LITERATURE REVIEW

SUBMITTED BY: Kaniz Fatima Madiha Niaz Asbah shujaat Abdul Rehman SUBMITTED TO: Prof. I.Siddique SUBJECT: SME SECTION: E DATED: Dec 23, 2011 l1f08bbam2100 l1f08bbam0167 l1f08bbam2144 l1f08bbam2012

IMPACT OF GENDER, EDUCATION AND AGE ON GROWTH OF SMEs

Literature review:
Growth of a firm is a multi-dimensional phenomenon. Growth implies a gradual increase of new capital and capabilities for a long time (A. M. Moreno and J.C. Casillas. High growth enterprises). There is considerable heterogeneity in a number of factors linked with firm growth. Growth has been used as a simple gauge of achievement in business. Also, growth is the most suitable gauge of the performance for existence of small firms. Moreover, growth is a significant requirement for the attainment of other financial goals of business. (Mika Pasanen,).A number of factors affects the firm growth. For example, the composition of business owner and its staff, the business practices and the strategies applied to that particular business and the characteristics of a firm i.e. its size, capacity, budget, the industry in which it operates and the country or state or place where it operates. Within all these major determinants we have chosen the composition of business owner and staff on the growth of the firm. The owner and staff make the human capital of the firm. Spending in certain human resource actions, especially with value to human resource planning, hiring and employee development, have a constructive effect upon performance, in the form of labor productivity. (M.J.Koch, R.G.McGrath, 1996). Moreover, human capital is most precious and most unique when it is firm-specific and resides in the atmosphere where it was originally developed. (N. W. HATCH and J. H. DYER, 2004)

According to the deterministic approach, dissimilarities in the rates of growth across SMEs depend upon a numbers of apparent industry and firm-specific internal characteristics (Leonardo Becchetti and Giovanni Trovato). In recent times, Firm growth is a much argued matter. Business growth rates vary among firms in a temporary and irregular manner, and it is difficult to settle the individuality and stability of the capabilities of organizations with this data. The outcome of all this is that conceive about competencies is being determined by association with the facts which is, at best, partial. (Laureson, Mahnke and Hansen, 1999). (Laureson, Mahnke and Hansen , 1999).The

greater part of disparity in performance of firm is not linked with customary observables like

location, industry, size, or capital; somewhat it is linked with unobservable aspects exact to the firm or business unit, most of which emerge to be enduring features of the business unit. One of them is the managerial capital of the firm; another is the expertise of its labor force (Laureson, Mahnke and Hansen, 1999). Generally speaking, the view of, is supported in a recent review of findings on firms growth by the growth of firm to a large degree is random there are some logical aspects, like funds investment and R&D (Laureson, Mahnke and Hansen, 1999). Though, there is minute propensity for the impact of these factors to continue over period. The appealing point is that they agree on the significance of firm-specific factors, and agree that R&D might be connected with the expertise and ability of workers, but diverge views though on the permanence of their effect (Laureson, Mahnke and Hansen, 1999). Firms continually try to bring new and innovative products in the market, which made their competitors products outdated and therefore compel them to leave the market place (Helsinki, 2006). Most of the theories discussed so far assume that rms aim to maximize prots. There are also different suppositions about the growth of the firm. For example, it was observed and proposed that the companies which are owner-managed take up course of action satisfying the minimum requirements to achieve a goal rather than optimal solutions and strategies; they do not opt to gain maximum

prots or sales rather choose a calm life and for this reason be inclined to provide work for less people than they could employed in their company (Hart, 2000). The significance of entrepreneurial skill is also highlighted as a factor which impacts on growth of firm, mainly the aptitude to amalgamate information on the many alarming situations which significantly influence the rm and its market (Hart, 2000). The major discussion in support of SMEs is that the way they employ their resources is much more efficient than large companies and this will better reveal the social cost of labor and capital (Bari, Faisal,Ali Cheema and Ehsan ul haq, 2005). Growth is the aim of SMEs, the capability of firm to grow is vital because it has been observed that such firms which face low or negative growth tends to fail. (Meri Niskanen and Jyrki Niskanen, 2007). SMEs create more jobs than large organizations. Problems faced by high growth SMEs are financing, Expansion in the markets, hiring competent employees and find good consultant. (High growth smes and employment)

