Showing papers in "Journal of Small Business Management in 1991"

Social Responsibility and Small Business: Suggestions for Research

Abstract: SOCIAL RESPONSIBILITY AND SMALL BUSINESS: SUGGESTIONS FOR RESEARCH Over the last three decades, managers and scholars have been searching for a better understanding of corporations' social responsibility, or the pros and cons of business involvement in resolving social problems (Bowen 1953, Friedman 1962, Heyne 1968, Levitt 1958). Carroll's (1979) construction of the four responsibilities (economic, legal, ethical, and descretionary) comprising a company's total concept of corporate social responsibility is useful for distinguishing between those responsibilities that are market or legally driven, and those that go beyond the law (Stone 1975). This quest has been quite fruitful in advancing the theory of corporate social responsibility (CSR) (Carroll 1979, Epstein 1987, Wartick and Cochran 1985). Nonetheless, there remains a visible gap between CSR theory and management practice that distresses many authorities (Jones 1980, 1983; Preston and Post 1975). This problem is exacerbated by limited informatioon on managing CSR in small businesses. Several factors have contributed to the shallow understanding of small business CSR. First, a distinct large-scale corporation orientation persists in the CSR literature (Chrisman and Archer 1984). Little research and discussion have focused on CSR in small (and medium-sized) businesses. Second, it has been proposed that small businesses lack sufficient influence or resources to adequately address social issues (Spencer and Heinze 1973). Third, small businesses have been encouraged to overlook social activism and to concentrate instead on avoiding irresponsible behavior (Van Auekn and Ireland 1982). The tenedency for CSR research to be conducted primarily in large-scale corporation ignores the fact that more than 60 percent of the U.S. work force is employed by companies with fewer than 50 employees (Trost 1988). Only 0.08 percent of all businesses employ 1,000 or more people; 95.3 percent of all businesses employ fewer than 50 people (U.S. Department of Commerce 1987). Consequently, when researchers examine CSR in large corporations their findings may not be generalizable to the most prevalent firms where most of the U.S. population works. The research emphasis on big business is detrimental to understanding CSR practices in small business issues. As a result, there are few theoretically or empirically based guideline upon which small business practictioners can draw in formulating CSR policies, objectives, or strategies. The advances made in CSR theory during the last 30 years are impressive. However, it is also very apparent that CSR is primarily understood from the perspective of large corporations (Fischer and Groeneveld 1976). Therefore, it is appropriate to ask what directions should be taken to reach a better understanding of CSR in small business. The big business orientation of previous CSR research limits its usefulness and applicability to the majority of businesses in the U.S. Further evoloution of theory and empirical research that includes small businesses would greatly enhance the usefulness of CSR concepts for practitioners. The purposes of this study are to: (1) review existing research to identify research-based inferences about small business CSR, (2) identify methodological problems and research gaps, and (3) propose a research agenda that will overcome these problems while leading to a more robust theory of CSR in small business. RESEARCH ON SMALL BUSINESS CSR The most notable characteristic of empirical research on CSR in small businesses is the limited number of studies. Table 1 provides a chromological overview of eight leading publications on small business CSR. Six of these articles were published in the American Journal of Small Business and the Journal of Small Business Management while the others were published in a book and conference proceedings. The small number of research studies was explicity acknowledged in 1984 (Chrisman and Archer 1984). …

Perceived Fulfillment of Organizational Employment versus Entrepreneurship: Work Values and Career Intentions of Business College Graduates

Abstract: Business college graduates and students are increasingly disenchanted with career prospects as organizational employees. Fierce competition, cost-cutting pressures, and leveraged buyouts have resulted in corporate restructurings that have undermined such traditional values as employee loyalty, security, and ownership of results (Jackson and Vitberg 1987). Consequently, more and more business students view the possibility of starting and operating their own business as a viable alternative to being employed by an established company (Duffy and Stevenson 1984). Recent survey support this view. A national survey by the Roper Organization revealed that 46 percent of college students consider a "business of one's own" an excellent way to get ahead (Karr 1988). Even more impressive were the results of a University of Pittsburgh survey of 1,000 M.B.A. students from top business schools across the United States. When asked what their long-term career goal was, 44 percent responded that they wanted to become an "independent entrepreneur." In contrast, only 34 percent wished to become a "high-ranking corporate executive" (Sandholtz 1990). This desire for entrepreneurial careers is reflected in the growing number of universities that have added courses and programs in entrepreneourship to their business curricula. Traditionally, most entrepreneurs began their careers by working for someone else. Over time, as organizational employment failed to satisfy their needs, they left to start their own businesses (Brockhaus and Horowitz 1986). Today, however, many students already appear to view established organizations as unwilling or unable to satisfy their needs. This perspective may reflect a greater awareness of actual organizational life and rewards as well as a recognition that organizations have changed over the past decade. This view, it should be noted, does not mean that these business school graduates will not enter the employ of established organizations. It does recognize, however, that such employment may be temporary, allowing the graduates to gain the experience and financial resources necessary to start their own business. Clutterbuck and Devine (1985) support this intention by noting the self-confidence that entrepreneurs acquire from learning the basics of good management from their employers. REVIEW OF LITERATURE Work Values Considerable research has focused on the work values of business college graduates. Results generally show that they desire work which provides a feeling of accomplishment, job security, and the opportunity to acquire knowledge and skills. However, they prefer to avoid work that could be characterized as routine or involving rules and procedures, and work that requires supervising others or taking risks (Bartol and Manhardt 1979; Brenner and Tomkiewicz 1979, 1982; Manhardt 1972). Although there is no clear evidence that business graduates' work values have changed, it is likely that they have modified their perceptions concerning the extent to which established organizations can meet their needs. The burgeoning interest in entrepreneurship among business students may reflect their increasing willingness to accept the uncertainties of business ownership, since many of the benefits once associated with being an employee--such as job security and prestige--no longer are perceived to exist. As such, the graduates' choice between entrepreneurship or employment in an organization could be determined by their perceptions of the outcomes associated with each alternative--and how much they value or desire these outcomes. Although a graduate might perceive entrepreneuship as more attractive than working for an organization, perceived barriers--such as lack of money or the onset of family responsibilities--could intervene, and cause the graduate to become an employee rather than an entrepreneur. In fact, Greenhaus, Sugalski, and Crispin (1978) found that a person's intention to pursue employment with a particular type of organization was not only a function of the organization's attractiveness but also of the accessibility or feasibility of the choice. …

Entrepreneurial Research on Student Subjects Does Not Generalize to Real World Entrepreneurs

Abstract: Theory and research in the social sciences support a model of dynamic interactive processes between individual characteristics and the environment which lead to complex behaviors such as the creation of new ventures and other entrepreneurial activities. Neither the characteristics of the individual nor the characteristics of the environment (social, physical, financial, etc.) are sufficient in themselves to explain the phenomenon of new venture creation. Research models in entrepreneurship must, therefore, reflect this dynamic relationship or at least be compatible with this perspective. Past research on the entrepreneur has been based, to a large extent, on the assumption that stable personality characteristics can explain how entrepreneurs are different from nonentrepreneurs. This assumption has influenced entrepreneurial research and the way we view entrepreneurs in many ways, one of which is subject selection based on operational definitions. The assumption of stable personality characteristics allows for the use of subjects who may or may not be entrepreneurs at the present time because they may be seen as "budding" or potential entrepreneurs. Since personality characteristics are stable across time and situations, they exist in much the same way at any point in time or career stage for a given individual. Because personality characteristics are stable, entrepreneurs would exhibit the same general characteristics regardless of the stage of their career or the situation in which they find themselves. Students who are current or potential entrepreneurs would exhibit the same stable defining characteristics as would nonstudents who are current or potential entrepreneurs. For the most part, the instruments used in measuring entrepreneurship have been based on personality models in psychology which purport to measure personality characteristics that are stable across time and situations and have a broad range of effects. Based on the stable state or trait model, one would expect that the same basic characteristic or constellation of characteristics would affect entrepreneurs and/or potential entrepreneurs at all stages in their careers, at all ages, and in all aspects of their life. Achievement, locus of control, risk taking, etc., would have a similar effect on the studies and social life of a student, and on the business and family life of a non-student. There seems to be a clear relationship between entrepreneurship and achievement motivation across a number of measurement instruments (Edwards Personal Preference Scale, the Mehrabian Scale, and the TAT (1)), and across a number of different samples. However, under the assumption of a set of dynamic and changing characteristics, differences across time and situations would be expected. Groups of entrepreneurs at different stages of their careers would be expected to differ in some central entrepreneurial characteristics just as entrepreneurs would be expected to differ from nonentrepreneurs. Changes over time in entrepreneurial characteristics are a potential explanation for some unusual results in the entrepreneurship literature. For example, Sexton and Bowman (1983) found that achievement motivation lacked predictive validity in groups of entrepreneurship students and non-business students, but the same construct has been found to predict entrepreneurship in nonstudent groups of entrepreneurs (Brockhaus 1982, Hornaday 1982, Hornaday and Aboud 1971, Lachman 1980, McClelland 1961). In subsequent research Sexton and Bowman (1984, 1986) modified the JPI/PRF-E (2) by dropping the achievement and 28 other scales from the test instruments because the scales lacked predictive validity for student subjects. In validating the modified instrument with nonstudent groups, Sexton and Bowman (1986) found not only that there were significant differences on all of the scales used between the experimental groups (entrepreneur) and control groups (nonentrepreneurs) but also that on seven of the nine scales there was a significant difference between the students and nonstudents (including both the entrepreneur and control groups). …

Key Interpersonal Relationships of Next-Generation Family Members in Family Firms

Abstract: Family firms of all sizes play an important role in our society. They account for 50 percent of the nation's gross national product, as well as half of the nation's work force (Beckhard and Dyer 1983; Dyer 1986; Lansberg, Perrow, and Rogalsky 1988; Rosenblatt, Mik, Anderson, and Johnson 1985). Many of those employed are next-generation family members, also known as potential heirs; however, only limited research exists concerning the personal experience of these individuals within the family firm. While succession process are complex -- and involve many factors at the individual, relational, and organizational level of analysis (Handler 1989)--this article focuses on two interpersonal relationships which are central to the next-generation family member's experience. They are the intergenerational relationship between current and next generation). Both relationships are critical because of their impact on succession processes and future strategic plans for the firm. Key themes related to each type of relationship emerged from the qualitative analysis of data from personal interviews conducted with 32 next-generation family members from 32 organizations. BACKGROUND Critical to the next-generation family member's experience of succession is the quality of his or her relationship with the firm's founder (first generation leader) or owner (second, third, fourth, or fifth generation leader). While theorists have suggested this relationship is important to the succession process (Lansberg 1986, Patrick 1985, Stempler 1988), there has been minimal investigation of its nature and evolution. For example, Patrick (1985) researched individual's perceptions of satisfaction and their working relationships with their fathers. Her findings suggest that "it is entirely possible to find working in the family business with father as boss to be a satisfying experience." On the other hand, Davis's study, which was limited to the relative life stages of father and son, indicated that the relationship was relatively harmonious when the father was age 50-59 and the son was age 23-32; but it was relatively problematic when the father was age 60-69 and the son was 34-40. Using quantitative analysis, weak support was obtained for the hypothesis that a problematic relationship between father and son would exist when the father was 41-45 and the son was 17-22 (Davis 1982). The intragenerational relationship between siblings (or other members of the same generation) also has received little attention. Stories on interpersonal conflict are reported in the popular press.(1) However, no established theory successfully describes sibling behavior in family firms. Friedman (1989) attempted to apply conflict management theories to siblings in family firms. He suggests that rivalry is common among siblings, and the important question is how to manage it in the family firm. In addition, family business consultants have made suggestions for minimizing conflict. For example, one well-known specialist indicates that: In successful family businesses, both siblings and the parent-owner work to make sibling rivalry positive rather than negative in effect. They use such techniques as (1) determining a general and well-publicized philosophy to govern salaries and promotions, (2) assigning siblings separate positions within the company, and (3) developing a code of conduct that will govern siblings' behavior among themselves (Ward 1987). Following a discussion of methodology, the two key interpersonal relationships and their impact on succession will be considered in detail. METHODOLOGY Given that few systematic studies of succession in family firms have been done from the perspective of the next-generation family member, this research was designed to be exploratory, descriptive, and theory-generating. An intensive study of 32 next-generation family members from 32 organizations was conducted. …

