Portuguese SMEs Research Articles

Are There Non-linear Relationships between Ownership Structure and Operational Performance? Empirical Evidence from Portuguese SMEs Using Dynamic Panel Data

This paper analyzes the causal relationship between the ownership concentration, insider ownership and operational performance using a sample of 4.163 Portuguese SMEs and panel data models. The main results show an endogenous and dynamic relationship between those variables. The quadratic specification established between ownership concentration and operational profitability suggests that for low levels of control rights the expropriation hypothesis prevails and for high levels the supervision hypothesis prevails. It was also possible to validate the effect of entrenchment and convergence of interests in the relationship established between the insider ownership and performance.

Supervisory Support and Stress Mitigation on SMEs: A Research Proposal

This paper discusses a methodology for evaluating the role of supervisory support on the mitigation of situational stress on SMEs, directly and through the job satisfaction and organizational commitment. We first present the ideas and literature supporting the model, discussing its merits and possible limitations, and then move on to present a layout of observable dimensions and measurability standards to assess its main underlying concepts on real Portuguese SMEs context. We thus propose the rationale and the methodological framework enabling a specific research of the role of supervisory support – and implicitly, the management quality – in coping and mitigating situational stress, and eventually identifying conditions allowing for above average organizational performance in a time of exceptionally difficult economic conditions.

Sustainable Value and Cleaner Production – research and application in 19 Portuguese SME

Eco-efficiency aims at improving the economic and ecological efficiency of companies, attaining a higher Value with fewer inputs, materials and energy, more outputs but fewer wastes. The result of implementing this strategy is the delivery of products and services that satisfy human needs, at lower costs while reducing the ecological impacts and resource intensity. This means a higher Value for companies, defined as the relationship between the satisfaction of needs and the resources used in achieving that satisfaction, as well as the increase of their competitiveness.The purpose of this research was to develop the Sustainable Value concept using the synergies between tools from Value Management, Value Analysis and from Eco-efficiency, Cleaner Production. The result is an indicator that integrates the three aspects of Sustainability: economic, environment and social and enables the monitoring of the evolution of those aspects in a company.The aim of this approach is to increase the Sustainable Value of the study subject, this being defined as the specific subject to which the methodology is applied, either a product or a process in a company. The satisfaction levels are evaluated considering environmental and social aspects. The resources used to attain that satisfaction of needs are also characterized in an explicit way in terms of environmental, social and economic aspects.The proposed Sustainable Value methodology, with an eight phases working plan, developed by a team, was validated by undertaking three projects, involving 19 Small and Medium Enterprises where Sustainable Value concept was implemented. They represent a wide range of activity areas in different regions of the country, covering almost the whole Portuguese territory.The application of the proposed methodology in the different companies shows the benefits concerning the inputs reduction (water, energy and materials) as well as emissions and waste reduction. The increase of the company's productivity and collaborators social welfare is also highlighted. Performance, costs and sustainable value variations are quantified.A first important conclusion that can be taken from the reported experiences is that the use of Sustainable Value Methodology enables the diagnosis of the main problems related to processes and products and the quantification of the used resources, and takes into account the three aspects of Sustainability: economic, environmental and social.Another conclusion is the applicability of the methodology to companies of different size and sectors. The same happens and is confirmed in existent literature about the subject with other approaches.The improvement of Sustainable Value of the study subjects is reflected in the competitiveness of the companies.Some suggestions about conditions that must be fulfilled for the success of the introduction and implementation of this approach in a company are also presented.

INVESTMENT DETERMINANTS OF FITNESS SMES IN PORTUGAL

Based on a sample of 182 Portuguese fitness SMEs we study the investment determinants of fitness SMEs in Portugal. The multiple empirical evidence obtained in this study lets us conclude that the main explanatory theories of firm investment cannot be considered mutually exclusive in explaining the investment of Portuguese fitness SMEs, since: 1) they adjust investment as a function of sales, corroborating the assumptions of Neoclassical theory; 2) cash flow is an important financial resource for investment, corroborating the assumptions of Free Cash Flow theory; and 3) external finance, namely debt, is a restrictive determinant of investment, which corroborates the assumptions of Agency theory. Besides these results, we find that growth opportunities and government subsidies are positive determinants of investment in Portuguese fitness SMEs, and the financial crisis of 2008 has a negative influence on investment in Portuguese fitness SMEs. The financial crisis of 2008 also means greater relative importance of cash flow and government subsidies for increased investment, and debt for diminished investment, in fitness SMEs.

