Strategy Process-Content Interaction: Effects on Growth Performance in Small Start-Up Firms

Chandler (1962) and Ansoff (1965) established strategy as a key influence on business success and performance. These authors also proposed that a distinction be made between the "process" of strategic management and the "content" of strategy. Content is concerned with the type of strategic decision, while process focuses on its formulation and implementation. Schendel and Hofer (1979) further solidified this distinction by maintaining that these subdivisions facilitated research progress. Thus, past studies have typically dealt with either process or content but not both. Recently, researchers have argued for investigation of the interaction of process and content (Duhaime and Grant 1984, Jemison and Sitkin 1986, Huff and Reger 1987). The rationale for this suggestion is straightforward: strategy process and content are interrelated concepts when linked to performance; that is, the content-performance relationship is influenced by process, while the process-performance relationship is sensitive to content. Numerous strategy studies have been conducted since Chandler and Ansoff, most of which have focused on large firms. Information about the strategic behavior of small firms is limited. This constitutes a problem due to the substantial impact of small firms on job creation and economic development. Thus the current study examines the strategy process and content interaction in the context of growth in small, start-up firms. BACKGROUND Process Research Strategy process research can be divided into several major categories (Huff and Reger 1987). One of these categories is planning practices. Most of the research concerning this category has focused on the impact of planning methods (that is, the degree of planning formality) on a firm's performance. Although there are exceptions, strong empirical support exists for the position that formal planning outperforms informal planning in large firms (Ansoff, Aver, Brandenburg, Porther, and Radosvich 1970; Herold 1972; Karger and Malik 1975; Thune and House 1970; Wood and LaForge 1979). Robinson and Pearce (1983) failed to find empirical support for the same proposition regarding small firms. Further, Lyles, Baird, Orris, and Kuratko (1993) found mixed results in their study of small firms, which, when combined with the findings of Robinson and Pearce, seems to indicate that formal planning may have its greatest impact in large firms. This assumption led to Schwenk and Shrader's (1993) meta-analysis. These authors combined 14 previous studies that had examined the effects of formal planning on the performance of small businesses. They found a positive association between formal planning and performance; however, the small number of studies included in their sample does not allow for a conclusive generalization. Content Research Similar to strategy process research, content research can be categorized into different classes, one of which involves strategic taxonomies or typologies (Fahey and Christensen 1986). Research on this topic seeks to classify strategies or patterns of strategic behavior and to investigate the performance implications of strategies within each taxonomy. Currently, strategies are categorized into comprehensive taxonomies using either single or multiple factors (dimensions). The taxonomies of Miles and Snow (1978) as well as Porter (1980) use multiple factors. In contrast, on a single dimension, a firm's strategy can be classified by its product/service innovation pattern. Strategic behavior in this case can vary between the two extremes of being highly innovative to being highly imitative. Research on the performance implication of this taxonomy is limited. Vesper (1990) argues that a new product/service idea (an innovative strategy) can be the most powerful entry wedge or start-up strategy. Sandberg and Hofer (1987) state that a new venture's performance is expected to reflect its distinctive competencies. …