Innovation, Competitiveness, Growth and ... - Alexandria (UniSG)

Urs Fueglistaller, Thierry Volery, Walter Weber (Hrsg.)

Innovation, Competitiveness, Growth and Tradition in SMEs Rencontres de St-Gall 2008

KMU-HSG – Schweizerisches Institut für Klein- und Mittelunternehmen

an der Universität St. Gallen / Swiss Research Institute of Small

Business and Entrepreneurship at the University of St. Gallen

Rencontres de St-Gall 2008

Wir danken den folgenden Institutionen für ihre freundliche Unterstützung der Rencontres de St-Gall 2008 / We would like to thank the following institutions for their kind support of the Rencontres de St-Gall 2008: · Forschungskommission der Universität St. Gallen · Gesellschaft zur Förderung des KMU-HSG

(c) 2008 bei den Verfassern und beim KMU-HSG – Schweizerisches Institut für Klein- und Mittelunternehmen an der Universität St. Gallen (c) 2008 Authors and Swiss Research Institute of Small Business and Entrepreneurship at the University of St. Gallen (KMU-HSG) KMU Verlag HSG Dufourstrasse 40a CH-9000 St. Gallen www.kmu.unisg.ch

ISBN-10: 3-906541-26-6 ISBN-13: 978-3-906541-26-6 EAN: 9783906541266

RencontresȱdeȱStȬGallȱ2008ȱ

ȱ ȱ OrganisationalȱDetailsȱ ȱ ȱ ȉ TopicȱOverviewȱ ȉ Scheduleȱ ȉ Participantsȱ ȱ

Rencontres de St-Gall 2008, September 1.–3. 2008, St. Gallen Innovation, Competitiveness, Growth and Tradition in SMEs

Chair: Blackburn

Monday Morning Sept. 1

Topic A:

   

Topic B:

  Chair: Welter

Monday Afternoon Sept. 1

 

    

Chair: Mugler

Tuesday Morning Sept. 2

Topic C:

Chair I: Pichler Chair II: Schaper

Fundamentals of Entrepreneurship, SME and Family Business Research

              

Policies for Innovation, Competitiveness and Growth

                        

Topic D:

Wednesday Sept. 3

New Venture Creation

             

Innovation Management in SMEs

                            

RencontresȱdeȱStȬGallȱ2008,ȱSt.ȱGallen,ȱExecutiveȱCampusȱȱ ȱ DetailedȱScheduleȱȱ ȱ Sundayȱ Aug.ȱ31,ȱ2008ȱ Mondayȱ Sept.ȱ1,ȱ2008ȱ ȱ ȱ

Tuesdayȱ Sept.ȱ2,ȱ2008ȱ ȱ

Wednesdayȱ Sept.ȱ3,ȱ2008ȱ ȱ

ȱ

18:00ȱ 19:00ȱ 08:30ȱȬȱ09:00ȱ ȱ 09:00ȱȬȱ10:30ȱ 10:30ȱȬȱ10:50ȱ 10:50ȱȬȱ12:00ȱ ȱ 12:00ȱȬȱ13:20ȱ ȱ 13:20ȱȬȱ14:50ȱ 14:50ȱȬȱ15:10ȱ 15:10ȱȬȱ16:20ȱ ȱ 19:00ȱȱ 09:00ȱȬȱ10:30ȱ 10:30ȱȬȱ10:50ȱ 10:50ȱȬȱ12:00ȱ ȱ 12:00ȱȬȱ13:00ȱ ȱ 14:00ȱ ȱ ȱ approx.ȱ19:00ȱ ȱ 09:00ȱȬȱ10:30ȱ 10:30ȱȬȱ10:50ȱ 10:50ȱȬȱ12:00ȱ ȱ 12:00ȱȬȱ13:20ȱ ȱ 13:20ȱȬȱ14:50ȱ 14:50ȱȬȱ15:10ȱ 15:10ȱȬȱ16:20ȱ 16:20ȱ

Welcomeȱcocktailȱȱ DinnerȱatȱHotelȱMetropol,ȱSt.ȱGallenȱ Arrivalȱofȱparticipants,ȱExecutiveȱCampusȱ ȱ OpeningȱofȱtheȱConferenceȱ/ȱConferenceȱSessionȱTOPICȱAȱ CoffeeȱBreakȱ ConferenceȱSessionȱTOPICȱAȱ ȱ Lunchȱ ȱ ConferenceȱSessionȱTOPICȱBȱ Coffeeȱbreakȱ ConferenceȱSessionȱTOPICȱBȱ ȱ DinnerȱinȱSt.Gallenȱ ConferenceȱSessionȱTOPICȱCȱ CoffeeȱBreakȱ ConferenceȱSessionȱTOPICȱCȱ ȱ Lunchȱ ȱ Departureȱtoȱtheȱ“RencontresȱExcursion”ȱȱ ȱ ȱ DinnerȱinȱSt.Gallenȱȱ ȱ ConferenceȱSessionȱTOPICȱDȱIȱȱ CoffeeȱBreakȱ ConferenceȱSessionȱTOPICȱDȱIȱȱ ȱ Lunchȱ ȱ ConferenceȱSessionȱTOPICȱDȱIIȱ Coffeeȱbreakȱ ConferenceȱSessionȱTOPICȱDȱIIȱȱ EndȱofȱConferenceȱ ȱ

Rencontres de St-Gall 2008

List of Participants

Achtenhagen, Leona, Prof. Ph.D. Jönköping International Business School, Jönköping University, P.O. Box 1026, 55111 Jönköping, Sweden, [email protected] Baldegger, Rico, Prof. Ph.D. HSW Fribourg, Chemin de Musée 4, 1700 Fribourg, Switzerland, [email protected] Bianchi, Carmine, Prof. Dr. University of Palermo, Faculty of Political Science, Via Mazzini, 59, (c/o CED4), 90139 Palermo, Italy, [email protected] Blackburn, Robert A., Prof. Ph.D. Small Business Research Centre, Kingston University, Kingston Business School, Hingston Hill, Kingston upon Thames, Surrey KT2 /LB, Great Britain, [email protected] Bornett, Walter, Dr. KMU Forschung Austria, Gusshausstr. 8, 1040 Wien, Austria, [email protected] Degadt, Jan, Prof. Dr. Research Centre for Entrepreneurship EHSAL-K.U. Brussel, Stormstraat 2, 1000 Brussel, Belgium, [email protected] Deschoolmeester, Dirk, Prof. Dr. Fac Ec & Bedrijfskunde (UGent), Dept Mgmt, Innovatie en Ondernemrschap, Tweekerkenstraat 2, 9000 Gent, Belgium, [email protected]

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Fayolle, Alain, Prof. Ph.D. 23 Avenue Guy de Collongue BP 174, 69134 Ecully cedex, France, [email protected] Filion, Louis Jacques, Prof. Ph.D. HEC Montréal, Chaire d'entrepreneuiat Rogers - J.A.Bombardier, 3000 Ch. de la Côte Ste-Catherine, H3T 2A7 Montréal, Canada, [email protected] Frank, Hermann, Prof. Dr. Wirtschaftsuniversität Wien, Augasse 2-6, 1090 Wien, Austria, [email protected] Fueglistaller, Urs, Prof. Dr. KMU-HSG – Schweizerisches Institut für Klein- und Mittelunternehmen, Dufourstrasse 40a, 9000 St. Gallen, Switzerland, [email protected] Gibson, Brian, Prof. Dr. The University of New England, Armidale NSW 2351, Australia, [email protected] Gruber, Marc, Prof. Dr. Chair of Entrepreneurship and Technology Commercialization, EPFL-ENTC, Odyssea 2.02, Station 5, 1015 Lausanne, Switzerland, [email protected] Haahti, Antti J., Prof. Dr. University of Lapland, Lapin Yliopisto, P.O. Box 122, 96101 Rovaniemi, Finland, [email protected] Havenga, Werner, Dr. University of Johannesburg, Auckland Park, 2006, P.O. Box 524, Johannesburg, South Africa, [email protected]

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Havnes, Per-Anders, Dr. Heilosvingen 11, 4626 Kristiansand, Norway, [email protected] Hultman, Claes M., Prof. Ph.D. Orebro University, 701 82 Örebro, Sweden, [email protected] Kailer, Norbert, Prof. Dr. Institut für Unternehmensgründung und Unternehmensentwicklung, Johannes Kepler Universität Linz, Freistädterstrasse 307/I, 4040 Linz, Austria, [email protected] Kamei, Katsuyuki, Prof. Ph.D. Kansai University, 567-0872 Ibaraki City Sinchujocho, 5-31-408 Osaka, Japan, [email protected] Kazumi, Tomoyo, Prof. Takachiho University, 19-1, Ohmiya2chome, Suginami-Ku, 168-85 08, Tokyo, Japan, [email protected] Kellermanns, Franz W., Prof. Ph.D. Mississippi State University, 3115 McCool Hall, Box 9581, MS 39762 Mississippi State, USA, [email protected] Miettinen, Asko, Prof. Dr. Tampere University of Technology, P. O. Box 541, 33101 Tampere, Finland, [email protected] Mugler, Josef, Prof. Dr. Wirtschaftsuniversität Wien, Augasse 2-6, 1090 Wien, Austria, [email protected]

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Müller, Christoph A., Prof. Dr. Universität Hohenheim (D) und KMU-HSG – Schweizerisches Institut für Klein- und Mittelunternehmen, Dufourstrasse 40a, 9000 St. Gallen, Switzerland, [email protected] Nauwelaerts, Ysabel, Prof. Dr. Departement Handelswetenschappen, Korte Nieuwstraat 33, 2000 Antwerpen, Belgium, [email protected] Neubauer, Herbert, Prof. Dr. Wirtschaftsuniversität Wien, Augasse 2-6, 1090 Wien, Austria, [email protected] Pichler, J. Hanns, Prof. Dr. Wirtschaftsuniversität Wien, Augasse 2-6, 1090 Wien, Austria, [email protected] Pleitner, Hans Jobst, Prof. Dr. Universität St. Gallen, Müller-Friedberg-Strasse 8, 9000 St. Gallen, Switzerland, [email protected] Raymond, Louis, Prof. Ph.D. Institut de recherche sur les PME, C.P. 500, Trois-Rivières, Canada, G9A 5H7, Canada, [email protected] Reboud, Sophie, Prof. Burgundy School of Business, 29 rue Sambin - BP 50608, 21006 Dijon Cedex, France, [email protected] Rössl, Dietmar, Prof. Dr. Wirtschaftsuniversität Wien, Augasse 2-6, 1090 Wien, Austria, [email protected]

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Schaper, Michael, Prof. Ph.D. Australian Competition & Consumer Commission, GPO Box 3131, Canberra ACT 2601, Australia, [email protected] Sertl, Walter, Prof. Dr. Schablederweg 5-1, 4040 Linz, Austria, [email protected] Szerb, Laszlo, Prof. Dr. University of Pécs, Rákóczi 80, 7622 Pecs, Hungary, [email protected] Tam, Simon K. W., Prof. Dr. University of Hong Kong, Men Wah Complex, School of Business, Pokfulm Road, Hong Kong, Hong Kong, [email protected] Tan, Wee Liang, Prof. LL.B. (NUS), LL.M. (Camb.), S.M. (MIT) Singapore Management University, 50 Stamford Road #05/01, Singapore 178899, Singapore, [email protected] Tanaka, Mitsuru, Prof. Dr. 2-21-3 Asahi-cho, Nara City, Japan, [email protected] Tsuyuki, Emiko, Prof. Ph.D. Meisei University, Hodokubo2-1-1, Hino, 191-8506 Tokyo, Japan, [email protected] Veciana, José Ma, Prof. Dr. Universitat Autonoma de Barcelona, Department d'Economia de l'Empresa, Edifici B, Campus de la UAB, 8193 Bellaterra (Barcelona), Spain, [email protected]

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Volery, Thierry, Prof. Dr. KMU-HSG – Schweizerisches Institut für Klein- und Mittelunternehmen, Dufourstrasse 40a, 9000 St. Gallen, Switzerland, [email protected] Watkins, David, Prof. Ph. D. Southampton Business School, East Park Terrace, Southhampton S09 4WW, Great Britain, [email protected] Welter, Friederike, Prof. Dr. Universität Siegen, Hölderlinstr. 3, 57068 Siegen, Germany, [email protected] Winch, Graham, Prof. Dr. University of Plymouth Business School, Drake Circus, Plymouth Devon PL4 8AA, Great Britain, [email protected] Wingham, Dianne, Dr. University of Newcastle, Newcastle 2300 New South Wales, Australia, [email protected] Zanger, Cornelia, Prof. Dr. Technische Universität Chemnitz, Lehrstuhl für Marketing und Handelsbetriebe, 09107 Chemnitz, Germany [email protected]

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Rencontres de St-Gall 2008 “Innovation, Competitiveness, Growth and Tradition in SMEs”

CONTENTS Monday Morning, September 1, 2008 Topic A: New Venture Creation

Monday Afternoon, September 1, 2008 Topic B: Fundamentals of Entrepreneurship, SME and Family Business Research

Tuesday Morning, September 2, 2008 Topic C: Policies for Innovation, Competitiveness and Growth

Wednesday, September 3, 2008 Topic D: Innovation Management in SMEs

RencontresȱdeȱStȬGallȱ2008ȱ ȱ ȱ ȱ ȱ ȱ MondayȱMorning,ȱSeptemberȱ1,ȱ2008ȱ TopicȱAȱ NewȱVentureȱCreationȱ ȱ ȱ ȱ Bianchi,ȱWinchȱ Fayolle,ȱBasso,ȱTornikoskiȱ Gruber,ȱDencker,ȱShahȱ Kazumiȱ Kellermanns,ȱChang,ȱChrismanȱ Szerbȱ Tamȱ Tsuyukiȱ

Understanding the Dynamics of ‘Abnormal’ Small Firm Growth* Carmine Bianchi Full professor of Business Management Department of Management, Faculty of Political Sciences, University of Palermo, Italy [email protected]

Graham W. Winch

Emeritus professor of Business Analysis University of Plymouth Business School, Plymouth, United Kingdom [email protected]

Abstract Published work in the small business growth addresses many aspects – commending growth objectives, developing and implementing growth plans, and characterising normal growth trajectories. However, case study analysis has identified two forms of abnormal growth – business “dwarfism” and “gigantism” - which can lead to missed opportunities for owner/entrepreneurs and local economies, and even to business crisis and collapse. This paper describes the analysis of structures that can lead to these phenomena and the capturing of them in qualitative and dynamic simulation models. The resulting models offer practical tools to support small and micro firm stakeholders in developing balanced and sustainable growth strategies. Introduction – “Abnormal” Growth Trajectories in Small Firms Growth strategies for small and micro enterprises is, understandably, a hot issue for academic research and an important focus for small firm support agencies, specialist consultants and advisers, and the owner/entrepreneurs themselves. The reasons for this attraction are not hard to define, as growing firms offer: • enhanced opportunities for the owner-entrepreneurs, or family owners, to maximise the financial benefits from their efforts and ingenuity; and • expanding opportunities for employment and trickle down business for the local and regional communities and economies that accompany the progress of the individual firms. The small business literature concerns many aspects of growth – commending growth objectives, developing and implementing growth plans, identifying the challenges growth brings – and there are a number of growth archetypes. These usually revolve around some form of normal growth trajectory involving start-up, early establishment, a growth phase and finally business maturity (see, for example, Churchill & Lewis, 1983; Scott & Bruce, 1987). Of course, what constitutes ‘normal’ is open to debate, but it might be interpreted as an ideal, hoped-for, or even theoretical growth pattern. The classic growth curve is “S” shaped, with the firm’s size flattening to a sustained plateau. This plateau results from there being some form of externally imposed limit to growth – this might be the maximum market share achievable, total market for a niche product, etc. (Penrose, 1995; Barth, 1999). However, case study analysis has identified two forms of abnormal growth trajectories – what might be called “business dwarfism” and “business gigantism”. In the dwarfism case, *

Paper to be presented at the Small Business Rencontres, University of St Gallen, September 2008

the firm’s growth has plateaued well below the natural, or external, limit to growth, implying that the reason for plateauing early is internally generated. In the case of the ‘business giant’, early growth has shot ahead of what may be considered as a normal growth rate. Such growth is likely beyond the capabilities of the firm, causing it to over-reach itself, and is thus unsustainable and may well lead to business crisis – so called overshoot and collapse.

Sales “NORMAL” “DWARF” “GIANT” “LIMIT TO GROWTH”

Years Figure 1 Normal and Abnormal Growth Trajectories

Both behaviours are important because they suggest firms that are either underperforming presently (in terms of sales volumes, revenues, or income), or, with gigantism, may presently be over-performing, but with a major risk of crisis and collapse in the future. In either case, the dual benefits to business owners and to other stakeholders might not be achieved, or might only be partially achieved. This paper aims to cast light on how such behaviours might arise, what the implications are, and to suggest that system analysis and simulation offer a way of educating entrepreneurs and stakeholders to the risks and opportunities, and, potentially, to support them in their search for ambitious but sustainable growth strategies. The Nature and Causes of Business Dwarfism and Gigantism Dwarfism The term business dwarfism (in Italian nanismo aziendale) has been adopted in recent times in the Italian political and socio-economic debate to label a stereotype of business marginality and entrepreneurial mediocrity, based on a structural disengagement from growth. Such firms may well be ‘successful’ in the sense that they have survived over many years, maybe multiple generations of family ownership, and have been profitable or have provided the owners with what they consider an adequate quality of life. Such firms may have had significant growth potential but the owners have seemingly been unaware or unconcerned that the firms remain small, or ‘stunted’. ‘Dwarf’ firms are commonly characterised (Russo 1988) as those small and micro firms whose structure and management routines have been kept unchanged over several decades in terms of structure, processes, and relational systems. An implicit assumption is that those firms which have not been increasing their size for a long time are affected by a ‘structural disease’ and support systems and tax incentives have been proposed to remedy this malaise. This may support owners whose firms are stunted

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despite their efforts and intensions, but does not address the circumstances of those whose ‘disease’ is purposefully chosen (Bianchi et al, 2004). Generally the central focus within much of the literature has been on debating the topic of stunted or capped growth, or even simply non-growth, rather than ‘dwarfism’ per se. Holmes and Zimmer (1994) distinguish Growth Capped from Growth SMEs. In the former, growth is sought and plans are developed to facilitate it, though growth will only be financed by additional equity inputs by the owners or bank debt. If new equity from outside sources is not an option, such firms experience an internal limit to growth. Conversely, the latter kind of firm is more prone to accept external capital sources to foster growth, which allows them to reach a larger size and promote change. Gibson (2002) asserts that “the notion that firms may have a capped growth objective is evident in many areas”. This work believes that there are thus many small firms, where owners take actions that suggest they are concerned with maintaining a stable business and that growing out of this stability is not regarded as a primary objective. In an empirical study oriented towards understand growth and non-growth motivations for an entrepreneur, Perren (1997) defined a number of relevant factors, such as: •

owner’s growth motivation,

•

management expertise for growth,

•

resource access,

and identified that such firms share a common set of negative motivations towards growth and these effects are particularly significant when the market shows a rising pattern of demand. Similarly, Brown and Kirchhoff (1997) have investigated the effects of resource availability on entrepreneurial orientation, and they distinguished two important factors: perceived environmental munificence and resource acquisition self-efficacy. Past research has focussed on an empirical analysis of more than ten detailed case-studies showing different profiles of dwarfism (Bianchi et al., 2004). Based on this field research, the authors have developed a conceptual model and a simulation model aimed at depicting the crucial factors characterising the phenomenon in a dynamic resource-based view (Bianchi & Winch, 2005). We have also tested the model with a number of entrepreneurs in order to verify its usefulness in an education context (Bianchi et al., 2006). Gigantism We view “business gigantism” as the emergence of unbalanced and unsustainable rapid growth that is typically stimulated by the ‘unnatural’ injection of disproportionately very large levels of funding. This might be through over-optimistic plans and compliant, if wellintentioned, funding agencies - often with government grants specifically ear-marked for encouraging small firms and/or regional economic development. This phenomenon naturally juxtaposes the dwarf business situation: firms suffering from business gigantism have grown too big in comparison to their earlier size and state, and have in effect overreached their capabilities. Past research by the authors has also shown that gigantism and dwarf businesses crises are often interlinked. In common with the dwarfism phenomenon, a lack of understanding about the strategic resource system, delays, and the inertial effects of external factors on the firm underlie the problem (Bianchi & Winch, 2005, 2006, 2008). The authors have studied two specific cases in depth where small firms secured substantial funding to support new developments. In both cases the funding was via public agencies, and in both cases the funding was secured on the basis of formal business plans which included a need for owners' co-funding. Unfortunately, the static and mechanistic nature of these plans 3

seems to have concealed the perils facing the firms if they attempt to grow too quickly. Specifically they understated or ignored the need to develop other new strategic resources (e.g. knowledge, prototypes, commercial contacts). In this way, they also seemed to have ignored the need for further equity injections and the time lags in bringing plans to fruition. By contrast, the optimistic views reflected in the plans, which were shared by owners, their consultants, and funders alike, seem to have implied that investing large amounts of money virtually guarantees growth and healthy profits. The Links between Process Structure, System Behaviour and Growth Performance Balancing Critical Strategic Resources In order to support the various key actors in better framing the systems which generate dwarfism and gigantism behaviours, the authors have used the System Dynamics methodology. System dynamics is an approach for mapping system structure, quantifying the relationships to produce a set of equations that capture the real world processes, and using these to simulate possible system behaviours over time. The underlying principle is that if process structure determines system behaviour, and system behaviour determines company performance, then the key to developing sustainable strategies to maximise performance is understanding the relationship between processes and behaviours and managing the leverage points. In their original work on dwarf businesses, Bianchi and his co-workers suggested a set of possible business structures based on feedback thinking and structural diagrams reflecting a resource-based view of the firm (see, e.g., Amit & Schoemaker 1993; Dierickx & Cool, 1989; Warren 2002). Our continuing studies of both the dwarf and gigantism phenomena have confirmed that the management of strategic assets, and more specifically the maintenance of an appropriate balance between the assets, is the key to sustainable growth. (Strategic assets is a catch-all term and includes a range of assets or resources critical to the success of a firm.) The emerging models all centre on the building up and decline of key core assets: •

financial assets,

•

the quality of products or services,

•

customer base, and

•

production capacity (e.g. human resources, machinery).

Each of the strategic assets can to some extent be controlled in isolation of the others; however, where there is not balanced growth or coherence in the assets, then firms will likely be unable to grow to achieve maximum potential, or might grow in a non-sustainable way. The basic system structure applying in all asset management is as in Figure 2. There are two key loops. Loop B reflects that strategic assets are not immortal, and can be lost over time through a variety of processes – plant deteriorates, customers are lost, quality relative to competitors falls. Loop A reflects that firms probably have a target for the strategic asset, hopefully explicit but maybe only tacit, and will take remedial action if the assets fall, or fall significantly, below that target. On its own, loop B would tend to drive assets down to zero, while loop A would attempt to control the assets at or around the target. In a firm for which growth is not a top priority and perhaps where the entrepreneur is really focused on day-today operations, then asset management might be overlooked and assets might be expected to fall away over time (Bianchi 2002). This effect could almost be seen as a self-fulfilling mechanism in that accepting the weak asset position is likely to militate against activities that

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could lead to growth, and could, if uncorrected, lead to crisis. Such firms are unlikely to have an active programme of replacing lost assets, so the loss could go on for a period of time. Strategic assets loss

-

Time to lose strategic assets

+

B +

Strategic assets

-

-

A

GAP

Desired strategic assets

+

+

Re-acquisition of strategic assets Figure 2 The Key Structure of Strategic Assets

Of course, dwarf firms are not firms that fail, but ones which survive and possibly operate reasonably profitably over long periods albeit at a small size. It is inevitable therefore that at some point, the dwarf firm owner will recognise that the asset position has deteriorated, perhaps to a point where operations are threatened, and take remedial action. Thus, over time, dominance switches between the two loops, in terms of which is most influential on current behaviour, and an oscillatory pattern of falling and recovering strategic assets will be observed. This pattern suggests that the firm could survive at modest levels of activity but would find breaking out and moving into growth mode would take purposeful changes in operating policies. Similar issues concerning the dynamics surrounding strategic asset management and asset balance also apply in gigantism situations. Our detailed case analysis focused on two such companies which experienced rapid growth stimulated by major injections of development funds. Figure 3 depicts the main causal structures and three key feedback loops applying in one case – an engineering firm – that can be examined to explain the ‘overgrowth and collapse’ of the company. The reinforcing loop ‘R1’ shows the intended growth the owners wished to foster when seeking funding. The high funding reflected the objective of hiring a large number of employees and associated increase in production capacity (machinery). Since both the increased staffing and production capacity raised costs and reduced income, the company also aimed to boost turnover by allowing clients more generous credit terms. In this way, higher sales orders were expected to increase sales revenues and liquidity, though these effects would be after delays associated with both the time to complete orders in the industry, and the remarkably generous payment terms. The effect of both delays was, on one hand, to neutralise the reinforcing growth-oriented loop the owners wished to pursue, and, on the other hand, to bolster the balancing loop ‘B1’, which represented a considerable limit to the

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firm’s operational growth. In fact, it was a major cause of lower sales collections, in spite of a higher order rate.

Figure 3 – Key loops in a case study firm experiencing ‘gigantism’ type growth

Financial crisis ensued as the firm tried to sustain increasing cash outflows to pay salaries and purchases, while it suffered significant problems with inflows due to the long production and sales collection delays. Therefore, rather than increasing bank balances and fostering further growth through capacity acquisition, the firm had to draw down liquidity from its bank credit. This raised financial costs and soon generated losses and negative cash flows reducing bank balances even further. Common aspects characterising crisis and failure in dwarf businesses have been linked either to a misperception of external factors which may weaken strategic assets, or to an overestimation of the level and consistency in such assets. While the former factor has a major impact on the outflows depleting strategic assets, the latter affects the inflows. Lack of understanding about the strategic resource system, delays, and the inertial effects of critical external factors are common to the two phenomena. Simulating Dwarf and Gigantism Behaviours Typically, analysis with system dynamics is a two stage process. Qualitative analysis, as shown above, can be used to categorise feedback mechanisms, identify key behaviourdetermining structures, support the talking and/or thinking through of how behaviour links to structure, and the assessment of possible structural changes. However, in many cases there is a distinct value to complementary quantitative analysis -- simulating system behaviours under different scenarios. In both the dwarfism and gigantism studies, simulations were used to refine the analysis.

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Usually, as part of the model validation process, the first stage of quantitative analysis is to show that the model is able to replicate the ‘reference behaviour’ – any characteristic behaviour, such as oscillations, exhibited by the present real-world system. A second phase is likely to involve a variety of runs to confirm how the structure affects behaviour, and from this how changes in the structure might bring about improvements in behaviour and performance (and what changes might actually make things worse!) Simulations with the dwarfism model give important insights confirming that the application of simple changes in owner-manager attitudes could potentially enable a stunted firm to break out into growth (Bianchi & Winch 2006). However, they also show that there is a real risk of such a firm gradually degenerating into structural instability. The results also suggest that the stable asset situation beneficial for sustained growth requires owners to move to a more reactive attitude to strategic asset management than is perhaps typical in dwarf businesses. The gigantism simulator was similarly constructed with a set of stock-flow structures, populated with data reflecting an actual ‘gigantic’ company situation (Bianchi & Winch 2008). As an example of the simulation outputs that are achievable, some of the key results are presented and interpreted here (Figure 4). In this case study, the policy levers available to decision makers in the simulated firm trying to achieve rapid growth were: (a) desired funding injection, and (b) maximum debt-to-equity ratio.

Figure 4 Unsustainable and Sustainable Growth Strategies for a Potential “Gigantism” Firm

The first scenario reflects a very aggressive growth strategy, requiring a high level of new funding, as was the actual case. This financing was needed for the hiring of 80 new employees, to add to the existing staff of barely 20 people; this also required a five-fold increase in plant capacity. In order to justify such funding the firm would have to increase its structure by 400-500% in a very short time! While the time to hire employees was relatively short, around a month, the time to build production capacity was longer - more like 6 months. Despite the timing issues, the new staff were hired before capacity acquisition was decided and started. The second policy parameter - maximum debt-to-equity ratio - is set to 0.65,

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implying a strong reliance on the injected funds and a low inclination by the owners to selffund the growth. In a second scenario, the desired funding has been set to barely half the first figure, reflecting a more modest objective of hiring 30 new employees with a need to increase plant capacity by about 2½ times. The firm must still more or less double its structure in a short time, though still ambitious this is much less intensive. Furthermore, growth is now more self– funded with maximum debt-to-equity ratio set to 0.4. As can be seen in Figure 4, the first scenario (solid curves) leads to crisis, exactly reflecting the experience of the actual company. On the other hand, in the second scenario (dotted lines) the more modest growth objectives and greater personal commitment by the owners to funding growth reflects a sustainable strategy. Although this leads to lower sales revenues, and also to a lower income rate in the early years, in the long run it shows much better results in terms of both liquidity and profitability and dividends significantly increase owners’ personal assets in the long term. The first scenario, by contrast, shows a decreasing pattern in personal assets, owing to a need to invest capital in order to address the debt-to-equity ratio issue. The implications and benefits for both entrepreneurs and other SME stakeholders Learning about, understanding and communicating the causes of abnormal behaviours This review of linked research projects relating to SME growth has shown that business dwarfism and gigantism are two manifestations of unbalanced growth. Business dwarfism means that a firm has almost certainly underperformed against its potential; gigantism suggests unsustainably rapid growth, causing a firm to over-reach itself, and a longer-term inability to maintain balanced growth might ultimately lead to ‘overshoot and collapse’. In order to encourage small/micro firm owners and other key players to learn from recurrent errors, these two phenomena can be framed through modelling. The process of diagramming is a powerful tool for surfacing ideas, sharing mental models, and talking through consequences. The learning process encouraged by such an approach can be expected to produce a change in decision makers’ mindsets, i.e. their mental models. This is not an easy and automatic process, since conservative behaviour and resistance to change are often major barriers discouraging so-called double loop learning (Argyris & Schon 1978; Senge 1990). Reinforcing the link between structural features and unwelcome and welcome behaviours A basic analysis of the twin-loop structure in the loop diagram for strategic asset management suggests that while a reinforcing loop can potentially support and feed growth, if the resource is not protected then growth is unlikely to be achieved. In this case, growth plateaus, limited by internal constraints, rather than the firm growing until external, unmanageable constraints determine its ultimate size. If assets are allowed to drain away, with owners only eventually taking remedial action, then there will be an alternating pattern of asset run-down then buildup leading to oscillatory behaviour, as observed in dwarf firms. A characteristic of balancing feedback with inbuilt delays is oscillating behaviour, and simulations with the dwarf business model did replicate such behaviour. The key to turning round stunted firms is therefore the active enhancement of key strategic assets. Basic simulations with the model show this, though more advanced scenarios also show that balanced management of interacting assets is necessary to turn the business into a growing business.

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With the gigantism phenomenon, the case study companies had adopted highly ambitious growth strategies that actually lead to crisis and failure. The processes most likely to be responsible for this situation had not been identified or had not been analysed fully. The analysis described here has identified processes that could cause unsustainable growth and interlinked them within causal loop diagrams. This includes the loop structures that support growth and those that might kick-in and prevent growth and/or provoke other negative reactions. The simulators reflect the operations of the case study companies, and experimentation has, through the setting policy of levers to critical values, replicated the kind of behaviour that led to major crises in both these firms. Supporting the development of sustainable growth strategies. The simulations with both models suggest that the application of simple changes in ownermanager attitudes and actions could produce sustainable and acceptable growth – in the case of a stunted firm potentially enabling it to break out into growth, in the case of a possible gigantism scenario suggesting more modest ambitions which could deliver strong and satisfying growth without the risk of crisis. The results also suggest that the kind of asset stability beneficial for sustained growth would require a more active attitude to strategic asset management than is perhaps typical. The simulator, by demonstrating that growth objectives might be feasible, should stimulate and encourage stakeholders to take a more detailed look at the practical options in individual firms. That said, it took careful analysis and multiple runs with the simulators to find the effective policy balances, and this suggests that the task in real life is indeed likely to be far from easy. However, this work has also shown that the analysis, simulated experiences, and entrepreneurial learning are possible with such simulators, and points to them offering a realistic support tool for this tricky task. Further, the models can be presented in the form of Interactive Learning Environments (ILE), also known as ‘management flight simulators’. Easy-to-use interfaces enable non-experts to rapidly generate and explore a wide range of scenarios allowing direct use by owners to help them understand the dynamic risks and opportunities in changing strategic direction. Institutional bodies would seem to have a clear commitment to supporting the small firm sector, reflecting the perceived importance of SMEs to employment and wealth creation and the accompanying need to encourage start-ups and business development in the sector. However, it is recognised that in many instances SME development needs will not or cannot be met by the private sector, in part or in full, and this justifies public intervention. The task of using any public monies to maximum effect is a difficult one, and Freel (1998) has argued that the notion of “picking winners” for grant and other support is “not a viable alternative to blanket cover”. Almost by definition, these firms are being moved into what might be considered an ‘unnatural state’ and the task of funding bodies and advisers is thus to ensure that only the firms with most potential are chosen, and then ensure that support is managed so that firms’ full potential is achieved. We argue that a good grasp of the complex interrelationships between firms’ assets using feedback analysis and simulation should be part of the process of stakeholder interactions in the process of designing sustainable growth strategies that are rewarding, but at the same time prudent and achievable.

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References Amit R, and P Schoemaker 1993. “Strategic Assets and Organizational Rent” Strategic Management Journal, 14, pp. 33-46 Argyris C, and D Schon, 1978. Organizational Learning: A Theory of Action Approach, Reading, MA: Addison-Wesley Barth H, 2003. “Fit among competitive Strategy, administrative mechanisms, and performance: a comparative study of small firms in mature and new industries”, J. of Small Business Management, 41(2), pp.133-147 Bianchi C, L Raimondi, and V Fasone, 2004. “Structural growth disengagement and value creation in small and micro-firms” in Proceedings of Rencontres de St-Gallen Bianchi C, and G Winch, 2006. “Unleashing Growth Potential in 'Stunted' SMEs: Insights from Simulator Experiments" Journal of International Entrepreneurship and Small Business, 3:1 Bianchi C, G Winch and S Tomaselli, 2006. “Investigating sustainable strategies for turning round ‘stunted growth’ businesses”, 3rd AGSE Entrepreneurship Research Exchange, Auckland Bianchi C, and G Winch, 2008. “Giants with feet of Clay. The Pitfalls in Going for Unbalanced and Unsustainable Growth”, 5th AGSE Entrepreneurship Research Exchange, Melbourne Brown TE, and BA Kirchhoff, 1997. “The Effects of Resource Availability and Entrepreneurial Orientation on Firm Growth”, Frontiers of Entrepreneurship Research (http://www.babson.edu/entrep/fer/papers97/kirtchoff/kir1.htm) Churchill N and V Lewis, 1983. “The five stages of small business growth”, Harvard Business Review, 1983, 61 (3), pp.30-40 Freel M, 1998. “Policy, Prediction and Growth: Picking Start-Up Winners?” Small Business and Enterprise Development 5(1) pp19-32 Gibson B., 2002. Submission to the Committee’s Inquiry into Small Business Employment Issues, Senate Employment Workplace Relations and Education References Committee, Submission n. 77, Small Business Employment (http://www.aph.gov.au/senate/committee/eet_ctte/smallbus_employ/submissions/sub077.doc) Perren L, 1997. “The Growth of Micro-Enterprises”, XX ISBA National Conference, Belfast Holmes S, and I Zimmer, 1994. “The Nature of the Small Firm: Understanding the Motivations of Growth and non-growth Oriented Owners”, Australian Journal of Management, 19 (1), pp. 97-120 Penrose E, 1995. The Theory of the Growth of the Firm, New York: Oxford University Press Russo G., 1988. “Fenomeno del Nanismo e Politica degli Incubators” [The ‘Dwarfism’ Phenomenon and Incubators Policy], Proceedings of the Workshop on : “Formazione e Sviluppo di Nuove Imprese”, S. Miniato, Pisa, November Scott M & R Bruce, 1987. “Five stages of growth in small business”, Long Range Planning, June, pp. 45-52 Senge P, 1990. The Fifth Discipline: the Art and Practice of the Learning Organisation, New York: Doubleday Warren K, 2002. Competitive Strategy Dynamics, Chichester: John Wiley & Sons

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The Act of New Venture Creation: Exploratory Elements of an Explanation

Alain Fayolle EM Lyon Business School C.E.R.A.G. (Université Pierre Mendès France de Grenoble) Visiting professor Solvay Business School, Brussels [email protected]

Olivier Basso Singleton Institute, Brussels [email protected]

Erno Tornikoski EM Lyon Business School [email protected]

Abstract The present contribution is exploratory and constitutes a first step to better understand the phenomenon of commitment to a new venture creation process. In order to achieve this objective, we will make a review of the main psychosocial theories of commitment, starting with an analysis of the concepts and theories developed in the field of both social and cognitive psychology. We then look at the notion of commitment within the field of entrepreneurship by analysing the most prominent works devoted to the subject and also by looking into two concrete cases. We use psychosocial approaches in analysing the two cases and, through the light of our findings, propose two perspectives to better understand the formation and persistence of entrepreneurial commitment before presenting the initial elements of a potential model of entrepreneurial commitment. Keywords: Entrepreneurial commitment – Entrepreneurial process – New venture process – Entrepreneurial cognition.

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INTRODUCTION The act of new venture creation does not relate to one single decision. Inaugural decisions and founding 'ruptures' often result from a long and winding path. Comparable in that sense to the act of artistic creation, the act of new venture creation is not suited to simplifying causal analysis. In light of this, numerous works conducted in the field of new venture creation have attempted to explain the emergence of the phenomenon, and more particularly the pivotal moment when the creation process is set in motion. This is how Shapero and Sokol (1982) designed a model based on the notions of 'desirability' and 'feasibility' of the project, combined with a factor of displacement that acts as a triggering event. The notion of displacement refers to the effect of a perceived disruption or radical change in one's personal life. The introduction of a discontinuity precipitates the decision to act entrepreneurially and serves as a catalyst for the trigger. This event, the sudden occurrence of which incurs imbalance in the individual's life, may be perceived by the actor either as a positive displacement (discovery of an opportunity) or a negative one (professional dissatisfaction or layoff). Following these precursor works appeared the concept of 'intention', which in turn led into a number of theoretical models. Using intention relies on the assumption that founding a business is both an intentional and planned act (Krueger and Carsrud, 1993). Since the beginning of the 1990s, the application of the theory of planned behaviour (Ajzen, 1991) to the field of new venture creation has made it possible to renew the approaches and models based on intention. However, this approach has several limitations as regards the nature of the phenomenon studied. Intention constitutes, under certain conditions, an acceptable predictor of human behaviour, but must not be confused with the behaviour itself, a fortiori when the phenomenon studied is as complex as new venture creation (Gartner, 1989; Bruyat, 1993; Bruyat and Julien, 2001). The study of the antecedents of intention and its formation certainly contributes to extending our knowledge of the phenomenon, but this approach does not make it possible to understand the process that leads an individual to actually start a venture creation process. Drawing on the theory of planned behaviour, Krueger and Carsrud (1993) in order to overcome this limitation, added exogenous variables that act as triggering factors, inhibitors or accelerators between intention and behaviour (in their model behaviour corresponds to taking action). However, their model presents another limitation linked to the initial postulate. Even if we accept that new venture creation is an intentional and planned behaviour, we do not know exactly at which point in the process intention actually appears consciously. Indeed, intention may precede the trigger of the process, as shown by Krueger and Carsrud (1993), but it may also appear after the process of new venture creation has been triggered. Intention therefore corresponds to the moment when the individual acknowledges where he or she is going. His or her behaviour becomes reflexive. Bruyat (1993) overcomes these difficulties by proposing a dynamic model of new venture creation structured around the concept of commitment. 2

The individual's commitment to a new venture creation process thus becomes a determining variable in understanding the actual point in time when the entrepreneurial process is set in motion and how the new organisation emerges. Commitment may be partial or total. Commitment is considered total when such a stage has been reached in the process that makes going back impossible. Once fully committed to the process, the individual will go through with his or her project, as disengagement costs will appear too high. We define commitment as the moment when the individual starts devoting most of his time, energy, and financial, intellectual, relational and emotional resources to his or her project. Once committed to the process, the individual no longer considers the possibility of going back: the investments made would make opting out far too difficult and would be experienced as a personal failure. The present paper is exploratory and provides an overview of the advancement of the research in progress: our objective is to better understand the phenomenon of commitment to a new venture creation process. In order to do so, we will use the main psychosocial theories of commitment, starting with an analysis of the concepts and theories developed in the field of both social and cognitive psychology (section 1). We then look at the notion of commitment within the field of entrepreneurship by analysing the most prominent works devoted to the subject and also by looking into two concrete cases (section 2). We use psychosocial approaches in analysing the two cases and propose two perspectives to better understand the formation and persistence of entrepreneurial commitment before presenting the initial elements of a potential model of entrepreneurial commitment.

1. COMMITMENT, ESCALATION OF COMMITMENT AND COMMITMENT THEORIES A review of the literature reveals the existence of numerous works that have led to the elaboration of theories on commitment in the fields of social psychology (Joule and Beauvois, 1989 and 2002; Kiesler and Sakumara, 1966; Kiesler, 1971), and cognitive psychology (Festinger, 1957; Staw, 1981). These concepts have been applied to the fields of management and company administration, especially in the contexts of commitment to work (Mowday, 1998, Meyer and Allen, 1997), new product development projects (Royer, 1996; Schmidt and Calantone, 2002) or software development projects (Keil, 1995; Abrahamsson, 2002). Commitment is related to decision and action. Festinger (1964) defines commitment as a decision that directly influences future behaviours. In 1971 Kiesler laid the foundations of the social psychology of commitment. For Kiesler, commitment is what 'binds the individual to his or her behavioural acts'. Contrary to popular wisdom, people are not committed through their ideas or feelings, but through their actions, their behaviours. To feel committed, individuals must feel they are the initiators of the given behaviour. As a result, individuals may be committed in various degrees. People are committed through their actions, and only the decisions made with a certain degree of freedom lead to perseverance. The perception of external pressure, or of a threat, will weaken all the more the strength of a commitment resulting from a 'freely consented' decision. Most psychologists define commitment as the force that stabilises the behaviour of individuals 3

(Brieckman, 1987; Kiesler, 1971), a force that gives individuals the strength to pursue whatever course of action they have undertaken, despite the obstacles met and whatever the attractiveness and potential of alternative options (Dubé, Jodoin and Kairouz, 1997). According to Beauvois and Joule (1981), in any given situation, the more the individual acts, the more he or she commits himself or herself. They also consider that the likelihood of an activity leading to the individual's commitment is directly linked to the individual's feeling of freedom. Individuals must feel they have a certain amount of freedom (real or perceived) when making a decision for the ensuing actions to lead to commitment. In a nutshell, the notion of commitment relates to a process that develops over time and leads individuals to preserve the consistency of their actions or the coherence of their decisions. Commitment corresponds to a position that it is difficult to opt out of (Becker, 1960), we can even say it corresponds to an irrevocable choice (Secord and Backman, 1974), or a constraint that prevents any change in behaviour (Gerard, 1965). The notion of escalating commitment completes the notion of commitment and often overlaps with it. The escalation of commitment corresponds to the propensity of individuals to persist, sometimes in an apparently incoherent manner, with a decision or a course of action, despite the existence of negative feedback and the great uncertainty ('halo effect') that affects the plausibility of future success (Staw, 1981). Sabherval et al. (1994) even speak about being 'too committed' to explain this unreasonable obstinacy. Escalation of commitment may concern the individual, the group, or the organisation (Caldwell and O'Reilly, 1982). Commitment escalation has been studied in various fields of application: researchers have used this perspective to address subjects such as the war in Vietnam, urban planning policies, and software development projects (Staw, 1981; Simonson et Staw, 1992). Beauvois and Joule (1981) attempt to explain the reasons for the escalation "We are only committed through our actions. We are not committed through our ideas, our feelings, but by our actual behaviour. The individual rationalises his or her behaviours by endorsing, retrospectively, ideas designed to justify them". This type of reconstruction of past behaviour ex post will be progressively internalised and contribute to convincing the individual that his or her new opinion is founded. To a certain extent, this perspective undermines the simplistic intention models that put forward intention as preceding and explaining the behaviour. Here intention is re-interpreted, reconstructed a posteriori. The act comes first. It shows how the 'intention-decision-action' logic must give way to more complex perspectives: the efforts to justify one's decisions, the retroactive influence of the outcomes of the actions undertaken, the capacity to look at a given situation from a different point of view, etc. all reveal the complexity of the processes at work. Consequently, other analysis frameworks must be used to better understand the notion of commitment. An analysis of the literature on the subject highlights three main approaches that show similarities.

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1.1.The theory of cognitive consistency and dissonance This theory originated with the precursor works of Festinger (1957) who at the time spoke of "simultaneous existence of elements of knowledge (cognition) which, in one way or another, are conflicting (dissonance), which motivates the individual to make efforts to make them concordant (reduction of dissonance)". The central postulate is based on the stability of individuals' cognitive systems. When individuals behave in a way that does not fit with their system of beliefs, the imbalance induced is such that they will do anything in their power to restore the balance of their cognitive system. In this case, individuals have a choice of two alternatives: they either alter their behaviour, or their attitudes. Dissonance results from internal conflicts that occur between acquired opinions and discordant new elements. Festinger (1957) identifies several types of cognitive dissonance: they may result from prior decisions that need to be justified, from actions the results of which are unexpected, or from the excessive amount of effort required to reach a given objective. This theory also relates to the phenomenon of self-justification (which results from the individuals' desire to appear rational (to themselves or others) in their every act or decision: "Individuals will bias their attitudes on the experimental task in a positive direction so as to justify their previous behaviour" (Festinger and Carlsmith, 1959). This link between the theory of self-justification and escalation of commitment is also acknowledged by Brockner (1992).

1.2.Beauvois and Joule's theory of commitment1 In line with the works of Festinger and Lewin, two French researchers in psychosociology from the University of Grenoble have chosen to focus on what they call the 'decision traps' which translate into three phenomena. - The 'freezing effect': the decision to behave in such or such a way freezes out the system of possible alternatives by making the individual focus exclusively on what is directly linked to his or her decision. The notion of 'freezing effect' translates the individual's commitment to the decision made. Once we have made a decision, we are bound to this decision, and, in a way, prisoner of it. - The 'escalation of commitment': a behavioural tendency of the individual to stick to his or her initial decision even though this decision is clearly questioned by the facts. The individual shows the need and the will to persist in his or her actions in order to prove the rational character of the initial decision taken. - The 'unnecessary expenditure' and 'dead end': it is an 'unnecessary expenditure' to the extent that individuals put themselves through an unnecessary and unproductive course of action because they 1

See especially: Beauvois and Joule (1981) and Joule and Beauvois (1989, 2002).

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have committed themselves to doing so (financially, materially, etc.); and a 'dead end' because individuals voluntarily put themselves through tough situations in which the goals set are no longer achievable. In this perspective, all goes to show that individuals, committed through their initial choices, would rather sink with the ship than admit and rectify an initial error of assessment, judgement or appreciation. This is where the notion of self-justification finds its relevance. This behaviour leads to useless actions and costs and may lead the individual to continue with a process whatever the consequences and whatever the costs. The commitment theory developed by these authors relies heavily on the individual's feeling of freedom and the nature of the acts accomplished or to be accomplished. According to Beauvois and Joule, the feeling of freedom accounts for the perseverance in a decision. 'Perseverance' here translates a tendency to persist repeatedly in a course of action, which leads to a stereotypical behaviour, because the individual is incapable of the mental or behavioural changes necessary to inhibit the ongoing activity. The actions considered may be split into two main categories. First we may distinguish: 'nonproblematic' actions that are compatible with our cognitive system and induce as a result a greater resistance to change and a strong commitment. In contrast, constrained or 'problematic' actions often lead to u-turns: people are led to alter their decisions, except when they have been costly to make. In the latter case, positions are more rigid and commitment is rather weak. When an individual has been forced to make a decision, indeed, there is often a boomerang effect that goes against the desired effect.

1.3.The escalation of commitment theory This stream of research owes a great deal to the works published by Staw and his associates (Staw, 1976, 1981; Staw and Ross, 1987; Simonson and Staw, 1992). Staw focuses on global courses of action, not isolated acts: "many most difficult decisions an individual must make are choices not about what to do in an isolated instance but about the fate of an entire course of action". He also underlines the fact that individuals have a tendency to persist in a given course of action, which provokes the escalation of commitment. This phenomenon can be explained by the need of all individuals to rationalise their behaviours. Staw (1980) distinguishes two types of rationalisation, retrospective and prospective: "the individual seeks to appear competent in previous as opposed to future actions", and the behaviour models based on the subjective expected utility theory examine the principle of prospective rationality. The combination of these two rationalisation factors brings an added difficulty to the understanding of decision-making processes. Staw (1981) highlights four factors of escalation:

Internal justification (self-justification) or external justification that he explains thus: "to prove to others that they were not wrong in an early decision and the force for such external justification could well be stronger than the protection of self-esteem". 6

Persistence of the action Perceived probability of result Perceived value of the result For Staw (1981), commitment is a complex process, subjected to multiple and sometimes conflicting forces. His theoretical model based on the four types of determinants presented above is still often used in empirical research today.

2. COMMITMENT TO A PROCESS OF NEW VENTURE CREATION: THE STATE OF CURRENT RESEARCH AND TWO CASE STUDIES

Our exploratory research is mainly interested in the concept of commitment in the context of a new venture creation by an individual who does it for the first time, without any particular experience. Here we consider commitment as a result, a posture, a state, as opposed to its process dimension that may vary in degree. It corresponds to the moment when the individual starts devoting most of his or her time, energy, and financial, intellectual, relational and emotional resources to his or her project. The possibility of going back is no longer an option, as, in light of the investments made, giving up would be too difficult and would be considered as a failure. Commitment therefore corresponds to a phase in the process, without which the process could not be completed in the best possible conditions.

2.1.The notion of commitment in the field of entrepreneurship To the best of our knowledge, commitment theories have been little used in entrepreneurship research. The notion of commitment itself is not perceived homogeneously. Bruyat (1993, 2001) structures his thesis around this concept. He describes commitment as a set of actions / decisions that are spread over time. Actions and decisions are joined in the process, and it is difficult to identify a traditional sequence of events (collection of data, analysis and deliberation, decision, and action). The new business founder described by Bruyat has a bounded rationality and progressively commits himself or herself to the process until total commitment. This escalation of commitment leads to a stage of near irreversibility (except if the individual opts out) and leads individuals to focus increasingly on their projects. Going back therefore becomes very difficult, even impossible, given the costs of disengagement (financial resources consumed, social costs through the partners involved, costs in terms of career, psychological costs and cognitive dissonance). This commitment process that leads to full commitment may be incremental or revolutionary, depending on the resistance to change in particular. It is therefore important to distinguish several forms of commitment. The analysis model proposed by Bruyat (1993, 2001) relies on the theory of catastrophes and provides a visual representation of the phenomenon. Gaillard Giordani (2004) addresses the question of commitment within the context of the relation between investors and entrepreneurs. The perspective adopted is financial and the approach focuses 7

mainly on the mutual commitment of the actors involved in the entrepreneurial process. The perspective developed by this author relies on the exchange of mutual and credible commitment; and these exchanges participate in the sense-making and realisation of the project. The types of commitment examined in this work relate to knowledge and resources that are specific to the process. While Bruyat considers commitment as an individual variable, it appears mainly in its collective dimension in Gaillard Giordani's doctoral research. Both authors nevertheless concur on the importance they give to the issue of commitment. In the Anglo-Saxon literature, commitment theories seem to be applied to the field of entrepreneurship in a totally different perspective. Commitment is no longer perceived as an essential element (phase or act) of the process, but as a psychological factor susceptible to divert the entrepreneur from the right decision paths, considering that the right decisions paths should be dominated by the – often economic – rationality of the actor. The reduction of cognitive dissonances and the escalation of commitment are considered as possible cognitive biases. This appears more particularly in the works of McCarthy et al. (1993), which attempt to analyse to what extent the decisions of financial re-investment are influenced by rational processes or variables of commitment escalation. The results show that entrepreneurs who started their own business are more prone to commitment escalation than entrepreneurs who took over an existing business. Moreover, entrepreneurs who have too much self-confidence are those who exhibit the most significant escalation of commitment.

2.2.Our research method The two case studies presented here correspond to situations of new venture creation that we were able to observe almost in their entirety by being in regular contact with the actors. We used several methods of data collection: interviews with the project bearers (with extensive notetaking), working documents produced by the individuals, and interviews with other parties involved in the project (mainly experts in new venture creation and stakeholders). In each case the data was collected over periods of time spanning several years. We develop below the reasons why we chose the case study method for our exploratory research. Case studies involve documenting a phenomenon by using several techniques of data collection. The various data sources help build a case destined to be analysed from a specific perspective, around a given issue (Hamel et al., 1991), which corresponds to our objective here. Moreover, this research method is particularly relevant for our investigation, in that it takes into account the time, context and circumstantial dimensions of the 'stories' we are concerned with. Some researchers, like Mintzberg for instance, have already tried to legitimise the research works that deal with a limited number of cases: "What, for example, is wrong with samples of one? Why should researchers have to apologize for them?" (Mintzberg, 1979: 583). For this author, researchers must go beyond statistical approaches and interpret the data, thus breaking away from the statistical weight of scientific replication, the objective being to discover new elements, even if their scope remains 8

limited. In order to reach this goal, various techniques are called upon: the perspective is that of a convergence of approaches. Hamel (1997) underlines this clearly: "Indeed, the case study, by definition, calls upon various techniques, be they observation, semi-directive interviews, and one or the other technique of contents analysis (…). The variety of the methods used is in line with the idea of comparing several angles of study or analysis" (p.103). Later, this author talks about 'data triangulation', which aims to compare different points of view, to weave a network which will outline the case pattern, its internal logic: "Various methods are used in order to place the object of study under various lights, in the hope that they will reveal all its dimensions" (p. 104). The types of data collected "may thus overlap and shed light upon one another in order to throw light on the case concerned" (p.105). Collecting the data is an essential part of the case study process. Several possible data sources can be used. Yin (1994) identified six of them (p.80) with their advantages and drawbacks: documentation, archives, interviews, direct observation, participant observation, technical and cultural artefacts. For the work presented here, we used and cross-analysed the first five sources cited above.

2.3.Presentation of two commitment cases Case A dates back to the late 1980s whereas case B is from the mid-1990s. We have always stayed in touch with the main actors of these two situations of new venture creation. Case A: AF is an engineer in a consultancy firm specialised in the market of central and local administrations. He likes his job and his working environment. He does not feel any dissatisfaction as regards his professional life and does not feel threatened in his job. In 1986, then aged 32, during a conversation with a colleague he happens to mention his desire to set up his own firm one day. He then discovers that this person has the same desire. Over the following days and weeks, this becomes a recurrent topic of their conversations, an idea emerges, takes shape and progressively takes more and more importance in the life of AF and his colleague. They start devoting time to the project and expand the team by inviting other people to join them on the project. The process is therefore triggered. While working on the project, the main actors remain in their employed positions. A market study is carried out and positive contacts are made with potential clients. Despite the fact that the activity they have in mind does not compete with their employer's activities, in order to avoid their employer learning about the project accidentally, AF decides to inform his superior as soon as possible, even though at this point, he is not yet certain they will go through with their new venture creation project. In AF's mind, this is an ethical issue, but it is a risky step to take in terms of career, especially if the project ends up being scrapped. On the one hand, the certainties and comforts of a paid job, and on the other the attractiveness of new venture creation with its inherent uncertainties. AF clearly has the impression, at this point in time, to give up what he has got to go chasing after shadows, but letting his employer know about his project is an indispensable step to pursue his project. He therefore requests an appointment with his hierarchy, and lets them know about his project. At the end of the interview, which went well, AF is convinced that a decisive step has just been taken and 9

that going back would be very difficult from then on. AF has just committed himself to the process of new venture creation. His firm (MC) will be effectively created five months after this interview and to this day continues developing IT solutions for the management of industrial SMEs, somewhere in the south of France. Case B: In 1995, RC is 28 and has just finished an MBA programme in a major French School of Management. RC is an engineering graduate and comes from a university background that does not predispose him to the career of entrepreneur. After completing technical studies, he worked for a large American company in France for a few years. During the MBA programme, RC enrolled in an optional entrepreneurship course and discovered a world that was entirely new to him. He recognises that this course generated rather quickly within him the intention to create a business. However, he decided to complete his MBA programme in an English university and graduated with a double degree, following which he was all set to find, without too much effort, a good and well-paid job corresponding to his new qualifications. RC therefore starts looking for a job, while at the same time becoming interested in the idea of setting up his own business. He becomes particularly keen on a rather crazy and passionate idea in the wine sector. He starts talking about it to his fellow students, his teachers, and especially to the teacher who was in charge of the new venture creation elective. The wine trade, whatever the quality of the concept developed, is a very tough sector with low margins, intense competition, and therefore the first reactions are rather discouraging. However, RC decides to hold onto his idea, and for three months leads his job search in parallel with his study of a venture creation project in the wine sector. He goes to recruitment interviews while meeting wine professionals to refine his project. This could have gone on forever, but RC starts realising he is diluting his time and energy into two projects of a contradictory nature. He has to choose. He decides to stop his job search for a while and devote all his time and energy to his new venture creation project. As time passes, he realises the significance of the decision he has made. We often met with RC during this period of his life, and we are convinced that this decision dramatically increased his commitment to the process. A year later RC created the business that he still runs today.

3. ANALYSIS OF THE CASES AND PROPOSITIONS We first analyse both cases from the perspective of psychosocial theories on commitment, which leads us to underline the limitations of these theories as regards our preoccupations. We then discuss our results further and make two propositions to orient future research.

3.1.Analysis of the two cases from the psychosociological perspective In both cases, the individuals are confronted with two possible alternatives. For A, the alternatives are: either "I stay with the company that employs me (and I give up on my project and put it aside, at least for a while)" or "I resign in order to eventually set up my own business (in which case, I must inform my employers as soon as possible)". For B, the alternative is either "I look for a paid job (and I devote most of my time and resources to this project) or "I focus all my attention on my venture creation 10

project (and I will go back to looking for a paid job if this does not work out)". In both cases, the individuals are faced with what we can call 'decisive' choices. Both subjects perceive the potential results of the decisions considered (going through with it, or not) as bearers of change in their life patterns. The retention of one alternative – persistence with the status quo or decision to set up a business for one, and looking for a new job or setting up a business for the other – will affect their existence in the long term. These structuring choices are perceived as pivotal periods, the consequences of which will shape radically and lastingly the life of the actors. What happens once the choices are made is aptly described by the theories of self-justification and escalation of commitment: what they aim to explain, above all, is not so much why, how, or when an individual commits himself or herself to the process, but why he or she remains committed. The initial steps do not so much constitute the major difficulty, but staying constant in this movement, persisting with this path does. For A as much as for B, the freezing effect leads the actors to focus exclusively on the path they have chosen. From then on, for A and for B, it will become difficult not to persevere with their future decisions and actions, in order to rationalise the whole process. Self-justification and escalation of commitment theories can also explain why, even if conflicting feedback arises, challenging the validity of their creation project, individuals A and B may still persist with their decision, and maybe even reinforce it further2. The choices made by A and B are of a different nature, and, a priori do not seem to bear the same weight. For A, declaring his intentions to his hierarchy amounts to taking the risk of being forced to resign. For B, it is rather a question of opting (or not) for a new venture creation project that seems unlikely to happen at a later time in his life. Other decisions and actions were taken before these choices, and other decisions and actions will be taken after. So why did these choices bear so much significance – in our view – to the extent that they very likely caused a decisive evolution of these individuals' commitment? Why these choices and not others? In both cases, the dynamic of commitment appears to be a subtle and fragile reality that seems to relate more to evolution than revolution. Commitment here relates to a transition period, a process during which a new situation is progressively structured, and it is often during transition periods that ambiguity, paradoxes and tensions are at their most intense. In both cases, the progression of commitment that leads to irreversibility – since aborting the process would be considered by the individual as a failure – happens long before its legal registration. The projects in themselves were still rather hazy at that stage. However, we may also envisage that commitment happens later in the creation process: at the time of legal registration, or even later, if the business founder has kept a paid job for instance.

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We were able to observe such situations in both cases.

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3.2.Research propositions: two conditions of entrepreneurial commitment Commitment as an implication process may take various shapes and is not suited to a single modelling approach. The nature of the path leading to commitment thus appears contrasted: for some individuals, commitment is progressive and spreads over a long period of time, without it being possible to identify a decisive moment. Such a representation seems to correspond to the observations we made about cases A and B. However, for other individuals that we have been able to observe through our practice of entrepreneurial support, commitment occurs as a sudden rupture. For instance, giving up one's career in order to set up a business represents a major change of direction, a major career change for the individual. In light of this, the process that leads an individual to commit to a new venture creation process can be seen as an incremental or radical change process. This implies that two conditions, illustrated by our cases, can be considered as necessary3 for the commitment to take place. Firstly, the act of new venture creation must be preferred (to any other alternative), and secondly, resistance to change must be overcome4. In both cases, of course, these are individual perceptions, and there may be some significant cognitive biases in estimating the risks, among other things. The desirability of entrepreneurial action involves psychological and social aspects as well as financial ones. Condition 1: The venture creation project must be preferred. Some projects abort because the entrepreneur is unable to gather the necessary means – e.g. financial resources, permits, means of production, support from a partner, and so on. The project must therefore be abandoned, even though it was what the entrepreneur preferred. If the individual is not forced to abandon the project, commitment occurs when the venture creation action (a specific project, whether detailed or not) is perceived as being preferable to the current situation (employee, unemployed, student, etc.) or to any other potential change (e.g. change of employer). The act of new venture creation is perceived as preferable to the current situation as soon as there is an increase in the attractiveness of the new venture creation and/or when there is a decrease (or indeed, a sharp drop) in the attractiveness of the current situation. Most theoretical models of venture creation retain this aspect as essential5. They describe the formation of this preference as the result of environmental factors and factors specific to the entrepreneur. We will not, however, be considering these factors in further detail at this point. Instead, 3

These two conditions are also put forward by Bruyat (1993). In both cases, resistance to change is perceptible. Change in one's satisfactory professional situation in the case of A, and change of career path for B, despite his predispositions that were reinforced following his MBA. 5 See for example Shapero (1975), Shapero and Sokol (1982), Bird (1988, 1992). The theory of planned behaviour, originally proposed by Ajzen (1991, 2002) and its applications in the field of entrepreneurship (Krueger & Carsrud, 1993; Autio, Keeley, Klofsten, & Ulfstedt, 1997; Tkachev & Kolvereid, 1999) also provide an interesting theoretical basis to explain how the preference could be formed. 4

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the preference, resulting from a push-pull situation, is assessed on the basis of criteria relating to the desirability and feasibility of the act of venture creation. The individual’s cognitive limitations must also be considered. The emergence of the preference is a complicated process, made even more complex by several factors, such as (i) the potential diversity of the criteria to be considered, (ii) the fact that the criteria are not independent of one another, (iii) the difficulty of measuring them (they are perceptions, not “objective” facts), (iv) the evolution of the perceptions over time, (v) the non-linearity of the functions linking some of the criteria to the preference (sygmoidal curves, parabolic curves, etc.), and (vi) the fact that it is impossible to formalize these links by a classical preference function (additive model). Only one factor may trigger opting-out. In other words, the emergence of preference is a system and as such it resists oversimplified approaches. Condition 2: Resistance to change must be overcome. The preference for a venture creation project, translated by a need and desire for change, will only lead to actual change if the actor is able to overcome his or her resistance to change. Strangely enough, this is not discussed as such in entrepreneurship literature, probably because entrepreneurs are often considered to have different attitudes to risk to the general public (they are often perceived as daredevils). However, empirical research does not appear to have produced key findings in support of this. Consideration of resistance to change adds to the complexity of analyzing commitment processes but, as we shall see later, also helps to explain their diversity. Consideration of resistance to change adds to the complexity of analyzing commitment processes but, as we shall see later, also helps to explain their diversity. Without going into detail, and without claiming to cover every possibility, we draw from our practical experience in new venture creation support and derive five situations in which resistance to change can be analysed. Firstly, resistance to change due to habits and inertia in reasoning and behaviour; this is particularly important where individuals have devoted most of their past commitment to an employed position without ever considering venture creation (cognitive dissonance, family role model). Secondly, resistance to change may also be due to fear of the unknown. Uncertainty may be related to a specific project or a lack of knowledge of what creating and managing a small business actually involves. Thirdly, resistance to change may also be due to the perceived irreversibility of the new situation; in some cases, individuals believe (accurately) that if their projects should fail, it would be impossible for them to go back to their previous jobs or indeed to any other job; failure, even if not immediate, would therefore be disastrous. Fourthly, resistance to change may be due to the perceived opportunity costs and/or significant irreversible costs; the potential entrepreneur gives up an enjoyable situation, devotes less time to family and leisure activities, commits most of the family heritage, cuts back on his or her lifestyle, and so on. Finally, resistance to change can be due to a lack of resources or advice and, more generally, environmental hostility to venture creation.

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Here again, the "hiding hand6" plays a significant role in dissimulating or exaggerating certain problems. Entrepreneurs who take action often overestimate their chances of success and underestimate the problems they are likely to encounter. Resistance to change in the venture creation process varies in intensity. For example, resistance to change is weaker if: the individual has been exposed early in life to the idea of venture creation (parents or entrepreneurial role models); if he or she has a social network and lives in an environment (family, friends, education) which is relevant and conducive to venture creation; if his or her current situation is unsatisfactory; and finally, if the project involves only a low degree of uncertainty for the individual (duplicate creation, broad experience of the sector and of management) or if it can be implemented gradually, without engaging significant irreversible costs. These various points are not independent, but overlap to some extent and form part of an overall system. Accordingly, the preference for new venture creation and resistance to change are not independent. Because of the complexity of the system, we have attempted to highlight a thread that could eventually be further formalised for specific applications. In our model, we assume that that the entrepreneur's full commitment does not occur unless (1) the venture creation project is preferred to the status quo or any other alternative option, and (2) the would-be entrepreneur is able to overcome his or her resistance to change. These are the two necessary conditions for the formation of entrepreneurial commitment. Now that we have established the conditions necessary for the formation of entrepreneurial commitment, we can raise further questions related to the formation of entrepreneurial commitment. For example, why are some choices so significant, in that they trigger a decisive change in the entrepreneurial commitment process? Why these choices, and not others? Clearly, in addition to the two necessary conditions for the formation of entrepreneurial commitment, we need to add a more dynamic vision of the reality.

3.3.For a new representation of the entrepreneur's commitment Analysis of the semantic definition of the term 'commitment' encompasses and articulates the theoretical elements developed above. Commitment refers initially to a deliberate binding by promise or contract. The example of the pledge (legal or romantic) is a good illustration of this situation: the subject who makes a pledge thus generates an obligation for himself or towards others. To commit oneself means to place oneself deliberately in a situation that then generates responsibilities and implies choices that are predetermined by the initial decision. This negative definition of commitment perceived as surrendering part of one's freedom can also be found in the psychosociological approaches developed previously. It is worth remembering that they particularly insist on the deliberate dimension of this subjection.

6

Hirschman (1967) explains that one of the motors for action is the individual’s ignorance of what awaits him or her when action is taken. The term hiding hand is a play on words with Smith’s hidden hand.

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However, commitment and escalation of commitment approaches essentially describe situations in terms of traps or manipulations whereby the individual surrenders his or her freedom. Cartesian criticism7 of promises is relevant here: to promise means to commit oneself, it means taking today the resolution to accomplish one or several actions in the future. It means deciding today what one will be tomorrow, without knowing anything about what the future holds and the situations one will be confronted with. But commitment cannot be reduced to the sole destructive dimension of the actor who perseveres in his or her choices: it may also be seen as a structuring and productive phenomenon, conducive to positive effects for the individual. Its creative force manifests itself in the construction of a professional path, in the writing of a book, the constitution of a couple, etc.. The actor thus chooses to follow a path in which the initial step (a degree for instance) naturally leads to opt for other actions that are linked and that complete the movement thus initiated. The theory of the decision trap with uncontrollable consequences should not detract from the positive side of commitment: it leads to the creation of a new state in which the subjects invest themselves. The language of finance meets the language of psychology: committing capital to a business means investing. To commit oneself means to invest oneself. Commitment is thus analysed as the process that crystallises a significant choice (here new venture creation), while being merely the more or less long-term consequence of a series of committing actions. Indeed, the set of minor decisions taken by an individual may be re-read as the progressive concrete realisation of a project. This only becomes obvious to the subject a posteriori, when he or she thinks back over the path he or she has taken. To summarise our position, commitment is the result of an action that necessarily leads to more actions. In this regard, commitment is a binding act: the actor's freedom or the degree of his or her freedom will be reduced. Why? Because what subjects accept when committing themselves includes two dimensions: on the one hand, they take part in a series of almost irreversible actions (constraining nature of the process), and on the other hand, commitment relates to other actions that reach beyond what subjects can perceive at the time when they commit themselves (gamble on the future). However, this constraining process is also what enables the subject to create a new path. For instance, the act of starting a family implies responsibilities and offers a new dimension to one's life: the choice of an individual life is abandoned, the creation of a state of dependency is chosen (parental responsibility) and corresponds to a life-changing decision. New venture creation is also a life-changing decision. The dynamic of commitment can vary in 7

Descartes, Discourse on Method, part III: "And I placed in the class of extremes especially all promises by which somewhat of our freedom is abridged; not that I disapproved of the laws which, to provide against the instability of men of feeble resolution, when what is sought to be accomplished is some good, permit engagements by vows and contracts binding the parties to persevere in it, or even, for the security of commerce, sanction similar engagements where the purpose sought to be realized is indifferent: but because I did not find anything on earth which was wholly superior to change, and because, for myself in particular, I hoped gradually to perfect my judgments, and not to suffer them to deteriorate, I would have deemed it a grave sin against good sense, if, for the reason that I approved of something at a particular time, I therefore bound myself to hold it for good at a subsequent time, when perhaps it had ceased to be so, or I had ceased to esteem it such."

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intensity, it may be progressive or immediate. One of the difficulties concerns the heterogeneity of the situations: we have until now considered commitment as resulting from a deliberate choice, not a constrained one. However, new venture creation does not always result from a free choice. It seems relevant here to distinguish a minima two, or even three possible configurations. Constrained new venture creation corresponds to a professional choice for want of a better alternative: the individual is out of a job or looking for a change and does not necessarily have a choice other than starting his or her own business in order to find a new activity. On the contrary, 'deliberate and embraced' new venture creation refers to a conscious professional choice and the existence of a project. Finally, even though this status is uncertain, some businesses seem to be created randomly: in this case, it is often a chance meeting or an idea that constitutes the turning point that leads to the individual's commitment. These few exploratory remarks remind us that the paths taken by business founders often reflect the complexity of unique and individual stories. Beyond the key stages (identifying an idea, finding resources, clients, and funding, legal registration), the sequence of events is anything but linear: what happens is the emergence (or not) of a new pattern leading to a commitment situation characterised by the irreversibility of the choice of becoming an entrepreneur. From a methodological point of view, the difficulty lies in combining an objective 'ballistic' approach that reflects the sequence of events that shape the entrepreneur's path with an approach based on the construction of meaning by the actors concerned. Indeed, preference and resistance forces only exist in relation to the representation that individuals have of them at a given point in time. The techniques of life-story analysis could help us define a terminology of the would-be entrepreneur's commitment: ups-and-downs, interruptions, regressions, alterations, bifurcations, etc., all correspond to a logic at a given moment in time that determines the position of the 'mobile entity' (the entrepreneur) on a commitment scale as regards his or her project. As the commitment process cannot be measured from a linear perspective (increase or decrease of commitment level), a real understanding of the phenomenon requires a new modelling of the entrepreneurs' paths. This analysis must go beyond the examination of variations in the subject's motivations, it must shed a light on the genesis, the constitution of a fundamental choice – new venture creation – by integrating the constitutive dimensions of this life path, that is to say the tangible facts and the actor's representations. The paths taken by business founders are no different from personal life paths taken by any individual: they are strewn with events, periods of crisis, and crossroads that leads them to make choices and sometimes opt for drastic changes. What must be done therefore is identify the 'ingredients' used in the decision-making process, by using several variables (structural, contextual, relational and individual) as well as various interacting temporalities. Maybe this is precisely what causes the type of 'rupture' or bifurcation that new venture creation represents in an individual's life (new job, new life). We have presented here the prolegomena of a model whose ambition is to combine these two dimensions by confronting the factuality of the various stages (constitutive moments) with the reconstruction of the factors that determined the choices. The model should also propose a more 16

precise definition of new venture creation: if it cannot be reduced to the legal creation of an activity, then what is it exactly? When does it actually happen? How is it linked with the commitment that leads to it? In the early stages of our reasoning, it seems that ambiguity remains as to the exact nature of commitment: is it the process or the result? Does commitment as a result coincide with the creation of the new business? This circular definition may be resolved thanks to an objective analysis of the time that the actor spends building his or her company. An entrepreneur's real commitment translates into the actual place that the project occupies in his or her professional life (allocated time and resources and absence of commitment to any other alternative). Psychological commitment also includes the total commitment of resources, which automatically excludes any other project.

CONCLUSION As a psychological construct, commitment is at the heart of several explanatory theories of behaviour. These behavioural approaches focus on its emergence and dynamic and often share some common ground. Commitment and escalation of commitment theories explain the deliberate entry of individuals, sometimes without their realising (especially in the case of manipulation), into a complex mechanism resulting from an initial decision, even if the subject was not aware of its significance at the time. Other works, such as the agency theory (Keil, 1995) or the theory of catastrophes (Bruyat, 1993) can be used successfully in combination with psychosociological approaches in analysing the complex process that leads an individual to create a new business. To test the relevance of this parallel between commitment and new venture creation, we examined, from the perspective of the theories mentioned above, two cases of new venture creation. Indeed, we were able to make numerous observations and gather extensive data about these experiences by studying the whole venture creation process. In view of this, it appears that psychosociological theories are useful in understanding the individuals persistence in their decision and the escalation of commitment. In other words, they make it possible to better understand the reasons why individuals' decisions, at a given point in time, commits them to a choice that will lead them further and further in the process, until the business is created and the new activity developed. However, these theories do not clarify the nature of this particular moment and the nature of the choice, embedded in a flow of actions and decisions, the heterogeneity of which is well-illustrated in our two case studies. They also provide little information on the formation of commitment and its evolution until its almost irreversibility in the context of new venture creation. The notion of commitment seems nonetheless very important in understanding the new venture creation process. Commitment could amount to a change of phase in the process with key consequences on the future of the project or of the nascent organisation. The concept therefore calls for particular treatment and must be placed within a different representation of the new venture creation process that takes into account the richness and diversity of the situations. Several elements have been put forward to constitute a new model: the career path logic, the analysis of life-story 17

narratives, the identification of a link between the events and the actor's interpretation of them, etc.; all outline the first lineaments of an ambitious model. The multiform and chaotic characteristic of the commitment process is undeniable: we know that numerous individuals who work on venture creation projects, alone or with support entities, have not reached this stage yet, and may never reach it This last possibility may come as a surprise to external observers who did not doubt the strength of the individuals' apparent commitment and who were unable to recognise the early warning signs or to explain the reasons for their abandon. Hence the importance of studying the concept of commitment further within this particular framework and context. A better understanding of the dynamic of commitment should improve the quality of the support given to entrepreneurs. Improving operational knowledge of the commitment should, at a more global level, enable the actors of venture creation support to better allocate incubating and support resources, by reserving them for projects that meet the relative conditions of commitment (acquired or latent).

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BIBLIOGRAPHIE Abrahamsson, P. (2002), The Role of Commitment in Software Process Improvement, Academic Dissertation, University of Oulu, Finland. Ajzen, I. (1991), "The Theory of Planned Behavior", Organizational Behavior and Human Decision Processes, 50, p. 179-211. Beauvois, J.L., Joule, R.V. (1981), Soumission et idéologies. Psychosociologie de la rationalisation, Paris, Presses Universitaires de France. Becker, H. S. (1960), "Notes on the concept of commitment", American Journal of Sociology, 66, p. 32-40. Brieckman, P. (1987), Commitment, conflict and caring, Englewood Cliffs. NJ: Prentice Hall. Brockner, J. (1992), "The Escalation of Commitment to a Failing Course of Action: Toward Theoretical Progress", Academy of Management Review, Janvier 1992, 17, p. 39-61. Bruyat, C. (1993), "Création d’entreprise : Contributions épistémologiques et modélisation", Thèse pour le doctorat ès Sciences de Gestion, Université Pierre Mendès France de Grenoble, 431 pages. Bruyat, C. (2001), Defining the field of research in entrepreneurship ?, Journal of Business Venturing, 16(2). Caldwell, D.F., O’Reilly, C. (1982), "Response to Failure : The Effects of Choice and Responsibility on Impression Management", Academy of Management Journal, 25, p. 121-136. Dubé, L., Jodoin, M. et Kairouz, S. (1997), Development and validation of three-factor model of commitment: From dynamic process to personal disposition, Manuscrit soumis pour publication. Université de Montréal. Festinger, L. (1957), A Theory of Cognitive Dissonance, Stanford: Stanford University Press. Festinger, L. (1964), Conflict, decision and dissonance, Stanford. CA: Stanford University Press. Festinger, L., Carlsmith, J. M. (1959), "Cognitive Consequences of Forced Compliance", Journal of Abnormal & Social Psychology, 58, p. 203-210. Gaillard-Giordani, M.L. (2004), "Les modalités transactionnelles et relationnelles de la création et du financement des nouvelles organisations : la dynamique des engagements et des désengagements", Thèse pour le doctorat en sciences de gestion, université de Nice Sophia Antipolis. Gartner, W.B. (1985), "A framework for describing the phenomenon of new venture creation", Academy of Management Review, 10, p.696-706. Gartner, W.B. (1989), "Some suggestions for research on entrepreneurial traits and entrepreneurship", Entrepreneurship Theory and Practice, 14, p.27-38. Gerard, H. B. (1965), "Deviation, conformity and commitment", In R. P. Steiner et M. Fishbein (Eds). Current studies in social psychology (pp. 263-277). New York: Holt. Rinehart et Winston. Hamel, J., Dufour, S., et Fortin, D., (1991), Publications, 77 p.

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Keil, M. (1995), "Escalation of Commitment in Information Systems Development: A Comparison of Three Theories", Academy of Management Journal, p. 348-352. Kiesler, C. A. (1971), The Psychology of Commitment, New York, Academic Press. Kiesler, C. A., Sakumara, J. (1966), "A test of a Model of Commitment", Journal of Personality and Social Psychology. Krueger, N. F., Carsrud, A. L. (1993), "Entrepreneurial Intentions: Applying the Theory of Planned Behaviour", Entrepreneurship and Regional Development, 5, p. 315-330. McCarthy, A. M., Schoorman, F.D., Cooper, A.C. (1993), "Reinvestment Decisions by Entrepreneurs: Rational Decision-Making or Escalation of Commitment?", Journal of Business Venturing, 8(1), p. 924. Meyer, J. P.Allen, N. J. (1997), Commitment in the workplace: Theory, research, and application, Sage Publications, p. 150. Mintzberg, H., (1979), "An Emerging Strategy of 'Direct' Research", Administrative Science Quarterly, Vol. 24 (December, 1979), pp. 582-589. Mowday, W.H. (1998), "Reflections on the study and relevance of organizational commitment", Human Resource Management Review, 8(4), p.387-401. Royer, I. (1996), "L'escalade de l'engagement dans le développement de produits nouveaux", Recherche et Applications en Marketing, 1996, 11(3), p. 7-22. Sabherwal, R. et al. (1994). Why Organizations Increase Commitment to Failing Information Systems Projects? Miami, FL, Department of Decision Science and Information Systems: Working paper. Schmidt, J. B., Calantone, R. J. (2002), "Escalation of Commitment During New Product Development", Journal of the Academy of Marketing Science, 30, p. 103-118. Secord, P. F., Backman, C. W. (1974), Social Psychology, New Jersey : McGraw-Hill. Shapero, A., Sokol, L. (1982), "The social dimensions of entrepreneurship", in Calvin A. Kent, Donald L. Sexton, Karl H. Vesper (Eds), Encyclopedia of Entrepreneurship, Englewood Cliffs, NJ: Prentice-Hall, INC, p.72-90. Simonson, I., Staw, B. M. (1992), "De-escalation strategies: a comparison of techniques for reducing commitment to losing courses of action", Journal of Applied Psychology, Staw, B. M. (1976), "Knee-deep in the Big Muddy : A Study of Escalating Commitment to a Chosen Course of Action", Organizational Behavior and Human Performance, 16, p. 27-44. Staw, B. M. (1980), "Rationality and Justification in Organizational Life", In B. M. Staw & L. Cummings (Eds), Research in Organizational Behavior (vol.2), Greenwich, Conn. : JAI Press. Staw, B. M. (1981), "The Escalation of Commitment to a Course of Action", Academy of Management Review, 6, p. 577-587. Staw, B. M., Ross, J. (1987), Understanding Escalation Situations : Antecedents, Prototypes, and Solutions, In B. M. Staw & L. L. Cummings (Eds), Research in Organizational Behavior, 9, p. 39-78, Greenwich, CT : JAI Press. YIN, R.K. (1994). Case study research. Design and methods, 2nd edition, London, Sage Publications.

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Individual, Organizational, and Environmental Drivers of Job Creation in New Firms

(abridged version)

Marc Gruber Ecole Polytechnique Fédérale de Lausanne Odyssea 2.02, Station 5, CH-1015 Lausanne, Switzerland [email protected] John C. Dencker University of Illinois at Urbana-Champaign 215 LIR Building, 504 E. Armory Avenue, Champaign, IL 61820 USA [email protected] Sonali K. Shah Foster School of Business University of Washington Box 353200, Seattle, WA 98195 [email protected] All authors are equal contributors.

ABSTRACT We build on and extend research in several disciplines to develop a multi-level framework to investigate drivers of job creation in new firms. Using survey data from individuals who transitioned from unemployment to self-employment, we find that a founder’s leadership experience has a positive effect on job creation. Yet, as labor requirements of the business opportunity increase, founders with leadership experience are able to make do with relatively fewer employees. We also find that environmental factors, particularly those related to risk of firm failure, have a curvilinear relationship with job creation. Implications for theory and public policy are discussed.

1

INTRODUCTION Governments around the world address critical public policy challenges in starkly different ways, often relying on market based approaches, as in Great Britain and the United States, or on regulatory and institutional approaches, as in Continental European nations(cf. Guillén, 2001). Nevertheless, common problems have lead to similar policy solutions, such as programs designed to support the transition of the unemployed into self-employment that have been established in Australia, Belgium, France, Germany, Greece, Great Britain, Ireland, Luxembourg, the Netherlands, Norway, Portugal, Sweden and the United States (Benus, 1994; OECD, 1995). Research shows that these programs have had some success in many countries, and that they are cost effective in terms of the long-term survival of the newly founded firms relative to the population of start-up firms (cf. Blanchflower 2004; Caliendo, 2008; Hinz & JungbauerGans, 1999; Pfeiffer & Reize, 2000). Yet, little is known about whether such programs can generate important spillover effects. In particular, we need to better understand whether these new firms create jobs for others (in addition to the founder) – which would reduce unemployment even further – and which factors influence this job creation process. As the current dearth of research on the effects of policy programs limits the ability of government officials to design, implement, and find public support for new programs (Osterman, Kochan, Locke, & Piore, 2002), increasing our knowledge of the social and economic processes leading to job creation in new firms would offer vital policy implications, such as helping policymakers to establish new labor market institutions to replace the previous paradigms that are often no longer effective in contemporary societies. Assessing how new firm founders create jobs presents a number of conceptual challenges. Even though several theoretical perspectives offer critical insights into the factors influencing job creation in start-up firms, there are key gaps in knowledge in many of these perspectives. Human capital theory indicates that founders endowed with greater amounts of knowledge and experience will create more jobs than founders with lower levels of human capital, with capital specific to self-employment playing a more important role. Yet, we know little about the types of human capital relevant for job creation, and even less about the specific mechanisms linking different forms of human capital to job creation. Entrepreneurship theory argues that the characteristics of the business opportunity being exploited will have a profound effect on job creation, even controlling for founder’s human capital (Shane, 2003). However, although this notion has been received favorably in the entrepreneurship literature, empirical research testing this argument is still scant. Moreover, as these opportunity characteristics likely operate in conjunction with a founder’s human capital, it is important for researchers to consider the interactions between individual and organizational determinants of job creation. Finally, open-systems theory suggests that the environment within which a firm is located will play a role in employment outcomes (Scott, 2000; Thompson, 1967), but research in this broad tradition often focuses on understanding how broader factors destroy jobs and firms, rather than create them (Haveman & Cohen, 1994). In short, the factors influencing job creation operate at a number of different and often linked analytic levels, doing so in ways that are not fully understood conceptually, or empirically. Even though research on job creation in new firms allows scholars the opportunity to “make contributions by relating micro-level change to societal level outcomes,” it is an under-researched dependent variable in entrepreneurship research (Ireland, Reutzel, & Webb, 2005 p. 561, citing Davidson 2004, p. 159) – a point also hig2

hlighted by Shane (2003) in his review of the literature. Thus, it is critical not only to fill in gaps in knowledge of the different research streams, but also to develop new theory that shows how distinct insights can be brought together to provide a more comprehensive understanding of the job creation process in new firms. In this study, we develop a multi-level framework of factors influencing job creation (in addition to the founder’s job) in newly founded firms. We do so by drawing on, refining, and extending human capital, entrepreneurship, and open-systems theories. In particular, at the individual level, we argue that leadership experience provides founders with the human capital to hire and manage a greater number of employees than founders without such experience. Yet, in addition to this baseline effect, leadership experience provides founders with the ability to be more effective job creators in situations where organizational level characteristics increase labor requirements. Finally, at the environmental level, we incorporate notions from relative bargaining power theory to highlight that organizational life chances affect a firm’s ability to attract employees, and thus have important consequences for job creation (Phillips, 2001; Sørensen, 1994). We examine the validity of our multi-level framework using detailed data collected from individuals participating in a program administered by the German Federal Employment Agency that was designed to support the establishment of new firms by the unemployed. A number of key findings arise from our analyses. We find that individual-, organizational-, and environmental-level factors all have a significant influence on job creation, with some of these factors operating in combination. Our results also show that founders with leadership experience create more jobs for others than those without such experience. In addition, we find that as labor requirements inherent in the business opportunity increase rates of job creation, founders with leadership experience make more efficient use of employees (i.e., are able to create fewer jobs) than founders without leadership experience. Finally, the analysis reveals that environmental factors, particularly those related to risk in the new business venture, influence the ability of founders to create employment for others. However, these factors do so primarily by influencing the life (survival) chances of these new firms, albeit in a curvilinear fashion, with declining life chances leading to higher rates of job creation up to a point where the risk of failure is so strong that it precludes job creation. We proceed with a discussion of the prior literature and the theoretical background of this study. We then develop our hypotheses, describe the estimation methodology and the data, and present our empirical results. Finally, we discuss the implications of our results for public policy, as well as for entrepreneurship, organizational, and labor market theories. LITERATURE REVIEW AND THEORETICAL BACKGROUND Extant research on job creation can be divided into two general sets of studies. The first set focuses largely on the macro-level outcomes of job creation by firms of different sizes – rather than the factors driving job creation – examining issues such as whether large or small firms are drivers of employment growth. For example, Birch’s (1987) pioneering analysis showed that small firms with fewer than 20 employees accounted for 88% of overall employment growth in the United States. His findings have had a large impact on policy and research, although they have been criticized for their calculation methods 3

(see Davis, Haltiwanger, & Schuh, 1996). In more recent research, Spletzer (2000) finds that firm births and deaths account for approximately 19% of all job creation from 1990-1995. Neumark, Zhang and Wall (2006) examine the relative importance of firm births and deaths, firm expansion and contraction, and inand out-of-state migration on employment growth and decline in California. They find evidence that the birth of new businesses and the expansion of existing businesses are the primary drivers of employment growth, with business relocation playing a negligible role. The second set is more closely aligned to the spirit of this study and examines the factors that influence the ability of new firm founders to create jobs. For example, Burke, FitzRoy and Nolan (2000) uncover in their study on different new firm performance outcomes that, among self-employed British citizens, having a university education was a significant predictor of the employment level, as was inheritance from parents (albeit in a non-monotonic way). These findings already indicate the usefulness of individual-level factors in predicting job creation outcomes. In addition, studies by Pfeiffer and Reize (2000) and Hinz and Jungbauer-Gans (1999) compare job creation in firms founded by unemployed individuals to other start ups, showing that they are similar in terms of their ability to create jobs. (…) In sum, even though research provides initial insights into the patterns of job creation, it leaves many questions unanswered: while we have some evidence suggesting that the birth of new firms does in fact generate new jobs for others, our understanding of the factors influencing the ability of newly founded firms to create jobs and whether these factors have a differential impact on the creation of different types of jobs is largely incomplete (Ireland et al., 2005; Shane, 2003). Our hypotheses are based on the question: What individual, organization, and environmental factors increase the ability of firms founded by previously unemployed individuals to create jobs? HYPOTHESES DEVELOPMENT There is little existing theoretical or empirical work on the drivers of job creation in new firms. In developing our framework, we thus draw from research on entrepreneurship (Aldrich & Ruef, 2006; Brüderl, Preisendörfer, & Ziegler, 1992; Shane, 2003), human capital theory (Becker, 1964) and relative bargaining power theory (Phillips, 2001; Sørensen, 1994) to generate predictions on the effects of individual, organizational and environmental factors on job creation. Individual Level: Human Capital Specific to Self-Employment & Job Creation A fundamental individual characteristic in the context of job creation is the founder’s human capital. Human capital refers to knowledge embodied in people, with higher levels of knowledge (measured, for example, by years of education or work experience) associated with higher levels of cognitive abilities, leading to more productivity and efficiency at particular tasks (Becker, 1964). As knowledge is one of the central resources upon which firm founders can draw, a considerable body of research has examined effects of different types of knowledge in the context of new firm formation (Aldrich & Ruef, 2006; Blanchflower, 2004; Delmar & Shane, 2003; Le, 1999). Hence, against a backdrop of sparse prior research, we ground our theory development on one particular factor that arguably has the most direct relevance in this area – the leadership experience of the 4

founder – while controlling for other general and specific human capital endowments that potentially play a role in the job creation process. (…) Hypothesis 1. Founders’ prior leadership experience will have a positive effect on job creation in new firms. Organizational Level: Characteristics of the Business Opportunity & Job Creation Firms can be characterized along a number of different dimensions, with extant research on entrepreneurship suggesting that organizational characteristics such as the size of the initial financial investment, the new firm’s innovativeness, its legal form, geographic market scope and strategic focus impact new firm performance outcomes (e.g. Audretsch & Mahmood, 1995; Brüderl et al., 1992; Durand & Coeurderoy, 2001; Feeser & Willard, 1990). In this paper we focus on one key aspect that seems most likely to impact job creation, namely the characteristics of the business opportunity (i.e., the labor requirements of the business opportunity), while controlling for the effect of other key organizational-level characteristics such as initial financial investment, firm innovativeness, and general business strategies. Different business opportunities have different requirements in terms of employment levels (Shane, 2003). Some opportunities do not necessarily compel a founder to hire employees. For instance, start-up firms in which a founder offers certain types of services, such as consulting or bookkeeping/tax planning, can easily be run out of a home office without the support of employees. By contrast, other types of business will require that the founder hires additional employees to become operational. For example, opening a restaurant entails that the founder not only finds a location and purchases necessary equipment, but also hires a variety of different types of employees, such as a chef, waiters, busboys, and dishwashers. Thus, depending on the labor requirements of the specific business opportunity, one would expect a founder to hire a certain number of employees in order to start-up her business. (…) Hypothesis 2a. The labor requirements inherent in the business opportunity will be positively related to job creation. Extending this discussion of opportunity characteristics, we draw on the notion that individual and organizational determinants interact (a concept termed the “individual-opportunity nexus” in entrepreneurship research; Shane, 2003). We argue that – given a particular business opportunity – the rate of job creation will be modified by the human capital of the founder. Specifically, we claim that founders possessing prior leadership experience will make more efficient use of employees than founders without such experience, all else equal. (…) Hypothesis 2b. The positive effect of prior leadership experience on job creation will be declining in increasing labor requirements of the business opportunity. 5

Environmental Level: Organizational Life Chances & Job Creation Open-systems theory suggests that the environment within which a firm is located will play a role in shaping employment outcomes (Scott, 2000; Thompson, 1967). (…) The relationship between a firm’s life chances and employment outcomes is captured in relative bargaining power theory which, in general, argues that the higher a firm’s relative bargaining power, the greater its ability to control the employment relationship (Sørensen, 1994). (…) Based on these arguments, we claim that the effects of bargaining power on employment outcomes will be strong in the context of newly founded firms. In particular, we argue that organizational life chances will have a strong effect on job creation rates in start-up firms: rates of job creation will be increasing in declining life chances because an increasing risk of failure will pressure founders to create jobs in the desire to increase survival chances by growing the size of the firm (Audretsch & Mahmood, 1995). In contrast, firms with high life chances are relatively more immune to the pressures stemming from increased likelihood of failure. For these firms, job creation will be driven primarily by labor market conditions and founders’ considerations of the non-trivial costs associated with additional employment (Sørensen, 1994). An important contingency in the link between life chances and job creation is that this relationship does not seem to be a linear one, but rather curvilinear when taking into account firms with the lowest life chances. In this vein, Phillips (2001) shows that the rate of promotion was increasing in decreasing life chances, but this pattern shifted for firms that were “near death”: at a certain point, life chances of an organization become so low that it is unable to adjust employment practices. In our context of new firm creation, these findings would suggest that the pressure to create jobs should increase in increasing failure rate of the firm, up to a point – firms with very low life chances are likely unable to create jobs. In sum, we argue that a firm’s life chances within the environment will have a critical influence on the job creation practices of founders. Following the arguments offered by research on relative bargaining theory, we hypothesize a curvilinear relationship between an organization’s life chances and job creation: Hypothesis 3: Job creation rates in new firms will have a curvilinear relationship with organizational life chances, as they increase in decreasing life chances until the risk of failure becomes so strong that job creation is precluded. METHOD We examine job creation in start-up firms using data from a population of firms founded by unemployed individuals receiving government assistance to support their transition to self-employment. We collected data through a survey distributed in early 2005 to the entire 2001 cohort of such firm founders, allowing us to trace their entrepreneurial experiences for three full business years. In all, data from 451 completed surveys were analyzed.

6

RESULTS Discrete-Time Event History Analyses: New Firm Failure Table X (omitted in abridged version) provides results from discrete time event history analyses of new firm failure, and represents the model used to create the measure of a firm’s life chances that were included in our analyses of employment counts. Findings are largely consistent with those of prior studies of new firm failure (cf. Brüderl et al., 1992). Discrete-Time Event History Analyses: Negative Binomial Models Predicting Job Creation Table 1 shows results from negative binomial models predicting yearly employment counts in the start-up firms over a three year period beginning at time of founding. The baseline Model 1 provides results for control variables. Model 2 introduces the main hypothesized individual level variable of interest. Consistent with Hypothesis 1, results show that founders with leadership experience have higher rates of job creation than founders who lacked such experience. In particular, with other variables held at mean levels, founders with leadership experience create jobs at a rate 1.84 times larger than for founders without leadership experience (exp(.61)=1.84). In other words, founders with leadership experience come close to doubling job creation rates of founders without such experience. Model 3 of Table 1 investigates the effect of organizational factors on job counts. Consistent with Hypothesis 2a, results reveal that job creation increases significantly in increasing labor requirements of the business opportunity. That is, if the employment size of the business opportunity in the founder’s fivedigit industry increases by one unit (employee), the founder’s job creation rate will increase by a factor of 1.67, holding all other variables at their mean levels (exp(.51)=1.67). Thus, founders are creating jobs at roughly two-thirds the rate of the average firm in the respective industry. Both leadership and labor requirements measures were strong when we included the measure of organizational life chances in our analyses, as indicated in Model 8, see Table 1. Model 4 of Table 1 examines the interaction between leadership experience and business opportunity characteristics. We find support for Hypothesis 2b, as results indicate that founders with leadership experience create significantly fewer jobs the higher are the labor requirements of the firm compared to founders without leadership experience. That is, as the employment size of the business opportunity in a given five-digit industry increases by one unit (employee), rates of job creation for founder’s with leadership experience will decrease by a factor of 0.66, holding other variables constant (exp(-.42)=0.66). Hence, a founder with leadership experience can not only create more jobs than a founder without leadership experience, but is also more efficient at the job creation process as the number of employees needed in a given start-up firm increases. Model 5 of Table 1 introduces the measure of a firm’s life chances that was created from the model predicting firm failure (Table 4). Consequently, higher values of this variable correspond to lower life chances. Our results show that job creation is decreasing significantly in decreasing life chances, a pattern similar to the one observed in Phillips’ (2001) study of promotion patterns. Model 6 of Table 2 introduces the squared life chances term. Consistent with Hypothesis 3, results show that the effect of life chances on job creation is non-linear: job creation rates increase in decreasing life chances of the firm, up to a point where risk of failure becomes so high as to curtail job creation. 7

In order to assess robustness of Hypothesis 3, we created spline measures of life chances (using the MKSPLINE command in STATA) that grouped founders into three equally spaced life chances groups: above average, average, and below average. The coefficients on these three measures capture the rate of job creation within these three groups (e.g., the coefficient the “average life chances” group captures the effect of decreasing life chances on job creation within than group). We entered these measures in Model 7 of Table 1, with results consistent with our predicted non-linear relationship between life chances and employment. DISCUSSION Summary of Key Findings We refine and extend theories of human capital, entrepreneurship, and relative bargaining power to develop a multi-level framework to investigate the individual, organizational and environmental drivers of job creation in new firms, a critical but little explored topic in the extant literature. We tested predictions from our framework using a unique event-history data set of firms founded by the unemployed individuals. Several key results arise from our analyses. At the individual level, we find that founders with leadership experience create more jobs for others than those without such experience. At the organizational level, results show that as labor requirements inherent in the business opportunity increase rates of job creation, founders with leadership experience make more efficient use of employees than founders without leadership experience. At the environmental level, our analysis indicates that the survival chances of the new firm influence the number of jobs a founder creates, albeit in non-linear ways, with declining life chances leading to higher rates of job creation up to a point where the risk of failure is so strong that it precludes job creation. Taken together, these results show that factors at multiple levels have unique and joint effects on job creation. The findings presented in this study are potentially relevant to most industrialized countries seeking to reduce unemployment, and for public policy programs designed to help the unemployed start a business. In particular, a key component of our study is that we show that formerly unemployed founders have the ability to create jobs for others, an important positive spillover effect of these policy programs. Our detailed analyses of the effects of this common initiative thus offer novel insights for public policy research and government officials designing and implementing such programs in many countries worldwide. Theoretical Implications The factors influencing job creation operate at a number of different and often linked analytic levels, doing so in ways that are not fully understood conceptually, or empirically. The systematic linkages that our analysis has revealed indicate ways in which we can better explain and predict job creation outcomes. Perhaps most importantly, the framework highlights the necessity of examining factors at multiple levels of analysis as well as interaction effects across these levels. We also contribute insights that serve to extend and refine human capital theory, entrepreneurship theory, and bargaining power theory. Human capital theory argues that founders endowed with greater amounts of knowledge and experience should be able to create more jobs than founders with lower levels of human capital. We offer empirical support for the idea that, with respect to job creation, leadership 8

experience is a critical human capital characteristic, and put forth a theoretical argument (mechanism) for why this effect occurs. Leadership experience provides founders with the human capital to hire and manage a greater number of employees than founders without such experience. In addition to this baseline effect, leadership experience gives founders the ability to be more efficient job creators in situations where the opportunity requires a larger labor force. As a contribution to research on entrepreneurship, we offer one the first studies using job creation as a dependent variable, thereby improving our understanding of how entrepreneurship impacts wealth creation at a societal level (MacMillan, 2005). In particular, we extend prior work that has mainly focused on understanding the relationship between (some of) the factors studied in this paper, and processes and outcomes such as opportunity identification (cf. Shane & Venkataraman, 2000), survival (cf. Brüderl et al., 1992), and sales (cf. Delmar & Shane, 2006). In addition, our findings support the notion that firm creation processes are influenced by the interaction between individual and organizational level variables (Shane, 2000; Shane, 2003). Yet, although the notion of the “individual-opportunity nexus” has been received favorably in the entrepreneurship literature, empirical evidence testing this argument is scant. In this vein, the results presented in this paper show that a founder’s individual characteristics (leadership experience) and the characteristic of the opportunity (labor requirements) interact to influence the job creation process. Finally, our findings offer important evidence in support of relative bargaining power theory, which predicts that a firm’s life chances will affect its ability to attract employees and hence firms with lower life chances must do more to attract employees (Phillips, 2001; Sørensen, 1994). There have been few empirical studies on relative bargaining power theory and those that do exist have examined promotion decisions. Our study shows that relative bargaining power theory can be usefully applied in the context of entrepreneurship, and influences outcome measures besides promotion, namely rates of job creation. Conclusion Governments around the world are struggling with the question of how to re-integrate the unemployed into the labor force. The support program studied in this paper has interesting implications for public policy in that we have reason to believe that an increasing number of unemployed individuals seek selfemployment over time as more and more countries face cost-cutting and downsizing in large firms due to competitive and shareholder pressures The framework presented in this paper can be viewed as an important step in uncovering the systematic link between the micro-level and the societal macro-level outcomes in job creation. It allows us to have a better understanding of what determines the extent and the nature of job creation in newly founded firms, providing future studies critical information on the trail to a more general theory of job creation.

9

TABLE 1 Discrete Time Event History Negative Binomial Estimates of Yearly Employment Counts Variables

Model 1

Model 2

Model 3

Model 4

Human capital .13 (.28) .16 (.28) .16 (.28) Secondary school degree (Haupts.) -.09 (.26) -.07 (.25) -.06 (.24) Secondary school degree (Reals.) -.03 (.23) -.06 (.24) -.05 (.23) Vocational degree -.06 (.46) .07 (.47) .05 (.46) Master-craftsman certificate -.49† (.26) -.52* (.27) -.58* (.26) University degree .33 (.34) .38 (.32) .28 (.34) PhD Years of prior work experience -.03* (.02) -.04* (.02) -.04* (.02) Duration unemployed -.18** (.06) -.18** (.06) -.15** (.06) Hours worked per week .22** (.08) .23** (.08) .25** (.07) -.24 (.29) -.22 (.29) -.29 (.27) Prior self-employment experience .20** (.07) .16* (.07) .15* (.07) Prior knowledge of business Individual demographics Age .16 (.11) .20† (.11) .18† (.11) Gender (male=1) .32 (.22) .26 (.22) .17 (.22) Individual personality characteristics Conscientiousness .07 (.12) .10 (.11) .05 (.11) Agreeableness .11 (.13) .08 (.13) .08 (.12) Emotional stability -.02 (.13) -.01 (.14) -.01 (.13) Openness to experience .09 (.12) .10 (.12) .08 (.11) Extraversion -.18 (.14) -.12 (.13) -.14 (.13) Support from family and relatives Hands-on -.05 (.08) -.03 (.08) -.02 (.08) Emotional .21* (.10) .17† (.10) .19† (.10) Organizational/industry characteristics Number of founding partners .30** (.12) .29** (.11) .29** (.11) Follower business .56 (.37) .51 (.36) .47 (.36) Customer types -.42 (.27) -.39 (.26) -.40 (.26) National market scope .15 (.27) .15 (.26) .17 (.26) Legal form (trade) 2.17*** (.52) 2.14*** (.54) 2.16*** (.54) Legal form (commercial) 1.40** (.53) 1.45** (.55) 1.52** (.56) Innovativeness of business venture -.19† (.11) -.20* (.10) -.19† (.10) Amount of capital invested .36*** (.05) .35*** (.05) .36*** (.05) Average industry wage -1.04** (.34) -1.12** (.34) -1.04** (.34) Period effects Second year of self-employment .45*** (.08) .45*** (.08) .29** (.10) Third year of self-employment .80*** (.10) .79*** (.10) .46** (.16) Hypothesized Measures Leadership experience (H1) .61*** (.19) .64*** (.19) .51** (.18) Labor requirements (H2a) Leadership * Labor req. (H2b) Life chances Life chances squared (H3) Life chances spline (high) Life chances spline (average) Life chances spline (low) Constant -1.88 (1.17) -1.75 (1.16) -2.32* (1.15) Chi-square 299.26 308.263 312.24 Df 31 32 33 Log-likelihood -1232.6 -1222.9 -1216.9 Note: Robust standard errors are in parentheses. †p<.10; *p<.05; **p<.01; ***p<.001. Two tailed tests. N = 1303 person years (451 founders) for all models.

.21 -.04 -.09 .02 -.59* .16 -.05* -.14* .27*** -.37 .15*

(.28) (.24) (.22) (.47) (.25) (.32) (.02) (.06) (.07) (.29) (.07)

.17 .14

(.10) (.22)

.06 .05 -.02 .06 -.13

(.11) (.12) (.13) (.11) (.13)

-.02 .18†

(.08) (.10)

.28* .42 -.42 .19 2.20*** 1.55** -.18† .37*** -1.04**

(.11) (.36) (.26) (.26) (.54) (.54) (.10) (.05) (.34)

.34** .56**

(.10) (.17)

1.41*** .41** -.42***

(.30) (.09) (.13)

-2.77 315.04 34 -1209.3

(1.16)

Note that life chances are the fitted values obtained from Table 4, thus higher values of the life chances variable indicate a higher likelihood of failure.

10

TABLE 1 (CONTINUED) Variables

Model 5

Model 6

Model 7

Model 8

Human capital .26 -.04 -.27 -.20 -.61* .11 -.03* -.11† .22** -.36 .12†

(.28) (.25) (.23) (.47) (.25) (.32) (.01) (.06) (.07) (.29) (.07)

.18 -.08 -.08 .04 -.60* .22 -.04* -.13* .25** -.36 .14†

(.28) (.24) (.24) (.48) (.25) (.32) (.02) (.06) (.08) (.28) (.07)

.21 -.09 -.11 .01 -.59* .23 -.04* -.13* .24** -.38 .15*

(.28) (.25) (.26) (.50) (.25) (.32) (.02) (.06) (.08) (.28) (.07)

.19 -.10 -.13 -.02 -.59* .32 -.03† -.13* .21** -.30 .15*

(.28) (.24) (.26) (.51) (.25) (.34) (.02) (.06) (.08) (.27) (.07)

.13 .25

(.10) (.22)

.14 .21

(.10) (.23)

.14 .14

(.10) (.24)

.15 .22

(.10) (.24)

.14 .04 .01 .05 -.17

(.11) (.12) (.13) (.11) (.13)

.07 .06 -.01 .06 -.17

(.12) (.12) (.13) (.11) (.12)

.08 .07 -.01 .06 -.16

(.12) (.12) (.13) (.11) (.12)

.09 .10 .01 .08 -.16

(.12) (.12) (.14) (.11) (.12)

-.02 .05

(.08) (.11)

-.04 .15

(.08) (.11)

-.04 .13

(.08) (.11)

-.04 .12

(.08) (.11)

.35** .67† -.24 .22 2.06*** 1.30* -.22* .34*** -.89**

(.11) (.38) (.26) (.26) (.52) (.53) (.10) (.05) (.32)

.35** .62 -.42 .12 2.10*** 1.42** -.19† .35*** -.95**

(.12) (.41) (.27) (.26) (.53) (.53) (.10) (.05) (.32)

.36** .64 -.39 .14 2.14*** 1.42** -.19† .35*** -.93**

(.12) (.42) (.27) (.26) (.53) (.55) (.10) (.05) (.32)

.40** .72† -.33 .14 2.11*** 1.36* -.21* .32*** -.92**

(.11) (.42) (.27) (.26) (.54) (.56) (.10) (.05) (.32)

.48*** .86***

(.11) (.20)

.37** .63**

(.12) (.21)

.38** .68**

(.13) (.24)

.37** .66**

(.13) (.24)

1.28*** .30** -.39** -8.44*

(.29) (.09) (.12) (3.32)

1.30*** .38*** -.39*** 15.27* -163.79*

(.28) (.09) (.12) (7.19) (63.22)

1.28*** .36*** -.39***

(.28) (.12) (.12)

.55** .45*

(.18) (.21)

-8.67 16.4* -16.6***

(33.2) (7.69) (3.53)

-23.3 16.0* -17.7***

(33.1) (7.88) (3.57)

Constant -1.93 (1.22) -2.71* (1.25) -2.50† (1.34) Chi-square 323.70 334.47 360.12 Df 35 36 37 Log-likelihood -1205.4 -1195.8 -1194.7 Note: Robust standard errors are in parentheses. †p<.10; *p<.05; **p<.01; ***p<.001. Two tailed tests. N = 1303 person years (451 founders) for all models.

-1.79 351.29 36 -1203.1

(1.32)

Secondary school degree (Haupts.) Secondary school degree (Reals.) Vocational degree Master-craftsman certificate University degree PhD Years of prior work experience Duration unemployed Hours worked per week Prior self-employment experience Prior knowledge of business Individual demographics Age Gender (male=1) Individual personality characteristics Conscientiousness Agreeableness Emotional stability Openness to experience Extraversion Support from family and relatives Hands-on Emotional Organizational/industry characteristics Number of founding partners Follower business Customer types National market scope Legal form (trade) Legal form (commercial) Innovativeness of business venture Amount of capital invested Average industry wage Period effects Second year of self-employment Third year of self-employment Hypothesized Measures Leadership experience (H1) Labor requirements (H2a) Leadership * Labor req. (H2b) Life chances Life chances squared (H3) Life chances spline (high) Life chances spline (average) Life chances spline (low)

11

Present State of Business Incubators in Japan and Issues – Desirable model for Japanese-style business incubators based on progressive practice

Tomoyo Kazumi Associate Professor/Faculty of Business Administration/Takachiho University, Tokyo, Japan E-mail: [email protected]

Introduction According to the National Business Incubation Association (NBIA), business incubation is "a business support process that accelerates the successful development of start-up and fledgling companies by providing entrepreneurs with an array of targeted resources and services. These services are usually developed or orchestrated by incubator management and offered both in business incubator and through its network of contacts. A business incubator’s main goal is to produce successful firms that will leave the program financially viable and freestanding. These graduates have the potential to create jobs, revitalize neighborhoods, commercialize new technologies, and strengthen local and national economies”. Business incubators have been positioned as an important policy tool for the revitalization of local industries and development of industrial clusters. Nevertheless, they have their critics, who voice opinions like this: "business incubators are expensive to set up and run, yet they have so far failed to live up to expectations in terms of results". This kind of critical assessment is, in large part, attributable to the historical background of the introduction and development of business incubators in Japan and their operating environment. Business incubation research in Japan dates back to the 1980s, and early works, such as the Softnomics Center (1986) and Japan Incubator Research Society (1989), centered on the introduction of the concepts behind business incubators and circumstances surrounding them in the United States and other countries. Those were followed by self-analyses of Japanese business incubators, surveys of successful cases, and the like in the 1990s. Examples include KSP (1994) and Seki and Yoshida (1993). More recently, Hoshino (2006) and others put forward papers designed to disseminate the correct understanding of business incubation. However, there have not been many works that summarize the evolution and present state of Japanese business incubators and critically evaluate them. The author conducted a complete survey of Japanese business incubators and analyzed their then-present state and issues faced by them in 1995 (Kazumi 1996). Now, more than a decade later, the number of business incubators has risen to the hundreds, making it necessary to update the situation.

1

This paper analyzes the reasons behind the present state of Japanese business incubators in the context of their evolution from the early introductory period right up to the present day, and explores directions of their future development that are independent of the US model by investigating and analyzing a progressive case that has produced excellent results in a short period.

1 Introduction and Development of Business Incubators in Japan Some 20 years have passed since business incubators were introduced into Japan 1. In this section, the paper looks into the origin of the problems identified so far by taking an overview of the historical background of the introduction and development of business incubators in Japan in the 1980s and 1990s.

(1) Introduction of business incubators in Japan Papers on business incubators began to appear in Japan in the mid-1980s. In 1985, the Softnomics Center2 established the Business Incubator Research Society and held an inspection tour of the United States and five research meetings by inviting researchers and other interested parties. The society pointed out that, in Japan, business incubators were "geared towards the laying of the foundation for a transformation of the industrial structure and research and development management focusing on the high-tech sector", whereas they were established and operated mainly for the purpose of creating employment in the United States and Europe, resulting in an overemphasis on facilities and lack of consideration for operational know-how, etc. Stating that "the concept (of business incubators) is yet to be established in Japan", it identified the development of a socioeconomic system that would encourage the start-up of new businesses, combined with consideration given to the creation of employment, as a matter of ultimate importance3. Although the society's discovery of the importance of operational know-how in as early as the 1980s was noteworthy, it still focused on facilities, equipment and other hardware elements during its field inspection tour. The same thing can be said of the National Government and local governments. The National Government and prefectural governments paid attention to business incubators as a new policy tool, and the construction of facilities began in the late 1980s.

(2) Industrial policy and business incubators In the 1980s, business incubators were viewed as a policy tool to foster venture businesses engaged in business activities based on advanced technologies and revitalize and stimulate the growth of industrial clusters. Examples include "rental research and development laboratories" under the Law concerning the Promotion of the Development of High-tech Industry Clusters (Law No. 35 of 1983, Technopolis Law), "industrial advancement promotion facilities" under the Law concerning the Promotion of the Clusterization of Specified Businesses Contributing to the Advancement of Local Industries (Law No. 32 of 1988, Industrial Brain Location Law), and "R&D-oriented business fostering and 2

support facilities" under the Temporary Measures Law concerning the Development of Specified Facilities Based on the Utilization of the Capacity of Private-sector Operators (Law No. 77 of 1986, Private-sector Vitality Utilization Law)4. Since the development of hardware infrastructure, such as buildings, is tangible and therefore easy to understand, it helps secure sizable budgets. This is believed to be the reason why it was enthusiastically pursued. Software-side support measures, such as services provided by incubation managers and other professionals, on the other hand, are less visible and therefore more difficult to understand, and often require fixed recurring budgets due to personnel costs. For this reason, they tended to be shunned. The heart of business incubation lies with software measures, such as management support and coordination. In Japan, however, business incubators were initially utilized as an industrial policy tool, particularly one geared towards fostering R&D-oriented businesses, and spread across the country on that basis. Because of this, the majority of business incubators established in and before the second half of the 1990s centered around the development of hardware infrastructure, leading to their failure to adequately produce expected results. When the author conducted a survey of domestic business incubators in 1995, eight facilities were found to have been established on the basis of the Technopolis Law and Industrial Brain Location Law. Of those, only one had an incubation manager. In addition, only 16 out of 82 companies that had moved in had their headquarters established at their respective incubators. (Although another 13 companies were identified in the survey, their status was unknown, because they were yet to move in). Moreover, only three facilities provided a management counseling service (Kazumi 1996, pp. 19-23) It was believed that business incubation was about specifying the industries to be supported in accordance with a law, screening applications in terms of whether they were R&D oriented, and letting successful applicants move into a facility for a cheap rent and stay there until the end of a predetermined period. There was a belief that, as long as businesses came up with high-tech products, they would succeed because buyers would automatically emerge. Unfortunately, this scenario, in most cases, turned out to be just a myth5.

(3) Problems with Japanese business incubators during their introduction phase (i) Lack of policy coherence In Japan, the notion of business incubators being synonymous with R&D-oriented business fostering facilities took hold as soon as they were introduced in the mid-1980s. As a result, the development of hardware infrastructure immediately took off, leaving the introduction and dissemination of operational know-how behind. The main reason for the failure of the software side to function was a lack of understanding about the central role of management support in the business start-up support functions of business incubators. At the same time, there were very few professionals with adequate knowledge and experience in business start-up support, particularly the fostering of R&D-oriented companies, resulting in the absence of incubation managers at most facilities. Although industrial location policy under the Techno3

polis Law incorporated the networking of business incubators with universities, public experiment and research organizations, and the like, it did not include their networking with individuals and organizations that supplied them with professional services essential for fundraising, marketing, business alliance building, and so on (for example; management consultants, accountants, lawyers and patent attorneys). Initially, business incubators were utilized as a policy tool in the area of industrial location policy relating to, among other things, the development of infrastructure aimed at luring businesses to set up bases. Management guidance (support) for individual companies, on the other hand, was provided under SME policy. However, this service was meant for existing companies, and often involved different sections of a local government, with no systematic mechanism for coordination among them put in place. Thus, despite the fact that the National Government and local governments made great efforts to introduce and spread business incubators as an industrial policy tool, they were slow to produce results, because only hardware elements took off, leaving software elements behind in terms of conceptual understanding and spread. Factors responsible for this were a lack of accumulated know-how needed to foster companies that had moved in, a shortage of specialist personnel and a discrepancy between the concept of business incubators and conventional policy principles and implementation methods. (ii) Underdevelopment of environment conducive to starting of companies and creation of venture businesses Another problem was the underdevelopment of a socioeconomic environment that provides the seedbed for the starting of companies and creation of venture businesses. In concrete terms, it encompassed, among other things, a lack of entrepreneurial education as part of school education, very limited availability of risk money for early-stage companies, difficulties in fundraising due to a very high hurdle for new listing and initial public offering, heavy skewing of the creation of technology seeds to research laboratories of major companies, and low mobility of quality personnel. In short, despite efforts made to foster R&D-oriented companies, few entrepreneurs emerged, and venture businesses faced enormous difficulties with commercialization and growth. Since then, adequate policy measures relating to technology transfer from universities and other institutions, the fundraising environment and business start-up support have been put in place, and factors involved in the socioeconomic environment have greatly improved. One can say that the environment needed to start companies and create venture businesses is now in place.

2 Present State of Business Incubators and Issues

(1) Development of business incubators under New Business Creation Promotion Law In December 1998, the Technopolis Law and Industrial Brain Location Law were replaced by the New Business Creation Promotion Law (Law No. 152 of 1998), which took partial effect in February 4

1999. Aiming to achieve local revitalization through the creation of new businesses, the new law set the following policy pillars: (i) direct support for the starting of companies by individuals and launch of spin-off businesses through the establishment of new companies, (ii) promotion of SME business activities based on new technologies, and (iii) development of a business environment conducive to the self-sustaining development of local industries on the basis of an effective utilization of local industrial resources. Business incubators are characterized as an element that forms part of a local platform to be developed in each prefecture under policy pillar (iii) (Ministry of International Trade and Industry, 1999). To strengthen local incubation functions, the Ministry of the Economy, Trade and Industry (METI) provides integrated hardware and software support under the development of the system of local platforms mentioned above (industrial cluster project from FY 2004), with the budget for the development of new business support facilities and other purposes reaching 6.7 billion yen in FY 2006. In particular, subsidies have been introduced for the fostering and utilization of entrepreneurs and support personnel, business matching, hosting of seminars, operation of comprehensive counseling corners, implementation of incubation manager training, and placement of incubation managers (personnel costs) as a support measure relating to the software side of business incubators. Figure 1: Breakdown of Business Incubators by Year of Establishment 0 1985年以前 1986年 1987年 1988年 1989年 1990年 1991年 1992年 1993年 1994年 1995年 1996年 1997年 1998年 1999年 2000年

10 2 1 1 2 2 2 2 0 2 1 1

5 4 4

9

20

30

13

27 27

2001年 2002年 2003年 2004年

24

40

50

60

48

Source: "Promotion of Innovation through Business Incubation - Survey Report" (March 2005) by Japan Industrial Location Center

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(2) Establishment of Japan Association of New Business Incubation Organizations On the heels of the enactment of the New Business Creation Promotion Law, it was decided to organize core support organizations as agents for business incubation throughout the country, and the Japan Association of New Business Incubation Organizations (JANBO) was established in June 1999 within the Japan Industrial Location Center. JANBO undertakes the promotion and dissemination of business incubation, training of incubation managers (IMs), exchange and sharing of business incubation-related information and know-how and research and investigation relating to business incubation. Of these activities, IM training is practically oriented, involving five months of OJT in addition to classroom studies on business incubation. By the end of FY 2007, over 500 people have completed the course. It also established JANBO awards in FY 2003 to further spread and advance business incubation, with awards presented to incubators and IMs who have produced outstanding results. In FY 2005, it introduced a certified IM system designed to formally recognize IMs who, on the basis of assessment, meet certain standards set in accordance with diverse criteria in order to improve the status of IMs and facilitate their mobility.

(3) Present state of business incubators and assessment In 2002 and 2004, JANBO conducted a comprehensive general survey on business incubators, and shed light on their situation by ascertaining their numbers and collecting basic data on their facilities (METI 2005). Let us now take an overview of the present state of Japanese business incubators using 2004 survey data. (i) Number of business incubators and years of establishment According to the four definitions set by JANBO6, there were 177 business incubators that provided management support, as well as access to facilities and equipment7. When the author surveyed domestic business incubators in 1995, there were only 40 such facilities, including those without a resident IM, so that there was more than a four-fold increase in their numbers over some 10 years. Not surprisingly, the breakdown of facilities by year of establishment shows that the number increased rapidly following the enactment of the New Business Creation Promotion Law in 1998. The major contributing factor to this was the introduction of national government subsidies payable to local governments which undertook hardware and software development relating to business incubators. (ii) State of tenant businesses Where restrictions apply to the activity fields of prospective tenant businesses, electronics & machinery and information & communications were the most common industrial categories, followed by pharmaceutical, biological & agricultural technologies, marketing & service, and the environment & recycling. Overall, 61.3 percent of all companies surveyed experienced an annual average increase in sales of at least 1 percent from the time of moving in to the time of the survey, with 42.5 percent enjoying an 6

annual average increase in sales of at least 30 percent. Survey findings on graduate businesses show that the cross-industry average tenancy period was 32.0 months, indicating that companies successfully achieved commercialization and financial independence in just less than three years. Companies which attempted to commercialize R&D results took nearly five years, with their tenancy period averaging about 56 months. Of all graduate businesses of main incubation facilities8, an average of 96.6 percent were in existence at the time of the survey, while the five-year survival rate of graduate businesses was also high at 89.3percent9. These figures show that business incubation had some degree of effectiveness in helping tenant businesses achieve growth and successful commercialization. (iii) State of IM support The average number of IMs stationed per facility was 1.9 for main incubation facilities and 2.0 for pre-incubation facilities. The most common service provided was "business start-up and growth support, 87%, followed by incubator management (for example; recruitment of tenant businesses, event planning and facility management), 56 percent, support system development, 49percent, and entrepreneur development, 34 percent. Twenty percent of IMs maintain almost daily contact with tenant businesses to provide business start-up and growth support, with 39 percent and 25percent doing so for 2 to 4 days a month and 2 to 3 days a week, respectively. (iv) Achievements of business incubation The JANBO survey attempts to quantify the benefits brought about by the local platform program over a five-year period from FY 1999 to FY 2003 as follows: the number of businesses started 1906, number of jobs created 3576, and an increase in sales achieved by tenant businesses 41.16 billion yen. Of these, the BI facility-related budget (new business support facility assistance and strengthening program) accounts for 254 businesses started, 660 jobs created and an increase in sales of 5.93 billion yen. Although the survey results indicate that business incubation has been successful in terms of business growth and survival rates as far as tenant businesses are concerned, these results are rather inadequate in the context of the start-up of new businesses and creation of employment in the Japanese economy as a whole. Nevertheless, there are other factors that need to be taken into account when evaluating those figures as follows: the survey only covered business incubators recognized under the local platform program, and there are quite a few cases in which spin-off businesses of existing companies move in or companies move in after being launched. It is also true that, given that most of the business incubators surveyed were established in 1999 or later, they have not been given enough time to produce significant results.

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(4) Problems with business incubators (i) Redefinition of concept and review of business incubation Quantitatively speaking, the creation of start-up companies by business incubators is inadequate. A widespread understanding of the basic concept of business incubation, i.e. supporting companies during their early stages and helping them achieve commercialization, has been slow to catch up, and some incubators even solely target entrepreneurs engaging in R&D-oriented businesses. However, in light of the diversity in local conditions from area to area, it is unrealistic to expect that R&D-oriented companies can be created in all areas. A sensible approach would be to devise a more realistic concept according to the issues and conditions characteristic to each area and develop a business incubation system consistent with such a concept. Examples include the revitalization of local industries and response to the closure of a large manufacturing plant. Another possibility is the creation of community-based businesses aiming to meet demand arising from an aging or shrinking population. The important thing is to establish a clear justifiable reason for the injection of public funds or local management resources to support the startup of new businesses, which is, after all, individuals' voluntarily action, to help them survive longer and grow faster. Since the target differs from objective to objective, a support menu and support activities should be tailored to each target. (ii) Position of business incubation in local revitalization Another problem is that the relationship between local revitalization and business incubation has not been clearly recognized. The industrial cluster project aims to "create industrial clusters which turn out new world-class businesses one after another". To achieve this goal, it is desirable to develop an environment conducive to innovation and efficient production in specified industries in each area by promoting local cooperation between the industrial, academic and government sectors. Business incubators are defined as entrepreneur development facilities under the industrial cluster project. The number of incubators and similar facilities affiliated with the industrial cluster project has been put at 125, which is only about 40 percent of all facilities (329)10. Moreover, only a fraction of the tenant businesses, approx. 2%, have taken part in the project11. Local economy revitalization policy initiatives other than industrial clusters often fail to incorporate business incubators, while most of the companies that form existing industrial clusters are SMEs. Persons starting new businesses do so on the basis of the latest business opportunities. This fact points to the need to promote the exploration of new business fields by combining existing companies in conventional industries which are suffering from a slump in demand with new companies. Nevertheless, in many areas, there is little interaction between new companies operating from the local incubation facility and existing local companies. It takes too long for business incubators to create small batches of new companies and wait for them to gradually replace existing ones. There is a need to position business incubators as a system integral to the revitalization of local economies, instead of operating them in isolation of local economies. 8

(iii) Enhancement of incubation managers as professionals Incubation managers (IMs) provide tenant businesses with management support and help revitalize local economies. For this reason, they must be professionals with advanced knowledge and support know-how. Although IMs are being trained through various training program, including those implemented by JANBO, they are no match for their U.S. counterparts. Their remuneration also falls short of levels appropriate for professionals. Despite the fact that about 70 percent of IMs have worked at private-sector companies, there are few experienced IMs, with 61 percent only having less than three years' experience (METI 2007). In the United States, 48 percent of full-time IMs have a masters degree, with another 29 percent holding a bachelor's degree. Their average income is $84,157 for men and $63,744 for women, and their length of experience in working as an IM is 0-4 years for 57 percent of them and 5-9 years of 34 percent of them (Knopp 2005). Although an accurate comparison is not possible because of the limited availability of Japanese IMrelated statistical data, according to the author's general impression, Japanese IMs are inferior to their U.S. counterparts in terms of both academic qualifications and annual income. To advance business incubation, it is necessary to position IMs as a high-level profession and improve their pay and other conditions to attract talented and well-qualified people.

3 New Trends in Business Incubators This section explores future directions of business start-up support and local revitalization on the basis of the practice of a business incubator engaged in new activities, taking into consideration the current issues faced by business incubators. The Chiyoda Platform Square (CPS) has sought inspiration from the yamori agent system dating back to the Edo period, in which agents called "yamori" took charge of the land, buildings and residents of row houses and extended this to the management of entire neighborhoods by looking after tenants' trade selection, fostering new businesses, and so on. CPS's updated version of the yamori agent system is a brainchild of the Chiyoda SOHO Community Development Promotion Study Group, established by Chiyoda Ward in 2000. The Kanda area of Tokyo's Chiyoda Ward has a concentration of old small office buildings and has been left with pockets of vacant office spaces due to the collapse of the bubble economy and rise of large-scale redevelopment projects. Against this background, the study group issued a recommendation advocating "the pursuit of SOHO-oriented community development policy initiatives that take advantage of Kanda's historical background and convenience associated with its central location by characterizing the SOHO sector, which embodies the "work where you live"-type work style and lifestyle, as a contributor to the regeneration of an inner-city commercial district, while envisaging the recovery of the area's resident population (Edami 2006, p. 37). In short, this amounts to an attempt to transform Kanda, a traditional craftsmen's town dating back to the Edo period, into a district dominated by SOHO professionals, such as IT engineers, consultants and planners. 9

Along the lines of this recommendation, yamori agents were recruited, and the first floor of an old office building was turned into a Linux café, which doubled as the base of an Open Resource-related venture, while office/studio space was created on a floor of another building to cater to architecture and design-related SOHO businesses. This was followed by a refurbishment of the Chiyoda SME Center, owned by Chiyoda Ward at the time, giving birth to CPS, which featured booth-style open-nest work spaces, closed-nest office spaces for SOHO businesses, conference rooms, a café, a business convenience store and other facilities. The heart of the yamori agent system lies in the creation of new activities, cross-sector interactions and businesses in the community through collaboration with administrative authorities, local residents and local businesses. In addition to promoting collaboration between businesses using its facilities, CPS seeks out opportunities for collaboration between users and local residents and transaction between users and local companies and tries to revitalize the entire community by drawing administrative authorities and local residents into the scheme as well. These activities get a further boost from CPS's facilities. For example, the cafe and outdoor wooden deck area have been opened up to nonusers. This, along with events held on the rooftop, facilitates interaction between users and local residents and companies. As a yamori agent has successfully brought in design offices and designers, hopes have been raised that plans to develop new products will proceed in collaboration with local small to medium-size textile wholesalers. The key difference that CPS has with other business incubators lies in the fact that its staff, these are yamori agents, try to solve local problems and create business opportunities for tenant businesses and others by actively involving themselves in the local community. It is also managed in a flexible and nimble manner which is only possible in the private sector. Moreover, it takes swift action whenever the need arises to improve support for tenant businesses or advance the revitalization of the local community, while minimizing costs through creativity and ingenuity. This light-footedness has produced tangible results. In just three years from its establishment, CPS has won more than 400 contracted users, who are engaged in business activities using CPS as their bases, as well as 1800 registered users. CPS's activities show a new direction for Japanese business incubators in terms of (i) an open facility and facility management that encourage collaboration among users and between users and the local community, (ii) setting of targets that take into consideration the area's historical background and local management resources, and (iii) flexible action to adapt to local circumstances and environmental changes. These characteristics are readily adaptable to non-SOHO industries. There is no need to develop high-tech industry clusters in all parts of the country. Possible avenues include support for the development of spin-off businesses by existing companies and commercialization through collaboration between start-ups and existing companies. To encourage this kind of collaboration, open facilities should be established and operated. Rather than blindly following the U.S. model, which is based on the construction of a research park in a desert, luring of research laboratories, launch of high-tech ventures by engineers who are exemployees of major corporations, and promotion of a further concentration of high-tech companies 10

through business incubation, local revitalization based on a combination of existing industrial clusters and IT and other cutting-edge technologies should be pursue as it would be more suited to Japanese conditions. CPS presents an excellent example for this new direction of business incubation.

Conclusion – Future Outlook of Japanese-style Business Incubators This paper provided an overview of the historical background of the introduction and development of the business incubation concept in Japan and discussed past and present problems and issues. Because of its origin as the National Government's policy tool under its industrial location policy, early Japanese business incubators tended to specialize in the fostering of R&D-oriented companies and all but neglected management support services, leading to their failure to produce adequate results. In recent years, the true role of business incubators has begun to be widely understood, and the business start-up environment has improved. On the other hand, in the face of problems such as a decline in local industrial clusters and collapse of communities due to the aging of the population and depopulation, there is an urgent need to recognize/utilize business incubators as a catalyst for local revitalization. Functions that will be demanded of business incubators in the future include a local business direction function designed to coordinate/commercialize technologies, human resources, brands and other business resources accumulated in the local area on the basis of a grand design drawn up for it. The creation of community-based businesses and businesses that utilize farm products, tourism resources, and the like may be considered to tackle a falling birthrate, aging population and depopulation. To make a swift response to the needs of entrepreneurs and the local communities possible, a publicprivate partnership in the form of facility development by the public sector and facility operation by the private sector is necessary. In addition to CPS, there are other successful business incubators. Examples include the SOHO Pilot Office in Mitaka City and SOHO Shizuoka. Their success is a result of incubation managers' efforts into business start-up support and local revitalization which involve community residents and local companies and take into consideration local characteristics (Koide 2006 and Kazumi 2004). A reevaluation of the roles and functions of business incubators will help produce results beneficial to the local area.

1. Although the Tohoku Industrial Technology Development Association was established in 1966, it was an R&D facility intended for companies pursuing collaboration between the industrial and academic sectors. The oldest facility that supported the commercialization of R&D results was Micon Techno House Kyoto, established by the Kyoto Industrial Information Center, a third-sector (publicprivate partnership) organization, in 1983. 2. The Softnomics Center ceased to operate in March 2005 and dissolved in the December of the same year. 3. This argument appears in the introduction of the Business Incubator Research Society Report (Oc11

tober 31, 1986), published by the Softnomics Center. 4. There were 26 designated areas under the Technopolis Law, and the same number of areas were designated under the Industrial Brain Location Law. Those designated areas were established prior to the enactment of the New Business Creation Promotion Law (1998), and a total of 24 business incubators are still in existence. Under the Private-sector Vitality Utilization Law, 14 research-core facilities were established altogether. 5. Some papers have passed a negative assessment on industrial location policy, including the Technopolis Law and Industrial Brain Location Law. Yamazaki 2003, p. 178, which states "from a long-term perspective, (industrial location policy) has not been so successful in making the local economic structure more advanced and maintaining and expanding employment", is a typical example. Nevertheless, discussion here focuses on business incubators. 6. Those four definitions are: (i) owning office space and other facilities to be offered to entrepreneurs, (ii) providing support for business start-up and growth through support personnel (e.g. incubation managers), (iii) placing restrictions on prospective tenant businesses (by business area, industrial category, number of years that have passed since establishment, size, etc.) and (iv) classifying companies which have moved out into two categories, "graduated" (the company moving out as a result of achieving its commercialization and other goals) and "other". 7. Of those 177 institutions, approx. 90% were established by local governments, non-profit corporations, universities, and the like. Although BIs established by private-sector companies account for about 10% of the above total, many similar BIs are likely to have slipped through the survey's net, as it is difficult to get a grasp of such BIs in a comprehensive manner. Private-sector BIs are classified into those used by a venture capital to nurture the start-ups it has invested in, those operated by a consulting firm, those operated by a real estate company in an office building owned by it, and so on. Ascertaining the situation surrounding BIs established by private-sector companies will be a future task. 8. JANBO divides the incubation process into pre-incubation (preparation for company establishment), main incubation (commercialization support) and post-incubation (follow-up support after graduation). 9. Graduated company current survival rate = Number of graduated companies currently in existence/Total number of graduated companies×100% Five-year survival rate = Number of graduated companies in existence for five or more years after graduation/Total number of graduated companies that graduated five or more years prior to survey ×100% (March 18, 2005) 10. "Japan's BI Policy - Future Direction and Strategies" by the Industrial Facilities Division, Regional Economic and Industrial Policy Group, Ministry of Economy, Trade and Industry 11. Ibid.

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References and Bibliography Edami T. (2006), Non-profit Joint-stock Company Transforming Local Area - Chiyoda Platform Square's Challenge(Hieirigatakabusikigaisha ga chiiki wo kaeru-Chiyoda Platform Square no chosen) , Gyosei Fukushima M. (2005), "Formation of Industrial Clusters and Creation of Businesses", Organization Science, Vol. 38, No. 3, Hakuto Shobo, pp. 25-40 Hoshino S. (2006), Up-to-date Business Incubation(Saishin business incubation), Doyukan KSP (1994), Trail of Venture Creation - KSP White Paper on Business Incubators(Venture souzou no ayumi KSP incubate hakusho) Kazumi T. (1996), “Present State of Japanese Business Incubator(Wagakuni no Incubator no genjo)", Research on SME Start-up Support - Desirable Form of Business Start-up Support and Guidance under Japanese Business Incubation System(Chushokigyo no sougyoushien ni kansuru kenkyu), Vol. 27 <95-10>, Japan Small Business Research Institute Kazumi T. (2003), "Business Incubation", Venture Business Management Theory(Venture kigyo keieiron), ed. by Kanai K. and Tsunoda R., Yuhikaku Publishing Kazumi T. (2004), "SOHO Start-up Support and Local Economic Regeneration(SOHO no sogyoshien to chiikikeizai saisei)" ,Shoko Kinyu, Vol. 54, No. 1, Japan Institute of Commerce, Industry & Economics, LTD., pp. 28-36 Ministry of Economy, Trade and Industry (Regional Economic and Industrial Policy Group) (2005), Study Report on Innovation Promotion Based on Business Incubator(Business Incubation ni yoru innovation sokushin chosa houkokusho) Ministry of Economy, Trade and Industry (Regional Economic and Industrial Policy Group) (2007), Business Incubator Basic Survey Report (Data Book)(Business Incubator kiso chosa houkokushoShiryo he n) Kikkawa T. and Research Institute for Advancement of Living Standards (ed.) (2005), Economic Regeneration from Local Areas(Chiiki karano keizai saisei), Yuhikaku Publishing Knopp, L (2005) "Compensation Survey of Incubation Executives", NBIA Koide M. (2006), Success of Your Business Start-up Guaranteed(Anagta no kigyo seikou sasemasu), CyBiz Mitsui I. (au. and ed.) (2005), Local Business Incubation, Industrial Clusterization and Inter-business Collaboration(Chiiki incubation to sangyo shuseki, kigyokan renkei), Ochanomizu Shobo Co., Ltd. Nishizawa A. (2001), "Achievements and Limitations of Venture Business Support Measures in Japan(Nihon ni okeru venture kigyo shien no seika to genkai)", Present State of Japanese Economy, 2001(Nihon keizai no genjo 2001nen ban) Ed. (ed. by Research Society on Contemporary Japanese Economy), Gakubunsha Co., Ltd. Nishizawa A. and Fukushima M. (2005), University Spin-off Ventures and Industrial Cluster Strategy(Daigaku hatsu venture kigyo to cluster sennryaku) , Gakubunsha Co., Ltd. Seki H. and Seki S. (au. and ed.) (2005), Business Incubators and SOHO(Incubator to SOHO), Shin13

hyoron Co., Ltd. Seki H. and Yoshida K. (1993), SMEs and Local Business Incubators(Chushokigyo to chiiki incubator), Shinhyoron Co., Ltd. Smiler R. W. and Gill Jr. M. D., "Business Incubators" (ed. and trans. by LTCB Research Institute, Inc., Nakata T. and Tominaga S. (1988), Pan Research Institute Ministry of International Trade and Industry (ed.) (1999), Guide to New Business Creation Promotion Law(Shin jigyo soshutsu sokusinho no kaisetsu), Research Institute of International Trade and Industry Yamazaki A. (2003) "Industrial Cluster Project as Local Industry Policy(Chiiki sangyo seisaku to shite no cluster keikaku)", Japanese Industrial Cluster Strategy(Nihon no sangyo cluster sennryaku), Yuhikaku Publishing Softnomics Center (1986), Business Incubator Research Society Report: Business Incubators - Business Incubation System and Economic Development(Business Incubator kenkyukai houkokusho)

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The Relationship Between Prior and Subsequent New Venture Creation in the United States: A County Level Analysis

Franz W. Kellermanns Mississippi State University Department of Management & Information Systems Mississippi State University Mississippi St, MS 39762-9581 Tel. 662-325-2613 [email protected] and INTES Center for Family Enterprises WHU (Otto Beisheim School of Management) Erick P.C. Chang (*) Arkansas State University College of Business Dept of Management and Marketing P.O. Box 59 State University, AR 72467 Tel. 870-972-3430 Fax 870-972-3833 [email protected]

James J. Chrisman Mississippi State University Department of Management & Information Systems Mississippi State University Mississippi State, MS 39762-9581 Tel. 662-325-1991 Fax 662-325-8651 [email protected] and Centre for Entrepreneurship and Family Enterprise, University of Alberta, Edmonton, Alberta, Canada T6G 2R6

Keywords: New Venture Creation, Externalities, Economic Development, U.S. Counties (*)

Corresponding author.The Relationship Between Prior and Subsequent New Venture Creation in the United States: A County Level Analysis

1

Abstract Minniti (2004; 2005) suggests that decisions to engage in entrepreneurship are interdependent and that the non-pecuniary network externalities and path dependencies of such decisions influence the geographical concentration of entrepreneurial activities. We apply her framework at the county level to study the association between prior and subsequent new venture creation in the U.S. Our results confirm the hypothesis that there is a non-linear relationship between prior new venture creation and subsequent new venture creation. Specifically, after controlling for population characteristics and economic conditions we find that new venture creation increases at an increasing rate based on the amount of prior entrepreneurial activity.

1. Executive Summary Defining entrepreneurship as the creation of new ventures (Gartner, 1988) this study tests the relationship between prior and subsequent entrepreneurial activity in the U.S. Bygrave and Minniti (2000) suggest that the level of entrepreneurship in a community is influenced by the heterogeneous personal characteristics of its population, economic circumstances, and prior entrepreneurial activity. Minniti (2004; 2005) refines this framework by explaining that entrepreneurship generates a non-pecuniary externality for proximate individuals by providing them with information that reduces the ambiguity of new venture creation. Consequently, she proposes that entrepreneurial decisions are path dependent, and that new venture creation in a given community will increase at an increasing rate depending on the extent of prior entrepreneurial activities. Since information is distributed asymmetrically among individuals, Minniti proposes that the path dependency of entrepreneurship helps explain why different communities experience different levels of new venture creation despite similarities in population characteristics and economic conditions. Our study applies this theoretical framework at the county level to explain the extent of new venture creation between 2000 and 2004 in the U.S. To measure prior and subsequent county-level entrepreneurial activity, as well as characteristics of the population and economy that have been shown to be related to new venture creation, data were collected from secondary sources including the U.S. Census, Profiles of America, USA Counties, and County Business Patterns. Our final database comprised 3,118 of the 3,141 counties in the U.S. Using OLS regression analysis, our results confirm the non-linear relationship between prior and subsequent new venture creation. Thus, new venture creation appears to increase at an increasing rate based on the level of prior entrepreneurship. In addition, the results suggest that among the variables representing county population and economic characteristics, the rate of net migration and changes in gross county product appear to have the greatest positive impact. We contribute to the literature by focusing on factors that are associated with differences in new venture creation across U.S. counties. By doing so we provide empirical support for Minniti’s (2004; 2005) contentions regarding the importance of entrepreneurial culture in influencing the geographic concentra2

tion of entrepreneurial activity. Our study confirms that entrepreneurship begets more entrepreneurship in increasing quantities and suggests that future efforts to more fully investigate Minniti’s theory are warranted. Future research on the determinants of new venture creation using Minniti’s model should be applied to different geographic units of analysis (e.g., cities, metropolitan areas), different regions (e.g., urban and rural), and in different nations to gain additional insights. Furthermore, the relationship between prior, current, and future entrepreneurial activity can have a number of root causes such as social networks, role models, and community culture, and these deserve investigation. The primary implications of this research are that entrepreneurial activities do indeed appear to be interconnected and self-reinforcing and that these attributes should be considered when designing public policy interventions to foster new venture creation.

2. Introduction The U.S. enjoys one of the highest levels of entrepreneurial activity among industrialized countries (Minniti, 2004). Although incentives, support, and social mobility in the U.S. all contribute to its entrepreneurial leadership (Zacharakis, Reynolds, and Bygrave, 1999), the most important factor may be the strong entrepreneurial culture that has developed in the past three centuries. Indeed, individuals’ decisions to engage in entrepreneurship appear to be interdependent rather than independent (Bygrave and Minniti, 2000; Minniti, 2004; Minniti, 2005). Prior studies have analyzed the entrepreneurial decisions of individuals (Carter, Gartner, Shaver, and Gatewood, 2003; Zacharakis et al., 1999). Other studies have determined a variety of demographic, economic, and technological factors that promote entrepreneurial activity in various regions and/or sectors of the economy (Bull and Winter, 1991; Reynolds, Miller, and Maki, 1995; Reynolds, Storey, and Westhead, 1994; Wennekers, Van Stel, Thurik, and Reynolds, 2005).Recently, a new theoretical framework was developed that highlights how the level of entrepreneurship in a community creates the social conditions that foster more entrepreneurship (Bygrave and Minniti, 2000; Minniti, 2004; Minniti, 2005). However, empirical studies have not adequately tested this framework. The purpose of this article is to fill this gap in the literature. We utilize the macro-economic theoretical framework originally proposed by Bygrave and Minniti (2000) and refined and elaborated by Minniti (2004; 2005) to study the relationship between prior and subsequent entrepreneurship at the county level in the U.S. For the purpose of this study we define entrepreneurship as the creation of new ventures (Gartner, 1988) and use the terms entrepreneurship and new venture creation interchangeably throughout the article. Minniti’s theoretical perspective of entrepreneurship complements previous work on the importance of social networks as sources of information (e.g., Shane and Cable., 2002). We contribute to the literature by testing the fundamental premise of Minniti’s theory regarding the path dependent nature of entrepreneurship. Stated simply, she proposes that the relationship between the extent of prior and subsequent 3

new venture creation in a community is non-linear. Based on her work, we hypothesize that because entrepreneurial activity can provide critical information reducing the ambiguity of individuals regarding entrepreneurial practices and consequences (Minniti, 2005), the level of entrepreneurship in a given community will increase at an increasing rate according to the amount of such activity that took place in prior periods. We operationalize the concept of community at the county level of analysis because many public policy and planning decisions occur at this level in the U.S. and utilizing counties allow us to study both rural and metropolitan communities (Chrisman, 1985; Chrisman, Van Deusen, and Anyomi, 1992). In the remainder of the paper, we discuss our theoretical foundations, the hypothesis development, methodology, and empirical results. We conclude the paper with implications for future research. 3. Theoretical Framework The entrepreneurship literature has discussed a variety of external conditions that affect new venture creation (Bull and Winter, 1991; Gartner, 1985; Reynolds et al., 1994; Shapero and Sokol, 1982; Specht, 1993). Pertinent to this study, Bygrave and Minniti (2000)and Minniti (2004; 2005) suggest that the level of entrepreneurship in a community is influenced by (1) heterogeneous personal characteristics of the members of its population, (2) economic circumstances, and (3) prior entrepreneurial activity. The first two elements have been discussed and studied extensively in previous literature. While they are necessary components of any model that seeks to explain new venture creation their inclusion does not represent an original contribution to the literature. On the other hand, the third element is the core of Minniti’s theory and upon which rests her unique contribution to the literature. Previous research on the influence of prior entrepreneurship on subsequent entrepreneurship has assumed a linear rather than a non-linear relationship (Armington and Acs, 2002; Shane, 1996) and thus has not fully captured the path dependent, selfreinforcing nature of entrepreneurial activity. As a consequence, we provide only brief attention to the population and economic characteristics that influence new venture creation and must, perforce, be included in the model. However, we more fully developing our discussion and hypothesis about the nonlinear relationship between prior and subsequent new venture creation. Regarding the first element of the framework, Minniti (2004) suggests that the relevant aspect of the personal characteristics of the members of a community’s population is the extent to which these characteristics make individuals alert to opportunities (Kirzner, 1973). Alertness would seem to have three components relevant to this study. The first is the predisposition of individuals to engage in entrepreneurship since this increases their likelihood to search for opportunities to create new ventures (Shapero and Sokol, 1982). We use net migration to capture the relative propensities for entrepreneurship in a community since migrants have been shown to be more entrepreneurial than the general population (Hammarstedt, 2001). In fact, several studies have shown that net migration is positively related to new venture creation (Bull and Winter, 1991; Chrisman, 1985; Chrisman et al., 1992; Dennis-Jr., 1986). The second is an individual’s human capital. Research has shown a positive relationship between human capital and entrepreneurship (e.g., Bosma, van Praag, Thurik, and de Wit, 2004). Furthermore, individuals with higher levels of human capital would seem more likely to be able to translate environmental cues into possible venturing opportunities. Skilled labor and age are used to measure elements of human 4

capital. Skilled labor captures the extent to which the population possesses the education and abilities to start a business (Acs and Armington, 2004) and age is an indictor of experience (Mueller, 2006). Finally, the degree to which individuals in a community are connected to one another could increase alertness since such connectedness would increase their exposure to information on potential venturing opportunities (Minniti, 2004). Age is also a measure of connectedness since older individuals are presumed to have larger social networks (Evans and Jovanonic., 1989). Natural increase in population is used as an additional measure. As Chrisman (1985) suggests, natural increase is an indictor of marriage and family formation and thus tends to be associated with stability and embeddedness. Furthermore, previous studies have shown a strong association between natural increase and new venture creation, particularly in rural communities (Armington and Acs, 2002; Chrisman, 1985; Chrisman et al., 1992; Lee, Florida, and Acs, 2004).1 The second element, economic circumstances, is a macro component that is critical to both an individual’s assessment of the attractiveness of entrepreneurship and a broader analysis of the incentives for entrepreneurship in a community. Income per capita, overall economic development, and levels of unemployment are used in this study to represent the potential opportunities for new venture creation that exist in the local environment. Prior research conducted at different levels of analysis such as countries, regions, counties, metropolitan areas, and cities have provided empirical support about how these components of the economic environment of a community fosters entrepreneurship. For example, several studies suggest that income per capita and economic development are important determinants of new venture creation (Begley, Tan, and Schock, 2005; Bull and Winter, 1991; Reynolds et al., 1995; Reynolds et al., 1994; Wennekers et al., 2005). Likewise, although the findings in the literature tend to be ambiguous as to the direction of the relationship, research results generally agree that unemployment has an important influence on new venture creation (Audretsch, 1994; Audretsch, Carree, Van Stel, and Thurik, 2005; Reynolds et al., 1995; Reynolds et al., 1994; Storey, 1991). 3.1 Prior entrepreneurship as a self-reinforcing network externality Drawing on the threshold models of Granovetter (1978) and Crane (1991), Bygrave and Minniti (2000) propose that as the rate of new venture creation in a community increases, the probability of the next individual starting a business also increases because the decisions of entrepreneurs generate positive feedback mechanisms for would-be entrepreneurs. Thus, they suggest that after allowing for difference in the institutional and economic environments in different communities a non-linear relationship between prior and subsequent entrepreneurship exists with the latter increasing at an increasing rate as the former increases in magnitude. Minniti (2004; 2005) expands upon that initial framework by explaining that entrepreneurship generates a non-pecuniary network externality for proximate individuals by providing them with information about the practices, routines, and consequences of entrepreneurship. She suggests that such information

1

It should be noted that each of these community attributes could also positively affect demand conditions and thereby further influence the extent of new venture creation.

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allowing those with the human capital and other resources needed to pursue a given opportunity to reduce the ambiguity associated with venturing, which enhances the probability that they will take positive action. Her perspective is thus consistent with earlier work on the importance of role models (Gartner, 1985; Shapero and Sokol, 1982) although it expands on that work by more fully explaining their informational value. Furthermore, Minniti makes it clear, that the dissemination of information is an unintended consequence, rather than a planned outcome, of entrepreneurs engaging in decisions and actions that lead to venture formation. Minniti (2004; 2005) thus proposes that entrepreneurial decisions are path dependent and selfreinforcing. Since information is distributed asymmetrically among individuals, Minniti proposes that the path dependency of entrepreneurship helps explain why different communities experience different levels of new venture creation despite similarities in population characteristics and economic conditions. Thus, entrepreneurs interact in a complex network of relationships and continuously adapt to changing economic circumstances. The interactions of prospective entrepreneurs with their social environment enable them to observe and learn from the behaviors of others. The extent to which such information is available can increase or decrease the probability they will discover and act upon profitable opportunities (Kirzner, 1973). If entrepreneurship is not simply a function of individual propensities or economic conditions, the actions of entrepreneurs and would-be entrepreneurs is expected to be interdependent (Minniti, 2005). Therefore, increasing returns to the adoption of entrepreneurship and geographic concentration, rather than a uniform pattern of new venture creation across communities, should occur. Again, this implies that higher levels of new venture creation in the past may lead to levels of new venture creation in the future that increase at an increasing rate. Thus we hypothesize: Hypothesis:

The relationship between prior and subsequent new venture creation is non-linear. Specifically, prior entrepreneurial activity provides increasing returns to subsequent entrepreneurial activity.

4. Methodology Data were collected from secondary sources including the U.S. Census, USA Counties, County Business Patterns, Bureau of Economic Analysis (BEA), and Profiles of America from the U.S. Department of Agriculture. U.S. counties were used as the unit of analysis. The intention was to include the entire population in the data analysis. However, missing data limited our analysis to 3,118 counties of the 3,141 counties in the U.S (99.2%). Tests for normality were conducted. These tests indicated that some measures, including the dependent variables, did not follow a normal distribution, thus violating an assumption of multiple regression analysis (Hair, Black, Babin, Anderson, and Tatham, 2006). The skewness and kurtosis of some measures were outside the range that researchers suggest is necessary for a normal distribution (DeCarlo, 1997; Hildebrand, 1986). Because our purpose is to present results about the new venture creation activities in the country with the greatest generality, our tests were conducted with the full sample of 3,118 counties. 6

However, we also conducted robustness tests with a normalized sample of 2,400 counties after eliminating outliers (Lynch, 2003). 4.1 Measures 4.1.1 Dependent Variables. To measure the dependent variable we collected data from County Business Patterns. Establishments were used as the unit of analysis. Using establishments rather than enterprises means that our dependent variable includes instances where an existing firm opens a new location (establishment) in a county. Thus, both independent and corporate ventures are incorporated into our measure (Sharma and Chrisman, 1999).2 However, this is consistent with our definition of entrepreneurship as the creation of new ventures (Gartner, 1988). New venture creation was measured by the net changes in the number of establishments, measured in thousands between (1) 2000 and 2002, and (2) 2002 and 2004. We used these time periods because most of our county variables were collected from the U.S. Census conducted in 2000. The two-year lag is consistent with prior research conducted in the U.S. (e.g. ,Acs and Armington, 2004; Armington and Acs, 2002). We use absolute changes rather than relative changes (e.g. growth rates) to quantify the additions of new ventures to the county as this seemed more conducive for capturing the non-linear effects of prior new venture creation. Although we measure net changes in new venture creation rather than absolute changes, previous research suggests that firm deaths in a region remain relatively constant over time (Birch, 1987). Thus, the net changes should be highly correlated with the number of new ventures actually created. 4.1.2 Independent Variables. To be consistent with the time frame used to measure our dependent variable, the measure of prior entrepreneurial activity represents net changes in establishments (in thousands) from 1998 to 2000. The data come from County Business Patterns. We used the natural logarithm to reduce kurtosis and skewness (Tabachnick and Fidell, 1996). We used the square term to test for the non-linear effect. We also centered both variables to reduce potential problems of multicollinearity (e.g., Aczel and Sounderpandian, 2002). 4.1.3 Population and Economic Variables. Following the theoretical framework of Minniti (2004; 2005), we used seven variables to account for the relevant population characteristics and economic circumstances of the counties. Four variables were used to measure population characteristics: age heterogeneity index, the rate of population change by natural increase, net migration rate, and skilled labor. Three variables were used to measure the economic conditions of the county: the absolute change in Gross County Product from 1998 to 2000, income per capita in 2000, and unemployment rate in 2000.

2

According to the US Census Bureau (2002: VI), ―…an establishment is a single physical location at which

business is conducted or services or industrial operations are performed. It is not necessarily identical with a company or enterprise, which may consist of one or more establishments. When two or more activities are carried on at a single location under a single ownership, all activities generally are grouped together as a single establishment. The entire establishment is classified on the basis of its major activity and all data are included in that classification.‖

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Blau’s (1977) index of heterogeneity was used to capture the age composition of the county.3 Richard et al. (2004) argue that the index is useful for capturing diversity and heterogeneity in groups. We collected data from Profiles of America on the proportion of the population in each of four age groups: 0-18 years old, 18-34 years old, 35-64 years old, and over 65 years old. To reduce problems of multicollinearity, we centered the index (e.g., Aczel and Sounderpandian, 2002). Following prior research (Armington and Acs, 2002; Chrisman, 1985; Chrisman et al., 1992; Lee et al., 2004), we collected data from Profiles of America to measure the rate of population growth by natural increase (births minus deaths) in each county from 1990 to 2000. Likewise, we collected data on the rate of net migration from 1990 to 2000 from Profiles of America. The net migration rate represents the number of people who immigrated into a county less the number of people who emigrated from the county divided by the county population. We used the proportion of the population with college degrees to measure the level of skilled labor available in 2000 (Lee et al., 2004). This a proxy measure for the human capital needed to start a business (Armington and Acs, 2002). The data come from the U.S. Census. Researchers have used changes in gross domestic product to measure economic development in a region (Carree, Van Stel, Thurik, and Wennekers, 2002). However, there is no statistic available to depict gross product at the county level. For this reason, we use the following formula to estimate the absolute changes in Gross County Product (GCP) from 1998 to 2000: GSP 2000 * County Employees in 2000 Total Employees in State 2000

_

GSP 1998 * County Employees in 1998 Total Employees in State 1998

Data on Gross State Product (GSP) were obtained from the BEA. Employment data come from County Business Patterns on employers’ reports during the week of March 12th each year. To obtain county level estimates we divided the GSP (in millions of US$) by the total number of employees in each state. The result is the GSP per employee in each state. We multiplied this amount by the number of employees in the county to obtain the estimated GCP for both 1998 and 2000. 4 We used the natural logarithm to reduce kurtosis and skwenewss (Tabachnick and Fidell, 1996). We collected data from USA Counties to measure the level of income per capita by county in 2000. Income per capita is obtained by dividing the total income of all people over 15 years old by the total county population (US-Census-Bureau, 2006). We used the natural logarithm to reduce kurtosis and skewness (Tabachnick and Fidell, 1996). We collected data from the U.S. Department of Agriculture’s Profiles of America to measure the unemployment rate in each county in 2000. The U.S. Bureau of Labor Statistics compiles the data from local area unemployment statistics.

3

The formula for the index is: 1 –Σpi2 where p is the proportion of a category and i is the number of categories.

4

It is important to note that the measure assumes that the employees in each county in a state are equally produc-

tive.

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4.1.4 Control Variables. We also controlled for business and population density, county type, industry sector, and region. The measures are discussed below. Prior research has determined that the concentration of business activity is an appropriate control when modeling new venture creation efforts (Acs and Armington, 2004). Using data from County Business Patterns, we constructed a measure of business density by dividing the number of establishments in 2000 by the number of employees in 2000. We used the natural logarithm to reduce skewness and kurtosis (Tabachnick and Fidell, 1996). Population density was used as a control because of the impact it has on entrepreneurship and total employment (Audretsch and Fritsch, 2002; Reynolds et al., 1995). We used data from the U.S. Census to control for the size of the county. The natural logarithm was calculated to reduce skewness and kurtosis (Tabachnick and Fidell, 1996). The work of Chrisman (1985) and Chrisman et al. (1992) suggest it is important to control for county type. The 2000 U.S. Census groups counties into three categories: (1) those that belong to a metropolitan statistical area, (2) those that belong to a micropolitan statistical area, and (3) rural counties that do not fall in the first two categories.5 To avoid overspecification, two categorical variables, Metro and Micro, were constructed to identify counties that are part of metropolitan or micropolitan statistical areas, respectively. Prior research has established the need to use industry variables to control for the effects that they have on new ventures (Armington and Acs, 2002; Chrisman, Bauerschmidt, and Hofer, 1998). For example, Krugman (1991) explains that regions with higher levels of manufacturing activity present opportunities for the location of new firms because these places contain a large pool of labor, a wide variety of infrastructure services, and large economies of scale that minimizes costs for exporting goods to other regions. To capture industry effects at the county level, we collected data from County Business Patterns to estimate the proportion of establishments in 2000 in retail, manufacturing, and service industries using 2digit NAICS codes. The retail variable measures the proportion of establishments that are in the 44 and 45 NAICS codes. The manufacturing variable measures the proportion of establishments in the 33 NAICS code. Services are measured by the proportion of establishments in the 51-56, 61-62, and 71-72 NAICS codes. Studies indicate there are regional differences across the U.S. in terms of innovations that may effect entrepreneurial activity and economic growth (Audretsch and Feldman, 1996). We used categorical va-

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The U.S. Census Bureau (2000b: 82238) defined county types as follows: ―Metropolitan Statistical Area — A Core Based

Statistical Area associated with at least one urbanized area that has a population of at least 50,000. The Metropolitan Statistical Area comprises the central county or counties containing the core, plus adjacent outlying counties having a high degree of social and economic integration with the central county as measured through commuting. Micropolitan Statistical Area — A Core Based Statistical Area associated with at least one urban cluster that has a population of at least 10,000, but less than 50,000. The Micropolitan Statistical Area comprises the central county or counties containing the core, plus adjacent outlying counties having a high degree of social and economic integration with the central county as measured through commuting.‖

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riables to identify counties in different regions of the country following an established classification of states (Chrisman, 1999).6 4.2 Data Analysis Ordinary Least Squares (OLS) regression was used to test the hypothesis. Despite the normality problems, additional tests did not reveal problems of multicollinearity among the independent variables used in the regression models. Because prior entrepreneurship activity and new venture creation measure changes in establishments at different periods of time, we also estimated the Durbin-Watson statistic. Owing to the normality problems of the data, problems of autocorrelation were found on the OLS regression models, although those were not found on the robustness tests conducted with the normalized sample of 2,400 counties. 5. Results Table 1 (see tables at the end of this paper) provides the means, standard deviation, and correlations for the county-level variables used in the models. Table 2 presents the OLS regression results using new venture creation from 2000 to 2002 as the dependent variable. Model 1 is the base model with only the control variables. The model is significant (p<0.001) and the adjusted R2 is 0.07. Business density, population density, metro counties, service industries, and the south and west regions were all significant at the 5% level or better. Model 2 adds the variables representing population characteristics and economic conditions to the base model. The adjusted R2 increases to 0.17 and the change in R2 is significant (p < 0.001). All the variables except the unemployment rate in 2000 are significant (p<0.05). Gross county product 98-00 and net migration rate 90-00 appear to have the highest relative influence on new venture creation. Interestingly, among the control variables only business density remained signification in model 2 (p < 0.01), a finding that appears to be consistent with Minniti’s (2005) discussion of the importance of entrepreneurial history. Model 3 adds prior entrepreneurship activity. The adjusted R2 increases to 0.19 and the change in R2 is significant (p < 0.001). The variables representing population characteristics and economic conditions remain significant, as does business density. Most importantly, prior entrepreneurial activity is positively related to subsequent new venture creation (p < 0.001). This confirms the relationship found in prior studies (e.g., Shane, 1996). Model 4 is used to test our hypothesis as we introduce the square term of prior entrepreneurship activity. The adjusted R2 for model 4 nearly doubles, increasing to 0.37. The change in R2 is significant (p < 6

Chrisman (1999) aggregates the SBA’s classification of 10 regions in the US as follows: Southern region (Alabama, Arkan-

sas, Florida, Georgia, Kentucky, Louisiana, Mississippi, New Mexico, North Carolina, Oklahoma, South Carolina, Tennessee, and Texas); Northern region (Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, Ohio, and Wisconsin); Western region (Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, North Dakota, Oregon, South Dakota, Utah, Washington, and Wyoming): Eastern region (Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, Virginia, and West Virginia).

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0.001). Again, the significance of the population and economic variables remains relatively stable. Business density is not significant in model 4 but the variables representing metro countries and the south region become signification. However, in support of the hypothesis and the principle contentions of Bygrave and Minniti (2000) and Minniti (2004; 2005), the coefficients of prior entrepreneurial activity and its square term are both positive and significant (p<0.001). A comparison of the standardized beta coefficients also reveals that prior entrepreneurial activity and the square of that are far and away the most important variables in the model in terms of explaining variations in subsequent new venture creation. Table 3 presents the OLS regression results using new venture creation from 2002 to 2004 as the dependent variable. Model 5 is the base model where the control variables are entered. The model is significant (p<0.001) and the adjusted R2 is 0.16. Business density, population density, service industries, and all three regional variables are positively related to new venture creation at the 1% significance level or better. The micro county variable has a negative relationship with new venture creation (p < 0.001). Model 6 adds the variables representing population characteristics and economic conditions to the base model. The adjusted R2 increases to 0.35 and the change in R2 is significant (p < 0.001). Only natural increase (p 0.05), net migration (p < 0.001), and gross county product (p < 0.001) are positively related to new venture creation during the 2002-2004 time period. Age heterogeneity is marginally significant (p<0.10). Excepting the micro county and north region variables, the control variables retain significance. Retail industries are also significant related to new venture creation in model 6. Model 7 includes prior entrepreneurship activity. The adjusted R2 increases to 0.38 and the change in R2 is significant (p < 0.001). The significance of the various variables representing population characteristics, economic conditions, and the control measures are stable. Again, the important finding is that prior entrepreneurial activity is positively related to subsequent entrepreneurial activity (p < 0.001). Model 8 provides further support for our hypothesis. The adjusted R2 increases to 0.59 and the change in R2 is significant (p < 0.001) when we add the square term of prior entrepreneurship activity. General stability exists in the significance of the majority of variables included in the analysis. Importantly, both prior entrepreneurial activity and the square of that variable are positively related to subsequent entrepreneurial activity (p < 0.001). Furthermore, as above, these variables have standardized beta coefficients that are substantially greater than any other variable in the model. Thus, these results support our hypothesis and Minniti’s (2004; 2005) contention that there are increasing returns to entrepreneurial activity over time. 5.1 Robustness Tests Although we conducted our analysis with almost the entire population of US counties, problems of normality may have biased our results. Therefore, we conducted robustness tests with a normalized sample of 2,400 counties from 47 states (counties from Delaware, the District of Columbia, Hawaii, and Rhode Island are not included in the sample). Table 4 (see end of this paper) provides the results of the complete models for the 2000-2002 and 2002-2004 time periods with the reduced sample. Both prior entrepreneurship activity and its square term are positive and significant (p<0.001) for both of the time periods analyzed using the reduced sample. 11

In sum, the OLS regression models provide evidence to support the Minniti and Bygrave (1999) framework as well as strong support for our hypothesis. It is important to note that the findings were consistent regardless of whether new venture creation was measured over the period of 2000-2002 or 20022004 and whether the full sample or reduced sample was used. This suggests that the results were not sensitive to the lag between the time periods used to measure our independent and dependent variables or biased by potential violations of the assumptions of multiple regression analysis. It also suggests that the impact of prior entrepreneurship activity on subsequent new venture creation endures for a reasonable period of time, as suggested by Minniti (2004; 2005). 6. Discussion and Conclusions This study tested the theoretical framework developed by Bygrave and Minniti (2000) and Minniti (2004; 2005). The results provide significant insights into the factors that influence new venture creation in U.S. counties between 2000-2002 and 2002-2004. The notion that prior entrepreneurship acts as a non-pecuniary network externality that generates increasing returns to entrepreneurship (Minniti, 2005) is supported. Not only does an increase in prior new venture creation have a positive impact on subsequent new venture creation, the increase in new venture creation appears to occur at an increasing rate. This suggests that the importance of entrepreneurship for the economic development of a region may be even greater than previously believed. Thus, entrepreneurship begets more entrepreneurship in increasing quantities. If one accepts the explanation developed by Minniti (2004; 2005) as a basis for the evidence presented in this article, this occurs as a consequence of the information entrepreneurship provides to aspiring entrepreneurs that reduces ambiguities and alters the incentives to search for opportunities to start ventures. What we have added to this understanding is that the growth in entrepreneurship through these mechanisms indeed appears to be non-linear. This finding contributes to our understanding of the geographic variations in rates of entrepreneurship and the upward and downward economic spirals that are often observed in some communities. Our study therefore contributes to knowledge about entrepreneurial activities in the U.S. by being one of the first to test the theoretical framework developed by Bygrave and Minniti (2000) and Minniti (2004; 2005), using the most current data about new venture creation activities in the U.S. at the county level. We contribute to management theory and practice by confirming that entrepreneurship is primarily a local phenomenon and entrepreneurial acts are interdependent. Importantly, our results did not change qualitatively when the lag intervals used between the measurement of the variables and new venture creation were altered or when we used the full or partial data set to test our hypothesis. In addition, by focusing on counties, we were able to provide interesting results at a level of aggregation that differs from prior studies that have focused on individuals, cities, labor market areas, or metropolitan areas. In that regard, counties represent a unit of analysis that captures entrepreneurial activities in rural areas, which have not been well represented in prior research endeavors. Finally, while our findings confirm that population characteristics and economic conditions, particularly net migration and gross county product, are of great consequence to new venture creation they also suggest that the entrepreneurial history of a community may be of even greater import. 12

7.1 Limitations Before concluding it is necessary to discuss the limitations of our study. First, problems of normality, kurtosis in particular, violated the assumptions of the regression analysis used to study the full population of counties. However, our robustness tests conducted with a normalized sample of 2,400 counties provided consistent support of our hypothesis. A second methodological limitation is our inability to obtain a more precise measure for gross county product. Deriving this construct from GSP implied that this measure was a function of the number of employees in the county vis-à-vis the number of employees in the state. While this assumption was reasonable under the circumstances, we recognize the limits of its validity since it is likely that the productivity of employees in different counties will vary. A third and more general methodological limitation is our measures of population characteristics and economic conditions. Although these seemed reasonable given our purpose and theoretical framework, other measures, such as the presence of a university, are possible and may yield further or greater insights. For example, other measures besides natural increase may be more appropriate for capturing the connectedness of the population. Furthermore, although natural increase captures some of the demand considerations associated with venturing opportunities (Chrisman, 1985), the full effects of population increase through this means are likely not to occur for many years. In short, efforts to refine and expand upon the measures used in this study to operationalize Minniti’s (2004; 2005) theoretical framework are needed. 7.2 Implications for Future Research and Practice Besides dealing with the limitations of the current study, there are a number of additional implications for future research and practice that follow from this research. Thus, future research needs to explore the relationship between prior and subsequent new venture creation, as well as macro-level factors that influence venture start-up decisions at other levels of analysis such as cities, metropolitan areas, and regions. For example, counties appear to be very appropriate for the analysis of rural areas but may be less valuable for analyzing urban areas where agglomeration effects may be more prevalent. Future research should address if there are differences in the factors that influence new venture creation in urban or rural areas and how entrepreneurial cultures may affect the development of new ventures in such areas. This would involve testing for interactions or estimating separate models, rather than merely using control variables to account for these differences. It is also necessary to explore how levels of community support, in terms of resources, networking, and culture, affect new venture creation. While we obtained the effects expected from the theoretical framework used, we were not able to isolate the causes as fully as needs to be done. In the same vein, prior entrepreneurial activity may affect subsequent activity for several reasons including competitive imitation, expanded opportunities for suppliers or producers of complementary products and services, reductions in ambiguity, or changes in the attitudes toward entrepreneurship on the part of individuals in a given community. Our findings support the theoretical position of Bygrave and Minniti (2000), and Minniti (2004; 2005) but more work is needed to isolate the various potential causes of new venture creation. 13

Moreover, new venture creation is influenced by population characteristics and economic conditions. Specifically, net migration and gross county product appeared to have the greatest influence, as measured by the standardized beta coefficients in the different models analyzed. With regard to net migration, newcomers may be more alert to new venture creation opportunities and may provide information and opportunities to other potential entrepreneurs as well. Future research that helps disentangle the influence of migration on entrepreneurship and economic development would be valuable, particularly given the current national debate regarding immigrants. Changes in gross county product were also strongly related to new venture creation in both periods examined. This suggests that the current level of economic activity in a county has an important influence on future entrepreneurial opportunities. As argued, information, alertness, and incentives are all important in the new venture creation process (Kirzner, 1973; Minniti, 2004; Minniti, 2005). Additional work that helps us better understand the interrelationship among these factors is needed. Our study and its theoretical basis also provide implications for policymakers. The results suggest that entrepreneurial activities do indeed appear to be interconnected, self-reinforcing, and path dependent. Therefore, these attributes should be considered when designing public policy interventions to foster new venture creation in order to ensure that the impact is not transitory. For example, proper incentives are needed but unless enough new potential entrepreneurs are inspired to take the plunge incentives alone may not be enough to change entrepreneurial rates over time. Furthermore, policy makers should consider whether fostering new venture creation by individuals who are not embedded in the community will transmit the ambiguity-reducing information needed to inspire further entrepreneurship among those who might take advantage of that information. In conclusion, this article provides support for the contention of Minniti (2004; 2005) that there are positive returns to prior new venture creation. By doing so we contribute to knowledge regarding why entrepreneurial actions tend to concentrate geographically and why otherwise similar communities experience different levels of new venture creation over time. Entrepreneurship appears to have historic, social, and economic elements that can create positive network externalities. The influence and interplay of these factors deserves further attention and hopefully our findings will inspire additional investigations.

