SME Project Evaluation: A proposed Action Research Approach Based on the Scientific Principle of Complementarity

Importance and Key Contribution [T]he potential reward … [for] devising a successful method of screening for entrepreneurship is so great that continual improvement is likely even if complete success cannot ever be attained... [ view full abstract ]

Importance and Key Contribution

[T]he potential reward … [for] devising a successful method of screening for entrepreneurship is so great that continual improvement is likely even if complete success cannot ever be attained (Casson 1982:212).

The continuing importance of entrepreneurs for economic development (Schumpeter 1934; Lavoie 2015), and the increasingly significant role of the SME business sector for local and regional economies have been widely recognised (Culliton 1992; European Commission 2015). Burke (1995:4-8) noted how previous researchers and Irish government efforts have emphasised the importance of increasing the supply of entrepreneurs. Using the terminology of Foreman-Peck (1985:10), Burke advocated that further efforts should be directed towards assessing which entrepreneurial ventures are likely to survive and grow by separating the ‘chaff’ from the ‘seedcorn’. It is intended that this paper will be part of a research effort towards the “continual improvement” (Casson 1982:212) in developing a method that can screen and evaluate SME ventures and help to ensure “an effective supply of enterprise” (Burke 1995:10).

The screening of entrepreneurial ideas is part of a wider SME business evaluation process (Lundström et al. 2014). Other researchers have commented that existing concepts and methods are inadequate for the purposes of evaluating SMEs (Hudson et al. 2001), and that there is an ongoing need for further enquiry into the link between entrepreneurship and SME performance (OECD 2015). An improved method of evaluation can benefit interested parties by channelling the “time and effort of the planning and financing process” in the direction of “more viable ventures” (Morse and Mitchell 2005:43).


Theoretical Base

Evaluation
Evaluation is the basis of all scientific endeavour, and as Scriven (2001:203) has pointed out: “there is no science without evaluation”. In a business context, evaluation is a process of discovery that leads to an informed judgement regarding the allocation of resources (Dhanaraj and Beamish 2003). As the use of the word ‘judgement’ implies, evaluation is a subjective process (Zábojník, 2014). Furthermore, the judgement of the parties conducting the evaluation will be influenced by their individual and group values that “inevitably shape [their] evaluations” (Karlsson 2003:7).

Recognising the integral role of values in the evaluation process indicates the need for consideration of factors that are relative and contextual (Krueger 1993). This implies that if we wish to develop concepts and empirical methods for the evaluation of SMEs then we need to adopt a complementary approach that seeks out information on the diverse range of values held by the relevant parties associated with the firm. A method of evaluation will also need to ensure that the information obtained is “inter-subjectively testable” (Popper 1983:154). This will involve interacting with the various stakeholders in order to assess their contrasting and sometimes conflicting perceptions and interpretations of the issues embedded in the context of the enterprise.

Complementarity
In physics, the principle of complementarity refers to the potential of different theories (e.g. the wave and particle theories of light) to account for differing aspects of the same phenomenon, when no theory can account for the whole. It was first proposed by the Danish physicist Niels Bohr. He remarked that, based on scientific observation at a quantum level “a complete elucidation of one and the same object may require diverse points of view which defy a unique description” (Bohr 1934:96 – emphasis added).

This sets a precedent for considering the possibility that viewpoints seemingly opposed or contradictory can, when properly considered in their frames of reference, prove complementary and lead to a more comprehensive analysis or evaluation of the subject of research. In an explanation of how the principle of complementarity transcended other fields of knowledge, Bohr claimed that understanding the characteristics of individuals and the cultures in which they live requires consideration of both singular and group features of behaviour, “the account of which implies a typical complementary mode of description” (1958:7).

This alerts us to the importance of the cultural context of individual-group interactions. Awareness of these factors can assist our understanding of individual entrepreneurial behaviours (such as the introduction of an innovative product/service) and the responses – based on different perspectives and values – of those other members of the group that will evaluate the proposed SME project. Previous research has emphasised the significance of the relationship between individual entrepreneurial behaviour and its cultural context which includes the interactions with other members of the wider business group or community (Cooper et al. 1988; Lavoie 2015).

