The institutional embeddedness of local inter-firm networks: a leverage for business creation

There is an increasing concern for the notion of ‘embeddedness’ of economic activity; yet the conceptualization of the concept and its operationalization remain underdeveloped. First, embeddedness may concern, on the one hand, the structure of relations that tie economic actors together (structural embeddedness) and, on the other hand, the social strands supplementing economic strands in each relation (substantive embeddedness). In this paper, a network framework is outlined which proposes several layers or ‘orders’ of embeddedness. Focusing on small firms, the point of departure is individual exchange relationships as personal ties combining economic and social concerns. First-order embeddedness concerns the localized business networks created by combining these dyadic relations. Second-order embeddedness is achieved when considering also the memberships of business persons in economic and social local institutions while third-order embeddedness concerns the special cases where these institutions bridge gaps between firms. The network model is operationalized and applied to a small Swedish industrial (furniture) community, its firms and economic/social institutions. The findings generally support the applicability of the model and demonstrate the supplementarity of different layers/orders of embeddedness. Further research challenges are deduced and implications for practitioners are provided.     

Risk management affecting IS/IT project success through communicative action

Project risk management is defined in the literature as being instrumental action based on rational problem solving. Research indicates limited positive effects of an exclusive focus of instrumental action on project success. This article proposes to extend this instrumental view through communicative action. This theoretical broadening was explored by interviewing project stakeholders about project success and risk management application. Analysis demonstrates stakeholders deliberately use risk management to convey messages to others, with the aim of influencing their behavior, synchronizing their perception, and making them aware of the context and their responsibilities. Stakeholders perceive these effects as contributing to project success.     

Interpreting Voluntary Exchange: Markets,Speech Acts And Communicative Action

This paper uses speech act theory to present a libertarian reinterpretation of the Habermasian concept of communicative action. Voluntary exchange in competitive markets is interpreted as a speech act and a form of communicative action that respects autonomy and obstructs power. Where exchange occurs in monopolistic markets, it is defective in being a form of (a) strategic action aimed directly at rival suppliers rather than buyers and (b) economic coercion. Voluntary exchange is not an isolated act but the outcome of a complex bargaining process, which may lead to negotiated exit, without the possibility of which economic relations are coercive.     

STRATEGIC NETWORKS AMONG SMALL FIRMS: IMPLICATIONS FOR STRATEGY RESEARCH METHODOLOGY*

This paper deals with the choice of methodological approach within strategic network research. Network-oriented research approaches indicate a broader set of organizational and environmental variables. the issue of trust in network relations implicates contextual aspects such as the socio-cultural foundation of people's interaction. the striving toward more complex, multi-level models of strategy is seen to put a heavy burden on the development of adequate strategy research methods. the paper reports and interprets experience from a case study of inter-organizational exchange governance in small firms. the discussion suggests a need for more in-depth knowledge of cultural contexts, and of socio-economic relations of actors within strategic networks. the paper recommends a search for new methodological inputs from other academic disciplines more experienced with human interaction research. In particular, methodological tools found within the field of social anthropology are recommended.     

Work and pay in small Chinese clothing firms: a constrained negotiated order

Small clothing factories in China represent ideal conditions to find regimes characterised by market despotism. Yet studies of similar firms in other countries suggest that ‘negotiated paternalism’ is a better characterisation and that work relations have a large degree of cross‐national similarity. Using interview data from seven small case firms and 63 employees in 12 small clothing firms in Guangdong province, this article finds important parallels with other countries in terms of pay system and negotiated order. Workers could negotiate relatively high wages, albeit at the cost of very long hours. This situation reflected booming economic conditions, a non‐rationalised production system that left space for individual and informal collective bargaining, and close personal ties between workers and managers. Work relations in small firms are more nuanced than the sweatshop image allows, and extreme exploitation is more likely in Taylorised workplaces run by large corporations.     

The influence of co-location in higher education institutions on small firms’ perspectives of knowledge transfer

Since 1980, the UK has experienced a dramatic growth in firms and employment in information–intensive business services, such as management consultancy and market research. Recent expansion of new and small firms operating in these sectors is the focus of a major ESRC–sponsored research project currently under way at Cambridge University Small Business Research Centre.

