Abstract
The strategy–firm growth relationship has remained an important issue for researchers, and in spite of the growing volume of work in this area, little consensus has emerged on this issue. One of the reasons behind this lack of consensus is the question—how to conceptualize strategy? and in this, a lesser examined way has been to use the strategic orientation (SO) construct. As conceptualized by Venkatraman (1989), the SO construct comprises six dimensions, that of analysis, pro-activeness, riskiness, aggressiveness, futurity and defensiveness. The need to integrate SO and resource-based view (RBV) has seen increasing emphasis by researchers since the choice of resources constitutes an important precondition for firm growth and even more so in the case of small firms. This study empirically examines strategy–firm growth relationship through the lens of SO by studying the influence of individual SO dimensions on firm growth. In this study, we attempt to empirically examine and validate the nature of SO construct and how its individual dimensions influence small firm growth, how the dimensions interact with firm resources and what is the moderating influence of resources on the relationship between individual SO dimensions and small firm growth.
Introduction
The issue of firm growth has been at the forefront of strategy research for a long time but despite the growing body of work in this area, there seems to be little consensus on why some firms outperform others albeit originating from similar circumstances and with similar access to resources (Tuck & Hamilton, 1993). One of the ways strategy research has sought to tackle this question is to consider the contribution of strategy to firm performance, but again no clear consensus has emerged in this regard (Parnell, 1997). An important reason behind this lack of consensus is the classificatory approach towards conceptualization and measurement of strategy. Studies have tended to adopt either Porter’s (1980) low cost, differentiation or focus typology or the Miles and Snow (1978) prospector, analyzer, reactor or defender typology. The problem in adopting these strategic approaches has been the assumption of mutual exclusivity of one or the other form of strategy, whereas the strategy–firm performance relationship may require a broader, more inclusive form of strategy involving its different strands simultaneously. Venkatraman’s (1989) work on six dimensions of strategic orientation (SO) which can be defined through the dimensions of aggressiveness, analysis, defensiveness, futurity, pro-activeness and riskiness has rendered crucial grounding to the understanding of the SO construct. Researchers have examined the relationship between different strategy-making aspects and firm growth mainly by exploring the effect of dimensions of SO on firm growth. The argument behind adopting this approach is that an inclusive approach to strategy formulation, that is, different dimensions of SO may throw better insights than exclusive approach of strategy modes adopted in earlier studies. Further, the dimensions of SO involve both entrepreneurial approach to strategy making expressed through the dimensions of pro-activeness, futurity, riskiness and aggressiveness as well as conservative approach to strategy making explicit through the dimensions of analysis and defensiveness.
Storey (1994) mentioned that there are three key influences on the growth of small firms: (a) access to resources, (b) the firm itself and (c) the strategic decisions taken by the firm. Despite the growing volume of work in the area of SO, resources and firm growth, their interaction has not been studied in the context of emerging economies, which are transitioning from central control to free market system. These economies are marked by challenges such as uneven pace of political change, limited capital, inefficient labour market and limited resource endowments (Hoskisson et al., 2000). Therefore, firm growth is more of a factor of management’s conscious decision making and strategic choice. According to Knight (2000), small firms with their relatively limited resources have to possess higher SO to survive or to outperform their competitors. Eisenhardt and Schoonhoven (1990) suggest that small firm growth is a function of entrepreneurial strategy, environmental changes and resources though they may be constrained by various factors such as markets and technology. According to Wiklund and Shepherd (2005), availability of resources allows firms to experiment with pro-active, risky and aggressive strategies that might not be the case in a resource-constrained environment. In one of the few studies done to examine SO–firm performance relationship, Morgan and Strong (2003) found that it is the conservative strategies that contribute to firm growth. Since the context of this study was in developed economies, it raises the question, whether the findings would also hold good in emerging economies and especially small firms, which are resource constrained. What precisely is the contribution of resources in encouraging these strategy dimensions and their respective influence on firm growth? This study examines how individual dimensions of SO along with moderating influence of resources influence small firms’ growth in the context of emerging economies.
