Keyword

Financial accessibility constraints, government regulations, organisational performance, SMEs, manufacturing, Jordan.

Abstract

This paper seeks to investigate the impact of financial accessibility constraints and government regulations on organisational performance of small and medium-sized enterprises (SME). On the basis of a literature review covering works specialising in financial accessibility constraints, government regulations and organisational performance, a quantitative study was carried out in Jordan using a sample composed by 291 Jordanian SMEs. Information was gathered by applying surveys addressed to the heads of accounting departments / financial managers in SMEs. The data collected using the questionnaire shows 159 usable questionnaires were received, which gives 54.6% response rate. The findings reveal that financial accessibility constraints negatively influence organisational performance, while government regulations are not significantly linked with organisational performance. In order to reduce the negative impact of financial accessibility constraints on SMEs performance, the government of Jordan and financial institutions should facilitate access to finance for SMEs as a critical factor influencing their performance. Further, the government of Jordan must legislate new regulations to improve performance and continue removing unnecessary burdens that may effect SMEs. Through study outcomes, the interested bodies including the government of Jordan, financial institutions, to name a few, could be assisted in formulating the policies associated with SMEs that are evidence-based. Aside from adding important knowledge to the body of the organisational performance of SMEs, this study can be a starting point for further investigation and analysis of organisational performance among SMEs.


Full Text : PDF
References
  1. Abdesamed, K. H. & Wahab, K. A. (2014). Financing of small and medium enterprises (SMEs) in Libya: Determinants of accessing bank loan. Middle East Journal of Scientific Research, 21(1), pp.113-122.
  2. Al-Hyari, K., Al-Weshah, G. & Alnsour, M. (2012). Barriers to internationalisation in SMEs: Evidence from Jordan. Marketing Intelligence & Planning, 30(2), pp.188-211.
  3. Al-Hyari, K. (2013). Identification of barrier factors and potential solutions to SMEs development among Jordanian manufacturing sector. International Journal of Business and Management, 8(24), p.132.
  4. Almajali, A. Y., Alamro, S. A. & Al-Soub, Y. Z. (2012). Factors affecting the financial performance of Jordanian insurance companies listed at Amman stock exchange. Journal of Management Research, 4(2), p.266.
  5. Ando, M. & Kimura, F. (2017). Job creation and destruction at the levels of intra-firm sections, firms, and industries in globalization: The case of Japanese manufacturing firms. RIETI Discussion Paper Series 17-E-100.
  6. Bai, Y., Yuan, J. & Pan, J. (2017). Why SMEs in emerging economies are reluctant to provide employee training: Evidence from China. International Small Business Journal, 35(6), pp.751-766.
  7. Baines, A. & Langfield-Smith, K. (2003). Antecedents to management accounting change: A structural equation approach. Accounting, Organizations and Society, 28(7-8), pp.675-698.
  8. Baldwin, R., Cave, M. & Lodge, M. (2012). Understanding regulation: Theory, strategy, and practice. Oxford University Press on Demand.
  9. Banerjee, A., Duflo, E., Glennerster, R. & Kinnan, C. (2015). The miracle of microfinance? Evidence from a randomized evaluation. American Economic Journal: Applied Economics, 7(1), pp.22-53.
  10. Beck, T. (2007). Financing constraints of SMEs in developing countries: Evidence, determinants and solutions. In: KDI 36th Anniversary International Conference, pp.26-27.
  11. Beck, T., Demirgüç-Kunt, A., Laeven, L. & Maksimovic, V. (2006). The determinants of financing obstacles. Journal of International Money and Finance, 25(6), pp.932-952.
  12. Cavana, R.Y., Delahaye, B.L. & Sekaran, U. (2001). Applied business research: Qualitative and quantitative methods. John Wiley & Sons Australia.
  13. Chenhall, R. H. & Langfield-Smith, K. (1998). The relationship between strategic priorities, management techniques and management accounting: An empirical investigation using a systems approach. Accounting, Organizations and Society, 23(3), pp.243-264.
