The differences in the impact of entrepreneurial abilities of various European SMEs on their financial risk perceptions


Abstract

Objective: The objective of the article is to investigate whether the impact of innovativeness and competitiveness of small and medium-sized enterprises (SMEs) on their financial risks differ depending on the countries where SMEs are located.

Research Design & Methods: The researchers created an online questionnaire and gained data from 1221 Czech, Slovak, and Hungarian SMEs. Moreover, the researchers applied ordinal logistic regression analyses to achieve the goal of this study.

Findings: According to the results, the impact of competitiveness on the bankruptcy risk perception of SMEs differ depending on the countries where they operate. Concerning the impact of innovativeness on financial performance and financial risk management, this article also proves that international differences between SMEs exist.

Implications & Recommendations: The developments in the financial literacy of company executives and their managerial experiences and the improvements in credit access conditions, intellectual property rights, and tax legislation can make SMEs reduce their concerns about their financial risks. Thus, policymakers’ implementations are crucial to providing equal opportunities for SMEs even if they operate in various markets.

Contribution & Value Added: This current research does not only make international comparisons among the investigated variables but also analyses the impacts of entrepreneurial competencies on various indicators of financial risk. These facts not only make this research become a unique study in the literature but also the reason why it should garner the interest of prospective readers such as policymakers, academicians, and SME owners.

               

Keywords

innovativeness; competitiveness; SMEs; financial risk; financial performance

Abdimomynova, A., Duzelbayeva, G., Berikbolova, U. Kim, V., & Baimakhanova, A. (2021). Entrepreneurship Education Prospects in The Public-Private Partnership System. Montenegrin Journal of Economics, 17(2), 83-92. https://doi.org/10.14254/1800-5845/2021.17-2.7

Abdulrab, M., Alwaheeb, M.A., Al‐Mamary, Y. H., Alshammari, N.G., Balhareth, H., Soltane, H.B., & Saleem, I. (2020). Effect of entrepreneurial orientation and strategic orientations on financial and nonfinancial performance of small and medium enterprises in Saudi Arabia. Journal of Public Affairs, 22(2), e2305. https://doi.org/10.1002/pa.2305

Abu Salma, A.J., Prasolov, V., Glazkova, I., Rogulin, R. (2021). The Impact of Business Processes on the Effi-ciency of Small and Medium-Sized Enterprises. Montenegrin Journal of Economics, 17(3), 131-143. https://doi.org/10.14254/1800-5845/2021.17-3.11

Aftab, J., Veneziani, M., Sarwar, H., & Ishaq, M.I. (2022). Entrepreneurial orientation, entrepreneurial com-petencies, innovation, and performances in SMEs of Pakistan: Moderating role of social ties. Business Ethics, the Environment & Responsibility, 31(2), 419-437. https://doi.org/10.1111/beer.12415

Anwar, M., & Shah, S.Z.A. (2021). Entrepreneurial orientation and generic competitive strategies for emerg-ing SMEs: Financial and nonfinancial performance perspective. Journal of Public Affairs, 21(1), e2125. https://doi.org/10.1002/pa.2125

Bai, Q., & Tian, S. (2020). Innovate or die: Corporate innovation and bankruptcy forecasts. Journal of Empiri-cal Finance, 59, 88-108. https://doi.org/10.1016/j.jempfin.2020.09.002

Bartolacci, F., Cardoni, A., Łasak, P., & Sadkowski, W. (2022). An analytical framework for strategic alliance for-mation between a cooperative bank and a fintech start-up: An Italian case study. Journal of Entre-preneur-ship, Management, and Innovation, 18(4), 115-156. https://doi.org/10.7341/20221844

Bič, M. (2022). Development of the Bankruptcy in Slovakia and the Czech Republic. International Journal of Entrepreneurial Knowledge, 10(1), 65-79. https://doi.org 10.37335/ijek.v10i1.140

Bigliardi, B. (2013). The effect of innovation on financial performance: A research study involving SMEs. Innovation, 15(2), 245-255. https://doi.org/10.5172/impp.2013.15.2.245

Campbell, J.Y., Hilscher, J., & Szilagyi, J. (2008). In search of distress risk. The Journal of Finance, 63(6), 2899-2939.

