The use and impacts of bank support on UK small and medium-sized enterprises

This article examines an under-investigated area in relationship banking, i.e. the use of bank advice and support and its impacts on the financial conditions of small and medium-sized enterprises (SMEs). The findings indicate that the characteristics of businesses and entrepreneurs, among other factors, have determinant effects on the use of bank support by SMEs when they make financial decisions. SMEs can alleviate the severity of their financial problems significantly by using bank support more fully, through developing long-term relationships with banks as primary network partners. The article further recognises the value of advice from banks as a substitute for entrepreneurial human capital, especially when bankers use private information to determine the nature and level of financial and non-financial assistance that they are prepared to supply to their clients.

Understanding absorptive capacity in Malaysian small and medium sized (SME) construction companies

Purpose – The construction industry is a very important part of the Malaysian economy. The government's aim is to make the industry more productive, efficient and safe. Small to medium-sized enterprises (SMEs) are at the core of the Malaysian construction industry and account for about 90 per cent of companies undertaking construction work. One of the main challenges faced by the Malaysian construction industry is the ability to absorb new knowledge and technology and to implement it in the construction phase. The purpose of this paper is to consider absorptive capacity in Malaysian construction SMEs in rural areas. Design/methodology/approach – The research was conducted in three stages: first, understanding the Malaysian construction industry; second, a literature review on the issues related to absorptive capacity and discussions with the Construction Industry Development Board (CIDB); and third, multiple case studies in five construction SMEs operating in a rural area to validate the factors influencing absorptive capacity. Findings – Nine key factors were identified influencing absorptive capacity in Malaysian construction SMEs operating in rural areas. These factors involved: cost and affordability; availability and supply; demand; infrastructure; policies and regulations; labour readiness; workforce attitude and motivation; communication and sources of new knowledge and; culture. Originality/value – The key factors influencing absorptive capacity presented in this paper are based on validation from the case studies in five construction SMEs in Malaysia. The research focuses on how they operate in rural areas; however, the research results have wider application than just Malaysia. The key factors identified as influencing absorptive capacity can serve as a basis for considering knowledge absorption in the wider context by SMEs in other developing countries.

Managing the complexity of information flow for construction small and medium-sized enterprises (CSMEs) using system dynamics and collaborative technologies

With the increase in e-commerce and the digitisation of design data and information,the construction sector has become reliant upon IT infrastructure and systems. The design and production process is more complex, more interconnected, and reliant upon greater information mobility, with seamless exchange of data and information in real time. Construction small and medium-sized enterprises (CSMEs), in particular,the speciality contractors, can effectively utilise cost-effective collaboration-enabling technologies, such as cloud computing, to help in the effective transfer of information and data to improve productivity. The system dynamics (SD) approach offers a perspective and tools to enable a better understanding of the dynamics of complex systems. This research focuses upon system dynamics methodology as a modelling and analysis tool in order to understand and identify the key drivers in the absorption of cloud computing for CSMEs. The aim of this paper is to determine how the use of system dynamics (SD) can improve the management of information flow through collaborative technologies leading to improved productivity. The data supporting the use of system dynamics was obtained through a pilot study consisting of questionnaires and interviews from five CSMEs in the UK house-building sector.

e-Leadership through strategic alignment: an empirical study of small and medium sized enterprises in the digital age

Small and medium sized enterprises (SMEs) play an important role in the European economy. A critical challenge faced by SME leaders, as a consequence of the continuing digital technology revolution, is how to optimally align business strategy with digital technology to fully leverage the potential offered by these technologies in pursuit of longevity and growth. There is a paucity of empirical research examining how e-leadership in SMEs drives successful alignment between business strategy and digital technology fostering longevity and growth. To address this gap, in this paper we develop an empirically derived e-leadership model. Initially we develop a theoretical model of e-leadership drawing on strategic alignment theory. This provides a theoretical foundation on how SMEs can harness digital technology in support of their business strategy enabling sustainable growth. An in-depth empirical study was undertaken interviewing 42 successful European SME leaders to validate, advance and substantiate our theoretically driven model. The outcome of the two stage process – inductive development of a theoretically driven e-leadership model and deductive advancement to develop a complete model through in-depth interviews with successful European SME leaders – is an e-leadership model with specific constructs fostering effective strategic alignment. The resulting diagnostic model enables SME decision makers to exercise effective e-leadership by creating productive alignment between business strategy and digital technology improving longevity and growth prospects.

