Cooperation between Small and Medium- sized Enterprises: The influence of social distance in Curaçao.

(1)

Cooperation between Small and

Medium-sized Enterprises: The influence of social

distance in Curaçao.

Scarlette La Reine - S2119676 Faculty of Economics and Business

Master Business Administration Small business & Entrepreneurship

Supervisor : Dr. C.H.M. (Clemens) Lutz

Co-assessor : Dr. Ir. H. (Haibo) Zhou

Date : June 22, 2015

(2)

Cooperation in Curaçao | Abstract 2

Abstract

“United we stand, divided we fall” is a well-known motto that has been used by different nations for the purpose to motivate people to form coalitions. This is not an exception for businesses, they are recommended to join each other in order to manage resource dependency and foster learning and knowledge exchange.

Purpose: The purpose of this study is to get new insight about the cooperation between SMEs, by analysing the cooperative strategies of Curaçao SMEs from a social and resource-based perspective, focusing on critical resources and capabilities, behavioural aspects and social characteristics.

Design/Methodology/Approach: Theoretical insights on cooperation in general, social distance and RBV are combined with data gathered from interviews about the cooperation agreement and possibilities between the SMEs of Curaçao.

Findings: This research add to our knowledge by showing that even when there exist social distance between SMEs, they can cooperate. For cooperation to occur, it has to be clear what each participant expect from each other. Having a clear role expectation, members put the differences aside in order to do business. And when entering a cooperation agreement ignoring the differences means that they are not considered important for the entrepreneur to do business.

(3)

Cooperation in Curaçao | Table of Content 3

Table of Content

Abstract ... 2 Table of Content ... 3 List of Figures ... 5 List of Tables ... 5

Chapter One: Introduction ... 6

Introduction ... 6

Background of the Study ... 6

Problem Indication ... 8

Purpose of the Study ... 8

Significance of the Study ... 9

Research questions ... 10

Summary ... 10

Chapter Two: Literature review ... 12

Introduction ... 12

Theoretical Frameworks ... 12

Cooperative and Foundations ... 12

Cooperation in general ... 13

The Resource-Based View ... 15

Social distance ... 16

Analysing Social Distance Dimensions ... 18

Conceptual Framework ... 19

Chapter Three: Methodology ... 22

Introduction ... 22

Research Type, Method, and Design ... 22

(4)

Cooperation in Curaçao | Table of Content 4

Data Collection and Analysis Method ... 24

Variables... 25

Dependent Variable: Inter-firm Cooperation ... 26

Independent variable: Social Distance ... 26

Independent variable: Resource-based View ... 27

Control Variables ... 27

Research Quality: Reliability, Validity, and Representativeness ... 27

Summary ... 29

Chapter Four: Research Findings ... 30

Introduction ... 30 Cooperation in SMEs ... 30 Case 1: Alpha... 30 Case 2: Bravo... 31 Case 3: Charlie... 33 Case 4: Delta ... 34

Social distance existence ... 36

Influence of social distance on cooperation ... 41

Influence of RBV on cooperation ... 43

Chapter Five: Conclusion and Recommendations... 46

Introduction ... 46

Conclusion ... 46

Theoretical implications ... 47

Limitations ... 47

Recommendations for Further Research ... 48

References list ... 49

Appendix A: Interview Question ... 53

(5)

Cooperation in Curaçao | Table of Content 5 List of Figures

Figure 1: Conceptual Model ... 21

List of Tables Table 1 The networks in the sample ... 23

Table 2 General Description of the Sample ... 24

Table 3 Relationship between sub-questions and interview questions. ... 27

(6)

Cooperation in Curaçao | Chapter One: Introduction 6

Chapter One: Introduction

Introduction

This chapter presents the main concept of this study indicating the problem and importance of cooperation between small and medium enterprises, and the influence of social distance on the island of Curaçao. This section will start with a brief overview of the topic to provide an in-depth understanding of its background prior to discussing the problem statement and significance for the conduct of this study. At the end, the research questions and sub questions are presented along with the study delimitations before proceeding with the literature review of the study.

Background of the Study

“United we stand, divided we fall” is a well-known motto that has been used by different nations for the purpose to motivate people to form coalitions. This is not an exception for businesses, they are recommended to join each other in order to manage resource dependency and foster learning and knowledge exchange. Child, Faulkner and Tallman (2005) states that “cooperative strategy is the attempt by organizations to realize their objectives through cooperation with other organizations rather than in competition with them”. “It focuses on the benefits that can be gained through cooperation and how to manage the cooperation so as to realize them.”

Small and medium-sized enterprises most of the time pursue the organization of a cooperative as a survival strategy (Suh, 2015). This is because they experience a competitive pressure that makes it necessary for them to cooperate. The competitive pressure is due to environmental shifts that occurred in the last decades; examples are the globalization of markets, the rise of and fast technology changes, and regulatory changes in and across nations (Parkhe, Wasserman & Ralston, 2006).

(7)

is partly driven by numbers showing that alliances outperform more traditional forms of business activity by over fifty percent.

Child et al. (2005) states that there are two rationales - learning and access to missing skills - to explain the reasons why firms cooperate. These rationales uses the Transaction Cost Economics (TCE) (Williamson, 1975), the Relational View (Dyer & Singh, 1998), and the Resource Based View (RBV) (Barney, 1991) as basis for the motives. These arguments include finding efficient solution to the hazards of economic transaction, improve strategic position through complementary assets; and accessing superior capabilities. Other motivations are co-opting/blocking competition, overcoming trade barriers, and facilitating international expansion.

Toole (2000) also state that there are two views regarding the tendencies why cooperation exists between firms. The first view is because firms have to cooperate out of necessity, characterized by the RBV of the organization and resource dependency theory. The other view is that firms simply want to collaborate; they choose to do so. Meiseberg and Ehrmann (2012) used Organizational Economics View (OEV) and the RBV to examine SMEs tendencies to network. They concluded that both theories play a role for the tendencies of SMEs to network. However, the organizational capabilities emphasized by RBV in terms of coordination and communication were most important for cooperation decision.

