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101008
ENTREPRENEURSHIP AND INNOVATION
Guest Editor:
Professor Vanessa Ratten
A.J. Palumbo School of Business Administration
Duquesne University
Pittsburgh, Pennsylvania, USA
E-mail: vanessaratten@gmail.com
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Int. J. Entrepreneurship and Small Business, Vol. 7, No. 4, 2009
Contents
SPECIAL ISSUE: ENTREPRENEURSHIP AND INNOVATION

Guest Editor: Professor Vanessa Ratten
389 Editorial
Vanessa Ratten
391 Cooperation in innovation practices among firms in Portugal: do external

partners stimulate innovative advances?
Maria José Silva and João Leitão
404 Dynamic capabilities, change and innovation in Greek SMEs:

a preliminary study
Apostolos Rafailidis and Giannis Tselekidis
420 Entrepreneurship and innovation within creative industries: a case study

on the Finnish games industry
Mirva Peltoniemi
431 Partnerships and innovative patterns in small and medium enterprises

Elena Cefis, Mihaela Ghita and Anna Sabidussi
446 Strategy and innovation: making the right strategic decision and developing
the right innovative capabilities
Lawrence J. Loughnane
457 Entrepreneurs and branding in an environment of mass customisation and

open innovation
Khaled Hamid
466 A comparison of spectators’ and franchise staffs’ perceptions on the

effectiveness of the marketing techniques adopted by the Super Basketball
League in Taiwan
Steve Chen, Ronald Dick, Chie-Der Dongfang and Pi-Yun Teng
478 Building a sense of community through sport programming and special

events: the role of sport marketing in contributing to social capital
Eric C. Schwarz
Contents
Book Review
488 International Entrepreneurship in Family Businesses by J.C. Casillas,

F.J. Acedo and A.M. Moreno
Vanessa Ratten
490 Contents Index
494 Keywords Index
498 Author Index

International Journal of Entrepreneurship
and Small Business (IJESB)
Honorary Editor-in-Chief: Professor Frank Hoy
Professor of Entrepreneurship and Chair for the Study of Trade in the Americas
Director, Centers for Entrepreneurial Development, Advancement,
Research & Support, College of Business Administration
University of Texas at El Paso, El Paso, TX 79968-0545, USA Fax: 1-915-747-8748
Associate Editors
Professor Louis Jacques Filion
Rogers-J.A.Bombardier Professor of Entrepreneurship, HEC Montreal
3 000 Chemin Cote Ste-Catherine, Montreal, Quebec H3T 2A7 Canada
Fax: 514 340 6382 E-mail: louisjacques.filion@hec.ca
Professor A. Bakr Ibrahim

CIBC Distinguished Professor of Entrepreneurship and Family Business
Concordia University, 1455 de Maisonneuve Ouest, Montreal, Quebec, Canada
E-mail: bibrahim@alcor.concordia.ca
Professor John Milton-Smith

Professor of Management, Curtin University of Technology
GPO Box U1987, Perth WA 6845, Australia
Fax: +61 8 92667897 E-mail: John.Milton-Smith@cbs.curtin.edu
Professor Jan M. Ulijn

Jean Monnet Chair of European Innovation, Entrepreneurship and Culture
Eindhoven University of Technology, P.O Box 513 5600, MB Eindhoven, The Netherlands
E-mail: J.M.Ulijn@tm.tue.nl
Regional Editors
Professor Robert B. Anderson (Regional Editor for Canada)
President of the CCSBE/CCPME, University of Regina, Faculty of Business Administration,
Regina, Saskatchewan, Canada
E-mail: jsbe@uregina.ca
Professor Rosalind Chew (Regional Editor for Asia)

Division of Economics School of Humanities and Social Sciences, Nanyang Technological
University, Singapore 639798
Fax: (65) 6793-0523 E-mail: archew@ntu.edu.sg
Professor Alain Fayolle (Regional Editor for Europe)

Director of Entrepreneurship Research Centre, EM Lyon and University of Pierre Mendès,
CERAG, BP 47 / 38040 Grenoble Cedex 9, France
E-mail: fayolle@em-lyon.com
Professor Patricia P. McDougall (Regional Editor for the USA)

William L. Haeberle Professor of Entrepreneurship, Kelley School of Business
Indiana University, 1309 East Tenth Street, Bloomington, IN 47405-1701, USA
E-mail: mcdougal@indiana.edu
Consulting Editor: Professor Leo Paul Dana

Senior Advisor, World Association for Small & Medium Enterprises
University of Canterbury, Dept. of Management, Private Bag 4800, Christchurch, New Zealand
100109
Members of the Editorial Board
Claire Auplat Professor Graham Hall
Tanaka Business School Manchester Business School
Imperial College London Booth Street West
South Kensington Campus Manchester M15 6PB, UK
London SW7 2AZ E-mail: ghall@man.mbs.ac.uk
E-mail: c.auplat@imperial.ac.uk Mary Han
Shantanu Banerjee Program Chair, ASAC International
School of Management Business Division, Program Chair
Queensland University of Technology ASAC Entrepreneurship Division
Gardens Point Campus, Brisbane John Dobson ACE Fellow, Ryerson University
4001 Queensland, Australia 350 Victoria Street, Toronto, Ontario
E-mail: s2.banerjee@qut.edu.au Canada M5B 2K3
Thomas Behrends E-mail: mhan@ryerson.ca
Lüneburg Universität, Universitätscampus Professor Carin Holmquist
Gebäude 8, Scharnhorststraße 1 Center for Entrepreneurship and
D-21335 Lüneburg, Germany Business Creation, Stockholm School of
E-mail: behrends@uni-lueneburg.de Economics, PO Box 6501, SE - 113 83
Stockholm, Sweden
Professor Sara Carter
E-mail: Carin.Holmquist@hhs.se
Department of Management and Organization
University of Stirling Andrew Hughes
Stirling, UK, FK9 4LA Copland Building 024
Fax +44 1786 467329 Australian National University
E-mail: sara.carter@stir.ac.uk ACT 0200, Australia
E-mail: andrew.Hughes@anu.edu.au
Julio Castro
Instituto de Empresa Business School Professor Jerome A. Katz
María de Molina, 11. 28006 Madrid, Spain Coleman Foundation Chair in
E-mail: Julio.Castro@ie.edu Entrepreneurship
John Cook School of Business
Nikhil Celly Saint Louis University, 3674 Lindell Blvd.
Richard Ivey School of Business St. Louis MO 63108 USA
University of Western Ontario Saint Louis, Missouri, USA
1151 Richmond Street N E-mail: katzja@slu.edu
London, Ontario, N6A 3K7, Canada
E-mail: ncelly@ivey.uwo.ca Bev Kitching
School of Management
Professor Mohammed Chowdhury Queensland University of Technology
Monroe College 29 East Fordham Road Gardens Point Campus, Brisbane
Department of Accounting 4001 Queensland, Australia
Bronx, NY 11427, USA E-mail: b.kitching@qut.edu.au
E-mail: mchowdhury@monroecollege.edu Professor Gary A. Knight
Teresa E. Dana Director of Multinational Business Program,
Christchurch College of Education College of Business, Florida State University
Christchurch, New Zealand Tallahassee, FL 32306-1110, USA
E-mail: teresa.dana@cce.ac.nz E-mail: gknight@cob.fsu.edu
Donald Feaver Professor Norris Krueger, Jr.
School of Law Clinical Professor of Entrepreneurship
Queensland University of Technology Boise State University, Boise, ID 82725, USA
Gardens Point Campus, Brisbane E-mail: nkrueger@boisestate.edu
4001 Queensland, Australia Professor Dr. Gilles Lambert
E-mail: d.feaver@qut.edu.au Professeur des Universités
Elena Golovko IECS - Ecole de management de Strasbourg
IESE Business School 61 avenue de la Forêt Noire
31080 Pamplona, Navarra, España 67085 Strasbourg Cedex, France
E-mail: docegolovko@iese.edu E-mail: gilles.lambert@urs.u-strasbg.fr
Members of the Editorial Board (continued)
Professor Terri Lituchy Professor Rajesh K Pillania
Concordia University Assistant Professor
Montreal, Quebec, Canada Institute for Integrated Learning in
E-mail: lituchy@vax2.concordia.ca Management (IILM) 3, Lodhi Road
Shane Matthews New Delhi-110003 India.
School of Marketing, Advertising Email: r_pillania@yahoo.com
and Public Relations Dr. Edwina Pio
Queensland University of Technology Faculty of Business (Management)
Gardens Point Campus, Brisbane Auckland University of Technology
4001 Queensland, Australia Private Bag 92006
E-mail: shanemathews@optusnet.com.au Auckland 1020, New Zealand
Gerard McElwee Hamish Ratten
Senior Academic School of Law
Lincoln Business School Queensland University of Technology
University of Lincoln Australia
Lincoln, LN6 7TS, UK E-mail: h_ratten@yahoo.com.au
E-mail: gmcelwee@lincoln.ac.uk Vanessa Ratten
Professor Rod McNaughton A.J. Palumbo School of Business
Eyton Chair in Entrepreneurship Administration
Director, Institute for Innovation Research Duquesne University
and Associate Director Pittsburgh Pennsylvania, USA
Centre for Business Entrepreneurship Email: vanessaratten@gmail.com
and Technology Lydia Schmelter
University of Waterloo School of Marketing, Advertising
Waterloo Ontario, Canada N2L 3G1 and Public Relations
E-mail: rmcnaughton@uwaterloo.ca Queensland University of Technology
Professor Teresa V. Menzies Gardens Point Campus, Brisbane
Past President CCSBE/CCPME 4001 Queensland, Australia
Faculty of Business E-mail: l.schmelter@qut.edu.au
Brock University Professor Sören Sjölander
Ontario, Canada L2S 3A1 Department of Innovation Engineering
E-mail: tmenzies@spartan.ac.brocku.ca and Management
Chalmers University of Technology
Professor Venkataraman Nilakant
Vera Sandbergs Allé 8B
University of Canterbury
SE-412 96 Göteborg, Sweden
Private Bag 4800
E-mail: sosj@mot.chalmers.se
Christchurch, New Zealand
E-mail: ven.nilakant@canterbury.ac.n Professor Martine M. Spence
The University of Ottawa
Professor Jean-Jacques Obrecht
Professor Emeritus
136 Jean-Jacques Lussier Street
Universite Robert Schuman
Ottawa, Ontario K1N 6N5, Canada
Strasbourg, France
Fax: +1 613 562 5164
E-mail: jean-jacques.obrecht@wanadoo.fr
E-mail: spence@management.uottawa.ca
Gul Berna Ozcan E-mail: martine.spence@rogers.com
Professor David J. Storey
Royal Holloway
University of London Associate Dean (Research)
Egham, Surrey TW20 0EX, UK Warwick Business School
E-mail: g.ozcan@rhul.ac.uk University of Warwick
Coventry, CV4 7AL, UK
E-mail: David.Storey@wbs.ac.uk
100109
Members of the Editorial Board (continued)
Charles Trappey Professor Dianne H.B. Welsh
School of Management Hayes Distinguished Professor of
Queensland University of Technology Entrepreneurship,
Gardens Point Campus, Brisbane University of North Carolina
4001 Queensland, Australia Greensboro Bryan School of Business
E-mail: c.trappey@qut.edu.au and Economics
Karen Verduyn P.O. Box 26165 Greensboro
Vrije Universiteit Amsterdam NC 27408-6165 USA
Karen Verduyn / room 3a-15 adscott@uncg.edu
De Boelelaan 1105 Professor Paul Westhead
NL-1081 HV Amsterdam Professor of Entrepreneurship
The Netherlands Institute for Enterprise and Innovation
E-mail: kverduyn@feweb.vu.nl Nottingham University Business School
Professor Claudio Vignali Jubilee Campus, Wollaton Road
The ‘Arnold Ziff’ Chair in Retailing Nottingham NG8 1BB, UK
School of Tourism, Hospitality E-mail: Paul.Westhead@nottingham.ac.uk
& Retailing Management Professor Nicholas Maurice Young
Leeds Metropolitan University Stanford University,
City Campus Stanford, California, USA
Leeds, LS1 3HE, UK E-mail: nmyoung@stanford.edu
E-mail: C.Vignali@lmu.ac.uk
Isabell Welpe
Ludwig-Maximilians-Universität
Klenzestr. 65, 80469
München, Germany
E-mail: isabell.welpe@t-online.de
Int. J. Entrepreneurship and Small Business, Vol. 7, No. 4, 2009 389
Editorial
Vanessa Ratten
Duquesne University
Pittsburgh, Pennsylvania, USA
Biographical notes: Vanessa Ratten is an Assistant Professor at the A.J.

Palumbo School of Business Administration at Duquesne University, USA.
Her main research interests are international entrepreneurship, technology
innovation and strategic management. She has presented and published her
work in numerous peer reviewed academic journals and at professional
conferences. She has published in journals including the European Journal
of Innovation Management, Journal of High Technology Management
Research, International Journal of Entrepreneurship and Small Business and
the Asia Pacific Journal of Marketing and Logistics. She has co-edited a
research book on European Entrepreneurship and is currently finishing a
co-edited research book on Asian Entrepreneurship. She is currently working
on research that examines the relationship between entrepreneurship and
sports marketing. In particularly she is interested in the role of sustainability,
corporate social responsibility and social entrepreneurship in the sports and
technology industries.
This special issue is on the important topic of entrepreneurship and innovation. The
first six papers are from the 2nd European Conference on Entrepreneurship and
Innovation, which was held at the Utrecht School of Economics, the Netherlands, on
8–9 November 2007. The first six papers focus on a variety of issues and theories
relating to entrepreneurship and innovation in the European context. The other two
papers included in the special issue relate to the role of sports in entrepreneurship and
innovation. Given the importance for Europe’s continued economic success on
entrepreneurship and innovation, it is crucial that the issues discussed in this special issue
be given attention. The papers are written by a number of authors from countries
within Europe and outside Europe. Country-specific papers are included that provide an
interesting contrast to entrepreneurship and innovation that is happening in different
European countries. The first paper by Silva and Leitão discusses the Portugese
experience of being entrepreneurial and innovative. The paper highlights the importance
of the environment in influencing a firm’s entrepreneurial innovation capability. The
authors confer that a firm’s external innovative partnerships are important to developing a
countries entrepreneurship and innovative capabilities. The second paper by Rafailidis
and Tselekidis focuses on the Greek experience of building innovation and dynamic
capabilities. The authors highlight that the current fast-changing business environment
necessitates a focus on innovation and entrepreneurship. The third paper by Peltoniemi
presents a case study analysis of the firms within the Finnish games industry. Peltoniemi
argues that innovation is a social and interactive process that encompasses a number of
Copyright © 2009 Inderscience Enterprises Ltd.

390 V. Ratten
activities. The fourth paper by Cefis et al. is on the Dutch occurrence of entrepreneurship
and innovation. The authors discuss the innovative characteristics of Dutch companies by
comparing them to other European companies. The fifth paper by Loughnane provides a
theoretical perspective and understanding about how innovation applies to businesses
around the world, including Europe. Loughnane argues that innovation is a complex
process that includes both upstream and downstream activities within the firms’ context.
The sixth paper by Hamid also focuses more on the theoretical notion of what innovation
is by discussing the environmental context of entrepreneurship. Hamid stresses that the
creative process of developing products provides a platform for businesses to encourage
their innovative and entrepreneurial capabilities. The paper by Chen et al. examines
franchises in Taiwan basketball. The Taiwanese basketball league discussed in this
paper provides a great example of the entrepreneurial nature of sports in terms of how
the basketball league is continually innovating. The paper by Schwarz examines
entrepreneurship in sports through a discussion on the role of communities in sports
marketing. Schwarz stresses that social capital in the form of entrepreneurship and
innovation is an ideal way for the sports industry to remain competitive. The book review
by Ratten further examines entrepreneurship by reviewing a book on family firms, which
is useful as it includes a discussion on many multinational and well known brand name
firms that have started off as family run enterprises.
Cooperation in innovation practices among firms

in Portugal: do external partners stimulate
innovative advances?
Maria José Silva* and João Leitão

Management and Economics Department
University of Beira Interior
Pólo IV, 6200–209 Covilhã, Portugal
Fax: +351.275.319.601
E-mail: msilva@ubi.pt
E-mail: jleitao@ubi.pt
*Corresponding author
Abstract: This paper analyses whether the entrepreneurial innovation

capability of firms is stimulated through the relationship established with
external partners. The literature review on innovation makes use of
two approaches: (1) systemic and (2) networks and interorganisational
relationships. The theoretical approach developed supports the basic idea that
innovation is an evolutionary, nonlinear and interactive process established
between the firm and the environment. Together with the firm’s assets, a wide
range of agents contribute towards acquiring external resources, knowledge and
information essential for developing productive and innovative activities. The
database was obtained through the Community Innovation Survey II (CIS II)
coordinated by EUROSTAT. Relationships with science partners have a crucial
role in promoting cooperation in innovative practices and stimulate the
propensity to make advances at the level of product innovation.
Keywords: innovation; networks; entrepreneurial innovation capability;

Portugal.
Reference to this paper should be made as follows: Silva, M.J. and Leitão, J.
(2009) ‘Cooperation in innovation practices among firms in Portugal: do
external partners stimulate innovative advances?’, Int. J. Entrepreneurship and
Small Business, Vol. 7, No. 4, pp.391–403.
Biographical notes: Maria José Silva is an Assistant Professor at the

University of Beira Interior (UBI), Covilhã, Portugal. Her academic
background includes a PhD in Management, specialising in Innovation, from
the UBI in 2004. She is the coordinator of the postgraduate course in
Technological Entrepreneurship. She is on the editorial board of the
International Review of Management and Economics and is a member of the
CAIE project – the Innovation and Entrepreneurship Support Centre. She is a
research fellow at ‘Núcleo de Estudos em Ciências Empresariais’ (NECE). Her
expertise is in innovation and technological entrepreneurship.
João Leitão is an Assistant Professor at the UBI, Covilhã, Portugal. His

academic background includes a PhD in Economics, specialising in the
Economics of Networks, from the UBI in 2004. He is also on several editorial
boards: the International Review on Public and Non Profit Marketing, South
African Journal of Information Management, The New Economics Papers
(NEP) and Revista Portuguesa e Brasileira de Gestão. He is the editorial

392 M.J. Silva and J. Leitão
coordinator of the International Review of Management and Economics,

and referee for Applied Economics, Frontiers in Finance and Economics,
Small Business Economics: An Entrepreneurship Journal, Frontiers of
Entrepreneurship Research, Revista Economia & Sociedade, European
Marketing Academy (EMAC), Academy of Management (AOM) and Advances
in Business Education & Training. His expertise is in public policies for
entrepreneurship, technological marketing and the economics of sports.
1 Introduction
Due to the challenges that firms are facing, innovation is assumed to be a key factor for
competitiveness. Several theoretical approaches developed in the last few years support
the idea that innovation results from an evolutionary, nonlinear and interactive process
between the firm and its partners, where external contacts that relate to innovation
influence the firm’s innovation capability. This paper aims to analyse the nature of the
relationships that are established among agents who cooperate in terms of innovation
practices. Furthermore, it aims to determine if the entrepreneurial innovation capability of
firms in Portugal is stimulated through the relationship established with external partners.
Here, a theoretical base is presented that is founded on approaches in current
literature, corroborated by empirical evidence that allows us to identify whether the
innovative advances of Portuguese industrial firms are stimulated by their relationships
with business and science partners.
The work tests the Observatório da Ciência e da Tecnologia or OCT (Observatory of
Science and Technology) hypotheses, derived from the second Community Innovation
Survey (CIS II). The generalised linear regression model is applied to the data obtained,
i.e., the logistic regression model.
The article is structured in the following way: The second section presents relevant
literature on relationships regarding innovation; the conceptual model is proposed and the
hypotheses to be tested in the statistical model are formulated. Section 3 presents the
sample, the variables and the logistic regression model for innovative advances. Section 4
discusses the results, while Section 5 concludes and presents policy implications.
2 Theoretical framework, hypotheses and model proposal

2.1 Literature review
In this research, innovation is seen neither as something intermittent that happens by
accident, nor as something that results from the action of an individual agent. Innovation
is seen as the result of an interactive process between the firm and the environment
(Kline and Rosenberg, 1986; Dosi et al., 1988; Lundvall, 1988; Lundvall, 1992; Nelson,
1993; Edquist, 1997; Maskell and Malmberg, 1999; Lundvall et al., 2002; Silva,
2003; Edquist, 2005; Silva et al., 2005; Leitão, 2006; Lundvall, 2007; Nieto and
Santamaría, 2007). The results of this same process are designated entrepreneurial
innovation capabilities. The term ‘entrepreneurial innovation capability’ was adopted to
integrate the components that result from the innovative process of a firm, i.e., product
Cooperation in innovation practices among firms in Portugal 393
innovation, process innovation and organisational innovation. This paper focuses on

entrepreneurial innovation capability oriented to advances regarding product innovation,
made by firms.
Considering entrepreneurial innovation capability in terms of product innovation,
two different types of innovation are distinguished: ‘new to the firm’ versus ‘new to
the market’. The category of ‘new to the firm’ innovation includes modifications and
improvements of the firm’s existing products, as well as the products that are new to
the firm, extending or substituting certain items (Kaufmann and Tödtling, 2000). The
innovation of these products consists of changes in the variety of the products, small
design improvements or technical changes in one or several products, as well as the
introduction of new ones. It is generally known as incremental innovation, with small
technical changes that result from the global, available knowledge.
The category ‘new to the market’ innovation includes products that are new to the
firm and the market (Kaufmann and Tödtling, 2001). Such products offer new qualities,
services or functions that up to that moment have not been available in any other
marketplace. Therefore, these products do not have competing products, which leads
to a temporary monopoly; they are often aimed at very specialised markets (Kaufmann
and Tödtling, 2001). These innovations often require more than just incremental
development, and in this way they contribute towards the development of innovative
advances. Thus, it is considered that the firm produces innovative advances when it
introduces a new product not only to the firm, but also to the market that is supplied by
the firm (CIS II, 1999; Kaufmann and Tödtling, 2001).
While analysing the resources available in this area, it was seen that there has been
a growing interest in the study of external partnerships and their impact on innovation
over the past few years. The network and interorganisational relationship approaches
suggest that external partnerships may stimulate the innovative process of firms.
According to these approaches, the external relationships established among partners are
characterised by a relatively open information exchange and such an information flow
may stimulate innovative activities (Hakansson, 1987; Cohen and Levinthal, 1989; Cohen
and Levinthal, 1990; Porter, 1990; Hakansson and Johanson, 1992; Furman et al., 2002;
Tether, 2002; Becker and Dietz, 2004; Drejer and Jørgensen, 2005; Edquist, 2005;
Hessels, 2007; Lundvall, 2007; Nieto and Santamaría, 2007). Despite being derived from
several theoretical approaches, this research has demonstrated considerable homogeneity
in the sense that the establishment of relationships with external partners influences the
innovative process.
Therefore, the systemic perspective of innovation was deepened, through the
consideration of organisational and environmental factors that influence innovative
performance and entrepreneurial competitiveness. According to this approach, innovation
originates from a collective learning process where institutions have a determinant role.
Thus, innovation capability is the result of an interactive process which embraces firms
and environment, by enhancing the inherent synergies of learning that belong to the
economic system and by stimulating the institutions that support innovation (Lundvall,
1985; Lundvall, 1988; Lundvall, 1992; Nelson, 1993; Cooke et al., 1997; Braczyk
et al., 1998; Cooke et al., 2000; Kaufmann and Tödtling, 2001; Lundvall, 2007). The
systematic approach emphasises that these institutions, when connecting several agents,
may play a crucial role in the creation and diffusion of innovation (Godinho, 2003). This
approach provides a better understanding of the relationships established between firms

and external partners, as well as allowing for the acknowledgement of several agents that
are crucial for disseminating innovation within the system.
2.2 Model proposal

For several countries, there are many studies that show the importance of external
partnerships regarding improvements in the firm’s innovation capability (Fritsch and
Lukas, 1999; Fritsch and Lukas, 2001; Kaufmann and Tödtling, 2000; Kaufmann and
Tödtling, 2001; Bayona et al., 2001; Romijn and Albaladejo, 2002; Hagedoorn, 2002;
Silva, 2003; Silva et al., 2005; Veugelers and Cassiman, 2005; Nieto and Santamaría,
2007; Schmidt, 2007).
As far as the Portuguese case is concerned, the previous findings of the CISEP/GEPE
(1992) study and the research conducted by Simões (1997) show the importance of
external partnerships as factors influencing the performance of Portuguese firms.
However, there are several issues relating to innovation that the literature so far has
not covered. As a result, in this area, besides knowing who the main partners are, it is
fundamental to analyse the following in order to understand the innovation process:
what is the importance of the various external partners regarding the development of
innovative activities and, thereby, their contribution to innovative advances? Thus, a
model is proposed to analyse whether, when it comes to innovation, the relationships
established with external partners stimulate firms to adopt innovative advances. The
proposed model is presented in Figure 1.
Figure 1 Analysis of external relationships in terms of innovative advances: proposed model
(EIC)
(IA)
2.3 Hypotheses
Several studies point out that the innovation capability of firms is influenced by
established partnerships with business partners, namely, client suppliers and group firms
(Simões, 1997; Fritsch and Lukas, 1999; Fritsch and Lukas, 2001; Kaufmann and
Tödtling, 2000; Kaufmann and Tödtling, 2001).
Looking at the various types of innovation partners, and taking into consideration the
data obtained through the innovation inquiry of firms (CIS II, 1999), two external
partnership groups have been identified: business and science. Regarding business
partners, two subgroups are identified: one group associated with business partners that
promote cooperation, namely, clients, suppliers and other group firms, and another group
of partners that do not cooperate, i.e., competitors. This group is distinguished from the
others, since a relationship with it can lead to anticompetitive behaviour. In terms of
science partners, there are two subgroups. The first is related to the entities that supply
knowledge and training, such as universities and other higher education institutions. The
second is related to the remaining partners considered in the CIS II enquiry, namely
public research institutes, nonprofitable private organisations and consultancy firms.
Therefore, it is intended to discover if the relationships established with clients,
suppliers and group firms stimulate the firm to develop innovative advances. Thus, the
following hypothesis was formulated:
H1 Innovative partnerships established with clients, suppliers and group firms are
positively related to the propensity of the firm to make innovative advances.
Given that firms establish partnerships with competitors that affect innovation, this
research intends to test if such partnerships help firms in the creation of new products that
are new not only to the firm, but also to the market. In this context, the following
hypothesis was formulated:
H2 Innovative partnerships established with competitors are positively related to the

propensity of firms to make innovative advances.
According to the existing literature, universities assume a special role in stimulating
innovative advances. For Kaufmann and Tödtling (2001), universities produce
far-ranging technological developments, because they focus primarily on the creation of
new knowledge regardless of economic motivations. Fritsch and Schwirten (1999) also
refer to the fact that universities and other institutions of higher education have input into
the private sector’s innovative activities. Taking these facts into consideration, the
following hypothesis was formulated:
H3 Firms that establish an innovative partnership with universities and other

institutions of higher education are more able to make innovative advances.
Partnerships with consultancy firms, and with private and public research institutions,
focus essentially on the production of scientific and technological knowledge that will
be promptly commercialised (Kaufmann and Tödtling, 2001). The relationship with
this type of institution is based on the demand for alternative sources of information
and knowledge for innovation. In this way, these institutions supply scientific and
technological knowledge. However, it is more common to supply applied knowledge,
specific skills and information (Bruce and Morris, 1998; Tether, 2002; Becker and Dietz,
2004). In order to find out if partnerships with these entities stimulate innovative
advances, the following hypothesis was formulated:
H4 Innovative partnerships established with consultancy firms and governmental and

private institutions are positively related to the propensity of firms to make
innovative advances.
The fourth hypothesis aims to determine whether innovative relationships established

with partners significantly influence the innovation capability of Portuguese industrial
firms at the product innovation level.
3 Research methodology
After proposing the analytical model and the hypotheses to be tested, the research
methodology was subsequently developed through the presentation of the population, the
sample and the variables to be used in the estimation of logistic regression.
3.1 Population and sample

