SMEs are important to both western and developing countries’ economies, as growing companies contribute to regional and national growth. They contribute to the expansion of private ownership through entrepreneurship, and create employment due to their local presence even in the most rural areas. Unlikely larger companies or corporate, SMEs are not in a position to exit from a market when conditions are adverse in order to focus on a different market, hence preserving employment. It is true that governments are interested in growing companies due to the local and national benefits related to business growth but nevertheless, companies often need governmental support in order to be able to start-up, develop and grow. This is especially true in turbulent times.
Despite the level of flexibility in the way SMEs react to changes in the market, SMEs can be managed by entrepreneurs or owner-managers. These differ significantly in their managerial styles and their decision making. Although not all SMEs are managed by entrepreneurs – because there is a distinctive behavioural difference between owner-mangers and entrepreneurs, some SMEs can be lead by entrepreneurs.
Entrepreneurs are more inclined to risk taking and this affects their strategic attitudes. Entrepreneurs are opportunity seekers and show less inclination to planning. Furthermore, their decision making shows itself to be “irrational and erratic”.
On the contrary, owner-managers tend to be more rational in their behaviour. They tend to take planning activities into consideration, and they control business processes as well as measuring performance.