Oughton and Whittam (1997) used the game theory and concluded that cooperation is the effect of profit maximization behaviour and institutional and cultural environments.

However, firms have difficulty most of the time to maintain the cooperation and thus make the cooperation unsuccessful. Researchers have made attempts to find the factors that distinguish the successful cooperation from the ones who failed (Park & Ugson, 1997; Mohr & Spekman, 1994). One of the factors that play a major role is partner selection, because it has an effect on the way that the skills and resources are embedded (VaramÄki & Vesalainen, 2003). Hennart and Zeng (2002) state, that partners with different culture is the main reason that cooperation between firms tend to be unsuccessful. A manner that cultural differences can obstruct cooperation is the lack of shared norms and differentiation in the criteria for evaluating decisions (Parkhe et al., 2006).

(8)

Small and Medium-sized Enterprises (SMEs) in order to explain network formation, functioning, and evolution in theory, and the way it is organized, managed and governed effectively in practice.

Problem Indication

Curaçao is known as an island with beautiful beaches and special architectures where the people are courteous. The economy of Curaçao is based on tourism, oil refining and transport, the financial service sector and trade and industry. The community plays an important role for the long-term development of the sectors on the island, especially the tourism sector which has the highest employment population of all the economic activities (Vision on Curaçao, 2013). Government wants further expansion of this sector. The population should prepare for this; which entails the creation of sleep accommodations, restaurants, recreation and entertainment possibilities.

Thus, a non-governmental organization (NGO) on the island thought that this could be a good opportunity for the unemployed people to start working in the tourism sector. In 2011, they came up with trainings for those people to enter the tourism sector. One of the training areas was on how to become an entrepreneur. The follow-up training was based on how to grow from a micro firm to small and medium sized firm. During this training, each participant joined other individuals of their neighbourhood to create a cooperative team. Together they had to focus on the unique things their neighbourhood can offer to tourists. Afterwards, the participants of each neighbourhood had to make a collective business plan. Every participant could include their ideas of how they can serve the tourists. If the plan was attractive and feasible, they received a starting capital.

Since then, not much has happened; all cooperatives are not yet working on full potential. The activities for tourists are not occurring on a frequent basis. The meetings among the entrepreneurs regarding their plans do not deliver very much. Analysing the struggle that the cooperatives faced, it came to mind that this is due to differences that exist among the participants.

Purpose of the Study

(9)

development and dissolution of networks. In their paper, they mentioned some of the other academic disciplines, as ethics fairness and social distance among others. Previous researches that analysed cooperation do not present a complete paradigm of the social characteristics of the entrepreneurs influencing the cooperation. In this case, this study will revise cooperative behaviour of SMEs using the concept of social distance. The concept includes all differences such as social class, ethnicity or sexuality, but also the fact that the different groups do not mix up. One characteristic that describes an entrepreneur is autonomy and independence, but when doing business, they are dependent on ties of trust and cooperation (Conway & Jones in Carter & Jones-Evans, 2006). So, this means that the cooperation between entrepreneurs within the network is important to be analysed. This study analyses how entrepreneurs within cooperatives deal with social distance. This paper will study the cooperation within network from a social perspective focusing on behavioural aspects and using relational analysis. Relational analysis views cooperation as central to the exchange process. Gundlach, Achrol and Mentzer (1995) state that exchange relationship is socially embedded. Analysing cooperation from a social perspective does not mean that the entrepreneurs behaviour are the only characteristics that influence the decision of cooperating. RBV is an argument used in other studies to explain that firms cooperate out of necessity by developing resources that is in charge to create a sustained competitive advantage. Rangone (1999) states that SMEs put strategic focus on some basic capabilities in order to have a sustained competitive advantage. Since RBV plays a major role in the decision-making process in order to cooperate and create a competitive advantage, it will be included in this research. This study wants to know how SME’s cooperate, considering social distance and RBV.

Significance of the Study

(10)

examine these in SMEs. SMEs count for the majority of the businesses around the world; however limited research is focused on them.

This study is academically important because although there are several research about inter-firm cooperation, the embeddedness of networks operation is still an enigma. By considering the social characteristics of each firm we will try to find some new insight of how cooperation between firms works. This paper will bring a theoretical contribution to and extend existing literatures on the subject of cooperation.

The practical relevance of this study should help the different cooperative firms on the island of Curaçao to get full potential out of the cooperative strategy. This include the evaluation of firm operation and analysis of the cooperation between firms. Furthermore this paper will highlight the importance and benefit of cooperation and will serve as promotion of SME’s cooperation on the island. Additionally I hope that this study will trigger other researchers to investigate SME’s on the island.

Research questions

As mentioned above, the purpose of this research is to study how SME’s cooperate considering social distance and RBV. This means that we will be analysing the cooperative behaviour of firms. Therefore the research question for this study is:

Does social distance exist between SMEs in Curaçao, and how do the resources and capabilities that create competitive advantage and social distance influence the way that SMEs cooperate within a network?

The Sub-questions for this study are:

1. How does cooperation between SMEs’ function? 2. Does social distance exist between SMEs?

3. What for influence does social distance has on the cooperative strategy?

4. How do the critical resources and capabilities influence the way SMEs cooperate?

Summary

(11)

(12)

Cooperation in Curaçao | Chapter Two: Literature review 12

Chapter Two: Literature review

Introduction

Chapter two addresses the main literatures and theories of this study’s concepts, including the different forms of cooperation, the analysis of all the economical and behavioural explanations for inter-firm relationships, and the aspects of the cooperatives, foundations, social distance and the resource based view theory.

Network relationships between companies are seen as an important means of reducing the costs of organizing, managing resource dependencies, and promote learning and knowledge (Baum, Calabrese & Silverman, 2000). The word network is described as cluster of relationships that tied a group of independent companies together (Street & Cameron, 2007) to cooperate with each other (Gulati, 1995). Different forms of network relationship exist, such as joint venture, franchise, patent licensing and cooperative agreement.

