Managerial Hubris, Trade Associations and Regulatory Knowledge in Micro‐Firms

Abstract

To avoid breaking the law for regulatory non-compliance, it is essential that micro-firm owner-managers are aware of deficiencies in their knowledge, so that they can seek improvement and avoid over-confidence (i.e. hubris) in their knowledge levels. Using newly collected survey data from micro-firms in the English accommodation sector and multivariate techniques, the authors explore the possibility of hubris by making a novel distinction between the Perceived-Knowledge and Actual-Knowledge of regulation held by micro-firm owner-managers. Both Perceived-Knowledge (from self-assessment) and Actual-Knowledge (from a simple test) over four core areas of regulation are found to be different, generally poor and suggestive of hubris. The relationship between these knowledge levels is further explored by considering the role of trade association membership (since they support members) and attitude (since it effects learning). Attitude is found to be positively associated with both forms of knowledge, while trade association memberships are also found to be associated with enhanced Perceived-Knowledge, but not Actual-Knowledge. In light of the results, the authors suggest several priority areas for improving Actual-Knowledge and self-assessment skills, and areas for future research.

Owner–manager perceptions of regulation and micro-firm performance: An exploratory view

“…One particular impact identified by prior research is the financial burden of adhering to regulations and associated influence on firms' behaviour (Bailey and Thomas, 2017). We posit such effects extend to what micro-firm owner-managers perceive to be relevant regulations, given extant literature on limited managerial knowledge and the risks of potential under/over-compliance (Cumming and Zambelli, 2013;Stokols et al, 2001;Betton et al, 2019). This burden includes both directly attributable cost increases to acquire/install required equipment and the wider impacts like time for research/understanding (FSB, 2004;Lewis et al, 2015aLewis et al, , 2015b.…”

“…Regulatory burden is widely considered to have a disproportionate effect on micro-firms because the costs/effects do not fully vary in proportion to firm size (Calcagno and Sobel, 2014;Carter et al, 2009;HM Government, 2013;OECD, 2001;Zorpas et al, 2008). Microfirms are hampered by their limited monetary/time resources, along with poor understanding of the relevant regulations and a lack of managerial skill (Carson, 1985;Johnson, 2002;Betton et al, 2019). For example, higher wage costs following an increase in the minimum wage for which the burden of compliance is at least partially fixed, therefore the overall costs/effects are a disproportionately greater percentage of revenue and managerial time for small-firms (Collard and Godwin, 1999;OECD, 2001).…”

“…Forcing respondents to answer all areas would create bias (i.e. employment knowledge would be understandably lower in firms without employees), so this tests for any bias created by the different number of questions used to form the independent variables (Hair et al, 2010;Lavrakas, 2008;Betton et al, 2019). Table 2 presents the descriptive statistics of the core variables.…”

What do business associations do?

“…If intermediary BAs can rely on spontaneous or public-order sanctions, they are able to coordinate various forms of collective action. They can enable valuecreating transactions by spreading information about business partners and regulations (Betton et al, 2018;Cai − Szeidl, 2018;Johnson et al, 2002;Leonidou − Katsikeas, 1997;Pyle, 2005Pyle, , 2006bRecanatini − Ryterman, 2001), and about breaches of property rights (Pyle, 2011;Rochlitz, 2016). They can improve knowledge-sharing (Costa et al, 2017;Kirby, 1988;Luna − Tirado, 2008;Pyle, 2006a;Qiao et al, 2014) and reduce the transaction costs of coordinating shared infrastructural projects (McNamara, 1993).…”

Do Learning Benefits Accrue Equally Over Successive Fundraising Attempts? Strategic Change and the Moderating Role of Experience

“…Indeed, management scholars have identified different effects that experience might have on performance. While some studies suggested that individuals learn from experience (Delmar and Shane, 2006; Toft‐Kehler, Wennberg and Kim, 2014), others have highlighted that experience could adversely affect performance (Betton, Branston and Tomlinson, 2019; Eggers, 2012; Simon, Houghton and Aquino, 2000). To enhance our understanding of learning from experience in the business context, scholars have turned to the study of serial entrepreneurs.…”