INNOVATION IN DISTRIBUTION CHANNEL(S) & COST EFFICIENCY ON SMALL & MEDIUM ENTERPRISE SCALES’ PERFORMANCE: Control variables and firm performance

INNOVATION IN DISTRIBUTION CHANNEL(S) & COST EFFICIENCY ON SMALL & MEDIUM ENTERPRISE SCALES' PERFORMANCE: Control variables and firm performanceAcknowledging probable shock of size of the firm, age of company, industry and competitive environment hostility on firm performance as found in other studies, were integrated as control variables in this study. Firm size does have impact on firm performance, but the degree and trend of its impact is diverse. While other studies; other studies found differently (Moreno & Casillas, 2007; Shanmugan & Bhaduri, 2002).

Impact of firm age on firm performance is diverse too. Kristiansen, Furuholt & Wahid found that the length of time in operation was significantly associated with business success. Similar positive impact of firm age can also be found in Shanmugam & Bhaduri and Birley & Westhead due to vast social capital owned by older firms. In contrast, other studies (Nichter & Goldmark, 2009) found that new firms grew faster than the older ones.
Significant influence of different types of industry on firm performance can be found in Gadenne and Humphreys & McClung, among others due to different marketing strategies and management practices (Gadenne, 1999). Pertinent to competitive environment hostility and firm performance, a study by Miller & Friesen is interesting.
Some theoretical foundations of individual perspective of innovation, transaction cost, depot, & resource base view theory would be expected to be supported by result of the conceptual frame work. Individualist perspective: Innovation is triggered and driven by certain individuals in the society who have necessary characteristics to make it happen-Entrepreneurs. The purpose of distribution channel establishment reducing economic cost that occur during the transaction (Williamson, 2007, 1989). While the essence of depot theory is that the goods tend to flow to end consumers at price in which dictated by consumers (see Leo in Bruce, 1967). Further, the resource base view (RBV) recommends that a firm must know its relevant resources and capabilities : valuable, rare, inimitable & non-substitutable. The resources enable firms to generate sustainable competitive advantages (Barney, 1991 in Chakraborty, 2011). Therefore, the two words, efficiently- compared to the least efficient competitor (Peteraf & Barney, 2003 in Chakraborty, 2011) and effectively- refer to customers’ satisfaction, have essential implication in RBV. The implications of this theory is that if competitive advantage is not created due to use of such resources (tangible & intangible), RBV cannot be applied.
Considering the relationship among the variables above, the conceptual framework of this study is shown in following Figure 2.

Figure-2

Figure 2. Conceptual framework of the study