Toward a capabilities perspective of the small firm

This paper attempts to explain the competitive advantages of the small firm in the capabilities perspective. It begins by identifying the kinds of strategic assets possessed by small firms. It argues that entrepreneurship and a simple capital structure are the sources of dynamism for small firms. The relationship between the small firm's resources and its capabilities are then critically examined. In particular, the analysis focuses on the influences of strategic assets on the organizational flexibility – a significant source of competitive advantage enjoyed by small firms. The competitive attributes of small firms are further discussed in terms of firm's internal and external capabilities. Finally, the relationship between the small firm's capabilities and the choice of technology strategies is examined.