Northern SMEs, community embeddedness and crisis-responses

Lead Author Helgi, Gestsson
Institution Contact University of Akureyri Faculty of Business Administration Nordurslod 2 600 Akureyri, Iceland Phone +354 460 8614 or + 354 695 0479
Co-Authors Ogmundur Knutsson, University of Akureyri, Iceland Markku Vieru, University of Lapland, Finland Lenita Hietainen, University of Lapland, Finland Svein Tvedt Johansen, UiT The Arctic University of Norway.
Theme Theme 5: New Markets for the Arctic, including Trade, Tourism and Transportation
Session Name 5.3 Management of the High North: the role of context, strategies and plans
Datetime Wed, Sep 14, 2016 01:30 PM - 01:45 PM
Presentation Type Oral
Abstract text Northern SMEs often work out of and in small communities in sparsely populated regions. Such firms often become the first victims of prolonged economic crises due to limited Financial Resources.

n many cases, such firms share a fate-dependency with the community in which they operate. The community depends on the company for work, whereas the company depends on the community for the social infrastructure that enable firms to operate and attract employees to the region in the first place.

SMEs differ with respect to how they view the relationship between the firm and local communities. Some firms see the firm and communities as tightly interwoven whereas others see the firm and community as clearly separated.

Drawing on a series of interviews with Icelandic, Norwegian and Finnish firms we look at how firms’ construal of and relationships to local communities, shape the firms responses to the crisis. The interviews feature examples from Iceland, Norway and Finland with an emphasis on the Icelandic banking crises.

In the paper, we argue that SMEs relationship to their local communities influence reactions to crises in three ways: (i) First, SMEs relationship to their local community influence the goals and values that inform the responses. (ii) Second, SMEs relationship to their local community form a more or less explicit compact between the firm and the community that help coordinate transactions between the SME and community representatives. (iii) Third, relationships also imply goodwill and trust that enable SMEs to activate a more diverse set of resources, thus allowing SMEs more leeway and a greater flexibility in responding to the crisis.
In the paper, we relate such SME-community relationships to the literature on dynamic capabilities and threat rigidity and show how social capital in the form of local relationships form an important component of dynamic capabilities for rural Northern SMEs
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