An examination of the relationship among organizational values, strategies, key success factors, skills, culture and performance of micro-businesses.

Paige, Rosalind C. ; Emery, Charles R.

ABSTRACT

In the United States, the level of economic dependence (revenues and job creation) on micro enterprises (fewer than 10 employees) has grown in recent years as the result of increased rightsizing and early retirements in middle to large-sized firms. As such, the government is placing increased emphasis on enterprise assistance programs and policies; particularly in the area of micro-businesses. This study examines relationships or linkages between the micro-business owner/manager's personal values and expertise, the strategies they adopt, the cultures they develop, and the financial and strategic performance within the retail craft industry. The findings suggest that owner/manager's personal values are highly correlated with the business strategy. Further, strategies that focused on the industry's key success factors (KSFs) had greater success than those that didn't. Also, an owner/manager's expertise was highly correlated with achieving financial and strategic objectives. However, the findings suggest that the current method of classifying business culture is not appropriate for micro-firms. Recommendations are offered for government assistance programs along with a strategic management model for future research.

INTRODUCTION

In the United States, the level of economic dependence (revenues and job creation) on micro enterprises (fewer than 10 employees) has grown in recent years as the result of increased rightsizing and early retirements in middle to large-sized firms (Chrisman & McMullan, 2002). Further, the government is trying to increase its emphasis on entrepreneurial opportunities for baby boomers as a method to reduce pressure on the social security system. As such, the government is placing increased emphasis on enterprise assistance programs and policies; particularly in the area of micro-businesses (Hoover, 2001). However, the effectiveness of these policies and programs are dependent on a thorough understanding of owner/managers and how they operate. While a plethora of research has been conducted on small businesses, very little has been conducted on micro-businesses. This study examines relationships or linkages between the micro-business owner/managers' personal values and expertise, the industry's key success factors and the strategies, the cultures they develop, and their financial and strategic performance.

The literature in this area suggests that owner/managers' personalities, in particular their values and goals, are indistinguishable from the goals of their business (Bamberger, 1983; O'Farrell and Hitchins, 1988). It is also suggested that owner/manager's personal values and resources (expertise) influence the strategies and in turn, the cultures they adopt in operating their businesses and, ultimately, the performance of their businesses (Thompson & Strickland, 1986). However, these propositions lack empirical support. Existing research tends to be based on qualitative case studies of small to mid-size businesses, i.e. no micro-businesses.

The aim of this research is to empirically test the relationships between the personal values and expertise of micro-business owner/managers (OMs), the industry's key success factors, the strategies they adopt, the cultures they develop, and their performance outcomes. A research model was adapted from the research of Kotsey and Meredith (1997) to explore the relationships among these five variables. In particular, the model suggests that certain dimensions of personal values are associated with specific strategy dimensions, cultures and certain performance outcomes. To address these areas of research, a study was carried out using data from retail craft micro-businesses in the southeastern United States.

PERSONAL VALUES AND ORGANIZATIONAL CULTURE

Organizational culture is generally defined as the values, beliefs, traditions, rituals, heroes and norms of the employees (Petrock, 1990; Schwartz & Davis, 1981). Using the values, beliefs and norms of large organizations, Deshpande, Farley, and Webster (1993) developed a cultural classification system. In short, they contend that large firms possess one of four organizational cultures: Market, Hierarchical, Adhocracy or Clan. Market cultures focus on competitiveness and goal achievement, led by decisive, achievement-oriented individuals with guiding strategies for achieving competitive advantage and market superiority. Hierarchy cultures stress order, regulation, and uniformity with more "coordinator" styles of leadership whose strategic emphasis is on predictable, smooth operations. Adhocracy' cultures emphasize entrepreneurship and creativity, where leaders are more innovative and risk-taking and whose strategic orientation focuses on innovation and growth. Lastly, Clan cultures emphasize teamwork, participation, cooperation, and a sense of belonging and family led by more mentoring leaders with strategic goals of building morale and developing human resources. Further, Deshpande et. al (1993) posit that four factors can be used to determine the type of culture a firm possesses: (1) Leadership; (2) Type of organization; (3) Organizational bonds; and (4) Measures of merit. As one can see, each of these factors in a micro-business is highly dependent on the owner/manager desires. In short, the evolution of an organization's culture flows from the top manager's values and is perpetuated through the management staff by the policies and procedures (e.g., hiring, promoting/demoting, socializing, training, rewarding). The strength of the organization's culture is critically affected by its leadership, communication, size, and structure (Schein, 1985). As such, one would expect to find strong cultures that are highly focused on the OM's values in micro-businesses because of the smallness in size and the close proximity between the owner/manager and workers.

H1: An organization's culture will be significantly related to an owner/manager's values in micro-businesses.

PERSONAL VALUES AND BUSINESS STRATEGY

Three basic factors influence managements' choice of strategy--management, environmental variables, and the firm's internal resources (Thompson & Strickland, 2003). The degree to which management and environmental variables influence business strategy has been debated by a number of researchers. Miller and Toulouse (1986) stated that management has the greatest influence in dynamic, unpredictable, and changing environments or in small businesses. Particularly in small businesses the need for change and action gives managers an opportunity to leave their personal imprint on the enterprise. Similarly, Porter (1991) and Peters and Waterman (1982) suggests that management values have a significant influence on both planned and emergent strategy. Bamberger (1983) goes further by stating that business strategies are products of managers' visions and values which in turn originate from their personalities.