During the growth processes, Small firms experience a lot of complex changes that make it hard to find out the individuality of the business and scrutinize organizational growth eventually (Johan Wiklund , Holger Patzelt , Dean A. Shepherd,2009).

EDUCATION:
Education can be defined as the activities of educating, or instructing or teaching that conveys understanding and knowledge. It is the most imperative possession a person must have. Education is helpful in various phases of life particularly, personal and socials. Education will help you grow as an individual because the more knowledge you have the better understanding you will have in any given problem that will come your way. Education is the practice of learning and attaining information. Education can be separated into two main types: formal learning which gets through an institution and self-taught learning or what is often called as life experience. Education is a process of cognitive cartography, plotting your experiences and evaluating a variety of consistent means to finest situations when you find yourself in non-optimal positions. Education has a wide effect on every aspect of life. Education is seemingly associated to awareness and expertise, inspiration, self-confidence, problem solving ability, dedication and discipline. Higher education increases the capability of the entrepreneur to deal with troubles and detained opportunities that are significant for the growth of the firm. One study relates the SME growth with the human capital of entrepreneurs running their businesses. This human capital theory emphasis that individuals with more education or higher quality often achieve higher performance in accomplishing significant responsibilities and thus play a major part in their firm growth .. Human capita helps the entrepreneurs in recognizing opportunities and information of conduct to more successfully and adeptly chase growth opportunities. (Johan Wiklund , Holger Patzelt , Dean A. Shepherd,2009)

AGE:
The end part of life; an advanced phase of life; pre-eminence; position of being old.In the terms of age younger individuals may be more eager to presume risks and grow their business. Young business owners are risk takers and always seized the opportunities to grow their SMEs. One study showed that variables different from size and age of firm may significantly affect the growth rate of SMEs such as education, age and gender of employees (Leonardo Becchetti and Giovanni Trovato)

GENDER
Previous research suggests a shortage of external funding chances might restrain the growth of numerous small and medium enterprises (SMEs), predominantly female-controlled SMEs. With reference to some studies profitability is the most considerable determinant of SME growth (John Watson) Due to many promising reasons women locate lower threshold than men. Supposed risks of highrate growth or want to balance work and career both concern women more than men and guide them to limit firm size (William Aspray and J. McGrath Cohoon). Within all these major determinants we have chosen the composition of business owner and staff on the growth of the firm. The owner and staff make the human capital of the firm. For a firm to be successful its human capital should have good technical skills, good planning abilities, leadership abilities, self belief, fairness, honesty, creative minds and self motivation. All these abilities can be possible if its staff is: 1) Mainly composed of males. 2) Well educated. 3) Young and talented.

Gender:

Literature has showed that female oriented businesses generally have less performance than male-oriented businesses in terms of sales and profit margins. It has been projected in the literature that women may have smaller number of opportunities to build up relevant experiences, may have fewer networks to get support and may have greater complexity in assembling property. It has be en recommended that females, as a group, may be more risk reluctant than males. There is a statistically important negative relationship between wages and the proportion of a firm's workforce that is female.( J.K. HELLERSTEIN AND D. NEUMARK, 1999)

Many studies propose that women perform less well on quantitative financial procedures such as jobs created, sales turnover, profitability. This can be explained as because do not enter business for financial gain, but to pursue intrinsic goals (e.g. independence, flexibility to interface family and work commitments). Women thus calculate their success in relation to their accomplishment in attaining these goals rather than on the more usual economic or financial procedures. The performance of a business is measured in economic or financial conditions. On the other hand, there is pragmatic confirmation that suggests that women owned business earn less revenue and often do not expand as speedily as male owned businesses (Daphne Hamilton, Peter Rosa, Sara Carter, 1996.)

