Abstract
Small and medium-sized enterprises (SMEs) in both the manufacturing and service sectors have been viewed as an important driving force behind the rapid economic growth in China. There are multiple factors that drive the success of SMEs. In this paper, we study the effect of innovation culture, technological capability, and organization size on the performance of SMEs in China. We hypothesize that firm performance is positively affected by each of these factors. We use data from 1124 SMEs in China and apply regression analysis to test our hypotheses. We find that technological capability and organization size have a statistically positive effect on the performance of SMEs. Because manufacturing and service industries have distinct characteristics, we also compare the effects of these factors on firm performance within these industries. We find that technological capability is positively and statistically significantly related to firm performance in the manufacturing industry but not in the service industry, while innovation culture is positively and statistically significantly related to firm performance in the service industry but not in the manufacturing industry.
Highlights
Small and medium-sized enterprises (SMEs) in the manufacturing and service industries are playing an increasingly important role in the economic development of many countries around the world, China, in which there has been a recent surge in the number of SMEs
A number of studies have found that technological capability positively affects firm performance [27,28,29]. Based on this past research, the present study develops a research framework that examines the relationship between organization size, innovation culture, and technological capability
We observe that both organization size and innovation culture have a significant positive correlation with firm performance
Summary
Small and medium-sized enterprises (SMEs) in the manufacturing and service industries are playing an increasingly important role in the economic development of many countries around the world, China, in which there has been a recent surge in the number of SMEs. Since joining the World Trade Organization (WTO), China has earned foreign exchange reserves mainly through its SMEs [2,4]. They generate direct foreign exchange, with many SMEs in China targeting foreign markets, as illustrated by the globally ubiquitous “Made in China” label. In this respect, Chinese companies have been able to successfully compete in the global market due to their lower labor and material costs for the same quality of product
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