An empirical study of optimal access to external finance by small and medium enterprise start-ups
-
Author(s)Herman BamataLink to ORCID Index: https://orcid.org/0000-0002-9199-3540
,
Krishna K. GovenderLink to ORCID Index: https://orcid.org/0000-0002-3079-5989
,
Ziska FieldsLink to ORCID Index: https://orcid.org/0000-0001-5353-1807
-
DOIhttp://dx.doi.org/10.21511/ppm.17(3).2019.20
-
Article InfoVolume 17 2019, Issue #3, pp. 242-258
- Cited by
- 1039 Views
-
450 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
The aim of this study is to empirically examine the relationships between the determinants of start-up SME success, namely start-up awareness and management skills, and the finance suppliers. This study has proposed a framework that improves the ability of start-up SMEs to access external finance. Through descriptive and inferential statistical analyses of data from a survey of a sample of SMEs in South Africa, it was ascertained that the framework which maps the entrepreneur’s start-up awareness and requisite management skills with the finance providers’ requirements will make up a tool to assist start-up SMEs in developing optimal financing options to grow their businesses.
view full abstract
- Keywords
-
JEL Classification (Paper profile tab)M13
-
References62
-
Tables7
-
Figures2
-
- Figure 1. Structural model results
- Figure 2. Financing framework for SME’s access to external finance
-
- Table 1. Determinants of start-up business success
- Table 2. Correlation between the constructs
- Table 3. Scale accuracy
- Table 4. Model fit summary
- Table 5. Coefficient of determination (R2)
- Table 6. VIF results in the structural model
- Table 7. Hypothesis test results
-
- Abor, J., & Quartey, P. (2010). Issues in SME Development in Ghana and South Africa. International Research Journal of Finance and Economics, 39, 218-228.
- Abraham, S. (2013). Will business model innovation replace strategic analysis? Strategy & Leadership, 41(2), 31-38.
- Ayandibu, A. O., & Houghton, J. (2017). The role of Small and Medium Scale Enterprise in local economic development (LED). Journal of Business and Retail Management Research, 11(2), 133-139.
- Beck, T. (2007). Financing constraints of SMEs in developing countries: the evidence, determinants and solutions.
- Bisseker, C. (2014). SMEs: Stop the failure rate.
- Blackburn, R. A., Hart, M., & Wainwright, T. (2013). Small business performance: business, strategy and owner-manager characteristics. Journal of Small Business and Enterprise Development, 20(1), 8-27.
- Bongini, P., Ferrando, A., Rossi, E., & Rossolin, M. (2017). Suitable or non-suitable? An investigation of Eurozone SMEs access to market-based finance. University of Milan-Bicocca, School of Economics and Statistics & European Central Bank.
- Braun, M., Latham, S., & Porschitz, E. (2016). All together now: strategy mapping for family businesses. Journal of Business Strategy, 37(1), 3-10.
- Burke, R. (2006). Entrepreneur’s toolkit. UK, Burke publishing.
- Carlson, K. D., & Herdman, A. O. (2012). Understanding the Impact of Convergent Validity on Research Results. Organizational Research Methods, 15(1), 17-32.
- Chawla, S. K., Khanna, D., & Chen, J. (2010). Are Small Business Critical Success Factors Same in Different Countries? Journal of Management, 7(1), 1-12.
- Chell, E. (2013). Review of skill and the entrepreneurial process. International Journal of Entrepreneurial Behaviour & Research, 19(1), 6-31.
- Chinomona, R. (2011). Non-mediated channel powers and relationship quality: A case of SMES in Zimbabwe channels of distribution (Unpublished Ph.D. thesis). National Central University, Taiwan.
- Coeuré, B. (2013). SME financing, market innovation and regulation. European Central Bank.
- Domeher, D., Abdulai, R., & Yeboah, E. (2016). Secure property right as a determinant of SME’s access to formal credit in Ghana: dynamics between Micro-Finance Institutions and Universal Banks. Journal of Property Research, 33(2), 162-188.
