Linking distinctive management competencies to SMEs’ growth decisions

Abstract

Purpose

The purpose of this study is to conduct a comparative analysis of the short- and long-term financial strategies to augment SMEs’ performance in emerging markets. Using a resource-based theoretic perspective; the analysis has investigated the mediating role of distinctive management competencies (DMCs) between efficient financial strategies and SMEs’ business growth.

Design/methodology/approach

The empirical data were drawn from a cross-industrial panel of 273 SMEs from Spain and 224 SMEs from Pakistan across all manufacturing sectors over the period of 2006-2013. Multivariate tests are conducted to estimate the impact of efficient financial strategies on SMEs’ performance. The advanced mediation version of Kenny and Judd (2013) is used to test mediation confirmation of DMCs; while Sobel test is applied to examine robustness of mediation results.

Findings

The robustness check of 497 privately held SMEs confirmed that practicing efficient financial strategies has significant influence on SMEs’ performance. Stimulatingly, mediating effect of DMCs, that are used for executives’ prudent financial decisions have been traced in both respondent countries. Based on the findings, it is argued that efficient financial strategies realistically translate into DMCs, which taken together are likely to lead more effective and significant to improve SMEs’ performance.

Research limitations/implications

The results suggest that power of distinctive managerial decisions is a crucial factor in the employment process besides efficient financial strategies identified in previous studies. The results of this study are of great importance to managers and major stakeholders, such as investors, creditors, financial analysts and policymakers, to inflate their efforts to reduce the incidence of business failure and for survival and growth of SMEs.

Originality/value

The paper raises a new theoretic explanation by determining the intervening role of DMCs in translating EFS into improved SMEs’ performance, thereby supplementing the extant theories.

Citation

Raza Bilal, A., Naveed, M. and Anwar, F. (2017), "Linking distinctive management competencies to SMEs’ growth decisions", Studies in Economics and Finance, Vol. 34 No. 3, pp. 302-330. https://doi.org/10.1108/SEF-10-2015-0236