Effects of Formal Strategic Planning on Financial Performance in Small Firms: A Meta-Analysis

1993 ◽  
Vol 17 (3) ◽  
pp. 53-64 ◽  
Author(s):  
Charles R. Schwenk ◽  
Charles B. Shrader
Keyword(s):  
Firm Performance ◽  
Strategic Planning ◽  
Financial Performance ◽  
Small Firm ◽  
Small Firms ◽  
Sampling Error ◽  
Meta Analysis ◽  
Firm Financial Performance ◽  
And Performance ◽  
First Time

Researchers have been examining the effects of formal strategic planning on small firm financial performance for more than twenty years. Reviewers of prior studies have drawn differing conclusions as to whether formal planning improves small firm performance. We have applied meta-analysis for the first time to the results of previous studies on formal strategic planning and small firm performance. The results suggest that even though the size of the effects for planning for individual studies Is not large, the overall relationship between formal planning and performance across studies Is positive and significant. Much of the variance in the size of the effects, however, Is not explained by sampling error, Indicating the potential for other variables to moderate the effects of planning on the performance of small firms. It is concluded, in general, that strategic planning is a beneficial activity for small firms.

Organizational Characteristics and Small Firms’ Performance Revisited

1989 ◽  
Vol 13 (2) ◽  
pp. 49-64 ◽  
Author(s):  
Paul B. Cragg ◽  
Malcolm King
Keyword(s):  
Firm Performance ◽  
Financial Performance ◽  
Small Firm ◽  
Small Firms ◽  
Causal Model ◽  
Organizational Characteristics ◽  
Future Research ◽  
Firm Financial Performance ◽  
Mixed Support ◽  
Research Studies

Numerous studies have attempted to gain a greater understanding of small firm performance with the intent of isolating factors which are important for success. The studies, some with serious limitations, suggest that many different variables are Important to success. A further study of 179 small, metal goods manufacturers enabled some of the specific relationships to be re-examined, but with mixed support for previous findings. Various suggestions are made for future research studies. A causal model of small firm financial performance is proposed.

scholarly journals Strategic Management and Firm Performance

2019 ◽  
Vol 7 (03) ◽  
Author(s):  
Dr. Sadudin Ibraimi
Keyword(s):  
Firm Performance ◽  
Strategic Management ◽  
Financial Performance ◽  
Empirical Studies ◽  
Business Strategies ◽  
Firm Financial Performance ◽  
And Performance ◽  
In The Beginning ◽  
The Relationship

This paper discusses the relationship between business strategies of firms and their performances. In the beginning the strategic aspects of the concept are presented, then competition and performance and their linkage to strategy is discussed. This is followed by the discussion of several empirical studies on the determinants of firm financial performance. Researches confirm that firms within the same industry differ from one another, and that there seems to be an inertia associated with these differences.

Does organizational learning lead to higher firm performance?

2015 ◽  
Vol 22 (5) ◽  
pp. 271-288 ◽  
Author(s):  
Wencang Zhou ◽  
Huajing Hu ◽  
Xuli Shi
Keyword(s):  
Organizational Learning ◽  
Firm Performance ◽  
Financial Performance ◽  
Secondary Data ◽  
Positive Association ◽  
Firm Innovation ◽  
Content Type ◽  
Firm Financial Performance ◽  
Positive Correlations ◽  
And Performance

Purpose – The purpose of this paper is to develop a framework for studying organizational learning, firm innovation and firm financial performance. Design/methodology/approach – This paper examines the effects of organizational learning on innovation and performance among 287 listed Chinese companies. Findings – The results indicate a positive association between organizational learning dimensions and firm performance (both objective financial performance and perceptual innovation measure). Research limitations/implications – The sample includes only firms for which secondary data are available. Different results might have been obtained if we include smaller, private firms into the sample. This paper only includes a limited number of measures of financial performance to assess the relationship between organization learning dimensions and firm performance. Therefore, researchers are encouraged to test the proposed propositions further with different performance measures. Practical implications – The results showed that it is the combination of several learning characteristics and not a single dimension that influenced the variance of firm performance. The findings reinforce the notion that systemic interventions that address a variety and different combinations of learning organization characteristics will be more likely to be successful than interventions that solely focus on singular or a limited number of dimensions. Originality/value – The integration of objective measures of firms’ financial performance with perceptual survey data represents a unique methodology that has not been widely used in the organizational learning literature. The positive correlations between the eight learning dimensions and the measures of firms’ performance lend credence to the efficacy of the organizational learning concepts.

scholarly journals A RESOURCE-BASED PERSPECTIVE ON THE RELATIONSHIP BETWEEN SERVICE DIVERSIFICATION AND FIRM PERFORMANCE: EVIDENCE FROM ITALIAN FACILITY MANAGEMENT FIRMS

2012 ◽  
Vol 13 (3) ◽  
pp. 567-585 ◽  
Author(s):  
Claudio Giachetti
Keyword(s):  
Firm Performance ◽  
Financial Performance ◽  
Competitive Advantage ◽  
Service Industry ◽  
Facility Management ◽  
Firm Financial Performance ◽  
Diversification Strategies ◽  
And Performance ◽  
Levels Of Service ◽  
The Relationship

In this article, a theoretical framework to study the effect of service diversification on firm financial performance is demonstrated. Data on 48 Italian facility management firms from between 2000 and 2009 show a consistent inverse U-shaped relationship between service diversification and firm performance, with the slope positive at low and moderate levels of service diversification but negative at high levels of service diversification. Further, the results show that firm experience in the service industry and firm affiliation to a consortium positively moderate the relationship between service diversification and performance. The results of this study provide evidence of the importance of service diversification strategies for gaining a competitive advantage.

