Impact of Partial Lean Thinking on the Financial Performance of Small and Medium-Sized Enterprises: An Exploratory Study in a Developing Economy

Abstract

Although evidence indicates impressive benefits of lean thinking for large enterprises, a lot of skepticism still remains about the adoption of lean in Small and Medium-sized Enterprises (SMEs). The current study intended to develop an understanding of the core concept of lean thinking in SMEs and to empirically investigate the relationship among lean adoption, operational measures, and financial performance. Particularly, the study highlights the mediating role of operational measures in deriving the financial performance associated with the adoption of lean in SMEs. The study comprises a survey; data is collected from 382 SMEs, and the hypothesized relationships are then analyzed using Structural Equation Modeling (SEM). The findings suggest that even in the case of partial implementation, lean approaches are capable of improving the operational measures and financial performance of SMEs. The impact of lean adoption on financial performance is found to be mediated by operational measures.