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Is there new evidence to show that product and international diversification influence SMEs' performance?

Is there new evidence to show that product and international diversification influence SMEs'... Purpose – The purpose of this paper is to examine the joint effect of product and international diversification strategies on the performance of small and medium enterprises (SMEs) in Spain. Design/methodology/approach – The authors rely on a panel data of small and medium Spanish manufacturing enterprises over the period 1993‐2006, collected from the Spanish Survey of Business Strategies. Findings – The evidence reveals the existence of a negative relationship between geographic expansion and profitability. Likewise, the adoption of both product and international diversification is not associated with higher performance. Research limitations/implications – A promising avenue for future research is the analysis of firms located in different countries (for example, emerging economies), or the study of this issue considering factors such as the ownership structure (family firms, the role of the state and banks, etc.). Practical implications – The authors' analysis underlines the fact that the distinctive particularities of SMEs – for example, limited resources, lack of previous experience in the adoption of new products and accessing new markets – might constrain diversification as an alternative for firm growth. As a practical implication, Spanish SMEs should overcome their shortcomings before adopting diversification in order to improve the profitability associated with these strategies. Originality/value – Although Spain's economic structure is highly segmented and made up of mainly SMEs, research on these companies in this country is rather scarce. In particular, the distinctive characteristics of SMEs mean that diversification might have different performance implications than for larger companies. Moreover, the authors' analysis offers new insights compared to previous research, which has traditionally relied on cross‐section data. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png EuroMed Journal of Business Emerald Publishing

Is there new evidence to show that product and international diversification influence SMEs' performance?

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Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
1450-2194
DOI
10.1108/14502191111130316
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to examine the joint effect of product and international diversification strategies on the performance of small and medium enterprises (SMEs) in Spain. Design/methodology/approach – The authors rely on a panel data of small and medium Spanish manufacturing enterprises over the period 1993‐2006, collected from the Spanish Survey of Business Strategies. Findings – The evidence reveals the existence of a negative relationship between geographic expansion and profitability. Likewise, the adoption of both product and international diversification is not associated with higher performance. Research limitations/implications – A promising avenue for future research is the analysis of firms located in different countries (for example, emerging economies), or the study of this issue considering factors such as the ownership structure (family firms, the role of the state and banks, etc.). Practical implications – The authors' analysis underlines the fact that the distinctive particularities of SMEs – for example, limited resources, lack of previous experience in the adoption of new products and accessing new markets – might constrain diversification as an alternative for firm growth. As a practical implication, Spanish SMEs should overcome their shortcomings before adopting diversification in order to improve the profitability associated with these strategies. Originality/value – Although Spain's economic structure is highly segmented and made up of mainly SMEs, research on these companies in this country is rather scarce. In particular, the distinctive characteristics of SMEs mean that diversification might have different performance implications than for larger companies. Moreover, the authors' analysis offers new insights compared to previous research, which has traditionally relied on cross‐section data.

Journal

EuroMed Journal of BusinessEmerald Publishing

Published: May 17, 2011

Keywords: Spain; Small to medium‐sized enterprises; Product management; Diversification; Business performance

References