Small Firm Information Seeking as a Response to Environmental Threats and Opportunities

Successful managers of firms of all sizes have long appreciated the value of environmental information. Consequently, proficient strategists scan and gather data to increase the effectiveness of their strategic planning processes (Lindsay and Rue 1980; Specht 1987). Research has shown that this information gathering is not a simple process. Strategists are usually not capable of gathering or processing all of the data available to them on any given issue. Therefore, the complexity of firms' environments coupled with the data processing limitations of both individuals and organizations results in complex interpretive processes (Daft and Weick 1984). The behavioral modalities corresponding with these activities might range from "automatic" processing to investigative probing, depending on the situation (Dutton 1993). Most of the research on information gathering has centered on larger organizations. However, timely and relevant environmental information is equally important for smaller firms. Miles (1980), for instance, points out that the neglect of such boundary spanning functions is evident in the high failure rate of new businesses. Research is needed to better understand how the process of information seeking works specifically in smaller firms. Researchers and observers of most aspects of small firm behavior agree that "A small business is not a little big business" (Walsh and White 1981, title), and we have learned to be wary of generalizing research results from large organizational settings to small firms (Dandridge 1979; Pearce, Chapman, and David 1982). The different organizational characteristics of smaller firms suggest the need for research focused on small firm information-gathering priorities and processes. Most of the past research on small firm information gathering has been either simply descriptive of that behavior or has addressed only its general relationship with performance. Until recently there has been little investigation of the interpretation processes involved in that relationship. Moreover, the long-held tenet of a positive relationship between perceived environmental uncertainty (PEU) and scanning behavior has been challenged as too simplistic (Boynton, Gales, and Blackburn 1993; Schafer 1990; Ungson, Braunstein, and Hall 1981). Recent progress in the theory of organizational information interpretation allows for more rigorous specification of scanning/interpretive processes for smaller firms. This study focuses on the relationships between small firm managers' perceptions of their environments and their information-seeking behaviors. Specifically, a broad sample of small firms is investigated for relationships among perceived threats/opportunities and consultation of various sources of information. Background Dollinger (1984, 1985) showed a positive relationship between the use of environmental information and small firm performance. However, relatively little research has been done to gain better understanding of the intervening processes of this relationship, such as information seeking. This section first summarizes small firm information gathering research from descriptive studies to investigations that can formulate hypotheses on the interpretive processes. This summary is followed by the description of a widely accepted information processing model which is the theoretical foundation for this study. The section concludes with developments from the cognitive literature that characterize the perceived environment in ways that are meaningful to practicing managers. Research on Small Firm Information Seeking Small firms differ from large firms in important ways affecting their information-seeking practices. These differences include: (1) the lack of (or substantially less sophisticated) management information systems (Kagan, Lau, and Nusgart 1990); (2) the frequent concentration of information-gathering responsibilities into one or two individuals, rather than the specialization of scanning activities among top executives (Hambrick 1981); (3) the lower levels of resources available for information gathering (Golde 1964); and (4) the quantity and quality of available environmental information (Pearce, Chapman, and David 1982). …