SMES’ INVESTMENT DETERMINANTS: EMPIRICAL EVIDENCE USING QUANTILE APPROACH

This paper makes an important contribution to the literature on SMEs, namely investigating whether the relationships between determinants and investment are dependent on the level of investment. Based on a sample of Portuguese SMEs, using two-step estimation method, firstly using probit regression and secondly using quantile regressions, we find significant non-linearities in relationships formed between determinants and investment over the distribution of investment. In particular, we find that: 1) sales, age and growth opportunities are restrictive determinants of investment for low levels of investment, but positive determinants of investment for high levels of investment; 2) debt and the interest rate are restrictive determinants of investment but only for low and intermediate levels of investment; 3) cash flow is a positive determinant of investment, but is more important for investment regarding low levels of investment; 4) GNP is a positive determinant of investment, but only for high levels of investment; and 5) investment in the previous period is a positive determinant of investment in the present period, but only for intermediate and high levels of investment. The relevance of the various theories explaining firm investment depends on SMEs’ level of investment.

Credit risk assessment and the impact of the New Basel Capital Accord on small and medium‐sized enterprises

PurposeThe purpose of this paper is to develop a credit‐scoring model as an aggregate valuation procedure that integrates various financial and non‐financial factors and thereby improves small to medium‐sized enterprises' (SMEs) knowledge about their default risk.Design/methodology/approachUsing panel data from a representative sample of Portuguese SMEs operating in the food or beverage manufacturing sector, this paper develops a logit scoring model to estimate one‐year predictions of default.FindingsThe probability of non‐default in the next year is an increasing function of profitability, liquidity, coverage, and activity and a decreasing function of leverage. Smaller firms and those with just one bank relationship have a higher probability of default. The findings suggest that a main bank has incentives to engage in hold up by increasing margins that ex post are too high.Practical implicationsBecause SMEs differ from large corporations in their credit risk (e.g., riskier, lower asset correlations), this study has implications for both banks and supervisory actors. Banks should consider qualitative variables when setting internal systems and procedures to manage credit risk. Supervisory institutions should claim mixed credit ratings to determine regulatory capital requirements.Originality/valueThis paper offers a new model, focused specifically on SMEs, and explores the role of financial and non‐financial factors in determining internal credit risks.

Is Age a Determinant of SMEs’ Financing Decisions? Empirical Evidence Using Panel Data Models

Using panel data models, this study investigates whether firm's age is a determinant of Portuguese SMEs’ financing decisions. The results suggest that age is relevant for: the impact of financial deficit on variations of short– and long–term debt; the level of adjustment of short– and long–term debt toward the respective optimal levels; and the relationships between usual determinants and short– and long–term debt. The results for young and old SMEs suggest that Trade–Off Theory and Pecking Order Theory should not be considered to be mutually exclusive, since both theories are necessary to understand the SMEs’ capital structure decisions throughout their life–cycle.

ARE THE DETERMINANTS OF YOUNG SME PROFITABILITY DIFFERENT? EMPIRICAL EVIDENCE USING DYNAMIC ESTIMATORS

Using two step method, namely probit regressions and dynamic estimators, and on the basis of two sub-samples of Portuguese SMEs: 1) 495 young SMEs; and 2) 1350 old SMEs, this study seeks to verify if age is a important factor of the relationships between determinants and profitability. Age, size, liquidity and long-term debt are of greater relative importance for the increased profitability, while risk is of greater relative importance for diminished profitability of young SMEs, compared to the case of old SMEs. R&D expenditure is of greater relative importance for increased profitability in old SMEs. Additionally, old SMEs have more persistent profitability than do young SMEs.

Design and competitiveness in a Portuguese SME in the footwear industry: a case study

The use of a case study approach, emphasising the role of design in companies, will be taken as an appropriate way to analyse competitiveness in a Portuguese SME in the footwear industry. Discussing, in particular, the design function, alongside recent initiatives in the field of marketing and innovation, we conclude that production and operations management is used not only as a means of cost optimisation but also as a specific driver of differentiation, particularly in achieving above average reputation in the business of subcontracting. This conduct has been supported by continued investment in design ‘people’ with a view to ‘innovation by design’.

Do the investment determinants of new SMEs differ from those of existing SMEs? Empirical evidence using panel data

ABSTRACTIn this study we investigate whether the investment determinants of new SMEs differ from those of existing SMEs. To do so, we use two samples of Portuguese SMEs: 495 new SMEs and 1350 existing SMEs, and to estimate the results we use the two-step estimation method. The empirical evidence allows us to conclude that cash flow, age, growth opportunities and GNP are of greater importance for stimulating investment in new SMEs than they are in existing SMEs; sales are of greater importance in stimulating investment in existing SMEs than they are in new SMEs; and debt and interest rate are of greater importance in reducing investment in new SMEs than they are in existing SMEs. Also, the persistence of investment over time is greater in new SMEs than it is in existing SMEs. These findings suggest that problems of information asymmetry between SME owners/managers and creditors are particularly important in the context of new SME activity. As guidelines for economic policy, we suggest adding effective support through the creation of beneficial lines of credit designed specifically to support new SME activity.

