The impact of technology on smes profitability Essays

The impact of technology on smes profitability Essays The impact of technology on smes profitability Essay The impact of technology on smes profitability Essay Despite the interest in new firm growth, research has found that a limited understanding of the driving mechanisms behind how and when new firms grow (Davidson 2010; Gilbert 2006 McPherson and Holt, 2007; McKenzie and Wicking, 2010). One potential explanation for this limited understanding Is the unclear relationship of Games growth to other tangential phenomena and performance metrics, such as profitability and survival (Davidson: 2009; Shepherd and Wicking, 2009). These concepts are important for a number of reasons in the context of explaining new firm growth. For instance, exit rates are especially high for Games relative to incumbents, and the risk of exit may promote or hinder new firms from trying to achieve growth. Profitability may provide needed positive cash flow and access to resources to fuel growth, but sizeable profits may only come after growth has been achieved (Davidson et al 2009). Therefore, there appear to be Important relationships concerning both the nature and the timing of growth in relation to profitability and survival that need to be better understood (Coda, 2010). Indeed, these three central concepts (I. E. Roth, profitability, survival) have been highly influential in theories of Games growth, and industry evolution and dynamics but surprisingly little research has specifically addressed these Issues In the same model (Coda, 2010; Davidson et al. , 2009). There are several reasons for this current state of the literature. To begin with, empirical research has to date not been able to adequately mitigate the statistical problems arising from the heterogeneous and dynamic picture of growth (Coda, 2007). Related, a lack of adequate data on new firms has prevented researchers from unearthing the relationship between growth ND other performance outcomes such as survival and profitability (Head and Kerchief; 2009). Hence, there Is an apparent gap between the theoretical concept of growth and the empirical evidence (Mackerel and Would; 2010). We present a theoretical framework based on evolutionary economics to untangle the endogenous and complex relationships among growth, profitability and survival, our evolutionary model builds upon the idea that new firms face uncertainty concerning market acceptance and competitive pressures. Research on the link between (product) innovation and profitability at the firm or establishment level suggests that Innovators are persistently more profitable than non-eliminators (Cellared; 2005). Profitability is complicated by two further issues. First, foreign-owned small and medium enterprises tend to be more productive (and by implication more profitable) than their indigenous counterparts (Griffith; 2004) largely because they are more technologically advanced so, there may be differences between the profitability of indigenous and foreign plants regardless of their product innovation performance. Secondly there Is evidence of a link between foreign ownership and Innovation, with enterprise firms are generally more likely to be innovative than indigenously-owned firms in terms of both products and their adoption of new process technologies (Hewitt-Dunderheads). Based on the background, this study seeks to investigate the impact of technology on GAMES growth and profitability in Managing area. Most of the GAMES (fax, printing, copying, scanning and typing machines and the computers related services businesses) do not adapt to the emerging and changing technology. Are the Games that are using technology more profitable than the Games that are not using technology? Theoretical definition Technology- Technology is typically understood as the body of scientific knowledge seed in the production of goods or services (Hill and Jones, 2007). GAMES- Means a separate and distinct business entity, together with its branches or subsidiaries, if any, including cooperative enterprises, managed by one owner or more predominantly carried on in any sector or sub-sector of the economy. National Small Business Act (No. 102 of 1996) Growth- Refers to a positive change in size, often over a period of time. Growth can occur as a stage of maturation or a process toward fullness or fulfillment (Allison 2005). Profitability- According to Young (2005) reparability is described as the change in net asset on the statement of activities, in other words, it considers whether the organization had an operating surplus, broke even or operated at a loss.