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CHAPTER III

LITERATURE REVIEWS

3.1 Introduction
This chapter provides an overview of the request as relevant literature sources that
addressed the issues of smash performance. Financeroll.com -- six sub-sections in
this chapter, which -- concepts and theories of firm performance, definitions of
smash performance, smash performance measurement, models used in the smash
performance measurement, the missing gaps in the previous studies, the
significance of the present study.

3.2 Theoretical Background


3.2.1 Stakeholder Theory
The stakeholders theory mentions that firms -- not the only entity that operates for
its own sake, but should provide benefits to its stakeholders due to firms have the
stakeholders and should pay proactively called ada (to them (Freeman, 1984).
The stakeholders referred tersebut mencakup the entire internal and external
parties who have a relationship -- affecting or affected, directly or indirectly by
the firm. Basically Stakeholders -- billion to control or have an ability to influence
the use of economic resources by the firm. These capabilities include US the
ability to restrict the use of economic-limited resources (capital and labor), access
to media, the ability to manage the firms, or the ability to influence the
consumption of goods and services that factor: by the firm. Therefore, presiding
over its stakeholders control an are important economic resources for the firm,
then the firm will react in the ways to satisfy the desires of stakeholders.

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Stakeholders interpreted as individuals, the group of people, a community or


society as a whole or "unsuccessful who relationship and interests on the firm. An
individual, group, and a community and society can be said as stakeholders if they
have characteristics such as the power, legitimacy, and the interests on the firm
(Freeman, 1994; Goodpaster & Holloran, 1994; Donaldson and Preston, 1995).
From the definition, financeroll.com has been a change of world health
organization is included in the definition of firm stakeholders. The firm
stakeholders -- not only investor relations and creditors. The underlying concept
of the firm stakeholders currently has grown to keep pace with changing business
environment and the implication of the firm's business activities.

Freeman (1984) identifies stakeholders based on the the sysctl changes that can't
occur in a corporate environment into two categories, that the internal
stakeholders and the external. The internal stakeholders -- those who in the
organization, they consist of the owner of the firm, consumers, employees, and
suppliers. While part of the external stakeholders -- those who -- beyond of the
organization, they -- the government, competitors, consumer advocacy,
environmentalists, Special Interest Group (SIG), and media.

By using these definitions, the government might be regarded as stakeholders for


the firm because the government has an interest in the activities and presence
of the company that one of the elements of social system in a country. Therefore
they can't not ignore the existence of the government in their business operations.

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The presence of bureaucracy that regulates firms operation must be obeyed


through compliance with government regulations to create a relationship between
the company and the government.

3.2.2

Resource-Based Theory

The resource-based theory (RBT) analyze and interpret the organization's


resources to understand how organizations achieve a sustainable competitive
advantage. RBT focuses on the concept of attributes corporate difficult-to-imitate,
as a source of superior performance and competitive advantage (Barney, 1986;
Hamel and Prahalad, 1996 in Madhani, 2009). RBT pioneered by Penrose
(1959) clarifies that the firm's resources -- heterogeneous, inhomogeneous, the
availability of-productive services is derived from firm bumi resources that
provide a unique character for each firm.

Resources must meet the criteria VRIN (Value, Rare, Imperfect Imitability, Nonbe partied and analyzed) order to provide a competitive advantage and sustainable
performance (Madhani, 2009). VRIN criteria --:
1. This special event (V): a this special event resource is presiding over
it provide the strategic value for the firm. The resources provide value if it
helps the firm in exploiting market Opportunities or assist in reducing
the market incognitoed. There is no advantage of does not cover having the
resources if it does not add or increase the value of the firm.
2. Rare (R): the resources that difficult to find -- essential between rivals and
become the firm's potential. Therefore, bumi resources should be rare or
unique to offer a competitive advantage. Resources owned by several firms in

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the market can't not provide a competitive advantage, because those -- not
billion to design and implement a unique business strategy compared to other
competitors.
3. Imperfect Imitability (I): resources can't be the basis of sustainable
competitive advantage only if the firm does not hold these resources and can't
not get them or can't not imitate these resources.
4. Non-be partied and analyzed (N): the non-be partied and analyzed resources
indicate that the resource can not be replaced by alternative resources. Here,
competitors can't not achieve the fund would be performance by replacing the
resources with other alternative resources.

According to the resource-based theory (RBT), resources can't be broadly defined


as the assets, organizational processes, firm attributes, information, or knowledge
that is controlled by a firm which can be used to understand and implement their
strategies (learned et al. , 1969; Daft, 1983; Barney, 1991; forbid and Schoemaker,
1993; Peteraf,1993; Peteraf and Barney, 2003). Some researchers classified the
firm's resources of the US tangible and intangible resources. Barney (1991)
categorizes resources into three types as follows: 1) the capital of physical
resources (technology, plant and equipment), 2) the human capital (training,
experience, insight) and 3) The capital of organizational resources (formal
structure).
From these descriptions, according to RBT, Intellectual capital meets the criteria
as a unique resource for creating a competitive advantage for a firm to create the
firm value. The value is in the form of the firm's better performance.

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3.3 Defining SME Performance


Related to the concepts of firm's performance, financeroll.com -- many
variations , etc that have been developed by the experts in
defining SME performance from various perspectives. Rue and Byars (1977)
any performance as a result of implementing strategy achieved by an organization.
The good performance is presiding over an organization succeeds to achieve the
organization goals or targets set, and poor performance means an organization yet
succeeds or summarized below in achieving the organization goals or target
agreed. Rue and Byars (1977) states that positive performance is considered as a
standard is performed through civil measure of performance in the future. Further,
Pfeffer and Salancik (1978) any performance as an ability to create an action in
achieving targets. Hawkins (1979) states performance is a result of the
accumulated activities conducted such as process or manners of performing and a
notable action or achievement.

Venkatraman and Ramanujam (1986) any performance as a reflection of revived


achievement as a result of various activities implemented. Atkinson et al. , (1995)
argues that performance is an assessment process of activities (value chain), in
ensuring the overall performance that has met the stakeholders requirements.
Wells and Spinks (1996) expresses performance should be illustrated as an
empirical condition based on the agreed criteria. Performance implies a process or
system of work ability assessment based on a amalgamation standard. The
standards of work, the target/objectives or the set criteria for a certain period

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serves to; i) track progress of organizational goals; ii) identify Opportunities for
improvement; iii) compare the performance of internal and external standards.

Kaplan and Norton (1996) states that performance can be viewed of the four
perspectives; they -- i) the customer's perspective (the customer trust), ii) the
financial perspective (the profitability), iii) an internal process (mobilize
resources), and iv) perspective of learning and growth (the ability to the sysctl
changes). Turner and Bititci (1999) state that performance is one of the main
factors that afektif the reliability of business strategy and will be areal tersebut
terus tidak terkontrol sejak tahun giving high satisfaction to stakeholders over
time. If performance measures increase, this means that the strategy has been
implemented we worked with (Anthony & Govindarajan, 2001).

Ferdinand (2003) argues that performance is reflected by the business activities in


various functions. This performance can't be indicated by i) human resources
performance include creativity, innovation and productivity where they --, ii)
operational performance which tersebut mencakup requiring of production,
quality of product and services, speed and accuracy of processing; iii) marketing
performance such as sales volume, market share and profitability; iv) the financial
performance include fund availability, the use of fund effectively and efficiently
which reflected by various financial ratios.
Bastian (2006) states that performance is an overview of achievement the
implementation of activities or programs or policies in achieving the goals,
objectives, missions, and vision of the organization. Mulyadi (2007) argues that

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performance is the success of personnel, team, or unit of organization to realize


the strategic objectives that have been set previously according to expectation. In
addition, Alasadi and Abdelrahim (2007) reveal that performance is the perception
of place on or manager about profits, turnover, Phasis which then is of a break
point, and business development. Similar to the above description, Veithzal al.
Rivai, et (2008) that performance is the results or the overall success rate for a
certain period compared to a diverse of possibilities, including standards of work,
targets or goals or criteria -- specified and agreed.

Based on the definitions above, it can be concluded the smash performance in the
two terms as follows. First, smash performance can be defined as the outcome of
activities carried out by the smash suited to the prior criterias agreed.
Second, smash performance reflects the meb earned ibms star of the smash, the
united states bahwa sekitar by rep. Joseph Pitts and Lei (2003) the superior
performance allows a firm to 'obtain bigger competitive advantages.

3.4 SME Performance Measurement


The smash performance measurement have diverse functions (Neely, Gregory and
Platts, 1995). According to Atkinson et al. (1997) the functions of performance
measurement is related to customer' perspectives that are sent electronically back
in identifying problems for improvement. Neely (1998) states financeroll.com -four objectives of performance measurement of smash, which --; (1) checking
position: to is performed through civil measure the current firm status and
monitoring progress over time for benchmarks; (2) communication position: to

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communicate to shareholders, customer, or employees with annual reports and


others; (3) banks or confirming banks abroad priority: Performance data provides
insights what is are important for business, thus exposing shortfalls which allows
organizations to identify the priorities; (4) imposing progress: performance
measurement can't help organizations focus on specific issues and encourage ways
to performance. Related to the smash performance measurement, Neely et al. ,
(2000) state that financeroll.com -- two approaches that often conducted in
measuring the performance of a firm they --, the financial and non-financial
measurements.

The financial p. practical aspects -- commonly used as the fundamental approach


such as assets sales, return on investment, but did not provide adequate nutrition
overview to evaluate business performance for long-term (Etzioni, 1964). Nonfinancial measurement, despite appears later "but it plays a significant role. Nonfinancial measurement is designed to assess how well the firm activity can be
performed and result will be obtained. Hansen and The first lady (1997) state this
measurement focusing on a) requiring; the firm ability minimize resources for
achieving the goals; b) quality; the ability to value addes products quality of
goods or services; and c) time; when these goods or services -- required. In
addition, Abouzeedan and Busler (2004) developed the Survival Index Value
(SIV) as a simple model to predict company life. The model dan personel the
financial and non-financial p. practical aspects at once and will described in the
next sub-section.
3.4.1 The elements used in the financial measurements
3.4.1.1 Assets

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The assets is paid a company whose shape can be all rights to property or services
that owned a company at once. Wealth had to be declared clearly, measured in the
unit money and ordered by length of time or speed change back to cash.
According to Ikatan Akuntan Indonesia in Siburian asserted (2004) The assets are
resources to be used by the company as a consequence past events and economic
benefits and where the future is expected to be company. According to the
guidelines state-owned enterprises Accounting revised 2011 Asset is resources
which is controlled by entity as a result of past events and where economic
benefits in the future is expected to be obtained by entity.
Economic benefits the future that exist in the assets are potential of the asset to
give donations, either directly or indirectly , or cash and cash equivalent cash. The
potential was able to form of things that productive and is part of business
activities.
These elements of assets
The assets can be classified into two groups namely assets and assets .
1. Assets of smooth is asset which is expected to be realized benefits in a year or
in the cycle normal operations. Assets of smooth consists of cash, short-term
investment, bankers' acceptances exacting,, preparation, fees that still must be
paid, money that still must be accepted and accounts other account.
2. Invest/participation is a assets that are used to growth in wealth through the
distribution investment result. Investment in the assets is also were grouped into
two parts are short-term investment and investment term debts long.
3. Substantial asset ca assets is a ready-to-use, in the form or to be built first,
which are used in operations of the company, was not intended for sale in order to
in a normal course and had the benefit more than a year. The assets is still consists
of the land, and the building, the investment long-term and others.
4. Assets of intangible assets, which does not exist that provide the right economic
and legal to the owners. The assets not exist can is shaped like goodwill, all rights
patents, all rights reserved, franchise owners and turkish, a registered trademarks.
5. Other assets and Other
Other assets and others describe posts that cannot be properly classified as to the
assets of smoothly, the assets of remained, investas/participation, as well as
intangible assets.
According to Horne and Wachowicz (2005:222) Assets Turnover in efficiency is
relatively use total assets of companies to produce sales. Higher the ratio assets
turnover reflect more efficient use of assets in overall sales. Wild, at al, (1997)
expressed assets turnover is a ratio is used to judge the effectivity and the intensity
of assets in mengahsilkan sales. This ratio more than the more than nor a sales
produced by and more than the effectiveness of assets a company. Assets turnover
is calculated by how he compares sales profit during the same with average-price
total assets in this period with the formula as follows:
Total assets of turn over = Net sales
Average total assets

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3.4.1.2 Initial capital


Capital Market is wealth owned company that can yield advantage in time to
come and revealed in the value of the money (Prawirosentono, 2002). Capital
Market is used to achieve the business including (1) some purchase lands and
buildings; (2) a year material purchase; (3) some purchase machinery and
equipment; and (4) some of them are stored in the form of money cash. Capital
Market is very important in operations of the company such as giving money to
buy raw materials or merchandise, to pay for salaries, labor and and costs. Each
company need to provide capital for company's operational activity. In
addition, capital market is also a major factor and a position is very high in the
development company through the increase of production to produce profits or net
for entrepreneurs (Achmad, 2009). With a capital market and will proceed
smoothly so as to allow business will develop capital market itself through a
process in the business.
Capital Market that is used companies may be in the form of a capital from its
own entirely or a combination of capital from its own with capital loans. The
various sources capital market will form a capital strength invested to run business
(Riyanto, 1985).