Theoretical Frameworks

Cooperative and Foundations

Cooperative organizations are widely used throughout the world and in various sectors. As mentioned in the introductory section, cooperatives are frequently developed by small and medium-sized firms as a survival strategy (Suh, 2015). Furthermore, there are foundations which represent non-profit organizations that usually donate funds and support other organizations, or are organizations which provide the source of funding for their own charitable goals. In this research cooperatives and foundations were considered.

The characteristics of the foundations vary in diversity of structures and purposes. However, the following common structural elements are always present in foundations:

 Legal requirements followed for establishment;

 Purpose of the foundation;

 Economic activity;

 Supervision and management provisions;

 Accountability and Auditing provisions;

 Provisions for the amendment of the statutes or articles of incorporation;

 Provisions for the dissolution of the entity;

(13)

Cooperation in Curaçao | Chapter Two: Literature review 13  Tax status of the foundation.

On the other hand, the member based type of organization such as cooperatives relies mostly on the commitment of the members. This commitment is grounded on the cooperative’s goals and vision. Nadeau and Thompson (1996, p. 7–8) define cooperative development as “a group of people forming an organization to provide themselves with specific economic or social benefits.” This definition is in line with the definition of The International Co-operative Alliance (ICA, 2014), which defines coCo-operative as “an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly owned and democratically controlled enterprise.”

According to Ratner (2013), the definition of ICA is the most widely accepted definition of cooperative. ICA also established a set of principles to put the cooperative values into practice. These principles are:

 Voluntary and open membership;

 Democratic control by members;

 Equitable contribution to the capital of their cooperatives by members;

 Autonomy and independence;

 Provision of education and training;

 Cooperation among cooperatives; and

 Concern for community.

Based on the information above, it can be concluded that cooperatives and foundations are not created only as business survival strategy, but also for the development of communitarian solidarity and integrity. This means that a cooperative and a foundation could be managed to achieve more than just financial returns (Stofferahn, 2009). Collaborating with each other small firms could be in a better position to reduce transaction costs and accessing superior capabilities, improve strategic position through complementary assets, overcome trade barriers, to compete with larger firms. It seems that cooperatives make it easier for small firms to be competitive.

Cooperation in general

(14)

Although network relationships are seen as an important means for firms, scholars and practitioners criticize the concept of cooperation as a ‘quasi-panacea’ to organizational challenges. Anecdotal evidence suggests that in practice, SMEs managers remain unconvinced of networking (Meiseberg & Ehrmann, 2012). The scarce results in the literature indicate that SMEs managers are unconvinced due to different factors, including the difficulty in finding partners, strong tensions on the internal resources or a lack of trust towards larger partner firms (Baum et al, 2000; Meiseberg & Ehrmann, 2012). Hite and Hesterly's (2001) analysis suggests that the networks that entrepreneurs can create is highly dependent on their previous social and professional ties and that this may severely limit the range of possible partners. Those SME that succeed in forming stable inter-firm relationships are still exposed to specific risks.

Relationship theories tend to focus on an economic or behavioural explanation of the inter-firm relationship. Based on literatures, it looks like economists focus on the transaction content of inter-organizational relationship while behaviourists focus on the social processes. In the economic explanation, the most efficient relationship structures are those that enable firms to remain independent, use the market, or gain control to exploit their power over partner firms. Theoretical schools, which take this view, include agency theory and transaction cost economics (Toole, 2000; Meiseberg & Ehrmann; 2012). The economic variables that are characterized in the research studies are price, power, risk avoidance and opportunism. If these are present to a high degree in a relationship, it is unlikely that mutuality and cooperation will exist (Toole, 2000). The tendency to network is high only when asset specificity is high because when cooperating firms are mutually dependent, their incentives for opportunism will reduce and partners are likely to continue to cooperate to recover their investments (Meiseberg & Ehrmann, 2012).

(15)

In this research I will use behavioural analysis to analyse how social distance influence the cooperation that exist.

The Resource-Based View

The resource-based view introduced by Barney (1991) states that the way resources of a firm are combined form the difference between firms. This view assumes that resources in an industry are heterogeneous and immobile. A resource is “something that a firm possesses, which can include physical and financial assets as well as employees’ skills and organizational (social) processes’; a capability, in contrast, is ‘something a firm is able to perform, which stems from resources and routines upon which the firm can draw”(Hart & Dowell, 2011 in Meiseberg & Ehrmann, 2012, p.286). Both resources and capabilities form the basis of competitive advantage, when these resources and capabilities are combined in such a way that they are inimitable and non-substitutable they are a source of sustained competitive advantage (Barney, 1991; Rangone, 1999).

The recent studies about RBV suggest that firms combine internal resources with external resources acquired through their network relationship to obtain competitive advantage (Meiseberg & Ehrmann, 2012). Not all the resources that a firm possess are important to the RBV, only the resources that are valuable, rare, inimitable and non-substitutable. These are the critical resources. According to the RBV, when firms deal with limited resources, they enter cooperative agreements with other firms to conquer such limitations.

According to Zander and Kogut (1995) the capabilities of a firm is based on the way individual and functional expertise is structured, coordinated, and communicated. “Alliance capabilities means a firm having the ability to coordinate and manage interdependence between partners, involving the ability to identify and build consensus on task requirements, to specify the roles and responsibilities of partners, and to adapt internal and inter-firm procedures over time”(Meiseberg & Ehrmann, 2012, p. 287).

(16)

information. The bonding ability entails that a firm should provide reliable response to partners’ work-related needs and showing understanding, appreciation and respect to partners’ concerns, ideas and views. Meiseberg & Ehrmann (2012) concluded that firms having strong coordination and communication capabilities are more inclined to network compared with other firms.

Rangone (1999) presents a RBV of an SME’s sustainable competitive advantage. The framework to strategy analysis of a firm’ competitive advantage is based on three basic capabilities. These capabilities are:

 innovation capability: the ability of a company to develop new products and processes to obtain above average technological and management performance.

 production capability: the ability of a company to produce and deliver products to customers, while ensuring competitive priorities.

 market management capability: the ability of a company to market and sell effectively and efficiently.

Rangone (1999) model suggests that a firm focus on one or more of these capabilities. However the extent to which the firm has these capabilities depends on the firm particular strategic focus, even if it is planned or emergent strategies.

