Skip to main content
SpringerLink
Log in

Modelling the Link Between Management Practices and Financial Performance. Evidence from Small Construction Companies

  • Published:
Small Business Economics Aims and scope Submit manuscript

Abstract

This paper develops a structural model to investigate the direct and indirect effects of owner–manager and company characteristics and selected management practices on the financial performance of a sample of 218 small Belgian construction companies. The results show that the owner–manager and company characteristics (experience, education, financial knowledge, knowledge of cost accounting, company size and age) have no direct significant impact on financial performance. However, several significant paths have been found between the owner–manager and company characteristics and management practices. As far as the direct effects of the management practices are concerned we observe several significant paths from the management practices to financial performance. Our findings indicate that a model approach by including owner–manager and company characteristics and management practices in an intertwined way is necessary when exploring their effects on small business financial performance.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • R. Ackelsberg P. Arlow (1985) ArticleTitle‘Small Businesses do Plan and it Pays Off’ Long Range Planning 18 IssueID5 61–67 Occurrence Handle10.1016/0024-6301(85)90202-X

    Article  Google Scholar 

  • H. E. Aldrich J. Pfeffer (1976) ArticleTitle‘Environments of organizations’ Annual Review of Sociology 2 79–105 Occurrence Handle10.1146/annurev.so.02.080176.000455

    Article  Google Scholar 

  • J. Argenti (1976) Corporate collapse: the causes and symptoms McGraw-Hill London

    Google Scholar 

  • J. Argenti (1986) ArticleTitle‘Spot Danger Signs Before it’s Too Late’ Accountancy 98 IssueID1115 101–102

    Google Scholar 

  • T. Bates (1990) ArticleTitle‘Entrepreneur Human Capital Inputs and Small Business Longevity’ The Review of Economics and Statistics 72 IssueID4 551–559

    Google Scholar 

  • R. C. Becherer J. G. Maurer (1999) ArticleTitle‘The Proactive Personality Disposition and Entrepreneurial Behavior Among Small Company Presidents’ Journal of Small Business Management 37 IssueID1 28–36

    Google Scholar 

  • T. H. A. Bijmolt P. S. Zwart (1994) ArticleTitle‘The Impact of Internal Factors on the Export Success of Dutch Small and Medium–sized firms’ Journal of Small Business Management 32 IssueID4 69–83

    Google Scholar 

  • M. R. Binks C. T. Ennew (1996) ArticleTitle‘Growing Firms and the Credit Constraint’ Small Business Economics 8 IssueID1 17–25

    Google Scholar 

  • S. Birley P. Westhead (1990) ArticleTitle‘Growth and Performance Contrasts Between ‘Types’ of Small Firms’ Strategic Management Journal 11 IssueID7 535–557

    Google Scholar 

  • N. Bosma M. Praag Particlevan G. Wit Particlede (2000) Determinants of successful entrepreneurship EIM Zoetermeer

    Google Scholar 

  • R. Chaganti J. A. Schneer (1994) ArticleTitle‘A Study of the Impact of Owner’s Mode of Entry on Venture Performance and Management Patterns’ Journal of Business Venturing 9 IssueID3 243–260 Occurrence Handle10.1016/0883-9026(94)90032-9

    Article  Google Scholar 

  • Churchill N. C. and V. L. Lewis, 1983, ‘The Five Stages of Small Business Growth’, Harvard Business ReviewMay-June, 30–50.

  • A. C. Cooper F. J. Gimeno-Gascon C. Y. Woo (1994) ArticleTitle‘Initial Human and Financial Capital as Predictors of New Venture Performance’ Journal of Business Venturing 9 IssueID5 371–395 Occurrence Handle10.1016/0883-9026(94)90013-2

    Article  Google Scholar 

  • G. D’Amboise M. Muldowney (1988) ArticleTitle‘Management Theory for Small Business: Attempts and Requirements’ Academy of Management Review 13 IssueID2 226–240

    Google Scholar 

  • W. N. Davidsson SuffixIII D. Dutia (1991) ArticleTitle‘Debt, Liquidity, and Profitability Problems in Small Firms’ Entrepreneurship: Theory & Practice 16 IssueID1 53–64

    Google Scholar 

  • F. Delmar (1997) ‘Measuring Growth: Methodological Considerations and Empirical Results’ R. Donckels A. Miettinen (Eds) Entrepreneurship and SME Research: on its Way to the Next Millennium Aldershot Ashgate 199–215

    Google Scholar 

  • G. G. Dess G. T. Lumpkin J. E. McGee (1999) ArticleTitle‘Linking Corporate Entrepreneurship to Strategy, Structure, and Process: Suggested Research Directions’ Entrepreneurship: Theory & Practice 23 IssueID3 85–102

    Google Scholar 

  • R. Donckels M. Cottyn R. Aerts (Eds) (1993) KMO’s ten voeten uit: van onderzoek tot actie Roularta Books Brussels