The data used in this study were collected by the OCT in Portugal. The data were
collected during the second semester of 1998, through CIS II questionnire. The surveyed
year was 1997 and there were a great many indicators relating to the period from 1995 to
1997. This questionnaire was conducted under the supervision of EUROSTAT and
following the guidelines of the Oslo Manual (OECD, 1997; OECD, 2005).
The population includes all industrial firms in Portugal with more than 20 employees.
The codes of industrial activities under analysis are based on the European NACE
(Classification of Economic Activities in the European Community), and are the
following: 15 to 37 and 40 to 41 respectively. The initial sample of 1556 industrial firms
was extracted from the 9284 firms that make up the population. The number of firms that
answered the questionnaire in a valid way, following the guidelines defined by
EUROSTAT, was 819 industrial firms, which thus constituted the final sample, and
represented an answer rate of 57.3%. Since this study focuses on the entrepreneurial
innovation capability of the firms, in terms of innovative advances in products, we
considered all 193 firms that undertook product innovation from 1995 to 1997.
3.2 Data
The firms were classified as ‘innovative to the market’ if they answered the fifth point of
the questionnaire positively, and were classified as ‘innovative to the firm’ if their answer
was negative. Firms were asked whether “from 1995 to 1997, the company introduced
technologically new or improved products which were new both to the firm and to the
market served by that firm” (CIS II, 1999, p.4). The sample has 193 product-innovative
industrial firms, which were classified according to their degree of innovativeness.
Ninety of these firms (47%) stated that they had introduced new products into the market
from 1995 to 1997. The remaining firms, i.e., 103 (53%), introduced innovations in
products that were new to the firm, but not to the market.
The two types of innovation present several differences that should be mentioned
(Figure 2). The firms that have attained incremental innovations (new to the firm)
present, as main partners, research institutions and consultancy firms (38.2%), followed
by the business partners: clients, suppliers and group firms (30.9%). Regarding the firms
that have developed products that constitute radical innovations that are new to the firm
and to the market, the main relationships are established with clients, suppliers and group
firms (40.6%), followed by universities and other higher education institutions (31.2%).
Figure 2 Distribution of firms by external innovative partnerships (see online version

for colours)
100%
90% Clients, suppliers

31% and group firms
80% 41%
70%
60%
25% Universities and
50% OHEI
31%
40%
30%
38% Research institutions
20% and consultancy
firms 27%
10%
5%
0%
NovoNew
paratoathe firm
empresa New para
Novo to theo market
mercado
For testing the previously formulated theoretical hypotheses, we considered several

dichotomous variables that are presented in Table 1.
Table 1 Variables of the model and hypotheses
Model I Code Measures

Dependent variable INA Binary
Innovative advances 1 = New to the market
0 = New to the firm
Independent variables
Relationships established with RE1 1 = Firm has established at least one relationship
clients, suppliers and group firms with clients or suppliers or group firms
0 = Firm has not established any relationship
Relationships established RE2 1 = Firm has established at least one relationship
with competitors with competitors
Relationships established with RE3 1 = Firm has established at least one relationship
universities and OHEI with universities or OHEI
Relationships established RE4 1 = Firm has established at least one relationship
with research institutions and with state or private research institutions or
consultancy firms with consultancy firms
3.3 Method: logistic regression

According to that which has been previously defined, the Innovative Advances (INA)
variable is binary, which assumes a value equal to 1, if the firm has developed product
innovations that are new to the market, or a value equal to 0, if the firm has developed
product innovations that are new only to the firm. The binary data are very common
among the several types of categorical data and their modelling is part of the linear
regression models category (McCullagh and Nelder, 1989). The logistic regression model
is the most common one (Agresti, 1996; Ferrão, 2003), in terms of the way it facilitates
the substantive interpretation of parameters. Thus, logit regression is an approach used in
studies of innovation capability factors (Kaufmann and Tödtling, 2000; Kaufmann and
Tödtling, 2001; Silva, 2003; Silva et al., 2005). In this sense, a logistic regression model
for innovative advances is proposed, using dichotomic independent variables, where ε i
represents the residual term. The estimation process is based on the maximum likelihood
procedure and takes into consideration the following model specification:
INAi = β0 + β1Re1 + β2Re2 + β3Re3 + β4Re4 + εi (1)
where:
INA = innovative advances
Re1 = relationships established with clients, suppliers and group firms
Re2 = relationships established with competitors
Re3 = relationships established with universities and other higher
education institutions
Re4 = relationships established with research institutions and consultancy firms
εi = error term.
4 Results and discussion
According to the Wald statistics, the results of logistics regression reveal that all the
estimators of the regression parameters are statistically significant up to 5%, except for
the relationships established with competitors. The estimators of the final model are
presented in Table 2.
The first hypothesis is concerned with the association between the capacity of the
firm to develop innovative advances and the variable that relates to relationships with
business partners. The results suggest that the relationships established with these
partners have positive and significant effects on the innovative advances made by the
firm, as indicated by the positive estimator of the parameter (0.797). As we analyse the
marginal effects associated with the variable being studied here, we see that firms which
establish relationships have an advantage of 2.219 when it comes to developing
innovative advances, compared to the firms that do not establish these relationships.
Therefore, the firms that connect with clients, suppliers and/or group firms are more able
to innovate than firms that have not established this kind of relationship. This ratifies the
results obtained by other authors, such as Fritsch and Lukas (1999; 2001) and Kaufmann
and Tödtling (2000; 2001).
Table 2 Results of the logistic regression for innovative advances
Parameter
Model estimator SE Wald Sig. EXP (B)
Relationships established with
Clients, suppliers and group’s firms 0.797 0.405 3.865 0.049* 2.219
Competitors –1.485 1.248 1.415 0.234 0.226
Universities and OHEI 1.243 0.575 4.669 0.031* 3.467
Research institutions and consultancy firms –1.112 0.554 4.034 0.045* 0.329
Constant –0.281 0.173 2.638 0.104 0.755
Model summary
Correct predict (%) 60.1
Chi-square 11.318 0.023
Log likelihood 255.361
Number of cases (n) 193
Note: * Significance level: 5%.
Regarding the second hypothesis, and according to the results obtained, nothing can be
concluded about this relationship, since the variable associated with this kind of
relationship is not statistically significant. Hence, the null hypothesis stating that there is
no connection between the relationships established with competitors and the propensity
of the firm to make innovative advances is neither accepted nor rejected. These facts are
possibly due to the reduced number of cases associated with the variable.
Concerning the third hypothesis, according to the results, relationships with
universities and other higher education institutions have positive and significant effects
on the propensity of the firm to make innovative advances. These results are in line
with the empirical investigations led by Fritsch and Schwirten (1999), Kaufmann and
Tödtling (2001) and Tether (2002). It should be mentioned that the success rating of
the firm in developing innovative advances in this context is 3.467. In other words, firms
that establish relationships with universities and other higher education institutions
have an innovation capability that is 3.467 greater than those that do not establish such
relationships. As the marginal effects value of the several variables are analysed, it is
noted that the variable associated with the relationships established with universities and
other higher education institutions has the highest value. Thus, it can be stated that the
innovative advances undertaken by the firms are also a product of the relationships that
they establish with universities and other higher education institutions.
Regarding the fourth hypothesis, the results obtained are quite significant, meaning
that the null hypothesis stating that there is no association between the established
relationships and the propensity of the firm to make innovative advances may be rejected.
Thus, there is a connection, but this connection has a negative sign, as the coefficient
estimation (–1.112) indicates. Consequently, the propensity of the firm to develop
innovative advances is negatively correlated with the establishment of such relationships.
These results suggest that establishing relationships with consultancy firms,
governmental and private research institutions maximises the propensity of the firm to
develop incremental innovations rather than innovative advances.
The predictive capacity of the model is 60.1%, which results from the comparison
between the predicted and the observed values of the variable answer. The value of the
Chi-square test statistic is 11.318, with a proof value inferior to the 0.05 significance
level. The log-likelihood statistic, 255.361, also corroborates the global significance of
the model, when compared with the null model.
5 Conclusions
This study aimed to analyse whether entrepreneurial innovation capability in terms of

innovative advances is stimulated by the relationships established between firms and their
business and science partners. To achieve this aim, a conceptual model was presented, a
model supported by evidence that allowed the formulated hypotheses to be tested.
Throughout the study, the factors included in the proposed conceptual model were
empirically contrasted, according to the CIS II data.
The results indicate that firms that establish relationships with business partners
– clients, suppliers and group firms – are more capable of developing innovative
advances than firms that do not establish such relationships. Concerning relationships
with competitors regarding innovation, there is nothing to be concluded in a statistically
significant way. This is possibly due to the reduced number of firms that establish
relationships with this type of external partner. Therefore, it can be concluded that the
vertical relationships established with business partners stimulate the development of
innovative capability, as far as innovative advances are concerned.
Regarding science partners, the results reveal that the development of innovative
advances made by firms is stimulated more through cooperation with universities than
with the remaining science partners. This is probably due to the innovative capability of
universities, which generate new knowledge regardless of economic motivations. This
exact same knowledge might have a wide range of business applications, allowing it to be
used to create additional innovations, whereas studies carried out by research institutions
depend more on economic factors, focusing on Research and Development (R&D) that is
rapidly commercialised.
As we analyse each type of relationship, we notice that the external relationships
established with business partners and with universities influence the firm to make
innovative advances. This positive influence has a greater importance when it comes
to establishing relationships with universities and other higher education institutions.
In turn, the relationships that are established with research institutions and consultancy
firms do not motivate firms to undertake innovative advances. Instead, a negative
statistically significant relationship between these two variables is observed. Therefore,
relationships with this type of entity promote the introduction of incremental innovations,
which are new to the firm but not to the market. Overall, it is possible to conclude that
establishing relationships that affect innovation with external partners influences
entrepreneurial innovation capability, in terms not only of innovative advances, but also
of incremental innovations.
In terms of policy implications resulting from the present study, it should be stressed
that public policies oriented towards the creation of open innovation networks are
needed. For assuring the success of open innovation networks, entrepreneurs and
industrial or commercial associations should participate as consulting staff in universities,

in order to promote the equilibrium between the demand ‘pull’ and the supply ‘push’ for
innovation, in a more efficient way.
The main limitation of this study is the lack of data on innovative firms, especially in
relation to the CIS, i.e., several innovative firms may not be included in this work. This
limitation means it is not possible to develop comparative analyses on the nature of the
relationships established between these firms and their private and public partners.
Furthermore, only data from a sample of Portuguese innovative firms are used, a
selection that should be expanded in future research.
Future research should be developed on the motivation of firms for engaging in
cooperative innovation projects. Firms’ characteristics, both general and regarding
innovation activities, which influence firms’ motivations for cooperating should be
analysed. Similarly, new research could examine whether public funding leads firms to
cooperate in order to access external knowledge and R&D.
A further line of pursuit for the current research would be to repeat the approach used
in this paper, using the data from CIS III and CIS IV, as a means of obtaining information
that would allow the evaluation of evolutionary patterns. In this context, it is considered
that the expansion of this research into several European Union countries, as well as
others that have answered the CIS questionnaire, may contribute to the development of
future studies on cooperative open innovation networks, using a cross-country approach.
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404 Int. J. Entrepreneurship and Small Business, Vol. 7, No. 4, 2009
Dynamic capabilities, change and innovation in Greek

SMEs: a preliminary study
Apostolos Rafailidis*
Department of Business Planning and Information Systems
Technological Education Institute of Patras
M. Aleksandrou 1, Koukouli, 263 34, Patras, Greece
E-mail: arafailidis@gmail.com
Giannis Tselekidis
Archimidous 60, 173 43, Athens, Greece
E-mail: tselekidis@gmail.com
Abstract: International competition is increasingly making firms enter a

process of change and transformation. The dynamic capabilities approach
is relevant in examining this change and has thus attracted considerable
attention. In the current business environment, change (especially innovation)
is essential for pursuing the creation of strategic competitiveness. It is the
creation and development of suitable dynamic capabilities, however, that may
actually enable or induce innovativeness.
This paper is an attempt to review relevant existing theory, so as to locate
possible commonalities of the dynamic capabilities of differing firms. Second,
through ongoing empirical research, the paper draws on data from a sample of
Greek SMEs.
The paper examines dynamic capabilities in relation to innovativeness.
Any relationship between dynamic capabilities and firm performance is
considered indirect, with the intermediate step being efforts for change and
innovation. In this way, the tautology pointed out in the literature between
dynamic capabilities and competitive advantage is bypassed.
Keywords: dynamic capabilities; innovation; change; factors; Greece;

SMEs; commonalities.
Reference to this paper should be made as follows: Rafailidis, A. and

Tselekidis, G. (2009) ‘Dynamic capabilities, change and innovation in Greek
SMEs: a preliminary study’, Int. J. Entrepreneurship and Small Business,
Vol. 7, No. 4, pp.404–419.
Biographical notes: Dr. Apostolos Rafailidis is an Assistant Professor at

the Department of Business Planning and Information Systems of the
Technological Education Institute of Patras, Greece. He mainly works in the
fields of technology and innovation management, organisational learning,
change management, interfirm technological cooperation and defence
economics from an industry perspective. His work has been published in
journals and conferences, as well as in international and Greek books. He has
also worked as an Assistant Professor at the Department of Finance and
Auditing of the Technological Education Institute of Epirus, Greece, as a
Researcher for the Universities of Patras, Athens and Piraeus, for the National

Dynamic capabilities, change and innovation in Greek SMEs 405
Center for Social Research, for the Hellenic Foundation for European &
Foreign Policy, and as a consultant for the Ministry of Defense and for the
Science Park of Patras.
Dr. Giannis Tselekidis is an Economist. He holds a PhD on Interfirm

Technology Transfer and Knowledge Assimilation Issues. His current position
is with the Greek Ombudsman, while in the past he has worked as a Lecturer at
the Department of Business Administration of the University of Patras, Greece.
Microeconomics, knowledge management, and research and development
management were the main courses he taught. His work has been published in
international journals and conference proceedings. His research mainly focuses
on knowledge management, on interfirm cooperation strategy and on the
development of dynamic capabilities.
1 Introduction
The 1990s have seen a great increase in the pressure for organisations to continuously
adapt, innovate and change. A close reading of the Fortune 500 reveals an attrition rate of
7% per year. It seems that there are two kinds of firms – those that are changing and
those that are going out of business.
The dynamic capabilities theory is an attempt to explain how some firms survive and
create and maintain competitive advantages in this rapidly evolving environment. Despite
the potential of the dynamic capabilities approach, it is argued that the approach is
conceptually vague and that it suffers from lack of operationalisation. There is a lack of
clarity about the nature of dynamic capabilities and disagreement about whether such
capabilities even exist (Winter, 2003).
Thus, an attempt to conceptualise dynamic capabilities more clearly and to
operationalise them is deemed useful. Dynamic capabilities have also been criticised for
the lack of empirical grounding (Priem and Butler, 2001) because the majority of
empirical research concerns qualitative case studies. In addition, the mechanisms through
which dynamic capabilities are related to the creation and maintenance of competitive
advantage remain unclear (Zott, 2003; Zollo and Winter, 2002), and the approach has
been criticised for being tautologically linked to performance (Williamson, 1999).
To approach these issues, in Section 2 this paper first attempts to analyse and define
dynamic capabilities. Then, a model is proposed to identify the mechanisms related to
dynamic capabilities and an attempt is made to answer the tautology argument mentioned
above. Then, based on the proposed model, the authors present in Section 3 some
preliminary results of an ongoing empirical research effort concerning a sample of
Greek firms. Section 4 presents the conclusions and implications for academics and
practitioners, as well as the proposed future research.
2 The concept of dynamic capabilities and enabling mechanisms
The concept of dynamic capabilities is characterised by conceptual ambiguity.

Teece et al. (1997, p.516) defined dynamic capabilities as “the firm’s ability to
integrate, build and reconfigure internal and external competencies to address rapidly
406 A. Rafailidis and G. Tselekidis
changing environments”. More recent research involving dynamic capabilities has

not managed to clarify things (e.g., Woiceshyn and Daellenbach, 2005; George, 2005;
Figueiredo, 2003).
Zollo and Winter (2002, p.340) defined dynamic capabilities as “a learned pattern of
collective activity through which the organisation systematically generates and modifies
its operational routines in pursuit of improved effectiveness”. In our view, this is the
most complete definition of dynamic capabilities. As Zollo and Winter noted, their
definition avoids the tautology of defining capability as an ability. In addition, the fact
that dynamic capabilities are a ‘learned pattern of collective activity’ that functions
systematically means they are recurrent, and thus conscious. This way, they can relate
explicitly dynamic capabilities with the theory of organisational learning. This is a
pivotal point in their approach.
The question that remains, however, is why organisations are differentiated with
regard to their collective learned activity pattern. That is, what is the cause driving some
firms to promote such activity more and better than others?
Before an attempt is made to answer this question, a distinction between resources,
routines and dynamic capabilities is useful. According to Sharif and Ramanathan (1987),
the basic resources of a firm can be classified into four categories:
1 technoware, which comprises physical facilities (manufacturing, tools, machines,
infrastructure, etc.)
2 humanware, which includes skills, experience, creativity, etc., embodied in humans
3 infoware, comprising of documents, manuals, specifications, theories, design
parameters, etc.
4 orgaware, which includes, organisational schemes-designs such as methods,
techniques, networks, managerial practice and firm culture.
Routines are stable patterns of behaviour that characterise organisational reactions to
variegated, internal or external stimuli. They are the combination and interaction of the
aforementioned resources and the various subnetworks formed by combining or crossing
the basic resources (Argote and Ingram, 2000), through the routines that produce the
firm’s products and services and define its inner functions and value chain. Moreover,
routines can be further distinguished as operational (when they involve the execution of
known procedures) and search routines (when they seek to identify the necessary changes
to an existing set of production routines) (Nelson and Winter, 1982). Routines of the
latter type are a central constituent of dynamic capability (Zollo and Winter, 2002).
In addition, many firms are characterised by asymmetries (Miller, 2003) or
imbalances (Rafailidis and Tselekidis, 2002) in the resources they possess. By
asymmetries or imbalances we mean that some of the resources and assets of a particular
firm are more developed in comparison with the rest of the resources and assets of the
same firm, and competitors are not able to imitate at a cost affording economic rents.
Asymmetries certainly do exist when comparing resources and assets between firms.
In the theory of dynamic capabilities, organisational knowledge and human capital
play a cardinal role as intangible drivers to reconfiguration (Galunic and Rodan, 1998).
For this reason, firms with dynamic capabilities frequently show asymmetries in
humanware and orgaware. However, the existence of asymmetries is necessary but not
sufficient for a firm to develop dynamic capabilities. They have to be complemented with
the development of the rest of the resources and assets. Organisational design can play a
key role in this and it includes the way a firm organises, controls and motivates its
resources to perform the most critical tasks. It includes formal aspects such as policies,
priorities and structure, and informal aspects such as values, beliefs and styles of
interaction (Miller, 2003, p.968).
Let us return to the question posed: why are organisations differentiated with regard
to their collective learned activity pattern? Part of the answer may lie with the
behavioural attitude of the firm to be aware of these imbalances, as well as its willingness
to act constantly in order to build upon them. Equally important is the effort to develop
complementary resources and assets to support the main ones.
The search for asymmetries is informed by thorough and persistent inquiry across the
breadth of an organisation and its markets. The search evaluates how asymmetries might
be connected to other organisational assets or resources to create value. This process
requires collective action and ongoing dialogue within an organisation (articulation of
knowledge) to examine resources and structures that are important at each point in
time. This search process creates the conditions for the creation of new routines and
organisational structures. This is the reason why such imbalances can be characterised as
positive (Rafailidis and Tselekidis, 2002).
In our view, this analysis complements the definition of Zollo and Winter (2002)
on dynamic capabilities, since it is organisational learning oriented and it explains
why some firms more strongly show a learned pattern of collective activity, through
which they systematically generate and modify their operational routines in pursuit of
improved effectiveness.
In addition, the paths of dynamic capabilities may be specific to the firms or the
industries, but at a more generic level, we concur with Eisenhardt and Martin (2000) that
the common characteristics of dynamic capabilities across firms are identifiable and that
dynamic capabilities demonstrate the nature of commonalities in key features. To this
end, we have attempted to identify and describe the main enabling organisational
mechanisms of dynamic capabilities.
2.1 Absorptive capability

The concept of absorptive capability was coined by Penrose (1959) and was later
developed by Cohen and Levinthal (1990). The latter authors argue that a necessary
condition for a given firm’s successful exploitation of new knowledge outside its own
boundaries is the development within the firm of the capability to assimilate new
information. This capability depends, in part, on the capability of a firm to recognise and
relate new knowledge to existing in-house expertise. The latter capability, in turn, is a
function of the firm’s level of prior related knowledge. Dietrickx and Cool (1989) argue
that firms with significant R&D know-how are frequently better able to exploit and
further develop technologies, compared to firms with lower R&D know-how. Arora
and Gambardella (1994) have shown that firms in the biotechnology sector are
differentiated in their capability to benefit from cooperation with universities and small
research-intensive firms. This capability was shown to depend on the number of scientific
papers published by the personnel of each firm, on patents and on R&D expenditures. A
number of more recent studies, such as the one by Tsai (2001), have used R&D intensity
as a proxy for absorptive capability.
Diversity of knowledge is closely related to absorptive capability. “A diverse

background provides a more robust basis for learning because it increases the prospect
that incoming information will relate to what is already known” (Cohen and Levinthal,
1990, p.129). Thus, the capability to absorb and learn is a function of the richness of
existing knowledge.
Equally as important as the diversity of knowledge is the depth of the firm’s existing
knowledge structure. The combination of depth and breadth of the existing knowledge
structure is expected to have a positive effect on the capability to assimilate and to use
extrafirm knowledge.
On the theoretical level, Zahra and George (2002) have discussed and developed the
concept of absorptive capabilities. They argue that there are four dimensions that
comprise the potential and realised absorptive capabilities. For Zahra and George, firms
need to manage these dimensions in order to perform better. Thus, firms focusing on the
acquisition and assimilation of new external knowledge (potential absorptive capability)
are able to continually renew intrafirm knowledge but may face cost issues if they do
not also manage to exploit this new knowledge. Conversely, firms mainly focusing on
transformation and exploitation (realised absorptive capability) may realise short-term
profit but might face difficulty with dealing with the need to continually renew
knowledge. Thus, such firms might have difficulty to follow changes in their operating
environment. By examining the four dimensions proposed, one may understand better
how absorptive capability can be developed and why some firms find it hard to manage.
To Zahra and George, absorptive capability is a multifaceted variable directly related
to firm processes and routines. It is a capability related to a series of activities, starting
from the recognition and evaluation of extrafirm information and knowledge, and
finishing with the transformation of these to useful and tangible results. In this way, the
authors have redefined the concept of absorptive capability and related it with dynamic
capabilities. Any shortage may have significant repercussions and consequently firms
need to manage a balance between exploration and exploitation, as known to the
knowledge management literature.
However, to the best of the knowledge of the authors of the present paper, there are as
yet no empirical studies using and validating the multifaceted variable of absorptive
capability as proposed by Zahra and George. The only known exception is research
by Jansen et al. (2005) at the unit, and not the firm, level. This research has identified and
confirmed the differential effects for potential and realised absorptive capacities. It has
also shown that particular organisational mechanisms are related to the two components
of absorptive capability and have to be expressly taken into account.
Concluding, absorptive capability constitutes an important factor for the creation of
new capabilities, through the assimilation and internalisation of new knowledge. This
new knowledge may drive successful change and innovation efforts.
2.2 Market-customer-oriented capability

There is no consensus regarding the definition of ‘market orientation’. Two recent
definitions are being widely used, however. The first is the definition by Kohli and
Jarowski (1990), who wrote that market orientation is the organisation-wide generation of
market intelligence pertaining to the current and future needs of customers, dissemination
of intelligence horizontally and vertically within the organisation, and organisation-wide

action or responsiveness to market intelligence. Similar definitions can be found in Deng
and Dart (1994).
The second definition is by Narver and Slater (1990), who define market orientation
as a one-dimensional construct consisting of three behavioural components and
two decision criteria: customer orientation, competitor orientation, interfunctional
coordination, a long-term focus and a profit objective. Market orientation is an integral
part of organisational learning, while it helps in timely adaptation to environmental
change and in the alignment of intrafirm resources with extrafirm demand (Alvarez and
Merino, 2003).
At the empirical level, it has been shown that there is a positive relationship of
market orientation with innovation efforts, as well as with firm performance itself. Narver
and Slater (1990) find that market orientation and business performance are strongly
correlated. Jarowski and Kohli (1993) report that market orientation is an important
determinant of performance, regardless of market and technological turbulence and
competitive intensity. Greenly (1995) found that a group of companies with higher
market orientation performed better than did a group with lower market orientation.
Bontis (1998) has shown that market orientation, as an integral part of a firm’s
intellectual capital, is positively and statistically significantly related to business
performance. Biemans and Harmsen (1995), doing a survey of other research efforts,
came to the conclusion that market orientation in product development is a very
important factor for the success of new products. A similar finding came up in the
empirical study of Athuahene-Gima (1995) in a sample of Australian firms. In a seminal
work, von Hippel (1988) argues that cooperation and communication between users and
suppliers of technology are of utmost importance for successful innovation. It is not
infrequent for equipment-technology users to spot potential improvements and report
them back to their suppliers. A fundamental element of this crucial and interactive
relationship between users and suppliers is the long-term cooperation between them, so
as to develop the level of trust necessary to exchange critical information and knowledge.
Teece et al. (1997) related dynamic capabilities to market orientation, when they
noted that the capability to create the conditions for change and adjustment is connected
to the capability to scan the environment, to evaluate markets and competitors, and to
reconfigure and transform faster than the latter.
Thus, market orientation capability (through market intelligence) is an important
factor for the development of new capabilities that can, in turn, lead to potentially more
successful efforts for change and innovation.
2.3 Organisational learning capability

Cangelosi and Dill (1965) were the first to distinguish between three levels of
organisational learning: individual, group and organisational. Individual learning is
embedded in the context of group learning, which in turn is embedded in the context of
organisational learning (Crossan and Inkpen, 1995). It is a prerequisite for organisational
learning (Kim, 1993) and it occurs simply by virtue of being human. Organisations
learn because individuals learn (McGee and Prusak, 1993), but individual learning does
not necessarily lead to organisational learning (Senge, 1990). Group-level learning is
considered as an intermediate level between individual and organisational levels.
Group knowledge is not just the sum of the knowledge of the individuals in the group
(Cohen and Levinthal, 1990). The knowledge of individuals needs to be shared and
legitimised through interactions and information technology before it can become group
knowledge. Learning at the organisational level starts once groups integrate their own
respective learning.
This approach to learning accentuates the importance of organisational systems,
structures, procedures, culture, etc. As Nonaka and Takeuchi (1995) note, the creation of
organisational knowledge has to be understood as a process of expanding and widening
the knowledge created by individuals and reflected to group level through discussion,
dialogue, experience sharing and observation.
As Barnett (1999) argues, organisational knowledge is an experience-based process,
through which cause and effect are codified into routines and organisational memory,
and is reflected in the change in collective behaviour. Thus, organisations learn
through useful prior experience; and the greater the availability of such experience, the
greater the probability to learn using it. The product of this process is the change of
organisational knowledge structures which deal with goal, cause-and-effect beliefs, etc.
(Lyles and Scwenk, 1992). In addition, organisations represent patterns of interaction
among individuals and therefore learning in organisations depends, to a large extent,
on the ability to share common understandings so as to exploit them (Daft and Weick,
1984). Thus, dominating factors in the quest for organisational learning are the
capabilities for the creation, acquisition, retention and dissemination of knowledge.
These capabilities depend on the organisational mechanisms to support their creation,
such as cross-functional teams (Gupta and Govindarajan, 2000; Cohen and Levinthal,
1990), encouragement of individuals to participate and share ideas (Sheremata, 2000),
institutionalisation and codification of new knowledge and best practices (Zollo and
Winter, 2002; Lin and Germain, 2003) and knowledge sharing (Sethi et al., 2001;
Schultz, 2001).
The creation of knowledge at the individual level is to be expected, regardless of
organisational settings. However, it is the integration of the knowledge of individuals
with that of groups and organisations that differentiates firms as to their capability to
achieve learning and create knowledge. Even when high levels of individual knowledge
have been achieved, this knowledge still has to be integrated to a higher, collective level
(Orlikowski, 2002; Okhuynsen and Eisenhardt, 2002).
The latter argument is also true for the dynamic capabilities theory. Zollo and Winter
(2002) define dynamic capabilities as a collective activity and emphasise the importance
of deliberate learning mechanisms (specifically organisational routines and knowledge
accumulation, articulation and codification) in their development. Henderson and Clark
(1990) argue that knowledge integration helps to implement the new architectural
innovations by developing the patterns of interaction.
Summarising, organisational learning capability helps firms develop new capabilities
that can lead to more successful efforts for change and innovation.
2.4 Human resources management capability

