Limitation for Measuring the Effect of Public Assistance Programs on a Country-Level Economy

Are there benefits in trying to measure public assistance effect at the country-level economy? Literature suggest two main approaches, Wood (1994) ; Blizzard (1995) ; Wood (1999) claims that an economic approach which represent each change as a result of macro economic status is the one with the upper hand. Chrisman (1995) ; Chrisman and Mcmullan (1996) ; Chrisman and Mcmullan (2002) represent an opposite approach, they claim that even though measurement has significant difficulties, it’s can be argued that improving the management level in a firm using assistance of outside help can lead to an improvement at the firm’s performance level. Such improvement at the firm level could suggest that changes will exist at country-level economy as well.

Analyzing the different ways scholars tried to cope with measuring the effect of public assistance programs on country-level economy, raise several questions regarding the possible accuracy that can be achieved based on the existing models:
1. There is objective difficulty in gathering data from public assistance programs that can be used for analysis at the country-level economy.
2. Measuring effects at country-level economy is based on measurement at the firm level. Using different models scholars “transform” data from firm level to country-level. The “transformation” process doesn’t take into account significant measures at country-level economy (e.g. GDP growth, Unemployment).
3. Luukkonen (1998) argue that the difficulties to assess the effect of public assistance programs comes from the problematicalness to “transform” the analyze data from the firm level to country-level.
4. Measures, like Sales growth and employment growth, which have been used to assess the effect of public assistance programs at country-level represent performance measurement which relate to “growth”. Other measures, such as, profitability, efficiency, liquidity, which relate to other dimensions of the overall performance structure, could in fact pull to other as well as opposite direction.
5. Sale growth and market share growth measures represent opposite directions. Sales growths that follow market share growth by a given firm suggest that the particular sale growth comes on the account of other firms in the industry, and it’s not represent genuine growth. Most scholars doesn’t coupe with this issue.

Human Resources, Financial Resources and Performance in Small Business

When reviewing the literature regarding human resources in small business we found out that the small business’ entrepreneur/owner is to be emphasized as a resource of paramount importance. According to Story (1994), the entrepreneur’s experience, expertise and abilities are generally considered a primary parameter of influence over the firm’s survival and development. Mullins (1996) claims that the entrepreneur’s decision-making capacity strongly affects organizational processes that constitute the foundation for competitive advantage as well as for growth. Rangone (1999) has defined the entrepreneur as a “unique” resource which supports the rest of the resources. Financial resources is more scarce in relate to small business literature, we can cite Westhead, Wright and Usbasaran (2001) who suggested that human and financial resources are those that need to be incorporated into the research model, which they had constructed.

Several studies were conducted in order to learn about the relationship between human or financial resources and small business performance. Cooper, Gimeno-Gascon and Woo (1994) have found that human resources, and especially the owner’s education, are correlated with growth. Moreover, knowledge of the industry and financial resources contribute to growth as well as to the firm’s survival. According to Westhead (1995), the founder’s experience affected performance and survival in hi-tech enterprises over a period of six years from the day of foundation. Brush and Chaganti (1999) examined small trade and service oriented businesses. Their study designates two dimensions of human resources – owner resources and owner commitment. A significant positive correlation was found between the two dimensions and net cash flow. No correlation has been found to the log of employment growth. Westhead et al. (2001) findings support the hypothesis that, if the firm’s founder possesses a significant prior knowledge of the industry, it is to be expected that the firm would register profitability beyond the means of its competitors. Premaratne (2001) indicates at a correlation between subsidies granted to the firm and increase in sales. However, he does not support a correlation between subsidies and profitability. Wiklund and Shepherd (2005) have found a significant positive correlation between access to capital and performance. Pena (2004) examined the relationship between human resources (education; management experience; prior entrepreneurial experience; entrepreneurs' relatives; implementation of ideas acquired in previous workplaces) and increase in profit, increase in sales and increase in the number of employees. A positive correlation was found between education and the implementation of ideas acquired in previous workplaces, and an increase in the number of employees and in sales. Chrisman, Mcmullan and Hall (2005) utilized education and prior experience as control variables. A correlation was found between prior experience and an increase in the number of employees and in sales. No such correlation with education was found.

Literature Review: Strategic Planning and Performance in Small Business

From the mid seventies we can note that scholars makes the distinction between small and large businesses in terms of needs, level of sophistication and range of strategic planning. Bracker and Pearson (1986), Rue and Ibrahim (1998), Perry (2001) and Wijewardena, Zoysa, Fonseka and Perera (2004) all formulate definitions of strategic planning which take the uniqueness of small businesses into account and allow for the fact that small businesses cannot draw on management and material resources in a manner similar to that of large organizations.

Empiric studies’ findings indicate at a correlation between strategic planning and performance. Nevertheless, the findings are mixed. A survey of twenty-six experimental studies enabled Miller and Cardinal (1994) to identify a significant positive connection between strategic planning and small business performance. Robinson (1982) found a significantly high level of profitability as well as an increase in sales and returns on sales and the number of full time employees in a group of small businesses that employed external consultants for the purpose of strategic planning. Compared with other businesses, Bracker and Pearson (1986) discovered a significant increase in income and remuneration per entrepreneur in businesses that prepared strategic plans (the highest of four designated levels of strategic planning). No significant increase was detected in the measure salary expenditure divided on the sum total of sales. A significant differentiation in the rate of sales increase was found by Rue and Ibrahim (1998) in small businesses that incorporated written planning (basic or sophisticated), as opposed to other businesses. Perry (2001) detected a significant differentiation in the degree to which planning was conducted in small businesses that did not applied for bankruptcy as opposed to those that did. Wijewardena et al. (2004) define three levels of planning: no written planning; basic planning; and detailed planning. The findings indicate that the level of planning stands in direct proportion to the level of increase in sales. Yusuf and Saffu (2005) classify three levels of planning: low; moderate; and high. A connection was found between increase in sales and the low level of planning. No correlation was found between strategic planning and increases in market share or in profitability.