Tag Archives: small business

RESEARCH: The Small Business Owner-Managers’ Attitudes toward Digital Media

An Excerpt from my latest paper: Camilleri, M.A. (2018). The SMEs’ Technology Acceptance of Digital Media for Stakeholder Engagement. Journal of Small Business and Enterprise Development (Forthcoming).


small-businesses-social-media

This contribution sheds light on the SME owner-managers’ attitudes toward the pace of technological innovation, perceived use and ease of use of digital media; as they communicate and interact with interested stakeholders online. It also explored their stance on responsible entrepreneurship, specifically on commercial, ethical and social responsibilities, as well as on their willingness to support other responsible stakeholders.

This empirical study and its theoretical underpinnings contribute to an improved understanding as to why today’s SMEs are expected to communicate with stakeholders through digital media. At the same time, it raises awareness of responsible entrepreneurial initiatives that could be promoted through digital media, including; corporate websites, social media and blogs, among others.

Generally, the results reported that there were high mean scores and low standard deviations, particularly when the participants were expected to indicate their attitudes on their commercial and ethical responsibilities. The nature of the SMEs’ CSR activities is usually integrated into their company culture, often implicitly in habits and routines that are inspired by highly motivated owner-managers; rather than explicitly in job descriptions or formalized procedures (Jenkins, 2006). The factor analysis indicated that the SME owner-managers were increasingly perceiving the usefulness of digital media to engage with marketplace stakeholders, including; consumers, suppliers and other businesses, as they promoted their responsible entrepreneurship behaviors.

The communications on their businesses’ social responsibility and environmentally-sound practices also served them well to engage with other interested groups; including; human resources, shareholders and investors, among others. This finding mirrors Baumann Pauly et al.’s (2013) argumentation as these authors remarked that each business decision on economic, social, and environmental aspects must take into account all stakeholders. Notwithstanding, the businesses and their marketers need to possess relevant knowledge on their stakeholders, as this will impact on the effectiveness of their CSR communication (Morsing and Schultz, 2006; Vorvoreanu, 2009).

The value of their communications lies in their ability to open-up lines of dialogue through stories and ideas that reflect their stakeholders’ interests (Fieseler and Fleck, 2013; Moreno and Capriotti, 2009). For these reasons, companies cannot afford to overstate or misrepresent their CSR communications. Their online communication with stakeholders could foster positive behaviors or compel remedial actions, and will pay off in terms of corporate reputation, customer loyalty and market standing (Tantalo and Priem, 2016; Du et al, 2010).

This study suggests that the SME owner-managers were recognizing that they had to keep up with the pace of technological innovation. Yet there were a few participants, particularly the older ones, who were still apprehensive toward the use of digital media. Eventually, these respondents should realize that it is in their interest to forge relationships with key stakeholders (Lamberton and Stephen, 2016; Taiminen and Karjaluoto, 2015; Rauniar et al., 2014; Uhlaner et al., 2004). This research posits that the owner-managers or their members of staff should possess relevant digital skills and competences to communicate online with interested parties.

Likewise, Baumann Pauly et al., (2013) also recommended that the managers must be trained, and that their CSR activities must be evaluated. These findings are in line with other contributions (Spence and Perrini, 2011; Perrini et al., 2007) that have theoretically or anecdotally challenged the business case perspective for societal engagement (Penwar et al., 2017; Baden and Harwood 2013; Brammer et al. 2012).

The regression analysis has identified and analyzed the determinants which explain the rationale behind the SME owner-managers’ utilization of digital media for stakeholder engagement and for the promotion of responsible entrepreneurship. It reported that the respondents’ technology acceptance depended on their perceived “use” and “ease of use” of digital media; and on their willingness to communicate online on their commercial, ethical and social responsibilities.

The results from the regression analysis reported positive and significant relationships between the SMEs’ online stakeholder engagement and the pace of technological innovation; and between the SMEs’ online engagement and the owner-managers’ perceived usefulness of digital media. This study indicated that the pace of technological innovation, the owner-managers’ perceived ease of use of the digital media, as well as their commercial responsibility were significant antecedents for their businesses’ online communication of their responsible behaviors. Arguably, the use of technology is facilitated when individuals will perceive its usefulness and its ease of use (Davis, 1989).

In fact, the findings from this research have specified that the owner-managers’ intention was to use digital media to communicate about their responsible entrepreneurship. They also indicated their desire to use this innovation to engage with stakeholders on other topics, including commercial and ethical issues. This is in stark contrast with Penwar et al.’s (2017) findings, as the authors contended that the SME owner-managers’ perceptions on social engagement did not hold the same virility when compared to the context of their larger counterparts. These authors argued that the tangible benefits of CSR engagement had no effect on SMEs. In a similar vein, Baumann Pauly et al.’s (2013) study reported that the larger businesses were more effective than SMEs in their CSR communications.

However, the findings from this study’s second, third and fourth regression
equations indicated that the small and micro businesses were using digital media to improve their stakeholder engagement and to communicate about their responsible entrepreneurship issues.