Female-owned businesses normally perform less than male-owned businesses on a diversity of measures such as revenue, profit, growth, and discontinuance rates. One justification for this logical difference in performance might be because "female business ownership is concentrated primarily in the retail and service industries where businesses are relatively smaller in terms of employment and revenue as opposed to high technology, construction, and manufacturing" (John Watson,.)At least some of the gender difference in business performance might be related to industry differences, because women tend to start up businesses in sectors that have low returns. The reasons to why male-oriented businesses are more successful rather than female oriented may include:

1) The age of the business: Female-owned businesses (on average) may be younger than male-owned businesses 2) Family obligations: female business owners (on average) have less time on hand for their businesses as compared to male owners. 3) Less capital: female-owned businesses (on average) may have less loans (or less access to capital), and female owners may not have the similar levels of education and past experience compared to male owners. 4) More risk-aversion of females: female owners (on average) may be more risk reluctant than male owners. 5) Less concerned with financial rewards: female owners (on average) may be less concerned with monetary rewards than male owners.

Hypothesis 1: Male-owned businesses exhibit higher growth than female-owned businesses.

Age:
It has also been argued in literature that young people are more risk takers towards there business and more concerned with growth. As young people are more averse towards higher income levels so they require more rewards from their businesses. The load to bear family lessens with the rising of age and hence the inspiration level also diminishes. The limited pragmatic evidence proposes that the owner-manager's age tends to be pessimistically linked to growth. Young people are more technical and have abilities to learn quicker and faster. Young people have following good qualities: (C. M. Praag, 2003.) 1. Putting young creative ideas to action: Young people are more creative and proactive, they put ideas into practice, they spot opportunities more easily and they take calculated risks. Therefore, young people are much more prepared and elastic to face our current and future challenges in a victorious and sustainable way.

2. Youth are source of economic expansion and social organization:

Youth creativity and risk taking is a consistency tool for young people as it develops an individuals social communication, his commitment in society and his professional enclosure. Young people also pursue their interests and dreams more positively to reality than older ones.

3. Youth are more technical: Furthermore, youth feels much more comfortable in the current era of information technology and is much more likely to adapt to new technologies and to promote innovation. Indeed, according to the Digital Diaries study from Internet Security Company AVG, there has been an important generational shift. Young people can learn technology very quickly than old people. 4. Youth moving around the world: In the globalization Youth speaks many more foreign languages, is more enthusiastic to travel around the world to go work abroad and understands the current world dynamics much better.

. Hypothesis 2: Growth is higher for businesses which have young employees.

Education: Education widely affects the growth of a SME. Education is linked with inspiration, skills and knowledge, crises management, commitment, devotion, self-ability and guideline and order. The higher the education the more easy it is to lever more and more intricate problems, determine opportunities and the growth of the firm. Well-educated younger workforce have a rational chance of getting 'good' jobs and significant numbers are affected by under- employment, and are motivated to remedy the problem of being overqualified by obtaining even more education (G.S. LOWE and H.KRAH,. 1995). Effective training of work is also necessary. The combination of well-educated workforce attached with workers with low levels of training - may not be such efficient and can lead to conflicts. (D.K. Foot, R.GOMEZ, 2003)

In ten out of seventeen empirical studies surveyed, found a positive relationship between prior level of education and firm performance. Having a Bachelors degree has a affirmative impact on both endurance and expansion of small ventures.