Conceptual Framework
Literature has viewed strategy from three points of view—the narrative, the classificatory and the comparative. The narrative approach comprehends strategy as a holistic phenomenon that is peculiar to the event, situation and organization (Czarniawska, 1998). The limitation of this approach is that it lays emphasis on qualitative methodology which falls short of theory testing. The classificatory approach on the other hand, seeks to classify firms according to certain typologies (Miles & Snow, 1978; Porter, 1980; Wright et al., 1995). The limitation of adopting this approach is the mutual exclusivity of one or the other form of strategy and studies have tended to adopt either Porter’s (1980) low cost, differentiation or focus typology or the Miles and Snow (1978) prospector, analyzer, reactor or defender typology. Whereas the comparative approach seeks to evaluate strategy through multiple dimensions of SO construct. The idea here is to configure strategy as a multidimensional construct that includes distinct characteristics of strategy. In this case, Venkatraman’s (1988–1989) work on six dimensions of SO has served as a crucial grounding to the comparative approach. According to him, the attractiveness of the comparative approach rests in its ability to further breakdown the ‘variations that can be seen across different strategy classifications into more fine grained differences underlying each trait (or dimension)’. Following Venkatraman’s (1989) work, this study adopts comparative approach in examining the strategy–firm growth relationship by exploring the influence of individual dimensions of SO construct, that is, pro-activeness, risk taking, aggressiveness, futurity, analysis and defensiveness on firm growth. The rationale behind this approach is that an inclusive approach may throw better insights than the exclusive approach to strategy modes as displayed in the classificatory approach.
Research in the field of resource-based view (RBV) argues that firm resources are the primary source of performance differences among the firms. The RBV maintains that competitive advantage is a condition of organizational resource capabilities (Barney, 1995; Petaraf, 1993). But resources rather than having a direct influence on firm growth provide firms’ strategies the cushion that may result in their growth. The rationale behind this argument can be traced back to Penrose’s (1959) assertion that firm growth is not the outcome of firm resources but the way in which resources (both tangible and intangible) of a firm are employed. It is not resources per se that are valuable but the strategic decisions a firm makes in organizing these resources. Different management of resources through different strategic approaches may therefore produce different outcomes in firms even when they possess similar resources—it is the firm’s strategic behaviour which results in different levels of firm growth. Based upon extensive literature review (Basu & Gupta, 2013) proposed the following model to examine the influence of individual dimensions of SO construct and moderating influence of resources on small firm growth, which are empirically examined in this study.
Proposed Model
‘Proposed model’: Relationship between individual dimensions of SO and growth of SMEs
Hypotheses Development
Based on the above mentioned conceptual model, the following hypotheses have been framed:
Dimensions of Strategic Orientation and Firm Growth
Futurity: It is clear that the whole concept of strategy is firmly grounded in the notion of reaching an envisioned future state through desired firm growth (Andrews, 1971; Ansoff, 1975; Steiner, 1979). This reflects the importance of futurity as the key dimension of SO construct. In the context of dynamic environment involving rapid change, this trait can enable a firm to acquire competitive edge in the market. This aspect closely recalls Boyd’s observation (1991) on long-term planning that enables firms to perform better than those in the field who do not manifest this behaviour. Futurity exhibits itself particularly in areas pertaining to forecasting sales, customer preferences and environmental trends. Based on these arguments, it is expected to be significantly related to small and medium enterprise (SME) growth.
Pro-activeness: Pro-activeness is central to strategic behaviour and reflects a firm’s keenness for exploiting opportunities, experimenting with change and mobilizing first-mover actions (Dess, Lumpkin, & Covin, 1997; Lynn, Morone, & Paulson, 1996). Grounded in action, pro-activeness is associated with competitive superiority due to the ‘step-ahead’ tactics pursued by firms (Gatignon & Xuereb, 1997). It explains the readiness exhibited by a firm in entering new markets, introducing new products before competition arrives and readiness in eliminating operations that have reached the optimum level in their life cycle. As an action-oriented approach, pro-activeness has been associated with market leadership exhibited by firms (Gatignon & Xuereb, 1997). Firms showing anticipatory and keen response to market indications and a high sense of involvement in bringing about improvements in business are able to secure high returns (Day & Wensley, 1988). Based on these arguments, it is expected to be significantly related to SME growth.