14

References Acs, Z.J., Armington, C., 2004. Employment growth and entrepreneurial activities in cities. Regional Studies 38 (8), 911-927. Aczel, A.D., Sounderpandian, J., 2002. Complete business statistics (5th ed.). McGraw-Hill: New York. Armington, C., Acs, Z.J., 2002. The determinants of regional variation in new firm formation. Regional Studies 36, 33-45. Audretsch, D., 1994. A reconciliation of the unemployment - New firm startup paradox. Small Business Economics 6, 381-385. Audretsch, D., Carree, M., Van Stel, A., Thurik, R., 2005. Does self-employment reduce unemployment? Max Planck Institute of Economics: Jena, Germany. Audretsch, D., Feldman, M., 1996. R&D spillovers and the geography of innovation and production. American Economic Review 86, 630-640. Audretsch, D., Fritsch, M., 2002. Growth regimes over time and space. Regional Studies 36, 113-124. Begley, T.M., Tan, W.-L., Schock, H., 2005. Politico-economic factors associated with interst in starting a business: A multi-country study. Entrepreneurship Theory and Practice 29 (1), 35-56. Birch, D.L., 1987. Job creation in America: How our smallest companies put the most people to work. Free Press: New York. Blau, P.M., 1977. Inequality and heterogeneity. Free Press: New York. Bosma, N., van Praag, M., Thurik, R., de Wit, G., 2004. The value of human and social capital investments for the business performance of startups. Small Business Economics 23, 227-236. Bull, I., Winter, F., 1991. Community differences in business birth and growths. Journal of Business Venturing 6 (1), 29-43. Bygrave, W.D., Minniti, M., 2000. The social dynamics of entrepreneurship. Entrepreneurship Theory and Practice 24 (3), 25-36. Carree, M., Van Stel, A., Thurik, R., Wennekers, S., 2002. Economic development and business ownership: An analysis using data of 23 OECD countries in the period 1976-1996. Small Business Economics 19, 271-290. Carter, N.M., Gartner, W.B., Shaver, K.G., Gatewood, E.J., 2003. The career reasons of nascent entrepreneurs. Journal of Business Venturing 18, 13-39. Chrisman, J.J., 1985. Population change and its effects on the retail sector: An exploratory study. International Small Business Journal 3 (4), 26-46. Chrisman, J.J., 1999. The influence of outsider-generated knowledge resources on venture creation. Journal of Small Business Management 37 (4), 42-58. Chrisman, J.J., Bauerschmidt, A., Hofer, C.W., 1998. The determinants of new venture performance: An extended model. Entrepreneurship Theory and Practice 23 (1), 5-29. Chrisman, J.J., Van Deusen, C., Anyomi, S.M.K., 1992. Population growth and regional economy: An empirical analysis of business formation and job generation in the retail sector. Entrepreneurship & Regional Development 4, 339-355. 15

Crane, J., 1991. The epidemic theory of ghettos and neighborhood effects on dropping out and teenage childbearing. American Journal of Sociology 96, 1226-1259. DeCarlo, L.T., 1997. On the meaning and use of kurtosis. Psychological Methods 2, 292-307. Dennis-Jr., W.J., 1986. Explained and unexplained differences in comparative state business starts and start rates. Frontiers of Entrepreneurship Research, 313-327. Evans, D., Jovanonic., B., 1989. An estimated model of entrepreneurial choice under liquidity constraints. Journal of Political Economy 97, 808-827. Gartner, W.B., 1985. A conceptual framework for describing the phenomenon of new venture creation. Academy of Management Review 10 (4), 696-706. Gartner, W.B., 1988. "Who is an entrepreneur?" is the wrong question. American Journal of Small Business 12 (4), 11-32. Granovetter, M., 1978. Threshold models of collective behavior. American Journal of Sociology 83, 1420-1443. Hair, J.F., Black, B., Babin, B., Anderson, R.E., Tatham, R.L., 2006. Multivariate Data Analysis (6th ed.). Prentice Hall Hammarstedt, M., 2001. Immigrant self-employment in Sweden - its variation and some possible determinants. Entrepreneurship and Regional Development 13, 147-161. Hildebrand, D.K., 1986. Statistical thinking for behavioral scientists. Duxbury: Boston. Kirzner, I.M., 1973. Competition and entrepreneurship. The University of Chicago Press: Chicago. Krugman, P., 1991. Increasing returns and economic geography. Journal of Political Economy 99, 483499. Lee, S.Y., Florida, R., Acs, Z.J., 2004. Creativity and entrepreneurship: A regional analysis of new firm formation. Regional Studies 38 (8), 879-891. Lynch, S.L. 2003. Expanding the model capabilities: Dummy variables, interactions, and nonlinear transformations. (Soc 504). Accessed on February 2, 2007. Minniti, M., 2004. Entrepreneurial alertness and asymmetric information in a spin-glass model. Journal of Business Venturing 19 (5), 637-658. Minniti, M., 2005. Entrepreneurship and network externalities. Journal of Economic Behavior & Organization 57 (1), 1-27. Minniti, M., Bygrave, W.D., 1999. The microfoundations of entrepreneurship. Entrepreneurship Theory and Practice 23 (4), 41-52. Mueller, P., 2006. Entrepreneurship in the region: Breeding ground for nascent entrepreneurs? Small Business Economics 27, 41-58. Reynolds, P.D., Miller, B., Maki, W., 1995. Explaining regional variation in business births and deaths: U.S. 1976-88. Small Business Economics 7, 389-407. Reynolds, P.D., Storey, D., Westhead, P., 1994. Cross-national comparison of the variation in new firm formation rates. Regional Studies 28, 443-456.

16

Richard, O.C., Barnett, T., Dwyer, S., Chadwick, K., 2004. Cultural diversity in management, firm performance, and the moderating role of entrepreneurial orientation dimensions. Academy of Management Journal 47 (2), 255-266. Shane, S., Cable., D., 2002. Network ties, reputation, and the financing of new ventures. Management Science 48, 363-381. Shane, S.A., 1996. Explaining variation in rates of entrepreneurship in the United States: 1899-1988. Journal of Management 22 (5), 747-781. Shapero, A., Sokol, L., 1982. Social dimensions of entrepreneurship. In Kent, C.A., Sexton, D.L.and Vesper, K.H. (Eds.), Encyclopedia of entrepreneurship. Prentice-Hall: Englewood Cliffs, NJ. Sharma, P., Chrisman, J.J., 1999. Toward a reconciliation of the definitional issues in the field of corporate entrepreneurship. Entrepreneurship Theory and Practice 23 (3), 11-27. Specht, P.H., 1993. Munificence and carrying capacity of the environment and organization formation. Entrepreneurship Theory and Practice 17 (2), 77-86. Storey, D., 1991. The birth of new firms - Does unemployment matter? A review of the literature. Small Business Economics 3, 167-178. Tabachnick, B.G., Fidell, L.S., 1996. Using multivariate statistics (3 rd. ed.). HarperCollins College Publishers: New York. US-Census-Bureau. 2006. About the US Census Bureau . (accessed April 29, 2006). Wennekers, S., Van Stel, A., Thurik, R., Reynolds, P., 2005. Nascent entrepreneurship and the level of economic development. Small Business Economics 24, 293-309. Zacharakis, A., Reynolds, P.D., Bygrave, W.D., 1999. Global entrepreneurship monitor, national entrepreneurship assessment: United States of America 1999 executive report. Kansas City, MO: Kauffman Center for Entrepreneurial Leadership.

17

3.75 0.35 0.22 0.05 0.24 0.40 0.40 0.30 0.17 0.00 0.17 0.03 0.08 7.47

5. Population Density (Ln)

6. Metro County

7.Micro County

8. Manufacturing

9. Retail

10. Service

11. South

12. North

13. West

14. Age Heterogeneity Index

15. Skilled Labor 2000

16. Natural Increase Rate 90-00

17. Net Migration Rate 90-00

18. Gross County Product 98-00 (Ln) 0.22

0.32

0.15

0.05

0.08

0.01

0.37

0.46

0.49

0.07

0.04

0.02

0.41

0.48

1.69

0.40

0.26

251.95

273.11

SD

18

20. Unemployment Rate 2000 0.05 0.03 N=3,118 +p<0.10, *p<0.05, **p<0.01, ***p<0.001

10.02

-2.42

4. Business Density (Ln)

19. Income per Capita 2000 (Ln)

0.04

41.38

2. New Venture Creation 00-02

3. Prior Entrepreneurship Activity

58.22

1. New Venture Creation 02-04

Mean

Table 1: Descriptives and Correlations

0.27*** 0.09***

0.56***

0.17***

0.21***

0.29***

0.08*** 0.07***

-0.01 0.08***

0.28***

-0.03+ 0.13***

0.26*** 0.08***

0.30***

0.41*** 0.14***

0.78***

1

1

-0.07***

0.14***

0.34***

0.21***

0.20***

0.17***

-0.06**

0.08***

-0.06***

-0.01

0.15***

-0.09***

-0.01

-0.05**

0.19***

0.18***

-0.07***

0.31***

1

2

0.28*** 0.10***

0.42***

0.19***

0.20***

0.30***

0.10*** 0.12***

-0.05**

0.20*** 0.08***

-0.01 0.15***

-0.06**

0.19***

0.20***

1 0.09***

3

0.07***

-0.26***

-0.30***

0.03

-0.32***

-0.14***

-0.11***

0.27***

-0.01

-0.11***

-0.27***

0.05**

-0.30***

-0.15***

-0.31***

-0.66***

1

4

-0.19***

0.48***

0.50***

0.15***

0.27***

0.38***

0.04*

-0.38***

0.00

0.06**

0.39***

-0.20***

0.21***

0.03+

0.57***

1

5

-0.21***

0.44***

0.38***

0.22***

0.36***

0.37***

-0.17***

-0.08***

-0.07***

0.01

0.28***

-0.29***

0.02

-0.39***

1

6

0.04*

-0.06**

-0.05** 0.10***

0.05**

-0.04*

0.11***

-0.02

0.02

0.03+

0.03

0.06**

0.07***

1

7

-0.02

0.00

-0.01

0.06***

-0.04*

0.11*** 0.21***

0.16*** 0.21***

0.02

-0.05** 0.27***

1

8

0.15***

-0.41***

-0.19***

-0.24***

-0.12***

-0.38***

0.28***

-0.22***

-0.04*

0.31***

-0.39***

1

9

-0.19

14. Age Heterogeneity Index

***

-0.08*** ***

0.42*** ***

0.08

18. Gross County Product 98-00 (Ln) ***

***

0.12

***

-0.30

p<0.10, *p<0.05, **p<0.01, ***p<0.001

+

-0.15

20. Unemployment Rate 2000

N=3,118

0.46

19. Income per Capita 2000 (Ln)

0.16

0.07

17. Net Migration Rate 90-00

***

***

0.22

***

16. Natural Increase Rate 90-00

***

0.62

-0.23

0.13

***

-0.36

***

-0.53***

1

11

15. Skilled Labor 2000

***

0.19

***

-0.07

13. West

12. North

-0.18***

11. South ***

1

10. Service

9. Retail

8. Manufacturing

7.Micro County

6. Metro County

5. Population Density (Ln)

4. Business Density (Ln)

3. Prior Entrepreneurship Activity

2. New Venture Creation 00-02

1. New Venture Creation 02-04

10

Table 1: Descriptives and Correlations – continued

***

***

*

-0.17

0.11 ***

***

-0.07***

-0.15

-0.19

-0.04

0.18

***

-0.29***

1

12

*

***

0.12

0.07

***

***

0.06***

0.04

0.19

0.17

***

-0.28***

1

13

***

0.02

-0.21

***

-0.08***

-0.26

-0.31

***

-0.34***

1

14

-0.08

0.09

***

***

0.03+

0.70

***

0.24***

1

15

0.12

0.15

***

***

0.29***

0.17***

1

16

-0.09

0.20

***

***

0.29***

1

17

-0.12

***

0.46***

1

18

19

-0.46***

1

19

Table 2: Regression Models using New Venture Creation from 2000 to 2002 as Dependent Variable Model 1

Model 2

0.08

Population Density (Ln)

0.24

***

0.02

0.03

0.01

Metro County

0.08

**

0.02

0.03

0.06

Micro County

-0.02

-0.01

-0.01

0.01

Manufacturing

0.01

0.00

0.00

-0.02

Retail

0.01

0.03

0.03

0.01

Service

0.05

*

0.03

0.04

0.03

South

0.08

**

-0.04

-0.03

-0.05

North

0.04

-0.01

-0.01

-0.01

West

0.19

***

0.04

0.06

*

Model 4

Business Density (Ln)

0.07

**

Model 3

**

0.03

0.06

**

-0.06

Natural Increase Rate 90-00

0.01 **

*

0.01

0.05

**

0.04

*

-0.07

*

-0.09

***

0.12

***

0.11

***

0.06

***

Net Migration Rate 90-00

0.19

***

0.16

***

0.09

***

Gross County Product 98-00 (Ln)

0.32

***

0.26

***

-0.05

*

Income per Capita 2000 (Ln)

-0.05

**

-0.05

**

-0.05

**

Unemployment Rate 2000

-0.03

-0.05

+

-0.09

***

0.63

***

0.61

***

97.73

***

Age Heterogeneity Index Skilled Labor 2000

0.17

Prior Entrepreneurship Activity

***

Prior Entrepreneurship Activity Square F-value

23.42

R2

0.07

Change in R2 N=3,118

20

37.36

0.07 *

**

p<0.10, p<0.05, p<0.01,

***

p<0.001

***

0.17 0.10

Adjusted R2 +

***

0.17

41.31

***

0.19 ***

0.02 0.19

*

0.37 ***

0.18 0.37

***

Table 3: Regression Models using New Venture Creation from 2002 to 2004 as Dependent Variable Model 5 Business Density (Ln)

0.11

***

Population Density (Ln)

0.41

***

Metro County

0.02

Micro County

-0.08

Manufacturing

Model 6 0.08

**

0.09

**

Model 7

Model 8

0.07

**

0.02

0.09

**

0.07

** +

-0.01

0.00

0.03

-0.03

-0.02

0.00

-0.01

-0.01

-0.01

-0.03

Retail

0.03

0.03

+

0.03

+

0.02

Service

0.13

***

0.05

*

0.06

**

0.06

**

South

0.13

***

0.05

*

0.06

*

0.04

*

North

0.08

**

0.03

0.03

+

West

0.25

***

0.08

**

0.08

**

0.05

***

0.03

+

0.03

+

0.01

-0.05

+

-0.07 -0.02

***

Age Heterogeneity Index Skilled Labor 2000

0.04

-0.03

*

***

Natural Increase Rate 90-00

0.05

*

0.03

+

Net Migration Rate 90-00

0.13

***

0.10

***

0.03

*

Gross County Product 98-00 (Ln)

0.53

***

0.45

***

0.11

***

Income per Capita 2000 (Ln) Unemployment Rate 2000

-0.03

-0.03

0.00

-0.02 0.19

Prior Entrepreneurship Activity

+

***

Prior Entrepreneurship Activity Square F-value

62.21

R2

0.17

Change in R2 N=3,118

98.19

0.16 *

**

p<0.10, p<0.05, p<0.01,

***

0.35 0.18

Adjusted R2 +

***

0.35

105.11

***

0.38 ***

0.03 0.38

-0.02

+

-0.06

**

0.70

***

0.66

***

241.26

***

0.60 ***

0.22

***

0.59

***

p<0.001

21

Table 4: Results of Robustness test

Business Density (Ln) Ln Population Density

New Venture Creation 2000-02 0.01 0.03

Metro County

0.04

Micro County

-0.02

+

New Venture Creation 2002-04 0.01 0.03 0.03 -0.02

*

-0.04

*

Manufacturing

0.04

Retail

0.01

-0.01

Service

0.01

-0.04

*

South

-0.07

*

-0.12

***

North

-0.05

+

-0.11

***

West

-0.01

-0.06

*

Age Heterogeneity Index

0.01

0.02

Skilled Labor 2000

0.05

*

0.13

***

Natural Increase Rate 90-00

0.12

***

0.08

***

Net Migration Rate 90-00

0.23

***

0.18

***

0.35

***

Gross County Product 98-00 (Ln) Income per Capita 2000 (Ln) Unemployment Rate 2000

-0.01 0.07

**

0.00

-0.05

*

-0.04

*

Prior Entrepreneurship Activity

0.25

***

0.30

***

Prior Entrepreneurship Activity Square

0.11

***

0.13

***

55.75

***

185.32

***

F-value R2

0.31

Change in R2 0.01 2 Adjusted R 0.30 N=2,400 +p<0.10, *p<0.05, **p<0.01, ***p<0.001

22

0.60 ***

0.01 0.59

***

The connection between innovation and business growth in the Hungarian SME sector

László Szerb Habil. Associate professor University of Pécs, Rákóczi 80, Pécs, Hungary, H-7622; Tel: +36-72-501-599/3125; Fax: +36-72-501553; E-mail: [email protected]

Abstract Researchers have been interested in innovation and growth for a long time. While macroeconomic models regarding the innovation and growth nexus are relatively well developed, our knowledge is still limited about the nature of connection in the firm level. Most business level examinations focus on the analysis of high growth high innovative firms in the high or medium tech sector. At the same time, much less is written about the majority of small and micro size firms that constitute the core of the economy. By relying on a representative sample of 500 Hungarian SMEs, I investigate the connection between growth and different types of innovation activities. It is presented that the connection between business growth and innovation is not linear but quadratic that raises the problem of causality. It means that stagnating business have the lowest level of innovation activity, and both negatively and positively growing businesses innovate more. This phenomenon is the most prevailed in the 10-19 and the 20-49 employee business size categories. A potential implication of this finding is the lack of future strategic focus: Some mall business owners do not innovate until they can maintain their level of sales. They do start innovating when growth begins to decline. The interrelation between growth and different innovation activities were further examined by cluster analysis that provided a very contradictory picture regarding growth and innovation. Only two cluster businesses, about 20% of the whole sample can be considered as innovative, however the business attitudes toward growth is ambiguous. There are some businesses aiming to grow without innovation and investment, and there was a cluster of firms where innovation served only to maintain competitive position. Whether these findings are only the specialties of the Hungarian SMEs or more general phenomena requires further examination.

1. Introduction1 Since Schumpeter’s seminal work (Schumpeter 1934) there have been an enormous number of publications regarding innovation. Out of the several potential extensions, the connection between innovation and growth has proved to be one of the most popular topics. Classical growth model of Solow (1956, 2000) and of endogenous growth theory of Lucas (1988) handle innovation as an exogenous 1

Acknowledgement: I am grateful for the financial support of OTKA Research Foundation, theme number NK

69283.

1

factor. Following Kaldor and Mirrlees (1962) and Arrow (1962) growth theories that included technological change, Romer (1990) was the first who incorporated innovation as an integral part of his growth model (Romer 1990). Another extension of the innovation theories to economic growth can be referred as the National System of Innovation (NSI) that views innovation as a complex process of the participating firms, research organizations and government institution (Freeman 1988, 1994, Edquist 1997, Nelson 1993, Lundwall 1992). Knowledge creation, knowledge transfer, learning and the interaction amongst the different stakeholders of innovation play the crucial role in the success of innovation (Lankhuizen, and Woolthuis 2003) and ultimately of economic growth. Instead of firms, universities are considered to be the most important players in the Etzkowitz and Leydesdorff (2000) triple-helix model. A recent marriage of the Romer and the NSI model aim to explain the paradox of high knowledge (measured by R&D and patents) and low growth rates by the existence of the knowledge spillover. According to the knowledge spillover theory, knowledge does not commercialize automatically: The existence of a filter can prevent the created knowledge to spill over to other firms and other sectors to the economy thus hindering economic growth (Acs and Plummer 2005, Carlsson et al 2007). While macro and meso-level growth models are relatively well developed the connection between micro (firm) level innovation and growth is still unclear mainly. According to the classical approach, the whole process of innovation starts with basic research, then it is followed by applied research and development, and finally ends with production and diffusion (Godin 2006, Dodgson and Rothwell 1995). This set-up has been heavily criticized because of the unicasual and deterministic view. Over years, five generation of innovation models have been developed from the technology push and demand pull innovations via the coupling feedback approach toward the integrated and networking models (Rothwell 1992). This conceptual setup is widely applied in the empirical literature of innovation. A popular direction of this research is to identify the determining factors of innovation. A large number of factors, such as basic firm characteristics (age, size, sector, location), strategic variables (R&D, absorption, finance investment, human resource development, organizational structure, collaboration, networking, ICT strategy etc.) and environmental factors (diffusion, spillover, spatial proximity, competition, government and regional policy, education, financial system etc) are found to explain more or less the innovation activity.2 Another field of research aiming to explain the connection between innovation and growth is entrepreneurship with a focus on small businesses. In the Schumpeterian sense, innovation can be viewed as a heart of entrepreneurship (Schumpeter 1934). There are empirical researches presenting evidences about the importance of small entrepreneurial businesses in innovation (Acs and Auretsch 1988, 1990, 2005). Since Birch (1987) seminal study, the examination there has been several studies focusing on a the small number of high growth, young firms, the so-called gazelles that believed to be responsible for the bulk of new job creation, technology progress, and economic growth is a (Auito 2

2

For summary literatures see e.g. Faberger et al (2005), Trott (2005), Malerba and Brusoni 2007

2005, Birch 1987, Parker et al 2005). At the same time, most small businesses that constitute the core of the economy do not innovate. Only some of them engage in R&D, and very few introduce novel innovations. Most SME innovations are marginal improvements of already existing products, and instead of new technology creation, they rely on the adoption of the available technologies (Brown 2002, Damanpour and Wischnevsky 2006, Lankhuizen and Woolthuis 2003, Rothwell 1986, 1994). While the investigation of small business innovation is a popular topic in the literature, our knowledge is still limited about the nature, the types, the factors, and aims of innovation in the smallest sized firms. Standard innovation statistics such as Oslo Manual based surveys, and several empirical studies examine only those businesses that employ at least 10 or 20 employees (Inzelt and Szerb 2006). The success of innovation and its potential positive effect on growth in these micro-sized businesses mostly depends not on the R&D effort and budget but on the collaboration and networking potential, and also on the absorption and adoption ability of the business. Another distinctive feature of small business innovation is its dependence on a few key personnel’s creativity, risk taking propensity, strategic and managerial capabilities. Moreover, these business owner-managers can have different aims then large profit oriented firms, focusing on surviving and maintaining the position of the business rather than growing. Their planning horizon reflects to a short term view where innovation is costly and risky activity better to be avoided. What is the connection between innovation and business growth in the small business setup? That is the main research question of this paper. In the following, I would like to examine the nature, the type, and the connection between innovation and growth in the small business sector by relying on a 2006 representative survey in the Hungarian SME sector. Part 2 describes the Hungarian SME sector, its innovation potential in the framework of international comparison. Part 3 contains the basic characteristics of the data set regarding innovation and growth. The analysis between the connection of innovation and growth is the topic of Part 4. Finally the paper concludes. 2. Innovation and growth in the Hungarian SME sector In order to evaluate the connection between innovation and growth in the SME sector correctly, the specialties of the examined country, that is Hungary should be noted. Hungary, similar to other Central Eastern European transitional countries has a relatively short history in SME development that goes back to 1990 when the transformation from the planned to a market economy started (Szerb and Ulbert 2002). By the mid 2000s, the Hungarian SME sector consisted of a relatively large number of registered businesses that exceeded the 120/1000 capita. Other available comparative statistics reinforce that the importance of the Hungarian SME sector was very similar to the EU average. In 2003 Hungarian (European Union 15 + 4 NAFTA country average) SMEs provided 71,4% (69,7%) of the jobs, 51,4% (57,3%) of the value added, 59.3% (57.6) of the turnover, and 16,4% (20%), %) of the export (Román 2006). However, this relative comparison hides the fact that an average EU business in the

3

SME sector is 5-10 times larger than a Hungarian SME in term of economic performance causing a low level of competitiveness. The entrepreneurial characteristics of Hungary are well-known from the Global Entrepreneurship Monitor (GEM) international research (Szerb 2005, Szerb et al 2006). On the basis of the Early Stage Entrepreneurial Activity (TEA) index – which shows the percentage of the 18-64 age bracket wishing to establish a new business or having a business younger than 42 months – both the absolute and the relative position of Hungary have continuously deteriorated in the period 2001-2005. In 2001, the indicator stood at 11.4%, but this declined to 6.6% in 2002, to 4.3% in 2004 and to 3.2% in 2005. Since that there is an improvement in the TEA index but Hungary performs very poorly in other entrepreneurship activity related features (Table 1) Table 1: Entrepreneurial activity and other entrepreneurship related features of Hungary compared (2004-2005 average, as a percentage of the 18-64 adult population) TEA (%)

Opportunity entrepreneurship share(%)

Knows entrepreneur (%)

Possesses startup skills (%)

Sees good business opportunity (%)

Hungary

4,02

61,26

28,69

18,03

13,51

USA

11,89

84,06

38,60

53,21

32,97

Europe

5,90

77,74

40,22

43,00

35,93

Latin America

16,47

65,22

44,49

62,48

50,08

Australia/ New-Zealand

14,12

85,21

42,94

59,46

53,30

Asia developed

4,05

79,47

28,83

21,13

18,00

Asia developing

17,23

60,14

49,31

49,87

31,21

Other

12,32

66,47

43,99

56,22

45,56

Average

8,93

75,06

40,84

46,53

38,01

Country

Source: own calculation based on GEM 2004, 2005 executive summaries

While most Hungarian businesses starts because of opportunity reasons, that corresponds to the development of the country, less than 30% of the adult population knows an entrepreneur who started a business in the past two years, just 18% possesses the necessary startup skills, and only 13,5% can see good business opportunities. In all of these measures, Hungary posits well below the average, and of other European countries. The innovation performance of the Hungarian SME sector can be evaluated with the European Innovation Scoreboard survey, where Hungary ranked 15th out of the 25 EU member countries. The 2002 Community Innovation Survey that consists of enterprises with over 10 employees data are available for Hungary (Table 2).

4

Table 2 Percentage share of enterprises introducing innovation by size classes in Hungary, 2002

Size classes Small enterprises (11-49 persons) Medium-sized enterprises (50-249 fpersons) Large enterprises (250- persons) Total

Industry

Services

Total

19,1

13,6

22,6

Of which: mainly own company product

process

16,9

65,8

59,8

30,3

24,5

64,0

42,5

44,6

25,0

41,4

71,3

46,2

21,4

15,8

19,4

66,1

53,8

Source: based on Innovation 2003, 18-19. and 21. oldal.Román 2006: Small and medium-sized enterprises and Entrepreneurship, Hungarian Central Statiscical Office, Budapest 2006, p. 74

According to Table 2, only 19,4% of Hungarian SMEs introduced product or process innovation, 21.4% in the industry and 15.8% in the services. Smaller businesses – except the medium sized service category – have lower innovation activity than larger businesses. The relative backwardness of the Hungarian SME sector to other EU countries in the field of innovation can be seen from the Innobarometer survey conducted amongst managers (Table 3).

Table 3: Percentage share of positive responses of managers introducing innovation, 2004 EU-25 enterprises

EU15

New members

Hungary

81

74

77

63

59

65

56

53

51

30

40

45

33

36

31

75-19

49

59

67

54

44

52

20

51-7

17

25

34

20

17

9

12

17-0

9

18

25

13

9

6

14

33-5

13

17

23

15

12

5

average

extremes

20-49 persons

50-249 persons

250499 persons

74

85-63

73

76

56

71-31

54

33

22-54

53

Interview question Introduction of new product, services Introduction of new process Market research for innovation In house research Contracting on research Application for patents Registration for international trademark

Source: Román 2006: Small and medium-sized enterprises and Entrepreneurship, Hungarian Central Statiscical Office, Budapest 2006, p. 75

While there is 11% and 5% difference in the product and process innovation between Hungary and the EU average, respectively, the deviation is the largest in research, patents and trademark applications. 5

Other innovation surveys report even larger differences in the innovation activity and effort between Hungary and other countries (for a summary see: KKV szektor…2006) Despite that studies on the growth of the Hungarian SME sector are scare, there is an agreement that the growth of the Hungarian SMEs has been disappointing and problematic. Most Hungarian businesses are very small, the average number of employees is about 4, firms are systematically underfinanced, lack the strategic focus, and the managerial-entrepreneurial skills of the business owners are also unsatisfactory. Macroeconomic conditions, discriminating financial system and the regulatory environment is rather harm than help small businesses (Jávor and Rozgonyi 1995, Laky 1998, Halpern and Kőrösi 2001, Papanek 2005, Szerb and Ulbert 2006). Recently, the world economy recession, the macroeconomic imbalances, and the increased competitive pressure of the foreign businesses associated with the EU accession caused further shock to the domestic small businesses. At the same time, there are huge differences between the performance of the mainly foreign owned large businesses and the domestic micro and small firms (Szerb and Ulbert 2002). Major (2002) recognized efficiency problems not only in the micro but also in the medium size businesses sector. Presently, there is only one published study that aimed to identify the factors of growth in the SME sector. Szerb and Ulbert (2006) applied the OLS stepwise regression method to identify the significant factors of business growth. However, the different dependent variables of growth are mainly influenced by different independent factors. Most observed outcomes corresponding to previous empirical results and the alterations are explained by the limited market economy experience and the transitional nature of Hungary. Business behavioural factors of investment, technology development, export, organizational change and strategic orientation are found to be the major determinants of business growth. Personal behavioural features like ownership experience in other businesses as well as business size, age, legal form, the number of founders and foreign owners are significant but less important determinants of growth. Szerb and Ulbert (2006) also examined the connection between growth and innovation. While it can be expected that innovation affect business growth positively, the innovation activity of the Hungarian small business sector is generally weak. Most small firms introduce only marginally new products or technology. The majority of innovations are only an improvement of existing products or technology. They are barely enough to maintain competitive position and not sufficient to induce substantial growth. Szerb and Ulbert (2006) presents mixed evidences about the influence of innovation on growth. While both product and technology innovations influence growth (both turnover and employment) positively and significantly, the stepwise regression outcome implies that product innovation is less important, insignificant factor of growth while technology innovation is vital for employment growth as well as when growth is measured as a composite factor. While the above findings corresponds well to our existing knowledge on the Hungarian SME sector growth and innovation potential, the results and the applied method are questionable. The OLS regression requires the independences of the right hand side variables, while it is clear that most of the in6

fluential variables of business growth do correlate to one another causing multicollinearity problems3. Moreover, the nonlinear effect of the variables on the business growth can also be expected, that, again, questions the reliance on any regression method. Another problem is the potential lag and causality effect between innovation and growth. Since it takes some time for the innovation to have an effect on growth, growth and innovation activity data are from the same time period. Moreover, it is not clear that innovation precedes growth, it may happen that growth either negative or positive requires innovation effort. In the following analysis I am trying to handle these problems by applying cluster analysis technique that is not sensitive to the above problems (except causality).

3. Survey and sample description The basis of my investigation is a representative sample containing 502 SMEs in partnership forms, established in 2004 or earlier. These businesses were randomly selected in a list containing 10 321 SMEs. In order to avoid a large number of very small businesses the sample is stratified according to size: Only those businesses are included that have at least two employees, or in other words one employee besides the owner. The survey was executed in 2007 between March and June. The time span of the investigation is the 2003-2006 time period. The following table shows the distribution of the sample in terms of the size of the businesses compared to the 2004 official statistical data. Table 4: The sample size and breakdown by business categories As a percentage of 2-249 businesses

Sample size

Size category

Number of business units 2004*

Sample size/ number of businesses (%)

2-4 employee

153 848

67,41

136

0,088

5– 9 employee

39 613

17,36

133

0,336

10–19 employee

18 170

7,96

102

0,561

20–49 employee

10 636

4,66

80

0,752

50–249 employee

5 028

2,20

51

1,014

228 241

100,00

502

0,220

Sum

*Source :Central Statistical Office: Business demography 2004, Budapest, p. 17.

The survey consists of six blocks: Basic data, establishment, strategy, future growth, finance, personal characteristics. Innovation is included in the strategy block. Previous surveys of innovation activity, including Inzelt and Szerb (2006), applied an older modified version of the EU/OECD harmonized Oslo Manual and the Frascati Manual which focused on technological - product and process - innova-

3

To be fair, Szerb and Ulbert (2006) checked out multicollinearity but did not find it to be significant. However, the application of any regression when multicollinearity is theoretically present and the connection between the influential independent variables is vital is not really proper.

7

tion. In this survey, we rely on the newer version of the Oslo Manual (version 3), which incorporates other types of innovation: organizational innovation as the change of the organizational structure and marketing innovation as the application of new marketing methods (Oslo Manual 2005). Marketing innovation is measured as the penetration of new markets or market segments. Table 5, below, shows the innovation activity of the sample businesses. A note that I measure the engagement of innovation activity and not introduced (finished) innovations. Table 5: The number and types of innovation in different size categories Types of innovation based on the intensity of innovation effort (intensive or very intensive are calculated)

Business size in 2003

2-5 employee

Innovation

Product

Technology

Marketing

Organizational

(any)

innovation

innovation

innovation

innovation

49 Percentage

6-9 employee

35 36,0

43 Percentage

10-19 employee 20-49 employee

25

17

193

150 38,5

28,8

25,5

16,3 7

33,3 130

20,5

12,8 13

17

103 29,9

13

23

13

7,5

31,4

21,3

33,3

10

32

17

1,5

22,6

29,4

28,8

49,0

30

30

23

2 20,6

17,3

33,3

38,8

Percentage

23

34

31

28 14,7

23,3

49,0

Percentage Sum

31

50

Percentage 50 - 249 employee

25,7

32,3

Percentage

20

13,7 45

25,9

9,0

Based on table 5, 38,5% of the businesses engaged in innovation in the 2003-2006 time period. Most businesses made effort to introduce product (29,9%) and marketing (25,9%) innovations, but only 20,5% tried to innovate new technology and 9% changed the organizational structure. The percentage of the innovative businesses in terms of the size of the business shows some deviations as compared to previous studies: Out of the 6-9 and of the 20-49 size businesses only 32,3% and 38,8% engaged in innovation, while a higher percentage of the businesses with 2-5 employees (36,0%) and with the 1019 employees (49%) innovate. The growth of the business is calculated in two categories: the increase of the number of employees and of the real turnover over the 2003-2006 time period. Growth rates are calculated as the slope of the regression line over employment and sales following Weinzimmer et al (1998) and Szerb and Ulbert (2006). This method has an advantage over the absolute and the relative as well as the Birch-index because it takes into consideration not only the starting and the ending points but also the potential ups and downs over the whole 2003-2006 time period. Table 6 reports these growth rates in three categories, positive, zero/close to zero in the case of sales and negative ones.

8

Table 6: The growth of employment and of real sales in different size categories Size of business 2-5 empl. % 6-9 empl. % 10-19 empl. % 20-49 empl. % 50-249 empl. % Total

Increase in employment +

0

-

Total

+

~0

-

Total

17

91

28

136

37

45

53

135

12,50

66,91

20,59

27,41

33,33

39,26

49

49

35

50

35

48

36,84

36,84

26,32

37,59

26,32

36,09

49

28

25

47

8

45

48,04

27,45

24,51

42

21

17

52,50

26,25

21,25

30

8

13

58,82

15,69

25,49

187 %

Increase in real sales

37,25

197 39,24

118 23,51

133 102

47,00 80

36 45,00

51

27 52,94

502

197 39,48

8,00 6 7,50 4 7,84 98 19,64

133 100

45,00 38

80

47,50 20

51

39,22 204

499

40,88

Regarding employment growth most businesses did not change employment (39%), 37% increased, and 24% decreased employment. However, there are high variations in different business categories: Around two-third of the 2-5 employee firms neither hired nor fired, 20-49 and 50-249 size businesses increased their number of employees. Similar tendencies can be seen in the case of real sales: The smallest businesses stagnated and the larger size firms increased sales. However, it was the largest share of the 10-19 and of the 50-249 size category businesses that lost real sales implying increased competition where winning or losing was typical and remaining on the same level was relatively scarce. Let us connect now growth (real sales) and innovation in the different size category businesses. According to table 7, the highest the share of innovating businesses (48%) is when real sales grow positively in every size of business category, as expected. However, relatively more businesses are innovating when real sales are negative as compared to stagnating businesses, that is opposite to our believes. The connection between present real sales growth and innovation is not linear but quadratic. The differences are the most significant in the small businesses employing 10-19 and 20-49 employees. A potential implication of this finding is that most stagnating businesses do not innovate then after a few years when sales decline begin to innovate to increase sales. There is also a higher probability that the success rate of the late innovation is lower as compared to the other cases when innovation begins when sales are going up.

9

Table 7: The connection between innovation and growth of real sales in different size categories (as a percentage of the innovating businesses) Any Innovation

Product innovation

Technology innovation

2-5 empl.

45,95

32,43

21,62

29,73

0,00

6-9 empl.

34,00

22,00

14,00

24,00

8,00

10-19 empl.

61,70

40,43

36,17

40,43

14,89

20-49 empl.

47,22

36,11

25,00

36,11

22,22

50-249 empl.

55,56

48,15

29,63

37,04

18,52

Total

48,22

34,52

24,87

32,99

12,18

2-5 empl.

33,33

22,22

8,89

15,56

2,22

6-9 empl.

37,14

28,57

28,57

25,71

8,57

10-19 empl.

12,50

0,00

12,50

0,00

0,00

20-49 empl.

0,00

0,00

0,00

0,00

0,00

50-249 empl.

50,00

50,00

25,00

25,00

25,00

Total

31,63

22,45

16,33

17,35

5,10

2-5 empl.

32,08

24,53

15,09

18,87

1,89

6-9 empl.

27,08

20,83

12,50

18,75

6,25

10-19 empl.

44,44

33,33

26,67

28,89

13,33

20-49 empl.

36,84

26,32

21,05

26,32

13,16

50-249 empl.

40,00

10,00

20,00

30,00

5,00

Total

35,29

24,51

18,63

23,53

7,84

Size of business

Positive growth

Stagnation

Negative growth

Marketing Organizational innovation innovation

If this can be true in other country SMEs , then this may explain, at least partially, the weak connection between innovation and business growth found in some empirical studies. In our case the correlation coefficients between real sales growth and innovation is below 0,1 and insignificant. 4. Analysis As I described in the introduction, most empirical analyses, including my co-authored article, about business growth and innovation applied some regression technique that I considered to be inappropriate to investigate the firm innovation-growth phenomenon. The examination of the present sample characteristics reinforces these doubts. In order to avoid multicollinearity, nonlinearity and causality problems, the cluster analysis technique, that groups together businesses that have similar features, is applied. The eight group classification results are presented in table 8.

10

Table 8: The classification of the sample businesses by cluster analysis Clusters Number of firms The size of business in 5 categories Increase of the number of employees 2003-2006 3 categories Increase of the real sales 2003-2006 3 categories Planned increase in real sales over the next 3 years 3 categories Planned increase in the number of employees over the next 3 years 3 categories Engagement in product innovation in 2003-2006 3 categories Engagement in process innovation in 2003-2006 3 categories Engagement in organization innovation in 20032006 3 categories Engagement in marketing innovation in 20032006 3 categories Innovation budget in 2003-2006 in 4 categories Number of owners at establishment 4 categories Geographic extension of sales Size of product diversification based on 4 level industry classification Size of real investment in 2003-2006 4 categories Age of business in 4 categories

1 93 1,58

2 79 1,68

3 73 1,44

4 48 2,81

5 51 3,43

6 51 3,43

7 55 3,93

8 43 3,98

2,38 2,35

1,68 1,71

1,85 2,05

1,92 2,21

1,59 1,31

1,75 2,18

1,36 1,87

2,14 2,33

0,47

2,33

0,55

0,50

2,27

0,53

2,25

0,91

1,22

2,19

1,22

1,17

2,51

1,20

2,51

1,47

0,10

0,33

0,23

1,04

1,29

0,14

0,09

0,21

0,09

0,25

0,11

1,02

0,75

0,10

0,07

0,12

0,01

0,09

0,03

0,27

0,43

0,04

0,00

0,07

0,14 0,16 2,39 2,10

0,32 0,30 2,14 2,28

0,15 0,10 1,90 1,78

0,96 2,92 2,35 2,52

1,12 3,02 2,27 2,73

0,12 0,02 2,51 2,49

0,18 0,09 2,42 2,40

0,16 0,05 2,63 1,51

1,20 0,83 3,71

1,29 1,24 1,90

1,34 0,47 2,22

1,17 1,71 3,56

1,47 2,29 3,06

1,27 2,20 3,31

1,45 2,36 3,44

1,56 0,26 3,56

All 15 variables are found to be significant at a 0,001, except diversification that is significant at the 0,05 level. Out of the 15 variables there are four growth (two present and two future), and five innovation related variables. Besides the size of business, there are the control variables of age, diversification, number of owners, geographic extension of sales as well as the magnitude of investment. In the following analysis I focus on the growth-innovation connection analysis with respect to firm size, and just touch the potential connection to the control variables. Cluster 1 consists of 93 mainly micro-size, old firms, established in the late 1980s. In the examined 2003-2006 time period they increased both sales and employment, but in the following three years they do not plan to grow. The source of the growth in the examined time period was not really known since they did innovate almost nothing and the level of investment was also very minimal. The cluster 2, 79 businesses are about the same size as cluster 1 ones, but they are much younger, established in the early 2000s. In the examined 2003-2006 time period their growth rates were moderate but in the following three years they plan to increase both sales and employment. However, their innovation activity, innovation budget and investment were relatively low. The 73, relatively young cluster 3 businesses are the smallest amongst the eight clusters. They increased sales in the 2003-2006 time period but they plan very minimum further enlargement. Similar to the two previous clusters they did not innovate and invest almost anything. They seem to focus on keeping their present costumers rather than increasing employment or sales.

11

The 48 cluster 4 old businesses are mainly small firms having 6-19 employees. They increased the number of employees moderately, but real sales raise were not bad in 2003-2006, and they plan to follow this strategy over the following three years. Their overall innovation effort was the second best amongst the eight clusters. The most innovation efforts were made by 51, cluster 5 businesses where the size of the firms were dominantly 20-49. These businesses looked that they increased both employment and sales very moderately in 2003-2006 but they should plan strong increase in both categories in the following three years. Besides innovation they invested the most. These businesses seem to be the late wakers to change the stagnating or declining trend of business growth. The 51 cluster 6 and the 55 cluster 7 firms are very similar to each other, there are only a few differences between these two groups: They are old, relatively large firms engaging and spending innovation only a little. One notable difference that cluster 6 businesses had stronger growth in 2003-2006 and did not really plan further growth, while cluster 7 firms had lower growth in the previous time period but planned increase sales and employment in the flowing three years. One potential source of growth was investment, probably expanding existing production capacities. Cluster 8 businesses are the largest and the oldest in the data set. While their employment and growth was good in the 2003-2006 time period they did not plan to increase this expansion in the following three years. The source of growth was most likely a previous time period investment and innovation, but both innovation and investment was minimal in 2003-2006. Probably they can see the future as very uncertain, and trying to concentrate on maintaining their position rather than boosting growth. Taken together, only cluster 4 and 5 99 businesses, around 20% of the whole firms engaged acceptable innovation strategy. However, the aim of cluster 4 businesses is mainly to maintain competitive position (late innovation) while cluster 5 businesses plan further growth. A seemingly interesting characteristic of clusters 2 and 7 firms is the planned growth without innovation effort, relying only on investment.

5. Summary and conclusion Despite the high interest amongst scholars in innovation related topics our knowledge is still limited about the innovation strategy of small businesses especially in the micro size category. The connection between innovation and growth is ambiguous, various investigations have contradictory results. Although, we do know that innovation activity increases with the size of the business. Moreover, most small business innovation just only marginal improvements of already existing product or technology, therefore instead of R&D, absorption capacity plays the key role. My examination based on a representative survey sampling 500 Hungarian SMEs having at least two employees. The connection between innovation activity and growth was in the centre of interest. It cleared up that the connection between business growth and innovation is not linear but quadratic 12

that raises the problem of causality. It means that stagnating business have the lowest level of innovation activity, and both negatively and positively growing businesses innovate more. This phenomenon was the most prevailed in the 10-19 and the 20-49 employee business size categories. A potential implication of this finding is the lack of future strategic focus: Some mall business owners do not innovate until they can maintain their level of sales. They do start innovating when growth begins to decline. The interrelation between growth and different innovation activities were further examined by cluster analysis. We could recognize a very contradictory picture. Only two cluster businesses, about 20% of the whole sample that could be considered as innovative, however the business attitudes toward growth were ambiguous. There were some businesses aiming to grow without innovation and investment, and there was a cluster of firms where innovation served only to maintain competitive position. Unfortunately, my analysis is proper only to raise more questions and doubts about the connection between growth and innovation in the small business sector. The clarification of the connection between innovation to other strategic variables and ultimately growth remains to further researches. References Acs, J. Z. - Audretsch, D. 1988 Innovation in Large and Small Firms: An Empirical Analysis, American Economic Review, Vol 78 no 4, pp 678-690 Acs, J. Z. - Audretsch, D. 1990 Innovation and small firms, Cambridge, Mass.: The MIT Press, Acs, J. Z. - Audretsch, D. 2005 Entrepreneurship, Innovation and Technological Change, Discussion papers in Entrepreneurship, Growth and Public Policy, Max Plank Institute of Economics working paper series Acs Z . J. - L. A. Plummer 2005 Penetrating the ``knowledge filter'' in regional economies, Vol. 39, 3 pp. 439-456 Arrow, K. J. 1962 The Economic Implications of Learning by Doing, Review of Economic Studies, Vol. 29, pp. 155-173. Autio, E. [2005 Report on high-expectation entrepreneurship, downloaded from: www.gemconsortium.org Accessed at 24.01.2006 Baumol, W. 2002a Entrepreneurship, Innovation and Growth: David –Goliath Symbiosis http://www.econ.nyu.edu/user/baumolw/sfg.pdf Accessed at 29.03.2007. Baumol, W. J. 2002b The free-market innovation machine: Analyzing the growth miracle of capitalism, Princeton: Princeton University Press Birch, D., (1987), Job Generation in America, the Free press, New York Brown, A 2002 New product development processes in small and medium-sized enterprises: Some Australian Evidences, Journal of Small Business Management 40(1), pp. 27–42 Carlsson, B – Z. J. Acs - D. B. Audretsch - P. Braunerhjelm: 2007 The Knowledge Filter, Entrepreneurship, and Economic Growth, Jena Economic Research Papers 2007-057 Damanpour, F. - J. D. Wischnevsky 2006 Research on innovation in organizations: Distinguishing innovation-generating from innovation-adopting organizations, Journal of Engineering and Technology Management, Volume 23, Issue 4, December 2006, Pages 269-291 Dodgson, M. – R. Rothwell eds. 1995 The Handbook of Industrial Innovation, Edward Elgar London 13

Etzkowitz, H. - L. Leydesdorff 2000 The dynamics of innovation: from National Systems and “Mode 2” to a Triple Helix of university–industry–government relations, Research Policy Volume 29, Issue 2, February 2000, Pages 109-123 Edquist, C. (1997): Systems of Innovation. Technologies, Institutions and Organisations. London & Washington: Pinter Publishers Fagerberg, J. - DC Mowery, RR Nelson 2005The Oxford Handbook of Innovation, Oxford University Press Freeman, C., 1988, The Economics of Industrial Innovation, 2nd edition, London: Pinter Freeman, C. (1994): Innovation and Growth. In: Dodgson, M. – R. Rothwell (eds): The Handbook of Industrial Innovation. London: Edward Elgar: 78-93 Godin, B. 2006: The Linear Model of Innovation, Science, Technology & Human Values, Vol. 31, No. 6, pp. 639-667 Halpern, L. – Kőrösi, G. [2001]: Efficiency and market share in Hungarian corporate sector. The Economics of Transition. Vol. 9. No. 3. p. 559–592. Inzelt A – L. Szerb 2006 The innovation activity in a stagnating county of Hungary, Acta Oeconomica Vol 56 no 3. pp. 279-299 Jávor I. – Rozgonyi T. 1995: Vállalkozás, vállalkozásfejlődés, vállalkozástörténetek. Társadalomkutatás. Vol.13 No. 3–4. p.222–239. Kaldor, N. – J. A. Mirrlees 1962 A New Model of Economic Growth Review of Economic Studies 29 pp. 174-192 [KKV szektor…2006] A KKV szektor feltérképezése az infokommunikációs szektorban, KOPINTDATORG jelentés, Budapest Laki M. 1998 A magánvállalkozások növekedési esélyei Magyarországon. Külgazdaság. Vol. 42 4. p. 41–54. Lankhuizen, M - R. K. Woolthuis 2003 The National Systems of Innovation Approach and Innovation by SMEs, EIM Research Report H200309, Zoetermeer, November 2003 Lucas, R. E.(1988), “On the Mechanics of Economic Development,” Journal of Monetary Economics, 22 (1), 3-42. Lundvall, B. A. (1992): National Systems of Innovation. London: Pinter Publishers Major I. 2002: Miért (nem) sikeresek a magyar középvállalatok? Közgazdasági Szemle. Vol. 49. No. 10. p. 993–1014. Nelson, R. (1993): National Innovation Systems. A comparative Analysis. Oxford: Oxford University Press. Oslo Manual 2005 Guidelines for collecting and interpreting innovation data : The measurement of scientific and technological activities / by: European Communities Statistical Office, Organisation for Economic Co-operation and Development. - 3. ed. - Paris : OECD 2005. Papanek, G 2005 A vállalkozások intézményi feltételei Magyarországon, Fejlesztés és Finanszírozás, 2005. 3. sz. 3-13. oldal. Parker, S.C. - D.J. Storey – A. van Witteloostuijn 2005 What happens to gazelles? The Importance of dynamic Management strategy, Working paper downloaded from http://www.dur.ac.uk/resources/dbs/businessschool/research%20paper012.pdf, accessed: 23.01.2005 Román, Z 2006: Small and medium-sized enterprises and Entrepreneurship, Hungarian Central Statiscical Office, Budapest 2006 Romer, P. 1990 “Endogenous Technological Change,” Journal of Political Economy, 98 (5), 71-102. 14

Rothwell, R 1992 Developments Towards the Fifth Generation Model of Innovation, Technology Analysis & Strategic Management; Mar1992, Vol. 4 Issue 1, pp73-75 Rothwell, R – M. Dodgson (1991) External linkages and innovation in small and medium-sized enterprises R&D Management 21 (2) , 125–138 Rothwell, R., 1989, “Small Firms, Innovation and Industrial Change”, Small. Business Economics, 1, pp. 51–64. Rothwell, R. (1994), "The changing nature of the innovation process: implications for SMEs", in Oakey, R. (Eds),New Technology-Based Firms in the 1990s, Paul Chapman, London, pp.11-21. Rothwell, R. (1986): The Role of Small Firms in Technological Innovation, in edited Curran, J et al. The Survival of the Small Firm Gower Schumpeter, J. 1934: The Theory of Economic Development, Cambridge, Harvard University Press 1934 Solow, R (2000) Growth Theory An Exposition Second Edition, Oxford University Press United Kingdom Solow, R. M.1956 “A Contribution to the Theory of Economic Growth,” Quarterly Journal of Economics, 70 (1), 65-94. Szerb L. (eds) 2005: Vállalkozásindítás, vállalkozói hajlandóság és a vállalkozási környezeti tényezők alakulása Magyarországon a 2000-es évek első felében. (Business start up, entrepreneurial attitudes and entrepreneurshial environment in Hungary in the first part of the 2000s) University of Pécs Szerb L. – Z. J. Ács – Bedőné Károly J. – Csapó K. – S. Terjesen - Varga A. – Ulbert J. 2006: Global Entrepreneurship Monitor (GEM) 2005 - A vállalkozói aktivitás és a vállalkozást befolyásoló tényezők alakulása Magyarországon az Európai Uniós csatlakozás után, (Entrepreneurial activity and its influencing factors in Hungary after the EU accession) University of Pécs Szerb L, – Ulbert J. 2002 Entrepreneurial Growth and the Role of Venture Capital, in Varga –Szerb (eds) Innnovation Entrepreneurship and Regional Development, PTE 2002 Weinzimmer, L. G. – Nystrom, P. C. – Freeman, S. J. 1998 Measuring organizational growth: Issues, consequences and guidelines. Journal of Management. Vol. 24 No. 2. p. 235–262

15

The Transactional Imagination: Founder entrepreneur, micro-foundations and macro-structures

Simon Tam Founder Director, ICO Group, Hong Kong

Abstract This paper reports on the results of two entrepreneurial experiments and discusses how knowledge creation in between could make the difference between venture death and venture success. The first experiment has ended in failure. The search for knowledge which might turn failure into success has uncovered a theoretically uncharted space in the fields of strategy, management, organization and entrepreneurship. This space is transactional innovation. Knowledge gained from field research to fill that space has yield findings which argues for the need to re-conceive the nature of a firm, re-define the roles of founder entrepreneurs, and re-create knowledge tradition based on micro-foundations, actor dependent causalities and macro-structures. The usefulness and relevance of these new conceptualizations are then put to test in the second experiment. The second experiment, while still in progress, has already had three years of resounding success.

Introduction: The calling Enterprise formation is in the business of procreation. The founder entrepreneurs are entrusted with that task. In turn, market economies have entrusted the founder entrepreneur with the procreation of their future. The statistics is not good in this regard. Fifty percent of the new born enterprises die within two years, and 90 percent of them die within ten years. Obviously these founder entrepreneurs need help. The venture capitalists are the first to come to help. (Ante, 2008) But the numbers that these venture capitalists could assist are extremely limited, when measured against the total number of firms given birth to every year. Obviously there is a need for more pervasive help, and this is where the academic world could play a part... What is it that the academic world could do that even venture capitalist could not do? How can the academic world make itself relevant and useful to the founder entrepreneurs? The answer is: theory. “There is nothing more useful than a good theory”, as Kurt Lewin used to say.

Most of the founder

entrepreneurs act without good theory. Most of them are running blind, without sound interpretative

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schemes and intervention theories. By theory here we concur with what Weisbord says: “A theory is not a method. It is a way of interpreting reality that helps you act with more certainty” ( Weisbord). This paper firstly reports on the failure of an entrepreneurial venture, launched in part under the aegis of the Nature of Entrepreneurial Work Research Program at the University of Hong Kong. While attempting to save this venture, a search for relevant and useful knowledge in existence to guide the effort has ended in vein. The poverty such knowledge for the entrepreneurs locked in the founding process had come to be acutely felt. The most critical missing piece is the lack of perspectives and paradigms on the transactional space and how entrepreneurs could act with them and within it to ensure venture survival and prosperity. This triggered off a new field research initiative on the side, through participant observation. The finding of this initiative has resulted in a new way of conceiving the nature of the entrepreneurial firm, of the roles of founder entrepreneurs, and of the types of entrepreneurial competencies needed to facilitate the earning of the birth right for a new born enterprise. This new set of hypotheses is then used to guide the founding of another entrepreneurial venture. This second new venture has not only earned its birth right, but is now well on the way to move to newer height. The paper will share this experience and these new conceptualizations. It ends with a calling for more research into the transactional realm, an area critical to the life and death of enterprises. The experimental phase of the Nature of Entrepreneurial Work Research Program A fascination with what the entrepreneurs really do in order that they could achieve phenomenal success has led to a life-long research program. This program has led to a typological understanding of entrepreneurial work. ( Tam, S. 2002) When the theoretical yield of participant observation was found to be approaching a limit, a decision was made to change the research strategy. The researcher had resigned from the University of Hong Kong, to be fully engaged in entrepreneurial work, from there to see if new insight into the entrepreneurial processes could be realized in the course venture experimentations. One of the gaps of knowledge which the researcher had not been able to gain access to is a consequence of the research method adopted in phase one. Very little could be learnt through participant observation about the early enterprise formation period. This is because the researcher had invariably arrived at sites at a stage when the company’s existence is already assured and assumed. We learnt that each of the successful enterprises has evolved its unique formula of success, and we could understand that these formulae fall into types and obey hidden evolutionary and systemic order. But as a rule the process of searching for the formula has been based on self reported data, without the researcher’s involvement or presence. Such lack of solid knowledge will prove to be fatal when the researcher entered into the phase of experimentation. Conducting venture creation experiments will thus enable the researcher to go through the initial stages of a firm’s existence, before the realization of its formula of success. This would help us unearth and understand the pre-conditions, if any, for subsequent success.

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On the one hand, conducting entrepreneurial experiment is an expensive endeavor, and could bring risks to whoever is committed to this exercise. On the other hand, without direct involvement, research yield might only stay skin deep. To overcome the accessibility problem, the researcher decided to enter into ventures himself. Essentially this means that there is a social scientist willing take on the role of an entrepreneur, through such involvement to see what entrepreneurial work is really like, from the inside out, rather than from the outside in. He is switching from being an observer to being a participant. Prior to this, the researcher has invested and co-founded an information technology business in Hong Kong. Over the years, it has evolved into a stable core business. It now comes to a stage when it could be restructured to become a holding company, in preparation for experimentation with new business formation around the core. That is the background to a series of venture experiments. Two of these experiments will be reported here. Entrepreneurial Experiment One The first experiment has involved a formation of a business related to the IT base.

One of the

projects which the mother company is engaged in has entailed an outsourcing arrangement with a Guangzhou data entry operation. The original data were scanned and shipped from Hong Kong via Internet to GZ for processing, the output was then returned to Hong Kong via the same electronic channel. It was then realized that if this could be done between Hong Kong and GZ, then theoretically this could be done between US and China. A business concept was thus born, to capitalize on the wage differential between the United States and China. The coming together of two groups of entrepreneurs, one from the US and the other from HK (the original founders of the holding company) resulted in a fifty-fifty joint venture. There is to be a separation of duties between the two teams, one is to do with the securing of outsourcing contracts from United States companies, and the other is responsible for the production and delivery part of the contracts in China. The original production site has already been set up through outsourcing in GZ, providing service to Hong Kong. So what is required is a matter of gearing this facility up so that it could provide service in English and directing the service to the US market. Formerly it is providing service in Chinese. The operation was already quite sizable and has stable contracts from Hong Kong that will sustain a core of staff for the coming few years. Running into problem and the search for solutions While the China side is running in a stable path because of the Hong Kong contracts, the US side soon had their hope of securing contracts frustrated. There were a lot of set backs. One by one, those potential clients as listed in the original business plan projection had politely declined our offers. There were 3

occasional interest shown, as indicated by the number of pilot and one-off projects, but most had not materialized into sizable contracts. There was a frenetic rush to find solutions. Change of targeted industry was one. Change of targeted geographical territories was another. Growing into new business networks was the third. We began to eliminate more and more possibilities for lack of breakthrough through trail and error, until we come to realize that it might be our lack of marketing and sales competencies that could be the source of the problem. We began to engage marketing expert in the US to advice on go-to-market strategies. Then we began to experiment with employing professional salesmen in US one after another. One pivotal turning point happened when the researcher went to see the top management of a leading company in Dallas, and along with my partners, explained the huge benefits of outsourcing to China. Within a week we heard from that company that they will be giving us a contract. If we were able to secure that contract, this will require us to scale up our operation in China ten times over within three years. The whole team was elated and the researcher returned to China to make preparation for the expanding volume of work. We eventually failed to secure that contract. We began to realize that for a complex sales situation, just employing one or two sales professional would not be enough to cover the vast decision making trees participating as a matter of routine. The whole entrepreneurial team would need to be engaged in the transactional act as well. We decided to battle on in spite of this huge set back. The discovery of a theoretically uncharted space While all the above were going on, just as everyone in the team did, the researcher on this end was desperately trying to make sense of this impasse. Being an academic by training, one of the actions taken was to see if the academic literature has anything to say about this phenomenon. It was at this juncture that the barren knowledge landscape on the relationship between entrepreneurship and transactional performance was first coming into view. This poverty of academic interest in the transaction arena is surprisingly pervasive, and this is the case across the fields of strategy, management, organization, entrepreneurship and even within marketing. This is strange, when one of their sister disciplines, economics, has completely constructed the core of the discipline around supply and demand (mainstream economics) and around transactional cost (institutional economics). “In virtually all discussions ( ), the sale process is the missing piece of the puzzle. Whether you’re looking at Business Week or an in-flight magazine or the latest report form the Harvard Business School, the world of sales and sellers is conspicuous by its absence. It is strange but true. Even though every business would stop dead in its tracks without the sale revenue, the sales process is never discussed in the same breath—or, for that matter, in the same room—as the “strategic” contributions of senior management” ( Sanchez et al. 1997, 5)

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“In the business literature, on the corporate organization chart, and in the traditional mind-set of most senior managers, sales and management are viewed as separate entities, and there’s little question about which is more important. “ Serious” decisions are made by senior management. The sales force might pump the gas, but it can’t drive the car” (ibid, 6) This lack of managerial attention might have also affected our academic focus in subtle ways. As a result founder entrepreneurs are suffering from the poverty of understanding of what it is and how it is done, and what kind of innovation potentials exist within that space. There is a complete lack of documentation on the inner secrets of how to bring about transactional breakthroughs imaginatively. The lack of systematic knowledge and theories on transaction The underestimation of the importance of transactional knowledge, competencies and imagination to entrepreneurial success is producing repercussions in the educational and training arena. This attitude has resulted in a complete lack of theory. In a typical MBA program, the topic of sales are usually relegated to a minor section within marketing, and one would be lucky to find a few passing remarks about sales management. In executive seminars, the issue of buying and selling is usually covered by the sharing of experience with veteran sales professionals, and their experience rarely got distilled into theories by academics. Academics tends to see sales activity as something that exist beneath the managerial level, something far removed from the strategy making role of directors, something that could be considered solved by the time the executive audience comes for professional upgrading. Why this lack is particularly serious for the entrepreneurial venture But transaction is something that makes or breaks a company. The continuing under development of knowledge, competencies and theories can be costly. For an entrepreneurial venture, nothing happens unless one can make a sale. And suffering from the liability of newness, having to make a deal without a brand, without track record, without client reference, without industry reputation could be a daunting challenge. The future of market economies is based on new venture success, and we just throw these adventurers into the water to see if they could swim. Transactional success is the entry ticket to the market. It is the act of earning the birth-right for the venture. What kind of theory do founder entrepreneurs want? The theoretical payoffs for sustained effort in entrepreneurial research could be substantial. We learnt from the findings of the Nature of Entrepreneurial Work program that there are definite ways for entrepreneur to make impact to the world as well as to make impact to the firm. We understand that to obtain superior rewards it requires the actor to be in tune with the underlying logics in the system, a distinctive entrepreneurial universe. The opportunity to magnify the impact of one’s talent 5

through mechanisms does exist, because there are mechanisms for multiplication inherent within the market system, and are open to those who could decipher the rules. These vehicles for multiplication come in various forms. An entrepreneur could exercise pervasive impact through innovations in product (as Steve Jobs), in process (as Henry Ford), in sourcing (as Mikimoto) and in distribution (as Richard Sears), through leveraging market forces (as Warren Buffet), through exploiting state-market difference (as Soros), through political relations (as Schindler), through resource re-configuration and re-deployment (as Iacocca). Each of these vehicles, when married to the right contextual shifts, produces quantum jump in performance. When these separate types are put together, a view emerges in which the actors, the multiplication mechanisms, the interpretative orientations, the profit logics, the contextual shifts, the causalities are all inter-linked functionally to form a coherent, self-organizing, and recurring universe.( Tam, 2002) With this background it would be possible for us to advance a view of participant reconstruction, a view which resonant with the calling for micro-foundations, actor dependent causalities and macro-structure. Commenting on the failure of the dominant literature to incorporate the role of the actor, and how the actor could impact on the larger entities, a few fellow academics have expressed grave concerns about the practical relevance of such form of theory building: “We are worried that the absence of micro-foundations in the capabilities view (the dominant view in strategic management) may contribute to the disappearing mandate for strategic management. In other words, the possibility of strategic action might become obscured by a firm emphasis on firm level constructs, such as routines and capabilities. It would often seem critical to management scholars as well as strategic managers to understand and to be able to impute actions to individuals, rather than to collective variables. And if indeed routines and capabilities are meaningful variables, both management scholars and strategic managers should take an interest in the micro-mechanisms through which they assert their influence on firm performance. Performance improvement might come about not by selecting new routines and capabilities, but also through changing and influencing the micro-mechanisms through which routine work their influence on performance” ( Abell et.al, 2007) The academic mandate in the eyes of the founder entrepreneurs could be regained. In this connection, we see the study of founder entrepreneurs as providing a natural fit for this advocated line of research pursuit. The nature of founder-entrepreneur’s work demands theoretic insights that bridge the micro with the macro, insight that could inform actors on how to interpret and intervene to bring about venture survival and performance. a) Founder entrepreneurs, as micro-actors, are being asked to create macro-structures from ground zero. They need to be the originator of routines and capabilities, among other things. b) Founder entrepreneurs, as micro-actors, need to be armed with knowledge of actor-dependent causalities, so that the job of firm creation could begin with conscious understanding. Given the open-ended nature of firm creation, blind search could be very costly. c) For founder entrepreneurs, performance separates life from death. It is important that they be well informed on the underlying causalities which could bring about the right kind of performance.

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With the current state of literature at hand, we do not know enough about the roles of the founder entrepreneurs. Within the entrepreneurial studies literature, there have been a lot of studies on the personalities, rather than the work roles, of the entrepreneurs. We do not know what special competencies, if any, are needed to fulfill the requirement of this daunting jobs of bringing a firm from concept to life, what sort of causalities one could leverage on to ensure the survival of the firms, and what kind of knowledge would be most useful to the task at hand. Yet this sort of understanding is mission critical. What should we be looking for? We learn from the first phase of our research program that it is possible to systematically understand entrepreneurial roles, which could be typologically segregated. We also understand that these roles are stable, recurring and orderly because entrepreneurial performance is tied to market mechanisms. There are only limited ways that the market mechanism could rewards the entrepreneurs. Once we know that entrepreneurial role systems are recurrent and stable, it would be meaningful for us to move on to the next stage of refined understanding. We could start learning how as actors they could influence the development of the firm. A firm is a socially constructed entity and as leading actors founder entrepreneurs need to know what need to be constructed and how to influence that construction in order that a venture could earn its entry ticket. . We understand that entrepreneurial interventions are triggered by how the realities are interpreted. And these interpretative schemes are typologically bounded. Different types of entrepreneur’s functions within different types of realities. Within each type of reality, founders are responsible for the generation of the interpretative schemes, to ensure a unique approach to the reality for advantage. A market forces player would need to devise an interpretative scheme so that one could following the movement of the market, make sense of it in ways so that one could exploit the situation to advantage. Thus the competence to construct a unique interpretive paradigm would be instrumental to the fulfillment of entrepreneurial role (for example, Warren Buffet and Templeton). On the other hand, a product innovator would need to evolve its own ways of interpreting the changing modes and aspirations of customers, so that products that satisfy those could be designed in accordance with such reading ( for example, Steve Jobs and Ralph Lauren). It would be great if the academic world could help them do so. To regain the academic mandate, we also need to help founder entrepreneurs build theories that would enable them to perform in interactive contexts. In other words, we need to be in search of a type of knowledge which could explain and predict interactive causalities.

Consider how we could help

an entrepreneur tango with his or her competitors. Consider how we could help an entrepreneur negotiate for contracts. Game theory, negotiation theory would be example that fit into this description. While we cannot predict in advance the specific ecology this kind of knowledge will be put to use, we could predict the form that will be. Entrepreneurs as actor need to become the causal mechanisms of firm’s performance.. In this regard, we are in agreement with the micro-foundation persuasion.

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The research design While the sample base for the first phase of our research was extensive, encompassing ten industries over ten years, and hundreds of representative cases, the experimental phase will not have this luxury. What we are trying to do is to make this an exploratory, hypotheses generation exercise, in the spirit of Barry and Glazer, with regard to the discovery of grounded theory. The background is that all these experiments are stemming from the same holding company, which concentrates on large scale systems integration work. The business has been in existence for over sixteen years and has earned a strong reputation and track record with government, finance, banking, insurance, education and logistic clients. Most of these clients are either institutions serving a global city, regional firms becoming global firm, or global firms entering China. All the experimental ventures are related in one way or the other to information technology and its diverse application areas. The information technology industry is in a very advantageous position because it is penetrating into all aspects of institutions, industries, functions and levels. As such there is no shortage of new venture opportunities around the core. With this as background, all new ventures therefore are controlled experiments in a certain sense. They are all stemming from the same industry, using the same base technology, invested with the same over-seeing management from the same holding company, working in the same region, into markets with the application of IT, and all with the participation of the researcher as one of the founders in both the holding and the new ventures. With these levels of control in place, it would enable the researcher to use the constant comparative method, for hypotheses generation purpose. The in-depth involvement of researcher in this arrangement would allow him to find way to map micro-action, trace actor-dependent causalities and hypothesis on how action, interpretation and interaction could be linked to macro-structures and performance. Entering an uncharted territory With the above as the theory building ideal, and the matching research design in place, the researcher-entrepreneur will try to undertake two tasks in parallel. Most of the decisions and communication exchange are stored in files and emails, leaving traces of evidence for subsequent analysis and comparative insight generation. He can, also switch into a phenomenological mode of operation, suspending his judgment as much as possible when he entered into the exploratory act. As the Zen master once said, you have to empty your cup before we could fill it up again with fresh insight. Learning to be humble in face of the transactional challenge Repeated failures at cracking the secret codes of transactional success, by a group of very intelligent founders (some of them have achieved international repute) had led all of us into a new kind of hum8

bleness with regard to this particular profession. This experience had completely taken away whatever arrogance we might have with regard to the transactional vocation. Commenting on the management’s lack of regards for the sales function, Sanchez et.al, specialists of the sales processes, have this to say: “The people who generate the revenue are often treated like Forrest Gumps. At best, their essential work is taken for granted. At worst, senior managers view it as a necessary evil” (ibid, 6) They also quoted the work of Robert Atkins, a partner with Mercer Management Consulting, published in Business Week, as testimony: “I don’t know a lot of CEO’s who are paying any attention to their sales channels. (ibid, 6) They also tried to explain why this is so: “As dangerously counterproductive as this situation is, there are logical, or at least traditional, reasons why it exists. One is the view of the sales rep as a slick-talking con artist—the kind of character who peddles refrigerators to Eskimos. Another is the image of the rep as a shuffling Willy Loman—somebody whose main ambition is to be “well-liked” and who is rightly seen as a loser. Underlying these stereotypes is a corporate peculiarity: the fact that, with a few notable exceptions (IBM’s Thomas Watson comes to mind), CEOs and other senior managers have never done any selling themselves. Their careers started in operations and finance, and they have never been educated about what a salespeople do” (ibid, 6) Working with sales people, and venturing into taking up some sales functions by the founding teams themselves, had taught all of us, how hard it could be. The empathy was particularly strong with regard to how they need to handle rejections day in day out and still need to charge ahead with a smiling face. It is a tough act learning how to reinvigorate oneself defeats after defeats. The Puzzle But still the puzzle remained. After a few years banging our heads against the proverbial wall, we were still going no where. What does it take to close a complex deal? To us, and to the sales people that we have engaged to enter into the US market, there was an unfathomable mystery with regards to the other side of the exchange equation. There were no perspectives and paradigms which could be good enough to guide us to deal-making, to understand what potential clients really wanted and what was needed to close a deal. Meanwhile the resources for the venture were being drained away by the blind search. It was amid this crisis that a series of surprising discoveries begun to come to the fore. Series of surprising discoveries: transactional core breakthrough, transactional context re-structuring and transactional context leveraging The turning point came, after a few years of struggle in securing contract from US without success, in the form of an accidental encounter with a sales master in Hong Kong. This encounter, along with the series of interviews and observations with other masters that follows, had completely reversed the re9

searcher’s understanding of the transactional universe. Eventually a new perspective for understanding the role of founder entrepreneurs in the transactional space emerged. This new perspective will have multiple building blocks. The most fundamental part is: what does it take so that entrepreneur could make transaction possible? There in we find the unique recipe of conversion as a product of founder’s search and deliberation. Then we find that on that basis of having achieved breakthroughs again and again, the entrepreneur will usually grow in confidence and gain a sense of masterly. Over time some will move on and take up the challenge of re-structuring the context of transaction. This is a big step up because with this new framework thus co-constructed, large volume and continuous flow of contracts could be processed. Therein we see the creation of conversion mechanisms. This framework by itself might not be sufficient enough for the entrepreneur to bring in the level of certainty that would be required to push the enterprise into a firm foundation. The next step up we see the founder entrepreneurs undertaking something more abstract in nature. This is to do with the uncovering of contextual shift, the mental tracing of the demand formation mechanisms, thereby finding ways to leverage the forces in the situation. Contextual shift will push the multitude of customers into the pipelines of the firm’s conversion framework. Levels of transactional performance This series of discoveries would not be possible without first encountering a sales master. After having met with so many sales in US, and having formed a view of what sales is about, I have come to assume that complex sales must be met with a lot of hurdles, and that sales cycles must be long, and the reject rate must be around 80 to 90 percent. This sales master appeared against this background, and presented an immediate contrast. Observing how this sales master arrives at a deal is analogous to seeing how a chess master makes his moves. My first observation of him has lasted for hours, which included his explanation on how he would exhaustively prepare for the kill. After the deal has been struck, he would also explain how he did it, and why he did what during. This goes on for a few times until I got the sense of the pattern involved. The central thrust is simple. He does not sell. He would thoroughly research the possible positions of the counter part, and thought through the options of the counter-part well before the meeting. For each options he would find ways to structure a win-win structure so that the counterpart would find each irresistible. The ways he could always find a way to work out win-win structure is eye-opening, reflecting abundant resourcefulness. Should he not be able to find these structures, he would decline entering into a deal making situation. In other words, he would try to conceptually win the battle before he starts the war.

During the interaction, his mind could always work out a few

steps ahead of the counterpart, which give him ample time to cover contingencies and maintain control over the unfolding conversations. His performance is stellar. His success rate is the reverse of the norm, 80 to 90%. His presence suggests that there is an alternative way of approaching the transactional situation, a complete reversal of the way of the low performing sales. He has evolved his own perspectives to 10

make sense of his counterparts, who could come in different shapes and sizes. He has evolved schema of interactions which he could liberally deploy in different scenarios. He could thus anticipate the sales processes and work out scripts of standard response, saving energy for contingencies. He would have many win-win solutions stored in his mind so that he could mix and match, modify to fit, or redesign spontaneously around basic blueprints. The existence of this alternative means that transactional situation is open to multiple interpretations, thus making it possible for actor to exercise influence over the course of development and perhaps control the outcome. This encounter has ignited my curiosity and encouraged me to hunt for newer approaches to enhance sales performance. And there are. As more and more cases began to come in, they seem to fall into distinct categories. As far as the sample allows us to generalize, there are five levels of transactional performance we could discern. Level One refers to those founders who do not have interest in sales, those who have been mindful about the sales situations they went through, and those have not developed the requisite sensitivity to the intrigue of sale. Sale is someone else’s business. I belong to this type before I put myself through entrepreneurial experiments. Level Two refers to those founders who could not conclude deals no matter how hard they try. They might want to learn about sales but do not know how or from whom. They have not encountered sales masters, nor have they been inspired by the possibilities these master could open. They have not been able to appreciate the meaningfulness and challenge of sale. Sale is a necessary evil. Sale is a duty, and is a hurdle to be overcome so that you could then move on to the real thing. Sale performance is a chancy affair. Level Three refers to those founders who could see the meaningfulness of transaction, challenged by it, and is excited by the kill. They have developed repertoire of scripts and standardized responses to map to multiple sale situations. They could also improvise on the spot. They are passionate about the art of making deals and could read the counterpart like a book. They know how to bring deals to closure in spite of odds and perform well across a variety of customer types. They come to realize a unique approach to go beyond the hurdles and bring both parties to a deal. And the basic core of this conversion has a common form. It lies somewhere in the successful search, conception and construction of a win-win structure. Level Four refer to those founders who not only could excel in deal making. They could migrate to the entrepreneurial level and is capable of conceiving and constructing multiple and overlapping macro-structures. At the core it is an ability to dynamically construct symbiotic relationships across multiple participants in the external context and integrating them together to form durable structures, thereby forming value creation and value exchange flows. Whereas level three is more concerned with concluding single transactional deals one by one, level four is concerned with the clustering of contextual units into grand structures so that large volume of deals could flow through. Because of this,

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the difference in the level of performance between level four and three could be quantum. We will label this kind of work as context re-structuring, and illustration of how this works will follow. Level Five refer to those who not only excel in deal making and those who could construct multiple symbiotic structures. It refers to those who had developed unique perspectives to decipher contextual shifts and could find ingenious ways to leverage those shifts to couple with the macro-structures to bring in permanence, stability and growth. Again the performance difference between level five and level four is quantum, because of the rare competence to inter-relate the deal-processing mechanism to a massive demand pipeline. We will label this kind of work as contextual shifts leveraging, and illustration of how this work will follow. What separate transactional failure from transactional success: finding a unique recipe pertaining to the specific type of transactional interface The turn of fate for an entrepreneurial venture from failure to survival is finally becoming clear: the founder has to be in search of a unique win-win structure which could become the key to unlock the firm or industry specific transactional impasse. What separates the unsuccessful from successful sale lies in finding a unique way which might work the magic to overcome the specific kind of apathy, doubts, hesitations, anxieties, or whatever reasons which stop the potential exchange partner from crossing the line. The transactional impasse that we have encountered in our first entrepreneurial experiment is not unique. Consider the case of Larry Ellison, the founder of Oracle. When the relational data-base product was first present to the potential customers, it was considered a laughing stock and no body believed it could work. It was considered too much of a toy and could never become a work-horse in the enterprise computing universe. It had taken Oracle ten years of hard work and Larry’s Ellison considerable ingenuity to overcome this anxiety and doubt. ( Symonds and Ellison, 2003) The success in finding a win-win structure could be conceived as the pivotal, conversion trigger-event. How to ensure that the two parties could arrive at a win-win structure is something that is going to demand huge ingenuity and possibly conceptual jumps. This is analogous to that of a task master who needs to work with the material for a long time so that he/she could discover a special way to converting the materials into product. Beyond that point, a piece of stone will no longer remain a piece of stone for long, when it reaches the hands of Michelangelo. A hamburger is more than a hamburger when it reaches the eyes of Ray Kroc. Artistic mastery and transactional mastery are analogous. Crossing that bar is what marks the novice from the master. The following case might reveal the same difference between what separated the McDonald brothers from Ray Kroc. The case is to do with one of the founders of a global courier company. What does a courier company sells? The answer is that this is a glorified mail room outsourcing business. It involves helping companies to dispatch mails in a more efficient manner so that one could save on mail room cost. This way of conceiving the nature of this business would not be able to explain the phenomenal growth of the industry and would not be able to explain the differentiation of 12

courier companies. For after all, how could you differentiate on the basis of having the messengers running between a company and the post-office? This founder, who has a biology background, got a job in a factory in Hong Kong which required him to frequent the airport for the export of cargo. There he began to be intrigued by the inner working of the cargo and logistic world. His biological back-ground probably enabled him to construct his understanding of the logistic world in terms of ecological cycles. His entry into the courier world was by invitation of three original founders in the United States. These original founders were trying to expand their business to Hong Kong from the original base in California. He agreed to join them and started off with a modest base. He tried at first to build up his pool of contracts by providing courier service to those American banks with presence in Hong Kong, thereby capitalizing on the geographic link between Hong Kong and United State for document flow management. Progress was relatively slow. His real breakthrough had come from a new realization. He saw a new way of constructing a win-win structure at the cross-section between factory operations and banking service. He came to learn that specific to factories in Hong Kong, mostly export oriented, were in need of three sets of capital to operate. The first set was to be invested into fixed assets, including the factory premises, the machines and the like. The second set was to be put into the employment, the raw materials, in the form of circulating capital. Then there is a third set. Because output were for export, the payment cycle could not be concluded without having to go through lengthy cycles. A typical cycle would incorporate time for shipment, custom clearance, ground distribution, warehouse acceptance, and shelving into stores. The same applies to the documents that accompany the goods, having to pass the hands of forwarders, shippers, customs, ground handlers, clients, bankers. Only after all these cleared and verified will the exporters have their money back. Thus the third set could easily tie up more capital than the first two because most of the time the goods are either floating on the sea and in transit, and the document could be held up in the red tapes. Here in lies the need for a solution: if the documentation could be speeded up, from months to days, then the amount of capital required for the third purpose could drastically shrink. This discovery fundamentally altered the fate of the courier enterprise in question. So while the amateurs were selling cost saving for the mailroom, which was modest; he began selling the solution for using courier service to dramatically restructure the financial situation in factories. The gains are huge for both parties of the exchange. Less financial tied up, faster recycling of capital, huge saving in interest, more business with less money, opportunities enlargement for the factories. For the courier company: exclusive access to the top echelon of factory management for a messenger service, locking factories into long term secured contracts, becoming an integral and critical part of the exporters business cycles, growing dependencies of the factories on the exporters’ business as they grow, and the externalities benefit deriving from securing contracts from the entire value chain, once a player in the document flow process has granted entry.

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Therein we see the power of the conceptual jump in changing the fate of an enterprise. The symbiotic opportunity so discovered, conceived, and converted into a win-win structure is, at its core, an entrepreneurial function. This is but one illustration of the kind of transactional imagination that needed to be in place in order that the transactional impasse so typical of new founded enterprises could be overcome. The contract is the product of entrepreneurial ingenuity. The process of arriving at the contract deserves serious entrepreneurial studies. It is particularly critical for entrepreneurial scholar to grasp at the challenge of achieving sale at the founding stage. Because by the time a whole batch of sales professionals are being dispatch on the road to make the kill, they will be following the founder’s innovated recipe. Studying transactional behavior at this stage, as fait accompli, we will only get at something that has already been converted into routines and mostly been taken for granted. The working of the micro-foundations and causalities could no longer be grasped at this stage. That is why most of the popular books on sale are for the sales professionals working within a taken-for-granted framework, and provide limited clues to the entrepreneurial challenge of how to construct the framework for the sales professional in the first place. Inventing the phone is very different from using the phone. The transactional role of this courier service founder, Mr. Po Chung, who is now the retired chairman Asia of DHL at the time of the interview, is analogous to that of the founder of Estee Lauder. She was trying to sell perfume to the American ladies at a time of extreme social conservatism. Immediately after the war, the buying of perfume was a preserve of the boyfriends and husbands, or directly only by those who are engaging in night life. And these boyfriends and husbands were miles apart in guessing at the aromatic aspiration of the opposite sex to be making the right choice. But the social stigma would prevent these ladies to lay their hands on the perfume themselves. At this transactional impasse, we saw the entry of Estee Lauder. She innovated in a completely new way. She will not be selling perfume. She will be selling Youth Dew, as bath solution instead. This stroke of genius has enabled the middle class perfume market to be made wide open. This transactional breakthrough is one of the foundation stones for one of the world’s largest cosmetic companies. Just as Po Chung would not be selling messenger service, he will be selling capital re-structuring. That opened a pathway to help the factories, right at the beginning stage of the industrial revolution in Hong Kong. Soon each and every industry—garment, fashion, toys, electronics, electrical, printing and packaging, watches, etc--- that are coming into being would embrace this service, launching the DHL service to new height. Whereas at level three the founder entrepreneurs are entrusted with the role to search for a key to unlock the market, to invent a conversion methodology to make transaction possible, the kind of work on level four and five will represent entrepreneurial attempts to move the secret recipe onto a massive scale. Sometime the realization of a recipe to solve the three upper levels challenges could happen at the same time, but this is rare. Here these three levels could be treated as analytically separate so that we could see the underlying logics in its entirety. It is from the discoveries of these upper three levels of

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endeavor that we begun to see the link between micro-actor and macro-structures and then onto performance. In the following, we will describe in further details how these are done. But before we go into the details, we need to continue with asking the central question. How could such a critical role of founder entrepreneurship remain so invisible to the researchers? The first reason: by the time the field researchers arrived at site, by definition the transactional riddle must have been solved, or else there will be no firm to study. As we begin our discovery on the fourth level, we see the second reason. This level of work has escaped the attention of the field researchers within the research sites because the bulk of transactional activities are usually conducted within client sites. This is especially true of the business to business kind of transactional activities, which both of our experiments are engaged in. Because of the criticality of securing contracts to any company, researchers are rarely allowed to participate. And since complex sale easily takes a few months or even years to conclude, accessibility has always been a problem. Thus the transactional front had remained quite hidden to the academic world. Theoretical treatment on a subject without empirical reference is difficult to come by, as a result. “ Even Michael Hammer and James Champy, who wrote () Reengineering the Corporation, reveal the same blind spot as other business gurus when they claim, “ sales is not a process, but a department.” When ( ) asked why he and Champy had included in their book so “few examples of re-engineered sales and marketing processes”. Hammer’s explanation? They “weren’t available… They weren’t ready to be discussed when we wrote the book” (Sanchez, ibid, 5) And it was only through privileged access as a result of participating in entrepreneurial experiments that the inner sanctum of the deal making world could come to be revealed. What is coming to view is startling, because there are large chunked of edifice constructed external to the organization, that are critical to the survival and prosperity of the venture, that has not been accounted for in the dominant literature. The importance of the transactional phenomenon has been sanctified in the economics literature as the center piece around which theories are constructed. In the strategy, management, organization and entrepreneurship literature, however, this phenomenon has been side-lined, diminished, underappreciated and relegated to an insignificant corner. Our conception of the transactional challenge has been reduced to the act of sale. And sale is defined only in terms of the salesman job. While the popular literature is full of treatments on the art of salesmanship, the academic literature, however, has entirely missed the centrality and criticalness of the interactive relationship between entrepreneurship and the transactional sphere. There is no serious study on how the entrepreneur could or should relate to the transactional challenge.

1) Context re-structuring work Part of the reason why this kind of entrepreneurial work has remained invisible is that the results of the work, macro-structures, are usually scattered across multiple organizations. Those studying individual 15

organization might find this of tangential interest, therefore insignificant and inconsequential. The following case will illustrate the point. There are a few contextual elements scattered all over China. First are a few electronic factories in the coastal provinces. Second is a group of government officials in the interior provinces, thousands of miles away. Third, there is a huge group of young girls and boys working in farming communities under the provincial administration. Fourth is a batch of retired supervisors from electronic factories in the Southern provinces. They are totally un-related to each other and each leads an existence separate from the other. No transaction could possibly exist between them—without intervention. An entrepreneur comes into the picture. He discovered that the electronics factories are suffering from huge labor turnover, as the coastal provinces are increasing prosperous and full of alternative employment opportunities. For each worker recruited and trained to be ready for assembly work, the factories would have to spend RMB 5000 as cost. He also discovered that those government officials are given a policy to find ways to relieve poverty in their remote provinces. Then he learnt that these young boys and girls working in the farms are dying to go to the cities and find work. A factory job could bring in multiple fold of what they could earn from a farm. Armed with this knowledge, he struck a series of deals with the electronic factories, promising each that he could provide the needed labor for them. They will be recruited, trained and made ready for selection in accordance with their customized needs, for RMB 3000 each. The factories readily agreed. He then went to the government officials, to propose a poverty reduction solution: He would provide training free of charge for farm boys and girls, and if they are good they will be given jobs in the cities. To join this program, the officials would need to select the best and the brightest from these farms that are available for this purpose. In addition, they need to provide training facilities, perhaps converting some underused government offices for that purpose. These officials were delighted by this god-sent solution. They just ordered some of the government buildings to be allocated for this dedicated use. The boys and girls are over-whelmed by this arrangement. By nodding their head they earn training opportunities that are free of charge training and the prospect of securing a job in the cities. They will do this with the full support from government, and they will be migrating to a new place of work accompanied by friends. Those retired electronic workers find their way into becoming the teachers and trainers, a job which use their skills but paid higher. The entrepreneur has string together a multi-party symbiotic structure, creating value to each and every participating party. His cost of recruitment, training and dispatch is RMB 1000 per worker. The training company, which the entrepreneur founded, has now successfully trained and dispatched 10,000 youngsters. The target just within this industry is 100, 000. He plans to replicate this arrangement to other industries and other provinces.

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That is only one of the many examples that we have been exposed to. There are numerous other ingenious designs of multiple and overlapping win-win-win structures which are being uncovered. The underlying FORM to these examples is: Mental switching is the pre-requisite for an entrepreneur to move one step up in the ladder, away from isolated deal making. To make that transition from singular deal to structured flow of deals, there is yet to be a new kind of paradigm shift. This paradigm shift needs to result in an overall concept which could embrace and convert dispersed, unrelated contextual elements into resources. These resources are then stringed together to form a symbiotic structure like piecing together Lego blocks. This symbiotic structure is then made to function as a processing mechanism for converting raw contextual elements into ongoing value creation and value exchanges. It is meant to be able to process a flow of deals instead of just a one-off deal. The processes required to pull this off could very messy, involving multiple rounds of negotiation and bargaining, and multiple mixes and matches. We will gross over these messy steps in this paper. Conversion could take place on a massive scale Because our exclusive focus in this research has been on figuring out the nature of entrepreneurial work on the transactional sphere, which is on the interface between the firm and its context of exchange, we have so far put aside our focus on the operation core activities. This is where most of the exciting things are being reported to be happening: the locus of innovation and re-invention. Here you have the likes of Menlo Park, a laboratory for experimentations on finding a transformation process to turn these raw materials into a light bulb, and those materials into a micro-chip. We might as well call this as the transformational space, in contrast to the transactional space this paper is concentrating on. (For the concept of operation core, see Mintzberg (1979)) But even here we are beginning to witness a striking parallel. If we consider the role of the operating core as a transformational mechanism, we could consider the role of these symbiotic structures as conversion mechanisms. It is about the conversion of contextual elements into resources so that they could create marketable value; it is also about the conversion of doubters into buyers so that transactional value could be realized. The massification of internal transformation requires the massification of external conversion as a precondition. Through gaining access to these examples, the role of the founder entrepreneur in the transactional sphere has just come to view. When the singular deal structure is reconceived into a mechanism capable processing large scale deal flow, in other words into a mechanism of mass conversion, this is analogous to the re-conceptualization of handicraft operation into an assembly line operation. It is a Henry Ford kind of contribution, albeit that it is happening in the transactional sphere, not in the internal transformational sphere. Once we move onto the massification level, then the target of the transactional operation shift from individual to population, from singular preference to social aspiration. With this we now reach the point where we began to appreciate the need for contextual shift leveraging work. What has the more brilliant entrepreneurs been doing with regards to the other side of the transactional reality? To be able

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to make this mental shift is what has enabled Ralph Lauren, formerly a tie salesman, to become the grand master of dream fulfillment. 2) Contextual shifts leveraging work The first major breakthrough in our exploration has been the discovery of a bewildering variety of conversion mechanisms, conceived and constructed by founder entrepreneurs across industries. But even more surprising new discoveries are waiting for us around the corner. There is yet another level of transactional imaginativeness, which could push performance up another quantum level. To fully appreciate this requires an ability to see the missing piece in the mass conversion mechanism construction. In our earlier work we have identified the importance of paying attention to the contextual shifts (Tam, S, ibid), but we have not seen how contextual shifts could be leveraged operationally. A contextual shift refers to a convergence of discontinuities in the environment which collectively re-conditions the existential circumstances of certain targeted population, thereby invalidating the usefulness and relevance of the current supply conventions. As a result of contextual shift, entire population will have their tested and truth existential based removed, and will be forced to move on in search of new solutions. Because we had not been able to zoom into the transactional sphere in our first phase of research, the interpretive and interactive interplays with contextual shift in the concrete were not captured. This time we discover that there has to be a conversion process, but on the demand side of the exchange equation. Again this is largely invisible to the non-discerning eyes. And this is usually kept as top business secret. Entrepreneurs would not want to publicize how they “see” their customer except for the part which could be released for public consumption. The unique Customer Picture as a rule is not released to the public because of the need for the firm to differentiate. Need for contextual insight: the logic To bring this into the open for the purpose of this research, let us start by retracing the logic. Perhaps with the following illustration, we could have some idea about the kind of challenge these transactional innovators would have to face. The movement of China from a centrally planned economy to that of a market economy is a contextual shift. Prior to that there were the gathering of strong forces which collectively created this discontinuity, and given that these new set of forces will grow in intensity, this trend is predicted to last for a long time. As a result the existential conditions of all Chinese in the Mainland are being fundamentally altered. But how do you convert your observations about the impact of this social reconditioning event, which is creeping out in every seams of the society in varying form, in different intensity, and in endless proliferation of ways into a coherent theme? For without a coherent image of how these are being converted into concrete demand, your enterprise could not provide a focused, structured and stable supply of solutions through the transactional sphere. 18

Without such understanding how could you visualize what the emerging transactional reality will likely be, and how would you position your company in advance for a leading position within this emerging reality? This is a test of interpretative excellence. In other words, if social reconditioning will dislodge the existing consumers from their comfort zone, into what concrete pockets will they be forced into? Where is the new catchments area, and what should the entrepreneurs be building within that new catchments area so that the full benefits of the contextual forces pushing the potential consumers into new pockets could be leveraged and captured? The choice of this focal theme could determine whether an enterprise could become a great player or a passenger. There are a lot of passengers, those who had failed to leverage on contextual shifts. Demand formation chain The search of contextual insight should ideally end up with a mental product: the demand formation chain. Why do we need that kind of conception? The economics literature could start its theory construction effort with the concept of demand. The entrepreneurship literature does not have the same luxury. Entrepreneur has to probe much deeper, to conduct an infinite regress into a series of pre-conditions which could giving rise to the demand, and in most case, to participate in the articulation of the vague feelings into concrete expression of demand. The infinite regress will hopefully guide us to the ground of certainty on which great enterprises could be built. This focuses on the other fifty percent of the transactional reality and requires another form of transactional imagination. Imagine an entrepreneur conducting business in a city facing the sea, on the brink of a continental block completely engulfed in Communist transformation. The city operates on a Capitalistic norm, a colony operating under British influence. This city’s livelihood has always been based farming, fishing and on trade, which was interrupted by war in the Pacific. After the war and the beginning of Communist transformation around the city there has been an influx of textile manufacturers, relocating from the Mainland, who brought in industrial production on a scale much larger than the recovering agricultural, fishery and trading sectors. Along with that came a natural extension of the textile foothold, the fashion and garment industry. The industrial sector further gain ground as a plastic flower industry began to take off. You were one of the major plastic flower manufacturers, one of the few who could see the benefit of turning the refugee influx to be factory workers. Business are working very well for you, your factory has been growing by leaps and bounds. If you were an entrepreneur living through the same set of circumstances, what future do you see? The entrepreneur in question saw a crisis that was coming and decide to completely withdraw from plastic flower industry. He sold it out at the peak of the industry, when everybody was still having a rosy dream. He also saw something else emerging on the horizon, and decided to switch into it, full force and full throttle. He saw something that most did not see, despite that fact that most contemporaries are living through the same set of circumstance. 19

One of the hallmarks of an entrepreneur is that he/she could see what other people could not see. But there is no systematic study on what and how these entrepreneurs see, and why seeing what other people could not see are so important. This “seeing” is the foundation of strategy-making and for the entrepreneur in question, strategy switching. To completely commit entrepreneurial resources to a direction for decades would call for the development of ingenious ways to ascertain the future. For without that sense of certainty how could entrepreneurs develop macro-structures? Macro-structure needs to be sustainable, and within the context of exchange, large scale transactional processing must presume large scale demand flow. There has to be a continuous reproduction of demand in order that these could be sustainable. And this reproduction mechanism needs to be discovered. How could one construct a career structure for thousands of employees, and enable each of them to secure a long term future with the organization, without a sense of what the business will be coming from? Creating a career structure for thousands of employee is different from seeking an employment in a company. It is a completely different task. The entrepreneur in question saw the following: a) The influx of refugee was going to continue unabated. This would result in the swelling of the population. This influx was assured because of the ongoing transformational experiments in China. This would bring in an increasing number of workers and business talents from the rest of China. There would be additional inflow of capitalistic talents to this colony, beyond the first batch of textile manufacturers. When the trading heritage, competencies and global network were combined with industrial production competencies, there would be more and more export-oriented industries being born to meet the need for worldwide increase in consumption. The cutting off of China would deprive China from competing with Hong Kong for this growing market. And the fact that Hong Kong had been able to carve out a niche from Japan in the textile and manufacturing field was an indication of the viability of an alternative industry formation model. b) These immigrants would need jobs and would need shelter. When the trading competencies and the industrial competencies coupled together with cheap and eager labor, the future expansion of industrial transformation could be assured. c) The land was fixed and not expandable. Demand for industrial and residential land would grow in leaps and bounds, dependent on the influx and the success in industrial expansion. Industrial land use pattern was fundamentally different from the trading land use pattern, therefore the existing way of thinking about the land use reality will increasing be invalidated. The transformation of land use pattern would give rise to new needs for which most existing players would find it difficult to comprehend. The trading operation requires limited space, and warehouse and shipping would need to be modernized. Hence there is a need for a new kind of land use providers. d) The existing pattern of residential land use would need to be different as well, thus invalidating the relevance of entrenched players who are content with low rise, small population logic.

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e) The unfolding scenario was predicted to be the acute shortage of land and the ever growing need for more space. Space would become the most critical shortfall, and as therefore the most valuable commodity. He saw a land use revolution about to begin. He decided to abandon plastic flower work and switch to become a real estate player. Logic distilled from empirical patterns The above, in it’s abstracted from, is not a unique case. In our phase one research, the cases covered ten industries and over 80 in depth samples. When combined with our new round of studies, we are now in a position to revisit our previous case, and fill in the details in between. The logical flow is now clearly discernable: --Contextual shift is a result of a convergence of discontinuities. It has two parts. On the one hand, one sees the weakening of the forces field which was responsible for the production, reproduction and maintenance of the existing transactional order. On the other hand, we see the gathering strength of the new set of forces. This new set of converging forces--their continuing strength and gathering momentum would need to be carefully ascertained and constantly monitored--will collectively constitute a new force field, and bring about a new transactional reality. --This contextual shift will cause social re-conditioning via the production of a new force field and the dissipation of the current force-field. What has been taken for granted as matter-of-fact will increasingly be invalidated, events contradictory to the expected and normal will crop up to give signal to the discerning eyes. But the same impact of social re-conditioning might not elicit uniform response. This is because it is bound to be producing impact on a population with vastly different initial conditions, degree of entrenchment, response elasticity, and gain & loss calculus. Thus one could presume that there will be differential pockets of transactional readiness and affordability. Only a minor set will have the right level of purchasing power to form a new demand structure. --To be able to ascertain the mechanisms responsible for the production and reproduction of the presenting phenomenon would be critical. And there could be multiple mechanisms and cycles in operation. For example, the change from a farming background to an industrial background will significantly raise a population’s purchasing power, which brings affordability to the new kind of residential premises too luxurious to dream of before the new force field has come into being. This is one example of the underlying causalities that a founder entrepreneur would have to watch. Examples of self-reinforcing, mutually feeding chains of causality in the new force field would run something like this: Influx of refugee  cheap labor increase industrial competitiveness more industries could prosper more industrial land will be needed Influx of refugee  more social provision needed by government to maintain law and order government need more financing increasing dependence on land sale as major source of income government land price policy locked into this reality and become predictable 21

Influx of refugee industrial wage earners outnumber those with fishing and farming background more purchasing power than previous regime new kind of housing could be affordable Influx of refugee more residential space needed land scarcity increase land price increase The net result of the new force field is the vertical up-shoot of demand and fixed land supply. While the pocket, pace and purchasing power might not be entirely predictable, the level of certainty this analysis could bring about is such that it could assure an entrepreneur to bet on this future Once the entrepreneur is made assured that these pre-conditions and the reproductive mechanisms are not going away, then this constitute a base on which we could exercise the transactional imagination. The two sides of the transactional reality could now come together to give a two sided picture. On the one side, the understanding of the demand formation mechanism and reproduction cycles, which is our level five concerns. On the other side, the readiness and ingenuity to construct large scale transactional structures, which is our level four concerns.

Inter-relating these two give us a more compre-

hensive picture: mass transaction requires mass demand as pre-condition. For the specific entrepreneurs in question, the possibilities for servicing the real estate need with critical shortage in sight now call for another level of ingenuity. His effort has been translated into a multiplex of win-win structures in different extended form. He then inter-related these structures into a holistic cluster to be able to serve the flood of demand, leveraging on his insight. Let us see the range of symbiotic structures which he could consider building up: 1) Structure one: from construction to real estate development to interior design & decoration to property management 2) Structure two: the land acquisition to land conversion value chains 3) Structure three: land financing, construction financing, mortgage financing, to re-mortgage financing provide a foundation for interlinking banks, real estate developer, users, speculators together 4) Structure four: Government land sales, tax, stamp duties, land titles administration to be working in harmony with real estate development need. 5) Structure Five: Real estate developer and lawyers on the property right side 6) Structure Six: Real estate developer and the real estate sales agencies, banks and finance company over the creation of the primary and secondary market. Impact of Transactional Imagination Combining the context restructuring work with the contextual shift leveraging work has lead this entrepreneurs in question into a leading player in Hong Kong. The powerfulness of playing with our imaginative faculty on both sides of the transactional reality could play off handsomely.

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The roles of the founder entrepreneurs in the venture formation process In this paper we have identified three roles for the founder entrepreneurs within the transactional space a) to create the recipe of conversion b) to create transactional processing mechanisms c) to leverage on the demand formation process All of the above requires extensive interpretation of and intervention into the external context. Given the limited space of this paper, we have only distilled the basic forms without going into a lot of contents. Implications for theory: The nature of the firm: the dual core metaphor Viewed from the angle of this discovery, our dominant literature in strategy, management, organization and entrepreneurship has missed out on the transactional imperative. The underlying model of the firm would need to be reconceived. Our dominant metaphor, which has informed theoretical formulation through the concept of the firm, has been based on that of a single nucleated image. There are various expressions of that metaphor: There are different ways of seeing the firms, but most are based on an underlying image of a single nucleus: the transformational core. a) an input—transformation core —output model b) a core and peripheral model ( core competencies) ( Hamel and Prahalad) c) a technical core and the need to protect the stability of the core ( Thompson) d) the operating core concept as at the base of all organizational forms, which is a synthesis of most of organization literature up to that time ( Mintzberg) Our finding indicates that our dominant metaphor has better be changed, if we want to make our knowledge relevant and useful to entrepreneurs. There are so many entrepreneurs who started the enterprises with a misconception that only one set of core competencies will make it work. There is a huge area of knowledge, competencies, relationships that need to be in place that are missing entirely from the literature. The information technology, for example, is full of entrepreneurs passionate about the promise of technological transformation, but has no clues on how to get those wonderful ideas to the market. We are proposing that if we want to see to it that a firm could be alive and kicking, it has to have two cores. One core will remain the same: playing the operational role. The other core will have to play the transactional role. To make a distinction between the two cores, we will consider the first one

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as being engaged in transformational role. The core process for the second one is the conversion process. Making the conversion core visible If we take this dual core metaphor, it would means what it takes to make the thing could be conceived as entirely different what it takes to sell the things. It requires two kinds of core competencies. It is subjected to two sets of logics. Performance breakthroughs, like those in the transformational side, also require paradigm shifts. So far our knowledge on the second core is still very sketchy. But the transactional horizon is full of amazing creativity and masterly acts, waiting for us to explore. The roles of the founder entrepreneurs: dual task model If we follow the argument above, we need to think about the roles of the founder entrepreneur in new ways. There are now at least two core sets of roles a) to ensure transactional success b) To ensure transformational success. What we need to think about is whether the two core sets of role might actually demand different sets of knowledge, competencies and network base. That whether asking the core competence to be from the same person would be too much of a stretch. What we have discovered is the issue of cumulative advantage in the transactional sphere. Our observation of the job of transactional innovator indicates that solution generation resourcefulness is critically dependent on knowledge, competencies and relationships, in particularly those who could produce and reproduce a cumulative and ever-widening network of contacts. Just having knowledge would not bring in a lot of solution resourcefulness. Because the construction of symbiotic structures requires a lot of mixes and matches, you need to have a lot of relationships, or a large pool to draw on for information, ideas, pattern of evolving trends in order than this could be multiple. Pure theoretical knowledge and rapid learning through books will limit the innovative possibility. The analogy with Lego is instructive; you need to have pools of concrete building block in order that you could build out the structures. New knowledge building tradition needed: The founder, micro-foundations and macro-structures The founder entrepreneurs are probably among those who are most critically in need of the kind of knowledge which are conceived and formulated on a philosophical foundation which stresses actor-dependent causalities, on micro-foundations and on macro-structures. This kind of knowledge could turn a situation from death to life, from low to spectacular performance. Let us reconsider what 24

kind of knowledge challenge is being put before us if we want to help founder entrepreneurs do what they have to do? Perhaps the most critical one is for founders to ensure that the new born could earn its birthright. But unlike biological procreation, which is a result of thousands of years of encoded evolutionary knowledge, entrepreneurial creation regularly come into being without all the necessarily ingredients for survival. It is a contrived existence, based on limited understanding, and from what we have discovered, a lot of misconceptions. The statistics of venture procreation is littered with high mortality, as much as ninety percent. In this research, we have identified how actor could play a part in flipping a situation from failure to conclude deals to creating value through contracts, by finding win-win structures. We have also seen actor could change the transactional reality by re-structuring the contextual elements. And we have seen that spectacular performance could result from interpreting the context in intelligent manner. The theoretical link between actor and macro-structure could be established. Conclusion: the use of new theory Entrepreneurial Experiment II This paper will conclude with a brief report on the second entrepreneurial experiment. Because the holding firm is already quite well established in the information technology field in Hong Kong, there is no shortage of proposals coming to us for collaborative ventures. But since the failure of the first experiment, we have instituted a new ground rule in our screening for new partnership. This ground-rule is a direct derivative from the theoretical findings we have outlined above. The ground rule is, unless there is a clearly identifiable transactional master in the core team, we would not enter into the venture at all. The reason for us to insist having this transactional master is because of the phenomenon of cumulative advantage that we have discussed before. We realize that it is not just a matter of pure knowledge application that could make a venture come to life. It is a matter of competence in coming with win-win ideas and solutions that will be critical for ensuring market acceptance. These solutions would need to be implemented externally. Profusion in solution generation would need to be based on a person’s familiarity, perceptiveness and ability to tap resources from the pools external to the venture boundary. Both contextual restructuring and contextual force leveraging would need to have extensive network base to produce the Lego effect. Great masters are very difficult to come by.

We had rejected a lot of proposals based on the

teaming deficiencies. Without the new learning and ground-rule in place, we might have been tempted to consider quite a few of those proposals in depth. But we now reject most outright once we realize that the hypothetical sales master has been missing. Eventually we encounter one. This ground rule has helped us considerably. There is not only a sales master, but also a core of veteran sales professionals who will be joining if this venture would be launched.

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Soon a new experiment is launched, to capture a particular niche within the Hong Kong information technology industry. The firm has made profit the first year. It has proven itself further in the second year, growing by about one hundred percent when compared. Client base has swollen to make a significant dent into the banking and finance sector. Then we secured entry into another global industry, integrated logistic. Since the second year, we have been experimenting with context re-structuring work. This has not worked out well, because the core sales team was too busy meeting and exceeding quota. In this third year, we are putting in dedicated resources so that the context re-structuring work could proceed with focus and vigor. In the coming years we might be able to report on further developments. The contrast between the first and the second experiment is like night and day. END

Bibliography Abell, P. Felin, T. Foss, N. (2007) Building micro-foundations for routines, capabilities and performance links. Center for Strategic Management and Globalization working paper, Copenhagen Business School. Ante, S.E. (2008) Creative Capital: Georges Doriot and the Birth of Venture Capital. Harvard Business Press. Blackford, M.G. & Kerr, K.A. (1994) Business Enterprise in American History. Houghton Mifflin Mintzberg, H (1979) The structuring of organizations: a synthesis of research. Prentice Hall. Mintzberg, H. (1973) The Nature of Managerial Work. (Harper and Row) Sanders, S. (1975) Honda, the man and the machines. Tut Books. Pomeranz, K. & Topik, S. (2006) The World that Trade created: Society, Culture and the World Economy, 1400 to present. M.E Sharpe Inc. Prahalad and Hamel, G. (1990) The core competence of the corporation. HBR, 1990. Sanchez, D., Heiman, S. & Tuleja, T. (1997) Selling Machine. Random House. Symonds, M. & Ellison, L. (2003) Softwar, An intimate portrait of Larry Ellison and Oracle. Tam, S. The Nature of Entrepreneur-Environment Relations—A Participant Reconstruction Perspective, Rencontres de St-Gall 2002 Thompson, J.D. (1967) Organizations in Action. McGraw Hill. Weisbord, M & Janoff, S. (2007) Don’t just do something, stand there. Berret Koehler publishing. Zook, C. (2001) Profit from the Core. Bain Company, Published by arrangement with HBS through Arts & Licensing international Inc.

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How public research institutes can create new startups? A case study on Innovation center for startups; National Institute of Advanced Industrial Science and Technology in Japan

Emiko Tsuyuki1

In recent years, there has been an emphasis on the importance of technology transfer and commercialization by using the outcomes of research conducted by universities and public research institutes. This paper examines a case study of creating high-tech startups within an intentionally designed incubation system at Innovation center for startups (INCS), National Institute of Advanced Industrial Science and Technology( AIST) in Japan.

Introduction In recent years, there has been an emphasis on the importance of technology transfer and commercialization by using outcomes of research conducted by universities and public research institutes. This is not a new issue. Many studies have done on industry-government-academia collaborations and technology transfer over the years. However, it is only in the last several years that the importance of technology transfer has been re-advocated because of the following reasons. Firstly, industries are becoming increasingly dependent on science. Science linkage between academic papers and patents were found in each technical field. Especially, that linkage is strongly related in growing industries, such as biotechnology, nanotechnology and ICT fields. Secondly, the expectancy and role of universities and public research institutes has been changing. There is a need for industries to strengthen their competitiveness on the international market through the commercialization of inventions provided by universities and public research institutes. There are two routes for transferring technology. The first is to spill over technologies through collaborative research with companies or licensing patents, and the second is to create startups.. As to returning publicly funded technology assets to society in the form of startups, establishing small enterprises is seen to make a small impact on industries. Commercialization of technology seeds is deemed not very significant unless the business scale reaches a reasonable volume. Therefore, the new companies, which employ technology seeds from advanced technology fields and aims for growth-oriented in scale and scope, are called “high-tech startups (HS)” to differentiate it from typical 1

Emiko Tsuyuki is associate professor of Department of Management at Meisei University. Address correspondence to:

Emiko Tsuyuki, Department of Management, Meisei University, Hodokubo1-1, Hino Tokyo Japan. 191-8506. Tel: +81-42-591-6460. E-mail: [email protected].

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family businesses(Shane 2004). The features of HS is that it has a mission to systematically follow, from the start, a growth strategy which would enable it to go public (IPO), or be acquired (M&A) to a major enterprise at least within ten years. As is widely known, HS have been performing successfully in the U.S. If that is the case, can all the countries and all the regions in the world create something akin to Silicon Valley if they boosted R&D and supported the creation of HS in a similar fashion? If not, how universities or public research institutes can “intentionally” create HS? This paper provides a case study for incubating HS, which conducted in a public research institute in Japan. A Model of Incubation Hackett and Dilts (2004) claimed that the study about incubators themselves was limited. A comparative study over incubators conducted by Clarysse et al. (2005), they clarified three categories of incubators, such as Low selective model, Supportive Model and Incubator model. They described that “the Incubator model results in fewer spin-outs, but the businesses supported will typically be likely to be VC-backed growth-oriented businesses, achieving higher levers of innovative activity at the leading edge of technology and operating in global markets”. Roberts et al（1996）studied the U.S. and British universities which created HS and came to the following conclusion: The infrastructure required for establishing businesses, such as human resources and venture capital (VC), is in place in areas such as the Silicon Valley or Greater Boston where there is an abundance of entrepreneurial spirit. So, even if universities and other organizations had no special mechanisms, successful case examples can come about simply through the use of the usual Technology License Organization (TLO). Other areas, meanwhile, can produce successful results by selecting highly promising technology suited for HS and providing strong support in terms of funds and people. In other words, whereas an incubation infrastructure functions in these two U.S. regions without having to implement special policies thanks to the function of market mechanism, it is difficult to establish HS in other regions unless some sort of mechanism is adopted policy-wise. In a word, there is a need for a political mechanism for technology selection and support. Overall both Clarysse et al and Roberts et al discussions, it would be intentionally necessary to design an appropriate functional incubator in order to create HS, if the incubation social infrastructure is immature. As I introduce in the following pages, INCS is an incubation-organization designed for creating HS through a mechanism of strong selection and support. I will focus mainly on the phase after a new invention has been made in which 1) it is recognized as a technology seed; 2) R&D and market survey are conducted; 3) funds and human resources are acquired; and the time 4) after a start-up is established and 5) until some degree of progress is made so as to lead it onto the growth track.

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Verification of AIST Model Outline of AIST AIST2 (National Institute of Advanced Industrial Science and Technology) was established on April 1, 2001. It is a newly formed research organization that is the result of an amalgamation of the 15 research institutes previously under the former Agency of Industrial Science and Technology (the former AIST) in the Ministry of International Trade and Industry and the Weights and Measures Training Institute. The new AIST is the largest public research organization in Japan. Headquarters of AIST are located in Tsukuba and Tokyo. AIST has over 50 autonomous research units in various innovative research fields such as life science and technology(18%), Information technology and electronics(16%), Nanotechnology, materials and manufacturing(16%), Environment and energy(24%), geological survey and applied geosciences(10%) and Metrology and measurement technology(15%). The research units are located at nine research bases and several sites (smaller than research bases) of AIST all over Japan. About 2500 research scientists (about 2000 with tenure) and well over 3000 visiting scientists, post doctoral fellows and students are working in AIST. About 700 permanent administrative personnel and many temporary staff supports research works of AIST. Figure 1 AIST- INCS Model AIST Inventers (Business seeds)

High-tech startups Creation AIST-INCS Task forces+ Gap fund (Prototyping, Marketing)

Business Experts Startup Advisors (SA)

Licensing or Other solutions

VC Seed money

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An Incubation Model in AIST

AIST set up Innovation Center for Start-ups (INCS)4 in 2002 as a super COE(center of excellence) project, co-sponsored by The Ministry of Economy, Trade and Industry and The Ministry of Education, Culture, Sports, Science and Technology . INCS is not only a research center, as is named, for 2

Detail information about AIST is http://www.aist.go.jp/index_en.html

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The case study of AIST-INCS model is mainly quoted from chapter six in “A study report” of INCS-AIST (2007). An official leaflet about INCS is http://unit.aist.go.jp/incs/ci/publication/panflet/panflet_e.pdf

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entrepreneurship but also a practical unit in order to create new startups. INCS subsequently started a task force in 2003 for creating future HS, using the schemes of the AIST-INCS model (Figure 1). A task force is a research and development team comprised of technology investors, startup advisers, post-doctoral researchers and technical staff. 44 task forces were formed between 2003 and 2006. The research and development operations carried out within the task forces are POC (Proof of Concept) as a preliminary stage for the firm creation of the HS. INCS provided the gap fund for those task forces from about US＄200,000 to US＄300,000 per team per year for maximum two years. A unique characteristic of the AIST-INCS model is that business experts (external entrepreneurs) are temporarily employed as startup advisers (SA), and these SAs are expected to launch HS. The SAs also become HS executives such as CEO, CFO and COO when the HS is launched, and soon after formulating a management team through investing from VCs, SAs leave AIST. The SAs are also expected to search inventions as business seeds. If the inventors (mainly researchers in ASIT) are motivated to be involved in a startup creation, SAs perform consulting work related to the business planning and submit applications to the task force adoption committee. Typically, the SAs work for two or three task forces. As a general rule, a task force is required to come to the conclusion either setting up a startup or finishing the project in two years operation. If the members of task force decide to set up a startup, they become shareholders and/or executives of the new HS.

1) 2)

3)

4)

5)

The flow and strategy of the entire HS creation process of INCS is as follows. AIST researchers, who have idea or invented new technology and wish to commercialize them, submit an application to the INCS task force adoption committee. After being selected as a task force, the task force members are required to submit the research and development and business plan. At this stage, the SAs carry out marketing activities such as communicating directly with the future clients, soliciting joint research, investigating the market conditions, and making presentations at international conventions, and reflect any needs in the development process. A company creation is highly depending upon the timing. Members of the task force decide to set up a startup at the optimal timing for them. As is the case of biotechnology, if the development span were long, the HS would be set up after finishing the task force. If the HS are set up without investment by VCs, the HS need to apply for public grant in order to increase the efficacy of the technology, and promote partnerships with major corporations. It is usual that the inventors and SAs become stockholders of the new startup. In addition, some researchers who move to the company from the task force team (such as post-doc researchers) also become stockholders as founding members. A task force can start contacting with VCs before setting a company. It is ideal to set up a startup approximately half a year before the task force ends. Therefore, the startup is able to receive investments from the VCs soon after launching.

The important question is who would be suitable for a SA. Ideally, they should be business experts who conducted a successful HS in a certain technological field (such as serial entrepreneurs), but the number of successful HS cases is limited, it is impossible to find such serial entrepreneurs in Japan. Therefore, INCS recruits business experts under considering the following elements. 4

· Capability of carrying all kinds of managing tasks · Self-independence · International working experiences · Connections and networks · Technological background to communicate with the inventors INCS recruited 17 SAs from October 2002 to March2007. Those SAs worked from one to five days per week. 11 out of 17 worked at least 4 days per week. At least 10 SAs met the all requirement above. Case Studies of Startups from AIST-INCS Model 1) Company A(Bio technology field) Company A’s technology is based on a new DNA microarray that can transfect nucleic acid such as plasmid DNA and siRNA. Approximately 1500 types of genetic biological effects can be analyzed with a mere 10mL cell culture scale. As a result, extensive gene function analysis using primary cells in culture is made possible, the correct target genes can be identified at a high speed and with high accuracy, phenotypic changes commonly seen in multiple cell types can be indexed, and the essential genes that influence objective phenotypic changes can be reasonably identified. In the past, problems with screening when using phenotypic reporter genes resulted in the obtained genes not necessarily being phenotypic. Company A’s business concept is to carry out joint research with pharmaceutical companies and increase the value of the startup by sharing the results. The activities of the task force proceeded through the following steps. 1) Mr. B, an AIST inventor (he used to work in an American research laboratory), pursued the commercialization of the invented technology, but he gave up because he had no competent of marketing skills and business experiences. 2) He consulted with Mr. C., a SA in INCS. Mr. C recommended applying for a task force, while at the same time discussing the whole concept of the business model. 3) Because Mr. C has no background in biotechnology, he searched through his network for an adviser, and recruited Mr. D. 4) Mr. D. had experience as a researcher for an international pharmaceutical company, and provided advice to several bio-ventures. 5) Their task force was given a positive assessment from the many pharmaceutical companies within Mr. D’s network, and the member of task force decided to set up a startup. Mr. D became the CEO, Mr. C the CFO, and Mr. B the CSO. The startup began contract negotiations for joint research with other companies. 6) They concurrently began negotiating with VCs, and raising fund from a VC. Company A was also succeeded in second round financing. Without the meeting between Mr. B and Mr. C and the participation of Mr. D, they would not have been able to set up a growth-oriented startup. In the case of Company A, Mr. C, as the SA, has a financial background and also MBA in the US. He has also experience in the management team of an 5

international incorporation and after that, he started a software development company by himself and served as the CEO. The combination of members of this task force was not realized by chance, but intentionally conducted in incubation process The activities of the SA is the critical point in the steps above, and the foundation of his activities is provided by the AIST-INCS model. 2) Company E (Micro electronics field) EEPROM and flash memory (Semiconductor Design Nonvolatile memory) have developed as industrial use. However, due to reasons of cost and security, it is seldom used at LSI process. PermSRAM (trademark) developed by Company E is a type of nonvolatile SRAM. It can use at the standard CMOS processes, and without increasing the wafer cost by removing the necessity for any additional processes, an LSI design for nonvolatile memory is made possible as an F/F (flip-flop) or a buffer-like circuit component. Company E’s business concept is to use nonvolatile memory technology as its core competence and provide design IP in semiconductor integrated circuits that realize a nonvolatile memory function in a standard CMOS platform. Company E proceeded through the following steps to set up. 1) Mr. F, a SA, was dissatisfied with the fact that there were few successful examples with LSI design in Japan. 2) Mr.F stumbled upon Mr. G, who planed to start a LSI design HS. Mr. G quit working for a major electronics corporation and worked for an overseas venture company. Mr.G had an interest in HS because of his experience at UC Berkeley, and wanted to eventually start his own business. 3) Mr. G’s plan envisioned commercializing the circuits invented by Mr. H, who was affiliated with the same company and was an associate professor at a technical university in Japan. 4) Mr. F, Mr. G, and Mr.H refined a business plan and filed an application for an AIST task force. A task force was adopted, and the plan was started as an AIST project. 5) Due to the limit of the AIST gap fund, they decided to set up a startup suddenly after starting the task force, and the chip prototype shuttle fee for Taiwan was covered with funding from a VC. 6) They formulated a management team of the startup as; Mr. G became the CEO. Mr.G recruited Mr.I as the CTO from the same electronics corporation. Mr. H became the CSO. Mr.F became CMO(chief marketing officer). 7) They had succeeded in second round financing from a few VSs. If Mr. G and Mr. H, both of them would have only been researchers and engineers, started the startup without helping by Mr.F, they might encounter some difficulties with respect to patent strategies ,marketing and communicating with VCs. Although their starting point was successfully achieved, their next stage was to acquire a primary user and sophisticate their technology. In the case of Company E, Mr. F’s background was Ph.D. of Engineering with technical expertise in liquid crystal development. After leaving the major electronics company, he became a consultant and worked with international corporations involved in semiconductor development.

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Results of Incubation There were 44 task forces started in AIST-INCS from 2003 to 2006. The results of incubation in AIST-INCS model were below (at the point of February 2007). 1) Project ended by 2007: 27 task forces · 8 task forces set up a startup and invested by either VCs or business partners · 12 task forces set up a startup but not yet invested by VCs · 7 task forces did not set up a startup 2) Project continued in 2007: 17 task forces · 5 task forces set up a startup and invested by VCs · 3 task forces set up a startup but not yet invested by VCs · 9 task forces continuously precede the project Even among the task forces which did not set up startups, the SAs were continuously working at bringing the technology into commercialization. There were four task forces progressing in the following ways; 1) Although they could not set up a startup because of the research group not having reached a consensus, the research continued as a joint research with the existing company. At the same time, they selected multiple existing companies for further joint research. 2) Commercialization of the product was difficult due to the lack of complementary technology, and the HS has not yet set up. However, the task force selected a company that had complementary technology and met their needs, gave this case into the negotiations with TLO through licensing. 3) Although the level of technology improved and modifications to the application were made during the period of the task force, business partners were necessary to receive investments from a VC. The member of the task force tried to obtain other public research funds for further technology development, and restarted to operations for setting up a startup. 4) Although they could not reach the practical level of technology, the possibility of commercialization was in sight due to the joint research with other companies. The member of the task force planned by means of merging with another startup, and came to complete of the technology. Although startups could not have been set up with the task forces, the road towards commercialization was accessible in some cases. This phenomenon would also be a result of SA’s activities toward the technology exploitation.

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Figure 2 HS Creation Process

Investments from VC Selection of Technology

Incubation

HS Creation Recruit CEO and Managers

Implication from the Case Study A region such as Silicon Valley that sees a cluster of high-tech entrepreneurs and VCs that have a wealth of experience and which correspond to an early stage, as well as the existence of law firms that are involved in the process right up until creating a business plan, cannot be formed in a short period of time. Even in other industrially advanced countries, startups from universities and research institutes increased at volume-wise, but the establishment of rapid-growth and scale-expansion high-tech startups is still limited. AIST-INCS model suggests that the following conditions are necessary within the mechanism of incubation of HS. 1) Technological screening for a seed of HS should be conducted not by inventors or scientists but by business experts 2) Recruit business experts from outside the organization (external entrepreneurs) for the leadership roles in a startup project, and develop the selected seeds so that they can be commercialized. 3) A strong management team with high-tech entrepreneurs is necessary at least when setting up a startup and starting business 4) In order to sharing the interest and retrieving the expense for research and development and additional supports, the incubating organization hold shares of startups 5) An institutional framework of public technology development funding such as gap fund is necessary to complement for investment at pre-seed stage or early stage startups A characteristic of the Japanese business environment is that successful examples of high-tech startups are extremely limited, including spin-offs from existing companies. Therefore, the important issue in Japan is to determine how high-tech entrepreneurs should be involved in an HS creation process, or how to construct a system in which they can be involved. Professor Morishita from the Medical Department of Osaka University, the founder of AnGes MG, Inc., Japan’s first startup from university to go public (IPO) in the new market of Tokyo stock exchange, stated the following in a lecture: 8

“It is important to have awareness of the importance of business experts in a company, and treat them as such. Business experts have great pride in their careers, and implementing a system that shows respect for them, including reflecting this through their salary, is important.” It is often that the HS creation process is shown generally in Figure 2. However, if the business plan has already been made, is there anyone who would take risks of the business plan? It may be possible to recruit management professionals after achieving a certain degree of success and planning to go public, or having already gone public. However, during the stages before a VC has invested, it is difficult to recruit appropriate CEO. On the other hand, if a business plan were created together with the inventors and the business experts involved, they would have a certain degree of confidence in business development. As such, there is no hesitation over their becoming members of the executive team. Through discussions with the inventor group during the prototype development stage, the whole concept can be understood. Regarding the fund raising from VC investment as well, there is also the possibility that they will declare their intention to assume management responsibilities and proactively negotiate the details, which increases the level of persuasion for potential investors. During the trial of the AIST-INCS model, the role of the SA was assessed as being effective to create HS and their growth. This results in that many VCs take part in a meeting with the task forces. It is sometimes, however, claimed that it would be appropriate to spend public money to recruit a business expert and to create a startup which is totally private company. However, if the research results were not realized as innovations and commercialization into the market, would this imply that the research and development project had used public money effectively? If policy makers dealing with public money do not understand the importance of high-tech entrepreneurs, this model will not become popular. That is to say, it is crucial for policy makers and the managers of universities and public research organizations to be aware of the importance of gap funding under the appropriate conditions in order to create startups. Discussion; An Integrated Model of TLOs and Incubators Until now, only incubation strategies for the creating HS have been focused on in this paper. In terms of organizational framework, however, it is optimal for the function of transferring technology to the existing company and the incubation of the HS to be implemented within the same organization. At Cambridge in England, the organization that manages the invention, the organization that carries out licensing to existing corporations, the organization that aims to establish the high-tech startup, were all originally handled without cooperation. Therefore, they established Cambridge Enterprise in order to integrate the functions of all of these organizations. At Imperial College London, a subsidiary named Imperial Innovations Ltd. 5 was established in 1986 which is fully owned by the college, and in 1997, the three activities (intellectual property applications, licensing (TLO function), and spin-outs (business/development) were merged into one organization. Imperial Innovations Ltd. is comprised of thirty employee altogether, including the former venture capitalists employed externally. Business specialists are assigned to each department: 5

Detail information about Imperial innovations is http://www.imperialinnovations.co.uk/

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two employees are in charge of joint contracts, three are in charge of life sciences and medicine, three are in charge of physics and engineering, and three are in charge of spin-outs and business development. The following two benefits are given as reasons for why an integration model is ideal. 1) After the high-tech startup is established, the HS need to negotiate with TLO for the patent licensing contracts, if the patent is owned by universities or research institutes. In that case, if TLO can own HS’s stock, it is not necessary to require patent licensing fee for the HS, because TLO expects to have capital gain by IPO or M&A of the HS. If the licensing organization and the HS incubator are separated and have different ways to maximize their profits, a conflict of interests would happen. This conflict sometimes prevents startups from incubation. 2) As introduced in AIST case examples, licensing becomes possible under several conditions when the company has been incubated as a high-tech startup. If HS incubation and licensing are handled by the same organization, a foundation exists in which this orientation can be further intensified through cooperation with a unified purpose. We need to collect and investigate more cases of incubators in order to find an ideal model of organization for technology exploitation and commercialization.

References AIST-INCS. (2007) A Study Report “Strategies for the Creation of High-tech Start-ups”. (only in Japanese) Clarysse, B., Wright, M., Lockett, A., de Velde, E. V., and Vohora, A. (2005) “Spinning out new ventures: A typology of incubation strategies from European research institutions,” Journal of Business Venturing, 20, pp. 183-216. Hackett, S. M. and Dilts, D. M. (2004) “A systematic review of business incubation research,” Journal of Technology Transfer, 29, pp. 55-82. Roberts. E and D. Malone. (1996) “Policies and Structures for Spinning Off New Companies from Research and Development,” Organization. R&D Management, Vol.26 (1). Shane, S.(2004) “Academic Entrepreneurship: University spinoffs and wealth creation,” Edward Elger publishing. William A. Sahlman. (1999) “Some Thought on Business Plan,” The Entrepreneurial Venture, Harvard Business School (Second edition).

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RencontresȱdeȱStȬGallȱ2008ȱ ȱ ȱ ȱ ȱ ȱ MondayȱAfternoon,ȱSeptemberȱ1,ȱ2008ȱ TopicȱBȱ FundamentalsȱofȱEntrepreneurship,ȱȱ SMEȱandȱFamilyȱBusinessȱResearchȱ ȱ ȱ ȱ Filionȱ Fueglistaller,ȱSchrettleȱ Kameiȱ Mugler,ȱFinkȱ Pichlerȱ Rössl,ȱKraus,ȱFinkȱ Schmidtȱ Vecianaȱ Volery,ȱGundolfȱ

Entrepreneurial Representations, Self-Space and Metanoia

Louis Jacques Filion1

ABSTRACT This paper emphasizes both the importance of action in the entrepreneurial dynamic and the fact that entrepreneurial thinking focuses on future action. The paper is divided into three sections. It begins by suggesting that the study of representations offers a different standpoint from which to examine and understand the entrepreneurial act, based on knowledge of the preceding thought process. The second section of the paper proposes some avenues for research into entrepreneurial representations, along with some specific topics to be explored. The classic subject of opportunity identification is addressed. However, some lesser-known concepts, such as self-space, are also highlighted as a means of explaining the learning and other elements leading up to entrepreneurial activity. The paper ends by highlighting the need for new approaches and methodologies for research into representations about entrepreneurship and innovation.

INTRODUCTION The purpose of this paper is to help understand the entrepreneurial act and the thinking process that precedes it. Entrepreneurship research has tended to focus on elements that are more easily measurable, and has paid less attention to the connections between the elements in the so-called “black box” – in other words, the thinking process that precedes entrepreneurial action, and the cognitive representations that explain variations in the entrepreneurial act. Readers who are less familiar with the notion of entrepreneurial representations will find expressions in the text that, although not defined here (for lack of space), have been addressed in more detail in previous texts (Filion, 1991; 2004; 2007; 2008), and in texts by other authors mentioned in this paper. These expressions include terms such as “mental models”, “reflexive approaches”, “cognitive approaches”, “images” and “Weltanschauungen”, all of which are specific to the field of representations. In this paper, the term “entrepreneurial actor” is used to refer to entrepreneurs, venture creators, intrapreneurs, technopreneurs, ecopreneurs and micro-entrepreneurs – in other words, anyone who plays an entrepreneurial role in

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Louis Jacques Filion is Rogers-J.A.Bombardier Professor of Entrepreneurship, HEC Montréal, 3000 Ch. Cote Ste-Catherine, Montreal, QC,Canada H3T 2A7 [www.hec.ca/chaire.entrepreneurship;[email protected]].

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an organization or in society. “Visionary thinking” refers to the ability to anticipate and think projectively. ENTREPRENEURSHIP: A SUBJECTIVE WORLD As others have pointed out, it will be difficult for entrepreneurship to progress from its current status as a field of study to become a scientific discipline unless more extensive knowledge can be acquired on the entrepreneurial act, and in particular on the thinking system that precedes it. The expression of entrepreneurship requires action, in the form of an activity system. This is one of the fundamental differences between entrepreneurship and the rest of the social sciences. Sociologists think about what society is, but do not necessarily need to become involved in social activity, whereas entrepreneurial actors know they must first think about parameters that will enable them to anticipate the future, and then take action. In other words, they must develop projective thinking with a view to action, if they are to design and set up an organizational system that can trigger changes in the market. Emerging sciences: different languages but a shared culture The subjectivist and constructivist schools of thought use a highly diverse vocabulary. Although the structural elements in each model are similar, the terms used to understand and organize thinking differ considerably from one approach to the next. This is clear from the work of the pioneers who created some of the emerging schools of thought, including Ackoff (1999), Checkland (1999), Churchman (1971) and Senge (1990). The authors who developed and continue to develop reflexive approaches do so in highly divergent contexts and within very different topics and disciplines. Despite these differences, however, they appear to share a basic culture. Although terminology and approaches may differ, the premises serving as a basis for understanding and structuring thought generally share the same values, goals and structures. They are all based on the study of the representations and interpretation methods used by human beings to understand their world. Given that the subjectivity of the entrepreneurial actor is a key element in the field of entrepreneurship, this therefore appears to be a promising field for subjectivist approaches. The first part of the paper introduces and situates the subject, while the second part proposes some avenues for future research on entrepreneurial representations. ENTREPRENEURSHIP AND REPRESENTATIONS: A MULTITUDE OF POTENTIAL AVENUES As we saw earlier, representations are important in understanding the structure of entrepreneurial thinking and activity. In this section, we propose some avenues for research to generate new knowledge that will help guide the design of learning for future entrepreneurs.

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Entrepreneurial actors, representations and entrepreneurial opportunities Entrepreneurial actors have long been associated with the ability to identify business opportunities (Fayolle and Filion, 2006). However, given that this paper includes entrepreneurial actors who work in social, non-profit and non-business contexts, we will refer to these opportunities – which form the basis of the entrepreneurial process – as entrepreneurial opportunities. The term includes not only business opportunities, but also opportunities for entrepreneurial expression in a variety of contexts. We view an entrepreneurial expression as one that necessarily involves differentiation and innovation that adds value over what existed previously. It is the ability to identify and develop these entrepreneurial opportunities that enables entrepreneurial actors to stand out, innovate and contribute added value. The process is clearly a highly subjective one, and representations can play a major role in preparing entrepreneurial actors for this role. Entrepreneurial actors must know the characteristics of their sector in order to target niches (gaps or spaces), and then imagine and design methods of occupying those niches or spaces through innovation. They must therefore be familiar with the value chain in the product or service design, production and marketing process in the chosen sector. Their representation of the target niche is a key element in the entrepreneurial process, as is the representation of how to develop that niche (see Figure 1 below). An understanding of these representations and their links with the design and implementation of entrepreneurial projects is a core element of the entrepreneurial process. Figure 1: Entrepreneurial actors and entrepreneurial process

Value Entrepreneurial actors

chain

Representations of entrepreneurial opportunities

Entrepreneurial projects

Entrepreneurship and entrepreneurial opportunities Identification of entrepreneurial opportunities has often been described as a core element in separating entrepreneurial actors from other people. This is an area in which representations are highly appropriate as a research field, since the identification of entrepreneurial opportunities is a highly subjective act that cannot really be understood without some knowledge of the mental model that forms the prism through which a person perceives and interprets reality. Careful study of several hundred entrepreneurs through semi-structured interviews lasting between four and five hours, over a period of more than 20 years, has allowed the author of this paper to examine the opportunity identification and development process in great detail (Filion, 1990; 2002; 2004; 2008). Based on our research, it is possible to divide the process into sequences showing how the representations evolve 3

over time. Figure 2 below presents some of the structural referents derived from the field data. It should be noted that the process involves a large number of relationship interactions that are not shown in the figure. We briefly explain the basics of this process below, to show the numerous potential research avenues deriving from the representations of each sequence in the model. Interest in a given field

Identification of an entrepreneurial opportunity

Design of the transformations required to develop the opportunity identified

Implementation of the entrepreneurial system

Learning

Corrections

Figure 2: Identification and development of entrepreneurial opportunities as a basis for the entrepreneurial process Many people believe the entrepreneurial thinking process ends with the identification of an entrepreneurial opportunity and is then replaced by a managerial thinking process. In reality, however, this is rarely the case. Once an opportunity has been identified, the would-be entrepreneur must make many adjustments in order to imagine a vision that will allow him or her to design the transformations required to develop that opportunity (Filion, 1991).

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Eventually, the entrepreneurial system will be designed and implemented, and learning and corrective action will follow. Throughout the process, decisions – in some cases many dozens of decisions – will have been made before the entrepreneurial process is launched. The creation of an entrepreneurial system requires managerial, technical and strategic skills, as well as human and relationship abilities. The main point here, however, is that what we refer to as the “identification of an entrepreneurial opportunity” in fact consists in the transformation of a host of elements which, in turn, allow the entrepreneurial opportunity to be developed and lead to the creation of an entrepreneurial activity system. Representations are an important element in understanding this process. The entrepreneurial process perceived as an inter-subjective relations system The entrepreneurial process is often perceived as being an individual phenomenon. However, based on our study of several hundred entrepreneurial actors in the field, we have concluded that the entrepreneurial process is in fact highly interactive. Entrepreneurial actors who succeed are often regarded by the media as “super-heroes” who owe their success to nobody but themselves. In the real world, however, this is not the case. Some humility and prudence is required. Each entrepreneurial actor has his or her own definition of success. Despite this, more than 90% of them, if asked to explain their success, will mention a mentor or another person who has facilitated or supported the visionary process throughout the design and implementation phases. Figure 3: Reciprocal representations and intersections between the entrepreneurial actor and the facilitator members of his or her entrepreneurial system Facilitator members of the entrepreneurial system

Entrepreneurial actor

Level of reciprocal knowledge Level of reciprocal acceptance Level of reciprocal integration

Extensive research has been done on the relations systems and social capital of entrepreneurial actors, but very few authors have studied representations of the relationship intersections between entrepreneurial actors and facilitator members of their entrepreneurial systems, to understand their points of convergence and divergence – in other words, the inter-subjective cross-relationships (see Figure 3 below).

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It is clear that an entrepreneurial process requires the creation of a constantly changing interactive activity system. However, this dynamic has not really been studied from the standpoint of the reciprocal representations of entrepreneurial actors and the stakeholders in the social system created over time by those actors. Inter-subjective aspects and intersecting relationships of the entrepreneurial system The entrepreneurial system is a highly subjective system that interrelates and incorporates a set of relations composed of heterogeneous intersubjectivities. This type of structure results from highly personalized and often modelized learning. The self-learning method developed implicitly or explicitly by entrepreneurial actors helps them to negotiate their differences, and also to shape the broad range of subjectivities with which they surrounded themselves to form their managerial nucleus into a coherent whole. Senge (1990) and others have proposed models of learning in general, and organizational learning in particular. We have also examined this phenomenon, based mainly on empirical field studies of different categories of entrepreneurial actors (Filion, 1998; 2004; 2008). Figure 4 below shows key concepts derived from these field studies. Figure 4: Self-representations, representations of the entrepreneurial system and management of relationship intersections

Self-concept

Implicit concept of potential Evoked representations

Self-space Definition of others’ spaces Self-organization

Visions

Entrepreneurial structuring

Spaces to occupy Management of others’ spaces Self-expression

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There are a number of elements that could help explain the development of a visionary system and the learning that makes it possible. Self-concept and self-space are two such elements that help explain the self-organization leading to the expression of visionary thinking and ultimately to the entrepreneurial selfexpression that forms the basis of the entrepreneurial activity system (Filion, 1999a and b; 2008). In studying these elements, it is also possible to understand how entrepreneurial actors interrelate with others to structure and implement the entrepreneurial process. A basic grasp of relationship intersections is vital in understanding the emergence, development and transformation of the entrepreneurial activity system (see Figure 4 above). Self-concept and self-space as key elements in learning and entrepreneurial expression In this section, we will look at the elements underlying the preparatory learning for entrepreneurial activity. One of the key central elements of this process is known as self-space (Burns, 1979; Taylor, 1989). This term refers to the way in which actors perceive themselves, their level of self-esteem, and their perception of their own abilities, which form the basis for self-awareness and the visionary process. Learning needs can be identified only when intentions are transformed into visions – in other words, real projects to be carried out. It is here that the individual derives the interest that will push him or her to acquire learning. However, it is the self-concept that conditions the scope of the vision, the extent of the learning an actor is prepared to acquire, and the nature of the risks and actions he or she is willing to take. A number of elements are involved in building self-concept, the most important being self-space.

Self-space In every society, every individual develops a self-space whose scope depends on the ambient society’s history, social class structure, sociological characteristics, development levels, population density and other sociological factors. There is a broad range of variations depending on social, ethnic and religious diversity and education levels within the host society (Marsella, Devos and Hsu, 1985). Self-space is the person’s individual psychological space, where the evolving, functional self-concept is located. Self-space is the spatial and systemic configuration surrounding the self-concept. The extent of the boundary determines the level of flexibility available when forming and developing self-concept. Self-space is the psychological distance that both connects and separates individuals. It is dependent on the space that social custom sets aside for each person. Self-space results from the social compromises and formal and informal conventions governing human relationships in a given society. The notion of psychological space has not been widely discussed in management and entrepreneurship literature. Yet, it plays a key role in explaining the type of entrepreneurial behaviour leading to differentiation and to innovation that we observed in our empirical studies of entrepreneurial actors. Figure 6 below summarizes the process of creating an individual psychological space or self-space. Each person functions within a given self-space that conveys certain characteristics of the sociological components making up the ambient society. However, it is influenced principally by the 7

individual’s own relations system and immediate environment – in other words, by his or her family, culture, ethnicity, education and religion – and it determines both the development and the expression of the self-concept. A handful of researchers have examined the concept of self-space (Hall, 1984; Latane and Liu, 1996). To understand the concept properly, we need to refer to certain other concepts, including liberty and its extension. The volume of standards and regulations existing within a society reflects the level of freedom or the formal self-space allocated to each individual, and may even reflect the informal self-spaces allocated to citizens by each other. As an individual grows into adulthood, he or she gradually constructs a new personal psychological space, based on his or her desired personal context and self-awareness. The same applies to would-be entrepreneurs. It is not uncommon for entrepreneurial actors to leave their families, move to other regions or even emigrate in order to build the space they need to develop on their own terms. This is a key factor in explaining how space is arranged to allow the self-concept to form and renew itself during a process. For example, a would-be leader needs a minimum amount of space to grow and achieve self-expression. If that space is not provided by the milieu, the person will move elsewhere. The self-space allocated to people from other cultures appears to be greater in most multi-cultural societies than the space people from the same culture allocate to one another. Figure 5: Self-space, self-concept, resilience, visions and activities Sociological components of the ambient society

Immediate development environment

Received self-space Activities

Self-concept

Definition of others’ selfspace Facilitation

Development of relations system Learning Self-awareness Visions Constructed self-space Context/Complexity Resilience Renewed self-concept

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Needs Intentionality

The constructed self-space will determine the extent to which self-concept can be developed. Intentionality, which is dependent on needs and contexts, will condition what can be envisioned and the learning required for action. Before they are able to take action, many entrepreneurial actors will need to select other people to facilitate the creation of an entrepreneurial activity system. The activities carried out will, in turn, influence the process of constructing the self-space and self-concept, which will change as a result. There is also a sustained inter-relationship between the epistemological system – i.e. the representations system – and the ontological system, due to the resilience that develops as the identity is formed and continues to evolve as a result of interactions with others (see Figure 5 above). We have also observed that entrepreneurial actors generally define the same type of self-space for other people that they have constructed for themselves. In the next section, we will look at some methodological topics and prospects for future research into representations. ENTREPRENEURIAL REPRESENTATIONS, TOPICS, APPROACHES AND RESEARCH METHODOLOGIES Generally speaking, university education transfers knowledge, while management training transfers expertise and entrepreneurship training transfers self-awareness and action-related skills. It is usually in entrepreneurship programs that students experience the highest levels of anxiety, because during every course they have decisions to make that could affect how they organize their own lives and the lives of the people around them. They need to learn mental models that will allow them to think and organize their actions using a minimum of resources. This is not the case for learning in other subjects, which will have less impact on their lives when it is applied. Entrepreneurial actors will experience periods of intensive reflection and activity, which will often result in fundamental changes in how they live and how they perceive themselves. Metanoia – in other words, a change of mindset (Senge, 1990) – inevitably occurs as a result of entrepreneurial learning. In many cases, it becomes an everyday element in their thinking, especially in the months immediately preceding the start of their entrepreneurial activities. The resilience they acquire and their new self-space and self-awareness will change how they think, sometimes to a significant degree. Entrepreneurial actors need a great deal of flexibility in their thinking processes if they are to be able to adjust to ever-changing contexts. Not only do they experience frequent changes, but they are also agents who initiate change. This is illustrated in Figure 6 below.

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Figure 6: Entrepreneurial system: representations, visions and metanoia

Representations

Entrepreneurial opportunities

Visions

Sharing of the vision

Social capital

Metanoia Change Development

Implementation

Learning Resilience

Facilitation

The elements shown in Figure 6 clearly illustrate the need for research into entrepreneurial representations, via the topics proposed in Table 1 among others. The table is by no means an exhaustive list, but suggests the main elements about which entrepreneurial actors must think as they prepare to take action.

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Table 1: Entrepreneurial representations and proposed research topics and methodologies Entrepreneurial representations and research topics

Entrepreneurial representations and research methodologies

Self-representations maintained by entrepreneurial actors

Retrospective History Life stories Biographical analyses

Evoked representations of potential career paths

Cognitive mapping

Notions of craft, hierarchy, boundaries, sector, mar- Systemic approaches ket, anxiety, learning, resilience, success Interpretative approaches Quantitative methodologies Representations of the entrepreneurial craft and crafts related to entrepreneurial success

Cognitive mapping Systemic approaches

Representations of the environment and of the sector

Perceptive and comparative methodologies

Representations of entrepreneurial opportunities

Approaches using creativity

Projective, visionary thinking

Projective approaches Systemic approaches

Shift from dream to vision to action

Systemic approaches Approaches using creativity

Entrepreneurial processes

Qualitative approaches and methodologies

Construction of self-space and others’ space Definition of intersections between self and others

Relationship approaches

Relationship between thinking and action

Constructivist methodologies

Entrepreneurial culture and reciprocity

Humanist approaches Constructionist approaches

We cannot overemphasize the importance of the right fit between the research topic and the chosen methodology (Filion, 1999a). Clearly, qualitative methodologies will generally be the best fit for research into representations. However, many of the related topics could be investigated using quantitative methodologies or a combination of quantitative and qualitative methodologies.

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CONCLUSION The core element of entrepreneurship is a proper grasp of the entrepreneurial act. One of the key elements explaining the entrepreneurial act is the entrepreneurial actor’s thinking prior to the act, but paradoxically, it is also one of the elements that have received the least attention from researchers. The first section of this paper situated the subject, while the second proposed some potential research topics and the third offered some thoughts on the proposed research topics and appropriate research methodologies. The main purpose of proposing topics that have received little attention from researchers in the past was to try to show that there are still unexplored areas in the field of entrepreneurship, and especially in areas that could be addressed using reflexive approaches and methodologies. A considerable amount of work still remains to be done to design new research methodologies that are more suited to the topic of entrepreneurial representations. Perhaps researchers themselves need to practise metanoia and develop new mental models of their own.

REFERENCES Ackoff, R. L. (1999) Ackoff’s Best. His Classic Writings on Management. New York: Wiley. Burns, R. B. (1979) The Self-Concept: In Theory, Measurement, Development and Behaviour. New York: Longman. Checkland, P. (1999) Systems Thinking, Systems Practice. 2e éd.(First edition 1981), Chichester: Wiley. Churchman, C. W. (1971) The Design of Inquiring Systems. New York: Basic Books. Fayolle, A. et L.J. Filion (2006) Devenir entrepreneur. Paris : Village Mondial. Filion, L.J. (1990) Les entrepreneurs parlent. Cap-Rouge, QC.: Éditions de l’entrepreneur. Filion, L.J. (1991) “Vision and Relations: Elements for an Entrepreneurial Metamodel”, International Small Business Journal, 9, 2 : 26-40. Filion, L.J. (1998) “Two Types of Entrepreneurs: The Operator and the Visionary - Consequences for Education”, Rencontres de St-Gall 1998 (Sept), Swiss Research Institute of Small Business and Entrepreneurship at the University of St. Gallen. Published in: Pleitner, Hans Jobst (Ed.) Renaissance of SMEs in a Globalized Economy, 261-270. Filion, L.J. (1999a) “Empirical Systems Modeling Methodology (ESM): Applications to Entrepreneurial Actors”. In Wagner, J.A.III (Ed.) Advances in Qualitative Organization Research, Stamford, CT: Jai Press, 2: 201-220. Filion, L. J. (1999b) “Self-space and vision”. 6th International Conference of the U.K.S.S. In: Castell, A. M., A.J. Gregory, G.A. Hindle, M.E. James, G. Ragsdell (Eds.). Synergy Matters, New York/London: Kluwer Academic/Plenum, 613-618. Filion, L.J. (2002) Savoir entreprendre. Montreal: Presses de l’Université de Montréal. Filion, L. J. (2004) “Operators and visionaries: Differences in the entrepreneurial and managerial systems of two types of entrepreneurs”. International Journal of Entrepreneurship and Small Business, 1, 1 / 2:35-55. 12

Filion, L.J. (2007) «Vision et facilitation dans un contexte de PME.» Dans : Filion, L.J. (Sous la dir.) Management des PME, Montréal : ERPI; Paris : Pearson Éducation, Chap. 24 : 351-366. Filion, L.J. (2008) «Les représentations entrepreneuriales, un champ d’étude en émergence.» Dans : Filion, L.J. et C. Bourion (Sous la dir.) Les représentations entrepreneuriales. Revue Internationale de Psychosociologie, 14, 32 et Éditions ESKA : 13-43. Hall, E. T. (1984) Le langage silencieux. Paris : Seuil. Latane, B. and J.H. Liu (1996) “The Intersubjective Geometry of Social Space”. Journal of Communication, 46, 4:26-34. Marsella, A. J., G. Devos and F.L.K. Hsu (Eds.) (1985) Culture and Self: Asian and Western Perspective. New York and London: Tavistock. Senge, P. (1990) The Fifth Discipline. New York: Doubleday. Taylor, C. (1989) Sources of the self :The Making of the Modern Identity. Boston, MA: Harvard University Press.

13

Service Competence and Firm Performance – towards a Concept for Strategic Differentiation for Small and Medium-sized Enterprises

Urs Fueglistaller Swiss Research Institute of Small Business and Entrepreneurship University of St. Gallen Dufourstr. 40 a CH-9000 St. Gallen Tel.: 0041 71 224 71 00 E-Mail: [email protected] Thomas Schrettle Swiss Research Institute of Small Business and Entrepreneurship University of St. Gallen Dufourstr. 40 a CH-9000 St. Gallen Tel.: 0041 71 224 71 00 E-Mail: [email protected]

Abstract Even though small and medium-sized enterprises (SMEs) play a vital role in world economies, strategic management research provides only limited insight into SME strategies. Scholars to date have mainly emphasized size-related disadvantages which small firms have to face in comparison to large corporations. In this paper we therefore argue that SMEs can gain competitive advantage through providing high quality services to their customers. Based on their service competence, long-term service relationships enable small business firms adapt their services to changing business environments and to offer customized services and hence to outperform large corporations. To stay ahead of competitors, providers must have a bundle of dynamic capabilities to constantly reshape their activities and the way they operate. In this paper, we introduce service competence as a construct to describe these capabilities and develop a set of propositions on how organizational antecedents influence the service competence of an organization. ***

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The explanation why some firms perform better than others has always been of central interest for strategic management research. But as the research field evolves, small and medium-sized enterprises, while playing a vital role in all economies, have not received adequate attention by strategic management scholars yet. Most research to date has mainly concentrated on large corporations which are dominant both in researchers´ and in public awareness. Concerning small firms, disadvantages which SMEs face on behalf of their limited resource endowment were emphasized albeit they can gain considerable competitive advantages due to limited size and the resulting flexibility (Fiegenbaum & Karnani, 1991), which enables SMEs to offer customized products and services, which large corporations cannot. There is considerable potential for strategic differentiation in this ability. As mature economies have turned from industrial towards more service-oriented economies, organizations have to adapt to the requirements of this “information-based, knowledge-driven, service-intense economy” (Bartlett & Goshal, 2002: 34). While firms face considerable challenges from that, there are also large opportunities arising, especially for SMEs with the ability to adapt rapidly and to provide value to the markets through commitment and superior services. Due to high degrees of flexibility and good knowledge of their customers´ present and future preferences, small business firms have the potential to differentiate themselves on behalf of service quality (Zeithaml et al., 1992). We hence consider service quality as a strategic option and as an opportunity for SMEs to compete against large corporations. However, changing business contexts make acquired competences obsolete or create new opportunities, either of which may require new competences to be built (Daneels, 2008). Service providers have to constantly develop their services and the way they are produced. We hence introduce service competence as a dynamic capability: a "firm's ability to integrate, build and reconfigure internal and external competencies to address rapidly changing environments" (Teece et al., 1997: 516). A high level of service competence to continuously adapt to changing customer needs hence is crucial for SMEs to secure present and future success in a highly competitive market context. It has to be mentioned that we consider this to be valid both for b2c and b2b relationships and also for small product companies as they can differentiate themselves by offering superior value to customers through complementary services. While dynamic capabilities have been of central interest in management research in recent years, yet there is still limited understanding on how organizational antecedents can influence dynamic capabilities and thus on how a high level of service competence can be achieved. Entering a discussion about service competence as a dynamic capability, we hence make some propositions on the relationship between organizational antecedents and service quality. By doing this, we strive to contribute to the existing literature in three different ways. First, we try to improve our knowledge about strategic options for small and medium-sized enterprises, as we think that this is an underdeveloped research field. Second, we contribute to the service management literature by integrating a dynamic capabilities perspective into the existing research. Third, we want to give indications to practitioners in SMEs on how to develop the abilities to successfully compete within their markets. Therefore we will do a short review of the relevant literature in the next part of this paper and we will develop a set of propositions as a basis for further research.

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Theoretical Background and Propositions Strategic management as a research field is basically concerned with the creation, survival and performance of all different types of organizations and with the notion that organizations cannot survive over time unless they can deliver some sort of value for the society in which they are embedded (Schendel & Hitt, 2007). In mature economies, value creation is increasingly based on the delivery of services to customers as they have turned from industrial towards more service-oriented economies. Accordingly, organizational scholars are more and more interested in service settings. However, we believe that there is still considerable imbalance within the field: while strategic management research has created huge amounts of knowledge in the last decades, the literature has mainly concentrated on large corporations. Even though SMEs constitute the bulk of enterprises in all economies and make a major contribution to economic growth, private sector output and employment, they are not adequately represented in management research. Especially with the rise of the Industrial Organization in the late 1970s, economics has provided the theoretical basis for strategic management with structural characteristics of an industry as main determinants for firm performance (Porter, 1980). A major line of research has hence concentrated on firm size as an important factor and on the positive relationship between firm size and profitability. As a result, many scholars emphasized size-related disadvantages in terms of economies of scale, experience curve effects, brand name recognition, managerial expertise, access to capital and bargaining power with suppliers and buyers and it was widely assumed that large firms have all strategic options that SMEs have, but not vice versa (Fiegenbaum & Karnani, 1991). Management research still suffers from what Robinson and Pearce (1984) called the “little big business” syndrome: concepts of strategic management are mainly developed in a large firm context and then just scaled down to be used in small businesses. However, SMEs are not just smaller versions of large companies, but differ significantly in the way they interact with their environments (Shuman & Seeger, 1986). It is direct interaction with customers which helps small business firms to build sustainable service relationships based on profound knowledge of customer requirements and preferences and which enables them to offer personalized or customized services that are unique and special (Zeithaml et al., 1992). Customers and providers get to know each other and develop a relationship and a history of shared interaction which they can draw on in future interactions (Gutek et al., 1999). In increasingly service-oriented economies, which are dominated by service focused businesses, SMEs hence have the potential to gain an advantage over large firms and to outperform rivals if they can deliver greater value to their customers or if they can deliver equal levels of value at lower cost. Recent research has indicated the selection of a strategy is especially important for SMEs as they cannot pursue different strategic configurations with contradictory strategic and organizational demands due to limited resource endowments (Ebben & Johnson, 2005). We hence argue a clear strategic positioning on behalf of service quality and service relationships is necessary to realize competitive advantages and to outperform rivals in today´s business environments. Strategic positioning arises from the choice of activities performed and from the way they are performed; or in other words, competitive strategy is about “being different” (Porter, 1996). Service activities are hence the basis for competitive advantage and for strategic differentiation along the different dimensions of service quality (Zeithaml et al., 1992) which is determined by levels of Reliability: The ability to fulfill customer requirements dependably and accurately, 3

Empathy: A customer´s perception of individual attention given by service providers, Assurance: Employees knowledge and courtesy and their ability to inspire trust and confidence, Responsiveness: The willingness to provide prompt service and to give immediate assistance, Tangibles: The appearance of physical facilities, equipment, personnel and written materials. Porter (1996) pointed to the problem that failures often occur in distinguishing between organizational effectiveness and strategy. An improvement of operational effectiveness, while it is essential for performance, might not be sufficient for long term survival, as “best practice” is easily imitable by rivals and does not offer a unique position in a market. In fact one might argue that service quality is rather an aspect of the operational processes than of an actual strategic position. But while operational effectiveness means performing the same activities better than rivals, our understanding of service quality, though including high levels of efficiency in operations, is mainly based on offering different service activities along the dimensions of service quality. While high levels of service quality are time-consuming and imply higher cost compared to lowquality services, we assume that good service quality allows firms to gain a price premium for their services. Furthermore, good quality leads to a higher number of service encounters and sustainable service relationships which positively influences efficiency in service operations. The ability to offer customized services hence provides the potential for superior firm performance and to gain a unique market position. Proposition 1: A high degree of service quality is positively related to firm performance. New strategic positions are created through change, as new customer groups develop or new needs emerge while societies evolve, new distribution channels appear and new technologies are developed (Porter, 1996). Changing business environments make acquired competences obsolete or create new opportunities, either of which may require new competences to be built (Daneels, 2008). Based on our prior research (Fueglistaller, 2001), we hence want to introduce service competence as a dynamic capability which enables organizations to continuously adapt to changing customer requirements and business environments: a "competence to add competences" is required to change services, they way they are produced or the customers who buy them (Daneels, 2008; Teece et al. 1997; Winter, 2003). A capability is defined here as a “high-level routine (or collections of routines) that, together with its implementing input flows, confers upon an organization´s management a set of decision options for producing significant outputs of a particular type” (Winter, 2003: 991). There is a sometimes confusing variety in the literature on labelling capabilities: while different authors refer to the concept as (core) competence, collective skill, complex routines, architectural competence or best practice, the term “capability” will be used throughout the paper to prevent confusion This corresponds to recent literature on the topic (Schreyögg & Kliesch-Eberl, 2007). According to the taxonomy of Winter (2003), routines are zero-level capabilities or operational capabilities. They can be defined as “repetitive, recognizable patterns of interdependent actions, carried out by multiple actors” (Feldmann & Pentland, 2003: 95). To gain competitive advantage, organizations in a highly dynamic environment have to systematically reconfigure capabilities over time, using dynamic capabilities. These are firstorder capabilities, enabling organizations to constantly change their organizational capabilities (Winter, 2003). Zollo and Winter (2002) additionally introduce learning mechanisms as meta-routines to change dynamic capabilities, which could be defined as second-order capabilities. Using the general 4

definition of Zahra et al., the qualifier “dynamic” distinguishes one type of capability from another type of a lower order (2006: 921). Different competences within firms have been identified as dynamic capabilities and have been used to explain why some firms perform better than others. Research and Development (R&D) for example is a technological competence of a higher order which preserves enterprises from technological obsolescence. Marketing as a second-order customer competence helps firms to better serve a particular customer segment: First-order customer competence consists of specific knowledge of customers' needs and preferences, purchasing procedures, competitors and communication channels. Second-order competences help firms to identify new customers, to acquire knowledge about them and adjust the activities operated (Daneels, 2008). In this paper, we propose service competence as a dynamic capability which enables service providers to continuously improve their offered services and their service processes in accordance with technological changes, customer needs and other changes in business environments. We argue that service competence enables service firms to anticipate changes in the market and to translate these changes into strategies accordingly. Recent literature has emphasized the role of employee adaptiveness for service customization and customer satisfaction on an individual level (Gwinner et al., 2005). In this paper, we want to discuss how antecedents and structures on an organizational level influence service competence as a dynamic capability and hence service quality as a strategic option. The influence of organizational antecedents on organizational outcomes and relationships is a recurring theme in strategic management research (Aiken & Hage, 1968). However, there is yet no general understanding of how formal and informal coordination mechanisms can influence the emergence of dynamic capabilities within organizations by knowledge creation and absorption, knowledge integration and knowledge reconfiguration (Verona & Ravasi, 2003) This paper will therefore examine the impacts of centralization of organizational decision making, firm connectedness, and formalization on service competence and make some propositions accordingly. A positive relationship between service competence and service quality is assumed. Several authors have pointed to the impact of the adoption of semistructures on organizational change and innovativeness (Brown & Eisenhardt, 1997) and also on the creation of dynamic capabilities (Teece, 2007; Verona & Ravasi, 2003). An important feature of a semistructure is a moderate level of centralized decision making. Centralization refers to the extent to which processes of decision making are concentrated within an organization. High concentration narrows communication channels and reduces quality and quantity of innovative ideas (Jansen et al., 2006). A high degree of centralization hence decreases knowledge utilization and explorative activities in organizational learning (Jansen et al., 2006; Jaworski & Kohli, 1993). Furthermore, a strong centralization of decision making structures causes an intense top-down knowledge flow from higher levels to lower levels in hierarchy, while horizontal knowledge flows are constricted concomitantly, which also has a negative impact innovative action and on organizational adaptiveness (Mom et al., 2007). Thus it is assumed that centralized decision making negatively impacts organizational service competence due to limited knowledge utilization and an overly concentration on existing routines: Proposition 2: There is a negative relationship between a unit's centralization of decision making and the emergence of service competence. Previous empirical research has strongly indicated the importance of intra-firm communication for organizational change and innovation (Brown & Eisenhardt, 1997) and for the creation of dynamic 5

capabilities (Verona & Ravasi, 2003). Knowledge sharing between business units can be fostered by the existence of knowledge networks (Hansen, 2002) and thus positively influence the creation of capabilities. Especially the roles of informal interfirm or interunit relations affecting knowledge transfer and organizational learning have been highlighted in recent years, because horizontal as well as bottom-up knowledge flows increase within informal networks, which positively influences explorative activies of firm management (Jansen et al., 2006; Mom et al., 2007). Informal social relations thus have a highly positive impact on interaction and exchange of information as well as the integration and utilization of the acquired knowledge (Jaworski & Kohli, 1993). Therefore, a positive relationship between connectedness and the creation of dynamic capabilities within an organization is assumed because organizations can make better use of acquired knowledge and of customer interactions. Proposition 3: There is a positive relationship between a unit's connectedness and the emergence of service competence. Another hierarchical structure within organizations which is supposed to affect the creation of capabilities is formalization of rules, procedures and structures which hampers experimentation and ad-hoc problem solving procedures (Jansen et al., 2006). Articulation and codification of organizational knowledge is necessary to put down formal procedures in a document or manual which can act as a frame of reference for individual and organizational behaviours. It hinders deviation of organizational actors from structured behaviour and existing knowledge (Jansen et al., 2006). The cognitive simplification by formalizing and codifying existing knowledge has been argued to be advantageous to behavioural adaption in dynamic environments (Brown & Eisenhardt, 1997; Zollo & Winter, 2002). Concerning the effect on the emergence of service competence, we assume that the formalization of procedures and rules has a positive impact, as it canalizes and aligns individual activities which leads to a higher effectiveness, lower failure rates and short response times. However, when a certain degree of formalization is reached, further increases are assumed to negatively affect the adaptiveness and innovation as the variance of knowledge creation is limited considerably and actors strongly focus on existing capabilities instead of searching for new ones. Organizational inertia can thus be created by excessive formalization. The existence of an optimal level of formalization within organizations is therefore assumed: Proposition 4: There is an inverted U-shaped relationship between a unit's formalization and the emergence of service competence.

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Discussion and Limitations We consider this paper and the developed propositions as a first step to discuss the role of service competence for organizations and especially for SMEs as a strategic option. As organizational structures like centralization, connectedness and formalization in small firms differ significantly from large corporations, we argue that there is considerable potential for strategic differentiation on behalf of service quality and service customization. To keep ahead of competitors, service competence as a dynamic capability is essential to continuously adapt these services. Various limitations of this paper merit discussion which could however point to interesting directions for future research. Due to limited space, we just point to two of the most important ones in this section. First, while service competence has been described as a bundle of capabilities, we did not point out, which capabilities we include in the construct. Yet we do not have a precise definition of service competence and this is an important point for our future research. Second, numerous scholars remain sceptical about the value and contribution of the Capability-based View (CBV), as the literature is still riddled with inconsistencies, overlapping definitions and inherent contradictions (Winter, 2003; Zahra et al., 2006). As capabilities are per definition highly patterned activities, some authors criticize the assumption of a dynamic process of renewing capabilities as being contradictory in itself. They consider it a deep-seated discrepancy which even challenges the whole concept of dynamic capabilities (Schreyögg & Kliesch-Eberl, 2007). Thus, the discussion about the usefulness of the CBV to explain competitive advantage is still ongoing and further research will be needed to better understand the role of dynamic capabilities.

References Aiken, M., Hage. J. (1968): Organizational Interdependence and Intra-Organizational Structure. American Sociological Review, 33: 912-930. Bartlett, C.A., Goshal, S. (2002): Building Competitive Advantage Through People. Sloan Management Review, 43: 34-41. Brown, S.L., Eisenhardt, K.M. (1997): The Art of Continuous Change: Linking Complexity Theory and Time-pased Evolution in Relentlessly Shifting Organizations. Administrative Science Quarterly, 42: 1-34. Daneels, E. (2008): Organizational antecedents of second-order competences. Strategic Management Journal, 29: 519-543. Ebben, J.J., Johnson, A.C. (2005): Efficiency, flexibility, or both? Evidence linking strategy to performance in small firms. Strategic Management Journal, 26: 1249-1259 Feldmann, M.S., Pentland, B.T. (2003): Reconceptualizing Organizational Routines as a Source of Flexibility and Change. Administrative Science Quarterly, 48: 94-118. Fiegenbaum, A., Karnani, A. (1991): Output flexibility - a competitive advantage for small firms. Strategic Management Journal, 12: 101-114. Fueglistaller, U. (2001): Tertiarisierung und Dienstleistungskompetenz in schweizerischen Klein- und Mittelunternehmen (KMU) - Konzeptionale Näherung und empirische Fakten. St.Gallen: KMUVerlag 7

Gutek, B.A., Bhappu, A.D., Liao-Troth, M.A., Cherry, B. (1999): Distinguishing Between Service Relationships and Encounters. Journal of Applied Psychology, 84: 218-233. Gwinner, K.P., Bitner, M.J., Brown, S.W., Kumar, A. (2005): Service Customization Through Employee Adaptiveness. Journal of Service Research, 8: 131-148 Hansen, M.T. (2002): Knowledge Networks: Explaining Effective Knowledge Sharing in Multiunit Companies. Organization Science, 13: 232-248. Jansen, J.J.P., Van den Bosch, F.A.J., Volberda, H.W. (2006): Exploratory Innovation, Exploitative Innovation and Performance: Effects of Organizational Antecedents and Environmental Moderators. Management Science, 52, No.11: pp. 1661-1674. Jaworski, B.J., Kohli, A.K. (1993): Market Orientation: Antecedents and Consequences. Journal of Marketing, 57: 53-70. Mom, T.M.J., Van Den Bosch, F.A.J., Volberda, H.W. (2007): Investigating Managers´ Exploration and Exploitation Activities: The Influence of Top-Down, Bottom-Up, and Horizontal Knowledge Inflows. Journal of Management Studies, 44: 910-931. Porter, M.E. (1980): Competitive Strategy. New York: Free Press. Porter, M.E. (1996): What is Strategy? Harvard Business Review, 74 (6): 61-78. Robinson, R.B. Jr., Pearce, J.A. II. (1984): Research thrusts in small firm strategic planning. Academy of Management Review, 9: 128-137. Schendel, D., Hitt,M.A. (2007): Comments from the Editors. Strategic Entrepreneurship Journal, 1: 1-6 Schreyögg, G., Kliesch-Eberl, M. (2007): How Dynamic Can Organizational Capabilities Be? Towards a Dual-Process Model of Capability Dynamization. Strategic Management Journal, 28: 913-933. Shuman, J., Seeger, J. (1986): The Theory and Practice of Strategic Management in Smaller Rapid Growth Firms. American Journal of Small Business, 11: 7-19. Teece, D.J. (2007): Explicating dynamic capabilities: the nature and microfoundations of (sustainable) enterprise performance. Strategic Management Journal, 28: 1319-1350. Teece, D.J., Pisano, G., Shuen, A. (1997): Dynamic capabilities and strategic management. Strategic Management Journal, 18: 509-533. Verona, G., Ravasi, D. (2003): Undbundling dynamic capabilities: an exploratory study of continuous product innovation. Industrial and Corporate Change, 12: 557-606. Winter, S.G. (2003): Understanding Dynamic Capabilities. Strategic Management Journal, 24: 991995. Zahra, S.A., Sapienza, H.J., Davidsson, P. (2006): Entrepreneurship and Dynamic Capabilities: A Review, Model and Research Agenda. Journal of Management Studies, 43: 917-955. Zeithaml, V.A., Parasuraman, A. Berry, L.L. (1992): Strategic Positioning on the Dimensions of Service Quality. in Swartz, T.A., Bowen, D.E., Brown, S.W. (Eds.): Advances in Services Marketing and Management: Research and Practice, JAI Press, Greenwich, CT, Vol. 1:207-228. Zollo, M., Winter, S.G. (2002): Deliberate Learning and the Evolution of Dynamic Capabilities. Organization Science, 13: 339-351.

