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Small firm performance; assessing the interaction between entrepreneurial style and organizational structure.

Marketing and the smaller firm

There exists an extensive body of academic literature concerning the factors influencing the performance of small and medium-size enterprises (SMEs). Gibb and Davies (1990) have suggested that these writings can be classified under the four major headings of entrepreneurial personality, organizational development, functional management skills and sectoral economics.

In many of the studies on functional management skills, competence in the area of marketing is frequently cited as being a key determinant impacting the success and failure of the small firm. Smallbone (1990) concluded that marketing was the key problem influencing the performance of firms at business start-up phase. An earlier survey (Milne and Thompson, 1986) of newly established firms also determined that the ability of the owner/manager to judge appropriate market opportunities was a key discriminator of probable success.

In the case of businesses which have been established for some years, Slatter (1984) proposed that lack of marketing was a key cause of company failure. Gill (1985) in a longitudinal study of the problems facing small firms reported that locating and retaining customers has a major impact on performance. Similarly, Bennett and Hall (1991), using in-depth interviews to compare successful and unsuccessful organizations, concluded that the ability to manage the marketing process effectively is the key difference for distinguishing between these two types of firm.

When commenting on ways to improve SME marketing competences, many of the functional management school of researchers assume that a classic strategic marketing orientation is a valid philosophy and recommend activities such as adopting a structured planning approach and/or the installation of effective control systems (Brock and Evans, 1989). Although this rational decision making approach has received extensive coverage in the management literature, there still is, however, only limited evidence to support the view that clear links exist between the acquisition of such competences and the subsequent growth rate of the firm (Carland et al., 1989).

Some academics have now begun to question the validity of even assuming that classic large firm marketing theories can be transferred into the SME sector. By moving away from hypothesis testing based on an American business school style of thinking and instead observing actual management practices, some researchers are beginning to evolve a somewhat different perspective of what might constitutes effective marketing practice with the smaller firm (Carson, 1985, 1993).

These types of study have subsequently prompted some writers to conclude that marketing in the smaller firm can often be viewed as an integral part of managing entrepreneurial activities. One of the justifications for proposing the appropriateness of small firms adopting an entrepreneurial marketing style is that SMEs face specific constraints which set them apart from larger organizations. Birley (1982) has suggested, for example, that these constraints include: goals not based on analysis of opportunity, but determined by which actions most appeal to the owner/manager; and a lack of resources and/or knowledge which severely limits decision making in relation to issues such as the selection of products or markets, sustaining long-term growth and optimal structuring of the organization. Carson (1985) identified two further constraints, lack of general management expertise and limited customer base, which can also be expected to influence the marketing perspective of the owner/manager. It is further argued that the nature of these constraints will mean that the survival of the smaller firm is most probable if the owner/manager adopts an entrepreneurial marketing style (Carson et al., 1995).

Verifying the claims for entrepreneurial marketing

One of the potential risks in accepting that entrepreneurial marketing is fundamental to small firm success is that many of the supporters of the concept have either an academic and/or an industrial background in marketing. In the interests of academic rigour, therefore, it does seem advisable to seek verification of viewpoint by drawing on other studies not specifically aimed at examining the relationship between marketing management competence and organizational performance.

A review of the literature revealed four studies in which the researchers had objectives which clearly extended beyond the issue of marketing practice, used an extensive sample frame, evolved a methodology through careful pilot testing and presented the data in a quantitative form which permitted some degree of statistical validation of the results. A common conclusion from these projects (summarized in Table I and utilized to evolve the model presented in Figure 1) is that successful small firms exhibit a proactive commitment to innovation as a means through which to sustain overall performance.

