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.