The The impacts of innovative and competitive abilities of SMEs on their different financial risk concerns: System approach
Keywords:financial risk management, financial performance, bankruptcy, innovativeness, competitiveness
Research background: The lack of financial resources of small and medium enterprises (SMEs) make them face high financial risk. Their entrepreneurial abilities that belong to Resource-based View (RBV), such as innovativeness and competitiveness, might reduce SMEs? financial risk because those entrepreneurial abilities increase the financial performance of businesses.
Purpose of the article: This paper aims to investigate the effects of the innovativeness and competitiveness of SMEs on their financial concerns based on financial risk, including bankruptcy, financial performance, and financial risk management.
Methods: The authors use a method of data analysis and synthesis, including advanced knowledge and digital processing of background studies. This paper examines 1221 SMEs from the Czech Republic, Slovakia, and Hungary. Those firms are chosen by random sampling method from Cribis and the Budapest Chamber of Commerce databases. Then the researchers directed an online questionnaire to collect the research data from the randomly selected firms. The researchers use Ordinal Logistic Regression Test for analysis purposes.
Findings & value added: This paper's results indicate that SMEs' competitiveness does not impact SMEs? bankruptcy prediction, financial performance, or financial risk management. On the other hand, while more innovative SMEs are less likely to face bankruptcy issues than less innovative SMEs, less innovative SMEs indicate better financial performance than their more innovative counterparts. Since this paper focuses on the influences of intangible assets of SMEs (such as characteristics based on RBV and Entrepreneurial Orientation) on their tangible assets (financial performance etc.) and puts emphasis on this fact from an International perspective, this paper makes a significant contribution to the literature. Furthermore, analyzing multiple relationships between SMEs? different entrepreneurial characteristics and various financial risk concerns is another important fact that might draw prospective readers? attention.
Agyabeng-Mensah, Y., & Tang, L. (2021). The relationship among green human capital, green logistics practices, green competitiveness, social performance and financial performance. Journal of Manufacturing Technology Management, 32(7), 1377?1398. doi: 10.1016/10.1108/JMTM-11-2020-0441.
Aziz, S., Rahman, M., Hussain, D., & Nguyen, D. K. (2021). Does corporate envi-ronmentalism affect corporate insolvency risk? The role of market power and competitive intensity. Ecological Economics, 189, 107182. doi: 10.1016/j.ecolecon.2 021.107182.
Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of management, 17(1), 99?120. doi: 10.1177/014920639101700108.
Belas, J., Amoah, J., Petráková, Z., Kliuchnikava, Y., & Bilan, Y. (2020). Selected actors of SMEs management in the service sector. Journal of Tourism and Services, 21(11), 129?146. doi: 10.1016/10.29036/jots.v11i21.215.
Belas, J., Çera, G., Dvorský, J., & Čepel, M. (2021). Corporate social responsibility and sustainability issues of small?and medium?sized enterprises. Corporate So-cial Responsibility and Environmental Management, 28(2), 721?730. doi: 10.1002/csr. 2083
Bič, M. (2022). Development of the bankruptcy in Slovakia and the Czech Repub-lic. International Journal of Entrepreneurial Knowledge, 10(1), 65?79. doi: 10.37335/ijek.v 10i1.140.
B?ring, P. (2015). The effects of firms? r&d and innovation activities on their sur-vival: A competing risks analysis. Empirical Economics, 49, 1045?1069 doi: 10.1007/ s00181-014-0901-z.
Brustbauer, J. (2016). Enterprise risk management in SMEs: Towards a structural model. International Small Business Journal, 34(1), 70?85. doi: 10.1177/026624261 4542853.
Boyer, T., & Blazy, R. (2014). Born to be alive? The survival of innovative and non-innovative French micro-start-ups. Small Business Economics, 42(4), 669?683. doi: 10.1007/s11187-013-9522-8.
