MODELING COMPETITIVE ADVANTAGE IN FAST GROWTH
SMALL-TO-MEDIUM ENTERPRISES: CONTINGENT EFFECTS
OF ENVIRONMENTAL TURBULENCE
Timothy L. James
BBus (Marketing) (Hons)
A thesis submitted in fulfillment of the requirements for the degree of Doctor of
Philosophy
School of Management
Business Portfolio
RMIT University
November 2008
ii
Declaration
I certify that except where due acknowledgement has been made, the work is that of the
author alone; the work has not been submitted previously, in whole or in part, to qualify
for any other academic award; the content of the thesis is the result of work which has
been carried out since the official commencement date of the approved research program;
any editorial work, paid or unpaid, carried out by a third party is acknowledged; and,
ethics procedures and guidelines have been followed.
____________________________
Timothy L. James
26th November, 2008
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Acknowledgements
First and foremost a great deal of gratitude must be afforded to my supervisor, Professor
Kosmas X. Smyrnios. Kos has been a true inspiration; from initially encouraging me to
undertake a research doctorate, to his continuing support throughout the project. The
completion of this thesis would not have been possible without his guidance and wisdom.
His patience and open door policy is truly admired and appreciated. Kos has not only
been a great supervisor, but also a great friend.
I would also like to express my sincere appreciation to my parents. Their unwavering
love, support, guidance, and encouragement have made the completion of this
dissertation possible. I also thank my siblings for always keeping a smile on my face.
Gratitude is extended to my friends who have helped keep me sane throughout the Ph.D
process; and to my lab mates for their support and valued friendship, and for making this
journey far from lonely.
I thank Business Review Weekly (BRW), in particular Amanda Gome and Jacqui
Walker, who sponsored the data collection, and the European Business School and
everyone at the EBS European Family Business Centre who welcomed me on a 12-month
stay in Germany.
I acknowledge Dr Carol Tan and the Research Development Unit, especially Prue
Lamont, for their support. And thank you to Dr Wei Chun Wang for her statistical advice.
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Table of Contents
Declaration......................................................................................................................... ii
Acknowledgements .......................................................................................................... iii
Table of Contents ............................................................................................................. iv
List of Tables .................................................................................................................. viii
List of Figures................................................................................................................... ix
List of Appendices............................................................................................................ xi
Summary......................................................................................................................... xiii
CHAPTER 1...................................................................................................................... 1
INTRODUCTION............................................................................................................. 1
Overview ............................................................................................................................ 1
Purpose............................................................................................................................... 1
Background ....................................................................................................................... 2
Rationale ............................................................................................................................ 4
Research Objectives.......................................................................................................... 7
Thesis Structure ................................................................................................................ 8
CHAPTER 2.................................................................................................................... 10
LITERATURE REVIEW .............................................................................................. 10
Overview .......................................................................................................................... 10
Small-to-Medium Enterprises........................................................................................ 10
Firm Growth.................................................................................................................... 11
Fast Growth Firms.......................................................................................................... 12
Determinants of Fast Growth ........................................................................................ 14
Firm Age and Size ........................................................................................................ 14
Economic Conditions and Industry Growth ................................................................. 15
Management Practices and the Challenges of Fast Growth.......................................... 17
Entrepreneurial Characteristics..................................................................................... 19
Strategy in Fast Growth Firms...................................................................................... 20
Technology in Fast Growth Firms ................................................................................ 24
Resources in Fast Growth Firms................................................................................... 25
Theoretical Conceptualizations ..................................................................................... 27
Contingency Theory...................................................................................................... 27
Strategic Fit................................................................................................................... 29
The Resource-Based View............................................................................................ 31
Strategic Orientation ...................................................................................................... 35
Strategic Orientation as an Organizational Resource ................................................... 36
Strategic Orientation as a Source of Competitive Advantage ...................................... 37
Strategic Behavior........................................................................................................... 39
Strategic Behavior as a Source of Positional Advantage.............................................. 42
v
Development of a Contingency-Based Conceptual Framework of Competitive
Advantage and Firm Performance................................................................................ 44
Market Orientation........................................................................................................ 45
Competitor Orientation ................................................................................................. 46
Learning Orientation..................................................................................................... 48
Technological Orientation ............................................................................................ 49
Venkatraman’s Strategic Behavior Conceptualization ................................................. 50
Relationships between Strategic Orientation and Strategic Behavior .......................... 54
Firm Performance ......................................................................................................... 57
Relationships between Strategic Behavior and Firm Performance............................... 58
Environmental Turbulence Moderators ........................................................................ 62
CHAPTER 3.................................................................................................................... 70
STUDY 1.......................................................................................................................... 70
Overview .......................................................................................................................... 70
Research Paradigm........................................................................................................ 70
Research Design............................................................................................................ 71
Method ............................................................................................................................. 71
Participants...................................................................................................................... 71
Measures .......................................................................................................................... 74
Competitor Orientation ................................................................................................. 75
Learning Orientation..................................................................................................... 75
Technological Orientation ............................................................................................ 76
Strategic Behavior......................................................................................................... 77
Firm Performance ......................................................................................................... 78
Environmental Turbulence Moderators ........................................................................ 79
Environmental Influences on Firm Performance.......................................................... 79
Validity and Reliability of Instruments ........................................................................ 80
Procedure......................................................................................................................... 81
Statistical Procedures ..................................................................................................... 82
Data Screening.............................................................................................................. 82
Confirmatory Factor Analysis....................................................................................... 82
Model Development...................................................................................................... 84
Environmental Turbulence Moderators ........................................................................ 86
Social Desirability Bias................................................................................................... 87
Results and Analysis ....................................................................................................... 88
Data Screening ................................................................................................................ 88
Confirmatory Factor Analyses ...................................................................................... 88
One-Factor Congeneric Measurement Models ............................................................. 89
Multi-factor Analysis.................................................................................................... 92
Convergent and Discriminant Validity ......................................................................... 95
Scale Reliability............................................................................................................ 96
Development of an Hypothesized Model....................................................................... 99
Path Analysis: Tests of Hypotheses............................................................................ 100
Analysis of Results ........................................................................................................ 103