- Doom, C., Milis, K., Poelmans, S., & Bloemen, E. (2009). Critical success factors for ERP implementations in Belgian SMEs. JEIM, 23(3), 378-406.
- European Central Bank. (2016). Survey on the Access to Finance of Enterprises in the euro area.
- Fatoki, O., & Garwe, D. (2010). Obstacles to the growth of new SMEs in South Africa: A principal component analysis approach. African Journal of Business Management, 4(5), 729-738.
- Fatoki, O., & Odeyemi, A. (2010). The determinants of access to trade credit by new SMEs in South Africa. African Journal of Business Management, 4(13), 2763-2770.
- Fatoki, O., & Odeyemi, A. (2010). Which New Small and Medium Enterprises in South Africa Have Access to Bank Credit? International Journal of Business and Management, 5(10), 128-136.
- Fornell, C., & Larcker, D. F. (1981). Evaluating Structural Equation Models with Unobservable Variables and Measurement Error. Journal of Marketing Research, 18(1), 39-50.
- Fraering, M., & Minor, M. S. (2006). Sense of community: an exploratory study of US consumers of financial services. International Journal of Bank Marketing, 24(5), 284-306.
- Ghezzi, A. (2013). Revisiting business strategy under discontinuity. Management Decision, 51(7), 1326-1358.
- Greene, L. C. (2012). Entrepreneurship ideas in action (5th ed.). South Western, Cengage Learning.
- Hair, J. F., Black, B., Babin, B., Anderson, R. E., & Tatham, R. L. (2006). Multivariate Data Analysis (6th ed.). USA: Pearson.
- Hair, J. F., Black, W. C., Babin, B., & Anderson, R. E. (2009). Multivariate Data Analysis: A Global Perspective (7th ed.). Upper Saddle River: Prentice Hall.
- Hair, J. F., Black, W. C., Babin, B., & Anderson, R. E. (2010). Multivariate Data Analysis (7th ed.). USA, Pearson.
- Hooper, D., Coughlan, J., & Mullen, M. R. (2008). Structural Equation Modelling: Guidelines for Determining Model Fit. Electronic Journal of Business Research Methods, 6(1), 53-60.
- Katwalo, A. M. (2010). Competence and Critical Success Factor Development as an Avenue for Achieving Sustainable Micro and Small Enterprises in Africa. Journal of Management Policy and Practice, 11(5), 139-144.
- Kipkebut, D. J. (2010). Human Resource Management Practices and Organizational Commitment in Higher Educational Institutions: A Kenyan Case. The IUP Journal of Organizational Behavior, 9(1-2), 45-70.
- Kline, R. B. (2011). Principles and Practice of Structural Equation Modeling. USA: Guilford Publications.
- Kumar, S., & Rao, P. (2016). A conceptual framework for identifying financing preferences of SMEs. Small Enterprise Research, 22(1), 99-112.
- Kwaak, T., & Zeijden, P. Van Der. (2016). Survey on the access to finance of enterprises (SAFE).
- Lai, C.-S., Chiu, C.-J., Yang, C.-F., & Pai, D.-C. (2010). The Effects of Corporate Social Responsibility on Brand Performance: The Mediating Effect of Industrial Brand Equity and Corporate Reputation. Journal of Business Ethics, 95(3), 457-469.
- Lekhanya, L. M. (2016). Determinants of survival and growth of small and medium enterprises in rural KwaZulu – Natal (Unpublished Ph.D. Thesis). University of Western Cape.
- Li, Y. (2015). SMEs and Entrepreneurial Finance in OECD Countries: Good Practice and Lessons Learned. Journal of Law and Governance, 10(2), 30-35.
- Louw, L., & Venter, P. (2013). Strategic management – Developing sustainability in Southern Africa (3rd ed.). South Africa: Oxford University Press Southern Africa (Pty) Limited.
- Manuel, T. A. (2012). Presidency & National Planning Commission, South Africa’s National Development Plan 2030.
