Abstract
Small and Medium Enterprises have become part of the economy in Greece offering fifty percent of employment opportunities. The organizational culture determines the level of innovation, profit, as well as technology adopted by the enterprise. The huge number of SMEs in Greece compared to other European countries makes it relevant to study the reasons for this form of performance in the business sector. Risk-taking and creativity are the traits most entrepreneurs indicated as significant in their business survival.
Introduction
The research project is an investigation of the organizational culture in Greek SMEs. The first part of the essay is about the contextual framework of the Greek SME performance and organization. The second part explores the social-cultural, technological, economic, and political environment of Greek SMEs. The third part is the literature review of the organizational culture and various theoretical perspectives related to organizational culture and entrepreneurship. The other part will discuss the methodologies used to conduct research, data collection as well as analysis. The theories of entrepreneurship especially the sociological and psychological theories are discussed. After the discussion, the research will provide the way forward and area of further research in Geek SMEs and the conclusion.
Contextual Framework of the Greek SMEs
Most of the SMEs in Greece have experienced difficult times due to the Global economic recession experienced by most of the European countries. This is in consideration that during the recession many consumers’ disposable income was reduced. This affected most of the SMEs ‘ revenues, as they had to cope with the reduced revenues especially SMEs in the tourism industry. The tourism industry is one of Greece’s robust industries, which experienced a prolonged low season affecting many tour companies (Ingram, 2010).
The Greek economy relies on Small and Medium Enterprises, unlike other European countries. Small firms provide more than fifty percent of the jobs available in the country. This shows that most people are employees in the Small business sector making the sector of interest to the economy (Ingram, 2010).
The Greeks value independence and most of them prefer self-employment rather than being employed by somebody else. This shows why there are too many micro-enterprises in the country. Micro enterprises provide an opportunity for the owners to have the needed independence and leadership opportunities (Ingram, 2010). The Greece government has policies to promote entrepreneurship in the country considering the recent introduction of the Youth Entrepreneurship Program, which provides funds and capital to young people with creative business ideas to enable them to start their own businesses.
The government has introduced a policy to cater to women entrepreneurs where it is providing funds to women who want to start a business. The funds are for capitalization and training women on how to operate the business. This has seen the number of enterprises increasing as such policies encourage entrepreneurship (Ingram, 2010).
The government supports SMEs especially in matters of second chance financing. This refers to the funds given to increase capital or improve any other aspect of the business to prevent bankruptcy (Ingram, 2010). However, there are government factors that affect the performance of SMEs in Greece. The first factor is the unavailability of most of the government agencies online leading to loss of time in the processing of the government services. The inefficiency in the provision of government services acts as a major challenge to the performance of SMEs (Ingram, 2010).
The other factor affecting the performance of the Small and Medium Enterprises in Greece is the high costs of operation charged by the government through property transfer costs. This makes it hard for the organizations to transact in property, as the costs of such transactions are too high for small businesses. The fact that most of the businesses are not having the necessary resources affects their operations (Ingram, 2010).
Government agencies take time to complete their transactions, especially when dealing with the SME making it hard for the organizations to operate effectively. Transactions involving the government and the small enterprise are very costly to the business due to the delayed payments. When such transactions are not handled carefully, the business may become bankrupt (Ingram, 2010). The social-cultural values of the Greek society encourage entrepreneurship because independence is highly valued and most people prefer to work independently rather than under close supervision. The culture also appreciates successful risk-takers thereby encouraging people to start small micro-enterprises with the aim of making a profit (Morgan, 2006).
Integration of technology and globalization has made it possible for the organization to experience break-through especially in marketing their products to foreign customers. Technology is significant to small business entrepreneurs as they use technology to explore new markets and opportunities. Technology affects the profitability of Greece SMEs because it is able to compete even with large organizations when technology is used effectively. Greece SMEs are utilizing information technology to source for foreign markets especially SMEs in the tourism industry where they source for customers from foreign nations (Morgan, 2006).
Technology enables businesses to receive government services and other major services needed by the organization such as banking. Online banking has provided an advantage to SMEs as it helps organizations to save time. Greece government is formulating methods of making its services accessible to the SME online to minimize congestion in its offices (Mullins, 2010).
The other major aspect affecting SMEs is the internationalization of small firms. They need to internalize the firms is imperative in the creation of internal markets. Internationalization refers to the process in which a firm expands its services to the international markets. The SMEs in Greece are not yet to exploit this advantage and most of them operate locally (Mullins, 2010).