Small business service firms are able to compete successfully with large firms due to the imperfect nature of the market which characterizes business services demand and supply, together with specialization of expertise. The success of small business service firms depends on informal person–to–person networks, word–of–mouth recommendation and repeal business based on successful earlier assignments or personal contacts acquired, for example, while working in a large consultancy or market research company. This paper examines the types of networks utilized by small business service firms and argues that two distinct types exist: demand– and supply–related networks; the former involves links with clients, the latter links and co–operation between complementary small business service firms.     

Small and Medium‐Sized Enterprises and Sustainability: Managers' Values and Engagement with Environmental and Climate Change Issues

This article reports on an in‐depth, qualitative study into the pro‐environmental engagement of small businesses in the east of England, with respect to climate change in particular. Managers of environmentally pro‐active small businesses were asked about the pro‐environmental measures they had implemented in their firms, their motivations for doing so, and their understanding of climate change. The managers in this study had a relatively good understanding of environmental issues in general and climate change in particular, and had implemented a range of pro‐environmental measures in their firms. Their understanding of climate change was a holistic one, which sat within their overall understanding of environmental and social issues. While economic arguments and external pressure played a role in their pro‐environmental engagement, perhaps the most notable motivation for managers in this study to engage with environmental and climate change issues was personal values and beliefs. Environmentally engaged managers exhibited an internal locus of control. Some of these findings contrast with the views of key informants in local government and business advice organisations, who tend to emphasise the business case and cost arguments when trying to encourage small businesses towards greater environmental engagement. These findings suggest that public policy and business advice in this area should perhaps focus more strongly on personal values and a sense of being able to contribute to environmental protection in their engagement with small businesses. Copyright © 2012 John Wiley & Sons, Ltd and ERP Environment.     

The transformation of the German vocational training regime: evidence from firms’ training behaviour

The German system of industrial relations has undergone significant changes in the last decade. This article reflects on and provides empirical evidence for how these changes have affected the training behaviour of firms. Conventional perspectives would predict a general decline in training investment when the constraints of collective wage bargaining are loosened. Relying on a large data set on the costs and benefits of apprenticeship training for the years 2000 and 2007, we do find evidence for this hypothesis but would add that the strength of the effect varies strongly across different types of firms. Large firms have benefited much more from participating in training than have small firms and have therefore maintained their investment in training because they are able to reduce net costs by expanding the productive contributions of apprentices. This finding may help to explain the apparent resilience of the German training system in the recent economic and financial crisis.     

Complexity, Identity and the Value of Knowledge-intensive Exchanges

ABSTRACT Researchers studying the structural embeddedness of firms in networks have focused on its effects on economic behaviour, strategic action and competitive behaviour, but network embeddedness as a source of firm value per se has been largely overlooked. I argue that neglecting the network context in which firms are embedded leads to an incomplete understanding of the value of the firm. I seek to understand how a focal firm's structural embeddedness network characteristics function as mechanisms that elucidate the value of its knowledge‐intensive exchanges. This paper presents a framework that identifies two processes of knowing exchange value, namely knowing through a learning bandwagon and knowing through a fad bandwagon. I argue that knowing value as a learning bandwagon is enabled by the normative and cognitive proximity of exchange partners, and that this is facilitated by the embeddedness of the focal firm in dense network structures. Knowing value as a fad bandwagon is based on a positional construction of the focal firm's status, which is determined by the centrality of the focal firm's network partners in their corresponding networks. This is a ranking system based on positional network data, whose efficacy stems from the inability of firms to manipulate their network positions.     

The Tracking of Environmental Costs: Motivations and Impacts

Abstract

Most accounting systems separately capture and accumulate one portion of the overall environmental costs of firms, while the remainder is embedded in other cost pools, such as general overhead costs or administrative costs. Little empirical evidence has been provided to explain the impacts of cost accounting systems that make a larger portion of firms' total environmental costs visible. The aim of this study is to conceptually and empirically examine the relationships among the tracking of environmental costs (TEC) by firms, their environmental motivations, and the impacts in terms of environmental and economic performance. Using survey data from a large sample of manufacturing firms, the results suggest two main conclusions. First, the TEC has an indirect influence on economic performance through environmental performance. Second, this indirect effect is influenced by the environmental motivations of the firm. More specifically, this indirect effect is greater (lesser) for firms whose motivations are predominately business-oriented (sustainability-oriented).     

