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Procedia Economics and Finance 6 (2013) 503 511

International Economic Conference of Sibiu 2013 Post Crisis Economy: Challenges and
Opportunities, IECS 2013

Success and Goals: an Exploratory Research in Small Enterprises

a
*
a
Faculty of Marketing, Academy of Economic Studies Bucharest, Romania

Abstract

Goals are important because they guide behaviour and influence performance level. This article aims to identify how small and
medium sized enterprises define success, which are the goals that guide them and which factors influence the setting of these
goals. Several factors related to the enterprise, not the entrepreneur, were tested. The results show that there is no association
between company's goals and those factors - except for one particular type of ability, namely the marketing ability. This makes us
ls.
2013
2013 The
The Authors.
Authors. Published
Published by
by Elsevier B.V. Open access under CC BY-NC-ND license.
Elsevier B.V.
Selection
Selection and
and peer-review
peer-review under
under responsibility of Faculty
responsibility of Faculty of
of Economic
EconomicSciences,
Sciences,Lucian
LucianBlaga
BlagaUniversity
UniversityofofSibiu.
Sibiu.

Keywords: business goals; small and medium sized enterprises; resources and capabilities

1. Introduction

The contribution of small and medium sized enterprises (SMEs) to economic development has been recognized
since the late 1940s with the establishment of government agencies responsible for this sector (1948 in Japan, 1953
in the U.S.) and the development of national policies which offered different tax treatment, subsidies and guaranteed
loans (OECD, 2008).
SME development was a generalized phenomenon in the last ten years worldwide (EIM Business & Policy
Research, 2010). There is a positive relationship between the development of the SME sector in recent years and
growth (Leegwater & Shaw, 2008). SMEs have proved to be a major employer in the economy, a generator of added
value, a significant participant in the value chains, a player with potential in international markets and an agent of
innovation. For example, in late 2009, as reported by Eurostat Business Statistics (Structural Business Statistics), the

* Corresponding author.
E-mail address: daniela.ionita@ymail.com

2212-5671 2013 The Authors. Published by Elsevier B.V. Open access under CC BY-NC-ND license.
Selection and peer-review under responsibility of Faculty of Economic Sciences, Lucian Blaga University of Sibiu.
doi:10.1016/S2212-5671(13)00168-8
504 Daniela Ioni / Procedia Economics and Finance 6 (2013) 503 511

private non-financial economy of the European Union counted 20,975,203 companies, out of which 99.8% were
SMEs. They employ over two-thirds of the total workforce and accounts for approximately 60% of the value added
created (Wymenga, et al., 2011). The situation is almost similar In Romania.
Compared to large companies, SMEs have the following limitations: a limited market power, a limited customer
base, difficulties in exploiting market opportunities, near-
on previous experience and common sense, and small or no budget for formal training (McCartan-Quinn & Carson,
2003).
However, some of them - called high growth SMEs (OECD, 2010) - obtain superior performance and succeed to
grow at high rates of over 20% annually. The number of high growth SMEs is relatively limited and estimated at
maximum 15% of all SMEs. Therefore the question is what if, beyond the limitations already mentioned, there are
other factors which limit the performance of SMEs? What if some of them do not want to grow but to maintain the
same level to assure SME owner-managers a satisfactory lifestyle? What actually wants a SME, which are the goals
that guide them?
This article aims to identify how SMEs define success, which are the goals that guide them and which factors
influence the setting of these goals.
The paper is organized as follows: first we present the theoretical background followed by research
methodology. Then we introduce an empirical study, present the results and discuss the conclusions.