Miller (1983) noted that managers have greater influence on business strategy in small firms, where the manager is also the owner of the firm. He explained that owner/managers are powerful enough to override obstacles to the successful realization of their business strategies. They have enormous impact on their enterprises through their power of ownership and face-to-face contact with employees (Miller & Toulouse, 1986). The owner/manager is thus at the center of all enterprise behavior and at the center of the OM are his or her values (Covin, 1991). Values are deeply rooted standards that strongly influence nearly every aspect of life including organizational behavior. Clearly articulated and understood, values significantly impact a firm's performance (Posner, Kouzes, & Schmidt, 1985). The influence of an individual's value system on the functioning of an organization is especially evident in small businesses (Olson & Currie, 1992). Small business owners' values largely impact the firms' success and performance (Higgins & Vincze, 1989; Guth & Taguiri, 1965; Olson & Currie, 1992). Theoretically, performance is affected by the relationship of the OM's personal value systems and OM's business strategy selection (Guth & Taguiri, 1965; Higgins, 1985; Higgins & Vincze, 1989; Miller, 1975; Posner, Kouzes, & Schmidt, 1985). Value-based management is a committed attempt to guide organizational decision making in accord with shared values. This approach to strategy development is one in which the organization's values are critical keys impacting the strategies chosen for determining and achieving long term goals. Hypothetically, the value system of the owner/manager is more important in small firms than the competitive environment and is reflected in the emergent strategies.

H2: An owner/manager's values will be positively related to the organization's emergent competitive (business) strategies in micro-businesses.

BUSINESS STRATEGY AND CULTURE

As previously mentioned, organizational culture is generally defined as the values, beliefs, traditions, rituals, heroes and norms of the employees (Petrock, 1990; Schwartz & Davis, 1981). In general, the evolution of an organization's culture flows from the organization's top manager and is perpetuated through the management staff by the policies and procedures (e.g., hiring, promoting/demoting, socializing, training, rewarding). Ideally, management creates an organizational culture through the policies and procedures to support the business strategy. In other words, culture follows strategy. A business or competitive strategy concerns the actions crafted to produce successful performance. This includes actions to build competitive capabilities and advantages through culture. For example, a firm with a "cost leadership" competitive strategy would attempt to create and maintain a culture of efficiency, whereas one of "differentiation" would focus on creating a culture of creativity and innovation (Porter, 1980). Porter (1980) suggests that successful small and micro-businesses will use a focused strategy based on differentiation. In other words, offering niche members a product they perceive as well suited to their own unique tastes and preferences. Successful use of a focused differentiation strategy depends on the existence of a buyer segment that is looking for special product attributes or seller capabilities and on a firm's ability make known their presence and to stand apart from rivals competing in the same target market niche. As such, the following hypothesis is proposed.

H3: Micro-businesses with different strategies will have different organizational cultures.

KEY SUCCESS FACTORS, CULTURE AND ORGANIZATIONAL PERFORMANCE

The performance of an enterprise is determined by the business strategy it adopts (Pearce & Robinson, 1985; Olson & Bokor, 1995). As previously mentioned, a business strategy is an overall game plan or plan of action which defines the competitive position of a firm (Mintzberg & Quinn, 1991). Several researchers have highlighted different business strategies by which firms compete (Miles & Snow, 1978; Porter, 1980; Merz & Sauber, 1995). For example, a firm may choose to compete by producing high quality goods or by producing at a low cost or focusing on a particular market niche. Hambrick (1983) notes that successful business or competitive strategies focus on the industry's key success factors. An industry's key success factors (KSFs) are those three to five competitive factors that most affect industry members' ability to prosper. Strickland and Thompson (2003) suggest that KSFs by their very nature are so important to competitive success that firms must develop their strategies around them. Paige (1999) defined the key success factors of the retail craft industry as: differentiation, customer satisfaction, consumer education, and advertising. As such, the following hypothesis is proposed.

H4: Micro-business strategies that focus on an industry's KSFs will have greater financial success (e.g. profit).

While the performance of an enterprise is determined by the business strategy it adopts, the successful implementation and maintenance of that strategy is dependent upon the organization's culture. In other words, the values and beliefs shared throughout the organization will shape how the work of the organization is done and as such, its performance. The research of both Deal and Kennedy (1982) and Kotter and Heskett (1992) indicates that the stronger or tighter the culture, i.e. the higher the percentage of employees that believe in the culture prescribed by top management, the higher rate of organizational success (i.e., achieving objectives). As previously assumed, micro-businesses should have strong cultures that are supportive of top management because of the close relationship between the owner/manager and the employees. As such, it seems reasonable to believe that the organizational culture of micro-businesses will have a significant effect on performance.

H5: Micro-businesses with different cultures will have different financial and strategic performance.

OWNER/MANAGER SKILLS AND ORGANIZATIONAL PERFORMANCE

A company's resource strengths or competitive skills are significant because they can form the basis for creating a competitive advantage and implementing a successful strategy. A company's success is more certain when it has appropriate and ample resources with which to compete, and especially when it has a valuable strength with the potential to produce competitive advantages (Collis & Montgomery, 1995). If a company doesn't have the resources and competitive capabilities around which to craft or implement an attractive strategy, managers need to take decisive remedial action to upgrade existing organizational resources and capabilities. This is particularly germane in micro-business where the bulk of the organization's business skills often reside with the owner/manager. In fact, research indicates that an owner/manager's lack of knowledge of his/her particular industry and skills requirements is a common cause of startup failures (Wood, 1994). As such, it seems logical to suggest that an owner/manager's skill set influence performance.

