Journal of Workplace Learning Re-conceptualising learning spaces: developing capabilities in a high-tech small firm Allan MacphersonOssie JonesMichael ZhangAlison Wilson
Article information: To cite this document: Allan MacphersonOssie JonesMichael ZhangAlison Wilson, (2003),"Re-conceptualising learning spaces: developing capabilities in a high-tech small firm", Journal of Workplace Learning, Vol. 15 Iss 6 pp. 259 - 270 Permanent link to this document: http://dx.doi.org/10.1108/13665620310488557
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Re-conceptualising learning spaces: developing capabilities in a high-tech small firm Allan Macpherson, Ossie Jones Michael Zhang and Alison Wilson
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The authors Allan Macpherson is Senior Lecturer at the Business and Management Centre, Liverpool Hope University College, Liverpool, UK. Ossie Jones is Professor of Innovation and Enterprise, Michael Zhang is Research Fellow and Alison Wilson is Project Manager, all at the Centre for Enterprise, The Business School, Manchester Metropolitan University, Manchester, UK. Keywords Innovation, Organizational development, Learning, Small to medium-sized enterprises Abstract Examines the process of managerial learning in a relatively remote rural small-sized firm. Relational competences and organisational innovation are key to the capture, employment and creation of knowledge and learning within the firm. The case study organisation has created a virtual cluster of innovation, through their supply network, that reaches well beyond the traditional regional institutional support mechanisms. Through this network of relationships, they have enhanced their own learning, facilitated the learning of supplier firms and integrated knowledge to create opportunities for product innovation and development. The paper concludes that these learning experiences indicate policy implications for the support of learning in small firms. To overcome failings in traditional support systems, policy should be directed at the development and maintenance of learning networks. This informal and organisational specific approach to learning and development overcomes some of the barriers to managerial learning in SMEs, and is a method that will address the specific business needs of small firms. Electronic access The Emerald Research Register for this journal is available at http://www.emeraldinsight.com/researchregister The current issue and full text archive of this journal is available at http://www.emeraldinsight.com/1366-5626.htm Journal of Workplace Learning Volume 15 . Number 6 . 2003 . pp. 259-270 # MCB UP Limited . ISSN 1366-5626 DOI 10.1108/13665620310488557
Introduction Previous research in the area of SMEs has consistently recognised that management in the SME sector is significantly different from large organisations (Wynarczyk et al., 1993). The SME sector is not homogeneous and management is, therefore, contextually specific and dependent on a variety of factors (Goss and Jones, 1997; Hannon, 1999). This has created problems in identifying development needs and delivering training support to the sector. Unfortunately, the vast majority of SME support schemes are based on management competences that are modelled on large organisation management functions and are inappropriate for the SME sector (Westhead and Storey, 1996). Since traditional business support systems seem to be failing to engage managers in the SME sector, alternative routes to managerial learning within SMEs need to be explored. Increasingly, the value of business networks and clusters is presented as a route to organisational learning and knowledge creation (Porter, 1998a,b), and Conway and Steward (1998) argue that interorganisational networks based on depth, quality and diversity are the most important source of new knowledge. Indeed, a study by Chell and Baines (2000) noted that although many SMEs demonstrate an active network orientation, network activity was more prevalent in those small firms that were growing. Previous work on industrial clusters and regional development indicate that interactions of firms in the innovation process play an increasingly important role in improving and expanding firms' competences and competitiveness (Porter, 1998b; Lundvall, 1992; Hakansson, 1987). Thus, ``entrepreneurial networks'' help ownermanagers strengthen their business by providing access to scarce resources, including skills, information and knowledge. However, some firms, particularly in rural areas, are isolated in terms of their institutional and infrastructure support mechanisms, and they lack access to clusters essential to network learning. Yet, as North and Smallbone (2000) point out, there is no clear evidence that, in terms of innovation and technological learning, firms in remote rural areas lag behind firms in accessible rural and urban areas. Rather, variance in innovativeness amongst SMEs is firm specific
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as well as sectoral and managerial. Given this contradiction, managerial learning in remote SMEs must be possible through alternative means. The interaction within a supply chain management network, both vertical and geographical, may be a possibility. However, this will require the conceptualisation of a competitive space of virtual ± and not geographical ± organisational proximity (Romano et al., 2001) to ameliorate the disadvantage of a remote rural location. This paper examines the process of developing technological and organisational competences in a small-sized, high-tech manufacturing firm (32 employees with an annual turnover of approximately £3.6 million as of 2001). Our aims are to understand in what ways innovation, both technological and organisational, has taken place in this organisation, located in a relatively remote area of northwest England. The relevance of the firm's rural location is explored to consider how this, together with the major influence in the region of a major multinational corporation, impacts on the firm's cluster activity and its network relationships. Given the rural location and the lack of a significant technological cluster, the ability of the organisation to develop relationships over great distances, both national and international, is key to its competitiveness. We begin with an examination of known problems with traditional support systems for managerial learning in SMEs. Opportunities available in networks are then outlined and the potential within supply networks highlighted. The research methodology and empirical findings are presented. Finally, the implications of learning through a virtual cluster evident in a supply network are discussed.