Civelek, M., & Krajčík, V. (2022). How do SMEs from different countries perceive export impediments de-pending on their firm-level characteristics? System approach. Oeconomia Copernicana, 13(1), 55-78. https://doi.org/10.24136/oc.2022.002

Civelek, M., Ključnikov, A., Vavrečka, V., & Gajdka, K. (2020a). The usage of technology enabled marketing tools by SMEs and their bankruptcy concerns: Evidence from Visegrad countries. Acta Montanistica Slo-vaca, 25(3), 263-273. https://doi.org/10.46544/AMS.v25i3.01

Civelek, M., Gajdka, K., Světlík, J., & Vavrečka, V. (2020b). Differences in the usage of online marketing and social media tools: Evidence from Czech, Slovakian and Hungarian SMEs. Equilibrium. Quarterly Journal of Economics and Economic Policy, 15(3), 537-563. https://doi.org/10.24136/eq.2020.024

Civelek, M., Ključnikov, A., Fialova, V., Folvarčná, A., & Stoch, M. (2021). How innovativeness of family-owned SMEs differ depending on their characteristics?. Equilibrium. Quarterly Journal of Economics and Econom-ic Policy, 16(2), 413-428. https://doi.org/10.24136/eq.2021.015

Csapi, V., & Balogh, V. (2020). A financial performance-based assessment of SMEs’ competitiveness – An analysis of Hungarian and US small businesses. Problems and Perspectives in Management, 18(3), 452. https://doi.org/10.21511/ppm.18(3).2020.37

de Araújo Lima, P.F., Marcelino-Sadaba, S., & Verbano, C. (2021). Successful implementation of project risk management in small and medium enterprises: A cross-case analysis. International Journal of Managing Projects in Business, 14(4), 1023-1045. https://doi.org/10.1108/IJMPB-06-2020-0203

Deku, W.A., Wang, J., Danquah, E., & Narain, D. (2021). Correlation between business innovation environ-ment (BIE) and entrepreneurial orientation dimension (EOD) on financial performance of manufacturing SMEs in Ghana. World Journal of Entrepreneurship, Management and Sustainable Development, 17(4), 787-803. https://doi.org/10.1108/WJEMSD-09-2020-0117

Donkor, J., Donkor, G.N.A., Kankam-Kwarteng, C., & Aidoo, E. (2018). Innovative capability, strategic goals and financial performance of SMEs in Ghana. Asia Pacific Journal of Innovation and Entrepreneurship, 12(2), 238-254. https://doi.org/10.1108/APJIE-10-2017-0033

Dvorsky, J., Kliestik, T., Cepel, M., & Strnad, Z. (2020). The influence of some factors of competi-tiveness on business risks. Journal of Business Economics and Management, 21(5), 1451-1465. https://doi.org/10.3846/jbem.2020.13440

Eisdorfer, A., & Hsu, P. H. (2011). Innovate to survive: The effect of technology competition on corporate bankruptcy. Financial Management, 40(4), 1087-1117. https://doi.org/10.1111/j.1755-053X.2011.01172.x

Halaskova, R., Halaskova, M., Gavurova, B. & Kocisova, K. (2022). The Local Governments Efficiency in the EU Countries: Evaluation by Using the Data Envelopment Analysis. Montenegrin Journal of Economics, 18(1), 127-137. https://doi.org/10.14254/1800-5845/2022.18-1.10

Hofstede Insights. (n.d.). Compare countries. Retrieved from https://www.hofstede-insights.com/fi/product/compare-countries/ on May 5, 2022.

Hofstede, G., Hofstede, G. J., & Minkov, M. (2010). Cultures and organizations: Software of the mind-intercultural cooperation and its importance for survival. McGraw-Hill.

Jalali, A., Jaafar, M., & Thurasamy, R. (2013). Influence of entrepreneurial orientation on the financial per-formance: Evidence from SMEs in Iran. Middle East Journal of Management, 1(2), 168-185.

Karadağ, H. (2018). Cash, receivables and inventory management practices in small enterprises: Their asso-ciations with financial performance and competitiveness. Small Enterprise Research, 25(1), 69-89. https://doi.org/10.1080/13215906.2018.1428912

Karas, M., & Režňáková, M. (2021). The role of financial constraint factors in predicting SME default. Equilib-rium. Quarterly Journal of Economics and Economic Policy, 16(4), 859-883. https://doi.org/10.24136/eq.2021.032

Khan, K.A., Dankiewicz, R., Kliuchnikava, Y., & Oláh, J. (2020). How do entrepreneurs feel bankruptcy?. Inter-national Journal of Entrepreneurial Knowledge, 8(1), 89-101. https://doi.org/10.37335/ijek.v8i1.103

Kliuchnikava, Y. (2022). The Impact of the Pandemic on Attitude to Innovations of SMEs in the Czech Repub-lic. International Journal of Entrepreneurial Knowledge, 10(1), 34-45. https://doi.org/10.37335/ijek.v10i1.131

