Entrepreneurship, knowledge sourcing and inter-firm technology transfer. The success case of a small business company

Introduction The main idea behind this paper is to address issues related to growth, entrepreneurship, and knowledge transfer. According to a vast part of the strategic literature, a firm should ensure a tight control over key resources, both human and technological, so to firmly grasp the drivers of its success. Growth, and more specifically entrepreneurial growth, are generally achieved through incremental innovation around a very specific resource or capability. The Japanese model, based on extensive use of external sources of supply, pose a serious threat to the conventional, internal growth process. Several Japanese firms, form various industries - ranging from electronics to automobile - rely on long term partnership relations to combine technological excellence and flexibility. This organizational structure has quickly been imitated in a number of western countries, and some argue that a similar situation can be found in the Italian motorcycle industry, where several firms share the same network of partners to leverage development costs without sacrificing product differentiation. A case of entrepreneurial success Nevertheless, the San Lazzaro (Bo) based Malaguti Spa followed quite a peculiar pattern of growth, by outsourcing not merely manufacturing activities, but also design, engineering and prototyping capabilities. Over the years its partner, Engines Engineering, established a solid reputation through several cooperative agreements with the most important firms in the industry, from Ducati to Suzuki, and even with Malaguti direct competitors, such as Piaggio Veicoli Europei Spa. By partnering with more technologically advanced firms than Malaguti Spa, Engines Engineering was able to absorb relevant amount of knowledge, and to subsequently inject it into Malaguti vehicles. By partnering Malaguti, a small entrepreneurial firm born in 19xx in Bologna, saw its market share grow from x% in 19xx, to x% in 200x, with revenues rising from x to x. Goals In this paper we will explore how Malaguti Spa modelled its organizational structure and its relation with Engines Engineering in order to balance the trade-off between search for novelty and control over strategic resources. We will also address the issue of knowledge transfer by comparing traditional modes for knowledge conversion (socialization, externalisation, combination, and internalisation) with the possibility of embedding knowledge directly into parts and components, and relying on a standardized architecture to ensure knowledge diffusion and assimilation. Methodology To illustrate the path followed by Malaguti, we will use an in-depth case-study, conducted via interviews with the central firm and its technological partner, corroborating results with publicly available data such as product portfolio, balance sheets and companies historical background. Interviews were conducted both at the managerial level, including Malaguti’s and Engines Engineering’s presidents, and at the operative level, e.g. designers, testers and engineers. The case-study methodology allowed to collect an extremely rich amount of qualitative data, which, combined with publicly available information, give a detailed explanation on Malaguti’s entrepreneurial-based growth path. The goal of the paper is to enlighten on the entrepreneurial strategy followed by Malaguti Spa, that represents a specific organizational pattern of economic growth based on innovation, quick response to change and technological excellence.