PETERJENNINGS, NOW WITH SOUTHAMPTON Institute, England, was at the time of writing with Sheffield Hallam University, England, and Graham Beaver is with Nottingham Trent University, England. Successful small firms practice strategic management either consciously and visibly or unconsciously and invisibly. Failure and success are interpreted as measures of good or indifferent management and are usually defined rational criteria which ignore stakeholder aspirations. Many owner managers pursue personal objectives which inhibit the probability of success if measured using these rational criteria. The majority of existing studies of small business performance tend to focus on either the symptoms arising from problems within the firm or upon the reason cited for failure. Comparatively little analysis of the ingredients that promote and sustain competitive advantage has been undertaken. Notwithstanding the fact that generic skills and abilities are required, the management process in small firms is unique and cannot be considered to be the same as professional management in larger organisations practised on a reduced scale. The multiplicity of roles expected of the owner-manager as the principal stakeholder often causes dissonance which enhances the probability of poor decision-making and inappropriate action. The authors consider that the root cause of either small business failure of poor performance is almost invariably a lack of management attention to strategic issues.

This paper takes a critical examination of the process and management of innovation and the attainment of competitive advantage in the emerging enterprise. The ingredients for the successful management of innovation are explored using two case illustrations of companies that have attained profitable and sustainable business development against the odds in the pharmaceutical and fibre-optics industrie

This paper first considers the role and characteristics of the small firm and its collective, the small business sector. A brief examination of the small firm discourse and research agenda is provided. The following section undertakes a critical examination of the small firm management context. A critical appraisal of the strategic management approach suggests that strategic activity in the small firm sector is much more informal, intuitive and invisible than has been previously suggested by design school advocates. The final part of the paper considers the role and development of policy and its effects on the survival, growth and performance of small firms. \u

PurposeTo show that the inability to adapt to a series of crises caused by business development is one of the principal causes of failure for all organisations and that one of the primary components in small business success must be the managerial competence of the principal actors, inevitably the owner‐manager.Design/methodology/approachThis paper examines the divergence between the prescribed and assumed models of entrepreneurial behaviour provided by contemporary management theorists and the real, observed and reported behaviour of small business practitioners and owner‐managers. It reports on case study examples and highlights the dichotomy between expected and actual behaviour in typical management situations.FindingsThe paper suggests that the almost egotistical attitude displayed by many entrepreneurs, constitutes an abuse of the trust and the power placed in the hands of small business owner‐managers and that in extreme instances, the abuse of entrepreneurial power may lead directly to the failure of the small firm.Originality/valueMany surveys of small business failure and sub‐optimal performance often suggest situational and operational causes and explanations. This paper offers a different perspective for future research because the cause may be seen to lie with the apparently non‐rational behaviour of the entrepreneur or owner‐manager who does not adhere to the “rules” and expectations of classical management theory.

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