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Economic value added: a useful tool for SME performance management

Economic value added: a useful tool for SME performance management Purpose – The aim of this study is to propose a performance measurement and management system (PMMS) for small‐ and medium‐sized enterprises (SMEs), based on an analysis of the connections between these firms' business practices and performance measured by economic value added (EVA). Design/methodology/approach – Secondary data from the PDG ® database was used on a sample of 108 Canadian manufacturing SMEs over two consecutive years. The primary statistical method used was regression analysis to investigate the influence of diverse business practices on EVA in these firms. Findings – This paper shows that EVA can be a useful tool for performance management in SMEs, when used in conjunction with a list of business practices that affect the firm's results. The findings indicate that some business practices have a direct impact on EVA within one year, while others have a deferred influence. The impacts of other practices on EVA were found to be weak or insignificant, an aspect that requires further investigation. Research limitations/implications – The main limitation of this study is the lack of generalizability of the findings. However, the sampled SMEs vary widely in terms of their characteristics, which may mitigate the negative impacts of a non‐probabilistic sample. Practical implications – This study offers a structured methodology to identify the paths leading to better performance in SMEs, through an improved understanding of their business practices' impacts on EVA. Originality/value – To the best of the authors' knowledge, this is the first study that explores the linkage between SME business practices and EVA. When applied in conjunction with a set of business practices, EVA can help managers detect problems and identify sources of improvement. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Productivity and Performance Management Emerald Publishing

Economic value added: a useful tool for SME performance management

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References (50)

Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
1741-0401
DOI
10.1108/17410401111150779
Publisher site
See Article on Publisher Site

Abstract

Purpose – The aim of this study is to propose a performance measurement and management system (PMMS) for small‐ and medium‐sized enterprises (SMEs), based on an analysis of the connections between these firms' business practices and performance measured by economic value added (EVA). Design/methodology/approach – Secondary data from the PDG ® database was used on a sample of 108 Canadian manufacturing SMEs over two consecutive years. The primary statistical method used was regression analysis to investigate the influence of diverse business practices on EVA in these firms. Findings – This paper shows that EVA can be a useful tool for performance management in SMEs, when used in conjunction with a list of business practices that affect the firm's results. The findings indicate that some business practices have a direct impact on EVA within one year, while others have a deferred influence. The impacts of other practices on EVA were found to be weak or insignificant, an aspect that requires further investigation. Research limitations/implications – The main limitation of this study is the lack of generalizability of the findings. However, the sampled SMEs vary widely in terms of their characteristics, which may mitigate the negative impacts of a non‐probabilistic sample. Practical implications – This study offers a structured methodology to identify the paths leading to better performance in SMEs, through an improved understanding of their business practices' impacts on EVA. Originality/value – To the best of the authors' knowledge, this is the first study that explores the linkage between SME business practices and EVA. When applied in conjunction with a set of business practices, EVA can help managers detect problems and identify sources of improvement.

Journal

International Journal of Productivity and Performance Management – Emerald Publishing

Published: Jul 26, 2011

Keywords: Performance management; Business practices; Small to medium‐sized enterprises; Performance management systems; Working practices; Canada; Economic value added

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