Ranjan, J., Government Of Andhra Pradesh and Srivastava, B.N., Indian Institute Of Management Calcutta, India
Small firms, though disadvantaged as compared to large firms, can derive competitive advantage by being strategically oriented. The study examined the relationship between strategic orientation of owner-managers and organizational performance in 3 industries varying in environmental complexity. A firm can have a strategic orientation if its owner-manager (a) recognises the linkages between strategy and competitive advantage, (b) follows the logical leads suggested by these linkages, and (c) these linkages are used to develop future action plans. The relationship between strategic orientation and firm performance was likely to be moderated by environmental complexity, structural complexity and managerial characteristics like optimistic/pessimistic basic assumptions, self- efficacy. Data was obtained from 98 owner-managers of small firms from 3 industries. A 21 item 7-point scale measured strategic orientation in owner- managers. Firm performance was measured employing 10 financial indicators that reflect profitability, growth and overall health of the firm. Multivariate and univariate statistical analyses confirmed that strategic orientation of the owner-manager has a significant main effect on all performance measures in all the 3 industries. Results also showed significant main effect of industry type, denoting performance differences due to environment complexity. The interaction effect was visible on some growth-related measures only, suggesting the moderator effect of strategic orientation under favourable/adverse industrial environments. Findings implicate that small firms can withstand competition by developing a strategic posture emanating from the owner-manager's strategic orientation.