3.4.1.3 Self-financed
Capital Market that was needed to finance operations of the company consists of
foreign capital and capital from its own. Riyanto (2001) said that capital from its
own capital which is derived from the company itself and planted in companies
for the time is not certain forever.
President Martono and Agus Harjito (2005) said that capital market itself as a
capital comes from the company both from the owner of the company (the holder
share) and net that will not be divided (net was arrested).
Mardiyatmo (2008) capital from its own is that the capital market, from the owner
business itself, consisting of savings, donations, grants, and so on.
Excess capital market itself is:
a) There is no charge for such things as medical administration fee or flower so
that it does not become companies;
b) Does not depend on other parties, it means that the acquisition funds obtained
from initial capital owners.
c) Don't need requirement that complicated and take a long time.
d) There is no obligation recovery, it means that the capital market invested by
the owner will be planted for a long time and there is no problem if the owner
of financial capital would shift to other parties.

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Lack capital itself is:


1) Limited in number as well, it means to get in a certain amount is depending on
the owner and the amount is still relatively limited.
2) The acquisition capital from its own in a certain amount of prospective new
owners new shareholders (candidates) difficult because they would consider
the performance and future business;
3) Less than a motivation the owner, it means that business owners who use
capital from its own his motivation was lower than in using foreign capital.
3.4.1.4 Total cost
Total cost/ total cost (TC) a number of throughout all costs and fees variables that
issued by companies to produce some products in a certain period of time. Based
on understanding, total costs can formulated as follow:
TC = FC + VC
Note:
TC= total cost (total cost)
FC= costs fixed cost)
VC= costs variables (variable cost)
3.4.1.5 Sales
Sutamto (2001) said sales is a man to convey work produced by to those who
needed with the agreement together.

Private sector (1999) sales in the company had three objectives are reached sales
volume, to a profit certain (Anorga, 2000), and a show growth (Siegel and Shim,
2003). The company to sell their goods can apply for methods that sales cash,
sales credit, and sales konsinyasi.
Company's success is assessed based on ability for profit. Net can be obtained
through its activities in the form sales, the greater volume sales greater the net that
will be obtained With company profit margins. will be able to develop various
activities, increasing the number of assets and capital market as well as being able
to develop and expand its business line.
Winardi (2000) the sale is the result achieved as rewards service that was
held on a commerce transaction business world.
Hartanto (2000) the sale is the result of the overall product or service that was
transferred by a company to the customer for one period.

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From the scriptural definition, it is clearly sales is a process to move work for or
services to other people where seller will get rewards form of money in
accordance with the price that has been agreed before.
Kotler (2005) the sale is the aim of all companies in the business marketing in
offering its products. The concept sales is a common approach that is used by
many companies to market. The concept sales holds that left to the
consumers usually will not buy the products from the company. Thus companies
should do in a sales aggressive and business promotion incessantly.
Sales also is one of the sources of revenue a person or a company buy and sell
transaction that, in a company when more than sales will be more than nor the
revenue increased by one or the company (Zimmerer, 2005).
Jill Griffin, sales was the beginning relations for life with the customer
Robert Ashton, sales is a process when someone is helping others took the
decision will

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3.4.1.6 Profits
Gitman (2003) profitability is the relationship between revenues and costs
generated by using the firm's assets of both current and fixed in-productive
activities.
Company Profitability is the ability in way society elector net and can be
measured in the ratio. The ratio is used to measure the effectiveness company
management as a whole is shown with the magnitude net that, companies and is
stated in the form the percentage.
Profitability demonstrate the ability a company in producing net during a certain
period at the level of asset sales, and capital market share. Profitability a company
can be measured in various ways depending on the net and asset or capital which
will deal with each other.
Profits is gain or value that economic actors obtained by proceeds from the sale
after deducted capital and production costs. In doing such a non-patterned
economy and the economic actors would be considered in terms of profits.
Profits is the number of money they got from the sales revenue in a certain period
of time but it has already been reduced to cost HPP (cost of goods sold
Production) and Expense (salary, electricity , advertising, marketing etc).
Basic Principles which are usually used is capital that used to be back a combined
with a profit achieved. If a producer is understood what market taste that is
pleased the possibility to get more of its profits will be realized. And it is usually
for a producer could predict desires, needs and public mood, he can also hold a
work that really sought by consumers and make it work is rare, this would make
rates go up, and the benefits can be achieved more.
3.4.1.7 Investment
Investment is in investing in the field. Investment is defined as capital investment or
ownership resources in the long-term that will be beneficial in some accounting period
will come (Supriyono, 1987). Investment is connecting resources at national long-term to
produce net profit in the future (Mulyadi, 2001). Taswan and Soliha (2002) investment

can be done by individuals and corporations (including banking institution that


has excess funds. Investment can also be defined as placing a number of funds at this
time with the hope of gaining an advantage in the future (Halim, 2003).

From the scriptural definition above can be concluded that the investment is a
commitment to a number of funds and delay consumption during period of time to
get a number of advantages in the future.
Investment can be divided into four groups as follows (Mulyadi, 2001) :
1) Investment that does not produce net (non-profit investment). Invesment this type
arose because the government regulation or because of the requirements contract that
has been approved, which require a company to do it without taking into account

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profit or loss. For example for waste water that has been used in the process of
production if rushed out plant will cause environmental pollution, then the
government require a company to set a cleaner installation waste water waste water
was, before the outside the factory.
2) Investment that cannot be measured losers (non-measurable profits investment). This
investment is intended to raise profit, but the spider which is expected to be increased
by companies with the investment is very difficult to be counted carefully. As an
example is expenses for the long term product promotion, the cost for research and
development, and the cost training and education programs.
3) Investment in the replacement ekuipmen (replacement investment). Invesment this
type on penggeluaran for replacement machinery and equipment. Important
information that need to be considered in the decision replacement machinery and
equipment is accounting information differential in the form akitva differential and
cost differential. This is a reimbursement machine is usually done on the basis of the
considerations costs (cost differential) that will be obtained the increase productivity
(or the differential) with a replacement.
4) Investment in business expansion (expansion investment). Invesment this type is
spending to increase its production capacity or operations to more than ever. To
decide this type of investment, which need to be considered is whether assets
differential is required for business expansion is expected to produce net differential
(that is the difference between the differential with the cost differential) and the
amount is not adequate. Persons that needs to be considered is the assessment net the
future (which is a difference in the revenue of the costs) and unfriendly investment
(return on investment) that will be obtained because of the existence investment.
Company's goal made investment in general are:
1. Can make For supervision of wisdom or in other companies.
2. To get the right is continuously.
3. To set up such a fund to a certain purpose.
4. To build good relations with other peusahaan.
5. For the purposes of the other.

3.4.1.8 Cost of goods on


To organise a corporate needed information concerning the price. cost of goods
sold is a way charging fees to produce goods and services are obtained. Some
experts define about cost of goods sold as described below.
Cost of goods sold was that of the sacrifice economic resources to get assets
(Mulyadi, 2000). Cost of goods sold is the number of all expenses directly or
indirectly related to the acquisition, preparation and placing these stocks so that it
can be sold (Baridwan, 1992)
From the two understanding above can be concluded that the price in relation to
the making a product was that of the sacrifice a source of economy that is the
production costs to produce a work, and is the basis of the formation price,
because of the price to goods average contra achievements, producer of the
sacrifice that has been done, on the other hand achievements waged by a producer
is the value of goods which were produced by the number of the value of
equipment production that was sacrificed to produce it.

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Perhitungan cost of goods sold for profit or loss, that is how to calculate incomes
in certain accounting period of the costs that issued or there is a period of the costs
and associated with the money.
A basis to determine the price of goods and services produced for a shadow of the
great sacrifice, to produce goods and services that there was that the goods.
determinants for the price is set, but from the point of view the importance
company itself is necessary for a tool for controlling the financing from the right
steps to achieve its production that effective to reinvigorate and efficient. For that,
analyzed with the cost that is used.
With the price that is the basis of determining selling goods, because the price
level achievements, producer of the sacrifice that has been done.
The count cost of goods sold aims to know the amount of the fees that issued or
services produced by the time and work was to be sold or that will be offered to
have had a guiding the price.
So that it will be concluded that the purpose of the count cost of goods sold was to
establish selling, know effectiveness and efficiency a company in the way they are
doing their activities, as a basis to take a decision and to determine the revenue
will be obtained .
In a relationship with in the process of production to produce a product is required
production costs. In a broad outline production costs can be divided into several
elements that costs for the raw materials, labor costs, the cost for overhead (plant
Helmy Roni, 1990).
Raw material for a part that form part, a comprehensive from finished product.
Raw materials are processed in the company manufacture can be obtained from
purchasing locally, import or from the acquisition. In sourcing raw materials with
the company did not only pay a price buy raw materials, but also also issued
costs, warehousing and buy costs other gains. Problems of elements what costs are
calculated as raw material goods price that is bought.
This is related to accounting principles that are often, where all the costs that
happened to get raw materials and to place in the state is ready to be processed, is
the key element cost of goods sold as raw materials. Price goods for raw
material is not only in the form the price of which are included in these receipts
were issued will only. Cost of goods sold raw materials consisted of buying price
(rates are listed in invoice will) plus with the cost-fee and costs that issued to
prepare materials was in the state is ready to be processed.
Buying and transportation fee is the key element that can easily be counted as raw
materials, goods higher costs while our (order cost, cost acceptance, the
demolition, the investigation, insurance, warehousing, and cost accounting for the

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raw materials, is elements fees that it is difficult to count the cost of goods sold as
raw materials.
Often in buy raw materials, transportation fee company to pay for the various raw
materials bought. This is ethically problematic transportation fee allocation to
each other the type of materials that had been carried away.
But from the explanation was above can be concluded that components that build
cost of goods sold raw materials consisting of cost of goods sold as raw material
costs coupled with a stick on raw materials for was to raw materials are ready to
be used in the process of production.
The method collection cost of goods sold products according to the
opinion Supriyono (1999) is as follows:
The method cost of goods sold future (Job Order cost Methodthat is gathered cost of
goods sold products where the cost is collected for each future or contract or
services separately, and every future or contact can be separate identities.
2
The method cost of goods sold process (Process cost Method) is a method
collection cost of goods sold products where products are gathered for each
unit of a certain period of time, for example, months, first, in.

