Intertwined processes of strategy and knowledge management in micro firms

Despite the fact that micro and small firms have an acknowledged role in economic growth and innovation, in the literature of strategic management the focus of theory development has been on larger companies and established organizations. Also the literature about small business strategy can be seen to draw on perspectives developed for larger firms.  This study, thus, aims to shed a light on the way in which strategy and knowledge management are intertwined in micro firms. The objective of our qualitative study it to explore the link between strategy and knowledge management in micro firm context. Micro firms in this study were mostly entrepreneurs offering professional services (e.g. management consulting, coaching, advertising, professional guidance, services for career planning and recruitment, services for financial management). The strategies of the microfirms were strongly based on the core capabilities of the entrepreneurs´ and the vision of creating customer value was also closely linked to strategy reasoning. In addition to this, five other influencing factors effecting simultaneously on both strategy and knowledge management could be recognized from the data: networks, entrepreneurial identity, market environment, customers and self-management. Instead of knowledge management being based on strategic decisions, in micro organizations it is likely to be opposite. Strategy is developed and evolved not systematically or in linear fashion but instead as mundane behavior. This study sheds a light on the knowledge management in micro firms and elaborates the intertwined relationship of strategy and knowledge management in small firms. It also provides practical implications as it describes practical benefits that are available from systematic analysis of qualifications and competences for micro firms.