RECENT SME RESEARCH: A CRITICAL REVIEW by
Professor Richard G.P. McMahon,
Head, School of Commerce,
The Flinders University of South Australia,
GPO Box 2100,
Adelaide South Australia 5001.
Telephone: 08-82012840
Facsimile: 08-82012644
Email: Richard.McMahon@flinders.edu.au
SCHOOL OF COMMERCE
RESEARCH PAPER SERIES: 98-6
ISSN: 1441-3906
Abstract
The purpose of this note is to provide an up-to-date and critical review of small and medium-sized enterprise (SME) research undertaken internationally over the last two decades or so, mainly from a methodological viewpoint. The desired outcome is an informed appreciation of the strengths and weaknesses of previous scholarly investigations in the field, so that the methodological choices and features of on-going research can be realistically evaluated by other SME researchers. There seems to be ample evidence that SME research has rapidly matured in the period under consideration – especially in terms of its disciplinary diversity, its conceptual underpinnings and its methodologies. Probably most worrying amongst the apparent failures of contemporary SME researchers is a growing feeling amongst leading scholars that cumulation of knowledge in the field is being seriously limited by ( inter alia ) a lack of awareness of the work of others, especially those in different countries.

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RECENT SME RESEARCH: A CRITICAL REVIEW
1. Introduction
The purpose of this note is to follow the earlier example of Holmes & Kelly (1989) by providing an upto-date and critical review of prior small and medium-sized enterprise (SME) research undertaken internationally over the past two decades or so, mainly from a methodological viewpoint. Almost 10 years ago now, Holmes & Kelly (1989, p. 21) commented as follows on the methodological weaknesses of previously published Australian SME research concerned with accounting matters:
During the past two decades, ‘empirical’ research concerning the relationship between small business owner-managers and practising accountants has provided limited insight into the role of accountants and accounting information in assisting small business operations. This research has been exploratory and largely descriptive, tending to focus on small samples of poorly defined small businesses in non-representative Australian regional locations. Rigorous statistical analysis of the results obtained is virtually non-existent.
Holmes & Kelly (1989, p. 29) went on to make the following observations on analytical techniques employed in previous investigations in the field:
The typical analysis was naïve involving the listing of frequencies for each question in tabular form and comparing the percentile differences between sub-groups, usually based on either employment size or industrial sector. Limited analysis was undertaken of the possible relationships within various cross tabulations presented in several studies. A number of parametric and non-parametric statistical tests are available which could have been applied to further analyse the data. For example, probit and logistic regression analysis . . . and development of ordinal models . . . are powerful statistical tests that would have further enhanced data analysis and the interpretation of the results obtained.
The key question 10 years later is, of course, whether SME research has outgrown such limitations and attained greater standing as a scholarly endeavour.
The desired outcome in this note is an informed appreciation of the strengths and weaknesses of previous scholarly investigations in the field, so that the methodological choices and features of ongoing research can be realistically evaluated by other SME researchers. Reviews and surveys of SME research reflected in this note include those of Loucks (1981), Paulin et al . (1982), Perryman (1982),
Peterson & Horvath (1982), Carsrud et al . (1986), Churchill & Lewis (1986), Wortman (1986),
Hornaday & Churchill (1987), Ireland & Van Auken (1987), Sexton (1987), Wortman (1987), Low &
Macmillan (1988), Sexton (1988), Bygrave (1989a, 1989b), Smith et al . (1989), Stevenson &

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Harmeling (1990), Bygrave & Hofer (1991), Aldrich (1992), Churchill (1992), Hofer & Bygrave (1992),
Macmillan & Katz (1992) and Van de Ven (1992) from North America; Chell & Haworth (1988) and
Curran (1989) from the United Kingdom; Szyperski & Klandt (1981) and Roessl (1991) from Europe; and Holmes & Kelly (1989), Gibson (1992), Holmes (1992) and Williams et al . (1992) from Australia.
2. An Overview
At the risk of creating an entirely negative view of SME scholarship, but as a means of leading into the discussion and focusing it, the most significant methodological problems identified in published reviews and surveys of prior research in the field can be summarised as follows (there is unavoidable overlap between criticisms, and authors cited are simply examples of those making particular criticisms):

Too much focus on exploratory research (Wortman, 1986; Churchill & Lewis, 1986; Wortman,
1987; Holmes & Kelly, 1989; Sexton, 1988; Holmes, 1992) and too little (Bygrave, 1989a,
1989b; Bygrave & Hofer, 1991).

Lacking conceptual rigour and theoretical underpinning (Carsrud et al ., 1986; Wortman, 1987;
Sexton, 1988; Curran, 1989; Holmes & Kelly, 1989; Bygrave & Hofer, 1991; Churchill, 1992;
Holmes, 1992; Macmillan & Katz, 1992; Williams et al ., 1992).