The smash performance measurement often case to the financial dean only with
the intention to meet the shareholders' satisfaction. Muchlis (2000) defines the
financial performance as the financial achievement or profitability which is
reflected in the financial markets such as Being diligent balance sheet, income
statement and the growth of sales, assets and stock of firm (Hanafi, 2005).
Profitability is measured by connecting gains from of the firm play activities with
assets used in generating firm profits (Hanafi, 2005). The profitability of a
firm illustrates the success of the financial performance of the firm's (operating
income).

The main purpose of the financial measurement is to assess the financial


performance and meb earned ibms star achieved by firm (Sawir, 2001). The

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financial performance can be measured using the ratio analysis or index linking
the financial data to each other. This analysis provide an overview of the
company's condition and meb earned ibms star. By using tools such as ratio
analysis will be billion to explain or give an overview of the financial position of
the company, especially if this ratio is used as the firm financial standard.

Syafri (2004) states that profitability of firm is a ratio that illustrates the firm
ability to 'obtain profits through capabilities using the available resources such as
sales, cash, capital, number of employees, number of branches are sabbath-and so
forth. Horne and Wachowicz (2005) expands these ratio by comparing the ratio of
sales with the profits of investment. So, ratio of profitability can't illustrate the
firm successes in co-author profits through operating activities and reflects
conditions for investment purposes.

Meanwhile Zarkasyi (2008) states that the financial measurement is related to


period of time. The smash financial performance is something factor: by the
smash in a certain period .... refer to established standards. Kashmir (2008) for
handling continues the result of these measurements can be used as a performance
evaluation tool of management of smash, whether they worked effectively or
otherwise. The success and failure of the firm can't be used as a reference for the
future plan, the united states well as the possibility to replace to a new
management, especially after the previous management was not succeed. This is
in line with Sutrisno's (2009) states that the financial performance is reflected by
the soundness of company. Based on the description above, it can be summarized

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that the performance measurement smash financial is the measurement performed


using the financial indicators or profitability ratios by the pre-be pass within a
certain period.

There is a reasonable agreement between the scholars relate to the financial


measurement criteria used to indicate the firm revived. Financeroll.com -- seven
ratios which often used to asses the financial performance of firm (Gitman,
2006), they --; Gross profit margins (GPM), Operating profit margins (OPM), Net
profit margins (NPM), return On this STUDY Earnings Per Share (EPS) return On
Equity (ROE) and return On Investment (ROI). From this quotation, it can be
explained as follows:
a) Gross profit margins (GPM). This ratio measures the percentage of gross
profits which compare sales. The better the GPM the better the company's
operations, that indicated by a relatively low cost of the piece on if compared
to sales. GPM can't be calculated by the formula 3.1 (Syamsuddin, 2007);
GPM=

( NSCOGS
) x 100%....3.1
S

Where,
GPM = Gross profit margins
NS

= Net Sales

COGS = Cost Of Good on


S

= Total Sales.

b) Operating profit margins (OPM) or usually called as return on Sales (ROS).


This ratio describes the pure profits earned on sales. Total OPM is called as
pure due to the real obtained from the results of company operations by
59

ignoring financial obligations in the form of interest and taxes. The higher
OPM the better the company operations. OPM can't be calculated by the
formula 3.2 (Syamsuddin, 2007);
OPM= x 100%..3.2
S

( )

Where,
OPM = Operating profit margins
NI

= Net Income

= Net Sales

c) Net profit margins (NPM). NPM is ratio between net income and sales. Net
income is the representational state transfer of sale membership after
deducting of all costs, including interest and taxes. Thus, NPM is a ratio to is
performed through civil measure net income achieved by firm on sales. The
higher NPM, the better the company operations. NPM is calculated using the
formula shown in equation 3.5 (Syamsuddin, 2007);
NPM= 100 3.3
S

( )

Where,
NPM = Net profit margins
NI

= Net Income

= Net Sales

d) Return On Assets (this study). This study describes the rate of return on
investments done by investor relations of the managing of all assets used by
management in the enterprises. According to Atrill (2011), this study
illustrates a firm's ability in generating profits using all assets owned. The

60

ability of firm in generating profits will attract the investor relations to invest
in the firms funds to expand their business. A low level of this study
could the cause for investors to pull back their funds. This study is calculated
using the formula shown in equation 3.2 (Sutrisno, 2009);
ROA= 100 .3.4
A

( )

Here,
This study

NI

= Net Income

= Total Assets.

Return on Assets

e) Earnings Per Share (EPS). EPS is represented in dollar amount earned on


behalf of each outstanding share of common stock, not the amount of earning
Montreal direction distributed to its stakeholders. The greater the EPS the
greater ability of the company to value addes net profits of each share. EPS
can't be calculated with the following formula 3.6 (Sutrisno, 2009);
EPS= 100 3.2
OS

( )

Here,
EPS = Earn Per Share
NI
OS X.

= Net Income
= Outstanding Share

f) Retun On Equity (ROE ). ROE is a ratio measuring the level of income


availabilty of the firm place on (shareholders) on their capital invested on the
firm. Halim (2007) states that this ratio shows the extent of which the
company mengelola areal ekosistem its own capital (equity) effectively, it

61

means to is performed through civil measure the profitability of investment


that has been done by place on or shareholders of their capital on the
company. Commonly, the higher ranked fourth, the higher the level of income
derived by place on (shareholders) of the firm. ROE is calculated using the
formula shown in equation 3.3 (Syamsuddin, 2007);
ROE= 100 .3.6
E

( )

Here,
ROE

= Return on Equity

NI

= Net Income

= Equity

g) Retun On Investment (ROI). ROI is ratio to is performed through civil


measure a firm's ability to value addes profits overall with the number of
available assets on the firm. The higher the ratio indicates the better the state
of firm. ROI is calculated using the formula shown in equation 3.4
(Syamsuddin, 2007);
ROI= 100 ... 3.7
I

()

Here,
ROI = Return on Investment
NI

= Net Income

= Investment

3.4.2 The Non-financial Measurement


3.4.2.1 Ensuing harmful socio characteristics of owner
a. Age
Age is a span of time to is performed through civil measure the presence of an
object or which he star revenge. In the demographic analysis, age

62

distinguished within three structures that is, young age,-productive age and
non--productive. The composition of Indonesian population by age group
consisted of young age (0-14 years),-productive age (15-64 years) and elderly
(65 years (BPS, 2000).
b. Gender
Mosse (2007) states gender is a framework that is used to consider the impact
of the activities or development program that may occur in men and Women,
as well the social economic relationship. Gender is includes appearance, attire,
attitude, personality, working in inside and outside of the household, sexuality,
family responsibilities, and so on. A gender often used as a clasp analysis to
understand the social reality with regard to Women and men in various
perspectives social, economic, political and religions. Presidential Instruction
No. 9 Year 2000 bahwa sekitar gender is a concept that case to the roles and
responsibilities of men and Women arising from and can't be changed by
social circumstances and culture.
c. Education
Act No. 29 of 2003 article 1, paragraphs 1 explain the meaning of education is
a penguasaan diri and deliberate effort to create an atmosphere of learning and
the learning process so that learners -- actively developing the potential for
him to have the spiritual power of religion, self-control, personality,
intelligence, noble character, and skills needed him, community, state and
nation.
According to Act No. 20 Of 2003 Chapter VI Article 13 Paragraphs 1
educational an anaerobic process where consists of formal education, nonformal, and informal that can't be complementary and enriching. Formal
education is the path that is structured and tiered education consisting of basic
education, secondary education and higher education. Non-formal education is
the path of education outside formal education can't be structured and tiered.
Informal education is the path of family education and the environment.

63

d. Occupation
Occupation means mentioned out a task that ends ... ladies and gentlemen with
the result property enjoyed by the person. The driving factors causing people
to work is the need to be met. Activity in the work contains elements of a
social activities, produce something and ultimately aim to meet their needs.
However, behind the purposes indirectly, these people works to get the
rewards in the form of Unpaid wages is a growing or salary from his work it.
So in essence the work is not just in order to survive, but also aim to achieve a
living standard better (As'ad, 2002)
e. Experience
Work experience is the knowledge or skills that known and controlled by a
person who as a result of the act or the work that has been done for some
certain time (Trijoko, 1980). Work experience is the process of formation of
knowledge or skills on the methods of a job because of the involvement of the
employee in the execution of work tasks (Manulang, 1984). Work experience
is a is performed through civil measure of the length of time or employment
that has done someone cracked me can't understand the task of a job and
carried out we worked with (Ranupandojo, 1984).
Work experience is as a is performed through civil measure of the length of
time or studied at his tenurial rights that have taken someone cracked me to
understand the task a job and has done well (Jodie Foster, 2001). Another
member on states that work experience is the length person mentioned out the
frequency and types of tasks according to ability (Aha, 2001).
From the description it can't be concluded that work experience is the level of
mastery of knowledge and skills of a person in his work can be measured by
the length of service and level of knowledge as well as the skills he
limitations.
People who -- experienced in working to have the ability to work better than
those who have just entered the world of work, because the person has learned
from the activities and problems that arise in its work.
f. Family
According to Burgess, et al (1963) the family consists of people who -- united
by the bond of marriage, blood and bonding adoption, usually live together in
one household,(interact and communicate each other in social roles of the
family as her debut feature and wife, father and mother and siblings, use the
fund would be culture. The family is the smallest unit of society consist of the
family head and some people gathered and living somewhere and
interdependencies. (The Ministry of Health, 1998).

64

Family Service America (1984) defines the family in a comprehensive way, i


as "two or more persons united by the bonds of togetherness and intimacy"
(Friedman, 1998).
Salvicion and Maglaya (1989 The family is two or more individuals who -members by blood, marriage relationships, or appointment, and they live in
one household,(interact with each other in their roles and create and sustain a
culture.
g. Business nature
SME business is the activity of an entity using basic resources (consultation
inputs ,), such as raw materials and worker, -- in and processed to provide
goods or services (output) to the customer.
Side businesses is a business or activity resulting financial benefits, beyond
routine based does work to be done daily that sometimes it is not limited by
time and place.
Side business is a business that is run apart from the main job. Side business is
usually done by someone cracked me because of the income derived from the
principal work or play job is not enough to meet the needs of everyday life.
"But it is not infrequently side business income is much greater than the
principal job.
Side businesses So is a type of business or work done by someone cracked me
outside the original job that has been done, for example, an employee of a
factory also has a trading business of pulse or cigarette then play job -employees of the factory and the type of sideline job is poised pulse and
cigarettes.
3.4.2.2 Ensuing harmful socio characteristic of smash
a. Smash field
Salvatore (1989) said that the agency business is an organization that
combines and resources to mengordinasikan producing purpose or produce
goods or services to be sold In the Government regulation. (PP) No. 57 in
2010 article 1 number 6 described the body into a company or form either in
the form the body of law and not the body of law, who runs a type of business
that is still and continually to obtain net.
Line of business is business-business that move in a particular area in the
sector economy. The Head of Central Bureau of Statistics regulation number
57 in 2009 to set a classification of raw materials economic activities that are
in Indonesia. KBLI 2009 was ordered to provide a set the framework of a
comprehensive economic activities in Indonesia so that it can be used for
standardizing collection, processing, presentation and analysis of statistics

65

according to economic activity, and to learn more about the condition or on


economy according to economic activity.
With the regulation, then the whole economic activities according to the field
business in Indonesia refers to listing Types of Raw Materials on business
Indonesia in 2009. KBLI 2009 mengasifikasikan all activities/economic
activity in some that are differentiated according business field approach in
which emphasized that the process of economic activity in creating
goods/services, and the approach functions that are more economic actors on
the function in creating goods/services such as the sector pertanian (01),
Fisheries (03), retail Trading (471), services (33), building materials (551),
food (663).
b. Smash license
Licensing business is one form government services to the business world.
With the permissions and legal certainty more secure and will give the facility
service facilities in government or from other relevant stakeholders.
c. Smash age
Company's age is the method of time which were calculated based on the
number of years since business was founded. Poerwadarminta (2003) age is a
long life or there are (since born or be).
Company's age to show company ability to stay and will be able to compete in
world trade. Widiastuti (2002) presents a company aged more parents have the
experience more so it will be more knowledge about their constituents' needs
company Bukh et al, (2005)
From the two separate understanding can be known that definition of a
company is a long life or there is a community organization or form are
engaged in business, and a purpose gain or net.
Nugroho (2012) defines a life as companies operational activities beginning to
be able to defend its business continuity company or maintain their existence
in the world of business (Harry, 2011).
According to some definitions are described above, so it can be drawn
conclusion that company's age is long live a company that shows that the
company is still exist, to be able to compete with the business world and to be
able to maintain their business continuity and is part of documentation that
shows the purpose of these companies.
In doing a measurements of company's age Ulum (2009) proposed that age
companies count on IPO until annual report.
While Collins and Porras (2001) said that "we have learned that the youngest
was founded in 1945 and the company stops that we have learned was

