Entrepreneurial Strategies in a Declining Industry

By Burpitt, William; Fowler, Sally | Journal of Small Business Strategy, Spring 2007 | Go to article overview

Entrepreneurial Strategies in a Declining Industry


Burpitt, William, Fowler, Sally, Journal of Small Business Strategy


ABSTRACT

This study explores the strategies of small firms in the North Carolina furniture supply industry, an industry that has suffered significant job loss due to foreign competition. In case studies of 17 firms, managers identified the strategies that they believed would be most effective in confronting the threats of global competition and imports. Entrepreneurial strategies involving development of new products and entry into new markets ranked highest, but most of the firms were employing strategies that emphasized efficiency and focused on existing products and markets. Firms that employed more entrepreneurial strategies reported superior financial performance in terms of revenue growth, suggesting that entrepreneurial strategies were in fact more effective in this declining industry. This research identifies the impediments that prevented firms from employing entrepreneurial strategies, as well as the types of resources the managers believed would be required for successful implementation of entrepreneurial strategies.

INTRODUCTION

This research investigates the nature of entrepreneurship in a context that offers soil seemingly inhospitable for the "fresh value-creating strategies" (Eisenhardt & Martin, 2000: 1105) we associate with the construct. Turning from the start-ups and emerging industries mat provide a natural venue for entrepreneurial activity this research explores evidence for and consequences of entrepreneurial strategies in an industry seen widely as in decline. A goal of this research is to determine if entrepreneurship will yield, in a beleaguered environment, the creation and recombination of resources that are the entrepreneurial firm's source of competitive advantage (Cockbura, Henderson, & Stern, 2000; Eisenhardt &

Martin, 2000; Grant, 1996). Between 2000 and 2001 the U.S. furniture industry lost more than 36,000 jobs, a decline of 6.5 percent. The most direct cause of this decline was imports. The U.S. International Trade Administration reports that U.S. imports of furniture and fixtures increased from $10.8 billion in 1998 to $17.5 billion in 2002. The largest increases in furniture imports came from China, Canada, Italy, Mexico, and Taiwan. Imports now account for almost fifty percent of U.S. furniture consumption. The pattern of job loss is particularly striking in North Carolina where the furniture industry has long been an economic mainstay. In North Carolina, the number of workers employed in furniture manufacturing dropped from 85,178 in 1990 to approximately 66,000 in 2001, a trend that worsened in 2002 and 2003. As reported in a recent study by the North Carolina Department of Commerce, the North Carolina furniture industry, which employs roughly 10 percent of North Carolina's workforce, "is contracting fast with no bottom in sight," and short of decisive action "will soon be history" (Ucheoma, Buehlmann, & Schüler, 2002: 4).

Research exploring the domestic implications of globalization has commonly focused on the importance of government policies for positioning and enabling U.S. industries to more effectively compete in the new global economic climate (Ucheoma, Buehlmann, & Schüler, 2002). Public policy recommendations focus on such areas as increasing expenditures on education and job training, economic policy initiatives aimed at job creation, targeting of incentives, improvements in infrastructure, and political and legislative efforts to influence trade policy in ways that might be more favorable to domestic production. This research shifts the emphasis away from government policy to firm-level practices that companies in declining or challenged industries can employ to survive and prosper in the global economy. Although furniture industry firms face increasingly difficult challenges in repositioning themselves in the global economy, not all firms have suffered equally and some have found ways of sustaining and even growing their domestic and foreign markets. …

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