The owner/manager's mentality and the financial performance of SMEs

Abstract

PurposeDespite the fact that the mentality of owner/managers is an important aspect of their personality characteristics no prior study has made any attempt to examine its possible impact on enterprise performance during various stages of growth. Therefore, based on a questionnaire survey conducted in Sri Lanka, this study attempts to examine this aspect of small to medium enterprises (SMEs).Design/methodology/approachBased on a review of the literature, a conceptual model was constructed as the initial step in this research for visualising and testing the relationship between owner/managers' personality styles, operational approaches and financial performance. The model was then extended to reflect the relationship between owner/manager's mentality styles and financial performance over all stages of enterprise growth.FindingsThe results of the study show that there is a strong relationship between owner/managers' mentality and financial performance of their enterprises. Moreover, when owner/managers of these enterprises become more entrepreneurial minded in the introductory and decline stages their performance tends to be higher. However, this relationship is not seen to be significant in the growth and maturity stages.Practical implicationsThe findings of this study can be useful to SMEs in any country as they show how the mentality of owner/managers is likely to affect the financial performance of their enterprises differently during different stages of growth.Originality/valueSince no similar research has been reported in the past this study takes its own independent approach and presents its analysis and findings as a novel addition to the small business literature.