Decision Making and Strategy Development in SMEs: An Empirical Investigation into the Role of Adaptation

This research investigates the nature of decision making in small and medium-sized manufacturing companies (SMEs). The role of adaptation is explored through a new proposed construct, Adaptive Decision Making (ADM). ADM is defined as “a conscious or unconscious tendency to place a high priority on adaptation to the environment throughout the decision making process”. ADM is based on the premise thattop managers in SMEspossess an adaptive orientation toward decision making that impacts strategy development.Data was gathered from over 500 SMEmanufacturing concerns in the US to develop and test ADM. The relationship between adaptive decision making and manufacturing strategy is explored using SEM. Results suggest that adaptive decision making plays a significant role in the formation of strategy in manufacturing SMEs.