Supply chain activities and SME's financial performance: moderating effects of firm size and supply chain position.

Although good supply chain management can drive large companies’ financial performance, its effectiveness in improving financial performance of small and medium-sized enterprises (SMEs) is still inconclusive, which results from the heterogeneity of SMEs compared to large companies. The objective of this thesis is to test the relationship between supply chain activities and SMEs’ financial performance and examine the moderating effects of firm size and supply chain position on this relationship. This thesis consists of three independent but interconnected papers, which fulfil the research objective collectively. Paper One titled “A conceptual framework of supply chain activities for SMEs’ financial performance” aims to identify supply chain activities that can drive the financial performance of SMEs based on a systematic literature review. Based on the 110 papers identified, a conceptual framework is established with nine supply chain activities that contribute to SMEs’ financial performance: purchasing, production, transport, inventory management, supplier partnership, customer partnership, supply chain strategy, quality management, and information sharing. Firm size and supply chain position are found to moderate the impact of supply chain activities on SMEs’ financial performance. To empirically test the conceptual framework, Paper Two titled “Supply chain activities and SMEs’ financial performance: The moderating effect of supply chain position” focuses on the performance of four internal supply chain activities (purchasing, production, transport, and inventory performance) and examines their relationships with SMEs’ financial performance along with the moderating effect of supply chain position. Based on survey data collected from 318 SMEs in the UK upstream food supply chain, partial least squares structural equation modelling results indicate that superior production and inventory performance can significantly improve the financial performance of SMEs, while purchasing and transport performance do not have significant effects. Multigroup analysis results suggest that supply chain position can moderate the impact of purchasing performance on profitability and liquidity and the impact of production and inventory performance on liquidity. Follow-up interviews were conducted with seven executives from UK food SMEs to triangulate the quantitative results obtained. Paper Three titled “Working capital management and SMEs’ financial performance: Moderating effects of firm size and supply chain position” empirically investigates the impact of working capital management and its three components (inventory holding days, accounts receivable days, and accounts payable days) on SMEs’ financial performance (profitability and liquidity) incorporating the moderating effects of firm size and supply chain position. Panel data regression results based on financial data of 325 SMEs in the UK upstream food supply chain from 2012 to 2018 suggest that cash conversion cycle, as a proxy of working capital management, is negatively associated with both profitability and liquidity of SMEs. All three working capital components have significantly negative relationships with SMEs’ profitability. Firm size and supply chain position significantly moderate some of those relationships. Those quantitative results were also triangulated by interviews with seven executives from UK food SMEs. This thesis empirically identifies that, the same as large companies, SMEs can also financially benefit from supply chain management. However, not all supply chain activities contribute to SMEs’ financial performance. The impact of supply chain activities on financial performance also varies with SMEs’ supply chain position and firm size. The results of this thesis can assist owner-managers of food SMEs with different sizes and supply chain positions to make informed decisions on the priority of supply chain activities in improving their companies’ financial performance.