Managerial practices and the productivity of knowledge‐intensive service businesses: An analysis of digital/IT and cash management practices

• Published date: 01 March 2018
• Date: 01 March 2018
• DOI: http://doi.org/10.1002/jsc.2191

RESEARCH ARTICLE

DOI: 10.1002/jsc.2191

Strategic Change. 2018;27(2):161–172. wileyonlinelibrary.com/journal/jsc © 2018 John Wiley & Sons, Ltd. 161

Abstract

Knowledge‐intensive service rms achieve superior producvity levels with management prac-

ces oriented to improve the relaonship with customers. Managerial pracces linked to digital

and IT‐based pracces and cash management techniques contribute to enhance SMEs’ produc-

vity level. The posive eect of cash management techniques and digital/IT‐based pracces

is condioned by the characteriscs of the businesses’ operaons, in our case, the knowledge

orientaon of the organizaon. While nonknowledge‐based businesses benet more from prac-

ces linked to digizaon and IT pracces, knowledge‐intensive businesses capitalize more on

management pracces that seek to improve the relaonship with customers.

1 

|

 INTRODUCTION

Small and medium‐sized enterprises (SMEs) are not scaled‐down ver-

sions of large businesses and dierences between the two primarily

relate to resource limitaons and the use of informal strategies and

more exible internal structures (e.g. Aldrich & Auster, 1986; Hudson,

Smart, & Bourne, 2001). Problems in securing external nance to meet

the need for resources is a concern for SME managers who handle this

constraint by turning to alternave business models based on low‐

cost and eciency‐enhancing operaons. Managerial pracces linked

to nancial bootstrapping† (Carter & Van Auken, 2005; Winborg &

Landström, 2001) and the use of digital business models (McAfee &

Brynjolfsson, 2008; Vendrell‐Herrero, Gomes, Mellahi, & Child, 2017)

represent key strategic choices embedded in these business models.

Financial bootstrapping includes cash management techniques

linked to cash ow improvements, giving the business greater strate-

gic exibility and control over its nancial structure (Harrison, Mason,

& Girling, 2004). Sharing facilies and equipment constutes a good

example: businesses split rent and maintenance costs to enhance

their cash ow in the short term. Also, this pracce can generate

other eects—such as knowledge sharing—with long‐term benets

(Smith, 2016). With regards to digital business models, technology

advances and the decline in compung and communicaon costs

have allowed the development of informaon technology (IT)‐based

competencies, such as database management and e‐commerce

deepening (Aral & Weill, 2007). These competencies enable strate-

gies oriented towards the long‐term sustainability of the business

(Busnza, Gomes, Vendrell‐Herrero, & Baines, in press; Vendrell‐

Herrero, Gomes et al., 2017).

For SMEs, the road to survival and development might be sup-

ported by dierent managerial pracces. Yet, the applicaon of these

pracces does not necessarily ensure performance in the long run.

The IT porolio should be aligned with the business strategy (Weill

& Aral, 2006), and in the case of nancial bootstrapping the essence

does not lie in “raising money but having the wits and hustle to do

without it” (Bhide, 1992, p. 110). Although ITs and digizaon (BarNir,

Gallaugher, & Auger, 2003; Vendrell‐Herrero, Gomes, et al., 2017)

and nancial bootstrapping (Carter & Van Auken, 2005; Winborg &

Landström, 2001) have received increased aenon, the analysis of

how dierent strategic pracces—digital and IT‐based pracces and

nancial bootstrapping techniques—impact business performance in

dierent types of SMEs remains largely unaddressed. This is the focus

of this study.

The underlying characteriscs of the strategic opons available

to SMEs, and of business operaons can each aect the eecveness

of bootstrapping and digital and IT‐based pracces. This is especially

Managerial pracces and the producvity of knowledge‐

intensive service businesses: An analysis of digital/

IT and cash management pracces*

Kriszna Horváth1 | László Szerb2

1 Entrepreneurship Research Center

(RIERC), Faculty of Business and Economics,

University of Pécs, Pécs, Hungary

2 Faculty of Business and Economics,

University of Pécs, Pécs, Hungary

Correspondence

Kriszna Horváth, Faculty of Business and

Economics, University of Pécs, Pécs Rákóczi

út 80, 7622 Hungary.

Email: horvathk@ktk.pte.hu

* JEL classicaon codes: G31, L25, L80, M15.

† The name originates in the English saying of “Pull yourself up by your own

bootstraps” and refers to improving the business’ situaon by its own eorts.