Business size moderation and internal factors mediation impacts on SME business performance

Abstract

Background: Small businesses are important for the economy of any country, including South Africa. Small and medium enterprises (SMEs) serve as a valuable engine for growth, innovation, new product development and job creation in the economy. Aim: This research examines business size as a moderator of the effects of the external business environment and the organisation of internal resources on the performance of SMEs in South Africa. Setting: Data for this study were collected using a survey questionnaire from 465 enterprises in South Africa across various industries. Methods: The study utilised a higher-order structural equation modelling and analysed data obtained from 465 complete responses using SmartPLS 4. Results: Findings indicate that business size moderates the relationship between business resources and performance. The study further demonstrated that external factors directly impact the management, allocation and utilisation of internal business resources. Conclusion: Both internal and external resources are found to influence business performance, with internal resources partially mediating the effect of external factors on business performance. The social capital construct suggests that for a better performance of business organisations, businesses must strive for diversification of their network channels and form meaningful associations within the industry they operate. Contribution: The study emphasises the importance of the internal resource factors to the success of businesses, irrespective of their size. Structural reforms and policies should be strengthened in supporting and enabling SMEs to grow their businesses to gain continued economic growth.