Assessing the nonlinear nature of the effects of R&D intensity on growth of SMEs: a dynamic panel data approach

Based on a sample of Portuguese SMEs for the period 1999–2006 and using two step estimation, namely probit regressions and dynamic estimators, this study makes two important contributions to the literature: (i) identification of a quadratic relationship between RD being a restrictive factor of SME growth for low levels of RD and (ii) the growth of SMEs seems to be dependent on the nonlinear effects associated with distinct levels of R&D intensity. The nonlinear effects identified suggest that Portuguese SMEs with high levels of R&D intensity more easily find an efficiency scale and are more dependent on internal financing and short-term debt as sources for funding growth, compared to the case of Portuguese SMEs with lower levels of R&D intensity.

Sources of finance for R&D investment: Empirical evidence from Portuguese SMEs using dynamic estimators

This paper makes two specific contributions to the SME literature: (i) it is pioneering in using the two-step estimation method, considering SME R&D intensity as dependent variable and cash flow, short and long-term debt and government subsidies as determinants; and (ii) the empirical evidence obtained allows us make important empirical contributions. Cash flow and short-term debt, regardless of the respective level, influence positively R&D intensity by SMEs. Secondly, long-term debt and government subsidies are only important for increased R&D intensity for higher levels of long-term debt and government subsidies. The multiple empirical evidence obtained in this study allows us to make important suggestions to policy-makers, as well as to SME managers/owners.

Are capital structure decisions of service SMEs different? Empirical evidence from Portugal

PurposeThe purpose of this paper is to analyze the importance of information asymmetry in the relationships between Portuguese SME's capital structure decisions and creditors, comparing the results of service SME with those found in manufacturing SMEs.Design/methodology/approachTwo samples of Portuguese SMEs are considered: one sample is composed by 610 unlisted service SMEs; and, the other sample is made up by 381 unlisted SMEs in manufacturing industry, for the period 1999‐2006. To estimate the results, the two‐step estimation method is used, to control possible bias arising from data selection. In the first step, probit regression is used. In the second step, after the control for possible data bias, dynamic panel estimators are used.FindingsThe results obtained suggest that information asymmetry in the relationships between SMEs and creditors has a greater relative influence on capital structure decisions of service SMEs than on those of manufacturing SMEs.Practical implicationsGiven the increasing importance of service SMEs in the Portuguese economy for stimulating employment, business volume, and consequently economic growth, it would be advisable for policy makers to create special long‐term lines of credit, with advantageous terms, so that Portuguese service SMEs, when internal finance is insufficient, can finance more efficiently the growth opportunities and the strategies for diversification. In addition, since SMEs' capital structure decisions present differences, both concerning the sector of industry and over time, the measures adopted by policy makers should differentiate their measures between industry sectors and over time.Originality/valueFirst, this paper is pioneering in comparing the adjustment of actual short‐ and long‐term debts, in service and manufacturing SMEs, towards the respective target ratios. Second, it is pioneering in using dynamic estimators and in using the two‐step estimation method, in studies of determinants of capital structure decisions of service and manufacturing SMEs.

The influence of age and size on the relationships between debt and determinants: an empirical study on Portuguese SMEs

SMEs influence the relationships between debt and determinants. To achieve the study objective, we consider two research sub-samples corresponding to low-age, low-size Portuguese SMEs and high-age, high-size Portuguese SMEs. The results show that greater size is more important to increase long-term debt for high-age, high-size SMEs than for low-age, low-size SMEs. Greater age of SMEs means a more accentuated decrease of short-term debt for high-age, high-size SMEs, compared to what happens with low-age, low-size SMEs. Recognition by creditors of growth opportunities and growth for low-age, low-size SMEs seems to be fundamental for these firms to obtain debt to sustain the firm growth, allowing them to invest in innovative activities, with the possibility to diversify activities and products.

Innovation in the organisation of management systems in Portuguese SMEs

In the past, economic success of most countries depended on the performance of their greater companies. Nowadays, bearing globalisation in mind and the wide implementation of the multinational companies, the economic success of developing countries and the internationalisation of their economy depends on the performance of SMEs. However, these companies, in some countries mostly of a family scope, usually have insufficient know-how about new forms of management. Recognising that management systems are nowadays considered market qualifiers, this paper presents two ways the smaller companies can direct their efforts to production while implementing the various management systems. Outsourcing the implementation and management of the several management systems to companies specialising in that activity is one way. The alternative is forming new companies with the same goal, but in a cooperative way amongst several small or medium sized companies operating in the same industrial sector or in close geographical proximity. The choice between alternatives for an SME depends on its sector of activity, its financial health, and applicable market qualifiers and order winners. Examples of both forms of outsourcing are discussed and the selection criteria inherent to this decision process are discussed based on the results of a survey of Portuguese companies.

