Ó Springer 2005
Journal of Business Ethics (2005) 58: 187–193
DOI 10.1007/s10551-005-1413-8
The Long-Term Performance of Small
Businesses: Are there Differences
Between ‘‘Christian-Based’’
Companies and their Secular
Counterparts?
ABSTRACT. Recent years have witnessed the proliferation of ‘‘Christian’’ companies in the U.S. These firms
declare their belief in, and active pursuit of, the successful
merging of biblical principles with business activities.
Economic success, hard work, and biblical values are seen
as capable of existing together in harmony. While the
number of such businesses appears to be growing, there
has been a dearth of any scientific study of these companies. No empirical research has been conducted to
determine whether these religious values and behaviors
have any significant impact on a company’s performance.
The present study is designed to partially fill this gap.
Specifically, it seeks to determine whether there are differences in long-term performance between self-proclaimed ‘‘Christian-based’’ businesses and their secular
counterparts. Data were collected from 312 companies. A
multivariate analysis of variance (MANOVA), followed
by univariate ANOVAs, found significant differences
between these two groups of firms on three of the four
Nabil Ibrahim is Professor of Business Administration and
holder of the Grover Maxwell Chair of Business Administration at Augusta State University. He teaches courses in
Strategic Management and Applied Statistics. He has authored numerous articles in academic and practitioner journals,
including Health Care Management Review, Journal
Professional Services Marketing, Journal of Business
Ethics, and Journal of Hospital Marketing.
John Angelidis is Professor of Management and Chair of the
Department of Management, St. John’s University. He
teaches courses in Strategic Management, Business and
Society, and Entrepreneurship. He has authored many articles in academic and practitioner journals, including Journal
of Business Ethics, Journal of Global Marketing, and
International Journal of Commerce and Management.
Nabil A. Ibrahim
John P. Angelidis
performance variables that were analyzed. Some explanations as well as limited generalizations and implications
are developed.
KEY WORDS: business, ethics, Christian-based
companies, performance, secular companies, small business
Introduction
Religion has always been considered an important
factor in the shaping of American life. The French
lawyer, Alexis de Tocqueville (1945), observed almost two centuries ago that religion played a major
role in America by shaping citizens who valued just
and wholesome communities. He saw religion as
essential to the fabric of the nation:
‘‘I do not know whether all Americans have a sincere
faith in their religion – for who can search the human
heart? – but I am certain that they hold it to be
indispensable to the maintenance of republican institutions. This opinion is not peculiar to a class of citizens or to a party, but it belongs to a whole nation and
to every rank of society’’ (p. 316).
Not surprisingly, then, from its beginnings religion has
had a major influence on the conduct of commercial
activities in the U.S. The relationship between these
two powerful forces has evolved through a series of
stages until today there is a sizeable group which
contends that ‘‘biblical principles’’ can successfully be
utilized in the business world.
The belief that business and the pursuit of
Christian ideals are not incompatible can be traced to
the Protestant Reformation. The teachings of the
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Nabil A. Ibrahim and John P. Angelidis
reformers, particularly John Calvin, not only
encouraged active participation in business activity,
but asserted that the key to heaven lay in the obligation to use one’s talents productively while on
earth. Calvinism emphasized traits such as diligence,
thrift, and industry, and equated spiritual worth with
temporal success.
John Calvin’s formulations were carried to
America by his followers, the Puritans. With few
exceptions, the colonies themselves were founded
on the opportunity for private gain. American
institutions were born and matured in this environment. Many modern-day American scholars and
practitioners argue that there is no inherent conflict
between the pursuits of business and the basic values
of religion and seek to apply their spiritual convictions in the workplace. Almost 50 years ago, one of
the strongest proponents of this belief succinctly
expressed it as follows: ‘‘Religious values and religious living cannot be applied at certain times and
places, only to be ignored at others . . . A set of
principles which are marked ‘For Sunday Only’ is no
religion at all’’ (Campbell, 1957, pp. 37, 44).
