The internal and external business environment affects organizational performance in terms of profitability, business growth, productivity, market share, and efficiency, among other factors.
The following is a collection of empirical studies from around the globe showing the impact of internal and external business environments on organizational performance.
Impact of external business environment on organizational performance
This study explored the impact of the external business environment on the performance of food and beverage companies in Nigeria. In particular, the study addressed the following objectives: to find out the effect of economic environment on performance of the target companies, to establish the effect of socio-cultural environment on performance of the target companies, and to find out the effect of technology on performance of the target companies (Okoye & Ogu, 2025).
The target population included staff of food and beverage companies operating in Nigeria. Using simple random sampling, a sample size of 100 respondents was selected to participate in the study. Data collection was done using a questionnaire. The collected data was analyzed using descriptive statistics, including frequency and percentage. Linear regression analysis was used to establish the effect of the independent variables (economic environment, sociocultural environment, and technological environment) on the dependent variable, that is, performance of food and beverage companies in Nigeria. The results were presented using tables as required (Okoye & Ogu, 2025).
The findings of linear regression analysis indicated that when all factors are held at a constant, economic environment contributed to 29% variance in performance of target companies; socio-cultural environment contributed to 21% variance in performance of the target companies, while technological environment contributed to 26% variance in performance of target companies (Okoye & Ogu, 2025).
External and internal factors have an impact on MSME performance.
This study explored the impact of external and internal factors on the performance of Micro, Small, and Medium Enterprises (MSMEs) in Indonesia. The specific objectives of the study were to determine the effect of external factors on MSME performance and to find out the effect of internal factors on MSME performance. External factors assessed in the study included aspects of government policy, socio-cultural and economic aspects, and the role of related institutions. Internal factors examined included human resource aspects, financial aspects, technical aspects of production, and market & marketing aspects (Irawan et al., 2022).
The target population included MSMEs conducting their business in Indonesia. A sample size of 250 respondents (business owners) was selected to participate in the study. Data collection was done using a questionnaire. The collected data was analyzed using descriptive statistics such as frequency and percentage. The findings were presented in suitable tables as deemed fit (Irawan et al., 2022).
The results indicated that 63.3% variance in performance of the target MSMEs was accounted for by the external and internal factors (Irawan et al., 2022).
Business environment and performance of small- and medium-scale enterprises in Benue State, Nigeria
This study explored the impact of the business environment on the performance of SMEs in the state of Benue, Nigeria. The specific objectives of the study included the following: to determine the effect of economic environment on performance of SMEs in Benue State, Nigeria; to establish the effect of political & legal environment on performance of SMEs in Benue State, Nigeria; to examine the effect of socio-cultural environment on performance of SMEs in Benue State, Nigeria; and to find out the effect of technological environment on performance of SMEs in Benue State, Nigeria (Adudu et al., 2021).
The target population included 650 licensed SMEs operating in Benue State. A sample size of 376 respondents was selected to participate in the study. Primary data was collected using a questionnaire. Descriptive statistics, for example, frequency and percentage, were used to analyze the collected data. Regression analysis was used to assess the effect of the independent variables (economic environment, political & legal environment, socio-cultural environment, and technological environment) on the dependent variable (performance of SMEs in Benue State, Nigeria). The results were presented in tables as deemed fit (Adudu et al., 2021).
The findings of regression analysis indicated that 70.7% of the variance in the performance of SMEs in Benue State was accounted for by the independent variables (economic, political & legal, socio-cultural, and technological). In particular, the results of the regression standardized coefficient demonstrated that when all factors are held constant, the economic environment explained 3.7% variance in SME performance, the political & legal environment explained 6.6% variance in SME performance, the socio-cultural environment explained 3.8% variance in SME performance, and the technological environment explained 5.8% variance in SME performance. This means that the political & legal environment had the highest effect on the performance of target SMEs, followed by the technological environment, socio-cultural environment, and lastly, the economic environment (Adudu et al., 2021).
