Entrepreneurial Connectivity: Network, Innovation and Strategy Perspectives 9811655715, 9789811655715

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Vanessa Ratten   Editor

Entrepreneurial Connectivity Network, Innovation and Strategy Perspectives

Entrepreneurial Connectivity

Vanessa Ratten Editor

Entrepreneurial Connectivity Network, Innovation and Strategy Perspectives

Editor Vanessa Ratten Department of Management, Sport and Tourism La Trobe University Melbourne, VIC, Australia

ISBN 978-981-16-5571-5 ISBN 978-981-16-5572-2 https://doi.org/10.1007/978-981-16-5572-2

(eBook)

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors, and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore

Acknowledgements

I thank Lucie Bartonek for her help in editing this book. It is a lot of work editing a book and takes a lot of time, thus I thank those involved. I dedicate this book to my mum Kaye Ratten who passed away 2014, which is now 7 years ago but who I still think about a lot. Thanks mum for the fun memories of holidays in Norway in which we went by train from Oslo to Bergen in the middle of winter. The train trip was amazing through the snow at Christmas time. For us, being from Australia, that was a novelty, and I have fond memories of the time there and with my brother Hamish. I also thank my other family members including Hamish, Stuart, David, Tomomi and Sakura. Thank you too to all the reviewers who helped review each chapter and provide feedback.

v

Contents

1

The Role of Entrepreneurial Connectivity in Society . . . . . . . . . . . . Vanessa Ratten

2

Disruption and Dynamics of Competitive Advantage – A Short Survey on Empirical Patterns of Entrepreneurial Innovation and Firm Dynamics in the Light of Technological Regimes . . . . . . . Markus Thomas Münter

3

4

5

6

7

The Past, Present, and Future of Social Entrepreneurship in Indonesia: A Strategy to Move the Ecosystem Forward . . . . . . . Ari Margiono and Feranita Feranita Exploring the Role of Network Intensity to Achieve Better Performance: A Case of Indonesian Ethnic Enterprises . . . . . . . . . Nurul Indarti, Hardo Firmana Given Grace Manik, and Andy Susilo Lukito-Budi Artificial Intelligence in the Telecommunication Sector: Exploratory Analysis of 6G’s Potential for Organizational Agility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Seppo Yrjölä, Petri Ahokangas, Ahmad Arslan, Marja Matinmikko-Blue, Ismail Golgeci, and Shlomo Tarba From Shaping of Pottery to Shaping of a Safe Tourism: The Case of the Artisanal Routes of Barcelos . . . . . . . . . . . . . . . . . Jéssica Ferreira, Bruno Sousa, Francisco Gonçalves, and Cátia Macedo The Saudi Response to the COVID-19 Pandemic and Its Economic Implications: Entrepreneurial Threats and Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sami Hamdan S. Alanzi, Vanessa Ratten, Clare D’Souza, and Marthin Nanere

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Contents

8

Fostering Entrepreneurship: Towards a Model to Support Community Managers . . . . . . . . . . . . . . . . . . . . . . . . . . 115 Gislene Feiten Haubrich

9

The Incumbent Revenge: A Blue Ocean Failure . . . . . . . . . . . . . . . 135 Véronique Ambrosini and Taman Powell

10

The Influence of Stakeholders in the Birth Stage of Bike Tourism Networks: An Exploratory Study in Italy . . . . . . . 145 Raffaele Cecere, Michele Terraferma, Francesco Izzo, and Barbara Masiello

Contributors

Petri Ahokangas University of Oulu, Oulu, Finland Sami Hamdan S. Alanzi La Trobe University, Melbourne, VIC, Australia Véronique Ambrosini Monash University, Melbourne, VIC, Australia Ahmad Arslan University of Oulu, Oulu, Finland Raffaele Cecere University of Campania ‘Luigi Vanvitelli’, Capua, Caserta, Italy Clare D’Souza La Trobe University, Melbourne, VIC, Australia Feranita Feranita Taylor’s University, Subang Jaya, Malaysia Jéssica Ferreira IPCA – Polytechnic Institute of Cávado and Ave, Barcelos, Portugal IGOT – Lisbon University, Lisbon, Portugal UNIAG, Viana do Castelo, Portugal Ismail Golgeci Aarhus University, Aarhus, Denmark Francisco Gonçalves IPCA – Polytechnic Institute of Cávado and Ave, Barcelos, Portugal Campus do IPCA – Lugar do Aldão, Vila Frescainha (São Martinho), Portugal University of Aveiro, Aveiro, Portugal Researcher in GOVCOPP, Aveiro, Portugal Gislene Feiten Haubrich CITCEM/UP, Vila Nova de Gaia, Portugal Nurul Indarti Department of Management, Faculty of Economics and Business, Universitas Gadjah Mada, Yogyakarta, Indonesia Francesco Izzo University of Campania ‘Luigi Vanvitelli’, Capua, Caserta, Italy

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Contributors

Andy Susilo Lukito-Budi Faculty of Economics and Business, Atma Jaya Catholic University of Indonesia, Jakarta, Indonesia Cátia Macedo IPCA – Polytechnic Institute of Cávado and Ave, Barcelos, Portugal Univeridad de Vigo, Vigo, Spain Hardo Firmana Given Grace Manik Faculty of Business, Duta Wacana Christian University, Yogyakarta, Indonesia Ari Margiono Center for Innovation, Design, and Entrepreneurship Research and Binus Business School Master Program, Bina Nusantara University, Jakarta, Indonesia Barbara Masiello University of Campania ‘Luigi Vanvitelli’, Capua, Caserta, Italy Marja Matinmikko-Blue University of Oulu, Oulu, Finland Markus Thomas Münter HTW Saar Saarbrücken, Saarbrücken, Germany Marthin Nanere La Trobe University, Melbourne, VIC, Australia Taman Powell University of Roehampton, London, UK Vanessa Ratten La Trobe University, Melbourne, VIC, Australia Bruno Sousa IPCA – Polytechnic Institute of Cávado and Ave, Barcelos, Portugal Campus do IPCA – Lugar do Aldão, Vila Frescainha (São Martinho), Portugal University of Minho, Braga, Portugal CiTUR, Coimbra, Portugal Shlomo Tarba University of Birmingham, Birmingham, UK Michele Terraferma Department of Management Studies and Quantitative Methods, University of Naples ‘Parthenope’, Naples, Italy Seppo Yrjölä University of Oulu, Oulu, Finland

List of Figures

Fig. 2.1 Fig. 2.2 Fig. 2.3

Fig. 2.4 Fig. 2.5 Fig. 4.1 Fig. 4.2 Fig. 6.1

Industry life cycle, technology cycle, and technological regime. (Authors own illustration) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Empirical regularities of entrepreneurial and routinized regimes. (Authors own illustration) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Survivability of firms, reduction of technological paths, emergence of dominant design and increase of entry barriers. (Authors own illustration) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Knowledge-preserving innovations versus disruptive innovations. (Authors own illustration) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Disruptive innovations and technological regimes. (Authors own illustration) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Various elements of Javanese ethnic community Source: Authors’ own . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Various elements of Minang ethnic community Source: Authors’ own . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Irmãos Baraça (arte popular portuguesa) Baraça Brothers (Portuguese popular art) Source: Authors (Jéssica Ferreira) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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15 17 20 55 55

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Fig. 8.1 Fig. 8.2 Fig. 8.3

A representation of the practice in coworking (Author’s own) . . . . . 119 Ingredients of competence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 Model to approach competence (Author’s own) . . . . . . . . . . . . .. . . . . . . . 124

Fig. 9.1

Tobacco category US lobbying expenditure ($m) . . . . . . . . . . . . . . . . . . . 142

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List of Tables

Table 3.1 Table 3.2 Table 4.1 Table 4.2 Table 4.3

Three Periods of Social Entrepreneurship Ecosystem in Indonesia . . .. . . .. . . . .. . . .. . . .. . . .. . . . .. . . .. . . .. . . .. . . . .. . . .. . . .. . . .. . . Recommendations for Strategic Development of the Social Entrepreneurship Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

32 36

Table 4.4 Table 4.5 Table 4.6 Table 4.7

Summary of the variables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Demographic profile of Javanese and Minang entrepreneurs . . . Demographic profile of the OMs who join the ethnic community . . . . . . . .. . . . . . . .. . . . . . .. . . . . . . .. . . . . . . .. . . . . . . .. . . . . . .. . . . . The result of Hypothesis 1a . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The result of Hypothesis 1b . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Characteristics of network intensity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The results of Hypothesis 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Table 9.1 Table 9.2

ERRC table for e-cigarettes vs. cigarettes . .. .. . .. . .. . .. .. . .. . .. .. . 138 Modified ERRC table for e-cigarettes vs. cigarettes . . . . . . . . . . . . . 141

Table 10.1 Table 10.2

Subjects interviewed for each of the two cases . . . . . . . . . . . . . . . . . . . Early-stage of Terre di Casole Bike Hub and role of the actors . .. . .. . .. . .. .. . .. . .. . .. . .. . .. . .. .. . .. . .. . .. . .. . .. . .. .. . .. . Early-stage phases of Valle Savio Bike Hub and role of the actors . .. . .. . .. . .. .. . .. . .. . .. . .. . .. . .. .. . .. . .. . .. . .. . .. . .. .. . .. . Early-stage phases of a cycle tourism network and the role of the stakeholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Table 10.3 Table 10.4

51 52 53 54 54 54 56

151 155 160 163

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Chapter 1

The Role of Entrepreneurial Connectivity in Society Vanessa Ratten

Abstract Entrepreneurs are individuals who pursue opportunities in the marketplace. In order to be a successful entrepreneur, some degree of connectivity within society is needed. This connectivity enables entrepreneurs to share ideas and information in the hope of some form of mutual exchange. Thus, connectivity in essence refers to collaboration or linkages that entrepreneurs have with other entities. This chapter will focus on explaining why entrepreneurial connectivity is needed within society with the goal of providing a holistic summary of its usefulness particularly in times of change. Keywords Connectivity · Entrepreneurship · Innovation · Network · Strategy · Technology innovation

1.1

Introduction

Entrepreneurs need to be connected to others in order to facilitate business opportunities (Blanchflower & Oswald, 1998). The extent to which this connection takes place differs depending on the nature of the entrepreneurial activity. This means it is important when considering entrepreneurial connectivity to focus on the level of networks, innovation and strategy taking place (Ferreira et al., 2016). Thereby helping to understand the way others cooperate and compete in society. This chapter will discuss the role of entrepreneurial connectivity with the aim of making it easier to understand and conceptualise for both research and practice. Entrepreneurs are those who are engaged in some kind of business venture that enables change (Malewicki, 2005). This normally means they pursue a market opportunity that others have overlooked. To do this takes perseverance and passion as it can take time for an opportunity to be realized in the marketplace. Therefore,

V. Ratten (*) La Trobe University, Melbourne, VIC, Australia e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 V. Ratten (ed.), Entrepreneurial Connectivity, https://doi.org/10.1007/978-981-16-5572-2_1

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timing is an issue and also luck plays a big part in the success of an entrepreneur. Although entrepreneurs can influence their performance in some ways by having the right kind of network partners (Shu et al., 2018). An entrepreneur’s network is unique as each entrepreneur will have different kinds of contacts. This means networks need to be differentiated in terms of the kind of people that are included within them. For some, good network partners tend to be in a specific industry or geographic location whilst for others they can hold certain kinds of information (Santos et al., 2021). Thus, each network partner should be evaluated for their usefulness and what they bring to a relationship. Networks can derive from personal or social connections. Personal connections take the form of family or friends that have a more closer connection to the entrepreneur. These connections can simultaneously be business connections due to their interest in certain market activity. Social connections are more intermittent and are formed though interaction with others. Although despite their sporadic nature social connections can also be useful to entrepreneurs particularly those who want to build their social capital (Ratten, 2021). Social capital is an important individual attribute that entrepreneurs can utilize in the marketplace (Apostolopoulos et al., 2020). It involves the connections an individual has to others that can help facilitate market entry. For entrepreneurs wanting to progress business ideas, their social capital can speed up and quicken business deals. This is important as time is money in a business setting. Knowing the right people to contact in order to get things done is an important asset for entrepreneurs that helps them be more competitive (Dickel & Eckardt, 2021). By nature, entrepreneurs are competitive, but the degree of their competitiveness differs depending on the nature and environmental condition of their industry. Most industries face constant competition due to technological and market innovations (Apostolopoulos et al., 2021). This means they need to be alert for changes in industry structure that might change current competitive positions. Although many industries have monopolies that restrict market entry and make it hard for incumbents to compete (Ferreira et al., 2017). For this reason, innovation or entrepreneurship can be used as a strategic tool. Politics also influence competitive dynamics within many industries particularly those in demand (Ferreira et al., 2018). For example, the health and education industry is heavily regulated in most countries due to the need for safety and standard provisions (Ratten & Jones, 2021). This means government agencies control the way the industry is structured through accreditation programs.

1.2

Overview of Book

This book is structured into ten chapters related to the role of entrepreneruial connectivity in society. This chapter has focused on how to define and conceptualise entrepreneurial connectivity. The second chapter titled ‘Disruption and dynamics of competitive advantage – a short survey on empirical patterns of entrepreneurial

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innovation and firm dynamics in the light of technological regimes’ by Markus Thomas Münter higlights the need to incorporate innovation thinking into entrepreneurial connectivity. By doing this it will enable a better way of understanding the competive changes occuring because of market disruption. The third chapter titled ‘The Past, Present, and Future of Social Entrepreneurship in Indonesia: A Strategy to Move the Ecosystem Forward’ by Ari Margiono and Feranita Feranita focuses on new social business ventures in an emerging country context. Thereby offering a novel perspective about the growth of social entrepreneurs made possible by collective social change. The fourth chapter titled ‘Exploring the role of network intensity to achieve better performance: A case of Indonesian ethnic enterprises’ by Nurul Indarti, Hardo Firmana Given Grace Manik and Andy Susilo Lukito-Budi stresses the need to rethink entrepreneurial capability in terms of network intensity. This will help to understand how ethnic enterprises can flourish in current market conditions. The fifth chapter titled ‘Artificial Intelligence in the Telecommunication Sector: Exploratory Analysis of 6G’s Potential for Organizational Agility’ by Seppo Yrjölä, Petri Ahokangas, Ahmad Arslan, Marja Matinmikko-Blue, Ismail Golgeci and Shlomo Tarba discusses emerging technology practices. This enables a useful focus on how entrepreneurship will change based on new innovative ideas. The sixth chapter titled ‘From shaping of pottery to shaping of a safe tourism: the case of the artisanal routes of Barcelos’ by Jéssica Ferreira, Bruno Sousa, Francisco Gonçalves and Cátia Macedo examines the way artisans influence tourism development in a region. The seventh chapter titled ‘The Saudi Response to the COVID-19 Pandemic and its Economic Implications: Entrepreneurial threats and Opportunities’ by Sami Hamdan S. Alanzi, Vanessa Ratten, Clare D’Souza and Marthin Nanere investigates a specific country response to a new market condition. The eighth chapter titled ‘Fostering entrepreneurship: towards a model to support community managers’ by Gislene Feiten Haubrich examines coworking in the form of entrepreneurial initiative. The ninth chapter titled ‘The incumbent revenge: A blue ocean failure’ is by Taman Powell and Veronique Ambrosini. This chapter provides a very interesting discussion about how new technology is integrated within an existing industry context. The tenth chapter titled ‘The influence of stakeholders in the birth stage of bike tourism networks: an exploratory study in Italy’ by Raffaele Cecere, Michele Terraferma, Mark Francesco Izzo and Barbara Masiello focuses on the role of tourism in entrepreneurial connectivity. Thereby paving the way for more fruitful discussion about how tourism networks work in an entrepreneurial sense.

1.3

Conclusion

This chapter has provided a broad overview of what entrepreneurial connectivity is and how it works in society. Thereby enabling more research to be focused on this interesting area of practice. There was a discussion of how entrepreneurial connectivity occurs through personal and social networks and the role of social capital in

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this process. It is hoped that the chapters included in this book will stimulate further discussion and attention on the interesting area of entrepreneurial connectivity.

References Apostolopoulos, N., Ratten, V., Stavroyiannis, S., Makris, I., Apostolopoulos, S., & Liargovas, P. (2020). Rural health enterprises in the EU context: A systematic literature review and research agenda. Journal of Enterprising Communities, 14(4), 563–582. Apostolopoulos, N., Ratten, V., Petropoulos, D., Liargovas, P., & Anastasopoulou, E. (2021). Agrifood sector and entrepreneurship during the COVID-19 crisis: A systematic literature review and research agenda. Strategic Change, 30(2), 159–167. Blanchflower, D. G., & Oswald, A. J. (1998). What makes an entrepreneur? Journal of Labor Economics, 16(1), 26–60. Dickel, P., & Eckardt, G. (2021). Who wants to be a social entrepreneur? The role of gender and sustainability orientation. Journal of Small Business Management, 59(1), 196–218. Ferreira, J. J. M., Fernandes, C. I., & Ratten, V. (2016). A co-citation bibliometric analysis of strategic management research. Scientometrics, 109(1), 1–32. Ferreira, J. J., Ratten, V., & Dana, L. P. (2017). Knowledge spillover-based strategic entrepreneurship. International Entrepreneurship and Management Journal, 13(1), 161–167. Ferreira, J. J., Fayolle, A., Ratten, V., & Raposo, M. (Eds.). (2018). Entrepreneurial Universities. Edward Elgar Publishing. Malewicki, D. S. (2005). Member involvement in entrepreneur network organizations: The role of commitment and trust. Journal of Developmental Entrepreneurship, 10(02), 141–166. Ratten, V. (2021). COVID-19 and entrepreneurship: Future research directions. Strategic Change, 30(2), 91–98. Ratten, V., & Jones, P. (2021). Covid-19 and entrepreneurship education: Implications for advancing research and practice. The International Journal of Management Education, 19(1), 100432. Santos, E., Oliveira, M., Ratten, V., Tavares, F. O., & Tavares, V. C. (2021). A reflection on explanatory factors for COVID-19: A comparative study between countries. Thunderbird International Business Review, 63(3), 285–301. Shu, R., Ren, S., & Zheng, Y. (2018). Building networks into discovery: The link between entrepreneur network capability and entrepreneurial opportunity discovery. Journal of Business Research, 85, 197–208.

Chapter 2

Disruption and Dynamics of Competitive Advantage – A Short Survey on Empirical Patterns of Entrepreneurial Innovation and Firm Dynamics in the Light of Technological Regimes Markus Thomas Münter

Abstract Christensen’s model of disruption is recently facing pushbacks. We resolve parts of the ambiguities by putting disruption theory into the context of technological regimes. Based on a review of empirical patterns, we show that the success of a potentially disruptive start-up is co-determined by firm-specific innovation capability, stage of industry evolution and technological regime. The main proposition of this chapter is, that industries over time typically develop from an entrepreneurial regime into a routinized regime, however, this process might be reversed by disruptive innovations. As a consequence, competitive advantage is pushed forth and back between entrepreneurial start-ups and incumbent firms. Keywords Disruption · Creative destruction · Technological regimes · Entrepreneurship · Competitive advantage

2.1

Firms, Competition and Innovation

Digitalization as part of the fourth industrial revolution is inspiring many R&D departments of large firms as well as entrepreneurs (inside an obligatory garage) of all kinds to develop new products or business models. Very often, this fiddling about big data, connectivity, artificial intelligence, or platform business models is seen as a potential threat to incumbents and supposed to create a competitive advantage for new firms. In this vein, a large number of start-ups around the globe currently aim at ‘disrupting’ existing markets, technologies, products, or customer linkages and with that replacing incumbent firms.

M. T. Münter (*) HTW Saar Saarbrücken, Saarbrücken, Germany e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 V. Ratten (ed.), Entrepreneurial Connectivity, https://doi.org/10.1007/978-981-16-5572-2_2

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This is not a novel or even unusual approach. Some 140 years ago, a couple of start-ups in that sense attacked the well-established industry of horse-drawn carriages: since 29 January 1886, the Kaiserliche Patentamt in Germany (Imperial Patent Office during the time of Wilhem I., former King of Prussia and later the first German Emperor) has identified Carl Benz as the inventor of the “vehicle with gas engine operation” under the number 37435. At the same time, Albert Hammel and Knut Johansen in Denmark, Magnus Volk in Great Britain, Siegfried Marcus in Austria, and Léon Serpollet in France were also, driven by entrepreneurial spirit and aspiration, designing motor-driven vehicles. An accumulation of similar innovations gave rise to the worldwide automobile industry. In 1926 Carl Benz’s firm merged with that of his competitor Gottlieb Daimler, close to bankruptcy and under pressure from Deutsche Bank. Together with the constructor Wilhelm Maybach, Daimler produced a steel-wheeled car from 1889 and sold it under the Mercedes brand name from 1901 (Münter, 1999).

2.1.1

Start-Ups, New Business Models and Disruption

However, while Daimler is still a dominant player in the market segment of luxury cars, in terms of market valuation, a start-up has recently taken lead. In December 2020, Tesla’s market capitalization has increased to more than USD 700 billion and was valued higher as the pooled market capitalization of the nine largest automobile firms globally – of course including Daimler. This financial valuation is not wellgrounded in current cash flows or enormous success in sales. It is rather based on the innovative capability of Tesla and at least the potential to disrupt the global automobile industry. And even more, this potential disruption is not so much about cars or the automobile market, but about creating an ecosystem of connectivity, big data, autonomous self-driving cars guided by artificial intelligence, platform business models like car sharing and ride-hailing, and of course the replacement of conventional combustion engines by electric ones. Looking at the various initiatives of competitors around the globe, lots of managers in the automobile industry are now trying to fight back. Similar developments happen in many other industries: FinTechs are attacking traditional banks, freemium models like Spotify are shaking up the music industry, media time on TikTok is by far outpacing children’s TV consumption and lots more. Disruptive market leaders like Airbnb (owns no real estate or beds), Facebook (does not create own content), Uber (owns no vehicles) or Alibaba (no inventory) have demonstrated, that a complete transformation of an industry is possible within less than a decade by fundamentally changing key parameters of existing business models. Against this background, many managers of large incumbent firms currently spy on new technologies and business models to assess, whether these ‘innovative ideas’ have the potential to threaten existing businesses and firms and if disruptive innovation is already at the doorstep – and how to deal with it. Behind this is strikingly a

2 Disruption and Dynamics of Competitive Advantage – A Short Survey on. . .

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more fundamental question, first raised by Schumpeter almost a century ago: what is the allocation of competitive advantage in the innovation process, i.e., is it small and young firms driving technological evolution based on entrepreneurial efforts and ideas, or is it large incumbents with powerful R&D departments pushing innovation to a new level?

2.1.2

Creative Destruction and Disruption – Two Sides of the Same Medal?

From both a theoretical and empirical perspective, these topics have long been analysed by economists. Joseph Schumpeter (Schumpeter, 1911 and Schumpeter, 1950) introduced the notion of ‘creative destruction’ to describe the core of the capitalist process, but especially to portray the interplay of innovation and competition in the long run that renews and transforms market structure. About 50 years later, Clayton Christensen picked up on these issues from a more managerial perspective to understand driving forces and patterns of ‘disruption’. However, with a little more than 20 years since Christensen’s (Christensen, 1997), there is more confusion than ever concerning the notion of disruption as a buzzword and the challenges it poses on existing industries, markets, and firms. Yu and Hang (2010) highlight a number of the lines of attack against disruption theory, i.e., that per se disruption is a relative phenomenon depending on the business model and magnitude of change, that disruption is not always driven by new entrants and not always leads to an exit of incumbents, and finally, that disruption needs to be carefully arranged and classified with other theories of innovation to avoid confusion. In that sense, King and Baatartogtokh (2015) summarize, that high-level theories like disruption do not discharge managers from careful microeconomic analysis and detailed strategic decision-making, and Christensen et al. (2015) himself was also asking for cautious use of the concept: Unfortunately, disruption theory is in danger of becoming a victim of its own success. Despite broad dissemination, the theory’s core concepts have been widely misunderstood and its basic tenets are frequently misapplied. Furthermore, essential refinements in the theory over the past 20 years appear to have been overshadowed by the popularity of the initial formulation. As a result, the theory is sometimes criticized for shortcomings that have already been addressed. (Christensen et al., 2015, p45).

2.1.3

Organization of This Chapter

This chapter aims to contribute to a better accessibility of the main themes of industry evolution and disruption theory from a managerial perspective. We place the ideas of knowledge generation and disruption in a broader evolutionary context of long-run patterns of innovation, technological regimes, and firm survival. By this,

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managers from both start-ups and incumbent firms should be empowered to assess, whether there is an opportunity (or even a threat) of disruption in their particular industry. This chapter brings together stylized facts from a large body of empirical research, findings on the long-run patterns of competition and develops an integrated approach combining Schumpeterian ideas, industry life cycles, the theory of technological regimes developed by Nelson and Winter (1982) and Christensen’s approach of disruption. The main proposition is, that industries typically develop from an entrepreneurial regime into a routinized regime, however, this process might be reversed by disruptive innovations. In Sect. 2.2, we will provide a short summary of patterns of long-run evolution of industries and dynamics of technological cycles and market structure. We confront these findings in Sect. 2.3 with the question, what are sources of competitive advantage in the innovation process, and how these change at the industry and firm level over time. Section 2.4 is focused on the connection between technological regimes and disruption theory. In Sect. 2.5, we derive key insights for managers trying to evaluate the threat of being disrupted on the one hand, the possibilities of adapting to disruption by creative accumulation, and possibilities for preventing an incumbent firm from being disrupted. In turn, this provides valuable insight to the question, whether some start-up in some industry is really a threat to an incumbent, or not.

2.2

Competition and Innovation as Creative Destruction

Competition, at least in the long run, is essentially a dynamic process of innovation, i.e. previous products, market structures, and firms are constantly being transformed or even replaced by new ones. A key role is played by entrepreneurs who develop innovative products or business models and bring them to the market. Innovation in Schumpeter’s sense here means implementation of so-called new combinations, for example in products, processes, technologies, business models, or the organisation of a firm. This does not require ‘something new’ per se, but rather emphasises the complementary and combinatorial character of innovation – e.g. digitalization, which essentially supplements existing business models, services, and products or enables new combinations (Brynjolfsson & McAfee, 2014). Disruption and the displacement of incumbent firms in competition is not a new phenomenon. Schumpeter (1911, 1950) emphasized the importance of dynamic competition and innovation as a process of creative destruction long ago. From a Schumpeterian perspective, competition is inseparable from innovations that repeatedly transform existing products, market structures, and firms or even replace them with new ones: Competition, at least in the most popular senses of the word, is all about rivalry between firms. [. . .] a strategic response to the action of a rival is an attempt to change the basis of competition between the two firms (i.e., meeting a price cut with a radical change in the way

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a product is distributed or marketed). It is about breaking the rules of competition, and it corresponds to what most people understand when they talk about innovation. (Geroski, 1998, p 15).

Accordingly, innovation is not primarily directed against competitors, but indirectly aims at changing market structures and the rules of the competitive dynamics. Innovations therefore do not follow from the competitive situation or a given market structure, but are the driving force behind the competitive process and determine dynamics of market structures. To get the big picture of long-run competitive processes, the focus needs to be on co-evolution of technology, firms, and competitive behaviour. While this process of innovation per se is open, empirical research from industrial organization and management science as well as case studies on various industries has identified a couple of stylized facts that unfold over time in a large number of industries. In the next section, we report some stylized facts from empirical studies on (a) industry life cycles, (b) technology cycles, (c) technological regimes, and (d) firm strategies in this context.

2.2.1

Industry Evolution and Technological Dynamics

The long-run development of market structure in many knowledge-based and technology-oriented industries with significant R&D-efforts or even high tech industries is characterized by a turbulent change in the number of firms: numerous entries of start-ups alongside a large number of exits of non-viable firms over time. Empirical studies show a robust pattern of the number of firms along an industry life cycle and beyond, the number of entries into and exits from industry, as depicted in Fig. 2.1 (Jovanovic & MacDonald, 1994; Klepper, 1996; Klepper, 1997 and Münter, 2013).

Fig. 2.1 Industry life cycle, technology cycle, and technological regime. (Authors own illustration)

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Initiated by a few first firms – in the automobile industry e.g. Benz and Peugeot – new innovative products and services are launched into the market. As a result, numerous new firms take these ideas up or modify the initial product innovation and enter an industry during stage 1, so that the number of firms increases significantly. However, after some time this process is reversed and the number of firms drops dramatically in stage 2 because of a shake-out process, before the number of entries and exits more or less balances out and the number of firms stabilizes in the further course during stage 3 of the evolution of an industry. This change in the number of firms is significantly shaped by the interplay of innovations within the industry, technological changes outside the industry, and strategic behaviour of (incumbent) firms. A main explanation for the long-run development of market structure, the number of firms and the changes in the competitive process lies in technology cycles that describe regular patterns of innovation over time as a sequence of experimental phase, emergence of the dominant design, and phase of incremental change (Henderson & Clark, 1990; Utterback & Suarez, 1993). As can be seen in Fig. 2.1, three phases running parallel to the industry life cycle can be identified: • Experimental phase: At the beginning of an industry life cycle, firms compete with very different product concepts – in this sense, competition is centred around product innovations, process innovations play only a minor role, if at all. There is a high degree of uncertainty regarding both technological possibilities and customer expectations. This means that initially, no firm is in a position to offer a convincing product from the customer’s perspective, but each firm tries to address market niches and gain market share in some trial-and-error process. Business models and strategies of firms are heterogeneous during this phase. Essentially, each new firm is based on product innovations, which makes previous solutions and existing knowledge partially obsolete. The process of innovation itself is focused on exploration in the product space. With that, it contributes to fast exits of recent entrants, if new products are more attractive to customers. • Emergence of a dominant design: As a consequence of continuous innovation, adaption, and imitation during the competitive process, a dominant design emerges. Via this dominant design, for the first time, one firm combines existing product innovations and features in such a way that the expectations of a large number of customers are addressed well. The variety of competing product concepts and business models of the experimental phase is significantly reduced, a lock-in effect occurs and the characteristics of the dominant design shape the expectations of the customers and are henceforth a de facto standard for all firms within the industry, which is adapted firm-specifically. • Phase of incremental change: Based on the dominant design, path-dependent developments of the product or services are carried out, which expand and deepen the existing knowledge in the industry, so that firm- and industry-specific knowledge is built up and increased. The focus is now on improving efficiency and

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scaling production driven by process innovations. With that, innovation now focuses on exploitation within a specific product and solution space. The emergence of the dominant design and the shift of core areas of R&D activities from exploration to exploitation also changes the nature of the competitive process in four essential dimensions and affects strategies chosen by firms: • Growth in market share: The market shares of those firms that can (and are willing to) produce the dominant design are now growing strongly. All smartphone manufacturers that have been able to map the core elements of the dominant design in the form of the Apple iPhone – touch screen with a virtual keyboard, photo camera, app store, music player, email reception, and WiFi capability – have grown significantly: Samsung, Huawei, HTC and of course Apple itself (Cecere et al., 2015). • Displacement of competitors: Firms that are unable to produce the dominant design or consciously adhere to their previous product concepts lose market share and are forced into niches or to exit the market. In the case of the smartphone industry, for example, the former market leaders Nokia, whose firm-specific dynamic capabilities were not sufficient, and the Blackberry manufacturer Research in Motion, which have continued to stick with the combination of small screen and physical keyboard. • Reduction of uncertainty: The dominant design significantly reduces uncertainty in the industry, so that incentives for investments in production capacity, branding, customer base and firm size are now created and firm-specific capabilities are extended. During that stage, typically firms are generating new knowledge which extends existing knowledge, rather than destroying it (Bergek et al., 2013; Pavitt, 1984). • Creation of entry barriers: The growth dynamics and investments of successful firms are accompanied by the creation and establishment of strategic barriers to entry so that the number of new firms entering the market is significantly reduced. At the same time, however, the probability of survival inside this industry is typically increasing – the reason for this is reduced uncertainty and that conditions of the competitive process are easier to be translated into strategic requirements and action. Over time, of course, the relative roles of firms change as well. Especially, technological dynamics are often connected to path-dependencies (so that some firms are simply on the wrong track, while others benefit from the chosen path) and R&D capabilities need to be developed and scaled according to requirements posed by a specific technological trajectory.

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Innovation and Competitive Advantage

Innovation is essentially a dynamic process, where new knowledge embodied in business models, products, or processes is introduced into markets. As a consequence, over time the nature of competition and the sources of competitive advantage are likely to change. Schumpeter answered the question regarding the sources of competitive advantages in the innovation process very differently in “Theory of Economic Development” (1911) and in “Capitalism, Socialism and Democracy” (1950), depending on the size of the firm: in 1911 he saw small, innovative and young firms (start-ups) in competition as essential drivers of technological progress, in 1950 he emphasized the role of large firms due to the high capital intensity of R&D processes and the necessary industry-specific knowledge. Implicit with the first perspective is a so-called attacker’s advantage of start-ups and entrants over incumbents based on discontinuous innovation that destroys knowledge (aka “creative destruction”): concepts based on this idea include competence-destroying innovation by Tushman and Anderson (1986) and architectural innovation first described by Abernathy and Clark (1985) as well as the original idea of disruptive innovation by Christensen and Rosenbloom (1995). The second view highlights a competitive advantage in the innovation process for incumbents over start-ups that extends and deepens the knowledge base (aka “creative accumulation”): through competence-enhancing innovation (Tushman & Anderson, 1986), path-dependent innovation (Abernathy & Clark, 1985), or continued dominance in the innovation process (Cefis & Orsenigo, 2001; Geroski et al., 1997), incumbents improve and consolidate their competitive positioning, raise barriers to entry and indirectly reduce the probability of successful entry of start-ups. Empirically, both points of view are justified: on the one hand, the relative roles of firms in the innovation process change over time; on the other hand, firm-specific roles in the R&D process emerge in many industries. This creates a cross-industry ecosystem of customers, firms, and suppliers in the R&D area, which determines the industry-specific patterns of innovation and interaction between large and small firms.

2.3.1

Innovation and Technological Regimes

Nelson and Winter (1982) and Winter (1984) picked up on the questions and ascribed central importance to the determinants of the emergence of new knowledge for the joint explanation of competition and innovation processes. The central themes – which once again go back to Schumpeter – are whether • new knowledge – product innovations, new business models, or technologies – is more likely to be generated in R&D departments of large incumbent firms, or by start-ups or spin-offs, and whether

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Fig. 2.2 Empirical regularities of entrepreneurial and routinized regimes. (Authors own illustration)

• new knowledge remains and consolidates persistently inside new firms and startups, or whether new knowledge is absorbed quickly and directly by large incumbent firms. A large body of empirical research inspected the idea of technological regimes in real markets (see for example Audretsch, 1991; Breschi et al., 2000; Leiponen & Drejer, 2007; Malerba, 2007; van de Poel, 2003; Zahra et al., 2006). As shown in Fig. 2.2, the patterns of the emergence of new knowledge and its repercussions on firms and firms’ strategies found in empirical studies can be assigned to two different environmental and competitive conditions for innovations (technological regimes) – i.e., an entrepreneurial and a routinized regime, as introduced by Winter (1984). The entrepreneurial regime describes conditions that promote the emergence and entry of new innovative firms into an industry. Under the routinized regime, on the other hand, innovations are strongly path-dependent and essentially based on existing knowledge as well as a large and complex knowledge stock – this explains competitive advantages for incumbent firms based on firm-specific skills and experience.

2.3.2

Determinants of Technological Regimes

Technological regimes can be identified on different levels such as products, processes, or business models, and define a set of rules or potential strategies based on technological know-how and novelty or differentness. The regime in which an industry finds itself depends essentially on whether creating new knowledge and grappling of emerging technological possibilities requires extensive accumulated

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knowledge and industry-specific experience, or whether this can also be done outside existing firms and even more without many years of industry-specific experience (Dosi, 1988; Dosi & Nelson, 2010; Marsili, 2002; Peneder, 2010): • Technological opportunities of an industry are determined by basic scientific research, basic innovations, and technology development in other industries. The more extensive and the better identifiable technological opportunities are, the greater the incentives for firms to invest in R&D and vice versa. • Cumulativeness of knowledge describes how strongly technological or processual knowledge builds on and mutually requires each other. The higher the cumulativeness and the more path-dependent the development, the higher the R&D investment and incentives. If knowledge cannot be accumulated or adopted in a large variety of applications, products, or services – i.e. has a high rate of obsolescence – little is invested in new knowledge. • The appropriability conditions of an industry determine to what extent firms can obtain or collect benefits or advantages (especially profits) from new knowledge. The stronger and more sustainable the ability of firms to reap the benefits of innovation, the greater the incentives for enterprises to invest in R&D. This is influenced, among other things, by property rights for knowledge (patents, etc.), the intensity of competition between firms and the number of technological paths pursued or realized in parallel in industry. While these concepts are a little fuzzy, a couple of stylized facts have emerged from empirical research to classify industries or markets into one of the two technological regimes. An industry is in the entrepreneurial regime, if for the appropriation of profits from new knowledge and for the use of emerging technological possibilities weakly accumulated knowledge is sufficient or no industryspecific experience is necessary – if vastly accumulated firm-specific knowledge and corresponding industry-specific experience is necessary, an industry is in the routinized regime. A pointed and not even exaggerated conclusion would be, that incumbents only exist under the routinized regime – under the entrepreneurial regime, firms hardly enjoy any competitive advantage from being older or having more experience within an industry. In this sense, under the entrepreneurial regime, small and young firms, in general, do not have a competitive disadvantage, whereas, under the routinized regime, competitive advantage for creating or marketing innovation is definitely situated within incumbent firms.

2.3.3

Dynamics of Technological Regimes

Originally, researchers tried to identify or classify whether one industry is better described by the entrepreneurial or routinized regime. However, consolidating empirical studies gives rise to yet another phenomenon: there is a specific dynamic in many industries that shifts competitive advantage from start-ups to incumbent firms (Audretsch, 1995; Münter, 1999; van de Poel, 2003). As a consequence, over

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Fig. 2.3 Survivability of firms, reduction of technological paths, emergence of dominant design and increase of entry barriers. (Authors own illustration)

time, many industries are characterized by a transition from an entrepreneurial to a routinized regime, as depicted in Fig. 2.3, which coincides with the emergence of the dominant design and the reach of the maximum number of firms. Under the entrepreneurial regime, many small firms follow different and quite heterogeneous technological paths. Many firms – indicated by dotted arrows – have limited survivability and exit the industry after some time due to a lack of profits. In contrast, some other firms – indicated by the bold arrows – succeed in building up industryspecific knowledge based on dynamic capabilities. At the same time, the variety of technological trajectories followed in an industry reduces significantly. This transition is the flip side of emerging barriers to entry in the form of industry-specific knowledge and firm-specific capabilities.

2.3.4

Reduction of Uncertainty and Onset of Strategic Behaviour

In the early stages of an industrial life cycle, young and often science- and researchbased start-ups are dominant in the innovation process: they bring more and basic innovations to the market. With the transition to the routinized regime, incumbent firms with high-investment R&D departments are superior in later stages of the industry life cycle and either regularly produce new products or processes or can learn, absorb and transfer new knowledge very quickly and effectively into their own organization. As explained by Cohen and Levinthal (1990) and Zahra et al. (2006), this learning process depends on absorptive capacity and firm-specific dynamic capabilities. Absorptive capacity describes the ability of a firm to evaluate, absorb

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and commercially use knowledge from outside the company. In other words, it describes the rate at which organizations can learn and use new scientific, technological, commercial, or other knowledge that exists outside of the organization itself. Absorptive capacity, while being based in general on pre-existing knowledge of an organization, first implies that learning is cumulative, and second, that learning is most successful when the learning object is related to something already learned. Dynamic capabilities differ between start-ups and incumbents: start-ups are often better equipped to explore new technologies or product options, incumbents might be superior when it comes to exploitation of existing opportunities that require a large and deep knowledge base. With this typical transition from an entrepreneurial regime to a routinized regime, competition between firms is fundamentally changing in two dimensions: • Reduction of uncertainty and risk – for firms and customers, the transition towards the routinized regime reduces uncertainty and risk: essential product characteristics, superior technologies, the size of the market, and truly relevant competitors become more recognizable. The decrease in uncertainty leads to better financing conditions and opportunities via the capital market and banks so that continuous growth of viable firms becomes possible. • The onset of strategic behaviour – during the entrepreneurial regime, firms have to consider, that significant technological or market changes might happen with high probability and severe impact on own strategies. Hence, firms focus on dealing with market and technological uncertainty. Individual competitors and their strategies play only a secondary role during this stage, as their ability to survive are not clearly discernible and the strategies of all market participants are subject to very rapid and drastic changes. The transition to the routinized regime places strategic behaviour in the driver seat for the first time, since now viable competitors are clearly to be identified and their strategies are easier to be recognized and understood. Strategic investments in sunk cost activities (production facilities, branding, M&A) are now defining incumbent firms that differ from start-ups in terms of firm-specific skills and investments and are creating competitive advantage.

