Balanced Scorecard in SMEs: Effects on Innovation and Financial Performance
38 Pages Posted: 3 Oct 2017
Date Written: June 1, 2017
Empirical research on the consequences of the use of the balanced scorecard (BSC) has mostly been conducted in large firms. Previous findings are not easily applied to the small business literature, and assumptions about the benefits of BSC for small- and medium-sized enterprises (SMEs) are not based on quantitative empirical evidence. We investigated the effects of SME’s use of BSC in terms of financial performance and innovation outcomes. Our arguments are based on the efficiency gains and potential flexibility losses associated with formalizing managerial practices in SMEs. We propose that the developmental stage of the firm may influence this trade-off. Based on a survey of 201 SMEs in Spain, we found that firms using BSC for feedforward control obtained better financial performance and presented higher levels of exploitative innovation. We also found that the positive effect of BSC on perceived and attained financial performance is stronger in more established SMEs.
Keywords: Balanced Scorecard, Financial Performance, Innovation, Small Business, Efficiency, Flexibility
JEL Classification: L25, M10, O31, M40, L21
Suggested Citation: Suggested Citation