Impact of Market Orientation and Performance Measurement Orientation on the Performance of Small and Medium Scale Enterprises

Abstract

Effective management of Small and Medium Enterprises (SME) performance is a crucial task since SMEs are recognized as the backbone and the growth engine of national economies. They play an important role from many directions, namely, in enhancing economic growth, job creation, innovation, and sustainable development. Prior research discuss links between market orientation (MO) and firm performance, as well as between performance measurement system (PMS) and firm performance, as well as between performance measurement system (PMS) and firm performance. However, studies on the reciprocated influence of the two perspectives on SME performance is limited. Empirical data were collected through a survey from Sri Lankan SMEs and the instrument included 59 Five-point Likert scale statements. Preset data from 35 respondents were analysed to identify the relationships between MO, Performance measurement orientation (PMO), and SME performance. According to the pretest results, MO as well as PMO has a positive relationship with SME performance. However, a post study with a larger sample of 73 responses did not establish the relationship between MO and SME performance but established the relationship between PMO and SME performance. The novelty of the study stems from three angles by: (1) being the first study explaining performance orientation which consists of adoption of PMS and use of performance information; (2) providing insights on how SMEs performance can be influenced by managing MO, PMO and other factors; and (3) listing the factors that influence MO and PMO.