Impact of institutional voids on the performance of Small and Medium-sized Enterprises

Saha, Krishnendu and Malesios, Chrisovaladis and Chowdhury, Soumyadeb and Dey, Prasanta Kumar (2022) Impact of institutional voids on the performance of Small and Medium-sized Enterprises. Journal of Strategy and Management. ISSN 1755-425X

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Abstract

Purpose
There is a critical gap in assessing how institutional voids affect SMEs' growth, investment commitment and reputation. The purpose of this paper is to explain how institutional void affects these three dimensions of SME performance; and to develop an institutional void-SME performance framework that can be applied for strategising, resourcing and competency acquisition for better performance.

Design/methodology/approach
The study used the Enterprise Survey Data of the World Bank, consisting of 118763 firms from 140 countries. The structural equation modelling (SEM) is used to analyse the data, validate our analytical model, and investigate the covariation between the constructs of institutional void and SME performance.

Findings
Evidence suggests that there is a strong positive correlation between formal institutional infrastructure (independent variable) and SMEs' reputation (dependent variable). Among the institutional sub-constructs, tax administration, business licensing and permits, access to a bigger market and skilled labour, and informal competition are significant for the SME performance constructs. We find similar results while comparing SMEs with large businesses.

Practical implications
The institutional void-SME performance framework developed from our findings will allow SMEs to manage institutional void affecting their performance. The analytical framework can also be the foundation for future empirical research.

Originality/value
The originality of the study is embedded in its investigation of SMEs' investment commitment and reputation in relation to institutional voids. The latent relationship between the sub-constructs of institutional voids and SME performance adds new knowledge to the dynamic relationship between institutions and firm performance.

Item Type: Article
Identification Number: https://doi.org/10.1108/JSMA-07-2021-0155
Dates:
DateEvent
29 January 2022Accepted
22 March 2022Published Online
Uncontrolled Keywords: Institutional voids, SME performance framework, Reputation, Investment commitment
Subjects: CAH17 - business and management > CAH17-01 - business and management > CAH17-01-01 - business and management (non-specific)
CAH17 - business and management > CAH17-01 - business and management > CAH17-01-02 - business studies
CAH17 - business and management > CAH17-01 - business and management > CAH17-01-04 - management studies
Divisions: Faculty of Business, Law and Social Sciences > Birmingham City Business School > Department of Accounting, Finance and Economics
Depositing User: Krish Saha
Date Deposited: 01 Feb 2022 10:04
Last Modified: 24 Mar 2022 17:35
URI: http://www.open-access.bcu.ac.uk/id/eprint/12735

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