Research Strategies for Small Businesses

Don E. Gudmundson

• Publisher: Routledge
• Year: 2016
• ISBN:
  9781134861934
• Edition: 1
• Topic: Commerce
• Subtopic: Petite entreprise

This book, originally published in 1996, develops a model of information gathering for small businesses. Whilst all small business owners gather and process some information, the quality and types of information gathered is limited. Size and resource constraints force small business owners to make difficult decisions related to the research that they conduct. The model developed in this book is tested in part through a study of the information gathering practices of small owners/managers in the landscaping industry in Wisconsin, USA.

I The Research Issue

DOI: 10.4324/9781315543239-1

“The environment, perhaps more than any other factor, affects organizational structure, internal processes and managerial decision making.”¹

“The construct of information environment, as that which is ‘sensable’ by the organization, stands conceptually between the construct of the actual external environment and the construct of the perceived external environment.”²

These quotations suggest that the relationships between an organization and its environments are not only important for the survival of the organization, but that they are also complex. The dependence relationships existing between organizations and their external environments are generally accepted by organization theorists.³ Organizations’ external environments provide resources organizations require for survival.

Organizational decision-makers come to know their organizations’ external environments through the information environment.⁴ This sensory environment provides decision-makers with data for decision-making. Therefore, understanding the information environment and how decision-makers interact with it is crucial to furthering our understanding of organizational decision-making. The present study is a response to the call for more research in this area.⁵

The adequate level of knowledge required to ensure a quality decision-making process is difficult if not impossible to ascertain. However, most researchers assume that as more information is gathered, decision-making processes improve in quality.⁶ In other words, a relationship is assumed to exist between the quantity of data gathered by organizations and the level of knowledge or understanding of an organization’s environments possessed by the organization’s strategists. Implicit in this discussion is the recognition that strategists vary in the quantity of data they gather. These individuals are hindered in their data gathering activities by various organizational and individual constraints. Few, if any, organizations have the resources to gather all the data possible on each issue that is presented to strategists in an organization. Therefore, strategists make decisions relating to the time and effort that will be committed to gathering data on various issues. How do decisionmakers decide the emphasis they will place on data gathering activities? In other words, what factors motivate or cause organization strategists to gather the quantity of data that they gather? This study begins to examine this question.

The processing of the data gathered is also an important factor in the development of a better understanding of organization decision-makers’ use of environmental data.⁷ Several theorists have focused their research efforts on examining cognitive processes of strategists.⁸ While theorists readily acknowledge the need for more research examining the cognitive data processing activities of strategists, interest in this area appears to be on the increase.⁹ However, the role played by data gathering in developing strategists’ environmental knowledge base has not been examined to the same degree.¹⁰ This study bridges the gap between these two streams of research. The cognitive element of decision-making and the data gathering element will be examined in an attempt to identify the possible relationships existing between them.

Strategic managers increase their understanding of their organizations’ environments through environmental data gathering practices (i.e. scanning). Although the environmental data acquisition and processing activities of organizations and their members hold an important place in the development of a theory of organizations, they are not well understood.¹¹

Several studies examining data gathering activities have provided evidence supporting the presence of a positive relationship between the quantity of data gathered and the quality of the decision-making process.¹² As the previous statement suggests, the quantity of data gathered by decision-makers appears to be an important element in determining the quality of the decisions made. Yet, what leads one decision-maker to gather a certain quantity of data about a specific event while another decision-maker gathers a different quantity of data associated with the same event is not well understood.

Although variations in scanning activities have been identified, attempts to explain these variations have met with limited degrees of success. Research on scanning has provided insight into the sources utilized, type of data gathered, and the quantity of environmental data gathered by organization strategists, but it has not provided any clear determinants of scanning behavior.¹³

Several variables have been examined by researchers in searching for determinants of scanning behavior. These include company size,¹⁴ respondent’s functional area,¹⁵ environmental dynamism,¹⁶ environmental uncertainty,¹⁷ environmental complexity,¹⁸ accessibility of information,¹⁹ level of intolerance for ambiguity,²⁰ and strategy.²¹ Following this stream of research, this study examines environmental uncertainty, utilizing Milliken’s conceptualization of environmental uncertainty, and the strategist’s interpretation of specific environmental conditions or events as possible determinants of data gathering (i.e. scanning) behavior.²²

When decision-makers are presented with a particular set of environmental events requiring a response, they must decide what to do. For most recurring situations the strategist has experience to fall back on. He or she has been faced with this or a similar set of circumstances before. Developing a response to these environmental events may require only that the strategist recognize the situation as one experienced previously and remember what he or she did the last time.