Social distance

In an effort to shed some light on the phenomenon of inter-firm cooperation, this study suggests that social distance have an influence on level of cooperation. First of all, social distance is defined next.

Social distance is generally understood as a uniquely sociological concept, and more complicated than spatial distance. Especially in recent decades, research on technological ties has shown that people can experience social distance and proximity without being present in the same physical space (Karakayali, 2009). Warner & DeFleur (1969) described social distance as based on sociological considerations of status position and role expectations in social relationships.

(17)

Social Distance as Affective Distance

This conception is based on the idea that those who are socially close to us are those we feel close to, and vice versa. The most popular utilization of this conception can be found in the Bogardus Social Distance Scale, according to whom, mutual sympathy and affectivity are the key elements of social distance (Karakayali, 2009).It is crucial to note here that such a conception treats social distance essentially as a subjective category.

The Bogardus Scale, for example, records the subjective attitudes and feelings of the members of a group toward other groups. Karakayali adopts the statement of Bogardus that in research about social distance, the attention is placed on the feelings that a person react with toward other person and/or other group of people. It would be quite vacuous to conceptualize social distance without any reference to subjective attitudes and emotions; however, there is an almost unsurpassable logical difficulty in treating social distance exclusively as a subjective category. If an individual is to develop specific emotional reactions toward other groups, he should already be able to identify those groups as distinct categories.

The Bogardus Scale, for example, is built on the implicit assumption that informants have a general, collective understanding of who does not belong to their own group when they answer a question like: ‘‘Would you (as member of group A) like to live in the same neighborhood with a member of group B?’’ In effect, what the Bogardus Scale measures is what the members of a group feel about another group that they already perceive as being distant ⁄ distinct from their own group (Karakayali, 2009).

Social Distance as Normative Distance

(18)

Whatever different forms they might take, however, all normative social distance systems distinguish between different degrees of membership to a group. It may be argued that as long as these distinctions overlap with the subjective feelings of the members, they work well. It is also quite likely that if there is a serious discrepancy between what the members feel and what the normative system dictates, the system, if not the group, might eventually dissolve (Karakayali, 2009).

Social Distance as Interactive Distance

The frequency that people interact with each other, also tells something about the degree of social distance. “Interactive distance is the degree of actual interaction and need not match the normative prescriptions” (Karakayali, 2009, p. 542). The frequency and length of interaction was used in Granovetter’s (1973) as the measures to determine the strength or weakness of social tie.

Social Distance as Cultural and Habitual Distance

Karakayali (2009) state that Gabriel Tarde (1962) the first sociologist was, that suggested that the degree of imitation that exist between two groups, the cause was for distance. Follow-up literature moved the emphasis to the overall result of imitative processes, that is, to cultural similarities that exist. Social groups and classes can be mapped on a multidimensional social space on the basis of the types and volume of capital they possess.

Analysing Social Distance Dimensions

When analysing the four distinct ways that social distance has been defined by Karakayali (2009), it may seem that they overlap, but it is important to note that not all these dimensions necessarily overlap. A high interaction could exist between members of two groups, but this does not mean that they feel close to each other neither that they will consider each other as part of the same group. However, looking at the normative and cultural dimensions, they seem to overlap. Rummel (1976) define cultural distance as “the objective differences between people in their meanings, values, and norms. These differences encompass the common, cultural components of philosophy-religion, science, language, ethics-law, and fine arts.” Norms and values may be part of a larger system of ethics; together with status, power and class.

(19)

sociocultural field, different actualities; and by taking different views on behavior one will get important different understanding. By including all the dimensions in this study, it will help getting different views on the behavior of the entrepreneurs.

Conceptual Framework

The purpose of this research is to study the effect of social distance and RBV (independent variables) on cooperation (dependent variable). First of all we should know how the SMEs neighbourhood cooperatives function to have a better picture of the case we are investigating; we need to analyse the activities of the cooperatives. In combination with the background information we should know how the entrepreneurs deal with each other in the cooperative and to classify the social differences that the members have.

According to Bogardus (1926, p. 40), “social distance exist between different groups of people as well as between persons.” He mentioned as example that social distance exist between occupational groups, religious groups, and, educational groups, even between departments of the same university. In a group that is defined normatively as closed, there could exist negative emotions, rivalry and hostility among the members. Because the member most of the time share the same desire and need the same scarce resources within the same environment (Karakayali, 2009).

(20)

First of all defining the RBV of a firm, will help describing the firm and its strategy. In this study RBV is also included because of the impact it has on cooperation. Literature suggest that when the critical resources of a firm cannot be obtained efficiently through market exchange, firms tend to seek these resources through cooperative arrangements to overcome the constraints (Meiseberg & Ehrmann, 2012; Das & Teng, 2000). Beside obtaining the critical resources, a firm should be able to manage these resources in such way to create competitive advantage. The capabilities of a firm as mentioned in the literature depends on the firm strategic focus. This means that if the firm wants to have a competitive advantage, it must develop one or more of these capabilities. For this research, we will use the production and market management capabilities from Rangone’s framework. We will not include the innovation capability, because this has not been developed yet by the firms we want to study on the island. Beside the production and market management capabilities we will include the coordination and communication capabilities discussed in the article of Meiseberg & Ehrmann. These capabilities are important to maintain an effective cooperation agreement with other firms.

(21)

Cooperation in Curaçao | Chapter Two: Literature review 21 Figure 1: Conceptual Model

(22)

Cooperation in Curaçao | Chapter Three: Methodology 22

Chapter Three: Methodology

Introduction

This chapter entails the presentation of the research methodology of this study, including its design, approach, sampling designs, data collection and analysis methods. Furthermore, the research quality, validity, and reliability of the study are also discussed along with the direct and indirect variables for this study.