We argue here that one of the key empirical issues involved in the process of SME evaluation is the need to understand and describe the interlinking roles and the contrasting views of individual entrepreneurs (as principals of SMEs that require access to resources including finance), and established members of the wider business community such as accountants and bankers (who act as the gatekeepers of financial resources).

Action Research
Action Research (AR) addresses problems that concern both practitioner and researcher (Lewin 1948; Coughlan and Coghlan 2002) and thereby provides an incentive for the various SME stakeholders to participate in the research process. In order to generate findings that are “theoretically desirable…and practically possible” (Buchanan et al. 1988:57), AR projects require high levels of co-operation and commitment. Gaining access to organisations that will provide this collaboration is “the most fundamental issue” for the researcher (Baxter and Chua 1998:70). Both authors of this paper had previous business experience working with individuals and firms in the SME sector. Following on from the recommendations of Buchanan et al. (1988), these contacts from industry were utilised in order to gain access to organisations that promised and delivered on their commitment to provide information as part of collaborative AR case study projects.

Research Questions & Method

The research question addressed in this paper is: ‘Can an Action Research (AR) approach based on the scientific principle of complementarity improve the theory and practice of evaluating SMEs?’ In this mainly conceptual paper our method is to survey and analyse prior literature to form the theoretical basis of our proposed AR approach. We also present the findings from previously conducted research projects to illustrate the practical outcomes that can result from our proposal.

Implications

For practical purposes AR has much to offer. It can create a ‘win-win’ learning situation of mutual benefit for all parties involved and the researcher can gain access to the evaluation process as it develops. For an academic interested in the evaluation of SMEs, this will provide insights into the factors that are viewed by the various parties as relevant to future performance. AR also seeks to improve the competencies of those involved in the organisation (Lindgren 2004) Hence, the AR process can enhance the performance levels of the firm, providing practical benefits for owner-managers and other stakeholders.

This open and collaborative approach to practical problem-solving is a cause for concern for some researchers on theoretical grounds summarised in the words of Jönsson: “this is nothing but consultancy!” (1991:393). Susman and Evered (1978) provide an extensive summary of the issues involved. They point out that when measured against the standards set by positivism, AR “is found not to meet its critical tests” (p. 582). In response to some of these criticisms, Susman and Evered highlight the fact that positivism itself is based on the assumption that “its methods are value free” (p. 585). This is an invalid assumption and, as Bohr has pointed out, the discoveries in quantum physics reveal the subjective and value-laden nature of “all the concepts of classical physics” (1934:97).

However, AR projects can be conducted in a way that the core procedural components of a theoretically valid research process remain present. These include cognisance of existing theory; a clearly specified research question; and “the collection of empirical evidence” (Brannick and Roche 1997:2). This is consistent Popper’s view of science as a process of speculations put forward as conjectures subject to logical and empirical (albeit inter-subjective) testing resulting in possible falsifications (1983:34). In this way, AR projects can be seen as a series of ‘experiments’ (Gill and Johnson 1991:58). In the case of the evaluation of SMEs, the experiments are designed to discover which theories about the firm’s performance and position are most appropriate. Like all experiments, the findings should be open to scrutiny and subject to further testing and possible falsification. In this way, AR (informed by the scientific principle of complementarity) can improve the theory and practice of SME evaluation.

References

Baxter, J. and Chua, W. (1998) “Doing Field Research: Practice and Meta-theory in Counterpoint”, Journal of Management Accounting Research, Vol. 10, No. 1, pp. 69-87.

Bohr, N. (1934). Atomic Theory and the Description of Nature: Volume I, Four Essays With an Introductory Survey, Cambridge University Press.
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SME, Evaluation, Action Research, Complementarity [ view full abstract ]

SME, Evaluation, Action Research, Complementarity