strategic orientation, management characteristics, and

ARAGÓN-SÁNCHEZ AND SÁNCHEZ-MARÍN 287

Journal of Small Business Management 2005 43(3), pp. 287–308

Strategic Orientation, ManagementCharacteristics, and Performance: A Study ofSpanish SMEsby Antonio Aragón-Sánchez and Gregorio Sánchez-Marín

This paper analyzes from a resource-based view the management characteristicsof Spanish small and medium enterprises (SMEs) according to their strategic orien-tation and the consequences in terms of firm performance and business efficiency.The typology of strategies formulated by Miles and Snow has important implicationsfor management, because depending on the strategic orientation adopted—defender,prospector, or analyzer—the firm can emphasize to a great extent some aspects ofmanagement, such as technological position, innovation, organizational design, andhuman resource management. Moreover, these aspects of management can largelydetermine firm performance and business efficiency. A sample of 1,351 Spanish SMEsprovided the data for an empirical test of these issues. The results confirm the expectedrelationships, revealing, on the one hand, significant differences between prospectorand defender SMEs regarding the key factors on which they base their managementcharacteristics and, on the other hand, the different influences that each strategicorientation has on firm performance.

IntroductionThe study and explanation of business

competitiveness is a recurring themeexamined by academics, consultants, andpractitioners. The internationalization ofeconomy, the frequent and uncertainchanges, the greater competition among

firms, the need for continuous innova-tions, and the growing use of infor-mation technologies force companies toface the challenge of improving theircompetitiveness. These difficulties aregreater for small and medium enterprises(SMEs) because their economies of scale

Dr. Aragón-Sánchez is associate professor of organization and human resource management

in the Department of Management at the University of Murcia, Spain. He received his Ph.D.

in management from the University of Murcia, Spain. His current research interests include

competitive strategies, training, and human resource management.

Dr. Sánchez-Marín is associate professor of human resource management in the Depart-

ment of Management at the University of Murcia, Spain. He received his Ph.D. in management

from the University of Murcia, Spain. His current research interests focus on executive com-

pensation, family firms’ compensation, and strategic management.

and their resources are less than those oflarge firms. However, what compensatesfor these weaknesses is the fact thatSMEs may enjoy greater flexibility be-cause of the simplicity of their internalorganization, being faster at adaptingand responding to changes.

This new situation reveals the need tosuggest or find more efficient manage-ment processes so that SMEs can applystrategies that allow them to achieve abetter performance. In the last years,strategic literature drawing on thecontext provided by the resource-basedtheory (Barney 1991; Prahalad andHamel 1990; Wernerfelt 1984) has per-sistently insisted on the relevance ofinternal resources—especially those ofintangible nature—as determiningfactors of business competitiveness (Hall1993, 1992). To a certain extent, thissimply reflects that, with increasingintensity, competence among firms issettled on grounds other than the indus-try structure (Rumelt 1991).

Several works show the clear prepon-derance of the firm effect over the indus-try effect when accounting for the firm’scompetitiveness (Mauri and Michaels1998; Powell 1996; Roquebert, Phillips,and Westfall 1996; Rumelt 1991;Schmalensee 1985). This finding pro-vides a solid empirical backing to theresource-based theory as a referenceframework for the study of the differ-ences of success among firms and leadsus to find out more about the mostadopted management techniquesdepending on the strategy followed bySMEs.

There is an increasing number ofstudies focusing on the main competitivefactors of SMEs. The literature on thisfield shows that intangible factors (Grant1991), such as structure and organiza-tional change (Feigenbaum and Karnani1991), human resource management(Bacon et al. 1996), innovation, and tech-nological resources (Hitt, Hoskisson, andIreland 1990), among others, are ele-

ments that clearly contribute to the SMEs’competitiveness and success.

However, there are still doubts regard-ing the competitiveness of SMEs. Doesthe improvement of firm managementinfluence its competitiveness? Whatstrategy should be followed? Whatfactors really explain competitivesuccess? The strategic orientation of thefirm may be considered a key elementwith important implications for the man-agement and efficiency of SMEs (Ham-brick 1983; Snow and Hrebiniak 1980).Depending on the strategic orientationadopted, the firm may emphasize moreor less aspects such as technologicalposition, innovation, organizationaldesign, and personnel management(Conant, Mokwa, and Varadarajan 1990).These aspects of management can largelydetermine firm performance and busi-ness efficiency (Slater and Narver 1993).

This paper intends to contribute to theexisting body of knowledge about SMEs’management in different contexts. Giventhe scarcity of studies in this field, thispaper, using data from more than 1,000firms, aims to investigate the following:(1) the extent to which resource-basedtheory proves true when applied toSMEs, analyzing whether internal factorshave significant negative effects on theSMEs’ competitiveness and identifyingthe main competitive factors; (2) SMEs’factors of success and how they vary inrelation to the strategic orientation; (3)whether the factors in question are dif-ferent from those of large firms, conse-quently contributing to the knowledge ofthe SMEs’ peculiar strategic behavior;and (4) in the light of the developmentof future research, this paper opens animportant and innovative field: identify-ing the factors relevant for the competi-tiveness of SMEs, which may providethem with advantages against largefirms; becoming aware of these factors isthe only way for both firms and govern-ments to take them into considerationand promote them in the future.

288 JOURNAL OF SMALL BUSINESS MANAGEMENT

Thus, trying to provide evidence onthis issue, we consider it interesting toanalyze from a resource-based point ofview the relationships between thestrategic orientation of SMEs and theirkey management factors in order toobserve whether such links exist andwhether they occur in large firms. Thisobjective is broached in four sections.First, the resource-based view providesus with the necessary framework to identify the main internal factors thancan be sources of sustainable competi-tive advantage for SMEs. Using Miles and Snow’s typology (1978), we analyzethe behaviors of the different strategictypes—defender, prospector, and ana-lyzer—in relation to the way in which tomanage these specific internal factors,examining the implications for per-formance as well. Second, we describethe empirical research methodologyapplied. Third, we present and evalu-ate the empirical findings. Finally, in thelast section, we present conclusions and a discussion about the resultsobtained.

Research Theory and HypothesesIntangible Resources,Capabilities, and CompetitiveAdvantage of SMEs

The resource-based theory (Barney1991; Prahalad and Hamel 1990; Wern-erfelt 1984), complementing the tradi-tional model of Porter’s (1985)competitive advantage, stressed theimportance of the internal resources andcapabilities of the firm in the context ofthe competitive environment (Collis andMontgomery 1995). In this way, the firmsthat devote their internal forces to exploitthe opportunities of the environment andto neutralize threats, while avoidingweak points, are more liable to obtaincompetitive advantages than those thatdo not do the same (Barney 1995). Thefirm’s internal resources and capabilities

constitute a much more stable point ofreference and develop as primarysources of benefit (Grant 1991) andcrucial determinants in the formulationof the organizational strategy.

