Abstract
This paper investigates the effects of performance measurement and management systems (PMMS) practices in high-tech Small and Medium Enterprises (SMEs). Traditionally, PMMS were designed for large companies and their effectiveness has been limited. The present research aims to extend PMMS research in the context of contingency theory by analysing how the fit between PMMS, the organisation and its environment can increase PMMS effectiveness. Specifically, it analyses whether PMMS that include diverse non-financial measures that are formal and aligned to strategy enable companies to make more efficient use of their resources and improve their perceived financial performance.
Data from 171 companies from the Cambridge Technology Cluster (45) and Austria (126) was collected through an online survey. Moderated Regression Analysis (MRA) was used to investigate the moderating effects of contingency variables: entrepreneurial orientation (EO), competition, environment uncertainty, PMMS system maturity and the profile of the owner/manager.
Results show that there is a dichotomy between what managers think they should measure and what drives the performance of the organisation. Managers’ level of satisfaction increases when the PMMS system is more formal and focuses on financial performance. Whereas innovation and learning was the only performance dimension having a significant impact on perceived financial performance (PFP). Furthermore, findings support the moderating effect of EO, EU and strategy alignment suggesting PMMS is a key capability for SMEs which can enable them to navigate dynamic environments.
The findings have tri-fold implications. For theory, results support further development of RBV and contingency theory. When designing and measuring performance, the focus should be on the fit between strategy, organisation’s needs (for level of formality) and PMMS in order to increase financial performance. From a practical perspective, managers should not focus on measuring for the sake of measuring but should identify the key drivers for their competitive advantage. In the case of high-tech SMEs, the focus should be on measuring and managing innovation and growth. From a policy perspective, results suggest that the government should continue to invest in training SME managers. However, the training should not be generic on textbook PMMS frameworks but tailored to the company’s needs to enable managers to better identify and take advantage of business opportunities.