2. Literature review

2.1. Success and performance

Success and performance are two concepts that, in many studies, seem to overlap, being difficult to separate
(Simpson, Padmore, & Newman,
performances, such as profit, sales, growth, number of employees or number of clients do not seem to be the main
objectives. Rather, they have non-financial objectives related to job satisfaction, making a reasonable living, need
for autonomy, creativity and community respect (Toledo-Lpez, Daz-Pichardo, Jimnez-Castaeda, & Snchez-
Medina, 2012). While some authors separate them into financial and non-financial criteria of success, others call
them economic and non-economic goals (Reijonen, 2008).
According to these criteria, SME owners/managers were divided into two distinct categories: those with an
entrepreneurial orientation which are guided by economic objectives such as company's growth or innovation -
and those with a small business orientation - which have rather non-economic goals, such as personal satisfaction or
providing a standard of living for their family (Runyan, et al., 2008).
But what makes some SME owners/ managers have economic goals while others seem rather interested in non-
economic goals? The answer seems to be how they define success. According to Oxford Dictionary, success means
the accomplishment of an aim or purpose. Unlike success, performance is the achievement of an outcome from any
activity or, according to Slack (in Simpson, et al., 2012, p.269) "the result of action". This means that if the result of
an action, namely the performance level, leads to the achievement of the goal, it is considered a success.
Which are the goals that entrepreneurs set? According to values theory, goals are influenced by our values
(Rokeach, 1979, p.48). Values are " desirable transsituational goals, varying in importance, that serve as guiding
principles in the life of a person o
capitalism are power (dominance over people and resources) and achievement (personal success through
demonstrating competence according to social standards)(Kasser, Cohn, Kanner, & Ryan, 2007) human beings have
a hierarchy of values which is not limited only to these two. According to Schwarz (1994) there are ten basic values
which guide behaviour: power, achievement, hedonism, stimulation, self-direction, universalism, benevolence,
conformity, tradition and security. These values are organized in a circumplex model which implies that a focus on
one value e.g. achievement - is associated with caring less about the opposite one e.g. benevolence.
Values are not only psychological but also social concepts and therefore can be used at organisational level
(Rokeach, 1979, p.50). Given the central position of the entrepreneur in the company (Andersson & Tell, 2009), his
 Daniela Ioni / Procedia Economics and Finance 6 (2013) 503 511 505

values will influence the organization and consequently the decisions, strategies and enterprise performance
(Tomczyk, Lee, & Winslow, 2013, Kotey & Meredith, 1997).
According to a recent study, ten success criteria are used by entrepreneurs, in descending order being: personal
satisfaction, profitability, satisfied stakeholders, balance between work and private life, innovation, firm
survival/continuity, utility/usefulness, contributing back to society, public recognition and growth (Gorgievski,
Ascalon, & Stephan, 2011).
Moreover, those ten success criteria seem to be aligned with specific values, as follows: profitability, firm
survival/continuity, growth and innovation are based on values such as power and achievement, personal satisfaction
is related to values such as stimulation, hedonism and self-direction, work-life balance and satisfied stakeholders are
based on benevolence and universalism values while utility, contributing back to society and public recognition are
supported by security, conformity and tradition values.
Again, striving for traditional business goals (such as growth) seems to conflict with personal goals such as work-
life balance, supported by benevolence and universalism which are important values for most people (Gorgievski,
Ascalon, & Stephan, 2011).
Therefore we will use in our research, business goals which are related to profit, continuity, growth and
innovation - and non-business goals which are related more to personal level, such as decision makers satisfaction,
work-life balance, public recognition and utility/contributing back to society. Because we are analyzing the
enterprise, not the entrepreneur, we assume that goals are modelled by many stakeholders (such as the management
team, the employees and in some cases a parent-company) not just the owner. Hence,
H1: SMEs with more employees, are guided by business goals rather than non-business goals.
H2: SMEs with external management are guided by business goals rather than non-business goals.
H3: SMEs connected to a parent-company are guided by business goals rather than non-business goals.

2.2. Resources, capabilities and external environment

Unlike managers, entrepreneurs act differently. They start with what they have and what they can do (resources,
capabilities, personal network) to imagine things that could be done (Sarasvathy, 2001).
According to Resource Based View Theory, the resources available to a firm are both tangible - material, human,
financial, informational - and intangible - advantageous contracts, licenses, organizational culture or firm reputation
(Wernerfelt, 1984). It is important however, not only the resources available, but also what is the company capable
to do with its resources, namely its capabilities. There are different kinds of capabilities: entrepreneurial, functional
(Brinckmann, 2007) and marketing capabilities.
Entrepreneurial capabilities refer to conceptual skills (creating business models, setting objectives, developing
strategies and plans), innovation skills (selecting new ways of action, divergent and unconventional thinking,) and
action skills (executing/implementing strategies and plans). Functional capabilities refer to both detailed knowledge
of the product that the company provides and deep understanding of what is happening in the industry. Marketing
capabilities are related to market responding abilities (Roberts & Grover, 2011), networking and communication
skills. Since the available means influence what a firm can do, we believe that more resources and higher
capabilities will lead to o more focus on business goals:
H4: More resources lead to a higher focus on business goals.
H5: Higher abilities lead to a higher focus on business goals.

