Understanding financial information used to assess small firm performance : an Australian qualitative study

Purpose The purpose of this paper is to investigate the reality of financial and management accounting in a small group of small firms. Specifically, from the owner's perspective, an exploration is undertaken to see what financial information is collected, how it is used (or not) to make business decisions and evaluate the firm's performance, and the role played by the accountant in that process. Design/methodology/approach A phenomenological paradigm underpins this exploratory study. Semi‐structured interviews were undertaken with the owners of ten small firms, where the focus was on understanding what happens in an organisational setting, as opposed to theory and textbook practice. Findings The qualitative data supported prior research in other countries. The in‐depth analysis revealed a very basic understanding of accounting information and problems with the financial literacy amongst these small firm owners. Accounting reports were not widely produced or used, so an informal assessment, such as how much cash was in the bank, was the primary means of assessing business performance. Accountants were used for taxation services, although some owners sought more general business advice. Originality/value An understanding is developed of why there might be a gap between textbook rhetoric and reality of accounting practice in small firms. The conclusion is that accounting textbooks need to include more information about the reality of financial management in small firms.

Managing growth and entry strategies across borders

Should the firm move successfully into a growth or expansion phase the owner manager will be required to increase the scale and scope of its operations. Part of this expansion will involve hiring additional employees, and increasing the overall complexity of the firm's activities. It is likely that the need for greater levels of professional management will be required to operate the firm, along with the need for enhanced planning and the introduction of systems to support the new levels of complexity. The transition from a small, owner-managed firm to a large systems-managed business will require the development of a team-based management approach with greater specialisation within the management team. Corporate governance is also likely to change as the growth cycle takes place. As it grows, the business will become more formalised in its accounting, management and other systems. The need for greater quantities of capital is likely to lead the business towards equity finance. As new equity partner are taken into the company the original owner managers may find their level of control diminished. The larger the firm becomes the more likely its management structure will become decentralised with greater separation between the owner and the firm in terms of operational and financial matters.

Competitive advantage through safety compliance : smaller firm responses to changes in the Australian occupational health and safety regulatory context

Smaller firms are often viewed as resistant to regulation due to cost burdens. However, evidence indicates that for some compliance is beneficial under certain conditions. Drawing on data on attitudes and responses of smaller firm owner-managers to changes in Australia’s harmonising work health and safety context we report on smaller firms’ responses to these changes. Despite uncertainty due to incomplete harmonisation, many owner-managers viewed safety compliance as important and necessary to do business. Those with negative views still linked positive safety performance to business outcomes. We categorise smaller firms’ responses and in this sample most are Positive Responders. We suggest ways forward for policy-makers to support smaller firms in complying with occupational health and safety regulation.

An alternative view of small firm adaptation

Increasingly, small firms with a history tied to a specific geographic location are having their survival threatened by new and innovative web-based entrants. This paper considers the plight of such firms and proposes an alternative means to reflect on how they may or may not learn about such threats. Adopting an evolutionary perspective, the construct absorptive capacity is used to highlight the deficiencies of current market orientation theory to explain the process of firm learning. The conceptual model of evolutionary potential provides a framework through which both the firm and its owner/s' abilities to learn can be taken into account.

Section 46(1) and 46(1AA) of the TPA : the struggle of the small against the large

The purpose of this article is to highlight the conflict in the policy objectives of subs 46(1) and subs 46(1AA) of the Trade Practices Act 1974 (Cth) (TPA). The policy objective of subs 46(1) is to promote competition and efficient markets for the benefit of consumers (consumer welfare standard). It does not prohibit corporations with substantial market power using cost savings arising from efficiencies such economies of scale or scope, to undercut small business competitors The policy objective of 46(1AA), on the other hand, is to protect small business operators from price discounting by their larger competitors.. Unlike subs 46(1), it does not contain a ‘taking advantage’ element. It is argued that subs 46(1AA) may harm consumer welfare by having a chilling effect on price competition if this would harm small business competitors.

Mobile data technologies and SME adoption and diffusion : an empirical study on barriers and facilitators

The technological environment in which Australian SMEs operate can be best described as dynamic and vital. The rate of technological change provides the SME owner/manager a complex and challenging operational context. Wireless applications are being developed that provide mobile devices with Internet content and e-business services. In Australia the adoption of e-commerce by large organisations has been relatively high, however the same cannot be said for SMEs where adoption has been slower than other developed countries. In contrast however mobile telephone adoption and diffusion is relatively high by SMEs. This exploratory study identifies attitudes, perceptions and issues for mobile data technologies by regional SME owner/managers across a range of industry sectors. The major issues include the sector the firm belongs to, the current adoption status of the firm, the level of mistrust of the IT industry, the cost of the technologies and the applications and attributes of the technologies.