Selection of funding schemes by a borrowing decision model: a Hong Kong case study

In financial decision-making, a number of mathematical models have been developed for financial management in construction. However, optimizing both qualitative and quantitative factors and the semi-structured nature of construction finance optimization problems are key challenges in solving construction finance decisions. The selection of funding schemes by a modified construction loan acquisition model is solved by an adaptive genetic algorithm (AGA) approach. The basic objectives of the model are to optimize the loan and to minimize the interest payments for all projects. Multiple projects being undertaken by a medium-size construction firm in Hong Kong were used as a real case study to demonstrate the application of the model to the borrowing decision problems. A compromise monthly borrowing schedule was finally achieved. The results indicate that Small and Medium Enterprise (SME) Loan Guarantee Scheme (SGS) was first identified as the source of external financing. Selection of sources of funding can then be made to avoid the possibility of financial problems in the firm by classifying qualitative factors into external, interactive and internal types and taking additional qualitative factors including sovereignty, credit ability and networking into consideration. Thus a more accurate, objective and reliable borrowing decision can be provided for the decision-maker to analyse the financial options.

Action learning: how learning transfers from entrepreneurs to small firms

The paper presents research with small and medium enterprise (SME) owners who have participated in a leadership development programme. The primary focus of the paper is on learning transfer and factors affecting it, arguing that entrepreneurs must engage in ‘action’ in order to ‘learn’ and that under certain conditions they may transfer learning to their firm. The paper draws on data from 19 focus groups undertaken from 2010 to 2012, involving 51 participants in the LEAD Wales programme. It considers the literatures exploring learning transfer and develops a conceptual framework, outlining four areas of focus for entrepreneurial learning. Utilising thematic analysis, it describes and evaluates what (actual facts and information) and how (techniques, styles of learning) participants transfer and what actions they take to improve the business and develop their people. The paper illustrates the complex mechanisms involved in this process and concludes that action learning is a method of facilitating entrepreneurial learning which is able to help address some of the problems of engagement, relevance and value that have been highlighted previously. The paper concludes that the efficacy of an entrepreneurial learning intervention in SMEs may depend on the effectiveness of learning transfer.

An entropy-based financial decision support system (e-FDSS) for project analysis in construction SMEs

Uncertainty contributes a major part in the accuracy of a decision-making process while its inconsistency is always difficult to be solved by existing decision-making tools. Entropy has been proved to be useful to evaluate the inconsistency of uncertainty among different respondents. The study demonstrates an entropy-based financial decision support system called e-FDSS. This integrated system provides decision support to evaluate attributes (funding options and multiple risks) available in projects. Fuzzy logic theory is included in the system to deal with the qualitative aspect of these options and risks. An adaptive genetic algorithm (AGA) is also employed to solve the decision algorithm in the system in order to provide optimal and consistent rates to these attributes. Seven simplified and parallel projects from a Hong Kong construction small and medium enterprise (SME) were assessed to evaluate the system. The result shows that the system calculates risk adjusted discount rates (RADR) of projects in an objective way. These rates discount project cash flow impartially. Inconsistency of uncertainty is also successfully evaluated by the use of the entropy method. Finally, the system identifies the favourable funding options that are managed by a scheme called SME Loan Guarantee Scheme (SGS). Based on these results, resource allocation could then be optimized and the best time to start a new project could also be identified throughout the overall project life cycle.

The use and usefulness of financial assistance to UK SMEs

Existing literature has paid considerable attention to the effects of supporting programmes on the survival and performance of small and medium-sized enterprises (SMEs), but it lacks a deep understanding of the benefits of the use of such assistance and the factors influencing the evaluation of such services from the perspective of SMEs. We examine the factors affecting the propensity to use assistance when SMEs make financial decisions and the usefulness perceived by the users. We examine 2500 UK SMEs and find that the use of assistance and the usefulness of such services, as perceived by SMEs, are much related to: the characteristics of the entrepreneur, the nature of the business, and the financial products used by the business. These empirical results imply that support and advice on financial decision making, available for SMEs, are important for them to better manage and to access finance. Assistance and advice are also very valuable for SMEs and entrepreneurs to compensate for their lack of human capital and thus facilitate overcoming possible problems in managing their businesses.

