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Report on Technology-Based Small Swedish Firms
Report on Technology-Based Small Swedish Firms
Report on Technology-Based Small Swedish Firms
Report on Technology-Based Small Swedish Firms
Report on Technology-Based Small Swedish Firms
Report on Technology-Based Small Swedish Firms
Report on Technology-Based Small Swedish Firms
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Report on Technology-Based Small Swedish Firms

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  • 1. Report on Technology-Based Small Swedish Firms Vinit Parida, Vinit.Parida@ltu.se Mats Westerberg, Mats.Westernerg@ltu.se Håkan Ylinenpää, Hakan.Ylinenpaa@ltu.se Division of Entrepreneurship and Industrial Organization Department of Social Science and Business Administration Luleå University of Technology, SE-97187, Luleå
  • 2. 1. Introduction Technology-based small Swedish firms are an important part of our modern economy. They are considered to be the most important segment with regard to job creation and producing large number of innovative products. However, statistics show that most of these small firms fail during their first few years after establishment. Several research studies explain that firms with distinctive or superior capabilities compared to their rivals can overcome this barrier and achieve competitive advantage. Building on the above background this study focused on two such capabilities, namely information and communication technology (ICT) capability and dynamic capability. As we are studying small firms operating in a turbulent environment, they need to constantly integrate, reconfigure, and develop their resources and capabilities and more importantly upgrade and reconstruct their core capabilities in responses to changing environments to attain and sustain competitive advantage. This capability is referred as dynamic capability. In addition, because we study technology-based firms’ and their business focus is on dealing with technological products and services, their ICT (information and communication technology) capability can also play a substantial role in securing competitive advantage. ICT capability is defined as a firm’s ability to strategically use information and communication technology functions or applications in their business activities (e.g. intranet, extranet, e-mails, websites, etc). Finally, we also wanted to investigate the role of firm strategy as a strong component for achieving and directing firm capabilities for better performance outcomes. 2. Method We initially conducted several interviews with technology-based small Swedish firms to get deeper understanding of the research problem. And later we performed a survey (May to July 2007) involving 1471 small firms (SNI code: 72220). Three criteria were used to sample these firms 1) they should have less than 50 employees (EU’s definition of small firm), 2) more than 1 million SEK in sales (reduce the probably of sampling non-active firm), and 3) dealing with technology related products. The questionnaire was addressed to the CEOs of the small firms as they have wide knowledge regarding their business and its strategic operations. In total we received 291 replies back which accounts for 21% response rate. Although not very high, non- response analysis indicated that the respondents were not different from the sample. Further, the number of respondents 1
  • 3. was more than sufficient to run statistical analysis. The analysis of survey data was made using the software SPSS (Statistical Package of Social Science) 14.0. 3. Demographic Results Based on the analysis of the firms which had replied to our questionnaire, Table 1 shows general demographics of technology-based small firms. Table1: General demographic information Average age of the CEO 46 Years Gender of the CEO 94% Male and 6% Female Education Level of CEO 65% University and 35% Basic Education Average Experience CEO (in the 10 Years Company) Average age of the Company 11 Years Average number of Employees 15 Employees Market of Operation (Mainly) 55% International and 45% National 4. Implication for Practitioners This study proposed that firms with certain capabilities are able to achieve competitive advantage better than their rival firms. But what are these capabilities/competences? What role does firm strategy play in this context? Thus, we would like to highlight the main implications for practitioners (CEOs and others). • Technology-based small firms view ICT as an important part of their business and many firms in this sector were front- runners in terms of effectively using ICT. The results show that ICT capability can lead to many benefits such as achieving efficiency and effectiveness with different processes and activities. Small firms with high level of ICT usage were also able to be more innovative and quicker at developing other vital capabilities. However, the impact of ICT capability on performance was not direct, which indicates that ICT capability only has a supporting role in achieving performance. • Inter-firm relationships (networking) were identified as an important factor to achieve better performance. Networking 2