Other situations require a more in-depth analysis. A strategist may be faced with environmental events that he or she is not familiar with. The strategist must both interpret the particular events and develop a response to them. Environmental events, with the perceived potential to influence a business’s current or future strategy, are often labeled as strategic issues.²³ When faced with these types of environmental events, the strategist may not rely on past experience to develop responses to the environmental events. Under these circumstances the decision-maker must often gather information before a response can be formulated. It is this relationship, between a strategist’s interpretation of a strategic issue and the subsequent data gathering activities initiated in the response formulation stage, that will be examined as a portion of this study.

Several researchers have examined the relationship between environmental uncertainty and various aspects of information gathering. Daft, Sormunen and Parks examined the relationship between scanning behavior and perceived environmental uncertainty using a combination of traditional measures of uncertainty and a measure of importance.²⁴ They found a positive relationship existing between their perceived environmental uncertainty measure and the frequency with which top executives scan their environments. Brown and Utterbach also reported a positive relationship between perceived environmental uncertainty and externally directed communication activities.²⁵

Milliken, however, has discussed some of the problems with using the traditional measures of environmental uncertainty.²⁶ She argues that environmental uncertainty has several components that must be recognized when examining the construct. The present study, following Milliken’s recommendations that the uncertainty construct be broken down into three components, extends research on the relationship between the environmental uncertainty construct and information gathering activities. The three components of the environmental uncertainty construct identified by Milliken are state uncertainty, effect uncertainty and response uncertainty. The three types of environmental uncertainty are examined in greater detail in other sections of this paper. Since this study examines scanning activities initiated in the response formulation stage of the decision-making process, response uncertainty is included as one of the possible determinants of scanning activities.

The purpose of this study is to test the relationships between two variables identified as possible determinants of scanning behavior (response uncertainty, and interpretation of a strategic issue) and the variance in scanning behaviors (frequency of data acquisition activities initiated in response to specific strategic issues, and interest in the specific strategic issue) associated with a specific strategic issue. This examination seeks to further an understanding of decision-makers’ data gathering activities in response to specific environmental events.

The present study will focus on small organizations for several reasons. Theorists have made numerous calls for research to be done on small business strategic decision-making.²⁷ Yet, the vast majority of research and theory on data acquisition activities has focused on large organizations. While this may provide a useful starting point, Dandridge has argued that the results from studies of large firms may not be generalizable to small firms due to significant differences in organizational structure between large and small firms.²⁸ Significant variations in the structure of organizations, such as that found between large and small organizations, influence the data gathering activities of the organization.²⁹

Other theorists assert that the role of the CEO is significantly different in small firms.³⁰ “Smaller firms are often closely held; frequently the CEO is in a position to decide everything himself.”³¹ Hence, decision-makers in small firms tend to operate on both the operational and strategic levels at the same time. In many large organizations, on the other hand, strategic planning is conducted at the top management level, far removed from the operations of the organization.³²

Large organizations often have separate departments that specialize in data gathering activities. The boundary spanning literature has focused its research efforts on examining these departments and individuals.³³ It is well recognized that these boundary spanning units or individuals serve several functions, including the gathering of external environmental data for the organization. It is also recognized that these individuals, in varying degrees, determine what information enters the organization and is accessible to the organizational strategists. Yet, most studies of data gathering activities in large organizations focus on the CEO as the individual gathering data.³⁴ It seems apparent that much of the information on...

Table of contents

• Cover Page
• Half Title Page
• Title Page
• Copyright Page
• Original Title Page
• Original Copyright Page
• Table of Contents
• List of Figures
• List of Tables
• Preface
• Chapter I The Research Issue
• Chapter II A Data Acquisition Model
• Chapter III Research Methodology
• Chapter IV Results
• Chapter V Discussion and Conclusions
• Appendix A
• Bibliography
• Index