  14. Chin, W. W. (1998). The partial least squares approach to structural equation modeling. Modern Methods for Business Research, 295(2), pp.295-336.
  15. Chin, W. W. (2010). How to write up and report PLS analyses. Handbook of partial least squares. Springer.
  16. Chin, W. W., Marcolin, B. L. & Newsted, P. R. (2003). A partial least squares latent variable modeling approach for measuring interaction effects: Results from a Monte Carlo simulation study and an electronic-mail emotion/adoption study. Information Systems Research, 14(2), pp.189-217.
  17. Cowling, M., Liu, W., Ledger, A. & Zhang, N. (2015). What really happens to small and medium-sized enterprises in a global economic recession? UK evidence on sales and job dynamics. International Small Business Journal, 33(5), pp.488-513.
  18. Cowling, M., Liu, W. & Zhang, N. (2016). Access to bank finance for UK SMEs in the wake of the recent financial crisis. International Journal of Entrepreneurial Behavior & Research, 22(6), pp.903-932.
  19. Cowling, M., Liu, W. & Zhang, N. (2018). Did firm age, experience, and access to finance count? SME performance after the global financial crisis. Journal of Evolutionary Economics, 28(1), pp.77-100.
  20. Dai, X., Wu, Y., Di, Y. & Li, Q. (2009). Government regulation and associated innovations in building energy-efficiency supervisory systems for large-scale public buildings in a market economy. Energy Policy, 37(6), pp.2073-2078.
  21. Davidsson, P. (1991). Continued entrepreneurship: Ability, need, and opportunity as determinants of small firm growth. Journal of Business Venturing, 6(6), pp.405-429.
  22. De Maeseneire, W. & Claeys, T. (2012). SMEs, foreign direct investment and financial constraints: The case of Belgium. International Business Review, 21(3), pp.408-424.
  23. Demirbag, M., Tatoglu, E., Tekinkus, M. & Zaim, S. (2006). An analysis of the relationship between TQM implementation and organizational performance: Evidence from Turkish SMEs. Journal of Manufacturing Technology Management, 17(6), pp.829-847.
  24. Dimaggio, P. J. & Powell, W. W. (2000). The iron cage revisited institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 17, pp.143-166.
  25. Dogan, E., Islam, M. Q. & Yazici, M. (2017). Firm size and job creation: Evidence from Turkey. Economic Research-Ekonomska Istraživanja, 30(1), pp.349-367.
  26. ECIJ, (2014). Economic challenges in Jordan: Jordan independent economy watch [Online]. Available at: https://jordankmportal.com/resources/economic-challenges-quarter-report.
  27. Falk, R. F. & Miller, N. B. (1992). A primer for soft modeling, University of Akron Press.
  28. Fiori, G., Nicoletti, G., Scarpetta, S. & Schiantarelli, F. (2012). Employment effects of product and labour market reforms: Are there synergies? The Economic Journal, 122, pp.558.
  29. Fraser, S., Bhaumik, S. K. & Wright, M. (2015). What do we know about entrepreneurial finance and its relationship with growth? International Small Business Journal, 33(1), pp.70-88.
  30. Freeman, S. & Reid, I. (2006). Constraints facing small western firms in transitional markets. European Business Review, 18(3), pp.187-213.
  31. Garengo, P. & Sharma, M. K. (2014). Performance measurement system contingency factors: A cross analysis of Italian and Indian SMEs. Production Planning & Control, 25(3), pp.220-240.
  32. Gill, A. & Biger, N. (2012). Barriers to small business growth in Canada. Journal of Small Business and Enterprise Development, 19(4), pp.656-668.
  33. Götz, O., Liehr-Gobbers, K. & Krafft, M. (2010). Evaluation of structural equation models using the partial least squares (PLS) approach. Handbook of partial least squares. Springer.
  34. Hadjimanolis, A. (1999). Barriers to innovation for SMEs in a small less developed country (Cyprus). Technovation, 19(9), pp.561-570.
