Commitment to Employees: Does It Help or Hinder Small Business Performance?

This study used a sample of 4,637 small businesses to test the relationship between organizational commitment to employees (OCE) and company performance. OCE was significant in all five of the performance models. The results of the employee productivity model revealed a significant positive relationship between OCE and company performance, suggesting that small businesses might be able to realize some benefit in employee productivity from OCE programs. In addition, results from the return on assets, return on sales, return on cashflow, and employee growth models indicated that some OCE programs might be more beneficial to small businesses than others. Potential antecedents of OCE were also examined. Company size, owner education, and gender of the owner had positive relationships with OCE. Partial support was also found for a positive relationship between owner experience and OCE. Differences in the results of this study compared to studies for larger corporations and suggestions for future research are also discussed.     

Company support for employee volunteerism: Does size matter?

This article examines the relationship between company size and support for employee volunteering. Based on organizational ecology and organizational stages theory, the study hypothesizes that larger versus smaller companies demonstrate greater formalization and codification of their support for employee volunteering. Similarly, larger versus smaller companies use employee volunteering efforts more strategically; this finding is consistent with a need to justify decisions. These outcomes in turn impact the nature of volunteering and the organizations benefiting from such programs. Survey data from a size-stratified sample of 990 randomly selected Canadian businesses indicates that large companies support employee volunteerism in a more formalized and strategic manner than small companies. This behavior includes having formal policies and programs, as well as exercising greater influence over the causes which benefit from employee volunteering. Additionally, large companies are more likely to tie other forms of charitable support to employee volunteering. The article discusses how the more formalized approach of large companies may impact society.     

Employment generation by small producers in the Canadian manufacturing sector

This paper uses job turnover data to compare how job creation, job destruction and net job change differ for small and large establishments in the Canadian manufacturing sector. It uses several different techniques to correct for the regression-to-the-mean problem that, it has been suggested, might incorrectly lead to the conclusion that small establishments create a disproportionate number of new jobs. It finds that net job creation for smaller establishments is greater than that of large establishments after such changes are made. The paper also compares the importance of small and large establishments in the manufacturing sectors of Canada and the United States. The Canadian manufacturing sector is shown to have both a larger proportion of employment in smaller establishments but also to have a small establishment sector that is growing in importance relative to that of the United States.     

Bank Debt Use and Firm Size: Indian Evidence

The paper employs a sample of listed Indian manufacturing firms over the period 1995–2004 to examine the factors influencing the concentration of bank debt in total debt. The results indicate that the factors vary by firm size. Small to medium-sized firms have a high concentration of bank debt. The results support the reputation view that firms face differential debt choice as they grow larger. When evaluating bank regulations, policymakers need to consider the importance of the reputation-building service which banks provide to businesses.     

Small businesses and liquidity constraints in financing business investment: Evidence from shanghai's manufacturing sector

When firms experience financial hierarchy, external finance, if at all available, is substantially more expensive than internal finance. Factors such as transaction costs, agency problem, and asymmetric information have created such a hierarchy. Stiglitz and Weiss (1981) argue that asymmetric information between firms and potential suppliers of external finance creates adverse selection and moral hazard problems in the credit market in developed market economies. This problem of a higher cost of external finance is commonly thought to be more serious for small firms because they are more disadvantaged than their larger counterparts in accessing external finance due to several factors: (1) Public information on small firms is generally not available and leads to the even greater problem of asymmetric information, i.e., more severe adverse selection and moral hazard problems. These information problems have excluded small firms from bond and share markets. (2) Due to the lack of available means of external finance, small firms rely more heavily on bank loans than their larger counterparts. In addition, as small firms are more interested in cultivating stable relationships with a few banks in order to secure a stable supply of credit, these banks become virtual monopolies by lending to small businesses and exercise their market power in lending to small firms.Most of existing research considers only small firms in market economies; little research has been done to understand the relationship between firm size and investment financing in any economy in transition. This paper makes a contribution to the literature by studying the relationship between firm size and liquidity constraints by using a firm level data of manufacturing enterprises in Shanghai during the period of 1989–1992. We consider whether small manufacturing firms in Shanghai are constrained by the availability of liquidity compared with their larger counterparts when they are financing their fixed investment. In a transforming economy such as China (or other similar transition economies), external finance relies heavily on loans from banks that are fully owned by the state. Due to historical reasons, allocations of credit are always biased in favor of state-owned enterprises. Such a `lending bias' imposes an extra cost on small Chinese enterprises in financing investment as the majority of them are not state-owned.In such an environment, our empirical results show that small manufacturing firms in Shanghai are actually less liquidity-constrained than their larger counterparts in financing their fixed investment. This surprising result is rather different from what people normally predict based on the experience in market economies. We suggest three possible explanations for this peculiar finding: (1) The composition of various firm size classes plays an important role in explaining the result: Non-state enterprises which are fast growing and efficient dominate the small firm classes. Their successes in the markets helps them to generate enough internal funds to smooth their investment over time. (2) The presence of heavy indebtedness of large state-owned enterprises may deprive them of sufficient cash available for investment decision. Given that state-owned enterprises have been making heavy losses, the central and regional governments have a liquidity problem in satisfying their huge liquidity demands. (3) Small enterprises in non-state sectors can rely on the informal credit market to obtain funds for investment although they are excluded from the state banking system.However, the further trade liberalization in terms of eliminating tariffs and quotas caused by China's bid of joining the WTO will erode the profits of these small enterprises as imported goods will be supplied at lower prices. In addition, further reforms in financial sectors may also affect the supply of external finance to small enterprises in nonstate sectors. The consequence may lead to a tight liquidity constraint for small enterprises in China.     