Ključnikov, A., Civelek, M., Fialova, V., & Folvarčná, A. (2021). Organizational, local, and global innovative-ness of family-owned SMEs depending on firm-individual level characteristics: Evidence from the Czech Republic. Equilibrium. Quarterly Journal of Economics and Economic Policy, 16(1), 169-184. https://doi.org/10.24136/eq.2021.006

Ključnikov, A., Civelek, M., Klimeš, C., & Farana, R. (2022). Export risk perceptions of SMEs in selected Vise-grad countries. Equilibrium. Quarterly Journal of Economics and Economic Policy, 17(1), 173-190. https://doi.org/10.24136/eq.2022.007

Ključnikov, A., Civelek, M., Polách, J., Mikoláš, Z., & Banot, M. (2020a). How do security and benefits instill trustworthiness of a digital local currency?. Oeconomia Copernicana, 11(3), 433-465. https://doi.org/10.24136/oc.2020.018

Ključnikov, A., Civelek, M., Vozňáková, I., & Krajčík, V. (2020b). Can discounts expand local and digital cur-rency awareness of individuals depending on their characteristics?. Oeconomia Copernicana, 11(2), 239-266. https://doi.org/10.24136/oc.2020.010

Ključnikov, A., Civelek, M., Cera, G., Mezuláník, J., & Maňák, R. (2020c). Differences in entrepreneurial orien-tation (EO) of SMEs in the international context: Evidence from the Czech Republic and Turkey. Engi-neering Economics, 31(3), 345-357. https://doi.org/10.5755/j01.ee.31.3.23933

Kocisova, K., Gavurova, B., & Behun, M. (2018). The evaluation of stability of Czech and Slovak banks. Oeco-nomia Copernicana, 9(2), 205-223. https://doi.org/10.24136/oc.2018.011

Kotaskova, A., Lazanyi, K., Amoah, J., & Belas, J. (2020). Financial risk management in the V4 Countries´ SME segment. Investment Management and Financial Innovations, 17(4), 228-240. https://doi.org/10.21511/imfi.17(4).2020.21

Kreiser, P.M., Marino, L.D., Kuratko, D.F., & Weaver, K.M. (2013). Disaggregating entrepreneurial orientation: The non-linear impact of innovativeness, proactiveness and risk-taking on SME performance. Small Business Economics, 40(2), 273-291. https://doi.org/10.1007/s11187-012-9460-x

Kusa, R. (2020). Linking relational capabilities and entrepreneurial orientation of an organization. Interna-tional Entrepreneurship Review, 6(3), 49-60. https://doi.org/10.15678/IER.2020.0603.04

Kücher, A., Mayr, S., Mitter, C., Duller, C., & Feldbauer-Durstmüller, B. (2018). Firm age dynamics and causes of corporate bankruptcy: Age dependent explanations for business failure. Review of Managerial Sci-ence, 14(3), 633-661. https://doi.org/10.1007/s11846-018-0303-2

Lewandowska, A. (2021). Interactions between investments in innovation and SME competitiveness in the peripheral regions. Journal of International Studies, 14(1), 285-307. doi:10.14254/2071-8330.2021/14-1/20

Li, Z., Anaba, O.A., Ma, Z., & Li, M. (2021). Ghanaian SMEs amidst the COVID-19 pandemic: Evaluating the influence of entrepreneurial orientation. Sustainability, 13(3), 1131. https://doi.org/10.3390/su13031131

Lindman, M., Scozzi, B., & Otero‐Neira, C. (2008). Low‐tech, small‐and medium‐sized enterprises and the practice of new product development: An international comparison. European Business Review, 20(1), 51-72. https://doi.org/10.1108/09555340810843690

Liu, F., Fang, M., Park, K, & Chen, X. (2021). Supply chain finance, performance and risk: How do SMEs adjust their buyer-supplier relationship for competitiveness?. Journal of Competitiveness, 13(4), 78-95. https://doi.org/10.7441/joc.2021.04.05

López Salazar, A., Contreras Soto, R., & Espinosa Mosqueda, R. (2012). The impact of financial decisions and strategy on small business competitiveness. Global Journal of Business Research, 6(2), 93-103.

