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Growing through external relationships- A case study of small furniture manufacturers' network

Utilising external relationships is one of the most important strategies and tools for small- and medium-sized firms to expand their business in a flexible way. The entrepreneurial search for new advantages and growth through cooperation has resulted in new hybrid forms of organizing. The objectives of the paper are threefold: (1) To briefly review the previous literature dealing with interfirm cooperation and growth processes of SMEs, (2) to illustrate the phenomenon with one empirical case where a special hybrid mode of interfirm cooperation has been built, and 3) to discuss the advantages and disadvantages of external growth strategy based on longitudinal qualitative data. The empirical part illustrates how one furniture firm has utilised a growth strategy through external relationships. It has built a special hybrid mode of interfirm cooperation, a hotel of small furniture manufacturing firms, where it operates as a leader. The leading firm takes care of marketing and selling the products, and it also bears the responsibility for the product development, quality control and strategic planning and for the organizing the whole group. The manufacture of products which a hotel of small firms has concentrated on has been divided into different stages of the production chain, and each of the ten subcontracting small firms takes care of one stage, e.g. sewing, upholstering, and surface coating. All the firms operate in the same building. In addition to the subcontractors inside the hotel, the leading firm has utilised many other external relationships in its growing process. The annual growth of the turnover of the leading firm has been 15-30 per cent during the last six years. In spite of constant growth, it has not hired more employees, but only new subcontractors. The empirical data has been collected by close observation and interviews during six years’ time, i.e., from the early planning phase of a hotel until these days.