Abstract
This article proposes that individual small firms, just like large firms, use different approaches to make strategy. Three processes relevant to small firms are identified: simplistic, participative and adaptive. The article examines how these processes are related to performance, depending on industry life cycle stage. Empirical analysis indicates that all three approaches are related to small firm performance, but that the importance and impact of these relationships will change according to the industry life cycle stage. Markedly, and contrary to evidence from studies in large firms, small firms in mature industries are most likely to benefit from using adaptive strategy-making processes.
Similar content being viewed by others
References
Abernathy, W. J., & Utterback, J. M. (1978). Patterns of industrial innovation. Technology Review, 80, 41–47.
Alpkan, L., Yilmaz, C., & Kaya, N. (2007). Marketing orientation and planning flexibility in SMEs. International Small Business Journal, 25(2), 152–172.
Anderson, C. A., & Zeithaml, C. P. (1984). Stage of the product life cycle, business strategy, and business performance. Academy of Management Journal, 27, 5–24.
Ansoff, H. I. (1987). The emerging paradigm of strategic behaviour. Strategic Management Journal, 8, 501–515.
Armstrong, J. S., & Overton, T. S. (1977). Estimating non-response bias in mail survey. Journal of Marketing Research, 14, 396–402.
Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99–120.
Barringer, B. R., & Bluedorn, A. C. (1999). The relationship between corporate entrepreneurship and strategic management. Strategic Management Journal, 20, 421–444.
Beaver, G. (2007). The strategy payoff for smaller enterprises. Journal of Business Strategy, 28(1), 11–17.
Beaver, G., & Jennings, P. (2000). Editorial overview: Small business, entrepreneurship and enterprise development. Strategic Change, 9, 397–403.
Bourgeois, L. J., & Brodwin, D. (1984). Strategic implementation: Five approaches to an elusive phenomenon. Strategic Management Journal, 5, 241–264.
Bracker, J. S., Keats, B. W., & Pearson, J. W. (1988). Planning and financial performance among small firms in a growth industry. Strategic Management Journal, 9(6), 591–603.
Byrne, B. M. (2001). Structural equation modeling with AMOS: Basic concepts, applications, and programming. London: Lawrence Erlbaum.
Cattell, R. B. (1966). The scree test for the number of factors. Multivariate Behavioural Research, 1, 245–276.
Chen, M. L., & Hambrick, D. C. (1995). Speed, stealth, and selective attack: How small firms differ form large firms in competitive behaviour. Academy of Management Journal, 38(2), 453–482.
Chaston, I. (1997). Small firm performance: Assessing the interaction between entrepreneurial style and organizational structure. European Journal of Marketing, 31(11/12), 814–831.
Ciavarella, M. A. (2003). The adoption of high-involvement practices and processes in emergent and developing firms: A descriptive and prescriptive approach. Human Resource Management, 42(4), 337–356.
Collier, N., Fishwick, F., & Floyd, S. W. (2004). Managerial involvement and perceptions of strategy process. Long Range Planning, 37, 67–83.
Cooke, P., & Wills, D. (1999). Small firms, social capital and the enhancement of business performance through innovation programmes. Small Business Economics, 13(3), 219–234.
Cooper, A. C. (1979). Strategic management: New ventures and small business. In D. E. Schendel & C. W. Hofer (Eds.), Strategic management: A new view of business policy and planning (pp. 316–327). Boston: Little Brown.
Covin, J. G., Green, K. M., & Slevin, D. P. (2006). Strategic process effects on the entrepreneurial orientation–sales growth rate relationship. Entrepreneurship: Theory and Practice, 30(1), 57–81.
Covin, J. G., & Slevin, D. P. (1989). Strategic management of small firms in hostile and benign environments. Strategic Management Journal, 10, 75–87.
Covin, J. G., & Slevin, D. P. (1991). A conceptual model of entrepreneurship as firm behavior. Entrepreneurship Theory and Practice, 16(1), 7–25.
Cutting, B., & Kouzmin, A. (2000). The emerging patterns of power in corporate governance—back to the future in improving corporate decision making. Journal of Managerial Psychology, 15(5), 477–497.
Dess, G. G., Lumpkin, G. T., & Covin, J. G. (1997). Entrepreneurial strategy making and firm performance: Tests of contingency and configurational models. Strategic Management Journal, 18(9), 677–695.
Eisenhardt, K. M., & Tabrizi, B. N. (1995). Accelerating adaptive processes: Product innovation in the global computer industry. Administrative Science Quarterly, 40, 84–110.
Floyd, S. W., & Wooldridge, B. (1992). Middle management involvement in strategy and its association with strategic type: A research note. Strategic Management Journal, 13, 153–167.
Frese, M., Van Gelderen, M., & Ombach, M. (2000). How to plan as a small scale business owner: Psychological process characteristics of action strategies and success. Journal of Small Business Management, 38(2), 1–18.
Gibbons, P. T., & O’Connor, T. (2005). Influences on strategic planning processes among Irish SMEs. Journal of Small Businesss Management, 43(2), 170–186.
Gibson, B., & Cassar, G. (2002). Planning behaviour variables in small firms. Journal of Small Business Management, 40(3), 171–186.
Gilmore, T. N., & Kazanjian, R. K. (1989). Clarifying decision making in high-growth ventures: The use of responsibility charting. Journal of Business Venturing, 4, 69–83.
Gray, C. (2004). Management development in European small and medium enterprises. Advances in Developing Human Resources, 6(4), 451–469.
Gupta, A. K., & Govindarajan, V. (1984). Business unit strategy, managerial characteristics, and business unit effectiveness at strategy implementation. Academy of Management Journal, 27, 25–41.