Implications and Conclusions

SME managers and executives are in a position to enhance the effectiveness of their businesses’ communication efforts. This study has identified and analyzed the SME owner-managers’ attitudes toward the utilization of digital media for the communication of commercial, ethical and social responsibility issues.

Previous academic research has paid limited attention to the technology acceptance of digital media among small businesses, albeit a few exceptions (Taiminen and Karjaluoto, 2015; Baumann Pauly, Wickert, Spence and Scherer, 2013; Durkin et al., 2013; Taylor and Murphy, 2004). In this case, the research findings indicated that digital technologies and applications were perceived as useful by the SME owner-managers. This implies that the utilization of digital media can be viewed as a critical success factor that may lead to an improved engagement with stakeholders.

Several SMEs are already communicating about their responsible entrepreneurship through conventional and interactive media, including; social media, review sites, blogs, et cetera. These savvy businesses are leveraging their communications as they utilize digital media outlets (e.g., The Guardian Sustainability Blog, CSRwire, Triple Pundit and The CSR Blog in Forbes among others) to improve their reach, frequency and impact of their message.

In addition, there are instances where consumers themselves, out of their own volition are becoming ambassadors of trustworthy businesses on digital media (Du et al., 2010). Whilst other stakeholders may perceive these businesses’ posturing behaviors and greenwashing (Camilleri, 2017; Vorvoreanu, 2009).

A thorough literature review suggested that the positive word-of-mouth publicity through digital media may lead to strategic and financial benefits (Camilleri, 2017; Taiminen and Karjaluoto, 2015; Durkin et al., 2013). Therefore, businesses, including SMEs, are increasingly joining conversations in social media networks and online review sites. These sites are being used by millions of users every day. Indeed, there is potential for SMEs to engage with their prospects and web visitors in real-time.

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Filed under Business, Corporate Social Responsibility, digital media, Marketing, Small Business, SMEs, Stakeholder Engagement

Financing Small Business Enterprises in Europe

THR

Excerpt from: Camilleri M.A. (2015). Nurturing Travel and Tourism Enterprises for Economic Growth and Competitiveness. Tourism and Hospitality Research. Sage DOI: 10.1177/1467358415621947

“This contribution has featured some relevant EU practitioner-oriented policies and instruments that are currently helping European enterprises to raise capital for further investment. It has identified how crowdfunding could unlock significant amounts of capital to start-ups, investments and projects. In addition, it suggested that crowdfunding could be a viable alternative to either investor or creditor-based funding, including banks, business angels, or even venture capital”.

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Better Access to Finance for European Enterprises

Although there has been substantial research on enterprises; information on their financing needs is quite limited. Small business entities are often viewed by financial institutions as relatively risky. In this light, the European Union (EU) continues to reaffirm its support for the small and medium sized enterprises (SMEs). As a matter of fact, the EU has drafted the ‘Small Business Act’ in 2008 and has refined it again in 2011. Another example of the EU’s commitment in this regard is conspicuous as it frequently calls for research and training schemes in the subject area of ‘SMEs’, where grants are issued under ‘Marie Curie’ and ‘Cordis FP7’ programmes.

Very often, small firms tend to find themselves in an equity gap, where it may prove quite hard to acquire capital. Although commercial banks are key providers of finance for many enterprises through the provision of loans; unsecured debt finance without collateral is very limited. Therefore, SMEs’ growth into viable investment opportunities may be severely restricted. Throughout the years, the EU has dedicated several funds to help these small (and micro) enterprises. Recently, the EU’s Enterprise and Industry Division has reiterated the importance of improving access to finance for SMEs. This interesting development has led to numerous funding schemes and to a new generation of financial instruments that support SMEs’ financing needs. Evidently, the EU has committed itself to boost its support for SMEs through various financing programmes, as illustrated in Table 1.

Table 1: EU measures that support SMEs

EU SMESource: EU (2015).

Europe is responding to the contentious issues facing SMEs by providing a mix of flexible, financial instruments under programmes, such as; the Competitiveness and Innovation Framework Programme (CIP), Progress Microfinance, the Risk Sharing Instrument (FP7), EIB loans and Structural Funds. For instance, the EU (in 2013) allocated a budget of €2.3bn specifically to bolster the “Competitiveness of Enterprises and Small and Medium-sized Enterprises” (COSME) during the period between 2014 to 2020. This initiative has been designed to support European SMEs in four key areas:

  • Developing entrepreneurship;
  • Helping SMEs access finance;
  • Supporting SMEs who wish to internationalise their business, and
  • Reducing the legislative and regulatory burden on SMEs.

Almost 220,000 SMEs profited from the Commission’s Competitiveness and Innovation Framework Programme (CIP) programme (EU, 2013). CIP has proved to be a very successful programme over the past few years. Since 2007, there were many SMEs that had benefited from CIP Funding . In fact, CIP was able to stimulate more than €15 billion of financing for SMEs, so far (EU, 2013). With a budget of €1.1 billion (CIP) has helped to mobilise over €13 billion of loans and €2.3 billion of venture capital for SMEs across Europe. Under its SME guarantee facility, CIP has helped nearly 220,000 SMEs to access loans.