Riskiness: This trait explains decisions taken by firms that could lead to possible losses or gains for them (Clark & Montgomery, 1996). This becomes significant in decisions on resource allocation and product and market choices a firm makes. Increasingly risk taking is depicted as an organization-level approach, as highlighted by Miller and Friesen (1982). This is a calculated behaviour based on analysis and risk-taking appetite of firms in their quest for growth that calls for decisions involving substantial financial and human resource investment. Firm behaviour in this particular instance, reflects a combination of entrepreneurial approach towards risk taking while looking out for opportunistic ventures (Baird & Thomas, 1990). It is through pushing the boundaries of risk and unfreezing time-honoured rules a firm can engage in exploratory and generative learning (March, 1991) resulting in superior firm growth. Thus, where traits of riskiness are evident within a firm’s SO, firm growth level may be notably high (Bettis & Hall, 1982; Bromiley, 1991). Based on these arguments, it is expected to be significantly related to SME growth.
Aggressiveness: This posture is adopted by a firm while allocating its resources meant for aggressive strategies in response to their rivals to generate firm growth (Covin & Slevin, 1991; Zahra, 1993). These may be based on product innovations and/or market development to capture market share or to take it away from competitors (Miles & Cameron, 1982) and may involve substantial investments to improve competitive position and market share. This aspect of SO emphasizes exploiting and developing resources in a quicker manner ahead of competitors or in response to their strategies (Clark & Montgomery, 1996). Aggressiveness indicates a mindset clearly oriented towards market share development through fighting competition aggressively, giving way to improved firm growth. Based on these arguments, it is expected to be significantly related to SME growth.
Analysis: This refers to a firm’s knowledge-building capacity (Bourgeois, 1980) and ability to enhance organizational learning (Cohen & Sproull, 1996). This orientation refers to the problem-solving approach of firms from their understanding of external and internal environment (Miller & Friesen, 1982). It reflects a firm’s tendency to go to the deeper root of problems to generate the best possible alternatives which becomes an important characteristic of the organizational decision making (Miller & Friesen, 1982). The whole aspect of this orientation bears close conformity to the idea of rational comprehensive processes (Frederickson & Mitchell, 1984), wherein the observed phenomenon is that of analytical activities and systems relating positively with firm performance (Eisenhardt, 1989). Based on these arguments, it is expected to be significantly related to SME growth.
Defensiveness: This approach reflecting defensive behaviour on the part of firms (Miles & Snow, 1978) becomes manifest through cost reduction and increasing efficiency. In this orientation, a firm pays scant attention to development beyond the defence of its domain (Miles & Cameron, 1982) or core technology (Thompson, 1967). This reflects high degree of strategy specialization (Child, 1974) and works on the express belief that expertise in a specialized area leads to higher performance (Venkatraman, 1989). Firms exhibiting this orientation can secure capabilities and skills that develop comprehensive strategies which give them advantage over firms that are less specialized or domain focussed (Hart & Banbury, 1994). Based on these arguments, it is expected to be significantly related to SME growth.
Resources, Dimensions of Strategic Orientation and Firm Growth
Despite various explorations of SO, a major challenge has been to establish the linkage between SO and firm resources. Penrose stressed that it is not the mere possession of resources but how adequate value can be created out of these resources is of immense importance. The RBV maintains that competitive advantage is a condition of organizational resource capabilities and resource heterogeneity is necessary but not a sufficient condition for firm performance. Barney (1991) mentions that a firm can have a competitive advantage when it implements a value creating strategy that is not being implemented by its current and potential competitors. Significant questions however remain on how do resources impact the individual dimensions of the strategy and what would be the impact of this interaction on small firm growth in emerging economies.
