Assessing potential performance proxies in entrepreneurial firms

This study investigates the association between potentially alternate indicators of performance in small firms. Determination of the best measures of performance continues to be a vexing issue in the entrepreneurship literature. Data availability and accuracy bring into question some of the traditional measures of performance and it is argued that simpler indicators may be equally reliable. Accordingly, the analysis in this paper explores the strength of correlations between alternate performance indicators. The benchmark variables are overall measures of performance expressed in terms of sales and employment growth. A major alternative to these growth based performance measures is a variable that measures growth based on changes in the number of locations at which the business operates. The paper then explores, as potential proxies for performance, a range of other variables that, while not directly recognised as performance indicators, are likely to be associated with improved performance. These include indicators of engagement in innovative activities, growth intentions, major changes in key business processes, and the scale of operations.