8

Tradition and Innovation in Japanese Family SME

Katsuyuki KAMEI Professor, Kansai University, Faculty of Informatics, Takatsuki Campus 2-1-1 Ryozenji, Takatsuki, 569-1052, Osaka, Japan E-mail : [email protected] [email protected] Tel. 00 81 (0)726-90-2407 Fax. 00 81 (0)726-90-2493

1. SME in Japan from a viewpoint of Family Business : Definition of Family Business and Particularity of Japanese Family Business 2. Longevity of Japanese Firms : Survival Strategy of “Shinise”, tradition and innovation 3. Territorial Legitimacy of SME, “Kyoto way of Entrepreneurship” 4. Biggest Problem of Japanese Family SME : succession and transmission

Abstract This study analyses the actual situation of Japanese Family SME. In Japan there exist many traditional family firms that are more than 100 years old. In spite of their existence, the academic research on family firms has just begun in Japan. Through our study based on the rare Japanese research and work in this field like Kurashina (2003) and Nomura(2007), we try to bring some new aspects in SME research. Thus we contribute to the following points: 1)analysis of stats-quo of family SME in Japan, 2)analysis of Japanese traditional enterprises, 3) territorial legitimacy and 4)classification of the problem of succession of Japanese family SME. Keywords: family SME, longevity, Japan, succession, territorial legitimacy

Introduction It is possible to recognize the existence of two oldest enterprises of the world in Japan. The first one is Kongo Gumi founded in 578 and the second oldest Houshi in 717. The second is the oldest member of Hénokiens association(association of enterprises which has more than two hundred years). According to Japanese Academic Association of Management Practice (Nihon Jissen Keiei Gakkai) in Japan there exist more than three thousand enterprises more than two hundred years and 15 thousand enterprises more than hundred years. Most of them are family enterprises which has their own characteristics. In spite of the existence of such enterprises of long tradition which went across the centuries, the research on family enterprises has just begun. For example, the transmission of enterprises is the subject rarely treated by the academic people in Japan compared with the situation in European countries.

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The multitude of family firms more than hundred years in Japan could bring elements of reflexion in the field of family enterprise. In the same time, the research carried out in Western countries could enrich the data and reflexions in the countries where the research in this field is still at the stage of manuscripts like Japan. This part presents the rare examples such as Nomura(2007), Kurashina (2003), Goto (2007) and Saito (2007). In this study, firstly we demonstrate the present situation of family enterprises in Japan. Secondly, we analyse the context of very old Japanese family SMEs, which are called “Shinise”. We present how these traditional SMEs survive by evolving their original core business with innovation. Thirdly we focus on the territorial legitimacy of family SME by presenting “Kyoto way of entrepreneurship”. Fourthly we analyse the biggest problem that family SMEs confront in Japan : succession and transmission problem.

1. SME in Japan from a viewpoint of Family Business : Definition and Particularity 1.1. What is family enterprise? As Amann et Allouche (2000) underlined, there exists the difficulty of the definition in the field of family enterprise research. Family enterprises are defined by management and capital control as follows. Definition of Stockholm School of Economics (SSE) : Family enterprise is a firm controlled by a family with at minimum one of the following three characteristics. 1) at least three members of the family are active in the enterprise, 2) the enterprise is under the family control since at least two generations, 3) the members of the family who control the enterprise have an intention to transmit the control to the next generation. Definition of Bocconi University: Family enterprise meet at least one of the two following conditions: 1) Managerial criteria : the majority of directors of the board are from the family 2) Patrimonial criteria : one family possesses the majority of stocks with voting right of the enterprise. 1.2. Reconsideration of the definition of family enterprise : Japanese definition In Japan, family enterprises have one particularity compared to their western homologues : la minority of the participation in the capital. This inferiority of participation rate by the family of course mainly in larger scale enterprise can be explained with two traditional reasons : (1) existence of the high rate of succession tax, the highest in the world (the highest zone was 70% before the reform in 2002 which went down to 50%) and also (2) cross participation system around major financial institutions which constituted le keiretsu (group). Especially taxation over the succession is much higher than western countries. Therefore after several generations, detention rate in capital by founding family decreased considerably in Japanese family enterprises. If the family doesn‟t possess enough asset to pay succession tax, they are obliged to sell some of their assets. This particularity of family enterprise urged some Japanese authors to define rather differently with multi-criteria. 2

The definition of Kurashina (2003) is based on 4 category of enterprises as mentioned below. According to Kurashna, the family enterprises are the type B, C and D. Type A : In non family enterprise, institutional investors are main stock holders and the manager possesses only limited number of the stock. Type B : Family members stay major stock holders and they keep the position of direction (president, vice president and general manager Type C : Founding family stay major stock holder but no one from the family occupy the high level of direction. Family member occupy only the position of simple member of the board. Type D : Founding family in not major stock holder. But they participate in the direction as a top management. Goto (2007) presents the definition as follows : Family enterprises are the enterprises where members of founding family engage not only in management but also in the ownership up to the level to occupy the position of president and major owner or simple owner of the capital. Saito (2007) presents more clear and precise definition : Family enterprise are the enterprise which meet the two following conditions : (1) Detention rate in capital by the family is superior to 5 %. (2) One family member occupies : whether the position of president or chairman of the board. 1.3. Family enterprise research in Japan 1.3.1. Why academic research on family enterprises is so late in Japan ? The research from the viewpoint of family enterprise is almost inexistent in Japan. In spite of the superiority in number of ancient enterprises, family enterprises was not treated as a academic subject until the research of Kurashina(2003). They tend to be considered as anachronic organisations. In addition, the series of scandals committed by family enterprises affected a lot the image of this type of firms in Japan. There can be the lessons to take from the actual situation in Japan where family enterprises are not looked up to in general. 1.3.2. Why do Japanese people take more and more interest in family business recently ? The research of Kurashina (2003) showed the general particularity and the financial performance of family enterprises in Japan. Kurashina (2003) confirmed the results of western research in the context of Japan. The main result is superiority of financial performance of family controlled enterprises compared with non family enterprises. The research by Kurashina (2003) is well confirmed by western academia like Allouche, Amann, Jaussard and Kurashina (presented in Japan as an article in the journal, Nikkei Venture, April 2007). It is the research conducted by Kurashina in collaboration with French researchers on the structure of family enterprises in France and in Japan. (“Do Ownership and Family Control influence Financial Characteristics and Performances?”) Another pioneer in family business research is Goto. An article by Goto (2007) on the longevity of Japanese family enterprises is published as one chapter in Handbook of Research on Family Business in 2007.

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Recently, with the efforts by pioneers, the public and the academia in Japan begins to take interest in the enterprises whose capital and management are under the control of founder‟s family. The journal, Nikkei Venture published the special issue on Family Business in April 2007. The Family Business Conference took place in Okinawa in 2007. A book on family business will be published in September 2008 under the direction of Kurashina. We can observe this tendency of interest in this field. This recent interest in family enterprise in Japan can be explained by the change of the society according to Sakaiya (2007). The industrial society up to 1980s put emphasis on the material richness. In such society which focused on mass production, the big enterprises directed by professional managers were appreciated. On the other hand, the society of the 21st century respects the spiritual richness which emphasizes the quality of satisfaction rather than the material richness in number. This can mean the time of the personality of the managersw. In such a epoch, family enterprises whose decision making is agile, are at the advantage as shown in Table1 according to Sakaiya(2007).

Table 1: Change of Society Value Society of Knowledge Value (after 1980s)

Society of Industrialisation (up to 1980s)

Happiness in “quality of satisfaction”

Happiness in “quantity of material possession”

Subjective Social Flexible

Objective Scientific Generalisation

Impasse of nation‟s dirigisme Advantage to family business Return of the religion

Nation‟s dirigisme Advantage to big business Decline of the religion Source : Sakaiya (2007), pp.28-29.

2. Longevity of Japanese Firms : Survival Strategy of “Shinise”, tradition and innovation 2.1. Multitude of ancient enterprises more than hundred years in Japan Japan is marked by the existence of very ancient enterprises. This country surpasses the other countries in the world by the longevity of its enterprises. It is possible to recognize the existence of two oldest enterprises of the world in Japan. The first one is Kongo Gumi founded in 578 and the second oldest Houshi in 717. The second is the oldest member of Hénokiens association(association of enterprises which has more than two hundred years). According to Japanese Academic Association of Management Practice (Nihon Jissen Keiei Gakkai) in Japan there exist more than three thousand enterprises more than two hundred years and 15 thousand enterprises more than hundred years. Most of them are family enterprises which has their own characteristics. This superiority in number of ancient enterprises in Japan is illustrated in the tables in annex of this paper. 4

Most of these ancient enterprises are familial and keep their own characteristics. In Japanese language, these ancient enterprises are called “Shinise”, which means old house. And some of these “Shinise” remain SME and non listed company. 2.2. Why do such a many centenary enterprises exist in Japan? Then why do such a many centenary enterprises exist in Japan? Goto (2007) shows three reasons for this longevity of Japanese firms. 1) Economic development during Edo period (Tokugawa period) (1603- 1867) which made possible for entrepreneurs to create their enterprise. 2) Management skills of the family who founded their enterprise during Edo period. Their skills reached the level of perfection before the 18th century. They are skills concerning business organization, separation of ownership and management, personal management, accounting system and risk management. 3) Education and philosophical background mainly with the education of “Shingaku” at the school for the children of merchants, which made possible for people to respect the concepts like family unity, sense of engagement, willingness to contribute in the work, obligation for the society, etc. The most influential philosopher of “Shingaku” was Baigan ISHIDA (1685-1754) who emphasized the importance of persistence and advised merchants to contribute to the society. As for Nomura (2007), he noted the following points on the longevity of “Shinise” in Japan. 1) Most of “shinise” are family enterprises non listed in the stock market. 2) Three reasons for the longevity of “Shinise” can be mentioned as follows: (a) The main territory of Japan has never been invaded by the foreign countries in the history. This country has never experienced the civil war which could destroy the whole territory. (b) There exists the sense of respect which gives much importance to the continuity of enterprise rather than the parental linkage. Therefore in Japanese family enterprises, there exists the time where someone outside the family is designated as president so as to do the linkage with the successor from the family. There is also the case where president from the family pass the presidency of the husband of his or her own daughter, which can be observed often in the family enterprises in the Osaka region. (c) There exists the culture and the tradition which respect the manufacturing. 3) Common caracteritics of centenary “Shinise” are as follows : (a) The ability to adapt to environmental change. (b) The ability to understand the environmental change. (c) The ability to respect and maintain their core competence.

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2.3. Survival Strategy of “Shinise”, tradition and innovation The study on long-lived family firms by Nomura(2007) shows how manufacturing “Shinise” survived not only by keeping their traditional value but also by developing the innovation based on their technological core competence since the foundation. Nomura(2007) emphasizes respect for “manufacturing” and “persistency” as a main common value at Japanese long-lived family SMEs. Considering the reality of SME, of course it was not at all easy for them to survive. Many of family SMEs have experienced several risk and crisis. In terms of strategic risk management or survival strategy, family SME manufacturers invented

and

innovated new technology based on their core business. The exaples of family SMEs innovating as a survival strategy are (1)Hayashibara, which innovated to be a research and development type company to manufacure biochemical product based on their core competence of the origine, syrup and jelly fabrication, (2)traditional sake manufacturer, Yushin shuzo, which innovated to make health care products using there competence to treat rice and (3) Fukuda metal at Kyoto, a specialist of golden powder who innovated to manufacture indispensable metalic parts in cellular phone in the world like microwave proof shield. The following part is the illustration of the history of these three companies as examples of LongLived Japanese Family SMEs in Japan (LLJFSME) succeeded in innovating with their respect for “manufacturing” and “persistency”. 2.3.1. History of Hayashibara Company 1883 Hayashibara's Beginning as a Starch Syrup Factory 1933 The third generation President; Ichiro Hayashibara introduced the processing technology with a new millet jelly by the acid saccharification method. 1950 Thanks to a technological improvement, Hayashibara becomes largest millet jelly manufacturer in Japan 1959 It succeeds in using Dempn that is a worldwide invention, and it succeeds in the industrialization of the technology that manufactures glucose. 1961 The former president Ichiro died. Ken assumes the position of a new president. Conversion from millet jelly manufacturer to R&D type enterprise. 1970 "Hayashibara Biochemical" is founded aiming at the creation of the Dempn chemical industry. 1988 The natural type interferon α obtains the authorization of the Ministry of Health and Welfare as anti-cancer drug. 1994 The technology that manufactures "Trehalose" from Dempn in large quantities and at a low price is developed. (http://www.hayashibara.co.jp/english/company/history/main.html, 27th of June, 2008)

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2.3.2. History of Yushin-Brewer Ltd. 1854 The brewing started in 1854 at Utazu-cho, Kagawa Prefecture 1972 Takashi Tokuyama, the fifth generation, assumes the position of the president. 1974 Beginning of R&D on the possibility to invent the other products from rice 1987 The bathing liquid of "Rice power extract"→Smash hits with the sales of three million bottles a year 1999 Invention of "Rice power extract No.11" with the moisture maintenance ability improvement action of the skin.→The first material in the world with effect of skin moisture maintenance ability improvement. 2006 Development of law alcohol Sake.

2.3.3. History of Fukuda Metal Foil & Powder

1700 Founder Benseki Fukuda opens Izutsuya, an establishment for the sale of gold and silver leaf/powder in Muromachi, Kyoto. 1715 Renseki, the second master of the enterprises, assumes leadership of the family business 1775 Renseki writes Ie-no-Nae (Family Seedlings), which becomes a family dictum. 1921

Manufacture of copper powder for production of carbon brushes begins

1933

Fukuda Ju Tin Aluminum Foil Manufacturing Co., Ltd. founded

1935 Fukuda Ju Shoten becomes joint-stock company. 1936 First successful prototype electrolytic copper powder in Japan 1937 Begins development of electro- deposited copper foil : manufacture of aluminium foil (via beating process) begins. 1938 Prototype production of tin powder and nickel powder using electrolytic method succeeds 1940 Corporate name changed to Fukuda Metal Foil & Powder Co., Ltd. 1956 Production of electro-deposited copper foil for printed circuit boards begins. 1983 Copper powder developed for use in anti-EMI electromagnetic shielding. Monthly production reaches 1,000 tons, annual production reaches 10,000 tons 1995 Dramatic increase in orders for metal foil and powder used in lithium-ion and other types of high-performance batteries (http://www.fukuda-kyoto.co.jp/01info-e/01-enk.html, 27th June in 2008)

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3. Territorial legitimacy of ancient enterprises in Japan 3.1. Construction of a Typology for Entrepreneurs Based on Legitimacy The following typology shown in Table2 was developed by Marchesnay (2003) and is a function of competitive legitimacy and territorial legitimacy. Marchesnay (2003) explains territorial legitimacy as two methods of integrating entrepreneurs‟ sense of belonging within their territory. It means the extent to which entrepreneurs are attached to the territory, namely the degree of their affection for the land to which they belong. This includes the length of existence of their enterprise within this territory. The other method is the degree of intensity they feel towards other actors within the territory. Marchesnay (2003) called the resulting four categories as isolated, notable, nomad and enterprising.

Table 2 - Typology of Entrepreneurs Based on Competitive and Territorial Legitimacy Competitive Legitimacy Territorial Legitimacy

Strong Weak

Weak Notable

Strong Enterprising

Isolated

Nomad Source : Marchesnay(2003)

3.2. Territorial legitimacy of ancient enterprises in Japan : “Kyoto way” of entrepreneurship One characteristics of Japanese ancient enterprises is their strong territorial legitimacy. This tendency is proved also in family enterprises in general. The rate of family enterprises is high outside the capital. Thus we can observe the existence of family enterprises which are recognized in regional territory. For example, Kyoto city, ancient historical capital of Japan is famous for the birthplace of family enterprises which made a world wide success. The examples are Kyocera, Murata, Horiba, Nihon Densan, Nintendo, Omron, etc. Of course this ancient capital is the center of traditional “Shinises”. Kamei (2007) explained the entrepreneurial atmosphere of Kyoto as shown below. 3.2.1.The Kyoto Way Kyoto, which was the capital about 1,200 years ago, is the cultural heart of Japan. The beautiful surroundings and the cultural heritage attract people from all over the world. Kyoto is also a centre of entrepreneurial and technological prowess. „Kyoto method‟ entrepreneurship has given birth to world-class ventures such as Horiba, Omron, Kyocera and Nintendo. Numerous Japanese books have been written on the „Kyoto model‟ of entrepreneurship or management. It is true that researchers have discussed whether such a particular Kyoto model exists. From previous studies, we can summarise the following characteristics of Kyoto as an entrepreneurial background as well as those of entrepreneurs. 8

3.2.2. The Coexistence of Tradition and High-Tech In addition to most traditional Japanese industries, Kyoto has a higher share of manufacturers than the national average. Within manufacturing, high-tech and electronics-related industries have become prominent. This coexistence of tradition and high-tech is a rare particularity of this city. 3.2.3. Traditional Industries as a Source of High-Tech The existence of traditional industries in this ancient capital of Japan has given birth to several technological revolutions. The Kimono industry has been the source of numerous evolutions in technology. The traditional pottery and porcelain industry, Kyo yaki or Kiyomizu yaki, has been the root of ceramic businesses such as Kyocera or Murata. Technology in the production of sake has led to innovation in biotechnology. 3.2.4. Respect for Honmamon (something with real value) Manufacturers at Kyoto are said to be honmamon-oriented. They esteem the quality of their products. They scorn imitating others in preferring differentiation to low pricing. 3.2.5. The Spirit of Shinise (traditional families of merchants and craftsmen) Within traditional families of merchants and craftsmen—or Shinise, which literally means „old shop‟—we can note the following tendencies: survival rather than profit, quality rather than quantity, respect for relationships with customers, sound business practices, anti-conservatism, a spirit of entrepreneurship, management without debt, cash flow-based management and horizontal networks with other firms. Kyoto does not have any big capitalists. Thus, enterprises in Kyoto are independent of large-scale capitalists (zaibatsu), and therefore, are unlikely to become subcontractors (shitauke). 3.2.6. Small Market Kyoto itself is a small market compared with Tokyo. New enterprises with little legitimacy have difficulty in cultivating the domestic market outside Kyoto. They often look to overseas markets. Thus, Kyoto ventures such as Horiba, Kyocera and Murata went to the US market first and then returned to exploit the domestic market. 3.2.7. An Academic Town much like a Juku Embracing the Whole City The city of Kyoto has the highest percentage of academics per capita in Japan, with more than 40 universities and 50 research organizations. Seven out of 12 Japanese Nobel Prizes have been awarded to researchers from Kyoto University. The cooperative atmosphere between industry and academia in this city can be considered as a big Juku (private school) embracing the entire city. Many student entrepreneurs started their enterprises from this academic centre. The first student venture was by Mr. Masao Horiba, who founded the enterprise named after him in 1945.

9

4. Problem of Family SME 4.1. What are the problems which family SMEs meet? Just as western scholars, Kurashina (2003) clarifies that there exists three categories of particular problems in family enterprises. (a) Business Problem : Corporate Governance. Compliance . Conflict between family director and non familial directors. Transmission of intangible assets.. (b) Ownership Problem : Transmission of enterprise. Transmission of asset. (c) Family Problem : Conflict among the generations. Conflict among the brothers and the sisters. Among the above mentioned points, Kurashina considers the transmission as a major problem at family enterprises. 4.2. Risk management in the transmission of family SME Here we describe the succession of family SME from the viewpoint of risk management by the successor. The typology of the risks in the transmission of family SME can be described as below : (1) Internal risk of the 2nd generation manager - Risk of personality which is not suitable for the management - Risk of incompetence (Kamei, 2006a) - Risk of psychology : jealousy, complexity et rivalry facing with his or her parent predecessor who don‟t get retired soon - Risk of conflict with his or her parent predecessor. - Risk of bad transmission of know-how. (2) External risk concerning the customers - Risk of comparison with his or her parent - Risk of the loss of customer who attached to his or her parent (3) Internal risk facing with employees - Risk of comparison with his or her parent - Risk of the loss of the employees who attached to his or her parent (jealousy and hostility from employees) (4) Financial risk of the succession of assets: - Financial risk concerning the succession tax - Financial risk concerning the succession of the stocks (5) Risk directly linked to the succession: 10

- Risk on the succession of ownership (financial risk) - Risk on the succession of management (relational risk) (6) Risk of the family conflict after the death of president/predecessor: - Risk of the conflict concerning the ownership succession - Risk of the conflict concerning the management succession (7) Risk in succession process: - Risk before the succession (education et initiation) - Risk during the succession (integration et reprise) - Risk after the succession (manoeuvre of his or her own strategy) The modality of risk management by the successor of the 2nd generation is described as follows : (a) education as a successor (management skill, entrepreneurship and leadership), (b) training of decision making and risk taking : promotion of risk sense (c)enlargement of perspective) (d) communication (with his or her parent, the other members of the family, the customers, the employees) In summary, the risks in succession of family SME are complicated in terms of (1) inseparability of financial aspects and human aspects with much possibility of the family conflict and (2) necessity of long years‟ preparation. The potential risks of human factor are difficult to identify. As for the risk evaluation, the possibility of predecessor‟s disappearance is absolute and the financial impact is enormous. The preparation tends to be late avec the secret of family succession : difficulty in formulating, implicit dialogue and discretion. Once a succession parent/child are pursued, it is no longer possible to avoid these risks but take them. In terms of risk reduction or risk transfer, on the financial aspect, there exist institutional and professional aids, but for psychological and human aspect, accompanying professionals like consultants, lawyer and certified accountant hesitate. Finally on the risk communication relating to each process, accompanying the dialog between different generations becomes very important. 4.3. Transmission and succession of enterprises in Japan 4.3.1. Accelerated ageing of managers of SME In Japan, ageing of the population is a well-known reality and demographical decrease has already begun. The managers of SME are already aged. 18% of them are more than 70 years old in 2002, three times as many as that in 1979 (METI, 2004). SME transmission is thus a major concern in this country as in the European countries. 4.3.2. Necessity of the promotion of enterprise transmission According to a study on the retirement of SME owner in Japan (METI, 2005), when an entrepreneur leaves an enterprise, 81.9% of the cases are by liquidation and only 18.1% of them are by transmission to another entrepreneur. Some SMEs could have continued their activity, if they had found a successor or a buyer. Having seen the situation where the exit rate surpasses the entry rate and also the necessity to revitalize the economy, it is vital to maintain the enterprises which could 11

have survived if a successor or a buyer had been found. The government begins to elaborate the modality to resolve this type of problems which SME meet in the actual situation. 4.4. Family Transmission In Japan, like in Europe, the rate of family transmission of SME is decreasing. At the beginning of the 1980s, the rate of the transmission of the enterprise to the child was near 80%, that to other family member 14% and that to the third party 6%. These rates between 1999 and 2003 changed to 42%, 20% and 38%.(TSR, 2003)

Table 3: Reason not to succeed the enterprise (multiple responses possible)

Son

Daughter

Mean

Little hope of development

50.3%

42.8%

45.8%

Do not have ability

22.2%

45.3%

36.0%

Comfort at the actual work

23.8%

12.3%

16.9%

Unsatisfactory Life level

21.1%

9.1%

13.9%

Stability to stay salaried worker

9.2%

15.2%

12.8%

Family do not agree

10.3%

6.5%

8.0%

Others

13.5%

15.9%

15.0%

(METI, 2005, p.190) The reasons why the children of the entrepreneurs do not want to take the relay of family SME are described with the background factors such as (1)bad economic situation since 1990s, (2)open possibility to choose the other profession, (3)decrease of the value of the succession of family asset among the young generation. (See Table3)

4.5. Reform in 2008 After the discussion of different committees on this subject, the tax reform planned in 2009 will put into practice sooner than expected. The law facilitating the transmission of familial SME entered in parliamentary discussion in February 2008 et would be effective as soon as October 2008. This proposes for the non listed stocks by admitting the delay of payment of these taxes. More concisely, this delay is applicated to 80% of stocks with voting right which the successor takes over. No taxable part of these stocks will pass from 10 to 80%. In Japan, the following conditions of application of this law require the possession of stocks during 5 years after the succession : - the successor should stay representative of the company, - the successor should maintain 80% of employees, - the successor should continue to possess the company. As long as the successor possesses his or her stocks, he or she is beneficiary of this support on the tax. If the successor dies, these taxes are erased. 12

Conclusion As a conclusion, from our study which show a different aspect of Japanese SMEs, we would like to make following propositions : 1) Necessity to demand the evolution of family SMEs which have three axes to respect (a) corporate governance, (b) compliance and (c) transparence. 2) Consideration of family SMEs which are not listed in the market within the research on family business. 3) Lesson from long-lived Japanese Family SMEs (LLJFSME) : tradition and innovation as a survival strategy. 4) Consideration of territorial legitimacy of SMEs. 5) Distinction and cooperation between SME research and Family Business research for the sake of academic synergy.

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References Allouche J.,& Amann B.(2000), L‟entreprise familiale : un état de l‟art, Finance Contrôle Stratégie, 3(1), 33-79. Dana, L. P. (2007), “Japan,” Asian Models of Entrepreneurship – From the Indian Union and the Kingdom of Nepal to the Japanese Archipelago: Context, Policy and Practice, Singapore & London: World Scientific, ISBN 981-256-878-6. Goto, T. (2006), Longevity of Japanese Family Firm, in Poutziouris, Smyrnios et Klein ed.(2007), Handbook of Research on Family Business, Edward Elgar Publishing. Kamei, K.(2006a) «Gestion des risques liés au management par la deuxième génération -Cadre théorique et Cas au Japon -», 1ères Journées Georges Doriot, Deauville, 16 et 17 mars 2006 , CDROM. Kamei, K.(2006b)«Risque et Esprit d‟entreprise -Essai de comparaison franco-japonaise du point de vue du facteur humain dans la gestion des risques-», 18èmes Journées Nationales des IAE, Congrès du Cinquantenaire, Montpellier, 3 et 4 avril 2006, CD-ROM. Kamei, K.(2007) ˝Kyoto way of Entrepreneurship˝ The 5th Interdisciplinary European Conference on Entrepreneurship Research (IECER), Montpellier Management School，March 1, 2007. Kurashina, T.(2003), Family Kigyo no Keieigaku (Gestion des Entreprises Familiales), Toyo Keizai Shinpo Sha (in Japanese). Marchesnay M. et K. Messeghem K.(2003), «Introduction: Présentation de la Spécificité de la PME», in Cas de stratégie de P.M.E., coordonné par Marchesnay M. et Messeghem K., Editions ems. METI(2005), White Paper on SMEs in Japan. Ohnishi, T.(2006), Kyoto way: venture spirit to succeed (Kyoto Ryu to iu Hoho), Ed. Nozomi, in Japanese. Nomura, S.(2007), Chozyu Kigyo wa Nihon ni Ari (Existence des Anciennes Entreprises au Japon), Nihon Hoso Shuppan Kyokai (in Japanese). Sakaiya, T. (2007), Family Kigyo ga Attotekini Yuri na Jidai (Le Temps Favorable pour les Entreprises Familiales), Nikkei Venture, avril 2007 (in Japanese). Saito, T.(2007), Family Kigyo no Riekiritsu ni kansuru Jissho kenkyu (Etude sur la Profitabilité des Entreprises Familiales), Bulletin of Center of Excellence –Waseda Institute for Corporation Lawa and Society, Vol.7 (in Japanese). Seki, M. and S. Seki(2005), Incubator and SOHO (Incubator to SOHO), Ed. ShinHyoron, in Japanese. Suematsu, C. (2002), Kyoto Style Management – Strategy of Moduling (Kyoyoshiki Keiei Module ka Senryaku), Nihon Keizai Shinbun, in Japanese. Tanaka, M.(1999), Small Business in the Japanese Economy, Kansai University Press. Tokyo Shoko Research(TSR)(2003), Kokeisha Kyoiku ni kansuru Jittaichosa (Formation du successeur) (in Japanese) Yokozawa, T. (2000) Shinise Kigyo no Kenkyu (Etude sur les Entreprises Traditionelles), Seisansha shuppan (in Japanese).

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Annex : Japanese Enterprises mentioned in the list, “the world’s 100 oldest continuously family-owned firms” Rank

1

2

26.

33.

37.

Firm Profile Kongo Gumi Construction/Osaka, Japan Founded: 578 40th generation www.kongogumi.co.jp Prince Shotoku brought Kongo family members to Japan from Korea more than 1,400 years ago to build the Buddhist Shitennoji Temple, which still stands. Over the centuries, Kongo Gumi has participated in the construction of many famous buildings, including the 16th-century Osaka castle. Today the family continues to build and repair religious temples and manage general contracting from its Osaka headquarters. Hoshi Ryokan (Member of Hénokiens Association) Innkeeping/Komatsu, Japan Founded: 718 46th generation www.ho-shi.co.jp/jiten/Houshi_E/ According to legend, the god of Mount Hakusan visited a Buddhist priest, telling him to uncover an underground hot spring in a nearby village. The hot spring was found, and the priest requested that his disciple, a woodcutter‟s son named Garyo Saskiri, build and run a spa on the site. His family, known as Hoshi, have run a hotel in Komatsu ever since; the current structure houses 450 people in 100 rooms. Toraya Confectioners/Tokyo, Japan Founded: pre-1600 17th generation www.toraya-group.co.jp Japan‟s oldest traditional confectionery has been making the sweet delicacy known as wagashi since its founding in Kyoto by Enchu Kurokawa. Kikkoman (Member of Hénokiens Association) Soy sauce/Noda, Japan Founded: 1630 www.kikkoman.com On the run after her husband‟s military defeat and death at the Osaka castle in the 16th century, widow Shige Maki escaped to Noda, Japan, and established a small business making what was to become soy sauce. The family business became a unified company in 1917 when eight branches of the Mogi family merged their companies together. The company has grown into the world‟s largest producer of soy sauce products. Gekkeikan (Member of Hénokiens Association) Sake/Fushimi, Kyoto, Japan Founded: 1637 13th generation www.gekkeikan.co.jp The Gekkeikan brewery was established by Jiemon Okura in the town of Fushimi. The quality of its sake has led to the company‟s appointment as the official supplier of the Japanese Imperial household. *WE by William O‟Hara and Peter Mandel http://www.familybusinessmagazine.com/oldworld.html

(consulted in February 12, 2008)

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(German original see next pages; deutsche Originalfassung siehe folgende Seiten) Critique and perspectives of entrepreneurship research – a maze with exit routes? Josef Mugler and Matthias Fink

Abstract: This contribution criticises the practices pursued by entrepreneurship research to date and discusses possibilities of reorientation. Against the background of a historical view of the evolution of the research object, "entrepreneur/entrepreneurship", it presents seven propositions concerning the deficits of present-day entrepreneurship research. It demonstrates why entrepreneurship research has not been successfully established as a standardised discipline up to now. Moreover, it identifies mechanisms that are widespread in this field and systematically impair the development of useful results in the practice of research. Possibilities of incremental adjustment and a radical reorientation are discussed as perspectives for the future development of fruitful entrepreneurship research.

Proposition 1: The products of entrepreneurship research are produced for its own benefit: a majority of researchers aim to compile a list of lectures at conferences and publications in journals with the greatest possible reputation within the relevant scientific community in order to optimise their own careers. Proposition 2: The scientific community in the field of entrepreneurship research is strongly fragmented in itself. If there is any networking, it takes place in the context of small international virtual research groups that emerge around individual dominant researcher personalities. Proposition 3: Entrepreneurship researchers work on highly specialised questions on the basis of small and distorted random samples that are only relevant to very specific contexts.

Proposition 4: Methodical claims are far more important as a quality criterion for research work than the substance and practical relevance of the work. Proposition 5: The results of entrepreneurship research (unlike those of research in science and technology) are hardly ever taken note of outside the relevant scientific community and can hardly even be applied.

1

Proposition 6: A holistic approach to research may make it possible for statements to be formulated at a lower level of abstraction, but a lower level of abstraction leads to a higher degree of complexity which, in turn, aggravates the condensation and thus the communication of the research results. Proposition 7: Entrepreneurship research focuses on the nexus between input and output data. The "black box" situated in between is often ignored because it is more difficult to access.

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Kritik und Perspektiven der Entrepreneurshipforschung – Ein Irrgarten mit Auswegen?

Josef Mugler und Matthias Fink

Kurzfassung: In diesem Beitrag wird die bisherige Praxis in der Entrepreneurshipforschung kritisiert und es werden Möglichkeiten der Neuausrichtung diskutiert. Vor dem Hintergrund einer historischen Betrachtung der Entwicklung des Untersuchungsgegenstands „Unternehmer/Unternehmertum“ werden sieben Thesen zu Defiziten der aktuellen Entrepreneurshipforschung präsentiert. Es wird aufgezeigt, warum es bislang nicht gelang, die Entrepreneurshipforschung als einheitliche Disziplin zu etablieren. Darüber hinaus werden Mechanismen identifiziert, die in weiten Teilen dieser Fachrichtung verbreitetet sind und in der Forschungspraxis systematisch die Erarbeitung brauchbarer Ergebnisse behindern. Als Perspektiven für die zukünftige Entwicklung einer fruchtbareren Entrepreneurshipforschung werden einerseits Möglichkeiten einer inkrementellen Adjustierung und andererseits eine radikale Neuausrichtung diskutiert. 1. Skizze der historischen Entwicklung der Entrepreneurshipforschung Die ersten Publikationen in den Wirtschaftswissenschaften zu Eigenschaften und Bedeutung des Unternehmers stammen aus dem romanischen und englischen Sprachraum (z.B. Cotrugli 1458, repr. 1990; Cantillon 1755; Turgot 1766; Smith 1776). Als erster namhafter Vertreter der deutschsprachigen Entrepreneurshipforschung gilt Joseph Alois Schumpeter (1912; zur Würdigung: Pichler 2008, 41). Auch der Soziologe Max Weber (1904/1905) findet mit seiner Untersuchung über die Auswirkungen der calvinistischen Ethik auf unternehmerisches Verhalten nach wie vor Beachtung (Gamm, Hetzel und Lilienthal 2001). Die sogenannte Österreichische Schule der Nationalökonomie erschloss erst später die Rolle des Unternehmers in Marktprozessen (Mises 1949; Kirzner 1973/1979). Gemeinsam ist diesen frühen Beiträgen ihr gesamtwirtschaftlicher bzw. soziologischer Ansatz. Die mit der Gründung der ersten Handelshochschulen (1898: Wien, St. Gallen, Leipzig) einhergehende Verselbständigung der Betriebswirtschaftslehre befasste sich zuerst mit Rechnungswesen- und Rationalisierungsfragen und allenfalls indirekt mit unternehmerischem Verhalten. In Diktaturen und Planwirtschaften entbehrt(e) eine Auseinandersetzung mit unternehmerischem Verhalten der realen Grundlage, da hier der Unternehmer nicht Akteur auf unsicheren Märkten, sondern allenfalls Lobbyist gegenüber dem Planungsapparat oder Problemlöser im Gefolge von Fehlplanungen sein kann. Nach dem Ende der Plan- und Kriegswirtschaft (1945) standen die Unternehmer im deutschen Sprachraum vor neuen Rahmenbedingungen: Sie mussten sich nun nach Jahren der teilweise durchaus auch als 3

bequem wahrgenommenen Bevormundung in der neuen „freien Marktwirtschaft“ bewegen und bewähren. In den Wirtschaftswissenschaften wurde diese Herausforderung von einer Forschergruppe unter der Führung von Alfred Gutersohn (St. Gallen), Karl Rössle (München) und Walter Heinrich (Wien) aufgegriffen und seit 1948 im Rahmen der Rencontres de St. Gall bearbeitet. Daraus ergaben sich auch länderübergreifende Forschungsprojekte, wie z.B. STRATOS (The STRATOS-Group 1990) und INTERSTRATOS (Haahti, Hall, und Donckels 1998). Obwohl die gewählte Terminologie ursprünglich den Begriff des Gewerbes in den Vordergrund rückte, war den an den Rencontres de St. Gall teilnehmenden Forschern die Bedeutung der Unternehmerpersönlichkeit von Anfang an bewusst: Der Kernerfolgsfaktor von Gewerbebetrieben wurde in einer bedarfsorientiert individualisierten Leistungserstellung gesehen, die durch eine Unternehmerpersönlichkeit ermöglicht wird, die umfassend beruflich ausgebildet ist und ihre eigene Leistung in das Unternehmen einbringt (sinngemäß nach dem Protokoll der Rencontres de St. Gall 1949). Die Bedeutung der Unternehmerpersönlichkeit erkannt zu haben, ist also keineswegs das Verdienst der Entrepreneurshipforschung der letzten zwei oder drei Jahrzehnte. Allerdings fanden diese Bemühungen der Rencontres-Gruppe im Mainstream der Betriebs- und Volkswirtschaftslehre der ersten Jahrzehnte der Nachkriegszeit nicht immer die gebührende Beachtung. Lange Zeit befassten sich nur wenige konzeptionelle Beiträge in der Betriebswirtschaftslehre des deutschen Sprachraums mit der Funktion und Persönlichkeit des Unternehmers (z.B. Oberparleiter 1951; Hofmann 1968). Erst im Gefolge der Sättigung wichtiger Massengütermärkte sowie der ersten unter anderem durch exzessive Nutzung von Großtechnologien herbeigeführten Umwelt- und Energiekrisen setzte eine stärkere Beachtung des Unternehmer-Phänomens ein. Wofür der Förderkreis Gründungsforschung seit seiner Gründung im Jahr 1987 kämpfte, wurde gegen Ende der 90-er Jahre des 20. Jahrhunderts Realität: 1997 entstand die jährliche Fachkonferenz „Gründungsforschungsforum“ (G-Forum), und 1998 wurde der erste Stiftungslehrstuhl für Entrepreneurship besetzt (European Business School in OestrichWinkel). Heute gibt es im deutschen Sprachraum über 60 Lehrstühle für Entrepreneurship an Universitäten und Fachhochschulen und mehrere einschlägige Fachkonferenzen. Innerhalb der letzten zehn Jahre hat die Entrepreneurshipforschung (auch) im deutschen Sprachraum eine explosionsartige Entwicklung genommen und ist heute wohl schon nicht mehr zu überblicken. Gleichzeitig kann eine isolierte Betrachtung dieses Forschungsfeldes innerhalb bestimmter Sprachgrenzen vor dem Hintergrund der regen Interaktion mit der internationalen Scientific Community heute nicht mehr sinnvoll erscheinen. In rund 60 einschlägigen, großteils englischsprachigen wissenschaftlichen Fachzeitschriften wird weltweit publiziert. Daher ist es schwierig, einen Überblick über die Schwerpunkte dieses Forschungsfeldes zu geben. Als Beispiele für derartige Bemühungen seien genannt: Haahti, Hall, und Donckels 2003; Busenitz, Pages West III, Shepherd, Nelson, Chandler und Zacharakis 2003; Davidsson und Wiklund 2001; Fallgatter 2004; Franke 2007; Fueglistaller, Müller, und Volery 2008; Grichnik 2006; Hobson 2006/2007; Klandt, Koch, und Knaup 2005; Kollmann und Kuckertz 2006; Low 2001; Sarasvathy 2004; Shane und Venkataraman 2000; Steyaert 4

2005; Veciana 2007; Venkataraman 1997; Welsch 2004). Diese Übersichten und Bewertungen zu wiederholen oder zu ergänzen, ist allerdings nicht Ziel dieses Beitrags. 2. Kritik der aktuellen Entrepreneurshipforschung Angesichts der Unüberschaubarkeit des Angebots an „Produkten“ auf den Basaren für wissenschaftliche Waren, den Fachzeitschriften und Konferenzen, fragen sich viele „Konsumenten“, was mit diesen Waren eigentlich geschieht. Wer soll sie verwenden, wer hat wirklich einen Nutzen davon? Für die „Anbieter“ genügt es oft schon, dass sie ihre Ware „präsentiert“ haben. Das bringt den Autoren zwar kein Entgelt aus dem Verkauf an Abnehmer, die sich von dieser Ware einen Nutzen erwarten, aber ein Entgelt in Form von „Bonuspunkten“ für die Karriere. Man stelle sich vor: Es ist Markt, kein Kunde geht hin, und die Verkäufer sind dennoch zufrieden. Die Seminarräume bei großen Konferenzen, wo nicht selten zehn und mehr Parallelsitzungen stattfinden, sind oft nur von Anbietern gefüllt, die sich gegenseitig zuhören (müssen), weil sie in eine Sitzung (einen „Verkaufsstand“) zusammengepackt wurden. Andere Forscher sind selten, Unternehmer oder Manager kaum jemals anzutreffen. These 1: Die Entrepreneurshipforschung produziert für sich selbst: Ziel der Mehrzahl der Forscher ist die Zusammenstellung einer karriereoptimalen Liste von Vorträgen auf Fachtagungen und Publikationen in Fachjournalen, die innerhalb der einschlägigen Scientific Community möglichst hohes Ansehen genießen. Junge ambitionierte Forscher sehen sich mit der frustrierenden Situation konfrontiert, dass sie in der Scientific Community nur dann ernst genommen werden, wenn sie sich in ihrer Forschung einerseits auf eine extrem enge Nische spezialisieren und andererseits den thematischen und methodischen Modetrends fügen, die von einzelnen „Gurus“ im jeweiligen Forschungsbereich gesetzt wurden. These 2: Die Scientific Community im Bereich der Entrepreneurshipforschung ist in sich stark fragmentiert. Eine Vernetzung findet allenfalls im Rahmen internationaler virtueller Kleinforschungsgruppen statt, die sich um einzelne dominante Forscherpersönlichkeiten bilden. So ist es mittlerweile alltäglich geworden, dass tausende Forscher individuell, allenfalls mit Spezialisten auf demselben Gebiet verbunden, von der großen Masse aber isoliert, hoch spezifische Fragestellungen bearbeiten, indem sie häufig Querschnittsdaten aus zu kleinen, zu verzerrten und nur für einen ganz bestimmten Teil der Welt relevanten Stichproben analysieren. Durch die hohe Spezifität der untersuchten Stichproben sind die einzelnen Studien kaum miteinander vergleichbar. Sie beziehen sich häufig auf verschiedene empirische Felder, wie z.B. verschiedene Branchen, Regionen und Zeitpunkte, ohne dass eine Prüfung der Relevanz dieser Feldmerkmale für die Untersuchungsergebnisse erfolgt wäre. These 3: Die Entrepreneurshipforscher bearbeiten hoch spezialisierte Fragestellungen auf der Basis kleiner, verzerrter und nur für ganz spezifische Kontexte relevanter Stichproben.

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Während kleine Stichproben vor allem die Reliabilität der Forschungsergebnisse schwächen, schaffen unpräzise Fassungen der untersuchten Variablen vor allem Probleme der Validität. Denn dann kann die Bedeutung dessen, was z.B. mit Unsicherheit, Erfolg, kultureller Distanz, oder Produktreife gemeint ist, von Studie zu Studie unterschiedlich sein – und damit möglicherweise deren Wirksamkeit als Determinanten einer bestimmten Strategieoption verfälschen. Widersprüchliche empirische Ergebnisse können sich somit auch durch eine unpräzise Begriffsbildung ergeben. Auf der anderen Seite stehen immer anspruchsvollere quantitative und qualitative Analysemethoden zur Verfügung. Was kann man aber mit perfekten Analysen imperfekter Daten erreichen? Solche Analysen erlauben jedenfalls keine fundierten und weit reichenden Aussagen. Aber das scheint kaum zu stören, denn der Hauptzweck besteht ja darin zu zeigen, dass man die Methoden beherrscht und sinnvoll einsetzen könnte, wenn, ja wenn man eine geeignete Stichprobe zur Verfügung hätte.

These 4: Als Qualitätskriterium für Forschungsarbeiten ist der methodische Anspruch weit wichtiger als der inhaltliche Gehalt bzw. die praktische Relevanz. Was kann sich der wahrnehmende, interpretierende und handelnde Unternehmer angesichts dieser ernüchternden Situationsdiagnose von der akademischen Entrepreneurshipforschung erwarten? Nur (und nicht selten widersprüchliche) Hypothesen oder Theorien, welche eine Vielzahl von mehr oder weniger ähnlichen Entwicklungen zu erklären versuchen? Nur abstrakte Aussagen, die erst mühsam auf ihre Gültigkeit für eine konkrete Situation geprüft werden müssen? Aussagen, die nicht verlässlich sind und über deren Bedeutung endlose akademische Diskussionen geführt werden? Diese Art der Forschung ist für Unternehmer häufig weder zugänglich noch attraktiv genug. Einerseits bleibt sie teilweise unbekannt oder wird nicht verstanden. Andererseits können Unternehmer die Ergebnisse der akademischen Entrepreneurshipforschung kaum auf ihre individuellen Situationen, also die Istzustände ihrer Konfigurationen, übertragen. Die mathematische Formulierung einer allgemeinen Preis- oder Transaktionskostentheorie ist zwar allgemeingültig, aber für den Unternehmer unbrauchbar. Der „Schumpeter-Unternehmer“ – diesbezüglich durchaus dem „Kirzner-Unternehmer“ entsprechend (Hering und Vincenti 2008, 28) – ist ein auf eigenes Risiko Suchender. Er produziert Pläne nicht als Entwicklungsexperte, sondern nach dem Gesetz von „Versuch und Irrtum“. Er ist nicht der rational Planende, Abwägende, Entscheidende, Kontrollierende, der Strategien auf dem Reißbrett entwirft, sondern das Gegenteil davon. Das Suchen des Unternehmers folgt nicht wissenschaftlich fundierten Handlungsempfehlungen, sondern ist Alternative dazu. These 5: Außerhalb der einschlägigen Scientific Community werden die Forschungsergebnisse der Entrepreneurshipforschung (anders als jene der naturwissenschaftlich-technischen Forschung) kaum wahrgenommen bzw. sind kaum anwendbar. Eines der Hauptprobleme der heutigen Entrepreneurshipforschung scheint darin zu liegen, dass einzelne Mosaiksteinchen intensiv untersucht und durchleuchtet werden, ohne dass es gelingt, das Wissen über diese einzelnen Minimalausschnitte der Wirklichkeit zu einem Gesamtbild zusammenzu-

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fügen. Diesem Problem versucht der ganzheitliche Forschungsansatz entgegenzutreten, indem, anstatt auf einzelne unidirektionale Kausalbeziehungen zu fokussieren, der Versuch unternommen wird, das ursächliche Zusammenwirken diverser Faktoren bei der Entwicklung von einer Situation zur nächsten zu rekonstruieren. Während bei partialtheoretisch fundierten Arbeiten versucht wird, jene Variablen, die außerhalb des betrachteten Zusammenhanges liegen, bei der Messung konstant zu halten, streben ganzheitlich fundierte Forschungsarbeiten danach, möglichst viele Variable in die Analyse einzubeziehen. Die Momentaufnahme dieser zahlreichen Variablen und der unter ihnen bestehenden Wechselwirkungen bildet die Konfiguration (Gestalt) ab. Das Ziel solcher Forschungsarbeiten besteht nun darin, aufzudecken, welche Kräfte auf welche Weise zusammenwirken, sodass sich eine VorläuferKonfiguration im Zeitablauf zu genau einer bestimmten Nachfolge-Konfiguration weiterentwickelt. Durch die Einbeziehung einer großen Anzahl von Variablen und die Berücksichtigung multidirektionaler Beziehungen bringen solche Konfigurationsanalysen einen Komplexitätsgrad mit sich, der einfache Hypothesentests und damit Aussagen über die Wirkung einer Variablen auf eine andere nicht mehr zulässt. Die Ergebnisse von Forschungsarbeiten, die dem ganzheitlichen Forschungsansatz verpflichtet sind, haben daher zwar eine höhere Praxisrelevanz, weil sie größere Ausschnitte realer Situationen beleuchten, gleichzeitig sind aber die Ergebnisse deutlich schwieriger zu verdichten und zu kommunizieren. These 6: Im Rahmen des ganzheitlichen Forschungsansatzes können zwar Aussagen auf geringerem Abstraktionsniveau formuliert werden. Der geringere Abstraktionsgrad führt jedoch zu einem höheren Komplexitätsgrad, wodurch die Verdichtung und damit die Kommunikation der Forschungsergebnisse erschwert werden. Über die aus der Vielzahl der Verknüpfungen resultierende Komplexität hinaus gibt es eine Komplexität, die aus der Art des Zusammenwirkens der Variablen resultiert. Dieser Komplexitätsursache kann nicht mehr nur durch die Identifizierung und Messung der Ausprägungen der beteiligten Variablen beigekommen werden. Es bedarf vielmehr einer Analyse dessen, was in Prozessen vor sich geht, was also beim Aufeinandertreffen aller relevanten Variablen passiert. Die Fragestellung erweitert sich damit – metaphorisch gesprochen – von Mengenverhältnissen für Zutaten (Determinanten) zur Frage des richtigen Vorgehens beim Zusammenmischen derselben. Gleiche Zutaten, jeweils anders zusammengemischt, können bekanntlich höchst verschiedene Kuchen ergeben. Wenn immer nur Zutaten identifiziert und gemessen werden, dürfen wir uns nicht wundern, wenn gleiche Zutatenmengen immer wieder zu verschiedenen Ergebnissen führen und keine verlässlichen Regelmäßigkeiten gefunden werden. Was für die Küche gilt, gilt sinngemäß auch für den Betrieb. These 7: Entrepreneurshipforschung ist auf die Verknüpfung von Input- und Outputdaten fokussiert. Die dazwischen liegende „Black Box“ wird oft ausgeklammert, weil sie schwerer zugänglich ist.

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3. Perspektiven für die Entrepreneurshipforschung Aus den Thesen über die diagnostizierten Defizite der aktuellen Forschungspraxis werden in der Folge Vorschläge für eine Neuorientierung zukünftiger Forschungsbemühungen abgeleitet. Dabei handelt es sich einerseits um sanftere Varianten mit inkrementellen Verbesserungen und anderseits um eine radikalere Variante der Neuorientierung. 3.1. Inkrementelle Adjustierung der Ausrichtung der Entrepreneurshipforschung Theorien mittlerer Reichweite Die Suche nach verlässlichen Theorien über Kausalbeziehungen in sozialen Kontexten hat zwar die Ambitionen der Forscher angestachelt, aber kaum praktisch verwertbare Ergebnisse erbracht. Ein Grund dafür liegt im hohen, aus den Naturwissenschaften kommenden Anspruch an den Gültigkeitsbereich der angestrebten theoretischen Aussagen. Anstelle von Theorien mit dem Gültigkeitsanspruch der Naturwissenschaften („semper et ubique“) wird daher für die Sozial- und Wirtschaftswissenschaften die Generierung von Theorien „mittlerer Reichweite“ empfohlen (Merton 1949). Darunter stellt man sich vor, dass die getroffenen Aussagen „irgendwo“ zwischen extremer Allgemeingültigkeit und Individualität, beispielsweise auf typisierte Problemstellungen (Betriebstypen, Unternehmertypen, Umwelttypen usw.) mit zeitlich begrenzter Gültigkeit fokussiert werden. Ein Beispiel dafür ist im Rahmen der Entrepreneurshipforschung die empirische Fundierung der Hypothese, dass eine starke Ausprägung der klassischen Unternehmermerkmale in stabilen Kontexten die Nachteile eines schlechten Zugangs zu Kapital kompensiert (Wiklund und Shepherd 2005, S. 71). Die Hypothese ist nicht extrem abstrakt und beansprucht für entsprechend typisierte, damit relativ konkretisierte Situationen ein hohes Ausmaß an Gültigkeit. Solche Entdeckungen sind Signale an alle Akteure, die in ähnlichen Konfigurationen tätig sind: vor allem an Unternehmer, Kapitalgeber und Rahmen gestaltende Politiker. Derzeit scheinen Unternehmer aber wenig Interesse an solchen Hypothesen zu haben, die nur aus auffälligen Wahrscheinlichkeiten innerhalb einer Stichprobe beobachteter Fälle gewonnen wurden. Möglicherweise mangelt es bislang an der geeigneten Kommunikationsstrategie. Außerdem sind Entdeckungen auf der Basis von Durchschnittswerten und Varianzen sehr kostspielig und zeitintensiv (im Beispielfall handelt es sich um eine Längschnittuntersuchung). Es stellt sich daher die Frage, wer in Zukunft für diesen Aufwand aufkommen wird. Die Unternehmer? Durch von ihnen direkt bezahlte Forschungsaufträge – oder von ihnen nicht verhinderbare indirekte Verwendung ihrer Abgaben für staatliche Forschungsbudgets? Ebenso bleibt unklar, wer die Masse an Fragebögen ausfüllen oder als Interviewpartner zur Verfügung stehen wird, wenn immer mehr Anhänger dieser Art von Forschung immer mehr unübersehbare Stichproben ziehen wollen.

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Arbeitsteilung zwischen Forschern und Unternehmern Was allgemein (und daher implizit, aber nur abstrakt auch für einen Einzelbetrieb) gilt, ist das ureigenste Interessengebiet der Forschung. Das ist aber für die Praxis nicht genug, denn die Praxis befasst sich nicht mit allgemein formulierten Problemen, sondern mit den Besonderheiten des Einzelfalls. Das Allgemeingültige und deshalb Abstrakte bedarf für die Entscheidung im Einzelfall der Konkretisierung. Konkretisierungen einer allgemeinen Strategie können von mehreren Betrieben in gleicher Weise vorgenommen werden. Das könnte z.B. dann eintreten, wenn ein Unternehmensberater allen seinen Klienten dieselbe, seiner Meinung nach bewährte Strategie empfiehlt. Diese Strategien können sich dann im Wettbewerb nicht vorteilhaft voneinander abheben. Daher ist in der Regel jene Strategie wertvoller, die im Konkreten einzigartig ist. Die Konkretisierung allgemeiner Strategietypen ist eine Kunst, die Kreativität verlangt. Sie ist daher eher die Kunst des gestaltenden Unternehmers als die des analysierenden Forschers. Sie ist aber auch oft nicht die Kunst eines einsamen Unternehmers, sondern die Kunst, die sich aus der Konfrontation von Ideen in einem innovationsfreundlichen Klima ergibt. Sie ist schließlich nicht nur die Kunst eines innovationsfreundlichen Mikroklimas innerhalb eines Betriebs, sondern auch eines innovationsfreundlichen Makroklimas in der Gesellschaft. Strategien (die zu Erfolg oder Misserfolg führen können) entstehen (emergieren) aus dem Aufeinandertreffen vieler Einzelmerkmale aus der Innen- und der Außenwelt des konkreten Betriebs (Mintzberg und Waters 1985). Die Aufgabe der betriebswirtschaftlichen Forschung sehen wir daher nicht darin, das, was Unternehmer tun sollen, besser zu tun. Stattdessen plädieren wir für eine Arbeitsteilung zwischen Forschung und Praxis, bei welcher jede von beiden ihre Stärken in die Waagschale wirft: die Forschung die Analyse und Gestaltung des Allgemeingültigen, die Praxis die Analyse und Gestaltung des Individuellen, Konkreten. Gute Forscher müssen nicht gleichzeitig gute Unternehmer sein, wohl aber können erfolgreiche Forscher auch einmal die Seiten wechseln und in die Unternehmerrolle schlüpfen. Je konkreter die Determinanten und die Prozesse des Zusammenwirkens und dessen Auswirkungen auf ein Ergebnis, z.B. eine Internationalisierungsstrategie und in der Folge von deren betriebswirtschaftlichem Erfolg, betrachtet werden, desto weiter entfernt liegt diese Aufgabenstellung daher von der Forschung. Der Umgang mit dem Einzelfall verbleibt ureigenste Kompetenz des Unternehmers. Die Forschung kann dazu allerdings manchmal Erkenntnisse beitragen, die sich in die konkreten Entscheidungsprozesse der Unternehmer nützlich einbauen lassen – unter einer (an sich selbstverständlichen) Voraussetzung natürlich: wenn diese Erkenntnisse richtig sind. Die Auflösung der Widersprüche und Inkommensurabilitäten in den vorgelegten Forschungsarbeiten im Bereich Entrepreneurship verlangt den Forschern da wohl noch einige Arbeit ab.

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Koordination der Einzelanstrengungen Studien zum selben Thema könnten besser aufeinander Bezug nehmen. Neue Studien könnten so konzipiert werden, dass die Behauptungen vorangegangener Studien überprüft werden. Bei der Anwendung eines Überprüfungsdesigns auf andere Regionen und/oder andere Branchen könnten diesbezügliche Unterschiede berücksichtigt bzw. zumindest transparent gemacht werden. Durch Zusammenarbeit zwischen den auf diesem Gebiet aktiven Forschern könnten in zukünftigen Studien größere Stichproben untersucht werden, die den Zufallsfaktor reduzieren und der Vielfalt der möglichen Variablen besser gerecht werden. Die untersuchten Variablen (beispielsweise sowohl Internationalisierungsstrategien als auch deren Determinanten) könnten – insbesondere wenn größere Stichproben verfügbar sind – stärker konkretisiert werden. Wenn das nicht möglich erscheint, sollte zumindest stärker auf die Präzision der Begriffe geachtet werden. 3.2. Radikale Neuausrichtung der Entrepreneurshipforschung – Entwicklung der Fähigkeiten zur Formulierung subjektiver Theorien Die soziale Welt ist durch das Auftauchen immer neuer Erscheinungen geprägt und insofern dynamisch. Einen großen Teil dieser Dynamik erhält sie durch unternehmerisch handelnde Personen, die nicht nur die Wirtschaft, sondern die Gesellschaft als Ganzes vorantreiben und diesem Entwicklungsprozess auch immer wieder neue Richtungen geben. Eine Erklärung dieser Prozesse scheint auf Basis stabiler Theorien, die es durch Verifikation bzw. Falsifikation über lange Zeiträume hinweg zu prüfen gilt, nicht leistbar. Stabile, weit reichende Theorien sind in einer Welt des ständigen Wandels von geringem Nutzen. Sie können nur auf einem sehr hohen Abstraktionsniveau Gültigkeit beanspruchen, wie beispielsweise die allgemeine Markt- oder Transaktionskosten- oder Spieltheorie. Will man abstrakte Theorien mit weitem Gültigkeitsanspruch zur Erklärung konkreter sozialer Phänomene nützen, müssen in der Regel unzählige Zusatzannahmen eingeführt werden. Damit werden diese Modelle allzu oft sehr komplex, bleiben aber trotzdem zu simpel, um die Realität adäquat abbilden zu können. Jede Begebenheit in der sozialen Welt ist ein Einzelfall, eine einzigartige Situation, die aus einem langen, einzigartigen Prozess resultiert, auf den eine unüberschaubare Zahl von Variablen Einfluss nimmt. Dennoch sind die meisten Einzelereignisse, mit welchen wir konfrontiert werden, nicht vollkommen überraschend und treffen uns nicht vollkommen unvorbereitet. Vielmehr können wir aus Einzelfällen lernen, so wie das auch jedem Kind in seinem Entwicklungsprozess gelingt. Lernen bedeutet fähig zu sein, explizites oder implizites Wissen aus einem oder mehreren Fällen auf einen neuen Fall zu übertragen. Das Beförderungsmittel kann als subjektive Theorie (Groeben, Wahl, Schlee, und Schlee 1988) bezeichnet werden: Diese ist (so wie die objektive Theorie) ein Gebäude aus Hypothesen, die (anders als die objektive Theorie) allerdings nicht mit den in der Forscher-

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gemeinde vertretenen und insofern objektivierten Meinungen übereinstimmen muss, sondern sich im Gehirn eines einzelnen Menschen manifestiert, der dazu auch gar nicht „Berufsforscher“, sondern bloß neugierig sein und wahrgenommene Signale logisch verknüpfen können muss. Jeder Ausschnitt aus der Welt kann als Bündel von interdependenten Variablen interpretiert werden, die durch ihre Interdependenzen und Interaktionen etwas (qualitativ) anderes ergeben als ihre bloße (quantitative) Addition. Dafür werden häufig Begriffe wie System, Ganzheit, Konfiguration oder Gestalt („gestalt“ existiert sogar auch als Lehnwort im Englischen) verwendet. Ein Unternehmen stellt durch das Zusammentreffen vieler Umwelt- und Innenweltvariablen ein solches System dar, ein individuelles, einzigartiges, anderen allenfalls ähnliches, aber niemals gleiches System. Die Unternehmerperson spielt in diesem System eine besondere Rolle: Sie entwickelt subjektive Theorien über die Effekte der wahrgenommenen Interdependenzen. Sind ihre Wahrnehmungen und Interpretationen in der konkreten Situation stimmig, kann sie zielgerichtet intervenieren: Damit steigen die Chancen auf eine wunschgemäße Weiterentwicklung der individuellen Konfiguration. Angesichts der Schwierigkeiten, rechtzeitig (und nicht erst ex post) zu verlässlichen, im Betriebsalltag umsetzbaren allgemeinen Erkenntnissen zu gelangen, sollte die betriebswirtschaftliche Forschung folglich stärker auf die Generierung von Erkenntnissen für den selbständigen Umgang mit a priori unbekannten Problemstellungen ausgerichtet werden. Das hieße, dass sich die betriebswirtschaftliche Forschung vor allem dort, wo allgemeingültige Erkenntnisse nur mit Verzögerung und geringer Verlässlichkeit entstehen, mehr um die Aufklärung eines anderen Wirkungszusammenhangs, gewissermaßen eines Meta-Wirkungszusammenhangs kümmern sollte: Dieser Meta-Wirkungszusammenhang betrifft die Entwicklung der Fähigkeiten von Personen (insbesondere Unternehmern und Managern und solchen, die es werden wollen) sowie Organisationen, individuelle, für ihre konkrete Situation gültige Wirkungszusammenhänge zu erkennen und darauf prompt, kreativ, aber gleichzeitig logisch konsequent zu reagieren. Das würde heißen, dass wir uns mehr damit beschäftigen sollten, wie Personen und Organisationen solche Fähigkeiten erwerben können, die sie in die Lage versetzen, sich selbst, die ihnen im Betrieb zur Verfügung stehenden Ressourcen und ihre Umwelt richtig zu erkennen, deren Weiterentwicklung in die Zukunft selbst richtig zu prognostizieren und durch eigene Interventionen darauf angemessen zu reagieren. 4. Resümee Nach einer Dekade der dramatischen Expansion der Entrepreneurshipforschung in den akademischen Strukturen des deutschen Sprachraumes und der tendenziell unkritischen Rezeption der an diesen Einrichtungen entstehenden Forschungsergebnisse, einerseits innerhalb der Scientific Community und andererseits auch vonseiten der Medien, ist eine neue Generation von Forschern herangewachsen, die sich kritisch mit den Fundamenten und der Entwicklung der Entrepreneurshipforschung auseinandersetzt. Die Skepsis, die ältere Generationen von Betriebswirten dieser hoch dynamischen und von einem positivistisch gefärbten Fortschrittsglauben getragenen Entrepreneurshipwelle von jeher entge11

genbrachten, bildet nun die Basis für eine kritische Auseinandersetzung mit der Forschungspraxis zum Gegenstand Entrepreneurship sowie für eine Evaluierung der daraus entspringenden Forschungsergebnisse. Die Defizite, die unsere Standortbestimmung offenbart, lassen sich wie folgt zusammenfassen: Wir erkennen ein stark fragmentiertes Forschungsfeld, in dem isolierte Kleingruppen von hochgradig spezialisierten, karriereorientierten Forschern auf höchstem methodischem Niveau Kleinstausschnitte der Wirklichkeit mit zu kleinen, zu verzerrten und zu kontextbezogenen Stichproben bearbeiten. Die Ergebnisse dieser Anstrengungen sind Detailaussagen über aus einem weiteren Zusammenhang herausgelöste Kausalbeziehungen zwischen einzelnen Variablen. Solche Aussagen sind häufig nicht mit früheren Ergebnissen in Verbindung zu setzen und sind mangels inhaltlichem Gehalt und Reichweite kaum praxisrelevant. So wird die Entrepreneurshipforschung von den Unternehmern und der Gesellschaft insgesamt tatsächlich auch kaum wahrgenommen. Damit fehlt der Entrepreneurshipforschung das Image der Nützlichkeit. Die Rechtfertigung der Scientific Community, dass sich diese Nützlichkeit nicht gleich, sondern erst langfristig einstellen wird, läuft Gefahr, nicht ernst genommen zu werden. Symptome dafür sind zähe Verhandlungen über Verlängerungen der Finanzierung von Stiftungslehrstühlen oder sogar deren Schließung: Unternehmer warten nicht auf Godot (im Sinne von Samuel Becket). Die Entrepreneurshipforschung braucht Auswege aus der zunehmenden Fokussierung auf sich selbst mit Konzepten, die eine deutliche Nutzenkomponente für die Gesellschaft heute und nicht bloß für eine vage ferne Zukunft erkennen lassen. Wiederholte Ankündigungen, aus der Vielzahl fragmentierter Einzelergebnisse irgendwann einmal zu einer befriedigenden, „alles“ erklärenden (und insofern mit großer Reichweite ausgestatteten) Theorie gelangen zu wollen, werden mit der Zeit unglaubwürdig werden. Die Unternehmer verlangen nützliche (viable) Forschungsergebnisse, die ihnen bei der Bewältigung ihrer Probleme möglichst effizient helfen. Dafür können weniger weitreichend angelegte Erklärungsversuche, klare Arbeitsteilung mit den Unternehmern sowie bessere Koordination unter den Forschern inkrementale Verbesserungen bringen. Die Entrepreneurshipforschung kann und soll die Unternehmer und ihre Bezugsgruppen außerhalb und innerhalb der Unternehmungen aber nicht von der Last der Entscheidungsprozesse – von der Suche nach Betätigungsmöglichkeiten über deren Bewertung bis zu deren Umsetzung und Kontrolle – befreien. Denn Chancen zu erkennen und diese durch dazu passende Entscheidungen zu nutzen, ist die ureigenste Aufgabe des Unternehmers. Der radikale Ausweg aus dem Irrgarten gegenwärtiger Entrepreneurshipforschung führt daher zur Befähigung der Unternehmerpersonen, eigene subjektive Theorien zu bilden und so ihre ureigensten Funktionen in Wirtschaft und Gesellschaft – als Alternative zur Versorgung mit Expertenratschlägen – wahrzunehmen. Diese Orientierung führt weg von der Suche nach Erkenntnissen und darauf aufbauenden Empfehlungen, was Unternehmer tun sollen, und hin zu Erkenntnissen, wie Menschen zu Unternehmern (gemacht) werden, die dann selbst am besten wissen, was zu tun ist. Die Entrepreneurshipforschung wäre somit auf eine Metaebene, die Metaebene 12

der Bildungsforschung (im umfassenden Sinn, daher nicht: Ausbildungsforschung) anzuheben – mit dem Erkenntnisziel: Was macht den perfekten Unternehmer aus? – Das war übrigens schon der Kern der (wahrscheinlich) ersten Abhandlung über den Unternehmer (damals: Kaufmann) von Benedetto Cotrugli (1458).

Literatur: Busenitz, L.W., G. Pages West III, D. Shepherd, T. Nelson, G. Chandler und A. Zacharakis (2003). „Entrepreneurship research in emergence: past trends and future directions”, Journal of Management, 29 (3), 285-308. Cantillon, R. (1755). Essai sur la nature de commerce en général. London. Cotrugli, B. (1458/1990). Il libro dell’arte di mercatura. Venedig. Davidsson, P. und J. Wiklund (2001). „Levels of analysis in entrepreneurship research: current research practice and suggestions for the future”, Entrepreneurship Theory and Practice, 25 (4), 81-99. Fallgatter M. J. (2004). „Entrepreneurship: Konturen einer jungen Disziplin“, Schmalenbachs Zeitschrift für betriebswirtschaftliche Forschung (ZfbF), 56 (2), 23-44. Franke, N. (2007). „Entrepreneurship“, in Handwörterbuch der Betriebswirtschaft, Hrsg. Köhler, R., H. U. Küpper und A. Pfingsten, 6. Aufl., Stuttgart, 367-374. Fueglistaller, U., C. Müller, und T. Volery (2008). Entrepreneurship. 2. Auflage. Wiesbaden. Gamm, G., A. Hetzel und M. Lilienthal (2001). Hauptwerke der Sozialphilosophie, Stuttgart. Grichnik D. (2006). „Die Opportunity Map der internationalen Entrepreneurshipforschung“, Zeitschrift für Betriebswirtschaft, 76 (12), 100-125. Groeben, N., D. Wahl, J. Schlee und B. Schlee (1988). Forschungsprogramm Subjektive Theorie: Eine Einführung in die Psychologie des reflexiven Subjekts. Tübingen. Haahti, A., G. Hall und R. Donckels (Hrsg.) (1998). The internationalization of SMEs: the interstratos project. London. Hering, T. und A. J. F. Vincenti (2008). „Unternehmerische Grundfunktionen“, in Entrepreneurship: Theorie und Fallstudien zu Gründungs-, Wachstums- und KMU-Management. Hrsg. Kraus, S., und M. Fink. Wien, 26-36. Hobson N. (2006/2007). „Is it about time you got a second life?”, Strategic Communication Management, 11 (1), 3. Hofmann, M. (1968). Das Unternehmerische Element in der Betriebswirtschaft. Berlin. Kirzner, I. M. (1973). Competition and entrepreneurship. Chicago, IL. Kirzner, I. M. (1979). Perception, opportunity and profit. Chicago, IL. Klandt H., L. T. Koch und U. Knaup (2005). Entrepreneurship-Professuren 2004 - Eine Studie zur Entrepreneurshipforschung und -lehre an deutschsprachigen Hochschulen. FGF, Bonn. Kollmann T. und A. Kuckertz (2006). Zehn Jahre G-Forum - Entwicklungstendenzen der deutschen Entrepreneurshipforschung. 10. Forum Gründungsforschung. Berlin. Low, M. B. (2001). „The adolescence of entrepreneurship research: specification of purpose”, Entrepreneurship Theory and Practice, 25 (4), 17-25.

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Merton, R. K. (1949). Social theory and social structure. Toward the codification of theory and research. Glencoe: Ill. (Revised and enlarged edition 1959) Mintzberg, H. und J. A. Waters (1985). „Of strategies, deliberate and emergent”, Strategic Management Journal 6 (3), 257-272. Mises L. von (1949): Nationalökonomie – Theorie des Handelns und Wirtschaftens. Genf. Oberparleiter, K. (1951). Das Unternehmerproblem. Wien. Pichler, J. H. (2008). „Entrepreneurially driven innovation as dynamics of „economic life‟: a Schumpeterian perspective”, in Beiträge zur Betriebswirtschaftslehre der Klein- und Mittelbetriebe. Festschrift für Josef Mugler zum 60. Geburtstag. Zeitschrift für KMU und Entrepreneurship. Hrsg. Frank, H., H. Neubauer und D. Rößl, D., Sonderheft 7, 41-55. Protokoll der Rencontres de St. Gall (1949). Unveröffentlichtes Manuskript. Sarasvathy, S. D. (2004). „The questions we ask and the questions we care about: reformulating some problems in entrepreneurship research”, Journal of Business Venturing, 19 (5), 707-717. Schumpeter, J. A. (1912). Theorie der wirtschaftlichen Entwicklung. Leipzig. Shane S. und S. Venkataraman (2000). „The promise of entrepreneurship as a field of reserach”, Academy of Management Review, 25 (1), 217-226. Smith, A. (1776). An inquiry into the nature and causes of the wealth of nations. London. Steyaert, C. (2005). „Entrepreneurship: in between what?: on the 'frontier' as a discourse of entrepreneurship research”, International Journal of Entrepreneurship and Small Business, 2 (1), 2-16. The STRATOS Group (1990). Strategic orientations of small European businesses. Aldershot. Turgot, A. R. J. (1766). Réflexions sur la formation et la distribution des richesses, London. Veciana, J. M. (2007). „Entrepreneurship as a scientific research programme“, in Entrepreneurship concepts, theory and perspective, Hrsg. Cuervo, A; D. Ribeiro und S. Roig, Berlin/Heidelberg, 23-71. Venkataraman S. (1997). „The distinctive domain of entrepreneurship research: an editor's perspective”, in Advances in entrepreneurship, firm emergence and growth. Hrsg. Katz J. A. und R. H. Brockhaus, Greenwich, CT.

Weber, M. (1904/1905). „Die protestantische Ethik und der Geist des Kapitalismus“, in Archiv für Sozialwissenschaften und Sozialpolitik, (20) 1, 1-54 und (21) 1, 1-110. Welsch, H. (Hrsg.) (2004). Entrepreneurship. The way ahead. New York. Wiklund, J. und D. Shepherd (2005): „Entrepreneurial orientation and small business performance: a configurational approach”, Journal of Business Venturing, 20 (1), 71–91.

14

Schumpeter: “Prophet of Innovation”

J. Hanns Pichler

Abstract In trying to paintbrush background and scientific "environs" when Schumpeter`s visionary "Theory of Economic Development" (1912) came out, classical and neoclassical thought as well as Marx‟ "Capital" had been exposed already for some time to scholarly scrutiny by the learned community. In neither classical-neoclassical nor Marxian visions, the entrepreneur explicitly figures. It is Schumpeter`s truly seminal interpretation of the capitalist process, wherein the entrepreneur as such takes centre stage as the "pioneering" and driving force in a dialectic sense as, in fact, sort of a villain, as the "antithesis" to the market system. As indeed an element constantly striving to outmanoeuver constraining competition, to "trick" given market conditions and, thereby, forever challenging the “system" itself; or more pointedly still: when and wherever possible to be, or to become, a monopolist. When relating this to modern entrepreneurship, its pivotal role in a regional and global or, more specifically so, in a structural as well as developmental context, Schumpeter`s vision, nowadays, more than ever in times of dynamic change may serve as a guide for any entrepreneurially oriented policy formulation. __________________________________

Underlying hypotheses and observations, Schumpeter states in the early German edition of his seminal “Theory of Economic Development” (1912)1, were not invented or merely fictitious, but taken and gleaned from economic reality in contrast to – then - prevailing equilibrium oriented and essentially “static” views of interpreting the market based capitalist process as “conditioned by given circumstances” (as he subtiled the very first chapter. Thus, the telling motto right on the title page of the first edition: “Hypotheses non fingo”. (As such never appearing again in any later issues, including the English translation of 1934; see Annexes 1 and 2.) From hindsight one might be left wondering as to what, in fact, makes Schumpeter‟s early conceived vision of the leadership role of the entrepreneur in “economic life” still so very topical, if not to say outright indispensable for explaining the dynamics of the “capitalist” system. In recognizing role and importance of entrepreneurially driven innovation with related forces of “creative destruction” as intrinsically market based phenomena, Schumpeterian notions indeed seem to have gained new momentum in today‟s economic debate for the very understanding of entrepreneurial by driven systems, including competitive entrepreneurial behaviour with emphasis also on related entrepreneurship edu-

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Newly edited and reprinted with an “Introduction” by J. Roepke and O. Stiller (2006). References and quotations in the following are being identified, respectively: if relating to the earlier German editions (in particular, the first or second) as “Theorie” followed by year; if relating to the English version as “Theory” (1934 or reprints). Quotations translated from the German editions being either omitted or referred to only passim in the 1934 English version, are marked “transl. J.H.P.”

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cation1. All that against a bibliographical background of his “Theory” which - intermittently nearly forgotten, widely misread or misinterpreted - took fully 14 years until its second, in parts radically revised and modified edition in 1926.2 Schumpeter explicitly voices his irritation in the foreword to the second edition that readers of the earlier version obviously “mistook” the book as a kind of “history” of economic development in line with the – methodologically more descriptive – German “Historical Schools” to which, nonetheless, the very flow and partly rather verbose style of the original text undoubtedly shows a certain affinity. In restating and emphasizing the theoretical thrust of his argument, the somewhat lengthy subtitle3 was added from the second edition onwards (and retained also in the English translation) to bring home the very essence together with substantial revisions to the core second chapter on “The Fundamental Phenomenon of Economic Development”.4 In the context of such revisions Schumpeter, in our view, perpetrated two “sins”: Firstly, by trying to schematize, thereby narrowing down and kind of “sterilizing”, in the second chapter the very role of the entrepreneur to the meanwhile famous, again and again being referred to, “five cases” in “the carrying out of new combinations”;5 as such conveying a rather bloodless, sort of descriptive “listing” of implied entrepreneurial traits and “characteristics” lending itself to a rather limited, yet tempting interpretation as a sort of proxy for defining the “Schumpeterian entrepreneur”, quite in contrast to the full blooded picture so vividly painted in the original version refraining from such schematization. Secondly, by omitting the entire seventh chapter (from 1926 onward)6, wherein Schumpeter tried to put his vision and overall conceptualization in a systemic context by way of a “holistic” topping off in form of a socio-economic synopsis to the expositions in the preceding chapters. It seems a pity that, especially the English reader, remains deprived of a possibly still more comprehensive and deeper understanding of the very thrust of the Schumpeterian message even if, admittedly, this chapter (of nearly 90 pages in the German original) might appear less rigorously argued. A “Theory” against the mainstream In order to fully appreciate the very boldness of Schumpeter‟s message, his “Theory” needs to be viewed in light of the prevailing mainstream of economic thought at time of its first publication. Classics and Neoclassics, notably of the Viennese marginal (“Grenznutzen”) tradition with Eugen v. Boehm-Bawerk and Friedrich v. Wieser as principal advisers to Schumpeter‟s habilitation at the Vien-

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Witness the numerous university chairs and programs on “entrepreneurship” having sprung up, and still expanding, over the past decades. Cf. more recently also Thomas K. McCraw (2007) with extensive references to Schumpeter‟s “Legacy”; or the relevance of innovative elements and factors in the context of the New (endogenous) Growth Theory (cf. P.M. Romer, 1990, et al.), as well as distinct Schumpeterian traits in the relatively new discipline of “Evolutionary Economics”. As essentially the basis for the subsequent English translation, published 1934 at Harvard after the 3 rd and 4th- both largely unchanged - German printings (1931, 1934). In German: „Eine Untersuchung über Unternehmergewinn, Kapital, Kredit, Zins und den Konjunkturzyklus”; in English: „An Inquiry into Profits, Capital, Credit, Interest and the Business Cycle“(„Profits“ to be understood entrepreneurial or “private”). In German: “Das Grundphaenomen der wirtschaftlichen Entwicklung” (Theorie 1912, 103-198; 1926, 88-139; Theory 1934, 57-94). Theorie 1926, 100f.; Theory 1934, 66, by contrast to the German version not explicitly being“listed”, but less conspicuously integrated in the text as such (see Annex 3). In German: “Das Gesamtbild der Volkswirtschaft“ (“Overall View of the Economy“, transl. J.H.P.), Theorie 1912, 463548.

na University7, clearly were dominating the discipline‟s common body of knowledge; and so was Marx‟ quite different, non-market based (“socialist”) interpretation of the economic process, all of which Schumpeter was well familiar with, while more specifically having been exposed, of course, to neoclassical thinking in the Viennese academic “style”. His habilitation thesis as mentioned, submitted in 1908, indeed was devoted to a theoretical treatment and discussion of the “state of the art” at the time, including a rather shrewd reception and re-interpretation of Walrasian equilibrium as an exposition of “pure economics” on essentially static grounds.8 These scientific environs and ingredients are important to note as points of departure in Schumpeter‟s own “Theory”, wherein his critical stand against the prevailing “mainstream” finds ample expression right in the first chapter9 by pointing at the intrinsically static, “circular flow”-type view of “economic life” and voicing his discontent over the obvious deficiency of such theorizing to adequately capture and explain the underlying dynamics of the market based “capitalist” process. By contrast, he explicitly commends Marx as - with his (dialectic) methodolgy - being able to indeed grasp the intrinsically dynamic nature of “economic development.”10 To mention as of specific relevance in this very context is Eugen v. Boehm Bawerk‟s profoundly neoclassical - and pointedly anti-Marxian – “The Positive Theory of Capital”11 as for Schumpeter yet another bone of contention and point of critical departure since, despite its erudite theoretical reasoning, again resting on essentially “static” grounds and, therefore, bound to miss the intrinsic nature of “capitalist” dynamics. (For an ingenious early re-interpretation of “The Positive Theory” with BoehmBawerk‟s subtle theorizing on the “round aboutness” of capitalist accumulation by his contemporary Swedish economist Knut Wicksell see graphical illustration, Annex 4.)12 It is against such background and dissatisfaction with mainstream “circular flow” concepts as prevailing then, that Schumpeter‟s own “Theory” evolved and took shape: as a theoretical - and in its endeavor similar to Boehm Bawerk‟s preceding, albeit “static” - attempt to, for his part, provide a nonMarxian dynamic interpretation of capitalist “development” driven by its inherent systemic forces “from within”. 13

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Based on his first book, entitled: „Das Wesen und der Hauptinhalt der theoretischen Nationaloekonomie“, Leipzig 1908 („The Nature and Content of Theoretical Economics“), repeatedly also being referred to (as „Wesen“ for short) in Schumpeter‟s subsequent „Theorie“. Cf. Walras, L.: Elements d‟economie pure, ou theorie de la richesse sociale, Lausanne 1874-77; English translation by Jaffe; W.: Elements of Pure Economics, Homewood, Ill.-London 1954. Entitled “The Circular Flow of Economic Life as Conditioned by Given Circumstances”, Theory 1934, 3-56; in German: “Der Kreislauf der Wirtschaft in seiner Bedingtheit durch gegebene Verhältnisse”, Theorie 1912, 1-102. Already the “Physiocrates”, Schumpeter argues, in grasping “the fact of circular flow … ipso facto describe a static economy … And this remained the objective of pure economics to our days.” Also with A. Smith, “wherever his arguments rest on firm ground, his view is essentially static … Wherever he speaks of progress, he never explains this on the basis of economic processes in themselves …” (Theorie 1912, 92ff., transl. J.H.P.) „The only major attempt toward the problem of development is the one of Karl Marx“… He strived to treat the development of economic life itself on basis of economic theory. His accumulation, his immiserization, his crisis theories follow from pure economic reasoning … aiming at the evolution of economic life as such … not just its circular flow …“ (Theorie 1912, 98; transl. J. H. P.) And if he “had not been more than a purveyor of phraseology, he would be dead by now. Mankind is not grateful for that sort of service and forgets quickly the names of the people who write the librettos for its political operas.” (Schumpeter, 1942, 5.) Translated with a “Preface” by W. Smart, London-New York 1891. German original: “Positive Theorie des Kapitales (1889), as Vol. 2 of “Kapital and Kapitalzins”; a center piece til today of neoclassical capital theory, which propelled its author to international fame. Boehm-Bawerk by the way, as Schumpeter states himself, never really approved of his “Theory” (cf. Theorie 1926, “Vorwort”). Cf. Wicksell, K. (1893). “ By development, therefore, we shall understand only such changes in economic life as … arise by its own inititative, from within.” (Theory 1934, 63.) “Development in our sense is then defined by the carring out of néw combinations.” (Ibid., 66; with the “five points” to follow, see Annex 3.)

We shall try in the following to pinpoint – against such background - what seems to emerge as a kind of “hidden agenda” behind Schumpeter‟s vision rendering it such lasting a legacy for interpreting capitalist development and its dynamics. Toward entrepreneurially driven “capitalism” In taking a profoundly critical stand against mainstream “statics”, Schumpeter in his “Theory” endeavors to depict market based (long term) “economic development” as an ever changing - and as such never toward equilibrium tending - process of “economic life” generally. This, in fact, constitutes the all pervading thrust of his argument; and indeed no one – apart from Marx in his systemic theorizing – has done so before in a similarly rigorous fashion which, no doubt, lends such seminal and lasting fascination to his “Theory”. The essence of capitalist dynamics, in Schumpeter‟s view, thus boils down to a continuous pursuit of “carrying out … new combinations”14 as an entrepreneurially driven process which proves “that economic life never is static; it lies in the very nature of development.”15 The question then arises: who is “carrying out”, what stands for the “new” and how are “new combinations” being carried through? Schumpeter‟s straightforward answer to that is: the entrepreneur, being depicted and singled out in the very “Schumpeterian” meaning (or “in our sense” as he repeatedly emphasizes). In any given economic moment or situation, so his argument, there exist “numerous possibilities for new combinations”, yet only a small group has the drive and takes “leadership” to, in fact, carrying them through, while “most do not see them”.16 Thus,”… the carrying out of new combinations is a special function … of people who are much less numerous than all those who have the „objective‟ possibility of doing it. Therefore, … entrepreneurs are a special type, and their behavior … the motive power of a great number of significant phenomena.”17 Hence it is, with Schumpeter, the entrepreneur - and only he - who ”‟leads‟ the means of production into new channels … drawing other producers … after him“, thereby rendering ”a service, the full appreciation of which … is not so easily understood by the public at large”.18 From there it follows, “the most typical incorporation of future value creating potentials is a new enterprise …”, and the “specific type” as characteristic for “a special class of economically active individuals has taken on a name of its own, namely entrepreneur.”19 The entrepreneur as the driving or “leading” force in economic life, be it as “business founder”20 or as “creative innovator” who through “anti-hedonist”21 activity and initiatives creates future values. “They (these values, J.H.P.) 14 15 16 17 18

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Theory 1934, 66. Theorie 1912, 162 (transl. J. H. P.). Theorie 1912, 162 (transl. J. H. P.). Theory 1934, 81f. Ibid., 89; yet, such „leadership in particular … must be distinguished from ‚invention‟. As long as they (inventions, J. H. P.) are not carried into practice, inventions are economically irrelevant.“ (Ibid., 88) However: „In as much as the carrying out of new combinations constitutes form and substance of development, so much so is the leader‟s initiative its driving force.” Alas, not all are „equally far sighted and energetic …“ (Theorie 1912, 162, footnote; transl. J.H.P.) Theorie 1912, 170f. (transl. J. H. P.); or somewhat more barren in the English version later on: „The carrying out of new combinations we call „enterprise‟; the individuals whose function it is to carry them out we call „entrepreneurs‟.” (Theory 1934, 74) In merciless Schumpeterian understanding: If a business founder merely continues to manage his „enterprise … in simply a static way, he ceases to be an entrepreneur!”. His very nature “is linked to creating (to combining, J. H. P.) something new.” (Theorie 1912, 174, footnote; transl. J. H. P.) Theory 1934, 94; the entrepreneur as – in a “non-hedonist” way - ever being absorbed by “the joy of creating, of getting things done, or of just exercising … ingenuity.” (Theory 1934, 93)

correlate with new combinations, … new combinations translated in value terms … the shadows of things to come …”22 In carrying out new combinations, the entrepreneur, firstly, singles out from a “multitude of various moments … the related right decision … which is given to few people only with specific capabilities, and secondly, carries them through. These are the characteristics of our entrepreneur, of our man of action. They are inseparable and of equal importance. And the result is economic development, progress”23; development or progress being triggered by “our type” of (Schumpeterian) entrepreneur. Uncovering the subtlety of implied “dialectics” The role of the Schumpeterian entrepreneur, as inseparably being geared to the very essence of “economic development”, thus resembles a kind of “hidden” form of what might be called Schumpeterian “dialectics” for interpreting the dynamics of capitalist development from a (non-Marxian) systemic perspective. The market system itself, under “given circumstances”, thereby constituting the thesis; the entrepreneur in the Schumpeterian sense as the driving (also the “creatively destructive”) force being the antithesis to the system, ever striving to “out compete” given circumstances by way of new combinations and thus - temporarily at least - trying to be or to become a kind of “monopolist”;24 finally, the synthesis of such a scenario to be seen in prevailing market forces tending forever to catch up with, to “compete down” temporarily dominating entrepreneurial initiatives provoking, by force of such process, entrepreneurial creativity yet anew in trying to tackle or outmanoeuver the system “from within” and, as such, quite distinct from Marxian “dialectics”. The entrepreneur in such a scenario takes on the role of unsettling “disequilibrator”, as an ever disturbing element to static or “circular flow” tendencies toward equilibrium in the very sense of “creative destruction”; as a movens of forever challenging the system “conditioned by given circumstances”,25 of constantly trying to trick competitive market constraints and forces through innovative “new combinations” providing thus the intrinsic drive for (Schumpeterian) “economic development”. Different from Marx, different also from the classical-neoclassical and as such essentially “static” concepts, Schumpeter in his “Theory” boldly presents an alternative (non-Marxian) interpretation of the “capitalist” process with the entrepreneur taking center stage. It is this very boldness too, which in good measure seems to account for the lasting relevance, if not to say fascination of his “Theory” up til now (shortly, by the way, to celebrate the 100 year anniversary since its first printing). Legacy and topical relevance in today’s perspective By provocatively casting the entrepreneur – traditionally being considered the “epitomy” of capitalism itself – as sort of villain or “antithesis” to the market system with its “mainstream” proclaimed tendencies toward (static) equilibrium, amply testifies to the originality of Schumpeter‟s own theorizing. Thereby depicting the specific role of the entrepreneur under systems-related aspects further implies 22 23 24

25

5

Theorie 1912, 170 (transl. J. H. P.). Theorie 1912, 177 (transl. J. H. P.). Since, with Schumpeter, „perfect competition“ temporarily always having been „suspended whenever anything new is being induced …“, thereby providing „the fundamental impulse that sets and keeps the capitalist engine in motion.“ (Schumpeter, 1942, 104f.) Cf. heading of the very first chapter of the “Theory” (in German: “…Bedingtheit durch gegebene Verhaeltnisse”; Theorie, both 1912 and 1926).

that the very same (“capitalist”) system essentially derives its inherent strength and dynamics from ever self-renewing entrepreneurial drive and initiatives; dynamics and strength, in the end, for sustained reproduction of the system as such out of its own forces, or “from within”. Notwithstanding Schumpeter‟s later skepticism under changed economic conditions in the face of World War II whether entrepreneurially led capitalism indeed may “survive”,26 we today can witness a sheer global revival of Schumpeter‟s early vision: be it in form of a new and growing awareness of the need for entrepreneurial initiatives, values and attitudes as crucial for sustainable development and more broadly based welfare; be it in recognizing the specific relevance of “entrepreneurship education”, or the importance of diversified entrepreneurially based small and medium sized business structures; be it in the context of fostering business start-ups combined with venture capital financing and concomitant tendencies toward privatization worldwide (including related emphasis on economies “of scope” rather than just one-sidedly “of scale”)27 – this all relates to the very notion of Schumpeterian “entrepreneurship” as being reflected in entrepreneurially driven initiatives, creativity and “leadership”. Leadership that in any market based system stands for structural diversification, for sustained viability and capabilities of success and sheer systemic “survival” under competitive conditions.28 From a contemporary perspective, relevance and importance of Schumpeter‟s vision nowadays seems to be demonstrated vividly in the ongoing - and partly still painful - restructuring from formerly centrally planned to market oriented systems in Central and Eastern Europe. A transformation whereby the final verdict over success or failure in large measure hinges on how effectively these economies are capable to build and rebuild their over decades ruthlessly weakened, if not outright ruined entrepreneurially based business structures as a prerequisite for economic dynamics and sustained development in an increasingly competitive environment with more and more diversified markets.29 More than ever, as it seems, can under today‟s regional as indeed world wide challenges Schumpeter‟s erstwhile vision serve as a valuable guide, as a kind of compass with a view to policy formulation for entrepreneurially conducive framework conditions, or more bluntly still: for creating conditions wherein entrepreneurial initiatives, creativity and leadership in the very Schumpeterian meaning can thrive and adequately are being rewarded. To conclude on that note in Schumpeter‟s own words: “Look around - and you will see, things really are like that.”30 Or in conformity to his early motto again: “Hypotheses non fingo.”31

26

27 28 29 30 31

6

Cf. his famous „Capitalism, Socialism and Democracy” (1942) and numerous related references; it is in this his later work (not in his “Theory”) wherein Schumpeter explicitly coins the popular and much cited phrase of “creative distruction” (later on back-translated into German as “schoepferische Zerstoerung”). Cf. Aiginger/Tichy (1984). Cf. Heertje, (1981); Heertje/Perlman (1993); Heilbroner (1993); Scherer (1929); Scherer/Perlman (1992). Cf. Becker/Knudsen (2002); Backhaus (2003); Giersch (1984, 1987); Scherer (1999); Shionoya/Perlman (1994). Theorie 1934, „Vorwort“ (Preface) to 4th German printing (transl. J. H. P.). See Annex 1; as kind of an invitation to scientifically „creative destruction“ Schumpeter, by the way, sums up the preface to the first edition wishing for himself „nothing more that this work as soon as possible be rendered obsolete and forgotten.“ (Transl. J.H.P.) – And this invitation, after now almost 100 years, apparently still holds.

References Aiginger, K./G. Tichy: Die Groesse der Kleinen. Die ueberraschenden Erfolge kleiner und mittlerer Unternehrmungen in den achtziger Jahren, Vienna (1984) Allen, R. L. Opening Doors. The Life & Work of Joseph Schumpeter, 2 vols., New Brunswick 1991 Anderson, B. M.: Schumpeter‟s Dynamic Economics, Political Science Quarterly, Vol. 30 (1915), Dec. Backhaus, J. G. (ed.): Joseph Alois Schumpeter. Entrepreneurship, Style and Vision, Boston 2003 Becker, M. C./T. Knudsen: Schumpeter 1911. Farsighted Visions on Econonomic Development, American Journal of Economics and Sociology, Vol. 61 (2002), April Boehm, S. (ed.): Joseph A. Schumpeter. Beitraege zur Sozialoekonomik, Vienna 1987 Boehm-Bawerk, E. v.: Positive Theorie des Kapitales (Innsbruck 1889), 4th printing, ed. by F. v. Wieser, Jena 1921 (= Vol. 2 of “Kapital und Kapitalzins”) Bottomore, T.: Between Marginalism and Marxism. The Economic Sociology of J. A. Schumpeter, New York 1992 Chandler, A. D. Jr.: The Visible Hand. The Managerial Revolution in American Business, Cambridge, Mass. 1977 Id.: Scale and Scope. The Dynamics of Industrial Capitalism, Cambridge, Mass. 1990 Clark, J. B.: Theorie der wirtschaftlichen Entwicklung, American Economic Review, Vol. 2 (1912), Nr. 4 (review) Clemence, R. V. (ed.): Joseph A. Schumpeter. Essays on Entrepreneurs, Innovations, Business Cycles and the Evolution of Capitalism, Cambridge, Mass. 1951 Dopfer, K.: The Phenomenon of Economic Change. Neoclassical vs. Schumpeterian Approaches, in Magnusson (Boston-Dordrecht-London 1994) Ebner, A.: The Institutional Analysis of Entrepreneurship. Historist Aspects of Schumpeter‟s Development Theory, in Backhaus (Boston 2003) Elliott, J. E.: Schumpeter and the Theory of Capitalist Economic Development, Journal of Economic Behavior and Organisation, Vol. 4 (1983), Dec. Fagerberg, J.: Schumpeter and the Revival of Evolutionary Economics. An Apprasial of the Literature, Journal of Evolutionary Economics, Vol. 13 (2003), Nr. 2 Giersch, H.: The Age of Schumpeter, American Economic Review, Vol. 74 (1984), May Id.: Economic Policies in the Age of Schumpeter, European Economic Review, Vol. 31 (1987), Feb./March Haberler, G.: Schumpeter‟s Capitalism, Socialism and Democracy. After Fourty Years, ed. by M. Okada, Kyoto 1981 (also in Heertje, New York 1981) Harris, S. E. (ed.): Schumpeter. Social Scientist, Cambridge, Mass. 1951 Hedtke, U./R. Swedberg (eds.): Joseph Alois Schumpeter. Briefe/Letters, Tuebingen 2000 Heertje. A. (ed.): Schumpeter's Vision. Capitalism, Socialism and Democracy after 40 Years, New York 1981 Heertje, A./M. Perlman (eds.): Evolving Technology and Market Structure. Studies in Schumpeterian Economics, Ann Arbor (1990), 3rd printing 1993 Heilbroner, R. L.: Was Schumpeter Right ?, Social Research, Vol. 48 (1981), Nr. 3 Id.: Was Schumpeter Right After All? Journal of Economic Perspectives, Vol. 7 (1993), Summer Klausinger, H.: Schumpeter und die Grosse Depression. Theorie-Diagnose-Politik, Diskussionsbeitraege, Institut fuer Volkswirtschaftslehre der Universitaet Hohenheim, Nr. 78, 1993 Kurz, H. D.: Joseph A. Schumpeter. Ein Sozialoekonom zwischen Marx und Walras, Marburg 2005 Id.: Schumpeter on Innovations and Profits. The Classical Heritage, Paper, Conference on “Neo7

Schumpeterian Economics. An Agenda for the 21st Century”, Trest 2006 (mimeo) Langlois, R.: Schumpeter and Personal Capitalism, in Eliasson, G./C. Green (eds.), Microfoundations of Economics Growth. A Schumpeterian Perspective, Ann Abor 1998 Magnusson, L. (ed.): Evolutionary and Neo-Schumpeterian Approaches to Economics, BostonDordrecht-London 1994 McCrae, R. C.: Schumpeter‟s Economic System, Quarterly Journal of Economics, Vol. 27 (1913), Nr. 3 McCraw, T. K.: Prophet of Innovation. Joseph Schumpeter and Creative Destruction, Cambridge, Mass.–London 2007 Mokyr, J.: The Lever of Riches. Technological Creativity and Economic Progress, New York 1990 Mugler, J.: Entrepreneurship and the Theory of the Firm, in Donckels, R./A. Miettinen (eds.), New Findings and Perspectives in Entrepreneurship, Aldershot 1990 Id.: Strategic Development of SMEs in Turbulent Environments, in Piasecki, B. (ed.), Entrepreneurship and Small Business Development in the 21st Century, Lodz 2002 Nelson, R./S.G. Winter: An Evolutionary Theory of the Firm, Cambridge, Mass. 1982 Nicholas, T.: Why Schumpeter was Right. Innovation, Market Power, and Creative Destruction in 1920s America, Journal of Economic History, Vol. 63 (2003), Dec. Perelman, M.: Retrospectives. Schumpeter, David Wells and Creative Destruction, Journal of Economic Perspectives, Vol. 9 (1995), Nr. 3 Roepke, J.: Der lernende Unternehmer. Zur Konstruktion und Evolution unternehmerischen Bewusstseins, Marburg 2002 Roepke, J./O. Stiller (eds.): Joseph Schumpeter. Theorie der wirtschaftlichen Entwicklung. Nachdruck der 1. Auflage von 1912, ergaenzt um eine Einfuehrung, Berlin 2006 Romer, P. M.: Endogenous Technological Change, Journal of Political Economy, Vol. 98 (1990), Nr. 5 Scherer, F. M.: Innovation and Growth. Schumpeterian Perspectives, Cambridge, Mass. 1984 Id.: Schumpeter and Plausible Capitalism, Journal of Economic Literature, Vol. XXX (1992), Sept. Id.: New Perspectives on Economic Growth and Technological Innovation, Washington D.C. 1999 Scherer, F. M./M. Perlman (eds.): Entrepreneurship, Technological Innovation and Economic Growth. Studies in the Schumpeterian Tradition, Ann Arbor 1992 Schmidt, K.-H.: Vorlaeufer und Anfaenge von Schumpeters Theorien der wirtschaftlichen Entwicklung. Arbeitspapiere des Fachbereichs Wirtschaftswissenschaft, Neue Folge Nr. 8, University Paderborn 1987 Schumpeter, J. A.: Das Wesen und der Hauptinhalt der theoretischen Nationaloekonomie, Leipzig 1908 Id.: Theorie der wirtschaftlichen Entwicklung, Leipzig 1912 Id.: The Theory of Economic Development. An Inquiry into Profits, Capital, Credit, Interest and the Business Cycle. Translated by R. Opie, Cambridge, Mass. 1934 Id.: Capitalism, Socialism and Democracy (New York 1942), 5th ed., Introduction by T. Bottmore, London 1976 Id.: “Capitalism”, Encyclopedia Britannica, London 1946 Id.: Science and Ideology, American Economic Review, Vol. 39 (1949), March (=Presidential Address, Dec. 1948) Id.: The Communist Manifesto in Sociology and Economics, Journal of Political Economy, Vol. 57 (1949), June; reprinted in Clemence (Cambridge, Mass. 1991) Id.: Economic Theory and Entrepreneurial History (1948), in Center for Research in Entrepreneurial History: Change and Entrepreneur. Postulates and Patterns in Entrepreneurial History, Cambridge, Mass. 1949 Id.: Comments on a Plan for the Study of Entrepreneurship, reprinted in Swedberg (Princeton 1991) Seidl, C. (ed.): Lectures on Schumpeterian Economics, Berlin etc. 1984 8

Shionoya, Y./M. Perlman (eds.): Innovation in Technology, Industries and Institutions. Studies in Schumpeterian Perspectives, Ann Arbor 1994 Stolper, W. F.: The Theoretical Bases of Economic Policy. The Schumpeterian Perspective, Journal of Evolutionary Economics, Vol. 1 (1991), Nr. 3 Id.: Joseph Alois Schumpeter. The Public Life of a Private Man, Princeton 1994 Stolper, W.F./C. Seidl (eds.): Joseph A. Schumpeter. Aufsaetze zur Wirtschaftspolitik, Tuebingen 1985 Streissler, E. W.: The Influence of German and Austrian Economics on Joseph A. Schumpeter. Paper, Conference of the International Joseph A. Schumpeter Society, Kyoto 1992 (mimeo) Swedberg, R.: Joseph A. Schumpeter. His Life and Work, Oxford 1991 Id.: Joseph A. Schumpeter. The Economics and Sociology of Capitalism, Princeton 1991 Id.: Schumpeter‟s Early Work, Journal of Evolutionary Economics, Vol. 2 (1992), Nr. 1 Vecci, N. de: Entrepreneurs, Institutions and Economic Change. The Economic Thought of J. A. Schumpeter (1905-1925). Translated by A. Stone, Aldershot 1995 Wicksell, K.: Ueber Wert, Kapital und Rente nach den neueren nationaloekonomischen Theorien, Jena 1893; reprinted in London School of Economics Series Nr. 15, London 1933 Id.: Zur Lehre von der Steuerinzidenz, Diss., Uppsala 1895; transl. as “Income Taxes and Duties”, in Sandelin, B. (ed.): Knut Wicksell. Selected essays in economics, Vol. I., London-New York 1997 (esp. Part II, Appendix to Eugen v. Boehm-Bawerk) Winter, S. G.: Schumpeterian Competition in Alternative Technological Regimes, Journal of Economic Behaviour and Organisation, Vol. 5 (1984), Nr. 3-4

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10

THE THEORY OF ECONOMIC DEVELOPMENT An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle

JOSEPH A. SCHUMPETER

TRANSLATED BY REDVERS OPIE

COPYRIGHT 1934 BY THE PRESIDENT AND FELLOWS OF HARVARD COLLEGE FIRST PUBLISHED BY THE DEPARTMENT OF ECONOMICS OF HARVARD UNIVERSITY AS VOLUME XLVI IN THE HARVARD ECONOMIC STUDIES SERIES, 1934

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SCHUMPETER’s FAMOUS „FIVE CASES“ characterising entrepreneurially driven development „by the carrying out of new combinations“:

(I) The introduction of a new good – that is one with which consumers are not yet familiar – or of a new quality of a good. (2) The introduction of a new method of production, that is one not yet tested by experience in the branch of manufacture concerned, which need by no means be founded upon a discovery scientifically new, and can also exist in a new way of handling a commodity commercially. (3) The opening of a new market, that is a market into which the particular branch of manufacture of the country in question has not previously entered, whether or not this market has existed before. (4) The conquest of a new source of supply of raw materials or halfmanufactured goods, again irrespective of whether this source already exists or whether it has first to be created. (5) The carrying out of the new organistion of any industry, like the creation of a monopoly position (for example through trustification) or the breaking up of a monopoly position. („Theory“ 1934, p. 66)

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*) „Positive Theorie des Kapitales“ (1889) **) Cf. Wicksell, K. (1893; graph, p. 97) 13

Innovationen in Familienunternehmen

Dietmar Rössl* / Sascha Kraus** / Matthias Fink***

Abstract Dieser Beitrag will Thesen zur Innovationsneigung und -fähigkeit von Familienunternehmen als Grundlage für nachfolgende empirische Studien formulieren. Dazu werden die idealtypischen Eigenschaften von Familienunternehmen und von Innovationen gegenüberstellt. Aus dieser Kontrastierung werden Thesen zu fördernden und hemmenden Faktoren für Innovationen in Familienunternehmen ableiten. Die identifizierten Aspekte stellen gleichzeitig eine Forschungsagenda zum Thema Innovation in Familienunternehmen dar. In the present paper we seek to formulate a set of claims concerning the readiness and ability of family businesses to innovate as a basis for future empirical research. For this, we contrast the characteristics of family businesses with the premises of innovation. The resulting profile of fit and misfit allows for the identification of aspects that both promote and hinder innovation in family businesses. The identified aspects may at the same time serve as research agendas for future (empirical) research on innovation in family businesses

1. Präambel Dieser Beitrag will Thesen zur Innovationsneigung und -fähigkeit von Familienunternehmen (FU) als Grundlage für nachfolgende empirische Studien formulieren. Dazu werden die idealtypischen Eigenschaften von FU und von Innovationen gegenübergestellt. Die Themenstellung bezieht ihre Relevanz aus der Bedeutung sowohl von FU als auch von Innovationen: FU spielen eine bedeutende Rolle in den Volkswirtschaften weltweit und leisten einen wichtigen Beitrag zu deren Wachstum und Stabilität (Shanker und Astrachan 1996; Klein 2000; Handler 1991: 21; Tio und Kleiner 2005: 142). In einer weiten Abgrenzung stellen FU 85% aller Unternehmen der OECD-Länder und machen auch in Zentraleuropa (Neubauer und Lank 1998: 115; Van den Berghe und Carchon 2003: 171) und den USA (Astrachan und Shanker 2003: 211; Matthews, Moore und Fialko 1999: 159; Potts, Schoen, Loeb und Hulme 2001: 102) den Grossteil der Unternehmen aus. Sie stellen zudem etwa 35% aller Unternehmen im S&P 500 oder dem Fortune 500-Index der grössten Unternehmen (Anderson und Reeb 2003: 1302; Lee 2006: 103). In Deutschland und Österreich wird

* Dietmar Rössl, Prof. Dr., Leiter des RiCC – Research Institute for Co-operation and Co-operatives und Professor am Institut für Betriebswirtschaftslehre der Klein- und Mittelbetriebe, Wirtschaftsuniversität Wien, [email protected] ** Sascha Kraus, Dr. MBA, Associate Researcher am RiCC – Research Institute for Co-operation and Cooperatives, Wirtschaftsuniversität Wien, [email protected] *** Matthias Fink, Dr. MMag., Universitätsassistent am Institut für Betriebswirtschaftslehre der Klein- und Mittelbetriebe, Wirtschaftsuniversität Wien, [email protected]

1

davon ausgegangen, dass ca. 80%, in der Schweiz ca. 75% der Unternehmen familienkontrolliert sind (Wiedmann 2002: 41f; Hennerkes 1998a: 19). Innovationen wiederum führen allgemein zu einer verbesserten Wettbewerbsposition (Damanpour, Szabat und Evan 1989; Zahra, Hayton und Salvato 2004). Innovationen sind Ausdruck unternehmerischer Aktivität und können letztlich dazu beitragen, dass das (Familien-)Unternehmen langfristig überlebt (Leenen 2005: 4). Die Forschung zu FU ist bisher stark auf die Frage fokussiert, worin sich diese von Publikumsgesellschaften unterscheiden. Die Innovationstätigkeit von FU ist hingegen noch wenig untersucht (Leenen 2005: 2f). „Research examining the relationship between innovation and ownership structure appears to be nonexistent.“ (Gudmundson, Tower und Hartman 2003: 3). Als Beispiele für die wenigen Arbeiten, die sich diesen Thema widmen: Litz und Kleysen (2001) analysieren in einer Fallstudie die unternehmerische Tätigkeit eines Jazzmusikers mit besonderem Augenmerk auf die Nachhaltigkeit der geschäftlichen Innovationen in Bezug auf die nachfolgenden Familiengenerationen. Gudmundson, Tower und Hartmann (2003) haben in einer quantitativ empirischen Studie den Einfluss von Organisationskultur, Eigentümerstruktur (family versus non-family business) und Kundentypen auf die Initiierung und Implementierung von Innovationsprozessen untersucht. Zusammenfassend stellen sie fest: „The results suggest that initiation and implementation of innovation are significantly enhanced […] when it is a family owned business. Family businesses have unique characteristics positively related to implementation of innovation […] (2003: 14). Wobei allerdings dieser Effekt durch Differenzen der Organisationskultur überlagert wird (2003: 13). Leenen (2005) untersucht die Treiber von Innovation in FU, warum Innovationsprojekte initiiert werden, ob Innovationen in FU eher inkrementell oder eher radikal auftauchen, ob eher Produktoder eher Prozessinnovationen vorherrschen und wie Unternehmenskultur, Führungsstil, Nachfolge oder die Frage nach Familienmitglied oder Fremdgeschäftsführer den Innovationsprozess beeinflussen etc.

2. Familienunternehmen 2.1. Eingrenzung des Objektbereichs Mit dem Begriff werden verschiedene Inhalte assoziiert (Chrisman, Chua und Sharma 2005: 556; Wimmer, Domayer, Oswald und Vater 2005: 6). Es fehlt eine allgemein akzeptierte Definition (Handler 1989: 255; Chittoor und Das 2007: 66), da das Forschungsfeld „Familienunternehmen“ nach wie vor in seinen Anfängen steckt (Craig und Lindsay 2002: 416). Die Definition muss FU von Publikumsgesellschaften, Einzelunternehmen bzw. generell von Personengesellschaften aber auch von solchen „Klein- und Mittelunternehmen“ abgrenzen, denen eben keine Familienunternehmenseigenschaft zukommen – obschon es weit reichende Überschneidungsbereiche mit diesen Unternehmenstypen gibt. Vielen Definitionsversuchen gelingt die klare Abgrenzung von FU zu Einzelunternehmen nicht: So definiert das Institut für Mittelstandsforschung FU als Unternehmen, in denen Eigentumsrechte und Führung in der Person des Unternehmers vereint sind (Schröer und Freund 1999). Die Unternehmensführung durch den Eigentümer ist gegeben, wenn bis zu zwei natürliche Personen oder ihre Familienangehörigen mindestens 50% der Anteile eines Unternehmens halten und diese natürlichen Personen 2

der Geschäftsführung angehören (Westhead 1997: 132; Chua, Chrisman und Sharma 1999: 28). Auch diverse „Family-Business-Indizes“ können von Einzelunternehmen nicht abgrenzen, da oft sowohl durch den Quotient „Summe des in der Familie gehaltenen Eigenkapitals / gesamtes Eigenkapitel“ als auch durch den Quotient „Anzahl der Familienmitglieder im Management / Anzahl der Personen im Management“ das für die Einordnung als FU erforderliche Gesamtscore von 1 unabhängig von Familienunternehmenseigenschaften erreicht wird (z.B. EPU). Im deutschsprachigen Raum werden FU mitunter implizit mit mittelständischen Unternehmen gleichgesetzt. Abgesehen von wenigen grossen international agierenden FU (Hennerkes 2004: 16) mag zwar ein Grossteil der FU tatsächlich dem Mittelstand angehören. Allerdings sind mittelständische Unternehmen nur zum Teil FU. Mit Reimers (2004:11) sehen wir daher den Begriff „Familienunternehmen“ als einen grössenunabhängigen Begriff an. Eine Reihe von Eingrenzungsversuchen stellen auf qualitative Merkmale zur Explikation von FU ab: So bezeichnen Habbershon und Williams (1999: 7) FU als einzigartige Bündel von Ressourcen und Fähigkeiten, die aus Interaktionen zwischen Familie und Unternehmen resultieren. Für Hennerkes (2004: 16) liegt ein FU dann vor, wenn die Verbundenheit der Familienmitglieder gemeinsam mit innerhalb der Familie festgelegten Handlungsprinzipien die Basis für ihr unternehmerisches Handeln ist. Ein Nachteil dieser Abgrenzungen liegt in der schwierigen Operationalisierung. Laut Klein (2004: 18) liegt ein FU vor, wenn einer der drei Einflussfaktoren Eigenkapital, Management und Kontrolle vollständig von der Familie dominiert wird oder der Mindereinfluss bei einem der drei Faktoren bei einem anderen Faktor ausgeglichen wird. Als notwendige Bedingung wird jedoch eine Beteiligung am Eigenkapital vorausgesetzt. Zur Lösung des Operationalisierungsproblems greift man somit auf die Kriterien „Eigentumsverteilung“, „Mitarbeit im Unternehmen“ bzw. „Mitarbeit im Management des Unternehmens“ und „Kontrolle“ zurück. Wobei es sowohl um die Aufteilung dieser Aspekte auf Personen, die derselben Familie – Kernfamilie oder Familienverband? – angehören, als auch um die insgesamt dominierende Position der Familie in Bezug auf diese Aspekte geht: Aus dieser Sicht werden FU als Unternehmen definiert, bei welchen das Eigentum auf eine oder mehrere Familien und deren Mitglieder verteilt ist und bei denen, neben dem Unternehmer, noch mindestens ein zusätzliches Familienmitglied im Unternehmen durch Mitarbeit aktiv beteiligt ist (Carsrud 2006: 856; Lyman 1991: 304; Covin 1999: 288; Rutherford, Muse und Oswald 2006: 318). Diese Definitionsversuche sind aber noch zu unbestimmt. Ein Unternehmen – selbst wenn es nur für einen begrenzten Zeitraum gegründet wird – wäre bereits als FU anzusehen, wenn ein weiteres Familienmitglied auf operativer Ebene tätig ist und marginale Eigentumsanteile hätte. Der Wille, das Unternehmen langfristig in der Familie zu halten muss daher – wie das auch zahlreiche Autoren tun (Barnes und Hershon 1976: 106; Sharma, Chrisman und Chua 1997: 2; Astrachan und Shanker 2003: 211) – als notwendige Bedingung ebenso hinzugefügt werden, wie die Verteilung der Kontrolle auf mehrere Familienmitglieder. D.h. die Mitarbeit weiterer Familienmitglieder auf rein operativer Ebene reicht nicht aus, um eine Familienunternehmenseigenschaft zu konstituieren.

Als FU soll hier ein Unternehmen gelten (Rössl 2005: 204), –

–

von dem mehrere Mitglieder einer Familie – nicht notwendigerweise einer Kernfamilie – Kapitalanteile halten dessen dominierende Kapitalanteile – wenn die Kapitalmehrheit nicht gebündelt agieren kann, folglich nicht notwendiger Weise Kapitalmehrheit – von einem oder mehreren Mitgliedern dieser Familie gehalten wird 3

–

–

–

in dem die strategischen Entscheidungen von mehreren Familienmitgliedern aufgrund der Höhe ihrer Kapitalanteile und/oder aufgrund informeller Macht getroffen werden, wobei es unerheblich ist, ob die Unternehmerfamilie selbst das Management stellt, oder ob sie das Unternehmen durch ein durch sie eingesetztes Management kontrolliert und von dessen wirtschaftlicher Entwicklung mehrere Personen dieser Familie direkt – d.h. z.B. nicht bloss über das Einkommen des Familienerhalters – existentiell abhängig sind, weil ihre individuellen Kapitaleinkünfte und/oder ihre individuellen Arbeitseinkünfte aus dem Unternehmen einen Grossteil ihrer Einkünfte generieren und das aufgrund dieser Bedeutung für die Familie im Einflussbereich der Familie gehalten werden soll.

Diese Eingrenzung zielt darauf ab, dass innerhalb der Familie das Eigentümerrisiko, die Entscheidungsgewalt und die existentielle Betroffenheit liegen. Im Unterschied zu Donckels (2001: 166) ergänzen wir die Definition um die existentielle Betroffenheit, um marginale wirtschaftliche Tätigkeiten auszuschliessen. Kritisch sehen Astrachan, Klein und Smyrnios (2002: 47) an den dichotomen Einordnungen in FU oder Nicht-FU die Grauzone in der Mitte. Sie halten daher nicht eine solche Differenzierung für ausschlaggebend, sondern den Grad der Involviertheit der Unternehmerfamilie im FU.

2.2.

Charakteristika von Familienunternehmen

2.2.1. Charakteristika der Entscheidungsprozesse  Schnelligkeit bei Entscheidungen kurzer und mittlerer Reichweite – Langsamkeit bei Entscheidungen langer Reichweite Zu den am häufigsten genannten Charakteristika von FU gehört die Deckungsgleichheit oder zumindest grosse Überschneidung zwischen Eigentum und Führung (LeMar 2001: 8). Häufig wird FU daher auf der einen Seite eine schnellere Entscheidungsfindung konstatiert, da weniger Bürokratie und Hierarchieebenen existieren (Leenen 2005: 3). Zu den Schwächen von FU zählen aber auf der anderen Seite Konflikte in der Familie bzw. divergente Familieninteressen innerhalb des Unternehmens (Wiedmann 2002: 45), die bei weit reichenden Entscheidungen, die eine Entscheidung der Familie(n) und nicht nur der Geschäftsführung erfordern, sowohl Entscheidungsfähigkeit als auch Entscheidungstempo erheblich behindern. Bei FU sind immer beide Bestandteile – Familie als auch Unternehmen – relevant (EisenmannMittenzwei 2006: 15), da FU sich immer auch mit den familienbezogenen Themen auseinandersetzen müssen, was mitunter Ressourcen raubend sein kann (Paisner 1999; Lester, Cannella und Miller 2006). Dies liegt daran, dass die Familie im Gegensatz zum Unternehmen nicht primär nach Wirtschaftlichkeit und Marktüberlegungen organisiert ist, bzw. wie Goldberg und Wooldridge (1993: 68) es ausdrücken: „Business is objective, but families tend to be emotional”. Dies führt oftmals zu einem Spannungsverhältnis zwischen den Prioritäten des Unternehmens und denen der Familie und führt dazu, dass der Erfolg eines FU immer vom effektiven – oder eben zeit- und Ressourcen raubenden – Ausbalancieren der beiden Dimensionen abhängt (Habig und Berninghaus 1998: 17; Sharma 2004: 1ff).

4

 Weitreichende Entscheidungen sind Mehrpersonenentscheidungen Strategische Innovationsentscheidungen sind in FU oft Mehrpersonenentscheidungen (Ausnahmen sind gegeben, wenn ein Familienmitglied die Kapitalmehrheit besitzt oder de facto über die Entscheidungsgewalt verfügt). Die Mitglieder des Family Teams bilden ein „Gruppendenken“ (Janis und Mann 1979) aus, das im Vergleich zu Individualentscheidungen auf der einen Seite riskantere Entscheidungen nach sich zieht. Diese erhöhte Risikobereitschaft lässt sich durch die sich gegenseitig aufgebaute Illusion der Unverletzlichkeit und durch eine Diffusion der Entscheidungsverantwortung begründen. Auf der anderen Seite erhöhen Gruppennormen die Organisationsrigidität, da die Diskreditierung von aktuellen Unternehmensstrategien erschwert wird. Dieser Aspekt wird noch verschärft, wenn Familienkonflikte die anstehenden Entscheidungen überlagern (Alcorn 1982: 120). 2.2.2. Grundüberzeugungen im Familienunternehmen

Dem FU werden folgende – hier unter dem Aspekt der Innovationsneigung und -fähigkeit interessierende – Grundüberzeugungen zugesprochen (Wimmer 1998: 60ff; Denison, Lief und Ward 2004; Rössl 2005: 206ff):  Der Vorrang der Person gegenüber der Organisation Das Engagement der Unternehmerfamilie – insbesondere in der Pionierphase – überträgt sich idealer Weise auf die Mitarbeiter. „[...] hat aber als Familienunternehmen einen besonderen Zugang zu seinen Mitarbeitern. Deren Einsatzfreude, Qualitätsstreben, Loyalität und Verbundenheit mit dem Unternehmen und der Eigentümerfamilie sind wesentliche Stützpfeiler des Unternehmenserfolges.“ (aus dem Leitbild eines FU) (vgl. auch Hennerkes 1998b: 60)

Zum einen impliziert diese Identifikation der Mitarbeiter mit dem Unternehmen und insbesondere dem Pionierunternehmer entsprechend starke Widerstände gegen Veränderungen, die sie als Veränderung der bestimmenden Kulturelemente „ihrer“ Unternehmung ansehen (Beckhard und Dyer 1983: 59f). Zum anderen korrelieren mit den persönlichen Beziehungen informelle, flache Strukturen und flexible Entscheidungsprozesse.  Loyalität kommt vor der Qualifikation Die Loyalität, die die Mitarbeiter in der Aufbauphase zum Unternehmer bewiesen haben, überstrahlt („Halo-Effekt“) alle weiteren Entscheidungen. Folglich werden neue – möglicherweise attraktive – Ideen mit hoher Vorsicht, ja Argwohn begegnet. Daraus folgt oft die Besetzung von Leitungspositionen durch Familienmitglieder oder loyale Mitarbeiter unabhängig ihrer Befähigung (Wiedmann 2002: 45).  Ressourcen sind immer knapp FU kultivieren eine auf die Gründungsphase zurückreichende unternehmerische Sparsamkeit – die sich aber nicht unbedingt in privater Sparsamkeit niederschlagen muss. Sowohl die unternehmerische Sparsamkeit als auch die vom aktuellen Unternehmenserfolg unabhängige Aufrechterhaltung eines „standesgemässen Lebensstils“ können jedoch Innovationen und notwendige Investitionsvorhaben vereiteln (Bechtle 1983: 131f). Aus diesem Spargedanken heraus, finden sich in FU auch kaum jene „organizational slacks“, die für Innovationen erforderlich sind.  Es müssen nicht alle alles wissen In FU herrscht oft eine bewusst herbeigeführte oder zumindest akzeptierte Intransparenz bezüglich der Ertragssituation des Unternehmens. Vor dem Hintergrund der mangelnden finanzielle Übersicht und Kontrolle (Wiedmann 2002: 45) ergeben sich, wenn – wie z.B. bei Innovationsentschei5

dungen – dann wirtschaftliche Mitverantwortung von beteiligten Familienmitgliedern eingefordert wird, zwangsweise Fehleinschätzungen: Die eigene Wettbewerbsposition kann überschätzt und/oder die Notwendigkeit der Veränderung unterschätzt werden. „Mein Bruder hat dann g’sagt: ‚Warum willst plötzlich alles ändern, wenn’s so gut läuft?’ – War meine eigene Schuld, ich wollte nicht, dass mir jemand dreinredet – also hab ich immer g’sagt: ‚alles paletti!’“ (Aussage eines Geschäftsführers eines Hotels, der das Gesamtkonzept in Richtung Appartements und wochenweise Vermietung verändern wollte.)

 Der bisherige Erfolg beweist die Richtigkeit der Weichenstellungen Diese Überzeugung kann dazu führen, dass an obsoleten Produkten und Produktionsweisen festgehalten wird (Haake 1987: 99ff), Änderungen mit Argwohn begegnet und nichts riskiert wird. Viele Autoren gehen davon aus, dass FU in Bezug auf Investitionen risikoaverser und veränderungsscheuer sind als Publikumsgesellschaften und somit Gelegenheiten verstreichen lassen (Cabrera-Suárez, De Saá-Pérez und Garcia-Almeida 2001; Gersick, Davis, Hampton und Lansberg 1997; Kellermanns und Eddleston 2006). Daraus folgt das Festhalten an längst wenig rentabel gewordenen Image-Produkten (Wiedmann 2002: 45) oder Produktionsweisen.  Das Unternehmen muss geschützt werden – Langfristigkeit im Denken Diese Überzeugung führt dazu, dass eine Familie sich in wirtschaftlich schwierigen Zeiten eher mit Kapital einbringt. Es wird argumentiert, dass Unternehmen eine grössere finanzielle Unabhängigkeit aufweisen, wenn Familienmitglieder die Anteilsmehrheit halten. Im Gegensatz zu Publikumsgesellschaften werden die Anteile nicht aufgrund von Quartalsergebnissen durch den Kapitalmarkt bewertet; dies begünstigt die Entwicklung langfristiger Strategien (Ensley 2006; Le Breton-Miller und Miller 2006). FU weisen im Durchschnitt ein höheres Lebensalter als Nicht-FU auf Die Besetzung von Leitungspositionen durch Familienmitglieder (Wiedmann 2002: 45) impliziert eine geringe Fluktuation der Entscheidungsträger und längere Funktionsperioden der Entscheidungsträger (Meyer und Zucker 1989; Leach et al. 1990; Welsch 1991: 191ff).  Tradierte Grundwerte als Handlungsorientierung Die Grundwerte in FU beziehen ihre normative Kraft stark aus Mythen rund um „Ankerpersonen“; damit sind i.d.R. nicht mehr aktiv im Unternehmen tätige meist bereits verstorbene Personen gemeint, die aufgrund ihrer Pionierleistung für das Unternehmen von Bedeutung sind. Grundüberzeugungen reichen dann oft zu diesen Ankerpersonen zurück oder werden auf diese zurückgeführt. Werden solche Grundüberzeugungen in die Argumentation eingebracht, werden auch das „Gewicht“ dieser Ankerpersonen und ihre faktische charismatische Macht genutzt. Ein Unternehmensnachfolger führt nach dem Tod seines Vaters bereits sein 10 Jahren den Betrieb. Jeder Versuch, sich von den Führungsprinzipien seines Vaters zu emanzipieren, wird von seiner Stiefmutter mit den Worten „Das kannst du dem Papa nicht antun!“ vereitelt.

Die Ansichten der Ankerpersonen sind damit „Richtschnur“ für die nachfolgenden Führungsgenerationen. Die Wahrung von Werten und Traditionen können eine schwer überwindbare Rigidität nach sich ziehen: Neue Ideen müssen sich erst gegen diese „Vorgaben aus der Vergangenheit“ durchsetzen (Levinson 1971: 92f).

3. Innovationen im Familienunternehmen Eine Innovation bezeichnet „the successful implementation of creative ideas within an organisation“ (Schaper und Volery 2004: 5). Sie ist demnach mehr als eine Idee, sondern zudem ein potentieller Problemlöser, welcher zeitnah Kundenbedürfnisse befriedigt (Kuratko und Hodgetts 2004). Eine

6

Innovation kann somit als Weiterentwicklung einer Invention zu einem marktfähigen Produkt angesehen werden (Trommsdorff und Schneider 1990: 20). „[F]amily businesses function with less risk than non-family firms, they function with a higher level of equity control, and they are more closed to outsiders.“ Daher vermutet die Forschung „that family businesses are less innovative than non-family firms“ (Gudmundson, Tower und Hartman 2003: 5), obwohl empirische Befunde in die Gegenrichtung deuten. (Gudmundson, Tower und Hartman 2003: 14)  „Innovation is a process whereby new ideas are put into practice.“ (Rickards 1985: 10) Damit sind Innovationen Resultat langfristiger kulturformender Prozesse und keine punktuellen kontextunabhängigen Ereignisse. Innovationen hängen eng mit der in der Organisationskultur eingebetteten Innovationsneigung zusammen. Folglich kann man zwei konträre Thesen ableiten: Innovationsbereitschaft ist der Ausgangspunkt für Innovationen. Durch die hohe Bedeutung der „Ankerpersonen“ wirkt deren „Innovationsgeist“ in FU generationsübergreifend weiter. Auf der anderen Seite kann man mit Litz und Kleysen (2001) den Generationenwechsel als potentiellen Bruch der Innovationsneigung sehen: Tabelle 1: Generationenübergreifende Innovation (adaptiert nach Litz und Kleysen 2001: 340) nicht-innovative ältere Generation aufkeimende Innovation innovative (Innovation muss sich erst gegen jüngere Generation rigide Strukturen durchsetzen) nicht-innovative jüngere Generation

keine Innovation

innovative ältere Generation fortgeführte Innovation (Innovationsideen treffen auf hohe Innovationsneigung) absterbende Innovation (die Innovationsneigung wird nicht fortgeführt)

 Innovationen erfordern die Koordination inner- und ausserbetrieblicher Aufgabenträger (Stummer, Günther und Köck 2006: 13) „[F]ehlendes Innovationsbewusstsein ungenügende Partizipationsmöglichkeiten der Mitarbeiter am Innovationsprozess [und folglich] geringe Identifikation mit den Lösungsideen“ werden als Gründe für das Scheitern von Innovationen angesehen (Stummer, Günther und Köck 2006: 105). Hier zeigt sich, dass FU die Bereitschaft zur Delegation zentraler Aufgaben auf Familienmitglieder und loyale Mitarbeiter begrenzen – nur wenn diese Personen Innovationsprojekte vorantreiben können, ist die Innovationsfähigkeit von FU gegeben. Aufgrund dieser Orientierung an „persönlichen Beziehungen“ korrelieren die Umsetzungschancen einer Innovation stark mit der Person, mit der sie verbunden ist.  Innovationsentscheidungen sind hochgradig riskante Entscheidungen Empirische Studien zeigen daher, dass Risikobereitschaft ein zentrales Charakteristikum innovativer Unternehmer ist (Kim, Song und Lee 1993). Etwa ein Drittel aller Produktinnovationen scheitert am Markt (Reichart 2002: 2f) wobei nur Grossunternehmen bei Innovationsprojekten eine gewisse Risikostreuung erreichen können. Zum einen kann man folgern, dass das „Gruppendenken“ im Family Team im Vergleich zu Individualentscheidungen riskantere Entscheidungen erlaubt. Der Effekt der höheren Risikobereitschaft begünstigt positive Innovationsentscheidungen. Zum anderen führt der Gruppendruck zur Ableh7

nung von kritischen Argumenten und erhöht über die starken Gruppennormen die Organisationsrigidität, da die Diskreditierung von aktuellen Unternehmensstrategien erschwert wird. Aus dieser Perspektive ist nicht so sehr das Innovationsrisiko, sondern vielmehr die Verteidigung der bisher verfolgten Strategie das eigentliche Innovationshemmnis in FU. Aus diesen beiden Effekten formulieren wir die These, dass Innovationen in FU schubweise verlaufen: Wenn nach Perioden des Widerstandes gegen stärkere Änderungen dem Änderungsdruck nicht mehr standgehalten werden kann, kommt es zu Innovationsschüben – und hier möglicher Weise gerade zu Radikalinnovationen, die einen sehr hohen Innovations- und Risikograd aufweisen, während es in den Beharrungsphasen zu – als solche vielleicht gar nicht wahrgenommene – Inkrementalinnovationen kommt.  Innovationsentscheidungen beinhalten ein hohes Konfliktpotential Bei Innovationen ist aufgrund des hohen Werteinputs die Wahrscheinlichkeit des Auftretens nicht nur sachlich-intellektueller sondern auch sozio-emotionaler und wertmässig-kultureller Konflikte hoch (Stummer, Günther und Köck 2006: 13) Grössere Innovationsvorhaben erfordern häufig nicht nur die Zustimmung der Geschäftsführung, sondern der beteiligten Familienmitglieder bzw. der beteiligten Familien. Und so trifft der hohe Konfliktgehalt von Innovationen auf den Konfliktgehalt familienbezogener Themen. So nicht Syndikatsverträge dieses Problem hintanhalten, vereiteln Konflikte zwischen den an den strategischen Entscheidungen beteiligten Familienmitgliedern und den dahinter stehenden Beeinflussern die Innovationsfähigkeit von FU (Leenen 2005: 204ff).  Innovationen erfordern vielfach rasche Entscheidungen und Umsetzungen (Spath, Warschat, Auernhammer, Gomeringer und Bannert 2003: 13 ff) Zum einen impliziert die Überschneidung zwischen Eigentum und Führung (LeMar 2001: 8) eine hohe Entscheidungsfähigkeit, andererseits können die im Rahmen des Innovationsprozesses aufbrechenden latenten Konflikte in der Familie den Innovationsprozess erheblich hemmen.  Innovationen sind strategische Entscheidungen, die eine Orientierung an langfristigen Vorteilhaftigkeitskalkülen voraussetzt Leenen (2005) untersucht die Treiber von Innovationen in FU. Anhand mehrerer Fallstudien folgert die Autorin u.a. dass langfristige Ziele zur Verbesserung der Produkte oder Dienstleistungen notwendig sind, um den Unternehmenserfolg sicherzustellen – hier trifft eine Voraussetzung für Innovationen auf idealtypische Eigenschaften von FU. Die für FU typische langfristige Orientierung führt zu geringeren Abzinsungen späterer Rückflüsse aus Innovationen, die gegebenenfalls von eigenen Nachkommen als Unternehmensnachfolger realisiert werden.  Innovationen verlangt neue Akzente Obwohl man vermuten kann, dass Innovation durch lange Funktionsperioden der Entscheidungsträger – wie für FU typisch – behindert wird, finden Koberg, Detienne und Heppart (2003: 30) keinen empirischen Hinweis auf einen solchen Zusammenhang.

8

4. FAZIT Die Innovationstätigkeit eines FU ist nachhaltig gefährdet, wenn die für FU häufig genannten Eigenschaften Risikoaversion, Nepotismus, Rigidität, Konflikte zwischen Familienmitgliedern oder verschiedenen Linien eines Familienverbandes dominieren (Leenen 2005: 4; Tagiuri und Davis 1996: 199ff). Der vorliegende Artikel zeigt, dass Innovationen in FU aufgrund der Bedeutung von FU als auch von Innovationen ein hochrelevantes Forschungsgebiet darstellen. Angesichts dieser Relevanz erscheint es notwendig, mehr über die Prozesse, die Innovationen in FU begünstigen bzw. behindern zu erfahren. Insbesondere quantitative Längsschnittanalysen könnten den Wissensstand über Innovation in FU wesentlich verbessern. Da viele FU in die Gruppe der KMU eingeordnet werden können, erscheint es zweckmässig, auch einen Blick auf die bestehende Forschung zu Innovationen in KMU zu werfen und die dort bewährten Forschungsdesigns auf ihre Übertragbarkeit auf FU zu prüfen. Aufgrund der Heterogenität von FU macht es vermutlich auch Sinn, Konfigurationen von FU (Harms, Kraus und Schwarz 2008) zu bilden, um nicht unterschiedliche situationsspezifische Wirkungsbeziehungen gegenseitig aufzurechnen und folglich zu übersehen. Der hier vorgestellte Versuch, aus den idealtypischen Eigenschaften einerseits von FU und andererseits von Innovationsentscheidungen und -prozessen Thesen zu fördernden und hemmenden Faktoren der Innovationskraft von FU abzuleiten, ist durch empirische Studien fortzuführen. Auf Basis von quantitativ-empirisch ermittelten Mustern von Wirkungs- und Beeinflussungsbeziehungen können dann Massnahmen (Syndikats- bzw. Stimmbindungsverträge, Schiedsgerichte, etc.) zur Begrenzung der Innovationsbarrieren in FU generiert werden. Literatur Alcorn, P. (1982). Success and Survival in the Family Owned Business, New York: McGraw-Hill. Anderson, R. und D. Reeb (2003). "Founding-family ownership and firm performance: Evidence from S&P500", Journal of Finance, 58 (3), 1301-1327. Astrachan, J. und M. Shanker (2003). "Family Businesses’ Contribution to the US Economy: A Closer Look," FBR, 16 (3), 211-219. Astrachan, J., S. Klein und K. Smyrnios (2002), "The F-PEC scale of family influence: A proposal for solving the Family Business definition problem," FBR, 15 (3), 45-58. Barnes, L.B. und S.A. Hershon (1976). "Transferring power in the family business," HBR, 54 (4), 105114. Bechtle, Chr. (1983). "Die Sicherung der Führungsnachfolge in der Familienunternehmung," Dissertation, HSG. Beckhard, R. und Dyer G. (1983). "Managing Change in the Family Firm – Issues and Strategies," Sloan Management Review, 24 (3), 59-66. Cabrera-Suárez, K., P. De Saá-Pérez und D. Garcia-Almeida (2001). "The succession process from a resource- and knowledge-based view of the family firm," FBR, 14 (1), 37-46. Carsrud, A.L. (2006). "Commentary: Are we family and are we treated as family? Nonfamily employees' perceptions of justice in the family firm: It all depends on perceptions of family, fairness, equity, and justice," ETP, 30 (6), 855-860. Chittoor, R. und R. Das (2007). "Professionalization of management and succession performance: A vital linkage," FBR, 20 (1), 65-79. 9

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Klein, S. (2000): "Family Businesses in Germany: Significance and Structure," in: FBR, 13 (3), 157181. Koberg, Ch.S., D.R. Detienne und K.A. Heppard (2003). "An empirical test of environmental, organizational, and process factors affecting incremental and radical innovation,” Journal of High Technology Management Research, 14 (1), 21-45. Kuratko, D.F. und R.M. Hodgetts (2004). "Innovation and the entrepreneur," in Entrepreneurship. Hrsg. D.F. Kuratko und R.M. Hodgetts. 6. Aufl., Mason, OH: Thomson, 138-150. Leach, P., W. Kenway-Smith, A. Hart, T. Morris, J, Ainsworth, E. Beterlsen, S. Iraqi und V. Pasari (1990). Managing the family business in the UK. A Stoy Hayward Survey in Conjunction With the London Business School. London: Stoy Hayward. Le Breton-Miller, I. und D. Miller (2006). "Why do some family businesses out-compete? Governance, long-term orientations, and sustainable capability," ETP, 30 (6), 731-746. Lee, J. (2006). "Family firm performance: Further evidence," FBR, 19 (2), 103-114. Leenen, S. (2005). "Innovation in family businesses - A conceptual framework with case studies of industrial family firms in the German 'Mittelstand'," Dissertation, HSG. LeMar, B. (2001). Generations- und Führungswechsel in Familienunternehmen. Berlin: Springer. Lester, R.H., A.A. Cannella und D. Miller (2006). "Interorganizational Familiness: How family firms use interlocking directorates to build community-level social capital," ETP, 30 (6), 755-776. Levinson, H. (1971). "Conflicts that Plague Family Business," HBR, 49 (3-4), 91-98. Litz, R.A. und R.F. Kleysen (2001). "Your old man shall dream dreams, your young man shall see visions: Toward a theory of family firm innovation with help from the Brubeck Family," FBR, 14 (4), 335-351. Lyman, A. R. (1991): "Customer service: Does family ownership make a difference?" FBR, 4 (3), 303-324. Matthews, C.H., T.W. Moore und A.S. Fialko (1999). "Succession in the family firm: A cognitive categorization perspective," FBR, 12 (2), 159-170. Meyer, M. und L. Zucker (1989). Permanently failing organizations. Newbury Park, CA: Sage. Neubauer, F. und A. Lank (1998). The Family Business: Its Governance for Sustainability. London: McMillan. Paisner, M.B. (1999). Sustaining the Family Business: An Insider's Guide to Managing Across Generations. Reading, MA: Perseus Books. Potts, T.L., J.E. Schoen, M.E. Loeb und F.S. Hulme (2001). "Effective retirement for family business owner-managers: Perspectives of financial planners (part 1)," Journal of Financial Planning, 14 (6), 102-115. Reichart, S. (2002). Kundenorientierung im Innovationsprozess. Die erfolgreiche Integration von Kunden in den frühen Phasen der Produktentwicklung. Wiesbaden: Dt. Univ-Verl. Reimers, N. (2004). Private Equity für Familienunternehmen: Nachfolgelösung und Wachstumsfinanzierung im deutschen Mittelstand. Wiesbaden: Dt. Univ.-Verlag. Rickards, T (1985). Stimulating Innovation: A Systems View. London: Frances Pinter. Rössl, D. (2005). "Family Business and Interfirm Cooperation," FBR, 18 (3), 203-214. Rutherford, M.W., L.A. Muse und S.L. Oswald (2006). "A new perspective on the developmental model for family business," FBR, 19 (4), 317-333. Schaper, M. und T. Volery (2004). Entrepreneurship and small business: A Pacific Rim perspective. Milton: Wiley. Schröer, E. und W. Freund (1999). Neue Entwicklungen auf dem Markt für die Übertragung mittelständischer Unternehmen. in IfM-Materialien Nr. 136. Hrsg. Institut für Mittelstandsforschung. Bonn: IfM. Shanker, M.C. und J.H. Astrachan (1996): "Myths and realities: Family businesses’ contribution to the US Economy: A framework for assessing family business statistics," FBR, 9 (2), 107-123. 11

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Tradition und wirtschaftliche Entwicklung der KMU

Karl-Heinz Schmidt, Paderborn (D) Universitätsprofessor Dr. rer. pol. Universität Paderborn Fakultät für Wirtschaftswissenschaften / Economics Warburger Str. 100 D-33098 Paderborn e-mail: [email protected] Tel: +49/05251-60-3252

Inhaltsübersicht 1. „Tradition“ – ein Grundproblem der KMU-Ökonomik? 2. Definitionen und Methoden 3. Evolutorische Ökonomik – ein falsches Basismodell für Untersuchungen von KMU? 3.1 Bestimmungsfaktoren der wirtschaftlichen Entwicklung von KMU 3.2 „Tradition“ in der evolutorischen Ökonomik 3.3 „Tradition“ als institutioneller Faktor 4. Positive Analyse der „Tradition“ als Bestimmungsfaktor der wirtschaftlichen Entwicklung von KMU 4.1 Einige Fallbeispiele traditionsorientierter Unternehmensführung in wachsenden KMU 4.2 Traditionales Handeln und traditionsorientierte Organisation von KMU in fortschrittsorientierter Umwelt 5. Schlussfolgerungen Literatur

Abstract The paper starts from the question, if “tradition“ must be taken as a basic problem of SME-economics. Answers are searched for by the subsequent paragraphs. Following the introduction, the term “tradition” and the methods of the investigations underlying the paper are described. The third paragraph is focussed on the determinant factors of economic development of SMEs and on the role of “tradition” in evolutionary economics. Special interest is oriented to “tradition” as an institutional factor. This interpretation means a link to institutional economics and to the fourth paragraph. It aims at a positive analysis of “tradition” as a determinant factor of economic development of SMEs. Several cases of SMEs of different countries expose tradition-oriented management. Referring to former studies and relevant literature, principles and effects of tradition, actions and tradition-oriented organisation of SMEs under the conditions of progress-oriented environment are pointed out. Finally, the conclusions demonstrate, that “tradition” does not generally effect as a hindrance or restriction of the economic development of SMEs; instead “tradition” can effect as a stabilizing factor of SMEs at turmoil of the economic and social environment. 1

1. „Tradition” – ein Grundproblem der KMU-Ökonomik? In neuen Veröffentlichungen zur ökonomischen Theorie der Unternehmung und zur KMU-Ökonomik muss der Leser sorgfältig suchen, um Hinweise auf die Bedeutung von „Tradition“, traditionalem Verhalten oder traditionsorientierten Entscheidungen der Unternehmensführung zu finden. Dagegen könnte man unter Berücksichtigung des historischen Hintergrundes von KMU erwarten, dass auf der Ebene der Unternehmungen und mehr noch in den Organisationen des KMU-Sektors wirtschaftliche Entscheidungen mit Ausrichtung auf Erhaltung oder sogar Stärkung des Einflusses der Tradition auf die wirtschaftliche Entwicklung getroffen werden. Ist daraus zu schließen, dass Tradition allgemein als wachstumshemmender Faktor und daher negativ angesehen wird, also auch in der KMU-Ökonomik unberücksichtigt bleiben sollte? Oder greift die gegenwärtig dominierende Sichtweise der Ökonomie infolge ihrer neoklassischen Prägung zu kurz? Eine Antwort wird in den folgenden Abschnitten dieses Beitrags gesucht. 2. Definitionen und Methoden Der Begriff „Tradition“ wird allgemein als Überlieferung kultureller Formen und Inhalte über eine bestimmte Zeit definiert. Die Inhalte können Sitten, Bräuche, Glaubensvorstellungen, Lieder, Erzählungen oder weitere kulturell relevante, schriftlich oder mündlich überlieferte Berichte betreffen. Dabei werden zwei Formen der Tradition unterschieden: (1) Der zeitliche Vorgang der Tradition und (2) die Diffusion, d. h., die räumliche/sektorale/strukturelle Ausbreitung von Kulturformen. Volkstümliche bzw. populäre Traditionen sind Gegenstand der Volkskunde, die zuweilen auch als Wissenschaft der Traditionen bezeichnet wird. Unabhängig von der Form der Überlieferung stellt der Begriff Tradition aber auch auf die Art des überlieferten Gutes ab, z. B. den Inhalt der Bräuche, Erzählungen oder Lieder. In jedem Fall ist die Tradition ein wichtiges Element der Kultur. Sie umfasst „…kurzum alles, was als Herkommen von den Vätern übernommen Geltung beansprucht und das Leben einer Gemeinschaft ordnet…“ (Kasper, W. (1989), Art. Tradition, I, 494). Demzufolge stellt der Begriff „Tradition“ auf die dauerhafte Anwendung und die Wirkungen dieser Anwendung ab. Auf diese Effekte richtet der Ökonom sein Interesse. Seine Definition von Tradition hebt die Wirkungen auf die Allokation der Ressourcen hervor, in allgemeiner Formulierung: Tradition senkt die Alternativkosten wirtschaftlicher Entscheidungen, genauer: die Alternativkosten der Ermittlung und Durchsetzung von Entscheidungen rational handelnder Wirtschaftssubjekte. Diese Interpretation weist voraus auf die nachfolgenden Abschnitte des Beitrags. Darin wird auf weitere theoretische Überlegungen und auf empirische Untersuchungen Bezug genommen, z. T. auf Fallstudien des Verfassers in verschiedenen Ländern. Die Methoden sind somit deduktiv und induktiv. Obwohl die empirischen Beispiele nicht repräsentativ für den KMU-Sektor sind, bieten sie wichtige Informationen bezüglich der allokativen Effizienz von „Tradition“ im KMUSektor und darüber hinaus.

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3. Evolutorische Ökonomik – ein falsches Basismodell für Untersuchungen von KMU? 3.1 Bestimmungsfaktoren der wirtschaftlichen Entwicklung von KMU Der Frage nach der Relevanz neuer Ansätze ökonomischer Analysen muss die Frage nach den (bisher unterschiedenen) Bestimmungsfaktoren der wirtschaftlichen Entwicklung von KMU vorangestellt werden. In neoklassischer Sichtweise sind die Produktionsfaktoren Arbeit, Boden und Kapital sowie das technische Wissen auf der Angebotsseite und die Präferenzen, Einkommen und Güterpreise auf der Nachfrageseite des Wirtschaftsprozesses zu nennen. Das gilt im Modell des allgemeinen wirtschaftlichen Gleichgewichts. Diese Vorstellung reicht aber nicht aus, um die wirtschaftliche Entwicklung der KMU, also eines Teilbereichs der Volkswirtschaft, zu erklären. Vielmehr sind zusätzlich weitere Bestimmungsfaktoren der wirtschaftlichen Entwicklung von KMU zu identifizieren, im Besonderen: Unternehmerqualifikation, Arbeitnehmerqualifika-tion, Zugang zu neuem Wissen und neuen Märkten, die Formen der Organisation und Kooperation von Unternehmungen sowie die rechtlichen und sozialen Rahmenbedingungen der Volkswirtschaft. Um die Einflüsse dieser Bestimmungsfaktoren auf die Unternehmungen im Zeitablauf darzustellen, haben Gruppen von Ökonomen die Forschungsrichtung der „Evolutorischen Ökonomik“ gegründet und mit Forschungsarbeiten und Veröffentlichungen vorangetrieben (z. B. um Ulrich Witt, Jena, und Kurt Dopfer, St. Gallen). Ziel dieser Forschungsrichtung ist es, „…den selbstorganisierten Wandel ökonomischer Systeme bei Auftreten von etwas Neuem…“ zu untersuchen (Lehmann-Waffenschmidt, M. (2006), 89). Dabei erscheinen die Hinweise auf „…das selbstorganisierende Erzeugen und Verbreiten neuer ‚Potentiale’ in einer sich wandelnden … Selektionsumgebung sowie die davon erzeugten Auswirkungen auf Prozesse innerhalb des untersuchten ökonomischen Systems“ (ebenda (2006), 89) als Ansatzpunkte für die Anwendung auch auf sektorale Studien, somit ebenfalls auf den KMUSektor. Dennoch ergibt sich die Frage, ob dabei auch die „Tradition“ berücksichtigt und hinsichtlich ihres Einflusses auf die wirtschaftliche Entwicklung der KMU untersucht wird. 3.2 „Tradition“ in der evolutorischen Ökonomik Evolutorische Ökonomik ist auf „das Neue“ ausgerichtet. Daraus müsste man schließen, dass „das Alte“ nicht (mehr) beachtet wird. Das würde auch für KMU gelten (Schmidt, K.-H. (1997), 29-39). Wenn „Tradition“ dieses „Alte“ umfasst, bleibt sie demzufolge unberücksichtigt oder der Substitution durch „das Neue“ ausgesetzt. Evolutorische Ökonomik und „Tradition“ scheinen sich auszuschließen. Ein anderer Zugang eröffnet sich indessen, wenn die einleitend angeführte Interpretation des Begriffs „Tradition“ berücksichtigt wird: „Tradition“ als Prozess der Überlieferung und „Tradition“ als dauerhaft nutzbares Gut, jeweils mit der Wirkung reduzierter Alternativkosten der Entscheidungsfindung. Daraus können vermutlich Ansatzpunkte für eine positive Analyse der „Tradition“ abgeleitet werden. Zuvor muss jedoch die „Tradition“ als institutioneller Faktor betrachtet werden. 3.3 „Tradition“ als institutioneller Faktor In der mikroökonomisch strukturierten Theorie des wirtschaftlichen Gleichgewichts, wie sie von Léon Walras und in vereinfachter Form von Gustav Cassel formuliert wurde, sind Sitten, Gesetze, Gewohnheiten u. a. Bestandteile der Wirtschaftsordnung den institutionellen Faktoren zugeordnet (Weise, P. u. a. (1979, 2005), 396 ff.). Sie zählen zu den Rahmenbedingungen des Preissystems, ebenso wie das technische und organisatorische Wissen. Das gilt auch für die „Tradition“, in jedem Fall für das „Gut“ 3

des Überlieferten, d. h. der vorgegebenen Sitten, Gewohnheiten, Gesetze usw., weniger eindeutig dagegen für die „Tradition“ als Prozess der Überlieferung. Dieser auf die Veränderungen von Sitten, Bräuchen, Gesetzen usw. ausgerichtete Aspekt der „Tradition“ kann eher in der Wachstumstheorie und in der evolutorischen Ökonomik berücksichtigt werden. Andererseits erscheint die Institutionenökonomie dafür zuständig zu sein, die „Tradition“ als Institution in die ökonomische Theorie einzuordnen. Grundlegende Veröffentlichungen zur „Neuen Institutionenökonomik“ sollten Anhaltspunkte für die Einordnung erkennen lassen (Richter, R. / Furubotn, E. G. (2003); Erlei, M. u. a. (1999)). Allerdings weisen führende Autoren der Institutionenökomonie wie Douglas, C. North darauf hin, dass verschiedene Formen von Institutionen unterscheiden werden sollten (North, D. C. (1992), 4-6). So grenzt North formgebundene und formlose Institutionen gegeneinander ab. Formgebundene Institutionen sind Gesetze, Verordnungen und andere Formen des kodifizierten Rechts. Zu den formlosen Institutionen zählt North Sitten und Bräuche, Wertvorstellungen, die in Gesellschaftsgruppen geteilt werden, sowie Normen mit ordnungspolitischen Wirkungen (Cortekar, J. u. a. (2006), 137 f.). Dort ist offenbar auch die „Tradition“ einzuordnen. Jedoch ergibt sich ein Problem hinsichtlich der Zuordnung der Akteure von „Traditionen“: North sieht zwar die Formen des kodifizierten Rechts als Institutionen an, aber nicht die politischen Parteien, Verwaltungsbehörden, Gewerkschaften, Unternehmen, Schulen und Universitäten. North bezeichnet sie als Organisationen. Sie stehen zu den Institutionen in ständiger Wechselbeziehung. Ihre Entwicklung vollziehe sich in Abhängigkeit von den institutionellen Rahmenbedingungen, doch nähmen die Organisationen selbst auf die Entwicklung der institutionellen Rahmenbedingungen Einfluss (North, D. C. (1992), 4-6; Cortekar, J. u. a. (2006), 138 f.). Zwar sind in der Literatur weitere Abgrenzungen von Institutionen zu finden, z. B. die Unterscheidung zwischen fundamentalen und sekundären Institutionen (Dietl, H. (1991), zitiert nach Cortekar, J. u. a., (2006), 139), doch kann auch in diesem Schema die Einordnung der „Tradition“ nur vermutet werden: da die fundamentalen Institutionen sich nur langsam wandeln und nicht direkt gestaltet werden können, sondern sich evolvierend verändern, liegt es nahe, ihnen auch die „Tradtion“ zuzuordnen. Jedoch bleibt wiederum die Frage offen, ob die Akteure von „Tradition“, im besonderen Verbände, Vereine, Kammern, Genossenschaften u. a. Träger von Kooperationen ebenfalls zu den fundamentalen Institutionen zu zählen sind, oder ob es sich dabei um sekundäre – oder andere – Typen von Institutionen (nach Dietl) handelt (Cortekar, J. u. a. (2006), 139). Dahinter steht die weitere Frage, ob diese Akteure – auch als wirtschaftspolitische Akteure des KMU-Sektors – die wirtschaftliche Entwicklung eher fördern oder hemmen. Dabei ist wiederum nicht so sehr die „Tradition“ als überliefertes Gut, sondern der Prozess der Überlieferung – mit Einflussnahme auf die wirtschaftliche Entwicklung – für die Ermittlung des Zusammenhangs zwischen „Tradition“ und wirtschaftlicher Entwicklung der KMU wichtig. 4. Positive Analyse der „Tradition“ als Bestimmungsfaktor der wirtschaftlichen Entwicklung von KMU 4.1 Einige Fallbeispiele traditionsorientierter Unternehmungsführung in wachsenden KMU Am 5. Juni 2008 verbreitete die Frankfurter Allgemeine Zeitung (FAZ) eine ganzseitige Anzeige des „manager magazin“ über zwei neue Laureaten einer „Hall of Fame“. Beide Preisträger sind bekannte Unternehmer, der eine in einem europäischen Medienkonzern, der andere in einem Stiftungskonzern der Elektrotechnik-/Elektronikindustrie. Dennoch unterscheiden sich die beiden Persönlichkeiten hin4

sichtlich der Ausrichtung ihrer Unternehmensstrategien auf Innovation und Tradition. Der erste modernisierte das von seinen Eltern geerbte Unternehmen in allen Funktionen und Bereichen, aber er förderte zugleich Kultur und Wissenschaft. Der zweite hat „…den Stiftungskonzern… an die Weltspitze geführt, ohne dessen große soziale Tradition aufzugeben“. Damit sei bewiesen, dass gerade in Zeiten der Globalisierung nachhaltiges Management zum Erfolg führt (FAZ vom 5. Juni 2008, Nr. 129, Anzeige „manager magazin – Wirtschaft aus erster Hand“). Dieser Anzeigentext betrifft zwar nicht unmittelbar KMU, sondern Großunternehmen, aber er betrifft die wirtschaftlichen, technischen und sozialen Beziehungen zwischen Großunternehmen und KMU, denn beide Großunternehmen verfügen über Zulieferbeziehungen bzw. Netzwerke intra- und interindustrieller Struktur. Zweitens betrifft der Text die ökonomische und soziale Bedeutung von „Tradition“. Das gilt explizit für den Text zu der zweiten Persönlichkeit: Unternehmenswachstum, ohne die „große soziale Tradition“ aufzugeben. In dem Text zu der ersten Persönlichkeit wird die „Tradition“ zwar nicht ausdrücklich genannt, jedoch lassen die Hinweise auf „…das von seinen Eltern geerbte Unternehmen“ sowie auf den „Förderer von Kultur und Wirtschaft“ darauf schließen, dass auch diese Persönlichkeit die „Tradition“ bei der Konzeption der Unternehmensführung berücksichtigt und zielorientiert nutzt. Die Instrumentalisierung von „Tradition“ sollte nicht überraschen, denn es handelt sich (nicht nur) bei den beiden Persönlichkeiten um rational handelnde Wirtschaftssubjekte (bzw. gewinnmaximierende Unternehmer). Solche Persönlichkeiten, die in eine „Hall of Fame“ aufgenommen werden könnten, sind auch unter den Unternehmern des KMU-Sektors nachweisbar. Sie können gewiss auch unter den Mitarbeitern/-innen, vor allem unter „verdienten älteren“, ermittelt werden. Entsprechende Beispiele wurden bereits in früheren eigenen Fallstudien über die Innovationen von KMU dargestellt. Darauf weisen auch die folgenden Fälle innovativer und zugleich traditionsorientierter Untersuchungen hin: (1) Der gegenwärtige Inhaber einer mittelständischen Unternehmung, die alle Dienstleistungen „rund um’s Fahrrad“ anbietet, kombiniert „Tradition“ und Innovation im Fahrradhandel. Er führt das Zweiradhaus in dritter Generation. Es wurde 1910 im Zentrum einer mittelständisch geprägten norddeutschen Gewerbe-, Verwaltungs- und Bischofsstadt gegründet, aber im Verlauf der Stadterweiterung in am Standrand neu entwickelte Industrie- und Dienstleistungszonen verlagert. An dem neuen Standort – zugleich verkehrsgünstig an einer Ausfahrtstraße der Stadt gelegen – ergaben sich günstige Voraussetzungen für das Unternehmenswachstum. Durch Produktinnovationen, neue Dienstleistungsangebote und wirtschaftliche Kooperation mit ähnlich strukturierten Zweiradhäusern anderer Bundesländer wurden Umsatz und Beschäftigung – trotz intensiven Wettbewerbs im Fahrradhandel – stabilisiert, z. T. auch erhöht. Die Ideen für neue Produkte und Werbestrategien werden zwar überwiegend vom Inhaber des Unternehmens entwickelt, doch stehen für die kundenspezifische Anwendung der Innovationen im dualen System der beruflichen Bildung zuverlässig ausgebildete Zweiradmechaniker zur Verfügung. Die „Tradition“ umfasst daher in diesem Unternehmen a) die generationenübergreifende Unternehmensführung, b) die kontinuierliche Einführung neuer, zuverlässiger Kombinationen von Produkten bzw. Produktteilen und Dienstleistungen, c) die Spezialisierung und Flexibilisierung der Angebotspolitik (Preise, Werbung, Standort u. a.) sowie d) die dauerhafte Kooperation mit ähnlich strukturierten Unternehmungen in anderen Regionen (in diesem Fall als Mitglied einer „Fahrrad-XXL-Gruppe“ mit elf Unternehmungen in Deutschland). Daraus folgt, dass „Tradition“ und Innovation in diesem Unternehmen des KMU-Sektors keinen Gegensatz, sondern eine Einheit bilden. Der Werbetext „Alt gegen Neu“ steht dem nicht entgegen. Vielmehr fordert er die Kunden auf, alte Fahrräder durch 5

neue Teile weiterhin nutzbar zu erhalten, oder sie für die traditionelle Form der Mobilität durch neue Fahrräder zu ersetzen. Auch darin kann „Tradition“ sichtbar werden (Kache, R. und Brucks, W., 5. Juni 2008). (2) Ein weiteres Fallbeispiel betrifft die Kooperation mittelständischer Unternehmen der Möbelindustrie in der Region Ostwestfalen-Lippe. Wie aus einer entsprechenden Studie über Kooperationen und Netzwerke hervorgeht (Liepmann, P. / Bonkamp, O. / Gohs, B. M., (2006)), erscheint die mittelständische Struktur der ostwestfälischen Möbelindustrie der Kooperationsneigung eher abträglich. Als Gründe werden genannt: - In vielen Betrieben der Möbelproduktion sind die Gründer noch die Eigentümer; - die Unternehmen sind zum erheblichen Teil aus kleinen Schreinereien entstanden; - die Unternehmer erwarten, dass in Zukunft keine Kooperationen und Netzwerke erforderlich sind; - hohe Flexibilität und regionale Konzentration der mittelständischen Unternehmen können sich als Wettbewerbsvorteil erweisen, aber dennoch dazu führen, dass das Kooperationspotential wenig genutzt wird (Liepmann, P. u. a. (2006), 63 f.). „Gründe hierfür können geringe Planungshorizonte der Beteiligten und eine unzureichende strategische Planung sein“ (ebenda, (2006), 67). Kooperationshemmnisse seien auch die geringe Kapitalausstattung vor allem kleiner Unternehmen der Möbelindustrie sowie die abnehmende Wettbewerbsfähigkeit der Möbelbranche in Deutschland infolge veränderter institutioneller Rahmenbedingungen (Steuern, Abgaben, Auflagen, EU-Osterweiterung, Globalisierung der Märkte u. a.) (ebenda (2006), 67). Expertenbefragungen hätten ergeben, dass auch Angst der Unternehmer vor Know-how-Verlust durch die Kooperation, mithin mangelndes Vertrauen der Beteiligten die Kooperationsbereitschaft beschränke. Gegenseitiges Vertrauen ist demnach ein wichtiger Bestimmungsgrund der Kooperation. Das gilt besonders für KMU (2006. 87 ff.). Die Kooperationshemmnisse erhöhen aber zugleich das Autonomiestreben der Unternehmen. Damit ist häufig eine verzögerte Anpassung oder die Beibehaltung des Produktionsprogramms, der Unternehmensorganisation und der Absatzmethoden verbunden. In diesen Fällen führt „Tradition“ langfristig zu abnehmender Wettbewerbsfähigkeit der von den Kooperationshemmnissen geprägten Unternehmungen. Andererseits kann sich eine traditionsbewusste Unternehmensführung in der mittelständisch strukturierten Möbelindustrie auch als innovativ und wachstumsorientiert erweisen. Das geht ebenfalls aus der genannten Untersuchung sowie aus weiteren Studien zur Unternehmenskooperation hervor (ebenda (2006), 101 ff.). (3) Als drittes Fallbeispiel für die Kombination innovativer und zugleich traditionsorientierter Unternehmensführung wird auf empirische Beobachtungen in ausländischen KMU hingewiesen. Besonders in Ländern mit innovativen Rahmenbedingungen wie Japan, wurden KMU ermittelt, deren Unternehmensführung dem Typ des Pionierunternehmers entsprach, der jedoch neben innovativen Produktionsabteilungen und Produkten als „zweites Segment“ einen Bereich traditioneller Produktions- und Absatzmethoden beibehielt. Das galt bereits 1993 für ein unweit von Nagoya lokalisiertes Unternehmen der Elektronikindustrie (Schmidt, K.-H. (1994), 63 ff.). Als weiteres Beispiel ist eine Unternehmung der Textilindustrie zu nennen, die zwar neueste Produktionstechnologie (nach dem Toyota-Nähmaschinensystem) anwandte, aber zugleich die traditionelle genossenschaftliche Organisation der Unternehmungen dieses Industriezweiges beibehielt 6

(ebemda (1994), 104 ff.). Es wäre jedoch verfehlt, hierfür den Unternehmertyp des Organisators oder Allrounders anzuführen (Stratos Group, Bamberger, J. (1990), 39 f.). Eher treffen funktional und/oder divisional orientierte Kombinationen verschiedener Unternehmertypen zu, z. B. das Produktionsmanagement für Baumwollver-arbeitung nach dem Typ des Pionierunternehmers, das Management des Zulieferwesens nach dem Typ des Organisators usw. (vgl. dazu Stratos Group, Bamberger, J. a. o. (1990), 41 ff.). Spätere Fallstudien über innovative Unternehmungen und Technologiezentren haben ebenfalls erkennen lassen, dass die Organisation von KMU nach „Tradition“ japanischer Unternehmensführung zu effizienter Allokation und stabiler Unternehmensentwicklung beitragen kann. Diese Beobachtung wird daher in dem folgenden Abschnitt mit Aussagen über die Möglichkeiten und Grenzen traditionalen Handelns bei innovativer Handlungsumgebung konfrontiert. 4.2 Traditionales Handeln und traditionsorientierte Organisation von KMU in fortschrittsorientierter Umwelt Ausgehend von der Unterscheidung von „Tradition“ als Vorgang des Übertragens bzw. der Überlieferung (actus tradendi) und als überliefertes Gut (traditum), wie Walter Kasper definiert hat (Kasper, W. (1989), V, 494), schließt sich an die empirischen Daten die Frage an, ob traditionales Handeln in fortschrittsorientierter Umwelt aufrechterhalten werden kann. Dabei ist traditionales Handeln wiederum in zweifacher Ausrichtung darzustellen als wertrational bezüglich des Wertes bzw. des Gutes „Tradition“ und als zweckrational im Prozess der Überlieferung bzw. des Weitergebens. Hierbei wird der Zweck in der Senkung der Alternativkosten der Entscheidungsfindung gesehen. Traditionales Handeln ist demzufolge insoweit (zweck-)rational als es dazu führt oder beiträgt, die Alternativkosten der wirtschaftlichen Entscheidungen zu vermindern. Dabei werden Inhalt und Wirkungen des traditionalen Handelns durch die kulturellen Rahmenbedingungen beeinflusst oder sogar bestimmt. Wiederum belegen einige Beispiele den Zusammenhang in KMU. Ein Kofferträger in einem „mittelgroßen“ Hotel in New York reagierte auf einen „Tip“ unter 2 US $ sehr unzufrieden, dagegen lehnte ein Kofferträger in einem Hotel etwa gleicher Betriebsgröße in Kyoto das Trinkgeld ab. Oder: eine Serviererin in einem Bierpub in Boston forderte mehr als das angebotene Trinkgeld, eine Serviererin in einem Restaurant nahe Johannesburg nahm es sehr dankend an. Obwohl der „Catching-up-process“ der LDC’s mit der Anpassung der Verhaltensweisen einhergehen wird, kann traditionales Handeln auch in Zukunft in Abhängigkeit von den kulturellen und wirtschaftlichen Rahmenbedingungen identifiziert werden. Zugleich wird festzustellen sein: Traditionales Handeln erfolgt nicht, wie Max Weber behauptet hat, aus der „…Unfähigkeit und Abgeneigtheit, sich überhaupt aus den gewohnten Bahnen herauszubegeben…“ (Weber, M. (1924), 302 f.), sondern es ist (häufig) eine Folge zunehmender Geschwindigkeit des „technischen Fortschritts“ sowie der sozialen und politischen Rahmenbedingungen der wirtschaftlichen Entwicklung. Der traditional handelnde Unternehmer investiert ggfs. nicht in die neue Computerversion, sondern er wartet, bis die nächste Version – auf der Grundlage neuer technischer Kenntnisse – angeboten wird. Der „Catching-up-process“ wird in diesem Fall diskontinuierlich – in Sprüngen – vollzogen, eine gewiss realistische Vorstellung.

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5. Schlussfolgerungen Der Beitrag wurde mit der Frage eingeleitet, ob „Tradition“ allgemein als wachstumshemmender Faktor anzusehen ist und daher auch in der KMU-Ökonomik unberücksichtigt bleiben sollte, oder ob die neoklassisch geprägte dominierende Sichtweise zu kurz greift. In drei Abschnitten wurde versucht, Anhaltspunkte für eine theoretisch begründete und empirisch belegte Antwort zu finden. Drei Schlussfolgerungen ergeben sich aus den voranstehenden Abschnitten des Beitrags: (1) Der Begriff „Tradition“ schließt unterschiedliche Inhalte ein; er wird von den Begriffen Institution und Organisation abgegrenzt. Max Weber interpretierte den Traditionalismus“ als „Heiligkeit der Tradition, (als) die Einstellung allein auf ein Handeln und Wirtschaften, wie es von den Vorvätern überkommen ist“ (Weber, M. (1924), 302). Nach Walter Kasper gehört zur Tradition ebenfalls „…alles, was als Herkommen von den Vätern übernommen Geltung beansprucht und das Leben einer Gemeinschaft ordnet“ (Kasper, W. (1989), I, 494). Zugleich unterscheidet Kasper jedoch „Tradition“ als überliefertes Gut und als Akt des Überlieferns. Beide Aspekte der Tradition sind für die Gesellschaft notwendig, um Orientierungslosigkeit und Beliebigkeit zu vermeiden (ebenda (1989), I, 495). In neuen ökonomischen Untersuchungen zeichnet sich ebenfalls eine neue Sichtweise der „Tradition“ ab. Um Entscheidungsfindungskosten zu senken, entwickeln Menschen Verfahren, im besonderen Regeln, mit deren Hilfe Entscheidungen an bestimmte Handlungsumgebungen gebunden werden. So entsteht auf individueller Ebene „habituelles Verhalten“, auf der Ebene der Gesellschaft entwickeln sich Traditionen. Also kann habituelles und traditionelles Verhalten durchaus rational sein, zumindest solange die Alternativkosten der Entscheidungsfindung nicht höher sind als die Kosten, die durch die Verbreitung neuer Gewohnheiten und Traditionen entstehen würden (Weise, P. u. a. (2005), 92). (2) Die „Tradition“ wird in neuen Entwicklungsrichtungen der ökonomischen Theorie nicht ausdrücklich berücksichtigt, jedoch sind Möglichkeiten erkennbar, Formen der Tradition von Institutionen und Organisationen zu unterscheiden und die Wirkungen traditionellen Handelns darzustellen. Das gilt für Veränderungen von Sitten und Bräuchen in der „evolutorischen Ökonomik“ und für Institutionen, z. B. für kodifiziertes Recht in der Institutionenökonomie, nicht dagegen für politische Parteien, Verbände oder andere Organisationen (North, D. C. (1992), 4-6; Cortekar, J. u. a. (2006), 137 f.). (3) Empirische Beispiele von KMU in fortschrittsorientierter Umwelt lassen darauf schließen, dass Traditionalität und Zweckrationalität der Entscheidungen sich nicht grundsätzlich ausschließen. Traditionelles Handeln kann sich als zweckrational erweisen, solange die Alternativkosten der Entscheidungsfindung geringer sind als die Kosten „neuer Methoden“ der wirtschaftlichen Entscheidung. Daher kann auch traditionsorientiertes Verhalten von Unternehmern in KMU die wirtschaftliche Entwicklung stabilisieren. Die angeführten Beispiele der KMU zeigen: „Alt und Neu“, Tradition und Innovation, „Catching up“ und Stabilisierung der Entwicklung sind miteinander vereinbar. Zusammenfassend ist somit festzustellen, dass „Tradition“ sich nicht allgemein als Wachstumshindernis oder Beschränkung der wirtschaftlichen Entwicklung auswirkt. Vielmehr kann sie sich als stabilisierender Faktor von KMU bei Störungen ihrer wirtschaftlichen und sozialen Handlungsumgebung und darüber hinaus erweisen. 8

Literatur: Brodbeck, K.-H. (2002), Die fragwürdigen Grundlagen der Nationalökonomie, 2. Auflage, Wissenschaftliche Buchgesellschaft, Darmstadt Bruhns, H. (2005), Max Weber: Ökonomische Theorie und Wirtschaftsgeschichte, in: Backhaus, J. G., Historische Schulen, Wirtschaft: Forschung und Wissenschaft, Bd. 11, LIT-Verlag, Münster, 26-52 Cortekar, J. / Jasper, J. / Sundmacher, T. (2006), Die Umwelt in der Geschichte des ökonomischen Denkens, Metroplis-Verlag, Marburg Erlei, M. / Leschke, M. / Sauerland, D. (1999), Neue Institutionenökonomie, Schäffer-Poeschel Verlag, Stuttgart Heidenreich, R. (1994), Ökonomie und Institutionen. Eine Rekonstruktion des wirtschafts- und sozialwissenschaftlichen Werks von K. W. Kapp, Verlag Peter Lang, Franfurt a. M. Kache, R. / Brucks, W. (2008), Die >>Drei Hasen<< sind wieder mobil, in: Westfälisches Volksblatt vom 5. Juni, Nr. 129 Kasper, W. (1989), Art. Tradition, I. und II, in: Staatslexikon, 7. Auflage, 5. Band, Verlag Herder, Freiburg u. a., 494-498 Kieser, A. (Hrsg.) (1993), Organisationstheorien, Verlag W. Kohlhammer, Stuttgart u. a. Lehmann-Waffenschmidt, M. (2006), Evolutorische Ökonomik, in: Dürmeier, Th. / v. Egan-Krieger, T. und Peukert, H. (Hrsg.), Die Scheuklappen der Wirtschaftswissenschaft, Metropolis-Verlag, Marburg, 85-95 Liepmann, P. / Bonkamp, O. / Gohs, B. M. (2006), Kooperationen und Netzwerke in ausgewählten Branchen der Region Ostwestfalen-Lippe, Edition der Hans-Böckler-Stiftung, Düsseldorf Manager magazin (Anzeige) (2008), Hall of Fame 2008, in: Frankfurter Allgemeine Zeitung vom 5. Juni, Nr. 129 Richter, R. / Furubotn, E. G. (2003), Neue Institutionenökonomik, 2. Auflage, Mohr Siebeck, Tübingen Schmidt, K.-H. (1988), Neue Technologien in kleinen und mittleren Unternehmungen, Verlag Otto Schwartz & Co., Göttingen Schmidt, K. H. (1994), Regional Innovation Poles in Japan, University-GH Paderborn, Dep. of Economics, Paderborn Schmidt, K.-H. (1997), Evolutorische Ökonomik und KMU, in: Belak, J. u. a. (Hrsg.), Unternehmensentwicklung und Management, Versus-Verlag Zürich, 29-39 Schmidt, K.-H. (2003), Technology Transfer and dynamic Labor qualification under different conditions of regional development, in: Oita University Economic Review, Vol. 55, Nr. 3, 31-77, and 4, 19-80 The Stratos Group (Bamberger, J. a. o. (1990), Strategic Orientations of Small European Businesses, Avebury, Aldershot a. o. Weber, Max (1924), Wirtschaftsgeschichte, 2. Auflage, Verlag Duncker & Humblot, München und Leipzig Weise, P. u. a. (1979, 2005)) Neue Mikroökonomie, 1. Auflage, Physica-Verlag Würzburg-Wien, 5. Auflage, Physica-Verlag Heidelberg.