Human capital is a profit lever of the knowledge-based economy. An organisation’s
members possess individual tacit knowledge (Nelson and Winter, 1982). Human capital
is important because it is a source of innovation and strategic renewal, whether it is from
brainstorming in a research lab, reengineering new processes or improving personal
skills. Wright et al. (1994), working from a resource-based perspective, argue that in
certain circumstances, sustained competitive advantage can accrue from ‘a pool of human
capital’. This is achieved through the human capital-adding value, being unique,
imperfectly imitable and not substitutable with another resource by competing firms
(Storey, 1995), and can be used as a basis and as an aid to implement strategies that can
create competitive advantage (Hitt et al., 2001). Thus, firms create value through their
selection, development and use of human capital (Lepak and Snell, 1999). For this
reason, human capital is also a primary component of the intellectual capital construct
(e.g., Bontis, 1999; Bontis, 2002; Edvinson, 2002) in the intellectual capital theory
literature. Consequently, HRM systems can facilitate the development and utilisation of
organisational capabilities (Lado and Wilson, 1994) and constitute a significant factor for
firm competitiveness.
The focus of most research in strategic human resource management has been on
large firms, but a growing body of literature that targets small firms provides additional
insight. There has been research focusing on innovative SMEs that studied the
relationship between human resource practices and firm performance. SMEs typically
face resource constraints that limit strategic and operational choices. So, in order to
compete in the modern international and innovation-based environment, SMEs need to
have highly motivated and skilled workers (Holt, 1993). Deshpande and Gohlar (1994)
argue that workforce characteristics, such as personal interest in the firm’s success and
worker self-discipline, are key elements for the success of an SME. McEvoy (1984)
found that the lack of progressive human resource management practices was the main
reason for the failure of the SMEs studied.
In addition, it has been argued that the various HRM practices of a firm have to be
integrated (Wright and Snell, 1991), that is, well designed and complementing each other.
Baron and Kreps (1999) argue that there has to be consistency between a firm’s various
HRP practices, so as to support organisational learning. Several empirical studies have
looked at the effects of individual work practices, such as profit sharing or training
(Bartel, 1995). However, it is the existence of complementarities between the HRM
practices that is the most important factor for increasing productivity and firm
performance. This is because of the interaction effects between the various HRM
practices. For example, Milgrom and Roberts (1995) argue that productivity
improvement teams are more effective when the firm also uses complementary practices
like employment security, skills training, flexible job assignments and communication
procedures. Ichniowski et al. (1997), in their empirical study, found that there is a
positive and statistically significant relationship between productivity and a set of
innovative work practices that complemented each other.
Summarising, HRM capabilities help firms develop new capabilities that can lead to
more successful efforts for change and innovation.
2.5 Change management capability

By change we mean any alteration of the status quo. By organisational change, we mean
a change made at the organisational level, i.e., affecting a whole organisation. Change
can be reactive or planned (Bartol and Martin, 1998). Reactive change occurs when one
takes action in response to perceived problems, threats or opportunities. On the other
hand, planned (or proactive) change involves actions based on a carefully through-out
process that anticipates future difficulties, threats and opportunities. Firms possessing
strong dynamic capabilities are frequently able to bring about planned change (Teece
et al., 1997), as they have procedures encouraging personnel to analyse, criticise and
question the status quo (Gibson and Brikinshaw, 2004; Beer, 2001). Such firms also have
the capability to actually continually pursue the realisation of the above-mentioned
encouragement procedures.
All kinds of change can be categorised in terms of their significance to the
organisation and the appropriate level of intervention required. There are, according to
Thompson (2003), six levels of change that form a vertical hierarchy, from the easiest
to the hardest:
1 changing functional strategies
2 changing business processes
3 changing competitive strategies, systems and management roles
4 changing the very structure of the organisation
5 changing corporate strategy and finally
6 changing the organisational values.
Whatever the change, resistance is always expected. Thus, the implementation of change
requires careful planning and the needs of employees need to be thoroughly considered
(Kotter and Schlesinger, 1979).
Kotter and Cohen (2002) argued that what a firm needs to actually manage and
change when trying to implement changes is the behaviour embedded in personnel. To
this end, he proposed a tightly knit eight-step process to effect change:
Step 1 Increasing urgency. In successful change efforts, the first step is making
sufficient people act with sufficient urgency, a behaviour that looks for
opportunities and problems, and that energises colleagues.
Step 2 Building the guiding team. With the feeling of urgency established, it is easier to
put together the right group of people to guide change and to create essential
teamwork within the group.
Step 3 Getting the right vision. The guiding team that was formed has to pose and
answer some questions to produce a clear sense of direction. For example, what
change is needed? What is their vision for the organisation?
Step 4 Communicating for buy-in. In successful change efforts, the vision, strategy
and direction of change is widely communicated for both understanding and
gut-level buy-in.
Step 5 Empowering action. In successful change efforts, when people begin to
understand and act on a change vision, the guiding team has to remove barriers
in their paths.
Step 6 Creating short-term wins. In successful change, empowered people create
short-term wins. Without sufficient wins that are visible, timely, unambiguous
and meaningful to others, change efforts run into serious problems.
Step 7 Not letting-up. After the first short-term win, the change effort will have
direction and momentum. People build on this momentum to make a vision a
reality by keeping urgency up and a feeling of false pride down.
Step 8 Making change stick. Tradition is a powerful force and leaps into the future can
slide back into the past. Change is kept in place by helping to create a new,
supportive and sufficiently strong organisational climate.
Summarising, change management capabilities help firms develop new capabilities that
can lead to successful efforts for change and innovation.
In our model, we believe that the mechanisms described are very important for the
development of dynamic capabilities. The five factors are correlated but conceptually
distinct, while dynamic capabilities are an unobservable construct defined by a set of
these five enabling mechanisms (constructs).
The effect of dynamic capabilities on firm performance is indirect and presents itself
through successful change and innovation efforts that can eventually lead to competitive
advantage. In this way, one can bypass the tautology described by Williamson (1999),
since innovativeness is now in between dynamic capabilities and firm performance.
3 Empirical research and results
In this section of the paper we present some preliminary results of an ongoing empirical
study. As the sample is still relatively small, we cannot statistically test the arguments
described using structural equation modelling. Instead, we examine relationships
between (1) the enabling mechanisms of dynamic capabilities and (2) innovativeness and
change capability.
We will examine whether these five constructs (absorptive capability,
market-customer oriented capability, organisational learning capability, human resource
management capability and change management capability), used as independent
variables, can help explain the results of the change efforts of Greek SMEs.
The sample consists of Greek SMEs (up to 250 employees) active in four industrial
sectors: metal products, machines and machinery, electric and electronic devices and,
finally, electric and electronic appliances. These sectors were selected because they
are technologically more active than more traditional ones and because they produce
products that are more or less used as inputs for all other sectors.
The firms that constituted the sample were located mainly with the use of ICAP
(a private firm collecting statistical data) lists, but with help from science parks and
business innovation centres.
In the lists of ICAP we put special emphasis on firms with balance sheets with
research and development expenses and with records for technology property rights,
because these were the factors most likely to signify change efforts.
All firms were asked to describe specific change and innovation efforts (product,
process, administrative or other efforts large enough to have long-term consequences)
that either succeeded or failed.
Up to this point, we have interviewed 37 firms. The questionnaire mostly consists of

closed questions – statements using a five-grade Likert scale (variables and items used
are not presented due to space restrictions, but are available upon request).
In order to pursue maximum unbiasedness, firms were assured that their names would
remain with us, while they would receive an executive summary of the findings. The
choice of live interviews with firms was preferred despite the high cost and time
constraints, because they allow a much deeper query process. The presence of the
researcher drives firms to be extra careful in answering questions and results in better and
more usable and useful results, when compared to mailing questionnaires, for example.
The dependent variable is success in change and innovation efforts (product, process,
administrative or other efforts large enough to have long-term consequences), as defined
by the ratio of successful to total number of each firm’s efforts.
Independent variables are:
• absorptive capability (X1)
• market-customer-oriented capability (X2)
• organisational learning capability (X3)
• human resource management capability (X4)
• change management capability (X5).
In order to examine whether the various dimensions of each construct created are
consistent (i.e., that they are indeed dimensions of the same variable), we used the
Cronbach’s Alpha index. In all cases, the values returned were above 0.7, which was
empirically used as a cut-off point.
In order to investigate the differentiation among firms in the success of their change
and innovation efforts, we used the nonparametric Kolmogorov-Smirnov Z test. The test
was run for two independent samples, with the grouping variable being the dependent
one. In order to group the dependent variable ‘ratio of success in change and innovation’
into two categories, we used the value 1 in cases where the variable had a value above
the sample mean (success), and 0 for the rest of the cases (failure). The results of the
Kolmogorov-Smirnov Z test are shown in Table 1.
As a reminder, the hypothesis made in Section 2 was that all five enabling
mechanisms – the variables for dynamic capabilities – were expected to be positively
related to success in change and innovation efforts.
The results of our preliminary statistical testing show that, apart from change
management capability (X5), all other variables are positively related to successful
change and innovation efforts for our sample of firms.
The unexpected result for the importance of the change management capability might
be attributed to our as yet small sample of firms. In addition, as all sample firms are
SMEs, they are by definition more flexible in relation to larger firms and, thus, there are
more intense personal relationships, with information being diffused perhaps more easily.
Third, change management is mainly related to the last and most applied stage of any
attempted change. In this stage, management may act in a more authoritative way.
Table 1 Nonparametric Kolmogorov-Smirnov Z
Most extreme differences Kolmogorov- Asymp sig. Exact sig. Point

Variables Absolute Positive Negative Smirnov Z (2-tailed) (2-tailed) probability
X1 0.514 0.000 –0.514 1.551 0.016 0.003 0.000

Absorptive
capability
X2 0.449 0.095 –0.449 1.354 0.051 0.020 0.002
Market-customer
oriented
capability
X3 0.639 0.000 –0.639 1.928 0.001 0.000 0.000
Organisational
learning
capability
X4 0.416 0.080 –0.416 1.255 0.085 0.046 0.005
Human resource
management
capability
X5 0.333 0.053 –0.333 1.004 0.265 0.124 0.005
Change
management
capability
4 Conclusions
The purpose of this paper has been to contribute to the conceptualisation of dynamic
capabilities, building on the definition by Zollo and Winter (2002). We have attempted
to define commonalities of dynamic capabilities across firms by examining the relations
between enabling mechanisms – factors and dynamic capabilities – and by developing a
multidimensional construct of dynamic capabilities.
We have argued that dynamic capabilities are an unobservable construct, a latent
variable expressed and manifested through the mechanisms described. Another argument
was that in between dynamic capabilities on the one hand, and competitive advantage on
the other, there are change and innovation efforts. Market dynamism was also taken into
account, as more turbulence makes dynamic capabilities more valuable.
Through this logic, a model was developed that is measurable, is operational and
bypasses the tautology between dynamic capabilities and competitive advantage.
Lastly, we experimented with the direct relationship that may exist between enabling
mechanisms on the one hand, and change and innovativeness on the other. The statistical
part of the research is only preliminary, as we do not have all the data necessary to
check the model with the latent construct of dynamic capabilities and the other
proposed variables.
It is our belief that future research can continue to study the concept of dynamic
capabilities and to build more robust models that may allow a cross-comparison
of research findings within similar and between different contexts (e.g., industrial,
national). Especially, market dynamism should be an integral part of a future model,

as more turbulence makes dynamic capabilities even more valuable (Eisenhardt and
Martin, 2000).
For practitioners, the determination and measurement of enabling mechanisms may
be of use in monitoring and controlling, as well as for benchmarking.
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Entrepreneurship and innovation within creative

industries: a case study on the Finnish
games industry
Mirva Peltoniemi
Institute of Business Information Management
Tampere University of Technology
P.O. Box 541, FI-3101 Tampere, Finland
E-mail: mirva.peltoniemi@tut.fi
Abstract: This paper explores entrepreneurship within the Finnish games

industry. This topic is approached with the evolutionary framework where
the entrepreneur is the driving force creating variation by introducing new
firms and new products. Within such a creative industry, most employees
provide entrepreneurial services in terms of creating novelty, introducing
new ideas and participating in deciding which ideas to follow. This means
that entrepreneurship is a social and interactive process which entails both
bargaining and learning. However, the space in which each employee may
practise his/her discretion is limited and it seems that doing this allocation well
is a crucial condition for the success of the firm. The direction of the firm
emerges from the interaction of managers and workers.
Keywords: entrepreneurship; innovation; search; games industry; creative

industries; evolutionary theory.
Reference to this paper should be made as follows: Peltoniemi, M. (2009)

‘Entrepreneurship and innovation within creative industries: a case study on the
Finnish games industry’, Int. J. Entrepreneurship and Small Business, Vol. 7,
No. 4, pp.420–430.
Biographical notes: Mirva Peltoniemi has an MSc (Engineering) from

Tampere University of Technology where she is currently working as a
Researcher and writing a doctoral thesis on the evolutionary mechanisms of the
Finnish games industry.
1 Introduction
During the last decade there have been several publications on cultural or creative
industries. The terms ‘creative’ and ‘cultural’ have been used somewhat interchangeably
in this context (see, e.g., Bilton and Leary, 2002, p.49) and similar characteristics have
been attached to both. The industries that are included under this umbrella are, according
to Hesmondhalgh (2002, p.12), the television, radio, cinema, newspaper, magazine and
book publishing, music recording and publishing, advertising, the performing arts, and
video and computer games, whereas the list by Power and Scott (2004) is somewhat
shorter, including music, electronic games, television, fashion and media. An older list
can be found in Hirsch (1972, p.642), including movies, plays, books, art prints,
phonograph records and pro football games.

Entrepreneurship and innovation within creative industries 421
The purpose of this paper is to explore entrepreneurship, meaning entries and

search processes, within the Finnish games industry. This means answering the
following questions:
• How were the firms founded?
• How do the firms innovate?
• How do the managers and workers interact?
The games industry is just one of the creative or cultural industries and thus the findings
presented in this paper cannot be generalised directly to other such industries. However,
we think that the games industry is a good example as it is truly international, growing
significantly and with content creation done in firms as opposed to individual artists
creating content (examples of which would be novels, music and movie scripts).
This paper concentrates on the innovation processes in the game development
companies. This means that the interest is in the small firms that create game content
in the hopes of getting a publishing deal with a game publisher. This structure, of large
companies selecting which ideas produced by the small companies or artists get to
be taken further, is common to most creative/cultural industries. “From a universe of
innovations proposed by ‘artists’ in the ‘creative’ (technical) subsystem, they select
(‘discover’) a sample of cultural products for organisational sponsorship and promotion”
(Hirsch, 1972, p.644).
The interaction of managers and workers is interesting because usually it is not the
CEO who comes up with the idea for the new innovative game and who would then
make the idea flow down in the organisation. It is assumed that the process has both
top-down and bottom-up effects. Bilton and Leary (2002) state that within the creative
industries, managers are manipulating and exploiting ideas just like the artistic workers,
and their task is to create “a space within which individual talents, experiences and
perceptions can collide in interesting ways” (p.61).
2 Theoretical background
In this section we shall look through some literature on entrepreneurship from the theory
of the firm perspective. Penrose (1995) makes a distinction between entrepreneurial and
non-entrepreneurial services. The entrepreneurial services consist of the introduction and
acceptance of new ideas. Such search activities are performed because the entrepreneur
believes that possible avenues for profitable expansion are likely to be found or that
expansion is necessary to be competitive. According to Schumpeter (1951), the main task
of the entrepreneur is to carry out new combinations. This is done constantly because the
source of the entrepreneurial profit may not be long-lasting and this means that the
business conception changes constantly.
Casson (1982, p.23) defines entrepreneur as someone who “specializes in taking
judgemental decisions about the coordination of scarce resources”. Casson points out
that even though everyone is involved in taking such judgemental decisions at some
point, the entrepreneur is a specialist in it and takes decisions on behalf of other people as
well. The coordination of scarce resources refers to improving the situation by making
changes in what the firm puts its resources into. This needs to be done as long as there is
422 M. Peltoniemi
new information becoming available that makes the current allocation of resources
appear inefficient (p.25). This definition of an entrepreneur rests heavily on the function
of decision making.
Another view on entrepreneurship can be found in Metcalfe (2006). According to
him, an entrepreneur is someone who changes the rules of the game. Thus, just starting a
business is not an entrepreneurial activity as long as the business is replicating existing
businesses. Entrepreneurs make conjectures that consist of both knowledge and beliefs.
These conjectures are tested by exposing them to the market and then either confirmed
or falsified.
According to Witt (1998), an entrepreneurial undertaking consists of:
• people taking the entrepreneurial positions
• people taking the non-entrepreneurial positions
• the business conception that is to be followed
• the mechanisms that transmit the conception created by the entrepreneurs to
the employees.
He states that the last one is the especially tricky part. On the other hand, Cyert and
March (1992) claim that such a transmission does not really take place. They state that
organisational goals are the result of a continuous bargaining-learning process. This is
because the goals are often vague and there may be several goals simultaneously.
A fundamental property of an entrepreneur is the ability to convincingly answer the
question, ‘What are we trying to do here?’ This entails imagination, as the entrepreneur
has to be able to make assessments over things that do not yet exist. It also entails
intuition, as decisions have to be made with imperfect knowledge. The social aspect of
communicating the goals and getting employees to follow them is also crucial. Finally,
having the courage to venture into the unknown and tolerating uncertainty and constant
change are essential for an entrepreneur.
The division of firm personnel into entrepreneurial and non-entrepreneurial positions
is somewhat problematic. It is agreed that the entrepreneur is the leader and the
employees are the followers. The entrepreneur is in charge of coming up with new ideas
and making decisions on which ones to implement. Thus, the entrepreneur is in charge of
creating novelty. The employees, however, have some kind of area of discretion, as the
plans of the entrepreneur are not perfectly detailed. In addition, in many lines of business
the employees are expected to be creative and come up with new ideas. With this in mind
we shall move into the case study findings on the nature of entrepreneurship within the
Finnish games industry.
3 Case study findings
The data for the case study were collected by interviewing the representatives (CEO, MD
or equivalent) of eight firms and some information of each firm is presented in Table 1.
The firms have been chosen to represent the industry as a whole and thus these firms
are of different sizes, ages, platform strategies and positions within the value chain.
Section 3.1 concentrates on the founding of the firms and the early stages following
it, Section 3.2 on innovation in existing firms and Section 3.3 on the roles of managers
and workers.
Firm Founded Employees Platform Subcontractor Developer Publisher Who? Why? How?
Table 1
Alpha 2004 35 Mobile X X Two colleagues from We can do it better Business plan
an existing than others. There is Recruiting
games firm money to be made
External financing
Beta 2002 27 Mobile X X Three young men We want to Technology

working in ICT do games Content
Customers
Gamma 2000 24 Mobile X X One man with More advanced Technology

a vision mobile phones need Games to verify
more advanced technology
games. Exit. Passion
Delta 1999 100 Mobile X X Two friends We want to do Subcontracting

cool things Original games
Epsilon 2000 170 Online, mobile, X X Two friends with We want to explore Demo
handheld, console an idea the applicability of Founding of the firm
our idea as business potential
Information on the firms and their early phases
was discovered
Zeta 2002 9 PC, online X X Six friends with It is possible to make Game engine
common interests a living out of this Founding of the firm
Complementing
fields of know-how
Entrepreneurship and innovation within creative industries
to get revenue
Eta 1995 25 Console, PC X Six guys with games, Boyish ambition to Garage
animation and coding show off First project
as hobbies
Founding of the firm
Theta 1995 13 Console, PC X Combination of two It is our dream to Idea development

existing teams do games Publishing deal
Founding of the firm
423
424 M. Peltoniemi
A case study is defined as an empirical inquiry that investigates a contemporary

phenomenon in its real-life context, the boundaries of which are not clearly evident (Yin,
1994, pp.13–14). In addition, a case study deals with a situation where there are many
more variables under interest than there are data points (Yin, 1994). The phenomenon
under study has many more variables than data points, which makes the case study a
suitable approach. In fact, there is only one data point, i.e., the games industry in Finland,
whereas the number of interesting variables is vast.
3.1 The birth of new firms

Table 1 synthesises the early phases of the firms. The table includes information on
who founded the firm, what was their motivation and what were the first stages in
the process.
The founders of the firms can be roughly divided into three different groups. We
call the first group ‘kids’ and it covers the firms Delta, Zeta and Eta. The common
denominator is that the founders were very young, mostly teenagers or university
students. The driving force seems to have been that they had nothing to lose. The
founders had a vision of what they wanted to do and how that would generate revenue.
However, that vision was quite blurry and was iterated several times before the business
started to pick up. And not all of these firms are there yet.
For Delta, the main motivation in the beginning was to do something fun and there
were not too many business considerations. However, as the realities of the business sank
in, they became willing to do things that are less ‘cool’. During this process they were
able to formulate their strategy and that is to do products instead of subcontracting.
The firm Zeta started from a different direction, namely from the game engine. They
had quite a bold vision early on, but they did not really have an understanding of all the
challenges. This led to a significant change in strategy to subcontracting in the hopes of
financing the development of original titles through income generated that way.
The third firm of this group, Eta, is perhaps the most classic entrepreneurial story,
as a garage is the scene of the main events. There were several people with common
interests and they developed ideas in a self-organising fashion, as no one had a clear
vision of what this group should head towards. As they tried out several things, they were
able to formulate a direction based on feedback on those trials.
The second group is called ‘insiders’ and it covers the firms Alpha, Beta and Theta.
The founders of these firms have had experience within the games industry or within
related industries, and they had quite a good grasp of the nature of the business from the
beginning. Within this group, quitting the previous job is quite clearly the point in time
when they became entrepreneurs. They wanted to do the same things as they were doing
previously, but in a different and better way.
Alpha could be defined as a spin-off of an older firm and the central motivation was
to do things better. This is quite in contrast to the firm Beta, which was founded by three
young men working in ICT, thus having knowledge and understanding of the underlying
technologies and their potential, who wanted to start earning a living by doing games.
Alpha had a business vision and Beta a technological vision that they could not follow in
their previous jobs. On the other hand, Theta was born as a result of combining two
existing teams. There the motivation was to join forces to be stronger and to have the
ability to do larger projects.
The third group is called ‘visionaries’ and it includes the firms Gamma and Epsilon.
Within both of these firms, there was a clear vision from the start, either a product or a
service, that the business has concentrated on. This also means that as attention is drawn
solely to the product or service, other parts of the firm may have been left with
inadequate attention. Within the firm Epsilon, the vision was strong enough to carry them
through the initial difficulties. Gamma has not been as lucky as it has had to iterate its
focus to survive.
Many interviewees stated that the typical way to start a game firm is by building on a
specific idea for a game and that their firm is a rare exception in that sense. Only one of
these firms claims to have done it this way. It seems that the mainstream way to start a
games firm is to have some kind of understanding or experience of what they are trying
to do and then start probing for what would actually generate revenue. As the firm found
a short-term revenue strategy, they started to think about a long-term one. However, the
long-term strategy is something that requires investments and some kind of ability to bear
the risks involved. For this reason, the short-term strategy has had to be kept alive until a
sufficient base in terms of money, contacts and employees has been acquired. This kind
of ‘crunch period’ is visible in the histories of all the firms. However, the length and
nature of the period varies between the firms. The crunch period sometimes lasts only
a few months, but after several years some firms are still struggling. It is typical to do
subcontracting and to simultaneously develop original projects to the demo stage.
However, if the demo does not sell the firm is back to square one.
It seems that the main difficulty for these entrepreneurs has not been in
communicating the goals to the employees, but in finding a match between their goals
and what they can persuade consumers or publishers to buy. The business conception
has mostly been quite broad and flexible and there have been constant search efforts to
find a profitable area on which to focus which would enable the firm to overcome the
crunch period. In most firms the founding of the firm has essentially been a social
process. There were several people giving their input and some ideas were eliminated
and some implemented, although they may have been iterated several times. Thus the
entrepreneurial team has been a more common actor than the heroic entrepreneur.
3.2 The innovation process

In the beginning there has to be an idea of what the game would be like and what it
would be composed of. Most firms stressed that they want everyone to produce such
ideas and present them informally. The expectation of ideas from everyone working
in the firm basically went without saying. It seemed to be a standard practice of the
industry. Some interviewees stated that that is the reason why people work within the
industry; if they did not have such a desire and ability to come up with new things they
would be doing some other kind of software:
“We of course have a process on how an individual can give ideas. Quite many
people have such job descriptions that they better come with ideas if they want
to keep on working here.” (Epsilon)
However, this production of ideas is not completely free of boundaries as most firms
have either a more strict or a more loose focus on what kinds of games they do. This can
be about the content; some firms do only car games or only action games, for example.
Another limiting factor is technology. This means that the kinds of ideas are preferred
that can be supported by the existing technology base of the firm.
426 M. Peltoniemi
Another interesting aspect of the idea production process is that the ideas of some
people are appreciated more than those of other people. The biggest responsibility for
idea development is usually on the game designer or producer. There is the assumption
that these people have a more advanced ability to estimate the customer response
or assess the feasibility of the idea. Basically, those ideas get more attention in the
decision-making process and it is thus more probable that they will be developed further:
“Every one gives ideas but only a few people give good ideas. Those are the
people who can see the product development cycle all the way to the end or at
least some part of it so that they can see where it is going and where it could
go.” (Eta)
“You can build it in many different ways. It is possible that one person has
quite an advanced vision on what the game is to be like. Small things and
influences come from others.” (Beta)
Furthermore, in addition to the master idea there is room and need for many smaller
ideas, especially in larger console and PC games. Such a game can include hundreds of
details that complement the general idea of the game. The high concept of the game
defines the general direction and the small ideas bring flesh to the bones:
“The high concept defines it so that it goes approximately west and then there
is a lot of room for different kinds of flowers to flourish as long as the general
direction is correct. Individual ideas come from anyone and some of those are
accepted and may even as such become a part of the finished game and then a
part of the ideas are changed and iterated first. If you have an idea related to
gameplay for example like what could happen in the game then usually those
are presented informally in the office corridor or somewhere.” (Eta)
The decision on which high concepts to start developing is usually done by the board of
the firm. Some smaller firms referred to weekly meetings with all the employees where
such decisions are made. It is a decision that is done by a group of people and several
aspects are taken into account. Also, some firms ask the opinions of their publishers or
operators before making a decision on their own.
Producing ideas and deciding whether to implement them is a constant process in a
game firm. However, it is not just a straightforward string of decisions followed by
implementations since during the process new information concerning the feasibility,
business potential and the fit between the idea and firm strategy is received and earlier
decisions are adjusted. This is well expressed in the following comment:
“Game projects are quite inexplicable and irrational because as we start doing a
game it is never strictly specified and in any case some mechanisms of the
game will change on the fly as the game designer says that this idea was good
on paper but it doesn’t work. And as the process goes through the milestones
then the customer might come up with requests for additional features. So game
projects are lively things and it is interesting to balance it all. Specifications
change but the deadline and the budget must hold.” (Gamma)
This means that the game firms undertake search activities continuously. They may be
triggered by a specific problem, such as “What kind of an enemy should the hero face at
level three?” But there is also the constant problem: “What should we do to justify our
existence in the market?” Basically, this justification follows from doing something
different or doing something better. The task of the firm could be defined as the search
for a feasible and commercially interesting novelty in the space of digital entertainment.
3.3 The roles of management and workers

There is no universal organisational structure that each game firm should follow, but a
suggested general construction is presented in Figure 1.
Figure 1 Roles and tasks in game development
Management
Sales and
General Art/Creative Financial
marketing
Licensed IP
The game
Deadline
Budget
Theme
Ideas
Interface between management and workers
Budget Game Art

Producer
deadline designer story
Game parts
Guidelines
Ideas
Workers
Graphics/ Coding/ Sound, etc.