Liability of country foreignness and liability of regional foreignness: their effects on geographic diversification and firm performance

The costs of inter- and intra-regional diversification have been widely discussed in the existing international business literature, but the findings are mixed. Explanations for the mixed findings have important managerial implications, because business managers have to estimate accurately the costs of doing business within and across regions before they make their internationalization decisions. To explain the existing mixed findings, this study differentiates between liabilities of foreignness at the country and regional levels, and explores the joint effects of liability of country foreignness (LCF) and liability of regional foreignness (LRF) on the performance of internationalizing firms. Using data from 167 Canadian firms, we find that LCF may not necessarily be negatively correlated with intra-regional diversification, but LRF is positively correlated with inter-regional diversification. LCF moderates the relationship between LRF and inter-regional diversification, and also mediates the relationship between intra-regional diversification and firm performance. LRF mediates the relationship between inter-regional diversification and firm performance. Missing one or more of these variables may result in different cost estimates. Identification of the relationships between these variables helps to improve the accuracy of estimating the costs of doing business aboard.

Institutional framing of CSR and social entrepreneurship interactions in South Africa

Objectives. This paper considers the intersection of Corporate Social Responsibility (CSR) and social entrepreneurship in South Africa through the lens of institutional theories and draws upon a number of illustrative case study examples. In particular it: (1) charts the historically evolving relationship between CSR and social entrepreneurship in South Africa, and how this relationship has been informed by institutional changes since the end of apartheid, particularly over the last few years; (2) identifies different interactional relationship forms between social enterprises and corporates engaging in CSR, with an emphasis on new innovative multi-stakeholder partnerships; and (3) considers internal engagements with social responsibility by SME social enterprises in South Africa. Prior Work. Reflecting South Africa’s history of division, the controversial role of business during apartheid, and the ongoing legacies of that period, the South African government has been particularly pro-active in encouraging companies to contribute to development and societal transformation through CSR and Black Economic Empowerment (BEE). Accordingly a substantial body of work now exists examining and critically reflecting upon CSR and BEE across a range of sectors. In response to perceived problems with BEE, efforts have recently been made to foster broader-based economic empowerment. However the implications of these transitions for the relationship between CSR and social entrepreneurship in South Africa have received scant academic attention. Approach. Analysis is undertaken of legislative and policy changes in South Africa with a bearing on CSR and social entrepreneurship. Data collected during fieldwork in South Africa working with 6 social enterprise case studies is utilised including qualitative data from key informant interviews, focus groups with stakeholders and observational research. Results. The paper considers the historically evolving relationship between CSR and social entrepreneurship in South Africa informed by institutional change. Five different relationship forms are identified and illustrated with reference to case examples. Finally internal engagement with social responsibility concerns by small and medium social enterprises are critically discussed. Implications. This paper sheds light on some of the innovative partnerships emerging between corporates and social enterprises in South Africa. It reflects on some of the strengths and weaknesses of South Africa’s policy and legislative approaches. Value. The paper provides insights useful for academic and practitioner audiences. It also has policy relevance, in particularly for other African countries potentially looking to follow South Africa’s example, in the development of legislative and policy frameworks to promote corporate responsibility, empowerment and transformation.

Bricks vs clicks: entrepreneurial online banking behaviour and relationship banking

Purpose – Little research has been conducted on the effects of information technology on financing entrepreneurial businesses or small and medium sized enterprises (SMEs). The purpose of this paper is to examine the impacts of entrepreneurial online banking and relationship banking on the severity of financial problems perceived by entrepreneurs and their interactive effect. It also investigates how characteristics of individual businesses and entrepreneurial demographics influence SMEs’ financial situation. Design/methodology/approach – An ordered logistic model is used on a UK dataset to empirically test the hypotheses derived in this paper. The empirical evidence is drawn from the 2004 UK survey of SME finances, which contains a sample of 2,500 firms. Findings – This paper finds that both entrepreneurial online banking behaviour and relationship banking alleviates the severity of financial problems perceived by entrepreneurs. The relationship affect is less evident for entrepreneurs who most frequently use an online approach to communicate with their banks than for those using traditional methods. Business and entrepreneur characteristics also have a strong impact on the severity of the financial problems suffered by SMEs. Originality/value – This paper provides evidence supporting the favourable impacts of the application of information technology on entrepreneurial finance from the perspective of entrepreneur/business. It also identifies a substitute relationship between entrepreneurial online banking behaviour and relationship banking, a relationship which contradicts existing evidence.