Competencies Needed for Small Business Success: Perceptions of Jamaican Entrepreneurs

Abstract: COMPETENCIES NEEDED FOR SMALL BUSINESS SUCCESS: PERCEPTIONS OF JAMAICAN ENTREPRENEURS Jamaica is a 4,244-square-mile island nation in the Caribbean. About two million people inhabit Jamaica, which is a member of the Commonwealth of Nations, and approximately 750,000 people live in the urban center of Kingston. This article discusses a study of Jamaican entrepreneurs' impressions of competencies needed to successfully operate small businesses in Jamaica. The findings should help promote the trend toward entrepreneurship in Jamaica and other developing nations. In the 1980s, Jamaica experienced serious unemployment problems. From 1984 to 1986, government employment declined by 21.3 percent, causing the national unemployment rate to reach 20.8 percent (Private Sector Organization of Jamaica 1987). The government also reduced its output of goods and services during the 1980s, transferring this responsibility to private individuals. According to the Planning Institute of Jamaica (1987), funds allocated for government services declined in the 1980s from $370 million to $323 million. This policy change not only affected the unemployment rate (now 16.8 percent), it also created many opportunities for the small business sector (Planning Institute of Jamaica 1989). Small Business in Jamaica Small businesses dominate five sectors of the Jamaican economy--domestic agriculture, manufacturing, tourism, fast food services, and entertainment. To a lesser degree, entrepreneurs also participate in the construction, transportation, public utilities, and communications industries (Trevor Hamilton and Associates 1989). In the Kingston metropolitan area, most small businesses operate garment manufacturing, handicraft and furniture industries, or personal care and hospitality services. Small businesses in rural parishes consist mainly of farms that produce food and livestock for the domestic market. In 1987, about 353,000 people (41 percent of the national work force) were self-employed. In 1987, these small businesses generated employment and income accounting for $508.3 million, or 26 percent of the country's gross domestic product. This sector also registered the highest rate of growth in the economy (2.6 percent), compared to a national growth rate of 0.5 percent and a growth rate among large businesses of 1.8 percent (Trevor Hamilton and Associates 1989). This proliferation of small businesses in Jamaica could be attributed to promotion and assistance by such public and private entities as the Small Business Development Center, the National Development Foundation, the Small Business Development Section of Jamaica Promotions Ltd., and the Jamaica Office of the Inter-American Institute for Cooperation on Agriculture. Possibly also having an impact were a joint project of the Jamaican government and the U.S. Agency for International Development that produced an entrepreneurship curriculum guide for use in high schools, and a College of Arts, Science and Technology's entrepreneurial skills development program started with help from the Canadian International Development Agency. As a result of these influences and many other factors, entrepreneurship has increased in Jamaicia. However, little empirical data exists to identify competencies necessary for successful self-employment in Jamaica. In fact, only limited sources of data on entrepreneurship in developing nations is available (much of it from international agencies such as the Peace Corps, the Foundation for International Training, the Canadian International Development Agency, and the International Labor Organization). One researcher of entrepreneurship in developing nations (Dana 1988) noted that programs and strategies that have been successful in one country may not work in another because cultural and governmental differences may require a different approach. Also, Nehrt (1987) pointed out that the national environment in developing countries is far different from that of the United States; therefore, entrepreneurship education curricula in developing countries must be tailor-made to fit local environments. …

Firm Size and Export Behavior: Lessons from the Midwest

Abstract: In the last three decades the number of American companies involved in international commerce has increased dramatically Ojile (1986), for example, indicates that more than 6,000 US organizations have some sort of operation abroad and about one-third of all US corporate profits result from international activity By 1984, the internationalization of trade had created 58 million jobs in the US, and in 1990 it was expected to have generated no fewer than 74 million employment opportunities (Young et al 1986) Nevertheless, the US ranks last among the Organization for Economic Cooperation and Development (OECD) countries in exports as a percentage of Gross National Product This low ranking is explained in part by the skewed distribution of export activity The Department of Commerce estimates that a mere 1 percent of US manufacturing firms account for 80 percent of US manufactured exports (Edfelt 1986) Given the large size of the foreign market and this low participation rate, small and medium-sized firms have the potential to reap large gains from export activities Although it may increase cost and uncertainty, exporting can help smaller organizations increase profits, prolong product life cycles, and open new distribution channels Furthermore, small firms have been shown to be less severely affected by adverse external shifts than their larger counterparts They have been shown to be less sensitive to currency fluctuations, in part, because they can usually make quick price adjustments (Holden 1986) Nations which achieve highly competitive positions in world markets tend to have small and medium-sized firms actively involved in international trade For example, in Germany and Japan small and medium-sized enterprises account for a large percentage of each country's exports (Dichtle et al 1984, Edmunds and Sarkis 1986) Unfortunately, this is not the case in the US, despite research indicating immense potential America's small and medium-sized firms are producing products desired in the world market; yet, their enthusiasm for internationalization is tempered by their inability to gather market information and maintain a continuous flow of communication with foreign clients, and by their lack of experience in planning and targeting export sales in world markets (Kaynak and Kothari 1984) Given this mix of positive and negative forces acting upon a given manufacturing firm, export participation is largely a function of size, experience, and managerial interest Firms headed by managers who perceive global marketing as an opportunity and challenge rather than an undesirable burden are much more likely to respond favorably to foreign market opportunities The research reported here examines the relationship between firm size, as measured by sales volume, export experience, and export attitudes Four hypotheses are tested using data from 195 midwestern manufacturing firms SIZE AND FIRM EXPORT BEHAVIOR In their review of the literature, Kaynak, Ghauri, and Oloffesson-Bredenlow (1987) indicate that small and medium-sized firms display similar behavioral and operational characteristics That is, most of them are either passive or reactive exporters This observation is consistent with other research Studies suggest lack of knowledge about foreign markets, inability to assess market conditions in a changing international environment, and inability to target export sales are the major problems inhibiting small and medium-sized organizations from exporting (Czinkota and Johnston 1983, Edmunds and Sarkis 1986, Green and Larsen 1987, Kaynak and Kothari 1984, Kinsey 1987) On the other hand, export success seems to be facilitated by patience, flexibility, and a willingness to take on additional risk (Holden 1986, Posner 1984) The federal government has launched numerous promotional programs to encourage non-exporter interest in global markets …

Small business financial management practices in North America : a literature review

Abstract: Sound financial management is crucial to the survival and well-being of small enterprises of all types. Studies of reasons for small business failure inevitably show poor or careless financial management to be the most important cause (see Berryman 1983, Peacock 1985 for reviews of the relevant literature). Potts (1977, p.2) states the case more succinctly: . . . the clearest and most startling distinctions between successful and discontinued small businesses lie in their approach to the uses which can be made of accounting information .... In recognition of such findings, recent years have seen increased attention to financial management in small business training and education programs and in the many books and articles written for small business. It is not unreasonable to ponder whether this attention has had a visible impact on the way in which small businesses are operated. It seems appropriate to review, and attempt to integrate, available empirical research findings concerning the financial management practices of small business in North America. Such a review can lead to improved understanding of both the research conducted to date and the financial management practices under scrutiny. Furthermore, it can act as a stimulus for future research. An additional function of this review is to identify and highlight trends in the financial management practice of small firms. This will assist policymakers in understanding the financial environment in which small firms operate and the possible impact of the current and proposed policies directed at the small business sector. Over the past decade there has been a significant increase in government sponsored agencies and educational programs directed at the small business sector and in interest in small firms, as illustrated by the President's annual report on small business. Such attention warrants consideration as to whether these policies have positively influenced the financial practices of small firms. This article provides a concise summary of research evidence which indicates that financial practice among small firms has not experienced any significant change over the past fifteen years. This result should have impact on future policy decisions. NORTH AMERICAN PRACTICE Accounting Systems It is clear that significant progress has been made in encouraging small business owner-managers to install and use accounting information systems. For example, in a survey of over 360 small businesses in Georgia, DeThomas and Fedenberger (1985) found a high standard of financial recordkeeping. Around 92 percent of respondents had some form of record-keeping beyond check stubs and deposit receipts. D'Amboise and Gasse (1980) studied the utilization of formal management techniques in 25 small shoe manufacturers and 26 small manufacturers in the plastics industry in Quebec, Canada. A cost accounting system was in operation in about 88 percent of businesses studied. It is also clear that the availability of affordable computers and suitable software has played an important part in promoting this situation. In a survey of 129 small manufacturing businesses in the province of Quebec, Raymond and Magnenat-Thalmann (1982) discovered a preponderance of accounting-related applications among computer software in use, particularly in the areas of accounts receivable, payroll, accounts payable, general ledger, sales analysis, and inventory. Further studies undertaken in a wide variety of settings by Cheney (1983), Raymond (1985), Malone (1985), DeThomas and Fredenberger (1985), Farhoomand and Hryck (1985), and Nickell and Seado (1986) confirm that accounting/financial management applications dominate as computer applications in the small businesses examined. Financial Reports Reflecting the availability of computerized accounting systems, there is some evidence that the standard of financial reporting in small businesses in North America is now quite high. …

Dealing with Limited Financial Resources: A Marketing Challenge for Small Business

