Small Business Context

 

Chapter 1 - Adopting the Entrepreneurial Process in the Study of Information Systems and Small Business
Managing IT in Government, Business & Communities
by Gerry Gingrich (ed)
Idea Group Publishing 2003

	Brought to you by Team-Fly

Currently, there is not one generally accepted definition for "small business." Some definitions employ a measure of annual revenue, size of investment, or number of employees. This latter definition tends to be employed most often (Longnecker et al.,1997). The European Parliament (2002) has defined micro businesses to include 0 to 10 employees, small businesses to include from 10 to 50 employees, and medium-sized businesses to include 50 to 250 employees. Individual researchers, then, adopt a definition within their respective research projects.

Table 1 presents a dichotomous conceptual interpretation of how managers tend to approach business practice. According to Stevenson (1999), managers in small businesses tend to be oriented toward the "promoter" end of a continuum, whereas managers of large businesses tend to take a "trustee" orientation.

Table 1: Approaches to Business Practice

ASPECTS OF BUSINESS PRACTICE	PROMOTER TRUSTEE
Strategic orientation	Capitalize on an opportunity	Focus on efficient use of current resources to determine the greatest return
Resource commitment and control decisions	Act in a very short time frame	Long time frame, considering long-term implications
	Multi-staged	One-time, up-front commitment
	Minimum commitment of resources at each stage	Large scale commitment of resources at one stage
	Respond quickly to changes in competition, market, and technology	Formal procedures of analysis, such as capital allocation systems

From a strategic orientation, then, managers of small businesses will emphasize responding to opportunities, while managers of large businesses will focus on efficient use of resources. Further, with regards to resources, the small business manager will respond quickly to the environment, with a minimum commitment of resources in a multi-staged approach. The promoter conceptually represents these tactics of the small business manager, where resource commitments tend to be multi-staged, with a minimum commitment at each stage. In a rapidly changing environment, this type of stepped commitment enables a firm to respond faster to changes in competition, the market, and technology. Conversely, the manager of a large business will take the time to follow formal procedures to make a one-time decision regarding a long-term commitment. The trustee, who tends to engage in a systematic analysis to determine what needs to be done to get the greatest return on the resources currently controlled, conceptually represents this approach. This process ultimately results in a large-scale commitment of resources at one point in time. To some extent, the formal systems adopted by large firms, such as capital allocation systems, tend to encourage up-front resource commitments (Stevenson, 1999).

Another concept, resource poverty, (Thong et al., 1994) may also be employed to provide further elaboration of the differences between managers of large and small businesses. Resource poverty refers to the lack of both financial and human resources. Managers of small businesses must continually conduct their affairs with limited amounts of money. This situation tends to increase the manager's focus, as indicated above, on a minimum and multi-staged commitment process. Further, limited human resources may mean either fewer available employees or employees without the appropriate skills. In either case, the manager of a small business will be limited in what activities can be initiated and completed. Hence, there will be a focus on the near term, with an emphasis on allocating these scarce resources only to what is considered top priority activities. Further, as presented later in this document, the scope of activities and the consequent required IS support will evolve as the small business expands.

Unfortunately, the deployment of IS requires the development of a long-term plan and a large one-time commitment of both financial and human resources. As shown above, this is anathema to the manager of a small business. How can this conundrum be addressed? First, the currently available research into this question will be presented. Then, a proposed framework will be presented and discussed.

	Brought to you by Team-Fly