Small & Medium Gold & Fashion Enterprises (SMEs) in Arezzo,Italy: Competitive Challenges and Strategic Implications

ABSTRACT

This paper provides some empirical evidence on organizational characteristics and strategies of firms in the Italian gold and fashion industries. The analysis is based on a data set of three SME clusters in Arezzo (a city and province in Tuscany, Italy, southeast of Florence) which led us to the identification of two main alternative strategies which can be implemented when facing the new global competition: a firm-centered brand strategy and an outsourcing strategy (a supply alliance with co-branding possibilities with one or more large Italian firms). We analyzed the resources and competencies of firms that adopted different export marketing strategies and further explored the relationship between strategic choices and performance of participating firms (measured in terms of growth, innovation, and export capabilities). The results show that the choice of a strategy is strongly influenced by the ability of SMEs to respond to changes in consumer behavior and competition, and that some variables significantly affect performance. Both strategies can be effective, and in some cases it is suggested to follow the middle of the road competitive approach: combining the two strategies, exporting own brand directly to the end markets and collaborating with a large firm in order to achieve a sustainable and significant competitive advantage.     

A Social Contract Account for CSR as an Extended Model of Corporate Governance (II): Compliance,Reputation and Reciprocity

This essay seeks to give a contractarian foundation to the concept of Corporate Social Responsibility (CSR), meant as an extended model of corporate governance of the firm. Whereas, justificatory issues have been discussed in a related paper (Sacconi, L.: 2006b, this journal), in this essay I focus on the implementation of and compliance with this normative model. The theory of reputation games, with reference to the basic game of trust, is introduced in order to make sense of self-regulation as a way to implement the social contract on the multi-fiduciary model of corporate governance. This affords understanding of why self-regulation, meant as mere recourse to a long-run strategy in a repeated trust game, fails. Two basic problems for the functioning of the reputation mechanism are examined: the cognitive fragility problem, and the motivational problem. As regards the cognitive fragilities of reputation (which result from the impact of unforeseen contingencies and from bounded rationality), the paper develops the logic and the structure that self-regulatory norms must satisfy if they are to serve as gap-filling tools with which to remedy cognitive limitations in the reputation mechanism. The motivation problem then arises from the possibility of sophisticated abuse by the firm. Developed in this case is an entirely new application of the theory of conformism-and-reciprocity-based preferences, the result of which is that the stakeholders refuse to acquiesce to sophisticated abuse on the part of the firm. Lorenzo Sacconi is professor of economics and Unicredit Chair in economic ethics and corporate social responsibility at the Department of Economics of the University of Trento, where he leads the LaSER - Laboratory of research in Social responsibility, Ethics and Rationality, and head of the graduate program (laurea magistralis) in “economic decisions, enterprise and corporate social responsibility”. He is also director of EconomEtica, the interuniversity centre for economic ethics and corporate social responsibility joining over 20 Italian Universities placed at the Milano-Bicocca University. Past president of tthe Italian Business Ethics Network and past member of the EBEN executive committtee, currrently he is a member of the executive committee of the Italian chapter of EBEN (EBEN Italy). On related subjects, he is author of the book: The social contract of the firm, Springer, 2000     

The internationalization process in the small and medium sized firms: A case study on the Italian clothing industry

In this research we use a data-base that reveals the propensity for contractual ventures and direct investments (1051 operations) of the clothing Italian companies during the period 1987–1991, on a national (342 operations) and international level (709 operations). The latter were analyzed with reference to the internal (412) and external growth strategies (297), cooperative (362) and non-cooperative (347) deals. Our analysis focuses on the different strategies that SMEs, on one hand, and large companies, on the other hand, show in the internationalization process. Main results of the study are:

the international growth of the SMEs takes place mainly through contractual agreements (68%), more so than with non-cooperative operation (32%), whereas in large companies the non-cooperative strategies slightly prevail (54%). Consequently, the external growth strategy is very important for the SMEs (72%) and somewhat less important for the large companies (54%);

the cooperative growth is usually seen by SMEs as an expansion both of the commercial (48% of the operations involves commercial purposes) and of the production areas (48% of the cases). This could indicate that SMEs try to organize on an international level the same network model used in Italy: SMEs decentralize their production within the country through networks of companies and industrial districts, whose horizontal connections (among SMEs themselves) and vertical connections (with large companies) provide flexibility and low costs;

large companies' expectations of the Single European Market have brought a great number of international operations in Europe (24%), notwithstanding the notable importance of Japan (23%) and U.S. (17%); on the contrary, SMEs focus on “niche and rich markets” as Japan (40%); but as far as the contractual agreements are concerned, both types of firm privilege the Japanese market: almost 50% of SMEs' international agreements are directed towards Japan (33% in the large company's case);

large companies and SMEs in the middle and high segments of the market carry out more operations than companies operating in the low quality and casual segments;

generally speaking, in Italy there is an urgent need for industrial policies promoting SMEs access to cooperative instruments (“learning by cooperating”).