There are factors that hinder the firms from operating internationally one of them being the number of days it takes a firm to export its products. Comparing Greek and other European countries it takes twenty-five days to export a product and thirty days to import a product compared with an average of fifteen days in other EU countries. The high costs of doing business internationally discourage most entrepreneurs to consider the international market (Pitelis & Roger, 2000).
The international market is very competitive and requires companies whose products have a competitive advantage especially in terms of price to ensure that they can fairly compete with goods produced locally. Most of the SMEs in Greece do not have this advantage and they only specialize in highly innovative products as their competitive edge in the international market (Pitelis & Roger, 2000).
The context of the SMEs operating in Greece includes the recent inclusion of Greece in the European Union. The economic integration provides an opportunity for Greece enterprises to market their product and services throughout the European market. The huge market offered by this integration includes reduced tariffs for member states (Pitelis & Roger, 2000).
Theoretical perspectives of entrepreneurship
The second aspect of this paper will deal with the theoretical perspectives of entrepreneurship. The entrepreneur in this case is the individual who starts a business or a venture with the aim of making a profit out of the venture (Baumol, 1993). The entrepreneur is the person responsible for the achievement of the business objectives. It is crucial to differentiate between small business management and entrepreneurship (Drucker, 1985). Small business management is the organization of small businesses to ensure that they make a profit whereas entrepreneurship is the art or the science of starting a new business venture and making it profitable. Someone may be a good small business manager but an entrepreneur must have good small business management capability.
The first entrepreneurial theories are the economic theories and the predominant economic theory is the Schumpeterian theory of entrepreneurship. The theory acknowledges that the entrepreneurs’ role is in the creation of the enterprise (Schumpeter, 1942). For the enterprise to be successful, it must have the novelty of production. That is, the enterprise must bring about new products to the market that are of better quality compared with the existing products or services. The entrepreneur must there have knowledge on how to utilize the new improved technology (Drucker, 1985). The theory makes a clear distinction between, invention, and innovation.
Innovation is the application of an existing concept practically. The invention is the process of creating something new. All these are imperative aspects of the entrepreneur. The theory fails to provide a clear organization of the entrepreneurship activities, and the reasons why some of the enterprises fail while others succeed (Mullins, 2010).
Max Weber’s theory of entrepreneurship is another theoretical perspective that has helped in shaping the manner in which enterprises operate. The theory’s premise is on the contribution of the entrepreneur’s values as a motivation for the entrepreneur. Weber notes that the protestant ethic is a major factor in theories of capitalism in the United States of America (Drucker, 1985). The protestant work ethic states that those who do not work should not eat.
It is a major influence on the entrepreneurial spirit in America and European countries (Hunt, 2002). The protestant work ethic demands that everyone should work. It further calls for compensation of the worker for profitability according to the work done. This provides motivation for people to look for ways of profiting ethically and entrepreneurship is one of the ways of profiting (Kizner, 1971).
The protestant work ethic also calls for the workers to act as stewards of their masters’ property and assets in an ethical manner. This led to the establishment of stocks and shareholding where the shareholders of an organization delegate entrepreneurship responsibilities to the managers of the enterprise (Kizner, 1973). Another crucial aspect brought about by Weber’s theory is the distinction between an adventurous spirit and an entrepreneurial spirit.
The adventurous spirit uses impulse while that entrepreneurial spirit uses self-discipline. Most of the businesses start from adventurous impulse or by capitalism impulse. Weber acknowledges the need for the entrepreneur to apply self-discipline in the quest for profits to avoid collapse (Jerillo & Stevenson, 1990).
The other entrepreneurship theory is the psychological theory of entrepreneurship. These theories look into what goes inside the mind of the entrepreneur. The first theory is the trait theory, which analyzes the personality of the entrepreneur (Kizner, 1973). The theory indicates that there are certain personal attributes that entrepreneurs possess and they enable them to start a new venture and make a profit from such ventures. The first one is that the entrepreneur has a risk-taking personality where he or she can risk capital and resources for the sake of making a profit. The risk-taking ability enables the entrepreneur to cope with losses that occur (Kizner, 1979). The entrepreneurs have leadership capability, which enables them to take care of the enterprise in its initial stages.
The need for independence drives the entrepreneurs because most of them have high expectations and cannot work in an environment where others control them (Kizner, 1979). They are risk-takers, very analytical, and able to assess situations in which they have an interest and determine whether the prospects are profitable or not profitable. The cognitive theory of entrepreneurship ratifies this by advocating entrepreneurship as a cognitive activity. The cognitive aspects come in the formulation of strategies that will enable the entrepreneur to profit from the business. The cognitive theories also look into the entrepreneurs’ motivation in their work. Achievement is one of the major factors that motivate them (Schumpeter, 1942).