Calantone, R. J., Kim, D., Schmidt, J. B., & Cavusgil, S. T. (2006). The influence of internal and external firm factors on international product adaptation strategy and export performance: A three-country comparison. Journal of Business Research, 59(2), 176?185. doi: 10.1016/j.jbusres.2005.05.001.
Catanzaro, A., & Teyssier, C. (2021). Export promotion programs, export capabilities, and risk management practices of internationalized SMEs. Small Business Economics, 57(3), 1479?1503. doi: 10.1007/s11187-020-00358-4.
Cerasi, V., Fedele, A., & Miniaci, R. (2017). Product market competition and access to credit. Small Business Economics, 49(2), 295?318. doi: 10.1007/s11187-017-9838-x.
Civelek, M., Ključnikov, A., Kmeco, Ľ., & Hamarneh, I. (2021). The influences of the usage of marketing communication tools on innovations of the functional areas of businesses: Perspectives for the mining industry. Acta Montanistica Slovaca, 26(4), 685?697. doi: 10.46544/AMS.v26i4.08.
Civelek, M.,Durda, L.,Vincúrová, Z., Dudáš, T., & Brezina, I. (2022). The differences in the impact of entrepreneurial abilities of various European SMEs on their financial risk perceptions. Entrepreneurial Business and Economics Review, 10(4), 107?124. doi: 10.15678/EBER.2022.100407.
Civelek, M., & Krajčík, V. (2022). How do SMEs from different countries perceive export impediments depending on their firm-level characteristics? System approach. Oeconomia Copernicana, 13(1), 55?78. doi: 10.24136/oc.2022.002.
Crovini, C., Santoro, G., & Ossola, G. (2021). Rethinking risk management in en-trepreneurial SMEs: towards the integration with the decision-making process. Management Decision, 59(5), 1085?1113. doi: 10.1108/MD-10-2019-1402.
Cucculelli, M., & Peruzzi, V. (2020). Post-crisis firm survival, business model changes, and learning: Evidence from the Italian manufacturing industry. Small Business Economics, 54, 459?474. doi: 10.1007/s11187-018-0044-2.
Donkor, J., Donkor, G. N. A., Kankam-Kwarteng, C., & Aidoo, E. (2018). Innova-tive capability, strategic goals, and financial performance of SMEs in Ghana. Asia Pacific Journal of Innovation and Entrepreneurship, 12(2), 238?254. doi: 10.1108/APJI E-10-2017-0033.
Eisdorfer, A., & Hsu, P. H. (2011). Innovate to survive: The effect of technology competition on corporate bankruptcy. Financial Management, 40(4), 1087?1117. doi: 10.1111/j.1755-053X.2011.01172.x.
El Chaarani, H., Vrontis, P. D., El Nemar, S., & El Abiad, Z. (2022). The impact of strategic competitive innovation on the financial performance of SMEs during COVID-19 pandemic period. Competitiveness Review: An International Business Journal, 32(3), 282?301. doi: 10.1108/CR-02-2021-0024.
European Commission (2006). Commission recommendation of 6 May 2003 con-cerning the definition of micro, small and medium-sized enterprises. Re-trieved from https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32003H0361 (04.09.2022).
Giovannetti, G., Ricchiuti, G., & Velucchi, M. (2011). Size, innovation and interna-tionalization: A survival analysis of Italian Firms. Applied Economics, 43(12), 1511?1520. doi: 10.1080/00036840802600566.
Gormley, T., Gupta, N., & Jha, A. (2018). Quiet life no more? Corporate bankruptcy and bank competition. Journal of Financial and Quantitative Analysis, 53(2), 581?611. doi: 10.1017/S0022109017001090.
Harrell, F. E. (2015). Regression modeling strategies. Springer series in statistics. Springer. doi: 10.1007/978-3-319-19425-713.
Hudakova, M., Masar, M., Luskova, M., & Patak M. R. (2018). The dependence of perceived business risks on the size of SMEs. Journal of Competitiveness, 10(4), 54?69. doi: 10.7441/joc.2018.04.04.
