American Journal of Small Business, Volume III, Number 3, January, 1979

Small Business And The Theory Of

Small Bureaucracies
STEVEN K. PAULSON, Virginia Polytechnic Institute
and State University
ALAN L. STUMP, Virginia Polytechnic Institute
and State University

ABSTRACT

Findings from a partial replication of Blau's 1966 study of small

bureaucracies suggest that small businesses of six or fewer employees
offer substantial promise for the construction of theories of organiza!'
tional behavior. Based on the strategy of examining simple forms 0
phenomena to isolate basic relationships, certain bivariate relation'
ships rejected by Blau for larger organizations, are found to be
significant for the smallest organizations in the present study. An
expanded multi-variate causal regression analysis provides additional
evidence. Seventy-seven small business firms constitute the sample,
and the variables analyzed are division of labor, professionalization,
managerial hierarchy, and administrative apparatus.

INTRODUCTION
Studies of bureaucratic structure conducted by social scientists
have typically emphasized "large scale," "formal" or "comple~"
organizations. This emphasis on large-scale formal organizations IS
surprising for two reasons. First, most definitions of formal organiza-
tion imply little about size. For example, Parsons defines formal
organizations as those groups that have the "value of primacy of
orientation to the attainment of a specific goal." [14, pp, 17·18]
Similarly, Etzioni defines complex organizations as those grouPS
deliberately constructed to achieve specific ends [6, p. 3]. The central
characteristic in both definitions is the attainment of specific goals, not
size of organization; they imply that size is simply a variable attrib ut
along which organizations may be classified. Secondly, analysis 0 f
small-scale organizational structure would seem to add simplicity of
investigation. Because of this simplicity, studies of small bureaucracie~
should lend themselves favorably to the construction of genera
theories of bureaucratic structure.
In research on business organizations, the focus on large size is
even more perplexing. As Preston has indicated, "the overwhelmin~
mass of business firms in the U.S. are 'small' by any standard 0
classification;" [15, p. 13] he reports that approximately 90% of ~11
firms have fewer than fifty employees with less than $100,000 In
annual business receipts [15]. McGuire addresses the issue directly and

34
 American Journal of Small Business, Volume III, Number 3, January, 1979

attempts to explain why scholars have, by and large, ignored the small
business and preferred to study the giant corporation [12]. One reason
MCGuire gives is that "the problems of the small company seem to be
uncomplicated and the solutions, in many cases, self-evident." [12, p.
115]
McGuire's statement is directly addressed by the present paper
which has the following objectives: (1) to develop the argument that
structural simplicity should be exploited, as it is in the physical
sciences, for its research and theoretical utility rather than ignored for
presumed "self-evidency;" (2) to determine, by examining data collected
On 77 firms, the extent to which small businesses are less "compli-
c.ated" in terms of the reciprocal effects of four structural characteris-
tics; (3) to determine, through an analytical replication, the extent to
which a widely cited theory of small bureaucracies, developed through
a study of public agencies, applies to the small business; (4) to "update"
the replication by performing multi-variate, causal, regression ana-
~ses. The "theory of small bureaucracies" referred to is that developed
Y Peter Blau and his associates in 1966 [3]; it is one of a very few
attempts to develop a theory of small organizations per se and
COntinues to be cited as a founding work in this area [13].

THE THEORY OF SMALL BUREAUCRACIES

Following Weber's [18] emphasis on the structural attributes of
~ureaucracy, Blau and his associates examined the interrelationships
etween the division of labor, professionalization, managerial hier-
archy, and administrative apparatus [3]. Within an organization, it
~as expected that a high incidence of professionals would lead to a low
Incidence of managers, and an increasing division of labor would lead
to a centralized authority structure. The division of labor and degree of
~rofessionalization were seen as aspects of organizational specializa-
tIon. The hierarchy of managerial authority and the administrative
apparatus were seen as mechanisms of bureaucratic coordination [3, p.
181]. Data were gathered by interviewing informants in 252 public
Personnel agencies; of the 252 agencies, data were used from 156.
1 Contrary to Blau's expectations, a high incidence of professionals
ed to a high incidence of managers. In an organization without
~~ofessionals, managers can be organized into a centralized hierarchy
lrected towards the completion of simple tasks; with professionals,
tnanagers must be dispersed in larger numbers throughout the
~rganization in order to coordinate the activities of the professionals.
Onsequently, the division of labor leads to the centralization of
authority only when the staff is not professional. Statistically, the six
Zero-order (bivariate) relationships among the four structural attributes
Were not significant (0.05). Nevertheless, higher-order (3 or more
\'ariable) relationships were apparent but data from more than Blau's

