Operational Perspective of SMEs Performance and Competitive Priorities Practices: Path Analytic Approach

Literature review suggests a close link between operations strategies and organizational performance. Nevertheless, there is dearth of research investigating the association between operations strategies and SMEs performance in a developing country, Pakistan, context. Thus, the paper attempts to fill this gap by finding out the influence of operations strategy on firms’ financial and non-financial performance. In addition, it digs out what predicts the financial and non-financial performance of the firms. Sample data is drawn from 244 manufacturing SMEs and is analyzed by Path Analytical Model of Structural Equation Modeling (SEM). The results reveal an overall positive and significant influence of competitive priorities on firm performance. However, there is no direct effect of Delivery priority on Financial, and Cost and Flexibility priority on Non-Financial Performance of the firms respectively. Moreover, the financial performance is predicted by focus on Cost, Flexibility, and Quality priorities respectively. By the same token, the predictors of Non-Financial performance are Delivery and Quality strategies in order of importance. The paper is not without limitations and acknowledges the constraints of access to data, time, finance, non-inclusion of important mediating/moderating variables. Practically, it offers implications to managers and policy makers to employ a set of competitive priorities that drives enhanced firm performance in this business setting, and to devise policies in accordance with market demands that lead to improved overall productivity respectively. Theoretically, the paper contributes to a richer and finer understanding on the connection between operations strategy and SMEs performance in a developing country context.