Strategy, Market Orientation, or Environment: Relative Influence on Small Manufacturing Firms

Abstract

This study’ primary objective was to compare the industry environment impact with the impact of firm strategy and market orientation culture on small manufacturing firm performance. The extent of market orientation has a greater impact on small manufacturing firm performance, than the direct or indirect impact of the particular industry environment and strategy selection. Emphasis on growth/differentiation strategy has a significant impact on small firm profitability. Industry characteristics have a minimal impact on small firm performance and minimal moderating impact on the relationship between strategy and performance. Possible explanations for this weak influence include small firm adaptability and the limited range of small firm strategic options. The study suggests that strong performance requires more than an appropriate match of strategy to the environment since there is a higher correlation between growth differentiation strategy and environmental turbulence in the lowest profitability group, compared to the highest group. But, there is significantly higher correlation between growth differentiation strategy and market orientation in the high profitability group, compared to the low group. The results suggest that firm culture and competencies that affect implementation of firm strategy are more critical determinants of relative small firm performance than the match of strategy and environment.