Unfortunately, however, none of these studies contains a quantitative analysis of the relationship which may exist between the adoption of an entrepreneurial marketing style and overall performance of SME sector firms. In fact possibly the only real attempt to determine a quantitative relationship between an entrepreneurial marketing orientation and overall performance was Covin and Slevin's 1988 study of US firms. These researchers argued, however, that based on earlier studies by individuals such as Geller (1980), Kwandwalla (1977) and Miller (1983), no examination of the influence of an entrepreneurial style can be divorced from the degree to which the firm has adopted an organic organizational structure. On the basis of these and other literature sources concerning the fit between style and structure, Covin and Slevin evolved the hypothesis that "in organically structured firms, increases in management's entrepreneurial orientation will positively increase performance; in mechanistically structured firms, increases in management's entrepreneurial orientation will negatively influence performance".
Table I.

Summary of findings concerning characteristics exhibited by SME
sector growth firms

Study                     Findings

Coopers & Lybrand         Perceive their markets as intensively
                          competitive (1994)

                          Are flexible decision makers

                          Seek leadership through offering superior
                          quality in a niche market

                          Deliver superior pre-/post-sales service

                          Use technology-driven solutions to
                          achieve a superiority position

                          Emphasize fast, frequent launch of
                          new/improved products and draw on
                          external sources of knowledge to assist
                          these activities

                          Emphasize application of technology and
                          techniques such as cross-functional
                          teams, process re-engineering to optimize
                          productivity

                          Recognize the need to invest in continual
                          development of their employees

                          Rely mainly on internal profits to fund
                          future investments

Cranfield study           Seek niches and exploit superior
(Burns, 1994)             performance to differentiate
                          themselves from competition

                          Operate in markets where there is only
                          an average-to-low intensity of
                          competition

                          Utilize clearly defined strategies and
                          business plans to guide future activities

                          Rely mainly on internally generated funds
                          to finance future investment

German versus UK          German firms emphasize acquisitions of
(Brickau, 1994)           detailed knowledge of firms external
                          factors capable of influencing
                          performance

                          German firms can clearly specify their
                          competitive advantages

                          German firms seek niches exploited
                          through a superiority positioning

                          German firms use strategies and plans to
                          guide future performance

                          German firms concurrently seek to improve
                          products through innovation and enhance
                          productivity through adoption of new
                          process technologies

                          German firms fund investment mainly from
                          internal fund generation

New Zealand export        Emphasize R&D to achieve continuous
(Tradenz, 1990)           innovation and gain control of firms
                          unique technologies

                          Orientation towards achieving "world
                          class" superiority in specialist niches

                          Use structured plans based on extensive
                          information search to guide future
                          performance

                          Exhibit a very entrepreneurial management
                          style and encourage employee-based
                          decision making

                          Strong commitment to using superior
                          quality coupled with high productivity as
                          a path to achieving competitive advantage




Covin and Slevin (1988) further proposed that the need for congruency between style and structure resulted in four types of firm:

(1) Efficient-bureaucratic firms which exhibit a conservative (i.e. nonentrepreneurial) style and have a mechanistic structure. These firms are successful because they market goods to customers who require standardized, uniform products or services at a competitive price.

(2) Unstructured-unadventurous firms which exhibit a conservative style and have an organic structure. These firms have the ability to respond quickly to opportunities but are not particularly efficient in marketing the standardized, uniform output which is required by their customers.

(3) Pseudo-entrepreneurial firms which exhibit an entrepreneurial style and have a mechanistic structure. These firms are ineffective because their rigid, inflexible structure is a barrier to being truly entrepreneurial.

(4) Effective-entrepreneurial firms which exhibit an entrepreneurial style and have an organic structure. These firms are effective because their organic structure enhances communication and minimizes bureaucratic barriers to innovation.

Perhaps not unsurprisingly given the somewhat negative implications of the terms "pseudo-entrepreneurial" and "unstructured-unadventurous", these researchers concluded that an organic structure would make a positive contribution to those firms which exhibit an entrepreneurial management style; whereas a conservative firm would be well advised to retain a mechanistic structure. Subsequently Slevin and Covin (1990) proposed that successful firms manage to move back and forth between the two congruent style/structure states of effective bureaucratic and effective-entrepreneurial. They provide the example of a computer firm which proactively develops a new product and then as sales grow, to sustain product quality and fulfil delivery dates, the organization will be forced to become conservative and mechanistic. Subsequently as sales begin to show signs of flattening, the firm cycles back into an effective-entrepreneurial state in order to manage the development of their next generation of products successfully.

