Small Firm Owners Research Articles

Allocating labor across small firms: Experimental evidence on information constraints

We document interest in labor reallocation among small firm owners in Ghana; 60% and 41%, respectively, self-report willingness to hire or work for the average local firm owner. Firm owners also exhibit high willingness-to-pay for information on a random subset of hiring firms and jobseeking firm owners during a Becker–Degroot–Marschak exercise. Conditionally random variation in access to this information generates immediate labor adjustments within and between firms, though rarely of firm owners themselves, and impacts firm closure 5-months post-intervention. Our findings suggest that labor market information of this kind is both valuable and actionable in our context.

Exploring the nexus of industry dynamism, climate risk exposure and mental health and well-being of owners of small and micro-sized suppliers: implications for sustainable supply chain management

PurposeAlthough climate change-related risks affect all stakeholders along the supply chain, the potential impact on small and micro-sized suppliers is incredibly excessive. The corresponding toll of these climate risk threats on the mental health and well-being of owners of small and micro-sized suppliers can adversely affect their participation in sustainability efforts, ultimately impacting the firm's performance. This often-overlooked dynamic forms the core of our research. We probe into two pivotal aspects: how industry dynamism and climate risk affect the mental health and well-being of owners of small and micro-sized suppliers and how, in turn, dictate involvement and, consequently, supply chain sustainability performance. This is further nuanced by the moderating role of the abusive behavior of buyers.Design/methodology/approachOur study is built on resource dependency theory and the supporting empirical evidence is fortified by a mixed-methods sequential explanatory design. This study comprises three phases. In the first phase, our experiment examines the effect of industry dynamism and climate risk exposure on sustainable supply chain management performance. Hypotheses H1a and H1b are tested in the first phase. The second phase involves using a survey and structural equation modeling to test the comprehensiveness of the model. Here, the relationship between industry dynamism, climate risk exposure, mental health and well-being of owners of small and micro-sized supplier firms, supplier involvement and sustainable supply chain management (H2–H7) is tested in the second phase. In the third phase, we adopt a qualitative approach to verify and provide descriptive explanations of phase two findings.FindingsOur findings underscore the significance of small and micro-sized suppliers in sustainability, offering invaluable insights for both theoretical understanding and practical implementation. Our study highlights that buyers must allocate sufficient resources to support small and micro-sized supplier firms and collaborate closely to address climate change and its impacts.Practical implicationsThe key takeaway from this study is that buyer firms should consider SDG 3, which focuses on the good health and well-being of their employees and the mental health and well-being of owners of small and micro-sized suppliers in their upstream supply chain. This approach enhances sustainability performance in supply chains.Originality/valueThis is one of the first studies that shows that industry dynamism and climate risk exposure can negatively impact small and micro-sized suppliers in the presence of a contextual element, i.e. abusive behavior of buyers, and ultimately, it negatively impacts sustainable supply chain performance dimensions.

Digital Technologies Application and Competitive Advantage for MSMEs Sustainability and Market Performance

The development of digital technology and intense competition have forced owners of small firms (MSMEs) to adapt technological developments to compete with competitors quickly. This study examines the effect of digitalization and competitive advantage on market sustainability and performance. This study used a qualitative method by distributing questionnaires to 166 MSMEs owners in Indonesia. The finding of this research indicate that digitalization and competitive advantage affect sustainability and market performance. This study's results suggest to MSMEs owners that technological proficiency is crucial for companies to survive in an uncertain environment.

Challenges and Opportunities in Adopting Capital Budgeting Practices

This study aims to examine the obstacles and potential advantages that small and medium firms encounter when using capital budgeting techniques. The present study employs a design that involves doing a comprehensive literature analysis to analyze various papers and prior research. The present study reveals a number of problems encountered by small and medium firms in the process of adopting capital budgeting techniques. One of the most significant obstacles that has a profound impact is the deficiency in understanding capital budgeting. The implementation of capital budgeting procedures is infrequently observed among small and medium firms, resulting in limited impact. Despite the potential benefits it offers to the development of small and medium firms, capital budgeting facilitates crucial decision-making processes pertaining to investments, long-term planning, and investment assessment for business owners. The practical implication of this study suggests that owners of small and medium firms should consider enhancing their financial knowledge or seeking professional experience in the areas of finance and management.

Impact of CEO duality and business education on the cost of debt

The purpose of this study is to investigate the impact of CEO duality (CD) and business education (BUS_EDU) of small family business owners on the cost of debt (INT). This study used a survey design to collect data from the owners of unlisted small family business firms in India. The empirical analysis shows that CD and B_EDU decrease the cost of debt. In addition, gender plays a moderating role in the association between BUS_EDU and INT. Further, CD and B_EDU increase the chances of decreasing the cost of debt by 0.70% and 0.50%, respectively. The empirical results contribute to the literature on the impact of CD and B_EDU on the cost of debt. The empirical analysis may be helpful to academia to extend the studies on the impact of CD and B_EDU on the cost of debt.

