Abstract
In periods of economic crisis and instability, the response of many business organisations is to try and adapt to prevailing market conditions. This typically results in a pattern of retrenchment and rationalisation designed to cut costs. Responses of this kind may be justifiable and, to varying degrees, effective at a firm-level. However, their wider repercussions can include the worsening of a pre-existing economic downturn (e.g. large- scale redundancies affecting local communities and cancelled orders affecting other firms in the supply chain). When faced with an economic crisis, some firms adopt a more entrepreneurial approach, in which the key features are strategic reappraisal and various forms of product, process and organisational innovation (Filippetti and Archibugi, 2011). While large corporations are capable of this kind of transformation, there is an increasing recognition of the important part that smaller entrepreneurial firms can play in innovation (Christensen, 1997) including the reinvigoration of industry sectors through open innovation (Chesbrough, 2003) and contributing to the reconfiguration of geographic clusters (Best, 2001). Studies of long wave cycles have shown that periods of economic crisis and depression can be important for innovation: they can disrupt established industry structures and cause entrepreneurs to see markets and customers in a different light so that they re-think products and services (Barras, 2009). However, comparatively little attention has been directed to considering just how entrepreneurial individuals in smaller firms mobilise the resources necessary for innovation and cope with risk in the unfavourable and demanding conditions that prevail in times of economic crisis.
This exploratory study seeks to address this research gap. It does so through an in-depth historical case study of the contrasting responses of two firms, in the same industry sector but operating on different scales with differing modes of production (i.e. artisanal v. mechanised), to the greatest economic crisis of the 20th century, namely, the Great Depression of the 1930s (Crafts and Fearon, 2011). The two firms, which served the same markets and were affected by the same external forces, followed very different paths: the larger one engaged in a series of acquisitions as a means of rationalising production and cutting costs, while the much smaller firm that operated on a very modest scale chose to innovate. This innovation involved developing a product that was new to Britain at the time, namely the sousaphone, an unorthodox musical instrument that hitherto had only been produced in the United States. As well as comparing the activities of the two firms operating on different scales, the study examines why the owners of this small firm decided to innovate in the very difficult trading conditions that prevailed at the time, and exactly how they were able to acquire and mobilise the resources needed to pursue this path. In particular, the study focuses on the use of improvisation (Kamoche, Cunha and Cunha, 2002), that is to say ‘impromptu action’ (Dickson, 1997: p. 37), and the closely related concept of entrepreneurial ‘bricolage’ (Baker and Nelson, 2005; Phillips and Tracey, 2007) or ‘making do’ (Eisenberg, 1990: p. 154), as a means of accessing the resources required.
The findings suggest that while large-scale enterprises often concluded that a strategy of retrenchment and rationalisation was the appropriate response to economic crisis, firms operating on a smaller scale viewed the situation differently and responded to the altered trading conditions in more positive, creative and entrepreneurial ways. As a result they were able to identify opportunities associated with new and expanding markets with scope for innovation. The study provides insights into the ways in which these small firms were able to identify and access the necessary resources for their innovations. It also sheds new light on the improvisatory nature of their entrepreneurial response, and its capacity to overcome seemingly insurmountable obstacles to growth in a recessionary environment (e.g. adapting existing resources to new uses, forming unconventional subcontracting arrangements and turning existing skills to new uses). The paper concludes with a summary of the key findings and their implications for future research and practice.
Get full access to this article
View all access options for this article.