CORE COMPETENCE AND DYNAMIC CAPABILITIES OF SMEs 2

Running head: CORE COMPETENCE AND DYNAMIC CAPABILITIES OF SMEs 1
Core Competence and Dynamic Capabilities of SMEs
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Affiliation
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CORE COMPETENCE AND DYNAMIC CAPABILITIES OF SMEs 2
Abstract
This study is based on examining the core competence of SMEs of Automation Solution
Providers. These twenty companies have formed a cluster/ecosystem/network to collaborate at
various levels to better satisfy the need of their manufacturing clients. The study examined the
literature on the competence of companies specifically working in co-operative environments
including strategic alliances, clusters, and ecosystems. The study uses deductive reasoning for
deducing the reason for collaboration among the companies to comprehend their core
competence. The study used formal and informal interviews with the managers getting
information on reasons for collaboration, qualification, and background of managers, hiring
procedures and needs, and benefits of collaboration. The study shows that skilful prototyping is
the competence of these companies. It also concluded that these companies were looking for
access to new technologies in collaborative companies.
Keywords: Capabilities, Cluster, Collaboration, Core Competence, Dynamic Capabilities,
Ecosystem, Small and Medium Sized Enterprises (SMEs), Strategic Alliances
CORE COMPETENCE AND DYNAMIC CAPABILITIES OF SMEs 3
Table of Contents:
1-Introduction .............................................................................................................................4
2-Method ....................................................................................................................................7
3-Literature Review ....................................................................................................................8
4-Result ....................................................................................................................................11
5-Conclusion.............................................................................................................................15
References ................................................................................................................................17
Table of Figures:
Figure 1: Reasons for Collaboration ..........................................................................................13
Figure 2: Gain from Collaboration ............................................................................................14
CORE COMPETENCE AND DYNAMIC CAPABILITIES OF SMEs 4
1-Introduction
With the rise of globalisation, Small and Medium Sized Enterprises are facing threatened
in their existence. Customers are now free to easily import any goods which they require from
any part of the world. It is no more a preference to manufacture goods locally. Furthermore, with
increased opportunities available to the companies, organisations prefer to have their
manufacturing plants relocated to the regions in which production costs are lower. This cause
inhibited growth in the local regions negatively affecting its businesses. One way to cope with
such a situation is to introduce national initiatives as seen in various countries. Such initiatives
include and are not limited to Industries 4.0, MAID, Make in India, and Production 2030 the
Swedish initiative. These all initiatives are similar in assisting the local manufacturers, ensuring
that the local industry remains strong.
Another strategy for combating this challenge is to band together and pool resources.
There can be different ways through which these resources can be pooled. There are various
theories which have shown how this collaboration can work. Open innovation, Ecosystems, and
Strategic Alliances (Chesbrough, 2004; Niederkofler, 1991; Moore, 1999).
Open Innovation is one of the newly established paradigms which assume that for
companies to work in the constantly changing environment, they should have access to
channelise external as well as internal ideas and use internal and external paths for reaching out
to the market (Chesbrough, 2004). Similarly, a strategic alliance is another way to tackle this
globalisation threat to local industries. International business literature has identified several
outcomes which benefits the companies engaging actively in strategic alliances. These
companies are witnessed of reaping higher returns on their equity, higher success rates, and
better rate on investments as compared to the mergers and acquisitions. However, it has also 
CORE COMPETENCE AND DYNAMIC CAPABILITIES OF SMEs 5
found through studies that managers usually lack knowing the formation process, evolution and
dynamics of the corporate relationship involved in strategic alliances (Toveda & Knoke, 2005).
A strategic alliance has a long tradition in management studies. It has been investigated using
multiple theoretical lenses from transaction costs, RBV to 


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