Abstract:
Small and medium scale entrepreneurs are vital for the economic development of any
country. High failure rate and low survival rate of SMEs obstruct to this expectation,
especially among developing countries. Past studies have identified the growth
affecting factors for SMEs as internal and external factors without demarcation
between high-growth and low-growth SMEs. Studying the distinctiveness of the
growth affecting factors between low-growth and high-growth SMEs would be useful
to develop a customized mechanism for treating separately for the needful SMEs.
This paper aims to reveal the demarcations of the growth affecting factors between
the low-growth and high-growth SMEs by selecting a sample of SMEs in the
Southern Province of Sri Lanka. Two hypotheses were formulated based on the
existing research gaps. Independent Sample T-Test and Mean Importance Index
method was applied to test the hypotheses. Comparison between the high-growth and
low-growth SMEs revealed that significant difference is there in the impact of internal
factors on the business growth between the low-growth and high-growth SMEs and no such a significant difference exists in the impact of external factors on the business
growth. This implies that growth affecting factors internal to the firm differently
effect on the business growth of high-growth and low-growth SMEs while factors
external to the firm affect equally to both types of SMEs. As per the mean important
indexes, owner-manager capabilities including growth orientation, risk-taking ability,
innovation and networking ability affect highly on their business growth of highgrowth
SMEs meanwhile factors beyond the firm’s control including labour rules and
regulations, poor market support systems and ineffectiveness of the BDS services
affect highly on the low growth of their firms. The high cost of financing affects
highly for the growth in both categories.