Martínez-Román, J.A., Gamero, J., de Loreto Delgado-González, M., & Tamayo, J.A. (2019). Innovativeness and internationalization in SMEs: An empirical analysis in European countries. Technological Forecasting and Social Change, 148, 119716. https://doi.org/10.1016/j.techfore.2019.119716

Mason, M.C., Floreani, J., Miani, S., Beltrame, F., & Cappelletto, R. (2015). Understanding the impact of en-trepreneurial orientation on SMEs’ performance. The role of the financing structure. Procedia Economics and Finance, 23, 1649-1661. https://doi.org/10.1016/S2212-5671(15)00470-0

Oláh, J., Virglerova, Z., Popp, J., Kliestikova, J., & Kovács, S. (2019). The assessment of non-financial risk sources of SMES in the V4 countries and Serbia. Sustainability, 11(17), 4806. https://doi.org/10.3390/su11174806

Olalere, O.E., Islam, M.A., Yusoff, W.S., Ariffin, K.H.K., & Kamruzzaman, M. (2021). The moderating role of financial innovation on financial risks, business risk and firm value nexus: Empirical evidence from Nige-ria. In AIP Conference Proceedings, 2339(1). AIP Publishing LLC. https://doi.org/10.1063/5.0045082

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 Performance in the Hotel Industry: A Synergistic Relation-ship. Journal of Tourism and Services, 23(12), 132-149. https://doi.org/10.29036/jots.v12i23.282

Pini, M., Tchorek, G. (2022). Comparative analysis of export determinants in Italian and Polish firms: The moder-ating role of non-family management. Journal of Entrepreneurship, Management and Innovation, 18(2), 41-67. https://doi.org/10.7341/20221822

PRS Group. (2020). Political Risk Index. Retrieved from https://www.prsgroup.com/regional-political-risk-index/ on 5 May 2022.

Roshchyk, I., Oliinyk, O., Mishchuk, H., & Bilan, Y. (2022). IT Products, E-Commerce, and Growth: Analysis of Links in Emerging Market. Transformations in Business & Economics, 21(1), 209-227.

Šebestová, J., Feijie, W., Luyan, Z., & Pokorná, P. (2020). Small business sustainability and regional develop-ment: lessons learnt from sectoral changes in China and the Czech Republic. Forum Scientiae Oecono-mia, 8(3), 5-30. https://doi.org/10.23762/FSO_VOL8_NO3_1

Statista. (2021). The number of business insolvencies. Retrieved from https://www.statista.com/statistics/1116430/number-business-insolvencies-country/ on 5 May 2022.

Stefko, R., Bacik, R., Fedorko, R., & Olearova, M. (2022a). Gender-generation characteristic in relation to the customer behavior and purchasing process in terms of mobile marketing. Oeconomia Copernicana, 13(1), 181-223. https://doi.org/10.24136/oc.2022.006

Stefko, R., Džuka, J., & Lačný, M. (2022b). Psychological Factors of Tourist Expenditure: Neglected or Negligi-ble?. Frontiers in Psychology, 13. https://doi.org/10.3389/fpsyg.2022.942252

Stefko, R., Džuka, J., & Lačný, M. (2022c). Factors influencing intention to go on a summer holiday during the peak and remission of the Covid-19 Pandemic. Ekonomický časopis (Journal of Economics), 70(2), 144-170.

Stefko, R., Heckova, J., Gavurova, B., Valentiny, T., Chapcakova, A., & Ratnayake Kascakova, D. (2022d). An analysis of the impact of economic context of selected determinants of cross-border mergers and acqui-sitions in the EU. Economic Research-Ekonomska Istraživanja, 1-18. https://doi.org/10.1080/1331677X.2022.2048200

Stefko, R., Fedorko, R., Svetozarovová, N., & Nastišin, Ľ. (2021). Start-up management and the relationship between the level of awareness among potential young entrepreneurs and the motivation to start own business. Quality-Access to Success, 22(183), 86-90.

Stefko, R., Fedorko, R., Bacik, R., Rigelsky, M. & Olearova, M. (2020a). Effect of service quality assessment on perception of TOP hotels in terms of sentiment polarity in the Visegrad group countries. Oeconomia Co-pernicana. 11(4), 721-742. https://doi.org/10.24136/oc.2020.029

Stefko, R., Jenčová, S. & Vašaničová, P. (2020b). The Slovak Spa Industry and Spa Companies: Financial and Economic Situation. Journal of Tourism and Services, 20(11), 28-43. https://doi.org/10.29036/jots.v11i20.137

Stefko, R., Jencova, S., Vsanicova, P., & Litavcova, E. (2019). An Evaluation of Financial Health in the Electrical Engineering Industry. Journal of Competitiveness, 11(4), 144-160. https://doi.org/10.7441/ joc.2019.04.10

Stefko, R., Gavurova, B., & Kocisova, K. (2018). Healthcare efficiency assessment using DEA analysis in the Slovak Republic. Health Economics Review, 8(1), 1-12. https://doi.org/10.1186/s13561-018-0191-9

