Estudio del caso 53

An analysis of extant work in the organization and management literature reveals an interesting tendency in this regard. Scholars increasingly seek to understand how to move away from constraints or at least to minimize their negative effects on growth. The effect of constraints in general and on innovation and SMME growth in particular is typically assumed to be negative (Hessels and Parker 2013).

According to Mahadea and Pillay (2008), the major internal constraints to SMME growth are management and finance. They further classified corrup- tion and crime as one of the major constraints to business development. This conclusion is based on the study conducted on environmental conditions for SMME development in South Africa. Mahadea and Pillay(2008) examined the impact of various factors that may affect positively or negatively SMME growth. These factors included human resources and management skills, socio-economic, access to finance, innovation and technology, taxation, regulations, laws, corrup- tion and crime. The study done byHlakudi(2012) identified some factors acting as constraints to SMME such as increasing fuel prices, the general increase in food prices, rising interest rates, and fluctuating exchange rates.

For example, SMME sector cannot afford to operate with high transportation costs that result from higher fuel prices. Similarly, the rise in interest rates in- creases the cost of credit and reduces the chances of access to funding as well as increasing loan repayments. When interest rate goes up, the number of SMMEs go down and vice versa (Hlakudi 2012). As a result, it can be assumed that the SMME sector benefited from a decline in interest rates. As a result of local constraints, SMMEs in South Africa fail to maintain their existence in the main- stream economy over the long run (Phago and Tsoabisi 2010). Consequently, many firms have suffered financial ruin and bankruptcy because of delays in payments by government.

To have further understanding on the relationship between constraints and SMME growth, it is useful to look at how constraints to growth have been iden- tified and measured in the literature. The literature on constraints to SMME growth draws largely from owner/managers’ perceptions of constraints (Doern 2009). Perceptions of the business environment are said to be important because they affect the growth motivations of individuals and influence the decisions and actions of these individuals (Davidsson 1991). Owner/managers’ perceptions of

2. The Impact of Constraints on SMME Growth 61

constraints are most often collected by cross- sectional quantitative surveys and structured questionnaires tend to be employed for this purpose.

To identify constraints to SMME growth, owner/managers are usually presented with lists of potential constraints and asked to select only those constraints they perceive to affect the growth of the businesses, or they are asked to rank each constraint in terms of perceived importance, perceived difficulty or perceived severity (Doern 2009). To examine the effects of constraints on SMME growth, items estimated as being very important or important may be plugged into a regression model. This approach was employed by the majority of the schol- ars (Bartlett and Bukviˇc 2001). Pissarides, Singer and Svejnar (2003) assumed that the most important constraints identified, indicated by the frequency of responses would be viewed as most important by all SMMEs.

Constraints to growth have been used to understand growth of SMMEs and to investigate which type of SMMEs is most likely to grow (Doern 2009). However, the effects of constraints are contradictory (Van Burg et al. 2012; Weiss, Hoegl and Gibbert 2014). Constraints sometimes can be considered as opportunities, promoting innovation and risk taking, but this depends on the type of constraints faced by the firm (Van Burg et al. 2012). In particular, the psychological litera- ture argues that people are more creative when facing constraints (Goldenberg, Lehmann and Mazursky 2001; Moreau and Dahl 2005). SMMEs appear to be more creative to take earnings from any emerging opportunity while employing their limited resources (Baker and Nelson 2005;Van Burg et al. 2012). However, literature that investigates the relationship between constraints and innovation has come out with varied results. Thus, it is unclear when constraints lead to innovative and imaginative problem-solving (Cunha, Rego, Oliveira, Rosado and Habib 2014; Dolmans, Burg, Reymen and Romme 2013; Senyard, Baker, Steffens and Davidsson 2014). Dolmans et al. (2013) argue that the lack of re- sources, which is seen as a constraint, drives firms to focus on innovation and enable them to survive.

However, despite potential positive effects, constraints are broadly defined as those factors that limit growth chances of a firm with a desire to grow (Storey 1994), and researchers have provided evidence of the negative effect of constraints on SMME growth (Bartlett and Bukviˇc 2001;Doern 2009;McCormick, Kinyan- jui and Ongile 1997; McGee 1989; Smallbone and Wyer 2000; Storey 1994). A lack of resources can affect SMMEs performance and growth, as they will have a limited capability to expand, employ the latest technologies and search for new

ideas (Berger and Udell 2006;Daniels 2004;Dobbs and Hamilton 2007; Gimede 2004; Mukama and Fish 2005). SMMEs with financial constraints cannot hire the required employees, which influences their innovative capability and viability (Chittithaworn, Islam, Keawchana and Muhd Yusuf 2011;Hyytinen and Toiva- nen 2005). Thus, the overall expected effect of constraints on SMME growth is negative, but the literature lacks insight in when and how constraints can be avoided or mitigated.