Academic journal article Journal of Small Business Management

Factors Contributing to the Growth of Small Manufacturing Firms: Data from Australia

Academic journal article Journal of Small Business Management

Factors Contributing to the Growth of Small Manufacturing Firms: Data from Australia

Article excerpt

The small business sector is a vital contributor to the overall performance of the Australian economy. Small businesses account for approximately 97 percent of all private sector businesses, and 51 percent of private sector employment (Australian Bureau of Statistics 1996). Nevertheless, the folklore is that most small businesses discontinue within a few years of their start up. Of those businesses that continue, there is considerable variability in the rate of growth. Therefore, it is important to identify the causes of failures and discontinuations as well as the factors contributing to the success or growth of small enterprises. Moreover, these causes of failure and factors of success may vary from country to country, depending on economic, geographical, and cultural differences. As such, empirical investigation into these aspects of small business in different countries is needed because the findings of such research are useful to economic development planners as well as to individual entrepreneurs in the countries concerned.

The purpose of this article is to examine a set of firm- and industry-specific variables that may have an impact on the growth of small firms. This study is based on an examination of a sample of small manufacturing firms operating in the Illawarra region of New South Wales in Australia. Because the study is exploratory, it does not attempt to identify any a priori entrepreneurial and managerial abilities or other specific characteristics associated with the successful operation of firms.

Review of the Literature

The previous research on factors contributing to the success or growth of small firms has focused primarily on the entrepreneurial, managerial, or other personality attributes of owner-managers. Few have examined firm- or industry-specific factors, which Tan and Tay (1994) claim are more significant than personality attributes in explaining the variance of growth in small business. Another limitation of previous studies is that they are based on small business in general; those focusing on manufacturing firms are sparse. Moreover, some of these studies seem to be supported by anecdotal rather than by systematic empirical evidence. The brief review provided in this section is confined to some of the empirical studies reported in the literature.

One of the studies that focused on the impact of owner-manager personality attributes on the success of small businesses in general is by Ibrahim and Goodwin (1986). based on a survey of 144 small firms in the retail, wholesale, service, and manufacturing sectors in a few metropolitan areas of the United States and Canada, they asserted that entrepreneurial behavior and managerial skills of owner-managers are key success factors in small business. Similar findings were reported by Huck and McEwen (1991) from a survey of 54 Jamaican entrepreneurs involved in manufacturing and service businesses. More specifically, these researchers identified entrepreneurs' competencies in management, planning and budgeting, and marketing as most crucial for the successful operation of a small business. Personality attributes of owner-managers were further examined by Duchesneau and Gartner (1990) in an extensive field study of 26 small merchandising firms in eight metropolitan centers in the southeast, central, and southwest Pacific regions of the United States. According to their findings, successful entrepreneurs were more likely to have been raised by entrepreneurial parents, and had broader business and prior startup experience. Such entrepreneurs also worked long hours, had a personal investment in the firm, and were good communicators.

Another study that examined personality attributes of owner-managers is by Ghosh, Teo, and Low (1993). On the basis of a questionnaire survey of 101 small and medium-sized enterprises in the manufacturing, financial, and merchandising sectors of Singapore, they reported that ability to satisfy customers, finding a market niche, good service, a good management team, and good networking were the chief success factors. …

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