Academic journal article Journal of Business and Entrepreneurship

Small- to Medium-Sized Enterprise Characteristics and Performance: An Exploratory Examination of the Census Bureau's Survey of Business Owners

Academic journal article Journal of Business and Entrepreneurship

Small- to Medium-Sized Enterprise Characteristics and Performance: An Exploratory Examination of the Census Bureau's Survey of Business Owners

Article excerpt

INTRODUCTION

Small- and medium-sized business owners make important contributions to business creation and growth in America's economy. Understanding the characteristics of these business owners and their business may shed light on the importance to measuring an economy's overall well-being (Lichtenstein 2014). A number of studies have examined small- and medium-sized enterprises (SMEs) relative to size and owner demographics (Blackburn, Hart, & Wainwright 2013); business acquisition (Fairlie & Robb 2009); and performance (Mittelstaedt, Harben, & Ward 2003; Wincent 2005; Wolff & Pett 2000). However, few studies have explored the relationship between demographics and business acquisition with measures of performance as demonstrated by sales and employee efficiency with regard to sales for SMEs (Blackburn, Hart, & Wainwright 2013; Pett & Wolff 2016).

The intention of this paper is to contribute to the growing body of literature exploring the relationship between SME characteristics and performance. Moreover this research explores the relationship between the difference in owner demographics (for example, gender, education level, and age), business acquisition (for example, founded, purchased, inherited, or transferred/gifted), and business performance (for example, sales, sales per payroll, and sales per employee) based on the size of the SME firm. The paper begins with theoretical development which establishes the relationships of the constructs being examined within this study in relation to SME size. Following next is a brief literature review to develop the theory establishing the relationships of the constructs being examined as they relate to SME size. A discussion of the unique data used in this study and methodology is subsequently provided. The data analysis and analytical findings are then presented. The paper concludes with a discussion of the results and suggestions for future research.

LITERATURE REVIEW

Today's global markets and environment play an important role in the growth and success of SMEs. The globalization of markets and industries impacts SMEs profoundly through increased competition, need for innovation, shrinking time to market, and consumer demands to name a few. These macro environmental pressures can impact SMEs either directly or indirectly, resulting in smaller businesses needing to adjust to the market shock or pressures more quickly than larger small businesses (Gartner 1997). For example, Adelino, Schoar, and Severino studied the effects of higher house prices during 2002-2007 on the growth of very small businesses (Berlin 2014). The research suggests that higher house prices were significantly associated with higher employment growth at the smallest enterprises (one to four employees) and that this positive effect declined monotonically with firm size.

There are numerous studies examining the relationships between SME and performance (Blackburn, Hart, & Wainwright 2013; Fairlie & Robb 2009; Mittelstaedt, Harben, & Ward 2003; Wincent 2005; Wolff & Pett 2000). Barney (1991) suggests that there is an association between a firm's resource investments and competiveness. The same can be said of firm size that as the number of employees grows, so should the corresponding resources (knowledge and capability). And as small businesses often have fewer resources compared to larger SMEs, it seems logical that smaller firms would have fewer resources. For example, Lussier and Sonfield's (2015) research compared "micro" enterprise (0-9 employees) to "small" enterprise (10-49 employees) concerning a number of managerial characteristics across eight countries. They found that small firms are more likely to engage in the formal planning and have a more prescribed management style compared to micro-sized firms. However, they found that the influence of the founder was greater in micro firms. These findings suggest that as SMEs grow in size (number of employees), they seem to benefit from the accumulation of more knowledge and resources. …

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