Perceived Uncertainty and Firm Performance in SMEs

Abstract

In this article we propose and test a model of the effects of perceived environmental uncertainty on personal networking activities and firm performance, utilizing a sample of owner-managers from 153 small firms in the high technology sector. We predicted that as the level of uncertainty perceived in the environment by decision makers increased, they would engage in increased external and internal networking activities. This increased networking in response to perceived uncertainty would then result in improved financial performance for their firms. The data provide support for the effects of perceived uncertainty on internal networking and firm performance. We found that as the level of perceived uncertainty in the environment increased, so did the frequency of internal networking. Increased internal networking in response to increased perceived uncertainty resulted in better firm performance. The data, however, do not provide support for our predictions related to external networking and firm performance.