Assembling resources when forming a new business

Every business builds on a specific set of resources. New businesses in particular have to assemble external resources that are mostly new to them. This resource assembly requires developing business relationships with other actors that control and can provide the needed resources. Adopting a resource interaction perspective, this paper examines a case of a new business venture in the automobile industry. The case study shows that when forming a new business the actors possess only partial knowledge of how to assemble the resources. Consequently, the actors must engage in extensive adaptation and interaction with others to enact workable resource interfaces and combinations. This necessity makes the new business formation process nonlinear and onerous. Further, the case demonstrates that new business formation is a collective process involving not only the emergence of a formal business organization but also reorganizing the applicable resource market. Since third parties involved in developing the necessary resource combinations can be considered part of the new business venture, setting the boundaries of the new venture becomes arbitrary. The arbitrary nature of such boundary setting has implications in entrepreneurship studies with regard to the unit of analysis and the concept of opportunity.     

A cross-national study on the impact of management teams on the rapid internationalization of small firms

While the importance of top management teams in the formation and development of new ventures is well recognised, their impact on the rapid internationalization of such firms remains relatively under-researched. This article presents the findings of a cross-national study conducted in Australia, Canada, Ireland and New Zealand that demonstrate the significant impact that such teams have in creating the core internal capabilities and leveraging the external resources required for rapid and dedicated internationalization. The need to augment the management team in order to address key resource or knowledge gaps and/or to expand international networks is also evident among many firms, as is the impact of changes in team structures on business strategy and internationalization. Directions for future research and implications for public policy in support of rapidly internationalizing small firms are presented and discussed.     

The Effects of Learning on Relationship Value in a Business Network Context

ABSTRACT

In today's intense global competition, a firm's ability to learn from its networks of business relationships is an important source of sustainable competitive advantage. Learning in a network of relationships involves a constellation of resource linkages among business partners tied together by interconnected resources. This has the potential of increasing the relationship value of a firm in terms of knowledge created through interactions among firms in the business network. Prior research has not yet examined the effects of learning in and through relationships in a business network context. Interdependence of firms in business networks gives rise to learning effects of adaptation and coordination that can have implications for relationship value. An empirical study of 215 business relationships from a network of nine high-technology companies in the United Kingdom shows that learning in and through relationships as a result of interactions and resource interdependencies in networks of relationships has a positive effect on a firm's relationship value. Furthermore, an understanding of the network context through interactions among firms facilitates learning and development of the firm's learning capabilities that enhance relationship value.     

Paths of evolution for the Chinese migrant entrepreneurship: a multiple case analysis in Italy

Chinese diaspora is one of the most important areas in the field of immigrant entrepreneurship and the Chinese case is, for absolute numbers, entrepreneurship rates and scientific attention, one of the most significant phenomena in the world and in Italy. While much of the literature on the topic focuses on ethnic networks and social ties, there is a lack of studies that acknowledge the role of business networks in the later growth of migrant entrepreneurship, when the importance of social ties within the ethnic community diminishes. This paper tries to answer the following research question: Which is the role of ethnic networks and business networks in the path of evolution of Chinese migrant entrepreneurship? Thus, the paper analyses the structure and characteristics of ethnic networks and business networks and the role of each in the growth and evolution of Chinese migrant entrepreneurship. Our research considers business networks as the main focus of analysis that may replace social ties in consolidating insidership in new business settings and in finding new opportunities. A qualitative methodology is adopted, namely a multiple case study. Five cases of individual Chinese companies settled in a specific area are presented, for which the networks in which they are involved are traced and analysed. The case analysis shows that in the evolution of Chinese migrant entrepreneurship, ethnic networks are very important in the early phases of the business, but the role of cross-cultural business networks becomes relevant for further development. Implications—managerial and for policy makers—are highlighted and discussed.     

Interactive resource development in new business relationships

Interaction in business relationships is a significant means of resource development. Studies of these processes have focused on interactive development in long-term relationships between buyer and supplier. This study explores the characteristics of joint resource development in new business relationships, where the two parties have no previous experience of interacting with each other. The study is based on the industrial network model and contains two cases of interactive development of new products with entirely different features. This research shows that joint development in a new relationship is strongly dependent on the resources of other business partners, since no previous adaptations exist between the two focal actors. Access to these resources is achieved through the established business relationships of the two parties. Furthermore, previous interactions with other business partners have a significant impact on the outcome of interactive development in a new business relationship. The main reason for these conditions is that the features of the resources of the two parties have evolved during these interactions.     

