The Performance and Competitive Advantage of Small Firms: A Management Perspective

Abstract

PETERJENNINGS, NOW WITH SOUTHAMPTON Institute, England, was at the time of writing with Sheffield Hallam University, England, and Graham Beaver is with Nottingham Trent University, England. Successful small firms practice strategic management either consciously and visibly or unconsciously and invisibly. Failure and success are interpreted as measures of good or indifferent management and are usually defined rational criteria which ignore stakeholder aspirations. Many owner managers pursue personal objectives which inhibit the probability of success if measured using these rational criteria. The majority of existing studies of small business performance tend to focus on either the symptoms arising from problems within the firm or upon the reason cited for failure. Comparatively little analysis of the ingredients that promote and sustain competitive advantage has been undertaken. Notwithstanding the fact that generic skills and abilities are required, the management process in small firms is unique and cannot be considered to be the same as professional management in larger organisations practised on a reduced scale. The multiplicity of roles expected of the owner-manager as the principal stakeholder often causes dissonance which enhances the probability of poor decision-making and inappropriate action. The authors consider that the root cause of either small business failure of poor performance is almost invariably a lack of management attention to strategic issues.

Competitive advantage as a legitimacy‐creating process

“…Similar to Jennings and Beaver's (1997) and Beaver and Prince's (2004) work we see the construction of competitive advantage in small firms as different to that of large organizations. Competitive advantage for small firms is more likely to be about survival than growth (Beaver and Prince, 2004).…”

Leadership and Small Firm Financial Performance: The Moderating Effects of Demographic Characteristics

“…These strategies in turn can affect the day-to-day operations of the firm, the activities of employees, and the overall profitability of the company. The relationship between firm performance and organizational leadership has received substantial attention in the literature (Collins, 2001;Edmondson, Roberto, & Watkins, 2003;Jennings & Beaver, 1997). Leadership continues to be an important topic -for both researchers and practitionerscontinuing a decades-long trend of performance-based inquiry.…”

Knowledge valley theory

“…Thus the type of management needed, shifts character and new management ideas and styles are needed. Jennings and Beaver (1997) found that management processes in small companies "bear little or no resemblance to management processes found in larger firms" and the Confederation of British Industry (CBI, 1995) highlights that companies who do not have the correct management expertise and who do not build a strong management structure, fail to achieve their targets and growth. This has led to many laudable efforts in introducing SME owners to management education, but still Storey and Westhead (1997) remark that there is "little evidence that management training programmes … led to better performance amongst SMEs", which may indicate that insufficient emphasis is being put on leadership, including the management of knowledge assets and pathways, including the deployment of 'knowledge hunters' (those who go within the organisation ask questions and uncover latent ideas and potential) and 'knowledge gatherers' (those who are aware of need and fill the knowledge gaps from internal and external sources) perhaps combined with the deployment of change agents.…”