Beyond the Formal–Informal Dichotomy of Small Firm Strategy‐Making in Stable and Dynamic Environments

Strategy-making assists small firms in managing change and uncertainty by developing suitable strategic options. We move beyond the conventional formal–informal dichotomy to show how three informal approaches—internal participation, external participation, and centralized strategy-making—help both entrepreneurial firms and conservative firms to navigate more or less dynamic environments. In an empirical study of 320 small firms, we find that participation during strategy-making relates positively to performance whereas centralization only matters for conservative firms in stable environments. In dynamic environments, better performance in entrepreneurial firms is associated with all three approaches. Our findings highlight the importance of viewing strategy-making in small firms as multifaceted and context specific.