Panikkos Poutziouris

Financial Policy and Capital Structure Choice in U.K. SMEs: Empirical Evidence from Company Panel Data

This article utilises up-to-date financial panel data, and investigates the capital structure of small and medium sized enterprises (SMEs) in the U.K. Different capital structure theories are reviewed in order to formulate testable propositions concerning the levels of debt in small businesses, and a number of regression models are developed to test the hypotheses.The results suggest that most of the determinants of capital structure presented by the theory of finance appear indeed to be relevant for the U.K. small business sector. Size, age, profitability, growth and future growth opportunities, operating risk, asset structure, stock turnover and net debtors all seem to have an effect on the level of both the short and long term debt in small firms. Furthermore, the paper provides evidence which suggest that the capital structure of small firms is time and industry dependent. The results indicate that time and industry specific effects influence the maturity structure of debt raised by SMEs. In general terms, average short term debt ratios in SMEs appear to be increasing during periods of economic recession and decrease as the economic conditions in the marketplace improve. On the other hand, average long term debt ratios exhibit a positive relationship with changes in economic growth.

Emerging Paths of Family Entrepreneurship Research

This futuristic commentary reviews family business research since its beginning more than 30 years ago. Prior to 2000, disciplinary roots, professional organizations, and early milestones are identified. More recent books, journals, and special issues are noted, and conceptualizations, theories, and databases are compared and contrasted. Lastly, current and future research paths or directions are identified and discussed, and researchers are challenged to move ahead into new and different research arenas.

Small Firms and the ISO 9000 Approach to Quality Management

DR. FRANCIS CHITTENDEN IS SENIOR FELLOW in business development, Dr. Pannikos Poutziouris and Dr. Syeda-Masooda Mukhtar are fellows in SME management, all at Manchester Business School, England. This paper reports the findings of a large survey about the international quality standard ISO 9000. The paper compares the characteristics of small businesses that use ISO 9000 with firms that do not and explores the reasons why businesses decide to seek registration under the standard. The benefits and disadvantages experienced by the small firms that have registered are also considered. A number of policy recommendations are presented that argue that ISO 9000 should be adapted so that more small firms can enjoy the advantages of registration. ISO 9000 is a quality management system that relies on the formal documentation of operating procedures. However, most small businesses are managed informally through the personal attention of the owner(s) and they perceive ISO 9000 to be expensive to operate and too bureaucratic for their needs. Informally-managed small businesses that adopted ISO 9000 reported increased costs as a result of implementing the standard. The formality required by ISO 9000 prevents many small firms from enjoying the benefits of registration even though, in most cases, the quality of their products and services is satisfactory.

The strategic orientation of owner‐managers of small ventures

This explorative research paper considers the strategic development objectives of small owner‐managed ventures in order to have an insight into how to systematically categorise the heterogeneous owner‐managed small business economy. It commences with a review of the literature and other studies pertinent to the strategic objectives of small business owner‐ managers from which the general research hypothesis is established; small firms have a variant form of strategic orientation owing to a plethora of internal (behavioural) and external market economic factors. This is followed by the research methodology and statistical analysis of a database which incorporates the views of 922 small firm owner‐managers on strategic objectives. The empirical evidence identifies four generic clusters of owner‐managers namely: growth stars, exiteers, survivors, and controllers. In order to throw more light on the profile of the variant clusters of owner‐managed small firms, the paper briefly examines the inter‐relationship...

Qualities of an effective successor: the role of education and training

Small family firms represent the predominant organizational form in Canada. They are perceived to be crucial to the development and growth of the Canadian economy. Despite this, scant attention is given to the study of human resource management practices in the specialist family business literature. A key human resource issue in family firms, which has been documented as a potential source of problems, is succession, selection and training. The objective of this research is to explore the qualities that are considered critical to an effective family business successor and discuss the crucial role that education and training could have in enhancing the qualities and skills of a successor. Results suggest that three factors are critical to an effective human resource strategy concerning the selection process of a successor. These include the successors capacity to lead, his/her managerial skills and competencies, and the willingness and commitment of the successor to take over the family business and to assume a leadership role.

