MEASUREMENTS AND INFLUENCING FACTORS OF PERFORMANCE FOR SMALL AND MEDIUM ENTERPRISES: A CRITICAL REVIEW

Abstract

There is a large amount of literature on small and medium enterprises performance and related factors.  Broadly, empirical studies of such nature explore different factors individually or severally influence business performance.  In the case of small and medium enterprises a growing concern is expressed in many countries with regard to their survival and success.  Sri Lanka, as a developing country, also takes much interest in developing the small business sector as it contributes much to the economic development of the country.  However, as Edmunds (1979) stated in those early days, small companies have trouble surviving and their failure rates are high. Small and medium sized enterprises (SMEs) are viewed as a source of flexibility and innovation, and make a significant contribution to economies, both in terms of the number of SMEs and the proportion of the labour force employed by these firms.  Even in such situation, concerns are expressed in terms of their performance and many issues assumed to be related to them.  However, a comprehensive study of all possible factors that influence differing performance could not be found and this is an identified gap for this study. Thus, the present study attempts to analyse the considerable literature on small and medium sized businesses and the factors that cause differing nature of it. In recognizing the economic impact of small businesses in most countries including Sri Lanka, and from what was known about their differing level of performances (success, failures, slow/high growth, profitability and productivity etc.) from supporting research and media releases, it is hoped that this study would extend the understanding and knowledge of factors influence the performance of small and medium sized enterprises. One of the major objectives in this study is to identify the determinants of small and medium enterprises’ performance.  This has been an important objective since the economy of many countries world wide increasingly becoming dominant in SME sector and number of SMEs is substantial and rising.  This is evident from many previous studies (Monk, 2000; Rue & Ibrahim, 1998, Siu, Fang & Lin, 2000).  Another objective is to provide a platform by developing a comprehensive model of factors to put a strong foundation for a future research.

Keywords: SMEs, Performance Measurements, Influencing Factors

For full paper: fmscresearch@sjp.ac.lk