Organizational culture
Most of the organizational cultures usually apply to large organizations with many employees. Small businesses usually experience challenges especially in having a definite organizational culture as most of the SMEs have high employee turnover rates and some of the medium enterprises have very few employees (Drucker, 1985). The owner or the entrepreneur is the determinant of the organization’s culture. This affects the manner in which the company operates and the artifacts, the beliefs, and the culture in the organization usually resemble that of the owner (Baumol, 1993). Much of the study conducted on organizational culture looks into the impact of the organizational culture in large corporations and does not include smaller organizations especially the SMEs is as their structures are usually different from those of large businesses (Baumol, 1993).
Organizational culture refers to the actions, behaviors, and symbols that characterize an organization. It is the traditions and precedents of how the organization operates and functions in terms of how it interacts with the clients, the public, and with other organizations. It is also the actions and precedents set by the organizations and handed over to the new members of the organization (Burns, 1961). The organizational culture is an integral part of the organization and it influences the manner in which the company operates.
It determines the kind of results of the organization. With the dynamism of the twenty-first century, many SMEs are finding themselves torn between incorporating changes in their organization and maintaining the status quo. The following are theoretical perspectives, which explore the role of culture in SMEs, and how those cultural patterns differ as per the organization, and how to bring change in the SME (Schein, 1992).
There are two major theoretical perspectives shaping the organization’s culture. The first perspective views culture as an external entity of the organization such that it is prone to the manipulation of the organization leaders and influences time and technology. This aspect sees the organization’s symbols, artifacts, and rituals as aspects that may change as their meaning and interpretations depend on the individuals in the organization (Burns, 1961). The second perspective views the organizational culture as part of the organization and as a major aspect of the organization which is critical and enhances the performance of the organization in matters of time and opportunity. The artifacts, the colors, and logos of the organization have a lot to do with the organization and they determine what the stakeholders of the organization perceive it to be (Burns, 1961).
The first theory to describe the organizational culture is Hofstede’s theory of organizational culture. The theory describes the nature of organizational cultures made up of four major entities. The first aspect of the organization that permeates the cultural perspectives is the power balance (Hofstede, 2001). The power balance in the organization refers to who wields the most power in the organization if inequality in the distribution of power in the organization exists. The distribution of power differs as per the organization and in most, SMEs the power belongs to the entrepreneur. In Small and Medium enterprises, the boss has more power than the subordinates but there are those organizations where the subordinates are as powerful as the boss (Hofstede & Minkov, 2010).
The second key determinant of the organization’s culture is coping with uncertainty. Every SME has ways of coping with uncertainty especially these days when there have been global financial crises characterized by many SMEs downsizing their labor force. Organizations adopt different mechanisms of coping with uncertainty (Trompenaars, 2010). This method of coping with uncertainty entails technology, law or policies, and religion. The organization either embraces technology or does not. The SME may have rules and regulations to govern the operations of the organization on how to deal with its employees or other stakeholders. The organizational culture may incorporate religious tendencies such as prayers or ceremonies to mark the end of the year (Trompenaars, 2010).
The other aspect that shows or indicates the SME organizational culture is whether the organization promotes individual or collective responsibilities. In SMEs where the individual or personal objectives permeate the group objectives, the culture values individual tasks and achievements rather than collective achievements. This aspect looks into the priorities in the organization whether it is teamwork or individualized work (Hofstede, 2001).
The other determinant of the organizational culture is the way in which the company treats gender issues. There are cultures that uphold gender equality while others do not. In SMEs, the gender of the entrepreneur determines how people are treated (Hofstede, 2001). The cultural web is another theoretical perspective outlining the nature of cultural organizations. This theory describes the organizational culture as an intricate web of various aspects of SMEs. The aspects of the organization that characterizes the organizational culture are the organizations’ paradigms. This refers to the philosophies governing the organization such as the missions, the values, and the vision of the organization (Schein, 1992).
The web of the organizational culture comprises the organization’s structures. The structures refer to the hierarchical system adopted by the organization in the administration of the organization’s operations. They are an integral part of the organizations’ culture (Schein, 1992). The other integral parts of the organizational cultural web are the symbols. The symbols are those aspects that represent the organization. The symbols are those elements viewed as the organization. They are the colors, the logos, and the names of the organization (Schein, 1992).
The stories existing in the organization are an important part of the organization’s culture. The stories are verbal messages about the organization’s traditions and heroes (Kizner, 1979). The stories play a big role in transferring the culture from the older generation to the new generation. Stories indicate the perception that the stakeholders of the organization have about the organization. Stories serve as an explanation of the cultural patterns of the organization. They explain the reasons behind certain aspects of the organization (Schein, 1992).
