The Mediating Role of SMEs' Performance in the Relationship between Entrepreneurial Orientation and Access to Finance.
| Autor | Civelek, Mehmet |
| Cargo | Research Article |
INTRODUCTION
SMEs are significant players in the economies of developing and developed countries since they decrease unemployment rates and increase tax incomes, export, as well as international and innovative activities of countries. In Turkey, for example, 99.8% of businesses are classified as SMEs, and SMEs account for 72.4% of the labor force and for 50.4% of the GDP (Turkish Statistical Institute, 2019). However, most of these enterprises face many obstacles, especially when receiving external finance. Since these businesses have lower revenues, financial resources, and assets compared to their larger rivals, they are less likely to receive bank credit, which is the first option when they look for external financing. However, access to bank finance is critical for their survival, growth, success, and development (Bature, Zakaria, & Sallehuddin, 2020; Munoz, Welsh, Chan, & Raven, 2015) and since SMEs have a lack of assets to collateralize, they need to show their potential to lending officers in different ways to gain credits.
In this regard, SMEs can perform some of their entrepreneurial behaviors that are the dimensions of entrepreneurial orientation. These behaviors are also related to the resource-based view theory, which highlights the importance of firm resources. According to this theory, firms that have valuable, rare, inimitable, and non-substitutable (VRIN) intangible resources can receive competitive advantages against their rivals and perform better in long term (Barney 1991; HadrysNowak, 2018; Ibrahim & Shariff, 2016). Thus, firms that have higher level of dimensions of entrepreneurial orientation (EO) might create products or services that are unique, difficult to imitate, and valuable. EO consists of some abilities such as innovativeness, risk taking, proactiveness, competitive aggressiveness, and autonomy that enable businesses to make efficient decisions and strategies regarding the processes of business operations (Beltrame, Floreani, Grassetti, Mason, & Miani, 2018; Lumpkin & Dess, 1996; Lumpkin & Dess, 2001). These entrepreneurial behaviors enable SMEs to explore new opportunities (Ibrahim & Shariff, 2016), to increase their competitiveness, revenues, sustainability (Dadzie, Agyapong, & Suglo, 2021) and to receive external financing options (Brouthers, Nakos, & Dimitratos, 2015; Wiklund & Shepherd, 2003). Moreover, EO makes SMEs to present their resource-based competencies (Brouthers et al., 2015) that stimulate these businesses' international activities (Hadrys-Nowak, 2018), thus increasing the performance of businesses (Bature et al., 2020). Since the performances of businesses also enable them to accessing bank finance, performance might be a mediator variable in the relationship between EO and access to bank finance.
In this context, having these entrepreneurial attitudes might enable them to increase their sales and income, which makes them to have better financial performance to accessing bank finance. This is because performance is a significant indicator for banks to provide credit for businesses since it provides information about firms' financial and economic potential (Chandrayanti, Nidar, Mulyana, & Anwar, 2020). Thus, firms that have improved financial performance can face reduced obstacles to accessing bank credit (Jabbouri & Farooq, 2021). For instance, firms that have higher sales and revenues can purchase some assets to show them as collateral for their credit applications and might reduce their costs of credits. In this regard, this paper aims to investigate whether performance of SMEs mediates the association between entrepreneurial orientation and access to finance. In this paper, access to bank credit is defined as firms' availabilities to receive credits from banks.
Business performance is evaluated regarding three to five fiscal year profitability of businesses that have been applied by some studies (Coopers & Lybrand, 1994; Laforet, 2013; Slater & Narver, 1994). In this regard, this paper also considers the last five years of profitability of businesses to evaluate their performance. Many studies separately confirm the positive relationship between EO of SMEs and their access to finance (Chandrayanti et al., 2020; Ibrahim & Shariff, 2016; Syahdan, Djaelani, & Mahdi, 2020) and between performance of SMEs and access to finance (Jabbouri & Farooq, 2021; Syahdan et al., 2020). Although mediating role of access to finance (Chandrayanti et al., 2020; Ibrahim & Shariff, 2016; Junoh, Hidthiir, & Basheer, 2019; Shariff, Ahmad, & Shabbir, 2020; Syahdan et al., 2020), network capabilities (Bature et al., 2020), demand growth and competitive intensity (Gupta & Batra, 2016), environmental dynamism (Zhai et al., 2018), and knowledge creation (Junoh et al., 2019) in the relationship between EO and SMEs performance have been analyzed by some studies, this research differs from these studies by extending the knowledge in the area of EO-access to finance relationship by employing performance as a mediating variable in this relationship.
Different from those studies, this paper uses firm performance as a mediating variable and investigates the full or partial mediation role of this variable in EO-access to bank finance relationship by including all dimensions of EO separately in the analyses. This is the research gap that this paper aims to fulfill. Hence, the research question might arise as follows: Does firm performance mediate the relationship between EO and access to finance? Since firm performance is evaluated by the five-year profitability of businesses and access to finance has also had positive impacts on firm financial resources, this research does not only analyze intangible resources such as entrepreneurial abilities and competencies of SMEs (entrepreneurial orientation) that belong to resource-based view theory, but also examines tangible resources (profitability, etc.) of SMEs. For these reasons, this paper is sole in the entrepreneurship literature and highlights the importance of entrepreneurial behaviors and financial performance in credit access of SMEs to prospective readers. This fact makes this paper to create value addition and fulfill the gap in the related literature.
This paper follows a positivist approach since it evaluates variables that are characterized by previous studies. Moreover, this paper follows other studies to create research hypotheses. This paper is also an empirical quantitative research since research data is converted to numbers that might be measured by statistical methods. Moreover, this study is a kind of exploratory and descriptive research since it tries to create relationships between research variables by characterizing the current conditions of SMEs from the perspective of firms' executives.
The sample of this research consists of SMEs that have applied bank credit in the last three years and the data of this paper is collected by a self-administered and internet-mediated questionnaire survey. Since data collection process by questionnaires is completed within a limited time, this paper is a cross-sectional study. For sample collection, the researcher has gained the lists of e-mail addresses of SMEs from chambers of commerce that are located in different geographical regions of Turkey. Therefore, the researcher's sample selection is based on the e-mail lists that are received from the chambers of commerce. To select this research sample, the researcher performed stratified random sampling method and strata are based on seven geographical regions of Turkey. Then, the researcher has sent the link of the online questionnaires to the randomly selected businesses. After that, the researcher has applied purposive sampling by specifying the characteristics of prospective respondents in the sent e-mails. The respondents of the questionnaires are firms' executives such as owners and managers of SMEs who are more informed about current financial conditions and operational details of firms. After excluding some of the fulfilled surveys that have missing values, a quantitative survey of 479 Turkish SMEs was conducted for the analyses.
In this regard, this research examines 479 SMEs that are located in Turkey and employs Andrew Hayes' process macro for the mediating role of performance in the relationship between EO and access to bank finance and direct impacts of other research variables, namely, EO and performance on access to bank finance and EO on performance. According to the results, performance and risk taking have significant impacts on access to finance. Other results show that firm performance mediates the relationship between innovativeness, and risk taking and access to finance. On the other hand, performance does not mediate between proactiveness, competitive aggressiveness, autonomy, and credit access. These significant results might draw attentions of SMEs, governments, non-governmental organizations, academicians, and financing institutions. By realizing the impacts of innovation and risk-taking behaviors in the performance and credit access, these players can collaborate to stimulate these entrepreneurial attitudes of SMEs by providing some trainings and incentives. Financing institutions might also consider these entrepreneurial behaviors in their hybrid credit evaluation methods. Since SMEs are one of the locomotive engines of economies, their entrepreneurial behaviors and performance might also stimulate the global economy.
The rest of the paper is structured as follows: the Literature Review section clearly explains the theoretical background of the research and indicates how the research hypotheses are set based on previous studies. The next section not only expresses the details about research data, data collection, and sample selection methods but also declares information about sample profile, approaches that the researcher follows for data analyses. The Results and Discussion section briefly describes...
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