Abstract: DEALING WITH LIMITED FINANCIAL RESOURCES: A MARKETING CHALLENGE FOR SMALL BUSINESS A broadening topic of research is enhancement of marketing practices within small business firms. One focus of this research has been small business owners' experiences with marketing under tight financial constraints. Such research is critical because small businesses often operate on a financial razor's edge, and a minor miscalculation in revenues or expenses could be fatal. A number of previous writers have emphasized that small firms, unlike larger businesses, have limited funds for marketing (Buskirk 1987, Davis 1985, Goldstein 1984, Hills 1987, Mehra 1982, Sheth 1987, Morganosky 1988, Stasch 1987, Weinrauch 1987, and Wortman 1987). As a result, small business owners should seek creative, low-cost ways to market their products and services, to identify the problems caused by limited financial resources, and to seek help dealing with such problems. Low-cost marketing is a relative and nebulous concept. What might be affordable for one company may not be for another. Nevertheless, two previous articles by Weinrauch (1987) provide some basis for discussion. They state that low-cost marketing may be explained as strategies that cost little in terms of actual dollars spent, consist of a very small percentage of the total budget, or cost-effectively enhance sales revenue. Intuitively, small business researchers know that small businesses are quite innovative in adopting "shoestring" approaches. This perception is sometimes highlighted in the popular business literature. Many shoestring approaches are reported in the form of business vignettes, anecdotal stories, or occasional case studies. Moreover, some recent books dramatize marketing techniques for "bootstrapping" the small business (Davidson 1988, Weinrauch 1989). However, empirical studies that record small business owners' experiences, perceptions, and levels of success related to marketing practices are lacking in the literature. PURPOSE This article highlights the results of an exploratory study to identify small business owners' attitudes and perceptions concerning dealing with a limited marketing budget. Specifically, the purpose was to: * identify small business owners' attitudes concerning their ability to compete with larger businesses; * examine the owners' attitudes about the importance that marketing plays within their small businesses; * identify selected strategic marketing areas that are posing problems for the small business owners; * determine the most popular sources of marketing assistance used by owners; and * determine if any significant correlations exist between the owners' attitudes, problems, marketing assistance used, and various traditional success measures. All of these objectives are tied to the major issue of limited financial resources, and results should have some interesting implications for both educators and practitioners. From a theoretical perspective, the findings should also generate interest in previously overlooked research areas. For instance, how significant are limited finances in competing with large companies? Do small business owners feel that educators and government officials are paying enough attention to developing and communicating effective small business marketing strategies? What type of marketing-related problems prevail when finances are constrained? Do small business owners diligently seek assistance to overcome budgetary constraints? Such research could help the multitude of small businesses with "shallow pockets" to more effectively use their limited resources. METHODOLOGY The survey instrument was pre-tested on a group of 25 small business owners, and ambiguous questions were deleted or reworded for clarity. …

Franchising and Franchisee Behavior: An Examination of Opinions, Personal Characteristics, and Motives of Canadian Franchisee Entrepreneurs

Abstract: FRANCHISING AND FRANCHISEE BEHAVIOR: AN EXAMINATION OF OPINIONS, PERSONAL CHARACTERISTICS, AND MOTIVES OF CANADIAN FRANCHISEE ENTERPRENEURS Over the past few years, many of the new enterprises that have been emerging in Canada are franchises. A wide variety of products and services are now available through franchises--from milk and prescription drugs, to real estate, dental, and hotel services. Franchising has become a popular business alternative due to its favorable reputation of being a proven business format for entrepreneurs. Statistics show that over one-third of all retail sales in Canada are generated from franchising, and these figures are rapidly growing (Franchising Annual 1987). In 1987, Canada's 1,700 franchisees and 42,000 franchises recorded sales of about $45 billion which amounted to approximately 45 percent of Canadian retail sales. Almost 35 percent of Canadian businesses are controlled by Americans, either by means of area franchises such as McDonald's restaurants of Canada Ltd., or through unit-by-unit franchises directly from headquarters in the United States (Knight 1986). Likewise, Canadian franchises own more than 2,000 units in the United States and elsewhere. A recent survey by the Retail Council of Canada showed that 79 percent of franchises respondents felt they had made the right decision in purchasing a franchise. Fifty-five percent indicated that they would make that same decision again. RESEARCH OBJECTIVE The purpose of this study is to examinee and analyze the behavior of Canadian franchisees. In doing so, we first explore the perceived importance of success factors in franchising, and the degree to which subjects manifest them. Second, we examine personal characteristics of franchisees, and their attitudes and opinions toward franchising. Third, we examine the reasons behind choosing to join franchise operations (Metro Toronto Business Journal 1986), rather than starting an independent business. Fourth, we determine which form of business is regarded as being more entrepreneural--franchising or operating an independent business. FRANCHISING DEFINED It appears that franchising has no set definition, as it holds many differet researchers. Bain (1986) defines a franchise as a contractual privilege granted by an individual or company (owner) to another individual or company. Norback and Norback (1982) view franchising as a license from the owner (franchisor) of a trade or service mark permitting the user (franchisee) to market a product or service under that name in accordance with the franchisor's system. Justis and Judd (1986) suggest that franchising is a distribution method which is being used by businesses for growth and expansion. For Ayling (1987), franchising is a method of raising capital by and for the franchisor. The contractual privileges and licensing distribution of franchising is unique to each industry or organization. Often franchisers provide franchisees with a slightly different package of goods and permit each franchisee to employ a different method of operation (Mackenzie 1985). The franchising arrangements very from nonexclusive distributorship or sublicense agreements, to "an arrangement under which one party grants another the right to operate a business in accordance with prescribed operating methods and procedures controlled by the grantor" (Franchising--An Information Source 1979). According to the Canadian Federal Department of Industry, Trade and Commerce (1979), franchisors allow franchisees to use their knowledge, expertise, trade marks, and other distinguishing features or names. When a Canadian franchisor enters into an agreement with a Canadian franchisee, the latter obtains an exclusive right, within a certain locality, to operate the franchised business for five years with an option to renew the agreement for another five years. In addition, the Canadian franchise package states that the option provided to the franchisee by the franchisor cannot be terminated within that period. …

Turnaround Strategies for Small Firms

Abstract: At any given time, between 20 and 30 percent of all companies are in need of a turnaround (Murphy 1986). Turnaround management is a process that involves establishing accountability, conducting diagnostic analyses, setting up an information system, preparing action plans, taking action, and evaluating results (Di Primio 1988). The need for turnarounds is, in part, attributable to factors such as increased competition, overinvestment in technology, more knowledgeable shareholders, and a willingness to gamble on the part of managers (Heany 1985). This need often is felt most in the small business sector, which is particularly distressing because small firms contribute so much to our economy. For the purposes of this article, a small business is defined as a company with fewer than 100 employees and sales of less than $5 millon (Bracker and Pearson 1986). Such companies comprise] 97 percent of all enterprises in the United States and employ more than 58 percent of the labor force (Keats and Bracker 1988). Between 1976 and 1986, small firms created more than three million new jobs (Bracker and Pearson 1986). However, despite these accolades, all is not rosy in the small business sector. The failure rate among small firm is high, although the exact rate is not known. Some researchers suggest that 67 percent of new businesses fail within four years (Cooper, Dunkelberg, and Woo 1989). Others state that nearly one-half of startups fail within 18 months (Ireland and Van Auken 1987). Furthermore, although an extensive review of the literature has produced little information concerning turnaround strategies for small firms, a common theme has been detected. The purpose of this article is to: (1) propose a typology for categorizing causes of small business failure, (2) propose a set of generic approaches to counteract the causes of failure identified within the typology, and (3) provide examples of how the generic approaches translate into specific actions. Contrary to conventional wisdom, a majority of businesses have failed because of internal factors affected by managerial action and discipline. Examples include failure to control operational costs and failure to analyze financial statements. In fact, the literature indicates few business failures can be attributed to competion and other outside (external) forces (e.g., national, regional, or industrial economic downturn). To establish primary causes of business failure, 30 articles were reviewed. These articles, published between 1972 and 1989 in 20 different publications, represented the work of 44 authors. They included case studies, empirical research, and anecdotal reports extracted from more than 100 potential sources of business failure literature. The literature review yielded 24 factors that are considered by the practitioners and researchers to contribute toward failure of small firms (see table 1). PROPOSED TYPOLOGY The 24 factors identified through the literature search can be analyzed from a number of different perspectives. Some of the obvious typologies include categorizing factors by: (1) business functions such as finance, marketing, and human resources; (2) whether they originate internally or externally, (3) whether they are strategic or operational (short- or long-term) in nature, and (4) whether they are within or outside of the firm's control. A simple yet elegant way to capture the value of all these perspectives was to develop a 2 x 2 matrix (see figure 1). The vertical axis of the "Environment/Response" matrix divides the factors based on whether they are part of a firm's internal environment (under management's control) or its external environment (beyond management's control). The horizontal axis distinguishes among the factors based on whether they are administrative or strategic in nature. Administrative factors include short-term operational activities, such as scheduling procedures, managing employees, and analyzing reports. …

Analysis of the Use of Advisors as Information Sources in Venture Startups

Abstract: The initiation of new business ventures seems to be fraught with many challenges, including the need for knowledge and expertise beyond that possessed by individual entrepreneurs. Realizing they need assistance and information, entrepreneurs often request advice from resources outside the firm. The challenge to the entrepreneur, according to Timmons (1986), "...is to select among the many advisors available--the ones necessary to his or her venture at a particular stage in its growth--and to learn how to benefit the most from their counsel." LITERATURE REVIEW Interest is increasing in identifying factors associated with the conduct and performance of the small, dynamic firm and the relationship among those factors (Robinson and Pearce 1984). Despite this, Keats and Bracker (1988) maintain that the extant literature tends to be prescriptive and lacks both theory and a rigorous empirical base. However, in the study of the role of outside advisors, this is gradually changing. Intensive boundary spanning has been strongly related to organizational performance (Dollinger 1984). Robinson (1982) found empirically that small firms engaging in outside-based strategic planning were more effective than those that did not. Also, research indicates that small business owner/managers must devote more time and energy to the environmental search than managers in large firms (Johnson and Kuehn 1987). This is confirmed in additional research by Smeltzer and Fann (1989), which indicates that managers in small, entrepreneurial firms communicate more with external publics than managers in large, mature firms. More specifically, Chrisman, Hoy, and Robinson (1985) examined the impact of Small Business Development Center (SBDC) programs on new venture development, concluding that the centers provide productive assistance to aspiring entrepreneurs. In addition, Chrisman (1989) concluded that aspiring entrepreneurs can obtain useful advice from an SBDC in formulating new venture strategies. The purpose of the research reported here is to analyze the use of advisors during the preoperational stage. However, the research is not limited to a specific advisor, such as an SBDC; rather, a wide variety of sources are considered. Furthermore, to better understand the use of advisors, the research is interpreted within the framework of network analysis and information theory. A review indicates these theoretical perspectives are pertinent when discussing the use of advisors during venture startups. This perspective will enhance our general knowledge of environmental scanning. Network Analysis In contrast to the general search of external information (environmental scanning), a network is a specific set of linkages among a defined set of persons (Maguire 1983). Networks are a specialized form of environmental scanning in which managers may receive instrumental information, emotional support, or both (Tausig and Michello 1988). One of the most frequent ways of analyzing networks is by means of Granovetter's (1982) concept of wak and strong ties. The strength of a tie is a combination of the amount of time, the emotional intensity, the intimacy, and the reciprocal services that characterize the tie. Research indicates that networks in which members are not well acquainted tend to contain more varied resources. Network members who are friends (strong ties) are more likely to share similar ideas, viewpoints, and information. Conversely, network members who are not friends (weak ties) are more likely to be different from each other and have different ideas, viewpoints, and information. Thus, networks made up of people who do not know each other (weak ties) should contain more diverse information than those networks that are made up of close friends. The importance of weak and strong ties was demonstrated in research by Aldrich, Rosen, and Woodward (1987). …

