Jones 2004

Asia Pacific Journal of
Human Resources http://apj.sagepub.com/
Training and Development, and Business Growth: A Study of Australian

Manufacturing Small−Medium Sized Enterprises
Janice Jones
Asia Pacific Journal of Human Resources 2004 42: 96
DOI: 10.1177/1038411104041535
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96 Asia Pacific Journal of Human Resources 2004 42(1)
Training and development, and business growth: A study of

Australian manufacturing small–medium sized enterprises
Janice Jones*
Flinders University of South Australia, Australia
The principal objectives in this paper are to compare and contrast training and
development initiatives for a longitudinal sample of 871 small and medium-sized
enterprises in the Australian manufacturing sector that have embarked upon
different growth development pathways; and to examine possible connections
between small and medium-sized enterprise growth, and training and develop-
ment. Statistical analysis reveals highly significant differences in management
training and qualifications, training changes, as well as training methods,
providers and fields, across the low-, moderate and high-growth small and
medium-sized enterprise development pathways. Furthermore, training is a
relatively consistent concomitant with small and medium-sized enterprise growth.
Keywords: business growth, small and medium-sized enterprises, training and development
Training and development in small and medium-sized enterprises (SMEs)

have received little specific attention from researchers in Australia. As in many
other areas of scholarly inquiry into business activity, empirical research in
human resource management (HRM) has tended to focus upon larger concerns
(e.g. Fisher and Dowling 1999; Kitay and Lansbury 1997; Kramar 1999;
* The permission of the Australian Statistician to use confidentialised data from the federal
government’s Business Longitudinal Survey, and to publish findings based on analysis of that
data, is gratefully acknowledged. Responsibility for interpretation of the findings lies solely
with the author.
The author also wishes to thank Professor Richard McMahon upon whose work this paper
is built. The Manufacturing SME growth and Method sections borrow heavily (with
permission) from McMahon’s (2001) research.
Correspondence to: Ms Janice Jones, Lecturer, School of Commerce, The Flinders Univesrity
of South Australia, GPO Box 2100, Adelaide 5001, South Australia, Australia;
fax: +618 8201.2707; e-mail: Janice.Jones@flinders.edu.au
Asia Pacific Journal of Human Resources. Published by Sage Publications (London, Thousand Oaks, CA and
New Delhi; www.sagepublications.com) on behalf of the Australian Human Resources Institute. Copyright © 2004
Australian Human Resources Institute. Volume 42(1): 96–121. [1038-4111] DOI: 10.1177/1038411104041535.

T&D and business growth in SMEs 97
Morehead, Steele, Alexander, Stephen and Duffin 1997). In the case of the
Australian manufacturing sector, over 99% of all businesses are SMEs
according to generally accepted definitions (Australian Bureau Statistics (ABS)
1996). As Kerr and McDougall (1999, 10) note ‘such under representation
seems inappropriate when the scale of this sector is considered’. This fact,
together with the key role that manufacturing inevitably plays in economic
prosperity, strongly suggests the importance of increasing our understanding
of the management of human resources in manufacturing SMEs in Australia.
According to the ABS (1996), a business is defined as small in the manu-
facturing sector if it employs fewer than 100 employees. While there is no
official definition of what constitutes a medium-sized enterprise, businesses
with between 100 and 199 employees are generally considered medium sized
(McMahon 2001a). Thus SMEs in the manufacturing sector may be consid-
ered as organisations employing less than 200 employees.
Given recent government policy regarding the identification and encour-
agement of high-growth SMEs, an important gap in the extant literature is
any reliable evidence concerning possible linkages between business growth,
and training and development. Moreover, for cost and other reasons, prior
research in this field has tended to employ comparatively small samples. The
recent availability of data from Australia’s Business Longitudinal Survey (BLS)
provides a promising new opportunity to take up the challenges so identified.
This paper builds upon a study undertaken by McMahon (2001b) as part
of an ongoing research effort to derive, characterise and employ an empirically
based development taxonomy for SMEs operating as proprietary companies
in the manufacturing sector, using panel data now available from the BLS.
The principal objectives in this paper are to compare and contrast training and
development initiatives for a longitudinal sample of 871 SMEs in the
Australian manufacturing sector that have embarked upon different develop-
ment pathways; and to examine possible connections between SME growth,
and training and development. The paper proceeds as follows. After outlining
prior research on HRM in SMEs, including the relationship between training
and development and SME performance, and the key findings of McMahon’s
(2001b) study, the current research method is outlined. Then, findings of the
research are presented and discussed, followed by conclusions arising from this
investigation.
Prior research
Personnel management/human resource management in SMEs
Personnel management has been identified as a major area of deficiency in

small business, and in the small business research literature (Gilbert and Jones
2000; Heneman, Tansky and Camp 2000; Pettigrew, Arthur and Hendry

1990). Not only do managers lack training in formal personnel management,

they also do not believe that the use of HRM practices is essential for
improving performance (Amba-Rao and Pendse 1985; McEvoy 1984). Further-
more, McEvoy (1984) argues that HRM practices may be a leading cause of
small business failures. Mathis and Jackson (1991) report that inadequate and
inefficient HRM in small firms has resulted in low productivity, and high
dissatisfaction and turnover among staff. While Deshpande and Golhar (1994)
conclude that there is no consensus among researchers regarding the role of
HRM in small firm success, a study of SMEs in the UK provides convincing
evidence of the link between the management of people and companies’
performance (Patterson, West, Lawthorn and Nickell 1997).
Patterson et al. (1997) studied manufacturing SMEs in the UK and
concluded that the management of people had a greater effect on a firm’s
performance than strategy, quality, manufacturing technology and R&D
combined. Specifically, ‘good’ HRM practices explained 19% of the differences
between profitability and 18% of the variations in productivity between firms,
and over time, within businesses.
While the development of HRM has been linked with large, complex
organisations (Storey 1992), small firms have usually found it difficult to
employ effective personnel management practices, and to contemplate the
more sophisticated HRM practices associated with large businesses (Gilbert
and Jones 2000). Yet, small firms need effective personnel policies, particularly
as each employee comprises a larger percentage of the workforce in the
business (Field and Gatewood 1987).
HRM practices in small businesses are qualitatively different from those
in large organisations, yet relatively little research has addressed the nature and
significance of these differences (Gilbert and Jones 2000). Gilbert and Jones
(2000) found that HR practices in small business are predominately informal,
ad hoc and opportunistic; nevertheless, they are effective in the small business
context. Moreover, they reflect the fact that the people management demands
of small business differ significantly from the HRM requirements of large busi-
nesses. Other research also reports that HR practices in small firms are charac-
terised by high levels of informality (Johnson 2000; Kotey, Slade and Gadenne
2000; Morehead et al. 1997; Wiesner and McDonald 2001). In addition, an
informal approach to HRM and industrial relations is likely to be adopted if
the principal owner is present and a more formal approach if the owner is
absent (Burrows and Curran 1989). Morehead et al. (1997) suggest that, in this
respect, small businesses are like their larger, private sector counterparts.
Furthermore, Gilbert and Jones (2000) argue that there may be major
differences in HR practices in small businesses seeking to become medium to
large businesses, compared to those HR practices in small businesses that
intend to remain small. Hornsby and Kuratko (1990) note that as small busi-
nesses expand and grow, they need to develop and improve personnel manage-
ment. Specifically, a greater understanding of personnel practices within

