Academic journal article Journal of Small Business Strategy

The Impact of Public Assistance Programs on Small Businesses: Strategic Planning, Entrepreneurship Resources Usage, and Market Orientation as Mediating Variables

Academic journal article Journal of Small Business Strategy

The Impact of Public Assistance Programs on Small Businesses: Strategic Planning, Entrepreneurship Resources Usage, and Market Orientation as Mediating Variables

Article excerpt

ABSTRACT

This paper draws upon a quantitative empirical longitudinal study of small trade and service businesses that participated in a coaching program initiated by the Ministry of Industry, Trade and Labor in Israel. The purpose of the study is to improve our understanding of the ways public assistance programs affect small businesses and improve their business results. A mediating model developed during the research enables the evaluation of the direct and indirect effects of public assistance programs on small businesses. Findings show that public assistance programs have a significant direct positive effect on small businesses performance. The indirect effect is mainly due to the reinforced market orientation induced by the assistance program, and to a lesser degree the result of the level of entrepreneurship demonstrated by the business owner.

Keywords: small business; assistance program; strategic planning; entrepreneurship; human resources; financial resources; market orientation

INTRODUCTION

Sassone and Schaffer (1978) differentiate between primary and secondary benefits that public assistance programs have on the assisted organization or business. Primary benefits are those benefits inherent to the services provided by the assistance program. Secondary benefits include an increase in human resources or in revenues that constitute a new addition to the economy. In line with the existing research, the present paper examines the effects of public assistance programs at the firm level (primary benefits).

Shapira et al. (1996) states that the implementation of assistance programs begins by transferring inputs from the assistance program to the client, then through a series of intermediate steps, actions are taken by the client that subsequently lead to business and economic outcomes. It is therefore possible to look at the assistance program (i.e., the consultant providing that assistance), its gist and input, as one entity, where the other entity is the client, its capabilities, aspirations and willingness. The assistance program's effectiveness relies on both parties as well as the quality of interaction between them. In the present research a longitudinal assessment of the assistance program's effect on performance of small businesses was conducted. The effect on performance was examined directly and indirectly through four mediating variables - strategic planning, entrepreneurship, human and financial resources usage and market orientation - that were found in previous studies to affect performance of small businesses. This approach enables the identification of both direct and indirect effects of assistance programs on business performance. Moreover, the utilization of operational measures in addition to financial measures enables the measurement of the assistance program's effect, not only in retrospect; but also in the changes seen in the business operation throughout the assistance process and the chances of future success.

LITERATURE REVIEW

Public Assistance Programs and Small Business Performance

Following the framework of Shapira et al. (1996), the public assistance program's effect on performance of small businesses is examined taking into account the program and the client, and the interaction between them.

The Program. According to Beach (1980) learning is a human process where skills, knowledge and attitudes are acquired and changed in a way that changes behavior. The notion of "learning" suggests that outside assistance can influence behavioral related parameters.

A number of studies examined the effect of public assistance programs on firm performance where the only difference between the small businesses that receive assistance and those that do not, is the assistance itself (Chrisman, 1999; Felsenstien et al., 1999; Chrisman and McMullan, 2000). Chrisman (1999) found that performance in firms that received assistance from the Small Business Development Center (SBDC) in the U. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.