Researching aims and methodology

Although there are apparent links between the Covin Slevin model and the emerging theories on how an entrepreneurial marketing style will enhance the performance of the small firm, Covin and Slevin's respondents were drawn mainly from the large firm sector. Hence the primary purpose of this research project is to determine whether the quantitative relationship which they demonstrated between entrepreneurial style and overall performance can be replicated in the small firm sector.

The other limitation of the Covin Slevin study, which is also shared by most other research on the smaller firm, is that the results are restricted to merely demonstrating a link between performance and the marketing management process. Hence a secondary aim is to utilize this research study to gain further understanding of the relationship which may exist between overall performance, style, structure and the organizational capabilities required to achieve the growth described in Figure 1.

Given the aim of testing the validity of the Coyin Slevin model in the small firm sector, their research technique was utilized. This involves asking respondents to indicate on a seven-point Likert-type scale, the extent to which six statements about entrepreneurial style and five statements about structure characterize their specific organization. The ratings on these items are then averaged to arrive at indices for entrepreneurial style and organicity.

Covin and Slevin (1986) have suggested that their model can be tested by comparing overall performance after mean scores for style and organicity have been used to classify firms into different types. Hence, to relate the indices for style and structure to overall firm performance, respondents were asked to describe sales revenue over the last three years in the context of the scale developed by Coopers & Lybrand (1994) of:

(1) sales increased by [greater than]30 per cent;

(2) sales increased by 11 to 30 per cent;

(3) sales increased by 1 to 10 per cent;

(4) sales remained unchanged;

(5) sales declined by -1 to -10 per cent; and

(6) sales declined by more than -10 per cent.

This approach was adopted because it fulfils the guidelines proposed by Dees and Robinson (1984) for firms of varying size and respondents who have differing perceptions and/or abilities to comment on more sophisticated financial measurements such as profitability or return on investment.

To provide a mechanism for examining the influence of style and structure on the internal capabilities of the firm, the characteristics influencing performance in Figure 1 were translated into 24 statements covering the areas of:

* Ability to identify a market niche.

* Exploiting an identified niche through superiority of product offering.

* Development of a formal business plan.

* Adequacy of financial resources to fund business activities.

* Innovation in relation to management of the new product development process.

* Human resource management practices.

* Quality management.

* Optimizing employee productivity.

* Use of manual and IT-based information and control systems.

Discussions with owner/managers and staff within government-funded small business advisory services were used to finalize the design of the research tool. The resultant questionnaire utilizes a scale ranging from "totally adequate" through to "totally inadequate" to measure senior managers' perceptions of the current capabilities of their firm.

Following pilot testing of the research tool, the survey was mailed to 300 manufacturing firms selected at random from a commercial database. Each selection was screened against the criteria of:

* being an autonomous trading entity (i.e. not a subsidiary of a national/multi-national firm);

* average annual sales in the range of [pounds]100,000 - [pounds]3 million; and

* a workforce size of 10-100 employees.

Usable responses were received by 92 firms representing a response rate of 30.7 per cent.

Results

The mean results for sales performance, entrepreneurial style and organicity for the entire sample were 4.41 (SD 1.45), 3.49 (SD 1.37) and 4.50 (SD 0.85) respectively. The latter two mean values were used to classify respondent firms into the four types defined by the Covin Slevin model; namely conservative style/mechanistic structure-style [less than] = 3.49, organicity [less than] = 4.50; conservative style/organic structure-style [less than] = 3.49, organicity [less than] 4.50; entrepreneurial style/mechanistic structure-style [greater than]3.49, organicity [less than] = 4.50; entrepreneurial style/organic structure-style [greater than] 3.49, organicity [greater than] 3.49.