Narrow focus with reliance on single paradigms or disciplinary frameworks, and insufficient learning from other fields in terms of both content and process (Hornaday & Churchill, 1987;
Sexton, 1987, 1988; Bygrave, 1989a, 1989b; Aldrich, 1992; Gibson, 1992; Macmillan & Katz,
1992; Van de Ven, 1992; Williams et al ., 1992).

Excessive academic orientation of the research, and insufficient attention to its policy relevance
(Curran, 1989; Williams et al ., 1992) and/or relevance to practitioners such as SME support professionals and owner-managers (Churchill & Lewis, 1986; Ireland & Van Auken, 1987;
Churchill, 1992).

Too many cross-sectional surveys, and far too few longitudinal and field research studies
(Paulin et al ., 1982; Stevenson & Harmeling, 1990; Roessl, 1991; Aldrich, 1992; Churchill,
1992; Hofer & Bygrave, 1992; Van de Ven, 1992; Williams et al ., 1992).

Use of small and/or non-representative and/or non-random and/or poorly selected samples
(Wortman, 1986; Ireland & Van Auken, 1987; Wortman, 1987; Curran, 1989; Holmes & Kelly,
1989; Sexton, 1988; Aldrich, 1992; Churchill, 1992; Williams et al ., 1992).

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
Reliance on data from surveys with poor response rates, and failure to adequately test for response and non-response bias – thus creating serious misgivings about the external validity or generalisability of findings (Holmes & Kelly, 1989; Smith et al ., 1989; Aldrich, 1992; Churchill,
1992).

Poor reporting of definitions used, sampling frames and samples employed, and other methodological details – so that it becomes difficult to validly compare research findings and/or replicate them (Wortman, 1986; Sexton, 1988; Bygrave & Hofer, 1991; Aldrich, 1992).

Reporting is largely descriptive and statistically simplistic, only limited use of more sophisticated techniques of statistical analysis, and widespread disregard for the circumstances in which particular forms of analysis may be validly employed (Carsrud et al ., 1986; Wortman, 1986;
Ireland & Van Auken, 1987; Wortman, 1987; Holmes & Kelly, 1989; Aldrich, 1992; Williams et al ., 1992).

For a variety of reasons, some inherent to the field, subject and/or researcher bias is frequently evident in reported research (Curran, 1989; Smith et al ., 1989; Churchill, 1992).
At a more general level, there are inevitably many criticisms relating to gaps in coverage of prior SME research across many disciplinary areas (Wortman, 1986, 1987; Curran, 1989; Churchill, 1992). Most worrying though, is a growing feeling amongst leading scholars that cumulation of knowledge in the field is being seriously limited by ( inter alia ) a lack of awareness amongst researchers of the work of others, especially those in different countries (Wortman, 1986, 1987; Sexton, 1988; Aldrich, 1992;
Williams et al ., 1992).
3. Quantity and Quality
Ireland & Van Auken (1987, p. 12) summarise as follows the findings of their review and classification of small enterprise/entrepreneurship research published in the period from 1976 to 1985 in two leading journals of the time, American Journal of Small Business and Journal of Small Business
Management :
In global terms, the classification process reveals that the preponderance of small business management and entrepreneurship research published in the two journals over the last ten years focused on going concerns, was generic in scope, concentrated on an examination of operations-related issues rather than strategic ones, was descriptive in nature, and appears to have been targeted primarily for academic audiences.

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Ireland & Van Auken (1987) go on to make a case for more research into new ventures; for research to focus upon more specific samples in terms of enterprise size, industry, geography, time frame, etc.; for more research with a strategic decision-making emphasis; for additional prescriptive as well as descriptive research; and for more research to be carried out with the needs of owner-managers/ entrepreneurs, and those who professionally support them, in mind.
In an essay entitled ‘The field of entrepreneurship: is it growing or is it just getting bigger?’,
Sexton (1988, p. 5) comments as follows on the state of small enterprise/entrepreneurship research world-wide towards the end of last decade:
With regard to research in the field of entrepreneurship, economists would describe the situation as being in disequilibrium; marketeers would say it is fragmented; strategic managers would be concerned about direction; organizational behavioralists would be concerned about communications; and investors might wonder about the timing of a return on their investment.
Although interest is high in entrepreneurship . . . it appears that research in the area could be described as one of academia’s best-kept secrets.
Sexton (1988) goes on to acknowledge considerable growth in the quantity of research being conducted in the area; but he bemoans its generally poor quality and the limited cumulation of knowledge that has occurred because of unawareness of each others’ work amongst scholars, and due to a common failure to relate individual research efforts to a broader context or to a convergent theory. Definitional imprecision and inadequate description of samples employed – inevitably making it difficult to discern what or whom is really being studied – is particularly deplored by Sexton (1988).
Other weaknesses identified include use of invalid and/or outmoded theories and techniques from other fields, small samples, lack of controls, too many exploratory studies, and poorly specified models with limited explanatory power.
In the United Kingdom, Curran (1989, p. 4) clearly has a more generous view of then recent developments in SME research than expressed by the North American in the previous paragraph, although the latter is unlikely to agree with everything in the following quotation:
As an initial, broad brush assessment, it can be said that the increase in the range, quality and depth of small business research since 1971 has been remarkable. The curves measuring output and quality have become steeper and steeper, especially since 1980. No other country, not even the United States, can match this contribution to small enterprise knowledge and there is every indication that we may expect further enhancement on both dimensions.

