Linking small business networks with innovation

Today, with an economy enabled and driven by connectivity, a fundamental shift in business models is occurring whereby information, knowledge, and relationships underpin competitive advantage. In order to compete in what some refer to as the networked economy, companies across the globe must use technology-mediated channels, create internal and external value, formulate technology convergent strategies, and organize resources around knowledge and relationships (Scott & Storper, 2003). The rise of information and communication technologies (ICT) and electronic information networks has led firms of all sizes to implement more technology driven solutions for improved productivity and information flow. Malhotra (2000) identified three general information management (IM) developments that have revolutionized company information processes over the last 40 years. The first phase, the automation phase, increased company efficiency of operations. The second phase, the rationalization phase, streamlined those procedures by eliminating bottlenecks made apparent by the automation. The third phase, the business reengineering phase, radically redesigned information and knowledge management processes through technology-intensive implementation of procedures in workflows and work processes (Malhotra, 2000). Now we have reached a fourth phase, the knowledge creation and knowledge transfer phase, that, if possible, is even more closely associated with technology than business process reengineering. With embedded knowledge flows and innovation linked to communities of practice as well as through linkages using technology, companies of all sizes have the potential to both collaborate and compete by taking advantage of connectivity and new relationships founded on the exchange and sharing of embedded knowledge. This article discusses how knowledge sharing environments such as communities of practice and virtual business communities can be important determinants of commercial viability and business success for small and medium sized enterprises (SMEs), provided that both the (virtual) environment and inter-firm relationships are conducive to information sharing and knowledge flows