A Meta-Analysis of the Effects of IT Investment on Firm Financial Performance

2011 ◽  
Vol 25 (2) ◽  
pp. 145-169 ◽  
Author(s):  
Jee-Hae Lim ◽  
Bruce Dehning ◽  
Vernon J. Richardson ◽  
Rodney E. Smith
Keyword(s):  
Financial Performance ◽  
Meta Analysis ◽  
Theory Development ◽  
It Investment ◽  
It Capability ◽  
Firm Financial Performance ◽  
And Performance ◽  
Research Choices ◽  
The Relationship ◽  
Future Theory

ABSTRACT We use meta-analysis techniques to examine research choices that affect findings with respect to the return on IT investment. Recent research has established that IT investment is substantially related to firm financial performance. We find, however, that the relationship between IT investment and performance varies, depending on how both financial performance and IT investment are measured. Despite criticism of accounting measures as indicators of IT payoff, we find that the relationship is often stronger in studies that employ accounting measures rather than market measures of firm performance. This difference is driven by research that focuses on the process-level impacts of IT investment. Furthermore, the relationship is also stronger when IT investment is measured as IT strategy or spending, rather than IT capability. We discuss the practical implications of the results of our meta-analysis and suggest new directions for future theory development and research.

Intellectual capital in Ugandan service firms as mediator of board governance and firm performance

2014 ◽  
Vol 5 (3) ◽  
pp. 300-340 ◽  
Author(s):  
Stephen Korutaro Nkundabanyanga ◽  
Joseph M. Ntayi ◽  
Augustine Ahiauzu ◽  
Samuel K. Sejjaaka
Keyword(s):  
Firm Performance ◽  
Financial Performance ◽  
Intellectual Capital ◽  
Predictor Variable ◽  
Mediating Effect ◽  
Board Governance ◽  
Content Type ◽  
Firm Financial Performance ◽  
Starting Point ◽  
The Relationship

Purpose – The purpose of this paper is to examine the mediating effect of intellectual capital on the relationship between board governance and perceived firm financial performance. Design/methodology/approach – This study was cross-sectional. Analyses were by SPSS and Analysis of Moment Structure on a sample of 128 firms. Findings – The mediated model provides support for the hypothesis that intellectual capital mediates the relationship between board governance and perceived firm performance. while the direct relationship between board governance and firm financial performance without the mediation effect of intellectual capital was found to be significant, this relationship becomes insignificant when mediation of intellectual capital is allowed. Thus, the entire effect does not only go through the main hypothesised predictor variable (board governance) but majorly also, through intellectual capital. Accordingly, the connection between board governance and firm financial performance is very much weakened by the presence of intellectual capital in the model – confirming that the presence of intellectual capital significantly acts as a conduit in the association between board governance and firm financial performance. Overall, 36 per cent of the variance in perceived firm performance is explained. the error variance being 64 per cent of perceived firm performance itself. Research limitations/implications – The authors surveyed directors or managers of firms and although the influence of common methods variance was minimal, the non-existence of common methods bias could not be guaranteed. Although the constructs have been defined as precisely as possible by drawing upon relevant literature and theory, the measurements used may not perfectly represent all the dimensions. For example board governance concept (used here as a behavioural concept) is very much in its infancy just as intellectual capital is. Similarly the authors have employed perceived firm financial performance as proxy for firm financial performance. The implication is that the constructs used/developed can realistically only be proxies for an underlying latent phenomenon that itself is not fully measureable. Practical implications – In considering the behavioural constructs of the board, a new integrative framework for board effectiveness is much needed as a starting point, followed by examining intellectual capital in firms whose mediating effect should formally be accounted for in the board governance – financial performance equation. Originality/value – Results add to the conceptual improvement in board governance studies and lend considerable support for the behavioural perspective in the study of boards and their firm performance improvement potential. Using qualitative factors for intellectual capital to predict the perceived firm financial performance, this study offers a unique dimension in understanding the causes of poor financial performance. It is always a sign of a maturing discipline (like corporate governance) to examine the role of a third variable in the relationship so as to make meaningful conclusions.