Barriers to managerial learning in SMEs Much of the research in managerial learning has focused on the reasons that management development is not accorded a high priority within smaller businesses or, indeed, does not take place at all. Whilst undoubtedly some are specific to individual research initiatives and could, therefore, be attributed to regional or sectoral issues, there are, nevertheless, consistent themes. Research identifies a number of structural and attitudinal
constraints to participation in developing managerial competence. Time and cost would appear to be fundamental issues within SME organisations, which influence whether training and development take place. With regards to cost, this is not just in terms of the cost of the training, but perhaps more importantly in the time lost to the organisation and the resultant opportunity costs (Smith et al., 1999; Wong et al., 1997; Kerr and McDougall, 1999; Westhead and Storey, 1996). SMEs also voice real concerns that by giving staff valuable skills, particularly in the form of recognised qualifications, this may enable them to move to other organisations, with the benefits of development accruing to the worker rather than the enterprise (Westhead and Storey, 1996; Johnson, 1999). There is also a tendency by the SME sector to recruit to deal with skill shortages rather than invest in training themselves (Childe et al., 2000). Family-run firms have also been found to resist intervention from external organisations (Smith et al., 1999; Westhead and Storey, 1996). In addition, previous research has highlighted that training can be perceived as a punishment for poor performance by the employee (Lange et al., 2000). Perhaps one of the greatest difficulties in persuading SMEs of the benefits of being proactive within the area of management development is the lack of evidence that shows a link between development and profitability (Westhead and Storey 1997; Wong et al., 1997). The number of variables that can influence an SME's profitability can make quantification impossible (Chaston et al., 1999). Cushion (1995, 1996) and Kerr and McDougall (1999) link this lack of demonstrable evidence to the lack of effective evaluation of training and development in small firms. There appear to be two major factors that prevent the conventional approaches to evaluation having utility for small businesses. The first is timescale. Many of the models of ``best practice'' in evaluation put forward a multi-level strategy over time. The time horizons in smaller businesses, however, are very different from those of larger organisations (Westhead and Storey, 1996), and investing in development that will impact on performance over time seems either irrelevant or a luxury to a company that is struggling to survive. The second area of
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concern is focused on the measures of success used in evaluation. As Hannon (1999) points out, these allow little room for effective comparison. Small businesses are interested in, and value, measures that seem to impact on their day-to-day operational practice rather than those associated with an ideal of enhanced management effectiveness per se. This echoes Cushion's (1995, 1996) concerns, that strategies developed in, and for, large companies are inappropriate for SMEs. Perhaps more importantly, it would appear that recognising the importance of developing managerial competence is an intrinsic component of the firm's culture and is undoubtedly influenced by the ownermanager's attitude, personality and values (Smith et al., 1999). Indeed, an Institute of Management Survey (2000) found that in companies employing fewer than 100 people, initiation and implementation of management development rested largely with the ownermanager. Moreover, Stanworth and Curran in 1973, produced research that referred to different ``entrepreneurial identities'' or motivations, which they proposed influenced business performance and the willingness to engage with external resources and agencies. Thus, the owner-manager's personal training and education history and experience would also appear to be critical in relation to the importance that training and development holds within the culture of the company. Indeed, much research has shown that small business owner-managers do have a particular ``ethos'', or value system, which may differ from managers working in larger organisations. Deakins and Freel (1998) and Gibb (1997) argue that the whole approach to learning for owner-managers in small business needs revisiting. They refer to ``the nature of entrepreneurial learning'' as essentially different ± as non-linear, opportunistic and informal. They also highlight the importance of skills relating to networking, learning from experience, and, particularly important for this study, the sourcing of, and ability to work with, resources and expertise from outside the firm. This position would appear to be supported by recent research from Chaston and Mangles (2000) and Chell and Baines (2000) who found evidence that organisational learning was more pronounced in firms participating in business networks.