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Nevertheless, Curran (1989, p. 25) acknowledges all the problems of emergent research in the field already identified, and also most clearly articulates a further weakness of which the majority of other reviewers seem to want to avoid mention:
In many areas of the human sciences researchers develop a strong empathy with those they study and in small business research this is even more likely given the cultural and political approval currently given to economic individualism.
From the other side of the North Atlantic, Aldrich (1992, p. 191) is similarly frank:
People who study entrepreneurship exhibit a certain sort of madness in their passion for the subject. This zest for the substance of entrepreneurship is what makes the field so attractive to many of us who are refugees from other, more boring fields. It also, however, occasionally draws stares of disbelief from adherents of older, more established fields, who are suspicious of anyone who is excited about an academic subject. Outsiders scrutinize our research closely, looking for flaws that will confirm their worst suspicions that our madness is certifiable.
Thus brought out is the emotional and/or doctrinaire bias of researchers which so obviously pervades much scholarly writing in the field.
4. Theoretical Foundations and Method
Echoing Bygrave (1989a, 1989b) in particular, Bygrave & Hofer (1991, p. 13) are less disparaging about progress in small enterprise/entrepreneurship research over the period identified in the last section of the note:
At the start of the 1980s, entrepreneurship was, at best, a potentially promising field of scholarly inquiry. However, by the end of that decade, due primarily to impressive advances in its body of empirical knowledge, entrepreneurship could claim to be a legitimate field of academic inquiry in all respects except one: it lacks a substantial theoretical foundation.
Thus, Bygrave & Hof er (1991, p. 13) go on to proclaim that ‘A major challenge facing entrepreneurship in the 1990s is to develop models and theories built on solid foundations from the social sciences’. They concur with Sexton (1988) and Bygrave (1989a, 1989b) on the need for definitional precision, and for clear specification of samples employed, if research in the field is to truly advance knowledge. Churchills’ (1992, p. 580) summation on the era is as follows:
In short, in 1980 the atmosphere was one of relatively unguided exploration; in 1985 the attitude was one of excitement, proselytizing, and a few breakthroughs; and in 1990 it was optimism and a maturing awareness of the size and complexity of the subject at hand.

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As a means of clarifying how theoretically ambitious small enterprise/entrepreneurship research can or should be, Bygrave (1989a, 1989b) and Bygrave & Hofer (1991) draw attention to Penrose’s
(1989) classification of theories as follows:

Superb theories – that make extremely accurate predictions like those emerging from
Euclidean geometry, Newtonian mechanics or Einstein’s special relativity theory.

Useful theories – that make rather more untidy and less accurate predictions than superb theories.

Tentative theories – that make predictions which, at best, are vague and of limited accuracy, and that generally lack significant empirical support.
On the basis of Penrose’s (1989) belief that there are no superb theories outside the mathematical and physical sciences, Bygrave & Hofer (1991, p. 16) argue that ‘the very best we can hope for in the field of entrepreneurship is useful models and theories’.
Bygrave (1989a, 1989b) and Bygrave & Hofer (1991) particularly emphasise that, to the extent that small enterprise/entrepreneurship models and theories must necessarily incorporate human volition, they are inevitably going to be non-deterministic or non-algorithmic. Bygrave (1989a, 1989b) and Bygrave & Hofer (1991) see such indeterminacy as bringing out the weakness in mathematical modelling approaches to research in th e SME field, the popularity of which they attribute to ‘physics envy’. Bygrave & Hofer (1991, pp. 19-20) refuse to subscribe to ‘the Laplacian fantasy that all entrepreneurial processes can be described with mathematical models’, and they go on:
. . . if entrepreneurship researchers feel that they must pursue mathematical models, we urge them to look beyond regression analysis for several reasons. First, regression analysis is reductionist while entrepreneurship is holistic. Also, regression analysis usually generates smoothly changing analytical functions, while entrepreneurship deals with sudden changes and discontinuities. In addition, regression analysis assumes stable models built with relatively few variables, rather than unstable models with many variables. In short, it is time to abandon the linear, incremental thinking that regression models inculcate.
At the close of his paper, Bygrave (1989a) provides the following methodological guidelines for sounder research in the emergent scholarly field of small enterprise/entrepreneurship:

Less physics envy.

