the network of relationships between the economic

THE NETWORK OF RELATIONSHIPS BETWEEN THE ECONOMIC ENVIRONMENT AND THE ENTREPRENEURIAL CULTURE IN SMALL FIRMS ANTONIO MINGUZZI Research Institute on Service Activities, National Research Council, Naples, and University of Molise, Campobasso, Italy

RENATO PASSARO Research Institute on Service Activities, National Research Council, and Naval University Institute, Naples, Italy

In this article we maintain that the cultural evolution processes of small firms are strongly influenced by the type of relationships that they establish with the economic environment. In the first part of the article, the main points of the discussion are set forth. Here, the theoretical debate is presented and the existing relations between the entrepreneurial culture and the interaction of firms with their economic environment is analyzed. In the second part of the article, the methodologies adopted for the statistical analysis are explained, and the results of the empirical analysis are presented. Finally, in the third part the implications for practitioners, industrial policies, and future directions in research are discussed. The importance of openness to change in the entrepreneurial culture is a basic assumption in this study. It is well known that in small and medium firms, entrepreneurs often demonstrate “a resistance to change” that limits the firm’s competitiveness. In some observed territorial and industrial contexts this resistance to change is determined by a cultural entrepreneurial homogeneity. This homogeneity is a result

EXECUTIVE SUMMARY

Address correspondence to Antonio Minguzzi, Istituto di Ricerche sulle Attivita` Terziarie, Consiglio; Nazionale delle Ricerche (IRAT-CNR), Via M. Schipa 115, 80122, Napoli, Italia.; Phone: (39 081) 2470929; Fax: (39 081) 2470933; E-mail: [email protected] The authors are grateful to the anonymous JBV referees and the editor for their very helpful comments on earlier drafts of this paper. Journal of Business Venturing 16, 181–207  2000 Elsevier Science Inc. All rights reserved. 655 Avenue of the Americas, New York, NY 10010

0883-9026/01/$–see front matter PII S0883-9026(99)00045-2

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of the similarity of the social, educational, and entrepreneurial experiences of the subjects observed. Indeed, the entrepreneurs studied had, for generations, received the same education, lived in the same area, and come from the same social setting. This entrepreneurial culture is typified by distrust of innovation and discontinuity, which leads these entrepreneurs to favor already proven solutions and initiate the behaviors of others, rather than take innovative actions. Principal component analysis has been used to identify the influences that various factors, within and external to the firm, have in the forming of an entrepreneurial culture and thus on the openness of entrepreneurs and firms to learning. In the sample, a trade-off emerged between tendencies to homologous behaviors and the spirit of initiative. Through cluster analysis we identified categories of entrepreneurs with a different propensity to innovation regarding established firm routines. “Learning entrepreneurs” belong mainly to industries that serve the final consumer while “bounded entrepreneurs” tend to specialize in commodities more often for export. The implications of our results might interest new entrepreneurs who can include this element when analyzing the viability of new ventures. Small, already operational firms, can evaluate opportunities arising from export processes or might adjust their position on the production filie´re to be closer to the final market. This empirical analysis should be reapplied to firms in areas with different environmental characteristics or to production filie´res where the relationship between customer and supplier is different, as for example in high-tech-industries, so as to verify whether the intensity of the relations with the market differs according to external factors or the technological intensity of the industries examined.  2000 Elsevier Science Inc.

THE INFLUENCE OF THE ECONOMIC ENVIRONMENT ON THE ENTREPRENEURIAL CULTURE AND THE COMPETITIVENESS OF SMALL FIRMS The characteristics of the entrepreneurial1 culture and the learning processes2 present in the firm are related to mechanisms of reciprocal dependence since the entrepreneurial and managerial culture of the firm evolve in relation to the capacity for learning and retention from the external environment (Low and MacMillan 1988; Bygrave 1993; Bull and Willard 1993). The characteristics of entrepreneurship are influenced in a very definite manner by the nature of the relations that firm’s establish with the external environment. Furthermore, the learning processes that induce the growth and retention of entrepreneurial and managerial culture in the firm and changes in entrepreneurial behavior can deeply influence the network of external relations of the firm. Nonetheless, the capacity to learn is deeply influenced by the characteristics of the entrepreneurial culture. The more the latter grows the more there is an increase in the capacity of comprehension of a more vast and heterogeneous ensemble of phenomenon (Frauenfelder 1978; Lindsley, Brass, and Thomas 1995; Ropo and Hunt 1995). Also, entrepreneurs are then increasingly confident of their ability to face unknown contexts and subjects. The interdependence between entrepreneurial culture and learning process works for 1 The entrepreneurial culture is the composite of personal values, managerial skills, experiences and behaviors that characterize the entrepreneur in terms of spirit of initiative, risk-propensity, innovative capacity and management of firms’ relation with the economic environment (Schumpeter 1934; Julien 1989; Covin and Slevin 1991; McGrath, McMillan and Scheinberg 1992). 2 The definition of learning, which is referred to in this article, is based on two components. The first is related to the acquisition of skill or practical knowledge, which implies the operational ability to produce some action (know-how component). The second is related to the acquisition of conceptual knowledge which implies the ability to develop a conceptual understanding from the experience (know-why component). This definition highlights the importance of the widening of the spheres of knowledge, both conceptual and applicative, that can contribute to the firm’s success (Kim, 1993).

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a reciprocal reinforcement that allows the firm to achieve its cognitive and competitive potential. Proposition 1: the interrelation between the entrepreneurial culture and learning processes influence the evolution of a firm and represent the main element for the increase of the competitive capacity of the firm.

The network of relationships between the economic environment and the entrepreneurial culture influence the entrepreneur to be more or less open to change. This network is complex, consists of external factors that interface with internal factors and create a specific entrepreneurial culture that influences the evolutionary development of the small firm, its ability to learn from the external environment and therefore its capacity to be competitive. It is possible to identify the following components in the network of relationships between the small firm and the economic environment: Objective factors external to the firm: •

economic environment

•

network of relationships between the firm and the market

Subjective factors internal to the firm: •

characteristics of the human resource (cultural stock)

•

openness to change (cultural rate)

These influence the level of learning propensity of the firm and therefore its competitive capacity. Today the capacity to rapidly perceive new external stimuli from the market and competitors and therefore transform them in new proposals and/or new products is a determining factor in achieving customer satisfaction. Firms that are not able to keep up this standard in a short period of time will moreover be excluded from the market (Figure 1). The two bottom boxes of the pyramid represent the external environmental factors and these can be modified only in the long term. Specifically, the economic environment is made up of actors present in the environmental system where the firm operates (clients, suppliers, competitors, central and local public administration, consultants). The network of relations between the firm and the market is represented by factors, such as changing combinations of the firm size, industry characteristics, market conditions and export processes, that determine if there will be strong or weak relations between the firm and the market. The next two steps of the pyramid represent the entrepreneurial culture consisting of subjective and internal factors of the small firm and the entrepreneur. Specifically, with reference to a “behavioral approach” of entrepreneurship (Krackhardt 1995), the entrepreneurial culture consists of two components (Minguzzi and Passaro 1993). The first is the “cultural stock” generated by the personal qualities of the entrepreneur, (Kirzner 1979) by his managerial style (Zahra 1993) and the level of education acquired by the subject. This depends on various subjective factors and experiences, such as high school and university education, professional training, training on the job and the type of profession carried out by the father (human resource characteristics).

