Uncovering the Effect of Corporate Governance, Competitiveness, and Distinctive Competence on SMEs Performance in Emerging Countries

Abstract

The purpose of this study is to investigate and analyze the impact of small medium enterprises’ (SMEs) corporate governance (CG) practices on the firm's competitive factors, distinctive competence, and firm performance in three emerging economies on three continents, namely Hungary, Indonesia, and Mexico. A total of 531 completed questionnaires were analyzed (Hungary 218, Indonesia 161, and Mexico 152). The study applied the conceptual model and tested it using covariance-based structural equation modeling (CB SEM). The results have shown that the direct and indirect relationships found in this study between corporate governance practices, distinctive competence, firm competitiveness, and firm performance, as well as the multiple-group analysis (MGA) comparison, contribute to the body of knowledge on understanding the SMEs characteristic performance within the emerging markets. This study also provide a significant theoretical contribution and outlines practical implications for corporate governance to improve the understanding of the relationship between corporate governance and the operational performance of SMEs in emerging markets. There are that three main important implications factors contributed for this study. First, this study extends the two variables used in the previously theory to explain the relationship between corporate governance and firm performance. Second, this study conducted a mediation effect analysis among the construct variables to investigate and better understand the factors that influence corporate governance and firm performance in SMEs by expanding the new construct variables. Third, the study examined the MGA comparison between the three emerging economies and other SME groups provides a clear and deeper understanding of the need to understand the different influencing factors in different countries