specific size categories is needed in order to improve the HRM abilities of small
firms. Alternatively, the authors argue that relying on traditional personnel
practices may cause an intensification of personnel problems as small busi-
nesses expand.
Gilbert and Jones (2000) also conclude that growing small businesses need
to develop their HRM practices, as increasing size brings increased complexity,
necessitating a more professional approach towards managing. While larger
firms (over 100 employees) typically employ personnel specialists, it is not until
a business had grown to the stage where managers have more to do than they
can comfortably handle that the HR function is assigned to a specialist manager
(Arthur 1995; Hornsby and Kuratko 1990). Thus, personnel management is a
role handled by most small business owners (Hornsby and Kuratko 1990).
Training and development, and SME performance

Conceptually, it is assumed that training – by developing existing or intro-
ducing new skills and/or knowledge – enhances business performance (Cosh,
Duncan and Hughes 1998; Kerr and McDougall 1999; Kitching 1998; Patton,
Marlow and Hannon 2000; Westhead and Storey 1996, 1997). However,
following a review of empirical evidence investigating the relationship between
training and development, and performance (Birley and Westhead 1990;
Cannon 1997; Cosh, Duncan and Hughes 1998; Johnson and Gubbins 1992;
Winterton and Winterton 1996; Wynarczyk, Watson, Storey, Short and
Keasey 1993), Patton, Marlow and Hannon (2000) argue that the evidence indi-
cating a strong relationship between training and development and small firm
performance is inconsistent.
Cannon (1997) asserts that management development significantly
increases the survival rates of SMEs. Birley and Westhead (1990) link manage-
ment training to size and profitability, while Winterton and Winterton (1996)
found evidence of a link between performance and competence-based manage-
ment development significantly weaker in smaller firms than in larger firms.
Johnson and Gubbins (1992) suggest training assists in maintaining competi-
tiveness, as well as facilitating expansion. In contrast, Wynarczyk et al. (1993)
were unable to find evidence of any relationship between management
training and performance. Cosh, Duncan and Hughes (1998) examined the
relationship between training investment and the survival and performance of
1640 SMEs in manufacturing and business services, and showed that while the
impact of training on survival was positive, it was not statistically significant.
In terms of business performance indicators, training was strongly related to
employment and sales growth in one of the two time periods investigated
(1987–90). However, profit margins were found not to be related to training.
Cosh, Duncan and Hughes (1998) conclude that training may influence
business survival and performance for SMEs of a certain size, or in certain time
periods, but not others.

Similarly, Westhead and Storey (1996, 1997) reviewed the literature and
failed to find any substantial evidence demonstrating that the provision of
training within small firms leads to, or is associated with, improved business
performance. Nevertheless, Westhead and Storey (1996, 1997) tentatively
acknowledge that a weak link probably does exist – only that such a link has
yet to be clearly demonstrated.
Patton, Marlow and Hannon (2000) suggest three reasons why studies
investigating the effects of training upon firm performance are inconsistent.
First, there may not actually be any causal or associative relationship between
training and performance. Second, methodological difficulties associated with
measuring and isolating the impact of training interventions on small firm
performance and, in particular, the difficulties of attributing cause and effect,
may account for the failure to find a statistically significant relationship. In
other words, separating out specific variables and testing them is a substantial
research challenge yet to be overcome. Finally, other variables that have the
potential to influence the training/performance relationship may not have been
accounted for. The authors question the possibility of such studies being
capable of identifying significant links between training and performance, yet
recognise that empirical studies are important to revealing experiences and
trends related to training and development initiatives.
Manufacturing SME growth

In McMahon’s (2001b) research, exploratory cluster analysis (as employed by
Hanks et al. (1993)) was used with key enterprise age, size and growth
variables to discover if there appear to be any stable development pathways
evident in the BLS panel data. Exploratory cluster analysis is a multivariate
statistical technique for developing meaningful clusters of cases, with the aim
of objectively classifying cases into a small number of mutually exclusive
groups on the basis of similarities among values for certain clustering variables
that the researcher selects (McMahon 2001b). The clusters or groups should
show high internal (within-cluster) homogeneity and high external (between-
cluster) heterogeneity. The groups are not predefined; they are derived from
the ‘natural’ structure of the data. Subsequent profiling using characteristic or
demographic variables aids interpretation of the nature of the groups
(McMahon 2001b).
Each of four annual data collections for the ongoing longitudinal panel
of 871 manufacturing SMEs was separately examined using cluster analysis.
Comparisons were then made of cluster analysis outcomes over time. Using
the clusters as markers or signposts, three relatively stable SME development
pathways were discernible in the longitudinal panel results – low, moderate
and high growth. The low-growth development pathway appears to account
for approximately 70% of SMEs in the panel. The moderate growth pathway
seems to be followed by roughly 25% of the panel. And around 5% of the panel

Table 1 Characterisation variables for SME development pathways
Low- Moderate High-

Characterisation growth growth growth Kruskal-Wallis
variable pathway pathway pathway statistic df Significance
Enterprise age
median for
1997–98 (years) 12 to 14 16 to 18 12 to 14 15.634 2 0.000
Total employment
mean for 1997–98
(persons) 16.9 64.7 123.6 475.407 2 0.000
Compound employ-
ment growth for
1994–95 to 1997–98
(% per annum) –0.2 2.4 6.6 21.121 2 0.000
Compound sales
growth for 1994–95
to 1997–98 (% per
annum) 5.3 9.3 10.4 17.746 2 0.000
Sales mean for
1997–98 ($million
per annum) 2.5 11.0 30.5 418.986 2 0.000
Total assets
mean for 1997–98
($million) 1.6 7.2 22.9 357.454 2 0.000
Source: McMahon (2001b)
look to lie on the high-growth pathway, which is in accord with the observed
rarity of substantial growth among SMEs worldwide (McMahon et al. 1993).
Differences between the identified SME development pathways in terms of
enterprise age, size and growth variables are highly significant in a statistical
sense, thus underpinning confidence in the development taxonomy (table 1).
It would appear that the development pathways and the pace of SME
development (over 20 years or so) in the McMahon (2001b) study match
reasonably well with those in earlier research of a similar nature undertaken
by Hanks et al. (1993). Both development models seem to lead towards the
same range of SME configurations that are widely recognised in the relevant
research literature (McMahon et al. 1993):
• Traditional SMEs – following the low-growth development pathway, these

concerns generally have few, if any, growth aspirations. They principally
exist to provide their owner-managers with a source of employment and
income. Furthermore, they are frequently operated in a manner consis-
tent with the lifestyle aspirations of their owner-managers. The McMahon
(2001b) study suggests that after approximately 15 years such SMEs would
have fewer than 20 employees, sales less than $3 million per annum, total

