Retail matters : examining the relationship between resources and performance in small retail firms

Retailing is an essential economic, social and cultural activity, and a strong retail sector makes a significant contribution to local, state and national economies. Small retailers contribute to their local areas by providing a variety of goods, employment opportunities, and an alternative to offerings from multinational corporations. In a shrinking global market retailers, particularly small retail firms, operate in increasingly volatile and competitive trading environments. Although the challenges facing the retail industry have been widely addressed in both the academic and trade literature, the accumulated research in the area of retailing has concentrated on the performance of large retailers. There is a dearth of research focussing on small retail firms and only a limited number of studies examining the resources utilised by high performing small retailers. Using the lens of R-A theory to address this gap in the research, this study aimed to empirically investigate the relationship between firm resources (informational, relational, physical, financial, human and organisational) and performance in small retail firms by identifying which resources are associated with higher levels of firm performance. This study further examined the effect of three mediating factors (strategic orientation, strategic planning capability and entrepreneurial orientation) and two moderating factors (customer orientation and environmental hostility) on the relationship between resources and performance. This study used a quantitative methodology. Data were collected via a mail survey delivered to 2,013 small retailers throughout the island State of Tasmania, Australia. Completed surveys were received from 401 small retailers; with 322 surveys returned as undeliverable this provides a response rate of 23.7%. The findings confirmed that two of the six proposed resources ‚Äö- informational (business) resources and access to financial capital ‚Äö- were important for firm performance. A third resource ‚Äö- informational (web) resources ‚Äö- was found to be negatively related to firm performance. Strategic planning capability was found to be positively related to firm performance, as well as to strategic orientation (a prospector orientation). Strategic planning capability positively mediated the relationship between informational (business), physical, relational, and human and organisational resources and performance. The findings further show that a firm's strategic orientation is important for firm performance. While both a prospector orientation and a defender/analyser orientation were found to be positively related to performance, firms with a prospector orientation reported higher levels of performance. While no relationship was found between entrepreneurial orientation and performance, the study confirmed a positive relationship with a prospector orientation and with strategic planning capability. Similarly, customer orientation was not found to be related to firm performance; however, there was support for the moderation effect of customer orientation on the relationships between physical resources and two of the proposed mediators: a defender/analyser orientation and entrepreneurial orientation. No relationship was found between owner/manager perceptions of environmental hostility and firm performance; nor did environmental hostility moderate the relationship between resources and performance. The findings have implications for both retail theory and retail practice. This research contributes to the small retail firm literature, and extends the use of R-A theory in the context of small and medium enterprises (SMEs) and retailing. Through the development of a conceptual model, this research contributes to the extant research on small retailer resources and performance by confirming specific resources related to higher levels of firm performance, and by highlighting the mediating or moderating effect of several factors on the relationship between resources and performance. From a practical perspective, the findings of this study have significant implications for the retailing industry by assisting small retail firms to identify which resources and strategies can lead to higher levels of firm performance.