FEATURE PAPER

Understanding Strategic Relationships in Small and Medium Sized Enterprises, etc.

The following paper was written by Michael Harris, William McDowell and Shanan Gibson from East Carolina University, and by Todd Mick from Missouri Valley College. It was presented at the 2010 Small Business Institute National Conference.

Abstract

This study examines the performance between operational variables for small and medium sized business (SMEs) within the context of interorganizational relationships. Specifically, it investigates the role of information quality and continuous quality improvement and the varying importance that SMEs place on each of these constructs. The sample consists of 134 vendors of a large university in the southwestern region of the United States. The results indicate that there is a positive relationship between information quality and continuous quality improvement with performance in SMEs. Implications for both research and practice are discussed, as well as ideas for future research.

Introduction

Much of the past research on strategic alliances has focused on multinational companies with diverse and complex operations (Das & He, 2006; Kelly, 2007). However, in the current business environment these partnerships have become important for all types of businesses, and more research is warranted in the small business arena (Kelly, 2007). Small and medium sized businesses (SMEs) are often more entrepreneurial in nature and can vary greatly from large companies. According to Das and He (2006), these differences can be both intrinsic and extrinsic in nature, and must be accounted for when attempting to identify prospective partners for strategic relationships.

In order to remain competitive SMEs often work with other organizations through a variety of collaborative efforts to achieve greater performance and remain competitive (Astley & Van de Ven 1983; Nooteboom, 2000). These coordinated efforts can come in the form of networks, joint ventures, strategic alliances, or other forms of interorganizational relationships that allow for the sharing of information, resources, and risk (Das & He, 2006; Li & Qian, 2007). However, the nature of the relationships among SMEs can be unique and often more varied than the traditional alliances of large corporations, particularly in terms of innovation, bargaining power, resource allocation, learning ability, and organizational capability.

Fortunately, many SMEs are often well suited to participate in strategic alliances. Some of these advantages include centralized decision making, flexibility, limited organizational structure, and a focus on sustainability and growth (Gélinas & Bigras, 2004; Das & He, 2006). In addition to suitability, SMEs often need the benefits that come from outside networks in order to compensate for resource limitations and inadequate internal infrastructure.

These constraints have been well documented as primary obstacles to new firm development and growth. While emerging SMEs are particularly susceptible to these restrictions, more established firms also struggle to find appropriate business networks. Interestingly, Dodge and Robbins (1992) and Harris, Grubb and Herbert (2005) found that external problems are more prevalent in the development stage of a small business as it attempts to develop legitimacy and 2010 Small Business Institute® National Conference Proceedings Vol. 34, No.1 – Winter 2010 90 find its niche in the marketplace. This seems to indicate that strategic alliances can be especially beneficial for nascent entrepreneurs. Research has shown that the development of long-term relationships with other organizations can increase the viability and survival for small businesses
(Aldrich & Auster, 1986), and the absence of such relationships may contribute to higher failure rates (Baum, Calabrese & Silverman, 2000).

The purpose of this study is to investigate interorganizational relationships in SMEs, and the impact of operational variables on internal performance. Specifically, our goal is to examine the relationship among information quality and continuous quality improvement with performance in SMEs.

(Read Entire Paper)

TIP OF THE WEEK

The Importance of Money Management

Have you ever considered the question, “What is money?”

Certainly you have thought about money. It is a rare small business person who does not think about money—making money, investing money, spending money, having enough money. In fact, money can seem so important to business that sometimes people make the error of believing that money is all that business is about. Of course, as you have already learned in the earlier chapters, business is about many important things, of which money is only one. But this still leaves the question, “What is this ‘money,’ and why is it so important?”

Throughout this book, terms that refer to money are tossed about: money, cash, cash equivalents, profits, and banking, to name a few. Have you given any consideration to what these terms mean? How are they alike? How are they different? How are they related to each other? The differences are important because in the end money in its different forms represents the lifeblood of the business, and knowing which form to use, and when to use it, can make the difference between boom and bankruptcy.

In this chapter, the meaning of these terms and how they are important to managing small businesses is discussed. If you are like most people, this chapter will contain some surprises. Things that you think you know are going to turn out to be false. Things you might think are trivial will turn out to be of great importance. It is part of what makes cash and money fascinating.

Money In/Money Out—Just How Important Is It?

A recent poll conducted by the National Federation of Independent Business (NFIB Foundation) found that almost two-thirds of small businesses experience money problems. Businesses either do not have enough money, or if they have money, they cannot get to it when it is needed. Nearly one-fifth of small business managers reported that cash flow—how much and when money will come into and go out of the business—is a continuing problem, one they face daily. The owners reported that the three primary causes of cash flow problems were (1) difficulty collecting money due from customers, (2) seasonal variation in sales, and (3) unexpected decreases in sales. Approximately 55 percent of small businesses that fail do so because of cash flow problems with an immediate impact, not because of lack of profitability.

Cash flow management is a problem for small businesses because of the difficulty of matching the timing of the receipt of cash to the timing of the need to expend cash. This repeating flow of money is call the cash-to-cash cycle or the operating cycle of your business.