The resource-based approach basesthe securing of competitive advantageson two concepts: resources and capabil-ities. Resources are those intangible andtangible assets linked to the firm in asemipermanent way, whereas capabili-ties are related to the way of accom-plishing different activities, dependingon the available resources (Grant 1991;Wernerfelt 1984). Several studies haveconfirmed that what is really necessaryfor the firm to reach and keep a com-petitive advantage stems from its intan-gible resources and its capabilities,because these—being based on non-codified data and tacit knowledge, whichmake it difficult to imitate them—requirea slow process of development (Peteraf1993; Barney 1991). Taking this intoaccount, the strategic literature hasstressed various factors (intangibleresources and capabilities) as determi-nants of business competitiveness: tech-nological capital and innovation, humanresources, and internal organizationdesign.

At the level of SMEs, investments onintangible resources and the creation ofcapabilities are quite problematicbecause of the necessity to increase theefficiency scale or size, in addition to the difficulties related to the internal and external growth through fusions oracquisitions (Pil and Holweg 2003).However, alliances and cooperation mayallow SMEs to reach a sufficient dimen-sion to obtain the advantages of beinglarge and, at the same time, keep theadvantages of SMEs in terms of special-ization, reduction in costs, and flexibility(Pil and Holweg 2003; Fernández,Montes, and Vázquez 1996).

That is why we consider it interestingto look at whether, from the SMEs’ per-spective, it is possible to obtain com-


petitive advantage by the promotion ofintangible factors and capabilities aslarge firms do. In this sense, by rely-ing on the resource-based approach,together with the literature focused onthe study of SMEs’ competitiveness, itseems reasonable to study managementcharacteristics—representing intangibleresources and capabilities—that may befundamental for their competitiveness:technological resources and innovation(Hitt, Hoskisson, and Ireland 1990), flex-ibility and organizational design (Feigen-baum and Karnani 1991), cooperation(Hoffmann and Schlosser 2001; Eisen-hardt and Schoonhoven 1996), andhuman resources (Wagar 1998; Bacon etal. 1996).

On the other side, it is also interest-ing to study how these resources andcapabilities determine the strategicprocess of the firm (Barney 1995), orwhether the way in which resources andcapabilities are managed is influenced bythe strategic orientation of the firm(Slater and Narver 1993; Conant, Mokwa,and Varadarajan 1990), and whether suchbond is similar to that existing amonglarge firms. This leads us to the determi-nation of the relationship between strate-gic orientation and firm performance(Snow and Hrebiniak 1980), allowing usto analyze the competitive effects of theuse of intangible resources and capabil-ities in relation to the environment’seffects (Mauri and Michaels 1998; Powell1996; Roquebert, Phillips, and Westfall1996; Rumelt 1991; Schmalensee 1985).These relationships are set out in the fol-lowing discussion.

Strategic Orientation andManagement Characteristics

Miles and Snow’s (1978) typology hashad one of the most widespread effects.Because of this and the view of organi-zations as a complete and integratedsystem in dynamic interaction with theirenvironments (McDaniel and Kolari1987), this typology may be considered

unique. Various studies have empiricallyvalidated this typology (Doty, Glick, andHuber 1993; Shortell and Zajac 1990),which is considered academically accept-able and internally consistent (Dvir,Segev, and Shenar 1993). This typologyis based on three premises. First, suc-cessful firms develop a systematicmethod of alignment with their environ-ment, responding to the adaptive cycle.Second, four strategic orientations can beidentified in every industry: defenders(firms focusing on a narrow and limitedproduct-market domain, trying to protecttheir market share), prospectors (organi-zations that continuously search for newmarket opportunities through processesof innovation and development in prod-ucts), analyzers (organizations that actdefensively or prospectively dependingon their environmental settings and theefficiency–innovation balance theyrequire), and reactors (characterized byperpetual instability and inconsistencybecause of their incapacity to respondeffectively to environmental changes).Third, defender, prospector, or analyzermay lead to satisfactory performance;reactor cannot because of its lack ofinternal consistency.

The relationship between strategictypes and key management characteris-tics has been examined in previous stu-dies (Slater and Narver 1993; McDanieland Kolari 1987; Smith, Guthrie, andChen 1986; Hambrick 1983; Snow andHrebiniak 1980), which have generallyfound that strategic orientation differswith regard to managerial factors andbasic competences (Conant, Mokwa, andVaradarajan 1990). However, they haveall been limited to the context of largefirms, and with few exceptions, this typeof analysis has rarely been conducted inthe context of SMEs. Therefore, in anattempt to provide evidence on thestudied issue, it might be interesting toanalyze the relationships between thestrategic orientation of SMEs and theirkey management factors to see whether


such links exist and whether they occuras it is the case in large firms.

Technological Resources and Innova-tion. Technological development andinnovation level constitute the basic ele-ments to achieve competitiveness (Hitt,Hoskisson, and Ireland 1990). Accordingto Miles and Snow (1978), the differentstrategic types vary depending on theinnovations developed, as well as on thetechnological position they occupy withregard to their competitors. Prospectorfirms are expected to place a majoremphasis on innovation (of product andmarket) as a means of gaining their com-petitive advantage and therefore to holda strong technological position in rela-tion to their competitors. By contrast,firms with a defender strategy focusmore on efficiency than on innovationand have a weaker technological positionthan prospectors (Conant, Mokwa, andVaradarajan 1990; Snow and Hrebiniak1980). The empirical literature has gen-erally corroborated these points. Forexample, McDaniel and Kolari (1987)found that prospectors’ degree of inno-vation is significantly greater thandefenders’, although such degree ofinnovation is similar between prospec-tors and analyzers. Slater and Narver(1993) found that prospectors’ degree ofinnovation is greater than the analyzers’and defenders’ in that order. Shortell andZajac (1990) drew similar conclusions fora sample of health service firms. Dvir,Seveg, and Shenar (1993) found thatprospectors are more dependent on tech-nological progress and that their techno-logical position is significantly greaterthan analyzers and defenders. In Spain,Camison (1997, p. 417) distinguishesthree successful strategy types in SMEs,stressing that firms with a proactive orinnovative strategy (similar to prospec-tors) are those that innovate most andhave a better technological position, fol-lowed by those with a customer-orientedstrategy (comparable to analyzers), and

those that a adopt a modernization strat-egy (analogous to defenders). Consider-ing the above, it can be stated that

H1: SMEs with a prospector orientationare more innovative and have a moreconsolidated technological positionthan SMEs with an analyzer orienta-tion and SMEs with a defender orien-tation, in that order.