Networks and learning in SMEs In a comprehensive review of SME business networks, Blundel and Smith (2001) define networks as the ``pattern of formal and informal linkages between individuals, businesses and other organisations such as government and voluntary agencies'' (pi, emphasis in original). Indeed, Miles and Snow (1986) and Castells (2000) have argued that the networked organisational form is a fundamental organisational shift and a product of the dynamics of the information economy. Clearly, networks are complex and Conway and Steward (1998) have argued that it is this diversity of actors and the relationships in networks that provide the opportunity for knowledge creation. Networks are more than sharing costs and resources, and networking provides an opportunity to coordinate efforts and exchange information that can create new knowledge (Teece, 1992), with networks providing the opportunity for firms, particularly small firms, to access the expertise available in other organisations. As Castells asserts, the network enterprise ``transforms signals into commodities by processing knowledge'' (Castell, 1992, p. 188, emphasis in original). The importance of tacit knowledge in the innovation process (Nonaka and Takeuchi, 1995) and the external environment as a source of that knowledge (for example, Drucker, 1985; Rothwell, 1992) also highlight the importance of effective interorganisational relationships and networks as learning opportunities. Much of the literature associated with networks has been regionally focused and has used the development of high-technology sectors in California as a key reference point. In her analysis of a key new technology cluster, Saxenian (1994) states: ``Silicon Valley demonstrates how inter-firm networks spread the costs and risks of developing new technologies and foster reciprocal innovation amongst specialist firms'' (Saxenian, 1994, p. 424). More recently, Koschatzky (1998, p. 385) notes that studies carried out in the US using patent data or the Small Business Administration census ``reveal proximity effects in the innovation activities of industrial firms, universities and business services''. The identification of high-tech regions has implications for policy-making as national governments have tried to replicate the successes of Silicon Valley, Emilia-Romana and Baden-Wurttemberg. Porter (1998b,
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p. xxiii) has been particularly influential suggesting there is ``mutual dependence'' between government and business because ``many of a company's competitive advantages lie outside the firm and are rooted in locations and industry clusters''. Despite this increasing focus of attention on regional network studies, which vary from industrial districts (Piore and Sabel, 1984) to detailed microsociological approaches (Granovetter, 1985; Steward and Conway, 1996), there has been little attention devoted to analysing ``the detailed structuring of those relationships'' (Sobrero and Schrader, 1998). In an attempt to resolve this problem, they suggest that there are two dimensions which are ``fundamental'' to the management of inter-firm relationships: contractual and procedural coordination. Contractual coordination refers to the legally defined exchange of rights (Stinchcombe, 1990; Williamson, 1985), while procedural coordination refers to the structural mechanisms that are necessary for the exchange of information and organisational learning (Nonaka and Takeuchi, 1995). The separation of organisational responsibility means that senior managers and lawyers will be responsible for contractual coordination and business unit managers and functional managers will be responsible for procedural coordination (Sobrero and Schrader, 1998). In other words, network interactions emphasise the processual elements that underpin the exchange of information and knowledge. Consequently, the geographical proximity will impact on the depth of vertical and horizontal relationships and create the context of networking. Some authors (Blackburn et al., 1991; Curran et al., 1993) report that small business owners have little time for networking and place more emphasis on independence via a ``fortress enterprise mentality''. In explaining the contradictory evidence, Chell and Baines (2000, p. 205) found networking was positively related to business growth being significantly higher in ``expanding or rejuvenating'' businesses than those ``plateauing or declining''. Research by Barnett and Storey (2000) also indicates that those SMEs who creatively configure and invest in their external relationships are more likely to succeed. ``Entrepreneurial networks'' help ownermanagers strengthen their business by providing access to scarce resources, including
skills, information and knowledge. Moreover, Christopher and Juttener (2000) highlight the fact that relationship management should be a strategic priority of any firm ± and is clearly important for networks building ± but this also highlights the fact that competence in networking may be the key factor in knowledge capture and learning through network interactions. If that is the case, the quality of inter-firm relationships will be dependent on the qualities and competence of those involved (Sinclair et al., 1996). Indeed, Hines and Rich (1998) propose that a culture of consensus and learning is an essential prerequisite for knowledge sharing and improving competitive advantage through supply networks, and must be considered in the formation of any supplier associations. Consequently, in a supply chain network, the customer can be a source of technical help, ideas and knowledge, but this depends on the degree of embeddedness of the relationship (Cox et al., 2002). The relationship history can create a culture of collaboration that facilitates exchange of knowledge, but the degree of effectiveness will be dependent on personal perceptions of that relationship (Weaver and Dickson, 1998). However, some localities may lack the fundamental building blocks to allow the formation of networks or inter-firm relationships evident in sectoral and spatial clusters. In this instance the networking beyond the locality, may provide the opportunity to create a virtual cluster of knowledge transfer.
