The Influence Of Private And Public Finance, Organisational And Environmental Variables On The Performance Of Beauty Salons In The Free State, South Africa: A Theoretical Perspective

Abstract

Although small, micro and medium enterprises (SMMEs), such as hair salons, have harnessed a subtle combination of private and public funding to bankroll their business operations, literature on the performance of SMMEs in developing countries that often identifies finance as a major obstacle to the SMMEs’ survival, tends to be uncritical about the nature and sources of funding. In view of the fragmented nature of the literature that examines the isolated influences of private and public funding on performance, it becomes difficult to unpack the combined influence of these different funding sources on the performance of emerging firms. The problem is compounded further by the existence of limited literature that focuses on the environmental and organisational variables that mediate the funding-performance relationship in small emerging firms. This article considers a critical integrated approach that is located at the intersection of types of funding (private and public funding), mediating organisational and environmental factors and performance, in explaining the SMME performance, well aware that there is a potential for large firms to crowd out the growth opportunities of SMMEs and the insufficiency of the “wicked financial problem” in explicating the performance of such firms. The theoretical study adopts hair salons as a metaphor for an otherwise large, complex beauty and cosmetological industry in its exploration of the combined influence of private and public funding on the performance of SMMEs, with organisational and environmental concepts as mediating variables. The study deviates from mainstream studies that tend to accord significance solely to finance in SMME development and therefore, places financing, organisational and environmental variables as key variables in explaning successful business performance. The main contribution of this paper is a conceptual framework that is based on the view that financing-performance does not occur in vacuum, but is rather mediated by organisational (human resources, technological acquisition, staff training and education) and environmental (technology acquisition, firm location, competition) variables.