German Small And Medium-sized Enterprises Research Articles

Cooperation in Innovation Networks: The Case of Danish and German SMEs

Information is a critical resource in innovation processes. External information can be helpful in innovation processes to complete them successfully. SMEs in particular are therefore advised to draw on consulting in innovation processes, as they cannot ensure the necessary information flow internally due to the lesser resources they have compared to larger companies. To promote economically relevant information of SMEs, the public sector provides specific advisory services. These services, however, are rarely utilized compared to direct customer and supplier contacts. From strategic management's point of view, the involvement of intermediaries in the innovation process is accompanied by the risk of losing specific knowledge to the business environment. Based on an empirical comparative study of Danish and German SMEs - Danish companies utilize public as well as private consulting services more often - determinants of the usage of business consultancies in innovation processes are elicited. Key words: SMEs, innovation, networks, public policy 1. Introduction Economic Operations and thus innovations are embedded in social relations and structures (Granovetter 1985; Hagedoorn 2006). Therefore, the organizational units that create innovations are not individual businesses, but usually networks. From a resource-oriented point of view, networks hold a variety of advantages for their members, such as access to material and immaterial resources, information and knowledge. Powell et al. (1996), for example, conclude in their study on innovation behavior in pharmaceutical companies that companies that are not able to initiate networks or form a cooperation have strategic disadvantages on the market. In this context, especially small and medium-sized enterprises (SMEs) are considered to be dependent on the social capital of networks, because of the limited resources they have under direct control due to their size (Kaufmann/Todtling 2003). However, innovation networks are not only relevant for participating SMEs, they also affect the economy in general (Laforet/Tann 2006). On the one hand, SMEs generate a large share of the economic output, as well as a large share of the innovations. On the other hand, globalised SMEs using innovation as competitive strategy ensure that new knowledge spreads and nourishes the innovative capacity of the overall economy. In order to keep up in the competition with well-resourced businesses, SMEs inevitably depend on cooperation. Information even has to be collected beyond the borders of the cooperation network. ... Networks are vital providers of various kinds of knowledge not only from directly related relationships but also from indirect relationships (Tolstoy 2009: 207). At the same time, with the trends towards decentralization and outsourcing in the past two decades, SMEs have significantly gained in importance for innovative strength: as a result of the transformation of the valueadded chain, innovations have frequently shifted from large companies to small and medium-sized businesses and thus to networks (Asheim 2004). These are good reasons for policy makers to support the development and especially innovations of SMEs. For that purpose, business development services provide general information for SMEs. However, they also try to specifically arrange access to material and immaterial resources, to connect with network partners and to directly or indirectly integrate consultancies. Some of these measures might, however, be counterproductive. From a strategic management's point of view - and on this all common approaches agree, from New Institutional Economics with the transaction cost approach through the market-oriented viewpoint of industrial economics to the resource-based view of the firm - it is essential to protect certain information and not feed it into the networks, through which it spreads uncontrollably. All these approaches agree on the fact that knowledge is a scarce resource in the field of innovation and that it has to be protected. …

Recomposed institutions: smaller firms' strategies, shareholder-value orientation and bank relationships in Germany

Small- and medium-sized enterprises (SMEs) are embedded differently in institutional spheres than large corporations. This influences how they are affected by institutional change. Based on our observations, scholars of the transforming German coordinated market economies are mostly focusing on large enterprises. In contrast, we explore how institutional change in the financing sector affects privately owned SMEs, especially those engaged in manufacturing. Additionally, we asked who is pushing SMEs towards a stronger shareholder-value orientation and how they respond to these changes. Although the direct impact of capital market actors on German SMEs is still limited, we find a diffusion of advanced management tools, which is linked in the literature to the shareholder-value concept, and a redefinition of firm-bank relationships without embracing the arms'-length, equity market-oriented mode of finance. These two features constitute a recomposition that includes institutional continuity as well as change.

