Strategy and cognitive scripts as predictors of growth in small businesses

Abstract

This study used structured interview data from 943 small firms in 14 cities in Turkey. A quota sample was selected with respect to firm size. The study incorporated as control variables industry rate of growth, competition, environmental uncertainty, firm size, product life cycle, and owner demographic characteristics such as age, education, and experience. Existence of a strategic process and Miner & Shaw's strategic stance (defender, prospector, or reactor) were used as one set of the predictor variables. Owners' cognitive scripts pertaining to willingness, ability, and arrangements (Mitchell, et al. 2000) constituted the other predictor variable set. The dependent variable, growth, was conceived as a multi-dimensional construct consisting of market expansion and resource acquisition. A hierarchical regression analysis showed that, among the control variables, early product life, relatively larger firm size, and a high degree of competition faced influenced growth positively. After the effect of these control variables were accounted for, presence of a strategic process and emphasis on prospector and defender strategies positively influenced growth overall, while a reactor strategy negatively affected growth in market expansion only. Furthermore, cognitive scripts pertaining to willingness to pursue an opportunity and to commit resources and time, as well as venture diagnostic ability were associated positively with resource aggregation. Market expansion was affected from venture diagnostic ability and willingness to pursue opportunities, and by ownership of a protectable idea/product. The study discusses the theoretical and practical implications of these findings.