35
American Journal of Small Business, Volume III, Number 3, January, 1979

156 cases would have been necessary to statistically document these

relationships. Blau noted that the:
· . . conception of social structure . . . implies a complex interde-
pendence between elements rather than correlations between pairs
of attributes unaffected by other conditions. [3, pp. 190-191]
Therefore, Blau placed more emphasis on the suggestive higher-order
relationships than on the documented, not significant, zero-order
relationships.
As indicated, of the 252 organizations Blau had originallY
investigated, 96 (37.5%) were excluded from the analysis. These
organizations, referred to by Blau as "tiny bureaucracies" had a total
staff of five or fewer persons. Blau notes that the tiny bureaucracies:

· .. were excluded from the investigation since the status

distribution measures used have little validity if constructed on
such a small basis. [3, p, 181]
Omission of the tiny bureaucracies was unfortunate because the cases
analyzed by Blau, then, were really not the smallest bureaucracies yet
they represented 37.5% of his sample. It is precisely these smallest
organizations that should lend themselves favorably to the initialI
analysis of bureaucratic structure, allowing a complex theory of smal
bureaucracies to be built with confidence. Consequently, if they existed
at all, it is among these smallest organizations that the six zero-order
relationships among the four structural variables should have been
significant.
The tactic of examining the smallest bureaucracies to understand
larger bureaucracies is mirrored in the general strategy followed in
other sciences of examining the elementary forms of a phenomenon
understand its more complex forms. For example, in the science 0
ti
biology, life processes are usually examined in organisms of thoSe
phyla, classes, or orders whose complexity is considerably less than th
"greater complexity" of the human organism. In the science ? f
chemistry, the principles of molecular structure are investigated 1n
those elements "ranking low" in the periodic table. These principles
when applied to more complex elements illuminate more compie"
phenomena such as isotope formation and radioactivity. Examining
the elementary forms of social phenomena to understand its more
complex forms is not new to behavioral and social sciences. George C.
Homans exemplified this strategy; he notes:
· .. one thing we mean by the 'elementary forms' of social
behavior is its fundamental processes, regardless of the various
and complicated ways in which these processes combine to

36
American Journal of Small Business, Volume III, Number 3, January, 1979

establish and maintain, at least for a time, particular social units.

[9, p. 2]

Emile Durkheim argued that in examining "simple, primitive" religion,

those underlying characteristics which are fundamental to all religions
Will become evident [5, pp. 13-21]. In short, by examining the
elementary form of any phenomena it is assumed that the most
fundamental relationships between components of these phenomena
Will be apparent. This assumption would have been supported in the
case of Blau's tiny bureaucracies if zero-order, bi-variate, relationships
had been analyzed and found to be significant.
By focusing on the 1966 Blau study, however, the present research
had the limitation of excluding more recent empirical (measurement
and analysis) and conceptual works. In an attempt to partially offset
this limitation, the replicative bivariate dichotomous analysis was
Supplemented by a continuous multivariate analysis which was based
on the conceptually updated elaboration in Blau's 1971 [4] work; both
of these analyses are presented in this paper. Nevertheless, since 1966
much additional conceptual and empirical work has been done. A fairly
Complete collection of organizational structural measures is provided
by James Price [16] and includes alternatives to Blau's [3] measures
under the rubrics of centralization, complexity, administrative staff
and routinization. Hage and Aiken's approach [7] has dominated much
of the structural literature during the 1970's and differs from the Blau
approach in two ways: first, much of their data are obtained in brief
self-report interviews with employees and, second, rather than
aggregate information into various ratios they obtain total scores to
attitude-like multiple item scales. Conceptually, at a general level,
however, many more similarities to Blau's approach than differences
from it are found. Indeed, as evidenced in Hall's recent exhaustive
review of the literature [8], the contemporary structuralist approach
Continues to be heavily influenced by Blau's 1966 [3] and 1971 [4] work.

