Re-thinking SME disadvantage in public procurement

The purpose of this paper is to investigate the relationship between firm size, resources, capabilities and involvement in public procurement. While the liability of smallness has been a recurring theme in research into public sector suppliers, there remains a dearth of evidence and theorising on the effects of size.

A model linking firm size, resources, capabilities, tendering activity and performance is devised. Resource-based view theory informs the model. Survey data from over 3,000 firms active in the Irish public sector marketplace is used to test the model.

As hypothesised, firm size is positively associated with tendering resources and capabilities. Resources and capabilities, in turn, influence tendering activity and performance. Specifically, resources act as enablers for the number and value of contracts firms tender for while capabilities are important for winning contracts. The author also finds similarities between medium and large enterprises in their ability to tender.

The treatment of tendering resources and capabilities is not exhaustive. Future research could include additional indicators of resources (e.g. external consultants, IT) and capabilities (e.g. production, process innovation).

Managers of micro and small suppliers should focus on augmenting their tendering capabilities as they lag bigger suppliers. Legislators need to re-assess current “one-size-fits-all” small and medium enterprise (SME) friendly policy as it is not sensitive to intra-SME differences.

This study introduces an important qualification into understanding of public sector suppliers by demonstrating that SME disadvantage is less black and white than shades of grey.