When you start a new business, you put in some money. You then buy all the things necessary to run the business, such as materials, supplies, rent, and labor. Some of these you purchase for cash. Other things you may buy on credit, creating payables, which you will have to pay next month. You then use labor to convert materials and supplies into your product or service, which you sell to your customers. Your customers then either pay you immediately, or agree to pay you soon. The promises of your customers to pay are receivables, which you will collect in the future. The money you collect will then be used to buy the things necessary to run your business, and thus the cycle repeats.

The time that it takes to complete this cycle can be as short as a few hours or as long as several years, dependent upon the type of business you are in. The ubiquitous pushcart vendors of hot dogs in New York City purchase inventory on credit every morning. They sell their product for cash during the day. Each evening they pay for the merchandise sold that day. The cash-to-cash cycle of a pushcart vendor is only a few hours. Construction projects, on the other hand, can easily take years to complete. A contractor will borrow money to begin construction. That money is paid out across the time that it takes to complete the project. The contractor, however, receives from his customer either a single payment upon completion or a few payments as prespecified completion targets are met.

Many small businesses experience difficulty or even failure because of (1) the mismatch in time between receiving cash and spending cash and (2) the mismatch between the size of payments received and the size of payments that must be made. In some businesses, such as restaurants, cash comes into the business in a reasonable dependable pattern that is affected by the state of the economy, the season, the day of the week, and the weather. Expenses, on the other hand, tend to occur less frequently but in larger amounts, as suppliers are paid monthly, and employees are paid weekly. Other businesses, such as construction firms, plumbing contractors, ski resorts, and equipment manufacturers, have cash receipts that tend to occur irregularly but in large amounts. However, the cash payment needs of these businesses are relatively smaller amounts paid consistently from month to month.
Although maximizing your wealth may not be your highest priority, managing your business’s money is critical to succeeding and being able to attain goals that are more important to you.

John Mackey, founder of Whole Foods, Inc., said, “Business is the most transformative agency in the world. [Business leaders] can make money and do good…. I always wanted make money…. To be sustainable, business has to profitable.”

ANNOUNCEMENTS

2011 Small Business Institute® Annual Conference

The Small Business Institute invites you to attend their 2011 annual conference which will be held in Bonita Springs, Florida. The conference will take place February 17-19, 2011. The deadline for paper submissions is September 17, 2011. Conference tracks include accounting and finance, ethics and environmental responsibility, experiential learning, family business, global entrepreneurship, marketing social entrepreneurship, small business, and women & minority business. For More Information,Click Here

2010 ASBE Call for Papers

The Association for Small Business and Entrepreneurship (ASBE) invites you to submit competitive papers, cases, and workshop proposals for our Fall Conference at the Stockyards Hotel located in the National Historic District in Fort Worth, Texas. The conference will take place October 6-8, 2010. The deadline for submissions is August 1st, 2010. For More Information,Click Here

SBI Journal – Request for Papers And Reviewers

The Small Business Institute is now requesting papers and reviewers for the fifth volume of the Small Business Institute Journal. If you are interested in submitting a paper please visithttp://www.sbaer.uca.edu/sbij/about.phpto see the guidelines and submission procedure. If you are interested in becoming a reviewer or would like more information please email us atsbij@uca.edu.

International Enterprise Promotion Convention: Call For Speakers 2010

Do you see Enterprise as a transformational force for people and communities? Do you support Enterprise Promotion, as a practitioner, funder or policymaker? Are you proud of your own achievements? Do you want to share your successes? Would you like to learn from the experience of colleagues around the World? If you can answer YES to even one of these questions, you should come and speak at IEPC 2010, in Harrogate, North Yorkshire from 8-10 November 2010.. For More Information,Click Here

International Conference on New Horizons in Education

The main goal of this conference is to present and discuss new trends in education. INTE-2010 conference is supported by many universities and organizations. INTE-2010 has already formed a large, multi-national and friendly community of colleagues who love to share ideas. INTE-2010 invites you to submit proposals for papers, panels, best practices, roundtables, tutorials, posters/demonstrations, and workshops. For More Information,Click Here

Student Case Writing Competition

The Baylor University Entrepreneurship Program and USASBE are jointly sponsoring a student case writing competition in conjunction with USASBE’s annual meetings beginning in 2011 at USASBE’s 25th Annual Conference to be held January 13-16, 2011 in Hilton Head, South Carolina. This is an innovative international event that supports and encourages undergraduate and graduate students who wish to engage in case research and case writing. Submitted cases are suitable if they advance the field of entrepreneurship, broadly defined, and contribute to an understanding of entrepreneurial phenomena. For more information,Click Here

ICSB 2010: “Entrepreneurship: Bridging Global Boundaries”

The ICSB World Conference 2010 will be taking place June 24-27, 2010. It will be held in Cincinnati, Ohio, USA. The Early Registration Deadline is April 30th, 2010. Topics will deal directly or indirectly with: * Entrepreneurship Education * Individual Entrepreneurship * Women and Minority Entrepreneurship * Small Business and SME’s in Developing Economies * Public Policy * Entrepreneurship and Technology * Family Business * Corporate Entrepreneurship * International Entrepreneurship * Entrepreneurship in the Arts * Entrepreneurship Across the Curriculum * Social Entrepreneurship * Additional topics of interest and value to ICSB’s membership. For more information,Click Here.

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