The Creation and Growth of Small Business Service Firms in Post-Industrial Britain

Since 1980, the United Kingdom has experienced a dramatic growth in firms and employment in information-intensive business services, such as management consultancy and market research. This article reports the results of the first substantial nation-wide investigation into the nature and causes of small professional business service firm growth in Britain, undertaken in 1991. It reveals marked differences in the characteristics, markets and competitive requirements of such firms, compared with small manufacturing firms. The demand for their services comes predominantly from large companies, and is more focussed on financial and other services and government. But small firms are also making increasing use of business services. Specialised expertise, reputation and educational and professional qualifications are essential prerequisites for the establishment of new business service firms. Their success is also being enhanced by increasing use of informal networking, collaborative partnerships, and subcontracting.     

Facing global economic crisis: Foreign sales,ownership groups,and corporate value

This study extends the research on internationalization to a new organizational context – emerging market firms (EMF), and a new time context – global economic crisis. We propose a U-shaped relationship between foreign sales intensity and firm value for EMFs during global economic crisis. Further, we distinguish between EMFs’ relational owners (i.e., business groups) and transactional owners (i.e., institutional investors) to investigate their different moderating effects. We find empirical support for our hypotheses using a sample of Chinese firms during the global economic crisis in 2008. Moreover, we provide research and practice implications.     

A supply chain management framework for services

While services represent the largest sector of the global economy, 86.8% in the United States, most supply chain management (SCM) research is focused on product flows. Executives in manufacturing firms have benefited from frameworks created to implement SCM processes, but this is not the case for their counterparts in service companies. The two most cited SCM frameworks for services have methodological and conceptual deficiencies. Drawing upon the service-dominant logic of marketing and using an empirical research approach, we developed supply chain structure maps for nine service firms. Our findings indicate that the supply chain structure maps of service companies are comparable to those in the product-based literature, which supports the service-dominant logic. Then, we identified the six key processes that constitute a framework to manage service supply chains. The customer relationship management and the supplier relationship management processes form the critical links in the supply chain, and the other four processes are coordinated through this linkage. The SCM framework for services provides direction for executives in service firms who need to increase cross-functional integration within their firms and with other members of the supply chain. For academics, 12 avenues for future research are identified.     

Introduction

The European research network on services and space (RESER) is a network of over 20 research groups and individuals active in services research and policy formulation located in 13 European countries. The network was established in 1988 on the understanding that service occupations and industries were under-researched, especially in relation to their importance in the employment structures of developed market economies. At that time in 1988, very few researchers were involved in the conceptualisation (theoretical and empirical) of the role played by business service activities in regional or local growth.

Members of the network have their roots in a variety of disciplines – economics, business studies, geography, sociology, psychology, political sciences and planning. Most are based in universities, but some work for private firms, as researchers or consultants.

Over the last few years, service research has been transformed. It is no longer considered as a novel research undertaken by academics who were considered to be somewhat misguided in no longer accepting the dominance of manufacturing industry. Services approaches have become mainstream in the social science literature whilst at the same time many service specialists no longer identify with the term ‘services’.     

Rethinking business segmentation: a conceptual model and strategic insights*

Segmenting business markets is challenging but potentially highly rewarding. An in-depth understanding of how to segment markets is necessary to guide the best decisions leading to profitable targeting. Business markets are changing rapidly due to new technology and a more complex business environment. Current segmentation frameworks are not sufficient to guide business-to-business (B2B), business-to-business-to-business (B2B2B), and business-to-business-to-consumer (B2B2C) market analyses. Thus, new strategic segmentation insights are required. This paper introduces and tests a new six-cell business market typology building on two key segmentation dimensions – product use by intermediaries in their marketing (B2B, B2B2B, and B2B2C) and product standardization (standardized or customized products). Examples are developed showing how this model is used by organizational marketers, research findings are presented, and a research agenda is proposed to fill the gap in the literature – i.e. understand the new model and apply appropriate business segmentation criteria.     

Choice of Market Entry Mode in Emerging Markets

Summary

This study explores the antecedents of market entry strategy in emerging markets and examines the market environmental, transaction-specific, competitive strategic factors and organizational capability that influence the choice of market entry mode. Empirical results based on a survey of Japanese companies support the combined relevance of their factors on choice of market entry mode in an emerging market. Although most of the mode of entry research assumes that the firm has the option to choose any entry mode in a given market, this study examines the impact of the factors in the internationalization process of firms. The results suggest that experiential knowledge has an immense impact on the choice of entry mode in China, an emerging market with high environmental uncertainty, but also high market potential. The empirical findings also show the important influences of risk-absorption capability and risk-dispersion mechanism on the choice of entry mode into the Chinese market.     

