Small-Firm Performance: Modeling the Role of Product and Process Improvements

Entrepreneurial and small and medium-sized enterprises (SMEs) firm performance is a complex, multifaceted construct that should be examined with an eye toward its complexity. Our research study seeks to accomplish this examination by proposing a conceptual model of SME performance with two distinct...

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Bibliographic Details
Published in:Journal of small business management 2006-04, Vol.44 (2), p.268-284
Main Authors: Wolff, James A., Pett, Timothy L.
Format: Article
Language:English
Subjects:
Business growth
Business models
Competition
Entrepreneurs
Entrepreneurship
Financial performance
Globalization
Hostility
Hypotheses
Hypothesis testing
Innovations
Managers
Process planning
Product development
Product management
Profitability
Profits
R&D
Research & development
Small & medium sized enterprises-SME
Strategic management
Studies
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Summary:Entrepreneurial and small and medium-sized enterprises (SMEs) firm performance is a complex, multifaceted construct that should be examined with an eye toward its complexity. Our research study seeks to accomplish this examination by proposing a conceptual model of SME performance with two distinct but related outcome dimensions-growth as one dimension and profitability as another. We propose hypotheses for relationships between four antecedent factor conditions- environmental hostility, firm size, innovation capability, and internationalization-and an SME's likelihood to pursue either product improvement or process improvement as their primary strategic orientation. Furthermore, we propose that an SME product improvement orientation likely has greater influence on growth and profit performance than will a process improvement orientation. The findings of the study suggest that internationalization and innovator position have a positive impact on new product and process improvements, while environmental hostility, internationalization, and product improvement have positive influences on growth as a performance dimension. In addition and as hypothesized, the product improvement orientation is positively associated with growth and in turn profitability, whereas the process improvement orientation showed no statistical relationship to growth and ultimately profitability.
ISSN:0047-2778
1540-627X
DOI:10.1111/j.1540-627X.2006.00167.x