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FIGURE 1 The network of relationships between the economic environment and the entrepreneurial culture in small firms.

The second component is made up of the “cultural rate” of the entrepreneur and represents the behavioral characteristics of the entrepreneur in terms of his openness to broadening his personal knowledge and his capacity to criticize and recognize the limits of his own knowledge (openness to change).3 The entrepreneurial culture as such is influenced by those factors listed in the first two boxes of the pyramid and are therefore subject to the specific environmental dynamics of each firm. The variables representing entrepreneurial culture are those which receive the feed-back from relations generated by firm-market interaction and thus represent the fulcrum of the development of the cognitive processes of entrepreneur and small organizations. In fact, through the stimuli received from contact with surrounding actors the entrepreneurial culture internalizes and acquires new values that lead to the modification of firm behavior models. Therefore, the entrepreneurial culture constitutes the dynamic variable in the learning processes of small firms (Hatch 1993). In addition to interacting with each other, the two components of the entrepreneurial culture also significantly affect entrepreneur’s learning capacity (as well as the small firm’s). Being open to the change enables the entrepreneur to explore developments in the environment and learn from unfamiliar cultures. At the same time a major stock of 3 The concepts of “rate” and “stock” have also been used by Gartner and Shane (1995) with reference to the measurement of entrepreneurship. They define “rate” as “a change from one state to another [...] whereas a stock specifies a particular level,” pg. 284.


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culture reassures the individual in relations with new subjects and environment (clients, suppliers, foreign markets, etc.) thus favoring the acquisition of new knowledge. Proposition 2: the entrepreneur plays a critical role in the development of a small firm because he can increase its competitiveness through relational processes and learn from the external environment that stimulates the evolution of his own managerial and entrepreneurial culture.

The considerations so far developed show how important the intensity of the network of relationships of the firm-environment is in developing learning processes which facilitate the exploitation of opportunities occurring in the environment, and constitutes an important supporting factor in the evolution of entrepreneurial culture and small firms (Johanninsson 1993). It is important to see that in the last few years there have been many contributions to the literature that have highlighted the role that organizational learning plays in the formulation of successful business strategies (Argyris and Schon 1978; Schein 1984; 1992; Smith and Peterson 1988; Huber 1991; Sackmann 1991; Kotter and Heskett 1992; Leonard-Barton 1992; Garvin 1993). But these contributions have been elaborated with reference to structured business organizations (such as medium and large firms) that tend to not identify themselves with small firms where: a) there often is no highly structured organization; b) the cultural growth processes do not originate from systematic learning and entrepreneurial training activities. Generally, the learning process within the firm is complicated and difficult to manage in that it can lead to the modification of the internal organizational structure and the redefinition of employees’ roles. In cases of “generative learning” or “double loop learning” the firm begins to seriously question its management rules for strategic decision as well as its business objectives (Argirys 1982; McGill, Slocum, and Lei 1992). For this reason the nature of learning processes depend directly and largely on the organizational structure of the firm and, indirectly, or the size of the firm since it binds the organizational structure of the firm. It is well known that in large firms, the organizational structure is more formal and well-developed. For example, larger firms implement programmed learning processes (organizational learning) which require the involvement of the entire business organization and is based on both internal and external resources (Quinn Mills and Friensen 1992). In small firms, on the other hand, the learning process is based on unplanned processes and informal organizations (Vesper 1980) in which the individuality and culture of the entrepreneur is the critical element. This process is mainly determined by interpersonal relations with subjects outside the firms that are influenced by the characteristics of the variables present in the first two steps of the pyramid of Figure 1. Proposition 3: in the small firm the learning that arises from interacting with the external environment represents a source of cultural growth and competitive advantage of the firm, particularly common in small firms that often evolve through experiential and imitative unplanned processes that are non-systematic and non-organized.

Specifically, the pyramid compartment detailing the network of relationships between the firm and the market is, at the same time, a complex system that influences the entre-

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preneurial culture. The set of elements that constitute such networks represents the specificity of the economic environment where the sample4 firms operate. Southern Italy is notorious for the strong presence of small firms of traditional industries such as fashion and food. Such firms, that often specialize in exporting, are an expression of a family type entrepreneurship. They have strong historical and social roots in the areas where they operate and this shows how their evolution is a critical factor for their growth. (Minguzzi and Passaro 1993; 1997). For these reasons, the conceptual framework proposed contains from our point of view, the variables that are necessary to adequately represent the peculiar aspects of the subject of this paper. The aspects of the relations between the firms and the market that influence the entrepreneurial culture are: a) b) c) d)

the size of firm (total revenue, number of employees); the industry characteristics (territorial concentration, proximity to the final market); the market conditions (variety and number of markets served); the export process (intensity of exporting and type of channel used).

The dynamic composition of these variables, in fact determines a wide range of possibilities that can vary between conditions of maximum and/or minimum intensity of the relations between the small firm and the market. In this way the entrepreneurial culture stimulates the firm’s learning processes, openness to change and competitiveness (Figure 2). Below, the listed factors are analyzed to explore the conditions that favor the development of the maximum intensity of the relations. a) The importance of the size variable has already been pointed out in the description of the relations between the environment and the entrepreneurial culture. It is equally important to consider how operationally the size of firm influences the relations between the firm and the market (Figure 2). Due to the technological homogeneity of the analyzed industries in the sample (mature industries), the representative variables of the size of a firm are essentially its total annual revenue and number of employees. The growth of the firm size represents an increase in the intensity of the relations with the market, because this means a modification of the managerial complexity (operating and strategic) of the firm which in turn influences the development of relations with the external context. The levels of delegation and internal decision making centers increase, thus enlarging the potential for interactions with external subjects, the need to acquire external competencies grows and also the need to create collaborative relations with service suppliers and consultants. Furthermore, there is an increase in the need to improve and formalize the organization mechanisms (routines, control procedures, etc.) addressed to improve both the internal efficiency 4 On the basis of the research and studies previously made (Minguzzi and Passaro 1993), the specific factors that define the environmental reference context for firms in southern Italy have been prevalently identified in the following areas:

• southern macro area: late development compared to areas in northern and central Italy; • local areas: low division of work between firms and the absence of an industrial “atmosphere”; • size and organizations of the firm: small firms often family run; • characteristics of the industries and of the demand: low-tech and mature industries; • entrepreneurial and managerial culture: not open to change and tendency to individualism; • prevalent form of internationalization: indirect form that limits the intensity of relations with the end user.