DATA COLLECTION AND REPLICATION RESULTS

The present sample consists of 77 small business organizations
~ocated in a "medium-sized" middle atlantic university community and
IS enumerated in Table 1.
The businesses were selected on a quota basis by university
graduate students who collected the data through interviews with the
businesses' managers in 1976. Interviewers were instructed to contact
the managers of any private retail or service business located within
the town limits. The population consisted of 359 such units. This
sample differs from the Blau [3] sample in being composed of small
businesses in one community; the Blau sample was composed of 156
Public personnel agencies located across North America. Thus, the

37
American Journal of Small Business, Volume III, Number 8, January, 1979

TABLE 1
DISTRIBUTION OF SAMPLE FIRMS BY
SIZE AND TYPE CATEGORIES·

Organization Size
Type of Business 1-6 7-19 20-255 Total
General Goods (TIGN)
Clothing 3 6 0 9
Drug/Convenience 1 4 1 6
Department 1 2 3 6
Hardware 3 2 0 5
(Subtotal) (8) (14) (4) (26)
Specialty Goods (T2SP)
Photographic/Electronic 2 2 0 4
Hobby/craft 4 1 0 5
Book 2 1 1 4
Florist 1 0 0 1
Jeweler 1 0 0 1
Bicycle 1 0 0 1
Motorcycle 1 0 0 1
(Subtotal) (12) (4) (1) (17)
Food Sales (T3FO)
Restaurant 0 5 4 9
Take-outs 0 2 2 4
General Grocery 2 0 5 7
Specialty Grocery 3 2 0 5
(Subtotal) (5) (9) (11) (25)
Services (T4SV)
Telephone Office 0 0 1 1
Rescue Squad 0 0 1 1
Clothing Cleaner 0 1 0 1
Motel 0 0 1 1
Barber 1 0 0 1
Bank 0 0 1 1
Theater 0 1 0 1
Travel Agency 1 0 0 1
Insurance Agency 1 0 0 1
(Subtotal) (3) (2) (4) (9)
Total
=
28 29 20 77
• X2 11.89 (p > .01) when frequencies of the four general business types are cross-
=
-
classified by the two size categories of 1-6 and 7 more members; X2 1.00 (p >.75)when
the 17 specialty goods stores are deleted from analysis.

sample is not a close replication and it is not random. Yet a reasonable

case may be made for its representativeness: (1) after data collection
was completed, the percentage of "tiny" organizations selected (28/7 7 '"
36.4%) was found to be quite similar to that of Blau's sample (96/256 '"
37.5%) thus the distribution of the critical size variable does not appear
to have been biased by the sampling procedure; (2) a related supportive

38
American Journal of Small Business, Volume III, Number 3, January, 1979

finding is that 90% of the organizations sampled had fifty or fewer

members - a conventional definition of "small business" and reported
to be "well over 90%" for the business population of the U.S. as a whole
[15]; (3) Table 1 presents further evidence of representativeness in
terms of the frequency distribution of four types of businesses in two
categories of size and except for the category of "specialty goods" the
chi square test for independence indicates that the various business
types follow the overall distribution. Thus while a randomly selected
sample would provide more certainty, it is reasonable to assume that
the sample is representative in general with a specific and minor over-
representation of specialty stores. Nevertheless, because of the nature
and size of the sample, the findings must be interpreted as tentative
rather than conclusive.
The operational measures of each of the four structural attributes
as well as size are quite similar to Blau's operational measures and
Were designed to make a discrimination within the present sample
Parallel to that made by Blau's measures in his sample. Each was
dichotomized at its median for the purpose of the replicative analysis
(see Appendix and Table 2). The statistic used for the replicative
analysis was Goodman's Phi and a test of significance was performed
based on the corresponding Chi Square value. Phi is a non-parametric
measure of association which, in 2x2 tables, ranges from -1.0 to +1.0
and is a conservative measure of diagonal concentration when some
cells have zero cases as was the situation in the present analysis [11, p.
199] [17, p. 226].
While none of Blau's zero-order relationships were significant
:-Vithout controlling for size, two zero-order relationships are significant
In the "non-tiny" businesses (equivalent to all of Blau's utilized cases)
of the present study. These significant relationships are (1) division of
labor with administrative apparatus and (2) managerial hierarchy
with administrative apparatus. This suggests that as the structure
becomes more centralized and the division of labor increases, the
proportion of clerical workers decreases. In "non-tiny" businesses,
then, the decreased need to coordinate clerical workers is reflected in
the centralizing of managers. Among the "tiny" businesses, four of the
six zero-order relationships are significant: (1) division of labor with
managerial hierarchy; (2) professionalization with managerial hier-
archy; (3) professionalization with administrative apparatus; (4)
managerial hierarchy with administrative apparatus.
The first of these suggests that as the division of labor increases,
the centralization of managers decreases. The remaining three findings
SUggest that centralization of managers is accompanied by decreasing
numbers of vocationally trained personnel and increasing numbers of
clerical workers.