     

Postponement Strategies for Global Downstream Supply Chains: A Conceptual Framework

Postponement is a well-known organizational concept and usually relates to the deferment in time of manufacturing and/or logistics operations. In the current global competitive landscape, situations where postponement can be applied are rapidly increasing. Faced with the wide range of customs duties and free-trade agreements currently in place, companies need to (re)design their postponement strategies to customize their products appropriately, and to the proper degree, in each market. As the actual location where operations take place has a major impact on a company’s overall performance, the spatial perspective must also be taken into account when designing global postponement strategies, alongside the conventional temporal perspective. Heretofore, the academic literature does not offer any comprehensive framework on a global scale either for handling what is known as the postponement boundary problem, or for conceptualizing the related postponement strategies. Building on previous research, the aim of the present study was to investigate the postponement concept in a global environment with a downstream focus. The intended purpose is twofold: first, to review and expand previous studies on the subject and, second, to provide some guidelines for conceptualizing global postponement strategies. A structured literature review was first conducted, followed by the development of a framework that combines both the temporal and the spatial dimensions. Finally, the framework was applied to a group of 28 business cases taken from the literature, to act as a bridge between academic theories and practitioners’ current business operations.     

The hidden problem of Facebook and social media at work: What if employees start searching for other jobs?

Companies are increasingly encouraging employees to use Facebook and other social media to interact with coworkers in order to empower collaboration and knowledge sharing. Yet, there is a hidden problem that has been neglected by managers. The more employees interact with coworkers through social media to facilitate their work in the organization, the more likely they are to learn about and become interested in other companies via social media, form new work connections outside the organization, and engage in job search behaviors. The use of social media to facilitate work and benefit organizations could paradoxically risk fostering withdrawal intentions and turnover, which damage organizations. This article provides evidence of this paradox from an empirical study. After having identified the problem, the article proposes both the solutions to avoid and the solutions to adopt, illustrating best practices from successful companies, comparing their benefits and costs, and indicating the situations in which each solution is best implemented. To conclude, I offer 10 recommendations to turn the problem into an opportunity and use social media as an innovative recruitment tool.     

The business plan as a project: an evaluation of its predictive capability for business success

Although there is extensive research aimed at identifying the main success factors for new ventures, efforts directed at evaluating the real effect of the existence and quality of a business plan on a firm's survival chances have been limited. This study attempts to fill this gap by analyzing to what extent the quality of a business plan, measured according to its economic, financial and organizational viability, constitutes a good predictor of business survival; and how other variables related to the characteristics of the entrepreneur and the business can affect the predictive capability of the model under consideration. Hypotheses are tested using data collected from 2142 service firms. The results show that none of the three variables that evaluate business plan quality (economic, financial and organizational viability) seems to have a determining influence on survival chances. Adding essential characteristics related to the entrepreneur and the business (education and training, experience, kind of motivation, number of employees and start-up capital) does little to increase the model's predictive capabilities.     

Equilibrium with endogenous technological changes: Theory and applications

In this paper we use a continuous-time general equilibrium model to analyze the problem of evaluating new irreversible investment opportunities that take the form of technological changes. Being a new technology, by definition, not perfectly correlated with the existing ones, the traditional spanning assumption invoked by the Real Option literature is not applicable in this context and a general equilibrium approach provides a more suitable framework. We analyze the problem of optimal consumption and investment of the representative individual in the context of the Cox Ingersoll and Ross (1895) model. We characterize the solution of the model under different assumptions about the utility function of the representative individual and about the parameters describing the technologies in the economy. A major result obtained from the model is the possibility of jumps in the equilibrium rate of return at the time in which technological changes are implemented. This is particularly interesting considering the fact that such jumps are obtained endogenously from the solution of the optimization problem and not imposed by “ad hoc” assumptions on the evolution of some variables.

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Riassunto Un modello di equilibrio economico generale in tempo continuo è utilizzato per analizzare il problema di valutare una nuova, irreversibile, opportunità di investimento che si presenta sotto forma di innovazione tecnologica. Essendo, per definizione, la nuova tecnologia non perfettamente correlata con le tecnologie esistenti, la letteratura delle “opzioni reali” non è applicabile ed un modello di equilibrio economico generale fornisce un ambiente più adatto allo studio del problema. Facendo uso del modello di Cox Ingersoll and Ross (1985) si fornisce una soluzione sotto diverse ipotesi riguardanti la struttura delle preferenze e la natura dell'innovazione tecnologica. Un interessante risultato è la derivazione di possibili discontinuità nel tasso di interesse di equilibrio in corrispondenza dell'adozione della nuova tecnologia.

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I would like to express my gratitude to Vasant Naik, David Peterson, Raman Uppal and especially Burton Hollifield and Tan Wang for helpful discussions and suggestions.     

Tax Discounting in a High‐debt Economy*

This paper estimates a consumption function for Belgium that allows for government debt discounting and for the overall discounting of the future (reflecting the consumers’ planning horizon or precautionary savings). It also allows for substitutability or complementarity effects from government expenditures. Results suggest that consumers do take into account (future) government activity. Ricardian Equivalence is rejected however, since we cannot reject a relatively short planning horizon or a precautionary savings motive for the consumers. We use bootstrapped distributions for inference since the instrumental variables estimators used may have non‐standard distributions. This procedure also helps to tackle potential endogeneity and sample size problems.