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Economic value added: a useful tool for SME performance management

Moujib Bahri (Teluq – Université du Québec à Montréal, Québec, Canada)
Josée St‐Pierre (Université du Québec à Trois‐Rivières, Québec, Canada)
Ouafa Sakka (Sprott School of Business – Carleton University, Ontario, Canada)

International Journal of Productivity and Performance Management

ISSN: 1741-0401

Article publication date: 26 July 2011

Abstract

Purpose

The aim of this study is to propose a performance measurement and management system (PMMS) for small‐ and medium‐sized enterprises (SMEs), based on an analysis of the connections between these firms' business practices and performance measured by economic value added (EVA).

Design/methodology/approach

Secondary data from the PDG® database was used on a sample of 108 Canadian manufacturing SMEs over two consecutive years. The primary statistical method used was regression analysis to investigate the influence of diverse business practices on EVA in these firms.

Findings

This paper shows that EVA can be a useful tool for performance management in SMEs, when used in conjunction with a list of business practices that affect the firm's results. The findings indicate that some business practices have a direct impact on EVA within one year, while others have a deferred influence. The impacts of other practices on EVA were found to be weak or insignificant, an aspect that requires further investigation.

Research limitations/implications

The main limitation of this study is the lack of generalizability of the findings. However, the sampled SMEs vary widely in terms of their characteristics, which may mitigate the negative impacts of a non‐probabilistic sample.

Practical implications

This study offers a structured methodology to identify the paths leading to better performance in SMEs, through an improved understanding of their business practices' impacts on EVA.

Originality/value

To the best of the authors' knowledge, this is the first study that explores the linkage between SME business practices and EVA. When applied in conjunction with a set of business practices, EVA can help managers detect problems and identify sources of improvement.

Keywords

Citation

Bahri, M., St‐Pierre, J. and Sakka, O. (2011), "Economic value added: a useful tool for SME performance management", International Journal of Productivity and Performance Management, Vol. 60 No. 6, pp. 603-621. https://doi.org/10.1108/17410401111150779

Publisher

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Emerald Group Publishing Limited

Copyright © 2011, Emerald Group Publishing Limited