2.4

Development of Knowledge Over Time

Building up knowledge, learning about technological opportunities, and diffusion of innovations typically take place alongside an S-shaped curve over time, as shown in Fig. 2.4 on the left (Christensen, 1992; Foster, 1986). The S-shaped pattern emerges because with fundamentally new technology all firms have to carry out basic research and experiments to learn about the possibilities and potential applications of this new knowledge – so that only small advances are possible. As soon as the uncertainty about the possibilities of the new technology decreases and a critical mass of potential products or applications is identified or crystallizes, the

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Fig. 2.4 Knowledge-preserving innovations versus disruptive innovations. (Authors own illustration)

industry-wide learning process accelerates significantly with a massive increase in cumulative R&D investment by firms. Finally, as the opportunities of technology are increasingly seized or exhausted, the learning rate is slowing down and decreasing. This pattern of knowledge growth applies equally at the firm and industry level and has been demonstrated and analysed for many products and industries. The innovation rate along a technological trajectory is influenced among other things by the R&D expenditure of the firms, the intensity of competition, and the mutual adaptability of technology advances of other firms. Figure 2.4 on the left shows that typically sequences of technologies are observed over time. When the technological possibilities of a technology are increasingly exhausted, firms invest more in a subsequent generation of the technology and introduce this to the market as soon as the performance has reached at least that of the previous technology generation.

2.4.1

Sustaining Innovations Versus Disruptive Innovations and the Survivability of Firms

For any sequence of technologies, two distinctive patterns are possible and can be observed: path-dependent knowledge-preserving innovations (which are called sustaining innovations or competence-enhancing that are evolutionary, continuous, and incremental) and knowledge-destroying disruptive innovations (which generate discontinuous, breakthrough, or radical technologies). Both cases are sketched in Fig. 2.4. With knowledge-preserving innovation and a transition from technology 1 to technology 2 characterized by a relatively long transition period and small technological differences, existing firms are usually

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well equipped to adapt to the new technology. The reason for this is extensively available path-dependent knowledge and vast experience about the previous technology. This circumstance makes it possible to easily understand and evaluate the upcoming new technology, it reduces uncertainty of implementation and makes the adaptation or transformation processes, especially within incumbent firms, easy to shape and deliver. A sequence of continuous, knowledge-preserving, and -enhancing innovations – over several years or even decades – takes place within an industry-specific paradigm (Castellacci, 2008; Dosi, 1988; Dosi & Nelson, 2010). Under the routinized regime, this paradigm is characterized by strategies, business models, processes, and products, which are collectively understood and applied by all firms of an industry similarly. For example, firms in the financial services industry are so similar that when an employee moves from BNP Paribas to Deutsche Bank, he quickly finds his way because the same things are done in the same way and similar strategic considerations play a role. Knowledge-preserving innovations stabilize an industry-specific paradigm, consolidate the positions of incumbent firms and strengthen entry barriers to new firms. Disruptive innovations, on the other hand, destroy industry-specific paradigms and endanger the existence of firms, and change market structures, so that new firms entering the market can regularly displace incumbent firms and replace their market leadership. With a disruptive innovation and a transition from technology 2 to technology 3, characterized – as shown in Fig. 2.4 on the right – by a relatively short transition period and a large technological difference, existing firms are often unable to adopt the new technology quickly and accurately.

2.4.2

Disruptive Innovations and Technological Regimes

The reason is that path-dependent and experience-related knowledge from the previous paradigm does not support a classification, appreciation, and evaluation of the new technology, but complicates it: the technology differs fundamentally in many dimensions from the previous one and thus uncertainty arises concerning the (possibilities of) implementation. Due to their path-dependent views, firms are literally blind to disruptive innovations, hesitate to adapt, and are subsequently forced out of the market by new competitors. Disruptive innovations create a new industry-specific paradigm: previous routines, basic principles and existing knowledge become largely obsolete and destroyed so that incumbent firms lose their resource-based competitive advantages. As a consequence, differences between old and new firms become blurred and competitive advantage of incumbent firms is significantly depreciated. Additionally, even if entries to the industry based on disruptive innovation might not be successful in the long run, competition amongst surviving incumbent firms might intensify. With the aforementioned it should be clear, that disruption can only take place under a routinized regime: under an entrepreneurial regime, an industry has no stable set of

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incumbent firms that share industry-specific knowledge that can be destroyed or rendered obsolete. Disruption under the routinized regime and the failure of formerly successful incumbents often follow similar patterns. In Germany, the world market leader in mail-order business Quelle did not understand the potential of e-commerce and the threat of Amazon, encyclopedia publishers like Brockhaus or Britannica ignored possibilities of collaborative article creation like Wikipedia, telecommunications providers lost large parts of their SMS revenues due to free services like Whatsapp, and filmmakers like Kodak – who actually invented digital photography – completely misjudged the possibilities and speed of development of a new technology that led to new cameras, new customer behaviour, new business models and products. Empirically, three mutually reinforcing causes are regularly identified explaining the failure of incumbent firms (Leonard-Barton, 1992; Christensen & Bower, 1996; Christensen, 1997; Hill & Rothaermel, 2003; Yu & Hang, 2010; Bergek et al., 2013): • General inertia or so-called core rigidities of incumbent firms in change and adaptation processes, i.e. inadequately developed dynamic capabilities that are revealed in a lack of flexibility and adaptability concerning technological changes – vested in human resources, organizational culture, resource allocation, and organizational structure. • Path-dependent investments in the existing technology or market position that make a change of technology appear unattractive from a financial perspective because the existing business is (still) profitable. In addition, path-dependent investments have a sunk cost character, so that depreciation on capital stocks endangers the survival of the firms. • A strategic misjudgement of the rapidly changing market and competitive conditions, as well as uncertainty due to shifting performance characteristics of products and emerging competitive advantages of new firms and start-ups. The characteristics of disruptive innovation are similar across many industries and studies. The newly emerging product or business model is initially not a threat to incumbent firms due to limited functionality – growth takes place with a few customers in niche markets. However, products based on disruptive innovations are often easier to use and focus on features that were previously unavailable. Although the first digital cameras were very heavy and unwieldy, the maximum resolution and the maximum number of images were significantly lower than analogue cameras – digital cameras have led to a competitive advantage in the niche market of sports photography (Klenner, 2011). Incumbent firms cannot respond by improving the performance parameters of the disruptive competitor product by continuously improving their existing products – an analogue camera cannot store 2000 images, marginal costs per photo cannot be reduced to zero, you cannot create a digital photo book and sharing or uploading images to social media networks is impossible. As a result, the entire value network of analogue photography was destroyed and replaced by a new digital ecosystem - numerous firms (film

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and camera manufacturers, developers, and distributors) lost their basis for existence and were forced out of the market in this nearly prototypical process of creative destruction.

2.4.3

Technological Regimes and Competitive Effects of Disruption

While story-telling about disruption seems easy and case studies are tangible, econometric identification and measurement are not so straightforward (Govindarajan & Kopalle, 2006). While the original contribution of Christensen (1997) focused on the technological dimension of disruption, we connect – looking at the competitive effect of innovation – Christensen’s disruptive innovation with the notion of architectural innovation originally developed by Abernathy and Clark (1985) and Tushman and Anderson (1986). The competitive effects of innovations in general, however, can be estimated and sketched adopting an advanced transilience map, as outlined in Fig. 2.5 on the left (Abernathy & Clark, 1985). Innovations can be classified into four possible types in terms of their knowledgepreserving and knowledge-destroying effects on customer and market relations and technology. • Path-dependent or sustaining innovations strengthen existing customer relationships based on existing technology. Essentially, the performance characteristics of the products are changed incrementally or the production costs are reduced. Path-dependent innovations preserve knowledge and stabilize the competitive

Fig. 2.5 Disruptive innovations and technological regimes. (Authors own illustration)

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behaviour of firms in the routinized regime and consolidate or strengthen the role of incumbent firms. In addition, existing customer relationships are intensified. • If existing technology is applied to a new demand or a new market segment, markets are created. This also applies if a firm addresses customer segments of a competitor based on existing technology. In this way, Sony gained large market shares with the so-called Walkman in the 1980s. Similarly, car manufacturers’ strategies to gain market share with SUVs are based entirely on existing technology, but address new market segments. • If an existing customer relationship is stabilized or expanded, but a completely new technology is used, this is a technology-pushing or revolutionary innovation. This category includes the strategies of established banks to convert their branch business model with existing customers into online banking, or of TV manufacturers in the transition to high-resolution formats and technologies. Revolutionary innovations are produced by incumbent firms with strong R&D departments, some of which are making their own knowledge base obsolete. At the same time barriers to entry are weakened so that the technological paradigm and indirectly incumbents become vulnerable. • If the existing market relationship and the existing technology path are destroyed at the same time, a disruptive innovation occurs. This creates new markets, changes existing markets and the basic patterns of strategic behaviour as well as the characteristics and the usability of competitive advantages. Incumbent firms loose the base of their competitive advantage and can be attacked by new entrants to the industry. Applying this framework also allows for overcoming potential short-comings of merely market- or competence-based explanations, where only a single dimension is fundamentally changed and which rarely leads to a Schumpeterian process of creative destruction replacing old firms by new ones (Bergek et al., 2013). In addition, this definition of disruption – the simultaneous destruction of technological knowledge and customer relationships – can be used to draw conclusions about the dynamics of technological regimes, as shown in Fig. 2.5 on the right: • Over time, an industry develops from an entrepreneurial regime into a routinized regime: in an early stage of industry evolution, only weak or low levels of accumulated knowledge are required to seize technological possibilities and to appropriate profits from innovative activity. With the emergence of the dominant design, firm-specific experience and accumulated industry-specific knowledge become relevant. • If a disruptive innovation destroys industry-specific knowledge, competitive advantages of incumbent firms are weakened or lost and barriers to entry are drastically reduced in their importance – the industry returns from a routinized to an entrepreneurial regime and new firms can now enter the industry in large numbers and try to gain market share. Drivers behind this process are manifold: van de Poel (2003) relates the change in technological regimes to different types of innovative activity and patterns, Geels

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(2002) highlights and emphasizes an increase of variety for technological trajectories in a firms’ sociotechnical landscape, Lee and Lim (2001) focus on the options of catching-up versus leap-frogging across several industries when new technologies emerge, and Peneder (2010) reports simultaneity of diversity and contingency of firm strategies and behaviour within and across industries. As a consequence, typically the former dominant design is being destroyed and the survivability of incumbents is significantly reduced – and an industry is thrown back into an entrepreneurial regime, where incumbent firms lose their competitive advantage.

2.5

Corporate Strategies in the Light of Disruptive Innovation

From a managerial perspective, it would be nice to know whether some new technology or business model has ingredients to be later known as ‘disruptive’: for founders in start-ups to identify the true potential to attack incumbents, for corporate managers to assess whether there is a real danger of becoming obsolete. Yet, the idea of disruption per se is defined as an ex-post concept. However, a couple of efforts over the last two decades tried to identify, whether disruption in a specific market or certain industry can be ex-ante forecasted or predicted (Adner, 2002; Dziallas & Blind, 2019; Klenner, 2011; Klenner et al., 2013; Li et al., 2018; Raynor, 2011; Rosenbloom & Christensen 1994). A key question is, if incumbent firms are threatened in their existence by changing competitive conditions, and even further if strategic options are available that allow an incumbent to rescue itself from being disrupted by (potentially new) competitors or start-ups. Empirical evidence concerning a forecast of disruption or technological discontinuities so far is weak, so from a managerial perspective, there is no straightforward checklist that might reveal, whether an industry, a specific market, or a firm is in danger of becoming obsolete (Charitou & Markides, 2003).

2.5.1

Assessment of Disruptive Threat (or Opportunity)

However, one can try to identify external market-based and internal resource-based factors that indicate the risk of becoming disrupted. From a market-based perspective, a checklist (for both entrepreneurs in start-ups as well as managers in incumbent firms) of the following items might give some indication: • Disruption needs the technology base and the customer linkages of an industry to be rendered obsolete at the same time. • Disruption is more likely in a routinized regime.

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• Disruption changes appropriability conditions and technological opportunities at the same time in a way that both can be leveraged with lower or even no accumulated know-how, i.e., existing static capabilities are fading. • Disruption is typically driven by late entrants to an industry, which employ or adapt outside knowledge (from other industries, markets or science/university). • Disruption is frequently based on inferior product innovations with initially limited functionality or scope. • Disruption often starts with an innovation in a niche market segment. It is obvious, that most of these indicators are at least fuzzy and even a sophisticated early warning system in the strategy department of a firm might easily ignore or misinterpret facts. If a firm realizes, however, that a mutual combination of these factors is present in the industry, there is a least a certain probability of a disruptive atmosphere in the market. The vulnerability of a specific firm, given market-sided indicators, to be displaced can be evaluated by an organizational framework gathered by Yu and Hang (2010) – vulnerability increases especially with: • Senior managers not understanding the opportunities of disruptive innovation because of their path-dependent experiences. • If at all, disruptive initiatives are driven from within the existing organization, rather than from an independent team collecting disruptive innovation ideas and putting them into implementation. • Strong and lethargic middle management that has the strongest incentive not to change and seize opportunities outside existing business models. • An organizational culture that does not support or foster intra- and entrepreneurship and risk-taking. • An organizational structure paired with a resource allocation process that favours existing businesses with stable low-variance returns over highly volatile returns from new businesses.

2.5.2

Potential Strategies Against Disruption

For any start-up having identified options for disruption, it is valuable to understand if incumbent firms might take action to fight back. In that sense, it should try to evaluate how incumbent firms might or might not react to some disruptive attack. If a firm is considered being under threat by disruption, a couple of measures might mitigate the pressure from potential displacement and support the survival of the firm: • A regular strategy for firms should be to leverage dynamic capabilities and apply ambidexterity, i.e. to implement both exploitative (to strengthen existing knowledge and customer base and hence the existing business model) and explorative (to understand possibilities of the disruptive threat and invest in the new business

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model) initiatives at the same time (Birkinshaw et al., 2016; March, 1991; O’Reilly & Tushman, 2008; Raisch & Birkinshaw, 2008). • If creative accumulation is nonetheless possible, firms should aim for dynamic integration and absorption of new knowledge rather than separation (Bergek et al., 2013) – this might be executed either by acquisitions or partnering in a less constrained setting. • Firms should build and improve absorptive capacity, to increase the ability to quickly adapt and leverage new knowledge outside their current knowledge base (Cohen & Levinthal, 1990; Zahra & George, 2002). • In case that market analysis indicates the potential of disruption, managers, and employees should be trained and enabled to understand disruptive dynamics and support potential disruptive projects as well as improve dynamic capabilities of the organization to seize opportunities and initiate change (Yu & Hang, 2010). Actively building barriers to disruption as Wessel and Christensen (2012) outline, implies creating a couple of interconnected barriers (e.g. a tech-implementation barrier, an ecosystem barrier or a business model barrier) to stabilize and encapsulate the existing firm and business in their routinized regime. Allowing intrapreneurship within a trustful environment and relaxing KPI-expectations as compared to the existing core business to create degrees of freedom, keep the new initiative organizationally separate, and grow ‘new business’ (Bower and Christensen, 1995; Hathway, 2009). To understand the importance of firm-specific strategic action for firm survival in the light of disruption, the German mail-order industry is indicative: while Quelle Group, back in the 1980s globally one of the largest mail order firms and undisputed market leader in Europe including a multitude of businesses like banking, insurance, photo services or kitchen and subsidiaries all over Europe went finally bankrupt in 2009 after more than a decade of continued restructuring and job cuttings due to ignoring online and e-commerce trends – its main rival Otto Group, continuously adapting to online strategies, implementing a platform business model clone of Amazon and seizing opportunities of digitalization, is still alive. A look at the banking and financial services industry in Europe reveals the difficulties to predict disruptive potential (Münter & Weisser, 2016): whether FinTechs – technology-based firms that establish digital banking business models – can actually survive in the long term and gain significant market share depends on whether and how quickly incumbent banks can learn and implement new technologies and adapt to changing competitive environments and ‘digital’ customers based on their absorptive capacity. In addition, large banks across Europe currently seek cooperation and close connections with start-ups and engage in open innovation processes (like hackathons and hosting barcamps) to hedge and safeguard their routinized regime by an ambidextrous strategy. A combination of strategies against being disrupted can be observed with Daimler: with autonomous driving, connectivity, alternative power units, new business models like mobility-as-a-service or car sharing, and severe necessities of CO2 reductions the automobile industry at least faces the opportunity of being disrupted –

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as an active strategy, Daimler chose first Smart and now the e-mobility unit to be located far away from the headquarters, and acquired, invested or partnered with CarWow, moovel, mytaxi, connectbusiness or FleetBoard to address all opportunities and aim for creative accumulation.

2.6

Summary and Discussion

Long-run competitive processes are characterized and driven by innovation. Over time, relative competitive advantages of firms change alongside shifts in technological regimes – in the beginning, start-ups and new, young firms dominate the innovation process; in later stages, incumbent firms with large R&D departments determine the speed of technological progress and the direction and trajectories of innovation. Summing the evidence from studies in industrial organization, management, and strategy, it seems to be a robust finding that industries evolve from an entrepreneurial to a routinized regime. However, the process is not irreversible. Especially disruptive innovations tend to make existing competitive advantages obsolete and drastically change competitive dynamics. With that, existing knowledge is less valuable, uncertainty increases, the dominant design is undergoing severe adjustments or even is replaced, and the set of relevant competitors becomes blurry again with increasing turbulence in market shares – the very notion of incumbency becomes obsolete. Whether an industry actually falls back into an entrepreneurial regime due to disruptive innovation depends on how quickly and precisely incumbent firms can shape learning and transformation processes to adapt to new knowledge and catch up on new technology. Accordingly, incumbent firms try to translate new knowledge created outside the industry into firm-specific knowledge that increases capabilities and is competence-enhancing. Whether incumbents remain and attackers fail, crucially depends on the stability of the routinized regime, i.e. the connectedness of incumbents with their customers, the integrity of the knowledge-base and the knowledge creation process within the industry, and the quality and accuracy of the attackers’ products and services to meet customer needs. Summing up the evidence from empirical studies so far, and incumbents firms taking action along the described lines, being disrupted is – maybe contrary to current anxieties – of low probability. In turn, this means for start-ups, that taking into account the stage of industry evolution and understanding technological regimes is essential. To increase the probability to successfully attack and replace incumbent firms, timing and careful orchestration of technological- and market-related strategies is necessary, albeit not sufficient: a little bit of blindness of incumbents (and of course luck) would prove helpful.

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Chapter 3

The Past, Present, and Future of Social Entrepreneurship in Indonesia: A Strategy to Move the Ecosystem Forward Ari Margiono and Feranita Feranita

Abstract Indonesia saw the exponential growth of social entrepreneurship in the last decade, where we see an increased awareness on social entrepreneurship and its impact in the society throughout the country. A recent report by the British Council has identified that there are more than 300,000 social enterprises in Indonesia. Following the increased awareness on social entrepreneurship, research and education on this topic have also been growing exponentially in the last few years. However, the social entrepreneurship sector faces many challenges due to uncertainties that surround the new and emerging sectors. The political and legal uncertainties are one of the many challenges that social enterprises face in Indonesia. All of these have raised the important question in regard to how social enterprises in Indonesia can cope with these emerging uncertainties and move forward with an ecosystem. With this book chapter, we seek to provide an overview of the state of social entrepreneurship in Indonesia categorised into three different periods and the ways forward for the government, academia, as well as the private sector in helping the preferrable future to unfold. Keywords Ecosystem · Indonesia · Social enterprise · Social entrepreneurship

3.1

Introduction

Social entrepreneurship, the activities to achieve social missions through business means (Austin et al., 2006), is at the heart of many communities in Indonesia. The activities itself have started to take place in Indonesia even before the independence

A. Margiono Center for Innovation, Design, and Entrepreneurship Research and Binus Business School Master Program, Bina Nusantara University, Jakarta, Indonesia F. Feranita (*) Taylor’s University, Subang Jaya, Malaysia e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 V. Ratten (ed.), Entrepreneurial Connectivity, https://doi.org/10.1007/978-981-16-5572-2_3

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of the country in 1945. Idris and Hati (2013) report that social entrepreneurship activities date back to early 1930’s when local communities organized business activities to support the independence movements. Despite the historical significance, the attention on social entrepreneurship activities in Indonesia has only gained ground in the recent years, and it is only in the last decade that we see the emergence and significant growth of new social enterprises in Indonesia. British Council estimates that there were around 300,000 social enterprises in Indonesia in 2018 (British Council, 2018), this comprises of approximately 2% of all small businesses in Indonesia (British Council, 2018). Similarly, research and publications on social entrepreneurship has also shown significant progress in the last few years where scholars begun to consistently publish both academic and non-academic studies on social entrepreneurship (British Council, 2020). However, despite the progressive development in the social entrepreneurship sector in Indonesia in both research and practice, there is still a lack of examination on the social entrepreneurship ecosystem in Indonesia. An entrepreneurship ecosystem, defined as a set of interconnected entrepreneurial actors, organisations, institutions, and processes that coalesce to connect, mediate, and govern the performance within local entrepreneurship environment (Mason & Brown, 2014), is an important element in the long-term success of social ventures. Thus, we propose that an appropriate understanding of the social entrepreneurship ecosystem is necessary for further development and sustainability of the social entrepreneurship sector in Indonesia. An entrepreneurial ecosystem consists of four essential and interconnected building blocks, namely: entrepreneurial actors, entrepreneurial resource providers, entrepreneurial connectors, and entrepreneurial culture (Mason & Brown, 2014). Entrepreneurial actor refers to the entrepreneurs and the supporting infrastructures, such as incubators and accelerators. Entrepreneurial resource providers include those components in the ecosystem that enable the transfusion of resources into emerging ventures. For example, banks, venture capitals, and angel networks are among the many resource providers that are required in the ecosystem. Entrepreneurial connectors are networks that allow nascent ventures to connect with different nodes. The role of connectors in an ecosystem is to help entrepreneurs to cope with resource deficiency issues and to facilitate knowledge sharing. Entrepreneurial culture that normalizes entrepreneurship, has been identified in the existing literature as an important element in the development of an entrepreneurial region, as the development will depend on the existence of appropriate societal support in terms of recognition, social status, and appreciation (Fritsch & Wyrwich, 2018; Spigel, 2017). Adapting the entrepreneurship ecosystem, this chapter aims to first review the social entrepreneurship ecosystem briefly in Indonesia, followed by identifying the gaps between the current social entrepreneurship ecosystem in Indonesia and the way forwards. In reviewing the social entrepreneurship ecosystem, we examine the social entrepreneurial actors, social entrepreneurial resource providers, social entrepreneurial connectors, and social entrepreneurial cultures, categorised into three

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different historical periods in Indonesia (the pre-independence period, the postindependence period, and the contemporary period). These three periods are chosen as they mark the shift in the overall environment that affects the changes in the entrepreneurial ecosystem backdrop. For example, the post-independence period shows a stark difference with the pre-independence period in the ways in which the government provided support to cooperatives. Similarly, the contemporary period displays a different configuration of resource providers compared to both the pre-independence and post-independence, especially the involvement of foreign funders in the social entrepreneurship ecosystem. In the following sections, this book chapter will outline the state of social entrepreneurship ecosystem in these three periods. The book chapter will then continue to discuss the emerging gaps and the strategies to further develop the social entrepreneurship ecosystem in Indonesia.

3.2

The State of Social Entrepreneurship Ecosystem in Indonesia

Social entrepreneurship has been gaining popularity and momentum in Indonesia in the last few decades (British Council, 2018; Chandra et al., 2021). British Council Indonesia issued a report in 2018, highlighting that there has been a significant growth of social enterprises in Indonesia in the last few decades (British Council, 2018). There was an estimation of around 300,000 social enterprises in Indonesia as of 2018, and young leaders are dominating the social entrepreneurship sector with 75% of the social enterprise leaders aged between 18 to 44 years old (British Council, 2018). Social enterprises in Indonesia are mostly in the creative industry (22%), followed by agriculture and fisheries industry (16%) and education sector (15%) (British Council, 2018). Despite being in the nascent stage in comparison to the Western countries, social entrepreneurship is considered a longstanding phenomenon in Indonesia and the social entrepreneurship ecosystem has evolved following the changes in the social, economics, and political environment over time. Existing literature has highlighted the important relationship between entrepreneurship ecosystem and the enveloping social, economics, and political factors in the environment (Spigel, 2017). Taking cue from this, this section categorises three different periods of the social entrepreneurship ecosystem in Indonesia (see Table 3.1). However, as a caveat, the categorization serves only as an illustration of the changes in the social entrepreneurship ecosystem between the different periods. Thus, the chapter does not pretend to present an exhaustive and thorough investigation of each period.

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Table 3.1 Three Periods of Social Entrepreneurship Ecosystem in Indonesia

Entrepreneurial actors Entrepreneurial resource providers

Entrepreneurial connectors Entrepreneurial culture

Entrepreneurial Ecosystem Characteristics Entrepreneurs and supporting entrepreneurial infrastructure Components of the entrepreneurial landscape; enable the transfusion of resources into growing firms Formal and informal networks to alleviate resource deficiencies Positive social norms and attitude towards entrepreneurship

PreIndependence (before 1945) Multiform

PostIndependence (1945 – late 1990’s) Uniform

Scattered and diverse

Governmentcatered

Pluralistic

Family and friends

Governmentfacilitated

Collaborative

Necessity

Necessity

Opportunity

Contemporary (post 2000) Multiform

Author’s own

3.2.1

Pre-Independence Period

The first period denotes the emergence of a social entrepreneurship ecosystem during the time of pre-independence of Indonesia before 1945. This period is marked by the lack of appropriate political support due to colonialism by Dutch (1600’s – 1940’s). During this period, the entrepreneurial actors – the social entrepreneurs and the entrepreneurial infrastructure – were scattered and diverse. Many of social entrepreneurs were linked to independence movement and they took various different organisational forms. It was of multiform social entrepreneurial entities in this particular period. Multiform refers to the presence of different types and business models of social enterprises in an ecosystem. For example, Idris and Hati (2013) have found that while many social entrepreneurship activities took the form of non-profit organisations, some of them took the form of for-profit entities. During this period, social entrepreneurs were highly independent and many of them were supported by family and friends. They served as the main network for the establishment and the operation of the social ventures. For example, a national heroine of women’s right, Raden Adjeng Kartini, utilized her family furniture business to support her school for young women in the early 1890’s (Beekman, 1984). Kartini was famous as a pioneer for facilitating education for Indonesian women as many young women were denied from entering the colonial public education. This period is also signified by the fact that many social entrepreneurs who opted to go into entrepreneurship were mostly due to the necessity and less on the opportunity. The colonialism setting and the rampant poverty during this period served as the driving factors for people to engage in entrepreneurship for survival.

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As a result, there was more necessity entrepreneurs as opposed to the opportunity ones in the pre-independence period.

3.2.2

Post-Independence Period

The second period is the post-independence social entrepreneurship ecosystem during 1945 to 1990’s. During this period, cooperatives – as a form of social entrepreneurship activities – received significant support and attention from the government. As a result, social entrepreneurial actors and infrastructure tended to be uniform around the cooperative movement. In this period, a particular ministry, Ministry of Cooperative and Small Business responsible for the development of cooperatives was established at the end of 1960s during President Suharto’s administration. This resulted in extensive resource provision provided to support the development of the cooperative sector in Indonesia. Furthermore, since cooperatives were seen as an instrument for poverty reduction, those who entered entrepreneurship during this period were again mostly necessity entrepreneurs.

3.2.3

Contemporary Period

The third period is the contemporary social entrepreneurship ecosystem post year 2000. This period is marked by a more open market and a democratic political system in Indonesia that was established since early 2000. Many of the non-profit organisations have transformed into social enterprises in the contemporary period. For instance, British Council Indonesia contributed by providing support for non-profit organisations to transform into social enterprises. During this period, diverse social entrepreneurship actors have started to flourish, and pluralistic support systems from different channels begun to emerge. Social entrepreneurs started to receive support from various professional networks, including banks, social venture capitals, and even from peer network. Different forms and business models of social enterprises take place in this period (Pratono et al., 2019), representing the return of the multiform entrepreneurial actor ecosystem. Integral resource providers for start-up stage and growth, such as angel investors, social venture capitals, and impact investors, have started to enter market and provided support to social entrepreneurs. Many of these resource providers are foreign impact investors. A recent report indicates that 93% of funds that were provided by impact investor were foreign fund and only 42% had local representatives in Indonesia (Soukhasing, 2020). This is a stark contrast to the mainstream investor landscape where foreign funds only comprised of 70% of the total investment in Indonesia (Soukhasing, 2020). Although still very rare, the emergence of opportunity entrepreneurs started to take place in this period. A number of social enterprises started to take on the profit-

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oriented business model. For example, Nazava, a social enterprise that sells water filtration system to peri-urban societies, emerged in this period as a social enterprise that utilizes a business model that allows the social enterprise to appropriate profit for the shareholders (Margiono et al., 2018).

3.3

Challenges and Gaps in the Social Entrepreneurship Ecosystem in Indonesia

Previous research indicates that the vibrant entrepreneurship ecosystems have certain characteristics that enable firms to flourish and grow. Brown and Mason (2017) have identified two ideal types of entrepreneurship ecosystem: embryonic ecosystem and scale-up ecosystem. In the embryonic ecosystem, there are limited number of start-ups and the interactions within the ecosystem are still limited. Entrepreneurial orientation is considered low, as the start-ups tend to focus more on the early/ premature exits because many of them were acquired by multinationals or other larger firms. Funding in this type of ecosystem is driven by the needs for the daily operations of the start-ups, where many of them are publicly funded through grants and incentives. The embryonic ecosystem is depicted by the limited number of dealmakers. Moreover, these deals often serve as the majority of the agreements taking place between investors and social entrepreneurs in this particular type of entrepreneurship ecosystem. In the scale-up ecosystem, there is a large number of growth-oriented start-ups, and the ecosystem is dynamic as there are lots of interactions between start-ups. As a result, the start-ups aim for growth and to become the next “blockbuster” firm. These ambitions are also supported by the availability of funding from venture capitals and other resource providers, such as banks and financial institutions. In this ecosystem, most of the financing institutions are private. Funding is also available across different levels, from angel investor funding up to the pre-IPO stage. The social entrepreneurship ecosystem in Indonesia seems to be still hovering around the pre-embryonic and the embryonic stage since the pre-independence period. During the pre-independence period, the attention on the social entrepreneurs was mostly given for the cause to fight for the independence of the country. Thus, the growth of social enterprise was less of their concern and the social entrepreneurship ecosystem was also less established. During the post-independence period, there was a surge of support from the government for cooperatives. This period marks the presence of embryonic ecosystem as the played a dominant role in fostering the ecosystem. In fact, the growth of cooperatives was mostly facilitated by the availability of various funding supports from the government. Despite the continuing support from the government in the contemporary period, the period is characterized by several challenges that keeps the ecosystem in the embryonic stage and less of a scale-up ecosystem. British Council in their report

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(2018) has identified a number of areas needed for development in this particular period. The following section highlights several relevant issues addressed in the report. First issue is the issues related to government policies. As of today, writing of this book chapter in 2021, the government has yet to legally recognise social entrepreneurship activities beyond cooperatives, as Indonesia does not have specific social entrepreneurship legal identity. This has created challenges for non-cooperative social enterprises to operate, as many of their activities are not legally recognized and thus resort to the use commercial legal identity (ASEAN Social Enterprise Structuring Guide, 2020). This has also created challenges for resource providers to provide support to social entrepreneurship actors. As a matter of fact, the lack of recognition has resulted in double taxation because many of the social enterprises use two legal entities (e.g. limited liabilities and foundation) to operate. Second is on the role of entrepreneurship connectors, such as the private sectors and higher education institutions. The private sectors are expected to help facilitate market access, among others, by bringing social enterprises into their value chain. Higher education institutions are also expected to play an important role as a hub for teaching, research, and peer-learning in the subject of social entrepreneurship. Unfortunately, at the moment, the activities within the social entrepreneurship connectors are still scattered and sporadic.

3.4

Strategic Development of the Social Entrepreneurship Sector in Indonesia

Various issues have led to the social entrepreneurship ecosystem in Indonesia to remain in the pre-embryonic and embryonic stages since the pre-independence period. In the pre-independence period, social entrepreneurship sector mostly served to help the independence of the country and the ecosystem was pre-embryonic. The post-independence period saw the emergence of embryonic ecosystem as the government provided full support to cooperatives in Indonesia. The contemporary period continued to see the embryonic ecosystem. Despite the difficult history and the identified issues, there have been few highlights that indicate the promises of a future scale-up social entrepreneurship ecosystem in Indonesia. Among others, the contemporary period saw the emergence of social enterprises that are opportunity driven. It is also in this period that we have started to see the involvement of foreign venture capitals and more advanced start-up infrastructures taking shape. To move the social entrepreneurship sector forward in Indonesia, efforts in addressing the existing gaps are necessary. The following sections highlight the recommendations for the strategic development of social entrepreneurship sector in Indonesia (Table 3.2).

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Table 3.2 Recommendations for Strategic Development of the Social Entrepreneurship Sector

Social entrepreneurial actors

Current State Social entrepreneurs embrace different business models and have limited skills to develop a growth-oriented social venture.

Social entrepreneurial resource providers

Social entrepreneurship infrastructure is less comprehensive, yet the important building blocks exist. There are social venture capitals and impact investors; bank and government also provide support to social enterprises.

Social entrepreneurial connectors

There are associations and groups where social enterprises can collaborate and work together.

Social entrepreneurial cultures

Social entrepreneurship is seen as a good thing because it gives impact to society.

Recommendations for Strategic Development Social entrepreneurs need to acquire appropriate skills. Universities and private sectors can help social entrepreneurs to increase their social-business tension management capabilities. Linkages in the existing infrastructures need to be enhanced. Government needs to provide appropriate policies for resource providers. Incentives and clarity in regulations are needed to enable private resource providers to operate and to create profit and impact in social ventures. Since Indonesia is diverse and archipelagic, social entrepreneurship sector should benefit from hubs and connectors that are regionally dispersed. Social entrepreneurship needs to be become mainstreamed and connected in the country’s economy and offer significant social and economic contributions to the society.

Author’s own

3.4.1

Social Entrepreneurial Actors

The future social entrepreneurship ecosystem needs to facilitate the development of skills and capabilities of social entrepreneurs. Social entrepreneurs need to cope with the ongoing tensions in managing social ventures and at the same time being growth oriented, thus the appropriate skills to develop business models and skills related to the management and growth of ventures are required. Higher Education Institutions play an important role in pushing the notion of social entrepreneurship forward in the society and can contribute by conducting social entrepreneurship research. Unfortunately, social entrepreneurship research in Indonesia at the current stage has been dominated by stories and cases of successful social entrepreneurs (British Council, 2020). Thus, there is a need to further move the research agenda forward to more studies at the organisational and the ecosystem level. Research at this level of analysis will help social entrepreneurs to better understand the dynamics and the mechanisms of social ventures, especially in a

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growth-oriented setting. More nuanced understanding of social entrepreneurship will also help social ventures to sustain beyond growth stage. Furthermore, the linkages between research and teaching are also important. Higher Education Institutions (HEIs) should foster the linkages between research and teaching on social entrepreneurship to help develop the skills and the capabilities of veteran and aspiring social entrepreneurs. Government’s role is also of a crucial one here. The government can incentivise HEIs to engage more in social entrepreneurship research and teaching through regulations. For instance, government can revisit and strengthen the existing’s regulation known as the Tridarma Perguruan Tinggi, university’s three tasks that oblige lecturers to engage in teaching, research and community work in each semester. The strengthening of this regulation can help to incentivise the lecturers in contributing to the society with more willingness rather than fulfilling an obligation. Furthermore, social entrepreneurial infrastructure needs to be further strengthened in the future. There has been a growing development of commercial entrepreneurial infrastructure in Indonesia. Since the first decade of the millennium, there has been an exponential growth in the number of incubators and accelerators in Indonesia. The emergence of the unicorns, just to name a few, GoJek, Tokopedia, Traveloka, among others – has also accelerate the development of entrepreneurial infrastructure in Indonesia. To avoid duplication, the existing pre-incubation processes, incubators, and accelerators need to incorporate social entrepreneurship activities. This is also important because integrating entrepreneurship infrastructure will help social entrepreneurs to tap into resources from the more developed ecosystem of commercial entrepreneurs. For example, the accessibility of business mentors from commercial entrepreneurial infrastructure would help social entrepreneurs – often with strong social missions and motivation but less on business experience – to get support in developing relevant growth-oriented business models.

3.4.2

Social Entrepreneurial Resource Providers

Similar to the commercial start-ups, social ventures also need resource providers to grow, such as financial institutions and investors. There has been a number of resource providers that support commercial entrepreneurs, yet, only in the recent years that specific resource providers for social entrepreneurship have start to emerge. Among others are the social venture capital and the impact investors who are interested to invest in environmental and social impact ventures. Nevertheless, there is still very limited support from the government in regard to the clarity on investments in social ventures. This is partially due to the lack of recognition in the social entrepreneurship activities, therefore the lack of legal instruments for non-commercial investors. Thus, the government should provide clearer regulations and incentives for investors planning to invest in social ventures. For example, tax incentives for social venture capitals and impact investors would facilitate the social entrepreneurship sector to scale-up further.

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Social Entrepreneurial Connectors

Connectors play an important role in a scale-up ecosystem. Connectors are known to help cross-fertilize inter-regional and cross-sectoral connectivity. For example, the higher the number of serial entrepreneurs or former entrepreneurs turned into mentors across various regions and sectors, the better the ecosystem in a particular country (Brown & Mason, 2017). This is primarily due to the fact that these mentors help to foster the development of entrepreneurs from different regions and sectors in a country. Social entrepreneurship sector should also benefit from the presence of connectors. Social entrepreneurial connectors can exist in various forms, from forums that facilitate new social entrepreneurs to learn, share, and connect among themselves to specific mentorship programs that can help new social entrepreneurs to start and grow their businesses. The development of social entrepreneurial connectors in the ecosystem should be supported jointly by the government, the private sectors, and even the non-profit sectors. For example, the government can provide facilities for connectors to flourish. Physical facilities such as incubators, co-working places, or in time of Covid-19 – virtual platforms, can serve as a place for social entrepreneurs to connect. What is important is that the government should provide these facilities in different provinces and islands in Indonesia. One of the perennial challenges in Indonesia lies in the fact that the archipelagic country consists of scattered large and small islands, and this emphasizes the needs for appropriate social entrepreneurship connectors to help new social enterprises in different islands across Indonesia to tap into existing resources, skills, and opportunities.

3.4.4

Social Entrepreneurial Cultures

Social entrepreneurship activities are often seen rooted in the Indonesian culture. This is evident in the fact that social entrepreneurship has been around in Indonesia before the independence of the country, and social entrepreneurship seems to be more aligned to Indonesia’s familial and collective culture. Many Indonesians consider social capital in terms of familial relationships and networks, and this leads to the primacy of social values over financial capital in many of their entrepreneurial choices (Margiono, 2015). The future social entrepreneurial ecosystem should be able to capitalize this culture to moderate the emergence of growth-oriented social enterprises. Within this context, the growth of social entrepreneurship sector should always be seen as two folded. Firstly, the sector should facilitate the ways in which the culture helps to foster entrepreneurial processes. This can be done, for example, through promoting context-specific entrepreneurial processes. The solutions that a social venture aim to offer should always be contextual and consultative to the beneficiaries and stakeholders. Secondly, the sector should also facilitate the growth of the business aspects

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of the social ventures. In most social venture business models, the growth of the business would contribute to the growth of the social impact. Thus, social entrepreneurship culture should also be mainstreamed in the whole economy of the country.

3.5

Conclusion

Social entrepreneurship activities have been around before the independence of the country. However, the social entrepreneurship ecosystem in Indonesia has been less investigated in the literature, let alone systematically. This book chapter explored social entrepreneurship ecosystem in Indonesia in three different periods. Each period displays specific particular ecosystem characteristics. However, all of these periods are yet to represent the scale-up entrepreneurial ecosystem despite some potentials, and there is much room for growth into scale-up ecosystem. This book chapter highlights a few strategies involving various sectors to facilitate the movement of the social entrepreneurship sector forward.