66

founded in 1812". The statement that was presented by Collins and Porras
showed that age company also can be measured in the establishment of a
company.
d. Business status
The body is unity economic and judicial have a reason for gain and/or
providing services to the people. The business can be interpreted in general
may be the law as a form of the perpetrators business activities so that his
government authorised and given permission to his efforts have a legal
umbrella.
The household is The company's economy, aimed at finding net with
factors characteristic enterprises production. consists of 2 types of the body
into shape of the body of law and the company's not form of the body of law.
The company's form of the body of law that is PT (limited company),
Company department (normality assesment), public Company,Foundation and
Co-operatives. While the business is not like the body of law as civil alliance,
a Company, the alliance komanditier (CV), business or trade (UD).
e. Employee
Labor is the work in the age who are ready to do the work,
among others are those who have been working, they are
looking for work, those who go to school, and they take care
around the house (MT Rionga & Yoga Paradise, 2007:2).
Sumitro Djojohadikusumo Subianto's (1987) about the meaning labor is all the
people who are ready and able to work, including those who are willing to be
unemployed although and able to work and those who are unemployed forced
the consequences of having no employment opportunities.
The workforce are those who had no work, both are working
and that while there are currently working because of a
because, like patani was waiting for the harvest/rain, the
officers currently on leave, the sick, and so on. Furthermore,
those who did not have jobs, but sedag looking for a
job/hoped to work or working in a way that is called optimum
unemployment.
Labor is everyone who is able to do work to produce goods or services to meet
the needs itself and for the people. To know how much amount of the labor
forces that can be absorbed by labor market, usually used a size that is named
participation levels the work force (TPAK).
f. Business scale

67

Riyanto (2008) stated that companies seen from the amount the equity, the
value sales or asset value.
Scott menyatatakan variable size organization is a context that measured
service demand or product organization
Malleret (2008) mendefinisaikan size companies as a new policy which
nominated well that must be carried out by a company to compete globally.
Longenecker (2001) proposed that there are many ways to define the scale
companies, namely by using various criteria, such as number of employees
and sales volume, and asset value.
Based on some definitions, it can be known that a company is a big or small
scale that determine company that can dilahat from the equity, the value sales,
the number of employees and a total assets that is the context that measured
service demand or product organization.
Law No. 20 of 2008 classify size companies into the 4 categories namely
micro, small business, medium business, and big business. Classification
company size was based on total assets owned and total sales on the company.
The criteria size a company stated in Law No. 20 of 2008 is described in the
table 2.1.
The criteria Company Size
Company Size
The criteria
Assets (not including land Sales on
& female residents
walked through the
business)
Micro business
Maximum 50 million
Maximum capacity of
300 million
A Small business
>50 Million - 500 million >300juta - 2.5 M
Medium business
>10 Million - 10 M
2.5 M-50 M
Big business
>10 M
> 50 M
Next, classification company size according to Stanley and Morse is an
industry absorb the labor force 1-9 people, including a domestic industry
kerajianan. A small industry absorb 10-49 people, industry and absorb 50-99
people, and major industrial absorb the labor force 100 people.
The statement that was presented by Stanley and Morse showed that size
companies can also be classified based on the number of workers in the
industry.
To make measurements of company size Prasetyantoko (2008) proposed
that total assets can describe size companies, the greater assets is usually the
company semakain.

68

Next, Yogiyanto (2007) stated that size assets are used to measure the amount
companies, size assets was measured as logarithm of the total assets.
g. Capital source
The problems faced by almost all entrepreneurs to start a business spending
large sums of money is as a beginning modal. Amounts that Many was to buy
raw materials for and helper, equipment and production facilities and other
operational expenses.
Through items purchased the company could generate large sums output that
can then sells it to get an amount of money and capital return A portion of the
revenues this advantage. some used to increase capital market value to
produce a product.
Sincere (2002) explained that are the one of the factors production that is very
important for every business, both small-scale medium and large.
Neti (2009) said in starting a business, capital market is one of the important
factors besides other factors, so that in a business could not walk if not
available capital market. This means that a business there will never be a or
were not able to walk without the capital market.
This illustrates that was a major factor capital and determination of a business
activities. It is Therefore every one that will carry on business, then the page
that he did was to think and to seek capital for its business.
As an important part In addition in the production, capital market is also a major
factor and a position that is very high in the company's development. This is
achieved by the increase of production, which produces profits or net for
entrepreneurs (Achmad, 2009).
With a capital market and will proceed smoothly so as to allow business will
develop capital market itself through a process in the business. Capital Market that
used to be a capital from its own entirely or a combination of capital from its own
with capital loans. The various sources capital market will form a capital strength
invested to run business. A Capital owned if managed in an optimal manner, it will
increase sales volume (Riyanto, 1985 in Achmad, 2009). There is also the use of
the term capital to refer to a more specific meaning, for example social capital and
human capital.
If it was seen from the above can be said that capital spending is beginning to do
business activities which consists of capital market financial and social capital is
an important part for business continuity.
h. Profits used

69

The aim is to maximize profits. This advantage is a leading indicators


achievements or the performance of the company that the amount were to be seen
in financial report, to be exact profit and loss. Wild, Subramanyam, and Halsey
(2005: 25) defines net as follows:
Net (earnings) or net profit (net income) indicates corporate profitability. Net
reflects return to the shareholders equity for the period at once, while posts report
detailing how did get.
Net consists of four main elements that revenue (revenue), burden (expense), the
advantage (gain), and the loss (losses). Definitions of the elements of the net was
has been put forward by the Financial Accounting Standards Board in St ice,
Stice, and dead." (2004: 230).
1) Revenue (revenue) is cash check-in or as an entity other than assets or debt
obligations (or a combination of both) of surrender or production a work, the
administration services, or other activities which is a business largest or business
that is being done entity.
2) Burden (expense) is cash out or the use of other asset or appearance obligation
(or combination of the two) of surrender or production a work, the
administration services, or in other activities which is a business largest or
business that is being done entity.
3) Benefits (gain) is the increase in equity (net assets) from the transaction
sideshow or transaction that happened once in a while from an entity and from all
transactions, the event, and other conditions that affect entity, except for which is
based on revenues from the owner or investment.
4) Losses (losses) is decline in equity (net assets) from the transaction sideshow or
transaction that happened once in a while from an entity and from all transactions,
the event, and other conditions that affect entity, except for which is based on
revenues from the owner or investment.
b. Type of Net
's gross profit 1)
According to Wild, Subramanyam, and Halsey (2005's gross profit: 120) is a
"revenue has been reduced cost of goods sold ". When the produce goods and
services does not detract from burden is directly related to goods and services or
cost of goods sold, and it will be difficult for the company to survive.
2) Operational profit
According to Stice, Stice, and dead." (2004: 243) "operational profit measure
performance fundamental business operation that was done by a company's gross
profit and obtained from reduced operational expenses". Operational profit shows
how efficient and effective company conduct operations.
3) Profit before tax

70

Profit before tax according to Wild, Subramanyam, and Halsey (2005: 25) is a
"profit from operations run before reserves for income tax".
4) Net profit
Net profit according to Wild, Subramanyam, and Halsey (2005: 25) is a "net of
company's business that is running after interest and tax".
2. Profit growth
In essence, the company operates is in the hope that a net at a certain level that
have been determined as goals that must be achieved. Profit growth a good
company reflects that the performance of the company is also good. It is a
measure performance from a company, the more than the company, indicate
achieved more good performance. Thus if the company's financial good, then
company profit growth is also good.
To gain profit, company must do their activities. Net that is implied in this
research is operating income. The operating income's gross profit margin is costs
associated with operating with. Costs associated with operating costs is related
with the company's operation. So, what is measured by net and components is
important to be able to understand and interpret financial situation a company.
Profit growth was influenced by changes components in financial reports. Profit
growth that was caused by changes components consolidated financial e.g. change
sales, cost of goods sold, changes burden operation, changes interest burden,
income tax, a change in posts extraordinary, and others.
The use profit before tax as indicators changes net is intended to avoid the
influence of tax rate which is different among same analyzed. The reason issue
item extra ordinary and discontinued operations of profit before tax is to remove
the element that may improve changes which might not be arose in the same.
Company's goal is, where with profit margins to widen its business. Company
ability to get net is one of the indications about the quality management and
operations of the company, which means company reflects the value.
i. Technology used
Technology according to The Dictionary of English (1990), Technology is; 1) A
method scientific tool to achieve the practical knowledge knowledge applied
science 2) Industry means to provide work- work that is required for survival and
comfort human life.
Random House Dictionary was quoted as saying by Naisbitt (2002) Technology is
as objects, an object, materials and exist that clearly- is clearly different to the
people.
According to a (2007 : 62) technology is a process that can increase the value, the
process is to use or produce a product, products that are produced by not separate

71

from the other product that has been there, and thus become an integral part of a
system.
Technology can be a means of a tool is simple and machines that complicated
At the end of 1937, a sociologist North, Read Irrevocable, wrote that technology
includes all tools, machines, utensils, weapons, instruments, housing, clothing,
communicating and transporting devices and the skills by which we produce and
use them ("technology on all these instruments, the engine, the officers, and the
vessels, and armor, housing, clothing, these devices carrier/transfer and
pengomunikasi, and skills make it possible for us to all.).
1. According to Technology Pengetian Djoyohadikusumo (1994, 222) is
closely related to science (science) and engineering (engineering).
2. Sardar Vallabhbhai (1987, 161) understanding technology is a means that
in the end scored a civilization, he is an expression its radically secularist
worldview of physical
3. The following is the sense or meaning Technology, according to - Beatrice
Capra (2004, 106) as the meaning 'science', has undergone a change in the
history.
4. Not to be left behind a sociology, named Manuel Castells was quoted as
saying by - Beatrice Capra (2004, 107) define or to give a technology is a
tool, the 'groups and the procedure which is a scientific knowledge for the
implementation of a certain work in a way that allows repetition.
5. This understanding that is not inferior to the other. High-definition or
understanding Technology According to Poerbahawadja Harahap, namely
there are two as follows: 1) Knowledge which is investigating how- ways
of working in engineering. 2) Knowledge that is used in a factoryfactories and- industry.
6. According to site Wikipedia Technology sense as a site that is often made
into a person reference, it is not a mistake if I consider Wikipedia is part of
the experts, the following information technology sense according to
Wikipedia is industry means to provide necessary items for survival and
comfort human life.
7. He was the last according to a (2007 : 62). Technology is a process that
increases the value added, the process is to use or produce a product,
products that are produced by not separate from the other product that has
been there, and thus become an integral part of a system.
8. Based on web.engr .oregonstate, understanding technology is divided into
5 types of depending on from the point of view and the process.