Table II presents the mean overall performance, style and organicity results for the four types of firm. These results suggest that a move towards greater organicity and/or adopting an entrepreneurial style are both likely to contribute to an improvement in the overall performance of the firm. Further support for this suggestion is provided by the results of t-tests to compare the overall [TABULAR DATA FOR TABLE II OMITTED] performance means of conservative/mechanistic firms versus conservative/organic firms and conservative/mechanistic firms versus entrepreneurial/mechanistic firms. The respective t values of 2.10 and 3.79 are both significant at the p [less than] 0.005 level.

To determine the nature of the relationship between organizational capability, entrepreneurial style and structure, the survey data were further analysed using discriminant function analysis. The attraction of this technique is that it seeks to place the data into natural clusters or groups, tests the degree to which actual data can be accurately classified in relation to these specified groupings and provides a quantitative statement of the degree to which each variable contributes to the overall discriminant function score for each analysed case (Churchill, 1979).

Punj and Stewart (1983) developed the approach of phased cluster analysis in which the first stage is to classify the firms into homogeneous groups. Using the overall score for entrepreneurial behaviour and organizational structure as the discriminator, the discriminant analysis correctly classified 85.9 per cent of 92 actual cases into either Group 1, Group 2, Group 3 or Group 4 [ILLUSTRATION FOR FIGURE 2 OMITTED]. Canonical discriminant functions 1 and functions 2 respectively explained 51.88 per cent and 28.61 per cent of total variance. The shared characteristics of firms within each group were found to be as follows:

* Group 1 firms exhibit a low level of entrepreneurial behaviour (scored [less than] 3.5 on the entrepreneurial scale) and have a mechanistic organizational structure (scored [less than] 4.5 on the organizational style scale).

* Group 2 firms exhibit a low level of entrepreneurial behaviour and have an organic organizational structure.

* Group 3 firms exhibit a high level of entrepreneurial behaviour and have a mechanistic organizational structure.

* Group 4 firms exhibit a high level of entrepreneurial behaviour and have an organic organizational structure.

Sexton and Bowman (1987) concluded that predictions of performance for small firms will usually require dissaggregation of data into growth and non-growth firms. In view of this advice and given the very small distances between the four group means in Figure 2, it was decided to repeat the discriminant function analysis having separated the survey data into non-growth firms (sales grown by [less than] 10 per cent over the last three years) and growth firms (sales grown by [greater than] 10 per cent over the last three years).

Non-growth firms

In the case of non-growth firms, the discriminant analysis correctly classified 100 per cent of 41 actual cases into either Group 1, Group 2, Group 3 or Group 4. Canonical discriminant functions 1 and 2 respectively explained 78.35 per cent and 15.00 per cent of total variance. The territorial map associated with this analysis is shown in Figure 3. The discriminant function coefficient values in Table III describing the relationship between organizational capability, entrepreneurial style and structure permit the following observations to be made.

In Table III standardized 1 and 2 coefficients of 0.318046 and 1.95252 for sales revenue suggest that Group 1, 2 and 3 firms seeking to achieve growth would be well advised to consider initiating the cultural changes necessary to move towards becoming more entrepreneurial and adopting an organic structure. It is necessary to note, however, that Group 1 and 3 firms initiating this type of strategic change may encounter some capability deterioration in the areas of occupying a niche to reduce the intensity of competition, offering superior products, preparing plans to guide future operations and rely on internal profits to minimize external borrowing (respective coefficient values 1 -1.72241, -0.46428, -1.97978 and -2.20715).

By becoming more entrepreneurial and adopting an organic structure, Group 1 firms can expect capability improvement in the areas of successfully developing new products, increasing the number of launches and reducing "time-to-market" (function 1 coefficients 1.157050, 0.76476 and 2.59671). A higher level of entrepreneurial behaviour in Group 2 firms may have a similar impact on new product success rates and reducing time-to-market (function 2 coefficients 0.85035 and 0.2166). Group 3 firms may acquire similar benefits by adopting a more organic structure.