assets below $2 million, little or no employment growth, and sales growth

up to 5% per annum.
• Capped growth SMEs – following the moderate growth development

pathway, these concerns generally have modest growth aspirations.
Bounds to growth could be externally imposed by the nature of their
competitive environment; or may be intrinsic given the nature of their
operations. Frequently though, growth is deliberately capped by owner-
managers to a rate that limits dependence upon external financing, thus
minimising surrender of control and accountability obligations such
support would normally bring. The McMahon (2001b) study suggests that
after approximately 15 years such SMEs would have fewer than 100
employees, sales around $10 million per annum, total assets less than $10
million, employment growth up to 3% per annum, and sales growth as
much as 10% per annum.
• Entrepreneurial SMEs – following the high-growth development pathway,

these concerns generally have ambitious growth aspirations. They are
most often associated with entrepreneurial aptitude, international outlook,
technical and commercial innovation, and other business qualities that
could see them eventually become large enterprises. The McMahon
(2001b) study suggests that after approximately 15 years such SMEs would
have over 100 employees, sales around $30 million per annum, total assets
more than $20 million, employment growth exceeding 5% per annum,
and sales growth greater than 10% per annum.
The fact that these common SME configurations are recognised in the
research lends further plausibility to the empirically based development
taxonomy derived. The strength of a taxonomic approach in identifying and
specifying stages in an enterprise life-cycle model derives from use of multi-
variate analysis of empirical data to reveal common patterns and relationships
in the data (Hanks et al. 1993). Only Smith, Mitchell and Summer (1985) have
previously employed a taxonomic approach to developing an enterprise life-
cycle model, but that research had a very small sample size and various other
weaknesses.
Importantly, McMahon’s (2001b) model uniquely incorporates two disen-
gagement (or arrested development) configurations that are frequently
observed among SMEs – the lifestyle business and the business electing for
capped growth. Furthermore, while predominantly focused upon stages of
growth, the model is sympathetic to, or at least not inconsistent with, an alter-
native gestalts of growth perspective that has recently received some support
in the literature (Kazanjian and Drazin 1989).
Against this background, this paper has the potential to make a useful
contribution to Australian HRM research in the following respects. First, the

paper focuses wholly upon training and development among SMEs, examining
the nature and significance of training and development differences among
low, moderate and high-growth SMEs that have tended to be neglected by
other researchers. Specifically, the concern is to discover whether or not there
are differences in management training, training methods, fields and
providers, as well as training changes among SMEs following different growth
development pathways, with a view to explaining differences that might arise.
As discussed above, the presence or absence of a working owner is recognised
as an important influence on HRM in small business, and so employment
related variables are also analysed. Second, the key policy issue of training and
development concomitants with business growth among SMEs is explicitly
considered. Finally, the research described in the paper employs a relatively
large and representative longitudinal panel sample of SMEs from the
Australian manufacturing sector, a technique seldom employed in Australian
HRM research (Kitay 1997).
Method
The panel data employed in this research are drawn from the BLS conducted
by the ABS on behalf of the federal government over the four financial years
1994–95 to 1997–98. Costing in excess of $4 million, the BLS was designed to
provide information on the growth and performance of Australian employing
businesses, and to identify selected economic and structural characteristics of
these businesses.
The ABS Business Register was used as the population frame for the
survey, with approximately 13 000 business units being selected for inclusion
in the 1994–95 mailing of questionnaires. For the 1995–96 survey, a sub-sample
of the original selections for 1994–95 was chosen, and this was supplemented
with a sample of new business units added to the Business Register during
1995–96. The sample for the 1996–97 survey was again in two parts. The first
formed the longitudinal or continuing part of the sample, comprising all those
remaining live businesses from the 1995–96 survey. The second part comprised
a sample of new business units added to the Business Register during 1996–97.
A similar procedure was followed for the 1997–98 survey. Approximately 6400
business units were surveyed in each of 1995–96, 1996–97 and 1997–98. The
BLS did not employ completely random samples. The original population (for
1994–95) was stratified by industry and business size, with equal probability
sampling methods being employed within strata. Further stratification by
innovation status, exporting status and growth status took place for the
1995–96 survey.
Data collection in the BLS was achieved through self-administered, struc-
tured questionnaires containing essentially closed questions. Copies of the
questionnaires used in each of the four annual collections can be obtained from
the ABS. The questionnaires were piloted prior to their first use, and were

then progressively refined after each collection in the light of experience. As

well as ongoing questions, each questionnaire also included once-off questions
dealing with certain matters of policy interest to the federal government at the
time of the collections. In the current study, such questions relate to training
methods, fields and providers.
Various imputation techniques, including matching with other data files
available to the ABS, were employed to deal with any missing data. Because
information collected from the SME proprietor in the BLS was sought under
the authority of the Census and Statistics Act 1905, and thus provision of appro-
priate responses to the mailed questionnaires could be legally enforced by the
Australian Statistician, response rates were very high by conventional research
standards, typically exceeding 90%.
The specific BLS data used in this study are included in a Confidentialised
Unit Record File (CURF) released by the ABS on CD-ROM in December
1999. This CURF contains data on 9731 business units employing fewer than
200 persons, broadly representing SMEs in the Australian context. Restricted
industrial classification detail, no geographical indicators, presentation of
enterprise age in ranges, and omission of certain data items obtained in the
BLS all help to maintain the confidentiality of unit records.
This research is concerned only with the manufacturing sector of the BLS
CURF. There are two reasons for this. First, over the last few decades, the
performance of the Australian manufacturing sector has been a major pre-
occupation of policy-makers and government departments dealing with
industry and trade. The sector has been characterised as non-competitive by
international standards, and it is considered to have failed in countering
Australia’s growing trade imbalance with the rest of the world (Pappas, Carter,
Evans and Koop/Telesis 1990). The second reason is that it is highly probable
that cross-industry differences in the nature of business activities, typical
employment per business, capital intensity, etc., could confound findings
relating to SME development patterns, and to SME growth and performance
more generally. Such influences are, to a reasonable extent, controlled for by
examining a single (albeit broadly defined) industry. There are 3411 manu-
facturing SMEs in the BLS CURF, representing approximately 35% of busi-
nesses in the file.
Additional focus is provided to this research by considering only manu-
facturing SMEs legally organised as proprietary companies. There are two
main reasons for this further narrowing of the unit of analysis. First, as
Freedman and Godwin (1994, 234) indicate, a particular concern with propri-
etary companies is not uncommon among SME researchers worldwide:
It would appear that, in so far as the issue is considered at all, the limited
liability company is of more interest to the small business research
community than are unincorporated firms; limited liability companies and
entrepreneurship have become equated, or at least associated.