Research Type, Method, and Design

This research is an exploratory research, since there is no literature that analyses SMEs cooperation based on social distance; and the context in which it is analysed is also new, because the research is conducted on the island of Curaçao, where little research development exist in SMEs’ literatures. According to Offenbeek and Hage (2015), this research adopts a theory elaboration approach. The theory elaboration approach aims to look for missing relationships that exists in the literature. Cooperation between firms has been studied, however literature propose to use other perspectives to analyse cooperation (Meiseberg & Ehrmann, 2012). Using other perspectives will contribute to a better understanding on the cooperation strategy of firms.

(23)

Cooperation in Curaçao | Chapter Three: Methodology 23 Sampling Method, Size and Design

According to Rummel (1976), distance as a concept can be misleading and to prevent this he mentioned three assumptions that should be considered when studying distance, namely: 1. commonality; 2. behaviour; and 3. directionality. “A distance assumes that there is something common between individuals, which can be compared in some quantitative or qualitative fashion. It requires some common attribute along which the difference can be assessed.” (Rummel, 1976). The second assumption emphasized that distance is behaviourally an empty concept. However distance (such as wealth) lead to certain behaviour. The third assumption is that distance assumes directionality. Another aspect to distance, beside the distance-magnitude, is its direction along the common dimensions. But since we want to study the behaviour of cooperating SMEs and not the magnitude of the distance, the third assumption is not relevant for this study (distance is not measured using a Likert Scale).

Each case has its own commonality; the common characteristic that exist in one of the organizations is that they come from the same neighbourhood. For the other case, the commonality is that the group consist out of unemployed women who attended an educational plan to start their own business. The common characteristic of the third case is that the members of the group are siblings. The common element that the fourth case have, is that the organization consist out of persons with an agricultural background. Table 1 depicts the characteristics of the cases studied.

Table 1 The networks in the sample

Network* # members Commonality

aspect

Sector Product/

service

Turnover**

ALPHA 15 Neighbours Hospitality Tour

package

7.950

BRAVO 13 Females participants

in educational plan

Hospitality Catering 10.815

CHARLIE 8 Sibling Agriculture Pork &

goat meat

19.600

DELTA 8 Farmers Agriculture Fruits &

vegetables

379.020

(24)

Eisenhardt (1989: 545) stated that “there is no ideal number of cases, a number between four and ten cases usually works well.” For this report, the aim was to target only the seven neighbourhood cooperatives (consisting from five to fifteen entrepreneurs) that originated from the followed trainings organized by the NGO. During the first contact with the group members, I realized that most of the cooperatives are not active anymore. Leaving me to use a snowball sampling technique to gather data. However due to time and resource constrains only four groups of cooperating SMEs were selected for the case study. From each group three member SMEs were interviewed, so twelve SMEs on the island were interviewed. Considering that social distance is a concept that is personal (it differ per person), the condition was, to conduct interview with someone of the management team of each firm. Since they know more about the business, its strategy and have influence in the decision making process (including decision about cooperating). Luckily all the interviews occurred with the small business owner. See table 2 for a description of the participants of this study.

Table 2 General Description of the Sample

Case code Interviewee Educational

level

Age category Business # of

Employees

ALPHA President High 50-59 Museum 3

Member Low 50-59 Handcraft shop 1

Member Low 60+ Snack bar 2

BRAVO President Low 60+ Event planner 1

Member Low 50-59 Cook 1

CHARLIE Coordinator High 40-49 Career advisor 1

Member Medium 40-49 Farm 1

Member High 30-39 Horticulture adviser 1

DELTA Director High 50-59 Farmer market foundation 12

Member Low 40-49 Farm 2

Member Medium 30-39 Farm 3

Data Collection and Analysis Method

(25)

representative of a cooperative SME based on availability. In general, if an interviewer becomes more involved in a group, he or she will understand the process better and consequently receive valuable descriptive and analytical data possibilities (Rouse, 1999). The method applied by this study allowed this understanding and data possibilities for further analysis. See Appendix A for the interview questions.

Hereby, the data analysis method for this study is described next. “Analysing data is the heart of building theory from case studies, but it is both the most difficult and the least codified part of the process.” (Eisenhardt 1989: 539). the analysis method applied could be broken down in the following steps.

1. Objective data filter

2. Interpretation of interview responses

3. Comparative analysis of results among cooperatives

4. Overall analysis of results through critical thinking, judgment, and observation 5. Linking to literatures

Thus, the analysis methods applied entailed critical thinking, critical judgment, objective observation, comparative analysis and analysis of the interview results and literatures.

Variables

The Sociology guide (2014) points out that social distance could be measured using direct observation of people interacting or through surveys asking people what type of person they would accept. The questions that were asked to measure social distance, involved what a person would do if another person want to become part of the group. This form of measuring is to get an indication of what would do; what a person will do in reality depends not only on behaviour, but also on the settings of the situation (Sociology guide, 2014). However, in this research interview has been used in order to get more information regarding the topic.

(26)

Grannovetter, 1973; Warner & DeFleur, 1969; Bogardus,1925; Barney, 1990; Rangone; 1999; Meiseberg & Ehrmann, 2012) which considered similar variables that measure the concepts mentioned in the conceptual framework. The conceptual framework represent the research of this study. The sub-questions will assist in answering the research question. Table 2 will illustrate the link between the sub-questions and the interview questions (See appendix A “interview questions”).

Dependent Variable: Inter-firm Cooperation

Cooperation is operationalized based on the years of engaging into an agreement. To obtain more information about the cooperation, question about the reason of establishing the cooperation, the activities they are engaged in, and how do they function will be asked. These questions should also give an indication of the level of engagement of the cooperation between the SMEs.

Independent variable: Social Distance

Social Distance as Affective Distance: The questions would ask the interviewees to describe how he/she feels about working with other people. Who (what type of people) they like, have sympathy for, and are able to understand the most. Questions presenting different kinds of acts in which the respondent should indicate what he would do (Warner & DeFleur, 1969; Bogardus,1925).

Social Distance as Socio-cultural Distance: All members that interact socially with each other share a set of characteristics classifying their social backgrounds, role dispositions, class, and status (Rummel, 1976). The differences and similarities between people are then captured by their objective distance as Rummel (1976) proposed, based on the following characteristics: income, home ownership, educational level and school, occupation, organizational memberships, family, sex, age, race, etc. This will help to identify a person's position in social space, his location within the web of social relationships.