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FIGURE 2 The network of relationships between firm and market.

and the interaction with subjects and external organizations, therefore, favoring the learning process. As described above, the size of the firm—and its organizational structure— represent a kind of “filter” of the relational exchanges between the external environment and the firm. Its efficiency grows once the “one-man firm” figure is abandoned in order to create an organization and a managerial structure made up of managers. This modifies the learning processes that are set through preconstituted routines, therefore abandoning uncertain conditions. The revenue and number of employees are indicators of the size of the firm. Therefore, they are identifiers of the firm’s capacity to intensely relate with the market by stimulating the learning process evolution. Proposition 4: relative to the “size of the firm” an increase in the size leads to an increase in relationships with the market. Conversely, a smaller size indicates fewer relationships with the market.

b) These considerations derive from the fact that commercial relations and market exchange are able to activate different mechanisms of entrepreneurial learning (Czinkota and Tesar 1982; Grandinetti and Rullani 1994) (Figure 2).

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The concentration of firms within a delimited territorial area obviously influences the quality of relations between firms and the environment. In fact, entrepreneurship that is able to cooperate and confront other firms and the external environment, where it is possible to gather information, know-how and innovative skills, derives from a development of an adequate network of socioeconomic relations among the actors operating in the environmental context. Furthermore, as supported by the marshallian theory of industrial districts, other determining elements are the diffused presence of belonging to an economic community, emulating or rivalry behaviors. All these elements are highly representative of a historical cultural, and territorial homogeneity of the subjects that make up the environmental system. (Becattini 1987; Amin and Thrift 1992). In fact, the geographic closeness allows the generation between the firms of an intense network of relations, information, and experience of exchanges, that are not formalized nor planned, to be based both on subjective exchange agents (personal acquaintances between entrepreneurial subjects, consultants, freelance professionals, managers and institutional representatives, etc.) and objective exchange agents (mechanisms and management processes that can be rapidly imitated). The positive effects of territorial concentration on the relations between the firm and the environment can be rendered useless by the characteristics of the entrepreneurial culture prevalent in the firms themselves. Such characteristics play a critical role because they represent a progressive activating factor or a hold back of the evolution processes and change of the firm. In fact, when the entrepreneurs assume an attitude of closure to change, and allow individual attitudes to prevail, exchange of information and know how are limited leading to lack of acquisition of knowledge, development of the firms and innovation of processes and products. This leads to a cultural homogeneity among the subjects because the weak connection with the external world is partnered by similarities in social, educational and entrepreneurial experiences within the local area (learning by localizing). In this scenario a noticeable role is played by the processes of family/entrepreneurial succession that favor the continuation of the traditional entrepreneurial models. In this way the local entrepreneurship is characterized by attitudes of distrust towards innovations and discontinuity. This drives the entrepreneurs to homogeneous behaviors where experienced choices and the imitation of the behaviors of others are favored rather than innovative actions (McGrath et al. 1992). This creates a vicious cycle where the imitated processes are inward oriented (Ropo and Hunt 1995), the productive processes are based on a fragile cooperative orientation, while innovative factors have difficulty in penetrating the local area at a speed that could constitute competitive advantages for adopters. Instead, the proximity of the firm to the final market represents the firm’s position in the production filie´re with respect to the end user. This position can influence the entrepreneurial learning process by the intensity and diversity of stimuli which the firm receives from operating in direct contact with the consumer. In fact, the proximity to the final market leads the firm to face a large variety of products that range from commodities to specialities. The presence of a firm on the final market is generally considered from more than one point of view as an element which allows the firm to receive quickly, and without distortion, the signals and tendencies manifested by consumers (Normann 1977; Kotler 1992). In a period of rapid change and instability in demand, the ability


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to monitor the market, to obtain information, and adopt appropriate strategies constitute a source of competitive advantage for the firm in that these abilities allow it to anticipate competitors’ moves and satisfy consumers’ needs quickly. The effectiveness of these processes also depends on the capacity of firms to learn from the external context and, in particular from the market (Dickson 1992; Day 1994; Sinkula 1994). Firms which possess the most efficient information/communication systems are even able to influence the dynamics of demand. The need to have access to sources of competitive advantage, determined by the possession of exclusive information, induces firms to be present in those markets where the intensity and extension of evolutionary stimuli are more frequent. Therefore, such characteristics are closely correlated with the position of the firm in the production filie´re. Firms located upstream in the production filie´re (e.g., tanning of hides and textiles), which receive unfocused and indirect information and stimuli, have reduced opportunities for learning. Such opportunities, however, are more fruitful for firms located in industries nearer to the final market (e.g., footwear and clothing). Smaller firms entering and establishing themselves in final markets may meet size, technological financial, and cognitive barriers. In spite of this, the final market is a directly accessible source of learning for smaller firms since it offers them opportunities to develop diverse relationships; both internally and with other firms and at domestic and international level (McDougall 1989). One possible way of facilitating the access of small firms to sources of learning present on the final market is made up of cooperative inter-firm agreements (Golden and Dollinger 1993; Esposito and Passaro 1997). For example, for small firms located upstream in the production filie´re, cooperation, understood as reciprocal involvement between firms vertically linked in design and production of a determined good, allows access to the knowledge in possession of firms downstream. This also depends upon the use of direct or indirect channels to export. For small firms that are close to the fmal market, but supply no-brand products for large commercial operators, horizontal cooperation and the creation of a direct sales consortium offer a chance to learn from the market side. Proposition 5: relative to “industry characteristics” where the firm operates, the condition of maximum intensity of relations between the firm observed and the market occurs when the firm is close to the final market. A similar effect is seen in the presence of a high territorial concentration of firms that operate on the basis of a work organization where inter-firm relations are strongly diffused. The positive effect of the firm-environment relations generated by the territorial concentration can be limited by the characteristics of the prevailing entrepreneurial culture.

c) With reference to market conditions, in other words, the variety and number of markets served, the relations that are established between the firm and the market are directly proportional to the intensity of the stimuli originating from contacts which are established with differentiated socioeconomic environments (Figure 2). The competition of small firms in a dynamic and selective market can constitute, besides an economic opportunity, an opportunity for individual and organizational learning. The source of learning lies in the commercial and productive relations with operators in multiple social and economic contexts which are differentiated among themselves (Hofstede 1980). Operating in a competitive dynamic context generates, inside the firm the development of a synergistic relation of reciprocal influence be-