Small firm performance: an empirical analysis in Malaysian housing construction industry

2017 ◽  
Vol 10 (1) ◽  
pp. 50-65 ◽  
Author(s):  
Rosman Mahmood ◽  
Ahmad Suffian Mohd Zahari ◽  
Najihah Marha Yaacob ◽  
Sakinah Mat Zin
Keyword(s):  
Firm Performance ◽  
Small Firm ◽  
Business Strategy ◽  
Small Firms ◽  
Growth Potential ◽  
Construction Sector ◽  
Internal Factors ◽  
Content Type ◽  
Entrepreneurial Capital ◽  
And Training

Purpose The purpose of this paper is to evaluate the importance of innovation for the performance of small firms in the construction sector. Furthermore, this paper also examines the influence of several factors related to entrepreneurial capital (entrepreneurial value, business strategy, experience and training) on small firm performance in the sector. Design/methodology/approach This study uses primary data of 255 small firms in the construction sector under the category of small contractors (G1). Stratified sampling method was utilized for data collection, which is then analyzed using the descriptive and multiple regression analysis to achieve the objectives of the study. Findings The findings showed that the factor of innovation and several factors related to entrepreneurial capital (entrepreneurial value, business strategy and business experience) have a significant positive relationship with the performance of small firms in the construction sector. However, factor of training indicated a significant negative correlation with small firm performance. Research limitations/implications Although this study found a significant impact in explaining the factors that affect performance, particularly in the construction sector, it only takes into account only some internal factors (entrepreneurial capital and innovation). Proposed future research should consider a variety of other factors mainly related to external factors, such as economic development, growth potential, industry structure, internal social capital and government policy. Practical implications This study provides clear implications related to the theory and contributions to the literature related to research in the construction sector. The study also provides invaluable insightfulness to various stakeholders including policy makers, institutional support and small contractors about the importance of innovation and entrepreneurial capital in determining the performance of small firms in the sector. Originality/value The results provide supportive evidence that entrepreneurial values and business strategy are important internal factors in determining the performance of a firm, which is consistent with the theory of resource-based view. Experience and training factors, as indicators of firm performance, are articulated in the theory of human capital. Hence, the findings not only can strengthen both the theories but also make a significant contribution to the literature of the study, particularly in the construction sector.

Assessing the Value of Information Technology Investment to Firm Performance

2002 ◽  
pp. 257-278
Author(s):  
Qing Hu ◽  
Robert T. Plant
Keyword(s):  
Information Technology ◽  
Firm Performance ◽  
Financial Performance ◽  
Capital Investment ◽  
Large Scale ◽  
Performance Data ◽  
It Investment ◽  
Firm Level ◽  
It Investments ◽  
And Performance

The promise of increased competitive advantage has been the driving force behind the large-scale investment in information technology (IT) over the last three decades. There is a continuing debate among executives and academics as to the measurable benefits of this investment. The return on investment (ROI) and other performance measures reported in the academic literature indicate conflicting empirical findings. Many previous studies have based their conclusions on the statistical correlation between IT capital investment and firm performance data of the same time period. In this study we argue that the causal relationship between IT investment and firm performance could not be reliably established through concurrent IT and performance data. We further submit that it would be more convincing to infer causality if the IT investments in the preceding years are significantly correlated with the performance of a firm in the subsequent year. Using the Granger causality models and three samples of firm-level financial data, we found no statistical evidence that IT investments have caused the improvement of financial performance of the firms in the samples. On the contrary, the causal models suggest that improved financial performance over consecutive years may have contributed to the increase of IT investment in the subsequent year. Implications of these findings as well as directions for future studies are discussed.

scholarly journals Government institutional support, entrepreneurial orientation, strategic renewal, and firm performance in transitional China

2019 ◽  
Vol 25 (3) ◽  
pp. 433-456 ◽  
Author(s):  
Chengli Shu ◽  
Dirk De Clercq ◽  
Yunyue Zhou ◽  
Cuijuan Liu
Keyword(s):  
Firm Performance ◽  
Financial Performance ◽  
Entrepreneurial Orientation ◽  
Transition Economy ◽  
Institutional Support ◽  
Equation Modeling ◽  
Content Type ◽  
Strategic Renewal ◽  
Firm Financial Performance ◽  
The Relationship

PurposeThe purpose of this paper is to examine how entrepreneurial orientation (EO) and strategic renewal (as a critical dimension of corporate entrepreneurship) might transmit government institutional support and thereby enhance firm performance in a transition economy.Design/methodology/approachMulti-respondent data were collected from 230 Chinese-based firms. The hypotheses were tested with structural equation modeling, in combination with a bias-corrected bootstrap method, to assess the significance of the theorized direct and indirect relationships.FindingsGovernment institutional support enhances EO and strategic renewal individually, yet EO also fully mediates the relationship between government institutional support and strategic renewal. Moreover, strategic renewal fully mediates the relationship between EO and firm financial performance, and it partially mediates the relationship between EO and firm reputation.Originality/valueThis study contributes to entrepreneurship literature by testing an organization-level model of entrepreneurial phenomena in established firms that identifies EO and strategic renewal as two distinct mechanisms through which government institutional support in a transition economy can enhance organizational effectiveness, which entails the firm’s financial performance and reputation. In doing so, this study provides an extended understanding of how EO and strategic renewal might influence a firm’s financial and nonfinancial outcomes in different ways.

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