How environmental uncertainty affects the link between business strategy and performance in SMEs

Abstract Purpose – This study aimed to examine the prospective role played by perceived environmental uncertainty in the strategy‐performance linkage among SMEs in China, Turkey, and the USA. Design/methodology/approach – The strategic group level of analysis was employed. Generic strategy, environmental uncertainty, and performance were measured by previously validated scales. Findings – The combination strategy‐performance linkage was supported in Turkey and the USA. In China, the highest performing strategic group emphasized a focus orientation accompanied by neither cost leadership nor differentiation, and the lowest performing group was comprised of low cost businesses. Research limitations/implications – This study supported the combination strategy thesis in the USA and Turkey. In China, conceptualizations of strategy appear to be more complex. High performing businesses emphasized a focus strategy, but not necessarily in concert with either cost leadership or differentiation. Practical implications – Firms in the USA place a great deal of emphasis on uniqueness and individuality, translating into approaches based on differentiation and innovation. However, attempting to control costs and differentiate without a defined niche leaves a firm vulnerable to larger, more experienced competition. Originality/value – This study addresses the death of strategy‐performance investigations in developing nations. Findings presented run counter to the notion that successful businesses in emerging economies emphasize cost leadership vis‐à‐vis differentiation. Conventional wisdom suggests that high performers tend to perceive greater certainty about their environments. The present analysis not only rejected this finding, but suggests that the opposite might be true.