Second, the primary concern in this research is with SME growth and
development, and it is more likely that these will be evident in businesses
legally organised as proprietary companies (Freedman and Godwin 1994; Gray
1992; Hakim 1989; Hughes and Storey 1994; Yellow Pages Australia 1995).
There are 2413 manufacturing SMEs legally organised as proprietary
companies in the BLS CURF, representing approximately 71% of manufac-
turing SMEs in the file. The size of the final data set identified by McMahon
(2001b) and used in the current study is 871 firms.
Training and development and employment pattern variables used in this
research are either categorical in nature or, if metric, have irregular distribu-
tional properties (that is, they are non-normally distributed). Transformation of
metric variables to produce normal distributions is avoided because of diffi-
culties of interpretation often created by such procedures. Thus, non-para-
metric/distribution free techniques of statistical analysis are employed
exclusively. Frequency distributions or descriptive statistics for training and
development and employment pattern variables across the low-, moderate and
high-growth SME development pathways are initially presented. Further
evidence for the statistical significance of apparent relationships between SME
growth and study variables are examined using either Chi-square tests, or
Kruskal-Wallis one-way analysis of variance tests. The Chi-square test analyses
relationships between two categorical variables. The Kruskal-Wallis test
examines possible differences between two or more groups (Coakes and Steed
2001). After establishing that linkages appear to exist, and are statistically
significant, differences identified by the Kruskal-Wallis test between the three
SME growth development pathways are further investigated using a series of
Mann-Whitney tests. In order to identify between which SME growth devel-
opment pathways significant difference/s exist for a given variable, low-growth
SMEs are compared with moderate growth SMEs (n = 832), moderate growth
compared with high-growth SMEs (n = 242), and high-growth compared to
low-growth SMEs (n = 668). The Mann-Whitney test tests the hypothesis that
two independent samples come from populations having the same distribution
(Coakes and Steed 2001). In order to enhance interpretation of the results
presented, percentages or proportions of the sample in each pathway associated
with the variable examined are reported in the tables.
Results
Management qualifications/business management training
Thirty-five percent, 70% and 92% of SMEs on the low-, moderate and high-
growth pathways respectively have tertiary qualified managers in 1994–95.
The number of workplaces with managers undertaking training in business
management on the low, moderate and high-growth pathways is 33%, 61%
and 72% respectively. Thus managers with tertiary qualifications, and under-

taking business/management training, are more prevalent among concerns

that are growing more rapidly. Kruskal-Wallis tests indicate statistically signif-
icant differences exist in tertiary qualified managers or managers undertaking
training in business management between low-, moderate and high-growth
SMEs (p < 0.001). A series of Mann-Whitney tests reveal that managers from
high-growth enterprises are statistically more likely to have tertiary qualifica-
tions than managers from moderate (n = 242, U = 2398.500, p < 0.001) or low
(n = 668, U = 3100.500, p < 0.001) growth SMEs. Moderate growth manufac-
turing SMEs are more likely than low-growth firms to employ tertiary
qualified managers (n = 832, U = 36501.000, p < 0.001). Managers in high- (n
= 668, U = 6065.500, p < 0.001) or moderate (n = 832, U = 41265.500, p < 0.001)
growth SMEs are also significantly more likely to undertake training in
business management than their low-growth counterparts.
Training changes
Frequency distributions reveal that in all four years of the longitudinal panel,
SMEs in each of the three growth development pathways identified by
McMahon (2001b) are most likely to report no major change in training
provision, with approximately half of all SMEs stating training remained the
same as in the previous year. However, when change occurs, it appears to be
more prevalent among SMEs that are growing more rapidly. SMEs are also
more likely to increase than decrease training.
The results of Chi-square tests1 for SME growth development pathway
differences presented in table 2 are significant. In three of the four years,
Table 2 SME growth development pathway differences: Results of Chi-square tests for
training changes (1994/95–1997/98)
Test values
Test variable Test details 1994–95 1994–95 1995–96 1996–97 1997–98
Growth pathway Chi-square 8.779 a 19.688 b 6.976 c 13.36 d 16.240 e

statistic
vs df 2 2 2 2 2
Change in training Significance 0.012* 0.000*** 0.031* 0.001** 0.000***
* p < 0.05, ** p < 0.01, *** p < 0.001

a
In 1994–95, higher growth SMEs more than likely to report changes to technical training.
b, d & e
Higher growth SMEs also more than likely to change management training in 1994–95 and 1996–97, and
training in 1997–98.
c
Moderate growth SMEs more than likely to report changes to management training in 1995–96.
1 In analysing differences among SME growth development pathways, existing categories

for training change variables are collapsed into dichotomous variables reflecting whether
or not a change in training occurred.

higher growth SMEs more than likely report changes to training; in 1995–96,
moderate growth SMEs more than likely change training.
Training methods
Low-, moderate and high-growth SMEs are most likely to have employees
participate in on-the-job training, and least likely to use job rotation/exchanges.
Low-growth workplaces are also least likely to use seminars/workshops/
conferences (table 3). Kruskal-Wallis statistics to test for SME growth devel-
opment pathway differences show statistically significant differences exist in
structured training (p < 0.001), on-the-job training (p < 0.01), seminars/work-
shops/conferences (p < 0.001) and job rotation/exchanges (p < 0.01). The results
of a series of Mann-Whitney tests presented in table 3 reveal that high-growth
SMEs are statistically more likely than moderate growth SMEs to use semin-
ars/workshops/conferences, and more likely than low-growth SMEs to have
employees engaged in structured training, on-the-job training, seminars/
workshops/conferences or job rotation/exchanges. Moderate growth SMEs are
more likely than low-growth firms to have employees engaged in structured
training, seminars/workshops/conferences or job rotation/exchanges (table 3).
Training fields
High- and moderate growth SMEs are most likely to train employees in health
and safety, while low-growth firms are most likely to have employees engaged
in ‘other’ training (table 4). Firms on the low- and moderate growth develop-
ment pathways are least likely to have employees undertaking professional
training; high-growth SMEs are least likely to utilise apprenticeships/trainee-
ships. A series of Kruskal-Wallis tests reveal statistically significant differences
exist between the three identified SME growth development pathways in
management training (p < 0.001), professional training (p < 0.001), computer
training (p < 0.001), trades/apprenticeships (p < 0.01), health and safety
training (p < 0.001) or ‘other’ training (p < 0.001). A series of Mann-Whitney
tests presented in table 4 show significant differences between high- and
moderate growth SMEs in terms of professional, computer, health and safety
and ‘other’ training. High-growth enterprises appear more likely to train
employees in the aforementioned training fields. A further series of Mann-
Whitney tests reveal statistically significant differences exist between high- and
low-growth SMEs in training in management, professions, computers,
trades/apprenticeships, health and safety and ‘other’ training. Again, high-
growth SMEs are more likely to train employees in the identified training
fields. Finally, Mann-Whitney tests also show that moderate growth enter-
prises are statistically more likely than low-growth firms to train employees in
management, professions, computers, trades/apprenticeships, health and safety
or ‘other’ training.