Hudakova, M., Gabrysova, M., Petrakova, Z., Buganova, K., & Krajcik, V. (2021). The perception of market and economic risks by owners and managers of en-terprises in the V4 Countries. Journal of Competitiveness, 13(4), 60?77. doi: 10.7441/ joc.2021.04.04.
IMD (2022). World competitiveness ranking. Retrieved from https://www.imd.org/ centers/world-competitiveness-center/rankings/world-competitiveness/ (25.11.2022).
Irava, W., & Moores, K. (2010). Resources supporting entrepreneurial orientation in multigenerational family firms. International Journal of Entrepreneurial Ven-turing, 2(3/4), 222?245. doi: 10.1504/IJEV.2010.03711.
Jenkinson, N., Penalver, A., & Vause, N. (2008). Financial innovation: What have we learnt? Bank of England Quarterly Bulletin, Q3/2008, 330?338.
Karada?, H. (2018). Cash, receivables and inventory management practices in small enterprises: Their associations with financial performance and competi-tiveness. Small Enterprise Research, 25(1), 69?89. doi: 10.1080/13215906.2018.1428912.
Karas, M., & Režňáková, M. (2021). The role of financial constraint factors in pre-dict-ing SME default. Equilibrium. Quarterly Journal of Economics and Economic Policy, 16(4), 859?883. doi: 10.24136/eq.2021.032.
Kaya, O. (2022). Determinants and consequences of SME insolvency risk during the pandemic. Economic Modelling, 115, 105958. doi: 10.1016/j.econmod.2022.105958.
Kim, B., & Kim, B. G. (2021). An explorative study of Korean venture companies: Do CSR and company competitiveness improve non-financial and financial performance? Sustainability, 13(23), 13106. doi: 10.3390/su132313106.
Ključnikov, A., Civelek, M., Klimeš, C., & Farana, R. (2022). Export risk percep-tions of SMEs in selected Visegrad countries. Equilibrium. Quarterly Journal of Economics and Economic Policy, 17(1), 173?190. doi: 10.24136/eq.2022.007.
Kliestik, T., Valaskova, K., Lazaroiu, G., Kovacova, M., & Vrbka, J. (2020). Remain-ing financially healthy and competitive: The role of financial predictors. Jour-nal of Competitiveness, 12(1), 74. doi: 10.7441/joc.2020.01.05.
Kölbel, J. F., Busch, T., & Jancso, L. M. (2017). How media coverage of corporate social irresponsibility increases financial risk. Strategic Management Journal, 38(11), 2266?2284. doi: 10.1002/smj.2647.
Le, T. T., & Ikram, M. (2022). Do sustainability innovation and firm competitive-ness help improve firm performance? Evidence from The SME Sector in Vi-etnam. Sustainable Production and Consumption, 29, 588?599. doi: 10.1016/j.spc.2021.11. 008.
Lejárraga, I., & Oberhofer, H. (2015). Performance of small-and medium-sized enterprises in services trade: Evidence from French firms. Small Business Eco-nomics, 45(3), 673?702. doi: 10.1007/s11187-015-9647-z.
Liu, F., Fang, M., Park, K, & Chen, X (2021). Supply chain finance, performance and risk: How do smes adjust their buyer-supplier relationship for competitive-ness? Journal of Competitiveness, 13(4), 78?95. doi: 10.7441/joc.2021.04.05.
Lumpkin, G. T., & Dess, G. G. (1996). Clarifying the eo construct and linking it to performance. Academy of Management Review, 21(1), 135?172. doi: 10.5465/amr. 1996.9602161568.
Markus, G., & Rideg, A. (2020). Understanding the connection between SMEs? competitiveness and cash flow generation: An empirical analysis from Hunga-ry. Competitiveness Review: An International Business Journal, 31(3), 397?419. doi: 10.1108/CR-01-2020-0019.
Mayr, S., Mitter, C., & Aichmayr, A. (2017). Corporate crisis and sustainable reor-ganization: Evidence from bankrupt Austrian SMEs. Journal of Small Business Management, 55(1), 108?127. doi: 10.1111/jsbm.12248.
