Profitability Of Small And Medium-sized Enterprises Research Articles

Elevating the profitability of small and medium enterprises: Systematic review on risk management principles

Small and medium-sized enterprises (SMEs) have a significant position in the world's economies by encouraging innovation and employment. These enterprises have limited resources and address particular obstacles while providing potential for development. Effective risk management is critical for SMEs to achieve long-term profitability. By identifying and minimizing possible risks, such as market changes and operational uncertainty, SMEs may protect their financial health and establish the foundation for long-term success. Implementing effective risk management concepts enables these organizations to handle insecurity, capitalize on opportunities and improve overall operational efficiency, resulting in a robust and effective business environment. In this research, we provide an in-depth examination of risk management in SME profitability, depending on empirical data, conceptual frameworks and beneficial case studies. Our objective is to determine common trends, challenges and standards of excellence in the field of SME risk management by investigating a range of resources. Initially, we collected 28 publications that primarily focused on risk management strategies for organization management, 10 articles were eliminated the cause of without taking into consideration SMEs. The subsequent phases of this systematic review of the literature, as well as the research process were based on in-depth analysis of the remaining 18 research articles. This research provides a beneficial understanding for improving overall SMEs' operational efficiency and profitability.

The Use of Social Media Platforms for Competitive Information and Knowledge Sharing and Its Effect on SMEs’ Profitability and Growth through Innovation

Traditionally, corporations obtain competitive information via marketing reports, trade journals, newspapers, and competitors’ websites. That information was secondary and limited. With the widespread usage of Web 2.0 technologies, social media platforms (SMPs) are used by micro, small, and medium-sized enterprises (SMEs) to search for information about their customers, competitors, and markets. SMEs are the engine of economic growth and effective solution to poverty and unemployment. There is also a growing use of SMPs to facilitate knowledge sharing, which leads to developing new ideas and sharing new knowledge, boosting creativity and efficiency, and assisting in achieving goals. This study aims to examine the effect of those uses of SMPs on Saudi SMEs’ performance growth and profitability through innovation. To evaluate 220 valid online questionnaire responses, we used SmartPLS 4 through a PLS-based structural equation model. The results show the positive direct effect of using SMPs for customer information and knowledge sharing on SME innovation in emerging economies and the indirect effect of those uses on SME performance growth and profitability. As a result, Saudi SME decision makers are advised to improve their effectiveness in using SMPs to acquire customer information and use it for knowledge sharing because those uses will positively influence innovation and increase SME growth and profitability.

Grains of Trust: Nurturing Repurchase Intentions With Expertise and Likeability in Rice Sales

This study examines the influence of salesperson likeability and expertise on repurchase intention within the framework of small and medium-sized enterprises (SMEs). In the highly competitive SME market, likeability—which goes beyond basic customer service to encompass qualities like relatability and empathy—has become a critical differentiation. Repurchase intention, which denotes consumer happiness and loyalty, is essential to the profitability and expansion of SMEs. The purpose of the study is to ascertain how salesperson expertise and likeability relate to repurchase intention. Using an online survey questionnaire, a sample of Padang, West Sumatera, clients of Beras Charissa is used in this quantitative study. The findings show that likeability and expertise both significantly influence the intention to repurchase. The study emphasizes how crucial likeability-based emotional ties and personal ties are in shaping consumer attitudes and actions. Furthermore, a salesperson’s expertise gives clients confidence, which improves trust and the customer experience. Although skill is still important, the article makes the case that improving a salesperson’s likeability through training that emphasizes customer engagement can boost client loyalty and promote repeat purchase.

Relationship of Innovation and Market Orientation With the Profitability of SMEs in Mexico

The objective of this research is to analyse the effect of innovation and market orientation of small and medium-sized enterprises (SMEs) on their profitability in 2018 in Mexico, because they are two key elements in the development and growth of these companies, which compete with large companies within a globalized and constantly evolving market. For this analysis, an empitical study was carried out through a survey on a sample 300 companies selected by simple random sampling adapting the scales of Kohli & Jaworski (1990) to measure market orientation, for innovation the scale proposed by the OECD (2005) was adapted and business profitability and adaptation was made to the cale proposed by Gadenne, Mia, Sands, Winata, & Hooi (2012). Reliability and validity of the scales were evaluated through the Confirmatory Factor Analysis, which shows that the higher level of orientation to the SME market, the higher level of business profitability so companies must seek to implement innovation activities in their products, processes and management to see better, results reflected, in addition, the influence exerted by market orientation on innovation activities drives the company to meet the needs of the client and in this way conquering their preference.