A recent phenomenon in the U.S. represents a
modern manifestation of these views – namely, the
proliferation of ‘‘Christian’’ companies which have
expressed their determination to successfully merge
biblical principles with business activities (Heilman,
2003; Hyatt, 2003; Moffett, 1985). These firms assert that it is possible to function in the world of
business according to Christian values with a master
image from the Bible, i.e., there is no conflict over
the interface between corporate and religious principles. It can be argued that these companies may
represent today’s spiritual heirs of John Calvin and
the Puritans in their firm conviction that religion can
be woven into the fabric of one’s business. Economic success, hard work, and biblical values are
seen as capable of existing together in harmony;
indeed, they are viewed as synergistic. Not only is
there no inherent conflict between corporate and
religious beliefs, but any material success is perceived
to be due to the organization’s conduct of its
business in harmony with religious values.
Purposes of the study
While the number of such businesses appears to be
growing, there has been a dearth of any scientific
study of these companies. As far as one can determine, no empirical research has been conducted to
determine whether these religious values have any
significant impact on a company’s performance. The
present study is designed to partially fill this gap. It
continues in the tradition of the research stream that
attempts to uncover meaningful distinctions among
firms, which often are unseen when firms are
combined into one large group. Specifically, it seeks
to determine whether there are differences in longterm performance between self-proclaimed ‘‘Christian-based’’ businesses and their secular counterparts.
Some researchers who have used a similar methodology compared their samples to broad market
averages such as the Standard and Poor’s 500 (e.g.,
Abbott and Monsen, 1979). However as Cochran
and Wood (1984) point out, ‘‘comparison to
industry control groups is superior. Accounting
practices, operating leverage, and other variables . . .
will be more homogenous within industries’’ (p. 47).
This view is supported by others who argue that
such an analysis must compare the firm’s performance with that of other firms in the same industry
(Brigham and Daves, 2002). Therefore, in order to
achieve a reasonable basis for homogeneity and
comparability, this study will focus only on manufacturing companies.
Methodology
Sample
Data were collected as part of a larger study of small
business. Two samples were utilized. Both consisted
of non-affiliated, autonomous, and privately-owned
firms. The first included a total of 400 randomlyselected U.S. manufacturing firms employing between 15 and 100 persons. Although there is no
universally accepted criterion for delineating small
firms (Reid, 1982), the number of employees was
chosen in this research as the key indicator of firm
size following previous studies (see, e.g., Moini,
1985; Wolff and Pett, 2000).
The second sample consisted of manufacturing
companies which have expressed, through their top
executives, their commitment to applying biblical
principles in the conduct of their business. Among the
most commonly used terms these executives have
The Long-Term Performance of Small Businesses
used to describe this type of commitment are: ‘‘to bear
witness to Jesus Christ. . . (and) . . .to share the gospel
of Jesus Christ with . . . employees and . . . customers
. . .’’ (Moffett, 1985), ‘‘to implement the teachings of
the Bible’’ (‘‘Labor and Management,’’ 1978), ‘‘to
share the faith’’ (Ibrahim et al., 1991), and to fulfill
‘‘God’s desire to extend his loving rule. . .into the
market places of the world’’ (International Christian
Chamber of Commerce, 2003). The sample of selfidentified ‘‘Christian-based’’ companies with 15–100
employees consisted of 241 firms. This list was compiled by the authors mostly from a survey of published
materials on ‘‘Christian-based’’ companies, from
executives attending annual meetings of the Fellowship of Companies for Christ, from the International
Christian Chamber of Commerce, and from the
presidents of organizations that are actively involved
in various ‘‘Christian ministries.’’
Measures
A questionnaire was developed to measure the
variables of interest. Respondents were asked to
indicate their present position with the company
(e.g., CEO, President, Chair of the Board), in what
year the company was founded, and the number of
full-time employees. As suggested by Venkatraman
and Ramanujam (1986), Tosi and Gomez-Mejia
(1994), and Rue and Ibrahim (1998), performance
was assessed through both subjective and objective
factors employing financial and non-financial criteria. These measures include performance relative
to industry averages, growth in sales, return on
investment (ROI), and growth in the size of the
firm (Dalton and Kesner, 1985; Hambrick and Lei,
1985). Several studies have demonstrated that the
total number of employees appears to be highly
related to other gauges of size (see, e.g., Robbins,
1983).
