Strategic Orientation, Management Characteristics, and Performance: A Study of Spanish SMEs

By Aragon-Sanchez, Antonio; Sanchez-Marin, Gregorio | Journal of Small Business Management, July 2005 | Go to article overview

Strategic Orientation, Management Characteristics, and Performance: A Study of Spanish SMEs


Aragon-Sanchez, Antonio, Sanchez-Marin, Gregorio, Journal of Small Business Management


This paper analyzes from a resource-based view the management characteristics of Spanish small and medium enterprises (SMEs) according to their strategic orientation and the consequences in terms of firm performance and business efficiency. The typology of strategies formulated by Miles and Snow has important implications for management, because depending on the strategic orientation adopted--defender, prospector, or analyzer--the firm can emphasize to a great extent some aspects of management, such as technological position, innovation, organizational design, and human resource management. Moreover, these aspects of management can largely determine firm performance and business efficiency. A sample of 1,351 Spanish SMEs provided the data for an empirical test of these issues. The results confirm the expected relationships, revealing, on the one hand, significant differences between prospector and defender SMEs regarding the key factors on which they base their management characteristics and, on the other hand, the different influences that each strategic orientation has on firm performance.

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Introduction

The study and explanation of business competitiveness is a recurring theme examined by academics, consultants, and practitioners. The internationalization of economy, the frequent and uncertain changes, the greater competition among firms, the need for continuous innovations, and the growing use of information technologies force companies to face the challenge of improving their competitiveness. These difficulties are greater for small and medium enterprises (SMEs) because their economies of scale and their resources are less than those of large firms. However, what compensates for these weaknesses is the fact that SMEs may enjoy greater flexibility because of the simplicity of their internal organization, being faster at adapting and responding to changes.

This new situation reveals the need to suggest or find more efficient management processes so that SMEs can apply strategies that allow them to achieve a better performance. In the last years, strategic literature drawing on the context provided by the resource-based theory (Barney 1991; Prahalad and Hamel 1990; Wernerfelt 1984) has persistently insisted on the relevance of internal resources--especially those of intangible nature--as determining factors of business competitiveness (Hall 1993, 1992). To a certain extent, this simply reflects that, with increasing intensity, competence among firms is settled on grounds other than the industry structure (Rumelt 1991).

Several works show the clear preponderance of the firm effect over the industry effect when accounting for the firm's competitiveness (Mauri and Michaels 1998; Powell 1996; Roquebert, Phillips, and Westfall 1996; Rumelt 1991; Schmalensee 1985). This finding provides a solid empirical backing to the resource-based theory as a reference framework for the study of the differences of success among firms and leads us to find out more about the most adopted management techniques depending on the strategy followed by SMEs.

There is an increasing number of studies focusing on the main competitive factors of SMEs. The literature on this field shows that intangible factors (Grant 1991), such as structure and organizational change (Feigenbaum and Karnani 1991), human resource management (Bacon et al. 1996), innovation, and technological resources (Hitt, Hoskisson, and Ireland 1990), among others, are elements that clearly contribute to the SMEs' competitiveness and success.

However, there are still doubts regarding the competitiveness of SMEs. Does the improvement of firm management influence its competitiveness? What strategy should be followed? What factors really explain competitive success? The strategic orientation of the firm may be considered a key element with important implications for the management and efficiency of SMEs (Hambrick 1983; Snow and Hrebiniak 1980). …

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