Art Technology
Basically, each firm has at least one person responsible for the management of the firm.
Depending of the size of the firm, different management areas are separated for different
people to take care of. The management level is in charge of many tasks from day-to-day
housekeeping to the long-term strategy of the firm. They take part in making decisions
on which games to start developing and how much resources can be allocated to each
project, but not in decisions on any details inside the game.
Between the management and the workers are the producer and the game designer.
Usually, the producer is in charge of the project management, including budget and
deadline. The game designer is in charge of the content. This usually translates into some
kind of tension between the two as the game designer wants to include many good ideas
into the game while the producer has limited resources and time to make it happen. On
the other hand, in smaller firms these can be the same person and in larger game projects
there can be several of both:
428 M. Peltoniemi
“The role of the producer is quite complex in that sense that his responsibility is
to keep the game project in schedule but also that it is of good quality. If games
are developed in-house and there is a game designer and producer in the team
then they are in a battle of wills. Game designer says that I want this and this
and this and the producer says that you can’t have them. Then there is arm
wrestling over what is so important that it is included even though it would
entail risking the deadline.” (Gamma)
The workers each have a specific area to focus on. However, they may have quite a large
area of discretion as specifications may be quite vague. Also, they usually make quite a
lot of suggestions, and alarm the producer or game designer if they think that something
is not going to work. Even though the workers are expected to be creative and have
problem-solving skills, they still have boundaries within which to work. This is a matter
of productivity as well as of limiting the stress put on each employee. However, it is a
double-ended sword as there is a fine line between too many and too few boundaries
when it comes to creative employees:
“We have to focus their thinking so that we say that these kinds of things,
concentrate on these. But there is quite a lot of room to move around. For a
creative person you have to allow that. If you don’t then there is no output and
they will leave to work somewhere else.” (Gamma)
No matter what kind of hierarchy is described on the organisational chart, there is usually
an ongoing debate inside the firm on what kinds of things they could and should do. In
some smaller firms some decisions may be done through voting. As firms grow they may
move on to votes where some are more equal than others. After that the next step is
defining who is responsible for what and has the power to decide on those matters:
“We have very strong personalities and they have opinions independent of
expertise. Consensus is prevalent but it isn’t automatic. To get the people to
accept the direction of the firm or the project requires discussions. In a perfect
world every one would have the same goals but in reality you have to create the
will to go to that direction and to allocate efforts to the right things. People who
have come to work here and stayed have had the preference to do these kinds of
things and in this environment. There is a lot of that but there is no stereotypic
or one shared vision even about the game project if everyone could make the
decision.” (Eta)
If entrepreneurship is defined as the introduction and acceptance of new ideas, then most
people within a game firm take part in entrepreneurial tasks. Ideas are introduced
by basically everyone and they are expected to do that. Formal decisions on what to
do are confined to the territory of a limited set of people from the management, producer
and designer functions. On the one hand, the deciding bodies limit idea production by
focusing the workers’ efforts on certain areas, and on the other hand, the workers
producing ideas limit the set of alternatives with their personal preferences and talents.
This would lead to the conclusion that in the context of the Finnish games firms,
entrepreneurship is a social process and it entails both bargaining and learning. Decisions
are made based on arguments that may be somewhat objective but often are subjective
views. Those decisions are adjusted and iterated as more of such arguments become
available. Even though decisions on which game concepts to develop are usually made by
a limited number of people from the management functions, the decisions are very much
influenced by the information that workers give on the feasibility, originality and market
potential of the game. Managers choose the focus of the firm, but that decision is
influenced by what the workers are capable of doing. Furthermore, the workers develop
their expertise through projects that the firm undertakes and that creates a path-dependent
behaviour, as some directions become more favourable for the firm based on acquired
expertise. The accumulation of technical and other expertise interacts with perceived
market potential. In this way expertise is developed in areas with good market potential,
while on the other hand, market potential is searched predominantly in areas that can
be supported by the workers’ expertise. As time passes this process constructs the future
of the firm.
4 Conclusions
The findings from the Finnish games industry indicate that people taking care of different
kinds of tasks within a firm conduct different kinds of search activities. The space where
they search has different dimensions. The task of management is to narrow down the
space within which each employee should conduct search activities. The purpose of
control mechanisms, such as budgeting and definition of responsibilities, is to keep
people within acceptable alternatives. The latitude of each person in the firm is dependent
on his/her position, seniority and personal characteristics. This latitude is defined by the
management but it is also a matter of taking up space. This means both the direction of
the search and the size of the area of discretion. Basically some people are more equal
than others even though there are no strict hierarchies.
It seems that the fundamental condition for the success of a game firm is to allocate
the search space appropriately, giving on the one hand sufficient freedom for creative
people and on the other hand, sufficient guidance to focus the efforts. However, this is
not a matter of dictation but of dialogue. Most of what the firms within the games
industry do can be defined as searching, which is fundamentally an entrepreneurial
function. This means that most employees of a firm undertake entrepreneurial tasks.
Searching is social and interactive as the directions where to commit search efforts and
the size and location of the allowed space for each employee is continuously adjusted in a
process that entails both learning and bargaining.
The description of entrepreneurial activities by Penrose (1995) as introducing and
accepting ideas would here mean that most employees perform such activities. Equally,
the search for new opportunities (Schumpeter, 1951) is something that practically
everyone takes part in. However, Metcalfe’s (2006) definition of entrepreneurship as
changing the rules of the game does not really fit here as none of these firms have created
anything fundamentally different in terms of their business models. The transmission of
the business conception to employees (Witt, 1998) is not a problem here. Instead, the idea
of the learning-bargaining process by Cyert and March (1992) is quite an accurate
description of the entrepreneurial activity in these firms. Casson’s (1982) definition of
the entrepreneur through specialisation to decision making is not that easily translated to
the context of the games industry, as people specialise in decision making to different
degrees. Thus, it appears that the difference between entrepreneurs and nonentrepreneurs
is more accurately put as a difference in degree than as a dichotomy.
This study indicates that in order for novelty to be created, there has to be both
divergence and convergence within the firm. Even though managers and workers take
different roles in this process, they both contribute to each of these. On the one hand,
managers create convergence by limiting the space where each employee may practise
430 M. Peltoniemi
searching. On the other hand, they create divergence by directing the search efforts to
new areas. Employees create divergence by introducing ideas and convergence by
offering a limited set of alternatives, and limited information on each, for the managers to
choose from.
It would be a harsh simplification to define an entrepreneur as the person who
specialises in decision making and who thus makes the decisions for other people. The
findings from this study indicate that there are different kinds of decisions that are all
important for the direction of the firm. The management-level people contribute mostly
to decisions on the search for funding, internationalisation, marketing, distribution
channels and partners. The employees contribute mainly to decisions on game content
and technology. Basically, the employees decide what to sell and the managers decide
how to sell it. Different kinds of entrepreneurial discretions are required in these roles.
They make their decisions guided by feedback processes between the focus of the firm,
the skills of the people and the observed market potential.
References
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creative industries’, International Journal of Cultural Policy, Vol. 8, No. 1, pp.49–64.
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A. Basu and N. Wadeson (Eds.) The Oxford Handbook of Entrepreneurship, Oxford
University Press, pp.59–90.
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Power, D. and Scott, A.J. (Eds.) (2004) Cultural Industries and the Production of
Culture, Routledge.
Schumpeter, J.A. (1951) The Theory of Economic Development: An Inquiry into Profits, Capital,
Credit, Interest, and the Business Cycle, Cambridge, MA: Harvard University Press.
Witt, U. (1998) ‘Imagination and leadership – the neglected dimension of an evolutionary theory of
the firm’, Journal of Economic Behavior & Organization, Vol. 35, pp.161–177.
Yin, R.K. (1994) Case Study Research: Design and Methods, SAGE Publications.
Partnerships and innovative patterns in small and

medium enterprises
Elena Cefis*
University of Bergamo, Italy
and
T.C. Koopmans Research Institute
Utrecht School of Economics
Utrecht University
Janskerkhof 12, 3512 BL Utrecht, The Netherlands
E-mail: e.cefis@econ.uu.nl
Mihaela Ghita
Department of Accounting and Finance
University of Antwerp
Stad Campus – SB.312
Prinsstratt 13, BE – 2000 Antwerpen, Belgium
E-mail: Mihaela-Livia.Ghita@ua.ac.be
Anna Sabidussi
Department of Business Administration
Wageningen University and Research Centre
Hollandseweg 1, 6706 KN, Wageningen, The Netherlands
E-mail: anna.sabidussi@wur.nl
Abstract: This paper investigates the effects of cooperation agreements as

possible drivers of innovative performance for Small and Medium-sized
Enterprises (SMEs). Drawing on the theoretical paradigm of ‘open innovation’
and on empirical evidence of the existence of a ‘threshold to innovate’, we
analyse whether partnership agreements act as determinants for the SMEs to
cross the innovative threshold or to persist in innovation activities. Our findings
suggest that adopting cooperative strategies is beneficial for companies in order
to become and/or remain innovators. Distinguishing among size classes, the
collaborative advantage seems to be higher for the SMEs: joining forces with
other companies, the SMEs can overcome the limits derived from their scarce
resources and become active innovators.
Keywords: cooperation; partnership; innovation; Small- and Medium-sized

Enterprise; SME; probit.
Reference to this paper should be made as follows: Cefis, E., Ghita, M. and
Sabidussi, A. (2009) ‘Partnerships and innovative patterns in small and medium
enterprises’, Int. J. Entrepreneurship and Small Business, Vol. 7, No. 4,
pp.431–445.

432 E. Cefis, M. Ghita and A. Sabidussi
Biographical notes: Elena Cefis is an Associate Professor of Applied

Economics at the Department of Economics, University of Bergamo, and a
Research Fellow at the T.C. Koopmans Research Institute, Utrecht University,
the Netherlands. She previously taught at the Utrecht School of Economics,
Utrecht, Pompeu Fabra University, Barcelona, and at Bocconi University,
Milan. She obtained in 1995 her PhD degree in History and her PhD degree in
Economics in 1999 at the European University Institute, Florence, Italy. She is
also an Associate Research Fellow at the St. Anna School of Advanced Studies,
Pisa, Italy, and her main areas of research are industrial dynamics and the
economics of innovation. She has published in Industrial and Corporate
Change, Research Policy, Small Business Economics and the International
Journal of Industrial Organisation.
Mihaela Ghita is a PhD student within the Department of Accounting and

Finance of the University of Antwerp, Belgium. She holds a BSc in Economics
and an MSc in Social Policy Analysis and Statistics from KU Leuven, Belgium,
and previously, she has worked as a Research Assistant at the Utrecht School of
Economics, Utrecht University, the Netherlands, on a project part of the
National Research Committee of the Netherlands (NWO) programme on
innovation dynamics.
Anna Sabidussi is an Assistant Professor of Corporate Financial Management

and a Research Fellow of the Department of Business Administration at
Wageningen University and Research Centre, The Netherlands. Her research
areas are innovation management and R&D investments’ optimisation. Within
the R&D investments’ decisions, she is especially interested in real options
analysis. Within innovation management, her focus is on the strategic alliances,
mergers and acquisitions in technology-related industries. Since 2005, she is a
member of the research group for the project The Impact of M&A-Driven
Market Dominance on Innovation Dynamics, sponsored by the NWO.
1 Introduction
Innovation is widely recognised as a driver of economic growth. Societal well-being
benefits from innovation, as well as individual firms. From a macro perspective,
companies’ ability to innovate represents a vital function for stimulating competitiveness
and employment in economies (European Commission, 1993; European Commission
1995a). From a micro point of view, companies are continuously challenged by
the need to be innovative, not only in order to flourish, but also to survive (Cefis and
Marsili, 2006).
According to several studies (Geroski et al., 1997; Cefis, 2003), a threshold effect
exists in innovation activities. Distinguishing between two categories, non-innovative
and innovative firms, Cefis (2003) found that companies experience the highest
barriers when they try to exit their condition of non-innovators. In a study of Cefis (2003)
based on patent applications, it has been shown that the probability to have the first patent
is uniformly much lower that the probability to have n + 1 patents (when n ≥ l). The
threshold induces a persistent negative effect and non-innovative companies tend to
remain in their current status.
The increased speed and complexity of technological advancements (European
Commission, 1995a) and the multitechnological nature of products (Narula, 2004) have
remarkably amplified the difficulties companies face in becoming and/or persisting as
Partnerships and innovative patterns in small and medium enterprises 433
innovators. Innovating, especially in capital- and knowledge-intensive sectors, can

require prohibitive levels of resources’ deployment. In these circumstances, the threshold
effect can be particularly hampering for the Small- and Medium-sized Enterprises
(SMEs) that are typically constrained by limited resources and can, therefore, experience
higher barriers to innovate (Narula, 2004).
In response to these complications, the last decades have witnessed the affirmation of
the ‘open innovation’ paradigm (Chesbrough, 2003) and the widespread recourse to
partnerships (Hagedoorn, 2002). From an ‘open innovation’ perspective, companies do
not dispose of all the necessary resources needed to innovate. Partnerships can be used
to access those resources, especially knowledge, or to ease their development
(Hagedoorn, 1993; Duysters and De Man, 2003). The main objective of the present paper
is to determine if partnership activities have an impact on the firms in order to become
innovators and/or to persist in the condition of the innovators. The question is approached
especially from the perspective of the SMEs that are mainly concerned with filling their
‘resource gaps’ for innovating (Teng, 2007).
The present paper is structured as follows. Section 2 provides a brief overview of the
theoretical foundation explaining the recourse to partnership activities for innovation.
Section 3 develops the main hypothesis to be tested. Section 4 presents the data and the
methods applied. Section 5 reports the obtained results. The conclusive remarks and the
recommendations for further research are addressed in Section 6.
2 Theoretical background
Partnership activities can refer to a wide range of administrative modalities (Osborn and
Hagedoorn, 1997), including equity alliances as well as collaborative agreements. In the
present paper, we will use the generic term ‘partnerships’ to indicate the broad category
of interfirm relationships established in seeking a mutual benefit to achieve innovation.
The concept that companies foster innovation by using partnerships finds a
conceptual foundation in the Resource-Based View (RBV) perspective (Nooteboom
et al., 2007).
The RBV approach derives from the works of Penrose (1959), Wernerfelt (1984),
Barney (1991) and Barney et al. (2001), among others. At the core of the RBV approach,
there is the concept that companies’ competitive advantage is determined by the key
resources the firms possess (Wernerfelt, 1984). These resources, to guarantee a
competitive advantage, have to be rare, valuable, not substitutable and imperfectly
imitable (Barney, 1991). Since it is difficult for competitors to replicate them, these
resources can be conceived, in economic terms, as the fonts of Ricardian rents (Lockett
and Thomson, 2001). From the RBV standpoint, resources can be classified as tangibles
(land, buildings, machinery, etc.) or intangibles (Galbreath, 2005). Intangible resources
can be classified as assets or skills (Hall, 1992). Assets refer to what a firm owns (like
patents, trademarks, etc.), while skills refer to the firms’ know-how and culture.
Knowledge has been identified as the most strategically important intangible skill (Grant,
1996). The role of knowledge is so relevant that a knowledge management perspective
has been defined as “the essence of the RBV” (Conner and Prahalad, 1996).
There is a strong link between knowledge generation and innovation (Popadiuk and
Choo, 2006). The firm that is able to generate new knowledge and transform it into new
products can be defined as a knowledge-creating company whose central business is
continuous innovation (Nonaka, 1991). Especially in markets where technologies evolve
fast, companies need to continuously engage in the process of developing new resources
(Wernerfelt, 1984).
To account for this dynamic perspective, the RBV theory has been expanded to
include ‘dynamic capabilities’. Dynamic capabilities refer to the “firms’ ability to
integrate, build and reconfigure internal and external competences to address rapidly
changing environments” (Teece et al., 1997). In the definition above, two aspects are
especially worth noting. First, from a resource/knowledge perspective, novelty can be
achieved through the integration, reconfiguration or ‘recombination’ of resources
(Matthews, 2002). Recombination can be obtained by means of two mechanisms: the
synthesis of the existing resources (where new links among the different knowledge bases
are generated), or the reconfiguration of the resources (where the existing links among
the knowledge bases are changed or altered) (Galunic and Rodan, 1998).
Second, the resources used to innovate can be both internally developed or
externally sourced. The rationale, from the RBV perspective, to enter partnership
activities is that “organizations enter alliances with each other to access critical
resources” (Gulati and Gargiulo, 1999) and to generate new knowledge (Tsai, 2001).
Alliances, conveying resources from the outside world to the company, represent a
“dynamic capability” (Eisenhardt and Martin, 2000). Partnership activities are especially
significant for innovation because the firms cannot possess all the necessary resources
alone (Powell et al., 1996).
The recourse to partnership activities mainly takes place when a company is in a
weak strategic position, struggling in highly competitive markets, or pioneering unknown
technologies (Eisenhardt and Schoonhoven, 1996; Powell et al., 1996). Das and Teng
(2000) have categorised the partnerships, distinguishing the level of similarity (the degree
of resemblance among the resources) and the level of utilisation (the relevance of the
contribution) involved in the relationship.
When similar resources are associated with a high level of utilisation, they can
typically generate economies of scale and scope in Research and Development (R&D).
When dissimilar resources are combined with a high level of utilisation, they unveil all
their potential generating synergies (Das and Teng, 2000). In case of similarity, the
exchange of technological knowledge among the partners is facilitated (Mowery et al.,
1998). When dissimilar resources have to be combined together, the partners need to
have a certain level of ‘absorptive capacity’, that is, the “ability to recognize the value of
new, external knowledge, assimilate it and apply it to commercial ends” (Cohen and
Levinthal, 1990; Mowery et al., 1998). Therefore, a certain level of internal previous
know-how is crucial in order to benefit from the partnership and to innovate.
3 Hypothesis
Consistent with the theoretical framework presented above, cooperation fosters

innovation by permitting the integration of complementary knowledge (De Man and
Duysters, 2005).
Using partners to access resources can also be less time-consuming and less
expensive than generating the same resources in-house (Hagedoorn, 1993). Moreover,
partnerships can be used to combine the existing resources and reach the critical mass
needed to innovate (Bidault and Cummings, 1994). All of the arguments above are
significant for all companies, but they have a special relevance from the perspective of
the SMEs. According to the European Commission, “SMEs are the key sector for
generating … creativity and innovation through the Union” (European Commission,
1995b). The SMEs have an absolute size limitation, but this constraint has been
overcome by the recourse to partnership activities (Narula, 2004).
Therefore, we formulate the following hypotheses:
H1a Cooperation has a positive effect on companies to become and/or

remain innovators.
H2a The SMEs benefit more from cooperation than large companies in order to become
and/or remain innovators.
Despite all the good reasons mentioned above to expect positive effects of the
collaboration on innovation, the literature also reports reasons why partnerships may fail.
In particular, and in line with the theoretical framework presented above, the results of
the partnership can be hampered by the relative distance between the knowledge bases of
the companies involved in the relationship (Lane and Lubatkin, 1998). Additionally,
some companies can decide to enter a cooperation not to share and develop knowledge,
but to predate their partners’ technological expertise (Hagedoorn, 1993). This can happen
more frequently when cooperation is established among competing firms (De Man and
Duysters, 2005). In this case, companies incur costs to protect themselves from their
partners’ opportunistic behaviour (Chan et al., 1997). Therefore, managing alliances also
requires a certain level of existing resources and the associated costs can be unaffordable
for SMEs (Narula, 2004).
Therefore, we formulate the following hypotheses:
H1b Cooperation has a negative effect on companies to become and/or

remain innovators.
H2b The SMEs benefit less from cooperation than large companies in order to become
and/or remain innovators.
4 Research design
4.1 The data
The analysis has been performed by linking two Dutch databases: the Community
Innovation Survey (CIS) and the Business Register (ABR).
The CIS collects data about innovation at the firm level and it has been conducted on
the EU state members. The survey represents a joint effort by the Commission’s services,
Enterprise DG and Eurostat to obtain comparable information and to monitor the
innovative characteristics of the European companies. The data are collected by national
statistical authorities every four years and it refers to the activities performed by firms in
the previous three years.
The Netherlands represents an exception to the typical situation in other European
countries, as the CIS is carried out here every two years. This offers, therefore, the
opportunity to study five waves: CIS 2 (from 1994 to 1996), CIS 2.5 (from 1996 to
1998), CIS 3 (from 1998 to 2000), CIS 3.5 (from 2000 to 2002) and CIS 4 (from 2002
to 2004).
Typically, CIS questionnaires have been addressed to companies with at least ten
employees (Eurostat, 2001). In this respect, the Netherlands has followed a dissimilar
path, having also included for CIS 2.5 and CIS 3 companies with less than ten employees.
The ABR is the official database of all the companies registered in the Netherlands
for fiscal purposes. It contains detailed information on the number of employees and the
sector (at the six-digit Standard Industrial Classification or (SIC)) in which the firm
operates. Moreover, the dates of the entrance and exit from the ABR, precious
information about the lifespan and/or the age of the company can be derived and tracked
(Cefis and Marsili, 2006).
The resulting unique dataset obtained that combines the CIS waves and the ABR
provides distinctive information on the characteristics and innovative activities of more
than 3500 companies per wave. In our analysis, we have decided to use the most recent
non-overlapping CIS waves, namely CIS 3 and CIS 4 and not the entire panel data
available, in order to avoid a severe selection problem due to the stratified characteristics
of the CIS samples. Indeed, we needed to consider the lagged cooperation proxy that
indicates the presence of the cooperation agreement in the previous CIS wave with
respect to the one in which we are measuring the effects on innovation. The lag among
the two non-overlapping CIS waves is necessary in order to allow the cooperation
agreements to exert their effects on the firm’s innovation proxies and to avoid an
endogeneity problem. Therefore, we chose to analyse the firms present in the two most
recent non-overlapping waves to capture the effects of partnership agreements on
innovation. A schematic overview of the construction design of our dataset is given
in Figure 1.
Figure 1 CIS manufacturing – data file structure
Source: CIS and ABR

records
CIS files (Waves 3, 3.5, 4) ABR files 1998–2004
FIRM DEMOGRAPHIC DATA
INNOVATION FIRM-LEVEL DATA
CIS–ABR PANEL
1998–2004
4.2 The methodology

The main focus of our analysis is given by the changes in the firms’ innovative behaviour
among the different size classes. The choices that the firms make with respect to
investing in innovation or not, following cooperation agreements, are analysed using
probit regression models.
Firstly, we estimate the Transition Probability Matrices in order to obtain an estimate
of the probability of firm i moving from the status of active innovator (Iit–1) or
non-innovator (N–Iit–1) in period t – 1 to an active innovative status (Iit) in period t. A
schematic overview of the variables used to depict the firms’ innovative patterns across
waves is given in Table 1. It also includes an accurate description of the control proxies
that will be employed in the parametric models.
Table 1 The variables used to develop the firms’ innovative patterns
Dimension Variable Description

New entrant Transition at time t from Firms registered a change in innovative
innovators non-innovator t – 1 to behaviour, from non-innovator in the
innovator t previous CIS wave to innovator in the
present one
Persistent Transition at time t from Firms registered no change in innovative
innovators non-innovator t – 1 to behaviour, registering as an innovator in the
innovator t previous CIS wave and staying as an
innovator in the present one
Involvement in Lagged involvement (with Firms declared having been involved in
cooperation respect to transition at time t) cooperation agreements in the previous
agreements (at in cooperation agreements for CIS wave
time t – 1) innovative purposes
R&D intensity Lagged R&D effort (with R&D expenses divided by the number of
(at time t – 1) respect to transition at time t) employees in the previous CIS wave
Pavitt’s Firms’ taxonomy, four categories:
taxonomy science-based, specialised suppliers,
scale-intensive, supplier-dominated
Firm size Number of employees Size classes: small (10–49), medium-sized
(50–249) and large (>250)
Firm age Expressed in months (since
the date of entry on the ABR)
Each probability (pit) of change from one innovative state to another within a timeframe
[(t – 1) – t] can be regarded as a pattern of firm-level innovative behaviour. We analyse
whether or not the firms are more likely to pass from non-innovators to active innovators,
namely, to make higher investments in R&D, in licensing, the training of personnel or in
innovative machineries following their entry into cooperation agreements. Two
innovative patterns will be the main focus of the analysis: the firms passing from
being non-innovators to active innovators, as well as the firms’ persistence in
innovative activities.
We assume that a firm i will experience a change in its innovative behaviour in period
t following a cooperation agreement undertaken at time t – 1. The expected change in the
innovative patterns depends on:
• their previous involvement in innovation-driven cooperations

• their observable control variables (technological regimes, firm size and age)
• their unobservable firm-specific attributes, captured by µi.
The effect of the unobservable time-varying factors is captured by idiosyncratic
error (εit).
Using a probit framework, the model can be estimated by the following
empirical model:
P (ϕis ) = probit ( β0 Coit −1 + β1 R & Dit −1 + β2 SBi + β3 SSi + β4 SIi + β5 Ageit −1 + β6 Ageit2 −1
+ β7 Sizeit −1 + β8 Sizeit2 −1 + β9 Ageit −1 ∗ Sizeit −1 + µi + εit ),
where ϕis denotes the firms’ transitions in different innovative states with s = 1, 2.
More precisely:
Pr (Yit = 1 | Yit −1 = 0) = ϕi1
Pr (Yit = 1 | Yit −1 = 1) = ϕi 2 ,
where Yit is the firms’ innovative status (0 = non-innovator/1 = innovator). In particular,

