Strategic flexibility in small firms

Contrasted with their larger counterparts, small firms are disadvantaged due to their limited resources, economies of scale, and managerial expertise. However, the ability to respond and adapt promptly in today’s rapidly changing environment provides SMEs advantage over larger firms. In this paper, we argue that SMEs need to overcome resource disadvantages, leverage structural advantages, and develop new relational advantages in collaboration with partners to enhance their strategic flexibility for gaining competitive advantage. Specifically, we conjecture that building proactively strategic relationships with suppliers and logistics providers in addition to improving information quality could allow these entities to develop strategic flexibility and improve performance. We use structural equation modeling to assess the proposed model on a sample of 75 small firms located in India.