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Asia Pacific Journal of Human Resources
Table 3 SME growth development pathway differences: Results of Mann-Whitney tests for training methods (1997–98)
Structured On-the-job Seminar/workshop Job rotation/exchange
29/01/04
Frequency (%) of SMEs a
Training method L M H L M H L M H L M H
2:52 PM
None 309(56.9) 41(24.3) 7(18.9) 139(25.6) 11(6.5) 2(5.4) 313(57.6) 35(20.7) 5(13.5) 312(57.5) 52(30.8) 13(35.1)
up to 25% 194(35.7) 96(56.8) 23(62.2) 181(33.3) 69(40.8) 14(37.8) 189(348) 118(69.8) 28(75.7) 131(24.1) 80(47.3) 16(43.2)
26–50% 21(3.9) 17(10.1) 3(8.1) 84(15.4) 44(26) 9(24.3) 23(4.2) 10(5.9) 3(8.1) 61(11.2) 25(14.8) 4(10.8)
Page 108
51–75% 7(1.3) 7(4.1) 3(8.1) 55(10.1) 28(16.6) 6(16.2) 11(2.0) 5(3) 1(2.7) 26(4.8) 11(6.5) 3(8.1)
76–100% 12(2.2) 8(4.7) 1(2.7) 85(15.6) 17(10.1) 6(16.2) 7(1.3) 1(0.6) 0(0) 13(2.4) 1(0.6) 1(2.7)
Total 629(100) 203(100) 39(100) 629(100) 203(100) 39(100) 629(100) 203(100) 39(100) 629(100) 203(100) 39(100)
2004 42(1)
Path L / Mb M/H H / Lf L/M M/H H / Lg L / Mc M / He H / Lh L / Md M/H H / Li
Mann-Whitney
test statistic 49662.500 3360.500 7183.500 58741.500 3268.000 9093.000 49801.500 3266.000 6999.500 55318.000 3581.000 9213.500
Significance 0.000*** 0.109 0.000*** 0.080 0.076 0.006** 0.000*** 0.049* 0.000*** 0.000*** 0.324 0.005**
L = Low-growth SMEs, M = Moderate growth SMEs, H = High-growth SMEs

* p < 0.05, ** p < 0.01, *** p < 0.001
a
Respondents may have provided more than one response, and hence percentages (across rows) will sum to more than 100.
b–d
Moderate growth SMEs are more likely than low-growth firms to have employees engaged in structured training, seminars/workshops/conferences or job
rotation/exchanges (n = 832).
e
High-growth firms are more likely than moderate growth SMEs to use seminars/workshops/conferences (n = 242).
f–i
High-growth SMEs are also statistically more likely than low-growth SMEs to have employees participate in structured training, on-the-job training
seminars/workshops/conferences and job rotation/exchanges (n = 668).
APJHR42_1_Jones.qxd
Table 4 SME growth development pathway differences: Results of Mann-Whitney tests for training fields (1997–98)
29/01/04
Management Professional Computers Trades Health & safety Other
Frequency (%) of SMEs a
2:52 PM
Training
field L M H L M H L M H L M H L M H L M H
412 72 14 461 90 13 408 80 12 393 89 19 337 30 4 295 50 5

None
(75.6) (42.6) (37.8) (84.6) (53.3) (35.1) (74.9) (47.3) (32.4) (72.1) (52.7) (51.4) (61.8) (17.8) (10.8) (54.1) (29.6) (13.5)
Page 109
120 90 23 73 74 22 121 78 19 133 74 17 177) 118 26 197 103 24
up to 25%
(22) (53.3) (62.2) (13.4) (43.8) (59.5) (22.2) (46.2) (51.4) (24.4) (43.8) (45.9) (32.5) (69.8) (70.3) (36.1) (60.9) (64.9)
26–50% 8(1.5) 2(1.2) 0(0) 5(0.9) 3(1.8) 2(5.4) 13(2.4) 6(36) 6(16.2) 14(2.6) 3(1.8) 1(2.7) 12(2.2) 10(5.9) 4(10.8) 29(5.3) 9(5.3) 4(10.8)
51–75% 4(0.7) 4(2.4) 0(0) 5(0.9) 2(1.2) 0(0) 1(0.2) 2(12) 0(0) 4(0.7) 1(0.6) 0(0) 9(1.7) 4(2.4) 2(5.4) 1(1.8) 5(3.0) 2(5.4)
76–100% 1(0.2) 1(0.6) 0(0) 1(0.2) 0(0.0) 0(0) 2(0.4) 3(1.8) 0(0) 1(0.2) 2(1.2) 0(0) 10(1.8) 7(4.1) 1(2.7) 14(2.6) 2(1.2) 2(5.4)
T&D and business growth in SMEs

629 203 39 629) 203 39 629 203 39 629 203 39 629 203 39 629 203 39
Total
(100) (100) (100) (100) (100) (100) (100) (100) (100) (100) (100) (100) (100) (100) (100) (100) (100) (100)
Path L / Mb M/H H / Ll L / Mc M / Hh H / Lm L / Md M / Hi H / Ln L / Me M/H H / Lo L / Mf M / Hj H / Lp L / Mg M / Hk H / Lq
Mann-
Whitney
test
statistic 50966.5 3430.0 7599.0 51810.5 2915.0 6324.5 53270.0 2918.0 6776.0 57341.5 3471.0 6252.0 45697.0 3153.5. 5921.0 55893.0 2769.0 7003.5
Sig. 0.000*** 0.152 0.000*** 0.000*** 0.005** 0.000*** 0.000*** 0.006** 0.000*** 0.014** 0.188 0.003** 0.000*** 0.023* 0.000*** 0.004** 0.001** 0.000***
* p < 0.05, ** p < 0.01, *** p < 0.001
a
Respondents may have provided more than one response, and hence percentages (across rows) will sum to more than 100.
b–g
Moderate growth SMEs are more likely than low-growth SMEs to provide management, professional, computer, trades/apprenticeship, health and safety or ‘other’ training (n = 832).
h–k
High-growth SMEs are more likely than moderate growth SMEs to provide training in professions, computers, health and safety or ‘other’ training (n = 242).
l–q
High-growth SMEs are also more likely than low-growth SMEs to provide training in management, professions, computers, trades, health and safety or ‘other’ training (n = 668).
109
Training providers
Workplaces following the low-, moderate or high-growth development

pathways are most likely to use employees/business owners to provide on-the-
job training, and least likely to use ‘other’ training providers (table 5).
Frequency distributions shown in table 5 reveal that high-growth enter-
prises are more likely than moderate growth SMEs, and moderate growth
more likely than low-growth SMEs, to have employees/business owners
provide structured training, and use professional and industry associations,
equipment manufacturers/suppliers, private consultants, TAFE and universi-
ties to train employees. In other words, there appears to be increase in use of
the aforementioned training providers across the SME growth development
pathways. Chi-square tests used to examine the statistical significance of rela-
tionships between training provider variables across the low, moderate and
high-growth development pathways reveal highly significant differences exist
(see table 5). The evidence is that high-growth manufacturing SMEs more
than likely use the identified training providers.
Table 5 SME growth development pathway differences: Results of Chi-square tests for
training providers (1997–98)
Frequency (%) of SMEs a Test values
Chi-square
Training provider L M H statistic df Significance
Employees/business owners
providing OTJ training 375 (59.6) 139 (68.5) 30 (76.9) b 8.775 2 0.012*
Employees/business
owners providing
structured training 114 (18.1) 71 (35) 19 (48.7) c 38.865 2 0.000***
Professional associations 103 (16.4) 79 (38.9) 27 (69.2) d 88.565 2 0.000***
Industry associations 133 (21.1) 81 (39.9) 24 (61.5) e 51.256 2 0.000***
Equipment manufacturer/
supplier 160 (25.4) 87 (42.9) 20 (51.3) f 30.080 2 0.000***
Private training provider 87 (13.8) 64 (31.5) 17 (43.6) g 46.357 2 0.000***
TAFE 156 (24.8) 97 (47.8) 24 (61.5) h 54.019 2 0.000***
University 31 (4.9) 31 (15.3) 13 (33.3) i 52.572 2 0.000***
Other 15 (2.4) 4 (2.0) 1 (2.6) 0.130 2 0.937
L = Low growth SMEs, M = Moderate growth SMEs, H = High growth SMEs