ϕ i1 represents the probability that a firm that was a non-innovator in period (t – 1) has to
become an innovator in period (t). Conversely, ϕi2 represents the probability that a firm
that was an innovator in period (t – 1) has to remain an innovator in period (t). The
former probability tells us the chances that a firm has to overcome the innovative
threshold, while the latter probability tells us how many chances a firm has to be a
persistent innovator.
Using a probit model, we model such probabilities on different types of regressors.
Coit–1 represents our main variable of interest: the involvement in cooperation agreements
undertaken for innovation-related purposes in the previous period. Since our aim is
to model firms innovative patterns, we have included among the regressors the R&D
intensity (the R&D expenses at time t – 1 divided by the number of employees) and
R&Dit–1 (because of its role in determining a firm’s capability to innovate). The others are
mainly control variables: SB, SS and SI represent the technological regimes according to
Pavitt’s taxonomy (science-based, specialised suppliers and scale-intensive) (Pavitt,
1984) and Age and Size are the firms’ demographic characteristics. The squared terms of
Age and Size are also included, as we expect a non-linear relationship between both firms
age and size and their innovative behaviour. We also add an interaction term, age-size, to
our model to test the possible heterogeneity in the innovative behaviour of large and
small firms as firms mature.
The firm-level changes in the innovative states we are analysing are the innovative
jumps from non-innovators to innovators and innovation persistency. The time interval of
the transition from t to t + 1 is 3–5 years, given the cadence of the CIS waves. This time
gap allows for a sufficiently long period in which the collaboration agreements can
become effective and start yielding results. Splitting the analysis by size classes (small,
medium-sized and large) allows the analysis of the level of heterogeneity induced by the
firms’ size in deriving patterns of entry or persistence in innovativeness.
5 Results and discussion
The descriptive statistics (available on request) reveal that the firms involved in
cooperation agreements in CIS 3 are, on average, larger than those that have not partaken
in such activities: the average number of employees of the firms previously involved
in cooperation activities is more than double compared to the firms not engaged in
cooperation (a mean of 375.7 employees versus 147.1 for the latter). It also appears from
the statistics that those firms (probably due to them being large firms) also invest more in
R&D and innovation activities, in general. Indeed, the R&D intensity for those involved
in cooperation agreements is almost four times larger for the firms actively collaborating
in innovation activities (a mean of 8.2 versus 2.87 for the noncollaborating firms). The
same pattern can be seen with respect to innovation intensity: the firms involved in
collaborations invest almost double the amount of the noncollaborators (the ratio is 11.9
versus 6.3 for the latter group of firms).
The multivariate analysis is split for innovative transitions and innovative persistence.
Clear distinctions are also made across size classes, covering first our complete sample
and then lowering the level of analysis to reflect the different innovative patterns across
the small, medium and large firms.
Table 2 shows that for the overall sample, engaging in cooperative agreements for
innovative activities will increase the probability of becoming an innovator in four years
by 11%. What also explains this transition is the fact that the firms have invested in
R&D. Indeed, R&D intensity is significant and positive. This result indicates that
cooperation is not used as a substitute of R&D activities, but as a complement. The
finding confirms that cooperation needs to be coupled with internal investments in order
to build the internal capacity to absorb external resources and knowledge and to exploit
better the results from the collaboration and the partnerships.
If we consider the distinction between the small, medium and large companies, we
note that cooperative activities are especially beneficial for the SMEs. Indeed, entering
into partnerships increases by almost 20% the probability to become an innovator for the
small companies, while for the medium and large-sized firms, this percentage is
remarkably lower (around 6% for the medium firms and almost 12% for the large
companies). For the SMEs, the intensity of their R&D activities is also a significant
factor explaining the transition from a non-innovator to a innovator status, while it does
not seem not to matter for the large firms.
Size matters to explain the transition from non-innovator to innovator, confirming
that the small companies encounter more difficulties crossing the threshold. The effect of
size is significant and nonlinear, but only for the overall sample: the differences in size
matters in explaining innovative behaviour when they are ‘significant’ differences,
implying that there is a different innovative behaviour among the small, medium and
large firms. In fact, when we consider more homogeneous classes with respect to size, the
effect of the firms’ size disappears.
Table 2 The innovative patterns following partnerships or cooperation agreements

Transitions from non-innovative to innovative states
Probit models reporting marginal effects
Innovative transitions (non-innovators to innovators)

All firms Small firms Medium firms Large firms
Dependent variable dF/dx z dF/dx z dF/dx z dF/dx z
Cooperation agreements 0.11*** 4.17 0.2*** 3.33 0.07** 2 0.12** 2.2
at time t – 1 (0.02) (0.06) (0.03) (0.05)
R&D intensity at 0.03*** 6.36 0.04*** 3.2 0.03*** 5.24 0.007 0.92
time t – 1 (0.004) (0.01) (0.006) (0.007)
Science-based 0.122*** 3.4 0.08 1.4 0.09** 2.03 0.26*** 3.5
(0.04) (0.06) (0.05) (0.06)
Specialised suppliers 0.04 1.3 –0.056 –1.2 0.04 1.07 0.29*** 5.04
(0.03) (0.04) (0.04) (0.054)
Scale-intensive 0.07* 1.6 0.08 1.2 0.02 0.34 0.23*** 2.7
(0.04) (0.07) (0.06) (0.07)
Firm size 0.2*** 4.75 0.13 0.95 0.05 0.06 0.41 1.22
(0.04) (0.14) (0.7) (0.34)
Firm age –0.03 –0.24 0.07 0.3 –0.01 –0.07 –0.26* –1.37
(0.13) (0.24) (0.17) (0.19)
Square of size –0.008** –1.7 –0.01 –0.4 0.009 0.11 –0.03 –1.2
(0.004) (0.03) (0.08) (0.02)
Square of age 0.006 0.49 –0.007 –0.3 0.005 0.33 0.03* 1.54
(0.01) (0.02) (0.01) (0.02)
Age*Size –0.03*** –24.2 –0.027*** –6.8 –0.03*** –19.08 –0.03*** –14.3
(0.001) (0.004) (0.001) (0.002)
LR chi2 893.2*** 100.7*** 474.07*** 381.5***
R-squared 24.60% 11.42% 22.80% 42.40%
Number of observations 2624 690 1501 661
Notes: (1) dF/dx is for the discrete change of the dummy variable from 0 to 1; for
continuous variables, it is calculated at the mean value.
(2) z corresponds to the test of the underlying coefficient being 0.
(3) Standard errors of the marginal effects in parenthesis; statistically
significant at: *** 1% level; ** 5% level; * 10% level.
Age affects the probability to become an innovator in a significant, negative and

nonlinear way, but only for large firms. However, the interaction between age and size
negatively affects the transition in the overall sample as well as for each size class,
suggesting that too large and/or too old companies may encounter difficulties in
becoming innovators. It seems that if the large companies were not able to innovate in the
early stages of their life, they have less probability to do so in the later stages. This result
can be surprising, considering that the older companies should be those that had the
opportunity to accumulate more resources over the years. A possible explanation is that
the nonrenewed stock of resources can become a source of rigidity for companies and
impede innovation (Leonard-Barton, 1992). This can be especially hampering for the
larger firms that typically have the disadvantage of being less flexible than the smaller
firms (Narula, 2004).
The organisational and technological characteristics of technological regimes,

captured by Pavitt’s taxonomy, seem to be important in explaining the probability to
cross the innovative threshold, especially in capital- and knowledge-intense sectors.
Table 3 shows the factors that affect the other innovative behaviour in our interest,
that is, the persistence in innovative activities. Entering into cooperation activities
positively and significantly affects the probability to remain in the innovators’ class. For
the overall sample, the results show that, given that a firm was already an innovator at
time t – 1, a partnership agreement increases by 1% the probability of remaining an
innovator over a four-year period. This process is supported by the effects of R&D
intensity. Indeed, the probability of being a persistent innovator increases if the firms
invest in R&D and perform a partnership agreement: cooperation needs to be coupled
with the firms’ efforts to build new internal knowledge and capabilities.
Table 3 The innovative patterns following partnerships or cooperation agreements

Persistence at time t + 1 in innovative activities
Probit models reporting marginal effects
Innovative persistence at time t + 1 (innovators to innovators)

All firms Small firms Medium firms Large firms
Dependent variable dF/dx z dF/dx z dF/dx z dF/dx z
Cooperation agreements 0.01*** 4.3 0.0005 0.9 0.013*** 3.55 0.008** 2.3
at time t (0.004) (0.001) (0.007) (0.008)
R&D intensity at time t 0.003*** 8.8 0.0003*** 4.08 0.003*** 6.6 0.002*** 3.9
(0.001) (0.0004) (0.001) (0.002)
Science-based 0.006* 1.7 0.0007 1.04 0.0032 0.7 0.02 2.01
(0.04) (0.001) (0.005) (0.02)
Specialised suppliers 0.0008 0.4 –0.0004* –1 0.00003 0.01 0.007 1.6
(0.002) (0.0007) (0.003) (0.0007)
Scale-intensive 0.0003 0.01 –0.0004 –1.7 0.001 0.2 0.02 1.5
(0.003) (0.0007) (0.005) (0.03)
Firm size 0.007* 1.6 0.003 1.08 –0.13** –1.9 –0.04 –1.6
(0.004) (0.005) (0.08) (0.04)
Firm age –0.0003 –0.03 0.0015 0.73 0.018 0.9 –0.008 –0.9
(0.13) (0.003) (0.02) (0.01)
Square of size –0.001*** –2.6 –0.0005 –1.2 0.014** 1.9 0.002 1.45
(0.005) (0.0008) (0.0008) (0.002)
Square of age –0.0008 –0.86 –0.0002 –1.05 –0.3 –1.5 –0.003 –0.3
(0.01) (0.0003) (0.002) (0.0009)
Age*Size 0.002*** 14.6 0.0001*** 5.2 0.002*** 11.8 0.002 7.3
(0.0006) (0.0002) (0.0009) (0.001)
LR chi2 1259.7*** 156*** 746.3*** 422.8***
R-squared 0.61% 0.6 0.59 0.67
Number of observations 2624 690 1501 661
Notes: (1) dF/dx is for the discrete change of the dummy variable from 0 to 1; for
continuous variables, it is calculated at the mean value.
(2) z corresponds to the test of the underlying coefficient being 0.
(3) Standard errors of the marginal effects in parenthesis; statistically
significant at: *** 1% level; ** 5% level; * 10% level.
If we focus on the distinction between the small, medium and large companies, we notice
that for the medium and large companies, entering partnerships augments by about 1%
their chances to remain innovators. Remarkably, for the small firms, the engagement in
partnerships is not significant in explaining the persistence in the innovator status. This
result seems to confirm the previous findings that innovating constantly is rare and most
companies innovate only occasionally (Geroski et al., 1997; Cefis, 2003). For the small
companies, the effect of partnerships seems to fade over time. This seems to be
confirmed by the fact that the intensity of the internal efforts is significant for all size
classes. Thus, in the long run, a persistent innovative behaviour cannot be sustained only
by external sources of knowledge: the internal sources are the crucial and strategic factor.
Inside the medium and large size classes, size has a significant, negative and
nonlinear effect on the probability to remain in the innovative status. This seems to
suggest that the firms’ dimension is, in itself, not a sufficient condition to continually
innovate. An explanation could be that the smaller firms, relative to their class (not in
absolute terms), are more able to adapt to changing environments (Narula, 2004). The
nonlinearity of the effect suggests that the above is true, as long as the limitations
associated with the smaller firm size do not offset the benefits.
Contrary to what happened in the probability of crossing the innovative threshold, the
interaction between size and age positively affects the probability of being a persistent
innovator. Thus, once the threshold is crossed, the larger and more experienced
companies have a higher probability to endure in an innovative status.
Surprisingly, for the persistence in innovative activities, the results only partially
support the previous finding (Cefis and Orsenigo, 2001) that technological
and organisational characteristics matter in explaining the probability of remaining
an innovator. Indeed, the Pavitt taxonomy coefficients are significant only for the
science-based sectors.
In summary, the results suggest that cooperation activities increase the probability
of all firms becoming and remaining innovators. The findings support Hypothesis 1a, that
firms search outside the company for the resources necessary to innovate. Confirming
that companies benefit from entering partnerships with each other, we reject
Hypothesis 1b, which states that partnerships negatively affect the probability of
becoming and/or remaining innovators. The findings also confirm Hypothesis 2a, that the
benefit of cooperation is greater for the SMEs than for large companies. The contrary
Hypothesis 2b is, therefore, rejected.
6 Conclusion
The results of our analysis show that adopting cooperative strategies is beneficial for
companies in order to become and/or remain innovators. Distinguishing among size
classes, this benefit seems to be more accentuated for the SMEs.
To perform our study, we have generated a unique dataset of Dutch manufacturing
firms covering the period from 1998 to 2004. To generate the database, we have
combined the information on the innovative behaviour of the Dutch companies provided
by the CIS and the demographic data gathered from the ABR of all the companies
registered in the Netherlands.
The findings of the present analysis are in line with the proposed theoretical
framework. Interpreting the RBV approach from an ‘open innovation’ perspective
(Chesbrough, 2003), we support the view that companies can become or remain
innovators by using partnerships to access critical resources and knowledge. Cooperation,
however, does not seem to be a substitute for the internal effort aimed at innovation; it is,
rather, a complement.
Cooperative agreements are a vital mechanism to promote a learning process where
partners benefit from sharing and combining their knowledge bases (Khanna et al.,
1998). Consistent with the presented theoretical approach, the firms are, moreover, not
exempted from investing in building their own resources to develop ‘absorbtive capacity’
(Cohen and Levinthal, 1990) and being able to profit from cooperation. Indeed, the
intensity of R&D expenses has been shown to be a significant factor in explaining both
the transition to an innovator condition and the persistence in the same status.
In particular, the strategic use of cooperation seems to be favourable for the SMEs.
Our results confirm that by joining forces with other companies, the SMEs can surmount
the boundaries derived from their limited resources and become innovators. For the
SMEs, the situation will be different if we focus on being a continuous innovator. In this
case, persistence does not seem to be sustained by cooperation activities. Our results
seem to suggest that, to remain innovators, the SMEs should pursue the strategy of
augmenting the intensity of their R&D efforts.
Acknowledgements
The authors thank Rob Alessie, Adriaan Kalwij, Lawrence Loughnane, Utz Weitzel,
Yi Zhang and the participants of the 2nd European Conference on Entrepreneurship and
Innovation, Utrecht, 8–9 November 2007, for their helpful comments and suggestions.
The empirical part of this research has been carried out at the Centre for Research of
Economic Microdata at Statistics, the Netherlands (CBS). The views expressed in this
paper are those of the authors and do not necessarily reflect the policies of the CBS. The
authors thank Gerhard Meinen and the on-site staff of the CBS for their precious
collaboration. They gratefully acknowledge the financial support of the NWO (Dynamics
of Innovation Programme, grant no.: 472-04-008). Elena Cefis also acknowledges the
financial support of the University of Bergamo (grant ex 60%, n. 60CEFI07, Department
of Economics).
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Strategy and innovation: making the right

strategic decision and developing the right
innovative capabilities
Center for Regional Development Studies
CETYS Universidad
Fracc. El LagoTijuana, BC, Mexico
E-mail: lloughnane@allium.org
Abstract: All organisations must be innovative. Is this true? No; despite the
call for companies to be innovative, research indicates it is not necessary for an
organisation to be innovative to be highly successful.
There are two types of innovation: upstream and downstream innovation.
Upstream innovation is the development of new inventions and technologies.
Downstream innovation is the process of turning the inventions and processes
into economic value.
Vision drives the decision to pursue innovation. Innovation exists in a
context approaching chaos. It exists in a context where complexity is high and
the unpredictable occurs far more frequently than predictable results.
A company that chooses to pursue innovation must recognise that being
innovative is not a strategy. Being innovative is a capability that is the result of
a successful strategy.
Keywords: innovation; entrepreneurship; creativity; business practice;

strategy.
Reference to this paper should be made as follows: Loughnane, L.J. (2009)

‘Strategy and innovation: making the right strategic decision and developing
the right innovative capabilities’, Int. J. Entrepreneurship and Small Business,
Vol. 7, No. 4, pp.446–456.
Biographical notes: Lawrence J. Loughnane is an Associate at the Center

for Regional Development Studies at CETYS Universidad. He received his
PhD from the University of Limerick, Ireland. He is also the Director of
Programs for Allium, a consulting firm that specialises in strategic assessments
and management development. He has taught in the USA, Spain, Ireland
and Mexico.
1 Introduction
There is a constant theme in the business press and respected business publications that
all organisations must be creative and/or innovative. The definitions of creation and
innovation are very close; close enough that many people consider them synonyms. They
are not. Creativity is about idea generation. Innovation is about idea implementation.

Strategy and innovation 447
Innovation is typically understood as the introduction of something new and useful, for
example, introducing new methods, techniques or practices, or new or altered products
and services.
It is critical for an organisation to decide if it is going to pursue innovation as
a management practice. To be considered innovative, an organisation needs to change
its industry in some way (Joyce et al., 2003). Innovators are focused on finding
altogether new product ideas or technological breakthroughs that have the potential to
transform industries.
It is not necessary for an organisation to be innovative to be highly successful
(Joyce et al., 2003). Once an organisation decides that innovation will be a
management practice, it must decide if it is going to pursue upstream innovation or
downstream innovation. Upstream innovation is the implementation of one’s own ideas.
Downstream innovation is implementing the ideas of others. Both upstream and
downstream innovations have the same goal – to make investments and manage those
investments so the return on the investments contributes to superior performance.
Superior performance is defined as the sustained creation of value for which a customer
will pay.
It is problematic that few companies are capable of excelling at innovation – it is a
very difficult management practice (Hamel, 2003). Without other complementary
management practice skills, innovation rarely, if ever, results in the creation of value.
Determining what management practices will lead to superior performance is the first
step to becoming a leader in an industry.
Traditionally, companies have been told that industry forces (Porter, 1980) and how
an organisation reacts to those forces determine performance. Industry leaders, rather
than focusing on external forces, focus on developing internal capabilities (Hawawini
et al., 2002). It is important to note that it is the industry leaders or those that want to be
industry leaders that focus on internal capabilities. Average or middle-of-the-road
companies focus on the external forces and how their strengths and weaknesses
match those forces. To be innovative and thus be in a position to change its industry in
some way requires that an organisation develop the capability to be innovative as a
management practice.
Joyce et al. (2003) document the results of research indicating that:
• companies that outperform their industry peers excel at what are called primary
management practices – strategy, execution, culture and structure
• companies that outperform their industry peers supplement their skill in primary
areas with a mastery of any two out of four secondary management practices – talent,
innovation, leadership, and mergers and partnerships.
Note that companies that exhibit superior performance excel at all of the primary
management practices. But it is not necessary for a superior performer to be innovative.
Innovation is not a primary management practice. Innovation is a secondary management
practice. (Secondary in this sense means that there is a decision about which two of the
four secondary practices a company will use.) An organisation must make a decision
to invest in the development of a capability to be innovative. Based on the amount of
literature on innovation, it might be expected that all companies should invest in the
creation of an innovative culture. The truth is few companies really make this investment.
448 L.J. Loughnane
Those companies that do make the investment often fail to achieve the intended
objectives because it is a very difficult management practice. And, it is not always the
best investment an organisation can make.
2 Management practice
Management practice can be viewed as the sides of a triangle. Each side supports the
other two. The sides of the triangle are content, context and process (see Figure 1).
Content is limited by an organisation’s capability and capacity. The competitive
environment (industry forces) defines context. Process is characterised by the patterns of
organisational behaviour an organisation exhibits as it gets things done.
Figure 1 Management practice
Content Context
Process
Management practice is contextual simply because what works in one situation (context)
can easily fail in another. When trying to determine what kind of management practice
will work in a particular context, a good place to start is to think about context as existing
on a continuum (see Figure 2).
Predictability requires stability. Stability is achieved through policies and procedures
coupled with flawless execution and with very few decisions. As chaos is approached,
the number of decisions made increases dramatically. The complexity of the context
increases. Flawless execution becomes more difficult. The power (knowledge, support
and resources) required to make good decisions increases. Decisions are subject to
chance rather than predictability.
Innovation exists in a context approaching chaos. It is a context where complexity is
high and the unpredictable occurs far more frequently than predictable results.
An organisation is not innovative because it has ideas, even great ideas. An
organisation is innovative when it converts the idea into a completely new product
or a technological breakthrough that has the potential to change an industry. Joyce
et al. (2003) tell us that “innovative companies lead the way with industry changing
innovations and a willingness to cannibalise offerings, resisting the temptation to wring
every last cent out of a product before introducing another to take its place”.
Figure 2 The innovation context
Chaos
Chance
Innovation
Complexity
Predictability
Stability
450 L.J. Loughnane
3 The problem
Deciding that innovation is an essential management practice is not a decision to be taken

without a great deal of reflection. Few senior leaders have a clear, well-developed model
of what innovation looks like as an organisational capability. And since they do not know
what it looks like, they do not know how to build it (Hamel, 2003).
Hamel (2003) found that two core challenges must be overcome if innovation is to be
developed into a deep capability in any organisation. The first challenge is that most
companies have a very narrow idea of innovation, usually focusing just on products and
services. Second, most companies devote much more energy to optimising what is there
(current products, services capabilities) than to imagining what could be.
There is not a shortage of creative people in most modern business organisations. The
problem is the shortage of management skills necessary to follow through. By its very
nature the creative process often is not structured, nor are the creative people. Many
creative people do not know how an organisation gets things done. Many creative people
do not know how the organisation makes money. Levit (2002) informs us that creativity
is not enough:
“All too often there is a peculiar underlying assumption that creativity
automatically leads to actual innovation.”
Creativity and the innovation that follows often require organisational change. Most
organisational-change programmes do not achieve their intended results. Why? Consider
a simple example. The creative person has lots of ideas but no implementation skills. The
next-in-command has a high degree of capability to manage the status quo but has a low
acceptance of new ideas, a low capability to consider change and a low level of skill to
manage change. Perhaps creativity will occur, but not innovation. Few companies with a
history of stability can change into innovative companies simply because of the good
ideas of creative people and the good intentions of top management.
Organisations, creativity and innovation do not make for a happy marriage. Creativity
requires ‘permissiveness’. Organisations require order and conformity to get things done.
Creativity and innovation can wreak havoc on the organisation.
4 The solution
Suppose that an organisation decides that it needs to be creative and innovative. How can
the circle created by the problems between the organisation and the need to be creative
and innovative be squared; i.e., what is the solution?
Perhaps one starting point is to define innovation differently. Bhide (2006) discusses
two types of innovation: upstream as the development of new inventions and
technologies, and downstream as a system of turning inventions and processes into
economic value. Upstream and downstream innovations require different knowledge
skills and resources and thus different strategies.
Figure 3
The innovation system
Continuities – incremental advances

Strategy and innovation
Proliferation of species and dimensions
Scientists and Engineers Local Adaptation
Upstream (creativity) Downstream (economic value)

451
452 L.J. Loughnane
At this point it is important to remember that formulating and implementing strategy is a

management practice. Innovation is also a management practice. The ability to practise
innovation is the result of the successful implementation of a strategy. Innovation results
from innovation process execution. Figure 3 illustrates innovation as a system that lies on
a continuum. Innovation is a complex and usually gradual process that involves many
players (companies) making incremental advances over time – the continuities. Scientists
and engineers work at ideas and creativity at the upstream point. At the downstream
point, big ideas are adapted to create economic value at a local level. Along the
continuum there are proliferations of species (different firms responding to different
customer needs). The species exist in different local competitive environments with
different business systems (dimensions).
First, it is important for an organisation to decide where it exists along the innovation
system continuum and how it creates value within the system. The organisation must
determine which secondary management practices – talent, innovation, leadership,
mergers and acquisitions – best support its primary management practices – strategy,
execution, culture and structure. Second, it must choose to practise innovation. Third, the
organisation must assess its competitive environment to determine what level of
creativity and innovation is needed as a management practice.
5 Back to the basics: strategy, execution, culture and structure – primary

management practices
In their groundbreaking study of 200 management techniques, Joyce et al. (2003) found
surprising results: most techniques themselves have no direct impact on superior business
performance. What does? Mastery of business basics is the key to superior performance.
To sustain superior performance, an organisation has to excel at four primary
management practices – strategy, execution, culture and structures – and any two of four
secondary practices – talent, leadership, innovation, and mergers and partnerships.
The key to this ‘4 + 2’ formula is not which technique you choose within each
practice, but how well and consistently an organisation sticks with it. There is no recipe
to follow. But the most enduringly successful companies in the study (those delivering a
ten-fold return to investors over a ten-year period) clearly demonstrated hallmarks that
any organisation can follow.
What one learns about strategy from Joyce et al. (2003), is how market competition is
shaping up for the future. Innovation is a practice that requires a constant research effort
on customer knowledge, market analysis, pricing, the competition and much more. The
authors also reveal their assumptions of how strategy is developed in the organisation.
Strategy, they argue is emergent. Mintzberg (1994) would agree that strategies emerge
but when looking at results, He argues that strategies are realised. Joyce et al. (2003)
persuade us that there is a synthesis between the vision prescribed by the corporation’s
executives and those actions, investment decisions and prioritisations that bubble up from
the bottom of the organisation from among middle managers, engineers, the sales force,
and financial staff. Mintzberg (1994) informs us that realised strategies are the result of
patterns of decisions over time.
What is important is there is no choice about the primary management practices;
however, there is a decision to be made in choosing to pursue innovation as a secondary
management practice.
6 Choosing innovation as a secondary management practice
Vision drives the process of deciding to pursue innovation. Vision is the result of
competent strategic analysis (a process). Vision results from an examination of the
environment (the context) in which an organisation exists. A true vision reflects the
direction that is desirable and possible. Choosing to be an innovative organisation is a
risky decision – it has to be possible.
7 Aligning the primary and secondary management practices
A continual programme to deepen the capability to perform both the primary and
secondary management processes is essential. Accomplished athletes make competing
look easy, but their skill is not just the result of being born with certain attributes. Their
skill comes from practice and discipline over time. Superior athletic performance is
the result of a balance of the physical, mental and emotional systems. Organisations are
systems and the parts of the systems interact. In organisations the alignment of the
primary and secondary management practices requires a systems approach. None of
the practices are stand-alone. The practices must be aligned and accomplished at the
same time.
8 The practice of innovation
To be successful at innovation, an organisation must have a “well developed model of

what innovation looks like as an organizational capability” (Hamel, 2003). According to
Hamel, few senior managers can describe their corporate innovation system. In fact, few
companies practise innovation. A review of the literature supports this view. The same
companies – Dell, Starbucks, Wal-Mart and Google – are examples that are cited as being
innovative by multiple authors in multiple articles.
To develop an organisational capability in innovation requires a strategic decision.
One must remember at this point that innovation is one way an organisation will create
competitive advantage (value for which a customer will pay). For a strategic decision to
be implemented requires a significant investment for which there must be a significant
return. Investment in creating innovation capability is about making a trade-off regarding
how a company will compete. A company must evaluate trade-offs to determine the
greatest return on investment.
Joyce et al. (2003) advise that it is not important what technique is used to perform
the primary or secondary practices. For example, Sawhney et al. (2006) describe
12 dimensions of the business system in which an organisation can look for opportunities
to innovate. They identify four key dimensions as anchors: offerings (what), customers
served (who), processes employed (how) and points of presence it uses to take its
offerings to market (where). Hax and Wilde (1999) developed the Delta model.
According to them, the Delta model defines strategic positions that reflect fundamentally
new sources of profitability, aligns the strategic positions with a firm’s activities,
introduces adaptive processes and shows granular metrics that are drivers of performance.
What is important is that an organisation excels at the technique chosen. Collins (2001)
454 L.J. Loughnane
reported in Good to Great that what existed in companies that went from good to great
was a down-to-earth, pragmatic commitment to excellence of process – a framework
– that kept the company, its leaders and its people on track for the long haul.
9 Investing in innovation: making the right strategic decision and

developing the right innovative capabilities
Investing in innovation is a strategic decision. Determining what innovative capabilities a

particular company needs is the result of analysis of the company and its environment.
Selecting the capabilities to be developed is a strategic decision. Innovation is a
management practice requiring company-specific knowledge, skills and resources.
Innovation is real, hard work that can and should be managed like any other practice.
Two businesses that deal in the same goods and services, in the same territory and
with the same clientele, cannot coexist equally (Henderson, 1989). Every business is
different – a business exists in a unique context. As context changes – internal and
external – companies must adapt. They must adapt by changing the content of innovation.
For example, content may shift from product innovation to process innovation. However,
the process of innovation (identifying opportunities and applying these ideas to the
creation of customer value) is a constant.
10 Innovation and entrepreneurship
Entrepreneurship is not innovation and innovation is not entrepreneurship.