More empirical models and fewer theoretical models.

Less concern with sophisticated statistics.

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
More field research.

More longitudinal studies.

Dedicated researchers.

Original field-derived data banks.

Less obsession with scientific revolutions.
Supplementing the methodological guidelines for sounder small enterprise/entrepreneurship research provided by Bygrave (1989a), Hofer & Bygrave (1992, p. 98) observe as follows on the methods of statistical analysis most likely to be suitable for the type of quantitative data typically obtained:
. . . regression, multiple regression, and various other parametric statistical techniques are vastly overused in the entrepreneurship area. Moreover, they are also used in inappropriate ways in many entrepreneurship research studies. For instance, most of these techniques are built on assumptions of linear relationships and continuous variables, neither of which is generally met by entrepreneurship phenomena. Put differently, non-parametric statistics rather than parametric statistics are called for in most entrepreneurship research – unless one has taken the time and made the effort to look at the underlying statistical distributions to see whether they are sufficiently well behaved to justify the use of parametric techniques. Few studies that we have seen, though, have done this!
Parallelling calls from Ireland & Van Auken (1987), Aldrich (1992) and Churchill (1992) for less
‘coarse grained’ samples, Hofer & Bygrave (1992, p. 96) also argue that ‘the sensitivity of outcomes to changes in initial conditions means that conditional data, rather than non-conditional data, should be gathered about most entrepreneurship phenomena’.
5. Summary and Conclusions
The foregoing discussion reveals ample opinion amongst leading international scholars that SME research has rapidly matured in the period under consideration – especially in terms of its disciplinary diversity, its conceptual underpinnings and its methodologies. However, there seems to be a pervasive uneasy feeling that, in pursuit of immediately publishable findings, quantity is receiving more emphasis than quality by universal scholarly standards. One thing that is evident is that there is a growing intolerance amongst committed scholars for sloppy method; whether this relates to gathering data, analysing data or reporting findings.
A major issue that is still less than fully resolved is whether, at its current stage of development, on-going SME scholarship should be more data driven or more theory driven. There is almost complete assent that, eventually, good theory must lead the way. The key disagreement seems to be

9 over whether we presently have sufficient theory, either in the SME field itself or taken from other more developed areas of scholarly inquiry, to strictly follow the scientific method in research. Given the inherent nature of the SME field, there also appear to be divergent views over the type of theory we should be looking for – deterministic and tidy or non-deterministic and chaotic. Paralleling this somewhat artificial dichotomy, there is a corresponding divergence of views on appropriate methods for gathering and analysing data, and, indeed, what types of data should be sought.
An emerging barrier to acceptance of SME research by scientists in other fields seems to be the value laden nature of a great deal of what passes for scholarship. In any human endeavour, one should not disparage enthusiasm and commitment. But, in scholarly inquiry concerned with SMEs, blinkered perceptions stemming from such human traits are fast becoming intractable obstacles to deep knowledge and genuine understanding. Another perennial issue is the relevance of much research that is produced – often seen as an end in itself, rather than as a means to an end. It would seem that, nowadays, the SME researcher can no longer afford to disregard any audiences for their output; be they other researchers, or policy-makers, or SME owner-managers and those who professionally support them.
Probably most worrying amongst the apparent failures of contemporary SME researchers is a growing feeling amongst leading scholars that cumulation of knowledge in the field is being seriously limited by ( inter alia ) a lack of awareness of the research of others, especially those in different countries. Anecdotal evidence suggests that the greatest geographical barriers to consciousness of the work of others engaged in SME research are the North Atlantic and the Equator. In this age of computer-based library resources, including those accessible through the Internet, apart from a lack of scholarly professionalism, it is difficult to see how such a circumstance can exist, let alone be rationalised.
6. References
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Bygrave, W.D. 1989a, ‘The entrepreneurship paradigm (I): a philosophical look at its research met hodologies’, Entrepreneurship Theory and Practice , vol. 14, no. 1, pp. 7-26.

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Bygrave, W.D. 1989b, ‘The entrepreneurship paradigm (II): chaos and catastrophes among quantum jumps’, Entrepreneurship Theory and Practice , vol. 14, no. 2, pp. 7-30.
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