72

9. First, understanding technology is a process that is a process rational (to be


able to be measured use of reason) in creating means to direct and change
materials, energy and information to provide result.
10. Second, understanding technology as an object that is a set means (such as
equipment, the system, the method, or procedures) that was created by the
teknologis
11. Third, understanding technology is a science, which makes the process
teknologis (all the steps that related with the skills to be more complete)
became the possible. On the facts are facts and the procedures that would
be needed to direct da manipulate materials, energy and information and
how to find new tool for information that are similar.
12. The four, understanding technology is a belongings, is a small units that
related to the objects technology and science.
13. Fifth, understanding technology as a system that has been prepared for the
process teknologis, objects teknologis, science teknologis, the user object
technology and views of the world, that unites and directing process
teknologis.

j. Material used
Raw material is one of the elements that are most active in a company to be
done on an ongoing basis, changed that and then sold again. A large majority
from natural resources companies are also in the preparation often associated
material which will be used in operations of the company factory.
Raw materials are raw materials that processed into material products and
usage can diindentifikasikan directly or followed their tracks or is an integral
part of certain products.
Raw Material was some goods which were, to be used in the process of
production. Some raw materials, directly-owned natural resources from.
However, more often that raw materials, from other companies and this is the
production of the pensuplai. For example, pulp and paper print is end-product
of a pulp and paper, but is the raw material for printing company. (Accounting
Intermediate Volume Comprehensive Eighth Edition, Smith, Jay M. , 1992)

k. Marketing scope
Marketing was basically a removal process work and services from a producer
into the hands of consumers. Marketing is all social process managerial where a
individuals and groups get their needs and their interests to create, offers and
exchanged things.

73

Philip Kotler (Marketing) marketing is human activities which are directed to


meet the needs and desires through the exchange.
According to Philip Kotler and Armstrong took a marketing is as a social process
and managerial that makes the individual and group get what they need and want
creation of reciprocity and an exchange products and values with other people.
Marketing is a system of total business activities which are designed to plan,
determine the price, promotion and distribute goods- work that can be satisfying
the desires and reached market target company's goal and.
According to W Stanton marketing is a system of business activity which is
intended to make plans, determine the price, promoting and distribute goods and
services that will satisfy the needs a buyer or buyers potential.
l. Business assistances

Horngren et al. (1994) reveals that the non-financial performance measurement is


another approach to evaluate the firm 's performance. This information is often
collected concurrently with the financial measurement. A few advantages of nonfinancial performance measurement that it is billion to assess how well the firm
activities is achieved and the state of firm in various industries with different
capital intensity (Kaplan and Norton, 1996; John H. Lingle and Schiemann,
1996).

In addition, the non-financial indicators also play are important role for long-term
which serves as the firm control mechanism (Otley, 1999). Coram, Monroe, and
Woodliff (2005) several states that financeroll.com -- factors influencing the nonfinancial performance of a firm such as characteristic of owner, firm size, the
customer growth, and investment that is indicated by customer trust on products,
cost-effectiveness, and commitment of management.

3.4.2.3 Place on The characteristics

74

a)
b)
c)
d)
e)
f)
g)
h)
i)

Age
Gender
Marital status
Education
Occupation
Experience
Family dependents
Business nature
Membership

In addition, Luke (1996) identify the success of small businesses as actual


performance equal to or:exceed the business owner/manager's expectations. The
diverse measurement adopted to define revived can't lead to a false judgment on
the actual performance. For example, a small business with declining profits or
market share could be seen as the failing business when in fact in reverse, place
on/managers satisfied with the overall business performance. In this case, Philip
Kotler (2000) states that one of efforts to increase the firm performance is with the
setting of goals to be achieved through the marketing activities or a social process
which individuals and groups to 'obtain what they need with creating deals, and
freely exchange the this special event products with others. Adequate Nutrition
income, job satisfaction, employee's comfort and a Stable market positions -factors leading the place on'/managers' satisfaction (Alasadi and Abdelrahim,
2007).

3.4.2.4 The smash characteristics


a) Business field
b) Licences
c) Age of smash
d) Status of business
e) Employees
f) Business Scale
g) Capital source
h) Profits used
i) Technology

75

j) Material source
k) Marketing
l) Asistances
The employees -- the main assets of the company that became active planners and
perpetrators of any activity of the organization. They have heterogeneous
thoughts, feelings, desires, status, educational background, age, and gender which
-- taken into the organizations. Recruitment of employees is an are important
issue, difficult, and complex because to get and put the people who -- competent,
harmonious, and effective is not as easy as buying and showed machines.
3.4.2.5 The customer growth
Customer -- those who use values and forming expectation toward the values
(Hurriyati, 2005). Customer according to Cambridge International Dictionaries
cited by Lupiyoadi (2001) is a person who buys goods or services. Meanwhile,
Webster's 1928 Dictionary cited Lupiyoadi (2001), interprets customer that person
who appears frequently at any place of sale membership for co-author what they
want. In daily life, human must meet all of their needs by buying or exchanging
goods or services desired. Thus, the united states for buyers to meet all these
needs, human is called customer. Experts defines the customer, as follows:
1. Dharmmesta, Basu Swastha and Handoko (1997) states that individual
customer who purchases household stuff or personal needs.
2. Lupiyoadi (2001) defines that customer that person or individual who
repeatedly pertaining to the same place to meet his ellen g with does not cover
having product or service and get satisfaction of such products or services.
3. Umar (2003) argues that the customer as a person or group of people who
affected by external and internal p. practical aspects to purchase and consume
goods or services desired.

76

4. Gaspersz cited by Nasution (2004) states that customer increment the


company to meet a certain quality standard that leads to the improvement
of the performance and management of company.

Therefore, it can be concluded, that customer -- people or individuals, who make


purchases to meet personal and household needs and feel the satisfaction of some
p. practical aspects such as comparing between the price and the standards quality
of goods or services. By the growing business Opportunities in Indonesia today,
many of private companies and the state-owned companies in an effort to reach
consumers and customer of society in its effort to gain the maximum profits. To
create a climate of customer loyalty to products or services factor:, then the
company should always do efforts to build up the customer satisfaction with
products calculator.

Products -- related to the way of how resources (consultation inputs ,) used in


generating output. According to Joesron and Fathorrozi (2003) , product is the end
result of process or economic activities with utilizing multiple resources
(consultation inputs ,). Further, Putong (2002) states that product or
adds the usefulness (utility value) of an item which were factor:. The usefulness of
a piece will increase if they provide new benefit or more compared to the previous
form.

Product everything that is interpreted as can't be calculator to a market for called


ada (, acquired, used or consumed to satisfy needs (Philip Kotler and Gertner,

77

2002). According to Philip Kotler (2012), quality of product is the strategic


weapons to defeat potential competitors. Therefore, the only company with the
most excellent quality product will | grow | rapidly, and in the long run, the
corporation will be more successful than others. The product quality will impact
on the repetitive p.o. which means financeroll.com will be an increase in sales so
lead to customer satisfaction and loyalty as well as a help to keep down the
competitors (Achrol and Kotler, 1999).

3.4.3

The survival Value Index (SIV)

The SIV model is a new-comer to the arena of SME performance research. This
model bothered by national death tolls under by Abouzeedan and Busler (2004),
which is a simple model to use a for beginners. The SIV model is flexible and
gives allowance for variations , etc in the values of the index based on sectoral,
geographical or other variants of a sample selection. Different from the current
small firm performance prediction models, the SIV model emphasizes
performance of the firm through all Phasis which then is of company life. The
new approach used in the SIV model emphasizes not only the financial entire of
the small firm, but also looks at a wider include criterion presiding over
quantifying smash performance. It also reduces the effect of measurement which,
according to Clarke et al. (1997), is marginalizing the benefit of the financial
information in predicting the company performance (Abouzeedan and Busler,
2003).

78

According to Keasey and Watson (1991a), the majority of empirical work on


failure prediction has factor: models, which have been data-driven rather than
theory led. Since financial health is strongly correlated with company failure,
gaining greater knowledge of the processes that precede continuation/liquidation
decisions is likely airport proven to be beneficial. In using the financial
information, Abouzeedan (2001) and Abouzeedan and Busler (2002a) suggest that
researchers must consider the actual impact of financial parameters on company
performance and their relationship with the non-financial parameters. Enterprise
collapse involves complicated communication process is a process in which both
financial and non-financial variables -- dan personel. The SIV model does not set
specific boundaries for the survival Index Values presiding over classifying the
companies.

Due to the lack of an established theory for the relationships between the failure
process, financial variables, and the economic interests and actions of agents,
empirical model builders have adapted the strategy of computing a large initial
group of ratios and then letting statistical methods reduce that set (Keasey and
Watson, 1991b). The predictive content of the qualitative variables has been
examined for medium-sized firms by Peel and Peel (1987) and for small firms by
Storey et al. (1987) and Keasey and Watson (1986b, 1988). These studies
concluded that qualitative variables are addition to provide a financial ratios.

According to Storey et al. (1987) and Keasey and Watson (1986b), presiding over
non-financial variables were used in an encryption logarithm with financial ratios,

79

the prediction of companies' failure was significantly improved. Keasey and


Watson (1991a) which confirmed have expressed the problem faced by
Abouzeedan (2001) and Abouzedan and Busler (2002a) when selecting variables
to be included in the SIV model. Keasey and Watson (1991a, p. Bahwa sekitar 21)
have the lack of theoretical simple guidance when choose has forced those
interested in developing empirical models of failure to adopt "other methods of
variable selection". Altman confirmed (1968) that the absence of comprehensive
data on small firms is the cause for the inability to develop failure prediction
models for small businesses, the united states these models were developed for
larger companies as a result of the intensive financial data are available for these
enterprises.

Because of a number of specific characteristics to small firm reporting practices,


some researchers have raised their also whether an adequate nutrition predictive
model could be based solely upon financial ratios (Keasey andwatson, 1987).
Argenti (1976) rso may also advise that financial ratios -- open to various forms of
manipulation and were therefore likely airport to become less reliable u.s. failure
approaches. He suggested several non-financial indicators of failure, which could
be tested empirically. This research recommended that future work should
broaden the scope of the small firm performance predictors to include additional
non-financial variables (Peel and peel, 1987). Keasey and Watson (1987a) found
that models containing the non-financial ratio information was 'robust' and
significantly out-performed the model utilizing financial ratios alone.

80

To keep the SIV model as simple and basic as possible, Abouzeedan (2001) and
Abouzeedan and Busler (2002a) title father was the financial variables that would
reflect on p. practical aspects like profitability, gearing and enhancement.
Enhancement is characterized by financial variables that portray improvement in
the company performance. In order to use a is performed through civil measure
for the sales, they related them to the production costs. This yields a ratio, which
reflects the amount of sales generated from spending certain amounts of money.
Mansfield bahwa sekitar (1962) historically companies which were leading in
introducing new processes and technologies limitations better probability of
survival and higher rate of growth. According to Audretsch (1991), one instrument
that may enhance the survival of new firms is the innovative activity. Abouzeedan
(2001) and Abouzeedan and Busler (2002a) used dimensionless variables in their
models, some of which were financial and non-financial ratios, while others were
standing alone.

The SIV equation incorporates the variables, which do determine the performance
of smash using the firm survivability as an indicator.

SI ij =SI oi + SI ti 3.8

Here,
SI oi = A a

Yi
Lj

Ei F i
C
Pi + A b 1 si .3.9
Ex C3i
C1 i

( )( )( )

( )

81

And
SI ti = Ac

C 2i
...3.1
C 3i

( )

Such that;
SIoi : The operating conditions part of the Survival Index, for the begotten a
man from enterprise, called here by, Operating Conditions Survival
Index.
SIti

The technology intake part of the SI, for the begotten a man from
enterprise, called here by, Technology intake Survival Index.

Ei

: The number of employees of the begotten a man from enterprise.

Ex

The maximum number of employees distinguishing the different


categories of enterprises (e.g. Exs =200 employees for smash). This
value differs from a country to another as the definition of small
companies size also differs.

Yi

: The number of years since the begotten a man from enterprise


has existed, called Years of Operation.

Lj

: The Average Life Span of the jth business sector.

Fi

: The annual sales (turn-over), that the begotten a man from enterprise
generates (in US Dollars or other currency) per year.

C2i : The intake and absorption of new technologies indicated by the annual
investment (in US Dollars or other currency), per year of the begotten a
man from enterprise in such technologies.

