales. Los resultados muestran el efecto predictivo de la orientación emprendedora y los recursos de TIC sobre el desempeño, mientras que los recursos de marketing mostraron un efecto negativo. Además, el efecto mediador de la capacidad de marketing sobre el desempeño no fue significativo con respecto a las tres variables independientes.
... While the merits of digital transformation through novel changes in business models are recognized widely, SMEs still grow slowly due to their lack of knowledge and financial resources necessary to take innovative processes. Without necessary assets such as financial resources and management skills for firm growth, an entrepreneur's growth intention is unlikely to bring about tangible and intangible performance for firms (Wiklund et al., 2009). In addition, without the necessary assets and organizational capabilities, potential growth opportunities at hand would not guarantee growth (Stenholm, 2011). ...
As digital transformation reshapes the innovative landscape, many small and medium-sized enterprises (SMEs) seek to adopt new technologies to cope with the dynamic environment. To address everlasting issues of insufficient capital and knowledge of SMEs and promote their growth, innovation vouchers have been introduced as a policy intervention to fill this gap by facilitating collaboration and knowledge sharing. This study aims to examine the impact of innovation vouchers on the financial growth of SMEs, focusing on the Korean case of artificial intelligence (AI) innovation vouchers introduced in 2020 to accelerate digital transformation through AI technology adoption. For the analyses, financial statements and an AI innovation voucher applicant list were collected from three databases. Using propensity score matching (PSM) to address selection bias, this study analyzes data from 663 AI voucher applicants to examine the effects of innovation voucher on SMEs’ financial growth in terms of the compound annual growth rate. The results showed that AI voucher beneficiaries experienced significantly higher growth in net profits compared to non-beneficiaries. Further analysis across different SME growth stages revealed that early-stage firms (1-3 years) saw improvements in net profits, mid-stage firms (4-5 years) showed growth in both net and operating profits, and late-stage firms (6-7 years) demonstrated increases in sales and operating profits. However, no significant differences were found for maturing stage firms (8+ years). These findings suggest that AI innovation vouchers contribute positively to SMEs’ financial growth, particularly in profitability metrics for younger firms. The vouchers appear to assist SMEs in implementing AI solutions into their business models, leading to improved profitability and sales growth. The study provides empirical evidence supporting the effectiveness of innovation voucher programs in stimulating SMEs’ innovation activities and financial growth. Policy implications highlight the importance of tailoring support to different SME growth stages, expanding the scope of innovation vouchers, creating more market-oriented programs, and encouraging broader participation from SMEs and relevant institutions to maximize the benefits of such initiatives in fostering digital transformation and sustainable growth among SMEs.
key words: Innovation voucher, Digital transformation, Technology adoption, SMEs, Policy evaluation
... Lastly, the study seeks to understand the strategic responses of SMEs to these barriers, prompting the question: What strategies have proven effective for SMEs in overcoming market entry barriers in Ghana and Tanzania? This approach not only allows for a comprehensive understanding of the constraints faced by SMEs but also offers insights into potential policy interventions and strategic frameworks that can enhance the business environment for SMEs in emerging economies (Wiklund et al., 2009). ...
Small and Medium Enterprises (SMEs) play a pivotal role in the economic development of emerging economies, yet they face substantial barriers to market entry that can impede their growth and sustainability. This study aims to analyze the major barriers to market entry encountered by SMEs in Ghana and Tanzania and explore the strategic approaches adopted to overcome these challenges. Utilizing a comprehensive literature review, this research synthesizes existing knowledge on entry barriers such as regulatory constraints, access to finance, market competition, and infrastructure deficits. The findings indicate that while both countries face similar obstacles, the intensity and impact of these barriers vary due to distinct economic and policy environments. Moreover, the study identifies successful strategies, including innovation, networking, and capacity building, that SMEs employ to navigate these challenges. By highlighting these barriers and strategies, this study contributes to a deeper understanding of the SME landscape in Ghana and Tanzania, offering insights for policymakers and practitioners to foster a more supportive business environment. The research emphasizes the need for targeted policy interventions to reduce entry barriers and enhance the competitive capabilities of SMEs. Future research should further investigate the dynamic interactions between these barriers and strategies across different sectors.
Purpose
We examine how formal institutions influence the employment growth ambitions of entrepreneurial firms with an explicit focus on how their influence varies for early-stage versus established entrepreneurial firms.
Design/methodology/approach
We develop four moderation hypotheses based on a review of research on entrepreneurial growth ambitions and formal institutions. Then, we use comprehensive institutional and entrepreneurship performance data from three large international data sources to examine the hypothesized relations.
