Abstract
In this study of small and medium-sized enterprises (SMEs) operating in German key technology industries, we investigate whether cooperating with others is an effective strategy for SMEs to enhance their organizational agility. Taking a contingency perspective, we are specifically interested in whether this effect depends on the firm’s location in an agglomerated or a peripheral area. Results show that a greater number of cooperative relationships with others is positively associated with SMEs’ organizational agility. This effect is stronger for agglomerated than for peripheral firms, suggesting that agglomerated SMEs can seize the abundant opportunities to cooperate in order to counter agglomeration diseconomies such as organizational inertia and mimetic behavior. This finding highlights the importance of absorbing external knowledge gained in cooperative relationships for SMEs’ organizational agility. Thereby, the study offers a novel perspective on how agglomerated SMEs can actively prevent being negatively affected by the downsides of agglomerations.
Highlights
In today’s heterogeneous, volatile business environments, firms face various challenges such as rapid technological changes, demand uncertainty, and product obsolescence
Concerning the role of the locational environment, contingency theory literature led us to formulate alternative hypotheses arguing that the relationship between cooperative relationships and agility is stronger either for small and medium-sized enterprises (SMEs) located in agglomerations owing to agglomeration economies or for SMEs located in peripheral locations owing to their distinct dependence on additional resources
Taking the role of location into account, we found this relationship to be stronger for SMEs located in agglomerations and weaker for SMEs located in peripheral areas, this result is only significant for higher numbers of cooperative relationships
Summary
In today’s heterogeneous, volatile business environments, firms face various challenges such as rapid technological changes, demand uncertainty, and product obsolescence. Organizational agility refers to a company’s ability to proactively drive its external environment and react flexibly to ever-changing customer demands, competitive moves, or continuous improvements along the value chain (Tallon and Pinsonneault 2011; Lim et al 2017). In this regard, agile organizations manage both supply-side uncertainty and demand shocks, and adjust strategy and technology as necessary and desirable. Yusuf et al (2014) are the first to highlight the role of partnering opportunities as a driver for organizational agility in a business environment that is characterized by
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