Competitive Marketing Strategies: A Survey of Japanese Manufacturing Firms' Competitive Performance in the British Market

The role of Japanese corporations in world markets has become so crucial that an understanding of the rules of competition employed by the Japanese is essential for all those involved in international business. The aim of this survey was to gain an insight into the role marketing plays in affecting the competitive position of Japanese firms in the British market. In particular the researcher focused on the overall approach of Japanese companies to the marketplace and the process by which they identify and bring products to the market.

The broad findings emerging from this study present few surprises, Japanese companies do not seem to suffer from a “sales orientation”, a “production orientation” or “finance orientation” as opposed to a “marketing orientation”. The in‐roads being made into the British market are based by and large on a strategy aimed at satisfying customer needs and wants. Japanese companies saw their strengths in placing emphasis on research and engineering and bringing the right product to the market quickly and decisively.     

Growth,Diversification, and Business Group Formation in Entrepreneurial Firms

Recent empirical research has demonstrated that the growth process of entrepreneurial firms is frequently achieved through the formation of business groups: i.e. a set of companies run by the same entrepreneur (or entrepreneurial team). This has been hypothesised as result of a growth process by diversification of the original activity. This entrepreneurial growth process offers an alternative explanation for the formation of business Groups, than that arising from managerial efficiency and expediency. The main aim of the article is to explore group formation through entrepreneurial diversification using a sample of high growth entrepreneurial firms. The analysis demonstrates that the running of a group of companies by the same entrepreneur is not only induced by the geographical extension of their operation and by diversification but also by the differentiation policy aimed at serving different market segments within the same sector. This seems to contrast with the diversification policy and organisational setting of large, managerial firms     

Exploring the relationship between the human resource management practices and growth in small service firms

This paper seeks to evaluate the relationship between the growth and the human resource management (HRM) practices of small service firms in catering to professional services and the retailing sectors in the UK. The paper reports and analyses the findings of 196 face-to-face structured interviews with small service business owners. Findings suggest that employee empowerment contributes to the sales growth of small firms in the different sectors of the service industry. The study also shows that employee training and recruitment through formal channels contribute to the sales growth of firms operating in the catering sector. This paper argues that contextual variables – the extent of the competition and the availability of the workforce – have a bearing on the HRM practices employed by small service businesses.     

Born internationals: Market expansion and business operation mode strategies in the digital media field

This paper examines leading Swedish and Finnish Internet consultancies operating in the digital media service field. These are ‘born international’ firms that internationalise their business at an exceptionally rapid pace. The paper focuses on why and to what extent the market expansion and business operation mode strategies of these companies deviate from the traditional pattern depicted by the Scandinavian process school. The empirical data consisted of interviews with the founder and senior management and secondary data from company and public archives. The research findings show that in fact both the international new venture research and the Scandinavian internationalisation model appear to be valid. The former model was evidenced by the fact that the born internationals indeed deviated from the behaviour of the traditional firms. The latter was exemplified by the fact that the final internationalisation profile, after the withdrawals of firms from unsuccessful markets, was close to what the Scandinavian internationalisation model would call ‘rational’ expansion. Hence, if the investigation period is long enough to account for unsuccessful endeavours and withdrawals, we may then find empirical support for the traditional model as well. To be reliable, the investigation period should cover at least one economic slow down.     

Triad lessons: Generalizing results on high performance firms in five business-to-business markets

Significant differences are known to exist among organizations operating in different countries due to different national and organizational cultures, strategic orientations, and management styles. Less clear, however, is whether there are significant patterns of differences in how marketing-related factors drive performance in the most successful firms regardless of country. Building on a previous study of major Japanese firms [Deshpandé et al., 1993. Journal of Marketing 57, 22–27], an exploratory study compared samples of business-to-business relationships of Japanese, English, French, German, and US companies. We found the expected significant differences in organizational cultures, but found no country-specific slopes or intercepts in regressions relating factors such as innovativeness, organizational climate and culture, and market orientation to business performance. Successful firms appear to transcend differences in national culture and develop a common pattern of drivers of success which include primary focus on organizational innovativeness, a participative work climate, and an externally oriented organizational culture.     