Flexibility and Organizational Design.Flexibility may be one of the mostremarkable features that distinguishSMEs from large firms and the source ofmany of their principal advantages, suchas speed of response, ability to innovate,and capacity to adapt (Feigenbaum andKarnani 1991). Compared with largefirms, SMEs implement a greater numberof management practices that promoteflexibility, for example, subcontracting,hiring temporary or part-time employ-ees, and making employ regulation(Ruigrok et al. 1999). However, theselevels of flexibility may vary according tothe aims pursued and strategic orienta-tion. Prospector firms implement a largenumber of practices, leading to greaterflexibility because of the need for con-stant innovation and adaptation to theirproduct-market domain (Slater andNarver 1993; Conant, Mokwa, andVaradarajan 1990). Firms with a defenderstrategy use fewer flexible practicesbecause they might obstruct maxi-mum efficiency and cost minimization(Conant, Mokwa, Varadarajan 1990). Inthe context of SMEs, Camison (1997) alsofound a positive relationship betweenthe level of proactivity of the firm strat-egy and its emphasis on flexibility.The most innovative and proactive SMEs(prospector orientation) adopt more flexible practices than the most conser-vative ones (analyzers and defender ori-entations). Innovation management alsohas an effect on organizational design inthat it forces SMEs to modify their organizational structure. According to


Camison (1997, p. 335), innovation lies on interdisciplinary teams that canexploit co-specialization to closely coor-dinate innovation, product development,design, engineering, production, andmarketing. It is clear from this point thatthe most innovative firms will have moredeveloped organizational structures—interms of number of departments—inorder to achieve the necessary interfunc-tional coordination to be able to innovatein their product-market domains. Thesepoints yield the following hypothesis:

H2a: SMEs with a prospector orienta-tion implement a greater number offlexible practices than SMEs with an analyzer orientation and SMEswith a defender orientation, in thatorder.

H2b: SMEs with a prospector orientationhave a more developed organiza-tional structure than SMEs with ananalyzer orientation and SMEs with adefender orientation, in that order.

Cooperation. There are very few firmswith sufficient resources to configuretheir value chain with absolute inde-pendence, which means that cooperationbecomes a very interesting option, par-ticularly for SMEs (Hoffmann andSchlosser 2001). Cooperation agreementsin the context of SMEs appear as a strate-gic alternative to improve their competi-tiveness, because they can access majorresources without having to merge,therefore maintaining their flexibility,which enables them to adapt to changesin their environment (Glaister andBuckley 1996). The study of cooperationbetween SMEs has focused on the strate-gic advantages provided by this man-agement practice. In particular, one ofthe main factors examined by this litera-ture concerns the relationships betweenbusiness strategy and cooperation(Eisenhardt and Schoonhoven 1996).Some studies, such as those by Sing

(1997) and Shan (1990), state that SMEsin highly competitive markets are asso-ciated with a greater number of alliancesbecause of the greater need for tech-nological resources. Eisenhardt andSchoonhoven (1996) argued that degreeof innovation is the fundamental strate-gic element that determines the need forcooperation. They found that SMEs withmore proactive and innovative strategies(prospectors) conclude a larger numberof cooperation agreements than firmswith more conservative strategies (ana-lyzers or defenders) because of thegreater need for resources to maintaintheir level of technology and innovation.Taking into account the arguments statedabove, we can formulate the followinghypothesis:

H3: SMEs with a prospector orientationsign a larger number of cooperationagreements than SMEs with an ana-lyzer orientation and SMEs with adefender orientation, in that order.

Human Resources. Emphasis on ade-quate human resource management iscurrently one of the main concerns offirms, because various studies havefound a positive relationship betweenhuman resource management and busi-ness performance (Huselid, Jackson, andSchuler 1997; Huselid 1995). However,according to Zahra and Pearce (1990, p.752), top managers will emphasize dif-ferent philosophies of human resourcemanagement depending on the organi-zation strategy. In line with that, Milesand Snow (1984) defined the most ade-quate human resource practices for eachof the strategic types. These relationshipshave generally been supported in theempirical literature (Peck 1994; Raghu-ram and Arvey 1994). Defender firmsusually have less developed systems ofhuman resource management, becausethey use recruitment and internal selec-tion. They design traditional compensa-tion systems based on a fixed salary and


rarely appraise employee performance.However, they attach major importanceto long-term training (Miles and Snow1984). In contrast, prospector firms makeuse of more developed human resourcemanagement systems: they resort torecruitment and external selection, theydesign evaluation systems based on per-formance, and reward is based on vari-able compensation. Nevertheless, theyoffer limited and informal training (Milesand Snow 1984). In the context ofSpanish SMEs, the study of Camison(1997) is again the only reference in thisline of research. The author found thatthe most innovative firms (prospectors)opt for more developed systems ofhuman resource management but attachless importance to training. Conversely,the least proactive firms (analyzers anddefenders) select less developed humanresources practices, although trainingplays a major role. These arguments yieldthe following hypothesis:

H4a: SMEs with a prospector orientationput greater emphasis on developingsystems of human resource manage-ment than SMEs with an analyzer ori-entation and SMEs with a defenderorientation, in that order.

H4b: SMEs with a defender orientationconfer greater importance to trainingthan SMEs with an analyzer orienta-tion and SMEs with a prospector ori-entation, in that order.

Strategic Orientation and Firm Performance

One of the main conclusions reachedby Doty, Glick, and Huber (1993) wasthat Miles and Snow’s typology of strate-gies is a powerful predictor of businessefficiency (explaining approximately 24percent of the firm’s variation in effi-ciency), even more than previous papershad found—for example, Hambrick(1983). Considering this point, it mightbe interesting to analyze to what extent

the strategic orientation of SMEs candetermine their performance.

Efficiency analysis of the differentstrategic types in Miles and Snow’smodel has been the subject of numerousstudies (Slater and Narver 1993; Veliyathand Shortell 1993; Wright et al. 1991;Conant, Mokwa, and Varadarajan 1990;Zahra and Pearce 1990; Snow and Hre-biniak 1980) with generally inconclusiveresults. Miles and Snow (1978) proposethat defenders, prospectors, and analyz-ers have the chance to be equally suc-cessful in developing their activities andthat, in any case, these three strategictypes will perform better than reactors.Wright et al. (1991) and Conant, Mokwa,and Varadarajan (1990) empirically sup-ported this theory and argued that thethree strategic archetypes achieve asimilar performance, which is alwaysbetter than reactors. However, in theirreview of the research on typology,Zahra and Pearce (1990) concluded thatthe support concerning the existence ofsimilar performance between defenders,prospectors, and analyzers has beenmixed. There are even works that con-tradict the theory, such as that of Snowand Hrebiniak (1980), which found thatreactors outperform prospectors anddefenders in the air industry. In short, lit-erature on this subject can be summa-rized in the statement made by Segev(1987, p. 574): on average, the perform-ance level of defenders, prospectors, andanalyzers is similar; however, a higherperformance or efficiency level requiresa greater degree of alignment by organ-izations with their environment.