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tween competitive ability and the level of managerial and organizational culture (Covin and Slevin 1991). As a matter of fact, the relation between the intensity of relations and variety/number of markets served assumes the form of a virtuous circle as the accumulation of cultural and professional skills of the entrepreneur increases the competitive potential of the firm. This potential allows the firm to extend its field of action on the already known markets and explore new markets that further nurture the learning process (Lindsley, Brass, and Thomas 1995; Ropo and Hunt 1995). Proposition 6: relative to the “market conditions” where the firm operates, the condition of maximum intensity of the relations between the firm and the market is observed in the presence of a high number of sale markets characterized by a variety of characteristics and behavior of the operators. On the other hand there is less intensity in the relations determined by the contact with few markets that are homogeneous among themselves.

d) Relative to the export processes, firm-market relations are influenced by the importance of exports on total firm revenue and the type of export channel used (i.e., direct or indirect) (Figure 2). In the last several years economic systems have been influenced by the radical processes of the internationalization of firms and the globalization of markets. The increase in competition has compelled firms to face the necessity of reacting energetically, with initiative, to new complexities. For small firms, the approach to foreign markets presents many obstacles that derive from the scarcity of resources they can allocate to monitoring the markets and identifying those which are more profitable (Gibb and Scott 1985; Steinmann, Kumar, and Wasner 1989; Dichtl, Koegelmayr and Muller 1990; Babbar and Rai 1993; Erramilli and D’Souza 1993). However, various research studies have emphasized that size does not constitute tout court a barrier to successful access to foreign markets (Cavusgil, 1984; O’Rourke, 1985; Bonaccorsi, 1992; Lau, 1992; Calof, 1993; Bijmolt, Zwart, 1994). This is highlighted by the fact that various studies underline that many small and mediumsized firms contribute remarkably to the foreign performance of their country (Czinkota and Tesar 1982; Varaido and Rosson 1992; Rosson and Reid 1987). These studies also remark how the managerial and entrepreneurial subjects with their own personal knowledge and experience, culture, expectations, and attitudes influence the presence and the success of small firms on foreign markets. The relation between entrepreneurial culture and internationalization has been analyzed in other articles (Minguzzi and Passaro 1993; Minguzzi 1993; Passaro 1993) that emphasized: 1) the presence of relations between entrepreneurial culture and export orientation as a key element in the firm’s success. This relation derives from the sum of experiences and entrepreneurial and managerial know-how that is realized in relation to economic and cultural environments that are different from their own. The more openness to change and increase in entrepreneurial learning there is, the more there is a chance to reinforce the competitive potential of the firms. Through a “virtuous circle” this assures the exploration of new markets/countries that further implement the interaction between the learning process and competitiveness; 2) that the experience and intensity (ex.: share of export sales on revenue) of exporting activity constitute an element which differentiates the learning paths of the firms.


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The relevance of such variables determines the force and speed of the interactive process between the entrepreneurial culture, learning and competitiveness. Summarizing, the process of relations by exporting implies that the processes of internationalization are a means of cultural development (Benito and Gripsrud 1991; Klandt and Mu¨ller-Bo¨ling 1993; Hofstede 1994) and cultural learning increases with the number of foreign markets served, the environmental differences among them, the experience and the intensity of the exporting activity. From this point of view even the type of channel used by the firm for the development of exporting is relevant for the intensity of relations because the internationalization processes of the firm do not influence relational learning if they occur through indirect exporting. Intervention by other operators between a firm and its foreign customers makes entry to foreign markets less complex and increases the distance between a firm and its final customers. In this case, the entrepreneur receives signals that are filtered by intermediaries, commercial agents, and import/export firms. Indeed, as the entire commercial cycle is controlled by other operators, the complexities of selling on a foreign market become less than that of selling on the domestic market and there is a risk that the relational learning process becomes marginal. Instead, the penetration strategies of the small firm on foreign markets using direct exporting generate a feed-back of intensity of relations that can increase the evolution of the entrepreneurial culture and the firm’s long-term competitiveness. Proposition 7: relative to the “export processes” developed by the firm, the condition of maximum intensity of the relations between the firm and the market is realized when there is a high level of direct export. On the contrary, indirect export determines a low relational intensity.

Considering all the propositions examined highlights the importance of the network of relations between the small firm and the market that, influencing the characteristics of the firm culture and the processes of entrepreneurial learning, determine the development of the firm’s competitive capacity. As we have seen, an ideal combination of the illustrated factors can determine the conditions for the creation of maximum opportunities and competitive growth potential of single firms. For this reason it is important, in industrial policy terms, to identify and support the determination of the illustrated conditions in the propositions. The proposed explanatory model, wants to be a contribution to those actions and support measures to small firms that operate in a selected mode, because they intervene by identifying and giving importance to firm, industry, and district specificities. In this manner they favor the internal growth of the know-how of the firm without creating conditions of protection because by avoiding the confrontation with the external environmental system they make the learning mechanism sterile.

RESEARCH METHODOLOGY The measurement of the change processes of the entrepreneurial culture is made uneasy by the difficulty of identifying a variable or set of variables appropriate to quantify the phenomena observed. It derives from the necessity of measuring a phenomena that manifests itself in a dynamic size and particularly when small firms are involved, and

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the difficulty of separating the subject contribution of the entrepreneur (entrepreneur specific) from the objective and total performance of the firm (firm specific). Recently in articles, the process of cultural evolution has been studied through the learning capacity of the organized structure (Nonaka et al. 1994). The specific problem of “measuring” learning has been faced by using learning drivers as costs and volumes of production (learning and experience curves). These method results are incomplete. In fact, they do not consider the different degree of maturity and innovation of different industries (Abernathy and Wayne 1974). These obstacles have been overcome by the half-life curves method (Gartner and Shane 1995). This method however, that is based exclusively on one factor (firm performance), isn’t able to perceive those learning factors that give results after long periods of sedimentation within the firm (Garvin 1993). These systems are scarcely adaptable to analyzing the learning processes in the small firm because, first of all, they are used in an aggregated manner and cannot perceive the contribution of the entrepreneurial factor to the performance of the firm, and secondly, because measurement of the performance of the small firm is often difficult and does not reflect real firm values. One method of overcoming these drawbacks is by using multivariate statistical methods. With these methods, in fact, it is possible to overcome the difficulty of identifying an “unique” indicator of the phenomena to be measured instead of the crossed correlation of a system of variables that can be heterogeneous and express the reality of each single firm. Given the heterogeneousness of the data used in these researches, the techniques of multivariate analysis appeared to be the most adequate for elaboration because of their capacity to reduce information to synthetic and homogeneous groups using descriptive techniques without preconstituted hypothesis (Mardia, Kent, and Bibby 1979). In particular, the sample was elaborated using the principal components analysis on standardized data and then the results were used in the cluster analysis (Gordon 1981) according to the French school approaches (Benzećri 1973; Lebart, Morineau, and Feńelon 1982). In this manner it was possible to simultaneously analyze a numerous group of variables and see the latent information structure and understand interactive complex phenomena of a qualitative nature (Yang, Leone, and Alden 1992; Taylor 1994). The application of such models is particularly useful for the measurement of complex and immaterial phenomena such as entrepreneurial culture and learning (Nonaka et al. 1994). This appears particularly valid in small firms where the determinants of learning is related to the entrepreneurial figure (competence, experience, behaviors), the economic environment (industrial, territorial, and the market), and the characteristics of the firm (size, performances) (Covin and Slevin 1993). To understand the nature and the determinants of the learning process in the small firm it is necessary to empirically test the characteristics and modes that develop the relations between such factors. Therefore, on the basis of these illustrated assumptions, this article’s intention is to interpret in a hierarchical manner the relevance of different factors on the formation of the entrepreneurial culture. To this aim, through an explorative approach, some methodologies of multivariate analysis are utilized (Savage and Black 1995). To this end, a sample of 104 Italian small firms,5 with high export propensity and belonging to 5 Using the classification of the European Observatory for SMEs of the ECSB (European Council for Small Business), small firms are those included in the class of employees 10-99. In reality 101 firms are part of this class while three of them belong to a bigger class due to a minimum difference.