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Creativity, Innovation and Entrepreneurship: its interrelations and impact on economic growth and development in the knowledge society.

JOSE Mª VECIANA Universitat Autònoma de Barcelona Departament d’Economia de l’Empresa Tel. +34 581 1209, Email: [email protected]

PROBLEM STATEMENT AND OBJECTIVE It is notorious that we live in the knowledge society. The deep technological changes that have taken place in the last decades have produced a qualitative change in the economic structure of the industrialized countries. In the economic scene we witness both a globalization and a localization or regionalization of the economy. In sectors that base its competitive advantage on mobile capital with immobile lower-cost labour globalization leads to delocalization of production from high wages countries to countries with low-cost labour. However, when the competitive advantage is based on knowledge as is the case in the knowledge economy, geographic proximity and the territory become a decisive factor in the economic activity because knowledge tends to be developed in the contexts of localized production networks embedded in innovative clusters. In Western countries the traditional industrial economy, which has been called “managed economy” (Audretsch and Thurik, 2001) because it is governed by the technostructure (Galbraith,1967) is being transformed in an “entrepreneurial economy” in which the decisive factor in the economy and the competitive advantage is innovation and new technology companies in a reduced geographic area. It thus emerges localization or regionalizatin as a cross-current to globalization. The territory thus becomes a central concept. Innovation, creativity, and new firm formation are closely interrelated. Technical progress leads to innovation waves and these lead to creation of new firms and they, in turn, generally suppose an innovation. Creativity stands in the doorway of both phenomena although it is usually not explicitly associated with them. These three phenomena are symbiotic and constitute the bases of economic growth and development. The purpose of this paper is to analyse the interrelation between creativity, innovation and entrepreneurship in the knowledge society and its impact on economic growth and development. Thereby we will highlight the sub-factors that underline these three phenomena and draw on the available empirical evidence to explain them. In our analysis we will focus on the regional, institutional, and social context. INNOVATION AS A KEY FACTOR OF ECONOMIC GRWOTH AND DEVELOPMENT The importance of innovation as a key factor of economic growth and development is not new. It was highlighted by such prominent economics like Smith, Schumpeter, and Arrow to mention only three of them. For instance, Adam Smith (1776) already mentioned in the first chapter of his book The Wealth 1

of Nations the relationship between scientific progress and technical progress in industry. Joseph Schumpeter in his Theory of Economic Development (1912) considered the entrepreneur’s task and capacity to realize new combinations of the production factors, i.e. innovation, as the basis of his theory. And Arrow (1962) pointed to the relationship between economic welfare and the resources assigned to innovation. On the other hand, Jewkes and his colleagues (1958) concluded that in the XIX century the relationship between science and invention was much closer than generally believed. Therefore, it has always been assumed the existence of a positive relationship between scientific progress, invention-innovation and economic development. Anyhow, it has only been in the last decades where the need of the scientific progress and innovation has been considered vital to meet the challenge of the competitiveness of nations and firms at a global level. We therefore think that it is necessary to refer briefly to two important aspects in this context: the analysis of the existing differences among the different countries regarding the R+D expenditure and innovation and to the empirical studies to understand the complex innovation phenomenon both at the country and firm level as well as its conditioning factors. R+D expenditure and innovation Since Solow (1956) based his model of economic growth on the neoclassical production function with its key factors of production, capital and labour, this model has served as a basis for explaining the determinants of economic growth. Romer (1986) and Lucas (1988) criticized Solow’s model arguing that in his model an important factor of production was missing, i.e. knowledge. They argued that knowledge was an important factor of production, along with the traditional factor of labour and capital, because it was endogenously determined as a result of externalities and spillovers. The first empirical studies on innovation have taken as a point of departure the investment in R&D by industry or at the country level as a percentage of the GDP and as output the number of patents. These studies hypothesize a positive relationship between investment in R&D and economic growth. For instance, Lichtenberg (1992) and Eaton & Kortum (1993) found that the level of R&D expenditure and the number of scientists and engineers were significant factors for explaining the income level of a country. Recently it has been reported that an investment of 32 mill. euros supplied by the Dublin Government in the period 2001-2005 to the biotechnology sector has generated an increase of 125 mill. euros in Irland?s GNP in these five years. Similar results are reported on Scotland (La Vanguardia, 26.04.07). The relationship between R&D expenditure and productivity has been studied by several researchers. For instance, Coe & Helpman (1993) show that the national and foreign “stock of knowledge capital” - i.e. the accumulated R&D expenditure in a country and in the countries with which there are exchange relationships – help to explain the productivity growth in the OECD countries. The increased availability of micro-level data in the EU in recent years, especially with the Community Innovation Survey (CIS) since 1990, has led to an increasing number of studies on the links between R&D, innovation and productivity at the company level. Anyhow, Griliches (1979) has raised two questions regarding such studies, i.e. regarding the measures of the “output” in R&D intensive industries, and on the definition and measure of the “stock of R&D capital”. Another critique has come from Pack (1994) who argues that R&D is not the only fac2

tor that explains variations of the GDP across countries. It has been found that slower growth of physical and human capital are minor sources of the slower growth rate of aggregate output. Similarly, the slowing in R&D, if any, has had a minor effect (Griliches, 1988). Moreover, the data suggest that changes in the ratio of R&D to GDP have not been large and that countries such as Japan whose R&D continued to grow rapidly were subject to the same slowing in total factor productivity growth. “In sum – writes Pak (1994-59) – the direct support for endogenous growth theory in explaining recent performance in the OECD countries is weak”. Anyhow, apart from the direct relationship between R&D expenditure and GDP or R&D and total productivity, it is worth remembering that the investment in R&D is also important for two additional reasons: on the one hand, the nature and magnitude of the “spillover effect” of R&D (Griliches, 1995 and Geroski, 1995). We will revert into this matter in the next section. The other has to do with the relationship between R&D and generation of opportunities. It is well known that technological opportunities are generated through investments in knowledge production. The new knowledge not only contributes to create new technological opportunities but the spillover effect spreads to third persons (Azuolary & Shane, 2001; Archibald et al. 2002; Acs et al. 2005). In sum, without underestimating the importance of R&D expenditure for economic growth, the above studies highlight the fact that although R&D plays an important role, it is not the only factor that explains innovation and economic growth, as we will see later. Territory and innovation. The spillover effect A key concept in the theory of endogenous regional development is the spillover effect. This theory claims that the endogenous development is based on firm behaviour, i.e. on the investment in R+D, on the organizational learning, and on the quality of its human resources (human capital). The spillover effect refers to the diffusion effect of knowledge and experience that each investment produces. This effect that is external to the firm fosters the creativity and improves the productivity of the firms in a specific territory, thus permitting endogenous growth and development. Anyhow, the first endogenous growth models (Romer, 1986; Lucas, 1988, and Rebelo, 1991 among others) did not explain the process by which knowledge spills over from the firm producing it for use by a third-party firm and treated the process as exogenous. This was to some extent remedied by the neo-Schumpeterian models of endogenous growth (Schmitz, 1989, Segestrom et al., 1990; Segestrom, 1991; Aghion and Howitt, 1998). These neo-Schumpeterian models design entrepreneurship as an R&D race where a fraction of R&D will turn into successful innovations. But these models do not specify either the characteristics of a certain area or territorial unit that are relevant to produce the exchange of knowledge among the firms (Vazquez Barquero, 2002). Research in the last decades has made evident that the learning processes, the diffusion of knowledge and therefore its spillover effect are produced and/or facilitated basically by the following factors: a) social networks, b) social mobility and c) entrepreneurial capital. Social networks. Social networks exist at multiple levels of analysis because ties can be established among individuals, groups of individuals, firms, industries, between universities and firms, and in geographic areas. They have been called “social capital”. Networks can link members of one category with members of another. For instance, Powell, Koput and Smith-Doerr (1996), Florida & Cohen (1999), and Feldman et al. (2002) have shown how the universities facilitate the pillover of knowledge 3

through recruiting and attracting talent to the territory, transmitting technology through local networks, training graduates for the firms and supplying a platform for the companies, individuals and public agencies to interact. In a similar way, Florida and Kenney (1988) analyzed the relationships that venture capital firms had with talent and human resources that they then transferred to their clients that generally are technology new firms. Gompers and Lerner (1999) have shown how the geography affects the localization of venture capital firms.These authors show that the geographic distribution of venture capital firms is spatially biased towards those regions in which predominate the concentration of technology new firms, like California, New England, and New York. Furthermore, Sorenson & Stuart (2001) found that the localization of new firms is important to obtain venture capital. In their analysis of the factors that determine venture capital investments in the 1986-1988 in the U.S. they found that the probability that a venture capital firm invests in a firm diminishes as the geographic distance between the venture capital firm and the potential new client increases. Social mobility. Social mobility within the same industry or territory is another important factor to foster the exchange of information, knowledge and experiences in it, thus strengthening the spillover effect. Hence the way Saxenian (1990) explains the situation referring to the Silicon Valey: “It is not simply the concentration of skilled labor, suppliers and information that distinguish the region. A variety of regional institutions –including Stanford University, several trade associations and local business organizations, and a myriad of specialized consulting, market research, public relations and venture capital firms- provide technical, financial, and networking services which the region’s enterprises often cannot afford individually. These networks defy sectoral barriers: individuals move easily from semiconductor to disk drive firms or from computer to network makers. They move from established firms to start-ups (or vice versa) and even to market research or consulting firms, and from consulting firms back into start-ups. And they continue to meet at trade shows, industry conferences, and the scores of seminars, talks and social activities organized by local business organizations and trade associations. In these forums, relationships are easily formed and maintained, technical and market information is exchanged, business contacts are established, and new enterprises are conceived… This decentralized and fluid environment also promotes the diffusion of intangible technological capabilities and understandings”. Malecki (1997) was one the first authors to point out the importance of qualified labour force as a mechanism for the transference of knowledge in technology based industrial clusters. Provenzer (1997) and Zucker et al. (1998) show that biotechnology firms tend to be located in few geographic areas and that is due to the fact that in them the most outstanding scientific of this field can be found. This finding is corroborated by Audretsch and Stephan (1996). Entrepreneurship capital. This is another mechanism that will be treated in the next section. Business strategy and innovation The fact that the U.S. experienced lower growth after 1997, specially compared to Japan, triggered a number of studies of the factors that does not contemplate the theory of regional endogenous development. We are referring to the strategy of a firm in general terms. Under this term we include the management and organization systems, i.e. the capacity and creativity to conceive, design and implement 4

not only new business strategies but new management systems like “just in time”, quality circles, total quality management, etc. (Dertouzos, Lester & Solow, 1989). This was evident in Japan but also later in Europe. The low cost airlines and IKEA are good examples. In these airlines the success does not result from the investment in R&D but on the creativity and innovation, that is, the strategic conception of the business that supposes a new combination of production factors and a new means-ends relationship. The objective –end- of the company are the same as their competitors- to transport passengers - , but the means are different (Veciana, 2005). IKEA has innovated the marketing and organizational system combining sales by catalogue and sales in the shop based on an innovative product and production strategy. The management systems also include the human resources policy, specially the recruiting, training and motivation of the employees that is considered nowadays as the most important factor in the resource based view of the firm. As an example we would like to mention the NESTLE’s “program innova” in Spain to foster creativity and innovation. This program was started in 1996 with the objective to double the impact on sales from innovation of new products and focused on the environment, the creativity and the processes. This program included the organization of creativity seminars that were attended by 190 employees and managers from the departments of marketing, sales, technical division, R&D, etc. As a result of this program 5.135 ideas were received coming from all areas of the firm (2.042 from the headquarters, 2.560 from the factories, 126 from the pensioners, 407 from regional sales divisions). The percentage of sales resulting from new products rose from 5% in 1996 to 11% in 2006. Therefore, besides the spillover effect, the conviction emerges that one of the factors that determine the long term productivity and competitiveness is the organization itself, that is, the organizational factors as already pointed out by Stiglitz (1988) and Pack (1994). “Indeed – Pack writes (1994:60) the earliest growth models, which viewed µ (1) reflecting disembodied sources of productivity growth, conform more to the sprit of the new focus on organization than models emphasizing externalities”. Changes in organisations and institutions do not stem from R&D, at least as usually conceptualized and measured. Differences in organisation probable help to explain how a sustained difference in income levels can occur between two countries, even if capital (measured in whatever augmented fashion) is identical. Therefore, from the above mentioned evidence the conclusion can be drawn that the innovation that leads to competitiveness and economic development exists also at the firm level and does not exclusively come from investment in R&D but also from the creativity and from the ability and competencies of the firm management. Firm size and innovation Although statistics show that large companies invest more than the small and medium size firms in R&D, several studies on this topic have shown that SMEs contribute to innovation as much as large firms. The usual practice to measure the output of R&D expenditure through a simple patent count has been questioned by several researches for two reasons. First, because a simple patent count does not include the quality of the “innovative output” (Hall et al., 2005). Second, because patents do not fully 5

reflect the result of the innovative effort of firms. Many innovations are not patentable. For SMEs the process to patent an innovation is slow, expensive and deterrent, and what is still more important, in the knowledge society not only the patentable innovations count but also innovations in strategy and management systems are important, as we have seen above. In a study by The Futures Group (1984) for the U.S. Small Business Administration that replicated an earlier study by Gellman (1976) analysed a database consisting of 8.074 product innovations in the U.S during 1982 and found that small enterprises innovated at a higher rate than large firms, the rate being 1,24 to 2,38 times the ones of the large firms. Audretsch (1991, 1995) concludes that small enterprises are not necessarily in a disadvantage versus the big corporations and adds that the ability to innovate allows small firms to compensate the disadvantages of scale compared to big companies. Audretsch and Acs (2006) found no empirical evidence showing the existence of increasing innovative outputs as the firm size grows. On the contrary, the factor that had a positive influence was “skilled labour force” (2006:29). Chakrabarti (1991) found that small firms produced more innovations per dollar invested in R&D than the large ones. ENTREPRENEURSHIP AND INNOVATION In this section we will examine why and how new firm formation has become an important mechanism for innovation and hence for economic growth, development, and competitiveness. To support our argument we will analyse the four main factors that impact the rate of new firm formation: a) entrepreneurial capital, b) the university, c) the immigrants and d) the creativity. Entrepreneuship capital and new firm formation By entrepreneurship capital it is meant the capacity for economic agents to generate new firms (Audretsch & Keilbrach, 2004). It does not refer to physical capital but to what traditionally has been named “entrepreneurial spirit”, that recently has been measured as the number of new firms created in a certain area and period. Research based on the entrepreneurship capital concept has emerged from the fact that investment in R&D – one of the factors that traditionally has been considered as a factor of endogenous development – has not always led to economic growth. Indeed, the research by Acs et al. (2005) has again corroborated that there is not a systematic relationship between investment in R&D and GDP growth, as mentioned above. Therefore the above mentioned endogenous growth models do not offer any explanation why in some countries – like Japan and Sweden – with R&D expenditure higher than in other countries – had a low growth rate in the last decades while others – Irland and Denmark – have experienced higher and persistent growth rates. The GEM data (Global Entrepreneurship Monitor) confirm this fact. Whereas Irland and Denmark have higher TEA (Irland:8,10% (2004), 9,83% (2005), 7,4% (2006), 8,2% (2007); Denmark: 5,88% (2004), 4,75% (2005), 5,3% (2006), 5,4% (2007) , TEA in Japan and Sweden is lower(2,76%-2,22%-3,4%4,3%, and 4,12%-4,4%- 2,9%-4,2% respectively). Both Schumpeter (1912) and later Chandler (1977, 1999) have pointed to the entrepreneurial function or the ability of firms to take advantage of the technical progress. Therefore, the explanation of

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the above mentioned difference would be the entrepreneurial capacity and the function that it realizes in technology transfer (Michelacci, 203). As Alan Greenspan, ex-president of the U.S. Federal Reserve expressed some years ago: “At present there is an important stock of technology available that is not being exploited commercially, which means that that at any moment there can be a significant increase of productivity (La Vanguardia, May 8, 2005). Therefore, although the investment in R&D and the existence of a stock of scientific knowledge are, in general terms, important factors in the new economy, its existence in a given territory is no guarantee of economic growth despite the spillover effect. This seems to be insufficient when the problem is to convert certain type of scientific or technological knowledge in economic knowledge. It is the entrepreneur who through his alertness, ability, and risk taking propensity realizes this important task in the knowledge society through new firm formation. Therefore, new firm formation is the most important mechanism by which scientific and technological knowledge is converted into economic knowledge that enables the production of new products and services as well as high value added jobs in the knowledge society. Audretsch and Keilbach’s research (2004) has shown that the most significant territorial factors that explain entrepreneurship capital and differences in endogenous development among 327 regions in Germany are: skilled labour force (knowledge workers); immigrants; labour force diversity; agglomerations; local attractiveness, and local diversity, the two first mentioned factors being the ones with more impact. Bartik (1989) in his research on the variation of new firm formation rates among different states in U.S. found that the main factors that had a positive impact on new firm formation rates were: demand, public services, immigrants and level of education of the labour force. Therefore, in the knowledge society the question is not to create new firms to reduce unemployment but to produce new technology firms capable of growing and creating high value added jobs. University and new firm formation Universities are nowadays considered as an important source of innovations in a country or territory and therefore play a key role in new firm formation Together with industry, universities are the sector that invests more in R&D. Universities have undergone a deep change. They are not only considered as an institution concentrated in basic research but it is expected from them that through the conversion of scientific and technological knowledge into innovations they contribute to the competitiveness and economic growth of the region. This goal should not only be attained by establishing the necessary links for the technology transfer from the university to the economy, but especially through “spin-offs” creation. For this purpose universities are establishing scientific and technological parks as well as incubators to facilitate the creation of spin-offs. “Spin-offs” are important because: a) they enhance local economic development; b) they are useful for commercializing university technologies; c) they help universities with their major missions of research and teaching; d) they are disproportionately high performing companies; and e) they generate more income for universities than licensing to established companies (Shane, 2004).

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Spin-offs creation is conditioned by two factors: by the university’s investment in R&D and by the university’s culture. Research by Kirchhoff et al. (2002) confirms that R&D expenditure by the universities has a statistically significant impact on the rate of new firm formation in general (and not only spin-offs). This impact is due to two factors. On the one hand, the university produces graduates, and research has found a strong relationship between social capital measured by the concentration of adult population with university degrees and the growth of urban areas and new firm formation. On the other, besides spin-offs, the R&D activities by universities produce the same phenomenom mentioned above, i.e. the “spillover effect” in the industry and clusters. Kirchhoff’s research has also shown that the impact of university R&D on new firm formation lasts during min. 5 years. It also confirms the research results by Birch, Haggerty & Parson (2000) regarding the impact on economic growth in metropolitan and rural areas, the most important determinant factors being in this order: universities, skilled labour, airports and environmental attractiveness. Armington & Acs (2002) have shown that the rate of new firm formation is high in areas where the percentage of university graduates is higher than in those in which predominates the unskilled labour. The university not only fosters new firm formation in general and specially “spin-offs but also attracts the localisation of new technology companies as Audretsch and Lehman (2005) have shown. Besides investment in R&D the university culture also impacts the spin-offs activities of universities (Bauer, 2001). Bair & Hitchens (1998) found that one university had problems in promoting the creation of “spin-offs” because scientists thought that they were against the scientific work and could question the university reputation. Kenney & Goe (2004) found that the departments of the University of Berkely had produced less spin-offs than those of the Stanford University because its culture is less supportive to spin-offs. Louis et al. (1989) also found that the differences in organizational culture and attitudes were the most important factor to predict the participation of researchers from the experimental schools in their own spin-offs companies. The existence of entrepreneurial role models in the university is another factor that favours the spin-offs creation. The presence of entrepreneurs among the faculty is crucial for the formation of spin-offs companies (Hsu & Bernstein, 1997; Bauer, 2001). Immigrants and new firm formation From the socioeconomic viewpoint immigrants have been considered as workers that supply unskilled and cheap labour force in industrialised economies. Anyhow, more recently attention has been drawn to immigrants from less developed countries as a source of talent and new firm founders. Although Light in the seventies already published the results of the first research on immigrants as new firm founders in the U.S. under the title: Ethnic Enterprise in North America: Business and Welfare among Chinese, Japanese, and Blacks (Light, 1972), only in the last two decades this topic has reached most industrialised countries (See Kloosteran & Rath: Immigrant Entrepreneurs: Venturing Abroad in the Age of Globalization, 2003). The first important conclusion that has brought about the empirical studies is that the new firm formation rate among the immigrant population is higher than in the general autochthonous population (Min, 1984; Saxenian, 1990, Audretsch & Keilbach, 2004; etc.). Anyhow, the more recent studies

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focus on immigrants with university degrees and specially scientists, engineers, legal immigrants and not on un-skilled workers. For instance, Saxenian, in her study titled “Silicon Valey’s New Immigrans Entrepreneurs” (1999) referred to the development of the regional economy in the Silicon Valey and the role played by immigrants. One of the most interesting results was that the Chinese and Indian engineers were managing 24% of the technology firms created between 1980 and 1998. Saxenian concluded that the scientists and engineers who were born abroad were creating a good portion of the jobs and wealth in the Californian economy. Even those that had returned to their countries of origin to take advantage of the opportunities there had established links in the U.S. and stimulated technological innovation and economic development in California. The importance of the contribution to new firm creation by the immigrant population has again been confirmed by a recent study by Vivek Wadhwa et al. (2007). According to this study some characteristics of the engineering and technology companies started in the U.S. from 1995 to 2005 are the following. In 25.3% of these companies, at least one key founder was foreign-born. States with above-average rate of immigrant-founded companies include California (39%), New Jersey (30%), and Massachusetts (29%). Immigrant-founded companies in California are concentrated in the Silicon Valey. Over half (52.4%) of Silicon Valey startups had one or more immigrants as key founder, compared with the California average of 38.8%. Nationwide, these immigrant-founded companies produced $52 billion in sales and employed 450.00 workers in 2005. Indians have founded more engineering and technology companies in the US in the past decade than immigrants from the U.K., China, Taiwan and Japan combined. Of all immigrant-founded companies, 26% have Indian founders. Almost 80% of immigrant-founded companies in the US were within just two industry fields: software and innovation/manufacturing-related services. A comparison with Saxenian’s 1999 findings shows that the percentage of firms with Indian or Chinese founders had increased from 24% to 28%. Regarding patens the study estimates that the contribution of non-citizen immigrants to the international patent applications increased from 7.3% in 1998 to 24.2% in 2006. The largest group of immigrant non-citizen inventors were Chinese (Mainland- and Taiwan-born). Indians were second, followed by Canadians and British. Immigrant non-citizens filed more theoretical, computational and practical patens than mechanical, structural or traditional engineering patens. This study concludes stating that it is clear that immigrants have become a significant driving force in the creation of new business and intellectual property in the U.S. and that their contributions have increased over the past decade. This fact should not be ignored when dealing with the issue of creativity, innovation and entrepreneurship and the public policies to promote them. 9

CREATIVITY AND NEW FIRM FORMATION Creativity stands at the beginning of any research, innovation or new firm formation process. Popper ( 1962/1973) affirms that scientific discovery contains an “irrational element” or “a creative intuition”. Einstein (1934) talks in a similar way about the “search for those universal laws …” and that there is not a logical way that guide these laws. They can only be grasped by intuition”. The strategic innovation resulting from the combination of new production factors or the increase of the sales volume coming from new products, as in the case of Nestle’s Program Innova , as we have seen above, are the fruits of creativity. In the same way, the foundation of a new firm is also a “creative act of highest order (Collins & Moore, 1964:36). As we have explained elsewhere (Veciana, 2005) the point of departure of a new firms is always an IDEA. To start a new business the entrepreneur must have conceived a business idea, the business model that will mould the goals, activities, and products or services of the new company. It must be based on the identification of an opportunity, which exploitation should produce product and services that satisfy a latent or manifest need in the market. Creativity has traditionally been studied at the individual level and considered to be the result from certain personal characteristics or from member heterogeneity in teams at the corporate level (Veciana, 1999) In this context we are interested in creativity as a stimulating factor of regional development and as creativity resulting from the social context, a research line that was initiated by Pack et al. already in 1925 and has been continued by other researchers in the last decades (Jacobs, 1961; Thompson, 1965; Lucas, 1988; Desrochers, 2001). Park et al. already pointed to the role of cities in concentrating and stimulating human creativity. Jacobs explained how cities function as open systems to attract talented persons with different education and experience and thus stimulating their creative capacity. Thompson was the first author to point out that cities function as “incubators” of new ideas and innovation. Lucas formalized Jacob’s ideas in a basic theory arguing that cities function as collectors of human capital thus generating new ideas and economic development. Desrochers argued that economic diversity is a key factor in city and regional growth, as creative people with varied backgrounds come together to generate new and novel combinations of existing technology and knowledge to create innovation and as a result, new firms. Lee et al. (2002) show that creativity, diversity and human capital have a positive and significant relationship with regional innovation production measured by per capita patent production. And Florida & Gates (2001) found that diversity has a positive association with regional high- tech output and growth. Audretsch & Keilbach’s study (2004) on the regional differences in new firm creation in Germany also found that diversity is an important factor, as we have seen above. In the same way and more specifically regarding the social characteristics of a certain territory and new firm formation we find a new research line focusing on the relationship between creativity and new firm formation. Whereas previous research has focused on the relationship between human capital and new firm formation, this new research line tries to find out the factors that explain the concentration of human capital in a certain territory, creativity and its relation with new firm formation rate. Lee, Florida and Acs’ research (2004) confirms a positive and significant relationship between creativity, diversity, human capital and the rate of new firm formation in a certain territory. Among these three factors creativity is the one that is more strongly correlated with new firm formation rate.

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While in this line of research human capital is defined and measured as a person’s capability which reflects level of schooling, accumulated experience, etc. more recent research (Florida, 2002 & 2004; Florida et al.2007) operate with an alternative measure for human capital, based on occupation, specifically a set of occupations that make up the “creative class”, including science, engineering, arts, culture, entertainment, and the knowledge-based professions of management, finance, law, healthcare and education. Florida et al.(2007) found that human capital and the creative class effect regional development through different channels. The creative class outperforms conventional educational attainment measures in accounting for regional labour productivity measured as wages. They also found that tolerance is significantly associated with human capital and the creative class as well as with wages and income. Earlier comparative studies showed that the creative class measure outperforms conventional human capital measures in accounting for regional development in Sweden (Mellander & Florida, 2006) and the Netherlands (Marlets & Van Woerken, 2004). The new theory and empirical research in the field of economic geography confirm the importance of agglomeration and the social context in economic growth and development (Krugman, 1991, and Acs & Varga, 2004). SUMMARY AND CONCLUSIONS Let us summarize the main sub-factors that contribute to creativity, innovation and entrepreneurship. Creativity Heterogeneous teams Diversity Tolerance Creative class (scientists, engineers, artist, etc.) in cities. Cities as “incubators” of new ideas and innovation. Human capital Innovation R&D expenditure Territory: spillover effect. . Social netwrosk . Social mobility . Entrepreneurship capital Business strategy and management systems Firm size: SMEs Entrepreneurship Entrepreneurship capital/new firm formation Universities Immigrants

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We can conclude that the above factors are in our opinion the ingredients to sketch an institutional theory of economic growth and development, a task that due to space limitations cannot be performed here. They can also serve as a guideline for policy makers to inspire and base their public policy decisions to foster entrepreneurship, innovation, and economic development in the knowledge society. Notes (1) Annual rate of productivity improvement.

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Entwicklungen in der Entrepreneurship- und KMU-Forschung : Eine Artikelanalyse von 1997 bis 2006 Dr. Thierry Volery1 Dr. Katherine Gundolf2

Abstract

The german-speaking research in entrepreneurship and small business is unknown in France. This is due to the fact, that english has become the most used language for scientific works and in the international economic context. The ignorance of the german speaking research is at last regrettable for two reasons: 1) german speaking researchers have been pioneers in the fields of entrepreneuship and SMEs; 2) SMEs represent a large part of the economy in the three biggest german speaking countries (Austria, Germany and Switzerland). The purpose of this, mainly descriptive, contribution is to make an inventory of research on SMEs and entrepreneurship in the last ten years (1997-2006). We will present, a record of the main german speaking journals in the fields of SMEs and entrepreneurship (Schmalenbachs Zeitschrift für betriebswirtschaftliche Forschung – ZfbF; Zeitschrift für Betriebswirtschaft – ZfB; Zeitschrift für Klein- und Mittelunternehmen – ZfKE), and we will try to present the origins of these fields, the used methodologies, the types of publications and the topics. Resumee Die deutschsprachige (Entrepreneurship- und KMU-) Forschung ist fast völlig unbekannt im französischen Sprachraum. Die sprachliche Hürde, die Anerkennung der englischen Sprache als lingua franca für wissenschaftliche Arbeiten und im internationalen Wirtschaftstreiben scheinen die Hauptgründe dieser fehlenden Visibilität zu sein. Diese Ignoranz der deutschsprachigen Forschung ist zumindest aus zwei Gründen bedauerlich: 1) deutschsprachige Forscher waren oft Pioniere im Bereich KMU und Entrepreneurship; 2) KMU spielen in den drei grössten deutschsprachigen Ländern (Österreich, Deutschland und der Schweiz) eine Hauptrolle im Wirtschaftslebens. Ziel dieses, hauptsächlich deskriptiv angelegten, Beitrages ist es, eine Bestandsaufnahme der deutschsprachigen Entrepreneurship- und KMU-Forschung der letzten zehn Jahre (1997-2006) zu machen. Wir stellen hier also ein Inventar von deutschsprachigen Fachzeitschriften (Schmalenbachs Zeitschrift für betriebswirtschaftliche Forschung – ZfbF; Zeitschrift für Betriebswirtschaft – ZfB; Zeitschrift für Klein- und Mittelunternehmen – ZfKE) auf, und versuchen somit, die Ursprünge der KMU- und Entrepreneurship-Forschung, die verwendeten Forschungsmethoden, die Publikationstypen und die Fachbereiche darzustellen.

1

Universität St. Gallen; Dufourstrasse 40a; St. Gallen; Schweiz; Tel. : +41 71 224 71 00; [email protected].

2

Montpellier Business School; 2300, avenue des Moulins; F-34185 Montpellier; France; Tel: +33 4 6710-2504; [email protected]

1

Einleitung Die deutschsprachige Entrepreneurship- und KMU-Forschung ist fast völlig unbekannt im französischen Sprachraum. In der Tat reicht es aus, die Literaturverzeichnisse der wichtigsten französischen Fachzeitschriften zu begutachten, um sich dessen bewusst zu werden. Selbst wenn dort Schumpeters frühere Schriften, wie die „Theorie der wirtschaftlichen Entwicklung―, manchmal mit dem Originaltitel zitiert werden, so sind doch diese Referenzen extrem rar. Die sprachliche Hürde, die Annerkennung der englischen Sprache als lingua franca für wissenschaftliche Arbeiten und im internationalen Wirtschaftstreiben scheinen die Hauptgründe dieser fehlenden Visibilität zu sein. Dieser Einfluss der englischen Sprache auf die Wissenschaft scheint für manche Forscher eher beunruhigend (Cossette, 1997). Der Wissensaufbau steht in einem festen Zusammenhang mit der Sprache des Forschers, da diese ihm Wörter zur Verfügung stellt und Regeln aufstellt, nach welchen er „denken― muss. Uniliguismus könnte deshalb den Mangel an wissenschaftlicher Diversität zur Folge haben. Diese Ignoranz der deutschsprachigen Forschung ist einerseits deshalb schon bedauerlich, da die deutschsprachigen Wissenschafter oft Pioniere in der Entrepreneurship- und KMU-Forschung waren (Schmude et al., 2008) . Andererseits, nehmen die Klein- und Mittelunternehmen in den drei grössten deutschsprachigen Ländern (Österreich, Deutschland und der Schweiz) den Grossteil des Wirtschaftslebens ein und stehen deshalb auch im Mittelpunkt der Wirtschaftspolitik. Paradoxer Weise, wie wir sehen werden, gab eine deutschsprachige Institution – das Schweizerische Institut für gewerbliche Wirtschaft in St. Gallen – die erste internationale Veröffentlichung über KMU in französischer Sprache (!) heraus. Das Ziel dieses Beitrags ist eine Bestandsaufnahme der deutschsprachigen Entrepreneurship- und KMU-Forschung der letzten zehn Jahre (1997-2006) zu machen. Dieser Beitrag ist deshalb hauptsächlich deskriptiv angelegt, und wir werden darin versuchen, auf die Fragen: Wer ? Was? Wieviel? zu antworten. Unser Vorgehen, welches sich von ähnlichen Studien (Cossette, 1997; Boissin et al., 2000) inspiriert, stellt ein Inventar von deutschsprachigen Fachzeitschriften (Schmalenbachs Zeitschrift für betriebswirtschaftliche Forschung – ZfbF; Zeitschrift für Betriebswirtschaft – ZfB; et Zeitschrift für Klein- und Mittelunternehmen – ZfKE) auf, um folgende Aspekte herauszuarbeiten: Wer sind die Autoren, welchen Institutionen und Ländern gehören sie an ? Was für Datenerhebungs- und Analysemethoden werden in den empirischen Beiträgen verwendet ? Sind die deutschsprachigen Literaturverweise zahlreich ? Wie ist das Verhältnis zwischen ihnen innerhalb der gesamten Verweise ? Welche Themen und Schwerpunkte werden in den Beiträgen bearbeitet ? Dieser Beitrag ist dreiteilig aufgebaut: In einem ersten Teil geben wir einen Überblich über den Ursprung der Entrepreneurship- und KMU-Forschung im deutschsprachigem Raum. Anschliessend präsentieren wir die verwendete Methode, mit welcher wir die Beiträge analysiert haben. Letztendlich, in einem dreiteiligem dritten Teil, zeigen wir die Resultate unserer Analyse auf.

2

1. Der Ursprung der Entrepreneurship- und KMU-Forschung im deutschsprachigem Raum Die Redaktion der Revue internationale PME hat erst kürzlich bemerkt, dass „jeder [im französischen Sprachraum] die Fabeln von La Fontaine kennt, in welchen entweder die Kleinen den Grossen helfen (Der Löwe und die Ratte, Die Taube und die Ameise), die Kleinen besser sind als die Grossen (Die Eiche und das Schilf), oder, dass es keinen Sinn macht grösser werden zu wollen (Der Frosch, der so gross wie ein Büffel sein wollte)― (Editorial n°2, 2003). Kurz gesagt, das „small ist beautiful― der sixties oder new age Genaration - soviele Anglizismen, um uns glauben zu machen, es sei etwas Neues – ist wieder voll in Mode. Weiters schreibt die Revue, dass sich in einem viertel Jahrhundert die Forschung über kleine, oder „humane― Organisationen im französischen Sprachraum beträchtlich entwickelt hat. Eine ähnliche Evolution kann auch in der beträchtlich älteren deutschsprachigen Entrepreneurshipund KMU-Forschung verfolgt werden. Schon 1948 hat das Schweizerisches Institut für gewerbliche Wirtschaft der Universität St. Gallen die erste Ausgabe der „gewerbliche Dokumentation― in deutscher Sprache Veröffentlicht. Im Jänner 1950, wird dann der erste Band der französischsprachigen „Documentation internationale― von der „Union internationale de l'artisanat et des petites et moyennes entreprises― (UIAPME) (Internationale Union des Handwerks und der KMU) herausgegeben. 1947 in Paris gegründet, umschliesst die UIAPME mehrere Vereinigungen (die Fédération Internationale de l'Artisanat (Handwerk), die Fédération Internationale de la Petite et Moyenne Entreprise (KMU), und die Fédération Internationale du Petit et Moyen Commerce (Handel)). Sie vertritt die Prinzipien einer liberalen Wirtschaft, der persönlichen Initiative und der Unabhängigkeit, der unter der Verantwortung ihrer Gründer geleiteten, Unternehmen. Ziel der „Documentation Internationale― ist es, die Informationslücken der Mitglieder der UIAPME, vor allem was das Handwerk, das kleinere und mittlerere Industrieunternehmen, sowie den kleinen und mittleren Handelsbetrieb betrifft, zu füllen. „Infolgedessen, gleich nach ihrer Gründung, stimmte die Union Internationale im November 1947, beim Pariser Kongress, dem Vorschlag zu, eine periodische, dokumentarische Zeitschrift, basierend auf regelmässigen Beratungen, herauszugeben (Vorwort der „Documentation Internationale―). Folgedessen wird die „Documentation Internationale― vier Jahre lang (1949-1953) herausgegeben, und sie veröffentlicht unter anderem die Resultate aus Umfragen über verschiedene Themen, wie die Finanzierung von unabhängigen Handwerk- und Handels-Unternehmen, die Schwarzarbeit, oder auch die Gewerbegesetzgebung. Die „Documentation Internationale― ist der Vorläufer von der Zeitschrift „Internationales Gewerbearchiv―, der ältesten deutschsprachigen KMU-Fachzeitschrift. Die erste Ausgabe von „Internationales Gewerbearchiv―, herausgegeben vom schweizerischem Institut für gewerbliche Wirtschaft der Universität St. Gallen, erscheint 1953. Die Revue übernimmt später den Namen „IGA – Zeitschrift für Klein- und Mittelunternehmen―, und heisst seit 2004 „Zeitschrift für Klein- und Mittelunternehmen – ZfKE―. Die ZfKE ist die einige Entrepreneurship- und KMU-Fachzeitschrift des deutschsprachigen Raumes. Sowie es Boisson et al. (2000) bemerken, steht die Existenz einer Fachspezifischen Zeitschrift für die Reife einer Problematik. Wenn eine solche Zeitschrift existiert, bedeutet dies, dass das Forschungsfeld für seine Wissenschafter, sowie jene aus anderen Richtungen, als wichtig gilt. Die Nachkriegszeit führt auch die Entstehung von mehreren KMU-zentrierten Konferenzen und Netzwerken mit sich. Die „Rencontres de St-Gall―, scheinen in diesem Zusammenhang besonders relevant zu sein. 1948 beschliesst die Universität St. Gallen, dem schweizerischen Neutralitätsgedan3

ken treu, zum ersten Mal Forscher aus ganz Europa um das Thema KMU zu versammeln. Man muss dazu sagen, dass in der Wiederaufbauphase der Nachkriegszeit, den KMU eine grosse Rolle zukommt. Das Ziel dieser „Rencontres― ist es, die Wissenschafter nach dem Krieg wieder zu einem Dialog zusammenzuführen, und dadurch die Forschung, die Lehre und die Wirtschaftspolitik weiterzuentwickeln (Schmidt, 2004). Die „Rencontres― von St. Gallen existieren noch immer in Form von einem zweijährigen Konferenzzyklus, in welchem sich 40-50 Forscher aus aller Welt drei Tage lang zusammensetzen. 2. Die gewählte Methode Unsere zeitgenössische Literaturanalyse über deutschsprachige Entrepreneurship- und KMUForschung untersucht drei Fachzeitschriften: Schmalenbachs Zeitschrift für betriebswirtschaftliche Forschung – ZfbF; die Zeitschrift für Betriebswirtschaft – ZfB; und die Zeitschrift für Klein- und Mittelunternehmen – ZfKE. Diese drei Revues haben ein Editorial Board und jeder Artikel wird in einem double-bliend review Prozess begutachtet. Die ZfbF und die ZfB sind zwei, seit längerem, gut etablierte betriebswirtschaftliche Fachzeitschriften, welche ein relativ grosses Prestige unter der scientific community geniessen. Die erste Ausgabe der ZfbF wurde 1906 unter dem Titel „Zeitschrift für handelwissenschaftliche Forschung― publiziert, während die ZfB zum ersten Mal 1924 erschien. Die ZfKE ist dem Entrepreneurship, der KMU und den Familienunternehmen gewidmet. Sie erschien ab 1953, zuerst unter dem Namen „Internationales Gewerbearchiv―. In den ersten beiden Zeitschriften wurden einzig die Entrepreneurship und KMU-relevanten Artikeln in Anbetracht gezogen, während alle Beiträge der ZfKE, ihrer Fach-Relevanz wegen, untersucht wurden. Im Ganzen haben wir 180 Artikel (151 aus der ZfKE, 22 aus der ZfB und 7 aus der ZfbF), datiert von Jänner 1997 bis Dezember 2006, in unsere Analyse eingebunden. Alle Beiträge wurden in einer Datenbank erfasst, welche mit Hilfe des Computerprogramms TextStat analysiert wurde. TextStat ist ein Textanalyseprogramm welches das Auftreten von Wörtern nach verschiedenen Parametern ordnet. Konkret bedeutet dies, dass dieses Programm die Daten analysiert, die abgebildeten Wörter heraushebt und dann Frequenzlisten erstellt. 3. Resultate 3.1. Autoren und Institutionen Tabelle 1 detailliert, wer die meisten Artikel produziert hat. Die produktivsten Autoren, Norbert Kailer und Johan Lambrecht, haben beide je fünf Artikel in der ZfKE in den letzten zehn Jahren herausgegeben. Norbert Kailers Arbeiten behandeln vor allem die Kompetenzentwicklung innerhalb von KMU (Kailer, 1998, 1999) und Unternehmensgründungen (Kailer, 2001, 2002), während Johan Lambrecht und seine Forschungsgruppe an der EHSAL (Katholieke Universiteit, Brüssel) eher soziologische Elemente des Entrepreneurship, sowie die BWL der KMU, bearbeiten. Dies ergibt ein Artikelspektrum, welches von der Expansion von KMU in Agglomerationen (Donckels und Lambrecht, 1997), über Flüchtlingsentrepreneurship (Von Braum et Lambrecht, 2006), bis hin zur Studie über die Verarmung von Unternehmern in reichen Ländern (Lambrecht et Beens, 2005) reicht.

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Tab. 1 : Die Hauptautoren zwischen 1996 und 2007 Autoren (Institut, Land)

ZfKE

ZfB

ZfbF

P. Davidson (Jönköping International Business School, Schweden)

2

-

-

R. Donckels (Katholieke Universiteit Brussel, Belgien)

2

-

-

M. Falgatter (BU Wuppertal, Dtld)

-

1

1

D. Grichnik (Uni Köln und Heinrich-Heine-Uni, Dtld)

1

1

-

M. Gruber (LMU, Dtld)

2

-

-

H. Grüner (FH Eberswalde, Dtld)

2

-

-

N. Kailer (Uni Bochum, Allemagne; Johannes Kepler Uni, Österreich)

5

-

-

S. Klein (European Business School, Dtld)

2

-

-

L. Koch (BU Wuppertal, Dtld)

1

1

-

J. Lambrecht (EHSAL - Katholieke Universiteit Brussel, Belgien)

5

-

-

C. Lettmayr (WU Wien, Österreich)

2

-

-

A. Martin (Uni Luneburg, Dtld)

2

-

-

J. Mugler (WU Wien, Österreich)

2

-

-

H. Pichler (WU Wien, Österreich)

2

-

-

D. Rössl (WU Wien, Österreich)

2

-

-

K.H. Schmidt (Uni Paddeborn, Dtld)

2

-

-

Die anderen Autoren, welche ebenfalls hier aufscheinen, sind jene, welche mindestens zwei Artikeln in den ausgewählten Zeitschriften publiziert haben. Ausserdem ist es interessant herauszuheben, dass die ZfKE relativ international ausgerichtet ist: diese Revue publiziert Artikeln von Autoren, welche aus verschiedenen Ländern (Deutschland, Österreich, Belgien und Schweden sind da nur die Häufigsten) abstammen, während die ZfB und die ZfbF hauptsächlich deutsche Autoren veröffentlichen. Weiters entnehmen wir Tab. 1, dass verschiedene Forschungszentren sich herausheben; darunter zählen die Wirtschaftsuniversität Wien (4 Autoren und 8 Artikel), die katholische Universität in Brüssel (2 Autoren und 7 Artikel) und die bergische Universität Wuppertal (2 Autoren und 4 Artikel). Die Auszählung der publizierten Artikel gibt jedoch nur ein (vielleicht falsches) Bild der Hauptautoren und Forschungszentren im Bereich Entrepreneurship und KMU ab, da die Leserschaft, also die Reichweite, der Artikel nicht in Anbetracht gezogen wird. So sind einerseits, zum Beispiel, Artikel gezählt worden, welche eventuell keine Resonanz unter der Forschungsgemeinschaft gefunden haben. Hingegen, existieren auch andere Möglichkeiten, wie Bücher oder Konferenzbeiträge, um seine Arbeiten zu verbreiten. Aus diesen Gründen erschien es uns wichtig, eine Analyse der Zitate durchzuführen, um dadurch ein genaueres Bild des Forschungsfeldes zu erschaffen. In dieser Zitatanalyse haben wir einzig die deutschsprachigen Referenzen gezählt, Selbstzitate haben wir ausgeschlossen. Die meistzitierten Autoren dieser 180 Artikel sind in Tabelle 2 erfasst. Unter diesen Autoren befinden sich Albach und Picot, welche oft als „Generalisten― betrachtet werden, weil sie in verschiedenen Disziplinen (Management, organization theory, information systems) publiziert haben. Andere Auto5

ren können in zwei Fachbereiche eingereiht werden. Unter ihnen zählen wir zum Beispiel Sternberg, wessen Arbeiten oft im Bereich Entrepreneurship und gleichzeitig der Wirtschaftsgeographie liegen, oder Bakes-Gellner (human resource und KMU). Einer letzten Kategorie gehören jene Forscher an, welche in zwei verschiedenen Fachbereichen (nicht gleichzeitig) publizieren, wie Pfohl, der entweder in Logistik oder im Bereich KMU veröffentlicht. Tab. 2 : Die meistzitierten Autoren in den 180 ZfKE, ZfB, und ZfbF Artikeln3 Autoren (Insitut, Land)

Anzahl der Autoren (Insitut, Land) Referenzen

Anzahl der Referenzen

H. Klandt (Uni Dortmund, EBS, Dtld)

20

H.C. Pfohl (TU Darmstadt, Dtld)

9

H.J. Pleitner (Uni St. Gallen, Schweiz)

19

R. Sternberg (Uni Köln, Dtld)

8

J. Mugler (WU Wien, Österreich)

18

E. Fröhlich (TU Graz, Österreich)

7

H. Albach (Uni Bonn, Freie Uni Berlin, Dtld)

18

N. Szyperski (Uni Köln, Dtld)

7

H. Pichler (WU Wien, Österreich)

12

N. Kailer (Uni Bochum, Dtld; Johannes Kepler Uni, Österreich)

6

J. Brüderl (Uni Mannheim, Dtld)

11

U. Bakes-Gellner (Uni Köln und ifm, Dtld; Uni Zürich, Schweiz)

5

A. Picot (Uni Hannover, LMU, Dtld)

10

F. Welter (RWI, Dtld)

5

Die drei meistzitierten Autoren, Klandt, Pleitner und Mugler gelten als die Pioniere in der Entrepreneurship- und KMU-Forschung. Es sind jedoch ihre Bücher (Klandt, 1998; Mugler, 1995), oder Kapiteln in Büchern (Klandt, 1990, 1994 ; Pleitner, 2000) welche öfters als ihre Artikeln zitiert werden. Dies scheint ein typisches Phänomen der deutschsprachigen Forschung zu sein, wo der anglosaxonische Begriff von publish or perish sich bei der jüngeren Generation durchgesetzt hat. Die Abbildung 1 zeigt das Netzwerk der deutschsprachigen Entrepreneurship- und KMUForschungsgemeinde auf anhand der, aus unserer Basis an Artikeln gewählten, Referenzen. Diese Abbildung muss jedoch auch mit Vorsicht interpretiert werden, weil die Analyse von meisterwähnten Artikeln zu einer Überbewertung von methodologischen Artikeln oder auch nicht gelesenen Artikeln führen kann (Callon, Courtial und Penan, 1993). Die links aufgezeigten Autoren (Pichler, Neubauer, Pleitner, Mugler) gehören hauptsächlich zum traditionnellen KMU-Netzwerk, während die Autoren rechts in der Abbildung (Klandt, Franke, Falgatter, Brüderl, Koch) eher zum neuen EntrepreneurshipNetzwerk zu zählen sind. Es existieren viele Brücke zwischen diesen beiden Netzwerken, und oft besuchen Forscher Konferenzen beider Netzwerke oder veröffentlichen Arbeiten, die an beide Bereiche grenzen. Die ungenau definierten Umrisse dieser Netzwerke reflektieren die Schwierigkeit klare Grenzen zwischen den Forschungsfeldern Entrepreneurship und KMU zu ziehen. Die Unterscheidung zwi-

3

Die mehrfach-Referenzen eines Autors, wie zum Beispiel Klandt (1994, 1998,)wurden einfach gezählt, wenn sie nicht getrennt aufgetreten sind.

6

schen Entrepreneur, Unternehmer und Geschäftsführer eines gewinnträchtigen Unternehmens ist relativ schwierig und nicht eindeutig. Abb. 1 : Die Hauptautoren des deutschsprachigen Entrepreneursip- und KMU- Netzwerke4

3.2. Wahl der Methode und Forschungstypus Die Unterscheidung zwischen den Artikelgattungen ist nicht einfach zu etablieren. Wir haben in diesem Beitrag, wie Cossette (1997), drei Hauptforschungsarten differenziert: (1) empirische Forschung, wenn es sich um Feldstudien oder Informationen aus Datenbanken handelt; (2) konzeptuelle Forschung, wenn es um Reflexionen oder Analysen über ein bestimmtes Thema oder chiffrierte Daten geht; (3) epistemologisch, wenn das Forschungsobjekt die Arbeiten anderer Wissenschafter sind und das Ziel dessen Charakteristiken zu determinieren. Wie es die Tab. 3 zeigt, dominiert die empirische Forschung, gefolgt von den konzeptuellen Arbeiten und weit danach von den epistemologischen Beiträgen. Weiters können wir bemerken, dass die Mehrheit (108 Arbeiten) der 120 gezählten empirischen Artikeln auf einer quantitativen Methode beruht. Einzig 8 empirische Arbeiten sind qualitativer Natur.

Tab. 3 : Art der publizierten Artikeln 1997

1998

Empirisch

13

12

7

Konzeptuell

4

2

Epistemologisch

2

2

4

1999 2000

2001

2002

2003

2004

2005

2006

Total

15

7

13

14

11

10

18

120

5

3

7

4

8

3

3

2

41

5

1

3

-

-

2

1

3

19

Die Pfeile zeigen an, wie oft ein Autor zitiert wurde. Der Pfeil von Dailer zu Klandt (2) weißt auf, dass in unserer Artikelbasis Kailer zweimal Klandt zitiert hat.

7

Der Fragebogen ist bei weitem der bevorzugteste Weg, um Daten für quantitative Studien zu sammeln. Die Analyse von bereits existierenden Datenbanken wird ebenfalls, jedoch nicht so häufig, verwendet. In den quantitativen Studien ist die Zahl der Beobachtungen nur selten grösser als 100. Der Artikel von Leicht und Lauxen-Ulbrich (2005) ist jener, welche auf der grössten Anzahl an Beobachtungen aufbaut. In diesem Artikel analysieren die Autoren, anhand 820.000 Mikro-Beobachtungen, die Evolution und die determinierenden Faktoren des weiblichen Entrepreneurship. Neuere Methoden, wie zum Beispiel die Experimentierung (Maurer und Schade, 2005), treten neuerdings auf. Interviews und Beobachtungen sind die meistverwendeten Erhebungsmethoden der qualitativen Studien. Oft basieren letztere auch auf Fallstudien. Es ist ebenfalls wichtig zu bemerken, dass die analysierten Artikeln keine transversalen oder langwierigen Studien, basierend auf einer jahrelangem Datenansammlung, aufweisen. Trotz ihrer geringeren Anzahl, sind die konzeptuellen und epistemologischen Beiträge, nicht von geringerer Bedeutsamkeit. In der Tat, haben sie eine wichtige Rolle im Aufbau des Entrepreneurship als Forschungsfeld gespielt, da sie geholfen haben, den konzeptuellen und methodologischen Korpus zu konstruieren. Als Beispiel dafür können die Arbeiten von drei von uns referierten Autoren dienen. Fallgatter (2001, 2004) versucht, zum Beispiel, die Konturen von Entrepreneurship als Forschungsfeld zu erfassen; und in einer typisch epistemologischen Vorgangsweise, versucht er eine Entrepreneurship Taxonomie und eine Erkenntnis-Theorie (wie nimmt Entrepreneurship Form an?), welche ebenfalls in der Entrepreneurship-Lehre Verwendung findet, zu erstellen. In seinem Artikel (Fallgatter, 2001) über Entrepreneure und ihre Eigenheiten, erkennt er, dass des Entrepreneurs Zentralität dessen Spezifizität darstellt. Fallgatter erstellt eine wirtschaftsgeschichtsbezogenen Entrepreneur Typologie und examiniert die damit verbundenen Organisationstypen. Der Finanzartikel von Welpe und Grichnik (2006) kann als zweites Beispiel genannt werden. Die zwei Autoren versuchen darin, eine vollständige Literatur Erhebung über dieses Thema zu liefern und zeigen die finanziellen Eigenheiten von Jungunternehmen im Vergleich zu etablierten Grossunternehmen auf. 3.3. Forschungsthemen und -Felder Es ist manchmal schwierig, eine Studie einem bestimmten Forschungsfeld zuzuordnen. Die Trennung der BWL in verschiedenen Zweige und die Grenzen dazwischen stossen nicht auf Einigkeit. Dazu kommt, dass mehrere Forschungsthemen verschiedenen Disziplinen zugeschrieben werden können (Cossette, 1997). In dieser Perspektive schreibt die Revue International PME, in jeder ihrer Ausgaben, folgendes zu ihren Charakteristiken: „Die Revue strebt die Verbreitung […] der Forschungsarbeiten über die Volks- und Betriebswirtschaft von KMU an. Unter Volkswirtschaft verstehen wir, zum Beispiel, die Studie über die Rolle und den Platz von KMU in der regionalen und nationalen Entwicklung oder auch das Verhältnis zwischen KMU und ihrer wirtschaftlichen Umgebung. Bei BWL denken wir an die Recherchen über das Verhalten von KMU oder Entrepreneuren und an die verschiedenen Funktionen der BWL, wie die Strategie, Marketing, Finanzwirtschaft, human resources, Informationen, etc.―

Diese Angaben, darunter auch die partiellen Grenzen die sie ziehen, wurden in diesem Beitrag beibehalten, und so haben wir im Endeffekt acht Kategorien der VWL und BWL der KMU definiert. Weiters haben wir drei Hauptfächer von Entrepreneurship determiniert: VWL, Management und Strategie. Die Tabelle 4 zeigt die Aufteilung der Beiträge nach diesen Kategorien. Wir bemerken, dass im Bereich KMU, die Artikel über das Management überwiegen. Die Hauptthemen sind hier sehr variabel 8

und umfassen, zum Beispiel, die Unternehmensübergabe in Familienunternehmen (Lemathe und Hill, 2006), das Management von Veränderungen (Martens und Michailow, 2006) oder auch den Internationalisierungsprozess (Bamberger und Wrona, 1997).

Tab. 4: Hauptfächer der Artikel KMU

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Total

Management

3

1

3

3

4

5

2

3

4

4

32

VWL

3

5

4

1

3

5

3

3

1

-

28

Organisational behavior

2

-

5

1

2

-

-

1

-

3

14

HR

1

3

-

3

-

1

2

2

-

2

14

Strategie

2

2

-

4

-

2

2

-

1

-

13

Finanz

-

-

3

-

-

-

1

1

2

1

8

Prod./Information syst.

-

1

-

-

-

-

-

-

-

1

2

Marketing

1

-

-

-

-

-

-

-

-

-

1

VWL

4

2

1

5

7

3

6

3

4

7

42

Management

1

1

-

-

1

-

3

2

-

3

11

Finanz

-

-

1

1

-

-

2

-

2

1

7

Strategie

-

1

-

1

-

1

1

1

-

1

6

Entrepreneurship

Wir haben 28 Arbeiten im Bereich VWL der KMU rezensiert, und jeweils 14 in den Bereichen organisational behavior und human resources. Über Strategie wurden 13 Artikel veröffentlicht, während über Marketing, Produktion und information systems jeweils nur 3 Arbeiten in den letzten zehn Jahren erschienen. Der zweite Teil dieser Tabelle fasst die Arbeiten über Entrepreneurship zusammen. Hier bemerken wir den starken Aufwärtstrend dieses Forschungsfeldes anhand der steigenden Zahl an Beiträgen. Während zwischen 1997 bis 1999 jährlich vier bis fünf Artikel veröffentlicht wurden, ist es nicht selten, dass mehr als zehn Beiträge zwischen 2003 und 2006 erscheinen. Die ZfB hat dem Thema Entrepreneurship sogar zwei Spezialausgaben (n° 2 im Jahre 2003 und n° 4 im Jahre 2006) gewidmet. Dieser Erfolg kann teils auf das Erscheinen von Internet und der „new economy― in den späten 90 Jahren zurückgeführt werden. Aber auch andere Ereignisse unterstreichen das wachsende Interesse der Forschungsgemeinschaft am Thema Entrepreneurship: 1997 wird das erste „G-Forum― gehalten. Der Förderkreis Gründungs-Forschung, wessen Ziel es ist die Entrepreneurship-Forschung und -Lehre zu fördern, entsteht zur gleichen Zeit. Und 1998, wird der erste Gründungslehrstuhl im deutschsprachigem Raum, an der European Business School (EBS) in Berlin, besetzt. Die Mehrzahl der Entrepreneurship Artikeln handeln von BWL. Die unter diesem Begriff bearbeiteten Themen sind, zum Beispiel, die Konditionen der Führungsmitglieder (Albach, 1997 ; Bergmann, 2004), die Tendenz der Studenten Entrepreneure zu werden (Franke und Lüthje, 2002 ; Kailer, 2002), das Lehren von Entrepreneurship (Koch, 2003; Neubauer, 2003) oder auch die Dynamik von Start-ups 9

(Schwarz, Harms & Breitenecker, 2006). Der häufigste Ansatz dieser Studien ist eher makroökonomisch angelegt, da öfters ein Gebiet oder eine Bevölkerung, als der Entrepreneur und sein Projekt selber betrachtet werden. Die Natur dieser Arbeiten ist extrem reich: wir finden nämlich gleichzeitig empirische, wie konzeptuelle und epistemologische Artikel darunter. Die Arbeiten über entrepreneurial management representieren die zweitgrösste Kategorie. Auch hier spiegeln die bearbeiteten Themen die Vielfalt der unternehmerischen Situationen dar: start-ups (Brettel, Heinemann und Hiddemann, 2006), intrapreneurship (Siegert et al., 1997) oder gar spin-offs aus Universitäten (Riesenhuber, Walter und Auer, 2006). Zuallerletzt wollen wir hier auf das wiederaufkommende Interesse an Familienunternehmen aufmerksam machen. Selbst wenn wir hier nicht die Artikeln unter dieser spezifischen Rubrik angeführt haben, muss auf die steigende Anzahl der Artikel seit dem Jahre 2000 hingewiesen werden. Zum Beispiel, widmete im Jahre 2002 die ZfB diesem Thema eine Spezialausgabe (n° 5), sie wurde unter dem Namen „Gründungs- und Überlebenschancen von Familienunternehmen― veröffentlicht. Hinzu kommt, dass in den letzten Jahren, viele Arbeiten speziell dem Familienunternehmen gewidmet wurden, zum Beispiel, über Beiräte (Klein, 2005), Investitionsentscheidungen (Zellweger, 2006) oder, auch mehr traditionnell : das überleben des Unternehmens (Albach, 2002 ; Letmathe und Hill, 2006). Fazit Dieser Beitrag versucht eine Bestandsaufnahme der neueren Entwicklungen der Entrepreneurship- und KMU-Forschung im deutschsprachigem Raum zu liefern. Diese beiden Bereiche haben eine lange Tradition in diesem Sprachraum hinter sich. Sie kann auf die Nachkriegszeit zurückgeführt werden, als mehrere Publikationen und Konferenzen aufkamen, um den Transfer von Wissen zu erleichtern und eine KMU freundliche Wirtschaftspolitik zu fördern. Die erste Bemerkung, die sich uns aufdrängt nach der Analyse der 180 Artikeln, ist die wunderbare Diversität der Autoren, Methoden und Themen. Während die Autoren hauptsächlich aus dem deutschsprachigem Raum abstammen (Deutschland, Schweiz und Österreich), gibt es doch auch Forscher aus anderen Ländern (Belgien, Schweden, Grossbritannien, Süd-Afrika), welche ebenfalls auf deutsch schreiben. Die verwendeten Techniken zur Datensammlung und -Analyse lassen uns denken, dass die Autoren sich einer eher traditionellen Perspektive und orthodoxen Wissensschaffungsmethoden anschliessen. Deshalb basieren die Resultate oft auf einer quantitativen Vorgehensweise, welche vor allem Daten aus Fragebögen mit geschlossenen Frageformen bevorzugt. Die Datenanalysen beruhen auf verschiedenen statistischen Computeranalyseprogrammen. Diese Vorgehensweise ist „strukturierend―, da sie dem Subjekt einen anderen Analyserahmen als den seinen - nämlich den des Forschers - schafft (Cossette, 1997). Die Diversität der Themen unterstreicht ebenfalls, wie reich die beiden Forschungsfelder sind. Manchmal ist diese Diversität so gross, dass sie das Gefühl einer Fragmentierung lässt. Vielleicht sollte man jedoch in dieser Vielfalt ein Zeichen von Stärke erkennen, und den üblichen Selektionierungsprozess ablaufen lassen. Forschung und Publikationen entziehen sich nicht den Modeeffekten, wie es der Aufschwung vom Bereich Entrepreneurship zeigt. In der Tat, haben die Veröffentlichungen in diesem Bereich in den letzten zehn Jahren immens zugenommen. Das neu aufkommende Interesse an Familienunternehmen unterliegt ebenfalls diesem Phänomen, welches seinen Ausgangspunkt in den „family offices― der grossen Banken, der Unternehmensberater und in der Presse findet. 10

Diese gefundene Diversität der KMU- und Entrepreneuship-Forschung bedeutet jedoch nicht, dass sich diese Bereiche dem anglo-saxonischen Einfluss (Hegemonie) entziehen können. Die steigende Anzahl an anglo-saxonischen Referenzen zeugt für diesen grösser werdenden Einfluss. Auch wenn man den jungen Wissenschaftlern nicht raten sollte die englischsprachige Literatur zu ignorieren, so sollte man trotzdem auf die Notwendigkeit, in der eigenen Muttersprache zu veröffentlichen, aufmerksam machen. Die Sprache ist ein grundlegendes Instrumentarium. Sie konstituiert die Elemente unserer Identität; sie hilft unsere Gedanken zu strukturieren, und sie definiert unsere Beziehung zum Unternehmen. Oft wird ausserdem auch vergessen, dass mit 90 Millionen Personen, deutsch die meistgesprochenen Muttersprache in Europa ist ! Die durchgeführte Studie ist jedoch weitaus nicht ausreichend repräsentativ : andere Fachzeitschriften und Medien (zum Beispiel Bücher und Internet) sollten ebenfalls herangezogen werden. Die Studie der Objekte und Forschungsfragen in diesen Artikeln wäre sicherlich auch sehr aufschlussreich und interessant gewesen, vor allem in einer internationalen Vergleichsperspektive. Jedoch hätte dies hier wahrscheinlich den Umfang unseres Beitrages gesprengt. Ähnliches gilt auch für eine genauere Untersuchung der hier geprüften Aspekte. Zum Beispiel hätten wir uns fragen können, wer sind die meistzitierten anglo-saxonischen Forscher? Wie hoch ist der Anteil der Auto-Zitate? Wir wird man ein Hauptautor? Etc. Die Resultate dieser Studie haben die Diversität der deutschsprachigen Entrepreneurship- und KMU-Forschung an den Tag gelegt. Wir haben versucht, die Haupttendenzen und -Autoren zu identifizieren. Und wir hoffen jetzt, dass unserer Beitrag in der Zukunft weitere Überlegungen nähren wird.

11

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Klandt, H. (1990), « Das Leistungsmotiv und verwandte Konzepte als wichtige Einflussfaktoren der unternehmerischen Aktivität », in Entrepreneurship — Innovative Unternehmensgründung als Aufgabe, Eds. Szyperski, N. & Roth, P., Stuttgart : Poeschel. Klandt, H. (1994), « Erkenntnis-und Gestaltungsorientierte Überlegungen zur Unternehmensperson und ihr mikrosoziales Umfeld als Erfolgsfaktoren der Unternehmung », in Neue Unternehmen, Ed Schmude, J., Heidelberg : Physica Verlag. Klandt, H. (1998), Der integrierte Unternehmensplan: ein Instrument für die Gründungsplanung, München : Oldenburg. Klein, S. (2005), « Beiräte in Familienunternehmen — Zwischen Beratung und Kontrolle », ZfKE, no. 3, 185-207. Koch, L. (2003), « Unternehmerausbildung an Hochschulen », ZfB, no. 2, 25- 46 Lambrecht, J. & Beens, E. (2005), « Die Armut unter Selbständigerwerbenden in einem reichen Land: eine missverstandene und ausprägte Wirklichkeit », ZfKE, no. 1, 1-20. Leicht, R. & Lauxen-Ulbrich, M. (2005), « Entwicklung und Determinanten von Frauenselbständigkeit in Deutschland: Zum Einfluss von Beruf und Familie », ZfKE, no. 2, 133-149. Letmathe, P. & Hill, M. (2006), « Strukturbrüche der Unternehmensnachfolge », ZfB, no. 11, 11131138 Martens, B.& Michailow, M. (2006), « Wandel und Kontinuität mittelständischer Unternehmen », ZfKE, no. 3, 221-242. Maurer M. & Schade, C. (2006), « Strategiepraktiker versus Strategietheoriker: Verhalten von Unternehmern im Vergleichsexperiment », ZfB, no. 4, 69-92 Mugler, J. (199) Betriebswirtschaftslehre der Klein- und Mittelbetriebe, 2. Auflage, Wien : Springer. Neubauer, H. (2003), « Unternehmerqualifizierung und Unternehmerausbildung », ZfB, no. 2, 1-23. Pleitner, H.J. (2000), « Faktor Mensch », in Management in KMU, Eds H. Pichler, H. J. Pleitner & K. H Schmidt, 3. Auflage, Bern : Paul Haupt. Riesenhuber, F., Walter, A. & Auer, M. (2006), « Akademische Spin-Offs: Eine empirische Untersuchung mit technischer Unsicherheit und der Steigerung des Wachstums », ZfB, no. 4, 117-138. Schmidt, K.H. (2004), « Dogmengeschichte internationaler Forschungskooperation am Beispiel des Rencontres de St-Gall », IGA – Zeitschrift für Klein- und Mittelunternehmen, Sonderheft no. 6. Schmude, J., Welter, F. & Heumann, S. (2008), « Entrepreneurship Research in Germany », ETP, march, 289-311. Schumpeter, J.A (1912), Theorie der wirtschaftlichen Entwicklung, 9. Edition, 1997, Berlin: Duncker & Humblot. Schweizerisches Institut für gewerbliche Wirtschaft (1948), "gewerbliche Dokumentation", Heft 1, August. Schwarz, E., Harms R.& Breitenecker, R. (2006), « Dynamik und Stabilität von Erfolgsfaktoren bei der Analyse junger Unternehmen », ZfB, no. 4, 165-182.

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Siegert, T. et al. (1997), « Marktwertorientierte Unternehmensführung im Lebenszyklus: eine Analyse am Beispiel junger Geschäfte », ZfbF, no. 5, 471-488. Verstraete, T. (1999), « Entrepreneuriat - Connaître l'entrepreneur, comprendre ses actes », Paris : L'Harmattan. Von Braum, W. & Lambrecht, J. (2006), « Flüchtlinge als Unternehmer in Belgien: Potenzial und Praxis », ZfKE, no 4, 266-290. Welpe, I. & Grichnik, D. (2006), « Das Wissenschaftsgebiet der Entrepreneurial Finance - Eine Bestandsaufnahme in Forschung und Lehre », ZfKE, no. 2, 141- 165. Zellweger, T. (2006), « Investitionsentscheidungen von Familien- und Nichtfamilienunternehmen », ZfKE, no. 2, 93-115.

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RencontresȱdeȱStȬGallȱ2008ȱ ȱ ȱ ȱ ȱ ȱ TuesdayȱMorning,ȱSeptemberȱ2,ȱ2008ȱ TopicȱCȱ PoliciesȱforȱInnovation,ȱȱ CompetitivenessȱandȱGrowthȱ ȱ ȱ ȱ Degadtȱ Deschoolmeester,ȱIzquierdoȱ Kailer,ȱThumȱ Müllerȱ Pesämaa,ȱKlaesson,ȱHaahtiȱ Pleitnerȱ Schaper,ȱClear,ȱBakerȱ Tanakaȱ Watkinsȱ Welterȱetȱal.ȱ

Innovation: concept, measurability, policy. The case of Belgium

Jan Degadt Research Centre for Entrepreneurship, Brussels

Paper to be presented at the Rencontres de St-Gall 2008

Abstract Innovation is a broad concept and it is not in contradiction with tradition. Any entrepreneur, even when working in a traditional sector or a businesses with strong traditions such as a family business can be innovative. Innovation is not only pushed by the entrepreneur but is increasingly market pulled. Through innovation the entrepreneur wants to influence his market structure or to develop new markets. It is not easy to measure innovation. R&D expenditures and internationalization are relevant. R&D is highly concentrated in a limited number of enterprises. Businesses operate in international markets while policy makers focus on a territory. Very often the effect of a policy is felt beyond the territory of the government. This is especially the case in a small open economy such as Belgium. Within a large area such as the European Economic area there is much Interdependence and many spillovers. The European Commission must allow a differentiated approach of the innovation policy by the countries and the regions and at the same time watch over the fairness of the competition.

1. Theoretical considerations. Innovation and economic theory 2. The measurement of innovation 2.1. Microeconomic considerations 2.2. Macroeconomic considerations 3. Policy and policy evaluation 3.1. Innovation and competitiveness 3.2. Evaluation of the innovation policy 3.3. Government intervention within the European Economic Area 3.4. Feedback between government policy and entrepreneurs 4. Conclusion

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1. Theoretical considerations. Innovation and economic theory Innovation is not confined to the area of entrepreneurship. Also other agents such as government agencies or non profit institutions can „innovate‟ but in this paper we limit the discussion to innovation and entrepreneurship, operating in a market environment. The link between entrepreneurship and innovation has been established strongly since Joseph Schumpeter. Since then innovation is considered as an essential characteristic of entrepreneurship. The link is emphasized by any textbook on entrepreneurship, even introductory ones, such as for example Zimmerer and Scarborough in its fifth edition(2008): “Entrepreneurs also create innovations to solve problems they observe, often problems they face themselves” (p. 44). The entrepreneur „innovates‟ but the entrepreneur has to do this also in a very „organized‟ way because the innovation has to be „implemented‟ into something that can be sold in the market such as a new product or an existing product at a lower cost. Here lies the distinction between innovation and creativity: “Creativity is the ability to develop new ideas and to discover new ways of looking at problems and opportunities” while “Innovation is the ability to apply creative solutions to those problems and opportunities to enhance or to enrich people‟s lives” (ibid. p. 43). The entrepreneur is a very „active‟ economic agent. He (or she or the entrepreneurial team) is creative but also runs the business as an organization and has to sell the product in a competitive market. “In short, entrepreneurs succeed by thinking and doing new things or old things in new ways. Simply having a great new idea is not enough; transforming the idea into a tangible product, service, or business venture is the essential next step” (ibid. p. 43). In conventional microeconomic analysis there is the theory of the firm. Following this theory the individual firm is a profit maximizing agent, so the question arises: to which degree is the pursuit of higher profits the main motivation (or at least an important motivation) behind the innovation drive of the individual entrepreneur. Must innovation contribute to higher profits? Following introductory microeconomics, the economic drive behind innovation simply is to enjoy a (temporary) monopoly rent. We can read this in an introductory textbook of economics such as for example John Sloman: “The promise of supernormal profits, protected perhaps by patents, may encourage the development of new (monopoly) industries producing new products. It is this chance of making monopoly profits that encourages many people to take the risks of going into business”. Through innovation, entrepreneurs not only „react‟ to the conditions of their market. They want to develop new markets (for example by developing new products) or they want to dominate their market (or at least a segment) by looking for cost advantages. This was also observed by Schumpeter, as described by Wickham (2006): “Schumpeter saw entrepreneurs not so much as the lubricant that oiled the wheels of an economy, but as self-interested individuals who sought short-term monopolies based on some innovation” (p. 7) Innovation can be fitted in a strategy of product differentiation. “The innovated product or service must be produced profitably, in addition to being distributed, marketed and defended from the attentions of competitors, by a well-run and well-led organization” (ibid., p. 7) 2

The definition of innovation often refers to the introduction of a new product or process or to the whole process of taking an invention or set of inventions from the start to the point of commercial introduction. However innovation is not only a matter of product differentiation or product management in general. It refers to all aspects of doing business. Entrepreneurs can be innovative with regard to any aspect of running their business including the production processes, the organization structure, finance management etc. Innovation can be successfully applied in „new‟ sectors such as high-tech but as well in very „traditional‟ sectors in industry, services and even agriculture. It can be successfully applied in new startups with an informal business culture but also in existing businesses such as family businesses with a tradition of several generations. Small as well as large businesses can be innovative with regard to their product, their technology, their organization or their financial management. However, in discussions on innovation there is a tendency to associate it with large, technologically advanced firms. This was already a sensitive point for Schumpeter, as can be read in the contribution of C. Freeman in the Palgrave dictionary: “Schumpeter (1928 and 1942) is often known for his emphasis of the advantages of large size and monopoly on innovative performance, whilst traditional theory has continued to stress the advantages of competitive market structures”. 2. The measurement of innovation Innovation is a crucial concept involving creativity, organization and profitability but can it be measured? Is it possible to use operational concepts that allow measurement? 2.1. Microeconomic considerations The creation of new businesses is necessary for the renewal and modernization of the economy but not sufficient. The new businesses also must be of „good quality‟. But what does that mean? One of the characteristics of this „good quality‟ is the degree of innovation. Now the question arises: is it possible to measure the innovation? It has been tried to measure and to make an international comparison by the Global Entrepreneurship Monitor Report, or the GEM report (Vlerick Leuven Gent Management School 2006). The authors of the GEM report use a very pragmatic concept of innovation and entrepreneurship: a business idea may be considered as innovative if it is perceived by the market as completely new, if there is no direct competition or if the technology is basically new. The GEM tried to determine the degree of innovation by asking three questions to starting entrepreneurs: - Do your (potential) customers consider your products or services as „new‟ or „unusual‟? - Are there no other businesses who offer the same products or services to your (potential) customers? - Were the technologies or procedures for your product not yet available one year ago?

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By these questions a „degree‟ of innovation of starting entrepreneurs was determined, following the number of positive responses: 0 1 2 3

No innovation Low innovation High innovation Maximum innovation

The questions have been submitted to a sample of starting Belgian entrepreneurs. The results are as follows: Number of positive responses

Belgium (%)

0

No innovation

50,7

1

Low innovation

26,3

2

High innovation

20,4

3

Maximum innovation

2,6

About half of the starters are not „innovative‟ at all. Only 2.6 % of the Belgian starters are considered as „innovative‟. The authors of the GEM report expressed their disappointment with this result, as innovative start-ups are considered to create most value added for the economy. We can also state it in another way: 49.3 % of the Belgian startups are „some way‟ involved in innovation. This is more than de European average of 44.3 %. For an international comparison the GEM authors calculated the „TEA Innovation Index‟: the percentage of the working population that has started up a new business (or is working on a project) in a category „low innovation‟, „high innovation‟ or „maximum innovation‟. This index is not only influenced by the degree of involvement in innovation but also by the share of the population which is involved in entrepreneurial activities. In 2006 the index for the EU (16 countries) was 2.22 and for Belgium 1.34. This result shows that Belgium lags behind the EU average: it is at the 14th place (of 16 participating countries). Following the empirical work of the GEM the Belgian population is „less entrepreneurial‟ than the European average but those who start a business are “more innovative” than the European average. This implies that there is a high correlation between entrepreneurship and innovation but the two concepts do not coincide completely. 2.2. Macroeconomic considerations In a macroeconomic approach, the question often is whether innovation is a drive for economic growth?

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In this type of research, innovation often is measured by some indicator for R&D investments. In 2008 the Belgian Federal Planning Bureau published an econometric study about the determinants of innovation in a small open economy such as Belgium (Biatour and Kegels 2008). The research covers the period 1987-2005 and 20 sectors of the Belgian private (market) sector. It determines the relationship between multifactor productivity on the one hand and three determinants on the other hand: R&D investment by private businesses, the qualification of the labor force and the diffusion of information and communication technologies (ICT). The most relevant conclusions for our discussion are: - Technological differences, measured by differences in multifactor productivity, have an influence on growth. When the difference with the world technological frontier increases, the growth in multifactor productivity will accelerate. Within a large area without economic borders a lag can be compensated in a relatively short delay. - The use of highly qualified labor increases the productivity of the Belgian businesses. - Internal R&D (R&D investment in Belgium) has no effect on the growth of multifactor productivity but R&D investments outside Belgium has a positive influence on the productivity of the Belgian manufacturing industry. The last conclusion also brings the aspect of internationalization to the foreground. Businesses who are located in a small country like Belgium and who invest in R&D do not operate in a regional or national market but on a European or larger scale. 3. Policy and policy evaluation The degree of innovation is monitored by policy makers. A high degree of innovation is considered to make the economy more „competitive‟. Innovation will not only support the development of new products or increase the productivity of labor and capital, but also bring more economic growth, employment, a better balance of payments, improve the labor conditions etc. There is clearly a link between microeconomic issues such as entrepreneurial startups and macroeconomic performance. 3.1. Innovation and competitiveness In 2006 the Belgian Central Economic Council ( a consultative and advisory body composed of the organizations representing employers and employees at the national level) made a diagnosis of the Belgian Innovation System, in cooperation with representatives of universities and organizations (Vandecandelaere 2006). In 2003 69,7 % of the R&D expenditures have been made by the private business sector. The average for the EU (15 Member countries) was 64,2 %. Public expenditures (expenditures by the governments) were only 6,8 %, while the EU average was 12,8 %. The survey also showed that within the private sector, the concentration was very high: in 2003 the 10 most active firms in R&D generated 32,82 % of the total of R&D expenditures in Belgium. A reduction of the R&D efforts by one of these businesses immediately could have a big effect. This is not typical for

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Belgium, it happens in most small countries. We also see the effect of internationalization again. In Belgium, 70 % of the R&D expenditures happen in foreign owned enterprises. Also in 2006 the Central Economic Council commissioned a study on the competitiveness of the Belgian economy and its effects on job creation (De Backer and Sleuwaegen 2006). Over the period 19982003 the number of jobs in the Belgian industry (manufacturing industry, construction and energy production) decreased with 24.696 units. This net decrease was the result of four movements: the entry of new businesses brought about a job creation of 58.775 units while the growth of existing businesses generated 218.128 new jobs. On the other hand 101.702 jobs went lost because existing businesses left the market while 199.897 jobs went lost because existing businesses downsized. The effects of the exit and downsizing were most intensely felt for businesses with traditional activities and low technological content, which illustrates the effect of „creative destruction‟ on a macro level.. Over the same period and in the services sector there was a net increase of 208.156 jobs. The entry of new businesses generated a job creation of 118.932 units and the growth of existing businesses brought the creation of 566.590 units. The exit of existing businesses destroyed 188.722 jobs and the downsizing of businesses destroyed 288.644 units. The Central Economic Council also examined the effects of innovation and internationalization on the dynamics of the labor market. The degree of innovation is measured by R&D investment. R&D investment is highly concentrated in the industrial sector (about 90 %). During the period 1998-2003 jobs have been created in industrial businesses who generated R&D investments while jobs got lost in Belgian businesses which did not invest in R&D on a permanent basis. Most jobs were lost in sectors and activities with low technological intensity such as textile and clothing or food and beverages. Investment in R&D is not only relevant for employment and job creation but also for the generation of value added. Over the period 1998-2003 the value added increased 11,1 % for the R&D investors and only 5,1 % for the non R&D investors. Also internationalization has had its effect. On the one hand there is not only a difference between Belgian and foreign firms. On the other hand there also is a difference within the group of Belgian businesses following the involvement of the firm in international activities. In the industrial sector the loss of jobs was much more intensive in internationally active businesses than in locally active businesses, in the services sector the job creation was more intensive in the latter group. If we bring together the effects of the parameter „R&D‟ on the one hand and the parameter „internationalization‟ on the other hand we observe that the loss of jobs specifically happens in businesses who are not active in R&D. The employment increases for businesses who are internationally active and who invest permanently in R&D. The same holds in the services sector. The study of the Central Economic Council concludes that internationalization and R&D investment are no substitutes with regard to the creation of employment and value added but rather complementary productive processes.

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3.2. Evaluation of the innovation policy Because innovation is crucial for the development of enterprises and the development of the economy as a whole, governments look for ways to support innovation and innovation-minded entrepreneurs. The need for government support is motivated by the positive external effects generated by innovation. There are two basic categories of policy instruments: direct financial support (subsidy, contract research, …) and tax incentives. In 2006 the Belgian Federal Planning Bureau made a comparison between public expenditures on innovation in Belgium, Sweden and Finland (Biatour and Kegels and Vandecandelaere 2006). Finland

Sweden

Belgium

Public R&D expenditures Mio Euros

1287

2496

1219

As percentage of R&D expenditures

25.7

23.5

23.5

As percentage of GDP

1.03

0.95

0.58

Public expenditures R&D in higher education

0.55

0.62

0.29

In Finland, 2 ministries are involved, in Belgium and Sweden 9. Policy is sector-oriented in the two Scandinavian countries while in Belgium for institutional reasons the first orientation is regional. The Regions can (and do) follow a sector-oriented policy. In 2007 an expert commission made a screening of the innovation policy instruments used by the Flemish regional government (Soete 2007). Following this commission the policy instruments have to take account of changes in the innovation process itself. They quote the following recent developments: - Businesses not only create added value by creating a technologically better product or service (technology push) but they do so increasingly by meeting a want or solving a problem (market pull). Due to new technologies such as ICT, businesses maintain a better contact with their customers and have better knowledge of their wants. The product increasingly becomes designed for the individual customer. - Businesses which offer technologically advanced products master the whole trajectory of the production, from product development to marketing. Some parts of the production process may be outsourced but the business masters the intellectual property. Innovation increasingly is a matter of integration. - Businesses innovate within the framework of open networks. The agenda of the R&D network is coordinated and shared with other parties such as end users, competitors and research institutes. Innovation needs knowledge coming from diverse sources and disciplines.

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3.3. Government intervention within the European Economic Area Businesses operate in a market within an open space such as the European Economic Area. When a national or regional government wants to design a policy to support entrepreneurship in general of innovation in particular, it has to focus on the businesses which are active on its territory. This is a very important case for EU policy. On the one hand there is an argument in support of positive government intervention, on the other hand the European Commission has to watch carefully the rules of fair competition within the European Economic Area. The following quotations from European policy documents show that it is not easy for the European Commission to find an equilibrium between these considerations. “The identification of policy areas should be market-driven, in full respect of the need to preserve free and fair competition. Without excluding any areas drom such initiative, there is a clear public interest in helping the emergence of solutions that would provide answers to citizens concerns. These would, in particular, be areas where public authorities play a critical role to eliminate existing barriers to market take-up of new products. However, this should not be at the expense of supporting innovation in more traditional sectors” (2006, p. 12) Innovation is market driven and not only pushed by the firms. This has been recognized by the EU: its policy should be devoted to support „innovation management‟ and to develop the promotion of markets. “‟Innovation management‟ is a prerequisite for innovation to flourish in firms. Many enterprises, especially SMEs, encounter difficulties in planning, implementing and marketing innovative products and in innovating in their production processes. Innovation cannot work without taking people into account”. “Enterprises of all sizes should be more flexible in responding to rapid changes in demand, adapt to new technologies, such as ICT and e-business, and be able to innovate constantly in order to remain competitive”. (2005, p. 17) The main motivation of the European Commission to accept state aid within the European Economic Area is the possibility of market failures. “Aid for projects covering fundamental and industrial research and experimental development is mainly targeted at the market failure related to positive externalities (knowledge spillovers), including public goods”. Other forms of aid are motivated in a similar way (2006, p. 8) 3.4. Feedback between government policy and entrepreneurs Governments operate on an national or a regional level, possibly within a framework of rules set by international organizations such as the EU or the OECD. These rules are agreed upon to guarantee fair competition. The problem of the government is to respect these rules and at the same time keep in touch with the entrepreneurs themselves and to evaluate what they really need. These needs can be very different. For entrepreneurs who are active on international markets the need for fair competition will prevail but for in-

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stance small enterprises who work predominantly for local and regional markets wand who submit small projects the administrative procedures may be a problem. In a panel discussion organized by UNIZO, a Flemish Small Business association, a small business owner complained that he had to spend four full working days to fill in his application in order to qualify for an innovation subsidy of 20.000,00 euros: “A bad idea with a good administrative file has more chance to qualify for government support than a good idea with a less good administrative file” Any policy must be designed in such a way that it pursues the objectives of the government and at the same time is as much as possible compatible with the agenda of the entrepreneur. 4. Conclusion Innovation is a broad concept. Innovation is not in contradiction with tradition. Any type of entrepreneur, even when working in traditional sectors or in businesses with strong traditions such as family businesses can be innovative with the product, the production process or any aspect of doing business. Innovation is increasingly market pulled: entrepreneurs meet and want to solve a problem but at the same time the entrepreneur wants to influence his market structure or to develop new markets through his innovation. Policy has to protect intellectual property and to promote competition. There is a high correlation but not full coincidence between entrepreneurship and innovation. It is not easy to measure innovation. R&D expenditures and internationalization are relevant. R&D is highly concentrated in a limited number of enterprises. Businesses operate in international markets while policy makers focus on a territory. Very often the effect of a policy is felt beyond the territory of the government. In a large area such as the European Economic area there is much interdependence and many spillovers. This is especially the case in a small open economy operating in this type of market as is illustrated by the case of Belgium.

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References Biatour, Bernadette and Kegels, Chantal and Vandecandelaere, Siska (2006). « Le financement public de l‟innovation: Etude comparative Finlande, Suède , Belgique », Bureau fédéral du Plan (Belgian Federal Planning Bureau), Working Paper 9-06 Biatour, Bernadette and Kegels, Chantal (2008). « Les determinants de l‟innovation dans une petite économie ouverte: le cas de la Belgique », Bureau federal du Plan (Belgian Federal Planning Bureau), Working Paper 11-08 Commission of the European Communities (2005). “More Research and Innovation – Investing in Growth and Employment : A Common Approach”, Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions Commission of the European Communities (2006). “Putting knowledge into practice: A broad-based innovation strategy for the EU”, Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions Commission of the European Communities (2006). “Community Framework for State Aid for Rsearch and Development and Innovation”, Official Journal of the European Union, 30.12.2006 De Backer, Koen and Sleuwaegen, Leo (2006). “Het concurrentievermogen van België. Tweede studie, de creatieve processen: ondernemerschap, internationalisatie en innovatie”, Centrale Raad voor het Bedrijfsleven (Belgian Economic Council) Soete, Luc a.o. (2007). “Eindrapport van de Expertgoep voor de Doorlichting van het Vlaams Innovatieinstrumentarium” Vandecandelaere, Siska a.o. (2006), “Diagnose van het Belgisch innovatiesysteem, internationalisatie en innovatie”, Centrale Raad voor het Bedrijfsleven (Belgian Economic Council) Vlerick Leuven Gent Management School (2006). Global Entrepreneurship Monitor, Rapport voor België en Vlaanderen Wickham, Philip A. (2006). Strategic Entrepreneurship, Pearson, Fourth Edition, Zimmerer, Thomas W. and Scarborough, Norman M. (2008). Essentials of Entrepreneurship and Small Business management. Pearson, Fifth Edition

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What Entrepreneurial Competencies should be emphasized in Entrepreneurship and Innovation Education at the Undergraduate Level?

Edgar Izquierdo Escuela Superior Politécnica del Litoral (ESPOL) Malecón 100, Guayaquil, Ecuador Dirk Deschoolmeester Ghent University Tweekerkenstraat 2, 9000 Gent, Belgium Tel.: +5934 2530383, +32 484078327 Fax No: +5934 2530383 E-mail: [email protected] [email protected]

Abstract An important first step toward competency-based education in the entrepreneurship discipline is the identification of relevant entrepreneurial competencies to be instilled in undergraduate students. We approached this issue by examining the opinions of entrepreneurs and academics experts in the entrepreneurship field. Two surveys were administered, one to Ecuadorian entrepreneurs and the other to academics from several countries in order to determine a set of relevant competencies that should be emphasized in entrepreneurship and innovation education. Results indicate relative differences in responses from the entrepreneurs’ perspective compared to the academics’ opinions. Entrepreneurs, on the one hand, chose decision making most frequently as of high importance when embarking on and running an entrepreneurial venture, whereas academics were in favor of identifying business opportunities. A discussion of the findings and implications for future research are presented.

Keywords: Entrepreneurial Competencies; Entrepreneurs; Academics.

Introduction Over the last decade, great attention has been paid to competency-based education (Stoof, 2005) ), and its relevance in entrepreneurship education and training at the university level as well as other training venues has become apparent (Bird, 2002). A basic premise of this movement is that an educational stance based on competency development can facilitate learning in a society characterized by complexity and rapid changes. Facilitation of learning may be possible because we can focus our efforts on the competency characteristic we want to influence in students. This implies that education based on 1

competencies does not necessarily consider the content as the starting point for curriculum development, but the competencies that are relevant to be successful in a certain task or job. Competencies are seen as characteristics that a person brings to a job situation, which can result in effective and/or superior performance in such job (Boyatzis, 1982). These characteristics include: motives and traits, social role and self-concept, and knowledge and skills (Boyatzis, 1982; Spencer and Spencer, 1993). In the case of entrepreneurs, they do not have jobs in the traditional sense; however, they do have jobs or tasks as they pursue and run a new business (Bird, 2002). Therefore, from an educational perspective, the question that needs to be answered is: What are the entrepreneurial competencies that universities should address in entrepreneurship education at the undergraduate level? In this regard, the model proposed by Boyatzis (1982) is relevant in this study as it provides the framework that helps identify what competencies and at what level they should be addressed in entrepreneurship education. It also helps link the activities to be included in an educational intervention with the levels of competencies that we want to influence in students. The contribution of this paper is that it provides a basic set of competencies that can be used by educators when delineating the competencies that students should acquire/develop through an educational intervention. Identifying relevant entrepreneurial competencies to be instilled in students is valuable because of their expected causal relationship with venture initiation and success (Bird, 1995). The following sections are organized as follows. First, we present a brief discussion of the definition of a competency as it provides the framework for selecting the set of competencies relevant for entrepreneurship education. Second, previous research on competencies of entrepreneurs is discussed, which is helpful to develop an initial list to be presented to entrepreneurs and academics experts in the field of entrepreneurship. Third, the method of the study is described. Next, the results are presented followed by a discussion and implications for future research. How is a competency defined? The extant literature has identified different definitions of an individual competency. For this study, we will use the one proposed by Boyatzis (1982) who defines a competency as an underlying characteristic exhibited by a person that can result in effective and/or superior in a job (Boyatzis, 1982). This characteristic may be a motive, trait, skill, aspect of one’s self-image or social role, or a body of knowledge which an individual uses. Based on the Boyatzis’s definition, Bird (1995) maintains that entrepreneurial competencies can be seen as underlying characteristics possessed by a person which result in new venture creation, survival, and/or growth. According to the level of exhibition, entrepreneurial competencies are categorized as threshold or success. The former are those considered as baseline or at a minimum standard, which include the competencies required to successfully create a business. The latter are the competencies necessary to go beyond launch into organizational survival and growth. The next section briefly reviews the entrepreneurial competencies that have been identified in previous research.

2

Competencies of entrepreneurs Entrepreneurs are permanently challenged to deploy a set of competencies to succeed in their entrepreneurial endeavors. Previous studies have been conducted in which the concept of entrepreneurial competency has been the guiding principle of analysis (Chandler and Hanks, 1994; Chandler and Jansen, 1992; Man and Lau, 2000). These studies, however, were oriented to link managerial or entrepreneurial competencies with firm-level performance. In an educational setting, on the other hand, we are mainly interested in individual-level competency as we attempt to help students become more skilled and motivated to start and succeed in new ventures (Bird, 2002). Thus, a common concern among academics is to get students to become more entrepreneurially and more innovative for such purpose. To do so, one of the goals of entrepreneurship education is to instill in students the development of entrepreneurial competencies as to be better prepared for an entrepreneurial life. Therefore, one of the first steps towards competency-based education in the entrepreneurship field is the identification of relevant entrepreneurial competencies as they can predict business formation and success within and across cultures (Mansfield, McClelland, Spencer, and Santiago, 1987). Knowing what competencies need to be developed is crucial in trying to meet the training needs of people in each phase of the entrepreneurial process. Previous studies have suggested that entrepreneurship education has to be oriented to intervene in each stage of development, which include: awareness, pre startup, startup, growth, and maturity (Cox, 1996; Henry, Hill, and Leitch, 2005a, 2005b). By paying attention to the training needs of individuals, educators and trainers can devise their content and approach to improve the entrepreneurial learning process. At the first stage, an educational intervention mainly focuses on the various aspects of creating and running a new business (Henry et al., 2005a, 2005b). This implies that courses at the undergraduate and graduate levels should seek to promote the development of skills and values, and possibly an attitude change towards starting, owning, and managing a company, or working in a successful organization (Jamieson, 1984). At later stages in the entrepreneurial process, education addresses the needs of would-be entrepreneurs for a selfemployment career by encouraging them to set up and manage their own businesses as well as to secure their growth and future development.

Levels of Entrepreneurial Competencies An action, or specific behavior of an individual, is manifested by competencies that are an expression of his/her characteristic or several characteristics (Boyatzis, 1982). In the case of entrepreneurs, different levels of entrepreneurial competencies are exhibited by individuals who start businesses or carry out changes in existing organizations and who add value through their opportunistic vision and effort (Bird, 1995). At the motives and traits level, common attributes of entrepreneurs include tolerance of ambiguity, locus of control, propensity to take risk, achievement values and task motivations are common attributes of entrepreneurs (Koh, 1996; Pandy and Tewary, 1979). Bird (1995) points out, however, 3

that research is mixed, especially when the success criteria is considered. For example, risk-taking propensity has not been definitely linked to entrepreneurial effort and outcomes because no conclusive results have been found. According to Schumpeter (1934), risk taking propensity is inherent in ownership rather than entrepreneurship; hence, it cannot be used as distinguishing characteristic of an entrepreneurial behavior (Brockhaus, 1980). Successful entrepreneurs are not gamblers, they are more inclined to take moderate than high risk as they tend to assess and calculate it carefully (Cunningham and Lischeron, 1991; Mancuso, 1975). Others such as self-confidence, persistence, and integrity have also been regarded as competencies exhibited by entrepreneurs; however, Bird (1995) emphasizes that no definite evidences have been found to differentiate successful from less entrepreneurs. At the social role and self-concept level, Bird (1995) points out that little formal research has been conducted. Differentiating competencies at this level can include: recognizing the relevance of relationships in a business context, concern for high quality of work, assertiveness, having selfconfidence, and taking actions to overcome obstacles (DuCette, 1986; McBer, 1983, 1986; McCleland, 1987; Spencer and Spencer, 1993). Furthermore, at the role-level competencies, previous research emphasizes that the entrepreneurial role is crucial to be successful in business (Chandler and Hanks, 1994; Chandler and Jansen, 1992). This role refers to behavioral actions associated to scanning for opportunities, selecting those that are promising, and formulating strategies to exploit them. At the knowledge and skill level, competencies such as finance/cash management, engineering, accounting, marketing, and sales have been frequently cited as important to succeed in business (Hood and Young, 1993). Furthermore, leadership, communication, and human relations have also been regarded as crucial skills areas of knowledge to success. These are important competencies for entrepreneurship as entrepreneur has to be able to persuade and discuss with various stakeholders such as customers, clients, suppliers, competitors, service providers and the like (Onstenk, 2003). One of the challenges of entrepreneurs is to remain constantly innovative, which drives them to learn continuously in their everyday activities. That is why the capacity of individuals for innovation is a crucial factor to succeed in business (Walker, Damanpour and Avellaneda, 2007), and a differentiating criterion to distinguish entrepreneurs from non-entrepreneurs (Carland, Hoy, Boulton and Carland, 1984). An associated skill is creativity, which is an essential competency in the innovative process (Kuratko and Hodgetts, 2004; Ronstad, 1985). Being creative requires being different, curious and persistent that enable individuals to generate novel ideas. Other competencies such as ambiguity tolerance, opportunity identification and venture evaluation, career assessment, deal making, networking, stress-coping mechanisms, intuitive thinking, seeing the market form a different angle, and identifying and solving problem are also crucial to succeed in business (DeTienne and Chandler, 2004; Garavan and O’Cinneide, 1994; Lindsay and Craig, 2002 ; Man and Lau, 2000; Ronstad, 1985; Shane, 2000). Important emphasis has been put to networking and team building skills since evidences indicate that entrepreneurs are more successful than entrepreneurs who do not possess these skills (Bird, 1988).

4

In addition to the competencies described above, the extant literature highlights the importance of decision making competency as crucial within the entrepreneurial process for its implications and issues involved (Busenitz and Barney, 1997; Eisenhardt, 1989; Smith, Gannon, Grimm, and Mitchell, 1988). To be successful, entrepreneurs are constantly required to make quick decisions, which are especially the case of the computer industry due to the accelerated changes in demand, competition and technology (Eisenhardt, 1989). In sum, the above discussion provides a summary of the competencies that entrepreneurs commonly deploy to be successful at starting and running their ventures. The extant literature presents other competencies such as coping with failure, concern for quality of work, the ability to motivate others and so on that have not been mentioned in the aforementioned review. However, the competencies already described are a good summary for the purpose of this study as we seek to develop a basic list to be used in competency-based entrepreneurship education. Research method As already mentioned, the present study is oriented to provide information that can be used by educators when having to delineate the competencies that students should acquire/develop through entrepreneurship education. The study was tackled by an analysis of responses to a survey among entrepreneurs and academics experts in the field of entrepreneurship. These two parties were inquired to give their opinions about the competencies that are crucial when getting involved in an entrepreneurial venture. In order to get a reduced list, the competencies were sorted based on the score means from highest to lowest. Then, we used a cut-off point of 4 for selection purposes so that a competency lower than this value was excluded from the final list. Sample The entrepreneurs’ population consisted of founders of nearly 1870 companies within the small and medium enterprise (SME) sector. This list was obtained from the Chamber of Commerce in Guayaquil, one of the most industrial and commercial cities in Ecuador. A purposeful sample of 60 Ecuadorian entrepreneurs was drawn from the population whose companies met two basic criteria: 1) the company had to be less than six years old as we were interested in relatively newly created firms; and 2) the company had to be a manufacturing or service firm. That is, the study excluded firms whose main activity was to resell goods from other companies. Thus, the selected sample included firms in: development of software products, manufacturing of agricultural products, food production, manufacturing of electronic and mechanical products, services in computer science, consulting services in management and related areas, and mechanical and electrical services. The entrepreneurs were contacted by phone and invited to participate on the survey. Forty entrepreneurs agreed to participate and answered the questionnaire. Eighty five percent of the entrepreneurs were male, in average 40 years old, and the majority of them possessed, at least, an undergraduate level degree. From the population of experts, a purposeful sample of 53 academics was selected. These experts were chosen mostly from a list of participants who had attended one of the important European conferences 5

in entrepreneurship in the year 2004. The questionnaire was sent to academics by the Internet with a cover letter explaining the purpose and scope of the study. Forty three academics answered the questionnaire, from which 30 were from countries that included: Austria, Australia, Belgium, Canada, Finland, France, Germany, Hungary, Italy, New Zealand, Singapore, Sweden, Switzerland, United Kingdom, and United States of America. The other 13 academics were from Ecuador, for a response rate of 88.3%. Survey instruments Based on the existing literature, two questionnaires were developed and presented to respondents, one to entrepreneurs and the other to academics. A list of entrepreneurial competencies was fulfilled by reviewing the works of Boyatzis (1982); Chandler and Jansen (1992); Hood and Young (1993); Spencer and Spencer (1993); Chandler and Hanks (1994); Garavan and O’Cinneide (1994); Bird (1988, 1995; 2002); Shane (2000); Lindsay and Craig (2002); Man and Lau (2000); Onstenk (2003); DeTienne, and Chandler (2004); Honig (2004); and Stoof (2005). The survey instrument to entrepreneurs was designed to gather information in two main areas: 1) demographic characteristics; and 2) the respondents’ opinions regarding the importance of possessing and exhibiting competencies when starting and running a new business. The other questionnaire intended to have inputs from the perspective of academics. The questionnaire to entrepreneurs was administered either by a face-to-face interview, the internet, or telephone while the one to academics was done by the internet. The variables were measured by the use of a five-point Likert scale, being 1 “Very low importance” and 5 “Very high importance.” Results In this study, entrepreneurs and academics were asked to indicate their opinions regarding the importance of competencies when getting involved in an entrepreneurial venture. Tables 1 and 2 present the intercorrelations among the study variables of interest. Insert Tables 1 and 2 about here Responses from both parties were ordered based on the score means for each of the entrepreneurial competencies considered in the study (see Tables 3 and 4).

6

Table 3 Ratings of entrepreneurial competencies according to Entrepreneurs’ opinions Entrepreneurial Competencies

M

SD

Decision making Innovative thinking Identifying and solving problems Having a different view of the market Communication Deal making and negotiation Identifying business opportunities Evaluating business opportunities

4.88 4.63 4.63 4.50 4.48 4.45 4.40 4.40

0.34 0.59 0.54 0.78 0.88 0.68 0.93 0.67

Networking Team work Team building Intuitive thinking Coping with uncertainties Coping with stress Taking calculated risk

4.30 4.23 4.18 4.08 3.98 3.98 3.85

0.76 0.89 0.78 0.97 0.89 1.07 0.80

N = 40; M: Mean; SD: Standard Deviation

Table 4 Ratings of entrepreneurial competencies according to Academics’ opinions Entrepreneurial Competencies

M

SD

Identifying business opportunities Evaluating business opportunities

4.67 4.51

.61 .67

Decision making Networking Innovative thinking Identifying and solving problems Coping with uncertainties Communication Deal making and negotiation Coping with stress Taking calculated risk

4.51 4.35 4.26 4.19 4.19 4.07 4.02 3.91 3.91

.67 .72 .37 .85 .76 .86 .80 .90 .84

Team building Intuitive thinking Having a different view of the market Team work

3.86 3.79 3.60 3.58

.97 .97 1.0 1.0

N = 43; M: Mean; SD: Standard Deviation

As can be seen, results indicate relative differences in responses from the entrepreneurs’ and academics’ opinions. Entrepreneurs, on the one hand, chose decision making most frequently as of high importance when embarking on and running an entrepreneurial venture, whereas academics were in favor of identifying business opportunities, which is an aspect more related to innovation. Most of the respondents (87.5% of entrepreneurs) indicated that decision making is a highly important competency that must be exhibited by entrepreneurs in their entrepreneurial endeavors. This yielded an average of 4.88, being 5 the highest value on the scale. Furthermore, innovating thinking, identifying and solving problems and having a different view of the market were the next three entrepreneurial competencies 7

in order of importance. On the other hand, 72.1% academics considered identifying business opportunities as of very high importance for business success, which resulted in an average of 4.67. Evaluating business opportunities, decision making, and networking were the next three competencies most frequently cited by academics as highly important for entrepreneurship. Competencies to be emphasized in entrepreneurship education The main purpose of the study was to obtain a reduced list of competencies with the idea of facilitating the design of an instructional method for teaching entrepreneurship and innovation to undergraduate students. It is reasonable to assume that undergraduates are naïve students in entrepreneurship and as such, we can expect that they are in their early-stage of entrepreneurial development. Hence, the present study was intended to determine a basic set of competencies that need to be possessed by individuals in their effort to successfully create a new venture. Following this approach, the competencies with a score mean greater than 4 were chosen, which means that such competencies were considered by entrepreneurs and academics of high importance for entrepreneurship (see Table 5). Table 5 Selected entrepreneurial competencies for entrepreneurship education Decision making Identifying and solving problems Identifying business opportunities Innovative thinking Evaluating business opportunities Communication Deal making and negotiation Networking

As we can see in Table 5, the resulting list included eight competencies that were common among both parties’ opinions and with a score mean higher than 4. The selected competencies were: Identifying and evaluating business opportunities, decision making, innovating thinking, communication, networking, identifying and solving problems, and deal making and negotiation. Discussion and implications The relative differences in opinions found between entrepreneurs and academics look as if both parties had distinct attitudinal positions. On the one hand, academics seem to have a less practical attitude and take into account the competencies that are viewed as crucial in the entrepreneurship literature (Bird, 1995). Accordingly, we think that the focus of academics may be less on which competencies entrepreneurs really exhibit and frequently exercise in a real life situation. This could be especially true since the extant literature posits that entrepreneurship is about the identification and the development of entrepreneurial opportunities (Shane and Venkataraman 2000; Venkataraman 1997).

8

On the other hand, the concerns of entrepreneurs, already embarked on an entrepreneurial opportunity, seem to be a little more downstream and focus on some critical tasks that amongst others may involve: access to a substantial customer base, securing following up financing, negotiating with providers, developing and effectively using personal network of contacts, understanding and controlling the enterprise as a whole, understanding and proficiently maneuvering within an industry, embracing competence of others, pursuing special know-how to a competitive position in the marketplace, maintaining a strategic focus, and dealing with uncertainty (Baron and Markman, 2003; Bird, 1988; 1995, Dubini and Aldrich, 1991; Herron and Robinson, 1993; Mitton, 1989; Witt, 2004). Important to remark, however, is that these competencies may vary according to the development of the particular venture (e.g. early stage compared to a growing stage firm), the sector in which it operates (high tech versus fast moving consumer goods) and the environmental circumstances that drive an entrepreneur to initiate in business (Dubini, 1988; Gatewood, Shaver and Gartner, 1995; Kourilsky and Walstad, 2002). In addition, the level of exhibition of these competencies can determine whether they are categorized as threshold or success (Bird, 2002). The former understood as those entrepreneurial competencies necessary to successfully create a business, and the latter as those required for success in such a venture (Bird, 1995). By taking these complexities, the specificities of each entrepreneurial venture become a step further in the analysis although the present study was not in that direction. Implications of the study Educating students for exploiting their capabilities to an entrepreneurially-oriented career has become a major impetus of entrepreneurship education. Going in this direction, we have argued that entrepreneurship education should focus attention on competency development. In this regard, the concept of a competency is useful in facilitating the design and implementation of instructional methods for entrepreneurship education. This term can also help identify which competencies and at what level they need to be addressed to better prepare students for a future entrepreneurial career. By recognizing what entrepreneurial competencies are conducive to succeeding in business, educators can include in their courses in- and out-class activities to instill in students the development of desirable competencies. We contend that activities to be exercised by students should be designed to mimic real-world situations. For example, allowing students to create their own enterprise during the course of an educational intervention is helpful to expose them to complex situations, such as: lack of information, uncertainty, development and use of personal contacts, search for advice from experts, and so on. This experience can provide students with the environment to become aware of the difficulties in creating a venture and in dealing with limited resources, which is usually the case for entrepreneurs (Hisrich and Peters, 2002). Furthermore, students can be encouraged to think innovatively as to be able to enter the market with and innovative product or service and to remain competitive (Carland et al, 1984; Lumpkin and Dess, 1996). In addition, they can have the opportunity to experience the need of possessing and developing a network of contacts both during the startup phase and in other phases of running the business (Greve and Salaff, 2003; Witt, 2004). Another benefit may be the possibility for students to realize the importance of having good communication skills, which are regarded as essential for entrepreneurial advancement (Hood and Young, 1993). Even another potential benefit is related to the op-

9

portunity to put in practice especial know-how and previous experience for designing a specific product or service as well as to embrace competence of others and to build a proper team. Recommendation for future research We have developed a working list of competencies that should be emphasized in entrepreneurship education. However, the study has only considered the point of view of Ecuadorian entrepreneurs, but also verified for and at least compared with for opinion of academics from different countries, remains a limitation. Another limitation is due to our methodological choice in selecting the entrepreneurs. That is, we did not choose them based on their companies’ performance since the study did not investigate how successful they were, for instance, in terms of sales or net profit growth. Therefore, an important direction for future research is to explore whether entrepreneurs from other countries have similar postures, which can give us better insights about the competencies that entrepreneurship education should entail. That is, further investigation is needed to examine whether contextual factors may explain differences in opinions, if any exist, of entrepreneurs from different countries. It is also important to conduct more research to confirm or refute the findings of this study by comparing the opinions of successful and less successful entrepreneurs. Although the findings presented in this study require further validation, they provide first insights on the competencies to be emphasized in entrepreneurship education. By instilling in students the development of entrepreneurial competencies, we can at least encourage them to become more entrepreneurial.

REFERENCES Baron, R. A. and Markman, G. D. (2003). Beyond social capital: the role of entrepreneurs’ social competence in their financial success. Journal of Business Venturing, 18, 41-60. Bird, B. (2002). Learning entrepreneurship competencies: The self-directed learning approach, International Journal of Entrepreneurship Education, 1, 203-227. Bird, B. (1995). Toward a theory of entrepreneurial competency. Advances in Entrepreneurship, Firm Emergence, and Growth, JAI Press, 2, 51-72. Bird, B. (1988). Implementing entrepreneurial ideas: The case for intention, Academy of Management Review, 13, 442-453. Boyatzis, R. E. (1982), The competent manager: A model for effective performance, New York: Wiley. Brockhaus, R. H. (1980). Risk taking propensity of entrepreneurs. Academy of Management Journal, 23, 509-520. Busenitz, L.W. and Barney, J.B. 1997. Differences between entrepreneurs and managers in large organizations: Biases and heuristics in strategic decision making. Journal of Business Venturing, 12, 9–30. 10

Chandler G. N. and Jansen E. (1992). The founder’s self-assessed competence and venture performance, Journal of Business Venturing, 7, 223-236. Chandler, G. N. and Hanks, S. H. (1994). Founder competence, the environment, and venture performance, Entrepreneurship Theory and Practice, 18, 77-89. Carland, J. W., Hoy, F., Boulton, W. R., and Carland, J. C. (1984). Differentiating entrepreneurs from small business owners: A conceptualization. Academy of Management Review, 9, 354-359. Cunningham, B. and Lischeron, J. (1991). Defining Entrepreneurship. Journal of Small Business Management, 45-61. DeTienne, D. R. and Chandler, G. N. (2004). Opportunity Identification and its Role in the Entrepreneurial Classroom: A Pedagogical Approach and Empirical Test, Academy of Management Learning and Education, 3, 242-257. Dubini, P. (1988). Motivations and environment on business start-ups: Some hints for public policies. Journal of Business Venturing, 1, 11-26. Dubini, P. and Aldrich, H. (1991). Personal extended networks are central to the entrepreneurial process. Journal of Business Venturing, 6, 305-313. Eisenhardt, K. M. (1989). Making fast strategic decisions in high-velocity environments. Academy of Management Journal, 32, 543-576. Garavan, T.N. and O’Cinneide, B. (1994), Entrepreneurship education and training programmes: A review and evaluation – Part 2, Journal of European Industrial Training, 18, 13-21. Gatewood, E. J., Shaver, K. G. and Gartner, W. B. (1995). A longitudinal study of cognitive factors influencing start-up behaviors and success at venture creation. Journal of Business Venturing, 10, 371-391. Henry, C., Hill, F. and Leitch, C. (2005a). Entrepreneurship education and training: Can entrepreneurship be taught? Part I. Education and Training, 47, 98-111. Henry, C., Hill, F. and Leitch, C. (2005b). Entrepreneurship education and training: Can entrepreneurship be taught? Part II. Education and Training, 47, 158-169. Herron, L. and Robinson, R. (1993). The entrepreneur and venture performance. Academy of Management Proceedings, 75-79. Honig, B. (2004). Entrepreneurship Education: Toward a Model of Contingency-Based Business Planning, Academy of Management Learning and Education, 3, 258-273. Hood, J. N. and Young, J. E. (1993). Entrepreneurship’s requisite areas of development: A survey of top executives in successful entrepreneurial firms, Journal of Business Venturing, 8, 115-135. Kuratko, D. F. and Hodgetts, R. M. (2004). Entrepreneurship: Theory, process, and practice, 6th. Edition. Cincinnati, OH: Thomson, South-Western. Kourilsky, M. L. and Walstad, W. (2002). The Early environment and schooling of high-technology entrepreneurs: Insights for entrepreneurship education. International Journal of Entrepreneurship Education, 1, 87-106. Lindsay, N. J. and Craig, J. (2002). A framework for understanding opportunity recognition : Entrepreneurs vrsus private equity financiers, The Journal of Private Equity, 6, 13-24. Lumpkin, G. T. and Dess, G. G. (1996). Clarifying the entrepreneurial orientation construct and linking it to performance, Academy of Management Review, 21, 135-172. Man T. W. Y. and Lau T. (2000). Entrepreneurial competencies of SME owner/manager in the Hong Kong services sector: A qualitative analysis, Journal of Enterprising Culture, 8, 235-254. 11

Mancuso, J. R. (1975). The entrepreneurs' quiz. In C. M. Baumback and J. R. Mancuso (Eds.), Entreprneurship and venture management. Englewood, N. J.; Van Nostrand, Inc. Mansfield, R. S., McClelland, D.C., Spencer, L. M., and Santiago, J. (1987). The identification and assessment of competencies and other personal characteristics of entrepreneurs in developing countries, Final Report: Project No. 936-5314, Entrepreneurship and Small Enterprise Development, Contract No. DAN-5314-C-00-3065-00. Washington, DC: United States Agency for International Development: Boston: McBer. Mitton, D. G. (1989). The compleat entrepreneur. Entrepreneurship Theory and Practice, 13, 9-19. Onstenk J. (2003). Entrepreneurship and vocational education. European Educational Research Journal, 2, 74-89. Ronstad, R. (1985). The educated entrepreneurs: A new era of entrepreneurial education is beginning. American Journal of Small Business, 10, 7-23. Schumpeter, J. A. (1934). The theory of economic development. Cambridge, MA: Harvard University Press. Shane S. and Venkataraman S. (2000). The Promise of Entrepreneurship as a Field of Research. Academy of Management Review, 25, 217-226. Shane, S. (2000). Prior knowledge and the discovery of entrepreneurial opportunities, Organization Science, 11, 448-469. Smith, K., Gannon, M. Grimm, C. and Mitchell, T. (1988). Decision making behavior in smaller entrepreneurial and larger professionally managed firms. Journal of Business Venturing, 3, 223-232. Spencer, L. M. and Spencer, S. M. (1993). Competence at work: models for superior performance. New York[etc.]: John Wiley. Stoof, A. (2005). Tools for the Identification and Description of Competencies, Thesis Dissertation, Open University of Nederland. Venkataraman, S. (1997), The Distinctive Domain of Entrepreneurship Research: An Editor's Perspective, In J. Katz and R. Brockhaus (Eds.), Advances in Entrepreneurship, Firm Emergence, and Growth, 3, 119-138. Walker, R. M., Damanpour, F. and Avellaneda, C. N. (2007). Combinative effects of innovation types on performance: A longitudinal study of public services. Academy of Management Proceedings, 16. Witt, P. (2004). Entrepreneurs' networks and the success of start-ups. Entrepreneurship & Regional Development, 16, 391-412.

12

.007

.036

.532**

.025

.165

.062

.161

.409**

.266

.146

-.085

-.114

.018

.152

.024

.183

-.055

3. OI 4. CWS

5. CWU

6. INNT

7. INTT

8. DVM

9. DM

10. OE

11. ISP

12. NW

13. TCR

14. TW

15. COM

.139

-.019

.324*

.262

-.051

.148

.237

.352*

.165

.094

.570**

.242

-

3. OI

.176

.060

.234

.261

.028

.014

.263

.350*

.272

.066

.321*

-

4. CWS

.212

.072

.497**

.201

.033

.188

.401*

.458**

.328*

.276

-

5. CWU

.006

.117

.205

.376*

.111

.000

.178*

.363*

.231

-

6. INNT

.212 .345* .326* .312

.251 .038 .245 .424** .280

.146

.228

.338*

.189

-

8. DVM

-0.53

.488**

-

7. INTT

.235

-.045

.458**

.380*

.123

.214

-

9. DM

.409**

.445**

.447**

.262

.565**

-

10. OE

.278

.340*

.163

.157

-

11. ISP

.359*

.163

.413**

-

12. NW

.359*

.120

-

13. TCR

.450**

-

14. TW

-

15. COM

N = 40; ** p < 0.01; * p < 0.05; Cronbach’s alpha = 0.74; DM: Decision Making; TB: Team Building; OI: Opportunity identification; CWS: Coping with Stress; CWU: Coping with Uncertainties; INNT: Innovative Thinking; INTT: Intuitive Thinking; DVM: Having a Different View of the Market; DM: Deal Making; OE: Opportunity Evaluation; ISP: Identifying and Solving Problems; NW: Networking; TCR: Taking Calculated Risk; TW: Team Work; COM: Communication.

-.121

.126

.403**

.352*

-.250

.314*

.185

.091

-.141

-

-

.086

2. TB

2. TB

1. DM

1. DM

Table 1 Zero-Order Correlations for Study Variables of Interest in regard to Entrepreneurs’ Opinions

13

.042

.551** .242

-.038

.136

.015

.133

.018

.066

.146

.205

.066

.214

.220 .144

4. CWS

5. CWU

6. INNT

7. INTT

8. DVM

9. DM

10. OE

11. ISP

12. NW

13. TCR

14. TW 15. COM

-.037 -.103

.101

.037

.264

-.071

.065

.210

.166

.403**

-.020

-.277

-

3. OI

-.230 -.147

.083

-.170

.086

-.078

-.097

.021

.170

-.291

.339*

-

4. CWS

.104 -.166

.028

.139

.092

-.051

.265

-.024

.183

.023

-

5. CWU

.396** .280

.043

.143

.125

.193

.137

.215

.329*

-

6. INNT

.177 .105

-.025

.073

.193

-.199

.006

.255

-

7. INTT

.135 .311*

.322*

.135

.118

-.018

-.047

-

8. DVM

.219 .067

.074

.151

.342*

.155

-

9. DM

.433** .186

.469**

.016

.163

-

10. OE

.010 .080

.125

.125

-

11. ISP

.272 .230

.094

-

12. NW

.263 .373*

-

13. TCR

.450**

14. TW

-

15. COM

14

N = 43; ** p < 0.01; * p < 0.05; Cornbach’s alpha = 0.7; DM: Decision Making; TB: Team Building; OI: Opportunity Identification; CWS: Coping with Stress; CWU: Coping with Uncertainties; INNT: Innovative Thinking; INTT: Intuitive Thinking; DVM: having a Different View of the Market; DM: Deal Making; OE: Opportunity Evaluation; ISP: Identifying and Solving Problems; NW: Networking; TCR: Taking Calculated Risk; TW: Team Work; COM: Communication

.483**

-.026

.003

.158

.039

.045

.117

.262

-.236

.124

.186

3. OI

-

-

.298

2. TB

2. TB

1. DM

1. DM

Table 2 Zero-Order Correlations for Study Variables of Interest in Regard to Academics’ Opinions

(German full version see next page – deutsche Version siehe nächste Seite) Innovation in SMEs through cooperation with universities in the field of competency development and further training3 Summary

Cooperation between SMEs and Universities is of increasing importance in order to enhance know-how transfer and the rate of innovation of SME. SME with a high percentage of university graduates, high-tech SME, academic spin-offs, born globals and gazelles cooperate significantly more often with the respective universities. Cooperation is in most cases initiated by alumni or the SME-management. Cooperation activities not only aim at the acquisition of up-to-date knowledge, but also to get into contact with potential trainees and young specialists, to have access to students who want to write their thesis in cooperation with an enterprise, to build up a network, to enhance the own reputation. Although most alumni work in SMEs or even found their own business in the long run, universities rarely focus on cooperation activities with SME Some recommendations for these cooperating universities are: Identifiy special target groups within the SME segment, f.i. SME with a many university graduates Combine a research cooperation with further training for the research team Use innovative forms of cooperation, f.i. combination of training, coaching, networking and practice oriented tasks within enterprises Keep SME-specific problems, like time or personnel capacity restraints, in mind when designing a cooperation /programme Concentrate on the USP of the respective university (f.i. up-to-date special technical knowledge, academic degrees and certificates, strategically important knowledge) Increase practice orientation through cooperation with other training institutes and practitioners as trainers Intensify alumni activities not only through university-wide associations, but also through the chairs themselves

3

Prof. Dr. Norbert Kailer, Director of the Institute of Entrepreneurship and Organizational Development, Johannes Kepler University Linz, A-4040 Linz, Freistaedterstrasse 315 (Austria), www.iug.jku.at, [email protected]; Dr. Monika Thum-Kraft, Deputy Director, IBW – Institute for Educational Research for the Economy, A-1050 Vienna, Rainergasse 38/2 (Austria), www.ibw.at, [email protected].

1

Innovation in Klein- und Mittelbetrieben durch Kooperation mit Hochschulen im Weiterbildungsbereich Norbert Kailer & Monika Thum-Kraft4 Zusammenfassung

Vor dem Hintergrund einer deutlichen Bedeutungszunahme von Kooperationen zwischen KMU und Hochschulen generell wird das Kooperationsfeld Kompetenzentwicklung zusehends wichtiger. Damit soll Wissenstransfer und die Innovationsintensität in KMU gesteigert werden. Insgesondere KMU mit hoher Akademikerquote, (high)-tech orientierte KMU, akademische Spin-OffGründungen und KMU mit Sitz in Inkubatoren, born globals und gazelles unter den KMU kooperieren deutlich häufiger mit Hochschulen. Die Kooperationskontakte gehen dabei am häufigsten von KMU-Seite aus, insbesondere von Alumni. Es wird nicht nur Fachwissen auf dem neuesten wissenschaftlichen Stand gesucht, sondern kooperiert wird vor allem, um Nachwuchskräfte kennenzulernen, um Zugriff auf Praktikanten und Diplomanden zu haben, um ein Netzwerk aufzubauen, die eigene Bekanntheit und Reputation zu erhöhen. Hochschulen fokussieren eher selten die Zielgruppe der KMU, obwohl ein Großteil ihrer AbsolventInnen in KMU arbeitet bzw. in weiterer Folge auch ein Unternehmen zu gründen oder zu übernehmen beabsichtigt. Empfehlungen für eine Weiterbildungskooperation von Hochschulen und KMU sind: Identifikation spezieller Zielgruppen innerhalb des Segmentes der KMU, z.B. KMU mit hohem Akademikeranteil und KMU, in denen eigene Alumni tätig sind Kombination von Forschungskooperation mit begleitendem Weiterbildungsangebot Innovative Kooperationsformen nutzen, wie z.B. die Einbeziehung von Coaching, Beratung, Netzwerkbildung der Teilnehmer, begleitende Praxisarbeit in den Unternehmen Berücksichtigung von KMU-Besonderheiten (Stellvertreterproblem, Zeitprobleme) in der methodisch-didaktischen Gestaltung Konzentration auf den hochschulspezifischen USP (up-to-date Spezialwissen, Abschluss mit akademischen Graden und Zertifikaten, strategisch wichtiges Fachwissen usw.) Durch Kooperation mit anderen Anbietern und Einbezug von Praktikern kann die gerade in KMU wichtige Praxis- und Anwendungsorientierung verbessert werden. Ausbau der Kundenbindung über Alumni-Vereinigungen Kontakthaltung über universitätsweite Kontaktstellen sowie die Institute selbst

4

Univ.-Prof. Dr.rer.soc.oec. Norbert Kailer, Vorstand des Institutes für Unternehmensgründung und Unternehmensentwicklung der Johannes Kepler Universität Linz, A-4040 Linz, Freistaedterstrasse 315, www.iug.jku.at, [email protected]; Dr.phil Monika Thum-Kraft, stv. Geschäftsführerin des Institutes für Bildungsforschung der Wirtschaft, A 1050 Wien, Rainergasse 38/2, www.ibw.at, [email protected].

2

1.

Ausgangspunkt: Kompetenzressourcen als Erfolgsfaktor

Die hohe wirtschafts- und arbeitsmarktpolitische Bedeutung eines nachhaltigen wirtschaftlichen Erfolges sowohl von bereits etablierten Klein- und Mittelbetrieben (KMU) als auch von neugegründeten und übernommenen Unternehmen ist unbestritten. Zunehmend werden dabei im Zuge der Diskussion um Kernkompetenzen von Unternehmen (Pralahad/Hamel 1999) die betrieblichen Kompetenzressourcen als strategische Erfolgsfaktoren auch für KMU und Jungunternehmen mit Wachstumsabsichten eingestuft (Hendry u.a. 1991, Kailer 1991, 2001, Gibb 1997, Schmidt u.a. 1998, Deakins/Frell 1998, Choueke/Armstrong 1998, Mahon/Murphy 1999, Schefzyk/Pankotsch 2002, ENSR 2003, Shane 2003, Moog 2005, Kriegesmann u.a. 2002, Schneeberger/Mayr 2004, Backes-Gellner u.a. 2005, Voigt u.a. 2005, Ganz u.a. 2005, Kailer/Stockinger 2008). Dementsprechend umfangreich ist auch das einschlägige Unterstützungsangebot (Europäische Kommission 2003, 2006).

2.

Verbreitung betrieblicher Kompetenzentwicklung in KMU

Sowohl in der Fachliteratur als auch der Unternehmenspraxis werden unterschiedliche, sich überschneidende Begriffe verwendet (Neuberger 1994): Weiterbildung i.e.S. beinhaltet seminaristisches Lernen in Kursen und Seminaren. Weiterbildung i.w.S. umfasst zusätzlich informelle Lernformen und die unterschiedlichen Formen des on-the-job-Trainings. Vereinfacht gesprochen beinhaltet Personalentwicklung (PE) darüber hinausgehend den Einsatz weiterer Human-Ressource-Instrumentarien (Becker 2007), die ebenfalls kompetenzförderlich wirken, bei denen aber die Aspekte der Personaleinsatz- und Laufbahnplanung im Vordergrund stehen (z.B. Mitarbeitergespräch). Die intensive Kompetenzdebatte der letzten Jahre lenkte das Augenmerk darauf, dass berufliche Handlungsfähigkeit großteils außerhalb organisierter Ausund Weiterbildungsprozesse erworben wird (ABWF 2002). Kompetenzentwicklung (KE) geht dementsprechend über PE hinaus, indem organisatorische Zuständigkeiten und Rahmenbedingungen als eigenständige Stellgrößen bei der Entwicklung individueller und organisationaler Handlungskompetenz berücksichtigt werden (Staudt u.a. 2002). Betriebliches Kompetenzmanagement geht damit über Weiterbildungsmanagement hinaus und umfasst z.B. die gezielte Zuordnung von Aufgaben zu Personen oder Teamzusammensetzung unter dem Aspekt der Entwicklung des Kompetenzportfolios, die lernförderliche Gestaltung von Arbeitsplätzen und prozessen sowie die Koppelung von Kompetenzentwicklung und Anreizgestaltung (Frey/Osterloh 2002, Backes-Gellner u.a. 2002). (Schriftliche) Erhebungen können diese Leistungspalette nur unvollkommen abbilden. Zudem hängen die Ergebnisse stark von der jeweils zugrundegelegten Begriffsdefinition ab. Berücksichtigt man darüber hinaus, dass vorliegende Studien meist schriftliche, regional begrenzte Erhebungen mit teils geringem Rück3

lauf sind, verwundert es nicht, dass die vorliegenden Unternehmensbefragungen zu sehr unterschiedlichen Ergebnissen kommen. Der EU-weite Continuing Vocational Training Survey (CVTS3) belegt z.B. einen deutlichen Zusammenhang zwischen Unternehmensgröße und Veranstaltungsaktivitäten: KMU führen weniger häufig Seminare und Kurse durch als Großbetriebe (Behringer u.a. 2007, Salfinger/Sommer-Binder 2007). Dies wird

mit kleinbetriebsspezifischen hemmenden Faktoren begründet, aber auch mit der Installierung von PE-Abteilungen in größeren Unternehmen, für die Veranstaltungsorganisation traditionell eine Hauptaufgabe darstellt. KMU und insbesondere Start-Ups bevorzugen jedoch flexibles Ad-hocLernen am Arbeitsplatz (Voigt u.a. 2005, Kailer/Stockinger 2008). Dies ist darauf zurückzuführen, dass der leicht beobachtbare Umsetzungserfolg zu einer positiven Kosten-Nutzen-Abschätzung arbeitsplatznaher bzw. -integrierter Maßnahmen führt (Backes-Gellner 2005). Dies gilt auch aus Mitarbeitersicht: Berufserfahrene Mitarbeiter bevorzugen kürzere Maßnahmen mit direktem Bezug zum eigenen Arbeitsbereich (Lachmayr 2006). Diese größenspezifischen Unterschiede sind bei Verwendung eines breiteren Kompetenzbegriffes deutlich geringer (Kailer 1991, Kailer u.a. 2001, Statistisches Bundesamt 2007). So weist das deutsche Berichtssystem Weiterbildung 2003 aus, dass 35 % der Kleinbetriebe bis 100, aber 49 % der Großbetriebe über 1.000 Mitarbeiter an formeller beruflicher Weiterbildung teilnehmen. Bezogen auf informelle berufliche Weiterbildung sind die Unterschiede deutlich geringer (65 % vs. 72 %). Allerdings sind insbesondere innerhalb der Gruppe der KMU deutliche Unterschiede in ihrer KE-Aktivität feststellbar (Kailer 1991). Weiterbildung in Seminarform dient vorwiegend der Absicherung von Routineprozessen, während für die Initiierung und Umsetzung betrieblicher Innovationen KMU deutlich stärker in interne Maßnahmen investieren; d.h. innovative, entwicklungsdynamische KMU setzen generell alle Formen von Kompetenzentwicklung häufiger und intensiver ein als entwicklungsstatische (Kriegesmann u.a. 2002). 3.

Weiterbildung als Handlungsfeld für Hochschulen

Der Kontakt zwischen Hochschule und Wirtschaft wird bereits bisher – je nach Ausrichtung der Hochschule unterschiedlich intensiv – in einer Reihe von Formen gesucht, wie z.B. Lehrveranstaltungen unter Einbindung von Unternehmenspraktikern Kooperationsforschungsprojekte von Hochschulen und Unternehmen, wobei eine Reihe von EUForschungsprogrammen auch explizit eine Beteiligung von KMU voraussetzen Unternehmenspraktika, Diplomarbeiten zu betrieblichen Fragestellungen Erleichterung der Mitarbeiterrekrutierung bzw. Laufbahnplanung von Jungakademikern durch Placement Services und Career Centers an Hochschulen Verstärkte Einrichtung – gerade im deutschsprachigen Raum – von Alumni-Vereinigungen bzw. internationale Ausdehnung entsprechender Netzwerke 4

Zunehmend setzen Hochschulen auch Engagement in der Weiterbildung als Positionierungsstrategie am Bildungsmarkt ein (z.B. das „University for life“-Konzept der Universität Graz). Die in Zukunft verstärkt erforderliche Drittmittelfinanzierung sowie die dem Feld innewohnende Entwicklungsdynamik in Angebot und Nachfrage verstärken dieses Interesse. Weiterbildungsangebote bilden einen wichtigen Bestandteil der Outreach-Aktivitäten, um Hochschulen stärker im (regionalen) Umfeld zu verankern. Daraus resultiert eine deutliche Ausweitung der Aktivitäten der Hochschulen (auch) im Weiterbildungsbereich. Sichtbar ist in erster Linie der markante Angebotszuwachs im überbetrieblich angebotenen postgradualen Bereich (z.B. wirtschaftsbezogenen Zusatzqualifikationen für Nicht-Ökonomen oder die Vielfalt der fachlich vertiefenden Professional Master-Lehrgänge. Auch eine Erhebung bei Alumni-Vereinigungen im deutschsprachigen Raum belegt den deutlichen Bedeutungszuwachs von Weiterbildungsangeboten für diese Zielgruppe – wobei allerdings kaum spezielle Angebote für KMU oder Jungunternehmer existieren (Haböck 2007). Einen weiteren aktuellen Vernetzungsbereich von Hochschulen mit Unternehmen stellen Company/Corporate Universities dar. Diese Aktivitäten fokussieren derzeit eher auf regional bedeutende Leitbetriebe und international tätige Großunternehmen (Kailer/Kottmann 2004). Jedoch sind in Hochschulen bisher kaum Stellen eingerichtet, die sich speziell auf die Entwicklung maßgeschneiderter Entwicklungsangebote für Unternehmen spezialisieren (Beispiel: Universität Augsburg). Während diese Aktivitäten eher auf Einzelpersonen bzw. auf größere Unternehmen ausgerichtet sind, wird im Zusammenhang mit der Förderung akademischer Spin-Off-Gründungen (Shane 2004) und ihrer Unterstützung durch Förderprogramme und (akademische) Inkubatoren vorwiegend auf innovative, meist High-Tech-Gründungen, fokussiert. Kooperationsforschung bzw. Wissenstransfer sollen die Innovationsintensität von KMU steigern und damit zu Umwsatzwachstum, Leistungssteigerung und letztlich arbeitsmarktpolitischen Auswirkungen durch mehr und gesicherte Arbeitsplätze beitragen (Pichler u.a. 2000). Dies wird auch gerade im deutschsprachigen Raum durch eine Reihe von Unterstützungsprogrammen gefördert (z.B. EXIST und PFAU in Deutschland, Akademia to Business in Österreich). Die Start-Ups und Jungunternehmen erhalten dabei von Hochschulen und akademischen Inkubatoren Unterstützung finanzieller Art sowie durch Coaching, Beratung und Training. Damit stellt sich die Frage, welchen Stellenwert Hochschulen als Kooperationspartner für die betriebliche Kompetenzentwicklung speziell in KMU haben. Generell kam dabei – zumindest im deutschen Sprachraum – den Hochschulen eine geringe Rolle zu. Nur 5 % der österreichischen Unternehmen kooperierten häufig mit Universitäten (Kailer u.a. 2001, ähnlich für Deutschland: Andersen 2001). Allerdings kooperiert ein Drittel zumindest gelegentlich, was auf ein Ausbaupotenzial hinweist. So liegt bei der CVTS3Erhebung der Anteil am Teilnahmestundenvolumen für (Hoch)-Schulen bei 6 % (Salfinger/Binder 2007). Jedoch gibt es auch eine Vielzahl von Beispielen von KMU mit ausgeprägtem Fokus auf betrieblicher Kompetenzentwicklung und innovativen Entwicklungsarbeiten in intensiver Kooperation mit Hochschulen. Dies sind insbesondere technologieorientierte (spin-off)-Gründungen, wachstumsorientierte „gazelles“ und starken Internationalisierungszwängen unterworfene „born globals“. Solche Kooperationen wer5

den auch der Europäischen Kommission gezielt gefördert (z.B. durch die 2008 gestartete Aktion des „European University Business Forums“). 4.

Hochschulen als Kooperationspartner von KMU: Empirische Erhebungsergebnisse

Vor dem Hintergrund steigender Bedeutung des Bereiches betriebliche Kompetenzentwicklung sowohl für Hochschulen als umsatzträchtiges Geschäftsfeld als auch für KMU als strategischer Erfolgsfaktor wurde in einer Erhebung bei österreichischen Unternehmen speziell die betriebliche Kompetenzentwicklung in Kooperation mit Hochschulen analysiert (Thum u.a. 2007).5 Dabei wurden folgende Forschungsfragen fokussiert: In welchen Formen kooperieren Hochschulen mit KMU? Inwieweit spielen Hochschulen bei der betrieblichen Kompetenzentwicklung von KMU eine Rolle und welche Faktoren hemmen und fördern solche Kooperationen? Welche Erwartungen haben KMU hinsichtlich Thema, Zielgruppe oder Methodik? Wie ist das Auswahlverhalten (Kontaktaufnahme, Auswahlkriterien) von KMU? Welche Gestaltungsempfehlungen lassen sich für darauf für Hochschulen ableiten? Im Folgenden werden einige ausgewählte Ergebnisse diskutiert. 4.1. Kooperationsformen mit Hochschulen

Deutlich mehr als die Hälfte (54,7 %) der antwortenden Unternehmen hat bereits in irgendeiner Art mit Hochschulen zusammengearbeitet. Dabei zeigen sich - nicht überraschend - statistisch signifikante Zusammenhänge6: Je mehr Mitarbeiter, je intensiver die internationale Kooperation, je höher die Akademikerquote, desto intensiver wird mit Hochschulen generell kooperiert. Die Palette der gewählten Kooperationsformen ist dabei sehr breit (Tafel 1).

5

Im Rahmen der Studie wurde u.a. eine Online-Erhebung bei einer Repräsentativstichprobe von 4.054 österreichischen Unternehmen durchgeführt. Der auswertbare Rücklauf betrug 11 % (n = 450).

6

6

Durchgeführt wurden Chi-Quadrat-Tests.

Kooperationsform

Gelegentlich

Mehrmals

Laufend

<100 MA

>100 MA

<100 MA

>100 MA

<100 MA

>100 MA

Ferialpraktika

41%

44%

41%

33%

18%

23%

Studentische Projekte

65%

56%

33%

33%

2%

11%

Diplomarbeiten/Dissertationen**

63%

48%

33%

27%

4%

25%

Entsendung von MA zu Uni-Seminaren (*)

61%

47%

37%

35%

2%

18%

Finanz. Unterstützung von HS**

100%

59%

0%

31%

0%

10%

Gemeinsame Veranstaltungen

65%

61%

28%

18%

7%

21%

Gemeinsame F&E Projekte

55%

49%

19%

34%

26%

17%

Unterstützung studierender MA

57%

49%

29%

38%

14%

13%

Unt.präsentation an Hochschule

65%

51%

31%

27%

4%

22%

Vorträge, Lehraufträge an HS

54%

49%

25%

33%

21%

18%

Andere

67%

86%

11%

0%

22%

14%

Tafel 1: Kooperationsformen nach Häufigkeit und Unternehmensgröße. Legende: (*) = knapp nicht signifikant, * = signifikant auf dem 5 % Niveau, ** = hochsignifikant auf dem 1 % Niveau (Chi-Quadrat-Tests) Nicht überraschend kooperieren Großunternehmen generell häufiger mit Hochschulen. Tafel 1 zeigt, dass Großunternehmen (mit mehr als 100 Mitarbeitern) signifikant häufiger Diplomarbeiten und Dissertationen betreuen und tendenziell häufiger Mitarbeiter an Hochschulseminaren teilnehmen lassen. Eine finanzielle Unterstützung der Hochschulen findet jedoch sehr selten statt. Jedoch berichtet auch ein beachtliches Viertel der antwortenden KMU von laufenden gemeinsamen F&E-Projekten und Vorträgen und Lehraufträgen an Hochschulen. 4.2. Kooperationsgründe Unabhängig vom Ausmaß ihrer bisherigen Kooperationserfahrung mit Hochschulen wurden die KMU nach Gründen für eine (mögliche) Zusammenarbeit befragt (Tafel 2).

7

Kooperationsgrund

Eher unwichtig

Völlig unwichtig

Sehr wichtig

Eher wichtig

<100 MA

>100 MA

<100 MA

>100 MA

<100 MA

>100 MA

<100 MA

>100 MA

Zugriff auf Praktikanten & Diplomanden* Kennenlernen potenzieller Nachwuchskräfte** Reputation durch Zusammenarbeit mit HS Wissen auf neuestem Forschungsstand halten Aufbau einer eigenen Company University Kostenvorteile Anregen bestimmter Forschungsschwerpunkte an der HS Netzwerkbildung mit Fachexperten von HS Mitarbeitermotivation durch WBAngebot mit akadem. Abschluss (*) Bildung eines (internat.) Forschungsnetzwerkes Möglichkeit der Weiterqualifizierung von Fachkräften

14%

19%

44%

49%

30%

30%

12%

2%

15%

30%

52%

48%

25%

21%

8%

1%

9%

15%

40%

46%

34%

31%

17%

8%

34%

36%

41%

42%

15%

16%

10%

6%

4%

5%

10%

9%

37%

38%

50%

48%

9%

12%

31%

31%

38%

43%

22%

14%

8%

8%

37%

46%

34%

29%

21%

17%

22%

23%

47%

43%

20%

26%

11%

8%

10%

16%

40%

39%

31%

36%

19%

9%

8%

10%

20%

27%

43%

39%

29%

24%

21%

22%

47%

51%

19%

22%

13%

5%

andere Gründe

0%

0%

0%

14%

31%

43%

69%

43%

Tafel 2: Kooperationsgründe von Hochschulen nach Wichtigkeit und Unternehmensgröße (Mehrfachnennungen, n = 325) Zu den wichtigsten Gründen, aus denen Unternehmen mit Hochschulen kooperieren (wollen), zählen das Fachwissen auf dem neuesten (wissenschaftlichen) Stand zu halten das Kennenlernen potenzieller Nachwuchskräfte Zugriffsmöglichkeiten auf Praktikanten und Diplomanden die Möglichkeit der Weiterqualifizierung von Fachkräften und Schlüsselkräften die Netzwerkbildung mit Experten der Hochschulen Am unwichtigsten wird der – vor dem Hintergrund der Unternehmensgrösse erwartungsgemäss – der Aufbau einer Company University angesehen.

8

4.3. Initiatoren der Kooperation

Angesichts der steigenden Bedeutung des Geschäftsfeldes Weiterbildung für Hochschulen bei gleichzeitig hoher und zunehmender Konkurrenz am Bildungsmarkt, wäre eine aktive Rolle der Weiterbildungseinrichtungen der Hochschulen zu erwarten. Die Erhebung zeichnet jedoch ein anderes Bild (Tafel 3). Impulsgeber für die Weiterbildungs-Kooperation Mitarbeiter mit Kontakt zur Hochschule Unternehmen Personalentwicklungsstelle des Unternehmens Hochschulmitarbeiter bzw. -institute Weiterbildungsstelle, Außeninstitut der Hochschule

61 % 54 % 18 % 10 % 5%

Tafel 3: Impulsgeber für Weiterbildungskooperation mit Hochschulen (n = 84 Unternehmen mit einschlägiger Kooperationserfahrung, Mehrfachantworten) Die Initiative zur Kooperation geht in der überwiegenden Zahl der Fälle von Unternehmensmitarbeite-

rInnen aus, die bereits über Kontakte zur Hochschule bzw. zu einem bestimmten Institut verfügen (61 % der kooperierenden Unternehmen). Es handelt sich dabei typischerweise um Absolventen dieser Hochschulen bzw. Institute, die oft in Lehre oder Forschung mit dem Institut verbunden sind (Kooperation in einem Forschungsprojekt, Lehrauftrag, gemeinsame Publikation, Praxisvorträge, Betreuung von Betriebspraktika und Diplomarbeiten, berufsbegleitende Erstellung einer Diplomarbeit/Dissertation). Betriebliche Bildungsabteilungen spielen (ausgenommen in weiterbildungsintensiven Großunternehmen) als Initiatoren der Kooperation nur eine geringe Rolle. Eher selten geht die Initiative von Hochschulmitarbeitern oder Hochschulkontaktstellen aus. 4.4. Zielgruppen Für welche Zielgruppen werden Hochschulen als geeignete Anbieter gesehen? Aus KMU-Sicht sind dies vorwiegend die Führungsebene bzw. Unternehmensleitung und Führungsnachwuchs (worunter wohl auch studierende potenzielle Nachfolger im Familienunternehmen verstanden werden) (Tafel 4). Eine zweite, deutlich kleinere Zielgruppe bilden Fachspezialisten (technische bzw. kaufmännische Fachspezialis-

ten bzw. F&E-Spezialisten). Hier dürfte fachliches Updating auf den neuesten wissenschaftlichen Stand im Vordergrund stehen. Bei technischen Fachspezialisten spielt auch die Vorbereitung auf die Übernahme von Führungsfunktionen eine Rolle. Für Zielgruppen wie ältere Fachkräfte, Teilzeitkräfte und karenzierte MitarbeiterInnen wird zwar in größeren Unternehmen z.T. ein entsprechendes Angebot bereitgestellt, jedoch wird (derzeit) dabei kaum eine Mitwirkung von Hochschulen ins Auge gefasst.

9

Zielgruppe

<100 MA

>100 MA

Management/Vorstandsebene/Geschäftsführerebene

43%

55%

mittlere Führungskräfte

45%

66%

Führungskräftenachwuchs

40%

64%

Trainees

8%

17%

Kaufmännische Spezialisten/Schlüsselpersonal

23%

31%

Technische Spezialisten/Schlüsselpersonal

26%

38%

F&E-Spezialisten

16%

38%

Ältere Fachkräfte (+40)

4%

6%

MitarbeiterInnen in Karenz, Teilzeitkräfte

3%

6%

Andere

0%

2%

Tafel 4: Zielgruppen nach Unternehmensgröße (Mehrfachnennungen)

4.5. Themengebiete Hochschulen werden von KMU als besonders geeignet für die Vermittlung von wissenschaftlich auf

dem neuesten Stand befindliche fachlich-technischer, kaufmännisch-betriebswirtschaftlicher sowie juristischer Themen gesehen. Vom überwiegenden Teil wird die Hochschule auch als geeigneter Anbieter für Projektmanagement sowie die Vermittlung von Sprach- und interkultureller Kompetenz eingeschätzt. Der Themenbereich Management, Führung und Leadership wird ebenso wie die Bereiche Strategie/Visionsarbeit, Unternehmensentwicklung/Change Management und Marketing/Verkauf von jeweils etwa zwei Drittel der Unternehmen genannt. Etwa die Hälfte nennt auch den Bereich der soft skills (Konfliktmanagement, Teamführung, Selbstentwicklung und -präsentation) (Tafel 5). Differenziert man ergänzend nach dem Ausmaß der Weiterbildungsaktivität, zeigt sich, dass gerade sehr weiterbildungsaktive Unternehmen Fachthemen, Strategie- und Visionsentwicklung und Projektmanagement nochmals häufiger nachfragen. Dies gilt aber nicht für den soft-skills-Bereich. Es wären hier also für die Anbieter verstärkte Anstrengungen notwendig, um auch in diesem Bereich als relevanter Anbieter wahrgenommen zu werden.

10

Themenschwerpunkt

sehr geeignet

eher geeignet

weniger geeignet

nicht geeignet

<100 MA

>100 MA

<100 MA

>100 MA

<100 MA

>100 MA

<100 MA

>100 MA

Fachlich-technische

42%

39%

45%

44%

11%

13%

2%

4%

Kaufmännischbetriebswirtschaftliche

35%

40%

50%

51%

13%

7%

2%

2%

Juristisches Wissen

33%

36%

47%

35%

19%

25%

1%

4%

Wissen über ausländische Märkte

7%

11%

43%

33%

41%

40%

9%

16%

Andere Fachthemen

3%

3%

47%

50%

35%

27%

15%

20%

Führung, Leadership, Managementtechniken

8%

20%

57%

46%

30%

30%

5%

4%

Soft skills, Konfliktmanagement, Teamführung

6%

12%

35%

44%

50%

37%

9%

7%

Selbstentwicklung, Selbstpräsentation

6%

7%

34%

33%

46%

53%

14%

7%

Sprachen, interkulturelle Kompetenz

15%

19%

51%

55%

33%

23%

1%

3%

Projektmanagement

8%

18%

59%

60%

28%

21%

5%

1%

Marketing und Verkauf

10%

14%

52%

56%

30%

23%

8%

7%

Strategie, Visionsarbeit

16%

20%

55%

54%

21%

22%

8%

4%

Change Management, Untern. entwicklung

12%

16%

49%

53%

30%

28%

9%

3%

Andere Themen

0%

0%

0%

25%

50%

0%

50%

75%

Tafel 5: Einschätzung der Hochschule als geeigneter Anbieter nach Themengebiet und Unternehmensgröße

4.6. Auswahlkriterien Als wichtigstes Auswahlkriterium aus Sicht der KMU steht mit Abstand die hohe Praxiserfahrung und

Praxisorientierung des Lehrpersonals an der Spitze. Erst mit deutlichem Abstand folgen – angesichts der geringen Akademikerquote in KMU nicht überraschend - die Zugangsmöglichkeit für NichtAkademiker sowie die methodisch-didaktische Qualifikation des Lehrpersonals.

11

Auswahlkriterium für WB-Angebote von Hochschulen

Hohe Praxisorientierung und -erfahrung des Lehrpersonals Hohe wissenschaftliche Reputation des Lehrpersonals Methodisch-didaktische Qualifikation d es Lehrpersonals

besonders eher eher unwichtig wichtig wichtig unwichtig <100 >100 <100 >100 <100 >100 <100 >100 MA MA MA MA MA MA MA MA 75%

77%

23%

21%

2%

2%

0%

0%

15%

14%

43%

46%

37%

31%

5%

9%

40%

52%

51%

39%

7%

9%

2%

0%

12%

7%

31%

42%

47%

41%

10%

10%

10%

10%

27%

29%

48%

44%

15%

17%

12%

6%

39%

36%

34%

46%

15%

12%

10%

11%

47%

52%

33%

33%

10%

4%

Internat. Teilnehmerzusammensetzung*

12%

9%

20%

35%

43%

43%

25%

13%

Mitsprachemöglichkeit bei der Festlegung der Inhalte (*)

15%

27%

48%

50%

29%

20%

8%

3%

Internationales Referententeam (*)

15%

11%

33%

46%

34%

34%

18%

9%

Mitwirkung bei Prüfungen (*)

3%

0%

13%

21%

49%

53%

35%

26%

Akademischem Grad oder Zertifikat

9%

4%

41%

37%

38%

49%

12%

10%

Modularer Aufbau

24%

28%

61%

59%

13%

12%

2%

1%

Besuch einzelner Kursmodule möglich

35%

33%

55%

56%

9%

10%

1%

1%

44%

37%

39%

52%

15%

7%

2%

4%

22%

26%

50%

51%

22%

22%

6%

1%

5%

4%

26%

30%

49%

55%

20%

11%

20%

13%

37%

42%

37%

37%

6%

8%

Miteinbeziehung von Soft Skills**

22%

26%

37%

54%

36%

20%

5%

0%

Geringere Kosten als vergleichbare Angebote am Bildungsmarkt

25%

22%

36%

40%

36%

33%

3%

5%

Renomee, Ranking der Hochschule Internationale Akkreditierung des Lehrganges Netzwerk von Lehrgangs-Absolventen /Alumniclub Umfassende Abschlussprüfung mit hohen Anforderungen

Zugangsmöglichkeit auch für NichtAkademikerInnen Anrechenbarkeit von Praxis/einschlägigen Kurse Ambiente ist betrieblichen Standards angepasst Einbau von Online-Kursen bzw. Fernstudienteilen

Tafel 6: Auswahlkriterien für Angebote von Hochschulen Kooperationsformen nach Bedeutung und Unternehmensgröße . Legende: (*) = knapp nicht signifikant, * = signifikant auf dem 5 % Niveau, ** = hochsignifikant auf dem 1 % Niveau (Chi-Quadrat-Tests)

12

Eine Modularisierung des Programmes, verbunden mit der Möglichkeit, nur einzelne Kursteile zu besuchen, ist angesichts der bekannten Zeit- und Stellvertretungsprobleme gerade in KMU (Kailer/Stockinger 2008) für ein Drittel der befragten KMU wichtig. In diesem Zusammenhang spielt auch die Anrechenbarkeit relevanter Praxis- oder Führungserfahrungen oder absolvierter einschlägiger Kurse zur Verkürzung der Ausbildungszeit wichtige Rolle. Knapp ein Viertel sieht die Einbeziehung von soft skills in das Kursprogramm als wichtiges Auswahlkriterium an. Internationale Aspekte (Akkreditierung, Teilnehmerzusammensetzung, Referententeam) werden vergleichsweise selten als sehr wichtig eingeschätzt. Auch der Aspekt der Kostengünstigkeit von Hochschulangeboten wird großteils nur von KMU ohne einschlägige Kooperationserfahrung genannt. Auch ein entsprechendes Ambiente (Seminarhotels, Ausstattung usw.) stellt eher selten ein wichtiges Auswahlkriterium dar (Tafel 6). 5.

Resumee und Gestaltungsempfehlungen

Vor dem Hintergrund einer deutlichen Bedeutungszunahme von Kooperationen zwischen KMU und Hochschulen generell wird auch das Kooperationsfeld Kompetenzentwicklung zusehends wichtiger. Die Kooperationsintensität nimmt mit der Unternehmensgröße zu, jedoch ist eine sehr unterschiedliche Kooperationsintensität innerhalb der Gruppe der KMU festzustellen. Gerade KMU mit hoher Akademikerquote, mit Tätigkeitsschwerpunkt im technologieorientierten Bereich, born globals und KMU mit dezidierten Wachstumsabsichten kooperieren deutlich häufiger mit Hochschulen. Dies wird auch durch entsprechende Unterstützungsprogramme, z.B. für Spin-Off-Gründungen und High-Tech-Gründungen sowie EUKooperationsprogramme gefördert. Die Kooperationskontakte gehen am häufigsten von KMU-Seite aus, wobei insbesondere Hochschul-AbsolventInnen eine Schlüsselrolle bei der Kontaktaufnahme zukommt. Hinsichtlich Themen und Zielgruppen für Weiterbildungssangebote werden Hochschulen aus KMU-Sicht deutlich anders als andere Weiterbildungsanbieter am Markt positioniert. Die Kooperationsgründe beschränken sich nicht nur auf Kompetenzentwicklung im fachlichen Bereich und auf wissenschaftlichem Niveau, sondern zielen auch auf Kennenlernen von Nachwuchskräften, auf Zugriffsmöglichkeiten auf Praktikanten und Diplomanden, sowie generell auf eine Netzwerkbildung mit Hochschulexperten, Reputationszuwachs und einen Ausbau des Bekanntheitsgrades. Beim Ausbau von Praxiskontakten generell und der Entwicklung von Weiterbildungsangeboten im speziellen wird derzeit von Hochschulen noch eher selten die Zielgruppe der KMU fokussiert, obwohl ein Großteil ihrer Studierenden nach Studienabschluss in KMU arbeitet bzw. in weiterer Folge auch ein Unternehmen zu gründen oder zu übernehmen beabsichtigt (Fueglistaller/Halter/Klandt 2006, s.a.

www.isce.ch). Jedoch können aus den Ergebnissen für Hochschulen, die auf eine Intensivierung ihrer Kooperation mit KMU im Bereich betrieblicher Kompetenzentwicklung abzielen, aus den diskutierten Erhebungsdaten folgende Gestaltungsempfehlungen abgeleitet werden. 5.1. Zielgruppenspezifizierung innerhalb der KMU Gerade KMU weisen in ihrer betrieblichen Kompetenzentwicklung ein sehr unterschiedliches Aktivitätsniveau auf (Kailer u.a. 2001). Bildungsaffine KMU setzen stark auf kostengünstige, informelle Lernfor13

men wie on-the-job-Training, Messebesuche oder Lernen aus Kundenfeedback. Erst wenn solche Kompetenzentwicklungsaktivitäten intensiv durchgeführt und verstetigt werden, kommen zusätzlich überbet-

riebliche Seminare und Coaching verstärkt zum Tragen (Kailer/Stockinger 2008). Speziell entwicklungsdynamische und innovationsaktive KMU setzen auch maßgeschneiderte innerbetriebliche Maßnahmen – auch in Kooperation mit Externen – ein (Kriegesmann u.a. 2002). Für Hochschulen erscheint angesichts der hohen Angebotskonkurrenz und der teils unrealistischen Erwartungen von kooperationsunerfahrenen KMU eine genauere Fokussierung der Programmangebote erforderlich. Sinnvoll erscheint eine Konzentration auf KMU mit Akademikern in der Leitungsebene bzw. mit höherem Akademikeranteil (z.B. im Beratungsbereich, in technologieorientierten KMU). Da Hochschulen auch zunehmend Bemühungen um stärkere Alumni-Bindung setzen (Haböck 2007), sollten hier gerade jene Alumni, die in KMU bzw. als Jungunternehmer tätig sind, gezielt angesprochen werden. Seitens der Hochschule können KMU-spezifische Weiterbildungsangebote mit einer Palette von Spezialseminaren bis hin zu Lehrgängen mit Lehrgangszertifikat (wie z.B. das NDU-Nachdiplomstudium an der Universität St. Gallen) bzw. akademischem Abschlüssen (z.B. Entrepreneurship-MBA) angeboten werden. Wenn die Hochschule sich im Bereich Corporate/Company University-Kooperationen betätigt, kann auch eine KMU-spezifische Variante, z.B. durch Kooperation mit einem KMU-Weiterbildungsverbund oder Cluster, entwickelt werden. Gerade im Zuge von Forschungskooperationen kann ein begleitendes Weiterbildungsangebot für das (erweiterte) Projektteam aus Hochschule und KMU einen wichtigen Ausgangspunkt für weitere Aktivitäten bilden. 5.2. Berücksichtigung von KMU-Spezifika im methodisch-didaktischen Angebotsdesign Auch für Hochschulen als Anbieter ist es wichtig, die speziell kleinbetrieblichen Zeit- und Kostenbegrenzungen stärker zu berücksichtigen (zB Abend- und Wochenendveranstaltungen, Ersatz von Präsenzzeiten durch Lernmaterial, Abhaltung außerhalb der Hauptsaison). Auch der Berücksichtigung einer finanziellen Fördermöglichkeit des Angebotes für teilnehmende KMU kommt hohe Bedeutung zu. Angesichts der hohen Bedeutung nicht-formalisierter Weiterbildung in KMU (Kailer/Stockinger 2008) sind innovative Kooperationsformen, wie z.B. die Einbeziehung von Coaching, Beratung, Netzwerkbildung der Teilnehmer, begleitende Praxisarbeit in den Unternehmen von hoher Bedeutung. Der Aspekt des Wissenstransfers in das Unternehmen ist bereits bei der Auswahl der Inhalte als auch des Lehrpersonals zu berücksichtigen. Durch einen Angebotsverbund mit anderen Weiterbildungseinrichtungen kann deren Infrastruktur und die Erfahrung im Bildungsmanagement gezielt genutzt werden und dabei ggf. universitäre Defizite ausgleichen und Schwellenangst abbauen. Sinnvoll ist der Einbezug von neuen Lerntechnologien, um insbesondere zeitlich-örtliche Restriktionen abbauen zu können. Präsenzphasen können so verkürzt werden (z.B. Angebot von Fernstudienangeboten oder Multimedia-Paketen).

14

5.3. Inhalte Durch eine Konzentration auf den hochschulspezifischen USP (fachlich hochstehendes Wissen auf dem neuesten Stand der Wissenschaft, Vergabemöglichkeit von akademischen Graden und Zertifikaten usw.) können sich gerade Hochschulen von anderen Anbietern abheben. Angesichts des umfangreichen praxisorientierten Weiterbildungsangebotes für KMU durch andere Anbieter (z.B. Bildungseinrichtungen der Wirtschaftskammern) ist eine Konzentration auf für die Unternehmen strategisch wichtige Kompetenzentwicklungsmaßnahmen (z.B. fachliche Spezialausbildung akademischen Fachpersonals) sinnvoll. Gerade bei längerfristigen Entwicklungsmaßnahmen, die z.B. in akademische Abschlüsse münden, ist jedoch eine rechtzeitige gemeinsame Abklärung der Rahmenbedingungen (z.B. Zulassungsbedingungen, Prüfungs- und Terminplanung) besonders wichtig (Kailer/Kottmann 2004). Durch gezielte AngebotsKooperation mit anderen Anbietern sowie durch Einbezug von Praktikern in die Bildungsmaßnahmen kann die gerade in KMU wichtige Praxis- und Anwendungsorientierung verbessert werden. 5.4. Bildungsmarketing und Interessentenansprache Im Zuge des Hochschulmarketing werden AbsolventInnen verstärkt unter dem Aspekt ihrer Bindung an die Hochschule angesprochen und entsprechende Alumni-Vereinigungen aufgebaut (Haböck 2007). Neben dieser Ansprache von Einzelpersonen (z.B. hinsichtlich der Teilnahme an Weiterbildungsprogrammen der Hochschule) können auch gezielt Alumni in KMU, Spin-Off-Gründer, Jungunternehmer und – übernehmer angesprochen werden. Auch im Rahmen von Forschungskooperationen kann das Thema begleitender Kompetenzentwicklung thematisiert werden. Diese Kontakte sollten nicht nur über einschlägige Hochschulcenters hergestellt werden. Da die Alumni meist eine hohe Bindung an spezielle Institute aufweisen, sollten auch einschlägige Bemühungen dieser Institute selbst (z.B. Instituts-Alumni-Vereine) unterstützt werden.

6.

Literatur

ABWF – Arbeitsgemeinschaft Betriebliche Weiterbildungsforschung e.V. (Hrsg.)(2002): Kompetenzentwicklung 2002 – Auf dem Weg zu einer neuen Lernkultur. Münster u.a. Andersen A (2001): Studie zum europäischen und internationalen Weiterbildungsmarkt, Bundesministerium für Bildung und Forschung (Hrsg.), Bonn. Backes-Gellner, U. et al. (2002): Mitarbeiterbeteiligung in kleinen und mittleren Unternehmen: Verbreitung, Effekte, Voraussetzungen. Schriftenreihe zur Mittelstandsforschung. Gabler. Wiesbaden. Backes-Gellner, U. (2005): Betriebliche Weiterbildung in kleinen und mittleren Unternehmen, Vortragsunterlagen zur BIBB-Fachtagung Kosten, Nutzen, Finanzierung beruflicher Bildung. Bonn. Becker, M. (2007): Lexikon der Personalentwicklung. Kohlhammer. Stuttgart. Behringer F./Moraal D./Schönfeld G. (2007): Betriebliche Weiterbildung in Europa: Deutschland weiterhin nur im Mittelfeld. Ergebnisse der dritten europäischen Weiterbildungserhebung. Bonn. Manuskript 27.11.2007.

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Choueke, R./Armstrong, R. (1998): The learning organisation in small and medium-sized enterprises – A destination or a journey? In: International Journal of Entrepreneurial Behaviour & Research. Vol. 4, No. 2. 1998, pp. 129 – 140. Deakins, D./Frell, M (1998): Entrepreneurial learning and the growth process in SMEs. In: The Learning Organization. Vol. 5., No. 3. 1998, pp. 144 – 155. ENSR - Beobachtungsnetz der europäischen KMU (2003): Entwicklung von Kompetenzen und Qualifikationen in KMU. Heft Nr. 2003/11. Brüssel. Europäische Kommission - Generaldirektion Unternehmen (2003): Grünbuch Unternehmergeist in Europa. Brüssel. Europäische Kommission (Hrsg.) (2006): The Oslo Agenda for Entrepreneurship Education in Europe. Oslo. Frey, B. und Osterloh, M. (2002): Managing Motivation. Gabler. Wiesbaden. Fueglistaller, U. und Halter, F. (2006): Führen – Gestalten – Leben: KMU in Bewegung – Eine Auseinandersetzung mit lebenszyklusorientierter Unternehmensführung. Schweizerisches Institut für Klein- und Mittelunternehmen an der Universität St. Gallen (Hrsg.). KMU HSG. St. Gallen. Ganz, W. et al. (Hrsg.) (2005): Schnelles Unternehmenswachstum: Personal – Innovation – Kunden. Kohlhammer. Stuttgart, S. 11 – 18. Gibb, A.(1997): Small Firms’ Training and Competitiviness. Building upon the small business as a learning organisation. In: International Small Business Journal. April-June 1997, pp. 13 – 29. Haböck D. (2007): Beiträge österreichischer Alumnivereinigungen zur Kundenbindung in Hochschulen und zur Förderung von Unternehmensgründungen aus Hochschulen, Universität Linz. Hendry ,C./Jones, A./Arthur, A./Pettigrew, A. (1991): Human Resource Development in Small to Medium Sized Enterprises. Research Paper No. 88. Centre for Corporate Strategy and Change. University of Warwick. Coventry. Kailer, N. (1991): Organisationsformen und Entwicklungstendenzen betrieblicher Weiterbildung in Österreich - Empirische Situationsanalyse und zukunftsbezogene Schlussfolgerungen. Schriftenreihe Nr. 86 des Instituts für Bildungsforschung der Wirtschaft (Hrsg.). Wien. Kailer, N.(1998): Entwicklung von kleinen und mittleren Unternehmen durch Kompetenzentwicklung, in: Kailer, N.. und Mugler, J. (Hrsg.): Entwicklung von kleinen und mittleren Unternehmen – Konzepte, Praxiserfahrungen, Entwicklungsperspektiven. Linde. Wien, S. 247 – 290. Kailer, N. (Hrsg.)(2001): Betriebliche Kompetenzentwicklung: Praxiskonzepte und empirische Analysen. Wien. Kailer, N. (2007): Gründungspotenzial und –aktivitäten von Studierenden an österreichischen Hochschulen – Austrian Survey on Collegiate Entrepreneurship, IUG-Arbeitsbericht 2007/3, Universität Linz (www.isce.ch). Kailer N./Kottmann, M. (2004): Hochschulen als Dienstleister einer innovationsorientierten Personalentwicklung, in: Geißler K./Laske S./Orthey A. (Hrsg.): Handbuch Personalentwicklung, 92. Erg.-Lief., Köln. Kailer, N./ Stockinger, A. (2008): Kompetenzentwicklung in Jungunternehmen und Kleinbetrieben, in: Meyer J.-A. (Hrsg.): Management-Kompetenz in kleinen und mittleren Unternehmen, Berlin, S. 57 – 72. Kriegesmann, B./Lamping, S./Schwering, M. (2002): Kompetenzentwicklung und Entwicklungsdynamik in KMU und Großunternehmen. Berichte aus der angewandten Innovationsforschung No. 202. Bochum. 16

Lachmayr, N. (2006): Berufliche Weiterbildung von ArbeitnehmerInnen über 45 in KMU – Chancen und Problemfelder. ÖIBF (Hrsg.). Wien. Mahon, J./Murphy, E. (1999): Managerial effectiviness in small enterprises: implications for HRD. In: Journal of European Industrial Training, 23/1 (1999), pp. 25 – 35. Moog, P. (2005): Der Faktor Personal in der Unternehmensgründung – Bedeutung und Management, in: Konrad, E. (Hrsg.): Aspekte erfolgreicher Unternehmensgründungen. Waxmann. Münster u.a., S. 229 – 242. Neuberger, O. (1994): Personalentwicklung. Enke. Stuttgart (2. Aufl.). Pralahad, C./Hamel, G. (1999): Nur Kernkompetenzen sichern das Überleben. In: Ulrich, D. (Hrsg.): Strategisches Human Resource Management. München und Wien, S. 52 – 74. Pichler,J./Pleithner, H.-J./Schmidt, K.-H. (2000): Management in KMU – Die Führung von Klein- und Mittelunternehmen. Haupt. Bern (3. Aufl.). Salfinger, B./Sommer-Binder, G. (2007): Erhebung über betriebliche Bildung (CVTS3). In: Statistische Nachrichten 12/2007, S. 1106 – 1119. Schefzyk, M./Pankotsch, F. (2002): Theoretische und empirische Implikationen wachstumsstarker StartUps – Stand der Forschung, in: Hommel, U./Knecht, T. (Hrsg.): Wertorientiertes Start-UpManagement. Vahlen. Stuttgart, S. 21 – 38. Schmidt, A./Kayser, G. u.a. (1998): Erfolgsfaktor Qualifikation – Unternehmerische Aus- und Weiterbildung in Deutschland. Trierer Schriften zur Mittelstandsökonomie Bd. 2. Münster. Schneeberger, A./Mayr, T. (2004): Berufliche Weiterbildung in Österreich und im europäischen Vergleich, IBW Schriftenreihe Nr. 126, Wien. Shane, S. (2003): A General Theory of Entepreneurship. The Individual-Opportunity-Nexus. Edward Elgar. Cheltenham and Northampton. Shane, S. (2004): Academic Entrepreneurship – University Spinoffs and Wealth Creation. Edward Elgar. Cheltenham and Northamptom. Statistisches Bundesamt (Hrsg.) (2007): Dritte Europäische Erhebung zur beruflichen Weiterbildung (CVTS3). Bonn (www.destatis.de). Staudt, E./Kailer, N./Kottmann, M./Kriegesmann, B./Meier, A./Muschik, C./Stephan, H./Ziegler, A. (2002): Kompetenzentwicklung und Innovation. QUEM Studien Band 14. Münster. Thum-Kraft, M. u.a. (2007): Betriebliche Kompetenzentwicklung in Kooperation von Hochschulen und Wirtschaft. IBW-Schriftenreihe 136. Wien. Voigt, M. et al. (2005): Kompetenzentwicklung in Start-up-Unternehmen – Strategien und Besonderheiten. QUEM Report Heft 93. ABWF (Hrsg.). Berlin.