Research issues: networks, proximity and virtual clusters Studies of internal technological and organisational change (Arrow, 1962; Aoki, 1986; Rosenberg, 1982) emphasise routines and learning-by-doing. However, research on firms' capability for external learning stresses the importance of environmental factors and learning-by-interacting. (Porter, 1998a; Lundvall, 1992; Hakansson, 1987) The external learning approach is closely related to studies of industrial and spatial clusters (Krugman, 1991; Storper and Walker, 1989). Such authors argue that geographic proximity attributes to the effect of knowledge spillovers (Koschatzky, 1998) and especially the acquisition of tacit knowledge that is considered critical to the firm's competences (Nonaka and Takeuchi, 1995). It appears,
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however, that most empirical case studies were carried out in industrial districts of advanced nations and regions with high degrees of concentration of customers, suppliers, capital provision and supporting services (Saxenian, 1994; Hakansson, 1987). Even the studies on less-favoured regions in industrialised nations (Cooke and Morgan, 1998) show that firms are provided with opportunities to become members of regional industrial clusters and innovation networks. In stark contrast, firms in certain regions are geographically disconnected from such industrial clusters and lack opportunities to benefit from local networks, so they must seek other opportunities for ``interactive learning''. According to Romano et al. (2001, p. 19) a virtual cluster is ``an e-business community, made up of customers, suppliers, distributors, and commerce providers sharing digital and knowledge networks for collaboration and competition''. The authors go on to argue that it is information and communications technologies (ICTs) in general, and the adoption of digital networks in particular, that have generated this new kind of collaboration and competition. Furthermore, they propose that one of the prerequisites in forming virtual clusters is the implementation of supply chain management and customer relationship management, which in turn can be reinforced by the development of technological platforms and service providers. In contrast, our approach to virtual clusters analysis takes a social interactive perspective in which attention is focused on tangible supply chain and customer relationships without overstating the virtual effect of ICTs. By tangible we mean the utilisation of conventional communication channels such as telephones and air travel for regional and global customer relationship management rather than online digital communication over time and space. At the same time, we adopt their notion that both supply chain management (SCM) and customer relationship management (CRM) are building blocks for the formation of virtual clusters. As described in the introduction section, the company, Romar Workwear Limited, is located in Cumbria, a rural area of northwest England. In 15 years the company has developed from an entrepreneurial team (consisting of one full-time and two part-time employees) to a small, successful, high-tech manufacturing company employing 32 staff.