Hair, J. F., Anderson, R. E., Tatham, R. L., & Black, W. C. (1998). Multivariate data analysis (5th ed.). New Jersey: Prentice-Hall.
Harris, S., Forbes, T., & Fletcher, M. (2000). Taught and enacted strategic approaches in young enterprises. International Journal of Entrepreneurial Behaviour and Research, 6(3), 125–144.
Hart, S. L. (1991). Intentionality and autonomy in strategy-making process: Modes, archetypes, and firm performance. In P. Shrivastava, A. Huff, & J. Dutton (Eds.), Advances in Strategic Management (Vol. 7, pp. 97–127). Greenwich: JAI.
Hart, S. L. (1992). An integrative framework for strategy-making processes. Academy of Management Review, 17(2), 327–351.
Hart, S. L., & Banbury, C. (1994). How strategy-making processes can make a difference. Strategic Management Journal, 15(4), 251–269.
Heckman, J. (1979). Sample selection bias as a specification error. Econometrics, 47, 153–161.
Hewitt-Dundas N., & Roper, S. (2001). Strategic re-engineering—small firms’ tactics in a mature industry. Northern Ireland Economic Research Centre Working Paper, 49, 30 p.
Hillman, A. J., & Hitt, M. A. (1999). Corporate political strategy formulation: A model of approach, participation, and strategic decisions. The Academy of Management Review, 24(4), 825–842.
Kaiser, H. F. (1959). The Varimax criterion for analytic rotation in factor analysis. Psychometrika, 23, 187–200.
Keeley, R. H., & Roure, J. B. (1990). Management, strategy, and industry structure as influences on the success of new firms: a structural model. Management Science, 36(10), 1256–1267.
Klepper, S. (1996). Entry, exit, growth, and innovation over the product life cycle. The American Economic Review, 86(3), 562–583.
Klepper, S., & Graddy, E. (1990). The evolution of new industries and the determinants of market structure. The RAND Journal of Economics, 21(1), 27–44.
Lumpkin, G. T., & Dess, G. G. (1995). Simplicity as a strategy-making process: The effects of stage of organizational development and environment on performance. Academy of Management Journal, 38(5), 1386–1407.
Lumpkin, G. T., & Dess, G. G. (2001). Linking two dimensions of entrepreneurial orientation to firm performance: The moderating role of environment and industry life cycle. Journal of Business Venturing, 16, 429–451.
Lumpkin, G. T., & Dess, G. G. (2006). The effect of simplicity on the strategy-performance relationship: A note. Journal of Management Studies, 43(7), 1583–1604.
Massey, C. (Ed.). (2005). Entrepreneurship and small business management in New Zealand. New Zealand: Pearson-Prentice-Hall.
McGahan, A. M., Argyres, N., & Baum, J. A. C. (2004). Context, technology and strategy: Forging new perspectives on the industry life cycle. In J. Baum & A. McGahan (Eds.), Advances in strategic management: Business strategy over the industry life cycle (Vol. 21, pp. 1–21). Amsterdam: Elsevier.
Miller, D. (1993). The architecture of simplicity. Academy of Management Review, 18(1), 116–138.
Miller, D., & Friesen, P. H. (1984). Organizations: A quantum view. Englewood Cliff: Prentice Hall.
Mintzberg, H. (1973). Strategy-making in three modes. California Management Review, 6(2), 44–53.
Mintzberg, H., & Waters, J. A. (1982). Tracking strategy in an entrepreneurial firm. Academy of Management Journal, 25(3), 465–499.
Nutt, P. C. (1984). Types of organizational decision processes. Administrative Science Quarterly, 29(3), 414–450.
O’Regan, N., & Ghobadian, A. (2004). Testing the homogeneity of SMEs: The impact of size on managerial and organisational processes. European Business Review, 16(1), 64–79.
Parnell, J. A., & Crandall, W. (2001). Rethinking participative decision making: A refinement of the propensity for participative decision making scale. Personnel Review, 30(5), 523–535.
Porter, M. E. (1980). Competitive strategy: Techniques for analyzing industries and competitors. New York: Free.
Quinn, J. B. (1980). Strategies for change: Logical incrementalism. Homewood: Irwin.
Robinson, R. B. (1982). The importance of “outsiders” in small firm strategic planning. Academy of Management Journal, 25, 80–93.
Robinson, K. C., & McDougall, P. P. (2001). Entry barriers and new venture performance: A comparison of universal and contingency approaches. Strategic Management Journal, 22, 659–685.
Robinson, R. B., Jr., & Pearce, J. A. (1983). The impact of formalized strategic planning on financial performance in small organizations. Strategic Management Journal, 4, 197–207.
Robinson, R. B., Jr., & Pearce, J. A. (1984). Research thrusts in small firm strategic planning. Academy of Management Review, 9, 128–137.
Statistics New Zealand. (2003). http://wdmzpub01.stats.govt.nz/wds/TableViewer/ tableView.aspx. Accessed April 1 2008.
Verreynne, M. (2006). Strategy-making process and firm performance in small firms. Journal of Management and Organisation, 12(3), 209–222.
Wooldridge, B., & Floyd, S. W. (1990). The strategy process, middle management involvement, and organizational performance. Strategic Management Journal, 11(3), 231–241.
Acknowledgement
The authors wish to thank Prof. Alan Hughes, Dr. Tim Kastelle and the three anonymous reviewers for their suggestions during the development of this article.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Verreynne, ML., Meyer, D. Small business strategy and the industry life cycle. Small Bus Econ 35, 399–416 (2010). https://doi.org/10.1007/s11187-008-9165-3
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11187-008-9165-3