Small firm capabilities for competitiveness : an empirical study of ICT related small Swedish firms

Abstract: Small technological firms are today facing turbulent environments where they are constantly challenged and have to struggle to remain competitive. The resourcebased view argues that firms with unique capabilities are able to achievecompetitiveness. Although firms' capabilities have received research attention, a small firm perspective has largely been lacking. As these small technological firms are operating in a turbulent environment, they would need to develop their dynamic capability i.e. their ability to constantly change in response to new demands. Furthermore, due to the fact that these technology-based firms' 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. Thus, with the aim to advance the field of the resource-based view, the purpose of this study is to identify and empirically test how factors related to small firms' capabilities are linked to competitiveness. To reach this purpose, both qualitative and quantitative studies were undertaken. The qualitative study included three case studies and the quantitative studies used survey data from 291 ICT related small Swedish firms for the analysis. During the study, it was found that the relation between a firm's capabilities and competitiveness is not only direct, but also mediated though the firm's strategy. Entrepreneurial orientation was conceptualized as the small firm's strategic practice or posture. Overall, the key findings from the study are the following: First, ICT plays a substantial role for small firms' innovation activities, but the degree of influence differs to a large extent depending upon various factors. Second, ICT capability is potentially a good tool for building competitiveness, since it has a positive influence on all the components of dynamic capability. Third, networking capability emerged as an important component of dynamic capability and has a strong link to firm performance. Fourth, it was feasible to cluster small technological firms into sub-groups based on their networking structure and networking capability. Each cluster showed unique characteristics in terms of capabilities and entrepreneurial orientation. Fifth and final, the results from the overall conceptual model show that ICT capabilities enhance dynamic capabilities but fail to significantly influence entrepreneurial orientation and firms' performance. However, dynamic capability has an impact both on firm strategy and on firm performance. As expected, entrepreneurial orientation significantly improved firm performance.