Meluzin, T, & Zinecker, M. (2014). Reasons for IPO implementation: Empirical evidence from the Polish capital market. Inzinerine Ekonomika-Enineering Economics, 25(3), 294?301. doi: 10.5755/j01.ee.25.3.3529.
Meluzín, T., Zinecker, M., Balcerzak, A. P., & Pietrzak, M. B. (2018). Why do com-panies stay private? Determinants for IPO candidates to consider in Poland and the Czech Republic. Eastern European Economics, 56(6), 471?503. doi: 10.1080/0012 8775.2018.1496795.
Meluzín, T., Zinecker, M., Balcerzak, A.P., Pietrzak, M. B., & Doubravský, K. (2021). Institutional settings and their impact on the IPO activity: An exploratory study based on qualitative modelling. Acta Polytechnica Hungarica, 18(2), 215?235. doi: 10.12700/APH.18.2.2021.2.12.
Nasser, W. H. (2021). Innovation capital, sustainable entrepreneurial orientation, and the moderating role of entrepreneurial resilience. Entrepreneurial Business and Economics Review, 9(3), 73?85. doi: 10.15678/EBER.2021.090305.
Nohong, M., Ali, M., Sohilauw, M., Sobarsyah, M., & Munir, A. (2019). Financial literacy and competitive advantage. SME strategy in reducing business risk. Revista Espacios, 40(32), 12?17.
Nogueira, M. Á., Fernández-López, S., Calvo, N., & Rodeiro-Pazos, D. (2018). Firm characteristics, financial variables and types of innovation: Influence in Span-ish firms' survival. International Journal of Entrepreneurship and Innovation Management, 22(1-2), 57?79. doi: 10.1504/IJEIM.2018.089714.
Nwekpa, K. C., Onwe, C., & Ezezue, B. O. (2018). Entrepreneurial orientation and business performance amongst microbusinesses in Nigeria. IOSR Journal of Business and Management, 19(7), 45?53. doi: 10.9790/487X-1907054553.
Pang, C., & Gai, Y. (2022). Research on efficiency in financing of small and medi-um companies based on dea method. Discrete Dynamics in Nature and Society, 2022, 1?13. doi: 10.1155/2022/4914151.
Pereira-Moliner, J., López-Gamero, M. D., Font, X., Molina-Azorín, J. F., Tarí, J. J., & Pertusa-Ortega, E. M. (2021). Sustainability, competitive advantages and per-formance in the hotel industry: A synergistic relationship. Journal of Tourism and Services, 23(12), 132?149. doi: 10.29036/jots.v12i23.282.
Rehman, A. U., & Anwar, M. (2019). Mediating role of enterprise risk management practices between business strategy and SME performance. Small Enterprise Research, 26(2), 207?227. doi: 10.1080/13215906.2019.1624385.
Roach, D. C., Ryman, J. A., & Makani, J. (2016). Effectuation, innovation and per-formance in SMEs: An empirical study. European Journal of Innovation Management, 19(2), 214?238. doi: 10.1108/EJIM-12-2014-0119.
Salazar, A. L., Soto, R. C., & Mosqueda, R. E. (2012). The impact of financial deci-sions and strategy on small business competitiveness. Global Journal of Business Research (GJBR), 6(2), 332?349.
Shashi, Centobelli, P., Cerchione, R., & Singh, R. (2019). The impact of leanness and innovativeness on environmental and financial performance: Insights from Indian SMEs. International Journal of Production Economics, 212, 111?124. doi: 10.10 16/j.ijpe.2019.02.011.
Shin, K., Park, G., Choi, J. Y., & Choy, M. (2017). Factors affecting the survival of smes: A study of biotechnology firms in South Korea. Sustainability, 9(1), 108. doi: 10.3390/su9010108.
