Understanding small business growth in South Africa using an integrated framework

Abstract

In South Africa, many small businesses need help to grow. In developed countries, small businesses do not have growth hurdles, mainly due to the understanding of the importance of growing small businesses. Unlike in developed countries, in South Africa, the growth of small businesses from an integrated public and private sector context need to be better understood. The reviewed literature showed that existing frameworks, especially with regards to the finance gap and resource theories, are generally sector-specific or not directly applicable to emerging countries. In this research, we postulate a simple yet practical integrated framework for understanding the growth of South African small businesses. A novel mixed methodology was employed to understand the intricacies underlying small business growth holistically. A nonprobability cross-sectional small business sample covering the economically important provinces in South Africa, together with thematic analyses, was used to gauge the state of small businesses qualitatively. A secondary bank database was quantitatively analysed to provide insight into the nature and type of relationships between small businesses and financial institutions. The results revealed that, in theory, product markets and human capital are the fundamental keys to understanding small business growth in the integrated framework. Knowledge of how best to access product markets from a small business perspective and an optimal product-market support system from the institutional perspective are found to be the main contributors to business survival. The understanding of human capital through the integrated funding framework is heuristically argued to enable funders to choose businesses with a higher likelihood of releasing innovative products and improve the likelihood of the business contributing more to the market returns. The research showed that understanding small business growth through the integrated framework provides a cornerstone on which private and public entities can interact to improve small business growth. In order to strengthen the integrated framework, the research can be extended more longitudinally over several economic business cycles, and the joint correlation of the framework keys on business growth can be studied