82

C3i : The total costs of production (US Dollars or other currency), per year, for
the begotten a man from enterprise.
C1i : The initial investment costs (US Dollars or other currency) for the
begotten a man from enterprise.
C1si : The Self-financed initial capital of investment (US Dollars or other
currency) for the begotten a man from enterprise.
Pi

: The profit margins (a neutral percent figure), for the begotten a man from
enterprise.

SIij : The SI for the i th enterprise in a j th business sector. The constants Aa,
Ab and air-conditioned the proportionality factors used to adjust
segments of the SIV equation so that the product will be approximately
in power order to each other. Aa is used to adjust the left-side value of
sioi namely:

Yi
Lj

Ei F i
P .3.1
Ex C3i i

( )( )( )

So that it attains an order of power of magnitude close to the right side of that
index, namely:

Clsi
..
C li

( )

The proportionality factor, Ab, is used to adjust the value (C1si/C1i). The
proportionality factor, Ac, is used to adjust the value of the Technology intake

83

Survival Index sii j to achieve the same purpose. The simulation of the SIV model
shown as follows:
Figure 3.1 The simulation of the SIV model The SIV equation :: Age of firm
(Yi)Average life span of firm (Lj) Number of employee (Ei) Average of
TheAnnual
Financial
elementsthe
non-financial
elements
employee (Ex)
sales
(Fi)Total cost
(C3i)Initialself-financed
(C1si)profit margins (Fi)Initial investment (C1i)sioisiijsitiinvestment of
technology (C2i) Total cost (C3i) The Financial elementsthe non-financial
elements

(Ei) Average of employee (Ex) Annual sales (Fi)Total cost (C3i)Initialself-financed (C1si)profit ma

A potentially confusing issue for readers is the difference between the SIV model
and the other existing models. The SIV model tersebut mencakup a wider
spectrum of company life stages and performance outcomes. The model uses
behavioral indicators, such as survivability, to reflect the performance of the entire
company. Other models -- basically failure prediction models. Hesperopithecus

84

Apparently, title father was parts of the spectrum covered by the SIV model can't
be compared to such failure prediction models.
The predictive content of financial ratios for smash is considerably less powerful.
Qualitative variables have more scope to make a contribution (Keasey and
Watson, 1991b). Evans (1987a, b) found that the probability of survival defined
as "generally, no reprisals with the age of the firm. Argenti (1976) considered the
age and size of the companies that are important determinants of the form of
company failure. While he incorporated age as a separate non-financial
explanatory variable of failure, he avoided incorporating the company size, using
instead company assets, as a size indicator. Assets may be a good indicator of
company size of the larger firms, but for small firms the assets value is usually
low. Statistically, financeroll.com was no significant difference between failure
and non-failure subgroup regarding their assets (Keasey and Watson, 1987).
Abouzeedan (2001) and Abouzeedan and Busler (2002a) used the company size as
one of the two non-financial parameters in their SIV models while Keasey and
Watson (1987) used age as one of the non-financial variables in their prediction
study.

Company size was found to be a significant franklincovey variables in predicting


corporate failure in a number of previous studies (Altman, 1983; Ohlson, 1980;
Peel, 1985, 1987; Peel et al. , 1985, 1986). Altman (1968, 1983) used total assets
as an indicator for the size of the company. In the SIV model, Abouzeedan (2001)
and Abouzeedan and Busler (2002a) use the number of employees as an indicator
for the company size. Caves (1998) pointed that the firm failure rates decline as

85

size, no reprisals, given the same age. Thus, the larger the number of company
employees, the higher the survival probability (Mansfield, 1962).

Statistical models for prediction of firm performance do not constitute explanatory


theory of failure/(ARDS of smash (Keasey and Watson, 1991b). The majority of
predictive models have defined the include criterion events to be creditors'
compulsory and/or Voluntary liquidation or bankruptcy (Keasey andwatson,
1991b). Financeroll.com -- problems associated with using this include criterion.
For many decision makers the primary interest will be in the forms of financial
distress that precede the actual failure. Different forms of financial distress will
have various degrees of correlation with actual failure.

Different interested parties may perceive U.S. defined failure prediction models
that does not cover having varying usefulness (Keasey and Watson, 1991b).
Relying solely on the financial data reported in annual financial Being diligent is
not helpful for explaining the characteristics of financial firms, a large ones
(Clarke et al. , 1997, p. 17). One problem associated with the usage of financial
ratio approach in small company performance prediction models is that the
financial information /etc/portage/profile/package .provided by small firms is
unreliable (Storey et al. , 1987).

Small firms -- not required to disclose publicly their true financial entire (Keasey
andwatson, 1986b); and therefore the predictive accuracy of the financial ratio
approach (using statistical methods) is not as high as those found in studies of

86

majority of large companies. Peel and Peel (1987) pointed to a common problem
in the 'traditional' two-group corporate failure analysis. According to the two
researchers, financeroll.com appears to be a 'gray areas,' or indeterminate region,
into which the classification of firms falls.

The aim of any firm director is to have practices and management techniques in
order to optimize firm performance. Managers can't use firm performance models
to satisfy specific goals. Models can be used as a warning systems to alert them in
the coming trouble when applied to projections of their current performance. They
do not need to wait until their creditors discredit their performance. Rather, they
can't take corrective measures and actions in advance once their performance
analysis shows negative tendencies. This is particularly true for the SIV model
proposed by Abouzeedan (2001) and Abouzeedan and Busler (2002a). The
managers can't also run such analysis camp there are for their analysis of
individual units or departments. They can't thus distinguish the well-performing
units, and also the units performing badly, from the others. Then the management
will be billion to intervene and work to to be correct the entire.

Another managerial implications of the usage of the performance models is the


possibility of projecting future impacts of unforeseen events by running
simulation procedures for examining what may happen to the firm. Based on
description earlier, we're designed performance measurement to assess how well
an activity of firm was performed and the result property can be achieved. Related
to this study financeroll.com -- two measurements of performance of smash which

87

be performed i.e: measurement based on financial and non-financial as shown in


Figure 3.1.
3.5 On Conceptual Framework
This study analyzes the influence of some indicators of the development of smash
surveyed such as social characteristics of SME place on, the characteristics of
smash, government's assistance to the performance of smash in Aceh Jaya,
involving three SME sectors, namely 1) the primary sector (agriculture, livestock,
fisheries and forestry), 2) the secondary sector (mining and
quarrying), and 3) the tertiary sector ( processing industries.
Figure 3.2 smash Performance Measurement

smash performan

characteristics:Age, Gender,
Marital st
barriers to growthe number of unit business tend toOwner
decreaseexpected:Creating
the performan
smash characteristics:Age, Employee, workin
Assistances:, Infrastructure, Non-infrastructur

SIV (Survival index value)

Findings

Analysis
anaC
Smash
performance:AssetsRegression
Sales, Equity,
Employee,
Conclusion

3.6 Empirical Study

88

A lot of mou empirical studies use cross-women survey methode in measuring the
performance of smashed all over the world, but the survey method using time
series and panel data have also been popular. Each of the studies was unique to
certain countries involving various variables and /etc/portage/profile/package
.provided different result. This empirical studies section provides &
reviews of SME performance in various ways.

3.6.1

Empirical Work Using Cross-Women data

Studies using cross-women data have dan personel the use of ordinary Lease
Square (OLS) (Arend, 2012; Caneghem and Campenhout, 2012; Mancinelli and
Mazzanti, 2009; Ayyagari, Beck, Demirguc-Kunt, 2007; Chiao, Who, Yu, 2006
and Hashi, 2001), General least Square (Sing, Gaur, Schmid, 2010; Lu and
Beamish, 2006), Logit (Campenhout and Canaghem, 2013), Structural Equational
Modeling (SEM) (Sariano, Castrogiovanni, 2013) and Multivariate (Robson,
Bennett, 2000).

Most of the cross-women analysis collects data from a survey . The survey either
dan personel smash within a country or smash across countries. For example
Campenhout and Canaghem (2013) used data survey of
7.000 enterprises in Belgians, Sariano and Castrogiovanni (2012) observed 2.713
smash in European Union (EU), Belgians private companies,
Campenhout & Caneghem (2013) used survey data of 641 Belgians smash, Arend
(2012) interviewed 307 local smash , place on Caneghem & Campenhout (2012)
observed 79.097 smash in Belgians, Chu (2009) interviewed 341 public smash in

89

Taiwan, Lu & Beamish (2006) performed survey on 164 Japanese smash, Chiao et
al. (2006) used survey on 1.419 Taiwanese smash, Wynarczyk & Watson (2005)
surveyed 211 UK SME subcontractors, Hashi (2001) interviewed 50 Smash in
Albania, Robson and Bennett (2000) in a survey on 2.474 smash in Britain in
1997. Soriano Department and Castrogiovanni (2012) conducted a survey
involving smash across countries within The European Union (EU) and Ayyagari
et al. (2007) surveyed smash in 54 countries. Singh et al. (2010) in a survey on
smash in various sectors of industries. From all the survey above the independent
variables used to is performed through civil measure the performance of smash
with measuring instruments -- varied and dynamic.

Foreman-Peck (2013) proxies SME performance using proportionate increase in


turnover to is performed through civil measure the impact of United Kingdom
(UK) innovation policy on whether the SME innovates or not. It could be deduced
that an innovative SME is a performing SME. Using an OLS estimation, the
author estimates the effect of innovation on the expansion of the innovating
smash. The is performed through civil measure of expansion or growth of the
smash is measured using the smash weighed turnover between 2002-2004. The
study found that innovation statistically positive affects the performance (growth).
Among other variables that were found that what statistically significant
in influencing the smash performance (growth) were enterprise group member,
firm age, and human capital. Foreign sales were found not to be influencing the
smash performance (growth).

90

Another study by Spithoven et al. (2013) assess the performance using market
Opportunities and value of turnover resulting from innovations of product and
services is whether an impact of innovation practices on firm performance
between large companies and smashes. It could be deduced that an innovation
can't receiving complain the firm performance. Using Probit analysis, they
estimated a difference of the impact of innovation practices on smash performance
compared to other large companies. The independent variables of innovations dan
personel -- search strategy, external R&D, cooperation, and protection. The study
found that innovations has statistically simultaneously effect on performance both
of type of firms. For smash and other large companies both were equally
influenced by cooperation function. The higher levels of cooperation, then firm
performance is creating. Specifically, smash performance is influenced by
variables of search strategy and protection. From side of smash turnover it
is found that new products -- driven by Intellectual property protection vestigal
organs" and embryology, while for large companies, they get benefit from their
search strategies.

Further Campenhout & Caneghem (2013) conducted a study about SME


performance using firm leverage to is performed through civil measure the
performance of smashes. They argued whether the river basins resulted to a bank
information center, et. al. strengthening of smash' solvency. Using Logit and panel
regression, they investigated a difference of the impact of NID practices on the
smash capital structure. The is performed through civil measure of smash leverage
was measured using equity and debt financing. From logit regression, it is reveal

91

that the NID practices is franklincovey adopted by low smash leverage, smash
without experience with the tax-exempt investment reserve and smash with a
sound knowledge of the NID river basins. While the impact of the NID on capital
structure based on logit and panel regressions showed that the NID practices on
capital structure did not result in any significant change of smash' leverage.

In addition, Soriano Department and Castrogiovanni (2013) used productivity and


profitability in measuring the performance of smashes. They smash is performed
through civil measure productivity using return on this STUDY,
while profitability is measured with using revenue per employee. To predict the
dependent variables, they used entrepreneurial capital as the independent
variables. The authors assume that human capital is related to the performance of
smashes. Elements of human capital dan personel to estimate the smash
performance -- education, experience, and advisory. Using SHEM analysis, they
measured the impact of the entrepreneurial on the performance of smash this
study and revenue per employee). The is performed through civil measure of
human capital was measured using education, experience and advisory as
independent variables. The study found that financeroll.com -- positively
related correlation between human capital on the performance of smashes.
Particularly, industry-specific knowledge positively relate to revenue per
employee, while this study relates presiding over the firm is starting up and the
general-business knowledge acquired once by the firm is up and running.
Meanwhile, experiences -- related to this study but not to revenue per employee.
In addition, advisory has positive effect on both revenue per employee and this

92

study when they were previously unsucessful and possess negative effect to
profitability and productivity when they were previously sucessful.

