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

TLDR: In this article, a survey on 182 small and medium-sized manufacturing firms in the United States found that internationalization and innovation capability positively affect product and process improvements, while environmental hostility, internationalization, and product improvement positively affect firm growth as a performance dimension.

Abstract: Small- and medium-sized firm performance is a complex,multifaceted construct. In order to better understand this construct, aconceptual model is proposed with two distinct, related outcome dimensions:growth and profitability. Four antecedent conditions—environmental hostility,firm size, innovation capability, and internationalization—that affect firmperformance as well as the likelihood that a firm will pursue either productimprovement or process improvement as their primary strategic orientation arereviewed. Data were obtained via a survey on 182 small- and medium-sized manufacturingfirms in the United States. Results reveal that internationalization andinnovator position positively affect product and process improvements.Environmental hostility, internationalization, and product improvementpositively affect firm growth as a performance dimension. It was found that aproduct improvement orientation positively affects firm growth, and henceprofitability, while a process improvement orientation has no relationship togrowth or profitability. (LKB)