The effect of the business environment on the corporate performance through business strategies in the construction service industry in DKI Jakarta, Indonesia
This study investigated the effect of the business environment on the performance of construction firms in DKI Jakarta, Indonesia. The objectives of the study included the following: to find out the effect of the external environment on business strategy in the target firms; to establish the effect of the internal environment on business strategy; to determine the effect of the external environment on the performance of target construction firms; to assess the effect of the internal environment on the performance of target companies; and to find out the effect of business strategy on the performance of target construction firms (Santoso et al., 2020).
The target population included 9798 construction service companies operating in Jarkata. A sample size of 370 respondents was picked to participate in the study. Data collection was done using a questionnaire. The collected data was analyzed in descriptive statistics, including frequency and percentage. SEM-PLS and multiple regression analysis were employed to assess the impact of independent variables and dependent variables. The results were presented in tables as required (Santoso et al., 2020).
The results of SEM-PLS indicated that the external environment had a positive and significant effect on corporate performance; the external environment had a positive and significant effect on business strategy; the internal environment had a positive and significant effect on corporate performance; the internal environment had a positive effect on business strategy; and lastly, business strategy had a positive and significant effect on corporate performance (Santoso et al., 2020).
External and internal capabilities and organizational performance: does intellectual capital matter?
This study explored the impact of external and internal capabilities on the performance of Taiwan Transportation Vehicle Manufacturing firms. In particular, the study sought to address the following objectives: to determine the effect of market knowledge capabilities on intellectual capital; to establish the effect of customer knowledge capabilities on intellectual capital; to find out the effect of capabilities on intellectual capital; to assess the effect of innovation capabilities on intellectual capital; to explore the effect of intellectual capital on organizational performance; and to assess the mediating role of intellectual capital on the relationship between organizational capabilities (innovation capabilities, relationship capabilities, customer knowledge capabilities, and market knowledge capabilities) and organizational performance (Huang & Huang, 2020).
The target population included vehicle manufacturing firms in Taiwan. A sample size of 814 managers from the target firms was selected to participate in the study. Collection of primary data was accomplished using a questionnaire. Descriptive statistics were used to analyze the collected data. The Structural Equation Model (SEM) based on the Partial Least Squares (PLS) method was used to establish the effect of the independent variables on the dependent variables. The results were presented in tables as deemed suitable (Huang & Huang, 2020).
The findings revealed that market knowledge, relationships, and innovation had a positive and significant impact on intellectual capital. The results also indicated that intellectual capital had a positive and significant effect on the performance of the target firms. On the other hand, the results showed that customer knowledge capabilities had an insignificant effect on intellectual capital. Furthermore, the findings showed that intellectual capital played a positive mediating role in the relationship between organizational capabilities (innovation capabilities, customer knowledge capabilities, and market knowledge capabilities, except for relationship capabilities) and organizational performance (Huang & Huang, 2020).
Impact of external business environment on organizational performance
This study explored the impact of the external business environment on the performance of frozen fish companies in Nigeria. In particular, the study sought to achieve the following objectives: to find out the effect of economic environment on organizational performance; to find out the effect of political environment on organizational performance; to assess the effect of technological environment on organizational performance; and to find out the effect of socio-cultural environment on organizational performance (Kowo, 2020).
The target population included frozen fish companies in Nigeria. A sample size of 120 individuals was selected to participate in the study. Data collection was done using a questionnaire. The collected data was analyzed using descriptive statistics such as frequency and percentage. Multiple regression analysis was used to indicate the effect of independent variables (economic environment, political environment, technological environment, and sociocultural environment) on the dependent variable (performance of the frozen fish companies). The results were presented in tables as required (Kowo, 2020).
The results of multiple regression analysis indicated that economic environment and political environment had a positive and significant impact on the performance of frozen fish companies operating in Nigeria. In particular, the results of the model showed that 128% variance in performance of the target companies was caused by the combined effect of economic environment and political environment (Kowo, 2020).