Based on these arguments, it is expected that resources would significantly moderate the relationship between individual dimensions of SO and SMEs growth, so the following hypotheses have been framed:
Research Design
Sample
The research design for this study was field study and a cross-sectional approach was used. A research focussed on SMEs in India limits sampling to firms who have made capital investment within the threshold defined by Micro, Small and Medium Enterprises (MSME) 2006 Act to be categorized as SMEs. The sampling frame was the database published by Small Industries Research Institute (SIRI), Delhi. From the sampling frame, a random sample of 2,200 SMEs spread across Delhi and National Capital Region (NCR) was shortlisted for data collection purposes. Prior appointments were taken through phone/mail and out of a total of 2,200 SMEs approached for personal appointments in Delhi–NCR, a total of 270 firms responded with appointments. Before approaching these firms personally, appointments were reconfirmed and in the end, data were collected from 242 senior level management functionaries of the level of General Manager and above representing 242 firms as a single respondent was selected from each firm. Responses were received from 242 firms out of which 19 responses were rejected on the ground of incomplete information, and therefore, a final data of 223 firms was considered for data analysis.
Variables and Measures
Dimensions of Strategic Orientation
Venkatraman’s (1989) work on SO designed to specifically capture the ingredients of competitive strategy, provided a comprehensive measure to suitably assess the question of a firm’s SO. The six dimensions of SO (aggressiveness, analysis, defensiveness, futurity, pro-activeness and riskiness) were measured by 22 items and tested for reliability. So, this study used the 22 items to measure the six dimensions of SO within the firm using semantic differential method on a 7-point Likert scale.
Resources
Wiklund (1999) reported that availability of financial, knowledge and human resources was associated with firm growth, and found that resource availability was one of the predictor of firm growth. Resources provide the firm strategies the necessary cushion to exercise various aspects of their strategies and thus moderate the relationship between the individual dimensions of SO and firm growth. To operationalize this construct, this research has used nine items to measure the three types of resources, that is, financial, knowledge and human resources on a 7-point Likert scale wherein three items have been used to measure each type of resource.
Growth of Small and Medium Enterprises
With regard to SMEs, there is no agreement on the appropriate measure to determine small firm performance (Day & Wensley, 1988). Research on small firms predisposes a researcher to choose subjective measures since objective financial measures on SMEs performance are a private matter of owners. Since most SMEs in India are privately held (Pandey, 2007), choosing the right parameter to measure firm performance is of utmost importance to get the required information. Many researchers advocate growth as the most appropriate performance measure in small firms (Brown, 1996). Many suggest that sales growth is the best growth measure since it reflects both short- and long-term changes in the firm. Employment growth is another important aspect of growth reflected in large number of studies that focus primarily on firm growth (Delmar, 1996). So the respondents were asked whether they were satisfied with the growth of their firm in the last three years on these two parameters on a 7-point Likert scale.
Data Analysis
Scale Reliability
The internal consistency or reliability of all the measurement scales was checked by calculating the Cronbach’s alpha, which is useful for investigating the reliability of multi-item interval- level scales. As per Nunnally (1978) and Hair, Anderson, Tatham, and Black (1995), a threshold Cronbach’s alpha value above 0.70 is considered reliable. Table 1 presents the results of reliability analysis of scales used and their means and standard deviation. While looking at Cronbach’s alphas, it was found that all the variables examined in this study had reliability values above 0.70, which is the threshold value (Nunnally, 1978).