In the context of SMEs, there are a fewreferences on this line of research. Onthe one hand, Smith, Guthrie, and Chen(1986) maintained that the efficiency ofthe strategic categories is contingent onsize: defenders outperform analyzers andprospectors in the case of small firms.These findings may be surprising,because they contradict the postulatesrelating to economies of scale; the


authors attributed these results to thecharacteristics of the electronic manufac-turing sector. On the other hand,Camison (1997) examined the relation-ships between the strategic orientation ofSMEs and their performance level. Usingthree measures of performance—profitability, productivity, and marketshare—the author found that “the mostprofitable and productive organizations,whatever the index chosen, [are] thosewith more proactive strategic behavioursintegrated into groups oriented towardsinnovation and quality, and towards cos-tumer satisfaction, in that order (Camison1997, p. 413). It can be deduced from thefindings of this paper that prospector,defender, and analyzer firms have a pos-itive performance and always outperformreactor firms, which is in line with Milesand Snow’s (1978) arguments. However,some differences have been observedbetween the three success strategies:prospectors outperform analyzers anddefenders, in that order (Camison 1997,p. 417), which agrees with the conclu-sions reached by, among others, Segev(1987). This may be accounted for thefact that prospectors, given their charac-teristics, have a greater capacity to adaptto environmental trends than analyzersand defenders (Veliyath and Shortell1993). In view of the foregoing argu-ments, H5 is formulated as follows:

H5: SMEs with a prospector orientationoutperform SMEs with an analyzerorientation and SMEs with a defenderorientation, in that order.

MethodologySample and Data Collection

Data collection was carried out byusing a sample design that follows theprinciples of stratified sampling in finitepopulations. The population, comprisingfirms from 10 to 250 workers, was seg-mented according to two criteria: indus-try and size. The industries consideredwere manufacturing, construction, and

services. Two groups were establishedaccording to size (from 50 to 250employees). The population wasobtained from DIRCE directory (CentralDirectory of Firms edited by the NationalInstitute of Statistics of Spain).

Firm selection was performed byusing the SABE database, which containseconomic and financial information onmore than 190,000 firms. The distribu-tion of the sample size over the specifiedstrata was carried out by using propor-tional affixation criterion (firms’ samplein each stratum is proportional to the rel-ative weight of the stratum in relation tothe population). Within each stratum,selection was conducted through simplerandom sampling. The target sample sizewas 1,299 firms, considering an overallmaximum error of 5 percent with a 95percent level of confidence.

Data were gathered by postal surveyusing self-administered questionnairesaddressed to the firms’ general man-agers. As a result of past experiences, wedecided that we should calculate a totalresponse rate of around 4.9 percent,which meant a selection of 26,510 firms,as shown in Table 1. The process ofsending and subsequently receiving thequestionnaires was carried out from Mayto September 2000. The total number ofvalid responses was 1,351, which repre-sents 5.1 percent of the total number ofquestionnaires sent (Table 1). Comparingthe response level within each stratum,we can state that representativeness ofthe final sample is satisfactory.

Measures of VariablesStrategic Orientation. The paragraphmethod was selected for measuringstrategic orientations, which entailsshowing respondents paragraphs withalternative descriptions of the Miles andSnow strategic archetypes and askingthem which identifies best their firms.Despite the limitations it presents(Conant, Mokwa, and Varadarajan 1990),the paragraph method has been widely


accepted in research on strategy(McDaniel and Kolari 1987; Snow andHrebiniak 1980), because the managers’perception is very close to the strategicreality of the firm (James and Hatten1995; Shortell and Zajac 1990). Thedescriptions used for strategic types wereadapted from Snow and Hrebiniak(1980). A qualitative variable was createdwith three values corresponding to eachstrategic archetype: defender, prospector,and analyzer.

Technological Position and Innovation.1

Technological position was measuredthrough a scale of values between 1 and4, where 1 = weak; 2 = sustainable; 3 =good; and 4 = strong. Innovation wasmeasured by two variables. The firstreferred to the number of areas (man-agement, purchases, sales, products,processes, and administration) in whichthe firm had made innovations in theprevious two years, varying from 0 to 6.The second focused on the firm’s use ofnew information and communication

technologies (e-mail, web page andcontact with clients/suppliers via theinternet), measured by a variable record-ing the quantity of information tech-nologies used, with values between 0and 3.

Flexibility and Organizational Design.2

Flexibility was defined as the sum of thenumber of flexible practices that firmsused or had used over the previous twoyears (establishing agreements oralliances with others, subcontractingjobs, hiring part-time workers, hiringworkers through a temping agency,making employ regulation), measured bya variable with values from 0 to 5. Orga-nizational design was evaluated by meas-uring the degree of organizationalstructure development, with a variablerecording the number of departmentswhich the firm differentiated in its orga-nizational structure (sales, production,purchases, accounting/finance, humanresources, computing, and R&D), withvalues from 0 to 7.


Table 1Sample Distribution and Valid Responses

Industry Size Total

Small Medium Sample Responses

Sample Responses Sample Responses

Manufacturing 5,796 529 3,592 247 9,388 776Construction 6,612 143 1,490 59 8,102 202Service 6,449 285 2,571 88 9,020 373

Total 18,857 957 7,653 401 26,510 1,351

1The reliability of these two variables was confirmed by Cronbach’s alpha coefficient, which

indicated a value of 0.74 for technological position and 0.69 for innovation.2The reliability of these two variables was confirmed by Cronbach’s alpha coefficient: 0.84 for

flexibility and 0.77 for organizational design.

Cooperation.3 Cooperation was definedby a variable reflecting the number ofagreements made by the firm over theprevious two years for product market-ing, joint production, purchases and supplies, sharing of warehouses ormachinery, and development of newtechnologies. This variable had valuesranging from 1 to 5.

Human Resources. The activitiesrelated to human resource managementhave been taken through five variables(recruitment and selection, performanceappraisal, training, promotion and careerplans, and compensation systems) thatwere measured on a scale from 1 to 5,where 1 = minimum development and 5 = maximum development. These fivevariables were used to construct a singleindicator of the degree of developmentof the human resource managementsystem, defined as the means value of thescore obtained for each of the above vari-ables.4 On the other hand, the impor-tance of training was measured as thetotal amount of training activities spentby the firm, indicating the volume ofresources devoted by the firm to thispurpose.