Consequently, respondents were asked to indicate, using a Likert-type scale, how they perceived
their firm’s performance vis-à-vis the rest of the
industry during the previous 5 years (5 ¼ better than
industry average, 3 ¼ equal to industry average,
1 ¼ below industry average). The objective factors
were the average ROI and growth rates in sales and
number of employees during that same period.
Clearly, there are many factors affecting an organi-
189
zation’s economic performance. In the short run,
competitive activities, Federal Reserve Board actions, international events, and other vicissitudes of
the environment would be expected to overwhelm
any possible economic influence of a company’s
predominant values. It is necessary, therefore, to
identify a relatively long-term measure of economic
performance. The 5-year period was long enough to
limit the influence of short-term irregularities but
short enough to provide a reliable estimate of the
firms’ most recent performance (Keown, et al.,
2001, Kumar and Sopariwala, 1992; McEachern,
1975). Indeed, in recent years many firms have
adopted a similar approach to replace the traditional
annual earnings-based bonuses in an attempt to
restore the integrity of the executive compensation
process (Ogden, et al., 2003).
It is important to note that there is a potential
difficulty in using percentages to measure changes
with relatively new firms (see, for example, Hansen
and Mowen, 1992). Small absolute changes appear
large because these companies usually have a much
smaller base. However, this will not be a problem if
many of the businesses that respond were not formed
very recently. For this reason, only those companies
which have been in existence for more than 10 years
were surveyed.
Data collection
Data collection was conducted via a mail questionnaire of the owners or top executives of these firms.
Prior to mailing the questionnaire, telephone calls
were made to ascertain that these companies were
still in business and that the sample of secular companies did not include any self-described ‘‘Christianbased’’ businesses, to verify the name and title of the
key top executive, and to notify them that they will
be receiving a questionnaire within a few days and
apprize them of the importance of the survey.
Each company was sent a copy of the research
instrument accompanied with a letter explaining in
general terms the project and assuring respondents of
the confidentiality of their answers. A first mailing
and one telephone follow-up urging participants to
complete and return the questionnaire generated a
total of 283 completed and usable responses. This
resulted in a net overall response rate of 43.5%.
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Nabil A. Ibrahim and John P. Angelidis
TABLE I
MANOVA and ANOVA results for differences between Christian-based companies and their secular counterparts
Group meansa
Dependent variables
Christian-based (n = 139)
Performance compared to industry
Growth rate in sales
Return on investment
Increase in number of employees
Multivariate tests
Wilks’ Lambda
Pillai’s Trace
Hotteling–Lawley Trace
a
3.20
7.28
6.57
3.56
(0.96)
(1.86)
(1.55)
(2.55)
F
P
0.49
11.97
3.99
4.24
0.4853
0.0006
0.0466
0.0403
Secular (n = 173)
3.12
6.46
6.16
4.11
(1.04)
(2.33)
(1.98)
(2.06)
0.6860
0.7104
0.7608
Standard deviations are in parentheses.
Results
Among the 312 respondents, 191 hold the title of
President, 256 are CEO’s, and 288 chair their
respective boards of directors. The median number of
employees was 26. Interestingly, unequal response
rates were received from the two groups –57.6% from
the ‘‘Christian-based’’ companies and 34.7% from
their secular counterparts.
With respect to their firms’ overall performance
(relative to their industry) over the past 5 years, the
overall mean score was 3.16. The companies in the
sample had, on average, a 6.83% annual increase in
sales, an average annual return on investment of
6.34%, and an average annual increase of 3.86% in the
number of employees.
The statistical analysis was conducted in two stages.
First, a multivariate analysis of variance (MANOVA)
was considered to be the most appropriate technique
for exploring differences in performance between the
two groups. This procedure compensates for variable
intercorrelations and provides an omnibus test of any
multivariate effect. The MANOVA revealed significant differences between the two groups (F ¼ 11.68,
p ¼ 0.0373). That is, there were significant differences between the two groups with respect to their
overall performance.