Organizations as learning systems: The case of the Japanese automobile manufacturing industry

This study sought to apply frameworks of organizational learning to companies in the Japanese automobile manufacturing industry and, in the process, to ascertain if Japanese automobile companies exhibit characteristics of high- versus low-learning organizations. Of particular interest are the effects of Japanese culture on organizational behavior. A basis for empirical testing of concepts of organizational learning to establish an explanation as to why some companies are more effective in succeeding in the global market according to accepted measures of success is provided. © 1995 John Wiley & Sons, Inc.     

Managing industrial service co-design: identifying challenges from technology firms

This article investigates how the co-design of industrial services is managed by technology firms. Through multiple-case studies within high-technology semiconductor companies, the article finds that overlapped stages and collective action require considerations on a case-by-case basis as determined by business opportunities, industry standards, existing organisational practice and service level agreements. The major contribution of this article is a connection between recent research emphasising the importance of providing industrial services, and established literature on co-design. Key service operations management challenges are also identified and discussed in terms of the need for studies and frameworks to coordinate negotiations for enhanced service encounters, to critique industrial service co-design, and to integrated information during service design.     

The Congruence of Successful International Competitors:

This paper examines the marketing strategies and organization of a matched triad of American, British and Japanese companies competing in the UK market. The sample includes leading companies in industries identified as being under threat by the EC. The relative success of business was measured and strategies identified using multiple depth interviews with senior managers within the businesses. The strategies of successful companies were found to be similar and not dependent on their country of origin or industrial sector. The most successful companies had a balance of marketing, innovation, planning and entrepeneurial orientation. More of these successful firms were Japanese than American, and very few were British.     

Businesses without glamour? an analysis of resources on performance by size and age in small service and retail firms

Research on factors influencing performance in new and small companies is extensive. Earlier work found that strategies (e.g. cost, quality, differentiation, etc.) affected performance contingent on industry conditions, the environment, and the entrepreneur’s background. Although this work provides a solid basis for understanding differences in entrepreneurial performance, some firms are limited in their choices of strategy due to size, age, or industry. Often these firms are in industries where entry barriers are low and competitive advantages are easily imitated.Small service and retail businesses operate in sectors where these conditions are apparent. Comprising more than 50% of all small firms, they require minimal start-up investments but face intense competition. Lacking the “glamour” of high innovation/high growth firms, service and retail companies are at the “end” of the value chain, their fortunes rising and falling as a result of the direct influence of the owner-founder. Hence, performance variation may be better explained by the capabilities of the firm or individual competencies of the owner-founder, that is the resource-base and resource combinations, rather than strategy.The strategic importance of an organization’s resources and capabilities is the foundation of resource-based theory. Resources are tangible and intangible assets tied to the firm in a relatively permanent fashion. Their combinations are heterogeneous and form the basis for product/market strategies. Studies of resources, strategies, and performance are emerging in the entrepreneurial area. Research shows that various resources in concert with different strategy types can lead to above average performance over the business life cycle, and that combinations of resources are related to survival. Yet the vast majority of work focuses on high growth, high tech, or manufacturing businesses. Less is known about the relationships of resources to performance in less “glamorous” sectors. In these small service and retail businesses, we speculate that resources, in particular human and organizational resources, may play a greater role in explaining performance than strategy. Further, as other authors have suggested, it is expected that the combinations of these resources will vary across age and size.This study examines the influence of human and organizational resources on performance in a sample of 195 service and retail firms operating in central New Jersey, using a structured questionnaire. All companies utilized a focus strategy (either focused cost or focused differentiation) and employed a minimum of 3 to a maximum of 100 employees. All measures had theoretical and/or empirical precedent and were tested statistically for reliability. We used factor analysis to reduce the independent variables to: two human resource variables (owner resources and commitment), one organizational resource variable (comprised of planning, systems, and staff skills), and one strategy variable (focused cost and focused differentiation). Control variables were business age, business size, environmental benignness, and industry growth. The dependent variable performance was measured in two ways: net cash flow and log of growth in employees over 3 years.The study first examined whether strategy or resources had a greater influence on performance. Results showed that strategy influenced performance less than human and organizational resources both individually and interactively. The influence of owner resources (background and attitudes) on net cash flow was stronger than on growth, where the only significant variable was industry (market) growth.To analyze effects of resources on performance by size, we divided the sample by size groupings, selecting the smallest (maximum five employees) and largest quartiles (minimum 16 employees), which were comprised of 55 and 50 companies, respectively. These analyses showed that owner resources, commitment, and organizational resources contributed positively to net cash flow in very small firms; however, interactive effects of these resource combinations were negative. For instance, owner resources and organizational resources together, and organizational resources and commitment together, resulted in less positive cash flow than when analyzed separately. This implies that different resource combinations can have negative influences in these very small firms.We examined age effects in the same manner as size—dividing the sample into age group quartiles and conducting an analysis only for very young (fewer than 5 years) and very old (minimum 19 years) groups, which comprised 54 and 52 companies, respectively. These analyses showed that although growth was more rapid among the youngest firms, there were no distinctive resource-based correlates to growth in either age group. Substantive increases in formalized systems and procedures were not apparent among the oldest of these companies compared with the youngest, contrary to previous work showing the evolution of these over business life cycles.Results of this study are applicable only in the context of service and retail firms, and, readers should note this sample was nonrandom and geographically concentrated. Our purpose was not to predict, but describe associations between resources and performance. This study shows that, for firms in competitive industries at the end of the value chain, type of strategy is less important than resource combinations for certain types of performance. Human and organizational resources are associated with more positive cash flow, whereas industry and market factors are related to growth. These results imply that firms seeking growth are best served by selecting and entering growth markets and industries. On the other hand, if strong positive cash flows are the primary objective, attention to combinations of resources is more important. For instance, owner-founders having a strong business and managerial background, and industry experience will need less formalized systems, whereas those owner-founders with weaker managerial resources might benefit from more formalized procedures and skilled staff.     

