Liquidity management in small firms: a learning perspective

Abstract

PurposeThis paper aims to focus on liquidity management in small firms and how this may be best met. It seeks to present results from eight case study firms to demonstrate different types of learning in small firms.Design/methodology/approachThe paper uses a qualitative methodology that involves in‐depth, semi‐structured interviews and direct observation, conducted longitudinally in eight case study companies.FindingsThe findings suggest that liquidity management is either based on owner‐manager past experiences, experiences of others or is strongly influenced by industry norms, which are shared rules within the industry, and not based on the calculation of costs and benefits of particular causes of action.Research limitations/implicationsThe study is limited to the extent to which it can be generalised to a wider population of small firms. The main implication is that policy makers should facilitate networking opportunities where owner‐managers can interact with external advisors.Originality/valueThe originality and value of the paper is that it conceptualises liquidity management in small firms as a learning process utilising closed and open loop learning.