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Practice Makes Profit: Business Practices and Firm Success

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Abstract

Which business practices set successful firms apart from others? We address this question using data from an official survey of almost 3000 New Zealand firms. Questions cover: leadership, planning practices, customer and supplier focus, employee practices, quality and process monitoring, benchmarking, community and social responsibility, innovation, IT use, business structure and the competitive environment. Some of these are internal practices reflecting a firm’s resources and capabilities; some are characteristics of the external environment. We find that capital investment choices, R&D practices, market research and a range of employee practices are positively associated with firm success; industry structure is also a key determinant of success. The association between specific business practices and firm success is mostly independent of firm size, age and industrial sector, other than for export marketing.

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Author information

Authors and Affiliations

  1. Ministry of Economic Development, P.O. Box 1473, Wellington, New Zealand

    Richard B. Fabling

  2. MOTU Economic & Public Policy Research, P.O. Box 24390, Wellington, New Zealand

    Arthur Grimes

Authors
  1. Richard B. Fabling
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  2. Arthur Grimes
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Corresponding author

Correspondence to Arthur Grimes.

Additional information

This is a revised version of a paper presented to the New Zealand Association of Economists conference, Auckland, June 2003. The views expressed are those of the authors and do not necessarily reflect the position of their employers. We thank Ed Lazear, Bob Buckle, Dean Hyslop, Hayden Johnston, two referees and the editor of this journal for their helpful comments.

Appendix: robustness test results

Appendix: robustness test results

Business Results with Additional Demographic Variables Included

APPENDIX: robustness test results Business Results with Additional Demographic Variables Included
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Fabling, R., Grimes, A. Practice Makes Profit: Business Practices and Firm Success. Small Bus Econ 29, 383–399 (2007). https://doi.org/10.1007/s11187-006-9000-7

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  • DOI: https://doi.org/10.1007/s11187-006-9000-7

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