environment. Since the external environment varies depending on the industry, we will characterize it in terms of
level of uncertainty affecting demand, competition and technological development. Four levels of uncertainty were
identified (Courtney, 2008):
Level one - there is only one scenario for future development but some variables are unknown;
Level two there are some alternative future scenarios that can be identified;
Level three - there is a spectrum of future scenarios we can imagine, but they represent some possibilities
and not a complete list;
Level four - it is difficult to imagine future scenarios, because everything is possible.
506 Daniela Ioni / Procedia Economics and Finance 6 (2013) 503 511

As the level of uncertainty increases, the entrepreneur believes that he cannot influence the results and
therefore, it is limited to personal goals:
H6: Higher the degree of uncertainty in the external environment, higher the focus on personal goals.

3. Research methodology

The purpose of the present research is to study the goals of Romanian SMEs (under 250 employees). The
research objectives are (1) to identify what business and non-business goals they have, (2) to identify what are the
factors which influence the business goals.
The studied universe is represented by active SMEs in Romania with at least one employee. The sampling frame
consists of all active SMEs in Romania at the end of 2011 which declared between 1 and 249 employees and
reported a contact email address. Systematic sampling was used and 8,000 companies were selected.
Research was conducted during April-May 2012, preceded by a follow-up in July 2012. Data were collected
using an online survey with a self-administered questionnaire. Since a significant percentage of e-mail addresses
were incorrect (18%) and the questions were sensitive, the response rate was 3.1%. Thus, 202 questionnaires were
collected. The unit of analysis is the small and medium sized enterprise (under 250 employees) from various
industries. The respondents are entrepreneurs or managers of these enterprises. Data were processed and analyzed
using SPSS application.
The analysis applied basic statistical methods, such as frequencies and cross-tabs. Multivariate regression
analysis in SPSS was also used to differentiate the factors that allow the explanation of success in SMEs. The data
were collected as part of a more extensive study of the marketing strategies of Romanian SMEs.

4. Results

Out of 202 companies, microenterprises (0-9 employees) represent 61.9% of total, small enterprises (10-49
employees) 32.2% while medium-sized enterprises (50-249 employees) the remaining 5.9%. Regarding industry,
about 65% of SMEs are in services and trade (see Table 1). As there is no significant differences between the

(weighting cases).

Table 1: Characteristics of respondents

Size N %
Micro (0-9 employees) 125 61,9
Small (10-49 employees) 65 32,2
Medium (50-249 employees) 12 5,9
Total 202 100
Industry N %
Professional, scientific and technical services 63 31,2
Wholesale, retail 46 22,8
Production 37 18,3
Other services (real estate, leasing, administrative etc.) 22 10,9
Construction 17 8,4
Accommodation and food service activities 5 2,5
Transportation and storage 4 2
Others 8 4
Total 202 100
Regarding the outside elements influence on major decisions we found that in 25% of companies external
managers are involved (which do not own shares in the company), while the influence of another company (a
parent-company, such as a franchisor, sole importer or representative) is found only in 12.4% of cases (see Table 2).
 Daniela Ioni / Procedia Economics and Finance 6 (2013) 503 511 507

Table 2: Outside influences

Outside influences Yes No Total

External management (employees without shares in the company) 25,0% 75,0% 100,0%
Parent-company affiliation 12,4% 87,6% 100,0%

In terms of internal environment, the most important elements are the financial resources, followed by human,
informational and materials resources. The decision makers satisfaction (strongly agree = 5, strongly disagree = 1)
related to the extent that they possess the necessary resources and capabilities is presented in the table below (see
Table 3):