Personal networks and firm competitive strategy—A strategic or coincidental match?

This article is based upon the premise that the personal network of the owner-manager is the most important resource upon which he or she can draw in the early days of the firm's development. This is particularly the case as the concept of personal networks is sufficiently general to include dimensions that include, for example, attention to customers, understanding of the business, market orientation, or stress on quality. As such, it is intuitively obvious that the nature and use of these networks must impinge upon the resultant strategy adopted in the firm, albeit often implicit rather than explicit. However, as yet there is no empirical evidence to support this conclusion. Therefore, this article probes one question: how do the characteristics of the owner-manager's network relate to the competitive strategy of new ventures? Clearly, within this, we expected to find relationships that were logically consistent.The research was conducted in two counties in England that possessed similar industrial structures and equal rates of new firm formation. A list of firms was obtained from local business directories, and all 629 firms that fit the criteria were contacted by telephone. Validation of the firms at this point resulted in a significant reduction in those that fit the sampling criteria.Four hundred twenty-three firms were mailed an 11-page questionnaire resulting in a 52% response rate.Preliminary analysis of the strategy variables identified six components that were consistent with previous literature. These were labeled as marketing differentiation, product innovation, market segmentation, distribution, growth through outside capital, and differentiation through quality. Correlation of these components with the networking characteristics of propensity to network, network activity, network density, network intensity, and content of network exchanges supports our proposition that entrepreneurs differ in their networking activities according to the competitive strategy pursued by the firm.Further classification of the owner-managers into strategic clusters demonstrates that most firms appear to follow multiple patterns of strategic behavior. Moreover, the comparison with the networking characteristics shows that owner-managers appear to differ in a logical manner in the use of their networks. Bailey, Montera, and Cardow (1992) argue that a firm's resource base consists of financial, physical, and human resources, and that the manner in which those resources interact is determined by the firm's strategy. Previous research on entrepreneurial networks has shown the amount of time and energy the owner-manager devotes to the development and maintenance of contacts. The underlying assumption of social-network theory is that through a personal network, the owner-manager of a new venture gathers access to critical resources, which for a variety of reasons the new firm does not possess internally. Consequently, this research has argued that this resource base cannot be ignored when attempting to understand the concept of “strategy” among new and small firms. In fact, this resource base may play a dominant role in formulating as well as implementing “strategy.”     

External Relationships and the Small Business: A Review of Small Business Alliance and Network Research*

In order to thrive, small businesses are often advised to develop relationships with external organizations that have the potential to assist business development, survival, and growth. A focus on the external relationships of the small business underlines the vital importance of external resources in moving a small business toward increased success and profitability. Covering the period from 1990 to 2002, this paper reviews the small business literature as it relates to the use of these external relationships (such as organizational partnerships, networks, and alliances). In response to both academic and practitioner demand for further research in this area, an exhaustive analysis of the relevant literature was conducted and three “meta” research questions representing the connections within this literature were formed. The resource‐based view of the firm, resource dependency theory, and punctuated equilibrium theory are proposed as useful starting points for exploring these research questions and can give direction for moving forward in this research area.     

Commentary on “Resource use and development across permeable project boundaries in open network contexts”

The purpose of this commentary is to analyze the paper “Resource use and development across permeable project boundaries in open network contexts”. Focus lies on commenting on the value of the paper in light of existing research on business networks. The paper is analyzed from a general, theoretical and empirical perspective. The conclusion of the commentary is that there are important contributions of the paper. It clearly adds to our understanding of resource use and development in business networks as it introduces a context involving several actors in a system of open innovation.     