Reliability Coefficient, Mean and Standard Deviation of Variables
Scale Validity: Factor Analysis
To examine whether the SO construct represents these six as independent dimensions, an exploratory factor analysis using principal component method with varimax rotation was conducted on the 22 items used to measure the six dimensions of SO Construct. Before conducting factor analysis, Kaiser–Meyer–Olkin (KMO) measure was done to check the factorability and sample adequacy and the results found that the value of KMO was 0.811, which is higher than 0.50, indicating that the data is very reliable and suitable for factor analysis. Further, Bartlett’s test of sphericity for testing the significance was highly significant corresponding to the chi-square statistic. Tabachnick and Fidell (2007) mentioned that the choice of cut-off for value of loadings is the preference of the researcher. For this research, the factor loading above 0.522 was considered significant. While examining the results of factor analysis, it was found that all items had values above 0.522, so all the 22 items used to measure the six dimensions of SO were retained.
All the six factors combined together explained 77.0 per cent of variance as shown in Table 2 Examination of correlation. Since the data used in this research contain self-reported measures, this raises a concern about the problem of common method bias, which can result in inflated or deflated observed relationships. To overcome this problem, Harman one-factor test was done as suggested by Podsakoff and Organ (1986) to overcome the potential threat to validity. All variables were entered into factor analysis and results of un-rotated factor analysis were examined, which yielded six factors with eigenvalues greater than one with no particular variable explaining substantial variance suggesting that common method bias was not a problem in this study.
Results of Exploratory Factor Analysis
Correlation Analysis
The results of correlation analysis, that is, Pearson product–moment correlation coefficient indicates the magnitude and direction of linear relationships among the variables. A careful examination of the correlation matrix indicated that though many variables were correlated, there was no significant degree of overlap among the independent variables indicating no issue of multicollinearity, so all the independent variables examined were retained. Examination of correlation matrix of variables in Table 3 indicates that correlations among the variables were well below 0.70, and the highest degree of correlation between two variables was .541. The results of correlation matrix provide a strong indication about the distinct relationship between individual dimensions of SO and firm growth. These findings signal that for SMEs growth not all SO dimensions are equally important, further, their degree of association varies with growth parameter.
Hypotheses Testing
Hierarchical linear regression analysis was done to test the hypotheses; first the six independent variables were entered along with the main effect of the moderating variables resources in the universal model. Then the interaction term was entered and the results of two-way interaction involving resources are shown in contingency model. Checks for multicollinearity were done by calculating the tolerance values and variance inflation factor (VIF) for independent variables. Tolerance values for the variables ranged between 0.63 and 0.87 and VIF values were less than 1.47, indicating no issues of multicollinearity. Further, mean centring was done to overcome the problem of multicollinearity while testing the moderating variable.
In Table 4, where the dependent variable was sales growth, the results of model 1 indicate that out of the six independent variables three were significantly related with sales growth, the two variables of futurity and pro-activeness were significantly and positively related with sales growth, whereas riskiness was significantly but negatively related with sales growth as indicated by the respective beta and p values. The six independent variables and the main effect of resources accounted for a variance of 28.9 per cent in sales growth as indicated by ▲R2. The results support the first three hypotheses and reject the fourth, fifth and sixth hypothesis. While examining the moderating influence of resources on the relationship between each of the six independent variables with sales growth, it was clear that the moderating influence varies with individual SO dimensions as indicated in model 2. The moderating influence of resources was significant and positive with futurity, pro-activeness and aggressiveness as indicated by beta and p values, whereas the influence was insignificant with the other three variables. The moderating influence of resources explained an additional variance of 6.2 per cent in sales growth as indicated by ▲R2.
Results of Correlation Analysis
* Correlation is significant at the 0.05 level (two-tailed).
Results of Hierarchical Regression with Sales Growth as a Dependent Variable
In Table 5, where the dependent variable was employment growth, the results of model 1 indicate that out of the six independent variables two variables namely futurity and pro-activeness were significantly and positively related with employment growth while the other four independent variables were not significantly related with employment growth as indicated by respective beta and p values. The six independent variables and the main effect of resources accounted for a variance of 10.6 per cent in employment growth as indicated by ▲R2. While examining the moderating influence of resources on the relationship between each of the six independent variables with employment growth, it was clear that the moderating influence varies with individual SO dimensions as indicated in model 2. In this case, the moderating influence of resources was significant and positive with pro-activeness and aggressiveness as indicated by respective beta value and p values, whereas the influence was insignificant with the other four variables. The moderating influence of resources explained an additional variance of 4.0 per cent in employment growth as indicated by ▲R2.
