Strategic flexibility and SME performance in an emerging economy

Abstract

Purpose – This study aims to address the following question: when strategic flexibility can be most beneficial to small and medium enterprises (SMEs) in the context of emerging economies. Design/methodology/approach – Drawing on dynamic capabilities perspective, this study builds a contingency model and examines it with survey data collected from 166 SMEs in China. Findings – This study finds that the relationship between strategic flexibility and firm performance is extensively moderated by external (competitive intensity and environmental munificence), internal (resource combination activities), as well as bridging factors (managerial ties). Originality/value – The findings contribute to the contingency view of strategic flexibility and firm performance research by incorporating insights from the dynamic capabilities perspective and by expanding the scope of existing research to emerging economies.

Strategic Flexibility: A Review of the Literature

“…However, as the findings and challenges of the research highlight, the analytical model implies complex relationships between different aspects of strategic flexibility and the existence of various combinations of relationships between triggers, dimensions, enablers, barriers, processes and outcomes. As indicated at the beginning of this paper, these relationships, at least between some of the aspects, are mentioned in the literature (Fredericks 2005;, albeit rarely, and a more contingent approach to strategic flexibility advocated (Guo and Cao 2014). For example, there are different natures of changes, and firms can act differently in relation to changes (see .…”

“…Combe et al 2012;Nadkarni and Narayanan 2007;Saini and Johnson 2005;Verdú-Jover et al 2014) and indicated by many other sources (Cadogan et al 2012;Chen et al 2015;Hitt et al 1998;Roca-Puig et al 2005), although occasionally with some limitations. For instance, this relationship is extensively moderated by competitive intensity, environmental munificence, resource combinations and managerial ties (Guo and Cao 2014). The extensive literature perspectives regarding the outcomes of strategic flexibility are synthesized in Appendix VII.…”

“…Parnell (2005) Measured by competitive speed and competitive variety variables Developed and applied by Roca-Puig et al (2005), later also used Escrig-Tena et al (2011) Reactive and proactive strategic flexibility according to five strategic imperatives: resources allocation needs, the need to modify business partnerships, emerging market opportunities, changing environmental conditions and changing organizational technology needs Celuch et al (2007); Celuch and Murphy (2010) Measured by six items: flexibility in relation to opportunistic shifts in economic conditions, the emergence of an unexpected market opportunity, the emergence of a new technology that adversely affects the existing business, opportunistic shifts in customer needs and preferences, the market entry of new competition and adverse changes in government regulations Developed and applied by Zahra et al (2008), later also used by Guo and Cao (2014) Measured via market flexibility, new product flexibility, expansion flexibility, manufacturing flexibility and supply chain flexibility Singh et al (2013b) Strategic flexibility is measured according to its facilitators: development of core competencies, product development, improved customer focus, fostering innovation, stronger networking, improving risk management and promoting sustainable development Dwyer et al (2014) Change of strategies according to the market entry of new competitors, changes in government regulations, shifts in customer needs and preferences, modifications in supplier strategies, the emergence of an unexpected opportunity, the emergence of an unexpected threat, political developments that affect the industry and shifts in stakeholder demands Perez-Valls et al (2015), adapted from Barringer and Bluedorn (1999) Strategic flexibility is measured via strategic planning, using a three-item scale; the items are the evaluation and review of strategic plans; adjustments of strategic plans to changing environments; and strategic planning as continuous process Ouakouak and Ammar (2015), adapting the measures of strategic planning from Segars et al (1998) and Papke-Shields et al (2006)…”

Knowledge, Renewal and Flexibility: Exploratory Research in Family Firms

“…Strategic management research, using a knowledge-based view of the firm, mentions both strategic flexibility (Chen et al 2017;Guo and Cao 2014) and an organization's ability to manage its knowledge internally (Scuotto et al 2017;Del Giudice and Peruta 2016;Ryan et al 2012) as essential for supporting strategic renewal goals (Hughes and Mustafa 2017;Del Giudice et al 2013a, 2013b. These factors are assumed to link synergistically (Chen et al 2017).…”

Dynamic capabilities and SME: the example of Chinese tourism companies in Spain

“…China, as an emerging economy, provides a very different setting to a developed country like Spain. As Guo and Cao (2014) describe, China has an intensely competitive market where firms have to develop constantly new actions and try out new competitive strategies in order to survive. Therefore, it is essential for them to dispose of dynamic capabilities.…”