It also seems, however, that these firms can expect the somewhat incongruous outcome that in becoming more entrepreneurial and/or organic, [TABULAR DATA FOR TABLE III OMITTED] capability to develop products to attract new customers/permit entry into new sectors may decline (coefficients -2.89024, and -0.58231). One possible intuitive explanation for this situation is that creating radically new products to attract new customers/enter new market sectors requires a disciplined, single-minded process management philosophy. Unfortunately enforcing a very disciplined approach to new product development in an entrepreneurial, organic firm may possibly be difficult because employees have usually been granted the freedom to self-determine task priorities and role responsibilities.

Similar to the situation for new product management, becoming more entrepreneurial and/or adopting a more organic structure has a somewhat mixed impact on human resource management capabilities. Group 1 (and to a lesser degree Group 3) firms can expect capability gains in the areas of optimizing workforce effectiveness, employee job satisfaction and implementing effective training programmes (function 1 coefficients 1.75419, 0.96743 and -0.02399, function 2 coefficients -0.70533, 1.66852 and 1.01560). Conversely the standard coefficient 1 and 2 values -1.6635 and -0.70533 suggest a more entrepreneurial style/organic structure will reduce the ability to operate a formal appraisal scheme.

These same coefficients indicate Group 2 firms, in becoming more entrepreneurial, may expect capability gains in the areas of employee job satisfaction and training programme effectiveness, but reduced capability for optimizing workforce effectiveness and operating of a formal appraisal scheme.

Group 1 firms in becoming more entrepreneurial and organic can expect gains in employee productivity, identification of new ways to enhance productivity and implementing investment programmes to upgrade future productivity. Group 2 firms in becoming more entrepreneurial, apparently can expect gains for employee productivity and the ability to identify new ways of enhancing productivity. Group 3 firms adopting a more organic structure may expect gains for employee productivity and implementing investment programmes to upgrade productivity (coefficient 1 1.32137, -0.85937 and 1.08576; coefficient 2 1.71751, 0.89990 and -1.74247).

Stronger entrepreneurial behaviour and adopting an organic structure will assist Group 1 firms in the areas of measuring customer expectations, defining quality standards and identifying quality variance (coefficient 1 0.80306, 0.68937 and 0.44217; coefficient 2 1.15025, 0.58682 and 0.34512). These organizations and Group 2 firms adopting a more entrepreneurial philosophy, should also expect a capability reduction in the area of implementing actions to effectively close identified gaps between actual and desired quality standards. These same coefficient values indicate that Group 3 firms, in becoming more organic, can expect gains in service management capability similar to those available to Group 1 organizations.

Group 1 firms moving towards being more entrepreneurial and organic will enhance their ability to utilize computer technology for data analysis, but concurrently should expect little or no capability improvement in the areas of control system management, identifying changing market conditions and incorporating IT advances into existing information systems (coefficient 1 2.81018, 0.25067, -1.09109, 0.03386 and -0.14827; coefficient 2 -0.87079, 0.05440, -0.37196, -0.56277 and 0.83854). These coefficients indicate similar outcomes for Group 2 firms becoming more entrepreneurial and Group 3 firms adopting a more organic structure.

Growth firms

In the case of growth firms, the discriminant analysis correctly classified 100 per cent of 51 actual cases into either Group 1, Group 2, Group 3 or Group 4. Canonical discriminant functions 1 and 2 respectively explained 56 per cent and 28.16 per cent of total variance. The territorial map associated with this analysis is shown in Figure 4. The discriminant function coefficient values in Table III describe the relationship between organizational capability, entrepreneurial behaviour and style. Comparing the results in the columns of Table III indicates that the relationship in growth firms between capability, behaviour and structure is somewhat more complex than that described earlier for non-growth firms. Nevertheless the data in Table III permit the following observations to be made.

