Turbulence, Flexibility and Performance of the Long-Lived Small Firm

The basic hypothesis is that flexibility enhances the long run prospects of the small firm. This is explored by examining precipitating causes of organisational change and their consequential adjustments. The study uses primary source data from mature small firms in Scotland. New measures of flexibility and firm-specific turbulence are used to explain the performance of mature small firms. Econometric estimates are reported on the relationship between flexibility, firm-specific turbulence, and performance. The first involves generalised least squares estimates (with heteroskedastic adjustment) of the relationship between firm-specific turbulence, four measures of flexibility, and performance. The second involves Heckman sample selection estimates of this performance relationship. It is found that firm-specific turbulence has a large negative effect on performance. Next in importance are those flexibility factors which are precipitating causes of organisational change (as opposed to consequential adjustments). Finally, trade-off relationships are found to exist between the agility and speed measures of flexibility