The Relationship between Environmental Uncertainty and Enterprise Performance. A Fuzzy-Set Analysis

Abstract

Abstract The purpose of this paper is to explore causal complexity in the relationship between environmental uncertainty and firm’s performance. Due to complexity in the external and internal environment, the relationship between environment and firm performance rests not only on a single attribute but on the interrelation and complementarities between multiple characteristics such as firm features and external factors. This study examines the influence of a firm’s specific characteristics and the dimensions of environmental uncertainty on the company’s performance. Fuzzy-set qualitative comparative analysis is used to analyze data collected via questionnaires from 58 Polish small and medium enterprises (SMEs). The results suggest that characteristics of the general business environment, as well as the firm-specific characteristics all matter to firm performance. In addition, our findings clearly demonstrate that the determination of high firm performance is underpinned by substantial interdependence among the selected conditions and complexity. Therefore, any particular condition may have a different or even opposite effect on the outcome depending on the presence or absence of other conditions. Based on this, we conclude that external environmental uncertainty characteristics, with the dimensions of competitive intensity, technological turbulence and market/demand turbulence, are not as important as the other conditions for high-performing firms. The study offers a new perspective on the relationship between environmental uncertainty and firm performance with its systematic comparative analysis of complex cases. It identifies different combinations of conditions (paths) leading to a high firm performance.