    Google Scholar 

  • R. Donckels (2000) ArticleTitle‘Groeifinanciering in KMO’s: met speciale aandacht voor familiebedrijven en de Europese context’ Tijdschrift voor Economie en Management XLV IssueID1 99–131

    Google Scholar 

  • G. Dovi R. Nelson (1994) ArticleTitle‘An Introduction to Evolutionary Theories in Economics’ Journal of Evolutionary Economics 4 IssueID1/2 153–172

    Google Scholar 

  • R. Durand (2001) ArticleTitle‘Firm Selection: An Integrative Perspective’ Organization Studies 22 IssueID3 393–417

    Google Scholar 

  • R. Durand R. Coeurderoy (2001) ArticleTitle‘Age, Order of Entry, Strategic Orientation and Organizational Performance’ Journal of Business Venturing 16 IssueID5 471–494 Occurrence Handle10.1016/S0883-9026(99)00061-0

    Article  Google Scholar 

  • G. J. Eidleman (1995) ArticleTitle‘Z scores – a guide to failure prediction’ CPA Journal 65 IssueID2 52–54

    Google Scholar 

  • T. -W. Fu M. -C. Ke Y. -S. Huang (2002) ArticleTitle‘Capital Growth, Financing Source and Profitability of Small Businesses: Evidence from Taiwan Small Enterprises’ Small Business Economics 18 IssueID4 257–267 Occurrence Handle10.1023/A:1015291605542

    Article  Google Scholar 

  • L. R. Gaskill H. E. Auken ParticleVan R. A. Manning (1993) ArticleTitle‘A Factor Analytic Study of the Perceived Causes of Small Business Failure’ Journal of Small Business Management 31 IssueID4 18–31

    Google Scholar 

  • M. Goos J. Konings (1999) ArticleTitle‘Firm Growth in Belgium’ Tijdschrift voor Economie en Management 44 IssueID4 449–466

    Google Scholar 

  • G. Hall (1994) ArticleTitle‘Factors Distinguishing Survivors from Failures Amongst Small Firms in the UK Construction Sector’ Journal of Management Studies 31 IssueID5 737–760

    Google Scholar 

  • D. C. Hambrick P. A. Mason (1984) ArticleTitle‘Upper Echelons: the Organization as a Reflection of its Top Managers’ Academy of Management Review 9 IssueID2 193–206

    Google Scholar 

  • A. Hankinson D. Bartlett B. Ducheneaut (1997) ArticleTitle‘The Key Factors in the Small profiles of Small-Medium Enterprise Owner-Managers that Influence Business Performance’ International Journal of Entrepreneurial Behaviour and Research 3 IssueID4 168–175

    Google Scholar 

  • M. T. Hannan J. H. Freeman (1989) Organizational Ecology Harvard University Press Cambridge, MA

    Google Scholar 

  • L. Hatcher (1994) A Step-by-Step Approach to Using the SAS System for Factor Analysis and Structural Equation Modelling SAS Institute Cary

    Google Scholar 

  • F. Havaleschka (1999) ArticleTitle‘Personality and Leadership: A Benchmark Study of Success and Failure’ Leadership & Organization Development Journal 20 IssueID3 114–132

    Google Scholar 

  • J. -M. Jacques J. Bughin D. Tscheulin (1994) ArticleTitle‘Les facteurs clés de succès de la gestion de l’entreprise’ Gestion 2000 10 IssueID1 13–5

    Google Scholar 

  • D. Y. Lee E. W. K. Tsang (2001) ArticleTitle‘The Effects of Entrepreneurial Personality, Background and Network Activities on Venture Growth’ Journal of Management Studies 38 IssueID4 583–602 Occurrence Handle10.1111/1467-6486.00250

    Article  Google Scholar 

  • A. Y. Lewin H. W. Volberda (1999) ArticleTitle‘Prolegomena on Coevolution: A Framework for Research on Strategy and New Organizational Forms’ Organization Science 10 IssueID5 519–534

    Google Scholar 

  • H. Littunen (2000) ArticleTitle‘Entrepreneurship and the Characteristics of the Entrepreneurial Personality’ International Journal of Entrepreneurial Behaviour and Research 6 IssueID6 295–309

    Google Scholar 

  • R. N. Lussier (1995) ArticleTitle‘A Nonfinancial Business Success Versus Failure Prediction Model for Young firms’ Journal of Small Business Management 33 IssueID1 8–20

    Google Scholar 

  • R. N. Lussier S. Pfeifer (2001) ArticleTitle‘A Crossnational Prediction Model for Business Success’ Journal of Small Business Management 39 IssueID3 228–239 Occurrence Handle10.1111/0447-2778.00021