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industries with different positions in the production filie´re (wine, tomato sauce, olive oil, coffee toasting, tanning, shoes, silk, and leather gloves) were analyzed.

THE PROCEDURE AND THE SAMPLE In this article the elaboration of the empirical data was performed by using two methodologies of multivariate analysis (principal component analysis and cluster analysis)6 applied in sequence. Thirteen different variables relevant to the analysis that were analyzed represent the internal context of the firm (2 variables),7 the entrepreneurial culture (5 variables), the characteristics of the exportation process (4 variables) and the industry characteristics (2 variables) (Table 1). The sample of firm’s used was collected over several years of research carried out by the Research Institute on Services Activities of the Italian National Research Council, aimed at analyzing the internationalization of national finns. Within this program, the industries present in southern Italy with average exporting sales of over 30% have been identified. The eight industries that satisfy these structural characteristics operate in the food industry (wine, tomato sauce, olive oil, coffee toasting) and in the so-called “fashion system” (tanning, shoes, silk, and leather gloves) were analyzed (Table 2). The analysis of all the southern firms in the chosen industries appeared difficult and not absolutely necessary because of the extreme fragmentation of the firms in some industries (above all, those of wine and olive oil) which often have an artisan or family structure of very small size without any importing or exporting activity. The whole field was therefore reduced by contacting the trade associations of every industry and inviting them to collaborate in identifying the firms truly internationalized and representative. The approximately 250 firms singled out were contacted for an interview by questionnaire, or the questionnaire itself was mailed to them. Only 70% (about 170 firms) accepted to meet our interviewer to fill out the semi-structured questionnaire. Another 30% of the firms (about 70 firms), that did not answer the questions completely or that showed clearly contradictory data, was eliminated from the database. The sample presents elements of homogeneity in family entrepreneurship, small size and propensity to internationalization (in its different intensity and forms). On the other hand, the following phenomena are non homogeneous among the industries of the sample: a) industry characteristics; b) territorial concentration. Regarding point a), the industries present a different position in the production filie´re which places them at different “distances” from the final market. In particular: a1) some industries produce semi-finished products or commodities for other firms (silk, tanning); a2) other industries take intermediate positions (wine, olive oil, tomatoes) since there 6

Software by Statgraphics威 plus, version 6 by Manugistics威. It was necessary to overcome a problem with the recording of the performances of the firms since the entrepreneurs were not always willing to communicate their gains or their losses. Furthermore, national legislation does not require the publication of annual asset and liability statements of small firms, which the sample is mainly made up of. For this reason it was not possible to use, as an index of performance, the earnings of the firms. Therefore it was necessary to use the average revenue of the last five years as a proxy. The size was indexed by quantifying the number of employees and the revenue. 7

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TABLE 1 Variables Definition Nr

Variable

1 Revenue 2 Number of employees 3 Age of entrepreneurs 4 Education level of the entrepreneur 5 Father’s profession

Type

Description

Firm Firm Entrepreneurial culture Entrepreneurial culture Entrepreneurial culture

It measures the size of the firm. It contributes to the measurement of the size of the firm. It measures the age of the entrepreneur interviewed.

6 Level of entrepreneur’s participation in Industry Association activity 7 Attitude to delegating of the entrepreneur

Entrepreneurial culture

8 Export sales as percentage of revenue 9 Number of exporting years

Export processes Export processes

10 Number of exporting markets

Export processes

11 Type of export sales channel

Export processes

12 Territorial concentration of the firm in every industry 13 Market proximity

Industry characteristics

Entrepreneurial culture

Industry characteristics

It measures the level of education of the entrepreneur. It identifies the father’s profession. It measures the intensity of the entrepreneurial experience acquired through the family environment. It measures the propensity of the entrepreneur towards collaboration among firms.

It measures the propensity of the entrepreneur to work in groups and to personal collaboration. It is inversely proportioned to individualism. It identifies in percentage the total foreign sales of the firm. It measures the intensity of internationalization of the firm. It identifies the number of years the firm has been exporting. It measures the length in time of the internationalization process of the firm. It identifies the number of foreign markets in which the firm operates. It measures the extent of the internationalization process of the firm. It identifies the modalities with which the firm is present in foreign markets. It measures the evolution of the process of internationalization of the firm. It identifies the intensity of territorial concentration of the firms in each industry. It represents a proxy of homologous behaviours of the firm. It identifies the positioning of the firms of the industry compared to the whole of the phases of the production process existing in that industry. It measures the intensity of the stimuli by learning what the firms receive through the contact with the final market.

are many situations in which the firms work for third parties producing a finished product which is commercialized with the brand of another firm; a3) the remaining industries work directly for the final market (coffee, shoes, gloves).8 As to point b), you can see that firms of the industries considered are localized in areas with a different degree of concentration of firms. This situation emphasizes the presence of a noticeable tendency towards homogeneous culture and behaviors and an intense competition among the firm of the industry (Becattini 1987; Porter 1990). In particular: b1) the highest concentration is present in the tomato sauce, tanning, and silk industries; 8 The level of proximity to the market of the industry instead is measured on the basis of the production sold to the final market or to industrial clients of the sample firms. High: beyond 70% of the final market; medium: between 30% and 70% to industrial clients; low: beyond 70% to industrial clients.


