Beyond the Formal–Informal Dichotomy of Small Firm Strategy‐Making in Stable and Dynamic Environments

Abstract

Strategy-making assists small firms in managing change and uncertainty by developing suitable strategic options. We move beyond the conventional formal–informal dichotomy to show how three informal approaches—internal participation, external participation, and centralized strategy-making—help both entrepreneurial firms and conservative firms to navigate more or less dynamic environments. In an empirical study of 320 small firms, we find that participation during strategy-making relates positively to performance whereas centralization only matters for conservative firms in stable environments. In dynamic environments, better performance in entrepreneurial firms is associated with all three approaches. Our findings highlight the importance of viewing strategy-making in small firms as multifaceted and context specific.

Acknowledgments

The authors wish to thank Ray Zammuto and the comments of the JSBM Editor and the anonymous reviewers for their helpful suggestions on earlier drafts of this paper.

Additional information

Notes on contributors

Martie‐louise Verreynne

Martie‐Louise Verreynne is an associate professor of Innovation in the UQ Business School at the University of Queensland.

Denny Meyer

Denny Meyer is an associate professor of Statistics in the Faculty of Health, Arts and Design at the Swinburne University of Technology.

Peter Liesch

Peter Liesch is professor of International Business in the UQ Business School at the The University of Queensland.