  35. Hair, J. F., Ringle, C. M. & Sarstedt, M. (2011). PLS-SEM: Indeed a silver bullet. Journal of Marketing Theory and Practice, 19(2), pp.139-152.
  36. Hair, J. F., Ringle, C. M. & Sarstedt, M. (2013). Editorial-partial least squares structural equation modeling: Rigorous applications, better results and higher acceptance. Long Range Planning, 46(1), pp.1-12.
  37. Hair, J. F., Sarstedt, M., Ringle, C. M. & Mena, J. A. (2012). An assessment of the use of partial least squares structural equation modeling in marketing research. Journal of the Academy of Marketing Science, 40(3), pp.414-433.
  38. Hair, J. F., Hult, G. T. M., Ringle, C. & Sarstedt, M. (2016). A primer on partial least squares structural equation modeling (PLS-SEM). Sage Publications.
  39. Harash, E., Al-Timimi, S. & AlsaadI, J. (2014). The influence of finance on performance of small and medium enterprises (SMEs). International Journal of Engineering and Innovative Technology, 4(3), pp.161-167.
  40. Hassanein, A. A. & Adly, S. W. (2008). Issues facing small Egyptian construction firms: The financing barrier. Journal of Small Business & Entrepreneurship, 21(3), pp.363-376.
  41. Henseler, J., Hubona, G. & Ray, P. A. (2016). Using PLS path modeling in new technology research: Updated guidelines. Industrial Management & Data Systems, 116(1), pp.2-20.
  42. Henseler, J., Ringle, C. M. & Sarstedt, M. (2015). A new criterion for assessing discriminant validity in variance-based structural equation modeling. Journal of the Academy of Marketing Science, 43(1), pp.115-135.
  43. Henseler, J., Ringle, C. M. & Sinkovics, R. R. (2009). The use of partial least squares path modeling in international marketing. Advances in International Marketing, 20, pp.277-319.
  44. Hijzen, A., Upward, R. & Wright, P. W. (2010). Job creation, job destruction and the role of small firms: Firm‐level evidence for the UK. Oxford Bulletin of Economics and Statistics, 72(5), pp.621-647.
  45. Huggins, R. (2000). The success and failure of policy-implanted inter-firm network initiatives: Motivations, processes and structure. Entrepreneurship & Regional Development, 12(2), pp.111-135.
  46. Hulland, J. (1999). Use of partial least squares (PLS) in strategic management research: A review of four recent studies. Strategic Management Journal, 20(2), pp.195-204.
  47. Hussain, M. & Gunasekaran, A. (2002). Non-financial management accounting measures in Finnish financial institutions. European Business Review, 14(3), pp.210-229.
  48. Ijirshar, V. U. (2015). The empirical analysis of oil revenue and industrial growth in Nigeria. African Journal of Business Management, 9(16), pp.599-607.
  49. Irwin, D. & Scott, J. M. (2010). Barriers faced by SMEs in raising bank finance. International Journal of Entrepreneurial Behavior & Research, 16(3), pp.245-259.
  50. JCI, (2015). Jordan chamber of industry [Online]. Available at:
  51.  http://www.jci.org.jo/Pages/viewpage.aspx?pageID=175.
  52. Jusoh, R. & Parnell, J. A. (2008). Competitive strategy and performance measurement in the Malaysian context: An exploratory study. Management Decision, 46(1), pp.5-31.
  53. Kerr & Nanda, R. (2009). Democratizing entry: Banking deregulations, financing constraints, and entrepreneurship. Journal of Financial Economics, 94(1), pp.124-149.
  54. Kitching, J. (2006). A burden on business? Reviewing the evidence base on regulation and small-business performance. Environment and Planning C: Government and Policy, 24(6), pp.799-814.
  55. Kuhn, J. M., Malchow-Møller, N. & Sørensen, A. (2016). Job creation and job types–new evidence from Danish entrepreneurs. European Economic Review, 86, pp.161-187.