References ASEAN Social Enterprise Structuring Guide. (2020). Retrieved October 27, 2020, from https:// www.britishcouncil.org/sites/default/files/asean_social_enterprise_structuring_guide_guide_ final_web_version_0.pdf Austin, J., Stevenson, H., & Wei-Skillern, J. (2006). Social and commercial entrepreneurship: Same, different, or both? Entrepreneurship Theory and Practice, 30(1), 1–22. Beekman, E. (1984). Kartini: Letters from a Javanese feminist, 1899-1902. The Massachusetts Review, 25(4), 579–616. Retrieved July 5, 2021, from http://www.jstor.org/stable/25089602 British Council. (2018). The state of social enterprise in Indonesia report. Retrieved October 27, 2020, from https://www.britishcouncil.org/sites/default/files/the_state_of_social_enter prise_in_indonesia_british_council_web_final_0.pdf British Council (2020). Social innovation and higher education landscape in Indonesia. Retrieved October 27, 2020 from https://www.britishcouncil.org/sites/default/files/sihe-country_reportindonesia_final.pdf Brown, R., & Mason, C. (2017). Looking inside the spiky bits: A critical review and conceptualisation of entrepreneurial ecosystems. Small Business Economics, 49(1), 11–30. Chandra, Y., Lee, E. K. M., & Tjiptono, F. (2021). Public versus private interest in social entrepreneurship: Can one serve two masters? Journal of Cleaner Production, 280, 124499. Fritsch, M., & Wyrwich, M. (2018). Regional knowledge, entrepreneurial culture, and innovative start-ups over time and space―an empirical investigation. Small Business Economics, 51(2), 337–353. Idris, A., & Hati, R. H. (2013). Social entrepreneurship in Indonesia: Lessons from the past. Journal of Social Entrepreneurship, 4(3), 277–301. Margiono, A. (2015). Are Indonesian entrepreneurial at all? The Jakarta Post. Retrieved October 27, 2020, from https://www.thejakartapost.com/news/2015/05/07/are-indonesians-entrepreneur ial-all.html

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Margiono, A., Zolin, R., & Chang, A. (2018). A typology of social venture business model configurations. International Journal of Entrepreneurial Behavior & Research, 24(3), 626–650. https://doi.org/10.1108/IJEBR-09-2016-0316 Mason, C., & Brown, R. (2014). Entrepreneurial ecosystems and growth oriented entrepreneurship. Retrieved October 27, 2020, from https://www.oecd.org/cfe/leed/Entrepreneurialecosystems.pdf Pratono, A. H., Pramudija, P., & Sutanti, A. (2019). Social enterprise in Indonesia: Emerging models under transition government. In Bidet, E. & Defourny, J. (Eds) Social enterprise in Asia: Theory, models, and practice (pp. 79–96). Routledge. Soukhasing, D. (2020) Investing in impact in Indonesia. ANGIN. Retrieved October 27, 2020, from https://www.angin.id/2020/10/05/investinginimpact Spigel, B. (2017). The relational organization of entrepreneurial ecosystems. Entrepreneurship Theory and Practice, 41(1), 49–72.

Chapter 4

Exploring the Role of Network Intensity to Achieve Better Performance: A Case of Indonesian Ethnic Enterprises Nurul Indarti, Hardo Firmana Given Grace Manik, and Andy Susilo Lukito-Budi

Abstract This study intends to bring more insight from a different perspective of ethnic entrepreneurship studies by providing empirical evidence about the relationship between network intensity in ethnic community network and performance. The social network theory is used as the underlying theoretical framework, while a positivist paradigm with an explanatory research design is adopted to examine the characteristics of network intensity on enterprise performance. This study undertook a structured survey of 100 Javanese ethnic enterprises in North Sumatra, Indonesia and 100 Minang ethnic enterprises in Yogyakarta, Central Java, Jakarta and Bogor (Indonesia) from September to November 2019. This study finds that the performance of the ethnic enterprises who joined the ethnic network (paguyuban) are having better performance (N ¼ 134) than those who do not join (N ¼ 66), but indifferent between the Javanese and Minang enterprises. Next, using the logistic regression, this study reveals that the dimensions of the wide variety of activities and high frequency of attendance (within the network) have more dominant odds in delivering better performance for the Javanese ethnic enterprise, compared to those for the Minang ones. These findings are in line with inward-looking or solidifying bonding within their ethnic network, or so-called the identity-based network that looks for depth and breadth in the network. In contrast, only the wide variety of activities dimension positively affects better performance in the Minang ethnic enterprises. This finding implies that the Minang

N. Indarti Department of Management, Faculty of Economics and Business, Universitas Gadjah Mada, Yogyakarta, Indonesia e-mail: [email protected] H. F. G. G. Manik Faculty of Business, Duta Wacana Christian University, Yogyakarta, Indonesia e-mail: [email protected] A. S. Lukito-Budi (*) Faculty of Economics and Business, Atma Jaya Catholic University of Indonesia, Jakarta, Indonesia e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 V. Ratten (ed.), Entrepreneurial Connectivity, https://doi.org/10.1007/978-981-16-5572-2_4

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ethnic entrepreneurs tend not to invest much time and energy to attend community activities frequently. Instead, they also divide their time to explore new networks for access to new external resources. Further discussion and implication are also presented. Keywords Ethnic community · Ethnic network · Network intensity performance · Strong ties · Weak ties

4.1

Introduction

The importance of entrepreneurship concept contextualization increases due to the growing awareness of recognising economic behaviour throughout its context (Welter, 2011). The context of entrepreneurial behaviour represents “circumstances, conditions, situations, or environments that are external to the respective phenomenon and enable or constrain it” (Welter, 2011: 167). According to Leighton (1988: 74, 76), “studying entrepreneurs as individual is a dead end”, while the context of entrepreneurial behaviour, such as environment, culture etc., is essential. Our study follows the work of Manik et al. (2021) argue that one of the environmental elements which needs to be studied is ethnicity. The umbrella topic of this element is widely known as “ethnic entrepreneurship”. In general, the term “ethnic” is an adjective that describes the differences or categorisation of people based on national origin, religion and ethnicity (Aldrich & Waldinger, 1990). The term “ethnic group” implies that there is awareness of certain group members about the exact cultural origin or background and migration experience and others acknowledge that they have such attributes (Assudani, 2009). Thus, the ethnic entrepreneurship uses new ways of combining resources to create something of value from people who have the same cultural background and/or migration experience and gather in ethnic community networks (Aldrich & Waldinger, 1990). The ethnic community networks are crucial to provide initial resources and legitimacy in starting and developing the ethnic enterprises (Almeida et al., 2015; Dana et al., 2019). Furthermore, in their latest systematic review work, Indarti et al. (2020) indicated that most studies about ethnic entrepreneurship were taken in developed countries using qualitative research. They also noted externalities (such as family, community) as one theme in this ethnic entrepreneurship that should have a role in entrepreneurship. As such, the collaborative environment in these externalities could lead to better business performance, specifically to those who had developed bonds with their group (Ratten et al., 2018). Nevertheless, a recent study by Manik et al. (2021) point out the inconsistency between ethnic community network and enterprise performance. Their studies indicate that the network characteristics (i.e., centrality, density, and tie strength) impact enterprise performance, while the different results from other studies still emerge. Thus, this study proposes the concept of network intensity as one consideration factor to improve performance. Our work proposes

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scrutinising the effect of network intensity dimensions (i.e., duration of involvement, variety of activities, frequency of attendance, and level of involvement) on the ethnic enterprise performance. Our study is in line with Chaganti and Greene’s work (2002) and Fennema (2004) which proposed that the term “ethnic entrepreneur” should be defined through the level of personal involvement of entrepreneurs in ethnic communities rather than by mere recognition or demographic identification. Chaganti and Greene (2002) further stated that true ethnic entrepreneurs socialize intensively with fellow ethnic groups, actively participate in ethnically based institutions or organizations, and feel a strong sense of accountability to contribute to ethnic communities. This definition provides a more accurate index for measuring the unique level of a business and confirming its effect on the performance of ethnic enterprises (Chaganti & Greene, 2002; Dana et al., 2019). The context of ethnic entrepreneurship research is also crucial to discuss. It becomes the next background for our research, which special reference to the ethnic community network, called paguyuban in Indonesia. The growth of new ethnic populations in Europe since 1945, as well as a new wave of immigrants to the United States in 1965, have made ethnic enterprises an international topic (Aldrich & Waldinger, 1990). Long before the 1965s, Barrett et al. (1996) revealed that the study of ethnic entrepreneurship originated in the US when foreigners worked on small businesses since the 1880s. Meanwhile, ethnic entrepreneurship has been a study object in European countries since the late 1980s (Kloosterman & Rath, 2001; Light & Gold, 2000; Rath & Swagerman, 2016). In other words, this topic is motivated by the situation of racial supremacy that emerged in America and Europe and has become the dominant research context for ethnic entrepreneurship today (Aliaga-isla & Rialp, 2013; Indarti et al., 2020). Some scholars then criticized the exclusivity of ethnic entrepreneurship research works. They mainly focus on the Western world and ignores the other side of the globe despite the mobility between countries, both among developing countries and from developed countries to developing countries, is increasing due to globalization and advances in information technology (Aliaga-isla & Rialp, 2013; Antwi Bosiakoh, 2017; Indarti et al., 2020; Verver et al., 2019). Thus, with the shift in the research context as revealed by the researchers mentioned above, the study of ethnic entrepreneurship will provide new insights and nuances if it is carried out in non-Western countries such as Indonesia. This choice is supported by the extension of the definition of migration provided by the UN Migration Agency (2019) that includes trans-provincial or cross-regional migration within a country. Indonesia has many ethnic groups that have wandering tradition such as Minang, Jawa, Bugis, Madura, and Batak (Fitrimawati et al., 2015). Among those ethnic groups, Javanese and Minang ethnics were selected due to different cultural values in their networking behaviour. The Javanese adheres to the principles of “rukun agawe santoso, congkrah agawe bubrah” or harmony makes prosperity, conflict makes disparity and the philosophy of “nrimo” that indicates its priority to maintain harmony and stability within their network (Hermawan et al., 2018). In other words, the Javanese ethnic group has an identity-based network or a closed network,

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which emphasises pride in the same identity instead of exploiting network resources aggressively for business purposes (Hite & Hesterly, 2001). On the other hand, the Minang people have the philosophy of urang awak, which implies their strong bond and the principle of “alam takambang jadi guru” or a universe is a place of learning. It encourages the Minang people to be aggressive in networking with other tribes in various places in Indonesia and even abroad (Rahman et al., 2019). Therefore, referring to the term coined by Hite and Hesterly (2001), the Minang ethnic group tends to be characterized by calculative- or open-based networks, prioritizing seeking specific economic functions or resource benefits that the network can provide. In particular, this study uses a kinship perspective to explain better the anthropological phenomenon of the familiness of an ethnic community in Indonesia, namely that “familiness” is not just about marriage relatedness (Manik et al., 2021; Verver & Koning, 2018). The Javanese people have several kinship patterns in ethnic communities, namely keluarga batih (nuclear family), sanak sedulur (ancestral relatedness), and sesuku (language and dialect relatedness) while the Minang people recognize six forms, such as semande (nuclear family/born of the same grandmother), seperut (born of the same great-grandmother), seninik (traditional leader relatedness), sekaum (family name relatedness), and sesuku (clan relatedness) (Damsar & Indrayani, 2016; Yusuf & Suwijah, 1997). This phenomenon is also similar to the research findings by Dana et al. (2019) about Memon ethnic entrepreneurs in Pakistan whose ethnic communities have an extended-family system. Based on the abovementioned argument, we propose the following research questions are: (1) Do network intensity dimensions (i.e., duration of involvement, variety of activities, frequency of attendance, and level of involvement) affect ethnic enterprise performance? (2) Do the Javanese and Minang ethnic groups have different behaviours concerning their network intensity dimensions? The chapter is structured as follows. The first part outlines the background of this chapter while theoretical foundation, the description of the Javanese and Minang ethnic group profiles, and the development of hypotheses discussed in the second part. The third section addresses research methods including approach, variables, data collection technique and data analysis. Conclusions and suggestions are presented in the fourth section.

4.2 4.2.1

Theoretical Basis and Hypothesis Development Social Capital Theory

Social capital theory views that entrepreneurship is not about the activity of a ‘lone superman’ who wants to change the world through innovation but as an activity that is socially and culturally inherent with complex interactions between individuals, communities and the wider society (Dana et al., 2019; Welter, 2011). Interdependence among network actors in an ethnic community based on several

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similarities such as mutual trust, shared norms, and solidarity or collaboration for mutual benefits is a basic assumption of social capital theory (Bourdieu, 1986; Dana et al., 2019; Woolcock & Narayan, 2000). In other words, high communication frequency, emotional intensity, intimacy, and mutual service are the keys to the longevity of social relationships (Granovetter, 1973). Social networks consist of two opposite characteristics, i.e. closed social networks or bonding ties and open social networks or bridging ties (Assudani, 2009; Uzzi, 1997). In another study, Hite and Hesterly (2001) uses the term identity-based network for closed networks, which describes the orientation of an ethnic community on network stability and internal harmony or, in other words, inward-looking networks. The opposite is a calculative-based network that describes an open network or accentuates network adaptability and exploits resources optimally for business development, not just having the same ethnic identity or being outwardlooking (Hite & Hesterly, 2001). Further, the attractive business opportunity structure (meso level) and solid institutional support strengthen the role of ethnic community networks in the host area, providing resources and initial legitimacy for the Javanese and Minang ethnic entrepreneurs. This is a mix-embeddedness analysis as described by Kloosterman (2010). The host areas researched in this study are some large cities in Indonesia such as Medan and Binjai for the Javanese and Jakarta, Bogor, and Yogyakarta for the Minang people, which are widely known as regions where the local governments strongly support the development of SMEs.

4.2.2

Description of the Javanese Ethnic Group Profile

4.2.2.1

Migration Profile

The Javanese people are the ethnic group with the most significant number in Indonesia. The origin of the Javanese ethnic area is from the provinces of Central Java, Yogyakarta and East Java, Indonesia. The history of Javanese ethnic migration to various regions in Indonesia is closely related to the labour need under the Dutch colonial government for plantation and the transmigration policy of Soeharto’s New Order presidency (Padmo, 1999). The first large-scale migration occurred during the Dutch colonial era from Java Island to various regions in Indonesia. The new political program in 1900 required the Dutch colonial government to improve the standard of living of the people in Java by reducing the population through moving part of the population of Java to other islands (Padmo, 1999). The second migration occurred during the Soeharto era with the transmigration policy. This policy intended to make the distribution of Javanese migrants at that time no longer concentrated in areas of Dutch plantations in North Sumatra but spread in various provinces in Indonesia (Padmo, 1999). Their jobs were generally factory workers, shop assistants, construction workers, culinary sellers, domestic helpers, and others (Handaru et al., 2015). The Javanese migrants

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who have previously settled in the host area usually temporarily accommodate their relatives who have just come from Java to migrate (Andriawati, 2016). The latest period is nowadays which the Javanese ethnic groups migrates because of their own need. Generally, they migrate for reasons of trade/business, study assignments, work assignments, and so on (Prihartono, 2016).

4.2.2.2

Cultural Mission

A harmonious relationship between humans, nature, and God is something that the Javanese ethnic group strives for continuously throughout their life (Wibawa, 2013). For the Javanese, God is the one who governs the entire universe according to God’s plan and will. Humans should not protest against what God has outlined (destiny) or in other words, humans are “wayang” (puppets) while God is the “dalang” (mastermind) (Kurnianto, 2015). In short, the Javanese continuously strive for a mental condition that always remember and close to God, think clearly and happily and surrender their life fully to God. For the Javanese, success achievement is when a person can fulfil a balanced material, emotional, and spiritual life (Hermawan et al., 2018). Therefore, for the Javanese ethnics, doing business is not just an ambitious profit-seeking but tends to surrender to God because sustenance has been arranged by God (Sutanto & Nurrachman, 2018). In other words, in doing business, the Javanese ethnic will try their best and assume that the benefits will come naturally according to their respective destinies or Javanese proverbs as called “nrimo ing pandum, makaryo ing nyoto” (Wulandari, 2017). Another philosophy that reflects the Javanese work ethic is “sepi ing pamrih, rame ing gawe” or work hard selflessly (Hermawan et al., 2018).

4.2.2.3

Social Network

The Javanese ethnic has its own perspective regarding how they perceive other people who have the same ethnic identity and who are not the same. The Javanese society adheres to a bilateral kinship system, namely lineages based on the father and mother lines or men and women have the same rights and obligations (Asnidar, 2007). The smallest group of relatives is called keluarga batih consisting of husband, wife, and unmarried children; the extended family usually consists of relatives (sedulur) dan sesuku or language and dialect relatedness (Yusuf & Suwijah, 1997). A value of high respect for elders becomes one of the fundamental principles guiding the Javanese behaviour in their familial relationship (Kurnianto, 2015). In the Javanese ethnic community, the hierarchical relationship between the old and the young is well preserved. They tried to adapt to whom they speak to, according to their respective rights and obligations. Those who have a higher position hierarchically will have a nurturing attitude (bapakisme) to those in a lower position (Wibawa, 2013). Regarding decision making, in the Javanese ethnic communities,

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the process of making it is carried out collectively. Because of the goal is to achieve this harmony, anyone who goes against the collective decision is considered arrogant (Hermawan et al., 2018). This kind of value manifests in the philosophy of “rukun agawe santoso, congkrah agawe bubrah” (harmony creates prosperity while conflict divides). Regarding relationships with other parties, the Javanese ethnic views their business partnerships as friends (dulur). Sometimes, they dare not to collect profit in advance by hoping to earn the trust of their business partners and focus on the common good (Hermawan et al., 2018).

4.2.3

Description of the Minang Ethnic Group Profile

4.2.3.1

Migration Profile

The Minang ethnic group, administratively, comes from the Province of West Sumatra, Indonesia and the Minangkabau cultural centre is located in three regions, namely Limapuluh Koto, Tanah Datar, and Agam (Stark, 2013). The migration process is generally carried out by men, both single and married, to look for business opportunities outside their hometown (Damsar & Indrayani, 2016). They will invest in overseas land by having a permanent residence. This migration is usually to areas far from homes such as Jakarta, Bogor, Yogyakarta, Makassar, and other big cities in Indonesia and even abroad. Usually, the decision to migrate is not solely a personal decision but a family or friendship decision because it will be related to their social capital (family or community) in the wandering destination (Damsar & Indrayani, 2016). The preparation process starts from their childhood period, such as putting the 10–12 old boys to live in surau (mosque) to learn an independent living (Wulandari et al., 2018). In the surau, they get religious lessons from religious scholars and build friendships and networks with friends (Rahman et al., 2019). After they become teenagers or adult, they asked to wander.

4.2.3.2

Cultural Mission

Wandering or merantau is an inherent part of the way of life of the Minangkabau people because they tend to have a dynamic, egalitarian, and independent culture (Wulandari et al., 2018). The philosophy of becoming a leader in small business than a subordinate in large company is a better choice reflects in their philosophy, i.e. “elok jadi kapalo samuik daripado ikua gajah” (instead of being the tail of an elephant, it is better to be the head of the ants) (Handaru et al., 2015). This stance also is reflected in similar philosophy statement i.e. “kalau melekap di celak ketiak, sampai mati tak dapat tegak” (living in someone’s armpit until they are old will not generate success) (Wulandari et al., 2018).

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Furthermore, the Minang people adhere to a philosophy of “sayang dianak dilacuti, sayang dikampuang ditinggakan”, which means that leaving the village reflects their love for their hometown. They believe that one day in the future, they can provide material and non-material support when they come back to their area of origin (Zulfikarni & Liusti, 2020). It is further emphasized by the philosophy of “hiduik bajaso, mati bapusako” (live meritoriously, die leaving inheritance) and “mati bapusako and hilang rano dek panyakik, hilang bangso dek indak barameh” (lost the skin color because of disease, lost the nation because of not wealthy) (Yati & Simanihuruk, 2016). Therefore, there are strong social sanctions among the Minang people if the migrants fail to produce wealth and new knowledge in the host area. The inhabitants of the hometown would call those who failed in the host area as “pulang langkitang” or like a snail coming home (Rajab, 2004).

4.2.3.3

Social Network

The kinship structure of the Minang people consists of six forms: semande (nuclear family or born of the same mother), seperut (extended family or born of the same grandmother), senenek (ancestral relatedness or born of the same greatgrandmother), seninik (traditional leader relatedness), sekaum (family name relatedness), and sesuku (clan relatedness) (Damsar & Indrayani, 2016). This ethnic group uses the matrilineal system that means the lineage (family names) comes from the mother and ninik mamak (uncle) or the mother’s brother is responsible for the children of the mother, especially regarding material support (Stark, 2013). This system is different from most ethnic groups in Indonesia, which adheres to the patrilineal kinship (father) system. Some general rules in this matrilineal kinship system include (1) the husband comes and lives in the wife’s family house; (2) the husband may leave the house if there is a divorce in the family and the wife remains with the family; and (3) the child will continue to live and be raised with the mother and relatives (Zulfikarni & Liusti, 2020). The structure of the Minang community is composed of three main pillars called Tungku Tigo Sajarangan, namely alim ulama (Islamic religious leaders), cerdik pandai (the intellectuals), dan ninik mamak (tribe leaders) (Annisa, 2011; Rahman et al., 2019). Alim ulama is the one in charge to maintain spiritual integrity, cerdik pandai upholds knowledge integrity, and ninik mamak maintain culture and traditions (Rahman et al., 2019). These three pillars work together to maintain the existence of the Minang people, both in their hometowns and in the host area (Fitrimawati et al., 2015). The number of Padang restaurants in various cities in Indonesia and even abroad is the evidence of the success story of this ethnic group in migrating. The success relates strongly with the ability of the Minang ethnic group to develop a strong bond as depicted in the philosophy of “urang awak”, depicting solid bonds between those of the same ethnic identity. At the same, they can build open networks with various parties as a representative of the philosophy “alam takambang jadi guru” (or the universe is a place of learning) (Manik et al., 2021).

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4.2.4

Hypothesis Development

4.2.4.1

The Comparison of Performance Between Ethnic Enterprises Owners Who Join Ethnic Community and Who Do Not

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The ethnic community (paguyuban) acts as natural business incubators that provide initial resources and business information for ethnic entrepreneurs who want to start a business (Dana et al., 2019; Fennema, 2004; Greene & Butler, 1996). The high level of interconnectedness and interdependence between fellow members of the ethnic community indicates a high sense of trust, allowing for smooth traffic of information and resource exchange (Gnyawali & Madhavan, 2001). On the other hand, the ethnic entrepreneurs who do not join ethnic associations will have many difficulties in setting up a business because they do not have an anchor or home base especially when facing cultural, social, and institutional challenges in the host area (Katila & Wahlbeck, 2011; Light & Dana, 2013; Ostgaard & Birley, 1994). Therefore, this study hypothesizes that: H1a: The performance of ethnic enterprise who actively involved in its ethnic community is higher than that who does not. As the study selected two ethnic groups (Javanese vs Minang) which have different characteristics, among the ethnic enterprises who join the community, comparing their performance is necessary. Therefore, we argue that: H1b: The performance of Minang ethnic enterprise who actively involved in its ethnic community is higher than that of Javanese one.

4.2.4.2

The Effect of Network Intensity on Firm Performance

Network intensity is about the extent to which a person’s level of embeddedness in a network (Ostgaard & Birley, 1994). We developed four dimensions of network intensity of ethnic community with reference to several works (e.g. Chaganti & Greene, 2002; Eggers et al., 2020; Ostgaard & Birley, 1994) namely (1) duration of involvement, (2) variety of activities, (3) frequency of attendance, and (4) level of involvement. The duration of involvement which indicates the level of involvement in the ethnic community, measured by the number of years joins that community. The variety of activities reflects the number of activities that lasted in the ethnic community. The frequency of attendance represents to how often the entrepreneur attends the activities in the ethnic community. The level of involvement (role) reflects the depth of the involvement measured by position of the ethnic entrepreneurs in the ethnic community (i.e., advisor, core committee, or members). The first dimension is the duration of involvement in the community determines the level of legitimacy obtained by an ethnic entrepreneur (Chaganti & Greene, 2002; Ostgaard & Birley, 1994). A high level of legitimacy allows an ethnic enterprise owner to easily access various available resources because of the high

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acceptance of the ethnic community members. The length of time involved in the ethnic community is also about seniority. The more someone contributes for a long time to a community, the more he/she will be central to that ethnic community (Fennema, 2004; Wang et al., 2019). The level of centrality will determine the influence that can ultimately become a special advantage like power for ethnic entrepreneurs who have it and can be used for the development of ethnic businesses. Thus, the proposed hypothesis is: H2a: Duration of involvement in the ethnic community has significant impact to firm performance, both the Minang and the Javanese ethnic enterprises. The next dimension is a variety of activities. The more variety of activities carried out in the ethnic community, the more opportunities or spaces for fellow members to share information and knowledge, both formally and informally (Almeida et al., 2015; Lambert et al., 2006; Ostgaard & Birley, 1994). The various activities organized also allow for the consolidation of the community and extensive means of communication so that they become more solid and produce a dense network (Dana et al., 2019; Watson, 2007). The end goal is a strong solidarity between them to help each other in the establishment and development of ethnic businesses. Hence, this study argues that: H2b: Variety of activity in the ethnic community has significant impact to firm performance, both the Minang and the Javanese ethnic enterprises. The third dimension is frequency of attendance in the ethnic community. The more frequent an ethnic entrepreneur attends various activities in the ethnic community, the higher the level of his/her popularity among the members (Chaganti & Greene, 2002; Eggers et al., 2020). This level of fame allows him or her to communicate more smoothly with the ethnic community members, especially with the influential figures (Dana et al., 2019; Ostgaard & Birley, 1994; Wanberg & Kanfer, 2000). The support from these opinion leaders is certainly a blessing because they can provide legitimacy and support for starting a business. So, we propose that: H2c: Frequency of attendance in the ethnic community has significant impact to firm performance, both the Minang and the Javanese ethnic enterprises. The last dimension is level of involvement or measured by an ethnic entrepreneur’s role in the ethnic community committee. The level of network centrality possessed by an ethnic entrepreneur in the association is not only determined by the long duration of involvement but also his/her position in the committee (Wang et al., 2019). Ethnic entrepreneurs who are trusted as advisors or governing board have good credibility and reputation (Fennema, 2004). They have their own advantages by occupying this special position because they become a place of dependence for other ethnic entrepreneurs who do not have positions or are only members of the community. (Aktamov & Zhao, 2014). The advantages obtained include getting faster access to the information of the ethnic community internal situation and the ease of access to the ethnic community resources which can then be used to develop

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their own business (Almeida et al., 2015; Dolfsma & Eijk, 2016). Accordingly, this study expects that: H2d: Level of involvement role in the ethnic community has significant impact to firm performance both the Minang and the Javanese ethnic enterprises.

4.3

Research Methodology

4.3.1

Research Approach and Variables

This study used a positivist paradigm with an explanatory research design. The independent variable (IV) is four characteristics of network intensity, and the dependent variable (DV) is an enterprise performance. In this study, the variable of network intensity consists of a duration of involvement, variety of activities, frequency of attendance, and level of involvement (Chaganti & Greene, 2002) as stated previously. For the firm performance, self-report performance items adopted from (Kim & Lee, 2018) was used. The high score reflects a higher score than the overall mean score value of performance. Table 4.1 summarizes the variables. Based on the hypotheses, the equation can be formulated as follow: perf ¼/ þβ1 duration þ β2 variety þ frequency þ β4 role

4.3.2

ð4:1Þ

Data Collection Technique and Analysis

Survey is the main research method used in this study. Data collection was carried out from September 2019 to November 2019 in several big cities in Java Island (i.e., Table 4.1 Summary of the variables Code Performance

Explanation DV, performance (high, low)

Duration

IV, duration of involvement (high, low) IV, number of variety activity in group IV, frequency of activity in group IV, level of involvement (high, low)

Variety Frequency Role

Source: Authors’ own

Value range 1 and 0; 1 ¼ high 1 and 0; 1 ¼ high 1 and 0; 1 ¼ high 1 and 0; 1 ¼ high 1 and 0; 1 ¼ high

Notes High: MS > ¼ OMS High: > ¼ 5 years High: more than two activity types Self-assessment from the business owner High: more than members

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Yogyakarta, Magelang, Jakarta, and Bogor) for the Minang business ownersmanagers (OMs) and some sites in North Sumatra (i.e., Medan, Binjai, Lubuk Pakam, and Batang Kuis) for the Javanese ones. The purposive sampling technique with one main criterion, namely the OMs identifying himself as Javanese or Minang through several screening questions was deployed. Of 220 distributed questionnaires, 200 was returned, so the response rate was 90.9%. The data analysis consists of two sections. The first section investigates the role of ethnic networks on their performance by comparing two groups (those who joined the network and not) using an independent t-test. The second one tests the significance of the network intensity using logistic regression (binary categorical data; 0,1) tools for the groups who joined the network. The choice of using logistic regression refers to the further interpretation of the network intensity characters. This current study intends to find out the quality of the characteristics of which portrays by high (1) and low (0) values. The beta from the logistic regression could bring prediction about what kind of intensity variables that important. In contrast, the odds ratio from logistic regression combines (high or low) that matters to better performance.

4.4

Results

Of 200 ethnic entreprises, more than half percent (67.0%) firms join for the ethnic groups (see Table 4.2). The majority of respondent gender is male, both who join the ethnic community (76%) and those who do not (73%), while the majority education level is senior high (join ¼ 54%; not join ¼ 58%) followed by junior high (16%; 24%) respectively. As the study focuses on the role of ethnic community, further analysis is examined on the ethnic entreprises joined the ethnic community. As shown in Table 4.3, the majority of the respondents who join the ethnic community act as owner (81%), mostly migrate between 2001–2019 (50%), and West Sumatera Province is the area of origin of most respondents (74%). The variety of activities held in the ethnic communities are gathering, cultural events, seminar, charity, Table 4.2 Demographic profile of Javanese and Minang entrepreneurs Characteristics Gender Male Female Level of education Elementary Junior high Senior high College degree

Joining the ethnic community (N ¼ 134)

Not join the ethnic community (N ¼ 64)

All

102 (76%) 32 (24%)

48 (73%) 18 (27%)

150 (75%) 50 (25%)

12 (9%) 22 (16%) 72 (54%) 28 (21%)

4 (6%) 16 (24%) 38 (58%) 8 (12%)

16 (8%) 38 (19%) 110 (55%) 36 (18%)

Source: Authors’ own

4 Exploring the Role of Network Intensity to Achieve Better Performance: A. . . Table 4.3 Demographic profile of the OMs who join the ethnic community

Characteristics Position Owner Manager Owner and manager Migrating year 1950–1980 1981–2000 2001–2019 Province of origin West Sumatera Central Java Yogyakarta East Java Characteristics List of activitiesa Gathering Cultural events Seminar Charity Environmental care events Religious events Frequency of the OMs’ attendance Very often Often Rare

53 Total 109 (81%) 24 (18%) 1 (1%) 16 (12%) 51 (38%) 67 (50%)

Javanese

100 (74%) 25 (19%) 2 (2%) 7 (5%) Minang

32 (94%) 26 (76%) 1 (3%) 28 (82%) 0 30 (88%)

99 (99%) 100 (100%) 83 (83%) 97 (97%) 94 (94%) 99 (99%)

4 (12%) 25 (73%) 5 (15%)

18 (18%) 69 (69%) 13 (12%)

Source: Authors’ own Note: aAn ethnic community could organize more than one activity

environmental care events, and religious events while most respondents (73% for the Javanese and 69% for the Minang) claim that they often attend the activities.

4.4.1

Hypotheses Testing

4.4.1.1

Testing for Hypothesis 1

In order to examine the Hypothesis 1, performance difference between the enterprises joined the ethnic community and who did not (H1a) and between the two ethnic groups (H1b), a t-test was performed (see Tables 4.4 and 4.5, respectively). The t-test result confirms a significant difference (higher) in performance between the ethnic business involved in the ethnic community and not.

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Table 4.4 The result of Hypothesis 1a

No. 1

Join the ethnic community (N ¼ 134) Mean-0a Std. deviation 19.84 2.69

Item Performance

Not join (N ¼ 66) Mean-1b 17.83

Std. deviation 2.03

M0–M1 2.01****

Source: Authors’ own Notes: One tailed t-test; *p < 0.1, ** p < 0.05, *** p < 0.01, **** p < 0.001. a Mean-0 ¼ Mean Performance for those who do not join the group b Mean-1 ¼ Mean Performance for those who join the group Table 4.5 The result of Hypothesis 1b No. 1

Javanese Mean-0a 3.99

Item Performance

Std. deviation 0.1

Minang Mean-1b 3.96

Std. Deviation 0.05

M0–M1 (0.032)

Source: Authors’ own Notes: Value range (answer): 1–5 (1 ¼ very low; 5 ¼ very high) One tailed t-test; *p < 0.1, ** p < 0.05, *** p < 0.01, **** p < 0.001 a Mean-0 ¼ Mean Performance for Javanese group b Mean-1 ¼ Mean Performance for Minang group Table 4.6 Characteristics of network intensity Network intensity Duration Variety Frequency Role

Javanese (N ¼ 34) High Low 22 (65%) 12 (35%) 14 (41%) 20 (59%) 29 (85%) 5 (15%) 4 (12%) 30 (88%)

Minang (N ¼ 100) High Low 78 (78%) 22 (22%) 91 (91%) 9 (9%) 84 (84%) 16 (16%) 19 (19%) 81 (81%)

Overall (N ¼ 134) High Low 100 (75%) 34 (25%) 105 (78%) 29 (22%) 113 (84%) 21 (16%) 23 (17%) 111 (83%)

Source: Authors’ own

The t-test result shows no significant difference in the performance between the Javanese and Minang ethnic groups (see Table 4.5). The result implies that variety between the two groups should be carried on with other aspects, as suggested in this study, such as their network intensity. The intensity could reveal variety between both the ethnic groups. Table 4.6 summarizes the characteristics of network intensity (in terms of duration, variety, frequency, and role of involvement) among the Javanese ethnic entreprises and the Minang ones. In the Javanese ethnic group, the members who joined for a longer time (> 5 years) are more dominant than those who joined recently. The frequency of participating in high activities is also notably dominant. On the other hand, the Minang group shows a higher percentage than the Javanese in term of their duration joining period in their ethnic community (78% > 65%). In addition, the two tribes share the same pattern for levels of involvement. Not many members from both the ethnic groups were having high involvement (Java 12% and

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Fig. 4.1 Various elements of Javanese ethnic community Source: Authors’ own

Fig. 4.2 Various elements of Minang ethnic community Source: Authors’ own

Minang 17%). Figures 4.1 and 4.2 show various ethnic community that the Javanese and Minang enterprises joined. These findings indicate that community related to familiness or cultural bond are dominant such as Ikatan Paguyuban Keluarga, Paguyuban Putra Lampung, etc.

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Testing for Hypothesis 2

For testing the role of network intensity on performance of ethnic enterprises (see H2a-H2d), a logistic regression was used as depicted in Table 4.7. We note that for the Hypotheses H2d (role of involvement) as stated is excluded due to multicollinearity problem. Hence, the H2d is rejected. The findings indicate that only two variables are significant, namely variety and frequency of the ethnic community for both Javanese and Minang enterprises. In detail, the Javanese remains to have significant results for variety and frequency while the Minang shows only variety is significant. The duration is not supported, giving H2a is rejected. High activities in the Javanese and the Minang enterprises brings better odds (Javanese ¼ 7.047; Minang ¼ 6.090; odds>1 – high is dominant) which contribute to good performance and give full support for the H2b. The findings also show the beta coefficient of the Javanesse is higher than the Minang ones (see significant Wald test ¼ 0.195 sig. at 95%). This result implicates that the variety of activities contributes more to better performance in the Javanese ethnic group compared to the Minang ones. For the frequency of network, the Javanese has 2.432 of beta value (sig. at 90%) with higher value odds (11.388; odds value>1; high value is dominant). It means the more frequent they participate in the ethnic community, the better the performance. In contrast, the Minang do not perceive the frequency as equally important as the Javanese in boosting the entreprise performance. The results confirm partial support for H2c (for the Javanese only).

Table 4.7 The results of Hypothesis 2 All (N=134) Performance b1 odds ratio 0.147 1.159 Duration 1.036** 2.819** Variety 1.001* 2735* Frequency 0.454 1.574 Role

Javanese (N=34) b2 odds ratio 0.065 1.069 2.002* 7.407* 2.432* 11.388*

Minang (N=100) Coef test b3 odds ratio b2-b3 0.276 1.317 1.807** 6.090** 0.195** 0.816 2.262 omitted 1)

Source: Authors’ own *p < 0.1, **p < 0.05, ***p < 0.01, ****p < 0.001 a The role variable is omitted due to it results in perfect prediction and the system recommends to delete to improve the result reliability. Since the variable is not significant, it is agreed to exclude the variable b The coef text is not undertaken due to the insignificant variable

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57

Discussion

This study aims to examine whether the performance of ethnic enterprises that join the ethnic communities is higher than that who does not. In addition, the dimensions of the intensity of the ethnic community network (i.e., variety of activities, duration of joining, frequency of attending activities, and roles/positions owned by the ethnic entrepreneurs) were also investigated in order to explore the level of roles. The findings show that the performance of ethnic entreprise different between the groups. The performance of ethnic enterprises joining the ethnic community is higher than that who does not. Among the four dimensions of network intensity, only the variety of activity and the attendance frequency affect both the Javanese and the Minang enterprises. The first finding confirms that by joining the ethnic community, the Javanese and the Minang ethnic entrepreneurs can gain the ethnic community knowledge easily and at a low cost. The knowledge will bring a good impact on firm performance. For example, an initiation to develop a new product could be a lot faster and lower sunk cost (Almeida et al., 2015; Katila & Ahuja, 2002). Next, the more variety of activities available in the ethnic community (e.g., cultural activities, social/charity activities, religious activities, sports activities, etc.) allows members to have many opportunities to exchange information and knowledge informally. The frequency of attending activities (often or not often) also matters. A high frequency of attendance indicates a higher interconnectedness between fellow community members so that the network density is getting stronger because everyone knows each other (Chaganti & Greene, 2002; Dana et al., 2019). The end of these two processes is the increased performance. In more detail on each ethnic group, the variety of activities and the frequency of attendance consistently affect the performance of Javanese ethnic enterprises. In contrast, only the variations of activities affect the performance of Minang ethnic enterprises. The frequency of attending community activities epitomizes a network’s density level (Chaganti & Greene, 2002). In other words, the Javanese ethnic entrepreneurs are proved to be inward-looking or focused on the ethnic community stability instead of sharing their focus on attending other activities in other networks in order to find new resources. Referring to Katila and Ahuja’s term (2002), the Javanese focus on conducting search depth using the existing knowledge in the ethnic community and maintaining its internal harmony. In contrast, the results of non-significant frequency of attendance and the significance of various activities of the Minang ethnic enterprises imply a tendency for the Minang ethnic group to build strong ties within the ethnic community and divide their focus to build new external networks. Considering these findings, the Minang ethnic entrepreneurs have a search scope orientation to explore new knowledge outside the ethnic community network (Katila & Ahuja, 2002). Fennema (2004) calls the ethnic communities with characteristics like the Javanese ethnic group as a bonding organization, while the Minang ethnic group refers to a bridging organization. In conclusion, the Javanese cultural values accentuate exploitation strategy, while the Minang groups seem to be more

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able to balance network exploitation and exploration or implementing ambidextrous strategy (Nofiani et al., 2021).

4.6

Conclusion and Future Research Agendas

This current study contributes empirically by investigating ethnic entrepreneurship with special reference to a developing country context (i.e. Indonesia), which meet the call for previous studies (Indarti et al., 2020; Verver et al., 2019). We conclude that a networking strategy, whether ambidextrous or not, is strongly influenced by the values or worldview that an ethnic group possessed. In other words, ambidexterity should not be hailed as the only strategy because the choices are very contextual-specific. The Javanese ethnic group is different to the Minang one in valuing their networking intensity, and vice-versa. As the nature of each ethnic community may differ due to its norms, values, and social networks; examining the networking behaviour of other wandering ethnic groups in Indonesia or other countries using similar dimensions of network intensity is one of relevant future research avenues.