Entrepreneurship is about creating wealth. Corporate entrepreneurship is the discovery
and pursuit of new opportunities through innovation and venturing (Hayton and Kelley,
2006). Innovation is about creating customer value. Each requires a different set of
knowledge, skills and resources. Entrepreneurship is not a small or large business
activity, nor is innovation. Companies of all sizes practise entrepreneurship and
innovation. To implement either, companies use a variety of management tools; for
example, scanning for opportunities in entrepreneurship and brainstorming in innovation.
Both entrepreneurship and innovation, to be successful, require an investment in the
development of capabilities to use specific management tools.
What is important is that an organisation must choose to develop the capabilities
that best reflect those required by the context in which it operates. And, an organisation
must define what the terms ‘innovation’ and ‘entrepreneurship’ mean in its particular
context. The terms ‘entrepreneurship’ and ‘innovation’, when not defined in context,
can negatively influence other practices such as strategy. How innovation and
entrepreneurship are defined can have a major impact on the culture of an organisation. It
is important to remember a previous point about innovation: stability is the enemy of
innovation. The same can be said about stability and entrepreneurship.
11 Academic impact
Examining the extent literature reveals two serious questions about management and the
practice of innovation:
1 Do managers have a clear, well-developed model of what innovation is?
2 Do managers have the requisite skills to manage innovation?
Innovation is a management practice and recent literature (Pfeffer and Fong, 2002;
Mintzberg, 2004) indicates that there is little evidence that business school research is
influential on to practice of management. Management and managerial skill is considered
a core competence for sustainable superior performance. Those responsible for research
and curricula must examine and evaluate programmes to insure they prepare students to
manage in organisations that choose to pursue innovation.
12 Conclusion
Even though there is a constant theme in the business press and respected business
publications for companies to be innovative, it is not necessary for an organisation to be
innovative to be highly successful. In fact it is problematic that few companies are
capable of excelling at innovation – it is a very difficult management practice.
Management practice has content, context and process. It is contextual simply because
what works in one situation (context) can easily fail in another.
There is not a shortage of creative people in most modern business organisations. The
problem is the shortage of management skills necessary to follow through. Companies
must invest in the development of management skills to take ideas through to value
creation. It is important that a company first decides where it exists within the innovation
system and how it creates value within the system.
There is no choice about primary management practices; however, there is a decision
to be made in choosing to pursue innovation as a secondary management practice. Vision
drives the process of deciding to pursue innovation. Innovation is a capability and a
company that pursues innovation must have a continual programme to deepen the
capability to perform both the primary and secondary management practices. To be
successful at innovation, an organisation must have a ‘well developed model of what
innovation looks like as an organisational capability’. Investing in innovation is a
strategic decision.
Every business is different – a business exists in a unique context. Context in a
dynamic world is constantly changing. Context changes the requirement for content
and the process must continually be improved. Because of commoditisation and global
competition, many companies believe innovation is critical to their future success.
These companies must determine what exactly innovation is. Although the subject
may be at the top of the agenda, many companies have a mistakenly narrow view of it.
Many see innovation as synonymous with new product development or traditional
research and development. Companies that do not see that innovation is a capability that
must be developed and being innovative as a strategic decision that includes trade-offs
are in peril.
456 L.J. Loughnane
References
Bhide, A.V. (2006) ‘Venturesome consumption, innovation and globalization’, Paper for a Joint
Conference of CESIFO and the Center on Capitalism and Society, Venice, 21–22 July.
Collins, J. (2001) Good to Great, New York: HarperCollins.
Hamel, G. (2003) ‘Innovation as a deep capability’, Leader to Leader, Winter, No. 27.
Hawawini, G., Subramanian, V. and Verdi, P. (2002) Is Performance Driven by Industry Factors?
A New Look at the Evidence, Wiley InterScience, www.interscience.wiley.com.
Hax, A.C. and Wilde, D.L., II (1999) ‘The delta model: adaptive management for a changing
world’, Sloan Management Review, Vol. 40, No. 2, pp.11–28.
Hayton, J.C. and Kelley, D.J. (2006) ‘A competency-based framework for promoting corporate
entrepreneurship’, Human Resource Management, Vol. 45, No. 3.
Henderson, B. (1989) ‘The origins of strategy’, Harvard Business Review, November.
Joyce, W., Nitin, N. and Roberson, B. (2003) What Really Works: The 4+2 Formula for Sustained
Business Success, New York: HarperCollins.
Levit, T. (2002) ‘Creativity is not enough’, Harvard Business Review, August.
Mintzberg, H. (1994) The Rise and Fall of Strategic Planning, New York: The Free Press.
Mintzberg, H. (2004) Managers Not MBAs: A Hard Look at the Soft Practice of Managing and
Management Development, San Francisco: Berrett-Koehler.
Pfeffer, J. and Fong, C.T. (2002) ‘The end of business schools? Less success than meets the eye’,
Academy of Management Learning & Education, Vol. 1, No. 1.
Porter, M.E. (1980) Competitive Strategy: Techniques for Analyzing Industries and Competitors,
New York: The Free Press.
Sawhney, M., Wolcott, R.C. and Arroniz, I. (2006) ‘The 12 different ways for companies to
innovate’, Sloan Management Review, No. 3, pp.75–81.
Entrepreneurs and branding in an environment of

mass customisation and open innovation
Khaled Hamid
Department of Fashion Design and Merchandising
School of Arts
Virginia Commonwealth University
Richmond, Virginia, USA
E-mail: mhamid@vcu.edu
Abstract: Recently, Mass Customisation and open innovation have emerged as

new and attractive business concepts. They reinforced a trend of business
models (and cultures) being shaped by new technologies while redefining the
relationship between businesses and consumers in the process. Both concepts
suggest a new paradigm that has a strong impact on the traditional product
development cycle. But the implications go beyond that, as they reposition
consumers in the development process of brands. The result is an equally
strong impact on marketing principles that is worth further exploration. As a
result, this new framework of ‘open sourced branding’, offers entrepreneurs
and small business owners, as well as brand managers and marketers, a lot of
new opportunities and challenges as they strive to compete. This paper aims at
looking into the ‘brand’ concept under mass customisation and explores some
of these new challenges and opportunities.
Keywords: technology; entrepreneurs; brands; marketing; Mass

Customisation; innovation.
Reference to this paper should be made as follows: Hamid, K. (2009)

‘Entrepreneurs and branding in an environment of mass customisation and open
innovation’, Int. J. Entrepreneurship and Small Business, Vol. 7, No. 4,
pp.457–465.
Biographical notes: Khaled Hamid is an Assistant Professor at Virginia

Commonwealth University in the USA. He has also lectured in undergraduate
to MBA levels in Singapore and other parts of Asia in the areas of marketing,
product development, strategic management and entrepreneurship. He has an
extensive working experience with leading international organisations in USA,
Europe and the Middle East in branding and marketing. He has submitted
papers and presented in international conferences in Europe and Asia in the
areas of branding, entrepreneurship and mass customisation. He is currently
working on a book on fashion branding. His research interests are in branding,
marketing and technology.
1 Introduction
Amid a myriad of brands, advertising and marketing campaigns aiming at luring

customers and attempting to dictate new trends, a new environment is shaping up,
driven by a new culture of empowerment and the wealth of information that is

458 K. Hamid
repositioning customers in the product development process. The new environment of

technological accessibility has not only given customers more choices, but most
importantly, the tools to be more active than passive in the decision-making process to
determine the shape and direction of his/her favourite brand rather then remain at the
receiving end of the equation. In short, the new environment has simply redefined the
roles of the players in the branding game.
Businesses are facing a new reality whereby instead of dictating and sometimes
manipulating, they have to negotiate, respond and share with consumers and outsiders
what they have been fiercely protecting for years, such as the creative elements of their
brands. Yet, the timing seems to be right for both sides. Consumers, on one hand, are
looking for better options to express and satisfy their needs and get what they really want,
and producers need to stay competitive, different and relevant to their customers. Brands
are getting too similar and competing on the basis of product features alone is a
short-term strategy, as features are easily and quickly copied.
As a result, Mass Customisation (MC) has surfaced as a viable alternative. Although
still in a somewhat early stage of adoption and with various degrees of successes, MC as
well as Open Innovation (OI) have attracted great scholarly interest as viable solutions.
Whereas most of the research work have either focused on the impact of MC on the
production side of operations, such as operations management and inventory control
or on technological applications, the implication on the marketing and branding
aspects seems equally fundamental and worth further exploration. ‘Old school’ marketing
strategies and principles may be deemed irrelevant and outdated in an environment where
consumers ‘codevelop’ the brands. Accordingly, many of these principles need to be
revisited, reexamined and probably redefined while creating new business realities with
new opportunities and challenges for entrepreneurs and business owners.
2 Mass customisation and branding
Piller (2005), a leading scholar on the topic, defines mass customisation as follows:1
“Mass customization refers to a customer co-design process of products and
services which meet the needs of each individual customer with regard to
certain product features. All operations are performed within a fixed solution
space, characterized by stable but still flexible and responsive processes. As a
result, the costs associated with customization allow for a price level that does
not imply a switch in an upper market segment.”
In the above definition Professor Piller highlights a series of keywords (in italics) that
characterise the concept. I would like to highlight as well the importance of being a
‘flexible’ and ‘responsive process’ as key elements to this paper’s topic. It is also
important to highlight that MC, by definition, is a middle of the road solution between
‘mass production’ and ‘full-customisation’ (made-to-order) which is clearly stated
above in being ‘performed within a fixed solution space’ (an element of mass production)
while being ‘characterised by stable but flexible and responsive process’ (elements of
full customisation).
In reality MC is not a very new concept, yet it owes its current rise to new
technological advances such as the internet, software development, web based
applications, and telecommunication innovations, that are enabling customers to interact
and integrate with the developing process and thus complete the circle for the model to
Entrepreneurs and branding 459
function. As a result, we have seen various attempts for adopting the model at various
levels of customer involvement that range from choosing or manipulating few features
such as colours or minor details, to total control and the overtaking of the design process.
Here are a few of examples of such operations:
• Threadless.com: probably one of the most successful examples offering mass
customised t-shirts online
• Dell: mass customised computers and laptops
• MiAdidas: mass customised sport shoes for the Adidas brand
• PersonalNovel.de: an online company that offers customers the opportunity to
customise novels.
Although the concept of ‘Open Innovation’ (OI) implies some differences to MC, it does
share a lot of common ground and will be referred to in this paper as an application of
MC. OI is characterised by group collaboration or community sourcing (a.k.a. crowd
sourcing) as is seen in the case of the Linux based operating systems, Wikipedia.com, or
Current TV which is a satellite TV network created by former US Vice President Al Gore
which airs many viewer-created content submitted through the internet where it is chosen
and voted for by its community of viewers.
As the model of MC gains more acceptance and growth, the question remains
on the extent of its implication on how a brand should be defined and treated in this
new environment.
3 Branding and mass customisation
There have been many ways to define the term ‘brand’ as we know it today. Yet I believe
the following definition would capture the essence of the term:
“A brand is a product (or service) with one or more distinct feature that allows
it to compete and attract a target group of customers through a promise of
value. The producers work on creating an identity to the brand with the help
of attractive attributes such as a logo, a name, or a color in order to position
themselves in a market. The essence of the brand is in the relationship it
develops with its customers and the image it establishes in their minds while a
brand’s long term survival is a function of innovation and consistency.”
The above definition brings forward few key terms for what branding is all about and
they are:
• distinct features
• target customer
• a promise
• relationship
• consistency
• innovation
• image.
460 K. Hamid
We need to re-examine the above terms and their relevance in an environment of mass
customisation and we shall start by the following hypothetical scenario:
“Some soda drinkers (including the author) who would like to switch to a diet
soda drink such as diet coke for example are held back by the difference
in taste of the sugar free drink. Now let us assume that with the help of
technological innovation a company like Coca Cola manages to develop a
vending machine that allows customers to adjust the sweetness level of the
coke to their taste so that each customer will still be getting a low calorie
diet drink yet with an acceptable taste. While that would be a great application
of mass customization it would raise a series of questions such as: How would
we define diet coke now? And what does diet coke mean for each of its
consumers? In essence, answering these questions highlights the paradigm shift
of branding under mass customization.”
3.1 Distinctive features and microbrands

By definition a Mass Customised brand (MC brand) is a brand where every consumer
decides on the distinctive feature of his customised item. On the other hand, an open
innovation environment is an environment of community sourcing whereby every
new input might add to, or tweak an existing distinctive feature. In both cases, the end
result is a variety of ‘distinctive features’ and variations of the ‘mother brand’. This
variety of features ends up creating what we may call a series of ‘micro-brands’ where a
micro-brand is a rather limited yet distinct version of the original one. This idea of a
brand without a one distinctive feature might seem like a contradiction to what a brand is
all about. Yet in reality:
“the idea of having just one key benefit is neither a reflection of how products
are invented nor really a reflection of how people choose, buy and appreciate
them. It is mainly a requirement of a certain type of ‘hard sell’ advertising.”
(Grant, 2006)
In addition, “the brand image approach was developed to suit the advertisers of its day:
mass produced products, which required differentiation” (Grant, 2006). This has been
how things worked in a mass produced environment which is obviously irrelevant in the
new model. As a result, marketing and advertising strategies need to change in a way that
is more responsive and accommodating to the new environment and the nature of the
newly created micro-brands. Under MC, a brand is inherently differentiated and the sum
of distinctive features created by the series of micro-brands do not qualify for the current
‘mass-produced’ ‘hard sell’ advertising strategies and marketing campaigns. There is a
need for a more direct and focused approach to communication and marketing messaging
as will be examined later.
3.2 Image and innovation

An image is best defined as how customers envision the product to be. Under MC an
image would seem to be strongly derived from the level of innovation and flexibility of
the customer’s interactive experience more than from its distinctive features. Features are
still relevant of course, but the level of integration, flexibility, and innovation of the
platform would be of a higher relevance simply because features being an element of
design are now under the users’ control and determined by the customer himself. So what
the customer/user is really looking for from the other side is a suitable and innovative
environment that would make the experience and process simpler and more effective. Is it
easy to manipulate the brand? Does the platform or software offer necessary tools for
manipulation? Does the system crash? Does the system offer a responsive and effective
feedback mechanism? Such issues would be key elements in defining the branding
experience and eventually determining the image. Thus we can say that whenever the
customer’s intervention is high, an image tends to be more innovation-dependant while it
is more features-driven where customer’s intervention is minimal. This would be clearly
evident in the case of brands that posses some kind of a monopoly or a ‘secret’ formula
as in the case of pharmaceutical products or in the case of Coke. These brands will be less
susceptible to the customisation of their monopoly feature, which in return would remain
the core of the branding experience. The Coke taste will remain an attractive feature as
long as it is out of reach and cannot be manipulated.
3.3 The relationship redefined

The most dramatic implication of these changes is the redefinition of the relationship
between the producer and the customer and the role of each within. The new relationship
is that of a ‘partnership’. This partnership changes the dynamics of brand development as
the role of the producer shifts from a product maker to a ‘service provider’ whose major
role as we mentioned, is to provide a platform and an infrastructure that is innovative and
flexible for customers to interact and create their micro-brands. Within this framework
the promise of consistency is an element of service; image is a function of innovation and
the relationship is that of sharing rather than dictating. This by all measures is a major
paradigm shift.
4 The new brand
Putting the above elements in perspective, we could now revisit the above definition of ‘a
brand’ and redefine it as follows:
“A brand in a mass customized environment is a unique version of a branded
product created through a partnership between a manufacturer and consumers
where the manufacturer as a service provider, delivers shared infrastructure,
and technology necessary for the user to co-design and define the desired
features. A mass customized brand is inherently competitive, innovative,
and positioned.”
The new definition highlights the new partnership relationship, the new role of the
producer, and elements that differentiate an environment of MC.
Viewing brands from that perspective reinforces the need for new marketing
approaches and strategies in order for the brand to survive. Some of these new
approaches will be referred to as we discuss the new opportunities the new models offer
to entrepreneurs and business owners.
462 K. Hamid
5 Opportunities created for entrepreneurs in the new environment
Working within a framework of MC and open innovation creates great opportunities for
entrepreneurs and small business owners on the verge of developing and introducing new
brands to the market. Some of these opportunities are:
• The opportunity to outsource or invite outside input for certain functions such as
design and creative work. It diminishes the need to possess certain technical or
creative skills allowing for greater flexibility as well as redirecting resources to
other aspects of operations such as production.
• In an open innovation environment where a sourcing community is created (e.g.,
Wikipedia.com or Linux) the product is actually in a continuous state of innovation
and development. This is a process that would otherwise cost a great amount of
money, time, and research effort on the organisation’s part. It is interesting that
innovation and the future development of the brand in this case is sponsored and
crafted by the actual end user who possesses the direct need for the product, a
situation that could hardly be imitated with any level of forecasting, market
research or focus groups. It is an ideal situation where we get a flow of real
solutions from ‘real’ users.
• From a marketing perspective the model delivers a marketer’s dream come true
where the end product is predetermined, pre-designed, and pre-demanded by the end
user. Which might hypothetically mean that the producer is making a product that is
pre-sold. The implications are obvious on the production and marketing sides. From
a marketing perspective it also redefines the need for, and scope of, market research
and forecasting measures as mentioned. In addition, it would redefine the scope and
categorisation of market segmentation in favour for targeting a larger spectrum of
smaller segments. The implication on cost reduction is easy to envision. It might
also eliminate the need for mass-produced high budgeted marketing and advertising
campaigns in favour for a more direct and focused messaging approach. Direct
marketing, mobile marketing, and viral marketing (think Facebook.com) are all
suitable alternatives to create ‘customised’ marketing strategies appropriate for these
models. It even opens the door for what is referred to as ‘open-source marketing’.
As with open innovation, under open source marketing consumers take over the
marketing responsibility for the brand. Think of how file sharing software such
as Kazaa and Napster were so popular and gained a great following without any
major marketing activities from their creators. It was the enthusiastic community
of users, through word of mouth, developing free plug-ins and skins to enhance the
programmes’ usability and appeal and creating forums and online communities that
created a marketing success story without relying on traditional methods of
campaigning or advertising.
In an article published online by Cherkoff on the topic of open source
marketing, he referred to a couple of intriguing cases relevant to this issue. The first
was an advertising video created by an outsider for Volkswagen’s (VW) Polo car
and posted online. The ad was shocking, well made, and ended being “viewed by
millions of people” (Cherkoff, 2005). Another example is an Apple iPod video that
was created by a school teacher called George Masters in 2004 and as Cherkoff
(2005) puts it:
“….he (Masters) then shared the viral film with an online community of Apple
fans expecting nothing in return, other than a little credibility from his
peers……within a few days (the video) had been viewed more than 40,000
times by curious individuals. The quality of the ad was so good that many
people presumed they were watching the output of a big ad agency.”
Given the above it is evident that open source marketing carries many of the
characteristics discussed above in reference to MC and OI. On one hand it is an
invitation to unlimited creative possibilities and opportunities for differentiation
and on the other it is a revolt against old school marketing agencies.
• On the production side, the model is clearly a suitable platform for the concept of
Just-in-Time, and thus delivers better inventory management and cost reduction
benefits. In addition, the model could very well strive on a network of workshops to
satisfy its low quantity ever changing products. Workshops and small business units
should flourish under this environment creating new business opportunities for
young entrepreneurs and smaller operations. It is worth mentioning here that there
are examples of open-innovation opportunities on the production side as well such as
Emachineshop.com where users can design and create various parts used in the
production process such as; casting, cutting, and moulding, among others.
• In a paper titled: ‘Does mass customisation pay? An economic approach to evaluate
customer integration’ by Piller et al., the authors indicate that as customisation “is
connected to the possibility of changing premium prices because of the added value
of a customized solution meeting the specific need of a customer” such as “ higher
set-up costs, cost for better qualified labour…and more complex and detailed quality
control” these costs are ‘counter-balanced’ by efficiency in forecasting and product
development, postponement of activities until an order is placed and better customer
retention (‘higher switching costs for the customer’). In addition, a customer is
usually involved in customisation with an expectation and willingness to pay a
suitable premium for their new gains “that does not imply a switch in an upper
market segment” (Piller et al., 2004)
• As mentioned, MC creates value through economies of scope rather than the
economies of scale principles associated with mass-production. Economies of scope
create both revenue opportunities through incremental revenues and the adaptability
and flexibility to pursue new and profitable channels.
• The internet and online applications proved to be a good platform for customer input
and interaction which diminishes (not necessarily abolishes) the need for other costly
channels (e.g., brick and mortar retail outlets) as well as open the door for a wider
integration among parties involved. In a way it is B2C meets B2B meets C2C meets
C2B all in a one virtual environment.
6 Challenges facing entrepreneurs in the new environment
• The biggest challenge is the mindset change. Managers who are used to a culture of
total control and a highly protective environment may not easily comprehend the
possibility of letting an outsider take control, manipulate and ‘hijack’ a brand they
464 K. Hamid
have been building and protecting for years. In the example given above about the
VW ad created by an outsider, in spite of the good quality of production and success
of the video “VW’s reaction was to demand a public apology and call the lawyers!”
(Cherkoff, 2005). It is safe to assume that entrepreneurs who are starting with an
advance understanding of the models and their dynamics would have a higher level
of acceptance and flexibility and a bigger potential for success with them.
• The second challenge is ‘control’. In an open environment such as that created by
MC and OI, possessing a level of control is not only challenging but necessary to
maintaining the brand’s integrity. Wikipedia.com is an excellent example of such
challenges. Wikipedia.com aiming at being the largest encyclopedia online allowed
readers’ to freely contribute, update and amend any entry. Yet problems rose when
participants contributed wrong or biased information. It was clear that a certain level
of control was mandatory and Wikipedia.com responded by adopting a series of
checkpoints that allow review of content (still by members) before being published.
Control also refers to measures needed to manage the growing customer base and
facilitate smooth feedback channels demonstrating quick response in order to
maintain customer retention and long term loyalty.
• Adopting MC is not an immediate guarantee for 100% sales. A good example is
Threadless.com which allows customers to vote for T-Shirts that were designed by
other members. Accordingly, production is based on popular votes. Yet popularity
did not always reflect on actual sales numbers. Look-Zippy.com, a French site of a
similar model developed a measure of control by which they post the selected
models online for two weeks where customers could place their orders and then
production follows.
7 In conclusion
There is no doubt that technology has changed customers’ attitudes, and expectations.
It has given them more choices and control in the decision making process, while
redefining their relationship with organisations. As a result, organisations need to respond
and rethink their strategies, structures, and develop new mental models in order to
compete. The development of MC as an attractive model that could either complement
existing activities or be adopted as an alternative is a manifestation of the culture and
new world we live in. Every new model offers opportunities as well as challenges
for innovative entrepreneurs. MC and open innovation offer many opportunities
for competitiveness and growth that might have been otherwise too costly or hard to
achieve. Control and mindset change prove to be the two major challenges to overcome.
As with all new and ‘young’ models, a mechanism of self-tweaking backed with
flexibility, imagination, and long term vision may be necessary to maintain growth
and competitiveness.
References
Cherkoff, J. (2005) ‘What is open source marketing?’, www.webpronews.com/topnews/2005/02/
04/what-is-open-source-marketing.
Grant, J. (2006) The Brand Innovation Manifesto, West Sussex: John Wiley & Sons, Ltd.
Piller, F. (2005) ‘Glossary: mass customization, open innovation, personalization and customer
integration’, www.mass-customization.de/glossary.htm.
Piller, F., Moeslein, K. and Stoko, C. (2004) ‘Does mass customization pay? An economic
approach to evaluate customer integration’, Production Planning & Control, June, Vol. 15,
No. 4, pp.435–444.
Bibliography
Adamson, A. (2006) Brand Simple: How the Best Brands Keep It Simple and Succeed, New York:
Palgrave Macmillan.
Anderson, C. (2006) ‘The long tail: why the future of business is selling less of more’, Hyperion,
New York.
Clifton, R., et al. (2004) Brands and Branding, Princeton: Bloomberg Press.
Perry, E. and Winsom, D. (2003) Before the Brand: Creating the Unique DNA of an Enduring
Brand Identity, New York: McGraw-Hill.
Seybold, P. (2006) Outside Innovation: How Customers Will Co-design Your Company’s Future,
New York: Collins.
Tapscott, D. (2006) Wikinomics: How Mass Collaboration Changes Everything, London: Penguin.
Tseng, M. and Piller, F. (2003) The Customer Centric Enterprise: Advances in Mass Customization
and Personalization, Berlin: Springer.
Note
1 For the sake of this paper I am focusing on the co-design process in reference to products.
A comparison of spectators’ and franchise staffs’

perceptions on the effectiveness of the marketing
techniques adopted by the Super Basketball League
in Taiwan
Steve Chen
Morehead State University
201 Laughlin Health Building
Morehead, KY 40351, USA
E-mail: s.chen@morehead-st.edu
Ronald Dick*
Duquesne University, USA
E-mail: dickr@duq.edu
Chie-Der Dongfang
Soochow University, Taiwan
E-mail: Dong@mail.scu.edu.tw
Pi-Yun Teng
Orient Institute of Technology, Taiwan
E-mail: fb017@mail.oit.edu.tw
Abstract: This study examines and compares the spectators’ and franchise
staffs’ perceived effectiveness of the marketing techniques adopted by the
Super Basketball League (SBL). Because many marketing strategies of the
National Basketball Association (NBA) have been practised in the SBL,
the researchers further modifies and translates Dick and Turner’s (2005)
questionnaire to assess the Taiwanese spectators’ perceptions toward the US
marketing strategies. The developed questionnaire contains seven fixed-choice
and 24 five-point Likert scale items. The factor analysis groups 17 of the 24
items into five categories: (1) Traditional Mass Media (TM), (2) Direct and
Electronic Mailing (DEM), (3) Sales Promotion (SP), (4) Gifts and Hospitality
(GH) and (5) Strategic Marketing (SM). The participants include 31 (n = 31)
staff members and 703 (n = 703) on-site spectators, who were randomly chosen
during three competitions. Females (60.5%) and students (72.8%) are the two
major groups that comprise the participants.
Descriptive analysis shows that more people obtained information about
the games from television commercials (49.6%) or by word of mouth (37.9%).
SM (M = 3.96, SD = .77) and TM (M = 3.92, SD = .66) were rated as more
effective ways to reach the targets. GH and DEM seemed to be less effective.
The results also indicate that significant differences exist in the perceived
marketing strategies based on various demographic characteristics (p < .05). In

A comparison of spectators’ and franchise staffs’ perceptions 467
general, females under 20 years old tended to rate TM as a more effective

means than their male counterparts did. The younger students without a college
degree considered DEM more effective. However, the franchise staffs did not
value GH as effective as the students or other working adults did. In the
meantime, the franchise staffs perceived SM more effective than the younger
students did. A disparity was clearly found in the perceived marketing
strategies between the franchise staffs and young students. For certain reasons,
the use of technology in advertising and promotion was still not highly
appreciated, based on the collected responses. In conclusion, the unique
cultural aspects of Taiwanese basketball necessitating suggestions for adjusting
the existing strategies, along with the limitations and concerns related to the
study, will be discussed.
Keywords: marketing techniques; basketball; ticket sales; promotional

strategies.
Reference to this paper should be made as follows: Chen, S., Dick, R.,
Dongfang, C-D. and Teng, P-Y. (2009) ‘A comparison of spectators’ and
franchise staffs’ perceptions on the effectiveness of the marketing techniques
adopted by the Super Basketball League in Taiwan’, Int. J. Entrepreneurship
and Small Business, Vol. 7, No. 4, pp.466–477.
Biographical notes: Steve Chen is an Assistant Professor in the Department of

Health, Physical Education and Sport Sciences at Morehead State University,
Morehead, Kentucky, USA. He currently serves as the Chair of Research
Committee of Kentucky Association of Health, Physical Education, Recreation
and Dance.
Dr. Ronald Dick is an Assistant Professor in the School of Business at

Duquesne University, USA. He was an Assistant Professor in Sport
Management at James Madison University and an Associate Professor at the
University of New Haven. He has an EdD from Temple University and an
MBA and a BS from St. Joseph’s University. He has 13 years of experience in
the National Basketball Association (NBA) with the Philadelphia 76ers and
New Jersey Nets. He was the Assistant Dean at Marian College and the
Assistant Athletic Director at the University of Houston.
Chie-Der Dongfang is an Associate Professor of Soochow University in Taipei,

Taiwan. He was one of the coaching staff of the Taiwanese National Team in
2006–2007. He was also the Most Valuable Player of the Chinese Basketball
Alliance in its inaugural season.
Pi-Yun Teng, is an Assistant Professor of the Orient Institute of Technology in