Firm Performance. Firm performanceis a multiaspect phenomenon that is dif-ficult to measure (Snow and Hrebiniak1980). The literature has shown that bothquantitative and qualitative indicators

have certain limitations, and it has beenrecommended that they be used in com-bination. (Hambrick 1983). Therefore,the present study used two differentmeasures of performance. The first—quantitative—measure was return oninvestment (ROI). The second—qualita-tive—measure, mostly called perform-ance indicator, was the result ofaveraging the mean value of the scoresobtained for each of the following sixvariables on the scale from 1 (muchworse than competitors) to 5 (muchbetter): knowledge and experience in thebusiness; ability to provide quality prod-ucts or services; capacity to develop newproducts and processes; ability tomanage and work in a group; workforceproductivity; and firm’s responsibilityconcerning the environment.5

Control Variables. Because the litera-ture shows that there is a strong positiverelationship between size and perform-ance, firm size was introduced throughsales. The manager’s education level alsomay affect the level of firm performance.This variable was measured on a scalefrom 1 to 4, where 1 = primary educa-tion, 2 = secondary education, 3 = uni-versity education, and 4 = postgraduateeducation. Finally, firms in the hands offamily groups are generally outper-formed by those that are not. Therefore,the family firm variable was introduceda dichotomy, taking a value of 1 when a


3The reliability of cooperation was confirmed by Cronbach’s alpha coefficient with a value of

0.73.4The reliability of this indicator was confirmed by Cronbach’s alpha coefficient, which indi-

cated a value of 0.78. The validity of this indicator was also confirmed with regard to its dis-

criminating aspect by resorting to a factor analysis following the principal component method.

A single factor was obtained with an eigenvalue above 1 (2.667), which explains 53.34 percent

of the total variance. The factor loadings had high values in all the items; the KMO index

(0.80) and Bartlett’s test ( p = 0.001) also showed satisfactory values.5Reliability and validity were confirmed. Cronbach’s alpha coefficient indicated a value of 0.72.

Factor analysis of the principal components gave a single factor with an eigenvalue of 2.532,

which explains a total variance of 42.2 percent. The factor loadings had high values in all the

items; the KMO index (0.75) and Bartlett’s test ( p = 0.001) also showed satisfactory values.

family group owns more than 50 percentof the capital and 0 in all other cases.

ResultsStrategic Orientation andManagement Characteristics

Table 2 shows the results of the analysis of variance and Schéffe’s meanscomparison test for firms in the manu-facturing industry. As we expected, theSMEs’ management characteristics varysignificantly according to their strategicorientation, except for aspects of coop-eration. Prospector SMEs are character-ized by a better technological position,greater innovation, and greater use ofinformation technologies than analyzerand defender SMEs. Prospectors alsoimplement a larger number of flexiblepractices and have a greater organiza-tional development than analyzers anddefenders. Finally, prospectors are moreconcerned about human resource man-agement, which results in a more devel-oped function. Contrary to what wasexpected, these firms also spend largeramounts on training than analyzers anddefenders. These results clearly supporthypotheses 1, 2a, 2b and 4a. Hypotheses3 and 4b are rejected.

Table 3 shows the results obtained forSMEs in the construction industry. Theseresults are not as significant as thoserelated to the manufacturing industry,although they do reveal different man-agement behaviors with regard to strate-gic orientation in all areas except forcooperation. The differences in meansshow that prospector SMEs are charac-terized by having a better technologicalposition than analyzers and defenders, aswell as by being clearly more innovativethan defenders. As for flexibility, the differences are practically negligiblebetween firms; only analyzers are moreflexible than defenders. The most devel-oped organizational structure is againshown by prospectors. With regard tohuman resource management, prospec-tors and analyzers have more developed

systems than defenders. However, no dif-ferences are found for amounts spent ontraining. These results support H1, H2b,H4a, and only partially, H4b.

Table 4 shows the results obtained forthe service industry. Except for amountsspent on training, all the other variablesare significant in the analysis of variance.Prospector SMEs specifically enjoy abetter technological position than ana-lyzer and defender firms. As for areas ofinnovation, prospector and analyzersclearly outperform defenders. In the useof innovation technologies, the tendencyis similar, although not so marked. In the application of flexible practices,prospectors and analyzers significantlyoutperform defenders. Organizationaldevelopment is also greater in prospec-tors than in defenders. In cooperationagreements, prospectors are slightlybetter than analyzers and defenders. Asfor development of human resourcemanagement, prospectors lead the fieldahead of all the others. Nevertheless, thedifferences in amounts spent on trainingare insignificant. These results supportH1, H2a, H2b, H4a, and partially, H3. H4is rejected.

In short, it can be said that theexpected relationships were generallysatisfied, although with slight differ-ences. First, it is seen that the industryclearly conditions the studied relation-ships: it is in the manufacturing industrythat the greatest number of relationshipswere satisfied, being followed by theservices. By contrast, the constructionsector shows the most erratic behav-ior. The most noticeable differencesoccurred, as expected, between prospec-tors SMEs (better technological position,more innovative, more use of informa-tion technologies, greater implementa-tion of flexible practices, more developedorganizationally, and more concernedabout human resource management) anddefender SMEs. Analyzers were alwaysmidway between the two, although witha behavior closer to prospector firms.



Table

2Vari

ance A

naly

sis

and M

eans

Com

pari

son—

Manufa

ctu

ring I

ndust

ry

Str

ate

gic

Ori

enta

tion

aF

Com

pari

son o

f

Pro

specto

rsA

naly

zers

Defe

nders

Meansb

(1)

(2)

(3)

1–2

1–3

2–3

Tech

nolo

gic

al

Posi

tion

3.1

72.6

92.5

341.8

4**

***

***

**

(0.7

3)

(0.7

3)

(0.7

5)

Innovation A

reas

3.3

53.1

62.4

025.0

7**

*n.s

.c**

***

*(1

.64)

(1.4

6)

(1.4

3)

Info

rmation T

ech

nolo

gie

s2.3

62.1

31.7

028.0

5**

***

***

***

(0.8

1)

(0.8

8)

(1.0

3)

Fle

xib

le P

ract

ices

2.2

92.0

61.6

914.8

1**

***

***

***

(1.1

7)

(1.2

1)

(1.0

7)

Depart

ments

4.8

64.4

43.7

619.3

9**

**

***

***

(1.7

8)

(1.8

5)

(1.9

5)

Agre

em

ents

with O

thers

Fir

ms

1.7

81.7

31.5

2n.s

.n.s

.n.s

.n.s

.(1

.00)

(0.9

1)

(0.8

5)

Hum

an R

eso

urc

e S

yst

em

2.9

42.7

32.4

716.8

0**

***

***

***

(0.7

6)

(0.7

6)

(0.8

4)

Tra

inin

g I

nvest

ment

59,1

32.3

424,2

12.0

723,1

08.7

14.8

2**

***

**n.s

.(1

81,5

55.2

2)

(49,9

04.6

2)

(55,9

11.3

3)

Num

ber

of

Case

s209

305

221

aM

eans

and s

tandard

devia

tions.

bSch

eff

é’s m

ultip

le c

om

pari

son t

est

.c n

.s.