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Chapter 5

Artificial Intelligence in the Telecommunication Sector: Exploratory Analysis of 6G’s Potential for Organizational Agility Seppo Yrjölä, Petri Ahokangas, Ahmad Arslan, Marja Matinmikko-Blue, Ismail Golgeci, and Shlomo Tarba

Abstract 6G (sixth generation of mobile communications) is one of the least understood future technologies from a management perspective, although the dynamics associated with it, like the internet of things (IoT), open service-based architecture (SBA) and Artificial Intelligence (AI) are increasingly visible in telecommunications sector. 6G envisions a highly interconnected future world where mobile connectivity is aimed at enhancing societal well-being and sustainability if managed properly. 6G will also considerably impact the agility of the organizations involved in providing different digital services by offering them an economical route to share and integrate various platforms, although it increases the management complexity of these platforms. To address this management complexity, AI has been referred to as the most viable tool for organizations to navigate the range of complex issues linked with platform sharing and integration, due to its potential for developing agility in both large and small organizations. Research on 6G started only a couple of years ago, and so far, most of the research on 6G has been undertaken from a technical perspective, with some recent studies analyzing some of the regulatory and business dynamics. To the best of our knowledge, no prior work (conceptual or empirical) has specifically attempted to untangle the link between AI and organizational agility development in the specific context of 6G. Our chapter is in response to these clear gaps in the literature, where we aim to

S. Yrjölä · P. Ahokangas · A. Arslan (*) · M. Matinmikko-Blue University of Oulu, Oulu, Finland e-mail: seppo.yrjola@oulu.fi; petri.ahokangas@oulu.fi; ahmad.arslan@oulu.fi; marja.matinmikko@oulu.fi I. Golgeci Aarhus University, Aarhus, Denmark e-mail: [email protected] S. Tarba University of Birmingham, Birmingham, UK e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 V. Ratten (ed.), Entrepreneurial Connectivity, https://doi.org/10.1007/978-981-16-5572-2_5

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undertake an exploratory analysis of 6G’s potential for the development of organizational agility in the telecommunications industry. Moreover, it is a pioneering work that future business and management scholars can build on while analyzing 6G’s management and implications in micro and macro settings. Keywords 6G · Agility · Artificial intelligence · Telecommunications sector

5.1

Introduction

It is an established fact that modern life’s economic and social aspects are increasingly data-driven, where continuous connectivity is a need globally (e.g., Pentland, 2013; Loukissas, 2019). Some scholars have gone even further in this context by arguing that near-instant and unlimited wireless connectivity is needed across physical, biological, and digital worlds (e.g., Mahmood et al., 2020). Specifically, the sixth-generation (6G here onwards) mobile communication network, aiming at deployment in the 2030s, has been referred to as a general-purpose platform that will utilize novel technology enablers such as man-machine interfaces, distributed computing, and artificial intelligence at the local clouds, multisensory precision sensing and data fusion, and actuation to control the physical world (e.g., Yrjölä et al., 2020b). In this context, it is important to highlight that developing products, applications, and services for the future digitized society in the 6G era requires a multidisciplinary approach and a re-imagining of how we create, deliver, and consume network resources, data, and services. The need for 6G is increasingly becoming visible because the monolithic telecommunications infrastructure of today that is based on proprietary hardware and closed architectures do not provide the flexibility, scalability, and degree of automation that the telecommunication industry needs to stay competitive and profitable (e.g., Yrjölä et al., 2020b). Moreover, converging digitalization across physical industries is increasing customer demand for high-performance networks, with trends towards open interfaces, virtualization, and cloud-native software. This technological development is expected to transform mobile business beyond connectivity towards cloud-based delivery, network-as-a-service business models, and software-led value creation across telecommunication, internet, enterprise, and industrial domains (e.g., Yrjölä, 2020). Technical studies done on 6G networks have highlighted that this network model will be designed, deployed, managed, and put into the market not only by the traditional mobile network operators but new stakeholders like local microoperators, cloud operators, and resource brokers (e.g., Yrjölä, 2020; Yrjölä et al., 2020b). It is essential to highlight that as the evolution of the economy and society continues towards data and service-driven networks, the importance of non-technical aspects like trust is expected to increase further in this context (e.g., Steedman et al., 2020). It has further been stressed that for the 6G network, communication service providers and relevant enterprises will require not only that all products and services

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are designed to be secure and private from the start, but also that vendors are to be trusted (Mocanu et al., 2020). The role of governments and other regulatory bodies (including the European Union) in ensuring this trust and data security is also critical to consider as it would significantly impact the development and application of 6G network. Moreover, stemming from these discussions, ensuring national sovereignty has gained importance as a driver for 6G development and its adoption (Moerel & Timmers, 2021). A key peculiarity of 6G is the increased visibility and importance of artificial intelligence (AI), which is linked to cloud-native computing, resulting in superior performance and flexibility (e.g., Shafin et al., 2020). Three principles can be used to understand advanced technologies: combining, recursiveness, and phenomena (Arthur, 2009). In 6G, AI will be combined in several functional domains. Creating a system that transforms how data is collected, shared, and analyzed in real-time will create strong drivers for future value creation and capture and introduce novel stakeholder roles that transform businesses. AI also exhibits modular structures that may be developed independently, potentially contributing to system-internal conflicts between modules that have different design objectives, thereby creating recursiveness that may influence perceived user value and produce serious privacy and ethical concerns, e.g., over the sources, location, and use of big and small data. Consequently, in the future 6G context, the ubiquitous near real-time wireless connectivity will be shaped by the growing societal requirements for inclusivity, sustainability, and transparency (Hexa-X, 2021; Yrjölä et al., 2020a). The datadriven learning at the heart of AI utilization for creating services will have its impact on the phenomena emerging, especially from big data collected from various 6G-enabled systems, platforms, mobile devices, things, and open data. 6G will be able to utilize big data, meaning large volumes of data that is transmitted at high velocity from a variety of data sources (McAfee et al., 2012). For the combination of big data and AI, the challenge is to ensure the veracity so that the 6G data sources represent the reality (Baesens et al., 2016). The pervasive influence of service-driven logic in 6G means to meet the diverse needs and preferences of each user or specialized 6G sub-network, whether human, physical machine, or digital twin. Thus, avoiding any data biases or challenges of representativeness in creating a learning 6G system is crucial. Up to date, the majority of all 6G research has been with a technology focus. Keeping in view the scant available research on 6G’s potential for the larger society, our chapter undertakes an exploratory assessment by focusing on different dimensions and aspects of the 6G networks from a multidisciplinary viewpoint. It is one of the first studies to undertake such an analysis (at least to our knowledge) and hence, contributes to multiple literature streams, including 6G and AI research from business and technological perspectives, as well as futuristic entrepreneurship in this sector linked to agility. As 6G is envisioned as the connectivity backbone for future digital society, its impact potentially resonates with over all digital businesses. Our chapter is also the first study to link 6G to sustainability dynamics as well as geopolitics in this context. Hence, the current chapter is expected to be a pioneering

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work on which future business and management scholars can build on while analyzing 6G’s management and implications in both micro and macro settings. The rest of the chapter is organized so that the next section offers a discussion linking organizational agility and artificial intelligence. After that specific discussion on the practical manifestation of these aspects in 6G context is presented. The chapter concludes with the presentation of implications, limitations, and future research directions.

5.2

Artificial Intelligence and Organizational Agility

There are different definitions and conceptualizations of AI in different streams of literature. However, in simple words, AI combines the science and engineering of making intelligent machines that significantly influence organizations, their performance, and the economy at large (e.g., Balas et al., 2020). Scholars have stressed that AI results in developing intelligent machines (including robots) that can understand the environment in which they operate and take required actions rationally (e.g., Marwala & Hurwitz, 2017; Balas et al., 2020). There are multidisciplinary roots of AI as a research field, and it has been argued that the fundamental disciplines important in this context are engineering, philosophy, mathematics, cognitive science, economics, neurosciences, and linguistics (Solomonoff, 1985; Helo & Hao, 2021). A key goal of AI systems is to mimic human behavioral patterns and solve real-world problems (Davenport & Ronanki, 2018). In order to develop these mimicking capabilities, philosophy contributes to the main component of how a machine or a physical system can learn and operate based on a set of rules (e.g., Joshi, 2020). In this context, mathematics provides a formal representation of these rules designed based on algorithms and probability, while cognitive science includes studies of how humans think and act, and when applied in AI, it shows how computers think and learn different things (e.g., Skansi, 2018). Linguistics focuses on how language and thinking are related, while neuroscience provides the study of brain functioning and how brains and computers can be similar or dissimilar (e.g., Gouveia, 2020). From an engineering and computing perspective, AI represents a significant departure from the traditional human-machine (computer) interaction, where a machine (including computer) did what it was told to do (e.g., Helo & Hao, 2021). AI-driven machines can be trained and have the ability to learn from a massive amount of given historical data (i.e., big data analytics) and find a pattern on their own, define goals (Birkinshaw, 2020), and then make decisions and find solutions that appear rational to the machine’s understanding, similar to a human worker (e.g., Jarrahi, 2018). Consequently, the ethics of quantification (Sareen et al., 2020) and ethics of AI (e.g., Jobin et al., 2019) have emerged as novel topics to add value to all fields relevant to developing and employing AI (Dignum, 2018). One of the key tenets of AI is that it enables solving complex problems relatively quickly and dynamically enhances innovation (Adams & Hamm, 2010; Jarrahi, 2018; Joshi, 2020). It has a wide range of applications, such as driverless cars,

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business processes, security, manufacturing, and trade (Davenport et al., 2020). It is a key overarching technology that drives new innovations and provides large-scale solutions to problems that seemed unfathomable in past decades. As such, the profound potential of AI has widely been studied, and strong arguments in its role in the future of businesses and societies have been discussed (e.g., Ming-Hui & Roland, 2018; Nica et al., 2019; Davenport et al., 2020; Di Vaio et al., 2020; Arslan et al., 2021). In turn, organizational agility is defined as the organizational capability to efficiently and effectively redeploy/redirect its resources to value-creating and capturing activities in response to external change (Teece et al., 2016). As such, organizational agility is particularly relevant in times of unprecedented pace of change within and across organizational boundaries (Bouguerra et al., 2019). It enables firms to prosper in hypercompetitive environments and amid unprecedented levels of technological change (Overby et al., 2006; Naughton et al., 2020). Key dimensions of organizational agility are alertness, responsiveness, flexibility, and speed (Gligor et al., 2013, 2019). In the context of organizational agility, task automation enabled by AI could speed up organizational processes and enhance organizational agility (Davenport et al., 2020). AI also reduces the cost and the time span of forecasting processes (Agrawal et al., 2018), which could foster alertness and responsiveness dimensions of agility (Gligor et al., 2013). Furthermore, AI’s critical role in processing and leveraging big data and integrating organizational functions (Davenport & Ronanki, 2018) could bolster organizational visibility that underlies key agile capabilities in the organization (Gligor et al., 2019; Naughton et al., 2020). Likewise, AI speeds up organizational learning and decision-making (Mnih et al., 2015) and can support managers to be resolute in their decision-making and implementation that are found to be further enablers of agility (Gligor et al., 2013). Thus, AI may serve an assisting (improving efficiency), augmenting (enabling otherwise impossible tasks), or autonomous (creating and deploying systems that act on their own) role for organizational agility (Garbuio & Lin, 2019). Kaplan and Haenlein (2019) identified three levels of AI maturity. The first level of maturity is based on machine learning (ML), meaning that its impact on organizations is limited to specific application areas since machine learning cannot easily be replicated to new areas of application without significant changes to the algorithms. The second maturity level extends AI to several application areas, thereby bringing in simple reasoning without human intervention. The third level includes a fully self-conscious system that interconnects creativity and general wisdom, making humans redundant. Beyond redundancy, AI has been attributed to create a technological singularity in the future: “after the intelligence of AI passes the human-level, its entire future will be perceived as a single point, since it will be beyond our comprehension.” (Wang et al., 2018). While AI may unsettle organizational procedures at the initial stages of its adoption and play an episodic obstructing role in organizational agility, it is likely to improve organizational agility in the long run, given the potential benefits mentioned above. Accordingly, we expect, at an overall level, AI to have a positive association with organizational agility.

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Practical Manifestation of AI and Organizational Agility in 6G Context

To explore and make sense of AI’s role in 6G, and the possible impact of this combination on organizational agility, it is important to notice that the 6G mobile communications platform will not be developed in isolation, but as a continuation from 5G where the current enhanced mobile broadband (eMBB) services will be further extended. For 6G, the work on defining new service classes is only about to start in the future, but already now, they can be expected to continue having features evolving from the 5G services (eMBB, URLLC, and mMTC). For example, these developments could include mobile broadband reliable low latency communications (MBRLLC) to converge eMBB and URLLC for providing, e.g., extended mixed reality services; massive ultra-reliable low latency communications (mURLLC) to converge URLLC and mMTC for smart factories’ robots and cobots (collaborative robots); human-centric services (HCS) for facilitating empathic and haptic communications; and multi-purpose services (MPS) that comprise control, location, sensing, and specific performance requirements of, e.g., the energy systems of the future (Saad et al., 2020). The world’s first 6G White Paper identifies sustainability as a key driver for 6G development and highlights merging different services, such as sensing, imaging, and positioning, with the communication service to provide totally new applications (Latva-aho & Leppänen, 2019). Similarly, the European Hexa-X project envisions the “unification of the physical, digital and human worlds” (Hexa-X, 2021, p. 29) and that in 6G, communications, positioning, imaging, and sensing will converge, also with ML and AI. This envisioned unification and convergence point out the challenges of mapping the relevant scale and scope for our exploratory analysis. Thus, while the research on 6G is still in early phases aiming at first network deployments around the year 2030, two major drivers are already clear (Latva-aho & Leppänen, 2019): sustainability (Matinmikko-Blue et al., 2020) and AI (Ali et al., 2020).

5.3.1

United Nations’ Social Development Goals Driving 6G Development

There is global consensus in the 6G research and development community that the United Nations Sustainable Development Goals (UN SDGs) should be taken as the starting point for defining the future 6G networks as both are aiming at the same year 2030 (Latva-aho & Leppänen, 2019; Matinmikko-Blue et al. 2020). Existing and future wireless systems including 6G will play a major role in helping various vertical sectors, such as industry, energy, health, and their public sector counterparts such as smart cities, meet the individual targets defined in the UN SDG framework. In parallel, the sustainability of the wireless networks themselves needs to be a key

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design criterion in developing these systems. This calls for the development of new key performance indicators (KPIs) that take into account sustainability factors in future mobile communication networks. Consequently, KPIs related to 6G networks are being extended to consider value-related aspects, resulting in new key-value indicators (KVI), the definitions of which are still at an early stage. The UN SDGs and 6G influence each other in a multitude of ways. Authors in (Matinmikko-Blue et al., 2020) identified a threefold role for 6G as (1) a provider of services to help in achieving the UN SDGs, (2) an enabler of measuring tools for data collection to help with the reporting of indicators, and (3) a reinforcer of a new ecosystem to be developed in line with the UN SDGs. The UN SDGs influence 6G design by driving the development of future 6G networks to be the backbone of future society to help in meeting the specific targets of the UN SDG framework as defined by the existing indicators. The UN SDGs influence 6G in design by making the 6G networks a measuring tool to collect data for the reporting on the achievement of the sustainability targets through their indicators. The UN SDGs also influence 6G for design through the development of the 6G systems in accordance with the UN SDGs, covering the societal, environmental, and economic sustainability perspectives.

5.3.2

The Impact of AI on Organizational Agility via 6G Use Cases

Traditionally the context of mobile communications has been approached from regulatory, technological, and business perspectives, keeping the mobile network operator as the focal player (Ahokangas et al., 2013). In this approach, regulation has been considered as the delimiting factor, technology as the enabling factor, and business as the realizing factor. However, as 5G is already an enabling technology that has been considered to disrupt the telecommunications sector; 6G is expected to bring further radical changes (Iansiti & Lakhani, 2020). To start with, we argue that 6G and AI can be considered as closely related general-purpose technologies (Bresnahan & Trajtenberg, 1995) characterized by their pervasiveness, technological dynamism, and innovation complementarities; radiating their impact on downstream and upstream sectors (Bekar et al., 2018); and having a transformational effect on the society at large (Hogendorn & Frischmann, 2020). As with all emerging technologies, there are numerous enabling technologies connected to 6G and AI that may impact organizational agility. Although there is little point to enlist them all, some of them include human-machine interfaces that allow for novel ways of interacting; virtual, augmented, and extended mixed reality that facilitate extreme user-experience; and ubiquitous distributed computing that refers to bringing cloud services to the edges of the mobile network. Also, distributed ledger technologies that enhance the security and privacy of communications; and context-aware things and systems that may support in achieving environmental or

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societal sustainability—are some other associated facets. However, a more fruitful approach is to look for use cases that can be identified for future AI-assisted, AI-augmented, and AI-autonomous 6G as antecedents for organizational agility (Saad et al., 2020; Viswanathan & Mogensen, 2020; Yrjölä et al., 2020a; Hexa-X, 2021). The following list of use cases shows some examples or these antecedents but cannot be considered exhaustive: • The convergence of increasingly maturing AI and 6G, i.e., the cost-efficient sustainable ubiquitous near-instant unlimited mobile connectivity aimed to be reached by 6G, encapsulates the generic characteristics potentially impacting organizational agility via new services—such as various AI-agents and assistants—that help humans in fundamental ways in all sectors and at all levels of analysis. • Up to the early stages of 5G, humans have been by far the largest user group of mobile communications services. However, a growing number of increasingly more autonomous things, robots, cobots (collaborative robots), vehicles, and drones—also swarms of them—and communities can be considered as the users of novel 6G services. As the service needs of different types of users in different sectors of society vary, 6G needs to become more versatile and adaptable, e.g., for the needs of different verticals such as industry, logistics, or agriculture. It has been claimed that the true growth potential of 6G lies not in consumer services, but in 6G’s capabilities to serve industries and thereby boost network effects and novel productivity gains at the societal level. • For humans, multisensory applications and services such as virtual, augmented, or extended mixed reality (VR, AR, and XR, respectively), are leading the way to holographic communications and immersive telepresence. These provide novel ways of working that connect the physical, digital, and virtual worlds by 6G. Also, at the other end of the communications continuum, haptic and empathic communications may enable AI-enabled work in radically new ways in augmenting human abilities to perform tasks and interact with others. A general observation from this continuum is the diminishing role of smartphones when communications will be embedded with different systems and artifacts such as wearables. • The value of privacy, security, and safety is increasing not only for humans in daily communications but also for ensuring that things, robots, and autonomous vehicles can be used safely and those critical infrastructures are secured. For ensured privacy, security, and protection against malicious cyber-attacks and -crime, 6G may offer (local) trust zones for homes, communities, smart factories, healthcare, smart cities, and different kinds of smart environments (e.g., roads for autonomous vehicles), even related to smart communication surfaces of the future. • 6G facilitates massive dynamic twinning, meaning the creation and existence of online and real-time digital twins (DT) of the physical reality in cases such as industrial design, smart factories or smart cities. It is expected that in the future,

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digital twins will be used, e.g., for environmental management and supporting the creation of situational awareness. • Climate change and biodiversity are two of the drivers emphasizing sustainable development, both societally and environmentally. In the societal context, trustworthy e-health services and institutional, local mobile coverage in schools and hospitals are examples of sustainable 6G services. In the environmental context, harnessing 6G to monitor the earth via bio-friendly and energy-harvesting sensors over 6G connectivity could help to create systems that monitor the status of the environment. • The first steps of transhumanism have already been taken, and in the future, 6G connectivity and body-area networks can be used to communicate and connect implanted biosensors that help to merge humans and machines together, providing humans with new capabilities. The digital (twin of) me, enabled by 6G, is one of the future visions that may impact all organizational levels. Technically, the 6G system will employ AI/ML in the air interface and optimization of radios, cognitive spectrum use, and context awareness. Zero human touch network optimization based on the traffic pattern will be applied extensively. In addition to radio applications, AI/ML will become essential for the end-to-end network automation allowing for dynamic orchestration and adaptation of network resources according to changing service requests. This will reduce the deployment time of new services and mitigate of failures while significantly reducing operational expenditures.

5.3.3

The Impact of AI and 6G on Organizational Agility at Different Levels of Analysis

The antecedents of organizational agility listed above evidence of the technological convergence, divergence, and emergence envisioned for 6G. In parallel, these use cases indicate a move from the exploitation of technology to exploration with new technologies, potentially changing the way how organizational agility will be achieved and managed (Fountaine et al., 2019). This raises the question what are the levels or units of analysis that we should pay attention to when looking at 6G’s outcomes and impact on organizational agility. Yrjölä et al. (2020a, b) provide a generic framework that comprises user, business, sustainability, and geopolitical levels of analysis on organizations. The following discussion builds primarily on inputs from Yrjölä et al. (2020a, b), Saad et al. (2020), and Hexa-X (2021) visions.

5.3.3.1

User-Level Impacts

At the user level, the impact of AI in 6G on organizational agility can be considered as an enabling factor. For humans, the 6G services will enable new working

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processes that connect the physical, digital, and human worlds, enabling remote work to extend beyond the current digital-only work content. Extreme experience built on virtual, augmented, and extended reality will be possible anywhere; telepresence may become the norm instead of the pre-COVID-19 “in real life” approach, supporting thus the distributed organization, learning, collaboration, and teamwork. Merged cyber-physical work contexts, mixed reality co-design and collaboration, experience before prototyping, and all kinds of immersive experiments, e.g., via haptic and affective/empathic communications, will enable using new senses and feeling, experiencing, and manipulating objects remotely. New human-machine interfaces, brain-computer interaction, embedded and wearable devices and intelligent surfaces will be used to enable the new work content and the extension of the work context. Also, the extended work context may support creating a safe and efficient work environment. All these examples contribute especially to environmental and societal sustainability that are expected to be the core values driving work but also consuming of services by the prosumers of the future. The starting point for the future 6G- and AI-enhanced work and organizational agility will be trust and trustworthy communications that also enable the inclusion of AI-assistants, robots/cobots. Moreover, different kinds of autonomous machines— including vehicles and drones, will also enhance organizational agility. Privacy, security, and safety as human rights need to be highlighted in future AI-enabled 6G, as there is also the risk of loss of privacy and the emergence of a control society. As a new phenomenon, autonomous AI-assistants, robots/cobots, and vehicles and drones and communities can be considered as new types of users of 6G. The key question for the emergence of this kind of new ecosystem of users will be how the control of these new users is organized in a human-centric way as the big, and small data required, consumed, and generated in future 6G may be owned, governed, and regulated differently depending on country or business sector.

5.3.3.2

Business-Level Impacts

The pervasive nature of AI and 6G has the potential to change businesses fundamentally in all sectors of the economy. However, different industry verticals with decentralized manufacturing are currently seen as the primary beneficiary of the novel flexibility, efficiency, and quality improvements that AI and 6G may bring about, especially when ubiquitous, unlimited, and near-instant connectivity is available for things, machines, and robots applying circular and sharing economy principles in digital twins. In addition, Industry 5.0 facilitates the long tail of mass customization, localization, and closer interaction with the users (e.g., Ali et al., 2021). Digital Trust, enabled by quantum computing and distributed ledger technologies like blockchain and smart contracts, will provide businesses a secure and predictable basis for digital society with world-class cybersecurity, public safety, and fintech. In addition, when the user-level impacts are harnessed in various business domains, we may expect businesses to gain benefits following the

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4C-paradigm of mobile communications: changes in connectivity services enable improvements in data content services and context awareness services, creating a commerce platform ecosystem in which different business models and business ecosystem roles transcend. The focal point in that expected change of businesses is the new 6G connectivity provided by future mobile network operators and especially local private network operators, the number of which is expected to grow fast. Currently, there are typically a handful of mobile operators (providing 2G–5G services and IoT network services) per country, but based on a trend started already in 5G, it is expected that in 6G millions of private local small scale operators will emerge in the future to serve the specific needs of industries, smart cities, communities (e.g., in the context of future smart grids) and different kind of campuses such as hospitals or universities. This trend toward localization in mobile communications will facilitate the convergence of different connectivity and data platforms (Ahokangas et al., 2021) and the emergence of new kinds of edge cloud and service/resource broker and integrator roles in the future business ecosystems. Also, the over-the-top (OTT) internet content providers and various cloud infrastructure providers will play a role in this localization of services. The fundamental first-order changes in the value creation and capture processes and corresponding value configurations—i.e., business models—in platform ecosystems comprising connectivity, content, context, and commerce services discussed above will have a second-order impact on all sectors relying on digitalization. The challenge will be to ensure that customers in different locations, served possibly by millions of different operators, can consume the services offered. For platform owners, the question will be how to open the platforms, and with what kind of business models, easily for complementing actors (complementors). The question for complementors will be how to utilize all kinds of platforms flexibly in parallel, and with what kinds of business models, in service provisioning toward extreme customer experiences. Consequently, from a business model perspective answering the questions of scalability to deal with the dynamism of the businesses, replicability to deal with entries to new markets or the creation of new markets, and economic, environmental, and societal sustainability of services will become crucial. Thus, the change from closed business models toward more open and mixed business models will continue, highlighting the role of coopetition, ecosystems-thinking instead of traditional supply- and demand-based platforms, and sharing economy strategies instead of traditional competition. The key challenge at the business level will be how to achieve legitimacy for the combination of AI and 6G. Disruptive innovations frequently suffer from low legitimation, exhibiting a low legitimation level due to associated high uncertainty (Snihur et al., 2021). At the same time, legitimation of the innovations is necessary to be able to create and capture value from the innovations (Biloslavo et al., 2020). In this concern, innovation-related disruptions have been found to cause regulatory, incumbent, and social pushbacks, calling for ecosystem-level activities to ensure successful commercialization across different segments and markets.

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Sustainability-Level Impacts

The United Nations’ Societal Development Goals (UN SDGs) have emerged as the key source of impact for developing future 6G (Matinmikko-Blue et al., 2021). However, in different markets, the starting points for using UN SDGs’ are different. Traditionally, in addition to the economic aspect, the environmental aspect has been considered in the development of telecommunications in the form of energy and resource efficiency (Zhang et al., 2020) as green radios. Increasingly, societal values have also been considered relevant for the 6G debate (Matinmikko-Blue et al., 2020). The different sustainability perspectives in 6G and AI should be considered in parallel as balanced and uncompromised by the developers and users of future 6G: environmental sustainability should not sacrifice economic and societal progress, societal values should not compromise economic and environmental sustainability, and economic sustainability should not cause negative societal or environmental consequences (Miceli et al., 2021). The types of sustainability should be considered over the lifecycle of all future mobile communications technologies from their development to their deployment. In the deployment phase, the sharing economy principles will increasingly be applied in the domains of the spectrum, infrastructure, and resource sharing. Also, it has been expected that AI-enabled 6G will increasingly be used to monitor the natural environment. From the perspective of integrated sustainable development, the emerging, enabling, and embedding nature of technology will be increasingly more important to consider (Kapoor & Teece, 2021). There will be several initial variations of the 6G technology; therefore their lifecycle needs to be considered from the beginning to deal with the uncertainties associated with them. As 6G and AI technologies will be commercialized as general-purpose technologies in multiple application domains, they might lead to significant societal outcomes and be placed with requirements for complementarity and extendibility. Thus, in developing these technologies, the business models and business ecosystems where these technologies will be commercialized need to be carefully considered to deal with the potential variations stemming from the use of 6G for various purposes.

5.3.3.4

Geopolitics

Geopolitical developments have been recognized influencing future telecommunications from economic, societal, and environmental perspectives. At the national level, concerns over sovereignty regarding digital technologies have already become an issue (Moerel & Timmers, 2021), especially in the context of critical infrastructures. The global competition of the US, China, and Europe in the AI and 6G contexts may lead to the creation of technology blocks (Yrjölä et al., 2020a; Feijóo et al., 2020) that may negatively influence the scalability, replicability, and internationalization of the AI-based 6G services due to technological fragmentation, compartmented innovation ecosystems, techno-nationalism, and market protection.

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Although all the three key geopolitical groups will be faced with the consequences of COVID-19 pandemic and eventually climate change, they run different policies. The market approach of the US, the rights-framework approach of the EU, and the government-push policy of China (Feijóo et al., 2020) are backed by differing values and legislations, influencing not only the traditional spectrum allocation, regulation, and harmonization decisions but also competition and innovation policies and especially the privacy, security, and consumer rights related decisions. In the same vein, international standardization of the 6G technologies may also slow down. The international spillover effect risk of data and service colonialism is already a reality in many consumer services and may in the future extend to services offered to different industrial verticals. Therefore, organizations participating in the development of AI and 6G will need to consider and foresight emerging geopolitical trends and risks carefully.

5.4

Implications, Limitations, and Future Research Directions

As the above discussion indicates, frameworks needed for making sense of the complexities of how 6G and AI impact organizational agility are just evolving. From the research perspective, six themes may be recognized to influence organization agility at large: trust and legitimation at the core of interaction, profiting from innovation, APIfication and rise of the developer, sustainability, and the technological and economic singularity as the potential outcome of the implementation of AI. Creating trust in the context of 6G and AI can be considered a bottom-up approach strategy to achieving legitimacy. To achieve legitimacy, i.e., be considered appropriate and become accepted (Suchman, 1995) in its context, the developers, users, and regulators of future 6G must consider it trustworthy. Innovations in general suffer from low legitimacy (Snihur et al., 2021) and the combination of AI and 6G doubly so as the combination may potentially raise ethical questions related to their data sources, access, ownership, and usage. A research gap identified in this is the poorly understood legitimacy of algorithms, especially AI. As AI is capable of learning from the data, improving the creation and capture of value on the platform, making decisions, and acting based on the data, the question arises whether AI, and not only the designers and users of it, can be held accountable for its actions and how legitimate these actions are in the first place (Gregory et al., 2020). Also, extant research claims that the relationship between a platform’s AI capability and perceived value is moderated by platform legitimation, data-stewardship and usercentric design, indicating that a wider perspective is needed for understanding legitimacy and the processes of legitimation in 6G. Thereby directing attention to combination possibilities stemming from different technologies (AI included), recursiveness stemming from tensions between different technology modules being

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developed independently, and phenomena emerging from data (Gregory et al., 2020), is critical. A new trend recognized within telecommunications is the “APIfication and rise of the developer”. “API-fication” (application programming interface) paradigm refers to the confluence of a few different trends. First, software is becoming ubiquitous. Second, the role of cloud computing and microservices is increasing in importance. With APIs, software functionality becomes like modular—stacking software modules together becomes easy, enabling to quickly build new software solutions. APIs allow to effortlessly continue to develop a solution by adding, changing, or removing bricks. This enables more agility and productivity than traditional, monolithic applications have provided. APIs allow to rethink the “theory of the firm”—the nature and structure of a company—including how the company is organized internally and the boundaries between the company and the market. APIfication breaks economies of scale and end-to-end platforms, which will be more easily replaced by best-of-breed solutions. APIs on one hand change how software is consumed. On the other hand, it changes how software is developed by allowing companies to mix internal and third party components when creating an offering. It is the key driver for platform play and decentralization. Stemming from APIfication, digitalization and converging 6G and IA, the role of the developer becomes increasingly important. Development talent is a scarce resource—most companies are struggling to attract the talent they need. Shift to the cloud has changed how enterprises purchase software. Developers have more control than before over what is being purchased. Developers are increasingly getting a seat at the table in major technology decisions. This has made developers a key target for sales efforts: many companies build their product to make it easy for developers to try them out. Once they try and get hooked, the commercial discussion is elevated to decisionmakers. Building a developer ecosystem is a pre-requisite for success for many businesses, and they are shifting their expensive top-down go-to-market motion to bottom-up product-led growth, where customers can try out the product easily and expand usage over time. Although sustainability has already been raised as a key driver for 6G (e.g., Matinmikko-Blue et al., 2021), future research is needed on multiple perspectives that link 6G, AI and related environmental and societal sustainability aspects. For example, research on the KPIs and KPIs role for developing and utilizing future 6G are urgently called for. The sense of community created by 6G technology and the ability to directly collaborate with others enables humans to participate and act in society in an unprecedented way. Co-evolution of human capabilities and intelligent 6G and AI technologies and how people participate and collaborate in the shaping and co-creation of the digital futures is taking place as part of their everyday lives and practices at work and leisure time. To make this possible, it is essential to consider whether users have real access to these services: that they have the needed devices and know how to use those and the available services. Furthermore, there is a serious need to consider also non-users and the reasons for exclusion, by their own choice or, e.g., for an external reason. A deeper understanding of technologies and related development and experimenting skills such as programming also further

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enhances the users’ possibilities to take an active role in the ecosystem and make and shape technologies for their personal needs. This enables the users to evaluate and reflect on the technologies and their role in the user’s own life as well as more widely in the society: Who benefits from technology or service use, and how? Who experiences value? What is the real price and is it worth paying? Finally, whether 6G and AI can be considered as general-purpose technologies, remains an open question. The differentiation between discrete, enabling, and general-purpose technologies helps clarify how to profit from technological innovations and their combinations, both privately and societally (Hogendorn & Frischmann, 2020). How firms can profit from enabling and general-purpose technologies is considered different from that of profiting from more narrowly applicable technologies (Gambardella et al., 2021)—broad applicability leads to difficulties in value capture for the innovators and raises concerns regarding the dominant designs for up-and downstream sectors, the strength of the appropriability regime to protect intellectual property rights in these sectors, and the availability of complementary resources. However, the question emerges how general-purpose technologies commercialization and business models in the combined context or 6G and AI could be. Of specific importance in this regard may become the tethering logics applied to these technologies as 6G provides opportunities to bring new resources into the domain of continuous network connection on both demand and supply sides of 6G services. This tethering may be of physical (via the infrastructure/platform), virtual (via devices or data), or legal nature (Hogendorn & Frischmann, 2020). Tethering also raises the question of regulation, as without regulation, different stakeholders may discriminate against each other in competitive situations. As the consequence of the convergence of data and connectivity platforms in the future, regulatory challenges will become increasingly more complicated. During recent years, discussions on whether AI’s utilization leads to technological and economic singularity and the potential redundancy of humans (e.g., Arslan et al., 2021) in value creations and capture have been raised, as AI matures and develops from mere calculation via computerized control and production toward computerized innovation (Nordhaus, 2021). However, AI needs 6G connectivity to reach the efficiency improvements, immersion, and rapid technological change envisioned for the singularity. Both demand and supply-side “tests” have been developed to evaluate whether singularity is really approaching, also using data from the telecommunications sector as evidence. These discussions resonate with the profiting from innovation research with their focus on both demand and supply-side phenomena and having reflections on both down- and upstream sectors around 6G and AI. Although being at least to some degree speculative, these pieces of research point out to look at the phenomena around 6G and AI from multidisciplinary perspectives. Our chapter has limitations as well like any other academic work. Firstly, it is a descriptive piece, where the discussion is based on existing research and secondary sources. Therefore, lack of primary data can be considered a limitation. However, keeping in view the lack of research on this topic and its newness, our chapter has the bases to offer a starting point for future studies to explore different aspects

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highlighted here in detail in different empirical settings. Another limitation can be the diversity of topics discussed in the chapter while referring to digital business and entrepreneurial possibilities. However, due to the current chapter being a pioneering work describing the potential of 6G for organizational agility, it was necessary to refer to all these aspects. The future studies can build on our chapter and analyze both macro and micro business dynamics associated with 6G, in detail, and in different contexts.

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Chapter 6

From Shaping of Pottery to Shaping of a Safe Tourism: The Case of the Artisanal Routes of Barcelos Jéssica Ferreira , Bruno Sousa and Cátia Macedo

, Francisco Gonçalves

,

Abstract In 2020 the Covid-19 pandemic caused tourism to fall into its worst crisis ever and travel to be put on hold, the year 2021 brings a new lease of life to tourism and a new hope of social and financial reconstruction for many tourist destinations. In the tourism reconstruction process, destinations try to show that they are able to receive tourists by practicing safe tourism. Considering Portugal as a safe country, the tourist offer is dedicating itself, through several strategies, to the readjustment process of its products, such as the artisan. The municipality of Barcelos is currently, in the north of Portugal, one of the territories with the most artisans, distributed in

J. Ferreira (*) IPCA – Polytechnic Institute of Cávado and Ave, Barcelos, Portugal IGOT – Lisbon University, Lisbon, Portugal UNIAG, Viana do Castelo, Portugal e-mail: [email protected] B. Sousa IPCA – Polytechnic Institute of Cávado and Ave, Barcelos, Portugal Campus do IPCA – Lugar do Aldão, Vila Frescainha (São Martinho), Portugal University of Minho, Braga, Portugal CiTUR, Coimbra, Portugal e-mail: [email protected] F. Gonçalves IPCA – Polytechnic Institute of Cávado and Ave, Barcelos, Portugal Campus do IPCA – Lugar do Aldão, Vila Frescainha (São Martinho), Portugal University of Aveiro, Aveiro, Portugal Researcher in GOVCOPP, Aveiro, Portugal e-mail: [email protected] C. Macedo IPCA – Polytechnic Institute of Cávado and Ave, Barcelos, Portugal Univeridad de Vigo, Vigo, Spain © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 V. Ratten (ed.), Entrepreneurial Connectivity, https://doi.org/10.1007/978-981-16-5572-2_6

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various artisan productions, such as pottery. The Figurado of Barcelos, a certified artisan product, is currently one of the largest pottery’s artisan productions in the municipality, distinguishing itself from any other production due to its unique characteristics. In this perspective, this study aims to understand and analyse the process of shaping the tourism product of the Barcelos artisanal route, to the new demands implied for a safe tourism. For this, a qualitative study will be implemented, through semi-structured interviews with craftsmen of the Barcelos artisanal routes and the regional artisan promotion entities. Living a phase of uncertainty, this theme aims to analyse important and central perspectives for the current tourism development, looking to somehow boost and enhance the territorial craft capital. In an interdisciplinary perspective, the present manuscript presents inputs for tourism and artisans management. At the end, guidelines for future work will be presented. The present chapter finds can be used for future research, acting as a basis for empirical studies. Keywords Artisans · Barcelos · Covid-19 · Cultural tourism · Safe tourism

6.1

Introduction

The World Economic Forum’s Tourism Competitiveness Report 2019, rating 140 countries, considered Portugal 12th in relation to the safety offered to tourists. The analysis parameters for Safe Tourism in 2021 have been changing and shaping to the new reality of the Covid-19 pandemic. If in 2020 this pandemic caused tourism to fall into the worst crisis ever and travel was put on hold, the year 2021 brings a new breath to tourism and a new hope of social and financial reconstruction for many tourist destinations. According to the Travel Pulse website, Portugal is part of the list of 18 safest places to visit in 2021, which emerges a new encouragement to tourism products. In another reference, the European Best Destinations aimed to promote culture and tourism in Europe, publishing a list with the safest European destinations to visit, always respecting the current circumstances and restrictions, in which the tourist destination Portugal was highlighted. In this perspective, we understand the relevance and need to study the tourist destination Portugal, as well as all its potential, directing the focus of study to the territory’s Craft Capital. The Barcelos’ Municipality is currently, in the North of Portugal, one of the most artisan territories, distributed by several artisan productions such as pottery, figurines, traditional ceramics, embroidery and weaving, woodwork, ironwork and tinwork and other arts such as leatherwork and contemporary crafts. This region is a territory with a very strong cultural and ethnological heritage due to the variety of arts and crafts, of which pottery stands out for its importance, specifically the Figurado (clay pieces representing various figures, such as mystical figures, people or even saints). The Barcelos’ Figurado, a certified artisan product, is currently one of the largest artisan productions in the municipality, distinguishing itself from any

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other production due to its unique characteristics. In this perspective, this study aims to understand and analyse the process of shaping the tourism product of the Barcelos artisanal route, to the new demands implied for safe tourism. As the artisan is a product of excellence that makes Barcelos the Artisan Capital of Portugal, it is understood as the main focus the study of its artisan routes, looking to understand: what are the damages and impacts caused by the pandemic; what are the strategies to share a safe tourism; and what are the main limitations and barriers in the sale of the artisan tourism product. To get to the necessary answers, a qualitative study will be implemented, through semi-structured interviews with Craft People of the Barcelos artisanal route and with regional artisan promotion entities. These research methods will be implemented at the moment of adapting the issues of safe accessibility, having as a principle the real analysis of the failures and needs from the perspective of the tourist offer (i.e. the Craft). Experiencing a phase of uncertainty, this theme intends to analyse important and central perspectives for the current tourism development, trying to somehow boost and valorise the territorial Craft capital. Attempting to provide answers to the stipulated questions, this study will have as its main results the highlight of Craft, associated with safe tourism for the socio-economic impulse of the Barcelos tourist destination. Since this is a qualitative approach with preliminary results, this study presents some limitations that require a continuation in future studies.