Relationship between financial stress and financial well-being of micro and small business owners: Evidence from India

Micro and small businesses financially suffered due to COVID-19 in India. This financial suffering created financial stress among them and deteriorated their financial well-being. However, micro and small business owners exhibit financial resilience by bouncing back to regular business activities through their hope, optimism, and self-efficacy, which are the components of positive psychological capital. This study analyzes the relationship between financial stress and financial well-being of micro and small firm owners keeping financial resilience as a mediator and positive psychological capital as a moderator in the mediation. This descriptive analysis employed a survey method to collect primary data using the interview method. The interview method was used as most micro and small business owners are comfortable with interaction rather than filling out the questionnaires due to the language barrier. The sample size is 384 respondents, as per Krejcie and Morgan’s formula. The mean scores indicate a moderate degree of financial stress (2.354), financial resilience (2.623), and financial well-being (2.637). The level of financial stress differs based on the respondents’ gender. Financial stress is more among female business owners (2.504) than their male counterparts (2.265).Further, business owners who earn more have a higher level of financial resilience (2.985), psychological capital (2.951), and financial well-being (2.711). Financial stress significantly impacts financial well-being (28.4%). Financial resilience has a partial mediation effect (65%) on financial stress and financial well-being. Finally, psychological capital moderates indirect relationships among financial stress, financial resilience, and financial well-being.

Understanding Combined Health and Business Risk Behaviour: Small Tourism Firm Owners Reopening Amid COVID-19 in Pingyao, China.

This study explores the psychological factors affecting small tourism firm (STF) owners’ decision making about reopening businesses in the midst of COVID-19 based on protection motivation theory and the theory of planned behaviour. The data were collected from a sample of 300 STFs in the Ancient City of Pingyao when the lockdown policy was lifted in China. A symmetric approach, i.e., partial least squares structural equation modelling (PLS–SEM), and an asymmetric model, i.e., a fuzzy set/qualitative comparative analysis (fsQCA), were used to analyse the net effect of the psychological determinants and correlations between the variables leading to high and low behavioural intentions to reopen businesses. The results indicate that social norms and perceived business uncertainty were the critical factors influencing the intention to reopen. The pathway (low perceived risk of infection, low perceived business uncertainty, high reward, high response efficacy, high self-efficacy, high attitude, and high subjective norm) was only one configuration for a high intention to reopen. The study results are discussed based on dual-process theory, and practical implications are offered to guide STF recovery amid COVID-19.

Psychological resilience and business survival chances: A study of small firms in the USA during COVID-19

Small firms make huge contributions to the circular economy. However, survival of these firms has been a concern, more so in the context of COVID-19. Hence, it is critical to understand the factors predicting business survival chances of small firms. The present study examines whether owners’ resilience (a psychological resource) is positively related to small firms’ business survival chances during the pandemic. We borrowed from the broaden-and-build theory to posit that psychological resilience provides a broadened repertoire of resources which help in coping with depression, leading to higher chances of business survival. Further, using a sample of 657 small firm owners, we investigated if direct and indirect linkages between psychological resilience and business survival chances change with owners’ experience of financial fragility (i.e., lack of financial resources). Our study carries significant implications for theory and practice.

The Mediating Effect of Coping Strategies Between Psychological Capital and Small Tourism Organization Resilience: Insights From the COVID-19 Pandemic, Malaysia.

Amid difficulty, the psychological capital of small tourism firm owners/managers has been given less attention. In the coronavirus disease-2019 (COVID-19) pandemic, this research examined how psychological capital (self-efficacy, hope, optimism, and resilience) affects organizational resilience. By structural equation modeling (AMOS 21.0), 644 small tourism firm owners in Malaysia were randomly selected to investigate the relationship between psychological capital and organizational resilience, and the mediating effect of problem-focused and emotion-focused coping strategies on this relationship. The findings of the study supported hypothesized relationships, as the psychological capital of small tourism firm owners in Malaysia significantly affects organizational resilience. Furthermore, the study discovered that problem-focused and emotion-focused coping strategies have partial mediating effects on the association between psychological capital and organizational resilience. In the context of small tourism businesses sector, the findings of the study have implications, as the firms identify the recovery procedure in the COVID-19 pandemic.