The company's core business is based on the supply of personal protective equipment (PPE) to BNFL's Sellafield plant and several other sites. During its expansion, the company has developed managerial competences and expanded technological capabilities by vigorously fostering relationships through a network of firms. Having established a secure business, the management team now contend with the challenge of continuing growth in the face of institutional barriers created by the absence of a ``scientific pole'' (universities and research centres), which is central to the creation of techno-economic-networks (Callon, 1992). In addition, there are significant geographical constraints, including inadequate infrastructure such as poor quality road and rail transport links. Creating a ``virtual cluster'' by networking beyond the locality through regional and global suppliers has helped compensate for limitations within the region. Our interest in Romar arose during a European Social Fund (ESF) project auditing managerial competences in small firms operating in the supply chains of larger organisations. While in search of firms that had demonstrated excellence to inform the development of an audit instrument and to identify relevant competences to benchmark, Romar was recommended by both staff at the British Nuclear Fuels Laboratory (BNFL) and the Northwest Regional Development Agency. Their success had been recognised by BNFL in their award of two Supply Network Innovation Prizes (SNIPs). The audit conducted as part of the ESF project placed Romar at the top of all 39 companies in the study. Thereafter, in addition to the analysis of company data such as financial reports, records of meeting and strategy presentations, we conducted four interviews with the Commercial and Marketing Director and three interviews with the Technical Director over an 18-month period. During this time they won a new contract as the single-source supplier of Personal Protective Equipment (PPE) to BNFL Sellafield. The Commercial and Marketing Director is responsible for the strategic development and organisation of business and marketing activities; the Technical Director is responsible for the development and innovation of production and supply items. Access to company information was very open and included strategic plans and the
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outcomes of strategy meetings outlining the intention to build closer supplier networks. We accept that there are limitations to single case studies in terms of the extent to which results can be generalised. Nevertheless, it is our view that the value of in-depth cases outweighs such limitations. For example, Monge (1995, p. 268) points out that despite ``much exhortation'' to conduct longitudinal studies, ``the percentage of published research articles that report data collected at more than one point in time is minuscule''. Ogbor (2002, p. 623) is critical of reliance on quantitative methodologies ostensibly based on neutral, objective and value-free social science that dominate studies of entrepreneurship. Instead, he calls for qualitative approaches in which there is an ``intimate collaboration between facts and theory''.
Managerial and organisational learning in Romar Background Two former employees of BNFL established the company in 1987, one of whom has remained with the company. The current owner-directors split their responsibilities between technical management, and marketing and commercial management. They have recently restructured and appointed senior management to take operational responsibility for production, purchasing and sales (Figure 1). For the first ten years of the company's operations, they were primarily a manufacturer of PPE. However, when the company won a single-source contract from BNFL Sellafield in 1997, which included supply to other BNFL sites, it grew in 18 months from around £800,000 to approximately £3.5m turnover. A large portion of the growth was through the management and supply of PPE equipment to BNFL. Nevertheless, 26 per cent of their turnover remains within the manufacture of their own PPE equipment. They have begun to outsource some routine manufacturing, such as sewing, while retaining the technical knowledge developed internally. Apart from the usual performance management criteria, such as on-time delivery, quality and order accuracy, BNFL also requires Romar to rationalise supplied items between the many sites and departments of BNFL, and use value engineering to improve products. Romar have approached product improvement in three
ways. First, they have used their previous experience, technological knowledge and active experimentation. Secondly, they have sought expertise from outside of the firm. Finally, they have brought together organisations to create dialogue and facilitate an exchange of knowledge. It is the last two of these elements that are of interest in this study, but they are inextricably linked to the knowledge, experience and creativity within Romar. Experience and technical knowledge When innovating new or developing existing products at Romar, they have drawn on their pervious experience in the industry, but they have also had to draw on expertise from outside of the firm. One product that has been developed is a protective suit made of a lightweight, flexible material. The original directors recognised the need for such a suit due to their previous experience in the industry and created a material properties specification. Difficulties had then to be overcome in finding a suitable material and developing a production process that would meet with the industry quality standards of the Nuclear Industry Inspectorate. Local government support agencies and local firms did not have the necessary expertise in plastics, and they were forced to research sources using business directories and the Internet to contact experts in plastics manufacture to obtain sample materials. The suit itself is manufactured inhouse, using unique technology developed at Romar to weld the plastic, while retaining the flexibility, strength and quality of the material at the join. They combined expertise and knowledge to create a new product, and also increased their own stock of knowledge on materials production in the process:
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It's a product that we've actually developed and manufactured from scratch for the nuclear industry because there was nothing in the market that could fulfil what they wanted. So we found materials and then we couldn't find the equipment and John's an instrument technician, so he built the machines . . . and we actually have a production technique that is totally unique to us (Commercial and Marketing Director (CD)). We would experiment with different materials, test them, build the suit, test it, find it wasn't right, develop it . . . just trial and error with a lot of different technical materials. Yes, over the years we've got to know the properties of materials . . . now we know what the hygroscopic and hydrophilic properties of certain types of groups are, and fibres, and there's a technical background (Technical Director (TD)).
