The Influence of Managerial Disagreement on Industry Characteristics and Strategy on Small Firm Performance

Abstract

Because of the potential importance of matching the finn’s strategy with the industry competitive environment, the performance of small finns, noted for the lack of formal information gathering and lack of formal planning, may suffer if there are serious differences in perceptions between presidents and sales managers. The impact of these differences may be more pronounced in volatile industries and more pronounced as the small finn grows. This study sought to empirically examine the impact on performance from differences between small finn presidents and sales managers in perceptions of the competitive environment and strategy emphasis under conditions of high and low industry volatility. The impact of these differences were also examined for finns of differing sales levels. The average level of absolute difference between presidents and sales managers in environmental perceptions has a significant negative influence on finn profitability. Industry variability and finn size does not appear to moderate this influence. The level of absolute difference between presidents and sales managers as to emphasis on growth/differentiation strategy or low cost strategy has a significant negative impact on new product success, customer retention, and relative product quality. This difference seems to be especially pronounced in situations of high variation in capital spending variability, where emphasis on growth/differentiation strategy is a significant influence on performance.