The importance of being networked: The costs of informal networking in the Western Balkans region

This is the first study to measure the size and costs of informal networking, quizzing the premise that informal networks benefit individuals, households and entrepreneurs. On the basis of survey data from the Western Balkans (WB) and empirical analysis, we establish that informal networking, or use of personal contacts for getting things done, has a regular occurrence in the region and its economic cost is substantial. In the structure of networking costs, the costs of invested time dominate over money. Respondents who perceive networking as important and beneficial tend to invest more time and money to maintain their networks. Higher costs are associated with larger networks, which are predominantly built on strong ties. The informal networking costs are also higher for those with better education and income, and in particular for entrepreneurs. Consequently, individuals bear the high costs of informal networking not only for social and culturally determined reasons, but to a large extent for instrumental purposes. Our data suggest that both sociability and instrumentality drive informal networking, which makes it an outcome of both informal constraints (taboos, customs, traditions, and codes of conduct) and inefficient formal rules (constitutions, laws, property rights).     

The effectiveness of more advanced human resource systems in small firms

In this paper, we analyze whether Human Resource (HR) systems in small firms can be associated with higher performance as well as higher wages. Our study, which focuses on Dutch pharmacies, shows that more advanced HR systems do not have any effect on firms' productivity. In these micro firms, it is only employees who significantly benefit from the introduction of both a basic and a more advanced HR system. Our findings that small firms do not significantly benefit from introducing less traditional HR practices offer an explanation for the thresholds in the diffusion of these HR practices in small firms, and suggest that in these firms formal HR practices are less important than personal relations between the employer and his or her employees.     

CO2 Emissions and Financial Performance of Socially Responsible Firms: An Empirical Survey

A firm's financial performance is closely related to its environmental behavior. This result is valid especially in the case of socially responsible firms. In the present study a data econometric analysis is conducted based on a GARCH model for socially responsible and conventional firms. According to our findings, the performance of socially responsible firms is negatively related to an increase of global CO₂ emissions. The firms' costs for implementing environmental policies and the investors' attitude towards the aforementioned firms may account for our results. Copyright © 2012 John Wiley & Sons, Ltd and ERP Environment.     

Environmental performance and bank lending: Evidence from unlisted firms

Growing public concerns about sustainability and adopting environmentally responsible practices increase risks as well as opportunities for firms and banks. It is unclear whether being environmentally responsible matters for unlisted firms, which are significant contributors to the degradation of the environment but which are not under strict scrutiny like public listed firms. Using a sample of 3915 firms from developing economies, we investigate whether the superior environmental performance of unlisted firms leads them to better loan conditions. After controlling for endogeneity and sample selection bias, we find that firms with better environmental performance received approximately 6.4% higher loans (as a ratio of total sales) and that this effect is more prominent in small and medium firms. This finding supports an information asymmetry view of agency costs. Our results, however, show that environmental performance does not affect loan duration and collateral requirement, indicating no spillover economic effect of corporate environmental performance on loan conditions. This partially supports a new perspective of legitimacy theory in relation to the ‘greenwash strategy’. Overall, our study shows that strategically engaged environmental activities that are integrated with core business objectives represent an important business strategy for firms to enhance credit access.     

What Kind of Dialogue Should Paradigm-Dialogues Be?

Paradigm-dialogues are important for several reasons. One reason is to clarify what kind of paradigmatical aspects do have an effect on choosing a qualitative or quantitative research method. To be successful a paradigm-dialogue should have informational quality, self-reflective quality, argumentative quality and communicative quality. The argumentative quality, however, should not be of a persuasive or competitive nature because of the partial a-rationality of paradigms. Paradigm-dialogues should be aimed at self-clarification, mutual understanding and sharing learning processes. That is why communicative quality is important to protect and to promote argumentative quality of a non-persuasive kind. Communicative quality should be understood in terms of striving for a dialogical relationship which is characterized by interactivity, communicative symmetry, openness, multiple hermeneutics, mutual trust and respect. Communicative symmetry is feasible and desirable. An ironic attitude may be helpful.     

