Entrepreneurial action, innovation and business performance: the small independent business

Abstract

Using a sample of some 300 small independent businesses, drawn from Central London, the paper examines how entrepreneurial behaviour affects business performance. It is argued that small businesses motivated by a desire to grow in terms of sales and/or employees and to survive in a dynamic and competitive environment need to be innovative. However, to what extent they will innovate successfully depends on their capacity to plan ahead, their capacity to innovate and their willingness to take risk. It is shown that entrepreneurial businesses are characterised by these competencies that allow them to innovate and thus develop and grow successfully. Not surprisingly, not all small businesses are equipped with these three competencies owing to their diverse array of strengths and weaknesses arising from the diversity in the managerial motives and aspirations of entrepreneurship. These results highlight the importance of the capacity to innovate and the capacity to plan ahead as strong predictors of small businesses’ performance.