6.2

Artisans and Safe Tourism

Artisan entrepreneurs have been referred to as cultural or lifestyle entrepreneurs due to the emphasis on creative industries (Ratten et al., 2019). This is due to the sale of handicraft goods and services being linked to the tourism industry of a region (Ratten & Ferreira, 2017). According to Ratten and Ferreira (2017), artisans are linked to disadvantaged parties as traditionally they had to finance their own businesses and compete with low-cost mass-produced products. Therefore, artisans are motivated by the experiential dimension of their services that revolves around cultural skills. To do this artisans conserve lifestyle values that involve the sharing of craft knowledge across generations. The study of consumer behavior has gained special interest in recent decades, in multiple contexts (Macedo et al., 2018). Tourism is a good example, assuming itself as a multifaceted and geographically complex activity, being that tourism increasingly gives rise to new (and different) market segments with individual, distinct interests (Ferreira et al., 2019; Santos et al., 2021) and involved corporate social responsibility in tourism domains (Casais & Sousa, 2019). These segments are characterized by travel motivation and, in turn, by the differentiation of the existing offer. There are several studies that validate the benefits of tourism for the development of regions. Tourism can be analysed as a socioeconomic activity, dynamic and

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competitive, understanding by its phenomenon of displacement of people (e.g. Galvão et al., 2020; Ferreira & Sousa, 2020). As an economic activity, the tourism sector is growing, creating economic, social, and environmental benefits for localities (Silva et al., 2018). In 2019 a new pandemic emerges, and since then, this new virus has spread to several countries, resulting in numerous deaths. The Covid-19 is not as contagious or as deadly as other viruses, but Covid-19 infected patients may present worsening symptoms that refer to organ death (Bai et al., 2020). Faced with the absence of vaccines and effective antiviral drugs, the various infected countries have adopted strict traditional public health measures to contain the pandemic. In this situation, the authorities of several countries, with the agreement of the WHO, implemented measures to avoid contact between people, seeking to interrupt the transmission of Covid-19 (Wilder-Smith & Freedman, 2020). As a result of these measures, the economy, and in particular, tourism, suffers as a huge downturn, damaging the establishment of industry. All measures for non-contagion were implemented, but the economy is in constant decline (Chinazzi et al., 2020). Following a fragile economy, and in a process of social and financial reconstruction, safe tourism gains a new image and relevance. In this context, the actual paradigm has caused changes in tourism and their vulnerabilities leading to devastating challenges to tourism activity, where the variables security and safety have become protagonists in the determining factors for the choice (and competitiveness) of a tourist destination (Fowler et al., 2012; Grünewald, 2012; Kovari & Zimányi, 2011). There are authors who combine the terms security and safety into a single concept “Surety” (Simões, 2012; Anichiti et al., 2021). There are several events in the last two decades that alert the consumer to surety, such as the September 11, and more recently the Covid-19 pandemic, through terrorist acts, wars between states, natural disasters and crime (Mansfeld & Pizam, 2006). The world’s dangers and threats are immense, making tourism consumption more conscious of the need for a safe destination. According to Wachyuni and Kusumaningrum (2020), tourists appreciate three fundamental aspects in tourist destinations “safe, clean and beautiful”, pointing out the safe & clean characteristics as paramount in the selection process of a tourist destination. The Covid-19 came to create some changes in the paradigm of consumer behavior. The consumer who is already more conscious about safe & clean, looks for beautiful environments, facing their psychological needs (such as escaping the anxiety and tension experienced in the pandemic), giving preference to consume destinations as natural attractions, in a short travel time, creating reasonable safety expectations only when they have access to accurate and reliable information about the destination (Wachyuni & Kusumaningrum, 2020; Zou & Meng, 2020). As mentioned by authors Andrinos et al. (2020), the influence of the pandemic, such as an increase in the number of Covid-19 cases in a country, can damage the safe destination image, leading to dissatisfaction, fear and anxiety of the tourist when they choose a destination.

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In the adaptation process, the tourism sector has felt the need to adjust its marketing strategy, creating safety and hygiene seals to attract tourists to their destinations, receiving them with a strict hygiene and cleanliness protocol implemented. The “Safe Travels” seal was created by the World Travel & Tourism Council (WTTC, 2021) in order to promote the sector’s recovery, and Portugal was the first country in Europe to obtain the “Safe Travels” seal, recognizing compliance with safety requirements for all. Some countries were creating seals to identify who was ready to safely receive tourists - for example, the Brazilian Ministry of Tourism launched the seal “Clean & Safe Responsible Tourism”, the Polish Tourism Organization (POT) introduced the seal “Obiekt bezpieczny higienicznie” (which corresponds to “Clean & Safe”), Switzerland Tourism launched the “Clean & Safe” campaign and seal, and Portugal Tourism that implemented the “Clean & Safe” Seal. Recently, the European Committee for Normalization, in partnership with the European Commission (EC, 2021), created the “European Tourism Covid-19 Safety Seal”, similar to the “Clean & Safe” seal implemented in Portugal, to authenticate compliance with health and safety rules in tourist establishments in the European Union (EU), despite its voluntary nature. In tourism, safety and security issues are sensitive and fragile and have consistently ranked as one of the top concerns facing the industry (Edgell & Swanson, 2013). Today, the success of a tourist destination is directly related to the ability to offer tourists a safe, clean and enjoyable trip. Some authors alert to the need to study the perception of risk and its impact on the safety of tourist destinations, considering that we want them to be as safe as possible. Simões and Gonçalves (2016), highlight that the fact that destinations have a high level of safety has become one of the main factors for the choice of destination.

6.3

Barcelos’ Artisan

This section aims at reflecting on Crafts as intangible cultural heritage, mainly in the territory of Barcelos (UNESCO Creative City). Therefore, by searching into the dictionary, the word “crafts” means skill and experience, especially in relation to making objects, a job or an activity that needs skill and experience or something produced using skill and experience, for example the craft of furniture or pottery (Dictionary Cambridge, 2021). Furthermore, since 2017, Barcelos integrates the Creative Cities network of UNESCO in the category of Crafts and Popular Art (Artesanato & Arte popular in Portuguese language). Besides, Barcelos is also known for being the birthplace of the Rooster of Barcelos (“Galo de Barcelos”), one of the main symbols of the Portuguese tourism, but also for being the Portuguese capital of Crafts, an activity that is distributed by several different productions, namely pottery, imagery, ceramics, embroidery, weaving, wood, iron and tin and also many other arts and crafts such as leather works and contemporary craftsmanship made by dozens of creators of pottery and imagery what makes this territory to be a Living Museum of Portuguese Crafts and Popular Art (UNESCO, 2017).

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The Rooster of Barcelos is one of the main symbols of the Portuguese tourism and Crafts being local intangible cultural heritage, that results from two ancient customs of this territory, namely Crafts and the Jacobean legend of the rooster of Barcelos. Actually, these two customs were associated through the intervention of tourism and politics, in the 1960, becoming then a local tradition. Moreover, the main local tourist attractions are related to this tradition, namely Crafts, gastronomy (roast rooster of the Jacobean legend), wine (vinho verde), Camino de Santiago and the traditional weekly market (Costa & Gonçalves, 2016; Gonçalves, 2018; Costa, C. & Gonçalves, 2019a; Costa & Gonçalves, 2019b). Since 2021, the Rooster of Barcelos is a registered national trademark recognized by the Lisbon Intellectual Property Court, the Municipality of Barcelos being the owner of this brand (Instituto Nacional da Propriedade Industrial, 2021). UNESCO (2003, p. 3), within the scope of the Convention for the Safeguarding of Heritage, defines intangible cultural heritage as “the practices, representations, expressions, knowledge, skills, instruments, objects, artefacts and associated cultural spaces, which communities, groups and, in some cases, individuals recognize as part of their cultural heritage”. It is transmitted from generation to generation, being constantly recreated by communities and groups based on their environment, their interaction with nature, whose history gives communities a sense of identity and continuity and promotes respect for cultural diversity and by human creativity. As stressed by Ahmad (2006), intangible cultural heritage includes oral traditions and expressions, language, performing arts, social practices, rituals, festive events and traditional Crafts. In this sense, it might be argued that the case of Crafts of Barcelos fits into this concept Intangible cultural heritage because it is a tradition that resulted from ancestral customs of this UNESCO Creative City and capital of national Crafts. The UNESCO Creative Cities Network (UCCN) was created in 2004 to promote cooperation with and among cities that have identified creativity as a strategic factor for sustainable urban development. The municipality of Barcelos built around the tradition in Crafts and folk arts an undeniable history and heritage of great social value. Crafts and folk arts are the core of these people and creativity is the legacy that the impressive artists of this land cultivated throughout the centuries and today symbolize our great cultural references. The creativity of local inhabitants is well reflected in the craftsmanship work in various arts, such as clay, embroidery, weaving, wood, iron, leather, wicker and in the contemporary arts (UNESCO, 2017). According to the International Charter on Cultural Tourism (ICOMOS, 1999, p. 2), “heritage is a broad concept and includes both the natural environment and the cultural environment. It covers landscapes, historical sites, built sites and environments, as well as biodiversity, collections, past and continuing cultural practices, knowledge and lived experiences. It records and expresses the long process of historical development, forming the essence of diverse national, regional, indigenous, and local identities, and is an integral part of modern life. It is a dynamic reference point and a positive instrument for development and exchange (e.g. Fig. 6.1). The particular heritage and collective memory of each locality or each community are irreplaceable, being an important foundation for development, both now and in the future”. Furthermore, this charter points to cultural and natural

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Fig. 6.1 Irmãos Baraça (arte popular portuguesa) Baraça Brothers (Portuguese popular art) Source: Authors (Jéssica Ferreira)

heritage, diversities and living cultures as the main tourist attractions, and as a value for the community and valuing it is valuing collective memory. Thus, if tradition is a custom valued in terms of identity and a trait of the community saved from obsolescence, then Crafts emerges as one of the most important factors in reviving customs and traditions (Frías, 1999, 2003). This section reflects on various concepts and the relationship among them, namely Crafts, heritage, tradition, and tourism. Crafts are customs and traditions becoming intangible cultural heritage that is linked to the sustainable development of the tourism of experiences, the Creative Tourism whose “raw material” is precisely the intangible cultural heritage of local communities in the territories (Costa & Gonçalves, 2016; Gonçalves, 2018; Costa & Gonçalves, 2019a; Costa & Gonçalves, 2019b). Therefore, within the scope of the “Creative Cities Network, UNESCO (2006, p. 3) defines Creative Tourism as “a new generation of Tourism, which requires an evolution on the part of managers, who must recognize creativity in their cities as a resource, in order to offer new opportunities to satisfy the everevolving motivations, needs and interests of tourists. It implies a journey aimed at a committed and authentic experience, with participatory learning in the arts, heritage, or the special character of a place, and provides a connection with those who reside in that place and create this living culture”. Furthermore, Raymond and Brown (2007) also produced a revised definition of Creative Tourism, which in the light of his experience in developing creative tourism in New Zealand: “a more sustainable form of tourism that provides an authentic feel

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for a local culture through informal, hands-on workshops and creative experiences. Workshops take place in small groups at tutors’ homes and places of work; they allow visitors to explore their creativity while getting closer to local people”. All these concepts have some differences, but they have elements in common, namely the reference to participatory and authentic experiences, which allow tourists to develop their creative potential and skills through contact with local Craftspeople and their culture and heritage.

6.4

Methodology and Case Study

With regard to obtaining the primary data for this research, we opted for the use of semi-structured interviews, since it allows interviewees to share their perspectives, stories and experiences about a particular social phenomenon observed by the interviewer. This is justified by the fact that the participants have practical experience in relation to a subject that the researcher intends to address (Wahyuni, 2012; Machado et al., 2021). The structure of this investigation went through a semistructured interview conducted with the five Portuguese artisans and two interviews with entities associated with the promotion of handicrafts in Barcelos. Respondents were selected based on an analysis of the market and their needs for competitive activities, the pottery, the basketry and wicker, the embroidery and sieve, and the iron and derivatives. However, the prospect of crafts supply and demand was considered, with local entities linked to tourism. It is noted that, on several occasions, the respondents themselves easily put themselves in the role of the tourist, allowing enriching the content of the interview, providing various perspectives. The semi-structured interview was conducted based on the main theme of the study, that is, artisanal routes of Barcelos, but also other categories to understand and analyse the process of shaping the tourism product of the Barcelos artisanal route, to the new demands implied for a safe tourism. It is also important to highlight the creation of a topic whose introductory questions are of a more general nature, including a brief sociodemographic description. In this way, for the introductory theme previously defined some objectives should be achieved, namely: Draw the profile of the owner/manager of the artisans under study, to identify the way the artisans under study emerged; to know the background of the owner/manager of the Portuguese artisans under study. Diversification is a very important element in the management and expansion of emerging products, such as cultural tourism. To analyze the diversification of the cultural tourism offer, the following objectives were established, namely: to know the activities complementary to the accommodation existing in the Figurado of Barcelos, of the owners/managers surveyed; to assess the degree of importance attributed to the complementary offer of the artisans under study; to realize the potential impact of the complementary offer in increasing the visitors and the consequent economic contribution to the artisans under study. The authors analyze and reflect upon what attributes, qualities, skills and knowledge are required for the different roles involved in artisan entrepreneurship. The key

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constructs are drawn from empirical research among handicraftsmen in which the data analysis was carried out throughout a qualitative analysis. Phillimore and Goodson (2004) seek to seize the multidimensional character of the phenomena in its natural manifestation, as well as to capture the different meanings of a lived experience, helping to understand the individual in their context. Nowadays there is a lot of discussion about the need for basic requirements to bring about a qualitative analysis, and most of the authors related to the subject consider that the experience of the researcher within the area, with the relevant literature and different forms of analyzing interview data, is a sine qua non condition to carry out an appropriate study, taking into arguments that he (researcher) is, in fact, his own instrument of work (Ferreira et al., 2019).

6.5

Results and Discussion

In the process of analysing the interviews conducted with craft and entities representing and managing Barcelos’ Craft, some preliminary results are comprehended. Specifically, through semi-structured interviews, we sought to understand some key themes, as the impact of the pandemic, the molding and reconstruction process to the new reality caused by the pandemic, and the possible practice of safe tourism in craft of the Barcelos. In this analysis was also aimed to understand the impact of the digital experiences, and what is the function of the entities representing the Barcelos’ Craft in this process. The beginning of 2020 was marked with the pandemic’s arrival, making it impossible to distinguish what 2019 was for what followed in the months that followed. In this prism, was important to understand that before the interviewees how were classifying the year 2019 and afterward. The interviewed Craft People considered 2019 was a very good year, with an even better 2020 expected. Sales were at a very high level, and there was a very good dynamic in tourism. On the same point, the entities responsible for artisan craft considered 2019 a brilliant year, in statistical and tourism perception terms, this year was one of the best years ever. For them that was a truly extraordinary year from the point of view of what is the operation, frequency and promotion of the product, and the trend was being quite positive, in terms of the offer, the number of operators, overnight stays and frequency of spaces. But, contrary to expectations, the workflow has gone from very well, to very bad. When a massive workflow would be expected from one moment to the next ended up drastically reducing the workflow, and in many cases, stopping sales. Now, already in a process of economic and social reconstruction, there has been several steps, some more limited than others, but the workflow of the last few months has been at a very slow pace and with ups and downs. Right now, 2021, it is starting to evolve, very slowly, due to the existing fear of investing in non-primary goods. On the other hand, the Craft People have been taking advantage of the lack of orders to develop their creativity into new pieces that they can sell in the future.

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When referred to the financial and social level the interviewed artisans consider that they have suffered an avalanche in the last few months. In social terms, the contact was practically non-existent, they assume a reduction of more than 90%, and the monetary flow was very small, almost null. The contact with clients they had previously, as tourists, shopkeepers, and collectors, was scarce, and in some cases, it ended up extinguished, as is the case of many stores that closed. From a financial point of view, there are some studies that were carried out by the municipality, which aimed to predict the short-term impact of the pandemic on tourism in Barcelos, specifically, drops in tourism of over 80% were analysed. However, the regional municipality, to reverse the forecasts stipulated, through some aid for Craft, end up addicting the results obtained, and help to keep the artisan work active. From the social point of view for Craft People, the consequences of the pandemic are dramatic. In Artisan Craft of the Barcelos, there are entire families that depend on this service, and everything that is national and international distribution and commercialization channels took an abrupt closure, which then takes time to be restored. Nowadays, the clients that remain are the collectors, who already know the artisans’ work, and contact them to create one or another piece, keeping the workflow active. The molding of Craft to the new market demands may be complicated, but it is indispensable. The Craft People interviewed consider that artisanship’s can be molded in the same way as the other arts and culture are molded to this new reality, to a tourism with limitations and restrictions in terms of social contact, but still, to a tourism full of active and possible experiences. They consider that in the process of rebuilding tourism there are several steps, and for Craft, the phase of events, such as fairs and exhibitions, will be one phase and visiting workshops, such as participating in artisanal routes will be another. The process of molding the Craft to these new market demands generates some discord among the entities representing the Barcelos’ Artisanship. On one hand, the part of the pottery museum considers that the artisan can be molded, just like the rest of society has molded and adapted to these new health and safety demands. On the other hand, the entity of the tourism office noted the difficulty that the artisan society must adapt to new commercialization formats, specifically, the digital medium. There are several adaptations that were made while the pandemic, such as the implementation of safety rules and sanitization of the spaces. With the rebuilding of tourism, for the Craft sector these measures will have to be reinforced and controlled. The adaptations that Craft may structure in the future are very much part of the modernization and agility of sales strategies. Digital experiences will be fundamental in the adaptation process, and from this point of view the municipal entity is prepared to give the necessary support and assistance to the Craft society. It was important to understand to what extent the artisans and the Craft Peoples’ associations complement each other on this subject. Digital experiences have added greater emphasis in recent months, if until the beginning of the pandemic the digital medium was already in an evolving process, with the arrival of the pandemic this process has accelerated, and digital experiences have become indispensable for the entire industry and trade. To the Craft People,

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using digital experiences as a marketing medium is something that is still to be implemented and structured. There are few Craftsmen interviewed that resort to the digital world to sell their pieces, many recalls that selling crafts online is difficult, because visual promotion ends up being limited, when compared to the personal and direct contact of the customer with the artisan piece. For to Craft’ entities, digital experiences are fundamental, despite the sector’s lack of digital literacy. Still, the municipality assumes that there will be support in this direction, representing a strategic lever in promotion. The return to the stipulated “normal”, experienced before the arrival of the pandemic, is one of the most desired feelings of recent months. The hope that in the future tourism and Craft will return to the “normal” that was present in 2019 is very present in the feelings of the Craft People interviewed, however, the reality is that many consider that the “normal” stipulation has suffered some changes. However, they consider that there is a gradual process, which allows an adaptation and molding to the demands of the market, “(. . .) even if we do not return to the normal that we lived before the pandemic, we will mold ourselves to a new normal that we will live in the coming times”. The Craft management entities assume that through adaptations, the decrease in activity from this pandemic, and with time, artisanship will return to the values prior to 2019. They consider that in tourism everything that was good, nothing has disappeared! The safe tourism, inserted in the safe & clean program, is one of the most soughtafter features in this deconfinement process. Tourists feel the need to do tourism, but still feel fear, and therefore seek to feel as safe as possible. From this perspective, Craft are no different, Crafts’ customers seek to resume the consumption process in a safe and effective way. The Craft People interviewed demonstrated that the Barcelos’ Craft has all the conditions for the return to activity, including the return to open events. However, they reinforce the idea that it is necessary to follow and control all the precautions for a safe trade. In this analysis, it is noted that concerning the practice of safe tourism in the Barcelos artisanal route, most of the interviewed Craftsmen consider that there are sufficient conditions for the practice of safe tourism, however, some consider safer the practice of physical craft events, rather than the participation of tourists in the artisanal routes. The opening of a safe tourism, within the context of clean & safe is possible, and is already being thought and implemented.

6.6

Final Considerations

Tourism can be analysed as a socioeconomic activity, dynamic and competitive, understanding by its phenomenon of displacement of people. However, the actual paradigm, Covid-19, has caused changes in tourism and their vulnerabilities leading to devastating challenges to tourism activity. Hence, the variables security and safety have become protagonists in the determining factors for the choice (and

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competitiveness) of a tourist destination. This chapter reflects on various concepts and the relationship among them, namely Crafts, heritage, tradition, and tourism. To Barcelos, Crafts and folk arts are the core of people and the creativity of local inhabitants is well reflected in the craftsmanship work in various arts, such as clay, embroidery, weaving, wood, iron, leather, wicker and in the contemporary arts. For this purpose, it was decided to create this study, which seeks to analyze and understand the reality of handicrafts in the period of tourism reconstruction. The results to be obtained should allow, among other things, when talking about the impact of the pandemic one understands that the period before the pandemic represented quite good results and sales, and with the arrival of the pandemic this evolutionary process dropped. However, already in a process of rebuilding tourism, it is understood that the Barcelos’ Craft can open safely, responding to the existing need in the market to resume tourism practices. In this context, innovation management as a field has gained ascendancy globally as a way for companies to compete and advance in the global marketplace (Ratten et al., 2017). For this research it is suggested that this topic should accompany this process and pandemic path, continuing to be analysed, but extending its study to other artisanal routes, extending the research to other areas of artisanal craftsmanship. Consumer behaviour in the (cultural) tourism area should focus more on the relationship between involvement and emotions. It is clear that study of this field needs further developments on the subject. Future studies should make it possible to understand the role of emotions and involvement in tourist consumer behaviour in postpandemic contexts (Santos et al., 2021). In this domain, and in specific the case of cultural tourism, emotions and involvement are crucial for the development of a tourism marketing strategy as a main tool for the differentiation of tourist destinations. According to Santos et al. (2021), tourist destinations should be able to develop marketing strategies around emotions and involvement (with the local community) as a competitive differentiation. An important contribution that is reinforced the role that involvement and emotions play (and may play) in the post-pandemic future. Future studies will want to follow for the reconstruction process of tourism, and the analysis of the evolution of artisan with the opening of tourism. We propose for the future the relevance of a conceptual model to be empirically tested using structural equations (e.g., using study variables such as “tourism quality”, “expectations”, “rebuilding impact”, “satisfaction” and comparison “pre” and “post covid”).

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Chapter 7

The Saudi Response to the COVID-19 Pandemic and Its Economic Implications: Entrepreneurial Threats and Opportunities Sami Hamdan S. Alanzi, Vanessa Ratten, Clare D’Souza, and Marthin Nanere

Abstract Risk management scholars typically define risk as the consequences of uncertainty, which could hold either threat or opportunity. Based on the risk definition, this research aimed to investigate the Saudi Arabia approach in confronting the implications of the COVID-19 pandemic and its impact on the different components of the Saudi economy, such as the Gross Domestic Product (GDP), the labour market, and the business dynamics in an attempt to determine the threats and define what could be opportunities. The findings from the research indicated that the Saudi management successfully embraced the appropriate health and financial measures in facing the pandemic, which reflected in the relatively low number of confirmed cases and fatalities up to June 2021 and the fast economic recovery after the painful oil prices drop and recession in 2020. Moreover, the pandemic involved some opportunities to expedite the achievement of some objectives of the Saudi Vision 2030. Such as diversifying the GDP revenue resources, Saudisation, and boosting the electronic money transfer as an alternative to cash in commercial transactions. Keywords COVID-19 · Economics · Financial measures · Health · Pandemic · Risk management · Saudi Arabia

7.1

Introduction

Humanity is testifying times of drastic uncertainty and an unprecedented health disaster globally. Undoubtedly, the COVID-19 pandemic is a once-in-life event that impossible to be predicted where it is heading. However, thankfully, the world now is suitably equipped to fight that emerging COVID-19 monster (Balkhair, 2020).

S. H. S. Alanzi (*) · V. Ratten · C. D’Souza · M. Nanere La Trobe University, Melbourne, VIC, Australia e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 V. Ratten (ed.), Entrepreneurial Connectivity, https://doi.org/10.1007/978-981-16-5572-2_7

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Historically, contagious illnesses have induced severe devastation in many societies. The sparking of different infectious diseases is now striking at an unparalleled high frequency. According to WHO (2021b) the globe has seen the springing up of many infection outbreaks and epidemics generated by 20 infectious viruses over the last decade. Many of those epidemics were induced by a new contagious virus such as H1N1, MERS, and SARS, which formed a high challenge for the health care systems in many countries worldwide (De Wit et al., 2016). However, these conditions prepared the world to face what could be the worst. Therefore, although the COVID-19 pandemic consistently moves everywhere at a record pace, the velocity and volume of the scientific awareness and discoveries on COVID-19 are correspondingly rapid and remarkable (Balkhair, 2020). COVID-19 is an illness induced by a new class of coronaviruses, which are a significant viruses family that causes severe respiratory syndrome. COVID-19 was initially reported in December 2019, Wuhan City, China. However, in January 2020, the first case outside the Chinese boundaries was discovered in Thailand, and since that date, the virus rapidly spread worldwide, causing panic and uncertainty everywhere (DOH, 2021). As a result, in 2020, January 30th, the WHO announced an international public health emergency and on February 11th called the illness COVID-19. A month later, WHO categorised COVID-19 as a global pandemic on March 11th, 2020. Since that date, the confirmed number of infected cases grew irrationally to reach 1.6 million on April 10th, 2020 (WHO, 2021b). Recently, WHO (2021a) reported that until April 1st 2021, the COVID-19 pandemic has resulted in 128,540,982 confirmed cases, 2,808,308 confirmed deaths, and 223 countries, areas, or territories have COVID-19 cases. The COVID-19’s growing diffusion across many countries has urged governments to roll out strict measures to hold the epidemic. Where saving lives was the prime objective, leaving tiny room for other issues such as economic collapsing. These measures resulted in many businesses have been provisionally closed, extensive limitations on flying and movement, financial market disturbance, a lack of confidence and intensified uncertainty (OECD, 2020). The rapid changes in the global economic environment imposed by COVED-19 made it challenging to precisely quantify these measures’ impact on Gross Domestic Product (GDP) growth. However, it is evident that they imply severe shrinkage in production level, investments, international commerce, and customers’ expenditure (IMF, 2020). There is no doubt that death and health issues lie on top of the catastrophic impact of the COVID-19 pandemic. However, the economic and social implications could also carry deleterious consequences on people’s lives and mental health due to business loss and unemployment. According to OECD (2020) several international institutions have evaluated COVID-19’s socio-economic influence to be more damaging than the global financial crisis in 2008, quantifying an average monthly fall ranging between two to three points in the GDP during the pandemic. In its report regarding the impact of COVID-19 on the labour market, ILO (2021) reported in early January 2021 that approximately 93% of the world’s labour are presently dwelling in countries with different levels of business closure measures, leading to the termination of over than 195 million positions.

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Furthermore, in terms of working hours, declining working hours due to COVID19 restrict responding actions in 2020 has quadrupled compared to 2009 during the global financial crisis. As a result, in 2020, the global labour market saw a historically unparalleled drop in working hours by 8.8%, equal to 225 million full-time positions loss. Optimistically, this ratio decreased to 7.2% during the 2020 third quarter and continued to decline to reach 4.6%, equal to 130 million full-time positions lost in the fourth quarter of 2020. Finally, it is worth mentioning that the global unemployment problem triggered by the COVID-19 pandemic may spotlight another social problem that can be addressed via CSR practices, as job loss figures indicate that job loss for women and youth workers was 5% and 8.7%, respectively, higher than mature men, which could be interpreted as a bias to male workers (ILO, 2021).

7.2

Historical Overview of CSR Performance During Global Crises

Like other global catastrophes, either natural or humanitarian made, pandemics necessitate worldwide solidarity and quick interventions to accommodate the disastrous implications of the obnoxious event. The term pandemic typically refers to a global transmissible virus breakout that requires a superior level of crisis management to be controlled (Glantz, 2014). The literature on disaster management argued that natural disasters and pandemic disease hold an influence on people’s physical and mental well-being similar to the implications of the social, religious, and ethnic conflicts and wars due to the high rate of fatalities and injuries left behind (Xu et al., 2016). In this vein, Gao (2011) argues that corporates charitable contribution is the original form of the CSR practices that corporates have used to express their awareness of their responsibility toward societies, mainly during the crisis time. During the crisis, typically, corporates would increase their philanthropic practices in an attempt to relieve the affected community, which attracted the attention of many scholars to study the corporates’ behaviours in responding to the crisis implications, which could play a significant role in mitigating its destructive social and economic impacts (Gardberg et al., 2019). Typically, corporates’ philanthropic contributions to crisis combating focus on providing direct assistance to people to overcome the disastrous consequences. These contributions usually take the form of either monetary or in-kind donations. For example, medicines donations that international pharmaceutical organisations use extensively to help people in endemic areas, such as the Mectizan Donation initiative for fitting the river blindness, an infectious disease caused by a parasitic worm, had hit approximately 15.5 million people in Africa or combating AIDS worldwide. In addition to allocating and delivering different imperative relief supplies in the wake of the emergence of various epidemics all over the globe (Muller et al., 2014). Similarly, several pharmaceutical organisations such as

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GlaxoSmithKline and Novartis consistently donate large amounts of medications as part of their CSR practices, coordinating their efforts with the World Health Organisation (WHO) and other associates to eradicate many diseases as Lymphatic Filariasis and Leprosy (Smith, 2003). However, Corporates contributions have not been limited to medicines. Different large organisations were reported using their capabilities to facilitate the distribution of aid supplies. For example, Ford Motors donated vehicles to help in facing California’s massive wildfires. In other events, UPS and FedEx used their fleets to distribute crises relief supplies. In 2007, Verizon devoted its communication tools and capabilities to support the rescue operations of the afflicted people in both the forest fires in Georgia and floods in Oregon. Moreover, General Electric donated $2.1 million for the war victims in Darfur, Sudan, in 2003. More and more events could be stated where corporates donated money, time, and resources and demonstrated a positive attitude in helping people to overcome the crises hard times (Johnson et al., 2011; Zhao et al., 2015). It can be claimed that corporates’ role in facing disasters by their philanthropy contributions and donations was evident worldwide in absorbing the implications of many catastrophes and health issues such as the SARS epidemic 2003 in china Gao (2011).

7.3

Summarising Corporations’ Response to COVID-19

Corporates who highly invested in CSR practices before the COVID-19 pandemic experienced better stock rate performance during the pandemic (Ding et al., 2021). This conclusion supports the notion that, typically, disasters would generate a spectrum of significant opportunities for organisations with more attentiveness and awareness of CSR values (Kim & Lee, 2015). In addition, investing in CSR would help in establishing trust with different stakeholders. Thus, they are more likely willing to accept any adjustments to assist the business while confronting any unfavourable events. Therefore, the COVID-19 pandemic is likely to boost CSR development in the long run after the pandemic finishes, as more organisations will realise that their business growth and longevity robustly correlated with their ability to balance between making a profit and satisfying different stakeholders (He & Harris, 2020). It has been argued that a disaster could be perceived as either a threat or a potential opportunity (Rodríguez, 2013). CSR scholars suggest that hard times could hold plenty of opportunities as the society recognises corporates that extended helping hand and rewards them back (Baskentli et al., 2019). Ding et al. (2021) claimed that corporates that neglected supporting customers to overcome the challenging pandemic period or tried to take advantage of the current supplies shortage due to the international movement restrictions and supply chain disruption to make more profit are likely to get penalised by customers and market. On the other hand, crisis time typically involves a recession that may force some corporates to diminish their CSR activities or even withdraw from the market due to the significant resource

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deficiency and the growing uncertainty (Rodríguez, 2013). Social and economic problems can be resolved by mutual helping between the different parties, including the government, people, and corporations (Aknin & Whillans, 2020). Accordingly, CSR could be a vital tool that corporates use to handle such a critical situation of the COVID-19 pandemic and achieve mutual benefit. Furthermore, helping people during the crisis time frequently reported having a positive impact on corporate profitability in the long run. Thus, it is expected that corporates will act positively towards fulfilling the community needs during the pandemic (Mahmud et al., 2021). In this vein, Mahmud et al. (2021) conducted a study to investigate the corporates response to COVID-19 consequences by analysing actions such as building awareness, donating medical and precautionary supplies, monetary support, and much other in-kind assistance and the degree of devoting budget, time, and expertise to their CSR activities during the COVID-19 pandemic. The study found that corporates response to the COVID-19 pandemic focuses on three dimensions; Firstly, protecting employees, where corporates have committed to safeguarding their employees in the workplace. For example, most corporates have directed their workers to follow the health instructions stated by health specialists and obey the government rules. Also, different corporations have embraced various policies, such as working from home and enforced hygiene and cleaning protocols, such as using personal protective equipment (PPE) and social distancing practices. Moreover, many corporations offered paid leave and other health care benefits, volunteer work benefits, and employees assistance initiatives. Secondly, providing supportive customer service, most corporations have pledged to maintain work under any conditions, from offices, homes, manufacturies, or even the client locations, to deliver goods and services to consumers according to their demands. For example, food companies have complied with all instructions and safety measures regulated by different authorities during the manufacturing and selling their products. Other companies offered 48 months of interest-free sales and deferred the outstanding payments to help customers overcome their financial hardship. Thirdly, supporting the entire community, where most international organisations mainly focus on fulfilling the public health and economic needs during the COVID19 pandemic, and many organisations directed their CSR activities to support their communities’ health and safety well-being during this disaster. Several organisations, both for-profit and not-for-profit, are collaborating to provide different imperative needs. For instance, General Motor devotedly works with Ventec Life Systems to accelerate producing and distributing the indispensable respiratory equipment for the COVID-19 infected people and producing approximately 50,000 face masks per day and other PPE products to help fill the gap in such supplies in the health sector.

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Example from Entrepreneurial CSR Contributions During the COVID-19 Pandemic

Although the COVID-19 pandemic brought pain and anxiety to everyone, it represented an opportunity for some leading organisations to demonstrate their entrepreneurship, particularly their social entrepreneurial mindset. For instance, Hasbro, the global leading entertainment organisation, has significantly helped boost people’s spirits during the lockdown periods by creating and launching “BringHometheFun,” the innovative initiative that aims for supporting millions of families globally to adjust themself to the “new normal,” forced by COVID-19, and which urged families to extend indoor times. Also, the initiative aimed to help families keep their children active and engaged and maintain a better world for them during the pandemic’s cruel lockdown periods. Furthermore, the initiative also positively impacted people’s mental health, providing families in the lockdown with a platform to interact and exchange experiences regarding how to deal with life at home using social media platforms and the “BringHometheFun” application (Hasbro, 2020). As the primary objective of this paper is investigating the implication of the COVID-19 on the different life aspects in Saudi Arabia, the following part of the study will commence with positing an optimistic viewpoint on the opportunities that could be implied in the current situation. Moreover, highlight the successful response of the Saudi management to the pandemic and review the measures taken by the Saudi government before touching on the pandemic’s impact on the Saudi economy.

7.5

COVID-19 Pandemic, Pain and Opportunity for the Economic Transformation in KSA

After a significant shrinking in 2020, Saudi Arabia’s economy is on the rehabilitation track as new COVID-19 infected numbers have steadied at controllable levels, the global situation improves, and the implementation of the nationwide vaccination schedule sufficiently progresses (16,558,180 doses of vaccine administrated by June 19th 2021, almost 50% of the Saudi population) (WHO, 2021c). The current recovery in the Oil prices and the extenuation in COVID-19 confronting measures will reinforce the Saudi medium-term financial positions. However, any surge in COVID-19 cases and decrease in Oil prices may represent significant hazards to the status quo, leading to more financial austerity measures, and in turn, hindering the progress of the Saudi economic recovery (Worldbank, 2020). Several Oil industry experts declared that the KSA would be able to increase its oil production and export later 2021, as the global market recuperates, particularly within large economic alliances in East Asia, Europe and the US (Kane, 2021).

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Although the economic reformation commenced in 2016 focusing on women participation in the labour force, boosting revenue from non-oil sectors, and promoting services providers role in leading growth has achieved noticeable progress in the economic diversification, the Saudi economy still highly relies on the Oil sector (Vision 2030, 2021a). The Saudi economy slipped into a broad recession in 2020 due to the dual blows of COVID-19, and the Oil prices drop, creating a considerable budgetary deficit. On the other hand, the negative impact of the COVID-19 on the Saudi Oil industry urged accelerating the transformation process of the economy to reduce the reliance on Oil production and exportation as the primary sources of the Saudi Gross Domestic Production (GDP) revenue (Basahel et al., 2021). According to the Worldbank (2020), the COVID-19 pandemic potentially would change several countries’ economic structures, mainly those relying on the wealth of their natural resources. However, Oil remains a precious asset to fund the conversion to the new economic models.

7.6

Successful Confronting

Although it was challenging to posit lookdowns and self-isolation roles in the KSA due to cultural and religious heritage, such as hosting millions of alhajis during the Hajj season and Umrah, the KSA was one of the leading countries worldwide that established high precautions measures to reduce the spread of COVID-19, such as the curfews and the compulsory self-isolation (Alshammari et al., 2020). The Saudi management proactively posited firm social distancing measures and launched several awareness initiatives to elevate the social realisation of the COVID-19 threat. However, simultaneously with the first confirmed cases, further restrictions were put in place to confine the spread of the virus, such as travel banning, pausing religious meetings, closing mosques and schools and educational institutions, cancelling cultural and entertainment activities, and announcing the curfew (Sayed, 2021). Moreover, the government has mandated the use of PPEs such as face masks and gloves and obligated the existence of checkpoints at the entrance of workplaces of the essential activities that exempted from the compulsory closure (Jan et al., 2021). The KSA executed a spectrum of continuous public measures to combat Covid19 at an early phase of its outbreak in Saudi Arabia; these measures and the massive medical resources that the Saudi management provided to confront the health impact of the Covid-19 led to a significant reduction in the number of the confirmed cases and fatalities (Alshammari et al., 2020), which reached 478,135 confirmed infections and 7716 deaths by June 24th 2021 (WHO, 2021c). The measures were designed and strictly imposed following the international standards and recommendations announced by the world health organisation (WHO). The successful implementation of these measures and awareness campaigns led to raising public consciousness and guiding people reactions during the pandemic, which contributed to relatively mitigate the deadly impact of the virus comparing to other developed countries (Sayed, 2021). It was evident that such measures were effective in slowing down the

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virus outbreak. However, they negatively impacted the Saudi economy and were a turning point for many small businesses, forced by the situation to close down (Jan et al., 2021). Therefore, the Saudi management rushed to launch several initiatives, develop policies, and take actions to support the Saudi economy and stimulating different sectors to overcome the implications of the COVID-19 pandemic.

7.7

The Saudi Government Response to the COVID-19 Pandemic

The Saudi government is reacting decisively to address the unparalleled impact and consequences of the COVID-19 crisis, taking prompt measures and actions to ensure its’ people safety and mitigate the pandemic economic and social effects. The Minister of Finance, Mr. Mohammed bin Abdullah Al-Jadaan, declared that the Saudi government took precautionary and robust actions to protect the Saudi citizens and all other residents and to secure the budgetary resources required for implementing the government protective plans and confining the virus spread, as well as protect government agencies and institutions and ensure their work persistency. In this vein, different ministerial committees were formed to analyse the influence and consequences of the COVID-19 on the various sectors and study the pandemic-related challenges that emerged and their impact on sustainable development within the Saudi regions. Also, examine the possibility and approaches of responding to them through stimulus packages, subsidies, or other methods (MOF, 2020b). Accordingly, the Saudi government developed and embraced a set of measures to minimise the economic and social impact of the pandemic on the Saudi community as follows;

7.7.1

Stimulating Economy

In March 2020, the Saudi government announced its plan to support the Saudi economy by launching a stimulant bundle of SAR70 billion to back and revitalise the affected private sector. The government allowances were planned to be in the form of some tax exemptions, postponing or cancelling of government fees aiming to enable the private sector more liquidity that allows them to sustain their economic activities. Moreover, although the Saudi government decreased its budget for the fiscal year 2020 by approximately 5%, this reduction was managed to hold minimal social or economic impact. Simultaneously, a contingency budget was developed to handle any additional pandemic-related costs that could occur (ILO, 2021). On the other hand, as a part of its role in stimulating the implementation of fiscal policies to improve economic stability and boosting the private sector sustainable growth, the SCB launched the Private Sector Financing Support Program with a budget of SR

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50 billion in March 2020 (MOF, 2020b). According to SCB (2020) the program aimed to back the Saudi government efforts in facing the COVID-19 consequences and mitigate its negative influence on the Saudi private sector sustainability, particularly its destructive impact on the Small and Medium Enterprises growth (SMEs), by minimising cash flow inconstancies, preserving operating capital, uphold the private sector, and sustaining employment. The program included several stimulus packages and subprograms to achieve three fundamental objectives. Firstly, support SME Financing by introducing subprograms, such as the Deferred Payments Program with a fund of SA30 billion to allow further extensions of loans and debts repayment and the lending program with a fund of SR13.2 billion assigned to maintain banking liquidity and lowering the repo rate to ensure consistent crediting service to the private sector and fiscal stability. In addition to the Loan Guarantee Program with a fund of SR 6 billion to relieve SMEs from the KAFALA program fees (SCB, 2020). Secondly, establish a supporting fund for POS and e-commerce with a budget of SR 800 million to provide 3 months refresher payment for all stores and firms within the Saudi private sector. Thirdly, support the banking sector to maintain high financial performance (SCB, 2020), which will positively back the Saudi economic and community development sustainability that confront exceptional health, financial, and social situation due to the COVID-19 implications.