Benchmarking competitive methods and strategic choices of Portuguese SMEs

PurposeThe purpose of this paper is to analyze and benchmark the strategic approaches utilized by Portuguese small and medium enterprises manufacturing organizations in response to the competitive pressures in the European and global markets.Design/methodology/approachFor the purpose of this paper, factor analysis and cluster analysis are used to analyze and to compare responses obtained from a cross‐sectional sample of 68 Portuguese manufacturing organizations.FindingsBased on the results of the analysis, it appears that the sampled organizations are following hybrid strategic orientations. These strategic orientations appear to be motivated by well‐defined mixed strategies. The strategic elements of e‐business are detected in these mixed strategies.Research limitations/implicationsThe sample used in this paper is specific in nature (Portuguese manufacturing organizations). Thus, the results should be interpreted accordingly.Practical implicationsThis paper attempts to shed some light on the effectiveness of current strategic practices of Portuguese manufacturing organizations. The findings of this paper have practical benchmarking strategic implications.Originality/valueThis paper investigates the nature and scope of new strategic orientations utilized by manufacturing organizations. Evidence of the presence of innovative, mixed strategies is uncovered.

Gestão da Inovação Tecnológica: estudo de cinco PMEs Portuguesas

O artigo apresenta os resultados de um aprofundado estudo exploratório sobre as práticas de gestão em cinco PMEs portuguesas inovadoras. O objectivo desta investigação consiste na identificação e avaliação dos factores organizacionais e de gestão que contribuem para o sucesso dos processos de inovação tecnológica. Os resultados obtidos podem também ajudar à identificação de práticas pouco adequadas ou de algumas lacunas em termos de gestão e, assim, das áreas a melhorar. Existe uma série de diferentes factores (embora estreitamente inter-relacionados) que devem funcionar em conjunto para criar e reforçar o ambiente que facilita o sucesso da inovação tecnológica. O estado da arte em relação a cada um destes factores, bem como a sua prática nas empresas estudadas, são apresentados no presente artigo. O artigo conclui que há duas grandes barreiras à inovação nas empresas estudadas. Por um lado, detectamos a falta de recursos humanos qualificados. Esta lacuna não é preenchida pelo recurso ao conhecimento externo pois, por outro lado, há uma importante omissão na comunicação externa com os agentes geradores de conhecimento (universidades e institutos de investigação).

Performance and size: empirical evidence from Portuguese SMEs

This article studies the relationship between company size and performance for small and medium-sized Portuguese companies. Using dynamic panel estimators, we conclude that performance is related positively to size. This relationship suggests the greater relevance of scale effects, diversification and the greater ability of larger companies to cope with market changes. Furthermore, our empirical results show that performance is persistent, not showing discontinuity, suggesting that small and medium-sized Portuguese companies are relatively successful in coping with possible scenarios of aggressive competition. Debt and level of fixed assets influence performance negatively, and separation of management and ownership influence performance positively. Liquidity, risk and ownership control are not relevant in explaining the performance of small and medium-sized Portuguese companies.

Collaboration among smes as a mechanism for innovation: An empirical study

The interest for collaboration among small and mediumsized enterprises and innovation has been highlighted, in recent times, due to the acceleration of technological changes and to increasing international competitiveness. Many small firms, with rigid structures and weak entrepreneurial dynamics, experienced difficulties in becoming innovators. Some of these firms can adopt collaborative agreements because these relationships enable them to get the necessary innovative activities, know-how, and exploit opportunities, which they cannot achieve alone. This study examines the motives for the formation of collaborative agreements in industrial Portuguese SMEs and presents some empirical evidence concerning collaboration as an important vehicle for the innovativeness of these small firms. The findings were based on a sample of 92 firms/collaborative agreements.

SMES and Innovation

Faced with market globalization, firms need to be able to adapt themselves rapidly to change, and to develop aggressive innovation policies. Innovation is a key factor in firms' competitiveness. However, research to date has focused mainly on larger companies and few studies have considered SMEs. The main purpose of this paper is to present the findings of a research project carried out to identify the main difficulties perceived by Portuguese SMEs in relation to innovation, and to ascertain the behavioural patterns that characterize their responses to these difficulties.