The virtualisation potential of SME networks: an exploratory investigation

According to the recent literature and current business practice, the recent changes characterising the business environment have forced companies to seek new forms of collaborative relationships with a higher degree of decisional and operational flexibility in order to satisfy customer demands faster and at a lower cost. This is also true for small and medium sized enterprises (SMEs) due to their traditional scarcity of resources. One of the emerging firms’ organizational models is the virtual enterprise (VE). In this model Information and Communication Technology (ICT) is considered a key resource for sharing knowledge and managing information flows among companies participating in a VE network. Electronic networks may increase the value of a firms’ capacity to develop a high level of local expertise and specialized knowledge by enlarging its domains on a global scale. Major consequences for local SME networks may derive from the adoption of the VE model. ICT may allow the development of local systems by enlarging their boundaries, so that they can manage relations with their suppliers and with the final market more independently and share specific knowledge. Despite increasing academic interest in the VE model, it is still not clear whether the VE model may be considered a possible response to the greater complexity and instability of today’s business environment. Moreover, since a number of definitions of VE have been suggested, it is not clear whether there is a unique organizational form or there are a variety of VE models presenting shared characteristics. In addition, although existing empirical studies mainly focus on traditional forms of collaboration among firms (such as supply chain and industrial districts), the evolutionary paths that allow firms to move from traditional forms to the VE model have not been fully explored. Finally, even if this topic has been dealt with extensively, there is little empirical research investigating real cases of VE. Two are the main objectives of this chapter: i) to ascertain whether it is possible to identify a unique VE model or a variety of VE models through analysing the literature in the field; ii) to contribute to plug the gap on empirical research through an questionnaire survey implemented on a SME network located in the eastern area of Naples (ENES) in order to assess whether the network is evolving towards the VE model. The results of the literature review indicate two VE models have been identified: the hierarchical and holarchical models. In the case of the hierarchical VE, a leader company assumes the coordination of the network, and generally manages market relationships acting as the product integrator. By contrast, the holarchical model is characterized by a self-organization in which the success of the virtual enterprise strictly depends on all partners co-operating as a single unit. The survey findings establish that VEs created within the ENES network assume a hybrid form. In comparison with the above two models, the hybrid model has some common and specific characteristics.