Effects of external business environment on performance of small and medium enterprises in Oyo State
This study examined the impact of the external business environment on SME performance in Oyo State, Nigeria. The specific objectives of the study included the following: to determine the effect of the economic environment on SME performance in Oyo State; to find out the effect of the socio-cultural environment on SME performance in Oyo State; to establish the effect of the technology environment on SME performance in Oyo State (Ogundare, 2019).
The target population included 7,987 SMEs licensed to operate in Oyo State. A sample size of 381 SMEs was selected for the study. As such, 381 respondents were selected from the sampled SMEs to participate in the study. Data collection was done using questionnaires. The collected data were analyzed using descriptive statistics, including frequency, percentage, mean, and standard deviation. The direct path coefficient model was used to test the effect of the independent variables on the dependent variable. The findings were presented in suitable tables as deemed fit (Ogundare, 2019).
The findings of the path coefficient analysis indicated that the economic environment explained 55.0% of the variance in the performance of SMEs in Oyo State; the socio-cultural environment explained 12.0% of the variance in the performance of target SMEs, while the technological environment had an insignificant effect on the performance of the target SMEs. Overall, the finding revealed that 34.5% variance in performance of SMEs in Oyo State is accounted for by the economic environment and the socio-cultural environment (Ogundare, 2019).
Internal and external factors affect the company’s performance.
This study explored the impact of internal and external factors on the performance of an oil and gas company called Hiap Seng Engineering Limited that is based in Singapore. Specifically, the study assessed the effect of operational ratio, average collection period, and quick ratio on the return on assets (ROA) of the target company. Also, the study investigated the effect of inflation rate, exchange rate, and standard deviation of the Hiap Seng company on ROA. Data was collected from the annual reports (including income reports and balance sheets) of the company recorded from 2014 to 2018 (Bulkaini, 2019).
The collected data was analyzed using descriptive statistics such as frequency and percentage. In addition, Pearson correlation analysis was employed to determine the relationships among the study variables. In addition, multiple regression analysis was done to assess the effect of independent variables on the dependent variable (Bulkaini, 2019).
The results of multiple regression analysis revealed that the internal factors (operational ratio, average collection period, and quick ratio) contributed to 80.8% variance in performance (ROA) of the target company. In particular, the results on regression coefficient indicated that average collection period and operational ratio both had a positive and significant effect on firm performance (ROA), while quick ratio had a negative but significant impact on firm performance (ROA) (Bulkaini, 2019).
Also, results of multiple regression analysis revealed that the external factors (inflation rate, exchange rate, and standard deviation) contributed to 53.5% variance in firm performance (ROA). Specifically, the results of regression coefficient analysis indicated that inflation rate and exchange rate had a negative and significant impact on firm performance, while standard deviation had a positive and significant effect on firm performance. The findings of multiple regression analysis also showed that both the internal and external factors combined contributed to 95.8% variance in performance (ROA) of the target firm (Bulkaini, 2019).
The effect of internal and external factors on the business success of agri-based exporting small and medium-scale enterprises in Thanh Hoa Province, Vietnam
The study explored the impact of internal and external factors on the success of agri-based SMEs in Thanh Hoa, Vietnam. Specifically, the study explored the effect of internal factors, including manager’s capability, capital resource, product & service, human resource, business strategy, and linkage, on the success of SMEs in Vietnam. In addition, the study assessed the effect of external factors, including customers & market, government support, technology, and natural resources, on the success of SMEs in Vietnam (Nguyen, 2018).
The target population included operating SMEs in Thanh Hoa Province, Vietnam. The SMEs were drawn from several industries, including foreign exchange, minerals, construction material, forestry, fishery, industrial products, and agricultural products. A sample size of 275 respondents was selected to participate in the study. Data was collected using a questionnaire. The collected data was analyzed using descriptive statistics, for example, frequency and percentage. Multiple regression analysis was used to explore the effect of the independent variables on the dependent variable. The results were presented in tables as needed (Nguyen, 2018).