Findings
Our findings suggest that effective formal institutions promote employment growth for established entrepreneurs in particular. Moreover, we found that ineffective formal institutions hinder employee growth for early-stage firms in particular.
Originality/value
We offer several original implications for policymakers and ecosystem builders seeking to support and encourage the early-stage entrepreneurship that accounts for the majority of new job growth in socioeconomic systems.
Entrepreneurial competencies substantially contribute to the performance of small and medium enterprises. However, Entrepreneurial competencies (EC) are influenced by Entrepreneurial Orientation (EO) and other environmental factors. This study unravels the direct effect of EO on EC as it has garnered much attention from researchers. This study also seeks to investigate the indirect effect (moderating) of Environmental Turbulence (ET), which has gained greater significance post-pandemic, on the relationship between EO and EC. Structural equation modelling via Smart PLS 4.0 was used to test the research hypotheses. Based on the analysis of a sufficient number of responses collected from SMEs in the national capital region of India, the study shows a significant relationship between EO and EC. It also unveils the significant role of ET on EO and EC. The results indicate that low ET strengthens the relationship between EO and EC. The study provides implications for policy makers, academicians and budding entrepreneurs.
This study investigates the complex relationships between high-performance work systems, entrepreneurial orientation, and firm performance under varying levels of environmental hostility. Using empirical data from a representative sample of 263 US firms, the paper explores these dynamics through the lens of the resource-based view and configurational theory. The study is the first one to analyze how high-performance work systems and environmental hostility interact to influence the relationship between entrepreneurial orientation and firm performance. The findings challenge the traditional notion of high-performance work systems as universally beneficial, revealing their potential to constrain firm performance, possibly due to structural rigidity inherent in centralized systems and standardization procedures and the contextual misalignment between human resource practices and employee work and business environments. While high-performance work systems seem to stifle the display of entrepreneurial behaviors, environmental hostility enhances firm performance by activating entrepreneurial orientation in hostile conditions. In benign environments, entrepreneurial orientation’s impact on performance is less pronounced. The study also uncovers the complex dynamics of the three-way interaction, showing that in highly hostile environments, entrepreneurial orientation can thrive even without well-developed high-performance work systems, making the case for flexibility and adaptability for activating entrepreneurial behavior in firms. These insights contribute to a nuanced theoretical understanding of how internal and external factors interact to influence firm performance. We provide actionable insights for managers on how to strategize about high-performance work systems to support entrepreneurial orientation effectively, especially in challenging and hostile environments, and offer specific guidance on the optimum configurations of high-performance work systems and entrepreneurial orientation for firm performance in benign and hostile environments. Finally, we present the study’s limitations and outline the future research agenda for scholars, calling on them to incorporate longitudinal and configurational approaches to understand the complex relationship between entrepreneurial orientation and firm performance.
Through Resource Based View (RBV) lenses, this research examines what influences the implementation of sustainable practices in small and medium-sized enterprises (SMEs), focusing on resource efficiency and green jobs. Drawing upon the resource-based view theory, the study aims to uncover the drivers behind SMEs’ engagement in sustainable practices. Cluster analysis and multinomial logit techniques were employed using the Flash Eurobarometer (498) 2022 database, encompassing 6,268 observations across 36 European countries. The findings reveal four distinct clusters of SMEs based on their implemented sustainable practices: minimum waste minimisation, low energy-saving focus, intermediate recycling prioritisation, and advanced resource-saving practices encompassing water, energy, and materials. The results emphasise the significance of investments in resource efficiency and the employment of green jobs in shaping SMEs’ sustainable practices. This research underscores the critical role of financial and human resources working together to enhance resource efficiency and sustainability in SMEs, thus contributing to the existing body of knowledge on sustainable practices in the SME sector.
Background: Small businesses are important for the economy of any country, including South Africa. Small and medium enterprises (SMEs) serve as a valuable engine for growth, innovation, new product development and job creation in the economy.Aim: This research examines business size as a moderator of the effects of the external business environment and the organisation of internal resources on the performance of SMEs in South Africa.Setting: Data for this study were collected using a survey questionnaire from 465 enterprises in South Africa across various industries.Methods: The study utilised a higher-order structural equation modelling and analysed data obtained from 465 complete responses using SmartPLS 4.Results: Findings indicate that business size moderates the relationship between business resources and performance. The study further demonstrated that external factors directly impact the management, allocation and utilisation of internal business resources.Conclusion: Both internal and external resources are found to influence business performance, with internal resources partially mediating the effect of external factors on business performance. The social capital construct suggests that for a better performance of business organisations, businesses must strive for diversification of their network channels and form meaningful associations within the industry they operate.Contribution: The study emphasises the importance of the internal resource factors to the success of businesses, irrespective of their size. Structural reforms and policies should be strengthened in supporting and enabling SMEs to grow their businesses to gain continued economic growth.
