Validating a Model of Factors Influencing the Financial Performance of SMMEs

Thobile Radebe (), Rita Klonaridis and Marko Deventer
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Thobile Radebe: Stellenbosch Business School
Rita Klonaridis: North-West University
Marko Deventer: North-West University

A chapter in New Challenges of the Global Economy for Business Management, 2025, pp 1151-1166 from Springer

Abstract: Abstract A fixed mindset can constrain entrepreneurs’ willingness to adapt and grow, impacting their business’ financial performance. While success factors are crucial for business success, there is a notable gap in understanding how a fixed mindset interacts with these factors and financial performance, particularly in the South African context. This study aimed to bridge this gap by validating a measurement model to explore these relationships among South African Small, Medium, and Micro Enterprises (SMMEs). Understanding these relationships can help tailor interventions and support mechanisms to foster more adaptive mindsets among SMME entrepreneurs, thereby assisting in developing strategies to overcome mindset-related challenges and improve financial performance. The study aimed to evaluate the reliability and validity of a measurement model consisting of eight factors: entrepreneurial fixed mindset, success factors (opportunity recognition, creativity, innovation, resilience, adaptability, risk-taking), and financial business performance. Data for the study was collected from 533 South African SMME owners using an online self-administered questionnaire distributed through an international research company’s database. The data was analyzed using various statistical techniques in AMOS, including reliability and validity analysis, confirmatory factor analysis, correlation analysis, and collinearity diagnostics. The findings indicate a relationship among the factors in the eight-factor model, demonstrating strong reliability, validity, and model fit measures. Each factor’s Cronbach’s alpha and composite reliability surpass the 0.70 benchmark, and the model shows evidence of construct, convergent, and discriminant validity. Therefore, this measurement model is reliable and valid, making it suitable for testing paths between the factors in future research. The findings have managerial implications for SMME owners and policymakers in South Africa, emphasizing the interplay between entrepreneurial mindsets and integrating entrepreneurial success factors to enhance financial performance.

Keywords: Entrepreneurship; Fixed mindset; Success factors; Financial performance; SMMEs; South Africa (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-981-96-4116-1_73

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DOI: 10.1007/978-981-96-4116-1_73

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