(27)

meetings planned, and how many times do the members contact each other in a week and through which channel (Warner & DeFleur, 1969; Grannovetter, 1973).

Independent variable: Resource-based View

To operationalized the concept of RBV, literature (Barney 1991; Rangone 1999; Meiseberg & Ehrmann, 2012) was used. As seen in literature review, other researches point out that obtain and sustain a competitive advantage, focus has to be on critical resources and capabilities. The capabilities important to this study are: production, market management, coordination and communication. To obtain these information, this study used the model proposed by Rangone (1999) to strategic analysis. This means that the interview questions are derived from the RBV definitions, Rangone’s model and the questions of the capabilities used in the study of Meiseberg and Ehrmann.

Control Variables

Descriptive variables are size of the network and it is measured as the number of members. The relationship duration was measured as the amount of years of a firm’s involvement in the cooperation under investigation (see appendix A for the list of questions related to each variable).

Table 3 Relationship between sub-questions and interview questions.

Sub-questions Interview questions

How does cooperation between SMEs’ function? Interview question # 3, 4, 9, 37-41 Does social distance exist between SMEs? Observation regarding the usage of

‘I’, ‘us’ and ‘them’. Interview question # 15, 16, 17, 19-36

What for influence does social distance has on the cooperative strategy?

Interview question # 5,7, 12-36

How do the critical resources and capabilities influence the way SMEs cooperate?

Interview question # 8, 37-44

From this table it can be concluded that the sub-questions are reflected in the interview questions.

Research Quality: Reliability, Validity, and Representativeness

(28)

results of the study independent of specific study characteristics and can be replicated (repeated) in other studies” (van der Bij, 2012: 6). Validity is defined as “research result is justified by the way it is generated; the way it is generated provides good reasons to believe that it is true and adequate” (van der Bij, 2012: 11).

To ensure reliability of the study four types of sources should be considered: the researcher, the instrument, the respondent, and the situation (van der Bij, 2012). In this research the same person who conducted the interviews also did the transcription and translation of the transcript into results. As researcher of this study, I tried minimalize the bias that could exist. In appendix A, I included the questions used as a guidance to conduct the interviews. If another person would do the research in the same way, they should achieve similar results. To prevent instrumental bias, researchers should use more than one research instrument. However in the case of this study it was not possible to conduct a desk research. In this study desk research was not possible, since there are no documents about the concepts studied. The usage of surveys would lead to empty results in the case of this research.

For this research we included more than one person to prevent respondents bias. From the cooperatives I interviewed three different peoples , each pertaining to a different firm. To prevent the bias of the circumstances the interviewees were all interviewed in an informal and comfortable setting. This setting should help them to open up and provide more valuable information. By building a relation of trust, the researcher is allowed to collect high quality data (Rouse, 1999).

(29)

Cooperation in Curaçao | Chapter Three: Methodology 29 Summary

(30)

Cooperation in Curaçao | Chapter Four: Research Findings 30

Chapter Four: Research Findings

Introduction

In this section of the paper the results of the interview held with the members of cooperatives and a foundation will be presented. We will use the sub-questions as a guidance to structure the results. For each sub-question the paper will present the results of each network. First a general description of the network is presented, including the activities, membership, resources and capabilities and their vision.

Cooperation in SMEs

Case 1: Alpha

General

This network is active since 2010. The NGO mentioned in the beginning organized a training to promote entrepreneurship an cooperation among them. Entrepreneurs from different neighbourhood attended. During the last sessions of the trainings, the participants were asked to join their neighbours and present a collective plan were each of participants should incorporate their business into the plan. This was the start of Alpha, with 4 members. After the trainings the participants approached other neighbours that also have a business to join the cooperative. Now the cooperative tells 15 members. One thing to note is that all the members of this cooperative are females.

The main focus of the network, is to promote the neighbourhood and its micro businesses. Through the cooperative, they firms created a tour within the neighbourhood. The tour package include a ticket to the museum, a bus tour in the neighbourhood, meals and opportunity take pictures in folkloric clothes. The tour start from the museum, where the customers get the history of the neighbourhood and are able to see artefacts that their ancestors used since 1849. The catholic church is also part of the history, and the tourist can take pictures of the arts within the interior of the church. When they are ready, they can choose to hop on the bus to start the tour or the can walk the route. On the route, they can enjoy the nature, see caves, visit the beaches and the handcraft store. After that they will be located to a member restaurant to enjoy an local meal.

(31)

the money collected from the market event, the network pays for trainings, borrow money to the members and other needs of the cooperative.

Membership

Each firm that is from the neighbourhood can join the cooperative, they have to pay a fee. However, the openness of the cooperative, a small proportion of the neighbourhood firms are member of the cooperative. There are other businesses within the neighbourhood, that are also based in the hospitality sector including hotels and island famous restaurants. But they are not member of the cooperative. A reason for this is that within the neighbourhood those firms are considered large, because of their popularity.

Resources and capabilities

The resources that are important to the cooperative are the location of the museum, because it’s on a rock at the beach shore and it is unmissable. The natural attractions (natural bridge made out of coral, the caves, the place where the island “breath” and the hills to see the whole village) on the route to show the visitors, the knowledge of the tourist guide regarding the history of the village, the skills of the cook to prepare authentic local food and the enthusiasm of the visitors for referral.

The focus of the cooperative reside on their market management capability. The cooperative use the natural resources of the village to promote the tours. They visited all hotels, apartments/resorts in the neighbourhood to distribute brochures. Through the trainings some of the members participated in, they were invited by a television program to get interviewed. Future

In the future the cooperative wants to offer tours to school groups. But they want to also enter cooperative agreement with the other businesses of the neighbourhood and with local travel agents. They want have their own wooden bus for the excursion (now they rent a bus). They also want to organize the market on a more frequent basis. Now they do it once a year, they want to start increasing it to three times a year.

Case 2: Bravo

General

(32)

give start to the cooperative. With time the group began to diminish and during another educational program that was held in 2010, the group asked the same questions to the participants. Nowadays the group consist of 13 females.