Information Technology and Establishment Size in America: Rybczynski Redivivus☆

The Rybczynski Theorem is one of the staples of international trade theory. In their article in this issue of the journal, J.J. Rosa and J. Hanoteau apply the theorem to a two-by-two world in which the two “industries” are small firms and large firms, and the two inputs are information and all other. The assumption that small firms are more information intensive, coupled with the fact that information has become pervasive in recent decades, allows them to derive the prediction that small firms will account for increasingly larger proportions of total output and employment in the economy. We highlight a couple of issues that we find problematic in the Rosa–Hanoteau study, and then develop two different empirical strategies to probe the connections between IT and the size distribution of establishments. First, we combine County Business Patterns with input–output data to explore whether the share of small plants has grown at a faster pace among industries that demand IT more heavily. Second, we explore, on an industry-by-industry basis and taking into account the potential endogeneity of IT location, whether clustering of IT firms in specific US counties is associated with a relatively large share of small establishments, on average, in those counties.     

The pattern of changes in the long-term development of establishment size

Hypotheses and analyses dealing with the expansion of small businesses are usually carried out over relatively short periods of time. The patterns drawn from these examinations, e.g., on the question of specific differences in the growth of size, are usually influenced by configurations of the overall economy and limit the realization of regular processes to the phases they are based upon. A second disadvantage lies in most cases in the fact that data sources are used for the empirical analyses that do not cover the economic system as a whole nor for all sizes of establishments. This study attempts to present the development of the sizes of establishments in Germany over a period of more than one hundred years (1882 to 1987) and thus avoids the narrow perspective of previous examinations. It becomes evident that this development does not take a continuous course; instead, it follows a wave pattern. Since this discontinuous development pattern is common to almost all sectors, it appears to be a general phenomenon. This study reveals that the small establishments with more than five employees, contrary to most theoretical assumptions, are of utmost importance even when considered over a long period of time. The growth of small establishments in recent years, observable in all sectors, may not be a unique phenomenon; however, in view of an overall growth of employment and the simultaneous shrinking of large establishments, it occurs under a new constellation.     

Wages,Health Insurance and Pension Plans: The Relationship Between Employee Compensation and Small Business Owner Income

Small business owners claim that their ability to provide higher wages and more frequent employee health insurance and pension benefits is severely constrained by the profitability of their firms. This paper examines the proposition that employee wage levels, provision of employee health insurance, and sponsorship of an employee pension plan are associated with small business owner income. A large trade-association survey supplies the data for the inquiry. Regression analysis (OLS and logistic) demonstrates that all three forms of employee compensation are tied to business owner income. Further, the business owner income variable "washes out" the generally accepted relationship between size of business and wages, though not the relationships between size of the business and the presence of health insurance nor between the size of business and the presence of pension benefits. The regressions also indicate that unit costs of health insurance and pension benefits are higher for those employing 10 or fewer and 20 or fewer respectively compared the other small businesses.     