Interactive resource development in new business relationships: A commentary essay

This commentary essay presents suggestions for future research in two major areas based on the article, “Interactive resource development in new business relationships” (Gadde, Hjelmgren, & Skarp, in this issue). The first area concerns cognition and sense-making processes both of which are currently under-researched in business network studies as well as in resource development studies. The second area highlights the so-called ‘hidden qualities’ of functions or benefits/damages that emerge when a resource is activated and its value is realized when combined with other resources. A large number of unexplored questions still remain for research on resource development, but the topics suggested above would offer important new knowledge to the field.     

The moderating effect of institutional context on the relationship between associational activity and new business activity in emerging economies

Varying institutional environments provide the foundation for a great deal of international business (IB) research yet relatively little empirical work has examined the association between institutional factors and new business development in emerging economies, although the importance of new business development for economic transition and growth is widely acknowledged. Drawing from social network and institutional theories, we address this gap by examining the effect of associational activity on the level of new business activity in emerging economies, and testing the thesis that associational activity becomes more instrumental for new business creation when aspiring entrepreneurs confront higher institutional burdens (i.e., obstacles derived from underdeveloped or absent institutions). On the basis of data from two cross-national research projects—the Global Entrepreneurship Monitor and the World Values Survey—we find a positive relationship between a country's associational activity and new business activity; this relationship is stronger for higher regulatory and normative institutional burdens and lower cognitive institutional burdens. This study is among the first to examine empirically the possible substitution effect between social ties and institutions to predict new business activity; it paints a nuanced picture of how social networks might be more instrumental in contexts characterized by weak institutions. We discuss the implications of these findings for IB theory and practice and offer directions for further research in the area.     

Financial bootstrapping in small businesses: Examining small business managers' resource acquisition behaviors

In recent years, small businesses have received much attention from policy makers and researchers, in that these businesses are considered important for economic growth and job creation. At the same time small businesses are assumed to face major problems in securing long-term external finance, which is regarded as restraining their development and growth. Small business managers are assumed to use institutional finance as a means of meeting the need for resources, and as a consequence the major part of the research on small business finance has focused on constraints in the supply of institutional (market) finance.As we see it, most small business managers handle the need for resources using means other than external finance by applying different kinds of financial bootstrapping methods. Financial bootstrapping refers to the use of methods for meeting the need for resources without relying on long-term external finance from debt holders and/or new owners. However, these other means of resource acquisition have, with few exceptions, not been focused on within earlier research on small business finance. Against this background, the purpose of this study is to describe small business managers' use of different financial bootstrapping methods, and, more importantly, to develop concepts that can help us better understand small business managers' financial bootstrapping behaviors.The research process was initiated with a number of unstructured interviews conducted with small business managers, accountants, consultants, bank officials, and researchers, in order to identify different financial bootstrapping possibilities. On the basis of the interviews and an earlier study on financial bootstrapping, resulting in the identification of 32 bootstrapping methods, a questionnaire was constructed and sent to 900 small business managers in Sweden. Given the limited knowledge within the area of financial bootstrapping, the study is based on explorative factor analysis and cluster analysis.From the cluster analysis six clusters of bootstrappers were identified, differing from each other with respect to the bootstrapping methods used and the characteristics of the business. On the basis of this information the different clusters were labeled: (1) delaying bootstrappers; (2) relationship-oriented bootstrappers; (3) subsidy-oriented bootstrappers; (4) minimizing bootstrappers; (5) non-bootstrappers; and (6) private owner-financed bootstrappers. The groups of financial bootstrappers show differences in their orientation toward resource acquisition, representing different aspects of an internal mode of resource acquisition, a social mode of resource acquisition, and a quasi-market mode of resource acquisition. We find that the delaying bootstrappers, private owner-financed bootstrappers, and minimizing bootstrappers all represent an internal mode of resource acquisition. The relationship-oriented bootstrappers follow a socially oriented mode of resource acquisition, whereas the subsidy-oriented bootstrappers apply quasi-market oriented resource acquisition.This study contributes to our empirical understanding by providing knowledge about the financial bootstrapping methods used in small businesses. Furthermore, by developing concepts this study contributes to the conceptual development of our knowledge about financial bootstrapping. The implication of this study is that financial bootstrapping is a phenomenon which deserves more attention in future research on small business finance. At the same time, financial bootstrapping behavior is probably a more general phenomenon, appearing in different contexts, such as R&D activities in large businesses, financing start-ups, etc. Finally, the study points out implications for small business managers, consultants, teachers, etc. Practitioners often tend to focus on market solutions to resource needs. This study shows, however, that this strong focus can be questioned. Resources needed in small businesses can in many situations be secured using financial bootstrapping methods, referring to internally oriented and socially oriented resource acquisition strategies.     

