Partnership or self‐reliance: prescriptions for small and medium‐sized enterprises

Abstract

Purpose

The past decade has witnessed the growing importance of partnerships by small and medium‐sized enterprises (SMEs). Yet, despite the popularity and presumed strategic importance of partnerships, partnerships by SMEs often fail and many SMEs turn to self‐reliance operation modes. This study explores industry and firm factors which affect SMEs's choices between partnerships and self‐reliance operation modes. Identification of these factors has important managerial implications for SMEs in their fights to overcome resource and competence limitations.

Design/methodology/approach

The authors collected data from 68 sample firms and ran regression models to test the propositions.

Findings

SMEs in technology industries should form partnerships. SMEs that are seeking foreign markets should form partnerships to pool their resources and manage diversities, whereas SMEs that focus on their home markets should use self‐reliance operation modes. International expansion requires substantial resources, including country‐specific knowledge. SMEs may not have sufficient resources to overcome market entry barriers and may have to seek resources from external sources. Partnerships are not appropriate for SMEs that focus on market niches. Age places severe constraints on whether an SME should form a partnership or remain self‐reliant. Young SMEs may rely on partnerships to outsource while established SMEs may be uninterested in partnerships. Finally, SMEs that enjoy first mover advantages should not rely too much on partnerships for external resources. In contrast, SMEs that do not enjoy first mover advantages can take partnerships as an important source of external resources.

Originality/value

The findings of this study make important contributions to the existing strategy literature. The study identifies contextual impacts that affect SMEs' choices between partnerships and self‐reliance modes and thus explain why partnerships work for some SMEs but not others. The findings of the study also provide managers with practical guidance as to how to make strategic decisions on partnerships

Citation

Li, L. and Qian, G. (2007), "Partnership or self‐reliance: prescriptions for small and medium‐sized enterprises", Journal of Business Strategy, Vol. 28 No. 6, pp. 29-33. https://doi.org/10.1108/02756660710835897