7.7.2

Supporting the Saudi Health Sector

With the highest priority for the health and safety of the Saudi people, the Saudi government pledged to provide the needed funds for the health sector to deliver the imperative health services for preventing, treating, and controlling the COVID-19 virus infection. The Saudi administration has reviewed its annual budget to reprioritise its expenditure and allocate extra funds to the health division. The supporting funds reached SR 47 billion in 2020, directed at elevating the health sector’s readiness, securing medications, providing supplementary beds and essential medical supplies such as ventilators and the COVID-19 testing kits, and support the medical and technical staff of the health sector (MOF, 2020b).

7.7.3

Support Labour Retention and Protecting the Saudi Society

Unemployment considers one of the most mischievous individual experiences. Several previous psychological literature pieces of research investigating the influence of unemployment on individuals’ well-being have affirmed its destructive impact on pecuniary and mental well-being (Ahn et al., 2004). In the same vein,

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another study conducted by Carroll (2007) declared that unemployment was the primary trigger of significant reductions in people’s life satisfaction; it directly declines individuals’ self-esteem and cultivates sensations of losing control and powerlessness amongst people. In their study of the impact of COVID-19 and the associated economic uncertainty and employment drop on people psychological and mental health, Godinic et al. (2020) argue that during economic uncertainty periods, people are usually inclined to decline their social activities due to their concerns about the future and preoccupation with existing family and fiscal state. Therefore, the COVID-19 pandemic could hold tremendous and long-term implications on society and the individuals’ health and financial capacity. COVID-19 has caused the liquidation of many companies, temporary lockdown of a massive number of businesses, labour layoffs, boundaries closure that led to restricting commodities transportation and shortage in resources, leading to the current status quo of global panic and distress, and employment insecurity. COVID-19 has caused the liquidation of many companies, temporary lockdown of a massive number of businesses, labour layoffs, boundaries closure that led to restricting commodities transportation and shortage in resources, leading to the current status quo of global panic distress, anxiety and employment insecurity. It is imaginable that many people will experience the trauma from the fear of losing their jobs, and some people will leave the COVID-19 pandemic with post-traumatic stress disorder (PTSD). Consequently, it can be stated that the threat is more than economical but rather multidimensional. Losing work usually leads people to feel depressed and tending to self-isolation, which is highly harmful to their psychological well-being (Godinic et al., 2020). Furthermore, it is expected that low mental well-being could lead to a higher suiciding rate. According to Kawohl and Nordt (2020) the outbreak of COVID-19 created emotionally injurious challenges such as the quarantine period and self-isolation requirement for people suspected infected. These challenges are expected to increase the suicide rate globally, especially among people suffering from anxiety and depression due to the exposure to the direct impact of the pandemic’s economic consequences, such as unemployment. Additionally, Kawohl and Nordt (2020) drew best and worst-case scenarios of suiciding rate based on the International Labour Organisation (ILO) expectations for job loss due to COVID-19. In the best-case scenario, it is expected that suicides could increase globally by 2135/year, while an increase of 9570/year was the worst scenario. Based on their thorough understanding of the destructive health, economic, and social impact of unemployment on society, Saudi Arabia’s King Salman, Saudi Arabia’s Crown Prince Mohammed bin Salman, and the Saudi management and institutions are chasing the clock to study, plan, and implement the necessary measures to mitigate the impact of the unemployment. Which dramatically increased due to the COVID-19 implications on the Saudi economy. King Salman bin Abdul Aziz Al Saud issued a royal decree that approved SR 9 billion to fund and launch “Saned” program to support small Saudi corporates that impacted by the pandemic to retain their employees by bearing 60% of the salaries for the Saudi employees for 3 months if the corporate pledged to maintain the employees’ payment after this period. Also, another royal decree was issued in July 2020 to support the Saudi

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private sector and boost employees retention by covering from 50% to 70% of Saudi employees costs. The royal decree also provided relief for struggling corporates to avoid the governmental penalties of violating the Saudi wages law. Moreover, the royal decree stated that the affected Saudi employees would be immediately joining the “Nitaqat system”, which was launched late in 2011 as a part of Saudization, the extensive government program that aims to increase the percentage of employing Saudi citizens in the private sector’s corporates, particularly international investments with a high workforce of foreign employees. According to the Saudization program rules, the public and private sectors corporates are obligated to hire a number of Saudi citizens proportional to the numbers of inbound workers (Sadi, 2013). Many other initiatives were taken to reduce corporates’ overheads and support the private sector sustainability in confronting the implications of the COVID-19 pandemic and encourage corporates to keep their employees, such as defer the collection of customs fees and VAT, partial exemption from the foreign labour residency fees, and suspending the collection of fines and penalties. In the same vein, the Saudi Ministry of Human Resources and Social Development (MHRSD), in November 2020, announced new regulatory rules for the contractual relationship between employers and employees. The new regulations considered the existing unparalleled situation enabling higher contractual flexibility and a wider range of options for employees to choose from. For example, it became available for employees to benefit from the government subsidies to compensate for the decrease in income due to a reduction in working hours. In such a case, employers have no right to terminate employees as the new contractual agreement reflects the reduced working hours (MHRSD, 2020). This regulatory rule creates a mutually beneficial situation as it removes the unnecessary labour cost out of the employers’ financial burdens and encourages them to keep their staff. At the same time, it helps employees secure their positions until the pandemic finishes, which also positively impacts employees’ psychological and mental health well-being as their feeling of financial security increases. Moreover, MHRSD established “Ajeer”, the online platform that aims to match the Saudi employees and expertises that lost their job because of the pandemic with employment opportunities and introduce them as a suitable alternative to foreign labour recruitment. To protect employees, the Saudi Ministry of Health (MOH) issued new precautionary measures to reduce the number of the office attending employees to be a maximum of 40% of the original company’s workforce, obligating companies to shut down health clubs and kindergartens inside the company’s premises. These measures aimed to guarantee that adequate distancing is maintained between employees in the workplace. Only critical and indispensable sectors such as medical, food, power and communication were exempted from this rule. The new measures obligated workplaces with the capacity of attending workers 50 or more to install a checking station at the entrance for temperature and COVID-19 symptoms inspection. Any suspected infection would be exempted from work and send for COVID19 testing, and companies are obligated to disclose their employees who display flu symptoms, such as high fever, coughing, breath shortness, or have been in touch

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with an infected case (SPA, 2020). In terms of social protection, the Saudi Ministry of Human Resources and Social Development and the General Authority of Awqaf (Endowments), with the participation of some Saudi non-for-profit organisations, approved SR 500 million and launched the “Community Fund” initiative. The initiative aimed to stimulate the non-for-profit sector, which considers a strategic partner of the Saudi government in its community sustainable development efforts, to undertake its social responsibility and contribute to confronting the pandemic implications on the Saudi community and supporting the government to mitigate the impact of the COVID-19 on the different life aspects in Saudi Arabia. The gathered funds directed to social solidarity activities and support the most harmed and vulnerable segments of the Saudi society, such as the poor, disabled people, elderly, widows, and convicts’ families (SPA, 2020).

7.8

COVID-19 Impact on the Saudi Economy

The Saudi community and economy are simultaneously countering two of the most significant challenges that the kingdom has seen in many decades, COVID-19 and the historic decline in oil prices due to the pandemic’s global economic implications. Both negatively impacted the KSA society and economy. Algamdi et al. (2021) argue that in addition to the adverse consequence of Oil prices decrease on the Saudi Gross Domestic Product (GDP), the strict measures that the Saudi government posited to confine the COVID-19 spread generated significant economic harm. The Oil price saw aggressive fluctuation during 2020 due to the uncertainty and shrinkage in the global economy. The Oil rate fell in April 2020 to record the lowest price in 17-year (18.4 USD for Brent crude) before it started to increase again slightly (EIA, 2020). Which critically doubled the impact of COVID-19 on the Saudi economy (Algamdi et al., 2021). In 2020 the first quarter (Q1), the Oil sector contribution to the Saudi GDP reached approximately 22.2%, recording a drop of 4.6% in the Oil revenue and causing a 1.0% contraction in the overall GDP increased to 4% in the first half 2020, as the pandemic led to a significant decline in the overall export revenue in 2020, which declined by 20.2% compared to 2019, due to the sharp fall in Oil exportation by 21.9% (GAFS, 2020). These ratios were expected to experience a considerable drop in 2021, driving another downfall in GDP and anticipated governmental revenue due to the high restrictions on travelling and other transportation activities to confine the spread of COVID-19 and the expected reduction in the Oil demand (Algamdi et al., 2021). However, due to the Saudi government persistent effort in supporting the private sector, particularly the small and medium-sized enterprises, encouraging local and international investments, and the implementation of the Saudi Vision 2030 development programs, such as the Fiscal Sustainability Program, Privatisation Program, National Industrial Development and Logistics Program, and the Financial Sector Development Program, in addition to the anticipated positive role of the development fund in assisting the Saudi economy, it is expected that the GDP will achieve a

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positive value of 3.2% in 2021 (MOF, 2020a; Vision 2030, 2021b). Undoubtedly, the crisis folds many risks. However, prudent crisis management could turn some risks into opportunities (Ulmer et al., 2017). Although the COVID-19 pandemic represented a high threat to the Saudi economy, it stimulated the Saudi decisionmakers to accelerate the implementation of their plans for diversifying the Saudi economy. In this vein, on December 15th 2020, the Saudi cabinet signed the budget for the fiscal year 2021. The new budget aims for responding to the intensified uncertainty generated by the COVID-19 pandemic and its extended consequences on the global economy and consequently the Oil revenues. According to MOF (2020a) in the shade of the ambiguity and uncertainty that characterise the global economy, mainly after the COVID-19 first wave and the expectations of second and maybe third waves, it has become difficult to predict when the pandemic could be finished. Accordingly, many countries struggle to avoid the crisis repercussions on their economic growth. Therefore, the objectives of the Saudi budget for the FY2021 were developed to ensure the government’s capacity to manage the disaster, incrementally retrieve the growth velocity of the Saudi economy, boost the social support and fund programs that targeting providing vital public services and backing businesses growth. In the wake of the Oil prices drop, which was one of the painful impacts of the COVID-19 pandemic on the economy in KSA, the Saudi management realised that relying on Oil production could hold significant financial risk for the Saudi economy, which urges the diversifying of the Saudi government revenue resources. Thus, the budget came to reflect the Saudi financial approach to balance economic stability and economic growth while striving to improve the non-oil sources of revenue, elevate the private sector’s contributions to diversify the sources of the GDP, and enhance the efficiency of government spending.

7.8.1

Impact on the Saudi Labour Market

The second significant impact of the COVID-19 pandemic on the Saudi economy is linked to the labour market, which predominantly relies on foreign workers who constitute approximately one-third of the total Saudi population and 80% of the workforce, many of them are low-skilled labour that is working in construction sites, hospitality, security, and house assistance. Unfortunately, the pandemic threatens their job security, income, and remittances to their dependents in their original countries (Algahtani et al., 2021). The potentials that the affected foreign labour could leave the KSA, in addition to the increased VAT (Value Added Tax) from 5% to 15% in July 1st 2020, negatively impacted the rate of domestic consumption (Al Gahtani et al., 2020). In this vein, Havrlant et al. (2021) argue that the COVID19 pandemic, long lockdown periods and the associated high uncertainty increased the inclination to money-saving and expenditure rationalisation. Consequently, a reduction in domestic consumption in the KSA. Typically, such spending reduction will impact the Saudi budget as the income decreases while the spending on the

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automatic stabilisers (Havrlant et al., 2021). The budget mechanisms (e.g. tax exemptions) used to balance the economic slowdown could emerge, such as the social transfer, which is a change in people’s spending habits or volume to mitigate their monetary burden (Barrientos, 2012; Dolls et al., 2012). In a study conducted on the impact of the COVID-19 pandemic on the Saudi labour market, Al-Youbi et al. (2020) argue that the pandemic resulted in an economic slowdown leading a vast number of the foreign labourer to back home, creating a considerable gap in the Saudi labour market. However, this gap can be filled by the Saudi labourers, in which have been trained and qualified through the Saudisation program as a part of the Saudi Vision 2030. Also, the challenge created by the pandemic urges the development of new policies to increase the cooperation and coordination between the Saudi Universities and vocational education institutions from one side and the labour market management from the other side to control the process of qualifying, training, recruiting the required number of workers and employees from Saudi people. Thus, the COVID-19 pandemic could represent an opportunity to expedite implementing the KSA Saudisation strategy and reform the Saudi labour market with Saudi labourers (Al-Youbi et al., 2020).

7.8.2

Impact on Saudi Corporates’ Business Model

The COVID-19 pandemic has changed the business model of many Saudi corporates, either Business to Customer (B2C) or Business to Business (B2B) had to follow the Saudi customers, which shifted to online trading as a contactless and secured alternative to the conventional shopping approach (Jan et al., 2021). The repeated curfews and lockdowns posited by the Saudi management to minimise the virus spread have significantly harmed the Saudi trade and business sector and slashed the number of commercial transactions. Therefore, the online solution seemed like the most convenient business model that suits the status quo (Algaissi et al., 2020). Accordingly, e-commerce in the KSA underwent fast growth. However, while such change was helpful for large-sized businesses that possessing established online platforms and experience in managing online interaction and sales transactions, it was challenging for small businesses that lack the required resources and experiences. According to Logistics (2020) some big Saudi retailers who embraced the online sales reported that during the pandemic, the average sales raised by 200% and the average basket value (order value) grew by 50%, while the installation of the company’s online application increased by 400%. On the other hand, SMEs in Saudi Arabia struggled to cope with the new normal enforced by the pandemic and needed quick support from the Saudi management (Jan et al., 2021). Despite its negative impact on health and life loss, indirectly, the COVID-19 pandemic contributed to expedite the achievement of one of the Saudi vision 2030 objectives, which aims to expand the use of online money transactions significantly from 35% in 2020 to reach 70% in 2030 to replace the cash method in the commercial transactions (Vision 2030, 2021a). E-commerce is currently expanding

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in Saudi Arabia to involve the trading of various products and services (Statista, 2020). Many companies saw improvement in their financial performance due to the increase in online sales, mainly, companies within the medical, food and beverage, and home entertainment services as a result of the extended lockdown and curfew hours (Jan et al., 2021).

7.9

Conclusion

This paper aimed to investigate the measures and actions that the Saudi government embraced to mitigate the COVID-19 pandemic implications. During the research, it was evident that the Saudi management was proactively braced and ready for the battle even before the first case was confirmed in 2020. Besides other implications on the labour market and the business dynamics, Saudi Arabia harshly suffered dual shocks from the deadly impact of the COVID-19 pandemic and the oil price drop and its harmful effect on the Saudi economy. However, strict health measures such as the lockdown, curfews, social distancing. Also, the supportive financial policies, such as approving economic stimulation packages and tax and debts defer, in addition to the massive support of the Saudi government to the health sector and providing the required medical supplies, led to significant mitigation in the destructive impact of the COVID-19 pandemic. On the other hand, as risk could be a threat or an opportunity, the study highlighted some opportunities that could be implied in the current situation. For instance, the oil price historical drop can be an opportunity to expedite the Saudi Vision 2030 implementation regarding diversifying the GDP revenue resources. Similarly, foreign labourers’ departure and business transformation to an online model could accelerate the Saudization strategy’s execution and replace cash with electronic money transfer in commercial transactions, respectively, which are essential elements of the announced Saudi Vision 2030.

7.10

Suggestions for Further Research

During the research, it was noticeable that the research on the implications of the COVID-19 pandemic still in the early stages (Ratten, 2020), yet the pandemic impact is not quantified in many countries and sectors. This opens a broad field for more research on the pandemic impact shortly. Also, the best of the author knowledge, research on the COVID-19 pandemic in the Middle Eastern countries, in general, and Saudi Arabia, in particular, focused on the role of the governments in facing the pandemic, and no studies addressed the role of the corporates in mitigating the impact of the pandemic on the society as a genuine CSR practice. Also, few studies targeted the effect of the pandemic on the customers’ behaviour. However, these few studies neglected the impact of CSR performance during the pandemic on the customers’ purchasing decisions, and in return, how that could impact the

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companies’ adoption of CSR practices, which could also be attractive topics for future research.

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Chapter 8

Fostering Entrepreneurship: Towards a Model to Support Community Managers Gislene Feiten Haubrich

Abstract The chapter addresses entrepreneurship in collaborative spaces from the perspective of the work activity, understanding it as continuous debates of norms. The theoretical study is organised to answer the following questions: do community managers potentially boost entrepreneurship in coworking? If yes, which tools do they have at their disposal to do so? From the six ingredients of competence, it is proposed a model to push entrepreneurial activity in coworking. Two main contributions are made to the literature. First, new ways of working are addressed, understanding the development of entrepreneurial actors in collaborative workplaces. Secondly, it proposes a model to help community managers focus on theirs and the coworkers’ entrepreneurial activity in a collective effort. Keywords Competence · Entrepreneurial activity · Work · Ergology

8.1

Introduction

Societies worldwide have been struggling to deal with many challenges in different dimensions of their collective fabric since the 2008s global crisis. Economy, education, labour market, among other elements of life in society, are highly affected by technological sophistication (Schwab, 2016), which goes far beyond the advancement of human capabilities to cope with the diversity of worldviews and ways to understand life. The recent coronavirus pandemic, on its side, has been wiping the world, stressing those existing challenges to the edge (OECD, 2021). The recovery, though, remains uncertain. Moreover, as pointed out by researchers, Gross domestic product (GPD) does not suit as the best method to measure recovery (van Bavel & Rijpma, 2021). This scenario is even more complex considering the environmental limitations and the urgency of shifting production and consumption patterns (Revéret et al.,

G. F. Haubrich (*) CITCEM/UP, Vila Nova de Gaia, Portugal © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 V. Ratten (ed.), Entrepreneurial Connectivity, https://doi.org/10.1007/978-981-16-5572-2_8

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2015). The current rhythm of competition has been proved dangerous and problematic regarding the waste of resources, the precarity of labour conditions, and several rifts on social bonds. Is it possible to restore those ties? How can trust be built among the actors who make business happen? Echoing Ratten’s (2021, p. 91) point of view, it is argued that “entrepreneurship is essential in times of crisis as it provides a positive outlook to new conditions”. Creating new ways of offering goods and services is crucial to introduce a different approach to competition, making it fair, creative, and glocally-centred. In this context, it is believed that coworking might play a key role. On the one hand, starting running a coworking space itself is an endeavour, especially in independent spaces (Bouncken et al., 2020) or resilient ones (Gandini & Cossu, 2019). On the other hand, coworking implies the encounter among actors with diverse backgrounds and has the potential to boost entrepreneurial initiatives (Gauger et al., 2021). Nonetheless, getting together to create new perspectives on business (and behaviours, of course) is not a natural event, but the naturalised possibilities of people running to each other allowed by work conditions. Architecture, design, ergonomics, and other environmental circumstances are crucial, but making people engage together also demands human efforts. Coworkers look forward to coworking to overcome isolation (Boboc et al., 2014), produce serendipity (Moriset, 2013), increase productivity (Reuschke et al., 2021), among other reasons (Gandini, 2015). As a central point to achieve any of these goals, the work managed by the staff seems essential once they have the mission of helping in the building bridges process among those who share the environment. Nonetheless, in terms of research, the spotlight barely turns to this crucial yet controversial activity. From Merkel’s (2015, 2019) perspective, hosts are curators of strangers, meaning their activity develops around assembling and gathering people. Dandoy (2021) understands that managers are catalysts, while Brown (2017) and Haubrich (2021) prefer to call it mediation in coworking. Some questions guide the reflection: do community managers have the potential to boost entrepreneurship in coworking? If yes, which tools do they have at their disposal to do so? Previous work has shown the potential of the notion of competence to approach the entrepreneurial activity of workers in coworking spaces (Haubrich et al., 2021). However, a practical path was not provided. The chapter proposes a model to support the community managers to push entrepreneurial activity in coworking spaces. Two main contributions are made to the literature. First, new ways of working are addressed, understanding the development of entrepreneurial actors in collaborative workplaces. Secondly, it proposes a model to help community managers focus on theirs and the coworkers’ entrepreneurial activity in a collective effort. The chapter is organised into two main sections in addition to its introduction and conclusion. The first one is devoted to discussing entrepreneurship in coworking spaces, and its structure is three-fold: starting by understanding coworking as a practice, following to approaching entrepreneurship (Filion, 1998, 2002, 2018, 2020) and, finally, presenting the competence ingredients (Durrive, 2016; Schwartz, 2003). The second section presents a theoretical model to support future fieldwork

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on developing entrepreneurship with high local impact. To test the prototype’s applicability, an excerpt of a coworker interview from previous fieldwork is included, identifying strengths, fragilities, and the indication for future studies.

8.2

Entrepreneurship in Coworking Spaces

Entrepreneurship has been enticing workers worldwide looking forward to designing their own business and changing ways in societies constitution. The motivation depends on necessity or opportunity (de Vries et al., 2020), but entrepreneurs “are a fundamental engine for economic growth” (Ratten, 2021, p. 96). Entrepreneurs are compared to artists once their metier lies on “defining and redefining contexts” (Filion, 2017, p. 60). From such a view, it might be assumed that crisis scenarios require more entrepreneurial thinking (Ratten, 2020), aiming to create new forms of offering goods and services to people. Such a way of reasoning implies an entrepreneurial activity as an “enterprising human action” focused on conceiving solutions through “products, processes or markets” (Ahmad & Seymour, 2008, p. 14). Hence, having an entrepreneurial activity has a broader sense, including different actors connected to entrepreneurship. More polemic, though, the definition of what it means to be an entrepreneur varies according to the researcher’s standpoint (Filion, 2011). Here, the focus on the entrepreneurial activity appeals to a broad sense of entrepreneurial roles in coworking. As entrepreneurship has increased in society and academic research, the related concept of “entrepreneurial ecosystems” has also risen as a fruitful metaphor to put the entrepreneurial activity in the spotlight (Audretsch et al., 2019). In that direction, the conception of microclusters (Capdevila, 2014b) defines coworking as the milieu to nurture entrepreneurship at an intermediate level. Coworking is understood as a “harbour” to entrepreneurs due to the freest flow of ideas without any hierarchical restriction (Bouncken & Reuschl, 2018). Since its emergence in 2005 (Rus & Orel, 2015; Spinuzzi, 2012), the coworking phenomenon has become even more multifaceted than its original endeavour had has predicted, assuming a hybrid role of “cross-pollination” and growing in typologies and goals (Orel & Mayerhoffer, 2021). The number of entrepreneurs and solopreneurs working in this kind of environment has increased in the last few years (Natalie Mitev et al., 2019), suggesting that independent workplaces might play a decisive role in facilitating entrepreneurship and new business models, notably digital ones (Bouncken et al., 2020). Meanwhile, the work of staff, especially community managers, remains related to administrative tasks. Entrepreneurial thinking is crucial, though, to create differentiation on translating (Bhabha, 2012) coworking values (Bacigalupo, 2016) and arranging the organisation. Although possible connections between coworking and entrepreneurship have been highlighted in the literature, understanding the activity as its ties up point remains overlooked. The next subsections address the two lines of this node, which seems appropriated to understand competence as its imbrication. From the

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notion of coworking as a practice to a human-centred perspective of entrepreneurial activity, the threads are sewed in the third subsection.

8.2.1

Coworking as a Practice

According to Jones et al. (2009), coworking may possibly be understood as a tripolar concept: an activity (verb), a space (adjective), and a movement (proper noun). Still, efforts are barely made to imbricate these three dimensions. Research often lies in space features as the main factor to thrive in coworking-spaces (Bouncken, Aslam, & Reuschl, 2018). Some work has been done concerning the activity. However, a diverse definition characterises it. For example, Tomokazu and Uda (2018) and Uda and Abe (2017) consider the activity as the promoted events, while Spinuzzi (2012) anchors his definition as a collaborative and inter-organisational object. Haubrich and Freitas (2019) face the activity as a process that combines adherence (situation) and desadherence1 (norms). Finally, the dimension of the movement remains on activist initiatives outside the academic walls. If the coworking values (Bacigalupo, 2016) are evoked (Merkel, 2015; Waters-Lynch et al., 2016), they remain shortly connected to the other two dimensions. Approaching coworking on such a tripolar base means understanding it as a practice. What does that mean? It is connected to a relation with the theory, or as translated by the ergology, the relation between adherence and desadherence (Durrive, 2015; Durrive & Haubrich, 2018). On the one hand, situations are always surrounded by norms, definitions in desadherence, resulting from maturation and exhaustive thought. It can be defined as the efforts to restrain human experiences. On the other hand, a norm, or the theory, always mismatch the real, the concrete and situated. The distance between the prescript and the real demands a decision, an answer guided by a debate of norms (Schwartz & Durrive, 2003). Figure 8.1 attempts to represent the mentioned dynamics. The debate of norms is the defining point of the practice as a transgression of the theory. Therefore, conceiving coworking as a practice requires setting the activity as a central point, which takes place in a specific space and is guided by values in a concrete situation. The consequences are two-fold. First, interactions from the activity assume significance in defining coworking as an organisational arrangement communicatively constituted (Haubrich, 2019). In this context, people usually chose where they are going to work; in which kind of community they feel they fit and evolve on their activity. Field research has shown that if workers are digital nomads, they probably will prefer to be part of a more fluid group. Otherwise, entrepreneurs, freelancers and remote workers tend to select a space to stay for a year, at least.

1 From the French desadhérence. The dialogical-dialectic process of the work activity, from the ergological perspective, will be developed in the next subsection.

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Fig. 8.1 A representation of the practice in coworking (Author’s own)

Secondly, the relative long-term stay allows the community to establish itself from a range of norms and renormalisations, which ultimately are forms of interaction from micro, meso and macro levels (Haubrich, 2020). In other words, from the interactions sustained by the work activity, coworking constitutes a practice expressed as an organisational arrangement (provisional system of norms), including the often-shared environment, the values2 translated on decisions, and the dialogic experience of work. Grounded on such arguments, it seems valuable to address the mediative role of community managers in grasping how the adherent moments of work activity cross norms from the space, the phenomenon, the professional status, among others. The next section approaches the entrepreneurial activity, instigating the co-relation among those norms.

8.2.2

The Entrepreneurial Activity

The inherent diversity of coworking can be assumed as a source of inspiration for entrepreneurial activity. Filion (2008, p. 25) recognises entrepreneurship as “an imminent inter-active process”, an insightful perspective to understand such a way of working. Filion (1991, 2002, 2008, 2010) is interested in developing a framework to support the learning process embedded in entrepreneurship. The first element of his proposal is the concept of “vision”, a projection, an ignition towards individual 2

Coworking Wiki: openness, community, accessibility, sustainability, collaboration (Bacigalupo, 2016).

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aspirations concerning different outcomes on his/her business. The “visionary process” is compounded by three categories (Filion, 1991, 2010), or moments, as it is preferred here. First, “emerging visions” correspond to the many possibilities popping up in the entrepreneur’s mind till they evolve into a consistent “central vision”, which is the elected goal guiding the subsequent actions (Filion, 1991). The intended projection is sustained by the combination of external (identification of breaches in the market) and internal (the available conditions to fill the recognised gaps) components. Those components nurture “secondary visions”, or the specific management activities expected to be held to achieve the central vision (Filion, 1991). Three main factors determine the developments of the visionary process: the self-concept, the self-space, and the most important, the relation system (Filion, 2002, 2008). The centrality in the entrepreneur’s capability of projecting proposed by Filion remains relevant because it focuses on the human dimension of the process. Instead of devoting his attention to a business plan or other tasks (Pierre & Burret, 2014) related to the entrepreneurial activity, Filion seeks to understand how entrepreneurs learn and thrive from their daily experiences, which are always unique. The framework arranged by Filion (2008, 2010) comprises what could be qualified as outcomes of the entrepreneurial activity. The central vision results from the emerging visions and becomes concrete by the secondary visions. The self-concept is an image, a result relatively stable concerning the view the individual has about him/herself. It is surrounded by the self-space, the spatial configuration defined by the relations system, framing the amplitude of the self-concept. However, how are these pieces coming up together? How does the entrepreneur realise the vision? From Filion’s point of view, it is learnt the entrepreneurship is fundamentally an initiative of an individual who looks different to reality and acts on it. Is it possible to flourish and nurture entrepreneurial behaviour? Actually, it is expected that people develop an entrepreneurial mindset (European Commission, 2018). However, the main tools at disposal to do so keep the concrete reality perceived by workers implied. Inevitably, it puts human efforts at the margin, highlighting the visible dimension of work while the ingenious process seems secondary. It is argued that the ergological perspective may contribute to understanding entrepreneurial activity differently. Three arguments support the proposed contribution. First, ergology is a pluridisciplinar approach to study the work activity (Schwartz, 2007, 2015) despite any professional occupation. It proposes knowledge production based on the dialogue, or a kind of confrontation, between academics’ and workers’ knowledge (Di Ruzza & Schwartz, 2021). Secondly, ergology’s main concept, inherited from the canguilhemian philosophy, is the notion of activity (Schwartz, 2006), defined as “the continuity of the debates of norms in which the self-body is the melting-pot (creuset)” (Schwartz, 2011). Third, the wide scope of norms confronted by workers in real situations is mediated by values, the weight each individual puts on decisions while living his/her activity (Durrive, 2015). These characteristics on approaching work as a human activity allow a detailed understanding of how the entrepreneurial activity can be an engine on societies’ directions. The notion of competence supports de journey.

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Competence Ingredients

To this point, the notion of coworking is presented as a practice involving regular encounters among members of a community. People choose to work in a specific space because they recognise the translation of the concept as fruitful and suitable to conduct their activity. On the one hand, besides any professional category, workers in coworking spaces supposed to develop an entrepreneurial perspective of reality, meaning the initiative taken in doing something differently (Filion, 2011). On the other hand, coworking itself assumes the form of an entrepreneurial organisation once the concept flows through new ways of working (Constantinescu & Devisch, 2018; Dandoy, 2021). In order to approach competence as a bridge among workers by entrepreneurial activity, it is necessary to understand the individual who works in this kind of environment. Filion (2002) provides an interesting starting point while arguing that the selfconcept triggers the visionary process. In his turn, Schwartz (2011) proposes the concept of self-body (corps-soi) to highlight the enigmatic dimension of the being who works. The body is understood as a whole, anchored by biological, social/ cultural, and singular dimensions because experiencing a human activity is always a dramatic process (Schwartz & Durrive, 2003). Dramatic means something happens in real situations besides what was prescribed, asking the self-body to observe, evaluate and decide; in ergological terms, the debates of norms. The activity is a crossroad where uses from others require the use of one’s self-resources. For example, an entrepreneur uses his/her knowledge, relation system, and worldviews to identify what is required by the other. The opportunity refers to navigation on a sea of norms, finding the best bay to anchor. Debating norms and renormalising them are the pillars of activity. The human-centric perspective of the entrepreneurial activity is delineated and supports a model towards its development in coworking spaces. However, understanding the self-body as a complex being (Schwartz, 2011), who creates a selfconcept (Filion, 2002) sustained on norms seized from the milieu (Durrive, 2015) by the relation system (Filion, 2010) to sculpture a self-space (Filion, 2008) is the genesis to approach competence as a seed to foster entrepreneurship. Recreating ways of offering goods and services starts by shifting the look to the coworker beyond a consumer, confronting the status quo of the relationship system from a linear point of view to a circular, interfaced one. Deviate the route asks for a grounded standpoint, challenging the definition of competence as a checkbox of expected achievements. The view of competence as an evaluation process that passes by the debate (Durrive, 2016) is supported by six ingredients, which keep the general and comparable but overflow the prescriptive dimension to stress the inventive one. The first ingredient refers to the capacity of dealing with protocols, codes, prescriptions in a work situation. The second ingredient, in opposition, is related to the historical incorporation of the situation, including all elements that cannot be anticipated, therefore, are unique. Schwartz (2003) defines it as the “encounter of

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Fig. 8.2 Ingredients of competence

encounters”: the self-body encounters his/her context, which is full of different and unexpected people and events. For example, a coworker knows others will be found at the space while he/she is there. Nonetheless: who, when, where (in which part of the coworking) or the specific circumstances remain open questions. Hence, someone might have the intention of meeting someone else, but many events are going to happen other than expected and set the encounter if it happens. The necessity of acting on a specific situation while following some previous definitions implies an articulation between general and singular. The required intersection is the third ingredient, which expresses the result of the activity. These three ingredients describe the dimension of the act when evaluating competence (Durrive & Haubrich, 2018). It is important to observe, though, the ingredients 1 and 2 are not controlled by the actor but are the base of the milieu imposing itself, aiming for an answer, an initiative of the actor (Canguilhem, 2015; Durrive, 2016). Ingredient 3, otherwise, concerns the visible part of work and the usual evaluation point of competence. In another way, ergology invites a dive into a learning process sustained by the actor’s point of view about the act (Durrive, 2016). At this point, it is argued that managers’ work in coworking spaces might be valuable to develop entrepreneurial activity along with coworkers. Thus, three ingredients complete the notion of competence. From the articulation (ingredient 3), it is possible to evolve the actors’ decision-making process by a dialogue identifying and reflecting upon their perspectives. Figure 8.2 summarises the methodological path. The articulation experienced by human activity goes beyond the yes or no as answers to determine a decision. Ingredient 4 lies in the debate of values imbricated to the debate of norms. It “is an opportunity to debate the specific dynamics and constraints at the workplace” (Schwartz, 2016). A value is a weight attributed to the components of a situation (Durrive, 2016). Accordingly to one’s trajectory, a point of view based on his/her values is established. The evaluation of an activity must consider which criteria were important to the actor while living it. Ingredient 5 refers to the resources the actor has at disposal to support the articulation, while ingredient 6 includes the mutual benefits of being part of a specific collective. The ingredients are interdependent and reveal a synergic result. The singularity of each actor is combined by their collaboration and sharing activities. They are part of and build a collective full of resources (norms). Dialogically, they increase their immaterial patrimony (knowledge, values, worldviews) while nurturing the collective one.

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Keeping all these points in mind, it is important to reiterate that this investigation focuses on independent coworking spaces (Bouncken, Laudien, et al., 2018), bottom-up initiatives (Capdevila, 2017), which are more likely to enfold resilient practices. The balance between economic sustainability and social impact defines the value logic holding up such an approach (Gandini & Cossu, 2019). Its possible achievement demands a cross-organisational understanding and a compromise from the actors in their endeavours. Therefore, cultivating an entrepreneurial activity goes further than the status of being a businessperson. It is a perspective that crosses all human activities. However, its progress relies upon connecting with the other. From the developed background, it is possible to present and expand the model to support community managers in their mediating role to boost entrepreneurship in coworking.

8.3

Approaching Competence: Towards a Model to Foster Entrepreneurial Activity

Several reasons motivate an approach to competence in the entrepreneurial context of coworking. First, since the “boom” of this kind of collaborative spaces in the mid-2010s (Akhavan et al., 2019; Moriset, 2013; Orel et al., 2021), managers have been struggling to highlight differences between coworking and other shared offices (e.g., business centres). Approaching the work beyond its visible part by inviting and supporting workers on their maturation process of the experience enhances the look to the different shapes and forms of reality. Secondly, building an organisation grounded on community, collaboration, openness, sustainability, and accessibility (Bacigalupo, 2016) is not easy or natural. Contrarily, it demands devotion, efforts, and real compromise. The notion of competence grows each of those values by a concrete practice. Perhaps the “how” question is still open, but it will be explicitly tackled in this section. The research endorses perspectives pointing out the activity of the community managers, in particular, and of the other staff members, in general, to the direction of mediation, encouragement, and curation of actors with specific goals and diverse backgrounds (Brown, 2017; Dandoy, 2021; Haubrich, 2021; Merkel, 2015, 2019). Such a view allows the affirmation that community managers do have the potential to boost entrepreneurial activity in coworking. The tools available to them are the events with multidimensional focuses (e.g. networking, education, wellbeing), promoting intended knowledge sharing (Capdevila, 2014a; Fabbri, 2016; Fabbri & Charue-Duboc, 2013). The spatial dynamics yielding unexpected encounters also is a resource often well developed (Bilandzic & Foth, 2017; Capdevila, 2019; Natalie Mitev et al., 2019; Schmidt & Brinks, 2017). Finally, there are community managers that ask for information at the time of admitting coworkers at the workplace and build a database constantly (or not) updated or accessed to improve the business.

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Fig. 8.3 Model to approach competence (Author’s own)

These recognised tools allow community managers to increase the levels of entrepreneurship in coworking because they push people by creating forms of interaction. However, the experience of diversity at work is kept aside, missing opportunities for coworkers’ vision and relation system improvements to develop their self-space and acknowledge their self-concept (Filion, 2008). The notion of debates of norms (Schwartz, 2011) supports the proposition of a tool to encourage coworking members to challenge their entrepreneurial activity. As mentioned previously, the ergological view of the activity lies in the idea of the imbrication between adherence and desadherence by the debate. This epistemological assumption guides all the techniques applied to approach human activity. Any ergological device is supported by three poles: 1 – antecedent norms, formal knowledge; 2 – concrete situation lived by the worker, the protagonist of the activity; and 3 – debate among poles 1 and 2 (Schwartz & Durrive, 2003, 2009). The proposed tool (Fig. 8.3) is rooted in the Working meeting groups (WMG),3 which is a modality of intervention aiming to produce knowledge from work. According to Durrive (2016), the WMG represents a possibility of socialisation of points of view, which are always conceptual and axiological, allowing workers to maturate their concrete experiences at work. It is intended to help workers reappropriate daily events questioning how they have used their self-body based 3

Groupes des Rencontres du Travail - GRT

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on the uses demanded by the others; how did they conciliate the tasks face the environmental conditions (Mailliot & Durrive, 2009). The purpose of this meeting is to create conditions, meaning time/space, for each participant to rediscover his/her competence from the challenges and difficulties dealt with in specific and indigenous ways. “As more one is aware of the normative frame he/she exists, more one is aware of the singularity of each actor engaged in the process of work” (Mailliot & Durrive, 2009, p. 159). The device presented in Fig. 8.3 is based on the ergological tool WMG. It highlights the three steps on approaching the work activity in coworking from a competence point of view. A coworker statement from previous fieldwork (Haubrich, 2019) was selected to simulate each step of the process to test the model’s applicability. The competence “Working with Others”, available at the EntreComp framework (European Commission, 2018, p. 7), is defined as the theme, which is conceptualised as: “work together and co-operate with others to develop ideas and turn them into action; network; solve conflicts and face up to competition positively when necessary”. The framework foresees fifteen competencies arranged in three areas, and the chosen one belongs to the “Into action” one. It seems suitable because it addresses the dimension of competition, which is a central theme of the book, and one of the challenges the research aims to tackle to support its redefinition. First Step – Norms The model is intended as flexible as possible, allowing the community manager, or another animator, to conduct the meeting by addressing any difficulty that might come up. First, he/she can choose which competence approach, defining the best order, supposing the EntreComp framework will be the normative guide. However, other sources might be selected, and it will not compromise the following steps. When defining the theme, it is important to keep looking to the community’s needs in terms of developing the entrepreneurial activity or the debates of norms related to identifying opportunities. To this chapter’s experimentation, the searched opportunity refers to the competence of working with others. In which situations coworkers recognise they are working together? How the situations highlight the values guiding the activity? These, among others, might be questions supporting the preparation while choosing the theme of the meeting. Once defined the theme and concept regarding the chosen competence, the community manager gathers participants, letting them free to join the group. However, it is not recommendable people to get in/out during the meeting, which could spoil the progress of the exercise. At the beginning of the meeting, the animator (community manager) will present the “rules of the game”: a) avoid using smartphones or other devices to concentrate and develop listening/focus skills; b) avoid leaving the meeting before its conclusion; c) each coworker assumes the role of ‘tutor’ one of the others. The assignment of the tutor can proceed with the criteria established by the animator. It is suggested, though, a neighbouring designation. Rule ‘c’ will better be explained in the following section. For now, it is worth to mention the first step relies on ingredient 1 of competence. Therefore, its main purpose is to present norms concerning the dynamic of the meeting and the concept of competence to be discussed.