17

The real impact of reducing administrative burdens from the enterprises’ and the economy’s point of view – an explorative concept Prof. Dr. Christoph Müller KMU – HSG, University of St.Gallen University of Hohenheim, Endowed Chair of Entrepreneurship, until 09/2008. [email protected]

I. Research question and project objectives 1. Research question The real impact of reducing administrative burdens from the enterprises‟ and the economy‟s point of view or what we want to know about the real advantages of reducing red tape: What happens with the savings resulting from reduced administrative burdens? Is there a peak of positive effects due to the reduction of administrative burdens? Or: Is there a point - and there really is such a point, where the positive effects (for example use of human and financial resource for productive purposes with the aim to generate positive operating cash flows) turn into negative effects (missing regulation might lead to abuse of market power and establish barriers for market entry)? On the other side: Which are the real benefits of regulation? Do the savings only exist on a sheet of paper or are they really important for the further growth of enterprises, especially SMEs? Walter Weber raised the question wether the reduction of administrative burdens really has a positive impact on SMEs, measured by free cash flows due to the reduction? We have to differentiate two levels: The level of a single SME and the level of the whole economy of a country. The reductions of some regulatory burdens show no effect on the macroeconomic level, on the orther hand the expenses for a single SME are cashed-in for investments goods or services or even for consultants. The problem we want to discuss is quite an interesting problem, nearly nobody wants to discuss actually. In their investigation about the Dutch Standard Cost Model, Löfstedt, R. / Bouder. F. / Torriti, J. (2008), S. 138 come to the conclusion, that our research guiding question is not solved by the well known Dutch method: „The model ignores how businesses will re-invest after the easing of the administrative burden‟ and „The benefits of the elimination of administrative burdens cannot be measured‟. That is really a point to discuss in context with the SCM-model, but either no other method have been tested on this re-invest question. But it has to be possible to measure these positive effects of reducing regulatory burdens. Therefore let‟s try an effort to structure the discussion and show a possible way to measure these special kinds of benefits. But hold in mind that it is quite difficult to make clear distinctions, because the entrepreneurs always react in their own unpredictable manner to the reduction or absence of regulations. The paper is a proposal for an empirical investigation, for which we are actually looking for partners at the level of the regulatory bodies and a couple of SMEs.

1

2. Project objectives The project objectives consist of four aspects : Complete collection and measurement of all information obligations of selected businesses from the companies‟ perspective in order to assess the contribution and effective discharge/relief of burdens by the federal government‟s program for reducing administrative burdens; the assessment of all policy / compliance costs (in the following called “regulatory costs”) is a precondition to identify these special kinds of regulatory costs, which have positive effects on SMEs and the whole economy when they are going to be reduced; Gathering of so called “irritation costs” of the same group of companies in order to identify those areas where administrative burdens, regulatory costs and irritation costs overlap most; Quantification of opportunity costs resulting from delays (duration of procedures) in order to get indications for the ratio between opportunity costs, regulatory costs and administrative burdens; Deduction of recommendations for the efficient use of resources in future projects for improvement of the regulatory quality. II. Methodology 1. Initial point of view: Enterprises Many instruments are available to assess the effects of laws. Each of those instruments has its own strengths and weaknesses. However, most of these instruments have in common that the focus is on the public goals to be achieved, and not on those which are being addressed by the laws, the norm addressees. In this project the enterprises are the norm addressees. The position that we want to put forward is, that public goals will be achieved better if all compliance costs of the addressees, the enterprises, are as low as possible. The lower the administrative burden, the higher the compliance with the regulation: enterprises will comply more and in a better way in case of low(er) compliance costs. This means that the realization of low compliance costs is a win-win situation for enterprises, for government and as a consequence for the economy as a whole. But we have to hold always in mind, that there is a limit to lower administrative burdens, which could be seen as a turning point. Beyond this point, further reduction of regulations leads to negative effects like discouraging of innovations and creative start ups due to market entry barriers and abuse of market power. So certainly we need basic and general regulations, but what is their optimum level? And what happens with the savings, are they really going to be invested for further growth? Therefore, in this proposal we want to introduce a survey design that for the first time takes the enterprises‟ point of view on all the effects of regulations, which is of high relevance across Europe, e.g. also the Regulatory Reform Group in the Netherlands lays their focus on an „integral policy to cover all aspects of better regulation for business‟. There is also a project in preparation from the Bertelsmann Foundation.

2

2. Business Effects of regulation The following survey of the compliance effects and the adequate methods for their measurement show, that we can have a look from two different perspectives. First, a perspective from the classification of the different kinds of effects from regulations on businesses. Second, a process orientated perspective, which is used by the WorldBank in their DoingBusiness Report. Both perspectives should be combined, because they want to evaluate similar effects with in principal the same methods, just in another order due to the focus on the selected process of starting a business.

Table 1: Business effects of regulation on a single company and their methods for measurement Business Effects of regulations (single company) Regulatory Impact Assessment Business Impact Assessment

Direct compliance costs

Substantive compliance costs

Secondary compliance costs

Effects on competition & innovation/ cost of delay/ opportunity costs / Irritation costs / enforcement costs

Information obligation / administrative burdens Standard Cost Model (info. obl.)

Direct financial costs (taxes, fines etc.)

Costs for information transfer to third party

Macro and social economic effects

Simulation models (Web-)Survey, Interviews, Tests

Costs for investments / production process

Business as usual costs and marginal costs

Direct measurement SCM Sirocco

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Table 2: Process oriented perspective on regulatory costs

Business Effects of Regulation: The process oriented perspective from the World Bank

Starting a

Registering

Dealing with

Enforcing

business

property

licences

contracts

For each process step: Measurement with the DoingBusiness – Method to get hard facts about time and cost for every process step It is possible to make a connection with the mentioned methods and the data for time and cost parameters to continue with an evaluation of the business effects of regulation for each step like - Direct compliance costs: Substantive compliance costs and costs for information obligations - Secondary compliance costs: Effects on competition & innovation / opportunity costs / Irritation costs / enforcement costs

3. Criteria for the use of methods The use of the mentioned methods must be in line with the fulfilment of special criteria for these methods. Otherwise we will get problems with the scientific standards and with the acceptance by the stakeholders of the (political) process. Therefore the methods must be… Easy to understand for all involved persons and parties Accepted by all relevant stakeholders Founded and developed in scientific way Designed for an efficient use in a standardized way Selective in the sense, that the relevant effects can be separated from the irrelevant Transparent and revisable for the reader of the final report Reliable and valid as methodological key criteria Integrated in the different steps of the regulation process Internationally comparable Easy to implement for the administration Without possibilities to influence through policies of interest. 4

4. Survey of the methods The way of testing, evaluating and improving the different methods is a preposition for the success of the whole project. The well known Standard Cost Model is evaluated in several studies, but the new SIROCCO method, the special kind of face to face – interviews, the test of typical procedures and levels of service quality and time of delay are new methods for this purpose. Therefore they have to be improved. The steering groups have to stay in contact with the measurement teams to collect, evaluate and decide about their proposals for improvements. Methods which are proposed for the project are the following: Regulatory Impact Assessment: The aim of the use of a Regulatory Impact Assessment (RIA) is to assess and measure whenever possible the total effects of a regulation. It is well known from the United Kingdom and the United States. According „Better Regulation‟ a RIA is an assessment of the likely effects of a proposed new regulation or regulatory change. It involves a detailed analysis to ascertain wether or not the new regulation would have the desired impact. It also helps to identify the side effects and the hidden costs associated with regulation. A RIA clarifies the desired outcomes of the proposed regulatory change. RIA also promotes evidence-based policy-making by giving detailed consideration to the likely impacts of decisions, along with structured consultation with stakeholders and citizens. The focus here is only on enterprises, but the underlying ideas of a RIA are put in practice. In that sense a RIA builds the framework for the integration of different, specialised methods. Business Impact Assessment: This an integrative approach to measure the relevant effects of regulation from an enterprise point of view. The BIA has been developed by Nijsen / van der Hauw / Regter in 2006. For the BIA the authors have developed on eight research questions about all relevant effects of regulations on businesses. Direct measurement: Financial costs are the result of a concrete and direct obligation to transfer a sum of money to the government. They include administrative charges, fees etc.. There is no special method needed to evaluate these costs. Standard Cost Model for information obligations (administrative burdens): The Standard Cost Model has been developed in the Netherlands (Nijsen et al.) to calculate the administrative burdens. They include the costs companies run up when meeting information obligations arising from government legislation. This approach has won broad acceptance, but it limited to the administrative burdens, which are only one part of all regulation effects. It is possible to make an ex-ante (for new regulations) or an ex-post (baseline) measurement with the SCM. The SCM uses a high degree in the measurement of administrative burdens, in particular going down to the level of individual activities. On the other side it is usual to work with a sample for ex – ante studies, and they are normally not representative in statistical terms. The structure of the SCM starts with a regulation, 5

which contents information obligations, which includes data requirements with special standard activities, and they can be measured in terms of internal costs hourly rate, time, overheads), external costs (hourly rate, time) and acquisitions (monetary value). The special cost of an activity consists of price x quantity, that means (tariff x time) x (population x frequency). Population refers to the number of businesses to which the regulation apply. Frequency is the number of times that a business delivers a data requirement per year. The SCM follows normally four steps in measurement: Project start up, preparatory analysis, time and cost data capture and standardisation, calculation, data submission and report. It is helpful to use a decision tree for measuring data requirements. Standard Cost Model for content obligations / SCIROCCO: (Scanning Instrument Regulations of other compliance costs belongs to the Mistral Family and quite similar to the Standard Cost Model). According to Nijsen (2007) at the Regulatory Reform conference in Berlin: Substantive obligations comply in a direct way with norms, standards, codes of conduct to safeguard public goals. Substantive compliance costs consists all costs to comply with substantive legal obligations. It is important to differentiate between business as usual costs (costs that would remain if there was no legal obligations) and marginal costs (costs that would disappear if there was no legal obligation). Therefore a base line must be defined, which acts as a starting point for reduction plans (base line 1: 100% compliance with existing relevant regulations, base line 2: or the average existing relevant practices in businesses). Then it is possible with SIROCCO to focus on marginal costs and to reckon with different solutions to comply with norms. SIROCCO proposes to follow the questions of a decision tree: Is there a legal obligation for businesses? Yes > Does compliance with this legal obligation contribute directly to the realization of the public goal? Yes > Is it about a registration obligation with a fixed legal format? No > Substantive compliance costs: must be quantified. The decision tree leads to nine steps: Preparation – 1. Selection of relevant regulations per Ministry: which substantive obligations are hard to comply with by businesses?, 2. Which categories of businesses?, 3. Which types of obligations?, 4. Which types of activities / investments stick to comply with the norms etc. (standardization of solutions per categories of typical firms), 5. Consult stakeholders (policy, inspection, businesses) to safeguard support before starting field work; Field work – 6. Select respondents per category of typical firm: businesses and suppliers, 7. Collect information about Price and suggestions for reductions (businesses and suppliers), and Quantity (Inspections, Bureau of Statistics);Validation and report – 8. Validation of Price Parameters and consultation of experts, 9. Final report. Surveys / Experiments / Process analysis: For the measurement of the secondary compliance costs it is possible to use some methods which are originally not constructed for that purpose, but which are useful for normal scientific purposes. That means it is possible to use and to adapt methods like surveys, web-surveys, expert interviews, some kind of experiments and process analysis. Simulation models play no role at this place, because it is not intended and possible to calculate the costs at a macroeconomic level.

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As an example for a pragmatic project design we can have a look at the experiences from Simon Schmid (2007), (presented at SECO - conference, Bern), responsible for the burden reduction program in the Swiss canton Basel-Land. Such a practicable solution should be also the aim for the Bertelsmann - Foundation project, because it allows the responsible persons at the political and administrative level to receive significant success stories when trying to reduce the negative effects of regulations. Since 2005 / 2006 in Basel-Land exists a legal obligation to reduce sustainable the density of regulations and the administrative burdens for SMEs. They use three kinds of methods / instruments: Regulatory Impact Assessment for all regulatory proposals; a forum with SME-experts and –representatives for checking regulatory proposals; a One Stop Shop for regulatory questions and procedures. The evaluation process is focussed on quality, depth and breadth of the regulations and consists of six evaluation steps. They are also working with a priority list of the relevant problems for SMEs. Doing Business – Method: The World Bank wants to investigate with the Doing Business project „the scope and manner of regulations that encourage business activity and those that constrain it‟. The focus of the Doing Business project lies on the four central processes of starting and running a company, esp. a limited liability company: Starting a business (number of procedures, time in days, cost in % of GDP per capita); registering property; getting credit; enforcing contracts. These four indicators for the case of a limited liability company cover areas of state and municipal jurisdiction and show the economic outcomes of regulations.

III. Process steps for evaluating the positive effects 1. Point of view: Single Enterprise The following questions should be answered from the point of view of a single enterprise to get an overview about all relevant effects of regulations on a single enterprise. The idea of the project is to measure the whole costs of all regulation effects on single enterprises and then to evaluate the mentioned real positive effects of reducing them. The enterprise point of view and not as usual the regulation point of view offers new insights in the real situation of all kinds of burdens and should help to reduce them effectively after a complete analysis. The consequence of this decision is a relatively small sample of companies due to efforts for time and cost of the investigation. On the other side it is possible to get deep insights in the different ways of complying with regulations in companies. 2. Eight process steps with research questions and methods 1: Definition and selection of companies At the beginning we have to define the kind of company, that we want to evaluate in our survey. Possible criteria are branch, size, family or holding owned company, personal or capital company. Then we take the perspective of a single company, which is the so called norm addressee of the regulations. The company has to follow the regulations and his reaction is the intended aim of the regula7

tions. It is important to differentiate between direct effects on norm addressees (in the focus of the regulation) and indirect effects on norm addresses (like collateral addressees, which are not in the focus of the regulation, but which are also affected). The next step includes the selection of five or ten companies along the relevant criteria and the preparation of face to face – interviews and measurements about all effects of regulation. One important question is, if it would be better to select the companies with the same or a different profile. 2: Measurement of substantive compliance costs From now on we want to collect and evaluate in a systematic way all relevant data and information about all compliance costs of all regulations. It is easier to collect the data about all regulations, when we make a classification of all possible regulation a company has to comply with. We can make a differentiation between five main areas of regulation: Working contract and social insurance - Regulations Tax and administration fee - Regulations Statistic - Regulations Production - Regulations Environment protection – Regulations. For every area it is important to make a collection of all possible single regulation as a preparation for the face-to-face interviews. We start with the direct compliance costs and the quantification of the substantive compliance costs. We have to quantify the direct financial costs for that single company through an analysis of these costs like administration fees, taxes or fines. The company has to show exactly which would be the resulting amount of direct financial costs when they would follow the regulations. Then it is easy to quantify the amount you can achieve through a reduction of these fees, taxes or fines. But these are the advantages for the companies, now it would be interesting to know, what they are going to do with their savings. Do they use it for new investments which leads to the generation of new cash flows or do they use it for consumption? But we have to remark that there are positive effects in terms of newly generated free cash flows through the reduction of these direct financial costs at the level of a single SME. At the level of the whole economy, especially from the point of view of the state, it has to been seen as neutral: the state always has its ideas about the investment - or more often the consumption - of these „financial cost – income‟. More often the state would consider the effects as negative, the state being concerned about shrinking income for itself. Quantify the costs of content obligations, in particular the costs for information transfer to third party like consumers and the costs for investments / changes in the production process. The appropriate method should be SIROCCO (Scanning Instrument Regulations of other compliance costs) from the Netherlands, because the Regulatory Reform Group wants to start now with SIROCCO, perhaps with some adaptions due to the experiences with the Regioplan / Actal – pilot projects. SIROCCO splits the substantive compliance costs (all costs to comply with substantive legal obligations) into „business as usual costs‟ (costs that would remain if there was no legal obligation) and „marginal costs‟ (costs that would disappear if there was no legal obligation). It is important to define a base line as a starting point for reduction plans offering different solutions on how to comply with regulations. It is also important to integrate the relevant stakeholders in the discussion. According to the SIROCCO 8

decision tree and the nine steps of investigation there is a standardized way to identify and to quantify the substantive compliance costs. The method is now beginning to be introduced in the market through the Dutch government. Therefore it would be useful to stay in contact with the Regulatory Reform Group, Actal and EIM to discuss the operational details of the method. Interestingly the fulfilment of content obligations is neutral at the level of the whole economy, because the cash out for the investing company is the cash in for the producing company of the investment goods. Therefore we can‟t identify a positive effect at this level. For a single SME it is not clear to define, if there is a positive effect or not. Yes, if it could use the invested cash for a more productive purpose, no, if the investment forced by the regulation is helpful for its productivity and competitiveness. A positive effect results from reduction of information to third parties. 3: Measurement of administrative burdens We continue with the quantification of costs of information obligations (administrative burdens). The proposed method is the Standard Cost Model with the analysis of the information obligations and standard activities. The parameters which must be measured and which offer potentials for reduction of administrative burdens are: Time and tariff (price), frequency / periodicity and population (quantity). To collect the data it is useful to develop a formula with all relevant parameters. It is important that we collect quantitative data to calculate the administrative burdens, but also qualitative information about the practical experiences with administrative burdens and the possibilities of using ICT to reduce them. The integration of qualitative information is a new approach to get more valid results and a better possibility to develop proposals for the reduction of administrative burdens. Information obligations lead to cash out for consultants or remain expenses for internal bureaucratic work. In both cases the reduction of these administrative burdens could be used for more productive projects by the single SME instead of administrative work. From the perspective of the whole economy it has to be seen as neutral, because otherwise consultants or administrative workforce in SME would be unemployed. 4: Estimation / Measurement of secondary compliance effects The next step is the measurement of the secondary compliance effects, which is quite more complicated, because no standard method is available and the range of answers and facts could be quite wide. Therefore it is not expected to receive statistically significant results, but in an explorative sense it should be possible to get important hints on useful proposals for the reduction of secondary compliance effects. We start with the quantification of the effects on competition & innovation on companies. Therefore it is useful to develop a questionnaire with the main possible effects, which can be derived out of the regulation content. In the face to face – interviews these effects have to be verified and the amount of investment or the amount of competition disadvantage against competitors without regulation has to be evaluated. Due to the small sample it is not possible to make a calculation at the macroeconomic level, but it will give first hints where bigger problems could be expected. In the case of our own investigation these kind of burden leads to losses because of missing investments, which could have led to positive free cash flows. Or the resources could have been invested in another country with a better regulation environment. Or it leads to a loss of sales because of a noncompetitive offers due to the internalisation of the administrative burdens. For the whole economy results a negative effect, if investments or orders are not generated in the own country. For the SME 9

only the loss of sales is cash relevant, the investments in other countries should result in „new‟ free cash flows, therefore it is seen as neutral. The second step includes the measurement of the opportunity costs resulting from delays. Companies want to execute normally their investment or constructing decisions without delays. Therefore it is an important factor of service quality that government can decide quickly, consistent and reliable. Otherwise the results are opportunity costs, because the companies have to wait and couldn‟t use their time with productive activities and the production of goods and services. We need a estimation for these opportunity costs for the companies. The cost of delay leads to not realized free cash flows for the companies and in a second stage to missing tax income at the state level. The reduction of these costs of delays will have a positive effect in two ways, for the SME and for the economy. Perhaps the state employees could be work for more productive purposes or they could lose their jobs. As a third step we have to measure the quality of service and the enforcement practices performed by the administration. This leads to enforcement costs, which are the result of low or high quality of enforcement routines in relation to best practice solutions. There are two possibilities to measure these enforcement costs: First with a questionnaire and face to face – interviews with companies and government about the costs and proposals for improvements, second with a test of an enforcement of a standard procedure according to the regulation. Therefore it is useful to define a list with specific activities between companies and administration, to define the relevant tariffs and then to collect data during a live case of handling with the regulation. Bad quality of service could also lead to investment decisions in favour of other countries or regions. Even worse, the same (bad) set up will generate unpredictable and different decisions for the same situations. Therefore a better service quality of the state leads to a positive effect especially for the state, for the SME it is a neutral effect because they can (possibly) swift to a better regulatory body. Even worse, the SMEs will react unpredictably. The forth group of secondary compliance costs consists of the so called irritation costs. They can be defined as follows: Irritation costs are the effect of the regulation(s), which are hindering the entrepreneur at the highest degree in his entrepreneurial activities. Therefore we should ask the entrepreneur in the face to face – interview, which five single regulations are responsible for irritations and then he has to bring them in an order (Top 1 – 5). Comparing all answers it should be possible to select in a pragmatic way the most irritating regulations for entrepreneurs. The method allows it better to have a holistic view on all regulations than a combination of the irritation cost question with every single question about the regulation. To improve or to cancel these regulations should therefore lead to the greatest impressions in the entrepreneurs mind. This is an important effect in the public, political discussion. Perhaps it is possible to develop a calculation with the entrepreneur about the real or opportunity costs for these irritation costs. They have to be compared with the other secondary compliance costs. For our purpose it is interesting to know at which point of a continuum of irritating burdens an entrepreneur will make different decisions. The effect is neutral, if the SME invests abroad instead of in the own country. But if no investment is the consequence of the irritation, the effect is (clearly) negative. For the whole economy both options / decisions have a negative effect, therefore the irritating costs has to be reduced. But who can measure them? Especially at the level of secondary compliance

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costs there is a relevant leverage effect because of the influence on investment decisions and on the competitive situation in an international context. 5: Concluding addition of all compliance costs and quality check The final step of the single measurements is the concluding addition of all the effects of regulation and a final check of the quality of the single measurements. 6: Interpretation of the relevance of the costs for companies What is the capability of the typical company to comply with the regulation (in financial and personnel terms)? The question is, how relevant are the cost effects for the companies. Are companies affected in their ability to struggle with competitors or is it possible to integrate the regulation without bigger problems in a short time into the „business as usual costs‟? It could be interesting to evaluate in which way this single regulation is combined with other regulations that affect the company much more. 7: International comparison In this context it is useful to receive results from an international comparison of the effects of regulation. What is the origin of the regulation? Is it a single, national regulation or a regulation at European or global level? How is the regulation legitimized? Is it possible to identify a gold plating – effect? 8: Final Report with all data and conclusions The final report consists of the calculated costs and of the conclusions for the further handling with the regulation: How can we better tailor enterprise regulations according to our investigation results? What are the central recommendations for the involved institutions in the regulation process (first discussions, legislation, execution, revision) and for all four dimensions (according to Frank Frick, Bertelsmann Foundation) of modern regulation (good policy, better regulation, good administration, good governance)? The recommendations and the possible alternatives should be founded on the collected data and information, especially on the ratio between the different effects of costs. But it is not the aim to start with some kind of cost-benefit or benefit-analyses in this project.

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Table 3: Survey of the fit between methods and type of compliance cost Method: Direct compliance costs Direct Content Informafinancial obligations tion oblieffects gation

Direct measurement Standard Cost Model - SIROCCO Standard Cost Model – Information Obligation Surveys: Face to face or websurvey, preferably face to face, only with a panel websurveys Experiments / process analysis Business Impact Analysis Regulatory Impact Analysis Macroeconomic simulation model Cost-benefit Analysis

Secondary compliance costs Effects on Quality of Macrocompetition service and economic / innovaenforcement / costs tions cost of delay/ irritation costs

XX XX

XX

X

XX X

XX X

X

X

X

X

X

X

X

X X

X

X

X = useful method for the special kind of effects of regulation XX = recommended method in this context

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X

X

X

Proposals for the integration in the political process This is a first proposal for a survey process with eight steps. It should be the challenge to validate the process during the pilot project. After validation the process should be integrated in the political process, because the process is tested, practicable, resilient and adequate. A decision about the beginning with new measurements in the future should be depending on predefined threshold levels. In this case it is not necessary to measure all effects of all regulations, it is only necessary to measure all effects of a single, new regulation. The first decision could be orientated on the number of norm addressees which could be affected by a regulation. A threshold level could be defined in percent of total number of companies in a country, perhaps five percent. The consequence would be a measurement with a sample of 10 companies. The second decision could be orientated on the results of this first measurement. If the costs of regulation are higher than one percent of the total sales volume of the companies it is to assume, that the regulation could be a „big fish‟. Then a second survey with a sample of 50 or 100 companies should validate the data from the first survey. The results of the second survey should allow the development of recommendations for improvements concerning all kind of effects. Consequences for New Ventures and Regulations With regard to the requirements on measuring methods, the special features of SME and start-ups should be highlighted. These specificities can be further differentiated on the basis of the international comparison figures presented at the outset. The individual factors of the Global Entrepreneurship Monitor reports provide indications for differentiation into young and established businesses. These factors are also collected annually for over 40 countries. Of the 13 individual factors of the GEM reports, the following factors with regulation reference are particularly relevant for young businesses (see Annex II: Table GEM Report 2006): Protection of intellectual property, Policy 2: Regulation and taxes, Market Openness 2: Market entry barriers, Market Openness 1: Market changes. Legal protection for intellectual property, free enterprise, low-hindrance regulations and low market entry barriers are basic prerequisites for the development of founding companies. In relation to these three factors, the countries to the fore of the GEM ranking should be particularly highlighted as positive examples: USA, Singapore, United Arab Emirates, Iceland, Belgium, Finland and Australia. For established companies, it is more important to defend their market positions, to be able to erect high market entry barriers against newcomers and to impose high compliance costs on young companies by setting high regulation standards. An example of this is the pharmaceutical industry, because large companies with well-established processes and relationships with the pertinent authorities particularly profit from the highly regulated production processes and the complex approval processes for new drugs (despite the burdens). The GEM Report therefore comes to the conclusion, in relation to industrial countries, that countries with better (poorer) structural conditions tend to present a higher (lower) founding quota (p.27).

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A concrete example of the continuous reduction of impeding regulations for SME and start-ups is Switzerland. Improving the structural conditions has been a subject of economic policy for ten years. Individual measures packages have been continually defined and implemented since 1998, the year of the first scientific studies by the Ministry of Economic Affairs. The measures implemented up to 2005 cover the areas of quality and coherence of regulation and regulation processes, authorizations in international exchange and within the domestic market, as well as process coordination between federation and cantons. The measures underway by 2007 are aimed at reducing the administrative burdens for businesses from different legal domains. The current measures comprise five main topics from the areas of simplification of regulations / reduction of administrative burdens, as well as improvement of processes between state and businesses. The development of practical Internet portals for start-ups and SME at both Federation and canton level is also at the center of the endeavours. The SME Admin website should be mentioned in this regard. It enables company registration via the Internet in dialog with commercial registers and national insurance. The figure shows a summary of the steps in the time sequence. IV. Conclusions and summary Regarding all the mentioned effects we can conclude, that there is a great difference between the positive effects for the SMEs and for the whole economy. What is good for the country is only in parts good for the SMEs and vice versa. The following table shows the differences. Black signifies: no effect, green: positive effect, blue: depends on the assumptions if positive effects or not. Theses results show us, that there is a reason at the level of political economy, why reducing administrative burdens could be so difficult in some countries. There is to little congruence between the aims of the state and the aims of SMEs. Indirectly, there is more congruence because competitive SMEs are also positive for the economy, but it would take a long term perspective, which is not quite usual in politics, therefore the short sight is overrated, and the result is more of a neutral effect. And there is another problem: From the economy‟s point of view it would be important to reduce the secondary compliance costs, but there is no standard method to measure them, therefore clear data for the political decisions are still missing and everybody is just talking about these effects, but nobody can reduce them, because too many interest groups are involved. So it is easier for SMEs to move to another regulatory regime (like from Germany to Austria and Switzerland) than for some states to reduce significantly red tape (just look at the latest slightly disillusionated report issued by the Normenkontroll-Rat in Germany). On the other side it is a great chance for a flexible, pragmatic and pro-acting state to offer better regulatory conditions than countries that are just talking about the problems. What should be the next step? After the discussion about the concept and methodological aspects it is useful to start a first measurement with a small sample of SMEs to make the measurement operational and to get first results about the positive effects in financial terms.

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Table 4 a and 4 b: Summary – positive effects of reducing regulatory / compliance costs Table 4a: View of an enterprise / SME regular: no effect bold: positive effect underlined: depends on the assumptions if positive effects or not.

Business Effects of regulations (single company) Regulatory Impact Assessment Business Impact Assessment

Direct compliance costs

Substantive compliance costs

Secondary compliance costs

Effects on competition & innovation/ cost of delay/ opportunity costs / Irritation costs / enforcement costs

Information obliga-tion / administra-tive burdens Standard Cost Model (info. obl.)

Direct financial costs (taxes, fines etc.)

Costs for information transfer to third party

Macro and social economic effects

Simulation models (Web-)Survey, Interviews, Tests

Costs for investments / production process

Business as usual costs and marginal costs

Direct measurement SCM Sirocco

15

Table 4b: view of the state regular: no effect bold: positive effect

Business Effects of regulations (single company) Regulatory Impact Assessment Business Impact Assessment

Direct compliance costs

Substantive compliance costs

Secondary compliance costs

Effects on competition & innovation/ cost of delay/ opportunity costs / Irritation costs / enforcement costs

Information obligation / administrative burdens Standard Cost Model (info. obl.)

Direct financial costs (taxes, fines etc.)

Costs for information transfer to third party

Simulation models (Web-)Survey, Interviews, Tests

Costs for investments / production process

Direct measurement SCM Sirocco

16

Macro and social economic effects

Business as usual costs and marginal costs

Board network characteristics and company performance in Sweden: The case of Gnosjö companies and their board members in southern Sweden

Authors Ossi Pesämaa, PhD Jönköping International Business School Center for Innovation Systems, Entrepreneurship and Growth Research Unit for Rural Entrepreneurship and Growth Experience Industries‟ Development Institute P.O. Box 1026, SE-551 11 JÖNKÖPING, SWEDEN Email: [email protected] Phone +46-(0)36-101933 Fax +46-(0)36-101888 Johan Klaesson, Associate Professor in Economics Jönköping International Business School Center for Innovation Systems, Entrepreneurship and Growth Research Unit for Rural Entrepreneurship and Growth P.O. Box 1026, SE-551 11 JÖNKÖPING, SWEDEN Email: [email protected] Phone +46-(0)36-101752 Fax +46-(0)36- 121832 Web: http://www.ihh.hj.se/rureg Antti Haahti, Professor of Tourism University of Lapland Faculty of Tourism and Business Lapland Institute for Tourism Research Coordinator for Experience Stratos Research Program P.O. Box 122, 96101 ROVANIEMI, FINLAND Email: [email protected] Phone +358-16-341 2687 Mobil +358(0)40-743-4802 Fax 358-16-341 2600 Web www.ulapland.fi

Abstract In focus of this paper are selected characteristics of enterprise boards and their influences on performance in companies located in Gnosjö, one of Sweden´s best known industrial districts. The aim and contribution of this paper is to propose and test a model that reflects the relationship between board characteristics, administration and company age on performance. Our results show that number of commitments among board members as well as company age is significant for company performance measured with sales and sales per employee. The support of the model is strong and we believe the results have practical as well as theoretical implications of importance.

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Introduction When managers of entrepreneurial companies typically talk about strategies, they first consider what products to make and secondly where to locate the business. The entrepreneurial companies locate in rural areas because of a wish to maintain a certain lifestyle, or because they can combine a resource available there with certain knowledge or interest that they have (Getz & Nilsson, 2004). In addition, many managers of entrepreneurial companies are confident in locating in a rural area, because there often is economic and social structure supportive of local corporate governance. The most central part of corporate governance is the board of directors. In an entrepreneurial company in a rural area such members of boards most likely are individuals in dominant positions influential in local economy. A board is thus an important forum for entrepreneurial companies to conceive, discuss and establish strategies (Randøy & Goel, 2003). Most boards reflect different combinations of ownership (Chuanrommanee & Swierczek, 2007). Some small entrepreneurial companies have a “paper board”, which consist of the entrepreneur and his/her spouse as well as an auditor. Others use the group dynamics of a board more fully, by including special expertise in combination with a required auditor and minority ownership (Bedard, Chtourou & Courteau, 2004). Finally, there are other constellations where local friendships reflect the board structure (Ingram and Roberts, 2000). We know that social capital in a local setting can be a beneficial force for local companies (Piore & Sabel, 1984). Gnosjöregion is a rural area, known for its entrepreneurial “spirit”, and probably one of the most well known regional clusters in Sweden (Karlsson, Larsson & Wiklund, 1992; Karlsson & Larsson, 1993; Johanisson, 1996). The region is in south Sweden. The local population is known for strong religious traditions and high church attendance, low level of education, strong focus on manufacturing industry, strong local cohesiveness, high level of small family companies and domination of men in the industry (Wigren, 2003). The Gnosjöregion has created many legends and myths that circulate in both academia and practice. Their closeness to each other has created a view that there is an in-group, which makes it difficult for outsiders to become accepted by the locals. One of the arguments heavily highlighted is that membership to any of the local churches will give people entrance to the local structure. This would thus make it rather difficult for individuals in the out-group to enter. Recall that this region is also reporting very high performing small manufacturing companies. For instance the small municipality Gnosjö has less than 10 000 residents and approximately 250 small companies, which makes the density of companies to one of the highest in Sweden. In this town the companies have a total sales of approx. 6 billion SEK (approximately $ 1 billion). This success has also created a heightened awareness in Gnosjö. In their website this is indicated by “the Gnosjö spirituality”, which reflects the professional skills, hard work, economic practice, humbleness, respect, network, cooperation, entrepreneurship, no hierarchy with powerful people, short distances geographically and mentally, flexibility, artfulness and thinking holistically (see www.gnosjo.se). Lately Gnosjö people have become more aware of opportunities in the stimulation of new emerging service industries such as in tourism. This stimulation of new service industries in the region is focused on cooperation between regions of Gnosjö, Gislaved, Vaggeryd and Värnamo. The cooperation is an effort to develop destination management practices for coordinated strategic management of tourism and design of tourism experiences. The cooperation aims for enchanted awareness 2

for destination preference building in national and international markets. Their initiatives are to cooperate in marketing for strong presence e.g. in travel expos and exhibitions, in different events, and in developing a common web portal (www.gnosjoregionen.se) for promotion of the whole region as a tourism destination. Considering what is publicly stated and the stories created and told about this region, one may expect that this networking also would reflect in the existing structures in the region, such as enterprise boards. On the basis of the Gnosjö regional spirit, we would expect high level of cohesiveness among entrepreneurial families and their friends. Therefore, it may be expected that this also should be reflected in the board structures developed in the public limited companies (PLC) in tourism. To explore, elaborate and to test these propositions we designed a model and collected data among the boards of public companies. We collected information about all companies with publicly reported financial information operating in the tourism industry. We found a total of 95 companies having together 379 board members. These companies were examined closely with focus on selected independent variables with possible influence the company performance variations. The research objective was based on following question: Do higher social capital, as indicated by number and efficiency of relations, in combination with company continuity, build and influence performance of the company? In order to propose an answer to this question we depicted a model based on earlier theory on board characteristics (e.g. Kim, 2005). The function of a board First of all, Swedish limited companies are required to have a board, an independent auditor and at least two ordinary members on the board. With the audit included the typical Swedish company board consists of at least three members, two ordinary members and one audit. The auditor can be selected by the company even though they have the function to control that all financial reporting reflect a standardized way to report financial information and that the numbers give a true and fair view of the company (Choi, 1997) . The auditor is typically a very important individual for a small company (Bushong, 1995). Their authority involve control (Bushong, 1995) so that the stakeholders, i.e. the bank, the suppliers, the customers, the employees, the state, the employee organizations, and other organizations (Frooman, 1999) may have confidence in agreements. The auditor is also allowed to work proactively to prepare for new emerging situations and, to use his or her competence to navigate the small company with advice and recommendation out of a situation that may otherwise cause troubles. Companies therefore generally select auditors that operate proactively. It is even likely that companies select an auditor that uses her/his expertise to touch the margins of what is allowed, and may also evaluate the audit and renew his contract based on his performance. An auditor can be very expensive. They can often verify their value because of the expertise they have on tax and experience working with other companies. They have therefore typically gained a very respectful position as the main advisor. The auditor is together with the rest of the board a crucial part of the small companies strategic corporate governance. A board, administration and continuance performance model A literature study on strategies that link entrepreneurship to corporate governance, board characteristics and its relationship to performance was conducted. Our literature search in social citation 3

index from 1945-2008 on “corporate governance” generated 2208 studies in peer reviewed journals. One of the most cited in this area (560 times cited) and relevant to our study was Shleifer & Vishny (1997) offering different directions to conducts studies in this field. Our next search performed on “board characteristics” yielded in 1690 studies and the most cited (111 times cited) work relevant for this study was Johnson, Hoskisson & Hitt, (1993). Their work included an empirical demonstration of a classical regression on performance including ten independent variables reflecting different strategic dimensions as well as seven control variables. Even though this is a rather subjective literature overview it captures the cutting edge of the literature that is published so far on the relevant topics of interest in this study. Table 1 (see appendix) demonstrates how directions of these studies also come out in extant research. Kim suggests that social capital and its effect on performance could be captured by the extent “board members have outside contacts with within an institutional environment” (2005:802). Lefort and Urzúa (2008) explicitly recommend independency of directors, whereas Black, Jang & Kim (2006) demonstrate that the structure is an effect of financing and then what position the company is today. Yet, Randøy & Goel, 2003 point out the important role of founder in corporate governance and Zahra, Neubaum & Huse, 2000 demonstrate the need to differentiate responsibilities so that the chief executive and chairman are not the same individuals. Finally, Wan & Ong (2005) claim that structure does not matter, but that process does on performance. Table 1 also shows a glimpse of the traditions of research design in this area and how different regressions are typically designed. This paper depicts a model that reflects how board characteristics in combination with proper administration and company age can have an effect on performance. This model depicts that social capital measured by number of ties, efficient ties or strong ties, can make companies perform better (Granovetter, 1973; Krachhardt, 1992). Our second assumption is that companies typically use their board of directors to issue different strategic situations. The two first assumptions together form the first postulate for this theory, namely that if a board and social capital are of significant importance for a company, then is also the board reflected by board members with strong relationships to each other. Our next assumption is that companies select the board members exclusively among those that also pursue a strong influence over the operations of the business. Some, of those that knows the business most are the ones that are close to the business either in their products or in local economic sense. These latter arguments are important to interlock boards (Westphal, Seidel & Stewart, 2001). Our next argument is that rural entrepreneurial companies develop their contacts from local friendships, which also reflect their performance (Piore & Sabel, 1984; Saxenian, 1994) especially in industrial districts such as Gnosjöregionen (Johanisson, 1996). Finally we believe that the board (structure) is also sometimes administrative groups which work closely to keep the books clean. Next argument for the model is that the board reflects continuance of working together for a long time, which is reflected by the companies number of years in business (company age) and the average age of the board members. All of this input is considered important to compose a board when it faces different strategic tasks of a company. That said, they select every individual carefully to meet occasionally to discuss sales strategies, market strategies, employment strategies, strategies that concern new administrative control systems, new strategies for location or strategies that concern totally new products. Each strategy may need a new individual with specific competence. 4

Except the strategic role many boards are formed to serve institutional interests, a disciplinary role, a figurehead role, an auditing role or ethical roles (Gabrielsson and Huse, 2005). The roles of member as well as the way members are selected differ. The typical member is part of the owner family, a friend, or a network of specialists who listen to the advice of an auditor. Therefore, we depict a model the core of which is to not neglect the experience of an auditor, but that social capital of auditor are critical for company performance. Similarly, we argue that ordinary board members with many contacts are also important for company performance. In addition we argue that less problems issued by the auditor (i.e. no remarks in the public statement from audit), continuity (company age) and average age of board members will affect the performance of the company. Performance is reflected by two indicators sales and sales per employee. Figure 1

Average age board member

Number of commitments auditor

Ln sales per employee

Number of commitments ordinary members Ln sales Company age

Proper administration Hypothesis H1: There is a positive relationship between the board members average age and sales per employee. H2: There is a positive relationship between the board members average age and sales. H3: There is a positive relationship between number of relationships an auditor has and sales per employee. H4: There is a positive relationship between number of relationships an auditor has and sales. H5: There is a positive relationship between number of relationships an ordinary board member has and sales per employee. H6: There is a positive relationship between number of relationships an ordinary board member has and sales. H7: There is a positive relationship between company age (continuance) and sales per employee. H8: There is a positive relationship between company age (continuance) and sales per employee. 5

H9: There is a positive relationship between proper administration (number of accepted audit statements) and sales per employee. H10: There is a positive relationship between proper administration (number of accepted audit statements) and sales. Dependent variable Performance Performance is one of the more traditional measures in company related studies. Ittner and Larcker (1998) examined many different performance measures and their implications on innovation. Yet, others have focused on market share (Greve 1998) profit share of sales (Audia, Locke and Smith, 2000) assets (Miller and Chen, 2004) investments (Luo, 1997). In corporate governance many have focused on market value, Q-value (Randøy & Goel, 2003; Lefort & Urzúa, 2008) value indexes (Wan & Ong, 2005; Black, Jang, & Kim, 2006) or return on asset (Kim, 2005). Black, Jang, & Kim (2006). This paper reflects performance by examining sales and sales per employee. All sales data were accessible from public sources in Sweden and represent four year mean which we calculated from the years 2003-2006. Independent variables Average age Next we examined average age of the board members. The assumption here is that either seniority or newness would have impact on performance. This assumption is also consistent with earlier theory (Kim, 2005). Number of auditors - clients relationships We downloaded the number of clients an auditor have. This indicator is based on the assumption that more clients would form a basis for creation of stronger social capital formation, which we assume to have a direct influence on performance.

Number of board member contacts We also downloaded number of contacts each ordinary member has. The same assumed logic should be valid in this case, too; i.e. a higher number of contacts in active relationships should enrich the content of stronger ties influencing social capital formation. This should be beneficial for the company, and thus be reflected in the company performance. Company age One way to get a picture of continuance, and some indication of resiliency for that matter, is to look at the age of the company. We share the view as introduced in the model by Kim (2005). The argument in using age of the company as predictor for performance is that long term orientation and resiliency is 6

also beneficial for sustained performance. We therefore examined the number of years the company has been in business as an indicator of continuance. Administration To develop a surrogate of the quality of administration we downloaded number of remarks stated by auditors in their published audits during the years 2003-2006. The assumption here was that “clean” books would also breed performance. The less remarks the more proper administration. Method

This paper uses linear regression to estimate the effects each proposed predictor has on performance (Hair et al, 2006). Linear regression typically estimate what independent variables best predict the value of the dependent variable Sample The sample consist of totally 95 companies selected from a number of national industrial classification (NIC) codes within Gnosjöregionen (www.gnosjoregionen.se) which totally include four municipalities, that is Gnosjö, Gislaved, Vaggeryd and Värnamo (GGVV). The NIC codes used in this study are assumed to reflect tourism and are selected from following main categories: transportation sector (passenger); Housing (e.g. hotels, camps, cottages, etcetera); Food (e.g. restaurant businesses); tourist equipment (e.g. rental of sports equipment); tourism sales bureaus (e.g. travel agents), tourism attractions (e.g. Museum, cultural attractions, historical places, man made attractions (entertainment parks); event and activity providers (e.g. sport and leisure attractions/facilities); peripheral attractions (e.g. shopping business with high likelihood of souvenir business). Details can be provided upon request. All of the selected municipalities GGVV belong to a functional region, which is also considered as a typical countryside area. According to national encyclopedia (www.ne.se) Gislaved have 29 327 residents distributed on 1 143 km2, Gnosjö 9 598 distributed on 423 km2, Vaggeryd has 12 816 inv distributed on 831 km2, finally Värnamo has 32 841 distributed on 1 224 km2. Following guidelines about Swedish geographical classification they typically consider areas with less than 3 000 residents and with a distance of more than 45 minutes in a car as rural. But those are classified as countryside that have 5-45 minutes to a larger city including more than 3 000 inhabitants. Remote country side areas are characterized by distances between households located at least 200 meters from each other, and with fewer than five inhabitants per square kilometer. We therefore consider these as companies inside a remote countryside area. Our example, the GGVV region, has an estimated of 10 households per square kilometer. This would mean that it is approximately more than 100 meters between the households (see Table 2). The sample consist of 95 Swedish limited companies, which means the owner has stocks in the company but the company is in itself authorized to complete agreements and contracts. These companies are also obligated to report about their financial status and to select an auditor which control that the financial information, leadership and other control systems reflect a true and fair view of the company (Choi, 1997). In addition the auditor declares whether or not the principles used to report 7

follow standard principles and practices to report financial information. If these are not followed the auditor will have to declare this as a remark in a public statement. Finally, these companies also have a board in which they can select any member. Typically the board reflects a structure of ownership, the executor (CEO), the audit and his/her assistance. Table 2: Descriptives Gnosjöregion

Gislaved Gnosjö Vaggeryd Värnamo GGVV region

Residents 29327 9598 12816 32841 84582

Area km2 1143 423 831 1224 3621

Residents/ Households/ Households km2 km2 11843 25,7 10,4 3631 22,7 8,6 5087 15,4 6,1 13755 26,8 11,2 34316 23,4 9,5 Source: (www.ne.se; www.dagspress.se)

When looking closely to all members we could say there is totally 379 members. Out of these members 129 are audits, 31 % are female and the average age is 49.45 years. 12 out of the 95 boards were fully dominated by men with no women and one board was dominated with women with no males. Most of the boards were however mixed with men and women. The audits had on average 214 commitments to other boards, the regular board member had 2.95 commitments to other boards outside tourism and including other regions. There was no differences between the characteristics of boards between the four municipalities. Results Results from hypothesis We used AMOS software, because we wanted to run two dependent variables simultaneously. This means we also received an extensive report for the overall model. Following indexes CFI, TLI an IFI exceeded the recommended cut off point of .9 according to (Hair, Black, Babin, Anderson & Tatham, 2006). The model had in total 10 degrees of freedom and a chi square of 12.801 (Chi square/DF=1.280), which also indicate the theoretical model and the sample fit. Typically, AMOS software is used for path analysis or structural equation models, but we used this software in order to run two dv:s. Our test report that hypothesis 1-5 and 9-10 received no support. The remaining hypothesis 6-8 received strong support. Social capital and proper administration has thus no support for sales per employee. Social capital is also of limited importance for sales with the exception of number of commitments from ordinary members which received strong support (H6) on sales (r=.292, p<.005). The most part of the explanatory power in the model instead seem to emerge from company age which exhibit support for both (H7) sales per employee (r=.301, p<.005) and (H8) sales (r=.246, p<.05).

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Table 3: Results Hypothesis Hypothesis H1: Ln sales/employee<---Average age H2: Ln sales<---Average age H3: Ln sales/employee<--- No of commitments audit H4: Ln sales<--- No of commitments audit H5: Ln sales/employee<--- No of commitments ordinary members H6: Ln sales<--- No of commitments ordinary members H7: Ln sales/employee<--- Company age H8: Ln sales<--- Company age H9: Ln sales/employee<--- Proper administration H10: Ln sales<--- Proper administration ** p< .05 *** p< .005

beta .110 -.059 .076 .092 -.079 .292*** .301*** .246** .010 .053

Intepretation Rejected Rejected Rejected Rejected Rejected Supported Supported Supported Rejected Rejected

Discussion This paper asked if social capital, as indicated by number and efficiency of relations, in combination with company age, build and influence performance of a company. Our question was approached by proposing, depicting and testing a model based on earlier theory on board characteristics (e.g. Kim, 2005). The model receives strong support, which indicates that this theory pose a significant status for further testing and purification. Our model included 10 hypotheses. Three hypotheses were significant and supported. Based on our findings, company age seem to seem to strongly predict performance (sales and sales per employees). This message might be of considerable importance since many entrepreneurship and innovation programs focuses more on business start-ups than durable effects companies have on performance. The implication of further studies could be to focus on programs in established companies. Our model also strongly considers characteristics in board of directors. Among these characteristics we expected first that average age as a measurement of diversity would have an effect on performance, which was not true in our case. Next, we expected that the auditors‟ social capital (i.e. number of commitments) affected performance. But, auditors‟ social capital was of a limited importance. But network characteristics of ordinary members (i.e. number of commitments of ordinary members) seem to influence sales. There is lot of variety in our sample in terms of how boards are formed. One implication could thus be that companies may consider hiring external expertise to its board. Our results were tested in the context of Gnosjöregion, known for its strong social capital. It is therefore somewhat surprising that tourism companies did not have the strong social overlaps as we expected to find on the basis of earlier studies. We may consider this finding a hypothesis for further comparative longitudinal studies. There is a need to elaborate the concept of social capital in comparative settings and in different cultures, to elaborate the model further, and to test for possible contextual and methodological influences on the structural validity.

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References Audia, P. G., Locke, E. A., & Smith, K. G. (2000) The paradox of success: An archival and a laboratory study of strategic persistence following radical environmental change. Academy of Management Journal, 43 (5): pp. 837-853. Bedard, J., Chtourou, S. M. & Courteau, L. (2004). The effect of audit committee expertise, independence, and activity on aggressive earnings management, Auditing – A Journal of Practice & Theory, 23 (2): 13-35. Black, B. S., Jang. H. & Kim, W. (2006). Predicting firms‟ corporate governance choices: Evidence from Korea, Journal of Corporate Finance, 12 (3): 660– 691 Bushong, J. G. (1995) Accounting and auditing of small business. (New York: Garland Publishing Inc). Choi, F. D. S. (1997). International accounting and financial handbook. New York: John Wiley & Sons. Chuanrommanee, W. & Swierczek, F. W. (2007). Corporate governance in ASEAN financial corporations: Reality or illusion? Corporate Governance An International Review, 15 (2): 272-283. Frooman, J. (1999). Stakeholder influence strategies. Academy of Management Review, Vol. 24, No. 2, pp. 191-205. Gabrielsson, J. & Huse, M. (2005). “Outside” directors in SME boards: a call for theoretical reflections, Corporate board: roles, duties and composition, 1(1):28-37. Getz, D. & Nilsson, P-Å. (2004).Responses of family businesses to extreme seasonality in demand: the case of Bornholm, Denmark, Tourism Management, 26 (1): 17-30. Granovetter, M. 1973. The strength of weak ties. American Journal of Sociology, 6: 1360- 1380. Greve, H. R. (1998). Performance, aspirations, and risky organizational change. Administrative Science Quarterly, 43: 58-77. Hageback, C. & Segerstedt, A. (2004). The need for co-distribution in rural areas: A study of Pajala in Sweden. International Journal of Production Economics, 89: 153-163. Hair, J F., Black, B., Babin, B., Anderson, R. E. & Tatham, R L. 2006. Multivariate data analysis. 6th ed. (London: Prentice-Hall). Ibarra, H. (1993). Personal Networks of Women and Minorities in Management: A Conceptual Framework, Academy of Management Review, 18 (1): 56-87 Ingram P. & Roberts, P. W. (2000). Friendships among Competitors in the Sydney Hotel Industry, American Journal of Sociology, 106 (2): 387–423. Ittner, C. D., & Larcker. D. F. (1998), Innovations in performance measurements: Trends and research implications. Journal of Management Accounting Research, 205-238. Johannisson, B. (1996), „Personliga nätverk som kraftkälla i företagandet.‟ In Johannisson, B. & Lindmark, L., „Företag, Företagare, Företagsamhet‟. (Lund: Studentlitteratur). Johnson, R. A., Hoskisson, R. E. & Hitt M. A. (1993). Board of Director Involvement in Restructuring: The Effects of Board Versus Managerial Controls and Characteristics, Strategic Management Journal, 14, (Special Issue: Corporate Restructuring) 33-50. Karlsson, C., Larsson, J. & Wiklund, J. (1992). Gnosjöfenomenet, (Stockholm: Allmänna Förlaget). Karlsson, C. & Larsson, J. (1993). A macro-view of the Gnosjö spirit. Entrepreneurship & Regional Development, 5 (2): 117-140. 10

Kim, Y. (2005). Board network characteristics and firm performance in Korea. Corporate Governance: An International Review, Vol. 13, No. 6, pp. 800-808. Krackhardt, D. (1992) "The Strength of Strong Ties: The Importance of Philos in Organizations." In N. Nohria & R. Eccles (eds.), Networks and Organizations: Structure, Form,and Action: 216239. Boston, MA: Harvard Business School Press. Lefort, F. & Urzúa, F. (2008). Board independence, firm performance and ownership concentration: Evidence from Chile, 61 (6): 615-622 Luo, Y. (1997). Partner selection and venturing success: The case of joint ventures with firms in the people‟s republic of China. Organization Science, 8 (6): 648-662. Miller, K. D., & Chen, W-R. (2004). Variable organizational risk preferences: Tests of the MarchShapira model. Academy of Management Journal, 47: 105-116. Piore, M.J. and Sabel, C.F. (1984). The Second Industrial Divide: Possibilities for Prosperity. (New York: Basic Books). Randøy, T. & Goel, S. (2003). Ownership structure, founder leadership, and performance in Norwegian SMEs: implications for financing entrepreneurial opportunities, Journal of Business Venturing, 18 (5): 619-637. Saxenian, A. (1994). „Regional Advantage: Culture and Competition in Silicon Valley and Route 128‟, (Cambridge, MA: Harvard University Press). Shleifer, A. & Vishny, R. W. (1997). A Survey of Corporate Governance, The Journal of Finance, 52 (2): 737-783 Westphal, J. D., Seidel M-D. L., & Stewart K. J. (2001). Second-order Imitation: Uncovering Latent Effects of Board Network Ties, Administrative Science Quarterly, 46: 717-747 Wigren, C. (2003). The spirit of Gnosjö: The grand narrative and beyond (JIBS Dissertation Series No. 017). Jönköping, Sweden: Jönköping International Business School. Other sources www.dagspress.se www.gnosjo.se www.gnosjoregionen.se www.ne.se

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Archival sources (annual reports)

Archival sources

Randøy & Goel, 2003

Kim, 2005

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Secondary data and survey

Zahra, Neubaum & Huse, 2000

Founder leadership in large public firms in Norway

Large publicly traded firms in Korea

204 Norwegian firms

4000 different board members during 10 years in.

One dependent variable: (1) Return on assets

Two dependent variables: Q-value (ratio of market value equity to book value of liabilities)

U.S manufacturing firms and second senior executives in each firm

239 medium sized firms and responses from 94 executives

Four dependent variables: of corporate entrepreneurship: (1) product innovation; (2) process innovation; (3) organizational motivation; (4) domestic venturing; (5) international venturing

Four independent variables: (1) Density (proportion of links relative to possible ties); (2) Square of network density; (3) degrees from elite institution (graduated from top schools; (4) membership in economic association.

Four independent variables: (1) Founder leadership; (2) board inside ownership; (3) Blockholder ownership; (4) foreign ownership

(1) executive ownership; (2) ownership by pension funds; (3) ownership by insurance companies; (4) ownership private companies; (5) board size; (6) board size squared; (6) outsiders ratio; (7) outsider director stock; (8) CEO and chair separated; (9) technological opportunities; (10) past ROA; (11) company size; (12) company age

Table 1: Literature overview of three selected studies recently published and targeting boards with regression analysis Unit/level of Author Data access Sample analysis Dependent variable Independent variables

Nine controls tested ( 1) lagged ROA; (2) age of firm; (3) log assets; (4) depth to equity ratio; (5) board age, (6) affiliation dummy; (7) board education level; (8) board average age; (9) board size

Interaction variables tested: (1) Founder leadership x board inside ownership; (2) Founder leadership x Blockholder leadership; (3) Founder leadership x Foreign leadership.

Four controls tested: (1) Firm size; (2) Firm age; (3) depth of total assets.

Controls – interaction variables

Dense and cohesive networks at boards can add value to corporations (Kim, 2005:806). In addition external capital have an effect on performance.

“Founder led firms can exploit their low agency cost status to use their board and insiders for strategic purposes” (Randøy & Goel, 2003:634).

Findings “Corporate entrepreneurship is high when: (1) executives own stock in their own company; (2)the board and chief executive are different individuals; (3) the board is medium sized; (4) outside directors own stock in the company” (Zahra, Neubaum & Huse, 2000: 947)

Survey (sample 424 firms).

Survey with 39 different governance elements

National database

Wan & Ong, 2005

Black, Jang, & Kim, 2006

Lefort & Urzúa, 2008

Four year 160 company panel data in Chile.

453 large firms

212 firms and 299 directors. Self reported responses on board structure (controls) board process (summated scales) and board performance (self reported data).

Large firms in Chile

Large firms in Korea

Large firms in Singapore

“Proportion of independent directors affects companies‟ value” (Lefort & Urzúa 2008:621).

Three control variables: (1) firm size; (2) no/yes association to fair trade association; (3) financial

Two groups of controls A and B: (A1) ownership concentration; (A2) degree of coincidence; (A3) group affiliation; incentive program; (B1) firm size; leverage; weekly returns; industry; time dummies. Five independent variables: (1) Proportion of independent directors; (2) proportion of professional directors; (3) proportion of outside directors; (4) board size; (5) external financial needs.

Company value index (KCGI)

Two dependents tested: Tobins Q (ratio of market value equity to book value of liabilities) and Return on assets

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The conclusions section present following that “larger firms are better governed”…”riskier firms are better governed”…”more profitable firms are worse governed”…”firms with higher equity finance need are better governed” (Black, Jang & Kim, 2006:690).

(1) Assets; (2) sales growth; (3) profitability; (4) equity finance need; (5) sole ownership; (6) chaebol, which is part of a fair business association in Korea; (7) leverage, which is a ratio of depth to market value; (8) firm age; (9) market share; (10) ratio of exports to sales; (11) ratio of capital expenditure to sales; (12) ration of aadvertising to sales; (13) ratio of property, plant and equipment to sales; (14) asset size; (15) bank dummy

"Board structure does not matter, while board process does. Board structure does not influence board process or board performance" (Wan & Ong, 2005: 285).

Four independent variables: (1) effort norms (five item scale); (2) Cognitive conflict (five items); (3) Affective process conflict; (4) Knowledge and skills

Two dependent variables. (1) Monitoring scale which seeks their ability to fully pursue their professional role (10 items); An index which seeks transparency of company to public.

Two groups of controls A and B: (A1) Board size; (A2) Industry; (A3) Market; (A4) Revenue; (B1) Chairman duality; (B2) Number of non executive directors (NED); (B3) Proportion of NED; (B4) Number of independent directors; (B5) Proportion of independent directors.

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Bürokratiebelastung und KMU (Red Tape and SMEs)

Hans Jobst Pleitner, St. Gallen1 Abstract The workload imposed by generally rampant bureaucracy on small and medium-sized enterprises in particular is gradually assuming proportions that are a threat to their survival. If entrepreneurs overburdened by red tape physically attack government inspectors (as has happened not long ago in the Canton of St.Gallen), then this is not merely a provincial farce; rather, it is a signal that the amount of red tape has reached proportions that those who are affected do not only regard as painful, but as ruinous bullying. Be that as it may: it appears to be only too justified that red tape has become the object of a counter-movement. Paradoxically, it is small countries that have taken up the cudgels against bureaucratic encumbrance; they seem to be more successful in this respect than the larger countries and the EU, where the reduction of red tape would be more necessary. Lists of measures include perfectly feasible, often quite obvious ones, such as attention to better comprehensibility, simplification, reduction in periodicity, coordination between related duties, abolition of redundant rules, waiver of implausible or unproductive regulations, exemption from obligations that make little sense, centralisation of contact offices, reduced fees, improved services, electronic procedures, reduction in special cases, relinquishment of unnecessary perfection, and provision of better information to addressees. Such a list touches upon items that may be trivial but of which no one would need to be ashamed if they were made leaner or eliminated to reduce the encumbrance of those who are affected by them today. At the same time, the latter themselves have an opportunity to reduce the weight on their shoulders with the help of organisational measures such as outsourcing or cooperation. Circles concerned with job preservation are apt to put forward the argument that an excessively resolute reduction in red tape would constitute a threat to the jobs of those who cope with bureaucratic encumbrances. Yet, as Mugler said with as much justification as wryness many years ago, this phenomenon of freeing up capacities and reducing the payroll of administrative staff would be ―somewhat rare‖ and of a limited extent in SMEs themselves (Mugler, 1987, p. 9). Indeed, much would be achieved if the excessive strain placed on resources were no longer constantly increased. In any case, it is evident that the desired reduction in red tape is unlikely to come about without resistance and that bureaucratic encumbrance will never be completely eliminated: our highly complex world no longer admits of a simple life. The creators of standards are fond of their creations because these safeguard their own income and status. Moreover, inertia is an obstacle to change in this field, too. Any attempts to reduce red tape will produce more red tape. We have been expelled from paradise, but ―under the bottom line‖ much can be done to make the lives of the victims of bureaucracy more bearable than they are today. ___________ 1

Ich danke Margrit Habersaat und Irene Müller für die Assistenz.

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I. Ausgangslage Die kleinen und mittleren Unternehmen (KMU) erfreuen sich durchwegs eines guten Rufs in unserer Gesellschaft als flexible Anbieter von Leistungen und Arbeitsplätzen, als überschaubare Gebilde mit menschlichem Antlitz und humanen Arbeitsbedingungen, als Gegengewichte zu mächtigen, anonymen Konzernen. Gelegentliche Negativmeldungen (mangelnde Einhaltung von Vereinbarungen nach außen, Hang zu patriarchalischem Gehabe nach innen) trüben dieses vorteilhafte Image nicht nachhaltig. Der interessierten Öffentlichkeit ist es daher nicht gleichgültig, wenn die KMU durch ungünstige Rahmenbedingungen unverdient zu leiden haben. Und erst recht gilt das für die unternehmerisch und die mitarbeitend tätigen Menschen in den KMU selbst. Als eine der besonders schmerzlichen Erschwerungen gilt die Belastung der Unternehmen durch bürokratische Anforderungen, wie sie von öffentlichen Institutionen ausgehen. Öffentliche Instanzen sind hier angesprochen, weil sich der einzelne Unternehmer ihnen in der Regel nicht entziehen kann. Vielleicht hat dadurch der Begriff der „Bürokratie― eine negative Konnotation erhalten, die ursprünglich nicht mit ihm verbunden wurde, wie zum Beispiel bei Ludwig von Mises (1997, S. 56ff.) und Max Weber (1999, S. 650ff.) nachgelesen werden kann. Möglicherweise haben auch überzogene „generell geordnete behördliche― (Max Weber) Maßnahmen das Phänomen der Bürokratie in Verruf gebracht. Mit anderen Worten wird der öffentliche Regelungswille bei den Adressaten (namentlich den mittelständischen Unternehmern) weitherum als übertrieben, gelegentlich als pervertiert empfunden. Die harsche Beurteilung ergibt sich daraus, dass bürokratische Auflagen von seiten öffentlicher Instanzen in den davon betroffenen Unternehmungen Kosten verursachen, ohne dass damit konkret oder überhaupt Erträge generiert werden: Weder Entschädigung noch Überwälzung kommen in Betracht (SGV, 2004, S. 3). Andererseits sind die Kosten unausweichlich, weil die Quellen der Auflagen Normen des Gesetzgebers oder der Verwaltung darstellen (Schorn, 2006, S. 3). Sie ergeben sich vor allem aus dem zu erbringenden Zeitaufwand, um sich zu informieren, um die Auflagen betrieblich zu erfüllen sowie um ständig eine Auskunftsbereitschaft gegenüber dem Staat vorzuhalten. Dabei bedeuten die zu produzierenden Leistungen keine konkrete, verlässliche Größe, sondern zeigen – zumindest (aber nicht nur) in der Wahrnehmung der Betroffenen – die Tendenz ständiger Zunahme. So sind nach einer Einschätzung des schweizerischen KMU-Verbandes zwei Drittel der bürokratischen Vorschriften weniger als 20 Jahre alt (SGV, 2004, S. 3). Soweit die Bürokratiepraxis Missstände darstellt, wären die Behörden seit Jahren gefordert, Verbesserungsmaßnahmen vorzusehen. Die Geschichte solcher Maßnahmen ist freilich noch nicht lang. Zunächst fällt dem Betrachter auf, dass die fraglichen Instanzen von jeher Begriffe wie Bürokratie und Bürokratiekosten meiden und stattdessen von Regeln und Regulierung sprechen, was den davon Betroffenen besser in den Ohren klingen mag, aber ihnen nicht hilft. Für unsere Erörterungen verwenden wir beide Begriffskomplexe. Wann ist die Diskussion um die Bürokratiebelastung in Gang gekommen: Während die Belastung von Untertanen mit Steuern, Abgaben, Zöllen u.ä. durch eine staatliche Obrigkeit in frühe Epochen der Menschheitsgeschichte zurückreicht und sich die so Belegten schließlich damit arrangiert haben, begann die Diskussion um die Verpflichtung von strapazierten Individuen und Unternehmungen durch den Staat zu zusätzlichen Leistungen systematisch erst im letzten Viertel des vergangenen Jahrhunderts (z.B. Rall/Wied-Nebbeling, 1975; US Small Business Administration, 1980, Nijsen, 2006). Eine erste empirische Studie für die Schweiz (Hunkeler) erschien 1985 am Gewerbeinstitut (heute KMU2

Institut) der Universität St. Gallen. Sie wies damals aus, dass ein mittelständischer Unternehmer für die Erledigung administrativer Arbeiten infolge öffentlicher Vorschriften im Monat durchschnittlich 30 Stunden aufwenden musste (Hunkeler, 1985, S. 145), also mehr als eine halbe Arbeitswoche. Dieses Ergebnis löste beträchtliches Aufsehen aus und verband sich mit dem Postulat an die Adresse von Verwaltung und Politik, energisch an den Abbau dieser Behinderung heranzugehen. Das geschah jedoch nicht. Im Gegenteil nahm die Regelungsdichte weiter zu, so dass 1997 eine Folgeuntersuchung fällig wurde (Müller, 1998). Ergebnis: Die Belastung erreichte in der Schweiz 55 Stunden pro Monat und Unternehmen, also fast eine Verdoppelung in nur zwölf Jahren (Müller, 1998, S. 82). Zum Vergleich wurde die Studie auf Deutschland und Österreich ausgedehnt und ergab dort sogar je rund 120 Stunden. In Geldeinheiten und auf die gesamte Volkswirtschaft hochgerechnet, erreichen solche Aufwendungen in Deutschland gegen 50 Mrd. € pro Jahr (für 2004 ermittelte das Institut für Mittelstandsforschung Bonn 46 Mrd. €; IfM, 2006, S. 3). Angesichts des Gewichts dieser Belastung ist zu betonen, dass sie für KMU relativ bis zu zehnmal größer ist als für Großunternehmen, weil sie im Wesentlichen einen fixen Charakter hat (Europäische Kommission, 2007a, S. 1). In dieser Situation ist nun eine weitere Verschleppung des Themas Bürokratiebelastung, namentlich der KMU, durch Politiker und Regierungen nicht mehr hinnehmbar. In der Tat beginnen die teilweise dramatisch anmutenden Ergebnisse in jüngster Zeit Früchte zu tragen, zumal Fachleute sich seit Jahren darüber Gedanken machen, wie sich dem Problem (der Messung und der Reduktion) adäquat beikommen lässt, so dass die Phase einer Konkretisierung über politische Deklamationen hinaus mittlerweile erreicht worden ist. Pionierarbeit wurde dazu in den Niederlanden geleistet, wo die Bürokratiekostenmessung dem Bürokratiekostenabbau voranging. Nijsen entwickelte noch in den 90er Jahren ein „Standardkostenmodell― (SKM), das die Quantifizierung des Regulierungsaufwandes präzise ermöglicht. Sie bedeutet natürlich per se noch keine Reduktion, hat aber zusammen mit flankierenden Maßnahmen gewirkt und in der Politik und Regierung einen Bewusstseinswandel hervorgerufen, der schon um die Jahrtausendwende über einen Zeitraum von acht Jahren eine Senkung der Bürokratiekosten um immerhin gut 6% auslöste (als Ziel wurde nunmehr 25% bis Ende 2007 angepeilt; Nijsen, 2006, S. 7; Frick/ Brinkmann/Ernst, 2005, S. 28ff.). Inzwischen wird das SKM in etlichen EU-Ländern eingesetzt oder eingeführt. II. Ursachenkonstellation und Arten regulatorischer Lasten Wer namentlich als Unternehmer den Eindruck gewinnt, die Regulierung wuchere trotz begonnener Dämpfungsanstrengungen einstweilen weiter, sollte sich Rechenschaft darüber geben, dass die dadurch hervorgerufene objektive Belastung weniger gewichtig sein mag als die ―gefühlte― Belastung (Karpen, 2006, S. 19). Dass die Lasten real massiv zugenommen haben, scheint aber außer Frage zu stehen. So wird aus Deutschland berichtet, die Anzahl der Gesetze sei in den sieben Jahren vor 2005 um 33%, die der Verordnungen gar um 66% vermehrt worden (Fuchs, 2005, S. 7). Selbst wenn das Nachbarland diesbezüglich einen besonders krassen Fall darstellt (Fuchs, 2005, S. 9), darf übergreifend davon ausgegangen werden, dass die Pflanze Regulierung sich eines überaus ausgeprägten Wachstums erfreut (dabei resultiert die Zunahme nicht nur aus der puren Anzahl an Gesetzen und Verordnungen, sondern auch aus der Art und Weise ihrer Umsetzung durch die Exekutive), und das 3

auf einem bereits hohen Niveau. So berichtet eine Studie der OECD schon 2001 für elf Länder, die Bürokratiebelastung („Red Tape―) erreiche mittlerweile 4% des Umsatzes der betroffenen Unternehmungen (OECD, 2001). Damit allein drohen viele Firmen rechnerisch unter die Rentabilitätsgrenze abzusinken. Die Ursachen für diese bedrohlich zunehmende Belastung sind indessen nicht einfach bei regulierungswütigen Gesetzgebern oder Regierungs- bzw. Verwaltungsfunktionären zu suchen. Sie „produzieren― ja die Belastung, können sich aber auf ihren Auftrag berufen (der durchaus auch auf die später Belasteten zurückgehen kann). Bei ihnen darf zumeist unterstellt werden, dass sie guten Willens sind, dass es ihnen aber an Augenmaß oder an einer übergeordneten Abstimmungsperspektive fehlt, wenn es an die Umsetzung geht. Die Plage übermäßiger bürokratischer Regulierungen hat also tiefere bzw. breiter gestreute Ursachen. So folgt die skizzierte Zunahme der Gesetze und Verordnungen keinem Automatismus im Sinne eines Selbstläufers, sondern ist generiert durch eine Zunahme von Ansprüchen und Aufgaben unserer Gesellschaft, die durch Gesetzgebung und Verwaltung kanalisiert werden. Diese wiederum ist eine Folge von Einflüssen aus unterschiedlichen Richtungen, unterschiedlicher Qualität und in unterschiedlicher Intensität. Die Skala der Quellen dieser Einflüsse reicht von Internationalisierung/Globalisierung, den demographischen Verschiebungen, dem veränderten Werte-Kanon, dem Klimawandel, der technischen Hochentwicklung bis zu neuen Sicherheitsbedürfnissen. Es geht nicht mehr nur um isolierte neue Einflüsse, es geht um eine völlig neue Einflusskonstellation. Alle diese Veränderungen, so schlagwortartig sie auch klingen, wirken sich bis in die Unternehmungen aus, auch die KMU. Die öffentliche Hand sieht sich ihrerseits vor gigantischen Regelungsaufgaben in einer Welt, die noch nie so komplex und so schnelllebig war. Umso heftiger bemühen sich Gesetzgeber, Regierung und Verwaltung um Rechtsklarheit, Entscheidungssicherheit und Risikobegrenzung. Diese Anstrengungen generieren eine Vervielfachung der Normen, wie wir sie oben angesprochen haben, und zwar umso ausgeprägter, je größer der Drang nach Perfektion bei den Normproduzenten ist. Ohne situativ adäquate Regeln andererseits droht Chaos. Pointiert ausgedrückt, stecken wir also in einem Dilemma, entweder in überzogener Regulierung zu ersticken oder in unbewältigtem Chaos zu ertrinken. Eine Lösung besteht offenbar einzig darin, die sich durch die skizzierten Entwicklungen aufdrängende Regulierung so auszugestalten und so zu dimensionieren, dass die Betroffenen, in unserem Falle die KMU, in ihrer Entfaltung nicht bedrohlich behindert werden und doch eine einigermassen funktionierende Wirtschaftsordnung gewährleistet bleibt. Diese Formulierung stellt keine Überspitzung mehr dar, kann doch kein Zweifel daran bestehen, dass Dynamik und Wachstum der Unternehmen und die Schaffung neuer Arbeitsplätze durch wuchernde administrative Belastungen gehemmt werden (IfM, 2006, S. 1). Angesichts dieser Tatsache war es überfällig, dass in einzelnen westeuropäischen Ländern Anstrengungen zum Abbau der Bürokratielasten angelaufen sind und dass dieses Anliegen nach den ersten Erfolgsberichten in der EU auf breiter Front in Gang kommt. Bevor wir uns mit den Zielen und der Realisierung von Entlastungsprogrammen beschäftigen, sei etwas näher erläutert, um was es bei den Bürokratielasten geht. Sinnvoll sind zwei Arten auseinanderzuhalten (Schweizerischer Bundesrat, 2006, S. 9; Europäische Kommission, 2007b, S. 2; SGV, 2004, S. 2): Zum einen ergeben sich aus der Regulierung administrative Kosten im Zusammenhang der Beschaffung, Lieferung und Speicherung (Dokumentation) von Informationen, des Ausfüllens von For4

mularen, der Abwicklung von Kontrollen usw. Dabei ist der Begriff „Informationen― weit definiert und umfasst auch die Vorkehrungen zu ihrer speziellen Ermittlung, wenn die Unternehmen noch nicht darüber verfügen. Zum anderen resultieren aus der Regulierung substanzielle Kosten, die für konkrete Sicherheitsoder Hygienemaßnahmen anfallen, z.B. Schutzhelme oder -schuhe, aber auch Kosten aus der Verpflichtung von Unternehmen, Produkte und/oder Produktionsprozesse an neue Vorgaben anzupassen. Das sagt sich leicht, kann aber erhebliche Aufwendungen bedeuten, z.B. in Form zusätzlicher Investitionen. Solche Kosten werden auch als Einhaltungskosten bezeichnet (Einhaltung neuer Vorschriften infolge der Regulierung). Um vollständig zu sein, sind auch Opportunitätskosten aufzuführen, die entstehen, wenn durch Regulierung der Handlungsspielraum der Unternehmen eingeengt wird und dadurch Gelegenheiten verpasst werden, z.B. Unterbindung eines Marktzugangs durch Regulierung (Brunetti/Scheidegger, 2006, S. 5). III. Ziele und Umsetzung eines Abbaus der regulatorischen Lasten Angesichts der bis jetzt skizzierten Überlegungen und Beobachtungen scheint die Zielsetzung im Kontext der Bürokratiebelastung recht einfach zu sein: Eine radikale Reduktion tut not. Wir haben aber bereits darauf hingewiesen, dass die Regulierung eine Aufgabe zwischen Szylla und Charybdis darstellt. In dieser Konstellation kommt ein uneingeschränkter Allround-Abbau bestehender Regelungen offenbar nicht in Betracht. Die angemessene Ordnung des Gesamtsystems muss vielmehr im Sinne einer Optimierung zwischen den beiden zu „zähmenden― gegenläufig wirkenden Größen „Erstickung― (von Aktivitäten durch Überregulierung) und „Ertränkung― (von Handlungen im Chaos durch mangelnde Regulierung) geschehen, wenn wir im oben strapazierten Bild bleiben wollen. Hier wird die Aufgabe der adäquaten Bemessung des Gesamtrasters der Regelungen in einer Wirtschaft zu einem subtil auszubalancierenden Komplex und damit zu einer permanenten politischen Herausforderung, von der nota bene nicht nur die Unternehmungen betroffen sind. Der Verfasser erlebte hierzu soeben ein handgreifliches Beispiel: Für die Erstellung einer neuen Identitätskarte durch die Wohngemeinde (wegen zeitbedingten Ablaufs der alten) erhält er eine fünfseitige Anleitung zur Vorbereitung und Einreichung des betreffenden Antrags (noch ohne das Antragsformular selber), mit 36 Beispielen, wie die Fotografie aussehen muss bzw. auf keinen Fall aussehen darf. Führungskräfte in kleineren Unternehmen, die sich mangels spezialisierter Stäbe selber mit den Auswirkungen der öffentlichen Regulierung auseinandersetzen müssen, können dem Betrachter jederzeit eine umfassende Auswahl bürokratischer Exempel vorführen, und zwar namentlich solcher, die mit erheblichem Erfüllungsaufwand verbunden sind und so über das Amüsierpotenzial des obigen Beispiels hinausführen. Wenn wir hier die Perspektive der KMU nachvollziehen, drängt sich daher eine Verschiebung von der oben angesprochenen Optimierung zur Minimierung des Regelwerks auf, d.h. ökonomisch der Verminderung des Regelinputs unter Beibehaltung der unverzichtbaren Normenordnung. Dieses Postulat drängt sich auch deswegen auf, weil es den betroffenen Unternehmungen nicht viel nutzen würde, bei Unzufriedenheit wegen der Bürokratiebelastung in ein anderes Land auszuweichen: Sie würden dort vergleichbare Verhältnisse antreffen und bestenfalls eine graduelle Entlastung erreichen.

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Das Gewicht der Bürokratielasten, die von den öffentlichen Organen und ihren (wiewohl zumeist gutgemeinten) Aktivitäten ausgeht, stellt also eine schwere Bürde für die Unternehmen dar, und zwar eine Bürde, die sie, absolut gesehen, alle vergleichbar schwer trifft. Pro Mitarbeiter sind die Lasten somit umso größer, je kleiner die einzelne Unternehmung ist. Daher scheinen die KMU in ganz besonderem Maße darauf angewiesen, eine Erleichterung zu erfahren. Diese Botschaft, verbreitet durch KMU-nahe Institutionen, hat sich nunmehr während der letzten Jahre in Politik und Regierungskreisen der entwickelten Länder (sprich der OECD-Länder) herumgesprochen und konkrete Versuche ausgelöst, die Belastung erträglicher zu gestalten. Die eingeleiteten Anstrengungen werden dadurch betont, dass mit ihrem Anstoß vorzeigbare quantitative Zielgrößen angekündigt wurden. So strebt zum Beispiel das Aktionsprogramm „Vereinfachung des unternehmerischen Alltags – Maßnahmen zur administrativen Entlastung und Erleichterung der Regulierung― der schweizerischen Bundesregierung eine Entlastung von gut 14% an (Schweizerischer Bundesrat, 2006, Ankündigung; S. 7). Für Deutschland könnte gemäß dem Institut für Mittelstandsforschung „sehr schnell― eine Entlastung der Wirtschaft von Bürokratiekosten um „mindestens 15%― erreicht werden (IfM, 2006, S. 3). Die EU-Kommission hat sich gar „verpflichtet, die administrative Belastung […] um 25% abzusenken―. Sie rechnet damit aber bis zum Jahr 2012 (Verheugen, 2007, S. 12; European Commission, 2008). Die österreichische Regierung setzt dieses Ziel bereits für 2010 (Österreichische Bundesregierung, 2007, S. 1). So weit ein paar Beispiele für großzügig angekündigte Entlastungsambitionen (wobei die Zielkomplexe materiell nicht einheitlich erscheinen). Im Folgenden wollen wir skizzenhaft versuchen aufzuzeigen, durch welche Art Maßnahmen der besagte Abbau der Bürokratielasten realisiert werden soll bzw. bereits vorgenommen wird. Es geht dabei um nicht weniger als einen „whole-of-government approach […] embedding administrative simplification in the overall regulatory […] system at the national level― (OECD, 2006, S. 1). Das „Regulatory System― lässt grundsätzlich drei Arten von Erleichterungen zu: Entlastungen bei der Ausführung bestehender Regeln, z.B. Verringerung der Periodizität von zu liefernden Berichten, Dekomplizierung von Formularen, Verbesserung / Neufassung bestehender Regeln zugunsten der Vereinfachung ihrer Handhabung, Verzicht auf neue Regeln im Interesse der Vermeidung weiterer Belastung für ihre Adressaten (Brunetti/Scheidegger, 2006, S. 4; OECD, 2006, S. 1; IfM, 2006, S. 3). Es liegt auf der Hand, dass im politischen Meinungs- und Normenbildungsprozess mit jeder Variantenstufe die Durchsetzung von Entlastungsimpulsen schwieriger wird, weil je nach politischem Lager diejenigen Normen befürwortet werden, die die Abbau-Apologeten eliminieren oder vermeiden möchten. Angesichts dieser Schwierigkeit wurde schon in den 90er Jahren – in den Niederlanden – der oben bereits erwähnte Vorschlag gemacht und umgesetzt, vor der Entscheidung über Einführung neuer oder Abschaffung bestehender Normen zunächst einmal überhaupt zu messen, welche Regeln welche quantitativen Effekte generieren, um die nur „gefühlten― Bürokratiekosten zu überwinden. Damit wird zwar noch nicht systematisch eine Entlastung erreicht, ist aber als Nebenwirkung eines sorgfältigen Messprocederes durchaus möglich, wie jeder Fachmann aus beliebigen (auch betriebswirtschaftlichen) Gebieten bestätigen kann. Ein positiver Effekt ergibt sich allein schon aus dem Zwang, standardisierte Begriffe zu verwenden (Nijsen/Frick, 2006, S. 15). Nijsen hat sein Messverfahren zu einem Standard6

Kosten-Modell (SKM) entwickelt, das heute international anerkannt ist und in vielen Ländern, namentlich der EU, eingesetzt wird. Die Ergebnisse der SKM-Erhebungen haben buchstäblich maßgebend Transparenz zur Erarbeitung von Reduktionsvorschlägen in Sachen Bürokratielasten geschaffen. Sie waren freilich ein Stück weit durch zusätzliche Erhebungen in den Unternehmungen zu „erkaufen― und stellen insofern einen Wurf mit der Wurst nach der Speckseite dar. An dieser Stelle kann und muss nicht auf Einzelheiten des Modells eingegangen werden. Seine weite Verbreitung spricht aber für die Brauchbarkeit und Sinnhaftigkeit im Einsatz für unser thematisches Anliegen. Das gilt wohl ebenso für die Tatsache, dass mittlerweile ein weiteres Konzept dieser Ausrichtung entwickelt worden ist, das Informationsverpflichtungen von Unternehmen auch gegenüber privaten Dritten umfasst und die Bürokratiebelastung auch z.B. bei Bürgern messen soll (Rösener/Precht/Damkowski, 2007, S. 9). Es handelt sich um ein eigenes Kosten-Modell der EU, dessen genauer Titel noch nicht festzustehen scheint und das in der Literatur einstweilen als „EU-K-M― bezeichnet wird. Es verfügt aber nicht über die Akzeptanz und Verbreitung des von der OECD empfohlenen SKM (Frick/Brinkmann/Ernst, 2006, S. 28; Rösener/ Precht/Damkowski, 2007, S. 86) und soll hier nicht weiter betrachtet werden. Die Niederländer werden inzwischen ihrer Vorreiter-Rolle bezüglich der Versuche zur BürokratieEntlastung weiterhin gerecht. Zum einen verwenden sie für Komplexe, die der präzisen, detaillierten Messung (noch) nicht zugänglich sind, oder für rasch benötigte Ergebnisse ein speziell entwickeltes Schätzverfahren („Quick Scan―; Nijsen/Frick, 2006, S. 16). Auch hier geht es also um eine Quantifizierung von Regulierungskosten. Fällig bleiben damit zum anderen gezielte Schritte zur Reduktion dieser Kosten, bedeutet doch die blosse Ermittlung (Berechnung oder Abschätzung) zunächst nur – in günstigen Fällen – einen Abbau als Nebeneffekt. Der Abbau stellt aber das Oberziel dar, getreu dem (abgewandelten) Zitat von Keynes, wonach die Vermeidung von Bürokratie-Aufwand die einzige administrative Beschäftigung ist, die Geld bringt. Eine erste Messung, besser Schätzung der Bürokratiekosten in den Niederlanden ergab einen so hohen Betrag (6 Mrd. €), dass sich in der Regierung die Einsicht zu konkreten Maßnahmen rasch einstellte. Der Regierungschef verpflichtete die Ministerien, jährlich Pläne zur Reduktion vorzulegen und durchzusetzen, mit dem Ziel einer Reduktion von 10% in den folgenden vier Jahren. Die eingeleiteten Maßnahmen generierten allerdings in der Folge eine Senkung von lediglich 6,5% in acht Jahren. Dieses Resultat hatte eine doppelte Konsequenz: Das Messinstrument wurde verfeinert und das Vorgehen „entpolitisiert―. Betrachtet wurde demnach nicht mehr die Effektivität gesetzlicher Regelungen, sondern nur noch die Effizienz ihrer Umsetzung, also die technisch-organisatorische Seite. Als unabhängiges Beratungsgremium fungierte ein schon im Jahre 2000 neu geschaffenes Organ, das ACTAL (Advies College Toetsing Administratieve Lasten). Es berät und unterstützt Regierung und Parlament in allen Fragen der Messung und Reduktion der Bürokratielasten und verfolgt laufend die Entwicklung mit Einschluss des gebotenen kulturellen Wandels. Zudem wurde drei Jahre später ein weiteres Organ (die Interdepartementale Projectdirectie Administratieve Lasten, IPAL) geschaffen, das mittlerweile im Finanzministerium angesiedelt ist und – auf der Basis des oben skizzierten SKM – mit allen Ministerien Einsparungsziele vereinbart, deren Erreichung von ACTAL und IPAL gemeinsam überwacht wird. Das System ist seinerseits aufwendig, scheint aber nunmehr die in den Niederlanden angestrebten 25% Senkung der Regulierungskosten fristgemäß zu erreichen (Frick / Brinkmann / Ernst, 2006, S. 30-32). 7

Warum diese Hervorhebung eines einzelnen nationalen Programms zur Senkung der hier diskutierten Bürokratiekosten? Weil in den Niederlanden dieses Problem frühzeitig erkannt und ebenso resolut wie umfassend angegangen wurde. Es erwies sich als erfolgversprechend und dient seit seiner Umsetzung als Inspirationsquelle für eine ganze Reihe weiterer Länder. Als Beispiele werden im Folgenden Hinweise auf die Programme in der Schweiz, in Deutschland und in der EU skizziert. In der Schweiz wurde, ähnlich wie in den Niederlanden, das Phänomen der hohen und zügig wachsenden Bürokratiebelastung schon früh erkannt. Bereits 1985 erschien im Schweizerischen Institut für gewerbliche Wirtschaft (heute KMU-Institut) an der Hochschule St. Gallen die oben angesprochene empirische Studie mit dem damals überraschenden Ergebnis eines durchschnittlichen Aufwands für ein mittelständisches Unternehmen zur Erledigung administrativer Arbeiten infolge öffentlicher Vorschriften von 30 Stunden pro Monat (Hunkeler, 1985). Das Aufsehen verging, und politisch geschah nicht viel. Erst die Folgestudie zwölf Jahre später (Müller, 1998) schuf den politischen Druck, der die schweizerische Bundesregierung schließlich seit 1998 zu Gegensteuerungsmaßnahmen veranlasste (Fueglistaller/Schliesser/Federer, 2007, S. 16). Im Mittelpunkt standen drei Projekte, die bis heute – mit Verbesserungen – praktiziert werden (Schweizerischer Bundesrat, 2006, S. 105f.): Regulierungsfolgenabschätzung (RFA): Danach müssen alle Gesetzes- und Verordnungsentwürfe von einer Einschätzung ihrer wirtschaftlichen Auswirkungen begleitet sein, damit die Legiferenten sie bei Entscheiden berücksichtigen und Bürokratiekosten im Rahmen halten können. KMU-Verträglichkeitstest: Auch hier wird der Versuch unternommen, geplante Erlasse auf ihre möglichen Effekte zu untersuchen. Dazu werden in ausgewählten KMU gezielt Erhebungen angestellt. Die Ergebnisse können in die RFA eingehen und werden publiziert. Forum KMU: Hier handelt es sich um ein außerparlamentarisches Expertengremium, welches sich dafür einsetzt, dass der Bund bei vorgesehenen Maßnahmen beachtet, welche Lasten für KMU sich aus ihrem Vollzug ergeben (würden). Von den zwölf Mitgliedern des Gremiums sind mindestens sieben Unternehmer, so dass der Praxisfokus gewährleistet ist. Alle drei Instrumente werden ausdrücklich als KMU-Tests verstanden (Schweizerischer Bundesrat, 2006, S. 112). Die Mittelstandsorientierung ist also zweifelsfrei gegeben. Die hier vorgestellten Instrumente konzentrieren sich auf die oben genannte dritte Kategorie von Regeln, also auf neu zu schaffende Regeln. Bestehende Normen werden jedoch nicht übergangen. Als Beispiele seien hier aus dem zitierten Bericht der Schweizer Bundesregierung (Bundesrat) existierende Vorschriften aufgeführt, die hinsichtlich der Regulierung verbessert werden sollen: Einfuhr von Fleisch und Fleischerzeugnissen: Ersatz von Einzelbewilligungen durch Jahresbewilligungen (Schweizerischer Bundesrat, 2006, S. 33) Bewilligung von Seilbahnen: Anstelle von drei Verfahren soll eines ausreichen (Ebenda, S. 34) Neuer Lohnausweis: Die neue Lohnbescheinigung durch den Arbeitgeber soll vereinheitlicht und vereinfacht werden (Ebenda, S. 36) Indirekte Steuern: Vereinfachungen und administrative Entlastungen bei der Mehrwertsteuer (Ebenda, S. 36) Für sich allein genommen, klingen solche Beispiele nicht eben spektakulär, aber in ihrer Summe stellen sie beachtliches Entlastungspotenzial dar. Immerhin ist von über 100 Maßnahmen allein auf Bundesebene die Rede (Verlautbarung zum hier behandelten bundesrätlichen Bericht, S. 1). Vor Jahresfrist setzte im Übrigen der Bundesrat ein spezielles Koordinationsorgan für seine KMU-Politik ein, zu 8

dessen Aufgaben u.a. ausdrücklich die Überwachung der von der Regierung beschlossenen Maßnahmen zur administrativen Entlastung der Unternehmen gehört (Schweizerischer Bundesrat, 2007, S. 1f.), was zugleich eine Rückenstärkung für das Forum KMU bedeuten sollte. Wenn wir versuchen, die hier an Exempeln festgemachten Ansätze zum Abbau der Bürokratiebelastung zu generalisieren, ergibt sich folgende ansehnliche Liste (Codoni/Wallart, 2007, S. 58): Verzicht auf bestimmte öffentliche Aufgaben, Vereinfachung von Normen, Verbesserung der Abläufe in der Exekutive, mehr Verlass auf Eigenleistung und Eigenverantwortung der Normadressaten, Tolerieren eines höheren Grades an Unsicherheit, Mut zur Lücke, Reduktion von Ausnahme- und Spezialfällen. In Deutschland wird ebenfalls vom Versuch einer Bewertung der Folgen ausgegangen, die sich aus öffentlichen Normen als Belastung für die mittelständischen Unternehmen ergeben, einer Bürokratiekostenfolgenabschätzung (GFA). Der Methodik dient eine ausgefeilte Studie im Auftrag des Bundeswirtschaftsministeriums, die sich nicht nur mit einem plausiblen Procedere, sondern auch mit den implizierten Problemen befasst (Schorn, 2006). Fast zeitgleich ist die Gesetzesmaschinerie zum Bürokratieabbau in Gang gebracht worden (BMWi, 2006; Bundesregierung, 2008), so dass der externe Betrachter nicht umfassend übersieht, inwieweit bei der Formulierung der neuen Normen deren Bürokratiekostenfolgen bereits berücksichtigt werden konnten. Es geht um drei „Mittelstands-Entlastungsgesetze― mit insgesamt 72 Maßnahmen bzw. Maßnahmenpaketen, z.B. die Befreiung von Statistikpflichten, die Vereinfachung von Auskunftsverfahren, die Anhebung der Buchführungsgrenze. (Die Dreiteilung hängt mit der Fristigkeit zusammen, von Sofortmaßnahmen im ersten bis zu längerfristigen Vorhaben im dritten Gesetz.) Für die Bewertung der Bürokratielasten wird das oben beschriebene niederländische Standard-Kostenmodell vorgeschrieben. Um die Steuerung des Bürokratieabbau-Prozesses hat sich ein „Koordinator für Bürokratieabbau und Bessere Rechtsetzung― zu kümmern, der direkt im Bundeskanzleramt angesiedelt ist. Ihm untersteht ein Ausschuss von Staatssekretären („Satelliten―) aus den Fachministerien, die deren Rechtsbereiche überwachen (Frick/Brinkmann/Ernst, 2005, S. 39f.). Schließlich ist ein „unabhängiges Gremium von Fachleuten― eingerichtet worden, das die bestehenden und geplanten Normen auf daraus sich ergebende Bürokratielasten überprüft und gegebenenfalls Verbesserungsvorschläge macht. Dieses Gremium trägt die obrigkeitlich angehauchte Bezeichnung „Normenkontrollrat―. Seine Besetzung mit acht Fachleuten wurde in der Presse mit zurückhaltendem Enthusiasmus aufgenommen, weil der Eindruck entstand, die Plätze seien nach Proporz vergeben worden (Polke-Majewski, 2006a). Vor allem aber, bleibt anzufügen, überrascht, dass sich unter den Mitgliedern kein einziger Unternehmer findet. Dabei hat der Rat die Bürokratieentlastung des Mittelstands zur Aufgabe! Es bestehen darüber hinaus Zweifel, ob die Kompetenzen des Gremiums für seine Aufgaben ausreichen (Karpen, 2006, S. 20f.), und das angesichts einer Zielvorgabe von 25% (= 20 Mrd. €) Reduktion der Regulierungslasten bis 2011 (BMWi, 2007) und eines Bestands von 27.000 Normen, der sich jährlich um 500 vergrössert (Polke-Majewski, 2006b). Da ist nicht auszuschließen, dass den Normenkontrollrat seine Aufgabe überfordert und dass die Mittelstandsentlastung überhaupt an Grenzen stößt. Werfen wir schließlich einen Blick auf die „Bürokratie-Politik― der Europäischen Union, könnten wir zunächst meinen, sie spiele keine allzu große Rolle, gilt doch das Subsidiaritätsprinzip, wonach fällige Regelungen, wenn immer möglich, auf nationaler, teilstaatlicher oder lokaler Ebene getroffen 9

werden und wonach sich die EU auch weiterhin in dieser Richtung entwickeln soll (Barroso, 2006; Europäische Kommission, 2008). Dadurch verbleibt im Grunde nur eine begrenzte Regulierungsaufgabe der EU – mit entsprechend limitiertem Bürokratiebelastungspotenzial. Dies bedeutet freilich eine idealistische Sichtweise. Die Kommission selber sah sich denn auch angesichts einer auch auf EUEbene anschwellenden Regelflut bereits im Jahre 2002 genötigt, einen „Better Regulation Action Plan― vorzulegen, mit dem Ziel „to up-date and simplify [...] community legislation― und eine „impact assessment procedure― zu starten (Commission of the European Community, S. 14f.). Im Jahr darauf beschlossen das Europäische Parlament, der Ministerrat und die Kommission ein „Inter-Institutional Agreement on Better Regulation― (Ebenda, S. 14), mit der realistischen Einschätzung, die Implementierung werde wohl ein langfristiger Prozess. Sie soll dem Appell folgen, immer zuerst an die KMU zu denken („think small first―; ebenda, S. 8). Inzwischen hat die KMU-Entlastungspolitik der EU eine Konkretisierung erfahren. Mit einem Bericht vom 30.5.2007 präsentiert die Kommission ihre „Modelle zur Reduzierung der überproportionalen Belastung kleiner Unternehmen durch öffentliche Regulierung―. Diese Modelle werden zehn Kategorien zugeordnet (Kommission der Europäischen Gemeinschaften, 2007, S. 3): 1.

Gesamtbefreiung von einer regulatorischen Belastung

2.

Teilbefreiung

3.

Vereinfachte Pflichten

4.

Zeitliche Ausnahmeregelung

5.

Verwaltungskoordination durch zentrale Anlaufstellen („One-stop-shops―)

6.

Einheitliche Termine

7. 8.

Coaching, Schulung Elektronische Dienste

9.

Vorzugsbehandlung für ganz kleine Unternehmen

10. Frühzeitige Regulierungsfolgenabschätzung (s.o. impact assessment procedure) Zu diesen „Modellen― werden im Sinne von „good-practice―-Fällen rund 30 Anwendungsbeispiele aus verschiedenen EU-Ländern aufgeführt, die ihrerseits aus rund 100 Fallbeispielen ausgewählt wurden (Ebenda, S. 2; S. 13f.). Die Auswahlarbeit oblag einer Gruppe von 15 Rechtsetzungsexperten, wie sie uns in ähnlicher Form (aber kleiner) in den oben skizzierten Ländern begegnet sind. Inwieweit die hochrangige Gruppe unter dem Vorsitz des ehemaligen bayerischen Ministerpräsidenten Stoiber Praxisaffinität zu mittelständischen Unternehmen entwickelt, lässt sich noch nicht abzuschätzen. In die Kommission selbst eingebettet ist schliesslich ein weiteres Spezialorgan, der KMU-Beauftragte (Ebenda, S. 1), der den direkten Draht der KMU zur Kommission gewährleisten soll (Verheugen, 2007, S. 9). Der geballte Einsatz der EU-Maßnahmen soll für eine Reduktion von 25% der Bürokratiebelastung bis 2012 sorgen, jener offenbar magischen Zahl, der wir in unseren Recherchen mehrfach begegnet sind. Überdies rühmt sich die Kommission, zehn „Fast Track Actions― umzusetzen, um „die administrative Belastung auch kurzfristig [zu] verringern― (Verheugen, 2007, S. 12). An Plänen, Versprechungen, ja Verpflichtungen fehlt es also nicht, wohl aber, so scheint uns, einstweilen an der Zuversicht mancher Betrachter bezüglich ihrer Erfüllung. Ein Schweizer Kritiker verweist darauf, die Erfolge der EU (genauer der EU-Kommission) im Kampf gegen die Bürokratie seien nur sehr bescheiden: So sollten allein im Jahr 2007 54 überflüssige Gesetze ersatzlos gestrichen wer10

den. Bis zur Sommerpause waren es erst vier, „darunter eine EU-Vorschrift zur Größe von Astlöchern― (Israel, 2007, S. 7). IV. Fazit Die Belastung namentlich der kleinen und mittleren Unternehmen infolge einer allenthalben wuchernden Bürokratie wächst permanent und erreicht allmählich ein Ausmaß, das deren Überlebensfähigkeit bedroht. Wenn hier und da betroffene Unternehmer gegen staatliche Kontrolleure sogar handgreiflich werden (wie vor kurzem im Kanton St. Gallen), so ist das nicht nur eine provinzielle Farce, sondern eher ein Signal, dass eine Schmerzgrenze zu Belastungen überschritten wird, die die Betroffenen als schikanös oder gar ruinös empfinden. Wie dem auch sei, es scheint nur zu gerechtfertigt, dass die Bürokratielasten zum Objekt einer Gegenbewegung geworden sind. Paradoxerweise haben zunächst kleinere Länder die Entlastungsaufgabe aufgenommen und scheinen damit erfolgreicher umzugehen als die großen Länder und die EU, die die Entlastung indessen aber nötiger hätten (Beralk/Borst, 2007, S. 204). In den Katalogen der Maßnahmen finden sich durchaus machbare, oft naheliegende, etwa die Sorge für bessere Verständlichkeit, Vereinfachung, Reduktion der Periodizität, Koordination zwischen verwandten Auflagen, Streichung redundanter Regeln, Verzicht auf unplausible oder unergiebige Vorschriften, Befreiung von wenig sinnhaften Verpflichtungen, Zusammenfassung von Anlaufstellen, reduzierte Gebühren, verbesserte Dienstleistungen, elektronische Abwicklung, Reduktion von Sonderfällen, Verzicht auf Perfektion, bessere Adressaten-Orientierung. Eine solche Liste streift triviale Positionen, derer sich aber niemand schämen muss, wenn sie durch Verschlankung oder Eliminierung heute Betroffene entlasten. Zugleich haben diese selbst die Chance, im Rahmen z.B. organisatorischer Maßnahmen, etwa durch Outsourcing oder Kooperation, ihrerseits zur Erleichterung des Gewichts auf ihren Schultern beizutragen. Aus der Perspektive der Arbeitsplatzerhaltung kommt gelegentlich das Argument, allzu resoluter Lastenabbau bedrohe die Position der mit der Bewältigung der Bürokratielasten Beschäftigten. Dieses Phänomen des Freiwerdens von Kapazitäten und einer Senkung der Verwaltungspersonalkosten dürfte jedoch in KMU selber „eher selten― und von begrenztem Ausmaß sein, wie Mugler schon vor vielen Jahren ebenso berechtigt wie trocken betonte (Mugler, 1987, S. 9). Es ist schon viel erreicht, wenn die Strapazierung der Ressourcen nicht mehr ständig zunimmt. So oder so ist nicht zu übersehen, dass der angestrebte Abbau von Bürokratielasten kaum ohne Widerstände möglich wird und ohnehin nicht bis auf null: Die hoch komplexe Welt lässt kein einfaches Leben mehr zu. Die Schöpfer von Normen hängen an ihnen, weil sie ihnen Einkommen und Status sichern. Trägheit hält zudem auch auf diesem Gebiet Veränderungen auf. Entlastungsversuche generieren neue Bürokratie. Wir sind aus dem Paradies vertrieben, aber es kann „per Saldo― viel getan werden, das Leben der Bürokratieopfer erträglicher zu gestalten, als es sich heute darstellt.

11

Literatur Barroso, J. M. (2006): Wer profitiert, soll sich auch solidarisch zeigen, Interview mit der NZZ am Sonntag, 9.7.06, S. 20f. Beralk, O. / Borst, S. (2007): Aufräumen in Brüssel, in: Focus, 41, S. 204. BMWi – Bundesministerium für Wirtschaft und Technologie (Hrsg.) (2006): Die Mittelstandsinitiative der Bundesregierung, Berlin, 10.7.06. — (Hrsg.) (2007): Der deutsche Mittelstand auf Erfolgskurs, ein Jahr Mittelstandsinitiative, Berlin, 19.7.07. Brunetti, A. / Scheidegger, E. (2006): Grundlinien des Aktionsprogramms für vereinfachte Regulierungen, in: Die Volkswirtschaft, 1/2, S. 4–9. Bundesregierung (Hrsg.) (2008): Wirtschaft von Bürokratie befreien/Drittes Mittelstandsgesetz, Berlin 2008, 23.07.08, Regierungonline, Bürokratieabbau, www.bundesregierung.de/nn_151820 (04.08. 2008). Codoni, D. / Wallart, N. (2007): Die internationale Konferenz in Bern zur Messung der administrativen Belastung, in: Die Volkswirtschaft, 9, S. 58f. Commission of the European Community (ed.) (2005): The Activities of the European Union for Small and Medium-sized Enterprises (SMEs), Working Paper, Brüssel, 8.2.05. Europäische Kommission (ed.) (2007a): Models to Reduce the Disproportionate Regulatory Burden on SMEs, Entrepreneurship, Brüssel. — (Hrsg.) (2007b): Verringerung der Verwaltungslasten, Ref. IP/07/294, Brüssel, 7.3.07. — (Hrsg.) (2008): Der Small Business Act, Doc. 272-2008, http://ec.europa.eu/enterprise/ entrepreneurship/sba_de.htm (04.08.2008). European Commission (Hrsg.) (2008): Commission cuts unnecessary administrative burdens in EU company law, Ref. IP/08/598, 17 April 2008. Frick, F. / Brinkmann, H. / Ernst, T. (2005): Das Standard-Kosten-Modell. Ein neuer Ansatz für effektiven Bürokratieabbau, in: Empter, St. / Frick, F. / Vehrkamp, R. (Hrsg.): Auf dem Weg zu moderner Regulierung, Gütersloh. Fuchs, M. (2005): Arbeitsbericht Arbeitsgruppe Bürokratieabbau, Berlin. Fueglistaller, U. / Schliesser, J. / Federer, S. (2007): Administrative Belastung von Kleinunternehmen – Analyse, Herausforderungen und Chancen, St. Gallen. Hunkeler, U. (1985): Zur Belastung der Klein- und Mittelbetriebe durch staatliche Regelungen, Dissertation, St. Gallen. IfM Institut für Mittelstandsforschung (Hrsg.) (2006): Stellungnahme an den Deutschen Bundestag zu den Themen der öffentlichen Anhörung am 29. Mai, Bonn. Israel, S. (2007): Gladiator Stoiber bekämpft jetzt die EU-Bürokratie, in: NZZ am Sonntag, 16.9.07., S. 7. Karpen, U. (2006): Wachhund, in: Frankfurter Allgemeine Zeitung, 11.7.06, S. 19. Kommission der Europäischen Gemeinschaften (Hrsg.) (2005): Umsetzung des Lissabon-Programms der Gemeinschaft, Mitteilung, Brüssel, 10.11.05. — (Hrsg.) (2007): Modelle zur Reduktion der überproportionalen Belastung kleiner Unternehmen durch öffentliche Regulierung, Brüssel, 30.5.07. Mises, L. von (1997): Bürokratie, Sankt Augustin. 12

Mugler, J. (1987): Der Beitrag der EDV zur Informationsbewältigung in KMU, in: IGAInternationales Gewerbearchiv, S. 1–11. Müller, Chr. A. (1998): Administrative Belastung von KMU im interkantonalen und internationalen Vergleich, Bern. Nijsen, A. (2006): Kein Kampf gegen Windmühlen, in: InnovatorsClub (Hrsg.): TIC-Trendletter, 5, S. 14–16. Nijsen, A. / Frick, F. (2006): Das Standard-Kosten-Modell. Anwendung in den Niederlanden, in: Bertelsmann Stiftung (Hrsg.): Agenda Moderne Regulierung, Gütersloh. OECD (ed.) (2001): Businesses’ View on Red Tape. Administrative and Regulatory Burdens on Small and Medium-sized Enterprises, Paris. — (ed.) (2006): Cutting Red Tape: National Strategies for Administration Simplification, Paris. Österreichische Bundesregierung (Hrsg.) (2007): Verwaltungskosten senken für Unternehmen, Wien. Polke-Majewski, K. (2006a): Licht im Dschungel, in: Die Zeit-online, 4.1.06. Polke-Majewski, K. (2006b): Die Anti-Regulierer, in: Die Zeit-online, 13.9.06. Rall, L. / Wied-Nebbeling, S. (1975): Die Belastung der gewerblichen Wirtschaft durch Gesetzgebung und Verwaltungsmaßnahmen seit 1968, Tübingen. Rösener, A. / Precht, C. / Damkowski, W. (2007): Bürokratiekosten messen – aber wie?, Berlin. Schorn, M. (2006): Ein Konzept zur Bürokratiekostenfolgenabschätzung, 2. Aufl., Köln. Schweizerischer Bundesrat (Hrsg.) (2006): Vereinfachung des unternehmerischen Alltags. Maßnahmen zur administrativen Entlastung und Erleichterung der Regulierung, Bern. — (Hrsg.) (2007): Verordnung über die Koordination der Politik des Bundes zugunsten der kleinen mit mittleren Unternehmen, Bern. SGV – Schweizerischer Gewerbeverband (Hrsg.) (2004): Administrative Entlastung der KMU, Bern. U.S. Small Business Administration (eds.) (1980): Background and Summary Statement of the Advocacy Paperwork Measurement and Reduction Project, Washington DC. Verheugen, G. (2007): Die KMU in der Lissabon-Strategie für Wachstum und Beschäftigung, Vortragsmanuskript, Berlin, S. 12. Weber, M. (1999): Wirtschaft und Gesellschaft, Berlin.

13

Is There A Correlation Between Competition Policy and Entrepreneurship?

Michael T. Schaper, Ph.D. Adjunct Professor, Curtin University of Technology, Western Australia Deputy Chairperson, Australian Competition & Consumer Commission1 Phone: +61 423 731 311 Private email: [email protected] Anne Clear Lecturer, Murdoch University Business School South Street, Murdoch WA 6150 Australia Phone: +61 8 9360 2705 Email: [email protected] Geoff Baker Murdoch University Business School Email: [email protected]

Abstract What impact does competition policy have on entrepreneurship? An effective competition regime should theoretically facilitate an open, competitive environment in which new market entrants can flourish and give rise to high levels of entrepreneurial activity. But is this really the case? In this paper, we test this argument by investigating whether the presence of a large suite of competition laws, and/or a highly ranked national competition policy, is significantly correlated to high levels of entrepreneurship. Twenty-one countries were examined, using three existing indices – the Global Entrepreneurship Monitor, the Global Competition Review, and the Antitrust Index. Surprisingly, the results indicate that there is no discernible correlation between the level of entrepreneurship and highly ranked competition policy.

Keywords: Antitrust law index, competition policy, regulation, small business, entrepreneurship

1

The views expressed in this paper are those of the authors only and do not necessarily reflect those of the Australian Competition & Consumer Commission (ACCC) itself.

1

Introduction Competition is an essential ingredient in the entrepreneurial process. When firms come into existence for the purpose of offering a product or service, and attempt to make a profit in the process, then they have effectively entered into a contest with each other. Some elements of this struggle are obvious, such as the need to win over customers, to sell more products, or to expand into new markets. Other aspects of the competitive process may not be as evident, but are still important, because almost every aspect of the entrepreneurial process is open to challenge. This can include a contest for the best staff and external professional advisers, access to raw materials and suppliers, support from financiers and investors, or even just the ability to obtain the best-placed advertisement in tomorrow’s newspaper. Competition need not be confined simply to a contest between two firms operating in the same arena – it can also exist between firms competing in seemingly unrelated areas (such as a local movie cinema, who may try to win customers not only from other nearby movie houses, but also from restaurants or theatres), or between whole industries (think of the automobile versus public transportation). Competition is, however, a relatively poorly understood and analysed phenomenon in entrepreneurship research. Whilst the activities of new venture creation, new product development, firm growth and innovation have been examined comprehensively, little is understood about the impact of the overall competitive environment and framework in which a firm must operate. What impact does a pro-competitive environment have on entrepreneurship? Does it lead to more entrepreneurial activity, or not? Whilst the answer to such a question may seem a priori to be “yes,” it is important to test such assumptions and determine if such is actually the case. In this paper, we examine this argument by investigating whether the presence of a large suite of competition laws, and/or a highly effective national competition policy, is significantly correlated to high levels of entrepreneurship. These issues are examined by correlating three existing indices – the Global Entrepreneurship Monitor, the Global Competition Review, and the Antitrust Index. Background The link between competition (or antitrust) policy and small entrepreneurial firms is one that has received only a small amount of attention in the research literature to date. More often than not, the linkage is implied rather than explicitly addressed. One of the few studies in this field to date has been that of Choi and Phan (2006), for example, who examined the formation of new US firms over the time period 1968-1993. Whilst they found that a pro-competition policy regime did lead to greater entrepreneurial activity, they also noted that “… the empirical case for the impact of competition policy on firm formation is unclear” (2006: 496). Overall, it is often suggested that competition policy regimes can affect entrepreneurial small firms in a number of different ways (Audretsch, Baumol & Burke 2001; Golodner 2001; Audretsch, van

2

Leeuwen, Menkveld & Thurik 2001; Kemp & Lutz 2006). This can occur through measures intended to: Prevent existing firms with established offerings from stifling new product or service innovations; Making it illegal for existing operators to collude to fix prices, customer access and/or market share; Ensuring that existing firms do not construct artificial barriers to entry which might exclude new market entrants; Preventing anticompetitive mergers that reduce the number of firms and/or products available to consumers; and Ensuring that supplier firms do not discriminate against small-scale enterprises in regards to such matters as the price of goods or equitable access to the same. Golodner (2001) also argues that there is an additional, but somewhat more intangible way in which competition policy interacts with entrepreneurship. He argues that nations which have effective, strong competition policy and laws send a very clear signal to their citizens that they value and encourage individual initiative, enterprise and risk-taking. Conversely, countries who do not vigorously police anticompetitive behaviour promote a culture that can discourage change, competition and contestability in the marketplace. Competition policy is also assumed to have an impact on national economic performance and the collective level of enterprise undertaken amongst a community. As Porter (1990) has suggested, a strong antitrust policy and the existence of strongly contested domestic markets are an important element in the growth of any national economy. Not all nations implement competition policy in the same way. Some jurisdictions have passed extensive suites of laws and regulations, and have relied on the existence of “black-letter law” to provide a suitable competitive framework. For many of these countries, it is the breadth of regulations – that is to say, the number of “laws on the books” – which is taken to be the most important factor in promoting competition. Nicholson (2004, 2008), for example, has devised an Antitrust Law Index (ALI) that measures the number of statutes in existence in a given jurisdiction. Using a simple dichotomous division, the Index is an additive summary of established laws. For example, countries that have laws regarding fines, prison terms and divestitures receive a point for each such remedy; thus a nation that has each such action on its statues receives 3 points, whilst a nation that only allows for fines and prison terms (but not divestitures) receives 2 points, and so on. As the author admits, such a tool is effective in assessing the number of laws, but cannot meaningfully evaluate the effectiveness of such laws. Moreover, simply having laws on the books does not mean that a country has a pro-competitive administrative regime; the two concepts can be quite divorced from each other. An alternate approach for many other nations is to focus on the quality of regulation, rather than merely the quantum. In this paradigm, the calibre of laws and enforcement actions is seen as paramount. The way in which competition policy is effectively policed, and the other steps competition 3

regulators take to educate, inform and promote fair markets, is judged to be just as (if not more) important than the number of formal rules. The Global Competition Review (Clasper, Cavendish & Vascott 2006) is one dataset that ranks national performance in this way. It attempts to rate nations by a somewhat more subjective set of criteria than the Antitrust Law Index, and evaluates the performance of competition authorities across the world using qualitative input from key stakeholders. This method seeks to determine the perceived effectiveness of a nation’s overall competition policies by obtaining feedback from a variety of respondents, including academics, economists and competition lawyers, amongst others. The GCR also ranks national competition agencies against the performance of the US Department of Justice and the European Commission’s Directorate-General for Competition. Likewise, the World Economic Forum (Nicholson 2008) also uses a qualitative measure to assess competition effectiveness, although its respondent set is limited to businesspeople and excludes other key stakeholders. There are thus at least two different ways to compare competition regimes between nations. One is to focus on quantity (such as the Antitrust Law Index); the other is to focus on perceived quality (as evaluated by the GCR). This leads to the following two testable propositions: H1: Nations with a more extensive range of competition laws have higher levels of entrepreneurship than other countries. H2: Nations with a higher level of effective competition policy have higher levels of entrepreneurship than other countries. Measuring the comparative levels of entrepreneurship between nations is also somewhat difficult. Most countries actually display similar proportions of small firms in their overall business populations and, since nations use different definitions of what constitutes a “new business,” “small business” or “growing firm”, generalisable international statistical comparisons have been hard to make to date (Schaper 2006). There is a paucity of standardised international comparative data about counts of business, numbers of new start-up firms, and the ratio of business ventures to population. One of the few attempts to overcome this gap in comparative international entrepreneurship studies has been the Global Entrepreneurship Monitor (GEM), a long-term longitudinal project that attempts to measure the level of new recently-formed business ventures, the ownership of established businesses, and current activities to create a new commercial enterprise amongst the adult population in a wide range of countries (Bosma & Harding 2007). Using a minimum sampling frame of 2,000 respondents in each nation, GEM attempts to measure prevalence rates using a common methodology and statistical procedures. This allows for the collection of comparable data between nations.

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Method and Results Data from three sources were used to test the two propositions: the 2006 Global Entrepreneurship Monitor, the 2006 Global Competition Review and the 2004 Antitrust Law Index.2 A total of 21 nations were assessed in all three studies, and thus form the basis of the following results. The proportion of adults engaged in early-start new business activity was selected as the GEM proxy measure of overall entrepreneurial levels in each nation. Whilst GEM actually measures three different sets of entrepreneurial activities within the population of each respondent nation (namely, the proportion of adults about to start a venture, the proportion who have just recently begun one, and the proportion established in a long-term venture), it was felt that the middle indicator is perhaps the most appropriate gauge of enterprising behaviour. Many nascent firms fail to launch, and many established firms are part of the established market place; in contrast, recently-begun ventures epitomise risk-taking and an attempt to competitively offer new products or other innovations into the market. These data sets are ordinal and, as such, only a limited number of valid statistical tools exist to validly measure and test any relationships that may exist between them. For this reason, a Spearman correlation was used to test each hypothesis, as suggested by Collis & Hussey (2003). H1: Nations with a more extensive range of competition laws have higher levels of entrepreneurship than other countries. This was tested by correlating the Antitrust Law Index (ALI) against GEM. The results (r 2 = 0.023, adjusted r2 = 0, t-test t = -0.67, p = 0.51) indicate an extremely low correlation, to the extent that there is almost no detectable relationship between the two variables. H2: Nations with a higher level of effective competition policy have higher levels of entrepreneurship than other countries. This was tested by correlating the Global Competition Review against GEM. Like the preceding test, these results (r2 = 0.0019, adjusted r2 = 0.0, t-test t = 0.19, p = 0.085) show no detectable relationship between the two variables. These results can sometimes also be confused by the presence of “outlier” groups, such as (in this case) nations with quite profoundly different economic and political structures to the majority of respondents. To ensure that the results were not distorted by the possibly confounding presence of nonOECD nations (in this case, Argentina, Brazil, Mexico and South Africa), the above tests were also conducted after excluding such countries. Although not detailed here, the results were largely similar and still showed no statistically significant correlation in either case.

2

The 2004 edition of the Antitrust Index was the most recently available dataset for this measure.

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Discussion At first glance, such results seem counter-intuitive. As was suggested at the beginning of this paper, it seems almost a given that countries with strong competition regimes should also foster higher rates of entrepreneurship amongst their adult population. How can one explain the near-total absence of any correlation between the levels of entrepreneurship (as measured by GEM) and a broad range of antitrust laws (as measured by the Antitrust Index), nor with effective competition regimes (as determined by the Global Competition Review)? One possible reason is that the data sets are a poor form of measuring the stated variables. As broadbased aggregations and rankings of many individual respondent inputs, they are perhaps too coarse to accurately evaluate the issues at hand. Another possibility is that competition policy, per se, does not figure highly in the decision-making of entrepreneurs. The decision to commence, operate and grow a business is often fuelled by a complex mix of personal motivating factors, perceived customer demand in the marketplace, and ability to access the necessary resources (such as personnel, funding, and premises). Other external variables moderated by government, such as taxation rates, regulatory regimes and advisory assistance, may in fact only play a very secondary role in the new venture process. One intriguing possibility raised by Capelleras, Mole, Greene, and Storey (2008) is that the level of entrepreneurship practiced in a given nation is relatively fixed, and that regulatory regimes will have only limited impact in changing the level of entrepreneurial activity. Different nations will exhibit different levels of adult participation in new small business startups; such rates are relatively immutable and the best that effective regulators can hope to achieve is to shift the focus of behaviour into particular desired outcomes. Conclusion There are still many aspects in the entrepreneurial process which are poorly understood. As was pointed out in the beginning of this paper, the relationship of macro-economic and regulatory variables to business formation and growth is one such area. The results presented in this study have attempted to shed some initial exploratory light into part of this area of enquiry. They seemingly indicate that there is no discernible correlation between the level of entrepreneurship and highly ranked competition policy. However, the apparent lack of a clear relationship between competition regimes and entrepreneurship does not mean that competition policy is irrelevant to the entrepreneurial process. Indeed, sound competition laws are highly desirable for many more reasons than simply their impact on entrepreneurs.

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What the findings of this study do suggest, however, is that many other factors may well be more important in the process of new venture creation and firm growth. Our contemporary understanding of the entrepreneurial process, and of the dynamics of firm growth, is still limited, as is our ability to determine the impact of external factors on entrepreneurship. Results such as this indicate that we still have much more to learn. References Audretsch, D.B.; van Leeuwen, G.; Menkveld, B. & Thurik, R. (2001) “Market Dynamics in the Netherlands: Competition Policy and The Role of Small Firms” International Journal of Industrial Organization Vol. 19 No. 5 (April), pp.795-821. Audretsch, D.B.; Baumol, W.J. & Burke, A.E. (2001) “Competition Policy in Dynamic Markets” International Journal of Industrial Organization Vol. 19 No. 5 (April), pp.613-634. Bosma, N. & Harding, R. (2007) Global Entrepreneurship Monitor: GEM 2006 Summary Results London: London Business School. Capelleras, J.-L.; Mole, K.F.; Greene, F.J. & Storey, D.J. (2008) “Do More Heavily Regulated Economies Have Poorer Performing New Ventures? Evidence From Britain and Spain” Journal of International Business Studies No. 39, pp.688-704. Choi, Y.R. and Phan, P.H. (2006) “The Influences of Economic and Technology Policy on the Dynamics of New Firm Formation” Small Business Economics Vol. 26 No.5, pp.493-503. Clasper, J.; Cavendish, J. & Vascott, D. (2006) “Rating Enforcement” Global Competition Review. Available [online] http://www.globalcompetitionreview.com/ Collis, J. & Hussey, R. (2003) Business Research (2nd edition) Basingstoke: Palgrave Macmillan. Golodner, A.M. (2001) “Antitrust, Innovation, Entrepreneurship and Small Business” Small Business Economics Vol.16 No.1 (February), pp.31-35. Kemp, R. & Lutz, C. (2006) “Perceived Barriers To Entry: Are There Any Differences Between Small, Medium-Sized and Large Companies?” International Journal of Entrepreneurship and Small Business Vol.3 No.5, pp.538–553. Nicholson, M.W. (2008) “An Antitrust Law Index For Empirical Analysis of International Competition Policy” Journal of Competition Law and Economics [online] April. Nicholson, M.W. (2004) “Quantifying Antitrust Regimes” FTC Bureau of Economics Working Papers No. 267, February. Porter, M.E. (1998) The Competitive Advantage of Nations New York: Free Press. Schaper, M. (2006) “Distribution Patterns of Small Firms in Developed Economies: Is There An Emergent Global Pattern?” International Journal of Entrepreneurship and Small Business Vol.3 No.2, pp.183-189.

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Table 1: Relative National Rankings Global Competition Review3

Antitrust Law Index4

GEM – Early stage entrepreneurial activity5

Argentina

2

17

10.2

Australia

4

13

12.0

Belgium

2.5

18

2.7

Brazil

3

11

11.7

Canada

3.5

13

7.1

3

14

7.9

Denmark

3.5

12

5.3

Finland

3.5

11

5.0

France

4

16

4.4

Germany

4

10

4.2

Ireland

3.5

16

7.4

Italy

3.5

15

3.5

Japan

3.5

9

2.9

Mexico

2.5

13

5.3

Netherlands

3.5

7

5.4

3

11

9.1

2.5

17

5.3

Spain

3

13

7.3

Sweden

3

16

3.5

United Kingdom

5

9

5.8

United States

5

21

10.0

Czech Republic

Norway South Africa

3

Ranked on a scale with a possible range from 2 to 5 Ranked on a scale with a theoretical range from 1 to 21 5 Percentile figure; proportion of adults in population 4

8

Technological Innovation and SMEs in Japan

Prof. Dr. Mitsuru Tanaka Professor Emeritus of Kansai University, Osaka Japan

Debating Points: Dual Structure and Differentials – Subcontracting System – Harmony and Co-existences vs. Mega Competition in The World Economy – SMEs=Vital Majority? – R&D – Socially Reasonable Division of Labor

1. Introduction: Changing Economic Environment Surrounding SMEs in Japan The technology problem, especially its level of SMEs in Japan has been still very important and severer. In Japan, ‗The development of industrial structure was pushed forward, in the first place, aiming at quantitative expansion and enlargement of firm size, which have been making progress in both the heavy and chemical industry and light industry. Particularly through technological innovations, new industries such as petrochemicals and synthetic fivers, or machine and durable consumer-goods industries as automobiles and electric household appliances were created and rapidly developed‘ ([1] p.93). However, for technology or technical innovation, of course the other many factors, ‗The position of SMEs as a whole must be said harsh ones, getting severer in relation to large enterprises especially from the high-pitched growth period toward the structural depression at present‘([1]p.94) since the so-called ―The Collapse of Bubble‖. Then, In this time of severer economic environment surrounding SMEs, where should we seek the conditions of maintenance and development of SMEs? Already Prof. Dr. Josef Mugler has raised question by fixing focus on such problems [2]. That is ‗How this organized and supported in Japan? Which public or private organizations offer technology transfer services for Japanese small firms? and how do they collaborate with small firms? and so on‘. Now, I would like to describe briefly how my country is organized for such these problems with recent ―WHITE PAPERS ON SMEs IN JAPAN‖ and some cases. Accordingly, I am in a hope that above-mentioned intention would, if, possible, lead to throw a fresh light and on a attaining a new recognition of what is essential for future survival task and related policies to promote the interest of SMEs and its management measures.

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Fig.1. Changing Economic Environment and Small and Medium Industry

Internationalization

Capital Foreign trade Finance・Service

Developed countries Developing countries NIEｓ･ASEAN･BRICS･ Vietnam, etc.

International Competitiveness Economic cooperation

Influence and requests to Japan Development of

Quantitative expansion

Industrial structure

Primary Industry Secondary

Qualitative consolidation

Tertiary

Reorganization of industry

structures

（Differentials）

Enlargement of firm Size Diversification Venture within firm Modernization and rationalization

Restructuring

Dual

Within industry Among agriculture, Industry and Commerce service

Large enterprises -concentration and accumulation Small and medium firms -groupings and cooperatives Fusion of different resources Heterogeneous business exchange

Reorganization of monopolies Influence on small and medium firms

Tightening of control system by large enterprises Entry of large enterprises into the fields of small and medium firms

Dependence on Problems of small and medium firms

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large enterprises

Prosperity

Modernization and

Downfall

rationalization

Stratification of small and medium firms

Fig.2. Changes in the business environment and the small business sector Long –term changes

Resulting developments

Macroeconomic changes

Increased diversity of the small business sector

-Decline in the economic growth rate

-Transformation of the dual economic structure

-Changes in causes of growth

-Emergence of gap in business performance among firms

Changes in the industrial structure -increasing economic importance of the Service sector -Maturation of existing industries

Changes in the marketplace -New business opportunities -Greater competition

Increasing globalization -Growth of international procurement -Overseas expansion of Japanese firms -Development of countries in Asia -Increasing presence of foreign-affiliated firms in Japan

Transformation of inter-firm relations and corporate organization -Increased flexibility of the subcontracting structure -Transformation of industrial agglomeration

Changes in consumer lifestyles -Fall in birthrate and graying of society -Growth in labor mobility -Changing lifestyles -Changes in people’s outlooks -Changes in needs

-Corporate downsizing

Slump in start-up activity -Fall in start-up rate

Growth in use of IT and technological change -Spread of IT -Development of technology to save simple labor

Change of distribution structure -Growth in size of retail outlets -Shortening of distribution routes

Changes in the institutional environment -Changes in the financing environment -Regulatory reform -Changes in small business policy

Actions expected of SMEs Development of new markets -R&D, innovation -Development of human resources, employment of high-quality manpower -Market development

Business innovation in various forms -Original technology, know-how, ―proposal-type‖ business -Networks, inter-sector cooperation -Outsourcing -Information disclosure, organizational reform

Maximization of strengths of SMEs

Growth of new/young enterprises

-Flexibility

-Venture businesses

-Diversity (individuality)

-SOHO

Source: ―WHITE PAPER ON SMALL AND MEDIUM ENTERPRISES IN JAPAN‖ 1999, p.5, Fig.1・1.

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2. Present Situation of Technological Innovation with development of IT and Computization In Japan, oligopolistic and gigantic computer manufacturing companies are competing with one another in trying to develop and sell their newer goods. So, ―Computer Goods Market‖ in Japan bears some parallels to fresh fishes, meats and vegetables markets. Because former developed and manufactured computer goods have to fall into older and even rotten ones. They are short life (only few weeks ~few months) before their depreciation. But, of course, we may say that this is very convenient chance as the so-called ―Intermediate Technology Transfer‖ for SMEs. Because SMEs may buy and introduce at a low price these battered-looking by large companies and /or former unsold ones to SMEs. However, anyway very expensive investment for SMEs. 3. Recent Situation of SMEs Context with Globalization through “WHITE PAPER ON

SMEs IN JAPAN” [3] -Trends in market competition and technological superiority to East Asian products-

Trends by category of end product The globalization of business affects not only those SMEs that themselves establish production operations overseas or enter foreign markets. It also affects enterprises that only have operations in Japan and target only the domestic market. Thus enterprises that do business only in the domestic market can also be affected by globalization, regardless of the location of their manufacturing operations, if there is an influx of foreign products into the domestic market. Now that there are developing international division of labor, enterprises are having to think about their international competitiveness in East Asia when they do business even if they have no intention of expanding internationally. Trends among SMEs that were themselves establishing operations in East Asia were examined. But what of reverse developments, i.e., the state of competition with East Asian products in the domestic market? The proportion of enterprises that sense competition has increased dramatically in the past five years, and this trend is expected to continue to strength. While there has thus been an increase in competition due to the influx into the domestic market of East Asian products, an examination of Japanese SMEs‘ technological competitiveness compared with that of East Asian enterprises reveals that the proportion of enterprises that sense themselves to be technologically superior to East Asian enterprises has not changed much in the past five years indicating that the growth in market competition observed above is proceeding more rapidly than East Asian enterprises are catching up technologically. It would seem, therefore, market competition in Japan has revolved to date around price competition. Looking ahead, however, the existence of numerous enterprises that consider East Asian enterprises to be technologically on a par with themselves suggests that competition will grow fiercer. If we look at the speed of market competition and technological catch-up by East Asian countries over the past five years broken down according to field of related end product, we find that there has been a rapid surge in market competition and technological catch-up over the past five years in the medical and welfare-related equipment field. This suggests that there was hardly any competition in this field five years ago, and that competition with East Asia in this field began to emerge in the past five years. In the automobile and production facility fields, there appears to have been little technology catch-up, and market competition, too, has not intensified. While both product fields are characterized by a strong tendency to depend on local supporting industries (which means that there is little international trade in parts and intermediate products), these results also provide some indication of Japanese manufacturing‘s strong competitiveness in the automobile sector.

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Fig.3. Technological level compared with East Asian enterprises and state of competition due to influx of East Asian products in domestic market Competition developing more rapidly than technological catch-up of competition

Source: Mitsubishi UFJ Research and Consulting Co. Ltd., ―A Questionnaire Survey of Recent Changes in Business Relations in Manufacturing‖ (November 2005). Note: Manufacturers and processors of parts, semi-finished products, and formed and fabricated materials with 300 or fewer workers.

(Small and Medium Enterprise Agency Ministry of Economy, Trade and Industry, Translated by Japan Small Business Research Institute ― WHITE PAPER ON SMALL AND MEDIUM ENTERPRISES IN JAPAN‖ 2006,p117,Fig.2-3-15)

Fig.4. Technological superiority and state of market competition by product category Conspicuous market competition in white goods, audio-video goods, and other consumer electronics. Whereas the white goods market was competitive five years ago, the markets for medical and welfare-related products, IT equipment, and audio-video equipment and other consumer electronics have grown more competitive in the past five years.

Source: Mitsubishi UFJ Research and Consulting Co.,Ltd., ―A Questionnaire Survey of Recent Changes in Business Relations in Manufacturing‖ (November 2005). Note: 1.Manufacturers and processors of parts, semi-finished products, and formed and fabricated materials with 300 or fewer workers. 2.Regarding their core field of technology, enterprises were asked whether they presently sensed market competition due to the influx of East Asian products in the domestic market (5.No.4.Not much, 3.Neither, 2.Somewhat, 1.Yes)and whether they were technologically superior to East Asian enterprises(5.Superior, 4.Somewhat superior, 3.Neither, 2.Somewhat inferior, 1.Inferior). The values now were then deducted from those five years ago to obtain the ―speed‖ 3.Regarding Fig.2),enterprises giving exactly the same responses five years ago and now that responded ―1.‖or ―5. ‖ were excluded from the calculations. (Small and Medium Enterprise Agency Ministry of Economy. Trade and Industry, Translated by Japan Small Business Research Institute ―WHITE PAPER ON SMALL AND MEDIUM ENTERPRISES IN JAPAN‖ 2006,p117,Fig.2-3-16)

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There exists a dual structure in the die market. On the one hand, there is demand in the domestic market for high-performance dies requiring the use of new technologies and new materials, and high intangible value added through the ability to provide development proposals, and on the other, there exists demand for products that do not require such high performance, and for these enterprises are now turning to cheaper East Asian markets. Competition with East Asian enterprises and the sources of Japanese manufacturing SMEs’ competitiveness Enterprises with a technological advantage over East Asian enterprises were examined to determine from which of the following three broad categories their superiority was derived: 1) the performance of the manufacturing equipment and machine tools that they used; 2)the skills of their employees; and 3)their ability to research and develop new technologies. An analysis of technological superiority and market competitiveness according to their responses revealed that enterprises whose superiority was derived from ―ability to research and develop new technologies‖ were more likely than enterprises that derived their superiority from ―performance of manufacturing equipment and machine tools‖ or ―skills of workers‖ to maintain a high level of both technological superiority and market competitiveness. If they are to continue competing with East Asian enterprises on an equal footing, then Japanese manufacturing SMEs will have to accept the fact that East Asia will draw closer and closer technologically as a result of the introduction of higher performance manufacturing equipment and the increasing experience of local workers. Ultimately, it is by constantly pursuing the ―research and development of new technologies‖ by which Japanese manufacturing SMEs can best maintain their edge. In this regard, it is also important that stress be placed on developing employees‘ skills through the training of human resources with an eye on the future. With enterprises finding it increasingly difficult to determine what direction technology development should take due to changes in transaction patterns, it will grow ever more important that development work should be directed toward applying limited business resources to enterprises‘ next moves and that action be taken to gather information to indicate what direction development should take. After all, Japanese SMEs, if they are to maintain their superiority, not only continue with the business activities that they have pursued to date, but also tackle problems such as the question of how to further raise employee skill levels and ensure the smooth transition of skills to younger workers. Naturally, the business interests of SMEs are diverse, and the changes in the transaction environment facing individual enterprises cannot be put down solely to the growing international development of labor. Moreover, the approaches that they should adopt also vary widely according to the specific trading conditions that they face. But while smaller enterprises in particular may be keenly aware of the need to embark on management reforms, such as by entering new fields of business, developing new products, and acquiring new customers, at this difficult time of dwindling orders and earnings, many enterprises can become absorbed in the present again when work picks up again-―danger past, God forgotten‖, one might say. Precisely because domestic investment in manufacturing is now heading up, all SMEs need to re-ascertain and reassess their strengths and weaknesses and do what they can in response on a constant and regular basis.

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4. How Technology Transfer Organized and Supported for SMEs in Japan 1. Public Sector 1) SMEs Agency, MITI ―MEDIUM AND SMALL ENTERPRISES BASIC LAW‖ (July 20, 1963.) CHAPTER II ADVANCEMENT. ETC. IN STRUCTURE OF MEDIUM AND SMALL ENTERPRISES (Elevation of technology) Article 10. The State shall, for the purpose of elevating technology of medium and small enterprises, provide the necessary enforcement policy for arrangement of experimental and laboratory organizations, promotion of research and development of technology, and expansion of undertakings in conjunction with technological guidance, training of technicians and cultivation of skilled workmen, etc.[4]. Upgrading Technology Coping with Informatization The Government provides the following to improve the technical capabilities of SMEs 1. Technical training 2. Technical guidance 3. Technological development 4. To give assistance to exchange information 5. To give assistance to regional projects (SMEs Agency, MITI ―OUTLINE OF SMALL AND MEDIUM ENTERPRISES POLICIES OF THE JAPANESE GOVERNMENT‖, March, 1991.) [5]

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Fig.5. The structure of Measures to Promoter Technology Transfer and Technological Exchange for SMEs in Japan (Plaza Business Work)

Entrepreneur of SME

Decision for Introduction of Technology

Application for Transfer of Technology Presentation of Information Technical Guidance

The SME Corporation

①Dispatch of Staff Support to The Structure of Exchange Know-How of Operation and so on for Setting-up The Place

I A n r t b r i o . t d r u a t t i i o o n n

Public Examination R&D Institution Reference of Presented Technology for Introduced Technology

②Introduction･ Arbitration of Instructor

③Drawing-up･ Analysis･ Appreciation of

Request for The SME Corporation

①

②

③

Karte

Reference･Analysis･ Appreciation of Presented Technology for Introduced Technology

Hold The Technical Exchange Plaza Business Work by The Prefectural Governor

Technical Guidance and Field Survey for Introduced Technology Appreciation Analysis Total Appreciation for Introduced Technology

ExpertResearcher for Technology Transfer

Entrepreneur of SME

Report for The Prefectural Governor

Source : Small and Medium Enterprises Agency, ―OUTLINE OF SME POLICES‖, 1982. Reference: Tsutomu Maotani ‗SMEs and Technological Measures‘, Edited by Nobuharu Tatsumi･Junichi Yamamoto ―RE-EXAMINATION OF SMEs POLICIES-Drawing-up The Long-range Plan for Japanese Economy‖(Yuhi-kaku), April,1985.(in Japanese)

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2) Prefectural Government Countermeasures to Promote and Develop for SMEs ･ SMEs in Traditional Production Areas ･ New Businesses Foundation and Presentation of Facilities as ―Techno-park‖ and ―Incubator‖ for SMEs 2. Private Sector-Private Industrial Side 1) Subcontracting System Recent ―WHITE PAPER ON SMEs‖ (―W.P‖) officially emphasized for subcontracting system. ‗The mutual cooperation between SMEs and Major corporations, as typically seen in the form of subcontracts among them, were of particular significance in moving toward a domestic demand-led economy in the late 1980 with relatively good results‘ (―W.P.-1991‖, p.34). In the general meanings, ‗The system of subcontracted operation and supervisory control over all closely related enterprises coming to be reinforced owing to the said exploiting mechanism utilized by the monopolistic capital have come to give rise to the following structural differentiation such as (a) subcompany,(b) enterprise placed under direct supervisory control,(c) small business placed under exclusive subcontract,(d) small business placed under floating subcontract,(e) small-scale enterprise and/or petty enterprise (cottage industry) placed under floating re-subcontract‘([6] p.110, [1] p.79). From (a) to (c) are the so-called ―Children Companies‖ for Major corporations as ―Parent Companies‖. And also, this is ―KEIRETSU‖*,even notorious in ―The Economic Negotiations between U.S. and Japan‖ and so on. * Ken-ichi Miyashita・David Russell, ―KEIRETSU Inside The Hidden Japanese Conglomerates A Revealing Looks at The Great Corporate Groups at The Heat of Japan‘s Industrial Strength‖, Mc Graw Hill, 1994. However, ‗According to the Ministry of Foreign Affairs of Japan, ―KEIRETSU‖ are business groupings which are based on capital investment, contractual relationship, or some combination of the two‘ ([7]p.112). Prof. Dr. Hans J. Pleitner who is the former president of ―Rencontres de St. Gall‖(The International Small Business Society in Switzerland) emphasized: Subcontracting relations in Japan compare with USA/Western Europe, it is Father and Son relationship. The father decides what is to be done. He does not let the son down. However, neither is the son free to work for others, should he need to. Altogether, this is not a question of ―good‖ or ―bad‖ –it is a question of adequacy or adequateness on different cultural/historical backgrounds([8]p.191). Certainly, parent companies would like to help and take care of subsidiaries as their superior and obedient children companies. Even in this case, of course ―The KANBAN System‖ and ―The Just in Time‖ are very severer for SMEs-Subcontractors.

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Changing Subcontractor Image and Change in Expectation for SMEs-Subcontractors Fig.6. The Position and The Role of SMEs (Small and Medium-sized Enterprises)

Source : Illustrate based on Tatsumi Nobuharu, ‗The Differentiated Structure of Small Business‘, ―NEW MARXIAN ECONOMICS COURSE‖, Vol.4-―PRESENT CAPITALISM AND SOCIALISM‖ eds., by Shima Yasuhiko, Udaka Motosuke, Ohashi Takanori,& Usami Seijiro, January, 1973 (in Japanese), ‗Automotive Parts・ products...How to Rode out The Waves of Internationalization-Forming Acute Angle/Slim down of The Pyramidal/Hierarchical Type・Subcontracting Structure of The Automobile Industry‘, ―SMALL BUSINESS FINANCE CORPORATION MONTHLY‖ , 87‘6, Management Soft Research, 1987, 6(in Japanese), Ota Shinichi, ―THEORY OF CONTEMPORARY SMALL BUSINESS‖, Sci-Tech, March, 1993(in Japanese) and so on.

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2) Service Corporations, Organizations, etc. for Technological Information and so on ○,1. Japan Small and Medium Enterprise Management Consultants Association (J-SMECA) Created in 1954 under the auspices of the Ministry of International Trade and Industry(MITI) Membership Association of Small and Medium Enterprise Management consultants registered by MITI 6,000 over memberships Background J-SMECA, non-profit and membership association of MITI-registered small and medium enterprise management consultants(SMECs) created on the date of October 30, 1954, chartered and authorized by the Minister, MITI, Japan Government has provided a number of valuable services to the Small and Medium Enterprises(SMEs) community in co-operation with the Small and Medium Enterprise Agency (SMEA), MITI. Since its inception in 1954, J-SMECA has steadily grown each year and has established an internal system of organization. J-SMECA membership of SMECs of over 6,000 has organized into 47 chapters nationwide. ○,2. The Japan Technomart Foundation The Japan Technomart Foundation explains its system and activities to promote technology transfer, introducing 12 technologies consigned by its member companies. Nomura Research Institute, Ltd. introduces seven technologies for which they have successfully intermediated for new businesses as a Technomart member. Daiwa Institute of Research Ltd. introduces seven technologies owned by Nippon Telegraph and Telephone Corp. (NTT) in order to promote technology licensing. Mitsubishi Electric Corp. introduced four of its own technologies, for which its Intellectual Property Licensing Dept. has promoted licensing. 3) Success and Development by Original R&D in SMEs for Technology ○,1. The Growth from SMEs A. Marshall‘s ―Movement Upward‖ Typical Examples MATSUSITA ELECTRIC INDUSTRIAL = PANASONIC HONDA ・SONY Recent Examples CASIO・KYOCERA, etc. Already, as ―BUSINESS WEEK‖ emphasized, ‗Through innovative applications of semi-conductor chips, Casio transformed into itself from an ―Obscure Maker‖ of bulky and expensive desk-top calculators into the world‘s largest producer of digital watches and handheld calculators‘([9] p.204, [1]p.240). ○,2. The Medium and Optimum Sized Enterprise=A. Marshall‘s ―Representative Firm‖ ○,3. Venture Business=Elite of Small and Little Business ○,4. Spin off and Economic Independence from Parents Companies

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5. Support for Manufacturing SMEs through “WHITE PAPER ON SMEs IN JAPAN” [3] Section I Support for the advancement of core manufacturing technologies at SMEs It is Japanese SMEs, whose excellent technologies play key roles in production, including casting, forging and plating, to work closely on the details with downstream companies in the course of developing and manufacturing products and parts, that allows Japanese manufacturing to be internationally competitive. In order to strengthen that competitiveness in manufacturing areas including fuel cells, robots and other high-tech industries that are taking the lead in the Japanese economy, as well as to foster creation of new industries, it is important to further enhance the competitiveness of SMEs with important core technologies. Those SMEs are, however, facing various difficulties, including changes in their business ties and connections as competition becomes more severe, greater risks in their technological development due to increased sophistication and specialization, difficulty in securing human and financial resources, etc. The bill for the SME Technological Advancement Law will therefore be submitted to the 164 th ordinary session of the Diet, and strategic, prioritized measures will be undertaken, including promotion of information-sharing between upstream and downstream industries, support for research and development on core technologies, etc. 1. Support for research and development by manufacturing SMEs (1) Issuance of guidelines for technological advancement(guidelines specific to each technology) and recognition of R&D plans (2) Projects to support the advancement of strategic core technologies (3) Reduction and waiver of patent fees, etc. (4) Lending arrangements of JASME-Under the SME Technological Advancement Law, the Japan Finance Corporation for Small and Medium Enterprises(JASME) will provide special loans to SMEs whose specific research and development plans, etc., have been approve by the METI minister, and that meet certain requirements. (5) Special exemptions under Small and Medium Enterprise Credit Insurance Law (6) Special exemptions under the Small Business Investment Limited Law 2. Enhancement of the environment for advancement of manufacturing core technologies (1) Support for development of networks between upstream and downstream companies (2) Projects to support the advancement of strategic core technologies (3) Programs to develop human resources for SMEs, making use of technical colleges, etc. (4) Objective proof of technical accuracy and reliability in measurement standards (5) Facilitating continuation of core technologies (6) Programs to enlighten SMEs on intellectual property Section 2 Promotion of technological innovation by SMEs

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Motivated, capable SMEs play leading roles in Japanese manufacturing, and their revitalization is essential to overall economic revitalization and strengthening of international competitiveness. Accordingly, strong support will be provided for the development of technologies by SMEs boldly tackling new challengies and entering new business and fields, in order to foster large numbers of SMEs whose outstanding technologies will put them at global forefront in their fields. 1. 2. 3.

Small Business Innovation Research(SBIR) SMEs/venture challenge support Promotion of commercialization of result of business innovation by SMEs

Section 3 Intellectual property measures for SMEs 1. Measures to protect SMEs‘ intellectual property rights 2. Support for the intellectual property strategies of local SMEs (1) Support for development of intellectual property strategies (2) Models for use of intellectual rights 3. SME/venture challenge support 4. Support for surveys of prior art for SMEs,etc. Section 4 Promotion of collaboration among industry, universities and government The development and commercialization of technologies through collaboration among industry, universities and government will be vigorously promoted through the following programs. 1. R&D by regional regeneration consortims (SME category) 2. R&D on innovative SME technologies by the National Institute of Advanced Industrial Science and Technology 3. Subsidizing commercial R&D by University business start ups 4. University venture business support 5. Subsidizing costs of promotion of technology transfers from universities

6. Conclusion With drastic and dynamic changing environment in contemporary world economic society, our studies, researches and investigations on SMEs problems have been widely and deeply enriching. Such situation has a similarity in a sense to the case where the study about ―physiocrats‖ is even in these days vigorously being made in the field of the history of economic doctrines or the history of economic thoughts. And as the matters now stand, we are placed under a situation as if the passage quoted by Dr. Masahiko Yokoyama once before— ‗as to ―Physiocrats‖, there are just as many different opinions as the number of students who are making study of it as committed by Henry Higgs‘ [10] p.iv, [1] p.42,) –might just as well be applicable as it is, to the case of the present studies on SMEs problems above mentioned. However, needless to say, our ultimate purpose is desirable and reasonable maintenance and development of SMEs! Now, finally, the most basic and important part of the management efforts of SMEs should be focused on research and development, and to emphasized in particular, the development of human ability to cope effectively with any change in the economic environment. It must be also stressed that the policy for instruction and training should be reinforced to develop human ability along with the policy to protect, foster and assist SMEs, including a series of measures for improvement of their economic environment. Construction of Equal and ―Socially Reasonable Division of Labor‖, Networking and Collaboration between SMEs and LEs! 14

If we are to ultimately aim at establishing a socially reasonable division of labor between SMEs and LEs (Large Enterprises), then we need to overcome the legitimatized and unreasonable exploitation of SMEs as especially the so-called discriminated ―minority industries‖ and their work force that have placed them at the bottom of the hierarchy of industrial structure. In order for SMEs to become a ―Vital majority‖ in a real sense, the old system that places SMEs at the bottom of the hierarchy should be changed, and a new system that will generate centripetal and cycle effects and relationships should be constructed by placing SMEs in the centre([11], p.37~38). Furthermore, what is the more important as another basic factor is not only corporate efforts of SMEs themselves, but also government policy to encourage them and the role of a leader or catalyst who makes a proposal to both of them from the international point of view. In this meanings, Roles and Contributions for World Economy of ―RENCONTRES de ST-GALL‖ are the Great and Forever! I would like to conclude by citing again precious instruction from Prof. Dr. Alfred Gutrersohn, Founder of ―RENCONTRES de ST-GALL‖, what is called for to solve the basic problem is ‗entrepreneurship and managing ability of SMEs which are confronted with drastically changing environment and changes in and diversification of values; and reeducation and training which have an accurate grasp of such motivation, concept and factors as enable them to maintain and develop their operations‘ ([12],[1], p.34.).

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References Mitsuru Tanaka, ‗Economic Environment of Small and Medium Enterprises-Its adjustment, Correction and Policy‘, Osaka International training centre, Japan International Cooperation Agency, ―EVOLUTION POLICY FOR CHANGING CONDITIONS OF SMALL AND MEDIUM ENTERPRISES IN JAPAN –in view of its possible application to developing countries-‖ (Translator, Shigeru Sugitani), January, 1979, Tanaka Mitsuru, (1999, November), ―SMALL BUSINESS IN THE JAPANESE ECONOMY-The Position, The Role, The Present Conditions of Small Business and Future Directions, Notes and Materials-‖, Kansai University Press, pp. vi+272.(Chapter 3) [2] Prof. Dr. Josef Mugler, Director, Institute of Small Business Management, University of Economics, Vienna, AUSTRIA [3] Small and Medium Enterprise Agency Ministry of Economy, Trade and Industry, Translated by Japan Small Business Research Institute ―WHITE PAPER ON SMALL AND MEDIUM ENTERPRISE IN JAPAN‖, October, 2006. [4] Small and Medium Enterprise Agency, MITI, ―MEDIUM AND SMALL ENTERPRISES BASIC LAW‖, July 20, 1963. [5] Small and Medium Enterprises Agency, MITI, ―OUTLINE OF SMALL AND MEDIUM ENTERPRISES POLICES OF THE JAPANESE GOVERNMENT‖, March, 1991. [6] Nobuharu Tatsumi, ‗The Differential Structure of Small Business‘, New Marxian Economics Course, Vol.4-―PRESENT CAPITALISM AND SOCIALISM‖ eds. by Yasuhiko Shima, Motosuke Udaka, Takanori Ohashi & Seijiro Usami, January, 1973.(in Japanese), Mitsuru Tanaka ‗The Recent Trend and Development of Theories of Small and Little Business in Japan‘, Kansai University, ―KANSAI UNIVERSITY REVIEW OF ECONOMICS AND BUSINESS‖, Vol.4.December,1975(Chapter 2 in [1]), [7] Takarajima Editorial Department, ―ENGLISH CONVERSASION FOR INMISUNDERSTANDING OF JAPAN‖, (A Separate Volume, ―TAKARAJIMA EX‖), June,1993. [8] Hans J. Pleitner, ‗Small Business in Switzerland‘, The Faculty of Sociology at Kansai University, ―BULLETIN OF SOCIOLOGY KANSAI UNIVERSITY‖, Vol.21, No.1,September,1989. [9] Ed. by Takeshi Hikino & Akira Nango, (December, 1982), ―DICTIONARY OF JAPANESE BUSINESS CULTURE‖, (Chapter9 in [1]) [10] Yokoyama, Masahiko, (April,1958.), ―THE ANALYSIS OF THE PHYSIOCRACY‖(in Japanese), ‗The Recent Trend and Development of Theories of Small and Little Business In Japan‘ (Chapter 2 in [1]) [11] Tanaka Mitsuru, (2004. July), ―Small Business of Buraku in Japan‘s Economy-Industrial Economy and Human Rights-‖ Kansai University Press, pp. iv+74 [12] Topic 5- ‗Entrepreneur and Enterprise in The Face of Changing Values‘, Edited by Hans Jobst Pleitner, ―SIGNIFICANCE AND SURVIVAL OF SMEs IN A DIFFERENT BUSINESS ENVIRONMENT‖, Swiss Research Institute of Small Business and Entreneurship, University of St. Gallen(HSG), September, 1996, ‗Changing World and Small Business-Pressing Problems for Survival and Development in The Borderless Age-‘ (Chapter 1 in[1]) [1]

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Engaging Entrepreneurs in Formulating Research and Innovation Policy at the European Level

Professor David Watkins Southampton Business School, UK [email protected]

ABSTRACT Within the framework or EU policy development we address the question of who to involve in the establishment of research questions and how. A specific attempt to do this is discussed in the context of a particularly challenging group. The firms involved are those which address – and seek to profit from – engagement with biodiversity in their core business. More than most classes of firm they have to hold that tricky balance between ensuring competitiveness while maintaining tradition. Some are growth oriented to the extent they wish to become the dominant firm in their niche, while to others „growth‟ in the sense normally used is anathema. Firms from all the major European countries are included. Their scale and scope range from small-scale wild and farmed fisheries to the management of national parks as business incubators. Many are extremely innovative technically, in terms of business processes and in the creation of new markets. For example, one case firm has established itself on the basis of agreeing nitrate capture quotas in an aqueous environment (to prevent marine pollution from agricultural run-off): the analogy is with delivering carbon capture quotas in an atmospheric environment. This is believed to be a world first. The project discussed was established by the European Commission in order to gain a deeper understanding of how to deliver environmental goals via private sector enterprises. A partnership of environmental NGOs and business schools is involved. Examples of emergent research questions are indicated, but the thrust of the paper is towards the process issues involved. Mixed methods are advocated including structured literature search; case writing; and focussed workshops. The framework for discussion is the „Mode 1‟ vs. „Mode 2‟ research distinction posited by Gibbons et al. (1994), which emphasises: transdisciplinarity; knowledge production in the context of application; multiple quality controls; diverse teams; reflexivity; and social accountability. The paper reports on progress with work which was discussed at the 2006 Rencontres (Watkins, 2006) when at the planning stage. INTRODUCTION Probioprise1 is a project commissioned by the EU Directorate General for Research. Its goal is to identify a research programme which will assist entrepreneurs to simultaneously meet two major planks of EU policy: the Lisbon Agenda, which seeks to make Europe globally more competitive by encouraging enterprising behaviour; and the Gothenburg Declaration, which aims to halt and reverse the loss of biodiversity in Europe by 2010. Normally, such objectives would appear to be in potential conflict, since enterprise „Probioprise: Creating a European Platform for SMEs and other stakeholders to develop a research programme for pro-biodiversity business‟, Framework 6 Priority 1.1.6.3 Global Change and Ecosystems. SSA #018356.

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and environmental concerns are not seen as natural bed-fellows. In a counter-intuitive leap of faith, the focus of the project is to identify and work with smaller enterprises, and potential enterprises, which benefit from the sustainable exploitation of biodiversity as a key resource (Pro-Biodiversity Enterprises, hence Probioprise). The focus is on such firms in protected areas (such as National Parks, Natura2000 locations and Ramsar sites). These sites tend to be located in some of the most rural areas of Europe and are often extremely peripheral in economic and social terms, as well as geographically. The research programme proposed will form one input to the development of EU‟s Framework 7 and subsequent Framework programmes; it is itself supported under Framework 6 as part of the work programme of EU DG Research. The Commission makes special efforts to involve SMEs in Framework. Probioprise is being undertaken by a consortium of European NGOs. Both Fauna and Flora International (FFI) and the European Bureau for Conservation and Development (EBCD) are environmental groups. The third partner is EFMD, formerly known as the European Foundation for Management Development. This evolved as an association of Europe‟s leading business schools and management development specialists from major international corporations, but has increasingly global reach. EFMD has a number of initiatives in place to stimulate entrepreneurship research and education in Europe. The author became involved in the project described as a representative of the EFMD‟s ‘Entrepreneurship, Innovation and Small Business Network’, and has been particularly involved in writing case studies of SMEs to inform the project‟s conclusions. The paper is therefore written from the perspective of a participantobserver; the contribution reports and reflects upon work done by a large international team engaged in organising and delivering a variety of related outputs, but the opinions expressed are those of the author alone. The mode of operation of the project is to undertake literature research, hold workshops of entrepreneurs operating in four different ecologically sensitive zones (forests, wetlands, grasslands and maritime / coastal zones), and to follow up the experiences of several of the participants through writing detailed case histories. The focus of this project is to identify management and other socio-economic research that could potentially make entrepreneurs more effective agents for delivering the dual policy aims - while themselves running economically effective businesses. At the time of writing, the four planned workshops have been held, and more than 100 individual enterprises have been involved in the data collection, with 15 organisations being the subject of detailed case histories. Cases have been written jointly by business experts nominated by EFMD and biodiversity experts nominated by FFI. ENTERPRISE AND THE ENVIRONMENTAL AGENDA A literature review of the intersection of scholarship regarding the smaller enterprise with that on environmental issues identified two major strands, broadly characterisable as the constraints perspective and the opportunities perspective, although the further one investigates the less clear this distinction seems to become. Constraints Perspective The first strand essentially concerns legislation as a constraint on environmentally insensitive behaviour or, in its more sophisticated form, as an incentive to environmentally sensitivity. At its simplest, „envi2

ronmentalism‟ is seen as having the same effects as regulation in general; as such it may also lead to innovation as firms try to adapt or circumvent legislation (Cf. Clark 1987). However, it is clear that the responses of firms to environmental regulation – as with regulation and „red tape‟ generally – are revealed to be more complex the further one investigates. Sharfman, Meo et al. (2000) observed that a growing number of firms have begun working towards the development of innovative systems that consume fewer resources, reduce waste and enhance productivity, while creating new market opportunities, but argue that since this environmentally friendly innovation occurs under varying types / levels of regulation, the role of such laws is still debatable. On the basis of four case studies undertaken for a U.S. Environmental Protection Agency (EPA)-funded study that describes environmentally conscious product and process innovations in high and low regulation environments, they modelled the antecedents of environmentally conscious technological innovation under high and low amounts of regulation. More quantitative work was conducted by Hitchens, Clausen et al. (2003) who sought to measure the relationship between firm competitiveness, management environmental culture, the importance of external advice on the use of cleaner production, and the firm's environmental performance among European manufacturing SMEs in the United Kingdom, Republic of Ireland, Germany and Italy in furniture and two other sectors. Cost and market drivers appeared to be almost as important as regulation, and the environmental initiatives adopted by firms did have an impact on both cost and market performance. Nevertheless, a statistically significant relationship between overall environmental and economic performance could not be shown. There was no evidence of a relationship between environmental performance and management's environmental attitudes. Moreover, SMEs failed to take up available advice, which often appeared to be of good quality. Further work by the same research group (Hitchens, Thankappan et al. 2005) concluded that more competitive SMEs do not necessarily have any greater capacity to adopt environmental initiatives. In a study which tried to link small firm environmental performance to factors such as profitability, growth, skills and R&D, they examined three interrelated propositions concerned with the impact of environmental initiatives on firm competitiveness: the relevance of management's awareness to environmental issues; the availability of external information and expertise to aid management; and the competitiveness of the firm. There was only scattered evidence to suggest any of these was importantly associated with the firm's environmental performance. The study showed that firms with an average economic performance were just as likely to adopt environmental initiatives as their highperforming competitors. Moreover, regardless of managers voicing personal concerns about the environment, most small firms do relatively little about the environment in practice and are reluctant to seek advice about it. Blackburn, Hart et al. (2005) investigated the effects of state regulation on small firms in three situations, including the response of business owner-managers to increased environmental regulation, in order to provide a holistic analysis of the effects of regulation on business strategy, the behaviour of ownermanagers and business performance. They argued for taking into account the 'world views' and experiences of business owners to understand their responses to interventions designed to meet wider government objectives, as well as structural factors, including labour force characteristics, supply chain influences and the nature and extent of competition. They conclude that the effects of regulation on smaller enterprises are always potentially more complex than they might appear at first sight and that what is re3

quired are sociological analyses, seeking to understand the motivations and meanings of small business owners, as well as economic perspectives. They argue that although business owners operate within certain structural constraints – including their business sector and resource and information limitations – within these parameters they respond according to a set of motivations and world meanings where the logics of intervention and the responses of business owners may not coincide. Opportunities Perspective In the second strand, environmental consciousness and concerns are the specific focus of business opportunities. This strand is somewhat piecemeal and at present lacks even a common vocabulary, but is evolving rapidly and may have much promise. Thus studies here may describe the „green entrepreneur‟ (Berle 1991; Fischetti 1992), „ecopreneurship‟ (Bennett 1991; Isaak 1998; Pastakia 1998; Isaak 2002; Schaper 2002), „bioneers‟ (Schaltegger 2002), „environmental entrepreneurship‟ (Keogh and Polonsky 1998; Linnanen 2002) or „sustainable entrepreneurship‟ (Anderson 1998; Cohen and Winn 2007). Despite this, the focus of the studies is very similar. There is even a small literature focussing on the support networks available to such firms, such as specialist sources of risk capital (Randjelovic, O'Rourke et al. 2003) and a growing case literature (e.g. Volery 2002; Seidl, Schelske et al. 2003) which might be adapted for pedagological use. Recently, attempts to systematise and theorise the situation have been attempted. These usually start from economic perspectives such as discussion of market failure (e.g. Pastakia 2002). Cohen and Winn (2006) suggest that four types of market imperfection (inefficient firms, externalities, flawed pricing mechanisms and information asymmetries) both contribute to environmental degradation but may also provide significant opportunities for the creation of radical technologies and innovative business models. Thus it is possible for “…founders to obtain entrepreneurial rents while simultaneously improving local and global social and environmental conditions”. Similarly, Dean and McMullen (2007) argue that since “…environmental degradation results from the failure of markets…environmentally relevant market failures represent opportunities for achieving profitability while simultaneously reducing environmentally degrading economic behaviours”. The key task therefore is to determine how entrepreneurs identify and seize the opportunities that are inherent in environmentally-related market failures. Market failure is one of the few widely accepted reasons for providing assistance to SMEs generally, be it in the form of finance, information services, training or consultancy (Cf. Storey 1994; Bovaird, Hems et al. 1995; Bergstrom 2000; Hinloopen 2004, among many others. Thus it is unsurprising that there have already been calls to establish „business biodiversity facilities‟ to mitigate market failure where the market currently underprices valuable biodiversity goods and services (Bishop, Kapila et al. 2006)

INVOLVING ENTREPRENEURS IN FRAMING POLICY It is something of a paradox that as the entrepreneurship / small business field has become an acceptable academic endeavour, it has become more and more detached from the stated interests of the subjects of its research. It is easy to see why this should be so. Verstraete (2002 and 2003) has explained the process of academic institutionalisation in France, which has a particularly rigid and statist academic system, al-

4

though Aldrich (2000) has argued that in Europe more generally2 entrepreneurship / small business academics are more practically and policy oriented than their colleagues in the USA. Evidence is scant, but Brockhaus (1988) specifically compared the concerns expressed by entrepreneurs to the US President in the 1986 White House Conference on Small Business to research undertaken in the key entrepreneurship niche journals and key conferences (Cf. Watkins and Reader 2003). He found little overlap. Banks and Taylor (1991) and Aldrich and Baker (1997) later reached similar conclusions. Indeed, since that time the situation has probably worsened as attempts to evaluate academic research around the world have increasingly focused on peer review and bibliometric measures rather than applicability in the outside world. Busenitz, Page West et al. (2003) exemplify those who seem to welcome this trend, seeking to locate and confine entrepreneurship research to just one narrow academic subfield, sacrificing all to academic respectability and career progression. This has happened to such an extent that even academics are beginning to worry, but it will be instructive to observe whether the response to the general Academy of Management Conference call for 2008 by Walsh (2007/8), seeking the development of phronesis, is higher or lower in „emergent‟ domains such as entrepreneurship. MODE 2 RESEARCH IN THEORY Be that as it may, in the respect described above, entrepreneurship research is just following in the footsteps of much of previous social science, and before that, natural science. In a book which has much influenced policy makers, Gibbons, Limoges et al. (1994) characterise the process by which academics set their own research agenda through peer review and discount the interests and needs of the wider community as „Mode One‟. They contrast this with a form of research that was evolving at the time they were writing and which they characterise as „Mode Two‟. Mode Two research takes into account the interests of other societal stakeholders from the outset and goes beyond traditional disciplines. Specifically, it is construed as research which is undertaken as: part of a socially accountable, reflexive process; is subject to a wider range of quality processes than simple peer review; is transdisciplinary; is performed by heterogeneous research teams; and perhaps crucially, is performed in the context of application. (See Figure One for a schematic of this.) Although these characterisations are ideal types, there is no question that the concept of Mode Two research has been extremely and increasingly influential (Nowotny, Scott et al. 2001). In particular, it is possible to see elements of all five Mode Two characteristics in the design of the EU Framework programmes. However, even when an effort is made to embrace potential users in the formulation of research policies and projects in order to meet the criterion „not only of research performed in the context of application‟, but also those of „social accountability‟ and a broader construct of „quality‟ (in terms of fitness for their purposes), it is much easier to find representatives of large firm interests than of small ones. MODE 2 RESEARCH IN PRACTICE: PROBIOPRISE PROJECT As noted earlier, the focus of Probioprise is to identify and work with smaller enterprises, and potential enterprises, which benefit from the sustainable exploitation of biodiversity as a key resource in order to

2

Probably most true of the UK and Nordic countries.

5

take note of their concerns and interests in the formulation of future Framework initiatives. We can now examine the extent to which this projects falls within the parameters of Mode Two research. Probioprise is itself a Framework Programme under the EU‟s 6th Framework; however, it is a special project by virtue of the fact that its aim is to inform the research agenda for Framework 7 and subsequently: in EU parlance, it is what is known as a Specific Support Action or SSA. So it is doubly important, given that the set of Framework Programmes is intended to support research that is near to application, that Probioprise meets the conditions of Mode Two research. These conditions therefore perfuse the design of the Probioprise project, as can be seen when we address each of the Mode Two characteristics individually. Heterogeneous, Dynamic Research Teams We have noted above that Probioprise is being undertaken by a consortium of European NGOs, bringing together expertise in environmental issues, business development and the management and influencing of core European institutions. Fauna and Flora International (FFI) is a long-established environmental NGO which focuses on the preservation and re-establishment of biodiversity on a worldwide scale. European Bureau for Conservation and Development (EBCD) is an organisation which was established to undertake environmentally-related tasks for European institutions such as the European Parliament. The third partner is the EFMD, the association of Europe‟s leading business schools and the management development specialists of major international corporations, which has a number of initiatives in place to stimulate entrepreneurship research and education in Europe. All of these organisations can be described as network organisations since they can quickly access and animate a wide range of contacts and expertise through their members and sponsors. They therefore pass the tests of heterogeneity and dynamism. Transdisciplinarity The core expertise set which FFI brings to the project is in ecological and biological sciences, together with experience of a political nature which comes from dealing with local and national administrations, together with other NGOs, on a worldwide basis. The expertise set which EFMD brings to the project comprises the disciplines which are traditionally taught in European business schools, which range from business history through organisational design and strategy to economics and applied mathematics. A subgroup of its members also has particular expertise in the emerging discipline of entrepreneurship and small business management. EBCD brings expertise in environmental management and law, together with political skills including lobbying. The criterion of transdisciplinarity thus seems well met. Socially Accountable Reflexive Process A core element of a socially accountable reflexive process is to involve the key stakeholders in a meaningful way, while not neglecting the legitimate interests of wider civic society. The design of the Probioprise project has addressed this issue in the following way. Following a literature search for publications of all kinds which address issues of SMEs engaging with biodiversity, each of the organisations activated its own networks to establish levels of knowledge and interest in the topic. On the basis of this, academics, consultants, and – above all – SME owner-managers were identified who had both an interest and expertise to share. These groups were divided into four on the basis of the kind of ecological setting in which they mainly operate: forestry, grasslands, wetlands, or the marine and coastal environment. A workshop 6

was then held for each of these groups. Representative SMEs which had a priori interesting experiences to share were invited to discuss their experiences of creating and developing their businesses, and to indicate the kinds of problems, issues and opportunities they expected to face in future. Discussions were wideranging, with both other entrepreneurs and the invited experts commenting on each presentation. Following each workshop, a report was circulated to all participants to invite their comments. In addition, a small number of SMEs from each workshop was chosen to be the basis of an extended case study which documented in more detail the firms‟ experiences and issues faced. Each case study has been written jointly by authors having respectively business expertise and expertise related to the nature of the biodiversity which was the basis of the business opportunity. Each case study is next sent to the SME for comment and as each becomes finalised it is placed on the project website. All participants in every workshop are encouraged to use the website to check on and contribute to progress and as the basis for contacting firms with which they may wish to do business. The site is also being opened up to other relevant parties. The project has thus established a platform to enable the interaction of firms working with biodiversity which may continue beyond the life of the project itself. The penultimate stage will be to write two documents based on the information collected from the workshops, case histories and literature review. The first of these comprises an analysis of the experiences of SMEs seeking to engage in a positive manner with biodiversity, including the issues faced and still to be overcome. The second output is a proposed Research Agenda to determine how SMEs may more effectively work with biodiversity to meet the joint aspirations of the Lisbon Agenda and the Gothenburg Declaration, and to assist them to do so. These papers will then again be circulated to all participants in the project, as well as being placed on an open website, for wide consultation before being presented to the European Commission and the European Parliament. In this way the criterion of the research being a socially accountable, reflexive process is being met. Knowledge Produced in the Context of Application From the discussion above it should be clear that the relevant actors – the entrepreneurs – are being involved throughout the process of determining the kind of research which they believe to be most relevant in assisting them to meet their business objectives while maintaining or enhancing the biodiversity on which their continued business success depends. In particular, by beginning the process with a wideranging and relatively unstructured set of workshops rather than with a fully developed, researcherdetermined set of topics or formal questionnaire, it is the entrepreneurs who are throughout being encouraged to take the lead in the design of the ultimate research agenda. For the first Workshop the organisers / animateurs deliberately did not do more than set out a list of likely „Issue Areas‟, which might for the most part be of the sort faced by any SME (see below), as a framework within which to capture these. This rather inductive approach is a rarity in the establishment of policy towards SMEs in any field: the aim was to ensure that the research which is ultimately undertaken within the Framework programmes, and which seeks to assist these SMEs by working on issues which they face (or believe they face), are those which the entrepreneurs themselves genuinely feel to be the most salient. As an example of the detailed way in which the project is being implemented, note that the workshops are being held in locations specific to the ecosystem with which the relevant entrepreneurs engage, and – wherever possible – that this is within a protected area and / or co-hosted by a scientific research institute prominent in research on

7

that ecosystem.3 In this way the team is seeking to ensure both that the research agenda itself is produced in the context of application, and more importantly that the research conducted in future on the basis of the research agenda is itself highly contextualised to the needs of the SMEs. Broad Range of Quality Controls Without wishing to labour the point, it should be clear that by feeding the results of the research back to a variety of interested parties in „real time‟ throughout the project – including the sponsoring group within the European commission, and not least the entrepreneurs themselves – the generalised quality criterion of „fitness for purpose‟ is taking priority over the narrowly constructed quality criteria of academic peer review.

PROGRESS TO DATE Engagement To date the project has managed to engage with owner-managers and business experts from nearly all the 27 Member States and some other countries in the EEA4 and beyond. This has been difficult, and it is a tribute to the power of the networks which the project partners have been able to animate. Criteria for inclusion in the project have actually been the subject of considerable debate within the team throughout. With a limit of 15 case studies and around 100 workshop participants it is difficult simultaneously to ensure good coverage of different firm sizes (EU itself recognises three within the general rubric of „SME‟5), types of enterprise (since the EU rubric again does not insist on the common characterisation of the profit-seeking independent enterprise which the term „SME‟ immediately suggests to AngloSaxon ears) and four (as a minimum) kinds of ecosystem. This is before one even examines the kinds of goods and services offered by the firm, or its position in the supply chain. The team has, however, as discussed below, tried to use such constraints as a springboard to generating aspects of the research agenda. The Emerging Research Agenda: Stimulated by Issues in the Case Studies Table One mainly sets out the characteristics of the case firms from the first round of case writing, comprising 8 organisations. The final row of Table One lists for each organisation two important issues arising as a result of the case analysis. Some of these relate to general business issues as faced by any SME (e.g. seasonality; managing growth), whereas others relate to issues specific to those firms located in or near protected areas and / or otherwise sustainably engaging with biodiversity for profit (boundary effect issues; lack of specialist services (including finance), „unfair‟ competition from less ecologically sensitive firms). There are – although not apparent from this table directly – some issues which although common to all SMEs – are severely compounded by these firms engaging with biodiversity. For example, lack of continuity in EU policies as experienced by the Portuguese firm Imobiente is compounded by the

3 For example, the forestry workshop was co-hosted by METLA, the Finnish Forest Research Institute; the grasslands workshop was held in Croatia in association with Žumberak-Samborsko Gorje Nature Park. 4 European Economic Area. Broadly, these countries are economically integrated with the EU without subscribing to the aspect of political integration that membership would entail. Switzerland and Norway are important members of this group. 5 This is based on numbers employed. Less than 10 are called micro-firms; up to 50 are small firms, and above that are medium-sized firms. The main rationale for this is that the different sizes will have different organisational characteristics.

