Academic journal article Academy of Entrepreneurship Journal

Small Business Growth: Expansion of the Workforce

Academic journal article Academy of Entrepreneurship Journal

Small Business Growth: Expansion of the Workforce

Article excerpt

ABSTRACT

While growth of sales, profits and geographic expansion of small businesses have been examined in numerous studies, little research exists examining when a small business should increase the size of its workforce. The present study attempts to address this gap in the literature by examining if organizational planning, communication, human resource management problems, and trusting employees might indicate when a small business should increase its number of employees. The findings indicate that as human resource problems begin to emerge, increasing the size of the workforce might begin to resolve some of these problems.

INTRODUCTION

Over the past 20 years, interest and research in small business has grown considerably (Barringer & Greening, 1998; Davidson, 1987; Kotey & Slade, 2005; Nicholls-Nixon, 2005). In addition to increased interest in small business, small business represents more than 75 percent of the nation's new jobs, employing more than 50 percent of the private sector workforce (Scarborough & Zimmerer, 2003). These numbers have increased while big business and corporate America continues to shrink their workforces (Holt, 1993; Howard, 2001). Even though the evidence indicates that small businesses are a big player in the U.S. economy, most of the research to date has focused on profits and sales, with little focus on growth of the workforce in small businesses. Additionally, most of the research on the growth of the workforce has been largely descriptive and exploratory, not providing much insight into when the conditions might be right for a small business to expand its workforce (Howard, 2001).

The present study attempts to extend the research to date by attempting to identify factors that might indicate when a small business should consider expanding its workforce. Recently, scales designed to measure organizational planning, communication, trust and human resource management problems have been developed specifically for small business (Howard, 2006). These scales will be used to determine the influence of these concepts as antecedents of small business growth. Additionally, sales, profits, market share and organizational size will be controlled to determine the independent effects of planning, communication, trust and human resource management problems on growth of the number of employees. First, this study will discuss the literature on growth of small businesses, planning in small businesses, communication in small businesses, trust of employees in small businesses, and human resource management problems in small businesses. Relationships between planning, communication, trust and human resource management problems with growth in employees will be presented. A brief statement concerning the control variables will also be presented. Second, the research methods will be described. Third, the results of the study will be presented. Finally, a discussion of the results and their implications on future research will be presented.

SMALL BUSINESS GROWTH

There exist many different definitions of small business. Additionally, numerous conditions that apply to different definitions exist, further influencing what is considered to be a small business. While one could spend endless amounts of time trying to develop their idea of a perfect definition of a small business, the definition to be used in the present study is "one that is independently owned, operated, and financed" (Hatten, 1997, p. 5). Additionally, the business is one that would not be dominant in its field of operation, having little impact on its industry (Hatten, 1997; Hodgetts & Kuratko, 1995). Finally, the following criteria are also considered as they pertain to the present study (Hodgetts & Kuratko, 1995):

   Manufacturing firms employ fewer than 250 employees;
   Annual sales of less than $22 million in the wholesale sector;
   Annual sales of less than $7. … 
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