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Steps Two and Three – Narrative Activity and Collective Work The next step of the model count on competence ingredients 2 and 3, targeting the activity from a narrative point of view. After the concept’s presentation, coworkers are invited to tell a story based on situations they experience in their daily life at work, grounding the definition at practical stakes. Related to the situation (ingredient 2), it could be mentioned where it has happened, at what time of the day, who was close/affected by it. Regarding the decision which articulates the concept of competence to the situation (ingredient 3), aspects of being part of a community should nurture the narrative. The purpose is to incite the speaker to think about his/her inventive work, even if it is not directly affecting the business. While listening to the story, other coworkers shall identify ways to get deeper into the narrated activity, especially the ‘tutor’, who has the main role in posing questions to help his/her neighbour enriching the evaluation. After the speaker finishes his/her narrative activity concerning the competence initially conceptualised, a third moment gets through it from the questions raised by the ‘tutor’. Steps two and three are interconnected because circumstances, values, and resources (from the self and the collective) can be recollected from the narrative and enhanced by the debate. The neighbours, mainly the tutor, can address questions regarding a maturation process for both speaker and listeners. From a dive in his/her narrative, elaborating tacit knowledge to interpret the competence, to the attention requested on formulating the questions instead of providing advice, a different approach is encouraged to people get in touch. The role of the animator, played by community managers, is crucial to guarantee trust and collaboration among the participants. Their help consists mainly of focusing on the facts of the narrative, letting the speaker notice the details brought out in the story (ingredients 4 and 5). An excerpt of a coworker narrative is introduced to exemplify the model’s dynamic. “So, I think my neighbour has said something like: ‘it’s too warm in here’. This morning, I was the one who turned on the heating of the coworking space. At that point, I believe we had achieved the temperature balance. This morning was really cold, but it was exactly like yesterday, I turned on the heating [in the morning], and in the afternoon, I felt it was too warm. So, when we realised that has happened, I lowered the heating in two degrees, and I let everybody know: ‘this morning, I turned on the heating, and I lowered it down in two degrees. If you think it is not ok, we can change it’. When my colleague said it was too warm, I told him: ‘you can turn it down if you want’. I felt responsible for turning on the heating, then [. . .] I am responsible for turning the heating on. I took the responsibility to turn it on, letting everybody know. I know when someone else does something, others will not feel truly legitimated to change it if they need.”

The excerpt expresses a situation not directly related to the coworker’s business, author of the narrative. Otherwise, it illustrates an ordinary event: the temperature agreement in the workplace. Supposing the tutor’s role, the questions should invite a reflection concerning this fact. For example, it could be asked: what do you mean by responsibility? Which are the requests to be legitimated to do something? What has encouraged you to take the initiative? What, in your perspective, is a good way to let everybody know about a change in the environment? Those questions might

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generate other reactions, and here, the animator plays an important part considering time, approach, and imbrication to the theme. Close to the challenges a mediator has, the individual at this position should assist a collaborative flow of ideas, avoiding criticism, engaging people to cross over the superficial layer of the narrative, especially the speaker. It is expected that each participant assumes the position of speaker, tutor, and listener, including the animator. In fact, he/she can start the meeting by sharing a situation picturing the definition of the competence. It is important to take notes and register the main ideas brought up by the group, which will be retrieved and validated in the final part of the meeting to underline the advancements on the competence concept guiding the WMG (ingredient 6). The closure of the encounter should highlight how the activity extrapolates the description of what must be done and promotes different aspects of daily life in the coworking space. Returning to the situation in analysis, ideas of “working together” and “co-operate” might be defined from the dimensions of responsibility, considering members’ self-image and the possible challenges to get through. Especially concerning the points of conflict-solving and ways to face competition, the meeting dynamic demands mainly three skills to evolve the situation: by telling a story as clear as possible, connecting it to the concept initially proposed. Here, the mediator should keep track and even read the concept again from time to time. It is required a common thread to focus on one competence at a time, grounding it to daily situations. What to do if someone gets off the path? The answer is linked to the skills of listening to a story and constructing questions in a way it shows how the desadherence and adherence get together. Improving the comprehension of daily experiences and how it could have consequences comes from the debates of what is expected, what frames the situation and the self-body and how he/she renormalise it. The activity embedded in the exercise is a key to highlight differences beyond its qualification as worst or best but accepting each one has challenges to deal with and singularities to learn about. The key is to incite and boost the visionary process. The description “network” could address ways of strengthening partnerships by knowing a bit more about each other. How are they close? How are they different? What could be learned from the gaps among the histories which could generate new ways of doing things? How one can support the other from what is missing? One might qualify these questions as another way to say what the word network summarises. However, it is important to remember that the worker has his/her relation system and self-space grounded on their previous renormalisations or ways of interaction with the milieu. Thinking from the ingredients of competence means enlarge a point of view by maturating experiences. As complex beings, or selfbodies, it is supposed that more ingenious forms of producing knowledge are promoted. The base to address the social practices from creative, novel, and critical ways requires equally complex tools to benefit the collective. One might ask how this circular dynamic could help to boost entrepreneurship. In that case, an argument must be offered. First, a creative process is established from the comprehension that an entrepreneurial activity relies on investing a different look

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to the reality and acting on it by creating new ways to arbitrate. When people are gathered and challenged to work collaboratively, a similar engine is on. Beyond providers fighting for clients, coworkers can identify and improve their differences, identifying ethical ways to work together. Second, from an approach to competence beyond the act, the visible part of the work, workers can dive into their intentions, values, knowledge, and any other resource they have singularly, that are not reproducible. They are also immersed in an activity based on trust, introducing distinct lessons from work situations. Finally, from the debates of norms holding the meeting, the visionary process can be nurtured, fortifying the relation system of each participant, and broadening the self-space, which is the base to a confident and reliable self-concept.

8.4

Conclusion

The chapter has addressed the notion of competence to foster entrepreneurship in coworking spaces. Among the available ways to study the phenomenon, the dimension of the entrepreneurial activity was selected from its broader sense of tackling the events and recreate contexts (Filion, 2018). The dimension of the activity was developed from the notion of debates of norms (Schwartz & Durrive, 2003, 2009), reflecting upon the different concepts and values learned from the relations system, upholding self-body’s (Schwartz, 2011) self-space and self-image (Filion, 2002, 2010). The notion of competence as the devoted actor’s point of view to the act (Durrive, 2016) endorses the debate of norms as a tacit knowledge process putting creativity and inventiveness in the spotlight. Those epistemological stakes hold up the mediation role played by community managers in coworking spaces. They are recognised as a “glue”, allowing the community to emerge and thrive. It might be supposed that such a position is vital to differentiate a coworking from a shared office. Nevertheless, they should be able to devote time to enjoy the possibilities of creating bonds with coworkers, which demands a different approach to manage the space in terms of its facilities, for example. They should pay attention to communication as the main process. However, communicating goes beyond sharing information but requires sensibility to identify how the interactions occur, how the cultural translation of global dimensions constitutes the phenomenon locally, and how the space exists in a broader community. Summarising the ideas stressed in the text, it is believed that the initial problem guiding the research was adequately answered. Then, it is possible to argue that community managers do have the potential to boost entrepreneurship in coworking spaces once they can create different forms of interaction. It is important to consider, though, community managers development of the entrepreneurial activity by observing and acting on the visualised opportunities. They already make efforts on promoting events, arranging the space, and collecting/analysing coworkers information. The proposed model to foster entrepreneurship, based on the working meeting

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groups, congregates the recognised potential of mediation and the communitybuilding process expected by coworkers, especially when they choose to cowork to avoid isolation and stimulate serendipity.

8.4.1

Contributions

The main contribution of the chapter is the model structured to approach competence among actors with diverse backgrounds and specific interests but sharing the need of boosting entrepreneurial activity in their work. The evaluation passing through the debates among workers ignites a learning process starting with self-knowledge and awareness of the normative frame surrounding how the self-body recognises itself. The concepts of self-image and self-space defined by (Filion, 2002) are understood by the possibilities of a deeper dive into the normative experience (Durrive, 2015), highlighting that delivering a result goes further the visible part, but increases the actor skills on listening to, interacting and collaborating with the others from their differences. They can build competition in an inventive way because they recognise themselves as capable of creating new solutions based on their perspective. In this sense, it was learned the entrepreneurial activity crosses all human activities, beyond establishing new companies, but creating solutions in forms of relationships from the observation and identification of opportunities. Thinking about new ways of working includes different ways of conceiving work, its relations, and results. The visionary process (Filion, 2010) provides important insights on how to approach entrepreneurial activity. The chapter supported a distinct way to explore its potential from a human-centred perspective. The selected phenomenon to challenge the model, coworking as a practice, seems rich to probe the odds in evolving communities. The role of the community manager appears with the potential to contribute to improving competencies, which are essential to face many social, economic, and environmental problems.

8.4.2

Limitations

The study is still a theoretical contribution to the field, which defines its originality and crucial limitation: the absence of fieldwork to supports its applicability. Despite a well-recognised and reliable conceptual framework and the fact model emerges from an established and tested ergological tool allowing a simulation from previous work, testing the model on the field is a primary requirement to validate acceptance of the proposal. The first suggestion, then, concerns the exploitation of the prototype, identifying strengthens and vulnerabilities. Researchers are encouraged to try it in coworking spaces, a type of organisational arrangement where managers desire to innovate and connect people.

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A second limitation concerns the personality of the community manager, who might not feel comfortable or able to mediate the working meeting group. In this scenario, two possibilities could be developed. First, a coaching process, based on the six competence ingredients, could be conducted individually or in a formal encounter among individuals who conduct such an activity. The researcher should then play the animator’s role, proposing concepts related to the mediation role of managers and evolving them from participants experience. Secondly, an external member could play the role of mediator. Even if it is not the recommendable strategy, at the first time, it could encourage the managers to deal with situations that represent a limitation to them. Finally, the restricted number of coworking spaces devoted to resilient practices might be point-it-out as a weakness of the study. In fact, the corporate wave of coworking (Gandini & Cossu, 2019) is the stronger one, limiting the range of action of independent space, constantly struggling to survive financially and build social impact. However, the challenges related to recovering local and national economies plus the social bonds during/and post-pandemic periods request transgressions on how to compete and consolidate business. It is believed this kind of transformation just can emerge from the local and dense debate around cultural values guiding human behaviours. This belief supports the proposition of a model based on the dialogue, aiming to nurture an entrepreneurial point of view of reality, making the actors at local levels able to observe and navigate the norms in order to renormalise them.

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Chapter 9

The Incumbent Revenge: A Blue Ocean Failure Véronique Ambrosini and Taman Powell

Abstract With this chapter we explore the relationship between incumbents and entrepreneurial newcomers in the presence of radical innovation. We frame our analysis by examining how different strategic groups leverage divergent capabilities to compete in the changing nicotine marketplace. Our argument draws on the example of the US nicotine market following the introduction of electronic cigarettes (e-cigarettes). Our primary focus is the actions of established tobacco companies and new e-cigarette companies started by entrepreneurs. While most extant studies suggest that incumbents will win in incremental innovation battles, and new entrants in radical disruptive innovation battles, we show how the incumbents emerged largely successfully in defending the industry dominant logic and their $900b global market. This raises questions as to the boundary conditions relating to value innovation and notably the impact of incumbents’ superior market positions enabled through intangible actions such as lobbying. Keywords Entrepreneurship · Disruptive innovation · Blue ocean strategy · E-cigarette · Tobacco

9.1

Introduction

The traditional tobacco cigarette industry incumbents adopted a defence strategy to combat the rise of the e-cigarette industry created by and large by entrepreneurial newcomers. While the incumbents could have chosen to embrace the new industry and respond to the disruptive innovation by developing the capabilities necessary to

V. Ambrosini (*) Monash University, Melbourne, VIC, Australia e-mail: [email protected] T. Powell University of Roehampton, London, UK © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 V. Ratten (ed.), Entrepreneurial Connectivity, https://doi.org/10.1007/978-981-16-5572-2_9

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compete, they decided to primarily focus on protecting their traditional industry, and try and put an end to the e-cigarette industry. The blue ocean logic of strategy, also called the value innovation logic, is a disruptive model of innovation that creates entirely new markets and business models (Christensen et al., 2002; Kim & Mauborgne, 1997). In contrast to the long existing tobacco cigarette red ocean industry, with a limited set of competitors and an established demand, the e-cigarette industry can be described as a blue ocean industry. The entrepreneurs exploited an untapped market space and created a new value curve. This strategy, called a value innovation strategy, allowed them to create a new market. Given that by and large the the mainstream argument in the innovation literature is that entrepreneurial firms that produce market disruption thrive and hurt the incumbents, that are unwilling or unable to respond (Christensen, 2016), one could naturally surmise that the entrepreneurs who created market disruption through innovation would be the ‘winners’ in the cigarette industry. Through our example we refute this proposition. Next, we briefly review the value innovation literature and then we turn our attention to the US e-cigarette industry, and the main players. We report empirical data gathered from secondary data relating to the industry and its key players. This illustration allows us to add new dimensions to the argument regarding the winners and losers in blue ocean industry; and a better understanding of entrepreneurial innovation-based strategic moves and competition.

9.2

Value Innovation

Kim and Mauborgne (2005) explain that adopting a blue ocean strategy is about challenging the dominant logic of the industry, i.e. colloquially it is about changing the rules of the game. It ‘is the capacity to re-conceive the existing industry model in ways that create new value for customers, wrong-foot competitors, and produce new wealth for all stakeholders’ (Hamel, 1998, p. 8). It is by creating blue oceans that companies become high performers. Value innovation delivers differentiation with the innovators competing on divergent dimensions to incumbent organisations (Berghman et al., 2012; Kachouie et al., 2018; Kim & Mauborgne, 1999). It is argued that via value innovation, organisations can create a new market space enabling them to out-compete competitors (Kachouie et al., 2018; Kim & Mauborgne, 1999; Pitt & Clarke, 1999). One of the main techniques that firms can use to build a blue ocean industry is the Eliminate-Reduce-Raise-Create (ERRC) framework. This framework helps firm envisage how they can act and create a value innovation strategy. In essence, it is about conceiving the new market place and a new value proposition for customers. To do so firms have to ask the following four questions. ‘What factors that the industry has taken for granted should be eliminated? What factors should be reduced well below industry’s standard? What factors should be raised well above the

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industry’s standard? What factors should be created that the industry has never offered?’ (Kim & Mauborgne, 2005, p. 29). It is generally argued that when disruptive innovation occurs via the creation of a blue ocean industry, new entrants displace incumbents and the industry gradually converges around the new dominant design (Abernathy & Utterback, 1978; Dosi, 1982). The theory argues that incumbents almost always lose to attackers in this scenario (Christensen, 2016). Christensen (1993, 2016) amongst others argue that incumbents cannot address the new logic adopted by entrepreneurial newcomers due to inertia, a misunderstanding of the necessary capabilities, and generally speaking a lack of foresight. So, altogether this suggests that the odds are stacked against the incumbents. But, is it so in all industry? As Tripsas (1997, p. 140) comments ‘there is a great variation in the performance of incumbent firms, and understanding that variation is crucial’ so this deserves attention so that we can better appreciate why entrepreneurial newcomers might not be able to overcome incumbents and fail in their competitive endeavours.

9.3

The Industry Context

In 2020 the cigarette industry is worth over $930b globally and over $120b in the US (Grand view research, 2021). To put this in context, the global cigarette industry is larger than the smart phone market (Market data forecast, 2020) and the computer hardware market (Business wire, 2020). It is 5 times larger than Alphabet (google), 3 times larger than Apple, and 2 times larger than Amazon. It is dominated by a small number of global companies. This does not account for nicotine replacement therapy (NRT) which also arguably competes in the nicotine market. An e-cigarette is a device that allows you to inhale nicotine in a vapour rather than smoke. While nicotine is the addictive substance in cigarettes, it is relatively harmless. Leading health organisations including the Royal College of General Practitioners, British Medical Association and Cancer Research UK agree that e-cigarettes are far less harmful than smoking. Based on the currently available evidence, Public Health England and the Royal College of Physicians estimate e-cigarettes are at least 95% less harmful (NHS, 2021). Almost all of the harm from smoking comes from the thousands of other chemicals, many of which are toxic, contained in tobacco smoke. Nicotine replacement therapy has been widely used for many years to help people to stop smoking and is a safe form of treatment (ibid.). The first documented reference to an e-cigarette is in a 1930 patent. Numerous patents for nicotine inhaler devices were filed throughout the twentieth century and early 2000s by both tobacco companies and individual inventors with significant activity in the 1990s. The first commercially successful e-cigarette was created in Beijing, China by Hon Lik, a 52-year-old pharmacist, inventor and smoker. The company Lik worked for, Golden Dragon Holdings, developed the device and changed its name to Ruyan, which means ‘like smoke’. E-cigarette products were

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Table 9.1 ERRC table for e-cigarettes vs. cigarettes Eliminate Matches/lighter Butt disposal Smoke smell on materials Regulatory compliance High rate ‘sin’ tax

Reduce Health risk Price

Raise Nicotine level options

Create Flavour options Variable usage: 1 or 100 puffs Mail distribution Razorblade business model

introduced to the US and Europe in 2006. In short, this is the creation of a new market place and Lik challenged the dominant traditional assumptions of the cigarette industry. It is entrepreneurial e-cigarette businesses that developed the new market place. In many ways the e-cigarette industry development mirrored that of previous disruptive technologies with new entrants employing significantly different resources and capabilities to develop novel products to deliver the same service, nicotine delivery, in a dramatically different way to the traditional products. In line with Blue Ocean Strategy logic (Kim & Mauborgne, 2005), while the novel products didn’t really deliver nicotine in a superior way – and were particularly challenging to use and unreliable – they offered some different performance characteristics that were appealing. Namely, interesting flavours and the belief (yet to be supported by science) that the products offered a reduced harm profile. The following figure applies the blue ocean ERRC framework for the novel e-cigarettes vis-à-vis traditional cigarettes. While at the introduction of e-cigarettes, they were ineffective in providing nicotine to consumers in a simple and reliable manner, over time these products improved significantly in this regard. This is in line with the disruptive innovation argument which highlights that such a novel product often initially underperforms on a core characteristic, however, gains customers due to other appealing dimensions (Christensen, 2016). Over time, as the core characteristic improves, in this case simple delivery of nicotine, it is argued that the products gradually take over the market due to the complementary characteristics. The classic example of this is with digital cameras. Initial digital cameras delivered poor quality photographs. But they offered other benefits such as being able to view the picture immediately and not having a limit to the number of photos that could be taken. These complementary characteristics, despite the poor-quality photos, were appealing to a segment of the market. As the picture quality improved, digital cameras largely took over the whole market (Table 9.1).

9.4

Varying Capability and Resource Base

In what follows we illustrate that each player leverages different resources and capabilities to compete. First, we highlight how entrepreneurial e-cigarette businesses emerged and developed the new product category. We also reflect on how the capabilities, business model and value chain structure were significantly different to

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the incumbent cigarette firms. Then we review how incumbents used their capabilities and well-established strengths in lobbying to influence the regulations that are to apply to the new market. It is well documented that when facing traditional disruptive innovation incumbents may not have the necessary and relevant cognitive and operational capabilities to enter the new market (Kim & Mauborgne, 2005), so a logical plan of actions is to make the new industry match the incumbent’s extant capabilities. In effect this means bringing the blue ocean in the red space and the conventional logic of out-competing. Rather than out-performing. Incumbents arguably did so in the emerging e-cigarette industry. They exploited their strong brand, distribution and financial power. However, at first, they still did not fare as well as the new entrepreneurial entrants. So, to reverse this situation, they had to use other capabilities.

9.4.1

E-cigarette Entrepreneurial Entrants

NJOY entered the US e-cigarette market in 2006 and was followed shortly by Green Smoke, Blu, and Logic. These new companies were independent, used Chinese manufacturers to produce their e-cigarette product, and employed a cigarette form factor commonly referred to as a cig-a-like. While these products mimicked the cigarette form factor, they were quite limited in terms of nicotine delivery, flavour, battery life, and number of inhales. Over the following years a large number of independent companies entered the market with products that aimed to capture a part of the new growing industry. Ideas and designs were frequently shared online. With websites such as the e-cigarette forum (e-cigarette-forum.com) providing a fertile ground for discussions and concept development. Products were rapidly developing with significant variation in form factor and technical design. Significant challenges relating to leaking, burning of wicking material, and limited battery life continued to plague the products. Using the products was also challenging and required significant effort and research to get a reasonable outcome. The vast majority of these companies were small operations created with the belief they were creating a product improvement. The products continued to be manufactured in China by newly emerging specialist e-cigarette manufacturers. Many of these manufacturers also sold their own branded products in the US market. Despite the significant variation is design and form factor, all e-cigarettes have the same components. A battery, a tank or pod to hold the nicotine solution, and an atomizer to convert the nicotine solution into a vapor for inhalation. The atomizer comprises of a metal coil that heats up and a wicking material that takes the liquid to the coil. While in many ways the product is simple conceptually, the combination of liquids, wicking, heating elements, and high-power delivery with the objective of delivering a consistent vaporized product without burning, leaking of any kind of electrocution is challenging. Importantly, and in line with previous examples of

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disruptive innovation, the capabilities required to develop an e-cigarette device is a complete divergence from the capabilities to develop a cigarette. As such the emergence of e-cigarette companies, providing a wide range of products, manufactured overseas and retailed in a novel channel is quite typical of the emergence of a new industry. Retail outlets, commonly referred to as ‘Vape Stores’, emerged to educate consumers on these novel products that were frequently seen as strange and confusing. This confusion was driven by the product novelty, product complexity, wide range of product options, and also the proliferation of flavours that were available to use in the products. The product novelty, significant number of stock keeping units and required education made these products unattractive to traditional tobacco retailers such as convenience stores. In any case, it is unlikely that the new e-cigarette companies would have been able to finance entry into this expensive retail distribution channel that was largely controlled by incumbent tobacco companies. By 2014 it was estimated that there were 35,000 vape stores in the US (Wikipedia, 2021). Despite this large number of stores, the channel was very fragmented and independent, with the largest chain being around 100 stores. The first breakthrough product in the US market was JUUL. JUUL was launched in 2015 and by 2017 it had captured a third of the e-cigarette market (Brodwin, 2019). While many of the new products in the industry were working to optimize the hardware technology, JUUL adopted a different approach. It essentially repackaged the cig-a-like product into a more attractive form factor and reformulated the nicotine. The nicotine reformulation allowed for a significantly higher level of nicotine to be used without being harsh to inhale for the consumer. This innovation allowed nicotine levels to be increased from a previous maximum of 18 mg/ml to 60 mg/ml. This transformed the cig-a-like product from a novelty, that did not deliver the level of nicotine smokers required, to an effective nicotine delivery device. In 2018, Altria, the manufacturer of Marlboro, invested $12.8b for 35% of JUUL valuing the company at $38b. This made JUUL the second-highest valued private company after Uber. At this time Altria was valued at $100b (McDonald, 2018).

9.4.2

Incumbent Tobacco Firms

It would seem safe to claim that any dominant profitable incumbent, in an industry experiencing multiple new entrants with a disruptive technology, would wish that the new technology had not been developed. This is more so the case when the capabilities for the new technology diverge significantly from those traditionally required. The next best alternative would be to remove some of the advantages of the new product and/or having it more aligned to the capabilities of the incumbent. Reviewing the previous ERRC (Table 9.1) would suggest changing the following elements would be beneficial for the incumbent tobacco companies in terms of reducing the competitiveness of the novel e-cigarette products:

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Table 9.2 Modified ERRC table for e-cigarettes vs. cigarettes Eliminate Matches/lighter Butt disposal Smoke smell on materials

Reduce

Raise

Create Variable usage: 1 or 100 puffs Razorblade business model

• Regulatory compliance – make this required and render the e-cigarette significantly more expensive (and increase the firm cost base). • High rate ‘sin’ tax – increase taxation of product ideally in line with tobacco products and also render the e-cigarette more expensive (and increase the firm cost base). • Health risk – raise questions as to the health risk of e-cigarette or make it perceived as a gateway product to dangerous cigarettes (to make the product less attractive and reduce sales). • Flavour options – reduce or remove options all-together (to make the product less attractive and reduce sales). • Mail distribution – stop this (to reduce availability). Importantly, compared to most previously disruptive innovations studied, these changes are largely defined by regulations. If this were achieved it would result in the following, not very compelling, ERRC proposition for e-cigarettes (Table 9.2). It’s important to point out here that we are approaching this from an incumbent defence strategy, not arguing right or wrong in terms of regulation and/or market outcomes. In what follows we infer the role of lobbying and show the objective of the incumbent tobacco companies and the amount that was spent on lobbying activities in the US market. We can only surmise as it is not possible to determine whether market, and regulatory, outcomes are the result of lobbying activity. A key capability of tobacco companies is government relations and lobbying. The following figure shows the amount spent on lobbying in the US for tobacco companies vs. e-cigarette companies (source data from here). Clearly tobacco companies spend a significant amount to influence government policy and have done so for a long time (Fig. 9.1). It is also worth noting that the previous theoretical objectives for tobacco companies vis-à-vis the e-cigarette market are all related to regulation. While the lobbying actions are not visible, some others are. For instance, the tobacco companies also submitted large legal positions to the US government stating their position on the new e-cigarette products. These are explicitly negative relating to the category. Indeed David Howard, a Reynolds’ spokesperson, states ‘[w]e believe FDA should not allow such products to be sold or marketed’ (Haar, 2014). Following Altria’s purchase of JUUL, the company actively added extensive warnings on the packaging. Specifically, they added a 147-word warning on the product. There was no legal requirement for this warning. In contrast, Altria, the manufacturer of Marlboro cigarettes, only prints the 5-word warning on its tobacco brands that was ordered by the supreme court; Altria spent decades in court to oppose this warning. Viewing the warnings side-by-side would give the impression

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Fig. 9.1 Tobacco category US lobbying expenditure ($m)

that e-cigarettes are significantly more dangerous than cigarettes. This incorrect perception of the relative risk of e-cigarettes vs. cigarettes is reflected in recent research which showed that the proportion of the US public who perceived e-cigarettes to be as harmful as or more harmful than cigarettes increased substantially from 2012 to 2017 (Huang et al., 2019). Altria also actively removed the flavour options that JUUL offered and argued that all flavours should be banned. These actions could be seen as a strong pre-cursor for what Altria, and other tobacco companies, wanted to happen for the whole e-cigarette industry, that is, wipe out its attractive differentiation features.

9.5

The Incumbents’ Revenge

Our vignette above highlight that while initially the entrepreneurial newcomers try to change the rule of the games in the cigarette industry, the introduction of e-cigarettes in the US market has proven to be far less disruptive than initially expected. We can argue that cigarette companies have withstood the blue ocean disruption posed by the introduction of e-cigarettes. We can suggest that in effect they reverse engineered the ERRC analysis and understood how to put to an end to the entrepreneurs’ buyer attractive - value innovation strategy. Indeed, currently regulatory changes across many states have resulted in a ban of shipping via mail, significant increases in taxation (up to 75%), and a banning of ‘flavours’. A recent study investigating the impact of the most recent flavour ban in San Francisco showed it was ‘associated

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with more than double odds of recent smoking among underage high school students. Reducing access to flavoured ENDS [e-cigarettes] may motivate youths who would otherwise vape to substitute smoking’ (Friedman, 2021). Similar results were found in Massachusetts where ‘messaging questioning the safety of e-cigarettes led to an increase in combustible cigarette use’ (Katchmar et al., 2021). Globally, smoking has reached an all-time high of 1.14b in 2019 and killed around eight million people in the same year (Gakidou et al., 2021). Drawing on this case, we can provide a number of insights about entrepreneurial value innovation and competition. Each strategy, be it the blue ocean or the red ocean strategy, requires different set of capabilities and the incumbents embarked in a defensive strategy fitting best their capabilities. Acknowledging that via acquisition of entrepreneurial firms allowing them to acquire the technology and know-how (Brueller & Capron, 2021), the incumbents are mitigating their risk and could be embarking on a parity strategy (Roberts, 2005), they however by and large chose predominantly what suited them best. They did not suffer from cognitive inertia (Tripsas & Gavetti, 2000). To defend their superior market position, they notably exploited their financial and lobbying power capabilities to diminish the magnitude of the e-cigarette industry and notably customers’ demand. The result? The incumbents ‘won’ the battle and pretty much brought to blue ocean industry created by entrepreneurial firms with a value innovation strategy to its knees. While it is known, that incumbents do create blue ocean and achieve sustainable performance in so doing, it goes against the well-established argument that the key to the sustainable growth of a company was whether they were or not the producer of the market disruption. As Kim and Mauborgne (2005, p. 192) wrote ‘the creation of blue oceans [. . .] was a pivotal determinant driving a company’s rise in profitable growth’. Our illustration does not corroborate this argument. It clearly refutes it, and goes to some ways to support Gary Hamel’s LinkedIn post (2021) that ‘Despite all the talk of disruption, America’s largest companies are becoming more entrenched, not less. Using mega-mergers, regulation and killer acquisitions, they’ve learned how to deflect disruptive threats. Good for them, but bad for economic dynamism’.

References Abernathy, W. J., & Utterback, J. M. (1978). Patterns of industrial innovation. Technology Review, 80(7), 40–47. Berghman, L., Matthyssens, P., & Vandenbempt, K. (2012). Value innovation, deliberate learning mechanisms and information from supply chain partners. Industrial Marketing Management, 41 (1), 27–39. Brodwin, E. (2019). The precarious path of e-cig startup Juul: From Silicon Valley darling to $24 billion behemoth under criminal investigation. Business Insider. Retrieved June 15, 2021 from https://www.businessinsider.com/juul-timeline-from-startup-to-tobacco-company-challengesbans-2019-9?op¼1&r¼US&IR¼T Brueller, N. N., & Capron, L. (2021). Acquisitions of startups by incumbents: The 3 Cs of co-specialization from startup inception to post-merger integration. California Management Review, 63(3), 70–93.

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Business wire. (2020). Global Computer Hardware Market (2020 to 2030). Retrieved June 15, 2021 from https://www.businesswire.com/news/home/20200904005427/en/Global-Com puter-Hardware-Market-2020-2030--. Christensen, C. M. (1993). The rigid disk drive industry: A history of commercial and technological turbulence. Business History Review, 67(Winter), 531–588. Christensen, C. M. (2016). The innovator’s dilemma. Harvard Business Review Press. Christensen, C. M., Johnson, M. W., & Rigby, D. K. (2002). Foundations for growth. How to identify and build disruptive new businesses. Sloan Management Review, 43(3), 22–31. Dosi, D. (1982). Technological paradigms and technological trajectories: A suggested interpretation of the determinants and directions of technical change. Research Policy, 11(3), 147–162. Friedman, A. S. (2021). A difference-in-differences analysis of youth smoking and a ban on sales of flavored tobacco products in San Francisco, California. JAMA Pediatrics. Published online May 24, 2021. Gakidou, E., et al. (2021). Spatial, temporal, and demographic patterns in prevalence of smoking tobacco use and attributable disease burden in 204 countries and territories, 1990–2019: A systematic analysis from the global burden of disease study 2019. The Lancet. Grand view research. (2021). Tobacco Market Size, Share & Trends Analysis Report By Product. Retrieved June 15, 2021 from https://www.grandviewresearch.com/industry-analysis/tobaccomarket Haar, M. V. (2014). Reynolds Calls for Open System Ban. Retrieved June 15, 2021 from https:// www.cspdailynews.com/tobacco/reynolds-calls-open-system-ban Hamel, G. (1998). Opinion: Strategy innovation and the quest for value. Sloan Management Review, 39(2), 7–14. Hamel, G. (2021). https://www.linkedin.com/posts/garyhamel_disruption-humanocracy-activity6806631791949099008-TD9N Huang, J., Feng, B., Weaver, S. R., Pechacek, T. F., Slovic, P., & Eriksen, M. P. (2019). Changing perceptions of harm of e-cigarette vs cigarette use among adults in 2 US National Surveys from 2012 to 2017. JAMA Network Open, 2(3), e191047. Kachouie, R., Mavondo, F., & Sands, S. (2018). Dynamic marketing capabilities view on creating market change. European Journal of Marketing, 52(5/6), 1007–1036. Katchmar, A., Gunawan, A., & Siegel, M. (2021). Effect of Massachusetts house bill no. 4196 on electronic cigarette use: A mixed-methods study. Harm Reduction Journal, 18(50). Kim, W. C., & Mauborgne, R. A. (1997). Value innovation: The strategic logic of high growth (pp. 103–112). Harvard Business Review., January-February. Kim, W. C., & Mauborgne, R. A. (1999). Strategy, value innovation, and the knowledge economy. Sloan Management Review, 40, 41–54. Kim, W. C., & Mauborgne, R. A. (2005). Blue Ocean strategy. Harvard Business School Press. Market data forecast. (2020). Global smartphone market segmentation by operating system. Retrieved June 15, 2021 from https://www.marketdataforecast.com/market-reports/ smartphone-market McDonald, J. (2018). Wow! Altria Buys 35% of JUUL for $12.8 Billion. Vaping360. Retrieved June 15, 2021 from https://vaping360.com/vape-news/74954/wow-altria-buys-35-of-juul-for12-8-billion/ NHS. (2021) Smokefree. Retrieved June 15, 2021 from https://www.nhs.uk/smokefree/help-andadvice/e-cigarettes Pitt, M., & Clarke, K. (1999). Competing on competence: A knowledge perspective on the management of strategic innovation. Technology Analysis & Strategic Management, 11(3), 301–316. Roberts, J. (2005). Defensive marketing. Harvard Business Review, 83(11), 150–157. Tripsas, M. (1997). Unraveling the process of creative destruction: Complementary assets and incumbent survival in the typesetter industry. Strategic Management Journal, 18(S1), 119–142. Tripsas, M., & Gavetti, G. (2000). Capabilities, cognition, and inertia: Evidence from digital imaging. Strategic Management Journal, 21(10–11), 1147–1161. Wikipedia. (2021). Vape Shop. Retrieved June 15, 2021 from https://en.wikipedia.org/wiki/Vape_ shop

Chapter 10

The Influence of Stakeholders in the Birth Stage of Bike Tourism Networks: An Exploratory Study in Italy Raffaele Cecere, Michele Terraferma, Francesco Izzo, and Barbara Masiello

Abstract The purpose of this chapter is to study the birth and early stages of bike tourism networks in Italy and to identify how and why the role of stakeholders influences their structure at this stage. In particular, we analysed the cases of two recently established bike tourism networks in two Central Italy regions: Terre di Casole Bike Hub, in Tuscany, and Valle Savio Bike Hub in Emilia-Romagna. The regions hosting the two networks are different both in their general tourism offer and in their cycling culture. We adopted a qualitative methodology, in particular the multiple case study method as it is consistent with our exploratory research aim. We conducted in-depth interviews with several actors from the public and private sector involved in each of the two networks. As a result, the phases related to the birth phase for each of the networks were identified and the actions of the different actors involved were identified for each phase. Significantly, five phases emerged from the comparison of the two cases: the idea generation, the creation of the network, territory adjustment for bike tourism, the positioning, promotion, communication and placement of the project and the final phase of future expansion. Among the actors, the policymaker plays an important role in the first, second, third and fifth phases; entrepreneurs mostly in the first and third ones, and the local community exclusively in the third one. The role of the external professional is central in all phases, primarily in fourth one. The chapter provides suggestions for future research by scholars interested in tourism networks, particularly cycle tourism. Furthermore, it aims to provide managers and policy makers involved in the tourism offer of destinations with useful insights drawn by such two cases.

R. Cecere (*) · F. Izzo · B. Masiello University of Campania ‘Luigi Vanvitelli’, Capua, Caserta, Italy e-mail: [email protected] M. Terraferma Department of Management Studies and Quantitative Methods, University of Naples ‘Parthenope’, Naples, Italy © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 V. Ratten (ed.), Entrepreneurial Connectivity, https://doi.org/10.1007/978-981-16-5572-2_10

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Keywords Cycle tourism · Bike tourism · Network · Birth · Early stages · Stakeholder

10.1

Introduction

Network is a term widely used in several scientific disciplines, although it does not have a shared description in any of them. The study of networks has its origins in mathematics and consists of nodes (e.g. subjects) and links, in order to indicate graphical models for understanding the relational nature of a phenomenon, the first applications of this technique being in the social sciences (Moreno, 1934; Simmel, 1908). The concept of relationships is typical of tourism (Albrecht, 2013) which needs to be studied from a systemic perspective to explain the actions and motivations of the individual subject, embedded in an environment made up of other elements, which is constantly changing and which makes the network itself stable in configuration but never static (Easton & Araujo, 1992). The literature on networks applied to tourism includes a large number of quantitative studies and a smaller number of qualitative studies able to investigate the network genesis and the role of the actors who have decided to take part in it (Beritelli, 2011). In particular, the life cycle of a tourist destination is quantified in time and in the number of tourists and includes various phases such as involvement, exploration, development, consolidation, stagnation, rejuvenation and decline (Butler, 1980). Although this seminal model has laid the foundations for several studies (Buhalis, 2000; Hovinen, 2002), the extant literature presents a gap regarding studies that specifically analyze the earliest stages of network creation. In fact, this chapter aims to fill this gap through a qualitative study that investigates the processes of birth and formation of a network. In particular, this study focuses on the birth and formation phase of a network in the cycle tourism: a business segment that in Italy, the country in which this study takes place, has high growth potential but is still in its birth phase according to the experts (Isnart-Legambiente, 2020; Izzo et al., 2021). Cycle or bike tourism is part of the slow and sustainable outdoor tourism practices that allow exploring places far from mass tourism and meeting people’s culture (Gazzola et al., 2018; Karanikola et al., 2018) with important impact on the local economy through overnight stays and consumption of local products such as food and wine (Bakogiannis et al., 2020; Kovačić, 2015). In fact, cycle tourism, or bike tourism, is a growing sector that offers many destinations rich in landscapes and historical-artistic resources the possibility to address new market targets, deseasonalize their offer (Bakogiannis et al., 2020; Pröbstl-Haider et al., 2018) and give a new life to already existing and often underused infrastructures, such as riversides, old disused railways and roads with low traffic levels (Lumsdon, 2000). In cycle tourism, as in sport tourism in general, especially when the offer is regionally based, it is usually not based on a single organisation, but rather on a network of providers and other stakeholders (Wäsche &

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Woll, 2010). In this vein, according to Wäsche et al. (2013), sport tourism destinations can be analysed from both a micro-level (organisation of a single service provider) and a meso-level (inter-organisation of the local or regional network). In the latter case, the concept of network is particularly important and our primary aim is to analysing the early stages of network formation in the cycling tourism as well as identifying the role of the key actors in this stage of the destination life cycle. In particular, this chapter answers to the following research question: how do the subjects who create a bike tourism network influence its structure and development in its early stages? In this study we analyse the stages of birth and early-stage of two recently established cycle tourism networks in two Italian regions, considering two cases at the local level and still in their infancy (Dredge, 2006b). Specifically, we analyse the cases of Terre di Casole Bike Hub in Tuscany and Valle Savio Bike Hub in EmiliaRomagna, two regions of Central Italy. The chapter is structured as follows: in the next paragraph we will review the extant literature on networks in tourism and in particular the role of stakeholders and networks in local cycling tourism systems. Afterwards, we discuss the methodology adopted and present the two cases that are the object of our analysis. For each of the two cases we identify the phases that constitute the broader case of a network creation and also focus on the role of the main stakeholders. From the results obtained, we will provide tips/insights for future research. Furthermore, based on the similarities and differences of the two networks drawn by cases analysis we aim to suggest useful practices for managers and policy makers involved in tourism and cycling in particular.

