Institutional Readiness and Small to Medium‐Sized Enterprise Alliance Formation

Abstract

The focus of this study, in contrast to research that explores the strategic choice by small to medium‐sized enterprises (SMEs) to form strategic alliances, is a characterization of the institutional attributes that enable alliance formation. This enabled state is defined as “institutional readiness,” which is the capacity of the institutional environment to support the formation of SME‐based strategic alliances. Utilizing institutional theory as a lens, this study sets forth a theoretical framework for institutional readiness and tests the framework using a survey of 2,054 SMEs from eight countries. Though it has been speculated for some time that institutional forces might have an important effect on firm behavior, to date, in contrast to the current research, there has been little research exploring these effects that is based upon multiple country settings and large samples of SMEs. Additionally, in contrast to the present study, few studies have been designed to rigorously test a broad set of institutional factors and in so doing provide a clear conceptualization of the interplay of institutional and firm attributes in the formation of interfirm alliances. The findings of this study suggest that in the case of SME‐based alliance formation, institutions do matter and in some cases, in unexpected and surprising ways.

1. Pat H. Dickson is an associate professor and director of the Business and Enterprise Management Program, the Schools of Business, Wake Forest University.

2. K. Mark Weaver is a professor and the Thomas H. Daigre Endowed Chair of Business Administration, E. J. Ourso College of Business, Louisiana State University.

1. Pat H. Dickson is an associate professor and director of the Business and Enterprise Management Program, the Schools of Business, Wake Forest University.

2. K. Mark Weaver is a professor and the Thomas H. Daigre Endowed Chair of Business Administration, E. J. Ourso College of Business, Louisiana State University.

Notes

1. Pat H. Dickson is an associate professor and director of the Business and Enterprise Management Program, the Schools of Business, Wake Forest University.

2. K. Mark Weaver is a professor and the Thomas H. Daigre Endowed Chair of Business Administration, E. J. Ourso College of Business, Louisiana State University.

1 Because the sample utilized for this study does not include SMEs from German civil law countries, no associated hypotheses are provided.

2 The home markets for the countries included in the survey have an average gross domestic product (GDP) from a low of $97,075 (in millions of U.S. dollars) for Greece to a high of $383,303 for Australia with GDP growth rates ranging from 1.54 percent for Indonesia to 4.72 percent for Finland (as reported in the United Nations Department of Economic and Social Affairs Statistical Yearbook 2002). Economic risk indices range from 96.92 (based on a 100‐point scale with the highest scores equaling low risk and lower scores high risk) to 43.56 for Indonesia (as ranked by the Euromoney 1998) Country Risk Index. Australia has as its legal foundation English common law, Greece, Indonesia, Mexico, and the Netherlands are based on French civil law, and Finland, Norway, and Sweden on Scandinavian civil law (La Porta et al. 1997). Culturally, the countries are also diverse on a number of the cultural attributes measured in the recent Global Leadership and Organizational Effectiveness research program (GLOBE) study (House et al. 2004).

3 For example, KOMPASS On‐Line systems was utilized for SME listings in the European Markets. KOMPASS, a leading global product and service information website and database, is considered to be a reliable source of names and addresses of registered businesses. In other countries, membership roles from Chambers of Commerce, Chambers of Importers and Exporters, Industry trade groups, etc., were utilized and cross‐referenced to develop master lists from which the sample was drawn.

4 The choice of size range for SMEs was based on both the European Observatory for SMEs, 1995 and the U.S. Government Printing Office, 1995 classifications. Typically firms with less than six employees are considered “micro” enterprises.