  56. Lee, N., Sameen, H. & Cowling, M. (2015). Access to finance for innovative SMEs since the financial crisis. Research Policy, 44(2), pp.370-380.
  57. Madrid-Guijarro, A., García, D. & Van Auken, H. (2016). Financing constraints and SME innovation during economic crises. Academia Revista Latinoamericana de Administración, 29(1), pp.84-106.
  58. Madrid‐Guijarro, A., Garcia, D. & Van Auken, H. (2009). Barriers to innovation among Spanish manufacturing SMEs. Journal of Small Business Management, 47(4), pp.465-488.
  59. Mag, S. & Varothayan, V. (2015). An investigation of strategic factors affecting the performance of manufacturing based small and medium enterprises (SMEs) operating in Batticaloa district in Sri Lanka. Journal of Emerging Trends in Economics and Management Sciences, 6(7), pp.228-236.
  60. Mahmood, R. & Hanafi, N. (2013). Entrepreneurial orientation and business performance of women-owned small and medium enterprises in Malaysia: Competitive advantage as a mediator. International Journal of Business and Social Science, 4(1), pp.82-90.
  61. Mahmud, N. & Hilmi, M. F. (2014). TQM and Malaysian SMEs performance: The mediating roles of organization learning. Procedia-Social and Behavioral Sciences, 130, pp.216-225.
  62. Marri, H. B., Gunasekaran, A. & Sohag, R. (2007). Implementation of advanced manufacturing technology in Pakistani small and medium enterprises: An empirical analysis. Journal of Enterprise Information Management, 20(6), pp.726-739.
  63. Martin, K. D., Cullen, J. B., Johnson, J. L. & Parboteeah, K. P. (2007). Deciding to bribe: A cross-level analysis of firm and home country influences on bribery activity. Academy of Management Journal, 50(6), pp.1401-1422.
  64. Mbogo, M. (2011). Influence of managerial accounting skills on SME’s on the success and growth of small and medium enterprises in Kenya. Journal of Language, Technology & Entrepreneurship in Africa, 3(1), pp.109-132.
  65. Mina, A., Lahr, H. & Hughes, A. (2013). The demand and supply of external finance for innovative firms. Industrial and Corporate Change, 22(4), pp.869-901.
  66. Mizruchi, M. S. & Fein, L. C. (1999). The social construction of organizational knowledge: A study of the uses of coercive, mimetic, and normative isomorphism. Administrative Science Quarterly, 44(4), pp.653-683.
  67. Nazarian, A., Soares, A. & Lottermoser, B. (2017). Inherited organizational performance? The perceptions of generation Y on the influence of leadership styles. Leadership & Organization Development Journal, 38(8), pp.1078-1094.
  68. Ngek, N. B. (2014). Determining high quality SMEs that significantly contribute to SME growth: Regional evidence from South Africa. Problems and Perspectives in Management, 12(4), pp.253-264.
  69. North, D. C. (1990). Institutions, institutional change and economic performance, Cambridge University Press.
  70. OECD, (2017). Enhancing the contributions of SMEs in a global and digitalised economy. Meeting of the OECD council at ministerial level Paris, OECD publishing, Paris, 7-8 June 2017 [Online]. Available at: https://www.oecd.org/mcm/documents/C-MIN-2017-8-EN.pdf.
  71. Okpara, J. O. (2011). Factors constraining the growth and survival of SMEs in Nigeria: Implications for poverty alleviation. Management Research Review, 34(2), pp.156-171.
  72. Olatunji, T. (2013). The impact of accounting system on the performance of small and medium scale enterprises in Nigeria. A survey of SME’s in Oyo state–Nigeria. International Journal of Business and Management Invention, 2(9), pp.13-17.
  73. Patanakul, P. & Pinto, J. K. (2014). Examining the roles of government policy on innovation. The Journal of High Technology Management Research, 25(2), pp.97-107.
