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The perceptual effects of location on the performance of small businesses

Sefiani, Yassine and Davies, Barry and Bown, Robin (2016): The perceptual effects of location on the performance of small businesses.

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Abstract

Purpose - This study aims to develop a clearer understanding of the effects of location on the performance of small and medium enterprises in Tangier, as perceived by local owner-managers.

Prior Work - Several studies have attempted to explain the role of location on business performance. Whilst some studies have stressed urban and rural locations, other studies have often paid particular attention to the connection of location and taxation and industry clustering effects. While the findings of these studies are important, they are perhaps insufficient in fully understanding the role of location.

Approach - Fifteen in-depth face-to-face semi-structured interviews were conducted with selected owner-managers of SMEs, forming a judgmental selection, to explore their experiences, beliefs, and attitudes with respect to their performance.

Results - Findings of the study revealed that location is a salient factor that influences the performance of SMEs in Tangier. Although at the research design stage it was considered a classificatory variable, location was mentioned extensively in the interviews, in relation to the ‘free zones’. Findings showed that firms located within the free zones enjoyed favourable conditions, in particular, those related to taxation and competition, compared to their counterparts located outside the free zones, which were excluded from these benefits. Furthermore, perceived unfair competition damaged the performance of the SMEs. These findings suggest that the placement of the business in relation to the free zones thus became an important financial and emotionally significant perspective on equality in relation to success.

Implications - Findings could encourage the government to adopt policies that will assist indigenous firms to benefit from advantages that are comparable to those that are available to those in the free zones. Greater attention to the perceptual effects of location would be advantageous.

Value - This research contributes to the theory about SME development in that it highlights the issue of location as a significant factor in the perception of success.Location was a much more acute and multi-faceted issue than in most other studies. In this context of Tangier, ‘location’ may function as a higher-order concept (than say urban versus rural) in relation to, both the placement of business within a country, and choices between countries as jurisdictions in terms of location. There have been few studies on what might be called the psycho-geography of small business, given the predominant view that we are seeing the ‘death of distance’.

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