Taipei, Taiwan. She had both played and coached for the Taiwanese Women’s
National Team for several years.
1 Introduction
Baseball and basketball are the two most popular spectator sports in Taiwan. Since
the lockout of the Chinese Basketball Alliance (CBA) in 1999, the newly created
semi-professional Super Basketball League (SBL) has emerged as the most competitive
and skillful adult league in Taiwan. The SBL celebrated its third year anniversary in the
468 S. Chen, R. Dick, C-D. Dongfang and P-Y. Teng
2006 season. Currently the league is comprised of seven teams (Yulon Dinos, Dacin
Tigers, VideoLand Hunters, Taiwan Beer, Bank of Taiwan, Yes&Yes Youmin and
Eastern television Antelopes), which are all situated in the capital city, Taipei. The
former CBA perennial power, Yulon Dinos, has captured the SBL Championship crown
for three straight years. Although all SBL teams function independently in their finance
and promotional activities, the operation of competitions and ticket sales are still
managed under the control of the Chinese Taipei Basketball Association (CTBA), which
is the governing body of Taiwanese basketball.
In terms of the marketing and financial aspects, the SBL is in a critical stage and
needs to drastically increase its attendance and ticket sales revenues. During the first
three seasons, the average attendance of a game was less than 2000. Even though the
average attendance occasionally reached 4000 or above during the playoffs and
championship series, many regular season games had an average attendance less than
1000 (ESPNStar, 2003; Lee, 2006). At this point, the broadcasting fee is the primary
revenue source allowing the SBL to survive. ESPN Taiwan spent a little more than
US$1 million ($3,500,000 NT) for the third-season broadcasting rights (Chao, 2005).
ESPN Taiwan was also recognised as the SBL’s sole official promoter of the league.
However, debates, rumours and questions have constantly arisen concerning the proper
amount to pay for the SBL broadcasting rights and who should be awarded
the rights (Chao, 2005; Tu, 2004; Yeh, 2006). This further illustrates the importance of
increasing ticket sales to keep the league self-sufficient.
Despite the urgent need to increase ticket revenues, both the CTBA and the Executive
Committee of the SBL have been heavily criticised for lacking creative marketing
strategies to reach fans (Chao, 2005; Chiu, 2006; ESPNStar, 2003; Fu, 2006; Tu,
2004). Many reasons seem to contribute to this lack of effort and ideas for developing
new marketing strategies. A few teams are semi-government-owned clubs. They
would not have the marketing budgets to operate the marketing campaigns, nor do they
have the marketing experts to guide the clubs’ public relations and advertising
programmes. Many of the team staff members are either senior or mid-level managers of
their parent companies. They often have no knowledge or background in the operation of
sport competitions.
All of the SBL games have been played in the arena of Taipei Physical Education
College. This building is more than 40 years old with a capacity of 3500 people. For this
reason, there is no attempt to monitor the designated home games for each team. Some of
the franchise staffs believe the CTBA should be fully responsible for selling tickets and
promoting the games because the ticket price is set by the CTBA. On game day, two
different prices of tickets are sold at the gates. The face values of lower arena and upper
arena tickets are about US$15 and US$10, respectively. Spectators can purchase advance
tickets by phone or internet through the CTBA. The limit on advanced tickets to be sold
is usually set at 1500. Thus, many fans have to line up for a long time to compete for
tickets to playoff and popular rivalry games.
When the CBA was established in 1995, many of its game rules and promotional
activities imitated those of the National Basketball Association (NBA). It seemed logical
for the CBA to follow what the NBA was doing because the NBA was the most popular
and prominent professional basketball league in the world. Many SBL franchise staff
members also adopt this concept. They believe if the league and the CTBA can
implement more current NBA marketing strategies, ticket revenues should increase
significantly. There is no need for them to ‘reinvent the wheel’. At this point, the
marketing department of each team has only expended a minimum amount of effort
researching the potential targets. Some of the popular promotional activities that have
been done include ticket discounts for fan-club members, small complimentary ticket
giveaways, and on-site souvenir giveaways. Star players occasionally attend some types
of charity events or charity games that are mainly sponsored by non-profit organisations.
Nevertheless, a league-wide public relations campaign or Strategic Marketing (SM) plan
has still not been developed.
If the league adopts more marketing strategies to boost ticket sales, what would be the
most effective strategies for the franchise staffs to select? Will franchise staff decisions
on the selected strategies match the preferences of the spectators and satisfy the needs of
those people? This study examines and compares the spectators’ and franchise staffs’
perceived effectiveness of marketing techniques adopted by the SBL. The findings of the
study will further help the league improve its marketing strategies for targeting potential
fans and retaining loyal consumers.
2 Review of literature
As the world’s most popular basketball league, the NBA still faces the challenges of
generating more ticket revenues. In the 1990s, popular NBA marketing practices such
as sponsorship deals, promoting star players, and globalisation of the league had made
the league successful (Schlossberg, 1996). Spoelstra (1993) also identified a number of
other successful marketing concepts and techniques utilised by the NBA, including
various game plans, the escalator theory, name capture, music concerts, theme evenings,
and exchange games. In recent years, the NBA has focused its marketing effort on both
the sale of season tickets and the promotion of single-game sales using computerised
information systems and technology (Lombardo, 2003a; Lombardo, 2003b; Zwartynski,
1995). Variable ticket pricing has also emerged, showing great promise in generating
additional revenues. Both the Chicago Bulls and Detroit Pistons introduced this method
in the 2005 season and experienced an attendance growth (May, 2006).
Mawson and Coan’s (1994) study was the pioneer in examining marketing directors’
perceived effectiveness of marketing strategies employed by the NBA. The authors
surveyed 22 NBA directors of marketing using Hambleton’s (1987) Marketing Technique
Questionnaire (MTQ) model. Marketing directors’ responses were further classified into
two main categories (high and low) based on the attendance of teams. The only
significant differences in ranking between the high and low attendance groups
were newspaper advertising and strategic planning (both had higher means for low
attendance teams).
When Dick and Sack (2003) examined the NBA marketing directors’ perceptions of
effective marketing techniques based on 21 techniques, it was found that many of the
top-ranked techniques in Mawson and Coan’s study were no longer popular anymore.
Dick and Sack asked the directors of marketing to add any other techniques not listed in
the original 21 items. A list of an additional 33 new techniques including group ticket
sales and community service projects resulted. The top five ranked strategies among
those 54 items were:
1 group ticket sales
2 community service projects
3 television advertising
4 mini packs (partial season tickets)
5 pricing strategies.
From a practical standpoint, if NBA marketing directors are using strategies that are
considered to be ineffective by the attendees, teams are not optimising their sales because
the attendees do not feel the utilised strategies increase their desire to attend games. In
2005, Dick and Turner followed up the study of Dick and Sack (2003). They attempted to
determine if the selected 20 marketing techniques that NBA marketing directors viewed
as valuable and useful were viewed in a similar fashion by attendees at NBA games. The
shocking truth was that NBA directors of marketing and ticket holders significantly
disagreed on the effectiveness of 15 of the 20 marketing techniques examined. In general,
the directors had a higher rating on each of those 15 strategies than the 200 participative
ticket holders.
Former NBA executive Spoelstra (1997) stated, “Tickets are the lifeblood of
professional sports” (p.59). The revenue from ticket sales can critically affect the survival
of the SBL. At this point, there is no study that has been done examining the SBL
franchise staffs’ perceptions of current marketing strategies. There is no information on
how the fans value the marketing strategies that are preferred by the franchise staffs. For
this reason, it is the researchers’ belief that understanding the fans’ responses toward the
current marketing strategies is an urgent task that needs to be accomplished.
3 Methods
3.1 Subjects
In order to examine and compare the spectators’ and franchise staffs’ perceived
effectiveness of marketing techniques adopted by the SBL, the researchers surveyed 31
franchise staff members and 703 on-site spectators. In this study, the franchise staff
members surveyed included team presidents, general managers, directors of public
relations, and head coaches of all seven teams. Among the 734 surveyed, about 60% were
female (n = 444). Nearly 74% of the participants were between 16 and 25 years old,
meaning a majority of the spectators were high school and college students (72.8%;
n = 534).
3.2 Instrument
The researchers modified and translated Dick and Turner’s (2005) questionnaire to assess
the Taiwanese spectators’ perceptions toward the US marketing strategies. The primary
reason for adopting this questionnaire was the SBL staff members were familiar with the
NBA marketing strategies and were willing to implement some of those strategies in
Taiwan. Twenty-four marketing strategies were provided in this study after reevaluating
Dick and Turner’s 54 listed strategies. These 24 strategies were reviewed by general
managers of three SBL teams and two sport management professors in Taiwan.
Participants’ responses on those 24 items yielded a high level of reliability (Cronbach’s
alpha = .886). Factor analysis was also performed to enhance the validity of the survey
items (see Table 3).
4 Procedures and data analysis
One thousand on-site spectators were randomly invited to participate in the survey during
three competitions. In order to ensure a high turnout and attendance rate, each of the
three games selected involved Yulon Dinos. Data were collected during the second and
third week of February 2006. The three games were played on 2/12, 2/18, and 2/19.
Participants were randomly picked by dance girls of the teams and five volunteers who
administered the survey. Questionnaires were distributed during the media timeouts and
halftime. In general, a participant took less than 10 min to complete the survey. Analysis
of data was conducted in the first week of March 2006 by using the SPSS 12.0 statistical
software program. Analysis of variance was the main statistical method utilised for
comparing the differences between specified groups.
5 Results
In general, a few specific characteristics of the participants were easily concluded based
on the survey responses. The majority of the participants were young females who
studied in high schools or colleges. About 60% of the participants had experienced
college education. In addition, more than 52% of the participants (n = 382) had attended
more than five games. About 25% were first-time attendees. Most of the participants
also came to the game with friends, such as classmates or colleagues at work (82.6%,
n = 606).
Television commercials and word of mouth were identified by the participants as the
two primary methods for them to obtain information about upcoming schedules and
events. For more detailed information on the popular methods for obtaining game
information, please refer to Table 1. As for marketing strategies perceived to be the most
effective by the spectators, the top three strategies were identified by similar percentages
of spectators. In order, they were:
1 community services/projects
2 promotion of star player(s)
3 pre-game events packaged with the game.
Table 1 Methods for fans to obtain game information
Rank Method Percentage (%)

1 Television commercials 49.6
2 Word of mouth 37.9
3 Newspaper 35.7
4 CTBA official sites 31.3
5 Official team sites 28.4
6 Sport magazines 26.8
Readers can find the participants’ top ten preferred marketing strategies in Table 2.
Table 2 Top ten preferred marketing strategies (maximum score: 5)
Rank Strategy Score

1 Community service projects 4.09
2 Promotion of star player(s) 4.08
3 Pre-game event packaged with game 4.07
4 Television advertising 4.01
5 Variation pricing 3.98
6 Season ticket discount 3.97
7 In-arena public address announcements 3.94
8 Special events/programmes at games 3.93
9 Group ticket sales 3.91
10 Target market selection 3.84
Factor analysis was utilised to further categorise the 24 listed marketing strategies. This
method helped the researchers better distinguish the participants’ preferences for different
types of marketing strategies. It grouped 19 of 24 strategies into five categories. Those
five factors yielded a total loading of .590. SM and TM were viewed as the most effective
types of marketing. For the results of the break down of marketing styles, please refer
to Table 3.
Table 3 Results of factor analysis (grouping 19 of 24 strategies into five categories with a
loading of .590)
Category Score % of variance Strategic items

Strategic Marketing 3.96 + .77 9.3 Target marketing and promotion of
(SM) star players
Traditional Mass 3.92 + .66 16.5 Billboard, game announcement,
Media (TM) newspaper, radio and television
Sales and Promotion 3.91 + .59 11.2 Public relations, group discount,
(SP) package sales, season ticket and
variation pricing
Gifts and Hospitality 3.65 + .84 10.4 Souvenirs, employee hospitality and
(GH) grass-root events
Direct and Electronic 3.36 + .73 11.6 E-mail blast, telemarketing and
Mailing (DEM) commercial fliers
When differences in perceived marketing styles were compared based on the participants’
demographic characteristics, it was found that people who attended a different number
of games did not vary their ratings of those five styles significantly. However, the under
20-year-old female spectators tended to rate TM as a more effective means than their
male counterparts did (Wilk’s Lambda = 1.941, F(5, 733) = 1.93, p < .01). Participants
with an education level of college degree or higher clearly rated DEM as less effective
(M = 3.10 + .64, f(3, 733) = 4.195, p < .01). They also significantly rated SM as more
effective (M = 4.19 + .75, F(3, 733) = 12.019, p < .01). On the contrary, high school
students and younger audiences tended to prefer DEM (M > 3.30), but not SM
(M < 3.90). Franchise staff members did not rate GH (M = 3.16 + .79, F(2, 733) = 5.49,
p < .01) and DEM (M = 2.99 + .70, F(2, 733) = 4.83, p < .01) as effective as the
students (GH = 3.68, DEM = 3.92) or other working adults (GH = 3.64, DEM = 4.02)
did. However, they perceived SM (M = 4.24 + .59) as more effective than the other two
groups (M < 4.02).
6 Discussion and conclusions
In the study by Chen et al. (2003), young high school and college students made up more
than 70% of the total audience. The composition of the spectators also contained a
high percentage of female spectators (60%) and frequent attendees (those who went to
games more than five times per year). This result is quite different from the composition
of NBA attendances, which normally have a higher percentage of male fans and
one-time attendees (Sport Business Research Network, 2005). The interesting fact is the
composition of spectators in the Taiwanese basketball league seems to remain unchanged
since the CBA era. Because the fan base is very unique, the marketing directors of the
franchises and administrators of the CTBA must recognise the needs and impact that the
young students and females may bring to the league. If any strategic marketing plans are
developed, they must include the concerns of those unique fan groups as well.
In this study, a disparity was clearly found between franchise staffs’ and young
students’ perceived effectiveness of marketing strategies. About 71% of franchise staff
members were male. The effective strategies that they tended to value were slightly
different from the preferences of young students and females. The students and those
with a college degree considered DEM more effective. More highly educated franchise
staff members had a different viewpoint on the effectiveness of DEM. Franchise staffs
also did not give as much value to GH as the students or other working adults did. Staff
members also perceived SM as more effective. Because the franchise staff members are
often the decision-makers in implementing new strategies, failing to see the needs of their
consumers can potentially cause the franchise staffs to adopt ineffective strategies. This
is a phenomenon that can be seen in the NBA, too (Dick and Turner, 2005). SBL staffs
have to closely evaluate the impact of two categories of strategies, DEM and GH, for
attracting young fans.
Like many Chinese basketball fans, the Taiwanese fans still rely heavily on the
traditional media, such as television and newspapers to obtain game information (Chen
et al., 2005; Chen et al., 2003). However, for certain reasons, the use of technology in
advertising and promotion still was not highly appreciated. In reality, the cost of
advertising on television can be more expensive than direct and electronic mailing.
According to Dick and Sack (2003), traditional media are also valued highly by NBA
directors of marketing, probably because this strategy is easy to operate and does not
require a lot of responsibilities from them.
Sending mass e-mail and electronic advertisements to the students would seem to be a
thrifty strategy. The students also appreciate this type of marketing strategy fairly well.
As computer technology continues to evolve, more interactive communication can be
created between the fans and franchises. Major professional leagues in America all
aggressively seek opportunities to deliver their games via broadband streaming, internet,
satellite television, and wireless/mobile communication (Hu, 2001; Olsen, 2003;

Umstead, 2006). By offering services through those advanced channels, the league
certainly can provide more chances for exposure and convenience to its consumers. An
increase of revenue through added subscriptions is often the result of this aggressive
marketing plan. Although the present SBL market is not mature enough to offer online or
wireless game deliverables, there is a great potential for growth in this domain. In the
meantime, if the SBL decides to utilise advanced internet and wireless technology
to interact with its fans, then the franchise staffs must also evaluate the young fans’
investment of time, cost of the electronic supplies, and potential monthly fees.
Traditionally, teenage fans’ parents probably will not be pleased with their children
spending a great amount of dollars and time browsing internets or playing with mobile
phones for entertainment purposes.
It is common to see NBA teams building luxury boxes and suites or setting up VIP
sections to charge high prices for a selective group of wealthy fans. At this point, the
current arena of Taipei Physical Education College certainly cannot accommodate this
type of service because the city will not renovate the old arena to build new luxury suites.
The season ticket plan and personal seat licensing could be workable or attractive.
However, in order to execute those marketing campaigns, a definite home court system
must be established from the current schedule. The number of designated home games for
each team must fairly and equally be set up by the league, so the marketing department of
each team can further manage pricing strategies and promotional activities independently.
Since high school and college female students have been recognised as the ‘bread and
butter’ of the league’s ticket revenues, the franchise staffs must understand whether or
not these young consumers can afford to pay for the season ticket or personal seat license.
This group of consumers normally does not generate much income. Their ability to pay is
heavily dependent on how much their parents are willing to support. Therefore, the
researchers believe introducing the mini-packages and special double-header discounts to
attract family crowds would be a more practical choice than both aforementioned
strategies. In general, while replicating NBA marketing strategies in Taiwan, it is crucial
for the franchise staffs to consider the cultural, demographic, and economical differences
between the US and Taiwanese fans.
7 Recommendations
Obviously, each team must continue its current public relations activities. Although
there were a lot of young fans that came to the game with their friends, there were not
as many who attended the game with their family members. It appears that the SBL
fails to effectively target the parents of its primary spectator group. Creating a more
family-oriented atmosphere to attract more parents attending the games should enhance
league image and financial benefits for the teams.
The SBL’s fourth season will begin in January 2007. The negotiation on the fee for
broadcasting rights still absorbs the franchise managers’ attention. They do not seem to
have extra energy and attention to devote to improving current marketing strategies. The
researchers strongly believe this is a crucial moment for the SBL to change its focus.
Together, the CTBA and the SBL must cooperate to create a year-round promotional
campaign. Ticket sales are not merely a game-day task, and promotional activities do not
just take place a week before the season opener. The SBL should think about how to
actively work with the Chinese Professional Baseball League (CPBL) to cross-promote
basketball during the off-season. To maximise the ticket revenues, all teams should
possess a common vision and share different ideas to target new fans and retain the loyal
consumers. Achieving this goal would require a league-wide effort and high levels of
coordination from all of the SBL teams and the CTBA. Some of the useful and logical
practices may include:
• upgrading the current membership programme to better reward the fans
• applying the practices of customisation to satisfy the needs of fans (e.g., online
ticket ordering)
• launching an informative official SBL website to serve the fans
• utilising mass e-mail to communicate with the student fans
• organising more camps, charity exhibitions, and community activities throughout
the year
• maintaining existing effective marketing practices, such as promoting star players,
double-header discounts, and campus visits
• experimenting with variable ticket pricing
• approaching more community groups to attend the games and providing special
benefits to those groups.
8 Limitations and concerns
Although the results of this study may generalise some useful conclusions for the league
to improve its current marketing plan, there are a few limitations and concerns that must
be addressed while interpreting the results. The participants were recruited on-site during
three games that showcased Yulon Dinos. The process of selecting the participants did
not completely follow the rule of randomisation. Technically, the researchers had
randomly recruited the participants from a convenience sample. Bias responses may
have existed due to the excessive concentration of one particular section of fans or loyal
supporters of a specific team. In addition, the participants’ inputs would not fairly
represent the perceptions of those who did not attend the games at all. In the future, it is
recommended that the league implement electronic polls or surveys to solicit the opinions
of those who did not attend the live games.
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Building a sense of community through sport

programming and special events: the role of sport
marketing in contributing to social capital
Eric C. Schwarz
Department of Sport Business and International Tourism
Saint Leo University
P.O. Box 6665/MC2067
Saint Leo, Florida 33574, USA
Fax: 1–352–588–8912
E-mail: drecschwarz@gmail.com
Abstract: The role of sport marketing in contributing to social capital is

derived from the historical relationship of marketing methods and the social
sciences. Examples can be found in psychology (attitudes, consumer behaviour,
motivation, participation levels, perceived value, perceptions, satisfaction
levels), sociology (ethics and morals, ethnicity, gender equity, globalisation,
performance enhancement, politics, race, social class and setting, violence
and deviance), economics (accounting, asset markets, consumption levels,
investments in sport products, labour equilibrium, pricing) and anthropology
(cultural identity, ethnography, history of sport, human development and
movement, rituals). In addition, market research validates most of these
activities and the advertising of sport is related to many of the creative arts.
The goal of this paper is to take a look at how marketing seems, in most
cases, to have moved away from the social sciences into the business realm
by bringing awareness to the historical relationship by articulating the role
sport marketing plays in contributing to the social psychological concepts of
‘social capital’ and ‘sense of community’.
Keywords: social capital; ‘sense of community’; sport marketing; social

sciences; sport programming; special events.
Reference to this paper should be made as follows: Schwarz, E.C. (2009)

‘Building a sense of community through sport programming and special
events: the role of sport marketing in contributing to social capital’, Int. J.
Entrepreneurship and Small Business, Vol. 7, No. 4, pp.478–487.
Biographical notes: Dr. Eric C. Schwarz is an Associate Professor of Sport

Business within the School of Business at Saint Leo University, USA.
Previously, he served over eight years as a member of the sport management
faculty in the School of Business, Management, and Professional Studies at
Daniel Webster College (NH), USA with additional responsibilities as the
Programme Director for the MBA in Applied Sport Management. During the
2006–2007 school year, he was on sabbatical leave, serving as a Visiting Senior
Lecturer and Research Fellow at the University of Ballarat in Australia. In
addition to his numerous presentations and publications around the world, he is
the author of Advanced Theory and Practice in Sport Marketing, published by
Butterworth-Heinemann/Elsevier in February 2008.

Building a sense of community 479
1 What are ‘social capital’ and a ‘sense of community’
Social capital is the concept that membership of a social group grants requirements,
responsibilities, and benefits on individuals (Hawe and Schiell, 2000; Portes, 1998;
Wall et al., 1998). The types of social capital most commonly focus on three areas:
involvement in social networks; engagement with others through informal, social
activities; and memberships with a group, association, or organisation (Putnam, 2000).
Social capital is dependent on a number of multidimensional and culturally specific
factors centred on specific norms of behaviour, networks, and organisations that
characterise a given setting, the people within that setting, and events that take place
over time (Silva et al., 2007). The ultimate goal of social capital is to enhance the quality
of life as a result of positive outcomes through interactions with others. Social capital is a
social science concept that traces its origins back to sociology and economics.
A sense of community is an experientially based concept that focuses on the
interrelationship and interdependence of individuals in a specific setting (Schwarz and
Tait, 2007). The most common type of community is based on geographic location, but
may also include membership in a group, or individuals who share similar beliefs,
behaviours, characteristics and/or values. Sense of community is difficult to pinpoint
as it is an intangible concept, but it can often be interpreted in terms of other measurable
terms. For example, the size of the community directly affects sense of community – an
urban community is defined by its sub-communities, while a rural community literally
defines the community.
Sport is any activity, experience or business enterprise that focuses on fitness,
recreation, athletics or leisure (Pitts et al., 1994). It does not always have to be
competitive, and participants do not have to have specialised equipment or a set of
rules (Parks et al., 2007). In general, the term ‘sport’ is an all-inclusive term covering all
aspects of the field, whereas the term ‘sports’ tends to involve a compilation of distinct
activities. Many concepts, functions, and activities are an integral part of social capital
and play a significant role in defining and developing a sense of community. Sport is one
of the most recognisable contributors, but it is also important to recognise other event
associated activities including festivals, arts, recreation, tourism, and leisure. However,
prior to truly understanding how the sport marketing and management of these activities
play a role in building a sense of community and contribute to social capital, we first
must understand the historical foundations of community studies rooted in the extensive
history of traditional sociology and the social sciences.
2 History of community studies
One of the earliest recognised and most influential studies was the Chicago School.
Emerging from the University of Chicago, the body of work was two-fold. In the initial
study during the 1920s and 1930s, researchers investigated urban sociology in terms of
the urban environment by combining traditional sociological theory with ethnographic
fieldwork. The second study, which took place after World War II, focused on utilising
field research combined with symbolic interactionism. The researchers’ overall goal
was gauge social relations in the city of Chicago by using the city as a social laboratory
(Pfohl et al., 2006).
480 E.C. Schwarz
Another significant investigation was the Middletown Studies of the 1920s through
to the Great Depression. This was an in-depth series of three field studies that focused
on the city of Middletown, Indiana as representative of a typical, small, urban centre.
The goal of the studies was to discover the most significant cultural norms, and hence
better understand social change. The studies focused on the major aspects of social life
including work, home and family, leisure time, government and community, and religion
(Hoover, 1989; Lynd and Lynd, 1937; Lynd and Lynd, 1956).
There have been numerous other studies and theories developed since the Chicago
School and Middletown Studies that have focused on various aspects of community
life. Many of those studies focused on the concept of sense of community. One prominent
theory was developed in the mid-1970s was that of Sarason’s (1974) and his definition of
psychological sense of community:
“the perception of similarity to others, an acknowledged interdependence with
others, a willingness to maintain this interdependence by giving to or doing for
others what one expects from them, and the feeling that one is part of a larger
dependable and stable structure.”
Another theory was presented by Gusfield (1975) where community was classified as
two dimensional: territorial and relational. Territorial focused on the physical location of
the community whereas relational focused on the nature and quality of relationships. This
was further elaborated upon by Riger and Lavrakas (1981) to be defined as physical
rootedness and social bonding.
While these previous studies provided a foundation for understanding communities
and building senses of community, the most widely accepted theory of sense of
community is that of McMillan and Chavis (1986). They propose that sense of
community is composed of four elements:
1 membership in the specific community
2 influence
3 integration and fulfilment of needs
4 shared emotional connectedness.
Membership in the specific community includes the concepts as boundaries (language,
dress, ritual, etc.); emotional safety and security; a sense of belonging and identification,
personal investment in the community; and a common symbol system (name, title, logo,
landmark, etc.). Influence is where individuals believe they have influence in the
direction of the community, and the belief that the cohesiveness of the community is a
factor of having influence over the individual members. Integration and fulfilment of
needs involves members of community being rewarded for their participation in relation
to their needs, their desires, and what is valued by both the individual member and
the community. Shared emotional connection is the most involved aspect of sense of
community according to McMillan and Chavis (1986), as they articulated seven features
of emotional connection that create a sense of community:
1 Contact hypothesis: the theory that the level of closeness between people is directly
proportional to the level of personal interaction of members within the community.
2 Quality of interaction: the direct effect members of a community have on each other.
3 Closure to events: the concepts of reducing vague and unclear interactions to ensure
that tasks are completed and ensure group cohesiveness takes place.
4 Shared value event hypothesis: creating group bonds as a function of a common
event (not always positive in nature, such as a crisis).
5 Investment in the community: the level of involvement and the relationship to
perceived importance of the community of individuals.
6 The effect of honour and humiliation on community members: the public appearance
of individuals to other community members – if they have been honoured, they will
feel more drawn to the community; if they have been humiliated, they feel less
appeal to belonging to that community.
7 Spiritual bond: the most difficult feature to measure because it is often beyond a
physical or emotional connection to a community – it can best be described as the
transcendental belief of the community above all others.
• An example might be someone who grew up in a rural town in the USA but
now lives in a larger city such as Boston, New York, Chicago, or Los Angeles.
Although they physically live in the community of the city, the individual
always refers to being from that rural town, and always has a transcendental
belief that they will always be a part of that rural community.
One of the most recent studies focuses on a theory of Community-based Enterprise
(CBE). CBE involves a community acting cooperatively as both entrepreneur and
enterprise in pursuit of the common good by creating and operating a new enterprise
embedded in its social structure, and managing and governing in such a manner that
strives to attain the economic and social goals of a community, resulting in sustainable
individual and group benefits over the short and long term (Peredo and Chrisman, 2006).
A significant foundation of CBE is the concepts of embeddedness and social networks,
resulting in the creation of social capital. Embeddedness acknowledges that action is
embedded in the structures of social relations (Razin, 2002), and social networks
are community-based structures that are developed through investment strategies centred
upon the institutionalisation of group norms and values, and the formalisation of
networks (Misener and Mason, 2006; Portes, 1998). The resulting social capital comes
from the reciprocal relationships embedded with the social networks (Misener and
Mason, 2006). This dependence on social capital is central to building a sense of
community because the community itself is often the major and most valuable asset of a
CBE. This is because an effective community-based enterprise requires an availability of
community skills, a multiplicity of community goals, and a realisation that success or
failure is fully dependent on community participation (Peredo and Chrisman, 2006).
3 Relationship of sense of community and social capital to sport
As a result of the various community studies and research, sense of community seems
to be a strong concept in the value and beliefs systems of societal members, and social
capital is a major influence that builds senses of community. As related to sport, one of
the major areas of study where social capital has been researched is through health
482 E.C. Schwarz
promotion. In their article on social capital and health promotion, Hawe and Shiell (2000)
surmised that the concepts of power within social environments, building relational ties
between members of communities, creating opportunities for empowerment and capacity
building by individuals within communities, and working together to create ‘healthy’
public places and communities, are all the result of effective management of social
capital. Sport, as an extension of health promotion activities, create connections between
individuals and the networks, norms, and trust that arise from those connections
(Griswold and Nichols, 2006; Putnam, 2000). As such, social capital as related to sport
builds on three main areas: civic engagement, informal social engagement, and tolerance
combined with trust (Griswold and Nichols, 2006).
Civic engagement means working to make a difference in the civic life of
communities by developing the combination of knowledge, skills, values and motivation
to make a difference. In addition, it means promoting the quality of life in a community,
through both political and non-political processes. Individuals who are morally and
civically responsible are recognised as being a member of a larger social fabric and
therefore considered social problems to be at least partly their own. Members of
communities who are civically engaged are willing to see the moral and civic dimensions
of issues, to make and justify informed moral and civic judgements, and to take
action when appropriate (Ehrlich, 2000). Informal social engagement is defined as
continuous interactions that occur between individuals and groups as a result of a
common association. The associations could be as a result of social networks, common
interests, attendance at similar activities, or almost any situation that brings people
together. Tolerance combined with trust is simply the concept of being able to accept
the individual differences of people, communities and activities, while believing in the
quality of the relationships created through social capital.
The ultimate goal of social capital is to enhance the quality of life as a result of
positive outcomes through interactions with others. This is articulated in social capital
theory, where it is hypothesised that individuals gain access to social capital through
membership in networks and social institutions to maintain or improve their position
within a specific community. Social capital theory provides an important conceptual
framework between the attributes of individuals and their immediate social situation, and
provides a link between social influences and developmental outcomes (Furstenberg and
Hughes, 1995; King and Furrow, 2004).
The application of social capital theory can be articulated through sport programming
and special events through the formation of specialised social networks. These
specialised social networks are centred on three behavioural factors: socialisation,
involvement, and commitment. Socialisation is defined as the process by which
individuals acquire attitudes, values, and actions which are appropriate to members of a
particular culture. In sport culture, we look at the process by which individuals develop
and incorporate skills, knowledge, attitudes, and items/equipment necessary to perform
sport roles (Schwarz and Hunter, 2008).
Socialisation in sport demands some type of involvement, which is defined as
creating a close connection with something. Involvement in the sport culture is as easy as
ABC – affective is the attitudes, feelings and emotions directed towards an activity;
behavioural are the actions or reactions directly related to the internal and external stimuli
an activity provides; and cognitive is the process of acquiring knowledge about an
activity (Schwarz and Hunter, 2008).
Commitment is the process by which an individual is emotionally or intellectually

