Inventory stickiness, environmental dynamism, financial constraints and survival of new SMEs in China

Abstract

PurposeAlthough the adoption of lean inventory management for performance improvement has been widely recognized, sticky inventory management is still a stopgap measure for new small and medium enterprises (SMEs) against survival risks. The purpose of this paper is to demonstrate the nonlinear relationship between new SMEs inventory stickiness and venture survival by focusing on the moderating effects of environmental dynamism and financial constraints.Design/methodology/approachClassical moderating model is employed to investigate the effects of environmental dynamism and financial constraints on the relationship between inventory stickiness and venture survival. This study uses the accelerated failure time model for survival analysis and tests the relationships based on a large set of new manufacturing SMEs in China over the period from 1999 to 2007.FindingsThe main finding is that inventory stickiness has an inverted U-shaped impact on the likelihood of survival. However, the inflection point of this inverted U-shaped relationship lies at the end of the sample. Further moderation analysis indicates that environmental dynamism positively moderates the inverted U-shaped relationship between inventory stickiness and venture survival, while financial constraints negatively moderate this relationship.Practical implicationsMost new SMEs have great potential to increase the likelihood of survival by improving inventory stickiness before achieving effective lean inventory management. Sticky inventory management can help new SMEs achieve better survival in a dynamic environment. However, new SMEs that are financially constrained should prudently implement sticky inventory management.Originality/valueThis paper contributes to the existing understanding about the likelihood of SMEs survival by addressing the role of sticky inventory management. It may be the first study to empirically demonstrate the moderating effect of environmental dynamism and financial constraints on the inverted U-shaped relationship between inventory stickiness and venture survival.

Internet of things for perishable inventory management systems: an application and managerial insights for micro, small and medium enterprises

“…The prior literature argues that one of the most common problems faced by agri-food manufacturing MSMEs worldwide is poor inventory management of perishable items (Zhu et al, 2021), affecting the profit of smaller companies and threatening their survival. Our study thus draws meaningful insights for MSME managers/owners seeking efficient inventory management using IoT.…”

“…Previous studies have argued that most food companies, particularly Micro, Small, and Medium Enterprises (MSMEs), view higher perishability rates as the main reason for declining revenue generation (Kamble et al, 2020b;Zhu et al, 2021). MSMEs face enormous financial and organizational challenges in warehouse facility management (Belhadi et al, 2018), involving significant national economic losses.…”

Does sticky inventory management improve productivity?

“…In this vein, the impact of inventory stickiness on productivity may be the same. Concretely, from the perspective of inventory slack, sticky inventory management forces manufacturing enterprises to better weather unexpected environmental disturbance, leading to high production stability (Zhu et al, 2021). In this case, inventory stickiness is more likely to be set as a buffer to prevent production interruptions and help increase productivity.…”

“…Taking into account that increasing inventory stickiness means reducing inventory leanness, sticky inventory management is more likely to exert a nonlinear impact on productivity growth. Unfortunately, extant researches paid more attention on the impact of sticky inventory management on profitability (Kroes and Manikas, 2018), product quality (Lin et al, 2021) and venture survival (Zhu et al, 2021). That is, the nature and empirical evidence on the relationship between inventory stickiness and productivity still remains equivocal.…”

“…In addition, it is argued that with an increase in environmental uncertainty, inventory slack can enhance the likelihood of venture survival (Azadegan et al, 2013). Similarly, Zhu et al (2021) noted that sticky inventory management in a dynamic environment minimize the likelihood of manufacturing enterprises going bankrupt. Meanwhile, the negative impact of inventory stickiness on profitability is diminished in an unstable environment (Kroes and Manikas, 2018).…”