The standardized 1 and 2 coefficients of 0.61906 and 0.08930 for sales revenue suggest Group 1, 2 and 3 firms, having entered a growth phase, should not expect that becoming more entrepreneurial and/or adopting an organic structure will contribute to further increase in future growth. Furthermore in the case of entrepreneurial, organic Group 4-type firms, the coefficient 1 value of 0.61906 provides added support for Covin and Slevin's (1991) conclusion that sustaining consistent sales growth in this type of firm is more likely to occur if, over the medium term, the organization adopts a more structured and controlled style of management. This type of firm can expect that a shift to a more disciplined internal culture will also enhance their capability in the areas of identifying specialist market niches and offering superior products (coefficient 1 0.36208 and 0.81574).

The standardized coefficient values for various aspects of the new product development process appear to suggest that Group 1 firms by becoming entrepreneurial and organic can expect to: improve their capability successfully to create new products and develop new products to attract new customers/permit entry into new markets; and encounter a capability erosion in the areas of increasing the number of launches and reducing "time-to-market" (function 1 -0.99612, 1.33607, 0.87333 and 0.44146; function 2 -0.13271, -0.13519, -0.59601 and 0.91716). These values also suggest that Group 2 firms adopting a more entrepreneurial style will somewhat improve their success rate for new product launches, increase the number of launches in the future and reduce "time-to-market", but concurrently be less effective at developing products to attract new customers/permit entry into new markets. Group 3 firms by adopting a more organic structure can expect the complete reverse of this situation; namely capability erosion in three areas of new product management but enhanced capability to develop new products for attracting new customers/entering new market sectors (function 1 coefficients 0.25766, 0.23332 and 0.76123).

Group 1 firms by becoming more entrepreneurial and adopting an organic structure may possibly improve the ability to optimize workforce effectiveness (coefficients -0.48943, 1.00610 and 0.43042). These actions will concurrently have a net minimal impact on job satisfaction, operating an effective appraisal system or implement employee training programmes (function 1 coefficients -0.48943, 0.51053, 0.34767 and 0.55583; coefficient 21.00610, 0.17027, -0.41018 and 0.69339). These values also suggest similar outcomes for Group 3 firms adopting a more organic structure, whereas Group 2 firms which become more entrepreneurial, should expect reduced capability in these areas of HRM.

Group 1 firms adopting an entrepreneurial style/organic structure can expect a net gain in the areas of employee productivity and to a lesser extent, identification of new ways to improve future productivity and/or introduce productivity enhancement technologies (function 1 coefficients -0.04353, 0.77122 and -0.601181; coefficient 2 0.67578, -0.05454 and 0.07683). These values suggest that Group 2 firms by becoming more entrepreneurial would receive no real benefit in this area of their operations., but Group 3 firms, by adopting a more organic structure, could expect an improvement in employee productivity.

Stronger entrepreneurial behaviour and adopting an organic structure will provide some assistance to Group 1 firms in the areas of measuring customer expectations and defining quality standards (coefficients 1 -0.01445 and 0.54803; coefficient 2 2.28246 and 0.52194). Concurrently, however, there would be some deterioration in the areas of identifying variance in quality, implementing actions to close quality gaps and optimizing decision making (coefficient 1 values -1.088641, 1.03171 and -0.65531; coefficient 2 -3.08103, 0.87124 and -1.409931). These values also indicate Group 2 firms becoming more entrepreneurial may expect capability gains for defining quality standards, quality variance identification and optimal utilization of information. Group 3 firms adopting a more organic structure can expect capability gains for measuring expectations, defining standards and closing quality gaps, but concurrently declines in the area of variance identification and optimizing decisions.

Group 1 firms becoming more entrepreneurial and organic can expect capability gains for utilizing computer technology but declines in the areas of control systems, market change identification and incorporating advances in IT. Similar outcomes can be expected by Group 2 firms becoming more entrepreneurial and Group 3 firms adopting an organic management structure (respective coefficient values 1 0.78611, 0.25926, -1.70057 and -1.51866; coefficient 2 0.32879, -0.91323, 0.33340 and -0.93126). These organizations and Group 2 firms adopting a more organic structure, should also expect a capability reduction in the area of implementing actions to effectively close identified gaps between actual and desired quality standards. These same coefficient values indicate Group 3 firms in becoming more organic can expect gains in service management capability similar to those identified for Group 1 organizations.