39
American Journal of Small Business, Volume III, Number 3, January, 1979

TABLE 2
COMPARISON OF THE MEASURES USED IN THIS STUnY
WITH THOSE USED BY BLAU ET AL.

This Study Blau et al, Study

(Small Business Firms) (Public Personnel Agencies)
Division of Labor (DIVLR)
Total number of manager position titles Number of distinct occupational titles
plus the total number of non-clerical pertaining to the non-clerical staff not
position titles. Dichotomized at 3.11. counting those indicative of status
differences within a specialty rather
than different specialties. Dichotomized
at between 3 and 4.

Professionalization (PROFS)
Total number of non-managerial, non- Proportion of the operating staff (ex-
clerical employees with a required eluding managers as well as clerks)
specific training divided by the total who are required to have a college
number of non-managerial, non-clerical degree with a specified major. Dicho-
employees. Dichotomized into zero and tomized at 0.5.
non-zero.

Managerial Hierarchy (MANHI)

Total number of managerial employees Ratio of men in managerial to those in
divided by the total number of non- non-supervisory positions among the
clerical, non-managerial employees. non-clerical staff, excluding those for
Dichotomized at 0.45. (Centralized =low whom neither was indicated. Dichotom'
value) ized at 0.34. (Centralized =low value)
Administrative Apparatus (ADMAP)
Total number of sales clerks divided by Proportion of clerks among the total
the total number of employees. Dicho- staff. Dichotomized at 0.6.
tomized at 0.56.

40
American Journal of Small Business, Volume III, Number 3, January, 1979

TABLE 3
PHI COEFFICIENTS OF ASSOCIATION AMONG FOUR
VARIABLES CONTROLLING FOR FIRM SIZE
Organizational Size of Firm
Small Tiny, Small
Relationship Tiny Small Large & Large & Large

DIVLR with:
PROFS +.23 +.27 +.11 +.21
MANHI +.40'" +.03 -.03 +.19
ADMAP -.21 -.56'" -.40'" -.17
PROFS with:
MANHI +.68'" +.17 -.29 -.01 +.24'"
ADMAP -.35'" -.12 -.22 -.15 -.16
MANHI with:
ADMAP -.51'" +.41 +.70'" +.54'" +.22'"
----------------------------
Number of firms 28 29 20 49 77
Range of number
of Employees 1-6 7·19 20-255 7-255 1·255
- - : : : - : : - - - - - - - - - - - -2 - - - - - - - - - - - - - - - -
'" Significant (p > .10) phi for corresponding X value
.... =cell size too small for calculation

The first of these suggests that as the division of labor increases, the
centralization of managers decreases. The remaining three findings
Suggest that centralization of managers is accompanied by decreasing
numbers of vocationally trained personnel and increasing numbers of
clerical workers.
Most of the zero-order relationships among the four structural
attributes proved significant for the smallest businesses. Thus the
attributes would be more useful in constructing a theory of small
?ureaucracies than Blau's conclusions suggest. Essentially the find-
IngS of this replication indicate that Blau and his associates [3] erred
~hen they eliminated the smallest bureaucracies from his analysis as
It Was in these organizations, of the present sample, that the structural
attributes were directly and thus most obviously related.