Stefko, R., Bačík, R., Fedorko, R., Horváth, J., Propper, M., & Gavurova, B. (2017). Gender differences in the case of work satisfaction and motivation. Polish Journal of Management Studies, 16(1), 215-225. https://doi.org/10.17512/pjms.2017.16.1.18

Straková, J., Talíř, M., & Váchal, J. (2022). Opportunities and threats of digital transformation of business models in SMEs. Economics and Sociology, 15(3), 159- 171. doi:10.14254/2071-789X.2022/15-3/9

Teja Kusuma, G. A., Setia Sapta, I. K., Dauh Wijana, I. M., Paulus Tahu, G., & Putu Indiani, N. L. . (2022). Build-ing SMEs’ passion for utilising digital media: a study of SMEs during the COVID-19 pandemic. Forum Sci-entiae Oeconomia, 10(3), 151-168. https://doi.org/10.23762/FSO_VOL10_NO3_8

Toulová, M., Tuzová, M., & Straka, J. (2016). The aspects of managing risks in connection with the interna-tionalization of SMEs from selected Central European countries. Acta Univ. Agric. Silvic. Mendel. Brun, 64, 1775-1784. https://doi.org/10.11118/actaun201664051775

Trading Economics (n.d.). Competitiveness Index. Retrieved from https://tradingeconomics.com/country-list/competitiveness-index on 5 May 2022.

Ulubeyli, S., Kazaz, A., & Sahin, S. (2018). Survival of construction SMEs in macroeconomic crises: Innovation-based competitive strategies. Journal of Engineering, Design and Technology, 16(4), 654-673. https://doi.org/10.1108/JEDT-03-2018-0057

Virglerová, Z., Belás, J., Kurzępa-Dedo, K., Krulický, T. (2021). Perceiving of legal risk and the role of public sector in SMEs of V4 countries. Administratie si Management Public, 36, 181-195. https://doi.org/10.24818/amp/2021.36-11

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 Management, 11(3), 35. https://doi.org/10.3390/jrfm11030035

Zadeh, F. G. (2022). Entrepreneurship and SMEs under COVID-19 crisis: A literature review. International Entrepreneurship Review, 8(3), 23-35. https://doi.org/10.15678/IER.2022.0803.02

Zhang, D., Zhuge, L., & Freeman, R.B. (2020). Firm dynamics of hi-tech start-ups: Does innovation matter?. China Economic Review, 59, 101370. https://doi.org/10.1016/j.chieco.2019.101370

Wach, K., Bilan, S. (2021). Public support and administration barriers towards entrepreneurial intentions of students in Poland. Administratie si Management Public, 36, 67-80. https://doi.org/10.24818/amp/2021.36-04


Published : 2022-12-30


CivelekM., DurdaL., VincúrováZ., DudášT., & BrezinaI. (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. https://doi.org/10.15678/EBER.2022.100407

Mehmet Civelek  m_civelek@windowslive.com
Pan-European University  Czechia
http://orcid.org/0000-0002-1247-5308

Senior Researcher at European Centre for Business Research, Pan-European University (Czech Republic). PhD in Finance (2019, Tomas Bata University in Zlin, Czech Republic). His research interests include Credit Risk Management in SMEs, entrepreneurship, and marketing.


Lukáš Durda 
Pan-European University  Czechia
http://orcid.org/0000-0001-5979-9855

Assistant professor at Pan-European University (Czech Republic). PhD in International Entrepreneurship (2019, Pan-European University, Slovakia). His research interests include tourism, business, and management.


Zuzana Vincúrová 
Pan-European University  Slovakia
http://orcid.org/0000-0002-6490-2367

Associate Professor at Pan-European University (Slovakia). Her research interests include Economics, Financial analysis, and Corporate finance.


Tomáš Dudáš 
Pan-European University  Slovakia
http://orcid.org/0000-0001-8931-8987

Associate Professor at Pan-European University (Slovakia). His research interests include Foreign Direct Investments, International economics and finance.


Ivan Brezina 
Pan-European University  Slovakia
http://orcid.org/0000-0002-8158-7805

Assistant professor at Pan-European University (Slovakia). His research interests include Economic theory, Macroeconomics and Microeconomics.






Creative Commons License

This work is licensed under a Creative Commons Attribution-NoDerivatives 4.0 International License.

Authors who publish with this journal agree to the following terms:

  1. Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a CC BY-ND licence that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
  2. Authors are asked to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.

 Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) only the final version of the article, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access). We advise using any of the following research society portals: