Author: Prof. Andrew Henley, Aberystwyth University

Day Two- Wednesday 26th June

Strand – Labour Markets

Session Six: 2.45pm – 4.15pm

This paper uses longitudinal data from businesses participating in an SME support programme since 2010 across Wales to assess the impact of leadership experience and quality on business growth.  SME growth literature is criticised for eclecticism and a failure to focus on “how”. Recent work identifies the contribution of management practice, as well as leadership human and social capital, cognitive traits and motivations.

A quantitative approach is adopted, using longitudinal data on 270 SME owners. Hypotheses are developed and investigated using multiple regression analysis. Models for both business size and business growth are estimated. Results show various dimensions of leadership quality to be associated with both size and growth. Sole owners, novices, and those starting from scratch have significantly small businesses; although, those who stick with their first venture on average achieve larger size. Older, female and family business owners do not achieve as fast growth over the period of observation, controlling for changes in employee productivity. Faster growth is associated with reported changes in passion for work and in interpersonal locus of control, and with higher initial perceptions of resource management skills.

Simplistic economic models of firm size based solely on a “black box” are likely to miss important insight from augmenting the model to include the contribution of management and leadership quality to the way in which “factors” are combined. Who leads a small firm and how it is lead are likely to be as important as technology combining labour and capital to create output.

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