H6: The degree of the OM's business expertise will be significantly correlated with the organization's financial and strategic success.

METHOD

Sample

The population of interest was small retailers of handmade crafts located in the nine southeastern states of the United States that include the Appalachian mountain range within their borders as identified by the Southern Highlands Handicraft Guild: Maryland, Virginia, West Virginia, North Carolina, South Carolina, Kentucky, Tennessee, Georgia, and Alabama. The sample included the owner/operators or primary decision-makers of small businesses (10 employees or less) carrying product assortments containing predominantly hand made finished craft products such as decorative or wearable fiber art, pottery and ceramics, basketry, wood, metal, glass, or jewelry. A random sample of 1000 small craft retailers was drawn from lists of 2021 craft retailers provided by Chambers of Commerce, craft publications, business cards from craft shows, and craft guilds within each of the states.

Response Rate

Nearly equal numbers of questionnaires were originally mailed to each of the nine southeastern U.S. states; however, response rates varied significantly. The greatest portion of respondents was from North Carolina at 28.1%, with Alabama having the lowest response at 3.6%. Of the 1000 questionnaires mailed, 196 (19%) were returned non-deliverable. Several respondents, totaling 54 (.054 %), returned the questionnaire incomplete stating reasons for not completing the questionnaire. From the remaining 750 questionnaires, 278 were completed and returned, resulting in a 38% overall response rate. Because the two separate survey mailings produced two different groups of respondents a wave analysis to test for non-response bias was conducted. The demographics of the two groups were compared using chi-squares and t-tests to determine if any differences existed. No significant differences were found between the groups.

Instrument Development and Pretest

Quantitative research techniques were used to gather the data necessary to accomplish the objectives. A questionnaire was developed based on a review of scholarly literature to measure the variables of interest including craft retailers' values, strategies, culture and their definitions of success. Each of the items was examined for construct validity by researchers with expertise in business management and organizational culture. The questionnaire was formatted according to the style recommended by Dillman (1978). The questionnaire was pretested twice; first with two scholars with research specialties in business management. Following a few necessary revisions, a second pretest was conducted among four small retailers of crafts.

The section on business values was designed to determine how respondents defined success, defined competitive strategies and how successful they believed their craft business to actually be. Participants first rated the level of importance of 14 criteria to define their value systems (Table 1). The criteria for defining values were developed from the literature and preliminary personal interviews and included statements of traditionally-based financial definitions such as achieving sales growth or increased profits and ranged to statements of success based on more personal or intrinsic definitions including personal happiness or balancing a personal life with work (Craig & Horridge, 1995; Kuratko, Hornsby, & Naffziger, 1997; Saylor, 1987; Solderssen, Fiorito, & He, 1998). The items were rated by the respondents on a 7-point Likert-type scale with 1 being "very unimportant" and 7 being "very important". After rating the criteria, respondents were then asked to indicate emergent strategies and how successful they considered their craft business using the criteria they considered the most important in the preceding 14 items. The questions were scored on a 7-point Likert-type scale.

The section on organizational culture consisted of four questions developed by Deshpande, Farley, & Webster (1993). These questions have been recognized within the marketing research discipline as a valid scale for measuring a firm's organizational culture (Bearden & Netemeyer, 1999). The Deshpande et al. (1993) scale for measuring organizational culture was adapted from Campbell and Freeman (1991) and Quinn (1988). The scale provides four descriptions related to each of four different business environmental issues: (1) Kind of organization; (2) Leadership; (3) What holds the organization together; and (4) What is important. The four descriptions relate to four types of organizational culture: Clan, Adhocracy, Hierarchical, and Market. The first item of each of the four questions relates to a Clan culture, the second item to an Adhocracy culture, the third item to a Hierarchical culture, and finally, the fourth item to a Market culture. The original Deshpande, et al. (1993) scale required participants to distribute 100 points across four descriptions representing the organizational culture types for the four different aspects of an organization. For this investigation organizational culture was measured using a revised version of the rating methods used by the Deshpande et al. (1993) study. Respondents were asked to rank each set of four descriptions from 1 to 4, with 1 being the characteristic which best described the small retail business.

Data Collection and Analysis

A multi-step mailing procedure was implemented utilizing the modified Dillman Total Design Method (Dillman, 1978). Two separate surveys with reminder post cards were mailed to the sample. Data analysis was initially undertaken to obtain an overview of the sample's characteristics using frequencies, percentages, and means. These questions related to the number of years the craft business had been in operation, the state in which it was located, which craft categories were carried in the store, and which category generated the greatest sales volume. Questions were also related to the background of the business person included years of business experience, gender and level of education, and finally, whether the income of the business was primary or supplemental.

A series of quantitative methods followed to test the study's hypotheses. Factor analysis, employed in an exploratory manner, was used to reduce the number of items for criteria for success. The orthogonal rotation technique was conducted first to determine that the factors were independent followed by the Promax rotation method of extraction to increase clarity and achieve a better fit. The strength of the factor loadings, the examination of the conceptual clarity of the items within each factor, scree-tests, and eigenvalues served in making decisions on how many and which factors to retain. Items with factor loadings of .40 or higher with a minimum difference of .20 on other factors were retained to define the factors. Each factor was named based upon the salient theme that carried through the items. A Cronbach's alpha of .60 was decided to be the lowest acceptable parameter for internal consistency for each of factor grouping. To distinguish the differences between the four groups, Fishers's (LSD) test of multiple comparisons was used. A <.05 level of confidence was used throughout the tests.

