Environment-strategy-performance relations in small businesses in China: A case of township and village enterprises in Southern China

This study examines the environment-strategy-performance relations for Chinese small businesses with a focus on township and village enterprises (TVEs). TVEs have played an increasingly important role in shaping the Chinese national economy and structural reform. We contend that environmental characteristics such as complexity, dynamism, and hostility influence TVE managers' perceptions of environmental uncertainty and potentiality, which in turn affect aspects of the firm's strategic orientations such as innovativeness, risk-taking, and proactiveness. Based upon an analysis of survey data, it is found that a TVE's innovativeness and proactiveness are positively associated with increased environmental dynamism. When contextual conditions are complex or hostile, however, strategic decisions are made more deliberately. The key findings suggest that small TVEs use a wary prospector orientation to align with environmental conditions, and that this strategy-environment configuration leads to superior financial and market performance.