Srivastava, B.N., Indian Institute of Management Calcutta and Ranjan, J., Government of Andhra Pradesh, India
Previous research has suggested that small firms use little strategic planning due to limitations imposed by size. But evidence gathered elsewhere indicates that small firms compete successfully on account of the strategic process. In light of such contradictory findings, we argued that the source of competitive advantage for small firms is not strategy per se but strategic orientation of the owner-manager. A firm can be said to have a strategic orientation if its owner-manager (a) recognises the linkages between the strategy and competitive advantage, (b) follows the logical leads suggested by these linkages, and (c) these linkages are used to develop and shape future action plans. Strategic orientation is a pattern of beliefs, feelings and action tendencies rooted in perceptions about the importance of strategic process. A 5-point Strategic Orientation Scale (SOS) was developed using 21 items__ 7 items each for the three components viz., valuing strategy making, recognizing linkages and following up. The scale was administered to 98 owner-managers of small firms representing 3 industry groups. The responses were factor analyzed using varimax rotation method. The factor loadings confirmed the presence of 3 distinct factors as originally conceptualized. The SOS was validated against other self-belief measures, viz., Self-Efficacy Scale (SES) with 27 items (Tipton, 1982) and Basic Assumptions Scale (BAS) with 9 items (Srivastava, 1990). SES and BAS scores of owner-managers showed high significant correlation with SOS and its component scores.