Mobilizing Resources and Generating Competencies. The remarkable success of small and medium-sized enterprises in the Danish business system. . - book review

Organization Studies, Nov, 2001 by Aime Heene

Peter Karnoe, Peer Hall Kristensen and Poul Houman Andersen (eds.): Mobilizing Resources and Generating Competencies. The remarkable success of small and medium-sized enterprises in the danish business system.

1999, Copenhagen: Copenhagen Business School Press. 362 pages

Since the mid-80s, strategic management theory, research, and practice have been dominated by the resource-based (Wemerfelt 1984) and the competence-based views (Hamel-Prahalad 1994; Sanchez and Heene 1997) on matters of competitiveness. Though tremendous progress has been made in developing these views on strategy and management in recent years, theoretical and empirical efforts to gain a (better) understanding of the very basic processes of mobilizing resources, building and leveraging the resulting competencies, and managing the associated processes of strategic leaming and knowledge development (that together allow firms to gain and sustain competitiveness) have remained largely underdeveloped.

The challenge undertaken in this edited book (consisting of a collection of research papers, theoretical in nature and based on the analysis of seven cases taken from different industries, such as food processing, banking, wind turbines, biotechnology, lighting, furniture) is to present a theoretical model to gain a better understanding of the processes of competence building and competence leveraging within one particular economy (Denmark). In developing the theoretical framework, the authors apply a 'systemic' view on management and competitiveness as it has been propagated by a number of researchers in (competence-based strategic) management (Sanchez and Heene 1996; Morecroft 1998). In developing their framework, the authors basically offer evidence to reject the common belief that only large firms are able to achieve international scale and scope. They show that SME' s pursue a practical logic of their own, often in opposition to, and always far away from, the predictions of universal theories on business evolution.

The researchers demonstrate that small- and medium-sized companies, depending on the institutional context in which they are embedded, have real chances to contribute to their economies' performances and to build and sustain global competitiveness.

Contrary to traditional perspectives on economic action, the theoretical framework offered assumes firms to be embedded in specific sociological and institutional contexts that shape the logics applied by firms and networks of firms in order to become and remain competitive. It is claimed that the viewpoint of 'institutional embeddedness' allows divergence in performance characteristics among economies to be understood as a very under-explained phenomenon in mainstream neoclassical international trade theory.

One of the most attractive features of the theoretical framework developed throughout the book is the explicit connections that are made between processes of building and sustaining competitiveness at different levels of analysis: economies, networks of firms, and firms themselves. It is demonstrated how these processes sustain each other at different levels of analysis, emerge from each other and together create enduring economic performance. In this respect, the book extends previously presented analyses in the competence-based, strategic-management literature (Sanchez et al. 1996).

The basic arguments of the systemic competence-based view developed in the different contributions in this volume can be summarized as follows. Firms are embedded in larger sociological and institutional contexts and this determines their economic action. The 'larger system' within which firms are embedded is central to explaining firm behaviour (but, at the same time, is also shaped by firm behaviour).

Differing sociological and institutional contexts will lead to persistent divergences in performance characteristics of economies.

There is more than 'one best mode' of industrial organization to become and remain competitive within global(ized) competition. The analysis of empirical data on the average firm size in different (successful) economies shows that it is indeed difficult to define an optimal distribution of size for a national industry structure. Economies, mainly consisting of SME's, can be competitive in the global economy, and, within these economies, SME's can contribute significantly to the performance of the economy in which they are embedded. Potential disadvantages of scale can be overcome by networking, and, as a result, competitiveness does not seem to be created at individual firm level, but seems to be the result, rather, of cooperative agreements throughout 'value systems'.

Market segmentation offers opportunities for creating viable and competitive clusters of SME's that succeed in building and leveraging the technological competences needed for economic performance.

Global competitiveness does not result solely from 'high-tech' innovations, but can also be the result of incorporating new technologies into existing firms and of progressively and gradually (through knowledge diffusion and knowledge-developing policies) becoming more technologically advanced in 'less-high-tech' technologies.