=not

signifi

cant.

*p<

0.1

.**

p<

0.0

5.

***p

<0.0

1.


Table

3Vari

ance A

naly

sis

and M

eans

Com

pari

son—

Const

ructi

on I

ndust

ry

Str

ate

gic

Ori

enta

tion

aF

Com

pari

son o

f

Pro

specto

rsA

naly

zers

Defe

nders

Meansb

(1)

(2)

(3)

1–2

1–3

2–3

Tech

nolo

gic

al

Posi

tion

3.2

92.5

92.4

015.1

4**

***

***

*n.s

.c

(0.5

6)

(0.6

0)

(0.7

1)

Innovation A

reas

3.1

92.5

92.2

63.9

6**

n.s

.**

n.s

.(1

.60)

(1.2

0)

(1.5

0)

Info

rmation T

ech

nolo

gie

s1.8

61.6

21.2

64.3

5**

n.s

.**

*(1

.06)

(0.9

8)

(0.9

7)

Fle

xib

le P

ract

ices

2.3

82.3

31.9

42.8

7*

n.s

.n.s

.*

(1.0

7)

(1.1

6)

(1.1

0)

Depart

ments

4.7

63.2

83.0

37.1

8**

***

***

*n.s

.(1

.26)

(1.9

8)

(1.9

2)

Agre

em

ents

with O

thers

Fir

ms

1.8

21.3

81.3

0n.s

.n.s

.n.s

.n.s

.(1

.33)

(0.5

5)

(0.4

7)

Hum

an R

eso

urc

e S

yst

em

3.2

42.9

22.7

43.7

8**

n.s

.**

n.s

.(0

.70)

(0.6

7)

(0.7

7)

Tra

inin

g I

nvest

ment

13,9

65.2

149,2

81.5

97,8

74.1

8n.s

.n.s

.n.s

.n.s

.(2

3,9

08.7

2)

(183,2

46.1

6)

(15,8

57.6

2)

Num

ber

of

Case

s21

68

77

aM

eans

and s

tandard

devia

tions.

bSch

eff

é’s m

ultip

le c

om

pari

son t

est

.c n

.s.

=not

signifi

cant.

*p<

0.1

.**

p<

0.0

5.

***p

<0.0

1.


Table

4Vari

ance A

naly

sis

and M

eans

Com

pari

son—

Serv

ice I

ndust

ry

Str

ate

gic

Ori

enta

tion

aF

Com

pari

son o

f

Pro

specto

rsA

naly

zers

Defe

nders

Meansb

(1)

(2)

(3)

1–2

1–3

2–3

Tech

nolo

gic

al

Posi

tion

3.1

02.6

42.4

722.5

8**

***

***

**

(0.5

8)

(0.6

3)

(0.6

3)

Innovation A

reas

3.0

32.7

42.1

613.0

9**

*n.s

.c**

***

*(1

.36)

(1.3

5)

(1.0

9)

Info

rmation T

ech

nolo

gie

s2.0

81.9

11.7

13.5

6**

n.s

.**

n.s

.(0

.87)

(1.0

5)

(0.9

7)

Fle

xib

le P

ract

ices

2.2

42.1

71.6

87.6

3**

*n.s

.**

***

*(1

.01)

(1.2

9)

(1.1

2)

Depart

ments

3.7

93.5

93.2

03.5

2**

n.s

.**

n.s

.(1

.81)

(1.7

0)

(1.5

4)

Agre

em

ents

with O

thers

Fir

ms

1.7

31.4

41.5

02.4

5*

*n.s

.n.s

.(0

.81)

(0.6

9)

(0.6

1)

Hum

an R

eso

urc

e S

yst

em

3.1

42.8

02.6

68.1

0**

***

***

n.s

.(0

.72)

(0.8

2)

(0.7

7)

Tra

inin

g I

nvest

ment

41,2

85.4

734,0

94.6

59,0

84.7

2n.s

.n.s

.n.s

.n.s

.(1

75,2

91.9

9)

(107,0

53.9

3)

(16,2

87.0

5)

Num

ber

of

Case

s72

133

133

aM

eans

and s

tandard

devia

tions.

bSch

eff

é’s m

ultip

le c

om

pari

son t

est

.c n

.s.

=not

signifi

cant.

*p<

0.1

.**

p<

0.0

5.

***p

<0.0

1.

Strategic Orientation and Firm Performance

Table 5 shows the means, standarddeviations, and correlations of the vari-ables used in subsequent regression forSMEs in each of the industries. Althoughthere are quite significant correlationsbetween variables, they are not exces-sively high, which indicates that there areno problems of multicollinearity (as cor-roborated by the indices of tolerance).

H5 predicts that SMEs with a prospec-tor strategic orientation outperformthose that have an analyzer or de-fender orientation. Strategic orientationhas been introduced as a dummy vari-able: two categories—prospector anddefender—have been analyzed directly,leaving analyzer as a reference category.Table 6 shows the results of the regres-sion analysis.6

In the manufacturing industry, differ-ences for type of firm performance intro-duced as a dependent variable can benoticed. With ROI, the coefficient ofprospector orientation is significant,although the overall model is not, whichrejects H5. Conversely, when an overallindicator of performance is introduced,the coefficient for prospector orientationis positive and significant, whereasdefender orientation is negative and sig-nificant. This indicates that, with respectto analyzers, SMEs with a prospector ori-entation outperform defenders, whichconfirms H5. The results obtained in theconstruction industry were similar to theabovementioned. When ROI was used,the coefficients were not significant inany case, which means that H5 cannot be accepted. In contrast, with overallindicator of performance, the coefficientsof the variables prospector orientationand defender orientation were signifi-

cant: the former, positive and the latter,negative. Again, H5 is confirmed. For theservices industry, with ROI, the coeffi-cient of the defender orientation is pos-itive and significant. However, the overallregression model is not significant,which means that the hypothesis isrejected. With overall indicator, theregression model is indeed significant,the same as the coefficient of prospectorstrategy, which, being positive, indicatesthat only this strategic orientation guar-antees a substantial improvement in firmperformance. These results partiallysupport H5.