Discussion

This study provides quantitative support for the accepted view that small firms can enhance their overall performance by adopting an entrepreneurial marketing style. It also confirms the correctness of the Covin Slevin perspective that academics recommending the benefits to small firms of adopting an entrepreneurial style should also communicate to owner/managers that such actions must not be implemented in isolation. Instead any deliberations on entrepreneurial marketing must be accompanied by a careful review of the appropriateness of the current organizational structure.

However, it would appear the data in Table II apparently contradict another aspect of the Covin Slevin model; namely the hypothesis that high performance can only come from the firm operating with a conservative style accompanied by mechanistic structure or an entrepreneurial style and an organic structure. The contradiction exists in the case of UK SMEs because the results in Table II indicate that: a conservative style/mechanistic organization can expect to achieve the lowest overall performance of any of the four possible types of firm; and for non-growth firms, an improvement in overall performance can be achieved either by becoming more entrepreneurial and adopting a more organic structure or by retaining a mechanistic structure while moving towards a more entrepreneurial style. This latter observation would suggest that the small firm, in balancing actions to improve performance by changing style versus restructuring the organization, should recognize that entrepreneurial style apparently has greater influence than organicity of structure.

The discriminant function coefficient values for sales revenue of non-growth firms in Table III provide added support for the Covin Slevin view on the incremental benefits of combining an entrepreneurial style with adoption of an organic structure. Furthermore these data also suggest that such a move, in addition to enhancing certain aspects of the new product management process, will also benefit the small firm in other areas of the organizational activity such as employee productivity, employee development and the management of quality.

Once the small firm has successfully implemented a growth strategy, then the discriminant function coefficient values in Table III would seem to provide quantitative evidence to support Slevin and Covin's (1990) qualitative assertion that the highly entrepreneurial/organic businesses, at certain points in the life cycle of the firm, might consider becoming less entrepreneurial and adopting a somewhat more mechanistic structure. This observation would indicate, therefore, that it may not always be advisable to recommend owner/managers should rigidly adhere to the rule that entrepreneurial style and an organic structure will always optimize performance. One possible explanation for this situation is provided by the data in Table III because the discriminant coefficient values appear to suggest that a more disciplined approach to the management of operations in growth firms could contribute to enhancing capability in areas such as new product development, employee productivity and sustaining service quality.

Possibly a safer form of guidance to offer the small firm is to follow Hamel and Pralahad's (1994) view that the starting point in mapping future strategy is first to establish which core competence are critical to sustaining growth in a specific market segment. Having determined these competence, the firm is then in a much better position to assess the degree to which revisions in entrepreneurial style and organizational structure can contribute to enhancing the internal capabilities of the organization; thereby ensuring achievement of the owner/manager's vision for the future.

Thus, for example, a small firm producing robotic machine tools which specializes in meeting the needs of customers seeking "one off" designs incorporating the latest advances in technology, would probably be well advised to be very entrepreneurial and organically structured. In contrast, a small engineering company wishing to continue manufacturing components to satisfy the needs of OEMs seeking standard parts at the lowest possible price, would possibly not gain any real benefit from becoming highly entrepreneurial. This latter type of firm should probably retain their current marketing style, but concurrently examine whether offering greater value to their customer might be achieved by adopting a more organic structure to enhance their capabilities to embed a TQM philosophy more strongly across all the areas of their operation.

References and further reading

Bennett, D. and Hall, D. (1991), "Customer commitment: the recipe for success", Small Business and Small Business Development, Vol. 1, pp. 1-5.

Birley, S. (1982), "Corporate strategy and the small firm", Journal of General Management, Vol. 8 No. 2, pp. 82-6.

Brickau, R. (1994), "Responding to the Single Market: a comparative study of UK and German food firms", unpublished PhD dissertation, University of Plymouth, Plymouth.