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TABLE 2 Sample Structure General Branch Food

Fashion system

Industry

Number of Firms

Wine Tomato sauce Olive oil Coffee Tanning Shoes Silk Leather gloves Total

35 19 11 7 13 11 5 3 104

b2) an intermediate concentration is present in the olive oil leather glove, and shoe industries; b3) a lower concentration characterizes the coffee and wine industries.9

RESULTS Correlation Analysis For the analysis of our hypotheses, the correlation among the variables of the sample shows: •

some variables have an obvious and evident direct relation: “revenue” and “employees” (0.5913); “numbers of exporting years” and “numbers of exporting markets” (0.4298) (Table 3);

•

an inverse correlation between “territorial concentration” and “proximity to the final market” (⫺0.4100). In Italy firms located in high concentrated areas have a high tendency towards producing semi-finished products and commodities rather than goods produced for final consumption. In contrast, firms that manufacture products for immediate consumption tend to avoid specialized monoproduct areas. This means that the firms of the sample analysed are not aligned with the state of “maximum relation intensity”, as shown in Figure 2 and proposition 5, regarding the “territorial concentration” and the “proximity to the final market.” An interpretative view of this will be discussed in the following paragraphs.

•

a direct correlation (0.4167) between “export sales” and “territorial concentration.” The presence of a high territorial concentration of mono-productive firms tends to increase the propensity towards exporting;

•

a direct correlation between “employees” and “territorial concentration” (0.4039) that describes the prevalent tendency of the bigger firms to be localized in areas where there is an elevated specialized service industry. The phenomena can be fit in the theory of the industrial districts and at times it is indicative of a dynamic phenomena of externalization of the bigger firms (Lorenzoni and Ornati 1988).

9 The level of territorial concentration of the industry is measured on the basis of the production quota realized within a specific area of the sample firms. High: beyond 60%; medium: between 30% and 60%; low: less than 30%.

Revenue 1.000 Employees 0.5913 Age 0.1071 Education ⫺0.0081 Father profession ⫺0.0300 Industry assoc. 0.1429 Delegation 0.2054 Export sales 0.0383 Exporting years 0.1222 Exporting mark 0.3128 Sales channel 0.2585 Concentration 0.2606 Proximity ⫺0.0013 1.000 0.0752 ⫺0.0331 ⫺0.2100 0.2311 0.1395 0.1473 0.2100 0.2689 0.2613 0.4039 0.1584

Revenue Employees

TABLE 3 Correlation matrix

1.000 ⫺0.3104 ⫺0.1100 ⫺0.0570 ⫺0.0243 ⫺0.0234 0.0364 ⫺0.0127 0.1625 0.0089 0.1198

Age

1.000 0.1827 0.1376 0.1846 ⫺0.0488 0.1684 0.2223 0.0662 ⫺0.1422 ⫺0.1467 1.000 0.0100 ⫺0.1400 0.1136 0.2410 0.2257 0.1892 ⫺0.0900 0.0400 1.000 0.3431 0.0066 0.2032 0.1670 0.2322 0.0989 ⫺0.0653 1.000 ⫺0.1413 0.0012 0.1061 0.1519 ⫺0.1322 0.1314

1.000 0.0197 1.000 0.0776 0.4298 0.0590 0.1841 0.4167 0.0967 ⫺0.2287 ⫺0.2396

1.000 0.3629 0.0011 0.1013

1.000 0.0214 0.1220

1.000 ⫺0.4100

1.000

Father Industry Delegation Export Exporting Exporting Sales Education profession association attitude sales years markets channel Concentration Proximity

196 A. MINGUZZI AND R. PASSARO


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TABLE 4 Principal Component Matrix Variables 1 2 3 4 5 6 7 8 9 10 11 12 13

Weight 1

Weight 2

Weight 3

Weight 4

0,394 0,443 0,025 0,140 0,242 0,292 0,162 0,141 0,323 0,399 0,345 0,235 ⫺0,016

⫺0,037 ⫺0,099 ⫺0,045 0,310 ⫺0,019 0,128 0,356 ⫺0,435 ⫺0,014 0,185 0,155 ⫺0,550 0,444

0,320 0,273 0,503 ⫺0,474 ⫺0,307 ⫺0,071 0,137 ⫺0,102 ⫺0,287 ⫺0,149 0,131 0,027 0,307

0,118 0,017 ⫺0,281 0,093 ⫺0,408 0,430 0,549 ⫺0,019 ⫺0,161 ⫺0,246 ⫺0,199 0,176 ⫺0,296

None of these values, however, limits the significance of the elaboration and results obtained.

Principal Component Analysis Applying the Principal Component Analysis10 the interpretation of the first four components allows the identification of the structural phenomena of entrepreneurial profiles explaining 57.14% of the total variance of the sample. In particular, the interpreted components describe respectively: 1) 2) 3) 4)

the the the the

size of the firm; tendency towards homologous behavior of the entrepreneurs; entrepreneurs’ spirit of initiative; relational propensity of the entrepreneurs.

First Component: Scale Factor The first component represents the scale factor of the sample as it results from the importance of the variables proportionally linked to the size of the firm. As a matter of fact, the three major values, employees (0.443), revenue (0.394) and numbers of exporting markets (0.399) represent variables that tend to increase along with the growth in size of the firm (Table 4). Therefore, this component does not explain particular entrepreneurial behaviors but differentiates the firms according to their scale.11 10 The Principal Component Analysis allows us to begin with a group of variables of large size, and therefore bearers of a wealth of information, and arrive at a new group of variables ranked according to their usefulness in interpreting the variance of the data analyzed. Thus, it is possible to bring out the latent structure which otherwise would not be measurable through techniques of non multivariate analysis (Benzećri 1973; Mardia, Kent, and Bibby 1979; Lebart, Morineau, and Feńelon 1982). 11 It is known that the first component of the ACP tends to represent the size factor of the observations examined. (Benzećri, 1973; Mardia, Kent, and Bibby, 1979; Lebart, Morineau, and Feńelon, 1982).

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Second Component: Homologous and Imitative Behaviors The second component represents the ability of the entrepreneurs in assuming homologous and imitative behaviors as revealed by the analysis of the correlations in Table 4. The positive axis of the variable is significantly influenced by the proximity to the market (0.444), by the propensity to delegate (0.356) and the level of education of entrepreneur (0.310). The negative axis, instead, is significantly influenced by the concentration of localization (⫺0.550) and export sales (⫺0.435). This means that the component polarizes towards the positive end the cultured entrepreneurs, willing to delegate, who manage firms oriented to the domestic market in industries positioned close to the end user. These firms, furthermore, tend to avoid localizing in specialized and concentrated areas. At the opposite end there are the centralizing entrepreneurs, not cultured, who manage firms belonging to industries with a high territorial concentration and specialized in exporting industrial products or commodities. It seems evident that the variable differentiates, at the negative end, the values of homogeneity which belong to the “district areas.” In these areas, the homologation of the specifications regarding both the markets and the products and behaviors is highly accentuated as the nearness of firms determines the advantage of quick access to information. This turns into a highly imitative effect of entrepreneurial behaviors and innovative activities. The latter, however, tend to become unproductive because of the high marginal return of the imitation compared to the marginal cost of the innovative effort. On the other hand, the positive axis magnifies the value of variety and differentiation. The firms in this case do not have easy access to information and therefore tend to follow individual paths in the search for success. The entrepreneurs are open to suggestions and contributions from collaborators which increase the variability of the possible initiatives. There are no processes of immediate homologation by competitors and this stimulates the development of innovative rather than imitative behaviors. The firm considers the final market and the consumers as a stimulus and a verification, thus developing its own learning process.

