Growth Trajectories of SMEs and the Sensemaking of IT Risks: A Comparative Case Study

Growth Trajectories of SMEs and the Sensemaking of IT Risks: A Comparative Case Study

Arvind Karunakaran (The Pennsylvania State University, USA), Jingwen He (The Pennsylvania State University, USA), Sandeep Purao (The Pennsylvania State University, USA) and Brian Cameron (The Pennsylvania State University, USA)
DOI: 10.4018/978-1-61520-609-4.ch008

Abstract

Our case will describe two small to medium enterprises which are located within the same region and sharing the broad industry sector but at a different ‘growth stage’ perceive the role of Information Systems differently. We describe how these two firms, at different growth stages and at different levels of maturity with respect to their information systems, perceive the usefulness of information systems differently. We extend the interpretations to discuss sub-sections within SMEs, which are at different stages of growth, and how the nature of information systems’ risks is likely to differ depending on these growth stages. We emphasize the importance of owner/manager’s “sensemaking of risks” as a key variable that influences the demarcation between entrepreneurs and small business owners, beyond the oft-discussed variables such as “achievement motivation,” “risk-taking propensity,” and “preference for innovation.” We conclude with the proposition that SMEs should not be considered as unitary entities; and suggest that there are likely to be different varieties of risks that SMEs face, and suggest the growth stage and organizational filters as key determinants of the owner/managers’ understanding of these risks.
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Executive Summary

Small and Medium Enterprises (SMEs) are considered to be the engines of growth and innovation of the modern economy (SBA, 1998, 2004c). According to Office of Advocacy estimates, small firms with fewer than 500 employees represent 99.9% of the 27.2 million businesses (SBA, 2004a, 2004b). However, two-thirds of them survive two years, 44 percent survive for four years, and 31 percent survive for seven years (SBA, 2004a). The reason for their failure is attributed to various factors like the institutional environment, financial crisis, owner/manager motivation, risk-taking propensity, competition, market conditions etc (Miner & Raju, 2004).

Our proposed case will describe two small to medium enterprises – Bedrock Manufacturing and VPro, Inc,- which are located within the same region and sharing the broad industry sector but at a different ‘growth stage’ (Churchill & Lewis, 1983) perceive the role of Information Systems differently. Bedrock Manufacturing designs and manufactures construction equipments for dozers, loaders, excavators, and motor graders. It has about 190 employees and annual revenue of 20 million dollars. VPro, Inc. manufactures industrial process furnace and provides custom vacuum and thermal process equipments for various industries. It has 8 employees with annual revenue of around 1 million dollars. Both are located in the I-99 Innovation Corridor of Central Pennsylvania and fit the U.S. Small Business Administration’s definition of a “Small Business”. We describe how these two firms, at different growth stages and at different levels of maturity with respect to their information systems, perceive the usefulness of information systems differently. We extend the interpretations to discuss sub-sections within SMEs, which are at different stages of growth, and how the nature of information systems’ risks is likely to differ depending on these growth stages. We emphasize the importance of owner/manager’s ‘sensemaking of risks’ as a key variable that influences the demarcation between entrepreneurs and small business owners, beyond the oft-discussed variables such as ‘achievement motivation’, risk-taking propensity’, and ‘preference for innovation’. We conclude with the proposition that SMEs should not be considered as unitary entities; and suggest that there are likely to be different varieties of risks that SMEs face, and suggest the growth stage as a key determinant of the owner/managers’ understanding of these risks.

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