Skalická, M., Zinecker, M., Balcerzak, A. P., & Pietrzak, M. (2023). Business angels and early stage decision making criteria: Empirical evidence from an emerg-ing market. Economic Research-Ekonomska Istraživanja, 36(1), 25?50. doi: 10.1080/1331 677X.2022.2063920.
Statista (2022). Leading countries by gross research and development (R&D) ex-penditure worldwide in 2022. Retrieved from https://www.statista.com /statistics/732247/worldwide-research-and-development-gross-expenditure-top-countries/ (14.12.2022).
Stocker, M., & Várkonyi, L. (2022). Impact of market orientation on competitive-ness: Analysis of internationalized medium-sized and large enterprises. Entrepreneurial Business and Economics Review, 10(1), 81?95. doi: 10.15678/EBER. 2022.100106.
Štefko, R., Horváthová, J., & Mokrišová, M. (2020). Bankruptcy prediction with the use of Data Envelopment Analysis: An empirical study of Slovak businesses. Journal of Risk and Financial Management, 13(9), 212. doi: 10.3390/jrfm13090212.
Tajeddini, K. (2016). Financial orientation, product innovation and firm perfor-mance?an empirical study in the Japanese SMEs. International Journal of Innovation and Technology Management, 13(03), 1640005. doi: 10.1142/S02198770 16400058.
Tobback, E., Bellotti, T., Moeyersoms, J., Stankova, M., & Martens, D. (2017). Bank-ruptcy prediction for smes using relational data. Decision Support Systems, 102, 69?81. doi: 10.1016/j.dss.2017.07.004.
Usman, M. (2016). Bank performance, risk and economic growth: Role of financial innovation. Journal on Innovation and Sustainability RISUS, 7(3), 3?22. doi: 10.242 12/2179-3565.2016v7i3p3-22.
Varis, M., & Littunen, H. (2010). Types of innovation, sources of information and performance in entrepreneurial SMEs. European Journal of Innovation Management, 13(2), 128. doi: 10.1108/14601061011040221.
Wai, K. W., Liston-Heyes, C., Liu, W., Liu, G., & Cowling, M. (2022). Organizational capabilities and SME exports: The moderating role of external funding intentions and managerial capacity. Small Business Economics, 58, 247?261. doi: 10.1007/s111 87-020-00408-x.
Williams Jr., R. I., Manley, S. C., Aaron, J. R., & Daniel, F. (2018). The relationship between a comprehensive strategic approach and small business performance. Journal of Small Business Strategy, 28(2), 33?48.
Yankson, I. O., Kwaning, E. A., & Dogbe, C. S. K. (2022). Assessing the moderating role of risk management capabilities in the relationship between service inno-vation and financial performance of insurance firms. International Journal of Contemporary Economics and Administrative Sciences, 12(1), 265?285. doi: 10.5281/ zenodo.6853435.
Yang, S., Ishtiaq, M., & Anwar, M. (2018). Enterprise risk management practices and firm performance, the mediating role of competitive advantage and the moderating role of financial literacy. Journal of Risk and Financial Manage-ment, 11(3), 35. doi: 10.3390/jrfm1103003.
Zadeh, F.G. (2022). Entrepreneurship and SMEs under COVID-19 crisis: A litera-ture review. International Entrepreneurship Review, 8(3), 23?35. doi: 10.15678/IER.202 2.0803.02.
Zhang, D. (2021). Corporate innovativeness and risk management of small firms?evidences from start-ups. Finance Research Letters, 42, 102374. doi: 10.1016/j.frl.2 021.102374.
Zinecker, M., Skalická, M., Balcerzak, A. P., & Pietrzak, M. (2022). Identifying the impact of external environment on business angel activity. Economic Research-Ekonomska Istraživanja, 35(1), 83?105, doi: 10.1080/1331677X.2021.1888140.
Zulu-Chisanga, S., Boso, N., Adeola, O., & Oghazi, P. (2016). Investigating the path from firm innovativeness to financial performance: The roles of new product success, market responsiveness, and environment turbulence. Journal of Small Business Strategy, 26(1), 51?68.