Impact of financial resource building effort on financial resource availability among small and medium enterprises

Abstract

Despite the growing research on financial resources within the supply chain of SMEs, our understanding of the relationship between financial resource building efforts and financial resource availability remains lacking. This study draws on attention-based view theory (ABV) to develop and test an argument that heterogeneity in financial resource availability is explained by the differences in SMEs financial resource building effort. The proposed relationship is tested on a sample of 274 SMEs owners in Ghana. Structural Equation Modelling is used to test the hypotheses of the study. Findings from the study indicate that SME financial resources building effort via retained profit, personal savings, family and friends, supplier’s credit and bank loan drive financial resource availability. The study findings provide a clear evidence that while financial resource availability is essential to SMEs performance, the effect largely depends on the differences in attention SMEs allocate to building their financial resource base from various sources of finance particularly retained profit and bank loan.

Keywords

• attention-based view
• financial resource building effort
• financial resource availability
• smes