How Owners’ Emotions Shape Small Family Firms’ Selling Price Perceptions

Planning for business succession is a challenging process. For non-family successors, small family firm owners typically demand a sale price, which they specify based on personal experiences with and feelings toward their firms. However, their price perceptions typically do not represent the firm’s market value, which leads to failed transactions. Research studies selected emotions and lacks a measurement framework to quantify their impact on selling-price perceptions. Our study contributes to the literature by developing, validating, and preliminarily testing a new scale, which we denote the individual price indicator. To this end, we develop the proposed scale by analyzing 115 peer-reviewed papers in terms of emotional aspects and systematizing the corresponding results. We further validate the scale in two qualitative and two quantitative studies. Lastly, we provide a first test of the scale on owners’ willingness to accept lower sales prices. Our results evidence the scale’s usefulness to facilitate an owner’s business valuation practices.

Retraction statement: ADHD symptoms and entrepreneurial orientation of small firm owners

Retraction statement: ADHD symptoms and entrepreneurial orientation of small firm owners

Exploring the link between management training and organizational performance in the small business context

PurposeThis study aims to explore the impact of management training on organizational performance in the small business context to evaluate whether formal management learning interventions bring organizational benefits to small enterprises.Design/methodology/approachA qualitative approach was adopted consisting of 100 interviews with small firm owners/managers and employees working in 50 Greek small enterprises operating in the manufacturing and services sectors. Participant firms consisted of 25 small enterprises (9 manufacturing firms and 16 firms in the services sector) whose owners/managers have completed various formal training interventions (i.e. accredited seminars and workshops, business and management courses, etc.,) and 25 small enterprises (16 manufacturing firms and 9 firms in the services sector) whose owners/managers have not completed any sort of formal business training and have never attended formal management courses.FindingsThe findings revealed that management training in small businesses had a positive impact on organizational performance. In particular, those respondents that completed formal training interventions argued that their firms achieved increased profitability during 2017 and 2018; improved staff productivity; very low staff turnover rate; and enhanced staff satisfaction and motivation compared with the less-trained owners of small firms in the same sector. The participants pointed out that their formal education in business and management has enabled them to realize the importance of employee learning and job design for staff motivation, whereas it has helped them to manage change more effectively.Practical implicationsThe present findings have major implications for practitioners (i.e. small firm owners/managers), as they point to a positive link between management training and organizational performance, thus encouraging them to invest in their self-development.Originality/valueThe existing evidence around the impact of management training on firm performance has been based mostly on quantitative research in large organizations. However, the available empirical studies fail to explore in-depth how formal management training can help smaller enterprises achieve improved organizational performance. Against this background, the present study sheds new light on this area.

Credit, Income and Inequality

Analyzing unique data on loan applications by individuals who are majority owners of small firms, we detail how a bank’s credit decisions affect their future income. We use the bank’s cutoff rule, which is based on the applicants’ credit scores, as the discontinuous locus providing exogenous variation in the decision to grant loans. We show that application acceptance increases recipients’ income five years later by more than 10% compared to denied applicants. This effect is mostly driven by the use of borrowed funds to undertake investments and is stronger when individuals are more credit constrained.

The effects of managerial preferences on the financial behaviour of small firms: a demand-side perspective

In this study, we argue that the financial behaviour of small firms is largely affected by the preferences of the owners, who aim for either independence or wealth maximisation. By analysing survey data from Germany, we observe that owners with a preference for minimising capital costs and maintaining decision-making autonomy deploy more internal financing and raise short-term debt to meet temporary capital requirements. In contrast, owners raise more long-term debt when banks also provide non-financial complementary resources, but they seem to acquire external equity instead of debt to develop new resources and capabilities in collaboration with new co-owners. In light of our findings, we propose a dichotomy of a financial bootstrapping and an added-value pecking-order that small firm owners follow depending on their overarching goal. Overall, our findings indicate that small firm capital acquisition in Germany nowadays reflects more demand-driven rather than supply-constrained behaviour.