( Evangelia Papadaki and Bassima Chami ) It has long been acknowledged that education may play an important job in financial growth. Also, latest work in the RBV has placed superior stress on the properties of resources, and, in particular, distinguishes between more tangible, input resources (e.g., people, machinery, financial capital) and knowledge-based resources(D. C. GALUNIC and S.R. INSEAD,1998)

Education increases effective communication which increases the returns from a successful investment in reputation. (Z.Griliche,1997). A rm- specic channel throughout which education may influence economic expansion is through entrepreneurship, which itself has been frequently found to be connected with growth. Highly educated business owner will employ highly educated workforce and pertain more reasonable strategies as compared to an liberate person. Highly educated workforce have higher efficiency ( Eliah sekirin) Latest facts convincingly shows that mainly those labor force participants with better levels of education and skills are those who earn higher income as compared to lower levels of human capital. This is a amalgamation of the reality that the proceeds to aptitude and education are senior in business owning positions than in earnings service and that standard incomes are higher for workers than business owner. A more well educated workforce will be inclined to be more attentive of the appeal of business planning and thus firms run by the better and skilled workforce might be more likely to have business plans. In contrast, the owner-manager with a less education will be inclined to work outside a formal planning framework. (H. Doug watts, P. Wardle, S.M. Richbell. ) This indicates that more levels of education lead to more dynamic business ownership and thus a more constructive relationship between the business ownership charge and economic significance creation. And because more fruitful business owners run superior firms, they need, on average, more employees leading to a lower best business ownership rate. Finally the question comes after the determinants how we measure growth? Growth is the outcome of investigation of opportunities. Firms are a collection of a certain number of capital that provide the means to successfully take advantage of those opportunities and grow.( F.D.Hermelo, R.Vassolo.). There are numerous theoretical and pragmatic challenges in the study of firm. The most regularly used measure for growth has been modification in the firms. Firm growth can be determined by increase in size of the firm. (Mika Pasanen and Tommi Laukkane). Department). In research, firm growth has been measured in many ways and various measures have been used. An additional distinctive measure for growth has been increase in the number of workforce. The growth criterion used is a combination of three criteria: (1) the number of employees, (2) the total number of man-years (including owners, and with part-time employees transformed into full-time employees), and (3) the total salary for the staff during the year.( T. Bager.)

Hypothesis 3: Businesses whose employees are educated exhibit higher growth than businesses whose employees are not.

Finally the question comes after the determinants how we measure growth?
Growth is the outcome of investigation of opportunities. Firms are a collection of certain number of capital that provide the means to successfully take advantage of those opportunities and grow.( F.D.Hermelo, R.Vassolo.). There are numerous theoretical and pragmatic challenges in the study of firm. The most regularly used measure for growth has been modification in the firms. Firm growth can be determined by increase in size of the firm. (Mika Pasanen and Tommi Laukkanen). In research, firm growth has been measured in many ways and various measures have been used. An additional distinctive measure for growth has been increase in the number of workforce. The growth criterion used is a combination of three criteria: (1) the number of employees, (2) the total number of man-years (including owners, and with part-time employees transformed into full-time employees), and (3) the total salary for the staff during the year.( T. Bager.Growth of young firms. Research Conference, 2002)

FRAME WORK (conceptual model)

More males in workforce of a SME

Younger workforce of a SME

High growth of SME

More educated workforce of a SME

Independent variables

dependent variable

We as students of university of central Punjab are doing a mini research on the effect of age, gender and education of workforce on the growth of SME. Your all information would be confidential and safe. Name of SME? ------------------------------Age of the firm/ date of establishment?------------------------------------No. Of employees? -------------------------------------No. of male employees?-----------------------------------No. of female employees?------------------------------------Number of employees between ages (18-30)? --------------------------------------Number of employees between ages (31-42)? ---------------------------------------Number of employees of age (43 and above)? ---------------------------------------Number of employees having education of primary?--------------------------------Number of employees having education of secondary? -----------------------------Number of employees having high secondary education and above? ----------------------------Total number of outlets?------------------------------------Total salary of the staff?--------------------------------------What kind of and how many types of products you are selling? ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------What kind of customers you are targeting? -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------