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Figure 1 Romar Workwear Limited organizational chart
Creating interaction Since Romar only produce a very limited number of their supply lines, valueengineering of existing products requires high degrees of collaboration. This involves not only access to the end-users but also to OEMs (original equipment manufacturers) and even OEM suppliers. In this case, Romar create contacts with firms who are supplying PPE items, and encourage BNFL to move away from existing equipment. In doing so, they increase the knowledge within BNFL, and learn more about the product development process: Part of the contract is to value-engineer products and rationalise what they are buying, bringing them [BNFL] away from old military specifications in to commercial industrial fields of protection, but because of what they do and the nature of it you have to work with the manufacturers to innovate the products because BNFL can't really take standard products (CD).
However, since experience at Romar also involves knowledge of end-user problems gained through previous experience in the industry, through product innovation themselves, and through discussions with
end-users, they use this experience to help suppliers: Our background in actually using the sharp end, i.e. air-fed suits and respirators has helped me in understanding when people are complaining about certain issues . . . I understand where they are coming from (TD). So we work with manufacturers in different fields that aren't our field of expertise, to help them develop the product for BNFL . . . we were involved in trialling and testing [a new mask] and the feedback to Finland and going to Finland and working with the design people to evolve a mask that was suitable for their [BNFL's] environment (CD).
But they not only help with technical advice to potential suppliers and the customer, they also take the supplier into the customer so that they can experience or see the problems first hand. This requires a high level of trust and collaboration that not only benefits the customer, but also provides opportunities for learning at Romar and with the supplier in the supply network. It provides synergies of capabilities between suppliers, Romar and BNFL. A lot of our innovation and product changes come from problems where . . . a plant would
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phone us up and say ``we have a problem can you come in and have a look at it'' (TD). For something more technical now. I actually pull the resources in from the group. So if you wanted a new air-fed hood, for example, I'd bring in Scotts, which we've done, and get them to BNFL . . . so it's a matter more of actually pulling technologies together in your R&D (TD).
Developing relationships During this process of value-engineering and innovation, Romar have created some close, collaborative relationships. The depth of collaboration inevitably varies with changes in personnel at BNFL undermining trust built up over time. Nevertheless, some relationships, through an exchange of ideas or knowledge and recognition of mutual advantage, have grown to the point where ``now we are collaborative partners [and] . . . we share development, time, costs and innovation'' (CD). However, in seeking out these closer relationships, the attitude of the supplier is as important as technical ability. They have had approaches from local companies, but have refused closer links ``because they don't have the same attitude, but find me another company that thinks like us, well hey we wouldn't have a problem with partnering'' (CD). One particular partnership is with a company in Surrey. Although a global supplier of air-fed suits, the partner's knowledge of the nuclear industry was limited. Both benefit from closer ties, with Romar becoming a sole distributor of the airfed system to the nuclear industry and providing expertise for the development of the partner's product. The relationship is so close that it has involved exchanges of personnel and access to commercially sensitive technical information: They [the supplier] have never had a distributor before and they've actually made us their sole supplier to the nuclear industry because we understand it technically better than them and they trust that we're going to put their product in when they send us on a lead . . . there is total trust and openness in manufacture and development. They've seen our manufacturing line, which we never show anyone, and they've taken our staff down and had our staff working in their factories (CD).
Structures for learning They see technological innovation as a particular focus for the company that draws on the strengths of the management team.