Board members’ contribution to strategic decision-making in small firms

This article explores how the boards of small firms actually undertake to perform strategic tasks. Board strategic involvement has seldom been investigated in the context of small firms. We seek to make a contribution by investigating antecedents of board strategic involvement. The antecedents are “board working style” and “board quality attributes”, which go beyond the board composition features of board size, CEO duality, the ratio of non-executive to executive directors and ownership. Hypotheses were tested on a sample of 497 Norwegian firms (from 5 to 30 employees). Our results show that board working style and board quality attributes rather than board composition features enhance board strategic involvement. Moreover, board quality attributes outperform board working style in fostering board strategic involvement

Ownership structure and business evaluation practices in family SMEs : evidence from empirical research in Italy

This paper presents early results from a pilot project which aims to investigate the relationship between proprietary structure of small and medium- sized Italian family firms and their owners’ orientation towards a “business evaluation process”. Evidence from many studies point out the importance of family business in a worldwide economic environment: in Italy 93% of the businesses are represented by family firms; 98% of them have less than 50 employees (Italian Association of Family Firms, 2004) so we judged family SMEs as a relevant field of investigation. In this study we assume a broad definition of family business as “a firm whose control (50% of shares or voting rights) is closely held by the members of the same family” (Corbetta,1995). “Business evaluation process” is intended here both as “continuous evaluation process” (which is the expression of a well developed managerial attitude) or as an “immediate valuation” (i.e. in the case of new shareholder’s entrance, share exchange among siblings, etc). We set two hypotheses to be tested in this paper: the first is “quantitative” and aims to verify whether the number of owners (independent variable) in a family firm is positively correlated to the business evaluation process. If a family firm is led by only one subject, it is more likely that personal values, culture and feelings may affect his choices more than “purely economic opportunities”; so there is less concern about monitoring economic performance or about the economic value of the firm. As the shareholders’ number increases, economic aspects in managing the firm grow in importance over the personal values and "value orientation" acquires a central role. The second hypothesis investigates if and to what extent the presence of “non- family members” among the owners affects their orientation to the business evaluation process. The “Cramer’s V” test has been used to test the hypotheses; both were not confirmed from these early results; next steps will lead to make an inferential analysis on a representative sample of the population.

Assetti proprietari e meccanismi di governance nelle imprese familiari [Finacial reporting in small family firms : searching for a new framework]

SOMMARIO: 1. La “governance” nelle aziende familiari: rilevanza, aspetti distintivi e criticità. 2. Il ruolo della compagine proprietaria nella definizione dei meccanismi di governo. 3. Composizione e funzioni del consiglio d’amministrazione. 4. I patti di famiglia come strumento di disciplina dei rapporti impresa-famiglia. 5. Considerazioni conclusive: prospettive di analisi e scenari futuri negli studi sulla governance delle imprese familiari.

Integrating the resource-based view and transaction cost economics in immigrant business performance

This paper presents a new integrated framework that integrates the resource-based view and transaction cost economics to explain the phenomenon of immigrant entrepreneurship. We extend the existing literature on immigrant entrepreneurship by identifying different types of ethnic network resources and demonstrating how these resources interact with transaction costs in the context of Chinese immigrants. Thus, our study contributes to the literature by providing a theoretical framework which identifies mechanisms immigrant entrepreneurs use to strategically deploy resources to minimize costs and maximize performance outcomes.

Continuous innovation in SMEs : how design innovation shapes business performance through doing more with less

Firms face the challenge to survive and thrive in an increasingly competitive global market, developing strategies to continuously innovate, often having to do more with less. Increasing awareness of the benefits of stimulating continuous innovation in small and medium enterprises has led to the development and implementation of design innovation programs, with many western countries investing in design innovation programs for better firm performance. This paper investigates how firms respond to a design innovation program and engage in continuous innovation, doing more business with a focused less diverse strategy. Early findings from a study of companies engaged in a design innovation program indicate that applying design principles to all aspects of their business has delivered better business performance and better positioning in global markets.