10.2

Literature Review

10.2.1 Network in Tourism Over the last two decades, network theories have provided approaches that have allowed insights into topics ranging from recreational tourism (Bendle & Patterson, 2008; Blackshaw & Long, 1998) to supply and demand perspectives in tourism contexts (Greve, 1995; Pavlovich, 2003; Pforr, 2006). The most widely used analysis approaches are mathematical, such as Social Network Analysis (SNA) (Baggio et al., 2010), which focuses on the connections in the network and does not take into account the differences of individuals. It can be said that a large part of the scientific production is based on quantitative methodologies, which are quite limited in adding new perspectives of knowledge and not able to study exploratory aspects (Albrecht, 2013). In summary, the large use of quantitative studies has underlined the knowledge gaps in the study of tourism networks, which can be filled with the help of qualitative approaches (Dredge, 2006a, 2006b), such as empirical cases (Zehrer & Raich, 2010), capable of shedding light on the motivations of individual actors in creating

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relationships. Specifically, regarding the main shortcomings on the dynamics and changes in networks, not only tourism, very little has been said about their life cycles (Mattsson, 1985; Thatcher, 1998) and how and why the network actors started to collaborate (Beritelli, 2011). The interest and cognitive curiosity about the dynamics of tourism networks is emphasised by the impossibility of predicting their development over time, mainly due to the multitude of exogenous factors (Von Friedrichs Grängsjö & Gummesson, 2006), and that, although they are often initiated by public authorities, due to the variability of their roles and powers, there are no generalisable schemes for structuring a life cycle (Soisalon-Soininen & Lindroth, 2006). In order to solve this lack, many tourism scholars (Agarwal, 1994; Buhalis, 2000; Cooper & Jackson, 1989; Getz, 1992; Haywood, 1986; Hovinen, 2002) decided to develop the destination life cycle based on the growth and stages of the life cycle (Butler, 1980), as the only frame of reference as close as possible to the network life cycle concept. The theoretical gaps just mentioned were created mainly due to technical impediments, in fact there was no possibility to study the early stages of the life of a network, and therefore the entire cycle, precisely because it was difficult to find empirical cases of tourism networks in their early stages. Therefore, the exponential growth of cycle tourism is giving the possibility to answer many questions that were difficult to answer before.

10.2.2 The Role of Stakeholders and Networks in Offering Bike Tourism Cycle tourism, like other forms of sports tourism, bases its offer on three main dimensions: people, activities and places (Weed & Bull, 2012). This perspective seems to be specific to mountainous and purely rural areas, which are almost naturally suited to offering other forms of sports tourism such as skiing and hiking (Weed & Bull, 2012), with major benefits, such as the development of a local economy and the creation of new jobs (Michael, 2006). In the tourism offer related to cycling, the territory (the “place dimension” in Weed & Bull, 2012) plays a fundamental role as a shared asset between the actors. Indeed, the territory represents the place of learning where tacit and explicit knowledge naturally intertwine among the different actors, directing them towards a common vision that produces innovation useful for all stakeholders (Bagiran Ozseker, 2019). This systemic vision lays the foundations for the concept of networking: to ensure a high level of quality of the tourism offer, cooperation between the key actors in the place where the offer is delivered is necessary (Wäsche et al., 2013). According to this perspective, long-term oriented collaboration and cooperation (the “activities dimension” in Weed & Bull, 2012) between communities, local businesses and other actors both public and private (the “people dimension” in Weed & Bull, 2012), represent the main elements to enhance the features/resources of the territory and develop innovative processes (Gazzola et al., 2018). In this

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perspective, in addition to private companies, such as hotels able to offer bike friendly services, the policymaker plays a key role. Public stakeholders are characterised by long-term perspectives and goals encouraging the creation of a system strategy (Cantone et al., 2007) which, in turn, generates better coordination and co-production of innovation in tourism products and services (Novelli et al., 2006). In particular, in cycle tourism, where the areas to be developed are often far from mass tourism flows and usually have a weak entrepreneurial structure, the action of public actors could be useful in developing an attractive offer and a sound strategic marketing activity capable of employing all available resources (Lumsdon, 2000). Further empirical evidence comes from studies carried out in several cycling areas. Pröbstl-Haider et al. (2018), in a study conducted in Austria and the Alpine region, showed that in order to offer valid attractions to the growing demand for bike tourism, all actors in the area are called upon to work together to offer innovative and sophisticated tourism products, such as attractive routes and infrastructure adapted to their needs (i.e. specialised accommodation, rental and repair services and technological services for route monitoring). In another study, Perić et al. (2019) analysed the business model of two newborn tourism networks in Italy and Slovenia linked to two cycling events which show many differences mainly related to the type of race, but at the same time two common factors as safety and respect for the environment. Furthermore, the opportunity to closely observe the genesis of cycling destinations has allowed interesting feasibility studies and territorial evaluations such as in the Gran Sasso area in Abruzzo (Italy), to understand which tourist offer has the best sustainability for mountainous places (Di Giacobbe et al., 2020). A further study showed that in a destination based on cycle tourism, economic development is slow and related projects have to be oriented to the long term: for this reason, special forms of public-private partnerships are needed to develop sustainable offer systems (Gazzola et al., 2018). In the same vein, other authors (Bakogiannis et al., 2020) in relation to the needs of cycle tourists have proposed an algorithm-based certification to identify the various stakeholders in the area that can be identified as bike friendly, thus selecting those suitable for the creation of a cycle tourism network. Finally, further study has shown how the importance of collaboration between proactive individuals, public not-for-profit entities, private companies and the Maori community has transformed the city of Rotorua, New Zealand, as a major destination for mountain bikers (Taylor et al., 2019). Indeed, in this study it was shown that tourism business initiatives can often also come from parties other than entrepreneurs or public bodies, such as end users. On the basis of the concepts just discussed, the chapter aims to study the structuring of the life cycle of tourism networks, focusing on the early stages, namely the stage of birth. For this study, two newborn networks in the cycling tourism in two Italian regions were identified: Terre di Casole Bike Hub (Tuscany) and Valle Savio Bike Hub (Emilia-Romagna).

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Methodology

10.3.1 Method In order to study how the actors that create a tourism network influence its structure in the early stages of its life cycle, we conduct an exploratory qualitative analysis on two cycling tourism networks located in two Italian regions, Tuscany and EmiliaRomagna. Although these two regions are territorially and culturally different, they share a common vocation for cycling and were among the preferred destinations for cyclists’ holidays in Italy (Isnart-Legambiente, 2020; Izzo et al., 2021). The choice of these two regions is not accidental but is linked to the fact that they host two nascent networks where it is possible to study possible similarities and differences in the stages of birth and also the role played by the stakeholders involved in the project. In this chapter, we adopt a qualitative research method (Eisenhardt, 1989; Eisenhardt & Graebner, 2007; Yin, 2003). Specifically, we applied an exploratory and inductive approach of multiple case studies in order to capture a holistic perspective of the phenomena under study (Yin, 2003). A further motivation for using this methodology stems from the fact that information from multiple sources provides a more complete and detailed understanding of a phenomenon and allows us to avoid random associations (Stake, 1995). In addition, data from different actors involved in each of the networks were collected for each case in order to examine and describe the processes in more detail over time and in the context in which they are situated (Creswell, 2003; Pratt, 2009; Siggelkow, 2007).

10.3.2 Sample, Data Collection and Analysis For both Terre di Casole Bike Hub and Valle Savio Bike Hub, in-depth semistructured interviews lasting 40–50 minutes were conducted via video call with some of the networks’ key informants. The interviews were conducted between May and June 2021. Specifically, interviews were conducted for both cases with (I) a policy maker, (II) an owner/manager of a hotel, (III) a related tourism company involved in the project and (IV) the external professional creator and developer of the project. The interviews followed a protocol of open questions aimed at stimulating the interviewees to follow a narrative approach in their dialogue with the interviewers (Yin, 2003). In addition, during the discussion, interviewees were asked to provide specific information and examples about the topics of interest (Rubin & Rubin, 2011) without sacrificing the possibility of adding further information. The interviewers took the stimuli provided by the respondents to listen to their opinions and enrich the discussion topics (Creswell, 2003). In addition, secondary data were collected from websites linked to the two networks, public and private actors operating in the locations of each of the projects, press releases and other related public sources. Each of the interviews was transcribed verbatim and its key data were

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Table 10.1 Subjects interviewed for each of the two cases Terre di Casole Bike Hub Major of Casole d’Elsa (policymaker) Hotel owner and ideator Tour guide (other company involved) Project creator

Valle Savio Bike Hub Funding manager and ideator (policymaker) Hotel manager Historic bicycle sales and rental shop (other company involved) Project facilitator

Source: Authors’ elaboration

compared with the secondary sources through a triangulation process in order to ensure internal validity and reliability (Eisenhardt & Graebner, 2007; Pettigrew, 1988; Yin, 2003). Subsequently, a cross-analysis was conducted to identify similarities and differences between the cases (Yin, 2003). Further emails and telephone calls were used to clarify doubts that arose during the writing of the cases. In addition, each of the two cases was written in a narrative style (Czarniawska, 1999) in order to make the results valid and reliable on the one hand, but also easily usable by subsequent scholars and to help the reader understand the context in which the cases developed. The following table (Table 10.1) gives an insight into the function of the actors interviewed for each of the two cases.

10.4

Findings

10.4.1 Terre di Casole Bike Hub Case Terre di Casole Bike Hub is a tourist offer project based in Tuscany, not far form the white roads where L’Eroica, an annual non-competitive cycling event known all over the world, takes place. Terre di Casole Bike Hub was born in 2015 in Casole d’Elsa, a small town in the province of Siena, in Tuscany (Italy), characterized by a territory composed of hills, vineyards, olive groves, pastures and woods, ideal for hard cyclists – looking for challenging routes – but also for soft cyclists, those who simply want to explore with a bike the landscape and live tailor-made experiences thanks also to a fascinating artistic, architectural, historical and “food and wine heritage”. The choice of the name Terre di Casole Bike hub is in fact not random. “Terre di Casole is also the name of one of the hotels in the hub, but the choice of the name aims to associate the wine DOC Terre di Casole with tourism products related to cycling” (Hotel owner).

The project deals with the possibility to provide cyclists with the possibility to ride along a series of roads and paths well marked with relative maps for mountain bike lovers, routes along the same white roads of the famous Gran Fondo and other historical races for those who practice road cycling. The suggested paths are attractive also for those who do not practice competitive cycling, but just want to

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enjoy the landscape riding a bike or e-bike along roads with little traffic. In addition, the project aims to develop a new way of offering tourism that involves local accommodations, restaurants and other local businesses. A particular characteristic of Terre di Casole Bike Hub is its innovative nature. In Casole d’Elsa, as in the entire region of Tuscany, there was not before a structured tourist product related to cycling, although the territory is absolutely suitable. “Previously there were initiatives related to experiencing the village and the art stores, but not to cycle tourism: there was no structured partnership between public and private to be able to present to international tourism in trade fairs, both in Italy and abroad” (Project creator and developer).

We have identified this phase as the pre-birth phase of Terre di Casole Bike Hub, followed by the birth of the idea. Terre di Casole Bike Hub is the brainchild of a local entrepreneur, hotel owner and bike tourism lover. “Before becoming the owner, I was the manager of the Terre di Casole Hotel and before that a bike traveller. In one of my experiences between Germany and Holland, an old lady offered help and hospitality to me and my group. From this memory it was born the idea of creating a place for bike tourists in which I personally would like to stay and my intention was to bring to Casole d’Elsa all the positive things I experienced during my experience as a bike tourist” (Hotel owner and ideator).

This romantic vision also meets the need of both the private actors and the policy maker to seasonally adjust the tourist offer and extend the period of activity of the accommodation facilities by a few months. For this reason, a professional consultant in the sector was hired who opted for a network-based solution. “When I arrived in Casole d’Elsa I noticed that the territory is particularly adequate and the influence of the notoriety of neighboring Tuscan villages such as San Gimignano and Volterra is strong. Rather than a project linked to a single structure, the best solution was to create a destination, activating tourist flows not only for a single hotel, but for a series of services in the territory”. (Project creator and developer).

This idea turned into a real territorial project and received the interest of the whole local community: inhabitants, entrepreneurs and politicians. The local actors involved in the project are bound together by a gentlemen’s agreement and finance the project through a participation fee or the contribution of useful resources to the network. This second phase has been identified as the creation of the network. “Owners of B&Bs, farmhouses, and 4 and 5-star hotels equipped their accommodations with bike-friendly amenities, the grocery store began preparing the bike-nic or bike-box for cyclists who then wanted to have a snack or lunch along the way and the village bar became a bike lounge. Other parallel activities such as falconry and truffle hunting have become experiences that bike tourists add to their vacation” (Project creator and developer).

The phase of network creation is followed by the implementation and communication of bike routes. In such third phase, of fundamental importance was the work carried out by one of the local tourist guides who contributed free of charge to the creation of new routes, included in a master plan of routes complete with mapping and signposting, as well as other promotional activities.

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“I joined the project in 2017 taking care, in a free way, of tracking through GPS safe routes that can be cycled, depending on their difficulty and nature, with various types of bicycles, mountain bikes, road bikes and e-bikes, and can be downloaded for free from the internet to serve the Bike Hub. Subsequently I started, again free of charge, to take journalists and important visitors, acting as their guide and carrying their luggage. Moreover, during my tours, I take care of finding photographic material useful for communication activities” (Tour Guide).

In addition, within the hub is also essential the active participation of policymakers whose contribution allows the creation of a system strategy. “From an economic point of view, great credit goes to the private actors who finance the project, but the Public Administration is committed to intercepting funding related to the tourism sector” (Mayor of Casole d’Elsa).

In particular, in this phase, the policymaker took responsibility for the safety and maintenance of roads and signposting. In addition, the intervention of the policy took on a strong relevance in the inclusion of Casole d’Elsa in the Grand Tour of the Val di Merse, a permanent and fully signposted cycling route of approximately 107 miles. The project consisted in modifying the itinerary, allowing cyclists to pass through Casole d’Elsa as well. “A permanent, well-maintained 107-mile route makes it possible to attract bicyclists and keep them in the area for three to four days” (Project creator and developer).

For the new route of the Grand Tour Val di Merse, the municipality of Casole d’Elsa financed the installation of the additional signage, becoming responsible for their maintenance, while other actors of the Bike Hub were involved in the communication and promotion of the entire route. The Val di Merse Grand Tour project was, in fact, also based on collaboration through mutual exchanges with other actors that bring benefits to all involved parties. “The Grand Tour Val di Merse didn’t do much promotional activity before, few people knew about it and some have now come to know about it thanks to the communication activity of Terre di Casole Bike Hub. They had been very good at mapping out the route and installing signage, but they weren’t very good at promoting themselves and being seen nationally and internationally” (Tour Guide).

In addition, in this-phase, the key figure remained the external professional, its creator and developer, who is still an integral part of the project actively dealing with marketing activities, online and offline communication, positioning and management of the destination. “When I designed the project, I thought there would be someone else to carry it forward in the future, but then the call from the community, the continued interest of new stakeholders in new social initiatives, such as building a children’s track and getting schools involved, kept me going. I started taking the project to trade fairs and getting the press involved” (Project creator and developer).

With regard to the infrastructure that allows the flow of cycle tourism in the area, within the Hub particular importance has been given on focusing investment and road safety of cyclists.

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“Although the realization of a cycle path could attract a high number of bicycle tourists, the costs of implementation and maintenance are high. Within Terre di Casole Bike hub we invest the available funds in the enhancement of existing low-traffic routes within which it is possible to discover the territory” (Project creator and developer).

This phase is followed by a subsequent phase concerning territory adjustment. In this fifth phase, the policy maker (the mayor of Casole d’Elsa) provided a bikestation that represents the meeting point for cyclists in the town, the installation of multifunctional benches that can be a resting place, a charging point for e-bikes and a hotspot for wi-fi and a network of emergency defibrillators in the area. Moreover, in this phase, within the network on which Terre di Casole Bike Hub is based, the Pro Loco (this is in Italy the name of place-based not-for-profit organizations committed to promote local tourism) also plays an important role, dealing with both the management and the use of private funds coming from the organizations and public funds from the public administration. The last phase is the project expansion phase, which marks the end of the earlystage and the beginning of the development stage. In this sixth phase, it emerges that Terre di Casole Bike Hub was the starting point for a larger hub, Strade di Siena, which includes 28 municipalities of which Siena is the leader, and Terre di Casole Bike Hub is included within this larger project that also involves the Region of Tuscany. A further characteristic of the Bike Hub is that it represents an environment in which tourists should feel at ease and the entire community can support them during their experiential journey. Some future projects are also based on this principle. “One idea we want to implement is to develop a plate to be posted at the house entrance of people who also want to be part of the project” (Hotel owner and ideator).

Terre di Casole Bike Hub has brought a series of benefits to all players involved in the project. In particular, it allows the accommodation facilities to diversify and seasonally adjust the offer by lengthening their period of activity that once was usually from April to September. “Even in the first days of spring we can see a tourist flow of people on bicycles that is different from what is concentrated in the summer season” (Mayor of Casole d’Elsa).

In addition to companies in the tourism sector, the project also involved other companies in the area, such as Pramac (company engaged in the production of power generation and goods handling systems) which, although not having a direct link with tourism, has begun to invest in sustainable mobility, bicycle education in schools, as well as other activities related to environmental protection. Two major strengths of Terre di Casole Bike Hub are communication and cohesion between actors based on principles of trust and commitment. Finally, it should be noted that the Bike Hub is a registered format and Terre di Casole Bike Hub represents a first example of collection of good practices involving public and private sector in the development of cycling tourism that could be applied also to other destinations. Table 10.2 summarises the-phases of early stage of Terre di Casole Bike Hub and the role of the actors.

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Table 10.2 Early-stage of Terre di Casole Bike Hub and role of the actors Phase Birth of the idea / idea generation

Network creation

Implementation and communication of bike routes

Territory adjustment from a bike-friendly perspective

Expansion of the project (end of the early stage and beginning of the development stage)

Actors role The owner of an accommodation facility calls in a professional for a marketing project related to his individual business; A professional consultant proposes a solution based on the territorial network. Many local entrepreneurs (owners of B&Bs, farmhouses, hotels, restaurants and other businesses) begin to offer bike friendly services and engage in social projects related to cyclotourism. A tour guide charts (using GPS) provides routes of varying difficulty for different types of bicycles; Policy maker, professional creator and tour guide enter into an agreement with the promoter of the “grand tour of Val di Merse”; Casole d’Elsa (policy maker) finances the placement of additional signage and is responsible for maintenance; The professional creator takes care of the communication and promotion of the project (e.g. press involvement, participation in fairs, relations with tour operators) and also of the whole grand tour of Val di Merse itinerary. The policy maker upgrades the area with infrastructure and services for bicycle tourists (e.g., bike stations, e-bike charging stations); The pro loco manages the public and private funds for the project. Terre di Casole bike hub inspires the creation of a larger hub, Strade di Siena, which incorporates 28 municipalities and also involves the whole Tuscany region.

Source: Authors’ elaboration

10.4.2 Valle Savio Bike Hub Case Valle Savio Bike hub is a project born in 2020 that is based on the creation of a ‘territorial laboratory’ aimed at creating a network to stimulate innovation and sustainability of the enterprises in the territory of the Unione dei Comuni della Valle del Savio (henceforth Unione), in Emilia-Romagna. In particular, the project supports all local economic activities related to cycle tourism and sustainable tourism. Its main objective is to increase tourism flows in the Savio Valley, but fully respecting the identity of the territory and encouraging enterprises to cooperate with the policy maker in order to create a complete/integrate tourism product in an experiential way linked to the world of cycling.

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The project was conceived and is coordinated by the Unione and its main partners are some local associations promoting the theme of sustainability and innovation such as CEAS Multicentro Cesena, CEAS Parco Nazionale delle Foreste Casentinesi and Clust – Er Create. A further important actor in the project has been a professional consultant who plays the role of facilitator. It is, therefore, a project conceived and promoted mainly by the public sector, in particular by the municipality of Cesena, which, together with those of Bagno di Romagna, Mercato Saraceno, Montiano, Sarsina and Verghereto, form the Unione dei Comuni della Valle del Savio, the body to which each of the municipalities entrusts the management of tourism. The municipalities belonging to this Union are characterised by territories where the practice of cycling is widespread, even if to a lesser extent than in the coastal area about 50 miles away. In town of Cesena in particular, several projects related to cycling have been carried out, such as the Bicipolitana and the Velostazione.1 Instead Bagno di Romagna, another municipality of the Union, hosted the arrival of a stage of the Giro d’Italia in 2017 and 2021. The culture of cycling in Emilia-Romagna takes on a strong value and is it present in the daily life of its inhabitants. In the past, some events related to amateur cycling were organised in the municipalities of the Union, such as the Gran Fondo del Capitano in Bagno di Romagna, but very often these events were poorly communicated and were cannibalised by other events organised in the same period in neighbouring municipalities. The conferral of the tourism policy to the Unione tried to solve this problem by coordinating sports and tourism events. Moreover, moving the attention to other municipalities of Emilia-Romagna, it is worth mentioning that Riolo Terme hosted the World Cycling Championships in 2020. Furthermore, the Riviera Romagnola (coastal area) hosts other important events such as the Gran Fondo Nove Colli, which attracts about 12.000 tourists every year. In fact, the Riviera Romagnola is already a highly sought-after destination for cycle tourists and since 2015 the Terrabici business consortium has been managing an important part of these flows. Terrabici offers accommodation and routes both on the coast and inland, in particular towards Bagno di Romagna in the Savio Valley. These important tourist flows that converge on the coastal area represent an excellent opportunity for Valle Savio Bike Hub, which could take advantage of tourists who would like to spend their holidays, or part of them, in less crowded areas. “In our area, especially in Bagno di Romagna, many sporty tourists use to stay on the Riviera and cycle along our routes. Our objective is to intercept these tourists who know the Savio Valley but have never experienced it. We want to introduce them to the characteristics of our landscape, our food and wine, and our thermal baths. To do this, we need to join forces with all the municipalities and businesses and not act individually” (Project funding manager and creator).

1

The Bicipolitana is a set of urban cycle routes connecting various points in the city of Cesena. On the other hand, the Velostazione, or bike station, is a structure for parking bicycles and providing bike-friendly services (maintenance, rental, sale of accessories, etc.). Examples of bike stations can be found in various countries (Japan, Sweden, Norway, the Netherlands, Spain, Italy). In particular, the one in Cesena is located near the railway station.

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The already widespread culture of cycling tourism and the possibility of attracting tourist flows to the territories of the Unione constitutes what we have called the pre-birth phase. This -phase is followed by the early-stage phases: In the first phase (idea generation), concerning with the startup of the project, the policy maker played a fundamental role. In particular, the policy maker first identified the needs of the companies in its territory, then, on the basis of these needs, it conceived Valle Savio Bike Hub and applied for public funding to the Region for its start-up phase for the years 2020–2021. “Through questionnaires we went to find out what the companies in the area wanted and we discovered that their answers were oriented towards the creation of a tourism product based on common objectives. We seized the opportunity of Regional Law n. 14/2014 and, on the basis of Terre di Casole Bike Hub, we decided to apply for a project that had as its strategy the creation of laboratories to stimulate innovation and sustainability of local businesses. The project, called Valle Savio Bike Hub is worth € 50,000, of which € 44,000 represents regional funding, while the remainder represents the contribution of the six municipalities of the Union equally distributed.” (Project funding manager and creator).

Once the funding had been obtained, the companies to be involved were identified, i.e. those companies in the area interested in creating a tourism product based on cycling: accommodation, bars, restaurants, farmhouses, bike rental, workshops, etc. This involvement process initiated the second phase. In this second phase, an audit was also carried out to collect information on the degree of knowledge and use of resources by businesses in relation to issues such as sustainability, digitisation and being bike-friendly. The facilitator’s support provided to the policy maker was crucial in the identification of companies and audit processes in the second phase. The third phase concerns the creation of the network. “On the basis of this audit I defined the topics to be covered in the workshops, which are the objective of the project funding. In total we organised eight workshops and in these meetings we talked about cycle tourism, sustainability, what it means to be bike friendly, we presented the routes and the network of companies that would be created, mobility, welfare and communication. These workshops allowed us on the one hand to discuss common issues, and on the other hand to think about a strategy to be implemented in the following project phases” (Project Facilitator).

In this phase of networking, the workshops organised by the project facilitator played a key role. In this phase it became clear that many companies were interested in joining the Bike Hub, both those involved in hospitality and those offering complementary services such as rental and assistance. The project also attracted the attention of the local community, who asked to participate in the initiatives by making some of their private spaces available to cyclists. The fourth phase follows, which is based on the creation of new routes and the improvement of existing ones. “We have mapped and created ‘daisy-chain’ routes starting and finishing in the same place in each municipality to be covered by road, mountain, gravel or electric bike. In addition, we built the permanent Grand Tour Valle del Savio route through the six municipalities of the Unione Valle Savio, also by mapping all along the route places to visit, places to eat, fountains and places to get assistance and bike-friendly services. To carry out this work a

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cooperative has been hired which collaborates with the Union of Municipalities and follows my guidelines” (Project Facilitator).

In the fourth phase, the involvement of private funds was fundamental, as in the case of the signposting of the Grand Tour of the Savio Valley. In fact, for this process, since public funding was not able to cover it, it was carried out thanks to the contribution of the Wellness Foundation. The latter is a large international association based in Cesena and proposed by Technogym, a world leader in the fitness equipment market whose headquarters are not far from Cesena which aims to transform Romagna into the district of wellness and quality of life for people. In addition, a fifth phase consists of the positioning, promotion, communication and placement of the project through the creation of a website, a smartphone app, video content and other printed material for off-line communication. Funding from private companies was also used in this phase. In particular for the production and printing of a printed guidebook with a link to the GPX tracks of the routes via QR code. The printing of this guide was entrusted to a specialised publishing house and can be purchased in bookshops with national distribution. The sixth phase involves the expansion of the network. In particular, from January 2022, the birth and formation phase will end and the stage of future development of the network will begin. The Valle Savio Bike hub project will be entrusted to an external company, a Destination Management Company (DMC), which will have the task of continuing the work started by the policy maker and facilitator through public funding and private contributions. “Each municipality in the Unione is participating in the project independently according to a shared plan, but these functions will be transferred to the DMC which will also be responsible for maintaining relations with businesses, tourists, managing bookings, participating in fairs and coordinating this project with others related to it. For the selection of the DMC, a call for tenders will be launched and we will use the competitive dialogue tool” (Project funding manager and creator).

Up to this point in its formation, i.e. throughout the early stage phases the benefits of the Valle Savio Bike Hub are numerous and impact both on individual enterprises and on the entire territory. In particular, the organisation of the workshops has fostered cooperation between the various enterprises in the area. “A large number of accommodations, wineries, guides, support and rental services participated in the workshops. What I tried to communicate to the companies at the workshops and what is now bearing fruit is the creation of a large network and many small networks within it formed by local companies. Very often the companies that form these small networks in small territorial districts did not know each other in the past and, often, did not know the places of interest in the territory where they are”. (Project Facilitator).

Testimonials also come from accommodation facilities that have benefited: “Thanks to expert mapping of the cycle routes, which took into account both the places to see and the services offered by us hotel owners and other companies, it was possible for groups of cycle tourists to pass by my hotel and, likewise, for me to offer them solutions for their stay. In addition, at the workshops I met new partner companies who were trained, together with me, for a common goal. This makes it possible to shorten management and

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organisational time, to be more competitive on the market and to offer a complete service of high quality” (Hotel owner).

In addition, the testimony of the owner of a historic bicycle shop opens up a window on the future of the bike hub and the cycling product in Italy as a whole: “Despite the fact that the hub has only been up and running for a short time, you can already see its potential. There is a lot of cohesion between us participants, which leads to really interesting common results when it comes to reception. The creation of bike hubs in various parts of Italy can help to make our country one of the most popular destinations for cycle tourists. In countries like Spain and Croatia cycle tourism is one of the most important economic sources and Italy can reach that level” (Owner of a historic bicycle rental and sales shop).

The benefits of the bike hub also invest in issues that can be observed on a macro level. In addition to networking between businesses, the Valle Savio Bike hub has gathered a lot of positive feedback from policy makers in the various municipalities of the Savio Valley due to its focus on sustainability, cycling culture, business development and the resulting increase in job opportunities. A further benefit lies in the interest of many tour operators already operating on the Riviera Romagnola to propose solutions also in inland places where the landscape, thermal baths and food and wine allow the development of cycle tourism and slow tourism. Finally, Valle Savio Bike Hub is also a great opportunity for the area to attract the interest of large companies such as Cangini Benne and Enel X, which have decided to invest in projects related to sustainable mobility, the culture of the inhabitants and the creation of job opportunities in the area. Table 10.3 summarises the phases of the early-stage of Valle Savio Bike Hub and the role of the actors.

10.5

Discussion

Terre di Casole Bike Hub and Valle Savio Bike hub are two projects aimed to the development of territories quite far from mass tourism flows. The first one, Terre di Casole Bike Hub, was born in 2015 in Casole d’Elsa (Tuscany), the second one, Valle Savio Bike hub, in 2020 in the territories of the Unione dei Comuni Valle Savio (Emilia-Romagna). The two projects have many points in common, first of all the importance of the natural beauty of the landscape as well as the food and wine offer, which seems to be particularly appreciated by cyclists (Bakogiannis et al., 2020; Gazzola et al., 2018; Karanikola et al., 2018; Kovačić, 2015; Yeoman et al., 2007). For both, the territory represents a key element, meant as a place (Weed & Bull, 2012) for knowledge sharing (Bagiran Ozseker, 2019), developing innovation (Gazzola et al., 2018) and creating new job opportunities (Michael, 2006). In an opportunistic way, the exploitation of territorial resources according to a new and bike-friendly mode of fruition is central to both projects. In fact, both of them aim to create a tourism network formed by local businesses characterised by bike-friendly service providers (accommodation facilities of various sizes,

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Table 10.3 Early-stage phases of Valle Savio Bike Hub and role of the actors Phase Birth of the idea

Identification of companies to be involved

Network creation

Creation of new bike routes and the improvement of existing ones

Positioning, promotion, communication and placement / sales development

Actors role The policy maker identifies the needs of local businesses through questionnaires. The need was the creation of a tourism product based on common goals; The policy maker applies the project for funding from the region. The policy maker and the facilitator identify the companies to be involved in the project; The facilitator organises an audit to collect information on the degree of knowledge and use of resources by companies in relation to topics such as sustainability, digitisation and being bike-friendly. On the basis of the audit, the external professional defines the topics to be covered in the eight workshops, which allow on the one hand to discuss common issues, and on the other hand to think about a strategy to be implemented in the following phases of the project; Many companies (hospitality, catering, rental, service) are interested in joining the bike hub; The project also draws the attention of the local community, who ask to participate in the initiatives by making some of their private spaces available to cyclists. The facilitator and the policy maker hire a cooperative to create and map daisy-chain routes starting and finishing at the same point in each municipality to be cycled by road, mountain, gravel or electric bike. The facilitator actively participates in the mapping; The facilitator and the policy maker hire a cooperative to create the permanent route of the Savio Valley grand tour through the six municipalities of the Unione. The facilitator and policy maker actively participate in mapping places of interest along the route (places of interest to visit, places to eat, fountains and other sites to get assistance and bike-friendly services); The facilitator also raises private funds from the wellness foundation to install signposts for the Savio Valley grand tour. The facilitator deals with the promotion, communication and positioning of the project through the creation of a website, a smartphone application, video content and other printed material for off-line communication. The (continued)

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Table 10.3 (continued) Phase

Expansion of the project (end of the early-stage phase and beginning of the development phase)

Actors role facilitator helps to raise funding from private companies, in particular for the editing and printing of a guidebook that can be purchased in bookshops with national distribution. The policy maker, through the competitive dialogue tool, identifies a DMC that will take over the management of Valle Savio Bike Hub from January 2022.

Source: Authors’ elaboration

restaurants, farmhouses, workshops, rentals, guides, etc.) and the policy maker (Gazzola et al., 2018). According to this view, for both cases, in addition to the territory, people and activities are the further two dimensions on which to build an offer system related to cycling tourism (Weed & Bull, 2012). In particular, according with previous studies, it emerges also in these two cases that the collaboration and cooperation between the stakeholders generated the birth of a tourism offer based on the quality of services (Wäsche et al., 2013; Pröbstl-Haider et al., 2018 Moreover, cohesion between actors based on commitment and trust (Mayer et al., 1995) and actor passion, linked to opportunities for free and voluntary participation (Taylor et al., 2019), emerge in both cases. In addition, both projects have attracted attention of large companies willing to invest in other related projects of collective benefit as to culture, safety, sustainability and respect for the environment: all themes strongly linked to cycle tourism (Perić et al., 2019). Although the two hubs have many points in common, they have also many differences. A first difference lies in the territory and timing in which the two networks took shape. Terre di Casole was born in 2015 in Casole d’Elsa, Tuscany, in a region where there was not yet a homogeneous product dedicated to cycling tourism and where cycling is mainly practised by tourists, but much less by locals. In fact, although cycling tourism has been developing in Tuscany in recent years, its attention is very much linked to the nature of the cycle paths and much less to the number of bike friendly facilities, which are relatively fewIn fact, Tuscany is characterised by a high natural induced tourism thanks to the particularities of its territory. For this reason, a more formal tourism has developed and in the past there was less interest in active tourism, which only in recent years public and private stakeholders have decided to enhance. For Valle Savio Bike Hub the situation is different. Valle Savio Bike Hub was born in Emilia-Romagna in 2020 and has benefited, on the one hand from the experience of Terre di Casole Bike Hub, and on the other from the different cycling culture of inhabitants. In Emilia-Romagna, there has been a strong interest in cycling tourism for a long time, which can be seen firstly in the numerous events that have been taking place for many years in various areas, but especially along the Riviera Romagnola, where the concept of bike hotels was born. In addition, in Emilia-Romagna the culture of cycling is rooted in the lifestyle of the inhabitants and this has influenced the overall development of the area

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in terms of reception, hospitality, services and ease of connections. The number of bike-friendly facilities and services in this region is higher and, for this reason, the number of network memberships is also higher. A further difference lies in the role of the policy maker. Although actively involved in both projects, in the case of the Valle Savio Bike Hub it assumed a role of primary importance from the first phases, i.e. the idea and the collection of public funding in the start-up phase to the subsequent entrusting of the network management to a Destination Management Company. However, in both cases it emerged that the policy maker favours the creation of a systemic strategy between public and private actors through a solid territorial marketing programme thanks to its long-term vision (Cantone et al., 2007; Lumsdon, 2000; Novelli et al., 2006). Although one of the main reasons for the network creation is the seasonal adjustment of the tourist offer, a substantial difference emerges in the idea generation for both networks. While the Valle Savio Bike Hub is the result of a deliberate strategy of the policy maker, the Terre di Casole Bike Hub arose from the desire of a local hotelier to create a place where cycle tourists can feel comfortable/comforted. This is a case where business/tourism entrepreneurs, who feel a strong need to innovate, often trigger processes that also influence other actors in the area (Jacob et al., 2010; Rogerson, 2013). Finally, it is possible to note how Terre di Casole Bike Hub was born small and how it is gradually growing, attracting the attention of neighborhood and triggering the creation of larger networks such as Terre di Siena. However, in Valle Savio Bike Hub, the experience, know-how and culture embedded in the area have allowed the birth of a network already mature and capable, since the early stage, to attract tourist flows. The interviews, conducted between May and June 2021, allowed to further accentuate this cultural difference, since they depicted the two networks in different stages of their cycle of evolution. As a matter of fact, Terre di Casole Bike Hub, which has already been active for 6 years, is following a slower growth than Valle Savio, which, although active for less than a year, has grown more quickly. However, both bike hubs point to achieve important results in the short and long term. The two cases allow us to identify the early-stage phases of networks creation and also the role that key stakeholders played within them. The phases identified in each of the two cases were reinterpreted in a more generalisable way and summarised. In particular, we identified five common phases related to the early stage of a network based on cycling tourism: birth of the idea, creation of the network, territory adjustment for cycling tourism, positioning/promotion/communication/sales development and future expansion of the project. For each of these phases we have also identified the main actors and their role. In particular, in the phase of the idea generation, local entrepreneurs and the policy maker can play an important role, assisted by the experience and know-how of an external professional consultant who can help to offer a better solution and an overview of the whole project. A second phase involves the creation of the actual network and the pooling of resources and knowledge of all public and private stakeholders. A third phase includes the structuring of the territory according to

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Table 10.4 Early-stage phases of a cycle tourism network and the role of the stakeholders Identified phase Birth of the idea/idea generation

Network creation

Upgrading the area for cycling tourism/territory adjustment

Identified stakeholders Policy maker/ entrepreneur External professional External professional/policy maker Local community Policy maker

Positioning, promotion, communication, placement/sales development Future expansion of the project

External professional Entrepreneur External professional External professional/policy maker

Role or action performed Starter/ideator Bringing experience and knowledge Developer of opportunities to meet and exchange resources Free initiative and/or support to other stakeholders in the creation and mapping of routes Installation of benches, e-bike charging points, signposting of routes and maintenance. Provider of guidelines on route creation and mapping Provider of additional necessary resources Creation of websites, apps, communication material, involvement of the press and tour operators Inclusion of the project in larger networks

Source: Authors’ elaboration

the basic needs of the tourist offer (i.e. construction of the cycle routes and enhancement of existing ones, with subsequent mapping via GPX track). In this phase, the contribution of experts in this field, those who have a good knowledge of the territory, as well as the economic support of the public and/or private sector are necessary, also in other initiatives such as the installation of benches and charging stations for e-bikes. The fourth phase consists of the promotion, communication and placement of the project in which tourism marketing professionals deal with the creation of websites, apps, communication material, the involvement of the press and tour operators. The first four phases imply a fifth one which consists of the growth of the network as regard to the opportunities that can be transformed into strengths. This phase consists of the creation of linking processes with other networks or the incorporation into other larger ones that attract greater tourist flows and trigger more advanced phases of development of the entire destination leading to its consolidation phase (Butler, 1980). Table 10.4 summarises what we have just outlined.

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Conclusions

The aim of this chapter is to investigate how and why the actors who create a tourism network influence its structure and formation in the early stages of its existence. We chose to study this phenomenon by analysing the creation of two networks in the field of cycle tourism. The choice of this sector is linked to the great growth it has experienced in recent years and the good purchasing power of cyclists, who are interested in spending their holidays in places characterised by the beauty of the area/ landscape and the services offered to them (Isnart-Legambiente, 2020; Izzo et al., 2021). The analysis of the two cases showed that the participation of the public sector, usually present in cases of networks of this type, plays a more influential role in Valle Savio Bike hub. The differences are numerous and make the two networks unique in their identity. In particular, Terre di Casole Bike hub was born in 2015 in Tuscany, a region where it represented the first example of a network in the cycling tourism market. On the contrary, Valle di Savio Bike Hub was born in 2020 in Emilia-Romagna and was able to take advantage of the experience and know-how already consolidated both by the actors who started the project and by many other actors in the area who were already aware of the opportunities of cycle tourism. Moreover, as already mentioned, Valle Savio Bike Hub was able to enjoy from the very first moment an overall vision of the policy maker who initiated the project. On the contrary, in Terre di Casole Bike Hub the idea came from a local entrepreneur and the policy maker was involved only afterwards. The two cases made it possible to divide the early stage into phases and to identify the role of the actors in each of them. Those in common between the cases are the birth of the idea, the creation of the network, the upgrading of the area in terms of cycling tourism, positioning/promotion/communication/placement and the final one of the future development of the network. The most influential actors in these phases are the political decision-maker (generation of the idea and funding in the other phases), the local entrepreneurs (generation of the idea, contributions in the other phases) and the external professional (generation of the idea, construction/valorisation/mapping of routes and positioning/promotion/communication/placement). The development phase marks the transition of a network from the early stage to the development phase. The authors’ choice to include it among the phases of early stage is justified by a relation of continuity between birth and development. Furthermore, from a more general perspective in relation to the type of network, although the phase on route development in the broadest sense is closely linked to cycle tourism, the elements emerging in the other phases can be applied to other types of networks involving the joint efforts of the public and private sectors. In particular, this study enriches the previous literature on networking with further evidence on the importance of a common vision within a network that produces useful innovation for all stakeholders (Bagiran Ozseker, 2019). The results of this study, which analyse the emergence model and the early processes of network formation, could also be applied to other types of

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tourism networks, such as seaside tourism, ski tourism and so on. Finally, this study offers qualitative evidence to enrich the literature on tourism networks in the early stages of their existence. However, this study is not without its limitations. The first is the small number of cases analysed, which may make the results not generalisable to other contexts from a theoretical point of view. The selection of only two case studies is an obliged choice, due to the recent emergence of bicycle networks in Italy and, for this reason, the choice of cases to be analysed is limited. Further studies could analyze the creation of bicycle networks, involving both the public and private sectors, in the coming years, when the phenomenon will be grown in Italy. Further studies could analyse case studies in other countries where cycle tourism is more widespread, such as France, United Kingdom, Spain, Croatia or Germany, and derive similarities and differences, as well as evidence on the later stages of the network’s life cycle, such as development and consolidation (Butler, 1980). Further quantitative studies could expand the research to more networks, identifying the impact that variables such as passion and a good marketing strategy have on the creation of a cycling destination. Finally, this study offers important implications for practice, stimulating the attention of entrepreneurs and policy makers in areas where landscape, food and wine, and hospitality play a significant role in attracting booming tourism demand. Indeed, this study highlights medium and long-term benefits such as seasonal adjustment, creation of new jobs, collective development of skills and creation of new opportunities within territories far from mass tourism.

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