Purpose
The purpose of this study is to examine how small- and mediumsized enterprises’ competitiveness
and its components influence their equity value. While business valuation methods
provide a framework for evaluating businesses based on financial data, they do not
address how to increase the equity value of the business. In contrast, research on
business competitiveness tends to focus on improving competencies, yet the relationship
and impact on business value remain understudied, especially in the small business
sector. The authors integrated these two lines of research.
Design/methodology/approach
Using a unique competitiveness measure developed within the Global Competitiveness
Project and a corresponding financial data set of 1,023 Hungarian small- and medium-sized
enterprises (SMEs), the authors empirically analysed the effect of overall competitiveness
and its ten components on equity value through ordinary least squares regression analysis.
Findings
The authors recognise a significant positive relationship between competitiveness
and value even after controlling for firm size and industry. The effect is stronger
in the service and retail sectors than in manufacturing. Four components of competitiveness
– international markets, decision-making, domestic market and online presence – are
found to be significant determinants of equity value.
Originality/value
This study is among the first to empirically link firm-level competitiveness, measured
through a multidimensional index, with equity valuation in the SME sector. By combining
a novel, multidimensional competitiveness framework with dual-method equity valuation
based on financial data from over a thousand Hungarian SMEs, the study offers a unique
theoretical contribution by linking firm-level strategic capabilities with financial
value creation. In doing so, it bridges a significant gap between the resource-based
view and SME valuation literature, particularly in contexts where intangible drivers
are central yet often unaccounted for in standard valuation models. The findings provide
clear managerial implications for entrepreneurs and investors seeking to enhance firm
value through targeted improvements in competitiveness, especially in emerging and
transitional economies.
