Textile SMEs performed better during the crisis than large companies

A study conducted at the University of Minho by Ana Marta Abreu shows that SMEs in the textile sector achieve better financial performance than large companies in times of crisis, which contradicts common expectations. The economic and financial crisis that affected Portugal caused several macroeconomic constraints.

The performance of Small and Medium-sized Enterprises during the crisis period reached, on average, 160%, when indicators such as total company assets, number of employees, age, total liabilities, equity, among others, were analyzed. This percentage is higher than the performance of large companies, which reached 102% during the crisis that shook Portugal in 2008. These variables were compared in the pre- and post-financial crisis periods for companies of various sizes.

This is the conclusion of Ana Marta Abreu, in a study carried out as part of her Master's in Monetary, Banking and Financial Economics at the University of Minho.

“Observing the values of both large companies and SMEs, we can conclude that the value of performance is higher in SMEs during the period when the crisis was present,” concludes the economist.

Ana Abreu analyzed the behavior of 5500 companies in the textile industry in Northern Portugal, between 2007 and 2016, with the aim of evaluating how the crisis affected their performance.

The textile sector represents about 10% of exports and 8% of the manufacturing industry's turnover.

The results suggest that “contrary to our expectations, it is the smaller companies, i.e., SMEs, that manage to achieve superior performance in periods of crisis,” reveals the academic work.

The age of the companies is one of the factors the author points to justify this result. "The more years the company operates in the sector, the lower its performance,” she states, adding that “in addition, as the company ages, if its managers do not adapt to technological innovation, the company may not be able to evolve in accordance with the market in which it operates.” These factors can contribute to an older company becoming more vulnerable in economic downturns.

In summary, it can be inferred from the study that large companies have much to learn from SMEs when it comes to adjusting and repositioning themselves during periods of crisis. In a context where there is talk of returning to a more challenging framework for the Portuguese economy, the perspective remains that large companies should prepare for the less prosperous period ahead, according to the International Monetary Fund (IMF) and the known projections of the European Central Bank (ECB).

Dissertation published in October 2017, authored by Ana Marta Guise de Abreu, as part of the Master's in Monetary, Banking and Financial Economics, at the University of Minho: http://repositorium.sdum.uminho.pt/handle/1822/49597

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