Minority Small Business Owners and Their Paths to Ownership

Abstract: MINORITY SMALL BUSINESS OWNERS AND THEIR PATHS TO OWNERSHIP The venture creation process has been examined in a variety of contexts, each contributing to our knowledge of entrepreneurs and their ventures. Yet despite numerous studies of retail, service, manufacturing, high-technology, and other types of businesses, Cooper and Dunkelberg (1986, 53) contend: Much of the previous literature has generalized broadly, not distinguishing among different types of entrepreneurs or ways of achieving ownership. Many previous studies have examined samples which were "mixtures" of different types of entrepreneurs, yet there has been little careful consideration of how that sample mix affected the findings. There has been little in the way of systematic, broad-based research, looking at people who have become business owners in different ways, in many industries, and in different time periods and geographic areas. These shortcomings identified by Cooper and Dunkelberg spurred the authors of this article to conduct a study examining alternative paths to ownership for minority business owners. This topic was chosen because of the significant increase in minority-owned businesses, but also because: Ethnic firms may sometimes appear to be different from nonethnic firms, since business in the minority community often reflects the customs and value systems which are unique to it. Many ethnic firms have operated under special cultural patterns, providing ethnic products and services to ethnic neighborhoods. In fact, minority-owned firms are found to exhibit different operating and financial patterns from nonminority firms, in terms of the manner in which they develop their profitability (Scott 1983, 43). Furthermore, developing a strong minority business segment has been recognized by all levels of society as a major priority (Bates and Furino 1985). According to Gomolka (1977), this is evidenced by set-asides, subsidies, and a variety of minority economic assistance programs such as the SBA's 8(a) minority contracting program, the Office of Minority Business Enterprise, and Minority Enterprise Small Business Investment Centers (MESBICs). It is the authors' belief that a better understanding of the business formation processes utilized by minority business owners can improve both the services and support mechanisms currently offered to this segment by both government and nongovernment organizations. In addition, it should extend understanding of the entrepreneurial process and help to confirm or support previous research on minority entrepreneurs. As Hisrich and Brush (1986, 3) state: "Given the growth in minority entrepreneurship and its increasing impact on the business community, it is important to understand the backgrounds, management skills, types of businesses and business problems of minority entrepreneurs." This study used the Cooper and Dunkelberg questionnaire to identify a variety of ownership characteristics of minority business owners. It allowed us to compare the predominantly nonminority sample of the National Federation of Independent Business (NFIB) owners with a sample of minority ownership-managers responding to this study.(1) The study also focused on a subsample of minority business owners who started their own firms (starters) and compared them to a similar subsample from the aforementioned NFIB study. Additionally, this study checked for differences between four minority groups, vis-a-vis their paths to ownership and several motivational and psychological characteristics. Thus, three broad questions are examined in this study: (1) Are there systematic differences in the paths to ownership used by minority small business owners? …

Areas of Strength and Weakness in the Adoption of the Marketing Concept by Small Manufacturing Firms

Abstract: AREAS OF STRENGTH AND WEAKNESS IN THE ADOPTION OF THE MARKETING CONCEPT BY SMALL MANUFACTURING FIRMS Prior research on the adoption of the marketing concept by small firms reveals that small businesses have been more reluctant than larger firms to embrace the marketing concept to obtain organizational goals (McNamara 1972, Peterson 1989). However, past investigations into the adoption of the marketing concept by small businesses have provided a limited evaluation of how well small firms embrace the concept. The methodology most often used in past research was to provide respondents (small business owners) with a brief description of the marketing concept and then ask them whether this description accurately portrayed the business philosophy of their firms (Peterson 1989). Although enlightening, this methodology failed to determine exactly which (and to what extent) certain aspects of the marketing concept are (and are not) implemented. The marketing concept notion is still foreign to many managers or small business owners who have never attended a formal marketing course or seminar; therefore, it is plausible that many businesses are implementing the marketing concept without being consciously aware they are doing so. Another important factor is that other empirical studies investigating the extent of implementation of the marketing concept in large- and medium-sized organizations have ignored certain basic features that make this unique concept so appropriate in the current business environment (see Hise 1965; Lawton and Parasuraman 1980; Lusch and Laczniak 1987; Lusch, Udell, and Laczniak 1976; McNamara 1972). These studies focused primarily on the organization's understanding of buyers' needs; marketing research activities; title of the marketing research person; coordination between various departments; percent of management personnel with formal marketing education; integration of the marketing department; and integration of marketing with other departments. While these measures can provide useful insight into business activities, the crucial issue is whether these indicators are comprehensive enough to reflect the extent to which the marketing concept is implemented (particularly in smaller organizations). By using more comprehensive indicators, the present study attempts to measure the true extent of adoption of the marketing philosophy by small firms. THEORETICAL FRAMEWORK Although every definition of the marketing concept in the marketing literature has shortcomings, Houston's (1986, 81) definition succeeds in expanding the notion of consumer-need satisfaction. The definition reads: The marketing concept states that an entity achieves its own exchange-determined goals most efficiently through a thorough understanding of potential exchange partners and their needs and wants, through a thorough understanding of the costs associated with satisfying those needs and wants, and by then designing, producing, and offering products in light of this understanding. This definition emphasizes the need to uncover customer needs and wants, efficiently produce goods and services, produce only products and services in demand by the consumer, and achieve organizational goals. However, this definition does not explicitly address the need to plan marketing activities and to take a long-term approach to creating the exchange between an organization and its customers (McGee and Spiro 1988). In addition, research and development are becoming increasingly integral parts of the marketing philosophy (Bennett and Cooper 1979, McGee and Spiro 1988). It is apparent from business experience that businesses investing more heavily in research and development tend to more successfully satisfy specific customer wants and produce better quality products than those that do not. Yet the marketing concept emphasizes more than consumer research; it also emphasizes the need for continuous environmental scanning to identify the firm's potential opportunities and threats. …

An Empirical Investigation of the Role of Marketing for Small Exporters

Abstract: AN EMPIRICAL INVESTIGATION OF THE ROLE OF MARKETING FOR SMALL EXPORTERS The magnitude and persistence of the U.S. international trade deficit has been a cause for concern among policy makers for many years. Given the attempts by U.S. trade negotiators to remove other nations' trade barriers, import restriction by the U.S. is obviously not a politically viable means to reduce this deficit. As a result, the U.S. Department of Commerce and other government agencies have introduced export promotion programs (e.g., the International Trade Administration's "E" awards for excellence in exporting and the Export Now campaign) to boost U.S. exports and narrow the import-export gap. Many of these programs have focused on small business; however, some programs have enjoyed only limited success (Kedia and Chhokar 1986). While the performance of small exporters has been quite disheartening over the past few decades--only a very small percentage of companies with export potential actually export--more recent studies show a somewhat brighter picture. The U.S. Small Business Export Expansion Act (1980) states that "it is in the national interest to engage small business participation in the international markets," and there are reports of an increasing contribution from small-to medium-sized exporters. In 1988, these accounted for 20 percent of all U.S. exports (Holstein 1989). Additionally, recent evidence indicates that these smaller American firms are achieving sustained (15-20 percent) growth in export sales and that 70 percent expect their international sales to continue growing at this pace for the next five years (Knowlton 1988). In fact, in the view of Holstein (1989), "big-league exporters, which number about 3,600, have used nearly all their spare capacity and lack the will to invest in more." Thus, recent success in curtailing the growth of the trade deficit has depended in large part on the sustained performance of small exporters. Little is known, however, about how successful these small exporters have been. From the small business person's perspective, the key issues are how to secure a foothold in foreign markets and how to expand these markets. As small businesses become more active in international markets, they will undoubtedly encounter some major roadblocks. While some may be unavoidable, others can be anticipated and avoided. Knowing how others have dealt with these roadblocks would be useful to small entrepreneurs who are likely to have more limited resources than traditional U.S. exporters (large multinational corporations). Entrepreneurs need to know, for example, whether small and large exporters operate in fundamentally different ways and what ways work best for the small exporter. The following is a review of previous research on these issues. RESEARCH Much empirical research has investigated the determinants of export success. With a few exceptions (e.g., Miesenbock 1988, Aaby and Slater 1989, Tybjec 1990) most studies have focused on the relatively few major exporters that have accounted for a large share of U.S. exports. While some researchers (Czinkota and Johnston 1983) have investigated the size of a firm as a variable that may affect performance, they have not specifically studied the unique problems of small exporters. Clearly, the success factors for large firms and small firms are unlikely to be the same. Additionally, while many studies (Axinn 1988) have analyzed the effect of firm-specific characteristics (size, organizational commitment, products exported, etc.) on the export success of firms, very few have offered insight into specific marketing strategy variables associated with export success. Other studies have examined the relationship between export marketing strategy and export performance, including such marketing variables as market segmentation and pricing (Piercy 1981). A study of manufacturing firms in Wisconsin (Bilkey and Tesar 1977) reports that small exporting firms' problems include inadequate financing, foreign government restrictions, lack of business connections, insufficient knowledge of foreign selling, and difficulty in gaining distribution access. …

Customer and Supplier Linkages for Small JIT Manufacturing Firms

Abstract: Customers around the world are increasingly selective about the quality and cost of purchased goods. To be competitive in a global market, a manufacturing firm, regardless of its size, must devise ways to produce quality goods at a lower cost. The Just-In-Time (JIT) philosophy has been proposed and implemented as a way of meeting this challenge. Three major tenets of the JIT philosophy include waste reduction, continuous quality improvement, and increased participation in decision making (Hannah 1987, Schonberger 1986, and Warne 1986). Successful implementation of the JIT philosophy strengthens both customer and supplier linkages. Large manufacturing firms are reporting success with JIT implementation (Schonberger 1986, and O'Neal 1987). As a result, more mnaufacturing firms are expected to embrace the JIT philosophy in the future (Stokes 1989). This will increase the number of small firms implementing JIT; however, little attention has been devoted to the experiences of small JIT firms. Existing literature provides only a generic description of the expected benefits and disadvantages of implementing JIT in small businesses (Newman 1988, and Sonfield 1984). Researchers Manoochehri 1988, and Sonfield 1984). Researchers argue that small firms are different from large firms because they lack sufficient capital to implement JIT, have no market power, and have little or no in-house JIT expertise (Newman 1988, Finch 1986). Therefore, some small firms may be incapable of implementing the JIT philosophy. Practitioners believe that large JIT firms are forcing this suppliers (typically small manufacturing firms) to adopt the JIT philosophy (Hutchins 1989, Stokes 1989). As a result these small firms may simply pretend to be JIT suppliers by carrying excess inventory and inspecting 100 percent of their product (Newman 1988). However, it must be noted that small firms have a unique advantage over large firms because of their flexibility in multifunctional labor, small lot size production, and participatory decision making (Manoochehri 1988, Sonfield 1984). For these reasons, JIT implementation experiences of small manufacturing firms, as related to their customers and suppliers, may differ from those of large firms. However, empirical studies have not yet been reported that document actual JIT implementation experiences of small firms. This study of small manufacturing firms examined effects of their JIT implementation at customer and supplier linkages. Small manufacturing firms must interact both with their customers and suppliers. Hence, success of their JIT implementation depends largely on the relationship between the firms and their customers and suppliers. For the purposes of this study, customer linkage evaluates respondents' relationships with their JIT customers, and supplier linkage examines the respondents' relationships to their suppliers. METHODOLOGY Tenets of the JIT philosophy--reduction in waste, improved quality, and participation in decision making--were used to develop an instrument to explore both customer and supplier linkages. The questionnaire consisted of 14 customer linkage items and 15 supplier linkage items. These items, classified according to the three tenets of JIT, are given in tablets 1 and 2. A five-point Likert scale was used to measure the change for each item since the JIT implementation. Possible responses were: decreased considerably, decreased somewhat, same, increased somewhat, and increased considerably. The responses were coded on a numerical scale from 1 to 5, respectively. A mean of 3 for any item reflects no change, while a mean less than 3 shows a decrease and a mean greater than 3 shows an increase. The JIT firms that have a supplier evaluation program and/or participate in their customers' evaluation program also were asked to rank-order evaluation criteria. Additional responses were sought regarding the benefits and difficulties associated with JIT implementation. …