The determinants of profitability in non-financial UK SMEs

PurposeThe purpose of this study is to examine determinants of profitability of non-financial firms listed small- and medium-sized enterprises (SMEs) in the UK from 2012 till 2020. It has been argued that profitability plays a key role in economic development and growth. Despite the important role that SMEs play in developed economies like UK, academic research into SMEs profitability determinants in developed countries is not extensive.Design/methodology/approachThe methodologies used include dynamic panel data estimation techniques. Relationship of nine independent variables with profitability was examined. Two models are created using return on assets (ROA) and return on equity (ROE) as dependent variables. Size, age, efficiency, working capital, liquidity, leverage and volatility of the firm represent firm-specific independent variables. Two macroeconomic variables, namely, gross domestic product and inflation are also used as independent variables. Data obtained from Thomson Reuters Data Stream for 93 listed SMEs companies in the UK from 2012 to 2020. Fixed effects, random effects and generalized method of moments were used in data analysis.FindingsAll variables showed significant influence on profitability, except liquidity reflecting insignificant impact on profitability in two regression models conducted for 93 firms under study. Efficiency, liquidity and leverage are the only three independent variables with similar impact on both ROA and ROE.Practical implicationsIdentifying determinants of profitability will help stakeholders and corporate executive make sound decisions to ensure sustainability and stability at the firm level. This is particularly important given the key role played by SMEs in economic development and growth. The findings of this study would help direct financial management practices to ensure a favorable sustainable organizational performance.Originality/valueThis study differs from previous studies that focused mainly on developing countries; with limited research conducted on profitability of SMEs in developed economies. To the best of the author’s knowledge, this is the first study to examine factors influencing profitability of SMEs in UK. Previous studies concentrated on service sector like insurance and hotel firms.

How do formal and informal institutions influence firm profitability in emerging countries?

Drawing from institutional economics, we examine how the quality of formal institutions (e.g. protection of property rights, efficiency of the judicial system and government regulations) and a particular aspect of informal institutions, trust, influence the profitability of small and medium-sized enterprises (SMEs) vis-à-vis large firms. Our theoretical framework, which is supported by an analysis of over 205,000 observations in 16 emerging countries in the Central and Eastern European (CEE) region, explains why informal and formal institutions have a considerably different effect on the profitability of SMEs and large firms, and indicates that while SMEs benefit from formal institutional quality more than large firms do, large firms benefit from trust in society more than SMEs. It further shows that formal institutions and trust substitute each other in influencing firm profitability and that this substitution effect is stronger for large firms.

Taxation Practices and the Survival of Small and Medium-Sized Enterprises (SMEs)

Small and Medium-sized Enterprises (SMEs) serve as vital economic stimulators in developing and developed economies. However, several factors including high energy costs and taxing practices hamper these businesses growth and expansion. Essentially, taxation or taxing practices are those multiple payments obligations placed on SMEs by the state. This study examined the effect of taxation/taxing practices on the growth of SMEs with a specific focus on whether ‘multiple payment obligations placed on SMEs have significant implications on their profitability, investment decisions, and cash flows. The study adopted survey research design. The chi-square and regression analysis were used in testing hypotheses. Results from the chi-square and regression analysis indicated that tax practices significantly affect SMEs profitability and investment decisions. However, on the effect of taxation on the cash flow of SMEs, the chi-square test showed a non-significant effect of taxation on cash flow while the regression analysis revealed a significant relationship between taxation and cash flow of SMEs. This contradiction may be ascribed to bias exhibited by some respondents in answering some questions asked during the survey. Therefore, the study recommended that the government improves on tax incentive already provided, improve infrastructure, and implement tax policies based on the ability to pay and eschew multiplicity of payment by SME owners; these will eventually encourage growth and expansion of SMEs and the economy at large.

FINANCIAL SELF-EFFICACY OF ENTREPRENEURS AND PERFORMANCE

In most developing countries, small and medium-sized enterprises (SMEs) are an essential segment of the economic composition and crucial players for fostering innovation, growth and prosperity. Despite wide agreement among researchers in entrepreneurship and SME management that entrepreneurial and general self-efficacy can positively impact business formation and growth, one aspect of entrepreneurial self-efficacy, i.e., financial self-efficacy, has not been linked to SME performance in terms of SME profitability and growth, or satisfaction of the entrepreneur with their company. This study fills this research gap by uncovering new knowledge about the relationship between the financial self-efficacy of the entrepreneur and elements of SME performance. Data were collected through a structured questionnaire in one European country. Hypotheses were conceptually developed and checked using regression analysis. The results of this research reveal new knowledge about the relationship between financial self-efficacy and performance. The entrepreneur’s financial self-efficacy can matter for the profitability of SMEs, as well as for the growth and satisfaction of micro-SMEs and certain differently defined groups of entrepreneurs or companies.