Table 3: Descriptive statistics

Variables Mean Std. Error Std. Deviation

Financial resources 2,51 0,086 1,218

Human resources 2,81 0,090 1,261

Informational resources 2,58 0,096 1,329

Material resources 2,52 0,082 1,139

Total resources 2,60 0,060 0,855

Entrepreneurial capabilities 3,86 0,053 0,731

Marketing capabilities 4,31 0,038 0,532

Functional capabilities 4,39 0,043 0,602

Total capabilities 4,17 0,037 0,517

According to these results, firms are slightly dissatisfied with their own resources, especially financial resources.
In terms of capabilities, companies consider that they have good functional capabilities, such as in-depth knowledge
about their industry or how to offer high standard quality products/services. In terms of marketing capabilities (such
as market responding abilities, networking and communication skills) it is found that firms are satisfied with what
they have. Instead they appreciate rather neutrally their entrepreneurial capabilities (such as the ability to develop
business models and strategies and to think unconventionally).
Regarding the external environment, 32% of respondents believe that the future can be predicted while 27%
consider it is impossible (see Table 4).

Table 4: Uncertainty level

Future evolution N %
Level 1 - There is only one scenario for future development but 42 21%
some variables are unknown.
Level 2 - There are some alternative future scenarios that can be 65 32%
identified.
508 Daniela Ioni / Procedia Economics and Finance 6 (2013) 503 511

Level 3 - There is a spectrum of future scenarios we can 40 20%

imagine, but they represent some possibilities and not a
complete list.

Level 4 - It is difficult to imagine future scenarios, because 54 27%

everything is possible.
Total 201 100%

SMEs goals are both business and non-business (or personal). Respondents had to allocate a fixed amount of 100
points between business and personal goals according to their importance, and the results show that business goals
are, on average, more important than personal goals: 62.3 versus 38.3 (see Table 5).

Table 5: SMEs business and personal goals

Descriptive statistics Mean Std. Error Std.

Deviation

Business goals importance 62,2 1,304 17,001

Personal goals importance 38,3 1,308 17,055

The most important business goals are, in order, growth, profit, continuity and innovation while the most
important non-business goals are work-life balance, decision makers satisfaction, public recognition and
utility/contributing back to society.
We consider that a company is business oriented, if minimum 51 points are allocated for business purposes
(which are related to profit, continuity, growth and innovation). We believe that a company is lifestyle oriented if
less than 50 points are allocated for business purposes. This means that more than 50 points are allocated to non-
business purposes such as decison makers satisfaction, work-life balance, recognition and public utility/contribuiting
back to society. Research result indicates that 63.5% of companies are business oriented and 36.5% are lifestyle
oriented.
To determine if there is an association between firm size, type of management and affiliation to a parent-
company - on one hand - and the type of company (business / lifestyle oriented) we used chi-square test for

the degree of association is relatively weak (contingency coefficient = 0.19). Similarly the relationship between the
type of management / affiliation to a parent-company and the company type (business / lifestyle oriented) was

p = 0.136) nor between affiliation w

Consequently, we will accept H1 hypothesis and reject H2 and H3 hypotheses.
Regarding the correlation between resources, capabilities and goals we found that there is no association, with
one exception. We identified a weak but statistically significant correlation between marketing capabilities and
business objectives (correlation coefficient = 0.163 and p = 0.037). This means that H4 hypothesis is rejected, while
H5 hypothesis is accepted but nuanced.
Regarding the influence of the external environment on non-business goals, we see that there is no link between
external environment uncertainty and non-
hypothesis is rejected.
To model the influence of these two factors - the company size and marketing capabilities on business goals,
we used linear regression. Company size variable can take three values (1 = microenterprise, 2=small enterprise and
3 = medium-sized enterprise) marketing capabilities are measured using a Likert scale (5 = strongly agree, 1 =
strongly disagree) and business goals importance is measured on a scale from 0 to 100. Although there is
controversy regarding the nature of the variables measured using Likert scale or constant sum scale, it is generally
accepted that these can be used as metric variables (Malhotra, 2007, p 277). In addition, linear regression models
can also use dichotomous variables (Mooi & Sarstedt, 2011).
 Daniela Ioni / Procedia Economics and Finance 6 (2013) 503 511 509