Ethical Problems Encountered by U.S. Small Businesses in International Marketing

Abstract: Reports indicate firms that fail to become active in international trade may begin to experience financial difficulties as foreign competition for slowly expanding domestic markets intensifies (Small Business Reports 1987b). This trend is especially alarming to small U.S. businesses, less than 10 percent of which are actively involved in international trade despite having export potential (Small Business Reports 1986). Nonexporters often cite their lack of international marketing knowledge and "perceived barriers" (such as understanding foreign business practices) as obstacles to their pursuit of foreign trade (Yaprak 1985). Despite the numerous programs available to assist managers with the technical aspects of international trade (for example, the International Trade Administration of the U.S. Department of Commerce), many owner-managers' worries and fears stemming from "perceived barriers' go unattended, representing a real disincentive for small businesses to export (Joynt and Welch 1985). One "perceived barrier" that has received much recent attention from both the popular press and researchers is the difficult ethical problems that international trade may pose. Such problems appear to be a potent "perceived barrier," in that many U.S. marketers report they tend to avoid foreign markets where they expect to encounter ethical dilemmas (Mayo et al. 1990). This "perceived barrier" may have a strong negative impact on the foreign trade intentions of small businesses, given that many have limited resources (such as having no legal or public relations specialists on staff) to wrestle with such ethical dilemmas (Ward 1987). Avoidance is only one of several options that small businesses may employ to cope with ethical problems. By including ethics in the strategic planning process and/or by developing codes of conduct, for example, small business managers may be able to anticipate and work through the ethical problems posed by some foreign markets (Robin and Reidenbach 1987). The success of such an approach, however, may partially depend upon how ethical concepts and problems are defined. Small businesses are more likely to implement codes and strategies where operational definitions of ethical concepts and problems have been developed (Ward 1987). A detailed listing of the type of ethical problems that might be encountered in international trade by small businesses, however, is currently not available. The sparse attention given to the ethical problems encountered by small businesses may have resulted from researchers' assumption that ethical problems bear equally upon firms of all sizes. This assumption may be misleading in that the type and impact of ethical problems may be different for small and large businesses (Longenecker et al. 1989). The present study determines the type of ethical problems that small businesses may encounter in international trade and how these problems may affect the firm and its management team. Since marketing activities are central to international trade and often are the focus of questions regarding ethical conduct (Fritzsche 1986), the present study will focus on the type of ethical problems that small business firms encounter in international marketing. METHODOLOGY The data for the present report were collected as part of a larger study by the author to ascertain the ethical issues confronting U.S. firms engaged in international business (Mayo et al. 1990). Sample The sample for the present study was selected from the District Export Councils Membership Roster (1987-1991 term, U.S. Department of Commerce 1987). District Export Council (DEC) members are experienced in international trade, are appointed by the U.S. Secretary of Commerce, and advise federal, state, and local governments and manufacturers on export-related matters. Consequently, it was assumed that the members would be well versed in international marketing and could comment on the nature of the non-domestic ethical problems encountered when selling transnationally. …

Entrepreneurship and Competitive Strategy for the 1990's

Abstract: Entrepreneurship and Competitive Strategy for the 1990's Numerous macroscopic changes are expected to transform the business environment of the 1990's. In fact, it is anticipated that the ethos of entrepreneurship l will be pervasive among successful firms, a development that augurs well for the field of entrepreneurship research. In the following discussion, we examine some of those expected environmental trends with a view toward understanding how businesses, both large and small, will need to respond. We also examine their implications for managerial behavior and organizational studies, and argue that successful competitive strategies of the future must be highly entrepreneurial in nature. Changing Environments Global trends. "Globalization," already part of the common lexicon, means that the number of competitors with a world-wide reach is increasing, and markets that were traditionally considered impenetrable are slowly opening up to competition from other countries. In 1992 Western Europe will eliminate all remaining economic boundaries between its 12 member countries, which is expected to make it a formidable force in the world marketplace since it will be possible to shift resources among nations with greater ease. The trade agreement between Canada and the U.S. is further evidence of newly emerging transnational alliances. North America, Japan, and Europe are expected to be the leading world markets through the 1990s. Hong Kong, South Korea, Singapore, and Brazil now rank among the top 20 exporters of manufactured goods. Over the next 50 years China, India, and most of Latin America are expected to follow a path similar to that set by Japan and South Korea. Some of the implications of globalization for U.S. companies are that price, quality, and service standards will have to be met on a global level; the corporate mind-set will have to change from that of being a U.S. company that does business overseas to being an international company; top managers will have to develop the sensitivity and awareness to deal with different political and cultural systems; they will have to forge alliances with other international competitors; they will need to integrate manufacturing and RD and, traditional management philosophies and practices will have to be changed to make them more consistent with a turbulent or rapidly changing environment. Technological trends. Over the years competitive advantage has shifted from those who had access to raw materials to those who have access to information. To ascribe the success of the Japanese to their cheap labor is to miss the point, as is evident by the inroads that Korean companies have been making into Japanese strongholds. Today, competitive advantage stems from access to strategic information. Information technologies permit companies to access large amounts of diverse information, analyze and interpret it, and transmit it around the world. Traditionally, companies had been able to capitalize on proprietary technologies and dominate the marketplace until long after they had recouped their RD they will have to examine ways to restructure or redesign their work environments in order to strike the right balance between technological imperatives and behavioral factors; and they must never forget that no matter how sophisticated the technology, it is ultimately human resources that make the difference in competitiveness. …

Application of Project Management by Small Businesses to Develop New Products and Services

Abstract: Organizations small and large have recognized the value of organizing complex product and service development endeavors into definable projects. The purpose of the present study was to survey the project management practices of small firms engaged in developing new products and services. More specifically, this study focuses on how small firms choose to organize and manage their projects and assesses managers' opinions concerning the relative effectiveness of different project management approaches. Before reporting the results, we will briefly discuss the significance of project management for the development of new services and products in small firms, the relative advantages of different project management approaches, and the application of project management by small firms. THE CONCEPT OF PROJECT MANAGEMENT Stuckenbruck (1982) has defined a project as a "...one shot, time-limited, goal directed, major undertaking, requiring the commitment of varied skills and resources." Project management is a critical mechanism for capitalizing on entrepreneurial spirit and generating new products and services. A key element of project management is the creation of a temporary organization within the existing hierarchy of the firm. This organization relies upon formal and/or informal coordinating mechanisms to integrate the efforts of people drawn from different disciplines who work either full or part time on the project. Within the product development process, project management is commonly used to complete the technological development and test marketing phases (Maile and Bialik 1984). Among the reported advantages of project management for development efforts by small firms are the following (Sayles 1989, Adams and Martin 1987, Kerzner and Thamhain 1984): * Control. Project management centralizes responsibility for budgetary cost control, schedules, resource allocation, technical quality, and client, customer, or public relations. * Innovativeness. Creative problem solving is enhanced by the diversity of the specialization, background, and experience of the participants working toward a common objective. * Adaption. Sine the new product/service will eventually be incorporated into the mainstream operations of the firm, the involvement of specialists from different areas helps make the project specifications and functioning consistent with the existing constraints of the firm. * Less Disruption. The normal routines and activities of the firm can continue because the innovation is conducted outside the normal boundaries of the organization by the new temporary operation. Alternative Project Management Approaches While companies apply project management in many different ways, there are generally three basic approaches used: functional, project team, and matrix. These alterantives have been described in detail elsewhere (Youker 1977, Larson and Gobeli 1987, Galbraith 1971), so we will only highlight major differences. The functional approach utilizes existing chains of command to complete specific project. The project is divided into segments and assigned to relavant specialists or functional groups with the specialist or head of the functional group responsible for his or her segment of the project. No formal project manager is designated and coordination is provided by top management. The second, diametrically opposed type of project structure, utilizes semi-autonomous project teams to complete projects. Most of the resources necessary to complete the project are separated from the regular organization and set up as a dedicated team headed by a project manager. The project manager has direct authority over all or most of the critical resources and personnel assigned to the project. A matrix organization is a hybrid structure which superimposes a project system on the existing functional structure of the firm. …

Training for Franchise Management

Abstract: As futurist John Naisbitt noted, franchising is "the wave of the future." Already, franchising accounts for a third of all U.S. retail sales; and this figure is projected to climb to at least 40 percent by the year 2000 (Justis and Judd 1990). The rapid expansion of franchising throughout the world is making the task of managing a franchise more complex and difficult, particularly in view of differences in national environments and local cultures (Chan and Justis 1990). Already, many franchise businesses have recognized management training as a sine qua non for their success. The successful franchisor depends on highly motivated employees who think and behave as representatives and innovators for the franchising company. It is critical that the franchisor be able to attract quality franchisees, who in turn can secure capable employees to run the operation successfully. Despite the importance of training for franchise management, there is a dearth of research in this area. The bulk of existing training literature focuses on training programs for large organizations and an increasing array of small businesses; few, however, have examined franchise management training programs. Historically, franchisor training has consisted solely of a franchisee training book or package. This is usually handed over to the franchisee to digest. Today the successful franchisor is more dedicated to training and seeks to provide training programs for all levels of individuals within the franchising organization--the franchisee/store owner, manager, assistant managers, and other employees. Unfortunately, no established guideline suggests how much of a franchisor should set aside for training. One rule-of-thumb says that an average 1 percent of gross salaries should be spent on franchise training programs. METHOD This article discusses findings of a preliminary study of training programs currently used by franchisors in the United States. Our main objective was to compare different aspects of the training provided by a wide spectrum of franchisors. The primary research instrument was a survey questionnaire. Based on anecdotal information collected from the field, we also were able to determine what some companies were doing with respect to training programs at the time of study. The sample consisted of a group of franchisors across the United States who responded to our request for information about training programs. A total of 250 requests were mailed and 108 were returned (a 42 percent response rate). The nonrespondents were randomly distributed and did not represent any particular size group, or industry. The sample of 108 respondents represented twenty-two different industries. RESULTS An interesting feature of franchise training programs concerns their length and duration. Table 1 shows that the length of the training programs surveyed varied from one week to more Table 1 FRANCHISOR TRAINING PROGRAMS Number of Franchisors 108 Length Number Percent One week 24 22 Two weeks 18 17 Three weeks 15 14 Four weeks 12 11 Over one month 24 22 Not specified 15 14 than one month. As reported in the table, approximately 22 percent of the franchisors required a one-week training program; 17 percent required two weeks; 14 percent required three weeks; 11 percent required four weeks; and 22 percent required a month or more of training. In addition, 14 percent of the franchisors indicated that they have training programs but did not specify the duration of their programs. An example of a successful training program is that instituted by Popeye's. The Popeye's Institute of Polytechnic provides training and orientation for both franchisees and other management personnel before opening new restaurants. …