* p < 0.05, ** p < 0.01, *** p < 0.001
a
Respondents may have provided more than one response, and hence percentages (across rows) will sum to
more than 100.
b–i
High-growth SMEs more than likely use employees/business owners to provide on the OTJ training and
structured training, as well as use professional and industry associations, equipment manufacturers/suppliers,
private consultants, TAFE and universities to train employees.

Working owners and full-time managers
In each of the four years of the longitudinal panel, businesses following the
high-growth development pathway are most likely to employ full-time
managers, and least likely to have working owners present (table 6). In
contrast, working owners are more likely to be present in low-growth SMEs,
and least likely to employ full-time managers. These variables had statistically
significant Kruskal-Wallis results indicating differences among SME growth
development pathways (p < 0.001). A series of Mann-Whitney tests presented
in table 6 reveal that high-growth SMEs are statistically less likely than their
moderate or low-growth counterparts to have working owners present, and
significantly more likely to employ full-time managers in all four years of the
longitudinal panel. Moderate growth SMEs are significantly more likely than
low-growth SMEs to employ full-time managers.s
An examination of table 7 reveals that more managers are hired among
manufacturing SMEs that are growing more rapidly in 1994–95. Kruskal-
Wallis statistics indicate statistically significant differences among SME growth
development pathways (p < 0.001). A series of Mann-Whitney tests reveal that
high-growth manufacturing SMEs employ significantly more new full-time
managers than do moderate or low-growth enterprises (table 7). Moderate
growth firms employ more new managers than do low-growth firms.
Discussion
Business and management training/qualifications
Managers in small, low-growth SMEs are significantly less likely to be in

receipt of business or management training than larger, higher growth SMEs
for a number of reasons related to particular features characterising the SME
sector (Kerr and McDougall 1999). First, as a result of the considerable
‘external’ uncertainty faced by a small compared to a larger business, a small
firm responds by normally having a shorter time perspective than a large firm
so that the small firm favours projects with short- rather than long-term
returns (Kerr and McDougall 1999; Westhead and Storey 1997). As the main
benefits of training are apparent to owners in the long rather than the short
run, smaller firms will invest less in training than larger firms (Westhead and
Storey 1997).
The second reason may relate to the absence of an internal labour markets
(ILMs) in a small SME (Westhead and Storey 1997). The main element of an
ILM is that individuals expect to obtain their next job within the organisation
for which they currently work. Thus it is in the interests of that organisation
to provide training to improve the performance of the manager, not only in
their current job, but also in preparation of their next job. However, because

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Asia Pacific Journal of Human Resources
Table 6 SME growth development pathway differences: Results of Mann-Whitney tests for working owners and full-time managers
(1994/95–1997/98)
29/01/04
1994–95 1995–96 1996–97 1997–98
Frequency (%) of SMEs

2:52 PM
L M H L M H L M H L M H
Working owners,
directors & 563 168 20 568 160 21 552 157 20 547 148 22
partners (89.5) (82.8) (51.3) (90.3) (78.8) (53.8) (87.8) (77.3) (51.3) (87) (72.9) (56.4)
Page 112
PATH L/M M / Hb H / Lc L/M M / Hd H / Le L/M M / Hf H / Lg L/M M / Hh H / Li
Mann-Whitney
test statistic 63830.000 2637.500 7667.500 60446.000 3070.000 8527.500 61112.000 3105.500 8868.000 58949.000 3193.500 8604.000
2004 42(1)
Sig. 0.996 0.001** 0.000*** 0.226 0.023* 0.001** 0.336 0.028 * 0.002 ** 0.084 0.049 * 0.001**
Other full-time 325 189 39 321 192 36 350 194 39 362 193 38
managersa (51.7) (93.1) (100) (51) (94.6) (92.3) (55.6) (95.6) (100) (57.6) (95.1) (97.4)
Path L / Mj M / Hn H / Lo L / Mk M / Hp H / Lq L / Ml M / Hr H / Ls L / Mm M / Ht H / Lu
Mann-Whitney
test statistic 21407.500 1911.000 997.500 19575.000 2386.500 2195.500 19403.000 2083.500 930.500 21169.000 1840.000 1311.500
Sig. 0.000*** 0.000*** 0.000*** 0.000*** 0.000*** 0.000*** 0.000*** 0.000*** 0.000*** 0.000*** 0.000*** 0.000***

* p < 0.05, ** p < 0.01, *** p < 0.001
a
Excludes working owners, directors and partners
b–i
From 1994–95 to 1997–98, high growth SMEs are statistically less likely than moderate (n = 242) or low (n = 668) growth firms to have working owners, directors & partners.
j–m
Moderate growth SMEs are significantly more likely than low growth SMEs to employ full-time managers in all fours years (n = 832).
n–u
In all four years, SMEs following the high growth pathway are significantly more likely to employ full-time managers than moderate (n = 242) or low growth
SMEs (n = 668).
Table 7 SME growth development pathway differences: Results of Mann-Whitney tests

for employment patterns (1994/95)
Employment patterns L M H
New managers recruited (mean) 0.2 0.6 1.1