人力资源管理实践与小企业绩效关系的实证研究

以江苏省部分小企业为例,采用结构方程建模方法,对人力资源管理实践与小企业绩效之间的关系进行实证分析,研究结果表明:人力资源管理实践水平越高,小企业的劳动生产率越高,员工自愿离职率越低;人力资源管理实践对小企业的盈利能力有积极的正面作用,这种作用以生产率和员工自愿离职率为中介变量。     

High performance work practices in small firms: a resource-poverty and strategic decision-making perspective

High performance work practices (HPWPs) are human resource management practices aimed at stimulating employee and organisational performance. The application of HPWPs is not widespread in small organisations. We examine whether the implementation of coherent bundles of HPWPs (aimed at employee ability, employee motivation or at the opportunity to perform) depends on the scarcity of resources, as reflected in the size of the company, and on strategic decision-making in small firms related to the owner’s expertise and attitudes. In our research, a total of 211 employees from 45 small organisations were asked to rate the presence of HPWPs in their organisation. These averaged perceptions were linked to information provided by the owner–managers on the size of their firm and their own expertise and attitudes. The findings support that smaller but coherent bundles of HPWPs can be found in small organisations and that the implementation of these bundles depends on available resources, strategic decision-making and the combination of the two. These findings highlight the need to integrate the notions of resource poverty and strategic decision-making to understand the uptake of bundles of HPWPs within small firms.     

Transaction Structure in Japanese Small Business Sector

An attempt has been made to examine some aspects of transaction structure of the small business sector in Japanese manufacturing. It has been found that there are some interesting findings in the industrial organization of the sector (1) In the transactions of intermediate goods with manufacturing, small businesses have more frequent transactions with other small businesses than with large firms. On the other hand, large firms have more transactions with each other than with small businesses; (2) The transactions between SMEs and large firms, and between SMEs themselves vary from industry to industry, depending on production/demand structure of an industry and product structure of its SMEs sector; (3) In engineering, such as electrical machinery and transport equipment, the intra-industry transactions from small businesses to large firms are great, suggesting a larger extent of subcontracting relationships. Also, textiles, clothing, and printing and publishing also have higher subcontracting transactions.The relationships are different between the two groups.     

Do Countries Matter More in Determining the Relationship Between Employee Welfare and Financial Performance?

Extant literature suggests that employee‐friendly practices influence corporate decision‐making. Using a bargaining framework, we examine the role of country‐level determinants in influencing employee‐friendly practices and their impact on value creation. Utilizing a comprehensive sample of 25,483 firm‐year observations from 56 countries, we find that firms domiciled in countries with weak employment protection and regulations can potentially benefit by voluntarily undertaking employee‐friendly practices. Also, in countries with flexible labor market conditions, firm value is enhanced by undertaking employee‐friendly practices. Furthermore, the importance of employee‐friendly practices in value creation is observed strongly in countries that provide better infrastructure, productivity, and incentives.     

Impact of employee development on job satisfaction and organizational commitment: person–organization fit as moderator

Researchers have begun to focus on emerging markets, particularly those in Asia, because of the phenomenal growth in the size of their business sectors and a remarkable increase in their share of global business. Businesses in the developing world are now grappling with people management issues that formerly were the preserve of businesses in the West. This study aims at exploring the role of employee development in job satisfaction and organizational commitment and in particular its moderation by person–organization fit. The context is the telecommunications sector in Pakistan. The results reported show a positive impact of employee development initiatives on employee job satisfaction and later the job satisfaction has significant impact on organizational commitment. The results also revealed, however, an unfavourable relationship between employee development and organizational commitment. The relationship between job satisfaction and organizational commitment was significantly moderated by person–organization fit.     

Corporate Support for Employee Volunteerism Within Canada: A Cross-Cultural Perspective

Company support for employee volunteerism (CSEV) is one mechanism whereby businesses meet the escalating expectation for corporate social responsibility (CSR). Institutional theory is applied to examine patterns of convergence and divergence in CSR programs cross culturally, with a particular focus on intra-country cultural differences. Using a national (Canada) survey of businesses, we examine cross-cultural differences regarding CSEV in two regions of Canada—French Canada (Quebec) and English Canada. Our results suggest that cultural differences, rooted in historical conditions, may shape CSEV program implementation in Canada. Quebec companies are less likely to engage in CSEV. If they do encourage employee volunteerism, they may exclude certain cause types from support and appear to focus more on the external benefits of CSEV, such as community perception, than do firms in English Canada. Recognizing that no nation is culturally homogenous, our study illustrates that CSR and CSEV may vary significantly whenever or wherever cultural differences occur. Businesses and nonprofit organizations need to consider culture as an important variable when implementing corporate volunteer programs.     

