The impact of environmental turbulence on the relationship between strategic planning and firm performance within Dutch SMEs

Abstract

Technology is changing at an accelerating pace, leading to business model innovations and changing industry dynamics. These changing dynamics raise the need for further understanding of whether and how environmental turbulence impacts the way that SMEs should conduct strategic planning in order to increase financial performance. Therefore, the following research question has been proposed: “What effect does environmental turbulence have on the relationship between strategic planning and financial performance within Dutch SMEs?” First of all, quantitative data showed that strategic planning has a positive effect on the innovativeness and financial performance of Dutch SMEs. Secondly, the data showed that certain aspects of environmental turbulence have a positive moderating effect on both the planning-performance and the planning-innovativenness relationship. Qualitative data also showed that strategic planning is more important in a turbulent environment as it helps SMEs to maintain direction and respond faster to changes in the market. Thirdly, the qualitative research led to the recommendation to plan formally and involve key players in the decision making process, regardless of the degree of environmental turbulence. Furthermore, the interviewed experts pointed out that SMEs should develop a long-term planning on a strategic level as well as a short-term planning on an operational level.