Brock, W.A. and Evans, D.A. (1989), "Small business economics", Small Business Economics, Vol. 1 No. 1, pp. 7-21.

Burns, P. (1994), Keynote address, Proceedings 17th ISBA Sheffield Conference, ISBA, Leeds.

Carland, J.W., Carland, J.C. and Abbey, C. (1989), "An assessment of the psychological determinants of planning in small business", International Small Business Journal, Vol. 7 No. 4, pp. 23-33.

Carson, D.J. (1985), "The evolution of marketing in small firms", European Journal of Marketing, Vol. 19 No. 5, pp. 7-16.

Carson, D.J. (1993), "A philosophy of marketing education in small firms", Journal of Marketing Management, Vol. 9 No. 2, pp. 189-205.

Carson, D., Cromie, S., McGowan, P. and Hill, J. (1995), Marketing and Entrepreneurship in SMEs, Prentice Hall, London.

Churchill, G.A. (1979), Marketing Research: Methodological Foundations, Dryden Press, Hinsdale, IL.

Coopers & Lybrand, (1994), Made in the UK: The Middle Market Survey, Coopers & Lybrand, London.

Covin, J.G. and Slevin, D.P. (1986), "The development and testing of an organisational-level entrepreneurship scale", in Rondstandt, R., Hornaday, J., Peterson, R. and Vesper, K. (Eds), Frontiers of Entrepreneurship Research, Babson Centre for Entrepreneurship Research, Wellesley, MA, pp. 628-39.

Covin, J.G. and Slevin, D.P. (1988), "The influence of organisational structure on the utility of an entrepreneurial top management style", Journal of Management Studies, Vol. 25, pp. 217-37.

Dees, G.G. and Robinson, R.B. (1982), "Measuring organisational performance in the absence of objective measures: the case of the privately-held firm and conglomerate business unit", Strategic Management Journal, Vol. 5, pp. 252-73.

Geller, A.M. (1980), "Matching people to business strategies", Financial Executive, Vol. 48, pp. 18-21.

Gibb, AA. and Davies, L. (1990), "In pursuit of a framework for the development of growth models of the small business", International Small Business Journal, Vol. 9 No. 1, pp. 15-31.

Gill, J. (1985), Factors Influencing the Survival and Growth of the Smaller Firm, Gower, Aldershot.

Hamel, G and Prahalad, G.K.(1994), Competing For The Future, Harvard Business School Press, Boston, MA.

Khandwalla, P.N. (1977), The Design of Organisations, Harcourt Brace Jovanovich, New York, NY.

McClelland, D.C. and Winters, D.G. (1969), Motivating Economic Achievement, Free Press, New York, NY.

Miller, D. (1983), "The correlates of entrepreneurship in three types of firm", Management Science, Vol. 29, pp. 770-91.

Milne, T. and Thompson, M. (1986), "Patterns of successful business start-up", in Faulkner, R. (Ed.), Readings in Small Business, Gower, Aldershot.

Punj, G. and Stewart, D.W. (1983), "Cluster analysis in marketing research: review and suggestions for application", Journal of Marketing Research, Vol. 20, February, pp. 134-48.

Slatter, S. (1984), Corporate Recovery- Successful Turnaround Strategies and their Implementation, Penguin, London.

Slevin, D.P. and Covin, J.G.(1990), "Juggling entrepreneurial style and organisational structure - how to get your act together", Sloane Management Review, Winter, pp. 43-53.

Smallbone, D. (1990), "Success and failure in new business start-ups", International Small Business Journal, Vol. 13 No. 3, pp. 34-47.

Storey, D.J., Keasey, K., Watson, R. and Wynarczyk, P. (1987), The Performance of Small Firms, Croome Helm, London.

Tradenz (1990), Export Manufacturing - Framework For Success, New Zealand Trade Development Board, Wellington.
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Author:Chaston, Ian
Publication:European Journal of Marketing
Date:Nov 1, 1997
Words:5726
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