RESULTS

A typical small or micro-retail craft firm owner was female (75%). The owner/operators of the small firms worked between 10 to 93 hours per week, averaging 46 hours per week. Business experience of the craft retailers ranged from one to 50 years, with 17.5 years being the average. More than one-third of the retailers had some college education and one-third possessed a Bachelor's degree. For a little over one-half, the income of the craft businesses was supplemental to another household income. Over 90% of the respondents started the craft retail business and presently owned it as well. The craft retail firms had been in operation between one and 35 years with the average at 12 years. Two-thirds of the retailers had a full-time staff of employees; however, all had less than 10 employees. Lastly, there were no significant relationship between cultural type and years of experience, gender or number of employees.

Hypothesis one tested the proposition that the personal values of micro-business owner/managers are closely linked with the organization's culture. First, however, it was necessary to perform a factor analysis to classify the owner/manager's values. Fourteen owner/manager values were classified into four personal value groups (Table 1). The first value factor was classified as Entrepreneurial Values (EVs), because items described craft retailers' values in terms of business goals. The second value factor was classified as a Personal Values (PVs), because it described craft retailer's values in terms of personal goals. The third value factor was classified as Craft/Cultural Values (CCVs), because it contained items that depict retailers' values of reinforcing a region's cultural identity or preserving a craft's tradition. The fourth value factor was labeled as a Personal Expression Value (PEVs), because it reflected the retailers' desire to express themselves or to receive a psychic paycheck from working with crafts.

Next, it was necessary to determine whether the micro-businesses fit the cultural classification system proposed by Deshpande et al. (1993). Organizational culture was determined from a chi-square analysis of respondents' answers to the four questions developed by Deshpande et al. (1993). The results indicated that very few firms (41 out of 278) exhibited a totally pure culture, i.e. answered the same way on all four questions. Unfortunately, this was sample was not large enough to properly test several hypotheses. As such, the test sample size was increased to include those organizations that answered the same on three or more of the four questions were judged to be within that culture (192 out of 278). A follow-up comparison was performed between those groups that answered the same on all four questions and those groups that answered the same on only three questions. The results indicated no significant differences between these groups. As such, the firms that answered the same on three or more of the four questions were used to test hypotheses concerning relationships to the organization's culture.

A cross-tabulation of the results from the culture questionnaire (Deshpande et al., 1993) indicated that craft retailers most strongly described their organizational cultures as clan cultures (139 out of 192). A Clan emphasizes loyalty, tradition, cohesiveness, and teamwork. In clan cultures personal satisfaction is more important than achieving financial objectives. Small retailers of crafts next described their business environments as adhocracy cultures (20 out of 192) or market cultures (19 out of 192). Adhocracy cultures emphasize innovation and entrepreneurship while market cultures are distinguished by their focus on competitiveness and goal achievement. Additionally, they exhibit higher traditionally defined business performance criteria (e.g., profit, customer focus) than the others. Finally, the small retailers least described their organizational cultures as a hierarchical culture (14 out of 192). A hierarchical cultures focus on rules, regulations, and smooth, orderly business operations. In fact, most micro-businesses suggested that their organizations were anything but orderly.

Next, a chi-square cross-tabulation was performed to assess the relationship between the organizations' values and their cultures (H1). This was first performed by comparing the owner/managers' individual values (top two blocks of a 7-point Likert scale) to their answers on the four cultural questions (Table 2). Second, the owner/managers were given an aggregate score for each of the four value dimensions (e.g., EV, PV, CCV, and PEV) based on their responses in the top two blocks of the 7-point Likert scale. In turn, their value dimension scores were compared to the four cultures (Table 3). The findings of both of these tests offer partial support for hypothesis one. For example, the entrepreneurial value system identifies significantly with a market culture and personal value system identifies significantly with an adhocracy culture.

Hypothesis two tested the proposition that the personal values of owner/managers are linked to their emergent strategies. In order to test this proposition a cluster analysis was performed to classify the organizations' retail strategies from their planned strategies and emergent behaviors. Subsequently, four strategies were identified from the competitive behaviors of the small craft retail firms. The first cluster, Entrepreneurial Strategy (Estrat), focused on managing the organization using "best practices." These owner/managers emphasized both financial (e.g., profit) and strategic objectives (e.g., knowledge of the industry's key success factors, customer satisfaction and the development of business skills). The second and largest cluster of small retailers used a Personal Strategy (Pstrat) which focused on creating a sound and lasting business. As such, their emphasis was on using "best practices" to stabilize the business rather for achieving financial objectives (e.g., profit, growth). The third cluster, Craft/Culture Strategy (CCstrat), indicated an emphasis to reinforce the region's cultural identity and preserve the craft tradition. At the same time, the business objectives were ones of sales and profit. These owner/managers, however, lacked the emphasis on "best business practices" stressed by the Entrepreneurship Strategy. Finally, the fourth culture, the Personal Expression Strategy (PEstrat), indicated the least importance on both financial and strategic objectives. One might say this was the lack of a business strategy. The achievement/satisfaction of goals, success criteria, or creating a family business was the least important to this group's owner/managers. Success entailed being able to express their skills or talents in their business and receiving personal gratification from working with crafts.