Third Component: Spirit of Initiative The third component measures the spirit of initiative of entrepreneurs. The positive axis is significantly influenced by age of entrepreneur (0.503), revenue (0.320), and proximity to the market (0.307), while the highest negative values are education of entrepreneur (⫺0.474) and father’s profession (⫺0.307) (Table 4). The component therefore differentiates, on one hand, the entrepreneurs of a certain age that, although not having a high level of education, have founded their own firm; meanwhile this firm has grown and works mainly for the final market. On the other hand, there are the young entrepreneurs who have formal education. They own small firms inherited from the family or manage firms that are spin-offs of family firms which they have worked for. The component in this case differentiates, at one end, entrepreneurial behaviors based on initiative that place those who have founded and manage with success their firms in final consumption industries. At the other end there are those who, not being first generation entrepreneurs, set themselves up with limited autonomy in an environment strongly linked to family entrepreneurship and industries that produce for third parties rather than the final market.


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TABLE 5 Results of Cluster Analysis Industries Intra Cluster Cluster learning passive bounded others Total

Number of firms

%

Wine

Tomato

26 45 7 26 104

25 43.27 6.73 25 100

26.9 53.3

19.2 17.8 14.3 25.0

Olive oil

Coffee

15.4 13.3

3.8 4.4

Tanning 2.2 42.9 75.0

Shoes

Silk

Gloves

26.9 9.0

7.8 42.8

Total (%) 100 100 100 100

one way analysis of variance: source of variation between clusters within clusters total (corrected)

sum of squares

d.f.

mean square

F-ratio

55.857867 98.257518 154.11538

7 96 1.3

7.9796952 1.0235158

7.796 p ⬍ 0.10

Fourth Component: Relational Propensity The fourth component describes the relational propensity of entrepreneurs. This emerges from the high polarization of three values compared to all the others. The propensity to delegate (0.549) and the propensity to participate in the activities of trade associations (0.430) acquires positive and considerable importance; while the father’s profession (⫺0.408) is, significantly, inversely correlated (Table 4). Therefore, on the one hand, there are the entrepreneurs who, not having family models to follow, are inclined to involve collaborators in taking responsibilities and at the same time give significant importance to relational activities that take place in trade associations. On the other hand, there is a polarization of second generation entrepreneurs who are inclined toward adopting hierarchical models in internal management and toward isolating themselves from the surrounding environment.

Cluster Analysis Through Cluster Analysis (CA), calculated on the average of the standardized Euclidean distances, the positioning of the entrepreneurs in regard to some principal components was identified. In this manner we obtain homogeneous groups, relative to initial data, allowing us to understand the role of the individuals in the evolutionary development of the entrepreneurial culture (Bijmolt and Zwart 1994; Zahra 1996). Having compared the analyses of the possible combinations among the diverse components, it emerged that the combination between the second and third component is the most significant. These components relate to the characteristic and behavioral aspects of the entrepreneurs. For this reason they assume a special importance in our analysis. The results of CA expressed a high concentration of the observations in two large groups that collect, as a whole, over 68% of the entrepreneurs with a third significant cluster of approximately 7% and a number of scattered observations (25%) (Table 5). The analysis of the positioning of the clusters compared to the entrepreneurial components highlights the fact that the first cluster identifies the learning entrepreneurs who, prevalently, take positive values for the second and third component, therefore classify-

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FIGURE 3 Plot of cluster.

ing themselves as resourceful entrepreneurs, inclined to innovative behaviors and operating in final market industries (Figure 3). The second cluster is positioned prevalently in the group with a low homologation and low initiative and therefore the subjects that constitute it can be defined as passive entrepreneurs. These, indeed, have erratic contacts with a “new” reality in terms of knowledge but continue to prefer family management systems and work in firms that are far away from the final market. This position, however, is the most critical for the development of the firm since it remains at the cross-roads between a potential opening to innovative behaviors and the danger of a slowing down towards homologation. Instead, the third cluster identifies the bounded entrepreneurs, those showing negative values of both components and work in commodity industries. These entrepreneurs represent a kind of limit to the “typical” components of the entrepreneurial profiles such as the spirit of initiative, the risk-propensity, the innovative capacity and the management of external relations (Ray 1993). Their capacity to survive and prosper can be interpreted as based on the efficiency deriving from the adequateness of the entrepreneurial profile to the characteristics of the economic environment where they operate. This means that the firms operating in less stimulating industries from the proximity of the final market can be competitive and can take advantage of the productive effi-


201

ciency since they face a market characterized by a prevalently standardized demand. These firms therefore find their strengths in their homologation. Evaluating the effects of the original variables on the results of the cluster, it emerges that the variables of the “industry characteristics” of the network of relations between the firm and the market (territorial concentration and proximity to the market) are the most influential on the segmentation of the entrepreneurs in different clusters. However, no firm within the sample realizes the conditions of “maximum intensity of relations” foreseen for these two variables (Figure 2). This is an empirical confirmation of the different conditions of the areas which have a high concentration of small firms in southern Italy compared to those in northern Italy. In fact, only in the latter ones can a presence of industrial districts be seen since, in southern Italy the aggregation of firms in specialized areas doesn’t generate intense exchange processes of information and cooperation which could increase the intensity of relations with the market. On the contrary, the variables of the entrepreneurial culture are less influential (father’s profession, entrepreneur’s participation in Industry Association activity, attitude to delegating, education level of the entrepreneur, age of entrepreneurs). It is important however to notice that the role of the size of the firm with revenue and employees is at the third and fifth place. The number of markets and export processes instead assume a medium influence on the CA. The strong influence of the objective variables of the network of relations between the firm and the market stands out (Figure 2) when conditioning the entrepreneurial attitudes towards a major or minor openness to change. In fact, from an industrial perspective it seems significant that in the first cluster there are no entrepreneurs in the silk and tanning industries which, based on the structural characteristics of the sample, prove to be the industries farthest from the final market, as they are suppliers to other industrial industries. On the contrary, there is a significant presence of entrepreneurs who lead firms close (shoes) or intermediate (wine, tomatoes) to the final market. This result gains further corroboration from the data relative to the percentage of entrepreneurs of the different industries in each cluster. Thus, the majority of entrepreneurs in the industries closer to the market (leather gloves 66.7%, shoes 63.6%) polarize in cluster of the learning entrepreneurs, while the majority of entrepreneurs who lead firms that have an intermediate position compared to the final market (wine, olive oil, tomatoes) are in the cluster of the passive entrepreneurs. Furthermore, most entrepreneurs of the industries far from the market (silk 60%) are present in the completely negative cluster of the bounded entrepreneurs.