In-work poverty: reversing a trend through business commitment

PurposeThis study aims to explore whether employer action may contribute towards reducing in-work poverty. Essentially, the study examines the extent to which small firm owners accept as being among their core responsibilities the support of the working poor both from an ethical and financial perspective. It further explores the impact of employee-friendly policies to support the working poor on the organizational performance of small enterprises.Design/methodology/approachA qualitative approach was adopted consisting of 60 responses from 30 small firm owners and 30 employees. More specifically, the study draws on the empirical data collected through face-to-face semi-structured interviews with the firm owners of 30 low-paying enterprises operating in Greece and 30 employees working in those firms.FindingsThe findings reveal that employer measures to reduce in-work poverty such as systematic training, travel allowance, provision of free meals and retail vouchers, bonus schemes and other indirect financial rewards do enhance overall employee well-being, which, in turn, makes employees more engaged with their work and motivate them to “go the extra mile” for their employer. As a result, organizations appear to enjoy several benefits including less absenteeism and staff turnover, reduced errors in production and increased productivity.Practical implicationsThe present analysis argues that a narrow focus by policymakers on both direct and indirect governmental measures (e.g. an increase of the minimum wage, childcare and housing support) to reduce in work-poverty could be problematic as there are employer instruments that could also have a direct and indirect impact on employee income that could be useful when thinking about how in-work poverty can best be addressed. The empirical work showed that the above-mentioned measures have the potential to bring various organizational benefits including increased staff loyalty, less absenteeism, improved customer service and increased productivity. Such findings indicate that there is a strong business case for employers to combat in-work poverty and provide “better” jobs to individuals.Originality/valueThe emphasis of research around in-work poverty has been placed predominantly on welfare state measures to support the working poor, whereas the contribution of employers has been ignored. The present study fills this knowledge gap by leading to a better understanding of whether there is a business case for employers to fight in-work poverty.

Knowledge stock and absorptive capacity of small firms: the moderating role of formalization

PurposeDespite the established significance of absorptive capacity, there is a worrying lack of research that empirically examines its antecedents. With a call for investigation guided by the knowledge-based theory, the purpose of this paper is to bridge any probable gap by exploring the effect that an organization’s knowledge stock and its knowledge integrating mechanisms have on the development of its absorptive capacity.Design/methodology/approachOn the basis of a survey administered to a sample comprising owners of small Indian automotive firms, this paper empirically examines the direct effect of an organization’s knowledge stock (including knowledge breadth and depth) and the moderating role of its structure-related mechanisms (e.g., formalization) on its potential and realized absorptive capacities. The study uses survey data from 226 small business owners and multiple linear regression analysis to examine the significance of its hypotheses.FindingsThe results show that knowledge stock has a statistically notable influence on a small firm’s absorptive capacity. The enabling role of formalization in the relationship between knowledge stock and absorptive capacity is also evident.Practical implicationsGiven the handicap of small firmsvis-à-vislarge firms to deploy internal R&D capabilities, business owners must ensure not to confuse absorptive capacity with the pre-existence of R&D capabilities.Originality/valueThe unbundling of knowledge stock into breadth and depth of knowledge enables business owners and researchers to understand how any particular knowledge stock can relate to an organization’s absorptive capacity.

Entrepreneurial learning in practice: The impact of knowledge transfer

The aim of this research is to provide perspectives on how entrepreneurial practitioners, specifically owners of high-tech small firms (HTSFs), engage with knowledge transfer and learn. The authors draw on extant research and report on the views and observations of the principals in two case study companies in the HTSF sector with regard to growing their ventures and developing learning while part of a Knowledge Transfer Partnership (KTP) programme. Entrepreneurial learning is an area of significant interest due to the growth of entrepreneurship and the varied ways in which learning can take place. There are many different interventions that can be used to transfer knowledge and develop learning, but there is limited, if any, consensus on their respective effectiveness. The researchers used an ethnographic approach in two companies over an 18-month period. The study concludes that the KTP intervention facilitates an opportunity for learning through disruption, with the key barrier to any new learning being established practice. Interestingly, the findings suggest that entrepreneurial learning is greatly facilitated by ‘on-the-job’ learning.

The perceived importance of external ties and the performance of small owner-managed firms

The effects of perceived importance of external ties, a dimension of tie strength, on the performance of small owner-managed firms were investigated using data from a survey of the owners of small owner-managed firms in Scotland and New Zealand. Ties rated as highly important were found to promote growth in sales. In contrast, weak-in-importance ties were found to suppress growth in sales. The results support the core competence perspective on the configuration of external ties, suggesting that firms should focus on important external ties that contribute to their core competencies.

Applying a Resource-Based View to the Competitive Advantage of Small and Micro-Sized Firms

Applying a Resource-Based View to the Competitive Advantage of Small and Micro-Sized Firms

Critical performativity and the small firm: Challenges and prospects

The idea of engaging directly with management practice while retaining a strongly critical social science stance has become popular under the banner of critical performativity. This idea has yet to be applied to small firms, and it also needs specification: as usually stated, it lacks grounds within science to define with whom to engage and with what goals. In total, three themes are addressed: the nature of a ‘radical pluralist’ view of engagement, the distinct challenges in a small firm context and a set of three illustrations of possible lines of engagement. Engagement is both desirable and feasible, though large challenges remain, notably the demands of small-firm owners and the requirements of close engagement over a period of time.