Results of Hierarchical Regression with Employment. Growth as a Dependent Variable
So Hypotheses 1 and 2 were fully accepted, whereas hypotheses 3 and 4 were partially accepted and hypotheses 5 and 6 were fully rejected. In case of moderating influence of resources, hypotheses 7a and 7d were fully accepted, whereas hypotheses 7b was partially accepted and the hypotheses 7c, 7e and 7f were fully rejected.
Discussion
The findings from this study imply that entrepreneurial strategies such as futurity, pro-activeness and riskiness have strong place in the complement of SO construct and the rewards of these strategies are obvious (Dess et al., 1997). This can be further substantiated by Miles and Snow (1978) framework which suggested that prospector firms exhibit entrepreneurial characteristics, which is in line with the findings of this study. This research has empirically examined SO as a multidimensional construct comprising six independent dimensions and found that it is not necessary that all SO dimensions contribute to firm growth. The results of exploratory factor analysis indicate that the dimensions of SO construct load on to six different factors, confirming that SO construct is best represented by six dimensions. A careful examination of correlation matrix and the results of hypotheses testing (hypotheses 1 through 6) provide strong support that individual dimensions of SO construct have a unique, distinct and independent relationship with SMEs growth. The results found that the dimensions of futurity, pro-activeness and riskiness were significantly related with firm growth, whereas the dimensions of analysis and defensiveness were found to be insignificant. The traits of futurity, pro-activeness and riskiness are typically the aspects of entrepreneurial strategy, whereas aspects of analysis and defensiveness are of conservative strategic approach. The results from this study are notable and different from other studies in a way that firms who emphasize the traits of defensiveness and analysis in their SO typically exhibit lower levels of business growth. These strategy dimensions are conservative in nature, relative to the futurity, pro-activeness, riskiness and aggressiveness, which are entrepreneurial in nature and reveal that fast growing small firms adopt entrepreneurial strategies. So the intuitively appealing notion that entrepreneurial strategies positively affect small firm growth in emerging economies is validated. Though neither entrepreneurial nor conservative strategies are inherently ‘good’ or ‘bad’, the findings of this study indicate that for small firms in emerging economies, it is better to adopt entrepreneurial strategies or the prospector strategies rather than adopting analyzer or defender strategies.
This study focussed on the aspect that availability of resources improves firm growth through the adoption of strategies that contribute to firm growth. For this purpose, it explored the moderating influence of resources on the individual dimensions of SO and SMEs growth. The findings provide strong empirical support to this assumption that resources encourage the adoption of strategies that lead to firm growth. The results indicate that moderating influence of resources on the relationship between individual dimensions of SO and SMEs growth varies in strength, direction and significance. The evidence for this is provided by the finding that indicated that resources encourage the firms to adopt an aggressive approach that leads to firm growth, whereas in the absence of resource availability the relationship between aggressiveness and firm growth was insignificant. So adopting a uniform approach to the moderating influence of resources on all SO dimensions equally can lead to simplistic assessment that resources have a universal and positive influence resulting in the wastage of limited resources especially in case of small firms in emerging economies. Further, the two-way interaction using contingency approach throws better insights rather than considering only the main-effect model.
