TURNAROUND STRATEGIES FOR DECLINING SMALL BUSINESS: THE EFFECTS OF PERFORMANCE AND RESOURCES

Abstract

This study explores the choice between growth and retrenchment as turnaround strategies for small business owners experiencing decline in performance. Current theory related to organizational failure describes deterministic and voluntaristic perspectives of strategic choice, but they have not been applied to small business decline. Using the voluntaristic perspective the proposed model suggests choice is contingent on the effects the owner/manager's perceptions of performance and resource availability during a period of decline. Survey data from small government contractors in the U.S. Small Business Administration database are used to test the model. The results indicate these contractors choose growth strategy when their perceptions of resource availability and past financial performance are both high and when both are low, indicating small business owner/managers remain aggressive when faced with adverse conditions.