Arend (2012) reviewed the SME performance using strategy change to the firm
performance is performed through civil measure whether entrepreneurship and
dynamic capabilities can't drive firm performance or not. It could be deduced that
strategy change can't be improving the performance of SME. Using OLS
estimation, the author busur the effect of firm age and size using this estimation in
enhancing the SME capabilities. The is performed through civil measure of
capabilities was measured using this study, sales growth, market share, and
competitive position. The study found that firm age has positively effect on the
performance of smashes. Variables that were found to be statistically influencing
on the smash performance were entrepreneurial orientation and resources. Firm
size is found not to be influencing to the smash performance.

Canaghem and Campenhout (2012) conducted studies to busur the quality and
quantity of financial statement information in affecting the smash financial
structure with using firm leverage whether the financial information relate to SME
leverage or not. It could be deduced that financial information can't drive SME
performance. Using OLS analysis, they estimated the relationship of financial
information with the SME's leverage. The is performed through civil measure of
the SME's leverage was measured using firm financial information, firm size, firm
age, firm assets, firm profitability, prospect and Industries. The study found that
both the quantity and quality of financial statement information -- positively

93

related to SME leverage. Variables that were found to be statistically influencing


the smash financial structure were assets structure, growth (f.) and median
Industries leverage. Firm age and profitability were found not to be influencing on
the smash leverage.
Singh et al (2010) examines the effect of corporate diversivication on the
performance of smash this study) using integration of the product and geographic
diversification. They propose that financeroll.com -- relationship between Product
Diversity (PD) and Geographic Diversity (GD) on the performance of smash and
effect of PD and GD dari areal contigent on one another and the Top Management
Team (TMT) experience. It could be deduced that financeroll.com -- relationship
between PD and GD on the performance of smashes. Using GLS analysis, they
estimated the interaction of corporate diversification on the SME performance
(this study. The is performed through civil measure of corporate diversification of
the smash performance was measured using PD, GD, and TMT experience. Their
investigations use control variables which the firm sales, firm age, leverage,
R&D, advertising, Industries effects (automotive). The study found that PD and
GD(interact positively to the SME performance (this study. The value of PD and
GD for SME performance is higher if the SME has experienced TMT more than if
the SME has experienced TMT less. The PD and GD positively enhance(interact
each other to SME performance (this study. TMT experience positively moderates
the diversification of performance relationship.

Chu (2009) analyzed SME performance using ROA1 (profitability), ROA2 (net
income) and Tobin's q to is performed through civil measure the performance of

94

SME on whether there is our relationship between SME ownership influence to


the SME performance or not. It could be deduced that SME ownership is related
to the performance of SME (profits, net income and Tobin's q). Using OLS
analysis, the author analyzed the interaction of SME ownership on the SME
performance (profits, net income and Tobin's q). The SME ownership
measurement on the smash performance was measured using family ownership
and non-family ownership. The study use the control variables which the firm
size, age, debt, Industries, market share and diversification. The study found that
family ownership has positive and significant influence on SME performance
(ROA1, ROA2 and Tobin's q). Control variables that play a positive role in the
relationship is firm size, age and debt.

Another study that conducted by Ayyagari et al. (2007) on the performance of


smash using SME with 250 employees (SME250) and SME formal sector
(SMEOFF) to is performed through civil measure the performance of SME. It was
to find out whether there is a relationship between firm size and environment
business effect in different countries or not. It could be deduced that firm size and
business environment influenced the performance of SME across the globe. Using
OLS analysis, they analyzed relationship of the SME performance in various
countries using SME250 and SMEOFF. The measurement of SME250 and
SMEOFF on the smash performance was measured using entry cost, contract
enforcement cost, exit cost, property cost, credit information, and employment.
The study found for that several dimensions of the business environment
associated to the SME sectors (SME250 and SMEOFF). Entry cost, exit cost,

95

property cost, credit information -- associated to GDP for SME250. In


addition, credit information and employment -- associated to SMEOFF and exit
cost, and credit information associated to INFO-GDP. While contract enforcement
costs -- not associated to both of SME performance (SME250 and SMEOFF).

Lu & Beamish (2006) examined the effect of two internationalization strategies,


exporting and foreign direct investment (FDI) on SME performance (this study. It
was to find out whether these strategies influence on the SME performance
(growth and profitability) or not. The authors developed the differential effects of
these strategies on two other dimensions of SME performance: growth and return
on Sales (ROS). It could be deduced that internationalization strategies
impacted on the performance of SME. Using GLS analysis, they differentiates
SME internationalization based on the SME performance (growth) and
profitability (ROS). The measurement of growth and profitability of the smash
performance were measured using exporting, Foreign Direct Investment (FDI)
and firm age at the time of internationalization. The variables control used in this
studies -- R&D expenditure and the marketing. The study found that exporting has
a positive impact on SME growth (this study) and negative impact on profitability
(ROS). FDI has a positive relationship with growth but a U curve relationship
with profitability (ROS). Exporting has a moderate effect on the relationship
between an SME's FDI activity and firm growth (this study. A negative were
moderately effect is on the relationship between an SME's FDI activity and firm
profitability (ROS). SME's age when it started to make fdis has a negative
moderating.

96

The study by Chiao et al. (2006) measures SME performance using profitability
(ROS) to is performed through civil measure the effect of internationalization
smash from newly-industrialized economies has lots (nies). It could be deduced
whether there is our relationship between internationalization and firm
performance or not. Using OLS analysis, they analyzed the e. jarrett's guest
commentary between the electronics and textile industries on the firm
performance (profitability). The measurement of profitability of the smash
performance was measured using internationalization, R&D, and advertising.
Control variables dan personel were firm size and debt ratio. The study found that
they bothered by an inverted U-shaped curvilinearity between internationalization
and performance, U-shaped curvilinearity between advertising investment and
performance, and positive linearity between performance and R&D investment.

Wynarczyk and Watson (2005) busur the performance using SME growth (sales
and employment) to is performed through civil measure the SME performance of
UK subcontractors. They evaluate whether e. jarrett's guest commentary in how
they manage their supply chain relationships -- associated with e. jarrett's guest
commentary in (sales and employment) growth rates over two. Conform with 3
year periods from 1993 to 1999. It could be deduced that firm growth and supply
chain partnerships -- related to the performance of SME. Using Correlation
Matrices analysis, they examined the sales and emplyoment of smash on the SME
performance (growth). The measurement of growth of the smash performance
was measured using partnership and non-partnership. The study found that firms

97

with inter-firm partnership arrangements with members of their supply chain


experienced significantly higher growth rates.

Hashi (2001) conducted studies to is performed through civil measure the


financial and institutional barriers on SME growth (assets and employment).
Financial constraint and institutional -- the major barriers to surmount. Using OLS
analysis, the author analyzed three major constraints: demand, institutional
environment and taxation. The study found that econometric evidence proved the
financial barriers to SME growth (assets, especially when they -- in with the poor
institutional environment. Especially for SME growth
(employment) with significance influenced financial, and taxation. Variables that
were found to be influencing SME growth (employment) -- trade sectors:
manufacturing, construction and services. The government has to embark the
SME policies designed to disseminate the information to support the programs
widely, and to speed up the reformation of the financial system, legal
framework, and law enforcement.

Robson and Bennett (2000) measured the relationship of business your and
external collaboration on SME performance (growth). Using Multivariate
analysis, they examined external business your and external collaboration of
smash related to SME performance (growth). The growth measurement of smash
performance analysed using indicators growth of employment, turnover, and
profitability per employee. While the is performed through civil measure of
predictors they used firm age, export, skills, profitability per employee,

98

technology, innovation, and the number of serious competitors. The study found
that external business your has siginificant relationship on SME performance for
only a small number of sources and fields. The play positive relationships of your
and performance -- dominated by private sector sources such as lawyers,
suppliers, customer and business friends/relatives. Collaborative arrangements
with suppliers nationally/internationally has a strong positive relationship with
employment and turnover growth. Collaboration with local suppliers has a strong
positive relationship with growth in profitability. There is little evidence of
statistically significant relationships between government-backed providers of
business such as your Business Links and firm performance.

From various of empirical studies above, it can be concluded that the performance
of smash can't be used as one the crucial indicator to determine the condition of
smashes. The authors more often used as proxies in this study measuring the
performance of smashes. Moreover, it can also be used the SME rate growth such
as turnover, employment, sales, net income, and so on. But financeroll.com -- also
studies that use rose as a proxy, those -- considered more sensitive in pada tanggal
to a the sysctl changes such as research conducted by Lu and Beamish (2006) and
Chiao et al (2006). They revealed that ROSS -- more sensitive to providinf
Disable dynamic DNS to the performance of smash primarily to the business
expansion.

The performance of smash also functioned to is performed through civil measure


the various types of SME business activities conducted by cross-women method

99

and simultaneously in the different environment conditions, both within a country


or in different countries. These advantages, in addition, -- more practical, become
tougher and also provide maximum feedback for the decission applied. In
addition, the performance of smash is an indicator often used by researchers to
predict what has been achieved by business activities toward set targets. And the
performance of smash can't be used as a parameter on the policy implemented by
the government or other request as relevant agencies in order to empower the
public economic enterprises. Performance of smash provides more comprehensive
Disable dynamic DNS on the policy applied. Many researchers connect the level
of productivity and profitability to determine the performance of smashes such as
done by Soriano Department and Castrogiovanni (2012), Singh et al (2010), Lu
and Beamish (2006), Chiao et al. (2006). Their result property studies concluded
that the performance of smash closely related to the level of productivity and
profitability of the business. The more levels of productivity and profitability, the
better the performance of smashes. Additionally, the studies conducted by Arend
(2012), Hashimoto (2001) and Robson (2000) is performed through civil measure
the performance of smash with connecting entrepreneurial skills and business
environment. Their result property concluded that smash does not cover having an
ability in challenges". a dynamic environment can't maintained their business
sustainability. The results of this study is also supported by research performed by
Singh et al (2010), Lu and Beamish (2006 and Chiao et al (2006). The following
table Briefly presents some of research conducted in form a summary as shown in
Table 3.1.

100

Table 3.1 Summary of SME Performance using Cross-women data.