8

industry in which it works – forestry – which has one of the longest product cycles found in any industry (Watkins 2006). However, although the case studies constitute the most intensive interaction between those on the project team and the SMEs – and are therefore likely to be the source of the deepest and most complex insights into the potential Research Agenda – they are by no means the only source. Team members have been compiling potential items from a variety of sources since the project began. Emerging Research Agenda: Stimulated by Literature Review and Follow Through Given that the ultimate objective of the Probioprise project is the establishment of a Research Agenda appropriate to the needs of the firms characterised in this paper, it has been vital to record contributions towards this agenda as and when they are signalled at each stage of the project; they are then followed through to other phases. Thus the ongoing literature review (of which some of the introductory material in this paper forms a part) suggests some areas where new knowledge is likely to be both appropriately generated through academic research and of value to the target firms. One example suggested in part by works cited above such as Pastakia (2002), Cohen and Winn (2007) and Dean and McMullen (2006) is the issue of the extent to which there is market failure in respect of the biodiversity services provided by SMEs. This is something which is being inducted through into the case studies: thus the firm Imobiente has customers who provide positive externalities in the form of water management where they are nevertheless unable to capture (or completely capture) the economic benefits. However, another firm (which is the subject of a case not otherwise reported here: Nordic Shell, a seafood producer) has been able to construct and implement a business model where the improvement of water quality for its community also generates real economic value for the firm.6 It is in this way that parts of the Research Agenda have been identified and developed. Emerging Research Agenda: Stimulated by Definitions and Methodological Issues Internal discussions relating to definitions, categorisations of firms and methodological issues have also directly generated useful research questions. Thus the issue of what constitutes an „SME‟ in EU parlance – as noted above – leads directly to important questions regarding the extent to which business and ecological motivations can be co-resolved, and what constitutes an appropriate context for doing this (Cf. Watkins 2007)). Consideration of these issues has led the team to engage more strongly with the social / community enterprise literatures, which in turn has generated further appropriate research questions regarding the applicability and development of these strands of management research.

Emerging Research Agenda: Stimulated by Issues from the Workshops The other main input into the Research Agenda has been to capture and analyse the issues emerging from discussion in the workshops. Although it was noted earlier that the approach to the whole study has been largely inductive, it would have been inappropriate for the team to have organised workshops which were totally unstructured. Thus inter alia a short check-list of headings within which more specific issues might be identified was developed (mainly on the basis of the business research expertise within the

6

In essence there is an „off-set‟ for the fixation of nitrogen run-off analogous in some ways to a carbon sequestration off-set.

9

group, deriving from the business school participants), as a means of helping to capture research issues manifesting themselves in the first workshop. This list was as follows: Typological / Definitional (Including Eligibility Criteria for EU and Other Support) Motivational Issues among Environmental Entrepreneurs specifically Organisational Issues Customer / Market Threats / Opportunities Supplier and Logistical Issues Position in Supply Chain Staffing beyond the Entrepreneurial Core Financial Strength and Sourcing Finance Knowledge Management (including Absorptive Capacity for New Business Expertise) Scalability (and Awareness of this) Existence of Networks / Clusters of Similar or Interacting Firms Use / Need for Common Services (Marketing, KM, etc) Role of Public Sector (at Local, Member State and EU Level ) Economic Factors A brief scrutiny of Table Two, which displays the outcomes from the first (and typical) Workshop shows that many of the issues which concern BD-based businesses are similar or identical to SMEs in general. However, some of these are complicated by the multidimensional objectives which many of these firms seek to achieve. Consider just two of these. It is not uncommon for an entrepreneur to establish a BD-based business with environmental considerations predominating and the business being seen as a simple tool.7 If the environmental objectives could be met more simply through other means (establishing an NGO, working in the public sector, etc.) then the business-as-tool might well be sacrificed. Even if it continues indefinitely, a motivation based on extreme satisficing behaviour may have implications for the extent to which public programmes should support such firms, whatever the apparent benefits. However, if others depend on the continued existence of the firm qua business entity this could cause a range of problems in future with which public agencies might have to engage. Clearly the milieu in which some of these BD-based businesses exist could create difficult problems for public support. However, it would be very wrong to leave an impression that all proprietors of BD-based firms lack the motivation and expertise to be successful in business; many of the firms whose experiences informed Table Two are innovative, profit-oriented businesses such as those which might be found in any sector. Their profitability may be constrained at present by a failure to capture the full benefits of the ecological services they provide, but they are keenly aware of this and often surprisingly anxious seek out market mechanisms to do this rather than rely on soft loans or other state support. There are clearly emerging opportunities, for example in co-operative action for direct marketing, sustainability certification and elsewhere, that could be business rather than public sector led, at least in the medium term. For the Probioprise team at present the most important thing is that the emerging Research Agenda can be speedily completed and made available to BD-based businesses for comment. Hopefully, in the light of 7

It has long been recognised that entrepreneurship may be an instrumental strategy for the continued pursuit of non-economic motivations or specific technical activities rather than a rational economic choice. (e.g. Watkins 1973).

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their feedback, there will exist a Research Agenda that a large number of BD-based businesses feel they can „own‟. If so, this will have been a relatively rare example of successfully engaging SMEs in Mode Two research…but could well become a useful model for the future both in environmental entrepreneurship and elsewhere in the Framework Programme. Or, to use Walsh‟s distinction (2007/8), following Aristotle, can we combine phronesis and episteme to good effect in developing the techne which will enable us to continue to improve mankind‟s material position while not destroying the planet.

REFERENCES Aldrich, H. (2000). Learning Together: National Differences in Entrepreneurship Research. The Blackwell Handbook of Entrepreneurship. D. L. Sexton and H. Landström. Oxford, Blackwell : 5-25. Aldrich, H. E. and T. Baker (1997). Blinded by the Cites? Has There Been Progress in Entrepreneurship Research? Entrepreneurship 2000. D. L. Sexton and R. W. Smilor. Chicago, Upstart Publishing Company: 377-400. Anderson, A. R. (1998). "Cultivating the Garden of Eden: Environmental Entrepreneuring." Journal of Organisational Change Management 11(2): 135-43. Banks, M. C. and S. Taylor (1991). "Developing an Entrepreneur- and Small Business Owner-Defined Research Agenda." Journal of Small Business Management 29 (2): 10-18. Bennett, S. J. (1991). Ecopreneuring: The Complete Guide to Small Business Opportunities from the Environmental Revolution. New York, John Wiley. Bergstrom, F. (2000). "Capital subsidies and the performance of firms." Small Business Economics 14 (3): 183-193. Berle, G. (1991). The Green Entrepreneur: Business Opportunities that Can Save the Earth and Make You Money. Blue Ridge Summit, PA, Liberty Hall Press. Bishop, J., S. Kapila, F. Hicks, and P. Mitchell (2006). Building Biodiversity Business: Report of a Scoping Study, IUCN /Shell. Blackburn, R., M. Hart, and D. Smallbone (2005). Regulation, regulation, regulation: Understanding the effects on entrepreneurship and small business performance. Proceedings of the RENT XIX Conference: Entrepreneurship, Competitiveness and Local Development, Naples, Edizioni Scientifiche Italiane for University of Naples Federico II, with EIASM and ECSB. Bovaird, T., L. Hems, and M. Tricker (1995). Market Failures in the Provision of Finance and in Business Services for Small and Medium Sized Enterprises. Finance for Growing Enterprises. R. Buckland and E. W. Davis. London, Routledge: 13-39. British Academy of Management (2002) Special Research Forum on Mode 2 Knowledge Production: „Exploring Practice-Oriented Research Approaches‟, Summary Materials, Glasgow, March. Brockhaus, R. H. (1988). "Entrepreneurial research: are we playing the correct game?" American Journal of Small Business 11 (3): 55-61. Busenitz, L. W., G. Page West, D. Shepherd, T. Nelson, G. N. Chandler, and A. Zacharakis (2003). "Entrepreneurship in Emergence: Past Trends and Future Directions." Special Issue on Entrepreneurship of Journal of Management 29 (3) 285-308. Clark, S. H. (1987). Farmers as Entrepreneurs: Regulation and Innovation, Brown University, Connecticut. Cohen, B. and M. I. Winn (2007). "Market imperfections, opportunity and sustainable entrepreneurship." Journal of Business Venturing 22(1): 29-49. Dean, T. J. and J. S. McMullen (2007). "Toward a theory of sustainable entrepreneurship: Reducing environmental degradation through entrepreneurial action." Journal of Business Venturing 22 (1): 50-76. Fischetti, M. (1992). "Green Entrepreneurs." Technology Review 5 (3): 38-45. Gibbons, M., C. Limoges, H. Nowotny, S. Schwartzman, P. Scott, and M. Trow (1994). The new production of knowledge: the dynamics of science and research in contemporary societies. London, Sage. Hinloopen, J. (2004). "The Market for Knowledge Brokers." Small Business Economics 22(5): 407-415. Hitchens, D., J. Clausen, M. Trainor, M. Keil, and S. Thankappan (2003). "Competitiveness, Environmental Performance and Management of SMEs." Greener Management International 44 (Winter): 45-57.

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Hitchens, D., S. Thankappan, M. Trainor, J. Clausen, and B. de Marchi (2005). "Environmental Performance, Competitiveness and Management of Small Businesses in Europe." Tijdschrift voor Economische en Sociale Geografie 96 (5): 541-557. Isaak, R. (1998). Green Logic: Ecopreneurship, Theory and Ethics. Sheffield, UK, Greenleaf Publishing. Isaak, R. (2002). "The Making of the Ecopreneur." Greener Management International 38 (Summer): 81-91. Keogh, P. D. and M. J. Polonsky (1998). "Environmental Commitment: A Basis for Environmental Entrepreneurship?" Journal of Organisational Change Management 11(1): 38-48. Linnanen, L. (2002). "An Insider's Experiences with Environmental Entrepreneurship." Greener Management International 38 (Summer): 71-80. Nowotny, H., P. Scott, and M. Gibbons. (2001). Re-Thinking Science: Knowledge and the Public in an Age of Uncertainty. Cambridge, Polity Press. Pastakia, A. (1998). "Grass-roots Ecopreneurs: Change Agents for a Sustainable Society." Journal of Organisational Change Management 11(2): 157-70. Pastakia, A. (2002). "Assessing Ecopreneurship in the Context of a Developing Country: The Case of India." Greener Management International 38 (Summer): 93-108. Randjelovic, J., A. R. O'Rourke, and R. J. Orsato (2003). "The emergence of green venture capital." Business Strategy and the Environment 12 (4): 240-253. Schaltegger, S. (2002). "A Framework for Ecopreneurship: Leading Bioneers and Environmental Managers to Ecopreneurship." Greener Management International 38 (Summer): 45-58. Schaper, M. (2002). "The Essence of Ecopreneurship: Introduction to Special Issue on Environmental Entrepreneurship." Greener Management International 38 (Summer): 26-30. Seidl, I., O. Schelske, J. Joshi, and M. Jenny (2003). "Entrepreneurship in biodiversity conservation and regional development." Entrepreneurship and Regional Development 15 (4): 333 - 350. Sharfman, M. P., M. Meo, and R. T. Ellington (2000). "Regulation, Business, and Sustainable Development: The Antecedents of Environmentally Conscious Technological Innovation." American Behavioral Scientist 44 (2): 277-302. Storey, D. J. (1994). Understanding the Small Business Sector. London, Routledge. Verstraete, T. (2002). Essai sur la singularité de l'entreprenariat comme domaine de recherche. A. Desreumaux and T. Verstraete. www.editions-adreg.net, ADREG Editions. Verstraete, T. (2003). On the Singularity of Entrepreneurship as a Research Domain. Annual Review of Progress in Entrepreneurship Research, 2000/2001. D. S. Watkins. Brussels, European Foundation for Management Development: 10-65. Volery, T. (2002). "An Entrepreneur Commercialises Conservation: The Case of Earth Sanctuaries Ltd." Greener Management International 38 (Summer): 109-116. Walsh, J. P. (2007/8) Program Chair‟s Remarks: The Questions We Ask, AoM 2008 Annual Conference Invitation, accessed from Academy of Management website, January 2008 Watkins, D. (1973). "Technical Entrepreneurship: a Cis-Atlantic View." R & D Management 3 (2): 65-70. Watkins, D. (2006). Involving Entrepreneurs in Designing and Developing the EU Research Agenda: Ecopreneurs in the EU‟s Framework Programme. Rencontres de St-Gall 2006: Understanding the Regulatory Climate for Entrepreneurship and SMEs. U. Fueglistaller, T. Volery and W. Weber. Wildhaus, Switzerland, Swiss Research Institute of Small Business and Entrepreneurship, University of St. Gallen (KMU-HSG). Watkins, D. (2007). Koli National Park: Incubation for Regional Economic Development and Environmental Protection through Multi-Level Entrepreneurship, Annual Babson College Entrepreneurship Research Conference, Madrid, June. Watkins, D. and T. Jones (2008). Aranyponty („Golden Carp‟) Fishponds, Hungary: From Obsolescent Fish Farm to Successful International Enterprise, Rural 2008 Conference: Sustainability, Culture and Business, Dumfries, University of the West of Scotland and University of Glasgow. Watkins, D. and D. Reader (2003). Quantitative Research on Entrepreneurship as a Field of Study: What do we Know? What should we Know? 17th Annual RENT Conference, Lodz, Poland, European Institute for Advanced Studies in Management / European Council for Small Business, November.

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Figure 1: Schema of Mode 2 Research

TRANSDISCIPLINARITY

HETEROGENEOUS, SOCIALLY ACCOUNTABLE REFLEXIVE PROCESS

DYNAMIC RESEARCH TEAMS

KNOWLEDGE BROAD RANGE OF QUALITY CONTROLS

PRODUCED IN THE CONTEXT OF APPLICATION

Source: Adapted from Summary Materials, British Academy of Management Special Research Forum on Mode 2 Knowledge Production: ‘Exploring Practice-Oriented Research Approaches’, Glasgow, March 2002

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Albufeira, Portugal

Wetlands

Forest

Forest

Freshwater fish-farming, processing + angling and eco-tourism including accommodation, restaurant, health spa Private family business. Post communist era successor to collective farm.

Diversified, including investment funds + technical assistance to firms, NGOs etc.

Traditional wetlands farm + associated eco-tourism including farm sports

Timber processing + some downstream activities

Forest consultancy / management, including land reclamation and water management

Private firm with overtly stated ecological role Registered in UK but activities are in Eastern Europe

Family farm (held as two separate limited (b.v) companies

Private firms with unlimited liability (spółka jawna - sp.j)

Private microfirm

30 on main site; 70-80 FTE overall. Beginning to structure by activity.

Micro-firm. Creates employment in other firms

7 FT plus around 50 PT staff. Management structures in place

Taxus ~6 Kolbon ~ 40

Extra costs of operating in Protected Area.

Credibility issues outside home country

Overregulation.

Access to finance for SMEs problematic.

2.5 FTE employees including owner. Many PT operatives on project basis, often in disadvantaged rural areas Continuity of EU policies.

Low market premium for quality products

Lack of finance aimed at biodiversity firms

Seasonality

Quality advisory services lacking

Koli, North Karelia, Finland8

SáregresRétimajor, Hungary9

Principal ecosystem Nature of Business

Forest + Wetlands Eco-sensitive contracting

Forest

Wetlands

National Park + Economic Development

Status / Ownership

Private company set up for purpose.

Size and scope

9 employees. Right at micro-firm / small firm transition point

Typical Issues of Concern

Managing growth.

Infrastructure owned by Finnish State. Partners licensed to operate facilities. Spins off independent SMEs as policy. Small core staff. Hotel staff + about 25 people in SMEs within Park, plus many more in area surrounding Institutionally anomalous

Heylen bvba Herentals, Belgium

Cheap competition from less ecoaware firms.

8 9

Boundary effects on periphery of protected areas

For an extended discussion of this case see Watkins (2007) For an extended discussion of this case see Watkins and Jones (2008)

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Imobiente

Taxus and Kolbon Saw mills Malopolska , Poland

Location

Firm

Field Fair

Kamerik , The Netherlands

Aranyponty Rt. Rétimajor Fish Farm & Eco-tourism

Lower Danube Basin – Ukraine, Bulgaria, etc Wetlands

Koli National Park

De Boerinn Farm

Table One: Sample Cases and Issues Identified

HRM issues

Table Two: Research Issues Emerging Directly from a Typical Workshop (Forestry) A. Typology etc

1. 2. 3.

B. Motivation

4. 5.

C. Organisation

6.

7. 8. 9.

D. Customers / Markets

10. 11.

E. Suppliers F. Staffing

12. 13. 14. 15.

G. Financial strength and sourcing

16. 17. 18. 19.

H. Knowledge management including absorptive capacity of new business expertise I. Scalability and awareness of this J.

Position in supply chain K. Existence of networks / clusters L. Use / need for common services Marketing; KM, etc) M. Role of Public sector in Member States and EU N. Economic Factors

20.

What is best level of aggregation in considering BD-based business since some firms work across ecologies? Are issues of ecological restitution different in kind at a business level from those of maintenance? BD-based business is a confusing concept for consumers? (BD-based business both cut trees / plant trees, etc). What are implications of this for mobilising public opinion? How do we balance eco motivation against business motivation? How big a problem is growth (since it can create greater role strain here than when eco motivation is absent)? Given that most – if not all – investment in maintenance of BD and all in the recreation of BD is derived from public funding in some way, what is the appropriate organisational form of „SMEs‟? Given that BD-based businesses exist in quasi-markets, what are implications for legal status and how do these vary across EU? How does this vary with historical background of Member States? What are opportunities for inter-State learning on bi-lateral or EU basis? Given that most BD issues are long-term, is the SME, with known short-term time horizons, an appropriate policy instrument? If iy is, how can issues of long versus shorttermism be identified and resolved? To what extent are opportunities for sustainable exploitation of BD compromised by non-sustainable exploitation by others? Certification / labelling seems important, but how do customers value labelling? E.g. Is mental map to pay premium for ecologically sound products or to pay less for products that are not? (Needs detailed level consumer behaviour research) What would be the technical and legal bases of any BD labelling scheme? ??? What are specific training needs/ how should these be delivered? How can they be best financed? Do we need to pay people to train if time is away from firm? Is there evidence that the capital / labour trade off is different in BD friendly firms, intrinsically and / or by choice? What are implications for this? Does this vary between Member States? If loans are at a commercial rate, why is a special fund required? Is the timing of investment / cash flow affected in a BD-based business compared with a „normal‟ one? If so, how? How can this be managed? What are implications of having to use much more specialised equipment (e.g. low impact machinery) in terms of amount and term of finance? In general, not just regarding SMEs and / or BD, should there be greater consideration of EU forestry policy since the time frames are so long? (Importance re carbon fixing; future energy resources, etc) How do we communicate necessary information / impart knowledge to BD active / potentially active SMEs (who are severely time / resource constrained)?

21. Are typical BD-based businesses scalable or, by their very nature, apparently constrained to remain small? 22. Do existing business models and processes exist to overcome this? 23. Is certification system common throughout chain? Should it be? 24. Does this vary by ecosystem? 25. In forestry long time scales and geographical isolation may contribute to weak networking. If true, how can this be redressed? 26. To what extent are SMEs aware of general issues facing them? (not just re BD-based business issues, but SME problems generally) 27. How can common services best be developed and marketed to SMEs? (BD a lower priority than directly profit related issues, so these need to be fixed first). 28. What should role(s) of public sector be? 29. How should this be split between different levels of government (subsidiarity issue)? 30. Levers include taxation, subsidy, regulation and certification. What else is possible? What should the balance be? 31. Can a market in BD be established (cf. carbon emission trading)? 32. What are the circumstances under which BD may be „marketised‟? 33. How big is the „market‟ for BD likely to be? Can we extrapolate from existing local pilot studies?

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RencontresȱdeȱStȬGallȱ2008ȱ ȱ ȱ ȱ ȱ ȱ Wednesday,ȱSeptemberȱ3,ȱ2008ȱ TopicȱDȱ InnovationȱManagementȱinȱSMEsȱȱ Iȱ&ȱIIȱ ȱ ȱ Iȱ Blackburn,ȱConwayȱ Gibson,ȱWingham,ȱAliȱHassanȱ HavengaȱW.ȱ Havnes,ȱPedersen,ȱRickeȱ Miettinenȱ Neubauerȱ Tan,ȱYooȱ Zanger,ȱKaminskiȱ ȱ IIȱ Baldeggerȱ Frank,ȱLueger,ȱKorunkaȱ Nauwelaerts,ȱV.Assche,ȱV.Beverenȱ Raymond,ȱStȬPierre,ȱMarchandȱ Reboud,ȱMazzarol,ȱVoleryȱ Voleryȱ ȱ

Clusters in the New Media Industry: Relevant Model or Artifact?

Robert Blackburn Small Business Research Centre Kingston University Surrey KT2 7LB Tel: +44 (0) 2085477354 Email: [email protected] Clifford Conway University of Brighton Mithras House Lewes Road, Brighton, BN2 4AT Tel: +44 (0)1273 642175 Email: [email protected]

Abstract This paper examines the relevance of the concept of clusters to small firms in the media industry. The analysis examines the activities of owner-managers and their businesses set in the context of contemporary models of clusters. The paper investigates whether the studied cluster exhibits the characteristics and benefits of an ideal type. The paper draws on evidence from a new media cluster on the South coast of England. The conventional wisdom of the Porterian cluster and others suggests that a range of economic and un-traded interdependencies arise through co-location. This paper aims to build upon this research to see whether it applies in the claimed new-media context on the South coast of England where trading with in-tangible goods and services are dominant. The research began with a critical review of the literature concerning industrial clusters and their features. These findings were applied into an interview protocol and a series of in-depth interviews were then carried out with managing directors in Sussex, England. This methodology was seen as the most effective way of exploring their experiences of the reality of the outcomes for co-location. The findings suggest that the new-media cluster meets few of the conditions and benefits widely assumed to arise from co-location. The findings reveled that customers and competitors are not co-located and there were limited networking behaviours between the studied organisations. However, there was evidence of knowledge spillovers in the sense of the labour market and use of freelances. The paper‘s key contribution is to encourage a more critical approach by researchers when applying generalized models or the conventional wisdom to specific phenomena. In this example, we would recommend the use of qualitative research findings to examine the reality of the assumed benefits that are said to ‗mysteriously‘ arise from clusters and the motivations and activities of actors with-

in those clusters. Care should also be exercised by stakeholders when seeking to transfer cluster models from one context, region and industry to another. Introduction and Context One of the dominant concepts in the contemporary small business and entrepreneurship literature is that of geographical clusters. This has its roots in industrial geography which identifies three elements: geographical proximity; connectivity between firms (the content and purpose of this can vary); and engagement with a supportive infrastructure (such as a science park or venture capitalists). Clusters are sometimes regarded as variants of 'industrial districts', the latter placing a greater emphasis on socio-political factors (Rosenfeld, 1997; Gordon and McCann, 2000). Early variants had a manufacturing emphasis (Marshall, 1890-1920) where businesses in ‗industrial districts‘ developed skills, expertise and innovation through the sharing of knowledge and firm specialisation as a result of agglomeration economies, positive externalities, technology transfer and knowledge spillovers. For example Marshall (1920, p.225) describes the process of skills learning as: ―The mysteries of the trade become no mysteries; but are as it were in the air and children learn them unconsciously‖. In addition, technology transfer is encouraged, if (ibid, p.225): ―One man starts a new idea, it is taken up by others and combined with suggestions of their own; and thus it becomes a source of further new ideas‖. Although the nature of economic activity has changed from manufacturing to service activities in developed economies, the legacy of the attractiveness of industrial districts as an effective means of production, distribution and exchange has not diminished with time. A significant contribution derived from the ‗Italian school‘ (eg Becattini, 1989) which emphasised the significance of community, small firms and institutional support as a means of providing a competitive, flexible and specialised means of production. More recently, Porter has emphasised the interaction of cooperation and competition leading to competitive advantage. The Porter definition suggests relationships with a range of companies and stakeholders based upon mutual interests: ―a cluster is a geographically proximate group of interconnected companies and associated institutions in a particular field, linked by commonalities and complementaries‖ (Porter, 1990, p.16). ‗Interconnected companies‘ could be vertical (suppliers and customers) or horizontal (with related industries and even competitors). The cluster model also contains other stakeholders who share mutual interests, such as universities and government agencies. ‗Commonalities and complementaries‘ also suggests that the ‗interconnected companies‘ are more likely to have similar needs for research, information, markets, technologies, needs for specific assets, resource requirements and public goods. Being co-located can potentially provide these at lower cost through greater choice, co-operation and networking (Porter, 1990; Doeringer and Terkla, 1995; Nachum and Keeble, 1999; Gordon and McCann, 2000). Co-location also allows for lower transportation and transaction costs as travel, time and increased trust should produce lower costs (Lublinsky, 2003; Storper and Harrison, 1991). Clusters can also attract the required skilled labour, the mobility of which can enhance the exchange of ideas and knowledge throughout the whole cluster (Camagni,1991; Krugman, 1991). There are also un-traded benefits 2

that can arise such as mutual co-operation, learning and resource sharing and are sometimes referred to as either ‗embedded benefits‘ or ‗un-traded-interdependencies‘ (Granovetter, 1985 and Storper, 1993). In addition the role of co-located universities, research establishments, trade bodies and government support agencies can help glue the cluster together and enhance learning and innovation, enhancing group norms, rules and agreed procedures, a form of ‗institutional thickness‘ (Amin and Thrift, 1995). In this ideal type, clusters can achieve a competitive advantage for members even on a global scale if the customers are demanding quality and excellence and that competition encourages differentiation and innovation. In addition, suppliers and related industries are attracted to locate in the cluster, providing goods and services and ‗knowledge spillovers‘. Knowledge spillovers, especially technological spillovers, can occur indirectly through innovation generated by others in the industry and directly through trading with suppliers and customers (Glibert et al., 2008). The cluster itself contains or attracts key resources, such as skilled staff, that can then manage and innovate new products and services through the transfer of tacit knowledge between organisations. The literature on clusters and associated concepts are not without critics. At a theoretical level, several academics have criticised Porter‘s cluster theory and the premises upon which it is based. For Martin and Sunley (2003, p.11) the cluster concept is: ―…vague and sufficiently indeterminate…accepted largely on faith‖. These authors also criticise the way other authors use arbitrary statistical measures to identify cluster and then assume that they have demonstrated the existence of a fully functioning cluster, assuming that networking, agglomeration economies, un-traded interdependencies, and institutional thickness are naturally occurring. Cluster theory can also be criticised for the lack of clarity concerning the boundaries that are employed: “The obvious problem raised by these cluster definitions is the lack of clear boundaries, both industrial and geographical. At what level of industrial aggregation should a cluster be defined, and what range of related or associated industries and activities should be included‖ (Martin and Sunley, ibid, p.12). For Porter (2000, p.16) the geographic scope of co-location can be quite wide, a locality, a city, a region: ―The geographic scope of clusters relates to the distance over which informational, transactional, incentive and other efficiencies occur‖. This caveat is rather open-ended and the actual physical distance can vary quite considerably from one cluster to the next (Le Veen, 1998). A complicating factor is that as a cluster evolves, its boundaries will probably change to reflect membership of new organisations and the linkages that are created and therefore policy will need to evolve to meet changing needs. Taylor (2005) levels numerous problems with the concept including the ‗neglect of the imperatives of capitalism‘ and the ‗fetishing of proximity‘ which neglects the subtleties of the functioning of business enterprises. The cluster concept is also founded on two chaotic concepts: ‗social capital‘ and ‗institutional thickness‘. Taylor‘s critique culminates in a request for a thorough empirical testing of the model. ‗What has been created in a theoretical edifice built on rhetoric that, notwithstanding a recent flurry of papers, is still weakly and selectively grounded in reality‘ (Taylor, 2005, 2). Others have 3

been similarly critical of the generality of the model and many have or suggested variants of the ideal type. Nevertheless, clusters continue to be frequently promoted by academics and policy makers as a means of stimulating entrepreneurship and the economy. Cluster Benefits for Small Firms? Having set out the broader benefits and weaknesses of the cluster model, what of the relations with small firms and entrepreneurship? The cluster literature emphasises numerous benefits for small businesses. This is especially the case given their resource constraints, absence of internal specialisms and relatively weak supplier and market power. A priori, cluster co-location may make it easier for members to access customers, suppliers, competitors and other third parties resulting in networking and communications between these parties to be more time-cost efficient. These relationships are more likely to be long term and bonded (Ebers, 1997; Jarillo, 1995), with greater levels of trust (Lyons, 1994). This can result in peer-to-peer relations within, for example, sectoral and cluster professional associations, extended family, ethnic groupings, sports and social clubs and political environmental interest groups (Birley, 1984/91; Eisenhardt and Schoonhoven, 1996; Hakansson and Snehota, 1995; Lipparini and Sobrero, 1997; Perry, 1999, Greve and Salaff, 2003; MacKinnon et al.,2004). Cluster membership has the potential for to help small firms overcome resource constraints in relation to learning and innovation. Many small firms do not have the internal resources to search the business environment for market information, business contacts, learning new skills, or improving firm problem solving (Dragoi, 1997; Penn et al., 1998; Kailer and Scheff, 1999; Keeble et al., 1999; Chaston, 1999; Tell and Halila 2001; Fuller-Love and Thomas, 2004). This increased potential networking benefits should allow small firms to cope more effectively with the business environment (Aldrich and Zimmer, 1986; Szarka, 1990) by potentially bringing more resources to bear, through pooling information, learning and innovation factors (Aldrich and Zimmer, 1986; Birley et al., 1991; Szarka, 1990; Carson et al., 1995; Conway, 1997; Shaw 1997; Fuller-Love and Thomas, 2004). Co-location of small firms may enable the transfer of tacit knowledge. Tacit knowledge, it is argued, is more problematic in its transfer (Nonaka, 1991) than codified knowledge. The proximity within clusters lends itself to face-to-face interactions, providing a more effective way for such knowledge to transfer. This is particularly the case when such interactions are based around trust and mutual dependencies (Malmberg and Maskell 1997). This leads us to a further important ingredient in the cluster model: that of trust. Trust is emphasised elsewhere as one of the pre-requisites of successful collaboration between networked firms (Neergaard and Ulhol, 2006). In his seminal work, Uzzi also argues that in an embedded logic of exchange, trust acts as the primary governance structure (1997). Yet, trust takes time to develop and it may be argued that operating within geographical proximity may help cultivate trust relations between owners and managers of firms. Learning and innovation are increasingly regarded as interdependent processes (Landabaso, 1999), where according to (Lundvall, 1992), innovation is enhanced through ‗interactive learning‘, commonly between producer and supplier or producer and client or producer and other local actors. Baptista and Swann (1998, p.538) demonstrated that firms that cluster are more innovative, precisely because learning and innovation are interdependent:

4

―One of the main reasons behind the existence and success of clusters is the pervasiveness of knowledge externalities or spillovers. It seems likely that spillovers, particularly those associated with new technological knowledge, tend to be geographically localised‖. Cluster co-location can therefore play a key role in enabling small firms, in particular to access technical, informational and complementary resources to help develop not just incremental, but also radical innovations, new products and services (Lipparini and Sobrero, 1997). Several authors have suggested that when small firms actively interact within in their local environment, learning and innovation can be enhanced due to the efficiencies afforded by proximity (Cooke and Morgan, 1998 and Storper 1993). Whilst a priori arguments exist for the benefits of small firm‘s cluster membership, in practice, questions have been raised regarding the extent to which entrepreneurs and small firms engage with networks and are embedded (Birley, 1984/91; Curran et al., 1993; Curran and Blackburn, 1994; Dodd, 1997). Birley (1984) discovered that few firms made use of the formal sources of help, for example, accountants and lawyers, but relied more on the ‗informal‘ networks of family and friends. Curran et al., (1993), however, established that small firm owners did not always make use of their own family or friends in times of crisis, or lacked sufficient time to commit to extended networking commitments. More significantly in the study of clusters, there is also a questioning of the relevance of geographical proximity for small firms. Curran and Blackburn (1994) and Edwards et al (2006) found evidence that small firm owners are only loosely connected to their ‗local economy‘ because the niche markets they serve go beyond the local. There was also a reticence by owner managers to becoming too involved with local partners wishing instead to maintain their independence and autonomy that might be threatened if they became too reliant on others in the local economy (Curran and Blackburn, 1994; Shaw 1997). This was seen as having a general constraining effect upon firm learning and innovation because of the ‗tradition of being insular and autonomous‘ (Laforet and Tann, 2006) Uzzi (1997) infers this in his discussion of the ‗paradox of embeddedness‘. Edwards et al (2006) found that the degree to which small firms network varied by sector where higher value added process tended to network more extensively where ‗learning of best practice might be considerable‘, however if the sector is characterised by ‗short term contracts‘ competitive concerns would reduce this tendency. Business owners were also less likely to be members of a club or association, unlike many stereotypes depict thus providing little socio-political embeddedness for cluster development. This was supported by Dodd (1997), after examining British household panel survey data, who could not find strong evidence that small firm owners used the extended network potential of clubs and societies significantly more than their salaried counter parts. If these firms are not fully embedded, then they may limit their ability to benefit from the benefits that are said to arise from networks. It is clear that the success and of cluster phenomenon in practice is strongly contingent on business sector, technology use, labour requirements and the level of local embeddedness to underpin economic exchange. What scientific evidence we have suggests little knowledge accumulation in the same direction. Here we focus on the new media industry which has attracted a good deal of attention. Evidence from a cluster of new-media firms in Cardiff , suggests that a third of firms interviewed considered colocation itself to be important (Cook and Hughes, 1999). The detractors cited several disadvantages for co-location, such as too much competition and price discounting. Smaller firms in particularly felt 5

insecure about networking or sharing information with larger firms, who with their larger ‗asset stock‘ could then behave in an anti-competitive way against them. Oakey et al. (2000) provides further corroboration with a study of the non-broadcast visual communication (NBVC) industry in the South East, which includes digitally based (video, internet, multimedia and conference production companies). They found that the majority of SME‘s had low proportions of purchases and sales occurring within their local area. However, for smaller companies, those with 2-4 employees, it was found that there was a significantly greater reliance on customers in the local market than for the larger smaller companies. The evidence on the relationship between ‗cluster activity‘ and innovation is also mixed. Freel, for example, summarises ‗… innovation may no longer be understood as the outcome of independent decision-making at the level of the firm, but rather must be viewed as an iterative, cumulative and cooperative phenomenon, which incorporates more than simple phased dyadic or bilateral relations between users, industry and the science base…(Freel, 2003: 751). Thus,‗…a firm‘s capacity for innovation will inevitably be enhanced by the extended knowledge base, and cost and risk sharing, offered through extensive linkages with external agency (e.g. suppliers, customers competitors universities, public agencies and so on)‘ (Freel, 2003:752). However, in his fieldwork Freel (2003) found that novel innovators tended to have a wider geographical reach than incremental innovators. From this it may be inferred that an emphasis on promoting local networks and exchange as a means of enhancing innovation may in fact be misleading. There have also been doubts regarding the transfer of technology between firms within clusters, as a primary means of stimulating innovation. Gilbert et al. (2008) found benefits to geographical cluster location for independently founded firms with Initial Public Offering (IPOs). However, they were unable to link these to technological knowledge spillovers: one of the alleged benefits of clustering. They suggested that other dynamic factors, including high levels of competitiveness and an enhanced ability to spot market niches as a result of being in a cluster, may be more significant factors explaining the better performance of firms based in clusters. Thus, the concept of technology transfer as a benefit to clusters is open to question. Finally, evidence suggests that the role of co-located institutions does not guarantee the existence or advantages of Amin and Thrift‘s (1994) ‗institutional thickness‘. In particular, the existence of government and quasi-government agencies underpinning business relations are not guaranteed. Services offered by government, through Business Link and other networking agencies have been criticised for providing inadequate services for small firms. The delivery is sometimes short-term, ad hoc or discriminatory, thus not adding to the embeddedness of co-located firms (Westhead, 1995; Carson et al., 1995; Romijn and Albu, 2002). Relations between Universities and small firms has also received mixed empirical support. Although Romijin and Albu (2002) found positive relationships with universities and the local technology cluster, in the main these firms had prior connections with the university and so a historical path-dependent relationship was already in place. Other studies have found a ‗silo mentality‘ in many universities with an ‗ivory tower‘ outlook to business (Etzkowitz et al. 2000). Thomas (2000, p.1222) claims that small companies in particular, ―tend not to be well integrated into the academic, governmental, company networks‖ and that support structures should be targeted at such firms to overcome this problem.. The ability to manufacture clusters is also highly questionable. Trust is emphasised by Neergaard and Ulhol (2006) as one of the longer term outcomes of the Danish networking model between some firms although they express doubts about the ability of 6

public policy interventions to stimulate new networks. They conclude by arguing the need for ‘…public policymakers to work with, seek to build on, and support existing enterprise initiatives, rather than to blindly subscribe to the physical-proximity thesis of the industrial district paradigm, while at the same time relying on a unidimensional economic and instrumental approach to network creation without any consideration of the role of trust‘ (Neergaard and Ulhol, 2006: 535), Thus, whilst attractive from a theoretical and policy perspective, the evidence suggests that the cluster model possesses a number of assumptions which remain open to empirical scrutiny. There appears to be few ‗general‘ empirical findings that confirm the ideal type and most studies of the model provide exceptions rather than the rule Data and Method In the reviewing the literature, one strong theme to emerge is the absence of reliable primary data on clusters. A particular criticism of the cluster literature is in relation to the methodologies employed. There is a near lack of research that actually involves interviewing small company owners, to discuss their thoughts and perspectives about networking, clusters, learning and innovation. Instead the focus is usually upon a confused range of firm sizes, in different sectors using quantitative approaches or is theoretically hypothesised (Hoffman et al., 1999). We use data collected from firms operating in the so called ‗new-media industry‘. This industry is characterised by web based digital technologies that are constantly changing, resulting in the convergence of different combinations of media, providing seamless interactivity for the user (Pratt, 1999; Backlund and Sandberg, 2002; Manovich; 2003). The industry is largely service based and includes website construction and design, e-commerce facilities, databases and interactive learning materials. The majority of firms are small if not micro sized, in keeping with the core skill of becoming creative ‗hot-shops‘ (Kaplinsky et al., 2003) who write software code in developing solutions as opposed to using proprietary packages written by others. A major characteristic of the new-media industry is that the underlying digital technology is changing often in a discontinuous fashion with relatively short product life cycles. This places an important emphasis on learning and innovation as part of firm survival and growth strategies (Pratt, 1999). The ‗new-media‘ industry has also become an important part of regional economic policy, as it is seen as the new engine for growth, employment, wealth creation and regional competitive advantage (Kinder and Molina, 1999). Juxtaposing the new media industry and clusters is not new. There are several reported new-media clusters in the UK: Cardiff, London including the M4/M11 corridors, Bristol, Oxford, Cambridge and Edinburgh. Most are major urban areas with a wide cross section of other industries, with several universities and other research institutions, providing either general or specific support (Tang, 1999; Cooke and Hughes, 1999; Kinder and Molina, 1999; Backlund and Sandberg, 1999, DTI, 2001 and SEEDA, 2002). . The characteristics of the industry, that is the technological paradigm, the prevalence of inter-firm collaboration and the size of the firms studied, collectively provide an appropriate test-bed for the cluster model. We draw on data from the Brighton-Hove (B-H) new media industry. B-H is said to be one of the largest outside of the London area, with 300+ companies and is sufficiently coherent to have its own website suggesting some level of self-defined coherence (www.wiredsussex.com). Authors who have 7

written about new-media and new-media in B-H appear convinced that it is a cluster and make reference to Porter‘s definition (Porter, 1998). This uncritical subscription to the concept is replicated in a line of numerous and influential UK government cluster policy initiatives (DT1, 1999; Pratt, 1999; DETR, 2000; DPA, 2000; DTI, 2000; DCMS, 2001; DTI, 2001; Wired Sussex, 2002; European Commission, 2002; Kaplinsky et al., 2003). However, whether or not the cluster concept is an appropriate foundation on which to understand the existence and operation of firms in the industry in B-H remains open to question. Given the above arguments, we draw upon face-to-face-interviews with the proprietors of 17 new media businesses in Sussex, England. There are three core technology areas on which these businesses are based: Web programming: These companies build web sites using their own code and not using proprietary software [8 companies]. Web databases: These companies build databases for web applications using their own code not proprietary software [3 companies]. Web site build and design: These companies rely upon proprietary software [6 companies]. Appendix 1 provides further details of the firms. Further details can be gleaned from Conway (2006). Research Propositions From the above literature review the following research propositions are explored within the context of a ‗new-media‘ cluster in Sussex: RP1 RP2 RP3 RP4 RP5

Owner-managers of new-media firms in B-H perceive themselves as part of a cluster Clustered new-media firms actively trade with co-located supply chain actors. Clustered new-media firms actively network with co-located support institutions Clustered new-media firms derive cost and un-traded benefits from co-location. Clustered new-media firms compete with each other for clients

The research approach comprised a qualitative research design in order to tease out the motivations and meanings of owner-managers in relation to clusters. From past studies, the ‗positivist‘ quantitative approach has been the most common methodology used in small firms‘ research (Curran and Blackburn 2000; Grant and Perren 2002). However, there are limitations to these approaches and some have argued that they have provided ‗little understanding of network relationships‘ (O‘Donnell and Cummins, 1999, p.84) as they do not fully discover the motivations of the various actors in the network (Curran et al. 1993). O‘Donnell and Cummins (1999) and Shaw (2000) have recommended the use of qualitative research tools, such as the in-depth unstructured face-to-face interviews to overcome these weaknesses in research design. Grant and Perren (2000, p.196) also make an appeal for small firm researchers to be more adventurous in their research designs and encourage: "…colleagues and the authors to step outside the hegemony of their 'normal' paradigm and to consider alternative paradigmatic positions". The selection of the firms to be interviewed was based upon Wired Sussex‘s (the local creative industries trade association) directory of members in conjunction with advice from a senior researcher at Wired Sussex. Of the 300+ members who claim to supply web based solutions, a list of 150 firms was drawn up of companies who claim to write code for web based solutions as opposed to the remaining 8

firms who only use proprietary software to design web sites. Code writers were sought as this involves a high level of added value and they would be expected to be more inclined to actively network to gain the benefits of identifying best practice (Edwards et al., 2006). Firms were then selected randomly from the list and were contacted for interview. Of the 17 firms, 14 claimed to be coders only, while 3 indicated that they wrote code but also used proprietary software for smaller standardized client requirements. The interviews were based upon a semi-structured design (Easterby-Smith, 1991) which enabled the respondent to discuss freely the research themes identified by the authors from the review of literature (Johannessen and Dolva, 1995). The interviews were transcribed and (Carson et al., 2001) then coded with the use of NVivo 7. This largely qualitative approach allowed for the exploration of the perceptions and opinions of respondents (O‘Donnell and Cummins, 1999) with respect to networking, cluster membership and the potential outcome for learning and innovation. These ‗why‘, ‗how‘ and ‗what‘ questions are particularly suited to a qualitative approach (Yin, 1994) as the perceived reality of the subject‘s lived experience was sought. Fieldwork Findings RP1

Owner-managers of new-media firms in B-H perceive themselves as part of a cluster

Whilst the bulk of research and policy documents use the term cluster, there is little or no research which has canvassed the views of the so-called actors within the cluster. Respondents were asked to comment on whether they considered themselves as part of a new media cluster. This is important not only as a way of understanding their level of engagement locally but as a means of teasing out the self-definitions of these owner-managers. Level of agreement with the term new media cluster, by case New Media Cluster Agreement

LNO

Partial agreement

BCDEGHIJMQ

No agreement

AFKP

The results show a mixed response. For some there was a strong affinity with the notion of a local new media cluster. Company L; felt it was something real and tangible, which gave a sense of membership: ―It is definitely a real thing… it just represents the sheer number of small businesses and freelancers, working in our industry…it is something that we definitely feel a part of and feel is out there‖ (Company L). However, the bulk of respondents suggested that it was a partial cluster, with intermittent or weak ties between firms. The reasons for this are shown in Table 1.

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Table 1 Reasons why Brighton and Hove is considered a ‘partial cluster’ Reasons for partial cluster

Case examples

Few direct local competitors

Companies, D, I, and M, serve niche markets, so while they agreed that B-H had many new media companies they were not perceived as direct competitors because they were specialists.

The cluster is limited by a lack of a coordinated strategy.

―…. What I think we lack in B-H is a vision based on what we already have, what we have, what resides here and what output we could grow and develop‖ (Company Q).

Existence of human capital, ideas and discussion with supportive agencies.

Although company C was scathing about the concept of cluster the participant did suggest that in practice, B-H does have a ―critical mass of intellectual discussion‖, that companies do network with each other, which is sometimes enhanced by the role of ‗Wired Sussex‘ (Company C). Company Q and others mentioned the benefit of the high level of graduate retention from the two local universities.

A location only of complementary, professional and technical suppliers

Most firms agreed that B-H did have an abundance of local suppliers although they did not all necessarily network or buy in these local services.

A number of respondents disagreed with the idea that they were operating within a ‗new media cluster‘. Some objected to the term ‗cluster‘. However, the main reasons were pragmatic and included their reported low levels of economic interaction with other firms in the sense of using similar, or same suppliers, and competing with each other for clients. On the other hand, even these firms cited activities which would help underpin a cluster: ―… what it means is that I have a lot of friends in this area (Brighton) who have got their own little companies who I talk to, I go for coffee with and we share ideas, so I suppose you could say to that extent, , we are a little community, but that is about it‖ (Company A). Social networking, it is often argued in the cluster literature, helps build up trust between actors and leads to economic interchange. Such social exchanges were found in other passages of transcriptions but whether they were converted into economic activity was another matter. Company I, has had little need to network with other third parties apart from clients. This was because the nature of their services is specialised and f its company policy is not to become dependant upon third parties for its core business competencies:

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―We are too specialist and ‗bespokey‘ also we would not wish to become reliant on a third party with respect to our clients and then something goes wrong‖ (Company I). For company P, while networking does happen in B-H detailed sharing with direct competitors is likely to result in more competition and lower prices: ―I‘m not being cynical but I do not think people share information that they want to keep for themselves. It is a kind of ‗kidology‘ involved with all of this. You have to put on a face when you go into networking, you put on a networking face and ‗oh, of course I can share everything, the best way of competing is by sharing‘. Of course we all know it is not true‖ (Company P). Clearly, from these results there is no consensus amongst owner-managers that they operate within a cluster and there is mixed support for the proposition. In reality also, their activities suggest that proximity does not necessarily lead to economic exchange and nor are they seeking to deliberately nurture such exchanges. RP2

Clustered new-media firms actively network with co-located supply chain actors.

One of the central tenets of the cluster literature is the development and use of a co-located supply chain. By supplies we are referring to purchased material inputs and labour. It was clear that the B-H cluster did not correspond to the ideal type in relation to supplies of material inputs. Although some firms reported the usefulness of links with suppliers during the start-up phase of their firm, suppliers were not considered by most firms to be a beneficial aspect of their networking strategy. This is particularly the case for those companies that write their own software code, and have little need to buy resources, where their main resource input, are their knowledge workers. Suppliers of office equipment or professional business services were largely judged on price and quality of service, rather than on their proximity convenience. Exceptions to this were in a minority. One of the non-code writing companies did have a relationship with its software suppliers to realise technical benefits for the firm. Another company worked with their supplier to cross sell their mutual product range. The dismissal by the remaining firms of networking with suppliers may suggest myopic thinking on their behalf, or as they often claimed, lacked sufficient time to prioritise them. Romijn and Albu (2002), suggest from their study that if suppliers are providing non-complex services, then substantial face-to-face meetings will not be required. This could be the case for the new media sample as their key input is human capital rather than specialised intermediate The supply of expertise and labour, however, presented a different picture. Close proximity and to a work force with relevant skills was regarded important for the majority of respondents. The use of complementary digital services suppliers (CDSS) was also indicated as important especially when inhouse expertise or capacity was inadequate. . Company H felt that the city has a strong grouping of complementary suppliers for outsourcing potential, and as an alternate source of new ideas:

11

―…because there is a close proximity of companies it will attract possible companies for outsourcing… there is always the influx of new blood…you cannot help but keep abreast of trends whether its fashion or technical trends‖ (Company H). Some also indicated that collaborating with CDSS enabled them to then bid for larger contracts. For company D, because of its size, competing for larger contracts such as £250,000 + and particularly when working with the public sector, usually involves quite strict procurement criteria: ―…the qualification that you need to get into that bid stage seems to be a lot more strict and the first thing they tend to look at is your financial status, which for any new company is likely to be huge problem and we always thought that joining forces with somebody else who did not have the skills but who could provide the financial backing, they would welcome‖ (Company D). Collaboration also enabled some firms to enter new markets. For example, Company D, worked with a telemetry technology based firm to develop systems for in-car navigation system that was a completely new market to Company D. The use of a local pool of freelancers was also considered important. Just under half of respondents used freelancers regularly on a project by project basis. They helped fill skill gaps or were used to supplement core staff in an overhead efficient manner: ―…it has allowed us to gain a wide degree of experience and when ever stuff comes up we cannot manage, we can bring people in to do it‖. (Company K) However, other respondents were less enthused about using freelancers preferring instead to develop their core staff: ―The preference is that you get more buy in, and you build up a relationship and you get to know each other‘s strengths etc, whereas freelancers, you cannot guarantee that they are going to be there when you need them and so you might build up a rapport but then they are busy on someone else‘s contract‖. (Company G) All respondents agreed that B-H was seen as a good source of technical staff and was a key reason for locating or remaining in the city. As a result of the evidence examined, there is mixed support for the proposition 2: Clustered newmedia firms actively network with co-located supply chain actors. Whilst these firms were strongly engaged with local supplies of labour, and especially free-lancers, their technical and material supplies were sourced elsewhere. The use of freelancers and complimentary businesses was however, used cautiously.

12

RP3

Clustered new-media firms actively network with all co-located support institutions.

There are two universities and one further education college in the B-H area. These not only provide degree courses but a variety of services to businesses and the community. However, only one respondent reported any form of relationship with either of the two universities. One of the reasons provided was that the Universities were largely seen as being out-of-date technically, because of the fast changing nature of the new media industry. It was also suggested that they exhibited a ‗technology‘ silo mentality, whereas new-media is largely characterised by a convergence of technologies: ―I despair of these organisations because they just do not understand that the longer they keep new-media and communications technologies as separate sectors, missed opportunities occur‖. (Company Q) Several respondents simply reported no need to contact or work with the two universities: ―Just never had the need…I suppose because we have been very focused in the work we have been doing, we have not been able to think, ‗well actually their projects maybe useful‘‖ (Company H). This is even more ironic when many of the people interviewed were graduates themselves and more specifically often graduates of the two local universities. In addition, the Universities were seen as a useful source of graduate employees, as having a skilled workforce was seen as key to enhancing design and creativity, although, these new staff invariably required enhanced training. B-H also has a co-located trade association for the ‗creative industries‘ of which new-media is considered a subset (DCMS, 2001). The association runs regular networking and training events. Yet the take up from those interviewed was minimal. The association was largely viewed as a vehicle for freelancers to network or for new entrants into the locality to begin building a local presence while the networking events were seen as quite superficial in their purpose: ―I was talking to them about the work we do but it was totally above their heads and they were not interested at all. I felt like I was more at a party, where I‘d just met somebody who was into something else‖. (Company A) The staff of the trade association were seen as administrators rather than new-media professionals and although they were well intentioned they were known to be under-resourced and with too wide a remit to be of effective use. The city of Brighton has a wide range of business networking groups, a local chamber of commerce, Business Networking International, Federation of Small Businesses and two focussed informal networking groups, ‗silicon beach‘ (http://www.silicon-beach.com/) and Skills Swap (http://www.skillswap.org/). The main limitations cited by respondents when considering engagement in networking was a lack of time, coupled with a strong reservation against delegating responsibility, particularly for networking that had little or no impact on the businesses ‗bottom line‘. In practice this meant none of the respondents reported attending any of the above networking groups on a regular 13

basis. The only exception was with the two focussed informal networking groups. These were seen as non-strategic and about a third of the respondents were happy to allow their staff to attend during out of office hours. However none reported that they approached this or other forms of networking as a systematic commercial practice. Seven of the 17 people interviewed were running businesses based in purpose built ‗media centres‘, of which several were centrally located and two on the outer fringes of the City. However, none were able to recall any planned networking activities being organised by the centre managers, who were seen primarily as landlords only: ―…the notion of some form of dynamic community residing in the media centre, I think is a romantic one‖. (Company Q) When questioned about their own initiatives concerning networking, within the centres, only one firm could indicate that this was pursued. It was suggested by another respondent that working in the centre was a similar experience to the ―anonymity of living in a block of flats‖. Because of the very limited networking activities with co-located institutions there is little evidence to support the third research proposition: ‘All clustered new-media firms actively network with all colocated support institutions‘. It seems that the motivations to network were not sufficiently strong enough to stimulate engagement with institutions and nor was the network regarded as sufficiently attractive or meaningful for these respondents. Most typical support institutions are co-located but there is little evidence of active networking. RP4

Clustered new-media firms derive agglomeration cost and un-traded benefits including knowledge spillovers from co-location.

One of the central components of the cluster model is the agglomeration economies of scale that will accrue to participants, including reduced costs of production. For those firms in the B-H cluster, labour was the major input. As already discussed, B-H firms used freelancers for their activities but there were also other benefits of location. Graduates from the two local Universities provide a steady stream of labour and this was seen as a major attraction for B-H, strongly influencing the location decision and particularly staying within the region. ―…we felt that we would be able to get graduates from the universities here, get a really good team of programmers together and the salaries, and overheads are not so high, we can sell in at a better rate and still make the same profit, compared to someone in London‖. (Company O) One major cost saving that was identified was the cost of skilled staff and most agreed that it was around 25-30% less than the cost of staff in London. Office costs were also regarded as being around 10-15% lower than those in London. Collectively, it was argued that these lower costs were giving these firms an advantage when competing against London competitors for London-based clients. Although, there are the additional costs of time and travel to meet clients outside of the city these were low relative to the cost of locating in London. The use of ICT technologies meant that services could largely be managed remotely, using email, VoIP and the telephone for day-to-day communications. 14

Whether or not these could be described as agglomeration economies is open to debate. Indeed, it seems that the advantage of being located in B-H is relative to the high costs of labour and offices in London rather than any agglomeration effect. On the other hand, the pool of labour within the B-H location undoubtedly provides a key input into these businesses. There was, however, mixed evidence of un-traded benefits being realised, largely because of the limited networking partners available. The sharing of direct staff and resources was not mentioned by any respondents who instead cited either concerns about loss of intellectual property or the time required to manage such relationships. One key un-traded benefit was the exchange of information and ideas with complimentary digital suppliers. This was usually done on an informal bi-lateral basis either face-to-face or by using technologies. These exchanges were based upon trust relationships that were reinforced by an ethical code that if broken would result in great damage to a firm‘s reputation in what is a close knit community. Interview findings revealed that B-H was largely seen as a good location for CDSS where a degree of cooperation and cross-fertilization can occur. Company H felt that the city has a strong grouping of complementary suppliers for outsourcing potential, and as an alternate source of new ideas: ―…because there is a close proximity of companies it will attract possible companies for outsourcing… there is always the influx of new blood…you cannot help but keep abreast of trends whether its fashion or technical trends‖ (Company H). Company J felt that the cluster allowed firms the potential to tap into a wide range of expertise within a very convenient geographic location: ―…there are a lot of companies with a very wide ranging set of skills… there just seem to always be somebody who knows absolutely everything about this new thing, [the Internet] or is developing it..You do not need to go anywhere else to find somebody who knows a lot about that one thing‖ (Company J). Clearly, there appeared to be ‗knowledge spillovers‘ in the sense of these firms buying in freelancers and employing graduates directly. For many respondents these advantages were often ‗taken for granted‘ rather than regarded as providing a competitive advantage. However, the evidence presented does chime with the some elements of the cluster model. Curiously, rather than emphasise issues related to agglomeration economies or un-traded dependencies, interviews with owner-managers revealed non-business factors as a major advantage of location. Eight of the business-owners already lived in B-H, whist nine moved to the area. The latter did so for a variety of reasons, Most respondents spoke of the benefit of being based in B-H in terms of lifestyle (sea and countryside) and also the creative atmosphere of being in a city where a diverse range of firms are based, resulting in: ―…a certain ‗je ne sais quoi‘ about Brighton. There are probably three other towns that have a similar air to Brighton and they are Bristol, Liverpool, Edinburgh. They have a similar sort of frisson in them that make you want to do things and have a forward looking attitude‖. (Company C) 15

Overall therefore, there is evidence to support aspects of the fourth research proposition: ‗Clustered new-media firms derive agglomeration cost and un-traded benefits from co-location‘. Although benefits were identified in terms of knowledge spillovers, both directly through the employment of freelance labour and directly through University graduates, some were concerned amount the loss of knowledge to these workers. RP5

Clustered new-media firms compete with each other for clients

In addition to co-operation, a further key element of clusters is the potential for firms to compete with each other. Gilbert et al. (2008), for example, suggested that competition between firms in geographic regions may aid business performance. The results from the study found that B-H was not, however, regarded as an attractive market in terms of clients. These firms looked further a field for customers, citing either London or even international markets. This logistically limits the amount of time available for face-to-face networking. The potential client base in B-H was largely seen as micro/small companies with relatively unsophisticated digital needs and with corresponding small budgets. Where firms had some business clients in B-H, the complaint was that competition from companies that used proprietary software to design websites was intense and coupled with relatively unsophisticated and price sensitive clients, resulted in poor profitability: “I think you would probably find plenty of new-media work here, [Brighton and Hove] but it

is of the budget variety likely to be better served by going to independent freelancers who can do the planning, design build in two to three weeks and anything beyond that then they are looking for a small two man outfit, but it is like any industry, you get what you pay for‖. (Company G) In addition to most clients not being co-located, respondents claimed to operate in niche markets with bespoke services and therefore their competitors were either national or global with little-to-no local networking taking place: ―Our direct competitors live in India, Ukraine, China….our competitors are the people who match us on price, quality and delivery. There are very few people in Brighton who could match us on price, quality and delivery, in all three‖. (Company C) As a result, the findings from the study lead to a rejection of the fifth proposition: clustered new-media firms compete with each other for clients. Rather, the client and customer base of the studied firms was beyond the boundaries of the B-H cluster. There are some cost savings from accessing a skilled labour pool. However there are costs arising from not having co-located customers. There are some un-traded benefits based upon trust relationships

16

Table 2: Important Factors in Locating or Starting up in Brighton and Hove

When locating or starting-up in B-H, what Never was the level of importance of the following?

Rarely

Sometimes

Always

Proximity of complementary digital services suppliers (CDSS)

OB

LKJHFEDC

PNMA FB

Proximity to customers

A

PKE

ONMLJHD C

Proximity to local suppliers

M

PONLK EDBA

JHFC

Proximity to Competitors

KA

POMFEDB

JHC

NL

F

PFA

ONMLK JHEDCB

Proximity of a workforce with relevant skills

A summary of the findings in relation to the location of the businesses can be gleaned in Table 2. Essentially, the Table demonstrates the unevenness in the factors affecting the operation of these businesses and underline the importance of labour markets compared with proximity to suppliers and competitors. Conclusions and discussion This paper has examined the relevance of the cluster model of business interaction to a cluster of new media firms in Brighton and Hove (B-H). Clearly, there are a substantial number of firms operating in the locality undertaking economic activity within the new media industry. However, the findings demonstrate that this does not mean that they simply correspond to the ideal type cluster model. The above findings suggest an unevenness in the relevance of the cluster model to firms in the B-H new media industry. The results show that many of the trappings of the ideal type are not found: especially in relation to local supply side, customer base and competitiveness factors. These results provide further support to the critics of the alleged benefits of co-location, or that small firms are active local ‗networkers‘ because of their intrinsic internal resource constraints and specialist weaknesses. The above findings also show that, although having some of the pre-requisite conditions to meet the characteristics of a ‗cluster‘, the small firms in the B-H new media sector are unlikely to move towards fitting the conditions of the ‗ideal type‘: the B-H cluster is not a full cluster in its infancy. In some respects, it can be argued that the results reveal the ingredients of success of the new media cluster in B-H. These include the contextual benefits of environmental attractiveness together with the benefits of a readily available supply of appropriately skilled labour. At the same time, there was a need for the businesses to go beyond the immediate locality in order to find clients. This geographical configuration, it may be argued, is also a result of the current technological paradigm of the new media industry and the actual location of the client base. One interesting way the cluster has managed without the fulfilling the alleged benefit of co-location is its use of internet based technologies (Pratt, 17

1999). Of course, it does assume that the client base is sufficiently knowledgeable and has invested in the relevant technology, to enable this form of economic exchange to occur at a distance. However, with the ever increasing application of such technologies through broadband connections more firms may be encouraged to trade more remotely (Torre and Rallet, 2005). The niche market strategy practiced by the sample firms also tends to take them beyond the immediate locality for clients thus reducing any general benefits a cluster may have to offer (Edwards et al., 2006). Similarly, in their study of a biotech cluster in Uppsala, Waxell and Malmberg (2007) also suggest that whilst local labour and expertise is important markets are more globalized. The influence of local institutions was mixed. There was a negative perception of the services provided by the two universities, apparently undermining any strong evidence of institutional embeddedness from this quarter. If the perceived ‗silo‘ mentality and redundant technologies are a reality, this will be particularly difficult to change. However, this may simply reflect a national concern cited by previous authors (Etzkowitz et al., 2000; Thomas, 2000), although other studies have indicated that when Universities do actively engage with the innovative ambitions of SMEs, positive outcomes arise (Pickernell et al.,2006). However, the role of the Universities as suppliers of graduates should not be overlooked as a key element of the B-H cluster: these provided expertise as well as at a lower cost than labour in London. B-H is a popular place to run a new-media firm. There appears to be three central reasons for this. One, access to qualified graduate staff and experienced freelancers at a relatively lower cost, compared to London salaries. Two, the overall ‗buzz‘ (Bathelt et al. 2004) and creative ambience of the city, a certain ‗je ne sais quoi‘ and ‗frisson‘ as one respondent stated, which is key to any design process (Pratt, 1999). Third, the so called ‗physic‘ value and lifestyle benefits (Cooper, 1999) of being located near the sea and countryside (Oakey et al., 2000; Kaplinsky, 2003). Collectively, this bundle of economic and non-economic factors does not simply correspond to the models of ‗clusters‘ in the literature. Whilst there is evidence of economic benefits from co-location, in the form of a readily available labour pool, other benefits accrue from non-business, co-location factors. Thus, the results confirm the findings of Gilbert et al. (2008) who suggest that technological spillovers are less important than knowledge spillovers within clusters. These businesses were benefiting from the knowledge base of direct employees and freelancers based in the B-H area. However, a major motivation of these owner-managers for locating in B-H was non-economic. Having decided upon this, it was clear that they were able to run their businesses because of the surrounding resources even though their client bases were predominantly outside the immediate locality. The findings of this paper appear to be in line with an earlier DETR report and a review of that report (McDonald et al., 2007) that networking and cluster characteristics were not fully evident in a number of other identified clusters and this was explained as arising because they were: ‗…highly individualistic and emerge through the unique interplay of a variety of factors…each of the six clusters has developed in a unique manner…the importance of these factors varies strongly. Consequently, no single model of cluster development can be formulated‘ DETR (2000, p.31-32). Caution should be exercised in relation to the promotion of clusters merely on the grounds of having similar firms within an area. Whilst co-location of ‗similar industrial firms‘ may be regarded a pre18

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Appendix: Profile of Businesses Firm

Location

Core Business

Job Title

No. of Staff

Regularly use Freelancers

Yrs

A

Central Media C

Web site builddesign

MD

2

Y

10

B

Central Office

Web databases

Snr Prog

15

N

20

C

Suburb House

Web Programming

MD

4

Y

13

D

Suburb Office

Web databases

MD

4

N

5

E

Suburb House

Web databases

MD

3

Y

4

F

Suburb House

Web site builddesign

Brch Mgr

1 + 10

N

3

G

Central Office

Web Programming

MD

5

N

9

H

Central Media C

Web site builddesign

MD

3

Y

5

I

Suburb Office

Web Programming

MD

4

N

3

J

Suburb House

Web Programming

Tech Dir

8

N

3

K

Central Media C

Web Programming

MD

6

Y

6

L

Central

Web site build-

MD

3

Y

3

Media C

design

M

Central Office

Web site builddesign

MD

4

N

3

N

Central Media C

Web Programming

MD

14

Y

3

O

Suburb Media C

Web Programming

MD

13

N

4

P

Suburb House

Web site builddesign

Sole Trad er

1

Y

5

Q

Central Media C

Web Programming

Chair

20

N

10

Source: Conway (2006)

24

Innovation, Technology and Commercialisation in an SME Environment

Brian Gibson, University of New England, NSW, Australia (Author for correspondence: School of Business economics and Public Policy Armidale NSW 2351 +61 2 6773 2838 [email protected]) Dianne Wingham, University of Newcastle, NSW, Australia

Ramraini Ali Hassan, Murdoch University, WA, Australia

Introduction This paper has a simple focus. It is based on the premise that innovation at its various levels is intertwined with the evolution of new technology and that the transfer of that technology (business to business or business to consumer) is achieved through the process of commercialisation. In taking a basic perspective the intention is to encourage those with an interest in these aspects of firm operations to not lose sight of the simplicity of the commercial arrangements that has seen humanity grow through technology transfer. It is also a reminder that a considerable proportion of the innovation that drives economic growth emerges from the activity of individuals or institutions and has done so successfully for many years without the intervention of governments and public research institutions. The paper proceeds with an initial discussion of the nature and interrelatedness of innovation, technology and commercialisation. A critique of the policy focus on innovation and its consequences for SMEs is then provided.

1

Innovation Innovation research has been characterised as falling into two major research streams, one at the macroeconomic level and the other with a microeconomic or organisational focus (see, for example, Brown and Eisenhardt, 1998; Dibrell, Davis and Craig, 2008). According to O‟Neill, Pouder, and Buchholtz (1998) and Dibrell, Davis and Craig (2008) the first of these regards innovation as a technology, strategy, or management practice that a firm is using for the first time (whether other organisations or users have previously adopted it) or as a significant restructuring or improvement in a process. The principal focus of research in this stream is the diffusion of innovation through organisations, industries, and nations. The focus of the second stream is on the organisational development and marketing of new products (or services as discussed in Miles, 2008) with a focus on the influences of internal structures, strategic processes and people (Zahra, 1993; Dibrell and Craig, 2006; Dibrell, Davis and Craig, 2008). Innovation from this perspective represents the commercialisation of inventions (where invention includes any act of insight). Regardless of perspective, innovation is often explored from a number of dimensions including radical, incremental, product, process and market. Radical innovation, as defined by Mole and Worrall (2001), refers to new technologies or new products that fill needs. Incremental innovation, however, improves what already exists including incremental changes in the organisational structures and moves to exploit new market (Avermaete, Viaene, Morgan, and Crawford, 2003). Further dimensions are provided by Johne (1999) who classifies innovation into three types - product (and service) innovation , process innovation and market innovation. These dimensions or domains of innovation are represented in Figure 1. According to Avermaete, Viaene, Morgan, and Crawford (2003)., innovation occurs as a result of changes in these four domains of innovation as shown by the arrow between boxes in Figure 1. As these authors explain, product innovation occurs from any changes in the organisational structure. Process innovation is said to exist as a result of changes in current production lines as well as implementation of new infrastructure. Organisational innovation occurs when there are changes in marketing, purchasing and sales, administration, management and policy. Finally, market innovation is assumed to be as a result of the exploitation of new market area and segments in the existing market area.

2

Product Innovation 1. Good 2. Service 3. Idea

Process Innovation 1. Technology 2. Infrastucture

Organisational Innovation 1. Marketing 2. Purchasing and sales 3. Administration 4. Management 5. Staff Policy

Market Innovation 1. Exploitation of territorial areas 2. Penetration of market segments

Figure 1

Domains of Innovation

Source: based on Avermaete, Viaene, Morgan, and Crawford, 2003 Technology and Commercialisation Clear in the previous discussion is the importance of understanding technology in defining innovation. A simple definition of technology, which suggests it is little more than the most current collection of available innovations, is: … a collection of techniques. In this context, it is the current state of humanity's knowledge of how to combine resources to produce desired products, to solve problems, fulfill needs, or satisfy wants; it includes technical methods, skills, processes, techniques, tools and raw materials (Wikipedia, 2008) The focus of much research (see, for example, Lipinski, Minutolo and Crothers, 2008) is on the transfer of technology – a concept that often has an information technology focus and more recently seems to have been identified as the domain of University and public research institutions. However the concept of technology transfer is also simple: Technology transfer is the process by which knowledge, intellectual property, and/or capabilities are transferred to any other entity, including private industry, academia, state and local governments, or other government entities, to meet public and private needs (Anon. 2007)

3

While not specifically mentioned it is implied in such a definition that this transfer is achieved with the intent of some individual or institutional gain (which may or may not be financial). In essence technology transfer represents the commercialisation aspect of innovation and while it may include academic or public research institutions it is not exclusively their domain. The Policy Focus on Innovation Innovation is widely recognized as a major contributor to nation‟s economic growth and both public and private sectors are considered to be key players in promoting innovation activities. Over time, increased activity in the fields of science and engineering by both public and private sector institutions has contributed largely to technological change at the national level (Salmenkaita and Salo, 2002). As a result, governments have developed specific policies which focus on the promotion of innovation activities carried out in both the public and private sectors. These „innovation policies‟ according to Salmenkaita and Salo (2002) are developed with a sole purpose to encourage both private and public organisation in the development and commercialisation of new technologies. These policies also represent „government intervention‟ through its influence on resource allocation decisions. As further explained by Salmenkaita and Salo (2002), government intervention is usually based on four rationales: the market; systemic failure; structural rigidities; and anticipatory myopia. Market and systemic failure consider the institutional structure of the research and development (R&D) system as a given and attribute the production of non-optimal outputs to problems of appropriability and coordination. The structural rigidities rationale, however, examines the structure of the innovation system as a variable that is under limited political control. The other rationale for government intervention which is anticipatory myopia, proposes that individuals and organisations may underinvest in the generation and assimilation of innovation that contributes to their ability to act with foresight. As also identified by Salmenkaita and Salo (2002), innovation is often developed from „science-push‟ models to more complicated models that require interaction from various key players. This process or model of innovation which demands an interaction among key players is often called a National Innovation System (NIS). Wessner (2007) argues that an NIS is shaped by social norms and value systems including attitudes towards failure, social mobility and entrepreneurship, most of which cannot be changed quickly or easily. Public policy in an NIS environment needs to strengthen links within the system by aligning the actions of key players such as universities, laboratories and large companies with the selfinterest of venture capitalists and entrepreneurs. Government interventions are often based on a traditional economic perspective that acknowledges the influence of technological change but identifies it as a scientific process that operates outside the realms of economics and argues that long run economic growth is limited by progress in areas such as physics biology and engineering (Howitt, 2007). Newer perspectives of endogenous growth theories are built on the notion of creative destruction identified by Schumpeter. As Howitt (2007) points out, economic 4

growth is now recognised as being a social process that affects the incentive to create new knowledge and the willingness to adapt to change. Such an approach favours, according to Howitt (2007), policies that include a focus on: generating more competitive (as opposed to restrictive) market conditions; improving patent protection laws; ensuring universities etc. can take advantage of opportunities to commercialise research and development without compromising their values of openness and information sharing; encouraging national innovation (as opposed to importing innovation in a globalised economy); acceptance of the dynamics of creative destruction (including the prospect that initial innovation can generate capital obsolescence that initially slows recorded growth); and, the minimization of inequality in society by education in creativity and fundamental analytical and problem solving skills rather than narrow, technology specific skills. Regardless of its theoretical foundation, the NIS approach in many countries is designed to ensure all key players are able to develop and commercialise technological innovation. While there is sound reasoning behind the approach and a clear imperative in many countries to encourage greater commercialisation of R&D from university and other public research institutions, the extension of the intervention to SMEs is often problematic. SME’s involvement in a NIS One of the problematic issues in involving SMEs in a broader innovation policy is a tendency to attempt prescriptive solutions. As Quaddus and Hofmeyer (2007) suggest, small businesses are often slow in their uptake of modern technologies. A response by governments in many countries is to introduce programs to support entrepreneurial activity and the birth and growth of new firms by either lowering the cost of entrepreneurial activity or stimulating entrepreneurship through teaching and encouragement (Svensson, 2007). It is generally accepted that resource barriers to innovation force private sector firms to access knowledge from outside of their firms. Dickson and Hadjimanolis (1998) suggest that those innovative firms that are unable to rely on their own internal capabilities and resources will often go to external organisations that have the needed resources and perform formal and informal links and network with other organisations to source for a new knowledge. The knowledge which is gathered from the outside usually is treated as something crucial to the innovation process (Cohen and Levinthal, 1990). These authors also stress that one of the key components of innovative capabilities is by being able to exploit firms‟ external knowledge or absorptive capacity. Absorptive capacity as according to Cohen and Levinthal (1990) the ability to value, assimilate and apply new knowledge. In relation to the firm‟s absorptive capacity, Zahra and George (2002) suggest absorptive capacity as a dynamic capability pertaining to knowledge creation and utilization. This capability enhances a firm‟s ability to gain and sustain a competitive advantage which is also very crucial for firm‟s innovativeness.

5

Often, most outside knowledge is obtained from public research institutions (PRIs) which include universities and public research institutes. PRIs which are often regarded as the main knowledge provider assumed to be able to provide a good source of knowledge in promoting innovative activities among firms (European Commission and Eurostat, 2000). However, for the knowledge to be accessed by the public particularly private sectors, it then has to be commercialised. As a result, the commercialisation of PRIs research is assumed to be important particularly in providing a good source of innovative ideas. So the rationale for intervention is sound but interventions often become prescriptive. For example at a recent international forum (Tarabishy, Gibson, Yoon, Jennings and Foord, 2008), participants identified that SMEs need special attention and assistance in areas such as: collection, evaluation and diffusion of technical, product and market information, acquisition, adaptation and operation of new technologies access to external R & D facilities and R & D know-how, training of personnel, acquisition of organizational and management know-how financing of R & D activities and other high-risk investments. While participants acknowledged that informal channels of technology transfer seem to keep playing an important role for SMEs and that many SMEs do in fact maintain a broader search for technology transfer opportunities than might otherwise be acknowledged, there was still very much a prescriptive approach focused on all SMEs. The other consideration is that there is not strong support for the success of these interventions. For example Svennson (2007) indicates that in countries such as Sweden the poor performance of projects financed by the government is a consequence of bad financing options rather than poor choice of projects.

Further concern about the need for government intervention is raised when the history of technology transfer is considered. For example, in discussing the Lyon silk industry of the eighteenth century, Hilaire-Perez and Verna (2006) suggest “technical knowledge regularly circulated”. They suggest it was shared through multiple private and public networks and involved a great diversity of strategies and varying degrees of openness within families, partnerships, and guilds. “Diverse media were used: verbal or nonverbal (for example, products and artifacts conveying prescriptive knowledge such as prototypes, patterns, models, and molds), oral (speech contact), and written (including all sorts of drawings, from plates to sketches)” (Hilair-Perez and Verna, 2006). Similarly, Coppola (2006) suggests that “technology transfer and technical communication have been intertwined since the time when homo erectus created tools and needed to talk about their use.” Technology transfer is not a new phenomenon and it has existed for centuries often without government intervention. 6

Conclusion While generated from somewhat eclectic sources, the ideas presented in this paper support a simpler focus on the issues of innovation and technology transfer especially as they influence small firms. Innovation is, and always has been, part of economic progress and SMEs have always been involved. There are clear imperatives to develop National Innovation Systems that will facilitate desired outcomes just as there is a need to have strong entrepreneurship (or at least SME) policies that support innovation and its commercialisation. But not all SMEs are, or will be, significantly innovative to an extent that will generate economic growth. Consequently, much of the prescriptive identification of necessary processes in small firms is not applicable and policy focused on making all small firms innovative need to be discouraged.

7

References Anonymous. 2007. New Resource for Technology Commercialization. The Journal of Nuclear Medicine. 48(9): 32 Avermaete, T., Viaene, J., Morgan, E. J. and Crawford, N. 2003. Determinants of innovation in small food firms. European Journal of Innovation Management, 6(1): 8-17. Brown, S.L. and Eisenhardt, K.M. 1998. Competing on the Edge: Strategy as Structured Chaos. Boston, Harvard Business School Press. Cohen, W. M. and Levinthal, D. A. 1990. Absorptive capacity: A new perspective on learning and innovation. Administrative Science Quarterly, 35(1): 128-152. Cohen, W. M., Nelson, R. R. and Walsh, J. P. 2002. Links and impacts: The influence of public research on industrial R&D. Management Science, 48(1): 1-23. Coppola, N.W. 2006. Guest Editor's Introduction: Communication in Technology Transfer and Diffusion: Defining the Field. Technical Communication Quarterly.15(3): 285-293. Dibrell, C. and Craig, J. 2006. The Natural Environment, Innovation, and Firm Performance: A Comparative Study. Family Business Review. 19(4): 275-288. Dibrell, C., Davis, P.S. and Craig, J. 2008. Fueling Innovation Through Information Technology in SMEs. Journal of Small Business Management. 46(2): 203-218. Dickson, K. E. and Hadjimanolis, A. 1998. Innovation and networking amongst small manufacturing firms in Cyprus. International Journal of Entrepreneurial Behaviour & Research, 4(1): 5-17. Drejer, A. 2002. Situations for innovation management: Towards a contingency model. European Journal of Innovation Management, 5(1): 4-17. European Commission and Eurostat. 2000. Statistics on innovation in Europe: Data 1996-1997, 2000 ed. Freeman, C. 1982. The economics of industrial innovation: Frances Pinter. London. Hilaire-Perez, L. and Verna, C. 2006. Dissemination of Technical Knowledge in the Middle Ages and the Early Modern Era: New Approaches and Methodological Issues.. Technology and Culture. 47(3): 536-586. Howitt, P. 2007. Innovation, Competition and Growth: A Schumpeterian Perspective on Canada's Economy. C.D. Howe Institute Commentary. 246: 1-14. Johne, A. 1999. Successful market innovation. European Journal of Innovation Management, 2(1): 6-11. Lipinski, J., Minutolo, M.C. and Crothers, L.M. 2008. The Complex Relationship Driving Technology Transfer: The Potential Opportunities Missed by Universities. Journal of Behavioral and Applied Management. 9(2), 112-135 Miles, I. 2008. Patterns of Innovation in Service Industries. IBM Systems Journal. 47(1): 115-128. 8

Mole, K., & Worrall, L. 2001. Innovation, business performance and regional competitiveness in the west Midlands Business Survey. European Business Review, 13(6): 353-364. O'Neill, H.M., Pouder, R.W. and Buchhotz, A.K. 1998. "Patterns of Diffusion of Strategies Across Organisations: Insights from the Innovation Diffusion Literature. Academy of Management Review. 23: 98-114. Quaddus, M. and Hofmeyer, G. 2007. An investigation into the factors influencing the adoption of B2B trading exchanges in small business. European Journal of Information Systems. 16: 202-2154. Salmenkaita, J.P. and Salo, A. 2002. Rationales for government intervention in the commercialization of new technologies. Technology Analysis & Strategic Management, 14(2): 183. Salter, A. J. and Martin, B. R. 2001. The economic benefits of publicly funded basic research: A critical review. Research Policy, 30: 509-532. Sensis. 2007. Sensis eBusiness Report - The online experience of Small and Medium Enterprises, Sensis, Melbourne Svensson, R. 2007. Innovation Performance and Government Financing. Journal of Small Business and Entrepreneurship. 21(1): 95-116. Tarabishy, A.E., Gibson, B., Yoon, H., Jennings, B. and Foord, D. 2008. Technology Transfer and its Impact on SMEs World-Wide Knowledge from the ICSB Global Community, Workshop at the 53rd ICSB Conference, June, Halifax, Canada. Wessner, C.W. 2007. The Global Tour of Innovation Policy. Issues in Science and Technology. 24(1): 4344. Wikipedia 2008. http://en.wikipedia.org/wiki/Technology#Definition_and_usage Zahra, S. 1993. New Product Innovation in established Companies: Associations with Industry and Strategy Variables. Entrepreneurship Theory and Practice. 18(2): 47-69. Zahra, S. A. and George, G. 2002. Absorptive capacity: A review, reconceptualization, and extension. Academy of Management. The Academy of Management Review, 27(2): 185.

9

Managing Human Capital to ensure Small and Medium-sized Enterprise Competitiveness

Dr Werner Havenga Department of Human Resources Management Faculty of Management University of Johannesburg South Africa E-Mail: [email protected]

Introduction Schermerhorn (2001:240) defines human resource management (HRM) as the “process of attracting, developing, and maintaining a talented and energetic workforce to support organizational mission, objectives, and strategies”. The social function of the firm is integrated in the organizations technical, financial, commercial and administrative work, taking into consideration the wishes and expectations of the employees with respect to the content of the work and the working condition. Departing from this viewpoint Koning (1992) states that HRM can be considered as a management style with a purpose of: -

incorporating management tasks at the line level or the middle-management level; strengthening the mutual relationships between the various areas of personnel management; strengthening the coherence of personnel-management in the strategic business plan; giving definite consideration to the developmental issues related to organization and personnel.

Until recently human resource management (HRM) has been considered as inappropriate for SME’s especially small businesses and consequently research in this direction has been relatively at a mini1

mum level. Small businesses in general have been seen as only smaller examples of large firms. However, according to Burns (2001:9) small business cannot be characterized as only scaled down versions of large firms since they show a number of fundamental differences. A number of these differences can be explained by lacking economies of scale and scope which amongst others is also caused by less provision for human resource management (Fitzsimmons & Fitzsimmons, 2003). Principle challenges facing SME’s, whether family or non-family businesses, point to human resource aspects (Hoover & Hoover, 1999). HRM and human resource development (HRD) is equally central for both small and large firms, but manifest itself differently in them. As early as the beginning of the 1990’s it was found that the size of a business does affect the formality of human resource practises. It also affects the sophistication of the HRM practises used. Small firms do not have the same kind of resources to implement official human resource practises, but they still need to keep employees satisfied and productive (Saru, 2007). Even with regard to HRM research the tendency is to focus on larger businesses and to ignore the very significant small and medium-sized segments of the economy. For smaller businesses, resource constraints may mean that HRM may often be less formal and also limited in their scope and sophistication, but this does not imply that effective HRM is any less significant to firm performance and success (Heneman, Tansky & Camp, 2000., Chandler & McEvoy, 2000., Welbourne & Cyr, 1999). Growth of small businesses is normally accompanied by an increase in their personnel and consequently managers-owners must begin to learn how to develop and implement HRM policies. The faster the growth experienced by the small businesses the greater the chance that HRM problems will be experienced. According to Mazzarol (2003) the owner-manager is usually burdened with the variety of HR functions for which he is generally poorly equipped. Managing such issues as recruitment and selection, staff promotion and retention, wages and salary negotiations, training and development, tax insurance regulations, and other HR aspects can place an extensive burden on the average small business owner. Already in 1986 Little (1986) stated that as the number of staff employed increases the need for a formal HRM manager or process also becomes pressing. Caudron (1993) views businesses with less than 100 employees as being able to operate without a full-time personnel or HR manager. However, once the employee base exceeds 150 a HR manager or department becomes a necessity. Earlier in this paper it was noted that small businesses in general have been typified as only being smaller examples of large firms. However, a number of problems arose when assuming that small firms are the same as large firms (Cassell, Nadin, Gray & Clegg, 2002). These problems emerge as a result of resource poverty which results because of various conditions unique to smaller firms. Koning (1992) comes to the conclusion that SME’s differ from large businesses in the following ways: -

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small degree of division in labour; informal, personal relationship between the entrepreneur and personnel as well as between personnel themselves;

-

the definite mark of the entrepreneur on the business operations; the strong binding and relatively large dependency on the local market and/or limited number of customers; a relative large degree of independence in the workplace in determining the content of the work and the working conditions.

Taking these characteristics into consideration it becomes evident that insights and ideas of HRM must be related to the specific characteristics of SME’s and to examine the degree of value HRM might have in SME’s and how it might be put in use. Purpose of the study The purpose of this study is to consider in an exploratory way the applicability of effective human resource management in a small business in order to ensure its competitiveness. HRM policy and practices as affected by owner-manager characteristics, external market considerations, nature of the internal work environment and the business structure was analysed and discussed by means of using a photographic equipment store as a case-study. The first part of the paper investigates the viewpoints of a number of researchers on human resources management policies and practices, and how it affects small firms’ competitiveness, growth and ultimate success. The discussion is not exhaustive, but serves as a basis for the second part of the paper which by means of a case-study assesses the applicability of HRM practices in small business. HRM, SME competitiveness and performance Hipplebaum and Kamal (2000) consider SME’s to be more likely to survive and sustain a competitive advantage over larger firms by increasing employee satisfaction, which in turn minimizes personnel turnover, absenteeism and lost productivity costs. Bringing about a HRM programme or department in SME’s may thus contribute to or can be considered to be a key element in increasing competitive advantage (Klass, McClendon & Grainey, 2002). Research by Hornsby and Kuratko (2003) has also revealed that a well-motivated, highly skilled workforce can be a determinant of small firms ability to remain competitive in the present business environment. Karami, Jones and Kakabadse (2008) also comes to the conclusion in their research that the HR capability of the firm is a considerable resource that determines the competitive advantage of the firm. In the light of a resource-based view they assume that HR capabilities, including skilled human resources, innovative human resources, human resource effectiveness, HR commitment, and training competent HR are factors that determine the competitive advantage of the firm. Hayton (2003) also comes to the conclusion that a firm’s human capital is an important source of sustained competitive advantage.

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For firms functioning in dynamic and complex competitive environments their human capital and the way in which it is managed is an important source of sustained competitive advantage (Barney, 1991). This competitive entrepreneurial performance refers to the ability to innovate, accept risk, and identify and exploit entrepreneurial opportunities (Hayton, 2003). Pfeffer (1998) suggests that there are seven HRM practices of successful businesses: employment security, selective hiring, decentralized work arrangements, performance-based pay, extensive employee training, reduced status differentials, and information sharing. Also refer de Kok, Uhlaner & Thurik (2006) who identify five primary HRM practice subscales with thirty-two items included in the subscales. In order to provide a source of competitive advantage the business’ human resources should be “leveraged”. This perspective, according to Wagnar and Rondeau (2006) imply that the application and adoption of certain bundles of HRM work practices have the ability to positively impact business performance by creating powerful connections”, or to detract from performance when certain combinations of practices are inadvertently placed in the mix. It should be taken into consideration that because of their comparatively lesser endowment with material or financial resources, smaller businesses are often dependent on above-average committed, motivated and qualified employees. The availability of human resources constitutes an important prerequisite for sustainable organizational success, which constitute growth and competitive ability (Behrends, 2007). HRM models commonly assert that employees should be regarded as value assets and that there should be an emphasis on commitment, adaptability and consideration of employees as a source of competitive advantage (Reid & Adams, 2001). Extensive recruitment and training procedures, increased employment involvement and incentive compensation can also be associated with higher levels of turnover, higher productivity and better financial performance (Huselid, 1995). These actions consequently result in better competitiveness, growth and business success. Astachan and Kolenko (1994) found positive correlations between HRM practises and gross firm revenues. Their results also supported arguments for competitive advantage gained through effective use of HRM practices. King- Kauanui, Ngoc and Ashley-Cotleaur (2006), in their study on HRM in SME’s in Vietnam, come to the conclusion that support was found for the importance of training, performance appraisal systems and incentive compensation on the overall performance of SME’s. These results according to them also supported the results of many studies in Western countries and also indicate that firms performance in these areas can best be explained by HRM best practises. It should be evident from the numerous studies above that the effective use of the HRM practises undoubtedly contribute to the greater overall performance, growth and success in the small business. However, in order to get more clarity on the worth of HRM a small business a case-study is discussed in the next section of this study.

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Methodology In this exploratory research project a single case study is used. The small business in question is a photographic equipment and printing store. Yin (1994:13) defines a case study as an “empirical inquiry that investigates a contemporary phenomenon within its real life context; especially when the boundaries between phenomenon and context are not clearly evident.” It employs a “replication logic” rather than a “sampling logic” and as such Yin (1989) states that each case needs to be considered as an independent study with the objective to identify patterns across cases that may reveal new theory or support existing theory. Gravetter & Forzano (2006) view the case study-design as a study of a single individual for the purpose of obtaining a description of the individual and its circumstances. It usually contains a detailed description of observations and experiences, as well as unique characteristics and responses of the individual. Case research has been popular in small business research for some time (Curran & Blackburn, 2001). Its value as a research instrument, according to Chetty (1996) lies in its ability to measure and record behaviour at close range and in this way enables the researcher and participants to interpret the reality of their experience and develop a better understanding of how that behaviour has taken place. Case study method is considered a more appropriate strategy where the research is seeking to answer questions associated with the “how” and “why”, and where control over events is not possible or essential (Mazzarol, 2003). Based on Watkins-Mathys and Lowe’s (2005) viewpoint it can be stated that research in small business is predominantly based on practice and that it is not yet bounded by concept of absolute truths. In this case-study it is the aim to describe the case setting on the basis of HRM practises in order to make the situation more clear and informative. For this study the unit of analysis was the ownermanager of the firm’s experiences of dealing with HRM in his business during a period of growth. Data collection took place by means of informal interviews with the owner-manager over a period of few weeks. Case-study: Photographic Equipment Store The case firm in this study is a small general and expert photographic equipment business that sells photographic equipment, develop photos, take photos on contract for primary, secondary and tertiary education institutions, individuals and businesses. Lectures are also given in the Department of Graphic Arts at a university. The business is situated in a shopping mall in a town with approximately 170,000 inhabitants. The store was founded 13 years ago by an academic who quitted the university job to start his own business. He has a Ph.D in education with undergraduate qualifications in business. The owner employs a full-time staff component of eleven excluding himself. He himself manages and administers the business whilst three of the employees are experts in handling hightechnology photographic development machines and cameras. The other employees are sales personnel.

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The industry in which the company operates is rather stable, but exposed to new developments such as digital photography. Growth in the firm has been substantial in the past few years. Staff increased from three to eleven employees. The business is a market leader in the town with three other competitors. The owner-manager has no formal mission statement for the company. He is also considering opening up a store in another town and moving his present store into a new larger shopping mall. The owner also fully realizes that the critical success factors for the business are qualified sales- and technical staff, good customer relations and keeping abreast with changing technology. However, planning for human resource management in the firm appears to be lower priority. Findings Recruitment and selection The rapid expansion of the business with growth in the existing market as well as possible physical movement of the firm to the new premises heavily pressurized the manager-owner. The recruitment and selection strategy used are crude and unimaginative. The application blank and interview are the most frequently used selection techniques. Newspaper advertisements and recruiting through existing staff, family and friends are the only recruitment techniques used. Turnover of personnel can be considered above normal. As for the selection techniques the ownermanager should consider more frequent use of sample and probation periods. Probationary period, sometimes called “delayed selection” may be the best approach to use when little relevant predictive data and information can be obtained prior to hiring a person (McEvoy, 1984). While this firm do not hire enough employees to permit formal validation, there is no reason why the owner-manager cannot keep recruitment and selection records which can be used in future to ascertain which type of employees of interviewers seem to be the most valid candidates of future job tenure and performance. Lazear (1998) as quoted by Peters (2005) states that entrepreneurs have to assess qualification needs and set clear standards of qualification to maintain and develop a unique market position, Before employees are hired, job design and discretionary space of decision-making in the firm should be determined. Smaller businesses according to Behrends (2007) often abstain from any systematic and professional approach when selecting new employees. They rarely use any long-term planning of human resource requirements, job profiles and other related issues, and usage of formal selection instruments is normally limited to the conducting of interviews. Communication and motivation The performance of the firm is strongly determined by the service quality which again is a function of communication and motivation. The owner-manager looked to his employees for assistance in maintaining a competitive advantage based on high quality and excellence in service. In order to achieve this, incentives in the form of bonuses were given on an irregular basis. Attempts were made to develop a dynamic team-based spirit and a positive organizational culture. This, however, did not seem very successful. Negative conduct by one of the employees against the owner affected almost all the members of the staff causing a very negative atmosphere, especially when unwarranted legal action was taken against the owner of the firm. The informal and fluctuating management style, (be-

6

tween autocratic and participative) of the owner-manager could have contributed to this situation. He is more autocratic than participative in most cases. The owner-manager although well educated is a creative individual with a business/administrative educational background and limited technical education. Apart from the turbulent internal environment as explained above he is also faced by changes in the external environment. Political interventions in the form of transformation, affirmative action and equal opportunities directly impact on the business. Systematic HRM policy capable of delivering the best quality employees, motivating and managing them becomes necessary in this turbulent times and as the business operations grow. It became evident that the most obvious weakness in the motivation area is that to little use is being made of goal setting. Communication by means of staff meetings is almost non-existent which consequently also effects the level of motivation of employees. Goal setting, according to McEvoy (1984) facilitates both performance evaluation and performance feed-back, and assists in clarifying job expectations and prevent misunderstandings. It is also necessary that the owner-manager should lay down policy clearly stating motivating strategies where recognition for work well done, pay rises, bonuses, profit sharing and job security are predominant. It should be easily administered and easily understood by employees. It should be noted that motivation efforts in small businesses can be explained by four variables which appear to strongly satisfy the needs of employees. The four variables, determined in a recent study by Peters (2005) are: opportunities to learn new skills; perceived fairness; entrepreneurial leaders empathy for employee problems; and stable working schedules. Training and development The owner-manager is, apart from the firm’s economy, in charge of deciding what kind of training is offered to his employees. There is no budget for training/development in the firm. However, if the owner-manager realizes that one of his staff needed training in a specific area then training in the form of on-the-job training would be provided. There is no training strategy and internal skills sharing is used to disseminate training regarding sales, operating relevant photographic equipment and small administrative tasks. Little formal training is offered or encouraged. On-the-job training is provided by the owner’s second-in-charge, which happens to be his son, and secondly by the manageress of the sales section. Though his second-in-charge lectures on photographic issues at the local university, the training and development given to the employees can not be considered sufficient. Information that it needs now and in the future must be identified, and brought to the employees. It must be remembered and that learning does not always need to be conscious or intentional. This means that learning can occur without formal training (Saru, 2007). If the firm can figure out how to make the competencies and tacit knowledge visible, it would also gain some competitive advantage over other firms that have not been able to do the same thing. Peters (2005) notes that entrepreneurs (SME owners) should be aware of the fact that especially young employee trainees are motivated by a high sense of fairness and empathy.

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Integrating training and development activities into key business decisions and activities should be considered crucial. The benefits of doing so include increased flexibility from being able to transfer people with core skills to different sections of the business, prevention of shortage in operational, technical, administrative or management skills (Kerr & McDougall, 1998; Beaver & Hutchings, 2005). While on-the-job training is provided in this firm and it offers the benefit of maximising transfer of knowledge, it can also be considered deficient that the trainer (second-in-charge) is an expert his technical field but lacks communication skills. Evaluation of effectiveness of his training outcome is also much more difficult. As a result of financial constraints, the owner-manager’s perception of outside training and availability of free time for such training, he rarely supports such training. It seems evident from the analysis of the case that the owner-manager are not aware or simply ignore training and development as internal constraints, in order to meet the competition coming from the external environment. This surely will result in organizational and individual personnel ineffectiveness in the medium and long-term Compensation and benefits As far as could be established the compensation and benefit policies and structures of the firm were informal. The owner-manager indicated that he uses any avoidable formal salary-survey of relevant labour markets to assure that his salary policies are competitive. No formal job evaluation system is used to assure that the salary or benefit structures are internally equitable. Benefits offered most frequently by small businesses (vacations, rest breaks, insurance, pension schemes) seems to be an oversight by this firm. No specific policy exists and he owner-manager deals with requests in this regard on an ad hoc basis. To the extent that turnover is an expression of job dissatisfaction which in part may be a function of compensation and benefits, the information gathered speculatively lead one to believe that the employee job satisfaction is not as high as was indicated. Considering that compensation and benefits are becoming increasingly critical for SME’s, also as a result of labour legislation and political aspects, these issues become more prevalent and needs the attention of the owner-manager to lay down specific policies in this regard. Benefits, allowances, training and development can be a large cost component to the small business if not managed correctly. Such costs can be reduced by utilising semi-retired, self-employed people or leased employees (Phillips, 2004). It has also been found that older workers have a much lower rate of turnover. This makes them, according to Beaver & Hutchings (2005) a very attractive proposition for small firms that can ill afford high levels of attrition and turnover, and wants to minimize costs of recruitment, selection and induction training. Luthans (1998) says that the relationship between incentive compensation systems and firm performance suggest that incentive compensation contributes increased product quality, greater acceptance of changes and improved firm performance. The impact of retained profits and bonus payments is also so strong that the incentive system explains much of productivity growth (Yao, 1997).

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Discussion While large firms normally have their own HRM department small businesses tend to overlook this very important aspect until much later in the firm’s existence and especially when it runs into trouble with personnel related problems. SME managers normally perceive that personnel problems pose a major barrier to the success of their business, yet they also believe that outside aid would not be helpful in resolving these problems. According to Behrends (2007), the lesser degree of institutionalization and formulization of HR-practices in small and medium-sized enterprises usually leads to them being attested a severe HRM-deficit. Figure 1: HRM process of photographic small business (case-study) Owner-manager characteristics (controllable) -

External market conditions (Uncontrollable)

Autocratic Post-graduate level Academic / Business experience: 20 / 15 years Introvert

-

Small business structure (controllable) -

Nature of work environment (controllable)

Family business Close corporation Single site – shopping mall Low complexity Low charge

Owner-manager commitment to employee partnering

Market growth (High) Political forces (High) Customer-supplier (Low) Competitor actions (Medium) Technological change (High)

-

Medium specialization Low employee autonomy Routine processes High and low worker skill

HRM Policy & practice -

Recruitment & selection (informal) Delegation of authority (low) Team building (low) Appointment of managers (medium) Remuneration policy (informal) Incentives & rewards (informal) Discipline & de-selection (informal

Growth HR Management

Source: Adapted from Mazzarol (2003)

-

Employee turnover (negative) Employee productivity (medium) Employee commitment (medium)

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Having discussed the most prominent HRM practices of the photographic equipment store as a casestudy, the four key elements that impact on the nature of HRM policy and practice within this small business is illustrated in figure 1. The HRM process of SME growth model of Mazzarol (2003) was adapted to illustrate the relationship between the owner-manager’s personal characteristics; external market conditions; nature of work environment; and the business structure. The characteristics of the owner-manager as discussed in the case have a direct influence on the firms structure as well as the nature of the HRM policy and practice. The decision making of the owner-manager is influenced by the external market conditions which is uncontrollable, and which also influences both the company structure (controllable) and nature of the work environment (controllable) within the firm. This seems to coincide with the outcome of earlier research into small business HRM practice done by Matlay (1999). The firms’ structure has an influence on the nature of the internal work environment, but is itself influenced by the work environment. The internal work environment, firms’ structure and the characteristics of the owner-manager directly impact on the shape of the HRM policy and practice of the firm. These policies and practices as could be determined from the case-study shifts from informal to formal and high to low as the firm grows. The HRM policies and practices result in negative and medium outcomes in the area of employee turnover, productivity and commitment to the firm (partnering). Ghassemieh, Tach and Gilinsky (2005) developed a HRM decision-making matrix for SME’s to include the entire range of HR options. As depicted in an adapted model in table 1, the proposed HRM-decision-making matrix model can assist SME’s choose a HRM strategy option, and find a configuration that will be most supportive of their situations or stages of growth. In the situation that the photographic equipment store finds itself it would seem that it can be classified under option I (No change). This option or Option II where staff assume HR duties can be considered most appropriate. In both of these options, the owner-manager will continue to make the recruitment and selection decisions, so there is no impact on business strategy. With Option I informal on-the-job training will be provided, but with Option II internal staff will take on some of the training duties, including crosstraining of existing staff. This is at present the case in the firm under study. Regarding compensation and benefits there is no impact on existing business strategy, yet in the case of Option II potential advancement for existing personnel who assume HRM responsibilities could be provided. In the case of both options the cost factor would be low. Options III – IV would not fit the requirements of the small firm and are therefore not dismissed in this study. Since the decision matrix model is presented by Ghassemich, et al (2005) as a conceptual model and adapted for the case researched, further empirical tests are warranted.

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Table 1: HRM Decision-making matrix for photographic business (case-study) Relative employee size

Considerations Option Recruitment and selection No impact on strategy

Training and development None

Compensation and benefits No impact

Estimated cost factor Low

< 10

I No change

11 - 100

II Staff assume HRM

No impact on strategy

Limited, some cross-training of existing personnel

Potential advancement for existing staff

Low

101 - 500

III Hire HRM Manager and build function

Makes HRM part of strategy

Limited costeffectiveness for firms with < 100 employees

Favourable impact

High

501 - 1000

IV Hire HRM Consultant

Makes HRM part of strategy

Limited costeffectiveness for firms with < 100 employees

Favourable impact

Moderate to high

501 - 1000

V Outsource HRM

Makes HRM part of strategy

Cost-effective

Favourable impact

Moderate to high

> 1000

VI Electronic HRM

No impact on strategy

Limited costeffectiveness for firms with < 100 employees

Favourable impact

Moderate to high

Source: Adpated from Ghassemich, et al (2005)

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Conclusion and Limitations The nature of the information obtained through an informal interview and one case-study as opposed to verifiable objective data, necessarily limits the value of the information and restricts any conclusions drawn from it to the single small firm. However, given the small business specific problems that was identified the information obtained in this exploratory study paved the way for a quantitative study of a number of SME’s and even comparative research. There also needs to be more research into the links between HRM competitiveness and business success in the SME sector. More attention should also be paid to HRM as a management theory. It seems that managers had little understanding of HRM as a management theory. However, SME owners-managers are familiar with many of its practices (Bacon, Ackers, Storey & Coates, 1996).

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Heneman, R.L, Tansky, J.W., & Camp, S. M. (2000). “Human Resource Management practices in small and medium sized enterprises: Unanswered questions and future research perspectives.” Entrepreneurship Theory and Practice, 25 (1): 11-26. Hoover, E.A & Hoover C.L. (1999). “What you see ahead “Family Business Magazine. 11(4) 31. Hornsby, J. & Kuratko, O. (2003). “Human Resource Management in U.S. small business: a Replication and extension. “ Journal of Development Entrepreneurship. 8 (1) : 73 Huselid, M.A, (1995). “The impact of human resource management practices on turnover, productivity and corporate financial performance.” Academy of Management Journal. 38 (3) : 400-422. Hayton, J.C. (2003). “Strategic Human & capital management in SME’s, an empirical study of entrepreneurial performance”. Human Resource Management. 42 (4): 375-393. Karami, A., Jones, B.M., Kakabalse, N., (2008). “Does Strategic human resource management matter in high-tech sector: Some learning points for SME managers” Journal of Corporate Governance. 8 (1): 7-17. Kerr, A & McDougall, M. (1998). “The small business of developing people“ International Small Business Journal. 17 (2): 65-74. King-Kauanui, S., Nyoc, SuDang. & Ashley-Cotleur, C., (2006). “Journal of human resource management: SME performance in Vietnam.” Journal of Development Entrepreneurship. 11 (1): 75-95. Klass, B., McClendon, J. & Gainey, T. (2002). “Trust and the role of professional employer organisations: Managing HR in small and medium enterprises” Journal of Management Issues. 14 (1): 31-48. Koning. C. (1992). “Human resource management and small medium- sized businesses” Rencontres de St-Gall. Switzerland. 1-11. Little, B. (1986). “The performance of personnel dating in small Louisiana firms: A research note.” Journal of Small Business Management. 10 (2): 53-63. Luthans, K. (1998). “Using HRM to compete in the 21st century.” Management Quaterly. 38 (4): 17-22. Matlay, H. (1999). “Employee relations in small firms” Employee Relations. 21 (3): 285-296. Mazzarol, T. (2003). “A model of small business HR growth management” International Journal of Entrepreneurial Behaviour and Research. 9(1): 27-49. McEvoy, G.M. (1984). “Small business personnel practices” Journal of Small Business Management. 22: 1-8. Peters, M. (2005). “Entrepreneurial skills in leadership and human resource management evaluated by apprentices in small tourism businesses.” Education & Training. 47 (8/9) 575591. Pfeffer, J. (1998). “The Human Equation: Building Profit by Putting People First.” Boston. MA Harvard Business School Pres. Phillips, B.D. (2004). “The future small business workforce: Will labour shortages exist” Bussiness Economics. 39 (4): 19-28. Reid, R.S & Adams, J.S. (2001). “ Human resource management- a survey of practices within family and non- family firms” Journal of European Industrial Training 25 (6/7): 310-320. Saru, E. (2007). “Organisational Learning and HRD: How appropriate are they for small firms” Journal of European Industrial Training. 31 (1): 36-51. Schemerhorn, J.R. (2001). Management Updated 2001 New York: John Wiley and Sons. Inc. Wagar, T.H. & Rondeau, K.V. (2006). “Retaining employees in small and medium-sized firms: Examining the link with human resource management.” The Journal of Applied Management and Entrepreneurship. 11 (2): 3-16. Watkins-Mathys, L & Lowe, S. (2005). “Small business and entrepreneurship research” International Small Business Journal. 23 (6): 657-677. Welbourne, T.M & Cyr, L.A. (1999). “The human resource executive in initial public offering firms”. Academy of Management Journal. 42 : 616-629. Ylao, S. (1997). “Profit sharing, bonus payment, and productivity: A case study of Chinese stateowned enterprises” Journal of Comparative Economics. 24: 251-296. Yin, R.K. (1994). Case Study Research: Design and Methods. London. Sage.

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Employment of External Resources in Innovation Processes

Per-Anders Havnes Jon Olav Pedersen Michael Ricke Agder Research, Kristiansand, Norway [email protected]

Abstract Enterprises maintain their sustainable competitive positions in dynamic markets by renewing their products and processes in business innovation processes. Small changes are obtained in incremental innovations. These are extensions of current practise and are usually implemented as part of daily operations without special considerations. Radical innovations introduce new business concepts, which require an ability to organize resources and competence in novel patterns. Enterprises extend their ability to develop new business concepts, their dynamic capability, by accessing external resources. This study proposes a model for empiric investigation of how such external resources are used in innovation processes. Introduction The purpose of this presentation is to investigate how the use of external resources varies in the course of business innovation processes, and how deployment of external resources is influenced by the nature of the innovation as well as by the context of the innovation process. Business innovation processes require access to new resources, including competence (Bayer & Gann, 2007; Chell & Baines, 2000), which are frequently tapped from external sources. Many therefore consider better access to such external resources to be a vital policy instrument to support the innovative capacity of the business sector, especially for smaller enterprises. The term innovation system (Cooke, 2001) has often been used to describe the interaction between an individual firm, on the one hand, and firms and institutions that can provide such resources on the other hand. Innovation systems have received attention from researchers as well as policy-makers as possible instruments for improving the innovation capacity of enterprises. It is imperative that innovation systems are developed with a thorough understanding of how enterprises utilize external resources in their innovation processes. This research is at an early stage. The objective here is to develop a research model through theoretical deliberations supplemented by personal observations from many years of working in and with enterprises in transition. The model will be tested empirically in a follow-up study.

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Research Questions There is a vast field of research concerning the utilization of external resources in business innovation processes with many interesting and important perspectives. This study has selected a small section of the field that we find essential to sustainable development of small enterprises. We will focus our study by posing three research questions: 1. What factors decide the use of external resources in innovation processes? 2. Are the same type and mix of resources used throughout the innovation process? 3. Are external resources managed similarly throughout the innovation process? Business Innovation Processes Business innovations enable enterprises to adapt to changes in the markets as well as to exploit new market opportunities (McDermott & O'Connor, 2002; Wolff & Pett, 2006). Business innovation processes are market driven in the sense that their objectives are to create utility to the enterprise through a stronger competitive position. This will be achieved through strengthening current positions or by capturing new positions in the market. With the current rapid transformation of markets, enterprises would quickly stagnate and loose competitive positions without renewing. Such renewal is most often produced by several small adjustments, commonly referred to as incremental, stepwise or gradual innovations (op. cit.). In many cases, incremental innovations are implemented in the course of ordinary operational activities and hardly noticed from day to day. However, the cumulative effect of incremental innovations is usually sufficient to maintain a competitive position when changes in markets follow predictable patterns. During times of dramatic changes in the business environment or when an enterprise intends to exploit completely new opportunities, incremental innovations will not provide sufficient leverage for rapid and large transformations. We refer to these large transitions over a short time period as radical innovations. They are also referred to with terms such as discontinuous or really-new innovations (Garcia & Calantone, 2002; McDermott & O'Connor, 2002).

New business concepts Innovations may represent novelties in one or along several dimensions. They may provide new products or services to a market; they may introduce new technology to existing products; they may introduce new forms of organization of an enterprise or a value creation chain; or most likely a combination of the above since these dimensions generally interact. The fundamental issue is the management of innovation processes, which differs from management in general (Gemünden, Salomo, & Hölzle, 2007) due to the high level of uncertainty and application of novel competence. The focus here is on innovation processes that are more than minor improvements of existing products or processes. Our interest is the introduction of products or processes that are recognizable novelties to the degree that they represent new business concepts, and will require special attention and provisions outside daily operations. A new business concept is the spark that triggers the innovation process. It comprises thoughts on how the novel products or processes may be achieved from the platform of current operational concepts, that is, products and processes, combined with thoughts or estimates of the market effect of the

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new business concept. The new business concept is conceived from the current state of products and processes in the enterprise, the current markets and a perception of future market opportunities.

The innovation challenge In real life incremental and radical innovations do not represent a dichotomy. Rather, one will find a continuity of transition rates ranging from incremental at one end to radical at the other end. Innovations at different points of this continuum imposes different requirements on the organisation that hosts the innovation process (McDermott & O'Connor, 2002). By definition, innovation processes address novel products or processes that require new capabilities or a new application of existing capabilities. Moreover, when the innovation requires interaction between an increasing number of components or subsystems, the complexity of the innovation process will increase rapidly. The combination of novelty and complexity will define the conceptual distance, often termed the leap (L) between the initial and terminal status for the innovation process: L = (novelty; complexity) As stated above, incremental changes are implemented over time as part of ongoing activities without special attention. The cumulative effect measured by the leap may, however, be just as large as for a radical innovation. Due to the time factor and the subdivision into many small steps of change, there is a significant reduction in the novelty and the complexity of each step. Thus the experienced radicality of the innovation will increase when the time for completion of the innovation process is reduced. The incubation period can be written as: I = (time) We denote the measure of novelty by , the measure of complexity by  and of time by  and can then symbolically define a conceptual radicality index as:

This radicality index is a symbolic representation of how an innovation is perceived. A high value for the radicality index will indicate that the persons that are exposed to the innovation will perceive that it will require substantial and rapid adaptation. A low value of the radicality index will indicate that that innovation will require minor adaptations with ample time. The larger the leap from old to new products the higher value of the radicality index. The perceived magnitude of the leap is subjective and we propose that it is a function of the nature of the changes, the novelty as well as the complexity. But the experience of the leap will also be a function of the context, including the enterprise’s capability and experience in handling innovation processes. The radicality index also proposes that the perceived experience of the leap will be more dramatic with decreasing time period for implementation of the leap.

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We are here looking at the innovation process from a management perspective. How can the innovation process be structured and supported in order to maximise the probability for success, that is, to achieve the initial objectives? We posit that the more radical innovation, the more challenging the management of the innovation process will be. Incremental innovations are usually handled as part of daily operations without extensive planning or attention. Radical innovations, on the other hand, require the firm to cope with novel challenges that need special attention and with decisions and control procedures (Gemünden et al., 2007). As the innovation process proceeds, new knowledge will be developed and old knowledge will be recombined in order to tackle the challenges posed by novel products and processes. The decomposition and structuring as part of the innovation process will also reduce complexity. Hence, the radicality index will be higher in the initial phases than the terminal phases of the innovation process. This line of reasoning suggests that the quality and quantity of external resources will vary throughout the innovation process.

Stages of the innovation process We propose that three phases or stages may be discerned in the innovation process with no distinct delineation between the stages: inception, development and implementation. Progress will normally not be linear within or between the stages. Due to the trial and error nature of development projects, iterations are frequently required to redefine intermediate solutions in the innovation process. The stages will therefore neither define the logical nor the temporal progression of the innovation process. Rather, the stages describe the progression from an idea to a completed and implemented innovation. Inception We postulate that the innovation process in an ongoing enterprise has two starting points. The first is the combination of products, processes, resources and competence that constitute the existing operational concept. The second is a new market opportunity that arises through changes in technology, in policies or in competitive forces in the markets. The opportunity is most often subjective and needs to be identified and interpreted in relation to the objectives and capabilities of the enterprise. The outcome of the inception phase is the identification of a new business concept that will allow the enterprise to exploit the new opportunity in the market1. This stage focuses on development of concepts and relies on creative abilities in addition to an ability to see practical implications without being unduly deterred by risk and unsolved problems. Development The new business concept will be made concrete during the ensuing development stage. As this stage progresses, problems will be better defined and the quest for solutions will start. This will require a gradual transition from creative towards effective management methods during the development stage. The definition of problems and break-down into tasks represent a division and structuring that allow for the use of discipline specialists, such as engineers, to direct their attention to solving specific problems within the scope of defined design criteria. In this phase, existing knowledge and resources will be recombined; and new knowledge and resources will be accessed or developed. The development stage focuses on giving the new business concept a concrete form that can be subjected to pilot tests in the value creation process of the firm and in the markets. 1

The new business venture will increase competitive positions through improved characteristics of existing products, introduction of new products or accessing new customers. Developments may be in processes (including marketing and sales) or in products.

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Implementation Once the value and practicability of a new process or new product have been proven through testing, implementation of new processes may start internally and marketing and sales efforts can commence externally. This phase is often overlooked in the innovation process, but is essential for ensuring that the accrued costs in the two previous phases are compensated for by future income. External constraints as well as a strong discipline-orientation in this phase combined with well-defined milestones will push the process further in the direction of efficient and effective work methods. Consistency between two major elements is decisive for a successful completion of the innovation process. The first element is the character of the innovation – what challenges does the innovation present. The second element is the capability of the enterprise to address these inherent challenges, that is, the capacity of the enterprise to muster resources and to act in a sufficiently dynamic way.

Innovation capacity – dynamic capability Our observations over many years indicate that one frequent reason for the inability to complete innovation projects is the failure to dedicate adequate resources to the project. Especially in small organisations where each person has several tasks, innovation projects compete with daily operative requirements. A minimum requirement for success is therefore that there is redundancy or slack that will allow an organisation to absorb the workload and to provide the necessary competence. Another minimum requirement for success is that the enterprise has sufficient capital to finance the innovation process until the income from the new business venture starts to flow in. In the long run, the enterprise must also have capacity to carry the costs of risk. The innovation capacity of an enterprise thus rests on the foundation of its resources, which have been accumulated as a result of previous activities. These resources have been shaped by the needs of the past and are subsequently applied in the current innovation process to respond to the needs of the future. The ability to come up with novel solutions will therefore depend on an ability to adapt the resources in response to the new requirements of the innovation process (Eisenhardt & Martin, 2000; Pek-Hooi, Mahmood, & Mitchell, 2004; Teece, Pisano, & Shuen, 1997). Eisenhardt and Martin (2000, 1107) define dynamic capability as “....the organizational and strategic routines by which firms achieve new resource configurations as markets emerge, collide, split, evolve, and die.” The dynamic capability is thus the process at the strategic level that enables the enterprise to change the content, structure and organisation of the resources that are available to the innovation process. Correspondence between the dynamic capability and the dynamic change patterns of the business environment is essential for the long-term survival of the firm. Therefore, adequate flexibility in its dynamic capability constitutes a significant part of the core competence for a firm’s innovative sustainability. The internal resources that are available to the innovation process will often need to be supplemented by external resources. The dynamic capability must therefore include practices to access alternative external resources in order to serve the important bridging function between the enterprise and its business environment. The dynamic capability has three main components in our research model. (1) The resources that are accessed and have a specific work capacity and capabilities that are related to the tasks at hand. (2) The structure or organization of the resources that are accessed. The structure may be closed and directed or open and searching, it may focus on control through acquisition and employment or on flexibility through partnering and hiring, and so on. (3) The actual knowl5

edge that is made available including general technological know-how as well as market information and the functional requirements of the customers. Dynamic capability is multi-dimensional. Nevertheless, it may be illustrated by a linear continuum. The enterprise may choose a position on this continuum as part of the strategic development of its core competence. At one end, the enterprise may choose low dynamic capability in combination with high repetitive efficiency. This configuration typifies standardized products with low per-unit costs found in mass production linked to stable markets. At the opposite end of the continuum, the enterprise may choose high dynamic capability in combination with high flexibility. This may be very efficient for providers of one-off or small-series products produced to the purchasers’ specifications. It is also appropriate in turbulent markets (Eisenhardt & Martin, 2000). This highlights that there must be correspondence between the characteristics of the firm’s (chosen) market and its (chosen) dynamic capability. The match between the temporal characteristics of a firm’s market and its dynamic capability is one of the central strategic choices of an enterprise and has been somewhat neglected in theory. The dynamic capabilities are a consequence of how the enterprise configures its total resources including how it accesses, interacts, and relates with external resources. The dynamic capability defines the possible expression of its innovation activities and the innovation process will influence how the dynamic capabilities develop. There is a two-way interaction between the dynamic capabilities and the innovation process. Research Model The reason for using external resources in innovation processes is to improve the probability for success. We maintain that the methods for accessing external resources will also influence the dynamic capability of the enterprise – and in effect partly constitute the dynamic capability. For this reason, the methods for deployment of external resources in innovation processes will therefore have short-term as well as long-term effects. One sub-problem we wish to address here is related to managing the innovation processes, as outlined by the three research questions posed above. We intend to improve the understanding of how enterprises find and integrate external resources efficiently for varying requirements throughout innovation processes. Each innovation process will be associated with developing one specific new business venture starting with an idea, which is the new business concept. Most often this will be organised as a project with a prospective utility. There is of course great variety in the character of innovation projects, and this variety will, together with the available internal resources of the enterprise, necessitate different employment of external resources. In our research model, the new business concept will be characterised by measures of novelty (new to world, enterprise, or market), venue (such as technology, process, product, market, or organization2), size (absolute and relative to the enterprise), and complexity (process and outcome). The dynamic capability bridges the gap between the enterprise and its environment. As developed above, the dynamic capability may be measured by the variables resources, structure, and

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The vast majority of innovations cannot be univocally identified as belonging to one category (Simonetti, Archibugi, & Evangelista, 1995). Innovations will often combine new product with new process and new market.

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Figure 1 Research Model - Use of external resources in innovation processes

Three stages: - Inception - Development - Implementation Structure Knowledge

Dynamic capability

Stage of innovation process Resources

Resources External resource employment

Novelty Venue Size

Structure Knowledge

New business concept

Complexity

knowledge. The resources and knowledge are partly intrinsic and partly extrinsic. The structure is, similarly, internal as well as external – but also bridging external and internal elements. The use of external resources may be measured by the same variables as dynamic capability: resources, structure and knowledge. We postulate that the new business concept and the dynamic capabilities, moderated by the stage of the innovation process, will decide which and how exteral resources will be deployed. Therefore, the deployment of external resources can be interpreted as one manifestation of dynamic capability. The research model is set out in Figure 1.

Testing of the model Following presentation, discussions and possible modifications of this model we intend to test the model in two rounds. The first round will be case studies of five to ten enterprises in order to verify empirically the concepts, the measures and the relationships in the model. The second round will be a postal survey of a larger number of enterprises in order to test the validity of the model in different contexts of the innovation processes. Discussion The purpose of this paper has been to develop a model for employment of external resources in innovation processes that can be tested empirically. It still remains to develop the set of variables that may be used to attach measures to these concepts. Additionally, the discussion above illustrates that the concepts are clearly subjective as well as abstract. It will therefore not be possible to find a set of variables that are objective and may be measured by means of absolute and unambiguous scales. Testing of the model must therefore include characteristics of the context, the persons involved and the enterprise, as well as the concepts and causal relationships set out in Figure 1. 7

We have proposed that the dynamic capability is a significant independent variable and that employment of external resources is the dependent variable. At the same time we have argued that the mode of engaging external resources constitutes a significant part of the dynamic capability of the enterprise. This might appear to be a circle argument, but is not so for two reasons. First of all, we are measuring phenomena at different points in time, and therefore the measurements are different variables. Secondly, the dynamic capability of the firm includes but is not restricted to the employment of external resources. Conclusion Our purpose has been to develop a model that can be used to test empirically how external resources are used to facilitate business innovation processes. Based on the work of other researchers, our theoretical deliberations as well as our practical experiences we propose that the use of external resources constitutes an important part of the dynamic capability of the enterprises. The dynamic capability is therefore an explanatory factor as well as being further developed as a consequence of the innovation process. Our intention is to test the model as a follow-up of this work. Literature Bayer, S., & Gann, D. (2007). Innovation and the dynamics of capability accumulation in projectbased firms. Innovation: Management, Policy & Practice, 9(3-4), 217-234. Chell, E., & Baines, S. (2000). Networking, entrepreneurship and micro business behaviour. Entrepreneurship & Regional Development, 12(3), 195-215. Cooke, P. (2001). Regional Innovation Systems, Clusters, and the Knowledge Economy. Industrial and Corporate Change, 10(4), 945-974. Eisenhardt, K. M., & Martin, J. A. (2000). Dynamic Capabilities: what are they? Strategic Management Journal, 21(10/11), 1105. Garcia, R., & Calantone, R. (2002). A critical look at technological innovation typology and innovativeness terminology: a literature review. Journal of Product Innovation Management, 19(2), 110-132. Gemünden, H. G., Salomo, S., & Hölzle, K. (2007). Role Models for Radical Innovations in Times of Open Innovation. Creativity & Innovation Management, 16(4), 408-421. McDermott, C. M., & O'Connor, G. C. (2002). Managing radical innovation: an overview of emergent strategy issues. Journal of Product Innovation Management, 19(6), 424-438. Pek-Hooi, S., Mahmood, I. P., & Mitchell, W. (2004). Dynamic Inducements in R&D Investment: Market Signals and Network Locations. Academy of Management Journal, 47(6), 907-917. Simonetti, R., Archibugi, D., & Evangelista, R. (1995). Product and process innovations: How are they defined? How are they quantified? Scientometrics, 32(1), 77-89. Teece, D. J., Pisano, G., & Shuen, A. (1997). Dynamic capabilities and strategic management. Strategic Management Journal, 18(7), 509-533. Wolff, J. A., & Pett, T. L. (2006). Small-Firm Performance: Modelling the Role of Product and Process Improvements. Journal of Small Business Management, 44(2), 268-284.

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How small software companies innovate: a regional look from Finland

Asko Miettinen Tampere University of Technology Industrial Management P.O.Box 541, 33101 Tampere, Finland [email protected] Abstract. A sample of regional small software firms (N = 25) are explored by semistructured interviews. Most of them are new entrants in the market benefiting from the rapid growth of this industry sector. The results of the study showed that about a half considered product superiority as their main competitiveness source ahead of more customer related factors. Internally these firms demonstrated a strong team and „adhocracy culture,‟ although they realised that more formal procedures will come along with their growth. Externally there was very little network-extensive business behaviour. Furthermore, demand-oriented innovation efforts seemed to compete with traditional technology-driven activities in these firms and software business was often considered more product than service. The issue of „informal innovation‟ is presented and further discussed in this context.

1. Introduction Programming and software have a key role to play in the development of information technology. Increasingly, the operation of society is controlled by means of computer software. Society, therefore, is increasingly dependent on software that works. The size and complexity of software have grown hand in hand, and the same trend will continue in the future. There are question marks about the reliability even of existing applications, and it is very difficult and expensive to try to improve them. Unless methods can be improved, the problems with software may become a bottleneck in IT development. Software is worldwide being outsourced to lower cost countries such as India and China. This may lead also Finnish software industry to lose one of its most significant competitive asset: its hold over software development. If this trend continues, research and the workforce in this sector will begin to dwindle. The role of open source code, on the other hand, may well increase in the future. It enjoys very strong support among researchers and programmers in the field. It is possible that we will see a divergence in software between publicly funded program development based on open source code and closed software development in business companies. The software industry is a relatively new industrial sector which has become one of the major growth industries over the past 40 years in advanced economies. This sector is characterized by a few big multinationals and a large number of small firms typically providing high-performance inputs into complex systems in production, of information processing and of product development. The software industry has also rapidly moved towards internationalisation of the sector, coupled with niche and

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small-scale market opportunities due to the technological change and vertical disintegration (Harrison et al., 2004). A great many firms in the sector appear to be relatively young, which is an indication that the expansion of the sector has provided opportunities for new entrants. Many of them are also „born global „, having much growth potential (Martin, 1998; Davenport et al.2002; Autere, 2005). The global volume of software industry is estimated to be about 350 billion EUR (2006) and its average growth in 2006-2008 6.5 per cent in the European Union (EITO 2007). The market for small and mid-market businesses in this industry is expected to be tens of billions a year in the future. Small enterprises can actually have the same expertise as big companies in the software business, which explains their potential competitive position in this sector (Hine & Miettinen, 2004). The software industry is recognised as highly innovative. The research and development pipelines are generally short compared to other high technology industries such as elaborately transformed manufactures and biotechnology. Product life cycles are correspondingly short. The software industry has become one of the major growth industries over the past few decades. As many studies have indicated (i.e. Harrison et al., 2004; Autere, 2005), software seems to be the primary element in most aspects of innovation from basic research through product innovation. Software provides the critical mechanism through which managers try to lower costs, compress the time cycles, and increase the value of innovation. It is also in the heart of the learning and knowledge processes that give innovations their highest payoffs. There were about 1,200 software firms in Finland in 2006 employing 12,400 professionals (Lamberg, 2006). Their turnover in 2006 was 1.4 billion EUR including exports worth 0.5 billion (Rönkkö et al., 2007). The growth of this industry sector has also been rapid: 13.1 per cent in 2007 and has continued in 2008. This is above the average growth in industry. This growth has also been faster in Finland than in most other countries over the past few years. Firms operating in this industrial sector are typically small, but a good number of them are growth oriented. In 2007, 40 per cent of software firms in Finland employed maximally six people. The average age of the enterprises was 11 years. Regionally a majority of software firms are located in Greater Helsinki area. Greater Tampere area is the second one in this sector having some 200 operating software companies (Lamberg, 2006; Rönkkö, 2007). Software industry in Finland is also considered an upcoming cluster playing potentially an important role in country‟s economy. Software is also one the core elements in process innovations or in creating the functionalities that make products valuable to customers. In others, software is actually the “product” or “service” the customer receives. Furthermore, software can provide the essential vehicle enabling the inventor-user interactions, fast distribution of products and market feedback that add most value to majority of innovations. Thus, software dominates today all innovation steps: it provides the enabling tools and infrastructure to other IT professionals in virtually all other industries. Given the changes within the information sector of the economy, typified by the shift in value added from hardware to software, there has been a significant rise in research interest in this area, too.

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2. Research question In most advanced economies, the software industry has consciously moved towards an internationalisation of the sector occupying a key role in the development of the knowledge-based information economy. Still it is characterised by a great number of small enterprises and a few multinational companies. Another attribute of the sector is a large number of niche and small-scale market opportunity driven small firms due to rapid technological change and vertical integration. Great many firms appear to be relatively young giving the evidence that the growth of the sector has continuously provided opportunities for new entrants. This study aims to explore how young and small software companies go about their internal management and external management in order to maintain their adaptive capacity, innovativeness and competitive advantage. The basis of their competitiveness and innovation efforts and experienced work loading are also studied. 3. Sample and Methodology A structured interview with managing directors of 25 small software firms were conducted in 20062007 in Pirkanmaa county (greater Tampere area) in Finland. A majority of the interviewees were founders of their young enterprises employing 11.3 people on average with the range from 4 to 42 employees. The interview lasting about one hour included items about their products and services, assessments about the creativity of their personnel, their communication techniques to the internal management as well as to the management of their external relationships, the basis of the competitiveness, collaboration with other firms, and innovation efforts. To analyse the responses, descriptive statistics such as means and standard deviations were used (several items were presented in the form of 5-point Likert scale). Eight enterprises from this sample were studied more in detail. In these cases, Robert E. Quinn‟s Competing Values Framework (CVF; Quinn, 1991; Quinn & Spreizer, 1991; Rogers & Hildebrand, 1993) indicating potential tensions between internal and external management. The CVF questionnaire was completed in the case firms in small teams of 3-4 people consisting of managers and employees (“a barometer group”). The CVF profile includes rating the current situation and the ideal one. 4. Results 4.1. Internal indicators To analyse the responses, both raw data presented in tabular form, and descriptive statistics are used, particularly means. It is important in assessing the internal processes of the firms to gain information on the extent of involvement of staff in the development activities. For example, innovation is a special tool through which firms try to strengthen their competitive position in the market. Most development activities are dependent on a creative process. It is then useful to gather data on perceptions on the creativity of staff in the company. These evaluation are made by the managing di-

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rectors and are biased to certain extent suffering from factors such as subjectivity, social leniency and halo effect. Anyway, Table 1 demonstrated that about a half of staff is considered very creative and another third reasonable creative. The staff in the interviewed companies is mostly very young (less than 30 years of age) and well educated, most having a university degree. This might explain why this simple creativity assessment indicates high percentage of creative people working in the firms.

Table 1. Percentage of creative staff (N = 25) Not creative

16.8 %

Reasonable creative

35.1 %

Very creative

48.1 %

Total

100.0 %

The software industry as most high-technology industries relies heavily on the intellectual abilities of its people. The following issue extends this probing into which skills are most critical in conducting their business operations. In this question was asked: How important is it for your staff to posses the following characteristics? The answers were given in 5-point Likert scale. (Table 2)

Table 2. Importance of staff characteristics (N = 25) Characteristic

Mean

SD

Problem solving ability

4.70

0.66

Creativity

4.53

0.50

Self motivation

4.40

0.60

Independent action

4.25

0.64

Planning skills

4.20

0.62

Teamwork skills

4.13

0.89

Entrepreneurial behaviour

4.10

0.72

Technical skills

4.10

0.91

Customer interaction

3.85

1.09

The means and standard deviations are provided in the table above to indicate the variability of the responses. The highest score is not surprising: problem solving ability is in the core of typical software projects and also in the centre of training and education of software professionals. The responses also indicate that creativity, self-motivation, independent action, planning skills and teamwork skills play an important role in internal management of the firms. Interestingly enough, customer interaction scores lowest out of these nine characteristics. It may well be that the managing director him/herself takes the responsibility for this side of the business, because small firms seldom have specialised and separate personnel for this particular purpose. Communication techniques are very important in the internal management of a business when it comes to taking an idea through to fruition. The type of communication techniques used need to re4

flect the level of creativity, cooperation and fluidity necessary for high performing to emerge. This is particularly important for project-based companies such as these. It is not surprising then that on a five point Liker scale of importance (5 = very important), face-to-face was rated most highly (Table 3), electronic next, followed by meetings and telephone not as important, tailing to paper (memos etc.). Table 3 Importance of various communication techniques to the internal management of business (N = 25) Technique

Mean

SD

Face-to-face

4.40

0.74

Electronic

4.15

0.81

Meetings

3.75

0.85

Telephone

3.30

0.92

Paper

2.73

1.14

Face-to-face communication appeared to be the most important communication means to the internal management of the firms ahead of other means such as formal meetings, electronic or telephone communication. In managing external relationships, electronic communication was ranked highest followed by face-to-face communication. Problem solving ability was considered the most important staff characteristic before creativity, self motivation, independent action, planning skills, team work and entrepreneurial ehavior. As to their innovation efforts, customer feedback was most crucial followed by customer involvement, interfirm collaboration and arms length negotiations. The results further demonstrate that firm expansion into a new market is an indication about a major form of strategic variation. It shows that firm expansion can be viewed as a form of constrained adaptation to growth opportunities. Enterprises in the sample that have undertaken major, discreet expansion moves exercise strategic choice in the sense that their management has substantial influence in determining and selecting among emerging options in terms of occurrence, timing and direction of growth and development. The object of such expansion exercised only by a few firms in the sample has been typically to improve performance by increasing profitability, business growth and the chances to survive. 4.2. External indicators More information can be gained about the business operations of the firms in the sample when questioning respondents about where their competitiveness comes from. In viewing the responses to this question, there is a strong evidence of a market pull effect in the business operations of each of the companies. In addition to market pull related issues, technology push factor were also often mentioned. Given both the market pull and technology push and the consequent importance of external relationships in the market including customers, suppliers and collaborators, the picture in incomplete without questions relating to these relationships. A direct impact question was used to gain an indica-

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tion of the importance of various external relationships. This question enquired how important different relational forms are to the firm‟s development effort? (Table 4)

Table 4. Importance of various factors in development efforts (N = 25) Factor

Mean

SD

Customer feedback

4.45

0.88

Customer involvement

3.93

1.17

Interfirm collaboration

3.55

0.83

Arms length negotiations

3.40

0.99

Ability to outsource

2.30

1.34

Relationship with Government

1.90

1.02

Customer feedback is the most important factor for firm‟s development efforts followed by customer involvement. Interfirm collaboration is less preferred representing the middle group issues in this list. Partial explanation of this may come from the age of the firms, with a number of them being less than five years old. New firms tend to concentrate more on their products and product development, as they are seeking to establish in their market. An external focus, including building networks is more likely when the firm becomes more established in its market. Network-intensive business behaviour has become an emerging theme in entrepreneurship-driven SMEs, especially in technology and knowledge-intensive industries such as software, but does not seem to among the first issues of new entrants in this sector. When it comes to the communication techniques employed in managing external relationships (Table 5), the picture is rather close to that describing the internal management of the firm (Table 3). Electronic has the highest mean followed by face-to-face and also telephone and meetings have changed their rankings, which is understandable given the small size of the companies. Paperwork has the clearly lowest mean in both cases. Table 5. Importance of various communication techniques to management of external relationships (N = 25) Technique

Mean

SD

Electronic

4.50

0.61

Face-to-face

4.30

1.08

Telephone

3.85

0.67

Meetings

3.85

0.99

Paper

2.75

0.97

One general observation from the literature is that the customer perspective and degree of customer relationships in small software companies varies considerably (Rajala & Wes- terlund, 2007). The interviewees were asked to define briefly what they would see as the basis of the competitiveness of their company. The answers varied, but can be categorised in three groups. 6

The first one consists of “mainly product oriented” answers (such as “strong technical expertise”, “superior product offering”, “unique technology” or “technical competence”). The second group is that of “mainly customer oriented” (such as “understanding customers‟ business”, “customer satisfaction” or “simply customers”) and the third “combined/mixed” (such as “technical know-how combined with closeness to customers”, “management of products and an ability to listen to the customer”, “our ability to communicate our product/service portofolio‟s benefits to the customers‟ language”). Table 6. General orientation of small software firms (N = 25) Orientation

N

%

Mainly product oriented

12

48

Mainly customer oriented

7

28

Combined/mixed

6

24

Total

25

100

The results in Table 6 indicate that almost a half (48 per cent) evaluated that their competitiveness comes in the first place from their products while another half of the respondents said to focus primarily on customers or combining their products and customers. This is somewhat surprising, because a vast majority of the firms have operated in software industry already several years, but also reminds about the fact that in most cases the entry decision was made based on rather technology/product know-how than customer related issues. Another observation was, however, that there appeared a clear tendency toward a closer cooperation between a good number of small software firms in the sample and forest, bio, ICT and media industries. Another existing trend was that of specialisation such as „a specialist in software vendor of remote managements and telematics solutions,‟, „total machine-to-machine solutions‟ or „specialist in web-applications improving customer‟s business processes and information management.‟ Yet a majority had difficulties in considering their business service rather than production. 4.3. Organisational culture Organisational culture of the small software companies was diagnosed by using Quinn‟s well-known Competing Values Framework. This diagnosis was not conducted in all 25 firms in the sample, but in eight companies attending a particular development programme in 2007-2008. The Competing Values Framework (CVF) has appeared to be useful for identifying the major approaches to organisational design, stages of life cycle development, organisational quality, theories of effectiveness, leadership roles and roles of human resource managers. It has been found to have a high degree of congruence with well-known and well-accepted categorical schemes (Cameron & Quinn, 1999). The CVF was developed initially from research conducted on the major indicators of effective organizations. Thirty-nine indicators of effectiveness were submitted to a statistical analysis, and two

7

major dimensions emerged that organised the indicators into four main clusters. One dimension differentiates effectiveness criteria that emphasise flexibility, discretion, and dynamism from criteria that emphasise stability, order, and control. The second dimension differentiates effectiveness criteria that emphasise an internal orientation, integration, and unity from criteria that emphasise an external orientation, differentiation, and rivalry. Together these two dimensions form four quadrants, each representing a distinct set of organisational effectiveness indicators. What is notable about these four quadrants is that they represent opposite or competing assumptions and values. Each continuum highlights a core value that is opposite from the value on the other end of the continuum. For example, flexibility versus stability, internal versus external. Thus, the dimensions produce quadrants that are also contradictory or competing on the diagonal (Figure 1). The upper left quadrant identifies values that emphasise an internal, organic focus, whereas the lower right quadrant identifies values that emphasise an external, control focus. Similarly, the upper right quadrant identifies values that emphasise an external, organic focus, whereas the lower left quadrant emphasises internal, control values. Each quadrant in the model (Figure 1) has given a label to distinguish its most notable characteristic – clan, adhocracy, market (firm) and hierarchy. These quadrant names are not randomly selected, but are rather derived from the scholarly literature that explains how, over time, different organisational values have become associated with different forms of organisations. Thus, four major culture types, the hierarchy culture, the market culture, the clan culture, and the adhocracy culture highlighting innovation and adaptation can be identified (Quinn, 1991; Cameron & Quinn, 1999). Not all eight CVF profiles are presented in this paper. There is only one example, but it is very typical and dominating among the eight cases. It is neither a mean profile, but rather „a dominant design‟ profile fitting in about 80 per cent of the cases. In Figure 1, a full profile line represents the actual situation in the firm, and the dotted line an ideal one by the consensus evaluation by the „barometer group‟ in each firm. The result is very clear: the team and adhocracy culture are appreciated (current profile) and there is also willingness to maintain this situation (ideal profile). The hierarchy profile is least preferred, but interestingly enough there seems to be an awareness among the barometer group members that it will be the direction to which the firm is going in the future when growing bigger. Shared values and goals, cohesion, participativeness, individuality, and sense of we-ness permeated clan-type, team oriented firms. They seem like extended families than economic entities. Instead of rules and procedures of hierarchies or the competitive profit centres of markets, typical characteristics of clan-type firms are employee involvement programmes, and commitment to employees. These characteristics are also evidenced by autonomous (or semiautonomous) work teams that receive rewards on the basis of team accomplishments (rather than individual ones) and that tend to hire and fire their own members. Some basic assumptions in a clan culture are that environment can best be managed through teamwork and employee development, customers are best thought of as partners, the organisation is in the business of developing humane work environment, and the major task of management is to empower employees and facilitate their well-being at challenging work, enhance their participation, commitment and loyalty.

8

Figure 1. An example of typical results from CVF-analysis: a ‘dominant design’ profile There might be several explanations to this result. All employees in the current study worked for small software companies unlike in the earlier national study. A good proportion of the respondents were also partners in the studied enterprises. A majority of companies were relatively new entrants in the sector maintaining still “the spirit of inquiry” and entrepreneurial enthusiasm. They also emphasized their advantage of a small size in organising their work in a flexible way influencing on how their employees felt about their working conditions and circumstances. 5. Informal innovation in small software firms Whilst it has gradually become accepted that there is likely to be no single firm size uniquely and unambiguously optimal for innovation, small firms maintain a distinct and critical role to play. Although fundamental or radical invention ordinary takes place within either large firms or large public laboratories, small firms are disproportionately responsible for near-to-market developments and initial market diffusion. In fulfilling this special role, small firms enjoy unique advantages associated with, lack of bureaucracy, flexibility, informal internal communication practices; and, adaptability through nearness to market (Freel, 2000). In this era of flexibility, responsiveness and acceptance of diversity, the traditional measures of innovation appear standardised, inflexible and limiting (such as data on R&D inputs, patent data and bibliometric data). For small business, the innovation process often does not follow any formal path of research and development more recognisable in larger firms. Nor does small business figure in the

9

innovation statistics in many national databases. For example, none of the 25 small software enterprises in this study had a separate R&D budget. Thus, to achieve a more complete assessment there exists a need to recognize both input and „throughput‟ as well as output measures and indicators. The dissatisfaction with the inadequacy of existing formal measures has spawned a quest for alternative measures of innovation, both large and small firms. Early steps have been taken in seeking measures which are ideally suited to small firms and their circumstance. The concept of informal innovation and its measurement in the context of software industry was raised by Romijn and Albalajedo (2002) in defining some new determinants of innovation capability in small electronics and software firms in southeast England. They refer to both formal and informal innovation support activities, such as staff training, informal technological efforts such as problem solving, informal R&D such as learning on-the-job. They concede however that only estimates of such informal efforts can be made. The internal environment of the firm interacts constantly and unwaveringly with the external environment to influence the competitive position of the firm. The innovation process contributes to and is impacted by this interaction. In analysing the informal innovation process, beyond the traditional measures of innovation, those factors which are attributable more to small innovative firms than larger ones, not only do input, output and impact factors need to be understood, but the influencing factors internal and external to the firm. In terms of internal factors, Motwani et al. (1999) gave guidance on the need to create internal management systems and structure which themselves support the creation of a work environment that encourages initiative and entrepreneurial behaviour in a general work culture. So its is critical to incorporate measures of the level of creativity within the firm. This can be measured by the proportion of staff involvement in the product, process and non-technological innovations, as well as the time staff actually spend on the innovation process. Innovative firms such as software developers require extensive involvement of staff in idea generation and product development. These type of factors may provide much better assessment of staff involvement in the innovation process than nomination of R&D personnel or R&D expenditure for smaller firms. Staff possession of skills useful in innovation relates largely to internal impact indicators for the firm. It reflects the intellectual assets as well as social and human capital available to the firm, incorporating diverse skills. The utilisation of skills is an important aspect of involvement in the stages of the innovation/commercialisation process, reflects the product development stages facing small companies. This will vary by industry sector, with biotechnology and life sciences firms facing much longer and more complex pipelines. Innovation speed that is how long it takes to develop new products/services from inception to market, the product development or R&D cycle, is critical and indicative of the firm‟s efficiency in bringing new ideas to fruition. It is a broadly accepted view that an innovation will be only recognised when it gets to market. It then needs to be novel when it arrives at market or else is not really innovation as it will be unlikely to have any economic impact. Innovation speed indicates also the effectiveness of the informal innovation approach over formal innovation.

10

6. Discussion and conclusions The software industry is still a relatively new industrial sector which has become one of the major growth industries over the past 40 years in advanced economies. This sector is characterized by a few big multinationals and a large number of small firms typically providing knowledge-based and high– performance inputs into complex systems of production, of information processing and of product development. The software industry has also rapidly moved towards internationalization of the sector, coupled with niche and small-scale market opportunities due to technological change and vertical disintegration. Many firms in this sector appear to be young rather than established, which is an indication that the expansion of the sector has provided opportunities for new entrants. Many of them are also „born global‟, having much growth potential. Given the software sector‟s role as an „enabling industry‟ and the changes within the information sector of the economy, characterised by the change in value added from hardware to software and services, there has been a significant rise in research interest in the software industry. Much of this research has focused on the „internal‟ aspects of software production as an engineering discipline or has been extended to examine the interorganisational dynamics of software production and interorganisational variations of in performance and in learning and adaptability (Harrison et al., 2004). In their study of 100 software companies around the world, Hoch et al.. (1999) found that the critical success factors did not vary much across different regions, economic environments and cultures. However, the factors differed quite a lot across three industry segments: professional services, enterprise solutions and mass-market products. Contrary to these findings, there was notable variety in terms of external and internal adaptation mechanisms in this study among 25 software firms. The organization boundaries of innovative small firms extend actually beyond their own employees. Customer, supplier and collaborator involvement in the innovation process, particularly of close to market developments as occur in the software development industry , are a source of innovation themselves. Where the traditional measures of innovation are internally focussed, it is important to accept that the innovative small firms does not in isolation. Software provision is a very capital-efficient business. Therefore, venture capitalists and other financiers like to invest in software companies. For this reason economic resources tend not to limit growth and strategic choices to the extent that they do in many other industries. Even start-up enterprises with limited tangible assets find that it is possible to raise a sufficient amount of capital to succeed.

References Autere, J. (2005), The Impact of Referents on Entrpreneurship. Growth of Small and Medium-Sized Software Companies in Three Finnish Regions. Helsinki University of Technology, Department of Industrial Management, Espoo. Cameron, K. & Quinn, R. (1999). Diagnosing and Changing Organizational Culture Based on Competing Values Framework. Addison-Wesley, printed in the U.S.A. Davenport, T. H., Thomas, R. J. & Cantrell, S. (2002), „The mysterious art and science

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of knowledge-worker performance. MIT Sloan Management Review, Autumn. European Information Technology Observatory 2007. (EITO) www.eito.com/ Freel, M. (2000), Do small innovating firms outperform non-innovators? Small Business Economics, Vol. 14, No. 3, 195-210. Harrison, R., Mason, C. M. & Girling, P. (2004), „Financial bootstrapping and venture development in the software industry. Entrepreneurship & Regional Development, 16, July, 307-333. Hine, D. & Miettinen, A. (2004), „Redressing oversights: exploring informal innovation in small IT firms. International Journal of Globalisation and Small Business, 1, 3, 258-285. Hoch, D.J., Reoding, G. P., Lindner, S. K. & Müller, R. (1999). Secrets of Software Success: Management Insights from 100 Software Firms around the World. Cambridge, MA: Harvard Business School Press. Lamberg, I. (2006). ICT Cluster in Finland. Review 2006. Tieke. (http://www.tieke.fi/ Mp/dp/file_library/x/IMG/18677/file/ICTTreview_netversion_060628.pdf) Martin, X., Swaminathan, A. & Mitchell, W. (1998), „Organizational evolution in the inter-organizational environment: Incentives and constraints on expansion strategy. Administrative Science Quarterly, 43, 566-601. Mowani, J., Dandridge, T., Jiang, J. & Soderqvist, K. (1999), Managing innovation in French small and medium-sized enterprises. Journal of Small Business Management, Vol. 37, No. 2, 106-114. Quinn, R. E. (1991), Beyond Rational Management. Mastering the Paradoxes and Competing Demands of High Performance. San Francisco: Jossey-Bass. Quinn, R. E. & Spreizer, G. (1991). The Psychometrics of the Competing Values Culture Instrument. An Analysis of the Impact of Organizational Culture on Quality of Life. School of Business Administration, University of Michigan: Ann Abor. Rajala, R. & Westerlund, M. (2007). A business model perspective on knowledgeintensive services in the software industry. International Journal of Technoentrepreneurship, Vol. 1, No. 1, 1-20. Rogers, P. & Hildebrand, H. (1993). Competing Values Instruments for Analyzing Written and Spoken Management Messages. Human Resource Management, 32: 121142. Romijn, H. and Albaladejo, M. (2002), Determinants of innovation capability in small electronics and software firms in southeast England. Research Policy, Vol. 31, No. 3, 1053-1067. Rönkkö, M., Eloranta, E. Mustaniemi, H. Mutanen, O-P. & Kontio, J. (2007). Finnish Software Product Business: Summary Results of National Software Industry Survey 2007. (http://www.swbusiness.fi/uploads/reports/1188293162_National_software_ product_survey_2007_SummaryResults.pdf). Sendelbach, N. (1993). The Competing Values Framework for Management Training and Development: A Tool for Understanding Complex Issues and Tasks. Human Resource Management: 32: 79-99.

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Indikatoren des Innovationserfolges im Klein- und Mittelbetrieb (Indicators of successful innovations in small and medium sized enterprises – dimensions and their correlation)

Herbert Neubauer Wirtschaftsuniversität Wien

Abstract Continuous innovations represent an important factor of successful development of enterprises. For approximately 40 years conceptual and empirical research has been undertaken to identify the “success factors” of new products. In the first part this paper analyses the findings of empirical work and the success factors of new product development. The prime objective is to summarize the most important findings in a compact way. Additionally the innovation success factors will be analysed in respect to their relevance for SMEs. Furthermore in four case studies the success factors and the innovation orientation towards innovation are analysed. On the basis of these findings there is evidence that it is a configuration of factors which is responsible for successful innovations in SMEs

Einleitung Innovativen Unternehmen kommt eine Schlüsselposition für die Wettbewerbsfähigkeit und Dynamik in einer Volkswirtschaft zu. Dabei wird ihnen oft die Rolle eines Pioniers im Einsatz neuer Technologien zugedacht. Das Ergebnis dieser Innovationsanstrengungen soll den Unternehmen wirtschaftliche Chancen eröffnen, zu Wettbewerbsvorteilen und Vorsprungsgewinnen verhelfen. (Vgl. Schumpeter, J.A., 2005). Ein derartiger Wettbewerbs-vorsprung ist im Einzelnen von den jeweiligen Ausprägungen einer Innovation, vor allem vom Neuigkeitsgrad abhängig, und insbesondere davon, wie denn das Neue am Markt wahr- und aufgenommen wird. Innovieren ist stets mit Risiko, Unsicherheit und Widerständen sowie Konflikten verbunden. Gerade der zunehmende Wettbewerbsdruck und die schnellen Änderungen von Technologien und Kundenbedürfnissen erwirken eine Verkürzung von Produktlebenszyklen und halten die Unternehmen an, noch rascher, effektiver und effizienter zu innovieren. Dass die Mehrzahl der Unternehmen die Bedeutung von Innovativität für den Unternehmenserfolg erkannt hat, zeigen die Ergebnisse der neuen Europäischen Innovationserhebung: 41,5% aller Unternehmen der 27 Länder in der EU setzen sich aktiv mit Innovationsprojekten auseinander: Sie haben im Zeitraum 2002 bis 2004 neue Produkte oder Dienstleistungen am Markt eingeführt und/oder Prozessinnovationen im Unternehmen implementiert (Eurostat, 2007). Dieser bedeutende Stellenwert der Innovation im Rahmen der betriebs-wirtschaftlichen Führung eines Unternehmens und damit eines KMU erklärt auch sehr rasch, dass die Auseinandersetzung mit jenen Faktoren, die den Innovationserfolg von Unternehmen auszeichnen bzw. beeinflussen, sowohl in Wissenschaft als auch Praxis große Aufmerksamkeit erzielt. Seit Mitte der 60er Jahre bis zum heutigen Tag wurden mehr als 300 namhafte Studien über Innovationserfolgsfaktoren publiziert (Ernst, H., 1

2002). Sie alle versuchen Faktoren, die den Erfolg von Unternehmen im Rahmen der Innovationsprozesse beeinflussen, zu identifizieren. Gerade in der jüngsten Vergangenheit werden die kritischen Stimmen über den Wert von Erfolgsfaktorenstudien immer lauter. (Nicolai, A./Kieser, A., 2002 und 2004 ; Bauer, H.H. & Sauer, N.E., 2004; Albers, S. & Hildebrandt, L., 2006; u.a.m.). Eine wesentliche Kritik dabei stellt darauf ab, dass die meisten Studien nur auf Innovationen in Großbetrieben abstellen (Hauschildt, J., 2004, u.a.). Nach Ernst (Ernst, H., 2002) wurden bisher nicht einmal 3 % der veröffentlichten Innovationserfolgsstudien im Bereich KMU durchgeführt. Damit liegen empirisch gesicherte Befunde über den Innovationsprozess und dessen Besonderheiten und damit über die Erfolgsfaktoren in diesem Bereich nur unzureichend vor (Hauschildt, J. & Walther, J., 2003). Zielsetzung dieses Beitrages wird es sein, die bisher vorliegenden Erfolgsfaktoren zu identifizieren und in Bezug auf ihre Eignung im KMU-Bereich zu hinterfragen und im Rahmen von vier Fallanalysen vergleichend zu analysieren. Weiters wird der Frage nachzugehen sein, welche Faktoren verantwortlich sind, innovative KMU zum Erfolg zu führen. Innovationserfolgsfaktoren in der Forschung In der betriebswirtschaftlichen Forschung beschäftigt man sich seit langem mit der Frage, welche Faktoren den Erfolg von Unternehmen beeinflussen. In der Gründungs-, Organisations-, Strategie- und Unternehmensführungsliteratur, sowie auch in der Innovations-forschungsliteratur werden dabei stets nach Determinanten gefragt, die den Erfolg oder Misserfolg von Unternehmen nachhaltig beeinflussen. Die stetige Zunahme an Veröffentlichungen dazu hat in den verschiedenen Bereichen den Bedarf an Gesamtschauen der Forschungsergebnisse hervorgerufen, die in so genannten Meta-Analysen und Literatur-reviews ihren Niederschlag gefunden haben, so auch in der Innovationserfolgsfaktorenforschung. In der Folge wird auf die neueren Meta-Analysen und deren Erkenntnisse zugegriffen, die auf Studien basieren, die sich auf Erfolgsfaktoren sowohl von Projekten als auch auf jene in der Unternehmensebene beziehen. Meta-Analyse nach Henard & Szymanski (2001) Die Meta-Analyse von Henard und Szymanski (2001) beruht auf 60 Einzelstudien, in der 24 „wesentliche“ Erfolgsfaktoren definiert wurden. Als Wesentliche wurden hier jene Erfolgs-faktoren angesprochen, die in mindestens zehn Studien eine signifikante Korrelation aufweisen konnten. Von den ursprünglichen 24 der als relevant identifizierten Erfolgsfaktoren konnten nur bei 16 ein signifikanter Zusammenhang mit dem Innovationserfolg festgestellt werden. Die Bereitstellung geeigneter Humanressourcen (dedicated human resources) wird hier als der bedeutende Erfolgsfaktor, gefolgt von den Kundenbedürfnissen entsprechenden und technisch ausgereiften Produkten („product meets customer needs, product technological sophistication“), dem Zeitpunkt des Markteintrittes (order of entry) und der Unterstützung des Top Managements (senior management support) herausgearbeitet.

2

Tabelle 1: Ergebnis der Meta-Analyse von Henard & Szymanski (2001) Predictor Variables

R² (Adjusted)

Product characterstics Product advantage

.40 (.31)*

Product meets costumer needs

.89 (.86)*

Product price

.40 (.21)

Product technological sophistication

.91 (.86)*

Product innovativeness

.32 (.09)

Firm strategy characteristics Marketing synergy

.43 (.38)*

Technological synergy

.07 (.00)

Order of entry

.89 (.84)*

Dedicated human resources

.95 (.94)*

Dedicated R&D resources

.20 (.07)

Firm Process Characteristics Structured approach

.47 (.39)*

Predevelopment task proficiency

.12 (.00)

Marketing task proficiency

.47 (.41)*

Technological proficiency

.60 (.43)

Launch proficiency

.55 (.48)*

Reduced cycle time

.70 (.59)*

Market orientation

.40 (.37)*

Customer input

.60 (.33)

Cross-functional integration

.35 (.25)*

Cross-functional communication

.16 (.11)*

Senior management support

.86 (.81)*

Marketplace Characteristics Likelihood of competitive responce

.81 (.74)*

Competetive responce intensity

.38 (.07)

Market potentioal

.57 (.47)*

* Significant at p < .05.

Meta-Analyse nach Pattikawa, Verwaal & Commandeur (2006)

Die Meta-Analyse in Tabelle 2 stellte auf 47 Einzelstudien ab, in denen 34 unterschiedliche Erfolgsfaktoren identifiziert und zu 4 Kategorien (Umfeld, Strategie, Organisation und Prozess) verdichtet wurden. Hier konnten 22 Variable mit einem signifikanten Bezug zum

3

Tabelle 2: Ergebnisse der Meta-Analyse von Pattikawa, Verwaal & Commandeur (2006) Construct class

Sample size and reliability adjustet mean

Environment Market potential

0.329

Market competitiveness

-0.075

Environmental uncertainty

-0.096*

Product homogeneity

-0.237*

Strategy Market orientation

0.480*

Customer orientation

0.309

Competitor orientation

0.389*

Technology orientation

0.353*

Product advantage

0.548*

Product newness

0.019

Degree of radicalness

0.216

Product customization

-0.002

Cost of innovation

-0.199

Marketing synergy

0.349*

Technology synergy

0.419*

Company resources

0.275*

Management skill

0.497*

Organizational Top management support

0.308*

Role of champion

0.157

Project manager competency

0.418*

Communication and information

0.235*

Degree of interaction

0.664*

R&D – marketing interface

0.588*

Decentralization

0.194

Formalization

0.126

Organization culture/climate

0.215*

Organization/project size

0.058

Process General PD proficiency

0.577*

Predevelopment activities

0.339*

Marketing proficiency

0.497*

Technical proficiency

0.505*

Launch activities

0.412*

Financial/business analysis

0.544*

Speed to market

0.390

* Significant beyond p > 0.05

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Innovationserfolg festgemacht werden, wobei anzumerken wäre, dass dieser nur bei 12 davon in nennenswertem Ausmaß der Fall ist. Der Befund dieser Meta-Analyse zeigt die Bedeutung von innerbetrieblicher Interaktionshäufigkeit (degree of interactions), das Zusammenspiel von F u. E mit Marketing (R&D-Marketing interface) und die generelle Expertise in Bezug auf den Entwicklungsprozess („general PD proficiency“) und unterstreicht damit die Wichtigkeit der organisations- und prozessbezogenen Erfolgsfaktoren.

Meta-Analysen Zusammenschau Hauschildt (2004) hat die Ergebnisse von Meta-Analysen sehr vereinfacht wie folgt zusammengefasst: Unternehmen sind dann erfolgreich, wenn sie ein technologisch neuartiges Produkt hervorbringen, das den Kunden einen neuartigen Nutzen stiftet, und wenn dieses Produkt nach professioneller Marktforschung sowie nach strategischer Planung in den Markt eingeführt wird. Dieser Innovationsprozess verlangt zudem engagierten Einsatz von Schlüsselpersonen und professionelles Projektmanagement. (Hauschildt, 2004) Abb. 1 Bedeutsame Erfolgsfaktoren der Innovation (Quelle Hauschildt, 2004, S.35)

Bedeutsame Erfolgsfaktoren der Innovation Ergebnisse einer Meta-Analyse von 60 empirischen Untersuchungen

Produkteigenschaften

Strategische Faktoren

Produktüberlegenheit gg. Konkurrenzprodukten („Product Advantage“, 0,44) Innovationsgrad („Product Innovativeness“, 0,30)

Technologisches Potential („Technological Synergy, 0,42)

Prozesseigenschaften

Markteigenschaften

Markt- und KundenOrientierung („Market Orientation“, 0,27)

Vermarktungspotential („Marketing Synergy“, 0,26)

Kapazitäten und Ressourcen („Company Resources“, 0,30) in Klammern: Betakoeffizienten einer multiplen Regressionsanalyse

5

Diese durchaus sehr vereinfachte Gesamtschau sollte noch um eine eigene Analyse erweitert werden (Quellen dazu sind die beiden vorher erwähnten Meta-Analysen sowie Literatur-reviews: Ernst, 2002; Van der Panne, 2003.). Anknüpfend an das Schema von Ernst (2002) mit den Erfolgskategorien 1) Prozess, 2) Organisation, 3) Intelligenz, 4) Top Management und 5) Strategie soll dabei noch stärker auf die beeinflussbaren Erfolgsfaktoren aus der Sicht des Managements eingegangen werden. Der wohl am besten analysierte Bereich ist jener der Ausgangsstellung des Innovations-prozesses. Hier lassen sich drei weitgehend abgesicherte Befunde verorten. a) Unternehmen sind dann erfolgreich, wenn sie einen selektiven Prozess von der Ideenfindung bis zur Markteinführung verfolgen. b) Erfolgt die Entwicklung eines neuen Produktes auf Basis gesicherter Marktanalysen, Marktpotentialprognosen und Wettbewerbsbedarfsanalysen, dann ist der Erfolg sehr wahrscheinlich. c) Die Planungsaktivität hat Vorrang vor der technischen Produktentwicklung. In Bezug auf die Organisation der Innovation lässt sich aussagen, dass die Projektorganisation die geeignete Form für die Entwicklung von Innovationen ist, wobei das Innovationsteam dann über einen mit den notwendigen Kompetenzen ausgestatteten und verantwortlichen Projektleiter verfügen sollte. Über die Bedeutung der Zusammenarbeit mit den Kunden und deren Auswirkung auf den Innovationserfolg liegen relativ wenige Befunde vor. Dass der Innovationserfolg durch innovationsfreundliches und unternehmerisches Betriebsklima eine positive Wirkung erhält, ist weitgehend unbeschritten. Das hohe Engagement des TopManagements für Innovation konnte durch die analysierten Befunde nicht eindeutig festgelegt werden. Es lässt sich in dem Zusammenhang zwar ein Zusammenspiel zwischen dem innovativen Commitment des Top-Managements und dem Innovationserfolg festmachen, inwieweit dies jedoch zum tatsächlichen Erfolg des Innovationsprojektes beiträgt, bleibt weitgehend offen. (Van der Panne, G., Van Beers, C., & Kleinknecht, A., 2003). In der letzten Kategorie - der Strategie - wird auf die strategische Ausrichtung abgestellt. Hier zeigt sich, dass die erfolgreichen Unternehmen eine strategische Planung für die Innovationsaktivitäten durchführen, was bei den nicht so erfolgreichen fehlt. Daher geht es darum, Ausgewogenheit im Aktivitätenplan aufzuzeigen. (Kurz- und langfristige, inkrementelle und radikale Innovation). Hinsichtlich der Bereitstellung entsprechender Ressourcen wird andererseits ein signifikant positiver Einfluss auf den Innovationserfolg festgestellt. Diese Gesamtschau hat die wesentlichsten steuerbaren Innovationserfolgsfaktoren auf Unternehmenserfolge beleuchtet und dabei die am hellsten leuchtenden Gebiete aufgegriffen. Selbst die hellsten Felder werden nicht von allen Befunden mit gleicher Leuchtkraft bestrahlt, ja es gibt sogar gegensätzliche Befunde. Wie bereits dargelegt, ist die Kritik an derartigen Untersuchung ebenfalls ein Thema der Innovationsforschung. Dies soll jedoch den Erkenntniswert der gefundenen Ergebnisse nicht trüben, sondern sie sollen mit der gebotenen Vorsicht des externen Betrachters beobachtet werden. Eine weitere Betrachtung unter dem Blickwinkel von KMU zeigt, dass die Mehrzahl der Analysen in Großbetrieben durchgeführt wurde. Im Rahmen einer Literaturrecherche konnten drei neuere Studien gefunden werden, die sich im KMU Bereich mit Innovationserfolgs-faktoren auseinandergesetzt haben.

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Tabelle 3: KMU Erfolgsfaktorenstudie Quelle

Basis

Variable

Hauschildt & Wal-

74 Innovationsprojekte

ther (2003)

(<500 Mitarbeiter)

-

Freel (2003)

597 Produktions-KMU (<500 Mitarbeiter) Neuprodukteinführung

-

de Jong & Vermeulen (2006)

1.250 KMU (0-499 Mitarbeiter) Neuprodukteinführung

-

Innovationsgrad technologisches Wissen marktbezogenes Wissen Planungsvermögen freie Kapazitäten/ Engpässe Kooperation Risikokapital Alter Größe F&E-Aufwendungen Anteil Techniker (%) Anteil SoftwareIngenieure (%) Kundenbeziehungen Lieferantenbeziehungen Beziehungen zu Wettbewerbern Beziehungen zu Universitäten Beziehungen zum öffentlichen Sektor Managementfokus schriftliche Innovationspläne Nutzung externer Netzwerke Marktforschung Zwischenbetriebliche Kooperationen Einbindung von Mitarbeitern Weiterbildung Alter Größe

Signifikante Erfolgsfaktoren -

-

Innovationsgrad (+) Umfang der technischen Beschreibung (+) Vorhandensein eines Referenzkunden (+) Unternehmensleitung als Promotoren (+) Entwicklungsdauer der Innovation (-) Kooperationsbeziehungen Größe (+) F&E-Aufwendungen (+) Anteil Techniker (%) (+) Kundenbeziehungen (+) Beziehungen zum öffentlichen Sektor (+)

Alter (-) Größe (+) Managementfokus (+) schriftliche Innovationspläne (+) Nutzung externer Netzwerke (-) Marktforschung (+) zwischenbetriebliche Kooperationen (+) Einbindung von Mitarbeitern (+)

Im Vergleich zu den Ergebnissen der Meta-Analyse von Großunternehmen fällt auf, dass der Schwerpunkt auf der Analyse des Einsatzes von Ressourcen, in der Nutzung von Kooperationen bzw. dem Engagement des Top Managements – wohl der Unternehmer – erkennbar ist. Zusammenfassend lässt sich somit festhalten, dass mit Einschränkung Befunde zu den Innovationserfolgsfaktoren vorliegen, diese jedoch für den Bereich der KMU noch sehr lückenhaft sind. Im folgenden Abschnitt soll dazu ein Beitrag geleistet werden, diese Befunde aus der Literatur mit jenen von vier analysierten Praxisfällen zu vergleichen und in der Folge Impulse für weitere anstehende Analysen zu liefern.

7

Analyse von Innovationserfolgsfaktoren im Rahmen von Fallstudien Die Auswahl der in der Folge präsentierten Unternehmen erfolgt an Hand folgender Kriterien: Es handelt sich um Klein- und Mittelbetriebe, die Nr. 1, 2 oder 3 auf dem Weltmarkt oder Nr. 1 auf dem europäischen Markt sind und einen geringeren Bekanntheits-grad in der Öffentlichkeit aufweisen (Simon, H. 2007). Damit sollte dem Kriterium der Hidden Champion und dem „good practice“ Gedanken entsprochen werden, um so den Anforderungen der Analyse und Verortung von Erfolgskriterien weitgehend zu entsprechen. Die Fallanalyse erfolgte vor dem Hintergrund, dass es sich bei jedem Fall um eine den Gegebenheiten und im Kontext arteigene Spezifikation der Innovierenden handelt, wobei hier die Basis in einer offenen Herangehensweise zu sehen ist. Dies erfolgte mittels qualitativ geführter Interviews und deren Auswertung, gestützt werden die gewonnen Erkenntnisse noch durch einen schriftlichen Erhebungsbogen, der die betriebsspezifischen Kennzahlen (Umsatz, Innovationstätigkeit) erfassen sollte. Die Interpretation der so gewonnenen Erkenntnisse (Transkription und Dokumentation) wurde auf Basis einer hermeneutischen Fallrekonstruktion aufbereitet und bildet so die Basis der folgenden Darstellung (Frossauer/Lueger, M., 2003). Zur besseren Vergleichbarkeit der Befunde sollen die dabei gewonnen Faktoren zu vier Kategorien gebündelt werden, die sich wie folgt darstellen: a) Strategie (Positionierung in (enge) Nischenmärkte; Konzentration der Tätigkeit auf Kernkompetenzen, Anpassung an Kundenbedürfnisse) b) Innovationsprozess (Kontinuierlicher Prozess sowohl technologie- als auch markenorientiert, sowohl auf Produkt- als auch auf Prozessebene abgestellt) c) Organisation (hohe Fertigungstiefe bei Kernkompetenzen, wenig bis kaum Outsourcing) d) Akteure (Führungsverhalten, Top-Management als Unterstützer) Ein derart eng gefasster Katalog stellt somit nur einen vereinfachten Raster dar und kann nur dem Kriterium eines strukturvereinfachten Überblickes über die gewonnen Erkenntnisse entsprechen. Es würde bei weitem den Rahmen dieses Beitrages sprengen, die einzelnen je vor ihrem spezifischen Hintergrund betrachteten Spezifikationen darzulegen und zu hinterfragen. Hier kann somit nur ein erster Versuch einer Darstellung unternommen werden, um der Frage nachzugehen, ob die in der Literatur, insbesondere für Großbetriebe gewonnene Erkenntnisse über die Innovationserfolgsfaktoren auch für KMU Gültigkeit haben.

Unternehmung A - ECON Maschinenbau & Steuerungstechnik GmbH Das Unternehmen wurde 1999 von einem Team von Spezialisten aus dem Bereich KunststopfMaschinenbau gegründet. Seitdem ist das Unternehmen ECON als Spezialanbieter für die kunststofferzeugende und –verarbeitende Industrie tätig und hat sich kontinuierlich innerhalb der Branche entwickelt. Das Unternehmen hat 27 Mitarbeiter und erzielte letztes Geschäftsjahr ca. € 3,5 Mio. Umsatz. ECON ist am Markt als Hersteller von thermoplastischen Kunststoffgranulaten, Extruder hersteller sowie als der Weiterverarbeiter etabliert. ECON positioniert sich zurzeit als Technologieführer auf dem Markt und will Marktführer werden. Derzeit schätzen sie ihren durchschnittlichen glo8

balen Marktanteil auf ca. 10 %. Das Unternehmen hat drei ernst zu nehmende Mitbewerber am Markt und diese befinden sich in Deutschland und USA. Das Unternehmen agiert gezielt in einem engen Nischenmarkt. ECON konzentriert sich auf den Ausbau ihrer Kernkompetenz. Marktorientierung dient der Wahrnehmung externer Chancen. Ziel ist die internationale Technologie- und Qualitätsführerschaft. ECON verfolgt konsequent die Strategie der Kundenorientierung im Sinne von Produkt- und Servicequalität und nicht der Kostenführerschaft. ECON versucht den Marktanforderungen durch enge Zusammenarbeit mit ihren Kunden gerecht zu werden. Mit Kunden haben sie partnerschaftliche Beziehungen, da durch den Verkauf einer Anlage eine meist langjährige Geschäftsverbindung entsteht. Meist langjährige Beziehungen zu den Lieferanten sind im Sinne einer Antriebskraft für die Innovation eher von untergeordneter Bedeutung. Die neue Technologie der Unterwassergranulierung ist eine Innovation, auf die der gesamte Unternehmenserfolg zurückzuführen ist. Innovationen spielen eine große Rolle bei ECON. Noch wichtiger sind die loyalen und hoch qualifizierten Mitarbeiter, die von einer Idee bis zur Umsetzung z.B. notwendigen Überstunden motiviert in Kauf nehmen. Durch die Zusammenarbeit mit Forschungsinstituten und das maßgebliche Reinvestment der erzielten Wertschöpfung in die Weiterentwicklung entstehen die weltweit bewährten ECON Future Systems. Das Unternehmen selbst verfügt über keine eigene Fertigung. Diese ist vollständig ausgelagert. Jedoch finden die Endmontage und der Steuerungsbau inhouse statt. Die Organisationsstruktur im Unternehmen ist sehr flach und unkompliziert. Flache Hierarchieebenen und kurze Entscheidungswege geben dem Unternehmen aber große Flexibilität, die einen Wettbewerbsvorteil darstellt. Das Top Management steht voll hinter allen F- und E-Aktivitäten und unterstützt und fördert es. Unternehmung B – Feldbacher Fruit Partners GmbH Das steirische Familienunternehmen Feldbacher wurde 1976 gegründet und beschäftigt derzeit in Österreich knapp 80 Mitarbeiter. Die Feldbacher Fruit Partners GmbH hat ihren Hauptfirmensitz in Feldbach (Steiermark) und verfügt über Tochtergesellschaften mit Verkaufs- und Produktionsniederlassungen in Russland und Bulgarien. Die Belegschaft umfasst 180 Mitarbeitern. Das Unternehmen ist Spezialist für hochwertiges Obst, bestes Gemüse und vielfältigste FeinkostSpezialitäten und liefert international an die weiterverarbeitende (Marken-) Lebensmittelindustrie im gesamten EU-Raum, Osteuropa, China und Südamerika. Das Obst und Gemüse wird je nach Kundenbedarf frisch, tiefgekühlt, aseptisch getrocknet oder in Konserven aufbereitet. Das innovativste Produkt ist derzeit der Steirer-Kren aus dem Kühlregal – ein frisch geriebener Kren im Glas, natürlich scharf im Geschmack und 6 Monate haltbar. Er ist das Ergebnis langjähriger Feldbacher-Erfahrung und Forschung in der Krenproduktion. Die weitere Analyse bezieht sich ausschließlich auf das Produkt „Steirer-Kren“. Das Unternehmen verfügt über ein einzigartiges Verarbeitungsverfahren, dass es ermöglicht, den natürlichen Geschmack des Krens 6 Monate in gleich bleibender Qualität zu erhalten. Das Unternehmen ist Marktführer im Bereich „Kren frisch gerieben“ in der Gastronomie. Es bewegt sich mit seinem Hauptprodukt Kren in einer sehr engen Nische, agiert hier jedoch international. Als Markt-Strategie verfolgt Feldbacher Qualität (Geschmack und Produktsicherheit) und Service (Zuverlässigkeit etc.).

