Efficiency, flexibility, or both? Evidence linking strategy to performance in small firms

Abstract This paper analyzes small firm performance in relation to efficiency and flexibility strategies. Using configuration theory, the authors propose that small firms that pursue efficiency strategies or flexibility strategies outperform those that attempt to pursue both. Additionally, size is used as a configurational attribute to develop competing hypotheses on whether efficiency strategies or flexibility strategies are better suited for small firm performance. In two samples of 200 and 144 privately‐held small firms, firms that mixed efficiency and flexibility strategies significantly underperformed. No significant performance differences were found between firms utilizing only efficiency strategies and those utilizing only flexibility strategies. Copyright © 2005 John Wiley & Sons, Ltd.