- Mazanai, M., & Fatoki, O. (2012). Access to finance in the SME sector: A South African perspective. Asian Journal of Business Management, 4(1), 58-67.
- Osano, H. M., & Languitone, H. (2016). Factors influencing access to finance by SMEs in Mozambique: Case of SMEs in Maputo central business district. Journal of Innovation and Entrepreneurship, 5(13), 1-16.
- Osano, H. M., & Languitone, H. (2016). Factors influencing access to finance by Pietermaritzburg Chamber of Business.
- Pietermaritzburg Tourism. (2016). Pietermaritzburg Fact File.
- Pungchompoo, S., & Sopadang, A. (2015). Confirmation and evaluation of performance measurement model for the Thai frozen shrimp chain. Business Process Management Journal, 21(4), 837-856.
- Ramayah, T., Lee, J. W. C., & In, J. B. C. (2011). Network collaboration and performance in the tourism sector. Service Business, 5(4), 411-428.
- Rupeika-Apoga, R., & Solovjova, I. (2017). Access to Finance for Latvian SMEs. European Research Studies Journal, 20(3A), 57-68.
- Schiraldi, H., & Silva, J. (2012). Writing a business plan: reference tools to assist budding entrepreneurs. Reference Reviews, 26(8), 7-9.
- Sedmak, M., & Longhurst, P. (2010). Methodological choices in enterprise systems research. Business Process Management Journal, 16(1), 76-92.
- Short, J. C., Ketchen, D. J., Shook, C. L., & Ireland, R. D. (2010). The Concept of “Opportunity” in Entrepreneurship Research: Past Accomplishments and Future Challenges. Journal of Management, 36(1), 40-65.
- Simpson, M., Padmore, J., & Newman, N. (2011). Towards a new model of success and performance in SMEs. IJEBR, 18(3), 264-285.
- Smit, Y. (2012). A structured approach to risk management for South African SMEs, Cape Peninsula University of Technology.
- Smorfitt, W. R. (2008). A critical assessment of the impact of interventions to stimulate the establishment and growth rates of SMEs in the formal sector in KwaZulu-Natal 1994–2008. (Unpublished Ph.D. Thesis). University of KwaZulu-Natal, Pietermaritzburg.
- Statistics South Africa (2016). Msunduzi.
- Storey, D. J., & Greene, F. J. (2010). Small business and entrepreneurship. England: Pearson Education Limited.
- Teece, D. J. (2010). Business Models, Business Strategy and Innovation. Long Range Planning, 43(2-3), 172-194.
- Tenenhaus, M., Vinzi, V. E., Chatelin, Y., & Lauro, C. (2005). PLS Path Modeling. Computational Statistics & Data Analysis, 48(1), 159-205.
- The World Bank Task Team. (2017). The World Bank in South Africa.
- Urbach, N., & Ahlemann, F. (2010). Structural Equation Modeling in Information Systems Research Using Partial Least Squares. Journal of Information Technology Theory and Application (JITTA), 11(2).
- Uyar, A., & Guzelyurt, M. K. (2015). Impact of firm characteristics on capital structure choice of Turkish SMEs. Managerial Finance, 41(3), 286-300.
- Vicente, M., Abrantes, J. L., & Teixeira, M. S. (2015) Measuring innovation capability in exporting firms: the INNOVSCALE. International Marketing Review, 32(1), 29-51.
- Wagner, E. T. (2015). Five Reasons 8 Out Of 10 Businesses Fail.
- Wetzels, M., Odekerken-Schroder, G., & Oppen, C. (2009). Using PLS Path Modeling for Assessing Hierarchical Construct Models: Guidelines and Empirical Illustration. MIS Quarterly, 33(1), 177-195.
- World Bank (2003). Pilot investment assessment: Mozambique industrial performance and investment climate. Maputo: CTA/CPI/RPED/APSG/WB.
Close
Problems and Perspectives in Management