Tech uncertainty increases advantages of small businesses.

In this study we examined the effect of technological uncertainty upon the performance of a stratified random sample of over 700 U.S. small/medium businesses with fewer than 250 employees. Within the sample, we observed that as technological uncertainty increases, so do the advantages that accrue to the youngest and smallest businesses. We found that these firms do better overall if they are facing higher technological uncertainty, suggesting that neither their age nor their size is a liability and conversely, may be a competitive advantage in exploiting the opportunities created by technological uncertainty.

These findings of a liability of oldness or liability of largeness in coping with technological uncertainty contrasts to the traditional generally accepted notions of a liability of newness (Stinchcombe, 1965) or a liability of smallness (Auster & Aldrich, 1986). However, it is consistent with some prior research that demonstrated how established firms adapt themselves to stable environments, such as by aligning capabilities to external conditions (DeSarbo et al., 2005) and creating “routines” (Nelson & Winter, 1982). For technological uncertainty, a condition of high environmental uncertainty leaves incumbents at a disadvantage (Tushman & Anderson, 1986). At the same time, while research on technological uncertainty has tended to emphasize firms that compete based on technological innovation (for example, Anderson & Tushman, 2001), our results are robust for a broader cross-section of both small and very small (micro) businesses.

Through this study we also contribute to the limited research on the effects of uncertainty upon micro-sized business. Using a subsample of businesses with fewer than 20 employees, we show that the advantages of being newer or smaller are also valid within this sample of smaller/micro-sized firms. Despite prior research on micro firms that emphasizes their lack of systems, processes, routines, and resources (for example, Achtenhagen et al., 2017), our data demonstrate that even these businesses cannot just overcome—but instead invert—the long accepted liabilities of newness and smallness. As with larger businesses, strategic flexibility has been held to be important for smaller businesses (for example, Supeno et al., 2015), but these results suggest opportunities to investigate the antecedents and consequences of variation in strategic flexibility among micro-sized firms as they do indeed appear unique from other larger SMEs (Gherhes et al., 2016).