Strategic Decision Process in SME’s Context: A New Perspective Using Indigenous, Institution, Firm, and Environment Characteristics

Jean Richard Jokhu, Rofikoh Rokhim1, Riani Rachmawati1, Mohammad Hamsal
International Journal of Economics & Business Administration, Volume VII, Issue 4, 68-83, 2019

Abstract:

Purpose: This paper aimed to contribute to fill the gap of the strategic decision-making process framework in the context of an SME. Not only adds a new perspective in the strategic decision-making process framework, but also suggests new perspectives of firms, environment, institutions and indigenous characteristics as the new approach that magnifies strategic decision-making’s models with respect to SMEs’ scale. Design/methodology/approach: The purposive sampling method has been used in this study. First, we used the CEO as the respondent to fulfilll decision involvement criteria. Second, the samples were selected based on the criterion that the last project of this SME has finished in the last 3 years. Then we choose a project bidding decision from construction SMEs to minimize decision bias. Finally, from 4253 SMEs listed in Papua, we finished with 350 respondents. The study had collected 156 SME's project decisions. Findings: The Heuristic decision, that previously neglected because of information bias and short decision process, deemed to be the most profound dimension in strategic decision making and demonstrated significant results toward SMEs’ project performance. All variables, exclude institution, shows good and significant results. The research uses project decision in the construction industry as the main unit analysis. Practical implications: Exploring strategic decision-making theory in the SME context could convince SME’s CEO to evaluate its external factors before taking a project, processing all the information needed toward its project performance. Originality/value: This heuristic measurement scale is the first valid and reliable tool, based on several previous researches (Busenitz and Barney, 1997; Artinger et al., 2015), that could identify and measure the heuristic process in a strategic decision process.


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