The owner/manager's responses to the questions on their competitive behavior were aggregated according to the four strategies. Then, each retail firm was assigned the emergent strategy in which their aggregated score was the farthest above the mean (at least one standard deviation). Only 96 of the 182 firms had strategies considered pure enough to test the hypothesis; 17 Estrat, 27 Pstrat, 28 CCstrat, and 24 PEstrat. Table 3 represents the cross-tabulation of the four value systems against the four strategies. The percentages are based on responses in the top two blocks (i.e., important and very important) of a 7-point Likert scale. All chi-square values were significant at p<.01.

For the most part, hypothesis two was supported. The owner/manager's value systems did agree with specific emergent strategies. For example, the Estrat was significantly associated with the value system of EV and CCV. The PStrat was most like the value system of PV and CCV. The CCstrat was most like the value system of CCV and PEV. The PEstrat was most like the value system of PV and CCV. Note that all strategies appeared to use the values of CCV.

Hypothesis three was developed to test the proposition that micro-businesses with different strategies will have different organizational cultures. A cross-tabulation was performed on the cultures developed from hypothesis one testing and the strategies developed in hypothesis two testing (Table 4). The results offer partial support for the notion that different strategies will have distinctly different cultures (as defined by Deshpande et al., 1993). As expected, the Market culture aligned with the Entrepreneurial strategy and the Clan culture aligned with the Personal strategy. Surprisingly, however, all cultures indicated that they used action of a personal expression strategy. As an interesting aside, those organizations that had the most specific strategies (i.e., purest) also claimed to be the most successful.

Hypothesis four was developed to test the proposition that micro-businesses with strategies that focus on the industry's key success factors will have a higher degree of financial success, i.e. profit. Paige (1999) defined the key success factors of the retail craft industry as: differentiation, customer satisfaction, consumer education, and advertising. The results of a correlation analysis of the firms' profits against the craft industry's key success factors indicate support for this hypothesis. Each of the key success factors (differentiation, customer satisfaction, consumer education and advertisement) were significantly correlated to profit at p<.01 (Table 5). Additionally, a regression analysis of the key success factors against profit revealed that the factors predicted 32% of the variance of profit at p<.01.

Hypothesis five was developed to test the proposition that micro-businesses with different cultures will have a different financial and strategic performance. A cross-tabulation was performed on the four cultures and the performance indicators (profit and customer satisfaction). The results indicate the Market and Adhocracy cultures are best for achieving the traditional performance measures (Table 6). Both the Market and Adhocracy cultures were significantly more successful in achieving profits and customer satisfaction. As an aside, it is interesting to note that a higher percentage of owner/managers who identify themselves as having Market or Adhocracy cultures also indicate that the business is their primary source of income (Table 7). For example, 63 percent of the Adhocracy cultures and 62 percent of the Market cultures stated the business was their primary source of income. Lastly, since it appears that there is a strong relationship between culture and traditional performance measures, it shouldn't be surprising to note that there is a significant relationship between culture and education (Table 8).

However, some of the results are surprising. For example, although 100 percent of the owner/managers identifying with a Market culture had some college, none were college graduates. Fifty percent of those identifying themselves with an Adhocracy culture had some college, 42 percent had a bachelor's degree and 8 percent had some graduate school. Owner/managers exhibiting a Clan culture had the highest overall level of education; 32 percent had some college, 49 percent had a bachelor's degree and 14 percent had some graduate school.

Hypothesis six was developed to test the proposition that the business expertise of micro-business owner/managers will be significantly correlated with the organization's financial and strategic success. Owner/managers were asked to rate their skill level (7-Likert scale) in the following area: (1) managing financial matters, (2) buying the right product at the right time, (3) creating visual displays, supervising employees, (4) assessing customer needs, (5) possessing personal ambition, (6) working hard, (7) possessing business skills, (8) possessing math skills, (9) forecasting trends, (10) planning and strategizing, (11) pricing skills, (12) creating promotions and advertisements, and (13) using creativity and innovation. A correlation analysis was conducted between the business owner/managers' skill set and their financial and strategic performance. Profit was used as the measure of financial performance and customer satisfaction was used as the measure of strategic performance. The results indicated that most of the skills were highly correlated with an overall perception of success and the financial and strategic indicators (Table 9). Notable exceptions were that a sense of success wasn't significantly correlated to expertise in math, finance, supervision and high degree of ambition. The only expertise that was not significantly correlated with profit was the possession of math skills. The skills that were not significantly correlated with customer satisfaction were ambition and creativity.

In order to refine this analysis, a stepwise regression of the OM's skill levels was performed on the firm's success at creating profits. The results indicated two predictors at [R.sup.2] = .14, p<.01: hard work and expertise at creating visual displays. Additionally, a regression analysis of the OM's skill levels was performed on the firm's success at creating customer satisfaction. The results indicated five predictors at R2 = .27, p<.01: pricing skills, managing financial matters, hard work, ambition, and expertise in supervising employees. In short, the hypothesis six was supported. Additionally, a cross-tabulation was performed to examine for relationships between organizational culture and the knowledge, skills and abilities of the owner/managers (Table 10). Not surprisingly, those OMs identifying themselves with Market and Adhocracy cultures possessed the highest level of business skills.