Next, to understand the underlying contributions
of the four variables to the significant multivariate
effect, we proceeded to test each dependent variable
using a one-way analysis of variance (ANOVA) with
the two groups constituting two levels of the inde-
pendent variable. These results, depicted in Table I,
show that differences between the two groups were
significant on three of the four variables.
Specifically, with respect to their firms’ overall
performance (relative to their industry) over the past
5 years, the mean for ‘‘Christian-based’’ companies
was 3.20 while their secular counterparts had a mean
score of 3.12. In terms of the annual growth rate in
sales, the ‘‘Christian-based’’ firms averaged 7.28%,
while the others averaged 6.46%. The annual return
on investment was 6.57% for the first group and 6.16%
for the second group. Finally, the annual increase in
the number of employees was 3.56% for the Christianbased businesses and 4.11% for the secular companies.
From the univariate ANOVAs, we see that important
differences exist between the two groups with respect
to return on investment (F ¼ 3.99, p ¼ 0.00466),
growth rate in sales over the past 5 years (F ¼ 11.97,
p = 0.0006), and growth rate in number of employees
(F ¼ 4.24, p = 0.0403). Thus, based on these three
objective measures, ‘‘Christian-based’’ companies
outperformed their secular counterparts. However,
no significant differences between the two groups
were observed with respect to their performance
relative to the industry (F ¼ 0.49, p = 0.4853).
Discussion and conclusion
The purpose of this study was to partially fill a void
in the literature by examining the performance of
small ‘‘Christian-based’’ firms, a population that has
The Long-Term Performance of Small Businesses
been largely ignored in past research. Because of the
prominent role of small businesses in the U.S.
economy, understanding the impact of their activities on their performance is a worthwhile research
theme.
The results provide some major conclusions. First,
there were significant differences between these
firms and their secular counterparts with respect to
the three objective measures of performance. The
former had experienced higher sales growth rates
and ROIs; however, their executives were not more
sanguine when asked to assess their firms’ performance vis-à-vis the rest of the industry. In addition,
the increase in the number of employees was significantly smaller among the ‘‘Christian-based’’
companies, suggesting a higher level of productivity.
There appear to be theoretical and practical
explanations for the findings. The higher activity
levels, greater efficiency, and higher ROIs are supported by a number of normative assertions in the
literature and empirical findings suggesting that, to
be successful, an organization must look beyond its
current market and grow and expand its operations.
There is general agreement among researchers and
practitioners that growth is essential if a business is to
survive and be profitable (see, for example, Pleshko
and Soviden, 2003). Furthermore, growth enables
businesses ‘‘to take advantage of the experience
curve to reduce the per-unit cost of products sold,
thereby increasing profits’’ (Wheelen and Hunger,
2004, p. 138).
The results showing that secular companies report
lower rates of growth in sales and lower profits but
suggesting that these companies are less efficient
would be consistent with the Ibrahim et al. (1991)
findings. Their study reported the characteristics and
practices of self-described ‘‘Christian-based’’ companies vis-à-vis their major constituencies. With regard to their employees, the vast majority of these
firms engage in regular on-site activities such as
devotionals and reading of scripture. At the same
time, the importance of profitability, competitiveness, and productivity are strongly emphasized.
Integrity and co-operation are also stressed, and
employees are expected to abide by the ‘‘golden
rule.’’ Similarly, these companies ensure that their
values are highly visible to their customers. Brochures and literature with biblical messages are distributed, biblical quotations are displayed in their
191
stationary, and ‘‘Christian’’ calendars and bumper
stickers are given. The company’s reputation as well
as customer satisfaction and offering them superior
value are of paramount importance. As a result, these
businesses tend to inspire loyalty among both
employees and customers. In addition, many of these
companies are actively supporting their communities
by donating goods, services, or funds to both secular
and ‘‘Christian’’ organizations. Finally, they
emphasize their determination to be loyal toward
their suppliers, and the importance of fair and honest
negotiations with them. Clearly, these firms’ organizational cultures and the strong positive relationships they maintain with their key stakeholders are
likely to lead to the results reported in this study.