Path L / Ma M / Hb H / Lc
Mann-Whitney test statistic 51741.500 3099.000 7328.000
Sig. 0.000*** 0.011* 0.000***
L = Low growth SMEs, M = Moderate growth SMEs, H = High growth SMEs

p < 0.05, ** p < 0.01, *** p < 0.001
a
Moderate growth SMEs employ significantly more new managers than low-growth SMEs (n = 832).
b&c
High-growth SMEs employ significantly more new managers than moderate (n = 242) or low-growth SMEs
(n = 668).
ILMs are unlikely to exist in most small firms (Wynarczyk et al. 1993),
managers in small firms recognise that their next job will not be in that firm,
since often the only more senior manager is the owner. Thus management
training is not seen to be in the interests of either party (Curran, Kitching,
Abbott and Mills 1993): the owner does not want to make the investment
because the manager is likely to leave, and the manager does not wish to par-
ticipate in management training on the grounds that this may be ‘narrowing’.
Training provided by the enterprise is ‘narrowing’ because it focuses upon
business procedures and, as a result, makes the individual less attractive to
other businesses (Creedy and Whitfield 1988). On the other hand, qualifica-
tion-based training is less likely to be provided since returns are long term and,
by its provision, the manager becomes more attractive in the external labour
market (Westhead and Storey 1997).
Third, the ‘price’ paid for training by small firms exceeds that of large
firms (Kerr and McDougall 1999; Westhead and Storey 1997). The price paid
includes not only the market price, but also the opportunity cost of his/her
absence from the workplace during the training period. This opportunity cost
of management time may differ between small, low-growth and larger, higher
growth SMEs, with the cost being higher in smaller rather than larger firms.
Small firms may also be more ‘financially constrained’ than large firms
limiting their ability to invest in management training.
Finally, training may be perceived to be ‘too general’ and not of specific
relevance to his/her business, or not provided by people with sufficient ‘under-
standing’. Alternatively, training may not be conveniently provided (e.g.
location, form of training, etc.), or small firm owners may be less well-
informed about the availability of management training (Fuller, Murphy and
Vickerstaff 1991) than their larger SME counterparts (Westhead and Storey
1997). As in the present study, Storey and Westhead (1994) conclude that
participation in some form of external training for managers was positively
related to firm size.

Importantly, the majority of moderate and high-growth SMEs have full-

time, tertiary qualified managers. Organisations with more managers and
professionals tend to ‘provide more training and this training is formal and
off-job in nature’ (Smith 1999, 78).
Training fields, methods and providers

SMEs on the low-growth pathway appear more likely to adopt an informal, ad
hoc approach to training and development, as the majority (defined as more
than 50%) of low-growth workplaces do not have employees attend structured
training programs nor seminars/workshops/conferences. Surprisingly, most
low-growth firms also do not use job rotation/exchanges. This was unexpected
given a multi-skilled workforce (developed through job rotation) is important
to a low-growth manufacturing SME to ensure continuity of operations. Low-
growth firms are, however, most likely to use on-the-job training, with
employees/business owners most likely to provide this training. Taking
advantage of training provided by equipment manufacturers/suppliers is the
next most frequently used training provider for low-growth SMEs, suggesting
SMEs on the low-growth pathway are opportunistic in their approach to
training (Gilbert and Jones 2000) with training and learning occurring in the
normal course of activities (Hendry et al. 1991).
Given the ‘tighter’ resource constraints (e.g. time and cost discussed above)
that are more likely to be evident in small, low-growth compared to larger, higher
growth SMEs, informal, on-the-job training and development activities are all
the more important in these SMEs (Bacon, Ackers, Storey and Coates 1996).
In contrast, high- and moderate growth SMEs adopt a more systematic,
structured approach to training and developing staff, and include structured
training and external courses, as well as the use of formal training providers
(e.g. professional/industry associations, TAFE). The majority of high and
moderate growth SMEs also have persons engaged in four of the six training
fields (i.e. management, computers, health and safety, and ‘other’ training). In
other words, higher growth SMEs, are more likely to implement more
comprehensive training and development programs and practices. One expla-
nation is that higher growth SMEs employ a larger number of people. In order
to deal with the complexities associated with managing a larger number of
employees, a more structured approach to personnel management is required.
In addition, SMEs on the moderate and high-growth development pathways,
as larger organisations, are more likely to have both the resources as well as
technical knowledge and skills (Weisner and McDonald 2001).
Training changes
When training changed, a higher proportion of moderate and high-growth
SMEs increased training in three of the four years, suggesting that interest in

employee development may rise as SMEs grow. Conversely, the absence of

increased training in low-growth firms over this period may again reflect the
reluctance of its owner to invest in long-term projects (Westhead and Storey
1997).
A feature important to any discussion about training and development in
the SME sector is the importance of the views of the owner-managers (Kerr and
McDougall 1999) since they determine the philosophy and strategic direction
for the company as a whole, including training and development (Hendry et al.
1991, Jennings, Banfield and Beaver 1996). Research shows that some owner-
managers may be keen to ensure employee skill development; for others,
training is often little more than ‘a motherhood’ statement’ (Stanworth, Purdy
and Kirby 1992). Some view training as an operational expense rather than an
investment (Finegold and Soskice 1988). Furthermore, many owner-managers
are either not aware (Westhead and Storey 1996) or yet to be convinced of the
benefits of training (Wood 1992). Westhead and Storey (1997) refer to the
‘ignorance’ and ‘market forces’ arguments as two explanations as to why
employees in small (or this case, low-growth) firms are less likely to receive
training than their counterparts in larger (higher growth) SMEs. First, the
‘ignorance’ explanation suggests that business owners are not fully aware of the
benefits of training, and as a result, provide less than optimal training for
employees. Second, the ‘market forces’ argument explains the lower incidence
of training in terms of various demand and supply factors related to the antici-
pated or actual costs and benefits associated with undertaking training. Research
suggests that this latter explanation is primarily responsible for small business
owners providing less training than larger firms (Storey and Westhead 1997).
Other owner characteristics have some influence upon the decision to
commission training initiatives. It has been suggested that a firm’s business
strategy is often intimately linked to the personality of the owner-manager,
reflecting their priorities and characteristics (Moran 1998; Perry, Meredith and
Cunningham 1998; Welch 1996). A range of variables including the owner’s
background, experience, growth orientation and motivation are critical when
making decisions to train, as well as the way in which training is used
throughout the organisation (Matlay 1996; Watson, Hogarth-Scott and Wilson
1998). In this study, SMEs following the low-growth development pathway
generally have few, if any, growth aspirations, and exist mainly to provide their
owner-managers with a source of employment and income (McMahon et al.
1993). Furthermore, they are frequently operated in a manner consistent with
the lifestyle aspirations of their owner-managers. Such an approach may (nega-
tively) impact upon their decision to invest in training and development.
In contrast, entrepreneurial SMEs following the high-growth develop-
ment pathway generally have ambitious growth aspirations (McMahon et al.
1993). McMahon et al. (1993) propose that they are most often associated with
entrepreneurial aptitude, international outlook, technical and commercial
innovation, and other business qualities that could see them eventually become