Uncovering Divergence: Management Attitudes towards HRM Practices and Works Council Presence in German SMEs

This article examines the impact of management attitudes towards human resource management (HRM) practices on the presence of works councils in German small and medium-sized enterprises (SMEs). Based on a survey among executives of German SMEs, the key result of a logit regression analysis is that managers' attitudes towards key HRM practices have a strong impact on the prevalence of the works council in German SMEs. In particular, positive management attitudes towards individual employee participation and direct supervision seem to be detrimental for the institutionalization of works councils. The results suggest that there is more diversity and management choice regarding the institutions of industrial relations than generally expected in the case of German firms.

An ageing workforce: a major challenge to German SMEs

The focus of this article is the result of a 2006 survey on the ageing workforce at German Small- and Medium-sized Enterprises (SMEs). The topic of demographic change has to become a higher priority at the HR-management of SMEs. Therefore SMEs have to know more about the needs of an ageing workforce. Due to strong employer brands by German blue chips, SMEs have to be proactive to manage the effect of demographic change on their business within the next three years. Consequently SME managers need to identify the impact of ageing on every single unit in their company to set up the appropriate tasks.

Performance measurement in SMEs: literature review and results from a German case study

A literature review of Performance Measurement Systems (PMS) in Small- and Medium-sized Enterprises (SMEs) shows that the main contributions focus on the development of theoretical models, but not on guidelines for practical implementation. In this context, an important neglected aspect is the general fitness or readiness of a SME to implement a PMS. Therefore, the aim of this paper is to determine critical prerequisites for a successful PMS implementation in SMEs. For this purpose, a case study in a German SME was conducted. The findings indicate that the existence of specific contingency factors – Corporate Strategy, software-based Enterprise Resource Planning (ERP) and Activity Based Costing (ABC) – strongly supports the successful implementation of a PMS and its later use. Hence, further research shall include these prerequisites as new variables determining the PMS process. Based on that, researchers and managers of SMEs can develop individual indicators to identify their own PMS readiness.

Credit Risk Assessment and Relationship Lending: An Empirical Analysis of German Small and Medium‐Sized Enterprises*

We estimate a logit scoring model for the prediction of the probability of default by German small and medium‐sized enterprises (SMEs) using a unique data set on SME loans in Germany. Our scoring model helps SMEs to gain knowledge about their default risk, which can be used to approximate their risk adequate cost of debt. This knowledge is likely to lead to a detection of hold‐up problems that German SMEs might be confronted with in their bank relationships. Furthermore, it allows them to monitor their bank’s pricing behavior and it reduces information asymmetries between lenders and borrowers. Finally, it can influence their future financing decisions toward capital market‐based financing.

SME Foreign Direct Investment: An Examination of the Joint Venture Experiences of German and U.K. Small and Medium Sized Firms in China

Joint Ventures (JVs) have become popular vehicles for foreign market servicing, but few studies have focused on the joint venturing activities of Small and Medium-sized Enterprises (SMEs). This article examines the activities of 9 U.K. and 12 German SME joint ventures in China. Based on a questionnaire survey and in-depth case interviews, it reveals that the JVs, though successful, are not without their problems and the experiences are similar to those of large multi-national enterprises. As the key to success is the choice of the joint venture partner, assistance is required to help SMEs identify and select appropriate partners.

German Banks and the Modernization of the Small Firm Sector: Long-Term Finance in Comparative Perspective

This paper analyzes the contribution of the German banking system to the modernization of small and medium-sized enterprises (SMEs) in industry. The simultaneous greater relative importance of and relatively high wages in German SMEs appear to be paradoxical in terms of dual labor market theory, which claims that lower wages and greater flexibility in the use of labor are important for helping small firms compensate for their constrained access to capital, R&D and skills resources relative to large firms. This paper suggests that the successful modernization of the German small firm sector despite pressure from below from industry-level wage bargaining and strong job protection can be attributed to support from above in terms of an institutional infrastructure helping small firms overcome the organizational deficiencies they face relative to large firms. The decentralized provision of long-term finance and sophisticated financial services for the modernization of SMEs is enabled by a three-tiered federalist form of corporatist organization in the cooperative and savings banks sectors, in which smaller banks at the bottom tier of the organization receive access to refinancing on capital markets and specialized services -- normally only available to large banks -- through the upper tiers of the banking organization.