The technical director provides the focus for innovation, and the commercial director provides business management skills: ``he's the person who can go out and look at a job and say, I know just how to create something I can sell them; John innovates the products and I innovate the business processes'' (CD). One of their strengths, as they see it, is to provide added value through industry knowledge and network of contacts in the PPE industry. The focus on knowledgecreation means that Romar managers are willing to outsource lower-value activities such as manufacturing to other firms in their network: ``not only do we develop specific products for specific needs but we sometimes take out operations . . . you don't have to make the product that you're going to wear'' (TD). Romar certainly see this access and use of knowledge as a future direction in which to develop the business. However, having audited their own business processes and organisational structure, they recognised that their existing operations required the directors to spend too much time in the general running of the company. This reduced their capacity to innovate and develop. With the introduction of a layer of senior ``operational management'', they believe that they can refocus their energies, ``so it's enabling me to go out there when a customer has a problem, solve it, get the samples made up and to produce new products'' (TD). In this way, the restructuring is seen as improving the ability of the business to contribute to the valueengineering and knowledge brokering process within the supply network, facilitating the learning within the organisation and recreating ``entrepreneurial space'' so that ``John (TD) innovates the products and I innovate the business processes'' (CD). In short, through inter-firm relationships and contacts, Romar see their role as valueengineering existing products, encouraging the development of new materials for better products, and developing new products. In their words, ``our job is to put it all together with a focus, and not get paid for that bit'' (CD). In the process, Romar have increased their managerial capabilities, innovated their organisational processes, and have demonstrated their capabilities in problem solving and innovation to such an extent that during a recent re-tendering process:
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Three of the guys (BNFL) on the [re-tender] panel said, you couldn't take this guy away from us because our section would shut. He's my consultant as well as my supplier because I ask him and it's free advice and he tells me what's wrong (TD).
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Organisational learning and virtual clusters The case study highlights how Romar's development, both organisational and technical, has been intrinsically linked to the interactions that occurred within the network of companies that they have built in order to deliver on their contract as a single-source supplier to BNFL. Given the unique nature of technological expertise that Romar have developed in their operations, and the international reach of the supply chain, the case provides an interesting contrast between local embeddedness and an extended network. In other words, Romar have utilised a deep understanding of BNFL's activities to demonstrate their ability to add value through product innovation and problem solving. At the same time, because of their geographic isolation, Romar managers have been forced to seek suppliers and collaborators from a very wide geographic area, and it is this activity that has provided Romar with learning opportunities. The supply chain literature emphasises the importance of collaboration founded on trust and mutual obligations between cooperating partners (Corbett et al., 1999; Wren et al., 1998). There are links here with the literature on innovation networks in which ``mutual dependence'' (Porter, 1998a) between firms decreases the likelihood of opportunistic behaviour and increases the value of knowledge sharing. This is also related to what Sobrero and Schrader (1998) describe as the distinction between contractual and procedural coordination. In terms of both supply chain relationships and innovation networks, there are limits to what can be specified in legal documents, and there is a heavy responsibility on those responsible for the day-to-day management of inter-firm relations. In other words, activities associated with procedural coordination are central to the exchange of information between actors in cooperating firms, which ensure that all partners benefit from organizational learning. The difference between large firms, which are the focus of the analysis carried out by Sobrero and Schrader
(1998), and small firms, such as Romar, is that in the latter the same individuals (the owners) are responsible for both contractual and procedural coordination. In large firms, this responsibility will be divided between senior managers (contractual) and operational managers (procedural). In this case, then, it is the ability to combine strategic direction and procedural interaction that enables Romar to capitalise on the learning opportunities within their innovation (supply) network. Much of the innovation network literature focuses on the benefits of regional collocation. For example, Saxenian (1994) and Porter (1998b) emphasise the importance of regional clusters typified by Silicon Valley, EmiliaRomana and Baden-Wurttemberg. Even those who concentrate on less-favoured economies such as Ireland and Wales (Cooke and Morgan, 1998) stress the importance of regional innovation networks. Similarly, Cooke and Wills (1999) argue that both national and EU programmes are designed to stimulate the development of cooperation between clusters of smaller firms. Even with the benefits of such programmes, some localities lack the fundamental building blocks to allow the formation of entrepreneurial networks or inter-firm relationships evident in sectoral and spatial clusters. In this instance, networking beyond the locality, through global