Navigating China's labyrinth: Singapore government‐linked companies and lessons learned from their experiences

The government‐linked companies (GLCs) were among the earliest Singapore firms to venture into China and tap into its rapid economic growth. Riding on their expertise in services and manufacturing, the financially strong GLCs have been able to penetrate the mainland market and gain a firm foothold in China. However, their success has not come easy. Many of the GLCs experienced many difficulties and had to learn to deal with the complexities of doing business in the mainland. This article uses an analytical framework to explore the difficulties that the GLCs face, with the Singapore‐Suzhou Industrial Park (SIP) as a case study. The article also examines if there has been a change in the business strategies after the SIP experience, offering some useful lessons for companies investing in China. © 2009 Wiley Periodicals, Inc.     

Organizational culture,innovation, and performance: A test of Schein's model

Innovation is the key to organizational survival and therefore the study of processes that support innovation should be of interest to researchers and practitioners alike. Schein's multi-layered model of organizational culture offers a useful framework for thinking about processes that foster innovation. A defining characteristic of the model is the subtle but important distinctions between the varied “layers” of organizational culture (i.e., values and norms, artifacts and behaviors). The basic assumption of this study is that Schein's model offers a tractable explanation of cultural processes that support organizational innovation, especially in service firms. Despite the intuitive appeal and practical value of Schein's conceptual framework, empirical research in relation to the model is limited. This paper develops a rationale for an empirical model based on Schein's conceptual model; the study reports a test of an empirical model. Data collected from approximately 100 principals of law firms provides a suitable empirical context for a test of the model. The findings generally support the hypothesized relationships. A key result is how layers of organizational culture, particularly norms, artifacts, and innovative behaviors, partially mediate the effects of values that support innovation on measures of firm performance. The findings have implications for theory and practice, especially in relation to building an organizational culture within professional service firms that fosters innovative behavior.     

A pragmatic service typology: capturing the distinctive dynamics of services in time and space

Many service classifications have provided helpful yet partial perspectives on the heterogeneity of services. This paper reconciles and integrates different earlier classifications into a new holistic typology of the service economy which is based on detailed statistical service sectors. Moreover, the paper assesses the empirical value of this taxonomy to capture the diversity of services development in time and space. A regional analysis of employment data in Germany provides evidence that knowledge intensive as well as business services follow very different sectoral and spatial dynamics than operational and consumer services. This typology yields differential insights in longitudinal and comparative regional analysis of the service economy.     

Innovation patterns and their effects on firm performance

This study aims to identify various innovation patterns and understand their effects on firm performance across business service sectors. By collecting empirical data from 198 Korean business services firms, we explore these firms’ major innovation patterns, conceptualized as combinations of different service innovation dimensions: service concept, service delivery, customer interaction, and technology. Then, in accordance with the innovation patterns they display, we group these firms into four clusters: ‘service delivery-based high-technology', ‘service delivery and customer interaction-integrated', ‘customer interaction-based high-technology', and ‘strongly balanced’ innovators. Last, we investigate whether these patterns influence firm performance. Our findings are three-fold: (1) the innovation patterns in business service firms result from the creation of new combinations of major service innovation dimensions, (2) four independent innovation patterns emerge in business service firms, and (3) these patterns lead to different levels of firm performance. Practically, our findings highlight the importance of highly qualified employees, customer interaction, and technology in improving financial performance.