There are some data requirements for regression analysis. First of all, the sample size should be large enough.
According to some rules of thumb if you want to test the overall relationship between the independent and
dependent variables, the number of observations should be at least 50+8*k (where k are the number of independent

be 104+k, in this case 106 observations. Because we have collected information related to all variables for 166
cases, we consider that this requirement is satisfied. Another issue is related to collinearity, which can be tested by
calculating the tolerance or VIF (Variance Inflation Factor). If tolerance is below 0.10 or VIF values are above 10,
we have a collinearity issue. In our case collinearity between the two independent variables is low (tolerance=0,996
and VIF=1,004) which means that collinearity is of no concern.
The results of the regression analysis are presented below (see Table 6).

Table 6: Descriptive Statistics

Mean Std. Deviation N

Business goals importance 61,75 16,541 166
Company size 1,44 0,597 166
Marketing capabilities 4,30 0,532 166

The correlation matrix (see Table 7) shows us that marketing capabilities and the importance of business goals
are significantly correlated (p<0.05) while the number of employees are not significantly correlated with the
importance of business goals (p>0.05).

Table 7: Correlations

Business goals Company Marketing

importance size capabilities
Pearson Business goals importance 1,000 0,112 0,158
Correlation
Company size 0,112 1,000 -0,063
Marketing capabilities 0,158 -0,063 1,000
Sig. (1-tailed) Business goals importance . 0,076 0,021
Company size 0,076 . 0,209
Marketing capabilities 0,021 0,209 .
N Business goals importance 166 166 166
Company size 166 166 166
Marketing capabilities 166 166 166

We can assess the overall model fit using the coefficient of determination R2 and significance of F-value. Even if
in exploratory research using cross-sectional data, values of R2 of 0.10 are typical (Mooi & Sarstedt, 2011), in our
-value is
significant (F=3,383 and p=0,036) we will interpret individual variables.

Table 8: ANOVAb

Model Sum of Squares df Mean Square F Sig.

1 Regression 1799,160 2 899,580 3,383 ,036a
Residual 43344,213 163 265,915
Total 45143,373 165
a. Predictors: (Constant), Marketing capabilities, Company size
510 Daniela Ioni / Procedia Economics and Finance 6 (2013) 503 511

b. Dependent Variable: Business goals importance

As we can further see in the next table (see Table 9), only marketing capabilities have a significant influence on
the dependent variable (p=0,033), while company size does not (p=0,113).

Table 9: Coefficientsa

Model Unstandardized Standardized t Sig. Collinearity Statistics

Coefficients Coefficients

B Std. Error Beta Tolerance VIF

1 (Constant) 34,719 10,987 3,160 ,002
Company size 3,388 2,129 ,122 1,592 ,113 ,996 1,004
Marketing capabilities 5,149 2,391 ,166 2,154 ,033 ,996 1,004
a. Dependent Variable: Business goals importance

Therefore, we dropped the independent variable company size from or analysis, re-run the regression model with
only one independent variable and found that R2=0,03 and F-test value is statistically significant (p<0.05). The
constant is 40,634 and the unstandardized coefficient is 4,909, which means that one point improvement in
marketing abilities will increase the importance of business goals by roughly five points.

5. Conclusions

In this research we attempted to identify what success means for SMEs and what are the factors which influence
the way in which they define success. We found that SMEs have business and non-business goals, the importance of
business goals being on average higher than non-business goals.
We tried to identify several factors that may influence the importance of business goals of a company. If previous
research has emphasized the importance of entrepreneurs personal values on business objectives, in this study we
tried to see if maybe other factors related to the company, not to the entrepreneur such as other stakeholders
(employees, management, parent-
uncertainty - have any influence. Research results show that there is no association between company's goals and
those factors - except for one particular type of ability, namely the marketing abilities. But this variable is able to
explain only a small percentage of business objectives importance. This makes us believe that - at least in SMEs -

while the influence of other factors is insignificant.

Moreover, this is also a limitation of current research. The fact that we have focused on factors beyond the
entrepreneur, did not help us to identify a viable model. Nevertheless, the main benefit is that - at least for policy-
makers - if you want to increase the importance of business goals in a company, you should primarily influence the
entrepreneur.

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