RESULTS OF THE MULTIVARIATE ANALYSIS

While the primary goal of this research was to replicate Blau's
study, a multivariate causal analysis of the variables in their
Continuous form was, nevertheless, performed because: (1) Table 1
~Uggests that small business type and size are related and may have
~nteractive effects on other relationships; (2) Table 3 shows that size
Oes have effects on several relationships to the extent of changing the

41
American Journal of Small Business, Volume III, Number 3, January, 1979

signs of some of the Phi values; (3) Blau's analysis did point to the
existence of higher order interrelationships among the structural
attributes larger organizations and he did, in fact, find these in
subsequent studies [2, p. 218]; (4) in a later work, Blau and Schoenherr
[4] perform such a multivariate analysis with much success.
Because Blau, in this later 1971 work, does provide a detailed
theoretical rationale for a multivariate causal analysis, the present
analysis may be seen simply as an undated replication of Blau's
continuing work, with one major exception: the 1966 work focused
explicitly on "small bureaucracies" while the 1971 work focused,
simply, on "public bureaucracies." And, of course, the present data
relate to small retail bureaucracies.
In order to keep the discussion brief, the reader is referred to the
notes on Table 4, Kerlinger and Pedhazur [10], and Alwin and Hauser
[1] for the details of the methodology used. The causal order of the
variables is taken directly from Blau and Schoenherr [4, p. 28];
variables are in continuous (non-dichotomized) form; the use of the
natural logarithm of size is based on the Blau and Schoenherr
discussion [4, p. 22].
The multivariate analysis provides for three types of intervariable
(X on Y) effects to be analyzed: spurious, the non-causal "effect" of X.
on Y due solely to their relationship to a prior, common, causal variable
W; indirect, the causal effect of X on Y through an intervening
variable(s) V; direct, the non-spurious immediate causal impact of X on
Y. Depending upon the theoretical, apriori, ordering of the variables it
is possible for a variable to have all three types of effects; the total
observed association (zero-order correlation) between X and Y is the
sum of all three of these effects.
In the present analysis, for example, the total association of
professionalization with managerial hierarchy is (from Table 4) +.334
composed of a spurious effect of +.022 and a non-spurious effect of
+.323; the non-spurious effect is further broken down into a direct effect
(+.343) and an indirect effect through administrative apparatus (-.020).
In this example the spurious and indirect effects are quite small and
thus of little interest. For some other relationships, however, the non-
direct effects are larger and, since they represent departures from the
simple causal order posited by Blau, are important to note.
The most critical spurious effects involve the independent variable
of the division of labor: the analysis shows a very strong observed
direct relationship between the division oflabor and the administrative
apparatus (-.958) and an almost equally strong but opposite signed
spurious effect (+.855); the same, although less dramatic effects exist in
the relationship between the division of labor and the managerial
hierarchy where the direct effect of +.474 is extensively offset by the
spurious component of -.227. In both cases the spurious relationshiPs
are due to the common prior causes of organizational size and

42
 REGRESSION ANALYSIS OF DIRECT. INDIRECT AND SPURIOUS EFFECTS
AMONG THE STRUCTURAL VARIABLES. IN CONTINUOUS
FORM. CASUALLY ORDERED# ~
;i
Dependent Variables Independent Variables ~
and Type of Effect ADMAP PROFS DIVLR SIZE TIGN T2SP T3FD R2 S·
I:l
;:s
MANHI: Asoe +.112 +.345 +.193 +.003 +.139 +.035 -.236
Efft +.195 +.323 +.420 -.005 -.028 -.078 -.278 ~
Drct +.195* +.343* +.474* -.295* +.158 +.123 -.082 .277 3
Indt .000 -.020 -.054 +.290 -.185 -.201 -.196 I:l
Spur -.083 +.022 -.227 +.008 +.167 +.113 +.042
~
ADMAP: Asoe
Efft
-.103
-.088
-.107
-.962
+.217 L
+.204
+.277
+.042
-.232
-.305
-.148
-.240
-
Drct -.088 -.958* +.995* -.178 -.299* -.513* .424
~
I:l
Indt .000 -.004 -.791 +.220 -.006 +.273 ::::
Spur -.015 +.855 +.013 +.235 +.073 +.092 19'
Ill:>
PROFS: Asoe +.003 -.037 -.031 +.056 -~091
Efft +.033 -.061 -.157 -.076 -.196 s·
..,. Drct +.033 -.082 -.173 -.098 -.212 .022 ~
!'
W Indt .000 +.021 +.016 +.022 +.016
Spur -.030 +.024 +.126 +.132 +.105 ~
DIVLR: Asoe +.815L -.154 -.194 +.087
Efft +.830 -.558 -.551 -.393
§
(1)
Drct +.830* -.284* -.100 -.292* .714
Indt .000 -.274 -.451 -.101 ;:::
.:...;
Spur -.015 +.404 +.357 +.480
SIZE: Asoc -.057 -.204 +.036 ~
Efft -.420 -.494 -.354 s
Q"
Drct -.420* -.494* -.354* .112
Indt .000 .000 .000 ~
Spur +.363 +.290 +.390 ~

