Small-Firm Performance : Modeling the Role of Product and Process Improvements

This study analyzes entrepreneurial and small-and medium-sized (SMEs) enterprises' firm performance and offers a conceptualmodel of SME performance in terms of growth and profitability. The data used inthe study consist of a representative random sample of 855 small- andmedium-sized manufacturing firms selected from the biannual directory publishedby the largest newspaper in a Midwestern state. The multi-phase approachyielded 192 key-informant responses. The study examined the following categories: performance, productimprovement, process improvement, environmental hostility,internationalization, firm size, and innovation. The findings help todistinguishbetween product improvement and process improvement as anorientation for growth. They also suggest that internationalization andinnovator position influence positively the new product and processimprovements. Moreover, environment hostility, internationalization, andproduct improvement impact positively firm growth as a performancedimension. A product improvement orientation is positively linked with firm growth andprofitability, while a focus on process improvement offered no relevantstatistical relationship to growth or profitability. As the findings of thisstudy are based on cross-sectional data, recommendations are made for futurestudies using longitudinal methods of analysis. (CBS)