There is ample evidence in the literature showing
these variables to be closely related. For example,
Michalisin, et al. (2000) report that firms achieve a
sustainable competitive advantage and earn superior
profits by possessing intangible strategic assets such as
exceptional reputations and strong and effective
organizational cultures. Also, in their study of
numerous firms in a wide variety of industries, Kim
and Mauborgne (1999) found that companies
achieve sustained high growth and profits by placing
great emphasis on offering customers superior value.
The much higher response rate from the
‘‘Christian-based’’ companies suggests greater willingness among these firms to cooperate with this
study. This raises an important question: is it possible
that there was a non-response bias in this study?
Perhaps only the more successful ‘‘Christian-based’’
companies responded to this survey because they
wanted to boast of their accomplishments. To a great
extent this argument can be refuted by these
respondents’ candid answer (and, as the analysis
showed, mistaken belief) that their firms’ performance did not exceed industry standards.
Certainly, the findings presented here must be
viewed in the context of study limitations. First,
although the results show that, compared to secular
companies, the ‘‘Christian-based’’ ones have higher
growth rates in sales and lower growth rates in their
workforce, it cannot be said that the results
empirically resolve the causal relationship between
the variables. It is evident that this study is ‘‘correlational.’’ The question is: did the ‘‘Christian-based’’
firms’ values and practices lead to greater profitability? Or, did the higher levels of sales and profits
192
Nabil A. Ibrahim and John P. Angelidis
encourage at least some of these companies to afford
the luxury of embracing ‘‘Christian’’ values and to
conduct their business accordingly? Future extensions of this research should give thought to using
longitudinal data to establish the temporal ordering of
these variables.
Another possible limitation is inherent in the use
of return on investment as a measure of profitability.
Certainly, it is a prime measure of economic performance. It encourages managers to pay attention to
the relationship among sales, investment, and
expenses; it fosters cost efficiency; and it discourages
excessive investment in operating assets (Hansen and
Mowen, 1992). Indeed, because it relates income to
the capital invested in the generation of that income,
ROI is ‘‘one of the most valid and most widely
recognized measures of enterprise performance’’
(Bernstein, 1993, p. 652). Nevertheless, one of the
most frequently mentioned negative aspects associated with ROI is that it fosters myopic behavior –
‘‘it encourages managers to focus on the short run at
the expense of the long run’’ (Hansen and Mowen,
1992, p. 861). It is possible, then, that the secular
firms have invested greater resources into their
activities and are experiencing a relatively low ROI
but will reap the benefits of these investments in the
long term. This possibility can never be ruled out
but seems implausible. Future research efforts need
to consider more clearly these possible relationships.
An additional caveat concerns the generalizability
of these results across industries. A study such as this
one focuses on many firms within a specific industry
by ensuring a greater homogeneity among the
companies that are examined. However, it opens a
line of inquiry on whether these results are valid
across other industries. Thus other studies which are
devoted to different industries would be a fruitful
future research avenue. Also, there is a need to
replicate our findings using different populations and
measures and larger samples. For example, different
measures of performance should be employed and
larger sample sizes should be analyzed.
In conclusion, this study’s major findings will
hopefully contribute to efforts to focus the attention
of researchers, business practitioners, and policy
makers on the needs and challenges facing small
firms. These companies can be formidable competitive forces as they often are the major sources of
technological innovations and job creation. Such
findings should accelerate the search for ways to
improve the capacity of small firms to compete
internationally and match their high growth rates
with higher profitability levels.
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Nabil A. Ibrahim,
Grover Maxwell Professor of Business Administration,
College of Business Administration,
Augusta State University,
Augusta, Georgia 30904-2200,
U.S.A.
E-mail: [email protected]
John P. Angelidis
Chair, Department of Management,
College of Business Administration,
St. John’s University,
Grand Central & Utopia Parkways,
Jamaica, NY 11439,
U.S.A.
E-mail: [email protected]