Negligent Hiring: Headaches for the Small Businessperson

Abstract: NEGLIGENT HIRING: HEADACHES FOR THE SMALL BUSINESSPERSON There continues to be a large number of lawsuits challenging employer hiring practices in the United States today. Often the basis of these lawsuits is a claim that in the hiring process the employer was negligent in some way in making employment decisions. The alleged negligence may arise from the employer's failure to make sufficient inquiry when hiring an employee or additionally may arise if the employer retains an employee when he or she knew or should have known that the employee might have the propensity to injure another person. A pattern has evolved from the multitude of recent cases that will help the small business employer identify and avoid potential problems in the hiring, training, supervision, and retention of employees. Let us assume that a small business owner is seeking to fill a job position in which the new employee will have a great deal of contact with the public. The owner narrows her decision to one candidate and decides to hire him. The owner very much likes the job candidate and because of time constraints and other priorities sees no need to contact references or former employers. In particular, the business owner decides not to investigate a six-month gap in the job candidate's employment history. The candidate is hired and begins work with zeal. However, after four months of calling on customers, the employee assaults and batters a prospective customer. It seems the two had gotten into an argument and a fight had ensued. The prospective customer sues the employer, and wins. It is brought to public attention for the first time at trial that the employee had been fired from a previous job for this same type of incident and had been unemployed for six months (the gap in the employment history on the application). It is also indicated at trial that had the present employer investigated the new hire's background, she would have discovered this information and the fact that, when under extreme stress, the new employee had a tendency toward violence, if provoked. Incidents quite similar to the one described above have occurred and resulted in successful cases against small business people. The small business owner should understand the basis of negligent hiring, liability, the process for defending such claims, and how to avoid such potential lawsuits. THE BASIS OF LIABILITY Application of the law of negligence to the activities of hiring or retaining employees is well-recognized. It is an established basis of recovery for personal injuries and is defined as the failure of a person to exercise that degree of skill or care usually exercised by a reasonable person under similar circumstances. Originally, negligent hiring claims were filed by employees who claimed employers had failed to provide a safe work environment which, in turn, resulted in some injury to the employee. A safe work environment was understood to include having competent and well-trained co-workers. If the employer breached this duty by hiring an unfit worker, an employee injured by his co-worker could recover for his employer's negligence. Today this type of lawsuit would most likely be handled by workers' compensation courts. The elements of negligence in such cases are relatively straightforward. The employer owed his employee a duty to provide a safe workplace; the employer violated this duty by hiring an employee he knew or should have known had a propensity to become violent; the employee was injured; and the injury could have been avoided if the employer had exercised care in the selection or retention of the unqualified employee. A unique aspect of current negligent hiring litigation is that it allows a third person to sue an employer who, through negligence, has placed an employee in a position such that he or she is afforded the opportunity to injure the plaintiff. No longer is negligent hiring solely an issue between a company and its workers; it is now a basis for recovery by the public against employers with faulty hiring practices. …

Will Small Business Be the Answer for Developing Economies

Abstract: WILL SMALL BUSINESS BE THE ANSWER FOR DEVELOPING ECONOMIES? There is great excitement in small business circles about political, social, and economic developments taking place around the world. Of particular interest are developments in Eastern Europe leading toward the establishment of market-based economies. Many people are anticipating that small business and entrepreneurship will lead the way to new economic development in heretofore tightly controlled systems. In this note, I shall attempt to identify some reasons why I think the excitement about entrepreneurship and economic development should be tempered a bit. While the positive link between economic development and entrepreneurship has been supported in the United States (Birch 1987), I am not aware of similar research systematically demonstrating the relationship in developing economies. While this does not suggest that a positive relationship may not exist in other countries, there is no reason to believe it does until appropriate research and analysis have been undertaken. Recent "International Notes" in this journal have illustrated some of the difficulties of small business development in Ecuador (Busch 1989) and Peru (Dana 1988). In both notes, the authors observed dramatic differences between developed and undeveloped economies and the resulting problems for entrepreneurship and small business. A broad assumption that there are similarities in economic development processes across developed and developing economies would seem to be both ethnocentric and unsubstantiated. At least two major problems are encountered when attempting to generalize economic development trends to other cultures. The first is that significant differences exist in available economic data in developed and developing economies. In the United States, for example, economic data in the forms of Standard Industry Classifications, employment security data, demographic data, and private databases (e.g., lifestyle analyses developed by marketing research firms) are widely available. Anyone who has worked in developing economies such as those in Latin America and Asia knows that such sophisticated data not only do not exist, but that there is little basis for expecting collection of such data in the near future. There are many reasons the data do not exist, and the reasons probably vary from country to country. A discussion of those reasons may be the subject of another note. The point here is that the assumption that developing economies will experience similar relationships between economic development and entrepreneurship as those in developed economies may not be warranted. Without comparable data across cultures, it is difficult to make credible cross-cultural comparisons. A second problem which emerges when attempting to generalize economic development trends from one economy to another is the lack of consideration of current models of entrepreneurship development. Plaschka and Welsch (1990), for example, suggest that the development of entrepreneurship is the result of coordination of internal and external components facing the entrepreneur. Internal components include factors such as: individual characteristics of entrepreneurs, characteristics of the location, characteristics of employees, financial resources, and firm characteristics such as systems of production, oraganization, and marketing. External components include factors such as: governments, taxes, laws, regulations, and free trade policies; location infrastructure and the existence of enterprise zones; the availability of a skilled labor force; the presence of venture capital, government loans and grants; and the presence of supporting institutions and systems, including universities, research facilities, public and private partnerships, networking and cooperative support between entrepreneurs. …

The Impact of Size, Color, and Copy Quantity on Yellow Pages Advertising Effectiveness

Abstract: THE IMPACT OF SIZE, COLOR, AND COPY QUANTITY ON YELLOW PAGES ADVERTISING EFFECTIVENESS Yellow page advertising has become the leading advertising medium for many small businesses, but there has been surprisingly little independent, scientific research about this ubiquitous communication tool. Previous research has examined trends in dollar expenditures, frequency of consumer usage, and the likelihood of patronage after using the yellow pages. However, relatively little is known about the effectiveness of color, size, length of copy, and other layout variables which are crucial elements of high-impact advertisement. Despite the absence of independent research on the effectiveness of layout and copy variables, some "conventional wisdom" has emerged concerning yellow page advertising. For example, it is widely believed that yellow page advertisements containing color are more effective than those using only black ink and that "large" yellow page advertisements are more effective than "small" advertisements. These claims appear to be based on a combination of tradition, "expert opinion," and relatively inconclusive research. For the small business owner, yellow page advertising often consumes a significant portion of the firm's promotional budget. This, combined with the fact that small businesses often do not employ advertising professionals to assist them, makes small businesses vulnerable to overspending for an advertisement which undersells. The dollar amounts spent on yellow page advertising attests that businesses must be convinced that the advertising medium can deliver customers. In 1987, advertisers spent $830 million on yellow page advertising--an increase from $760 million in 1986 (Gersh 1988). Additionally impressive are usage rates of the yellow pages by consumers. The campaign sponsored by U.S. West Direct claiming it is "the book that gets used" clearly is not an exaggeration. The National Yellow Pages Service Association (NYPSA) reports that almost 77 percent of adults refer to the yellow pages each month. If their figures are accurate, this means 32 million adults use a yellow page directory daily. Of even greater significance is that many users want to purchase products. One independent study indicates that 28.8 percent of all consumers refer to the yellow pages before buying (NYPSA 1988). The yellow page medium has been largely ignored by independent and academic researchers, and this is unfortunate since "effective advertising guidelines" established for print advertisements (such as newspapers and magazines) cannot be directly applied to the unique characteristics of yellow pages. Much research, for example, has examined the effectiveness of color and the frequency of insertion for print advertising (Lonning 1986). However, many yellow page directories permit only one color in addition to black, (usually red; but more recently blue or green). Likewise, guidelines regarding frequency of running print advertisements are of little value, since yellow page directories are typically issued annually. As for the "research findings" and guidelines for businesses distributed by several yellow page publishers, many are of questionable reliability. Their claims may or may not be valid, but research supporting the claims is either weak or nonexistent. For example, one claim made by a yellow page publisher is that a large advertisement is 30 times more effective than a small one. Yet nowhere is it documented how the publisher came to this conclusion. The authors of this article wondered if this claim was accurate--or a ploy to sell more yellow page space. This piqued their interest to explore the topic further by conducting an experiment to evaluate the impact and effectiveness of the following: (1) a "large" advertisement compared to a "smaller" advertisement, (2) "more" copy compared to "less" copy, and (3) use of the color red. The results of this research are reported here, following a brief description of selected findings from studies on similar topics. …

Fueling Asian Immigrants' Entrepreneurship: A Source of Capital

Abstract: Agreat many samll entrepreneurial enterprises have been established in the United States by post-Vietnamese War Asian immigrants (Lewis 1989). For instance, Koreans dominate the retail liquor and wig trade in Los Angeles and own many small groceries nationwide. In one Boston neighborhood, a multiplicity of Vietnamese-owned shops line the streets; and one area of Arlington, Virginia has so many Vietnamese shops it is known as "Little Saigon." In New York's garment industry, the Chinese have become a major force, and Chinese restaurants operate throughout the nation. Cuisines of Vietnam and Thailand also have gained popularity, providing new entrepreneurial opportunities for those Southeast Asian nationalities. The successful establishment of U.S. business enterprises by immigrants is the result of informal ethnic support networks. These networks provide entrepreneurs with three types of assistance: (1) business contacts, (2) advice and training, and (3) capital loaned through informal financial markets. These informal financial markets, labeled Rotating Saving and Credit Societies (RSCS) by Asian sociologists, are discuseed in this article. Detailed analysis of techniques, motivation, and procedures used to establish and maintain the societies are provided. The article contains six sections. The following section identifies types of societies and participation procedures, while the third section discusses the financial structures of the societies' lending activities. Section four focuses on how interest rates and payment systems ar determined. Potential rates of return, the duration of the lending cycles, estimates of default rates and the amount of money involved are examined in the fifth section. And the sixth section summarizes this information and addresses the overall implications of this unique source of capital. ROTATING SAVING AND CREDIT SOCIETIES The societies have been used in Asian countries as a mutual aid device that meets participants' saving and credit needs (Samson 1971; Nanamikul 1979; Presidential Committee on Agricultural Credit 1980; Bouman 1981; Chotigeat 1985). Thereore, it is only natural that the process also is used by Asian immigrants interested in establishing new businesses in the United States. In each RSCS, selected participatns regularly contribute funds, which then are loaned to the members. In addition to saving and lending benefits, members have access to funds earlier than they would have if they had saved individually. The person who forms an RSCS will be referred to as the "organizer." This person is a well-respected member of the Asian community, with demonstrated business acumen. The main reason organizers establish the societies is to help others who need financial backing. However, the organizer's altruistic efforts also ensure that, in successful societies, they themselves will obtain interest-free loans upon demand. Organizers ultimately are responsible for collecting funds and monitoring the efforts and integrity of participants and must select trustworthy members. Participants, on the other hand, need to choose societies that are most likely to serve their own unique needs and interests. Form the borrower's point of view, an RSCS may be the only viable way to engage in a desired business pursuit in a comparatively short period of time. The following list, although not exhaustive, presents some of the major reasons for attractiveness of the RSCS: 1. Many immigrants enter the host country with little or no English proficiency. This not only creates difficulties for employers seeking to determine whether they have the requisite employment skills, but also may limit their ability to fill out employment applications. 2. Many of these immigrants were shopkeepers or artisans in their own countries, and they would like to return to familiar business pursuits. However, while their work ethics and entrepreneurial skills are portable, their wealth is not. …