# Order is from organization type (T1GN, T2SP, T3FD) as the most antecedent through SIZE, DIVLR, PROFS and ~
;:s
ADMAP to MANHI. Type dummy variables coded 0,1 thus direct effects are alternative standardized weights to be added ;::
to full equation for given organization type -=- coefficients for the 4th type are .000. I:l
L = natural logarithm of size used in place of actual (raw) size if R2 in full equation is greater by .20; thus certain more 9
specific effects cannot be calculated from the values given with complete accuracy. .....
~
• = p > .10 for the direct effects (Drct).
~
Drct. = direct effect = standardized partial regression coefficient in full equation (i.e. includes all independent variables
which are causally prior to the dependent variable); Indt = indirect effect = difference between the direct effect and the
standardized partial regression coefficient in reduced equation (i.e. includes the independent variable and others causally
prior to the independent variable); Spur = spurious effect = zero order Pearson correlation coefficient (Asoe) minus the sum
of the direct and indirect effects (Efft = Drct + Indt).
American Journal of Small Business, Volume III, Number 8, January, 1979

organizational type; contrary to the implications of Table 1, size and

type do not interact (e.g. the spurious component of the effect of size on
various dependent variables is quite small) but have fairly independent
effects on succeeding variable inter-relationships. This effect of size is
described in the context of the major indirect effects of the analysis and
the discussion of the effect of organization type which follows.
The most critical indirect effects of the analysis involve the
independent variable of size and may be seen, roughly, as corollaries of
the critical spurious effects discussed above. That is, the direct effect of
size on the managerial hierarchy (+.290) is completely offset by the
indirect effect (-.295) which, while involving many specific single
intervening variable indirect paths, is primarily through the interven-
ing variable of the division of labor - the variable with the greatest
spurious effect on the managerial hierarchy! Likewise, the critical
indirect effect of size on the administrative apparatus (-.791 vs. +.995
direct) is primarily through the same intervening variable of the
division of labor - the variable with the greatest spurious effect on
administrative apparatus.
The coefficients for the three dummy variables of organization type
are simply used as indicators of the relative efficacy of the analysis in
predicting structural characteristics within certain types of small
businesses. The spurious and indirect effects discussed above are most
accentuated in general goods stores (TIGN) and least accentuated in
food sales stores (T3FD). The coefficients are most accurate, of course,
for service businesses where in the dummy coefficients are zero.
Regarding the direct effects which are, of course, partial coeffi-
cients in multivariate analysis, the general thesis of the research
appears to have been upheld; among the larger of the "small"
businesses, the relationships among the structural characteristics
become more complex and interwoven. That is, four of the six non-zero
order direct effects are statistically significant as compared with two of
the zero-order coefficients. In addition, while the comparison is rough,
the signs of the direct, multivariate effects are consistent with the phi'S
of the "small and large" organizations in Table 3 - further evidence
supporting the general thesis of this paper.