The reason why this cooperative was established is to create a stable salary for a group of “unemployed” women. These women consist of namely cooks. Some of them sell meals at home, others cooks lunch meal to deliver at offices. The issue with this is, that not every day is the same, the sale may vary considerably. And as single parent, the responsibility exists to pay checks. And if the sales vary, the checks cannot be paid. So after the educational plan, they came with the idea to open a restaurant together. The restaurant should provide each of the members with a monthly salary. The restaurant offers local foods to the customers. This restaurant was established first in a museum (renting space), but they had to move. Since the cooperative did not find a location yet. They started offering catering service to parties and events. Now they can organize a complete event, offering catering and decoration services. Since the members of the cooperative knows a lot about the culture of the island, they can incorporate this knowledge into the event giving it a cultural touch.

Membership

The only condition to become part of the cooperative is that, one should participate in the educational plan. The educational plan stress the importance of cooperation among individuals, but also how to master one of the tasks that should be carry on within the catering industry.

The resources that are important to the cooperative are the skills of the members (as employees of the catering), the quality of the food should meet the standard of all the cooks within the network. The expertise of the event planner is planning parties and activities efficiently and on a short time noticed. The team should be able to handle pressure. The direct connection that the cooperative has with the coach who gives the educational plan. Because this person is responsible to master each prospective member that wants to enter the catering group.

(33)

promote the catering service to big companies on the island using brochure, social media and business card.

Future

In the future they want to have the best catering service on the island, so they keep focussing on the abilities of the members to perform. Beside catering the cooperative wants to open a shop to sell handmade souvenirs and other artisan products. Because during the educational plan, they teach the participants to do craftworks, and by opening a shop the participants receive an extra stimulus. They also want to find an historical location soon in order to continue with their restaurant. The restaurant was the main source of income in the past.

Case 3: Charlie

General

This network was created in 2014 out of 8 siblings. The network started after a family party organized in which they searched the island for goat meat. After the party, one of the brothers did a research to look at the supply and demand for goat meat on the island. And he concluded that the demand was higher. So he took this opportunity to start a farm. Considering that as siblings, they had a piece of land as heritage, he approached his family to make use of the land. The siblings agreed and offered their help in the business. They agreed to create a cooperative in order to work together. Each sibling paid an initial capital of 200 guilders to start. They approached another group of the family consisting out of cousins, in order to also use their piece of land to grow the crops for the animals. But this attempt for the family groups to work together failed. So the siblings used their own piece of land to grow the feed to fed the animals and also for breeding the of the animals.

The main focus of the cooperative is to produce pork and goat meat for the local market on affordable prices. So they started with a farm. Through the cooperatives, they want to show others the importance of cooperation.

(34)

Membership

The siblings thought that using a cooperative would be more suitable to do business, since each of them have their own specialization in other fields and have their own businesses. They consider this, an opportunity to show others that working together can lead to higher economical rents. However, they limited their membership to only family. They wanted to started intimate and when the cooperative is more stable, they will evaluate to open the boarders for others to join.

The resources that are considered important to the cooperative are that they has their own piece of land to run the farm. Another resource is the previous knowledge that exist in the agriculture and breeding of animals. This knowledge was transferred from parents to children, because the family had a farm in the past. The contribution of each member of the family with their own experience in different area of interest is also a critical resource to the cooperation.

This cooperative focus on the production capability, because they want the meat to be of a high quality. To ensure this, they perform quality checks and also ask for customers opinion. Marketing is also considered important, since they cooperative is very young. However most of the customers are made through referral.

Future

In the future the cooperative wants to start innovating in order to produce the meats more efficiently, delivering the same quality products incurring lower cost. The idea is to satisfy the local market, so there is no need to import.

Case 4: Delta

General

(35)

The main focus of the foundation is to provide a central location where farmers can deliver their products for distribution (centralized distribution location). This means that the farmers is only responsible for planting and harvesting. When the farmer enters a contractual agreement with the foundation, the foundation will be in charge of selling the products. In the agreement it is stipulated which fruits and vegetables the agreement is based on the quantity that the farmer should deliver a week. For this part of the agreement the farmer will get a fixed price based on the amount stipulated in the contract per kilo. This means if the contract is specify that the farmer should deliver 60 kilo cucumber a week and the price he will get for each kilo is 1 guilder, the farmer will get 60 guilders a week. If the farmer deliver less than 60 kilo (poor weather conditions) he will still get 60 guilder. If he deliver more than 60 kilo, he will get 60 guilders plus the a percentage of each extra kilo cucumber sold on the market. However this is a risk for the farmer, because it is not sure that there is a demand for the products, with the consequence that if the extra production is not sold, he would not get the extra reward.

Another part of the contract is that if you enter a contractual agreement with the foundation, all the farm production should be delivered to the foundation. This means that if the contract is based on cucumber, but the farm harvested watermelon, those watermelon should also be delivered to the foundation.

The tasks of the foundation include doing market research to measure the demand of each product that they could deliver. And if the local production is not sufficient to supply the market demand, the island should import the remaining quantity. Quality check of the local production before distributing the products on the market.

Membership

(36)

The resources that are important to the foundation are the parcel were the foundation is situated and the irrigation system on the location. Another resource is the knowledge of the farmers in order to produce high quality products. The foundation has contact with seed supplier on the island, take makes it more easy for to farmers to obtain. The contact with the customer supermarkets and stores is also important to the foundation, because those stores help in the prediction of the market.

The focus of the foundation reside on the production capability. This is because the quality of the fruits and vegetables are very important. The foundation has strict measuring techniques. Future

Now the foundation want to go a step further by starting with research in the agricultural sector using greenhouses. They recently acquire 3 greenhouses to start with researches. Having an agricultural business concerned with research and training, where other businesses could benefit. They want to cooperate with other agricultural organizations on the island to achieve a more developed agricultural sector. The goal of the organization within 5 years is for the sector to have professional farmers and that the local production will supply the most part of the market. This mean that the farmers should have a higher technical level of farming.