9

Als Wettbewerbsvorteil wird die Konzentration auf ein Nischenprodukt genannt. Weiters wird vom Unternehmen das spezielle Verarbeitungsverfahren als technologischer Wettbewerbsvorteil gesehen. Das Unternehmen passt sich schnell an die Kunden/Lieferantenbedürfnisse an. Die Kunden spielen eine äußerst wichtige Rolle beim Innovationsverhalten. Da nach wie vor im Produktionsprozess viel Handarbeit notwendig ist, strebt das Unternehmen laufende Prozessinnovationen an, um die Produktion zu optimieren. Die Beziehung zu den Lieferanten wird als sehr offenes und gutes Verhältnis beschrieben, die bei Innovationen eine unterstützende Rolle einnehmen. Als Basis für den Unternehmenserfolg werden die professionellen Mitarbeiter, die im Team hervorragend zusammenarbeiten, angegeben. Um das betriebsinterne Know-how nicht offen zulegen, wurde auf eine Patentanmeldung verzichtet. Dies deutet darauf hin, dass aufgrund des speziellen Verarbeitungsverfahrens die Produktion auf keinen Fall ausgelagert werden kann. Mögliche Bereiche, die outgesourct werden könnten, sind Distribution und Verkauf. Die hierarchischen Strukturen im Unternehmen werden als sehr flach beschrieben und die Wichtigkeit des Teamgeists wird mehrmals betont. Als Management Strategie wird „Management by objectives“ (Führen durch Zielvereinbarungen) genannt), d.h. Ziele werden für jede Organisationseinheit und die jeweiligen Mitarbeiter festgelegt. Unternehmen C – Piezocryst Advanced Sensorics GmbH Das Unternehmen Piezocryst wurde 2003 als Ausgründung der AVL, einem technologisch führenden Serviceanbieter für die Automobilindustrie, gegründet und beschäftigt heute 62 Mitarbeiter. Der jährlich erwirtschaftete Umsatz beträgt ca. 10 Mio Euro. Pierzocryst ist spezialisiert auf die Entwicklung und Produktion von piezoelektrischen Sensoren. Auf Basis einer einzigartigen Kristalltechnologie, Entwicklungskompetenz und Präzisionsfertigung liefert Piezocryst Drucksensoren, Dehnungs- und Beschleunigungssensoren für verschiedenste Anwendungen und Industrien. Piezocryst ist weltweit der 2. größte Anbieter hochqualitativer Piezosensorik. Um dieses Wachstum weiter fortzusetzen, investiert Piezocryst in großem Umfang in seine Mitarbeiter, die F&E sowie seine Herstellungskapazitäten. Um den gesamten Produktionsprozess überwachen zu können und eine gleich bleibende hohe Qualität sicherstellen zu können, werden nahezu alle Sensorteile durch eigens hoch entwickelte Prozesse im Haus produziert. Das Unternehmen gilt am Markt als Technologieführer. Der gesamte Markt für Piezo-elektrische Messtechnik besteht aus 3-5 Anbietern, wobei der absolute bzw. relative Marktanteil von Piezocryst auf 20% bzw. 35% eingeschätzt wird. Ein ständig wachsender Markt, der aufgrund hoher Spezialisierung und Nischenanforderungen stets neue Möglichkeiten eröffnet, wird als Chance vom Unternehmen gesehen. Nur sehr wenige, vor allem einfache Produktionsschritte können und werden bei Piezocryst ausgelagert, es wird fast alles inhouse entwickelt und gefertigt. Als Kernkompetenz wird die Konstruktion und Präzisionsfertigung genannt. Für Piezocryst sind die Kunden eine wichtige Antriebskraft für Innovationen. Da kundenspezifische Lösungen erstellt werden, tragen Kunden teilweise sehr stark zu der Produktentwicklung bei. Die Beziehung zu den Kunden ist partnerschaftlich und eine rasche kunden-spezifische Lösungsfindung wird als entscheidender Wettbewerbsvorteil gesehen. Die Beziehung zu den Lieferanten von Piezocryst wird ebenfalls als partnerschaftlich gesehen, spielt aber als Antriebskraft für Innovationen eine eher untergeordnete Rolle. Es kommt zu laufenden Produkt- und Prozessinnovationen. Der Un-

10

ternehmenserfolg kann nicht auf eine einzige Innovation zurückgeführt werden, sondern auf eine Vielzahl von laufenden Innovationen. Die rasche Entscheidungsfindung und Adaption an den Kunden, die aufgrund der flachen Hierarchien und der überschaubaren Größe möglich sind, wird als wichtiger Wettbewerbs-vorteil gegenüber der Konkurrenz angesehen. Als Basis für den Erfolg des Unternehmens wird die Schnelligkeit in der Umsetzung betont. Kurze Entscheidungswege und flache Hierarchien ermöglichen diese und stellen für das Unternehmen einen äußerst wichtigen Wettbewerbsvorteil dar. Ein partizipativer Führungsstil, d.h. flache hierarchische Strukturen im Unternehmen, ermöglichen es Mitarbeiter, bei der Verbesserung von Abläufen und Details in der Umsetzung aktiv mitzuwirken. Unternehmen D – Sore Wireless Solutions GmbH Sorex Wireless Solutions GmbH wurde 2004 gegründet und beschäftigt derzeit 25 Mitarbeiter. Das Unternehmen agiert im Bereich elektrischer Zutrittssysteme, spezialisiert auf den Zutritt per Mobiltelefone. Die Hauptaufgabe besteht in der Entwicklung spezieller Soft- und Hardware, die in Verbindung mit kabellosen Funklösungen die gewünschten Steuerungen vornimmt. Die Produktpalette erstreckt sich von der „intelligenten“ Vernetzung von Heim und Haus bis hin zur drahtlosen Vernetzung von Kassensystemen des Einzelhandels. Das Produkt wireless Key wurde Anfang 2008 eingeführt und bestreitet eine Alleinstellung in dieser Nische. Das Unternehmen agiert in einem Nischenmarkt (als einziger Anbieter), den das Unternehmen auch selbst erschaffen hat. Da dieses Produkt erst am Anfang seines Lebenszyklus steht, jedoch bisher weltweit einzigartig ist und patentiert worden ist, wird in den nächsten Jahren der Vertrieb auf dem Weltmarkt als eine besondere Chance angesehen. Die Geschwindigkeit des Innovierens wird neben der Flexibilität eines kleinen Unternehmens als wichtiger Wettbewerbsvorteil angesehen: „Wenn es um das Thema Innovation geht, siegt nicht der Größere, sondern der Schnellere – und wir waren bei der Entwicklung unseres Produktes dank unserer Experten der Schnellste weltweit“. Der Innovationsantrieb ist sowohl marktorientiert (Anpassen an Kundenerwartungen durchaus möglich) als auch technologieorientiert (fortlaufende Produktentwicklung durch ein Experten-Team). Die Innovationstätigkeit erfolgt bei Sorex hauptsächlich auf der Produktebene. Sorex ist Spezialist für kabellose Lösungen. Ein Experten-Team im Bereich Soft- und Hardware- Entwicklung ist tagtäglich damit beschäftigt, Lösungen auf diesem Gebiet zu finden. Dank dieses Experten-Teams hat Sorex die Möglichkeit, das Produkt perfekt an die Kundenwünsche anzupassen. Das Verhältnis zu den Kunden wird als sehr eng und partnerschaftlich angesehen. Das Unternehmen hat im Bereich Bluetooth nun ein Produkt entwickelt (wireless Key), welches weltweit bisher eine Alleinstellung hat. Die Rolle der Mitarbeiter bei Innovationen wird als sehr wichtig eingestuft, denn laut Sorex setzt sich Innovation aus einer Idee und dem Mut zum Risiko zusammen. Somit kann eine Innovation nur dann erfolgreich am Markt platziert werden, wenn Mitarbeiter vorhanden sind, die gute Ideen haben und bereit sind, Risiken (wenn auch kontrollierte Risiken) einzugehen. Dennoch sind Innovationen nur erfolgreich, wenn sie auf das Interesse und den Bedarf des Kunden abgestimmt sind. Das Produkt wireless Key entspricht diesen Anforderungen. Im Unternehmen existiert eine flache Hierarchie. Die Mitarbeiter werden in die Innovationsprozesse sehr stark einbezogen, was durch einen partizipativen Führungsstil ermöglicht wird. Die flache Hierarchie begünstigt auch eine schnelle Entscheidungsfindung. 11

Die Kernkompetenz der Produktentwicklung und auch die Prototypen-Fertigung findet man bei Sorex direkt im Haus. Lediglich die Produktion wird ausgelagert.

Zusammenschau der gefundenen Ergebnisse Die hier identifizierten Erfolgsfaktoren in innovationserfolgreichen KMU zeigt in einer ersten – wenn auch sehr vereinfachten Zusammenschau - folgendes Bild:

Kategorie

Kriterien

ECON

Feld-

Piezo-

bacher

cryst

Sorex

Positionierung des Gesamtunternehmen

√

√

√

√

Konzentration auf Kernkompetenz

√

√

√

√

Marktorientierung

√

√

√

√

Technologieorientierung

√

√

√

√

Markt- und technische Expertise

√

√

√

√

Entwicklungsprozessexpertise

√

√

√

√

prozess

Expertisen in Produkt- und Prozessaktivität

X

√

√

X

Organi-

hohe Fertigungstiefe bei Kernkompetenzen

X

√

√

√

hoher Zentralisierungsgrad (kein Outsourcing)

X

√

√

√

Interaktionsaktivität – autoritär

X

X

X

√

Unterstützung durch Top-Management

√

√

√

√

Kompetenz der Teammitglieder

√

√

√

√

Strategie

Innovations-

sation

Akteure

√ weitgehend gegeben X teilweise oder nicht zutreffend

12

Gesamtschau und Implikationen Als ein wesentliches Ergebnis lässt sich festhalten, dass der Innovationserfolg grundsätzlich ein mehrdimensioniertes Konstrukt ist, das sich somit nicht an einem oder wenigen Faktoren festmachen lässt. Die neuere Erfolgsfaktorenforschung zeigt dies bereits sehr stark auf. Weiters lässt sich ableiten, dass es unterschiedliche Strategien bzw. Schwerpunktsetzungen für den Weg zum Innovationserfolg gibt. Wenn es auch wünschenswert wäre, dem Ideal in allen Kategorien (Strategie, Innovationsprozess, Organisation, Akteure und Umfeld) zu entsprechen, eine unabdingbare Notwendigkeit für den Erfolg scheint es nicht zu sein. Die in den bisherigen empirischen Studien gefunden Faktoren dürften im weiten Bereich auch für kleine und mittlere Unternehmen ihre Gültigkeit besitzen, wenngleich den Akteuren und deren Fähigkeit eine wesentlich größere Bedeutung zugesprochen werden muss. Daraus lässt sich weiters ableiten, dass die gefundenen Konfigurationen von Erfolgsfaktoren, der ziel-gerichteten Ausgestaltung der Innovationsprozesse und die Einbindung von motivierten Akteuren zu Innovativerfolgen führen. In Zukunft gilt es somit, verstärkt dem Gedanken der Auseinandersetzung mit Konfigurationen von Erfolgsfaktoren Rechnung zu tragen und breiter angelegte Studien, durchaus im qualitativen Umfeld, insbesondere im Bereich von kleinen und mittleren Unternehmen durchzuführen und daraus Innovationsstrategien, die nicht nur ressourcenorientierten Ansätzen zugeordnet werden können, abzuleiten.

Literaturverzeichnis Albers, S. und Hildebrandt, L. (2006). Methodische Probleme bei der Erfolgsfaktoren-forschung – Messfehler, formative versus reflektive Indikatoren und die Wahl des Strukturgleichungs-Modells. In: Zeitschrift für Betriebswirtschaft, 58 (1), 2-33. Bauer, H.H. und Sauer, N.E. (2004). Die Erfolgsfaktorenforschung als schwarzes Loch. In: Die Betriebswirtschaft (DBW), 64 (4), 631-633. De Jong, J.P.J. und Vermeulen, P.A.M. (2006). Determinants of product innovation in small firms: A comparison across industries. In: International Small Business Journal, 24 (6),587-609. Ernst, H. (2002). Success factors of new product development: A review of the empirical literature. In: International Journal of Management Reviews, 4 (1), 1-40. Eurostat (2007). Gemeinschaftliche Innovationsstatistiken, http://epp.eurostat.ec.europa.eu/ cache/ITY_OFFPUB/KS-SF-07-061/DE/KS-SF-07-061-DE.PDF. Freel, M.S. (2003). Sectoral patterns of small firm innovation, networking and proximity. In: Research Policy, 32 (5), 751-770. Frossauer, U. und Lueger, M. (2003). Das qualitative Interview. Zur Praxis interpretativer Analyse sozialer Systeme, Wien. Hauschildt, J. und Walther, J. (2003). Erfolgsfaktoren von Innovationen mittelständischer Unternehmen, In: Schwarz, E.J. (Hrsg.), Technologieorientiertes Innovationsmanagement: Strategien für kleine und mittelständische Unternehmen, Wiesbaden, 6-22. 13

Hauschildt, J. (2004). Innovationsmanagement, 3. Auflage, München. Henard, D.H. und Szymanski, D.M. (2001). Why some new products are more successful than others. In: Journal of Marketing Research, 38 (3), 362-375. Nicolai, A. und Kieser, A. (2002). Trotz eklatanter Erfolglosigkeit: Die Erfolgsfaktorenforschung weiter auf Erfolgskurs. In: Die Betriebswirtschaft (DBW), 62 (6), 579-596. Nicolai, A. und Kieser, A. (2004). Von Konsensgenerierungsmaschinen, Nebelkerzen und „the Operation called verstehen“. In: Die Betriebswirtschaft (DBW), 64 (7), 631-635. Pattikawa, L.H./Verwaal, E./Commandeur, H.R. (2006). Understanding new product project performance. In: European Journal of Marketing, 40 (11/12), 1178-1193. Schumpeter, J.A. (2005). The Theory of Economic Development. 11th printing, New Brunswick (1.Aufl. 1934). Simon, M. (2007). Hidden Champions des 21. Jahrhunderts – die Erfolgsstrategien unbekannter Weltmarktführer, Frankfurt. Van der Panne, G./Van Beers, C./Kleinknecht, A. (2003). Sucesss and failure of innovation: A literature review. In: International Journal of Innovation Management, 7 (3), 309-338.

14

Organizational Learning Platform and New Product Development

Wee-Liang Tan and So-Jin Yoo Singapore Management University

Abstract Many countries are keen for their SMEs to innovate and develop new products and services. To innovate requires the firm to acquire new skills and or knowledge whether it seeks to make incremental or radical innovations. Organizational learning is critical to innovations in SMEs. In an increasingly complex business environment, organizations have been confronted with rapid changes in technology, competition, regulation and customer needs and demands. This has caused managers and researchers alike to search for new ways of developing organizational capabilities by continuous adaptation and anticipation of the need for change. Organizational learning, which promotes continuous adaptation and change, has therefore captured the imagination of managers seeking to survive the current turbulent operating environments. Despite its importance and impact overarching an organizational performance, there has not been much attention paid to how to implement and apply this tenet to organizations. Implementing organizational learning requires a recognition and identification of facilitating factors. This study, therefore, aims to empirically examine 1) how both facilitating factors and inhibiting factors affect organizational learning, and 2) how organizational learning influences performance of new product development. 1. Introduction In an increasingly complex business environment, organizations have been confronted with rapid changes in technology, competition, regulation and customer needs and demands. This has caused managers and researchers alike to search for new ways of developing organizational capabilities by continuous adaptation and anticipation of the need for change. Organizational learning, which promotes continuous adaptation and change, has therefore captured the imagination of managers seeking to survive the current turbulent operating environments. Despite its importance and impact overarching an organizational performance, there has not been much attention paid to how to implement and apply this tenet to organizations. Implementing organizational learning requires a recognition and identification of both facilitating and impeding factors. Although recent studies have provided a number of facilitating factors for learning in organizations, they tend to be rather descriptive or suggestive, employing small number of samples or case-based studies in nature (Senge, 1990; Nevis et al., 1995; Goh and Richards, 1997). Similarly, although prior studies have revealed a number of factors, presumably inhibiting organizational learning, they are more or less likely to be either conceptual or small number of case-based studies (Adams et al., 1998; 1

Bierly and Hamalainen, 1995). As a result, the findings derived from those studies are required to be validated from large sampled, quantitative researches. This study, therefore, aims to empirically examine 1) how both facilitating factors affect organizational learning, and 2) how organizational learning influences performance of new product development. The current paper is structured as follows. First, relevant literature on organizational learning will be reviewed, and research model and hypotheses developed. Research methodology then will be discussed, and analysis and findings will be provided. Results will be discussed and implication will be provided. 2. Relevant literature and hypotheses development Garvin (1993) provides the normative definition of learning organization as: “an organization skilled at creating, acquiring, and transferring knowledge, and at modifying its behavior to reflect knowledge and insights.” He asserted that “new ideas are essential if learning is to take place, and whatever the sources, these ideas are the trigger for organizational improvement. Without accompanying changes in the way that work gets done, only the potential improvement exists.” This definition of organizational learning reflects three overlapping stages of learning process: 1) cognition; 2) behavior; and 3) improvement in performance. Whether consciously choose or not, all organizations learn via their individual members. Organizations may be able to learn independent of any specific individual but not independent of all individuals. Organizational learning is thus affected either directly or indirectly by individual learning (Kim, 1993). Though individual learning is important to organizations, organizational learning is not simply the sum of each member‟s learning (Fiol and Lyles, 1985; Hedberg, 1981). Organizations, unlike individuals, develop and maintain learning systems that not only influence their immediate members, but also are then transmitted to others by way of organization histories and norms (Fiol and Lyles, 1985). Collective learning is one of the major features that differentiate organizational learning from individual learning. Even when organizational members leave and leadership changes, knowledge and skills developed and shared among the members through learning can be accumulated and preserved in organizations‟ memories. Consequently, these routines and memories stored in the form of manuals, procedures, symbols, rituals and myths, influence and determine the direction and scopes of individual and organizational learning (Kim, 1993; Romme and Dillen, 1997). Most authors refer to two kinds of learning processes: single-loop learning (adaptive, lower-level; feedback) and double-loop (generative, higher-level; feed-forward) learning. Single-loop learning, resulting from repetition and routines, involves processes in which errors are tracked down and corrected within the existing set of rules and norms (Fiol and Lyles, 1985), and primarily concentrates on a specific activity or direct effect (Romme and Dillen, 1997). This type of learning is particularly important in situations in which the organization controls its environment (Duncan and Weiss, 1979). On the other hand, double-loop learning involves changes in the fundamental rules and norms underlying action and behavior (Argyris and Schon, 1978), and generally has long-term effects with consequences for the whole organization. This type of learning occurs through the use of heuristics, skill development, and insights, and it is thus more cognitive than is lower-level learning. The desired con2

sequence of this type of learning often is not any particular behavioral outcome, but rather the development of frames of reference, or interpretative schemes, new cognitive frameworks within which to make decisions. Since changes in higher-level learning are intertwined with structural change making organizational changes or adjustments does not and should not automatically assume the existence of learning. In fact, “unlearning” may be the one of the most important consequences of higher-learning (Fiol and Lyles, 1985). Because higher-level learning can be a costly and painful process, it is normally elicited only by major difficulties (Miller and Friesen, 1980). Argyris and Schon (1978) emphasize double-loop learning as an important, often missing, level of learning in contrast with single-loop learning, which they have found to be more common. They further asserted that organizational performance problems are more likely due to a lack of awareness and inability to articulate and check underlying assumptions than to a function of poor efficiency. Senge (1990) argues that the prevailing view of learning organizations emphasizes increased adaptability, which is only the first stage in moving toward learning organizations. He further suggests that leading companies are focusing on generative learning, which is about creating, as well as adaptive learning, which is about coping. In this study, we employ double-loop learning as our definition for organizational learning rather than singleloop learning. 2.1 Antecedents to Implementing Organizational Learning Although organizations are assumed to learn, the impacts derived from the learning would be different accordingly by the input and resources invested in. Organizational learning starts with the intention and willingness to learn, which is articulated and supported by top management and shared by the members of organizations. Without providing appropriate tools and platform for learning to be implemented in organization, effective learning won‟t take place in organizations. Developing effective learning organization requires a deliberate intervention by leaders to establish the necessary internal conditions for the organization to operate in a learning mode (Garvin, 1993; Goh and Richards, 1997). Learning takes time, and thus early identifying and assessing the impact of the factors leading to learning could help managers focus on specific interventions required to improve learning within organizations. A number of factors have been listed considered to promoting organizational learning in past studies. For example, McGill and Slocum (1993) suggest that openness to different experiences, a willingness to acknowledge failures and to learn from them, and an orientation to continuous experimentation are important behaviors that promote organizational learning. Pedler et al., (1989) list a set of conditions describing a learning organization as: 1) individuals, groups and departments exchanging and sharing information on expectations and feedback on satisfactions to assist learning; 2) information systems that enable members to question current operating assumptions and seek information for individual and collective learning; and 3) culture and management style within the organization encourage experimentation, learning and development from success and failures. By analyzing the commonalities among the various recommendations found in the literature, Goh and Richards (1997) provide five major underlying organization characteristics and management practices: 1) clarity of purpose and mission; 2) leadership commitment and empowerment; 3) experimentation and rewards; 4) transfer of knowledge; and 5) teamwork and group problem solving. Nevis et al., (1995) have de3

veloped a comprehensive model of organizational learning and suggested ten facilitating factors focusing on practices in the organizations: 1) scanning imperative; 2) performance gap; 3) concern for measurement; 4) experimental mind-set; 5) climate of openness; 6) continuous education; 7) operation variety; 8) multiple advocates; 9) involved leadership; and 10) systems perspective. Senge (1990) suggested the use of five component technologies for promoting learning in organizations: 1) systems thinking; 2) personal mastery; 3) mental models; 4) shared vision; and 5) team learning. Fiol and Lyles (1985) provide four contextual factors which affect the probability that learning will occur: 1) corporate culture conducive to learning; 2) strategy that allows flexibility; 3) organizational structure that allows both innovativeness and insight; and 4) the environment. Sinkula et al., (1997) conceptualize learning orientation as “set of organizational values that influence the propensity of the firm to create and use knowledge,” and suggest three organizational values routinely associated with the predisposition of the firm to learn: 1) commitment to learning; 2) open-mindedness; and 3) shared vision. Slater (1995) describes three essential features of learning organizations: 1) facilitative leadership; 2) a market-driven, entrepreneurial culture; and 3) open, organic structure. Those above factors considered enhancing organizational learning are deemed to be rather broad, descriptive and perceptual, and lack more practical aspects such as investment and budgeting in learning or systemic support and appraisal for learning. By referring to the various recommendations found in the literature and interview with practitioners, we developed three major factors enhancing implementation of organizational learning: 1) learning commitment; 2) learning readiness; and 3) openmindedness. Organization learning requires commitment on part of the firm. While learning intent reflects the decision on the part of the firm in its “mind” and “will” that it intends to engage in organization learning, organization commitment refers to its implementation of its intent. Whereas intention is the equivalent of vision and an antecedent to action, we call the firm‟s action in carrying out its intention, learning commitment. Here we use the word “commitment” in the sense of a firm‟s dedication to its learning intent. It is the firm‟s sincere and steadfast adherence to the goal of learning. Such commitment is action-oriented. It would manifest itself in actions such as the setting aside and devoting a portion of its resources towards learning infrastructure, systems, activities, training and development, policies and procedures amongst other things, needed for organization learning. Our definition of “learning commitment” is different from the one of Sinkula et al., (1997) who viewed it as a value toward learning. In fact, learning commitment in learning orientation (Sinkula et al., 1997) is more likely to be cognitive and perceptual whereas our approach emphases on actual investment in learning to occur. Recent study (Yoo and Tan, 2008) suggests that learning intent (commitment in Sinkula et al., 1997) was not related to the learning outcomes in inter-firm collaboration. Although organizations may commit resources, efforts and address organization learning, the difference between different organizations in their actual learning may be because of different levels or organization readiness. Much like units in the military that, with their training and preparation for mobilization for war, are at differing levels of operational readiness, organizations depending on the activities, resources and commitment would be at differing levels of learning readiness. Organizations that have yet to build the capabilities required for learning would be less ready that those that have. It includes appropriate and timely feedback and appraisal on learning and value shared among the members of organizations. 4

Open-mindedness is the willingness to critically evaluate the organization‟s operational routine and accept new ideas (Calantone et al., 2002). Mental models, deeply held images of how the world works, limit us to familiar ways of thinking and acting (Day and Nedungadi, 1994). When organizations proactively question long-held routines, assumptions, and beliefs, they are engaging in the first phase of unlearning. Unlearning is at the heart of organizational change, and open-mindedness is an organizational value that may be necessary for unlearning efforts to transpire. (Sinkula et al., 1997). As discussed, organizational learning starts with the intention and willingness to learn. Without providing appropriate tools and platform for learning to be implemented in organization, effective learning won‟t take place in organizations. Therefore, it is hypothesized that H1a: Organizational learning will be facilitated by its level of commitment to learning. H1b: Organizational learning will be facilitated by its level of readiness for learning. H1c: Organizational learning will be facilitated by its level of open-mindedness to learning. 2.2 Barriers to Organizational Learning Prior to designing learning culture in organization, it is necessary to recognize and identify the possible barriers to learning to occur in organization. Early detecting and eliminating factors inhibiting implementing learning in organization is equally important as building platform for learning to occur. There has been a small number of attempted made in identifying the barriers to organizational learning compared to those focused on facilitating factors. Bierly and Hamalainen (1995) suggested four impediments to organizational learning: 1) environmental stability, 2) structure of organization, 3) organizational culture, and 4) the need for organization to unlearn. According to them, an open decentralized structure is typically more flexible, adaptive, and responsive to external and internal stimuli. Not only affecting the inter-functional communication and learning, the organizational structure but plays a role in determining who communicates most frequently with, and influences, the top management. The organization‟s culture can either facilitate or impede the different types of learning. The culture that values such as risk-taking, openness in communication, and teamwork are shared and rewarded throughout the organization will facilitate internal learning (Starbuck, 1992). Organizational “inertia” is one of the greatest barriers to learning. Organizational change is difficult. Inertia is resistance to change, or, at least, resistance to changes that run counter to a fundamental existing orientations (Miller, 1993). A firm‟s prior history (memory) constraints its future behavior in that learning tends to be premised on local processes of search (Levitt and March, 1988). Organizations often resist change even when their environments threaten them with extinction (Thompson, 1967), because a whole learning system is bound together by a theory of action. Radically new situations require that theories of action be replaced, but organizations have difficulties doing this (Argyris and Schon, 1978). Evolutionary and contingency theorists have suggested that there are integral relationships among environmental, organizational, and strategy-making variables, and changing only one or two key elements might upset the balance, destroying complementarities (Miller and Friesen, 1980). Organizational myths, norms, and procedures that have worked well in the past are very difficult to change. Thus, many successful organizations tend to become complacent, learn too little, and 5

eventually fail (Nystrom and Starbuck, 1984). Unlearning is a prerequisite for generative learning to take place. Unlearning is the process through which learners discard knowledge and make room for new responses and mental maps (Hedberg, 1981). Unlearning takes time and resources, and in the meantime they are quite disoriented or paralyzed. Organizations, which have been poisoned by their success, are often unable to unlearn obsolete knowledge in spite of strong dis-confirmation (Nystrom et al., 1976). Unlearning is needed in order to make room for more adequate interpretative frameworks and responses in organizational memory. Another impediment to learning is “compartmentalized thinking.” Many large, established organizations break tasks down into separate steps, and give people a clear role to play and set of requirements to meet. The shared mental models that develop in these organizations reflect different functional thoughts worlds (Dougherty, 1992). Thus, different groups in these organizations often have different targets and tend to evaluate the same outcome differently (Levitt and March, 1988). These routines lead to compartmentalized thinking (Kanter, 1983), and each department focuses on its own goals and as a result, information either does not cross the boundary or is interpreted quite differently on the other side. A poor communication between people and between organizations can be a major block to learning and quality improvement. (Stata, 1989) Intra-organizational knowledge sharing refers to collective beliefs or behavioral routines related to the spread of learning among different units within an organization (Moorman and Miner, 1998). It keeps alive the knowledge and information gathered from various sources and serves as reference for future action (Lukas et al., 1996).Thus, it is hypothesized as H2a: Organizational learning will be inhibited by its level of inertia. H2b: Organizational learning will be inhibited by its level of compartmentalized thinking. 2.3 Consequences of organizational learning As discussed earlier, organizational learning is believed to engender improvement in performance. A number of studies have investigated the effects of organizational learning on organizational performance (Calantone et al., 2002; Sadler-Smith et al., 2001; Baker and Sinkula, 1999; Bontis et al., 2002). Baker and Sinkula (1999) posited that learning orientation will indirectly influence organizational performance through product innovation because learning orientation is expected to facilitate the type of higher-order learning that leads to technologically driven shift in product paradigms. New product success is the dimension of performance that involves the firm‟s ability to adapt to changing conditions and opportunities in the environment (Walker and Ruekert, 1987). Day (1994) suggests that various market sensing information processes are crucial inputs to new product activities in learning firms. Prior studies suggest that how organizational information processes affect timeliness depends on which information process is being considered. Information acquisition processes are crucial in sensing signals of environmental change (Klein and Newman, 1980) and thus allow organizations to generate timely strategies. Likewise, effective information transmission should speed the process of strategy development because it ensures that all parties involved are aware of relevant information that is crucial to the new product (Cooper and Kleinschmidt, 1994).

6

Successful organizations rely on external information to detect opportunities emerging in the environment and respond with creative solutions (Aguilar, 1967). When such information is transformed through internalizing process and creates new knowledge, organizational learning can contribute to the development of novel products. Therefore, it is hypothesized as H3a: Organizational learning will positively influence the timeliness of new product development. H3b: Organizational learning will positively influence the creativity of new product development. 3. Methodology This study employed a mail survey and data was collected from the multiple sources to tackle the problems of common method variance. Although the nature of the data collection (retrospective responses to both independent and dependent variables via mailed questionnaire) opens up the issue of common methods variance problems, several actions were taken to limit them. To the issue of knowledge, respondents were jointly selected to identify those that were most knowledgeable about the specific projects being studied. For example, information on antecedents (learning commitment and readiness, open-mindedness and sharing value) and barriers to learning was collected from the top/owner managers whose opinion has been generally highly reflective of the organization as a whole (Hambrick, 1981). Meanwhile, information on the consequences of learning such as new product development performance (speed and creativity) was obtained from R&D manager (or marketing manager) of the organization. To the issue of information recall, only relatively recent projects were requested (within three years). Moreover, various checks were undertaken to limit such biases. We took Parkhe (1993)‟s recommendation and performed post hoc single factor test. The results of un-rotated factor analysis revealed neither a single nor a general factor, suggesting that the threat to validity posed by systematic variance common to the measures is lacking. 3.1 Research Sample Korean Innovation Business (Inno-Biz) was selected as the research population. The Korean government has selected a certain number of innovative businesses biannually since 2001 employing the OECD Oslo Manual, which is the internationally recognized standard for measurement of innovation. The sample frame was derived from 368 firms classified as the Innovation Business in 2002. The questionnaires with cover letter were mailed to top/owner managers of 358 firms after excluding 10 firms used for the pre-test. 16 questionnaires out of 358 that had either failed to reach the organization or refused to participate in were excluded from the population count of the initial mailing-out, yielding a relevant population of 342. A total of 173 respondents from two mailings returned, giving an overall response rate of 50.6%. After excluding 50 firms, which had incomplete responses, 123 usable questionnaires were used for the analysis of the data. The response rate was considered to be very satisfactory for a mail survey, particularly with only two waves of mail-out although there were pre-notification and encouraging phone-calls for participation. Several two-sample t-tests were performed to investigate sample biases such as non-response bias and control variable bias (firm age and size), and no bias was found. 7

No single industry dominated the respondent firms (information and communication, 31.7%; machinery and metal, 23.0%; electric and electronic, 20.6%; medical equipment, 8.7%; biochemical, 4.8%, and others, 11.2%). The types of businesses were - manufacturers (65.1%), service (12.7%) and both (22.2%). Majority of the firms have been in business less than 10 years (86.5%) and had less than 100 employees (90.0%). 86.5% of the firms had total sales less than 10 million dollars in previous year. The respondents firms were considered to be new and small in size. 3.2 Measuring Variables The measurement scales were derived from the organization learning and new product development literature, and some items developed by the authors. Organizational learning scale was composed of five items, adapted from Bontis et al., (2002) and Baker and Sinkula (1999). Since organizational learning involves embedding individual and group learning into non-human aspects of the organization and assimilates new learning (feed forward) (Crossan et al., 1999), we employed items reflecting individual, group learning, and feed-forward learning. With respect to commitment for learning we were interested in the systemic support for learning and budget for training and learning. Five items were either employed from Bontis et al., (2002) or developed by the authors. Readiness for learning included fair treatment of ideas, relevant feedback from the managers, and shared value at organizational level. Five items measuring organizational readiness for learning were adapted from SadlerSmith et al., (2001), Goh and Richards (1997), and Baker and Sinkula (1999). Three items measuring open-mindedness was adapted from Baker and Sinkula (1999) and Goh and Richards (1997). The respondents were asked to indicate their perception on a 7-point Likert-type scale, ranging from of „strongly disagree‟ to „strongly agree.‟ Barriers to learning were measured by eight items, adapted from Adam et al., (1998) - four items for compartmentalized thinking in disseminating information and four items for inert. Moorman (1995)‟s 7-item scale was employed to measure performance of new product development. Two items measured timeliness of new product development (timelines to develop and market) and five items measured creativity of new product developed. 3.3 Validity and Reliability All constructs were considered to have face and content validities derived from the literature (Baker and Sinkula, 1999; Sadler-Smith et al., 2001; Bontis et al., 2002; Goh and Richards, 1997; Adam et al., 1998; Moorman, 1995). Discriminant validities for the constructs were assessed by the exploratory factor analysis, using principal component factor method with varimax rotation. All 16 items for antecedents to learning and organizational learning scales were factor analyzed and clearly loaded on the four separate constructs as anticipated, supporting discriminant validities of these constructs. 7 items for timeliness and creativity of new product development were also loaded on two separate factors as anticipated. A coefficient alpha test was performed to investigate the internal reliability of the measuring scales. All scales (commitment, 0.80; readiness, 0.81; open-mindedness, 0.74; organizational learning, 0.72; compartmentalized thinking, 0.83; inertia, 0.70; speed, 0.90; and creativity, 0.94) were above the cut-off of 0.70 (Nunnally, 1978). Means, standard deviations and correlations among the variables were provided in table 1. 8

4. Analysis and Results Hypothesized model was examined by two stages of analysis. First, hypotheses were examined by path analysis (structural equation modeling), which can simultaneously measure each path coefficients for causal-effects whilst providing overall fit of goodness for the model. For path analysis, the adequacy of the model was first investigated and then significance of each path coefficients was examined. The goodness of fit measures well met the minimum requirement for the adequacy of the model (e.g., GFI= 0.97, AGFI =0.89, NFI = 0.93, IFI = 0.98, TWI = 0.93, CFI=0.97, RMSEA=0.06). The significance of path estimates was examined using a critical ratio (C.R.), and six out of eight coefficients were significant (p<0.1 to 0.01). Significance and effects of each path coefficients were provided in the table 2. Path coefficients for learning commitment (0.19, p<0.01), learning readiness (r=0.32, p<0.01), and open-mindedness (r=0.20, p<0.1) were all significant and positive, supporting hypothesis 1a, 1b and 1c. Meanwhile, path coefficients for organizational inertia was significantly and negatively related to organizational learning (r=-0.21, p<0.01) and thus hypothesis 2a was supported. However, compartmentalized thinking to organizational learning was not significant. Hence, hypothesis 2b was not supported. Finally, the path coefficients for organizational learning to speed (r=0.15, p<0.01) and creativity (r=0.46, p<0.01) of new products development were significant and positive, supporting both hypothesis 3a and 3b. 5. Discussion and Implications The purpose of this study is to investigate the possible effects of factors both considered to enhance and inhibit organizational learning. A number of interesting findings emerged from the analysis for discussion and implications. As predicted, those three factors - learning commitment, learning readiness, and open-mindedness - were found to enhance organizational learning. Unlike the prior studies, we employed more practical, action-based items for measuring facilitating variables for learning. Organizational learning starts with the intention and willingness to learn. Without providing appropriate platform for learning to take place, learning intent will never be realized. This study aimed to reveal the variables considered to be important in designing implementation of learning in organizational level. In contrast to our expectations, inertia was the only variable proved to have a negative effect on organizational learning, and compartmentalized thinking was not considered to have any significant effects on that. Indeed, it is the organizational inertia that impedes learning to occur, particularly in case of generative (highlevel, double-loop) learning, which requires unlearning and discarding the long-held mental models. It would seem that compartmentalized thinking could be reduced to some level by encouraging risktaking and experimentation or by restructuring the organizational systems and structure. As expected, organizational learning was found to have a positive effect on the performance of new product development (NPD). This study contributed to the research in organizational learning by empirically investigating the effects of facilitating variables on organizational learning. Both managers and researchers can benefit from the finding provided in this study for designing effective learning organizations. 9

6. References Adams, E. M., G. S. Day and Dougherty. D. (1998) Enhancing new product development performance: An organizational learning perspective, Journal of Product Innovation Management, 15, 403-422. Aguilar, F. (1967) Scanning the business environment, New York: Macmillan. Argyris, C and D. A. Schon. (1978) Organizational learning: A theory of action perspective. Reading, MA: Addison-Wesley. Baker, E. B and J. M. Sinkula. (1999) The synergistic effect of market orientation and learning orientation on organizational performance, Journal of the Academy of Marketing Science, 27, 4, 411427. Bierly, E. P. and Hamalainen, T. (1995) Organizational learning and strategy, Scandinavia Journal of Management, 11, 3, 209-224. Bontis, N., M. M. Crossan and J. Hulland. (2002) Managing an organizational learning system by aligning stocks and flows, Journal of Management Studies, 39, 4, 437-469. Calantone, J. R., S. T. Cavusil and Zhao, Y. (2002) Learning orientation, firm innovation capability, and firm performance, Industrial Marketing Management, 31, 515-524. Cooper, R. G and Kleinschmidt. (1994) Determinants of timeliness in product development, Journal of Product Innovation Management, 11, December, 381-396. Crossan, M. M., H. W. Lane and White, R. (1999) An organizational learning framework: From intuition to institution, Academy of Management Review, 24, 3, 522-537. Day, S. G. (1994) Continuous learning about markets, California Management Review, 36, Summer, 9-31. Day, S. G and Nedungadi, P. (1994) Managerial representations of competitive advantage, Journal of Marketing, 58, April, 31-44. Dougherty, D. (1992) Interpretive barriers to successful product innovation in large firms, Organization Science, 3, May, 179-202. Duncan, R. B and Weiss, A. (1979) Organizational learning: Implications for organizational design, Research in organizational behavior, 1, 4, 75-124. Fiol, C. M. and Lyles, M. A. (1985) Organizational learning, Academy of Management Review, 10, 803–813. Garvin, D. A. (1993) Building a learning organization, Harvard Business Review 71, July-August, 7891. Goh, S and Richards, G. (1997) Benchmarking the learning capability of organizations, European Management Journal, 15, 5, 575-583. Hambrick, D. C. (1981) Specialization of environmental scanning activities among upper level executives, Journal of Management Studies, 18, 3, 299-320. Hedberg, B. (1981) How organizations learn and unlearn, In Nystrom, P. C. and Starbuck, W. H. (ads), Handbook of Organizational Design, Oxford, Oxford University Press, pp. 3-27. Kanter, R. M. (1983) The change masters: Innovation and entrepreneurship in the American corporation, New York: Simon and Schuster Kim, H. D. (1993) The link between individual and organizational learning, Sloan Management Review, Fall, 37-50. Klein, E. H and Newman, H. W. (1980) How to integrate environmental forces into strategic planning, Management Review, 69, July, 40-48. Levitt, B. and J. C. March. (1988) Organizational learning, Annual Review of Sociology, 14, 319-340. Lukas, A. B., G. T. M. Hult., and Ferrell, O. C. (1996) A theoretical perspective of the antecedents and consequences of organizational learning in marketing channels, Journal of Business Research, 36, 233-244. McGill, M and Slocum, J. W. (1993) Unlearning the organization, Organizational Dynamics, 67-79. 10

Miller, D. (1993) The architecture of simplicity, Academy of Management Review, 18, 1, 116-138. Miller, D and Friesen, H. P. (1980) Momentum and revolution in organizational adaptation, Academy of Management Journal, 23, 4, 591-614. Moorman, C. (1995) Organizational market information process: Cultural antecedents and new product outcomes, Journal of Marketing Research, 32, August, 318-335. Moorman, C and A. S. Miner (1998) Organizational improvisation and organizational memory, Academy of Management Review, 23 (4): 698-723. Nunnally, J. C. (1978) Psychometric theory, McGraw-Hill BookCompany. Nevis, C. E., A. J. Dibella and Gould, M. J. (1995) Understanding organizations as learning systems, Sloan Management Review, Winter, 73-85. Nystrom, C. P., B. Hedberg, and Starbuck, H. W. (1976) Interacting processes as organization process, In Ralph, H. K., Louis, R. P., and Slevin, P. D (eds), The management of organization design, New York: Elsevier North-Holland, Vol. 1: 203-230. Nystrom, C. P and Starbuck, H. W. (1984) To avoid crisis, unlearn, Organizational Dynamics, 12, 4, 53-65. Parkhe, A. (1993) Strategic alliance structuring: a game theoretic and transaction cost examination of interfirm cooperation, Academy of Management Journal 36,4, 794-829. Pedler, M., T, Boydell., and Burgoyne, J. (1989) Towards the learning company, Management Education and Development, 20, 1-8. Romme, G. and Dillen, R. (1997) Mapping the landscape of organizational learning, European Management Journal, 15, 1, 68-78. Sadler-Smith, E., D. P. Spicer and I. Chaston. (2001) Learning orientations and growth in smaller firms, Long Range Planning, 34, 139-158. Senge, M. P. (1990) The leader‟s new work: Building learning organizations, Sloan Management Review, Fall, 7-23. Sinkula, M. J., W. E. Baker and Noordewier, T. (1997) A framework for market-based organizational learning: Linking values, knowledge, and behavior, Journal of the Academy of Marketing Science, 25, 4, 305-318. Slater, S. (1995) Learning to change, Business Horizons, Nov-Dec, 13-20. Starbuck, W. H. (1992) Learning by knowledge-intensive firms, Journal of Management Studies, 713740. Stata, R. (1989) Organizational learning - The key to management innovation, Sloan Management Review, Spring, 63-74. S-J. Yoo and Tan W-L. (2008) Learning Intent, Absorptive Capacity, and Relational Capital in InterOrganizational Learning, 15th International Product Development Management Conference, Hamburg, Germany. Thompson, J. D. (1967) Organizations in action, New York: McGraw-Hill. Walker, C. O and Ruekert, W. R. (1987) Marketing‟s role in the implementation of business strategies: A critical review and conceptual framework, Journal of Marketing, 51, July, 15-33.

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Figure 1 Hypothesized Model Barriers - Inertia - Compartmentalized Thinking

H2a and 2b

Consequences

Antecedents

NPD - Commitment - Readiness - Open-mindedness

H1a, 1b and 1c

Organizational Learning

- Timeliness - Creativity

H3a and 3b

Table 1 Means, Standard Deviations and Correlations among the Variables Means

SD

1

1. Commitment

Variables

22.71

5.86

-

2

3

4

5

6

7

2. Readiness

26.52

4.31

0.56**

-

3. Open-mindedness

16.36

2.72

0.34**

0.46**

-

4.Organizational

23.84

3.97

0.49**

0.55**

0.41**

-

12.89

3.59

-0.19*

-0.33**

-0.38**

-0.37**

-

14.42

3.64

0.12

0.08

-0.15

-0.16

0.45**

7. Speed

8.56

2.49

0.29**

0.23**

0.16

0.28**

0.06

0.09

-

8. Creativity

26.34

6.09

0.09

0.20*

0.27**

0.37**

-0.07

-0.04

0.19*

Learning 5. Compartmentalized Thinking 6. Inertia

-

*p<0.05 **p<0.01

Table 2 Results of Estimated Path Coefficients and Critical Ratio Estimate

S.E.

C.R

Commitment → Organizational Learning

0.19**

0.06

3.19

Readiness → Organizational Learning

0.32**

0.08

3.72

Open-mindedness → Organizational Learning

0.20*

0.12

1.59

Compartmentalized Thinking → Organizational Learning

0.01

0.09

0.07

Inertia → Organizational Learning

-0.21**

0.09

-2.28

Organizational Learning → Speed

0.15**

0.05

2.79

Organizational Learning → Creativity

0.46**

0.13

3.48

*p<0.1, **p<0.01

12

Kooperative Markenführung in regionalen KMU-Clustern (Cooperative Branding in regional SME clusters)

Zanger, Cornelia; Kaminski, Sandra

Zusammenfassung / Abstract Die zunehmende Wettbewerbsintensität auf internationalen Märkten stellt kleine und mittlere Unternehmen (KMU) aktuell vor immer schwierigere Herausforderungen. Kooperationsstrategien bieten einen Ausweg, wie zahlreiche Untersuchungen bestätigen. Die Zusammenführung von KMU´s in kooperativen Strategien und insbesondere in Marketingstrategien erweist sich jedoch als schwierig. In der vorliegenden Arbeit werden die Möglichkeiten einer Zusammenarbeit von KMU auf dem Gebiet des Marketing insbesondere der kooperativen Markenführung diskutiert. Es wird der Ansatz einer regionalen Clustermarke entwickelt und dessen Implementierung am Beispiel der vogtländischen Musikinstrumentenbauer erörtert. Increasingly fierce competition on international markets is confronting small and medium-sized enterprises (SMEs) with more and more difficult challenges. Numerous studies have confirmed that cooperation strategies offer a way out. However, the forging of alliances between SMEs in cooperative strategies and, in particular, in marketing strategies has proved to be a thorny endeavour. This paper discusses the possibilities of SME cooperation in the field of marketing, particularly in cooperative branding. It develops the approach of a regional cluster brand and examines its implementation with the help of the case study of the manufacturers of musical instruments in Germany’s Vogtland region.

1

Kooperative Marketingstrategien in regionalen KMU-Clustern

KMU sehen sich vor dem Hintergrund der Globalisierung vor immer schwierigeren Wettbewerbsbedingungen. Dies trifft in besonderem Maße traditionelle Branchen, die mit herkömmlichen Materialien und traditionellen Technologien arbeiten. Als Beispiel dafür kann der Musikinstrumentenbau gelten. Als Ausweg werden Kooperationsstrategien in Form von KMU-Netzwerken aber auch Clustern gesehen, die größere insbesondere regionale Wettbewerbsvorteile generieren können (vgl. Porter 1998). Für regionale KMU-Cluster stellt sich aus Sicht des Marketing die Frage, wie das Zusammenwirken der Clusterakteure optimal gestaltet werden kann. Da der Markenstrategie im Rahmen des Marketing eine zentrale Rolle zugeordnet wird, ergibt sich folgerichtig die Fragestellung nach den Chancen einer gemeinsamen Markenstrategie der Clusterakteure, der im Folgenden nachgegangen werden soll. Die Bedeutung des Konzeptes regionaler Cluster zur Stärkung der Wettbewerbsfähigkeit und der wirtschaftlichen Entwicklung von Unternehmen und Institutionen wurde in zahlreichen Studien untersucht (vgl. bspw. Pantazis 2006; Dümmler 2005; Gordon/McCann 2005; Ketels/ Lindqvist/Sölvell 2005; Schramm-Klein 2005; Bathelt/Malmberg/Maskell 2004; Sautter 2004; Audretsch 2003; Brö1

cker/Dohse/Soltwedel 2003; Bieger/Scherer 2003; Hertog/Brouwer/Maltha 2000). Die Möglichkeiten der Zusammenführung von Clusterakteuren und das Erschließen von Synergien durch aktive, von innen initiierte Steuerungsprozesse wie sie eine kooperative Marketingstrategie erfordert sind bislang jedoch noch unzureichend erforscht (Ketchen/ Snow/Hoover 2004). Seit den ersten Beiträgen von Porter Anfang der 1990er Jahre stieß das Clusterkonzept auf großes Interesse. Das Ursprungskonzept von Porter wird jedoch als zu vage kritisiert (vgl. Martin/Sunley 2003). Diese unscharfe Abgrenzung führte zu vielen Clusterinterpretationen (Überblicke zu Definitionen aus Sicht des strategischen Management vgl. z. B. Dümmler 2005: 44ff.; Enright 2003: 101; Martin/Sunley 2003: 7; Belleflamme/Picard/Thisse 2000: 158f.). Beinahe allen Clusterdefinitionen gemeinsam sind folgende Merkmale (vgl. Dümmler 2005: 55ff.; Schramm-Klein 2005: 538; Sautter 2004: 66): Bezug der Akteure zu einer Hauptbranche – sektorale Abgrenzung einer gemeinsamen Wertschöpfungskette geringe Distanz zwischen den Akteuren – geographische Nähe und daraus resultierende soziale Nähe Interaktionen zwischen den Akteuren – Beziehungen, die von einfachen Input-OutputVerbindungen bis hin zu engen Kooperationen reichen Realisierung positiver externer Effekte – wie Spillovers, Economies of Scale. Im hiesigen Kontext soll unter einem regionalen Cluster eine überdurchschnittliche, regionale Konzentration von Unternehmen insb. KMU und Institutionen einer Hauptbranche sowie weiterer unterstützender, verwandter Branchen verstanden werden, die über Wertschöpfungsketten oder diagonale Interaktionen miteinander agieren, um auf diese Weise Wettbewerbsvorteile im nationalen und internationalen Kontext zu erreichen (vgl. Kaminski Forthcoming). Kern des regionalen Clusters ist somit das Potenzial der Zusammenarbeit regional und funktional benachbarter Unternehmen, öffentlicher Behörden und Verwaltungen, Forschungseinrichtungen, Hochschulen, Verbände, kollektiver Einrichtungen und Vereinigungen. Das Cluster steht zwischen Konkurrenz und Kooperation. Einerseits kämpfen Clusterakteure um Nachfrager, andererseits kooperieren sie in verschiedenen Bereichen. Die Kooperation in bestimmten Bereichen (wie z. B. Technologie) kann Wettbewerbserfolge in anderen Bereichen (wie z. B. Marketing) erleichtern. Das Cluster kann als Element einer Region verstanden, was die Übertragung formaler und inhaltlicher Abgrenzungsmerkmale einer Region ermöglicht (vgl. dazu bspw. Blotevogel 1996: 57ff.). Formal handelt es sich damit einerseits um einen Raum mittlerer Größenordnung oberhalb der lokalen/kommunalen und unterhalb der staatlichen/nationalen Ebene, innerhalb dessen die soziale Kommunikation nicht nur medial vermittelt sondern auch durch direkte Face-to-Face-Kommunikation realisiert werden kann. Andererseits kann ein regionales Cluster als Funktionsraum verstanden werden, welcher sich durch individuelles oder institutionelles Handeln bildet und Gegenstand ökonomischer, politischer und administrativer Tätigkeiten ist. Der funktionale Bezug des regionalen Clusters ergibt sich durch die Kernbranche und der mit dieser in Verbindung stehenden Wertkette. Darüber hinaus kann das regionale Cluster als Wahrnehmungs- bzw. Identitätsraum interpretiert werden (zu regionaler Identität allg. vgl. Blotevogel 1996: 60; Weichhart 1996: 37f.), was mit Blick auf eine gemeinsame Markenidentität von besonderem Interesse ist (vgl. ausführlich Kaminski Forthcoming). Die zunehmende Inflation von Produkten und Marken aufgrund zunehmender Marktsegmentierung, die Globalisierung, den ständige Eintritt neuer Wettbewerber, die Verkürzung von Produktle2

benszyklen, der steigenden Inflation kommunikativer Maßnahmen, Informationsüberflutung und flüchtiges Informationsverhalten der Nachfrager, die Notwendigkeit der Vermittlung eines Zusatznutzens, zunehmende Markenerosion, sinkendes Markenvertrauen sowie steigende Macht des Handels (vgl. Esch/Wicke/Rempel, 2005, S. 13ff.) sind nur einige der Probleme vor denen Unternehmen aktuell stehen, die aber KMU´s aufgrund der bekannten Größennachteile ganz besonders treffen. Kooperationsstrategien zwischen KMU schaffen durch die Verstärkung von Kernkompetenzen zur Synergien Potentiale zur Behauptung im Wettbewerb und dies gilt besonders auch für kooperatives Marketing wie entsprechende Studien zeigen (vgl. Zanger 2002: 436ff., Zanger 2000: 277ff.). Nun stellt sich die Frage, ob dies auch auf kooperative Markenstrategien übertragen werden kann, denn die Einzelmarken von KMU soweit diese überhaupt strategisch entwickelt werden, sind einem hohen Wettbewerbsdruck durch die starken Marken von Großunternehmen ausgesetzt und kaum vor Imitationen geschützt. Die Umsetzung von Markenstrategien erfordert von den Unternehmen eines regionalen KMU-Clusters zusätzliche personelle, materielle und/oder finanzielle Ressourcen. Kooperationen bieten diesbezüglich Potenziale zur Realisierung von Wettbewerbsvorteilen durch Kosten-, Differenzierungs- und Zeitvorteile. Eine Verflechtung der Einzelmarkenkonzepte der Akteure eines regionalen Clusters kann das Schaffen und den Erhalt von Konkurrenzvorteilen für die Clusterakteure insgesamt unterstützen. Das Ergebnis derartiger Verflechtungen von Einzelmarkenstrategien der Clusterakteure kann eine gemeinsame, kollektive Marke sein – die regionale Clustermarke. 2

Die Chancen und Risiken kooperativer Markenführung in KMU-Clustern

2.1 Konzept der regionalen Clustermarke Bei der Zusammenarbeit in Form einer regionalen Clustermarke handelt es sich um eine formelle, multilaterale und diagonale Kooperationsform der Clusterakteure im Bereich des Marketing. Partner dieser Zusammenarbeit können alle Clusterakteure sein. Die regionale Clustermarke als Ausdruck kollektiver Marketingstrategie dient der Abstimmung und strategischen Ausrichtung des Verhaltens der Clusterakteure. Sie ist als eine bewusst geplante und systematische Vorgehensweise im Sinne eines aktiven von innen initiierten Prozesses zu verstehen. Diese Strategie baut auf dem Konzept der Mehrmarkenführung im Sinne einer externen, institutionenübergreifenden Markenkombinationsstrategie auf. Im Fokus stehen die Unterstützung und Ergänzung der Einzelmarkenkonzepte der Clusterakteure, was in Form einer gemeinsamen Markierung mit regionalem und funktionalem Bezug realisiert wird. Es wird eine gemeinsame Markierung der Leistungsbündel der Clusterakteure durch die Einzelmarke und die regionale Clustermarke forciert. Das Ziel der Strategie der regionalen Clustermarke ist die Realisierung strategischer Wettbewerbsvorteile gegenüber internationalen Konkurrenten außerhalb des regionalen Clusters aufbauend auf Differenzierungs- und/oder Kostensenkungspotenzialen. Diesbezüglich stellen sich spezifische Anforderungen an die regionale Clustermarke. Konstitutive Voraussetzung ist, dass die regionale Clustermarke eine eigene, unterscheidungsfähige Markierung erhält und durch ein systematisches Kommunikationskonzept im Markt eingeführt wird. Die Clustermarke gibt das Versprechen ab, als Klammer über alle Clusterakteure (repräsentiert durch ihre Einzelmarken) für dauerhaft werthaltige, nutzenstiftende Wirkungen für den Kunden zu stehen. Eine derartige gemeinsame Markenstrategie ist aber nur dann erfolgreich, wenn es gelingt dauerhaften Mehrwert, z B. in Form von Alleinstellungsmerkmalen zu schaffen. Dies kann durch die Bün3

delung der Kraft der Einzelmarkenkonzepte erreicht werden. Dabei bestehen die besonderen Herausforderungen darin, einerseits die Eigenständigkeit der Einzelmarkenkonzepte zu wahren sowie diese andererseits in die gemeinsame Marke zu integrieren und Abstimmungen im Zeitverlauf vorzunehmen. Benefit für die einzelnen KMU ist bei Erfüllung der gegeben Markenversprechen eine hohe Wertschätzung am Markt sowie verbesserte Kundenbindung (vgl. ausführlich Kaminski Forthcoming).

2.2 Wirkungsmechanismus der regionalen Clustermarke Die regionale Clustermarke fokussiert auf die Unterstützung und Ergänzung der Einzelmarkenkonzepte der Clusterakteure. Intern können die Clusterakteure einerseits an einem Transfer von Kompetenzen und immateriellen Ressourcen zwischen ihnen partizipieren. So sind die individuellen Fähigkeiten der Mitarbeiter insbesondere im Bereich Marketing und Markenführung von Bedeutung für einen solchen Transfer. Dieses Wissen kann sich auf Konkurrenten und Nachfrager, Distributionssysteme und aktuelle Trends beziehen. Darüber hinaus kann internes Wissen bspw. im Hinblick auf Kommunikationsinhalte und die Nutzung von Kommunikationsinstrumenten ausgetauscht werden. Andererseits kann durch die gemeinsame Nutzung von Kommunikationsinstrumenten eine Reduzierung der Kommunikationskosten bei den Akteuren erreicht werden (z. B. durch gemeinsame Messeauftritte oder gemeinsame Events für Nachfrager oder Händler). Diese Transfereffekte stellen für die Clusterakteure Chancen dar, personelle und finanzielle Defizite auszugleichen. Im Sinne der regionalen Identität kann die Clustermarke auch als Herkunftsangabe fungieren. Dazu muss sie gemeinsame Werte der in der Branche aktiven KMU der Region symbolisieren, die wiederum auf der gemeinsamen Clusteridentität beruhen. Die gemeinsame Identität kann durch Kommunikation gestärkt und weiter entwickelt werden. Die Entwicklung der regionalen Clustermarke ist als ein Kommunikationsprozess zu verstehen und kann somit über Rückkopplungseffekte die gemeinsame Clusteridentität stärken und weiter entwickeln. Zur Erklärung und zum Verständnis der externen Wirkungen der Clustermarke sind die Erkenntnisse zum Markentransfer bedeutsam. Die positiven Wissensstrukturen die im Sinne des Fremdbildes der regionalen Clustermarke auf Seiten der Nachfrager gebildet werden, sollen positiv auf die Wissensstrukturen der Einzelmarkenkonzepte der Clusterakteure wirken. Dabei wird ein Transfer von Markenwissen (Markenimage und Markenbekanntheit) mit funktionalem, regionalem und emotionalem Bezug von der Clustermarke auf die Einzelmarkenkonzepte angestrebt. Dieser Markentransfer kann in 3 Richtungen wirken (vgl. Kaminski Forthcoming, zu Wirkungen von Markentransfers vgl. Drengner 2006: 85ff.; Günther 2002: 10ff.): Stabilisierung von Einzelmarkenkonzepten: Das Einzelmarkenkonzept soll in seiner Position in der Wahrnehmung der Nachfrager durch die Verbindung mit der regionalen Clustermarke weiter gestärkt werden. Umpositionierung von Einzelmarkenkonzepten: Die Position der Einzelmarke soll in der Wahrnehmung der Nachfrager verändert werden. Die Verbindung der Einzelmarke mit der regionalen Clustermarke soll bei den Nachfragern Assoziationen hervorrufen, die bspw. einzigartige Differenzierungen von Wettbewerberangeboten ermöglichen. Aufbau einer neuen Einzelmarke: Die regionale Clustermarke kann einer neuen Einzelmarke zu Bekanntheit und bestimmten Imagekomponenten verhelfen. Im Sinne eines Imageaufbaus sollen 4

neue Denotationen und/oder Konnotationen mit regionalem, funktionalem und erlebnisorientierten Bezug mit der neuen Einzelmarke verbunden werden. Transfererfolge können aber nur dann erreicht werden, wenn die regionale Clustermarke bekannt ist und mit ihr starke, positive und einzigartige Assoziationen verbunden werden. Außerdem ist ein glaubwürdiger Zusammenhang zwischen der regionalen Clustermarke und den Einzelmarkenkonzepten herzustellen. Ähnlichkeit kann bspw. durch das Herausstellen eines gemeinsamen Verwendungsumfeldes oder gemeinsamer Erlebniswelten erreicht werden. Ebenso ist darauf zu achten, dass die durch die Clustermarke zu transferierenden Assoziationen für die Nachfrager relevant und einzigartig sind, um eine Differenzierung von Konkurrenzangeboten erreichen zu können. Jedoch ist zu berücksichtigen, dass dieser Transfer in beide Richtungen verlaufen kann und ebenso negative Transfereffekte auftreten können (vgl. Kaminski Forthcoming, zu Einflussfaktoren auf den Erfolg von Markentransfers allgemein vgl. Caspar/Burmann 2005: 260; Keller 2005: 951ff; Park/Milberg/Lawson 2005: 965; Zatloukal 2002: 218).

2.3 Vorgehensweise bei der Entwicklung einer regionalen Clustermarke Die Entwicklung einer regionalen Clustermarke orientiert sich strategisch sich an dem Ansatz der identitätsorientierten Markenführung, der von einem permanenten Austausch zwischen Markenidentität als Selbstbild aus Sicht des Markengebers und Markenimage als Fremdbild aus Sicht externer Zielgruppen (vgl. Burmann/Meffert 2005: 49; Esch/Langner/Rempel 2005: 106). Das Selbstbild der Clustermarke besteht aus sachlichen, emotionalen und herkunftsbezogenen Elementen. Diese ergeben sich einerseits aus dem größten gemeinsamen Nenner der Einzelleistungen bzw. Einzelmarkenkonzepte der Clusterakteure. Andererseits bestimmt das Profil des regionalen Clusters in seiner Gesamtheit dessen Inhalte. Die sachlichen Komponenten speisen sich aus den gemeinsamen objektiven Merkmalen der angebotenen Leistungen sowie den gemeinsamen Kernkompetenzen der Clusterakteure. Der Erfolg der regionalen Clustermarke wird weiterhin von emotionalen Komponenten bestimmt, welche die Beziehung zwischen Marken und Nachfrager betreffen. Auf emotionaler Ebene ist einerseits die Markenpersönlichkeit bedeutsam. Dies erfordert die Erarbeitung von Gemeinsamkeiten emotionaler Komponenten der Einzelmarkenkonzepte. Andererseits bietet die Clustermarke Potenziale, die Marken-Nachfrager-Beziehung durch Authentizität und Vertrauen zu stärken. Authentizität kann über regionale, lokale und historische Verankerung, Kompetenz, Professionalität und Originalität der Markenleistungen und der mit ihnen vermittelten Geschichten erreicht werden (vgl. Lewis/Bridger 2001: 56ff.). So schafft die regionale und historische Verankerung der Clusterakteure Chancen, die regionale Clustermarke besonders authentisch wirken zu lassen. Kooperationen und Interaktionen zwischen den Clusterakteuren bieten Möglichkeiten einer besonders glaubwürdigen und originären Ausrichtung. Die herkunftsbezogenen Elemente des Markenselbstbildes sichern den regionalen Bezug der Clustermarke im Sinne einer Herkunftsangabe für die Einzelmarkenkonzepte. Aus dieser gesamten Struktur der Marke werden unter Berücksichtigung der Bedürfnisse der Nachfrager, der Markenkonzepte der Wettbewerber und aktueller Trends einzigartige und nutzenstiftende Merkmale ausgewählt sowie eine Vision der regionalen Clustermarke entwickelt. Diese einzigartigen und nutzenstiftenden Merkmale werden in einem weiteren Schritt als zentrale Eigenschaften der Clustermarke am Markt etabliert. Das Ergebnis ist der zeitlich stabile Markenkern, der gegenüber den Bezugsgruppen das zentrale Nutzenversprechen gibt. Diese Inhalte des Markenselbstbildes bestimmen die inhaltliche 5

Ausgestaltung des systematischen Kommunikationskonzeptes der regionalen Clustermarke. Dieses Selbstbild wird durch die Positionierung umgesetzt, d. h. für die Nachfrager „übersetzt“. Dabei sind relevante Markt- und Kommunikationsbedingungen zu berücksichtigen. Die Beurteilung dieser ausgesendeten Signale der Clustermarke durch die Nachfrager bestimmt das Fremdbild der regionalen Clustermarke. Für den Erfolg der Einzelmarkenkonzepte und des Konzepts der regionalen Clustermarke sind Selbstbild und Fremdbild der Markenkonzepte in Übereinstimmung zu bringen. (vgl. ausführlich Kaminski Forthcoming). Insgesamt zeigt sich, dass die Zusammenarbeit in Form einer regionalen Clustermarke verschiedene Möglichkeiten bietet, Schwächen auszugleichen, Stärken weiter zu entwickeln und sich an neue Kundenbedürfnisse anzupassen. Zur weiteren Präzisierung des Konzeptes der regionalen Clustermarke werden in den folgenden Abschnitten die Ergebnisse einer Forschungsfallstudie dargestellt. 3

Fallstudie: Das vogtländische Musikinstrumentenbaucluster

3.1 Das regionale Cluster vogtländischer Musikinstrumentenbau in seinem aktuellen wirtschaftlichen Umfeld Im Vogtland, im Südwesten der deutschen Bundeslandes Sachsens, konzentrieren sich Unternehmen des Musikinstrumentenbaus. Diese Region kann anhand folgender Merkmale als ein regionales Cluster charakterisiert werden: Sektorale Abgrenzung der Wertschöpfungskette: Die Hauptbranche ist der Musikinstrumentenbau. In ca. 120 Unternehmen werden nahezu alle Orchesterinstrumente gefertigt. Zu dieser mit der Hauptbranche in Verbindung stehen Wertkette zählen weiterhin Unternehmen der Holzindustrie, der Zubehörfertigung, nachgelagerter Branchen und spezieller Infrastruktur, Normungsinstitute, staatliche Behörden (z. B. Institut für Musikinstrumentenbau), Anbieter von Ausbildung und Forschung (z. B. Außenstelle der Westsächsischen Hochschule Zwickau in Markneukirchen) und Finanzinstitutionen. Zusätzlich sind Verbände und Vereinigungen wie Heimatvereine, Innungen, Handwerkskammer sowie die IHK bedeutsam. Geographische und soziale Nähe der Akteure: Die geographische Nähe der Akteure bezieht sich auf das Gebiet um die Städte Markneukirchen und Klingenthal. Mit Gründung der ersten Geigenbauinnung im Jahr 1677 kann das Gebiet als historisch gewachsenes Raumgebilde verstanden werden, dass in den Vorstellungswelten seiner Bewohner fest verankert und regionale Identität sowie soziale Nähe vorhanden sein lässt. Indikator für eine kritische Masse an Akteuren: Der Musikinstrumentenbau bestimmt derzeit 6065% der ökonomischen Infrastruktur um die Städte Markneukirchen und Klingenthal. Diese Masse an ähnlichen oder ergänzenden Partnern mit deren spezialisierten Arbeitskräften, Fähigkeiten und Wissen ermöglicht es, die umgebende Wirtschaft fühlbar zu beeinflussen und indirekt Wachstumsimpulse an andere Branchen der Region zu geben. Vorhandene Interaktionen der Akteure: Insbesondere durch das im Rahmen der BMBF-Initiative InnoRegio geförderte Projekt „Musicon Valley“ konnten verschiedene Netzwerke sowohl zwischen Clusterakteuren als auch externen Partnern realisiert werden. Ein wichtiger zentraler Partner ist dabei die Geschäftsstelle des Musicon Valley e. V.

6

Realisierung positiver externer Effekte und clusterspezifischer Wettbewerbsvorteile: Die Interaktionen zwischen den Akteuren führten zu einem Wissensaustausch i. S. v. kollektiven Lernprozessen. Durch diese Prozesse konnten neue Erkenntnisse z. B. zum Einsatz modifizierter und nachwachsender Holzwerkstoffe gewonnen werden. Dies stimuliert die Spezialisierung des Clusters und mündet in der Entwicklung räumlich begrenzter Ressourcen und Fähigkeiten, welche nur den Clusterakteuren zugänglich sind. Das vogtländische Musikinstrumentenbaucluster stellt ein geeignetes Untersuchungsobjekt für das Konzept der regionalen Clustermarke dar. Im Rahmen einer Studie des Projektes „Musicon Valley“ konnten von November 2004 bis August 2006 die Implikationsmöglichkeiten des theoretischen Ansatzes der regionalen Clustermarke in einer realen Umgebung untersucht werden (vgl. Zanger et al. 2006). Aufgrund der vielen Besonderheiten und der Komplexität des Konzeptes der regionalen Clustermarke wurde das Forschungsfeld explorativ erschlossen. Dabei wurde ein qualitatives, multimethodisches Vorgehen realisiert. Es kamen verschiedene Datenerhebungstechniken von der teilnehmenden Beobachtung über Interviews und Gruppendiskussionen als Methoden der Primärforschung bis hin zu Analysen von Berichten, Präsentationen und Dokumentationen als Methoden der Sekundärforschung zum Einsatz. Die lange Tradition des Musikinstrumentenbaus um Markneukirchen und Klingenthal sichert ein großes Fertigungs-Know-how sowie Qualitäts- und Produktionsvorteile der Musikinstrumentenhersteller. Bis Anfang des 20. Jahrhunderts war die Region sehr bekannt und in vielen Instrumentenbereichen Weltmarktführer mit zahlreichen Premiummarken. Die wirtschaftlichen und politischen Umbrüche ergaben aber in der Folgezeit, dass die vogtländischen Musikinstrumentenhersteller jahrzehntelang vom internationalen (westlichen) Markt isoliert waren. Darunter litt die Bekanntheit der Marken des vogtländischen Musikinstrumentenbaus. Aktuell ist eine geringe internationale Bekanntheit zu konstatieren. Exportverkäufe haben mit einem Anteil von mehr als 50% für die vogtländischen Musikinstrumentenhersteller jedoch nach wie vor eine hohe Bedeutung, was die besondere Relevanz der Erhöhung der internationalen Bekanntheit der vogtländischen Instrumente unterstreicht. Ihnen gegenüber stehen am Markt etablierte starke, auch emotional konditionierte Wettbewerbsmarken aus Westeuropa (insb. Italien und Frankreich), Wettbewerber aus anderen Gebieten Deutschlands (insb. Bayern) sowie Substitutionskonkurrenz aus Osteuropa und Asien die auf Preis-Mengen-Strategien setzt. Die Mehrheit der vogtländischen Musikinstrumentenhersteller ist momentan jedoch nur schwer in der Lage, sich in diesem Wettbewerbsumfeld auf längere Sicht zu behaupten. Eine gemeinsame kooperative Markenstrategie kann ein Ansatz zur Festigung einer gemeinschaftlichen Marktposition der vogtländischen Musikinstrumentenbauer sein. Die Potenziale gemeinsamer markenstrategischer Anstrengungen zur Unterstützung von Einzelmarken wurden bislang nicht erkannt. Die überwiegend kleinen und Kleinstunternehmen des Musikinstrumentenbaus im Vogtland stehen müssen gegenwärtig den Aufwand zur Markenprofilierung, so die Aufgabe überhaupt gesehen wird, allein erbringen. Die Zusammenarbeit der Akteure in Form einer regionalen Clustermarke bietet daher interessante Anknüpfungspunkte, um den Aufbau emotional ausgerichteter Markenkonzepte der vogtländischen Musikinstrumentenhersteller zu unterstützen und die positiven Effekte der regionalen Clustermarke möglichst schnell wirksam werden zu lassen. Der Ausgangspunkt der Forschungsarbeit an der Fallstudie war eine 2-stufige Situationsanalyse. Im Mittelpunkt der Außenanalyse standen die zentralen Wettbewerber in Deutschland, Ost- und Westeuropa, Nordamerika und Asien sowie die wesentlichen Zielmärkte und Zielgruppen. Bei der Innenana7

lyse wurden sowohl das vogtländische Cluster in seiner Gesamtheit als auch die Clusterakteure betrachtet. Aufbauend auf Interviews mit lokalen Experten zur Spezifik des vogtländischen Musikinstrumentenclusters und dem theoretischen Bezugsrahmen der regionalen Clustermarke wurde ein teilstandardisierter Interviewleitfaden entwickelt, mit dem Unternehmensvertreter des vogtländischen Musikinstrumentenbaus befragt wurden. Die Stichprobe besteht aus 39 Unternehmen, die in einem Quota-Verfahren bezüglich der Musikinstrumentenart und der Unternehmensgröße ausgewählt wurden. Die Datenauswertung erfolgte unter Nutzung der Methoden der qualitativen Inhaltsanalyse (vgl. ausführliche Darstellung bei Kaminski Forthcoming).

3.2 Die regionale Clustermarke als Chance kooperativer Markenführung der Akteure des vogtländischen Musikinstrumentenbauclusters Aufbauend auf den Ergebnissen der Situationsanalyse wurde das Selbstbild der Clustermarke des vogtländischen Musikinstrumentenbausclusters entwickelt. An dieser Stelle wird der Markenkern vorgestellt, der zentrale Nutzenversprechen gegenüber externen Zielgruppen gibt. Der Kern der regionalen Clustermarke lässt sich durch 4 Bestandteile beschreiben: Lange Tradition Handwerkskunst Individualität Made in Germany, Made in Vogtland Dieser Markenkern umfasst funktionale, emotionale und herkunftsbezogene Aspekte. Die funktionalen Komponenten repräsentieren den hohen Qualitätsanspruch der Marke, geben das Qualitätsversprechen im Sinne hoher Material- und Fertigungsqualität der Musikinstrumente. Die emotionale Ausrichtung bezieht sich auf die individuellen, direkten, partnerschaftlichen Kundenbeziehungen, die persönliche Note und das einzigartige Charisma des Musikinstrumentes, die lange Tradition und Handwerkskunst, was das außergewöhnliche und exzellente Klangerlebnis sichert. Die herkunftsbezogenen Komponenten beziehen sich auf die Herkunft aus dem Vogtland bzw. Deutschland im Sinne der hohen handwerklichen Fertigungsqualität, Zuverlässigkeit, Präzision, Ruhe und Geborgenheit der Fertigung (vgl. Kaminski Forthcoming). Es soll die zentrale Botschaft vermittelt werden, dass der Mythos1 traditioneller, vogtländischer Musikinstrumentenbau lebt. Dieses Wissen, was auf Seiten der Nachfrager gebildet wird, soll im Sinne eines Markentransfers auf die Einzelmarkenkonzepte der Musikinstrumentenhersteller übertragen werden und damit einen Beitrag zur Differenzierung von Konkurrenten außerhalb des Clusters leisten. Dabei ist jedoch zu beachten, dass alle Maßnahmen diesen Mythos betreffend authentisch sein müssen. Die Kommunikation muss im Sinne einer authentischen Botschaftsvermittlung die Kriterien lokale und historische Verankerung sowie Glaubwürdigkeit berücksichtigen. Das entwickelte Selbstbild der regionalen Clustermarke ist mittels einer geeigneten Positionierungsstrategie zu übersetzen. Wesentliche Erfolgschancen werden dabei in einer erlebnisorientierten Positionierung gesehen. Das Ziel besteht darin, erlebnisorientierte Rahmenbedingungen zu schaffen, um Ereignisse und Situationen mittels subjektiver Interpretationen zu einzigartigen Erlebnissen im Zusammenhang mit dem vogtlän-

1

Als Mythos soll in diesem Zusammenhang das einzigartig Emotionale angesehen werden, das rational nicht erklärbar ist und die Besonderheit eines Subjekts oder Objekts für das Marketing ausmacht.

8

dischen Musikinstrumentenbau werden zu lassen. Dadurch kann eine Verankerung der Clustermarke in Verbindung mit den Einzelmarken der Clusterakteure in der Gefühls- und Erfahrungswelt der Kunden und potentiellen Nachfrager zu erreichen (zur Wirkung erlebnisorientierter Rahmenbedingungen im Marketing. vgl. bspw. Klaus 2007: 34 f.). Die Inhalte des Selbstbildes und der erlebnisorientierten Positionierungsstrategie sind die Basis für die Ausgestaltung und den Einsatz eines systematischen erlebnisorientierten Kommunikationskonzeptes. Bei der Entwicklung dieses systematischen Kommunikationskonzeptes wurde besonderes Augenmerk auf den kooperativen Aufbau authentischer, erlebnisorientierter Rahmenbedingungen gelegt. Für die Inszenierung des Gesamterlebnisses der regionalen Clustermarke des vogtländischen Musikinstrumentenbaus wurden 6 kooperative Erlebnismodule entwickelt (Handwerk-Tradition-Klang, Besuch im Vogtland, Erlebnispfad, Messepräsentation, Großhändlerevents und virtuelles Musikinstrumentenbaucluster). In diesen Erlebnismodulen spiegeln sich 5 Typen von Erlebnissen (sensorisch, affektiv, kognitiv, verhaltensbezogen, sozial) wider, die einen speziellen Erlebniswert und spezielle Erlebnisqualität für die Nachfrager im Zusammenhang mit vogtländischen Musikinstrumenten schaffen sollen. So wird die Clustermarke multisensual erlebbar, da sie sich nicht nur funktionsorientiert präsentiert, sondern in der regionalen Identität verortet werden kann. Die Kooperation der Clusterakteure im Bereich der Markenführung ermöglicht also spezifische Erlebnisversprechen, welche über einzelmarkenspezifische Versprechen hinausgehen. Für den ganzheitlichen Erfolg dieser Erlebnismodule ist es aber notwendig, dass alle Clusterakteure gemeinsam ihr Know-how und ihre Fähigkeiten einbringen. So sollte bspw. auch verstärkt mit Hotels und Kureinrichtungen der Region zusammen gearbeitet werden, um das Modul „Besuch im Vogtland“ bestmöglich abzustimmen und zu koordinieren und dadurch Nachfrager begeistern zu können (vgl. Kaminski Forthcoming). Eine weitere Herausforderung besteht darin, die Inhalte des Kommunikationskonzeptes an die externen Zielgruppen effektiv und effizient zu kommunizieren. Dabei sind alle kommunikativen Maßnahmen der regionalen Clustermarke nach den Grundprinzipien der integrierten Kommunikation zu gestalten (formale, inhaltliche und zeitliche Integration). Abschließend ist zu bemerken, dass die empirische Untersuchung zeigte, dass die Übernahme von Verantwortung für die Entwicklung, Implementierung und das Controlling der Clustermarke sowie die Moderation im Sinne einer aktiven Einbindung, Beteiligung und Sensibilisierung aller Akteure eines regionalen Clusters grundlegende Bedeutung für den Erfolg einer regionalen Clustermarke haben. Durch die aktive Einbindung aller beteiligten Akteure von Beginn an, können mentale Barrieren der Clusterakteure hinsichtlich der Kooperation mit direkten Konkurrenten überwunden werden. 4

Fazit und Ausblick

Die Strategie der regionalen Clustermarke bietet erste Ansätze, den Herausforderungen eines zunehmend internationaleren Branchenwettbewerbs mit regionalen Kooperationen von KMU´s zu begegnen. Insgesamt zeigt die regionale Clustermarke als Konzept der strategischen Markenführung auf, dass kooperative Regionalisierungsstrategien als Leistungsergänzung von Einzelmarkenkonzepten dienen können. Die regionale Clustermarke ermöglicht unter Berücksichtigung des Spannungsfeldes zwischen Bewahrung der Individualität und Nutzung der Chancen der Kollektivität neue Wege zur Generierung strategischer Wettbewerbsvorteile im internationalen Umfeld für die Clusterakteure. Grundsätzlich bietet die regionale Clustermarke durch ihren funktionalen, regionalen und erlebnisorientierten Bezug für die Clusterakteure Chancen, in einem dynamischen Wettbewerbsumfeld Differenzierungs9

vorteile gegenüber Konkurrenten zu erreichen, die in dieser Form von Konkurrenten außerhalb des regionalen Clusters nicht oder nur mit sehr hohen finanziellen und personellen Aufwendungen realisiert werden können, wie sie sonst nur Großunternehmen zur Verfügung stehen. Die regionale Clustermarke entsteht aus der synergischen Verbindung von Kompetenz, Image und Identität der Einzelakteure sowie ihrem Wirken im Branchenkontext und ihrer Zugehörigkeit zur Region. Interessante Anknüpfungspunkte für weitere Forschungsarbeiten bieten sich insbesondere bezüglich der Wahrnehmungen der Nachfrager sowohl hinsichtlich der regionalen Clustermarke als auch deren Wirkungen auf die Einzelmarkenkonzepte. Bei den externen Wirkungen des Markentransfers der regionalen Clustermarke zeigen sich dabei Anknüpfungspunkte zu den Erkenntnissen der kognitiven Ansätze zum Markenwissen.

5

Literaturverzeichnis

Audretsch, David (2003): Globalization, Innovation and the Strategic Management of Places. In: Bröcker, Johannes / Dohse, Dirk / Soltwedel, Rüdiger (2003), Innovation Clusters and Interregional Competition, Springer Verlag, Berlin: 11-27 Bathelt, Harald / Malmberg, Anders / Maskell, Peter (2004): Clusters and Knowledge: Local Buzz, Global Pipelines and the Process of Knowledge Creation. In: Progress in Human Geography. 2004. 28(1). 31-56 Belleflamme, Paul / Picard, Pierre / Thisse, Jacque-Francois (2000): An Economic Theory of Regional Clusters. In: Journal of Urban Economics. 2000. 48 (1). 158-184 Bieger, Thomas / Scherer, Roland (2003): Clustering und integratives Standortmanagement – von einem theoretischen Konzept zu konkreten Handlungsstrategien. In: Scherer, Roland / Bieger, Thomas. (2003), Clustering - Das Zauberwort der Wirtschaftsförderung, Haupt Verlag, Bern: 1-12 Blotevogel, Hans Heinrich (1996): Auf dem Weg zu einer „Theorie der Regionalität“: Die Die Region als Forschungsobjekt der Geographie. In: Brunn, Gerhard (1996) Region und Regionsbildung in Europa – Konzeption der Forschung und empirische Befunde, Nomos Verlag, Baden-Baden: 4468. Bröcker, Johannes / Dohse, Dirk / Soltwedel, Rüdiger (2003): Clusters and Competition as Engines of Innovations. In: Bröcker, Johannes / Dohse, Dirk / Soltwedel, Rüdiger (2003) Innovation Clusters and Interregional Competition, Springer Verlag, Berlin: 1-10 Burmann, Christoph / Meffert, Heribert (2005): Theoretisches Grundkonzept der identitätsorientierten Markenführung. In: Meffert, Heribert / Burmann, Christoph / Koers, Martin (2005): 37-72 Caspar, Mirko / Burmann, Christoph (2005): Markenerweiterungsstrategien, In: Meffert, Heribert / Burmann, Christoph / Koers, Martin (2005): 245-271 Drengner, Jan (2006): Imagewirkungen von Eventmarketing. 2. Aufl. Wiesbaden: Deutscher Universitäts Verlag Dümmler, Patrick (2005): Wissensbasierte Cluster in der Schweiz: Realität oder Fiktion? Das Beispiel der Medizinaltechnikbranche. Dissertation ETH Zürich. Nr. 16082. Zürich 2005 Enright, Michael (2003): What we know and what we should know. In: Bröcker, Johannes / Dohse, Dirk / Soltwedel, Rüdiger (2003), Innovation Clusters and Interregional Commpetition, Springer Verlag, Berlin: 99-129. 10

Esch, Franz-Rudolf / Langner, Tobias / Rempel, Jan Eric (2005): Ansätze zur Erfassung und Entwicklung der Markenidentität. In: Esch, Franz-Rudolf (2005), Moderne Markenführung, 4. Aufl., Gabler Verlag, Wiesbaden: 103-129 Esch, Franz-Rudolf / Wicke, Andreas / Rempel, Jan Eric (2005): Herausforderungen und Aufgaben des Markenmanagements. In: Esch, Franz-Rudolf (2005), Moderne Markenführung, 4. Aufl., Gabler Verlag, Wiesbaden: 3-55 Gordon, Ian / McCann, Philip (2005): Clusters, Innovation and Regional Development: An Analysis of Current Theories and Evidence. In: Karlsson, Charlie / Johansson, Börje / Stough, Roger (2005), Industrial Clusters and inter-firm networks, Northampton, Edward Elgar Publishing: 29-57 Günther, S. (2002): Wahrnehmung und Beurteilung von Markentransfers, DUV, Wiesbaden Hertog, Pim den / Brouwer, Erik / Maltha, Sven (2001): Innovation in an Adolescent Cluster: The Dutch Multimedia Cluster. In: OECD (2000): 133-154 Kaminski, Sandra (Forthcoming): Die regionale Clustermarke – Konzept strategischer Markenführung im Spannungsfeld zwischen regionalem und globalem Wettbewerb. Chemnitz, Techn. Univ., Diss. Keller, Kevin Lane (2005): Erfolgsfaktoren von Markenerweiterungen, In: Esch, Franz-Rudolf (2005), Moderne Markenführung, 4. Aufl., Gabler Verlag, Wiesbaden:947-961 Ketchen, David / Snow, Charles / Hoover, Vera (2004): Research on Competitive Dynamics: Recent Accomplishments and Future Challenges. In: Journal of Management. 2004. 30 (6). 29-43 Ketels, Christion / Lindqvist, Göran / Sölvell, Örjan (2005): Cluster Initiatives in developing and Transition Economies. Stockholm Klaus, Kerstin (2007): Banken und Erlebnisorientierung – Verhaltenswirkung aus umweltpsychologischer Perspektive. Wiesbaden: Deutscher Universitäts Verlag Lewis, David / Bridger, Darren (2001): Die Neuen Konsumenten, Frankfurt, New York: Campus Verlag Pantazis, Nadine (2006): Unternehmensgründungen in regionalen Clustern, untersucht am Beispiel der Optischen Technologien in Südostniedersachsen. Hannover Park, Whan / Milberg, Sandra / Lawson, Robert (2005): Beurteilung von Markenerweiterungen, In: Esch, Franz-Rudolf (2005) Moderne Markenführung, 4. Aufl., Gabler Verlag, Wiesbaden: 963-981 Porter, Michael (1998): Clusters and Competition: New Agendas for Companies, Governments and Institutions. In: Porter, Michael. (1998) On Competition. Boston: Mcgraw-Hill Professional:197288. Sautter, Björn (2004): Regionale Cluster – Konzept, Analyse und Strategie zur Wirtschaftsförderung. In: Standort – Zeitschrift für Angewandte Geographie. 2/2004. 66-72 Schramm-Klein, Hanna (2005): Wettbewerb und Kooperation in regionalen Branchencluster. In: Zentes, Joachim / Swoboda, Bernhard / Morschett, Dirk (2005) Kooperationen., Allianzen und Netzwerke, 2. Aufl., Wiesbaden: Gabler Verlag: 531-556 Weichhart, Peter (1996): Die Region – Chimäre, Artefakt und Strukturprinzip sozialer Systeme? In: Brunn, Gerhard (1996) Region und Regionsbildung in Europa – Konzeptionen der Forschung und empirische Befunde, Nomos Verlag, Baden-Baden: 25-43 Zanger, Cornelia (2002): Kompetenzen in KMU-Netzwerken. In: Füglistaller, Urs / Pleitner, Hans Jobst / Volery, Thierry / Weber, Walter (2002), Umbruch der Welt – KMU vor Höhenflug oder Absturz?,Verlag KMU HSG, St. Gallen: 427-440

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Zanger, Cornelia (2000): Kundenvertrauen in KMU-Netzwerken, in: Pleitner, Hans Jobst / Weber, Walter (2000), Die KMU im 21.Jahrhundert – Impulse, Aussichten, Konzepte, Verlag KMU HSG, St. Gallen: 269-279 Zanger, Cornelia / Gaus, Hansjörg / Jahn, Steffen / Kaminski, Sandra / Wenisch, Michael (2006): Competence-Based Preconditions for the Operativeness of a Regional Marketing Cluster. In: Proceedings of the 51st ICSB World Conference. Melbourne Australia. June 18-21, 2006 Zatloukal, Grit (2000): Erfolgsfaktoren von Markentransfers. Wiesbaden: Deutscher Universitätsverlag

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The Internationalization Behavior of Mature Firms A Case Study of Born-again Global Firms

Rico Baldegger, PhD Professor for Entrepreneurship and Management University of Applied Sciences Western Switzerland School of Business Administration Fribourg Ch. du Musée 4 CH – 1700 Fribourg Switzerland Tel: +41 (0)79 719 19 20 Fax: +41 (0)26 429 63 75 [email protected]

Abstract The international entrepreneurship model developed by Zahra and George was used in an exploratory effort to explain the internationalization pattern of mature and previously domestically focused firms. In-depths interviews were conducted with seven older firms based in Switzerland that suddenly expanded beyond national borders, resulting in substantial business in foreign markets The results of the case studies show that not only new ventures, but also well-established mature companies can internationalize quickly and comprehensively, when searching for the best entry strategies according to the market situation in the respective country. Once established in foreign markets, the born-again global firms are able to attract a more qualified and high-skilled workforce and developed a significant capability of learning from their new international partners. This leads to an improvement in their products and services, which in some cases result in a change in business model as well as in a different choice of target market. Due to their late, but fast internationalization process, the companies did not only achieve growth, but they also became more innovative, self-confident and sustainable.

1

INTRODUCTION Since the late 1980s an increasing number of new ventures with limited resources have been reported to be international from inception. These so-called “international new ventures” (Oviatt and McDougall 1994) or “born globals” (Rennie 1993) neither developed in incremental stages with respect to their international activities nor did they dispose of a large resource base. Instead, other factors such as the ownership of unique intangible assets or specific knowledge prevailed. They did not regard internationalization as a risky business but rather as their only chance to survive in this new environment. Nowadays, more and more small and medium-sized companies “leapfrog” (Moen and Servais 2002) into the international arena and therefore generate a substantial share of their revenues in foreign markets early in their corporate lives. Being a new observable phenomenon, contradicting existing internationalization theories such as the stages model, these born globals claimed a place of their own in the academic world. As a result, numerous researchers investigated the antecedents and outcomes of this internationalization pattern (Coviello and McAuley 1999) and new frameworks, models and theories attempting to explain this behavior were developed. Yet an increasing number of researchers have recently started to criticize the fact that only international new ventures were taken into account in research papers, thus neglecting one particular type of firms regarded as equally important by numerous authors and institutions [for example (Zahra and George 2002; European Commission 2003; Dimitratos and Jones 2005)]: mature domestically focused corporations with apparently no considerable motivation to go international during a long time in their lives, but which “suddenly” decide a strategic shift and consequently “embrace […] rapid and dedicated internationalization” (Bell, McNaughton et al. 2001, p.174). These firms are referred to as “reborn globals” (European Commission 2003) or “born-again global firms” (Bell, McNaughton et al. 2001) that seem to combine elements from both the traditional process theories and the born global model. In the beginning of international entrepreneurship (IE) research, most studies focused on the internationalization of new ventures. According to several authors [for example Young, Dimitratos, and Dana (2003), Zahra et al. (2002)], however, IE needs to expand its field beyond the early stages in the internationalization behavior of specific types of companies, namely high technology firms in global or rapidly internationalizing markets. We therefore posit that research emphasis should be placed on the internationalization activities of all firms irrespective of age, size or industry, including activities of established mature organizations that can be considered internationally entrepreneurial. This topic is of even higher relevance when looking at Switzerland. Swiss companies are generally very export-oriented: In the high-tech industry, 51.3 percent of the firms start exporting within three to four years after inception, and in the services industry it is a considerable 32.2 percent. Only 8.3 percent of all companies that have not yet exported think they will not take up any export activities in the coming two years (Arvanitis and Marmet 2001). Moreover it is important to know that small and medium-sized enterprises (SMEs) are the predominant type of firm as they account for 99.7 percent of private businesses, and 66.8 percent of all people in employment work in an SME (Habersaat, Schönenberger et al. 2001). The main objective of this paper is to build theory by examining the internationalization behavior of SMEs. In particular we want to shed light on the questions why mature domestically focused firms suddenly turn into born-again global firms, how they do so, what the consequences are in terms 2

of profitability and survival, and what necessary and sufficient elements are needed for sustainable born-again global firms. The article proceeds with a brief literature review and an outline of the research method and model we suggest, followed by a summary of the case study results. Finally, conclusions and implications are presented INTERNATIONALIZATION THEORIES Process Theory of Internationalization The process theory of internationalization, also referred to as the stages model of internationalization, is considered as one of the most influential theories explaining the internationalization of a firm. In this area of research, two schools of thought co-exist: The Uppsala model (U-model) and the innovation-related internationalization model (I-model), which views expansion into foreign markets as an innovation. The Uppsala model considers internationalization as a slow and incremental process whereby internationalizing firms pass through four distinctive stages, each level reflecting some higher involvement in the foreign country (Johanson and Wiedersheim-Paul 1975): 1. No regular export activities, 2. Export via independent representatives (agents), 3. Establishment of an overseas sales subsidiary, 4. Overseas production/manufacturing units. Based on these deliberations, (Johanson and Vahlne 1977) developed a model to describe and explain the internationalization process of the firm. They view internationalization as causal cycles where knowledge about foreign markets and market commitment (resources committed to foreign markets) are affected by the firm‟s current activities and commitment decisions. Central to the model is the importance of cumulative market knowledge. Firms are expected to make stronger resource commitments as they gain experience from their current business activities, which results in an increase in market knowledge. Additionally, due to the implied reduction of uncertainty and risk, firms gradually penetrate markets with increasing psychic distance (Knudsen and Madsen 2003). Psychic distance is defined as “the sum of factors, preventing the flow of information from and to the market”, for instance differences in “language, education, business practices, culture, and industrial development” (Johanson and Vahlne 1977). While the described dimensions are useful in analyzing the internationalization pattern of a company, the gradual evolvement is certainly not applicable to many companies as the international new venture theory has shown. This aspect is not the only flaw of the process models: Several authors have criticized them as they only focus on one single firm, neglecting the impact of networks [for example Coviello and Munro (1995)]. Born-again Global Firms According to Bell et al. (2001), there is growing evidence of a new phenomenon, that is the emergence of born-again global firms. They have been well established in their home markets with no intention of going international, but after a certain period of time they unexpectedly turn into rapidly and compre3

hensively expanding companies. With regard to theory, their behavior can be considered as a combination of the process theory and the INV theory. On the one hand, these companies are well-established in their country of origin, but on the other hand they internationalize with great speed, engage in foreign direct investment (FDI) very quickly and are prepared to take risks. Mature domestically focused companies may be influenced by specific events such as new opportunities in the international markets or unfavorable economic conditions in the home country and therefore undergo a strategic shift. Bell et al. conducted studies in several UK regions, Australia and New Zealand in order to find out more about the reasons and internationalization processes of these born-again global firms. The case firms had to be current exporters, employing less than 250 employees and be independent and indigenous. All in all, 60 companies were investigated, 16 of which fulfilled the criteria of a born-again global: they were predominantly “traditional” firms, that is a long time focused on the home market and then rapidly internationalized within 2-5 years of their first sales in a country other than their origin. Nearly two-thirds of them had export ratios of over 50 percent, one third between 20 percent and 49 percent, and only one case company had international sales of below 20 percent. Interestingly, with a number of the case companies, the dramatic change in strategy was triggered by a “combination of „critical incidents‟ and not just as a result of a single „episode‟” (Bell, McNaughton et al. 2001, p.180). The most common “episode” was a change in ownership and/or management, for example a management buy out, a takeover by another firm or by an administrator who then triggered the internationalization process. Another observation was that the focal firm had taken over another firm with international involvement, which was an encouragement to launch its existing products into new markets, too. Finally, client follower ship also provided a stimulus to venture abroad, which can be considered as a “critical incident” coming from a firm‟s network. On the one hand, it is possible that an existing domestic customer starts internationalizing and that the company then follows him into new markets. On the other hand, there is evidence that new clients that are already involved internationally enter the home market of a company and bring international business. Bell, McNaughton and Young claim that “the rationale behind the „born global‟ phenomenon need not only apply to start-up ventures” and that “‟born global‟ is not an organizational form per se” (Bell, McNaughton et al. 2001, p. 186). They rather consider it as a strategy to increase firm value, which can also be embarked on by using alternative organizational forms, though. Another finding is that internationalization is “not a linear, incremental, unidirectional path” (Bell, McNaughton et al. 2001, p. 186). Although mature firms have focused on the domestic market for many years, they can also start rapid and dedicated internationalization and do not necessarily adopt an ad hoc, reactive and opportunistic approach. In comparison to new ventures, their proceeding can be equally structured, proactive and flexible in terms of entry modes. Research Model The research model from Zahra et al. (2002) was used to investigate why, how, when and which consequences mature domestically focused companies would suddenly internationalize their operations. The model provides a useful framework for qualitative research as it covers many important aspects of firm internationalization, although the large number of interdependent variables leads to a considerable level of complexity. Second, its rather broad nature allows the researchers to expand the field of 4

international entrepreneurship and does not limit the research to the domain of start-ups. Finally, Zahra et al (2002) identify at least three promising research streams when their model is tested in practice: the international entrepreneurship process (“how, why, and when do entrepreneurial firms discover and exploit opportunities outside their home country?”), the context of international entrepreneurship (“what contextual factors influence the internationalization of entrepreneurial firms?”) and postinternationalization agenda (“what happens after internationalization?”). Thus, the framework aims at exploring the factors that are of interest to researchers in the area of born-again global firms. According to Zahra and George, prior research of international entrepreneurship has generally concentrated on the three dimensions extent/degree, speed and scope of internationalization. Based on their process-related definition, they developed a comprehensive framework linking inputs and determinants of internationalization with outputs. Therefore it connects both internal and external factors with the firm‟s strategy and combines traditional international business theories [(Hymer 1976; Dunning 1988), Global Strategy (Hitt, Hoskisson et al. 1997), Strategic Management (Grant 1996) and Entrepreneurship (Kirzner 1973 )]. Antecedents: The integrated model states that the environmental, organizational and strategic factors affect the extent, speed and scope of a corporation‟s internationalization process and its ability to create competitive advantage. Determinants: The international entrepreneurship framework analyses the internationalization process of a company in several dimensions, namely extent, scope and speed. The first dimension indicates the amount of international sales as a percentage of firm sales (export ratio), the second reflects the number of markets covered or value chain activities operated abroad, and the third counts the number of years elapsed between the establishment of the firm and its first foreign sales. Outcomes: Obviously, much attention is drawn to the question whether international activities do have a positive impact on firm performance. (Schueffel and Baldegger 2008) found evidence that rapidly expanding companies attach more importance to value creation than to long-term profitability. Nevertheless, the results provided by past empirical studies have remained inconclusive concerning the link between international entrepreneurship and performance. Whereas Bloodgood, Sapienza, and Almeida (1996) proved a positive and marginally significant correlation, others reported a negative (Collins 1990) or even a non-existing relationship between international entrepreneurship and firm income (McDougall and Oviatt 1996). Context: Context variables are “those conditions that make internationalization more attractive or lucrative than solely domestic operations” (Zahra and George 2002, p. 27). Environmental as well as strategic factors are supposed to have a moderating effect on the relationship between antecedents and international entrepreneurship. RESEARCH METHODOLOGY Our exploratory study, whose methods are described below, has the objective of gathering suitable qualitative data in order to conduct an initial investigation in this direction. Therefore, our approach is inductive (generating hypothesis) rather than deductive (testing hypothesis). The theory, being fragmented and affected by the absence of a common frame, we chose to resort to qualitative methodology in the development of concepts and hypothesis (Eisenhardt 1989; 5

Yin 2003). Our sample should serve to identify companies whose internationalization behaviour is as close as possible to the process model of internationalization. That is why, for a company to be chosen, it must (1) be based in Switzerland and its owner must be Swiss, (2) be a family firm with no intention of entering the stock market (3) originally be a company comprising low-level technology, (4) employing fewer that 250 workers prior to internationalization (see European Commission, 2003), (5) displaying an export ratio of more than 20 percent, (6) been active on the domestic market at least 5 years before entering foreign markets and which (7), while developing their core products and services were active in at least one foreign country. These criteria allowed us to control the variability related to the size of the enterprise, the sector of activity, the ownership and place of operation; they should improve the external validity of our results. 21 of the enterprises matched all of the criteria.

Table 1: Sample of enterprises

Case

Founding Year

Activity/Product

Number of Turnover Employees before before Number of Internatio- Turnover in Internationalisa Employees in nalisation 2005 tion 2005

A

1936

water-miscible cutting fluids, cutting oils and forming oils

B

1975

garden design/landscape architecture

1904

• stainless steel hardware (stranded wire, wire ropes etc.) ▪ stainless steel components for facade greening ▪ webnet solutions

6 Mio.

D

1918

▪ water-resistant, synthetic adhesives ▪ elastomeric sealants

E

1958

F

C

G

10 Mio.

160 Mio.

Number of Employees in Foreign Operations in 2005

60

400

180

64

100

1

21 Mio.

30

72

12

9 Mio.

26 Mio.

35

75

0

production and supply of honey, dried fruit, nuts and herbal products

29 Mio.

50 Mio.

70

89

5

1878

production of high-quality handtools (screwdrivers, striking tools etc.)

2.5 Mio.

25 Mio.

70

120

0

1859

▪ card manufacturer (debit/credit/loyalty cards etc.) ▪ national identification documents ▪ securities

25 Mio.

120 Mio.

120

400

200

The information was obtained by interviewing the CEO as well as a second person who had been involved in the planning and/or implementation of internationalization. Other sources, publications (press articles, company brochures, internet), were used in order to prepare for the interviews and acquire information about the previous five years. This was necessary because constraints of time meant that longitudinal research was not possible. After the interview stage and initial evaluation, a workshop was organized for the companies which participated in the research; the aims of which were to encourage exchange of experiences connected with internationalization and future business. In order to improve conceptual validity, we conducted in-depth, semi-structured interviews. The aim of this process was to encourage the interviewees to voice any ideas which we had not considered at the beginning (Yin 2003) .By using only one moderator, a standard number of questions and put in the same order the reliability of the evaluation was assured. The interviews lasted, on average, 90 minutes and were recorded. The audio tapes were transcribed and the transcripts were reviewed by the persons questioned to ensure that the contents corresponded to their original intentions. The interviews for cases A, B, D and F were conducted in German, case C was in English and cases E and G were in French. The content of the transcripts was analysed in order to identify common themes. In order, 6

once more, to improve the validity of this analysis these were cross-checked with secondary sources obtained relative to the enterprises. The IE framework described above served as a basis and guideline for the interviews that were conducted in a semi-structured way. Despite the use of a questionnaire the interviews were as open and flexible as possible. The studied case companies, their main activities/products are briefly presented in Table 1. Furthermore Table 1 provides an overview of the most important demographics of the case study firms. RESULTS Organizational Factors When analyzing the organizational factors of the case companies before they launched their internationalization process, it is particularly interesting to examine the top management team (TMT) characteristics with regard to education abroad, previous experience in a multinational company and professional experience in foreign markets. With the exception of company E, which started international activities already in 1958, all the companies were internationally-oriented in some way. Interestingly, the first step into international markets took place shortly after a change of the CEO, on average within less than four years. Again, this was not the case with E or with D, which had already gone abroad four years before the current CEO took his position. Table 2: Top Management Team Characteristics before Internationalization

Company

Professional Experience abroad

Internationallyoriented Company

Education abroad

A

No

No

Yes

B

Yes

No

Yes

C

Yes

No

No

D

Yes

No

Yes

E

Yes

Yes

No

F

No

No

No

G

Yes

Yes

Yes

Regarding the firms‟ unique assets, process know-how and product knowledge generally seemed to play a more important role than networks, for instance, as all case companies had a strong focus on research and development although they were not technology-based. Obviously, they were able to build up networks through internationalization and not inversely, like many researchers claim [for example Oviatt et al. (1995)]. Only the company C profited to a great extent from the close cooperation with a big partner that significantly influenced its drive to internationalize quickly and comprehensively. The other firms, however, either adopted a reactive or a proactive approach to internationalization without disposing of noteworthy contacts or networks beforehand.

7

Environmental Factors The geographical expansion of the seven case firms is generally very extensive. Interestingly, all of them are active in Europe and Asia. Eastern Europe is more important a market than North America: 86 percent of the interviewed companies export to the former destinations while only 71 percent are active in the latter one. Strategic Factors The companies handle most of their international operations either themselves or, particularly sales, with a foreign partner. Due to the lack of resources in Switzerland, all the companies are compelled to establish reliable raw materials procurement in foreign markets. Only company G has set up an international R&D department; five companies, however, have so far set up part of their firm infrastructure, for example general management, planning management, legal, finance, accounting quality management etc., in international markets. Therefore they are not deterred from giving up part of the responsibility in Switzerland but continue doing research in their home country mainly because of the know-how that has been built up there over years. Interestingly, none of the companies is prepared to outsource its human resource management, which is uniquely controlled from the headquarters in Switzerland. As for primary activities, all the firms have built up a vast distribution network abroad with the help of which they sell their products. The four companies that dispose of production facilities abroad obviously handle their inbound logistics, operations and outbound logistics in the respective markets as well. International after-sales service is delivered by four companies; the others organize this activity from their headquarters in Switzerland. With the exception of F and D, all the companies have hired at least one employee in foreign operations, with G exhibiting the highest percentage of 50 percent. Case D used to have a subsidiary in Germany as well but closed it only three years after establishment. On average, 16.9 percent of all staff was on the payroll outside Switzerland in 2005. All the interviewed companies have shown a remarkable development since the first step into foreign markets by adapting their business practices or models, for instance. They managed to acquire great knowledge and built up the ability to internalize, create and transfer know-how into new markets, which is the crucial component in sustaining competitive advantage (Pinch, Henry et al. 2003). In most cases, the firms can be said to have developed new sets of skills or competences as well as constructing new goals, values or even systems. Competitive Advantage There is no doubt that all companies have profited from their international activities so far, both in terms of financial and particularly non-financial outcomes. Therefore, all the firms reported a positive relationship between international entrepreneurship and profits. Obviously, their export ratio and turnover increased tremendously through internationalization. Yet margins have not risen considerably due to internationalization.

8

Table 4 Increase in Turnover since Internationalization

Company

Turnover before Increase in Turnover Turnover in 2005 Increase in TurnInternationalisation since Internationaliin Mio. over per Year2 in Mio. sation1

A

10

160

1500.00 percent

7.81 percent

B

5

15

200.00 percent

12.25 percent

C

6

21

250.00 percent

6.30 percent

D

9

26

188.89 percent

2.28 percent

E

29

50

72.41 percent

3.95 percent

F

2.5

25

900.00 percent

4.49 percent

G

25

120

380.00 percent

21.01 percent

Environmental Factors When investigating the context variables influencing the internationalization pattern of the case companies, the limited growth of the domestic market together with increasing competition clearly was a crucial factor to most of the companies. Consequently, owners saw internationalization as a viable or the only way for sustainable development of the family business. Surprisingly, only three companies have taken advice from the Osec, the Swiss export promotion agency, whereas a larger number, that is five firms, approached external business consultants or ambassadors. It does not come as a surprise that every company pursued a differentiation strategy on the corporate level, therefore seeking to be unique in its industry without completely ignoring its cost position, obviously. In all the cases, the focus before internationalization was very much on the quality of the products and on efficient production processes, hence the high significance of research and development. Some companies stated that they undoubtedly had a certain market blindness or myopia of learning before venturing abroad. As already mentioned, networks and alliances initially did not play a prominent role because the companies rather searched for opportunities themselves and without external support. As far the integration of foreign operations is concerned it is reported that more than 70 percent now have set up subsidiaries abroad. All the companies except for F are very flexible in terms of entry modes and choose a strategy according to their goals and the market share they want to gain in the respective country. As for export, most companies have commissioned agents to represent them in foreign markets, which seems to be an ideal solution to all of them except for company G.

1 2

Turnover 2005/ Turnover Before -1

(Increase in Turnover) 1/n - 1 n = internationally active for n years

9

INTERNATIONALIZATION THEORIES REVISITED The Suitability of the Process Theory of Internationalization The case companies clearly satisfy the first criteria of the Uppsala model stating that internationalizing firms do not have any regular export activities initially. Indeed, the firms were all uniquely active on the Swiss market for at least 25 years before venturing abroad. However, the assertion that four distinctive stages are passed afterwards does not hold true for all of them, especially not for the companies that started internationalizing later than the others in the sample, that is G, B and C. They established production facilities or overseas representative offices within less than 5 years after their strategic change and saw very fast growth of their export ratios. However, the internationalization patterns of the other case companies cannot be referred to as a stepwise and reactive process either, as the process model suggests. Except for E, all the companies were in active search of opportunities in foreign markets from the very beginning and did not merely respond to customer enquiries. What is more, none of the companies avoided markets with great psychic distance, on the contrary: Even the corporations that launched the internationalization process a long time ago entered very distant markets within a short period of time, that is within four years since the strategic change. Evidently, the internationalization behavior of the studied case companies cannot be fully explained and described by the process theory on account of their rather rapid and committed internationalization. Neither did the firms accumulate a great amount of knowledge before venturing into countries with a considerate psychic distance nor did they only enter a very small number of new markets in the first five years. The only company whose behavior is quite process-oriented is F because it has never had any other market entry strategy than export, but it ventured into markets with immense cultural distance from the very beginning and is now active in 51 countries around the globe. The Suitability of the Hybrid Theory: Born-again Global Firms As proposed by Bell et al. (2001), born-again global firms can be regarded as a combination of the process theory and the INV theory, incorporating elements from both approaches. Hence, this approach will be used to investigate its suitability for interpreting the findings from the empirical research. As the firm-specific variables of the case companies show, these firms are at least 31 years old, the youngest and also the last to go international being B. All of them have been active on the Swiss market for a minimum of 25 years before venturing abroad. The reasons for this step differ from the critical incidents indicated by Bell et al. (2001), which might be related to market-specific factors: Bell conducted his research in either bigger (UK regions and Australia) or more isolated (New Zealand) markets that present different challenges to Switzerland with its small, but exposed (that is in the centre of Europe) home market. Obviously, one of the main reasons for the case companies to internationalize was the small domestic market along with a changing demographical environment and increasing competition. Initially, everybody was aware that the company‟s survival and long-term profitability would be difficult to guarantee in these circumstances. However, the expansion did not only 10

take place due to the impact of these push-factors, which can be considered as “hard facts” that stem from the external environment. Almost all the companies had other motives or “soft factors” that exerted considerable influence, such as a certain proclivity to take risks, entrepreneurial thinking, professional experience and also curiosity that pulled them into remote international markets. It is certainly not a coincidence that in five cases the internationalization process was launched shortly after a generational change. The new owner arrived with international experience, new ideas for developing innovative products or services and probably also a broader mind. Rather than merely adopting an opportunistic approach towards internationalization and regarding it as the only means for sustainable development, they also had personal ambitions and were prepared to seize opportunities rather than being afraid of taking risks. As Bell et al. stated the case companies proved that internationalization is on no account a linear and stepwise process. Despite their already well-implemented and established structures, strategies and cultures, they were able to tackle internationalization in a similar way than born globals with regard to their flexibility and aptitude to operate wherever they see fit. Furthermore, by analyzing the case companies, it became evident that traditional corporations are more people-driven compared to the knowledge-intensive born globals indeed, as Bell et al. (2001, p. 186) suggested. As explained before, the entrepreneurs and their motivation to conquer international markets played a more important role than the ambition to spread pre-emptive technologies and to be first to sell a unique product or service abroad. They found other ways to build up comparative advantages and to succeed on the global market which will be discussed in more detail below. Table 5 (see appendix) synthesizes the main factors regarding internationalization for 1. traditional firms expanding in stages 2. born globals, and 3. born-again global firms. Entrepreneurship in this context corresponds to “a company‟s formal and informal activities aimed at increasing innovation and venturing. […] Venturing defines a company‟s strategic territory (business scope), whereas innovation makes the pursuit of opportunities within given markets possible and profitable” (Zahra, Hayton et al. 2001,p. 4 & 6). Most international companies have the capability of leveraging these innovations across borders by adjusting their products to local cultures and market conditions. The case companies, too, developed a unique ability to combine their product know-how and experience with fundamentally new knowledge, which allowed them to exploit new opportunities arising from internationalization. March (1991) makes a clear distinction between the so-called exploitative (learning new things by using existing knowledge) and exploratory learning (gaining radically new know-how), which is particularly important to the development of sustainable entrepreneurship (Guth and Ginsberg 1990). By integrating their knowledge, the case companies were able to build new skills that again paved the way to enter new potential markets outside their business scope. This ongoing cycle can be illustrated by the development of C. Before venturing abroad, this firm produced and sold wire ropes in quite a narrow market with their main clients being mountain railways, agriculture and forestry. In the late 1980s, the company started to enter a new industry when it discovered the need of architects for wire ropes. Due to the launch of the internationalization process in 1991, new skills could be acquired mainly through project management and the cooperation with other companies (mainly Carl Stahl), which introduced C into new techniques and wire applications, that is the so-called “webnet”. Nowadays the firm is a valuable and highly regarded partner in big projects such as the construction of the airport in Bangkok. With every new assignment C has to adapt

11

to different conditions, therefore learns and enlarges its expertise that helps develop more sophisticated products for their current as well as for new markets. This example shows what tremendous impact internationalization has on the ability to build core competences. Obviously, each of the case companies has its own distinct way of gaining knowledge and being innovative, but the above described cycle remains the very same one for all of them. Another common feature is the shift from the product view to a more holistic approach to satisfying the customers‟ need, that is by project management and tailor-made services. It is also important to emphasize the fact that although the companies come from diverse backgrounds and internationalized in different decades, their behavior regarding the development of core competences was surprisingly similar. CONCLUSION AND CONTRIBUTIONS To date IE has focused on the activities of small and newly-established organizations, largely neglecting the behavior of bigger and established firms in traditional sectors (Dimitratos and Jones 2005). This study has shown that established companies can exhibit the same “innovative, proactive and riskseeking behavior” (McDougall and Oviatt 2000) across borders as new ventures. Despite their very well-rooted structures, strategies and cultures, they can flexibly adapt to their new environment. They are prepared to explore areas outside their current business in order to find new sources of external competence and innovation. All survey companies have found ways of learning from their customers, suppliers, competitors, new employees or other market players and of developing important skills as capabilities. Furthermore, they have integrated several aspects of different internationalization strategies, mainly the process theory and the born global concept, to form their own unique approach to internationalization. Thus, this study shows that research into IE should not merely focus on born globals but rather take into account also the international activities of well-established firms regardless of age, size or industrial sectors. Only by doing this a comprehensive view on this research area can be gained. Two main reasons why the case companies turned into born-again global firms after many years of activities in Switzerland were identified: Firstly, the external environment, especially the small home market, pushed them into international markets and secondly, a committed entrepreneur who was in active search of new opportunities was a pull factor. As theoretically hypothesized by Jones and Coviello (2005) and their dynamic process of innovation in internationalization behavior, these engaged entrepreneurs particularly took advantage of unexpected occurrences and changes in customers‟ expectations. Their internationalization path was never exactly planned and the whole process was not a clear strategic procedure but a rather ad-hoc and opportunistic and trial and error approach. Therefore, markets as well as entry modes have not been chosen after extensive market research but rather following an intuition or sometimes even based on coincidences. Regarding profitability and survival, it is essential to know that internationalization did not necessarily bring about an increase in margins. Rather did the growth in turnover and cash flow allow the companies to make new investments that would not have been possible otherwise. Most companies are convinced that they would not have a promising outlook in the increasingly globalized and competitive markets without internationalization. Yet all in all, the results of this study have provided evidence that there is a close link between IE and innovation. The focus on the outside-in process of in12

novation (Gassmann and Enkel 2006), that is the enrichment of a company‟s knowledge base via the integration of new (international) partners, clearly fostered the firms‟ innovativeness. As a result, one important implication for practitioners is that the future for a company seeking to be highly innovative lies in markets outside Switzerland. Several examples, also among the case companies, show that internationalization is manageable for small and medium companies, too, despite their limited resources. For a born-again global firm to be sustainable, it has to be prepared and willing to undergo essential changes and find a new fit between corporate structure, strategy and mainly culture. The more informal and flexible the structure of the company was before internationalization, the more rapid and dedicated the process seemed to be. Some companies like C and B did not even dispose of an organization chart and meetings, for instance, did not take place on a regular base. Internationalization forced them to become more process-oriented and to shift away from their very pronounced product view. Before initiating the internationalization process, the companies regarded their products rather as a physical entity with a precise specification, but now they offer their clients a far broader and, if necessary, tailor-made concept with a comprehensive support service. As far as networks are concerned, however, they do not play such a predominant role as with born globals: They do not necessarily have to exist already before internationalization but are rather built up during the expansion when they become crucial. Obviously, contacts have to be established and partners also need to be found before venturing abroad, but they are loose connections rather than networks. The main challenge is that companies have to adapt quite quickly in line with the international expansion and that the ability to learn faster than competitors is a crucial factor in an international environment. It is important for employees to be involved in this process from the very beginning and especially to be informed and integrated in order to avoid tensions. Many of the case companies, for instance, soon started to offer their staff language courses and to invite their main international business partners so that their employees make their acquaintance, too. Therefore it is recommendable for a company starting to internationalize that employees be in direct contact with foreign customers in order to increase both their knowledge and appreciation of the new situation. Initially, the fluctuation rate of the case companies tended to go up: On the one hand because certain employees were neither prepared nor able to work in the new, certainly more challenging environment and on the other hand due to the fact that an internationally-active company is inclined to attract new high-skilled and specialized workforce. As for structures, most companies had a rather informal and functional structure before venturing abroad. As a conclusion, the openness to learn from other markets and the flexibility to modify the products according to the needs of the client ensures the competitiveness of born-again global firms. They are innovative in adapting to changes, which makes it easier to launch their products in new markets. The driving force for a born-again global firm seems to be the personality of the owner who initiated the major change and who is never afraid of trying something different. LIMITATIONS AND FUTURE RESEARCH DIRECTIONS It is important to note several limitations to this study. First, the sample was drawn across a variety of industries, which indicates that industry-specific conditions could not be taken into account. Future research might provide further insight whether industry-specific characteristics have a strong impact on internationalization behavior of established companies. Second, researchers building theory from 13

cases might on the one hand run the risk of generalizing too much due to the complexity of the topic and overlook or neglect certain specific characteristic of companies. On the other hand, the wealth of information obtained from the interviews as well as other sources is tremendous and entices investigators into being overly detailed and complex when synthesizing the research data. Finding the balance between these two extremes is a difficult problem to tackle in the process of case study research. Some possible directions for further research have emerged. Most importantly, a quantitative study needs to be conducted. It is recommendable that the sample be drawn from as large a database as possible covering a wide range of different industries in various regions of Switzerland (Schueffel, Baldegger et al. 2007). Another possible direction is the comparison between rapidly internationalizing established companies and purely domestic firms that have no intention of taking up export activities. The aim would be to examine whether their approach to innovation, their structures, strategies and cultures differ to a great extent from internationally-active companies. For upcoming research it would be worthwhile to carefully examine a potential relationship between internationalization behavior and the innovativeness of a firm. It could also be of interest to know whether the behavior of born-again global firms in Switzerland differ from other countries.

14

Figure 1 An Integrated Model of International Entrepreneurship (Zahra and George, 2002, 50) Environmental factors Competitive forces Growth opportunities National culture Industry profitability Institutional environment Economies of scale Organisational factors

IE

Competitive advantage

Management team characteristics Firm resources Firm variables

Extent speed Scope

Financial outcomes Non-financial outcomes

Strategic factors Competencies Differentials / Proximity Generic strategies Entry strategy

Table 3 Extent, Scope and Speed of Internationalization of the Case Companies

Company A B C D E F G

Average InternationallyGrowth per Export Ratio active for n Years Year (Export Ratio)3 80 percent 32 1.65 percent 20 percent 6 3.09 percent 50 percent 15 2.74 percent 70 percent 28 1.91 percent 25 percent 14 1.61 percent 64 percent 50 0.99 percent 50 percent 7 5.96 percent

3

(Export Ratio) 1/n - 1 n = internationally-active for n years

4

Number of countries/n

Number of Export Markets

Speed4

44 7 45 21 20 51 16

1.22 1.17 3.00 0.75 1.43 1.02 2.29

n = internationally-active for n years

15

Table 5 Internationalization Profiles traditional firms, Born Globals and Born-again Global Firms [Bell et al. (2001) and Interviews]

Motivation to internationalize

Traditional Firms

Born Globals

Born-again Global Firms

Reactive

Proactive

Mainly proactive

Adverse home market conditions

Global niche markets

Adverse home market conditions

Reluctant management "Force" export initiation

International objectives

(size of market) Committed management

Committed management

Active search

Mainly active search

Firm's survival

Competitive advantage

Competitive advantage

Increasing sales volume

First mover advantage

Firm's survival

Incremental

Concurrent

Two distinct phases (domes-

Domestic expansion first

Simultaneous domestic and export

tic/international)

International expansion patterns

expansion Less sophisticated markets tar-

Focus on lead markets

geted

Pace

Domestic expansion first

Focus on opportunities, regardless the markets

Limited evidence of networks

Strong evidence of networks

(Moderate) Evidence of networks

Gradual

Rapid penetration of global niches

Rapid penetration of global markets

Speedy internationalization

Rather speedy internationalization

Many markets at once

Several markets at once

Flexible

Flexible

Slow internationalization

Single market at a time

Method of distribution/ entry modes

Conventional

Integration with client's channels Use of licensing, joint ventures Use of agents/distributors

Ad-hoc and opportunistic

International strat- Reactive behavior to export egies opportunities

16

Use of various entry strategies

Structured

Mix of ad-hoc (initially) and structured (now)

Planned approach to international

Trial and error approach to interna-

expansion

tional expansion

References Arvanitis, S. and D. Marmet (2001). Unternehmensgründungen in der schweizerischen Wirtschaft. Strukturberichterstattung. SECO. Bern, Staatssekretariat für Wirtschaft Bell, J., R. McNaughton, et al. (2001). "Born-Again Global Firms: An extension to the born global phenomenon." Journal of International Management 7(3): 173-190. Bloodgood, J. M., H. J. Sapienza, et al. (1996). "The internationalization of new high-potential U.S. ventures:antecedents and outcomes." Entrepreneurship Theory and Practice 20(4): 61-76. Collins, J. M. (1990). "A market performance comparison of U.S. firms active in domestic, developed and developing countries." Journal of International Business Studies 21(2): 17. Coviello, N. E. and A. McAuley (1999). "Internationalisation and the smaller firm: A review of contemporary empirical research." Management International Review. 39(3): 353-356. Coviello, N. E. and H. J. Munro (1995). "Growing the entrepreneurial firm: networking for international market development." European Journal of Marketing 29(7): 49-61. Dimitratos, P. and M. V. Jones (2005). "Future directions for international entrepreneurship research." International Business Review 14(2): 12. Dunning, J. H. (1988). "The eclectic paradigm of international production: A restatement and some possible extensions." Journal of International Business Studies 19(1): 1-31. Eisenhardt, K. M. (1989). "Building theories from case study research." Academy of Management Review 14(4): 532-550. European Commission (2003). Internationalisation of SMEs. Observatory of European SMEs. EU. Gassmann, O. and E. Enkel (2006). "Open Innovation: Externe Hebeleffekte in der Innovation erzielen." Zeitschrift Führung + Organisation 3(Juni): 132-138. Grant, R. M. (1996). "Toward a knowledge-based theory of the firm." Strategic Management Journal 17(Special Issue): 109-122. Guth, W. D. and A. Ginsberg (1990). "Guest Editors' Introduction: Corporate entrepreneurship." Strategic Management Journal 11: 5-15. Habersaat, M., A. Schönenberger, et al. (2001). "Die KMU in der Schweiz und in Europa." seco Publikation. Standortförderung, 3.(3): 75. Hitt, M. A., R. E. Hoskisson, et al. (1997). "International diversification: Effects on innovation and firm performance in product-diversified firms." Academy of Management Journal 40(4): 767-798. Hymer, S. H. (1976). International Operations of National Firms : A Study of Direct Foreign Investment. Cambridge, MA, The MIT Press. Johanson, J. and J.-E. Vahlne (1977). "The internationalization process of the firm - A model of knowledge development and increasing foreign market commitments." Journal of International Business Studies 8(1): 23-33. Johanson, J. and F. Wiedersheim-Paul (1975). "The internationalization of the firm - Four Swedish cases." Journal of Management Studies 12(3): 305-322. Jones, M. V. and N. E. Coviello (2005). "Internationalisation: Conceptualising an entrepreneurial process of behaviour in time." Journal of international Business Studies 36: 284-303. Kirzner, I. M. (1973 ). Competition and Entrepreneurship. Chicago, University of Chicago Press. Knudsen, T. and T. K. Madsen (2003). International new ventures: an empirical analysis of some basic charactersitics. Working Paper Draft, University of Southern Denmark. March, J. G. (1991). "Exploration and exploitation in organizational learning." Organization Science 2. McDougall, P. and B. M. Oviatt (1996). "New venture internationalization, strategic change, and performance: A follow-up study." Journal of Business Venturing 11(1): 23-40. McDougall, P. and B. M. Oviatt (2000). "International entrepreneurship: The intersection of two research paths." Academy of Management Journal 43(5). Moen, Ø. and P. Servais (2002). "Born global or gradual global? Examining the export behavior of small and medium-sized enterprises." Journal of International Marketing 10(3): 49-72. Oviatt, B. M. and P. P. McDougall (1994). "Toward a theory of new international ventures." Journal of International Business Studies 25(1): 45-64. Oviatt, B. M. and P. P. McDougall (1995). "Global start-ups: Entrepreneurs on a worldwide stage." Academy of Management Executive 9(2): 30-43. 17

Pinch, S., N. Henry, et al. (2003). "From „industrial districts‟ to „knowledge clusters‟: a model of knowledge dissemination and competitive advantage in industrial agglomerations " Journal of Economic Geography 3(4): 373-388. Rennie, M. W. (1993). "Global competitiveness: Born global." The McKinsey Quarterly(4): 45-52. Schueffel, P. and R. Baldegger (2008). The Process Model of Internationalization and the International New Venture Framework. Fribourg, Growth Publisher. Schueffel, P., R. Baldegger, et al. (2007). Le comportement d'internationalisation des PME suisses: Born global et internationalisation progressive. Congrès International en Entrepreneuriat et PME Fribourg, l'Association Internationale de Recherche en Entrepreneuriat et PME. Yin, R. K. (2003). Case Study Research: Design and Methods. Newbury Park, Sage Publications. Young, S., P. Dimitratos, et al. (2003). "International entrepreneurship research: What scope for international business theories?" Journal of International Entrepreneurship 1(1): 31-42. Zahra, S. A. and G. George (2002). International Entrepreneurship: The current status of the field and future research agenda. Strategic Entrepreneurship: Creating a new mindset. M. A. Hitt, D. R. Ireland, D. L. Sexton and M. Camp. Oxford, Blackwell Publishing: 255-282. Zahra, S. A., J. Hayton, et al. (2001). "Fostering entrepreneurship during international expansion: Managing key challenges " European Management Journal 19(4): 359-369.

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Innovationskontext und -logik in zwei Kleinunternehmen – eine qualitative Analyse (Innovation context and logic in two SMEs – a qualitative analysis)

Hermann Frank (WU Wien) – Manfred Lueger (WU Wien) – Christian Korunka (Universität Wien)

Abstract The first section of this paper gives an overview over innovation promotion programs in Austria. The second part analyzes in two qualitative case studies specific innovation strategies. Based on the RENT model (Mazzarol und Reboud 2005) both companies can be described as “champions”. The case studies are based on qualitative interviews and interpretive analyses. A comparative analysis shows similarities in innovation dynamics, as both companies combine employees’ creativity with economic and social market developments. In the fist case a high product/service specialization is observable, whereas in the second case a “trend scout” function is utilized to maintain the innovation dynamics.

Einleitung und Zielsetzung Um das Innovationsverhalten von Unternehmen zu verstehen, bedarf es der Berücksichtigung des äußeren und inneren Kontexts. Einen Einflussfaktor stellt auch die Innovation dar, wobei es nicht nur um den Innovationsgrad geht, sondern auch um ökonomische Erwartungen. Eine Innovationsdiagnose, welche diese berücksichtigt, muss neben dem Kontext vor allem die Lebensdauer, das Volumen und Gewinnpotenzial der Innovation einschätzen. Mazzarol und Reboud (2005) stellen unter Berücksichtigung dieser drei Variablen das „RENT-Modell“ vor, das die zukünftigen Ertragserwartungen durch eine multiplikative Verknüpfung dieser Variablen errechnet. Zugleich bieten sie eine Typologie, bei der die Variablen mit unterschiedlichen Ausprägungen zu Extremtypen („RENT-configurations“) verdichtet werden: Shrimp, Gadget, Lark Mirror, Joker, Oasis und Champion. Die Konfiguration des Champion weist in allen Dimensionen (Lebensdauer, Volumen, Gewinnspanne) hohe Ausprägungen auf. Zugleich sind damit hohe Anforderungen verbunden, z.B. an die Ressourcenverfügbarkeit. Aus diesem Grund wird das RENT-Modell mit einem „Innovation Diagnostic Diamond“ verknüpft, der eine Einschätzung der externen und internen Kontextbedingungen ermöglicht. Er besteht aus dem Marktindex (Kundenfokus und Kundennutzen der Innovation), Innovationsindex (Management des Innovationsprozesses und von intellectual property), Ressourcenindex (technologische, finanzielle, sowie Management- und Humanressourcen) und Strategieindex (strategische Planung in Bezug auf die kommerzielle Verwertung der Innovation) besteht und grafisch in Form eines Diamanten veranschaulicht werden kann, wobei beide Modelle (RENT-Modell und Innovation Diagnostic Diamond für kleinere Unternehmen entwickelt wurden (CEMI-CEREN 2006)). Ziel des Beitrags ist es, die spezifische Logik des Innovierens unter Berücksichtigung der inneren und äußeren Kontextfaktoren anhand von zwei Fallstudien zu rekonstruieren. Beide Fälle sind dem Typus des Champions zuzuordnen; zugleich weisen sie in Bezug auf den Innovation Diagnostic Diamond überdurchschnittlich gute Werte auf. Zunächst wird daher ein äußerer Kontextfaktor (Förderangebote) beschrieben. Vor der Präsentation der Ergebnisse wird die Methodik skizziert. Die Fallanalysen stellen die Kontextfaktoren in den Mittelpunkt. Abschließen werden die Ergebnisse der Fallanalysen vergleichend analysiert. 1

Innovationsförderung in Österreich Die Unternehmenslandschaft in Österreich ist geprägt durch eine Vielfalt an KMUs, die einen wesentlichen Beitrag zur Innovationsleistung erbringen. Für den Zeitraum von 2002 bis 2004 gaben 48 % der Kleinbetriebe (10 - 49 Beschäftigte) an, Innovationen durchgeführt zu haben (Statistik Austria, 2006). Um die Konkurrenzfähigkeit der österreichischen Wirtschaft zu stärken, wurde im Jahr 2000 beschlossen, dass ab 2001 der Bund eine Finanzierung von entsprechenden Maßnahmen nur dann übernimmt, wenn die Initiativen und Projektanträge in die mittelfristigen Strategien und internationalen Entwicklungen eingebettet sind, mit Business-Plänen untermauert und entsprechend genehmigt wurden. In der Folge wurden das Forschungsorganisationsgesetz und das Forschungs- und Technologieförderungsgesetz den Entwicklungen angepasst. Gemäß § 11 des Forschungs- und Technologieförderungsgesetzes können Förderungen insbesondere durch zinsbegünstigte Gelddarlehen, Annuitäten-, Zinsen- und Kreditzuschüsse sowie durch sonstige Geldzuwendungen gewährt werden. Förderprogramme können eine Reihe von finanziellen Risiken entschärfen: Das ist besonders für Kleinunternehmen wichtig. Betrachtet man die in Österreich bestehenden Förderprogramme, setzen diese an verschiedenen Stellen des Innovationsprozesses an. Drei Einrichtungen sind von zentraler Bedeutung:  Der Fonds zur Förderung der Wissenschaftlichen Forschung (FWF): Dieser fokussiert die Forschungskomponente von Innovation und fördert vorrangig Forschungskompetenz unabhängig von ihrer wirtschaftlichen Verwertbarkeit. Von den 44 in den Jahren 2001 bis 2006 genehmigten Anträgen betrafen 36 Mikro- oder Kleinunternehmen.  Österreichische Forschungsförderungsgesellschaft (FFG): Zu ihren Agenden zählen die Förderung von Forschung, Technologie und Innovation sowie das Management von kooperativen Förderprogrammen der EU und auf nationaler Ebene die Unterstützung und Strategievorbereitung für die zuständigen Entscheidungsträger. Drei Programmbereiche sind zu nennen: Basisprogramme, Protec Förderinitiativen und Cooperation in Innovation and Research with Central and Eastern Europe (CIR-CE).  Austria Wirtschaftsservice GmbH (AWS): Sie unterstützt Innovationsprojekte und Infrastrukturprogramme. Bevorzugt werden junge KMUs gefördert. Dafür gibt es eine Vielfalt von Programmen, wie etwa PreSeed- und Seedfinanzierung, High-Tech Double Equity und das Programm Unternehmensdynamik

Fallstudien zur Analyse von Innovationsstrategien Generell lassen sich zwei weitgehend unterschiedliche Innovationsmodelle darstellen: Lineare Modelle und Modelle, die sich durch vielfältige Feedbackschleifen auszeichnen, welche die sequentielle Abfolge des linearen Innovationsmodells durchbrechen. Insofern stellt sich für die empirische Praxis die Frage, wie man den Innovationsprozess untersuchen kann, um dieser Nichtlinearität Rechnung zu tragen. Im Zentrum einer derartigen Analyse steht das Verständnis jener Regeln und Kräfte, die Innovationsprozesse charakterisieren: Diese umfassen Veränderungen, die sich im Zusammenhang mit Innovationen auf die zentrale Operationsweise eines Systems beziehen, von längerfristiger Wirksamkeit sind und als Komplex aufeinanderbezogener Veränderungen verstanden werden. Die Analyse fokussiert drei zentrale Komponenten (z.B. Frank und Lueger (1997)):

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 Entwicklungsobjekt: Die Komplexität betrieblicher Handlungsstrategien macht es notwendig, die Mehrdimensionalität organisationaler Prozesse zu berücksichtigen. Drei Komponenten spielen eine Schlüsselrolle: (a) Die sachlich-instrumentelle Dimension (Gestaltung technisch-ökonomischer Effizienz und Effektivität), (b) Die politisch-soziale Dimension (Beziehungen, Kooperationserfordernisse und Aushandlungsprozesse), (c) Die kulturell-reflexive Dimension (Normen und Werte), die auch die sachlich-instrumentelle und die politisch-soziale Ebene reflektieren.  Entwicklungskräfte: Im Zentrum einer entwicklungsdynamischen Analyse von Innovationsprozessen steht neben jenen Kräften, die die eingespielten Operationsweisen eines Unternehmens in Gang halten und eine stabilisierende Wirkung entfalten, vor allem die Frage nach Kräften, die Entwicklung vorantreiben. Solche Kräfte sind nichts anderes als Krisen oder Herausforderungen (Spannungen), die entweder intern produziert oder von außen in das Unternehmen hinein genommen werden.  Entwicklungslogik: Für eine Analyse von Entwicklungsprozessen ist neben der Deskription von Objektveränderungen auch die Re-Konstruktion jener Regeln wichtig, die konkretes Handeln zu geordneten Mustern verbinden und den Spielraum der Veränderung solcher Handlungsregeln im Rahmen der Entwicklungslogik steuern. Im Prozess des Organisierens eröffnen sich immer mehrere Handlungsoptionen, die Entscheidungen provozieren. Daraus ergibt sich ein sequentieller Aufbau von Ordnung als flexible, nicht vollkommen idente (Re-)Produktion sinnbezogener Interaktionen. Das Verständnis dieser Prozesse und des spezifischen Typs von Innovationsverhalten bilden den methodischen Ausgangspunkt der empirischen Analyse. Fallauswahl Der Fallauswahl lagen folgende Kriterien zugrunde: es handelt sich um eine interessante Innovationen, weshalb Unternehmen ausgewählt wurden, die dafür einen Preis gewonnen haben; der innovative Charakter dieser Entwicklungen sollte unbestritten sein, weshalb eine bewilligte Förderung ein zentrales Kriterium bildete; die Innovation hat sich als erfolgreich für das Unternehmen erwiesen, weshalb der Umsatzzuwachs als Kriterium gewählt wurde; es handelt sich um ein Kleinunternehmen, weil diese Unternehmen eine markante Rolle in der Innovationslandschaft einnehmen; und die Innovation erfolgte in enger Zusammenarbeit mit dem Unternehmensumfeld, weil viele Kleinbetriebe nicht alleine, sondern in einer mehr oder weniger losen Kooperation mit Dritten ihre Innovationen realisieren. Da beide Fälle auch hinsichtlich des RENT-Modells und des Innovation Diagnostic Diamond als erfolgreich gelten (Champion) bzw. mit überdurchschnittlich guten Voraussetzungen ausgestattet sind, sind sie als „good practice“-Beispiele für eine Analyse besonders geeignet. Im ersten Fall handelt es sich um ein Zivilingenieur- und Engineering-Unternehmen, das auf Tragwerksplanung, Bauklimatik, Baubetreuung spezialisiert ist und eine neuartige Gebäudefassade entwickelt hat. Im zweiten Fall handelt es sich um innovative Design- und Lifestyle-Produkte an der Schnittstelle Mensch und Technik im Alltagsleben. Methodische Vorgangsweise Da die Falldarstellung auf Besonderheiten abstellt, wurde die Frage untersucht, wie und vor welchem Hintergrund Innovationen generiert werden. Dies macht eine offene und flexible Vorgangsweise im Rahmen einer qualitativ orientierten Sozialforschung notwendig. In beiden Unternehmen wurden qualitative Interviews durchgeführt (Froschauer und Lueger 2003). Die Gespräche wurden aufgezeichnet, um eine Dokumentation für die Analyse zu haben. Generell 3

orientierten sich diese Gespräche an folgenden Richtlinien: Grundprinzip war eine erzählgenerierende Form der Gesprächsführung, um Beobachtungs- und Handlungsrelevanzen zu erschließen. Dies erforderte eine Einstiegsfrage, die einen auf die befragte/n Person/en und das zentrale Thema maßgeschneiderten Ausgangspunkt für das weiterführende Gespräch bot. Indem eine offene Gesprächsführung wenig Struktur vorgibt, forciert sie die Selbststrukturierung der Erzählung durch die befragten Personen, was die Analyse der Besonderheiten eines Falles aus der Perspektive der Erzählenden ermöglicht. Thematisch orientierten sich diese Gespräche an folgenden Inhalten: (a) Den erzählgenerierenden Einstieg bildeten in der Regel Fragen nach der eigenen Tätigkeit bzw. Fragen nach der Unternehmensentwicklung, die Produkte und den Aufgabenbereichen. (b) Einen wesentlichen Schwerpunkt bildeten Innovationsstrategien, wobei darüber hinaus auch allgemeine unternehmerische Standpunkte erkundet wurden. (c) Aussagen über Innovationen wurden anhand von Beispielen vertieft, um praktische Erfahrungen ausführlicher zu besprechen. (d) Diese Erkundungen wurden um eine Reflexion von Innovationsstrategien im eigenen Unternehmen und deren Bedeutung für künftige Entwicklungsstrategien erweitert. Die Interpretation erfolgte im Rahmen hermeneutischer Fallrekonstruktionen in zwei Schritten (zu den konkreten Interpretationsverfahren siehe Froschauer und Lueger 2003):  Eine Feinstrukturanalyse im Sinne der objektiven Hermeneutik (Oevermann 2002). Dieses Verfahren zielt auf die Erfassung von Sinngehalten, die in der selektiven Abfolge kleiner Spracheinheiten enthalten sind und unabhängig von den Motiven, Intentionen oder Dispositionen der TextproduzentInnen die Strukturierung des sozialen Kontextes der Texterzeugung repräsentieren (Wernet 2000).  Eine anschließende Systemanalyse des gesamten Interviewmaterials (Froschauer und Lueger 2003), die sich an der Rekonstruktion der Komplexität und Dynamik von Innovation orientierte. Dafür werden die Texte für die Interpretation in thematische Einheiten unterteilt, wobei jeder Textteil in Hinblick auf Alltagsbedeutungen, die Perspektive der Textproduktion (Kontextanalyse) und dem objektiven und praktischen Sinn aus einer distanziert-wissenschaftlichen Perspektive analysiert wird.

Fall 1: Ziviltechnikerbüro für Bauwesen Unternehmensgegenstand und Unternehmen Unternehmensgegenstand ist die Erbringung von Engineering-Leistungen in der Baubranche. Die Leistungspalette reicht von der vergleichsweise einfachen Erstellung eines Energieausweises für Gebäude bis hin zu komplexen innovativen bautechnischen Lösungen innovativer Architekturideen, für die das Unternehmen besonders bekannt ist. Im Rahmen dieser anspruchsvollen Projekte fungiert das Unternehmen als Generalkonsulent, der als Schnittstellte zwischen Bauherrn und Architekten steht und diese von der Konstruktion und Bauplanung bis zur Schlüsselübergabe begleitet. Die Funktion des Generalkonsulenten, der neben der bautechnischen Lösung (Tragwerksplanung, Bauphysik etc.) auch für die Projektentwicklung, Projektabwicklung und das Baucontrolling zuständig ist, eröffnet dem Bauherrn die Möglichkeit, dass er im Zuge der Bauabwicklung nur einen Ansprechpartner hat, der eine fachgerechte und kostenoptimale Abwicklung sicherstellen soll. Die Architekturleistung (als vorgelagerter Prozess) wird von einem Architektenbüro erbracht.

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Formal werden diese Leistungen von zwei rechtlich selbständigen Unternehmen (RWT PLUS GmbH) mit jeweils einer „Filiale“ erstellt. Ein rechtlich selbständiges Engineering-Büro hat seinen Sitz im Zentrum von Wien mit einer Filiale in Abu Dhabi (die juristische Gründung erfolgt erst im Jahr 2008, daher sind in Abu Dhabi noch keine Mitarbeiter beschäftigt; Büroräumlichkeiten gibt es seit Sommer 2007). Ein weiteres rechtlich selbständiges Unternehmen besteht in Eisenstadt. Es verfügt über einen weiteren Standort in Oberwart, Entwicklungs- und Innovationsleistungen werden in Wien und Eisenstadt erbracht. Das Unternehmen war von Beginn an international tätig und hat sich an Hochhaus- und großen Wohnbauprojekten beteiligt. Im Gegensatz zu nationalen Projekten, die neben dem Wohnbau auch den Industrie-, Freizeit- und Kommunalbauten und Hallenbau inkludieren und bis zur Schlüsselübergabe betreut werden, engagiert sich das Unternehmen bei internationalen Projekten nur bis zum sog. Tender, d.h. bis zur Projektgenehmigung. Das Projekt wird dann einen Generalunternehmer übergeben, welcher den Bau realisiert. Unternehmensentwicklung und -philosophie Die Gründung erfolgte im Jahr 1996 von Dr. Richard Woschitz nach Beendigung seiner Assistententätigkeit an der Technischen Universität Wien. Im Jahr 2008 beschäftigt der Unternehmer 38 fix angestellte sowie zwei freie MitarbeiterInnen in den beiden Unternehmen und deren Filialen. Der durch diese Zahlen zum Ausdruck kommende nachhaltige Erfolg, der bereits mehr als eine Dekade umfasst, prädestiniert das Unternehmen für eine Fallanalyse. Die Unternehmensphilosophie rückt das Bauwerk ins Zentrum und betrachtet die Rolle des Generalkonsulenten als komplementäre technische Betreuung zur Idee des Architekten: Nachdem sich der Bauherr für einen Architekten und dessen Entwurf entschieden hat, versucht der Generalkonsulent in Symbiose mit dem Architekten das Bauwerk zu realisieren. Ein maßgeblicher Einfluss auf das Denken und Handeln im Unternehmen geht vom Anspruch aus, dass das Unternehmen in seiner Funktion als Generalkonsulent über eine technische Kompetenz verfügt, die es erlaubt, eine originelle (künstlerische) Idee innovativ umzusetzen. Um dieses Ziel zu erreichen, setzt der Eigentümer und Gründer des Unternehmers auf zwei komplementäre Maßnahmen, indem er versucht, seinen MitarbeiterInnen im Rahmen regelmäßiger Mitarbeitergespräche diese Philosophie nachhaltig zu vermitteln und durch die regelmäßige Beteiligung an Wettbewerben, die diese Innovationskompetenz einfordern, diese Kompetenz unter Konkurrenzbedingungen laufend unter Beweis zu stellen. Diese beiden Maßnahmen werden getragen durch die langfristigen Ziele des Unternehmens, die der Unternehmer verfolgt: Neben inhaltlichen Aspekten (Zuverlässigkeit, Qualität und Flexibilität in der Projektplanung und -abwicklung) sind dies vor allem eine stabile und nachhaltige Unternehmensentwicklung. Hier kommt zum Ausdruck, dass das Unternehmen Gegenstand der eigenen Ambitionen ist, wobei der langfristige Horizont unter dem die Entwicklung geplant wird, das Unternehmen zu einem „persönlichem Lebenswerk“ werden lässt, dessen Existenz durch das Vermeiden größere Risiken abgesichert wird. Der Nukleus dieser Philosophie kommt bereits in der Phase des Markteintritts zum Ausdruck: Der Gründer erwirbt in einem Versteigerungshaus die Betriebsmittel (z.B. Konstruktionstische) und versucht von Beginn an durch sein „Säulenmodell“ (Zuverlässigkeit, Qualität und Flexibilität) und durch Verzicht auf übermäßige Preisforderungen seine Kunden an sich zu binden. 5

Zugleich wird von Anfang an versucht, das Unternehmen in einer Nische zu positionieren, in welcher der Wettbewerb nicht nur über den Preis ausgetragen wird. Dazu dient vor allem die Teilnahme an Wettbewerben bzw. Ausschreibungen für innovative Bauprojekte, in denen eine hohe technischinnovative Kompetenz gefordert ist, die entsprechende Freiräume bei der Preisgestaltung eröffnet. Projekte, bei denen in erster Linie anhand des Preises entschieden wird, ob man einen Auftrag erhält oder nicht, werden zumindest bei komplexen innovativen bautechnischen Lösungen für innovative Architekturideen nicht angestrebt. Stabilisierung des Unternehmensaufbaus Das Unternehmenswachstum (gemessen an der Zahl der MitarbeiterInnen) und die drei bzw. vier Standorte (Wien, Eisenstadt, Oberwart und der in Gründung befindliche Standort in Abu Dhabi) stellen an ein Dienstleistungsunternehmen dieser Art besondere Anforderungen, zumal die Unternehmensphilosophie erhebliche Ansprüche an die Innovationskompetenz des Unternehmens postuliert und diese in hohem Maße an die MitarbeiterInnen gebunden ist. Einen wesentlichen Beitrag zur Stabilisierung, vor allem in finanzieller Hinsicht, leistet das Verhältnis von innovativen und Routineprojekten. Während innovative Projekte eine geringe Gewinnspanne erwirtschaften, resultiert die Ertragskraft des Unternehmens primär aus den Routineprojekten, deren Überschüsse zum Teil in die Umsetzung eigener innovativer Ideen fließen. Insofern ist eine stabile finanzielle Entwicklung des Unternehmens eine unabdingbare Grundvoraussetzung für dessen Innovativität. Von den 200-250 Projekten, die das Unternehmen pro Jahr abwickelt, sind nur 2-3 pro Jahr hochinnovativ; eine größere Zahl dieser Projekte hat den Charakter von Großprojekten mit einer Laufzeit von 1-2 Jahren. Eine beträchtliche Zahl sind kleinere Routineprojekte (z.B. einfache statische Berechnungen, Energieausweise für Gebäude, Gutachten), die innerhalb einer Woche abgewickelt werden. Sowohl die Stabilisierung des Unternehmensaufbaus als auch das signifikante Wachstum beruhen neben diesen finanziellen Voraussetzungen auf vier zusätzlichen Pfeilern:  Unternehmensphilosophie: Diese kommt in der technisch-innovativen Kompetenz gepaart mit Zuverlässigkeit, Qualität und Flexibilität zum Ausdruck. Damit ist es von Start weg gelungen, sich Reputation zu verschaffen. Angesichts des Dienstleistungscharakters der Beratungsleistung spielen Erfahrungs- und Vertrauenseigenschaften eine herausragende Rolle. Da diese erst während oder nach der Leistungserbringung vom Bauherrn beurteilt werden können, spielt die gelebte und kommunizierte Unternehmensphilosophie eine enorme Rolle, vor allem wenn es für den Bauherrn um beträchtliche Investitionen geht, wie dies bei großen Bauprojekten in der Regel der Fall ist.  Qualifikation der MitarbeiterInnen: Voraussetzung für die Wirksamkeit der Unternehmensphilosophie nach Innen und Außen ist die Identifikation mit der Unternehmensphilosophie. Dieser Aspekt impliziert zwei Dimensionen:  Auf sachlicher Ebene heißt dies, dass MitarbeiterInnen mit sehr guter Qualifikation und Motivation benötigt werden. Dabei kommen dem Unternehmer seine Lehrtätigkeit an der Technischen Universität und die Reputation des Unternehmens zugute. Beides eröffnet den Zugang zu MitarbeiterInnen mit diesen Eigenschaften. Im Rahmen von Lehrveranstaltungen können potenzielle Nachwuchskräfte beurteilt und rekrutiert werden; aufgrund der Reputation und der Verankerung des Unternehmens im Markt können bereits erfahrene MitarbeiterInnen gewonnen werden. Un6

terstützt wird der Qualifikationsbedarf durch Weiterbildungsmöglichkeiten und interne Schulungen.  Auf sozialer Ebene versucht der Unternehmer durch regelmäßige Veranstaltungen mit Freizeitcharakter (z.B. Skifahren), den sozialen Zusammenhalt und die Identifikation mit dem Unternehmen zu fördern. Dies ist wichtig, weil vor allem größere Projekte auch mit Belastungen verbunden sind und Teams, die diese Projekte abwickeln, einen entsprechenden Zusammenhalt in belastungsintensiven Phasen benötigen.  Stabilisierung von Kundenbeziehungen: Das Unternehmen setzt vor allem bei größeren Projekten auf Stammkunden, deren Anteil etwa 70% beträgt. Das Unternehmen ist zwar offen in Bezug auf die Gewinnung neuer Kunden und beteiligt sich daher auch an Ausschreibungen und Wettbewerben, die Zugang zu Neukunden eröffnen. Allerdings hat eine Neukundenbeziehung aus der Sicht des Unternehmens immer „Probecharakter“. Kommt es zu einer wechselseitig als gut wahrgenommenen Zusammenarbeit, drängt das Unternehmen auf eine Fortsetzung der Zusammenarbeit im Rahmen weiterer Projekte. Erlebt der Gründer bzw. Unternehmer die Zusammenarbeit hingegen als problematisch, wird das Projekt abgeschlossen und keine weitere Zusammenarbeit angestrebt.  Kompetenzverteilung und Führung: Das Unternehmen ist als Projektorganisation strukturiert und an verschiedenen Standorten tätig. Jeder Standort verfügt über einen eigenen Leiter mit Entscheidungsbefugnissen. Die Letztentscheidung bleibt beim Unternehmer selbst. Aufgabe der Standortbzw. Projektleiter ist es, bei sensiblen Entscheidungen den Unternehmer rechtzeitig zu informieren. Da mit Ausnahme des Standorts Abu Dhabi alle anderen Standorte in einem Umkreis von ca. 100150 km liegen, kann der Unternehmer bei wichtigen Entscheidungen immer vor Ort sein. Trotzdem verfügt das Unternehmen über ein IT-gestütztes Kommunikationssystem, das die interne Koordination beträchtlich erleichtert. Resultierend aus der Größe des Unternehmens und der Art der Organisation ist der Unternehmer bei allen wichtigen Projekten trotzdem persönlich involviert. Dementsprechend sieht er sich selbst als „Simultanschachspieler“. Daraus resultiert eine Wachstumsschwelle. Bedingt durch die hohe Qualifikation werden Hierarchieunterschiede nicht betont. Das fördert die Mitarbeiterzufriedenheit und schafft ein positives Betriebsklima. Das Zurückdrängen von Hierarchieunterschieden begünstigt die Selbstverantwortung der MitarbeiterInnen, die im Fall von Fehlern diese möglichst selbständig oder im Projektteam zu lösen haben. Gesamthaft gesehen tragen die skizzierte Kompetenzverteilung und der Führungsstil dazu bei, dass der Unternehmer Freiräume für Innovationsaktivitäten gewinnt, die aufgrund ihres Nicht-RoutineCharakters wesentlich mehr von seiner Aufmerksamkeit erfordern. Innovationsstrategie Diese vier Elemente, die als stabilisierende Kräfte wirken, bilden die Grundlage für die Innovationsstrategie. Hinzuzufügen ist, dass die Hälfte der kundeninduzierten Innovationen nicht von Stamm-, sondern von Neukunden kommt. Das Unternehmen strebt eine Balance von Replikation und Innovation an. Die Replikation innovativer Leistungen trägt zur Amortisation der Innovationen bei und ermöglicht Offenheit für Neues, in dem sie Ressourcenüberschuss (Slack) generiert. Damit verschafft sich das Unternehmen die Möglichkeit, „über den Tellerrand zu schauen“ und technische Lösungen zu entwickeln, die über die Standardsysteme von Statikbüros weit hinausgehen und bspw. auch Elemente der Bionik berücksichtigen. Voraussetzung ist die herausragende technische Kompetenz. Grundsätzlich basieren die Innovationaktivitäten des Unternehmens auf Produktebene auf zwei unterschiedlichen Zugängen: 7

 Kundeninduzierte Innovationen, bei denen aus der Zusammenarbeit mit Architekten und Bauherrn nach innovativen technischen Lösungen gesucht wird, wobei das Ingenieur-Know-how auch die Berücksichtigung der Materialanforderungen (Holz-, Glas-, Stahlbau) impliziert. Für derartige Innovationen führt der Unternehmer die ersten Gespräche und entscheidet dann, welche Projektteams das Projekt weiter betreuen und abwickeln, wobei der Unternehmensphilosophie entsprechend auch innovative Lösungsvorschläge von Seiten der Mitarbeiter erwartet werden. Wichtiger Bestandteil dieses Strategieelements ist das verstärkte Engagement bei internationalen Ausschreibungen und Wettbewerben.  Selbst induzierte Innovationen, bei denen es sich um aktive Strategieelemente handelt, die als Eigenentwicklung oder als Auftragsentwicklung extern abgewickelt werden. In diesem Fall kam es zu einer Kooperation mit anderen Organisationen. Wichtig ist vor allem eine Forschungskooperation zwischen den Standorten Wien und Eisenstadt, die für Forschung und Innovation zuständig sind und der Prüf-, Überwachungs- und Zertifizierungsstelle der Stadt Wien, die eine führende Rolle auf dem Gebiet der Baustoffprüfung einnimmt. Mit Hilfe dieser Forschungskooperation können fixkostenintensive Investitionen vermieden werden, die aufgrund der niedrigen Frequenz derartiger Projekte nicht rentabel wären. Zugleich eröffnete der Standort Eisenstadt im Burgenland, das bis vor kurzem Ziel 1 Fördergebiet der EU war, den Zugang zu Förderungen. Ein Meilenstein bei den selbst induzierten Innovationen bildet die Innovation „Flexiskin“, die mit anderen entwickelt und für die das Unternehmen 2006 mit einem Innovationspreis ausgezeichnet wurde. Dabei handelt es sich um eine dichte und flexible Außenhaut für Gebäude, die auf alle Gebäudeformen passt. Für den Unternehmer ist diese Entwicklung wichtig und integraler Bestandteil der Unternehmensphilosophie, weil „der Kreativität in der Architektur hinsichtlich organischer Gebäudehüllen nun keine Grenzen mehr gesetzt sind“. Die Möglichkeit der Anwendung auf Wandund Dachflächen und des Verzichts auf Verblechungen haben revolutionären Charakter, weil sie traditionelle Formen des Verputzes inkl. ergänzender Spenglerarbeiten teilweise ersetzen. Auch bei dieser Innovation kommen Kundenbezüge zum Ausdruck, da das Produkt vor seiner fertigen Entwicklung bzw. endgültigen Eignungsprüfung durch die Prüfanstalt bereits das Interesse eines Bauherrn gefunden hatte. Folglich war eine reibungslose Kooperation mit allen involvierten Partnern eine Grundvoraussetzung. Da das Unternehmen in der Baurealisierung selbst nicht tätig ist, kassiert es von den Bauunternehmen, die dieses Produkt zum Einsatz bringen, „Lizenzgebühren“, die für die Finanzierung von innovativen Projekten verwendet werden. Eine weitere Innovationsaktivität bezieht sich auf die Erschließung internationaler Märkte. Aufgrund der frühen Beteiligung an internationalen Ausschreibungen und Wettbewerben wurde diese Bereitschaft und Fähigkeit rasch entwickelt. Ausdruck einer strategischen Haltung ist die räumliche Fokussierung. Aufgabe der Eröffnung der Filiale in Abu Dhabi ist die Nutzung des enormen Baubooms ebendort und die Spezialisierung auf einen Kulturraum, um auch daraus Vorteile ziehen zu können. Ein weiterer geplanter Entwicklungsschritt ist die aktive Erschließung des unmittelbar an den Eisenstädter und Oberwarter Raum angrenzenden Raum Westungarns, der von diesen Standorten bearbeitet werden kann. Auf organisatorischer Ebene plant der Unternehmer eine Phase der Effizienzsteigerung interne Prozesse, die sich aufgrund des starken Wachstums eröffnet, das mehr Formalisierung erforderlich macht.

8

Fazit Auffallend ist die Stimmigkeit („fit“) der beschriebenen Elemente des Unternehmens und seiner marktlichen Umwelt. Dies begünstigte einen reibungsfreien und ökonomisch effizienten Aufbau. Folglich verfügt das Unternehmen auch über die nötigen finanziellen Ressourcen, um Innovationen zu finanzieren. Die für Innovationen erforderlichen Irritationen bezieht das Unternehmen aus seiner Beteiligung an Wettbewerben und Ausschreibungen. Damit unterbindet es Trägheit und generiert den Druck zu Veränderung und Lernen selbst. Das Wissen, dass innovative Projekte wenig zum finanziellen Erfolg, aber viel zur Reputation beitragen, führt zu eine bewussten Balance von Replikation und Innovation in Bezug auf kundenindizierte Innovationen. Die Trennung in zwei rechtlich selbständige Einheiten, von denen ein Standort in einem Ziel 1 Fördergebiet ist, eröffnet den Zugang zu einer wesentlichen Förderung, entkoppelt den Erfolg der selbst induzierten Innovation vom zweiten Unternehmen und verschafft zugleich eine gewisse finanzielle Flexibilität. Der in der Kultur des Unternehmens verankerte Innovationsanspruch wird getragen von der Qualität der Humanressourcen. Diese Erwartung richtet sich an die MitarbeiterInnen als Kollektiv, aber auch an jeden einzelnen. Weiterbildungsangebote und regelmäßige interne Besprechungen und Schulungen bieten ein Forum der Reflexion und unterstreichen die Bedeutung der kulturell-reflexiven Dimension im Unternehmen. Die Koordination der Arbeitsabläufe findet in Projektteams in Absprache mit dem Unternehmer statt, der die Letztentscheidung zentral regelt, aber zugleich den Projektteams Autonomie einräumt, die ihn entlastet und den Teams Verantwortung und Lernmöglichkeiten gibt. Als wesentliche Kraft, die die Entwicklung vorantreibt, ist der Innovationsanspruch generell zu nennen, der aufgrund der regelmäßigen Beteiligung an Wettbewerben nicht zum rhetorischen Imponiergehabe verkommt, sondern immer praktisch eingelöst werden muss. Nicht zuletzt sind es auch die Kunden selbst, die innovative Lösungen erwarten, zumal dieser Anspruch auch nach Außen kommuniziert wird. In diesem Zusammenhang ist neuerlich die Erschließung von Förderquellen zu nennen, die die materielle Voraussetzung dafür schaffen, dass das Unternehmen bestimmte Teile seiner Innovationsstrategie realisieren kann. Der in der Gründungsphase eingeschlagene Weg der Spezialisierung (Entwicklungslogik) wird konsequent fortgesetzt. Die Strategie, mit technisch-innovativer Kompetenz den Preiswettbewerb zu umgehen, drückt sich aktuell im Versuch aus, einen konkreten Markt in einem Kulturraum (Abu Dhabi) zu erschließen. Allerdings handelt es sich keineswegs um ein Unternehmen, das nur im Explorationsmodus (March 1991) agiert, sondern mit vielen Routineprojekten (Exploitationsmodus) finanzielle Sicherheit erzeugt, sodass festzuhalten ist, dass das Unternehmen über die dynamic capability der Ambidexterität verfügt.

Fall 2: High-Tech, Mode und Lifestyle Unternehmensgegenstand und Unternehmen Das in Wien angesiedelte Unternehmen gliedert sich in zwei rechtlich getrennte, aber organisatorisch verflochtene Gesellschaften: „Lösungsmittel“, 2001 gegründet, beschäftigt sich mit Innovationen in den Bereichen Industrie- und Produktdesign; URBAN TOOL, 2004 gegründet, ist auf die Vermark9

tung und den Vertrieb dieser Produkte spezialisiert. Sowohl die Geschäftleitung als auch die Eigentümerstruktur sind in beiden Gesellschaften ident. In beiden Gesellschaften sind mit Stand 2008 neben den drei GesellschafterInnen insgesamt sechs bis sieben weitere MitartbeiterInnen beschäftigt, zum Teil als TeilzeitmitarbeiterInnen, wobei der Großteil des Personals dem Unternehmen URBAN TOOL zugewiesen ist. Betrachtet man die beiden Unternehmen als eine gemeinsam agierende Einheit, so liegt eine Organisation vor, die an der Grenze zwischen Mikro- und Kleinbetrieb liegt. Obwohl sich das Ursprungsunternehmen „Lösungsmittel“ anfangs mit verschiedensten Designarbeiten befasst hat, wobei sich Orientierungsdesign als ein früher Schwerpunkt heraus kristallisierte, steht derzeit die Entwicklung von Produkten im Zentrum, die sich durch eine innovative Verbindung von Textilien und Elektronik hervorheben. Im Zusammenspiel der beiden Gesellschaften übernimmt URBAN TOOL die internationale Vermarktung, weil sich Lösungsmittel aufgrund der Begrenztheit des österreichischen (und des deutschsprachigen) Marktes für die vertriebenen Produkte als ungeeignet erwies. Da derzeit etwa 95 Prozent des Umsatzes im internationalen Handel mit 30 Ländern (u.a. Japan, Indien, Kanada, Polen, USA, Russland) erwirtschaftet werden, wird der heimische Markt als „Mustermarkt“ zur direkten Feedbackgewinnung bearbeitet. Auf den Großhandel konzentriert sich das Unternehmen, um die Produkte international zu positionieren und Multiplikatoreffekte zu erzielen. Der internationale Onlinevertrieb bildet ein zweites Standbein, das Feedback vom Endverbraucher gewährleistet. Entscheidende Impulse gehen von der Eigenentwicklung von Produkten aus – die zum Teil durch Förderungen unterstützt – bis zur Marktreife gebracht werden. Der innovative Charakter des Unternehmens resultiert vorrangig aus der Schnittstellenpositionierung zwischen verschiedenen Bereichen: So bewegte sich das Orientierungsdesign zwischen Architektur, Design und Marketing. Derzeit konzentriert sich die Produktentwicklung auf die Überschneidungen von Mode und mobiler Elektronik, um Funktionalität mit Anforderungen des modernen Lebensstils zu verbinden. Trotz des breit gefächerten Interesses werden drei Zielgruppen bevorzugt angesprochen, die auch optisch visualisiert werden und zunehmend in Produktlinien repräsentiert sind: SportlerInnen (Funktionalität), Business-Leute (Premium-Bereich mit ausgeprägter Funktionalität) und junge Menschen, die solche Produkte einfach „cool“ finden (Design und Markenimage). Unternehmensentwicklung und Unternehmensphilosophie Die Entwicklung des Unternehmens ist von einem Bruch gekennzeichnet: Am Beginn stand eine Vielzahl unterschiedlicher Aktivitäten im Designbereich (etwa Webdesign und Grafik) in der Gesellschaft Lösungsmittel. Gewonnene Wettbewerbe im Orientierungsdesign schärften das Profil nach außen und steigerten die von außen wahrgenommene Professionalität, die sich förderlich auf Folgeprojekte auswirkte. Dennoch erwies sich das Betätigungsfeld für die Entwicklung als problematisch: So waren diese Projekte mit enormen Akquisitionsleistungen verbunden, die sich in der Regel über längere Zeit erstreckten und trotz großer Vorinvestition keine Sicherheit gaben, den Zuschlag zu erhalten. Darüber hinaus ergaben sich weitere Schwierigkeiten: Jeder Auftrag musste mühsam einzeln errungen werden, die Aufträge waren aufgrund häufiger Planungsänderungen hinsichtlich des Aufwandes schlecht abschätzbar, und außerdem war der Preisdruck enorm. Auch Versuche einer internationalen Akquisition erwiesen sich als wenig Erfolg versprechend. Aus diesem Grund gelang es mit dieser Ausrichtung nicht, das Unternehmen auf eine gesicherte ökonomische Basis zu stellen. Erfolgreicher erwies sich eine andere Entwicklung, Elektronik über Steuerschnittstellen und textile Kabel direkt in Modetextilien zu integrieren. Aufgrund des Kundeninteresses an einem Produkt wurde eine Vertriebsgesellschaft zur Vermarktung der Designerstücke gegründet, was eine Förderung des 10

AWS wesentlich erleichterte. Zur gleichen Zeit gewann das Unternehmen mit einem von der Firma Lösungsmittel entwickelten Produkt den „Brand New Award“ auf der ISPO-Sportmesse in München für innovative Produkte in der Kategorie der besten Sportaccessoires. Der Preis sowie das auf der Messe erhaltene positive Feedback boten einen Anreiz, sich stärker mit einer internationalen Vermarktung auseinanderzusetzen. Der für das Vertriebsunternehmen verwendete Name URBAN TOOL war der erste Schritt zur Etablierung einer international anschlussfähigen Marke. Die weitere Entwicklung war charakterisiert durch Expansion in verschiedene Länder, wobei die Produktentwicklung durch Förderungen gestützt war und die mediale Reputation durch Nominierungen und Preise gesteigert werden konnte (z.B. Gewinner des Calls „FemPower“ als Förderinitiative des ZIT für „wearable communications“ 2004; Exportpreis der Wirtschaftskammer Österreich in der Kategorie „Handel“; zwei Nominierungen für den „smartTextiles -product of the year award“ auf der CeBIT 2007; Nominierung für den 3. Volvo „SportsDesign Award“ für „personal design“ auf der ISPO 2007 sowie der European Design Management Award 2007). Es lassen sich drei Entwicklungsstufen unterscheiden: In der ersten dominierten Versuche, sich über Designprojekte am österreichischen Markt zu etablieren, was zu einer Professionalisierung im Bereich des Orientierungsdesigns führte und in erste Gehversuche im internationalen Geschäft mündete. In der zweiten bildeten Erfolge von Modeprodukten im Zusammenhang mit mobiler Elektronik den Auslöser für einen Entwicklungsschub, der im Aufbau eines internationalen Vertriebs mündete. Dabei war es notwendig, das Geschäft völlig umzustellen (etwa Englisch in den Außenbeziehungen, Befassung mit internationaler Geschäftsabwicklung). Derzeit befindet sich das Unternehmen im Übergang zur dritten Phase der Konsolidierung des Umgangs mit der internationalen Vermarktung und Stabilisierung kooperativer Beziehungen mit Unternehmen in der Produktentwicklung. In dieser Phase verlieren geförderte Projekte an Bedeutung, während kooperative Entwicklungen mit anderen Unternehmen wichtiger werden. Zeitlich geht das Unternehmen davon aus, dass es noch etwa zwei bis drei Jahre braucht, bis die Marke international gut etabliert, das Produktportfolio konsolidiert und die Vertriebswege gefestigt sind. Mit dieser Entwicklung veränderte sich auch die ursprüngliche Unternehmensphilosophie: Stand zunächst der Verkauf von Designdienstleistung im Vordergrund, aber nicht deren selbständige Vermarktung, so trat zunehmend die Vermarktung selbst entwickelter Produkte in den Vordergrund. Obwohl das Unternehmen es auf eine flexible Weise versteht, die sich bietenden Chancen aufzugreifen und die gesamte Ausrichtung zu verändern, blieb das Unternehmen dem Kreativbereich und dem Design treu. Allerdings wurde das Ziel an den erfolgreichen Produktvertrieb angepasst: Es werden vorrangig Projekte mit direktem Vermarktungsfokus bearbeitet, um die Produkte preislich erschwinglich zu halten. Stabilisierung der Unternehmensentwicklung Betrachtet man diese Entwicklung, so erweist sich das Bemühen um eine Stabilisierung des Unternehmens als entscheidender Faktor zum Verständnis der Entwicklungsdynamik. Die konkrete Entwicklungsrichtung war keineswegs von Anfang an so geplant, sondern beruhte auf verschiedenen Wegen der Marktpositionierung im Designbereich. Das Orientierungsdesign brachte zwar Erfolg, konnte das Unternehmen aber nicht langfristig stabilisieren. Hingegen bot die Vermarktung von Modeaccessoires als Stilelemente eines technologiegeprägten Alltags mehr Chancen. Dabei kristallisierten sich

11

nach und nach jene Bedingungen heraus, um diese Idee auch wirtschaftlich in eine Erfolgsstrategie verwandeln zu können. Dabei spielten drei Faktoren eine Schlüsselrolle: (1) Die Nutzung unterschiedlicher Plattformen zur Erhöhung der Sichtbarkeit: Im Zuge der Versuche, ein stabiles Geschäftsfeld zu etablieren, erwies sich die Sichtbarkeit der eigenen Produktentwicklungen als ein entscheidender Faktor. Dabei lässt sich ein Stufenprozess identifizieren, in dem das Unternehmen lernte, nicht nur die Präsenz zu verbessern, sondern auch die eigenen Strategien auf sich eröffnende Chancen abzustimmen:  Die Beteiligung an Wettbewerben und Ansuchen um Förderungen: Frühzeitig versuchte Lösungsmittel Anschluss an den Markt zu finden und wählte dafür zwei Wege: Förderungen, um die erste Entwicklungsphase des Unternehmens zu erleichtern und Wettbewerbe, um einen Zutritt zu bestimmten Marktsegmenten zu erlangen. Beide Strategien erwiesen sich als aufwändig, aber Erfolg versprechend.  Die Präsenz auf internationalen Messen: Die Beteiligung an Wettbewerben bot einen ersten Einstieg in die Messepräsenz, weil mit einem Preis auch eine Ausstellungsfläche auf der ISPOSportmesse in München verbunden war. Die ersten Kontakte mit dem internationalen Geschäft und die positiven Rückmeldungen lenkten die Entwicklung in eine neue Richtung: Erstens wurde deutlich, dass für solche Produkte breiteres Interesse bestand. Zweitens stellte sich heraus, dass für die Vermarktung eine eigene Firma sinnvoll ist, die sich als internationale Marke positionieren lässt. Drittens zeigte sich, dass für eine Nutzung dieses Geschäftspotentials die internen Strukturen in mehrfacher Hinsicht umgestellt werden mussten, weil sich die deutschprachigen Produktunterlagen als unzulänglich erwiesen, man keine Produktion in der erforderlichen Größenordnung an der Hand hatte und nur unzulängliche Kenntnisse über internationale Geschäftstätigkeit verfügbar waren. Die Gründung von URBAN TOOL bot ein Instrument für den Aufbau des internationalen Vertriebs. Ein überraschender Großauftrag aus Japan beschleunigte diesen Prozess. Diese positiven Erfahrungen führten in der Folge auch zur Präsenz auf der CeBIT in Hannover, bei der die Technologie im Vordergrund steht und die einen anderen Zugang zum Markt bietet. Diese Präsenz war ein Experiment ohne viel Vorwissen, aber auch dieses erwies sich als hilfreich: Wenngleich die eigenen Produkte eine starke Affinität zur Mode aufweisen, spielen gerade die technischen Attribute eine entscheidende Rolle. Bis heute ist die technische Komponente ein entscheidender Faktor. Generell machte sich im Laufe der Zeit die Überzeugung breit, dass diese Präsenz trotz der hohen Kosten für ein junges Kleinunternehmen Zugänge eröffnet, die sonst verschlossen bleiben.  Die Entwicklung des Online-Vertriebs: Mit der Internationalisierung wurde der Webshop-Verkauf zu einem interessanten Geschäftszweig, der einen offenen Vertriebskanal etabliert. Die OnlinePräsenz wirkt zusätzlich in zweierlei Hinsicht: Es wird der Kontakt zu den Endkunden hergestellt, was eine Rückmeldung darüber gibt, wie die angepeilten Zielgruppen auf Angebote reagieren. Zum anderen bietet diese auch für Großhändler auf der Suche nach interessanten Produkten einen Einblick in die Produktphilosophie. All diese Aktivitäten wirken letztlich auf die Präsenz in den Medien, was sich bei den Zielgruppen in einer erhöhten Nachfrage ausdrückt. Insgesamt stellte sich heraus, dass der Internetauftritt das erste Gesicht der Marke ist. Dieser wurde vor 1½ Jahren umgestellt, was sich in einem unmittelbaren Anstieg der Kontaktzahlen und des Umsatzes niederschlug: Handelte es sich vorher um ein Designlabel und eine kleine Geschäftsidee, wird nun der Charakter einer internationalen Marke mit professionellen Hintergrund herausgestrichen.