Assessing Competitive Advantage in Small Businesses: An Application to Franchising

Abstract: ASSESSING COMPETITIVE ADVANTAGE IN SMALL BUSINESSES: AN APPLICATION TO FRANCHISING An important theme in research related to business strategy centers on understanding the basis for and assessing the sustainability of competitive advantage (Day and Wensley 1988, Porter 1985). One change in the competitive environment that renders these assessments more challenging is the movement away from traditional "arm's-length" business arrangements and toward longer-term, more cooperative associations. These types of associations, which have been termed alliances or partnerships (Heide and John 1990), are characterized by "just-in-time" manufacturing systems (Frazier, Spekman, and O'Neal 1988) and by cooperative arrangements in distribution channels (Stern and El-Ansary 1982). In the context of small businesses, franchise arrangements illustrate this phenomenon; these arrangements represent significant levels of cooperation between the franchisor and franchisee and may serve to buffer the franchised operation from market forces (Hunt 1977). An assessment of competitive advantage in small firms is clearly an important topic (Neil 1986, Stoner 1987, Watkin 1986); yet there has been limited research in this area. This article is based on research that applies the concept of competitive advantage to identify small businesses that would be good franchisee candidates. The basic approach was to assess the nature and extent of the competitive advantage held by a small business and use this as the basis for identifying firms likely to have favorable attitudes toward franchise arrangements. It also was an opportunity to more fully understand the reasons for those attitudes. COMPETITIVE ADVANTAGE The essence of competitive advantage is the conversion of superior skills and/or resources into positional advantages, which in turn create positive performance outcomes (Day and Wensley 1988). Superior skills refer to "distinctive capabilities" of personnel that set them apart from competition and are illustrated by "ability to utilize relevant technologies" and "specialized knowledge of segment needs" (Day 1984). Superior resources are more tangible assets that enable a firm to realize its capabilities and may include distribution coverage and manufacturing processes. Successful utilization of skills and/or resources should give rise to positional advantage (Porter 1980), including cost leadership, differentiation, and focus. Cost leadership refers to a firm's ability to establish a clear cost advantage relative to its competition. In a differentiation strategy, a firm strives to be unique along some dimensions that are widely valued by buyers, by selecting one or more attributes that buyers perceive as important, and by positioning the firm to uniquely meet those needs. Differentiation may be achieved through superior product quality, providing a superior service or technical assistance, or creating a unique product or service that is perceived by customers or distributors to be superior in value for the price (Day 1984). A focus or protected niche strategy is a market segmentation approach where the firm concentrates on a specific buyer group or market segment. The basis for this focus would generally be a cost advantage, a differentiated advantage, or both. Porter's Value Chain (1985) has been proposed as a meaningful concept for understanding competitive advantage (Day and Wensley 1988, Porter 1985, Watkin 1986, McGinnis and Kohn 1988). Application of the concept generates insights concerning how firms compete against other firms, how value is created, and whether or not firms can expect to maintain a current competitive advantage. The basic premise is that competitive advantage stems from, and is understood by, examining the many discrete activities a firm performs in support of its products. According to Porter, five primary value activities constitute the critical means of creating value: inbound logistics, operations, outbound logistics, marketing and sales, and service. …

Non-Tariff Barriers and Entry Strategy Alternatives: Strategic Marketing Implications

Abstract: Currently, the U.S. export market is dominated by large companies and multinational corporations. Kathawaba, Judd, Monipallil, and Weinrich (1989) state that only 10 percent of the total U.S. export business is conducted by small business despite the fact that foreign markets may offer the smaller firm solid opportunities for long-term growth and profitability. Furthermore, involvement in international business is not typically a formal objective flowing from the strategic thought processes of most U.S. small businesses. Instead, initial attempts to export are often stimulated by an inquiry from a potential customer located in a specific foreign country (Suzman and Wortzel 1984, Piercy 1981). Graham and Meloan (1986) found that 86 percent of the firms in their study initiated exporting as a result of these foreign inquiries and only 17 percent of the firms indicated that any significant research was completed before exporting began. Johnston and Czinkota (1985) had similar findings in their study of three industries. Only 38 percent, 50 percent, and 53 percent of the firms in each industry actively sought their first foreign order; conversely, between 47 percent and 62 percent of these firms received their first order on an unsolicited basis. Thus, despite the potential for sales growth and the existence of numerous government and private sector support programs, it appears that the majority of American small businesses begin exporting because someone overseas seeks them and/or their product, not because of a planned marketing strategy to enter a foreign market. Ironically, very few small businesses attempting to compete domestically would admit that they can be successful by waiting for customers to come to them. It may be just as illogical to expect high levels of international marketing success by taking this reactive approach. Although small businesses can seemingly achieve some success in exporting by waiting for foreign customers to contact them on an unsolicited basis, the more successful exporters probably pursue a focused, planned approach that clearly identifies foreign target markets and adapts their current domestic strategy when and where necessary (Dawson 1985, Kaynak et al. 1987, Namiki 1988). While a well organized, planned entrance into international markets will enhance the probability of success as well as the level of success (e.g., sales or profit volumes), many obstacles and challenges are likely to be encountered. These obstacles originate from sources both internal and external to the firm. Non-tariff barriers (NTBs) constitute a complex set of constraints that can frustrate and thwart the small business's international efforts. Recent literature has suggested that NTBs may now be the major obstacle faced by firms attempting to enter foreign markets (Czinkota, Rivoli, and Ronkainen 1989; Jeannet and Hennessey 1988). The purpose of this article is to provide an analysis of the NTBs most likely to be encountered by small businesses and to suggest strategies that can be used to overcome these constraints to international trade. NTBs are thus viewed as "restraints" to the small business international marketing efforts that can require business strategy changes in order to adapt to market differences. NON-TARIFF BARRIERS Non-tariff barriers did not seriously affect trade flows until the mid-1960s (Baldwin 1970). Prior to that time, tariffs (e.g., financial surcharges) were the dominant means of distorting world trade flows to the benefit of a particular host country. However, the success of the General Agreement on Tariffs and Trade (GATT) rounds has resulted in relatively low tariff levels (averaging between 4 and 7 percent) among industralized countries. As tariff protection has diminished, non-tariff protection has emerged as a difficult, challenging constraint and may now be the most significant trade distorting mechanism (Ray and Marvel 1984). …

Developing an Entrepreneur- and Small Business Owner-Defined Research Agenda

Abstract: It is paradoxical that an applied discipline such as organizational research is often criticized as being out of touch with the needs of business executives (Behrman and Levin 1984; Duncan 1974; Ford 1978; Mulligan 1987; Ryan 1977; Strasser and Bateman 1984; Taylor, Cochran, and Barnett 1988). Indeed, some even argue that researchers and practitioners work in different realities (McGuire 1986). This criticism also seems to apply to entrepreneurial research. As interest in entrepreneurship has increased, there has been a growing recognition that existing research in this area has not produced a satisfactory body of knowledge about the entrepreneur and the business problems he or she encounters. The same can be said about the future research agendas proposed by several researchers in this field. For example, Wortman (1987) identified five broad entrepreneurial research areas and numerous specific topics within each area. Although culled from the empirical literature, the research agenda actually represents Wortman's views about what the important issues are. It is an open question as to whether or not entrepreneurs concur with his judgments. Similar criticisms can be leveled at the research directions and design recommendations made by Low and MacMillan (1988). These researchers conclude that entrepreneurial research should be far more rigorous in both its theoretical base and empirical content. It is noteworthy that these prescriptions, especially the emphasis on theory, seem more relevent to academic researchers than to entrepreneurs. In a recent article, Gartner (1988) suggests that Mintzberg's (1973) statement of purpose from his study of managerial work would likewise serve as a research guideline for entrepreneurship research. Gartner notes that such research done by actually observing entrepreneurs, would help us answer many questions we have been asking for years. While Gartner is to be commended for pointing out such an obvious oversight in our research thrusts, his approach does not focus on the issues entrepreneurs themselves have defined as important. The same can be said for virtually every article or book on entrepreneurship which has a section on research directions. (1) Although not limited to entrepreneurial research, work by Balbaky and Sonnenfeld (1984) likewise seems more attuned to academic interests than to those of business practitioners. These researchers identified five trends facing businesses that will require additional executive training: technological change, workforce and population changes, foreign competition, economic instability, and changing worker attitudes. Unfortunately, they provide little justification for the selection of these issues, and no indication that the views of executives themselves were sought out. Complaints of lack of relevance also regularly surface from the business community. In 1988, a disgruntled Wharton graduate told Business Week "At no time in two years did any of my classes discuss . . . any . . . issue that can't be solved in 80 minutes." A Duke graduate stated "My lasting regret is that I spent $40,000 to learn useless tools from academicians who never worked for a real business . . . but I didn't learn anything about managing, motivating, and leading people." In the same article, Paul Allarie, president of Xerox Corporation, sums up the viewpoint of many executives: "The academicians are too busy writing about what other academics are interested in. They've got to think about what's relevent [to business people]." A recent article in Forbes echoed the same concern. The author, Joe Queenan (1989), reviews a number of articles in academic and practitioner journals, identifying several "important" business issues such as Tao (2) and intrinsic value, androgynous managers, institutional decision making, and many others. With tongue-in-cheek, he congratulates the academic community on its identification of these timeless truths. …

