Resources, Strategy and Performancein the Smaller Firm

This study investigates the relationship between firm resources, positioning strategies and performance in the smaller firm. Porter’s generic strategies have been useful in describing how firms compete in the marketplace, and the resource based view has shown that resources can lead to a sustained competitive advantage. The strategic management field has begun to combine the two theories and examine the link between them. Small firms must make the best use of their relatively scarce resources. It is proposed that the relationship between resources and performance is contingent upon the positioning strategy the firm competes on, although there has only been limited supporting research to date. This research builds on work by Edelman et al. (2005) by examining the relationship between human, organisational and physical resources, and the strategies of quality/ customer service, innovation, and cost leadership in 447 retail, engineering, and professional service firms in New Zealand. Using Structural Equations Modelling this research finds that positioning strategies are the mechanism by which firms can leverage their resources into higher performance. This relationship can be modelled as mediated or moderated, with statistical analysis sensitive to model complexity. The firm’s environment influences this relationship with different resources required to support each position depending on the industry. Specifically human, organisational, and physical resources appear to be viable sources of competitive advantage when they are leveraged by a strategy of quality/ customer service, innovation or cost leadership when the industry environment is conducive to the resource – strategy combination