Evolution, financial management and learning in the small firm

There is an assumption that inadequate financial management practices are contributors to turbulence in the small firm sector; yet there have been few investigations into the factors that influence an owner-manager's approach and the processes involved in the evolution of strategy and associated learning in this area. Previous studies have adopted a comparative static approach that is survey-based; we argue that these studies can only give limited insights. We adopt a comparative case study methodology to develop an evolutionary process view of financial management in small firms. Despite the increased attention paid to owner-managers in the small firms sector, we know comparatively little about the process of financial management and how small firms learn and adjust strategy and decision-making in this area. In this paper, we attempt to shed some light on the process issues within small firms from qualitative evidence collected as part of a programme of case study research with entrepreneurs and owner-managers. We discuss case evidence and focus on how owner-managers reach financial management decisions, how they learn and adjust behaviour within the entrepreneurship process.