Academic journal article Journal of Business and Entrepreneurship

How Small and Medium Size Manufacturers Use the Internet for Technology Development

Academic journal article Journal of Business and Entrepreneurship

How Small and Medium Size Manufacturers Use the Internet for Technology Development

Article excerpt

ABSTRACT

This article analyzes how small and medium size manufacturers (SMMs) use the Internet. We used a phone questionnaire and interviews to conclude firms are taking two approaches toward the use of the Internet: general and strategic. The general approach is to use the Internet as a basic communication device for e-mail and web browsing. A smaller group of problem-solving firms uses the Internet strategically for information sharing, collaboration, and technology development. These firms link to one or more other companies or organizations to gain specialized resources or skills or to respond to customers' demands. Under the strategic approach, the Internet becomes an extranet supporting a rich information exchange leading to technological innovation.

INTRODUCTION

The first aim of this article is to describe how small and medium size manufacturers (SMMs) use the Internet. Many claims have been made about how the information age has affected firm and industry competitiveness. Much of the recent discussion focuses on the rapid acceleration in the number of Internet users, services, and applications. Recent studies report that Internet use quadrupled to more than 30 million users in the past five years (1993-1998), on-line users who say they use email daily increased from 45 percent in 1995 to 59 percent in 2000, and business transactions via the Internet will top $2.7 trillion by the year 2004 (ForresterResearch, Inc., 1997, 2001). In another study, the authors reported the Internet is still not widely used for business and that more time is needed before many businesses are confident with the technology to use it for crucial business functions (Information Week, 1998). Despite the growth in the use of the Internet, there is still much uncertainty about the effectiveness and potential of the Internet as a business tool/resource.

The second aim of this article is to identify how SMMs use the Internet to search for new technologies, particularly within the framework of collaborative entrepreneurial networks. Collaborative entrepreneurial networks are characterized by SMMs strategically seeking inter-firm alliances in order to improve their ability to innovate. While OEM strategic outsourcing spawns inter-firm networks, it is SMMs' ability to innovate within the network that makes them entrepreneurial. Earlier work by Kaufman, et al. (2000) and Wood, et al. (1997) showed how four specific types of small and medium size suppliers position themselves to take advantage of original equipment manufacturers' (OEM) strategic outsourcing and lean manufacturing practices. This research concluded that entrepreneurial networks exist, and within these networks, specialized SMMs, known as "problem-solving suppliers," cooperate, share resources, and engage in joint activities. While OEM outsourcing may drive specialized inter-firm networks, it is the SMMs' innovative capacity that is key to their competitiveness. Porter (1990, 1985) maintains that the only way to sustain competitiveness in the long term is to develop new products and/or less costly or enhanced versions of existing products. The Internet, by giving firms' suppliers, customers, and competitors quicker access to information about new technologies, products, and markets, will increase the pressure on all firms to innovate (Maynard, 1997).

The second section of this article briefly reviews the literature on the importance of new organizational forms and collaborative linkages between large and small companies to improve innovative potential. In reviewing this literature, we placed particular emphasis on how small firms are strategically positioning to take advantage of increased strategic outsourcing opportunities created by OEM restructuring, the adoption of lean manufacturing practices, and the revolution in new communication capabilities. Researchers have maintained that a firm's ability to sustain competitive advantage is ultimately tied to its capacity to innovate. …

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