Organizational life cycle and performance among SMEs : Generic strategies for high and low performers

Purpose – This exploratory study seeks to bridge a gap in the literature by exploring the life cycle‐strategy relationship to discover the preferred strategy for high and low performing firms in four of the five stages of the organizational life cycle. Design/methodology/approach – In total, 600 managers randomly chosen from chamber of commerce membership lists in the southern USA were mailed an extensive scale that included items to measure life cycle stage, generic strategy, industry attractiveness and stability, size, and satisfaction with performance. The instrument included 20 life‐cycle items, four items for each of the five stages. Findings – Partial support was found for the expected relationship between strategy and performance as firms move through the organizational life cycle. New, high‐performing organizations that were satisfied with their performance preferred first mover strategies, while renewing organizations categorized as high performers also emphasized the first mover strategic approach. Mature high performers preferred a uniqueness strategy over one based on efficiency. Research limitations/implications – The fifth proposition, concerning declining firms, could not be adequately tested. Other limitations of this study include the limited sample size, the limited size variance of participating firms, and the cross‐industry nature of the sample. Combining the research stream of organizational life cycle with generic strategies and satisfaction with performance complicated the project. Practical implications – Life cycle and performance research provides managers with a snapshot of high and low performing firms and an understanding of how their situation, decision‐making style, strategy and structure fit. High performers focus on proactive, first mover strategies. Originality/value – The organizational life cycle is operationalized, demonstrating characteristics for high and low performing firms in each stage except decline.