Growing SMEs and internal financing: the role of business practices

Abstract

PurposeThe purpose of this paper is to identify business practices that may promote internal financing of growing SMEs. The authors expand the literature on entrepreneurial finance that reduces business practices to either financial management or bootstrapping, by exploring all management practices that may have an impact on liquidities. This study enriches the literature on business practices. This is an important consideration for managers of SMEs who intend to preserve their financial independence and their capacity to survive different crises.Design/methodology/approachThe empirical study involved a sample of 235 growing Canadian SMEs. The sample was extracted from a private database using a questionnaire that covered a wide range of business practices. Variance testing of business practices between SMEs with a line of credit and those without (and lower overall debt) was supplemented by a logistic regression.FindingsSMEs which make use of efficiency-promoting technology, carry out preventive maintenance and control their costs and turnover during their growth are more inclined to use less external financing.Originality/valueThis is the first study that associates business practices, beyond bootstrapping, with financing and which answers a critical question posed by SME executives on how to preserve their financial and decision-making autonomy through growth stages. In addition, the desire to retain control of the company does not compel the SME manager to limit the size of the company.

The moderating effect of financial performance exerts on the interaction of absorptive capacity and organizational performance

“…Previous studies on SME have already been produced to find mediating effects on organizational performance: Absorptive Capacity and Firm Performance in SMEs: The Mediating Influence of Strategic Alliances (Flatten et al, 2011), Absorptive capacity, firm performance, and the moderating role of entrepreneurial orientation (Wales et al, 2012), Technological constraints to firm performance, the moderating effects of firm linkages and cooperation (Kolade et al, 2019), Mediating role of innovativeness in the link between core competencies and SME performance (Ng et al, 2020), Growing SMEs and internal financing: the role of business practices (Fadil & St-Pierre, 2021), Entrepreneurial competencies, entrepreneurial orientation, entrepreneurial network, government business support and SMEs performance. The moderating role of the external environment (Pulka et al, 2021).…”

The Information System of Lebanese Exporting SMEs

“…To make decisions, they rely exclusively on their judgments, intuitions, and experiences (Mintzberg et al, 1976;Papulová & Mokroš, 2007;Simon, 1987). Various studies have highlighted the owner-managers personal influence, decision-making autonomy, financial power, and competence in managing SMEs (Araújo & Pedron, 2016;Fadil & St-Pierre, 2021;Fernet et al, 2016;Wang & Poutziouris, 2010). The decision-making process in SMEs typically follows the intuitiondecision-action pattern.…”

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“…It also contributes to developing new jobs and reducing unemployment rates in the community, in addition to launching innovative new types of goods, products and services, which leads to the opening of new markets, and contributes to Reducing the gaps in the economies of countries, considering that the small and medium enterprise is: "The enterprise owned by one or a few individuals and its sales and assets are not large" (Dwyer, Duncan, & Southam, 2020). The researchers (Fadil & St-Pierre, 2021) defined the small and medium enterprise as that organisation that generates more than one business innovation and the ability to take risks and push individuals to innovate and innovate, and that many small and medium enterprises have become large through their operations Scaling, rebuilding, updating and changing.…”