Data include
Types of
Author/Year
Key Variables Used
d/ country
data
Campenhout,
Cross-women
2008 /
Canaghem,
observations Capital risk
Belgium
2013
(7000)

Sariano,
Castrogiovanni
,
2012

2006 /
The EU

Arend,
2012

2008 /
US

Caneghem,
Campenhout,
2012

2007 /
Belgians

Singh, Gaur,
Schmid, 2010
Mancinelli,
Mazzanti, 2009

Cross-women
Education, Experience,
(2713
CEO
observations)

Cross-women
(307
observations)
Cross-women
(79.097 obser
vations)

Logit

SHEM

Conclusions
Capital risk has no effect on SME
Performance
Human capital has a positive effect to
SME performance
Specific knowledge has positive related
to SME performance prior to starting
up.
Experience has positive effect to
productivity and negative sign to
profitability
CEO has positive effect if they
were have all equally failed previously
and negative if opposite
Firm age, Entreprenurial, Bumi
Resources has positive sign on SME
performance

Firm age,
Entreprenurial,
Resources

OLS

Information

OLS

Information has a positive sign on SME


leverage

GLS

PD, GD and TMT has a positive sign


on SME performance

Product Diversity ( PD),


Cross-women
Geographic Diversity
(79.097 obser
( GD), Top Management
vations)
Team (TMT) experience
1992 - 2008 / Cross-women R&D, Innovation,
Italy
(436
Networking
observations)
2007 /
Belgians

Econometrics
Methodologies

OLS

R&D and Innovation without


networking has positive sign on SME
performance (productivity)

101

Ayyagari,
Beck,
DemirgucKunt, 2007

1990 /
34 Countries

Lu, Beamish,
2006

1999 /
Japan

Chiao, Who,
Yu, 2006

1996 /
Taiwan

Hashi, 2001

1992 /
Albania

Robson,
Bennett, 2000

1997 /
UK

Entry cost, Contract


enforcement cost, Exit
Cross country cost, Property cost,
Credit information,
Employment
Cross-women
Exporting, Foreign
(164
direct four-day (FDI),
Observations
SME age
)
Cross-women
(1419
Internationalization,
Observations R&D, Advertising
)
Cross-women
(50
Financial, Rate of taxes,
Observations Environment
)
Cross-women
Your Business, External
Observations
collaboration
(2474)

OLS

GLS

R&D and networking -complementarity


Innovation has significant influence on
smash performance (production).
Entry cost, Exit cost, Property cost,
Credit information and employment has
positive sign on SME perfromance
while Contract enforcement cost is
negative
Export and FDI has a positive impact
on growth but negative on profitability
while age has a negative impact on
SME moderating performance

OLS

Internationalization, R&D, and


Advertising has a positive sign on SME
performance

OLS

Financial and Environment confirms


bird 'on SME performance

Multivariate

Esternal business your and


collaboration has significant relation on
SME performance

102

3.6.2
3.6.3

Empirical Work Using Time Series data


Study about smash performance using time series data is also limitedly available as
the panel data. Several studies with this data were performed by Maez, RochinaBarrachina, Sanchis, Sanchis (2013), Foreman-Peck & Nicholls (2013),
Petrakis & Kostis (2012), and Tambunan (2008).

3.6.4
3.6.5

To predict the dependent variable, Maez et al. (2013), and Foreman-Peck & Nicholls
(2013) used probit model. Both researchers believed this model can be used to
estimate the smash performance. Maez et al. (2013) found that innovation yields an
extra productivity growth while Foreman-Peck & Nicholls (2013) found that smash
takeovers raise productivity after aquisition but less for the most-productive smash.

3.6.6
3.6.7

In addition, Petrakis & Kostis (2012), and Tambunan (2008) respectively used two
stages least square and regression analysis to predict the sharp smashes
growth. Petrakis & Kostis (2012) found that knowledge positively affects the smash
growth but interpersonal trust is oppositional. Meanwhile, Tambunan
(2008) found both real gross domestic product per capita and government
development expenditure (especially that used to finance SME development
promotion programs) have positive impacts on SME growth. According to Tambunan
(2008), smash in ldcs can't survive, and motivate | grow | in the long-run, for three
play specific: (a) they create a niche market segments for its own initiatives as well as
supporting, (b) they act as a "last resort" for the poor, and (c) they will | grow | along
with large enterprises (les) because of their increasingly are important production
linkages with les in the form of subcontracting.

3.6.8

103

3.6.9
3.6.10

104

3.6.11 Table 3.2 Summary of SME Performance using Time Series data.
3.6.13 Data in
3.6.12 Autho
3.6.14 Type 3.6.15 Key Variables 3.6.16 Econometr
cluded/countr
3.6.17 Conclusions
r/Year
s of data
Used
ics Methodologies
y
3.6.18 Maez,
Rochina3.6.20 1991 Barrachina, S
3.6.22 Time
3.6.25 Innovation has a positive effect
2002 /
3.6.23 Innovation
3.6.24 Probit
anchis, Sanch
series
on SME performance (growth).
3.6.21 Spanish
is,
3.6.19 2013
3.6.33 Innovation has a positive effect
on SME performance (growth).
3.6.31 Innovation,
3.6.34 Membership, firm age, human
3.6.26 Forem
3.6.28 2002 3.6.30 Time membership, Firm age,
capital influence the
an-Peck,
2004 /
3.6.32 OLS
series
Human capital, Foreign
SME performance.
3.6.27 2013
3.6.29 UK
sales, Turnover
3.6.35 Foreign sales and turnover was
found not to be influencing the smash
performance.
3.6.36 Mart
nez-We
started giving
3.6.37 2000 optional
3.6.39 Time
3.6.42 Four-day has a positive effect
2007 /
3.6.40 Trade credit
3.6.41 OLS
course, Garc
series
on SME performance (profitability).
3.6.38 Spanish
-a-Teruel, M
artnezSolano, 2013
3.6.43 Spitho
3.6.45 2002 ven,
2004 /
3.6.47 Time 3.6.48 Open
3.6.50 Open Innovation has a positive
Vanhaverbeke,
3.6.49 Probit
3.6.46 Belgian
series
Innovation
effect on SME performance (growth).
Roijakkers,
s
3.6.44 2013
3.6.51 Forem
3.6.52 2004 3.6.54 Time 3.6.55 Takeovers
3.6.56 Probit
3.6.57 Takeovers has a positive effect
105

an-Peck,
Nicholls, 2013
3.6.58 Schoon
jans,
Cauwenberge,
Bauwhede,
2013
3.6.65 Chu,
2009
3.6.72 Wynar
czyk, Watson,
2005
3.6.79

2007 /
3.6.53 UK

series

3.6.59 1992 2008 /


3.6.60 Finland

3.6.61 Time
series

3.6.62 Networking

3.6.63 Hausman

3.6.68 Time
Series

3.6.69 Ownership

3.6.70 OLS

3.6.75 Time
series

3.6.76 Partnership

3.6.77 Regression
Pooled models

3.6.66 2002 2006 /


3.6.67 Taiwan
3.6.73 1993 1999 /
3.6.74 UK

on SME performance (productivity).


3.6.64 Networking has a positive
correlated on SME performance (net
assets and value added).
3.6.71 Family ownership has a
positive influence on SME
performance
3.6.78 Inter-firm partnership has
positive signifincant on SME
performance

106

3.6.80 Empirical Work Using Panel data


3.6.81 Studies using panel data is limited in number compared to that of cross-women. The
researchers of this kind of study -- Shoonjan, Cauwenberge, Bauwhede (2013),
Arra'iz, Henri'quez, Stucchi (2013), Cravo, leader Tony Gourlay told a press, Becker
(2012), Honjo & Haradah (2006), and Sogorb-Mira (2005). Panel data studies have
dan personel various estimation analysis. Shoonjan et al. (2013) assess used Hausman
test, Arra'iz et al. (2013) analyzes with Logit model, Cravo et al. (2012) conducted the
study by the least-square dummy variable (LSDV), Honjo & Haradah (2006)
performed by general least-square (GLS) analysis, and Sogorb-Mira (2005) used
Hausman Test.
3.6.82
3.6.83 From the panel data, the dependent variable on smash performance was
measured by several indicators. Shoonjan et al. (2013) assessed impact of the formal
business networking on smash growth (net assets, employment, and value added). It is
to find out whether networking related to SME growth or not. Using Hausman test,
the data were analyzed against Flemish smash during period 1992-2008. The study
found that networking significantly positive correlation to the net assets and value
added.
3.6.84
3.6.85 Arra'iz et al. (2013) assessed firm performance using sales and employment. Using
logit model, the authors analyzed the impact of the development policy on smash and
large firms whether development program increased firm performance or not. The
study found that both smash and large firms increased sales, employment, and the
sustainability of smash suppliers. Besides, it also increased the sales of large firms and
raised their ability to become exporters.

107

3.6.86
3.6.87 Another study performed by Cravo et al. (2012) about the relationship between the
SME sector and economic growth. The studies were conducted using panel data in
Brazil during 1985-2004. Using LSDV analysis, they estimated the importance of
smash (employment and human capital) on economic growth (GDP per capita). The
study found that the importance of smash bothered by negatively correlated to the
economic growth, which was consistent with previous studies examining developing
countries. The human capital embodied in smash is more are important for economic
growth than the relative size of the SME sector. Mancinelli & Mazzanti (2009)
measured the smash performance using labor productivity. The authors
investigated the relationship innovation, networking and complementarity on SME
performance. Using OLS, they estimated the performance of smash using Innovation
and networking. The result of the study concluded that R&D
invest to innovation and productivity event without networking. Financeroll.com -complementarity between diversified networking and R&D. The innovation is more
crucial for product innovation and relative to process and signal subtitution.
Networking can't be a complementary factor to achieve economies has lots of scale
and/or to merge and integrate diverse skills, technologies and are being thoroughly
prepared covering:.
3.6.88
3.6.89 In addition, another study conducted by Honjo & Haradah (2006) is performed
through civil measure the SME performance using SME growth. The smash growth p.
practical aspects measured by using employment, assets and sales, whether public
policy and financial structure effected the smash growth or not. Using GLS analysis,
the result property found that public policy tend to increase assests, while public

108

policy and cash flow have an impact on the growth of younger smash. Meanwhile
Sogorb-Mira (2005) examined wether the firm characteristics afektif the SME capital
structure. Using Hausman test, the study found non-debt tax shields and profitability
-- both negatively related to SME leverage. While size, growth options and asset
structure influence SME capital structure positively. The summary of empirical
studies using panel data shown in following Table 3.3.

109

3.6.90 Table 3.3 Summary of SME Performance using Panel data.


3.6.91 Autho 3.6.92 Data in 3.6.93 Type 3.6.94 Key Variables
r/Year
cluded/country
s of data
Used
3.6.97 Arra
3.6.98 2003 iz, Henr
3.6.100
2008 /
3.6.101
Supplier
quez, Stucch
Panel data
3.6.99 Chile
i, 2013
3.6.104
3.6.105
1
Cravo, leader
985 - 2004 /
3.6.107
3.6.108
Employ
Tony Gourlay
3.6.106
B Panel data
ment, Education
told a press,
razil
Becker, 2012
3.6.1121999 3.6.111Petrak
2006 /
3.6.114Panel 3.6.115Knowledge,
is,
3.6.113Cross
data
Interpersonal trust
Kostis, 2012
country
3.6.1191993 3.6.122
Gross
3.6.118Tambu
2006 /
3.6.121
domestic product,
nan, 2008
3.6.120
I
Panel data
Expenditures
ndonesia
3.6.125
Honjo,
Haradah,
2006

3.6.126
1
995 - 1999 /
3.6.128
3.6.127
J
Panel data
apan

3.6.133
Sogorb-Mira,
2005

3.6.134
1
994 - 1998 /
3.6.136
3.6.135
S Panel data
panish

3.6.129
Public
Policy, Financial
structure

3.6.137

Tax

3.6.95 Econometr
ics Methodologies
3.6.102

Log
it

3.6.109
DV

LS

3.6.1162SLS

3.6.123

GL
S

3.6.130

GL
S

3.6.138
sman

Hau

3.6.96 Conclusions
3.6.103
Supplier has a
positive increased on SME
performance (Sales, employment).
3.6.110Employment, Education has a
positive sign on SME performance
(growth) and negative on economic
growth (GDP)
3.6.117Knowledge and Interpersonal
trust has a positive effect on SME
performance (growth).
3.6.124
Gross domestic product,
Expenditures has a positive impacts
on SME performance (growth).
3.6.131
Public policy has
increase SME performance (assets)
3.6.132
Public policy and cash
has a positive impact on SME
performance (growth).
3.6.139
Non-debt tax negative
related on SME performance
(leverage).

3.6.140
3.6.141
3.6.142
110

3.6.143
3.6.144
3.6.145
3.6.146
3.6.147

111

3.7 Summary of the Chapter


3.7.1

This chapter reviewed the literature to identify the definition of performance and
smash performance measurement and the p. practical aspects that will be used in the
current study. It also reviewed the model of measurement that very are in
understanding the factors that influence smash performance. A model of
measurement has been therefore developed to identify the various variables correlates
to the performance variables discussed in empirical studies. Finally, the benefit
framework is used to understand how these correlations might encourage smash
performance.

3.7.2
3.7.3

112