DISCUSSION

The aim of this research was to empirically test the relationships between the micro-business owner/managers' personal values and expertise, the strategies they adopt, the cultures they develop, the industry's key success factors, and their business performance. Previous theoretical research suggests that there should be a strong correlation between an organization's values and their culture. The findings in this study indicate that, in most cases, the OM's values are related to the organization's culture. In other words, OMs that valued entrepreneurial attributes created market cultures and ones that valued personal attributes created adhocracy cultures. On the other hand, each of the value questions (Table 2) was given high scores by members of the clan culture. This seems to suggest that the cultures of micro-businesses are heavily laced with clan-like values even though other cultural systems may predominate. Also, the craft/culture value system appears to be near the top of each culture except the hierarchical culture. This seems to suggest that the desire to promote the craft itself is an important part of the culture of the micro-businesses within this particular industry. Additionally, it should be noted that only 41 out of 278 businesses had pure cultures (i.e., four out of four on the culture classification questions) and that the vast majority of those had clan characteristics (71%). The lack of pure cultures calls into question whether the Deshpande et al., (1993) classification of organization culture works for micro-businesses. Lastly, as an aside, there was no significant relationship between cultural types and either the OM's years of experience or gender. This indicates that the culture of a micro-business is more dependent on the owner's values than his/her experience or gender.

Theoretical research on the relationship between top management values and strategies posit that value systems influence the development of strategies (Thompson & Strickland, 2003). As predicted, the findings of this study indicate a positive relationship between the OMs' values and their strategies. It was interesting to note, however, that all the emergent strategies contain of a high degree of the Craft/Culture value system. In other words, most organizations incorporated the following values into their strategies: (1) reinforcing the region's cultural identity, (2) providing a differentiated product or service, (3) preserving and elevating the craft tradition, and (4) gaining a positive reputation in the community with consumers and within the craft industry. Further, the results suggest that a matrix may be used to illustrate or classify organizational strategies of craft micro-firms based on OM values. For example, a two by two matrix may be constructed with a "personal values" on one axis and a "business values" on the other. As such, a strategy that is high in "personal values" and high in "business values" might be classified as a personal business strategy. One that is low in "personal values" and high in "business values" might be classified as entrepreneurial or market strategy. The results failed to capture any successful businesses that had both a low "personal" and a low "business" focus. This indicates that a "low-low" combination isn't the basis for a successful strategy. Also, similar to the cultural purity problem, only 51 percent of the test sample had strategies pure enough for testing. This suggests that approximately half the firms are using mixed or multiple strategies. But unlike the skewed distribution of cultures within craft industry, the pure strategies appeared to be relatively equally distributed; entrepreneurial 18 percent, personal 28 percent, craft/culture 29 percent, and personal expression 25 percent. Lastly, as one might expect, those organizations with the purest strategies (least variance on strategic factors) were also the most successful in achieving their goals.

Theoretical research on the relationship between strategy and culture suggests that "culture follows strategy" (Thompson & Strickland, 2003). In other words, managers develop a particular culture to implement a particular strategy. The findings offered only partial support for the notion that different strategies have distinctly different cultures. Surprisingly, however, the top two blocks of the Likert scale for the comparison of the Entrepreneurial strategy to all cultures was very low. Although the Market culture aligned the best with an Entrepreneurial strategy, only 26 percent of the Market cultures indicated that their entrepreneurial actions were in the top two block of the Likert scale. This suggests that entrepreneurial actions within the retail craft industry aren't as strong as one might think. Also, surprisingly, the Market culture aligned well with the Craft/Culture strategy. This suggests that organizations pursuing either an Entrepreneurial or Craft/Culture strategy implement a Market culture. Additionally, the alignment between the Clan culture and the Personal strategy was a fairly convincing 52 percent (top two blocks) as compared to the next culture with an alignment of 19 percent. Overall, it is interesting to note that a high percentage of cultures aligned with the emergent behaviors of the Personal Expression strategy. However, it doesn't appear to make sense that Personal Expression strategy should align so highly (99%) with a Hierarchical culture. Hierarchy cultures stress order, regulation, and uniformity with more "coordinator" styles of leadership whose strategic emphasis is on predictable, smooth operations. It is interesting to note, however, that all cultures gave high marks to those behaviors signifying a strategy of Personal Expression. This seems to suggest that regardless of the culture and the values, most retail craft business have a high degree of personal expression in their emergent strategy.

Theoretical research on business strategy suggests that firms that focus on the key success factors of an industry will be financially more successful (Porter, 1980). The findings of this study support that notion. Firms with the highest profits focus their strategies on the customers, i.e. satisfaction through differentiation and outreach through education and advertisement. As an aside, the generic competitive strategy of "focused differentiation" was used by 98 percent of the firms claiming to be financially successful (top two blocks of a 7-point Likert scale). This agrees with Porter's (1980) notion that small entrepreneurial firms need to pursue a "focused differentiation strategy to be successful.

Theoretical research on the relationship between culture and performance suggests that market-like cultures will have the best financial and strategic performance (Thompson & Strickland, 2003). The results of this study indicate that the Market and Adhocracy cultures are best for achieving the traditional performance measures (Table 6). This is reasonable since Market cultures focus on competitiveness and goal achievement, led by decisive, achievement-oriented individuals with guiding strategies for achieving competitive advantage and market superiority. Adhocracy cultures emphasize entrepreneurship and creativity, where leaders are more innovative and risk-taking and whose strategic orientation focuses on innovation and growth. Note that none of the organizations who identified themselves as Hierarchical were in the top two blocks of profit or customer satisfaction. Also, very few of those organizations identifying themselves as having a Clan culture had high performance in traditional terms. Additionally, it is interesting to note that a higher percentage of owner/managers who identify themselves as having Market or Adhocracy cultures also indicate that the business is their primary source of income (Table 7). Lastly, since it appears that there is a strong relationship between culture and traditional performance measures, it shouldn't be surprising to note that there is a significant relationship between culture and education (Table 8). Although one might expect that higher levels of education might correspond with the market oriented cultures, the results suggest that the clan cultures are the better educated. The data, however, doesn't indicate the disciplines in which the owner/managers received their education.