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Auch Konkurrenz wird derzeit eher förderlich erlebt: Die Platzierung ähnlicher Produkte (oder die Nachahmung) durch bekannte Firmen gilt daher nicht als Problem, sondern als Marketingvorteil, weil diese für bestimmte Entwicklungen sensibilisieren und die Interessenten auf die eigenen Produkte aufmerksam machen. (2) Erfahrungssammlung im internationalen Geschäftsleben: Die erste Phase des Einstiegs in den internationalen Handel war mit einer Reihe von Ungewissheiten verbunden: Risiken im Zahlungsverkehr; die Produktion in einem Billiglohnland, um ein akzeptables Preisniveau zu erreichen, was sich für die Qualitätssicherheit als problematisch erwies; die Etablierung von Kooperationen mit Technologiepartnern, um bestimmte Geschäftsideen verwirklichen zu können. Besonders hervorzuheben sind folgende Entwicklungen:  Allgemeine Erfahrungen im Zuge der Geschäftsentwicklung: In der Anfangsphase ergaben sich einige Probleme und Risiken, deren Bearbeitung Schwierigkeiten bereitete:  Verständigung: Englisch ist die gemeinsame Basis, wird aber nicht von allen Geschäftspartnern beherrscht. Dies erhöht den Aufwand für Rückversicherungen, um Missverständnisse auszuschalten. Dazu treten kulturelle Barrieren in Form von unbekannten Geschäftsgepflogenheiten oder Ressentiments gegenüber einem von Frauen dominierten Unternehmen, wie das bei URBAN TOOL der Fall ist.  Auftragsgröße und Zahlungsabwicklung: Wird eine große Order storniert, kann das zu finanziellen Turbulenzen führen. Auch ist es schwierig, nicht erfolgte Zahlungen international einzufordern, weil dies selbst Kosten verursacht, die Erfolgsaussichten beschränkt sind und Zeitverlust damit einhergeht. Daher wird eine Strategie des Ausbaus einer ausreichenden Absicherung und der Intensivierung der Vertrauensbasis durch persönlichen Kontakt verfolgt.  Produktqualität: Wichtig war die Etablierung eines Qualitätssicherungsverfahrens. Dafür gibt es inzwischen einen Agenten vor Ort (Asien), es gibt Regelungen hinsichtlich der Zahlungsziele zur Sicherung der Qualität. Und mit der Dauer und Ausweitung der Geschäftsbeziehung war es möglich, günstigere Konditionen zu verhandeln. Das Unternehmen sieht heute die Notwendigkeit, ein ausgeglichenes Verhältnis zwischen Kooperation und Druck zu schaffen, um die gewünschte Qualität im Zeitplan auch tatsächlich zu erhalten.  Anforderungen von Geschäftspartnern: So konfrontierte bspw. die Kooperation mit Apple das Unternehmen mit einer Reihe von bürokratischen Maßnahmen. Obwohl diese Bürokratie für ein kleines Unternehmen mit hohem Aufwand verbunden ist, erkannte es rasch, dass solche Verfahren in adaptierter Form geeignet sind, die eigenen Geschäftsbeziehungen mit Großkunden abzusichern.  Die Entwicklung von Strategien im Umgang mit Geschäftspartnern: Die Erfahrungen im Geschäftsleben führten zu einer Expansion und zu einem professionellen Marktauftritt. Das war eine Voraussetzung, selbst Forderungen an Geschäftspartner stellen zu können. Dies ist deshalb wichtig, weil für ein Kleinunternehmen der Aufbau eines internationalen Vertriebsnetzes kaum möglich ist. Allerdings resultierte daraus eine Abhängigkeit von Großkunden hinsichtlich der Produktplatzierung am Markt. War es in der ersten Phase akzeptiert, mit Großhändlern undifferenziert zu arbeiten, um das Geschäft anzukurbeln, hat man im Laufe der Zeit bemerkt, dass ein Vertrag noch keine Ergebnisse hinsichtlich des Verkaufs der Produkte bringt. Für das Unternehmen heißt das, je stärker ein Händler auch Verpflichtungen übernimmt, desto mehr engagiert er sich für das Produkt und desto erfolgreicher vermarktet er dieses. Aus diesem Grund entwickelte das Unternehmen Anforderungen und Anreize an Geschäftspartner, um deren Aktivitäten zu stützen: 13

 Die Definition von Anforderungen führt zu einer Selektion der Großhändler. Insofern geht das Unternehmen derzeit nur mehr dann eine Geschäftsbeziehung ein, wenn die Bedingungen für eine erfolgreiche Markenpositionierung durch den Großhändler gegeben sind. Das Unternehmen entwickelte zu diesem Zweck ein „Bewerbungsformular“, wo die Großhändler angeben, wie sie vorgehen werden. Dies dient auch dem Schutz der Marke. Solche Forderungen nach Investitionen in die Marke können nur dann erfolgreich gestellt werden, wenn das Produkt einen guten Namen hat und bereits erfolgreich ist.  Motivationssysteme wie z.B. Rabatte wirken nicht nur als Belohnung für das Engagement, sondern helfen auch, Kalkulierbarkeit herzustellen. Dies erzielt man durch eine Verbindung mit Vorausorder und Anzahlungen, um eigene Investitionen zu sichern und die Lagerhaltung zu minimieren. Durch diese Veränderung der Position in den Machtverhältnissen gelang es dem Kleinunternehmen, sich international erfolgreich zu etablieren. Die gute internationale Reputation Österreichs als innovatives Kulturland wurde als Standortvorteil erlebt, wobei diese Attribute auch für die Vermarktung eingesetzt werden. Inzwischen wird auch stärker mit persönlichen Kontakten vor Ort gearbeitet, auch um ein besseres Verständnis der Geschäftspraktiken und der Geschäftsbedingungen vor Ort zu erlangen. (3) Schaffung der Rahmenbedingungen für die Unternehmensentwicklung: Eine vorteilhafte Unternehmensentwicklung braucht mehr als nur die Präsenz am Markt und gute Beziehungen. Folgende Komponenten erwiesen sich als bedeutsam:  Die Unterstützung durch Förderungen und die Teilnahme an Wettbewerben: Hier geht es darum, aktiv verfügbare Möglichkeiten zu nutzen. Die Gründung von URBAN TOOL war nur aufgrund einer Förderung möglich. Besonders Förderungen spielte eine entscheidende Rolle bei Innovationsprojekten und deren Entwicklung zur Marktreife. Darüber hinaus erfüllte die Teilnahme an Wettbewerben drei Funktionen: Erleichterung des Markteintritts (besonders wichtig beim Orientierungsdesign); Verstärkung der medialen Präsenz; Schaffung neuer Chancen zur Unternehmensentwicklung (etwa internationale Kontakte).  Darüber hinaus war es nötig, das eigene Umfeld neu zu strukturieren. So entschied sich das Unternehmen für einen Wechsel der Bank und der Steuerberatung, um wirtschaftliche Beratung stärker in das Unternehmen einzubinden. Um eine vertrauensvolle Beziehung herzustellen, legte man hohen Wert darauf, dass diese Einrichtungen das Unternehmen auch beraten und eine Sprache sprechen, die auch auf das Unternehmen eingeht. Letztlich muss aber auch die Bank mit der Flexibilität der Planung im Unternehmen leben können.  Die Rekrutierung von neuen MitarbeiterInnen schaffte neue Herausforderungen: So baut man auf junge BewerberInnen auf, die die Markenphilosophie gut wiedergeben, jedoch keine langjährige Erfahrung einbringen können. Die Lohnkosten veranlassten eine Suche nach flexibleren Personallösungen: Praktika, als unverbindliche Annäherung mit der Option auf Anstellung; sowie die Auslagerung bestimmter Aufgaben, um die laufenden Kosten gering zu halten und die Professionalität der Arbeitsleistung sicher zu stellen. Insgesamt peilt das Unternehmen ein natürliches Wachstum an, wobei Investitionen in Entwicklungsressourcen, der Ausbau von Netzwerken und der Erhalt der Unternehmensdynamik im Zentrum stehen.

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Innovationsstrategie Für das Selbstverständnis des Unternehmens ist nicht nur die erfolgreiche Positionierung als Marke am internationalen Markt entscheidend, sondern insbesondere die Entwicklung innovativer Produkte. Das macht sich zunehmend im Außendruck bemerkbar: Es reicht in dieser Branche nicht, einmal ein erfolgreiches Produkt zu lancieren, sondern der Markt erwartet regelmäßige Innovationen, um das „trendige“ Image zu erhalten. Die Schwierigkeit besteht darin, Innovation auf Dauer zu stellen und alltagstauglich zu machen. Dabei ist zuerst die Frage zu stellen, was das Innovative des Unternehmens überhaupt ausmacht:  Produktbezogen ist es die neuartige Kombination von bestehenden Lösungen zu einem neuen Produkt. Dieses wird erreicht durch die Schnittstellenpositionierung zwischen Mode und Technik und die Anbindung an den modernen urbanen Lebensstil. Daher werden technische Komponenten nicht neu entwickelt, sondern Ideen mithilfe verfügbarer Komponenten in neues Produkt verwandelt und auf eine marktfähige Lösung adaptiert.  Geschäftsbezogen handelt es sich um eine Art sozialer Innovation in Form einer Netzwerkstruktur mit Vertriebs- und Entwicklungspartnern. Im Zentrum steht ein Kleinunternehmen, das mittels Kooperationen das Innovationspotential sichert und den internationalen Geschäftserfolg stabilisiert. Im Selbstverständnis ist eine Umorientierung festzustellen, die sich in der Differenz des früheren Schwerpunkts auf Orientierungsdesign und dem neuen Vermarktungsschwerpunkt manifestiert: Ursprünglich wurde den Endabnehmern eine innovative Lösung als kreative Einzelleistung verkauft (dies bedingte aufwendige Akquisitionen auf einem hart umkämpften Markt). Nunmehr steht die Entwicklung innovativer Lifestyle-Produkte im Zentrum, die das Unternehmen selbst vermarktet. Dies trug wesentlich zur Stabilisierung der Geschäftstätigkeit bei, machte aber auch die Gründung eines zweiten Unternehmens erforderlich, das nicht nur lokal begrenzt agiert, sondern internationalen tätig ist. Beide Innovationsorientierungen stehen in Wechselwirkung: Zum einen ist die Innovativität der Produkte und deren Anschlussfähigkeit an gesellschaftliche Entwicklungstrends ein wesentlicher Aspekt des Erfolgs. Zum anderen macht der Vermarktungserfolg Druck, permanent Neues zu entwickeln, um das innovative Image zu erhalten. In diesem Zusammenhang lassen sich mehrere Antriebskräfte identifizieren, die dieses ermöglichen:  Selbstverständnis: Das Unternehmen sieht sich als kreatives Unternehmen, das erfolgreich Ideen vermarktet. Deshalb wird in Innovationsaktivitäten investiert, wobei als Auslöser Trends, Feedback der Konsumenten und die Entwicklung des Marktes fungieren.  Förderungen: Vor dem Hintergrund des Selbstverständnisses, eigene Ideen zu generieren und zu vermarkten, boten Förderungen eine entscheidende Chance, diese Strategie auch finanziell abzusichern. Deren Bedeutung hat im Zuge der Entwicklung abgenommen.  Stabilisierungsstrategie: Ein bedeutsamer Faktor bestand in der Unsicherheit, woraus eine Spannung zwischen kreativen Ansprüchen und der Notwendigkeit einer ökonomischen Absicherung entstand. Dies begünstigte das Interesse, Chancen rasch zu nutzen.  Marktimage: Mit zunehmendem Erfolg als innovative Marke baute sich Druck auf, diesem Anspruch gerecht zu werden. Der Druck kommt von zwei Seiten: den Großkunden und den Endabnehmern, dennoch setzt man vorrangig auf die eigene Kreativität.

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Insbesondere das Interesse an einer Stabilisierung des Unternehmenserfolgs und der Marktdruck müssen intern so bearbeitet werden, dass sie diese Entwicklung fördern. Im Unternehmen lassen sich mehrere Bereiche erkennen, die dies ermöglichen:  Die interne Organisation von Innovation: Wenngleich strategische Entscheidungen von den drei GesellschafterInnen getroffen werden, bildet der gemeinschaftliche Prozess der Entscheidungsfindung einen Schlüssel zur Nutzung des intern verfügbaren kreativen Potenzials. Die Bedeutung von Innovation drückt sich auch darin aus, dass die Mehrzahl der Mitglieder aus dem kreativen Bereich stammt. Damit sich das kreative Potential entfalten kann, wird einem guten Arbeitsklima großes Augenmerk geschenkt.  Dynamische Planung: Um diesen Innovationsdruck in einer flexiblen Form bearbeiten zu können, wurden intern die Begriffe „dynamische“ und „überraschende“ Planung geprägt.  Kooperationsnetzwerk: Innovationen werden keineswegs nur intern entwickelt, es spielen auch Großhändler, Endkunden, Lieferanten und ähnlich orientierte Unternehmen sowie Technologiepartner eine wichtige Rolle. Das verbindende Interesse ist zwar das Geschäft, es spielen aber auch der Erfahrungsaustausch und die kooperative Entwicklung von Produkten eine große Rolle. Aus diesem Grund werden in jüngster Zeit auch Joint Ventures und Lizenzverträge mit Fertigungs- und Entwicklungspartnern eingegangen, um wechselseitig Kompetenzen zu nutzen und das Unternehmen finanziell zu entlasten. Fazit Das Unternehmen vollzog einen Entwicklungsprozess von einer lokal auf individuelle Lösungen spezialisierten Designfirma hin zu einem international tätigen Kleinunternehmen, das sich dem Vertrieb innovativer und zugleich alltagstauglicher Lifestyle-Produkte an der Schnittstelle zwischen Mode und mobilen Technologien widmet. Die Unternehmensentwicklung ist getragen durch diese Produktphilosophie, deren Umsetzung jedoch an die wahrgenommenen Marktchancen angepasst wurde. Wesentliche Antriebskräfte dafür waren am Beginn die eigenen Initiativen zur Produktentwicklung, zur Teilnahme an Wettbewerben und das Bemühen um Förderungen. Dabei erschloss sich über die Produktvermarktung die Chance, das Unternehmen nicht nur ökonomisch zu stabilisieren, sondern zugleich auch die kreative Designarbeit fortzusetzen. Dafür war es nötig, dem Unternehmen eine neue Richtung mit einem Vermarktungsschwerpunkt zu geben. In der Folge entwickelte diese Marktorientierung eine eigene Entwicklungslogik, bei der die Hauptorientierung in der Nutzung der Fähigkeiten anderer Unternehmen in einem Netzwerk mit Großhändlern, Lieferanten oder Technologiepartnern zu finden ist. Dies erforderte eine Struktur, in der zuverlässige Geschäftsbeziehungen hergestellt werden können. Nach außen geschieht dies über die Regulierung der Anforderungen an Geschäftsbeziehungen und Anreizen für Investitionen kooperierender Unternehmen. Nach innen sind klare Entscheidungsstrukturen bei gleichzeitiger Förderung eines kreativen Klimas wichtig. Förderungen erwiesen sich als eine entscheidende Hilfe in der Startphase, um die Abwicklung größerer innovativer Projekte und die Markteinführung solcher Produkte zu gewährleisten. Es ist daher unwahrscheinlich, dass sich ohne diese Starthilfe die beschriebene Entwicklung ergeben hätte. Die Suche nach Stabilisierung des Unternehmens mündete in eine Strategie der flexiblen Nutzung von Gelegenheiten, wobei teilweise schlecht kalkulierbare Risiken in Kauf genommen wurden. Allerdings zeichnet 16

sich das Unternehmen dadurch aus, solche Risiken rasch in eine Risiko minimierende Strategie einzubinden.

Vergleichende Analyse der Fallstudien Die beiden Unternehmen weisen Unterschiede und Gemeinsamkeiten auf. So sehen sie sich ihrem Selbstverständnis zufolge als innovativ, wobei vordergründig der Erfolg der Kreativität der MitarbeiterInnen zugeschrieben wird. Tatsächlich spielt aber die Sensibilität in Hinblick auf neue Entwicklungen eine möglicherweise viel größere Rolle, indem sie die Möglichkeit eröffnet, die Dynamik wirtschaftlicher und sozialer Entwicklung aufzugreifen (moderne Architektur, Mode und mobile Kommunikation), in innovative Lösungen (Konstruktionen, Modeaccessoires) zu transferieren und ökonomisch zu verwerten. So schafft bei RWT die Orientierung an kreativen Kundenideen einen wichtigen Impuls für die Entwicklung innovativer technischer Lösungen. Bei URBAN TOOL geht es um die Rekombination von technischen Komponenten zu einer Idee, die in ein mit modernen Lifestyle-Trends zu vereinbarendes Produkt integriert werden. Dabei treten zwei Komponenten organisationalen Lernens deutlich hervor: Die Irritierbarkeit (als sensible Umweltwahrnehmung in Form von enttäuschen Erwartungsstrukturen: Etwas ist anders als angenommen und wird als bearbeitbare Anforderung aufgefasst) und deren Integration in Unternehmensprozesse (Entwicklung einer technischen oder organisatorischen Lösung) (Luhmann 1997). Allerdings verwandeln beide Unternehmen dieses Lernpotential unterschiedlich: Bei RWT ist es die Entwicklung von maßgeschneiderten Lösungen, die sich in Ausnahmefällen auch für eine allgemeine Vermarktung anbieten (Flexiskin). Da sich das Unternehmen aber nicht nur auf diese Lösung verlassen kann, lebt es vom Vertrauen, innovative und zuverlässige Lösungen für kreative Anforderungen verfügbar zu machen. Dies wiederum setzt eine hohe Spezialisierung voraus, um ein scharfes Profil als Akquisitionsvoraussetzung zu schaffen. Zugleich benötigt es eine kontinuierliche Unternehmensentwicklung für den Aufbau von Vertrauen. Bei Lösungsmittel hat sich die Strategie (Orientierungsdesign) als nicht erfolgreich erwiesen (mangelnde spezifische Reputation und zu kleiner regionaler Markt). Die zweite Strategie mit URBAN TOOL hingegen setzt auf eine Trendscout-Funktion, wobei nach Ideen gesucht wird, die auf Realisierbarkeit geprüft und je nach Möglichkeit auch entwickelt und vermarktet werden. Dabei ist der rasche Wandel im Designbereich entscheidend, weil hier ein Vorsprung geschaffen wird. Im Gegensatz zu RWT ist daher die Vernetzung entscheidend, die auf zweifache Weise genutzt wird: Als Kreativantrieb (Entwicklungspartner liefern Ideen und eröffnen neue Kombinationschancen) und als Vertriebsmotor (Großkunden). Bezüglich des Umfeldes wird deutlich, dass Konkurrenz zwar für RWT ein Problem ist und eine Abgrenzungsstrategie braucht, die auf Qualität und Zuverlässigkeit bei innovativen Architekturlösungen und auf der Gewinnung von Stammkunden beruht, während sie für URBAN TOOL sogar zum Absatz fördernden Antrieb wird, weil auf einem dynamischen Markt kurzfristig Begehrlichkeiten für die eigenen Produkte geweckt werden. Dabei sind eine breite internationale Ausrichtung und eine rasche und flexible Projektentwicklung vorteilhaft. Beide Unternehmen sind bei ihren innovativen Aktivitäten auf Partner angewiesen, aber in unterschiedlicher Weise: bei RWT sind es Partner für konkrete Entwicklungsprojekte, die Probleme defi17

nieren und deren Lösung abnehmen; bei Lösungsmittel/Urbantool sind es Netzwerke, die Entwicklungspotentiale schaffen und die Vermarktung organisieren. In beiden Fällen hängt die innovative Leistung und der damit zusammenhängende Erfolg von einer intensiven Kooperation ab: Bei RWT ist es die Reputation, die man mit Projekten aufbaut, bei URBAN TOOL ist es die Stabilisierung der Beziehungen zu den Netzwerkpartnern. Interessant an beiden Fällen ist, dass das Thema „Konflikt“ kaum angesprochen wurde, obwohl innovationsbewusste Unternehmen in der Regel konfliktbewusst sind, weil aus Konflikten Kreativität entstehen kann, sofern sie nicht einseitig gelöst werden (Hauschildt 2004). Dies deutet darauf hin, dass es sich weniger um innovative Unternehmen im klassischen Sinn handelt, sondern vielmehr um kreative Unternehmen, die jeweils äußere Anlässe oder Entwicklungen in der Umwelt aktiv aufgreifen und ihre Kreativität einsetzen, um Kundenprobleme zu lösen (speziell RWT) oder auf Trends frühzeitig aufzuspringen (URBAN TOOL). In beiden Fällen handelt es sich primär um nachfrageseitig induzierte Innovationen, wobei bei RWT eine demand pull-Situation (kundeninduzierte Innovation) überwiegt, während bei URBAN TOOL in der Regel eine (umfassendere) market pull-Situation vorliegt (Aufgreifen von Trends), die mit Angeboten neuer technischer Lösungen (technology push) kombiniert wird. Da beide Unternehmen primär Dienstleistungsunternehmen sind, stellt sich die Frage, welcher theoretische Zugang herangezogen werden kann, um das beschriebene Innovationsverhalten zu erklären. Ein Rückgriff auf den ressourcenorientierten Ansatz liefert eine Reihe von Ansatzpunkten für die Erklärung des beschriebenen Verhaltens (Burr und Stephan 2006):  Humankapital (fachlich qualifizierte und motivierte MitarbeiterInnen): Die Bedeutung dieser Ressource wird explizit von RWT betont, wobei aufgrund der technisch anspruchsvollen Lösungen bei RWT auch auf individueller Ebene hohe Anforderungen bestehen, während bei URBAN TOOL stärker eine interdisziplinärer Zusammensetzung des Teams sowie für Innovationen offene Kooperationspartner wichtig sind.  Reputation: Beide Unternehmen pflegen den Ruf als erfolgreicher Anbieter von innovativen Lösungen mit Qualität, was die Neukundengewinnung fördert (RWT) und die Verhandlungsposition gegenüber Netzwerkpartnern stärkt (URBAN TOOL).  Organisationskapital (effiziente Organisationsformen für Entwicklung von Innovationen): In beiden Fällen spielt das Projektmanagement eine zentrale Rolle. Im Rahmen von Projekten können mit überschaubarer sozialer Komplexität durch eine entsprechende fachliche Zusammensetzung auch sachlich komplexe Projekte erfolgreich abgewickelt werden, wobei bei RWT der Zeitrahmen zur Realisierung von Bauvorhaben entscheidend ist, für URBAN TOOL hingegen die Kontrolle der eigenen Einflusschancen im Netzwerk und der professionelle Umgang mit Modetrends.  Technologie (IT-Systeme zur Koordination): Während aufgrund der Kleinheit URBAN TOOL die projektübergreifende Koordination noch weitgehend informell regelt, benötigt RWT bereits ein internes IT-gestütztes Kommunikationssystem. URBAN TOOL greift beim Vertrieb an den Endkunden auf das Internet zurück.  Unternehmens- bzw. Dienstleistungskultur: Diese besteht im Fall von RWT darin, dass ein innovations- und kundenorientiertes MitarbeiterInnenverhalten erwartet wird und die MitarbeiterInnen auf die Unternehmensphilosophie eingeschworen werden. Die Unternehmenskultur von URBAN TOOL ist durch eine umfangreiche Lernerfahrung geprägt, die sich in einem zunehmend internationalem Kontext vollzieht und die Bereitschaft und Fähigkeit zu Kooperationen beinhaltet. Das Unternehmen versucht von einer reaktiven zu einer aktiven Gestaltung dieser Beziehung überzugehen. 18

Viele dieser Erfahrungen wurden in einer „Kultur des Experimentierens“ gewonnen, die auch Rückschläge beinhaltete, die RWT größtenteils erspart blieben. Beide Unternehmen verfügen über diese Ressourcen. Dies ist für Unternehmen dieser Größe wichtig, da sie kaum über Entwicklungsabteilungen verfügen, sondern die Innovationsleistung von „regulären“ MitarbeiterInnen zu erbringen sind, wobei aufgrund der Immaterialität von Dienstleistungen besondere Anforderungen an die Kommunikation zwischen Kunden und MitarbeiterInnen resultieren (Vermeilen und van der Aa 2003).

Literatur Burr W. und M. Stephan (2006). Dienstleistungsmanagement: Innovative Wertschöpfungskonzepte für Dienstleistungsunternehmen, Stuttgart: Kohlhammer. CEMI-CEREN (2006). Case Study Protocol: Strategic Innovation in Small Firms – An international analyis of innovation and strategic decision making in small to medium enterprises. CEMI Report 0602, The University of Western Australia: Centre for Entrepreneurial Management and Innovation ([email protected]). Frank H. und M. Lueger (1997). Reconstructing Development Processes. Conceptual Basis and Empirical Analysis of Setting Up a Business. In: International Studies of Management & Organization, 27(3), 34-63. Froschauer U. und M. Lueger (2003). Das qualitative Interview. Zur Praxis interpretativer Analyse sozialer Systeme. Wien: WUV. Hauschildt J. (2004): Innovationsmanagement, 3. Auflage, München: Vahlen. John R. (2005). Innovationen als irritierende Neuheiten. Evolutionstheoretische Perspektiven. In: Aderhold J. und R. John (Hg.): Innovation. Sozialwissenschaftliche Perspektiven. Konstanz: UVK. Luhmann N. (1997). Die Gesellschaft der Gesellschaft. 2. Teilband. Frankfurt/M.: Suhrkamp. March J. (1991). Exploration and Exploitation in Organizational Learning. In: Organization Science, 2(1), 71-87. Mazzarol T. und S. Reboud (2005). Costumers as predictors of rent returns to innovation in small firms: an exploratory study. In: International Journal of Entrepreneurship and Innovation Management, 5 (5/6), 483-494. Oevermann U. (2002). Klinische Soziologie auf der Basis der Methodologie einer objektiven Hermeneutik – Manifest der objektiv-hermeneutischen Sozialforschung, http:// publikationen.ub.unifrankfurt.de/volltexte/2005/540/, abgerufen am 23. 6. 2008. Statistik Austria (Hg.) (2006). Innovation 2002-2004. Ergebnisse der Vierten Europäischen Innovationserhebung (CIS 4). Wien: Statistik Austria. Vermeulen P. und W. van der Aa (2003): Organizing Innovation in Services. In: Tidd J. und F. Hull (eds.). Service Innovation: Organizational Responses to Technological Opportunities and Market Imperatives, London: Imperial College Press, 35-53. Wernet A. (2000): Einführung in die Interpretationstechnik der Objektiven Hermeneutik. Opladen: Leske + Budrich.

19

Innovation Profile of the Flemish Creative SMEs

Ysabel Nauwelaertsa, b, c, Frederik Van Asschea, c and Ilke Van Beverena,b a

Lessius University College, Department of Business Studies, Antwerp, Belgium Catholic University of Leuven, LICOS – Centre for Institutions and Economic Performance, Leuven, Belgium c CONCreaS – Centre for Entrepreneurship in the Creative Sectors, Antwerp, Belgium

b

Abstract1

This paper analyzes the innovative profile of the Flemish creative (design) sector using data obtained from 51 companies, taking part in an Innovation Diagnostic of their enterprise. Flemish creative companies are typically very small, but highly innovative. Results clearly show that the Flemish creative industry faces a number of specific challenges, mostly related to risk assessment and financing constraints. Moreover, creative entrepreneurs often lack the necessary economic background required to successfully commercialize their innovations and manage their business in an optimal way. Finally, government support appears not to be very well adapted to the need of micro firms (employing less than ten employees) in general and to the requirements of the creative sector specifically.

1 Acknowledgements: We would like to thank the Flemish Centre for Entrepreneurship in the Creative Sectors (CONCreaS) and Design Vlaanderen for granting us access to their database of creative entrepreneurs in Flanders. Students who participated in the seminar “Innovation in the Belgian SME sector” organized at Lessius in the Fall of 2006 provided valuable assistance in collecting the data used in this chapter. Our gratitude also goes to the six entrepreneurs who agreed to participate in in-depth interviews which resulted in the case studies analyzed here. Finally, we thank the editors of this volume for their helpful comments and suggestions. Any remaining errors are naturally our own.

1

1. Introduction In this paper, the innovative profile of a sample of 51 creative (design) companies in Belgium is analyzed. Since most of the firms active in this industry are small- to medium-sized, we will first briefly introduce the Belgian SME sector in general and discuss the importance of the creative industries within this sector. The companies that participated in the survey are typically very small, but highly innovative. Given the specific nature of the sector, combined with the small size of the firms, the design sector faces several specific challenges. First, it is very hard for these companies to acquire financial backing for their innovation projects and as a result it is virtually impossible to undertake market research prior to the introduction of their innovation(s). This is especially critical, considering that innovation is central to the survival and growth of these companies. The typical creative entrepreneur is entirely dependent on the continuous development of new products, processes, services or ideas in order to retain his competitive edge. As a consequence, the industry faces specific issues relating to risk assessment and financing constraints when they want to introduce their innovation to the market. Moreover, most entrepreneurs that took part in our study are educated as designers (in fashion, jewelry, product development, web design, etc.) and are as such poorly prepared to undertake the full commercialization process of their innovations. Financing constraints also play an important role here, since most of the respondents lack the necessary financial means to hire a business manager for this part of the innovation process. Finally, a clear point emerging from this study is that existing government support for innovation does not seem very well adapted to the specific needs of „micro firms‟ (firms employing less than ten employees) in general and to those of the creative sector specifically. Nevertheless, it should be noted that most of the companies in the sample are highly successful in their respective sub-industries, although perhaps smaller in size than they could be, provided some of the issues mentioned above could be addressed. This paper is organized as follows. Section 2 sketches the general profile of the Belgian SME sector and summarizes the characteristics of the Flemish creative sector. Section 3 analyzes the data, collected from our sample of creative entrepreneurs. Section 4 discusses the case studies and gives an overview of the most salient findings of this study. Finally, section 5 formulates policy recommendations and concludes.

2. Brief report on the Belgian SME sector and the Flemish creative sector This paper summarizes the findings from a larger study from the same authors. From the performance indicators presented in this larger study, based on Eurostat data (2008), it is clear that Belgium has an SME oriented economy. The number of enterprises and the employment figures are somewhat higher than the overall EU-15 averages. When divided into different size classes, the differences with respect to the EU-15 average become more noticeable. For example, only Mediterranean countries have more micro enterprises than Belgium. In terms of turnover and added value, the Belgian SME share nevertheless seems to be decreasing as a result of a significantly lower

2

productivity. Within a European context, these parameters still remain slightly higher than average, with only Denmark, Finland and Ireland showing even higher productivity per employee (on average). The object of this study is to assess the innovative profile of the Flemish creative or design sectors. In the context of this paper we will assume that both terms are referring to the same sector, although in international publications the term creative sectors is used as a broader label that can refer to almost all economic sectors that imply creativity in their product portfolio, processes or services. The Bureau of European Design Associations (BEDA)2 describes design as “a broadly transferable process that gives physical shape to people‟s needs and desires for the future using the designer‟s creativity and intuition, often assisted by more formal external research, generating future vision.” According to BEDA, design is a process that leads to an actual marketable product (BEDA, 2001). The Flemish Ministry of Economy defines design as: … “a holistic dealing with matters, that besides the (re-) styling of products, extends to the application of innovative and alternative materials, ergonomics, engineering, ecology and ethics, psychology, culture and last but not least management” (ESOMAR3, 2004). Quantifying this sector is quite difficult. There is no specific Nace4-code for design companies. In fact, we‟ve even noticed that often Flemish creative entrepreneurs and enterprises are registered with an incorrect nace-code (i.e. because of altered, broadened or shifted activities or simply nonavailability of a suitable activity code). Similarly and partly as a consequence of this classification problem, European surveys lack common comparable statistics. Nevertheless BEDA estimates that the 410.000 European designers generate a consolidated annual turnover of € 35 billion. (BEDA; 2006). The lack of reliable data is surprising, especially since both academics and decision makers agree that creativity and the design of new products, processes and services are important success factors in present-day business. In 2007 Flanders Design presented the results of a survey about the use of design in a representative sample of 400 production and 100 services companies. Graph 1 shows that 47 percent of both production and services companies integrate design aspects in their business strategy from time to time. Some 11-12 percent considers design as a strategic value (Flanders Design, 2007).

2

BEDA units and represents approximately 40 public and private design institutions across Europe. BEDA was founded to communicate the importance and added value of design and innovation within the European economy to the European institutions. 3 ESOMAR is a World Association of Opinion and Marketing Research Professionals (formerly known as the European Society for Opinion and Marketing Research. 4

The Nace classification if the official nomenclature of economic activities used by Eurostat. The classification can be downloaded from the Eurostat Ramon server at http://ec.europa.eu/eurostat/ramon/ .

3

Graph 1: The use of design in 400 production and 100 services companies in Flanders, 2007 0%

10%

services 2007

11%

production 2007

12%

20% 12%

30%

40%

12% 20%

50%

11% 9%

60%

70%

80%

90%

100%

53%

6%

53%

Design as a strategic value

Use of design for the development of products

Use of design for the finishing of products

No systematic use of design

No implementation of design

Source: Flanders Design (2007)

Although half of the companies indicate not to implement design as such, close to all of them apply activities that can be considered as design activities (branding, corporate styling, patent applications,…). Profitability is higher for frequent implementers of design than for those who implement design rarely (Design, 2007). Companies in the creative industries tend to have a significantly different business profile. They innovate more often, pay more attention to strategic and marketing issues, and seem to be more advanced in their use of human resources practices (de Jong, et al., 2007). In international literature the creative industries are ever more identified as a principal accelerator of the economy. On the one hand they contribute to overall knowledge generation, while on the other hand the creative industries as such contribute to employment and the total added value of their region. Moreover, Dutch empirical research has shown that the presence of creative industries have strong positive indirect effects on regional employment, growth, firm entry and startups (de Jong, et al., 2007). The elevated awareness for design, creativity and outward appearance of products, processes and services, is the result of, among others, a highly funded creativity policy by the Flemish regional and urban governments . BEDA's mapping of the European design industry shows that close to 16 percent (about 67,000) of Belgian companies think that design provides an added value to their activities (even 29 percent in the construction industry). About 200,000 jobs in Belgian companies can be directly or indirectly attributed to the design sector. For the Flemish region BEDA estimates these figures to be 18 percent of the total amount of enterprises and 80,000 direct and indirect jobs (BEDA, 2006). In 2007, the Vlerick Leuven Gent Management School was asked by FlandersDC5 to determine the economic value of the core creative and cultural sector6 in Flanders, according to scientific standards.

5

Flanders DC (short for Flanders District of Creativity) is the Flemish governmental organization that

promotes entrepreneurial creativity throughout the region in order to make Flanders a more creative, more prosperous and more ambitious place to live and work (FlandersDC, 2008).

4

For the period 1995-2003, De Voldere et al.. concluded that the sector grew annually by 3 percent in terms of total employment and number of enterprises. Tables 1 and 2 clearly show that this growth was not only mainly generated in Flanders compared to Brussels. This growth was far more rapid when compared to the total Belgian economy, where the average growth of employment was only 1.6 %, only half of the growth in the creative sector. With an average employment of about 8.53 fulltime-equivalent staff members in 2003, the majority of these enterprises is situated within the micro and small size class (De Voldere et al., 2007). Table 1: Core creative and cultural sector in Flanders and Brussels, 1995-2003 (volume & growth) Employment

Number of enterprises

1995

2003

Δ

Annual growth

Flanders

26,255

33,156

26.30%

3.00%

Brussels

23,014

22,401

-2.70%

-0.30%

Flanders & Brussels

49,269

55,557

12.80%

1.50%

Flanders

3,076

3,888

26.40%

3.00%

Brussels

1,629

1,831

12.40%

1.50%

Flanders & Brussels

4,705

5,719

21.60%

2.50%

Source: Maenhout, De Voldere, Onkelinx (2006) Table 2: Annual growth of core creative and cultural sector in Flanders and Brussels, compared the total Belgian economy, 19952003 SMEs Micro Annual growth in number of enterprises of the total Belgian economy (1999-2003) Annual growth in number of enterprises of the core creative and cultural sector in Flanders (19952003) Annual growth in employment of the total Belgian economy (19962003) Annual growth in employment of the core creative and cultural sector in Flanders. (1995-2003)

Small

Large enterprises Medium

Total

Subtotal

0.82%

0.76%

0.84%

0.81%

1.10%

0.81%

n.a.

n.a.

n.a.

n.a.

n.a.

3,00%

0.61%

2.07%

2.97%

1.60%

1.60%

1.60%

n.a.

n.a.

n.a.

n.a.

n.a.

3.00%

Source: Based on De Voldere e.a. (2007) and Eurostat (2008)

Quite obviously, the Flemish core creative and cultural sector is an emerging and fast growing segment of the economy. In order to measure the impact of the creative sector on the Flemish economy in a realistic way, the Vlerick researchers omitted the formally subsidized cultural sub sector7 from their analysis and identified the core creative sector as follows: the audiovisual industry; 6

De Voldere et al. define the core creative industry as a gathering of the entire market oriented business

sectors that provide a „symbolic added value‟. 7

The subsidized cultural sector is, despite its symbolic added value, evidently a non-market oriented industry, i.e museums, authors, theaters, etc (De Voldere et al., 2006)

5

the music industry; fashion industry; architecture and design; the printed media and publishing sector. (De Voldere, et al.., 2006)8. We calculated that the apparent labor productivity in the Flemish core creative sectors differs significantly from the average Belgian ratios. Although we have the impression that productivity in the total creative sector is somewhat lower than average, this is in fact not correct. Roughly all of the economic activity is situated within the micro (or small) size class (-s). In general terms, the creative sector productivity per person is somewhat 30 percent higher than the average for Belgian SMEs. The architecture and design sub-sector scores lower than the other sub-sectors, but this can be explained by the high level of self-employment prevalent in this segment. Hence, the Flemish creative or design sector is a small but rapidly growing and highly productive sector with a high rate of self-employment, a growing market potential and backed up by large amounts of governmental support. The growth in value added and employment surpasses the Belgian SME average.

3. Data Analysis a. Sampling In October 2006, an invitation was distributed by the Flemish Centre for Entrepreneurship in the Creative Sectors (CONCreaS) to all creative entrepreneurs listed in their combined databases; to participate in the Innovation Diagnostic9. This invitation was sent by mail to 432 small firms active in the creative sector. A number of firms responded directly to the invitation, while others where contacted by telephone in the following weeks to encourage participation in the survey. The final sample consists of 51 firms, for which the data were collected between October and December 2006. While the majority of the participants preferred to fill in the questionnaire together with a member of the Lessius team10 during an interview (which usually took place at the firm), six firms preferred to fill in the diagnostic alone and to send it to us directly by e-mail. Although the sample is relatively small, it is more or less representative for the firms in the original database. Moreover, firms active in the creative sector in Belgium are typically micro-firms, with few or even no employees. The majority of firms is led by the owner-manager (who also answered the questionnaire in most cases), typically without any support of other senior managerial staff or a board of directors. We will discuss these and other characteristics related to the data in what follows.

8 9

For more a detailed definition of these sub-sectors we refer to De Voldere et al. (2006) For a more detailed description of the diagnostic tool, we refer to chapter 1 in this volume.

10

The Lessius team consisted of Ysabel Nauwelaerts, Frederik Van Assche and Ilke Van Beveren, together

with the students who participated in the seminar “Strategic Innovation in the Belgian SME sector” in the Fall of 2006.

6

b. General summary statistics Although all firms in the sample are active in the creative sector, they are active in a range of different activities, as can be seen in table 3. From the table, it is clear that the majority of the participating firms are active in “Interior design and architecture”, “Product development and industrial design” or “Web design and ICT”; together these three activities account for 55 percent of the firms in the sample. Table 3 : Distribution of sample by activity Activity

#

Interior design / architecture

10

Product development / Industrial design

10

Web design / ICT

8

Jewelry design / goldsmith

7

Landscape architecture

5

Photography

5

Ceramics / Pottery

3

Visual artist / Graphic artist

2

Fashion design

1

Total

51

As was already noted, most firms in our sample are micro-firms. According to the OECD (2004) definition, which was employed for the purpose of this research project, micro firms are enterprises employing less than 9 employees and generating an annual turnover of less than € 2 million. In fact, only four firms in our sample employ more than 9 employees and only two firms report an annual turnover of more than € 2 million. Moreover, 25 (39) firms report no full-time (part-time) employment in the current year; while 26 firms have an annual turnover below € 250,000. Table 4 summarizes these and other general characteristics of the data set. Table 4: Summary statistics (N = 51) Variable

Mean

Stdev

Min

Max

Age of the firm

16.75

18.24

1.00

100.00

Current Full-Time Employment

1.94

3.19

0.00

13.00

7.05 %

48.77 %

-100.00 %

200.00 %

0.47

0.99

0.00

4.00

Growth in Part-Time Employment compared to three years ago

1.96 %

31.56 %

-100.00 %

200.00 %

Current Annual Turnover (€)

402,439

537,579

2,000

2,300,000

Growth in Turnover compared to three years ago

74.67 %

163.73 %

-65.63 %

900.00 %

Growth in Full-Time Employment compared to three years ago Current Part-Time Employment

7

The growth figures in table 4 should be interpreted with caution. If a firm only employed one fulltime employee three years ago and has no employees in the current year, this implies a growth rate of -100 percent. The maximum growth in turnover of 900 percent is realized by a firm that has introduced a major innovation in the last three years. The same firm has also doubled its employment over the same period. It is also one of the very few firms in our sample who have applied for a patent for their innovation, the commercialization of which has been highly successful. From table 4, it is clear that the firms in our sample grow on average in terms of employment and turnover, although not at a very high rate in terms of employment, especially when their average size is taken into account. As was noted in the previous section, the average firm in our data set is small compared to the other samples in this book. Overall, average employment in the “international” data set, which comprises of the samples for all countries; amounts to 66.6 full-time employees and 23.9 part-time employees (Mazzarol, 2007). Average growth rates for employment and turnover in the global data set equal 22 and 29 percent respectively. This implies that the firms in our sample show a higher growth rate in terms of turnover compared to the sample average, but a much lower growth rate in terms of employment. This most likely has to do with the high costs associated with hiring employees and the uncertain (risky) environment in which creative entrepreneurs operate. We will come back to some of these issues in what follows. c. Innovation in the creative sector: Summary of findings As was already noted, creative entrepreneurs in Belgium differ from other firms in the global sample in terms of their strategic decision making process. Since most firms have no or only a few employees and no senior managerial staff or board of directors, the owner-managers attach more value to the advice of family, friends, lawyers and accountants than firms in other countries (Mazzarol, 2007). Customers and suppliers are perceived as influential in the commercialization of innovations, although not as critical. The entrepreneurs in our sample share the need to retain their creative edge and uniqueness and as such the relative influence of all persons other than the designers themselves is perceived of lesser importance. Given the highly innovative character of the sector, it is not surprising that only two firms in our sample did not realize any innovations during the past three years. Of the other 49 firms, 21 introduced between 1 and 5 innovations; 8 firms introduced between 6 and 10 innovations and 20 entrepreneurs commercialized more than 10 innovations over the same period. On average, the firms in our sample spent 32.17 percent of their annual turnover on the development and commercialization of their innovations. As was explained in detail in chapter 1, entrepreneurs were asked to evaluate a particular innovation in terms of its volume (total annual sales generated by the innovation), rate (rate of profit associated with the innovation) and length (duration of the innovation‟s lifetime). On the basis of 8

these three characteristics, eight rent profiles were identified. The results for the Flemish sample are given in table 5. Compared to the global sample of firms, our sample has a significantly higher frequency of “Shrimp” and “Oasis B” profiles (Mazzarol, 2007). Although the “Shrimp” profile might at first sight seem undesirable, this is not necessarily the case for creative entrepreneurs, who often develop many innovations per year. From the 11 “Shrimp” profiles in our sample, seven firms realized more than 10 innovations during the past three years. This implies that these establishments are much less dependent on a single innovation, but rather on their long-term success in commercializing multiple innovations. The “Oasis B” profile is an attractive profile for micro firms, given its low requirements in terms of production volume. As we will see below, creative micro firms face serious difficulties in acquiring sufficient funding for their innovations, rendering high investments virtually impossible. Hence, the Oasis B profile, which combines low volume with a high rate and high length is a highly attractive rent configuration for the firms in our sample. Table 5: Rent profiles for innovative firms (N = 49) Rent profile

Definition

N

Shrimp

Low volume, low rate, low length

11

Champion

High volume, high rate, high length

9

Gadget

Low volume, high rate, low length

3

Joker

High volume, low rate, high length

3

Flash in the pan A

High volume, low rate, low length

6

Flash in the pan B

High volume, high rate, low length

3

Oasis A

Low volume, low rate, high length

4

Oasis B

Low volume, high rate, high length

10

Graph 2 shows the average market, innovation, resources and strategy index for the sample of Flemish creative entrepreneurs. In spite of the highly innovative nature of the sector, the average indices are only slightly higher than 5. The highest score is obtained for the market index (6.24), which (as was explained in chapter 1) relates to the way firms manage the introduction of their innovations to the market. Graph 2: Average Innovation Index of the Creative Sector in Flanders Market Index 10 8 6 4 2

Strategy Index

0

Innovation Index

Flemish Creative Sector Average Score Resource Index

Maximum Score

9

In what follows, we will discuss the potential causes for these relatively low scores in somewhat more detail. d. Summary of findings and implications In addition to the questions relating to the strategic decision making process and innovation rent profile at the firm level; the participants were also asked to give their opinion with respect to the general innovation climate in Belgium. Several factors emerged as particularly important to the majority of entrepreneurs from this analysis; they are summarized in table 6. Table 6: Innovation climate in Flanders: Overview of findings Positive influence

±

Negative influence

Geographic proximity to key markets

Access to (external) financing to fund future growth

Difficult access to workforce with necessary skills and education

Lifestyle in Flanders (Communications) Infrastructure (roads, electricity, ICT)

Access to high quality (local) research centres (eg. Universities)

Cost of doing business (wages, resources, other costs and regulation) Limited government support for local (small) innovators

As can be seen in table 6, the Flemish region is generally perceived as positive by firms with respect to the geographic distance to their market, the lifestyle (and standard of living) and infrastructure. However, since many firms in the creative sector sell luxury goods or services, they are necessarily heavily influenced by the economic climate. All factors related to supporting staff, government support and the cost of doing business are considered to be factors hampering the innovation climate in Flanders. Government support is often not directed specifically at the design sector and is often reserved for new start-ups. Firms that have been active for a longer period of time, often do not qualify for any form of government funding. Even if they might, it is often not feasible for the single owner-manager of micro firms with little or no employees to keep track of all the possibilities and meet all the requirements to obtain government support. Although access to external finance is not perceived as a negative factor, it can certainly not be considered a positive factor either. Since most firms in our sample started their activities several years ago and are still active today, they have obviously been successful in obtaining the necessary starting capital. However, both traditional banks and venture capital funds generally respond negatively to financing requests made by the creative sector. The main cause for the attitude of both bankers and venture capitalists or business angels can be found in the volatile character of these firms‟ investments and returns. Furthermore, financial institutions tend to require detailed business and financial plans when firms apply for financial support. Given the specific nature of the design sector, it is often very hard for the entrepreneur to estimate future profits and costs, a task for which they often lack 10

sufficient (economic) training as well. Moreover, commercialization of innovations typically takes a long time, hence the return on investment does not necessarily come immediately. We will come back to this issue below. Moreover, acquiring advice from sector organizations such as UNIZO11 or from external advisors such as accountants of lawyers, often proves to be hard, given their lack of specialization in and knowledge of the design sector. Similarly, access to external networks, such as local research centers and universities merits improvement. Of the 51 entrepreneurs in our sample, only one firm was engaged in an active collaboration project with a university. For each of the four innovation indices discussed briefly in the previous section (market, innovation, resources and strategy), respondents were asked to sum up the three most important challenges their business faces. Table 7 summarizes the most frequently stated obstacles for each of the indices. Again, a number of these difficulties are undoubtedly related to the small size of the firms in our sample, but given the highly innovative character of the sector, we feel they are too easily overlooked by policy makers. Table 7: Innovation Index: Challenges facing the Flemish design sector Market

Innovation

Resources

Strategy

Small size of the local market

Effective and affordable IPR protection

Lack of financial resources

Lack of strategic expertise

Competition (local, imports and imitation)

Imitation

Finding qualified personnel

Drawing up a financial / business plan

Economic climate (consumer confidence) Branding

Lack of official recognition of profession Lack of innovation resources

Lack of management and specific external expertise

Securing sufficient capital provision

Lack of government support for incumbent innovators

Lack of formal innovation management

The most notable challenges facing creative entrepreneurs in Flanders are clearly related to a lack of resources. Given the high costs associated with intellectual property protection, it is virtually impossible for the firms in our sample (with a few notable exceptions) to apply for patents for their innovations. This lack of protection makes them highly vulnerable to outside competition, including cheap imitations. Similarly, the absence of the required knowledge to draw up a financial and business plan, required to secure sufficient financing for their firm, is related to the lack of resources to hire a qualified manager or external expert. Other challenges are more related to a lack of support by the government, which spends a lot of resources on supporting new start-ups, but offers less opportunities for small incumbent firms that require financial and other support. Some entrepreneurs (eg. goldsmiths) mentioned the lack of recognition of their profession (as opposed to retail jewelry stores), which could help to limit competition and imitation issues. The small size of the local market is also mentioned as a hampering 11

UNIZO is the Flemish representative Organisation for the Self-Employed and SMEs (http://www.unizo.be/eu/index.jsp).

11

factor in bringing innovations to the market, a factor that is also related to the lack of available resources to expand the business internationally. Despite the many challenges and difficulties the design sector in Flanders continues to face, most participants in our survey evaluated their own innovations as positive. Although they lack formal innovation management processes and managerial and strategic expertise in some respects, the majority of the entrepreneurs we interviewed was very much aware of their strengths and limitations and employed at least some form of (ad-hoc) strategic management. Nevertheless, it can not be ignored that the growth potential of the sector can, under the current conditions, not be fully realized. 4. Interpretation of results and discussion of cases a. Presentation of six cases The final stage of the research consisted of an in depth study of the innovation process of six creative firms, selected from the list of the 51 respondents. The six creative firms, chosen for the more extended case studies are different in a number of important respects. They are active in quite different sub-sectors within the creative industry and their revealed innovation profiles are also quite different. Table 8 summarizes the six firms selected for the case studies. For reasons of confidentiality, we replaced the names of the firms by an imaginary name, referring to the firm‟s main activities. Table 8: Summary of cases Name of the firm

Activity

Rent profile

Furniture

Interior design

Champion

Jewels

Goldsmith

Oasis

Mobile

Product design

Oasis

Alumat

Industrial design

Flash in the pan

Informat

Web design

Flash in the pan

Luxe

Product design

Joker

b. Study of the most important weaknesses of innovative, creative SMEs In what follows, we study in a more in depth way the main problems and remarkable points related to the innovation process of creative SMEs in Belgium. The case studies allow us to obtain better insights into both the causes of challenges the entrepreneurs face as well as into the key factors to success. Moreover, using the information obtained from the cases, it is possible to illustrate the salient observations resulting from the study. Naturally, it is not possible to describe all six cases in-depth here, hence we will focus on the most remarkable and typical points resulting from them. 12

A first important problem that we identified in almost every case is the difficult access to financial resources. This problem for creative SMEs has been confirmed by other studies such as Nauwelaerts and Frank (2007). It seems very hard for creative SMEs to gather financial resources, especially in the form of bank loans but also subsidies or other sources of financial support. The distrust and suspicion of financial providers towards creative SMEs is generally very high. The main reasons for the difficult access to financial resources seem to be related to the nature of the „creative activities‟ themselves. In general, creative firms dispose of only a small amount of tangible fixed assets or fixed capital. The main part of their capital is incorporated in their creative and innovative capabilities which are generally considered as „human capital‟ or „intangible assets‟. The problem with these intangible assets is that, although they might contain or lead to some very important and extraordinary value, their actual value is very often hard to prove, especially in the earlier stages of a project. Many small / micro creative companies‟ tangible assets are limited to a computer, some software and a small, often rented office. Companies such as „Mobile‟ and „Luxe‟ work mostly on a project basis which entails that they have no production activities (apart from the development of prototypes). Above that, their work requires a long period of time before realizing any financial return and their income can be quite volatile. This represents a first major set of problems in convincing banks to obtain a loan. The project of the mobile daycare centre can perfectly illustrate these elements. The „Mobile„ has been working on the development of the mobile daycare centre for some years. This concept is relatively new and requires not only a lot of adjustments over time (after pre-testing,…) but it also takes time to convince the customers of the value of this new concept. Since the mobile designer is not a producer of the product, but only the developer of the concept, he has very little tangible assets to prove the value of his creation or to use as a guarantee (collateral) for his loans. He has to convince financial supporters by his persuasive talk and his drawings. This is a very painful problem that a number of the creative SMEs face, particularly those firms whose activities are limited to the design and do not entail (m)any production or sales. Those creative entrepreneurs that do have substantial production or sales activities, clearly seem to have much fewer problems in finding sufficient financial resources. Companies such as „Alumat‟ who sell and (partly) produce finished products, dispose of enough tangible assets to guarantee their value towards financial providers or partners. Also their strong financial results from the past in terms of sales and return offer them a strong bargaining position towards banks and other financial providers. „Alumat‟ is therefore also one of the few creative firms admitting to having no substantial problems in acquiring sufficient financial resources. Another aspect, related to this issue, is the fact that banks and other financial institutions request detailed financial or investment plans from the entrepreneur before allowing / allocating financial support. Many creative SMEs admit they do not have the appropriate personnel and knowledge to set up a detailed and realistic financial plan. The cost as well as the search for the appropriate person for 13

this job causes problems. Companies like „Jewels‟ or „Luxe‟ confirm the strong mistrust of banks and other financial supporters and they indicate their personal lack of knowledge in financial and management related topics as a major weakness. Above this, it seems hard to find a good financial adviser who can provide them with the necessary management and financial advice. A final, typical weakness of the creative SMEs in our study is related to the very small production series they are generally confronted with. The nature of their products or services which are mostly „unique, innovative, creative and exclusive‟ entails that production is limited to very small series. The small production batches are generally very costly and block any possibility to realize scale economies. This weakness is also apparent from the results of the innovation profiles where most of the creative SMEs seem to have a „small volume‟. Their small sales volumes clearly restrict their financial and operational capabilities as well as their bargaining position towards investors etc. Nevertheless, a few exceptional creative SMEs

such as „Alumat‟ and „Informat‟ succeeded in

realizing higher sales-volumes because they do not only sell unique products, but they also offer more standardized products. Also the firm „Jewels‟ recognized the importance of realizing higher sales volumes. Therefore, „Jewels‟ added a collection of more commercial, imported jewels to their portfolio which provides them with larger and more stable sales volume and income, needed to guarantee the survival of their exclusive, tailor made jewel collection.

5. Policy suggestions and conclusions On the basis of the previous 51 innovation profiles and 6 case studies on creative SMEs in Belgium, we conclude this paper by formulating some suggestions and policy implications which could help to improve their innovation process. The suggestions which are formulated here, try to give a solution or an answer to the most relevant problems revealed in the study. They are presented in two points. First we formulate a set of advices for the SMEs themselves in order to overcome or avoid the most important weaknesses or traps. Next we present a number of policy implications or suggestions for governments and other public institutions to help creative SMEs in their innovation process.

a. Suggestions for the SMEs One first important conclusion from our study is that most of the weaknesses and problems identified in the creative SME sector seem to be quite general and related to one another. This means that the problems should be tackled together but also that, once a firm can overcome one or two of these problems, it will generally be easier to solve the others. Some of the most frequent problems which seem to be very much interrelated are : the difficult access to financial resources, the relatively small sales volumes, the small production series / batches, the limited fixed assets (as collateral) and 14

the lack of managerial and financial knowledge (for example to set up a financial or investment plan). It is clear that most of these weaknesses are related to one another and it also appears from our study that the more successful creative SMEs show no important problems for any of these points. Two of the case study firms for example succeeded to raise their sales volume by adding a more commercial product line to their exclusive ‘small series’. This allowed them to convince financial suppliers more easily thanks to the stronger financial basis they could lean on. A first important suggestion to overcome the typical „financial‟ and „volume‟ problems could be to enlarge sales volumes for example by extending the exclusive, innovative and unique, small product lines with some more commercial, standardized products. This could be realized through imports of more commercial goods from inside or outside the country. In general, creative firms are not too excited to sell commercial products since they are often considered as a competitive threat. Nevertheless, SMEs like the jewel designer or „Alumat‟ prove that this enlargement of their product lines with more commercial products has a positive effect on the financial and general state of the firm. This larger and more stable revenue, resulting from the commercial product line can guarantee a stronger financial basis and helps in convincing external investors. This offers the creative entrepreneur more space to develop and commercialize its more exclusive and more capital requiring innovations on a longer term. Second, a set of creative SMEs we studied seem to realize limited margins because they mainly create, but do not produce nor commercialize their innovations in their own name. The production and commercialization is often taken over by larger firms, claiming the largest part of the revenue. One solution to this problem would be for the creative SMEs to incorporate the production and / or commercialization of their innovative products in their own firm since these activities offer a larger share of the value added and margins. Firms like „Luxe‟ should try to commercialize their own creations in order to retain a larger share of the profits and realize a higher margin or rate. Nevertheless, this is not always a possible or realistic path to follow by the micro firms because of their limited financial resources. An alternative solution could be found in a „take over‟, merger or acquisition of the SME by a larger / stronger firm. Some of our studied micro-firms admitted openly that they had no negative feelings towards (or were even in search of) larger firms to take over their assets and financial responsibility. Of course, the creative freedom should be agreed upon the contract, in order to guarantee the innovative impulse.

b. Suggestions for public support to creative SMEs Some of the public policy implications we suggest hereafter, could sound more traditional than others but they all result clearly from our study of Belgian creative SMEs. First, the important problem of difficult access to financial resources could be tackled in different direct or indirect ways. If the government is convinced of the importance of innovation in a dynamic 15

society, it could help directly by offering financial support in the form of subsidies, grants, fiscal advantages, guarantees or warrants. Especially in the first five years of a new business, some external, public financial support seems to be almost indispensable for creative SMEs to survive in a competitive environment. The typical weaknesses mentioned above, which are inherent to creative and innovative firms (high fixed costs, limited fixed assets, longer period before the innovation yields return,…) justify the need for some public financial support in the early years of innovative entrepreneurship. The financial support should not necessarily be directly offered through subsidies,… but can also be granted by some kind of guarantee to facilitate entrepreneurs‟ access to external loans from private financial institutions. One important detail is that these means of public financial support should be well communicated and easily accessible, also for the very small firms which seemed not always to be the case. Second, there seems to be a crucial need for practical education and training in managerial, financial, administrative and marketing related issues. This gap could be perfectly fulfilled by organizing practical training programs or workshops helping the creative entrepreneurs in their managerial or financial issues. These programs should be very well focused on the specific needs of the creative entrepreneurs, for example focusing on how to set up a business plan and a financial or cash plan, how to tackle the (inter-)national markets, how to follow up or solve administrative issues and so on. CONCreaS, „the Centre for Entrepreneurship in the Creative Sectors‟, is a good example of such an initiative for the Flemish creative entrepreneurs. Another solution could be found in providing some professional, public assistance for young innovative firms who want professional support in one of these issues. Finally, we think the government has an important role to play in stimulating networks where creative entrepreneurs can gather and meet in order to share information, knowledge and best practices. These networks seem to play an important role also in finding financial and professional support. They can also lead to some joint initiatives in terms of sharing production capacity for example for the production of prototypes or sharing commercial and logistic networks.

16

6. References BEDA Bureau of the European Design Associations (2001), „Design for future needs‟, Barcelona, Spain, http://www.beda.org/images/pdf/668bce9b7764d218d5f649e782191a17.pdf BEDA Bureau of the European Design Associations (2006) „European Design Report; The European Design Industry in facts and figures‟, Barcelona, Spain, Belgian federal government (2005) „Lisbon strategy, the national Lisbon reform programme 2005-2008 Belgium‟, http://www.belgium.be/eportal/ShowDoc/chancellery/imported_content/pdf/lisbon_strategy_EN.pdf?c ontentHome=entapp.BEA_personalization.eGovWebCacheDocumentManager.en, 17/01/2008 de Jong, J.P.J; Fris, P., Stam, E. (2007) Creative Industries – Heterogeneity and connection with regional firm entry, Zoetermeer, Netherlands, Scales, dec. 14th 2007 De Voldere, Isabelle; Maenhout, Tine; Onkelinx, Jonas; and others (2006) „Creatieve industrie in Vlaanderen‟, Leuven, 106 p. EUROSTAT (2008) „Structural business statistics‟, http://epp.eurostat.ec.europa.eu/portal/page?_pageid=0,1136195,0_45572097&_dad=portal&_schema= PORTAL, 10/01/2008 ESOMAR Public Sector Social Research (2004) „Grasping the ungraspable‟, Berlin, Germany, May 2004 Federaal Wetenschapsbeleid (2008) „O&O en innovatie-indicatoren, Statistieken & indicatoren‟, http://www.belspo.be/belspo/stat/xls/O&OStatistieken_Internet_NL.xls#'CE12'!A1, 17/01/2008 Flanders Design (2006) „Vormgeving in cijfers‟, Brussels, http://www.flandersdesign.be/UserFiles/File/3333_presentatie_DEF3.ppt, 17/01/2008 Flanders Design (2007) „The economical impact of design on companies in Flanders‟, Brussels, http://www.flandersdesign.be/UserFiles/File/economical%20impact%20of%20design.versie%20websit e.ppt, 17/01/2008 FlandersDC (2008) website Flanders District of Creativity, www.flandersdc.be, 20/01/2008 Heirman, Nicolaï (2007) „Strategische innovatie in de Belgische KMO‟s en meerwaarde van de creatieve sectoren‟, Lessius University College, Department of Business Studies, Antwerp, Belgium, Diss. lic. Mazzarol, Tim and Sophie Reboud (2006) „Strategic decision making in small innovative firms: The perceived importance of other voices,‟ Paper presented at the EFMD 36th EISB Conference on Entrepreneurship, Innovation and small Business 2006 (UK: Southampton) Mazzarol, Tim (2007) „International SME innovation study: Summary findings from the survey,‟ November 2007 Nauwelaerts, Ysabel and Frank, Tom (2007) „Kritische succesfactoren van startende en jonge bedrijven in de design sectoren‟ in Tijdschrift voor Economie en Management, Vol. LII, 1, p. 65-94, 2007 OECD (2004). SME Statistics: Towards a more systematic statistical measurement of SME behaviour. Promoting Entrepreneurship and Innovative SMEs in a Global Economy, Istanbul, Turkey 3-5 June, Organisation for Economic Co-operation and Development, Paris, 2004 Reboud, Sophie and Tim Mazzarol (2003) „Risk assessment in SMEs, a proposed tool,‟ Cahiers du CEREN 4, 31-40. 2003

17

In search of performance for manufacturing SMEs: A taxonomical approach

Louis Raymond Josée St-Pierre Marie Marchand Chaire de recherche du Canada sur la performance des entreprises Institut de recherche sur les PME Université du Québec à Trois-Rivières P.O. Box. 500 Trois-Rivières QC Canada G9A 5H7 tel.: 1-819-376-5080 fax: 1-819-376-5079 email: [email protected] Abstract In this paper, we propose a taxonomical approach to organisational performance, that is, a holistic, multidimensional and integrated approach for a deeper understanding of the performance management task faced by SME owner-managers. The first research objective is to identify performance configurations or gestalts that allow one to characterise manufacturing SMEs in a meaningful and eloquent manner with regard to their organisational performance. The second objective is to determine the extent to which these configurations are conditioned by the environmental and organisational context in which performance is managed. To answer these questions, the results of an empirical study of 205 Canadian manufacturing SMEs are presented. Three configurations are found, that is, global performers, gazelles, and mature performers. These configurations are characterized and contextualized. Introduction In an economy that has become global and knowledge-based, and facing increasing pressures from their business partners, small and medium-sized enterprises (SMEs), and manufacturing SMEs in particular, face new challenges with regard to performance management (Raymond, 2003). Not only must they maintain their competitive position in order to survive and grow but they must also simultaneously manage other important aspects of performance such as innovation, productivity and profitability. But is it realistic to ask this of SME owner-managers? Is it possible to grow, be innovative and achieve high levels of operational and financial performance all at once, and under what conditions? The notion of performance management has thus become a focus of interest for researchers and practitioners in the SME domain (Garengo, Biazzo, and Bititci, 2005). Moreover, there is a need for further understanding of what constitutes organisational performance, whatever the type of organisation, and of the conditions under which it is achieved in manufacturing SMEs (Epstein, 2004).

1

In this paper, we propose a holistic approach to organisational performance, that is, a multidimensional and integrated approach for a deeper understanding of the performance management task faced by SME owner-managers. From this perspective, the various dimensions of performance cannot be treated independently of one another and must be in some “state of balance” (Ridgway, 1956). Going beyond purely financial considerations, such an approach is meant to allow for a greater alignment of resources and activities upon the strategic objectives of the firm (Lorino, 2001) and a better understanding of their role in the attainment of performance by manufacturing SMEs. Based upon the contingency theory that underlies a configurational or “gestalts” approach that originates in the strategic management literature (Van de Ven and Drazin, 1985), one would expect the nature of performance management in SMEs to be revealed by the extent to which the different dimensions of performance such as growth, productivity and profitability are in some form of equilibrium (Miller, 1996). As this approach has yet to be taken in study of the performance of SMEs, it leads us to the following research questions: To what extent are the various dimensions of organisational performance aligned in a coherent manner? In other words, are there performance configurations or gestalts that allow one to characterise manufacturing SMEs in a meaningful and eloquent manner with regard to their organisational performance? And to what extent are these gestalts conditioned by the environmental and organisational context in which performance is managed? To answer these questions, the results of an empirical study of 205 Canadian manufacturing SMEs will be presented.

Conceptual and Empirical Background A consensus on the definition of organisational performance is yet to be achieved. Organisational performance is a complex and multidimensional construct (Carton and Hofer, 2005). As identified by authors such as Quinn and Rohrbaugh (1983) and Tangen (2004), two perspectives are dominant, one being objective/economic/rational (productivity, efficiency, profitability, competitiveness, etc.), the other being subjective/political/systemic (coherence, value of human resources, satisfaction of stakeholders, adaptability, etc.). Defining and evaluating organisational performance thus constitutes a complex problem (De La Villarmois, 2001). To further complicate the situation, the notion of organisational performance has evolved over time (Marchand and Raymond, 2006) and with it, the aspects of performance measured and managed in business organisations, following changes in the business, technological and social environment. Beyond financial performance (profitability, liquidity, financial health), new principles of performance measurement appeared in the 80s that put more emphasis on cause-effect linkages (e.g., cost drivers in activity-based costing), thus providing a prospective view of operations and production management. Also, in line with Skinner’s (1974) early work, a preoccupation with strategic alignment became more apparent, notably with Kaplan and Norton's “balanced scorecard” framework (1992). A number of researchers have thus shown interest since the early 90s in an holistic approach of organisational performance linked to organisational and managerial development in both large and small business enterprises (Bourne, Mills, Wilcox, Neely, and Platts, 2000). Performance definition was then founded on the firm’s strategic objectives and on the interests and expectancies of an enlarged number of partners that included not only owners and stockholders but also other important stakeholders such as customers, employees, suppliers and governments (Bititci, Carrie, and McDevitt, 1997). In a context of sustainable development, the notion of organisational performance continues its evolution, while the 2

stakeholder group is extended to include society and future generations (Neely, Adams, and Kennerly, 2002). For instance, Lorino (2001) defines performance as a relative notion associating value and cost, where value is determined according to society’s needs, and cost is a monetary measure of the resources consumed. A holistic perspective of organisational performance takes into account a diversity of organisational performance dimensions, but also requires these dimension to be seen as integrated within a “performance logic” (Marchand and Raymond, 2008), a notion that refers to the set of cause-effect relationships by which organisational determinants (e.g., management practices) result in the form of increased or decreased performance. Causal paths of performance thus inter-relate these determinants and results. Initially, these causal paths are specific to each firm, and refer to a state of ideal equilibrium also specific to each firm (Drucker, 1954; Ridgway, 1956). To the specific performance logic of an organisation, ideally corresponds the performance management logic of that organisation (Lorino, 2001). An imbalance between the various dimensions of performance may have negative consequences, and drivers of excellence may become destructive forces. In effect, a condition of sustainable performance would be the attainment of some form of dynamic equilibrium among performance dimensions rather than a strong result on one dimension or another. Different performance measurement frameworks have been proposed by researchers to simplify the task of modelling the firm’s performance logic (e.g., Fitzgerald et al.’s “results and determinants framework”, 1991; Kaplan and Norton's “balanced scorecard”, 1992; Brown’s “process-oriented framework”, 1996), each of them adopting a specific management perspective (Neely, Mills, Platts, Richards, Gregory, Bourne, and Kennerley, 2000) and underlining a specific enterprise model (Rolstadas, 1998; De Toni and Tonchia, 2001). Frameworks based on a multiple-stakeholder perspective of performance have more recently been proposed (e.g., Bititci et al.’s “integrated performance measurement system”, 1997; Neely et al.’s “performance prism”, 2002). There is, however, an expressed need for more empirical knowledge on the performance management practices of SMEs (Garengo et al., 2005). Given that the theoretical approaches (e.g. performance measurement frameworks) developed have been mostly oriented toward the large enterprise, these approaches would not necessarily be compatible with performance management practice in SMEs (Hudson, Smart, and Bourne, 2001). In particular, differences could be found with regard to the organisational dimensions that must be considered and to the type of performance indicator to be defined or selected. In addition, SMEs’ context, their resource constraints, their strategic flexibility and their need for results in the short term would not be taken into account. Developing new markets and new products are among the strategies devised by SMEs to increase their competitiveness when facing with an environment that is growing more hostile, more turbulent and more complex (Özsomer, Calantone, and Di Benedetto, 1997). World-class SMEs in particular would follow a strategic approach, based on innovation, by which they detect and seize opportunities (Sambamurthy, Bharadwaj, and Grover, 2003; Wade and Hulland, 2004). Innovation is thus of crucial importance as a dimension of the organisational performance of SMEs within highly competitive business environment (Acs and Audretsch, 1990). Following their review of the literature on performance measurement in SMEs, Garengo et al. (2005) confirm it should take into account the organisation in its entirety and integrate all functions/dimensions in balance with the importance given to each (in view of the firm’s strategic objectives). Notwithstanding the complexity of the construct/concept of organisational performance, litera3

ture indicates recurrent performance dimensions and measurement scopes: financial performance, performance of the manufacturing strategy or operational performance (e.g. productivity, production cycle, flexibility, quality), social performance (e.g. human resource management) and managerial performance (e.g. innovation and knowledge management) (Marchand and Raymond, 2008). Furthermore, the most relevant dimensions of performance are not necessarily the same for all stakeholders (Helfert, 2003; Neely et al., 2002). As shown in Table 1 managers, for instance, will be more interested in productivity, shareholders will focus on profitability, bankers on solvency and profitability whereas governments will mainly look to growth in employment. For world-class SMEs, innovation will be of prime importance not only for managers, but for also all value chain stakeholders (employees, suppliers, customers) (Chesbrough, 2003). This perspective can be enriched in specific situations when for instance large enterprises must evaluate the profitability, productivity and innovation capability of manufacturing SMEs as business partners within subcontracting network (Julien, Raymond, Abdul-Nour, and Jacob, 2004). Solvency is also of particular interest to managers, considering the financing problems encountered by many innovative SMEs even if they are productive and profitable. This is another justification for a holistic analysis of performance in the SME context. For SMEs, growth, profitability, productivity/efficiency, solvency and innovation have been identified as of particular importance (e.g., Raymond and St-Pierre, 2007; Wolff and Pett, 2006), Table 1: Performance Dimensions of Interest to Stakeholders Growth Profitability Productivity Dimension

Innovation

Solvency

Stakeholders Shareholders

√

√√

√

√

√

Owner-managers

√√

√√

√√

√√

√√

Employees

√

√

√

√

Customers

√√

Suppliers

√

Bankers

√

√√

Government

√√

√

√√ √

√

Adapted from Helfert (2003)

Research Model As presented in Figure 1, the research model integrates two strategic development perspectives originating in strategic management research. The first perspective focuses on the imperatives of competition, considering the enterprise as a set of strategic activities, aiming for adaptation to an industrial environment by searching for a favourable competitive position in the market (Teece, Pisano, and Shuen, 1997). The second perspective conceptualises the firm as a set of resources and competencies, that is, assets, processes and knowledge that possess an inherent value, considering that it is the resources unique to each enterprise that should constitute the essence of its strategy (Barney, 1991). While the premises that found these two perspectives differ, certain researchers have demonstrated that they are complementary (Spanos and Lioukas, 2001).

4

Solvency

Pro d

SME performance gestalt

y y

ab ilit

ivit

fit

uct

Pr o

tion

• Industry (tech. intensity) • Power of customers

h wt ro

Organizational context • Size of the firm • Age of the firm

resources and competencies-based perspective

Environmental context

G ova Inn

market and competition-based perspective

Figure 1: Research Model on the Performance of Manufacturing SMEs

The research model stipulates that the performance of a manufacturing SME is contextualised with regard to the business environment (industry and power of customers) (Mauri and Michaels, 1998; Raymond and St-Pierre, 2004) and the organisation (size and age of the firm) (Smith, Guthrie, and Ming-Jer, 1989; Durand and Coeurderoy, 2001). Moreover, the organisational performance of these firms is approached from an integrated perspective under five aspects, that is, growth, profitability, productivity, innovation and solvency. The basic proposition underlying this model is that the firms that one could qualify as “global performers” are those that succeed in innovating and growing while adequately managing their strategic resources and capabilities without compromising on their productivity, their solvency and their profitability.

Research Method The research data were obtained from a database created by a university research centre that contains information on 205 Canadian manufacturing SMEs. With the collaboration of an industry association to which most of these firms belong, the database was created by having the SMEs' chief executive and functional executives such as the controller, human resources manager and production manager fill out a questionnaire to provide data on the practices and results of their firm and add their firm’s financial statements for the last five years. In exchange for these data, the firms are provided with a complete comparative diagnostic of their overall situation in terms of performance and vulnerability (further information on the diagnosis system and on data collection and validation can be found in St-Pierre and Delisle, 2006). For the study's purposes, a SME is defined as an enterprise with more than 20 employees and less than 250, corresponding to the definition used by the European Union. The median size of the sample firms is 49 employees, whereas annual sales range from 1 to 55 million dollars (CAN), the median 5

being 5.6 million. More than fifteen industrial sectors are represented, including metal products (25.9 % of the sampled SMEs), plastics and rubber (15.1 %), wood (13.7 %), electrical products (6.8 %), machinery (5.3 %), food (4.9 %) and furniture (4.9 %). Being relatively representative of Canadian manufacturing SMEs with regard to size and sector, a third of the sampled SMEs (33 %) operated in industrial sectors of low technological intensity, 49 % in sectors of medium-low intensity and 18 % in sectors of medium-high intensity, following to the OECD’s (2005) classification. There are no hightech firms in the sample. Each one of the five aspects of performance, that is, growth, profitability, innovation, solvency and productivity is evaluated by a performance indicator. These indicators were chosen in reason of their scope and theoretical utility as research variables, that is, their explanatory potential and predictive adequacy with regard to the organisational performance of manufacturing SMEs, given their repeated use in previous empirical studies in strategic management, small business and finance. Thus growth is measured by the average growth in net sales over the last three years, profitability by the return on assets, innovation by the percentage of sales from new or modified products, solvency by the level of indebtedness, and productivity by the gross margin per employee. The descriptive statistics of the performance indicators and contextual variables can be found in Appendix A, whereas their intercorrelations can be found in Appendix B.

Results The alignment perspective of organisational performance adopted in this research is based on an internal congruence conceptualisation, whereby fit or co-alignment is seen as a pattern or gestalt, that is, a set of relationships, which are in a temporary state of balance. Adopting this perspective implies that “instead of looking at a few variables or at linear associations among such variables we should be trying to find frequently recurring clusters of attributes or gestalts” (Miller, 1981, p.5). Characterising the Performance of Manufacturing SMEs As most appropriate to a gestalts perspective (Venkatraman, 1989), the cluster analysis technique was used to test the research questions of the study. This approach aims to group organisations into clusters such that each cluster’s membership is highly homogeneous with respect to certain attributes. Here, the attributes (or clustering variables) are the components of organisational performance, namely growth, profitability, productivity, solvency and innovation. A second aim is that each group differs from other groups with respect to these same characteristics. The SPSS TwoStep clustering algorithm was used as it can handle a large number of cases and automatically determines the optimal number of clusters. A three-cluster solution was found to be most parsimonious in identifying groups of firms that could be clearly distinguished from one another, based on a meaningful pattern of relationships among the clustering variables. Table 2 presents the means of the clustering variables for each of the three clusters. One-way analysis of variance (ANOVA) was used to evaluate the equality of variable means across the clusters and thus assess the distinctiveness of each derived cluster. The ANOVAs were repeated with size of the firm, and age of the firm, power of customers and industry as covariates in order to control from the possibly confounding effect of these variables. No such effects were found. F-tests confirm that 6

these means differ significantly across the three groups for all clustering variables. Added tests of significance of pair-wise contrasts (Tamhane’s T2 test) indicate certain similarities however. The first and smallest cluster identified by the analysis is made up of 49 enterprises (24 %) that were named Global Performers. The first group clearly dominates the other two in terms of solvency, productivity and profitability. The second cluster comprises 71 SMEs (35 %), named Gazelles. This group is leader of the three in terms of growth but is the laggard in terms of solvency, noting however that the Global Performers attain almost the same growth rate but with significantly less indebtedness. It is rather in terms of innovation that the Gazelles clearly dominate the other two groups, with an average rate that is more than twice as high. The last and the biggest of the three clusters is composed of 85 firms (41 %) that were labelled as Mature Performers. These firms significantly lag the other two in terms of growth and productivity, but show more solvency and equal profitability when compared to the Gazelles, and a level of innovation that is equal on average to that of the Global Performers.

Table 2: Performance Profiles Resulting From the Cluster Analysis profile Performance Growth sales growth Profitability return on assets Productivity Gross margin per empl. Innovation new product sales /sales Solvency indebtedness

Mature Performers mean (n = 85)

Gazelles mean (n = 71)

Global Performers mean (n = 49)

Anova F

Anova F with covariatesa

0.062

0.291

0.221

19.7***

15.6***

0.082

0.102

0.241

76.8***

74.0***

19 7203

24 6802

47 1041

50.2***

45.7***

0.192

0.641

0.292

63.4***

52.8***

0.552

0.703

0.461

33.6***

28.0***

***: p < 0.001 a Size of the firm, Age of the firm, Power of customers, and Industry Nota. Within rows, different subscripts indicate significant (p < 0.05) pairwise differences between means on Tamhane’s T2 (post hoc) test.

It is important to recall at this stage of the analysis that the three profiles of organisational performance were identified here a posteriori, that is, on an empirical rather than theoretical basis. These profiles thus constitute a taxonomy rather than a typology of the manufacturing SMEs studied (Miller, 1996). One must then contextualise this taxonomy with regard to the business environment and the organisation in order to better specify its implication for the understanding and management of performance.

Contextualising the Performance of Manufacturing SMEs There is also the question of ascertaining if the three performance gestalts that emerged are conditioned by the environmental and organisational context. Thus, one-way analyses of variance were used to test for differences in industry, power of customers, size and age of the firm across the three groups 7

of SMEs. As presented in Table 3, an F-test indicates that group means significantly differ across groups for power of customers and age of the firm. Added tests of significance of pair-wise contrasts confirm that the Global Performers show less customer dependency and thus should have more control over their rate of growth and innovation as there would be less pressure in this regard from customers. And Gazelles are younger than the other groups, as would be expected in high-growth firms and highly innovative firms, that is, firms whose products are less mature. Table 3: Context Variables by Performance Profile of Manufacturing SMEs profile Context variable Industry (technological intensity) low-tech medium to low-tech medium to high-tech Power of customers % sales to 3 main customers Size of the firm number of employees Age of the firm number of years since creation *: p < 0.05

Mature Performers mean (n = 85)

Gazelles mean (n = 71)

Global Performers mean (n = 49)

0.36 0.45 0.19

0.31 0.46 0.23

0.31 0.59 0.10

0.4 1.4 1.5

0.452

0.462

0.341

4.1*

68

70

71

0.1

341

222

301

8.8***

Anova F

***: p < 0.001

Nota. Within rows, different subscripts indicate significant (p < 0.05) pairwise differences between means on Tamhane’s T2 (post hoc) test.

These results are interesting in many aspects and demonstrate that performance indicators used by researchers have to be defined carefully. More specifically, performance indicators cannot be considered as substitutes for one another. Economic performance, as measured by growth and innovation, can alter financial performance, and the organisational context should be taken into consideration to better understand growth and the pressure that it imposes on the development of SMEs. A holistic perspective on performance is thus particularly useful in apprehending the behaviour of SMEs. Not surprisingly, Global Performers are also more independent, mature and relatively less innovative firms that have succeeded in terms of profitability and solvency because their environment is probably more stable. To the opposite, Gazelles that attract so much governmental attention for their contribution to employment creation and their dynamism could be considered as “temporarily” vulnerable enterprises due to their high innovation and solvency rates. But, this high degree of innovation contributes to their lower profitability and productivity because Gazelles do not adequately master their new products’ characteristics, given their frequent renewal of products. Intuitively and from an organisational perspective, these results seem fully justified. Moreover, they reveal specific SME profiles that should be taken into account in future studies, notably when researching on innovation because of its particular effects, and considering the SMEs’ age, growth rate and customer dependency. This is a critical issue as the most innovative SMEs are also the fastest 8

growing firms and the most indebted. This last result also highlights the apparent vulnerability of these firms and should be researched with more depth in the future. Implications and Limitations Researchers and practitioners could benefit from certain implications of this research. Being among the first to describe and conceptualize the performance of manufacturing SMEs from a holistic and integrated perspective, through the five dimensions that are growth, productivity, profitability, innovation and solvency, this study has provided a new taxonomic approach to the characterisation of these enterprises. In particular, a solution is provided to the difficult question of integrating innovation within the firm’s overall performance (Epstein, 2004). This performance-based characterisation of enterprises contrasts with the more usual approach that is based on strategy (e.g., Miles and Snow, 1978; Miller, 1981). Here, instead of holistically characterizing the organisation in terms of environment and strategy and then linking each strategic configuration to a specific dimension of performance, it is performance that is holistically characterized and then linked to specific aspects of the firm’s environment and strategy, thus creating a potential for new insights on the environment-strategyperformance relationship for future research that adopts this approach. The configurational approach to organisational performance taken in this study could serve as a basis for identifying the various aspects that must be taken into account when studying the performance management system of SMEs and using the system classification frameworks developed to this effect (Marchand and Raymond, 2008). It could thus constitute the conceptual foundation and methodological core of such a system aimed at developing the performance management competencies of SMEs. Designed from complementary strategic perspectives, the system could help in identifying the strengths and weaknesses of the SME with regard to its resources and competencies, and its opportunities and threats with regard to its competitive position. By allowing the firm to better visualize and deepen its understanding of its performance logic and the relationship between its strategic development and its performance, the system would produce more relevant, reliable and actionable information on the transformation of strategic investments into increased innovation, growth, productivity and profitability. An interesting result is the link discovered between these variables and indebtedness. The holistic approach taken here is particularly useful in demonstrating that indebtedness can be associated to high-performance SMEs in economic terms and not only to financially distressed firms. This approach also provides a new answer to the necessary trade-off between the standardisation of performance measurement required for comparative evaluation or benchmarking purposes and the customisation required for an optimal performance configuration that is specific to each firm, that is, taking into account its strategic objectives and contingencies. This investigation has limitations that must be mentioned. While the firms surveyed are fairly representative of the general population of Canadian manufacturing SMEs in terms of size and industry, there might yet exist a sample bias in that these are firms that have chosen to undertake a benchmarking exercise. As such, these firms could differ from the general population in terms of strategic capabilities and innovation (Cassell, Nadin, and Gray, 2001). Finally, given that the attainment of a performance gestalt can be studied as a dynamic process, a longitudinal study could reveal results that a cross-sectional study cannot, notably causal links among the various aspects of performance. A more

9

dynamic perspective could also ascertain the stability of the gestalts and their eventual link with the firm’s age and strategic development level.

Conclusion Facing competition that has become global and under pressures from their business partners, many manufacturing SMEs must increase their performance in all aspects, be it in terms of innovation, productivity, growth and financial health. In this more turbulent environment, achieving strong growth while increasing productivity and profitability, even if it implies self financing, is just not a dream but an actual reality for a number of these firms. Their management of performance implies that researchers must not only help managers in identifying all relevant performance dimensions and associated performance indicators but also in acquiring a deeper knowledge and finer comprehension of the interrelationships among these dimensions and indicators, that is, explicitly rendering the firm’s “performance logic”. This also implies that further research must focus on developing and implementing performance management information systems that support this logic and thus enable managers to better cope with increased performance demands.

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Fitzgerald, L., R. Johnson, S. Brignall, and R. Silvestro (1991). Performance Measurement in Service Businesses, London: CIMA. Garengo, P., S. Biazzo, and U.S. Bititci (2005). “Performance measurement systems in SMEs: a review for a research agenda,” International Journal of Management Reviews 7(1), 25-47. Helfert, E.A. (2003). Techniques of financial analysis: A guide to value creation, Eleventh Edition, New York: McGraw-Hill Irwin. Hudson, M., A. Smart, and M. Bourne (2001). “Theory and practice in SME performance measurement systems,” International Journal of Operations & Production Management 21(8), 1096-1115. Julien, P.-A., L. Raymond, G. Abdul-Nour, and R. Jacob (2004). “The network enterprise: Ten years of experience at the Bombardier Chair, 1993-2003,” in Annual Review of Progress in Entrepreneurship Research: Volume 2, 2002-2003, Ed. D. Watkins, Brussels: European Foundation for Management Development, 278-298. Kaplan, R.S. and D.P. Norton (1992). “The balanced scorecard, measures that drive performance,” Harvard Business Review 70(1), 71-79. Lorino, P. (2001). Méthodes et pratiques de la performance. Le pilotage par les processus et les compétences (2nd ed.), Paris: Éditions d’Organisation. Manzoni, J.-F. (2004). “From high performance organizations to an organizational excellence framework,” in Performance Measurement and Management Control: Superior Organizational Performance, Eds. M.J. Epstein and J.-F. Manzoni, London: JAI Elsevier Science, 19-44. Marchand, M. and L. Raymond (2006). “Performance measurement systems: An information systems conceptualisation and definition,” Integrating Global Organizations Conference, Siena, Italy, 1-13. Marchand, M. and L. Raymond (2008). “Researching performance measurement systems: An information systems perspective,” International Journal of Operations & Production Management (accepted for publication). Mauri, A.J. and M.P. Michaels (1998). “Firm and industry effects within strategic management: An empirical examination,” Strategic Management Journal 19(3), 211-219. Miles, R.E. and C.C. Snow (1978). Organizational Strategy, Structure, and Process, New York: McGraw- Hill. Miller, D. (1981). “Toward a new contingency approach: the search for organizational gestalts,” Journal of Management Studies 18(1), 1-26. Miller, D. (1996). “Configurations revisited,” Strategic Management Journal, 17(7), 505-512 Neely, A., J. Mills, K. Platts, H. Richards, M. Gregory, M. Bourne, and M. Kennerley (2000). “Performance measurement system design: developing and testing a process-based approach,” International Journal of Operations & Production Management 20(10), 692-704. Neely, A., C. Adams, and M. Kennerley (2002). The Performance Prism: The Scorecard for Measuring and Managing Business Success, London: Financial Times Prentice Hall. OECD (2005). OECD Science, Technology and Industry Scoreboard 2005, Paris: OECD, . Accessed on March 5, 2008. Özsomer, A., R.J. Calantone, and A. Di Benedetto (1997). “What makes firms more innovative? A look at organizational and environmental factors,” Journal of Business & Industrial Marketing 12(6), 400-416. Quinn, R.E. and J. Rohrbaugh (1983). “A spatial model of effectiveness criteria,” Management Science 29(3), 363-377. Raymond, L. (2003). “Globalization, the knowledge economy, and competitiveness: A business intelligence framework for the development of SMEs,” Journal of American Academy of Business, Cambridge 3(1-2), 260-269. Raymond, L. and J. St-Pierre (2004). “Customer dependency in manufacturing SMEs: Implications for R&D and performance,” Journal of Small Business and Enterprise Development 11(1), 23-33. Raymond, L. and J. St-Pierre (2007). “Characterising the financial situation of Canadian manufacturing SMEs: a confirmatory approach,” International Journal of Accounting, Auditing and Performance Evaluation 4(1), 31-56. Ridgway, V.F. (1956). “Dysfunctional consequences of performance measurements,” Administrative Science Quarterly 1(2), 240-247. Rolstadas, A. (1998). “Enterprise performance measurement,” International Journal of Operations & Production Management 18(9/10), 989-999. 11

Roper, S. and J.H. Love (2002). Product innovation and small business growth: A comparison of the strategies of German, U.K. and Irish companies, Research Policy 31, 1087-1102. Sambamurthy, V., A. Bharadwaj, and V. Grover (2003). “Shaping agility through digital options: reconceptualizing the role of information technology in contemporary firms,” MIS Quarterly 27(2), 237-263. Skinner, C. W. (1974). “The focused factory,” Harvard Business Review 52(3), 113-121. Smith, K.G., J.P. Guthrie, and C. Ming-Jer (1989). “Strategy, size and performance,” Organization Studies 10(1), 63-81. Spanos, Y.E. and S. Lioukas (2001). “An examination into the causal logic of rent generation: contrasting Porter's competitive strategy framework and the resource-based perspective,” Strategic Management Journal 22(10), 907-934. St-Pierre, J. and S. Delisle (2006). “An expert diagnosis system for the benchmarking of SMEs’ performance,” Benchmarking: An International Journal 13(1/2), 106-119. Tangen, S. (2004). “Performance measurement: from philosophy to practice,” International Journal of Productivity and Performance Management 53(8), 726-737. Teece, D.J., G. Pisano, and A. Shuen (1997). “Dynamic capabilities and strategic management,” Strategic Management Journal 18(7), 509-533. Van De Ven, A.H. and R. Drazin (1985). “The concept of fit in contingency theory,” Research in Organizational Behavior 7, 333-365. Venkatraman, N. (1989). “The concept of fit in strategy research: Toward verbal and statistical correspondence,” Academy of Management Review 14(3), 423-444. Wade, M. and J. Hulland (2004). “Review: The resource-based view and information systems research: review, extension, and suggestions for future research,” MIS Quarterly, 28(1) 107-142. Wolff, J.A. and T.L. Pett (2006). “Small-firm performance: modeling the role of product and process improvements,” Journal of Small Business Management 44(2), 268-284.

12

Appendix A: Descriptive Statistics of the Research Variables (n = 205) Organisational Performance indicator Growth sales growtha Profitability return on assetsb Productivity gross margin per employeec Innovation sales of new & mod. products / sales Solvency indebtednessd Size of the firm number of employees Age of the firm number of years since creation Power of customers % of sales to 3 main customers

mean

median

s. d.

min.

max.

0.18

0.13

0.25

-0.29

1.85

0.13

0.11

0.10

-0.13

0.45

27 983

23 034

19 069

1 115

117 430

0.37

0.30

0.32

0.00

1.00

0.58

0.60

0.19

0.14

1.33

70

49

52

20

240

29

24

18

5

116

0.43

0.40

0.25

0.00

1.00

a

average growth in net sales over the last 3 years earnings before income taxes / total assets c gross profit / number of employees d total debt / total assets b

Appendix B: Correlation Matrix of the Performance Indicators and Covariates correlation (n = 205) Growth 1. sales growth Profitability 2. return on assets Productivity 3. gross margin per employee Innovation 4. sales of new&mod. prod./sales Solvency 5. indebtedness Size of the firm 6. number of employees Age of the firm 7. number of years since creation Power of customers 8. % of sales to 3 main customers Industry (technological intensity) 9. low-tech, med.-low, med.-high *

: p < 0.05

**

: p < 0.01

***

1.

2.

3.

4.

5.

6.

7.

8.

.34***

-

-.00

. 29***

.06

.02

-.01

-

.05

-.37***

-.13

.06

-

.06

.04

.23***

-.07

.11

-

-.22**

-.13

.12

-.21**

-.20**

.15*

.19**

-.10

-.29***

-.04

.07

-.12

-.09

-

.05

-.12

.17*

.10

.08

.12

-.13

.00

-

: p < 0.001 (two-tailed)

13

The French National Innovation System: An International Comparison from the Small Firms' Perspective

Sophie Reboud* Burgundy School of Business Group ESC Dijon Bourgogne 29 rue Sambin BP 50608 21006 Dijon, France Email: [email protected] *Corresponding author Tim Mazzarol UWA Business School University of Western Australia 35 Stirling Highway, Crawley WA 6020, Australia Email: [email protected] Thierry Volery Swiss Research Institute of Small Business and Entrepreneurship University of St Gallen Dufourstrasse 40a, 9000 St Gallen, Switzerland Email: [email protected]

Abstract: This study examines the national innovation system of France and focuses on the innovation practices of small firms. It compares the perceptions of senior managers from small, innovator firms in France with those from Australia and Switzerland. The role of government in supporting small firms in their commercialisation was also highlighted as being important. Consistent with the findings from earlier studies the central role of leading customers in influencing the decision to proceed with an investment in an innovation was also highlighted.

Keywords: innovation management, small firms, national innovation systems, case studies.

1. National Innovation Systems The concept of a National Innovation System (NIS) has emerged over the past thirty years as a response to the recognition that innovation within a national economy cannot be understood as a simple input-output process (OECD, 1997). Traditional measurements of innovation within a country focused on inputs such as expenditure on research and development (R&D) or the number of research scientists employed. With outputs being such things as the number of patents generated (OECD, 2001). However, research into the nature of NIS since the 1980s has highlighted the importance of networking between public and private organisations located within the nation state that serve to generate and 1

diffuse new ideas, technologies and economic opportunities (Freeman, 1987; Nelson, 1993a; Patel & Pavitt, 1994a). An NIS may be defined as: ―…that set of distinct institutions which jointly and individually contribute to the development and diffusion of new technologies and which provides the framework within which governments form and implement policies to influence the innovation process. As such it is a system of interconnected institutions to create, store and transfer the knowledge, skills and artefacts which define new technologies.‖ (Metcalfe, 1995). Academic study of NIS by various innovation scholars (e.g. Lundvall, 1992; Freeman, 1995; Edquist, 1997; Nelson, 1993b; Larédo & Mustar, 2002) can be seen as part of the neo-Schumpeterian challenge to neo-classical economics. This underlines the importance of specifying contexts in terms of time and space and argues that institutional differences can have an important influence on the rate and direction of innovative activity (Lundvall, 1998). Balzat and Hanusch (2004: 197) describe an NIS as: ―…a historically grown subsystem of the national economy in which various organizations and institutions interact with and influence one another in the carrying out of innovative activity.‖ It is thus about a systemic approach to innovation in which the interaction between technology, institutions, and organizations is central. The focus of an NIS should be not only on high technology, but the application of technology and innovation across all industry sectors, with particular focus on intersectoral knowledge flows, and the role of the national education system to supply skilled labour (Lundvall, 2007). An important aspect of the NIS is the role of the government in setting national policy that can enhance the generation and commercialisation of innovation (Trott, 2007). Much of the innovation is generated from publicly funded research within universities or other scientific R&D centres. Its commercialisation is fraught with risk and often requires collaboration between public and private institutions with numerous issues arising in relation to governance and cooperation. The NIS concept has resulted in a structurally different view of how governments can stimulate the innovation performance of a country (Patel & Pavitt, 1994b). For example, in France the government is known to be playing an important role in the French economy. And that influence can be shown by the fact that the share of private funding in R&D was 55 percent and is increasing year by year, but it remains considerably lower than most of the developed countries, where private funding for R&D in general account for 60 to 70 percent of total funding (Français dynamiques). The concept of the NIS emerged in the 1980s as a move towards a systemic approach to innovation at the macro economic level (Nelson, 1993b). While individual actors and national framework conditions are of key significance, linkages between them are equally important (OECD, 1997). For example, there is evidence that economic growth and labour productivity are correlated with the level of innovation within a nation‘s industries (Crosby, 2000). Porter and Stern (1999; 2001) have defined what they call the ―National Innovative Capacity Framework‖ which is comprised of three broad elements. The first of these is the ―Common Innovation Infrastructure‖, which in turn consists of three key components: i) the cumulative technological sophistication of the national economy; ii) the human capital and financial resources that are made available for R&D activity; and iii) the level of resources and policy commitments made by public authorities to innovation. The second element of the framework is the ―Cluster-specific Environment for Innovation‖, which consists of the interrelationship between what Porter (1990) has identified as the diamond of competition (e.g. factor inputs, demand condi2

tions, firm strategy and rivalry and related and supporting industries) taking place within industries. The third element is the quality of the linkages that exist between the common innovation infrastructure and the industry clusters in which individual firms compete. The interrelationship between the various elements of a national innovation system impacts upon the level of R&D and commercialisation taking place within the economy (Berger & Revilla Diez, 2006). For example, regions that are well supplied with physical and information infrastructure (e.g. transportation, information and communications technologies) are more likely to be economically prosperous and innovative. The quality of the education and training system within a region can also have a positive influence by ensuring a steady supply of skilled employees and managers. Innovation is also fostered by the presence of locally based research centres such as universities. Government can also assist R&D and commercialisation through regulations protecting intellectual property rights (IPR), as well as assisting small firms with establishment costs or tax concessions (Porter, 2001a). The level of innovation found among firms is contingent in part on its internal structure and the nature of its managerial leadership. However, the firm‘s external environment also impacts on its level of innovation and how successful it is in undertaking commercialisation activities (Berkhout, Hartmann, van der Duin, & Ortt, 2006). Regional economies are shaped by their local firms and it is important to focus policy support upon the small firms in order to enhance the overall level of innovation with the economy (Sternberg & Arndt, 2001). This concept of a national innovation system seeks to define the interaction that takes place within a country of the research and development (R&D) centres, universities and other publicly funded or supported institutions, the financial and investment markets, government policy makers, and the industry sectors that commercialise research (Lundvall, 1992; Nelson, 1993b). The success of an NIS is thus contingent upon a variety of complex interrelated issues; however, one important element is the exchange of knowledge via both formal and informal exchange relationships throughout industries. Failures have been identified as taking place at four key areas. The first involves the failure to provide adequate infrastructure and investment, particularly the ability of governments to supply R&D or communications infrastructure, plus the availability of venture capital. The second is that of ―transition failures‖ where there is a failure of new ideas or technologies to diffuse across industry sectors. The third failure is that of ―lock in‖, whereby there is a tendency for industries to remain committed to existing technological paradigms that stop them from innovating. Finally, there is the failure associated with institutional rigidities where the legal and regulatory systems within the country make it difficult for innovation. This can be due to labour inflexibility, restrictions on the introduction of new technologies or the lack of protection of intellectual property (IP) rights (Smith, 2000). 2. Small Firms and the NIS Small firms are those with fewer than 250 employees and an annual turnover of less than €50 million (OECD, 2004a). Most are micro-enterprises with less than 10 employees and in many of the world‘s economies they contribute to a significant proportion of the national investment in R&D (OECD, 2004b). As Porter and Stern (2001) suggest in their ―National Innovative Capacity Framework‖, there must be good investment in the ―Common Innovation Infrastructure‖ of the country, with attention given to education and the overall technological sophistication of the economy. However, there must be strong linkages between these elements and mechanisms to assist small firms to make such connec3

tions. This will avoid the risk of the failures highlighted above. The need to assist entrepreneurs to access external networks and to develop the strategic management skills for dealing with such networks is important. Other research has suggested that small business manufacturers shun collaborative alliances out of a fear of information leakage, the desire to remain independent, a distrust of other firms or difficulties in identifying suitable partners (Dean, Holmes & Smith, 1997). Building trust between entrepreneurs from small firms is therefore a key issue (Brunetto & Farr-Wharton, 2007). Porter (2001b) has suggested that the key elements determining the overall competitiveness of a region or country are: i) the factor input conditions (e.g. supply of skilled labour, cost of raw materials and doing business); ii) the climate for innovation-based local rivalry between firms; iii) demand conditions (e.g. size, sophistication and proximity of markets); and iv) clustering of related and supporting industries. These four elements are illustrated in Figure 1. This model recognises that different countries can have different innovation systems and that some of these differences may have an impact on the capacity of firms to innovation.

Figure 1: Key elements of an Innovation-Oriented National Industrial Cluster

Source: Stern (2004).

3. The French NIS According to Malerba (2005), one of the main challenges for the system of innovation literature is to explore the dynamics of the system, in particular how do new systems emerge and what is the link with the previous system. The French NIS has progressively evolved from an over centralised and planned stage, to a more decentralised and flexible system, looking for internal synergies. Since the 4

Second World War, the different political changes that occurred in France progressively shaped the current NIS. The fifth Republic was created in 1958 with Charles de Gaulle as President. Drawing heavily upon French culture, his notion of glory and grandeur were central to the process national unification and reconstruction. The State played a major role in formulating and implementing industrial policy (and this) thanks to a particularly rigid and highly centralised form of state control. Another characteristic has been the separation of large firms from major public sector research organisations with a lack of interaction between them. De Gaulle forged the French economic policy that still exists in France today as it employs a highly socialist and protectionist strategy. For example, the French continue to subsidize their own domestic industries, and place restrictive tariffs on imports while simultaneously seeking to open the international market to their exports. The central planning office still exists in Paris and continues to generate five-year plans for the government. (Harrison & Dockery, 2007) French politics is traditionally divided between right and left, which have opposing views for the direction or the national economy and therefore innovation. Under different governments, conservative and socialist, nationalisation allowed the state to act as an employer and producer of goods and services on a large scale. Even where firms were not taken into public ownership, France had and sometimes still has, a style of state involvement in individual company funding and strategy formulation, by building a consensus around a set of medium term priorities; promoting ‗National Champions‘ to be competitive in global markets; and acting as entrepreneur itself in a series of government initiatives or ‗Grands Projects‘, based largely upon industrial patriotism rather than commercial prospects. Those periods were a sort of "Golden Age" for French R&D (Walsh & Le Roux 2004). The evolution of the French NIS is outlined in Table 1 (see appendix) where it can be seen that the period immediately following the Second World War until the 1980s was focused mainly on large national projects. By the 1980s greater attention was being given to the regions along with a desire to see enhanced linkages between industry and publicly funded research centres such as universities. Driven by the need for increased levels of international competitiveness and the integration of the French economy into the European Union (EU), the 1990s saw the emergence of the first of a series of great national debates over the state of the French NIS. A major part of this period was the recognition of the need to reform the French higher education system and publicly funded scientific research community. This was a debate being echoed in other EU countries (Slaughter & Rhodes, 2004). More recently the national debate on the state of the French NIS has continued with greater recognition of the role of small firms within the wider economy and their capacity to make a significant contribution to the level of innovation in the country. Much research has focused on the resulting NIS system of France (Guermond 2001, Walsh & Le Roux 2004, Larédo & Sachwald 2005) and special attention was given to the importance of regional competencies, learning abilities and knowledge potentials for interregional competition and for the kind of innovation activity. There is a series of organisations aiming to bring together the (numerous) actors on the regional level, such as: i) technical centres; ii) regional centres of innovation and technology transfer (CRITT) and the Centre of Technological Resources (CRT) which offer scientific and technological services; iii) the national centres of research and technology (CNRT) which bring together public research laboratories and private research centres. The networks of technological development (RDT) which are networks of institutional actors such as OSEO, DRIRE, DRRT and the chambers of commerce, aiming to exchange and provide information for the benefit of small firms, 5

even the less ‗innovation-aware‘ ones. Figure 2 illustrates the complexity of the system and the difficulty to establish a clear governance. Figure 2: Structure and governance of the French NIS

Steering and funding the FNIS

Conseil supérieur de la recherche et de la technologie (CSRT) Agence nationale de la recherche (ANR) (Funding)

Haut Conseil de la Science et de la technologie (HCST) Agence d’évaluation de la recherche (AER) (Assessment)

Resources of the FNIS

Organization, information diffusion, and management of the FNIS

Agency for Industrial Innovation (Agence de l’innovation industrielle )(AII)

Agency for innovation in SMEs (OSEOANVAR)

National Research Institutes and private research Labs

R&D and Innovation networks (Réseaux de recherche et d’innovation technologique)

(RRIT)

Education and Research Orgaizations (Pôles de recherche

Label Cluster (Pôles deIncubators (Incubateurs Carnot compétitivité)

et d’enseignement supérieur) (PRES)

d’entreprises innovantes)

(after Fernez-Walsh & Romon, 2006)1

4. Innovation in Australia, France and Switzerland As previously discussed, France can defined as a centralised, bureaucratic country with a strong focus on publicly funded research, but a rather weak dynamism in its financial markets. In addition it has been viewed as experiencing a slow rate of evolution and only a weak entrepreneurial spirit. The antecedents leading to these characteristics in France are an accumulation of its history, culture and political organisation. Economic reform remains a major issue of political importance within France at time of writing. In this study we have sought to compare France with two other OECD countries: Australia and Switzerland with respect to their NIS and its likely impact on innovation in small firms. Australia, France and Switzerland are all members of the Organisation for Economic Co-operation and Development (OECD) and all have advanced, affluent economies. However, there are also many differences to be found between them. Australia is an island continent located in the southern hemisphere adjacent to South East Asia and the Pacific a relatively young nation; it has a resource-based economy focusing on the export of minerals, natural gas, food and fibre. By contrast, France is in the northern hemisphere within Western Europe and is a founder member of the European Union (EU). The French economy has both a significant manufacturing base and a major agricultural sector, and is

1

6

The Agency for Industrial Innovation and OSEO merged in November 2007.

the home of many major companies with significant R&D investment. Switzerland is a relatively small nation within the heart of Europe but not a member of the EU. The small size of Switzerland belies its strength as a centre of many world class companies in the financial services and manufacturing sectors. Table 2 (see appendix) provides a comparison of these three countries drawing upon OECD statistics from 2005. It can be seen that France has three times the population of Australia and around six times that of Switzerland, with over twice the GDP of Australia and seven times that of Switzerland. However, Australia‘s real GDP growth rate is around 3 times that of France while Switzerland‘s is nearly double, and the per capita income of both Australia and Switzerland are higher. At the time this study was undertaken, the unemployment rate in France was double that of Australia and Switzerland while rates of hours worked during the year and self-employment levels were also lower in France. An examination of the relative investments in R&D and education within the two countries shows that Switzerland invested more of its GDP on R&D. While expenditure on education was similar, in France and Australia, it was significantly higher in Switzerland. In the field of information and communications technologies (ICT), Australia had been investing more than France and more Australian households had access to both computers and the Internet. Nevertheless, Switzerland out performed both in terms of household ICT usage. Australia and France have major agriculture sectors and innovation has been a major driver for agriculture in Australia as commodity prices became increasingly squeezed and the need for more sustainable production techniques increased. The need to maintain the effectiveness of innovation adoption and diffusion within the agriculture sector was a concern within Australia (Marsh & Pannell, 2000). In terms of patenting activity France has substantially more patent families than either Switzerland or Australia. The OECD uses the concept of patent families, defined as “a set of patents (originating from the priority filing) taken in various countries (i.e. patent offices) to protect the same invention” (Dernis & Khan, 2004 p.7). Triadic patent families are based on the notion of a patent lodged across the three principal Patent Offices in the United States, European Union and Japan. In 2003 Australia had just over 431 triadic patent families recorded by the OECD as compared with 894.5 from Switzerland and 2,356 from France. However, while the total number of such patent families had grown by around 24 percent in France over the period from 1990 to 2003, the growth rate in Australia over the same period was 133 percent and that from Switzerland 9 percent (OECD, 2007). Innovation, particularly the commercialisation of new technology, has been a key feature of Australian Federal Government policy since at least the early 1990s (DCITA, 2004). Initiatives have involved increasing the level of funding for fundamental scientific research at universities and major research centres, grants for investment in R&D infrastructure, and funding for commercialisation of new technology across a wide range of sectors, but particularly ICT and biotechnology. A strong emphasis has been placed on inter-industry linkages and clustering activities, as well as strengthening the nexus between the universities and other publicly funded R&D centres, and industry (Molyneux, 2000). These public policies were in response to concerns raised in the late 1980s and 1990s over Australia‘s relatively poor track record on commercialisation despite having a strong track record in scientific research (Wood, 1992). The need for Australia to invest in R&D and commercialisation was seen as important to the nation‘s ability to maintain its international competitiveness (Roach, 2000; Ferris, 2001; Kerin, 2006). As a result of such policies, private sector investment in R&D since the early 1990s has risen within Australia (Garrett-Jones, 2004), and Australia‘s universities rank well 7

against their counterparts in Europe and North America in terms of technology transfer and commercialisation (Yenken & Gillin, 2006). Australia was ranked in seventh place against the European Union (EU) countries in terms of the level of innovation activity within its manufacturing industry, and ninth in terms of its services sector (ABS, 2003). By comparison France ranked twelfth within the EU in terms of manufacturing and fifteenth for service firms (ABS, 2003). This type of innovation ranking has generated some anguish within France over its international performance, leading many analysts and commentators to suggest that it is a reflection of economic decline (CPCI, 2006). Growth and innovation within smaller French firms (e.g. under 100 employees) has been significantly less than for medium sized firms (e.g. 100 to 500 employees) (OSEO, 2006). Initiatives targeting innovation and growth in small firms have been launched in recent years by the French Government (Ministère délégué à la Recherche, 2003, Lesourne & Randet, 2007) and the French Managers Association (MEDEF, 2002), as will be seen in next paragraphs. Switzerland performs very well in terms of nearly all available indicators of science, technology and innovation, often holding with a leading international position (OECD, 2006). At the European level, Switzerland is among the leading countries in terms of innovation and is ranked in second place out of 33 countries, according to the 2005 European Innovation Scorebord (European Communities, 2006). In most of the innovation indicators Switzerland is well above the EU average (e.g. lifelong learning, intellectual property output, and value added in high-tech manufacturing). Only two indicators (science and engineering graduates and public funding innovation) fall below the EU25 average. 5. Methodology 5.1. Questionnaire The questionnaire used in the study was developed as a diagnostic tool designed to assist managers from small firms to evaluate the risk and return of future investment in a particular innovation, and to assess their managerial practices in relation to commercialisation, considered as critical points for a small firm, as mentioned in the introduction of the paper. It includes also a set of questions on the perception of the national environment. Ten items measured the small firm manager‘s perceptions of the national environment. These included the elements of the ―National Innovative Capacity Framework‖ as defined by Porter and Stern (2001), with attention given to the access to a skilled and educated labour force, to the cost of doing business, to the access to key markets and financial resources, to the access to research centres and to government support for innovation. Also canvassed were opinions of the quality of lifestyle within the country. Lifestyle within a country or region has been associated with enhanced levels of innovation due to its ability to attract and retain creative, entrepreneurial people who bring their skills, talents and expertise (Florida, 2002). 5.2 Sample The study drew a sample of 143 small firms comprising 39 French, 40 Swiss and 64 Australian companies. The selection of the sample was undertaken on the basis of size and level of innovation. The OECD (2004) definition of small firms was used to define the parameters for firm selection. There8

fore, the units of analysis in this study are firms with 10 to 250 employees and a turnover below €50 million. As there were no reliable databases of innovative small firms, the research team made use of some held by government agencies, listings in technology parks, and their personal networks within the business communities of their home countries, in order to boost the size of the sample. Data collection was undertaken via face-to-face interviews after an initial contact letter was sent to the CEO of the company explaining the study and seeking their participation. Each interview lasted around 2 hours and involved the respondent completing a questionnaire, used for the quantitative part of the survey, as well as a discussion of its outcomes. The sample firms were drawn from a variety of industries, although the largest proportion (31%) was manufacturers, which is explained by the desire to find firms that had clearly identifiable innovations. No significant differences were found between the three countries in terms of industry type. The average length of time the firms had been in operation was 24 years. ANOVA tests showed that Australian firms were on average younger than those from France and Switzerland. The firms from Australia had a mean age of 12 years while the French firms were an average of 39 years old and the Swiss firms 29 years old. In terms of size, the firms had annual turnovers ranging from less than US $50,000 to just over US $40 million, with an average of US $15.5 million. The average size of the firms was 59 full time employees. The Australian firms were found to be significantly smaller than their French counterparts with an average of 32 full time employees as compared to 95 employees in the French firms. The Swiss firms, with an average of 68 employees, were in the middle. 5.3. Data Analysis The survey data was subsequently examined using a discriminant analysis procedure, which is useful for building predictive models of group membership based on the characteristics of individual cases. The group membership used for this analysis was country (e.g. Australia, France or Switzerland), and the predictor variables were the ten items relating to the respondents‘ perceptions of the external environment as conducive for innovative small firms, and the items from the four indices relating to market, innovation, resources and strategy. The CEO in each firm was asked to comment on their perceptions as to the general climate of innovation within their country. This perception is mentioned by the literature as having strong influence over the small business manager's strategic decision making (Gagnon, et al, 2000). This was explored with a series of questions that examined how easy or difficult they felt it was to manage a competitive, innovative firm within their country. Key issues examined were access to a skilled and educated workforce, the cost of doing business, the geographic distance to key markets, access to external financing, ability to find and recruit high quality management staff, lifestyle, access to university and other research centres, government support for innovation, compliance costs and regulations, and the quality of the communications infrastructure. The discriminant analysis models were run using the step-wise procedure in the SPSS statistical software program. In each case a varimax rotation procedure was employed in order to provide clear separation of the functions. A hold out sample was not employed as the predictive accuracy of the final model was not the paramount objective of this analysis (Birley & Westhead, 1993). For each model Wilk‘s Lambda statistics were used to determine if the discriminant models as a whole were significant (Wilks & Thompson, 1937). Rao‘s V was used to determine the inclusion of the items in the 9

models with a range from 0.05 to 0.10 significance levels of the F-statistics determining entry or removal. The minimum Rao‘s V for entry was 0. A discriminant analysis was undertaken with the ten items relating to how the external environment supported innovation for small firms as independent variables, and the three countries as grouping variables. The Wilks Lambda measure was 0.903 with its chi-square significant at the 0.001 level. The model used 135 of the 143 cases in the sample (94.4%), and correctly classified 64 percent of the cases. Two standardized canonical discriminant functions were generated after the varimax rotation identifying three of the original ten items as significant within the model. The first function accounted for 76.4 percent of the variance in the model, and the second function for the remaining 23.6 percent. 6. Findings The results from the discriminant analysis are shown in Table 3 (see appendix). In addition, Figure 3 illustrates the findings using a diagram to plot the relationship between the three country subpopulations and these descriptors. The rotated standardised canonical discriminant function coefficients for the significant independent items within each model were then used in conjunction with the group centroid functions for the grouping variables to estimate visual plots illustrating the relationships between these variables.

Figure 3: Discriminant analysis plot of external environment

Communications & Internet services excellent for business

Switzerland

Lifestyle in the country enhances business

France

Cost of doing business is low compared to other countries Australia

As shown in Figure 3, the Australian managers were more likely to view the cost of doing business in their country as a positive for small firms seeking to commercialise new innovations than did those 10

from France or Switzerland. The Swiss managers were more likely to express a positive view in relation to their national infrastructure with the Australian managers being more negative about their national transportation and communications infrastructure. The managers from all three countries indicated a strong, positive perception of the lifestyle in their country. However, the Swiss were significantly more positive than the French over this issue. Both Swiss and Australian managers were more likely than their French counterparts to express a positive view of lifestyle as being an enhancement to business. The details for 5 more critical items are given below. 6.1 Access to a Skilled and Educated Workforce An analysis using ANOVA tests (one-way) also found Australian and Swiss managers more negative over their ability to access skilled employees than their French counterparts. This may be explained by the low levels of unemployment found in these two countries at the time of the study as compared to France where unemployment levels were double. It highlights the problem faced by small firms engaged in growth who have to compete for employees within the wider labour market, typically competing against larger firms that can frequently offer better wages and conditions. 6.2. The Cost of Doing Business French managers were also found to be significantly more negative in relation to the cost of doing business than Australian or Swiss. The negative view of the French firms toward the cost of doing business may be explained in terms of the general feeling of French managers that firms are overtaxed in France. This feeling was generally stronger among French small business managers, especially since the implementation of the Law recommending the 35 hours working week. 6.3. Access to key Marketing and Financial Resources Swiss firms were also found to be significantly more likely than Australian firms to agree with the view that geographic distance to markets was not a problem for them. This is a reflection of Switzerland‘s central location within the heart of Europe, and Australia‘s relative geographic isolation from major northern hemisphere markets. Swiss firms were also found to be significantly more positive over the availability of external financing than were the Australian firms. This may reflect the presence within Switzerland of many strong international banking and financial services organisations, and it‘s relatively more sophisticated financial market when compared to Australia. It should be noted that 63 percent of the Australian and 79 percent of the Swiss firms indicated that they considered equity financing as being important to the future growth of their business. By comparison only 24 percent of the French firms held this view. 6.4. Access to Research Centres The Swiss were significantly more positive than the Australian or French firms in relation to their ability to access high quality research centres such as universities. This feeling of the French firms can probably be linked with the generally difficult relationships that exist between French universities and French firms. The actual level of sentiment across the region might also be even higher because of the specificity of the Bourgogne region in contrast with other more dynamic French regions. The Bourgogne region suffers from a lack of research institutions and universities that can partly explain this appreciation. 11

6.5. Government Support for Innovation No differences were found between the countries in terms of how they viewed the level of government support for innovation, with most being either negative or equivocal. However, the Swiss firms were found to be significantly more positive over the regulations and laws governing business operations than were the Australian and French. Finally, the three countries were found to be quite different from each other in relation to the perception that the communications infrastructure in the country was excellent for business. The Swiss firms were the most positive, followed by the French and then the Australians. This may reflect the problems facing Australia as a geographically very large country with a fast growing economy that has begun to place pressure on the national telecommunications, rail, road, sea and air transportations systems. At the time the data was being collected, there was a strong debated within political circles of the need for greater investment in infrastructure. 7. Discussion of the Findings What do these findings tell us about the nature of innovation management in small firms? With respect to the four research questions initially raised by this study, the findings suggest that the national innovation infrastructure within a country is viewed as potentially important to small innovator firms. All three of the countries examined in this study are advanced western economies, yet the differences found between them in relation to the responses from these firms indicates that government investment in infrastructure, the cost of doing business, the geographical proximity or isolation of the country and the overall economic conditions it is experiencing all may impact upon the capacity of small innovator firms to do business. While measuring the impact of the relationship between the national innovation system and the success or failure of the commercialisation within small firms is difficult to determine from the data available, the results suggest that managers from small innovator firms do view their external environment as having an impact on their ability to manage innovation and commercialisation activities. Although government support was treated with some negativity or indifference, direct assistance in the form of R&D grants or commercialisation support can be beneficial and many of the smaller firms, particularly those in Australia, were positive about this. The role of government policy and compliance issues also loomed large in the responses of the Swiss firms, suggesting that this is an area where innovation can be enhanced or impeded. The cost of doing business was an issue for French firms, suggesting that government taxation and labour market reforms can play a role in influencing innovation activity amongst small firms. Also important can be the ability of small firms to access R&D centres such as universities, or infrastructure such as telecommunications, road, rail and air transportation, financial and physical resources. As highlighted in the findings, Swiss firms seemed the most positive about such issues.

The findings suggest that the recent reforms to the French NIS are yet to have a major impact on small firms. As illustrated by the responses from the Australian and Swiss firms, government support for commercialisation can have positive impacts and is an area that the French Government should continue to pursue.

12

8. Conclusion The French NIS has experienced many changes over the past 60 years with a move from large, national projects to a more diverse, regionally focused approach with greater attention given to the role of small firms. Unlike their larger counterparts the small firm is generally unable to find the time and resources to engage in long term R&D projects with universities. Investments in innovation need to be generate quick returns that can boost the firm‘s cash flow (Mazzarol & Reboud, 2006). As Lundvall (2007) has observed, the focus within an NIS should not only be upon the high technology sectors and the direct engagement of universities with industry for R&D projects. Also of importance are the low technology sectors and how the NIS enhances the diffusion of innovation into the firms that comprise these industries. Such innovation adoption by less high technology sectors is likely to have a significant impact on the overall productivity of the economy. This paper has drawn upon the findings of a small scale study of small innovator firms in France, Australia and Switzerland in order to examine aspects of the impact on such firms of the NIS. The French NIS has been examined as a particular point of focus and the results suggest that the national environment and government policy does impact on these firms, with some inter-country differences. Future research should draw a larger sample from a wider range of countries to evaluate the extent of cross-national differences in innovation policy and the impact that this has on the business activity of small firms. References ABS (2003). Australian Industry 2000-2001. Canberra, Australian Bureau of Statistics Cat: 8155.0. Balzat, M., & Hanusch, H. (2004). "Recent trends in the research on national innovation systems." Journal of Evolutionary Economics 14(2): 197-210. Berger, M., & Revilla Diez, J. (2006). "Do firms require an efficient innovation system to develop innovative technological capabilities? Empirical evidence from Singapore, Malaysia and Thailand." International Journal of Technology Management 36(1/3): 267. Berkhout, A. J., Hartmann, D., van der Duin, P., & Ortt, R. (2006). "Innovating the innovation process." International Journal of Technology Management 34(3/4): 390-404. Birley, S., & Westhead, P. (1993). "A Comparison of New Businesses Established by 'Novice' and 'Habitual' Founders in Great Britain." International Small Business Journal 12(10): 38 - 60. Brunetto, Y., & Farr-Wharton, R. (2007). "The Moderating Role of Trust in SME Owner/Managers' Decision-Making about Collaboration." Journal of Small Business Management 45(3): 362-387. CPCI, (2006), L'Industrie Française 2005-2006. Paris, Commission Permanente de Concertation pour l'Industrie (CPCI), Ministere de L‘Economie des Finances et de L‘Emploi Crosby, M. (2000). "Patents, Innovation and Growth." Economic Record 76(234): 255-262. DCITA (2004). Backing Australia's Ability: Building our Future Through Science and Innovation. Canberra, Department of Communications, Information, Technology and the Arts, Commonwealth of Australia. Dean, J., Holmes, S., & Smith, S. (1997). "Understanding Business Networks: Evidence from the Manufacturing and Service Sectors in Australia." Journal of Small Business Management 35(1): 78-84. Dernis, H., & Khan, M. (2004). "Triadic Patent Families Methodology." OECD Science and Technology Working Papers 2004/2(OECD Publishing). Edquist C. (Ed.) (1997) System of Innovation: Technologies, Institutions and Organization, Pinter, London. 13

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Nelson, R. (1993a) National Innovation Systems: Pilot Case Study of the Knowledge Distribution Power of Finland, VTT Group for Technology Studies, Helsinki, Finland. Nelson, R. (Ed.) (1993b), National Innovation Systems. A Comparative Analysis, Oxford University Press, New York and London. OECD (1997). National Innovation Systems. Paris, Organisation for Economic Co-Operation and Development. OECD (2001). Oslo Manual: The Measurement of Scientific and Technological Activities: Proposed Guidelines for Collecting and Interpreting Technological Innovation Data. Oslo, Organisation of Economic Co-operation and Development, European Union, Eurostat. OECD (2004a). SME Statistics: Towards a more systematic statistical measurement of SME behaviour. Promoting Entrepreneurship and Innovative SMEs in a Global Economy, Istanbul, Turkey 3-5 June, Organisation for Economic Co-operation and Development, Paris. OECD (2004b). Financing Innovative SMEs in a Global Economy. Istanbul Turkey 3-5 June, Organisation for Economic Cooperation and Development. OECD (2007) OECD Statistics [online available] http://stats.oecd.org OSEO, (2006) "La conjoncture des petites et moyennes entreprises, 42ème enquête semestrielle, janvier 2006 Oséo Services. Patel, P., & Pavitt, K. (1994a) ―The Nature and Economic Importance of National Innovation Systems‖, STI Review, No. 14, OECD, Paris. Patel, P., & Pavitt, K. (1994b) ―National Innovation Systems: Why They Are Important, And How They Might Be Measured And Compared‖, Economics of Innovation and New Technology, 3(1): 77-95. Porter, M. E. (1990). The Competitive Advantage of Nations. New York, MacMillan Press. Porter, M. E. (2001b). Clusters of Innovation: Regional Foundations of U.S. Competitiveness. Washington, DC., Council on Competitiveness. Porter, M. E., & Stern, S. (1999). The New Challenge to America's Prosperity: Findings from the Innovation Index. Washington D.C., Council on Competitiveness. Porter, M. E., & Stern, S. (2001). "Innovation: Location Matters." Mit Sloan Management Review 42(4): 28-36. Porter, M.E., (2001a) "Innovation and competitiveness: findings on the Netherlands, Organizing Innovation in the Knowledge-Based Economy", The Hague, The Netherlands, December 3. Roach, T. (2000). "Saving Aussie science from third world status " Australasian Science 27(5): 42. SESSI, (2007), "Tableau de bord de l'innovation, 18ème édition", Ministère Français de l'Industrie Slaughter, S., & Rhoades, G. (2004). Academic Capitalism and the New Economy: Markets, State, and Higher Education. Baltimore, Johns Hopkins University Press. Smith, K. (2000). "Innovation as a Systematic Phenomenon: Rethinking the Role of Policy." Enterprise & Innovation Management Studies 1(1): 73-102. Stern S., (2004), "The Innovation Index Challenge: Benchmarking Global Innovation Leadership", presentation prepared for the Innovation Measurement Symposium, Melbourne Business School, November, 2004, based on the National Innovative Capacity Project, including joint research with Jeffrey Furman, Joshua Gans, and Michael E. Porter. Sternberg, R., & Arndt, O. (2001). "The Firm or the Region: What Determines the Innovation Behavior of European Firms? ." Economic Geography 77(4): 364-382. Trott, P. (2007) ―Book Review: The Management of Technology and Innovation: A Strategic Approach, Edited by Margaret White and Garry Bruton‖, R&D Management, 37(4): 379-380. Walsh, V., & Le Roux, M., (2004) ―Contingency in innovation and the role of national systems: taxol and taxotère in the USA and France‖, Research Policy 33(9): 1307–1327 Wilks, S. S., & Thompson, C.M. (1937). "The Sampling Distribution of the Criterion Lambda when the Hypothesis Tested in not true." Biometrika 29(1/2): 124-132.

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Wood, F. (1992). "The Commercialisation of University Research in Australia: Issues and Problems " Comparative Education 28(3): 293-313. Yencken, J., & Gillin, M. (2006). "A longitudinal comparative study of university research commercialisation performance: Australia, UK and USA." Innovation 8(3): 214-227. Zysman, J. (1983) Governments, Markets and Growth, Cornell University Press, Ithaca NY.

Table 1: Four steps in the construction of the French NIS Main reports and key words 1945-1980: "Colbertiste", "trente glorieuses" "Big Programs", "National Champions", creation of ANRT* (1953)

Aims and objectives of the policy France's position as the global leader in specific sectors, which requires substantial financial investments and extensive use of scientific research and technological innovation.

1980s: Attempts to decompartmen-talize public research 1982: creation of CSRT*, BCRD* Coordinating the public funding for R&D, the principle of intervention of regions in the FNIS, the principle of extending the mission of personnel and public research institutions in the use of research results 1990s: First great national debate 1998: Guillaume1's report (about the weaknesses of the Growing involvement of institutions of higher educaFNIS), July 1999: New law of orientation of the re- tion and research in applied research, and growing role search and innovation. of regional institutions and European research and innovation. Better situation for the public institutions in science and technology (Especially universities). Public researchers will be able to work as consultants or to set up a business. 2000s: Second great national debate 2001 Creation of FUTURIS* 2003, the researchers Previous laws (1982, 1999) did not prevent France of protest. losing grounds on the international scene. According Beffa's report (2005) thus creation of AER* & ANR*, to studies conducted by FUTURIS (1-Unproductive and 67 projects of "pôles de compétitivité" (jul 2005), expenditure R & D, 2-Misdirecting public expendiAII* (aug 2005), HCST (nov 2005), « Carnot* » (mar ture) => The launch of major structuring programmes. 2006) } *

ANRT: Association nationale de la recherche technique CSRT: Conseil supérieur de la recherche et de la technologie BCRD: Budget civil de R&D FUTURIS: Futur, Recherche, Innovation, Société HCST: Haut Conseil de la science et de la technologie ANR: Agence nationale de la recherche AER: Agence d‘évaluation de la recherche AII: Agence de l‘innovation industrielle HCST: Haut Conseil de la science et de la technologie Carnot: First twenty groups of public research centres

(based on Fernez-Walch & Romon, 2006)

1

CEO of the National Agency for Research Valorization (ANVAR), which was then renamed as OSEO when it merged with the Bank for SMEs (BDPME) at the beginning of the 2000s.

16

Table 2: A Comparison of Australia, France and Switzerland (2005) Country Total population (millions) GDP (US $ billions) Real GDP growth rate Per capita GDP (US $) Proportion of manufacturers that are small firms Unemployment rate Self-employment rate GDP expenditure on R&D per annum Investment in ICT as a % of total non-residential fixed capital formation Proportion of households with access to home computers Proportion of households with access to the internet Proportion of age group 25 to 64 years with tertiary level education Expenditure per student in tertiary education: 2003 constant prices (US $) Total expenditure as % of GDP on education institutions for all levels of education

Australia 20.3 m $701 bn 2.8% $34,239

France 60.9 m $1,897 bn 1.2% $30,266

Switzerland 7.4 m $267.4 bn 1.9% $35,649

94%

90%

88%

5% 13%

10% 9%

4.5% 11%

1.64%

2.16%

2.94%

21.5%

16.4%

n/a

67%

50%

71%

56%

34%

73.5%

31%

24%

28%

$12,405

$10,704

$25,900

5.8%

6.3%

6.5%

Source: OECD Statistics (http://stats.oecd.org)

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Table 3: Results of the Discriminant Analysis Eigenvalues Function

Eigenvalue

% of Variance

Cumulative %

1 2

.347(a) .107(a)

76.4 23.6

76.4 100.0

Canonical tion .508 .311

Correla-

a First 2 canonical discriminant functions were used in the analysis. Wilks' Lambda Test of Function(s)

Wilks' Lambda

Chi-square

df

Sig.

1 through 2 2

.670 .903

52.376 13.348

6 2

.000 .001

Rotated Standardized Canonical Discriminant Function Coefficients(a)

The cost of doing business is low in comparison to other countries? The lifestyle in this country enhances our business? The communicaitons infrastructure in this country ( e.g. roads, telecommunications, internet services) are excellent for our business? Coefficients are based on rotated structure matrix. a % of variance by function 1 = 72.8, function 2 = 27.2 Functions at Group Centroids Country Australia France Switzerland

Function 1 -.550 .167 .832

Unstandardized canonical discriminant functions evaluated at group means

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2 .252 -.551 .150

Function 1 -.386 .372 .872

2 .492 .756 -.180

The Strategic Management of Innovation in SMEs: A Multiple Case Study Approach in Switzerland Thierry Volery Swiss Institute for Entrepreneurship and Small Business University of St. Gallen, Dufourstrasse 40a 9000 St. Gallen, Switzerland email: [email protected]

Abstract This study seeks to examine the process of strategic management of innovation within SMEs with particular focus on the decision process of entrepreneurs who lead such companies. From a strategic perspective, innovation can be understood as a rent seeking activity, which results from the volume, the rate of margin, and the length of the innovation. Drawing on eight case studies from Eastern and Central Switzerland, we show that the potential rent of an innovation results from the volume, the rate of margin, and the length of the innovation. The industry and the capital intensity of the production process also influence the rent configuration. However, and contrary to the general assumption, small firms do not necessarily prefer rent configurations with small volumes. Considering the relationship between rent configuration and innovation management process, it can generally be assumed that sound innovation management process is associated with a favorable rent configuration. Introduction The contribution of small and medium-sized enterprises (SMEs) to innovation and overall economic growth has been repeatedly demonstrated through empirical research (Acs, 1999). However, the vast majority of studies dealing with innovation processes refers to large companies or to SMEs with a high-tech background (Bhaskaran, 2006; Akgün, Lynn & Byrne, 2004). “Most of what is written about innovation either focuses on the hottest new start-up or the sleeping giant who suddenly awakened. Rarely do stories of established SMEs in traditional industries make headlines with their managerial activities”. (Blumentritt, 2004). This lack of research interest in established SMEs from a "low-tech" background is particularly striking when we consider the importance of the SME sector in the economy. For instance, SMEs account for 99.7% of the companies and employ almost 70% of the workforce in Switzerland. In order to contribute to a deeper understanding of innovation in SMEs, this study takes a broad approach by including enterprises from various industries. We focus our attention on three questions: how SMEs make strategic innovation decisions, how they assess potential risk-return profiles of future innovations, and how the innovation management process is structured. Empirical evidence is based on a series of eight case studies about SMEs from the German-speaking part of Switzerland. This study is part of an international research project which seeks to examine the strategic management of innovation within SMEs, with particular focus on the decision making of the entrepreneurs who lead such companies.

1

1. Review of the literature Van de Ven (1986) defines innovation as “the development and implementation of new ideas by people who over time engage in transactions with others within an institutional context”. This definition is sufficiently general to apply to a wide variety of technical, product, process, and administrative kinds of innovations. Therefore, it is possible to identify five types of innovations: 1. Product or service innovation: Product or service innovation denotes a change in the product a company makes or the service it provides (Tushman & Nadler, 1986). 2. Market development innovation: A market development innovation describes the process of addressing new customers with existing or new products or services. For instance, tapping a new geographical market through the export of existing products can be qualified as market development innovation. 3. Marketing innovations: Significantly new approaches to the marketing of products or services can be characterized as innovation activities. Examples for marketing innovations are the use of new distribution channels or the development of new brands. 4. Process innovation: Process innovation is a change in the way a product is made or the service provided (Tushman & Nadler, 1986). 5. Administrative innovations: Administrative innovations comprise new institutional policies, structures, or systems. Some prominent examples of administrative innovations are strategic planning units, T-groups, joint ventures, matrix structures or quality circles (Abrahamson, 1991). An administrative innovation does not immediately result in a new or improved product or service but it influences the introduction or production process (Kimberly & Evanisko, 1981). Innovation could be an important source of competitive advantage (Porter, 1996) and therefore directly influence the survival of a firm in the marketplace. SMEs especially need to think about their business strategically, since they cannot “succeed on brute force, throwing resources at problems” (Porter, 1991). Decisions about the commercialization of strategic innovations are normally made by the company’s board or at least significantly influenced by it. Since strategic innovations determine future profitability of the firm and frequently require significant resource commitment, the innovation decision is directly related to the company’s existence. In order to protect competitive advantages resulting from strategic innovation, firms try to create isolating mechanisms which prevent others from competing for a given market opportunity and appropriate the rents associated with it (Alvarez & Barney, 2004; Rumelt, 1984). 1.1 Innovation as a rent-seeking activity A strategic perspective on innovation is taken in this study. Strategy aims at the establishment of sustainable, distinctive competitive advantage which, in turn, is precondition for rent appropriation (McGrath, Tsai, Venkatamaran & McMillan, 1996). In other words, strategic management focuses on capturing rents, i.e. on the capturing of excess profits that do not immediately induce a competitive response (McGrath, 1997; Mahoney & Pandian, 1992). Rent can be defined as returns that “arise from the existence, discovery, and successful commercial exploitation of entrepreneurial opportunities” and are “in excess of the opportunity costs of all resources used” (Miles et al., 2003). Accordingly, entrepreneurial rents are all residual returns exceeding "normal" returns (i.e. returns that would pay all factors of production). All types of innovation are generally suitable to capture rents: for instance, product innovation can generate more value and there2

fore command higher prices. Similarly, organizational innovation can lead to reduced fixed costs or to the development of new markets and higher sales (Miles et al., 2003). Firms seek opportunities to capture rents which exist because of competitive imperfections in factor or product markets (Barney, 1986a; Alvarez & Barney, 2004). Market imperfections are, for instance, a result of technology or demand changes or they are created purposely by individuals (Schumpeter, 1934; Kirzner, 1973). In order to exploit those imperfections successfully, three conditions must be fulfilled: the firm must possess the rare knowledge about the rent-generating opportunities associated with a particular competitive imperfection, it must dispose of the resource endowment necessary to take advantage of this opportunity and it must find a way to appropriate some of the rents (Alvarez & Barney, 2004). Even if a firm knows about a rent-generating opportunity and has the resources to make use of it, competitors and other market forces can erode the firm’s appropriable rent. Existing opportunities to create and capture rents will cause entrepreneurial competition, influencing the longevity of a product’s market position through imitation and innovation of other firms (Miles et al., 2003). The ability of the firm or entrepreneur to sustain a product’s competitive position will depend on the protection of intellectual property rights and deterrence of new entrants. 1.2 Determining the potential rent of an innovation According to Santi et al. (2003), the potential rent of an innovation results from the volume (potential annual sales), the rate of margin (average rate of profit), and the length of the innovation (duration of the life cycle of the innovation). The volume is determined by four “indicators”: the potential of sector diffusion, the potential of geographic diffusion, the limits to exploitation and the size of the user markets (Santi et al., 2003). The indicator sector diffusion aims at estimating the spectrum of potential applications in different market segments (application dimension) whereas, the indicator geographic diffusion refers to the spatial area in which the innovation will be commercialized (spatial dimension). The third factor, limitations to exploitation, refers to possibly not accessible geographic markets or market segments due to patents already in place or other preclusive criteria. The fourth indicator, size of user markets, combines the preceding indicators by measuring the average annual sales which are generated in all market segments and geographic areas accessible. The rate of profit is determined by three indicators: the process of generation of the innovation, the type of innovation and the kind of prior protection. If the process of generation takes place in close cooperation with suppliers, research institutions, customers or other factors, Santi et al. (2003) assume a favorable effect on the rate of profit as long as measures are taken to secure the confidentiality of the innovation and to protect the intellectual property associated with it. Furthermore, the type of innovation will influence the rate of profit potentially generable: incremental vs. radical, isolated vs. integrated into a system and substitution vs. creation of new market (Abernathy & Utterback, 1978; Henderson & Clark, 1990) are the relevant distinctions impacting the innovation profitability according to Santi et al. (2003). The third indicator, the kind of prior protection, relates to the ability of the firm to protect its intellectual property. If the innovation is really new and there is no prior intellectual property claim on it, the entrepreneur will be able to protect it and capture the associated rents. The lifetime of the innovation depends on the technology used and the ease to copy this technology. If the technological basis of the innovation rests upon fundamental research requiring extensive research efforts, the innovation will tend to have a long life cycle. In contrast, if the innovation is 3

based on applied research and does not require major research work, its length of lifetime will be limited. The technical ease to copy will also determine the probability and speed of competitive imitation. The less transparent the innovation (because of technological complexity and specific knowhow), the more difficult it is to access the knowledge inherent in the innovation. The ability to patent the technology and to enforce the patent effectively will further increase the lifetime of the innovation. 1.3 The innovation process in SMEs SMEs differ significantly from large companies as to how business is conducted, operations managed and strategies formulated: “a small business is not a little big business” (Welsh & White, 1981). One of the most frequently mentioned attributes of SME is their resource scarcity (Huang, Soutar & Brown, 2002; Blumentritt, 2004; Aragòn-Sanchez & Sánchez-Marín, 2005). Generally, key resource constraints comprise shortage of labor or physical inputs, shortage of finance, lack of suitable investment opportunities and insufficient managerial capacity (Mahoney & Pandian, 1992). The resource poverty of SMEs lead to a higher vulnerability to mistakes and variations in their economic performance (Martin & Staines, 1994). As Blumentritt (2004) notes: “one major misstep could have dire consequences for firms with little financial slack”. Another characteristic of a SME concerns organizational differences in terms of structures, processes and responsibility. SMEs have management structures which differ from those of large companies (Acs et al., 1994; Rothwell, 1989) by having less bureaucracy and flatter management structures (Bhaskaran, 2006). Decision-making is less formalized and often rests with a small group of people. Particularly in family-owned firms, decision-making processes are significantly influenced by the owner-manager and contingent on his personality (Bhaskaran, 2006). These key characteristics also influence innovation management processes in SMEs. Acs et al. (1994) suggests that the less hierarchical and bureaucratic management structures in SMEs can result in an innovative advantage, at least in certain industries. In large firms, innovation decisions must survive bureaucratic resistance and risk aversion is inherent in rigid structures, whereas in SMEs the innovation decision is made in an environment free of bureaucratic constraints. Furthermore, the organizational atmosphere in SMEs is beneficial to creative work: lines of communication are shorter, there is a more direct interaction between the enterprise and its customers and there are no fixed reward and control structures stifling creativity (Wijnberg, 1990). Empirical findings suggest that formal planning is of minor importance in SMEs. Small firms rarely engage in “large company techniques” like formal planning and rather use informal management practices. When planning and control techniques are used, they usually involve short time horizons and are informal, irregular and incomprehensive (Martin & Staines, 1994). The rational weighting of different options and the decision for one of them based on comprehensive collection and analysis of information can even be disadvantageous. “In fact, too much analysis can be harmful, by the time an opportunity is investigated fully, it may no longer exist” (Bhide, 1994). 2. Methodology This study is part of an international research program coordinated by Graduate Business School at the University of Western Australia and the Groupe ESC Dijon in France. A multiple case study method is used. This methodology is particularly recommended to examine many issues across many cases and

4

avoid chance associations (Eisenhardt, 1991). Theory can be both developed and tested using multiple case study approaches (Yin, 1989; Eisenhardt, 1989). Each case study is based on a 15 section-questionnaire administered face-to-face and on an indepth interview with owner-managers of SMEs. The questionnaire has two purposes: (1) it is a data collection method for the research project; and (2) it is a strategic screening to help the owner-manager to correctly assess the anticipated value of the innovation and the erosion effects it will face when it is launched on the market. The questionnaire was developed with an Excel spreadsheet program and, after a certain number of sections are completed, it produces a report of the rent configuration or of the innovation management process. The reports are a diagnostic tool, which will also serve in the subsequent interview. 2.1 Measurement Drawing on Santi's approach (2003), we considered that the potential rent of an innovation results from three main components: - volume (sales likely to be generated over one year); - rate of margin (profits likely to be generated from an innovation); - length (duration or a life cycle of an innovation). Assuming that every component has two possible variables, one can get eight combinations of these variables. There are six rent profiles defined and used in the survey (Figure 1).

Figure 1: The six rent configurations

Within these six configurations, the “Champion” configuration appears to be the most desirable. However, the “Oasis” configuration appears to be the most suitable for small firms because of the small sales volume. Since small firms typically lack extensive resource endowments, it is anticipated that they would strive for “Oasis” innovations. This configuration shows favorable characteristics in terms 5

of profit rate and length in combination with rather small volumes. In contrast, “Lark Mirror”, “Joker” and “Champion” configurations are characterized by high volumes which “may not be followed easily by small firms with limited capacity to commit to such production” (Reboud & Mazzarol, 2003). The least attractive configuration is the “Shrimp” configuration with low values regarding all three components. The “Gadget” differs from the “Shrimp” only in the higher rate of profit. The short length and the high volumes of the “Gadget” induce the innovator to adopt a “take the money and run strategy.“ (Reboud & Mazzarol, 2003). In addition to the estimation of the potential return an entrepreneur might yield from an innovation, there remains the need for the development of an effective business model to fully commercialize the innovation (Akgun, Lynn & Byrne, 2004). To address this problem, a four part framework was developed that seeks to measure the SME owner-manager's current approach to innovation management, mapping behavior on four dimensions (Mazzarol & Reboud, 2006): 1. Market index – a measure of the firm's focus on customer needs and how the new innovation offers customers value for money. 2. Innovation index – a measure of the firm's formal process of new product development, and its management of intellectual property. 3. Resources index – a measure of the firm's technological, human, financial and managerial resources. 4. Strategy index – a measure of the firm's strategic planning in relation to its commercialization process. Each index comprises a total of ten items that are scored by the owner-managers undertaking the survey. Scores could range from 0 to 10, with 5 being the average for each of the four indexes. The four dimensions form a "diagnostic diamond" depicted in figure 2.

Figure 2: The diagnostic diamond Market Index

Innovation Index

Strategy Index

Resource Index

6

2.2 Sample and data collection method A series of eight interviews with SME owner-managers were conducted for this study. The sample was selected from a small business population with high levels of innovation and commercialization activity, existing track records of trading history and well defined product portfolios. The eight SMEs are located in Central and Eastern Switzerland and they come from a broad range of industries in order to allow inter-industry comparisons. Their number of employees varies between 10 and 150. In order to enhance the reliability and validity of the data, the output generated by the diagnostic questionnaire (rent profile and diagnostic diamond) was discussed with the respondents immediately in order to validate the results. Through this, respondents were given the opportunity to check the conclusions drawn by the researcher and express any suggestions or amendments to it. 3. Results This section outlines the findings for each company. After a brief overview of the company, we analyze how strategic innovation decisions are made, what is the rent profile for future innovations, and how the innovation management process is structured. 3.1 Software Ltd Software Ltd was founded in 1982 and is a private limited company. The company currently employs 23 people. The company has three subsidiaries in Switzerland as well as a software development center in Bratislava. Its product portfolio comprises software solutions for car dealers and garages. Software Ltd offers complete software solutions for authorized car and motorcycle dealers including tools for customer relationship management and warehousing, OEM-interfaces. Software Ltd introduced 6 to 10 innovations in the last three years and invests up to 30% of its annual turnover in innovations. The main focus of the innovation activities are product and service innovations (61-80%), followed by process technology innovations (21-40%). The factors considered as most important for innovation success or failure can be grouped under three headings: customers, competitors and cooperation with external business partners. Customers are considered as the most important group influencing the success or failure of an innovation: their general attitude toward innovation, their needs, their ability to see the benefits provided by the innovation, their willingness to switch to an alternative product or service as well as the bargaining power of leading customers were ranked as important or very important with respect to the success or failure of an innovation. Software Ltd plans to commercialize a technological product innovation which can work alone without integration in a system and is compatible with existing products and processes. The three determinants of the innovation’s rent profile, potential volume, potential rate of profit and potential length of lifetime, are favorable resulting in a “Champion” configuration with high potential rent. It is anticipated that the innovation will have a high potential sales volume combined with medium to high gross and net profitability. With respect to the market impact of the innovation, it will potentially “create a new market by creating a new dominant design”. The only potential weakness of the innovation seems to be the easy imitability by competitors. Overall, Software Ltd shows a well developed diagnostic diamond: the financial and human resources necessary for the commercialization of the innovation seem to be available internally (Resource Index), the company seems to closely cooperate with customers during the innovation process 7

(Market Index) and the internal steering of the innovation process is well structured (Innovation Index). However, the company seems to lack a formal approach to innovation management process: a formal process for new product development exists “more or less” and the company does not have a formal, written business plan. The major challenges for Software Ltd are: to recognize customer needs (market dimension), find enough qualified employees (resource dimension), new technologies (innovation dimension) and the maintenance of sound relationships with OEMs/importers (strategy dimension). 3.2 Wood Flood Ltd Wood Floor Ltd is a wholesaler of wood floors located near Lake Zurich. The company has been established for 12 years and currently employs 10 people. Its annual sales grew continuously over the past years to CHF 10m in 2006. It can be considered an innovative company, introducing 10 innovations into markets over the past three years with market development innovations and marketing innovations playing the most important role (21-40% of the innovations). Measured as percentage of sales, the company invests up to 5% of annual sales into innovative activities. For the next three years, Wood Floor Ltd plans a market innovation which will be developed in cooperation with key suppliers. This innovation aims to create a new market and it will be compatible with existing products and processes. With high potential sales volumes, low profit rates and a rather short length of lifetime, this rent configuration can be characterized as “Lark Mirror”. Since this innovation involves the development of a new geographical market (the French-speaking part of Switzerland), the geographical diffusion and potential sales volume was estimated as rather high. The configuration “Lark Mirror” can impose major challenges on the firm in terms of capital outlay required to secure returns over the short life cycle. Furthermore, Wood Floor Ltd faces much bigger competitors in its sector, which leads to further erosion of innovation rents. The innovation management process at Wood Floor Ltd is formally structured and the generation of new innovations is internally perceived as a major focus of the firm. The relatively low score of the Innovation index results from the lack of legal protection through patents and the infrequent use of confidentiality agreements. Because of the nature of the wholesale business, patent protection and confidentiality agreements are rather uncommon protection measures, especially for market development and marketing innovations. Hence, it is not surprising that Wood Floor Ltd mentioned imitation as the most important and speed as the second most important strategic challenge. When legal measures like patents or contracts (e.g. non-disclosure agreements) are not applicable or enforceable, speed can be an appropriate protection from competitive imitation: shorter time-to-market can constitute a source of competitive advantage not easily imitable by others. 3.3 Ribbons Ltd Ribbons Ltd was founded in 1914. The company produces ribbons for multiple purposes: the five product lines comprise all types of ribbons from high quality decoration ribbons in a broad variety of designs to tapes for technical applications. Ribbons Ltd currently employs 130 people. Even though the family-owned company does not disclose sales numbers, it can be assumed that the company experiences remarkable growth as the workforce increased by 20% since 2003, which can be traced back to its international expansion. About 90% of the production is exported. Ribbons Ltd can be considered a highly innovative company since more than 10 innovations were introduced to the market in the last 8

three years. Most of those innovations are product innovations (41-60%) while marketing and process innovations account for 21-40% each. In the next three years, Ribbons Ltd plans to commercialize a product innovation which involves changes in technological processes. This innovation will be applicable independently and will be compatible with other products or services. It will be generated in cooperation with key suppliers and will be capable of creating a new market. The predicted annual sales after three years for this innovation range between €400’000 and €600’000. Its geographical diffusion is estimated as medium and its diffusion within market segments as limited. Regarding the profit margin of this innovation, a gross profitability of about 21-40% and a net profitability between 11% and 20 % is predicted. The length of lifetime is determined by a technology which is hard to copy. The diagnostic questionnaire qualifies this configuration as “Champion” even though the profitability seems to be rather low and the market diffusion reaches only intermediate values. However, the innovation management process at Ribbons Ltd shows some weaknesses in the internal steering of the commercialization process. The comparably lower score of the innovation index is partly due to a lack of effort to protect the innovation from imitation. There is currently no formal intellectual property strategy in the company. In fact, the main protection relies on trade secrets and additional legal protection is perceived as redundant. 3.4 Telecom Service Ltd Telecom Service Ltd is a small service firm for telecommunications companies founded in 2001. Its service portfolio encompasses planning, implementation and maintenance services for operators of mobile telecommunications networks. Telecom Service Ltd is a fast-growing company which increased its turnover from CHF 1.4 m to CHF 3.8 m in the past three years. With 6-10 innovations commercialized in the past three years and investments in innovations of around 10% of annual sales, Telecom Service Ltd can be considered a highly innovative company. The majority of those innovations were process technology innovations (41-60%) followed by service innovations (21-40%). The technological product innovation Telecom Service Ltd is planning to commercialize soon will be generated in cooperation with key customers and will be an improvement of existing products. Its potential annual sales volume after three years will range between CHF 600,000 and CHF 800,000. The geographical diffusion is estimated as rather limited and the diffusion within market segments as medium. The potential profitability of this innovation ranges between 21-40% (gross profitability) and 11-20% (net profitability). However, the innovation has the ability to create a new design which could become dominant. The innovation will be rather easy to copy by competitors which negatively influences the predicted length of lifetime. The rent configuration of this innovation was identified as a “Lark Mirror”. This rent configuration is characterized by high volume and may not be easily pursued by small firms with limited production capacity. In addition, this rent configuration might look attractive at first glance since additional sales give the impression of a fast-growing company. However, the short duration of the rents could imply that resources which are necessary in the beginning might become redundant when the innovation comes to the end of its life cycle. A service company like Telecom Service Ltd would possibly have to recruit new staff which had to be laid off after only a few years or months. The low profitability of the innovation is partially due to the market structure. The discussion with the owner-manager revealed that there is only a limited number of big customers buying Telecom Service 9

Ltd’s services. This implies that customers possess a high negotiation power, thereby eroding the rent that can be extracted from the innovation. Although all dimensions of the innovation process show evenly high scores and no dimension is particularly weak, some shortcomings can be identified. For instance, the internal planning process seems to follow a rather unstructured, informal approach and no business plan is formulated. Another weakness is the lack of effort put into the protection of the innovation from competitive imitation: ideas are not kept secret through non-disclosure agreements. 3.5 Publishing Ltd Publishing Ltd is a small publishing company for B2B magazines located in Zurich. Its product portfolio comprises two trade journals for automation and production technology. The company has been established for 74 years and currently employs 21 people. Its current annual gross turnover amounts to CHF 9m and 3% of the turnover is invested in innovation activities. The company operates in an industry significantly affected by the increasing importance of new information and communication technologies: advertising expenditures are reallocated from print to online advertising, and information becomes readily and freely available on the internet. The innovation planned for the near future possesses a rather weak rent profile. This rent configuration is called “Shrimp” due to its low volume, low rate of profit and short length of product life cycle. With a limited geographic diffusion, only CHF 200,000 estimated sales after three years, and a poor diffusion within market segments, the overall potential sales volume is low. Thin margins (less than 20% gross profitability) and the easy copiability by competitors complete the overall poor configuration. This rent configuration clearly reflects the intense competition in the industry which was discussed before. Substitution products, a shrinking market, decreasing entry barriers and direct competitors are the key determinants eroding the rent potential. The innovation management process at Publishing Ltd shows a considerable weakness with regard to the internal steering of the commercialization. There is no formal process for new product development, outside assistance is needed for the development of a prototype, the innovation has not been tested independently, there is little effort made to protect the innovation or keep it confidential and the prior experience of commercialization is very limited within the organization. As shown in Figure 1, the innovation index reaches only a low score (4.0) compared to other dimensions of the innovation management process. In contrast, the strategy index reaches a considerably high score (8.67). Altogether, the diagnostic diamond casts some doubt on Publishing Ltd ’s ability to commercialize the planned innovation. If a policy requiring the managers to examine all aspects of a planned innovation would exist, the diagnostic diamond would have a more balanced profile. 3.6 Building Services Ltd Building Services Ltd is a small company from the construction industry located in St. Gallen. Its main product, "Buildingtec", is a technology for the design, manufacturing and installation of steel reinforcement in concrete slabs, floors, and walls. With 30% of annual sales, Building Services Ltd dedicates a surprisingly high share of its resources to innovation activities. In the next three years, the company plans to commercialize 6-10 innovations, mainly consisting of product or service innovations. 10

The innovation project currently developed by Building Services is a “Lark Mirror”, characterized by high volumes, low profit rates and a short length of lifetime. The high potential sales volumes result from a very high potential geographic diffusion, estimated annual sales of more than €800,000 and a very wide diffusion within market segments. Because Building Services Ltd is responsible for the worldwide distribution of the licenses for the reinforcement technology, this assessment seems to be very plausible. However, gross profitability (lower than 20%) is rather poor and the easy imitability limits the innovation’s life cycle. The diagnostic diamond of Building Services Ltd depicted in Figure 1 shows high values regarding the innovation index and resource index while the market index and strategy index are underdeveloped. With respect to the market index, the discussion of questionnaire items made clear that the low score partially stems from the fact that Building Services Ltd claims to already know the customer. For instance, the compatibility with existing technologies or systems was not examined because, in the opinion of owner-manager, the innovation could be integrated in all existing systems. Similarly, it was argued that the customer’s ability to test the innovation prior to the purchase was not researched because it is not possible to test it. Therefore, prior beliefs about the customer substituted a thorough analysis of the customer’s needs. With regard to the strategy index, the main weaknesses encompass the poor assessment of potential competitors' reaction to the commercialization of the innovation, the insufficient evaluation of potential threats and the absence of a comprehensive financial model. 3.7 Machinery Ltd Machinery Ltd is a private limited company which has been established for 22 years. The company is an engineering company producing machines and parts in the area of post press processing of newspapers and magazines. It assembles technology for conveying, storing, bundling and packaging of newspapers. The innovation activities of Machinery Ltd of the last three years were mainly focused on product innovations: they account for the majority of innovations commercialized in this period. The annual investments in innovation activities amount to 5% of annual turnover, i.e. to around CHF 3.9m per year. The specific innovation analyzed in this case was a product innovation consisting of an improvement of existing conveyor technology. Like most of Machinery Ltd’s products, this innovation will require the integration in a system and will have the potential to create a new market. The manager expects the geographical distribution to be high with sales of €400,000 to €600,000 after three years. However, the potential diffusion within market segments is expected to be limited. With 21-40% gross profitability, the innovation’s rate of profit is rather low, but the market impact of the innovation outweighs this since the innovation will possibly create a new dominant design. From a technical point of view, this innovation can be imitated by competitors with modest effort but since it will be protected through patent rights, the innovation is rather difficult to imitate from a legal perspective. Machinery Ltd rent profile was identified as a “Champion” configuration with rather high volume, high rate of profit and high length of lifetime. The diagnostic diamond in Figure 1 reveals that the strength of the innovation management process is the internal steering of the commercialization process (innovation index score: 8.4) whereas the strategic planning constitutes its weakness (strategy index score: 6.4). The scores for the resource index (score: 7.0) and the market index (score: 8.0) lie in between. The market index is most negatively influenced by the fact that the customer benefits of the innovation were not fully researched and the 11

most appropriate pricing strategy was not fully explored. Regarding the resource index, the identification and recruitment of suitable personnel poses a major challenge to the company. The manager remarked that one of the major problems in terms of strategic planning was “the lack of a consistent, clear strategy”. This statement is reflected in the relatively low strategy scores compared to other areas of the innovation management process. For instance, extensive planning resulting in a formal, written business plan is only done if the project involves a new organization (i.e. the foundation of a new company). Otherwise, planning is limited to the calculation of project costs. 3.8 Textile Testing Ltd Textile Testing Ltd is a service company specializing in testing and quality assurance services for the textile industry. Textile Testing Ltd conducts a variety of tests including colorfastness, flammability, fiber analysis, and fabric performance tests. Additionally, Textile Testing Ltd offers product, quality and environmental audits as well as supply chain assessments. The firm has 25 full-time employees. 20% of the turnover is generated in Switzerland and the remaining 80% in foreign markets. In the past three years, Textile Testing Ltd commercialized 1-5 innovations mainly consisting of new test procedures. In order to fund the innovation activities adequately, about 4% of the annual turnover was invested in the development of new products and new markets. The company plans to commercialize further innovations within the next three years: it will develop a new product innovation which will be generated through a broad network. New tests at Textile Testing Ltd are developed together with other subsidiaries of the parent company and external specialists rather than with customers or suppliers. The rent profile of this innovation will be characterized by high volume, but low rate of profit and short product life cycle. As shown in Figure 3 the innovation profile of Textile Testing Ltd is a “Lark Mirror”. The geographic diffusion will be far-reaching: the company can offer its services to companies all over Europe without maintaining an extensive distribution network. In most cases, the customers will send samples of their products to Textile Testing Ltd and the company applies its tests to it. However, since the sales per customer (measured in monetary units) are comparably low, the overall turnover after three years will not exceed €200,000. The gross profitability of this innovation will range between 21-40% while the net profitability will lie between 21-30%. Because this innovation will not change the dominant design significantly its market impact score is low. The short product lifecycle of this innovation is determined by its ease of imitation. According to the manager, it is almost impossible to protect test procedures through patents. The innovation management process of Textile Testing Ltd shows one particular weakness: it lacks a formal, structured process. Neither a formal process for new product development nor a formal business plan exist. The manager was not surprised about the results, since, in her opinion, this type of rent configuration is a usual feature for the industry. The interview revealed that strong competition by large players and new competitors from low-cost countries are some of the main challenges faced by the company. Textile Testing Ltd cope with these challenges by developing ancillary services such as consulting, which will in turn increase customer retention. 4. Discussion In this section, the results of the individual cases will be summarized, compared and interpreted. Due to the small sample size, findings are not statistically significant and they cannot be generalized. However, we will seek to develop a series of propositions which can be tested in future research. 12

The results of the cases are summarized in Figure 3. The rent configurations of the sample companies comprise three “Champions”, four “Lark Mirrors” and one “Shrimp”. This result is particularly remarkable against the expectation that the “Oasis” configuration would suit SMEs best. All other configurations pose one or more threats to the company: for instance, “Lark Mirror” and “Champion” configurations are characterized by high volumes, possibly exceeding the limited production capacity of an SME (Reboud & Mazzarol, 2003). Figure 3: Overview of rent configurations and innovation management processes

The four companies with “Lark Mirror” configuration, Wood Floor Ltd, Telecom Service Ltd, Building Services Ltd and Textile Testing Ltd have one thing in common: they do not have capital-intensive production. Wood Floor Ltd is wholesaler of wood flooring, Telecom Service Ltd offers services to telecommunications companies, Building Services Ltd sells licenses or its technology and Textile Testing Ltd provides testing services for the apparel and textile industry. The nature of their businesses allows them to generate high turnovers with relatively few employees (these companies have on average between 10 and 25 employees). Building Services Ltd and Textile Testing Ltd can serve the European or even the worldwide market with their products. “Lark Mirror” configurations can be associated with low or high rates of profit. In the sample, three of the four companies with this configuration have a low rate of profit (Wood Floor Ltd, Building Services Ltd, Textile Testing Ltd) and one has a high rate of profit (Telecom Service Ltd). The reasons for low profitability can be manifold. For example, Wood Floor Ltd is confronted with much larger competitors with more market power; Building Services Ltd has to fight against imitators and Textile Testing Ltd has to cope with competitors from low-cost countries exerting price pressure on the whole industry. In all three cases, competitive pressures from incumbent firms are high with significant erosion effects on the appropriable rent. 13

The third factor determining the “Lark Mirror” configurations is the short length of lifetime. Most of the four companies rated their planned innovations as (very) easy to copy from a legal as well as technical perspective. This is particularly interesting in the case of Telecom Service Ltd, since it is the only one of the four companies predicting high profitability for its innovation. In contrast to the other three companies, Telecom Service Ltd seems to act in an industry environment with less competitive pressure. It can be anticipated that the high profitability of the innovation will attract new entrants possibly eroding the rent. The three companies with “Champion” configurations create tangible products. Software Ltd AG produces software, Ribbons Ltd manufactures ribbons and Machinery Ltd produces machinery. Furthermore, these three companies are the biggest companies in the sample. If the software developers working in Slovakia for Software Ltd are added to the firm’s headcount, these three firms are by far the biggest companies in the sample. It appears therefore that bigger SMEs have more elaborated processes for innovation assessment. As a result, only innovations with favorable rent configurations will be introduced in the market place. This proposition would be supported by the sample data since the three firms with the ”Champion” configuration have the highest average values in the diagnostic diamond. The results also suggest that firms producing tangible products are more likely to realize innovations only when these will create rents which justify the investments which have to be made into additional production capacity. The resource risk for these companies in terms of fixed costs is much higher than for a small service firm which will employ one or two additional people in order to provide new services. Considering the relationship between rent configuration and innovation management process (i.e. the diagnostic diamond), it can generally be assumed that sound innovation management process is associated with a favorable rent configuration. When the firm has a sound process in place, it will be able to determine the potential risk-return-profile of the innovation and be capable of deciding if it is willing to take these risks. This is only possible if the company reduced the uncertainty associated with this assessment through the collection and analysis of relevant data about competitors, customers, and other industries variables. However, an unfavorable rent configuration (e.g. “Shrimp”) does not necessarily mean that the firm has a poor innovation management process. Several factors can lead to unfavorable rent profile. First, the innovating firm may have evaluated the risk-return structure thoroughly and wants to commercialize the innovation notwithstanding its unfavorable rent potential. This can be the case where there is intense competition in an industry and the rents generated by an innovation will underlie fast erosion by all kinds of competitive (re-)actions (for instance, competitors imitate or out-innovate the firm fast, switching costs for customers are low). Nonetheless, the firm needs the innovation in order to keep up with competitors or the exit barriers in the industry are high. An example of this kind of relationship is Textile Testing Ltd. The manager did not seem to be surprised about the unfavorable rent profile of the planned innovation since it was exactly what she expected: “Sometimes, we’re surprised ourselves that we still exist”, she said. Second, the innovator sees the innovation as part of an overall strategic plan which will secure the future survival in the marketplace. Even though the innovation itself will yield returns barely covering the costs of its development and market introduction this innovation can be crucial for future business development. For instance, if Publishing Ltd extends its online-offer by providing well-investigated content for B2B users, this can be rather unprofitable in the beginning. Nevertheless, it can lead cus14

tomers to prefer Publishing Ltd’s content over other web-content which is freely available and can be a source of customer loyalty. In the future, this might prepare the ground for further product extensions and might be the reason why Publishing Ltd will survive the structural change in its industry. One could argue that this has to be included in the evaluation of the innovation rent. From a pragmatic point of view, these strategic advantages will be based on argumentation and are difficult to trade off against present disadvantages resulting in an anticipated low innovation rent. Third, unfavorable rent configurations could be followed because of problematic decision-making processes. When, for instance, a family-owned company decides to implement an innovation against the resistance of executive managers, the best internal management process might prove worthless. Managers might have analyzed all aspects of the innovation and have come to the conclusion that it is not promising to continue with a certain innovation but other, more influential groups with less information might have a different opinion. Figure 4 schematically depicts the relationship between innovation management process (diagnostic diamond) and rent configuration. However, the definition of “favorable” and “unfavorable” rent profiles is difficult. It can be assumed that “Champion”, “Oasis” and “Lark Mirror” (with high rate of profit) configurations are rather positive whereas “Shrimp”, Gadget”, “Joker” and “Lark Mirror” (with low rate of profit) are unfavorable. Similarly, it is not always easy to establish when the diagnostic diamond is “insufficient” or “sound”. We can assume that when the average score of the four dimensions falls below 6 or one of the dimensions falls below 4, the innovation management process has to be revised. Figure 4: Relationship between diagnostic diamond and rent configuration Innovation

Diamond Diagnostic

Diagnostic Diamond

Sound innovation management process: high average score and no particular weakness in a single dimension

Insufficient innovation management process: low average score or particular weakness in a single dimension

Rent Configuration

Configuration Unfavorable

Favorable

tion

Rent

V R L

-

+

Implications

The firm combines a sound Implications diagnostic diamond with a favorable rent profile: the quality of innovation management process has to be maintained and the innovation rent protected Examples: Software, Machinery, Ribbons, Telekom Service

V R L

-

+

Favorable V R L

-

+

Unfavorable V R L

-

+

The firm has an insufficient The firm combines a sound innovation management process: diagnostic diamond with an before the innovation rent can be unfavorable rent profile: evaluated, weaknesses in the structural characteristics process have to be identified and should be altered, internal corrected. Additional information cost efficiency increased, new about erosion effects should be niches explored etc. collected. Examples: Wood Floor, Example: Publishing Textile Testing, Building Serrvices

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The implications of the empirical findings are particularly relevant for researchers and innovators using the diagnostic tool. Researchers examining strategic innovation decisions and innovation management processes in SMEs can use the insights gained during the empirical study in order to formulate hypotheses and test them with a larger sample size. For instance, it would be interesting to examine if there are relationships between the quality of the innovation management process (as represented by the diagnostic diamond) and company or industry characteristics. Another interesting research question would be if the often praised flexibility of SMEs coincides with reality. In the sample, many SMEs seem to struggle with diverse customer demands and apparently have difficulties to acquire the right competencies fast enough to meet them. Furthermore, as part of a larger empirical work, the collected data will be used in order to compare strategic innovation in different countries and will lead to well-grounded statistical statements about the nature of strategic innovation and decision-making in SMEs. Eventually, the suggestions for an improvement of the diagnostic questionnaire might result in some adaptations, further increasing the value of such an evaluation aid for innovators.

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ISBN-10: 3-906541-26-6 ISBN-13: 978-3-906541-26-6 EAN: 9783906541266