Knowledge flow and inter-firm networks: The influence of network resources,spatial proximity and firm size

The objective of this paper is to analyse the characteristics and nature of the networks that firms utilize to access knowledge and facilitate innovation. The paper draws on the notion of network resources, distinguishing two types: social capital–consisting of the social relations and networks held by individuals; and network capital–consisting of the strategic and calculative relations and networks held by firms. The methodological approach consists of a quantitative analysis of data from a survey of firms operating in knowledge-intensive sectors of activity. The key findings include: social capital investment is more prevalent among firms frequently interacting with actors from within their own region; social capital investment is related to the size of firms; firm size plays a role in knowledge network patterns; and network dynamism is an important source of innovation. Overall, firms investing more in the development of their inter-firm and other external knowledge networks enjoy higher levels of innovation. It is suggested that an over-reliance on social capital forms of network resource investment may hinder the capability of firms to manage their knowledge networks. It is concluded that the link between a dynamic inter-firm network environment and innovation provides an alternative thesis to that advocating the advantage of network stability.     

The gap between the environmental attitudes and the environmental behaviour of small firms

Small firms are facing serious difficulties responding to environmental pressures. Due to their unique characteristics, small firms cannot be expected to employ scaled down solutions that have been developed by, and for, larger organizations. The indications are that the typical owner–managers of manufacturing and service small firms are struggling to bridge the gap between their environmental attitudes (aspirations) and their environmental behaviour (practices). Part of the problem would appear to be the domination of an outmoded paradigm that has created a set of values, personal and corporate, that is unable to cope with the environmental problems of today. However, the prognosis need not be pessimistic. There is evidence to suggest there are driving forces promoting change toward a more sustainable small firms sector. A number of emerging solutions offer ways to tackle the problem at the level of the firm, such as industrial ecology, and at the level of the institution, such as ecological modernization. The message remains that support for more extensive environmental education and training programmes and a much stronger regulatory framework would help to counteract the imbalance between the resistant forces and driving force that are presently widening the gap between small firm environmental attitudes and behaviour. Copyright © 1999 John Wiley & Sons, Ltd and ERP Environment.     

Why does eco‐innovation differ in service firms? Some insights from Spain

Although environmental innovation studies have traditionally focused on manufacturing firms, the distinctive features of eco‐innovation activities carried out by service firms require special attention. Using the Spanish Commumity Innovation Survey (CIS), this paper determines which are the main drivers of undertaking eco‐innovation and investigates the similarities and differences between service and manufacturing firms within the five sub‐groups of services (supplier dominated, scale intensive physical networks, scale intensive information networks, science‐based, and others). The results confirm that the main eco‐innovation triggers are similar—technological push factor orientation (internal R&D and persistence) and firm size—while the impact of market pull factors and public environmental legislation differ within the services sub‐groups. In addition, we find a high degree of heterogeneity within service firms. In contrast to traditional service firms, those in the groups involving R&D activities, information networks, and scale‐intensive physical networks exhibit intensive eco‐innovation performance and show a high level of green indicators.     

Small businesses and the environment: turning over a new leaf?

Previous studies on the environmental practices of small and medium‐sized enterprises (SMEs) in the UK and beyond have portrayed owner‐managers as laggards who underplay their firm's environmental impacts and resist environmental management due to its perceived cost. Yet a recent cross‐sector survey of 220 UK SMEs suggests that this intransigent stance may be slowly changing. Responses indicate a high percentage of owner‐managers actively involved in recycling, energy efficiency, responsible buying and selling, and efforts to reduce their carbon emissions. Owner‐managers saw it as their responsibility to help solve environmental problems and were reportedly willing to accept the costs of tougher environmental regulations and taxation. Business owners were motivated not just by the ‘push’ of legislation and environmental concern but by the ‘pull’ of potential cost savings, new customers, higher staff retention and good publicity for their firms. The survey also found that owner‐managers had resonance with the Stern Review's (2006) conclusions that the benefits of strong early action on climate change outweigh the costs, and that a transition to a low‐carbon economy will bring opportunities for business growth. This indicates that SMEs may be coming round to the idea that there is a business case for sustainability, although there is still some scepticism on the overall profitability of environmental action. Copyright © 2009 John Wiley & Sons, Ltd and ERP Environment.