Theoretical research suggests there is a strong relationship between individual or organizational performance and knowledge, skills and abilities (Hackman, 1987). The findings of this study indicate that the owner/manager's skill set was significantly correlated with both the financial and strategic indicators as well as his/her perception of success. Not surprisingly, those OMs identifying themselves with Market and Adhocracy cultures possessed the highest level of business skills. What was surprising, however, was that the Adhocracy OMs appeared to possess a higher level of KSAs than the Market OMs in some key business skills (e.g., planning strategy, forecasting, assessing consumer needs). Perhaps this is because their level of education is higher. Also, not surprisingly, the initial preparation of a business plan was significantly correlated with the owner/manager's perception of success. Forty-nine percent of the owner/managers who initially completed a business plan reported the highest level of success. Only 32 percent of those who didn't initially complete a plan reported the highest level of success. Those OMs who initially completed a business plan were only slightly more successful (79% vs. 71%) at achieving the highest level of customer satisfaction. Unfortunately, only 30 percent of the owner/managers completed a business plan during startup.

CONCLUSIONS

A prime purpose of this research was to investigate the strategic management process of micro-businesses in hope of finding methods to improve their success rate. The strategic management process involves the development of values, objectives (key success factors), strategies, culture, and expertise to produce the desired results. The small business research model of Kotsey and Meredith (1997), i.e., OM values lead to strategies and strategies lead to performance was used as the basis for this research. Additionally, the research of Deshpande et al. (1993) on the classification of organizational cultures in large businesses was used to classify micro-business cultures.

The findings indicated that in most cases the OM's values influenced the organization's culture. In other words, OMs that valued entrepreneurial attributes created a market cultures and ones the valued personal attributes created an adhocracy cultures. It should be noted, however, that there were only 41 pure cultures out of 278 firms and the vast majority of micro-firms had characteristics of clan cultures. The lack of pure cultures calls into question whether the Deshpande et al., (1993) classification of organization culture works for micro-businesses. The results seem to suggest that a new instrument should be developed specifically to classify micro-businesses. Such an instrument might use questions based on the firm's personal and business goals to classify the culture. Also, future studies needs to consider the affect of part-time employees on the micro-business culture. While there were very few pure cultures, the ones that were pure, exhibited strong relationships to emergent strategies.

Additionally, the findings indicated that specific OM values were commonly associated with specific emergent strategies. For example, entrepreneurial valves were associated with entrepreneurial strategies and personal values were associated with personal strategies. Similar to the lack of purity in culture, only half of the craft retailers had what might be called a pure strategy; many seemed to use a broad array of competitive approaches. Surprisingly, however, all micro-craft firm strategies possessed a strong craft/regional culture value system. Also, the results indicate that those OMs who focused their strategies on the industry's key success factors outperform those who didn't. The least successful craft retailers had the least consumer orientation and a less focused strategy than the more successful firms. In general, business performance (profit and customer satisfaction) was related to the OM's efforts, expertise, and strategies. However, further research needs to be conducted to establish the exact relationship between factors within the micro-business strategic management process. While this research doesn't establish causal relationship, it does suggest a strong relationship between values and strategy, values and culture, and strategy and performance. Specifically, it suggests that values relate to strategy and culture and factors, such as culture and expertise may moderate the relationship between strategy and performance. This relationship is offered as a model for testing the strategic management of micro-businesses.

Lastly, this research indicates that governmental enterprise assistance programs should focus on building business expertise to include strategic planning. Additionally, the findings validated that consumer education and advertisement are key success factor in the craft industry. As such, this is another area that the government could lend assistance. This effort would go hand-in-hand with the growing interest in hand made products and efforts to increase tourism. Also, the significant relationship between OM expertise and business success suggests that an educational assistance program should be bundled with financial support programs.

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Table 1: Factor Analysis of Owner/Manager Personal Value Systems

 Factor Title and Items Factor Loadings

Entrepreneurial Values (EVs)
 Reason for starting business was to make money 83
 Desire to fulfill a personal economic or financial
 need 81
 Exceeding customer expectations 64
 Achieving sales growth or increased profit 55
 Cronbach's alpha=.73
Personal Values (PVs)
 Reason for starting business was personal
 satisfaction 88
 Achieving personal happiness and fulfillment 83
 Having independence and control over my life 78
 Feeling satisfied with owning my own business 72
 Balancing family/personal life with work 60
 Cronbach's alpha=.87
Craft/Cultural Values (CCVs)
 Reinforcing the region's cultural identity 70
 Providing a differentiated product or service 63
 Preserving and elevating the craft tradition 60
 Gaining a positive reputation in the community
 with consumers and the within the craft industry 57
 Cronbach's alpha=.81
Personal Expression Values (PEVs)
 Reason for starting business was love or passion
 for craft 85
 Receiving personal gratification of working with
 crafts 72
 Expressing my skills or talents 56
 Cronbach's alpha=.71

Table 2: Cross-Tabulation of Cultural Types to Individual Value
Questions (by percentage in the top two blocks of a 7-point Likert
scale)

