Tratt, Benedikt (2021): Working capital management routines in small German craft businesses: an empirical study of the drivers of implementation, in: Journal of Small Business & Entrepreneurship.
Keywords: Working capital management, small business management, small and medium-sized enterprises (SME)
Working capital management routines in small German craft businesses: an empirical study of the drivers of implementation
Benedikt Tratt
2021
Abstract
Using data from a survey of small German craft businesses, this article sheds light on the drivers of working capital management (WCM) efforts of small enterprises and their relation with performance. Unlike previous studies, this article explicitly investigates the routines small firms undertake to manage their working capital (WC). Based on the argumentation of asset orchestration theory, factor and cluster analysis are applied to identify four distinct types of small businesses with regard to their WCM approach. Thereupon, several regression analyses are applied to identify the drivers of this differentiation. The results determine financial education and skill of individual personnel as the main driver of WCM routine implementation in small businesses. Firm age, willingness to grow in size, and ease of access to external funding are also affecting WCM undertakings. Considering performance, evidence indicates a positive association between the implementation of WCM routines and both liquidity and profitability.