Innovation and Strategic Types of Private and Non-Profit SMEs in Iran Based on Miles and Snow

1. Department of Management and Accounting ,University of allameh taba taba e Innovation and Strategic Types of Private and Non-Profit SMEs in Iran Based on Miles and Snow�s Model

2. Abstract In this paper, we try to make a typology of innovation strategies among private and non-profit SMEs through which we can apply the Miles and Snow�s model. we also endeavor to expand the scope of the model which undertakes to analyze the fit between entrepreneurial, managerial and governance characteristics and innovative posture of the firm. Results show that significant differences in the mentioned contextual variables are available among various strategic typologies of private and non-profit firms .

3. Introduction The goal of this paper is to complete one specific model, namely the Miles and Snow typology, through a definition of the entrepreneurial, managerial and governance characteristics that relate to different innovative behaviours of small and medium private and non-profit businesses. We choose to focus on innovation strategies since it is widely recognized that technological advantages are the main drivers of competitive success in the global landscape as well as one of the fundamental parameters for the new international division of labour www.Win2Farsi.com

4. Introduction We decided to adopt the Miles and Snow model because we believe that this typology offers a better description of firm�s general orientation towards innovation and change than other classifications proposed in the literature Moreover Miles and Snow typology, due also to its 30 years history, is perhaps the one that has received the most extensive support and validation, both through theoretical arguments and empirical tests on several samples and dimensions . www.Win2Farsi.com

5. Introduction Recent empirical work shows also that this model can be appropriately applied to strategic behaviour of smaller firms leading to significant results . Small and medium private and nonprofit controlled firms are indeed the subject of our study. Since strategic behaviour of private and nonprofit firms is likely to be influenced by their �stockholders� and this concept includes dimensions such as ideology, culture and power of the owners, values and motivations of the entrepreneurs, multi-generational commitment, governance arrangements ,growth of the firm.

6. MILES AND SNOW�S IDEAL TYPES Based on their field studies conducted in four industries Miles and Snow differentiate among four strategic patterns : (1) prospector strategy (2) defender strategy (3) analyzer strategy (4) reactor strategy

7. Defender Strategy The Defender operates in a stable and narrow environment. It establishes its dominant position by developing long-term relationships with its business clients or customers, to whom it offers a full range of products or services.A Defender tends to spend very little resources to the monitoring of the competitive environment and its effort is put either towards cost efficiency or quality assurance.

8. Prospector Strategy The Prospector is the most dynamic of the four ideal types. It is an organization that operates in an unstable, uncertain and turbulent environment by using high levels of environmental monitoring to identify business and market opportunities. This strategy requires a flexible, flat and organic organizational structure and a high degree of power delegation towards the lower levels of the organization.

9. Analyzer Strategy The Analyser is, as stated by the authors, a unique combination of the Prospector and the Defender and it resides along a continuum with the other two types at each end. It is therefore an organization that at the same time follows a strategy of risk minimization and search of new opportunities. Its domain is �a mixture of products and markets some of which are stable, other changing�

10. Reactor Strategy The Reactor, is a type of organization that is characterized by the absence of both coherence in its constituent parts and consistency of behaviour . �This inconsistency potentially may stem from at least three sources: (1) Management fails to articulate a viable organizational strategy. (2) A strategy is articulated but technology, structure, and process are not linked to it in an appropriate manner (3) management adheres to a particular strategy-structure relationship even though it is no longer relevant to environmental conditions

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12. Profile of the Leadership: Generation and Succession Research on private and non-profit firms suggests that characteristics and dynamics of the leadership have a significant impact on organizational outcomes, such as strategic orientation and performance The generation of leadership could influence the entrepreneurial orientation affecting firm�s proactiveness and risk taking . Proposition 1a. Founder-led private and non-profit firms are more likely to adopt a prospector or analyser strategy than non-founder led private and non-profit firms.

13. Profile of the Leadership: Generation and Succession The dynamics of leadership succession may be another important factor which has effect on the innovativeness of strategies. We define leadership succession in private and non-profit firms as the process during which the entrepreneurial control of business is transferred from one generation to the next. Proposition 1b. Private and Non-profit firms which are involved in the succession process are more likely to pursue defender or reactor strategies.

14. Profile of the Ownership When ownership becomes dispersed among the stockholders, it is likely that a differentiation occurs between stockholders which are involved in the management of the firm and stockholders which are not involved. This creates the premises for a �classic� agency problem: values, goals and visions of the two categories of owners may be misaligned or conflicting . Proposition 2a. Firms which have an higher proportion of ownership dispersed among stockholder members not involved in the management are more likely to adopt defender or reactor strategies.

15. Profile of the Ownership Recent literature on corporate governance and firm performance suggests that there exists a relationship between ownership structure and innovation strategies. In particular, ownership by insiders, which are involved in the management and/or have a thorough knowledge of the firm and its value network, is positively related both to cost-efficiency strategies and to strategies of incremental innovation and adaptation of new technologies to the needs of specific customers . Proposition 2b. Firms with a higher proportion of insider ownership are more likely to adopt defender and analyzer strategies.

16. Profile of the Ownership On the other hand, the presence of outsiders in the ownership structure appears to be positively associated with the pursuit of radical innovation strategies. These owners may be for example venture capitalists and private equity institutions, or larger firms belonging to the same or to another industry. Proposition 2c. Firms with higher proportion of outsider ownership are more likely to adopt prospector strategies.

17. Functional Specialization of the Members of Dominant Coalition The specialization of the most influential members of the dominant coalition is one of the dimensions specified by Miles and Snow in the definition of the administrative level of their strategic typologies. The dominant coalition is the group of actors which is in charge of the main decisions of the company and it is usually identified with the top executives� group.

18. Functional Specialization of the Members of Dominant Coalition Proposition 3a. Firms whose dominant coalitions are more specialized in R&D and marketing are more likely to adopt a prospector or analyser strategy. Proposition 3b. Firms whose dominant coalitions are more specialized in production and finance are more likely to adopt a defender strategy. Proposition 3c. Firms whose dominant coalitions exhibit an unspecific pattern of specialization are more likely to adopt a reactor strategy.

19. CONCLUSIONS The goal of this paper was to extend and investigate the Miles and Snow typology, through a definition of the entrepreneurial, managerial and governance characteristics that relate to different innovative behaviours . Private and non-profit SMEs belonging to the �Defenders� group place an higher emphasis on process innovation and established domain exploitation strategies than firms belonging to the other groups. Firms belonging to the �Prospectors� group appear to be strongly oriented towards product innovation and new domains exploration.

20. CONCLUSIONS Analyzer private and non-profit firms present an �intermediate� profile between defenders and prospectors in product and process innovation. Reactor firms place little emphasis on product and process innovation and do not have a distinctive focus on business model innovations. www.Win2Farsi.com