The Behaviour and Performance of Young Micro Firms: Evidence from Businesses in Scotland

Abstract

This paper is an empirical study, making appeal to firsthand evidence gathered by face-to-face interviews with the owner-managers of 150 small firms in Scotland. It investigates the performance of the micro firm in the early years of its life cycle, by reference to four key behavioural characteristics: (i) strengths, weaknesses, opportunities and threats (SWOT) analysis; (ii) the gathering of trade intelligence on the firm's rivals; (iii) the use of information technology (IT) in the business; and (iv) financial form and the owner-manager's preferences as regards the form of their equity stake holding. Seven propositions, based on the evidence accumulated, are formulated, and tested. These are illustrated by boxplots and cross-tabulations, and supported with chi-square statistics for testing measures of association. Taken together, the data provide an illuminating picture of the strategic behaviour of the young micro firm, and the subsequent effect that actions can have on firm performance. In particular, it is found that the use of IT in clusters of devices has a highly significant positive association with performance.