Small firms' choice of business strategies.

Summary

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Empirical evidence on a range of business strategies open to small firms is examined in companies from manufacturing, services and sales sectors, and company size appears to be an important variable, with bigger firms more likely to use strategies to promote growth. The growth rate of smaller firms tends to be higher, however, a finding which requires furthe investigation. New technology and planning strategies are more likely to be adopted where managers or owners are better educated, and sole owner and independent firms are less likely to adopt planning strategy.

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Small firms' choice of business strategies.

According to the standard industrial organization paradigm, firms employ numerous business strategies such as product development, marketing, research, and innovation to gain a competitive advantage over their rivals. Empirical work on firm strategies has focused largely on research and development (R&D) among large publicly-traded manufacturing firms [10]. Two recent developments have increased interest in the choice of business strategies by small firms. First, a growing body of evidence suggests that, after several decades of decline, the employment share of small firms has been increasing through the 1970s and 1980s [16]. With the greater awareness of small firms' contribution to job creation, researchers and policy-makers are increasingly focusing on the sources of small business growth [6]. Second, economic development programs across the U.S. are focusing on small businesses for promoting regional growth [17]. Success of such programs requires a better understanding of factors influencing small firms' choice of business strategies. Business strategies adopted by small firms are likely to be different from business strategies adopted by large firms due to factors such as economies of scale and differences in organizational st...

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