Chinese entrepreneurship: the development of small family firms in China

This explorative paper considers the recent developments in the emerging small family business sector in post‐reform China as the country embraces socio‐economic and structural transition from a centrally planned to a market‐orientated system. The important contributions that Chinese small family firms play in the acceleration of private sector development across the social and industrial sectors as well as the geographic boundaries of the Pacific Rim are highlighted. The authors propose typologies of Chinese entrepreneurship and tentative enterprise policy recommendations for the future development of small private family businesses in China.

A model of capital structure decision making in small firms

Although earlier capital structure theories, grounded within the finance paradigm (agency theory, transaction cost theory etc), have contributed to a deeper understanding of the capital structure puzzle, recent efforts suggest that research for the missing pieces of the puzzle should continue. This paper considers that these missing pieces of the puzzle could be diverse non‐financial and behavioural factors influencing capital structure decisions, that have received relatively little attention from finance researchers. The paper reports on an exploratory attempt to use interview techniques for the study of capital structure in small firms. Interviews can provide evidence about non‐financial and behavioural variables that quantitative analysis cannot. The paper develops a model for understanding capital structure decision making in small firms. It analyses the responses of small business owners/managers concerning the management of the financial structure of their firms and the factors that influence their capital structure decisions. Small business owners’ responses indicate that although a number of different financial variables may affect their capital structure decisions, other non‐financial and behavioural factors such as the need for control, risk propensity, experience, knowledge and goals may be more important in influencing the capital structure of their firms, at any time. The results indicate that significant progress in understanding the factors that influence capital structure may be achieved if financial researchers incorporate management theory in their studies, so that financial as well as non‐financial and behavioural factors are explored.

Entrepreneurial risk taking: empirical evidence from UK family firms

– The theme of this paper is entrepreneurial risk taking. Specifically, the paper has twofold objectives: to develop insights into individual and familial correlates of risk‐taking propensity in family firms; to explore impacts of risk taking on business performance., – A quantitative survey was conducted with the sampling frame outlined based on the FAME database. A total of 236 companies participated in this survey., – The results suggest that individual and familial variables will determine the risk‐taking propensity, specifically entrepreneurs industrial tenure, age, and the controlling generation in family businesses. Furthermore, risk‐taking intensity correlates with business performance., – The cross‐sectional rather than longitudinal design of the study determines that it can only proffer a snapshot of the scenario. Further, the current study excludes non‐incorporated firms. Future explorative studies in a similar vein may be executed through channels of national and local development agencies to capture non‐incorporated firms., – Recent recognition of the intertwinement of family and business in family firms has led to the assumption that risk‐taking propensity in family firms is influenced by family ownership and family associated concerns. Nonetheless, rarely has the influence of family on risk‐taking propensity and the ensuing performance been addressed in the literature. The insights developed by this original exploration will broaden the knowledge landscape of family firms and entrepreneurial venturing allowing us to better understand how family firms can survive and prosper in the increasingly competitive market.

Taxation and the Performance of Technology Based Small Firms in the U.K.

This paper analyses a database of U.K. small companies in order to establish the profile of Technology Based Small Firms (TBSFs) in terms of their demography, financial structure and performance, and tax affairs. Following the evaluation of the impact of direct taxation on the high technology small companies, compared to that of their low technology counterparts, the paper briefly discusses the current policy debate about the nature and appropriateness of tax-based incentives for the development of this strategically important scale and type of enterprise.

PAYE - NIC Compliance Costs: empirical evidence from the UK SME economy

This article reports on the findings of an empirical investigation, supported by the Leverhulme Trust and the Federation of Small Businesses (FSB), into the compliance costs incurred by UK firms in administering PAYE. The article starts with a review of the literature and reports on other studies focusing on the impact of compliance costs on business. This is followed by an introduction to the objectives of this research project, the methodology employed and more specifically the statistical analysis (sample = 431) of the results and discussion of key research findings. In conclusion, the article presents the policy implications of the research and outlines a set of recommendations and tax initiatives that will contribute to the amelioration of the disproportionate burden of PAYE-NIC related compliance costs borne by the small business sector in the UK.