Drawing on the literature involving the venture start-up process, integrated with motivational theory from the field of organizational behavior, a model describing the factors that affect firm start-up, strategic implementation, and the entrepreneur's decision to sustain entrepreneurship is proposed. Several hypotheses for future research are suggested.
Entrepreneurial orientation (EO) has become an important and extensively researched topic in the literature. Empirical results suggest that EO may influence firm performance. However, it is important to determine whether the EO-performance relationship is sustainable since EO can be a resource-consuming strategic orientation. This research examines the sustainability of the EO-performance relationship; i.e., whether EO affects performance during an extended period of time or is a “quick fix” where performance is only temporarily affected. Using data from Swedish small firms, the results indicate that there is indeed a positive relationship between EO and performance. This relationship also increases over time. The results show that investments in EO may be worthwhile for small firms since they pay off over an extended period of time.
This paper focuses on dynamic capabilities and, more generally, the resource‐based view of the firm. We argue that dynamic capabilities are a set of specific and identifiable processes such as product development, strategic decision making, and alliancing. They are neither vague nor tautological. Although dynamic capabilities are idiosyncratic in their details and path dependent in their emergence, they have significant commonalities across firms (popularly termed ‘best practice’). This suggests that they are more homogeneous, fungible, equifinal, and substitutable than is usually assumed. In moderately dynamic markets, dynamic capabilities resemble the traditional conception of routines. They are detailed, analytic, stable processes with predictable outcomes. In contrast, in high‐velocity markets, they are simple, highly experiential and fragile processes with unpredictable outcomes. Finally, well‐known learning mechanisms guide the evolution of dynamic capabilities. In moderately dynamic markets, the evolutionary emphasis is on variation. In high‐velocity markets, it is on selection. At the level of RBV, we conclude that traditional RBV misidentifies the locus of long‐term competitive advantage in dynamic markets, overemphasizes the strategic logic of leverage, and reaches a boundary condition in high‐velocity markets. Copyright © 2000 John Wiley & Sons, Ltd.
We combine theory and research on alliance networks and on new firms to investigate the impact of variation in startups’ alliance network composition on their early performance. We hypothesize that startups can enhance their early performance by 1) establishing alliances, 2) configuring them into an efficient network that provides access to diverse information and capabilities with minimum costs of redundancy, conflict, and complexity, and 3) judiciously allying with potential rivals that provide more opportunity for learning and less risk of intra‐alliance rivalry. An analysis of Canadian biotech startups’ performance provides broad support for our hypotheses, especially as they relate to innovative performance. Overall, our findings show how variation in the alliance networks startups configure at the time of their founding produces significant differences in their early performance, contributing directly to an explanation of how and why firm age and size affect firm performance. We discuss some clear, but challenging, implications for managers of startups. Copyright © 2000 John Wiley & Sons, Ltd.
In marketing applications of structural equation models with unobservable variables, researchers have relied almost exclusively on LISREL for parameter estimation. Apparently they have been little concerned about the frequent inability of marketing data to meet the requirements for maximum likelihood estimation or the common occurrence of improper solutions in LISREL modeling. The authors demonstrate that partial least squares (PLS) can be used to overcome these two problems. PLS is somewhat less well-grounded than LISREL in traditional statistical and psychometric theory. The authors show, however, that under certain model specifications the two methods produce the same results. In more general cases, the methods provide results which diverge in certain systematic ways. These differences are analyzed and explained in terms of the underlying objectives of each method.
When the first author reviewed the literature on small firm growth in the mid-1980s for his dissertation, he noted that surprisingly few studies had focused on that specific problem. Today, this is no longer true. In recent years ever more comprehensive lists of studies have been compiled and reviewed. Storey compiled results from more than twenty-five studies. Delmar scrutinized the operationalizations of growth in fifty-five studies. The second author of this chapter recently reviewed and classified close to seventy studies for his dissertation, while Ardishvili et al. included in their classification a full 105 published and unpublished studies focusing on new venture growth. However, rather than presenting a set of solid generalizations on the causes and effects of growth, these reviewers all tend to come up with relatively critical accounts concerning both theoretical and methodological shortcomings.