large enterprises. For small SMEs to grow successfully, owner-managers need

to learn to delegate responsibility to specialist managers, as a growing firm
inevitably reaches a point where the owner can no longer make all decisions
alone. And in the current study, working owners are a less significant and
consistent concomitant with SME growth than full-time managers; recruiting
full-time managers also correlates with SME growth.
New demands are likely to be made of management in SMEs undergoing
considerable business growth. Managers need to develop new skills, requiring
training (Stanworth, Purdy and Kirby 1992). Wynarczyk et al. (1993) argue
that in fast-growing SMEs, management will be constantly developing, and
the skills needed will change as both cause and effect of the development of
the SME itself. The present study demonstrates that tertiary qualified
managers undertaking business training are significant concomitants with
SME growth, while increasing management, technical and general training
are relative consistent correlates with growth. In terms of skills, training in
management, professions, computers, trades/apprenticeships, health and safety,
and ‘other’ training also correlate with SME growth.
Furthermore, highly motivated, developing staff with effective, transfer-
able skills are more likely to be able to meet the demands of a fast-changing
work environment which typically characterises growing SMEs (Kerr and
McDougall 1999). Staff may develop and obtain such skills through formal,
structured training courses, including seminars/workshops/conferences, or the
more informal, on-the-job training and job rotation/exchanges. Similarly, a
variety of providers from employees/business owners providing on-the job and
structured training, to professional/industry associations, equipment manu-
facturers/suppliers, private providers, TAFE and university providers may
supply such training. In this study, all four training methods, and eight of the
nine training providers are significant concomitants with SME growth.
The propensity to increase training, use various training providers and
methods, as well as train staff in a range of fields is likely to vary between
low-, moderate and high-growth manufacturing SMEs, as it is probable that
the needs and pressures for training and development will vary according to
the particular business conditions faced by the SME (Hendry et al. 1991). In
summary, high-growth SMEs are significantly more likely to utilise a compre-
hensive range of trainers and training methods, and train staff and manage-
ment in a wider range of fields.
The fact that increasing training, as well as training in all six fields, four
methods and eight of the nine training providers are positively correlated with
organisational growth are sufficiently important to warrant further attention
from both researchers and policy-makers in the field. This is particularly
pertinent given that many Australian organisations invest little in training
(Davidson 1996) and recent research shows a decline in the average level of
training investment per employee in Australian organisations (Howes 1998).
Qualitative research should seek to examine more fully training and

development in SMEs, including motivations for training and development

initiatives, as well as barriers to investing in training and development. For
example, is the propensity to invest in employee training related to organisa-
tional changes such as technological change and quality assurance, changing
management practices and philosophies, or difficulty in recruiting skilled
labour? What is the impact of regulatory influences or industrial awards on
the decision to train staff, and does this vary among different sized SMEs?
With respect to obstacles to training, do employers limit their expenditure on
training because employees are already adequately trained? Or are time and
cost constraints more important considerations? These answers may have
policy implications in relation to training initiatives/schemes. Future research
should also should examine the relationship between training and develop-
ment and other HR practices in SMEs. For example, to what extent is training
and development integrated with career development? If SMEs invest in staff
training and development, what career structures exist in order to retain staff,
so that employers benefit from training provided? Do differences exist
between career progression structures provided for managerial versus opera-
tional staff?
This study has shown that it is possible to demonstrate highly statistically
significant relationships between training and development variables, and
SME performance. However, statistical techniques can only demonstrate an
association between variables; they cannot by themselves maintain a causal
relationship (Kitching 1998). A two-way relationship exists between training
and development, and SME performance. In other words, improvements in
SME performance cause an increase in training; conversely, an increase in
training leads to an increase in firm performance.
However, it is simplistic to suggest that training and development initia-
tives can be considered in isolation when evaluating SME performance, as it is
clear a range of factors influence the training and development/performance
relationship. A major problem is distinguishing the effects of training from
the plethora of macro- and micro-level factors that affect business perform-
ance (Kitching 1998). While quantitative studies such as the present one are
invaluable in identifying general trends across large populations, qualitative
analysis needs to be employed in an attempt to understand the dynamics
through which training activities translate into SME performance outcomes.
In addition, in order to establish the relative importance of training as a causal
influence on SME growth, an understanding of other factors that shape SME
performance is needed.
Conclusion
SME founders perceive HRM as very important to the growth of their enter-
prises (Heneman, Tansky and Camp 2000), while researchers and small
business alike have acknowledged that growing businesses need to develop

their HRM practices (Gilbert and Jones 2000; Heneman, Tansky and Camp
2000; Hornesby and Kuratko 1990). This study supports this view, at least in
one aspect of HR practice, namely, training and development. Furthermore,
any assistance would need to come from sources that understood both the
dynamics of small business, as well as their HRM priorities (Gilbert and Jones
2000). However, current HR theory is often developed and tested in large
organisations, and as a result little is known about the extent to which the
theory applies to smaller organisations (Heneman, Tansky and Camp 2000).
Westhead and Storey (1996, 18) conclude that: ‘there is a need to build theory
based on SME experience. Fundamental to this is the recognition that the small
firm is not a “scaled-down” version of a large firm’. The findings identified in
the current study may, in part, meet this need.
Janice Jones (MComm., UNSW) is a lecturer in management in the School of Commerce at Flinders
University of South Australia.
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Asia Pacific Journal of

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Training and Development, and Business Growth: A Study of Australian

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96 Asia Pacific Journal of Human Resources 2004 42(1)

Training and development, and business growth: A study of

Training and development in small and medium-sized enterprises (SMEs)

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T&D and business growth in SMEs 97

Personnel management/human resource management in SMEs

Personnel management has been identified as a major area of deficiency in

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98 Asia Pacific Journal of Human Resources 2004 42(1)

1990). Not only do managers lack training in formal personnel management,

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T&D and business growth in SMEs 99

Training and development, and SME performance

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100 Asia Pacific Journal of Human Resources 2004 42(1)

Manufacturing SME growth

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T&D and business growth in SMEs 101

Table 1 Characterisation variables for SME development pathways

Low- Moderate High-

Source: McMahon (2001b)

• Traditional SMEs – following the low-growth development pathway, these

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102 Asia Pacific Journal of Human Resources 2004 42(1)

assets below $2 million, little or no employment growth, and sales growth

• Capped growth SMEs – following the moderate growth development

• Entrepreneurial SMEs – following the high-growth development pathway,

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T&D and business growth in SMEs 103

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104 Asia Pacific Journal of Human Resources 2004 42(1)

then progressively refined after each collection in the light of experience. As

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T&D and business growth in SMEs 105

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106 Asia Pacific Journal of Human Resources 2004 42(1)

taking business/management training, are more prevalent among concerns

Test variable Test details 1994–95 1994–95 1995–96 1996–97 1997–98

Growth pathway Chi-square 8.779 a 19.688 b 6.976 c 13.36 d 16.240 e

* p < 0.05, ** p < 0.01, *** p < 0.001

1 In analysing differences among SME growth development pathways, existing categories

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T&D and business growth in SMEs 107

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Structured On-the-job Seminar/workshop Job rotation/exchange

L = Low-growth SMEs, M = Moderate growth SMEs, H = High-growth SMEs

Frequency (%) of SMEs a

412 72 14 461 90 13 408 80 12 393 89 19 337 30 4 295 50 5

T&D and business growth in SMEs

Path L / Mb M/H H / Ll L / Mc M / Hh H / Lm L / Md M / Hi H / Ln L / Me M/H H / Lo L / Mf M / Hj H / Lp L / Mg M / Hk H / Lq

110 Asia Pacific Journal of Human Resources 2004 42(1)

Workplaces following the low-, moderate or high-growth development

Frequency (%) of SMEs a Test values

L = Low growth SMEs, M = Moderate growth SMEs, H = High growth SMEs

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T&D and business growth in SMEs 111

Working owners and full-time managers

* p < 0.05, p < 0.01, * p < 0.001