A solution to the problem of rural regions experiencing decreasing populations and shortage of employment opportunities may be to stimulate the expansion of existing small businesses. Managers of small businesses are instrumental in this process. Knowledge of factors that make them expand their businesses therefore is essential for developing regional economic-growth policy. Attesting to this, Besser (1999) found that small business managers' high levels of commitment, leadership, and support for the community are important. We empirically test the hypothesis that adoption of expansion goals by small business managers is influenced by expert advice. A rural region on the west coast of Sweden located between two metropolitan areas is examined. The region, in which small businesses dominate, has a population of about 12,000 that is declining steadily. Expanding these businesses would be a way of stimulating economic growth. Many factors are likely to determine the success of a small business, such as available work force, business ideas, capital structure, potential markets, and infrastructure. However, the influence of such factors is filtered in general through the managers' perceptions. Such perceptions are likely to be affected by a host of factors including cognitive, motivational, and social/psychological. We focus here on the motivational factor of goal setting. One of the most influential approaches to understanding human motivation, particularly in work settings, is the theory of goal setting (Locke and Latham 1990). Yet it may be noted that other perspectives may be more appropriate to account for striving toward or maintaining goals that are established already (for instance, Austin and Vancouver 1996; Carver and Scheier 1998). Appropriate goals however are not sufficient, as some degree of knowledge also is required for successful performance (Locke 2000). We assume that the higher aspiration level entailed by expansion goals for a business in combination with adequate knowledge leads to better- performance measured as profit and turnover rates. Some research supports this contention. For instance, Baum er al. (2001) found a direct effect of aspiration levels on later success. In recent years, there has been a surge of interest in knowledge management within organizations. A widespread belief exists in the potential for organizations to generate competitive advantages on the basis of their knowledge assets. Harvey and Denton (1999) identified several reasons for this, including the greater demands being placed on businesses by customers and the intensely competitive nature of global business. Locke et al. (1981) report that 99 of 110 studies found that specific or difficult goals lead to better work performance than medium, easy, do-your-best, or no goals. In this vein, Frese et al. (2000) found that the most successful strategy by small businesses is to combine goals and multidirectional plans, making the manager actively search for opportunities. Furthermore, Orser et al. (2000) showed that the use of business plans was correlated highly with firm size and propensity to increase revenues. By expansion goals we mean willingness to enlarge the firm by finding new markets. Defensive goals, the opposite, are characterized by satisfaction with status quo. In our survey, respondents were asked to indicate whether they pursue a number of specified goals assumed to define a continuum from expansion goals to defensive goals. Why do some small business managers adopt expansion goals for their businesses whereas others do not? Although many personal characteristics including aspirations are important, we focus on the role of expert advice. We hypothesize that the choice of an expert adviser is an essential determinant of adopting expansion goals. Harvey and Fischer (1997) found that advice tends to give novice decision-makers an opportunity to share responsibility. Advice also may increase confidence and risk taking. …
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