 Clan Adhocracy

Helping others 59 50
Owning my own business 52 69
Exceeding customer expectations 53 69
Independent/control over my life 67 87
Achieving personal happiness/fulfillment 62 81
Incorporating personal values into my work 58 56
Balancing my family/personal life with work 55 50
Expressing my skills/talents 50 50
Achieving sales growth/increased profits 37 31
Preserving and elevating the craft tradition 40 69
Receiving gratification of working with 46 69
crafts
Providing a differentiated product/service 50 62
Reinforcing the region's cultural identity 30 63
Gaining reputation in the community/craft 60 75
industry

 Hierarchical Market

Helping others 25 62
Owning my own business 25 62
Exceeding customer expectations 50 62
Independent/control over my life 25 54 **
Achieving personal happiness/fulfillment 0 54 *
Incorporating personal values into my work 25 39 **
Balancing my family/personal life with work 25 54 **
Expressing my skills/talents 100 39
Achieving sales growth/increased profits 0 62 **
Preserving and elevating the craft tradition 25 69 **
Receiving gratification of working with 25 54
crafts
Providing a differentiated product/service 0 86 *
Reinforcing the region's cultural identity 0 46 **
Gaining reputation in the community/craft 0 77 *
industry

** Significant at p<.01

Table 3: Cross-Tabulation of Value Systems to Organizational Cultures
(by percentage in the top two blocks of a 7-point Likert scale)

 Clan Adhocracy Hierarchical Market

EV 58 50 0 65
PV 82 100 0 67
CCV 89 90 0 89
PEV 80 90 100 89

Note: All values are significant at p<.01.

Table 3: Cross-tabulation Comparison between Value Systems and
Strategies (by percentage in the top two blocks of a 7-point Likert
scale)

 ESTRAT PSTRAT CCSTRAT PESTRAT

EV 88 34 51 41
PV 72 79 51 100
CCV 100 81 85 94
PEV 83 66 83 70

Note: All values are significant at p<.01.

Table 4: Cross-Tabulation Comparison of Organizational Cultures and
Strategies (by percentage in the top two blocks of 7-point Likert
scales)

 ESTRAT PSTRAT CCSTRAT PESTRAT

Clan 12 52 27 69
Adhocracy 6 19 6 88
Hierarchical 0 0 21 99
Market 26 15 46 74

Note: All values are significant at p<.01.

Table 5: Correlation of the industry's key success factors against a
firm's profits

KSFs Differentiation Customer Sat

Profit .30 ** .28 **

KSFs Consumer Education Advertising

Profit .06 ** .32 **

** Significant at p<.01.

Table 6: Cross-Tabulation Comparison of Organizational Cultures and
Performance (by percentage in the top two blocks of 7-point Likert
scales)

 Clan Adhocracy Hierarchical Market

Profit 11 43 0 41
Customer satisfaction 17 50 0 45

All values are significant at p<.01

Table 7: Cross-Tabulation Comparison of Organizational Cultures and
Income Source (by percentage)

 Clan Adhocracy Hierarchical Market

Primary 42 63 25 62
Secondary 58 37 75 38

All values are significant at p<.01

Table 8: Cross-Tabulation Comparison of Organizational Culture and
Education (by percentage)

 Clan Adhocracy

Grades 1-8 02 00
Grades 9-12 13 00
1-3 years tech, voc or college 32 50
Bachelor's degree 49 42
Some graduate school 14 08
Graduate degree 00 00

 Hierarchical Market

Grades 1-8 00 00
Grades 9-12 21 00
1-3 years tech, voc or college 79 100
Bachelor's degree 00 00
Some graduate school 00 00
Graduate degree 00 00

All values are significant at p<.01

Note: Evaluation done on the 192 firms exhibiting the purest cultures

Table 9: Correlation of Business Skills and Organizational Performance

 Finance buying display superv cusneeds

success .09 .20 ** .22 ** .05 .22 **
profits .13 * .19 ** .15 ** .16 ** .14 *
cust sat .24 ** .32 ** 20 ** .21 ** .19 **

 ambit hardwork busskill math forecast

success .06 .24 ** .14 * .02 .18 **
profits .23 ** .16 ** .19 ** .03 .15 **
cust sat .11 .20 ** .22 ** .18 ** .20 **

 strategy price advertis creativi

success .19 ** .19 ** .20 ** .18 **
profits .19 ** .14 ** .21 ** .09
cust sat .25 ** .30 ** .23 ** .09

** Significant at p<.01
* Significant at p<.05

Table 10: Cross-Tabulation Comparison of Organizational Culture and
Owner/Manager KSAs (by percentage in the top two blocks of a 7-point
Likert scale)

 Clan Adhocracy

in managing financial matters 16 6
in buying the right product at the right
 time ** 16 6
in visual display 28 56
in employee supervision 9 25
in assessing consumer needs and wants ** 24 61
in personal ambition * 22 19
in working hard ** 54 56
in business skills ** 14 42
in math ** 17 6
forecasting trends * 12 50
in strategizing and business planning ** 11 19
in pricing * 25 50
in promotions and advertising * 12 25
in creativity and innovativeness 26 62

 Hierarchical Market

in managing financial matters 0 31
in buying the right product at the right
 time ** 0 62
in visual display 0 39
in employee supervision 0 31
in assessing consumer needs and wants ** 0 46
in personal ambition * 25 69
in working hard ** 25 92
in business skills ** 0 39
in math ** 0 23
forecasting trends * 0 23
in strategizing and business planning ** 0 0
in pricing * 0 54
in promotions and advertising * 0 39
in creativity and innovativeness 25 39

** Significant at p<.01
* Significant at p<.05