Strategy and small firm performance

Abstract

The objective of this study is to contribute to the debate on the relationship between strategy and firm performance, especially for SMEs. The research questions are: Can different strategic groups of SMEs be identified and to what extent does the selected strategy influence the firm performance of SMEs?For the empirical analysis, data from the SME panel of EIM is used. The analysis shows that four distinct groups of companies can be identified: service differentiators, stuck-in-the-middle companies, innovation and marketing differentiators and process differentiators. Companies in the first two groups are relatively small and are less active with strategic issues like planning etc. Companies in the last two groups are relatively large and deal with strategy in a more professional way (written-down strategy, regular updates et cetera). If controlled for size, there are no significant differences in terms of turnover and profit.