Managerial and Policy Implications
In the light of these findings, the existing approach towards the uniform adoption of SO as a wholesale construct contributing to the growth of SMEs should be reviewed. This blind pursuit of uniform focus on all SO dimensions is not the most effective way for firms to grow. The findings provide a finer-grained analysis of SO construct and how various dimensions in different combinations lead to firm growth rather than mutually exclusive modes of strategies. The independent nature of dimensions will encourage the owners/managers and policy makers to re-examine their understanding about their strategic choices. Firms should focus only on those aspects of strategy or the combinations that add significant value whether entrepreneurial or conservative mode as focussing on all SO dimensions can overstretch them and this may not be beneficial; it is also possible that different aspects of entrepreneurial and conservative mode may simultaneously influence firm growth. If the owners/managers of these firms know that it is the specific subset of SO dimensions, which contribute positively in their firm’s growth rather than all dimensions, then they can focus only on those dimensions rather than putting their efforts on the entire SO construct. This will save the limited resources at their disposal and will help them focus in a better manner on the subset of relevant SO dimensions. This study helps the owners/managers and the policy makers in identifying the strategic approach needed for firm growth by providing them the strategic flexibility about selectively deploying strategic options based on their assessment about which aspect of strategy whether entrepreneurial or conservative or their specific dimensions are beneficial to pursue at a particular stage of firm development. The findings of this study reveal that firms should put a premium on entrepreneurial strategies rather than conservative strategies, as the rewards of entrepreneurial strategies are better than other options especially in case of small firms. Conversely, firms adopting cautious or defensive strategies should be careful of the fact that it may not lead to growth especially in emerging economies.
Conclusions, Limitations and Implications for Future Research
Important conclusions can be derived from this study such as priorities need to be established to appreciate the benefits of entrepreneurial strategies that lead to small firm growth especially in emerging economies. Consequently, emphasizing these dimensions of SO in emerging economies is much about ‘managing on the front foot’ rather than following a ‘wait or watch’ approach. Firms emphasizing futurity, pro-activeness and riskiness in SO need to examine the benefits of maintaining competitive advantage, whereas the ones focusing on analysis and defensiveness should examine the trade-off in long-term performance attributes or in other economies. An interesting framework for interpretation of these findings is offered by theories of competitive analysis, as significant resources are needed to sustain entrepreneurial energies of small firms. These efforts can result in first-mover advantage leading to better firm growth. Population ecology theory has also been allied to this debate by researchers investigating pioneers/entrepreneurial firms, followers or conservative firms (Lambkin, 1988). Population ecology theory suggests that the latter outperforms the former and this conclusion is drawn from the effect of liability of newness which postulates that mortality is more evident among ‘new’ organizations (Freeman, Carroll, & Hannan, 1983) but Robinson et al. (1994) warn that for followers that do not achieve competitive scale, the performance effects of late entry may be exaggerated. The results of this study indicate that small firms in emerging economies are better placed if they focus their energies on entrepreneurial strategies rather than focusing on conservative aspects and playing on the front foot offers them more rewards and may help them in overcoming the liability of newness.
The research has some limitations, first of all the sample of this study was drawn from Delhi and NCR in India, so one should be careful in generalizing the results to other regions/countries and emerging markets. Another limitation of this study is its cross-sectional design as the data was collected at one point of time and did not record changes over a period of time. A longitudinal study would allow the firms to be studied over a period of time which might have shown the role of different aspects of SO whether entrepreneurial or conservative in influencing firm growth at different stages of firm life cycle. This might have validated the notion that at different times and stages of firm growth, different aspects of strategy contribute towards firm growth, as over the life cycle of a firm or the nature of competitive intensity, it is quite possible that firms may move away from entrepreneurial strategies to conservative strategies. This study has examined the moderating influence of resources, whereas there can be many other ‘contextual’ variables that can moderate this relationship, which this study has not considered; hence, this may be taken as another limitation of this study.
This study helps the firms to identify the selective triggers of strategy to grow but an important area for future research can be to examine the various combinations of SO among its dimensions suited for firm growth and whether the inequality of importance of these SO dimensions requires that these dimensions should be assigned differential weights as per their level of importance. Future research can examine whether some of these dimensions are always present, whereas some dimensions may vary depending upon the context of the firms. Future research should take into account the influence of various other contextual variables in addition to resources that can influence this relationship and examine many configurations using configuration approach by considering many contextual variables simultaneously rather than viewing the moderating influence of one variable using contingency framework.