Globalization and E-Commerce II: Environment and Policy in Germany

• Due to its economic power as the largest economy in Europe and third largest in the world, Germany inevitably will play an important role in e-commerce. • After the improvement and diffusion of high-speed Internet access, like ISDN or DSL, Germany enjoys more ISDN telephone lines than any country; also the highest DSL per capita ratio, in Europe. • Germany includes a large, highly educated and relatively wealthy population, which is an important prerequisite for successful e-commerce activities. Due to foreign language skills in the German population (every pupil is required to learn English; a large number know basic French or Spanish, too), the language barrier to using international Web sites is small. Moreover, the German education system puts increasing emphasis on information and communications technology (ICT) skills. • Invention activity in some areas of ICT shows signs of improvement. Starting from a low level, patent activity in mobile communications and the Internet grew faster in Germany than anywhere else in Europe. This growth could be viewed as an early indicator of strengthening the mobile e-commerce sector in Germany and may be interpreted as an important effort in catching-up with overall e-commerce development. • More than 80% of the GNP is created in mid-sized companies (Mittelstand), which traditionally are considered as more flexible and innovative than large enterprises. The majority of these small and medium-sized enterprises (SMEs) can access the Internet. Looking at Internet penetration, German SMEs are at the top together with SMEs in Scandinavian countries. • The central position of Germany as a hub to Europe together with the excellent public and private transport infrastructure is a competitive advantage to attract foreign investments.

Regional Networking of Small and Medium-Sized Enterprises in Japan and Germany: Evidence from a Comparative Study

In this paper we compare the regional network relationships of small and medium-sized enterprises (SMEs) in the mechanical engineering and related metal manufacturing industries in Japan and Germany. We show that the structure of network relationships is still largely determined by traditional forms of the organization of production, despite convergent developments. The network relationships of SMEs in Japan are thus very largely determined by a hierarchically organized system of production. By contrast, the German SMEs almost always have far more scope for strategic action than their Japanese counterparts because they are less dependent on large companies and have their own distinctive images in the final markets. In both countries, cooperative network relationships are on the increase. However, reregionalization as postulated in the flexible specialization hypothesis does not appear to be a dominant trend in either Japan or Germany.

Transnational technology transfer of SMEs and its impact on regional development

Innovatory activities and the innovatory capacity of enterprises are key factors for entrepreneurial competitiveness especially in the context of internationalization. Transnational technology transfer can have a positive impact on the technological capability of enterprises in the host country and on regional economic development. The role of small and medium-sized enterprises (SMEs) has remained obscure in this context. Against this background, the empirical research undertaken by the present authors intends to clarify the role of German SMEs in the context of internationalization with regard to transnational technology transfer and its impact on home and host countries on an empirical basis. Therefore, a representative postal survey of German SMEs in selected industries was sent out (8% random sample) and complementary interviews with matched-pairs of SMEs were conducted. The empirical results indicate that the success of an internationalization strategy depends on the methods of strategic orientation. Most internationalized enterprises are specialized in certain products with a specific know-how. Against this background, internationalization normally takes place with capital intensive forms in important markets. Subsidiary firms, affiliates or branch plants are set up that remain in control of the investing German company. These forms of internationalization are chosen by enterprises that want to assure that specific know-how, as being a critical determinant for their competitiveness, is not transferred to third parties. The regional impact of such a transfer is of little relevance as the partners are not integrated into the regional networks. Theories currently discussed in this context do not address transnational technology transfer and its regional impact sufficiently.