Social distance existence

Affective distance

Alpha: According to the president everything is working fine between the members of the network. She states that everybody cooperate for the benefit of the network. In her opinion, she can work with everybody. The only thing that she asks from others in order to work with them, is respect and positive attitude. With the members of the network, she has a good relationship based on those aspects. If someone with negative attitude wants to join the cooperative, she is willing to accept it (thinking that she is able to change the perspective of the person). In her opinion people should be willing to help each other, that is the reason she is part of the cooperative.

(37)

the cooperative via telephone in order to discuss her thoughts. This is an indication that her level of understanding and sympathy with that person is higher (she feels more at home with that particular member). When the question regarding her behaviour in particular situations, she could not explain how she would react (I do not know what I would do when found in a situation where I have to work with someone of the neighbourhood that I do not like).

The third member of the network feels at satisfied being member of the network. Before joining the cooperative, she was not socially involved in the village. She was focused on her direct family and her business. But since she saw the benefits of joining the network, she opened up. Now she feel more connected to the other members. She thinks that not all the members are sincere, but since she was accepted in the network, she is willing to accept and work with everyone.

Bravo: All the interviewees show understanding for the other members. They have the opinion that each of them as member of the network are in the same situation (unemployed) and want to achieve the same thing (stable salary). Being in the same situation, they have the idea that the one should support the other in order to achieve the cooperative vision. The president of the cooperative indicate that following the educational plan should help the prospective members to understand each other and become “family”. The other members interviewed also think that the educational plan helped them to see each other as family. They think that the other participants of the educational plan that did not join the cooperative have not reach the level of understanding necessary. One of the members mentioned that the educational plan serve as a self-sorting instrument, because people that attended the plan and did not feel connected with the others, did not join the cooperative. All of the interviewees stated that they are willing to work with everyone that show responsibility and determination. From the result one can deduce that there is no affective distance or the distance is not perceived between the members.

(38)

Delta: The farmers did not know the director of the foundation in the past. They heard about the benefits of the foundation and decided to give it a try in order to minimize the pressure of searching for customers. The farmers found it an optimal way to focus only on their farms. the year of experience of the foundation made it easy to understand the needs of the farmers. One of the farmers stated that based on the level of understanding that exist between him and the foundation, he is part of the network for already 10 years.

The foundation has strict rules, however these rules demonstrate that the foundation show understanding to the farmers. An example is the agreement that even if the farmers fail to deliver the contractual amount (consequence of environment), they will still get the contractual fixed payment. Both the farmers and the director of the foundation consider themselves having a bond. They feel comfortable working with each other.

All the three interviewees mentioned that even a person that they do not like, become an affiliative, they will do business with that person as if nothing happened. This shows that they are open to work with everyone.

Sociocultural distance

Alpha: In the cooperative there are people that are full-time employees and are part of the cooperative in their spare time. These persons dedicate themselves to the cooperative as secretary and public relations. There are some of the members that have a small production at home. There are housewives that have their small business of making souvenirs or cooking for others. This means that there is a difference in the level of income between the members. Also the educational level of the members vary; the president has a high educational level and the other members interviewed have a low educational level (table 2). All the members of the cooperatives are from the same neighbourhood. We can consider that the norms and values of the interviewees are the same, looking at the answers they gave about what they consider important. The values that they consider important are: respect and positivity.

There exist no authoritative command between the members. Everything is discussed during meetings and everyone takes decisions together. However when talking to the members about the cooperative that they form part of, one of them distinguish between ‘I’ and ‘others’. One of the Alpha interviewees answered the questions using ‘us’ and the other answered the questions using ‘I’. For the third member there was a variation between the answers given, sometimes she used “I” and in other occasion she used “us”.

(39)

Bravo: The members of the cooperative have the same status. All the members of the cooperative are unemployed women having the same educational level and pertaining to the same age category and most of them are cooks. The only difference is that they come from different neighbourhoods. However these neighbourhoods are located near each other. According to the interviewees, the values that a person should have to be part of the cooperative are: persistence, creativity, responsibility, honest, secured, business awareness, independent strength, trust.

They do not distinguish themselves from the group based on the answers they gave and the usage of “I” and “us”. The interviewees keeps talking about ‘us’ (we got a training, we organized an event, we want to continue with the restaurant). From the results, socio-cultural distance was not perceived.

Charlie: The cooperative consist out of siblings. They used this manner to start a cooperative, because growing up together as a family, they share the same norms and values. This means that their level of sociocultural distance is minimal, because most of their sociocultural aspects are more or less the same. They have the same level of necessity. However their educational backgrounds vary. The values that they consider important for a cooperative to work are: communication, trust, openness, respect, responsibility. All the three interviewees talks about ‘he/she and the siblings’ as one group. These characteristics suggest that there is no socio-cultural distance between the members of the network.

(40)

So we could say that there exist a sociocultural difference based on the class and status of the organization compared to the farmers.

The cases, Bravo, Charlie and Delta, made the comment that ‘our community is selfish and egoistic’. This tells that they consider themselves part of the community (usage of the word ‘us’ and ‘our’ community).

Interactive distance

Alpha: The members of the cooperative have different communication channels. They may use telephone, internet and face-to-face conversation. Not all the members make use of telephone as a channel, due to the related cost. Some of the members make use of the internet to send emails with information. But not all the members go through there emails daily. And there is an inclination for which people to contact via which channel. The meetings will take place once a month when there is no special occasion or they are planning for an event. If there is an event, the meetings will take plays weekly to plan and brief each other. Each meeting will last approximately for 2 hours. Beside this, the members of this cooperative are neighbours, this means that they have physical contact at least once a week for about 3 minutes to greet each other.

Bravo: This cooperative meets every month. But first the board will meet and brainstorm on different plans. Then they will call a meeting with all the members to present what they discussed during the board meeting. Other communication channel they use is telephone. However they think that this way of communicating could work better. They are considering to start using a chain method to call the members. Each member will be assigned to contact one person. They will use this channel to inform the other members about meetings or other important things that are important for the cooperative. Face-to-face conversation occur during the meetings (once a month). Some of the members have face-to-face communication more frequently (more than once a week).