A critical analysis of challenges relating to working capital financing towards SME profitably

SME funding is the financing of small and medium-sized businesses, and it is a key purpose of the general corporate financial economy, in which investment for various kinds of enterprises is provided, obtained, and budgeted or valued. Working capital (WC) is a profitability ratio that reflects the functioning cash flow available to a company, institution, or other entity, along with governments. Working capital is regarded as an integral part of capital reserves, along with fixed assets such as plants and tools. Total assets are equivalent to the total capital investments. In both industrialized and developing economies, small and medium-sized enterprises (SMEs) are viewed as stock market development engines. The significance of these businesses is mainly ascribed to their important contribution to increasing employment, rising Gross domestic product, and advancing company. SMEs face many obstacles, including problems arising from poor money-related administration, which are major causes of business setbacks in SMEs. From a strategic governance perspective, the objective of this research is to analyze the primary job of managing finances and recognize the financial planning strategies and obstacles impacting organizational effectiveness in SMEs. This research also looks at the importance and challenges of SMEs, as well as the links among both key Small and medium-sized implementation and financial planning strategies.  Numerous individuals assert that profit growth and cashflow must be balanced. Many research findings, nevertheless, had also concluded that successful Working Capital Management can boost profits. The findings, which seem to be rigorous to the appearance of unobserved heterogeneity, show that managers can create value by minimizing the time receivable accounts, and inventory levels are exceptional at their company. Similarly, reducing the cash flow enhances the firm’s financial performance. Thus, the research could analyze the impacts related to working capital financing towards SME profitability.

Research on the investment efficiency based on grey correlation-DEA model.

Small and medium-sized enterprises (SMEs) are an important part of stimulating market vitality. In the post-pandemic era, the ability of SMEs to absorb employment plays an important role in stabilizing society and promoting economic growth. This paper selects 226 sample data from 2014 to 2017 measures the investment efficiency of small and medium-sized enterprises and makes a further analysis its influencing factors. Because there is a lag between investment and output. In this paper, the grey correlation analysis is used. Measuring the investment efficiency of SMEs by using BBC-DEA method. The study found that the overall investment efficiency of SMEs is low. Considering from the inside of the enterprise, this paper uses the Tobit model to make an empirical analysis. It is found that the influence of board structure and agency cost on investment efficiency are significantly negative. Growth, ownership concentration, equity incentive, salary incentive, profitability of SMEs have a significant positive effect on the investment efficiency of enterprises.

SME Profitability of Trade Credit during and after a Financial Crisis: Evidence from Korea

An economic downturn can occurred through unexpected events in various fields, such as the subprime mortgage crisis and the outbreak of Coronavirus Disease-2019 (COVID-19). Trade credit is important for small- and medium-sized enterprises (SMEs), especially during a monetary contraction, as it is the last option for firms that lack bank credit. This study aims to determine whether trade credit is profitable for the buyer and supplier firms during and after a financial crisis. We use panel data consisting of all trade credit transactions and financial statements of 5,751 Korean firms during the period 2008-2012. It shows that trade credit is more profitable for both buyers and suppliers in the post-crisis period than during the crisis. Moreover, trade payable is more effective for unconstrained buyers than for constrained buyers. Finally, a mixed strategy is superior to an aggressive or passive strategy of SMEs. The results suggest less profitability of trade credit during a period of contraction and greater sensitivity of the buyer SMEs, emphasizing the idiosyncratic liquidity strategy of each firm. This study can be helpful to develop a strategy of profitable trade credit for SMEs and to establish a policy of managing liquidity for the authority.

The Impact of Venture Capital on the Growth of Small- and Medium-Sized Enterprises in Agriculture

Small- and medium-sized enterprises (SMEs) are considered to have potential innovation capabilities and can create new market opportunities. Venture capital can financially support entrepreneurial activities for economic growth and governs and nurtures the growth of the SMEs. The aim of this study is to investigate the influence mechanism of venture capital on the development of SMEs in agri-food industry. Based on the enterprise growth theory, this study constructed an evaluation model, consisting of technological innovation, profitability, development capability, and solvency, to examine the effect of venture capital on the growth of agricultural SMEs. Using data of 40 agricultural SEMs from the SME and ChiNext boards in China, the empirical analysis has been conducted with the multivariate regression analysis method. The results show that the venture capital can significantly improve the technology innovation, profitability, and growth ability of SMEs. For the solvency of SMEs, the promoting role of venture capital is not obvious. Finally, the practical implications of this study for venture capitalists, entrepreneurs, and regulators are discussed.

