Efficiency and Flexibility in Small Firms: The Impact of Industry Structure

Efficiency and flexibility may be a classification of small firms ’ competitive strategies (Ebben & Johnson, 2005). Which strategy, efficiency or flexibility, is more effective? How do small firms implement the two strategies? This study examines the two questions in different industry contexts. I argue that both industry concentration and dynamism can affect the relative effectiveness of efficiency and flexibility. To implement the two strategies, small firms may focus on the product side or the process side of their operation, depending on the industry environment. I demonstrate that competition and demand are two mechanisms through which the industry environment affects small firms ’ competitiveness.