These loan guarantees are required by individual entrepreneurs or  small enterprises that do not possess sufficient collateral.  Every euro that is dedicated to guarantees will in turn stimulate 30 euros in bank loans (EU, 2013).

Sources:

EU (2015) Improving the financing environment in Europe. http://ec.europa.eu/enterprise/policies/finance/financing-environment/index_en.htm accessed on the 20th January 2015.

EU (2013) Improving access to finance for SMEs: key to economic recovery. http://europa.eu/rapid/press-release_IP-13-387_en.htm?locale=FR accessed on the 20th January 2015.

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‘Crowdfunding’ for economic growth and competitiveness

crowdfunding

 

Recently the European Commission has launched a consultation programme (between the 3rd October to 31st December 2013) to explore the costs and benefits of ‘crowdfunding’ as an alternative form of finance. Contributions are sought from competent authorities, crowdfunding platforms, entrepreneurs and individuals who launched crowdfunding campaigns. Stakeholders are invited to share their views about crowdfunding opportunities and to help in the design of an optimal policy framework which will untap the potential of this new form of financing. Crowdfunding entails the collection of funds through small contributions from many parties in order to raise capital for a particular project or venture. This alternative source of financing has the potential to bridge the equity gap many start-ups face. It is hoped that this initiative stimulates entrepreneurship amid different regulatory, supervisory, fiscal and social structures of the European Union. Evidently, the European Commission is delving through extant national legal frameworks to understand better how businesses can raise their capital through such open forms of financing. Whereas some crowdfunding campaigns are local in nature, there may be others who are benefiting from easier access to financing within the single European market.

Certain safeguards may be necessary to maintain the stakeholders’ trust and engagement. The ultimate objective of the European Commission’s consultation is to gather data about the needs of market participants and to identify the areas where there is an opportunity for the sustainable growth of enterprises though debt-based or equity-based crowdfunding. The consultation covers all forms of crowdfunding; ranging from donations and rewards to financial investments. Everyone is invited to share their opinions and perceptions, including citizens who might contribute to crowdfunding campaigns and entrepreneurs who may launch such campaigns. National authorities and crowdfunding platforms are also encouraged to reply.

In a similar vein, the United States’ Securities and Exchange Commission (SEC) is currently considering crowdfunding as it was featured in “Jumpstart Our Business Startups Act” (JOBS Act). It is very likely that the proposal for crowdfunding will bring a major shift in how small U.S. companies can raise their money in the private securities market. Alternative sources of finance which are already secured via the internet include; monetary contributions in exchange for rewards, product pre-ordering, lending and / or investment. With crowdfunding now there’s the possibility that smaller businesses will be able to raise up to $1 million a year by tapping unaccredited investors. Any type of project with a promising ROI may soon opt for crowdfunding. Hopefully, it will be the micro entrepreneurs and researchers who will be capable of soliciting such ‘crowdfunding’ opportunities.

These plans can be successful only if the regulatory costs are kept as low as possible. Otherwise, small enterprises may not be intrigued by such a financing proposition. From the outset, crowdfunding may still seem a bit unclear at this stage. There are many companies including startups that can take advantage of these rules. Probably, one of the main causes of concern will be any reporting requirements for small companies to file their annual financial statements. For instance, SEC’s crowdfunding proposals may suggest certain disclosures, such as; “information about officers and directors, how proceeds from the offering will be used, and financial statements”. It transpires that the crowdfunding proposals are limiting how much money an unaccredited investor can contribute each year. The proposal says that investors with a net worth and income of less than $100,000 can contribute only $2,000 or 5 percent of their net worth or income, whichever is greater. Those with a net worth or income of more than $100,000 can contribute more. In an effort to reduce burdens on companies and portals, SEC’s plan would not explicitly force them to take steps to verify income levels and the net worth of investors in crowdfunding. At the same time, SEC would require companies using crowdfunding to release financial statements and other information that could prove costly.

No doubt that the most experienced entrepreneurs and their intermediaries will have no difficulty in meeting such crowdfunding rules and regulations. Perhaps, it is the first-time entrepreneurs who may require further support. At present the smaller businesses earning revenues (and profits) below a certain threshold are not legally obliged to provide audited financial statements. Moreover, small enterprises may not always have historical financials. This means that financial services authorities will find it quite difficult to determine how small companies are true and fair in their financial reports. According to the US proposals, the businesses who consider crowdfunding as a source of finance will have to audit their accounts.

By the end of this year the European stakeholders would have consulted about this ‘new’ source of finance. It is hoped that any discourse in this regard will translate into facilitative, soft-law measures leading to legislative action. If the crowdfunding proposals will be implemented; more capital will be unlocked for start-ups, investments and projects. This capital finance will surely help to spur economic growth and competitiveness.

More information is available here:

http://ec.europa.eu/internal_market/finances/crowdfunding/

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