  74. Rhodes, J., Hung, R., Lok, P., Ya-Hui Lien, B. & Wu, C. M. (2008). Factors influencing organizational knowledge transfer: Implication for corporate performance. Journal of Knowledge Management, 12(3), pp.84-100.
  75. Richard, P.J., Devinney, T.M., Yip, G.S. and Johnson, G. (2009). Measuring organizational performance: Towards methodological best practice. Journal of Management, 35(3), 718-804.
  76. Sami El-Khasawneh, B. (2012). Challenges and remedies of manufacturing enterprises in developing countries: Jordan as a case study. Journal of Manufacturing Technology Management, 23(3), pp.328-350.
  77. Sathe, V. (2007). Corporate entrepreneurship: Top managers and new business creation. Cambridge University Press.
  78. Scott, W. R. (1987). The adolescence of institutional theory. Administrative Science Quarterly, 32(4), pp.493-511.
  79. Selden, S. C. & Sowa, J. E. (2004). Testing a multi-dimensional model of organizational performance: Prospects and problems. Journal of Public Administration Research and Theory, 14(3), pp.395-416.
  80. Shariff, M. N. M., Peou, C. & Ali, J. (2010). Moderating effect of government policy on entrepreneurship and growth performance of small-medium enterprises in Cambodia. International Journal of Business and Management Science, 3(1), pp.57-72.
  81. Siaw, C. L. & Rani, N. S. A. (2012). A critical review on the regulatory and legislation challenges faced by Halal start-up SMEs food manufacturers in Malaysia. Procedia-Social and Behavioral Sciences, 57, pp.541-548.
  82. Smolarski, J. & Kut, C. (2011). The impact of venture capital financing method on SME performance and internationalization. International Entrepreneurship and Management Journal, 7(1), pp.39-55.
  83. Solanke, A. A., Fashagba, P. F. & Okpanachi, J. (2015). Maintenance of accounting records and business growth among small and medium enterprises in North-Central Nigeria. Journal of Accounting and Finance Management, 1(3), pp.1-7.
  84. Strobel, N. & Kratzer, J. (2017). Obstacles to innovation for SMEs: Evidence from Germany. International Journal of Innovation Management, 21(3), pp.1-28.
  85. Tassey, G. (2014). Competing in advanced manufacturing: The need for improved growth models and policies. The Journal of Economic Perspectives, 28(1), pp.27-48.
  86. Tsoukas, S. (2011). Firm survival and financial development: Evidence from a panel of emerging Asian economies. Journal of Banking & Finance, 35(7), pp.1736-1752.
  87. Valmohammadi, C. (2011). The impact of TQM implementation on the organizational performance of Iranian manufacturing SMEs. The TQM Journal, 23(5), pp.496-509.
  88. Van Der Schans, D. (2015). The British business bank's role in facilitating economic growth by addressing imperfections in SME finance markets. Venture Capital, 17(1-2), pp.7-25.
  89. Vinzi, V. E., Chin, W. W., Henseler, J. & Wang, H. (2010). Handbook of partial least squares: Concepts, methods and applications. Springer Science & Business Media.
  90. Wang, T., Thornhill, S. & Zhao, B. (2016). Pay‐for‐performance, employee participation, and SME performance. Journal of Small Business Management.
  91. Wong, K. K. (2013). Partial least squares structural equation modeling (PLS-SEM) techniques using Smart PLS. Marketing Bulletin, 24(1), pp.1-32.
  92. Yu, C., Zhang, M. & Zhou, F. (2017). China’s manufacturing sector: Development characteristics and typical patterns over 35 years. In A Research Report on the Development of China’s Manufacturing Sector, pp.1-26. Springer, Singapore.
  93. Yu, T. & Cannella, A. A. (2007). Rivalry between multinational enterprises: An event history approach. Academy of Management Journal, 50(3), pp.665-686.
  94. Zhou, A. (2015). Access to finance: The effect of financial constraints on private firms' performances in China. Georgetown University.
  95. Zucker, L. G. (1987). Institutional theories of organization. Annual Review of Sociology, 13(1), pp.443-464.