Business experience or Financial Literacy? Which one is better for opportunity recognition and superior performance?

Abstract

Recognition of useful opportunities is very crucial for small and medium‐sized enterprises' (SMEs') survival and growth in the competitive environment. However, the majority of SMEs cannot easily recognize new opportunities in the turbulent markets due to a lack of managerial competencies and knowledge. Several studies have been carried out to unleash the determinants of opportunity recognition that configure SMEs' success, but the results are disjointed. In particular, the mediating role of opportunity recognition between business experience, financial literacy, and SME performance has been missed. This study aims to test if either financially literate or experienced managers can recognize new opportunities that result in high performance. For testing the hypotheses, we surveyed 232 Pakistani SMEs from the manufacturing, trading, and service sectors. After performing the structural equation modeling, we found that financial literacy and business experience are the substantial prognosticators of opportunity recognition and SMEs' performance. Opportunity recognition shows a partial mediating role between financial literacy and SMEs performance as well as between business experience and SMEs performance. However, this research endorses that business experience is more vital for high performance as compared to financial literacy whereas in terms of opportunity recognition financial literacy is more crucial as compared to experience. This study recommends the enterprises to hire the financially literate and experienced managers as both display a prominent role in the identification of opportunities and high performance. Further implications are discussed.

Unleashing the importance of creativity, experience and intellectual capital in the adaptation of export marketing strategy and competitive position

“…Our research reveals that experience has an indirect influence on sustainable performance in business industry where the adaption of export marketing strategy plays a full mediating role. However, [ 21 ] demonstrated that new opportunity recognition partially mediates the link between managerial experience and sustainable performance. Matching Feurer, Schuhmacher [ 58 ] who described that adequate knowledge and experience are very crucial in building innovative products and marketing strategy.…”

“…It refers to the knowledge and experience of top managers/owners in international business, trading, export, import, operation, supply, and purchasing and selling. In order to know about experience of the marketing managers, we have asked five questions (adopted from Anwar, Shuangjie [ 21 ]) and Ying, Hassan [ 11 ]) if they have knowledge or experience of import/export, national and international trade experience etc.…”

“…[ 81 ] Additionally, in case of SMEs, many studies have recommended self-reported measures where firms were asked to rate their performance in terms of return on assets, return on equity, return on investment and sale growth etc. since last three years as compared to the major competitors [ 12 , 14 , 21 , 77 ].…”

“…As compare to less or no experience managers, high experiential managers proactively exploit new opportunities in markets and configure their strategies accordingly—thereby resulting satisfactory performance [ 21 ].…”

“…and intangible resources (intellectual capital, experience, capabilities, skills, networking and strategy etc.) which facilitate organizations in getting sustainable competitive performance [ 11 , 12 , 21 ]. The theory has widely discussed in management, economics and business literature in both theoretical and empirical contexts [ 11 , 14 , 22 ].…”