Efficiency, flexibility, or both? Evidence linking strategy to performance in small firms

Abstract

This paper analyzes small firm performance in relation to efficiency and flexibility strategies. Using configuration theory, the authors propose that small firms that pursue efficiency strategies or flexibility strategies outperform those that attempt to pursue both. Additionally, size is used as a configurational attribute to develop competing hypotheses on whether efficiency strategies or flexibility strategies are better suited for small firm performance. In two samples of 200 and 144 privately-held small firms, firms that mixed efficiency and flexibility strategies significantly underperformed. No significant performance differences were found between firms utilizing only efficiency strategies and those utilizing only flexibility strategies.

Business model innovation vs replication: financial performance implications of strategic emphases

“…Thus, the finding departs from certain findings in earlier research that stress the difficulties that small firms may face in combining competing strategies (cf. Ebben & Johnson, 2005;Hughes et al, 2007). On the other hand, the finding may also reflect the fact that business model innovation activities and replication activities may partly overlap, particularly in small firms: an initial 'proto' business-model may be further developed in the course of its replication efforts (Chesbrough & Rosenbloom, 2002;Winter & Szulanski, 2001).…”

“…On one hand, small firms' often-cited characteristics are their limited resources and relatively modest ability to shape their environment (e.g. Cooper, Gimeno-Gascon, & Woo, 1994;Ebben & Johnson, 2005;Gibb, 2000;Lee, Lim, & Tan, 1999). Therefore, the strategic choice to innovate novel business models (as opposed to imitate ones existing in the market) might lead, on average, to inferior financial performance for small firms.…”

“…Specifically, small firms may find it particularly difficult to divide their limited resources over business model innovation efforts and replication efforts. Indeed, Ebben and Johnson (2005) recently found evidence of the general difficulty that small firms face in following different strategies at the same time, leading to lowered performance for small firms pursuing such hybrid strategy combinations. Hughes, Hughes, and Morgan (2007), in turn, demonstrate that the performance of small firms that try to sustain the dual-dominant orientations of entrepreneurial orientation and exploitative learning is lowered.…”

The influence of size on cost behaviour associated with tactical and operational flexibility

“…The improvement in efficiency is usually a loss in flexibility. The authors identify many cases, including agriculture (that provides several examples of this phenomenon), in which flexibility is achieved at the expense of a loss of efficiency, an issue that Adler et al, 1999, Ebben andJohnson, 2005).…”

A Case Study on Performance Implications of Hybrid Strategy in Automotive Supplier Industry

“…Although strategic purity initially received considerable support, (Dess & Davis, 1984;Hawes & Crittendon, 1984;Roos,Flinkman, Jä ppinen, Lönner & Warensjö, 2002;Lä htinen & Toppinen, 2008), it was challenged in later studies (Campbell-Hunt, 2000;Parnell & Hershey, 2005;Raynor, 2007;Salavou, 2010;Huang, 2011;Salavou, 2013;Shinkle, Kriauciunas & Hundley, 2013). While some studies revealed that pure strategies improved performance (Ebben & Johnson, 2005;Lechner, Gudmundsson & Vidar, 2014;Hansen, Nybakk & Panwar, 2015), others suggested that different generic strategies were linked to different aspects of performance (Chandler & Hanks, 1994;Baum, Locke & Smith, 2001). There is another group of studies, which indicated that hybrid strategies, combining elements of both generic competitive strategies, simultaneously lead to better performance (Carter, Stearns & Reynolds, 1994;Kim & Choi, 1994;Acquaah & Yasai-Ardekani, 2008; Pertusa-Ortega, Molina-Azorí n & Claver-Corté s, 2009; Leitner & Güldenberg, 2010;Hodgkinson, 2013;Parnell, 2013;Manev, Manolova, Harkins & Gyoshev, 2014;Salavou, 2015).…”