Small Business Usage of Target Marketing

Abstract: SMALL BUSINESS USAGE OF TARGET MARKETING Target marketing, which has been adopted by a number of large producers, wholesalers, service institutions, and retailers in the United States, involves three basic steps. The first is market segmentation, where the total market is subdivided into distinct groups of buyers who might respond to separate products or marketing mixes. This has been described as a condition where "Heterogeneity in demand functions exists such that market demand can be disaggregated into segments with distinct demand functions" (Dickson and Ginter 1987). Then, each market segment is evaluated to determine its potential, and one or more of the segments are selected for penetration. Finally management designs a detailed marketing mix to appeal to the segment(s) chosen (Kotler and Armstrong 1990). Increasingly, firms are discovering target marketing's potential for success. Particular classes of customers are targeted in an attempt to effectively satisfy their distinct needs, as opposed to attempting to appeal to the mass market through a compromise strategy. When target marketing is well-conceived, it can produce strong customer satisfaction and brand loyalty and give firms an edge against rivals. Many successful firms, including DuPont, RJR Nabisco, General Mills, and WalMart, have found this an effective strategy. In fact, most markets have become so fragmented that selling to the mass market is no longer feasible. The value of target marketing is enhanced because identified market segments in one geographic location are often generalizable to other locales. One study discovered generalizable segments in 12 states that are in different regions of the United States (Lesser and Hughes 1990). Another study demonstrated that segments with similar attitudes and behavior can exist across international boundaries--in this case the United States, the Netherlands, France, and Norway (Bronislaw, Dahringer, and Cundiff 1989). Because of the success of target marketing by larger enterprises, logic suggests that it would also be a popular strategy of small companies. But only limited evidence in the literature addresses the degree of target marketing by small firms. Also not available in the literature are data indicating how small firms employ target marketing. This article is based on a study that was designed to fill these voids. PAST RESEARCH The literature contains many studies relating to target marketing and market segmentation in a wide array of industries. A sample that illustrates the wide applicability of these techniques is examined here. For instance, the passenger airline industry has been the subject of considerable research into market segmentation, and findings suggest that personality, environmental, and demographic variables are useful for subdividing the market. According to one study, different segments of airline passengers have distinct consumer preferences regarding convenience, economy, and safety (Bruning, Kovacic, and Oberdick 1985). Another industry where target marketing has been widely employed is the restaurant industry, which includes many small businesses. One study indicated considerable differences from one market segment to another in the basic desire for certain food attributes, such as nutrition and taste. Based upon the finding, the authors indicated that target marketing strategies had considerable potential in that industry (Bahn and Granzin 1985). In addition, researchers also have identified segments of health care consumers that differ considerably in the type and extent of health care benefits and facilities they prefer and utilize (Bonaguro and Miaoulis 1983). Studies of target marketing have not been restricted to profit-seeking organizations, and the strategy has been shown to be useful for fund raising. Various segments have different reasons for donating (or not donating) funds or volunteer hours, so appeals for funds and volunteer recruitment efforts can be tailored to meet the needs of each segment (Harvey 1990, Yavas and Riecken 1985). …

Simultaneity of Value and Non-Cash Expenses in Small Business Valuation

Abstract: SIMULTANEITY OF VALUE AND NON-CASH EXPENSES IN SMALL BUSINESS VALUATION There are many approaches to valuing a small business, ranging from simple rules of thumb, such as gross revenue multipliers, to more sophisticated techniques such as discounted cash flow (DCF) analysis (Pratt 1981). Between these extremes lie a host of other techniques such as the use of comparables, price/earnings approaches, and replacement value methods. In the valuation of businesses with high growth potential, though, DCF analysis is particularly encouraged due to its emphasis on future or anticipated benefits (cash flow) as opposed to historical performance. However, in situations where depreciation and/or amortization (D/A) occurs on more than just the value of the physical assets but is in fact dependent upon the value (price), a problem arises with the DCF approach not heretofore recognized: that value cannot be determined without estimating D/A, and D/A cannot be determined without value. Therefore, a simultaneous-equation method must be used in order to solve for the optimal value, or at least the maximum value for the business, granted all other assumptions and inputs. There is no mention of this relationship in the literature, with the exception of an oblique reference to the problem in a capital budgeting application (Mayer 1978). The purpose of this discussion, therefore, is to point out the problem and to show how it can be addressed. The importance of this problem is twofold: first, ignoring the interdependency undercuts the DCF method and essentially leads to "guesstimates" of business value; secondly, there is no financial way to incorporate the interdependency into other value approaches such as those mentioned above. The next section develops a general model based on the simultaneity of value and tax shields. An application of the model to small business valuation is then provided, followed by a summary. THE MODEL The general DCF valuation model assumes that the value of an asset is the value today of its expected cash flows (Carland and White 1980). All assets (e.g., bonds, stocks, capital projects, small businesses) are essentially valued in the same way: (1) the cash flows are estimated over the life of the asset; (2) the required rate of return is estimated for the cash flows; and (3) each cash flow is discounted at the required rate of return and summed to find the value. Equation 1 formalizes this process: V = [CF.sub.1]/[(1+k).sup.1] + [CF.sub.2]/(1 + [k).sup.2] +... + [CF.sub.n]/(1 + [k).sup.n], where: V = the present value of the asset, [CF.sub.t] = the expected cash flow in period t, k = the required rate of return, n = the life of the asset. In the case of small business valuation, [CF.sub.t] includes all sources of cash flow, including but not limited to sales, cash expenses, tax shields of non-cash expenses, changes in long-term debt, gross capital expenditures, salvage values, and the change in net working capital (Lloyd and Hand 1982). To focus on the simultaneity problem, however, let [CF*.sub.t] represent the net cash flow in period t from all sources except tax shields of non-cash expenses. That particular source of cash flow and value can then be isolated by rewriting the general model as follows: [Mathematical Expression Omitted] where [NCE.sub.t] = total non-cash expenses providing tax shields in period t, T is the marginal tax rate, and all else is as previously defined. Let [NCE.sub.t] = [d.sub.t]V, where [d.sub.t] is the D/A rate in period t and V is the value or price as previously defined. Substituting into equation (2) above then gives: [Mathematical Expression Omitted] In this form, the simultaneity between value and cash flow is apparent. When the V terms are isolated on the left hand side and the tax rate T is held constant, the model reduces to: [Mathematical Expression Omitted] which further simplifies to: [Mathematical Expression Omitted] The value in the numerator is simply the present value of the net cash flow (exclusive of tax shields) for each period summed over the life of the asset. …

Acquired Immune Deficiency Syndrome: A Small Business Dilemma

Abstract: ACQUIRED IMMUNE DEFICIENCY SYNDROME: A SMALL BUSINESS DILEMMA The AIDS virus continues to infect tens of thousands and wreak havoc on untold lives throughout the world. The U.S. Public Health Service estimates that 54,000 Americans will die from AIDS in 1991. This is nearly as many as were killed in the entire Vietnam War (New York Times 1987, Philadelphia Inquirer 1987). A largely overlooked aspect of the disease is the potentially devastating effect on small businesses. The vast majority of literature in both popular and professional journals concentrates on the technical aspects of the disease and promotes compassion, support, and understanding for the victims. Those articles targeted toward AIDS in the workplace also reflect this orientations. There is a void in the literature concerning the impact of AIDS on small businesses. What type of problems will small business owners and managers encounter because of AIDS? What is the financial impact of these potential problems? Are small business owners aware of the dimensions of possible future problems associated with AIDS-infected employees? What actions toward formulating necessary policies to deal with the problem have businesses implemented? This article explores these and other questions concerning the impact of AIDS on small businesses. The article first presents an informative background on the disease itself. Second, AIDS in the business environment is discussed, and the potential problems for small businesses are presented. Third, a research study concerning the impact of AIDS on small businesses in the southeastern United States is presented. Last, a list of recommendations for small businesses is made. AIDS: THE DISEASE Medical researchers have thus far identified four HTLV viruses. One, HTLV III, is known to manifest itself in what we commonly consider as AIDS (which is usually referred to as HIV, for Human Immunodeficiency Virus). Medical prognosis is still out on HTLV IV, currently found only in Africa. AIDS is generally considered to be 100 percent fatal. However, unlike influenza and most infections, AIDS will not resolve itself by killing off the vulnerable and the elderly, as the young and healthy develop immunity to it. Moreover, AIDS is not self-limiting. It is a delusion to think that AIDS is confined to homosexual men and intravenous drug users. The AIDS population now includes individuals who were sexually active with gays or drug users, individuals who received blood transfusions before blood banks began testing for the virus, and a small group for whom transmission cannot be explained (Day 1988). There are also other populations at risk, such as health care workers. Society can reduce the transmission of the AIDS virus through behavior modification while scientists continue to search for a cure. Each new piece of information adds to what we know about the disease and helps define the potential for defining the population at risk and the mediums for transmission. Since 1979, the Center for Disease Control has modified the definition of AIDS at least three times, an indication that scientists keep discovering new and important information. There is considerable conflicting information published on the future prevalence of the disease, and the means of transmission. Estimates range from 73,000 diagnosed AIDS cases in 1991 by the National Center for Health Services Research and Health Care Technology Assessment to a forecast by Industry Week of 279,000 (Pascal 1987). Among forecasters there appears to be a vast difference in the assumptions concerning the transmission of the disease over the next several years. The Center for Disease Control and most Public Health officials have almost universally agreed that AIDS cannot be transmitted through casual contact. Their advertisements, for example, state there is no medical evidence that AIDS can be transmitted through contact with an infected food handler or through saliva. …

Developing Artificial Intelligence Applications: A Small Business Development Center Case Study

Abstract: DEVELOPING ARTIFICIAL INTELLIGENCE APPLICATIONS: A SMALL BUSINESS DEVELOPMENT CENTER CASE STUDY During the last decade, artificial intelligence (AI) programs have emerged as a promising new technology for structuring, guiding, and improving information processing for decision making. AI programs give consultative advice to physicians about infectious diseases; help physicists examine unknown molecules and predict their molecular structures with spectroscopic analysis; assist mathematicians in solving complex problems (Harmon and King 1985); process credit requests for American Express; hunt submarines for the U.S. Navy (Kupfer 1987); help create advertisements for retailers (McCann, Tadlaqui, and Gallagher 1990); and evaluate a client's potential for repaying a loan (Waterman 1985). AI computer software, in some sense, can think. In other words, the programs can "solve problems in a way that would be considered intelligent if done by a human" (Waterman 1985, 267). AI programs will build human knowledge and processing into an interactive system, draw from that knowledge, and then present selected information that helps solve problems (Nilsson 1980, Van Horn 1986). The subdivision of AI with the most promise for small businesses is "expert systems." Expert systems are programs that contain the information processing ability of experts in a given area. With the proliferation of personal computers and programs for designing AI applications, expert systems are within the reach of small businesses and Small Business Development Centers (SBDCs). While some AI applications are costly and time consuming, potential cost-effective applications for small businesses exist. SBDCs and small businesses need to know the capabilities of expert systems and become familiar with case studies of applications. This article documents an AI application for an information transfer task at an SBDC. THE STRUCTURE OF EXPERT SYSTEMS The major components of expert systems are the knowledge base and the inference engine. The knowledge base is the set of information collected from expert(s) for the structuring, focusing, and processing of information to answer questions. The definition of objects and variables in a chosen area or domain creates the elements of the knowledge base. The relationships between variables and objects are defined and coded as rules. The most common example of a knowledge-base rule is the "if-then" statement: If a given event occurs, then a given step or question follows. To make the knowledge base compatible with the AI software, each process is reduced to a detailed logical sequence with rules and branching. Since even simple processes have several decision paths, many alternative sets of logic are necessary. Knowledge bases are usually large and complex. The inference engine controls the internal logic relating the facts and rules to the user's information. The direction of analysis can be forward or backward, working from either the beginning logic to a conclusion or from a conclusion to the beginning logic. The inference engine will prompt the computer to ask the user questions; and the answers determine branching to other questions and the outcome. The inference engine controls the AI's speed and style, while the knowledge base controls the AI's content. The result will be expert opinions and information about a given opportunity. DEVELOPMENT OF AN AI APPLICATION Two major elements in the development of AI systems are the selection of the program shell to be used and the process of developing information for the shell. Several companies offer computer programming shells--general frameworks with defined logic paths and rules--for the development of AI applications. The developer uses the logical templates to create the AI application. The shells contain the raw material and a general structure, but the developer needs to supply the specific blueprint, frame the application, and adjust the fit. …