In short, the regression results indi-cate that, when ROI is used as a performance variable, the expected rela-tionships are not satisfied. On the con-trary, when overall indicator is used, therelationships proposed are generally sat-isfied. The prospector orientation pro-vides SMEs with better performance thanthe analyzer orientation, in that order.

ConclusionsThis study examines from a resource-

based perspective the influence of strate-gic orientation in SMEs on the mostimportant characteristics of their man-agement, analyzing the effect that the dif-ferent strategic profiles have on theperformance of these organizations aswell. As most of the literature studiedthese relationships in the context of largefirms, the present paper deals with asample of Spanish SMEs.

As for the first four hypotheses,which address the relationships betweenthe strategic orientation of SMEs andtheir management characteristics, it can be said that a high percentage of the expected links was fulfilled.These results show the validity of the


6The same analysis of regression was carried out including the enterprise’s age as control vari-

able. However, it did not turn out to be significant in any case, and the results of the analy-

sis were similar to those showed in Table 6. Thus, it was decided to not include it in the

models of regression.


Table

5M

eans,

Sta

ndard

Devia

tions,

and C

orr

ela

tions

for

All V

ari

able

s

Mean

S.D

.1

23

45

6

Manufa

ctu

ring I

ndust

ry1.

Siz

ea

16,8

76.4

164,9

81.2

42.

Managin

g D

irect

or

Tra

inin

g2.7

21.1

50.1

2**

*3.

Fam

ily F

irm

0.6

90.4

6-0

.13**

*-0

.19**

*4.

Pro

spect

or

Ori

enta

tion

0.2

70.4

40.0

7**

0.0

5-0

.03

5.

Defe

nder

Ori

enta

tion

0.2

80.4

5-0

.09**

-0.1

3**

*0.0

1-0

.38**

*6.

Retu

rn o

n I

nvest

ment

0.1

00.0

9-0

.02

-0.0

40.0

30.0

8**

-0.0

37.

Overa

ll I

ndic

ato

r3.6

40.5

10.1

0**

*0.0

9**

-0.0

20.2

8**

*-0

.19**

*0.0

8**

Const

ructi

on I

ndust

ry1.

Siz

ea

8,4

35.4

428,5

47.7

32.

Managin

g D

irect

or

Tra

inin

g2.4

61.1

50.2

1**

*3.

Fam

ily F

irm

0.7

90.4

1-0

.20**

*-0

.22**

*4.

Pro

spect

or

Ori

enta

tion

0.1

10.3

1-0

.04

0.0

10.0

95.

Defe

nder

Ori

enta

tion

0.4

60.5

0-0

.08

-0.1

1-0

.05

-0.3

2**

*6.

Retu

rn o

n I

nvest

ment

0.1

00.0

8-0

.13*

-0.1

9**

0.1

7**

-0.0

20.1

5*

7.

Overa

ll I

ndic

ato

r3.6

80.5

1-0

.01

0.0

40.1

10.2

5**

*-0

.24**

*0.0

7

Serv

ice I

ndust

ry1.

Siz

ea

21,4

16.1

0162,9

89.5

52.

Managin

g D

irect

or

Tra

inin

g2.6

51.1

30.0

63.

Fam

ily F

irm

0.7

40.4

4-0

.10*

-0.2

7**

*4.

Pro

spect

or

Ori

enta

tion

0.1

90.3

90.1

1**

0.0

5-0

.01

5.

Defe

nder

Ori

enta

tion

0.3

50.4

8-0

.05

-0.0

80.0

2-0

.36**

*6.

Retu

rn o

n I

nvest

ment

0.0

90.1

0-0

.01

0.0

10.0

00.0

10.1

3**

7.

Overa

ll I

ndic

ato

r3.6

10.5

00.0

90.1

1*

-0.1

1**

0.2

8**

*-0

.12**

0.0

1

aThousa

nds

of

euro

s.*p

<0.1

.**

p<

0.0

5.

***p

<0.0

1.

resource-based theory when applied toSMEs. We have found that these firmsfocus their attention on the studiedfactors of management: technology andinnovation, organizational design, andhuman resources, based on intangibleresources and capabilities (Hall 1993;Grant 1991), as key elements that allowit to achieve a sustainable competitiveadvantage (Peteraf 1993; Barney 1991).In this way, it may be stated that, inaccordance with previous studies (Mauriand Michaels 1998; Powell 1996; Roque-bert, Phillips, and Westfall 1996; Rumelt1991; Schmalensee 1985), the competi-tiveness of SMEs is based on internal elements supported by resources andcapabilities difficult to imitate, such as

technological innovation, flexibility andorganizational design, and humanresources management (Wagar 1998;Bacon et al. 1996; Feigenbaum andKarnani 1991; Hitt, Hoskisson, andIreland 1990). The only exception hasbeen found in relation to cooperation.Contrary to what was expected (Hoff-mann and Schlosser 2001; Eisenhardtand Schoonhoven 1996), cooperation inactivities does not manifest itself as anelement important for the competitiveadvantage of SMEs (Pil and Holweg2003), especially in the Spanish environ-ment, where there are not formalizednetworks to emphasize the agreementsand alliances between small firms (Fer-nández, Montes, and Vásquez 1996).


Table 6Multiple Regression Analysisa

Manufacturing Construction Industry Industry Service Industry

ROIb Overall ROI Overall ROI Overall Indicator Indicator Indicator

Firm Size -0.016 0.076** -0.063 -0.009 -0.009 0.019(0.000) (0.000) (0.000) (0.000) (0.000) (0.000)

Manager Education -0.054 0.048 -0.131 0.066 -0.003 0.067Level (0.003) (0.017) (0.005) (0.032) (0.005) (0.025)

Family Firm 0.019 0.001 0.120 0.087 0.002 -0.122**(0.008) (0.041) (0.015) (0.093) (0.013) (0.065)

Prospector 0.078* 0.237*** 0.020 0.201*** 0.051 0.279***Orientation (0.009) (0.045) (0.021) (0.118) (0.016) (0.072)

Defender -0.001 -0.086** 0.114 -0.147* 0.139** -0.028Orientation (0.009) (0.044) (0.012) (0.076) (0.013) (0.062)

F 1.317 14.685*** 2.190* 3.717*** 1.070 7.574***R2 0.010 0.094 0.067 0.099 0.017 0.112

aStandardized coefficients and standard error in brackets.bROI = return on investment.

*p < 0.1.**p < 0.05.

