Small Business Economics

, Volume 13, Issue 3, pp 185–200 | Cite as

The Behaviour and Performance of Young Micro Firms: Evidence from Businesses in Scotland

  • Julia A. Smith


This paper is an empirical study, making appeal to firsthand evidence gathered by face-to-face interviews with the owner-managers of 150 small firms in Scotland. It investigates the performance of the micro firm in the early years of its life cycle, by reference to four key behavioural characteristics: (i) strengths, weaknesses, opportunities and threats (SWOT) analysis; (ii) the gathering of trade intelligence on the firm's rivals; (iii) the use of information technology (IT) in the business; and (iv) financial form and the owner-manager's preferences as regards the form of their equity stake holding. Seven propositions, based on the evidence accumulated, are formulated, and tested. These are illustrated by boxplots and cross-tabulations, and supported with chi-square statistics for testing measures of association. Taken together, the data provide an illuminating picture of the strategic behaviour of the young micro firm, and the subsequent effect that actions can have on firm performance. In particular, it is found that the use of IT in clusters of devices has a highly significant positive association with performance.


Life Cycle Information Technology Positive Association Stake Firm Performance 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Cooper, A. C., G. E. Willard and C. Y. Woo, 1991, 'A Reexamination of the Niche Concept', in H. Mintzberg and J. B. Quinn (eds.), The Strategy Process: Concepts, Contexts, Cases, 2nd edn., Englewood Cliffs, NJ: Prentice-Hall International.Google Scholar
  2. Dodgson, M. and R. Rothwell, 1989, 'Technology Strategies in Small and Medium-sized Firms', in M. Dodgson (ed.), Technology Strategy and the Firm: Management and Public Policy, Harlow, Essex: Longman.Google Scholar
  3. Dosi, G., 1988, 'Sources, Procedures, and Microeconomic Effects of Innovation', Journal of Economic Literature 16, 1120–1171.Google Scholar
  4. Everitt, B., 1980, Cluster Analysis, 2nd edn., London: Heinemann Educational Books Ltd.Google Scholar
  5. Frank, M. Z., 1988, 'An Intertemporal Model of Industrial Exit', Quarterly Journal of Economics 103, 333–344.Google Scholar
  6. Freund, J. E. and F. J. Williams, 1970, Modern Business Statistics, 2nd edn., London: Pitman.Google Scholar
  7. Jovanovic, B., 1982, 'Selection and Evolution of Industry', Econometrica 50, 649–670.Google Scholar
  8. Kreps, D. M., 1990, A Course in Microeconomic Theory, Hertfordshire, U.K.: Harvester Wheatsheaf.Google Scholar
  9. Madu, C. N. and C.-H. Kuei, 1993, 'Introducing Strategic Quality Management', Long Range Planning 26(6), 121–131.Google Scholar
  10. Mintzberg, H., 1979, The Structuring of Organizations, New Jersey: Prentice-Hall.Google Scholar
  11. Mintzberg, H., 1994, 'The Fall and Rise of Strategic Planning', Harvard Business Review 72(1), 107–114.Google Scholar
  12. Norusis, M. J., 1993, SPSS Base System User's Guide 6.0, Chicago, IL: SPSS Inc.Google Scholar
  13. Porter, M. E., 1980, Competitive Strategy: Techniques for Analyzing Industries and Competitors, New York: Free Press.Google Scholar
  14. Porter, M. E., 1985, Competitive Advantage: Creating and Sustaining Superior Performance, New York: Free Press.Google Scholar
  15. Porter, M. E., 1991, 'How Competitive Forces Shape Strategy', in M. E. Porter (ed.), On Competition and Strategy, Harvard Business Review Paperback No. 90079.Google Scholar
  16. Porter, M. E. and V. E. Millar, 1991, 'How Information Gives You Competitive Advantage', in M. E. Porter (ed.), On Competition and Strategy, Harvard Business Review Paperback No. 90079.Google Scholar
  17. Reid, G. C., 1987, Theories of Industrial Organization, Oxford: Basil Blackwell.Google Scholar
  18. Reid, G. C., 1996, 'Capital Structure at Inception and the Short-run Performance of Micro-firms', CRIEFF Discussion paper No. 9607, Department of Economics, University of St Andrews.Google Scholar
  19. Reid, G. C. and J.A. Smith, 1996, 'What Makes a New Business Start-up Successful?', CRIEFF Discussion Paper No. 9618, Department of Economics, University of St. Andrews.Google Scholar
  20. Reid, G. C., N.G. Terry and J. A. Smith, 1997, 'Risk Management in Venture Capital Investor-Investee Relations', The European Journal of Finance 3(1), 27–47.Google Scholar
  21. Smith, J. A., 1997, Small Business Strategy: An Empirical Analysis of the Experience of New Scottish Firms, University of Abertay Dundee Ph.D. thesis.Google Scholar
  22. Smith, J. A., 1998, 'Strategies for Start-Ups', Long Range Planning 31(6), 854–869.Google Scholar
  23. Storey, D. J., 1994, Understanding the Small Business Sector, London: Routledge.Google Scholar
  24. Wonnacott, T. H. and R. J. Wonnacott, 1969, Introductory Statistics, New York: Wiley.Google Scholar

Copyright information

© Kluwer Academic Publishers 1999

Authors and Affiliations

  • Julia A. Smith
    • 1
  1. 1.Institute of Economics and StatisticsUniversity of OxfordOxfordUK

Personalised recommendations