SUMMARY The majority of the literature on corporate performance in SMEs has indicated that the absence of formal strategic planning (or inadequacies in its process) can be directly linked with failure, while its presence can be linked to success (Bracker and Pearson, 1986; Stoner, 1983). However, other empirical evidence fails to find a relationship (Robinson and Pearce, 1983). These differences are due to methodological and theoretical problems facing research in this domain. This paper attempts to improve on both issues. The hypothesis that ‘formal planning is not associated with better‐than‐average performance’ is tested on a sample of SMEs, controlled by sector, using a 5‐year operating period. Five measures of financial performance are utilized, including both the arithmetic and geometric measurements of central tendency as appropriate. Moreover, perceptions of CEOs, rather than the aggregation of scale‐based measurements of organizational variables, are used to prescribe the measure of formality used in the analysis.
British Journal of Management – Wiley
Published: Dec 1, 1994
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