Economic Condition

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BUSINESS STRATEGIES AND PERFORMANCE
DURING DIFFICULT ECONOMIC CONDITIONS

For the Department of Business Innovation and Skills (BIS)

John Kitching
Robert Blackburn
David Smallbone
Small Business Research Centre, Kingston University
Sarah Dixon
School of Management, Bath University

June 2009

URN 09/1031
Contents
EXECUTIVE SUMMARYi
1. INTRODUCTION, RESEARCH OBJECTIVES AND METHODS1
2. RESEARCH CONTEXT1
2.1 Defining Difficult Economic Conditions1
2.2 The Current Crisis1
3. ANALYTICAL FRAMEWORK1
4. THE BUSINESS STRATEGY AND MANAGEMENT LITERATURE1
4.1 Business Strategy: General Considerations1
4.2 Strategic Adaptation to Environmental Jolts, Turbulence and Radical Institutional Change1 4.3 Strategic Adaptation to Recession1
4.4 Retrenchment Strategies1
4.5 Investment Strategies1
4.6 ‘Ambidextrous’ Strategies1
4.7 Business Size as an Influence on Strategic Adaptation to Difficult Economic Conditions1 4.8 International Experience1
5. CONTEMPORARY COMMENTARY ON THE CURRENT CRISIS1
6. STRATEGIC RESPONSES IN THE RECESSION: DELIBERATIONS FROM A THINK-TANK1 6.1 Introduction and Objectives1
6.2 Business Responses in Recession1
6.2.1 Knowledge Base1
6.2.2 Unevenness of Recession1
6.3 Modelling Strategic Change1
6.3.1 Typologies of Strategic Change1
6.3.2 Strategic Thinking and Strategic Actions1
6.4 The Role of Innovation under Recession Conditions1
6.5 Roles for Public Policy1
6.5.1 Legitimise Change and Innovation within Organisations1 6.5.2 Stimulate Experimental Approaches to Supporting Innovation1 6.5.3 Promote the Provision of Finance1
6.5.4 Pay Attention to Business Exits1
6.5.5 Consider Small Firms/New Firms Initiatives1
6.5.6 Redefining sectors and cross-sector initiatives1
6.5.7 Policy Messages for Recovery1
6.5.8 Harnessing Creativity and Sources of National Excellence1 6.6 Conclusions and Implications from the think-tank1
7. ASSESSMENT OF DATA SOURCES1
8. CONCLUSIONS1
APPENDIX1
REFERENCES1

EXECUTIVE SUMMARY

Introduction and Research Objectives

• This report reviews the available literatures in order to: (i) identify the pressures, threats and opportunities facing businesses operating in difficult economic conditions such as those currently being experienced in the UK and globally; (ii) identify the strategies adopted by businesses that have experienced such conditions; and (iii) assess which strategies proved to be problematic and those that have allowed businesses to respond dynamically, survive and emerge strongly as economic conditions improved.

• Sources for the report include academic studies of business responses to recession and other ‘environmental jolts’, contemporary commentary on the current crisis, and the deliberations of a ‘think-tank’ involving leading academic experts on business strategy and management.

• The literature directly focused on business responses during recession is limited and partial. The search was, therefore, extended to wider literatures on business responses to environmental shocks/jolts, ‘endgame’ strategies in declining industries and business turnaround. These literatures provide support for the analysis presented, although their relevance to recession conditions has to be demonstrated rather than assumed.

Uncertainty

• Previous recessions provide pointers to possible business responses but, given the specificities of the current crisis, it is difficult to predict trends or prescribe courses of action with a high degree of confidence in their likely success.

• The increasing globalisation of economic activity – the interconnectedness of economic activity across national frontiers - renders the current crisis different from previous recessions.

• The current recession may well constitute a ‘structural break’ or ‘phase shift’ in the economy,...
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