The Effect of Access to Debt on Lebanese Small and Medium Enterprises Performance

Since thirties access to debt has been considered as one of the main challenges facing the growth of Small and medium-sized enterprises (SMEs). Therefore, empirical studies focused on how facilitating access to debt affects SMEs financial performance in developed countries. However, this is not the case in the developing economies countries such as Lebanon due to the lack of financial transparency and poor financial reporting. In addition, very few studies discussed the theoretical pillar behind SMEs financial behavior on how access to debt affects firm performance in developed and developing countries. Therefore, this study attempts to investigate the effect of access to debt on Lebanese SMEs financial performance in terms of profitability and tangibility. In addition, the study explores the theoretical explanation of how Lebanese SMEs access to debt affects profitability (PR) and tangibility (ST) using trade-off theory (TOT) and pecking order theory (POT). Data of 102 SMEs for the period 2014 till 2017 from 12 official audit firms located in Beirut-Lebanon. Additionally, generalized least squares (GLS) method was used to conduct regression analysis. The analysis reveals the positive effect of Lebanese SMEs access to debt on SMEs profitability and tangibility confirming the adoption of trade-off theory as an approach by Lebanese SMEs and lenders. It is concluded that facilitating Lebanese SMEs access to debt to reach proper debt level improves SMEs performance which in return affects positively the lenders and economy as whole.

SMEs capital structure determinants: empirical evidence from Kazakhstan

The purpose of this paper is to study the standard firm-factor determinants on capital structure of small and medium-sized enterprises (SMEs). To this end, we analyzed small and medium sized firms in Kazakhstan, where all sectors were considered. We use panel data methods to investigate the determinants of capital structure for non-financial SMEs in Kazakhstan. This study examines the impact of key determinants such as asset tangibility, size, growth, profitability and tax rate of SMEs. The trade-off theory and the pecking order theory of capital structure guided this study. The results suggest that despite some differences in the influence of factors on the capital structure, most of the determinants presented by the theory of finance appear indeed to be relevant for the Kazakhstan small and medium business sector.

THE BIG FIVE PERSONALITY OF THE SME MANAGER AND THEIR COMPANY’S PERFORMANCE

This study addresses a certain research issue: how do the Big Five personality traits of managers of small and medium-sized enterprises (SMEs) impact the business performance of companies? A representative random sample of managers of SMEs in Slovenia was used for data collection through survey research. Hypotheses and the model were tested using structural equation modeling. A valuable contribution is made in the form of a new model of Big Five personality induced SME growth, profitability and new value creation. Openness of managers can be predictive of growth and new value creation of their companies, with the new value creation impact especially expressed in female-managed companies. Conscientiousness may not be crucial for performance, except for new value creation in females where this relationship can be negative. Extraversion can predict the growth and profitability. Agreeableness can have negative effects on all performance elements. Neuroticism can be predictive of growth and profitability. Practitioners must be aware of the importance of managers’ Big Five personality traits for SME performance. Where possible, managers may like to develop their levels of openness, extraversion, non-agreeableness and neuroticism.

Internationalization Orientation in SMEs: The Mediating Role of Technological Innovation

Abstract This study examines the relationship between internationalization orientation and international performance of small and medium-sized enterprises (SMEs), and the mediating effect of technological innovation. Prior research suggests that internationalization is a prominent strategic choice for SMEs growth and profitability. However, there is still no explicit agreement on how internationalization affects international performance. Similarly, the role of innovation on performance has long been emphasized, but the implications of technological innovation on international performance are still eluding us. Our investigation of 116 SMEs in the United Kingdom reveals that internationalization orientation has a significant effect on their international performance, with SMEs adopting simultaneously an inward and outward international orientation achieving superior results. We further demonstrate that there is an inverted U-shaped relationship between technological innovation and international firm performance among SMEs. Meanwhile, we find that technological innovation positively mediates the effect of internationalization orientation on international firm performance, particularly for the SMEs exhibiting moderate levels of technological innovation activities. The findings of this study suggest that managers can improve international performance by combining inward and outward internationalization orientation with technological innovation activities in their strategic decisions.