bound to a course of action. In sport culture, commitment refers to frequency, duration,
and intensity of involvement in a related activity. Programme and event managers
must understand the thought processes of individuals it relates to concepts such as
willingness to spend their valuable discretionary money, time, and energy (Schwarz and
Hunter, 2008).
One of the most prevalent social networks integral to the operation of sport
programming and special events, and hence is crucial to the building of a sense of
community through these activities, is sport volunteerism. Sport volunteerism
involves individuals who chooses to contribute their time, skills, and experience, for
no payment (other than possibly reimbursement for out-of-pocket expenses), to benefit
the community (Australian Sports Commission, 2000). In addition, people volunteer
for personal satisfaction, because they want to help others and do something worthwhile,
or they have a desire for involvement as a result of personal or family association
(Australian Bureau of Statistics, 2007). As a result of this social network, there is a link
between volunteerism and social capital. However, research (Harvey et al., 2007) shows
that existing relationships between social capital and volunteerism are related mostly to
long-term volunteer involvement – individuals involved in short-term volunteering tends
to emphasise the immediate advantages of this involvement rather than the long-term,
intangible consequences. Therefore, long-term motivation and involvement is more likely
to engage individuals in actions that contribute to the development of social capital
(Harvey et al., 2007).
Sport programming and special events serve an integral role in the development of
community networks and social capital (Misener and Mason, 2006), which serves a role
in the formation of regional identity, and expands the further development of social
networks (Raagmaa, 2002). These expanded social networks then provide social support,
self-esteem, identity, and perceptions of control (Cattell, 2001; Cohen and Syme, 1985),
all of which are integral components to increasing the level of participation in social
activities by individuals within the community setting (Cattell, 2001).
In order to build a sense of community as related to sport activities, social capital
needs to provide the glue that binds the community together in collective action,
and the gears to direct community members towards participation (Krishna, 2002).
According to Misener and Mason (2006), this can be best accomplished by adhering to
the following propositions:
• community values should be central to all decision-making processes
• various stakeholders, particularly community interest groups, should be involved in
strategic activities related to events (i.e., bid process, management, legacy)
• collaborative action should empower local communities to become agents of change
• open communication and mutual learning throughout strategic activities must be
maintained to minimise power brokering.
So how do we move forward? One way is to take a look at foundational concepts inherent
to the theory and practice of sport marketing.
484 E.C. Schwarz
4 The role of sport marketing in contributing to social capital
There has been a long tradition of communities using and devising [sport] activities
as opportunities for social and commercial exchange (Picard and Robinson, 2006). The
foundation for this social and commercial exchange is most often articulated through
sport marketing and management efforts, especially through the mass media and via
managerial performance. With regard to mass media, there are a number of issues that
must be realised by communities when getting the message out about activities. First is
the fact that there is currently a shift towards increased use of new media. Effective use
of new media including multimedia, computer technology, and digital media is crucial to
attracting the younger generation, but it is still important to continue utilising the
traditional media outlet including print media (newspapers) and broadcast media (radio
and television). This is defended by research that shows that older people are more reliant
on the media medium they developed a connection with during their youth (Jung et al.,
2001; Shah et al., 2001). Therefore older adults (55+) tend to be more reliant on print
media, young and middle adult aged (25–55) adults gravitate towards broadcast media,
and youth (under age 25) tends to get their information from the internet and other new
media sources (Jung et al., 2001). The failure to consider how people use media will
likely lead to a lack of communication with community members, decrease participation
in recreation and arts programmes, negatively affect the success of events and festivals,
and decrease the level of sense of community.
In a study conducted by Schwarz and Tait (2007), the importance of communication
to and from communities; facility, event, and programme maintenance and development;
support for volunteers; and administrative expertise are integral to contributing to social
capital, building senses of community, and the management of sport programming. Of
these four areas, the biggest concern is communication. This is where sport marketing
can play a significant role.
Regardless of the type of organisation or location, a lack of communication can only
lead to problems. The design of an integrated sport marketing communications plan is
important to articulate organisational goals with the philosophy, mission, and vision of
the sport organisation. Those goals must be communicated to key target audiences
in measurable terms through a list of objectives, which are the individual benchmarks that
need to be accomplished and communicated to reach the goal. This includes contacting
all members of the sport organisation (internal and external) through pertinent media
outlets (print, radio, television and internet) and internal promotional opportunities
(websites, bulletin boards, newsletters, and notice boards). These increased sport
marketing communication efforts should not only increase awareness, but also increase
the number of attendees and volunteers for sport activities. While the creation of an
integrated sport communication plan seems like a complex and time consuming process,
the benefits far outweigh the pitfalls. An efficient and solid integrated sport marketing
communications plan will allow managers to spend less time trying to rectify problems,
provide stakeholders with a greater awareness of events, and to more effectively build
brand equity for each event.
Sport marketing efforts provides a means to gain a better understanding of the
sport consumer through the efficient and effective application of sport marketing
research efforts, the implementation of a sport marketing information system, and the
evaluation of sport marketing behaviour. This information is then utilised to deliver sport
programming and special events through sport marketing logistics, including sport
product and service management, sales management, and purchasing and supply chain
management. Getting the information out about sport programming and special events is
implemented through promotions, advertising, and sponsorship.
While many of these sport marketing efforts can provide a positive contribute,
problems can arise that impact the growth of social capital and negative affect the
development of senses of community. These issues include the struggle by sport
organisations to utilise the knowledge of customers acquired through sport marketing
efforts to position their brands, their inability to put their brands to work beyond the
traditional media, and the failure to create brand acceptance and understanding
throughout the individual sport organisation.
5 Recommendations and suggestions for future research
Research shows that sport-related events and activities do contribute to social capital and
a sense of community (Schwarz and Tait, 2007). However, as noted in the review of
literature, to truly understand whether an activity contributes to a sense of community,
you would have to either be a part of that community, or be engaged with that
community. This has been most often achieved as a result of marketing research via field
studies. While field studies seems to be most effective, they are often cost and time
ineffective because:
• the amount of time needed to engage with a specific community is high
• the number of locations that could be researched domestically, internationally, and
globally is endless
• the number of researchers needed to accomplish the necessary research can
be boundless.
This is great news for researchers since there seems to be a limitless opportunity to
conduct research – as long as they have the resources available. Each additional study
connecting the relationship between social capital and the concept of sense of community
further advances this unrepresented area of sociological research as related to sport
marketing and management. These marketing research opportunities can focus on a
multitude of areas including analyses of demographics, geographics, psychographics,
and socioeconomics; cultural diversity, accessibility, and infrastructure availability
assessments; and economic impact studies. In addition, sport marketing and management
consultancies focusing on facility, event, and volunteer management; and marketing plan
development and implementation, can further advance the information available to
determine the level of sport programming and special events desirable to contribute to
social capital and build a sense of community.
6 Conclusion
The history of marketing, and hence sport marketing, is grounded in sociology and the
social sciences. However, in many cases, marketing and sport marketing has moved away
from the social sciences into the business realm. There are many opportunities to return
to this historical association to expand the scope of sport marketing beyond ‘traditional’
486 E.C. Schwarz
and ‘alternative’ sport. In addition, there are significant opportunities to expand into
areas of ‘non-traditional’ sport-related activities including recreation, arts, festivals,
and other leisure activities. The reality is that in order for these concepts to have a
place in the mainstream foci of sport marketing, additional research, experiential
learning projects, and service learning opportunities need to focus on enhancing social
capital, building senses of community, and expanding the image of under-represented
leisure opportunities.
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Clevedon, UK: Channel View Publications.
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Book Review: International Entrepreneurship in

Family Businesses by J.C. Casillas, F.J. Acedo and
A.M. Moreno
Reviewed by Vanessa Ratten

Duquesne University, USA
Published 2007 by Edward Elgar, Cheltenham, UK. 338pp.

ISBN: 978 1 845428792
Keywords: book review.
Reference to this book review should be made as follows: Ratten, V. (2009)

‘International Entrepreneurship in Family Businesses by J.C. Casillas,
F.J. Acedo and A.M. Moreno’, Int. J. Entrepreneurship and Small Business,
Vol. 7, No. 4, pp.488–489.
Biographical notes: Vanessa Ratten is an Assistant Professor at the A.J.

Palumbo School of Business Administration at Duquesne University, USA.
Her main research interests are international entrepreneurship, technology
innovation and strategic management. She has presented and published her
work in numerous peer-reviewed academic journals and at professional
conferences. She has published in journals, including the European Journal
of Innovation Management, the Journal of High Technology Management
Research, the International Journal of Entrepreneurship and Small Business
and the Asia Pacific Journal of Marketing and Logistics. She has co-edited a
research book on European entrepreneurship and is currently finishing a
co-edited research book on Asian entrepreneurship. She is currently working
on research that examines the relationship between entrepreneurship and
sports marketing. In particular, she is interested in the roles of sustainability,
corporate social responsibility and social entrepreneurship in the sports and
technology industries.
The research areas of international entrepreneurship and family business have grown
significantly during the past decade. Hence, it is timely that a book devoted to
both research areas has been published. The book titled International Entrepreneurship
in Family Businesses is a welcome addition to the literature that exists in the international
business and entrepreneurship field. The book is written by three authors
all from the University of Seville in Spain who are well recognised experts in the
field of family management studies. The book is cleverly divided into four parts
(introduction, antecedents, determinants of international entrepreneurship of family
business, conclusion and case studies). Part 1 of the book (pp.3–15) contains one chapter
on international entrepreneurship of family firms: research process. Chapter 1 discusses
the research process of the book, which combines two types of analysis. The first analysis

Book Review 489
type is a review of the literature of internationalisation and family business. The second
analysis type is a historical sample of multinational family firms. The introduction part of
the book is well written and structured, which makes the book easy to read and digest.
Part 2 of the book (pp.15–97) includes three chapters. Chapter 2 (pp.15–42) examines
what a family business is. The authors state that family business “within it, economic and
organisational aspects are combined with feelings and relationships that exist between
members of the family”. Indeed, it is the dynamics of a family that can make a business
successful or fail. The authors highlight that the majority of business in any economy
are family operated. Table 2.2 on page 23 states the percentage of family business,
percentage of Gross National Product they contain and percentage of employment family
business has in a number of different countries around the world. The chapter also
includes an interesting section on the uniqueness of the family business. Chapter 3
(pp.42–73) is on globalisation and growth strategies for family businesses. The authors
discuss the concept of globalisation and its impact on small- and medium-sized
enterprises. Box 3.1 on page 58 provides useful examples of medium-sized family global
leaders like Baader, Chupa Chups and Corticeira Amorim Industria. Chapter 4
(pp.73–97) is the last chapter in Part 2 of the book and discusses international family
businesses: literature review and proposal. Table 4.1 on page 76 states the key research
on the internationalisation of the family business from 1991 to 2005 by author, title
and journal. A discussion on the bibliometric analysis of the articles provides very
useful information about the distribution of references by articles. Part 3 of the
book (pp.97–215) contains five chapters. Chapter 5 (pp.97–123) in on environmental
influences. Box 5.1 on page 100 provides a great example of a Finnish family
business. The box describes how the Myrlykoski corporation has globalised. Chapter 6
(pp.123–139) is on international entrepreneurship at the founder stage: characteristics
of the founder-owner. The chapter discusses how managers traits affect the
internationalisation process, which is essential in family businesses. Box 6.1 on page 128
provides a great discussion on Amancio Ortega who is the richest man in Spain and the
creator of the ZARA empire. Chapter 7 (pp.139–167) discusses the succession process,
which can be a contentious issue in family businesses. Table 7.2 on page 146 provides a
useful depiction of family-owned business succession. Chapter 8 (pp.167–193) continues
to examine succession issues by discussing a number of issues that are important in
succession planning. For example, the authors discuss attitude and managerial style of
the predecessors. Chapter 9 (pp.193–215) discusses other resources that contribute to
international entrepreneurship in family business. The resources discussed include
finances and managerial. Box 9.1 on page 201 discusses the interesting example of
Chopard, which was the result of an acquisition by a German firm of a Swiss firm. Part 4
(pp.215–295) of the book includes three chapters. Chapter 10 (pp.215–235) discusses
dimensions of family business internationalisation. Box 10.1 on page 223 discusses the
growth and development of Koch Industries, which is the largest private firm in North
America. Chapter 11 (pp.235–287) examines seven family multinational histories. It
is one of the longest chapters but definitely worth reading. The case studies in this
chapter are very well written and discuss in detail the developments and history of
the firms involved. Chapter 12 (pp.287–295) is the conclusion chapter and pulls together
well all the ideas discussed in previous chapters but also suggests future research
directions. Overall, all the information and statistics included in the book are current and
well-researched. The authors have done a tremendous job of pulling together all the
information on family business in the global context.
490
International Journal of Entrepreneurship and Small Business
CONTENTS, KEYWORDS AND AUTHOR INDEXES

FOR VOLUME 7
Contents Index Volume 7, 2009
Issue No. 1
1 A study of enterprise in Rankin Inlet, Nunavut: where subsistence

self-employment meets formal entrepreneurship
Aldene Meis Mason, Leo Paul Dana and Robert Brent Anderson
24 The profitable new Japanese entrepreneurs: the minor role of

information technology
Tatsuyoshi Masuda
59 The contribution of entrepreneurship to society

Hans Ruediger Kaufmann
74 Strategic decision making in small firms: a taxonomy of small

business owners
Petra Gibcus, Patrick A.M. Vermeulen and Jeroen P.J. de Jong
92 Learning mode of small business owners in Belgium

Annick Willem and Herman Van den Broeck
107 An exploratory study of the characteristics affecting the success of SMEs

in Pakistan
M. Khurrum S. Bhutta, Jamshad H. Khan, Adnan Omar and Usman Asad
123 Exploring firm emergence: initially conditioned or actively created?

Erno T. Tornikoski and Vesa Puhakka
139 The strategic management competence of small and medium-sized

growth firms
Marko Kohtamäki, Erno Tornikoski and Elina Varamäki
Contents Index 491
Issue No. 2
SPECIAL ISSUE: ENTREPRENEURSHIP AND THE REGION

Guest Editors: Professor Michael Dowling, Professor Jürgen Schmude,
Associate Professor Frank Lasch and Professor Frédéric Le Roy
151 Editorial
Michael Dowling, Jürgen Schmude, Frank Lasch and Frédéric Le Roy
155 IECER Conference – five years of entrepreneurship research: topics

and trends
Jürgen Schmude, Stefan Heumann, Frank Lasch and Frédéric Le Roy
175 Geographical environments for entrepreneurship

Edward J. Malecki
191 Mapping entrepreneurial activity and entrepreneurial attitudes in

European regions
Niels Bosma and Veronique Schutjens
214 Innovative milieu, micro firms and local development in Barcelona

Josep Lladós, Mireia Fernández-Ardèvol and Jordi Vilaseca
232 Social capital: an asset or a liability to entrepreneurial activity?

Lars Rønning
Issue No. 3
SPECIAL ISSUE: HIGH-TECH ENTREPRENEURSHIP

Guest Editors: Associate Professor Frank Lasch, Professor Frédéric Le Roy,
Professor Michael Dowling and Professor Jürgen Schmude
253 Editorial
Frank Lasch, Frédéric Le Roy, Michael Dowling and Jürgen Schmude
258 Entrepreneurship in emerging high-tech industries: ICT entrepreneurs

between experts and kamikazes
Frank Robert, Pierre Marquès, Frank Lasch and Frédéric Le Roy
284 How are the conditions for high-tech start-ups in Germany?

Romy Voß and Christoph Müller
492 Contents Index
312 The locational factors and performance of the high-tech startups in China
Utz Dornberger and Xiuhua Zeng
324 Entrepreneurship and ICT: a comparative analysis between Germany

and Portugal
João Leitão and João Ferreira
347 The impact of regional development policies on biotechnology firm

creation: a comparative analysis of France, Germany and the UK
Călin Gurău and Alexander Groh
367 Of acting principals and principal agents: goal incongruence in the venture
capitalist-entrepreneur relationship
Esben Christensen, Robert Wuebker and Rolf Wüstenhagen
Issue No. 4
SPECIAL ISSUE: ENTREPRENEURSHIP AND INNOVATION

Guest Editor: Professor Vanessa Ratten
389 Editorial
Vanessa Ratten
391 Cooperation in innovation practices among firms in Portugal: do external

partners stimulate innovative advances?
Maria José Silva and João Leitão
404 Dynamic capabilities, change and innovation in Greek SMEs:

a preliminary study
Apostolos Rafailidis and Giannis Tselekidis
420 Entrepreneurship and innovation within creative industries: a case study

on the Finnish games industry
Mirva Peltoniemi
431 Partnerships and innovative patterns in small and medium enterprises

Elena Cefis, Mihaela Ghita and Anna Sabidussi
446 Strategy and innovation: making the right strategic decision and developing
the right innovative capabilities
Contents Index 493
457 Entrepreneurs and branding in an environment of mass customisation and

open innovation
Khaled Hamid
466 A comparison of spectators’ and franchise staffs’ perceptions on the

effectiveness of the marketing techniques adopted by the Super Basketball
League in Taiwan
Steve Chen, Ronald Dick, Chie-Der Dongfang and Pi-Yun Teng
478 Building a sense of community through sport programming and special

events: the role of sport marketing in contributing to social capital
Eric C. Schwarz
Book Review
488 International Entrepreneurship in Family Businesses by J.C. Casillas,

F.J. Acedo and A.M. Moreno
Vanessa Ratten
494
Keywords Index Volume 7, 2009
Indexing is based on the keywords and phrases, title and abstract on the first page of
each paper. Page references are to the first page of the paper or report.
A
active behaviours 123
agency theory 367
angels 175
B
Barcelona 214
basketball 466
beadwork 1
Belgium 92
biotech firm creation 347
brands 457
bureaucracy 284
business environment 284
business practice 446
business success 214
C
caribou 1
case study 367
change 404
cleantech 367
cognitive ability 74
Cointegrated Vector Autoregressive Model 324
commonalities 404
conditions 284
cooperation 431
creative industries 420
creativity 446
CVAR 324
D
decision makers 74
definition 59
description of entrepreneurs 258
dynamic capabilities 404
E
economic survey 107
education 59
energy technology 367
entrepreneurial activity 191, 232
entrepreneurial attitudes 191
entrepreneurial innovation capability 391
Keywords Index 495
entrepreneurs 457
entrepreneurship 1, 155, 175, 191, 214, 258, 284, 324, 367, 420, 446
entrepreneurship and society 59
entrepreneurship research 155
environment 155
Europe 155
European regions 191
evolutionary theory 420
external support agency 24
F
factors 404
farm households 232
firm emergence 123
focus groups 92
France 258
G
games industry 420
Germany 284
goal incongruence 367
Greece 404
growth 139
H
high tech 258
high-tech 284
high-tech startups 312
home office 24
I
ICT 214
ICTs 258, 324
identity 59
IECER Conference 155
Information and Communication Technologies 258, 324
Information and Communications Technology 214
information asymmetry 367
initial conditions 123
innovation 214, 391, 404, 420, 431, 446, 457
institutional support 284
interdisciplinary research 155
internet use 24
J
Japan 24
K
Kivalliq 1
Kivalliq Arctic Foods 1
496 Keywords Index
L
learning capability 92
learning gaps 92
learning mode 92
learning process 92
learning support 92
local environments 175
locational factors 312
M
managerial ability 24
marketing 457
marketing techniques 466
Mass Customisation 457
milieu 214
morale of employee 24
multidisciplinary paradigms 59
N
network 214
networks 175, 391
new entrepreneur 24
new firm formation 175
new firm’s location 312
Nunavut 1
P
Pakistan 107
partnership 431
Portugal 391
PR China 312
previous occupational status 24
previous work experiences 24
probit 431
promotional strategies 466
Q
quantitative study 139
R
Rankin Inlet 1
reflective learning 92
regional policies 347
research and development 284
research paper 92
research topics and trends 155
S
search 420
self-employment 1
‘sense of community’ 478
Keywords Index 497
small and medium enterprises 107

small- and medium-sized enterprises 74, 431
small business management 139
small business owners 92
SME 431
SMEs 74, 107, 404
social capital 232, 478
social sciences 478
special events 478
spinoffs 175
spin-offs 284
sport marketing 478
sport programming 478
start-up firm 367
start-ups 284
strategic decision making 74
strategic management competence 139
strategy 446
subsistence 1
success characteristics 107
T
talented employee 24
taxonomy 74
technology 457
ticket sales 466
transnational comparisons 347
types of entrepreneurs 258
typology of entrepreneurs 258
U
universities 175
urbanisation 191
V
VC 367
venture capital 175, 367
498
Author Index Volume 2, 2006
Anderson, R.B. 1 Marquès, P. 258

Asad, U. 107 Mason, A.M. 1
Bhutta, M.K.S. 107 Masuda, T. 24
Bosma, N. 191 Müller, C. 284
Cefis, E. 431 Omar, A. 107
Chen, S. 466 Peltoniemi, M. 420
Christensen, E. 367 Puhakka, V. 123
Dana, L.P. 1 Rafailidis, A. 404
De Jong, J.P.J. 74 Ratten, V. 389, 488
Dick, R. 466 Robert, F. 258
Dongfang, C-D. 466 Rønning, L. 232
Dornberger, U. 312 Sabidussi, A. 431
Dowling, M. 151, 253 Schmude, J. 151, 155, 253
Fernández-Ardèvol, M. 214 Schutjens, V. 191
Ferreira, J. 324 Schwarz, E.C. 478
Ghita, M. 431 Silva, M.J. 391
Gibcus, P. 74 Teng, P-Y. 466
Groh, A. 347 Tornikoski, E. 139
Gurău, C. 347 Tornikoski, E.T. 123
Hamid, K. 457 Tselekidis, G. 404
Heumann, S. 155 Van den Broeck, H. 92
Kaufmann, H.R. 59 Varamäki, E. 139
Khan, J.H. 107 Vermeulen, P.A.M. 74
Kohtamäki, M. 139 Vilaseca, J. 214
Lasch, F. 151, 155, 253, 258 Voß, R. 284
Le Roy, F. 151, 155, 253, 258 Willem, A. 92
Leitão, J. 324, 391 Wuebker, R. 367
Lladós, J. 214 Wüstenhagen, R. 367
Loughnane, L.J. 446 Zeng, X. 312
Malecki, E.J. 175

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• Please enter my subscription to the International Journal of Entrepreneurship and

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SPECIAL ISSUE: ENTREPRENEURSHIP AND INNOVATION

391 Cooperation in innovation practices among firms in Portugal: do external

404 Dynamic capabilities, change and innovation in Greek SMEs:

420 Entrepreneurship and innovation within creative industries: a case study

431 Partnerships and innovative patterns in small and medium enterprises

457 Entrepreneurs and branding in an environment of mass customisation and

466 A comparison of spectators’ and franchise staffs’ perceptions on the

478 Building a sense of community through sport programming and special

488 International Entrepreneurship in Family Businesses by J.C. Casillas,

490 Contents Index

494 Keywords Index

498 Author Index

Professor A. Bakr Ibrahim

Professor John Milton-Smith

Professor Jan M. Ulijn

Professor Rosalind Chew (Regional Editor for Asia)

Professor Alain Fayolle (Regional Editor for Europe)

Professor Patricia P. McDougall (Regional Editor for the USA)

Consulting Editor: Professor Leo Paul Dana

Biographical notes: Vanessa Ratten is an Assistant Professor at the A.J.

Copyright © 2009 Inderscience Enterprises Ltd.

Cooperation in innovation practices among firms

Maria José Silva* and João Leitão

Abstract: This paper analyses whether the entrepreneurial innovation

Keywords: innovation; networks; entrepreneurial innovation capability;

Biographical notes: Maria José Silva is an Assistant Professor at the

João Leitão is an Assistant Professor at the UBI, Covilhã, Portugal. His

Copyright © 2009 Inderscience Enterprises Ltd.

coordinator of the International Review of Management and Economics,

2 Theoretical framework, hypotheses and model proposal

innovation, process innovation and organisational innovation. This paper focuses on

approach provides a better understanding of the relationships established between firms

2.2 Model proposal

Figure 1 Analysis of external relationships in terms of innovative advances: proposed model

H2 Innovative partnerships established with competitors are positively related to the

H3 Firms that establish an innovative partnership with universities and other

H4 Innovative partnerships established with consultancy firms and governmental and

The fourth hypothesis aims to determine whether innovative relationships established

3.1 Population and sample

Figure 2 Distribution of firms by external innovative partnerships (see online version

90% Clients, suppliers

For testing the previously formulated theoretical hypotheses, we considered several

Table 1 Variables of the model and hypotheses

Model I Code Measures

3.3 Method: logistic regression

4 Results and discussion

Table 2 Results of the logistic regression for innovative advances

This study aimed to analyse whether entrepreneurial innovation capability in terms of

industrial or commercial associations should participate as consulting staff in universities,

Edquist, C. (1997) ‘Systems of innovation approaches – their emergence and characteristics’,

Maskell, P. and Malmberg, A. (1999) ‘Localised learning and industrial competitiveness’,

Dynamic capabilities, change and innovation in Greek

Abstract: International competition is increasingly making firms enter a

Keywords: dynamic capabilities; innovation; change; factors; Greece;

Reference to this paper should be made as follows: Rafailidis, A. and

Biographical notes: Dr. Apostolos Rafailidis is an Assistant Professor at

Copyright © 2009 Inderscience Enterprises Ltd.

Dr. Giannis Tselekidis is an Economist. He holds a PhD on Interfirm