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Flexibility, Firm-Specific Turbulence and the Performance of the Long-lived Small Firm

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Abstract

The hypothesis that flexibility enhances the long run prospects of the small firm is explored by examining precipitating causes of organizational change within it, and consequential adjustments. The study is fieldwork based and uses evidence gathered directly from entrepreneurs. New measures of flexibility and firm-specific turbulence are used to explain long-run performance, measured over 28 distinct attributes. Econometric estimates (using GLS and Heckman selectivity correction) are reported, on the relationship between flexibility, firm-specific turbulence and performance. Firm-specific turbulence is shown to have a negative effect on performance, but the latter is enhanced by increasing the flexibility of the small firm.

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Author information

Authors and Affiliations

  1. Department of Economics, University College Cork, Cork, Ireland

    Bernadette Power

  2. Center for Research into Industry, Enterprise Finance and the Firm (CRIEFF), Department of Economics and Finance, University of St. Andrews, St. Salvator’s College, St. Andrews, Fife, Scotland, KY16 9AL, UK

    Gavin C. Reid

Authors
  1. Bernadette Power
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  2. Gavin C. Reid
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Correspondence to Gavin C. Reid.

Additional information

JEL classification: C42, D21, G33, L2, M13, M21.

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Power, B., Reid, G.C. Flexibility, Firm-Specific Turbulence and the Performance of the Long-lived Small Firm. Rev Ind Organ 26, 415–443 (2005). https://doi.org/10.1007/s11151-005-0224-5

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  • DOI: https://doi.org/10.1007/s11151-005-0224-5

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