Many variables have been identified that could be included in the research framework for this study - variables drawn from existing models of strategy-making and EO. To select variables for the study, the following criteria suggested by Covin and Slevin ( 1 99 1 ) were applied :
• The relevance of the variables has to be proven in previous strategy-making and/or
entrepreneurial research;
• Variables must be clearly defined and there must be theoretical justification for their
inclusion in the model;
• There should be an indication that the constructs are of importance in the SME
context;
• The ultimate dependent vari able is firm performance since it is the contention of
both entrepreneurship and strategy-making literatures that individually or combined they lead to competitive advantage and therefore improve firm performance;
• The framework should include context and content variables; and
• The framework could include direct, mediating and moderating effects. .
All the variables identified in Chapter Two and Three adhere to the above selection criteria. A central tenet of strategic management literature is the influence that the congruence of strategy, structure, processes and systems have on organisational performance (Chrisman et aI., 1 998). Firm performance is used as the dependent variable in most studies of this nature (e.g. Sandberg & Hofer, 1 987).
This section provides a framework for understanding the concept of strategy-making in S MEs. This framework is only intended as a guide for the empirical study, and does not pretend to be an all inclusive model of strategy-making and firm performance in SMEs. It builds on the main themes that have emerged from the literature review in order to answer the research question, namely:
What are the strategy-making processes of small and medium enterprises (in New Zealand) and how are these related to firm peljormance?
A set of research objectives and propositions are formulated. The reader is reminded that the term ' firm' in the propositions refer to 'New Zealand SMEs ' . The purpose of the propositions is to facilitate the operationalisation of each objective. These objectives and relevant propositions are summarised in Table 4. 1 and justified and presented in the remainder of this section.
Table 4. 1 : Research obj ectives and propositions
I .
3.
OBJECTIVES . PROPOSITIONS'
To present the demographical PI
and other contextual factors of
the SMEs in the study, in particular the level of EO of the
firms. .
To determine the strategy- P2a
making processes that New Zealand SMEs employ as well as
their relationship with firm P2b
performance.
SMEs in NZ have high levels of EO
The rational, adaptive, entrepreneurial, symbolic and. participative
·strategy-making processes are important strategy-making modes that
SAlEs may exhibit
The entrepreneurial mode of strategy-making will be most favOIired by
SMEs .
P2c Firms that employ the rational mode of strategy-making will per/onn well
P2d Firms that employ more than one mode of strategy-making will per/orm
well . "
To investigate how a selection of P3a
contextual factors affect the relationsh ip between strategy- P3b
making processes and firm performance.
P3c
P3d
To compare the strategy-makirig P4a
processes of firms of different"
sizes, age, structures and levels .
of EO. P4b
Environmental IIncertainty will impact on the relationship between strategy-making and performance (moderating factor)
Environmental IIncertainty will inflllence the mode of strategy-making that a fiml employs, specifically, jirms in dynamic and hostile environments will employ adaptive and entreprenellrial processes
Stage of indllstry life cycle and indllstry sector will influence the mode of strategy-making that ajirm employs
EO, jirm size, jirm age and organicity of stnlcture will influence the relationship between strategy-making and per/onnance (moderating factor)
EO wiII the mode of strategy-making that a jirm employs. specifically, entrepreneurial firms will employ an entrepreneurial mode of strategy-making . "
Size will influence the mode of strategy-making ihat a firm employs, specifically. smaller SMEs will employ adaptive and participative processes. while larger SMEs will employ rational and entrepreneurial processes
P4c Age will influence the mode of strategy-making 'tha( a firm employs, specifically. younger SMEs wili employ entrepreneurial and adaptive . -processes. while older SMEs will employ rational and symbolic processes P4d' Firm stntcture will influence the mode of strategy-making that a firm 'employs. specifically. jimlS with organic structures will employ entrepreneurial modes of strategy-making - .
5. To investigate how a selection of business strategies (content variables) affect the relationship between strategy-making processes and firm performance.
P5a The mode of strategy-making that a firm employs will influence the choice of strategy (content) which will influence jirm perfomlQnce (mediatingfactor)
6.. To establish the _ ,direct P6a . Entrepreneurial finns (firms with a high level of EO) will olltperform
7.
. relationship that some of the non-elltrepreneuriafjirms i . . . . , ' " . . context and. content factors may. f'6b Contextual factors.' including EO •. size. age, striicfUre� envirollme�ta/
" have w!th firm performance. unr;ertafnty and Industry life cycle. will impact on the strategies (content)
that a firm chooses. sp�cifically smaller and, younger finns will employ
focus. strategies. while entrepreneurial or firms :With organic
stnlcfUres will employ differentiation strategies .. .
To investigate the P7a
configurational relationships between the variables of the
study. P7b
It is possible to create a conjigurational //lodel of strategy-making, external and internal context variables and strategy types that will predictjirm performallce.
It is possible to create archetypes that empirically classifY thejirms of the study.