ДЕТЕРМИНАНТЕ ПРОФИТАБИЛНОСТИ МАЛИХ И СРЕДЊИХ ПРЕДУЗЕЋА У СЕКТОРУ ТРГОВИНЕ У СРБИЈИ

The purpose of this paper is to investigate the determinants of profitability for small and medium-sized enterprises (SMEs) in the wholesale and retail sector in the Republic of Serbia. The wholesale and retail sector is a very important sector for Serbian economy, and also one of the most profitable sectors. The research of determinants of profitability includes two phases. First, the differences between the profitability of SMEs and large enterprises were conducted using the Student t-test. Second, the panel data estimation techniques were used to detect determinants of firm profitability. The profitability measure is based on the return on assets, and the determinants of profitability were defined as follows: size, leverage, liquidity, tangibility, investment, sales growth and lagged profitability. The data was collected from the financial statement of enterprises. For this purpose, 9,005 observations of 1,801 SMEs and 1,605 observations of 321 large trade companies over the period of 2010-2014 were included. The results indicate that SMEs achieve statistically significant better profitability than large wholesale and retail companies. The findings indicate that leverage, liquidity, sales growth and lagged profitability positively influence the profitability of SMEs. Furthermore, the results show an inverse relationship between the size and tangibility on one side and profitability on the other side.

Resource organization and firm performance

Purpose – The purpose of this paper is to examine how entrepreneurial orientation (EO) and the use of management accounting practices (MAPs) in decision making affects the profitability of small- and medium-sized enterprises (SMEs), and also to analyze the extent to which EO and the use of MAPs affects profitability differently in growing and non-growing SMEs. Design/methodology/approach – The paper employs an empirical investigation which is based on a sample of 153 Swedish manufacturing SMEs. The data are analyzed by two- and three-way interaction regressions. Findings – EO and MAPs have a positive effect on profitability in non-growing SMEs, but the combined effect of EO and MAPs has no additional effect. However, for growing SMEs, high usage of MAPs in decision making is a prerequisite for EO to influence profitability. Originality/value – This study is the first to use the resource-based view to examine the relationship between two dimensions of resource organization and SME profitability. EO is used as a proxy for how resources are organized in order to identify opportunities, and MAPs are used as a proxy for how efficiently resources are organized.

A Review of the Effect of the Role of Purchase Rewards to Customers, as a Purchase Intention Mediator, on the Profitability of SMEs (Small and Medium-sized Enterprises) in Sanandaj City

The present research study intended to investigate the impact of the Role of Purchase Rewards to Companies’ Customers, as a Purchase Intention Mediator, on the Profitability of SMEs in Sanandaj City in 2014. Three different types of variables, including Independent, Dependent and Intervening variables, are specified in this study; Purchase Rewards to Customers is the Independent Variable, Profitability is the Dependent Variable and the Purchase Intention Mediator is the Intervening Variable. The ultimate research application of the current study is that of Applied Research implementations based on the descriptive research methods. To this end, correlational research and survey research methods were selected as the branches of descriptive research. The study’s statistical population consists of 444 companies’ Managers and an unlimited number of Customers of SMEs in Sanandaj city among which 206 managers and 384 clients were selected as sample population based on Cochran’s Sample Size Formula. Moreover, Likert Scale Questionnaire was employed to accomplish the survey research in order to collect research data required. The research data were analyzed both descriptively and inferentially, using LISREL8.7 and SPSS18 softwares, based on Pearson Correlation Coefficient test and Structural Equation Modeling (SEM). To estimate the reliability of the Questionnaire, Cronbach Alpha Reliability measure of estimation was adopted; accordingly, the reliability of the questionnaires of the research three different variables such as Purchase Rewards to Customers Variable, Profitability variable and Purchase Intention Mediator variable were estimated as 0.841, 0.747 and 0.839 successively. Furthermore, the research hypotheses were confirmed at %95 confidence level. Consequently, it was concluded that, based on the research results, the role of purchase rewards to customers had a statistically significant effect on the profitability of SMEs in Sanandaj city. The type of rewards and the time of the rewardings were ranked accordingly; the former got the first rank while the latter got the second rank. It was concluded that the more the purchase intentions of the customers, the lesser the relationship between the role of purchase rewards and the profitability of SMEs. DOI: 10.5901/mjss.2015.v6n6s6p261

The Financial factors that Influence the Profitability of SMEs

The main objective of this paper is to identify the financial factors that impact on the functionality and profitability of SMEs (Small and Medium-sized Enterprises). Our research has been applied to small and medium enterprises from Romania taken into consideration the financial indicators from 2009 to 2012 in order to test the correlation between them and the profitability of the invested capital. We chose SMEs because in the last decade there have been significant developments in this sector which have increased its importance. Our study results showed that managerial decisions on investment can influence decisively the profitability of SMEs especially in a period of economic instability. The importance of SMEs in a developing country like Romania is crucial, the development of this sector has direct effects on the development of the country mainly because SMEs represent about 99% of all firms in Romania, providing approximately 50% of GDP and also providing approximately 65% of the jobs.