The findings of the multiple regression model indicated that the independent variables (government support, linkage, human resources, manager’s capability, customers & market, product & service, capital resource, and business strategy) contributed 63.1% of the variance of business success in targeted agri-based firms. In particular, the results of regression standardized coefficients indicated the following: a manager’s capability contributed 14.5% variance in business success; capital resources contributed 19% variance in business success; products & services contributed 15.3% variance in business success; human resources contributed 16.1% variance in business success; business strategy contributed 12.9% variance in business success; customers & market contributed 18.9% variance in business success; linkage contributed 16% variance in business success, while government support contributed 18.5% variance in business success in target firms (Nguyen, 2018).
The effects of local business environments on SMEs’ performance: empirical evidence from the Mekong Delta
This study examined the effect of the local business environment on SME performance in the Mekong Delta region, Vietnam. The study objectives included the following: to find out the effect of preferential treatment of state-owned companies on SME performance, to establish the effect of promotion policy of local government for private firms on SME performance, to assess the effect of local labor force on SME performance, and lastly, the effect of bribery on SME performance in the Mekong Delta (Dut, 2015).
The target population included 150 SMEs in the Mekong Delta operating in the manufacturing and service sectors. A sample size of 63 respondents was selected to participate in the study. Data collection was done using a questionnaire. Descriptive statistics, for example, frequency and percentage. Multiple regression was used to assess the effect of independent variables on the dependent variable. The results were presented in tables as deemed fit (Dut, 2015).
The findings of the correlation matrix revealed the following: favorable treatment of state-owned companies by local government had no significant impact on SME performance; promotion policy had a positive and significant impact on SME performance; availability of labor had a positive and significant impact on SME performance; bribery had a significant effect on SME performance (Dut, 2015).
Citation
Adudu, C.A., Osianya, F.P., and Adebanjo, T.O. (2021). Business environment and performance of small- and medium-scale enterprises in Benue State, Nigeria. International Journal of Research Publication and Reviews, 2(7), 594-605.
Bulkaini, H. (2019). Internal and external factors affect the company’s performance. Unpublished Master’s Thesis submitted to Universiti Utara Malaysia.
Dut, V.V. (2015). The effects of local business environments on SMEs’ performance: empirical evidence from the Mekong Delta. Asian Academy of Management Journal, 20(1), 101-122.
Huang, C.C. and Huang, S.M. (2020). External and internal capabilities and organizational performance: does intellectual capital matter? Asian Pacific Management Review 25, 111-120.
Irawan, R.N., Sutinem, Chanifah, I.M. (2022). External and internal factors have an impact on MSME performance. Jurnal Ilmu Ekonomi & Manajemen, 9(2).
Kowo, S.O. (2018). Impact of external business environment on organizational performance. IJARIIE, 4(3).
Nguyen, T.L. (2018). The effect of internal and external factors on the business success of agri-based exporting small and medium-scale enterprises in Thanh Hoa Province, Vietnam. Journal of Finance and Economics, 6(3), 87-95.
Ogundare, J.A. (2019). Effects of external business environment on performance of small and medium enterprises in Oyo State. Unpublished Master’s Thesis submitted to Ahmadu Bello University, Zaria.
Okoye, A.T. and Ogu, O.A. (2025). Impact of external business environment on organizational performance (A case study of food and beverage companies). International Journal of Research and Innovation in Social Science, 9(14).
Santoso, R., Purwoko, B., Umar, H., and Renwarin, J.M.J. (2020). The effect of the business environment on the corporate performance through business strategies in the construction service industry in DKI Jakarta, Indonesia. International Journal of Managerial Studies and Research, 8(4), 1-12.
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