Learning Networks as an Aid to Developing Strategic Capability among Small and Medium-Sized Enterprises: A Case Study from the Irish Polymer Industry

Strategic decision making within small to medium-sized enterprises (SMEs) is a necessary element for business growth. SMEs must adapt and become more efficient and dynamic within current business paths and in finding new paths. Traditional philosophies are not focused on delivering new capabilities or developing new business paths. Learning networks are cooperative associations of partner firms that share knowledge, physical resources, and expertise to improve current performance and to advance new business paths. Ireland has emerged as a significant net contributor of plastics to the global medical device, telecommunications, and ophthalmic sectors. The role of the first polymer network as a catalyst for both new business development and increased technological enhancement is advanced in this study of Mould-Tech, an Irish polymer manufacturing firm. Adaptation of dynamic learning networks as expounded in this study present participant firms with new opportunities both to learn and earn—that is, to enhance and acquire new capabilities and to grow their businesses.     

Business model innovation: How the international retailers rebuild their core business logic in a new host country

Although research into the business model has received increasing attention, few studies have so far been conducted on business model innovation in an international context. The purpose of the study is to identify different patterns of business model innovation which enables international retailers to rebuild their core business logic in new host countries. On the basis of comparing and contrasting the business model changes of 15 international retailers from various home countries to one single host country (China), our study provides an in-depth understanding of business model innovation in the context of international business. By looking at the firms’ capabilities in rebuilding their core logic in the setting of a host country, we reveal six routes of retail business model innovation. Utilizing the lens of organizational learning theory and internationalization, we identify three patterns of resource deployment by international companies in the process of developing business model innovations. Our study, therefore, provides insights and guidance for multinational companies in general, international retailers in particular, as for how to successfully adapt their business model from home country to host country.     

Efficiency versus effectiveness in business networks

Efficiency and effectiveness are central terms in assessing business performance, yet the challenge for companies is to balance efficiency with effectiveness in business networks. Companies often fail to achieve differentiation and innovation in their surrounding networks, through dealing with efficiency and neglecting effectiveness. This article describes the term efficiency as a necessary condition or hurdle reflected in the company's operating margins, and ‘effectiveness’ as the company's ability to generate a sustainable growth of earnings in its surrounding network. The study builds on notions of efficiency and effectiveness using empirical research in manufacturer-retailer networks conducted between 2002 and 2005. The study draws conclusions to the importance of linking efficiency and effectiveness and more widely on companies' performance in business networks.     

Small firms and networks in capital intensive industries: The case of Spanish steel wire manufacturing

This article uses an interdisciplinary approach to gain a better understanding of the organization of the Spanish industry in a long-term perspective. Sociological concepts about networks, and studies about family firms from management and business history literatures, are combined to illuminate the dominance of family ownership in capital intensive industries. Popp, Toms and Wilson's work on the spatialization of resource distribution and resource dependence has been used to understand the dominance of small family firms co-ordinated by networks in the particular case study of the Spanish steel wire manufactures. The article also has important implications for questioning Casson's interpretation about the difficulties dynastic family firms may have in science-wire rod industries.     

Corporate venturing: the origins of Unilever's pregnancy test

Large established corporations face many challenges to develop and sustain dynamic capabilities in innovation and the creation of new businesses because of constraints arising from technological and resource lock-ins, and routine and cultural rigidities. From the 1960s large corporations became increasingly aware of such problems. Heavy research spending was not translated into successful new business creation. The formation of autonomous entrepreneurial units within large corporations was one response. The origins of Unilever's home pregnancy test, Clearblue, which was launched in 1985, is used as a case study to examine the viability of one version of this strategy. Unilever was able to translate its extensive knowledge base in immunology into a successful branded product in medical diagnostics by creating a separate corporate entity, Unipath, with a distinctive culture, shielded from the mainstream Unilever organisation, yet able to draw on corporate capabilities in marketing, and financial resources. Yet the very distinctiveness of Unipath orphaned it within Unilever, and the business was divested in 2001.     