The organizational culture adopted by the SME usually affects the performance of the SME. It is imperative to note that most small businesses do not have a defined way of operating their businesses, as owners are usually interested in the flexibility of their businesses to help them handle the changing operating environment (Hunt, 2002). Such business anchored on flexibility lacks major components of organizational culture such as business mission and values.
These are an integral part of the business and failure for an organization to have values that it upholds or a mission towards the people who they serve creates a loophole in the organization. Most of the SME’s indicate that they are in the business for the sole purpose of making a profit and they, therefore, move on to different aspects of operation (Mullins, 2010).
A defined culture enables the organization to stick to its values as well as mission. Lack of values makes the business flexible and in the end, it fails. The organizational culture enables the small enterprise to set its priorities right such that when there are available funds the culture dictates what aspects of the business need funding (Hunt, 2002).
Organizational culture especially the slogans and the symbols used by the organization are an important aspect of the business, and they play a major role in positioning the business in the mind of its potential customers. Small businesses usually underscore the need to have symbols and colors and it may be attributed to the reasons why they become bankrupt. The symbols, as well as slogans, help in marketing the organization. Relating and making them part of the organization’s culture is imperative in ensuring that the organization succeeds (Hofstede, 1991).
An organization’s culture improves customer confidence because the customers identify with the organization’s operations and a certain degree of predictability. Customer loyalty enables the organization to have revenue accrued from the sales of the organization. SMEs that have ways of creating customer loyalty through their organization’s cultural values such as unwavering customer service have stable revenues (Hofstede, 1991).
Recommendations
From the contextual analysis of the data from the European Union, the following are recommendations on the way forward to save the SMEs in Greece from collapse and thus affect the economy of the country negatively. The first recommendation is the need for the government to formulate policies that are friendly to the small businesses especially the cost of transferring property. The high costs have made it hard for small businesses to own property especially real estate. The government must look for ways of reducing bureaucracy in exporting locally made products. Currently, the number of documents required during the clearance process is five. Reducing these documents to three will be a significant way of promoting exports.
The government must address the issue of the poor online presence of the government agencies making it hard for entrepreneurs to access the government services online. This leads to loss of working hours as employees queue in government offices to obtain the services. The government is now addressing this issue by proposing to make an online one-stop-shop where enterprises may obtain licenses and all other documents online (Kizner, 1973).
The government must look for ways of expanding businesses and transactions of small and medium enterprises. As earlier shown the small enterprises employ more than fifty percent of the population. The government must ensure that fifty percent of the tenders awarded by the government go to the SME and this will increase the growth of revenues garnered by the SMEs, which is vital for their stability. The government needs to reduce the number of days that it takes to complete a transaction as the prolonged and delayed payments usually affect the enterprises negatively usually leading to their collapse (Hunt, 2002).
SMEs should use the organizational culture theories to ensure that their cultures encourage innovation. This is because new inventions are the only means through which the small enterprise profit. Without providing goods and services that are of higher quality than competitors, SMEs will be out of the market. To avoid these entrepreneurs must have innovation strategies for their organizations to provide effective services (Jerillo & Stevenson, 1990).
Small enterprises must ensure that they create loyalty programs for their customers to ensure that they have customer loyalty, which is a major foundation for a successful business. The entrepreneurs need to ensure that they not only start new ventures but also stay in those ventures long enough for their success. Having a good organizational culture is imperative in bringing in new customers as well as retaining the existing customers (Jerillo & Stevenson, 1990).
The SME’S in Greece need to create an organizational culture to ensure there is employee loyalty and reduce the high level of labor turnover experienced by small and medium enterprises. This is possible through a culture that encourages innovation and employees participation in the invention and innovation processes. The inclusion of innovation as part of the enterprise culture improves employees’ creativity as well as loyalty to the enterprise that is crucial for the long-term development of the organization (Jerillo & Stevenson, 1990). Small and medium enterprises need to use the advantage provided by information technology to market products and increase the sales volume. The information technologies allow small organizations to conduct target marketing using social networks such the Twitter. The need for the target market is of great consequence to the organization as well as the success of the business (Holbeche, 2006).
Conclusion
Small and Medium Enterprises depend on entrepreneurship attributes. However, having an organizational culture is an important aspect of small businesses as this makes the organization stable allowing it to have potential customers. In addition, it assists the organization to brand and market the products thereby increasing the sales volume. Lack of proper mechanisms to boost investor confidence affects how the company operates, which is critical in ensuring that there are proper strategies to improve the SMEs.
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