The impacts of management competence on small and medium-sized enterprises performance: from the balanced scorecard perspective

Abstract

This study examines the relationships between directors' managerial competence and the performance of small and medium-sized enterprises (SMEs) from the balanced scorecard (BSC) perspective, which consists of four dimensions: finance, customer, internal processes, and learning and growth. A data set of 419 directors of small and medium-sized enterprises (SMEs) was compiled in Thanh Hoa province, Vietnam, a transitional economy where SMEs play an essential role. The data were analyzed using the Partial Least Squares Structural Equation Modeling (PLS-SEM) model. The empirical findings demonstrated a strong positive correlation between directors' management skills and SME performance. Specifically, the results indicate that management skills significantly and positively influence all four dimensions of enterprise performance. In contrast, knowledge and attitudes have a significant influence on only some dimensions. When analyzing the effect of management competence on specific performance outcomes in each BSC aspect, the study revealed that management knowledge has a negligible effect on customer and internal processes. In contrast, attitudes have a negligible impact on financial outcomes. Overall, the research demonstrates that directors' practical skills and knowledge application proficiency are crucial to the operation of SMEs. In contrast, excellent knowledge and a positive attitude should be considered foundational and necessary for the management process. Instead of emphasizing academic training activities, the government should focus on supporting programs that develop and enhance the management skills of SME directors.