From laboratory to market: on the propensity of young inventors to form a new business

Many researchers have studied correlates of business formation. Through the case-based and statistical literature, several broad categories of influence on the entrepreneurial decision to start a new business have been identified. We contribute to this literature through statistical analysis of a unique database of young inventive scientists and engineers and their propensity toward new business formation. Our particular focus is on young inventors starting a business based on their creative achievements. Among this group, we do not find empirical support for the influence of traditional variables such as age, education, and gender on the propensity to start a new business. Rather, we find that their entrepreneurial experience as a new business proprietor is driven by dimensions of their university laboratory research experience.     

Understanding consumption and entrepreneurship in subsistence marketplaces

This article describes exploratory research on how consumers and small entrepreneurs navigate subsistence marketplaces, with particular emphasis on social networks, a central characteristic of these contexts. Existing studies have characterized subsistence contexts as 1-to-1 interactional marketplaces due to the prevalence of face-to-face interactions among consumers and sellers when evaluating products, making purchases, and operating small businesses. This research uses survey methods to study these networks, paying particular attention to how individuals interact within them, the kind of information being shared, their influence on purchase decisions and business decisions, and finally, their impact on the marketplace skills of subsistence consumers and entrepreneurs. Consideration of both consumers and entrepreneurs provides perspective on the role of social networks from both sides of the business transaction. The article also discusses implications for business research and practice.     

Fragmented networks and transnational entrepreneurship: Building strategies to prosper in challenging surroundings

Transnational entrepreneurship studies highlight the importance of personal profiles, institutions, and networks in creating and succeeding in this type of entrepreneurship. Even so, less is known about migrants whose networks are fragmented and closed, facing challenging environments at home and abroad. This paper aims to study the attributes of transnational entrepreneurs with small and fragmented networks, from post-conflict environments, who can perform an important role in the socioeconomic development and internationalization level of their countries of origin due to the cross border mobilization of resources they encourage. For that reason, the specific case of Colombian transnational entrepreneurs who have been able to overcome those obstacles with their transnational business is analyzed with the intention of understanding how they manage those shortcomings when engaging in transnational entrepreneurship. In aiming to obtain a deeper understanding of their characteristics, similitudes, differences, and motivations, the research uses multiple case studies. The main findings suggest that transnational entrepreneurs form purposeful–strategic networks to compensate their lack of amalgamated social systems, and that they have special qualities that distinguish them from other Colombian migrants and transnational entrepreneurs. Moreover, Colombian transnational entrepreneurs focus their business in the international market, using strategically their knowledge of both the local and foreign environment, while their main interest to do so is not altruistic but business oriented. Governments from post-conflict countries should promote transnational entrepreneurship while facilitating network formation and institutional trust through diverse strategies. Finally, implications for further research are drawn.     

Reengineering IS Research and Its Intellectual Infrastructure for the Electronic Economy

The emerging electronic economy is bringing with it rapid advances in open networks and information technology (IT) capabilities, increasing global complexity and interdependence, and increasingly short business cycle times. Many enterprises are reengineering the way they carry out their business to take advantage of these new conditions. In this article, we contend that it is also time for information systems (IS) academics to fundamentally rethink the IS research process and the intellectual infrastructure that enables it in light of these new conditions. We first examine why the current IS research process needs to be changed. We then systematically analyze needed change along 6 dimensions. The change potentials are used to propose an IS research paradigm that is based on interactive knowledge repositories and collaborative electronic networks. We propose a new intellectual infrastructure that is based on a new type of IT-enabled electronic space for the research community, which we term a cybrarium. A cybrarium is focused not only on the storage and dissemination but also on the synthesis of knowledge generated in the research community. We articulate the basic distinctions between electronic Web journals and cybrariums and show how a cybrarium leads to a fundamentally changed research process. We contend that such a redefined research process and its underlying intellectual infrastructure will enable the IS research community to make the transition to a large-scale global collaborative alliance that is faster, more forward looking, and cumulative.