Competence or flexibility? Survival and growth implications of competitive strategy preferences among small US businesses

Abstract

Purpose – Research in strategic management has provided a wealth of contributions to the study of competition between firms, yet most strategic management theories were developed and refined for large firm contexts. This suggests the assumed theoretical relationships between strategy preference and performance may break down in the small business setting. Design/methodology/approach – The paper uses a data set from the National Federation of Independent Businesses to test hypotheses relating the strategy preferences of 754 small firms with the performance outcomes of survival and expected growth. Findings – Small businesses can focus on both survival and growth when they pursue competency-based strategies, but they risk their very survival when pursuing flexibility-based strategies. Virtually all small firms pursue strategies to compete, but some of the strategies they follow to pursue growth endanger their survival. Research limitations/implications – Because of life-cycle and resource endowment factors, researchers should carefully parse differences between large and small firms when studying the relationship between strategy preferences and organizational performance. Practical implications – Small business owners should be aware that their choices of strategies to pursue growth may lead to unintended consequences, such as the demise of their firms. Originality/value – The paper demonstrates to researchers and practitioners how strategic preferences that presumably allow larger firms both to survive and grow do not have the same effects for smaller firms. The paper establishes boundary conditions for the effectiveness of flexibility strategies on performance in terms of firm size.