CONCLUSIONS
The literature clearly documents the importance of organizational
size in organizational analysis and the present research has added
evidence to this point for the analysis of small business organizations.
Size makes a difference in zero-order dichotomous analysis of
structural variables as well as in higher order continuous analysis - a~
least among those variables suggested by Blau's theory of smal
bureaucracies. But the central point of this paper has been to report
that in very small organizations the inter-variable relationships are

44
American Journal of Small Business, Volume III, Number 3, January, 1979

less complex and thus ameanable to scientific research aimed at theory

building and testing. In brief, the general contention, supported by the
analyses of this research, is that small businesses offer a unique and
promising empirical setting for the study of organizational structure
and that the theory of small bureaucracies developed by Blau et al.
does give an accurate description of the structure of small business
organizations. Nevertheless, because 'of extensive spurious and indirect
effect complications, certain findings were much clearer than others. In
this context, the following hypotheses, while supported in this study,
need to be clarified through retesting in future research with different
as well as comparable measures and samples of small business
organizations:
1. holding size constant, an increase in the division of labor will
bring about a decrease in the administrative apparatus;
2. holding size constant, an increase in the division of labor will
bring about a decentralized managerial hierarchy;
3. holding type constant, an increase in the division of labor will
bring about a decrease in the administrative apparatus;
4. holding type constant, an increase in the division of labor will
bring about a decentralized managerial hierarchy.

These conclusions, in combination with the sparse literature on

small business structure, produce several additional, but more general,
recommendations for further research. First, large samples of small
businesses must be studied in order to have the data base necessary for
making statistically sound inferences and for computing higher order
coefficients of association. Such samples should be random and
stratified according to size to insure having a sufficient and proportion-
ally accurate number of cases in all size categories. Secondly,
~dditional variables such as age of organization as well as those
Included in general organization theory such as formalization,
stratification, effectiveness, efficiency and job satisfaction should be
measured and analyzed in terms of their relevency to small business
behavior. Third, longitudinal studies are needed to determine the time
sequence of effects among these variables. Assuming such research is
Conducted and that the structure of small business becomes well
Understood - a reasonable expectation for the near future given their
structural simplicity as documented in this paper - a firm basis for the
construction of a more general theory of business organizational
structure would be available. For the small business researcher and
Consultant, such a basis could provide insight into such problems as
effectiveness and survival. But perhaps the most important conse-
quence would be the drawing of management implications for the

45
American Journal of Small Business, Volume III, Number 3, January, 1979

small business owner who is, after all, responsible for the bulk of
business transactions in our society.

APPENDIX:
INSTRUMENT USED IN SURVEY OF SMALL BUSINESSES
Ql. Are you the manager of (name of store)?
Yes (Go to Q2)
No (Probe to find who is manager and if convenient ~o
interview; if not convenient, interview this person If
appears to have knowledge of store operation)

Q2. First, I would like to know about the different jobs people hold in
this store.
What is your title? (If no formal title, ask if "manager" is
appropriate; if it is, use it; if not probe for appropriate
title)
Q3. Are there other people who hold managerial positions? That is,
people whose main job is to oversee the work of others:
supervisor, assistant manager, head.
Yes (Probe and record titles and number of people with each
title)
No (Go to Q4)

Q4. Is there any distinction made among sales clerks in terms of job
title? By sales clerk we mean anyone whose main job is to come
into contact with customers: waitress, usher, ticket taker, cashier,
salesperson.
Yes (Probe and record titles and number of people with each
title)
No (Probe for total number of sales clerks and record)

Q5. Do you have other positions in your store such as secretaries,

bookkeepers, janitors, stockers, security guards, whose main job
is neither overseeing the work of others nor contacting customers
for sales purposes?
Yes (Probe and record titles and number of people with each
title)
No (Go to Q6)
Q6. Now, for each of these positions I would like to know if a specific
type of training or education is required for employment.

46
American Journal of Small Business, Volume III, Number 3, January, 1979

Specifically, is a certain type of training or educational degree

required for (position titles as recorded)?
Yes
No

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8. Hall, Richard H., Organizations: Structure and Process, Second Edition, Englewood
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10. Kerlinger, Fred N. and Pedhazur, Elazar J., Multiple Regression in Behavioral
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gists, Boston: Allyn and Bacon, 1974.
12. McGuire, Joseph W., "The Small Enterprise in Economics and Organization
Theory," Journal of Contemporary Business, 5:115-138, Spring, 1976.
13. Miles, Robert H. and Petty, M.M., "Leader Effectiveness in Small Bureaucracies,"
Academy of Management Journal, 20:238-250, June, 1977.
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15. Preston, Lee E., "The World of Small Business: A Suggested Typology," American
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16. Price, James L., Handbook of Organizational Measurement, Lexington, Massachu-
setts: D.C. Heath, 1972. '
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