Entrepreneurial growth through constellations

The “constellation” is a particular type of network, characterized by the presence of a “leading firm” able to coordinate a series of entrepreneurs who work together with the leading firm to produce and sell.Constellation-style growth is characterized by a leading firm establishing a closely linked network of external firms, all with a high degree of dependence on the leading firm. Typically, the leading firm will maintain control of certain key matters to coordinate the group, such as control of product development, image, and marketing strategy. However, it will devolve to the external firms' functions such as line production and wholesale and retail distribution.Constellations are distinguished from other firms that rely on outside production by their willingness to grow through a specific style of external growth through these external units, moving into a range of different products, and to closer links with the market.The constellation will also tend to have relatively informal (non-legal) ties between members. The non-legal character of this tie increases the flexibility of the constellation to be coordinated efficiently and effectively by the leading firm.Constellations are also characterized by a high input of technological and product innovation, as stimulated in a relatively shallow pyramid of power within the structure. This structure allows therefore the constellation to be particularly competitive in market niches where a high component of innovation in the product is essential. It also contributes to product quality and production flexibility.Constellation-style growth therefore not only allows the firm to grow with a reduction of investment risk, but adds to competitive advantage by fostering personal entrepreneuring through the use of coordinated partnerships of external firms with a leading firm.The model is particularly diffused in Italy, where entrepreneurial firms organized in this manner have been able to assume world leadership in the high-quality niches of mature market segments such as furniture and textiles. However, the organizational pattern should be seen as internationally relevant as a model for growth.This article examines the model in an effort to explain its relevance to entrepreneurial growth, and uses several case studies from modern Italian business to explain how the constellation behaves in practice.