    Article  Google Scholar 

  • J. Maes C. Vandoren L. Sels F. Roodhooft (2000) Onderzoek naar oorzaken van faillissementen van kleine en middelgrote bouwondernemingen CTEO Leuven

    Google Scholar 

  • J. T. Mahoney R. J. Pandian (1992) ArticleTitle‘The Resource-Based View Within the Conversation of Strategic Management’ Strategic Management Journal 13 IssueID5 363–380

    Google Scholar 

  • G. Martin H. Staines (1994) ArticleTitle‘Managerial Competences in Small Firms’ Journal of Management Development 13 IssueID7 23–34 Occurrence Handle10.1108/02621719410063396

    Article  Google Scholar 

  • C. H. Matthews S. G. Scott (1995) ArticleTitle‘Uncertainty and Planning in Small and Entrepreneurial Firms: An Empirical Assessment’ Journal of Small Business Management 33 IssueID4 34–52

    Google Scholar 

  • InstitutionalAuthorNameNationaal Instituut voor de Statistiek (2002) Faillissementstatistieken NIS – Ministerie van Economische Zaken Brussel

    Google Scholar 

  • R. R. Nelson S. G. Winter (1982) An Evolutionary Theory of Economic Change Harvard University Press Cambridge MA

    Google Scholar 

  • S. Perry (2001) ArticleTitle‘The Relationship Between Written Business Plans and the Failure of Small Businesses in the US’ Journal of Small Business Management 39 IssueID3 201–208 Occurrence Handle10.1111/1540-627X.00019

    Article  Google Scholar 

  • C. P. Rao M. K. Erramilli G. K. Ganesh (1990) ArticleTitle‘Impact of Domestic Recession on Export Marketing Behaviour’ International Marketing Review 7 IssueID2 54–65

    Google Scholar 

  • R. A. Reuber E. Fisher (1999) ArticleTitle‘Understanding the Consequences of Founders’ Experience’ Journal of Small Business Management 37 IssueID2 30–45

    Google Scholar 

  • S. Roper (1999) ArticleTitle‘Modelling Small Business Growth and Profitability’ Small Business Economics 13 IssueID3 235–252 Occurrence Handle10.1023/A:1008104624560

    Article  Google Scholar 

  • L. W. Rue N. A. Ibrahim (1998) ArticleTitle‘The Relationship Between Planning Sophistication and Performance in Small Business’ Journal of Small Business Management 36 IssueID4 24–32

    Google Scholar 

  • Sels L., S. De Winne, J. Maes, J. Delmotte, D. Faems and A. Forrier, in press, ‘Linking HRM and Small Business Performance. An Examination of the Impact of Human Resource Management Practices on the Productivity and Financial Performance of Small Business’, Small Business Economics.

  • D. Storey K. Keasey R. Watson (1987) Performance of Small Firms: Profits, Jobs, and Failures Croom Helm London

    Google Scholar 

  • M. Gelderen ParticleVan (2002) ArticleTitle‘Best Paper Award Winners of Rent 2001’ International Small Business Journal 20 IssueID3 345–349

    Google Scholar 

  • J. Watson J. E. Everett (1996) ArticleTitle‘Do Small Businesses have High Failure Rates?’ Journal of Small Business Management 34 IssueID4 45–62

    Google Scholar 

  • B. Wernerfelt (1984) ArticleTitle‘A Resource-Based View of the Firm’ Strategic Management Journal 5 IssueID2 171–180

    Google Scholar 

  • H. Wijewardena G. E. Tibbits (1999) ArticleTitle‘Factors Contributing to the Growth of Small Manufacturing Firms: Data from Australia’ Journal of Small Business Management 37 IssueID2 88–95

    Google Scholar 

  • S. A. Zahra J. G. Covin (1995) ArticleTitle‘Contextual Influences on the Corporate Entrepreneurship – Performance Relationship: A Longitudinal Analysis’ Journal of Business Venturing 10 IssueID1 43–58 Occurrence Handle10.1016/0883-9026(94)00004-E

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Research Center for Organization Studies, Katholieke Universiteit Leuven Policy Research Center on Entrepreneurship Enterprises and Innovation, Naamsestraat 69, B-3000, Leuven, Belgium

    Johan Maes & Luc Sels

  2. Research Center for Accountancy, Finance and Insurance, Katholieke Universiteit Leuven Vlerick Leuven Ghent Management School, Naamsestraat 69, B-3000, Leuven, Belgium

    Filip Roodhooft

Authors
  1. Johan Maes
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Luc Sels
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Filip Roodhooft
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Johan Maes.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Maes, J., Sels, L. & Roodhooft, F. Modelling the Link Between Management Practices and Financial Performance. Evidence from Small Construction Companies. Small Bus Econ 25, 17–34 (2005). https://doi.org/10.1007/s11187-005-4255-y

Download citation

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11187-005-4255-y

Keywords

Jel Classification

Search

Navigation