supply chains, may provide opportunities to create virtual clusters. The criticality or complexity of the products and the emphasis on innovation in the supply chain can create an impetus for closer collaboration, encouraging companies to establish networks of technical expertise beyond their immediate locality. This is certainly the case with Romar. The company is strongly linked to its main customer (BNFL). At the same time, the lack of other suitable technology-based firms in the immediate vicinity has encouraged them to seek expertise through their suppliers and to seek firms with specific technical knowledge. In fact, the owners have consciously rejected closer ties with local firms because of their perception that such firms lack commitment to innovation and quality, which are central to Romar's competitive advantage, and echoing Smith et al.'s (1999) sentiment that it is the owner-manager's attitude, personality and values that are key to learning approaches within the firm. Hence, the lack of similar firms within Cumbria has encouraged the entrepreneurs associated with Romar to create
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a network that is not constrained by geographic boundaries. Organisational learning is dependent not only on the access to knowledge, which may be increased through organisational networks or other inter-organisational interactions, but also depends on the ability to integrate that knowledge (Powell et al., 1996; Chesbrough and Teece, 1996). Romar have demonstrated this awareness in restructuring the organisation to ensure that managerial resources are available to continue interorganisational engagement and to embed that learning in innovation within and between firms. If network learning is to be successful, it thus requires critical competences in both relationship management and in structuring organisational processes and routines to embed that learning into the organisation. Romano et al. (2001) argue that the emergence of ICTs and associated developments in digital technologies has been an enabler for the emergence of such networks. More importantly, the strategic vision of Romar's directors has been an essential element in building a hightechnology small firm in a region that has little to offer in terms of support. The skills relating to networking, learning from experience, and sourcing of resources and expertise from outside the firm are key functions of the owner-managers of SMEs (Deakins and Freel, 1998; Gibb, 1997), and are evident in this case study. If policy support is to replicate Romar's achievement, flexibility is needed in policy approach to support small firm networks of innovation that extend beyond geographical clusters, but also recognise the essential nature of organisational processes to support that learning. Indeed, the impact of the technology revolution may make the administrative boundaries of current regional support services almost irrelevant (Henry and Pinch, 1999), requiring flexibility in policy approach to support small firm networks of innovation that extend beyond the remit of local and central government (Hendry et al., 2000).
Conclusion In conclusion, the case of Romar illustrates the potential for smaller firms in isolated regions to succeed, given managerial commitment to overcoming the disadvantages
of their locality (North and Smallbone, 2000). Growing the business has depended heavily on maintaining good links with their major customer and the only large organisation within the region. The fact that BNFL is operating in a technological area that is demanding in terms of commitment to quality has provided Romar with the opportunity to demonstrate high levels of technical and managerial capabilities. Existing technical capabilities have been extended by building a virtual network of companies that operate along the whole of the value chain. Thus, network governance, structures and processes are fundamental topics of research for understanding the creation and transfer of knowledge in an emerging network economy. If the nature of entrepreneurial learning is fundamentally different (Choeuke and Armstong, 1998), and can be sustained through informal networks and partnerships (Barnett and Storey, 2000), development of networking competences and knowledge capturing processes in SMEs will require attention. Indeed, the move to more collaborative inter-organisational relations will cause difficulties unless the appropriate competences already exist, or can be developed. Rather than traditional business support systems and didactic learning programmes, alternative approaches need to consider the range of opportunities that may exist for organisational learning within an extended business milieu. Indeed, this study supports the conclusions by Chaston and Mangles (2000) that SME support agencies would be better targeting their provision at the development and maintenance of learning networks and in helping SME managers to take a closer look at their business relationships for opportunities to learn and enhance organisational knowledge. Firms must be encouraged to engage actively in activities to capture knowledge if they are to increase their competitiveness. Consequently, it is essential to re-conceptualise organisational boundaries (Grant, 2001) and to consider that access to knowledge is possible through ``virtual clusters'' available in the supply chains or other business networks. Moreover, this informal and organisational specific approach to learning and development overcomes some of the barriers to managerial learning in SMEs highlighted earlier, and is a method that will address the specific business needs of small firms.
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Further reading Blundel, R. and Smith, D. (2001), ``Business networks: SMEs and inter-firm collaboration'', A Review of the Research Literature with Implications for Policy, Small Business Services, UK. Penrose, E. (1959), The Theory of the Growth of the Firm, (2nd ed., 1980), Blackwell, Oxford.
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