DISCUSSION From the analysis carried out, an empirical confirmation of the influence that the economic environment and the different typologies of relations between small firms and the market have on the characteristics of the entrepreneurial culture and openness to learning of the small firms stands out. The phenomena influence the competitive capacity of the small firm through the increase of its ability to face different situations, rapidly comprehending dynamic phenomenon able to generate adequate answers to new realities. From the different groups of variables analyzed for a sample of small firms with different relations with the economic environment, the ACP has pointed out the most relevant profiles of the entrepreneurial culture of the firms analyzed. Using the CA it

202


TABLE 6 Influence of variables in clusters Nr.

Variables

Fisher

V. Test

Prob

1 2 3 4 5 6 7 8 9 10 11 12 13

Territorial concentration Market proximity Number of employees Number of exporting markets Revenue Type of export sales channel Father’s profession Export sales as percentage of revenue Level of entrepreneur’s participation in Industry Association activity Delegation attitude of the entrepreneur Number of exporting years Education level of the entrepreneur Age of entrepreneurs

123.55 55.79 32.88 21.55 14.16 11.32 7.17 7.14 7.02 2.34 1.81 1.35 0.70

10.89 8.32 6.72 5.54 4.49 3.98 3.04 3.03 3.00 1.28 0.97 0.64 0.01

0.000 0.000 0.000 0.000 0.000 0.000 0.001 0.001 0.001 0.099 0.167 0.260 0.496

emerged that the proposed framework that illustrates the influence of a series of environmental variables on the entrepreneurial culture was adequate (Table 6). Specifically the results of the study shows that the demand from final markets, which is less standardized and rational and more mutable, creates a stronger learning stimulus for entrepreneurs and small firms. Those entrepreneurs who work for intermediate markets, and often export indirectly, develop, instead, a higher standardization of behavior models. They tend to relate only to those interlocutors who value alreadyestablished organizational routines and do not ask for change and adaptation rather than those who seek new solutions and suggestions for dealing with complexity. In this manner, they are banished to commodities markets. Here, in fact, a firm’s preference for the efficiency of existing solutions is more important than the quest for new ones and may, in the short term, be less effective. Thus, in their product specialization, repetitive procedures and homologation of experience, some small firms find their road to survival. This creates, however, a loop in their entrepreneurial culture that internalizes values that are ever more resistant to change. This distances these entrepreneurs from opportunities that stimulate the development of capacities needed to be competitive in the market of final product. In these markets the competitiveness of the small firm is significantly influenced by the capacity to innovate products and procedures to satisfy the niche demand and develop a industry of latent demand. By preferring the homologation of behavior to the uncertainty of exploring a wide variety of solutions, entrepreneurs tend to reject opportunities that, requiring innovation in relational behavior, would enhance learning capacities. It is the entrepreneurial culture that determines such choices. In this size, the cognitive processes of small organizations are modified over time (through generations of entrepreneurs) and geographical space (between firms in a certain area). This study has brought to light the following three factors as influences in the entrepreneurial culture and learning process of smaller firms: 1) a connection exists between the characteristics of the industry/filie´re, where the small firm operates (factor conditions), and the prevalent entrepreneurial culture in that same industry/filie´re (entrepreneurial behaviors). In particular, it emerges that the bounded entrepreneurs tend to be present at earlier stages in the production filieére while the learning entrepreneurs tend to be present in the final stages. This means


203

that in terms of new business development (new venture, start-up, spin-off) the entrepreneur’s attitude to innovation must be examined along with the market conditions and competitive context in which the firm operates. If the entrepreneur’s attitude to innovation is a competitive asset in final markets, it may, conversely, even be a handicap when operating in intermediate markets. Here, in fact, the ability to standardize organizational and operational routines, to conform to those already adopted by rival entrepreneurs, is often essential. This is further corroboration of the greater importance of the quality of relations with the market in influencing entrepreneurial culture and learning. In this context, quality means direct relations as close as possible to the final market; 2) the territorial concentration of small competing firms tends, in the long run, to homogenize entrepreneurial culture towards one prevalent model. This closed system may generate self-reproducing behaviors that can only be modified through the introduction into the community of subjects (entrepreneurs) who bear different values since they have different formative, social and professional experiences. This process of territorial aggregation doesn’t increase the intensity of relations between the firm and the market because it relates to productive specializations in commodities (activities far from the market) rather than in specialities. This does not confirm proposition 5 and leads us to consider the implications concerning the profound cultural and entrepreneurial differences present between the areas that have a high concentration of small firms in southern Italy and the industrial districts present in northern Italy. 3) the exportation processes of the firm do not influence culture and learning if they occur through indirect exporting. Intervention by other operators between a firm and its foreign customers makes entry to foreign markets less complex and increases the distance between a firm and its final customers. In this case, the entrepreneur receives signals that are filtered by intermediaries, commercial agents and import/ export firms. Indeed, as other operators control the entire commercial cycle, the complexities of selling on a foreign market become lesser than that of selling on the domestic market and there is a risk that the learning process becomes marginal. Instead, the penetration strategies of the small firm in foreign markets generate a learning feed-back that can increase the firm’s long-term competitiveness. Often, however, the “immediate advantage” rationale and the desire to draw maximum benefit from the existing situation limit this potential “investment.” A further implication of the results relates to the diverse paths of learning that is based on different entrepreneurial attitudes. Such attitudes are relative to the entrepreneurial ability to relate positively with the surrounding environment (learning by relationing), with a multiplicity of differentiated markets (learning by exporting) (Passaro 1993), or with the subjects operating on the final markets (learning by market proximity). These forms of learning are informal. They have a relational characteristic and influence the firm as a “by-product” of commercial and productive activities. With regard to the firm’s evolution, the success of small firms can be interpreted to be the result of an appropriate combination between entrepreneurial attitudes and business activities able to exploit these attitudes. The relational learning process at the basis of this combination is instrumental in storing up additional knowledge and applying it towards the firm’s development. The results obtained can also be used in economic policy decisions. As a matter

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of fact it becomes evident that the learning needs of the firms belonging to industries positioned differently in relation to the final market are of a different kind. The firms that are farther from the market, for instance, need policy interventions that aim primarily at giving more value to entrepreneurial culture in order to sustain the firm’s success. Secondly, for firms that operate in foreign markets, the utilization of learning opportunities depend on the presence of forms of export in which the firm is directly involved. This leads to the adoption of measures to set up direct foreign sales structures, export consortiums, and promotional activities. On the whole, a series of differentiated sets of policy tools to support the development of small firms emerges. But measures must be provided that take into account the structure of production filie´re and the characteristics of their entrepreneurial culture. Further empirical research is necessary to highlight these guidelines and direct economic policy decisions with more accuracy.

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