***p < 0.01.

On the other hand, as it was expected,the use of internal factors is different,depending on the strategic behavior ofSMEs (Barney 1995), and it is here wheregreater differences between these firmsand larger ones are found. In general, wemay conclude that there are differencesin the behavior observed in the manage-ment variables between firms withprospector and defender strategies thatare much smaller than the differencesbetween prospectors and analyzers.Therefore, the validity of Miles andSnow’s (1978) model can be acceptedoverall for the analysis of SMEs. In addi-tion, we would like to point out somespecific results.

First, technological position and inno-vation attain higher values when SMEsfollow a prospector orientation thanwhen they are defenders or analyzers.These results support the postulates of Miles and Snow (1978) that firms with a prospector strategy place greateremphasis on innovation and have abetter position in technological resourcesthan those following a defender strat-egy. This conclusion is also reached inthe empirical studies for larger firms(Slater and Narver 1993; Conant, Mokwa,and Varadarajan 1990; McDaniel andKolari 1987) and for SMEs (Camison1997).

Second, SMEs implementing a largernumber of flexible practices are seen tobe among those that follow a prospectorrather than a defender strategy, similar to the results reported by Slater andNarver (1993) and Conant, Mokwa, andVaradarajan (1990), and in the context of Spain, Camison (1997). Likewise,prospector firms are shown to have moredifferentiated organizational structures,with a larger number of organizationalunits with different structures.

Third, SMEs following a prospectorstrategy put greater emphasis on devel-oping their systems of human resourcemanagement, a result that confirms themodel proposed by Miles and Snow

(1984) and which is in line with the find-ings of Camison (1997). However, thisconfirmation is not complete: the resultsrelating to investment in training are notconsistent with those reported in the lit-erature, because defender firms are moreconcerned about training their employ-ees. Conversely, in the analyzed sampleof SMEs, the greatest emphasis on train-ing appears among prospectors.

On the other hand, it is important to notice the different results dependingon the activity analyzed. The resultsobtained in relation to the manufacturingindustry are more in line with the theo-retical design, whereas there are fewersignificant results in services and con-struction. This may be explained by thefact that the services and constructionsectors are singular and heterogeneous,especially in the context of SMEs. In con-sequence, we may say that the resultswere poorer than expected for these twoindustries.

H5, which addressed the relationshipsbetween SMEs’ strategy and perform-ance, obtained disparate results. Two dif-ferent measures of performance wereused: an accounting measure—ROI—anda perception measure of the firm’s situa-tion with respect to its competitors, syn-thesized in an overall performanceindicator. ROI as a performance variabledoes not give any relevant result. Thisresult, as indicated by Miles and Snow(1978) and corroborated by Wright et al.(1991), may be due to the fact thatfirms—SMEs in that case—do have theopportunity to perform well independentof the strategy followed. Likewise, weshould not overlook the limitations ofthe accounting measures of firm per-formance, because they are based onaccounting data, which, apart from pos-sible errors, give a limited idea of firmperformance and do not take tangibleassets into consideration (Kren and Kerr1997, p. 300), which might explain thelack of significant results in contrastingthis hypothesis.


Conversely, when the overall indicatoris used as a measure of performance, thehypothesis gains support. It is found thatSMEs with a prospector strategy outper-form analyzers and defenders, in thisorder. This result is contrary to Miles andSnow’s (1978) claims but consistent withthe conclusions reached for large firmsby Slater and Narver (1993) and Zahraand Pearce (1990), and by Camison(1997) for SMEs. They show that strate-gic orientations differ with regard to firmperformance and that firms with a moreprospector orientation usually outper-form the rest because of their greaterproactivity and capacity to adapt. Theseresults add some nuances to the findingsof the previous hypotheses, taking intoconsideration the resource-based view:the SMEs that have a strategic prospec-tor orientation are the ones that best takeadvantage of their internal resources andcapabilities, leading to a greater effect onthe results and, consequently, to a bettercapability in the long term. Likewise, itis necessary to highlight that these firmshave strategic and management behaviormore similar to that of large firms.

Again, the results obtained differamong industries, better results beingfound for manufacturing and construc-tion industries than for services, proba-bly because of the heterogeneity of thissector compared with the two first.

After the global analysis of results, itmay be stated that there are not toomany differences between the strategicbehavior of SMEs and that of large firms.Nevertheless, there are still certain con-trasts between SMEs and large firms inrelation to the links between strategy andresults. Thus, the main question that weshould ponder on in this respect is: whymight the relationship between strategyand performance of SMEs differ fromthose of large firms, considering thesame strategy typology. The literaturedoes not offer clear conclusions in thissense but merely contrasts the differ-ences in management according to the

strategic orientation for large firms(Slater and Narver 1993; McDaniel and Kolari 1987; Smith, Guthrie, andChen 1986; Hambrick 1983; Snow andHrebiniak 1980). Because of this, we aredealing with a relatively unexplored fieldin the literature. Notwithstanding, wehave drawn some conclusions that mayaccount for the differences existingbetween large firms and SMEs: (1) thescarce professionalism in the manage-ment of SMEs may have an influence onthe lack of a strategic behavior that ismore structured and formal than that oflarge firms; (2) SMEs usually have lessinformation about their environmentthan large firms, which may result in lesscapability for strategic responses to suchchanges; and (3) because of the charac-teristics of the country, in this case Spain,we find that a large number of SMEsapply a reactive management and thattherefore they are apart from conven-tional strategic approaches.

All in all, the lack of a professional-ized view in the strategic formulationand establishment in SMEs may have abearing on the lack of adaptation to theenvironment, and consequently, it mayaccount for the worst economic andfinancial results of SMEs in relation tolarger firms. Nonetheless, it is also nec-essary to point out that this situationdoes not take place in every SME. Thereis a group of them—the most innovativeones—that could be placed at the levelof large firms as far as the link betweenstrategy and result is concerned, obtain-ing sustainable competitive advantagesbased on their flexibility and innovation.However, the group of more conservativeor defensive firms, by adopting morereactive and traditional strategies, hasproblems to compete in the market,obtaining poorer final results.

Furthermore, it is important to pointout that we did not find differences byage in SMEs in relation to the linkbetween strategy and performance.Therefore, it seems that contrary to larger


firms, the tenure of smaller companieshas no influence on their strategic behavior and, consequently, on their performance.

In short, the aim of this paper is, froma resource-based perspective, to providenew evidence on the competitiveness ofSMEs by analyzing the extent to whichstrategic orientation conditions theirform of management and, therefore,competitiveness. The results confirm notonly what previous studies had demon-strated for large firms but also what wasalmost unexplored in relation to SMEs.On the one hand, it is fundamental tomention the importance of strategic ori-entation as an element that influencesSMEs’ management and determines theirperformance and, on the other hand, ithas been confirmed that SMEs with amore prospector strategy generally out-perform the rest because of their greatercapacity for management and adaptationto the current environment.

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