The impact of strategy, technology, size and business environment on the organizational form of small firms in China

Our research tests the hypothesis that the organizational form of a small firm is determined by the contingencies of environment, strategy, size and technology. It was tested on a sample of private firms in Guangdong Province, PR China, notable for its entrepreneurship. Our methodology was novel, involving detailed fieldwork with entrepreneurs for data collection, allied to rigorous econometrics for contingency analysis, using ordered probits. We found that business strategy was the most important determinant of organizational form, followed by new investment, cost leadership, focus strategy and financial aspects (e.g. cash flow, profit expectations). These findings are of interest both to academic researchers and to government bodies responsible for stimulating superior organizational forms in small businesses, like incubator units.