Trade Liberalisation,Exit, and Output and Employment Adjustments of Australian Manufacturing Establishments

This paper investigates three potential sources of Australia’s manufacturing productivity gains from trade liberalisation in the mid‐1990s: the exit of inefficient establishments, economies of scale, and the reduction in x‐inefficiency via employment reduction. We use manufacturing establishment level data and exploit the intersectoral variation in the effective rates of assistance (ERA) to see how businesses adjusted to trade liberalisation during the period. We find the documented productivity gains to be mostly accounted for by the reduction in x‐inefficiency through employment shedding in industries experiencing a high degree of trade liberalisation. We find little evidence that the exit of inefficient establishments in highly liberalised industries contributes to productivity gains. In fact, we find that the more productive establishments are more likely to exit, perhaps reflecting product switching by these businesses to make more profitable use of inputs. Similarly, there does not appear to be a strong relationship between the extent of trade liberalisation and output adjustments. However, we do find indicative evidence of an overall productivity‐enhancing effect through economies of scale. These findings suggest that, at least for the case of Australia, the ease of making employment adjustments can be crucial for policies such as trade liberalisation to have the desired effect. In addition, trade liberalisation may provide incentives for domestic producers to seek more profitable use of their inputs and to move further downward along their cost curves. We think further studies assessing the productivity gains from product switching and economies of scale effects in both liberalised and non‐liberalised industries and focusing on the interplay between labour market policy and firm adjustments would be valuable.     

The Effect of Business Regulations on Nascent and Young Business Entrepreneurship

We examine the relationship, across 39 countries, between regulation and entrepreneurship using a new two-equation model. We find the minimum capital requirement required to start a business lowers entrepreneurship rates across countries, as do labour market regulations. However the administrative considerations of starting a business – such as the time, the cost, or the number of procedures required – are unrelated to the formation rate of either nascent or young businesses. Given the explicit link made by Djankov et al. [Djankov et al. 2002, ‹The Regulation of Entry’, Quarterly Journal of Economics 117(1), 1–37] between the speed and ease with which businesses may be established in a country and its economic performance – and the enthusiasm with which this link has been grasped by European Union policy makers – our findings imply this link needs reconsidering. Prepared for: Small Business Economics (2007), Special issue GEM conference 2005     

The Impact of Regional Factors on the Start‐Up Ratio in Japan*

We analyze regional factors of the start‐up ratio in Japan using two datasets with different regional aggregation levels. The explanatory variables represent demand, cost, human resource, financial, industry agglomeration and industrial structure, and other factors. The empirical results demonstrate that even though all these factors significantly affect the start‐up ratio at the municipality level, some of these factors are not significant at a larger economic area level. In particular, we obtained evidence that human resource factors, together with the average wage and average size of establishments, are important determinants of the regional start‐up ratio in both the samples.     

New Statistical Dimensions of Services in Britain

The neglect of the British service sector in statistics is partly re-ymedied here in unpublished extensions, available in computeryform, of published statistics. The Census of Employment nowyallows for disaggregation of workplace establishments by 15 size-ybands. Extracting the one million service sector units which ityidentifies in Britain reveals their great level of heterogeneity, withya median size offive employees, but with 1.6 million employed inyunits of 1000 or more workers. Geographically, the average sizeyof unit varies principally from urban to rural types of area. Theyanalysis of V A T registrations demonstrates both an urban-ruralyand a North-South divide in the increase of businesses from 1981yto 1989.     

Asymmetric changes in Australia’s small business loan rate

This paper examines the dynamic asymmetric relationship between changes in the Reserve Bank of Australia’s (RBA) cash rate and the interest rate for small business loans using monthly data (1990–2011). The results provide support for the rockets-and-feathers hypothesis with respect to both the amount and adjustment asymmetries. While the RBA’s rate rises exert a one-to-one and instantaneous impact on the loan rate, its rate cuts are only slowly and partially passed onto small businesses with a delay of 1–2 months. The results also suggest that the recent global financial crisis increased the cost of borrowing for small businesses in Australia by 2.21 %. These findings indicate that small businesses have limited time to respond to interest rate rises and not provided with the full benefit of interest rate decreases. Addressing this problem should ease the interest rate burden for small businesses and enhance their contribution to the economy.