Time to reassess the size criterion for SME classification? An empirical investigation

Firms employing between one and 250 people are usually classified as small and medium sized organisations. An important question that by and large has remained unanswered is whether these firms behave the same and whether their behaviour is governed by their size. In this paper, the authors empirically examine the relationship between the size of small and medium sized manufacturing organisations and their culture, leadership and strategic planning. The analysis suggests that size is not a significant influence on leadership, organisational culture or the strategic planning processes. Therefore, it is possible to conclude that the criterion for the definition of SMEs is appropriate and that SMEs with up to 250 employees can be treated as a homogenous grouping. This finding has profound implications for policy makers and small business advisers and dispels the suggestions that there are significant differences between the various SME sizes using the number of employees. In particular, it means that policy makers can formulate policies directed at SMEs in the knowledge that all firms employing fewer than 250 employees have broadly similar emphases on strategic planning, culture and leadership dimensions. Although the number of employees is the most common way of classifying organisations, this paper questions whether this is an appropriate criterion.