  • 4. allowed small firms the possibility to gain resources, knowledge and competence from other firms. However, establishing relations were not enough, small firms also needed to have appropriate capability in being able to gain advantage from these relations (i.e. a networking capability). We could also see groups within the technology-based small firms based their networking practices. Generally, firms having more established relations with other firms/institution and having a higher networking capability were better performers compared to other firms. • As indicated by the previous “bullet”, networking is a key to success in a dynamic environment. One reason for this is that networking helps the firm to change (be flexible) with changing needs by continuously develop different capabilities, using external inputs. These inputs can be in the form of new knowledge, information and learning. Thus, small firms should form alliances, partnerships or just work collaboratively in a network to be able to acquire the needed inputs in an effective way. Once the needed knowledge is identified and acquired, it has to be aligned or incorporated with the existing activities and processes, which when done well results in development of innovative products and better performance. • All activities require resources, which are traditionally lacking in small firms. When they plan to get involved in some process or activity, they have to consider the costs and benefits of such a venture. Thus, external collaboration should be formed considering this point. Having too many relations would consume much more resources than can be benefited from them. A better network strategy is focused on having quality relations with fewer potentially useful partners, rather than many relations with unrelated partners. Another important aspect related to inter-firm relationships has to do with a firm’s ability to maintain these relations and create new relations. Sometimes it may be necessary to change partners – divest old relations that no longer are able to provide value to the firm and build up new relations with those that are believed to be of value in the future. Our results clearly reveal that the ability to build new relationships are strongly linked to a better performing firm. • Finally, as we expected, firm strategy played a significant role for competitive advantage. Particularly, firms with a stronger entrepreneurial strategy had superior performance. These firms had three main characteristics which differentiated them from others. First, these firms were had a 3
  • 5. proactive forward-looking perspective which helped them in discovering and exploiting profitable opportunities. Second, these firms had a high level of readiness towards taking risks in terms of daring action where outcomes are uncertain but promising. Third, these firms support new ideas, novelty, experimentation, and creative processes that have resulted in innovation in terms of new products, services, or technological processes. This entrepreneurial strategy was strongly supported by having the capabilities discussed earlier, indicating that firms with stronger capabilities had stronger entrepreneurial strategy. 5. Publications Based on the survey we have been able to publish several articles. Please e-mail vinit.parida@ltu.se, if you would like of have a copy of these articles. • Parida, V., Westerberg. M. and Ylinenpää, H. (2009) ‘How do small firms use ICT for business Purpose? A study of Swedish technology- based firms’, International Journal of Electronic Business. • Parida, V. and Westerberg, M. (2009) ‘ICT related small firms with different collaboration network structures: Different species or variations on a theme’, RENT Anthology 2007, Edward Elgar. • Parida, V. (2008) ‘Small firm capabilities for competitiveness: An empirical study of ICT related small Swedish firms’, Luleå: Luleå University of Technology, Licentiate Thesis DT 2008:01. • Parida, V., Westerberg, M. and Ylinenpää, H. (2008) ‘Importance of ICT for technology-based small firms networking’, eChallenges e-2008 Conference & Exhibition,Oct 22 – 24, 2008, Stockholm, Sweden. • Parida, V. and Pemertin, M. (2008) ‘Networking: small firm’s gate to competitiveness’, EMARK 08, Sep 17-19, 2008, Grand Canary, Spain. • Parida, V. and Pemertin, M. (2008) ‘Network and ICT capabilities: A Resource Based View approach to Small firm’s innovation’, 15th International Product Development Management Conference, Jun 29-Jul 01, 2008, Hamburg, Germany. • Parida, V. and Westerberg, M. (2008) ‘Linking Firm Capabilities to Entrepreneurial Orientation and Firm Performance: Evidence from Small Swedish Technological Firms’, 2008 Babson Collage Entrepreneurship Research Conference, 4-7 June 2008, Chapel Hill, USA. • Parida, V. (2007) ‘ICT and dynamic capabilities: A study of ICT related Swedish small firms’, 2nd Conference on Nordic Innovation Research, 3-4 Dec 2007, Luleå, Sweden. • Parida, V. and Westerberg, M. (2006) ‘ICT use for innovative in Swedish industrial service SME’s’, 1st Conference on Nordic innovation Research, 8 Dec, Oulu, Finland. (Best paper award) 6. Acknowledgement 4
  • 6. We would like to thank all respondents for spending time and effort on filling in the questionnaire. As we are conducting a follow up study on the same industry as the 2007 survey, you may receive a new questionnaire that we hope you can help us with and give us an opportunity to find more interesting results to support technology-based small Swedish firms. Thank you in advance for this! 5

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